/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/041119.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, November 19, 2004, Vol. 8, No. 254 Headlines 31985 VIRGINIA WAY: Voluntary Chapter 11 Case Summary ABRAXAS PETROLEUM: Inks $15 Mil. Credit Facility with Wells Fargo ALTRA INDUSTRIAL: Moody's Puts B3 Rating on $165M Sr. Sec. Notes AMERICAN SKIING: Further Extends Debt Offering Until Tuesday AMERIDEBT INC: Court Approves Appointment of Chapter 11 Trustee AMERIDEBT INC: Chapter 11 Trustee Hires Arent Fox as Counsel ATA AIRLINES: Gets Court Nod to Use $20.7M of Cash Collateral ATA AIRLINES: Four Other Airports Want PFCs Segregated ATA AIRLINES: Hires BMC Group as Notice and Claims Agent AVENUE CLO: S&P Assigns BB Rating to $376 Million Class B-2L Notes BRODER BROS: Moody's Rates Proposed $50M Senior Unsec. Notes B3 CATHOLIC CHURCH: Court Approves Portland & Tort Committee Pact CENTERPOINT ENERGY: Posts $1.1 Billion Net Loss in Third Quarter CHOICE ONE: Emerges from Bankruptcy Protection CMS ENERGY: S&P Affirms BB Corp. Credit Rating with Stable Outlook COMDISCO HOLDING: Distributing $.0982 Per Right to Right Holders COMMERCE ONE: Selling Intellectual Property Assets CONMED CORP: Moody's Places B2 Rating on $150M Senior Sub. Notes CORPORATE BACKED: S&P Puts Junk Ratings on CreditWatch Developing DEKALB COUNTY: S&P Slices Ratings on $1.9 Million Bonds to B- DIGITAL LIGHTWAVE: Nasdaq Confirms Non-Compliance of Rules DIGITAL LIGHTWAVE: Names Daniel Lorch as Chief Operating Officer DORSET CDO: Fitch Affirms Junk Ratings on Five Note Classes EDISON ASSOCIATES: Files Chapter 22 Petition in S.D. New York EDISON ASSOCIATES LP: Case Summary & Largest Unsecured Creditors ENRON CORP: Court Sets Nov. 29 as Distribution Record Date ENRON CORP: Oregon Electric Explains Portland General Bid ENRON CORP: Court Approves Nov. 30 Auction of Bridgeline Interests EXIDE TECH: Faces $35 Mil. Claim for Environmental Cleanup Costs FEDERAL-MOGUL: T&N Pension Plan Trustees May Vote to Reject Plan FERNDALE EXIT: Case Summary & 8 Largest Unsecured Creditors FRONTLINE CAPITAL: Asks Court to Extend Exclusive Periods FULTON STREET: Moody's Reviewing Class C's Ba2 Rating GAYLORD: Moody's Rates Proposed $200M Senior Unsecured Notes B3 GAYLORD ENTERTAINMENT: S&P Rates Planned $200M Sr. Unsec. Notes B GENERAL GROWTH: S&P Cuts Rating on $1.7B Sr. Unsec. Notes to BB+ GENTEK INC: S&P Places BB- Rating on CreditWatch Developing GLOBAL CROSSING: Begins Implementing Restructuring Plan HCA INC: S&P Puts BB+ Ratings on Senior Notes with Stable Outlook HIGH ROCK: Wants Exclusive Filing Period Extended Until Feb. 10 HIGH ROCK: Creditors Must File Proofs of Claim by November 22 HORIZON PCS: Sept. 30 Balance Sheet Upside-Down by $593.8 Million HORNBECK OFFSHORE: Noteholders Agree to Amend Debt Indenture HYCREST DAIRY: Voluntary Chapter 11 Case Summary INDYMAC ABS: Fitch Junks Three Classes & Rates Two Classes Low-B INNOPHOS INC: S&P Places B+ Rating on CreditWatch Negative INNOVATIVE COOKIES: Case Summary & 20 Largest Unsecured Creditors INTERSTATE BAKERIES: Utility Companies Seek Additional Assurance KAISER ALUMINUM: Summary of Australian & Finance Units' Plan LB-UBS COMMERCIAL: S&P Places Low-B Ratings on Three Cert. Classes LIONEL LLC: Wants to Hire O'Melveny & Myers as Counsel MICROTEC ENTERPRISES: Posts $766,000 of Net Loss in Third Quarter MIDLAND REALTY: Fitch Affirms B Rating on $11.1M Class J Cert. MIRANT CORP: District Court Affirms Extension of Exclusive Periods MIRANT CORP: Court Expands Examiner's Scope of Responsibilities MKP CBO: Moody's Pares Ratings on Classes B-1A & B-1L to B3 MORGAN STANLEY: Fitch Affirms B Rating on $13.6 Mil. Class F Cert. NEXSTAR BROADCASTING: Moody's Rates $235M Senior Secured Loan Ba3 NORTHWESTERN: Restructuring Costs Will Affect Operations NYFB PARTNERS INC: Case Summary & 9 Largest Unsecured Creditors OCEANVIEW CBO: S&P's Junks Class C Notes ORMET CORP: Unions Form Unity Council to Promote Restructuring OSE USA: Sept. 26 Stockholders' Deficit Widens to $46.2 Million PARK-OHIO INDUSTRIES: S&P Junks Proposed $200M Senior Sub. Notes PENN OCTANE: Latest Form 10-K Report Includes Going Concern Doubt PHOENIX VILLAGE: Case Summary & 5 Largest Unsecured Creditors RCN CORPORATION: Gets Court Nod to Tap Dechert as Special Counsel ROYAL & SUNALLIANCE: Fitch Rates GBP450 Million Sub. Debt BB ROYAL & SUNALLIANCE: Moody's Withdraws Non-Pooled Units' Ratings SAFETY-KLEEN: 206 Avoidance Actions Transferred to Judge Lindsey SCHUFF INTL: Deregisters Stock & Suspends Reporting Obligations SCIENTIFIC LEARNING: Gets Nasdaq Delisting Notice Over Late Filing SEARS ROEBUCK: S&P May Downgrade Ratings After Kmart Merger SMITHFIELD FOODS: Moody's Puts Ba2 Rating to $200 Sr. Unsec. Notes SOTHEBY'S: Moody's Upgrades Long-Term Ratings with Stable Outlook SPIEGEL INC: Offers to Settle Potential Suit by the SEC STAR CAR: Section 341(a) Meeting Slated for December 6 STOCKHORN CDO: Fitch Places BB- Rating on $5 Million Class E Notes SUNRISE CDO: Moody's Reviewing Class C's Ba2 Rating TCW LINC III: S&P Slices Ratings on Classes A-3A & A-3B to CC TULLAS CDO: Fitch Affirms Junk Ratings on Four Note Classes UAL CORP: Wants Exclusive Plan Filing Period Stretched to Jan. 31 UAL CORP: Gets Court Nod to Hire Bridge to Analyze Business Plan US AIRWAYS: Court Approves ALPA Labor Agreement Modifications US AIRWAYS: IAM Fund Asks Court to Reconsider Wage Cut Order US AIRWAYS: PrimeFlight Wants Decision on Agreement VARTEC TELECOM: Gets $20 Mil. DIP Financing from Rural Telephone VERILINK CORP: Modifies Loan to Reduce Credit Line to $3.5 Mil. W.R. GRACE: Overview and Summary of Plan of Reorganization W.R. GRACE: Classification and Treatment of Claims Under the Plan W.R. GRACE: Liquidation Analysis Under the Plan of Reorganization WILLIAMS: Increases Common Dividend Five-Fold to 5 Cents Per Share WIND RIVER: S&P Assigns BB+ Rating to $9 Million Class D Notes Z-TEL TECH: Discloses Status on Outstanding Pref. Stock Offering * BOOK REVIEW: The Manipulated Society ********* 31985 VIRGINIA WAY: Voluntary Chapter 11 Case Summary ----------------------------------------------------- Debtor: 31985 Virginia Way LLC 410 Broadway 2nd Floor Laguna Beach, California 92651 Bankruptcy Case No.: 04-17009 Chapter 11 Petition Date: November 16, 2004 Court: Central District of California (Santa Ana) Judge: Robert W. Alberts Debtor's Counsel: John A. Saba, Esq. 32221 Camino Capistrano #B-104 San Juan Capistrano, CA 92675 Tel: 949-489-2150 Total Assets: $1 Million to $10 Million Total Debts: $500,000 to $1 Million The Debtor has no unsecured creditors who are not insiders. ABRAXAS PETROLEUM: Inks $15 Mil. Credit Facility with Wells Fargo ----------------------------------------------------------------- Abraxas Petroleum Corporation and its subsidiaries: (1) Eastside Coal Company, Inc., (2) Sandia Oil & Gas Corporation, (3) Sandia Operating Corp., (4) Wamsutter Holdings, Inc., and (5) Western Associated Energy Corporation entered into a new senior secured revolving credit facility with Wells Fargo Foothill, Inc. Wells Fargo serves as arranger and administrative agent. Abraxas Petroleum and its Subsidiary Guarantors also entered into a $25 million second lien increasing rate bridge loan with Guggenheim Corporate Funding, LLC, as arranger and administrative agent, on October 28, 2004. The New Credit Facility has a maximum commitment of $15 million, which includes a $2.5 million subfacility for letters of credit. Availability under the New Credit Facility is subject to a borrowing base consistent with normal and customary natural gas and crude oil lending transactions. Outstanding amounts under the New Credit Facility bear interest at the prime rate announced by Wells Fargo Bank, National Association plus 1.00%. Subject to earlier termination rights and events of default, the New Credit Facility's stated maturity date is October 28, 2008. The Company is permitted to terminate the New Credit Facility, and under certain circumstances, may be required, from time to time, to permanently reduce the lenders' aggregate commitment under the New Credit Facility. The termination and each reduction is subject to a premium equal to the percentage listed multiplied by the lenders' aggregate commitment under the New Credit Facility, or, in the case of a partial reduction, the amount of the reduction. Year % Premium ---- --------- 1 1.5 2 1.0 3 0.5 4 0.0 Each of the Subsidiary Guarantors has guaranteed, and each of the Company's future restricted subsidiaries will guarantee, the Company's obligations under the New Credit Facility on a senior secured basis. In addition, any other subsidiary or affiliate of the Company, including Grey Wolf, that in the future guarantees any other indebtedness of the Company or of its restricted subsidiaries will be required to guarantee the Company's obligations under the New Credit Facility. Obligations under the New Credit Facility are secured, together with the new notes, by a shared first priority perfected security interest, subject to certain permitted encumbrances, in all of the Company's and each of its restricted subsidiaries' material property and assets, including the Collateral. Under the New Credit Facility, the Company is subject to customary covenants, including certain financial covenants and reporting requirements. The New Credit Facility requires the Company to maintain a minimum net cash interest coverage ratio and also requires the Company to enter into hedging agreements of not less than 25% or more than 75% of the Company's projected natural gas and crude oil production. The New Credit Facility will contain a number of covenants that, among other things, will restrict the Company's ability to: * incur or guarantee additional indebtedness and issue certain types of preferred stock or redeemable stock; * transfer or sell assets; * create liens on assets; * pay dividends or make other distributions on capital stock or make other restricted payments, including repurchasing, redeeming or retiring capital stock or subordinated debt or making certain investments or acquisitions; * engage in transactions with affiliates; * guarantee other indebtedness; * make any change in the principal nature of its business; * prepay, redeem, purchase or otherwise acquire any of its or its restricted subsidiaries' indebtedness; * permit a change of control; * directly or indirectly make or acquire any investment; * cause a restricted subsidiary to issue or sell its capital stock; and * consolidate, merge or transfer all or substantially all of the consolidated assets of the Company and its restricted subsidiaries. The New Credit Facility also contains customary events of default, including nonpayment of principal or interest, violations of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material judgments and liabilities, and is subject to an Intercreditor, Security and Collateral Agency Agreement, which specifies the rights of the parties thereto to proceeds from the Collateral. Abraxas Petroleum Corporation is a San Antonio-based crude oil and natural gas exploitation and production company. The Company operates in Texas, Wyoming and western Canada. At September 30, 2004, Abraxas Petroleum Corporation's balance sheet showed a $76,387,000 total stockholders' deficit, compared to a $72,203,000 deficit at December 31, 2003. ALTRA INDUSTRIAL: Moody's Puts B3 Rating on $165M Sr. Sec. Notes ---------------------------------------------------------------- Moody's Investors Service assigned these new ratings to Altra Industrial Motion, Inc., a manufacturer of mechanical power transmission products. The rating outlook is stable. The ratings are subject to review of the final documentation of the financing transactions. New Ratings Assigned: * B3 for the $165 million senior secured notes, due 2011, * B2 senior implied rating, * Caa1 senior unsecured issuer rating, and * SGL-3 speculative grade liquidity rating. Moody's does not rate the company's new $30 million asset-based revolver due 2009, nor the $14 million junior subordinated holding company PIK notes due 2019. Proceeds from the new notes, together with equity investments from Genstar Capital, a private equity firm, will be used to fund the acquisition of the power transmission business from Colfax for $180 million, as well as to repay the existing debt of Kilian, a small specialty bearing company that Genstar recently acquired from Timken and that will be combined with Colfax Power Transmission to form Altra. The ratings are constrained by Altra's significant debt leverage, modest profitability and cash flow generation, as well as its substantial pension funding shortage. The ratings also reflect the highly competitive and mature nature of the mechanical power transmission industry, strong cyclicality in its end-markets, as well as the challenges posed by the gradual shift of US manufacturing base to lower-cost foreign locales. On the other hand, the ratings are supported by the company's good niche market position and strong brand recognition, established distribution channels, and some degree of end-market and geographic diversification of its revenue base. Altra operates in the highly competitive and mature mechanical power transmission industry, which is estimated to be $29 billion in size globally. The company manufactures industrial clutches and brakes, enclosed gear drives, open gearing, couplings and other related products, which are sold to large OEMs as well as through distributors. End-markets include the material handing, turf & garden, transportation, and other general industrial sectors. As such, demand for Altra's products tends to fluctuate through the economic cycles and is driven primarily by industrial production and manufacturing activities in the US. In addition to the cyclicality in its end-markets, as US manufacturers increasingly shift their production base overseas, Altra, like many US-based component suppliers, face challenges posed by a contracting domestic customer base. However, following customers overseas also involves considerable risks. Not only does it incur incremental costs to set up operations overseas, but the retention of the OEM customers cannot be ensured either as the OEMs may expand their sourcing base to include local suppliers. Moody's notes that despite its relatively small size, Altra has good market position in certain niche products such as clutches and gearings. Some of its brands, in particular Boston Gear and Warner Electric, have strong brand recognition in the industry. However, the mechanical power transmission industry is highly competitive and mature. Pricing power is generally low for component suppliers. As the large OEMs seek to consolidate their vendor base, the pressure for Altra to gain scale and expand its product offering is intense. Pro forma for the transaction, Altra's total debt of $165 million will be approximately 5.1 times Moody's estimated EBITDA of $32.2 million for the LTM period ended September 2004. LTM EBIT and EBITDA would cover interest expense 1x and 2x, respectively. Given its modest profitability, high interest expense, and expected higher capex needs, Moody's expects the company's free cash flow (cash from operations minus capex) to range between $5 million and $9 million in the initial years. The free cash flow is negatively impacted by a substantial funding shortage of its pension liabilities, which are estimated to be approximately $17.1 million at end-2004, including a $14 million shortage at its US pension plans. Mandatory funding requirement is estimated to be $6 million for 2005 and $4 million for 2006. Moody's expects Altra to have adequate liquidity over the next twelve months, as indicated in its SGL-3 speculative grade liquidity rating. The modest amount of operating cash flow that it is expected to generate in 2005 should be adequate to fund its capital spending and other operational needs. External liquidity is provided by the asset-based revolver with initial availability of roughly $30 million, which will be undrawn at closing. The revolver will have two financial covenants, e.g. a minimum fixed coverage ratio and a maximum annual capex amount. However, the covenants will not be tested when availability under the revolver is maintained at $12.5 million or above. The B3 rating on the $165 million senior secured credit facility, at one notch lower than the senior implied rating, reflects the benefit of the collateral package as well as effective subordination to the senior secured revolving credit facility. The $165 million notes, consisting of approximately $125 million of fixed rate notes and $40 million of floating rate notes, are secured by a second priority lien on substantially all of the issuer's assets and those of its subsidiary guarantors. The notes are guaranteed by the issuer's domestic restricted subsidiaries. Headquartered in Quincy, Massachusetts, Altra Industrial Motion, Inc., is a manufacturer of mechanical power transmission products, with pro forma LTM revenue of approximately $337 million. AMERICAN SKIING: Further Extends Debt Offering Until Tuesday ------------------------------------------------------------ American Skiing Company (OTC: AESK) extended the expiration date for its tender offer for its 12% Senior Subordinated Notes due 2006 until 5:00 p.m., New York City time, on November 23, 2004. As of the close of business on Tuesday, November 16, 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 23, 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. Copies of documents may be obtained from: Georgeson Shareholder Communications, Inc., Information Agent (212) 440-9800 (888) 264-6999 (toll-free) About the Company Headquartered in Park City, Utah, American Skiing Company (OTC: AESK) -- http://www.peaks.com/-- 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. * * * As reported in the Troubled Company Reporter on Nov. 2, 2004, American Skiing Company disclosed 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 Nov. 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. AMERIDEBT INC: Court Approves Appointment of Chapter 11 Trustee --------------------------------------------------------------- The Honorable Paul Mannes of the U.S. Bankruptcy Court for the District of Maryland approved the appointment of Mark D. Taylor, Esq., as the Chapter 11 Trustee of AmeriDebt, Inc.'s estate. Mr. Taylor was appointed Chapter 11 Trustee by W. Clarkson McDow, Jr., the United States Trustee for Region 4. The Court based its decision on the three facts cited by the U.S. Trustee: * AmeriDebt's management has abdicated total control to Ballenger The managers of AmeriDebt, an alleged non-profit credit-counseling agency, had breached its fiduciary responsibility to its consumers by abdicating all of its management, operational and financial accounting responsibilities to The Ballenger Group. AmeriDebt and Ballenger Group are parties to a Fulfillment Agreement, which gives Ballenger total control of AmeriDebt's assets and resources, in total disregard for the welfare of AmeriDebt's consumers. * AmeriDebt's management is guilty of gross mismanagement The U.S. Trustee explains that it is gross mismanagement on AmeriDebt's part to enter into a one-sided agreement with Ballenger, where it is given permanent processing rights for the debt management plans availed by AmeriDebt's consumers and further authorizes Ballenger to assign existing consumers to other credit counseling agencies of Ballenger's choosing. * AmeriDebt's management may be violating State laws The U.S. Trustee has concluded that AmeriDebt is not licensed to charge fees as a credit-counseling agency to the residents of the states of Maryland and Minnesota enrolled in its debt management plans. The U.S. Trustee explains that Mr. Taylor as Chapter 11 Trustee for AmeriDebt would provide appropriate management and oversight of the Debtor's operations and address the concerns of the State Attorney General, the Federal Trade Commission and other plaintiffs who have sought relief on behalf of the Debtor's consumers. Mr. Taylor does not represent any interest adverse to the Debtor or its estate. Headquartered in Germantown, Maryland, AmeriDebt, Inc. -- http://ameridebt.org/-- is a credit counseling company. The Company filed for chapter 11 protection on June 5, 2004 (Bankr. D. Md. Case No. 04-23649). When the Company filed for protection from its creditors, it listed $8,387,748 in total assets and $12,362,695 in total debts. AMERIDEBT INC: Chapter 11 Trustee Hires Arent Fox as Counsel ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Maryland gave its permission to Mark D. Taylor, the Chapter 11 Trustee for AmeriDebt, Inc., to employ Arent Fox PLLC, as his counsel. Arent Fox will: a) assist and advise the Trustee with regard to his powers and duties under Section 1106 of the Bankruptcy Code; b) assist and advise the Trustee in analyzing the Debtor's acts, conduct, assets and liabilities; c) advise the Trustee concerning efforts to collect and recover property for the benefit of the Debtor's estate; d) prepare on the Trustee's behalf, all necessary and appropriate applications, motions, notices, draft orders and other pleadings; e) assist the Trustee with negotiation and preparation of a plan of reorganization of liquidation and all related documents and prosecute the plan through the confirmation process; f) represent the Trustee in connection with any adversary proceedings or automatic stay litigation that may be commenced and any other action necessary to protect and preserve the Debtor's estate; g) advise the Trustee in connection with any sale of assets or other dispositions of property of the Debtor's estate; h) appear before the Court, any appellate courts and other courts in which matters may be heard and protect the interests of the Trustee and the Debtor's estate; and i) perform all other necessary legal services for the Trustee in the Debtor's chapter 11 Mr. Taylor is a member of Arent Fox. He may, from time to time, render legal services to the Debtor's estate in addition to his duties as Trustee. Mr. Taylor will bill the Debtor's estate for his services at $385 per hour. Mr. Taylor reports Arent Fox's professionals bill: Designation Hourly Rate ----------- ----------- Members $350 - 550 Counsel 260 - 540 Associate 185 - 380 Legal Assistants 110 - 180 To the best of the Trustee's knowledge, Arent Fox does not represent any interest adverse to the Trustee, the Debtor or its estate. Headquartered in Germantown, Maryland, AmeriDebt, Inc. -- http://ameridebt.org/-- is a credit counseling company. The Company filed for chapter 11 protection on June 5, 2004 (Bankr. D. Md. Case No. 04-23649). When the Company filed for protection from its creditors, it listed $8,387,748 in total assets and $12,362,695 in total debts. ATA AIRLINES: Gets Court Nod to Use $20.7M of Cash Collateral ------------------------------------------------------------- ATA Airlines' businesses require cash. Without cash, the Debtors would not be able to operate for even a single day. When ATA filed for chapter 11 protection, it had approximately $21,776,594 of Available Cash. Approximately 95% of that cash is pledged to secure repayment of a $168,000,000 loan from Govco Incorporated, Citibank, N.A., AFS Investments XII, Inc., and International Lease Finance Corporation, for which the Air Transportation and Stabilization Board provides a $148,500,000 guarantee. The ATSB Loan balance is approximately $139,900,000 plus accrued but unpaid interest as of October 26, 2004. The Debtors ask the U.S. Bankruptcy Court for the Southern District of Indiana for permission to use the 95% portion of their Available Cash -- $20,687,765 -- that constitutes Cash Collateral securing repayment of the ATSB Loan to fund their on-going operations while in chapter 11. Responses A. Indianapolis Airport Authority The Indianapolis Airport Authority operates the Indianapolis International Airport. Ben T. Caughey, Esq., at Ice Miller, in Indianapolis, Indiana, tells the Court that the Debtors and their agents collect Passenger Facility Charges and hold them for the benefit of the IAA. On a monthly basis, the Debtors accrue $335,654 aggregate average in PFCs due and payable to the IAA. In the past, the Debtors have complied with the accounting and remittance requirement of the PFC regulations, however, the Debtors are currently obligated to pay for PFCs for September 2004, and will subsequently continue to accrue obligations. The IAA estimates that the Debtors' unpaid PFC obligation aggregates $211,000. According to Mr. Caughey, in In re Begier v. United States, 493 U.S. 53, 67 (1990), PFCs, like excise tax, are not the estate's property, but rather property held in trust. Congress designed the PFC statute to require air carries to collect PFCs, hold them in trust, account for them, and remit them, less handling costs, on a timely basis to approved airports. PFCs are trust funds from the moment of collection from the passenger. Air carriers, including the Debtors, have no equitable or legal interest in the PFCs. Under Section 541(d) of the Bankruptcy Code, Mr. Caughey notes that funds held in trust are excluded from the debtor's bankruptcy estate and are immediately payable to the trust beneficiary. In this regard, the IAA objects to the Debtors' use of their prepetition cash collateral to the extent that the Cash Collateral includes the IAA's PFC trust funds. Furthermore, IAA asks the Court to: (a) direct the Debtors to immediately segregate and remit all PFCs due to the IAA; (b) on a going forward basis, direct the Debtors to take all necessary and appropriate steps to ensure that the Debtors segregate all PFCs collected on a daily basis, remit the PFCs to the IAA on a monthly basis, and otherwise fully comply with all accounting and remittance requirements provided by 14 C.F.R. Section 158; and (c) deny the Debtors' request to use cash collateral to the extent the cash collateral includes its PFC trust funds. B. City of Chicago The City of Chicago owns and operates an airport system, including facilities and ticket operations, at Chicago Midway International Airport. On January 1, 1997, the City of Chicago and ATA Airlines, Inc. entered into a Chicago Midway Airport Amended and Restated Airport Use Agreement and Facilities Lease, under which: (a) Chicago leases to the Debtors certain portions of Midway Airport for the purpose of conducting an Airport Transportation Business; and (b) performing operations and functions that are incidental and necessary to the conducting of the Airport Transportation Business. Additionally, the Midway Terminal Agreement unambiguously prohibits the Debtors for pledging and encumbering the Leased Premises in any fashion. Elliot D. Levin, Esq., at Rubin & Levin, PC, in Indianapolis, Indiana, points out that Debtors' proposed interim cash collateral order provides the Debtors' lenders with certain "Replacement Liens" as part of the lenders' adequate protection. In particular, the Interim Cash Collateral Order purports to grant valid, perfected and enforceable liens and security interests assigned by the Debtors to the "Collateral Agent" that would cover the Leased Premises and Midway Terminal Agreement, but this right is then qualified by a provision, which is unclear, and unnecessary, at least with respect to the Leased Premises and the Midway Airport Terminal. Chicago requests that any interim cash collateral order entered by the Court unequivocally exclude from "Replacement Liens" any lien, right, interest, or claim related to the Leased Premises and the Debtors' rights under the Midway Terminal Agreement. Debtors Respond Charles T. Cleaver, Vice-President and Treasurer of ATA Holdings Corp., states that the Debtors' Cash Collateral Motion inadvertently included the statement that PFCs were included in one master segregated account, together with, for example, "trust fund" payroll taxes. Mr. Cleaver tells the Court that months before the Petition Date, the Debtors established a separate segregated account at First Indiana Bank and all PFCs were transferred to that account. In addition, Mr. Cleaver relates that 49 U.S.C. Section 40117(m)(1) permits an airline to deposit "average" monthly PFC collections into the escrow account. However, to be conservative, the Debtors have been depositing the actual amount of PFCs collected on a daily or weekly basis. Furthermore, based on discussions with the Federal Aviation Administration personnel, the Debtors have also agreed to maintain at least $3,100,000 in that account at all times, which sum is consistent with the average monthly PFC collections over the past year. Mr. Cleaver maintains that the Debtors are in full compliance with all applicable federal regulations and the Debtors will continue to honor the requirements. The Debtors ask the Court to overrule the objections based on alleged deficiencies in segregating or remitting PFCs. * * * Judge Lorch authorizes the Debtors to use their Cash Collateral, on an interim basis, to pay the ordinary and reasonable expenses of operating their businesses, including, without limitation, payroll and benefit expenses. Judge Lorch rules that the PFCs are trust funds and are not property of the estate pursuant to Section 541 of the Bankruptcy Code. The Debtors will not grant to any third party any security or other interest in the PFCs. The Debtors are authorized to pay, for the benefit of the ATSB Lender Parties, $250,000 plus reasonable expenses for the costs to be incurred by the ATSB Lender Parties for the fee of Lazard Freres & Co., LLC, as financial advisor to the ATSB Lender Parties for one month, in connection with: (i) enforcing their rights under the Loan Documents, the ATSB Loan, the ATSB Guarantee and the ATSB Guarantee Agreement; (ii) the negotiation, drafting and execution of the Interim Order; (iii) advising the ATSB Lender Parties in connection with a Restructuring Transaction and any DIP financing proposals or agreements; and (iv) protecting the ATSB Lender Parties' rights during the Chapter 11 cases. The Debtors are authorized to provide adequate protection to the ATSB Lender Parties in exchange for the Debtors' use of the Cash Collateral. 13-Week Cash Budget As additional adequate protection, the Debtors provide the ATSB Lender Parties with, among others, a rolling 13-week detailed cash forecast, showing the Debtors' sources and uses of cash. ATA Holding Corp, et al. Cash Budget For 13 Weeks Ending January 21, 2005 Cash at Beginning of Period $45,562,441 Receipts: Military 83,360,219 Charter 24,629,035 Scheduled Service 187,828,439 Holdback AMEX - Holdback Discoverer (1,200,000) Holdback Diner's Club (800,000) Other Receipts 9,910,952 Financing & Miscellaneous 855,417 Wet Lease Receipts 27,311,739 ------------- Total Receipts 331,895,801 Disbursements: Maintenance 3,702,719 Payroll 81,927,369 Tax 41,246,618 Accounts Payable 66,302,411 Fuel 83,921,871 Debit 2,047,285 Lease 27,434,166 Insurance 7,492,138 Handling/ Landing 7,939,343 Chicago Express 9,727,927 Miscellaneous 7,333,062 Restructuring 8,746,300 DIP Financing 525,000 ------------- Total Disbursements 348,346,209 Net Cash Flow (16,450,508) New Borrowings - ------------- Cash at End of Period $29,112,033 Beginning DIP Balance - New Borrowings - Ending DIP Balance - ------------- Net Liquidity Position $29,112,033 ============= 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. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Four Other Airports Want PFCs Segregated ------------------------------------------------------ In separate filings, four airport operators support The Greater Orlando Aviation Authority's request for segregation of passenger facility charges collected by the ATA Airlines and its debtor-affiliates: (a) The City and County of San Francisco, acting by and through the San Francisco Airport Commission; (b) The Denver International Airport, owned and operated by the City and County of Denver, in connection with its municipal airport system; (c) The Indianapolis Airport Authority, which owns and operates the Indianapolis International Airport; and (d) The Dallas/Fort Worth International Airport Board. The Airport Operators agree that the Debtors should open a bank account, separate and apart for all other accounts, to deposit all collected PFCs and remit the PFCs to the appropriate airport monthly as required under 14 C.F.R. Sections 157 and 158. Since commencing operations at the Airport Operators' facilities, the PFCs collected by the Debtors continue to accrue, and the Debtors continue to incur obligations, on a monthly basis on the average with respect to each Airport Operator: Airport Operator ATA's Obligation ---------------- ---------------- San Francisco Airport $345,700 in monthly rent, Commission charges, and landing fees; and $202,000 in monthly PFCs at $4.50 added to each ticket sold Denver International $200,000 in monthly rent, Airport charges and landing fees; and $73,000 in monthly PFCs at $4.50 added to each ticket Indianapolis Airport $335,654 in monthly PFCs. The Authority Debtors obligation to the IAA begins to accrue in September 2004 and now aggregates $211,000 Dallas/Fort Worth $225,121 in aggregate PFCs International Airport Board Debtors Respond Charles T. Cleaver, Vice-President and Treasurer of ATA Holdings Corp., informs Judge Lorch that the Debtors have established a separate segregated account at First Indiana Bank and all PFCs were transferred to that account. Moreover, Mr. Cleaver assures the United States Bankruptcy Court for the Southern District of Indiana that the Debtors are in full compliance with all applicable federal regulations and the Debtors will continue to honor the requirements. With respect to the PFC remittances for September 2004, Mr. Cleaver relates that the funds were not due to be paid to the airport authorities until November 1, 2004. Any motions seeking to order the Debtors to take steps that have already been undertaken with respect to PFCs should be denied as moot, Mr. Cleaver says. * * * Judge Lorch rules that the PFCs are trust funds and are not property of the estate pursuant to Section 541 of the Bankruptcy Code. The Debtors will not grant to any third party any security or other interest in the PFCs. 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. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Hires BMC Group as Notice and Claims Agent -------------------------------------------------------- In view of the heavy administrative and other burdens on the United States Bankruptcy Court for the Southern District of Indiana and Office of the Clerk of the Court that may be imposed by thousands of creditors and other parties-in-interest involved in ATA Airlines and its debtor-affiliates' Chapter 11 cases, the Debtors sought and obtained the Court's authority to employ BMC Group as their notice, claims and balloting agent, nunc pro tunc to the Petition Date. BMC Group is one of the country's premier Chapter 11 administrators with experience in noticing, claims processing, claims reconciliation, balloting and distribution. BMC Group has acted as official notice, claims and balloting agent in several other cases in various judicial districts. At the request of the Debtors or the Clerk's Office, BMC Group will: (a) prepare and serve required notices in the Debtors' Chapter 11 cases, which may include notice of: -- the commencement of Chapter 11 cases and the initial meeting of creditors; -- the deadline for filing claims, if any; -- objections to claims; -- any hearings on a disclosure statement and confirmation of a reorganization plan; and -- other miscellaneous notices to any entities, as the Debtors or the Court may deem necessary or appropriate for an orderly administration of the Chapter 11 cases; (b) after mailing of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes a copy of: -- the notice involved; and -- an alphabetical list of persons to whom the notice was mailed to and the date and manner of mailing; (c) reconcile and resolve claims; (d) receive and record original proofs of claim and proofs of interest filed; (e) create and maintain official claims registers, including, among other things, information for each proof of claim or proof of interest: -- the applicable Debtors; -- the name and address of the claimant and any claimant's agent, if the proof of claim or proof of interest was filed by an agent; -- the date received; -- the claim number assigned; and -- the asserted amount and classification of the claim; (f) implement necessary security measures to ensure the completeness and integrity of the claims registers; (g) transmit to the Clerk's Office a copy of the claims registers upon request and at agreed upon intervals; (h) act as balloting agent which will include these services, without limitation: -- print ballots including the printing of creditor and shareholder specific ballots; -- prepare voting reports by plan class, creditor or shareholder and amount for the Debtors' review and approval; -- coordinate mailing of ballots, disclosure statement and plan or other appropriate materials to all voting and non-voting parties and provide affidavit of service; -- establish a toll-free "800" number to receive questions regarding voting on the plan; and -- receive ballots and record ballots, inspect ballots for conformity to voting procedures, date stamp and number ballots consecutively and tabulate and certify the results; (i) maintain an up-to-date mailing list for all entities that have filed a proof of claim or interest, which list will be available upon request of a party-in-interest or the Clerk's Office; (j) provide access to the public for examination of copies of the proofs of claim or interest without charge during regular business hours; (k) record all claim transfers pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure and provide notice of the transfers; (l) comply with applicable federal, state, municipal, and local statutes, ordinances, rules, regulations, orders and other requirements; (m) provide temporary employees to process claims, as necessary; (n) promptly comply with further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; and (o) perform other administrative and support services related noticing, claims, docketing, solicitation and distribution as the Debtors or the Clerk's Office may request. Pursuant to an Agreement for Services entered among the Debtors, Baker & Daniels, and BMC Group, the Debtors will pay BMC Group according to its standard prices for its services including reimbursement of necessary expenses. In addition, the Debtors will prepay BMC Group's estimated postage amounts in connection with the noticing services. The Debtors' estates and particularly the creditors will benefit from BMC Group's significant experience in acting Claims Agent and the efficient cost-effective methods that BMC Group has developed. BMC Group is fully equipped to handle the volume involved in properly sending the required notices to and processing the claims of creditors and other interested parties. BMC Group Vice President Tinamarie Feil ascertains that BMC Group is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code and holds no interest adverse to the Debtors and their estates. 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. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) AVENUE CLO: S&P Assigns BB Rating to $376 Million Class B-2L Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to Avenue CLO Fund Ltd./Avenue CLO Fund (Delaware) Corporation's $376 million floating-rate notes due 2017. The preliminary ratings are based on information as of November 17, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- the expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes; -- the cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- the experience of the collateral manager; and -- the legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Avenue CLO Fund Limited/ Avenue CLO Fund (Delaware) Corporation Class Rating Amount (mil. $) ----- ------ --------------- X AAA 8.0 * A-1L AAA 286.0 A-2L AA 34.0 A-3L A- 19.0 B-1L BBB 19.0 B-2L BB 10.0 Preferred shares N.R. 24.0 * Scheduled amortization during the reinvestment period. N.R. - Not rated BRODER BROS: Moody's Rates Proposed $50M Senior Unsec. Notes B3 --------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to Broder Bros., Co.'s proposed $50 million Add-On issue of 11-1/4 % guaranteed senior unsecured notes due 2010 and affirmed the company's existing ratings. Ratings outlook stable. The ratings reflect the expectation that, despite the increase in the senior unsecured debt, Broder will be able to service the additional debt levels and maintain credit protection metrics that are appropriate for the rating category. The ratings recognize the diversification of the company's customer base, the presence of multiple suppliers for the imprintable blanks it distributes, Broder's experienced management team, and the expectation that the company will reduce leverage and improve interest coverage in the near term. Broder, with a 13% national market share in the distribution of imprintable sportswear and accessories, is the largest in the industry. The company's 15,000 regular customers and 50,000 to 100,000 potential customers, consist of Fortune 1000 companies, concerts, sporting events, schools, athletic leagues, and tourist destinations. The ratings are constrained by the remaining need to fully integrate the recent acquisition of NES, by the risk that greater than expected price deflation in 2005 and in subsequent years may weaken projected sales, and by the company's high leverage, low interest coverage, and relatively low cash flow coverage. The full integration of NES is expected by mid-year 2005. At 12/31/04 on a proforma basis Debt/EBITDA is 5X, EBIT/ Interest is 1.3 X, and retained cash flow/ adjusted debt is 6.1%. The ratings also recognize the contractual subordination of the guaranteed senior unsecured notes to the $175 million senior secured revolving credit facility. The stable outlook reflects the reasonable assumptions for business and operations in 2005 and the strong market position attained by the company. In the near term, Debt/ EBITDA is expected to decline to 4X and retained cash flow/ adjusted debt to increase to 7.0%. These ratings were affected by this rating action: * $50 million add-on 11-1/4 % guaranteed senior notes due in 2010, assigned at B3, * $175 million 11-1/4 % guaranteed senior notes due in 2010, affirmed at B3, * Senior Implied rating, affirmed at B1, * Senior Unsecured Issuer, affirmed at Caa1. The outlook is stable. Broder Bros. Co., based in Philadelphia, Pennsylvania is a leading distributor of imprintable sportswear and accessories in the U.S. In 2003 Broder acquired Alpha Shirt Company and in 2004 it acquired NES Clothing Company. Broder reported revenues of approximately $487 million for fiscal year 2003, Alpha reported revenues of approximately $409 million for fiscal year 2002, and NES generated revenues of approximately $132 Million for the twelve months ended June 30, 2004. CATHOLIC CHURCH: Court Approves Portland & Tort Committee Pact -------------------------------------------------------------- The Archdiocese of Portland in Oregon advised the U.S. Bankruptcy Court for the District of Oregon that it maintains funds and investments for itself, and as a fiduciary, trustee, or custodian for various parishes, schools, charitable trusts, and other entities, held in accounts located at Key Bank and Union Bank of California. The Official Committee of Tort Claimants in Portland's case, however, asserts that Portland maintains the funds and investments for itself, and not as a fiduciary, trustee, or custodian for the parishes, schools, and other entities. Therefore, the funds and investments in the Accounts are all property of Portland's estate. The Portland Tort Committee explains that the parishes and schools have no legal existence separate from the Archdiocese and are analogous to divisions of a corporation. The estate includes the parishes and schools, and the Accounts, including an Archdiocesan Loan and Investment Program, a Catholic Education Endowment Fund, and all parish and school bank accounts. Portland, in turn, argues that under Canon Law, the funds and investments that are held for other entities are not property of its estate. Thomas W. Stilley, Esq., at Sussman Shank, LLP, tells Judge Perris that in the event the funds are determined to be property of Portland's estate, intervention of the Court with respect to Portland's functions and responsibilities in using and administering the funds would be unconstitutional. It intrudes on the exercise of religious freedom under the First Amendment to the United States Constitution and the laws, which forbid or restrain the manner in which the Court may burden the free exercise of religion. In the alternative, Mr. Stilley asserts that the Court's authority to limit the use of the funds should not be exercised because Portland's use and administration of the funds is in the ordinary course of its business under Sections 363 and 1108 of the Bankruptcy Code. Operating Budget Portland and the Portland Tort Committee want to implement a procedure that will allow the Archdiocese, the parishes, and the schools to continue to utilize the funds and investments in the Accounts without: -- the necessity of the Court determining any of the disputed legal issues at this time; and -- without waiver of any rights by Portland, the Committee, or any party-in-interest to pursue determination of the Disputed Legal Issues in the future. Portland requires the continued use of what it deems to be its funds in the Accounts for its ordinary day-to-day operations. The parishes and schools require the use of funds in the Accounts for day-to-day operations -- including summer salaries, tuition assistance, scholarships, and textbooks, and for repairs and renovations to real and personal property. In addition, the funds in the ALIP are used to fund certain building projects at parishes and schools and other expenditures. Portland has prepared a budget, which sets forth the estimated cash to be used for day-to-day operations, and lists, which set forth anticipated expenditures from the ALIP and CEEF for the period from July 15, 2004, through December 31, 2004. A copy of the budget and lists is available at no charge at: http://bankrupt.com/misc/portland_operating_budget.pdf Mr. Stilley relates that the Accounts are replenished as funds are received by Portland from parishes and schools. The parishes typically pay 8% of the amounts collected from their non- designated offertory to Portland on a monthly basis. Portland uses these funds to defray day-to-day operating expenses and for its programs and ministries. Most of the parishes place all other parish funds in excess of the amounts they anticipate will be needed for three months' operating expenses in the ALIP. The Stipulation To preserve the viability of Portland, the parishes and the schools, to allow them to continue to operate in the ordinary course, and to provide adequate oversight over Portland's use and administration of the funds and investments in the Accounts, Portland and the Portland Tort Committee further stipulate that: (a) Portland may continue to utilize the funds and investments in the Accounts and in accordance with the Operating Budget, the ALIP Budget, and the CEEF Budget. Portland will use the funds in the Accounts only in the amounts and for the uses set forth in the Operating Budget, the ALIP Budget, and the CEEF Budget. (b) Portland may use the funds and investments in the Accounts in accordance with the Operating Budget through and including December 31, 2004, so long as, the total cash and investment balance in each of the Accounts -- excluding the General Operating Fund, the Annual Catholic Appeal, the Insurance Fund, and the ALIP -- after giving effect to expenditures, at all times equals or exceeds 95% of the cumulative cash and investment balance in each of the Accounts as of June 30, 2004. The Budget Period may be extended by further stipulation and Court order. (c) Portland's Operating Budget expenditures for any line item may exceed the amount budgeted for that line item by a factor of no more than 20% of the budgeted amount. (d) Portland is authorized to make disbursements of ALIP and CEEF funds not provided for in the ALIP Budget and CEEF Budget: * Upon a request by any parish or school for one or more disbursements not provided for in the ALIP or CEEF Budget totaling $30,000 or less, in the aggregate within a six-month period, for repairs, maintenance, or other normal operating expenses, but excluding capital expenditures and other out of the ordinary transactions, and if the request complies with the established guidelines and procedures for making the disbursement, Portland will be authorized to make the disbursements without further Court notice or order; and * Upon a request for a disbursement not provided for in the ALIP Budget or CEEF Budget that is either: (1) for a capital expenditure or other out of the ordinary course expenditure; or (2) in excess of $30,000 in the aggregate within a six- month period, and if the request complies with the established guidelines and procedures for making the disbursement, then before making the disbursement, Portland will provide the Tort Committee with 10 business days' prior written notice setting forth the name of the participant, the amount of the request, and a description of the purpose for the requested disbursement. If no written objection is received from the Committee within the 10-day period, Portland will be authorized to make the disbursement without further Court notice or order. If the Committee objects to the disbursement, it will, within the 10-day period, provide Portland with written notice of its objection. Upon receipt of the objection, Portland will not make the disbursement without first obtaining a written withdrawal from the Committee of its objection, or pursuant to a Court order after 20 days' notice and an opportunity for hearing to the participant requesting the disbursement, the Committee, the 20 largest unsecured trade creditors, the U.S. Trustee, and all parties requesting special notice. (e) In addition to the other information included in its monthly financial reports, Portland will provide a report pursuant to Rule 2015 of the Federal Rules of Bankruptcy Procedure comparing the actual performance to the Operating Budget, the ALIP budget, and the CEEF Budget for the month ended immediately prior to the filing of the report and the period from the Petition Date. Portland will provide a copy of the monthly financial report and the FRBP 2015 Report to the Tort Committee and the U.S. Trustee. (f) Portland will keep all property of the estate, including all parish and school property, free of all liens, encumbrances and other security interests, other than those in existence on the Petition Date, and will pay and discharge when due all taxes and levies arising or accruing from and after the Petition Date. Portland will not sell or transfer any property, including any parish or school property, without prior Court order. (g) Portland will provide the Tort Committee and its agents with access to all of its financial books and records, subject to availability and workload constraints. The Committee may contact Portland's banks to verify cash balances and other transactions. (h) On or before the last business day of each month, Portland will provide the Tort Committee with copies of: * evidence of all bank deposits made by Portland during the previous calendar month; * evidence of all withdrawals and transfers from Portland's bank accounts during the previous calendar month; * all bank statements and other account statements received during the previous calendar month; * Portland's check register for the previous calendar month; and * Portland's bank account reconciliation for the prior calendar month. (i) On or before December 1, 2004, Portland will deliver to the Committee an operating budget for the six-month period starting on January 1, 2005, and ending on June 30, 2005. (j) Portland will use its best efforts to obtain from the parishes and schools their June 30, 2004 financial statements and provide copies of all the statements obtained by Portland to the Committee. The stipulation is without prejudice to any Disputed Legal Issues. All Disputed Legal Issues and all positions of Portland and the Tort Committee with respect the Issues are preserved. At Portland's behest, Judge Perris approves the Stipulation. 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., and 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., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. In its 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. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) CENTERPOINT ENERGY: Posts $1.1 Billion Net Loss in Third Quarter ---------------------------------------------------------------- CenterPoint Energy, Inc., (NYSE: CNP) reported a net loss of $1.1 billion for the third quarter of 2004 compared to net income of $182 million, or $0.59 per diluted share for the same period of 2003. The net loss for the third quarter of 2004 was primarily related to two major events: 1) The company recorded an $894 million extraordinary charge to earnings. This charge reflects a write-down of the company's generation-related regulatory assets resulting from the Public Utility Commission of Texas' deliberations in the proceeding to determine the company's stranded investment and other true-up amounts filed pursuant to the Texas electric restructuring law. 2) Due to the pending sale of the company's interest in Texas Genco Holdings, Inc. (NYSE: TGN), the company recorded a $259 million net loss from discontinued operations and reclassified the electric generation segment as discontinued operations for all periods presented. Net income for the third quarter of 2003 included $35 million of income from discontinued operations. Income from continuing operations was $17 million for the third quarter of 2004 compared to $147 million for the third quarter of 2003. The third quarter of 2003 included after-tax income of $144 million related to Excess Cost Over Market revenues, which terminated as of December 31, 2003, in accordance with the Texas electric restructuring law. "We're very disappointed in the estimated recovery amount from our true-up proceeding pending before the Texas Public Utility Commission," said David M. McClanahan, president and chief executive officer of CenterPoint Energy. "However, we're pleased that the sale of Texas Genco is progressing well, and we will de- leverage the company with the proceeds from the sale and the ultimate securitization of the approved true-up balance. We continue to execute the strategy that we developed when we formed CenterPoint Energy a little over two years ago -- namely, reducing our debt and optimizing and enhancing our core energy delivery businesses. We're making good progress." For the nine months ended September 30, 2004, the company recorded a net loss of $1 billion, which included a $154 million net loss from discontinued operations resulting from the pending sale of Texas Genco and the $894 million extraordinary charge to earnings from the write-down of generation-related regulatory assets. Net income for the same period of 2003 was $413 million, which included $52 million of income from discontinued operations. Income from continuing operations was $43 million for the nine months ended September 30, 2004, compared to $362 million, or $1.18 per share for the same period of 2003. The nine months ended September 30, 2003 included after-tax, ECOM-related income of $296 million, or $0.97 per diluted share. Third Quarter 2004 Highlights True-Up Proceeding On March 31, 2004, the company filed its true-up application with the PUC, marking one of the final steps in the implementation of the Texas electric restructuring law. In this application the company is seeking to recover a true-up balance of $3.7 billion, excluding interest. Although a final order has not been issued, based on deliberations by the PUC commissioners during six public meetings, the company estimates that it will recover approximately $2.0 billion of its requested amount, excluding interest which will be recorded once a final determination has been made by the PUC. Consequently, the company recorded an $894 million extraordinary loss in the quarter. Once the PUC issues a final order, the extraordinary loss may be adjusted. Sale of Texas Genco On July 21, 2004, CenterPoint Energy and Texas Genco announced a definitive agreement for GC Power Acquisition LLC, a newly formed entity owned in equal parts by affiliates of The Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. L.P. and Texas Pacific Group, to acquire Texas Genco for approximately $3.65 billion in cash. The transaction, subject to certain regulatory approvals, will be accomplished in two steps. The first step, expected to be completed in the fourth quarter of 2004, involves Texas Genco's purchase of the 19 percent of its shares owned by the public for $47 per share, followed by GC Power Acquisition's purchase of a Texas Genco subsidiary that will then own Texas Genco's coal, lignite and gas-fired generation plants. In the second step of the transaction, expected to take place in the first half of 2005 following Nuclear Regulatory Commission approval, GC Power Acquisition will complete the acquisition of Texas Genco, the principal remaining asset of which will then be Texas Genco's interest in the South Texas Project nuclear facility. Total cash proceeds to CenterPoint Energy from both steps of the transaction will be approximately $2.9 billion for its 81 percent interest in Texas Genco. After-tax proceeds are estimated to be approximately $2.5 billion. Operating Income By Segment Detailed Electric Transmission & Distribution The electric transmission & distribution segment reported operating income of $178 million in the third quarter of 2004, consisting of $169 million for the regulated transmission and distribution utility (TDU) and $9 million for the transition bond company, which is an amount sufficient to pay interest on the transition bonds. Results for the third quarter of 2004 do not include any revenues related to ECOM, which terminated as of December 31, 2003, in accordance with the Texas electric restructuring law. Operating income for the same period of 2003 totaled $383 million, consisting of $151 million for the TDU, $10 million for the transition bond company and $222 million of non-cash income associated with ECOM. The TDU continues to benefit from solid customer growth as nearly 51,000 metered customers were added since September 2003. Increased operation and maintenance expenses from environmental remediation costs and increased transmission payments were more than offset by a land sale. Operating income for the nine months ended September 30, 2004, was $390 million, consisting of $361 million for the TDU and $29 million for the transition bond company. Operating income for the same period of 2003 totaled $823 million, consisting of $339 million for the TDU, $29 million for the transition bond company and $455 million of non-cash income associated with ECOM. Natural Gas Distribution The natural gas distribution segment reported an operating loss of $2 million for the third quarter of 2004 compared to an operating loss of $5 million for the same period of 2003. Due to seasonal impacts, operating results for the third quarter in this segment are typically the weakest of the year. Continued customer growth, with the addition of over 45,000 customers since September 2003, and higher revenues from rate increases more than offset increased operating expenses. Operating income for the nine months ended September 30, 2004, was $137 million, compared to $146 million for the same period of 2003. Pipelines and Gathering The pipelines and gathering segment reported operating income of $35 million for the third quarter of 2004 compared to $39 million for the same period of 2003. Increased transportation and gas gathering margins were more than offset by higher operation and maintenance expenses primarily related to pipeline integrity expenditures and litigation settlement costs. Operating income for the nine months ended September 30, 2004 was $123 million compared to $124 million for the same period of 2003. Other Operations The company's other operations reported an operating loss of $4 million for the third quarter of 2004 compared to operating income of $1 million for the same period of 2003. The operating loss for the nine months ended September 30, 2004, was $17 million compared to an operating loss of $16 million for the same period of 2003. Interest Expense Interest expense incurred for the third quarter of 2004 was $206 million compared to $238 million for the same period of 2003. In accordance with Emerging Issues Task Force Issue No. 87-24, "Allocation of Interest to Discontinued Operations", the company reclassified interest to discontinued operations of Texas Genco according to the terms for debt repayment in the respective credit facilities in effect for each period. After reflecting the reclassification of interest expense to discontinued operations and interest incurred by discontinued operations of $14 million for the third quarter of 2004 and $54 million for the same period of 2003, interest expense related to continuing operations was $192 million in 2004 and $184 million in 2003. Interest expense incurred for the nine months ended September 30, 2004, was $621 million in 2004 compared to $712 million for the same period of 2003. After reflecting the reclassification of interest expense to discontinued operations and interest incurred by discontinued operations of $38 million for the nine months ended September 30, 2004, and $181 million for the same period of 2003, interest expense related to continuing operations was $583 million for 2004 and $531 million for the same period of 2003. Discontinued Operations Due to the pending sale of the company's interest in Texas Genco, the electric generation segment has been reclassified as discontinued operations in the third quarter of 2004. As a result of the sale, the company recorded a $253 million loss related to the sale of Texas Genco and an additional loss of $93 million offsetting the company's 81 percent interest in Texas Genco's third quarter 2004 earnings. Until the sale of Texas Genco is complete, the company's interest in any Texas Genco earnings will be offset by an increased loss on the pending sale. Income from Texas Genco presented in discontinued operations was $87 million for the quarter and $36 million for the same period of 2003. For the nine months ended September 30, income from Texas Genco presented in discontinued operations was $192 million for 2004 and $66 million for the same period of 2003. These operations are presented as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long- Lived Assets", for all periods presented. Fourth Quarter Dividend The Board of Directors of CenterPoint Energy has not yet taken up the matter of a cash dividend for the fourth quarter, but is expected to do so at its meeting later in November. About the Company CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas, of which approximately 2,500 megawatts are currently in mothball status. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total over $19 billion. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at http://www.CenterPointEnergy.com/ * * * As reported in the Troubled Company Reporter on Nov. 16, 2004, Fitch Ratings affirmed the outstanding senior unsecured debt obligations of CenterPoint Energy, Inc., at 'BBB-'. Also affirmed are outstanding ratings of CNP subsidiaries CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. The Rating Outlook for all three companies has been revised to Stable from Negative. CHOICE ONE: Emerges from Bankruptcy Protection ---------------------------------------------- Choice One Communications successfully completed its previously announced "prepackaged" financial restructuring and emerged from chapter 11 as a strategically, operationally and financially strong company well-positioned for the long term. As a result of the restructuring process -- which began on October 6, 2004, and took just six weeks from start to finish -- the Company now enjoys substantially reduced debt, a stronger balance sheet and increased liquidity, enabling Choice One to remain a premier telecommunications provider. To support its future business activities and as part of the financial restructuring, the Company obtained $30 million of new financing provided by a subset of the Company's existing lenders. "We are grateful to our employees, customers, lenders and suppliers, whose strong and continued support allowed us to move through the reorganization process quickly, efficiently and effectively," said Steve Dubnik, President and Chief Executive Officer. "Our ability to achieve such a significant financial restructuring in less than two months is virtually unprecedented in our industry and leaves Choice One very well positioned to continue to serve our customers, create a dynamic work environment for our colleagues, and pursue additional opportunities for profitable growth." Choice One's Plan of Reorganization became effective on November 18, 2004. Under the Plan, which was confirmed by the U.S. Bankruptcy Court for the Southern District of New York on November 8, Choice One has: (i) converted approximately $404 million of outstanding senior debt into $175 million of new senior secured term notes with a six-year term and 90% of the common stock of the reorganized Company; (ii) converted approximately $252 million of outstanding subordinated debt into the other 10% of such common stock and into two series of seven-year warrants to purchase additional shares of common stock from the reorganized Company; and (iii) obtained a revolving credit facility of $30 million from a subset of its existing lenders to provide for ongoing working capital requirements. All existing preferred stock, common stock, options to purchase common stock and warrants will be cancelled to convert Choice One into a private company. Headquartered in Rochester, New York, Choice One Communications, Inc. -- http://www.choiceonecom.com/-- is an Integrated Communications Provider offering voice and data services including Internet solutions, to businesses in 29 metropolitan areas (markets) across 12 Northeast and Midwest states. Choice One reported $323 million of revenue in 2003, and provides services to more than 100,000 clients. The Company and its 18 debtor- affiliates filed for chapter 11 protection on October 5, 2004 (Bankr. S.D.N.Y. Case No. 04-16433). Jeffrey L. Tanenbaum, Esq., and Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the Debtors filed for bankruptcy, they reported $354,811,000 in total assets and $1,078,478,000 in total debts on a consolidated basis. CMS ENERGY: S&P Affirms BB Corp. Credit Rating with Stable Outlook ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'BB' corporate credit ratings on public utility holding company, CMS Energy Corporation, and its regulated utility subsidiary, Consumers Energy Company. Standard & Poor's also affirmed its 'BBB-' rating on Consumers Energy's first mortgage bonds. At the same time, Standard & Poor's revised its outlook on the companies to stable from negative for all entities. Jackson, Michigan-based CMS Energy had about $7.0 billion of debt outstanding as of September 30, 2004. The outlook revision reflects CMS Energy's significantly improved liquidity position, continued focus on its low-risk, core utility operations, and significant reduction of its parent level debt over the past few years from $5.6 billion at year-end 2001 to an expected $2.7 billion at year-end 2004. "CMS Energy has addressed most of its debt maturities through 2005 while maintaining an adequate liquidity position," said Standard & Poor's credit analyst Brian Janiak. "Nevertheless, the current ratings and stable outlook are contingent on the company maintaining adequate liquidity while it continues to focus primarily on its core utility operations and reduce its high leverage to further improve its financial profile," continued Mr. Janiak. Standard & Poor's also said that steady cash flow generation from regulated units, constructive regulatory decisions in a balanced and timely manner, as well continued access to capital markets are all incorporated into current rating stability. Erosion in utility operations and cash flow, an adverse change in the regulatory climate, or a weakened liquidity position in any combination will lead to a rating downgrade. COMDISCO HOLDING: Distributing $.0982 Per Right to Right Holders ---------------------------------------------------------------- Comdisco Holding Company, Inc, (OTC:CDCO) will make a cash payment of $.0982 per right on the contingent distribution rights (OTC:CDCOR), payable on December 10, 2004, to contingent distribution rights holders of record on November 30, 2004. Comdisco Holding Company has approximately 152.3 million contingent distribution rights outstanding. The company also reported that on November 15, 2004, a distribution of approximately $84.6 million was made to creditors in the bankruptcy estate of Comdisco, Inc., from the disputed claims reserve. Approximately $29.7 million was paid to newly allowed claimholders and the balance of approximately $54.9 million was redistributed to general unsecured creditors in a supplemental distribution. After giving effect to the most recent quarterly distribution, the present value of distributions to the initially allowed general unsecured creditors in the bankruptcy estate of Comdisco, Inc., is approximately $3.535 billion and the present value recovery to General Unsecured Creditors is approximately 97 percent. The remaining disputed claims in the bankruptcy estate of Comdisco, Inc., total approximately $204 million. Contingent Distribution Rights - Effect on Common Stock The plan of reorganization of the company's predecessor, Comdisco, Inc., entitles holders of Comdisco Holding Company's contingent distribution rights to share at increasing percentages in proceeds realized from Comdisco Holding Company's assets after the minimum percentage recovery threshold was achieved in May, 2003. The amount due contingent distribution rights holders is based on the amount and timing of distributions made to former creditors of the company's predecessor, Comdisco, Inc., and is impacted by both the value received from the orderly sale or run-off of Comdisco Holding Company's assets and on the resolution of disputed claims still pending in the bankruptcy estate of Comdisco, Inc. As the disputed claims are allowed or otherwise resolved, payments are made from funds held in a disputed claims reserve established in the bankruptcy estate for the benefit of former creditors of Comdisco, Inc. Since the minimum percentage recovery threshold has been exceeded, any further payments from the disputed claims reserve to former creditors of Comdisco, Inc., entitle holders of contingent distribution rights to receive payments from Comdisco Holding Company, Inc. The amounts due to contingent distribution rights holders will be greater to the extent that disputed claims are disallowed. The disallowance of a disputed claim results in a distribution from the disputed claims reserve to previously allowed creditors that is entirely in excess of the minimum percentage recovery threshold. In contrast, the allowance of a disputed claim results in a distribution to a newly allowed creditor that is only partially in excess of the minimum percentage recovery threshold. Therefore, any disallowance of the remaining disputed claims would require Comdisco Holding Company, Inc., to pay larger cash amounts to the contingent distribution rights holders that would otherwise be distributed to common shareholders. About Comdisco Comdisco filed for chapter 11 protection on July 16, 2001 (Bankr. N.D. Ill. Case No. 01-24795), and emerged from chapter 11 bankruptcy proceedings on August 12, 2002. The purpose of reorganized Comdisco is to sell, collect or otherwise reduce to money in an orderly manner the remaining assets of the corporation. Pursuant to Comdisco's plan of reorganization and restrictions contained in its certificate of incorporation, Comdisco is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose. Accordingly, within the next few years, it is anticipated that Comdisco will have reduced all of its assets to cash and made distributions of all available cash to holders of its common stock and contingent distribution rights in the manner and priorities set forth in the Plan. At that point, the company will cease operations and no further distributions will be made. John Wm. "Jack" Butler, Jr., Esq., Charles W. Mulaney, Esq., George N. Panagakis, Esq., Gary P. Cullen, Esq., N. Lynn Heistand, Esq., Seth E. Jacobson, Esq., Andre LeDuc, Esq., Christina M. Tchen, Esq., L. Byron Vance, III, Esq., Marian P. Wexler, Esq., and Felicia Gerber Perlman, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented Comdisco before the Bankruptcy Court. Evan D. Flaschen, Esq., and Anthony J. Smits, Esq., at Bingham Dana LLP, served as Comdisco's International Counsel. COMMERCE ONE: Selling Intellectual Property Assets -------------------------------------------------- Commerce One, Inc., (OTC: CMRCQ) is conducting an auction to sell its patents and patent applications relating to Web services. Web services are programmatic interfaces that can seamlessly travel among diverse networks and diverse applications and languages. Web services provide a standard way to interoperate among diverse software applications that run on diverse platforms. According to Wintergreen Research, in 2003, the Web services market, excluding portals, accounted for $208 million in revenue and could have a compound average growth rate of as much as 52% from 2003 through 2008. The Company believes it has developed an important patent portfolio for the emerging Web services market. This portfolio includes seven issued U.S. patents and 30 U.S. patent applications. In connection with its Chapter 11 proceeding, Commerce One is conducting an auction to sell its existing business operations, and a separate auction to sell its Web services patents and applications. Headquartered in San Francisco, California, Commerce One, Inc. -- http://www.commerceone.com/-- provides software services that enable businesses to conduct commerce over the Internet. Commerce One, Inc., and its wholly owned subsidiary, Commerce One Operations, Inc., filed for chapter 11 protection on Oct. 6, 2004 (Bankr. N.D. Calif. Case Nos. 04-32820 and 04-32821). Doris A. Kaelin, Esq., and Lovee Sarenas, Esq., at the Law Offices of Murray and Murray, represent the Debtors. When the Debtors filed for bankruptcy, they listed $14,531,000 in total assets and $12,442,000 in total debts. CONMED CORP: Moody's Places B2 Rating on $150M Senior Sub. Notes ---------------------------------------------------------------- Moody's Investors Service assigned a rating of B2 for ConMed Corporation's $150 million senior subordinated convertible notes, due 2024. Moody's also affirmed ConMed's existing ratings. The ratings outlook remains stable. Moody's took these rating actions: (i) Assign a B2 rating on ConMed's $150 million senior subordinated convertible notes, due 2024 (ii) Affirm the Ba3 rating on ConMed's $240 million guaranteed senior secured credit facility consisting of a $100 million revolving credit facility, due 2007, and a $140 million Term Loan B, due in 2009; (iii) Affirm ConMed's Senior Implied Rating of Ba3; (iv) Affirm ConMed's Senior Unsecured (non-guaranteed exposure) Issuer Rating of B1; and (v) Affirm a stable ratings outlook. The ratings reflect steady and consistent internal revenue growth, increasing operating cash flow, and a stable level of capital expenditures required to support its business plan. Despite increased debt associated with the recent $80 million acquisition of the Endoscopic Product Line from C. R. Bard and a higher debt to capitalization ratio of 42%, ConMed's credit metrics have improved. By the end of the 2004, the ratio of earnings before interest and taxes to interest is projected to expand to over 7.5 times and the ratio of adjusted free cash flow to adjusted debt should improve to approximately 18%. Supporting ConMed's ratings are favorable industry trends. Moody's expects that, as the populations of developed countries age and live longer, they will need more surgical procedures, creating a market for ConMed's products. Further, continued pressure to reduce healthcare costs has increased the demand for less invasive procedures, such as arthroscopy and endoscopy, which reduce the length of expensive hospital stays. Finally, concern with patient safety has augmented demand for disposables. Disposables accounted for 75% of ConMed's total sales in 2003, a proportion that is likely to hold over the rating horizon, lending stability to its cash flows and hence additional support to its ratings. The combination of these trends bode well for continued growth in ConMed's markets. ConMed's recent purchase of C.R. Bard's Endoscopic division fits with its long-term strategy of supplementing internal growth and development with acquisitions. The company will inherit sales of 50 people who target physicians who treat GI disorders. The new salesforce could potentially cross-sell some of ConMed's existing products. Further, the addition of the Endoscopic product line should accelerate the company's overall rate of revenue growth and stabilize gross margins. Lending further support to ConMed's ratings are: (1) the company's geographic and product diversification, vertically integrated and low manufacturing operations, (2) extensive marketing and product distribution infrastructure, (3) successful integration of acquisitions over the past few years, (4) minimal reimbursement pressure, and (5) the recent acceleration in the rate of internal growth. The company has established a strong market position in most of the markets that it serves. For example, the company is the second largest provider in its two most important markets, arthroscopy and powered instruments. ConMed also is also one of the leading providers of medical devices for the electrosurgery, ECG electrodes, and EndoSurgery markets. Somewhat mitigating ConMed's strong market share in its major markets is the intense competition that the company faces from larger and better-capitalized companies in a number of its businesses. Stryker, Tyco, Johnson and Johnson and 3M (patient care) all have significant positions in one or more of the sectors that ConMed serves. In addition, the company faces pricing pressure in its more commodity-like products such as surgical suction instruments, tubing and ECG electrodes. As these markets continue to mature, the company will continue to experience pricing and margin pressures. Lastly, ConMed has been reliant on acquisitions to enhance the overall growth of its revenues and cash flows. The stable rating outlook reflects Moody's expectation that ConMed will continue to grow revenue and cash flows at a moderate, mid- single digit rate, using its cash to fund capital expenditure and gradually reduce debt. It also reflects Moody's expectation that ConMed will continue to make relatively small, strategic acquisitions, reducing any temporary increase in debt needed for the purpose in the short term. If the company grows cash flows more rapidly than we expect, and uses the excess cash flows to retire debt, the company's outlook could become positive. ConMed has set its debt/total capitalization target at the 35-45% range, and is currently operating near the upper limit of that range. If it lowers its debt to total capitalization through issuing equity to retire debt in order to achieve it, its outlook could also improve. Conversely, if competitive pressures further retard revenue and cash flow growth, or additional acquisition financing increases the company's debt burden materially, its outlook could change to negative. ConMed has recently issued $150 million senior subordinated convertible notes, due 2024. The company will use the proceeds to repay $120 million of borrowings under its senior credit facility, some of which was incurred to effect the C.R. Bard product line acquisition, and to purchase $30.0 million shares of ConMed's common stock. The notes are convertible into common stock, and cash. The B2 rating on the senior subordinated convertible notes reflects the contractual subordination to senior debt at the issuing entity, ConMed. The rating also incorporates an effective subordination to total obligations at the operating subsidiaries. The senior subordinated convertible notes are not guaranteed. The affirmation of the Ba3 rating for the existing credit facility considers the bank debt's seniority, guarantees from subsidiaries, and a collateral package consisting of substantially all assets of the company. The senior credit facility, however, is placed at the same level of the senior implied rating due to the limitation of the collateral package, significant amount of intangible assets (67% of total assets), and the predominant amount of senior debt (72% of total adjusted debt). Located in Utica, New York, ConMed Corporation is a medical device manufacturer specializing in instruments, implants and video equipment for arthroscopic sports medicine and powered surgical instruments, such as drills and saws, for orthopedic, otolaryngology, neuro-surgery and other surgical specialties. The company is a leading developer, manufacturer and supplier of radio frequency electrosurgery systems used routinely to cut and cauterize tissue in nearly all types of surgical procedures, endoscopy products such as trocars, clip appliers, scissors and surgical staples and a full line of electrocardiogram electrodes for heart monitoring and other patient care settings. The company also offers integrated operating room systems and equipment. ConMed's products are used in a variety of clinical settings, such as operating rooms, surgery centers, physicians' offices and hospitals. In 2003, its consolidated revenues were approximately $497 million. CORPORATE BACKED: S&P Puts Junk Ratings on CreditWatch Developing ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on all classes of certificates issued by Corporate Backed Trust Certificates Series 2001-6 Trust and Corporate Backed Trust Certificates Series 2001-19 Trust on CreditWatch with developing implications. Both series are swap-independent synthetic transactions that are weak-linked to the underlying securities, Delta Air Lines Inc.'s 8.3% senior unsecured notes due December 15, 2029. The rating actions reflect the November 12, 2004, placement of the senior unsecured debt ratings on Delta Air Lines Inc. on CreditWatch developing. A copy of the Delta Air Lines Inc.-related research analysis dated November 12, 2004, is available on RatingsDirect, Standard & Poor's Web-based credit analysis system. Ratings Placed On Creditwatch Developing Corporate Backed Trust Certificates Series 2001-6 Trust $57 million corporate-backed trust certificates series 2001-6 Rating ------ Class To From ----- -- ---- A-1 C/Watch Dev C A-2 C/Watch Dev C A-3 C/Watch Dev C Corporate Backed Trust Certificates Series 2001-19 Trust $27 million corporate-backed trust certificates series 2001-19 Rating ------ Class To From ----- -- ---- A-1 C/Watch Dev C A-2 C/Watch Dev C DEKALB COUNTY: S&P Slices Ratings on $1.9 Million Bonds to B- ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on DeKalb County Housing Authority, Georgia's $1.9 million Section 8 assisted first-lien revenue bonds series 1994A (Macon Gardens project) to 'B-' from 'B'. The outlook is stable. The downgrade reflects the continued decline in debt service coverage to 0.72x maximum annual debt service (MADS) for the fiscal year ended 2003. The latest audited financial statements for the fiscal year ended December 31, 2003, indicate that the performance of the property continued to decline with debt service coverage of 0.72x MADS, down from 0.81x MADS for the fiscal year ended December 31, 2002, and 0.97x MADS for the fiscal year ended December 31, 2001. Average gross rental income for the project for fiscal 2003 slightly increased to $461 per unit per month, from $450 per unit per month. According to the project manager report, gross monthly contract rent per unit for 2004 is also at $461, indicating that that project has not received a rental increase. The last rental increase was received during 2003. The rents at the property are currently below fair market rents at 82%. Projects with rents below HUD's fair market rent may receive rent increases. The expense ratio for fiscal 2003 is at 65%, higher than 60% for fiscal 2002. Annual expenses per unit for the fiscal 2003 are at $3,535, significantly higher than $3,236 for fiscal 2002. DIGITAL LIGHTWAVE: Nasdaq Confirms Non-Compliance of Rules ---------------------------------------------------------- Digital Lightwave, Inc., notified the Nasdaq Stock Market, Inc., that Jeffery S. Chisholm, a member of the Board of Directors and Chairman of the Audit Committee, resigned from the Board, effective October 26, 2004. The Company acknowledged that as a consequence of the resignation, it was not compliant with Nasdaq's independent director and Audit Committee requirements as set forth in Marketplace Rule 4350. On November 8, 2004, Nasdaq confirmed that the Company no longer complies with Nasdaq Marketplace Rule 4350(c)(1) and 4350(d)(2)(A). Nasdaq also confirmed to the Company that Nasdaq Marketplace Rule 4350(c)(1) and 4350(d)(4) provides for a cure period until the earlier of the Company's next annual shareholders' meeting or one year from the occurrence of the event that caused the failure to comply with these requirements, in order to regain compliance. The Company intends to regain compliance with Nasdaq Marketplace Rule 4350 as promptly as possible. Based in Clearwater, Florida, Digital Lightwave, Inc., provides the global communications networking industry with products, technology and services that enable the efficient development, deployment and management of high-performance networks. The Company's customers -- companies that deploy networks, develop networking equipment, and manage networks -- rely on its offerings to optimize network performance and ensure service reliability. The Company designs, develops and markets a portfolio of portable and network-based products for installing, maintaining and monitoring fiber optic circuits and networks. Network operators and telecommunications service providers use fiber optics to provide increased network bandwidth to transmit voice and other non-voice traffic such as Internet, data and multimedia video transmissions. The Company provides telecommunications service providers and equipment manufacturers with product capabilities to cost-effectively deploy and manage fiber optic networks. The Company's product lines include: Network Information Computers, Network Access Agents, Optical Test Systems, and Optical Wavelength Managers. The Company's wholly owned subsidiaries are Digital Lightwave (UK) Limited, Digital Lightwave Asia Pacific Pty, Ltd., and Digital Lightwave Latino Americana Ltda. At September 30, 2004, Digital Lightwave, Inc.'s balance sheet showed a $22,560,000 stockholders' deficit, compared to a $21,140,000 deficit at December 31, 2003. DIGITAL LIGHTWAVE: Names Daniel Lorch as Chief Operating Officer ---------------------------------------------------------------- Digital Lightwave Inc.'s Board of Directors appointed Daniel Lorch, age 53, as Chief Operating Officer of the Company on November 8, 2004. In this newly created position, Mr. Lorch will report to James Green, President and Chief Executive Officer. Mr. Lorch joined the Company in June 1996 and has served most recently as Senior Vice President of Global Supply, beginning in May 2003. In his previous responsibilities with the Company, Mr. Lorch served as Vice President Network Management Services, Vice President Customer Development and Senior Director Customer Service and Support. Prior to joining the Company, from 1980 to 1996, Mr. Lorch served as Chief Executive Officer and President of Digital Engineering, Inc., a nationwide field service and computer maintenance company. Based in Clearwater, Florida, Digital Lightwave, Inc., provides the global communications networking industry with products, technology and services that enable the efficient development, deployment and management of high-performance networks. The Company's customers -- companies that deploy networks, develop networking equipment, and manage networks -- rely on its offerings to optimize network performance and ensure service reliability. The Company designs, develops and markets a portfolio of portable and network-based products for installing, maintaining and monitoring fiber optic circuits and networks. Network operators and telecommunications service providers use fiber optics to provide increased network bandwidth to transmit voice and other non-voice traffic such as Internet, data and multimedia video transmissions. The Company provides telecommunications service providers and equipment manufacturers with product capabilities to cost-effectively deploy and manage fiber optic networks. The Company's product lines include: Network Information Computers, Network Access Agents, Optical Test Systems, and Optical Wavelength Managers. The Company's wholly owned subsidiaries are Digital Lightwave (UK) Limited, Digital Lightwave Asia Pacific Pty, Ltd., and Digital Lightwave Latino Americana Ltda. At September 30, 2004, Digital Lightwave's balance sheet showed a $22,560,000 stockholders' deficit, compared to a $21,140,000 deficit at December 31, 2003. DORSET CDO: Fitch Affirms Junk Ratings on Five Note Classes ----------------------------------------------------------- Fitch Ratings affirmed the rating on one class of notes issued by Dorset CDO Ltd.: -- $260,223,851 class A notes affirmed at 'CCC+'; -- $10,000,000 class B notes remain at 'C'; -- $12,000,000 class C notes remain at 'C'; -- $10,000,000 class D notes remain at 'C'; -- $10,000,000 class E notes remain at 'C'. Dorset is comprised of a static portfolio of assets held physically, as well as a series of assets that are referenced through a credit-linked note -- CLN. Assets held physically consist of corporate bonds and sovereign debt, while asset-backed securities -- ABS -- are referenced through the CLN. Since the previous rating action on February 11, 2004, negative performance by certain assets has been mitigated by improved performance from other assets and principal repayments to the class A notes allowing Dorset's performance to remain stable. Dorset's class A notes are currently receiving their coupon; however, Fitch anticipates an impairment to the principal of the notes. EDISON ASSOCIATES: Files Chapter 22 Petition in S.D. New York ------------------------------------------------------------- Edison Associates, LP, returned to the U.S. Bankruptcy Court for the Southern District of New York, filing another chapter 11 petition on November 17, 2004. Edison Associates' first filed for bankruptcy on February 9, 2001, after a $20,160,000 judgment was entered against them and in favor of its former employee, Steven Minichello. The Honorable Cornelius Blackshear dismissed the case on March 27, 2003, at the U.S. Trustee's request. In its second bankruptcy filing, Edison Associates seeks to protect its assets while it continues to resolve its liability to the New York State Department of Taxation and Finance, and the Internal Revenue Service. The New York Tax Department and the IRS each asserts a $1 million claim relating to tax and penalties. Headquartered in New York, New York, Edison Associates LP -- http://www.thesupperclub.com/-- operates The Supper Club, a popular restaurant & nightclub. The Supper Club features live entertainment and hosts private parties. The Company first filed for chapter 11 protection on February 9, 2001, in the U.S. Bankruptcy Court for the Southern District of New York. The case was dismissed on March 27, 2003, by Judge Cornelius Blackshear. The Company filed another chapter 11 petition on November 17, 2004 (Bankr. S.D.N.Y. Case No. 04-17375). Ellen Werfel-Martineau, Esq., at Stein Riso Mantel, LLP, represents the Company in its restructuring efforts. In the Company's second bankruptcy filing, it estimates assets and debts between $1 million and $10 million. EDISON ASSOCIATES LP: Case Summary & Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Edison Associates LP dba The Supper Club 240 West 47th Street New York, New York 10036-6002 Bankruptcy Case No.: 04-17375 Type of Business: The Company operates The Supper Club, a popular restaurant & nightclub. The Supper Club features live entertainment and hosts private parties. See http://www.thesupperclub.com/ Chapter 11 Petition Date: November 17, 2004 Court: Southern District of New York (Manhattan) Debtor's Counsel: Ellen Werfel-Martineau, Esq. Stein Riso Mantel, LLP 254 South Main Street New City, New York 10956 Tel: (845) 634-1010 Fax: (845) 634-8317 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 21 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Edison Management, Inc. $300,000 228 West 47th Street New York, New York 10036 New York State Department Tax penalties $211,000 Tax & Finance Bankruptcy Unit PO Box 5300 Albany, New York 12205 MAS Security $81,008 295 Route 46 West, Suite 202 Fairfield, New Jersey 07004 Internal Revenue Service Tax penalties $50,000 SPB - BNKY Section, 5th Floor PO Box 2899 Church Street Station New York, New York 10008 Demasco, Sena & Jahelka LLP $44,410 Tuttle Hospitality $40,000 Eisenberg, Tanchum & Levy $34,996 Guest Informant $20,000 Sonnier and Castle $16,902 American Telecollect $9,798 BML Stage Lighting Company Inc. $7,416 Central Fish Market of New York $5,903 Global Coverage Inc. $5,903 Cananwill Universal Premium $5,689 Financing I CTM Brochure Display $5,636 Imperial A.I. Credit $5,228 Companies, Inc. 4 Wall Entertainment - East $5,126 Szabo Associates Inc. $4,500 BMI General Licensing $4,474 Overall Supply Inc. $4,335 Riviera Produce Corporation $4,335 ENRON CORP: Court Sets Nov. 29 as Distribution Record Date ---------------------------------------------------------- The Record Date, as defined in the Chapter 11 Plan of Reorganization of Enron Corporation and its debtor-affiliates, refers to the date or dates established by the U.S. Bankruptcy Court for the Southern District of New York for the purpose of determining the holders of Allowed Claims and Allowed Equity Interests entitled to receive distributions. In the Confirmation Order, the Distribution Record Date was determined to be July 15, 2004. Pursuant to the Plan, on the Effective Date, all Enron Preferred Equity Interests and Enron Common Equity Interests will be cancelled and will be of no force and effect. Public trading of the equity interests will, therefore, cease on or before the close of business on the Effective Date. A Preferred Equity Trust and a Common Equity Trust have been established pursuant to the Plan. Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, in New York, relates that certain Plan provisions require the Preferred Equity Trustee to annually send to each holder of a Preferred Equity Trust Interest and the Common Equity Trustee to each holder of a Common Equity Trust Interest, a statement setting forth the holder's share of items of income, gain, loss, deduction or credit -- the Tax Activity -- for federal income tax return purposes. According to Mr. Rosen, the Debtors are prepared to make distributions to the holders of Allowed Claims. However, there has been some confusion with regard to the Record Date. To accommodate creditors that have transferred their claims after the Confirmation Date or may wish to transfer their claims, the Debtors want to adjust the Record Date to occur after the Plan Effective Date. This way creditors will have advance notice of the Record Date. If the Record Date is adjusted, Mr. Rosen says, the Debtors will continue to recognize claims transfers on or before November 29, 2004. In aid of the consummation of the Plan, the Debtors ask Judge Gonzalez to: (a) establish November 29, 2004, as the Record Date for distribution purposes; (b) clarify the Preferred Equity Trustee's and the Common Equity Trustee's reporting obligations in respect of Tax Activity; and (c) approve a revised form of notice of the Effective Date, which includes clarifications to the Record Date. * * * "Motion granted," Judge Gonzalez rules. Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. 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. 130; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Oregon Electric Explains Portland General Bid --------------------------------------------------------- Oregon Electric Utility Company submitted its opening brief to the Oregon Public Utility Commission summarizing the definitive "net benefits" of its proposal to purchase Portland General Electric. The filing is part of the official OPUC review process, which includes opening briefs from Oregon Electric and other parties. Reply briefs will be filed on December 3, with oral arguments to be held before the PUC Commissioners on December 13, 2004. "Our brief crystallizes Oregon Electric's compelling proposal to invest in the future success and stability of PGE." said Peter O. Kohler, M.D., prospective board chairman of Oregon Electric and PGE. "In addition to undeniable benefits for customers, we have also agreed to conditions that protect PGE's customers. These are the most extensive conditions ever agreed to in a PUC filing." In its brief, Oregon Electric details the clear, concrete, and irrefutable benefits of its proposal, including: -- A guaranteed $43 million rate credit to PGE customers. The rate credit would be payable over five years beginning in 2007. -- Assurance that PGE's headquarters will stay in Portland, jobs will stay in Oregon, and PGE will continue its charitable leadership in the community. -- $94 million in contractual protection for PGE against potential liabilities and losses unrelated to Enron, in addition to contractual protection against Enron-related liabilities in an amount up to $1.25 billion. The $94 million would be placed in an escrow account in case it is ever needed by PGE. -- Strong leadership and local representation through the appointment of seven Oregonians, an Oregon Chairman, and nationally recognized business leaders to the PGE Board. -- An immediate end to the uncertainties and distractions of Enron ownership. -- Substantial future capital reinvestment in PGE, ensuring reliability and efficiency from existing assets and the acquisition and development of new resources. -- A 10-year extension of PGE's Service Quality Measures. None of the benefits of Oregon Electric's proposal will be available to PGE customers if the proposal does not move forward. "The only viable alternative if our proposal fails to be approved is that Enron's ownership of PGE will persist for the foreseeable future," said Tom Walsh, prospective board member of Oregon Electric. "The Bankruptcy Court has already approved the 'spin' of PGE stock to Enron's creditors as the alternative, which will take many years to accomplish," Mr. Walsh added. "We cannot afford to lose another company headquartered in Oregon," said Duane McDougall, prospective Oregon Electric board member and former CEO of Willamette Industries. "Unlike Enron or any possible public owner, Oregon Electric will be a significant Oregon corporate taxpayer, expecting to add approximately $50 million to the state's coffers over the next five years. Those funds are desperately needed to invest in Oregon's education system, among other priorities." Oregon Electric is a new Oregon company formed for the sole purpose of investing in Portland General Electric. Oregon Electric's goal is to maintain PGE as an independent utility based in Oregon, serving local customers and contributing to the health of the community and the growth of the regional economy. The company is backed by Texas Pacific Group, one of the leading private equity firms in the country. In addition, respected Northwest leaders and industry experts have committed to join the new PGE board upon approval of the transaction. They include: -- Peter Kohler, M.D., President of Oregon Health & Science University -- Kirby Dyess, Principal with Austin Capital Management, LLC and former Corporate Vice President and Director of Operations at Intel Capital -- Maria Eitel, President, Nike Foundation, and Senior Advisor, Nike, Inc. -- Gerald Grinstein, CEO, Delta Air Lines, Inc., and Principal, Madrona Investment Group LLC -- Jerry Jackson, former Arkansas Public Utility Commissioner and former Executive Vice President and Group President, Utility Operations, Entergy Corporation -- Duane McDougall, former President and CEO, Willamette Industries, Inc. -- Robert Miller, Chairman, Rite Aid Corp., and former CEO, Fred Meyer, Inc. -- M. Lee Pelton, Ph.D., President, Willamette University -- Tom Walsh, President, Tom Walsh & Co. In addition, Peggy Fowler, CEO of PGE, and David Bonderman and Kelvin Davis, partners of Texas Pacific Group, will also join the Board. On November 18, 2003, Oregon Electric signed a binding agreement with Enron to acquire all of Portland General Electric for approximately $2.35 billion. The Oregon Electric proposal is now pending review and approval before the Oregon Public Utility Commission. Oregon Electric's Proposal to Purchase PGE A Summary of Benefits In its filing on October 11, 2004, Oregon Electric restated the reasons why its acquisition of PGE would result in a net benefit to PGE's customers. If the Oregon Electric proposal is approved, the following benefits will be achieved: -- An end to Enron: An immediate end to Enron's ownership of PGE, ensuring renewed stability and certainty backed by responsible shareholder support -- A $43 million rate credit: Customers will receive a total rate credit of $43 million, to be paid over five years beginning in 2007 -- Local headquarters remain: PGE's headquarters will stay in Portland, jobs will stay in Oregon, and PGE will continue its charitable leadership in the community -- The creation of a new board with substantial local representation: Oregon Electric has designated seven leading Oregonians to serve on the PGE Board, including an Oregon Chairman -- Protection against Enron-related and other liabilities: PGE will benefit from certain contractual protections from Enron provided under the purchase contract against potentially significant Enron-related liabilities and losses and against certain other non-Enron related liabilities and losses -- Service quality: A commitment to reinforcing high quality service standards, including a 10-year extension of service quality measures that are currently in place -- Addressing customer concerns: Periodic access by customer organizations and other PGE stakeholder groups to the PGE Board of Directors, providing these constituencies with the opportunity to voice concerns directly to the board -- Capital reinvestment: Substantial future capital reinvestment in PGE, ensuring reliability and efficiency from existing assets and the acquisition and development of new resources -- Long-term efficiency and cost-effectiveness: A commitment to undertaking a comprehensive review of the company post-closing, with the goal of identifying efficiency and productivity gains that ensure customers receive safe and reliable electricity as cost-effectively as possible -- An Oregon taxpayer: Oregon Electric will be a substantial Oregon taxpayer and will not consolidate its returns with any other operating company, as happened in the Enron era -- More renewables: A commitment to vigorously pursue a target of using cost- effective renewable resources to fulfill 10 percent of PGE's peak capacity by 2012 -- Organizational accountability for environmental initiatives: The appointment of a manager within PGE with the appropriate responsibility and authority to work with the advocacy groups for renewable energy sources, sustainability, energy efficiency, and environmental matters -- Greater assistance to low-income customers: A doubling of cash contributions for the next 10 years that PGE currently makes to Oregon HEAT, a non-profit organization that assists low-income families in paying utility bills, which will be paid for with Oregon Electric shareholder (rather than customer) funds Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. ENRON CORP: Court Approves Nov. 30 Auction of Bridgeline Interests ------------------------------------------------------------------ The Honorable Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York approved the sale of Enron North America Corp., Louisiana Resources Company, LRCI, Inc., Louisiana Gas Marketing Company, and LGMI, Inc.'s interests in Bridgeline Holdings, LP, and Bridgeline, LLC, to Targa Bridgeline, LLC, subject to higher and better offers, pursuant to a Purchase and Sale Agreement. Enron North America, Louisiana Resources, LRCI, Louisiana Gas, and LGMI are debtor-affiliates of Enron Corporation. Targa Bridgeline is a limited liability company. Targa Bridgeline's parent, Targa Resources, Inc., is a Delaware corporation. The Debtors sought and obtained the Court's permission to: (a) schedule an Auction on November 30, 2004, at which the Debtors will solicit bids for their interests in Bridgeline Holdings, LP, and Bridgeline, LLC; (b) approve their proposed Bidding Procedures; and (c) schedule a hearing on December 2, 2004, at 10:00 a.m. Eastern Time, to approve the sale of the Bridgeline Interests to the winning bidder at the Auction. The Purchase and Sale Agreement Under the terms of the Purchase and Sale Agreement, the Debtors will sell and assign the Bridgeline Interests to Targa Bridgeline. The principal terms of the Purchase Agreement are: A. Purchase Price -- $100,000,000, be subject to adjustments B. Deposit -- $10,000,000 and will expire not sooner than May 20, 2005 C. Sale and Purchase of the Bridgeline Interests On the Closing Date, the Debtors will sell, assign, transfer, convey and deliver to Targa Bridgeline and Targa will purchase from the Debtors, the Bridgeline Interests pursuant to an Assignment and Assumption Agreement. Under the Assignment and Assumption Agreement, the Debtors will also transfer to Targa all of their obligations, liabilities and duties that arise out of the Bridgeline Interests from and after the Effective Time and Targa will assume and discharge, all of the Debtors' obligations, liabilities and duties arising out of the Bridgeline Interests from and after the Effective Time. D. Payment of Purchase Price At the Closing, upon satisfaction or waiver of the closing conditions set forth in the Purchase Agreement, Targa Bridgeline and the Debtors will execute and deliver the Closing Notice, to the Escrow Agent regarding the return to Targa of the undrawn Deposit Letter of Credit, provided that the Closing Notice will not be delivered to the Escrow Agent until the Bank receives confirmation that the Debtors have received the Purchase Price. At the Closing, Targa will pay the Debtors or their designee, the Purchase Price by wire transfer of immediately available funds into an account the Debtors designate. The parties agree to pay, if applicable, the True-up Amount in accordance with the Purchase Agreement. E. Time and Place of Closing The closing of the sale and purchase will take place at the offices of LeBoeuf Lamb Greene & MacRae, LLP, located at 1000 Main Street, Suite 2550, in Houston, Texas, at 10:00 a.m. local time, on the second business day after the conditions to Closing pursuant to the Purchase Agreement, have been satisfied or waived by the party entitled to waive the condition. F. Termination of Agreement The Purchase Agreement may be terminated: (a) Prior to the Closing Date by: * the mutual written consent of the Debtors and Targa Bridgeline; or * either the Debtors or Targa if the Closing has not occurred on or before March 31, 2005; (b) By the Parties' written agreement -- the Outside Date -- provided that the terminating party is not in default of its obligations in any material respect, provided further that if the Debtors and Targa are in default of their obligations in any material respect, then the Purchase Agreement will terminate automatically as of the Outside Date; (c) By either the Debtors or Targa, if consummation of the transaction becomes illegal or prohibited or if any final and non-appealable order is entered by a Governmental Authority of competent jurisdiction permanently restraining, prohibiting or enjoining the Parties from consummating the transactions; or (d) By the Debtors, at any time after they enter into an agreement with respect to an Alternative Transaction, or by Targa, upon, but not prior to, the closing of an Alternative Transaction. G. Alternative Transaction Until the earlier of the Closing or the termination of the Purchase Agreement, the Debtors will be permitted to solicit inquiries, proposals, offers or bids from, and negotiate with, other persons or entities, relating to the sale, transfer or other disposition of all or substantially all of the Bridgeline Interests or the assets of the Partnership and may take any other affirmative action to cause, promote or assist with any transaction by a third party provided that the Debtors may only enter into, and seek Court approval of, any definitive agreement if the Alternative Transaction is a Superior Transaction. H. Targa Resources Guarantee Targa Resources guarantees to the Debtors the due and punctual performance and discharge of all of Targa Bridgeline's obligations under the Purchase Agreement. I. Termination of CVX Trade Credit Support Targa Bridgeline recognizes that, in connection with the Partnership Credit Agreement, CVX has provided credit support to the Partnership pursuant to the CVX Support Agreement and the guarantees issued by CVX thereunder. As of the Closing Date, Targa Bridgeline will provide a share of the CVX Trade Credit Support as required in the Settlement Agreement. J. Debtors' Obligations The obligations and liabilities of each of the Debtors under the Purchase Agreement will be several in nature, and not joint. The Debtors tell the Court that they no longer have any need or use for their Bridgeline Interests. The Purchase Agreement was negotiated at arm's length and in good faith and represents fair market value for the Bridgeline Interests and the LLC Interest, the Debtors assert. Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. 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. 129; Bankruptcy Creditors' Service, Inc., 15/945-7000) EXIDE TECH: Faces $35 Mil. Claim for Environmental Cleanup Costs ---------------------------------------------------------------- In October 2004, the U.S. Environmental Protection Agency, in the course of negotiating the government's prepetition claim with Exide Technologies, notified the company of the possibility of approximately $35,000,000 in additional cleanup costs associated with the remediation of Exide's Hamburg, Pennsylvania properties. To date, the EPA has not made a formal claim for this amount or provided support for these estimates. Although Exide does not believe that there is a basis for the claim, J. Timothy Gargaro, Exide Technologies' Executive Vice-President and Chief Financial Officer, discloses in a regulatory filing with the Securities and Exchange Commission that if the government proceeds with an action and prevails, the amounts of the claim, when added to all other reserved claims, could result in an inadequate reserve of new common stock and Warrants to resolve all those claims. In lieu of paying any increased costs, according to Mr. Gargaro, Exide would still retain the right to perform the cleanup activities, which would preserve its existing reserved common stock and Warrants. Because Exide does not believe that there is a basis for the EPA claim and because of its prepetition status, no provisions have been recorded in connection the claim. Headquartered in Princeton, New Jersey, Exide Technologies is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on April 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 56; Bankruptcy Creditors' Service, Inc., 215/945-7000) FEDERAL-MOGUL: T&N Pension Plan Trustees May Vote to Reject Plan ---------------------------------------------------------------- Justice Patten of the U.K. High Court rules that the Turner & Newall Pension Plan Trustees may vote against the U.S.-filed restructuring plan, without breaching their fiduciary duty to the Pension Plan members, The Telegraph reports. T&N has asserted that the plan filed for Federal-Mogul Corporation in the U.S. bankruptcy courts is structurally unfair. Federal-Mogul is the parent company of T&N. In a separate news report, Federal-Mogul promised to honor its pension fund obligations and pay its 2004 contribution amounting to $25 million. "Federal-Mogul Corp. will pay the minimum legally required contribution to Turner & Newall Plc's pension fund for the next 10 years even after the company went into bankruptcy," Bloomberg News reports, citing a Financial Times interview with Federal- Mogul interim Chief Executive Steve Miller. 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 their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) FERNDALE EXIT: Case Summary & 8 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: Ferndale Exit 262 Limited Partnership 5600 Via Elena Tucson, Arizona 85718 Bankruptcy Case No.: 04-24603 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Ferndale Exit 262 Limited Partnership 04-24607 Number Two Type of Business: The Debtor owns and develops real property located at 5628 Barrett Road in Ferndale, Washington. Chapter 11 Petition Date: November 12, 2004 Court: Western District of Washington (Seattle) Judge: Philip H. Brandt Debtors' Counsel: James L. Day, Esq. Bush Strout & Kornfeld 601 Union Street, #5500 Seattle, WA 98101-2373 Tel: 206-292-2110 Fax: 206-292-2104 Total Assets Total Debts ------------ ----------- Ferndale Exit 262 Limited $4,919,645 $4,672,001 Partnership Ferndale Exit 262 Limited $3,426,553 $4,645,520 Partnership Number Two A. Ferndale Exit 262 Limited Partnership's 4 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Taplett Family Limited $1,500,000 Partnership P.O. Box 5008 Bellingham, WA 98227 Old Standard Life Note: Value of $3,100,000 Insurance Co. interest in same real Attn: Michael Brixey property that is held 601 West First Ave. by Debtor's affiliate Dept. 17100 is $1,838,232 Spokane, WA 99201 secured value: $2,757,348 Foster Pepper & Shefelman Attorney Fees $47,733 Whatcom County Treasurer Real Property Fees $24,269 B. Ferndale Exit 262 Limited Partnership Number Two's 4 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Taplett Family Limited $1,500,000 Partnership P.O. Box 5008 Bellingham, WA 98227 Old Standard Life Note: Value of $3,100,000 Insurance Co. interest in same real Attn: Michael Brixey property that is held 601 West First Ave. by Debtor's affiliate Dept. 17100 is $2,757,348 Spokane, WA 99201 secured value: $1,838,232 Foster Pepper & Shefelman Legal Fees $25,850 Whatcom County Treasurer $19,670 FRONTLINE CAPITAL: Asks Court to Extend Exclusive Periods --------------------------------------------------------- FrontLine Capital Group asks the U.S. Bankruptcy Court for the Southern District of New York for an extension until January 31, 2005, of its exclusive period to file a plan of reorganization. The Debtor also asks the Court to extend until March 31, 2005, its exclusive period to solicit acceptances of that plan. The Debtor is now in the process of reviewing and resolving claim issues and platforms with regards to its plan and disclosure statement. It stresses that an extension is essential to ensure its ability to formulate a viable plan. The Debtor assures the Court that an extension will not harm or prejudice creditors and adds that majority of its creditors support its request for an extension. Headquartered in New York, New York, FrontLine Capital Group, a holding company that manages its interests in a group of companies that provide a range of office related services, filed for chapter 11 protection on June 12, 2002 (Bankr. S.D.N.Y. Case No. 02-12909). Mickee M. Hennessy, Esq., at Westerman Ball Ederer & Miller, LLP, represents the Debtor in its restructuring efforts. As of March 31, 2002, the Company listed $264,374,000 in assets and $781,374,000 in debts. FULTON STREET: Moody's Reviewing Class C's Ba2 Rating ----------------------------------------------------- Moody's Investors Service placed under review for downgrade one class of notes issued by Fulton Street CDO, Ltd.: * the U.S. $7,000,000 Class C 12.39% Fixed Rate Notes due April 20, 2037 (currently rated Ba2). This transaction closed on March 27, 2002. According to Moody's, its rating action results primarily from significant credit deterioration of the collateral pool, as evidenced by the Moody's Maximum Rating Distribution Test (631 compared to a maximum of 450), the Class C Overcollateralization Test (99.6% compared to 100% required minimum), and the Weighted Average Coupon Test (7.498% compared to 7.65% required minimum). Moody's also noted that approximately 9.8% of the collateral pool currently has a Moody's rating of below Baa3 (5% limit). Rating Action: Review for Downgrade Issuer: Fulton Street CDO, Ltd. Class Description: U.S. $7,000,000 Class C 12.39% Fixed Rate Notes due April 20, 2037 Prior Rating: Ba2 Current Rating: Ba2 (under review for downgrade) GAYLORD: Moody's Rates Proposed $200M Senior Unsecured Notes B3 --------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to Gaylord Entertainment Company's proposed $200 million guaranteed senior unsecured notes due 2014. Moody's also affirmed the B3 rating on Gaylord's $350 million 8% guaranteed senior notes, due 2013, the B2 senior implied rating and Caa1 senior unsecured issuer rating. The outlook is stable. Proceeds from the proposed $200 million guaranteed senior unsecured note offering will be used to repay approximately $200 million of secured debt at Gaylord Nashville operating subsidiary. The ratings assignment and affirmation reflect Gaylord's high leverage, relatively weak coverage, and tight liquidity as well as the limited scope and modest scale of its operations compared to others in the industry and the risk associated with its current growth strategy, predominantly Gaylord National and Resort Quest -- RZT. The ratings also consider the challenges associated with the continuing integration of RZT and ramp-up of Gaylord Texan, and the potential cash tax liability associated with its Secured Forward Exchange Contract -- SFEC -- agreement in May 2007. However, the ratings also reflect Gaylord's core customer base which should provide a relatively high degree of certainty in regards to contracted bookings over the short term, the increased benefit of rotational bookings, and relatively good view of potential business near term. The ratings also incorporate Gaylord's somewhat steady RevPAR performance, the sizeable contribution from food and beverage to total RevPAR, and its brand recognition. As of September 30, 2004, leverage was high for the rating category at over 7.7x on an LTM adjusted EBITDA basis (excluding pre-opening costs but including non-cash rent expense of about $7.4 million related to the Florida ground lease), and is forecasted to stay around 7.0x for the full year 2004. However, Moody's expects leverage to moderate towards the 5.0x range by the end of 2005, which is more reflective of the current rating category. In addition, although the company was unable to cover gross interest on an LTM basis as of September 30, 2004, when non-cash interest associated with the SFEC agreement is excluded, approximately $6.8 million per quarter, unadjusted EBITDA coverage improves on an LTM basis to about 1.5x. Unadjusted EBITDA coverage increases to about 2.0x with the exclusion of all non- cash interest costs. Moody's also views the company's current liquidity as very modest with cash on hand of $73 million ($36 million unrestricted) and revolver availability of under $25 million after covenant restrictions. Moreover, with covenants tightening in the first quarter of 2005 Moody's believes the company will be challenged in its ability to meet some of these lower covenant levels as they stand in its current credit agreement. Gaylord also confirmed its intentions to begin building a new resort property along the Potomac River in Prince George's County, Maryland. The new project is scheduled to be completed in 2008 and the company has already received approval from Prince George's County for two bond offerings aggregating approximately $160 million. However, although the total amount and type of funding for the project has yet to be determined, the company has stated that it expects to finance a significant portion of the capital required to complete the construction of the project with secured debt. The ratings are supported by Gaylord's customer base, which focuses on large groups generating in excess of 200 peak room nights per event. These larger groups provide a relatively high degree of certainty in regards to contracted bookings over the near term and reasonable level of insight to potential business further out. The ratings also incorporate Gaylord's somewhat steady RevPAR performance historically, predominantly Opryland Nashville and more recently the Gaylord Palm in Florida, and the scale of its facilities which generate revenue from food and beverage that has recently exceeded that of its lodging revenues on a revenue per available room basis -- RevPAR. In addition, Gaylord Texan, which opened in April 2004, should continue to increase its contribution to consolidated earnings as its operating performance ramps-up to its expected potential. However, despite RevPAR performance, occupancy rates still remain below historic levels. For the nine month period ending September 30, 2004, total segment RevPAR, total RevPAR(including food and beverage), and occupancy rates were approximately $100, $220, and 71% respectively. The B3 rating on the senior unsecured notes also reflect the benefit of full and unconditional, joint and several, guarantees from each subsidiary that is a borrower or guarantor under the revolving credit facility, including Opryland Nashville once the repayment of the Nashville notes is complete. Although, even with these guarantees in place the notes will be contractually subordinated to potentially $100 million of secured bank debt if the revolver were fully drawn. Although Gaylord's capital structure will be without secured debt after the refinancing of the Nashville notes, Moody's believes planned capital requirements over the near term will be funded in large part by secured debt. The stable outlook reflects Moody's expectation that Gaylord's consolidated operating performance continues to improve as Texas continues to ramp-up and the integration of RZT moves ahead. The outlook also incorporates our expectation that management is able to significantly improve liquidity from current levels in the near term and the company can successfully address the potential cash tax liability of $156 million associated with SFEC in advance of its May 2007 maturity. However, despite an increase in operating performance any meaningful improvement in credit metrics over the intermediate term will be hampered by higher debt levels needed to finance the National project and the anticipated growth of RZT through 2008. Factors that would improve the current ratings and/or outlook would include a sustained improvement in credit metric with leverage on an unadjusted EBITDA to gross debt basis of under five times, gross interest coverage exceeding two times, and gross cash flow (before working capital) exceeding 10%, with sufficient liquidity to fund internal requirements for the following twelve to eighteen months. An inability to improve current liquidity on a sustainable basis or persistently high leverage resulting from a deterioration in operating performance or the inability to minimize the cost of the SFEG tax liability would negatively impact the rating and outlook. The proposed notes will be offered and sold in a privately negotiated transaction without registration under the Securities Act of 1933, under circumstances reasonably designed to preclude a distribution in violation of the Act. The issuance has been designed to permit resale under Rule 144A. Gaylord Entertainment Company is a diversified hospitality and entertainment company headquartered in Nashville, Tennessee. GAYLORD ENTERTAINMENT: S&P Rates Planned $200M Sr. Unsec. Notes B ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Gaylord Entertainment Company's proposed $200 million senior unsecured notes due 2014. Concurrently, Standard & Poor's revised its outlook on Gaylord to stable from negative, raised its rating on company's senior unsecured debt to 'B' from 'B-', and affirmed its 'B' corporate credit rating. Proceeds from the proposed note offering will be used to fully redeem the $193 million outstanding senior secured notes issued by Gaylord Opryland Hotel Nashville LLC, a subsidiary of Gaylord Entertainment Company. Pro forma for the notes offering as of Sept. 30, 2004, the company had about $552 million of debt outstanding. "The outlook revision reflects the successful ramp-up of Gaylord's new hotel in Grapevine, Texas [Gaylord Texan], which opened in April 2004, and additional visibility associated with spending related to the company's newest project, a 1,500-room property near Washington, D.C. [Gaylord National]," said Standard & Poor's credit analyst Sherry Cai. Based on preliminary information, Standard & Poor's expects that Gaylord National will be funded in a manner consistent with current ratings. Standard & Poor's revision of Gaylord's senior unsecured debt rating to 'B', the same level as the corporate credit rating, relates to a change in the capital structure stemming from the proposed refinancing. As a result of the repayment of the $193 million in secured debt issued by Gaylord Opryland, priority debt in the capital structure will be meaningfully reduced, and Gaylord Opryland will become a guarantor of the unsecured debt issued by Gaylord, including the new notes. The ratings on Gaylord reflect the company's: -- small hotel portfolio, -- active growth strategy, -- reliance on external sources of capital to fund growth, and -- potential challenges associated with the development of the sizable Gaylord National near Washington, D.C. Nashville, Tennessee-based Gaylord has four existing hotels: -- two located in Nashville, -- one in Orlando, Florida, and -- one in Texas. Gaylord Opryland, Gaylord Palms, and Gaylord Texan are large, convention-oriented properties, while the second property in Nashville is smaller, a 300-room Radisson that also targets group business. Gaylord also has media and entertainment holdings -- the Grand Ole Opry and the radio station 650 WSM-AM. However, the Nashville businesses are a relatively small part of the company, comprising only 9% of revenue in the first nine months of 2004. In addition, Gaylord purchased ResortQuest International Inc. in November 2003. ResortQuest operates in the highly fragmented vacation rental business and contributed about 31% of revenue year-to-date. The stable outlook reflects the successful ramp-up of Gaylord Texan and the expectation that the lodging industry and Gaylord will perform well in 2005. Moreover, Standard & Poor's now expects that Gaylord National will be funded in a manner consistent with current ratings. GENERAL GROWTH: S&P Cuts Rating on $1.7B Sr. Unsec. Notes to BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services removed its ratings on General Growth Properties, Inc., and the Rouse Company from CreditWatch negative following the November 12, 2004, completion of the merger of the two companies. The ratings were placed on CreditWatch with negative implications on August 20, 2004, following the announced merger. At the same time, the 'BBB-' corporate credit rating for General Growth Properties is affirmed and the 'BBB' corporate credit rating for The Rouse Company is withdrawn. Additionally, the rating assigned to roughly $1.7 billion of existing Rouse senior unsecured notes is lowered to 'BB+' from 'BBB-'. All other ratings are affirmed. The outlook is negative. General Growth announced its acquisition of Rouse Aug. 20, 2004. The $12.9 billion gross consideration includes: -- the $7.2 billion purchase of Rouse common equity at $67.50 per share, -- the assumption of roughly $1.7 billion of Rouse unsecured bonds, -- the assumption of $3.6 billion of Rouse mortgages, and -- the repayment of the Rouse unsecured credit facility (approximately $430 million outstanding). The merger will strengthen General Growth's market position and is expected to provide operating economies of scale and increase General Growth's influence with its retail tenants. The high quality Rouse portfolio ($448 sales per square feet) will also enhance asset quality, as sales per square foot are estimated at $385 on a combined basis versus the $370 industry average. General Growth's financial profile will remain weak for the rating in the near-to-medium term. In addition, the company faces integration and new business risk. While some of Rouse's management will likely be retained, General Growth has no prior experience developing master-planned communities. The company has been very successful in booking bank loan commitments. However, the rating would be lowered if expected refinancings prove more costly and time consuming, and/or if an integration stumble or weakened market conditions result in eroded value for either the acquired (fully-priced) Rouse assets or General Growth's existing business. GENTEK INC: S&P Places BB- Rating on CreditWatch Developing ----------------------------------------------------------- Standard & Poor's Ratings Services said that its 'BB-' corporate credit rating on Gentek Inc. remains on CreditWatch where it was placed March 26, 2004, but that it revised the implications to developing from positive. "The revision followed the company's announcement that it had retained Goldman, Sachs & Company to evaluate a possible sale of the company, which could lead to an increase in debt sufficient to cause a downgrade," said Standard & Poor's credit analyst Robert Schulz. "Alternatively, if growth plans and the resulting financial profile are considered to be improved and sustainable, an affirmation or modest upgrade is possible." All rated debt has been previously repaid in full with asset sale proceeds. Hampton, New Hampshire-based GenTek Inc. is a diversified provider of automotive and industrial products and specialty chemicals. The Krone telecommunications unit was sold earlier in 2004. The Krone unit had revenues of $316 million and adjusted operating income of $13 million in 2003, and GenTek had revenues of around $1 billion before the Krone sale. GenTek emerged from bankruptcy in November 2003. Key issues to be considered in resolving the CreditWatch include: -- Business strategy. GenTek's remaining businesses are still diverse; some are quite profitable, while others are more challenged. There is potential for fairly large shifts in the company's business mix as a potential new owner formulates strategy; and -- The financial structure resulting from a sale. Standard & Poor's will consider the impact of these issues on the company's prospective business and financial profile. Headquartered in Hampton, New Hampshire, GenTek Inc. -- http://www.gentek-global.com/-- is a technology-driven manufacturer of communications products, automotive and industrial components, and performance chemicals. The Company filed for Chapter 11 protection on October 11, 2002 (Bankr. D. Del. Case No. 02-12986) and emerged on Nov. 10, 2003 under the terms of a confirmed plan that eliminated $670 million of debt and delivered 94% of the equity in Reorganized GenTek to the Company's secured lenders. Old subordinated bondholders took a 4% slice of the equity pie and prepetition unsecured creditors shared a 2% stake in the Reorganized Company. Old Equity Interests were wiped out. Mark S. Chehi, Esq., and D.J. Baker, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represented the Debtors in their restructuring. When the Debtors filed for protection from its creditors, they listed $1,219,554,000 in assets and $1,456,000,000 in liabilities. GLOBAL CROSSING: Begins Implementing Restructuring Plan ------------------------------------------------------- On October 8, 2004, Global Crossing Limited's board of directors approved a restructuring plan designed to focus on businesses that are consistent with the Company's overall strategy-to be a premier provider of global data and Internet Protocol services by building on its extensive broadband network and technological capabilities. The restructuring plan involves concentrating the Company's efforts in areas that the Company anticipates will provide profitable growth opportunities and moving away from a number of unprofitable and non-strategic parts of the business. In a regulatory filing dated November 15, 2004, Daniel O'Brien, the Company's Executive Vice President and Chief Financial Officer, disclosed to the Securities and Exchange Commission that Global Crossing has begun to implement the restructuring plan during the fourth quarter of 2004. The Company has developed the restructuring plan in light of ongoing adverse conditions in the telecommunications industry, in particular the continued pricing pressures for telecommunications services. The Company believes that the implementation of the restructuring plan will, over time, reduce the Company's financing requirements, accelerate the date by which its operating cash flow will be sufficient to satisfy its anticipated liquidity requirements and lead to overall profitability for the Company. The restructuring plan has three principal elements: (1) The Company will downsize, discontinue, harvest or exit several business areas. These include small business and consumer local and long distance, financial industry trader voice, calling card, and other low margin services. The Company plans to accomplish this through a series of actions, including commercial actions intended to improve profitability and dispositions and other strategic alternatives. The most significant business that will be affected by these actions is the Company's legacy North American voice business. The Company anticipates that the restructuring actions will result in significant reductions in revenue from this business area, while continuing with a core, higher margin revenue base sufficient to maintain network efficiencies. (2) The Company will implement workforce reductions, facilities consolidation and other cost savings initiatives. The Company expects that these restructuring efforts will result in the elimination of approximately 600 positions, representing approximately 15% of its workforce, by March 2005 across a range of business functions and job classes, principally in the Company's North American operations. The Company expects to achieve approximately $40 to $45 million in annual cost savings from the elimination of these positions. As part of the restructuring plan, the Company also plans to close and consolidate a number of offices and other real estate facilities, with associated anticipated annual cost savings of approximately $1 to $2 million. The restructuring plan also includes outsourcing initiatives intended to reduce ongoing operating expenses, principally in the area of non-access related procurement. (3) The Company will place greater emphasis on several new business development initiatives in areas where it can capitalize on the Company's IP network and capabilities. These initiatives are focused principally on global IP offerings and new carrier data offerings and on expanding the Company's distribution capabilities through systems integrators and other indirect channels. The Company plans to redeploy certain personnel and reorganize its sales and marketing efforts around these initiatives. As a result of these efforts, the Company estimates that it will incur cash restructuring charges of approximately $12 to $14 million for severance and benefits in connection with the anticipated workforce reduction and approximately $4 to $5 million related to the real estate consolidation. In addition, the Company is in the process of identifying and evaluating specific vendor contracts implicated by the restructuring in order to estimate the associated restructuring charge, which is expected to be material. Once determined, that estimate will be disclosed in a subsequent SEC report. Based on current plans, the majority of the restructuring charges related to severance and benefits will occur in the final quarter of 2004 and the restructuring charges related to real estate consolidations and termination of vendor contracts will occur in 2005. As a result of these restructuring activities, the Company will perform a review of its long-lived assets to determine if any impairment exists. As of November 15, 2004, Global Crossing has eliminated approximately 250 employee positions under its restructuring plan. A full-text copy of the Restructuring Agreement dated October 8, 2004, is available for free at: http://sec.gov/Archives/edgar/data/1061322/000119312504197291/dex46.htm 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 December 9, 2003. (Global Crossing Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) HCA INC: S&P Puts BB+ Ratings on Senior Notes with Stable Outlook ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' rating to hospital operator HCA Inc.'s $500 million senior unsecured notes due December 1, 2009, and $750 million senior notes due January 15, 2015. These notes are being issued as a Rule 415 shelf drawdown. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating and its other outstanding ratings on the company. The outlook is stable. The proceeds of the senior unsecured notes will be used to repay outstanding borrowings under a $1.25 billion short-term loan facility. This facility was used only to help fund the company's $2.5 billion common stock share repurchase program that is under way as a modified "Dutch" auction. The rest of the share repurchase program will be funded from borrowings under HCA's new, unrated $2.5 billion bank credit facility. With the completion of this financing, total outstanding debt is about $11 billion. HCA is the largest owner and operator of acute-care hospitals, with a portfolio of 190 hospitals and 91 ambulatory surgery centers (of which seven hospitals and 10 ambulatory surgery centers are owned through equity joint ventures) in 23 states, the U.K., and Switzerland. Despite its aggressive financial policy, the company has: -- a reasonably diversified hospital portfolio, -- strong positions in several of its markets, and -- relatively favorable reimbursement. "Profitability will continue to be tied to changes in reimbursement rates by the government and other third-party payors that are under increasing pressure to contain their health care costs," said Standard & Poor's credit analyst David Peknay. "Payment rates from private insurers are still favorable. However, hospitals are experiencing declining levels of rate increases," he continued. Other key expense categories, like: -- labor, -- pharmaceuticals, and -- insurance, are chronically difficult to control. Still, the company's operating cash flow remains significant, and we expect the company to generate funds internally for the next couple of years in excess of capital needs. Nevertheless, credit protection will be more characteristic of a speculative-grade financial profile, which reflects the debt being incurred to finance its share repurchase program. S&P expects HCA's management to respond to weakness in operating performance or cash flow by scaling back discretionary spending to maintain credit measures characteristic of its current rating. HIGH ROCK: Wants Exclusive Filing Period Extended Until Feb. 10 --------------------------------------------------------------- High Rock Holding, LLC, asks the U.S. Bankruptcy Court for the District of Nevada for an extension of the period within which it alone can file a Disclosure Statement and Plan of Reorganization through and including February 10, 2005. The Debtor did not say when it wants its exclusive period to solicit acceptances of that plan extended. High Rock owns substantial assets consisting of approximately 9,000 acres of land and approximately 20,000 acres of certificated water rights in Washoe County, Nevada. High Rock representatives are still continuing to explore a variety of investment proposals and alternative financing agreements in relation to those assets that could be part of implementing a viable Plan of Reorganization, hence the Debtor's request for an extension of its exclusivity period. The Court will convene a hearing at 2:30 p.m., on Dec. 15, 2004, to consider the Debtor's request. Headquartered in Sparks, Nevada, High Rock Holding, LLC, owns and develops real estate. The Company filed for chapter 11 protection on July 15, 2004 (Bankr. D. Nev. Case No. 04-52135). Jeffrey L. Hartman, Esq., at Hartman & Hartman, represents the Debtor in its restructuring. When the Debtor filed for chapter 11 protection, it listed $30 million in total assets and $14,322,684 in total debts. HIGH ROCK: Creditors Must File Proofs of Claim by November 22 ------------------------------------------------------------- The United States Bankruptcy Court for the District of Nevada set November 22, 2004, as the deadline for all creditors owed money by High Rock Holding, LLC, on account of claims arising prior to July 15, 2004, to file their proofs of claim. Creditors must file their written proofs of claim on or before the November 22 Claims Bar Date and those forms must be delivered to: Clerk of the Bankruptcy Court District of Nevada 300 Booth Street Reno, Nevada 89509 Headquartered in Sparks, Nevada, High Rock Holding, LLC, owns and develops real estate. The Company filed for chapter 11 protection on July 15, 2004 (Bankr. D. Nev. Case No. 04-52135). Jeffrey L. Hartman, Esq., at Hartman & Hartman, represents the Debtor in its restructuring. When the Debtor filed for chapter 11 protection, it listed $30 million in total assets and $14,322,684 in total debts. HORIZON PCS: Sept. 30 Balance Sheet Upside-Down by $593.8 Million ----------------------------------------------------------------- Horizon PCS, Inc. (Pink Sheets:HZPS), a PCS affiliate of Sprint (NYSE:FON), reported it financial results for the third quarter and nine months ended September 30, 2004. Performance Highlights -- Roaming revenues, which consist of Sprint travel, non-Sprint roaming, and wholesale revenues, were $14.1 million and $16.0 million for the three months ended September 30, 2004 and 2003, respectively. Roaming revenues for the current quarter consisted of $13.1 million of Sprint travel and non-Sprint roaming revenue and $1.0 million of wholesale revenues. Roaming revenues for the year ago quarter consisted of $15.7 million of Sprint travel and non-Sprint roaming revenue (including $5.5 million associated with the NTELOS markets) and $0.3 million of wholesale revenues. Subscriber revenues were $30.2 million for the current quarter compared to $50.5 million in the year ago quarter. The year ago subscriber revenues included $17.2 million associated with the NTELOS markets. The decline in roaming and subscriber revenues was principally due to the exit from the NTELOS markets. -- Adjusted EBITDA was $8.5 million for the three months ended September 30, 2004, compared to $63,000 for the comparable period in 2003. The 2003 third quarter included $2.0 million of negative EBITDA from the NTELOS operations. -- As of September 30, 2004, 81% of the Company's subscriber base was prime credit class and the remaining 19% was sub-prime credit class. Of the sub-prime base, 62% provided a deposit. Of the total gross adds in the third quarter of 2004, 80% were prime credit class subscribers. As of September 30, 2004, 68% of the Company's subscriber base was under contractual agreement. At the end of the third quarter, Horizon had cash, cash equivalents and marketable securities of approximately $55.6 million, which excluded $142.6 million in restricted cash and funds held in escrow. Capital expenditures were approximately $264,000 for the third quarter and $1.6 million for the year-to- date period. On October 1, 2004, the Plan of Reorganization in the Company's Chapter 11 proceeding became effective and it implemented the Plan's debt and equity restructuring provisions. Bill McKell, chairman and CEO of Horizon PCS, said, "It is gratifying to report positive Adjusted EBITDA in the period just before exiting bankruptcy reorganization, which demonstrates the success of our restructuring initiatives. Over the past year, we have made strategic changes to our business, as well as numerous operational improvements to reposition our company for future growth. With the bankruptcy successfully behind us, we can now focus on initiatives to resume growing this business." About Sprint Sprint -- http://www.sprint.com/-- is a global integrated communications provider serving more than 26 million customers in over 100 countries. With more than $26 billion in annual revenues in 2003, Sprint is widely recognized for developing, engineering and deploying state-of-the-art network technologies, including the United States' first nationwide all-digital, fiber-optic network and an award-winning Tier 1 Internet backbone. Sprint provides local communications services in 39 states and the District of Columbia and operates the largest 100-percent digital, nationwide PCS wireless network in the United States. About the Company Horizon PCS -- http://www.horizonpcs.com/-- is a PCS Affiliate of Sprint, with the exclusive right to market Sprint wireless mobility communications network products and services to a total population of approximately 7.5 million in portions of 11 contiguous states. Its markets are located between Sprint's Chicago, New York and Knoxville markets and connect or are adjacent to 12 major Sprint markets. As a PCS Affiliate of Sprint, Horizon markets wireless mobile communications network products and services under the Sprint and Sprint PCS brand names. At September 30, 2004, Horizon PCS' balance sheet showed a $593,801,245 stockholders' deficit, compared to a $596,999,529 deficit at December 31, 2003. Headquartered in Chillicothe, Ohio, Horizon PCS, Inc., -- http://www.horizonpcs.com/-- filed for chapter 11 protection on August 15, 2003 (Bankr. S.D. Ohio Case No. 02-10429). Jack R. Pigman, Esq., at Porter Wright Morris & Arthur LLP, and Shalom L. Kohn, Esq., at Sidley Austin Brown & Wood, represent the Debtor in its restructuring efforts. On September 21, 2004, the U.S. Bankruptcy Court for the Southern District of Ohio confirmed Horizon PCS's Joint Plan of Reorganization. The Plan, originally filed with the Court on August 12, 2004, became effective October 1, 2004. HORNBECK OFFSHORE: Noteholders Agree to Amend Debt Indenture ------------------------------------------------------------ Hornbeck Offshore Services, Inc., (NYSE: HOS) received the consents necessary to adopt the proposed amendments to the indenture governing the Notes in its previously commenced tender offer and related consent solicitation for any and all $175,000,000 aggregate principal amount of its 10-5/8% Senior Notes due 2008 (CUSIP 440536 AB 6). Adoption of the proposed amendments required the consent of holders of at least a majority of the aggregate principal amount of the outstanding Notes, and holders who tendered their Notes in the Offer were deemed to consent to the proposed amendments. A total of approximately $159,454,000, or over 91% in aggregate principal amount of the outstanding Notes were validly tendered and not validly withdrawn before 5:00 P.M., Eastern time, on November 17, 2004. The Company and the Indenture trustee, Wells Fargo Bank, National Association, anticipate executing, within the next few days, a supplemental indenture setting forth the proposed amendments to eliminate most of the restrictive covenants and certain events of default from the Indenture. The proposed amendments will become operative upon the closing of the purchase by the Company of the Notes tendered by the Consent Time, which totaled more than a majority of the Notes outstanding. The closing is expected to occur on November 23, 2004. The amendments will be binding upon all holders of Notes, including those not tendering pursuant to the Offer. Based on an initial settlement date of November 23, 2004, the total consideration per $1,000 principal amount of Notes will be $1,102.28. Holders that tender their Notes after the Consent Time and on or prior to 5:00 P.M. Eastern time, on December 3, 2004, will receive the purchase price per $1,000 principal amount of Notes of $1,069.73, based on an expected final settlement date of December 6, 2004, but the tendering holders will not receive the consent payment of $30.00 per $1,000.00 principal amount that is payable to holders that tendered their Notes prior to the Consent Time. Payment for all of the Notes accepted in the Offer will also include accrued and unpaid interest up to, but not including, the applicable settlement date. About the Company Hornbeck Offshore Services, Inc., is a leading provider of technologically advanced, new generation offshore supply vessels in the U.S. Gulf of Mexico and select international markets, and is a leading transporter of petroleum products through its fleet of ocean-going tugs and tank barges, primarily in the northeastern U.S. and in Puerto Rico. * * * As reported in the Troubled Company Reporter on Nov. 17, 2004, Moody's upgraded the senior implied rating for Hornbeck Offshore Services, Inc., to Ba3 from B1, the issuer rating to Ba3 from B1 and assigned its Ba3 rating to the company's proposed $225 million senior unsecured notes offering. The outlook is stable. HYCREST DAIRY: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: HyCrest Dairy, Inc. 4400 HyCrest Lane Tallahassee, Florida 32309 Bankruptcy Case No.: 04-41412 Type of Business: The Debtor operates a dairy farm. Chapter 11 Petition Date: November 16, 2004 Court: Northern District of Florida (Tallahassee) Judge: Lewis M. Killian, Jr. Debtor's Counsel: Allen Turnage, Esq. Law Office of Allen Turnage P.O. Box 15219 2234 Centerville Road, Suite 101 Tallahassee, FL 32317 Tel: 850-224-3231 Fax: 850-224-2535 Total Assets: $2,763,600 Total Debts: $2,090,397 The Debtor did not file a list of its 20-Largest Creditors. INDYMAC ABS: Fitch Junks Three Classes & Rates Two Classes Low-B ---------------------------------------------------------------- Fitch Ratings affirmed and took rating actions on these IndyMac ABS, Inc. Home Equity issues: * Series SPMD 2000-A group 1: -- Classes AF-3, R affirmed at 'AAA'; -- Class MF-1 affirmed at 'AA'; -- Class MF-2 affirmed at 'A'; -- Class BF remains at 'CCC'. * Series SPMD 2000-B group 1 -- Classes AF-1, R affirmed at 'AAA'; -- Class MF-1 affirmed at 'AA'; -- Class MF-2 affirmed at 'B'; -- Class BF downgraded to 'C' from 'CC'. * Series SPMD 2001-A group 2 -- Class AV affirmed at 'AAA'; -- Class MV-1 affirmed at 'A-'; -- Class MV-2 affirmed at 'BBB-'; -- Class BV affirmed at 'BB'. * Series SPMD 2001-B -- Class AV affirmed at 'AAA'; -- Class MF-1 affirmed at 'AA'; -- Class MF-2 affirmed at 'A'; -- Class BF downgraded to 'CCC' from 'BB'. * Series SPMD 2001-C -- Classes AF-B4, AF-A, A-R affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B affirmed at 'BBB'. * Series SPMD 2002-B -- Classes AF, AV affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B-1 affirmed at 'BBB'; -- Class B-2 affirmed at 'BBB-'. * Series SPMD 2003-A group 1 -- Classes AF-1 - AF-5 affirmed at 'AAA'; -- Class MF-1 affirmed at 'AA'; -- Class MF-2 affirmed at 'A'; -- Class BF affirmed at 'BBB+'. * Series SPMD 2003-A group 2 -- Classes AV-1, AV-2 affirmed at 'AAA'; -- Class MV-1 affirmed at 'AA'; -- Class MV-2 affirmed at 'A+'; -- Class MV-3 affirmed at 'A'; -- Class MV-4 affirmed at 'A-'; -- Class MV-5 affirmed at 'BBB+'; -- Class BV affirmed at 'BBB'. The affirmations on approximately $566 million of the classes reflect credit enhancement consistent with future loss expectations. The negative rating actions on $13,213,328 of the classes (series SPMD 2000-B group 1 class BF and series SPMD 2001- B class BF) are the result of poor collateral performance and the deterioration of asset quality beyond original expectations. Series SPMD 2000-B group 1, with 17.48% of the original collateral remaining, contained 12.29% manufactured housing collateral at closing (July 28, 2000), and as of October 25, 2004, the percentage of MH has increased to 37.37%. To date, MH loans have exhibited very high historical loss severities, causing Fitch to have concerns regarding the adequacy of enhancement in this deal. MH has been responsible for 44.17% of total losses to date in this transaction. The remainder of the collateral is secured by subprime fixed-rate mortgages. Since October 2003, this transaction has had no overcollateralization remaining and class BF had started taking write-downs. As of October 2004, class BF has $1,838,328 of principal remaining. The 12 month average gross losses are $141,984, and current monthly excess spread before losses is $34,080. Series SPMD 2001-B, with 14.81% of the original collateral remaining, contained 2.33% MH collateral at closing (July 28, 2000), and as of October 25, 2004, the percentage of MH has increased to 9.49%. MH has been responsible for 14.4% of total losses to date in this transaction. The remainder of the collateral is secured by subprime fixed- and adjustable-rate mortgages. This transaction currently has $1,036,202.46 of OC remaining, compared to the target OC of $1,750,000. The current monthly gross loss was $606,776, with only $125,335 in excess spread to cover losses. The six and 12-month average gross losses are $259,476 and $238,989 respectively, which has resulted in the regular monthly depletion of OC. The group 1 and group 2 mortgage pools within the SPMD 2000-B transaction are not cross-collateralized, so any excess spread generated within group 1 is not available to offset losses in group 2. However, the deal was structured with mortgage insurance. Currently, 36.36% of the mortgage pool of series 2000-B group 2 has MI down to 80% loan to value, and 41.19% of series 2001-B has MI down to 60% loan to value, which will serve to somewhat mitigate the overall loss numbers. Fitch will continue to closely monitor this deal. INNOPHOS INC: S&P Places B+ Rating on CreditWatch Negative ---------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' corporate credit rating and other ratings on Cranbury, New Jersey-based Innophos, Inc., on CreditWatch with negative implications. The placement follows the firm's announcement that its Mexican subsidiary, Innophos Fosfatados de Mexico S. de R.L. de C.V., has received a notice of claims from the National Waters Commission of Mexico for possible errors related to payment for the extraction and use of water from national waterways from 1998 through 2002 at the company's Coatzacoalcos manufacturing plant. The claims for governmental duties, taxes and other charges total $36 million, and there are also claims for interest, inflation adjustments and penalties under the Mexican federal tax code of $96 million. "While Innophos believes it is indemnified against these claims, the unexpected and substantial amount of the charges does result in a degree of uncertainty for this specialty chemical company's credit quality at a time when debt leverage measures are subpar for the ratings," said Standard & Poor's credit analyst Wesley E. Chinn. "Moreover, while the charges are for water usage in past years, this matter raises concerns as to whether current or future earnings will be impacted by additional water-related costs in Mexico," Mr. Chinn added. Innophos believes that it is indemnified against these claims under the terms of the sale agreement with Rhodia S.A. from whom Innophos was purchased on Aug. 13, 2004. On Nov. 8, 2004, Innophos sent Rhodia a formal notice of its contractual right of indemnification from Rhodia with respect to these claims. Rhodia has not yet responded to the notice of indemnification. Innophos has delayed the release of 2004 third-quarter earnings, pending the investigation by management, outside auditors and others of these water-related charges. Standard & Poor's will resolve the CreditWatch listing as more information related to the resolution of this matter is made available. INNOVATIVE COOKIES: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Innovative Cookies, Inc. 1220 37th Street, North West #102 Auburn, Washington 98001 Bankruptcy Case No.: 04-24709 Type of Business: The Debtor produces and distributes cookies. See http://www.innovativecookies.com/ Chapter 11 Petition Date: November 15, 2004 Court: Western District of Washington (Seattle) Judge: Thomas T. Glover Debtor's Counsel: Larry B. Feinstein, Esq. Vortman & Feinstein 500 Union Street #500 Seattle, WA 98101 Tel: 206-223-9595 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Chinatrust Bank $606,883 10900 NE 8th Bellevue, WA 98004 Base Capital LLC $600,000 411 108th NE, Suite 1970 Bellevue, WA 98040 New Era Staffing $51,370 John Fuchs $50,000 Bader Martin Ross & Smith $39,805 Dawn Food Products, Inc. $15,036 American Express $14,335 Alaska Air Visa $12,994 A Better Concept $11,365 Wells Fargo Bank $10,289 Labels West Inc. $7,252 Borracchini Foods $7,208 Columbia Bank 04 $6,171 Remedy $5,231 Ron Hansen Strategic Branding $5,085 Oki Developments, Inc. $4,484 Medosweet Farms, Inc. $4,566 Transilwrap Company, Inc. $4,517 Columbia Bank 03 $4,389 Capital One $3,979 INTERSTATE BAKERIES: Utility Companies Seek Additional Assurance ---------------------------------------------------------------- Paul M. Hoffmann, Esq., at Stinson Morrison Hecker, LLP, in Kansas City, Missouri, relates that uninterrupted utility services are critical to Interstate Bakeries and its debtor-affiliates' ability to sustain their operations during the pendency of their Chapter 11 cases. In the normal conduct of their businesses, the Debtors use gas, water, electricity, telephone, and other services provided by the Utilities for their various baking processes. The Utilities service the Debtors' bakeries, thrift stores, depots, and corporate headquarters and affiliated facilities. Mr. Hoffmann tells the U.S. Bankruptcy Court for the Western District of Missouri that the Utility Services are also necessary for the Debtors to perform significant functions, including: * conducting sales and marketing functions and to communicate with customers, vendors, bakeries and corporate headquarters; * maintaining sanitary lavatory facilities for employees; and * providing heat to many of the Debtors' facilities. Any interruption of these services would severely disrupt and seriously impede the Debtors' day-to-day operations. Mr. Hoffmann assures the Court that prior to their bankruptcy filing, the Debtors paid the Utilities' bills consistently and on a regular basis. The Debtors are unaware of any outstanding defaults or arrearages of any significance with respect to any invoice for utility service. Thus, the Debtors believe that any Utility seeking a deposit from them is doing so in accordance with a "per se" policy followed when one of its customers files a petition for relief under the Bankruptcy Code. Accordingly, at the Debtors' request, the Court rules that no Utility will: (a) alter, refuse or discontinue services to, or discriminate against the Debtors, solely on the basis of the Debtors' Chapter 11 cases or on account of any unpaid amount for utility services provided before the Petition Date; or (b) require the payment of a deposit or other security in connection with the Utility's continued provision of utility service. Mr. Hoffmann notes that the Debtors' demonstrated ability to pay future utility bills as they come due from future revenues and their anticipated debtor-in-possession financing constitute adequate assurance of payment for future utility services within the meaning of Section 366 of the Bankruptcy Code. Thus, the Utilities have adequate assurance of future payment without the need for the Debtors to provide additional security deposits, bonds, or any other payments. 13 Utility Companies Want Deposits Posted At least 13 Utility Companies require additional adequate assurance of payment because of the Debtors' poor financial condition, which is based on these observations: * For the 53 weeks ending May 29, 2004, the Debtors generated net sales of $3,468,000,000 with a net loss of about $26,000,000. For that same time period, the Debtors estimate assets of $1,626,000,000, at book value, current liabilities of $931,000,000 and long-term liabilities of $391,000,000; * On June 3, 2004, the Debtors announced an increase of their reserve for workers' compensation during fiscal 2004 and took a $40,000,000 charge to pretax income; * On August 21, 2004, the Debtors further amended the leverage and interest coverage covenants of their Existing Credit Agreement to relax the covenants until November 2005, thereby increasing the interest rates for all loans under the Existing Agreements by 0.50%. Nonetheless, the Debtors were unable to avoid filing for bankruptcy court protection; * To allegedly create more liquidity, the Debtors issued $100,000,000 in senior subordinated convertible notes on August 12, 2004, under an Indenture, with the net proceeds of the 2014 notes primarily used to prepay certain required term loan principal payments due under the Existing Credit Agreement and to reduce the amount outstanding under the Revolver. Again, this measure did not preclude the Debtors from seeking bankruptcy court protection; * The Debtors determined that they needed to restate their financial statements for the second and third quarters of fiscal 2004, requesting a 15-day extension to August 27, 2004, to file the annual report, but nevertheless failed to timely file their financial statements, including their form 10-K with the Securities and Exchange Commission; * The uncertainty as to whether the Debtors were in compliance with covenants under the Existing Credit Agreement during fiscal 2005, and the possibility that the report of their independent auditors with respect to their fiscal 2004 financial statements might contain a paragraph to the effect that there may be substantial doubt about the Debtors' ability to continue as a going concern; * The Debtors' admission that, after reviewing preliminary and estimated fiscal 2005 first quarter results, their financial condition had worsened, and that they were likely in the very near term to be unable to comply with covenants under the Existing Credit Agreement; and * The Debtors' counsel felt the need to secure the payment of their fees. The Utility Companies and their estimated prepetition losses and two-month postpetition deposit requests are: Deposit Utility Company Accounts Loss Request --------------- -------- ---- ------- American Electric Power 78 $118,029 $156,196 Dominion Virginia Power 23 17,942 30,155 Dominion North Carolina Power 3 937 1,405 Dominion Peoples 8 1,205 12,220 Dominion East Ohio 16 4,472 22,378 Dominion Hope 2 59 1,582 Duke Power Company 37 76,397 125,738 Niagara Mohawk Power Corporation 15 38,397 60,453 Nat'l Fuel Gas Distribution Corp. 9 7,510 109,200 Westar Energy, Inc. 19 76,664 155,980 San Diego Gas & Electric Co. 22 65,415 104,712 Southern California Gas Co. 80 67,943 94,000 Public Svc. Electric & Gas Co. 10 177,364 145,400 The Utility Companies contend that the Debtors failed to properly serve them with the Utility Motion and the Utility Order, as service was not effected in accordance with Rules 7004 and 9014 of the Federal Rules of Bankruptcy Procedure, which require that service of a motion on a corporation be made by mail to the attention of an officer, a managing or general agent or to any other agent authorized by appointment or by law. As a result, the Utility Companies had no opportunity to respond to the Utility Motion, despite the fact that the Utility Companies were known entities that provided continuous and continue to provide utility service to the Debtors. The Utility Companies also believe that the Court did not make a determination that the Debtors' utility companies were adequately assured of payment before the Court entered the Utility Order. The Utility Companies ask the Court to: (1) vacate the Utility Order in its entirety; (2) require the Debtors to post deposits; and (3) immediately determine what adequate assurances of payment pursuant to Section 366(b) of the Bankruptcy Code should be provided, as the determination of adequate assurance in the Utility Order was made on an ex parte no notice basis. 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: Summary of Australian & Finance Units' Plan ------------------------------------------------------------ On November 15, 2004, Kaiser Alumina Australia Corporation and Kaiser Finance Corporation filed their Joint Plan of Liquidation with the United States Bankruptcy Court for the District of Delaware. The primary objectives of the Plan are to: (a) maximize the value of the ultimate recoveries to all creditor groups on a fair and equitable basis; (b) settle, compromise or otherwise dispose of certain claims and other disputes on terms that the Liquidating Debtors believe to be fair and reasonable under the circumstances and in the best interests of their estates and creditors and Kaiser Aluminum & Chemical Corporation, as the sole stockholder of each Debtor; and (c) effectuate the orderly liquidation and dissolution of the Liquidating Debtors. The Plan provides for, among other things: (a) the classification and treatment of claims and interests; (b) the establishment of a distribution trust to make distributions in accordance with the Plan; (c) the creation and administration of trust accounts; and (d) the liquidation of Kaiser Australia and Kaiser Finance. A full-text copy of Kaiser Australia and Kaiser Finance's Liquidation Plan is available for free at: http://bankrupt.com/misc/KAAC_&_KFC_Joint_Liquidation_Plan.pdf A full-text copy of the Disclosure Statement is available for free at: http://bankrupt.com/misc/KAAC_&_KFC_Disclosure_Statement.pdf Sources of Cash The cash available in Kaiser Australia's and Kaiser Finance's estates to fund the Plan will come from: (a) the net cash proceeds to the Liquidating Debtors in connection with the sale of their interests in Queensland Alumina, Ltd., pursuant to a purchase and sale agreement, after taking into account the costs and expenses of the sale payable by the Liquidating Debtors in accordance with the settlement of intercompany claims and the satisfaction of any applicable Allowed Secured Claim with a valid and enforceable lien against the QAL proceeds; and (b) the proceeds, if any, received from the successful prosecution, settlement, or collection of preference actions, fraudulent 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. Kaiser Australia and Kaiser Finance currently estimate that, on the effective date of the Plan, the QAL Proceeds will be $396,000,000. Kaiser Australia and Kaiser Finance are not aware of any Recovery Actions and the Official Committee of Unsecured Creditors has independently determined that there are no viable preference actions concerning payments made by the Liquidating Debtors. Accordingly, the Recovery Action Proceeds is assumed to be zero. The estimated QAL Proceeds on the Effective Date will include $40,000,000, which will be held in a cash collateral account to secure the obligations of Kaiser Australia and Kaiser Finance and the rest of the Debtors under a February 12, 2002 postpetition credit agreement with Bank of America, N.A., and a consortium of lenders. On the Effective Date, cash in Kaiser Australia's Cash Collateral Account will be used to make payments, if any, to KACC by Kaiser Australia pursuant to the Intercompany Claims Settlement. Any remaining amounts held in the Cash Collateral Account will not be released for distribution to holders of Allowed Claims until amounts owing under the DIP Financing Facility are paid in full and the DIP Financing Facility is terminated. The Liquidating Debtors and the Creditors Committee currently expect that Intercompany Settlement Payments of $26,500,000 to $37,500,000 in the aggregate will be required and, accordingly, that between $2,500,000 and $13,500,000 of the cash held in the Cash Collateral Account will ultimately be released for distribution to holders of Allowed Claims. The Release, however, is not expected to occur before the Effective Date and may not occur before the effective date of a reorganization plan for KACC. No assurance can be given as to whether or when the release will occur or, if and when the release does occur, as to how much cash will then remain in the Cash Collateral Account. Uses of Cash Kaiser Australia and Kaiser Finance's cash as of the Effective Date will be used to: (a) fund a segregated trust account to be established and maintained to fund the payment of all reasonable fees, costs and expenses incurred by a distribution trustee; (b) fund a segregated trust account to be established and maintained by the Distribution Trustee to satisfy allowed secured claims, administrative claims, priority claims, and priority tax claims against the Liquidating Debtors' estates, in accordance with the Plan; (c) make any required payments under the Intercompany Claims Settlement; (d) fund amounts required to be maintained in the Cash Collateral Account; and (e) fund a segregated trust account to be established and maintained by the Distribution Trustee to satisfy allowed unsecured claims against the Liquidating Debtors' estates with any remaining cash. The Liquidating Debtors and the Creditors Committee currentlyanticipate that available cash will be applied as: (in millions) Estimated Available Cash $396.0 Estimated Funding of: Distribution Trust Expenses Account (1.0) Priority Claims Trust Account (21.0) - (25.0) Estimated Net Intercompany Settlement Payments (26.5) - (37.5) -------------- Estimated Cash Remaining to Fund Unsecured Claims Trust Account $332.5 - 347.5 ============== Moreover, based on the various estimates and assuming that the holders of Senior Subordinated Note Claims vote to accept the Plan and there are no Allowed Other Unsecured Claims, the aggregate cash ultimately to be distributed to the holders of Senior Note Claims, Subordinated Note Claims, and the PBGC Claims would be: Estimated Aggregate Subclass Cash Distribution -------- ------------------- Subclass 3A (Senior Notes Claims) $211.1 to 228.3 Subclass 3B (Senior Subordinated Note Claims) 8.0 Subclass 3C (PBGC Claims) 106.4 to 111.2 The Liquidating Debtors and the Creditors Committee expect that up to $13,500,000 ultimately will be released from the Cash Collateral Account for distribution to holders of allowed claims. The amount is not expected to be released before the Effective Date and, accordingly, it is expected that the initial distributions to be made to holders of allowed Senior Note Claims and the PBGC on or promptly after the Effective Date will be less than what has been estimated. Although the Debtors and the Creditors Committee believe that either no Other Unsecured Claims will ultimately be allowed or any allowed Other Unsecured Claims will be de minimis, in the event Other Unsecured Claims that have been asserted are not disallowed before the Effective Date, the cash reserve to satisfy disputed claims against Kaiser Australia or Kaiser Finance would have to be established in respect of Other Unsecured Claims, thereby further reducing the initial Cash distributions to be made to holders of allowed Senior Note Claims and the PBGC. Kaiser Finance Claim Against KACC Under the Intercompany Claims Settlement, the $1,106,150,093 general unsecured claim held by Kaiser Finance against KACC will be allowed and will receive the same treatment as allowed general unsecured claims -- excluding retiree medical claims -- under any KACC reorganization plan. Under the Liquidation Plan, no distribution of the Kaiser Finance Claim will be made, and the Kaiser Finance Claim will be held in the Unsecured Claims Trust Account, until receipt by the Distribution Trustee of distributions from KACC pursuant to a confirmed KACC reorganization plan or otherwise. In-kind distributions consisting of property received by the Distribution Trustee from KACC in respect of the Kaiser Finance Claim will then be made to holders of Allowed Claims in Subclass 3A, Subclass 3C and Subclass 3D in accordance with the terms of the Plan. It is presently anticipated that, pursuant to (i) the agreements reached by KACC with the Official Committee of Salaried Retirees and union representatives, which provide for the termination of existing post-retirement benefit plans and existing hourly pension plans, and (ii) the Intercompany Claims Settlement, the Distribution Trust, as holder of the Kaiser Finance Claim, will receive one-third of 25% of Reorganized KACC's residual value after the satisfaction of administrative, priority and secured claims against KACC and after taking into account, among other things, the satisfaction of the PBGC's claims against Kaiser Aluminum & Chemical of Canada Limited, and any use of KACC assets to settle asbestos, silica and other tort claims. Distribution Trust The Distribution Trust will be established on the Effective Date for the purpose of: * collecting, maintaining and administering assets for the benefit of the creditors and claimants of the Estates; * liquidating -- including objecting to Claims and determining the proper recipients and amounts of distributions to be made from the Distribution Trust -- and distributing the Distribution Trust Assets for the benefit of the Beneficiaries who are determined to hold Allowed Claims as expeditiously as reasonably possible; * pursuing available causes of action, including Recovery Actions; * closing the Chapter 11 cases; and * implementing the Plan and completing dissolution. The Distribution Trust Assets will be transferred to and vest in the Distribution Trust, free and clear of claims, liens and interests, except as may be otherwise provided in the Intercompany Claims Settlement. Upon the transfer, the Liquidating Debtors will be deemed dissolved and their business operations withdrawn for all purposes without any delay. The Distribution Trust Assets include: (a) the Trust Accounts and any cash -- and any other property -- held by the Trust Accounts; (b) the rights of the Liquidating Debtors under or in respect of the Intercompany Claims Settlement, the QAL Purchase Agreement or any causes of action not released by the Plan, including the Recovery Actions, and any proceeds thereof; and (c) the QAL Proceeds including any amounts paid over to the Distribution Trustee upon the termination of the DIP Financing Facility for deposit into the Unsecured Claims Trust Account as contemplated by the Plan. The Liquidating Transactions will not in any way merge the assets of the Liquidating Debtors' estates, including the Trust Accounts. All claims against the Liquidating Debtors are deemed fully satisfied in exchange for the treatment of the claims under the Plan. Holders of allowed claims against either Liquidating Debtor will have recourse solely to the applicable Trust Accounts for the payment of their allowed claims in accordance with the terms of the Plan. All liens against the Distribution Trust Assets will be fully released upon the holder of the lien receiving its full distribution under the Plan, or on the Effective Date if the lienholder is not entitled to any distribution. Distribution Trustee The Distribution Trustee will be the exclusive trustee of the Distribution Trust. The identity of the Distribution Trustee will be disclosed at least 10 days before the Confirmation Hearing. The Trustee will be selected by the Creditors Committee with the consent of the Liquidating Debtors. Powers of the Distribution Trustee (A) General Powers The Distribution Trustee will be empowered to, among other things: * execute all agreements, instruments, and other documents and effect all other actions necessary to implement the Plan; * establish, maintain, and administer the Trust Accounts; * accept, preserve, receive, collect, manage, invest, supervise and protect the Distribution Trust Assets; * liquidate, transfer or otherwise dispose of the Distribution Trust Assets; * calculate and make distributions of the Distribution Trust Assets to holders of Allowed Claims; * comply with the Plan and exercise its rights and fulfill its obligations; * review, reconcile, settle or object to Claims and resolve any those objections; * investigate and, if appropriate, pursue any Recovery Actions or other available causes of action -- including any actions previously initiated by the Debtors and pending as of the Effective Date -- and raise any defenses in any adverse actions or counterclaims; * retain and compensate, without further Bankruptcy Court order, the services of professionals or other persons or entities to represent, advise and assist the Distribution Trustee in the fulfillment of its responsibilities in connection with the Plan and the Distribution Trust Agreement; * take steps as are necessary, appropriate, or desirable to coordinate with representatives of the estates of the Other Kaiser Debtors; * take actions as are necessary, appropriate or desirable to close the Chapter 11 cases; * file appropriate Tax returns on behalf of the Distribution Trust and Debtors and pay taxes or other obligations owed by the Distribution Trust; * pay all Distribution Trust Expenses using the Distribution Trust Expenses Account; * execute, deliver, and perform other agreements and documents or exercise other powers and duties as the Distribution Trustee determines, in its reasonable discretion, to be necessary, appropriate, or desirable to accomplish and implement the purposes and provisions of the Distribution Trust; * take actions as are necessary, appropriate or desirable to terminate the existence of the Liquidating Debtors under the laws of Australia; and * terminate the Distribution Trust in accordance with the terms of the Plan and Distribution Trust Agreement. (B) Right to Object to Claims After the Effective Date, only the Distribution Trustee, with the prior consent of the Steering Committee, will have the authority to file, settle, compromise, withdraw or litigate to judgment objections to Claims. After the Effective Date, the Distribution Trustee, with the prior consent of the Steering Committee, may settle or compromise any Disputed Claim. (C) Right to Pursue Causes of Action In accordance with Section 1123(b) of the Bankruptcy Code, the Distribution Trustee will retain and may enforce any claims, demands, rights and causes of action that either Estate may hold against any entity, including the Recovery Actions, to the extent not released under the Plan. In particular, the Distribution Trustee will retain the right to pursue any adversary proceedings available to the Liquidating Debtors in connection with the QAL Purchase Agreement or the Intercompany Claims Settlement. (D) Right to Vote the Kaiser Finance Claim Only the Distribution Trustee, on behalf of the Distribution Trust as holder of the Kaiser Finance Claim, with the prior consent of the Steering Committee, will have the authority to accept or reject a reorganization of KACC. Indemnification of Distribution Trustee The Distribution Trustee and the members of the Steering Committee will be indemnified by the Distribution Trust from the Distribution Trust Expenses Trust Account, except for any act or omission constituting bad faith, fraud, willful misconduct, gross negligence or a breach of its fiduciary duties. Compensation of the Distribution Trustee The Distribution Trustee will receive fair and reasonable compensation for its services, with such compensation to be paid from the Distribution Trust Expenses Account. Term of the Distribution Trust The Distribution Trust will terminate upon: * the payment of all costs, expenses and obligations incurred in connection with administering the Distribution Trust; * the distribution of all remaining Distribution Trust Assets and proceeds in accordance with the provisions of the Plan, the Confirmation Order and the Distribution Trust Agreement; * the closure of the Chapter 11 cases; and * the completion of any necessary or appropriate reports, tax returns or other documentation. 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. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) LB-UBS COMMERCIAL: S&P Places Low-B Ratings on Three Cert. Classes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to LB-UBS Commercial Mortgage Trust 2004-C8's $1.3 billion commercial mortgage pass-through certificates series 2004-C8. The preliminary ratings are based on information as of November 17, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying mortgage loans, and the geographic and property type diversity of the loans. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.56x, a beginning LTV of 90.9%, and an ending LTV of 82.1%. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned LB-UBS Commercial Mortgage Trust 2004-C8 Class Rating Amount ($) ----- ------ ---------- A-1 AAA 53,000,000 A-2 AAA 383,000,000 A-3 AAA 44,000,000 A-4 AAA 154,000,000 A-5 AAA 35,000,000 A-6 AAA 383,054,000 A-J AAA 85,479,000 B AA+ 19,726,000 C AA 19,726,000 D AA- 14,795,000 E A+ 14,794,000 F A 16,439,000 G A- 11,506,000 H BBB+ 13,151,000 J BBB 9,863,000 K BBB- 16,438,000 L BB+ 6,576,000 M BB 4,931,000 N BB- 4,932,000 P B+ 3,287,000 Q B 3,288,000 S B- 1,644,000 T N.R. 16,438,748 X-CL* AAA 1,315,067,748** X-CP* AAA 1,225,507,000** * Interest-only class ** Notional amount N.R. - Not rated LIONEL LLC: Wants to Hire O'Melveny & Myers as Counsel ------------------------------------------------------ Lionel L.L.C., and its debtor-affiliate, Liontech Company, ask the U.S. Bankruptcy Court for Southern District of New York for permission to employ O'Melveny & Myers, LLP, as their bankruptcy, general corporate and appellate counsel. O'Melveny & Myers is expected to perform three types of services: I. Bankruptcy Related Services a) advise the Debtors regarding matters of bankruptcy law in connection with their chapter 11 cases; b) advise the Debtors of the requirements of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, applicable bankruptcy rules pertaining to the administration of their cases and U.S. Trustee Guidelines related to the daily operation of their business and the administration of the estates; c) prepare motions, applications, answers, proposed orders, reports and papers in connection with the administration of the estates; d) negotiate with creditors, prepare and seek confirmation of a plan of reorganization and related documents, and assist the Debtors with implementation of the plan; e) assist the Debtors in the analysis, negotiation and disposition of certain estate assets for the benefit of the estates and their creditors; f) advise the Debtors regarding general corporate and securities matters, bankruptcy issues related to pension, retiree, labor and collective bargaining obligations, and litigation issues; and g) render other necessary advice and services as the Debtors may require in connection with their cases. II. General Corporate Related Services a) review executory contracts and unexpired leases; b) negotiate and document debtor in possession financing and exit financing; c) negotiate and document asset sales; d) assist in the issuance of new debt and equity securities pursuant to a plan of reorganization; and e) assist in other general corporate matters arising from time to time in the ordinary course of the Debtors' business. III. Appellate Services a) render services as necessary to appeal the judgment entered against Lionel by the United States District Court for the Eastern District of Michigan, Southern Division, in the case of Mike's Train House, Inc. v. Lionel L.L.C., Case No. 00-CV-71729. Adam C. Harris, Esq., a Partner at O'Melveny & Myers, is one of the lead attorneys for the Debtors. For his professional services, Mr. Harris will bill the Debtors $695 per hour. Mr. Harris reports O'Melveny & Myers' lead professionals bill: Professionals Designation Hourly Rate ------------- ----------- ----------- Walter Dellinger Partner $750 Dale Cendali Partner 650 Robert Winter Counsel 485 Abbey Ehrlich Associate 450 Toby Heytens Associate 380 Craig Anderson Associate 335 Melissa Holyoak Associate 250 Mr. Harris reports O'Melveny & Myers' other professionals bill: Designation Hourly Rate ----------- ----------- Partners $460 - 750 Associates/Counsel 250 - 510 Paralegals 70 - 220 To the best of the Debtors' knowledge, O'Melveny & Myers is "disinterested" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Chesterfield, Michigan, Lionel L.L.C., -- http://www.lionel.com/-- is a marketer of model train products, including steam and die engines, rolling stock, operating and non-operating accessories, track, transformers and electronic control devices. The Company filed for chapter 11 protection on November 15, 2004 (Bankr. S.D.N.Y. Case No. 04-17324). Abbey Walsh Ehrlich, Esq., at O'Melveny & Myers, LLP, represent the Debtors in their restructuring. When the Company filed for protection from its creditors, it listed estimated assets and liabilities of $50 million to $100 million. MICROTEC ENTERPRISES: Posts $766,000 of Net Loss in Third Quarter ----------------------------------------------------------------- Microtec Enterprises, Inc. (TSX:EMI) reported its financial results for the quarter ended on September 30, 2004. During the third quarter of 2004, revenues were stable as compared to the corresponding quarter of 2003 at a level of $7,535,000. Overall administration, monitoring and customer service expenses declined by 0.5% at $2,724,000, whereas installation, sales and marketing expenses increased by 5.9% to $805,000. Earnings before depreciation, interest, taxes, and amortization (EBDITA) stood at $4,006,000. Debt-servicing costs increased by $1,084,000 in the third quarter of 2004 compared with the same period last year due to successive increases by lenders of the interest rates applicable to credit facilities. As a result, the net loss totaled $766,000 in the third quarter of 2004. "Had it not been for the additional financing costs of more than $1,600,000 supported by Microtec since the beginning of the year, results would have been much better than expected and the company would have posted a positive net income," indicated Mr. Raymond Gilbert, Chairman and Chief Executive Officer of Microtec Enterprises, Inc. The order for protection under the Companies' Creditors Arrangement Act should make it possible for Microtec to complete its debt and financial restructuring. "It is important to note that this order does not affect the operations, nor the services offered by the Company and that no lay-offs are anticipated," concluded Mr. Gilbert. About the Company Solidly established in Canada, Microtec Enterprises, Inc. -- http://www.microtecsecuri-t.com/-- provides a wide range of security and home automation services that ensure the protection and well-being of its residential and commercial customers. The Company is building on its strong position in the industry by developing new products and services, expanding its subscriber base, and creating strategic alliances. * * * As reported in the Troubled Company Reporter on Nov. 15, 2004, Microtec Enterprises, Inc., has obtained an order from the Superior Court of the Province of Quebec for protection under the Companies' Creditors Arrangement Act in order to facilitate its financial restructuring. The filing includes the Company and all its subsidiaries. The order provides the Company with additional time to finalize and complete the recapitalization plan already being negotiated, facilitate the proposal of an arrangement, including with its lenders, and obtain adequate protection for directors and officers of the Company in the course of their duties. The Court has appointed Raymond Chabot, Inc., as monitor for the restructuring. Requests for information intended to the monitor should be directed to: Jean Gagnon 514-878-2691 -- or -- Jean Chiasson 418-647-3151 MIDLAND REALTY: Fitch Affirms B Rating on $11.1M Class J Cert. -------------------------------------------------------------- Fitch Ratings upgrades Midland Realty Acceptance Corp.'s commercial mortgage pass-through certificates, series 1996-C1: -- $18.6 million class G to 'AA' from 'BBB+'. In addition, Fitch affirms these classes: -- $4.1 million class A-3 'AAA'; -- Interest-only class A-EC 'AAA'; -- $20.4 million class B 'AAA'; -- $26 million class C 'AAA'; -- $14.8 million class D 'AAA'; -- $5.6 million class E 'AAA'; -- $7.4 million class F 'AAA'; -- $11.1 million class J 'B'. Fitch does not rate the $5.6 million class H, the $3.8 million principal-only class K-1, and the interest-only class K-2 certificates. The rating upgrade is due to the increase in subordination levels resulting from loan payoffs and amortization and due to the reduced uncertainty and lower than expected losses from the disposition of eight assets earlier in 2004. As of the October 2004 distribution date, the pool has paid down 68.4% to $117.4 million from $371.1 million at issuance. In addition, the pool has paid down 20.6% since Fitch's March 2004 review. Midland Loan Services, Inc., as master servicer, collected year-end 2003 financials for 85.7% of the transaction. Among those properties that reported at YE 2003, the weighted average debt service coverage ratio (DSCR) increased to 1.50 times (x) compared to 1.44x at issuance for the same loans. Four loans (7.9%) are currently in special servicing: * one real estate owned (REO) property (2.1%), * one 90-day delinquent loan (2.8%), * one 60-day delinquent loan (1%), and * one loan that is current (1.9%). The REO property is secured by a healthcare facility located in Weatherford, Texas. A sale of the property is anticipated to close by month end and losses are expected. The borrower for the 90-day delinquent loan is in bankruptcy; however, based on the current appraised value, no losses are expected on this loan. The 60-day delinquent loan is being brought current and then a return to the master servicer is likely. The loan that is current was transferred to special servicing in September 2004 due to tenant rollover issues. The special servicer, Midland, is currently evaluating workout options. In addition to the specially serviced loans metioned, three loans (4.7%) are considered Fitch loans of concern due to decreases in DSCR and occupancy. These loans' higher likelihood of default was incorporated into Fitch's analysis. MIRANT CORP: District Court Affirms Extension of Exclusive Periods ------------------------------------------------------------------ M.H. Davidson & Co. and the Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC, took an appeal from Judge Lynn's order extending the period within which Mirant Corporation and its debtor-affiliates have the exclusive right to file a Chapter 11 plan and to solicit acceptances for that plan to the U.S. District Court for the Northern District of Texas. Both Appellants argue that Judge Lynn erred in granting the second extension. Judge Lynn, the Appellants assert, also erred in refusing to consider the Debtors' failure to provide a duly authorized business plan by March 1, 2004, as contemplated by the Bankruptcy Court's prior order granting the first extension of the Exclusive Periods. In addition, the MAGi Committee argues that the Bankruptcy Court: (a) improperly shifted the burden of proof under Section 1121(d) of the Bankruptcy Code by requiring the MAGi Committee to show cause why the Exclusive Periods should be terminated; (b) made no factual findings to support its conclusions that the Debtors: -- have engaged in good faith progress towards reorganization; -- have made progress in negotiations with their creditors in the formulation of the reorganization plan; and -- are not seeking an extension of the Exclusive Periods to pressure creditors to submit to the Debtors' reorganization demands; and (c) erred by basing its findings on unidentified and unspecified matters that were not before it at the hearing on the Debtors' request for extension. District Court's Analysis Under Section 1121(d), District Court Judge John McBryde holds that the burden is on the debtor to show cause for extending the exclusive period. Whether to grant a request for extension lies within the Bankruptcy Court's discretion. In virtually every case where an extension has been granted, Judge McBryde notes that the debtor showed substantial progress had been made in negotiations toward reorganization. The debtor's burden gets heavier with each extension it seeks as well as the longer the exclusive periods last. The court must balance the potential harm to creditors and limit the delay that makes creditors hostages of Chapter 11 debtors. According to Judge McBryde, the bankruptcy judge properly noted the size and complexity of the Debtors' interlocking corporate structure and the number of large contingency items that needed to be resolved or at least further clarified before a meaningful reorganization plan can be presented. The Bankruptcy Court did not grant the extension sought by the Debtors. Nor did the Bankruptcy Court follow the MAGi Committee's suggestion that a 60-day extension be granted. Instead, it granted an extension that it concluded would be meaningful in that Debtors would be pressed, but not unduly so, to submit a proposed plan without the disruption of having to return to the Court to seek further extension in the interim. Judge McBryde notes that the Bankruptcy Court was not impressed by talk of "gating issue" and "visibility" or with the fact that the Debtors' witness could not give an assessment of the Debtors' management. The indication was that the Bankruptcy Court would rely on the examiner, rather than Debtors, to appraise the Court about what needed to be done. The Bankruptcy Court made it clear that further extension of the Debtors' Exclusive Period would be difficult to obtain and that the Court would not hesitate to act if presented evidence that the Debtors were abusing the privileges extended to them. Judge McBryde agrees with the Bankruptcy Court that the Debtors need to be able to use the tools available under Chapter 11, and that those tools would only be available if the Exclusive Periods were extended. "Of concern to the Bankruptcy Court was that the Debtors have an opportunity to present a single plan, or at least larger plans, that would have the potential to achieve the greatest good for everyone so that the Court and the parties would not be burdened by piecemeal resolution of the individual estates," Judge McBryde says. "And, the Bankruptcy Court legitimately took into account that a meaningful reorganization of the Debtors could not be accomplished on a piecemeal basis." Judge McBryde, accordingly, finds that cause existed for the extension granted. Judge McBryde affirms the Bankruptcy Court's decision. "The Bankruptcy Court did not err in failing to require [Debtor MAGi] to separately explain why a plan had not been filed as to it or to provide a timetable of the steps to be taken for the filing of such plan; nor does the record support a conclusion that the Bankruptcy Court should have required Mirant Corporation to present evidence that it had fulfilled its fiduciary duty to [Debtor MAGi] by considering and analyzing the possibility of a separate plan [for Debtor MAGi]," Judge McBryde explains. With respect to the Bankruptcy Court's refusal to consider the Debtors' failure to provide duly authorized business plan by March 1, 2004, Judge McBryde says, there is nothing in the record to suggest that the Bankruptcy Court abused its discretion to evaluate the extent to which the Debtors' degree of compliance will be taken into account. Furthermore, Judge McBryde holds that there is no reason to believe that, if and when the issue of terminating the extended period of the exclusivity is presented, the Bankruptcy Court will not properly place the burden of proof. Moreover, the issue asserted by the MAGi Committee regarding placement of burden of proof in a proceeding to be conducted in the future is premature. Judge McBryde rules that the MAGi Committee's claim that the Bankruptcy Court erred "in considering the entire record" of the jointly administered Chapter 11 cases in making its determination is predicated on the exchange that occurred between Judge Lynn and the Debtors' counsel at the conclusion of the only witness' testimony at the hearing. The record does not reflect that the Bankruptcy Court considered from an evidentiary standpoint anything other than the record directly related to the hearing. The Bankruptcy Court was not asked to take judicial notice of any specific pleadings or other papers. Nor is there any indication that Judge Lynn took into account any particular information to which the MAGi Committee did not have an opportunity to respond. The MAGi Committee did not put on any evidence or request a continuance to enable it to prepare to present any evidence. The Bankruptcy Court's findings were stated into the record, and no party objected on the ground that the Bankruptcy Court was taking into account any matter that should not have been considered. As reported in the Troubled Company Reporter on May 17, 2004, Judge Lynn of the U.S. Bankruptcy Court for the Northern District of Texas extended the Debtors' exclusive period to file a plan through December 31, 2004, and their exclusive period to solicit plan acceptances until February 28, 2005. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: Court Expands Examiner's Scope of Responsibilities --------------------------------------------------------------- As the behest of Mirant Corporation and its debtor-affiliates, Judge Lynn of the U.S. Bankruptcy Court for the Northern District of Texas expands the definition of the duties and powers set forth in the Order appointing William K. Snyder as Examiner in Mirant's cases, to provide that: (a) Prospective or Ongoing Transactions 1. Mr. Snyder will review any prospective or on-going transaction or course of dealing between any Debtor and any of the Debtor's insider, which transaction or course of dealing the Debtor intends to take without (i) notice of hearing, and (ii) any opportunity for the Court to determine whether the transaction or course of dealing is fair and consistent with the best interests of creditors and the estate of each Debtor affected by the transaction or course of dealing; 2. In analyzing any transaction or course of dealing, Mr. Snyder will not utilize his own professionals, unless authorized to do so by the Court, but rather will rely on business judgment. Mr. Snyder will confer with the Debtors and the Debtors' counsel if he determines that a transaction or course of dealing is not fair to any Debtor or is not consistent with the best interests of the creditors and the estate of each of the Debtors affected by the transaction or course of dealing; 3. Following his conference with the Debtors, Mr. Snyder will report to the Court, the United States Trustee, the Debtors and the entity at the request of which the transaction or course of dealing was reviewed. Unless the Debtor intends to proceed with a transaction or course of dealing, which in Mr. Snyder's judgment is unfair to any Debtor or will prejudice the creditors or the estate of any Debtor, the report will be limited to the advice that the transaction or course of dealing has been analyzed and the applicable Debtor's or Debtors' conduct is and will be consistent with the fiduciary responsibility of a debtor- in-possession. In all other instances, Mr. Snyder will report as he sees fit; (b) Potential Causes of Action 1. Mr. Snyder will undertake an investigation of any potential causes of action or basis for claim objection or claim subordination available to any Debtor against any past or present insider or any member of a Committee. To the extent practicable and consistent with his judgment, Mr. Snyder will rely on work-product, reports, or other materials made available to him by the Debtors, any Committee, or any other party-in-interest. If Mr. Snyder determines that another party-in-interest is investigating the cause of action, he may defer to the other party, provided the party agrees to report to Mr. Snyder regarding the results of the investigation; 2. Mr. Snyder will report to the Court regarding the advisability of pursuing any potential cause of action which he investigates or which is investigated by another party-in-interest. In formulating his report, Mr. Snyder will specifically address: -- the merits of the cause of action, including the probability of success; -- the cost of pursuing the causes of action; -- the effect of pursuing the cause of action on the timing of the Debtors' reorganization; -- the effect on the Debtors' business of pursuing the cause of action; and -- the potential effect on the return to creditors and interest holders of any of the Debtors; and (c) Facilitation of Communications Mr. Snyder will mediate any dispute, which is interfering with communications or negotiations among the parties, or otherwise act to facilitate communications and negotiations among the parties. In the event Mr. Snyder concludes that communications or negotiations are impracticable, Mr. Snyder will report to the Court regarding the matters under discussion or negotiation and the reasons why communication or negotiations are unable to progress. Mr. Snyder will be deemed not to have waived or impaired any privilege, which could otherwise be claimed by any entity that cooperates with him. Any communication to Mr. Snyder submitted as privileged or confidential will not, absent waiver by the claiming party or Court order, be discoverable from Mr. Snyder. To the extent Mr. Snyder must include confidential or privileged material in any report he submits to the Court, his complete report will be made only to the Court under seal, with a copy to the party claiming privilege or confidentiality. The report will be redacted or otherwise protected before Mr. Snyder's transmission of it to other parties. Mr. Snyder may, with Court approval, retain counsel and other professionals, like forensic accountants, appraisers or experts, as he deems necessary. Mr. Snyder may immediately retain and utilize the services of Corporate Revitalization Partners, LLC, and Gardere Wynne Sewell, LLP, to assist him in the performance of his duties. In that regard, Mr. Snyder will promptly file appropriate applications for retention of Corporate Revitalization effective as of the commencement of Mr. Snyder's appointment and for employment of Gardere Wynne effective as of April 27, 2004. Mr. Snyder will promptly report to the Court at any time that his rolling quarterly average total billings -- including his and his retained professionals' fees and Expenses -- are anticipated to exceed $500,000. The report will include a description of the tasks Mr. Snyder must perform and a budget showing the estimated cost of their performance. All Protected Persons and any entity, which intends to seek any compensation or reimbursement in the Debtors' Chapter 11 cases will cooperate with Mr. Snyder. Mr. Snyder will coordinate investigative efforts of all relevant parties. All relevant entities and Mr. Snyder will endeavor to avoid any unnecessary duplication of effort in the Debtors' Chapter 11 cases. In connection with any investigation, all relevant entities and Mr. Snyder will make every effort to accommodate the Debtors' operating needs and constraints. Mr. Snyder will immediately report to the Court any failure to comply with this matter. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000) MKP CBO: Moody's Pares Ratings on Classes B-1A & B-1L to B3 ----------------------------------------------------------- Moody's Investors Service lowered the ratings of four classes of notes issued by MKP CBO I, Ltd.: (1) to Aa3 (from Aaa on review for downgrade), the $250,000,000 Class A-1L Floating Rate Notes Due February 2036; (2) to Baa3 (from Aa3 on review for downgrade), the $25,000,000 Class A-2L Floating Rate Notes Due February 2036; (3) to B3 (from Baa3 on review for downgrade), the $7,375,000 Class B-1A 8.75% Notes Due February 2036; and (4) to B3 (from Baa3 on review for downgrade), the $7,000,000 Class B-1L Floating Rate Notes due February 2036. This transaction closed on February 8, 2001. Moody's noted that all four classes of notes would remain under review for downgrade. According to Moody's, its rating action results from significant deterioration in the weighted average rating factor of the collateral pool and overcollateralization ratios. Moody's noted that, as of the most recent monthly report on the transaction, the weighted average rating factor of the collateral pool is 1625 (425 limit) and that about 26% of the collateral pool currently has a Moody's rating of below Baa3 (5% limit). Moody's further noted that despite the partial paydown of the Class A-1L Notes on the September 8, 2004 Payment Date, the overcollateralization tests are still in violation: the Class A Overcollateralization Test is currently at 103.5% (106% covenant) and the Class B Overcollateralization Test is at 97.6% (101% covenant). Rating Action: Downgrade and Review for Downgrade Issuer: MKP CBO I, Ltd. Class Description: the U.S. $250,000,000 Class A-1L Floating Rate Notes Due February 2036 Prior Rating: Aaa (under review for downgrade) Current Rating: Aa3 (under review for downgrade) Class Description: the U.S. $25,000,000 Class A-2L Floating Rate Notes Due February 2036 Prior Rating: Aa3 (under review for downgrade) Current Rating: Baa3 (under review for downgrade) Class Description: the U.S. $7,375,000 Class B-1A 8.75% Notes Due February 2036 Prior Rating: Baa3 (under review for downgrade) Current Rating: B3 (under review for downgrade) Class Description: the U.S. $7,000,000 Class B-1L Floating Rate Notes due February 2036 Prior Rating: Baa3 (under review for downgrade) Current Rating: B3 (under review for downgrade) MORGAN STANLEY: Fitch Affirms B Rating on $13.6 Mil. Class F Cert. ------------------------------------------------------------------ Fitch Ratings upgrades Morgan Stanley Capital Inc.'s commercial mortgage pass-through certificates, series 1996-C1: -- $18.7 million class E to 'A' from 'BBB+'. These classes are affirmed: -- $15.8 million class A 'AAA'; -- Interest-only class X 'AAA'; -- $20.4 million class B 'AAA'; -- $18.7 million class C 'AAA'; -- $17 million class D-1 'AAA'; -- $5.1 million class D-2 'AAA'; -- $13.6 million class F 'B'. Fitch does not rate the $3.5 million class G certificates. The upgrade reflects the increased credit enhancement levels resulting from loan payoffs and amortization and due to the reduced uncertainty related to the specially serviced loans. The transaction has paid down 15% since Fitch's June 23, 2004 review. As of the November 2004 distribution date, the pool's certificate balance has paid down 67% to $112.9 million from $340.5 million at issuance. The master servicer, GMAC Commercial Mortgage Corp., provided year-end 2003 financials for 92% of the pool. The YE 2003 weighted average debt service coverage ratio increased to 1.69 times (x) from 1.55x at issuance. Currently two loans (4.4%) are in special servicing. The larger loan (3%) is secured by a multifamily property in Kokomo, Indiana. The property is 70% occupied. The loan is 90 days delinquent and the special servicer is pursuing foreclosure; losses are likely. The second loan (1.4%) is secured by a multifamily property located in Oak Ridge, Tennessee. The borrower has requested debt relief but the loan is still current. NEXSTAR BROADCASTING: Moody's Rates $235M Senior Secured Loan Ba3 ----------------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating for Nexstar Broadcasting, Inc.'s $235 million senior secured term loan due 2010. The transaction refinanced the existing senior secured term loan and increased total availability by approximately $40 million. In addition, Moody's affirmed all existing ratings for the company. The affirmations of the ratings acknowledge Nexstar's modest improvements in leverage and operating margins, subsequent to the company's acquisition of Quorum, which is in line with Moody's expectations. The negative outlook reflects the risk of Nexstar's still high debt capitalization, the potential for additional acquisitions, and Moody's expectations of a less robust advertising market in 2005. Moody's took these ratings actions: * Nexstar Holdings, Inc. -- Affirmed the Caa1 rating for the 11.375% senior discount notes due 2013, -- Affirmed Nexstar Holdings' Caa1 issuer rating, and -- Affirmed the company's B1 senior implied rating. * Nexstar Broadcasting, Inc. (including Mission Broadcasting) -- Assigned a Ba3 rating for the $235 million senior secured term loans due 2010, -- Affirmed the Ba3 rating for the $80 million revolving credit facility, -- Affirmed the B3 rating for the $285 million of senior subordinated notes, and -- Withdrew the Ba3 rating for the existing $195 million senior secured term loan. The rating outlook was revised to negative from stable. The ratings remain constrained by Nexstar's acquisition strategy, still high debt burden and thin interest coverage after capital expenditures (1 times EBITDA for TTM ended 3Q'04 including non- cash interest), and the potential for future capital expenditure requirements given the company's limited approach to digital upgrades. The ratings also reflect the risk associated with the cyclicality of the advertising market, and the expectation of additional weakness related to the upcoming off year of political- and Olympic-driven sales. However, the ratings also reflect management's demonstrated success in acquiring and integrating under-performing stations. EBITDA margins have improved from around 27% at year-end 2003 to around 32% for the trailing twelve months ended 3Q'04. As a result, while leverage remains very high, it has declined to 8.2x holding company debt-to-EBITDA (7.0x at the operating company) from the 10.3x debt-to-EBITDA (8.9x at the operating company) level at year-end 2003. Moody's notes that approximately 40% of Nexstar's station portfolio was acquired in December 2003 with the Quorum acquisition, and this provides Nexstar an opportunity for further margin improvement. The ratings are also supported by: (1) Nexstar's position in the small- and medium-sized television markets, (2) limited competition within these markets, (3) a greater proportion of more resilient local advertising revenues (about 68% of revenues), (4) leading local news programming (accounting for over 30% of advertising revenues), (5) diversity of network affiliates, and (6) geography. The ratings also benefit from Nexstar's duopolies in 13 of its 27 markets and its local service agreement with Mission Broadcasting that expands programming coverage. Moody's also believes that the assets provide reasonable coverage of the company's total outstanding debt. The negative outlook incorporates the company's weak credit metrics going into a challenging advertising environment. In order to maintain its ratings and return to a stable outlook, Moody's would expect leverage to decline to inside 7 times holding company debt-to-EBITDA over the next 12-to-24 months. Absent this decline in leverage, the ratings may be lowered. Moody's does not believe the company has the ability to significantly reduce its debt load through free cash flow generation in the near-to-medium term and, therefore, does not expect the ratings to improve over this time frame. The rating outlook could return to stable sooner if key credit and operating metrics improve more quickly and can offset Moody's concerns regarding the company's acquisitive nature, potential for increasing capex requirements, and weaker revenue prospects in 2005. The Ba3 ratings on the $315 million in senior secured credit facilities are notched up from the B1 senior implied rating reflecting their senior position within the capital structure and the benefits of the collateral package and debt protection measures within the credit agreement. The notching up also considers the company's meaningful amount of "junior capital." The facilities are secured by the stock and assets of its subsidiaries, and further benefit from upstream guarantees from all subsidiaries. The B3 senior subordinated notes rating reflects their contractual subordination to the bank borrowings, as well as the benefit of subsidiary and parent guarantees. The Caa1 rating for Nexstar Holdings' senior discount notes is based on the structural subordination of the notes to all of the company's existing debt and other subsidiary obligations. Nexstar Broadcasting, based in Irving, Texas, owns and operates and provides services to 46 television stations in 27 markets and reaches approximately 7.4% of the U.S. television households. NORTHWESTERN: Restructuring Costs Will Affect Operations -------------------------------------------------------- In its Form 10-Q filing with the Securities and Exchange Commission dated November 8, 2004, Northwestern Corporation said that despite the fact that it successfully consummated its plan of reorganization and executed its exit financing on Nov. 1, 2004, its Chapter 11 proceedings have negatively impacted the Company and its future prospects are uncertain. The uncertainty regarding its future prospects may hinder Northwestern's ongoing business activities and ability to operate, fund and execute its business plan by: (i) impairing relations with existing and potential customers; (ii) negatively impacting its ability to attract, retain and compensate key executives and associates and to retain employees generally; (iii) limiting its ability to obtain trade credit; and (iv) impairing present and future relationships with vendors and service providers. The Company has incurred, and expects to continue to incur, significant costs associated with the Chapter 11 proceedings, which may adversely affect its results of operations and cash flows. The amount of these costs, which are being expensed as incurred, are expected to have a significant adverse effect on the Company's results of operations and cash flows. Although its plan of reorganization has been successfully consummated and it has emerged from bankruptcy, management expects to continue to incur significant costs in connection with the consummation of the plan of reorganization. These expenses are also expected to have an adverse effect on Company results of operations and cash flows. Northwestern will be subject to claims made after the date that it filed for bankruptcy and other claims that were not discharged in the bankruptcy proceeding, which could have a material adverse effect on its results of operations and profitability. 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. NYFB PARTNERS INC: Case Summary & 9 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: NYFB Partners, Inc. 601 Ashley Drive, Suite 1200 Tampa, Florida 33602 Bankruptcy Case No.: 04-22263 Chapter 11 Petition Date: November 16, 2004 Court: Middle District of Florida (Tampa) Judge: K. Rodney May Debtor's Counsel: Richard J. McIntyre, Esq. Trenam, Kemker, Scharf 101 East Kennedy Boulevard, #2700 Tampa, FL 33602 Tel: 813-223-7474 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 9 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Dennis Allen Trust $1,188,833 Chesapeake Atlantic Holdings $110,187 601 North Ashley Drive, Suite 1200 Tampa, GL 33602 Chesapeake Atlantic Holdings $80,732 601 North Ashley Drive, Suite 1200 Tampa, GL 33602 George F. Young $25,000 Universal Solutions $20,000 Hillsborough County $16,667 Gregory Hughes $12,240 Eagle Roofing $9,000 Gary Krielow $9,000 OCEANVIEW CBO: S&P's Junks Class C Notes ---------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A-1B, combination securities (class A-1C notes together with the preference shares), A-2, B-F, B-V, and C notes issued by Oceanview CBO I Ltd., a CDO backed primarily by investment-grade ABS and other structured securities. Concurrently, the ratings on the class A-1B and combination securities are removed from CreditWatch with negative implications, where they were placed November 8, 2004. However, the ratings on the class B-F, B-V, and C notes remain on CreditWatch with negative implications. The rating assigned to the class A-1A notes is affirmed, based on a financial guarantee insurance policy issued by MBIA Insurance Corp. ('AAA'). Deerfield Capital Management LLC manages the transaction. The lowered ratings reflect factors that have negatively affected the credit enhancement available to support the notes since the transaction was originated in June 2002. These factors include a reduction in the level of overcollateralization available to support the notes and a negative migration in the overall credit quality of the assets within the collateral pool. Standard & Poor's noted that Oceanview CBO I Ltd. is currently holding $61.7 million in principal cash; the CreditWatch placements remaining on the B-F, B-V, and C note ratings will be resolved in January or February 2005 following a review of the potentially mitigating effects of the collateral manager's reinvestment of the principal cash available. Standard & Poor's also noted that an amendment to the transaction is currently in the final stage of consideration to revise the trading guidelines in the indenture; the current rating actions are unrelated to these proposed amendments. Ratings Lowered and Removed from CreditWatch Negative Oceanview CBO I Limited Rating ------ Class To From ----- -- ---- A-1B AA+ AAA/Watch Neg Comb. sec. AA+ AAA/Watch Neg A-2 A+ AA/Watch Neg Ratings Lowered and Remain on CreditWatch Negative Oceanview CBO I Limited Rating ------ Class To From ----- -- ---- B-F BB-/Watch Neg BBB/Watch Neg B-V BB-/Watch Neg BBB/Watch Neg C CCC+/Watch Neg BB/Watch Neg Rating Affirmed Oceanview CBO I Limited Class Rating ----- ------ A-1A AAA Transaction Information Issuer: Oceanview CBO I Ltd. Co-issuer: Oceanview CBO I Inc. Current manager: Deerfield Capital Management LLC Underwriter: UBS Securities LLC Trustee: Deutsche Bank Trust Co. Transaction type: CBO of ABS Tranche Initial Current Information Report Action ----------- ------- ------- Date (MM/YYYY) 11/2002 11/2004 Cl. A-1A note rtg. AAA AAA Cl. A-1A note bal. $262.50mm $262.50mm Cl. A-1B note rtg. AAA AA+ Cl. A-1B note bal. $70.00mm $70.00mm Comb. sec.* rtg. AAAr AA+ Comb. sec.* note bal. $12.50mm $12.50mm Cl. A-1 O/C ratio 115.94% 111.72% Cl. A-1 O/C ratio min. 108.00% 108.00% Cl. A-2 note rtg. AA A+ Cl. A-2 note bal. $28.00mm $28.00mm Cl. A-2 O/C ratio 107.23% 103.33% Cl. A-2 O/C ratio min. 101.50% 101.50% Cl. B-F note rtg. BBB BB-/Watch Neg Cl. B-F note bal. $10.00mm $10.00mm Cl. B-V note rtg. BBB BB-/Watch Neg Cl. B-V note bal. $5.00mm $5.00mm Cl. B O/C ratio 103.09% 99.34% Cl. B O/C ratio min. 100.50% 100.50% Cl. C note rtg. BB CCC+/Watch Neg Cl. C note bal. $2.80mm $2.524mm * The class A-1C notes shall, together with the preference shares, comprise the combination securities; Standard & Poor's rated only the principal amount on the class A-1C note component. Portfolio Benchmarks Current -------------------- ------- S&P wtd. avg. rtg. (excl. defaulted) BBB S&P default measure (excl. defaulted) 0.67% S&P variability measure (excl. defaulted) 1.09% S&P correlation measure (excl. defaulted) 1.59 Wtd. avg. coupon (excl. defaulted) 7.17% Wtd. avg. spread (excl. defaulted) 2.19% Oblig. rtd. 'BBB-' and above 86.65% Oblig. rtd. 'BB-' and above 89.53% Oblig. rtd. 'B-' and above 95.58% Oblig. rtd. in 'CCC' range 4.18% Oblig. rtd. 'CC', 'SD', or 'D' 0.24% Obligors on Watch Neg (excl. defaulted) 2.24% S&P Rated Previous Current OC (ROC) Rating Action Rating Action --------- ------------- ------------- Cl A-1A N/A* ('AAA'-insured) N/A Cl A-1B 97.60% (AAA/Watch Neg) 99.44%(AA+) Comb. sec. 97.60% (AAA/Watch Neg) 99.44%(AA+) Cl A-2 97.31% (AA/Watch Neg) 98.82%(A+) Cl B-F 96.09% (BBB/Watch Neg) 98.28%(BB-/Watch Neg) Cl B-V 96.09% (BBB/Watch Neg) 98.28%(BB-/Watch Neg) Cl C 96.35% (BB/Watch Neg) 97.92%(CCC+/Watch Neg) * Not applicable. Overcollateralization is not published for insured tranches because the insurance policy, rather than the tranche credit support, determines the public rating. For information on Standard & Poor's CDO Portfolio Benchmarks and Rated Overcollateralization Statistic, please see "ROC Report November 2004," published on RatingsDirect, Standard & Poor's Web- based credit analysis system, and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Go to "Credit Ratings," under "Browse by Business Line" choose "Structured Finance," and under Commentary & News click on "More" and scroll down to the desired articles. ORMET CORP: Unions Form Unity Council to Promote Restructuring -------------------------------------------------------------- Unions representing workers at Ormet Corp. facilities in Ohio, West Virginia and Louisiana have established a Unity Council to promote a restructuring that "secures a viable, long-term future for the Company, its employees, retirees, suppliers and the communities in which is operates," on November 17. In a joint resolution approved by: -- United Steelworkers of America (USWA) Locals 5724, 5760, 5760-01, 14465-01, -- International Union of Operating Engineers (IUOE) Local 406, and -- International Longshoreman's Association (ILA) Local 3033, the three unions said they "will each do everything in our power to ensure that [Ormet] is reorganized in a way that respects our members and retirees and creates a Company that honors its commitments." The USWA, IUOE and ILA represent unionized employees of Ormet at the company's: -- Hannibal Reduction Division and Hannibal Rolling Mill Division in Hannibal, Ohio; -- Bens Run Recycling Facility in Friendly, West Virginia; -- Burnside, Louisiana, Terminal; and -- Burnside, Louisiana, Refinery. "The Company has shown no interest in working with its workers and their Unions and has instead chosen the path of confrontation with each of our organizations," the unions said in their joint resolution, which detailed company actions at each of the facilities: -- "The Bankruptcy Court has rejected the Steelworkers' labor agreements at the Reduction and Rolling Mills despite Ormet's unconscionable, bad faith delays in providing the necessary information needed to evaluate the Company's proposals and despite the Steelworkers having put forth a reasonable proposal which could provide the Company with a long-term future; -- "The Operating Engineers have been faced with similar delaying tactics by ORMET in providing information, had reasonable proposals refused by ORMET and had a contract implemented despite ORMET's bargaining in bad faith; -- "The Longshoremen at ORMET's Terminal and Steelworker members at the Burnside Refinery and Bens Run are facing requests for further concessions that only serve to degrade the living conditions of active and retired ORMET employees." The unions "pledged to work together and to fully support each other in every way possible," the resolution concluded, adding that "We will each do everything in our power to ensure that the Company is reorganized in a way that respects our members and retirees and creates a Company that honors its commitments." Headquartered in Wheeling, West Virginia, Ormet Corporation -- http://www.ormet.com/-- is a fully integrated aluminum manufacturer, providing primary metal, extrusion and thixotropic billet, foil and flat rolled sheet and other products. The Company and its debtor-affiliates filed for chapter 11 protection on January 30, 2004 (Bankr. S.D. Ohio Case No. 04-51255). Adam C. Harris, Esq., in New York, represents the Debtors in their restructuring efforts. When the Company filed for bankruptcy protection, it listed $50 million to $100 million in estimated assets and more than $100 million in total debts. OSE USA: Sept. 26 Stockholders' Deficit Widens to $46.2 Million --------------------------------------------------------------- OSE USA, Inc., (OTCBB:OSEE) reported its results for the third quarter ended September 26, 2004. Revenues for the three and nine-month periods ended September 26, 2004, from continuing operations were $1,240,000 and $3,470,000, respectively, compared with revenues of $828,000 and $2,380,000 for the same periods one year ago. The Company reported a net loss applicable to common stockholders of $92,000 for the third quarter of 2004, compared with a net loss applicable to common stockholders of $1,006,000 for the same quarter of 2003. For the first nine months of 2004, the Company reported a net loss applicable to common stockholders of $1,032,000, compared with a net loss applicable to common stockholders of $7,089,000 for the same period of 2003. At September 26, 2004, OSE USA's balance sheet showed a $46,243,000 stockholders' deficit, compared to a $45,211,000 deficit at December 31, 2003. Founded in 1992, OSE USA, Inc., has been the nation's leading onshore advanced technology IC packaging foundry. In May 1999 Orient Semiconductor Electronics Limited -- OSE, one of Taiwan's top IC assembly and packaging services companies, acquired a controlling interest in IPAC, boosting its US expansion efforts. After the closure of its US manufacturing operations, the Company has focused on servicing its customers through its offshore manufacturing affiliates. OSE USA's customers include IC design houses, OEMs, and manufacturers. PARK-OHIO INDUSTRIES: S&P Junks Proposed $200M Senior Sub. Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' senior subordinated debt rating to Cleveland, Ohio-based Park-Ohio Industries Inc.'s proposed issuance of $200 million of senior subordinated notes due 2014. At the same time, Standard & Poor's revised its outlook on Park-Ohio to positive from stable and affirmed its 'B' corporate credit rating on the company. "The outlook change reflects Park-Ohio's improving operational performance due to recovering industry fundamentals that are producing stronger earnings and funds from operations," said Standard & Poor's credit analyst Nancy Messer. "As economic strength in Park-Ohio's end-markets continues, earnings and cash generation should improve to levels consistent with the rating into 2005. Over the next two years, ratings could be raised if Park-Ohio can achieve and sustain adjusted total debt to EBITDA measures of less than 5x," Ms. Messer added. Revenues and EBITDA in 2004 have increased year-over-year because of expanding markets combined with the benefits of the company's restructuring efforts. In addition, the company will improve its financial flexibility with the proposed debt issuance, as proceeds from the offering, in combination with borrowings under the company's revolving credit facility, will be used to repurchase the existing 9.25% senior subordinated notes due 2007. Park-Ohio, a wholly owned subsidiary of unrated Park-Ohio Holdings Corporation, operates logistics and manufacturing businesses serving a variety of markets, including transportation, semiconductor, industrial equipment, agricultural equipment, construction equipment, and aerospace. PENN OCTANE: Latest Form 10-K Report Includes Going Concern Doubt ----------------------------------------------------------------- Penn Octane Corporation (NASDAQ: POCC), reported that, pursuant to rules of the Nasdaq Stock Market that became effective in 2004, that it received a going concern qualification in the audit opinion which was included in its recently filed Form 10-K with the Securities and Exchange Commission. The qualification states that "conditions exist which raise substantial doubt about the Company's ability to continue as a going concern." Factors contributing to the inclusion of the qualification include: -- reduced sales volume to Penn Octane's primary customer, which may result in insufficient cash flow to pay obligations when due; -- the pledge of substantially all assets as collateral on existing debt, which may render the Company unable to obtain additional financing collateralized by those assets; and -- the fact that Penn Octane's existing credit facility may be insufficient to finance its business. Each audit opinion received by Penn Octane since inception has contained a going concern qualification. For further information, please refer to Penn Octane's Form 10-K filed with the SEC on November 10, 2004 (SEC file number 000-24394). About the Company Penn Octane historically has been a leading supplier of Liquefied Petroleum Gas to Northeastern Mexico until the recent transfer of its owned pipeline and terminal assets to Rio Vista Energy Partners L.P. (Rio Vista). Penn Octane continues to lease a 132-mile, six-inch pipeline, which connects from a pipeline in Kleberg County, Texas, to the terminal facility in Brownsville, Texas. The Brownsville terminal facility was transferred to Rio Vista in September 2004. Penn Octane supplies to Rio Vista all LPG, which Rio Vista supplies to Northeastern Mexico. Penn Octane also utilizes a 12-inch propane pipeline, which connects certain gas plants in Corpus Christi, Texas, to its pipeline in Kleberg County. The Company's network is further enhanced by the 155 miles of pipeline it has rights to use to transport LPG to and from its storage facility of 500,000 barrels in Markham, Texas, that enhances the company's ability to deliver LPG to Rio Vista for potential further distribution to Northeastern Mexico. The Company has recently begun operations of its gasoline and diesel fuel reseller business. By having the ability to access portions of certain pipeline and terminal space located in California, Arizona, Nevada and Texas, the Company is able to sell gasoline and diesel fuel at rack loading terminals and through bulk and transactional exchanges. PHOENIX VILLAGE: Case Summary & 5 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Phoenix Village Mall Limited Partnership 127 Phoenix Village Fort Smith, Arkansas 72901 Bankruptcy Case No.: 04-77548 Type of Business: The Debtor owns a mall and leases mall space to merchants. Chapter 11 Petition Date: November 16, 2004 Court: Western District of Arkansas (Fort Smith) Judge: Richard D. Taylor Debtor's Counsel: James F. Dowden, Esq. James F. Dowden, P.A. 212 Center St., 10th Floor Little Rock, AR 72201 Tel: 501-324-4700 Fax: 501-374-5463 Total Assets: $7,017,350 Total Debts: $5,345,187 Debtor's 5 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Tax Collector $91,120 Sebastian County P.O. Box 427 Fort Smith, AR 72902 Luckinbill, Inc. $15,185 P.O. Box 186 Enid, OK 73702 American Express $11,616 P.O. Box 360002 Fort Lauderdale, FL 33326 Bank One Cardmember Services $10,588 Hawkins Co. $6,280 RCN CORPORATION: Gets Court Nod to Tap Dechert as Special Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave RCN Corporation and its debtor-affiliates permission to employ Dechert LLP as special conflicts counsel, nunc pro tunc to September 14, 2004. Dechert LLP is a full-service law firm with broad experience and expertise in the fields of intellectual property, bankruptcy, corporate reorganization, debtors' and creditors' rights, as well as in many other areas of practice. According to Deborah M. Royster, RCN Corporation Senior Vice President, General Counsel and Corporate Secretary, Dechert has represented the Debtors since: -- 1999, in connection with certain patent infringement claims and related issues; and -- 1997, in general intellectual property, labor, and immigration matters. Dechert will provide legal representation on matters that the Debtors' primary bankruptcy counsel, Skadden Arps Slate Meagher & Flom, LLP, cannot provide due to a conflict, adverse interest, or other connection, including: (a) the resolution of patent infringement claims asserted against the Debtors; and (b) any other matters specifically requested by the Debtors and agreed to by Dechert, to the extent Dechert does not represent or hold any interest adverse to the Debtors or their estates with respect to the specified matter. The Debtors believe that Dechert is well qualified to provide the services, especially since it has significant familiarity with the Claims. In exchange for its services, Dechert will be paid based on its customary hourly rates: Attorneys $230 - 650 Non-lawyer personnel 135 - 195 Dechert may perform services on behalf of both the Debtors and their Non-Debtor Affiliates. Services performed exclusively for any of the Non-Debtor Affiliates will be billed directly to the Non-Debtor Affiliates and not to the Debtors' estates. To the extent Dechert performs services on behalf of both the Debtors and the Non-Debtor Affiliates, the Firm will allocate a proportional amount of its fees and expenses for the services to the Non-Debtor entities, and it will only seek payment from the Debtors' estates of that portion allocated to the Debtors. Within a year before the Debtors' bankruptcy filing, Dechert was paid $152,000 for services rendered to the Debtors and to the Non- Debtor Affiliates, subject to continuing reconciliation. As of May 27, 2004, the Debtors and their Non-Debtor Affiliates owed Dechert $34,000 for legal services previously rendered. Dechert has received payments from certain Non-Debtor Affiliates in full satisfaction of these obligations and in partial satisfaction of certain postpetition obligations. Debtor RCN Corp. currently owes Dechert $2,000 for postpetition services rendered, subject to continuing reconciliation. Martin J. Black, a partner at Dechert, assures Judge Drain that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Dechert does not hold any interest adverse to the Debtors' estate. 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) ROYAL & SUNALLIANCE: Fitch Rates GBP450 Million Sub. Debt BB ------------------------------------------------------------ Fitch Ratings changed Royal and SunAlliance Insurance PLC's -- RSAIP -- rating Outlook to Stable from Negative. At the same time, its ratings are affirmed at Insurer Financial Strength 'BBB' and Long-term 'BB+'. In addition, Fitch has assigned Royal and SunAlliance Insurance Group -- RSAIG -- a Long-term 'BB-' rating and its GBP450 million 8.5% perpetual subordinated debt a 'BB' rating. The rating on RSAIG's remaining subordinated debt is affirmed at 'BB'. The rating on the GBP450m subordinated debt, in common with RSAIG's other rated issues, is based principally on a limited and subordinated guarantee provided by RSAIP. The Outlook on RSAIG is Stable. The rating and new Outlook of RSAIP reflect the progress made by the company in reducing the business risks, enhancing the capital base and improving its performance. Against these aspects are continued risks associated with the run-off of operations including litigation and reserving risks, restricted fungibility of capital between the UK and US operations, and some remaining execution risk to its strategy. Fitch expects to see further progress in the company's delivery of its announced operational improvement plans. Fitch noted in November 2003 that further progress in restructuring was required by RSAIP to maintain its current rating. The agency believes that progress has been made in reducing the risks associated with R&SA's -- RSAIP and RSAIG -- operations, for instance through the UK Life business sale, the subordinated debt restructuring and the sale of Codan Life. These actions have served to enhance the capital base and also to reduce the regulatory uncertainty pertaining to the group's capital position. Despite the reduction in these risks, Fitch believes that R&SA retains significant reserving risk (especially in relation to the US, asbestos and structured products) in addition to litigation risk (e.g. through US student loans) and risks relating to the run-off of its US business lines. Fitch notes R&SA's indication that some potential has been identified in the third quarter for further prior year adverse claims development. R&SA expects to continue to assess this potential during the fourth quarter. Fitch expects that any fourth quarter reserve strengthening is likely to be below GBP200m and this deterioration is within the bounds already factored into the current rating. Fitch also considered the potential for adverse litigation decisions. It believes that the balance sheet impact from an adverse legal finding (e.g. in relation to student loans), even if combined with the expected fourth quarter reserve strengthening, would be unlikely to be material enough in itself to warrant a downgrade of R&SA's ratings. In addition, Fitch notes that R&SA would be likely to appeal an adverse litigation decision to a higher court, giving the group time to implement contingency measures and extending the time period to resolution. Fitch will be looking for R&SA to continue to demonstrate tangible performance enhancement from the operational improvement programme and to continue to reduce the risks associated with its business. These ratings were initiated by Fitch in response to investor demand. These ratings are based primarily on public information. ROYAL & SUNALLIANCE: Moody's Withdraws Non-Pooled Units' Ratings ---------------------------------------------------------------- Moody's Investors Service has withdrawn the Ba3 insurance financial strength ratings of Royal & SunAlliance USA's non-pooled insurance operating companies. Moody's has withdrawn these ratings for business reasons. Refer to Moody's Withdrawal Policy on http://moodys.com/ These ratings have been withdrawn: * Peak Property and Casualty Insurance Corporation -- insurance financial strength at Ba3; * Guaranty National Insurance Company of Connecticut -- insurance financial strength at Ba3; * Atlantic Security Insurance Company -- insurance financial strength at Ba3; * Atlantic Indemnity Company - insurance financial strength at Ba3; * Unisun Insurance Company -- insurance financial strength at Ba3; and * Orion Insurance Company - insurance financial strength at Ba3. Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. SAFETY-KLEEN: 206 Avoidance Actions Transferred to Judge Lindsey ---------------------------------------------------------------- Judge Wizmur transferred to Judge Paul B. Lindsey 206 adversary proceedings initiated by Safety-Kleen Services, Inc., against various creditors. The transferred Avoidance Actions include those filed by the Safety-Kleen Corporation, its debtor-affiliates and the Safety-Kleen Creditor Trustee against: * Schneider National Bulk Carriers, Inc., * MP Environmental Services, Inc., * Energy USA-TPC Corp., et al., * Delta Airlines, Inc., * Dewco Milwaukee Sales, et al. * Onsite Companies, et al. * Sunoco, Inc. * Intercont Products Division, * Allied Waste Industries, Inc., * T & T Graphics, Inc., * Technology Solutions Co., Inc., * Von Roll America, Inc., * Skowf, Inc., * Lobo Container, Inc., * Dart Trucking Company, Inc., * ISG Resources, Inc., * ExxonMobil Chemical Company, * Ikon Office Solutions, Inc., * Carl Bolander & Sons Co., * Petersen, Inc., * X-Rite, Inc., * EDP Contract Services et al., * Dowling & Pope Advertising, Inc., * PricewaterhouseCoopers, et al., * GSC Advertising, Inc., * Ondeo Nalco Company, * Paint Brush Corporation, and * Turner Gas Company, Inc. A complete list of the Adversary Proceedings transferred to Judge Lindsey is available for free at: http://bankrupt.com/misc/Adversary_Proceedings_transferred_to_Judge_Lindsey. pdf Headquartered in Delaware, Safety-Kleen Corporation -- http://www.safety-kleen.com/-- provides specialty services such as parts cleaning, site remediation, soil decontamination, and wastewater services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Del. Case No. 00-02303) on June 9, 2000. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,031,304,000 in assets and $3,333,745,000 in liabilities. (Safety-Kleen Bankruptcy News, Issue No. 83; Bankruptcy Creditors' Service, Inc., 215/945-7000) SCHUFF INTL: Deregisters Stock & Suspends Reporting Obligations --------------------------------------------------------------- Schuff International, Inc., (AMEX:SHF) filed a Form 15 with the Securities and Exchange Commission to deregister its common stock and suspend its reporting obligations under the Securities Exchange Act of 1934. The company is eligible to deregister pursuant to Securities Exchange Act of 1934 Rule 12g-4(a)(1)(i) because it has fewer than 300 shareholders of record. The company's board of directors believes that the anticipated reduction in administrative costs and other savings associated with deregistration are in the best interests of the company. The company's board of directors determined, after careful consideration, that deregistering is in the overall best interests of the company's stockholders. Several factors were considered by the board in making this decision, including, but not limited to: -- The substantial reduction or elimination of significant legal, accounting, and printing costs associated with the preparation and filing of the company's periodic reports and other filings with the SEC; -- The elimination of substantial increases in legal, audit and other costs associated with being a public company in light of new regulations promulgated as a result of the Sarbanes- Oxley Act of 2002 and the SEC rules thereunder; -- The concentration of stock ownership in relatively few holders of the company's common stock; and -- The anticipated decrease in the liquidity of the company's common stock. As of Nov. 16, 2004, the company's obligation to file reports under the Securities Exchange Act, including Forms 10-K, 10-Q and 8-K, will be suspended. The deregistration will not become effective, however, until the SEC terminates the registration, which the company expects to occur within 90 days. Note that, at any time prior to certification of deregistration by the SEC, the company reserves the right to voluntarily withdraw the Form 15. Despite the suspension of its obligation to file periodic financial reports, the company will continue to file periodic reports with the SEC on a voluntary basis as provided in the Indenture between the company and Bank of New York, as trustee for the holders of the company's 10-1/2% senior notes due 2008, of which approximately $85 million in principal amount remains outstanding. The company will continue to file periodic reports with the SEC until the notes are paid in full or the provision requiring filing of periodic reports is amended or waived. The company also has notified the American Stock Exchange that it plans to voluntarily delist from AMEX in conjunction with its Form 15 deregistration application. Following the delisting, the company anticipates that its shares will be traded in the over the counter market, but can make no assurances that any broker will make a market in the company's common stock. About the Company Schuff International Inc. -- http://www.schuff.com/-- is a family of steel fabrication and erection companies providing a fully integrated range of steel construction services, including design engineering, detailing, joist manufacturing, fabrication and erection, and project management expertise. The company has multi-state operations primarily focused in the U.S. Sunbelt. * * * As reported in the Troubled Company Reporter on June 21, 2004, Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on Schuff International, Inc., to 'CCC' from 'B-'. The outlook is negative. SCIENTIFIC LEARNING: Gets Nasdaq Delisting Notice Over Late Filing ------------------------------------------------------------------ Scientific Learning (NASDAQ: SCIL) received a Staff Determination notice from the Nasdaq Stock Market on November 16, 2004, stating that the Company is not in compliance with Nasdaq's Marketplace Rule 4310(c)(14) because the Company has not yet filed its Report on Form 10-Q for its quarter ended September 30, 2004. Therefore, the Company's securities are subject to delisting. However, the Company intends to request a hearing to review this determination, and the Company's stock will continue to be listed on the Nasdaq National Market pending the outcome of the hearing. Beginning at the opening of business on November 18, 2004, the trading symbol for the Company's securities will be changed from SCIL to SCILE. The delay in filing the Form 10-Q results from the previously announced reconsideration of the length of the Company's revenue recognition period. In October, the Company announced that, together with its outside auditors, it was reconsidering its revenue recognition period. As announced then, the result of this reconsideration may be that the Company will recognize revenue ratably over the full term of on line Progress Tracker access included in a customer's contract. For multi-year contracts, which are relatively few in number but large in size, the revenue recognition period could be up to five years. For its more common transactions, which have a one-year access period, the shift in revenue recognition timing would be within that one-year period. The issues under discussion do not include any questions about cash flow or about whether these sales can be recorded as revenue. There have been no suggestions of improprieties or misconduct. As announced in October, at September 30, 2004, the Company had $10.3 million in cash and cash equivalents and no debt. The issues are technical accounting issues and have required lengthy discussions with many experts at the Company's auditing firm. The Company and its auditors have not yet completely resolved the issues. "We are devoting all appropriate resources to resolving these issues quickly. We are determined to complete our work, announce our results, and bring our filings up to date as soon as possible," said Robert C. Bowen, Chairman and Chief Executive Officer. As permitted by Nasdaq, the Company intends to request a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. Requesting a hearing will stay the delisting until the hearing panel has rendered a decision. There can be no assurance that the hearing panel will grant the Company's request for continued listing. About the Company Scientific Learning produces the patented Fast ForWord(R) family of products, a series of computer-delivered reading intervention products that complement reading instruction. Based on more than 30 years of neuroscience and cognitive research, Fast ForWord products help children, adolescents, and adults build the cognitive skills critical for improving reading and language skills. For more information about Scientific Learning and its products, visit its Web sites at http://www.brainconnection.com/ and http://www.scientificlearning.com/or call toll-free 888-452-7323. At June 30, 2004, Scientific Learning's balance sheet showed a $5,510,000 stockholders' deficit, compared to a $6,566,000 deficit at December 31, 2003. SEARS ROEBUCK: S&P May Downgrade Ratings After Kmart Merger ----------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings on Sears, Roebuck and Company, including the 'BBB' corporate credit rating, remain on CreditWatch with negative implications, where they were initially placed October 21, 2004. This CreditWatch update follows the announcement that Sears has agreed to merge with unrated Kmart Holding Corporation in a transaction valued at over $11 billion. It is likely that ratings for Sears and the new holding company parent, Sears Holdings Corporation, will be in the 'BB' category upon completion of the merger, which is scheduled for the end of March 2005. The combined company will include the approximate 870 Sears full-line stores, 1,500 Kmart discount stores, and about 1,100 Sears specialty stores. With combined revenue of about $55 billion, Sears Holdings will be the third-largest retailer in the U.S., behind Wal-Mart Stores Inc. and Home Depot Inc. Despite the company's much greater size, and synergies that are estimated by management of about $500 million per year after the third year, both companies lag their peers in terms of store productivity and profitability. Sears continues to be challenged by competitors such as J.C. Penney Company Inc. and Kohl's Corporation, while Kmart faces Wal-Mart in numerous markets. To be successful, Standard & Poor's believes that management will need to make the Sears and Kmart stores more relevant to consumers in terms of convenience, merchandising, and value. Although we see the merger as an opportunity for Sears to accelerate its off- the-mall strategy by converting existing Kmart stores into Sears Grand stores, this strategy is still in its infancy and has yet to demonstrate success. While Kmart has greatly improved its profitability by reducing both costs and promotional sales, sales continue to decline. Selling some Sears proprietary brands may help differentiate the company's offerings, but it will still face substantial challenges competing with Wal-Mart and Target Corporation. Business risk for the combined entity will limit consideration for an investment-grade rating. Financing for the acquisition is expected to utilize existing cash at both companies. Sears Holdings should be able to utilize asset sales, tax benefits, and a lower or eliminated dividend to enhance cash flow, which will help offset restructuring costs. Standard & Poor's will monitor developments, and meet with management to discuss the company's future financial and business policies prior to resolving the CreditWatch listing. SMITHFIELD FOODS: Moody's Puts Ba2 Rating to $200 Sr. Unsec. Notes ------------------------------------------------------------------ Moody's Investors Service assigned a Ba2 rating to Smithfield Foods Inc.'s $200 million add-on to its 7% senior unsecured notes, due 2011. Moody's also affirmed Smithfield's Ba1 senior implied, Ba2 senior unsecured, and Ba3 subordinated note ratings, as well as its SGL-2 speculative grade liquidity rating. The ratings outlook remains stable. The add-on to the senior unsecured notes were sold at a premium, and proceeds will repay revolver outstandings and create additional liquidity that would be available for general corporate purposes, including acquisitions and investments. Smithfield's ratings reflect its leading market position in hog production and pork processing, and the diversity gained from its beef, turkey and international operations, but are limited by the company's exposure to cyclical commodity markets and its high debt levels. The stable ratings outlook has been based on Moody's expectation that Smithfield will take advantage of currently strong cash flow from improved hog markets to build sufficient financial flexibility ahead of the next market down-cycle so that leverage does not increase beyond 5x EBITDA in future down-cycles. The outlook remains stable, although continued acquisitions without equity funding would pressure the outlook and rating. Smithfield's ratings are: * $200 million 7.0% senior unsecured notes, due 2011 -- Ba2 assigned, * $400 million 7.0% senior unsecured notes, due 2011 - Ba2, * $300 million 8.0% senior unsecured notes, due 2009 -- Ba2, * $350 million 7.75% senior unsecured notes, due 2013 -- Ba2, * $200 million 7.625% senior subordinated notes, due 2008 -- Ba3, * Senior implied rating -- Ba1, * Unsecured issuer rating -- Ba2, * Speculative grade liquidity rating -- SGL-2. Moody's does not rate Smithfield's $900 million revolving credit facility, $345 million of privately placed secured notes, or approximately $285 million of other debt and capital leases, mostly secured and at subsidiaries. Smithfield's ratings are limited by: (1) high operating leverage (low margins, high fixed costs, and asset intensity), (2) combined with the inherent volatility of its business (which is exposed to commodity input and output price swings), and (1) debt levels that result in very high leverage for the rating level during periods of weak hog markets. The ratings also consider that ongoing capital spending needs are substantial and acquisitions are an integral part of the company's growth strategy. In addition, the ratings reflect: (1) the inherent business risks of animal disease outbreaks; (2) food product safety issues; (3) environmental aspects to its business that can constrain expansion, require non-productive investment and attract litigation; and (4) sensitivity to agricultural and trade policies and regulations. Smithfield's ratings gain support from its position as the leading market hog producer and pork processor in the US, a position that was strengthened by its acquisition of Farmland Industries' pork production and processing business in October 2003. Smithfield now accounts for 27% of pork processing in the US (Tyson is second, at 18%) and 14% of hog production (followed by Premium Standard Farms and Seaboard, each at 4%). The ratings also take into account the company's track record of generally reasonable multiples paid for acquisitions and an equity funding component for major acquisitions, which Moody's expects will continue. In addition, the ratings benefit from: (1) Smithfield's increasing emphasis on higher margin, value-added fresh and further processed products, which produce more stable earnings streams than commodity fresh meat; (2) diversity provided by its beef business, acquired in calendar 2002 and representing approximately 25% of revenues; and (3) improving profitability from its international operations, a modest contributor to earnings but target of increasing investment. Smithfield's SGL-2 rating indicates good liquidity, which provides key support to the company's long term rating, given the volatility of the business. Moody's stable outlook assumes that Smithfield will improve credit measurements over the next year from increasing earnings as a result of stronger hog markets and application of the up-cycle cash flow to reduce debt or make credit-enhancing acquisitions and investments. The outlook and ratings could be pressured if credit improvement does not appear sufficient to assure leverage would remain below 5x during the next period of cyclical hog market weakness. Recent acquisitions include feedlots from ConAgra, which will require significant working capital and are likely to have volatile earnings, and businesses in Romania and Poland that may not provide near term support to credit measurements. The ratings could be pressured by continued acquisitions if not accompanied by meaningful equity support, or by share repurchases. The ratings are not likely to be upgraded while the company has a significant amount of secured debt or until leverage is reduced materially, to levels that would peak below 4x EBITDA during a down-cycle. Smithfield has: -- a large revenue base ($9.7 billion in the LTM ending 8/1/04), -- substantial book equity ($1.6 billion), and -- sizable tangible assets ($4.4 billion). Debt at August 1, 2004, was $2.0 billion. The company also guarantees up to $76 million debt and liabilities of other related entities. Pro forma debt/LTM EBITDA is 3.2x (3.6x adjusted for operating leases). The business has low EBIT margins, at 4.3% in the LTM (ending August 1, 2004), though improved from 1.5% in FY 2003. EBIT coverage of interest was 3.5x in the LTM. Smithfield's speculative liquidity rating of SGL-2 indicates that Moody's expects the company to have good liquidity over the next twelve months. Cash flow generation is expected to cover both capital spending and debt amortization requirement. With proceeds from the note issuance repaying outstandings under the revolver, pro forma November 12, 2004, availability under the revolver is ample, at approximately $591 million, after utilization to back about $111 million of letters of credit and $198 million of borrowings. Covenant cushions are adequate. Smithfield's back door liquidity benefits from the fact that the working capital associated with the Farmland business (approximately $190 million of inventory and accounts receivable), assets associated with the recently acquired ConAgra feedlots ($40 million of fixed assets plus working capital, as it builds), and certain other assets are not encumbered. Maintenance of good liquidity is a key element supporting Smithfield's long term rating due to the inherent variability of its business. The senior unsecured notes do not benefit from subsidiary guarantees and are effectively subordinated to Smithfield's secured debt ($632 million pro forma at August 1, 2004, for the note issuance). Therefore, the note ratings are notched down from the senior implied rating to reflect their structural and effective subordination. Indenture covenants fall away permanently if the notes obtain investment grade ratings. The subordinated notes are notched below the senior unsecured notes to reflect their contractual subordination. Smithfield Foods, Inc., with revenues of $9.7 billion in the latest twelve months ending 8/1/04, has headquarters in Smithfield, Virginia. SOTHEBY'S: Moody's Upgrades Long-Term Ratings with Stable Outlook ----------------------------------------------------------------- Moody's Investors Service upgraded the long-term debt ratings of Sotheby's Holdings, Inc., with a stable outlook. The upgrade reflects the company's strengthened liquidity, a moderation in the liabilities remaining from the department of justice investigation, and strong operating performance. The new rating level reflects Sotheby's strong brand name, its recognized expertise in an industry that has high barriers to entry and is dominated primarily by two players, as well as current management's financially responsible behavior. It also reflects Sotheby's very strong liquidity from on balance sheet cash, operating cash flow, and an unfunded $200 million revolving credit facility, as well as the nearest term debt maturity being in 2007. The rating is constrained by the high level of funded debt, the seasonal and cyclical nature of the industry, which results in swings in operating performance and credit metrics, and the high level of fixed costs making it difficult to adjust to cyclical downturns. The stable outlook takes into account our expectation that leverage metrics will be uneven given the cyclical nature of the company's business. It also assumes that the company will maintain strong liquidity and that Sotheby's will finance capital expenditures, working capital needs, and dividends from internally generated cash flow. Given the recent upgrade, a further upgrade is unlikely in the intermediate term; however, ratings could move upward should the company reduce on balance sheet debt, including sale-leasebacks, to below $100 million while maintaining consistent cash balances. Ratings could move downward should the company's liquidity deteriorate such that cash balances fall below $100 million for an extended period of time, should the competitive environment change, or should on balance sheet debt rise above $300 million. While we expect some volatility in credit metrics, significant deterioration during a trough in the business cycle, such that Adjusted Debt/EBITDAR rises much above 5.0x is likely to trigger downward rating pressure. The year 2004 has been a strong year for Sotheby's. Operating performance has improved as a result of two successful auction seasons, as well as significant private sales, including the Forbes Faberge eggs. LTM 9/30/04 EBITDA from continuing operations rose to $75.1 million from $34 million in the prior fiscal year. This improvement in EBITDA caused Adjusted Debt/EBITDAR to improve to 4.4x on a LTM basis. Given the cyclical nature of the company's business, the current year's performance is not an indication of future levels of operating cash flow. In addition, liquidity has strengthened; the company sold the real estate business to Cendant (net cash proceeds of $94.0 million); and it extended the maturity on its $200 million credit facility to 2007. The remaining liabilities as a result of the department of justice investigation have moderated. The remaining fine to be paid is $27 million due in February 2005 and February 2006. The other remaining liability is $62.5 million in discount certificates which can be used to satisfy consignment charges or redeemable for cash between May 2007 and May 2008. The senior unsecured notes and issuer ratings are notched down by two from the senior implied rating as a result of the bank facility being secured by all the assets of the company, the subsidiary co-borrower structure of the credit facility, the lack of any subsidiary guarantees, as well as the sale of the York Avenue property in a sale lease back transaction. In addition, the two notches represent the preponderance of secured debt in the capital structure relative to the size of the unsecured notes. These ratings were upgraded: * Senior implied to Ba3 from B1; * Senior unsecured to B2 from B3; * Senior unsecured shelf to (P)B2 from (P)B3. These rating has been assigned: * Issuer rating of B2. Sotheby's Holdings, Inc., headquartered in Bloomfield Hills, Michigan, is one of the two largest auction houses in the world. Total revenues from continuing operations were $319.6 million for the fiscal year ended December 31, 2003. SPIEGEL INC: Offers to Settle Potential Suit by the SEC ------------------------------------------------------- On March 7, 2003, the Securities and Exchange Commission filed a Complaint in the United States District Court for the Northern District of Illinois against Spiegel, Inc., alleging violations of various provisions of the Exchange Act and the rules promulgated under it. Simultaneously with the filing of the Complaint, Spiegel and the Commission consented to the entry of a Partial Final Judgment and Order of Permanent Injunction. On March 27, 2003, by the parties' consent, the District Court amended certain provisions of the Partial Final Judgment. Under the terms of the Amended Partial Final Judgment, among other things, the District Court appointed an Independent Examiner to review Spiegel's financial records for the period from January 1, 2000, to March 11, 2003, and permanently enjoined Spiegel, its officers, and those persons in active concert or participation with the company, from: (i) engaging in any acts or practices in violation of Section 10(b) of the Exchange Act, 15 U.S.C. Section 78j(b), and Rule 10b-5, 17 C.F.R. Section 240.10-5; and (ii) violating Section 13(a) of the Exchange Act, 15 U.S.C. Section 78m(a), and Rules 13a-1 and 13a-13, 17 C.F.R. Sections 240.13a-1 and 240.15d-13. Among other things, these statutes, rules and regulations require the timely filing with the Commission of financial statements in annual reports on Form 10-K and quarterly reports on Form 10-Q in accordance with the rules and regulations of the Commission. On March 17, 2003, Spiegel's outside auditor, KPMG, LLP, advised Spiegel that, in light of the appointment of the Independent Examiner, KPMG would not be able to provide Spiegel with an audit opinion that would enable the company to file its 2002 Form 10-K in accordance with the Commission's rules and regulations. KPMG also advised Spiegel that KPMG similarly could not complete its review of Spiegel's quarterly financial statements subsequent to its 2002 fiscal year in accordance with Statement on Auditing Standard No. 100, which is required in Spiegel's Forms 10-Q filing. As a result of these circumstances, on March 31, 2003, Spiegel sought clarification of the Amended Partial Final Judgment. Spiegel sought confirmation that neither the company nor its employees would be held in contempt of the District Court's Amended Partial Final Judgment as a result of its inability to file its periodic reports. Spiegel undertook to make various public disclosures of its financial results in lieu of the periodic reports and forewarned that it may need to seek the additional relief sought following the Examination Report filing. On April 15, 2003, the District Court entered its First Relief Order, which granted Spiegel's request subject to certain additional public disclosure conditions agreed to by Spiegel and the Commission. On September 5, 2003, the Independent Examiner delivered his Examination Report to the District Court. In the Report, the Independent Examiner cited several accounting irregularities that allegedly affected the accuracy of Spiegel's financial statements dating back to at least 2000. The Examination Report also contains several criticisms of the work done by Spiegel's then outside auditors, KPMG, in connection with its fiscal 2000 and fiscal 2001 year-end audits, as well as the quarterly reviews of Spiegel's financial statements done by KPMG since fiscal year 2000. Spiegel's management and its Audit Committee then decided that it was not in the best interests of the company to continue using KPMG as its auditor. Spiegel terminated its engagement with KPMG on November 17, 2003. Prior to terminating its engagement with KPMG, Spiegel began the process of attempting to locate new independent auditors. Spiegel solicited interest from most of the accounting firms that would have the resources to audit a company of Spiegel's size. Only one firm, BDO Seidman, LLP, submitted a proposal to perform audit work for Spiegel. Spiegel offered the audit engagement to BDO, and the Bankruptcy Court approved that engagement in December 2003. On December 4, 2003, Spiegel made a second request in the District Court seeking relief from injunction contained in the Amended Partial Final Judgment. In that request, Spiegel sought additional time -- until April 7, 2004 -- to allow BDO to determine whether the firm could complete the required audit work in time for Spiegel to meet its reporting obligations. On December 10, 2003, the District Court entered its Second Relief Order, granting Spiegel's request subject to certain additional conditions agreed to by the parties. BDO completed the 2003 audit in 2004. In all, BDO spent over 4,500 hours working on the 2003 audit and Spiegel devoted 15 to 20 people to work internally on the 2003 audit. Spiegel is not yet able to determine whether it ever could: (i) prepare reliable financial statements for years prior to 2002 for First Consumers National Bank, its wholly owned non-debtor subsidiary, and the related credit operations that BDO could audit so that Spiegel could file the 2003 Form 10-K with completed audited financial statements; and (ii) make all past-due financial filings to meet its obligations under the Injunction and the Commission rules and regulations. While it is conceivable that Spiegel might be able to prepare financial statements for prior years for the FCNB credit operations that BDO could audit, Spiegel estimates that the cost of this endeavor would exceed $5 million and would take many months assuming that it can be accomplished at all. The Commission advised Spiegel that given the difficulties the company is having with regard to filing its annual reports on Form 10-K and quarterly reports in Form 10-Q, and its inability to comply strictly with the terms of the Amended Partial Final Judgment, the Commission is considering commencing Section 12(j) Proceedings against Spiegel, the effect of which, if successful, will be that, pursuant to Section 12 of the Exchange Act, the Commission will revoke the registration of all Spiegel securities. Given its difficulties in complying with the terms of the Amended Partial Final Judgment, Spiegel finds it proper for its estate and creditors to submit a Settlement Offer in anticipation of the Commission's commencement of Section 12(j) Proceedings. With the Bankruptcy Court's permission, Spiegel will submit a Settlement Offer to the Commission and take all necessary steps to give effect to the Settlement Offer, if the Settlement Offer is accepted by the Commission. A copy of Spiegel's Offer of Settlement is available for free at: http://bankrupt.com/misc/Spiegel_Settlement_Offer.pdf 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) STAR CAR: Section 341(a) Meeting Slated for December 6 ------------------------------------------------------ The United States Trustee for Region 2 will convene a meeting of Star Car Wash of Queens, Inc.'s creditors at 9:30 a.m., on December 6, 2004, at 111 Livingston Street, Suite 1102 in Brooklyn, New York. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Jamaica, New York, Star Car Wash of Queens, Inc., operates a car wash from its leased premises. The Company filed for chapter 11 protection on Nov. 8, 2004 (Bankr. E.D.N.Y. Case No. 04-25754). Douglas J. Pick, Esq., at Pick & Saffer LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $459,110 in total assets and $11,198,001 in total debts. STOCKHORN CDO: Fitch Places BB- Rating on $5 Million Class E Notes ------------------------------------------------------------------ Fitch Ratings affirms these Stockhorn CDO Limited's notes: -- $11,500,000 class A notes affirmed at 'AAA'; -- $10,000,000 class B notes affirmed at 'AA-'; -- $3,000,000 class C-1 notes affirmed at 'BBB+'; -- $5,500,000 class C-2 notes affirmed at 'BBB+'; -- $3,000,000 class D-1 notes affirmed at 'BBB-'; -- $2,000,000 class D-2 notes affirmed at 'BBB-'; -- $5,000,000 class E notes affirmed at 'BB-'. Stockhorn CDO, Limited I is a static-pool, synthetic collateralized debt obligation structured by Swiss Re Capital Markets. The CDO was established in July 2002 to issue approximately $40 million in notes that reference a $500 million portfolio of investment-grade credit default swaps. The proceeds of the notes were utilized to enter into a deposit swap with Swiss Re Financial Products, and exposure to the reference portfolio is achieved via a credit default swap with Swiss Re Financial Products. Payments received from both the default swap and the deposit swap will be utilized to pay interest on the outstanding notes and other expenses of the issuer. Additionally, the ratings of the notes address the timely payment of interest and the ultimate payment of principal. Since the last rating action in August 2003, the portfolio has experienced stable performance, along with minimal ratings migration, increasing from 12.27 to 13.34, as reported in the October 31, 2004 trustee report. One credit event has occurred to date, NorthWestern Corporation. However, given the high recovery on NorthWestern Corporation, along with the excess spread captured, Stockhorn realized only a nominal reduction to the first loss, approximately $86,000. Additionally, Fitch accounted for the credit event during the last review process in August 2003. Accordingly, Fitch has determined that the ratings assigned to all rated securities, as indicated, reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments as needed. SUNRISE CDO: Moody's Reviewing Class C's Ba2 Rating --------------------------------------------------- Moody's Investors Service placed two classes of notes issued by Sunrise CDO I, Ltd. on review for possible downgrade: * the U.S. $45,100,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2037, and * the U.S. $17,050,000 Class C Third Priority Secured Floating Rate Notes Due 2037. According to Moody's, the action results from deterioration in the credit quality of the underlying collateral portfolio, consisting primarily of structured finance securities. Moody's noted that as of the October 31, 2004 monthly report, the transaction is violating the Class A, Class B and the Class C Overcollateralization Tests. Rating Action: Under Review for Possible Downgrade Issuer: Sunrise CDO I, Ltd. Class Description: the U.S. $45,100,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2037 Prior Rating: Aa2 Current Rating: Aa2 (under review for downgrade) Class Description: U.S. $17,050,000 Class C Third Priority Secured Floating Rate Notes Due 2037 Prior Rating: Ba2 Current Rating: Ba2 (under review for downgrade) TCW LINC III: S&P Slices Ratings on Classes A-3A & A-3B to CC ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1F and A-1 notes issued by TCW LINC III CBO Ltd., an arbitrage CBO transaction originated in July 1999, and lowered its ratings on the class A-2L, A-2, A-3L, and A-3 notes. At the same time, the ratings on the class A-1F and A-1 notes are removed from CreditWatch positive, and the ratings on the class A-2L and A-2 notes are removed from CreditWatch negative, where they were placed September 20, 2004. On the July 30, 2004, payment date the $20.81 million remaining portion of the class A-1L notes was paid down in full, and both the A-1F and A-1 notes had partial paydowns of $3.12 million and $19.20 million, respectively. These paydowns were mandated by the failure of TCW LINC III's coverage tests. The redemption improved the credit enhancement available to support the A-1F and A-1 notes. As a part of its analysis, Standard & Poor's reviewed the results of recent cash flow model runs. These runs stressed various parameters that are instrumental in the performance of this transaction, and are used to determine its ability to withstand various levels of default. When the stressed performance of the transaction was then compared to the projected default performance of the current collateral pool, Standard & Poor's found that the projected performance of the class A-1F, A-1, A-2L, A-3L, and A-3 notes was, in light of the current quality of the collateral pool, not consistent with the prior ratings. Consequently, Standard & Poor's has revised its ratings on these notes to their new level. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the assigned ratings continue to reflect the credit enhancement available to support the notes. Ratings Raised and Removed from Creditwatch Positive TCW LINC III CBO Limited Rating ------ Class To From ----- -- ---- A-1F AAA A/Watch Pos A-1 AAA A/Watch Pos Ratings Lowered and Removed from Creditwatch Negative TCW LINC III CBO Limited Rating ------ Class To From ----- -- ---- A-2L B B+/Watch Neg A-2 B B+/Watch Neg Ratings Lowered TCW LINC III CBO Limited Rating ------ Class To From ----- -- ---- A-3A CC CCC- A-3B CC CCC- Transaction Information Issuer: TCW LINC III CBO Ltd. Manager/Servicer: TCW Investment Management Co. Underwriter: Bear Stearns Cos. Inc. (The) Trustee: Bank of New York Transaction type: Cash flow arbitrage CBO Tranche Initial Last Current Information Report Action Action ----------- ------- ------ ------- Date (MM/YYYY) 08/1999 10/2003 10/2004 Cl. A-1F note rtg. AAA A AAA Cl. A-1F note bal. $15.00mm $15.00mm $11.87mm Cl. A-1 note rtg. AAA A AAA Cl. A-1 note bal. $96.00mm $96.00mm $76.00mm Cl. A-2L note rtg. AAA B+ B Cl. A-2L note bal. $21.50mm $21.50mm $21.50mm Cl. A-2 note rtg. AAA B+ B Cl. A-2 note bal. $82.00mm $82.00mm $82.00mm Cl. A-3A note rtg. A- CCC- CC Cl. A-3A note bal. $34.00mm $34.00mm $34.00mm Cl. A-3B note rtg. A- CCC- CC Cl. A-3B note bal. $45.00mm $45.00mm $45.00mm Cl. A O/C ratio 119.00% 91.40% 83.29% Cl. A O/C ratio min. 110.00% 110.00% 110.00% Portfolio Benchmarks Current -------------------- ------- S&P wtd. avg. rtg. (excl. defaulted) B S&P default measure (excl. defaulted) 5.30% S&P variability measure (excl. defaulted) 3.20% S&P correlation measure (excl. defaulted) 1.13 Wtd. avg. coupon (excl. defaulted) 9.36% Wtd. avg. spread (excl. defaulted) 0.00% Oblig. rtd. 'BB-' and above 19.31% Oblig. rtd. 'B-' and above 66.44% Oblig. rtd. in 'CCC' range 16.98% Oblig. rtd. 'CC', 'SD', or 'D' 16.58% S&P Rated Current O/C (ROC) Rating Action --------- ------------- Class A-1F 110.52% (AAA) Class A-1 110.52% (AAA) Class A-2L 100.32% (B) Class A-2 100.32% (B) For information on Standard & Poor's CDO Portfolio Benchmarks and Rated Overcollateralization (ROC) Statistic, please see "ROC Report November 2004," published on RatingsDirect, Standard & Poor's Web-based credit analysis system, and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Go to "Fixed Income," under "Browse by Sector" choose "Structured Finance," and under Commentary & News click on "More" and scroll down to the desired articles. TULLAS CDO: Fitch Affirms Junk Ratings on Four Note Classes ----------------------------------------------------------- Fitch Ratings affirmed the ratings on three classes of notes issued by Tullas CDO Ltd.: -- $267,487,273 class A notes affirmed at 'BB-'; -- $6,000,000 class B notes affirmed at 'B-'; -- $8,000,000 class C notes affirmed at 'CC'; -- $14,000,000 class D notes remain at 'C'; -- $8,000,000 class E notes remain at 'C'; -- $10,000,000 class F notes remain at 'C'. Furthermore, the class A and B notes are removed from Rating Watch Negative. Tullas is comprised of a static portfolio of assets held physically, as well as a series of assets that are referenced through a credit-linked note -- CLN. Assets held physically consist of corporate bonds and sovereign debt, while asset-backed securities -- ABS -- are referenced through the CLN. Since the previous rating action on January 13, 2004, negative performance by certain assets has been mitigated by improved performance from other assets and principal repayments to the class A notes allowing Tullas' performance to remain stable. UAL CORP: Wants Exclusive Plan Filing Period Stretched to Jan. 31 ----------------------------------------------------------------- UAL Corporation and its debtor-affiliates return to the U.S. Bankruptcy Court for the Northern District of Illinois to seek another extension of their exclusive periods to file and solicit acceptances of a plan of reorganization. The Debtors want the period within which they have the exclusive right to file a Chapter 11 Plan extended through January 31, 2005, and the period within which they have the exclusive right to solicit votes for that plan through March 31, 2005. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, recounts that the Court was amendable to short-term 30-day extensions of the Exclusive Periods while the Debtors stabilized after ATSB loan guarantee denial and the intensification of economic pressures. The Debtors' attention is now focused on creating a viable and financeable business plan to attract non-guaranteed capital. The Debtors have made enormous progress in creating a new business plan. A far more constructive process has been established, but output will require additional work and involve further sacrifices by all stakeholders. The work completed to date -- and the work still to be done in the next 60 days to finalize the new business plan and deliver a cost structure that future revenues can support -- justifies a longer extension of the Exclusive Periods than the month-to-month baby steps recently granted. The Debtors have filed a Section 1113 Motion to achieve additional cost savings. This process will occur during December 2004 and January 2005. Assuming the desired savings are achieved, the Debtors will be positioned to pursue exit financing and commence the formal plan process. Since these objectives will require more time, the Debtors plan to seek a much longer extension of the Exclusive Periods at the January 2005 hearing. Mr. Sprayregen tells Judge Wedoff that the extra time is needed because the Section 1113 process cannot succeed within the space of another 30-day extension. Given the myriad challenges facing the Debtors, an extension of the Exclusive Periods will promote a stable restructuring environment and facilitate resolution of these important predicates to exit. 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: Gets Court Nod to Hire Bridge to Analyze Business Plan ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois gave UAL Corporation and its debtor-affiliates permission to employ Bridge Associates, LLC, of New York City, to analyze their business plan and prepare a confidential report detailing that analysis. As reported in the Troubled Company Reporter on Nov. 3, 2004, the Association of Flight Attendants and the International Association of Machinists sought the appointment of a trustee for United Airlines, Inc., and its debtor-affiliates' bankruptcy cases. The AFA and IAM agreed to withdraw their requests if the Debtors employed Bridge to analyze their business plan. Bridge is a nationally recognized business turnaround, operational and financial consulting, and restructuring and management firm. Bridge is well qualified to provide the services to the Debtors in an efficient manner. The Debtors will Bridge for 30 days. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, informed the Court that Bridge will have access to all information relevant to the Debtors' business plan. Bridge will vet the business plan and test the related underlying assumptions. During the Engagement Period, the IAM's and AFA's professionals will have full access to the relevant Bridge professionals, subject to confidentiality agreements. Bridge's engagement will automatically terminate once the business plan-related work is completed. Bridge will: (1) review the Debtors' Business Plan; (2) provide an independent evaluation of the Business Plan; and (3) report on the feasibility of implementation. Bridge will prepare a preliminary version of the report by November 22, 2004. The final report will be delivered by November 30, 2004. Bridge's fees during the Engagement Period will approximate $500,000. Bridge will be paid on an hourly basis, plus reimbursement of actual, necessary expenses. Bridge's hourly rates are: Principals and Senior Consultants $300 - 450 Senior Associates or Consultants 250 - 300 Associates or Consultants 200 - 275 The hourly rates for specific professionals who will analyze the Debtors' business plan are: Anthony Schnelling $450 Frederick Kragel 450 Dean Vomero 400 Sidney Harris 350 John Pidcock 300 Alpesh Amin 250 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) US AIRWAYS: Court Approves ALPA Labor Agreement Modifications ------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Virginia gave US Airways, Inc., and its debtor-affiliates permission to modify the Debtors' Collective Bargaining Agreement with the Air Line Pilots Association, International. The modifications will provide the Debtors with $300,000,000 in annual savings from ALPA in 2005 with increased amounts in future years. The Order is effective retroactive to October 15, 2004, the date interim relief under Section 1113(e) was granted. The Debtors may implement a retroactive pay reduction. The Debtors will not seek or support any Section 1113 relief from the CBA, and will oppose any relief sought by another party, until the earlier of: (a) the effective date of the Debtors' plan of reorganization that implements the 2004 Transformation Plan; or (b) March 31, 2005. As reported in the Troubled Company Reporter on Oct. 27, 2004, Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado, explained that the Agreement was reached after extensive negotiations that involved trade-offs in pay, productivity, benefits and scope. Each category has a mix of consequences for the pilots depending on factors like seniority and work preferences. The Agreement addresses the financial, transformational and labor relations imperatives facing the Debtors, along with the pilots' interests. The US Airways pilot group ratified the US Airways/ALPA Transformation Plan Tentative Agreement by a 58% margin. This agreement supersedes the Oct. 15, 2004 Bankruptcy Court decision that ruled in favor of the Company's motion to impose immediate interim contractual relief on certain US Airways labor unions. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: IAM Fund Asks Court to Reconsider Wage Cut Order ------------------------------------------------------------ IAM National Pension Fund asks the U.S. Bankruptcy Court for the Eastern District of Virginia to reconsider its order granting the request of US Airways and its debtor-affiliates for interim wage & benefit reductions. John R. Harney, Esq., at Vanderpool, Frostick & Mishanian, in Manassas, Virginia, reminds the Court that the October 15 Order allowed the Debtors to reduce their employer contributions to the IAM National Pension Fund to a flat 3%. The Order brings the Debtors' contribution below the amount required to fund the benefits for their employees. However, the Trustees of the National Pension Plan will not fund benefits for the Debtors' employees without the requisite contributions. Unless the Court clarifies or modifies the Order, the Trustees will terminate the Debtors' participation in the National Pension Plan. The National Pension Plan provides that employers that reduce the rate of monthly contributions cannot continue to participate in the Plan. This reduction in the employer contribution rate shifts some of the burden of funding the benefits of the Debtors' employees to the other employers participating in the National Pension Plan. The Trustees are unwilling to allow contributions from other groups in the Plan to be used disproportionately to fund the benefits of the US Airways groups. As a result, the Trustees will terminate the participation of the Debtors effective October 15, 2004, unless the contribution rates are restored. As reported in the Troubled Company Reporter on Oct. 26, 2004, the Association of Flight Attendants-CWA Monday asked the Court to reconsider his decision to permit US Airways to impose 21 percent pay cuts on flight attendants. Other work groups received similar cuts. "These draconian cuts are excessive, even measured by the company's original request for relief," said David Borer, AFA general counsel. "Any relief provided to this carrier must be based on its proof of financial need, not the company's fuzzy math." Debtors Respond to Requests for Reconsideration The various requests for reconsideration are simple examples of unions that are dissatisfied with the Court's decision, according to Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado. Reconsiderations are not intended to provide a forum for a disappointed party to rehash the same arguments that a court previously rejected. Instead, reconsiderations are intended to permit a court to correct glaring errors of law or fact or to amend findings or a judgment based on newly discovered evidence or an intervening change in the law. Mr. Leitch asserts that the unions are not entitled to reconsideration absent a showing of one of three narrow grounds: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct an error of law or prevent manifest injustice. The various Motions for Reconsideration do not meet any of these narrow grounds, Mr. Leitch says. Rather, the unions use different words to rehash arguments that did not carry the day a few weeks ago. These Motions for Reconsideration, which are based on recycled arguments, are a waste of the Court's resources. Mr. Leitch asserts that the evidence presented at the Section 1113(e) Hearing supported the decision reached by the Court, and the Motions for Reconsideration do not meet the stringent standard for reconsideration of that decision. Therefore, the unions' requests should be denied. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: PrimeFlight Wants Decision on Agreement --------------------------------------------------- On November 14, 1997, International Total Services Corporation entered into a General Terms Agreement with US Airways, Inc., whereby ITSC provided pre-departure screening, skycap, ticket checking, passenger assistance, aircraft cleaning and other services to US Airways. ITSC assigned its interests in the General Terms Agreement to SMS Acquisition, Inc. SMS Acquisition, Inc., later changed its name to PrimeFlight Aviation Services, Inc. As of the filing of its first Chapter 11, US Airways owed PrimeFlight $1,688,036 for prepetition services. US Airways assumed the General Terms Agreement in the previous bankruptcy. In exchange, PrimeFlight agreed to accept $337,607 in 12 monthly installments to satisfy its prepetition claim. PrimeFlight agreed to freeze its rates for services for one year. These concessions severely limited PrimeFlight's ability to weather future interruptions in payment from US Airways, W. Neal McBrayer, Esq., at Miller & Martin, in Nashville, Tennessee, explains. PrimeFlight has in excess of 3,500 employees working at 57 airports. The Debtors account for approximately 19% of PrimeFlight's business. PrimeFlight has more than 700 employees at 22 airports devoted to the Debtors. PrimeFlight has suffered financially with the airline industry. As of September 12, 2004, the Debtors owed PrimeFlight $421,000 for prepetition services. Although PrimeFlight has continued to provide services, there is a risk that it will experience difficulty paying its employees if the amounts due from the Debtors are not paid in a timely manner. Mr. McBrayer asserts that the U.S. Bankruptcy Court for the Eastern District of Virginia should compel the Debtors to assume or reject the General Terms Agreement by a certain date. The Debtors can avoid liability under the General Terms Agreement by providing 30 days' notice. Therefore, there is no basis for the Debtors to delay this decision other than possibly delaying the payment of the prepetition liability. A deadline for the assumption or rejection of the Agreement will not adversely impact the Debtors. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARTEC TELECOM: Gets $20 Mil. DIP Financing from Rural Telephone ---------------------------------------------------------------- VarTec Telecom, Inc.'s primary senior secured creditor, Rural Telephone Finance Cooperative, agreed to provide debtor-in-possession financing to VarTec on a superpriority basis under terms and conditions similar to those set forth in the October 7, 2004, amended and restated credit agreement by and between Rural Telephone and VarTec, as amended, and as approved by the U.S. Bankruptcy Court for the Northern District of Texas. As of November 3, 2004, $20 million is proposed to be available for VarTec to borrow and up to $10 million of cash is proposed to be available in a working capital reserve account pursuant to the DIP financing arrangement. At November 3, 2004, Rural Telephone had a total of $197 million of loans outstanding to VarTec. Rural Telephone's total exposure to VarTec could increase above the $197 million if Rural Telephone were to advance funds to VarTec under the $20 million that is proposed as DIP financing and under certain conditions of the DIP financing arrangement. VarTec also sought court permission to maintain certain other business and financial relationships during the pendency of the bankruptcies. On November 1, 2004, the Court granted temporary approval of DIP financing of up to $5 million, with some limitations, under the conditions proposed by the DIP financing arrangement. VarTec experienced extensive competition in its primary businesses, resulting in a significant reduction to its cashflow. In addition, recent court rulings and disputes with certain unsecured creditors, including Teleglobe, Inc. and SBC Communications, threatened VarTec's abilities to continue as a going concern absent bankruptcy protections. Rural Telephone lends to its rural telecommunications members and their affiliates. At August 31, 2004, Rural Telephone had $4.6 billion of loans outstanding to its 507 members. Rural Telephone obtains all of its funding from National Rural Utilities Cooperative Finance Corporation. Rural Telephone operates under a management agreement with CFC. Rural Telephone is headquartered with CFC in Herndon, Virginia. Rural Telephone is a taxable entity and takes tax deductions for allocations of net margins as allowed by law under Subchapter T of the Internal Revenue Code. Rural Telephone pays income tax based on its net margins, excluding net margins allocated to its patrons. CFC believes that it is adequately reserved against its exposure, through Rural Telephone, to VarTec. 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. VERILINK CORP: Modifies Loan to Reduce Credit Line to $3.5 Mil. --------------------------------------------------------------- Verilink Corporation (Nasdaq: VRLK) said RBC Centura Bank waived Verilink's previously announced noncompliance with the tangible net worth financial covenant under the terms of the loan documents. The loan documents have also been modified, among other things, to reduce the total amount available under the line of credit to $3,500,000 from $5,000,000, and to reduce the minimum required tangible net worth covenant to $5,000,000 from $7,000,000. The line of credit expires April 7, 2005. Approximately $2 million is currently outstanding under the line of credit. As a result of the waiver and modifications, Verilink is now permitted to borrow under the line of credit based on eligible accounts receivable. About the Company Verilink Corporation provides broadband access solutions for networks. The company develops, manufactures and markets a broad suite of products that enable carriers (ILECs, CLECs, IXCs, and IOCs) and enterprises to build converged access networks to cost-effectively deliver next-generation communications services to their end customers. The company's products include a complete line of VoIP and TDM-based integrated access devices (IADs), optical access products, wire-speed routers, and bandwidth aggregation solutions including CSU/DSUs, multiplexers and DACS. Verilink also provides turnkey professional services to help carriers plan, manage and accelerate the deployment of new services. The company has operations in Madison, Alabama, Aurora, Colorado and Newark, California with sales offices in the U.S., Europe and Asia. To learn more about Verilink, visit the company's Web site at http://www.verilink.com/ * * * As required under Nasdaq Rule 4350(b), the Company is providing notice that the report of PricewaterhouseCoopers LLP, the Company's registered independent public accounting firm, on the Company's financial statements as of July 2, 2004, contains an explanatory paragraph, which refers to uncertain revenue streams and a low level of liquidity and notes that these matters raise substantial doubt about the Company's ability to continue as a going concern. W.R. GRACE: Overview and Summary of Plan of Reorganization ---------------------------------------------------------- As reported in the Troubled Company Reporter on Nov. 15, 2004, W. R. Grace & Co. filed a Plan of Reorganization as well as several associated documents, including a Disclosure Statement, with the U.S. Bankruptcy Court in Delaware in connection with its Chapter 11 reorganization proceeding. David B. Siegel, W.R. Grace & Co.'s Senior Vice President, General Counsel & Chief Restructuring Officer, relates that the Debtors' Plan deals with: -- Transfer of assets into the Asbestos Trust; -- Transfer of Claims and Demands to the Asbestos Trust; -- Creation of Asbestos Trust sub-accounts; -- Appointment and termination of Trustees; -- Creation and termination of the Trust Advisory Committee; -- The cooperation agreement between the Reorganized Debtors and the Asbestos Trust; -- Institution and maintenance of legal and other proceedings by the Asbestos Trust; and -- The Reorganized Debtors' sole right and authority to resolve Asbestos PI-AO Claims for which the Holder of the Asbestos PI-AO Claim elects the Litigation Option. The Debtors' Plan divides Asbestos Claims into two categories: (1) Asbestos Personal Injury Claims; and (2) Asbestos Property Damage Claims. The Asbestos PI Claims are further divided into two classes: -- Asbestos Personal Injury Symptomatic/Eligible Claims; and -- Asbestos Personal Injury Asymptomatic/Other Claims. All Asbestos Claims will be channeled to the Asbestos Trust. The Asbestos Trust On the Plan Effective Date, the Asbestos Trust will be created as a "qualified settlement fund." The purpose of the Asbestos Trust will be to, among other things: (a) assume the liabilities of the Debtors with respect to all Asbestos Claims; (b) process, liquidate, pay and satisfy all Asbestos Claims (i) in accordance with the Plan, the Asbestos Trust Agreement, the Trust Distribution Procedures, the Case Management Order, and the Confirmation Order and (ii) in a way that provides reasonable assurance that the Asbestos Trust will value and be in a position to pay, present and Future Asbestos Claims and to otherwise comply with Section 524(g)(2)(B)(i) of the Bankruptcy Code; (c) preserve, hold, manage, and maximize the assets of the Asbestos Trust for use in paying and satisfying Allowed Asbestos Claims; and (d) otherwise carry out the provisions of the Asbestos Trust Agreement and any other agreements into which the Trustees have entered or will enter in connection with the Plan. Asbestos Trust Funding Funding will come from several sources. On the Effective Date, Sealed Air Corporation and Cryovac, Inc., will fund $512.5 million in cash, plus interest, and 9 million shares of Sealed Air common stock into the Asbestos Trust in accordance with the Plan and the provisions of a settlement agreement which resolves asbestos and fraudulent conveyance claims against, among others, Grace, with respect to Grace's 1998 transaction with Sealed Air. Effective on the 31st day after the Effective Date, Grace will transfer or cause the transfer of the Debtors' Payment into the Asbestos Trust in accordance with the Plan. The Debtors' Payment is comprised of: (a) the positive difference between the Asbestos Trust Aggregate Fund and the Sealed Air Payment, with the difference to be funded by: * warrants in an amount sufficient to fund the Asbestos PI-AO Class Fund; and * the common stock, par value $0.01 per share, of Grace valued at the average of the closing prices on the New York Stock Exchange for the trading days within the 30 calendar days beginning on the Effective Date; and (b) additional warrants in an amount such that, upon the payment of the Sealed Air Payment and the Debtors' payment into the Asbestos Trust, the Parent Common Stock and Warrants that make up the Debtors' Payment would constitute the majority of the issued and outstanding voting shares of Reorganized Grace. The Sealed Air Payment and that portion of the Debtors' Payment consisting of the Parent Common Stock, to the extent necessary, will first fund the Asbestos PI-SE Class Fund, the Asbestos PD Class Fund and the Asbestos Trust Expenses Fund. The remainder of the Sealed Air Payment, if any, and the Warrants included as part of the Debtors' Payment will fund the Asbestos PI-AO Class Fund. In addition, in the event that the proceeds of the sale of Parent Common Stock following exercise of all of the Warrants are insufficient to pay all Allowed Asbestos PI-AO Claims in full, the Reorganized Debtors will pay the Asbestos Trust in full and in cash for the benefit of the Holders of the Claims. The Sealed Air Payment is dependent on the resolution of the Debtors' objections to the Sealed Air Settlement Agreement. The Debtors have argued that the Sealed Air Settlement Agreement, as proposed, would restrict the ability of the Debtors' management to fulfill their legal obligations to file accurate and complete tax returns and financial statements as required by the Internal Revenue Service and the Securities and Exchange Commission, thereby exposing the Debtors to potentially significant penalties and their management to potential personal and criminal liability. The Plan assumes that the objections will be addressed by the Bankruptcy Court in an acceptable manner and that the Sealed Air Settlement Agreement, as modified to address the Debtors' objections, will be approved. The Reorganized Debtors will fund distributions to all other Classes directly, with funds from a number of sources including: * an exit financing; * a settlement agreement among Grace, Grace-Conn., Fresenius Medical Care Holdings, Inc., & National Medical Care, Inc., the Asbestos PI Committee, and the Asbestos PD Committee, on February 6, 2003. The Fresenius Settlement Agreement resolves asbestos and fraudulent conveyance claims against, among others, Grace, with respect to Grace's 1996 transaction with Fresenius; * insurance proceeds; * cash flow from future operations; and * the Parent Common Stock. Treatment of Asbestos Claims The Debtors' Plan provides a structure under which Holders of Asbestos Personal Injury Claims are able to settle with the Asbestos Trust in a fair, efficient, and expedient manner. The Debtors believe that this will allow Asbestos PI Claimants to recover the full value of their claims as quickly as possible. To this end, most Asbestos PI Claimants will be able to elect to enter into a settlement with the Asbestos Trust instead of litigating against it. Each Holder of an Asbestos PI Claim will have the option to retain his right to litigate his claim against the Asbestos Trust and to recover the full amount of his allowed claim against the Asbestos Trust. If an Asbestos PI Claimant elects, or is deemed to elect, the Litigation Option, his claim will be litigated against the Asbestos Trust and he will be precluded from seeking any further recovery against any party protected and released under the Plan on account of the Claim. If an Asbestos PI Claimant does not elect the Litigation Option, he may still choose the cash-out option or the registry option. If an Asbestos PI Claimants elects the cash-out option, his claim will be treated under the terms of the PI-SE Trust Distribution Procedures or the PI-AO Trust Distribution Procedures, as applicable. All Asbestos PI-AO Claims whose Holders elect the Litigation Option will be litigated by the Reorganized Debtors in the name of the Asbestos Trust, initially at the expense of the Asbestos Trust out of the Asbestos PI-AO Class Fund. After the exhaustion of the Asbestos PI-AO Class Fund in its entirety, all Allowed PI- AO Claims will be paid in cash by the Asbestos Trust from funds to be paid to the Asbestos Trust by the Reorganized Debtors, such funds being in addition to the Debtors' Payment. If an Asbestos PI-AO Claimant chooses the Registry Option, he will be precluded from seeking any further recovery against an Asbestos Protected Party, any Insurance Entity or any Entity Released under any Plan provision. The statute of limitations will be tolled to the extent the Holder becomes an Asbestos PI-SE Claimant. The Holder will also be entitled to seek further recovery against the Asbestos Trust if he becomes an Asbestos PI-SE Claimant. All Asbestos PI-SE Claims whose Holders elect the Litigation Option will be: (1) litigated by, and at the expense of, the Asbestos Trust; and (2) paid by the Asbestos Trust out of the Asbestos PI-SE Class Fund, which will be funded solely by the Sealed Air Payment and the Parent Common Stock component of the Debtors' Payment, if necessary. The Asbestos Trust will be the only Entity that a Holder of an asbestos claim may look to for recovery on account of a Claim. The Asbestos Trust Agreement and the TDPs govern more the operation of the Asbestos Trust and how asbestos claims whose holders elect the Cash-Out Option will be dealt with. Treatment of General Unsecured Claims The Plan provides that all holders of general unsecured claims will be paid the value of their allowed claims, 85% in cash and 15% in Parent Common Stock. Grace will satisfy certain other non-asbestos related liabilities, including environmental, tax, workers' compensation, employee-related benefits, pension and retirement medical obligations, and intercompany claims, as they become due and payable over time. In essence, these claims will "pass through" confirmation and be paid by the Reorganized Debtors in the ordinary course of their business. Treatment of Equity Interests The Plan provides that Parent Common Stock will remain outstanding. However, the interests of existing shareholders will be subject to dilution by, among other things, additional shares of Parent Common Stock issued under the Plan and possible exercise of the Warrants issued under the Plan. To preserve significant net operating loss carry-forwards, which are subject to elimination or limitation in the event of a change in control, the Plan places restrictions on the purchases of Parent Common Stock. The restrictions would prohibit, for a period of three years, a person or entity from acquiring more than 4.75% of the outstanding common stock or prohibit those persons already holding more than 4.75% from increasing their holdings. Payments and Distributions Under the Plan The Plan sets forth the mechanics of Asbestos Trust payments and Plan Distributions. Among other things, the Plan provides that payments to Holders of Allowed Asbestos Claims will be made by the Asbestos Trust in accordance with the Asbestos Trust Agreement, the TDPs and the CMO. All Distributions or payments required or permitted to be made under the Plan will be made by the Reorganized Debtors in accordance with the treatment specified for each Holder as specified in the Plan. Corporate Governance of Grace and the Other Debtors Certificates of Incorporation or Articles of Incorporation, as applicable, of each of the Debtors that is a corporation will be amended as of the Effective Date. The amended Certificates of Incorporation or Articles of Incorporation of the Debtors will, among other things: (i) prohibit the issuance of non-voting equity securities; (ii) as to any classes of securities possessing voting power, provide for an appropriate distribution of the power among the classes, including, in the case of any class of equity securities having a preference over another class of equity securities with respect to dividends, adequate provisions for the election of directors representing the preferred class in the event of default in payment of dividends; (iii) include, in the case of the Grace, restrictions on the transfer of the Parent Common Stock as necessary to protect the Reorganized Debtors' tax position; and (iv) effectuate any other provisions of the Plan. The Plan also deals with amendments to Grace's bylaws and the purchase of Directors and Officers and fiduciary liability tail coverage. Occurrence of the Confirmation Date The Court must make all of the findings of fact and conclusions of law before confirmation of the Plan. Among other things, these findings of fact and conclusions of law relate to: (1) the Court having found that the aggregate of the Asbestos PI-SE Class Fund, the Asbestos PD Class Fund, and the Asbestos Trust Expenses Fund is not greater than $1,483,000,000; (2) the Court having found the Asbestos PI-AO Class Fund is not greater than $130,000,000; (3) compliance with all applicable subsections of Section 524(g) of the Bankruptcy Code; (4) effectiveness of the Sealed Air Settlement Agreement and the Fresenius Settlement Agreement; (5) the unimpaired status of the classes of Asbestos Claims; (6) the effectiveness of the various injunctions provided for in the Plan; (7) insurance matters; and (8) the lack of preclusive effect of certain asbestos-related litigation. Prior to or in conjunction with Plan confirmation, the Court must have entered an Estimation Order in form and substance acceptable to the Debtors, which Order includes these findings: * the Asbestos PI-SE Class Fund will constitute the maximum amount that will be required to be paid to pay in full all Allowed Asbestos PI-SE Claims; * the Asbestos PD Class Fund will constitute the maximum amount that will be required to be paid to pay in full all Allowed Asbestos PD Claims; and * the Asbestos Trust Expenses Fund will constitute the maximum amount that will be required to be paid to pay in full all expenses of the Asbestos Trust. Conditions to Occurrence of the Effective Date The Plan sets forth conditions precedent to the Effective Date, including entry of the Confirmation Order, affirmation of the various injunctions specified in the Plan, filing of the necessary corporate documents, obtaining the necessary exit financing, and obtaining other various documents or agreements. No Successor Liability The Plan provides that the Debtors, the Reorganized Debtors, the Asbestos PI Committee, the Asbestos PD Committee, the Futures Representative, and the Asbestos Protected Parties will not assume, agree to perform, pay, or indemnify creditors or otherwise have any responsibilities for any liabilities or obligations of the Debtors or any of the Debtors' past or present affiliates, as these liabilities or obligations may relate to the Debtors' operations or assets. Neither the Asbestos Protected Parties, the Reorganized Debtors, nor the Asbestos Trust is, or will be, a successor to the Debtors or any of the Debtors' past or present affiliates by reason of any theory of law or equity, and none will have any successor or transferee liability of any kind or character, except that the Reorganized Debtors and the Asbestos Trust will assume the obligations specified in the Plan and the Confirmation Order. Except as otherwise expressly provided in the Plan, effective automatically on the Effective Date, the Asbestos Protected Parties will be unconditionally, irrevocably and fully released from all claims that occurred or existed prior to the Effective Date. Consolidation of the Debtors Subject to the occurrence of the Effective Date, the Debtors will be deemed consolidated under the Plan for the limited purposes of allowance, treatment and distribution under the Plan. Each and every claim filed or to be filed against any of the Debtors will be deemed filed against the deemed consolidated Debtors and will be deemed one claim against and obligation of the deemed consolidated Debtors. This deemed consolidation, however, will not affect: (i) the legal and organizational structure of the Debtors; (ii) any encumbrances that are required to be maintained under the Plan in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been or will be assumed, pursuant to the Plan, or in connection with any exit financing; (iii) the Sealed Air Settlement Agreement; and (iv) the Fresenius Settlement Agreement. Notwithstanding anything contained in the Plan to the contrary, the deemed consolidation of the Debtors will not have any effect on any of the Claims being reinstated and left unimpaired under the Plan, and the legal, equitable, and contractual rights to which the Holders of any claims are entitled will be left unaltered by the Plan. The Plan does not contemplate the merger or dissolution of any Debtor which is currently operating or which currently owns operating assets or the transfer between Debtors or commingling of any assets of any Debtor. The limited substantive consolidation will not affect the legal and corporate structures of any Reorganized Debtor or the Equity Interests in Debtors other than Grace. The Debtors believe that substantive consolidation is in the best interests of their estates and will promote a more expeditious and streamlined distribution and recovery process for claimants. In particular, substantive consolidation of the Debtors' estates will result in: (1) the deemed consolidation of the assets and liabilities of the Debtors; (2) the deemed elimination of multiple and duplicative creditor claims and joint and several liability Claims; and (3) the payment of Allowed Claims from a common pool of assets. Substantive consolidation will relieve the Debtors from having to litigate creditor claims against multiple Debtors on the same liability, as only one claim will be deemed allowed and payable from one common pool of assets. The Debtors estimate that there have been 1,032 duplicate proofs of claim filed against their estates. Feasibility of the Plan To demonstrate the feasibility of the Plan, the Debtors have prepared the pro forma and prospective financial information for the Reorganized Debtors and the Non-Debtor Affiliates, with information presented on a consolidated basis for the fiscal years 2004, 2005 and 2006 taking into account the anticipated financial impact of the Plan. The Financial Information has been prepared in conformity with U.S. generally accepted accounting principles consistent with those currently utilized by Grace in the preparation of its consolidated financial statements. However, the pro forma and prospective financial information have not been audited by registered independent public accountants. The pro forma and prospective financial information are based on a variety of assumptions subject to significant business, economic and competitive uncertainties, contingencies and risks, many of which are beyond the control of the Debtors. The projections assume that the Plan becomes effective December 31, 2004. W.R. Grace & Co. and Subsidiaries Condensed Consolidated Balance Sheets (in millions) Projected - As of December 31, -------------------------------- 2004 2005 2006 -------- -------- -------- ASSETS Current Assets Cash & cash equivalents $300 $250 $250 Trade accounts receivable 401 425 442 Inventories 224 244 261 Deferred income taxes 14 14 14 Other current assets 30 28 34 -------- -------- -------- Total Current Assets 969 961 1,001 Properties and equipment 650 650 650 Goodwill 85 85 85 Cash value of company owned life insurance, net of policy loans 75 59 65 Deferred income taxes: NOL carry-forwards 212 226 219 Temporary differences 206 171 149 Asbestos-related insurance 500 500 232 Other assets 225 228 215 -------- -------- -------- Total Assets $2,922 $2,880 $2,616 ======== ======== ======== LIABILITIES & EQUITY Current Liabilities Short-term debt $16 $- $- Accounts payable 115 127 135 Income taxes payable 38 38 38 Other current liabilities 126 141 153 -------- -------- -------- Total Current Liabilities 295 306 326 Long-term debt 800 780 516 Deferred income taxes 34 34 34 Underfunded defined benefit pension liability 296 265 232 Liability for asbestos- related litigation 130 77 74 Liability for environmental remediation 107 94 81 Liability for post-retirement health & social pensions 186 164 142 Liability for accounts payable & litigation 57 32 7 Liability for tax claims 50 30 10 Other liabilities 171 151 132 -------- -------- -------- Total Liabilities 2,126 1,933 1,554 Shareholders' Equity (Deficit) Share capital 1,070 1,133 1,140 Retained earnings & other equity items (274) (186) (78) -------- -------- -------- Shareholders' Equity (Deficit) 796 947 1,062 -------- -------- -------- Total Liabilities & Share- holders' Equity (Deficit) $2,922 $2,880 $2,616 ======== ======== ======== W.R. Grace & Co. Consolidated Analysis of Continuing Operations (in millions) Projected Year Ending December 31, -------------------------------- 2004 2005 2006 -------- -------- -------- Net Sales: Davison Chemicals $1,184 $1,304 $1,385 Performance Chemicals 1,052 1,100 1,166 -------- -------- -------- Total Grace sales 2,236 2,404 2,551 -------- -------- -------- Pre-tax operating income: Davison Chemicals 151 160 170 Performance Chemicals 133 140 148 Corporate Costs: Support functions (47) (57) (58) Pension & performance- related compensation (50) (50) (50) -------- -------- -------- Corporate costs (97) (107) (108) -------- -------- -------- Pre-tax income from core operations 187 193 210 Pre-tax loss from non-core activities 2 - - Interest expense (14) (55) (45) Interest accretion of asbestos liability - (9) (5) Interest income - 6 6 -------- -------- -------- Income (loss) before Chapter 11 expenses & income taxes 175 135 166 Chapter 11 expenses & charges (394) - - Provision for income taxes (69) (47) (58) -------- -------- -------- Net Income (loss) ($288) $88 $108 ======== ======== ======== W.R. Grace & Co. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in millions) Projected - December 31, -------------------------------- 2004 2005 2006 -------- -------- -------- Operating Activities Income (loss) before Chapter 11 expenses, income taxes & minority interest $181 $142 $173 Depreciation & amortization 111 121 131 Interest accrued/accreted 12 9 5 Provision for environmental remediation 20 - - Total working capital changes (23) (31) (21) Income taxes paid, net of refunds (32) (25) (29) Other accruals & non-cash items 13 (9) 7 Proceeds from asbestos-related insurance 6 - 268 Cash used for non-operating liabilities: Expenditures/warrants for asbestos-related litigation (8) (62) (7) Expenditures for environmental remediation (11) (13) (13) Payments to fund post- retirement health & special pensions (22) (22) (22) Expenditures for retained obligations of divested business (2) (25) (25) Payments to fund tax claims - (20) (20) Expenditures for non-operating Liabilities - (20) (20) Chapter 11 expenses paid (15) - - Payments of Chapter 11 liabilities with cash under the Plan (1,065) - - -------- -------- -------- Net cash provided by operating activities (835) 45 427 -------- -------- -------- Investing Activities Capital expenditures for property & equipment (76) (85) (90) Business acquired, net of cash acquired (66) (68) (75) -------- -------- -------- Net cash used for investing activities (142) (153) (165) -------- -------- -------- Financing Activities Net charge in short-term & COLI loans/investments (14) 15 (6) Exercise of warrants to satisfy asbestos liability - 62 8 Cash received from exercise of options 68 - - Borrowings under exit facility 800 (19) (264) Cash contributions under Chapter 11 settlements 115 - - -------- -------- -------- Net cash provided by (used for) financing activities 969 58 (262) -------- -------- -------- Effect of exchange rate changes on cash & cash equivalents (1) - - Increase (decrease) in cash & cash equivalents (9) (50) - Cash & cash equivalents, beginning of period 309 300 250 -------- -------- -------- Cash & cash equivalents, End of period $300 $250 $250 ======== ======== ======== A copy of Grace's Plan is available at no charge at: http://bankrupt.com/misc/Grace_Chapter_11_Plan.pdf A copy of the Disclosure Statement is available at no charge at: http://bankrupt.com/misc/Grace_Plan_Disclosure_Statement.pdf A copy of the Debtors' historical, pro forma and prospective financial information is available at no charge at: http://bankrupt.com/misc/Grace_Exhibit_Projections.pdf Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Classification and Treatment of Claims Under the Plan ----------------------------------------------------------------- W. R. Grace & Co.'s Plan of Reorganization filed on Nov. 13, 2004, with the U.S. Bankruptcy Court for the District of Delaware, provides for the classification of claims and equity interests. Section 1122(a) of the Bankruptcy Code permits a plan to place a claim or an interest in a particular class only if the claim or interest is substantially similar to the other claims or interests in that class. The Plan will pay all claimants in full and will leave most claimants, including holders of asbestos claims, unimpaired. Holders of general unsecured claims and holders of equity interests in W.R. Grace & Co. are impaired under the Plan. The Debtors believe that the classification of claims and equity interests under the Plan is appropriate and consistent with applicable law. Class Description Recovery Under the Plan ----- ----------- ----------------------- N/A Administrative Paid in full, in cash Expense Claims Estimated recovery: 100% Estimated amount: $75 million N/A Priority Tax Claims Each holder will receive: Estimated amount: (a) full cash payment; or $232 million (b) equal quarterly cash payments on the Initial Distribution Date -- within 60 days after the Effective Date -- then on each Quarterly Tax Distribution Date in an aggregate amount equal to the allowed priority tax claim, together with interest at 3.5% per annum, over a period not exceeding 6 years after the assessment of claim. Estimated recovery: 100% 1 Priority Claims Paid in full, in cash Estimated amount: $0 Unimpaired Estimated recovery: 100% 2 Secured Claims Paid in full, in cash Estimated amount: $0 Unimpaired Estimated recovery: 100% 3 Unsecured Pass-Through Legal, equitable, and Employee Related Claims contractual rights of the holders are unaltered by the $191 million of Claims Plan. are estimated to be Allowed and outstanding. Unimpaired Estimated recovery: 100% 4 Workers' Compensation Legal, equitable, and Claims contractual rights of the holders are unaltered by the Allowed Claims have Plan. already been paid and continue to be paid as Unimpaired they become due. Estimated recovery: 100% 5 Intercompany Claims Legal, equitable, and contractual rights of the No impact on all claims, holders are unaltered by the as all consolidated Plan. payments are based on the Debtors and Non- Unimpaired debtor affiliates. Estimated recovery: 100% 6 Asbestos PI-SE Each Holder will: Claims (a) be paid in full by the Claim amount to be Asbestos Trust under the determined by the Asbestos Trust Agreement Court. and the PI-SE TDP. (b) complete an Asbestos PI Questionnaire or Claims Materials, and will choose to elect: * the Litigation Option; or * the Cash-Out Option. Failure to return the Questionnaire will result in an automatic election of the Litigation Option. Unimpaired Estimated recovery: 100% 7 Asbestos PI-AO Each Holder will: Claims (a) be paid in full, in cash by Claim amount to be the Asbestos Trust from the determined by the Asbestos PI-AO Class Fund; Court. (b) complete an Asbestos PI Questionnaire or Claims Materials, and will choose to elect: * the Litigation Option; * the Cash-Out Option; or * Registry Option. Failure to return the Questionnaire will result in an automatic election of the Litigation Option. Unimpaired Estimated recovery: 100% 8 Asbestos PD Claims Paid in full and processed, under the Asbestos Trust Claim amount to be Agreement and the PD TDP. determined by the Court. Unimpaired Estimated recovery: 100% 9 General Unsecured Paid in full, plus postpetition Claims interest, for claimants entitled to accrue or be paid interest in Estimated amount is a non- default situation at 85% $951 million as of cash and 15% Parent Common Stock 9/30/04, plus accrued interest through the Impaired payment date. Estimated recovery: 100% 10 Equity Interests Holders will retain interests in the Parent provided that these will: * be subject to the Asbestos Trust funds and the Management Stock Incentive Plan; and * be restricted under the amendment of certificates of incorporation of the Debtors. Impaired 11 Equity Interests in Legal, equitable, and Debtors Other than contractual rights of the the Parent holders are unaltered by the Plan. Unimpaired Estimated recovery: 100% Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Liquidation Analysis Under the Plan of Reorganization ----------------------------------------------------------------- Section 1129(a)(7) of the Bankruptcy Code requires that even if a plan is accepted by a class of creditors or equity interest holders, the Bankruptcy Court must nonetheless determine that the plan is in the "best interests" of any class of creditors or equity interest holders that are impaired by the plan. The "best interests" test requires that the Bankruptcy Court find either that: (i) all members of an impaired class have accepted the plan; or (ii) the plan will provide the holder of a claim or equity interest in a certain class a value distribution, as of the plan's effective date, that is at least equal to what the holder would receive in a hypothetical liquidation of the debtor under Chapter 7 of the Bankruptcy Code. As reported in the Troubled Company Reporter on Nov. 15, 2004, W. R. Grace & Co. filed a Plan of Reorganization as well as several associated documents, including a Disclosure Statement, with the U.S. Bankruptcy Court in Delaware in connection with its Chapter 11 reorganization proceeding. The Debtors' Best Interests Analysis in the Plan shows that holders of General Unsecured Claims would receive an estimated distribution of 54% to 89% on their claims under a Chapter 7 liquidation while the holders would receive an estimated 100% distribution under Chapter 11. The Best Interests Analysis assumes that the Debtors' estates are substantively consolidated solely for the purposes of the actions associated with the confirmation and consummation of the Plan. The Analysis assumes that the hypothetical Chapter 7 liquidation is effected via the orderly sale of the business of the Debtors and Non-Debtor Affiliates as going concerns. Because the asbestos channeling injunction provided for under the Plan would not be available in a Chapter 7 liquidation, the value realized from the orderly sale of the businesses in all likelihood would be reduced as a result of a buyer's concern regarding the risk of asbestos liability in the acquisition of assets. Furthermore, the lack of the asbestos channeling injunction may preclude an orderly sale of the businesses as going concerns, in which case an actual liquidation of assets would be required. In that case, values realized would be further reduced. Comparison of Chapter 11 Reorganization to Chapter 7 Liquidation (Unaudited, $ in millions) Chapter 11 Reorganization ------------------------- Low High ---------- ---------- Calculation of estimated net proceeds available for allocation: Estimated value of Reorganized Debtors and Non-Debtor Affiliates $2,200 $2,600 Less: discount factor - - Less: taxes due in foreign command - - ---------- ---------- Estimated proceeds from sale of businesses $2,200 $2,600 Plus other assets: Cash 448 458 Fresenius Payment 115 115 Sealed Air Payment 985 985 Insurance recovery 500 500 Present value of projected use of tax assets 50 70 ---------- ---------- Estimated net proceeds available for allocation $4,298 $4,728 Allocation of estimated net proceeds to Secured, Administrative and Priority Claims: Costs associated with Chapter 7 liquidation - - Environmental Claims (15) (15) Tax Claims (232) (232) Other claims (59) (59) ---------- ---------- $3,992 $4,422 Allocation of estimated net proceeds to General Unsecured Claims: Bank debt, capital leases, drawn letters of credit (610) (610) Unsecured Pass-Through Employee Related Claims (191) (191) Environmental Claims (330) (330) Litigation Claims (10) (10) Trade Claims (35) (35) Other claims (150) (150) Fresenius Indemnity Claim - - PBGC Claim, net - - Assumed asbestos liabilities (1,689) (1,689) ---------- ---------- Excess/(Shortfall) $977 $1,407 ========== ========== Recovery to Holders of General Unsecured Claims 100%+ 100%+ Value to Holders of Equity Interests $977 $1,407 Chapter 7 Liquidation ------------------------- Low High ---------- ---------- Calculation of estimated net proceeds available for allocation: Estimated value of Reorganized Debtors and Non-Debtor Affiliates $2,200 $2,600 Less: discount factor (1,100) (1,300) Less: taxes due in foreign command (68) (63) ---------- ---------- Estimated proceeds from sale of businesses $1,032 $1,237 Plus other assets: Cash 457 457 Fresenius Payment - - Sealed Air Payment - 827 Insurance recovery 472 500 Present value of projected use of tax assets - - ---------- ---------- Estimated net proceeds available for allocation $1,961 $3,021 Allocation of estimated net proceeds to Secured, Administrative and Priority Claims: Costs associated with Chapter 7 liquidation (53) (37) Environmental Claims (15) (15) Tax Claims (84) (84) Other claims (68) (68) ---------- ---------- $1,742 $2,818 Allocation of estimated net proceeds to General Unsecured Claims: Bank debt, capital leases, drawn letters of credit (517) (517) Unsecured Pass-Through Employee Related Claims (191) (191) Environmental Claims (323) (323) Litigation Claims (10) (10) Trade Claims (32) (32) Other claims (150) (150) Fresenius Indemnity Claim (148) (148) PBGC Claim, net (146) (99) Assumed asbestos liabilities (1,689) (1,689) ---------- ---------- Excess/(Shortfall) ($1,464) ($342) ========== ========== Recovery to Holders of General Unsecured Claims 54% 89% Value to Holders of Equity Interests - - A copy of the Debtors' Liquidation Analysis is available at no charge at: http://bankrupt.com/misc/Grace_Plan_Liquidation_Analysis.pdf Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) WILLIAMS: Increases Common Dividend Five-Fold to 5 Cents Per Share ------------------------------------------------------------------ The Williams' Companies, Inc. (NYSE: WMB) board of directors approved a regular dividend of 5 cents per share on the company's common stock, payable on December 27, 2004, to holders of record at the close of business on December 10, 2004. "Our restructuring is nearly complete. We've driven down our debt. We've increased our cash flow from operations. And we've made disciplined investments in our businesses," said Steve Malcolm, chairman, president and chief executive officer. "Raising the dividend is another sign of our financial progress. The board is confident in our cash flow and our ongoing ability to increase shareholder value while continuing to improve our credit ratings," Malcolm added. The Board's declaration raises the dividend five-fold. The company previously had paid a penny per share since the third quarter of 2002, when Williams reduced its dividend to conserve cash. Since late 2002, Williams has reduced its debt by more than $6 billion. Williams' businesses also have produced net cash from operations of approximately $770 million in 2003 and $1.1 billion for the first nine months of 2004. About the Company The Williams' Companies, Inc., through its subsidiaries, primarily finds, produces, gathers, processes and transports natural gas. The company also manages a wholesale power business. Williams' operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, Southern California and Eastern Seaboard. More information is available at http://www.williams.com/ * * * As reported in the Troubled Company Reporter on Nov. 10, 2004, 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. WIND RIVER: S&P Assigns BB+ Rating to $9 Million Class D Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Wind River CLO I Limited/Wind River CLO I Corporation's class A, B, C, and D floating- and fixed-rate notes and composition obligation notes. The preliminary ratings are based on information as of November 17, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes and by the subordinate notes and coverage test; -- The cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; and -- The legal structure of the transaction, which includes the bankruptcy-remoteness of the issuer. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Wind River CLO I Limited/Wind River CLO I Corporation Class Rating Amount (mil. $) ----- ------ --------------- A-1 AAA 365.00 A-2 AA 23.00 B-1 deferrable A* 25.00 B-2 deferrable A* 7.00 C-1 BBB* 15.00 C-2 BBB* 12.00 C-3** BBB 8.00 D BB+* 9.00 Subordinated note N.R. 47.50 Composite obligations 1 BBB+*** 10.00 Composite obligations 2 BB+*** 5.00 Composite obligations 3 BBB+ 18.00 Composite obligations 4 BBB*** 8.00 Composite obligations 5 BBB*** 8.00 * The class B, C, and D notes will be deferred interest notes. ** The C-3 notes will be a zero coupon note. *** The preliminary ratings only address the repayment of principal and not of interest. N.R. - Not rated Z-TEL TECH: Discloses Status on Outstanding Pref. Stock Offering ---------------------------------------------------------------- Z-Tel Technologies, Inc. (NASDAQ:ZTELC), parent company of Z-Tel Communications, Inc., reported the current status of its previously announced exchange offer of its common stock for all of its outstanding classes and shares of preferred stock. As of 12:00 noon, Eastern time, on November 17, 2004, Z-Tel had received tenders of: -- 3,906,806 shares (98.24%) of its Series D Convertible Preferred Stock; -- 4,166,667 shares (100%) of its 8% Convertible Preferred Stock, Series E; and -- 168.5 shares (100%) of its 12% Junior Redeemable Convertible Preferred Stock, Series G. Included in the amount of shares tendered are all of the shares of preferred stock owned by The 1818 Fund III, L.P., the tender of which is a condition to the consummation of the exchange offer. Also included are 782,225 shares and 1,250,000 shares of Series D Convertible Preferred Stock owned by Gramercy Z-Tel, L.P., and Richland Ventures III, L.P., respectively, the two largest shareholders of Series D Convertible Preferred Stock. The Exchange Offer does not expire until 5:00 p.m., Eastern time, on November 29, 2004, accordingly holders of shares of preferred stock who have not yet tendered their shares and wish to do so will have until the time to validly tender their preferred shares to Z-Tel, which Z-Tel has offered to exchange as follows: -- For its Series D Convertible Preferred Stock, which as of September 27, 2004, 3,976,723 shares with a liquidation preference of $16.55 per share and a conversion price of $8.47 per share were outstanding, to exchange 25.69030 shares of its common stock, for each share of its Series D Preferred Stock (representing an exchange price of approximately $0.644 per share); -- For its 8% Convertible Preferred Stock, Series E, which as of September 27, 2004, 4,166,667 shares with a liquidation preference of $16.26 per share and a conversion price of $8.08 per share were outstanding, to exchange 25.24216 shares of its common stock, for each share of its Series E Preferred Stock (representing an exchange price of approximately $0.644 per share); and -- For its 12% Junior Redeemable Convertible Preferred Stock, Series G, which as of September 27, 2004 171.214286 shares outstanding with had a liquidation preference of $144,974.90 per share and conversion price of $1.28 per share were outstanding, to exchange 161,469.4 shares of its common stock, for each share of its Series G Preferred Stock (representing an exchange price of approximately $0.898 per share). The exchange offer is being made in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933 and is conditioned on: (i) receipt of the approval of Z-Tel's shareholders of certain matters to be voted upon at a special meeting to be called by Z-Tel; and (ii) the tender of all shares of preferred stock owned by The 1818 Fund III, L.P. The complete terms and conditions of the exchange offer are set forth in the Offer to Exchange and Letter of Transmittal that has been mailed to holders of the preferred stock. Copies of the Offer to Purchase and Letter of Transmittal may be obtained from Z-Tel by contacting Andrew L. Graham, the Exchange and Information Agent for the exchange offer, at (813) 233-4567. Stockholders are urged to read the Offer to Exchange and Letter of Transmittal because they contain important information concerning the exchange offer. About the Company Z-Tel offers consumers and businesses nationwide enhanced wire line and broadband telecommunications services. All Z-Tel products include proprietary services, such as Web-accessible, voice-activated calling and messaging features that are designed to meet customers' communications needs intelligently and intuitively. Z-Tel is a member of the Cisco Powered Network Program and makes its services available on a wholesale basis to other communications and utility companies, including Sprint. For more information about Z-Tel and its innovative services, visit http://www.ztel.com/ At September 30, 2004, Z-Tel Technologies' balance sheet showed a $166,227,000 stockholders' deficit, compared to a $131,019,000 deficit at December 31, 2003. * BOOK REVIEW: The Manipulated Society -------------------------------------- Author: Isadore Barmash Publisher: Beard Books Paperback: 284 pages List Price: $34.95 Order your personal copy at: http://amazon.com/exec/obidos/ASIN/1587982277/internetbankrupt Most other books on the inter-related subjects of how organizations and individuals manipulate the media to create distorted images and accomplish questionable ends treat these at a superficial level or almost as a form of light, popular entertainment. The books take varied examples of such media stories and images and compare what was reported or the images created with true circumstances of the respective matter or person. These books are more or less simple analyses of how the manipulation occurred, and they serve as cautionary tales to the public about accepting all that they read or see in the media. Barmash's "The Manipulated Society," by contrast reaches to a deeper level than these other books. Their aim is for individuals to develop a skepticism and certain defensiveness with respect to the skilled, dubious, and often unnoticeable manipulation, so individuals will not be adversely affected by it. But this merely leaves an artificial situation involving the perpetrator of the manipulation, the media, and the public. Most other books connote that if the public realizes the manipulation that is going on, the public, and society, is sufficiently safeguarded. The manipulation has been rendered harmless. But with a keen moral sense, Barmash takes the case farther than this. Barmash is concerned not only with how the media is being manipulated by public-relations people, advertisers, various "spokespersons" and "talking heads" in the service of corporations, politicians, celebrities, and other figures who seek public attention or are thrust into it, but also with the effects of this on basic social values and the subsequent fraying of the social fabric necessary to keep the country strong and united. "In a word, we are losing are values because our values are being manipulated by others with specific, ulterior motives." The "callousness" being formed in the public--the skepticism or defensiveness urged by other critics--leads to "an almost complete loss of credibility in not only all our communications' elements but also in the various institutions of American society." This loss of credibility in central institutions such as government bodies and large corporations is the more serious effect of the manipulation of the media Barmash concentrates on which most other media and social critics stop short of dealing with. To illustrate the disorienting and corrupting effects of the media manipulation whether it is uncritically taken in or commonly accommodated when it is recognized, in places Barmash uses the simple but effective technique of devising representative individuals and putting them into familiar situations. Readers will recognize themselves in these situations, which are like short scenes in a TV drama or soap opera. By seeing their behavior, talk, and thoughts along with the author's commentary on these, readers see what Barmash means by saying that basic values are being jeopardized. "A young man between the ages of twenty- two and twenty-eight" deciding to get married is one such representative character. A mother with a young child is another. Along with such imaginary characters, Barmash relates anecdotes or interviews with actual persons in journalism, public relations, and other areas of the media. It is mainly by these techniques using recognizable imaginary individuals and also familiar individuals in the fields he is dealing with that Barmash persuasively makes his central point about the relationship between the ubiquitous manipulation of the media and the effects of this in the lives of individuals. If anything, "The Manipulated Society" is more relevant today than when it was first published in 1974. Barmash's examples are still familiar, though the names of the corporations and politicians have changed. Barmash's analyses are seen as models for revealing the media manipulations that have been followed by many other critics. The manipulations Barmash spoke against have become even more sophisticated. Some big media today are seen by many not only as being manipulated, but as willing partners of those doing the manipulating. Thus Fox News is seen as more or less a house organ of the Bush Administration; and PBS is seen as a platform of liberals. Yet despite the familiarity of the media and social issues Barmash was one of the first to specify and criticize almost three decades ago and the greatly increased influence of the media, "The Manipulated Society" still stands out for the clarity and depth of its analysis of the media manipulation running through modern society. Isadore Barmash has been a business and financial writer for the "New York Times" for over twenty-five years; and has also written in these areas for other domestic and international publications. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo and Peter A. Chapman, Editors. Copyright 2004. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***