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/raid1/www/Hosts/bankrupt/TCR_Public/050127.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, January 27, 2005, Vol. 9, No. 22 Headlines ABITIBI-CONSOLIDATED: Declares 2.5 Cents per Common Share Dividend ABITIBI-CONSOLIDATED: Appoints Dr. Hans Black to Board AERO PLASTICS: Look for Bankruptcy Schedules By February 7 AFM HOSPITALITY: Names Susan McIntosh Chief Financial Officer ALISON GEM CORP: Case Summary & 30 Largest Unsecured Creditors ALOE SPLASH INC: List of 18 Largest Unsecured Creditors ALOE SPLASH: Section 341(a) Meeting Slated for Feb. 8 AMERICAN BANKNOTE: Disclosure Statement Hearing Set for Feb. 24 ARMSTRONG WORLD: Hires F. Grasberger as Vice President & CFO ATHLETE'S FOOT: Committee Wants to Hire Kronish Lieb as Counsel ATX COMMUNICATIONS: Files First Amended Joint Plan in New York AVAYA INC: Reports First Fiscal Quarter 2005 Results BARRETT T.B. INC: Case Summary & 20 Largest Unsecured Creditors BELL CANADA: Nexxlink Shareholders Approve Acquisition Offer BOYD GAMING: Board Declares $0.085 Per Share Quarterly Dividend CABLEVISION SYSTEMS: S&P Affirms Low-B Ratings CABLEVISION SYSTEMS: Moody's Says Liquidity Profile Remains "Good" CATHOLIC CHURCH: Court Approves Portland's Six-Month Budget CATHOLIC CHURCH: Spokane Paying Bishop Skylstad $1,285 per Month CHESAPEAKE CORP: Ups Cash Flow Guidance for F.Y. 2004 Results CHOICE COMMUNITIES: Wants to Retain Shapiro as Bankruptcy Counsel CHOICE COMMUNITIES: Section 341(a) Meeting Slated for Feb. 23 CINCINNATI BELL: Moody's Rates Planned $250M Sr. Sec. Debt at Ba3 CORNERSTONE PROPANE: Names Dave Riggan Chief Financial Officer CORNING INC: Earns $163 Million of Net Income in Fourth Quarter CSG SYSTEMS: Earns $12.3 Million of Net Income in Fourth Quarter DEL MONTE: Moody's Changes Rating Outlook to Positive from Stable DEX MEDIA: Prices Secondary Offering at $23.25 per Common Share DII/KBR: Halliburton Completes Asbestos/Silica Settlement Funding ECHOSTAR COMMS: Moody's Says Liquidity Profile is "Very Good" FEDERAL-MOGUL: Asks Court to Extend Removal Period to June 1 FIDELITY NATIONAL: Moody's Rates $3.2B Senior Sec. Loans at Ba3 GAP INC: Board Declares $0.0222 per Share Quarterly Dividend GMAC COMMERCIAL: Fitch Junks $19 Million 1998-C2 Mortgage Security HEXCEL CORP: Dec. 31 Balance Sheet Upside-Down by $24.4 Million HOLLINGER INC: Can't Hold Shareholders' Meeting by January 30 HOLLINGER: E&Y Will Examine Ex-Directors P.Y. Atkinson & M. Sabia HOLLINGER: Will Deposit C$1.5M in Officers' Indemnification Trust HUFFY CORP: Schatz & Nobel Commences Class Action Lawsuit INTERSTATE BAKERIES: Court Extends Exclusive Periods to July 19 iSTAR FINANCIAL: Exchanging Series B Notes with 7.70% Sr. Debt JOSEPH G. ROCHE: U.S. Trustee to Meet Creditors on Feb. 18 KNIGHTHAWK INC: Arranges Up to $2,000,000 of Equity Financing KRISPY KREME: Has Until Mar. 25 to File October Quarterly Reports LB COMMERCIAL: Fitch Affirms $9.1MM 1995-C2 Multi-Class Certs. LEPPLA MOVING: List of its 20 Largest Unsecured Creditors LUXFER HOLDINGS: Moody's Junks Senior Unsecured Debts MERCER INT'L: S&P Rates Proposed $300M Senior Unsec. Notes at B MERRILL LYNCH: Fitch Affirms 'B-' Rating on $9.8MM 1995-C2 Certs. MIDLAND REALTY: Fitch Upgrades $12.8 MM 1996-C2 Mortgage Certs. MIRANT CORP: Liquidation Analysis Under Joint Chapter 11 Plan MOHEGAN TRIBAL: Completes Acquisition of Pocono Downs Racetrack NATIONAL ENERGY: Liquidation Analysis Under Plan of Liquidation NEWS CORP: Moody's Affirms Ba1 Ratings on Trust Preferred Shares NOVA CHEMICALS: Moody's Revises Outlook on Low-B Ratings to Stable PEABODY ENERGY: Declares $0.15 per Share Quarterly Dividend PLYMOUTH RUBBER: Negotiating Sale & Leaseback Financing Deal POGO PRODUCING: Moody's Revises Ratings Outlook to Developing POLYMER RESEARCH: U.S. Trustee Wants Chap. 11 Trustee Appointed PUTNAM STRUCTURED: Fitch Downgrades Two Class C-1 Notes to BB+ RAINBOW MEDIA: S&P Lifts Corporate Credit Ratings to BB from B RELIANCE GROUP: Inks Tax Sharing Pact with Bank Committee RELIANCE GROUP: Court Confirms Creditors' Committee Plan for RFSC RELIANT BUILDING: Alenco Asks Court to Close Chapter 11 Cases RUSSEL METALS: Look for Year-End Financial Report on February 24 SELECT MEDICAL: Launching $660MM Sr. Debt Offer to Finance Merger SEMINIS VEGETABLE: Moody's Reviews Ratings for Possible Upgrade SILICON GRAPHICS: Sept. 24 Balance Sheet Upside-Down by $150.8-Mil SOUTH STREET: Fitch Holds Junk Ratings on Five Note Classes STEVENOT WINERY: Case Summary & 20 Largest Unsecured Creditors STOTT RANCH: Church Harris Approved as Bankruptcy Counsel TENET HEALTHCARE: Fitch Rates New $500MM Sr. Unsecured Notes at B- TENET HEALTHCARE: S&P Rates Proposed $500M Sr. Unsec. Notes at B TENET HEALTHCARE: Moody's Rates New $500M Sr. Unsec. Notes at B3 TOUCH AMERICA: Trustee Wants Until June 3 to Object to Claims TRUMP HOTELS: UBS Securities Performs Valuation Analysis TRUMP HOTELS: Wants to Terminate Agreements with Tribe UAL CORP: Wants Court Approval to Reject 15 Aircraft Leases VENOCO INC: Reports 4Q Average Oil Production and Activity Update VENOCO INC: Appoints William Schneider as President VERILINK CORP: Posts $2.2 Million Net Loss in Second Quarter W.R. GRACE: Equity Deficit Widens to $588.4 Million at Dec. 31 W.R. GRACE: Court Restricts Equity Trading to Preserve NOLs WESTPOINT STEVENS: Court Approves T-Ink License Agreement WORLDSPAN L.P.: Discloses Refinancing Transactions WORLDSPAN L.P.: Commences Tender Offer for 9-5/8% Senior Notes * Lisa Rich Joins Sheppard Mullin as Legislative Affairs Director ********* ABITIBI-CONSOLIDATED: Declares 2.5 Cents per Common Share Dividend ------------------------------------------------------------------ Abitibi-Consolidated, Inc., reported that its Board of Directors has approved a dividend payment to shareholders of record on February 7, 2005, amounting to 2.5 cents per common share, payable on March 1, 2005. Abitibi-Consolidated is a global leader in newsprint and uncoated groundwood (value-added groundwood) papers as well as a major producer of wood products, generating sales of $5.4 billion in 2003. The Company owns or is a partner in 27 paper mills, 22 sawmills, 4 remanufacturing facilities and 1 engineered wood facilities in Canada, the U.S., the UK, South Korea, China and Thailand. With over 15,000 employees, excluding its PanAsia joint venture, Abitibi-Consolidated does business in approximately 70 countries. Responsible for the forest management of 17.5 million hectares of woodlands, the Company is committed to the sustainability of the natural resources in its care. Abitibi-Consolidated is also the world's largest recycler of newspapers and magazines, serving 16 metropolitan areas in Canada and the United States and 130 local authorities in the United Kingdom, with 14 recycling centres and approaching 20,000 Paper Retriever(R) and paper bank containers. * * * As reported in the Troubled Company Reporter on Dec. 22, 2004, Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Montreal, Quebec-based newsprint producer Abitibi-Consolidated Inc. to 'BB-' from 'BB'. At the same time, all ratings outstanding, including those on subsidiary Abitibi-Consolidated Co. of Canada, were lowered to 'BB-' from 'BB'. The outlook is negative. ABITIBI-CONSOLIDATED: Appoints Dr. Hans Black to Board ------------------------------------------------------ Abitibi-Consolidated, Inc., reported the appointment of Dr. Hans P. Black to the Company's Board of Directors. Mr. Black is currently the President of Interinvest Consulting Corporation, a global money management firm with offices in Montreal, Boston, Bermuda and Switzerland. He is also Chairman of Les Aliments SoYummi, Inc. Mr. Black holds a Doctorate in Medicine from McGill University and is a member of the Montreal Society of Financial Analysts -- MSFA -- and the Chartered Financial Analyst -- CFA -- Institute. Mr. Black also sits on the boards of la Fondation Institut de Cardiologie de Montreal, l'Orchestre de Chambre I Musici de Montreal, la Fondation des Jeunesses Musicales du Canada, Washington National Opera, and the NASDAQ listed biotechnology company Nymox Corporation. "We are very pleased that Mr. Black has agreed to join our Board. His broad based experience in a range of diverse businesses, as well as his knowledge of global investments will be very valuable to us," declared Richard Drouin. The appointment is effective January 25, 2005. Abitibi-Consolidated is a global leader in newsprint and uncoated groundwood (value-added groundwood) papers as well as a major producer of wood products, generating sales of $5.4 billion in 2003. The Company owns or is a partner in 27 paper mills, 22 sawmills, 4 remanufacturing facilities and 1 engineered wood facilities in Canada, the U.S., the UK, South Korea, China and Thailand. With over 15,000 employees, excluding its PanAsia joint venture, Abitibi-Consolidated does business in approximately 70 countries. Responsible for the forest management of 17.5 million hectares of woodlands, the Company is committed to the sustainability of the natural resources in its care. Abitibi-Consolidated is also the world's largest recycler of newspapers and magazines, serving 16 metropolitan areas in Canada and the United States and 130 local authorities in the United Kingdom, with 14 recycling centres and approaching 20,000 Paper Retriever(R) and paper bank containers. * * * As reported in the Troubled Company Reporter on Dec. 22, 2004, Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Montreal, Quebec-based newsprint producer Abitibi-Consolidated Inc. to 'BB-' from 'BB'. At the same time, all ratings outstanding, including those on subsidiary Abitibi-Consolidated Co. of Canada, were lowered to 'BB-' from 'BB'. The outlook is negative. AERO PLASTICS: Look for Bankruptcy Schedules By February 7 ---------------------------------------------------------- Aero Plastics, Inc., asks the U.S. Bankruptcy Court for the Northern District of Georgia for an extension until Feb. 7, 2005, to file its Schedules of Assets and Liabilities and Statements of Financial Affairs. The Debtors explain that the creditors and other parties-in- interest will have ample time to review the schedules and statements prior to meeting of creditors scheduled for Feb. 17. Headquartered in Leominster, Massachusetts, Aero Plastics, Inc. -- http://www.aeroplastics.com/-- manufactures household products. The Company filed for chapter 11 protection on Jan. 6, 2005 (Bankr. N.D. Ga. Case No. 05-60451). J. Michael Lamberth, Esq., at Lamberth, Cifelli, Stokes & Stout, PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. AFM HOSPITALITY: Names Susan McIntosh Chief Financial Officer ------------------------------------------------------------- AFM Hospitality Corporation (TSX: AFM) named Susan McIntosh CFO for AFM Hospitality Corporation. Since joining AFM in June 2004, Susan has been responsible for: (1) accounting and financial reporting for AFM and its subsidiaries; (2) directing divisional controllers; (3) integrating new acquisitions into AFM accounting and reporting; and (4) most importantly clearing AFM from Issuer defaults related to the late filing of financial statements. Her other responsibilities have grown to include treasury, risk management, compliance reporting, and internal audit. "With a solid background in both manufacturing and services industries, Susan brings more than twenty years public and private accounting in the lumber, wine, hospitality and cable wiring industries to our growing company and its new international subsidiaries," said Lawrence P. Horwitz, Chairman and CEO, for AFM Hospitality Corporation. "We are pleased to promote Susan to CFO and look forward to her continuing to raise the level and quality of our financial reporting." Susan resides in Seattle, Washington and will be working from both the Toronto, Ontario and Seattle, Washington offices. In an unrelated item, long time member of the AFM Board of Directors, Terry M. Shaikh, has resigned from the AFM Board Directors following his resignation from Rushlake Hotels (USA) Inc., a wholly owned subsidiary of Jivji Holdings B.V., and parent company to Hospitality First Securities, Inc., both shareholders of AFM. AFM previously announced a desire to move to a board of outside independent and unrelated directors as well as a smaller board. Through its subsidiary companies, AFM Hospitality Corporation -- http://www.afmcorp.com/-- operates or has open and executed franchise, management, and membership agreements with more than 300 hotels, restaurants and other nationally franchised service businesses throughout Canada and fifteen other countries. The company's focus is to be a leader in global hospitality management and franchising; InterActive Reservations Platforms and Marketing Solutions; and luxury lifestyle brands and branded services. AFM Hospitality Corporation is a publicly traded company listed on the Toronto Stock Exchange (TSX: AFM). * * * As reported in the Troubled Company Reporter on Nov. 30, 2004, AFM Hospitality Corporation released its consolidated financial statements along with its Management Discussion and Analysis for 2003. Previously, AFM did not file its annual statements by the appropriate deadlines; and, as a result, the relevant securities commissions imposed Issuer Cease Trade Orders. With the release of 2003 financial statements and its interim statements for 2004, AFM Hospitality intends to satisfy the provisions of the securities commissions and cure its default of the financial statement reporting requirement. With the change of CFO's during 2004 and the departure of an interim CFO, AFM's management and its board of directors, believed that it was prudent to invest additional time to review AFM's books, records, and related disclosures in accordance with company guidelines and the new disclosure standards as AFM completed several complex transactions during 2003. While reporting a sizeable loss for 2003, AFM is pleased that it received a clean opinion letter from its outside auditors and it has not been necessary to report any restatement of any periods prior to 2003. Additionally, AFM expects to report a significant turn around for 2004 compared to 2003. ALISON GEM CORP: Case Summary & 30 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Alison Gem Corporation 1156 Avenue of the Americas New York, New York 10036 Bankruptcy Case No.: 05-10404 Type of Business: The Debtor is a manufacturer and wholesaler of jewelry goods selling both diamond and colored stone jewelry to a variety of major retailers, small local retail chains, and single family owned retail stores. Chapter 11 Petition Date: January 25, 2005 Court: Southern District of New York (Manhattan) Judge: Prudence Carter Beatty Debtor's Counsel: Ian R. Winters, Esq. Sean C. Southard, Esq. Klestadt & Winters, LLP 292 Madison Avenue, 17th Floor New York, New York 10017-6314 Tel: (212) 972-3000 Fax: (212) 972-2245 Total Assets: $20,600,000 Total Debts: $43,000,000 Debtor's 30 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ SUGEM $1,473,226 7 East 47th Street New York, New York 10017 Tel: (212) 220-4393 Milistar (N.Y), Inc. $1,092,407 15 West 46th Street New York, New York 10036 Tel: (212) 840-4506 Indian Diamond Imports $1,043,643 15 West 47th Street New York, New York 10036 Tel: (212) 921-0056 Vashali Diamond Corporation $664,427 579 Fifth Avenue New York, New York 10017 Tel: (212) 308-6033 AAROHI Diamonds, Inc. $496,833 145 West 45th Street New York, New York 10036 Tel: (212) 869-5494 Laxmi Diamond $471,817 1605 Pamchratna Opera House Mumbai 400 004 0 Bhumish Diamond $422,646 580 5th Avenue New York, New York 10036 Tel: (212) 840-7226 Bluerays, Inc. $350,732 22 West 48th Street New York, New York 10036 Tel: (212) 302-1810 Gama Diamonds, Ltd. $304,289 Maccabi 749 Dia Ramat Gan Tel: 119 723 575 Eurostar Belgium Inc. $273,233 589 Fifth Avenue New York, New York 10017 Tel: (212) 754-4100 Royal Diamond Company $266,587 580 Fifth Avenue New York, New York 10036 Tel: (212) 869-9685 D-3 Diamonds $213,018 589 Fifth Avenue New York, New York 10017 Tel: (212) 382-3875 Reliable Gold & Chain $208,744 2 West 47th Street New York, New York 10036 Tel: (212) 764-7293 Lotus Gem. $188,653 917 Prasad Cham Mumbai 400 004 India 3680066 Sanghavi Diamonds Inc. $188,391 Glory Gems Inc. $113,255 M. Fabrikant & Sons $111,896 Somipdiam, Inc. $102,440 Fancy Trading Internat $97,043 Grand Central Jewelry $92,742 Jean & Alex Jewelry MF $89,371 Forte Jewelry Inc. $88,828 Shinestones, Inc. $67,940 Two-Tone U.S.A. $67,737 Pronto Jewelry, Inc. $49,956 Star Rays New York Inc. $32,224 International Gemoligi $31,316 Keystone Findings, Inc. $29,921 Atit Diamond Corporation $22,718 Royal Stone $21,180 ALOE SPLASH INC: List of 18 Largest Unsecured Creditors ------------------------------------------------------- Aloe Splash, Inc., released a list of its 18 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Bruce Cleland $439,690 c/o Gilbert B. Weiner, Esq. 2425 East Camelback Road, Suite 950 Phoenix, AZ 85016-9260 Tel: (602) 912-8550 Super Store Industries $122,307 Attn: Stefan Edh 2600 Spengler Way Turlock, CA 95380 Tel: (209) 664-3218 Natural Bevcor LLC $44,584 4202 East Broadway Road, Suite 191 Mesa, AZ 85206 Tel: (480) 629-8211 McNeil Specialty Products Company $44,038 PO Box 403335 Atlanta, GA 30384 Tel: (732) 524-6288 Snell & Wilmer $22,912 Wesley Burke $22,292 7-Up Bottling Company $21,382 Jerry Moyes $20,951 Southwest Advisors, Inc. $10,832 Columbia Distributing $7,022 American Trends of California $5,720 Iowa Rotocast Plastics $5,587 Wells Fargo Card Services $5,422 Wright Express $4,000 Perchak Properties $3,695 Collins May $2,751 Verizon Wireless $1,563 Frys $1,000 Headquartered in Scottsdale, Arizona, Aloe Splash, Inc. -- http://www.aloesplash.com/-- manufactures beverages with aloe vera in different flavors. The Company filed for chapter 11 protection on December 27, 2004 (Bankr. D. Ariz. Case No. 04-22170). John R. Worth, Esq., at Forrester & Worth, PLLC represents the debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $500,000 to $1 million and debts between $1 million to $10 million. ALOE SPLASH: Section 341(a) Meeting Slated for Feb. 8 ----------------------------------------------------- The United States Trustee for Region 14 will convene a meeting of Aloe Splash, Inc.'s creditors at 1:30 p.m., on February 8, 2005, at US Trustee Meeting Room, 230 North First Avenue, Suite 102, in Phoenix, Arizona. 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 Scottsdale, Arizona, Aloe Splash, Inc. -- http://www.aloesplash.com/-- manufactures beverages with aloe vera in different flavors. The Company filed for chapter 11 protection on December 27, 2004 (Bankr. D. Ariz. Case No. 04-22170). John R. Worth, Esq., at Forrester & Worth, PLLC represents the debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $500,000 to $1 million and debts between $1 million to $10 million. AMERICAN BANKNOTE: Disclosure Statement Hearing Set for Feb. 24 --------------------------------------------------------------- The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware will convene a hearing at 4:30 p.m., on February 24, 2005, to consider the adequacy of the Disclosure Statement explaining the Plan of Reorganization filed by American Banknote Corporation. Judge Walsh will also consider approval of the Voting and Noticing Procedures for the Plan. The Debtor filed its Disclosure Statement and Plan on January 20, 2005. The Plan's primary purposes are to reduce the Debtor's debt service requirements and overall level of indebtedness, to realign its capital structure, and to provide it with the flexibility to amortize a portion of its new indebtedness while continuing to provide the necessary capital to reinvest and grow its business. If consummated, the Plan will compromise unsecured debt by delivering 10 million shares of New Issued Common Stock with an initial aggregate value of $114 million. The Debtor will also exchange a smaller amount of Old Notes for New Notes. The Plan contemplates reducing the number of holders of New Common Stock to below 300 so the Reorganized Debtor can elect to become a private company. The Reorganized Debtor will benefit from being a private company as it can reduce the costs associated with its business operations and as a result of the Plan's consummation, the Debtor will have adequate future liquidity and the long-term relief it requires to reinvest back into its business. The Plan groups claims and interests into nine classes, with all unimpaired claims consisting of Administrative Claims, Priority Tax Claims, Other Priority Claims and Miscellaneous Secured Claims to be paid 100% of their claims on the Distribution Date. Impaired claims consisting of: a) Allowed Note Claims will receive their Ratable Portion of 7,920,884 shares of the New Issued Common Stock; b) Note Convenience Claims will receive either 60% of cash equal to the amount of those claims or New Notes equal to 100% of those claims, while SERP Claims will be paid in full on the Distribution Date; c) Allowed Equity Interests will receive their Ratable Portion of 207,402 shares of the New Issued Common Stock and approximately $4 million in cash on the Distribution Date, while the De Minimis Equity Holders will receive their Ratable Portion of approximately $1 million in cash; and d) all other Equity Interests will be cancelled on the Effective Date and will receive no distribution under the Plan. Full-text copies of the Disclosure Statement and Plan are available for a fee at: http://www.researcharchives.com/download?id=040812020022 Objections to the Disclosure Statement, if any, must be filed and served by February 22, 2005. Headquartered in Englewood Cliffs, New Jersey, American Banknote Corporation, -- http://www.americanbanknote.com/-- is a holding company, which operates through its subsidiary companies, principally in the United States, Brazil, Argentina, Australia, New Zealand and France. Through these subsidiaries, the Company manufactures, markets, distributes and supplies related services to, a variety of secure documents, media, and fulfillment and reconciliation systems. The Company filed for chapter 11 protection on January 19, 2005 (Bankr. D. Del. Case No. 05-10174). Adam Singer, Esq., at Cooch and Taylor and Paul N. Silverstein, Esq., at Andrews Kurth LLP represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $124,709,527 and total debts of $115,965,530. ARMSTRONG WORLD: Hires F. Grasberger as Vice President & CFO ------------------------------------------------------------ On January 6, 2005, F. Nicholas Grasberger signed an indemnification agreement and a change-in-control agreement with Armstrong World Industries, Inc. The Indemnification Agreement indemnifies Mr. Grasberger from claims and liabilities stemming from his service as an officer of Armstrong Holdings, Inc., or AWI, and commits the company to maintain at least the same level of director and officer insurance coverage during his service, subject to the Board of Directors determining that lesser coverage is appropriate. The Change-in-Control Agreement contains provisions similar to those provided to other senior company officers, except that AWI's emergence from Chapter 11 will not constitute a change in control. The severance benefits are payable if Mr. Grasberger is involuntarily terminated or terminates employment for good reason within three years following a change in control. Walter T. Gangl, Deputy General Counsel and Assistant Secretary of Armstrong Holdings, explains in a regulatory filing with the Securities and Exchange Commission that "good reason to terminate employment exists if there are significant changes in the nature of the employment following the change in control." The Change- in-Control Agreement includes a provision where the executive may choose to terminate employment for any reason during the 30-day period beginning one year following a qualifying change in control and receive severance benefits. "The agreement has an automatic renewal feature, meaning the agreement will continue in effect unless either Armstrong or the executive elects not to extend the agreement," Mr. Gangl says. Severance benefits under the Change-in-Control Agreement include: (1) a lump severance payment equal to three times the sum of the officer's annual base salary and the higher of either: * the officer's highest annual bonus earned in the three years prior to termination or prior to the change in control; or * the annual target bonus if he terminates prior to December 31, 2005; and (2) a lump-sum payment of the portion of the target incentive award calculated by multiplying the target by the fractional number of months completed in the performance award period. A copy of the Indemnification Agreement is available for free at: http://sec.gov/Archives/edgar/data/7431/000119312505004673/dex103.htm A copy of the Change-in-Control Agreement is available for free at: http://sec.gov/Archives/edgar/data/7431/000119312505004673/dex102.htm * * * Judge Fitzgerald authorizes the employment of Mr. Grasberger as Senior Vice President and Chief Financial Officer, effective January 1, 2005. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATHLETE'S FOOT: Committee Wants to Hire Kronish Lieb as Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Athlete's Foot Stores, LLC, and its debtor-affiliate seeks permission from the U.S. Bankruptcy Court for the Southern District of New York to retain Kronish Lieb Weiner & Hellman LLP as their counsel. Kronish Lieb will: (a) attend the meetings of the Committee; (b) review financial information furnished by the Debtors to the Committee; (c) review and investigate the liens of purported secured parties; (d) confer with the Debtors' management and counsel; (e) coordinate efforts to sell assets of the Debtors in a manner that maximizes the value for unsecured creditors; (f) review the Debtors' schedules, statement of affairs and business plan; (g) advise the Committee as to the ramifications regarding all of the Debtors' activities and motions before this Court; (f) file appropriate pleadings on behalf of the Committee; (i) review and analyze accountant's work product and reports to the Committee; (j) provide the Committee with legal advice in relation to the cases; (k) prepare various applications and memoranda of law submitted to the Court for consideration and handle all other matters relating to the representation of the Committee that may arise; (l) assist the Committee in negotiations with the Debtors and other parties in interest on an emergence plan; and (m) perform such other legal services for the Committee as may be necessary or proper in these proceeding. Jay R. Indyke, Esq., will represent the Committee in this proceeding. The Firm will bill the Debtors based on its professionals' current hourly rates: Designation Rate ----------- ---- Partner $525 - $695 Special Counsel $485 Associates $240 - $420 To the best of the Committee's knowledge, Kronish Lieb is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in New York, New York, Athlete's Foot Stores, LLC, -- http://www.theathletesfoot.com/-- operates approximately 125 athletic footwear specialty retail stores in 25 states. The Company and its debtor-affiliate filed for chapter 11 protection on December 9, 2004 (Bankr. S.D.N.Y. Case No. 04-17779). Bonnie Lynn Pollack, Esq., and John Howard Drucker, Esq., at Angel & Frankel, P.C. represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed total assets of $33,672,000 and total debts of $39,452,000. ATX COMMUNICATIONS: Files First Amended Joint Plan in New York -------------------------------------------------------------- ATX Communications, Inc., and its debtor-affiliates filed on Jan. 24, 2005, with the U.S. Bankruptcy Court for the Southern District of New York their First Amended Joint Plan of Reorganization. A full-text copy of the Plan is available for a fee at: http://www.researcharchives.com/download?id=040812020022 The Plan incorporates a comprehensive settlement with Leucadia National Corporation and with local exchange carriers Verizon Wireless and SBC. These three creditors agreed not to share in the distributions to be made to other holders of general unsecured claims. Leucadia will be issued a $25 million New Senior Note and 100% of New Common Stock (850,000 shares) to satisfy its claim of approximately $170 million; the New Common Stock will not be publicly traded. The Debtors will make a cure payment to Verizon for $16.5 million and will assume their executory contracts; the rest of Verizon's $58 million claim will only be satisfied after general unsecured creditors recover 15% of their claims. SBC's $37 million claim will be satisfied through the sales proceed of the Debtors' Mid-West operations. General unsecured creditors aggregate claims amounting to $70 to $80 million will share $7 million in cash and will recover 8.75% to 10% of their allowed claims. Allowed convenience claim holders will receive cash payment of 15% of the allowed amount of their claims on the effective date. Subordinated claims, old common stock interests and equity interests will be extinguished on the effective date. Headquartered in Bala Cynwyd, Pennsylvania, ATX Communications, Inc. -- http://www.atx.com/-- is a local exchange and interexchange carrier providing integrated voice and date services, and operates a nationwide asynchronous transfer mode network. ATX, CoreComm New York, Inc., and their affiliates filed for chapter 11 protection on January 15, 2004 (Bankr. S.D.N.Y. Case Nos. 04-10214 through 04-10245). Paul V. Shalhoub, Esq., and Marc Abrams, Esq., at Willkie, Farr, & Gallagher LLP represent the Debtors in their restructuring efforts. When the Debtor filed for protection from their creditors, it listed $664 million in total assets and $596.7 million in total debts. AVAYA INC: Reports First Fiscal Quarter 2005 Results ---------------------------------------------------- Avaya, Inc., (NYSE: AV) reported income from continuing operations of $33 million or seven cents per diluted share in the first fiscal quarter of 2005. In the same quarter last year the company reported income from continuing operations of $30 million or seven cents per diluted share. Avaya said first quarter income from continuing operations of $33 million included a loss associated with its senior secured notes tender, as well as integration costs and write-offs of in-process research and development related to the acquisitions of Spectel and Tenovis. These items had a negative impact of 11 cents per diluted share in the first fiscal quarter. In addition, the acquisitions contributed an operational loss in the quarter. The combined impact of all these charges and losses was a reduction in earnings per share of 13 cents. Avaya's first fiscal quarter 2005 revenues increased 18 percent to $1.148 billion compared to revenue of $971 million in the first fiscal quarter of 2004. The revenue increase largely reflected the impact of recent acquisitions and favorable currency rates. Excluding these two items, revenues grew at double-digit rates in all regions except the United States where sales were essentially unchanged versus the year ago period. "We continue to improve our profitability with operating income rising 70 percent year-over-year," said Don Peterson, chairman and CEO, Avaya. "We completed the Tenovis acquisition, shipped our five millionth IP telephony line and substantially reduced our debt. Our first quarter results position us to meet our goals for the year." Avaya said its fiscal 2005 goals are to increase revenues between 25 and 27 percent compared to fiscal 2004 revenues of $4.055 billion, grow operating income by 40 percent compared to $311 million in fiscal 2004 and raise annualized operating margin to between 8.5 and 9 percent compared to 7.7 percent last year. As a result of the Tenovis acquisition, which has a significant rental and managed services business, Avaya made changes and enhancements to its financial reporting: * On a consolidated basis, the company now breaks out revenue into three line items -- products, rental and managed services, and services -- and provide costs for each of these three. * On a segment level, the company groups businesses into two reporting units -- Global Communications Solutions and Avaya Global Services -- and provides a breakout of major revenue line items within each. * The company also is providing more information on the geographic breakout of revenue and product revenue by channel. First Fiscal Quarter Highlights During the quarter, Avaya was recognized as a market leader by a variety of industry analyst groups for products and solutions across our portfolio. Among the analyst reports: * In IP Telephony, Synergy Research Group cited Avaya as the worldwide leader in enterprise IP telephony -- for the fourth straight quarter. In Asia Pacific, Frost and Sullivan have noted Avaya as the IP telephony leader. * In contact centers, was cited by Frost and Sullivan as the "clear favorite" in a survey of business leaders. * In Unified Messaging the IDC Leadership Grid places Avaya significantly ahead of all competitors. In the quarter, Avaya put new solutions on the market, including The Avaya Video Telephony Solution: Desktop Edition, an IP-based solution that makes desktop videoconferencing as simple as a phone call. The solution lets users initiate videoconferences from an office, home office or remote location via PC or laptop -- through a broadband or Wireless LAN connection. Avaya delivered Avaya Modular Messaging -- which can support up to 20,000 users in multiple locations using a single, centralized system and IP telephony and networking. Customers across the globe are moving or migrating to Avaya IP Telephony, including: * The government of Washington, D.C., which is deploying Avaya voice solutions as part of its DCNet initiative to link 30,000 employees in 360 locations; * In Mexico, Avaya was awarded one of the country's largest IP telephony implementations to date -- a new network for Prosa, a Mexican company specializing in processing electronic transactions, that will connect more than 10,000 endpoints; * Honda UK, which has selected Avaya IP Office and wireless networking for dealerships; and * Rakuten, a Japanese eCommerce company with one of the country's largest installations of IP Telephony, which is supported by Avaya IP telephony solutions. Avaya closed on the following acquisitions in the quarter: (1) Tenovis, a major European provider of enterprise communications systems and services; (2) Spectel, a world leader in audio and web conferencing for enterprises and service providers -- whose products are now being marketed under Avaya Meeting Exchange; and (3) RouteScience, a maker of adaptive networking software that helps companies monitor and manage VoIP and other latency- sensitive traffic over wide area networks. Avaya, Inc. -- http://www.avaya.com/-- designs, builds and manages communications networks for more than one million businesses worldwide, including more than 90 percent of the FORTUNE 500(R). Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol telephony systems and communications software applications and services. Driving the convergence of voice and data communications with business applications -- and distinguished by comprehensive worldwide services -- Avaya helps customers leverage existing and new networks to achieve superior business results. * * * As reported in the Troubled Company Reporter on Jan. 21, 2005, Moody's Investors Service upgraded the senior implied rating of Avaya, Inc., to Ba3 from B1. Moody's simultaneously withdrew the ratings of the 11-1/8% senior secured notes that have been substantially redeemed. The ratings outlook is positive. Ratings upgraded include: * Senior implied rating to Ba3 from B1 * Issuer rating to B1 from B2 * Shelf registration for senior unsecured debt and preferred stock to (P)B1 and (P)B3 from (P)B2 and (P)Caa1, respectively. Ratings withdrawn include: * Senior secured notes at B1. As reported in the Troubled Company Reporter on Nov. 18, 2004, Standard & Poor's Ratings Services raised its rating on Basking Ridge, New Jersey-based Avaya Inc.'s senior unsecured debt to 'B+' from 'B' to reflect lower amounts of priority secured debt in Avaya's capital structure. On November 16, 2004, Avaya announced it had successfully tendered for $271 million of its outstanding $284 million of senior secured notes. Avaya maintains access to an undrawn $250 million senior secured credit facility, although the senior unsecured debt holders would not be materially disadvantaged. The corporate credit rating is affirmed, with a positive outlook. BARRETT T.B. INC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Barrett T.B., Inc. dba Taco Bell dba Kentucky Fried Chicken 7334 Townline Road North Tonawanda, New York 14120 Bankruptcy Case No.: 05-10532 Type of Business: The Debtor operates a Taco Bell restaurant and a KFC restaurant. Chapter 11 Petition Date: January 25, 2005 Court: Western District of New York (Buffalo) Judge: Michael J. Kaplan Debtor's Counsel: Daniel F. Brown, Esq. Damon & Morey LLP 1000 Cathedral Place 298 Main Street Buffalo, New York 14202 Tel: (716) 856-5500 Estimated Assets: $1 Million to $10 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Long Lane Master Trust IV Trade debt $16,000,000 c/o AMC of America 2003-2004 600 East Las Colinas Boulevard Suite 200 Irving, Texas 75039 Taco Bell Trade debt $1,390,000 PO Box 116946 2003-2004 Atlanta, Georgia 30368-6946 McLane Food Trade debt $98,578 File 7197 2003-2004 PO Box 1067 Charlotte, NC 28201-1067 Benderson Development Company Trade debt $69,029 570 Delaware Avenue #1 2003-2004 Buffalo, NY 14202 New York State Electric & Trade debt $20,684 Gas (NYSEG) 2003-2004 PO Box 5550 Ithaca, NY 14852 NAFA Trade debt $19,546 PO Box 955638 2003-2004 Saint Louis, MO 63195-5781 Susan K. Jaros Trade debt $16,642 Town Clerk 2003-2004 Allied 4 OP, LLC Trade debt $16,000 2003-2004 The Wasserstrom Company Trade debt $13,216 2003-2004 Niagara Mohawk Trade debt $12,500 2003-2004 Pryamid Walden Company, LP Trade debt $11,952 M&T Bank 2003-2004 National Fuel Trade debt $11,406 2003-2004 Boulevard Mall Trade debt $11,382 c/o Goldman Sachs Mortgage Co. 2003-2004 Marshall Morgan LLC Trade debt $10,000 2003-2004 Citibank Trade debt $7,970 2003-2004 BG Mid-City I, LLC Trade debt $7,663 Dept. 591112W53761 2003-2004 Jean Moncreiff $7,027 School Tax Collector Nextel Communications Trade debt $6,344 2003-2004 Uniland Development Company Trade debt $6,113 2003-2004 Jaeckle Fleischmann & Mugel Legal services $6,000 BELL CANADA: Nexxlink Shareholders Approve Acquisition Offer ------------------------------------------------------------ Bell Canada reported that, following the expiry of its offer to purchase all the outstanding common shares of Nexxlink Technologies, Inc. (TSX: NTI), all of the conditions set out in the offer had been met. A total of 9,488,489 common shares of Nexxlink, representing approximately 86.3% of the aggregate number of common shares outstanding (on a fully-diluted basis), were tendered under the offer. Accordingly, Bell Canada has taken-up and intends to pay for all the Nexxlink common shares deposited under the offer on January 27, 2005. Bell Canada will grant additional time to Nexxlink shareholders who have not yet tendered their shares, by extending its offer to 5:00 p.m. Eastern time, February 7, 2005. Bell Canada intends to acquire all outstanding common shares not tendered by that date pursuant to rights of compulsory acquisition, if available, or pursuant to a subsequent acquisition transaction, with the result that Nexxlink will become a wholly owned subsidiary of Bell Canada. Bell Canada, Canada's national leader in communications, provides connectivity to residential and business customers through wired and wireless voice and data communications, local and long distance phone services, high speed and wireless Internet access, IP-broadband services, e-business solutions and satellite television services. Bell Canada is wholly owned by BCE, Inc. For more information please visit http://www.bell.ca/ BCI is operating under a court-supervised Plan of Arrangement, pursuant to which BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholder and dissolving the company. BOYD GAMING: Board Declares $0.085 Per Share Quarterly Dividend --------------------------------------------------------------- Boyd Gaming Corporation's (NYSE: BYD) Board of Directors has declared a quarterly cash dividend of $.085 per share, payable on March 1, 2005 to shareholders of record on Feb. 11, 2005. Headquartered in Las Vegas, Boyd Gaming Corporation (NYSE: BYD) -- http://www.boydgaming.com/-- is a leading diversified owner and operator of 18 gaming entertainment properties, plus one under development, located in Nevada, New Jersey, Mississippi, Illinois, Indiana and Louisiana. * * * As reported in the Troubled Company Reporter on Nov. 25, 2004, Fitch Ratings affirmed Boyd Gaming Corporation's senior secured bank debt ratings at 'BB' and raised the senior unsecured and subordinated debt ratings one notch to 'BB-' and 'B+', respectively. The Rating Outlook is Stable. Approximately $2.3 billion of debt securities are affected by Fitch's action. Ratings reflect: (1) Boyd's sizable and uniquely diversified portfolio of high quality, (2) recently renovated assets, (3) successful operating history, and (4) strong track record of making high-return acquisitions. CABLEVISION SYSTEMS: S&P Affirms Low-B Ratings ---------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Bethpage, New York-based cable operator Cablevision Systems, Inc., and holding company CSC Holdings, Inc., including the 'BB' corporate credit rating. The ratings were simultaneously removed from CreditWatch. The outlook is positive. In addition, Standard & Poor's raised its ratings on Cablevision's Rainbow Media Enterprises, Inc., and Rainbow National Services LLC units and removed them from CreditWatch. The corporate credit rating was raised to 'BB' from 'B'. "The rating actions follow Cablevision's announcement that it has a definitive agreement to sell its Rainbow 1 satellite to EchoStar Communications Corp., along with ground facilities and related assets, for $200 million," said Standard & Poor's credit analyst Catherine Cosentino. "Discontinuation of the VOOM satellite business removes a major uncertainty surrounding Cablevision's credit profile, given the high business risk and attendant financing requirements of VOOM. Moreover, discontinuation of the satellite business is expected to materially improve the company's financial profile in 2005, given the ongoing start-up losses associated with VOOM." Excluding the satellite losses, the Cablevision's consolidated debt to annualized EBITDA for the three months ended Sept. 30, 2004, totaled about 6x, versus 7x with the satellite losses (including stock plan expense, adjusted for operating leases and financial guarantees, and excluding nonrecurring broadcast rights termination fees, a related liability reversal, and collateralized indebtedness). Ratings on Rainbow Media Enterprises and its subsidiary, Rainbow National Services, were raised to reflect the consolidated rating of parent Cablevision. Rainbow Media Enterprises was created as a vehicle to spin off the VOOM business and the American Movie Classics -- AMC/Independent Film Channel -- IFC/WE: Women's Entertainment -- WE -- programming assets to shareholders. Instead of spinning off these assets, however, Cablevision has decided to sell the VOOM business. Because the AMC/IFC/WE assets have considerable value, Cablevision is expected to continue to service Rainbow Media Enterprises' debt at Rainbow National Services. The senior unsecured and subordinated debt ratings of Rainbow National Services is 'B+', two notches below the 'BB' corporate credit rating, due to the substantial secured bank debt at Rainbow, which has priority in terms of payment in a bankruptcy. CABLEVISION SYSTEMS: Moody's Says Liquidity Profile Remains "Good" ------------------------------------------------------------------ Moody's Investors Service affirmed the SGL-2 speculative grade liquidity rating for Cablevision Systems Corporation following its announcement of plans for subsidiary Rainbow DBS to sell certain satellite assets to EchoStar Communications Corp. for approximately $200 million. The affirmation reflects Moody's view that Cablevision's projected short-term liquidity profile continues to be best characterized as "good." All ratings have for some time incorporated the expectation of the eventual separation of Rainbow assets from Cablevision, as well as the absence of incremental funding required for the Rainbow DBS Voom direct broadcast satellite venture. While the ultimate outcome is unclear, Moody's does not expect the company's creditors to realize any long-term incremental tangible benefits from the proceeds of the asset sale and excess cash balances related to the pre-funded Voom business plan that will remain under the Cablevision corporate umbrella. Hence, the sale does not impact the most recent (December 20, 2004) SGL analysis. Cablevision continues to enjoy full access to undrawn amounts remaining (approximately $383 million at the beginning of the fourth quarter) under its $2.4 billion revolving credit facility (at CSC Holdings, Inc.). The company recently loosened the maximum leverage covenant under this facility, providing for a more gradual stepdown of total debt to 5.75 times EBITDA in the second half of 2005, and 5.5 times beginning in 2006, compared to previous levels of 5.25 times in the second quarter of 2005 and 4.5 times in 2006. The amendment increases the covenant cushion and enhances financial flexibility, arguing for a strongly positioned SGL-2 liquidity rating, although the long-term benefits of this relief and added flexibility are less certain and remain dependent on certain strategic options now available to the company which have yet to be disclosed. Additionally, the current free cash flow deficit position of the company continues to temper this enhanced financial flexibility and constrain the liquidity rating, particularly in the context of fairly modest projected free cash flow, in coparison to the consolidated debt burden, to be generated over the coming year. Nonetheless, Moody's continues to expect strong digital, high speed data, and telephony subscriber growth to drive solid top-line and cash flow growth. The company's core cable operations should generate an estimated $1.4 billion or more of EBITDA in 2005. Still high cash interest expense can be expected to consume much of the operating cash flow, but Moody's notes that Cablevision is beginning to benefit from declining debt service costs following the repayment of preferred stock (quarterly cash dividends of approximately $44 million) and its 9.875% notes during 2004. Cablevision replaced these instruments late last year with floating rate debt and 8% notes at the Cablevision Systems Corporation level, yielding estimated annual savings of approximately $90 million. Moody's believes that capital spending to support ongoing growth will exceed 2004's projected $650 million level for the telecom group of assets. Moody's anticipates that the company will transition to positive (albeit relatively modest) free cash flow after cash interest, working capital, and capital expenditure needs for the full year 2005. The remaining non-telecom businesses should continue to be largely self-funding, with the exception of those portions of the Rainbow DBS (Voom) business remaining after the satellite sale to EchoStar. The costs associated with Voom's shutdown and the timing for the disposal of the remaining Rainbow DBS-related assets remain uncertain, but pre-funded cash balances associated with debt financings by Rainbow National Services earlier this year should be sufficient to fund such costs over at least the next year. Cablevision has no scheduled amortization payments over the next year, although it must satisfy the remaining $25 million payment for exiting the Sony box contract back in 2002. Additionally, News Corporation could exercise its option to put its remaining ownership in the Fox Sports networks (Florida and Ohio) and MSG back to Cablevision in December 2005 for a considerably larger sum, which would presumably entail either full depletion of former Voom funds and EchoStar remitted cash balances and incremental financing in the capital markets. News Corporation exercised its put option on two other Fox Sports networks (Chicago and Bay Area) in January 2003, which Cablevision satisfied through the issuance of a $150 million promissory note maturing in December 2006. The bulk of Cablevision's assets remain unencumbered, and Moody's believes that they could be quickly monetized if necessary, thereby providing a valuable secondary source of liquidity which lends support to the SGL-2 rating. Headquartered in Bethpage, New York, Cablevision Systems is a domestic cable multiple system operator serving approximately 3 million subscribers in and around the metropolitan New York area. The company's senior implied rating is Ba3 and the rating outlook is negative. * * * As reported in the Troubled Company Reporter on Jan. 25, 2005, in Fitch Ratings' view, the decision by Cablevision Systems Corporation and CSC Holdings, Inc., to sell Rainbow 1 and to exit the direct broadcast satellite business removes a significant overhang from CSC's credit profile and positions the company to focus on its core cable business. Fitch believes that the Rainbow DBS business model struggled to become a viable business and in the absence of a spin-off presented material business and financial risk to CSC's credit profile. Fitch currently rates CSC's senior unsecured debt 'BB-', the senior subordinated debentures 'B+', and the senior secured bank facility 'BB+'. All of the ratings have a Stable Rating Outlook. Moody's Investors Service affirmed all ratings for Cablevision Systems Corporation and CSC Holdings, Inc., a wholly owned subsidiary of Cablevision Systems, following the Company's announcement of plans for its subsidiary Rainbow DBS to sell certain satellite assets to EchoStar Communications Corp., for approximately $200 million. The summary of Moody's ratings and actions: -- Cablevision Systems Corporation * $500 Million New Floating Rate Notes due 2009 - B3 (affirmed) * $1 Billion New Senior Unsecured Notes due 2012 - B3 (affirmed) * Senior Implied Rating -- Ba3 (affirmed) * Issuer Rating - B3 (affirmed) * Liquidity Rating - SGL-2 (affirmed) * Rating Outlook (CVC and CSC) - Negative (unchanged) -- CSC Holdings, Inc. -- CSC * $4.2 billion aggregate senior unsecured notes -- B1 (affirmed) * $250 Million of 10.5% Senior Subordinated Debentures due 2016 - B2 (affirmed) As reported in the Troubled Company Reporter on Aug. 19, 2004, Standard & Poor's Ratings Services' ratings for Cablevision Systems Corp. (BB/Watch Neg/--) and its related entities remain on CreditWatch with negative implications due to the uncertainty regarding the company's ability to complete its planned spin-off of its satellite broadcast business and a significant portion of its programming businesses later this year. CATHOLIC CHURCH: Court Approves Portland's Six-Month Budget ----------------------------------------------------------- To recall, The Archdiocese of Portland in Oregon and the Official Committee of Tort Claimants appointed in the diocese's chapter 11 case want to implement a procedure that will allow the Archdiocese, the parishes, and the schools to continue to utilize the funds and investments in various 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. * * * The Archdiocese of Portland in Oregon has prepared a budget, which sets forth the estimated cash to be used for day-to-day operations, and lists, which sets forth anticipated expenditures from the Archdiocesan Loan and Investment Program and Catholic Education Endowment Fund for the period from January 1, 2005, through June 30, 2005. A copy of the budget and lists is available at no charge at: http://bankrupt.com/misc/portland_2nd_operating_budget.pdf 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 Official Committee of Tort Claimants in Portland's case modified their previous stipulation governing Portland's use of funds. The parties agree that: (a) Portland may use the funds and investments in the Accounts only in the amounts and for the purposes described in the Operating Budget, the Archdiocesan Loan and Investment Program budget, and the Catholic Education Endowment Fund budget through and including June 30, 2005. The Budget Period may be extended by further stipulation and Court order. (b) Portland will be authorized to make disbursements of ALIP and CEEF funds not provided in the ALIP Budget and CEEF Budget pursuant to these modified procedures: (1) Upon a request for a disbursement not provided for in the ALIP or CEEF Budget for an aggregate of $40,000 or less, 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 for making for making the disbursement, Portland will be authorized to make the disbursement without further notice or Court order. (2) Upon a request for a disbursement not provided for in the ALIP Budget or CEEF Budget in excess of an aggregate of $40,000, 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 Portland 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. (3) If no written objection is received from the Committee within the 10-day period, Portland will be authorized to make the requested 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. (4) 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. Judge Perris approves the modified stipulation. 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. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Spokane Paying Bishop Skylstad $1,285 per Month ---------------------------------------------------------------- The Catholic Diocese of Spokane advises Judge Williams of its intent to compensate Bishop William S. Skylstad during the pendency of its reorganization case in accordance with Rule 3016-1(d)(2) of the Local Bankruptcy Rules of the United States Bankruptcy Court for the Eastern District of Washington. Spokane wants to pay Bishop Skylstad $1,285 monthly. Spokane has paid Bishop Skylstad a total of $15,245 over the past 12 months. In addition to his paycheck, Spokane provides him with medical, dental, and retirement benefits, the use of a car and rent-free housing in a modest home in Spokane. The compensation is in consideration of the numerous services he provides to Spokane. According to Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, in Spokane, Washington, Bishop Skylstad is responsible for overseeing the pastoral care and life of the Church for Catholics in 13 counties in Eastern Washington. His responsibilities are summarized by three general responsibilities of "Governing, Teaching, and Sanctifying." Local Bankruptcy Rule 3016-1(d)(3) provides that: Compensation may commence after notice is given. Any party in interest objecting to compensation will do so in writing and has the duty to request a hearing on the objection. The compensation will continue until the Court orders otherwise. The Court will provide an expedited hearing on the objection. If the Court rules that the amount received prior to the hearing is excessive, it may order disgorgement of funds back to the estate. Responsibility to Govern Bishop Skylstad's appointment to the office of Bishop calls for him to provide governance to the mission of the Church. He does this by establishing a number of Diocesan Offices to assist him in this executive function: * The Parish Services Office, * The School Office, * The Communications Office, * The Tribunal Office, and * The Fiscal Services Office The vision for this oversight is developed through a broad structure of consultation with individuals from throughout Spokane. The result of this consultation guides the ministry of Bishop Skylstad and his staff. After consultation, Bishop Skylstad helps to set the mission for each division and establishes short and long-term goals and policy for them and for guidance of the other entities so that the responsibility of his office is met. Leader of Worship The Bishop, according to Church tradition, ordains others to share in the office, priests and deacons. By ordination and assignment, they receive office in the Church and carry out the work of the Church, under the guidance of the Bishop. Bishop Skylstad makes pastoral visitation to the parishes and entities, and on those occasions primarily acts as the leader of worship and as chief teacher of the faith. Teacher As teacher, Bishop Skylstad's preaching, writing, and pastoral presence in communities share the Catholic faith tradition. In a special way, Bishop Skylstad is required to authenticate the Catholic life of the educational institutions in Spokane. Any Catholic ministry in the 13 counties of Spokane is united to the Church by its relationship of mutual respect and service with Bishop Skylstad. In this way, he interfaces with other Catholic ministries in Spokane like health care and education, as well as relating to the leadership of religious orders. As the holder of the office of Bishop, he represents the whole church to leaders from other religions as well as civil leaders. Part of the governing, teaching, and sanctifying roles takes place in the context of the larger church. All bishops of the Church form a college of unity with the Pope, the Bishop of Rome. That unity is ritually affirmed every five years when the Bishop travels to Rome to renew that bond with the Holy Father. In a different way, this is done as member of the College of Bishops, which acts in the United States primarily through its official organization, the United States Catholic Conference of Bishops. Bishop Skylstad works 70 hour per week. At least 75% of that time is dedicated to Diocesan tasks. The balance of his work week is dedicated to work for the USCCB, to which he was recently elected President. Spokane does not pay Bishop Skylstad for his work with the USCCB. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Archdiocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) CHESAPEAKE CORP: Ups Cash Flow Guidance for F.Y. 2004 Results ------------------------------------------------------------- Chesapeake Corporation (NYSE: CSK) increased the guidance for its reported cash flow available for shareholders and debt reduction for fiscal-year 2004 to approximately $73 million, up from the company's previously disclosed guidance of $50 million to $60 million. Included in this amount are costs and related payments on the early redemption of debt. The improved cash flow is primarily the result of timing of payments relating to working capital and capital expenditures along with the sale of non- strategic land. Chesapeake's fiscal-year 2004 earnings guidance remains within the previously disclosed range of $0.90 per share to $1.10 per share but is expected to be at the lower end of that range. To supplement the company's consolidated financial statements presented on a GAAP basis, the company reports "cash flow available for shareholders and debt reduction," a non-GAAP measure, which the company believes enhances the overall understanding of the company's ability to pay-down debt and pay dividends to its shareholders. Also, this non-GAAP measure is a primary indicator management uses as a basis for planning and forecasting future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for cash flows from operating activities prepared in accordance with GAAP. In determining fiscal-year 2004 cash flow available for shareholders and debt reduction, Chesapeake expects to report net cash provided by operations of approximately $93 million less net cash used in investing activities of approximately $20 million resulting in cash flow available for shareholders and debt reduction of approximately $73 million. The company will release its fourth quarter and fiscal-year 2004 financial results on Feb. 4, 2005. About the Company Chesapeake Corporation is a leading international supplier of value-added specialty paperboard and plastic packaging with headquarters in Richmond, Va. The company is one of Europe's premier suppliers of folding cartons, leaflets and labels, as well as plastic packaging for niche markets. Chesapeake has more than 50 locations in Europe, North America, Africa and Asia and employs approximately 6,100 people worldwide. * * * As reported in the Troubled Company Reporter on Dec. 3, 2004, Moody's Investors Service rated Chesapeake Corporation's new EUR100 million Senior Subordinated Notes B2. Chesapeake intends to use the net proceeds from this issue to fund a tender offer of its $85.0 million 7.2% senior unsecured debentures due March 15, 2005, with the balance available for general corporate purposes which may include funding near term debt maturities. Should the tender offer be successful, Moody's will withdraw the applicable rating. Moody's also affirmed Chesapeake's Ba3 senior implied and B1 senior unsecured and issuer ratings. The outlook remains stable. CHOICE COMMUNITIES: Wants to Retain Shapiro as Bankruptcy Counsel ----------------------------------------------------------------- Choice Communities, Inc., dba Eastpoint Nursing Rehabilitation Center asks the U.S. Bankruptcy Court for the District of Maryland for permission to employ Shapiro Sher Guinot & Sandler as its counsel in this bankruptcy proceeding. Shapiro Sher is expected to: a) provide the Debtor legal advice in the continued possession and management of its property; b) prepare the Voluntary Petition, Statement of Financial Affairs, Schedules, Statement of Executory Contracts and other statements and schedules required by the Bankruptcy Code, Bankruptcy Rules, or Local Bankruptcy Rules; c) represent the Debtor, as debtor-in-possession, at any meetings of creditors convened pursuant to Section 341 of the Bankruptcy Code; d) represent the Debtor, as debtor-in-possession, in connection with any proceedings for relief from stay which may be instituted in this Court; e) prepare on behalf of the Debtor, as debtor-in- possession, all necessary applications, motions, answers, orders, reports and other legal papers and advice and assistance to and representation of the Debtor in preparing, filing and prosecuting a plan under Chapter 11; f) represent the Debtor in collateral litigation before the Bankruptcy Court and other courts; and g) provide such other legal services for the Debtor which may be necessary herein, and to generally represent, advise and assist the Debtor, as debtor-in-possession, in carrying out its duties under the Bankruptcy Code. Joel I. Sher, Esq., a member at Shapiro Sher, discloses that his Firm received a $75,000 retainer from the Debtor. Mr. Sher did not disclose the hourly rates of professionals at Shapiro Sher. To the best of the Debtor's knowledge, Shapiro Sher is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Baltimore, Maryland, Choice Communities, Inc., owns and operates a licensed 180-bed nursing facility. The Company filed for chapter 11 protection on Jan. 24, 2005 (Bankr. D. Md. Case No. 05-11536). Joel I. Sher, Esq., at Shapiro Sher Guinot & Sandler represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and estimated debts between $10 million to $50 million. CHOICE COMMUNITIES: Section 341(a) Meeting Slated for Feb. 23 ------------------------------------------------------------- The United States Trustee for Region 4 will convene a meeting of Choice Communities, Inc.'s creditors at 9:00 a.m., on February 23, 2005, at 300 W. Pratt, #375 in Baltimore, Maryland. 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 Baltimore, Maryland, Choice Communities, Inc., owns and operates a licensed 180-bed nursing facility. The Company filed for chapter 11 protection on Jan. 24, 2005 (Bankr. D. Md. Case No. 05-11536). Joel I. Sher, Esq., at Shapiro Sher Guinot & Sandler represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and estimated debts between $10 million to $50 million. CINCINNATI BELL: Moody's Rates Planned $250M Sr. Sec. Debt at Ba3 ----------------------------------------------------------------- Moody's Investors Service upgraded the senior implied and other ratings of Cincinnati Bell, Inc. Moody's also assigned a Ba3 rating to the proposed $250 million senior secured revolving credit facility and a B1 to the pending $350 million of Senior Unsecured Notes due 2015. Moody's also affirmed the Company's speculative grade liquidity rating of SGL-2. The ratings outlook is stable. The affected ratings are: -- Cincinnati Bell Inc. * Senior implied upgraded to Ba3 from B1 * Issuer rating upgraded to B1 * Liquidity rating affirmed at SGL-2 * $250 million senior secured credit facility assigned Ba3 * $50 million 7.25% Senior Secured Notes due 2023 upgraded to Ba3 from B1 * $350 million Senior Notes (pending) due 2015 assigned B1 * $500 million 7.25% Senior Unsecured Notes due 2013 upgraded to B1 from B2 * 16% Senior Subordinated Discount Notes due 2009 upgraded to B2 from B3 * $540 million 8.375% Senior Subordinated Notes due 2014 affirmed at B3 * 6.75% Convertible Preferred Stock affirmed at Caa1 Moody's is affirming the Ba2 ratings on the senior unsecured debt of Cincinnati Bell Telephone Company, and withdrawing the rating on Cincinnati Bell Inc.'s 6.75% convertible subordinated notes that were redeemed in November 2003. Moody's will withdraw the ratings on the existing revolving and term loan credit facilities upon completion of the pending transactions. The ratings upgrade reflects Cincinnati Bell's continued debt reduction since Moody's assigned a positive rating outlook in June 2003, and its stable operating performance. In the five quarters through 3Q04, Cincinnati Bell has repaid over $250 million of debt, while revenue declines have been modest and EBITDA margins slightly expanded. Going forward, Moody's expects Cincinnati Bell to continue to use its free cash flow to reduce debt, even after accommodating the acquisition of the 19.9% interest in the Company's wireless subsidiary for $85 million. The Ba3 senior implied rating reflects the stable operating and financial performance of the Company, its commitment to and track record of utilizing substantially all of its free cash flow to reduce debt, and the company's material free cash flow generating profile. Over the last four quarters ended 3Q04, Cincinnati Bell generated close to $300 million in cash provided by operations, spent approximately $130 million on capital expenditures and $10 million on preferred stock dividends to yield free cash flow of $160 million. This represents roughly 7% of total debt outstanding at 3Q04. Moody's expects Cincinnati Bell to maintain or improve this level of free cash flow generation and to continue to dedicate free cash flows to the reduction of debt, aside from a $85 million investment to purchase the 19.9% stake in the Company's wireless subsidiary from Cingular. Cincinnati Bell's good returns also support the Ba3 senior implied rating, as EBIT/Average Assets was 15.8% for the four quarters ended 3Q04, a level Moody's expects to remain fairly constant. The Ba2 rating on the senior unsecured debt of Cincinnati Bell Telephone Company reflects the superior position of these obligations in the company's capital structure. Cincinnati Bell Telephone generates the majority of the consolidated Company's revenue and almost all of the company's free cash flow. Moody's expects the company to repay the Cincinnati Bell Telephone obligations as they mature, and to not incur any additional indebtedness at the Cincinnati Bell Telephone level. The Ba3 rating on the new $250 million senior secured revolving credit facility and the $50 million of 7.25% senior secured notes due 2023 reflect their strong position in the capital structure as senior secured obligations of the ultimate parent holding company, Cincinnati Bell Inc., with upstream guarantees from the Company's subsidiaries, with the notable exceptions of Cincinnati Bell Telephone and Company's wireless subsidiary, as well as a pledge of the assets and stock of those subsidiaries and the stock of Cincinnati Bell Telephone. The deficiency of the security and guarantee package, due to the lack of upstream guarantees and collateral from Cincinnati Bell Telephone and Company's wireless subsidiary, constrain these ratings. The B1 rating on the senior unsecured debt of Cincinnati Bell Inc., which includes the $500 million of 7.25% Senior Notes due 2013 and the pending offering of $350 million of Senior Notes due 2015, reflect their structural subordination to the CBT debt and their effective subordination to the secured debt discussed above. These obligations do benefit from upstream guarantees from some of the company's subsidiaries, but notably, not Cincinnati Bell Telephone and Company's wireless subsidiary. The B2 rating on the 16% Senior Subordinated Discount Notes due 2009 reflect their contractual subordination to the senior secured and senior unsecured debt discussed above. The B3 rating on the 8.375% Senior Subordinated Notes due 2014 reflects their contractual subordination to the 16% Senior Subordinated Discount Notes. Cincinnati Bell is a fully integrated telecommunications provider in southwestern Ohio, and adjacent portions of Kentucky and Indiana. The Company is the incumbent local exchange carrier in the Greater Cincinnati area and has expanded its local wireline services into neighboring counties. Like all local exchange carriers, Cincinnati Bell has been losing local access lines in its incumbent territory, with 3Q04 in- territory access lines 3.4% below year-ago levels. This erosion is likely to increase due to new competitive threats from cable television companies that offer telephony services over their own networks. Time Warner Cable has recently launched telephony services in much of Cincinnati Bell's incumbent territory, with only modest results to date. To defend its franchise, Cincinnati Bell offers a bundle of telecommunications services, including local, long distance, DSL, and wireless. Cincinnati Bell's wireless offering has suffered through a difficult technology transition from TDMA to GSM. Consequently, churn rates for the company's postpaid subscribers peaked at 3.7% in 3Q04, and wireless subscriber growth is below Moody's expectations. Nonetheless, the ability to offer a more complete telecommunications service bundle, due to the inclusion of wireless on a currently more reliable telephone network, due to cable telephony's less robust backup power capabilities and far shorter service history, provides Cincinnati Bell a solid position from which to meet competitive threats and to defend its franchise. Still, Moody's expects competition will accelerate the pace of local in-territory access line losses and slowly erode Cincinnati Bell's consolidated revenues, making cost control even more important to driving continued positive free cash flows. Fortunately, Cincinnati Bell's relatively concentrated service territory helps drive efficiencies, and should keep returns fairly high (EBIT/Average Assets 15% or better). The stable ratings outlook reflects Moody's opinion that Cincinnati Bell will successfully combat competitive threats to its franchise and deliver stable operating results over the upcoming 12 to 18 months. Factors that could negatively affect the ratings include accelerating revenue declines that could lead to reduced free cash flow generation. Should free cash flow fall closer to 5% of total debt, the ratings would likely fall. Longer term, potential pressure to return capital to shareholders could also negatively affect the ratings. The ratings could be positively affected if free cash flow growth accelerates and/or debt reduces more rapidly to where free cash flow raises above 10% of total debt. The pending refinancing materially reduces the Cincinnati Bell's liquidity, as undrawn revolver capacity will be reduced from $365 million at 3Q04 to approximately $125 million as the company reduces the size of its committed revolving credit from close to $400 million to $250 million. Nonetheless, due to the free cash flow generation of the company and the minimal mandatory amortization requirements, Moody's believes Cincinnati Bell's liquidity profile can continue to be characterized as "good", meriting an SGL-2 rating. Moody's expects Cincinnati Bell to comfortably comply with covenants, thereby retaining access to undrawn amounts of its revolving credit facility, and providing the company with the liquidity necessary to acquire Cingular's 19.9% stake in the Company's wireless subsidiary without requiring additional external financing. Based in Cincinnati, Ohio, Cincinnati Bell Inc. is an integrated telecommunications service provider with over 978,000 local access lines in service and 479,000 wireless subscribers at September 30, 2004. LTM revenues were $1.2 billion. CORNERSTONE PROPANE: Names Dave Riggan Chief Financial Officer -------------------------------------------------------------- CornerStone Propane Operating, LLC, one of the nation's largest retail propane marketers, disclosed the latest additions to its management team with the appointments of Dave Riggan as Chief Financial Officer, Paul Grady as Chief Operating Officer and Joe Sorce as Vice President of Marketing. Dave Riggan brings substantial public and private company experience to CornerStone, having most recently served as Chief Financial Officer at Caliber Holdings Corporation, a $200 million consolidator of collision repair centers. Prior to Caliber Holdings, Mr. Riggan worked as Chief Financial Officer for the U.S. division of 24 Hour Fitness USA, Inc., a $900 million firm in the health club business with 300 locations. Mr. Riggan also has propane experience, having served as Chief Financial Officer at Amerigas Propane, Inc., during and immediately following its initial public offering in 1995. Mr. Riggan gained much of his experience at American Tobacco, working in various roles from 1983 to 1995 and ultimately attaining the position of Vice President and Controller. Also, Mr. Riggan is a CPA and earned both a B.S. in Accounting and an MBA from Virginia Tech University. Paul Grady joins CornerStone as Chief Operating Officer, after a one- year absence from the propane industry to serve as Chief Executive Officer of Juice Bowl Products. His propane industry experience stems from his work as Chief Operating Officer and Sr. Vice President of Operations of Amerigas Propane from 2000 to 2003. Mr. Grady joined Amerigas in 1995 where he held the position of Vice President of Sales and Operations before becoming Chief Operating Officer. Mr. Grady has extensive acquisition experience stemming from five years at UGI, Inc., as Director and then Vice President of Corporate Development, as well as five years as Director of Corporate Development for Campbell's Soup Company. Mr. Grady received a B.A. in Marketing at Stetson University and a J.D. from Stetson College of Law. To enhance the Company's marketing efforts, CornerStone has appointed Joe Sorce as Vice President of Marketing. Mr. Sorce joined CornerStone after spending two years at Star Gas as Director of Strategic Marketing, having previously held the position of Assistant Treasurer for Star Gas Partners, LP. Prior to joining Star Gas, Mr. Sorce worked as an investment banker for Bear Stearns and as a regulatory manager at AT&T. Mr. Sorce received a B.A. in economics from Yale University and a Masters in Management, with a concentration in marketing and strategy, from the Kellogg Graduate School of Management at Northwestern University. Bill Corbin, Chief Executive Officer of Cornerstone expects these latest staffing additions to contribute to the Company's growth and stability. "With the addition of Dave Riggan, Paul Grady and Joe Sorce, CornerStone further advances its goal of building the strongest, most-talented organization possible. Each of the new team members has diverse business knowledge and experience in the propane industry. We look forward to the contributions these leaders will bring to our team and the future of the Company," said Mr. Corbin. Headquartered in New York, New York, Cornerstone Propane Partners, L.P. -- http://www.cornerstonepropane.com/-- is the nation's sixth largest retail propane marketer, serving more than 440,000 retail propane customers in over 30 states. The Company filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13856) on June 3, 2004. Matthew Allen Cantor, Esq., at Kirkland & Ellis LLP, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $582,455,000 in assets and $692,470,000 in liabilities. The Court confirmed the Company's Joint Plan of Reorganization on Nov. 8, 2004, allowing the Company to emerge from bankruptcy protection only seven months after its chapter 11 filing. CORNING INC: Earns $163 Million of Net Income in Fourth Quarter --------------------------------------------------------------- Corning Incorporated (NYSE: GLW) reported fourth-quarter sales of $1.033 billion, with net income of $163 million. Net income includes net special charges of $14 million. Excluding these net charges, Corning's earnings per share (EPS) would have been $0.12 and at the high end of previously-announced quarterly guidance. This EPS is a non-GAAP financial measure. This and all non-GAAP financial measures are reconciled on the company's investor relations Web site and in attachments to this news release. For the year, Corning recorded sales of $3.85 billion, an increase of 25 percent over 2003 sales of $3.09 billion. The company had a net loss of $2.17 billion or $1.56 per share. This compares to a 2003 net loss of $223 million or $0.18 per share. Excluding special items, Corning had net income for the year of $674 million or $0.45 per share in 2004, compared to net income of $128 million or $0.10 per share in 2003. This is a non-GAAP financial measure. James R. Houghton, chairman and chief executive officer, said, "We had a solid fourth quarter and a spectacular year. Three years ago we embarked on a significant restructuring of the company. At that time, I said we knew there was a light at the end of the tunnel, but we did not know how long it was. I am pleased to say today that we have emerged from that tunnel, and we believe Corning has a very bright future." Mr. Houghton added, "This is the second consecutive year that we have achieved a $500 million improvement in profitability before special items. I believe that we have strong momentum across a number of our business segments going into 2005." Profitability before special items is a non-GAAP financial measure. Fourth-Quarter Operating Results Corning's fourth-quarter sales of $1.033 billion increased 3 percent over the previous quarter's sales of $1.006 billion, and increased 26 percent over the prior year's fourth-quarter sales of $820 million. Gross margin for the fourth quarter declined to 35 percent versus 40 percent in the previous quarter, a result of lower margins in the Telecommunications segment caused by a number of adjustments not expected to reoccur in the first quarter, the write-off of certain assets in the semiconductor product line, and weak manufacturing performance in the Environmental Technologies segment. The company recorded $311 million in fourth-quarter sales for its Display Technologies segment, a 5 percent increase over third- quarter sales of $295 million. Sequential quarterly volume in liquid crystal display (LCD) glass increased 2 percent, and movements in exchange rates resulted in a 3 percent increase in sales. Pricing for the quarter again remained stable, and net income for the segment increased 6 percent to $151 million from $142 million in the previous quarter. For the full year, Corning's LCD glass volume increased by 65 percent. Wendell P. Weeks, president and chief operating officer, said, "While our Display Technologies segment experienced some Taiwanese customer slowdowns in November, we had very strong performance in December. The slight slowdown in orders has allowed us to rebuild our inventory levels to more efficiently manage our customer requirements." Telecommunications segment sales were $423 million, a 3 percent increase over third-quarter sales of $412 million. Excluding the impact of the divestiture of the frequency control product line, sales increased 6 percent. The segment recorded a net loss of $9 million versus a net loss of $1.82 billion in the third quarter. The third-quarter loss was primarily due to goodwill, fixed assets and equity method investment impairment charges. Fourth-quarter fiber volume was essentially flat compared to the third-quarter results and better than the company expected. Fiber pricing was down only slightly in the quarter. "Our fourth-quarter telecommunications results continue to reflect the strength of hardware, cable and fiber sales in North America, particularly related to Verizon's fiber-to-the-premises buildout, as well as higher than usual project sales," Mr. Weeks said. Environmental Technologies segment sales for the fourth quarter were $130 million, a decline of 4 percent from the previous quarter's sales of $136 million. Sales were impacted by the normal end-of-the-year slowdown in auto production. Quarterly segment earnings were impacted by continued difficulties in manufacturing performance at several facilities. Due to normal seasonality, the Life Sciences segment sales and earnings declined slightly from the previous quarter. "This was a very satisfying quarter for Corning. Our sales increased 26 percent compared to this same period last year. Excluding special items, our net income improved by $125 million, and our EPS was three times what it was last year," Weeks said. These are non-GAAP financial measures. Special Items Corning's fourth-quarter net special charges consisted of a $17 million charge to reflect the increase in the fair market value of Corning common stock to be contributed to settle the asbestos litigation related to Pittsburgh Corning Corporation and $3 million of net credits related to adjustments to restructuring reserves. For the full year, the company's net income was reduced by $2.839 billion of net charges comprising the following: -- Restructuring, impairment and other charges and credits of $1.789 billion ($1.802 billion after-tax and minority interest) primarily related to the impairment of goodwill and fixed assets in the Telecommunications segment. -- An asbestos settlement charge of $33 million ($30 million after-tax) to reflect the increase in the market value of Corning's common stock to be contributed to settle the asbestos litigation related to Pittsburgh Corning Corporation. -- A loss on repurchases and retirement of debt of $36 million ($34 million after-tax) related to Corning's ongoing debt reduction program. -- A provision for income taxes of $937 million as a result of the company's decision to increase its valuation allowance against a significant portion of its deferred tax assets. -- Equity method charges of $56 million, included in equity earnings of associated companies, net of impairments, of which $35 million related to impairments of certain Telecommunications segment equity method investments and $21 million related to restructuring actions and bankruptcy related charges recorded by Dow Corning Corporation. -- Income from discontinued operations of $20 million related to the final settlement of escrowed proceeds from the 2002 sale of Corning Precision Lens. Cash Flow/Liquidity Update Corning ended the year with $1.9 billion in cash and short-term investments, an increase from the previous quarter's balance of $1.7 billion. The cash increase was primarily due to strong cash flow from operations, including the receipt of a $102 million customer deposit. The company's debt-to-capital ratio was 41 percent, a slight decline from the previous quarter's ratio of 42 percent. "We continue to make progress on our financial priorities. We met or exceeded all of our expectations for the year. Our balance sheet continued to improve. We reduced our overall debt level, and we had operating cash flow of over $1 billion," said James B. Flaws, vice chairman and chief financial officer. First-Quarter Outlook Corning said that it expects first-quarter sales to be in the range of $980 million to $1.03 billion and EPS in the range of $0.11 to $0.13 before special items. This EPS estimate is a non- GAAP financial measure and excludes any possible special items. The company expects foreign exchange rates to remain stable and that its gross margin will be in the range of 37 percent to 38 percent for the quarter. In the Display Technologies segment, Corning expects that the sequential volume growth will be in the range of 5 percent to 10 percent, including both its wholly-owned business and Samsung Corning Precision Glass Co. Ltd., a 50 percent owned equity company. The sequential volume growth in Corning's wholly-owned business is expected to be flat to up 10 percent in the first quarter. Samsung Corning Precision is anticipating sequential volume growth of 5 percent to 15 percent for the quarter. The rate of volume growth will be largely dependent upon the industry's ability to efficiently bring on new panel manufacturing capacity during the quarter, as well as continued strong market demand for LCD products. Corning noted that its capacity expansion plans are modular and may be adjusted if industry growth projections change. While the company anticipates continued growth in the LCD glass market during the first quarter, it also noted that the level of glass demand could differ by geographic region. Pricing for LCD glass is expected to begin to decline after being stable to up slightly over the last two years. As a result, the company anticipates that the average price for LCD glass will be down approximately 5 percent sequentially in the first quarter. "Last week, we introduced the first successful commercial application of Generation 7 LCD glass substrates at Samsung Corning Precision. This larger size glass substrate is designed to support the LCD TV market, which we continue to believe will be a significant driver of LCD glass volume increases for the next several years," Mr. Flaws said. In the Telecommunications segment, the company is anticipating first-quarter sequential fiber volume will be flat to down 10 percent against an unusually strong fourth quarter. First-quarter fiber price declines are expected to be around 5 percent. The company noted that at the end of the fourth quarter it received final notification from the People's Republic of China's Ministry of Commerce that it had removed its preliminary fiber dumping determination which had placed a 16 percent duty on Corning fiber imports. Previously, the company said that its fiber exports to China had been impacted by the preliminary determination. "We are very pleased with the final ruling," Mr. Flaws said. "It alleviates any uncertainty about our ability to compete in the very important and growing China region. We are hopeful about regaining lost market share in this dynamic fiber market," he said. Mr. Flaws added "We are entering the first quarter with excellent momentum in our major businesses. Corning's management team will be discussing the outlook for our businesses in more depth at our annual investor meeting in New York City on Feb. 4." Annual Investor Meeting Corning will host its annual investor meeting in New York City on Friday, Feb. 4. Investors who are interested in attending should register prior to the event at http://www.shareholder.com/corning/registration.cfm About Corning Incorporated Corning Incorporated -- http://www.corning.com/-- is a diversified technology company that concentrates its efforts on high-impact growth opportunities. Corning combines its expertise in specialty glass, ceramic materials, polymers and the manipulation of the properties of light, with strong process and manufacturing capabilities to develop, engineer and commercialize significant innovative products for the telecommunications, flat panel display, environmental, semiconductor, and life sciences industries. * * * As reported in the Troubled Company Reporter on August 16, 2004, Fitch Ratings upgraded Corning Incorporated's senior unsecured debt to 'BB+' from 'BB' and the convertible preferred stock to 'B+' from 'B'. The Rating Outlook is Positive, Fitch said. Approximately $2.7 billion of securities were affected by Fitch's action. The upgrade mainly reflects Corning's: * strengthened credit protection measures, resulting from significantly improved operating performance; and * lower cost structure and the company's ongoing improving capital structure through a reduction of debt via cash buyback, equity offerings, and asset sales. Firth also considered are Corning's solid market positions for active matrix liquid crystal display -- LCD -- glass and telecommunications and increasing equity earnings from investments (mostly Samsung Corning Precision Glass and Dow Corning Corporation), a majority of which are non-cash. The Positive Outlook reflects Fitch's belief that industry conditions for LCD monitor demand could improve further and telecommunications will remain stable, resulting in continuing positive trends for operating metrics and credit protection measures. Concerns center on the increased capital commitments made to the Display Technologies segment (pressuring free cash flow), a Telecommunications segment (40% of revenues), which continues to have GAAP net losses but is free cash flow positive, potential for growing pricing pressures for LCD glass, and a continued need to invest in research and development to generate the next break- through product for future revenue streams. CSG SYSTEMS: Earns $12.3 Million of Net Income in Fourth Quarter ---------------------------------------------------------------- CSG Systems International, Inc. (Nasdaq: CSGS), a leading provider of customer care and billing solutions, released its results for the quarter ended Dec. 31, 2004. Fourth Quarter 2004 Results Processing revenues for the fourth quarter of 2004 were $84.3 million, which represents a four percent increase compared to $80.8 million for the same period last year, and to $80.7 million for the third quarter of 2004. Software revenues increased 12 percent year-over-year to $9.5 million, however decreased one percent from the third quarter of 2004. Maintenance revenues remained relatively consistent for the fourth quarter of 2004 at $24.3 million, compared to $24.7 million for the same period last year and $24.6 million for the third quarter of 2004. Professional services generated $18.5 million of revenue in the quarter, a 16 percent increase when compared to the same period last year and a two percent increase when compared to the third quarter of 2004. Net income presented under generally accepted accounting principles for the fourth quarter of 2004 was $12.3 million, resulting from foreign currency transaction losses. Fourth Quarter 2004 Highlights: * GAAP results were as follows: total revenues were $136.6 million; operating income was $20.7 million; and net income per diluted share was $0.24. Net income per diluted share was negatively impacted by approximately $0.02, resulting from foreign currency transaction losses. * Cash flows from operations for the quarter ended December 31, 2004 were $22.3 million. * CSG's Broadband Services Division (BSD) signed a contract with Comcast immediately after the end of the quarter to provide voice over IP services to all the customers processed on CSG's solution, which is approximately two- thirds of Comcast's subscriber base. In addition, Verizon selected CSG to provide customer care and billing for its fiber-to-the-home initiative and Time Warner Shreveport will convert its customers off its legacy billing system and onto CSG's platform. * CSG's Global Software Services Division (GSS) added another China Telecom property to its client list with Zhejiang Telecom. In addition, another e-business company, VinIQ, which is a Canadian automobile e-commerce site, selected CSG through Telus Business Solutions to provide customer care and billing services. * Frost & Sullivan honored CSG with its 2005 Product Leadership award. * Neal Hansen, chairman and chief executive officer, announced his intention to retire June 30, 2005. In addition, Hank Bonde joined CSG as president and chief operating officer. "As we go into 2005, CSG has never been in a stronger position," said Neal Hansen, chairman and chief executive officer for CSG Systems International, Inc. "We have a clearly defined plan for how we will continue to deliver unmatched value to our customers and continue to grow the business. Now, more than ever, carriers and operators are turning to companies like CSG to help them grow their businesses in a profitable way." Financial Condition As of Dec. 31, 2004, CSG had cash and short-term investments of $157.5 million, compared to $138.9 million as of Sep. 30, 2004 and $105.4 million as of Dec. 31, 2003. Billed net accounts receivable were $142.1 million as of Dec. 31, 2004, compared to $123.3 million as of Sep. 30, 2004 and $130.7 million as of Dec. 31, 2003. Cash flows from operations for the quarter ended Dec. 31, 2004 were $22.3 million. This compares to $24.8 million for the third quarter of 2004 and $(38.5) million for the fourth quarter of 2003. The fourth quarter of 2003 reflects the impact of a $94.4 million arbitration payment made to Comcast. During the fourth quarter of 2004, CSG did not acquire any of its common stock under its Board-approved stock repurchase plan. The company plans to enter into a corporate 10 5-1 plan in the first quarter of 2005, for the purposes of repurchasing the company's stock. First Quarter 2005 Financial Guidance "For the first quarter of 2005, we are expecting revenues of between $130 million and $137 million and GAAP earnings " Peter Kalan, chief financial officer, said. "Our first quarter earnings per share guidance is negatively impacted by 5 cents associated with the accrual of retirement benefits for Mr. Hansen. "In addition, there are over $15 million of non-cash items included in our first quarter earnings per share guidance, " Mr. Kalan said. "These non-cash items include amortization of approximately $7 million, depreciation expense of approximately $4 million, and stock-based employee compensation expense of approximately $4 million. Our guidance does not include any restructuring charges that may be incurred during the quarter as we are not able to estimate them today." About the Company CSG Systems International -- http://www.csgsystems.com/-- Headquartered in Englewood, Colorado, is a leader in next- generation billing and customer care solutions for the cable television, direct broadcast satellite, advanced IP services, next generation mobile, and fixed wireline markets. CSG's unique combination of proven and future-ready solutions, delivered in both outsourced and licensed formats, empowers its clients to deliver unparalleled customer service, improve operational efficiencies and rapidly bring new revenue-generating products to market. CSG is an S&P Midcap 400 company. * * * As reported in the Troubled Company Reporter June 1, 2004, Standard & Poor's Ratings Services said that it assigned its 'B' rating to Englewood, Colo.-based CSG Systems Inc.'s $200 million senior subordinated convertible contingent debt securities. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating with a stable outlook. The proceeds of this issue, along with a portion of cash on the balance sheet, will be used to refinance approximately $199 million in senior secured bank debt and to repurchase up to $40 million of CSG's common stock. "The ratings reflect the company's concentrated customer base in a highly competitive market, partially offset by CSG's recurring revenue base and moderate, but predictable, earnings and cash flow," said Standard & Poor's credit analyst Ben Bubeck. DEL MONTE: Moody's Changes Rating Outlook to Positive from Stable ----------------------------------------------------------------- Moody's Investors Service changed the ratings outlook for Del Monte Corporation to positive from stable, assigned a Ba3 to the Company's prospective senior secured credit facilities and a B2 to the Company's prospective $250 million senior subordinated note issuance. Proceeds from the new credit facilities and senior subordinated notes will refinance the Company's existing credit facilities ($750 million outstanding at 10/31/04) and fund the repurchase of its 9.25% senior subordinated notes ($300 million outstanding) under a tender offer scheduled to expire February 10, 2005 (consents representing 99% of principal have been received as of 1/25/05). Del Monte Corporation is a wholly owned subsidiary of Del Monte Foods Company. The change in ratings outlook to positive reflects Del Monte's consistent cash flow generation and Moody's expectation that Del Monte will continue to apply free cash flow to further debt pay- down. As a result, although profitability is being pressured by increased costs and marketing spending, Moody's expects Del Monte's leverage to continue to decline over the next year to eighteen months, further improving its credit profile. Ratings could be upgraded as average leverage approaches 2.5x EBITDA, assuming earnings and cash flow trends do not deteriorate and free cash flow is maintained in the range of 12-15% of debt, even if the company decides to do share repurchases, start paying a dividend, or pursue acquisitions. Strategic acquisitions with balanced funding components could lead to an upgrade if business and transition risks are not high. The ratings could be pressured by share repurchases or acquisitions that increase leverage too much above 3.5x, or by the institution of a dividend at a level that reduces free cash flow to much below 10%, restraining the pace of Del Monte's ability to continue to deleverage. Del Monte Corporation's ratings are: * $350 million senior secured revolving credit, maturing 2011 - Ba3 assigned, * $200 million senior secured term loan A, maturing 2011 - Ba3 assigned, * $400 million senior secured term loan B, maturing 2012 - Ba3 assigned, * $250 million senior subordinated notes, maturing 2015 - B2 assigned, * $450 million 8 5/8% senior subordinated notes, maturing 2012 - B2 affirmed, * Senior implied rating - Ba3 affirmed, * Unsecured issuer rating - B1 affirmed, * SGL rating - SGL-2 affirmed, * Ratings outlook - Positive. Moody's Ba3 ratings on Del Monte's existing $300 million revolving credit and $609 million term loan, and the B2 rating on the $300 million 9 1/4% senior subordinated notes will be withdrawn when the refinancing transactions close. Moody's has reassigned the senior implied rating, issuer rating, and speculative grade liquidity to Del Monte Corporation from Del Monte Foods Company in order to regularize Moody's rating. Del Monte's ratings gain support from its product and category diversification, which spans processed vegetables, tomatoes, fruit and tuna, soup, pet foods, and baby food. The Company has a portfolio of well-known brands, including Del Monte, Contadina, StarKist, 9Lives, and Kibbles'n Bits. Its $3.2 billion revenue base provides meaningful scale, while its products benefit from relatively stable consumption trends. The ratings also take into account that Del Monte's management team has been effective in executing operating, acquisition and financial strategies, including the large acquisition of businesses from HJ Heinz in December 2002, which more than doubled Del Monte's revenue base, and the subsequent pay-down of acquisition debt to de-leverage to more moderate levels. Del Monte maintains good liquidity, which is important to its credit profile, given a high degree of seasonality during the year. Del Monte's ratings are limited by modest margins and low demand growth for many of its products. In addition, the consolidation of food retailers has increased their negotiating leverage and made competition more intense in the packaged food sector, restraining food supplier margins. Del Monte's sales growth has been lower than expected since acquiring the Heinz businesses, and earnings have been pressured by cost increases, including steel, freight, fuel, and other commodities, as well as increased marketing spending to support sales and re-invigorate brands. The ratings also take into account that agricultural crop cycles result in large swings in Del Monte's working capital during the year. In addition, the company has some customer concentrations, particularly with WalMart, which accounts for more than 25% of sales. The ratings also consider that Del Monte may institute dividends, pursue share repurchases to enhance shareholder returns, or seek additional acquisitions to boost growth and increase business scale further, which could negatively impact credit quality if leverage is increased materially as a result. Finally, the ratings incorporate the risk associated with the sharing of the Del Monte brand name with other independent companies, which could expose Del Monte to spill-over risk if the other companies mismanage the name or become exposed to product liabilities that consumers then associate more broadly with the brand name. Del Monte's debt at 10/31/04 was $1.5 billion, down $261 million from October 2003. Debt/LTM EBITDA was 3.3x (3.8x adjusted for operating leases), at a time in the year when the revolver is heavily utilized for seasonal working capital needs. For FY04 (ending May 2, 2004), when working capital is at a seasonal low, debt was $1.4 billion, or 2.9x EBITDA (3.3x adjusted for operating leases). Del Monte has stable cash flow generation ($250 million in the LTM ending 10/31/04), which is well above capital spending ($75-80 million expected for fiscal year 2005). Free cash flow after capital spending represented 14% of outstanding debt at the end of FY04 and 12% in the LTM (ending October 2004), indicating good ability to de-lever. Margins improved with the addition of the Heinz businesses, but have trended down somewhat since then and remain modest (EBIT/Sales at 11-12%). The refinancing transactions will add approximately $40 million of debt as a result of fees and expenses, but will reduce interest expense by approximately $10 million per year, allowing EBIT coverage of interest to improve pro forma for the transactions (to 3.4x from 3.1x for the LTM). Assets ($3.5 billion at FY04) include a material intangible component (about 40%), but returns on assets (about 10%) are supportive of intangible values. Del Monte's SGL-2 liquidity rating reflects good liquidity, backed by relatively stable operating cash flow at a level that comfortably covers capital spending and required debt amortization. The new $350 million revolver, which will mature in 2011, provides an adequate source of committed external financing to support Del Monte's highly seasonal working capital swings. Revolver utilization is typically at a low in May/June and peaks in September/October, during the harvest and packing season, after which utilization decreases rapidly. Peak seasonal utilization was about $190 million in the past year. Pro forma for the transaction, approximately $107 million is expected to drawn under the revolver, with seasonally high cash flow then paying down the outstandings before seasonal usage picks up again in the summer of 2005. The Ba3 ratings on the senior secured credit facilities are at the senior implied level because they represent the majority of Del Monte's debt structure. The facilities are secured by most of the material assets of the company and its domestic subsidiaries. The B2 rating on Del Monte's senior subordinated notes is notched down from the Ba3 senior implied rating to reflect their contractual and effective subordination to Del Monte's credit facilities. Both the credit facilities and the notes are guaranteed, on a senior and subordinated basis, respectively, by Del Monte Foods Company and by Del Monte Corporation's domestic subsidiaries. Del Monte Corporation is the primary operating subsidiary of Del Monte Foods Company. Del Monte Foods Company has headquarters in San Francisco, California. The Company reported $3.2 billion of revenues in the twelve months ending Oct. 31, 2004. DEX MEDIA: Prices Secondary Offering at $23.25 per Common Share --------------------------------------------------------------- Dex Media, Inc. (NYSE: DEX) disclosed that the secondary offering of 18,000,000 shares of its common stock has priced at a public offering price of $23.25 per share. The shares are being sold by certain affiliates of TCG Holdings, L.L.C. and WCAS IX Associates, LLC. The underwriters have an option to purchase up to an additional 2.7 million shares from the selling stockholders to cover over-allotments, if any. Dex Media, Inc. will not receive any proceeds from the sale of shares by the selling stockholders. Morgan Stanley, Lehman Brothers Inc. and Merrill Lynch & Co. led the offering. A copy of the prospectus relating to the offering may be obtained from Morgan Stanley, Lehman Brothers Inc. or Merrill Lynch & Co. at: Morgan Stanley Attn: Prospectus Dept. 1585 Broadway New York, NY 10036 Tel: (212) 761-4000 -- or -- Lehman Brothers Inc. 745 Seventh Ave. New York, NY 10019 Tel: (212) 526-7000 -- or -- Merrill Lynch & Co. 4 World Financial Center New York, NY 10080 Tel: (212) 449-1000 A registration statement relating to these securities has been filed with and declared effective by the U.S. Securities and Exchange Commission. The offering is being made by means of a prospectus. These securities may not be sold nor may offers to buy be accepted prior to the time that the prospectus is delivered in final form. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. About Dex Media, Inc. Dex Media, Inc. is the exclusive publisher of the official White and Yellow Pages directories in print, Internet and CD-ROM formats for directories for Qwest Communications International Inc. The company publishes 259 directories in Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. The company's leading Internet based directory, DexOnline.com, is the most used Internet Yellow Pages in the states Dex Media serves, according to market research firm comScore. In 2003, after giving effect to the acquisition of Dex Media West, LLC, Dex Media, Inc. generated revenues of approximately $1.6 billion. * * * As reported in the Troubled Company Reporter on June 18, 2004, Fitch Ratings affirmed these ratings on Dex Media's subsidiaries, Dex Media East LLC (DXME) and Dex Media West LLC (DXMW): DXME -- $1.1 billion senior secured credit facility 'BB-'; -- $450 million senior unsecured notes due 2009 'B'; -- $525 million senior subordinated notes due 2012 'B-'. DXMW -- $2.1 billion senior secured credit facility 'BB-'; -- $385 million senior unsecured notes due 2010 'B'; -- $780 million senior subordinated notes due 2013 'B-'. In addition, Fitch has assigned a 'CCC+' rating to the holding company's, Dex Media Inc., $500 million 8% notes due 2013 and its $750 million 9% aggregate principal discount notes due 2013, which has a current accreted value of $512 million. Approximately $6.3 billion of debt is affected by Fitch's actions. The Rating Outlook is Stable. On July 28, 2004, Moody's Investor Service upgraded its credit ratings by two notches to B3. In anticipation of a common stock offering and the use of a portion of the proceeds to reduce debt, on May 17, 2004, Standard & Poors revised the outlook on Dex's single-B credit ratings to stable from negative. DII/KBR: Halliburton Completes Asbestos/Silica Settlement Funding ----------------------------------------------------------------- Halliburton (NYSE: HAL) reported that the company has completed the funding of the asbestos and silica settlements for its subsidiaries that had filed chapter 11 proceedings. Halliburton paid the final cash installment of the $2.775 billion used to fund the trusts for the benefit of current asbestos and silica claimants. In addition, on January 20, 2005, Halliburton issued 59.5 million shares of common stock that have been contributed for the benefit of future asbestos claimants. As a result of the issuance of these new shares, the total number of shares of common stock outstanding is now approximately 504 million. The plan of reorganization became effective on January 20, 2005. Halliburton has collected to date over $1.0 billion in cash from various insurance carriers related to the asbestos and silica settlements. "The funding and completion of this settlement allows us to open a new chapter for Halliburton. We are excited about the company's prospects in the coming years," said Dave Lesar, chairman, president and chief executive officer of Halliburton. Halliburton -- http://www.halliburton.com/-- is one of the world's largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services and Engineering and Construction Groups. The company's World Wide Web site can be accessed at Headquartered in Houston, Texas, DII Industries, LLC, is the direct or indirect parent of BPM Minerals, LLC, Kellogg Brown & Root, Inc., Mid-Valley, Inc., KBR Technical Services, Inc., Kellogg Brown & Root Engineering Corporation, Kellogg Brown & Root International, Inc., (Delaware), and Kellogg Brown & Root International, Inc., (Panama). KBR and its subsidiaries provide a wide range of services to energy and industrial customers and government entities in over 100 countries. DII has no business operations. DII and its debtor-affiliates filed a prepackaged chapter 11 petition on December 16, 2003 (Bankr. W.D. Pa. Case No. 02-12152). Jeffrey N. Rich, Esq., Michael G. Zanic, Esq., and Eric T. Moser, Esq., at Kirkpatrick & Lockhart LLP, represent the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $6.255 billion in total assets and $5.295 billion in total liabilities. ECHOSTAR COMMS: Moody's Says Liquidity Profile is "Very Good" ------------------------------------------------------------- Moody's Investors Service affirmed the SGL-1 speculative grade liquidity rating for EchoStar Communications Corporation following its announced plan to purchase certain satellite, and related, assets from Rainbow DBS Co., a subsidiary of Cablevision Systems Corporation, for $200 million. The rating incorporates Moody's expectation that EchoStar will fund the acquisition with cash on hand, leaving a cash balance of approximately $750 million to $1 billion following the payment of a special $455 million shareholder dividend in the fourth quarter of 2004 and beginning-of-year working capital adjustments for cash outlays related to year-end capital expenditures. The rating affirmation reflects the still substantial cash balances available to the company, and specifically incorporates Moody's unchanged view that expansion of satellite assets is necessary to promote the future success of the business from a competitive perspective. The SGL-1 rating reflects the "very good" liquidity position as expected over the next twelve months, driven again primarily by the company's substantial cash balances. Moody's estimates that EchoStar will have approximately $750 million to $1 billion of unrestricted cash and marketable securities on its balance sheet pro forma for the asset purchase and prior payment of a special $455 million dividend in the fourth quarter, as well as completion of EchoStar's $1 billion offering of 6-5/8% senior unsecured notes and the redemption of its 10-3/8% senior unsecured notes which occurred immediately after the close of the third quarter. While the current level of cash offers adequate flexibility for the SGL-1 rating, sustained dedication of cash to shareholder returns could warrant a lower rating in time as cash reserves are depleted. Moody's would be more wary of maintaining the SGL-1 rating if cash balances dropped closer to the $500 million level, whether for operational reasons or due to further share repurchases or dividends, as maintenance of this extra level of financial flexibility is deemed to be of high importance given the company's heightened competitive environment, in conjunction with the absence of a backstop liquidity facility. Nevertheless, the satellite asset purchase from Cablevision effectively constitutes the acceleration of otherwise inevitable future capital expenditures, in Moody's view, and as such represents a fiscally prudent use of capital which had already been anticipated. EchoStar's bond indenture covenants do not restrict its ability to use this excess cash, and the company has no public debt maturities over the next 24 months; requirements for cash generated by operations consist predominantly of interest expense and capital expenditures. In Moody's view, the lack of clarity on EchoStar's future subscriber acquisition promotions and the SBC partnership dynamics and economics, as well as intensified competition from DirecTV (and EchoStar's response to such competition) and the cable TV industry more broadly, yields considerable uncertainty about future operating (and specifically, cash flow) performance. Moody's nevertheless expects that cash on-hand, combined with projected internally generated cash flow, will be more than sufficient to cover capital expenditures, cash interest, and working capital needs over the next 12 months. Uncertainty on the level of capital expenditures, which could vary significantly based on the number of new subscribers who opt to lease equipment from EchoStar, as well as management's view of its long-term satellite resource needs, heightens risk. The recent increase in customers who lease will likely continue, leading to higher capital expenditures in the intermediate term. Capital spending for additional satellite capacity has also increased and will likely continue to rise (even after the Rainbow DBS purchase), further constraining future free cash flow. Working capital is difficult to predict and can swing fairly significantly on a quarterly basis, but Moody's anticipates the cumulative working capital impact will not materially affect EchoStar's liquidity over the course of any full twelve-month period. The large cash balances and substantial subscriber base allow the company to tolerate such swings. Although EchoStar's lack of a back-stop facility increases the importance of maintaining excess cash balances, Moody's believes that the company could secure one without too much difficulty, and relatively quickly, if needed. Notably, the very flexible terms incorporated in the company's bond indentures would also allow it to securitize a significant amount of assets. Additionally, while Moody's believes that the company has fairly limited saleable non-core assets that could be quickly monetized without adversely impacting the core business, the unpledged and high perceived value of its assets suggests that other means of alternate liquidity could be realized were incremental capital necessary. EchoStar Communications Corporation is a leading provider of direct broadcast satellite pay television services to about 10.5 million subscribers. The company maintains its headquarters in Englewood, Colorado. The senior implied rating for the company is Ba3 and the rating outlook is stable. * * * As reported in the Troubled Company Reporter on Jan. 25, 2005, Moody's Investors Service affirmed all ratings for EchoStar Communications Corporation and subsidiary EchoStar DBS Corporation after the Company's announcement that it plans to purchase certain satellite assets from Rainbow DBS Co., a subsidiary of Cablevision Systems Corporation for $200 million. The ratings assume that EchoStar will fund the acquisition with cash on hand, estimated at approximately $1.2 billion following the payment of a special $455 million shareholder dividend in the fourth quarter of 2004. The list of Moody's ratings and actions: -- EchoStar Communications Corporation * $1 Billion of 5-3/4% Convertible Subordinated Notes due 2008 -- B2 (affirmed) * Senior Implied Rating -- Ba3 (affirmed) * Issuer Rating -- B1 (affirmed) * Liquidity Rating -- SGL-1 (affirmed) * Rating Outlook (all ratings for both EchoStar and EDBS) -- Stable (unchanged) -- EchoStar DBS Corporation * $1 Billion of 6-5/8% Senior Unsecured Notes due 2014 (new) -- Ba3 (affirmed) * $446 Million (remaining amount) of 9-1/8% Senior Unsecured Notes due 2009 -- Ba3 (affirmed) * $500 Million of Senior Unsecured Floating Rate Notes due 2008 -- Ba3 (affirmed) * $1 Billion of 5-3/4% Senior Unsecured Notes due 2008 -- Ba3 (affirmed) * $1 Billion of 6-3/8% Senior Unsecured Notes due 2011 -- Ba3 (affirmed) As reported in the Troubled Company Reporter on Nov. 2, 2004, Fitch Ratings initiated coverage of Echostar Communications Corporation and its wholly owned subsidiary, Echostar DBS Corporation, by assigning to Echostar's convertible subordinated notes a 'B' rating and Echostar DBS' senior notes a 'BB-' rating. The Rating Outlook is Stable. FEDERAL-MOGUL: Asks Court to Extend Removal Period to June 1 ------------------------------------------------------------ Pursuant to Rule 9006(b) of the Federal Rules of Bankruptcy Procedure, Federal-Mogul Corporation and its debtor-affiliates and the Official Committee of Unsecured Creditors ask the U.S. Bankruptcy Court for the District of Delaware to further extend the time by which the Debtors may file notices to remove civil actions pending as of the Petition Date, through and including June 1, 2005. The Debtors continue to evaluate asbestos-related actions in which one or more of the Debtors is the plaintiff in order to determine which actions might be suitable for removal. The parties want to preserve whatever ability the Debtors may have to remove claims against the Debtors to the Bankruptcy Court. Judge Lyons will convene a hearing on February 18, 2005, at 10:00 a.m., to consider the Debtors' request. Pursuant to Del.Bankr.LR 9006-2, the Debtors' Removal Period is automatically extended through the conclusion of that hearing. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's larges 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. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) FIDELITY NATIONAL: Moody's Rates $3.2B Senior Sec. Loans at Ba3 --------------------------------------------------------------- Moody's Investors Service has assigned a prospective rating of (P)Ba3 to the proposed $3.2 billion in senior secured credit facilities expected to be jointly entered into by two direct subsidiaries of Fidelity National Information Services, Inc. (FIS) -- Fidelity National Information Solutions, Inc., and Fidelity National Tax Service, Inc. FIS is a subsidiary of Fidelity National Financial, Inc. (NYSE: FNF). The outlook for the rating is stable. The new credit facility will consist of a $1.0 billion Term Loan A, a $1.8 billion Term Loan B (both of which will be fully drawn at closing), and a $400 million revolving credit facility. Proceeds from the facility are to be used to finance a leveraged recapitalization of FIS. As part of the recapitalization, FIS is expected to pay a dividend to its parent company, Fidelity National Financial, which in turn will pay a special cash dividend to FNF shareholders. In addition, the company also plans to sell a 25% stake in FIS to private equity investors. In assigning the (P)Ba3 rating to the credit facility, Moody's considered the strong franchise of FIS in the financial services outsourcing business, the company's leading market position in many of its product lines, its strong recurring revenue stream with long-term customer contracts, and the stability of its underlying financial institution customer base. Offsetting these strengths are the company's very aggressive financial leverage, a highly competitive technology services market, the risk that customers may elect to provide services in-house rather than rely on an outside vendor, and the integration challenges associated with the company's numerous recent acquisitions. Moody's also notes that the rating of FIS reflects the potential that the company will be separated from its parent, FNF, at some point in the future. The FIS credit facility will by supported solely by its own operations, with no guarantee provided by parent company, FNF, and with no cross default provisions with FNF's current debt. As a result of these factors, Moody's has given relatively little credit for parent company support and has analyzed FIS largely as a "stand-alone" entity. The primary factor that could positively impact the rating of the FIS credit facility would be a material decline in financial leverage (i.e. free cash flow to adjusted debt of 10% or higher). Additional factors would include success in integrating prior acquisitions and developing product lines. Factors that could negatively impact the rating would include financial leverage materially above current levels, a decline in profit margins (i.e. to below 10%), difficulties in integrating prior acquisitions, or a significant loss of customers due to competitive pressures. Florida-based Fidelity National Information Services, Inc., provides technology, processing, and information-based products and services to the financial services and real estate industries. For the nine months ended September 30, 2004, the company reported revenue of $1.6 billion, and pre-tax operating income of $307 million. GAP INC: Board Declares $0.0222 per Share Quarterly Dividend ------------------------------------------------------------ Gap Inc.'s (NYSE: GPS) Board of Directors voted a quarterly dividend of $0.0222 per share payable on Feb. 23, 2005, to shareholders of record at the close of business on Feb. 8, 2005. About the Company Headquartered in San Francisco, California, Gap Inc. operates 3,051 stores under the Gap, Old Navy, and Banana Republic brands. Gap Inc. had annual revenues of approximately $15.9 billion in the fiscal year ended February 1, 2004. * * * As reported in the Troubled Company Reporter on Jan. 25, 2005, Moody's Investors Service placed the long term debt ratings of Gap Inc. and its subsidiaries on review for possible upgrade and affirmed the company's SGL-1 rating. The ratings placed on review: * Gap Inc.: -- Senior implied of Ba1, -- Senior unsecured notes and global convertible bonds of Ba1, -- Issuer rating of Ba1. * Gap (Japan) K.K: -- Senior Notes guaranteed by Gap Inc. of Ba1. The rating affirmed is: * Gap Inc.: -- Speculative grade liquidity rating of SGL-1. The review for a possible upgrade is prompted by evidence that Gap, Inc., has been able to maintain its improvements in operating margins even in an environment where sales have been softer than expected, as well as the continued reduction in the Company's funded debt and continued strong free cash flow generation. During fiscal year 2004, Gap Inc. repaid approximately $871 million of funded debt. GMAC COMMERCIAL: Fitch Junks $19 Million 1998-C2 Mortgage Security ------------------------------------------------------------------ Fitch Ratings upgrades GMAC commercial mortgage securities, Inc., series 1998-C2: -- $113.9 million class C to 'AAA' from 'AA'; -- $164.5 million class D to 'A' from 'BBB+'; -- $38 million class E to 'BBB+' from 'BBB-'. In addition, Fitch affirms these classes: -- $51.7 million class A-1 at 'AAA'; -- $1.4 billion class A-2 at 'AAA'; -- Interest Only (IO) class X at 'AAA'; -- $126.5 million class B at 'AAA'; -- $88.6 million class F at 'BB+' -- $44.3 million class G at 'BB'; -- $19 million class H at 'BB-'; -- $19 million class J at 'B+'; -- $19 million class K at 'B'; -- $25.3 million class L at 'B-'; -- $19 million class M at 'CCC'. The $8.8 million class N is not rated by Fitch. The upgrades are due to the increase in subordination levels resulting from loan repayments and amortization. As of the January 2005 distribution date, the transaction's principal balance decreased 16.7% to $2.10 billion compared to $2.53 billion at issuance. As of year-end 2003 the weighted average debt service coverage ratio - WADSCR -- for the transaction was 1.25 times compared to 1.23x at issuance. Currently, nine loans (1.3% of the pool) are in specially servicing. GMAC Commercial Mortgage Corp. -- GMACCM, the master servicer, has negotiated discounted payoffs on the three largest specially serviced loans: * a retail property in Lackawana, New York (0.3%), * a retail property in Hamburg, New York (0.2%), and * a healthcare property in Tomball, Texas (0.2%). The anticipated closing for these loans is by the end of January or the beginning of February 2005. A fourth loan, a retail property in Norton, Virginia (0.1%), is 90 days delinquent. Class N is sufficient to absorb the Fitch expected losses on these four loans. Fitch reviewed as part of its analysis, the five credit assessed loans (25.8% of the pool). The debt service coverage ratio - DSCR -- for each loan is calculated using servicer provided net operating income less required reserves divided by debt service payments based on the current balance using a Fitch stressed refinancing constant. Four of the five loans have maintained investment grade credit assessments. The OPERS Factory Outlet Portfolio (8.7%) is stable with a weighted average occupancy as of August 2004 of 93.6% compared to 94.6% at YE 2003 and 96.7% at issuance. As of YE 2003 the DSCR was 2.37x compared to 1.68x at issuance. Two properties sustained extensive sign and roof damage during the East Coast's 2004 hurricane season. The borrower collected insurance proceeds and repairs are substantially completed. The Boykin Portfolio (4.9%) is beginning to show signs of improvement since Fitch's last review. Although, the average daily rate - ADR -- declined slightly, an increase in occupancy has resulted in an increase in the portfolio's overall revenue per available room - RevPar -- to $63.16 as of TTM September 2004 compared to $58.85 as of YE 2003 and $55.35 at issuance. The DSCR as of TTM September 2004 was 1.62x compared to 1.37x at YE 2003 and 1.55x at issuance. The three remaining credit assessed loans, Arden Portfolio (6.3%), South Towne Center & Marketplace (3%) and Grove Property Trust (3%) have performed at or better than issuance. HEXCEL CORP: Dec. 31 Balance Sheet Upside-Down by $24.4 Million --------------------------------------------------------------- Hexcel Corporation (NYSE/PCX: HXL) reported results for the fourth quarter and full year of 2004. Net sales for the fourth quarter of 2004 were $276.4 million, up 24.8% as compared to $221.4 million for the fourth quarter of 2003. In constant currency, revenues for the fourth quarter of 2004 were 21.8% higher than last year. Gross margin for the fourth quarter of 2004 was $58.1 million, or 21.0% of sales, compared with $41.3 million for the same period last year. Operating income for the fourth quarter of 2004 was $20.6 million as compared to $10.7 million for the same quarter last year. Included within operating income (selling, general and administrative expenses) in the fourth quarter of 2004 are $1.1 million of transaction costs related to the previously disclosed secondary offering of shares of the Company's common stock by certain of its stockholders. Depreciation expense for the quarter of $13.1 million was $1.4 million lower than the prior year, while business consolidation and restructuring expenses were $0.9 million compared to $1.6 million in the fourth quarter of 2003. Net income for the quarter was $7.6 million compared to a net loss of $9.7 million for the same quarter of 2003. During the fourth quarter of 2004, the Company recorded a $1.6 million loss on early retirement of debt in connection with its purchase of $23.0 million of its senior subordinated notes due 2009. The loss is included in non-operating income/expense in the Company's statement of operations. Included in the Company's tax provision for the 2003 fourth quarter is the write-off of a Belgian deferred tax asset of $4.7 million. As previously disclosed, during the fourth quarter of 2004, the Company recorded as part of deemed preferred dividends and accretion a non-cash charge of $12.9 million related to the conversion of a portion of its mandatorily redeemable convertible preferred stock into common shares in connection with a secondary offering of common stock in December. This charge, together with the ongoing quarterly amortization of deemed preferred dividends and accretion, totaled $16.0 million in the fourth quarter of 2004 compared to $3.0 million in the same quarter of 2003. After reflecting deemed preferred dividends and accretion, net loss available to common shareholders for the fourth quarter of 2004 was $8.4 million, or $0.20 per diluted common share, compared to a net loss of $12.7 million, or $0.33 per diluted common share, for the fourth quarter of 2003. For the full year of 2004, net sales were $1,074.5 million as compared to $896.9 million in 2003, an increase of 19.8% (16.6% on a constant currency basis). Gross margin increased to $229.1 million from $174.5 million. Operating income of $88.8 million in 2004 was $28.8 million higher than the $60.0 million of operating income achieved in 2003. The improvement this year reflects higher sales volumes, particularly from commercial aerospace and industrial market applications. Included in full year 2004 operating income were $2.3 million of bad debt provision related to Second Chance Body Armor, Inc., a ballistics customer that filed for protection under Chapter 11 of the U.S. Bankruptcy Code, a $7.0 million charge related to a litigation settlement, a $4.0 million gain on the sale of land and transaction costs of $1.1 million related to the Company's secondary offering. Net income was $28.8 million for 2004 compared to a net loss of $11.1 million in 2003. After reflecting deemed preferred dividends and accretion, net income available to common shareholders for the year was $3.4 million, or $0.08 per diluted common share, compared to a net loss of $20.7 million, or $0.54 per diluted common share, in 2003. Chief Executive Officer Comments Commenting on the quarter and full year's results, Mr. David E. Berges, Chairman, Chief Executive Officer and President, said, "After almost three years of uncertain markets and painful actions, we are thrilled with the trends in our markets as well as our resultant earnings progress in 2004. Revenue growth first came from the requirements of our body armor and military aircraft customers, and then, starting mid year, from the decisions of Airbus and Boeing to start increasing commercial aircraft production. More importantly, the long term prospects for composites in aerospace advanced dramatically in recent quarters. We have seen the rollout of the Airbus A380 super jumbo jet with 22% composite content by weight, more than double the percentage of all other current commercial aircraft. The next new Airbus aircraft will see the introduction of carbon fiber wings and move composite content to over 30%. The new Boeing 7E7 with carbon fiber wings and fuselage is expected to contain over 50% composite content. This increasing penetration of composites has the potential to create an acceleration effect to the aerospace rebound for years to come." Mr. Berges continued, "The fundamental driver of our improving performance is revenue growth and our success in delivering good leverage through to the net income line. On increased revenues of $177.6 million in 2004, we generated $54.6 million of gross margin - a 30.7% rate on the incremental sales. Net income for the year increased by $39.9 million, despite a number of unusual items such as the carbon fiber litigation settlement, a bad debt provision and Sarbanes-Oxley costs which hurt our operating income leverage. But continued cash focus led to lower interest expense and we had improved performance from our joint ventures which helped us deliver net income in all four quarters. We continued to generate free cash despite investing in our growing businesses and we reduced net debt by another $67.5 million or 15.3% from the beginning of the year. The formula for success in 2005 will be the same. Our markets offer the continued potential for annual double digit revenue growth and our task is to use our operating leverage to deliver improved profitability as a result." Fourth Quarter Revenue Trends As in recent quarters, the year-over-year shift in foreign exchange rates has continued to increase revenues compared to prior period actual results. In constant currency, commercial aerospace revenues were $119.0 million for the fourth quarter of 2004, an increase of $28.0 million, or 30.8%, over revenues in the same quarter of 2003. The year-on-year increase reflects the increase in commercial aircraft build rates as well as the ramp up of Airbus A380 production. Industrial market revenues for the quarter in constant currency of $87.9 million were up $15.1 million, or 20.7%, compared to revenues of $72.8 million in the fourth quarter of 2003. The continued strength in industrial market sales reflects higher demand for reinforcement fabrics used in military body armor applications and increasing sales of products used in wind energy applications. Space and defense revenues in constant currency of $49.2 million were up $4.0 million or 8.8% compared to the fourth quarter of 2003 reflecting continued growth in helicopter blade replacement programs and higher military aircraft production offset by the cancellation of the Comanche Program, which contributed $4.1 million of revenue to the same quarter last year. Revenues from the electronics market were $13.6 million in constant currency, up 9.7% compared to last year's quarter. 2004 Full Year Revenue Trends and 2005 Outlook Consolidated revenues in constant currency of $1,046.1 million for 2004 were 16.6% higher than 2003. In constant currency, commercial aerospace revenues were $453.8 million for 2004, an increase of $63.9 million, or 16.4%, over the revenues in 2003. The year-on- year increase reflects the benefit of higher aircraft build rates in 2005, a favorable change in mix of aircraft being produced, and the benefit of the new Airbus A380 program. We expect 2005 to show a continuation of these trends. Industrial market revenues for the year in constant currency were $344.2 million, an increase of $69.3 million, or 25.2%, compared to revenues of $274.9 million in 2003. The largest portion of this revenue increase came from sales of reinforcement fabrics used in military body armor applications. Sales to wind energy applications also increased at a double digit rate year-on-year. In 2005, we expect ballistic sales to remain at current levels but growth in wind applications to accelerate and drive continued growth in this market. Space & Defense revenues in constant currency of $187.8 million were up $8.5 million, or 4.7%, from 2003, despite the termination of the Comanche program which contributed $13.5 million of revenue last year compared to $4.4 million this year. The Company provides materials to a wide range of military programs. Over time, the revenues the Company obtains from these programs tend to vary based on customer ordering patterns and the timing and extent of program funding. Electronics revenues for the year in constant currency were $60.3 million compared to 2003 revenues of $52.8 million. The Company continues to focus on higher-end electronics applications, and this focus on advanced technology materials and specialty applications, together with some recovery in industry demand, is contributing to enhanced performance in our electronics business. Debt Total debt, net of cash, declined in the quarter by $31.7 million to $374.2 million as of December 31, 2004. During 2004, total debt, net of cash declined $67.5 million (see Table E for details of the components of net debt). Inventories at December 31, 2004 were slightly lower than September 30, 2004 and $23.7 million higher ($17.5 million higher in constant currency) than Dec. 31, 2003. Accounts receivable measured as days sales outstanding as of December 31, 2004 were comparable to the same quarter last year. The Company anticipates that net debt will increase in the first quarter of 2005 reflecting the usual seasonality in its cash flows. In the first quarter of each year, working capital increases and there are a number of annual cash payments. In the first quarter of 2005, the Company will also make a $7.5 million investment in its existing Chinese joint venture. Interest expense during the fourth quarter and full year of 2004 was $11.4 million and $47.7 million, respectively, and compares to interest expense of $12.5 million and $53.6 million in the respective periods of 2003. The decline in interest expense during 2004 reflects the Company's on-going efforts to reduce its total debt through open market purchases. The Company is exploring refinancing some or all of its debt to reduce its interest expense. Consideration is being given to the possible replacement, repurchase, refinancing, redemption, tender and/ or defeasance of its existing senior secured credit facility, 9.875% Senior Secured Notes due 2008, 9.75% Senior Subordinated Notes due 2009 and 7% Convertible Debentures due 2011. The consummation of any potential future refinancing transaction(s) will depend on various factors, including market and economic conditions. There can be no assurance that any potential refinancing will be consummated or, if consummated, as to the terms thereof. Capital expenditures for the quarter and year were $17.8 million and $38.1 million respectively. We expect 2005 capital expenditures to be more in line with our annual depreciation rate. Independent Registered Public Accounting Firm's 2004 Report Due to the requirements of Section 404 of the Sarbanes-Oxley Act, the independent registered public accounting firm's audit report date on the financial statements will be deferred until the Company files its 2004 Annual Report on Form 10-K. This is a change from prior years practice when the independent registered public accounting firm's audit report date was typically rendered at the time of the Company's earnings release. About the Company Hexcel Corporation is a leading advanced structural materials company. It develops, manufactures and markets lightweight, high- performance reinforcement products, composite materials and composite structures for use in commercial aerospace, space and defense, electronics, and industrial applications. At Dec. 31, 2004, Hexcel Corp.'s balance sheet showed a $24.4 million stockholders' deficit, compared to a $93.4 million deficit at Dec. 31, 2003. HOLLINGER INC: Can't Hold Shareholders' Meeting by January 30 ------------------------------------------------------------- Hollinger, Inc., (TSX:HLG.C)(TSX:HLG.PR.B) and Hollinger International, Inc., continue to pursue, on a without prejudice basis, the conclusion of mutually acceptable arrangements to permit the audit of Hollinger's 2003 annual financial statements to begin as soon as possible. As previously reported, Hollinger's 2003 annual financial statements could not be completed and audited until Hollinger International's 2003 annual financial statements were completed. On January 18, 2005, Hollinger International filed its 2003 Form 10-K with the United States Securities and Exchange Commission, which included audited financial statements and related MD&A for the fiscal year ended December 31, 2003, and restated audited financial results for the fiscal years ended December 31, 1999, 2000, 2001 and 2002. Hollinger International stated that the restated financial results were to correct accounting errors in prior periods and to reflect reclassifications arising from the adoption of a new audit standard. On January 21, 2005, Hollinger International filed its audited financial statements (and related MD&A) and its renewal Annual Information Form for the year ended December 31, 2003, with the Canadian securities regulatory authorities. The foregoing were necessary but not sufficient conditions to permit Hollinger to complete and file its 2003 annual financial statements as the completion and audit of the financial statements will require a level of cooperation from Hollinger International, which is still in negotiation, and its auditors. Hollinger International indicated that it expected to be able to file, within approximately two months, its interim financial statements for the fiscal quarters ended March 31, June 30 and September 30, 2004. In addition, Hollinger International stated that it would work expeditiously to file its 2004 Form 10-K, which will include its audited financial statements and related MD&A for the fiscal year ended December 31, 2004. While Hollinger International has said it expects to file a request with the SEC for a 15-day extension beyond the required filing date of March 16, 2005, to complete and file the 2004 Form 10-K, due to the anticipated work involved in the audit, Hollinger International noted that it may not be able to complete and file the 2004 Form 10-K by March 31, 2004. Hollinger's Audit Committee will now consider what, if any, additional financial information and alternative financial statements Hollinger will be in a position to publicly disclose and/or complete as a consequence of Hollinger International's recent filings. Extension for Holding 2004 Annual Shareholders' Meeting On June 25, 2004, Madame Justice Pepall of the Ontario Superior Court of Justice granted Hollinger an interim order extending the time for calling Hollinger's 2004 annual shareholders' meeting to a date not later than September 30, 2004. The postponement was sought because until such time as the annual audited financial statements of Hollinger for the year ended December 31, 2003, are complete, Hollinger is unable to satisfy the Canadian law requirement that such financial statements be placed before the shareholders at the annual shareholders' meeting. On September 28, 2004, Mr. Justice Colin L. Campbell of the Ontario Superior Court of Justice granted Hollinger an interim order further extending the time for calling Hollinger's 2004 annual shareholders' meeting to a date not later than January 30, 2005. As Hollinger's 2003 annual financial statements are still not complete, Hollinger will be seeking a further interim order extending the time for calling Hollinger's 2004 annual shareholders' meeting beyond the deadline of January 30, 2005, set out in the Mr. Justice Campbell's order. Hollinger intends to hold its 2004 annual shareholders' meeting as soon as practicable after its fiscal 2003 audited financial statements are completed and available for mailing to shareholders. Supplemental Financial Information As of the close of business on January 21, 2005, Hollinger and its subsidiaries (other than Hollinger International and its subsidiaries) had approximately US$45.2 million of cash or cash equivalents on hand and Hollinger owned, directly or indirectly, 782,923 shares of Class A Common Stock and 14,990,000 shares of Class B Common Stock of Hollinger International. The increase in Hollinger's cash and cash equivalents on hand during the period since its January 11, 2005, status update is due to the receipt by Hollinger on January 18, 2005 of the regular and special dividends on its holdings of shares of Class B Common Stock of Hollinger International as described below. Based on the Jan. 21, 2005, closing price of the shares of Class A Common Stock of Hollinger International on the NYSE of US$14.75, the market value of Hollinger's direct and indirect holdings in Hollinger International was US$232,650,614. All of Hollinger's direct and indirect interest in the shares of Class A Common Stock of Hollinger International are being held in escrow with a licensed trust company in support of future retractions of its Series II Preference Shares. All of Hollinger's direct and indirect interest in the shares of Class B Common Stock of Hollinger International are pledged as security in connection with Hollinger's outstanding 11.875% Senior Secured Notes due 2011 and 11.875% Second Priority Secured Notes due 2011. In addition, Hollinger has previously deposited with the trustee under the indenture governing the Senior Notes approximately US$10.5 million in cash as collateral in support of the Senior Notes (which cash collateral is also collateral in support of the Second Priority Notes, subject to being applied to satisfy future interest payment obligations on the outstanding Senior Notes as permitted by amendments to the Senior Indenture). Consequently, there is currently in excess of US$231.6 million aggregate collateral securing the US$78 million principal amount of the Senior Notes and the US$15 million principal amount of the Second Priority Notes outstanding. Hollinger International Dividends On December 16, 2004, the Board of Directors of Hollinger International declared a special dividend of US$2.50 per share of Class A Common Stock and Class B Common Stock of Hollinger International to holders of record of the Shares on Jan. 3, 2005, payable on January 18, 2005. The Board of Directors of Hollinger International also declared a regular quarterly dividend of US$0.05 per Share to be paid on January 18, 2005, to shareholders of record on January 3, 2005. On January 18, 2005, Hollinger received the regular and special dividend on its direct and indirect holdings of shares of Class B Common Stock of Hollinger International, net of applicable withholding tax. Hollinger expects to receive shortly the regular and special dividend on its direct and indirect holdings of shares of Class A Common Stock of Hollinger International, net of applicable withholding tax. The special dividend declared by Hollinger International resulted in the distribution of approximately US$227 million of the net proceeds from the sale of The Telegraph Group. In announcing the declaration of the special dividend, Hollinger International stated that it was committed to distributing to its shareholders, including Hollinger, a total of US$500 million of the net proceeds of the sale of The Telegraph Group. It has stated that it proposes to distribute the balance of these proceeds in the form of a tender offer for the Shares after it publishes its delinquent financial statements and other reports. Alternatively, Hollinger International may consider a further special dividend but it gave no assurances that it would distribute cash to shareholders in either form. Hollinger International previously agreed not to block any payment to Hollinger of any dividend or other distribution unless it is required to do so by a court order (which it will not seek), statute or regulation. There is to be no reduction or set-off. Hollinger in turn previously agreed to an extension of the injunction granted by Vice-Chancellor Strine in Delaware limiting Hollinger's control of Hollinger International beyond its original October 31, 2004, expiration date to the earlier of the date the proceeds from the strategic process have been distributed to Hollinger International's shareholders and January 31, 2005. Retractions Hollinger commenced honouring retractions of its Series II Preference Shares on October 28, 2004. On retraction, each Series II Preference Share is exchangeable into a fixed number (being 0.46) of shares of Class A Common Stock of Hollinger International or, at Hollinger's option, cash of equivalent value. To date, the retractions have been effected by Hollinger delivering 0.46 of a share of Class A Common Stock of Hollinger International owned directly or indirectly by it in exchange for each retracted Series II Preference Share. Since October 28, 2004, Hollinger has delivered 9,637 shares of Class A Common Stock of Hollinger International and no cash pursuant to retractions of its Series II Preference Shares. Retractions of Hollinger's outstanding retractable common shares submitted after May 31, 2004, continue to be suspended until further notice. SEC Escrow As part of its settlement discussions with staff of the SEC relating to the action commenced by the SEC against Hollinger and its former directors and senior executives, Lord Black and F. David Radler in the U.S. District Court, Northern District of Illinois, Hollinger has voluntarily agreed that it will enter into an arrangement whereby it will deposit: (i) the net amount received or to be received by it directly and indirectly from the Special Dividend, being approximately US$37,471,613; and (ii) subject to any overriding rights of the holders of Hollinger's outstanding Senior Notes and Second Priority Notes, the net amount of any subsequent distribution made by Hollinger International of The Telegraph Group sale proceeds, if any, into an escrow account with a licensed trust company. The escrow will terminate upon the conclusion of the SEC Action as to all parties. The escrow arrangements will provide that Hollinger will have access to the escrowed funds for ordinary business and certain other purposes, including, the payment of principal, interest, premium and fees, if any, on or relating to Hollinger's indebtedness for borrowed money, the payment of dividends on the Series II Preference Shares of Hollinger, the buy-back of non- Ravelston shares of Hollinger and the acquisition of assets (other than from Ravelston and certain of its affiliates). The escrow is subject to Hollinger and the SEC agreeing to a mutually acceptable termination date for the escrow should the parties be unable to reach an overall settlement of the SEC Action as against Hollinger in the near future. If termination of the arrangement occurs, Hollinger has agreed to provide staff of the SEC a reasonable opportunity to assert any rights it may have with respect to the escrowed funds. Hollinger is currently in the process of arranging for the escrow of the net amount received by it directly and indirectly from the Special Dividend. In the interim, Hollinger has agreed to hold the funds in a segregated bank account. Hollinger's principal asset is its interest in Hollinger International, Inc., which is a newspaper publisher the assets of which include the Chicago Sun-Times, a large number of community newspapers in the Chicago area, a portfolio of news media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 31, 2004, as a result of the delay in the filing of Hollinger's 2003 Form 20-F (which would include its 2003 audited annual financial statements) with the United States Securities and Exchange Commission by June 30, 2004, Hollinger is not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. Approximately $78 million principal amount of Notes is outstanding under the Indenture. On August 19, 2004, Hollinger received a Notice of Event of Default from the trustee under the Indenture notifying Hollinger that an event of default has occurred under the Indenture. As a result, pursuant to the terms of the Indenture, the trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the Notes will have the right to accelerate the maturity of the Notes. Approximately $5 million in interest on the Notes was due on September 1, 2004. Hollinger has deposited the full amount of the interest payment with the trustee under the Indenture and noteholders will receive their interest payment in a timely manner. There was in excess of $267.4 million aggregate collateral securing the $78 million principal amount of the Notes outstanding. Hollinger also received notice from the staff of the Midwest Regional Office of the U.S. Securities and Exchange Commission that they intend to recommend to the Commission that it authorize civil injunctive proceedings against Hollinger for certain alleged violations of the U.S. Securities Exchange Act of 1934 and the Rules thereunder. The notice includes an offer to Hollinger to make a "Wells Submission", which Hollinger will be making, setting forth the reasons why it believes the injunctive action should not be brought. A similar notice has been sent to some of Hollinger's directors and officers. HOLLINGER: E&Y Will Examine Ex-Directors P.Y. Atkinson & M. Sabia ----------------------------------------------------------------- Hollinger, Inc., (TSX:HLG.C)(TSX:HLG.PR.B) reports that Ernst & Young, Inc., the Inspector, is continuing the inspection of Hollinger's related party transactions pursuant to an Order of the Ontario Superior Court of Justice. The Inspector has provided five interim Reports with respect to its inspection of Hollinger. Hollinger and its staff continue to give their full and unrestricted assistance to the Inspector in order that it may carry out its duties, including access to all files and electronic data. Hollinger International has also assisted the Inspector in this regard. Counsel for the Inspector and various parties appeared before Justice Colin L. Campbell of the Ontario Superior Court of Justice on January 6 and 11, 2005. The Inspector wishes to examine certain former directors of Hollinger, including Lord Black, F. David Radler and J.A. Boultbee. Counsel for Lord Black and Messrs. Radler and Boultbee each submitted at the hearing on January 6, 2005, that it is premature for the Inspector to take the position that it is essential for their examinations to be conducted in order to write its report. A Notice of Constitutional Issue was served by counsel for Lord Black on December 22, 2004, on the Attorney General of each of Canada and Ontario on the basis that certain of the examinations proposed by the Inspector breach certain provisions of the Canadian Charter of Rights and Freedoms. The Inspector has obtained Orders to examine two former directors of Hollinger, Peter Y. Atkinson and Maureen Sabia. Other persons, including Peter G. White, a director and officer of Hollinger, have voluntarily agreed to be examined. A motion of the Inspector in writing with respect to an electronic inspection process is presently being considered by Mr. Justice Campbell. The next hearing before him is presently anticipated to be held on February 9, 2005. The Inspector is anticipated to provide an updated report to the Court before then. Hollinger's principal asset is its interest in Hollinger International, Inc., which is a newspaper publisher the assets of which include the Chicago Sun-Times, a large number of community newspapers in the Chicago area, a portfolio of news media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 31, 2004, as a result of the delay in the filing of Hollinger's 2003 Form 20-F (which would include its 2003 audited annual financial statements) with the United States Securities and Exchange Commission by June 30, 2004, Hollinger is not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. Approximately $78 million principal amount of Notes is outstanding under the Indenture. On August 19, 2004, Hollinger received a Notice of Event of Default from the trustee under the Indenture notifying Hollinger that an event of default has occurred under the Indenture. As a result, pursuant to the terms of the Indenture, the trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the Notes will have the right to accelerate the maturity of the Notes. Approximately $5 million in interest on the Notes was due on September 1, 2004. Hollinger has deposited the full amount of the interest payment with the trustee under the Indenture and noteholders will receive their interest payment in a timely manner. There was in excess of $267.4 million aggregate collateral securing the $78 million principal amount of the Notes outstanding. Hollinger also received notice from the staff of the Midwest Regional Office of the U.S. Securities and Exchange Commission that they intend to recommend to the Commission that it authorize civil injunctive proceedings against Hollinger for certain alleged violations of the U.S. Securities Exchange Act of 1934 and the Rules thereunder. The notice includes an offer to Hollinger to make a "Wells Submission", which Hollinger will be making, setting forth the reasons why it believes the injunctive action should not be brought. A similar notice has been sent to some of Hollinger's directors and officers. HOLLINGER: Will Deposit C$1.5M in Officers' Indemnification Trust ----------------------------------------------------------------- Hollinger, Inc., (TSX:HLG.C)(TSX:HLG.PR.B) reported that as a result of the expiry of Hollinger's directors' and officers' liability insurance on June 30, 2004, Hollinger placed C$500,000 in trust with the law firm of Aird & Berlis LLP, as trustee, in support of Hollinger's indemnification obligations to director Gordon W. Walker, Q.C. and former director Richard Rohmer. Hollinger agreed to deposit additional moneys in trust up to a maximum of C$1,500,000 as and when Hollinger reasonably determined that it had such moneys available. Hollinger has now determined that it is able to deposit an additional C$1,500,000 in trust with the law firm of Aird & Berlis LLP, as trustee. The additional funds, together with the original C$500,000, will support Hollinger's indemnification obligations to directors Gordon W. Walker, Q.C., Paul A. Carroll, Q.C., Donald M.J. Vale, Robert J. Metcalfe and Allan Wakefield and former director Richard Rohmer. Hollinger's principal asset is its interest in Hollinger International, Inc., which is a newspaper publisher the assets of which include the Chicago Sun-Times, a large number of community newspapers in the Chicago area, a portfolio of news media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 31, 2004, as a result of the delay in the filing of Hollinger's 2003 Form 20-F (which would include its 2003 audited annual financial statements) with the United States Securities and Exchange Commission by June 30, 2004, Hollinger is not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. Approximately $78 million principal amount of Notes is outstanding under the Indenture. On August 19, 2004, Hollinger received a Notice of Event of Default from the trustee under the Indenture notifying Hollinger that an event of default has occurred under the Indenture. As a result, pursuant to the terms of the Indenture, the trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the Notes will have the right to accelerate the maturity of the Notes. Approximately $5 million in interest on the Notes was due on September 1, 2004. Hollinger has deposited the full amount of the interest payment with the trustee under the Indenture and noteholders will receive their interest payment in a timely manner. There was in excess of $267.4 million aggregate collateral securing the $78 million principal amount of the Notes outstanding. Hollinger also received notice from the staff of the Midwest Regional Office of the U.S. Securities and Exchange Commission that they intend to recommend to the Commission that it authorize civil injunctive proceedings against Hollinger for certain alleged violations of the U.S. Securities Exchange Act of 1934 and the Rules thereunder. The notice includes an offer to Hollinger to make a "Wells Submission", which Hollinger will be making, setting forth the reasons why it believes the injunctive action should not be brought. A similar notice has been sent to some of Hollinger's directors and officers. HUFFY CORP: Schatz & Nobel Commences Class Action Lawsuit --------------------------------------------------------- The law firm of Schatz & Nobel, P.C., which has significant experience representing investors in prosecuting claims of securities fraud, announces that a lawsuit seeking class action status has been filed in the United States District Court for the Southern District of Ohio on behalf of all persons who purchased the publicly traded securities of Huffy Corp. (Pink Sheets: HUFCQ.PK) between April 16, 2002 and August 13, 2004. The Complaint alleges that Huffy violated federal securities laws by issuing false or misleading public statements. Specifically, the Complaint alleges that: (1) Huffy's positive statements concerning its growth and long-term prospects were false and misleading because Huffy was experiencing problems integrating the McCalla and Gen-X acquisitions; (2) Huffy's Canadian operations were engaged in improper accounting practices; (3) legacy costs associated with discontinued operations were continuing to mount; and (4) Huffy's financial condition was dramatically eroding such that it was approaching insolvency. On August 13, 2004, Huffy issued a press release announcing that, in the course of its review of its financial statements for the first quarter of 2004, it had determined that certain accounting entries, estimated in the range of $3.5 to $5.0 million and related primarily to customer deductions, credits and reserves for inventory valuation and doubtful account receivables for Huffy Sports Canada (formerly known as Gen-X Sports), were more properly reflected in the period ended December 31, 2003 rather than in the first quarter of 2004. In response to this announcement, the price of Huffy common stock declined from a close of $0.58 per share on August 13, 2004, to close at $0.35 per share on August 14, 2004. Then, on August 16, 2004, Huffy announced that it was being delisted from the New York Stock Exchange -- NYSE. Finally, on October 20, 2004, Huffy announced that it was filing for bankruptcy. A member of the class, may no later than March 25, 2005, request that the Court appoint him or her as lead plaintiff of the class. A lead plaintiff is a class member that acts on behalf of other class members in directing the litigation. Although the ability to share in any recovery is not affected by the decision whether or not to seek appointment as a lead plaintiff, lead plaintiffs make important decisions, which could affect the overall recovery for class members, including decisions concerning settlement. The securities laws require the Court to consider the class member(s) with the largest financial interest as presumptively the most adequate lead plaintiff(s). Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. INTERSTATE BAKERIES: Court Extends Exclusive Periods to July 19 --------------------------------------------------------------- Section 1121(b) of the Bankruptcy Code provides for an initial 120-day period after the Petition Date during which a debtor has the exclusive right to file a Chapter 11 plan. Section 1121(c)(3) provides that, if a debtor proposes a plan within the exclusive filing period, it has a period of 180 days after the Petition Date to obtain acceptances of the plan. The Exclusive Periods are intended to afford Chapter 11 debtors a full and fair opportunity to rehabilitate their business and to negotiate and propose a reorganization plan without the deterioration and disruption of their business that might be caused by the filing of competing reorganization plans by non- debtor parties. By this motion, Interstate Bakeries Corporation and its debtor- affiliates ask the Court to extend their exclusive period to: (1) file a plan through September 19, 2005; and (2) solicit and obtain acceptances of that plan through November 16, 2005. J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom, LLP, in Chicago, Illinois, asserts that the sheer size and complexity of the Debtors' cases justifies an extension of the Exclusive Periods. The Debtors' Chapter 11 cases have been further complicated by other factors including certain deficiencies in the Debtors' recently implemented financial reporting systems and the existence of about 500 union contracts. However, the Debtors continue to work diligently to resolve their financial reporting issues and to develop and analyze information as it becomes available. Since the Petition Date, the Debtors' new senior management has expended enormous efforts responding to the many exigencies and other matters that are incidental to the commencement of any Chapter 11 case but which are compounded given the size and complexity of the Debtors' cases. The Debtors: -- devoted considerable time to responding to a multitude of inquiries and information requests made by the Official Committee of Unsecured Creditors, the Official Committee of Equity Security Holders, the lenders, vendors, customers, landlords, bondholders, shareholders and other parties-in- interest; -- sought and obtained Court approval for a $200,00,000 DIP financing facility thereby providing the liquidity essential to ameliorate concerns of postpetition creditors; -- diligently worked with their vendors and established trade terms that have allowed the Debtors to exceed their initial cash flow projections; -- diligently worked to resolve their financial reporting issues and to develop and analyze information as it becomes available; -- have been involved in preserving human capital, which is a crucial factor in running a successful operation; -- formulated and sought Court approval of a comprehensive employee retention program that is designed to maintain employee morale and retain and appropriately compensate key employees; -- sought and obtained Court approval to continue complying with grievance procedures and to enter into collective bargaining agreement extensions and side agreements; -- realized operating synergies through consolidation of redundant bakeries and construction of new bakeries; and -- filed their schedules and statements of financial affairs, which collectively list more than 24,313 creditors, $1,597,842,723 in assets, and $954,436,568 in liabilities. The Debtors need more time to formulate and implement a credible long-term business plan that is essential to the assessment of a reasonable range of values for the Debtors' reorganized businesses and the determination of how much debt and equity those businesses will be able to support. Until a business plan is completed, the treatment of the union contracts in connection with the Debtors' reorganization cannot be determined. Hence, the Debtors are unable to unilaterally implement productivity improvements and effect savings with respect to health care, pension and other retirement costs because 81% of the Debtors' employees are covered by one of the approximately 500 union contracts. Mr. Ivester assures the Court that the Debtors' request is not a negotiation tactic, but instead, merely a reflection of the fact that their cases are not yet ripe for the formulation and confirmation of a viable plan of reorganization. * * * Judge Venters extends the Debtors' Exclusive Plan-Filing Period through July 19, 2005, and the Exclusive Solicitation Period through September 16, 2005. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) iSTAR FINANCIAL: Exchanging Series B Notes with 7.70% Sr. Debt -------------------------------------------------------------- iStar Financial Inc. (NYSE: SFI), the leading publicly traded finance company focused on the commercial real estate industry, has commenced a consent solicitation and offer to exchange iStar Financial Inc. 5.70% Series B Senior Notes due 2014 for any and all outstanding TriNet Corporate Realty Trust 7.70% Senior Notes due 2017, based upon an exchange ratio calculation described below. A holder's tender of TriNet Notes will constitute a consent to amend the indenture relating to the TriNet Notes to eliminate or waive most of the restrictive covenants and to amend some of the events of default governing the TriNet Notes. Catherine D. Rice, chief financial officer commented, "Exchanging iStar Notes for TriNet Notes is a step forward in our efforts to simplify our corporate structure and eliminate ongoing costs associated with the separate reporting requirements resulting from the TriNet Notes being outstanding." For each $1,000 principal amount of TriNet Notes tendered, holders will receive iStar Notes in an amount equal to $1,000 multiplied by the exchange ratio. The exchange ratio is equal to the exchange price of the TriNet Notes, which includes accrued and unpaid interest, divided by the new issue price of the iStar Notes, which includes accrued and unpaid interest. Since the iStar Notes will be issued in denominations of $1,000, the exchange ratio calculation will be rounded down to the nearest $1,000 principal amount, with the balance payable in cash. The exchange price of the TriNet Notes will equal: (1) the discounted value of the remaining payments of principal and interest on $1,000 principal amount of TriNet Notes through their maturity date at a discount rate equal to: (a) the bid-side yield to maturity on the 4.25% U.S. Treasury Note maturing November 15, 2014, as calculated by Bear, Stearns & Co. Inc., at 2:00 p.m. New York City time on February 22, 2005 (unless the expiration date of the exchange is extended); plus (b) a fixed spread of 160 basis points. In order to encourage eligible holders to tender early, the exchange price of the TriNet Notes includes a consent amount of $20.00 per $1,000 principal amount. The consent amount is only offered to eligible holders who validly tender their TriNet Notes on or prior to 5:00 p.m. New York City time on the consent date of February 8, 2005 and do not validly withdraw their tenders on or before that date. The consent amount of $20.00 per $1,000 principal amount will be deducted from the exchange price of the TriNet Notes with regard to TriNet Notes tendered after the consent date. The new issue price of the iStar Notes will equal: (1) the discounted value of the remaining payments of principal and interest on $1,000 principal amount of iStar Notes through their maturity date at a discount rate equal to: (a) the bid-side yield to maturity on the 4.25% U.S. (b) Treasury Note maturing Nov. 15, 2014, as calculated by Bear, Stearns & Co. Inc. at 2:00 p.m. New York City time on Feb. 22, 2005 (unless the expiration date of the exchange is extended); plus a fixed spread of 125 basis points. Based upon the yield of the 4.25% U.S. Treasury Note maturing Nov. 15, 2014 at 11:00 am New York City time on Jan. 24, 2005, the exchange price of the TriNet Notes, inclusive of the consent amount, and the new issue price of the iStar Notes would have been $1,181.66, and $1,021.88, respectively, and the exchange ratio would have been 1.156359. Excluding payment of the consent amount, the exchange price of the TriNet Notes would have been $1,161.66 and the exchange ratio would have been 1.136787. iStar Financial's obligation to exchange notes that are tendered will be subject to customary conditions, including that at least a majority in principal amount of the TriNet Notes are properly tendered and not validly withdrawn. iStar Financial has the right to waive these and the other conditions. The indenture amendments relating to the TriNet Notes will become effective if holders of a majority in principal amount of the TriNet Notes tender their TriNet Notes and do not withdraw them before a supplemental indenture relating to the amendments is executed. To the extent iStar Financial Inc. receives the requisite consents, we expect to enter into a supplemental indenture giving effect to the proposed amendments on the consent date. However, the amendments will not become operative until iStar Financial accepts and consummates the exchange of all notes validly tendered. If the amendments with regard to the TriNet Notes become operative, they will be effective as of the date the supplemental indenture was executed. Holders who tender TriNet Notes will be able to withdraw them until the supplemental indenture relating to the TriNet Notes is executed. If we do not receive notes and related consents from a majority in aggregate principal amount of TriNet Notes, but nonetheless decide to accept the notes of that issue that have been tendered, withdrawal rights with respect to the TriNet Notes will end at the expiration time of the offer. iStar Financial has engaged Bear, Stearns & Co Inc. to act as dealer manager in connection with the exchange offer. Questions regarding the exchange offer may be directed to Bear, Stearns & Co. Inc., Global Liability Management Group, at (877) 696-BEAR (2327) (U.S. toll-free). Copies of the Prospectus and the Letter of Transmittal and Consent form can be obtained from Georgeson Shareholder at 17 State Street, 10th Floor, New York, NY 10004, by telephone at (866) 873-6993. About the Company iStar Financial --http://www.istarfinancial.com--is the leading publicly traded finance company focused on the commercial real estate industry. The Company provides custom-tailored financing to high-end private and corporate owners of real estate nationwide, including senior and junior mortgage debt, senior and mezzanine corporate capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust, seeks to deliver a strong dividend and superior risk-adjusted returns on equity to shareholders by providing the highest quality financing solutions to its customers. * * * As reported in the Troubled Company Reporter on Jan. 24, 2005, iStar Financial, Inc., plans to acquire Falcon Financial Investment Trust. Fitch expects no change to iStar's rating and Outlook as a result of this transaction. The iStar's ratings are: -- Senior unsecured debt: 'BBB-'; -- Preferred stock 'BB'; -- Rating Outlook Stable. JOSEPH G. ROCHE: U.S. Trustee to Meet Creditors on Feb. 18 ---------------------------------------------------------- The United States Trustee for Region 17 will convene a meeting of Joseph G. Roche and Genievieve M. Roche's creditors at 1:30 p.m., on Feb. 18, 2005, at 235 Pine Street, Suite 700 in San Francisco, California. 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 Sonoma, California, Joseph G. Roche and Genevieve M. Roche -- http://www.rochewinery.com/-- operate a winery. The Debtor filed for chapter 11 protection on Jan. 18, 2005 (Bankr. N.D. Calif. Case No. 05-10082). Christopher G. Costin, Esq., at Beyers, Costin and Case represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $52,082,652 in total assets and $12,939,135 in total debts. KNIGHTHAWK INC: Arranges Up to $2,000,000 of Equity Financing ------------------------------------------------------------- KnightHawk, Inc., entered into an agreement in principle with Research Capital Corporation that will see Research Capital act as the agent on a commercially reasonable best efforts basis in a proposed offering that will raise up to $2,000,000 by way of a Short Form Offering Document. The offering will consist of a maximum of 4,000,000 units at a price of $0.50 per unit. Each unit will consist of one common share and one common share purchase warrant. Each common share purchase warrant will entitle the holder to purchase one additional common share at an exercise price of $0.60 per common share for a period of eighteen months from the closing date. If the common shares close at or above $0.75 per common share for a period of 30 consecutive trading days, then the warrant holders must exercise their warrants during the following 90 day period, otherwise the warrants will expire at the end of the 90 day period. This offering is scheduled to close in March 2005. The agent will receive a cash commission of 8.5% and an option to purchase units up to such number of units as is equal to 8.5% of the aggregate number of units sold under the offering for a period of 18 months from the closing date of the offering at a price of $0.50 per Agent's Unit. Each Agent's Unit will consist of 1 common share and 1 common share purchase warrant with the same terms and conditions as the units sold to the public. The agent will also be paid a corporate finance fee in the amount of $25,000. The proceeds from the sale of the units will be used to fund major aircraft engine overhauls, and for working capital. Depending on the amount that is raised, the Company may also fund some capital improvements to the rail lines. This proposed offering will be done pursuant to a short form offering document in accordance with the TSX Venture Exchange's Policy 4.6. The offering is subject to acceptance for filing by the TSX Venture Exchange. KnightHawk -- http://www.knighthawk.ca/-- provides contract rail and air cargo services, delivering freight both domestically and transborder between Canada and the United States, on behalf of its customers in the North American railway and air cargo express industries. KnightHawk's air division operates a fleet of cargo aircraft, and during the past ten years and over 45,000 flying hours has maintained an excellent on-time performance record, a crucial reliability factor for its customers. As of July 31, 2004, KnightHawk had a $1,466,000 stockholders' deficit compared to a $5,794,000 deficit at Oct. 31, 2003. KRISPY KREME: Has Until Mar. 25 to File October Quarterly Reports ----------------------------------------------------------------- The six-lender consortium under Krispy Kreme Doughnuts, Inc.'s Credit Facility have agreed to defer until March 25, 2005, the date on which an event of default would occur by reason of the Company's failure to deliver financial statements for the quarter ended October 31, 2004. In exchange for a $50,000 fee, the five Lenders: * Wachovia Bank, N.A., * Branch Banking and Trust Company, * Bank of America, N.A., * Royal Bank of Canada, * CIBC Inc., and * The Bank of Nova Scotia, agree to amend the $150 million Credit Facility to: * impose limitations on the issuance, extension and renewal of new letters of credit; * limit additional revolving credit or swing loan borrowings to $59,000,000; * restrict the creation of guarantees for debt incurred by the Company's joint ventures; * require prompt financial reporting from this point forward; and * require delivery of 13-week cash forecasts to the Lenders each Tuesday. These amendments remain effective whether or not the delinquent financial statements are delivered. If Krispy Kreme doesn't deliver to its lenders financial statements for the quarter ended October 31, 2004, on or before Mar. 25, 2005, that will trigger an event of default absent a further waiver from the lenders. If a default occurs, the Credit Facility may be terminated and all amounts outstanding thereunder would be immediately due and payable. Kroll Zolfo Cooper on Board As previously reported in the Troubled Company Reporter, Krispy Kreme hired Kroll Zolfo Cooper LLC as its financial advisor and interim management consultant. Stephen F. Cooper has been named Chief Executive Officer, replacing Scott A. Livengood, who retired as Chairman of the Board, President and Chief Executive Officer and had resigned as a director of the Company on Jan. 18. The Company also named Steven G. Panagos as President and Chief Operating Officer. Mr. Cooper is the Chairman and Mr. Panagos is a Managing Director of KZC. Mr. Cooper, 58, is the Chairman of KZC, a position he assumed in September 2002 when Kroll Inc. acquired Zolfo Cooper LLC, the corporate recovery and advisory firm that he co-founded in 1985. During his time at KZC and its predecessor, Zolfo Cooper, Mr. Cooper has worked on numerous engagements, advising and assisting clients in developing and negotiating reorganization and restructuring plans, performing valuations, performing viability analyses, formulating business strategies and cost reduction programs, developing and evaluating business plans and preparing liquidation analyses. Mr. Cooper has most recently led a KZC team engaged to assist Enron Corp., where he has served as Acting Chief Executive Officer, President and Chief Restructuring Officer since 2002, in its restructuring efforts. For periods during the past five years, he also served in a similar capacity for Malden Mills Industries, Inc. (Interim Chief Executive Officer), Laidlaw Inc. (Vice Chairman and Chief Restructuring Officer) and Family Golf Center, Inc. (Interim Chief Executive Officer). Mr. Panagos, 43, is a Managing Director and the National Practice Leader of KZC's domestic Corporate Advisory and Restructuring Group. Mr. Panagos joined Zolfo Cooper in 1988 and has more than 20 years' financial management experience. Mr. Panagos has worked on numerous engagements, advising and assisting clients in developing and negotiating reorganization and restructuring plans, performing valuations, performing viability analyses, formulating business strategies and cost reduction programs, developing and evaluating business plans and preparing liquidation analyses. Mr. Panagos has most recently led a KZC team engaged to assist The Penn Traffic Company, where he served as Interim Chief Executive Officer from August 2003 to April 2004 and currently serves as Chief Restructuring Officer (a position he has held since May 2003), with its reorganization. For periods during the past five years, he also served in a similar capacity for Metromedia Fiber Network Inc. (Chief Restructuring Officer) and Crown Books Corporation (Interim Chief Executive Officer). Other Management Changes Further, James H. Morgan, who had served as director of the Company since July 2002 and Vice Chairman since March 2004, was elected Chairman of the Board of the Company and Robert L. Strickland, a director since 1998, was elected Vice Chairman. Goodbye, Mr. Livengood Mr. Livengood has become a consultant to the Company on an interim basis. In accordance with his employment agreement, Mr. Livengood did not receive any severance on his retirement. In accordance with his stock option agreements, substantially all of Mr. Livengood's unvested stock options to purchase a total of 330,125 shares became 100% vested and they, together with his previously vested options to purchase a total of 1,380,129 shares, will remain exercisable, subject to the provisions of the option plans and agreements, for the remainder of their terms. Concurrently with his retirement, Mr. Livengood entered into a Consulting Agreement, dated January 18, 2005, with the Company. The Consulting Agreement has a term of six months and will be extended for an additional six months unless either party elects not to extend. During the term of the Consulting Agreement, Mr. Livengood will receive compensation of $45,833.34 per month (equivalent to Mr. Livengood's monthly base salary prior to his retirement) and the Company will provide continued medical coverage for him and his dependents as well as the cost of certain physical examinations. He will receive certain support services and reimbursement of expenses to the extent reasonably necessary to provide the consulting services requested by the Company. He will also receive a personal computer and certain other office equipment. The Company will reimburse Mr. Livengood for his attorney's fees in connection with negotiating the Consulting Agreement. Founded in 1937 in Winton-Salem, North Carolina, Krispy Kreme is a leading branded specialty retailer of premium quality doughnuts, including the Company's signature Hot Original Glazed. Krispy Kreme currently operates 435 stores (comprised of 399 factory stores and 36 satellites) in 45 U.S. states, Australia, Canada, Mexico and the United Kingdom. Krispy Kreme can be found on the World Wide Web at http://www.krispykreme.com/ LB COMMERCIAL: Fitch Affirms $9.1MM 1995-C2 Multi-Class Certs. -------------------------------------------------------------- LB Commercial Conduit Mortgage Trust's, multiclass pass-through certificates, series 1995-C2 (LB 1995-C2), are upgraded by Fitch Ratings: -- $24.7 million class E to 'AA' from 'A'. Fitch also affirms these classes: -- Interest-only class IO at 'AAA'; -- $5.8 million class D at 'AAA'; -- $9.1 million class F at 'B+'. Fitch does not rate the $9.1 million class G certificates. The upgrade to class E reflects increased credit enhancement from loans payoffs and amortization since issuance. As of the December 2004 distribution date, the pool's aggregate principal balance has been reduced by 80% to $48.7 million from $259.9 million at issuance. The pool has become more concentrated by loan size and property type, with the top five loans representing 67% of the pool and hotels representing 85%. Four loans (37%) are currently in special servicing including three real estate owned -- REO 35%. The largest two REO loans (30%) are secured by full-service hotels in Fort Worth, Texas; the properties are currently under contract. The other REO loan (6%) is secured by an anchored retail property in Millville, New Jersey. Losses are expected on all three loans; however, they are expected to be absorbed by the nonrated class G at this time. LEPPLA MOVING: List of its 20 Largest Unsecured Creditors --------------------------------------------------------- Leppla Moving & Storage, Inc., released a list of its 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Paul Hanson Insurance Services $44,633 Attn: Shannon Horvath 1827 Clay St. Napa, CA 94559 Wells Fargo $28,091 MAC T5601-012 P.O. Box 659700 San Antonio, TX 78286 Bank One $10,208 Cardmember Services P.O. Box 9001950 Louisville, KY 40290 Canyon State $6,946 Comdata Network $2,101 Citicapital $1,872 D&B RMS $1,600 Texaco Shell $1,253 Systems & Service Technologies, Inc. $2,134 Mark McNally $1,169 Beau's Crates $995 Oramark $868 Discount Tire Co. $745 Mesa Merchant Police $675 Mesa Tribune $564 Ryan McCauley $500 Office Max Credit Plan $491 Concentra $373 Wright Express $359 Arizona Bank & Trust $313 Headquartered in Mesa, Arizona, Leppla Moving & Storage, Inc. -- http://www.movingyourfurniture.com/-- provides moving and warehousing services. The Company filed for chapter 11 protection (Bankr. D. Ariz. Case No. 05-00823) on January 19, 2005. J. Kent Mackinlay, Esq., at Warnock, Mackinlay & Associates, PLLC, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $1 million to $10 million. LUXFER HOLDINGS: Moody's Junks Senior Unsecured Debts ----------------------------------------------------- Moody's Investors Service downgraded the senior implied rating of Luxfer Holdings Plc to Caa1 from B3 and placed all ratings under review for further possible downgrade. Affected ratings are: * Senior implied rating downgraded from B3 to Caa1 * Senior unsecured issuer rating from Caa1 to Caa2 * GBP 160.0 million 10.125% senior notes due 2009 lowered from Caa1 to Caa2 (outstanding principal reduced to approximately GBP 131.4 million as of 30 September 2004) The downgrade reflects: (i) Luxfer Holdings' weak cash generation and liquidity profile, with very limited flexibility to absorb potential future negative credit events, (ii) Luxfer's highly challenging operating environment and limited scope for operating performance improvements as profitability is likely to continue to be adversely impacted by the unfavourable US$/GBP exchange rate, increasing competition from the Chinese producers and softening products demand in some specific end-user markets, and (iii) Moody's growing concerns as to Luxfer's ability to grow cash flows and meet its operating and financial obligations over the near-term. During the first nine months of 2004, Luxfer Holdings continued to face difficult trading conditions as the Company's performance was negatively affected by: (i) a weakening US$/GBP exchange rate, (ii) lower-than-expected sales of gas cylinders to the beverage and fire extinguisher markets and zirconium chemical products to the paper industry, (iii) rising raw material prices, especially aluminium, magnesium and chemical inputs, and (iv) significant pricing pressure from Chinese producers in more commodity-like zirconium-based products. Although Moody's recognizes for the first nine months of 2004: (i) Luxfer Holdings' higher sales volumes in the gas cylinders division, especially sustained by a recovery in the US medical market, (ii) an improved product mix in the Elektron division, following the introduction of the new G4 zirconium catalyst products and a strong performance in the magnesium business, and (iii) encouraging margin improvements, mainly reflecting the benefits of its cost restructuring initiatives, Luxfer's operating profitability remains weak with GBP 21.2 million adjusted EBITDA reported for the last twelve months to September 2004 compared to GBP 18.8 million for full year 2003. Moody's expects also the Company's EBITDA for full year 2004 to be mainly in line with prior year level after adjusting 2003 reported EBITDA for GBP 2.0 million costs related to the launch of the new G4 zirconium products. The downgrade also reflects Luxfer Holdings' weak cash generation and the resulting tight liquidity position. Luxfer has absorbed cash since the beginning of financial year 2003 and reported negative GBP 6.0 million free cash flow for the first nine months of 2004, despite GBP 4.3 million cash inflow from assets disposals, reflecting limited cash contribution from operating activities, increasing working capital requirements and material cash interest costs in the magnitude of approximately GBP 13-14 million per year. At the end of September 2004, Luxfer Holdings reported GBP 5.5 million cash on balance sheet, cash and cash equivalents amounted to GBP 9.9 million as of 31 December 2003 and GBP 16.8 million as of 31 December 2002, with approximately GBP 2.0 million utilisation under its revolving credit facility. Moody's expects the Company's very modest liquidity cushion to be further reduced at the end of financial year 2004 with limited flexibility left to the company to absorb further potential negative credit events. Importantly, Moody's notes that Luxfer Holdings relies for its on- going financing requirements solely on the continuing availability of its twelve-month GBP 30.0 million revolving credit facility, providing GBP 20.0 million short-term borrowings with the rest available for letter of credits, performance bonds and forward foreign currency contracts. Moody's review for further possible downgrade will focus primarily on Luxfer Holdings' ability to successfully turn around operating performance in light of a more favourable business environment, potential for future increases in the company's cash flow generation and management's funding plans. Headquartered in Manchester, United Kingdom, Luxfer Holdings Plc specializes in the design and manufacture of high-pressure aluminium gas cylinders, as well as aluminium, zirconium, and magnesium-based engineering products for use in the aerospace, automotive, medical, and general engineering industries. During the first nine months of financial year 2004, Luxfer reported consolidated revenues of GBP 174.1 million and EBITDA of approximately GBP 17.7 million, for total debt of GBP 133.6 million (before issue costs). Luxfer reported LTM net debt/EBITDA of 6.0x as of 30 September 2004. MERCER INT'L: S&P Rates Proposed $300M Senior Unsec. Notes at B --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Seattle, Washington-based pulp producer Mercer International, Inc. At the same time, Standard & Poor's assigned its 'B' senior unsecured debt rating to Mercer's proposed $300 million senior unsecured notes due 2013, based on preliminary terms and conditions. The outlook is stable. "The ratings on Mercer reflect its participation in the highly cyclical, fragmented, and competitive pulp industry; limited product diversity; vulnerability of earnings and cash flows to changes in exchange rates and wood fiber costs; and very aggressive debt leverage," said Standard & Poor's credit analyst Pamela Rice. These negatives acutely overshadow relatively modern and efficient pulp operations and a good track record with capital expansion projects and cost reductions. The senior unsecured notes are not guaranteed by Mercer's subsidiaries. Nonetheless, the rating on the notes is the same as the corporate credit rating, based on Standard & Poor's expectations that the amount of priority liabilities ranking ahead of senior unsecured lenders will not place noteholders at a material disadvantage in the event of bankruptcy. Proceeds from the proposed note offering, combined with about $140 million of equity, will be used to fund Mercer's $210 million acquisition of Stone Venepal (Celgar) Pulp, Inc., to repay debt of the company's subsidiary, Zellstoff-und Papierfabrik Rosenthal GmbH & Co. KG, for general corporate purposes, and to pay transaction fees. Total debt outstanding upon closing at Mercer and its restricted subsidiaries will be $382.5 million. Mercer is a holding company that is organized as a publicly traded business trust. Its Rosenthal subsidiary, located in eastern Germany, is engaged in northern bleached softwood kraft (NBSK) pulp manufacturing with an estimated 310,000 air-dried metric tons -- ADMTs -- of annual capacity. The Celgar mill, located in British Columbia, has operated in bankruptcy since 1998, and has about 430,000 ADMTs of annual NBSK pulp capacity. These two subsidiaries will be governed by the terms of the $300 million note indenture. Pro forma sales for Mercer and its restricted subsidiaries in 2004 were about $400 million. Mercer operates other companies not governed by the terms of the unsecured note indenture, including Zellstoff Stendal GmbH, a new German pulp mill that is 63.6% owned by Mercer, and two small wholly owned German paper mills. These unrestricted subsidiaries are financed individually with debt that is nonrecourse to, and with no cross default provisions against, Mercer. In addition, 80% of Stendal's debt is guaranteed by the German government. Stendal is currently in a start-up phase and is not expected to pay material dividends to Mercer for several years. As such, Standard & Poor's based its assessment of the company's credit risk on the business and financial profiles of Mercer and the restricted group only. MERRILL LYNCH: Fitch Affirms 'B-' Rating on $9.8MM 1995-C2 Certs. ----------------------------------------------------------------- Merrill Lynch Mortgage Investors, Inc.'s - MLMI -- commercial pass-through certificates, series 1995-C2, are upgraded by Fitch Ratings: -- $12.1 million class D to 'AAA' from 'AA+'. Fitch also affirms these classes: -- $14.2 million class A-1 'AAA'; -- $3.8 million class A-2 'AAA'; -- Interest only class IO 'AAA'; -- $10.1 million class B to 'AAA'; -- $12.1 million class C to 'AAA'; -- $9.6 million class E to 'BBB+'; -- $9.8 million class F 'B-'. Fitch does not rate the $2.1 million class G certificates. The rating upgrade is a result of continued overall pool performance and additional credit enhancement provided by loan payoff and amortization. As of the February 2004 remittance report, the pool balance has paid down 92% to $73.9 million from $962.4 million at issuance. The certificates are collateralized by a pool of seasoned mortgages. The transaction's pay structure is modified pro rata, by which each class of certificates receives payments of principal and interest in the same percent as their proportion of the pool, with the exception of class G, which does not receive principal payments. Unscheduled payments are made to the most senior certificates, and losses are allocated to the least senior class, currently class G. Each class must maintain a target credit support level of a certain percent specified in the transaction's documents and determined by date. Since the last review, the transaction has experienced $24.3 million in losses. Due to these losses, the credit enhancement level for class F has dropped below the target level of 3%. It is likely that this class will receive only interest payments until the required subordination levels are once again met. There are currently no specially serviced loans in the pool. MIDLAND REALTY: Fitch Upgrades $12.8 MM 1996-C2 Mortgage Certs. --------------------------------------------------------------- Fitch Ratings upgrades Midland Realty Acceptance Corp.'s commercial mortgage pass-through certificates, series 1996-C2: -- $15.4 million class F to 'AAA' from 'A+'; -- $12.8 million class G to 'AA' from 'BBB'; -- $5.1 million class H to 'A' from 'BBB-'; --$12.8 million class J to 'BB+' from 'BB'; In addition, Fitch affirms these classes: -- $53.2 million class A-2 'AAA'; -- Interest-only class A-EC 'AAA'; -- $30.7 million class B 'AAA'; -- $28.2 million class C 'AAA'; -- $23.0 million class D 'AAA'; -- $7.7 million class E 'AAA'; -- $7.7 million class K 'B'. Fitch does not rate the $10.8 million class L-1 or the interest- only class L-2 certificates. The class A-1 certificates have paid in full. The ratings upgrades are due to the increase in subordination levels resulting from loan payoffs and amortization. As of the December 2004 distribution date, the pool has paid down 59.5% to $207.4 million from $512.1 million at issuance. In addition, the pool has paid down 21.5% since Fitch's September 2004 review. Seven loans (4%) are currently in special servicing: six loans (3.1%) that are current and one loan (0.9%) that is 90+ days delinquent. The largest specially serviced loan (1.1%) is secured by a two building, 23,153 square foot - sf -- retail/office complex located in Dillon, Colorado. While the loan remains current, Fitch is concerned as the occupancy was just 21% as of December 2004, with all four remaining leases rolling within the next six months. The 90+ day delinquent loan is secured by a multifamily property located in Euless, Texas. Foreclosure is expected during the first quarter 2005; however, a loss is not anticipated as a recent appraisal valued the property higher than the current debt. The other specially serviced loans (1.9%) are secured by five Frank's Nursery & Crafts stores located in Michigan, Minnesota, and New Jersey, which are cross- collateralized and cross-defaulted. Four of the five properties are under contract for sale and the fifth is currently being marketed. Minimal losses, if any, are expected on these five loans. MIRANT CORP: Liquidation Analysis Under Joint Chapter 11 Plan ------------------------------------------------------------- Mirant Corporation and its debtor-affiliates have evaluated numerous alternatives to their Plan, including, without limitation, the sale of the Debtors as a going concern, either as an entirety or on limited bases and the liquidation of the Debtors. After studying these alternatives, the Debtors have concluded that the Plan is the best alternative and will maximize recoveries of holders of Claims and Equity Interests. Reorganization Beats Liquidation If no plan of reorganization can be confirmed, M. Michele Burns, Executive Vice President, Chief Financial Officer and Chief Restructuring Officer of Mirant Corporation, says, the Debtors' Chapter 11 Cases may be converted to cases under chapter 7, in which event a trustee would be elected or appointed to liquidate the properties and interests in property of the Debtors for distribution to their creditors in accordance with the priorities established by the Bankruptcy Code. The Debtors believe that liquidation under chapter 7 would result in smaller distributions being made to creditors than those provided for under the Plan because of: (1) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee for bankruptcy and professional advisors to that trustee; (2) the erosion in value of assets in the context of the expeditious liquidation required under chapter 7 and the "forced sale" environment in which a liquidation would likely occur; (3) the adverse effects on the salability of business segments as a result of the likely departure of key employees and the loss of customers; and (4) the substantial increases in claims which would have to be satisfied on a priority basis or on parity with creditors in the Chapter 11 Cases. Accordingly, the Debtors have determined that confirmation of their Plan will provide each holder of a Claim or Equity Interest with a greater recovery than it would receive pursuant to liquidation of the Debtors under chapter 7. If the Plan is not confirmed, Ms. Burns points out that any other party-in-interest could undertake to formulate a different plan of reorganization. "Such a plan of reorganization might involve either a reorganization and continuation of the business of the Debtors, the sale of the Debtors as a going concern or an orderly liquidation of the properties and interests in property of the Debtors," Ms. Burns says. With respect to an alternative plan of reorganization, the Debtors have examined various other alternatives in connection with the process involved in the formulation and development of the Plan. The Debtors believe that the current Plan enables holders of Claims and Equity Interests to realize the best recoveries under the present circumstances. In a liquidation of the Debtors under chapter 11, the properties and interests in property would be sold in a more orderly fashion and over a more extended period of time than in a liquidation under chapter 7, probably resulting in marginally greater recoveries. Further, if a trustee were not appointed, since one is not required in a chapter 11 case, the expenses for professional fees would most likely be lower than in a chapter 7 case. However, although preferable to a chapter 7 liquidation, the Debtors believe that a liquidation under chapter 11 for the Debtors is a much less attractive alternative to holders of Claims and Equity Interests than the Plan because the recovery realized by holders of Claims and Equity Interests under the Plan is likely to be greater than the recovery under a chapter 11 liquidation. The Debtors believe that the Plan is in the best interest of all holders of Claims and Equity Interests, and urge all holders of impaired Claims and Equity Interests to vote to accept the Plan. 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. 52; Bankruptcy Creditors' Service, Inc., 215/945-7000) MOHEGAN TRIBAL: Completes Acquisition of Pocono Downs Racetrack --------------------------------------------------------------- The Mohegan Tribal Gaming Authority, operator of Mohegan Sun, has completed its acquisition of the entities owning Pocono Downs, a standardbred harness racing facility located on 400 acres in Wilkes-Barre, Pennsylvania as well as five Pennsylvania off-track wagering (OTW) operations located in Carbondale, East Stroudsburg, Erie, Hazleton and Lehigh Valley (Allentown). The Lehigh Valley (Allentown) OTW is a 28,000 square-foot facility and is the largest OTW in the state of Pennsylvania. "This acquisition is a significant milestone for the Mohegan Tribe in its quest to diversify outside the reservation and provide long-term economic growth for future generations. We look forward to working hand in hand with the local community and the Commonwealth of Pennsylvania to build a successful operation beneficial to all parties involved," said Mark F. Brown, Chairman of the Authority's Management Board. With the closing of the transaction, the Authority, through the Pocono Downs entities, has the right to apply for a Category One slot machine license under Pennsylvania's gaming law which application, if approved, would initially permit the installation and operation of up to 3,000 slot machines at Pocono Downs. Upon receipt of a gaming license, the Authority plans to develop a new slot machine facility at the Pocono Downs site, which it anticipates will open in fiscal year 2006. The new facility will also include restaurants, lounges and a small entertainment venue. The Authority anticipates that it will spend up to $175 million on the construction, furnishing and equipping of the new facility, in addition to paying a one-time $50 million fee to the Commonwealth of Pennsylvania upon receipt of a gaming license. "We are extremely excited about entering the Pennsylvania market during this time of great gaming opportunity in the state," said William J. Velardo, Chief Executive Officer of the Authority. "We are also looking forward to working with the outstanding long-term employees of Pocono Downs." The Authority paid approximately $280 million for the Pocono Downs entities before certain closing adjustments and other costs. The purchase price was funded through a draw on the Authority's recently amended bank credit facility. In accordance with the terms of the acquisition agreement, the Authority has retained certain post-closing termination rights in the event of certain materially adverse legislative or regulatory events. SG Americas Securities, LLC served as advisor to the Authority in connection with the acquisition. About the Authority and Mohegan Sun The Authority is an instrumentality of the Mohegan Tribe of Indians of Connecticut a federally recognized Indian tribe with an approximately 405-acre reservation situated in southeastern Connecticut, adjacent to Uncasville, Connecticut. The Authority has been granted the exclusive power to conduct and regulate gaming activities on the existing reservation of the Tribe, and the non-exclusive authority to conduct such activities elsewhere, including the operation of Mohegan Sun, a gaming and entertainment complex that is situated on a 240-acre site on the Tribe's reservation. The Tribe's gaming operation is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Mohegan Sun currently operates in an approximately 3.0 million square foot facility, which includes the Casino of the Earth, Casino of the Sky, the Shops at Mohegan Sun, a 10,000-seat Arena, a 350-seat Cabaret, meeting and convention space and an approximately 1,200-room luxury hotel. More information about Mohegan Sun and the Authority can be obtained by visiting http://www.mohegansun.com/ * * * As reported in the Troubled Company Reporter on Nov. 10, 2004, Standard & Poor's Ratings Services lowered its ratings on Mohegan Tribal Gaming Authority -- MTGA, the entity formed to own and operate the Mohegan Sun casino, including its issuer credit rating to 'BB' from 'BB+'. At the same time, all ratings on MTGA were removed from CreditWatch where they were placed on October 15, 2004. The outlook is stable. As of June 30, 2004, pro forma for the July 2004 offering of $225 million senior sub notes, total debt outstanding was approximately $1.2 billion, including approximately $115 million of tax-exempt off-balance sheet Tribal debt. The downgrade follows the company's announcement on Oct. 15, 2004, that it entered into a definitive agreement to acquire Pocono Downs racetrack from Penn National Gaming for $280 million. MTGA anticipates spending up to $225 million to purchase the gaming license and build-out the racetrack for the planned installation of up to 3,000 slot machines at the facility. The deal is subject to customer approvals and is expected to close by the end of 2004. "Given increased spending expected over the next couple of years, MTGA's leverage is expected to rise to level that is weak for the previous ratings," said Standard & Poor's credit analyst Peggy Hwan. While leverage had increased to this level in the past as the company completed the phase II expansion of Mohegan Sun, ratings were held at the time because it was expected that free cash flow would be used to reduce debt, and that over time, leverage would be maintained at a level more in line with the previous ratings. It is now Standard & Poor's expectation that MTGA will continue to pursue opportunities beyond its core market. "Given our analysis of MTGA's current business profile, debt leverage is commensurate with the new ratings," added Ms. Hwan. NATIONAL ENERGY: Liquidation Analysis Under Plan of Liquidation --------------------------------------------------------------- To confirm the Plan of Liquidation for NEGT Energy Trading Holdings Corporation and its debtor-affiliates, the Bankruptcy Court must determine that the Plan is in the best interests of all individual dissenting creditors in each impaired class. The "best interests" test requires that the Plan provide each holder with a recovery having a value at least equal to the value of the distribution each holder would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. This test is based on liquidation values, Steven Wilamowsky, Esq., at Willkie Farr & Gallagher LLP, in New York, says. Mr. Wilamowsky notes that the ET Debtors have liquidated, or are in the process of liquidating, substantially all of their assets. "If these cases were to be converted to Chapter 7 cases, the Debtors' estates would incur the costs of payment of a statutorily allowed commission to the Chapter 7 trustee, as well as the costs of counsel and other professionals retained by the trustee." The ET Debtors believe that amount would exceed the amount of expenses that will be incurred in implementing the Plan and winding up their affairs. "The estates would also be obligated to pay all unpaid expenses incurred by the Debtors during these cases (such as compensation for professionals) which are allowed in the Chapter 7 cases," Mr. Wilamowsky adds. Furthermore, Mr. Wilamowsky continues, there would be no certainty that the settlements under the Plan would be received. Accordingly, the ET Debtors believe that holders of Allowed Claims would receive substantially less than anticipated under the Plan if the Chapter 11 Cases were converted to Chapter 7 cases. Feasibility Requirement Under Section 1129(a)(11) of the Bankruptcy Code, the ET Debtors must show that confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtors or any successor to the Debtors -- unless that liquidation or reorganization is proposed in the Plan. Mr. Wilamowsky points out that the Plan complies with this requirement because all of the Debtors' remaining assets will be distributed to creditors pursuant to the terms of the Plan and, provided the Plan is confirmed and consummated, the estates will no longer exist to be subject to future reorganization or liquidation. Alternatives to the Plan The ET Debtors believe that the Plan is the best alternative available to their creditors, providing those creditors with the earliest and greatest possible values that can be realized on their Claims. The alternatives to confirmation are: (i) confirmation of an alternative plan or plans of liquidation; or (ii) liquidation of the ET Debtors' assets under Chapter 7 of the Bankruptcy Code. Mr. Wilamowsky asserts that the ET Debtors structured the current Plan to maximize values. Any alternative plan likely would result in reduced distributions to certain creditors. In addition, due to the time required to negotiate, draft and obtain approval of an alternative plan, alternatives to the Plan would lead to delayed distributions to creditors. Moreover, the ET Debtors believe that the value of distributions under the Plan will equal or exceed the value of distributions that would be available after their liquidation under Chapter 7 of the Bankruptcy Code. "A liquidation under Chapter 7 would require the Bankruptcy Court to appoint a trustee to conduct the liquidation of the Debtors. Such a trustee would have limited historical experience or knowledge of these Chapter 11 cases or of the Debtors' records, assets or businesses. The fees charged by a Chapter 7 trustee and any professionals hired by the Chapter 7 trustee could impose substantial administrative costs on the Debtors' estates that would not be incurred under the Plan. Further, there is no assurance as to when distributions would occur in a chapter 7 liquidation." Thus, the ET Debtors believe that confirmation of the Plan is preferable to the alternatives because the Plan should maximize value, ensure an expeditious resolution of their chapter 11 cases and provide for equitable distributions to their creditors. Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company and its debtor-affiliates filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher, and Paul M. Nussbaum, Esq., and Martin T. Fletcher, Esq., at Whiteford, Taylor & Preston, L.L.P., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and that plan took effect on Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) NEWS CORP: Moody's Affirms Ba1 Ratings on Trust Preferred Shares ---------------------------------------------------------------- Moody's Investors Service confirmed News Corporation's debt ratings of Baa3 senior unsecured. The rating outlook was changed to positive. This rating action concludes the review initiated on April 26, 2004. The ratings that were confirmed include: -- News America Incorporated: * Baa3 senior unsecured -- News Corporation Finance Trust II: * Baa3 senior unsecured -- News Corp Overseas Limited: * Ba1 trust preferred shares -- News Corporation Exchange Trust: * Ba1 trust preferred shares The confirmation reflects Moody's belief that News Corp. will pursue negotiations with Liberty Media Corporation in the near- term to reduce Liberty Media's approximately 18% voting stake in News Corp. and this stake is currently worth around $9 billion. This belief is supported by public comments by News Corp. executives stating that the company would entertain some sort of a Liberty transaction such as a stock buyback, an asset-for-stock swap, or some other action to relieve the Liberty overhang that could materially affect its balance sheet. Concluding the review for upgrade with a rating confirmation reflects the increased event risk associated with the range of actions open to News Corp. Moody's believes that both companies have an incentive to reach an amicable solution, so we do not anticipate a radical solution to this issue that would change News Corp.'s credit profile enough to lower the company's Baa3 debt rating. The Baa3 senior unsecured debt rating of News Corp. and its subsidiaries is based on its position as one of the world's leading diversified media enterprises. Its diversity is both geographic and by business line, and helps to offset the variable performance of its individual business units. It also reflects Moody's expectation for continued prudent financial management as the media giant seeks to broaden its presence in both the content and distribution businesses. Aside from the uncertainty surrounding a potential transaction with Liberty Media, the ratings and outlook reflect moderating acquisition driven event risk relative to past history, as Moody's expects the Company to pursue less aggressive acquisition strategies going forward, and focuses on organic growth and strategic ventures. Moody's expects this strategic shift to continue in the intermediate term. The positive outlook reflects News Corp.'s solidly positioned franchises in various global markets. Strong free cash flow generation from its media & entertainment units, supplemented by large cash balances leaves News Corp. with exceptional financial flexibility and liquidity for the Baa3 rating category, and mitigates potential negative credit impact that may occur regarding actions that may be taken to reach a solution with Liberty. News Corp.'s current financial flexibility and metrics still support a review for upgrade, and if much of the financial strength can be maintained while fulfilling the company's objectives with Liberty, an upgrade again will be considered. The News Corporation, with its headquarters in the United States, is one of the world's largest media companies and has operations in the production and distribution of motion picture and television programming, television, satellite and cable broadcasting, the publication of newspapers, magazines, books and promotional free-standing inserts, the development of digital broadcasting, conditional access and subscription management systems; and the creation and distribution of popular on-line programming. NOVA CHEMICALS: Moody's Revises Outlook on Low-B Ratings to Stable ------------------------------------------------------------------ Moody's Investors Service affirmed the Ba2 senior unsecured ratings of NOVA Chemicals Corporation, and revised its ratings outlook to stable from negative. Moody's also changed the company's speculative grade liquidity rating to SGL-1 from SGL-2. The outlook revision was prompted by NOVA's announcement that it expects to receive a cash payment of approximately $110 million stemming from its resolution of a tax dispute with U.S. Internal Revenue Service. This is in addition to the $80 million received in the fourth quarter of 2004 from the sale of its ethane gathering system. The ratings affirmations reflects Moody's view that the combination of the cyclical upturn in petrochemicals, and these one-time cash inflows, will enable the company to maintain a robust cash balance despite anticipated share repurchases and the pending maturity of $100 million of debentures in September 2005. In July 2004, Moody's changed its rating outlook for NOVA to negative reflecting concerns over the company's plan to undertake a share repurchase program that is currently anticipated to cost over $300 million. The company spent $72 million in share repurchases in the September 2004 quarter. The stable outlook reflects Moody's expectation that NOVA will generate 2005 free cash flow (cash from operations less capital expenditures/turnaround costs) in excess of $250 million. This will be sufficient to redeem the $100 million debentures and complete the remaining share repurchases while maintaining a cash balance that exceeds $150 million. There is limited downward pressure on the ratings due to the upturn in the petrochemicals cycle. However, the ratings outlook could be revised to negative if the outlook for ethylene and styrene profitability deteriorates significantly and the company initiates another 10% share repurchase in July. At the current time, Moody's believes that any upside to the current ratings is limited due to the volatile nature of the commodity petrochemicals margins. Only the combination of a permanent change in targeted debt levels combined with changes to the structure of its credit agreements could put positive pressure on the ratings. Ratings affirmed: * Senior unsecured notes and debentures, due from 2005 through 2028 - Ba2 * Senior Implied - Ba2 * Issuer Rating - Ba2 Ratings upgraded: * Speculative Grade Liquidity Rating - SGL-1 from SGL-2 The ratings affirmation reflects the improving year-on-year olefin and polyolefin margins, the anticipation of improved profitability in styrene over the next 12 months, and the expected improvement in financial metrics to levels that are well above those consistent with the current rating. However, due to the volatile nature of feedstock and commodity petrochemical and plastics pricing, profitability and free cash flow may not increase sequentially. Changes in co-product pricing or the failure to fully implement announced price increases could cause actual results to differ materially from Moody's current projections. NOVA's current credit metrics remain weak but have recovered from trough levels, with debt, adjusted for preferred securities and securitized receivables, to EBITDA of 3.7 times for the LTM ended September 30, 2004. With over 9 billion pounds of ethylene and styrene capacity and over 7 billion pounds of polyethylene and polystyrene capacity, NOVA has substantial leverage to the upcycle in commodity petrochemicals and plastics. Currently we expect total debt to EBITDA to decline to below 2.5 times and EBITDA to interest coverage to rise above 8 times by year-end 2005. NOVA's SGL-1 rating reflects its sizeable cash balance, which stood at $233 million as of September 30, 2004. Moody's anticipates that the company's year-end cash balance has increased as positive free cash flow and proceeds from the Alberta Ethane Gathering System sale should offset share repurchase activity. As previously stated, Moody's anticipates that NOVA will generate free cash flow of well over $250 million in 2005. This free cash flow combined with proceeds from the tax refund should allow the company to easily address $100 million of maturing debentures as well as remaining share repurchase activity. The company's liquidity is supported by its $300 million revolving credit facility expiring April 1, 2007, and a $250 million accounts receivable facility also maturing April 1, 2007. Availability under the credit facility was $247 million as of Sept. 30, 2004 (after consideration of $53 million letters of credit). Moody's does not anticipate that the company will need to draw under the credit facility for the next twelve months given its significant cash balance. Outstandings under the accounts receivable facility were $226 million at September 30, 2004, and are expected to rise to $250 million in 2005 as volumes and prices continue to increase. Additionally, Moody's anticipates that the company will easily remain in full compliance with the financial covenants governing these facilities over the same period. Headquartered in Calgary, Canada, NOVA Chemicals Corporation is a leading producer of ethylene, polyethylene, styrene, polystyrene and expanded polystyrene. NOVA reported revenues of $4.78 billion for the LTM ended September 30, 2004. PEABODY ENERGY: Declares $0.15 per Share Quarterly Dividend ----------------------------------------------------------- The board of directors of Peabody Energy declared a regular quarterly dividend on its common stock of $0.15 per share. The dividend is payable on March 1, 2005, to holders of record on Feb. 8, 2005. Moody's Rating Services and Standard & Poor's assigned their low-B ratings to Peabody Energy's 6-7/8% Senior Notes in March 2003. About the Company Peabody Energy (NYSE: BTU) is the world's largest private-sector coal company. Its coal products fuel more than 10 percent of all U.S. electricity and more than 2.5 percent of worldwide electricity. PLYMOUTH RUBBER: Negotiating Sale & Leaseback Financing Deal ------------------------------------------------------------ Plymouth Rubber Company, Inc. (Amex: PLR.A, PLR.B) is negotiating with real estate development firms and various financing sources, including its current lenders, for an overall refinancing involving the sale and leaseback of the Company's real estate in Canton, comprising approximately 40 acres of land and buildings. The transaction would require the execution of definitive purchase and sale and lease agreements, and would be subject to the receipt of a satisfactory environmental report and other conditions. If negotiations are successfully completed, and definitive agreements are executed before the end of February, the Company anticipates that a closing could take place before the end of the second quarter of 2005. Terminates SEC Reporting The Company has filed with the Securities and Exchange Commission certifications terminating the Company's obligations to file periodic and current reports under the Securities Exchange Act of 1934. Maurice J. Hamilburg, the Company's President and Co-CEO, stated: "The Company's Board of Directors concluded that the substantial costs associated with remaining a public company, particularly those associated with implementing recent Sarbanes- Oxley directives, overwhelmingly outweigh the benefits to Plymouth of having its shares trade in the public markets." About the Company Plymouth Rubber Company, Inc. manufactures and distributes plastic and rubber products, including automotive tapes, insulating tapes, and other industrial tapes and films. The Company's tape products are used by the electrical supply industry, electric utilities, and automotive and other original equipment manufacturers. Through its Brite-Line Technologies subsidiary, Plymouth manufactures and supplies highway marking products. At Aug. 27, 2004, Plymouth Rubber's balance sheet showed a $377,000 stockholders' deficit, compared to a $612,000 of positive equity at Nov. 28, 2003. * * * Going Concern Doubt Plymouth Rubber's Audit Committee previously dismissed PricewaterhouseCoopers LLP as its independent registered public accounting firm. The reports of PricewaterhouseCoopers LLP on the financial statements of the Company for the two most recent fiscal years ended Nov. 28, 2003, and Nov. 29, 2002, contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. However, the reports included an explanatory paragraph wherein PwC expressed substantial doubt about the Company's ability to continue as a going concern. The Company's audit committee approved the engagement of Vitale, Caturano & Company, Ltd. as the Company's new independent registered public accounting firm as of Oct. 14, 2004. During the Company's two most recent fiscal years and through Oct. 14, 2004, the Company has not consulted with Vitale, Caturano & Company, Ltd. regarding any matters or reportable events described in Items 304(a)(2)(i) and (ii) of Regulation S-K. POGO PRODUCING: Moody's Revises Ratings Outlook to Developing ------------------------------------------------------------- Moody's affirmed Pogo Producing Company's Ba1 senior implied and Ba3 senior subordinated note ratings upon its announced series of asset sales, stock buybacks, curtailed development capital spending, debt refinancings, and cash repatriations announced today. The rating outlook is moved to developing from stable, pending the timing, sequence, and scale of the cash inflows and outflows of the announced program and the resulting impact on the operating and financial profile. In the developing outlook, there is no potential for an upgrade on the current business. There is a reasonable possibility for a ratings confirmation and stable outlook if Pogo Producing fully executes its plan, including the important asset sale element, in a timely fashion. However, ratings caution and a risk of downgrade exist if the full stock buyback program proceeds without an asset sale program. Ratings caution is also warranted in light of Pogo Producing's escalated reserve replacement costs, negative production trends, and need to assess the appropriateness of the ratings relative to the nature of Pogo's acquisition activity, acquisition funding activity, its smaller pro-forma scale, and its operating performance as 2005 progresses. During the course of 2005, Pogo Producing will pursue: 1. A shrink-to-grow plan involving the possible sale of its Gulf of Thailand reserves and holdings in Hungary by mid- 2005. The Gulf of Thailand properties currently generate approximately 30,800 boe per day, or 29% of Pogo's production, and hold 56.8 mmboe of proven reserves, or 19% of Pogo's total reserves. 2. The immediate initiation of a program to return $275 million to $375 million to shareholders by repurchasing 9% to 12% of Pogo's common stock in the ensuing six to nine months. 3. The curtailment of roughly $280 million in development capital spending deemed insufficiently economic in the face of surging drilling and services costs, in spite of still historically robust oil and gas prices. Moody's rating action is taken against the back drop of modest gross leverage on proven developed reserves ($3.22/PD Boe), quite low net leverage on PD reserves, and strong cash flows before heavy sustaining capital spending. However, Pogo Producing also had a very weak year with the drillbit and sequential quarter production fell significantly. Moody's estimates 2004 drillbit finding and development costs of close to $18/boe. Furthermore, a very low percentage of production was replaced organically. Organic production trends are weak and should be weaker still with the full curtailment of development capital spending. Related to high drillbit finding and development costs plus curtailed 2004 capital spending, Pogo fell far short of replacing production with the drillbit. Excluding acquisitions, reserves declined 11.3% during the year. Pogo Producing acquired approximately 44.8 mmboe of proven reserves during 2004 and reported 296.3 mmboe of year-end 2004 reserves. Excluding the acquired reserves, year-end 2004 reserves would have been 251.5 mmboe. Pogo Producing's ability to retain its ratings will depend upon the issues: 1. To have confidence Pogo can repay bank debt drawn to fund stock buybacks by mid-2005 or early third quarter 2005, we will need visibility during the second quarter of 2005 that a sale of the Gulf of Thailand can be closed in that timeframe. 2. Ability to control the rate of production decline. It may be important for the production decline expected from the curtailment of capital spending to be at least partially offset by the return of Main Pass 61/62 production that had been impaired during the last hurricane season. 3. Conducting 2005 acquisition activity with ample common equity funding. Assuming Pogo Producing completed all of the above tasks, it would hold 240 mmboe of total proven reserves, of which 84% or 196 mmboe would be PD reserves. Pro-forma year-end 2004 debt, assuming the full plan was executed, would approximate $300 million. Debt/PD boe would be a conservative $1.50/PD Boe and balance sheet leverage would also be conservative. By shedding the Gulf of Thailand properties, one of Pogo's two short-lived reserve holdings, the other being its Gulf of Mexico properties, Pogo may improve its subsequent ability to sustain more favorable sequential quarter production trends. The stock buybacks would initially be funded with bank debt and cash flow. Pogo Producing would hope to subsequently repay all bank borrowings with proceeds from the potential sale of its Gulf of Thailand reserves plus a potential bond offering. If the asset sale is to proceed, it must close during 2005 to capitalize on the tax window for repatriating foreign investments back to the U.S. under the American Jobs Creation Act. Pogo hopes to close the sale of those properties by mid-2005. A potential complication to a sale is the fact that its operating partner for the Gulf of Thailand properties, Chevron Corporation, has a right of first refusal on Pogo Producing's share of the partnership. Pogo Producing Company is headquartered in Houston, Texas. POLYMER RESEARCH: U.S. Trustee Wants Chap. 11 Trustee Appointed --------------------------------------------------------------- Deirdre A. Martini, the U.S. Trustee for Region 2, asks the U.S. Bankruptcy Court for the Eastern District of New York to appoint a Chapter 11 Trustee for the estate of Polymer Research Corp. Ms. Martini gives four reasons why the Court should grant her request: a) based on investigations on the Debtor's pre-petition books and records, the Debtor's officers have breach their fiduciary duties by making inappropriate payments to themselves in the weeks and months prior to the filing of the bankruptcy petition; b) the Debtor's officers are still continuing in their attempts to make inappropriate payments to insiders, to the detriment of the estate's creditors; c) the Debtor's motion to the Court on December 16, 2004, for an order to sell certain real property contains a provision to disburse $250,000 of the sale proceeds to an insider, and d) further delay in appointing a Chapter 11 Trustee will result in further dissipation of the Debtor's estate. Ms. Martini believes these facts demonstrate causes to appoint a Chapter 11 Trustee pursuant to Section 1104(a) of the Bankruptcy Code. The Court will convene a hearing at 10:00 a.m., on February 24, 2005, to consider Ms. Martini's motion. Headquartered in Brooklyn, New York, Polymer Research Corp. of America -- http://www.polymer-ny.com/-- is a company devoted to research and development utilizing a proprietary process called chemical grafting. The Company filed for chapter 11 protection on October 1, 2004 (Bankr. E.D.N.Y. Case No. 04-24036). Randy M. Kornfeld, Esq., at Stavis & Kornfeld LLP, represents the Debtor in its restructuring. When the Debtor filed for protection from its creditors, it listed $15,000,000 in total assets and $5,033,000 in total liabilities. PUTNAM STRUCTURED: Fitch Downgrades Two Class C-1 Notes to BB+ -------------------------------------------------------------- Fitch Ratings has taken action on seven classes of notes issued by Putnam Structured Products CDO 2001-1 Ltd. These rating actions are effective immediately: These classes are affirmed: -- $56,000,000 class A-1MM-a notes at 'AAA/F1+'; -- $50,000,000 class A-1MM-b notes at 'AAA/F1+'; -- $105,000,000 class A-1SS notes at 'AAA'; -- $35,000,000 class A-2 notes at 'AAA'; -- $24,000,000 class B notes at 'AA'. These classes are downgraded: -- $8,337,683 class C-1 notes to 'BB+' from 'BBB'; -- $8,337,683 class C-2 notes to 'BB+' from 'BBB'. Putnam is a collateralized debt obligation - CDO -- managed by Putnam Advisory Company which closed Nov. 30, 2001. Putnam is composed of approximately: -- 38% residential mortgage-backed securities -- RMBS, -- 18% real estate investment trusts -- REITs, -- 10% commercial mortgage-backed securities -- CMBS, -- 9% consumer asset-backed securities -- ABS, -- 7% CDOs, and -- 6% commercial ABS. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. Since the last review, the weighted average rating of the assets has decreased to 'BBB-' from 'BBB/BBB-'. The class A/B overcollateralization - OC -- and class C OC ratios have decreased to 107.9% and 101.6%, respectively, as of the trustee report dated Dec. 31, 2004, from 112.1% and 105.1% as of the June 30, 2003 report. Assets rated 'BB+' or lower represented approximately 9.5% of the performing collateral. In addition, the class C adjusted OC ratio which adjusts the performing collateral balance by a percentage of the assets rated 'BB+' or lower is currently at 100.1% versus its trigger of 101.0%, and subsequently on the last three distribution dates the class C note balances have paid down with excess interest proceeds. The current interest rate environment has placed increased pressure on excess spread. Consequently, the terms of the interest rate swap, which were negotiated at closing, have created an excessive cash outflow on the transaction. To offset the cash outflow, Putnam Advisory has used a strategy that includes purchasing short-duration, U.S. agency mortgage derivatives, such as inverse floaters. Currently, the inverse floaters represent 2% of the portfolio. The inclusion of these 'AAA' bonds has the current effect of improving the weighted average rating factor - WARF -- and increasing the weighted average spread, however, the inverse floaters are very sensitive to Fitch's interest rate scenarios. The ratings reflect the effect of these securities and that of the interest rate swap on cash flows utilizing various interest rate scenarios. As a result of this analysis, Fitch has determined that the original ratings assigned to the class C-1 and class C-2 notes no longer reflect the current risk to noteholders. The rating of the class A-1MM, A-1SS, A-2, and B notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal, by the legal final maturity date. In addition, the rating on the class A-1MM notes addresses the noteholders' ability to put the notes back to the put provider on its next applicable remarketing date, which will be no later than one year from its prior remarketing date. The ratings of the class C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ RAINBOW MEDIA: S&P Lifts Corporate Credit Ratings to BB from B -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Bethpage, New York-based cable operator Cablevision Systems, Inc., and holding company CSC Holdings, Inc., including the 'BB' corporate credit rating. The ratings were simultaneously removed from CreditWatch. The outlook is positive. In addition, Standard & Poor's raised its ratings on Cablevision's Rainbow Media Enterprises, Inc., and Rainbow National Services LLC units and removed them from CreditWatch. The corporate credit rating was raised to 'BB' from 'B'. "The rating actions follow Cablevision's announcement that it has a definitive agreement to sell its Rainbow 1 satellite to EchoStar Communications Corp., along with ground facilities and related assets, for $200 million," said Standard & Poor's credit analyst Catherine Cosentino. "Discontinuation of the VOOM satellite business removes a major uncertainty surrounding Cablevision's credit profile, given the high business risk and attendant financing requirements of VOOM. Moreover, discontinuation of the satellite business is expected to materially improve the company's financial profile in 2005, given the ongoing start-up losses associated with VOOM." Excluding the satellite losses, the Cablevision's consolidated debt to annualized EBITDA for the three months ended Sept. 30, 2004, totaled about 6x, versus 7x with the satellite losses (including stock plan expense, adjusted for operating leases and financial guarantees, and excluding nonrecurring broadcast rights termination fees, a related liability reversal, and collateralized indebtedness). Ratings on Rainbow Media Enterprises and its subsidiary, Rainbow National Services, were raised to reflect the consolidated rating of parent Cablevision. Rainbow Media Enterprises was created as a vehicle to spin off the VOOM business and the American Movie Classics -- AMC/Independent Film Channel -- IFC/WE: Women's Entertainment -- WE -- programming assets to shareholders. Instead of spinning off these assets, however, Cablevision has decided to sell the VOOM business. Because the AMC/IFC/WE assets have considerable value, Cablevision is expected to continue to service Rainbow Media Enterprises' debt at Rainbow National Services. The senior unsecured and subordinated debt ratings of Rainbow National Services is 'B+', two notches below the 'BB' corporate credit rating, due to the substantial secured bank debt at Rainbow, which has priority in terms of payment in a bankruptcy. RELIANCE GROUP: Inks Tax Sharing Pact with Bank Committee --------------------------------------------------------- The Official Unsecured Bank Committee and the Official Unsecured Creditors Committee sought and obtained the U.S. Bankruptcy Court for the Southern District of New York's authority for Reliance Group Holdings to enter into, and perform any obligations under, a Tax Sharing Agreement, which will aid in the confirmation of Reliance Financial Services Corporation's Plan of Reorganization. Andrew P. DeNatale, Esq., at White & Case, in New York City, explains that the Committees and M. Diane Koken, the Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator of Reliance Insurance Company, have been negotiating various settlements, which set forth agreements on the allocation of various assets between RFSC, RGH and RIC. Under the PA Settlement, RGH is to enter into and perform any obligations under the Tax Sharing Agreement for the parties to realize their assets, before the Effective Date. Among other things, the Tax Sharing Agreement provides a mechanism for allocating certain tax attributes among RGH, RFSC and RIC, in accordance with the terms of the PA Settlement and the settlement between the Committees, on behalf of RFSC's and RGH's estates. The Tax Sharing Agreement contractually obligates RFSC and RIC to distribute to RGH its agreed-upon portion of any refunds that may become available from time to time as a result of "special estimated tax payments" made under Section 847 of the Internal Revenue Code by or on behalf of RGH. RGH's entry into, and performance of its obligations under, the Tax Sharing Agreement will facilitate RGH's receipt of its portion of the Section 847 Refunds and, thereby, increase the value of the RGH estate. Mr. DeNatale notes that the Court's previous approval of the PA Settlement provided sufficient authority for RGH to enter into the Tax Sharing Agreement. However, out of an abundance of caution, the Committees want the Court to specifically authorize RGH to enter into and perform any obligations under the Tax Sharing Agreement. The RFSC Plan filed by the Creditors' Committee contemplates that the Tax Sharing Agreement will have been entered into by all parties before the Effective Date. The Plan states that the Tax Sharing Agreement will control in the event of a conflict between the terms of that Agreement and the PA Settlement Agreement. A full-text copy of the Tax Sharing Agreement is available for free at: http://bankrupt.com/misc/tax_agreement.pdf Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIANCE GROUP: Court Confirms Creditors' Committee Plan for RFSC ----------------------------------------------------------------- Section 1129(a)(1) of the Bankruptcy Code provides that a reorganization plan must comply with the applicable provisions of the Bankruptcy Code. The legislative history and subsequent case law indicate that this provision requires that a plan satisfy Sections 1122 and 1123 of the Bankruptcy Code, which govern the classification of claims and the contents of the plan. On January 24, 2005, the Official Unsecured Creditors' Committee stepped Judge Gonzalez through the 13 statutory requirements under Section 1129(a) of the Bankruptcy Code necessary to confirm its First Amended Plan of Reorganization for Reliance Financial Services Corporation: A. The Plan complies with all applicable provisions of the Bankruptcy Code. As required by Rule 3016(a) of the Federal Rules of Bankruptcy Procedure, the Plan is dated and identifies the Creditors' Committee as the proponent of the Plan. As a result, the Plan satisfies the requirements of Section 1129(a)(1). B. The Creditors' Committee has complied with the applicable provisions of the Bankruptcy Code, satisfying Section 1129(a)(2). Specifically: (a) the Debtor is a proper debtor under Section 109 of the Bankruptcy Code; (b) the Creditors' Committee is a proper proponent of the Plan under Section 1121(c) of the Bankruptcy Code; (c) the Creditors' Committee has complied with all applicable provisions of the Bankruptcy Code, except as permitted by the Court; and (d) the Creditors' Committee has complied with the applicable provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Disclosure Statement Order in transmitting the Solicitation Materials and soliciting and tabulating votes on the Plan. C. The Plan is the result of extensive arm's-length negotiations among the Creditors' Committee, the Official Unsecured Bank Committee and M. Diane Koken, the Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator of Reliance Insurance Company, to reorganize RFSC and maximize the recovery to the Debtor's creditors. The Creditors' Committee has proposed the Plan in good faith and not by any means forbidden by law, thereby satisfying Section 1129(a)(3). D. Any payments for services or costs and expenses in connection with RFSC's Chapter 11 case, the Plan and incident to the Chapter 11 case, has been approved by, or is subject to approval of the Bankruptcy Court, thereby satisfying Section 1129(a)(4). E. The Creditors' Committee has disclosed the names and affiliations of each proposed officer and director for the Reorganized Debtor, and the members of the RFSC Advisory Committee, prior to the Confirmation Hearing. These appointments are consistent with the interests of creditors and equity security holders, and with public policy. There are no insiders that will be employed or retained by the Reorganized Debtor. Thus, Section 1129(a)(5)(B) is not applicable to the Chapter 11 Case. F. Section 1129(a)(6) is inapplicable to RFSC's case because the Plan does not contain rate changes for which a governmental regulatory commission has jurisdiction after confirmation. G. The Disclosure Statement and evidence presented at the Confirmation Hearing, or made part of the record of the Bankruptcy Court's consideration of the Plan, establish that each Holder of a Claim or Equity Interest in an impaired Class either has accepted the Plan or will receive or retain under the Plan, for the Claim or Equity Interest, property with a value, as of the Effective Date, that is not less than the amount that it would receive if the Debtor were liquidated under Chapter 7 of the Bankruptcy Code. Classes 2, 4a, 4b, 4c, and 5 are impaired under the Plan. Therefore, the Plan, satisfies the requirements of Section 1129(a)(7). H. Classes 1 and 3 are unimpaired and are presumed to have accepted the Plan. Classes 4a and 4b have voted to accept the Plan in accordance with Sections 1126(c) and (d). Class 2 did not vote to accept the Plan. Holders in Classes 4c and 5 are not entitled to receive or retain any property and are deemed to have rejected the Plan. Thus, the Creditors' Committee, as the proponent of the Plan, requested that the Court confirm the Plan under Section 1129(b) because the requirements of Section 1129(a)(8) have not been satisfied with respect to Classes 2, 4c and 5. I. The treatment of Administrative Claims under Sections 3.1, 3.2 and 3.3 of the Plan satisfies the requirements of Section 1129(a)(9)(A), the treatment of Classified Priority Claims under Section 5.1 of the Plan satisfies the requirements of Section 1129(a)(9)(B) and the treatment of Priority Tax Claims under Section 3.4 of the Plan satisfies the requirements of Section 1129(a)(9)(C). J. At least one Class of Claims that is impaired under the Plan has voted to accept the Plan, determined without including any acceptance of the Plan by any "insider." Accordingly, the Plan satisfies Section 1129(a)(10). K. The Plan is determined to be feasible because confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of the Reorganized Debtor, satisfying Section 1129(a)(11). L. All fees payable under 28 U.S.C. Section 1930 either have been paid or will be paid by the Effective Date pursuant to Section 14.9 of the Plan. Fees or charges assessed against RFSC's Estate under 28 U.S.C. Section 1930 will be paid as soon as practicable. The Plan provides that, except if the Office of the United States Trustee agrees to a different treatment, the Reorganized Debtor will pay fees or charges through the entry of a final closing decree in this case. Accordingly, the Plan satisfies Section 1129(a)(12). M. The Debtor has no retiree benefits within the meaning of Sections 1114 and 1129(a)(13). As a result, Section 1129(a)(13) does not apply in this instance. In accordance with Section 5.2 of the Plan, the Bank Claims are allowed for $252,944,097. On the Effective Date, all Litigation Claims will be assigned to Reliance Group Holdings and managed by the Creditors' Committee or a liquidating trustee. RGH, or its designee, will litigate the Litigation Claims. If Litigation Proceeds are recovered from the Litigation Claims or from the Directors & Officers Litigation, RGH or its designee will pay to Reorganized RFSC the RFSC Litigation Proceeds. Reorganized RFSC will hold RFSC Litigation Proceeds in trust for the benefit of the Litigation Proceeds Claimants. The RFSC Litigation Proceeds will not constitute property of Reorganized RFSC. Pursuant to Section 505(a)(1), on September 27, 2004, the Court issued findings of fact, conclusions of law or other rulings for the plan of reorganization proposed by the Bank Committee. The 505 Order addressed: a) the ability of the RFSC Tax Group to succeed to the "special estimated tax payments" made by RGH pursuant to Section 847 of the Internal Revenue Code; b) the liability of Reliance Insurance Company for tax imposed under Section 831 of the Tax Code; c) the inapplicability of the first sentence of Section 847(6)(A) of the Tax Code to RIC; d) the absence of need to designate "special estimated tax payments" on a tax return for the payments to be treated as special estimated tax payments refundable pursuant to Section 847 of the Tax Code; e) the inapplicability of the NOL limitations of Section 382(a) of the Tax Code to an ownership change from the plan of reorganization proposed by the Bank Committee; f) the absence of tax avoidance as the purpose of the plan proposed by the Bank Committee; and g) the active trade or business conducted by RFSC subsequent to the Petition Date, within the meaning of Treasury Regulation Section 1.269-3(d). Consequently, Judge Gonzalez rules that the Creditors Committee's Plan is substantially identical to the plan of reorganization proposed by the Bank Committee when the 505 Order was issued. Any differences, including changes in the Plan proponent, do not materially alter the findings contained in the 505 Order. The differences between the Plan and the plan of reorganization proposed by the Bank Committee do not adversely impact any components of the 505 Order, as applied to the Creditors Committee's Plan. High River's Objection Judge Gonzalez rules that High River Limited Partnership's withdrawal of its confirmation objection after the objection deadline rendered the objection a nullity. Therefore, the Notice of Reinstatement, which was filed after the objection deadline, did not relate back to the previously filed objection. The equities did not support permitting High River to file an objection to confirmation after the objection deadline. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 68; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIANT BUILDING: Alenco Asks Court to Close Chapter 11 Cases ------------------------------------------------------------- Alenco Holding Corporation, as Plan Administrator of the Reorganized Reliant Building Products, Inc., and its debtor- affiliates' under the confirmed First Amended Joint Plan of Reorganization, ask the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, to enter a final decree closing the Debtors' chapter 11 cases. Under the Plan, Alenco and certain affiliate companies purchased certain assets of the Debtor. Alenco was granted the sole responsibility of reviewing, filing, compromising or litigating to a cash recovery all Debtor Actions and filing and prosecuting objections to claims. Alenco has completed distributions to creditors whose claims have been allowed as required by the Plan and the Plan has been substantially consummated. A hearing is set on Feb. 14, 2005, at 9:00 a.m., to consider the closing of the Debtors' bankruptcy cases. Objections, if any, must be filed with the: U.S. Bankruptcy Clerk 1100 Commerce Street Room 12A24 Dallas, Texas 75242 Reliant Building Products, Inc. together with its 12 subsidiaries and affiliates filed voluntary Chapter 11 petitions on July 11, 2000 (Bankr. N.D. Tex. Case No. 00-34446). On March 15, 2001, the Bankruptcy Court confirmed the Debtors' First Amended Plan of Reorganization. RUSSEL METALS: Look for Year-End Financial Report on February 24 ---------------------------------------------------------------- Russel Metals, Inc.'s (TSX:RUS) results for the 2004 fourth quarter and year-end will be issued on Thursday, Feb. 24, 2005. An Investor Conference Call will be hosted by Edward M. Siegel, Jr., President and Chief Executive Officer and Brian R. Hedges, Executive Vice President and Chief Financial Officer on Friday, February 25, 2005 at 9:00 a.m. ET to review the results. The dial-in telephone number for the call is 1-800-291-5032. For those unable to participate in the conference call, it will be recorded and available for listening at 1-800-558-5253 until midnight, March 4th You will be required to enter reservation number 21214189 in order to access the call. Russel Metals is one of the largest metals distribution companies in North America. It carries on business in three metals distribution segments: service center, energy tubular products and import/export, under various names including Russel Metals, A.J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Armabec, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Drummond McCall, Ennisteel, Fedmet Tubulars, Leroux Steel, McCabe Steel, Megantic Metal, Metaux Russel, Milspec Industries, Poutrelles Delta, Pioneer Pipe, Russel Leroux, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Vantage Laser, Wirth Steel and York Steel. * * * As reported in the Troubled Company Reporter on February 9, 2004, Standard & Poor's Ratings Services raised its ratings on Russel Metals, Inc., including the long-term corporate credit rating, which was raised to 'BB' from 'BB-'. At the same time, Standard & Poor's assigned its 'BB-' rating to Russel Metals' proposed US$175 million notes. The rating on the notes is one notch lower than the long-term corporate credit rating, reflecting the significant amount of priority debt, including secured bank lines and subsidiary obligations, which would rank ahead of the notes in the event of default. The outlook is stable. SELECT MEDICAL: Launching $660MM Sr. Debt Offer to Finance Merger ----------------------------------------------------------------- Select Medical Corporation (NYSE: SEM) disclosed its intention to issue under Rule 144A and Regulation S up to $660 million principal amount of senior subordinated notes due 2015. The net proceeds of the offering will be used to provide a portion of the funds necessary to: -- finance Select's previously announced merger with an affiliate of Welsh, Carson, Anderson & Stowe IX, L.P., -- refinance certain of Select's existing indebtedness, and -- pay related fees and expenses. The simultaneous completion of the merger is one of the conditions to the offering. Select anticipates completing the offering in February 2005. This announcement is not an offer to sell nor a solicitation of an offer to buy the securities described herein. Select is offering the notes in reliance upon exemptions from registration under the Securities Act of 1933 for offers and sales of securities that do not involve a public offering. The securities to be offered have not been and will not be registered under the Securities Act of 1933 or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. About the Company Select Medical is a leading operator of specialty hospitals in the United States. Including the SemperCare acquisition completed on January 1, 2005, Select Medical operates 99 long-term acute care hospitals in 26 states. It operates four acute care medical rehabilitation hospitals in New Jersey and is a leading operator of outpatient rehabilitation clinics in the United States and Canada, with approximately 750 locations. Select Medical also provides medical rehabilitation services on a contracted basis at nursing homes, hospitals, assisted living and senior care centers, schools, and worksites. For the nine months ended September 30, 2004, Select Medical reported total revenues of $1.24 billion. * * * As reported in the Troubled Company Reporter on Jan. 20, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Select Medical Corp. to 'B+' from 'BB-'. Standard & Poor's also assigned its 'BB-' rating and its recovery rating of '1' to Select Medical's $880 million proposed senior secured bank credit facility. Select Medical Corp. is a wholly owned subsidiary of EGL Holding Co. -- Holdco. The facility is rated one notch above the company's corporate credit rating; this and the '1' recovery rating mean that lenders are likely to realize full recovery of principal in the event of a bankruptcy. At the same time, Standard & Poor's assigned its 'B-' rating to $660 million in senior subordinated notes due in 2015 that are also obligations of Select Medical Corp. The ratings are removed from CreditWatch where they were originally placed May 12, 2004, following the announcement of a proposed Medicare regulatory change, and updated for the upcoming LBO. The proceeds, along with new equity, will finance the acquisition of the company by Welsh, Carson, Anderson & Stowe, Thoma Cressey Equity Partners, and certain members of Select's senior management team in a transaction valued at $2.2 billion, or 8.3x 2004 estimated EBITDA. As of Sept. 30, 2004, Mechanicsburg, Penssylvania-based Select's total debt outstanding was $355 million. With the completion of the transaction, total debt outstanding will increase to about $1.6 billion. The ratings on the existing subordinated notes will be withdrawn. The outlook is negative. "The speculative-grade rating on Select Medical Corp. reflects its relatively narrow service niche as an operator of long-term acute-care -- LTAC -- hospitals and outpatient rehabilitation clinics, and LTAC challenges related to the fact that nearly half of the company's revenues are derived from Medicare, which is subject to reimbursement risk," said Standard & Poor's credit analyst David Peknay. "The rating also reflects the company's ongoing expansion efforts, which challenge its ability to extend its recent successes." As reported in the Troubled Company Reporter on Jan. 18, 2005, Moody's Investors Service assigned new ratings (senior implied at B1) to Select Medical Corporation (New) in connection with the proposed leveraged buyout of the company by an investor group. The new ratings primarily reflect the company's heightened financial risk following the proposed transaction. Simultaneously, Moody's lowered the existing ratings of Select Medical Corporation, which primarily reflects the risks associated with the transition to new Medicare reimbursement guidelines and the company's increased appetite for financial leverage. SEMINIS VEGETABLE: Moody's Reviews Ratings for Possible Upgrade --------------------------------------------------------------- Moody's Investors Service placed the ratings of Seminis Vegetable Seed, Inc. under review for possible upgrade following the announcement that Monsanto Company (Baa1 senior unsecured) has signed a definitive agreement to acquire Seminis, Inc., the holding company of Seminis Vegetable Seed, Inc., for $1.4 billion plus a performance-based payment of up to $125 million by the end of fiscal year 2007. Upon closing of the purchase by Monsanto Company, expected to be completed during the first half of 2005, and retirement of Seminis Vegetable's existing debt, Moody's will withdraw its ratings on Seminis. The ratings under review for possible upgrade: * $75 million senior secured revolver, maturing 9/08 - Ba3, * $90 million senior secured term loan, maturing 9/09 - Ba3, * $340 million 10.25% senior subordinated notes, due 2013 - B3, * Senior implied - B1, * Unsecured issuer rating - B2. Seminis, Inc., which has headquarters in Oxnard, California, is a developer, producer and marketer of vegetable and fruit seeds with sales in more than 150 countries. The Company reported FY04 (ending 9/30/04) revenue of $526 million. SILICON GRAPHICS: Sept. 24 Balance Sheet Upside-Down by $150.8-Mil ------------------------------------------------------------------ Silicon Graphics (NYSE: SGI) reported the results for its second fiscal quarter, which ended December 24, 2004. Revenue for the quarter was $223 million, compared with $175 million for the first quarter ended September 24, 2004. Gross margin was 37.5% in the second quarter, up from 35.9% in the first quarter. SGI's second- quarter operating loss from continuing operations was $9 million, compared with an operating loss of $26 million in the first quarter. The second-quarter net loss from continuing operations was $11 million or $0.04 per share, compared with a net loss of $28 million or $0.11 per share last quarter. GAAP operating expenses for the second quarter were $93 million, compared with $89 million for the first quarter. Non-GAAP operating expenses for the second quarter were $88 million, excluding $5 million recorded as other operating expense. This compares with prior quarter non-GAAP operating expenses of $86 million excluding $3 million in other operating expense. These other operating expenses consisted of primarily charges associated with facilities consolidation. Management believes that a non- GAAP presentation of operating expenses is useful to investors to facilitate period to period comparisons of SGI's operating results. "Altix revenues continue to build during the second quarter as we successfully installed the world's fastest production computer at NASA's Ames Research Center and the world's largest shared memory computer in Japan," said Bob Bishop, chairman and CEO of SGI. "Furthermore, Silicon Graphics Prism has been successfully launched into the visualization market. Nevertheless, we continue to fall short of our profitability objectives and will take steps to lower expenses accordingly." Unrestricted cash, cash equivalents and marketable investments on December 24, 2004 were $106 million. About the Company Silicon Graphics, also known as Silicon Graphics, Inc. -- whose March 26, 2004 balance sheet shows a stockholders' deficit of $164,448,000 -- is the world's leader in high-performance computing, visualization and storage. With offices worldwide, the company is headquartered in Mountain View, Calif., and can be found on the Web at http://www.sgi.com/ At Sept. 24, 2004, Silicon Graphics' balance sheet showed $150,829,000, compared to a $122,678,000 deficit at June 25, 2004. SOUTH STREET: Fitch Holds Junk Ratings on Five Note Classes ----------------------------------------------------------- Fitch Ratings upgrades the ratings on two classes of notes issued by South Street CBO 2000-1, Ltd., a collateralized bond obligation - CBO -- backed by high yield bonds. The ratings on one class of notes are affirmed and the ratings on the other classes of notes remain unchanged. This class is paid in full: -- Class A-1L notes 'PIF'. This class is affirmed: -- $72,678,214 class A-2L notes 'AAA'. These classes are upgraded: -- $15,000,000 class A-3L notes to 'BBB-' from 'BB+'; -- $30,000,000 class A-3 notes to 'BBB-' from 'BB+'. These classes remain unchanged: -- $20,000,000 class A-4L notes 'CC'; -- $8,000,000 class A-4A notes 'CC'; -- $10,000,000 class A-4C notes 'CC'; -- $15,000,000 class B-1 notes 'C'; -- $4,354,790 class B-2 notes 'C'. According to its Dec. 17, 2004, trustee report, the South Street 2000-1 portfolio collateral includes a par amount of $18 million of defaulted assets, representing 10.7% of aggregate collateral principal balance. The senior class A overcollateralization -- OC -- test (which includes the class A-2L, A-3L, and A-3 notes) is passing at 133.2% versus a trigger of 120%. The class A, B, and total OC tests are failing at 99.96%, 86.59%, and 78.06, versus their triggers of 110%, 103%, and 108%, respectively. The upgrade of the class A-3L and A-3 notes reflects the continued paydown of the class A-2 notes and the continued improvement in the senior class A OC test. In addition, Fitch has reviewed the results of cash flow model runs, incorporating several different default and interest rate stress scenarios. Also, Fitch discussed with Colonial Management Associates, Inc., the investment advisor, their expectations and opinions of the portfolio. Deal information and historical data on South Street CBO 2000-1, Ltd., is available on the Fitch Ratings web site at http://www.fitchratings.com/ STEVENOT WINERY: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Stevenot Winery and Imports, Inc. 2690 San Domingo Road Murphys, California 95247 Bankruptcy Case No.: 05-90138 Type of Business: The Debtor operates a winery. See http://www.stevenotwinery.com/ Chapter 11 Petition Date: January 24, 2005 Court: Eastern District Of California (Modesto) Judge: Thomas Holman Debtor's Counsel: Daniel L. Egan, Esq. Wilke, Fleury, Hoffelt, Gould & Birney, LLP 400 Capitol Mall 22nd Floor Sacramento, CA 95814 Tel: 916-441-2430 Total Assets: $7,663,000 Total Debts: $6,425,281 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ McGuigan Simeon Wines Ltd. Trade debt $1,900,000 Level 2, 170 Greenhill Road Parkside, SA 5063 Winebow, Inc. Trade debt $42,184 75 Chestnut Ridge Road Wanaque, NJ 07465 Pine State Trading Co. Trade debt $23,242 100 Enterprise Avenue Gardiner, ME 04345 Caliber Wine Group Trade debt $18,883 Scott Laboratories Trade debt $14,749 Silvaspoons Vineyards Trade debt $21,272 Value of Collateral: $8,420 Unsecured Value: $12,852 Rolleri Vineyards Trade debt $70,295 Value of Collateral: $61,047 Unsecured Value: $9,248 Zusman and Associates, LLP Trade debt $8,225 Sonoma County Vintners Co-Op $7,661 Classic Wine Imports-Boston Trade debt $7,818 Ramondin USA, Inc. Trade debt $7,575 Vance Bishop Trade debt $6,899 Worldwide Wines, Inc. Trade debt $5,450 United Parcel Service Trade debt $5,076 Whisper Consulting, LLC Trade debt $4,962 Tapp Technologies, Inc. Trade debt $4,580 GMAC Value of Collateral: $36,717 $31,940 Unsecured Value: $4,777 Solomon Wine Company, Inc. Trade debt $4,727 Mark Collins $4,600 The Woodworks $3,966 STOTT RANCH: Church Harris Approved as Bankruptcy Counsel --------------------------------------------------------- The U.S. Bankruptcy Court for the District of Montana gave Stott Ranch Inc., permission to employ Church, Harris, Johnson & Williams, P.C., as its general bankruptcy counsel. Church Harris will: a) provide legal advice to the Debtor with respect to its powers and duties as a debtor-in-possession in the continued operation of its business and management of its property; b) prepare on behalf of the Debtor all necessary applications, answers, motions, orders, reports, a chapter 11 plan and disclosure statement, and other legal papers; c) assist and represent the Debtor in adversary proceedings and in litigations that may be filed against the estate; and d) perform all other legal services to the Debtor that are necessary in its chapter 11 case. Steven M. Johnson, Esq., a Shareholder at Church Harris, is the lead attorney for the Debtor. Mr. Johnson discloses that the Firm had not yet received a retainer in its representation of the Debtor. Mr. Johnson will bill the Debtor $200 per hour for his services. Mr. Johnson reports Church Harris' professionals bill: Designation Hourly Rate ----------- ----------- Counsel $115 - $180 Paralegals $75 Church Harris assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in Choteau, Montana, Stott Ranch Inc., filed for chapter 11 protection on January 13, 2005 (Bankr. D. Mont. Case No. 05-60078). When the Debtor filed for protection from its creditors, it listed total assets of $7,629,000 and total debts of $2,571,070. TENET HEALTHCARE: Fitch Rates New $500MM Sr. Unsecured Notes at B- ------------------------------------------------------------------ Fitch has rated Tenet Healthcare Corp.'s new $500 million senior unsecured notes issue due 2015 a 'B-' rating, consistent with the company's existing senior unsecured ratings that have also been affirmed by Fitch. The Rating Outlook remains Negative. Proceeds from the new issue are expected to repurchase outstanding Tenet debt maturing in 2006 and 2007. If the debt repurchase is completed as planned, Tenet will greatly improve its maturity schedule, and the company will face no significant maturities until 2011. Tenet's rating reflects the company's high leverage, continued operational difficulties, and potential cash burn in 2005, coupled with a modestly challenging industry environment. Operationally, some encouraging signs have emerged, primarily the company's progress with managed care payors. However, the industry environment remains somewhat challenging owing to continued soft volume trends and continued bad debt concerns, and several of THC facilities continue to underperform with EBITDA margins significantly below industry averages. Fitch expects modest EBITDA margin improvement in 2005 spurred by soon-to-be-announced restructuring efforts and improved managed care pricing. Fitch anticipates that Tenet is likely to burn through $150 million-$200 million in free cash flow (after capital expenditures) in 2005. However, tax refunds and additional divestiture proceeds (mainly A/R liquidation) should allow Tenet to maintain a significant cash balance from $750 million-$1 billion. Tenet's current cash balance is approximately $770 million, and total debt is approximately $4.5 billion. The company recently canceled its $800 million secured bank credit facility and replaced it with a cash-collateralized, $250 million facility to backstop various letters of credit. Fitch notes with concern the lack of a more standard and permanent facility; however, the company's current cash balance, in Fitch's view, provides sufficient liquidity in the interim. On Dec. 31, 2004, Tenet paid $395 million to a settlement fund to settle outstanding patient liability claims against a former Tenet hospital in Redding, California. The settlement is expected to be tax deductible. Fitch cites the Redding settlement as a positive, as the amount was within Fitch expectations and it eliminates one of the more serious legal challenges the company was facing. The Negative Outlook reflects the operational difficulties noted above plus the host of still ongoing investigations primarily regarding the company's previous pricing strategy and physician relationships among other matters plus pending shareholder suits. Tenet's leverage (total debt/EBITDA) for the last 12 months ended Sept. 30, 2004, was 6.7 times and coverage (EBITDA/interest) was 2.0x. TENET HEALTHCARE: S&P Rates Proposed $500M Sr. Unsec. Notes at B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Tenet Healthcare Corp.'s proposed $500 million senior unsecured notes due 2015. At the same time, Standard & Poor's affirmed Tenet's 'B' corporate credit rating, raised its ratings on Tenet's senior unsecured notes to 'B' from 'B-', and withdrew its bank loan and recovery ratings. The change in the senior unsecured notes rating does not reflect any change in the company's credit profile, but rather the elimination of structural subordination of the unsecured parent company debt that had existed prior to the recent cancellation of the company's secured bank facility. Tenet's new one-year, $250 million letter-of-credit facility, though senior to Tenet's unsecured notes, does not materially disadvantage them. Proceeds from the new notes will be used to refinance existing debt, eliminating any significant debt maturities until 2011. "The low-speculative-grade ratings on Tenet Healthcare Corp. reflect expectations of weak operating performance and cash flow over the next year and the uncertain impact of the company's numerous strategic initiatives to improve its long-term prospects," said Standard & Poor's credit analyst David Peknay. "This offsets the size and scale of the company's otherwise still-considerable hospital facility base after it completes its pending asset sales." Tenet, based in Santa Barbara, California, had about $4.5 billion of debt outstanding as of Sept. 30, 2004. The company is undergoing a major corporate overhaul in order to ensure its long-term viability. It has sold a significant number of its hospitals and will keep a core of about 69 of its more profitable facilities. The company is adjusting to significant reductions in its reimbursement from Medicare and private insurance companies, given third-party payor scrutiny following prior Tenet billing practices. The company is transforming its management structure to better control operations and to improve its low operating margins. The majority of its top 100 officers have been replaced, and the company is looking at several ways to improve operating efficiency. Tenet's relocation of its corporate headquarters to Dallas, Texas, symbolizes the company's new cost-conscious, operations-focused culture. TENET HEALTHCARE: Moody's Rates New $500M Sr. Unsec. Notes at B3 ---------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to Tenet Healthcare's new $500 million senior unsecured note offering pursuant to Rule 144A. At the same time, Moody's affirmed the Company's B2 senior implied rating and other long-term ratings and its SGL-4 speculative grade liquidity rating. The ratings outlook remains negative. Moody's understands that the proceeds from this new issue will be used largely to refinance all remaining 2006 and 2007 debt maturities. In addition, depending on final issuance size, the company expects to have some additional funds available to support cash balances, which have been depleted to about $500 million following the recent $395 million Redding settlement and a collateral requirement for Tenet's outstanding LOCs under a new temporary loan agreement. The ratings incorporate the expectation that Tenet Healthcare will be able to collect a tax refund related to facility divestitures within the next several months, raising cash balances to at least the $1 billion range during the second quarter of 2005. While the elimination of near-term debt maturities is viewed favorably, Moody's B3 senior unsecured ratings and SGL-4 rating reflect Tenet Healthcare's weak liquidity position as a result of negative free cash flow, and uncertainty related to the timing and amount of potential cash outlays for outstanding litigation. Moody's believes that operating performance remains a critical risk factor for Tenet Healthcare. The current ratings assume that free cash flow will be negative for fiscal year 2005. Moody's will evaluate the Company's progress toward improving operations and reversing negative free cash flow trends. Moody's plans to study the revenue and cash flow prospects for Tenet's remaining facilities to evaluate their relative contribution to the enterprise. The distribution of cash flows across the facilities may affect Moody's perception of the Tenet Healthcare's financial strength. Operating challenges - some of which are sector-wide in nature - include weak volume growth trends and higher bad debt expense. For Tenet Healthcare, recent negative volume growth trends have been partially attributed to the overhang from investigations. In addition, the Company has cited that progress being made in achieving better managed care rate increases has been impeded by the success of large national plans - with greater negotiating clout - pushing aside regional plans. Further, the continued loss of volume in patients enrolled in higher-priced managed care products, which tend to provide better rates, has hurt profitability. The ratings also incorporate continued concerns regarding the departure of the vast majority of senior management during the past 12-18 months. The rating outlook is negative and reflects the high level of uncertainty associated with current operating performance and cash flow as well as the potential for significant cash needs associated with outstanding litigation. If debt levels rise materially or if Tenet Healthcare 's operating performance fails to improve, the ratings could be lowered. If the priority of claim of senior unsecured creditors is compromised by significant levels of new secured borrowings, the ratings of the existing senior unsecured creditors would likely be lowered. Factors which could lead to stabilization of the rating outlook include improvement of liquidity through stabilization of operations and breakeven free cash flow after assuming a restored level of capital spending. Clarity surrounding the DOJ investigation and the tax settlement would be additional considerations. The B3 senior unsecured ratings continue to be notched below the B2 senior implied rating due to two factors: 1. Tenet Healthcare continues to maintain secured debt in the form of a temporary LOC loan, and 2. Moody's believes that if Tenet were to enter into a new bank agreement, the bank lenders would likely have a more secured position compared with the senior unsecured creditors. The rating assigned: -- Tenet Healthcare Corporation: * B3 $500 million senior unsecured notes. The ratings affirmed: -- Tenet Healthcare Corporation: * B2 senior implied; B3 issuer rating; B3 senior unsecured note ratings; SGL-4 speculative grade liquidity rating. Headquartered in Dallas, Texas, Tenet Healthcare Corporation operates 69 hospitals and is among the nation's largest hospital companies. TOUCH AMERICA: Trustee Wants Until June 3 to Object to Claims ------------------------------------------------------------- Chanin Capital Partners -- the Plan Trustee appointed to facilitate the liquidation of Touch America Holdings, Inc., and its debtor-affiliates' estates pursuant to their confirmed Amended Liquidating Chapter 11 Plan -- asks the U.S. Bankruptcy Court for the District of Delaware for an extension until June 3, 2005, of the Claims Objection Deadline. The current deadline is set on Feb. 3, 2005. To date, the Trustee has objected to approximately 595 of the 1,000 claims filed against the Debtors' estates. The Trustee submit that it needs more time to thoroughly review and evaluate the remaining claims. Also, the Trustee continues to negotiate for a consensual resolution of many disputed claims. Headquartered in Butte, Montana, Touch America Holdings, Inc., through its principal operating subsidiary, Touch America, Inc., develops, owns, and operates data transport and Internet services to commercial customers. The Company filed for chapter 11 protection on June 19, 2003 (Bankr. D. Del. Case No. 03-11915). Maureen D. Luke, Esq. and Robert S. Brady, Esq. at Young Conaway Stargatt & Taylor, LLP represent the Debtor. When the Company filed for bankruptcy protection, it listed $631,408,000 in total assets and $554,200,000 in total debts. The Debtors Plan became effective on October 19, 2004. TRUMP HOTELS: UBS Securities Performs Valuation Analysis -------------------------------------------------------- At the behest of Trump Hotels & Casino Resorts, Inc.'s Board of Directors, UBS Securities, LLC, undertook an analysis of the estimated range of the going concern enterprise value of Reorganized THCR, on a consolidated basis, after giving effect to the reorganization as set forth in the Plan. UBS completed its analysis on November 2, 2004. Subject to certain assumptions, limitations and qualifications, UBS estimates the going concern enterprise value of Reorganized THCR as of the assumed Plan Effective Date of December 31, 2004, to be between $1,750,000,000 and $2,150,000,000. THCR President and Chief Operating Officer Scott C. Butera says UBS' estimated going concern enterprise value represents a hypothetical valuation of Reorganized THCR, assuming that Reorganized THCR continues as an operating business. The estimated going concern enterprise value does not purport to constitute an appraisal or necessarily reflect the actual market value that might be realized through a sale or liquidation of Reorganized THCR, its securities or its assets, which value may be significantly higher or lower than the UBS estimate. The estimated going concern enterprise value is not necessarily indicative of the prices at which the new common stock or other securities of Reorganized THCR may trade after giving effect to the reorganization under the Plan, which prices may be significantly higher or lower than implied by the estimate. In conducting its analysis, UBS: -- reviewed certain publicly available business and historical financial information relating to THCR; -- reviewed certain internal financial information and other data relating to the business and financial prospects of Reorganized THCR, including the projections prepared by THCR's management; -- conducted discussions with members of THCR's senior management concerning the business and financial prospects of Reorganized THCR; -- reviewed publicly available financial and stock market data with respect to certain other companies in lines of business UBS believed to be comparable in certain respects to Reorganized THCR's businesses; -- reviewed the financial terms, to the extent available, of certain transactions that UBS believed to be generally relevant; -- reviewed information available with respect to the trading of THCR's securities; -- reviewed the Restructuring Support Agreement and the Summary Stand-alone Restructuring Term Sheet dated October 20, 2004; and -- conducted other financial studies, analyses and investigations, and considered other information, as UBS deemed necessary or appropriate. The actual value of an operating business is subject to various factors. Many of those factors, Mr. Butera admits, are beyond the control or knowledge of THCR or UBS, and the value will fluctuate with changes in the factors. The market prices of Reorganized THCR's securities will also depend on, among others, prevailing interest rates, conditions in the financial markets, the investment decisions of prepetition creditors receiving the securities under the Plan. There can also be no assurance as to the trading market that may be available in the future with respect to Reorganized THCR's securities. Mr. Butera makes it clear that UBS' analysis was undertaken solely for the purpose of assisting THCR's Board in evaluating the Plan and the distributions that holders of claims and interests will receive under the Plan. UBS' analysis addresses the estimated going concern enterprise value of Reorganized THCR and does not address any other aspect of the proposed reorganization, the Plan or any other transactions, and does not address the Debtors' underlying business decision to effect the reorganization as provided in the Plan. UBS has not been asked to, nor did UBS, express any view as to what the value of Reorganized THCR's securities will be when issued pursuant to the Plan or the prices at which they may trade in the future. Mr. Butera points out that UBS' estimated going concern enterprise value of Reorganized THCR does not constitute an opinion as to fairness from a financial point of view to any person of the consideration to be received by the person under the Plan or of the terms and provisions of the Plan. UBS based its analysis in Reorganized THCR's achieving the projections prepared by management. The financial results reflected in the Projections are in certain respects materially better than the recent historical results of operations of THCR. Reorganized THCR's actual future results may differ materially from the Projections and the differences may affect the value of Reorganized THCR. Methodology In preparing its valuation, UBS utilized these methods: A. Discounted Cash Flow Analysis UBS performed a discounted cash flow analysis to estimate the present value of Reorganized THCR's future consolidated unlevered, after-tax cash flows available to debt and equity investors based on the Projections. UBS used the Projections of Reorganized THCR's consolidated cash flow through 2009 and calculated the present value of the terminal value as of 2009. To calculate the terminal value as of 2009, UBS applied a range of forward EBITDA multiples to the estimated 2010 EBITDA of Reorganized THCR. The 2010 EBITDA was estimated based on the 2009 EBITDA projected in the Projections grown by a growth rate to reflect THCR's estimate of the growth rate of its market. UBS then applied a range of discount rates to arrive at a range of present values of those cash flows and terminal values. UBS also reviewed the growth rates of the terminal year cash flow in perpetuity implied by the terminal values arrived at using the EBITDA method. Moreover, the discounted cash flow analysis involves complex considerations and judgments concerning appropriate adjustments to terminal year EBITDA, EBITDA multiples, and discount rates. B. Selected Publicly Traded Companies Analysis UBS analyzed the market value and trading multiples of selected publicly held companies in lines of business UBS believed to be comparable in certain respects to the line of business of Reorganized THCR. UBS calculated the enterprise value of the selected companies as a multiple of certain historical and projected financial data of the companies, making appropriate adjustments to reflect recent or pending acquisitions by the companies on a pro forma basis. UBS then analyzed those multiples and compared them with multiples derived by assigning a range of enterprise values to Reorganized THCR and dividing those enterprise values by the corresponding historical and projected financial data of Reorganized THCR. The projected financial data for Reorganized THCR were based on the Projections and the projected financial data for the selected companies were based on publicly available research analyst reports and other publicly available information. Although the selected companies were used for comparison purposes, no selected company is either identical or directly comparable to the business of Reorganized THCR. Accordingly, UBS' comparison of the selected companies to the business of Reorganized THCR and analysis of the results of the comparisons was not purely mathematical, but instead necessarily involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the relative values of the selected companies and of Reorganized THCR. C. Selected Transactions Analysis UBS reviewed selected recently completed or announced transactions involving companies in lines of business UBS believed to be comparable in certain respects to Reorganized THCR. UBS calculated the enterprise value of the companies implied by the transactions as a multiple of certain projected financial data of the companies. UBS then analyzed those multiples and compared them with the multiples derived by assigning a range of enterprise values to Reorganized THCR and dividing those enterprise values by the corresponding projected financial data of Reorganized THCR. Although the selected transactions were used for comparison purposes, no selected transaction is either identical or directly comparable to the transaction contemplated by the Plan and no companies involved in the selected transactions were either identical or directly comparable to reorganized THCR. UBS' analysis of the selected transactions was also not purely mathematical, but instead necessarily involved complex considerations and judgments concerning differences in transaction structure, financial and operating characteristics of the companies involved and other factors that could affect the relative values achieved in the transactions and the estimated going concern enterprise value of Reorganized THCR. Assumptions With THCR's consent, UBS made these assumptions: 1) The Plan will be confirmed and consummated in accordance with its terms, and THCR will be reorganized as provided for in the Plan. The Plan will not differ in any material respect from the terms described in the Restructuring Support Agreement and the Summary Standalone Restructuring Term Sheet dated October 20, 2004. 2) The Effective Date will be December 31, 2004. 3) Reorganized THCR will achieve the Projections including and in particular the completion as scheduled and budgeted of an expansion and new hotel tower at Trump Taj Mahal. 4) Reorganized THCR's capitalization and available cash will be as provided in the Plan and the Disclosure Statement. In particular, the pro forma indebtedness of reorganized THCR as of the Effective Date will be $1,465,200,000. 5) Certain tax benefits and attributes will be available to Reorganized THCR, as reflected in the Plan and the Projections. 6) Reorganized THCR will be able to obtain all future financings, on the terms and at the times, necessary to achieve the Projections. 7) Neither THCR nor Reorganized THCR will engage in any material asset sales or other strategic transaction, and no asset sales or strategic transactions are required to meet Reorganized THCR's ongoing cash requirements. 8) All governmental, regulatory or other consents and approvals necessary for the consummation of the Plan will be obtained without any material adverse effect on Reorganized THCR or the Plan. 9) There will not be any material change in the business, condition, results of operations, assets, liabilities or prospects of THCR other than as reflected in the Projections. 10) There will not be any material change in economic, market, financial and other conditions. Analyses Must be Considered as a Whole The preparation of a valuation analysis is a complex analytical process involving various judgmental determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to particular facts and circumstances, and the analyses and judgments are not readily susceptible to summary description. UBS believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all its analyses, could create a misleading or incomplete view of the processes underlying UBS' conclusions. UBS did not draw, in isolation, conclusions from or with regard to any one analysis or factor, nor did UBS place any particular reliance or weight on any individual analysis. Rather, UBS arrived at its views based on all the analyses undertaken by it, assessed as a whole. For purposes of UBS' analysis, the estimated going concern enterprise value of Reorganized THCR equals the value of its fully diluted common equity, plus its outstanding debt, minus cash, determined based on Reorganized THCR, on a consolidated basis, as an operating business, after giving effect to the reorganization set forth in the Plan. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor- affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. TRUMP HOTELS: Wants to Terminate Agreements with Tribe ------------------------------------------------------ Trump Hotels & Casino Resorts, Inc., and its debtor-affiliates seek the authority of the U.S. Bankruptcy Court for the District of New Jersey to mutually terminate certain agreements with Twenty-Nine Palms Band of Luiseno Mission Indians of California and Twenty-Nine Palms Enterprises Corporation, collectively known as the Tribe. The "Trump 29 Debtors" are parties to three agreements with the Tribe: 1) Development Agreement Trump Hotels & Casino Resorts Development Company, LLC, and the Tribe are parties to a Gaming Facility Development and Construction Agreement dated April 27, 2000, as amended on March 28, 2002. The Development Agreement provided for THCR Development Co. to expand and renovate the Tribe's then existing "Spotlight 29 Casino," a native American casino offering "Class II" gaming under the provisions of the federal Indian Gaming Regulatory Act, converting it into a "Class III" gaming facility. Pursuant to the Development Agreement, the Tribe will pay THCR Development Co. $2,460,000 as development fee. 2) Management Agreement THCR Management Services, LLC, and the Tribe are parties to an Amended and Restated Gaming Facility Management Agreement dated March 28, 2002. The Management Agreement provided for THCR Management Services to operate and manage the Tribe's casino for five years from the date that the Management Agreement was approved by the National Indian Gaming Commission pursuant to the IGRA and expansion of the casino was completed and opened to the public. The Tribe agreed to pay THCR Management Services a management fee equal to 30% of the "Net Revenues," as defined under IGRA, of the casino during the management term. 3) License Agreement Trump Hotels & Casino Resorts Holdings, LP, and the Tribe are parties to a Trademark License Agreement dated May 31, 2000, as amended on March 28, 2002. THCR Holdings LP granted the Tribe a license to operate the casino under the name "Trump 29 Casino," for no additional monetary consideration. As of December 29, 2004, the management fees have been paid current through November 30, 2004; the development fee remains unpaid. Under the provisions of the IGRA, the Tribe can conduct "Class III" gaming operations on the Tribe's reservation lands only if the Tribe has entered into a "Compact" with the State in which the reservation lands are located. On October 1, 1999, the Tribe entered into a Compact with the State of California, which was, in turn, approved by the United States Department of the Interior pursuant to the IGRA in May 2000. In addition, under the Tribe's gaming ordinance, to manage the Tribe's casino THCR Management Services was required to be licensed by the 29 Palms Gaming Commission, an instrumentality of the Tribe charged with regulatory oversight of the Tribe's casino. On September 13, 2001, the Commission issued a Tribal license to THCR Management Services enabling it to manage the Tribe's casino. On April 22, 2002, THCR Development Co. completed the expansion of the Tribe's casino and THCR Management Services commenced managing the Tribe's casino pursuant to the Management Agreement. The Compact between the Tribe and the State of California requires the Commission to renew all "gaming resource supplier" licenses issued by the Tribe every two years. In June 2004, the Commission requested that THCR Management Services submit new license applications for itself, its key employees and its parent companies. THCR Management Services complied with the request as well as with the follow-up requests of the Commission for additional information. Pursuant to Commission regulations, a hearing before the Commission commenced on November 18, 2004, at which time THCR Management Services began presenting evidence in support of the license application. The Commission has conducted several days of hearings, which presently have been continued but have not been concluded. The Commission has expressed certain concerns regarding the renewal of THCR Management Services' license, and there is no assurance that the license will be renewed. Should the Commission ultimately decide to deny renewal of THCR Management Services' Tribal gaming license, the Tribe would then terminate the Management Agreement without any compensation to the Trump 29 Debtors. Termination Agreement Subsequently, the Trump 29 Debtors and the Tribe commenced negotiations regarding a mutual termination of the Development Agreement and Management Agreement and concomitantly, a termination of the License Agreement. The negotiations resulted in a memorandum of understanding and certain related documents, pursuant to which the Trump 29 Debtors and the Tribe agreed to mutually terminate the Development Agreement, Management Agreement and License Agreement, and to exchange mutual releases. The Termination Agreement also provides that the Tribe will pay to THCR Management Services: -- all management fees earned by it, but remains unpaid, under the Management Agreement through December 31, 2004, which the Debtors estimate to total around $640,000; plus -- a $6,000,000 termination fee. The Trump 29 Debtors agreed to accept the payments in full satisfaction of all amounts otherwise due and owing from the Tribe under the Management Agreement and Development Agreement. The effectiveness of the termination of the Management Agreement, and the obligation of the Tribe to make the termination payments to the Trump 29 Debtors, is conditioned on the approval of the termination payments by the Tribe's lenders. Charles A. Stanziale, Jr., Esq., at Latham & Watkins, LLP, in Los Angeles, California, asserts that the Debtors' entry into the Termination Agreement is warranted. The Termination Agreement will resolve all pending issues between the Debtors and the Tribe arising under the Management Agreement and the Development Agreement without the necessity of further proceedings before the Commission, which proceedings would certainly be costly and time- consuming for the Debtors' estates. An adverse decision of the Commission on the licensure of the Trump 29 Debtors is also not subject to appeal, thus risking the termination of the Agreements without compensation to the Trump 29 Debtors. In the event, the only recourse to the Trump 29 Debtors would be to commence an arbitration proceeding against the Tribe asserting a breach of the Management Agreement and seeking monetary damages. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor- affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. UAL CORP: Wants Court Approval to Reject 15 Aircraft Leases ----------------------------------------------------------- UAL Corporation and its debtor-affiliates ask Judge Wedoff for permission to reject the leases for 10 Boeing 737-300 aircraft bearing Tail Nos. N394UA, N396UA, N397UA, N322UA, N319UA, N323UA, N324UA, N352UA, N395UA and N393UA. The Debtors also want permission to reject the leases for five Boeing 737-500 aircraft with Tail Nos. N901UA, N908UA, N909UA, N911UA and N915UA. The Debtors want to reject the Leases of Tail Nos. N319UA and N352UA as of January 20, 2005. The Debtors will reject all other Leases as of January 31, 2005. James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, explains that six of the aircraft are financed through the JETS 1995-A Transaction, which are subject to the Temporary Restraining Order entered by the Court on November 26, 2004. The TRO prohibits U.S. Bank, N.A., and The Bank of New York, as Aircraft Trustees, from repossessing aircraft subject to the JETS 1995-A Transaction, among others. These aircraft are narrow body and are configured and suitable only for domestic service. Now, "that the busy holiday travel season has ended, these six JETS 1995-A aircraft are no longer essential," to the Debtors' continuing operations, Mr. Sprayregen tells Judge Wedoff. The Debtors are trying to restructure their aircraft financings in line with current market rates. The Debtors also seek to better match their fleet capacity with demand. As a result, the Debtors are undertaking an extensive analysis of several hundred aircraft financings. The Debtors have determined that the Leases are burdensome to the Debtors' estates. The Lease Rates exceed current market rates for comparable aircraft. The payment obligations outweigh the benefits that the Debtors receive from possessing and using the Aircraft. The Debtors and the Financing Parties have been unable to agree on terms that would allow the retention of the Aircraft on economically agreeable terms. Hence, the Debtors want to reject the Leases and rely on other Aircraft with lower costs. The Aircraft subject to the Leases were procured through leveraged lease financing arrangements. A common law trust holds title to and leases the Aircraft to the Debtors on behalf of equity participants. An Indenture Trustee holds security interests to secure the debt for various lending parties. Wilmington Trust Company is the Owner Trustee. Mr. Sprayregen notes that Tail Nos. N324UA and N323UA are parked at Southern California Aviation in Victorville, California. All other Aircraft are parked at Timco Aviation in Goodyear, Arizona. U.S. Bank Objects U.S. Bank serves as Indenture Trustee or Pass Through Trustee for Aircraft with Tail Nos. N901UA, N908UA, N909UA, N394UA, N396UA and N397UA. U.S. Bank argues that the rejection of the Leases cannot undo the liability the Debtors have incurred by obtaining the Temporary Restraining Order. The Debtors "shamelessly" assert that the six JETS-1995A Aircraft, which were the subject of the TRO, along with eight other aircraft, are now burdensome to the estate. Only a few weeks ago, U.S. Bank tells Judge Wedoff, the Debtors cried out that loss of these aircraft would jeopardize the airline. Now that the busy holiday travel season is over, the Debtors are thrusting the aircraft back at the Trustees. The TRO has caused the Trustees to lose several months of higher leasing revenues. Certain aircraft lease opportunities may have been lost for good. The Debtors are deliberately reducing their fleet with aircraft obtained from the Trustees. In other words, the Debtors are allowed to unexpectedly shove aircraft back at the Trustees while the TRO prevents the Trustees from taking any action to lessen the economic consequences. The Debtors should not be absolved from liability for loss suffered by the Trustees due to the TRO. Ronald Barliant, Esq., at Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, points out that the Controlling Parties are glad to take the aircraft back, so they can be remarketed at rates well in excess of what the Debtors are paying and offering. However, the Debtors must pay for their intransigence. U.S. Bank also notes that the Debtors lay the blame for the aircraft disputes at the feet of the Trustees. U.S. Bank disagrees. Mr. Barliant explains that the Debtors tried to renegotiate the Leases at below market rates. The Debtors imply that the Trustees played hardball in negotiations. However, the Trustees had advantageous revenue opportunities for the aircraft and were not willing to subsidize the Debtors' haphazard restructuring efforts. Therefore, the Trustees have been forced to forego significant revenue opportunities in the marketplace. The Trustees reserve all rights with respect to the factual assertions in the request. U.S. Bank asks the Court to make sure that the Debtors return the aircraft in compliance with the return conditions consistent with the operative documents and Section 1110 of the Bankruptcy Code. U.S. Bank insists that the aircraft be returned with the correct engines installed with all maintenance logs and records. The aircraft must be registered with the Federal Aviation Administration at the Debtors' cost. 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. 73; Bankruptcy Creditors' Service, Inc., 215/945-7000) VENOCO INC: Reports 4Q Average Oil Production and Activity Update ----------------------------------------------------------------- Venoco, Inc., reported that its 4th quarter 2004 average net production was approximately 11,214 barrels of oil equivalent per day. The company's 4th quarter activity included 2 wells drilled in the Sacramento Basin, one of which was completed in the 4th quarter; the other was completed in Jan. 2005. Also in the basin, 18 workovers were completed in the 4th quarter. There were three successful re-drills on Platform Gail and one workover in the Big Mineral Creek field. "We are very pleased with our 4th quarter performance," said Tim Marquez, President and CEO. "The workover programs are showing good results and we expect the new wells to prove up reserves and boost average net production." Venoco recently completed drilling a new well from its Platform Holly in the Santa Barbara Channel to a total depth of 14,247 feet into the Sespe formation. Initial logging indicates more than 600 feet of net pay. Testing and completion is expected to take at least another week and then the well will begin production. As announced in the offering memorandum relating to Venoco's completed offering of its 8.75% Senior Notes due 2011, Venoco also anticipates closing the purchase of all of the membership interests of Marquez Energy LLC in February 2005. According to MELLC, its current average net production is approximately 550 BOE per day. Venoco estimates that its average net production for the 1st quarter of 2005 will be approximately 12,500 BOE per day not including the MELLC production. Venoco has four re-drills planned for its offshore operations in the 1st quarter of 2005. Additionally, Venoco has 13 workovers and/or recompletions planned in its Sacramento Basin fields along with four new wells. Another new well is planned for its operation in Texas at the Big Mineral Creek field. Venoco has completed a statutory merger in which a trust controlled by Tim Marquez became the company's sole stockholder. About the Company Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties, with offices in California and Denver, Colorado. Venoco operates three offshore platforms in the Santa Barbara Channel, two onshore properties in Southern California, approximately 100 natural gas wells in Northern California and a field in North Texas with approximately 70 wells. * * * As reported in the Troubled Company Reporter on Dec. 13, 2004 Moody's assigned a Caa1 rating to Venoco Inc.'s proposed $150 million of 7-year senior unsecured guaranteed notes, a B3 senior implied rating, and an SGL-3 liquidity rating, with a stable rating outlook. The rating notch between the note and senior implied ratings reflects the notes' substantial potential effective subordination, under multiple secured debt carve-outs in the indenture, as well as important inherent borrowing base redetermination powers of that bank debt. The indenture permits secured debt up to the greater of $80 million (in three baskets) and 25% (in two baskets) of consolidated net tangible assets. Venoco holds 57.9 mmboe of proven reserves, of which 69% is proven developed (PD). Venoco's outlook or ratings could strengthen if it demonstrates sustainable sequential quarter production gains, amply supported (stress tested) production and reserve replacement costs, and avoids material additional leverage. Venoco's year-end 2004 third party reserve report, and its 2004 and 2005 10-K FAS 69 data will also be important milestones. VENOCO INC: Appoints William Schneider as President --------------------------------------------------- Venoco, Inc., has named William "Bill" Schneider as President. Mr. Schneider will be responsible for managing the company's portfolio of assets as well as focusing on merger and acquisition activities. He will be based in Venoco's Denver office. "Bill's wealth of experience in both the financial and energy sectors is an excellent compliment to Venoco's strong asset base," said Tim Marquez, CEO and Chairman of the Board. "His skills and relationships in the industry will help us take Venoco to the next level." Mr. Schneider has over twenty years of experience including investment banking, corporate finance, worldwide business development, and corporate planning. He has spent the last ten years in investment banking, most recently as a Managing Director for Harris Nesbitt's Energy Group where he advised numerous companies on mergers and acquisitions in the Exploration & Production, Power and Integrated Oil sectors. Prior to his tenure at Harris Nesbitt, Mr. Schneider was with Donaldson, Lufkin & Jenrette and Smith-Barney. Prior to banking, Mr. Schneider spent twelve years with Unocal Corporation including managing corporate planning in Los Angeles and investor relations in New York. Mr. Schneider has a degree in Petroleum Engineering from Colorado School of Mines and an MBA in finance from UCLA's Anderson Graduate School of Management. About the Company Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties, with offices in California and Denver, Colorado. Venoco operates three offshore platforms in the Santa Barbara Channel, has nonworking interests in three others, and also operates two onshore properties in Southern California, approximately 100 natural gas wells in Northern California and a field in North Texas with approximately 70 wells. * * * As reported in the Troubled Company Reporter on Dec. 13, 2004, Moody's assigned a Caa1 rating to Venoco Inc.'s proposed $150 million of 7-year senior unsecured guaranteed notes, a B3 senior implied rating, and an SGL-3 liquidity rating, with a stable rating outlook. The rating notch between the note and senior implied ratings reflects the notes' substantial potential effective subordination, under multiple secured debt carve-outs in the indenture, as well as important inherent borrowing base redetermination powers of that bank debt. The indenture permits secured debt up to the greater of $80 million (in three baskets) and 25% (in two baskets) of consolidated net tangible assets. Venoco holds 57.9 mmboe of proven reserves, of which 69% is proven developed (PD). Venoco's outlook or ratings could strengthen if it demonstrates sustainable sequential quarter production gains, amply supported (stress tested) production and reserve replacement costs, and avoids material additional leverage. Venoco's year-end 2004 third party reserve report, and its 2004 and 2005 10-K FAS 69 data will also be important milestones. The ratings are restrained by: (1) high leverage; (2) roughly 87% of net proceeds will not be reinvested in oil and gas activity, with 77% directly and indirectly funding outflows to shareholders; (3) Venoco's small size; high unit production and G&A costs and, as a medium gravity sour crude oil producer, price realizations of roughly $5/barrel below benchmark light sweet oil prices; (4) resulting risk in weaker price markets; (5) several years of falling reserves due to reduced investment, sizable negative reserve revisions, and production; (6) very high resulting recent reserve replacement costs (the long-term trend has been competitive); (7) uncertainty concerning how productive increased capital spending will be; (8) material offshore California plugging and abandonment costs; (9) a concentration of production and reserves in the politically sensitive California offshore; and (10) exposure to a pending Beverly Hills law suit, of uncertain merit, by residents claiming alleged exposure to cancer causing agents. VERILINK CORP: Posts $2.2 Million Net Loss in Second Quarter ------------------------------------------------------------ Verilink Corporation (Nasdaq: VRLK), a leading provider of broadband access solutions, reported its financial results for the second quarter ended December 31, 2004. Net sales were $13.3 million, an increase of 8% over the previous quarter and 46% over the year ago Q2 fiscal 2004. Net loss computed in accordance with generally accepted accounting principles (GAAP) for the second quarter of fiscal 2005 was $2.2 million, compared to a net loss of $24.5 million for the previous quarter and net income of $264,000 in the second quarter of fiscal 2004. Second quarter GAAP results included acquisition-related and other items totaling $1.0 million, which includes intangible assets amortization of $684,000, restructuring charges of $291,000, and compensation expense of $36,000 related to restricted stock awards. Excluding the effects of these items, non-GAAP loss was $1.1 million or $(0.05) per share, compared to a non- GAAP loss for the previous quarter of $3.0 million or $(0.14) per share. For the previous quarter, the net adjustments to reconcile to the GAAP loss was an impairment charge related to goodwill of $20 million, intangible assets amortization of $572,000, restructuring charges of $443,000, compensation expense of $233,000 related to restricted stock awards, and direct acquisition costs paid and expensed of $287,000. Second quarter fiscal 2004 net income was $479,000 or $0.03 per diluted share. For the year-ago quarter, the net adjustment to reconcile to GAAP income was intangible assets amortization, which totaled $215,000. "The continued execution of our strategy to consolidate recent acquisitions and prepare for opportunities for next generation converged communications service access has resulted in increased revenue and reduced losses," said Leigh S. Belden, President and CEO of Verilink. "During the quarter we made significant progress in business development activities that we believe position us well for continued growth. Chief among these activities was the expansion of our international distribution and customer base, and expansion of our interoperability activities with partners and customers alike. We continued to experience strong sales of our SHARK TDM IADs, and growth in our professional services business. We believe Verilink continues to improve its position as the partner of choice for access to next generation converged service offerings. Further validating Verilink's unique value proposition, our 8000 series IAD received the 'Product of the Year' award for 2004 by Internet Telephony Magazine and 'Hot Products for 2005' by Xchange Magazine." Verilink Second Quarter 2005 Summary: -- Reported revenues of $13.3 million for Q2 fiscal 2005, a 46% increase over the same period in fiscal 2004 -- Improved gross margin by 5 percentage points on a sequential quarter basis to 36% in Q2 -- Achieved another record quarter in shipments of SHARK IADs -- Professional Services revenues increased 15% on a sequential quarter basis -- New customer wins in Russia, Greece and Australia -- Significant interoperability certification activities with Sylantro, Broadsoft, Metaswitch, Nortel, General Bandwidth, and VocalData (Tekelec) -- 3000 Series, 8000 Series and WANsuite IADs added to Alcatel's world-wide CPE catalog -- 8000 Series IAD Awarded "Product of the Year" for 2004 by Internet Telephony Magazine; "Hot Products for 2005" by Xchange Magazine -- Renegotiated line of credit with RBC Centura Bank, borrowed the remaining $1.5 million available under the line of credit and complied with all the financial covenants as of quarter end -- Tim Anderson joined Verilink as Vice President and Chief Financial Officer, bringing 22 years of finance experience to Verilink, including broadband sector and public company experience -- Announced the move of the Company's headquarters to Centennial, CO in the metro Denver area About the Company Verilink Corporation is a leading provider of broadband access solutions for today's and tomorrow's 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, AL, Aurora, CO and Newark, CA with sales offices in the U.S., Europe and Asia. To learn more about Verilink, visit the company's website at http://www.verilink.com/ * * * As required under Nasdaq Rule 4350(b), Verilink Corporation 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: Equity Deficit Widens to $588.4 Million at Dec. 31 -------------------------------------------------------------- W. R. Grace & Co. (NYSE:GRA) reported that 2004 fourth quarter sales totaled $589.1 million compared with $511.3 million in the prior year quarter, an increase of 15.2%. Revenue from higher volumes and improved product mix accounted for about half of the increase, with favorable currency translation, acquisitions and price increases accounting for the remainder. Grace reported a fourth quarter net loss of $487.4 million, compared with a net loss of $49.5 million in the fourth quarter of 2003. The 2004 fourth quarter includes a net pre-tax charge of $570.7 million to account for certain terms and conditions under Grace's proposed plan of reorganization filed in November 2004, as amended on Jan. 13, 2005. The charge includes an increase in the recorded liability for asbestos-related litigation, net of insurance recovery, of $476.6 million, and additional interest on pre-petition debt and general unsecured claims of $94.1 million. The asbestos-related charge conforms to a condition precedent to confirmation of the Plan that the Bankruptcy Court shall have found that the maximum amount necessary to fund Grace's asbestos- related liabilities (including trust administration costs) does not exceed $1,613 million. The interest related charge is to account for an increase in the rate to which general unsecured creditors would be entitled under the Plan. Pre-tax income from core operations in the fourth quarter of 2004 was $33.8 million compared with $51.3 million in the fourth quarter of 2003, a 34.1% decrease. The fourth quarter reflects higher performance-related compensation as well as increases in the costs of petroleum-based raw materials, transportation fuels, energy and certain operating expenses. These cost increases more than offset added profit from higher sales and productivity improvements. "Our businesses continued to deliver solid sales growth," said Grace's Chairman and Chief Executive Officer Paul J. Norris. "However, the cost of raw materials and energy increased substantially in the quarter causing lower profit margins. Actions have been taken to improve supply chain productivity and to recognize the higher costs in our future selling prices." For the full year 2004, Grace reported sales of $2,259.9 million, a 14.1% increase over 2003. Currency translation and acquisitions accounted for 3.8 and 2.3 percentage points of the increase, respectively. Grace reported a net loss for the full year ended December 31, 2004 of $402.3 million or $6.11 per share, compared with a net loss of $55.2 million, or $0.84 per share, for 2003. The 2004 net loss includes a $592.3 million pre-tax charge to account for certain terms and conditions in the Plan and for revised estimates of Grace's cost to resolve non-asbestos-related contingent liabilities, and $18.0 million of Chapter 11-related expenses. Pre-tax income from core operations was $179.3 million in 2004, compared with $148.7 million in 2003, a 20.6% increase. Full year pre-tax operating margin was 7.9%, about 0.4 percentage points higher than last year. The increase in 2004 operating profit and margins was attributable principally to strong sales growth across all product lines and productivity gains in manufacturing processes; offset by higher costs for pensions, certain raw materials and energy. "We are very pleased with our business progress and results for 2004" said Mr. Norris. "We also saw progress in our Chapter 11 proceedings with the filing of our reorganization plan in the fourth quarter. We hope that this filing and related motions will be viewed favorably by the Bankruptcy Court and will accelerate our exit from Chapter 11." Core Operations Davison Chemicals Refining Technologies and Specialty Materials Fourth quarter sales for the Davison Chemicals segment were $319.7 million, up 17.5% from the prior year quarter, mainly reflecting volume increases from growth programs, improved economic conditions, and acquisitions. Excluding the effects of favorable currency translation, sales were up 14.2% for the quarter. Sales of refining technologies products, which include fluid cracking catalysts, hydroprocessing catalysts and performance additives, were $177.4 million in the fourth quarter, up 16.7% compared with the prior year quarter (14.7% after accounting for favorable currency translation). The increase resulted from volume gains particularly in Europe, favorable product mix factors as customers move to higher performing catalysts, and added revenue from the contractual pass-through of commodity metals costs. Sales of specialty materials products, which include silica-based engineered materials, specialty catalysts and separations products, were $142.3 million, up 18.4% compared with the fourth quarter of 2003, primarily attributable to sales from the acquisition of Alltech International Holdings, Inc., completed in August and favorable currency translation which accounted for 10.7 and 4.9 percentage points, respectively. Operating income of the Davison Chemicals segment for the fourth quarter was $36.1 million, 7.0% lower than the 2003 fourth quarter. Operating margin was 11.3%, lower than the prior year quarter by 3.0 percentage points. The decrease in operating income and margin was caused primarily by substantially higher costs of raw materials and energy, offset by improved sales in North America, Europe and Asia as well as favorable foreign currency translation. Full year sales for the Davison Chemicals segment were $1,192.2 million, up 14.6% from 2003 (excluding currency translation impacts, sales were up 10.8%). Full year operating income was $148.2 million, compared with $118.9 million for the prior year, a 24.6% increase, with 5.9 percentage points attributable to favorable foreign currency translation. Full year operating results reflect favorable economic conditions, product mix factors and cost structure improvements, offset by the higher raw material and energy costs in the fourth quarter. Performance Chemicals Construction Chemicals, Building Materials, and Sealants and Coatings Fourth quarter sales for the Performance Chemicals segment were $269.4 million, up 12.7% from the prior year quarter. Favorable currency translation accounted for 2.8 percentage points of the increase. Sales of specialty construction chemicals, which include concrete admixtures, cement additives and masonry products, were $138.9 million, up 12.7% versus the year-ago quarter (10.0% excluding favorable currency translation). Sales were up in all geographic regions, mainly reflecting the continued success of growth initiatives. Sales of specialty building materials, which include waterproofing and fire protection products, were $64.1 million, up 21.2% compared with the fourth quarter of 2003 (up 18.5% excluding favorable currency translation impacts). The fourth quarter results reflect strong sales of waterproofing materials, particularly roofing underlayments and flashing tapes in North America and specialty below-grade waterproofing worldwide. Sales of specialty sealants and coatings, which include container sealants, coatings and polymers, were $66.4 million, up 5.4% compared with the fourth quarter of 2003 (2.5% after excluding favorable currency translation impacts). The increase was primarily attributable to higher volumes of coatings products and Daraform(R) closure sealants in Europe, Asia and Latin America. Operating income for the Performance Chemicals segment was $25.8 million, down 17.8% compared with a strong prior year quarter. This reflected increased raw material costs, as well as higher operating expenses to support the strong business growth in 2004. Operating margin of 9.6% was 3.5 percentage points lower than the 2003 fourth quarter margin, attributable to higher raw material and transportation costs and higher operating expenses, partially offset by productivity gains. Full year sales of the Performance Chemicals segment were $1,067.7 million, up 13.5% from 2003 (excluding currency translation impacts, sales were up 9.7%). Full year operating income was $131.8 million compared with $107.9 million for the prior year, a 22.2% increase, reflecting strong sales in all geographic regions and positive results from productivity and cost containment initiatives. Corporate Costs and Other Matters Fourth quarter corporate costs related to core operations were $28.1 million compared with $18.9 million in the prior year quarter; full year corporate costs were $100.7 million compared with $78.1 million last year. The fourth quarter and full year increases are attributable primarily to higher performance-related compensation from the significant increase in operating income. Also in the fourth quarter, Grace recorded a liability of $82.0 million to account for the tax on undistributed earnings of certain foreign subsidiaries that are likely to be repatriated in connection with the expected cash requirements of the Plan. These earnings can no longer be considered retained indefinitely by such subsidiaries for reinvestment. Cash Flow and Liquidity Grace's full year cash flow provided by operating activities was $318.5 million for 2004, compared with $110.9 million for the comparable period of 2003. Full year pre-tax income from core operations before depreciation and amortization in 2004 was $288.1 million, 14.5% higher than 2003. These results reflect the higher income from core operations described above. Cash used for investing activities was $131.1 million in 2004, primarily for capital replacements and business acquisitions. Also, Grace contributed $20.0 million to its qualified U.S. pension plans as permitted by a Bankruptcy Court order issued in August. At December 31, 2004, Grace had available liquidity in the form of cash ($510.4 million), net cash value of life insurance ($96.0 million) and unused credit under its debtor-in-possession facility ($183.8 million). Grace believes that these sources and amounts of liquidity are sufficient to support its strategic initiatives and Chapter 11 proceedings for the foreseeable future. Chapter 11 Proceedings On April 2, 2001, Grace and 61 of its United States subsidiaries and affiliates, including its primary U.S. operating subsidiary W. R. Grace & Co.-Conn., filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Grace's non-U.S. subsidiaries and certain of its U.S. subsidiaries were not part of the Filing. Since the Filing, all motions necessary to conduct normal business activities have been approved by the Bankruptcy Court. As previously reported, on Nov. 13, 2004 Grace filed its proposed Plan, as well as several associated documents, including a disclosure statement, with the Delaware Bankruptcy Court. These documents were amended on Jan. 13, 2005. Copies of the Plan and related documents may be obtained through the Bankruptcy Court. Grace's Consolidated Financial Statements for the fourth quarter and year ended Dec. 31, 2004, reflect adjustments to conform to the Plan as follows: -- An accrual and charge of $713.2 million to increase Grace's recorded asbestos-related liability to that which is reflected as the maximum amount allowed under the conditions precedent to the Plan. This charge increases Grace's recorded asbestos-related reserve as of December 31, 2004 to $1,700 million. -- An asset and credit of $236.6 million to increase Grace's estimate of insurance proceeds to which it would be entitled to an aggregate of $500.0 million, based on an assumed asbestos-related liability of $1,700 million as described above. -- An accrual and charge of $94.1 million to increase Grace's estimate of interest to which general unsecured creditors would be entitled under the Plan based on revised eligibility and interest rates that generally apply as follows: -- 6.09% compounded quarterly on bank debt, -- contractual rates on qualified claims as defined in the Plan, and -- 4.19% compounded annually on other qualified allowed claims. -- An asset and credit of $151.7 million for net income tax benefits related to the items described above. The net pre- tax effect of the above items was a $570.7 million charge to reflect the net liability aspects of the Plan. The deferred tax benefit on this net liability is $199.7 million at a statutory rate of 35%. Of this amount, $48.0 million exceeds Grace's analysis of the tax assets that can be realized under conservative scenarios of future taxable income (exclusive of the tax effects under the litigation settlements with Sealed Air Corporation and Fresenius Medical Care). Accordingly, a valuation allowance of $48.0 million has been recorded against the total of Grace's deferred tax assets. No accounting has been made for the assets available to fund Grace's asbestos-related and other liabilities under the litigation settlements with Sealed Air Corporation and Fresenius Medical Care as such agreements are subject to conditions which, although expected to be met, have not been satisfied and approved by the Bankruptcy Court. The value available under these litigation settlement agreements, as measured at Dec. 31, 2004, was $1,165.7 million comprised of $115.0 million in cash from Fresenius and $1,050.7 million in cash and stock from Sealed Air. Most of Grace's noncore liabilities and contingencies (including asbestos-related litigation, environmental claims, tax matters and other obligations) are subject to compromise under the Chapter 11 process. The Chapter 11 proceedings, including related litigation and the claims valuation process, could result in allowable claims that differ materially from recorded amounts. Grace will adjust its estimates of allowable claims as facts come to light during the Chapter 11 process that justify a change, and as Chapter 11 proceedings establish court-accepted measures of Grace's noncore liabilities. See Grace's recent Securities and Exchange Commission filings for discussion of noncore liabilities and contingencies. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The 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. At Dec. 31, 2004, W.R. Grace's balance sheet showed a $588.4 million stockholders' deficit, compared to a $163.8 million deficit at Dec. 31, 2003. W.R. GRACE: Court Restricts Equity Trading to Preserve NOLs ----------------------------------------------------------- In order to preserve the future tax benefits related to its significant U.S. federal net operating losses, W.R. Grace has obtained a Bankruptcy Court order imposing notice requirements and potential restrictions on stock acquisitions by those persons or entities that: (i) currently own 4.75% or more of Grace common stock or (ii) seek to acquire 4.75% or more of Grace common stock. Pursuant to the order, Grace has the right to object in Bankruptcy Court to such persons or entities acquiring Grace common stock if such acquisition would pose a material risk of adversely affecting Grace's ability to utilize its NOLs. Under U.S. tax rules, NOLs are subject to potentially severe limitations in the event of ownership changes triggering a change in control (as defined under the Internal Revenue Code). The order will remain in effect until Grace emerges from Chapter 11. 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. WESTPOINT STEVENS: Court Approves T-Ink License Agreement --------------------------------------------------------- To recall, T-Ink, Inc., WestPoint Stevens, Inc., and its debtor- affiliates engaged in extensive discussions regarding the potential applications of the T-Ink technology within the textile industry. After good faith and arm's-length negotiations, the Debtors were able to reach an agreement for licensing the T-Ink technology. The License Agreement will allow them to take advantage of a unique opportunity to expand their product line and increase market share. The Debtors have historically been at the forefront of integrating new technology in the manufacturing and augmentation of their products, through ownership of their own patents and trademarks as well as through licensing agreements. The T-Ink License Agreement presents a unique opportunity for the Debtors to create a new market and introduce new products with interactive technology into the textile industry. * * * The United States Bankruptcy Court for the Southern District of New York gave the Debtors permission to enter into T-Ink License Agreement. Headquartered in West Point, Georgia, WestPoint Stevens, Inc., -- http://www.westpointstevens.com/-- is the #1 US maker of bed linens and bath towels and also makes comforters, blankets, pillows, table covers, and window trimmings. It makes the Martex, Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux brands, as well as the Martha Stewart bed and bath lines; other licensed brands include Ralph Lauren, Disney, and Joe Boxer. Department stores, mass retailers, and bed and bath stores are its main customers. (Federated, J.C. Penney, Kmart, Sears, and Target account for more than half of sales.) It also has nearly 60 outlet stores. Chairman and CEO Holcombe Green controls 8% of WestPoint Stevens. The Company filed for chapter 11 protection on June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the Debtors in their restructuring efforts. (WestPoint Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 215/945- 7000) WORLDSPAN L.P.: Discloses Refinancing Transactions -------------------------------------------------- Worldspan, L.P. and WS Financing Corp. disclosed their intention to issue under Rule 144A and Regulation S up to $350 million senior second lien secured floating rate notes and to refinance their existing senior secured credit facilities with a new $440 million senior credit facility, consisting of term loans in the aggregate of $400 million and a $40 million revolving credit facility. The gross proceeds of the Refinancing Transactions will be used to finance the cash tender offer and consent solicitation launched for the Issuers' outstanding 9-5/8% Senior Notes due 2011, refinance the Issuers' existing senior secured indebtedness, redeem up to the full amount of the preferred stock issued by Worldspan's parent corporation, Worldspan Technologies, Inc. -- WTI, prepay and terminate sponsor advisory fees and dividends on WTI's Class B Common Stock and pay related fees and expenses of the Refinancing Transactions. Any remaining proceeds from the Refinancing Transactions are intended to be used for general corporate purposes. Worldspan -- http://worldspan.com/-- is a leader in travel technology services for travel suppliers, travel agencies, e- commerce sites and corporations worldwide. Utilizing some of the fastest, most flexible and efficient networks and computing technologies, Worldspan provides comprehensive electronic data services linking approximately 800 travel suppliers around the world to a global customer base. Worldspan offers industry-leading Fares and Pricing technology such as Worldspan e-Pricingr, hosting solutions, and customized travel products. Worldspan enables travel suppliers, distributors and corporations to reduce costs and increase productivity with technology like Worldspan Go!(R) and Worldspan Trip Manager(R). Worldspan is headquartered in Atlanta, Georgia. * * * As reported in the Troubled Company Reporter on Aug. 06, 2004, Moody's Investors Service has confirmed Worldspan's B1 guaranteed secured bank credit facility rating, B2 guaranteed senior note rating, and Caa1 subordinated note (Seller Notes) rating. The rating action concludes a review for possible upgrade initiated on June 4, 2004 and is in response to Worldspan's announcement on June 29, 2004 that its anticipated IPO has been postponed. The rating outlook is stable. As reported in the Troubled Company Reporter on April 7, 2004, Standard & Poor's Ratings Services placed its 'B+' corporate credit rating and other ratings on Worldspan L.P. on CreditWatch with positive implications, reflecting the S-1 filing by its parent, Worldspan Technologies Inc., for an initial public offering of up to $315 million of common stock. Proceeds will be used primarily to repay debt. WORLDSPAN L.P.: Commences Tender Offer for 9-5/8% Senior Notes -------------------------------------------------------------- Worldspan, L.P. and WS Financing Corp. have commenced a cash tender offer and consent solicitation for any and all of their outstanding 9-5/8% Senior Notes due 2011 (CUSIP Nos. 98158EAA1 and 98158EAB9). There are currently $280 million aggregate principal amount of Notes outstanding. In conjunction with the tender offer, the Issuers are also soliciting the consent of holders of the Notes to the elimination of substantially all of the restrictive covenants and certain default provisions in the indenture governing the Notes. The proposed amendments to the indenture require the consent of a majority in aggregate principal amount of outstanding Notes not owned by the Issuers or their affiliates to be adopted. Holders cannot tender their Notes without delivering a consent and cannot deliver a consent without tendering their Notes. The tender offer and consent solicitation are made upon the terms and conditions set forth in the Offer to Purchase and Consent Solicitation Statement dated January 25, 2005, and the related Letter of Transmittal and Consent. The tender offer will expire at 11:59 p.m., New York City time, on February 22, 2005, unless extended or terminated. The consent solicitation will expire at 5:00 p.m., New York City time, on February 4, 2005, unless extended. Holders who tender Notes before the Consent Date and do not withdraw such Notes prior to the execution of the supplemental indenture will receive the total purchase price, which includes a consent payment plus accrued an unpaid interest up to but not including the initial settlement date. The total purchase price for each $1,000 principal amount of the Notes validly tendered and accepted for purchase by the Issuers pursuant to the tender offer and consent solicitation will be calculated on February 4, 2005, based upon a fixed spread of 50 basis points over the yield on the 3-1/8% U.S. Treasury Note due May 15, 2007. The total purchase price includes a consent payment equal to $30.00 per $1,000 principal amount of Notes. Holders who validly tender their Notes after the Consent Date and before the Expiration Date and do not withdraw the Notes will receive the total purchase price minus the consent payment. Additionally, holders will receive any accrued but unpaid interest up to but not including the applicable settlement date. Consummation of the tender offer and consent solicitation, and payment of the tender offer consideration and consent payment, is subject to the satisfaction or waiver of various conditions described in the Offer to Purchase and Consent Solicitation Statement. The Issuers have retained J.P. Morgan Securities, Inc., to serve as Dealer Manager and Solicitation Agent for the tender offer and consent solicitation. Requests for documents may be directed to MacKenzie Partners, Inc., the Information Agent, by telephone at (212) 929-5500 (collect) or (800) 322-2885 (toll free), or in writing at 105 Madison Avenue, New York, New York 10016. Questions regarding the tender offer may be directed to Leonard Carey, High Yield Capital Markets, of J.P. Morgan Securities, Inc., at (212) 270-9769 (collect). Worldspan -- http://worldspan.com/-- is a leader in travel technology services for travel suppliers, travel agencies, e- commerce sites and corporations worldwide. Utilizing some of the fastest, most flexible and efficient networks and computing technologies, Worldspan provides comprehensive electronic data services linking approximately 800 travel suppliers around the world to a global customer base. Worldspan offers industry-leading Fares and Pricing technology such as Worldspan e-Pricingr, hosting solutions, and customized travel products. Worldspan enables travel suppliers, distributors and corporations to reduce costs and increase productivity with technology like Worldspan Go!(R) and Worldspan Trip Manager(R). Worldspan is headquartered in Atlanta, Georgia. * * * As reported in the Troubled Company Reporter on Aug. 06, 2004, Moody's Investors Service has confirmed Worldspan's B1 guaranteed secured bank credit facility rating, B2 guaranteed senior note rating, and Caa1 subordinated note (Seller Notes) rating. The rating action concludes a review for possible upgrade initiated on June 4, 2004 and is in response to Worldspan's announcement on June 29, 2004 that its anticipated IPO has been postponed. The rating outlook is stable. As reported in the Troubled Company Reporter on April 7, 2004, Standard & Poor's Ratings Services placed its 'B+' corporate credit rating and other ratings on Worldspan L.P. on CreditWatch with positive implications, reflecting the S-1 filing by its parent, Worldspan Technologies Inc., for an initial public offering of up to $315 million of common stock. Proceeds will be used primarily to repay debt. * Lisa Rich Joins Sheppard Mullin as Legislative Affairs Director ----------------------------------------------------------------- Lisa Rich has joined the Washington, D.C. office of Sheppard, Mullin, Richter & Hampton LLP as director of legislative affairs. Ms. Rich represents clients in all aspects of the legislative process, including lobbying members of Congress and senior officials of the Executive Branch. Edward Schiff, managing partner of the Washington, D.C. office, said, "We are very pleased to welcome Lisa, who brings over 10 years of congressional and government relations experience to Sheppard Mullin. Her legislative and political background adds a great deal of value to the service and counsel we bring to clients, especially in the areas of white collar defense and antitrust." Commented Ms. Rich, "I look forward to providing clients with legislative representation in Sheppard Mullin's growing D.C. office. I am also excited about working with my former colleague Roscoe Howard, who left his post as D.C.'s U.S. Attorney to join the firm last year." Mr. Rich's efforts on behalf of her clients incorporate all aspects of legislative representation, including: -- drafting legislation, analyzing legislative history, and testimony; -- preparing witnesses for hearings; -- testifying on behalf of clients before congressional committees; -- monitoring legislative hearings, mark-ups, and other activities to keep clients advised of the current status of legislation and anticipated legislative initiatives; -- analyzing legislative proposals; -- developing and coordinating overall legislative strategy, tactics, and advocacy; -- counseling regarding compliance with the Lobbying Disclosure Act, gift rules and federal election laws; and -- lobbying administrative agencies. Ms. Rich previously served as Congressional Liaison at the United States Sentencing Commission, where she coordinated the Commission's legislative agenda and interacted with the United States Senate and House of Representatives regarding criminal sentencing policy. While with the United States Sentencing Commission, she also interacted with the United States Departments of Justice, Transportation, and Homeland Security as well as the Drug Enforcement Administration and numerous other federal agencies with interests common to those of the Sentencing Commission. During her career, Ms. Rich has served on several special Congressional Committees where she investigated matters for the legislative branch including allegations regarding the release of American hostages in Iran, American arms shipments to Bosnia, and improper federal political contributions by the Teamsters. Outside of her legislative branch work, she also worked for several Independent Counsel investigations requiring interaction with numerous national and international law enforcement agencies, executive branch offices, and intelligence agencies including the Central Intelligence Agency, the Federal Bureau of Investigation, and the National Security Agency. Ms. Rich graduated from American University Washington School of Law in 1998 and earned a bachelor's degree, summa cum laude, from St. Andrews Presbyterian College in 1990. About Sheppard, Mullin, Richter & Hampton LLP Sheppard, Mullin, Richter & Hampton, LLP -- http://www.sheppardmullin.com/-- is a full service AmLaw 100 firm with 430 attorneys in nine offices located throughout California and in New York and Washington, D.C. The firm's California offices are located in Los Angeles, San Francisco, Santa Barbara, Century City, Orange County, Del Mar Heights and San Diego. Sheppard Mullin provides legal expertise and counsel to U.S. and international clients in a wide range of practice areas, including Antitrust, Corporate and Securities; Entertainment and Media; Finance and Bankruptcy; Government Contracts; Intellectual Property; Labor and Employment; Litigation; Real Estate/Land Use; Tax, Employee Benefits, Trusts and Estate Planning; and White Collar Defense. The firm was founded in 1927. ********* 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, Dylan Carlo Gallegos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo and Peter A. Chapman, Editors. Copyright 2005. 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 ***