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/raid1/www/Hosts/bankrupt/TCR_Public/050128.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, January 28, 2005, Vol. 9, No. 23 Headlines ABITIBI-CONSOLIDATED: Incurs $108 Million Net Loss for 4th Quarter ADESA INC: Subsidiary Expands Salvage Auction Business AIRGAS INC: Earns $23 Million of Net Income in Third Quarter AIRGATE PCS: 97% of Noteholders Agree to Amend 9.375% Indenture ALASKA COMMS: Gets Requisite Consents to Amend Sr. Note Indentures ALISON GEM: Wants to Hire Klestadt & Winters as Bankruptcy Counsel AMERICAN BUSINESS: Nasdaq Delists Common Shares AMERICAN BUSINESS: Wants to Maintain Cash Management System AMERICAN COMMERCIAL: Judge Lorch Confirms Amended Chapter 11 Plan AMERICAN COMMERCIAL: Moody's Rates Planned $200M Sr. Notes at B3 AMERICREDIT CORP: Prices $900 Million Asset-Backed Securitization ARGOSY GAMING: Hosting 2004 Results Conference Call on Feb. 9 ARMSTRONG WORLD: Creditors Transfer 18 Trade Claims ATA HOLDINGS: Reduces Indianapolis Operations Due to Tight Market BJ SERVICES: Files Form 10-K Annual Report with SEC BOWATER INC: Declares $0.20 per Common Share Quarterly Dividend BURLINGTON INDUSTRIES: BII Trust Files 2004 Status Report CATHOLIC CHURCH: Spokane Tort Committee Wants to Retain Riddell CATHOLIC CHURCH: Spokane Claimants Wants to Conduct Examination CONEXANT SYSTEMS: Records $120.7 Million First Quarter Net Loss COMPUTER ASSOCIATES: Updates Full Fiscal Year 2005 Guidance COPYTELE INC: Auditors Raises Going Concern Doubt DEL MONTE: Fitch Rates $250MM 6-3/4% Sr. Subordinated Notes at BB- DEL MONTE: S&P Rates Proposed $950M Senior Sec. Facility at BB DESA HOLDINGS: Files First Amended Joint Liquidating Plan DOMTAR INC: Canadian Dollar Appreciation Lowers Profit by $175M E*TRADE FINANCIAL: Posts $98.4M Net Income for 2004 4th Quarter EASTMAN HILL: Moody's Junks Class B-1 Notes & Securities FAIRFAX FINANCIAL: Will Webcast Year-End Results on February 11 FEDERAL-MOGUL: Dr. Peterson Says T&N Asbestos Liability is $11BB FIBERMARK INC: Confirmation Hearing Continued to February 28 FIDELITY NATIONAL: Fitch Assigns BB- Rating to Sr. Sec. Facility GMAC COMMERCIAL: Moody's Pares Rating on Class F Certs. to B1 HAWK CORP: Begins AMEX Trading of 8-3/4% Sr. Notes Under HWK.Z HAWKEYE RENEWABLES: Moody's Puts B2 Rating on $185M Sr. Sec. Loan HEALTH & NUTRITION: Transfers Name to New Owner After Asset Sale HELIOS SERIES: Moody's Pares Rating on $24M Class C Notes to B1 HEXCEL CORP: Issuing $200 Million Sr. Notes to Refinance Debts HEXCEL CORP: Moody's Junks Proposed $200 Million Senior Sub. Notes HIGHWOODS REALTY: Moody's Holds Ba1 Rating on Senior Unsec. Debt ICON HEALTH: Moody's Junks $155M Senior Subordinated Notes INTEGRATED ELECTRICAL: Completes Internal Investigation INTERSTATE BAKERIES: JPMorgan Replaces Harris Letters of Credit JOSEPH G. ROCHE: Files Schedules of Assets & Liabilities JOY GLOBAL: Performance Improvement Cues Moody's to Lift Ratings LB-UBS COMMERCIAL: S&P Places Low-B Ratings on Six Cert. Classes LSI LOGIC: Posts $197 Million GAAP Net Loss in Fourth Quarter MAGNUM HUNTER: S&P Places Low-B Ratings on CreditWatch Developing MAYTAG CORP: Names P.J. Bognar as Senior Vice President for Sales MID-STATE RACEWAY: Majority Stakeholder Wants Directors Kicked-Out MID-STATE RACEWAY: J. Gural & TrackPower Acquiring Vernon Downs MIRANT CORP: Financial Projections Underpinning Chapter 11 Plan MORGAN STANLEY: Moody's Junks Classes G & H Certificates MORGAN STANLEY: Interest Shortfalls Prompt S&P to Watch Ratings NATIONAL CENTURY: Trust Files Mega Lawsuit Against 19 Entities NATIONAL ENERGY: Asks Court to Approve Plan Voting Procedures NEIGHBORCARE INC: Earns $9.7 Million of Net Income in 1st Quarter NOVA CHEMICALS: Posts $162 Million Net Income for 2004 4th Quarter OMNOVA SOLUTIONS: Posts $14.7 Million Net Loss in Fourth Quarter PACIFIC LUMBER: S&P Places Junk Rating on CreditWatch Negative PERKINELMER INC: Fourth Qtr. Revenues Up 11% to $478.6 Million PIPEMASTERS INC: Voluntary Chapter 11 Case Summary POGO PRODUCING: S&P Revises Outlook on BB+ Ratings to Stable PQ CORP: Moody's Puts B1 Rating on $410M Sr. Sec. Bank Facility RELIANCE GROUP: RIC Will Pay $990K to Settle Sandenhill D&O Claims RESIDENTIAL ASSET: Moody's Reviewing Ratings & May Downgrade RITE AID: Prices 2.3 Mil. Mandatory Convertible Preferred Shares ROGERS & SON CONSTRUCTION: Case Summary & 22 Unsecured Creditors RSI HOLDINGS: Capital Deficits Trigger Going Concern Doubt RYERSON TULL: Declares Cash Dividends & Sets Annual Meeting SECOND CHANCE: BDO Seidman Approved as Financial Consultants SEMCO ENERGY: Moody's Revises Outlook on Low-B Ratings to Stable SOLUTIA INC: Wants to Assume Huntsman Agreements STELCO INC: Steelworkers Director Wants Members' Pensions Secured STEVENOT WINERY: Wants to Hire Wilke Fleury as Bankruptcy Counsel TATER TIME: Taps Southwell & O'Rourke as Bankruptcy Counsel TATER TIME: Section 341(a) Meeting Slated for March 22 TECO AFFILIATES: File Chapter 11 Petitions in D. Arizona TECO AFFILIATES: Case Summary & 36 Largest Unsecured Creditors TECO ENERGY: To Host Fourth Quarter Webcast on Feb. 1 TRITON CDO: Moody's Junks $12.5M Class C-1 & $5M Class C-2 Notes TXU CORP: Board Elects Stan Szlauderbach as SVP & Controller UAL CORP: Wants Court to Approve Master Pact with Gate Gourmet ULTIMATE ELECTRONICS: Nasdaq Issues Delisting Notice W.R. GRACE: Wants to Refund Defense Costs & Settle Claims W.R. GRACE: Asks Court to Approve Continental Settlement Pact W.R. GRACE: Wants Removal Period Extended to Plan Effective Date WESTPOINT STEVENS: Court Approves Marianna & Columbia Leases WILLAMETTE VALLEY: Voluntary Chapter 11 Case Summary XEROX CORP: S&P Revises Ratings on BB- Rating to Stable * Fitch: Balanced Rating Changes Signal Stronger U.S. Bond Market * BOOK REVIEW: Full Faith and Credit: The Great S & L Debacle ********* ABITIBI-CONSOLIDATED: Incurs $108 Million Net Loss for 4th Quarter ------------------------------------------------------------------ Abitibi Consolidated, Inc., reported a fourth quarter loss of $108 million, or 24 cents a share, after recording a write down of $235 million after-tax, for the permanent closure of both its Sheldon, Texas and Port-Alfred, Quebec newsprint mills as an initial step of its in-depth operations review. This compares to a loss of $81 million, or 18 cents a share, in the fourth quarter of 2003. Also included in the quarter's results were the following after-tax items: A gain of $169 million on the translation of foreign currencies, namely the Company's US dollar-denominated debt, a lumber duty credit of $39 million, a negative income tax adjustment of $4 million and mill closure elements of $21 million. Although not a GAAP-measure, the loss would have been $56 million, or 13 cents per share, before the impact of foreign currency translation and other specific items in the fourth quarter. This compares to a loss of $91 million, or 21 cents a share, in the fourth quarter of 2003, also before specific items. The operating loss in the fourth quarter was $335 million compared with an operating loss of $211 million in the same quarter of 2003. The major difference year-over-year is higher mill-related closure costs, a stronger Canadian dollar and higher distribution costs. Offsetting these are higher prices for all of the Company's paper and wood products, lower costs in both paper segments as well as a $57 million credit related to the revised U.S. lumber duty rates handed down in the fourth quarter. For all of 2004, the Company lost $36 million, or 8 cents a share, compared with net earnings of $175 million, or 40 cents a share for 2003. On an operating basis, the Company reported a loss of $219 million in 2004, compared with a loss of $326 million in 2003. Although not a GAAP-measure, the loss would have been $153 million, or 35 cents per share in 2004, before the impact of foreign currency translation and other specific items. This compares to a loss of $373 million, or 85 cents a share, in 2003, also before specific items. "We will be making strategic moves over the coming months to return our Company to appropriate levels of profitability," added Weaver. "It won't be easy, but we are dealing with a new reality in the North American newsprint market". Currency Compared to both the fourth quarter of 2003 and for all of 2004, the Canadian dollar has appreciated by 8% against the US dollar. The Company estimates the unfavourable impact of this appreciation on its operating results to be approximately $67 million in the fourth quarter and $188 million for the whole of 2004. Capex Capital expenditures during the quarter came in at $140 million, with PanAsia's Hebei project to construct a 330,000 tonnes newsprint mill outside of Beijing, China representing $61 million of that amount. This US$300 million project, which is being fully funded by the joint venture, is on budget and on schedule. The Hebei project, combined with the completion of the Alma project in the third quarter, the hydro modernization project at Iroquois Falls, Ontario as well as asset maintenance account for most of the 2004 total spend of $385 million ($106 million related to Hebei). Banking Covenants At the end of the fourth quarter, and following the asset write down, the Company's net funded debt to capitalization ratio was 65.8% compared to its 70% covenant and its EBITDA-to-interest coverage was 2.1x compared to the 1.25x threshold. These covenants only apply to the Company's revolving credit facility, which was un-drawn at year-end. In-Depth Operations Review "We are forging ahead in 2005 with a strategic plan designed to make Abitibi-Consolidated a more nimble competitor in the global marketplace," said President and Chief Executive Officer, John Weaver. "This plan will be implemented over the next several quarters and see investment at our strongest mills, while other facilities will be reviewed to maximize value. Improvements in cash flow as well as the cash generated from the execution of this plan are intended for debt reduction." Measurable steps will be implemented to improve annualized EBITDA by $250 million by the end of 2006, including: -- Achieving $175 million in cost, productivity and sales mix improvements. The Company's goal is to have newsprint mills only in the first or second cost quartiles, and to reduce North American newsprint cash costs by $25 per tonne. -- As part of the plan, the Company will focus its review on its higher cost mills in Newfoundland (Grand Falls and Stephenville) as well as on two Ontario mills (Kenora and Fort William). -- The remaining $75 million in profit improvements to come from other initiatives, among which will be: * The next AO/EO conversion; * The re-launch of the Lufkin, Texas mill into a new product or the sale of the mill 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 $5.8 billion in 2004. The Company owns or is a partner in 26 paper mills, 22 sawmills, 4 remanufacturing facilities and 1 engineered wood facility in Canada, the U.S., the UK, South Korea, China and Thailand. With approximately 14,000 employees, excluding its PanAsia joint venture, Abitibi-Consolidated does business in approximately 70 countries. Responsible for the forest management of approximately 18 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. ADESA INC: Subsidiary Expands Salvage Auction Business ------------------------------------------------------ ADESA Inc.'s (NYSE: KAR) total loss vehicle auction business, ADESA Impact, opened its 29th North American auction facility in Connecticut. The new 20-acre greenfield facility is located in Middletown, southeast of Hartford, adjacent to Interstate 91. With eight New England facilities, Impact is the only salvage auction company with locations in all six New England states. Cheryl Munce, president of Impact, stated "As important as technology is in our industry, strategic locations with adequate storage are critical in our ability to service our insurance customers and salvage buyers." Munce added, "We are committed to helping our customers reduce the high cost of services in this region by expanding our footprint." ADESA Impact is the 3rd largest salvage remarketing company in North America with 29 auction facilities in the United States and Canada. ADESA, Inc., also includes: * ADESA Corp., a network of 52 wholesale vehicle auctions; * AFC, a dealer floorplan finance company; * PAR, a vehicle remarketing company; * AutoVIN, which provides vehicle inspection services to the automotive industry and its lenders; and * ComSearch, which provides Internet-based parts location and insurance claim audit services nationwide. Headquartered in Carmel, Indiana, ADESA, Inc. -- http://www.adesainc.com/-- is North America's largest publicly traded provider of wholesale vehicle auctions and used vehicle dealer floorplan financing. The Company's operations span North America with 53 ADESA used vehicle auction sites, 28 Impact salvage vehicle auction sites and 83 AFC loan production offices. * * * As reported in the Troubled Company Reporter on June 4, 2004, Standard & Poor's Rating Services assigned its 'B+' rating to ADESA Inc.'s proposed $125 million senior subordinated notes due 2012, and affirmed its 'BB' corporate credit and senior secured ratings on the Carmel, Indiana-based operator of wholesale used-vehicle auctions and provider of used-vehicle floorplan financing. The outlook is stable. AIRGAS INC: Earns $23 Million of Net Income in Third Quarter ------------------------------------------------------------ Airgas, Inc., (NYSE:ARG) reported strong growth in sales, operating income and net earnings for its third quarter ended Dec. 31, 2004. Net earnings for the quarter grew 10% to $23 million, compared to $20.9 million in the same period a year ago. The current quarter includes integration expenses of $0.01 per diluted share related to the acquisition of the U.S. packaged gas business from The BOC Group. Results for the quarter ended December 31, 2003, include an insurance-related gain of $0.02 per diluted share. Third quarter sales increased 35% to $612 million reflecting continued same-store sales growth, the consolidation of National Welders Supply Company (a joint venture affiliate), as well as acquisitions. National Welders contributed sales of $43 million; excluding this amount, sales grew 26%. Total same-store sales were up 9% compared to the same quarter a year ago, with gas and rent up 5% and hardgoods up 14%. These results reflect continued improvement in manufacturing and other industrial market segments. "Our EPS grew by 19%, excluding the current quarter's integration expenses and the prior period's insurance gain, reflecting continued sales momentum," said Airgas Chairman and Chief Executive Officer Peter McCausland. "However, earnings were a little softer than we hoped. Operating expenses, including fuel cost and cylinder maintenance, increased at a faster pace as volumes continued to grow, and we have experienced some product cost increases. We are planning comprehensive pricing actions to be implemented in the next 30 to 60 days. Given that most of the cost pressures we are experiencing directly relate to our cost to purchase and deliver product to our customers and the significant investment we have made over the last few years to enhance our customers' value experience, I am confident we will achieve appropriate revenue enhancement." Year to date, adjusted debt increased by $181 million as a result of the July 30 closing of the BOC acquisition. After-tax cash flow for the nine months ended December 31, 2004 was $160 million compared to $137 million in the comparable prior year period. Free cash flow for the comparable periods was negative $7 million versus positive $65 million. The decline in free cash is attributed to increased inventories and accounts receivable in connection with overall sales growth and the BOC acquisition, as well as capital expenditures to support the growth in strategic products like medical gas and bulk. The definition of after-tax cash flow and free cash flow, a reconciliation of each to the attached Consolidated Statement of Cash Flows, the definition of adjusted debt and a reconciliation to the balance sheet are attached. Mr. McCausland continued, "Our growth platforms of bulk, medical and specialty gases as well as safety products and strategic accounts all performed well in the third quarter and our January same-store sales remain strong." The Company will conduct an earnings teleconference on Thursday, Jan. 27, 2005, beginning at 11:00 a.m. Eastern Time. Access the teleconference by calling (888) 202-2422. This press release, slides to be presented during the Company's teleconference and information about how to access a live and on-demand webcast of the teleconference are available in the 'Investor Info' section on the Company's Internet site http://www.airgas.com/The telephone replay will be accessible for one week starting January 27 at 1 p.m. Eastern Time by calling (888) 203-1112 and entering passcode 155503. About Airgas, Inc. Airgas, Inc. -- http://www.airgas.com/-- is the largest U.S. distributor of industrial, medical and specialty gases, welding, safety and related products. Its integrated network of nearly 900 locations includes branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also distributes its products and services through eBusiness, catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base. * * * As reported in the Troubled Company Reporter on Nov. 8, 2004, Standard & Poor's Ratings Services raised its ratings on Airgas Inc. The corporate credit rating was raised to 'BB+' from 'BB'. The outlook is stable on this Radnor, Pennsylvania-based industrial gas distributor. AIRGATE PCS: 97% of Noteholders Agree to Amend 9.375% Indenture --------------------------------------------------------------- AirGate PCS, Inc., (Nasdaq: PCSA) disclosed that, as of 5:00 p.m., New York City time on Jan. 25, 2005, the consent solicitation relating to its 9.375% Senior Subordinated Secured Notes due 2009 and its First Priority Senior Secured Floating Rate Notes due 2011 expired. As of such time, AirGate had received consents from holders of approximately 97% and 92% of the outstanding principal amount of 9.375% Notes and Floating Rate Notes, respectively, pursuant to the Consent Solicitation Statement, dated Jan. 11, 2005. As a result, AirGate has received the necessary approval of the holders of each series of Notes to the proposed amendments to each of the indentures under which the Notes were issued. As previously announced, AirGate entered into an Agreement and Plan of Merger with Alamosa Holdings, Inc., pursuant to which AirGate will merge with and into a direct wholly-owned subsidiary of Alamosa. The purpose of the consent solicitation was to obtain the requisite consents to amend the indentures governing the Notes so that neither AirGate nor Alamosa would be required to make a repurchase offer for the Notes upon completion of the merger. Upon completion of the merger, Holders of Notes as of Jan. 10, 2005, that validly delivered their consents before the Expiration Time will receive a consent payment equal to 0.25% of the principal amount of Notes represented by such consents. In connection with the consent solicitation, AirGate intends to promptly execute a supplemental indenture providing for the proposed amendment to each indenture under which each series of Notes was issued, to be operative upon completion of AirGate's previously announced merger with Alamosa Holdings, Inc. On or about Feb. 15, 2005, AirGate will hold a special meeting of AirGate stockholders to vote on the adoption of the merger agreement and Alamosa will hold a special meeting of Alamosa stockholders to vote on the issuance of shares of Alamosa common stock in the merger. If the parties obtain the requisite shareholder approvals, they expect to close the merger promptly thereafter. UBS Securities LLC is acting as the Solicitation Agent. Holders with questions about the consent solicitation can contact UBS' Liability Management Group at (203) 719-4210 (call collect) or (888) 722-9555 x4210 (toll-free). For additional information, contact MacKenzie Partners, Inc., the Information Agent for the consent solicitation, at (800) 322-2885 (toll free) or (212) 929-5500 (collect). This press release does not constitute a solicitation of consents of holders of the Notes and shall not be deemed a solicitation of consents with respect to any other securities of AirGate. About the Company AirGate PCS, Inc., is the PCS Affiliate of Sprint with the right to sell wireless mobility communications network products and services under the Sprint brand in territories within three states located in the Southeastern United States. The territories include over 7.4 million residents in key markets such as Charleston, Columbia, and Greenville-Spartanburg, South Carolina; Augusta and Savannah, Georgia; and Asheville, Wilmington and the Outer Banks of North Carolina. * * * As reported in the Troubled Company Reporter on Oct. 6, 2004, Moody's Investors Service assigned a B2 rating to the proposed $175 million of senior secured floating rate notes due 2011 of AirGate PCS, Inc., and affirmed the company's other ratings. The rating outlook is positive. The affected ratings are: * Senior implied rating B3 (affirmed) * Issuer rating Caa1 (affirmed) * $175 million senior secured floating rate notes due 2011 -- B2 (assigned) * $159 million 9.375% senior subordinated secured notes due 2009 -- Caa1 (affirmed) * $141 million senior secured credit facility due 2007/08 -- WR (withdrawn) ALASKA COMMS: Gets Requisite Consents to Amend Sr. Note Indentures ------------------------------------------------------------------ Alaska Communications Systems Group Inc.'s (Nasdaq:ALSK) subsidiary, Alaska Communications Systems Holdings, Inc., has received the requisite consents and has successfully completed its previously announced solicitations of consents in respect of ACSH's 9-3/8% Senior Subordinated Notes due 2009 and 9-7/8% Senior Notes due 2011. The consent solicitations are being made in connection with ACSH's previously announced tender offers, which are scheduled to expire at 9:00 a.m., New York City time, on Feb. 10, 2005, unless extended or earlier terminated. Liane Pelletier, ACS president and chief executive officer, stated, "This transaction is effectively the first step in our strategy to recapitalize the company and lower our overall cost of capital." The solicitations of consents expired at 5:00 p.m., New York City time, on Jan. 25, 2005. After the expiration of the solicitations of consents, ACS, its subsidiaries and the trustees entered into supplemental indentures, which amended the indentures under which the senior subordinated notes and the senior notes were issued. If they become operative, the amendments to the senior subordinated notes indenture would, among other things, eliminate substantially all of the restrictive covenants and eliminate most events of default (other than for failure to make payments of interest or principal). If they become operative, the proposed amendments to the senior notes indenture would, among other things, increase the amount of senior secured bank indebtedness that ACSH and its subsidiaries may incur. If the tender offers are consummated, holders who tendered their notes prior to the expiration of the consent solicitations will be entitled to receive the consent payments in accordance with the solicitations of consents. Subject to certain conditions, holders of senior subordinated notes who did not tender their notes prior to the expiration of the solicitation of consents but who validly tender and do not withdraw their senior subordinated notes by 9:00 a.m., New York City time, on Feb. 10, 2005, will receive total consideration for their senior subordinated notes of $1,036.88 per $1,000 principal amount of notes tendered by such time, but will not receive a consent payment. Subject to certain conditions, holders of senior notes who did not tender their notes prior to the expiration of the solicitation of consents but who validly tender and do not withdraw their senior notes by 9:00 a.m., New York City time, on Feb. 10, 2005, will receive total consideration for their senior notes of $1,088.75 per $1,000 principal amount of notes tendered by such time, but will not receive a consent payment. Tenders of senior notes will be subject to pro ration in the event that tenders for more than $59,350,000 aggregate principal amount of senior notes are received. ACSH is making the tender offers and consent solicitations as part of a refinancing of a portion of its existing debt. ACSH intends to finance the tender offers and consent solicitations with a portion of the term loan borrowings under an approximately $385 million new senior secured credit facility, the proceeds of a $75 million equity offering by ACS and cash on hand. The tender offers are still subject to arranging the new senior secured credit facility, successful completion of the equity offering and other customary general conditions. At the expiration time of the solicitations of consents, $139.9 million aggregate principal amount of senior subordinated notes had been validly tendered and not withdrawn and $170.8 million aggregate principal amount of senior notes had been validly tendered and not withdrawn. J.P. Morgan Securities, Inc., and CIBC World Markets Corp. are acting as the dealer managers and solicitation agents, and Global Bondholder Services Corp. is acting as depositary, in connection with the tender offers and consent solicitations. Copies of the Offers to Purchase and Consent Solicitation Statements, Letters of Transmittal and Consent, and other related documents may be obtained from the depositary at 866-470-3900. Additional information concerning the terms of each tender offer and consent solicitation may be obtained by contacting J.P. Morgan Securities Inc. toll-free at 866-834-4666 (toll free) or 212-834-3424 or CIBC World Markets Corp. at 212-885-4489. This press release shall not constitute an offer to purchase or the solicitation of an offer to sell or a solicitation of consents with respect to the senior subordinated notes or the senior notes. The tender offers and consent solicitations may only be made in accordance with the terms of and subject to the conditions specified in the Offers to Purchase and Consent Solicitation Statements, dated January 12, 2005, and the related Letters of Transmittal and Consent, which more fully set forth the terms and conditions of the tender offers and consent solicitations. About the Company Alaska Communications Systems is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. * * * As reported in the Troubled Company Reporter on Nov. 5, 2004, Standard & Poor's Ratings Services affirmed its ratings on Alaska Communications Systems Group, Inc., and subsidiaries, including the 'B+' corporate credit rating. All ratings were removed from CreditWatch, where they were placed with negative implications June 8, 2004, due to concern about higher financial risk accompanying the company's proposed $400 million income deposit securities -- IDS -- offering. The outlook is negative. At the same time, Standard & Poor's assigned its '1' recovery rating to Alaska Communications' existing $250 million senior secured credit facility. The existing 'BB-' bank loan rating on the facility and the '1' recovery rating indicate a high expectation of full recovery of principal in the event of a payment default or bankruptcy. ALISON GEM: Wants to Hire Klestadt & Winters as Bankruptcy Counsel ------------------------------------------------------------------ Alison Gem Corporation asks the U.S. Bankruptcy Court for the Southern District of New York for permission to employ Klestadt & Winters, LLP as its general bankruptcy counsel. Klestadt & Winters is expected to: a. advise the Debtor with regards to its rights and obligations as a debtor-in-possession and assist the Debtor in preparing all necessary documents for its chapter 11 case; b. take all necessary actions to protect and preserve the Debtor's estate during the pendency of its chapter 11 case, including: (i) the prosecution of actions by the Debtor and the defense of any actions commenced against the Debtor; (ii) assist in negotiations concerning all litigation in which the Debtor is involved, and (iii) object to claims filed against the Debtor's estate; c. prepare on behalf of the Debtor, all necessary motions, applications, answers, orders, reports and papers in connection with the administration of its chapter 11 case; and e. perform all other necessary legal services in the Debtor's chapter 11 case. Ian R. Winters, Esq., a Partner at Klestadt & Winters, is the lead attorney for the Debtor. Mr. Winters discloses that the Firm received a $49,817.30 retainer. Mr. Winters will bill the Debtor $375 per hour for his services. Mr. Winters reports Klestadt & Winters' professionals bill: Designation Hourly Rates ----------- ------------ Partners $300 - $450 Associates $125 - $250 Paralegals $125 Klestadt & Winters assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in New York, New York, Alison Gem Corp., 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. The Company filed for chapter 11 protection on January 25, 2005 (Bankr. S.D.N.Y. Case No. 05-10404). When the Debtor filed for protection from its creditors, it reported total assets of $20,600,000 and total debts of $43,000,000. AMERICAN BUSINESS: Nasdaq Delists Common Shares ----------------------------------------------- American Business Financial Services, Inc., (Nasdaq: ABFIQ) reported that, on January 24, 2005, it received a letter from The Nasdaq Stock Market stating that ABFS' common stock would be delisted from The Nasdaq Stock Market at the opening of business on February 2, 2005, in accordance with Marketplace Rules 4300 and 4450(f). The Nasdaq Stock Market also indicated that, prior to delisting, ABFS' trading symbol would be "ABFIQ" starting from the opening of business on January 26, 2005. On January 21, 2005, ABFS and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. A separate subsidiary filed its petition on January 24, 2005. As a result of these proceedings, ABFS elected not to appeal the decision of The Nasdaq Stock Market. Headquartered in Philadelphia, Pennsylvania, American Business Financial Services, Inc., together with its subsidiaries, is a financial services organization operating mainly in the eastern and central portions of the United States and California. The Company originates, sells and services home mortgage loans through its principal direct and indirect subsidiaries. The Company, along with four of its subsidiaries, filed for chapter 11 protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203). Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,083,396,000 in total assets and $1,071,537,000 in total debts. AMERICAN BUSINESS: Wants to Maintain Cash Management System ----------------------------------------------------------- Bonnie Glantz Fatell, Esq., at Blank Rome, LLP, in Wilmington, Delaware, informs the Honorable Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware that American Business Financial Services, Inc., and its debtor-affiliates maintain numerous bank accounts at several banks as part of a centralized cash management system that provides for a comprehensive set of internal controls governing the receipt and disbursement of funds. From time to time, one or more of the Bank Accounts may contain funds in an amount not completely insured or guaranteed as contemplated in Section 345 of the Bankruptcy Code. The Cash Management System includes a master Sweep Account at JP Morgan Chase Bank, N.A. Inflows to the Sweep Account include, among other sources, net proceeds from Whole Loan Sales and amounts automatically swept or manually transferred from nine zero balance accounts. Disbursements are made from the Sweep Account to fund ZB Accounts and pay the operating expenses of the Company. No checks are drawn on the Sweep Account. Ms. Fatell explains that nine ZB Accounts at Chase are funded from time to time by the Sweep Account, with balances swept into the Sweep Account on a daily basis. The ZB Accounts include a core ABFS operating account, from which substantially all vendor payments are made, and four ABC operating accounts used to pay, among other things, certain accounts payable, payroll, employee benefits, recording fees and other expenses. The ZB Accounts also include Home American Credit, Inc., and American Business Mortgage Services, Inc., operating accounts utilized in the Loan origination process. The remaining two ZB Accounts are no longer active and may be scheduled for closing. The Debtors utilize three Bank Accounts in the loan collection process. Generally, depending on whether the loan is securitized or owned, borrowers are directed to make regular monthly payments and loan payoffs to one of two lock-box accounts at Firstrust Savings Bank. Funds are swept daily from the Lock-Box Accounts and transferred to a mortgage collection account at Chase. Automated Loan payments are remitted directly to the Chase Mortgage Collection Account. In certain instances, borrower payments and payoffs are remitted to two non-Debtor bank accounts. Borrower payments and payoffs for certain Warehouse Loans serviced by Wachovia Bank, N.A., and Wachovia Capital Markets, LLC, are remitted to a lock-box account maintained at Wachovia. In addition, at the request of AMBAC Assurance Corporation, a Securitization Insurer, borrower payments and payoffs relating to Loans in five Securitizations are in the process of being redirected to a non-Debtor owned lockbox account at Firstrust. Several Bank Accounts, as well as several non-Debtor bank accounts, are involved in processing Loan payments and payoffs. Loan processing begins after Loan payments and payoffs are deposited in the Chase Mortgage Collection Account. Thereafter, the Company's computerized servicing system directs the apportionment of each payment or payoff into its constituent parts: -- principal and interest, -- amounts designated as taxes or insurance, and -- certain advance reimbursements and fees related to Loan servicing. P&I for serviced Loans is manually transferred to a non-Debtor owned Securitization trust account. P&I for owned Loans is manually transferred to one of the Originators' operating accounts at Chase. Amounts designated as T&I are transferred to a segregated ABMS Bank Account at Chase. Advances and Fees are segregated and manually transferred to an ABC Bank Account at Chase. Advances and Fees are transferred from the Servicer Advance Account to the Sweep Account on a daily basis. The Debtors have various other Bank Accounts, including: (a) a Tiger Bank Account at Chase for receipt of payments and recoveries related to REO; (b) several cash collateral accounts to secure certain obligations; (c) several miscellaneous deposit, escrow and other Bank Accounts at Chase; (d) an ABC Bank Account at Beneficial Savings Bank established in connection with a prior sale of Loans; (e) numerous Bank Accounts at Wilmington Trust Company opened to facilitate prior Securitizations or other transactions; and (f) a money market account with B1ackRock, Inc. "Many of these Bank Accounts carry minimum balances and may be closed as part of the Debtors' continuing review and consolidation of its Cash Management System," Mr. Fatell says. Accordingly, the Debtors ask the Court for permission to use their existing Bank Accounts and Cash Management System. The Debtors further ask Judge Walrath to authorize the Banks to process, honor and pay all prepetition checks or other transfers related to taxes and insurance. Headquartered in Philadelphia, Pennsylvania, American Business Financial Services, Inc., together with its subsidiaries, is a financial services organization operating mainly in the eastern and central portions of the United States and California. The Company originates, sells and services home mortgage loans through its principal direct and indirect subsidiaries. The Company, along with four of its subsidiaries, filed for chapter 11 protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203). Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,083,396,000 in total assets and $1,071,537,000 in total debts. (American Business Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERICAN COMMERCIAL: Judge Lorch Confirms Amended Chapter 11 Plan ----------------------------------------------------------------- The Honorable Basil H. Lorch of the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany division, confirmed the Amended Plan of Reorganization filed by American Commercial Lines LLC and its debtor-affiliates. The Debtors filed their amended plan on October 19, 2004. Judge Lorch determined that the Plan satisfies the requisite provisions in Section 1129 of the Bankruptcy Code, that it should: * properly classifies the claims, * specifies the unimpaired classes of claims, * specifies the treatment of unimpaired classes of claims, * provides for the same treatment of each claim in each class, * provides adequate and proper means for its implementation, * is not inconsistent with applicable provisions of the Bankruptcy Code, * complies with applicable provisions of the Bankruptcy Code, * was proposed in good-faith, * provides for the payment for services or costs and expenses in connection with the Debtors Chapter 11 cases, * provides for the proper treatment of administrative and tax claims pursuant to the requirements of Section 1129((a)(9) of the Bankruptcy Code, * is feasible, * calls for the payment of fees payable under Section 1930 of the Judiciary Procedures Code, * does not alter retiree benefits, * is fair and equitable, and * does not call for the avoidance of taxes or the application of Section 5 of the Securities Act of 1933. About the Plan New Organizational Structure Under the Plan, Debtors ACL Capital Corp. and ACBL Riverside Terminals will be dissolved. The resulting Reorganized Debtors are: * A New Holding Company, which will indirectly own 100% of Reorganized American Commercial Lines LLC. The Reorganized American Commercial Lines will own equity interests in eight affiliated entities: (a) 100% of Reorganized Debtor Louisiana Dock Company LLC; (b) 100% of Reorganized Debtor Jeffboat LLC; (c) 100% of Reorganized Debtor American Commercial Terminals LLC; (d) 100% of Reorganized Debtor American Commercial Barge Line LLC; (e) 100% of Reorganized Debtor American Commercial Logistics LLC; (f) 100% of Reorganized Debtor ACBL Liquid Sales LLC; (g) 100% of Reorganized Debtor American Commercial Lines International LLC; and (h) 50% of Vessel Leasing LLC. * Reorganized American Commercial Terminals LLC will own 100% of Reorganized American Commercial Terminals Memphis LLC; * Reorganized Louisiana Dock Company LLC will own equity interests in three affiliated entities: (a) 35% of T.T. Barge Services Mile 237 LLC; (b) 100% of Reorganized Debtor Houston Fleet LLC; and (c) 50% of Bolivar Terminal Company. * Reorganized American Commercial Lines International LLC will own equity interests in four affiliated entities: (a) 100% of Reorganized Debtor Orinoco TASA LLC; (b) 100% of Reorganized Debtor Orinoco TASV LLC; (c) 100% of ACBL Venezuela Ltd.; and (d) 71% of ACBL Dominicana S.A. * Reorganized American Commercial Barge Line LLC will own 33.33% of Barge Net. * Reorganized American Commercial Logistics LLC will own 50% of Barge Link LLC. The Plan does not include any substantive consolidation of the Debtors for any purpose. Recoveries Under the Proposed Plan These claims will be paid in full: * Administrative Claims, * Allowed DIP Claims, * Allowed Priority Claims, * Tax Claims (over six-year period with interest), * Senior Secured Claims based on the June 30, 1998 Credit Agreement estimated to be $363,924,000, and * Other Secured Claims other than Senior Secured Claims, Maritime Liens Claims and Tort Lien Claims. Holders of claims against one or more vessels owned by one or more Debtors will receive half of what they're owed if they want their Maritime Lien Claims paid in cash. Alternatively, holders of Maritime Lien Claims can elect to receive a 5-year note for 100% of their claims. Maritime Lien Claims are estimated to total $12,000,000 to $17,000,000. Holders of Allowed Secured Claims against property of one or more Debtors arising under: (a) General Maritime Law for maritime torts, including personal injury, death, property damage and cargo damage, or (b) Section 506 of the Bankruptcy Code. will be paid in full either in cash or with Tort Lien Holder Notes. Tort Lien Claims are estimated to be less than $1 million. General Unsecured Claims Common shares of the New Holding Company will be distributed to holders of General Unsecured Claims on a pro rata basis: Projected Estimated Percentage Debtor Claims Recovery ------ --------- ---------- American Commercial Barge $327M to $340M 8% to 9% Line LLC American Commercial Lines $278M to $279M 2% to 3% International LLC Jeffboat LLC $279M to $280M 8% to 9% Louisiana Dock Company LLC $280M to $281M 3% to 4% Holders of General Unsecured Claims against these Debtors will get nothing: * American Commercial Lines Holdings LLC less than $1M; * American Commercial Lines LLC $306M to $313M; * American Commercial Logistics LLC $278M to $279M; * Houston Fleet LLC $278M to $279M; * Lemont Harbor & Fleeting Services LLC $278M to $279M; * ACL Capital Corp. $278M to $279M; * ACBL Liquid Sales LLC $278M to $279M; * Orinoco TASV LLC $278M to $279M; * Orinoco TASA LLC $278M to $279M; * American Commercial Terminals LLC $278M to $279M; and * American Commercial Terminals-Memphis LLC $278M to $279M. Holders of Convenience Class Claims, totaling $1,500,000, will be paid 8% of their allowed claims, in cash, 45 days after the effective date of the Plan Holders of the: (1) 10-1/4% Senior Notes due June 30, 2003 that were not exchanged pursuant to the April 15, 2002 exchange offer, owed an estimated $6,893,000; and (2) 12% Pay-in-Kind Senior Subordinated Notes due July 1, 2008, owed an estimated $124,354,000; take nothing under the Plan. Equity Holders will not get anything either. A full-text copy of the Plan and the Disclosure Statement is available for a fee at: http://www.researcharchives.com/download?id=040812020022 Headquartered in Jeffersonville, Indiana, American Commercial Lines LLC, an integrated marine transportation and service company transporting more than 70 million tons of freight annually using 5,000 barges and 200 towboats in North and South American inland waterways, filed for chapter 11 protection on January 31, 2003 (Bankr. S.D. Ind. Case No. 03-90305). American Commercial is a wholly owned subsidiary of Danielson Holding Corporation (Amex: DHC). Suzette E. Bewley, Esq., at Baker & Daniels represents the Debtors in their restructuring efforts. As of September 27, 2002, the Debtors listed total assets of $838,878,000 and total debts of $770,217,000. AMERICAN COMMERCIAL: Moody's Rates Planned $200M Sr. Notes at B3 ---------------------------------------------------------------- Moody's Investors Service has assigned a B3 rating to American Commercial Lines LLC's proposed $200 million senior notes, due 2015. The proposed notes, along with usage of about $162 million, estimated, as of January 26, 2005, of the Company's proposed $225 million senior secured revolving credit facility will represent the majority of the Company's debt financing and will refinance much of the debt the company has under its interim capital structure following its emergence from bankruptcy protection on January 11, 2005. On close of the transaction, American Commercial will have about $92 million of equity in its capital structure, 18% of total capital. Also, Moody's has assigned a B2 senior implied and a B3 senior unsecured issuer rating to American Commercial, as well as a Speculative Grade Liquidity Rating of SGL-2. The ratings outlook is stable. The stable outlook reflects Moody's expectations of stable operating margins and cash flows, despite anticipated decreases in the company's revenue base over the near term owing to on-going fleet rationalization. Proceeds from fleet retirements will also provide a modest amount of funds, which can be used for debt reduction over the next 12 months. Ratings could be subject to downward revision if unexpectedly severe or prolonged operating difficulties cause operating margins to fall below 5%, result in persistently thin or negative free cash flow generation, or EBIT coverage below 1.0x interest expense. Conversely, the rating outlook could improve if the company were to demonstrate improvement in operating results and debt reduction such that free cash flow were to approximate 10% of debt, EBIT were greater than 1.5x interest expense, and lease- adjusted debt/EBITDAR were to fall below 5.5x for a sustained period. Upon close of the proposed transaction and restructuring of the company as a result of its exit from bankruptcy, American Commercial will remain a heavily-levered company operating in a traditionally volatile business sector. Although the Company's operating performance has improved during the course of its re- organization, reflecting reduction in American Commercial's operating fleet, focus on operating efficiencies, and general market improvements since the January 2003 bankruptcy filing, recent operating results suggest thin cash flows and earnings relative to re-financed, post-emergence debt levels. Total debt of $408 million, represents about 5x pro forma estimated LTM October 2004 EBITDA (about 6x EBITDAR on a lease- adjusted basis). Interest coverage of the refinanced debt is also weak based on pro forma operating earnings for the same period, with an estimated EBIT/interest of about 1.0x. Similarly, Moody's estimates pro forma free cash flow for this period to be thin, at about 3% of the closing debt balance. Moody's expects American Commercial's operating margin to improve in FY 2005, owing to continued improvements in the Company's cost structure, including vessel expenses and overhead, stability in barge revenues in a continued strong rate environment, as well as expectations for strong operating results from the Company's Jeffboat shipbuilding subsidiary. This should allow the Company to generate sufficient free cash to repay a modest amount of debt over the near term, while remaining adequately in compliance with leverage limits defined by the proposed senior secured credit facility and increasing the availability of the revolving credit facility. However, Moody's notes the volatile nature of the barge markets in which the company operates, and the potential impact that externalities, such as weather conditions on the river systems, can have on the company's operating performance. Moody's remains cautious that, despite a positive near term economic outlook, the company may encounter unexpected and uncontrollable adverse operating conditions. Such operating set-backs may put significant strain on the company's ability to generate adequate cash flows, possibly resulting in increased borrowings under its revolving credit facility over the short-term. Over the longer term, if such conditions persist, American Commercial could face difficulty in meeting covenant levels or debt service requirements. Moody's believes, however, that the company's substantial contract coverage of revenue through FY 2005 mitigates the effects that unexpected adverse conditions may have on the company's financial condition over the next 12 months. The ratings are supported by American Commercial's leading market position in the U.S. inland barge sector, the Company's long term contracts and relationships with a wide range of key shipping customers, as well as the relative diversity in the barge operator's cargo mix. The Company operates over 3,000 barges and 136 towboats, making American Commercial the largest provider of covered hopper dry cargo barges and one of the largest liquid barge operators on the U.S. Inland Waterways. Moody's believes that American Commercial 's fleet size is important in gaining long-term contracts and renewing shorter-term contracts with important customers. A majority of the Company's expected FY 2005 barge revenue is based on fixed contracts, typically one to three years in length. American Commercial has a large and fairly diversified base of customers; the top 10 shipping customers comprise about 35% of the company's FY 2004 revenue, with no single customer accounting for more than 15% of total revenue. Similarly, despite the Company's concentration in grain cargoes, American Commercial has been successful in adding other dry bulk commodities, including coal and steel, as well as a growing contribution from liquid bulk shipping. This reduces the Company's historical exposure to the highly cyclical and seasonal grain cargo markets, improving revenue stability. The B3 rating on the senior unsecured notes, one notch below the senior implied rating, reflects the severity of loss that could be borne by holders of these notes in the event of default. These notes are effectively subordinated to all borrowings under the company's proposed senior secured credit facilities. Moody's assesses the asset coverage of all debt to be modest, despite the substantial level of fixed assets on the American Commercial's balance sheet. On total assets of $645 million, pro forma, as of October 1 2004, about $428 million of this amount was represented by fixed assets. In a liquidation scenario, Moody's believes that realizable asset values may possibly cover potential senior secured credit facilities outstanding, $225 million committed as of close of transactions, but that coverage available to unsecured debt holders may imply substantial loss of principal. The Speculative Grade Liquidity Rating of SGL-2 reflects Moody's assessment of a good liquidity profile. Upon close of the proposed transaction, American Commercial will have an estimated cash balance of about $24 million. The Company plans to have about $63 million of its $225 million senior secured revolving credit facility available at that time. Although the facility will be heavily drawn, in Moody's opinion, the remaining availability gives m American Commercial moderate latitude to cover potential cash short-falls over the next 12 months. Free cash flow is projected to be modest in FY 2005, but improving over 2004 levels, approximately $13 million, pro forma for the transactions, reflecting the Company's reduced cost structure for leased-in vessels and moderate capital expenditure levels during a period of anticipated stability of freight revenue and operating margins. This should reduce the likelihood that the company will have to draw further on its senior secured credit facility. Also, Moody's notes that financial covenant levels associated with this facility allow for ample cushion against unexpected downward operating results, minimizing the possibility of covenant violation over the near term. However, with essentially all assets on the Company's balance sheet encumbered by debt, either through the revolving credit facility or MARAD debt, Moody's believes that the company's ability to raise funds through additional indebtedness to be quite limited. American Commercial Lines LLC, headquartered in Jeffersonville, Indiana, is one of the largest integrated marine transportation and services companies in the United States, providing barge transportation and related services, and barge, towboat and other vessel construction. As of December 31, 2004, the Company operated 3,240 barges in the U.S., consisting of 2,513 covered hoppers, 348 open hoppers and 379 tank barges. The Company had pro forma LTM October 1, 2004 revenues of $617 million. AMERICREDIT CORP: Prices $900 Million Asset-Backed Securitization ----------------------------------------------------------------- AmeriCredit Corp. (NYSE:ACF) disclosed the pricing of a $900 million offering of automobile receivables-backed securities through lead managers Wachovia Securities and JPMorgan. Co-managers are Credit Suisse First Boston, Deutsche Bank Securities and Lehman Brothers. AmeriCredit uses net proceeds from securitization transactions to provide long-term financing of its receivables. The securities will be issued via an owner trust, AmeriCredit Automobile Receivables Trust 2005-A-X, in four classes of Notes: Note Class Amount Average Life Price Interest Rate ---------- ------------ -------------- ---------- ------------- A-1 $164,000,000 0.25 years 100.00000 2.73% A-2 $258,000,000 0.90 years 99.99968 3.22% A-3 $277,000,000 2.10 years 99.98118 3.63% A-4 $201,000,000 3.42 years 99.98207 3.93% ------------ $900,000,000 ============ The weighted average coupon is 3.7%. The Note Classes are rated by Standard & Poor's, Moody's Investors Service and Fitch Inc. The ratings by Note Class are: Note Class Standard & Poor's Moody's Fitch ---------- ----------------- ------- ------ A-1 A-1+ Prime-1 F1+ A-2 AAA Aaa AAA A-3 AAA Aaa AAA A-4 AAA Aaa AAA XL Capital Assurance will provide bond insurance for this transaction. Initial credit enhancement will total 9.5% of the original receivable pool balance building to the total required enhancement level of 17.0% of the then outstanding receivable pool balance. The initial 9.5% enhancement will consist of 2.0% cash and 7.5% overcollateralization. This transaction represents AmeriCredit's 47th securitization of automobile receivables in which a total of more than $36 billion of automobile receivables-backed securities has been issued. Copies of the prospectus relating to this offering of receivables-backed securities may be obtained from the managers and co-managers. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described in this press release, nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such State. About the Company AmeriCredit Corp. -- http://www.americredit.com/-- is a leading independent auto finance company. Using its branch network and strategic alliances with auto groups and banks, the Company purchases retail installment contracts entered into by auto dealers with consumers who are typically unable to obtain financing from traditional sources. AmeriCredit has approximately one million customers and $11 billion in managed auto receivables. The Company was founded in 1992 and is headquartered in Fort Worth, Texas. * * * As reported in the Troubled Company Reporter on Sept. 20, 2004, Fitch Ratings upgraded AmeriCredit Corp.'s senior unsecured debt rating to 'BB-' from 'B' and said the Rating Outlook is Stable. Approximately $166 million of debt was affected by this action. ARGOSY GAMING: Hosting 2004 Results Conference Call on Feb. 9 ------------------------------------------------------------- Argosy Gaming Company (NYSE: AGY) will host an investor/analyst conference call on Feb. 9, 2005, at 10:00 a.m. EST to review its fourth quarter and year-end operating results for the periods ended Dec. 31, 2004. The call will be broadcast live via the Internet and may be accessed through its website at http://www.argosy.con/For those interested in participating in the call, dial (706) 634-1306 and reference conference ID #3657889 ten to fifteen minutes prior to the call start time. A replay of the call will be available at our website through Feb. 23, 2005. About the Company Argosy Gaming Company -- http://www.argosy.con/-- is a leading owner and operator of casinos and related entertainment and hotel facilities in the midwestern and southern United States. Argosy owns and operates the Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan market; the Argosy Casino- Riverside in Missouri, serving the greater Kansas City metropolitan market; the Argosy Casino-Baton Rouge in Louisiana; the Argosy Casino-Sioux City in Iowa; the Argosy Casino- Lawrenceburg in Indiana, serving the Cincinnati and Dayton metropolitan markets; and the Empress Casino Joliet in Illinois serving the greater Chicagoland market. * * * Moody's Rating Services and Standard & Poor's assigned their single-B ratings to Argosy Gaming's 7% Senior Subordinated Notes in July 2004. ARMSTRONG WORLD: Creditors Transfer 18 Trade Claims --------------------------------------------------- The Clerk of the U.S. Bankruptcy Court for the District of Delaware recorded 18 claim transfers from October 21, 2004, to January 6, 2005. Amroc Investments, Inc., purchased 10 claims from nine trade creditors: * Hunzicker Brothers Inc., * Penn State University, * Duquesne Light Co., * Southern Electric Supply, * Rexel Pyramid Division, * Gulf Coast Air & Hydraulics, * Seven Maples Systems & Controls Inc., * Nordson Corporation, and * York Container Company. OZ Master Fund and OZF Credit Opportunities Master Fund sold two claims each to Bear Stearns & Co., Inc., aggregating $21 million and $13 million. Contrarian Funds, LLC, acquired two claims from Bearing and Drive, Inc., totaling $138,500. North Pole Capital Master Fund acquired Bear Stearns' claim for $6,000,000. Bear Stearns assigned its claim for $567,071 to Loews Corp. 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) ATA HOLDINGS: Reduces Indianapolis Operations Due to Tight Market ----------------------------------------------------------------- ATA Holdings Corp. (ATAHQ) discloses plans to reduce its schedule in Indianapolis as a result of fierce competition in the Indiana market. As part of its overall reorganization, the changes will entail significant adjustments to ATA's flight service through Indianapolis. George Mikelsons, ATA's Chairman, President and CEO said, "I want to thank the people of Indianapolis for all their support of ATA in our three decades of service in what I believe is the best city for a corporation to be based. I am saddened by the necessary changes to our service in our hometown, but ATA hopes to return to these routes when the market adjusts to reasonable levels." Beginning in April, ATA will provide daily flights from Indianapolis to Orlando, Ft. Myers, Las Vegas and Los Angeles. Effective February 28, ATA will end service from Indianapolis to San Francisco, Dallas and New York. Effective April 10, ATA will end service from Indianapolis to Cancun, Ft. Lauderdale, Sarasota, St. Petersburg and Phoenix. Effective March 28, ATA will end Chicago Express service from Chicago to Flint, South Bend and Grand Rapids, as well as recently-announced service from Indianapolis to Evansville, Milwaukee, South Bend, Fort Wayne and Flint. Service from Indianapolis to Gary, IN, previously scheduled to start February 1, will not be initiated. "We have taken aggressive actions to ensure the long-term competitiveness of ATA now and in the future," said Gil Viets, ATA's Executive Vice President and CFO. "By making these moves now, we can adapt our business to the industry's difficult market dynamics and continue on our path of transformation." The adjustments in Indianapolis are necessary steps in ATA's reorganization, which include the airline's announcement in December that it accepted a bid of Southwest Airlines for acquisition of certain of ATA's Midway Airport lease rights, providing ATA a continuous presence in Chicago- Midway. As part of the deal, ATA and Southwest Airlines entered into a codesharing agreement for Chicago-Midway routes, representing the first significant codeshare for both airlines. "We will be offering our customers who are impacted by this change a variety of options. They will be contacted by one of our Reservations Associates in the near future to discuss their options," said Doug Yakola, Senior Vice President, Customers and Ground Operations. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago-Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. BJ SERVICES: Files Form 10-K Annual Report with SEC --------------------------------------------------- BJ Services Company (NYSE: BJS; CBOE; PCX) filed its Annual Report on Form 10-K for the fiscal year ended September 30, 2004. The Company has conducted a comprehensive review of the Asia Pacific Region's balance sheet and we have determined that excess liabilities had accumulated over a period of years, which still existed at September 30, 2004, in the amount of $12.2 million. The net effect of these adjustments has been reported in Other Income in the Consolidated Statement of Operations for the year ended September 30, 2004. The following table provides a summary of consolidated results of operations for the three and twelve months ended September 30, 2004, as adjusted compared with the consolidated results of operations for the three and twelve months ended September 30, 2004 as reported by the Company on November 2, 2004: Three Months Ended Twelve Months Ended As As As As Reported Adjusted Reported Adjusted 9/30/04 9/30/04 9/30/704 9/30/04 (In thousands except per share data) -------- -------- -------- -------- Revenue $694,465 $694,465 $2,600,986 $2,600,986 Total operating expenses 570,491 567,721(A) 2,165,371 2,162,601 Operating income 123,974 126,744 435,615 438,385 Interest expense (4,068) (4,068) (16,389) (16,389) Interest income 3,076 3,076 6,073 6,073 Other income/(expense), net 224 9,660(A) 83,232 92,668 Income before income taxes 123,206 135,412 508,531 520,737 Income tax expense 37,604 38,434 158,866 159,696 Net income $85,602 $96,978 $349,665 $361,041 Earnings Per Share: Basic $0.53 $0.60 $2.18 $2.25 Diluted $0.52 $0.59 $2.14 $2.21 (A) Includes a $2.8 million income statement reclassification, which had no impact on net income and is unrelated to the Asia Pacific Region adjustments. BJ Services Company is a leading provider of pressure pumping and other oilfield services to the petroleum industry. * * * As reported in the Troubled Company Reporter on Jan. 3, 2005, the Company received a report from a whistleblower alleging that its Asia Pacific Region Controller had misappropriated Company funds in fiscal 2001. The Company began an internal investigation into the misappropriation and whether other inappropriate actions occurred in the Region. The Region Controller admitted to multiple misappropriations during a 30-month period ended April 2002. The misappropriations identified to date total approximately $9.0 million and have been repaid to the Company. The misappropriated funds were recorded as an expense in the Consolidated Statement of Operations in prior periods and, therefore, no restatement is required. As a result, the Company expects to record $9.0 million as Other Income in the Consolidated Condensed Statement of Operations for the quarter ending December 31, 2004. The Company is conducting a review of accrued liabilities and certain other balance sheet accounts for the Asia Pacific Region and a review of certain tax records in the region before filing its Form 10-K. As the Company continues its investigation, further adjustments may be recorded in the Consolidated Statement of Operations. The Company also received whistleblower allegations that illegal payments to foreign officials were made in the Asia Pacific Region. The Audit Committee of the Board of Directors engaged independent counsel to conduct a separate investigation to determine whether any such illegal payments were made. That investigation, which is also continuing, has found information indicating that illegal payments to government officials in the Asia Pacific Region aggregating in excess of $1.5 million may have been made over several years. Earlier this month, the Company said it would give a notice of default to the lenders under its $400 million revolving credit facility for failing to comply with its covenants to timely provide audited financial statements. The delivery of the company's annual report to the SEC solves this problem. The Company also indicated it has no borrowings under its $400 million Revolving Credit Facility and has cash and cash equivalents and short-term investments in excess of its other indebtedness. BOWATER INC: Declares $0.20 per Common Share Quarterly Dividend --------------------------------------------------------------- The Board of Directors of Bowater Incorporated (NYSE: BOW) declared a quarterly cash dividend of $0.20 per common share payable on April 1, 2005, to holders of record at the close of business on March 10, 2005. Simultaneously, Bowater's subsidiary, Bowater Canada Inc., declared a quarterly cash dividend to holders of its exchangeable shares (TSE: BWX) in the same amount with the same record and payable dates. Bowater Incorporated, headquartered in Greenville, South Carolina, produces newsprint and coated groundwood papers. In addition, the company makes uncoated groundwood papers, bleached kraft pulp and lumber products. The company has 12 pulp and paper mills in the United States, Canada and South Korea and 12 North American sawmills that produce softwood lumber. Bowater also operates two facilities that convert a groundwood base sheet to coated products. Bowater's operations are supported by approximately 1.4 million acres of timberlands owned or leased in the United States and Canada and 30 million acres of timber cutting rights in Canada. Bowater is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange, the Pacific Exchange and the London Stock Exchange. A special class of stock exchangeable into Bowater common stock is listed on the Toronto Stock Exchange (TSE: BWX). * * * As reported in the Troubled Company Reporter on Oct. 21, 2004, Moody's Investors Service downgraded Bowater Incorporated's senior implied, senior unsecured and issuer ratings to Ba3 from Ba2 due to systemic newsprint market issues and their potential impact. The same factors cause the outlook to remain negative. As reported in the Troubled Company Reporter on May 14, 2004, Standard & Poor's Ratings Services assigned its 'BB' bank loan rating to newsprint producer Bowater Inc.'s $435 million senior unsecured revolving credit facility due 2007. All other ratings were affirmed at 'BB'. The outlook is stable. BURLINGTON INDUSTRIES: BII Trust Files 2004 Status Report --------------------------------------------------------- Rebecca L. Booth, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, informs the U.S. Bankruptcy Court for the District of Delaware that since the Effective Date, the BII Distribution Trust -- successor-in-interest to Burlington Industries, Inc., and its debtor-affiliates -- has worked diligently to fulfill its obligation under the Plan and the BII Distribution Trust Agreement. To recall, the Plan empowers the Trust to: (a) market, liquidate, sell, transfer or otherwise dispose of the Distribution Trust Assets; (b) make Distributions contemplated by the Plan; (c) establish and administer any reserves with respect to Disputed Claims; (d) object to Claims and resolve these objections; (e) pursue any Recovery Actions; and (f) liquidate the remaining Claims and make Distributions under the Plan. Recovery Actions On November 12, 2003, the Trust filed 84 Recovery Actions seeking to avoid and recover alleged preferential transfers made to various entities before the Petition Date. The Trust, Ms. Booth says, is still pursuing 14 of those adversary proceedings and has dismissed or agreed to dismiss 71 adversary proceedings. Of the 14 continuing adversary proceedings, 11 defendants have filed responsive pleadings. The Trust is currently working to settle or prosecute these claims. Administrative Claims Issues The Trust has completed analysis of the Administrative Claims in the Debtors' reorganization cases. Ms. Booth relates that: -- 18 parties sought payment of Administrative Claims before the November 25, 2003 Administrative Claims Bar Date; -- 20 parties asserted entitlement to Administrative Claim Priority in their proofs of claim; and -- 47 parties asserted Reclamation Claims against the Debtors' Estates, which were not assigned Claim numbers by the the claims agent but which assert entitlement to Administrative Claim Priority. To protect the interests of the Debtors' Estates and ensure a fair Distribution to all creditors, the Trust had sought and obtained an extension of the Administrative Claim Objection Bar Date to October 31, 2004. The Trust has now reviewed all of the asserted Administrative Claims asserted in the Debtors' reorganization cases and filed objections to these Claims. Five Administrative Claims, however, remain unresolved. Claims Objection As of the Effective Date, majority of the work that remained in the Debtors' Chapter 11 cases relate to resolving the 4,005 Claims that were filed against or scheduled by the Debtors. Of these 4,005 Claims, 789 Claims were withdrawn or expunged as of the Effective Date. The Trust has 3,216 Claims pending against the Estates that needed to be analyzed. Ms. Booth explains that the Plan initially set March 9, 2004, as the objection bar date for these Claims. However, to ensure that the Trust had sufficient time to review, and if necessary object to these Disputed Claims, the Trust sought and obtained approval of two extensions of the Claims Objection Bar Date. Currently, the Claims Objection Bar Date is set for March 31, 2005. The Trust has also sought and obtained relief from certain requirements of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware to allow for the most efficient and cost-effective administration of Claims. Since the Effective Date, the Trust has diligently reviewed all pending Claims to ensure that each creditor receives only its appropriate recovery under the Plan. During these period, the Trust has filed a total of 19 Omnibus Objections to Claims, including two Amendments to certain of the Debtors' Schedules and Statements of Assets and Liabilities. As a result, nearly 3,184 Claims have been resolved. This includes 667 Claims that have been withdrawn or disallowed and expunged and 2,517 that have been allowed. An additional three Claims have been settled since December 31, 2004. Currently, 29 Disputed Claims remain unresolved. Sale of Certain Real Property Assets Ms. Booth reports that the Trust has been working to finalize asset sales that were in process on the Effective Date. The Trust has sold parcels of real property since the Effective Date and is diligently working to sell or otherwise dispose several others, for which it has yet to reach agreement on the terms of a sale agreement with a prospective purchaser or purchasers. WLR Purchase Agreement Matters Since the closing of substantially all of the Debtors' assets to WLR Recovery Fund II, LP, in cooperation with Mohawk Industries, Inc., on November 10, 2003, the Trust has worked with the Buyer to resolve various issues related to the sale of the Debtors' assets and business operations to the Buyer. Moreover, the Trust has finalized the working capital adjustment calculation required by the WLR Purchase Agreement and has obtained the release of restricted cash collateral from a lender following the Buyer's issuance of a replacement letter of credit related to certain obligations assumed by the Buyer under the Plan and the WLR Purchase Agreement. The Trust, Ms. Booth says, is continuing to work diligently to resolve certain remaining issues between the Trust and the Buyer regarding matters relating to the WLR Purchase Agreement. Reserves As of December 31, 2004, the Trust has approximately $8,000,000 of reserves for Administrative, Priority, Other Secured, and Multiple Classification Claims. Ms. Booth reports that the aggregate amount of Allowed Class 4 Unsecured Claims as of December 31, 2004, is $373,000,000, including $305,000,000 related to the 7.25% Senior Notes due in 2005 and 2027 and approximately $68,000,000 related to Allowed Class 4 Unsecured Claims. Moreover, $10,900,000 remains held in the Class 4 Unsecured Claim Reserve primarily as undistributed cash pending resolution of approximately $30,000,000 of disputed Class 4 claims. The Reserve includes: (i) certain obligations related to the former operations of the Burlington Companies to the extent not assumed by the Buyer; (ii) contingent liabilities, including the liabilities, cost and expense related to certain properties owned by BII Real Estate; (iii) the dissolution of certain Mexico subsidiaries; and (iv) other expenses in connection with the administration and liquidation of the Trust. Ms. Booth, however, can give no assurance that the reserves will be adequate to pay all contingent liabilities since the amounts of the liabilities are not determinable. Distributions Ms. Booth informs the Court that the Trust has made Distributions on account of certain Class 2 "Other Secured" Claims and all Class 3 "Prepetition Bank" Claims totaling about $385,500,000 on the Effective Date. In addition, the Trust has made periodic distributions to holders of: * Allowed Administrative Claims, * Allowed Class 1 Claims (Unsecured Priority Claims), * Allowed Class C4 Claims (General Unsecured Claims), * Allowed Class C5 Claims (Convenience Class Claims), and * Priority Tax Claims. The Trust has also made payments to Professionals on account of Fee Claims totaling approximately $5,400,000. The Trust will continue to make the appropriate Distributions under the Plan, as Claims are determined to be Allowed Claims. Other Estate Matters Ms. Booth tells the Court that the Trust is responsible for administering and resolving certain Estate obligations relating to the former operations of the Burlington Companies to the extent that the Buyer did not assume these obligations. These obligations include certain prepetition insurance policies covering worker's compensation and environmental liabilities with respect to certain real estate formerly owned by the Burlington Companies. "The Trust also is working diligently to liquidate and/or dissolve certain non-Debtor entities located in Mexico," Ms. Booth adds. "The Trust likely will need to sell certain assets, pay certain liabilities and incur certain costs in order to complete the liquidation and dissolution of these non-Debtor entities." Ms. Booth concludes that "[b]ecause the Plan is for the most part a liquidating plan and the Effective Date has already occurred, the majority of the matters going forward in these reorganization cases will relate to the liquidation of the Estate's assets, the claims administration process and Distributions to creditors." The Distribution Trust Representative has worked diligently to assume the administration of the Estates from the Debtors without interruption and to keep these reorganization cases moving forward on the right track." Headquartered in Greensboro, North Carolina, Burlington Industries, Inc. -- http://www.burlington-ind.com/-- was one of the world's largest and most diversified manufacturers of soft goods for apparel and interior furnishings. The Company filed for chapter 11 protection in November 15, 2001 (Bankr. Del. Case No. 01-11282). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, and David G. Heiman, Esq., at Jones Day, represent the Debtors. WL Ross & Co. LLC purchased Burlington Industries and then sold the Lees Carpets business to Mohawk Industries, Inc. Combining Burlington with Cone Mills, WL Ross created International Textile Group. Burlington's chapter 11 Plan confirmed on October 30, 2003, was declared effective on Nov. 10, 2003. (Burlington Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Spokane Tort Committee Wants to Retain Riddell --------------------------------------------------------------- Due to the size and complexity of the Catholic Diocese of Spokane's Chapter 11 case, Spokane's Official Committee of Tort Claimants seeks Judge William's approval to retain Riddell Williams P.S. as its legal counsel. The Tort Committee selected Riddell Williams because of the firm's experience in bankruptcy and insurance coverage matters, and because of the other practice specialties available at the firm that may be required in representing the Tort Committee. Riddell Williams will: (a) Provide legal advice with respect to the duties and powers of the Tort Committee in the case, including preparation of bylaws; (b) Assist the Tort Committee in investigation of the acts, conduct, assets, liabilities, and Spokane's financial condition and business operation; (c) Analyze Spokane's financial condition and to render advice to the Tort Committee in determining the course of action necessary to reorganize effectively; (d) Prepare and file pleadings and documents which may be required; (e) Represent the Tort Committee at meetings and hearings; (f) Represent the Tort Committee in adversary proceedings and contested matters and other court proceedings; (g) Negotiate with Spokane and other parties-in-interest; (h) Participate in Spokane's Chapter 11 case to the extent it involves the rights and interest of the constituents of the Tort Committee, including, without limitation, the formulation of a Chapter 11 plan of reorganization and its confirmation; (i) Prepare, if necessary, a request for the appointment of a trustee or an examiner; (j) Prepare, file and contest, if necessary, a motion to convert Spokane's Chapter 11 case to Chapter 7; (k) Perform any and all other services that are in the interest of the Tort Committee relevant to the case; and (l) Provide other representation as is appropriate and necessary for the Tort Committee's benefit. Riddell Williams will be compensated for its services in accordance with the firm's hourly rates. The firm's attorneys and paralegals and their billing rates are: Robert Amkraut $250 Bruce Borrus $315 David Brenner $295 Mona McPhee $190 Maria Milano $250 Matt Pile $190 Jayson Sowers $230 Sheila Rowden (paralegal) $110 Chris Collison (paralegal) $110 Joseph E. Shickich, Jr., a Principal at Riddell Williams, has agreed to reduce his hourly rate from $340 to $330. George E. Frasier, also a Principal at Riddell Williams, agrees to cut his hourly rate from $370 to $350. Brynne Malone, Chairman of the Tort Committee, assures Judge Williams, that Riddell Williams is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code as modified by Section 1107, and does not hold any interest adverse to Spokane's case. 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) CATHOLIC CHURCH: Spokane Claimants Wants to Conduct Examination --------------------------------------------------------------- Numerous tort claimants of the Diocese of Spokane want to inquire into the acts, conduct, property, and liabilities of the Diocese, and matters that may affect the administration of Spokane's estate. The Tort Claimants ask Judge Williams for permission to conduct an examination pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure on: (a) Marcia Galluci, an employee of Lutheran Family Services and member of one or more Boards of the Diocese; and (b) Brynne Malone, Steve Denny, and Marjorie Garza, who are alleged holders of claims against Spokane, and are presently members of the Official Committee of Tort Claimants in Spokane's case. According to Dillon E. Jackson, Esq., at Foster Pepper & Shefelman, PLLC, in Seattle, Washington, arrangements for the examinations will be made by agreement of the counsel, or if unrepresented, the individual named as required by the rules of the Court at the offices of Foster Pepper & Shefelman, PLLC, at the US Bank Building, West 422 Riverside Avenue, Suite 1310, in Spokane. Additionally, the Tort Claimants want to examine Joseph Shickich, Esq., at Riddell Williams P.S., the proposed counsel to the Tort Committee, to inquire further into the conflicts of interest, offices and interests held by Mr. Shickich and members of Riddell Williams. Mr. Shickich's examination will be conducted at the offices of Foster Pepper in Seattle. 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) CONEXANT SYSTEMS: Records $120.7 Million First Quarter Net Loss --------------------------------------------------------------- Conexant Systems, Inc. (NASDAQ:CNXT) reported revenues of $140.6 million for the first quarter of fiscal 2005, which ended Dec. 31, 2004, in line with its revised outlook provided on Dec. 13, 2004. During the quarter, the company reduced inventory at its distributors by $40 million and at its direct customers by approximately $10 million, indicating an end-customer demand level of approximately $190 million. In addition, the company achieved its revised expectations for gross margins, pro forma operating expenses, and pro forma earnings per share -- EPS. First fiscal quarter 2005 revenues of $140.6 million decreased 34 percent from fourth fiscal quarter 2004 revenues of $213.1 million, and decreased 21 percent compared to first fiscal quarter 2004 revenues of $177.3 million. The first fiscal quarter 2005 pro forma operating loss was $85.9 million, compared to a pro forma operating loss of $9.6 million in the fourth quarter of fiscal 2004, and a pro forma operating profit of $17.2 million in the year-ago quarter. On a pro forma basis, net loss for the first fiscal quarter of 2005 was $0.20 per diluted share, compared to a net loss of $0.04 in the fourth fiscal quarter, and a net profit of $0.04 per diluted share in the first fiscal quarter of 2004. Based on generally accepted accounting principles -- GAAP, the net loss for the first quarter of fiscal 2005 was $120.7 million, or $0.26 per diluted share, compared to a net loss of $370.5 million, or $0.79 per diluted share, in the fourth quarter of fiscal 2004, and net income of $40.6 million, or $0.13 per diluted share, in the first quarter of fiscal 2004. Conexant provides pro forma results as a supplement to financial statements based on GAAP. The company uses pro forma information to evaluate its operating performance and believes this presentation provides investors with additional insight into its underlying operating results. A full reconciliation between pro forma and GAAP results is included in the accompanying financial data. "Our decision to aggressively reduce channel inventory to match revenues with end-customer demand as quickly as possible resulted in a reduction of approximately $50 million in total channel inventory during the first fiscal quarter," said Dwight W. Decker, Conexant's chairman and chief executive officer. "Our significant progress in reducing inventory and the achievement of our revised revenue target of $140 million reinforces our belief that end-customer demand for the quarter was approximately $190 million. "We maintained gross margins of 40 percent of revenues, excluding the impact of previously announced inventory charges of $53 million," Mr. Decker said. "Through a sharp focus on collecting receivables and reducing our internal inventory levels, we significantly improved our working capital metrics and delivered a modest positive net cash flow from operations." As expected, pro forma operating expenses for the quarter were $93 million, compared to pro forma operating expenses of $95 million for the fourth fiscal quarter of 2004. Pro forma cash flow from operations was approximately $4 million. This was offset by one-time and non-operating items; a $16 million decline in the value of the company's holdings in Skyworks Solutions, Inc. (NASDAQ:SWKS) and SiRF Technology (NASDAQ:SIRF); the $15 million acquisition of Paxonet Communications in India; $12 million in restructuring charges and other payments; an $8 million settlement of intellectual property litigation; and $2 million in capital expenditures. As a result, Conexant's cash, cash equivalents and investments declined by $49 million sequentially, from $440 million in the immediate prior quarter to $391 million at the end of the first fiscal quarter. Second Fiscal Quarter 2005 Outlook "Historically, the first calendar quarter is a period of reduced demand for our PC and set-top box related product lines," Mr. Decker said. "We expect this seasonal dynamic to result in an overall decline this quarter of approximately 5 percent in end-customer demand, to about $180 million. We also plan to drive the completion of our current inventory reduction initiative, which should result in the further consumption during the quarter of approximately $20 million in channel inventory. Subtracting inventory consumption from our demand estimate, we expect to deliver second fiscal quarter revenues of approximately $160 million, up approximately 15 percent sequentially from the $141 million in revenue we recorded in the just finished quarter. "We expect to deliver gross margins between 38 percent and 40 percent of revenues for the second fiscal quarter," Decker continued. "We further anticipate that the previously announced cost-reduction actions will result in a decline in operating expenses from $93 million in the December-ending quarter to approximately $89 million in the current quarter. Given our outlook for revenue, gross margin, and operating expenses, we anticipate that our second fiscal quarter pro forma net loss per share will be $0.07 to $0.08, based on approximately 470 million fully diluted shares." About the Company Conexant Systems, Inc. -- http://www.conexant.com/-- is a fabless semiconductor company that recorded more than $900 million in revenues in fiscal year 2004. The company has approximately 2,400 employees worldwide, and is headquartered in Newport Beach, California. * * * As reported in the Troubled Company Reporter on Dec. 20, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on Newport Beach, California-based Conexant Systems, Inc., to 'B-' from 'B' on sharply reduced sales and profitability over the next few quarters. The outlook is negative. COMPUTER ASSOCIATES: Updates Full Fiscal Year 2005 Guidance ----------------------------------------------------------- Computer Associates International, Inc. (NYSE: CA) reported financial results for its third fiscal 2005 quarter ended Dec. 31, 2004 that exceeded previous guidance for revenue and met expectations for operating earnings. Also, the Company updated guidance for the full fiscal year 2005. "We had another quarter of solid results based on strong execution of our business strategy," said CA's Interim Chief Executive Officer Kenneth Cron. "CA is now in a position to succeed and move forward to grow the Company; our financials are sound and we are solidifying a strong management team for the future." "We are putting the pieces in place to position CA for long-term, sustainable growth," said CA's President and CEO-elect John Swainson. "Today's enterprise IT customers are looking for a more holistic approach to tackling the challenges of IT systems management and security. By redefining our go-to-market strategy, focusing on our core competencies and aligning our product portfolio to customer needs, we will grow the business and become a true partner to our customers." Financial Overview: Third Quarter Fiscal Year 2005 Total revenue for the third quarter of fiscal year 2005 was $911 million, a 9 percent increase over the third quarter of fiscal year 2004, and $46 million greater than the high end of the range of the Company's previous guidance. On a constant currency basis and excluding $15 million in revenue related to Netegrity products, total revenue for the third quarter would have increased approximately 3 percent compared to the similar period last year. "We are starting to see real traction from our growth initiatives," said CA Chief Operating Officer Jeff Clarke. "Our channel business performed well this quarter, up 17 percent, and security continues to be a strong segment of our business, with more than 94 percent bookings growth. CA's cost-cutting efforts are on track and the Netegrity integration is going extremely well." Revenue from CA's Technology Services unit was $64 million for the quarter, up approximately 8 percent when compared to the similar quarter last year, due to strong performance in North America and Asia, particularly related to CA's Identity and Access Management solutions. New deferred subscription revenue was $898 million for the quarter, which includes $845 million in direct bookings and $53 million in indirect bookings. Total indirect bookings for the quarter were $84 million, a 17 percent year-over-year increase. CA's total deferred subscription revenue balance as of Dec. 31, 2004, was approximately $4.8 billion. The Company reported GAAP earnings from continuing operations for the third quarter of $36 million, compared to GAAP earnings from continuing operations of $17 million, reported in the comparable period last year. GAAP results for the current quarter include an $18 million, related to the fiscal 2004 shareholder litigation settlement. Capital Structure CA generated approximately $366 million in cash from continuing operations in the third quarter, compared to the $339 million reported in the similar period last year. The balance of cash and marketable securities at Dec. 31, 2004, was approximately $3.33 billion, up from $2.25 billion on Sept. 30, 2004. With approximately $3.30 billion in total debt outstanding, the Company has a net cash position of $28 million. This is the first time in more than nine years that the Company's cash and marketable securities balance exceeds its total debt. Developments During the Quarter During the quarter, CA made a number of important advances, including: * Naming 26-year industry veteran John Swainson president and CEO-elect; * Enhancing its capital structure with a successful private placement of $1 billion senior unsecured notes and a four-year $1 billion revolving credit facility; * Selecting SAP for its enterprise resource planning system and Accenture to assist with the implementation, which is already underway; * Outlining its EMEA growth strategy with a strong focus on small and medium businesses and expanded OEM partnerships; * Completing its acquisition of Netegrity ahead of schedule; * Offering CA Wireless Site Management 4.0 to bolster and streamline Wi-Fi security management; and * Following its successful acquisition of PestPatrol, announcing eTrust PestPatrol Anti-Spyware r5. Outlook for the Remainder of Fiscal Year 2005 The following updated guidance is based on current expectations and represents "forward-looking statements": For the fourth quarter ending March 31, 2005: * Revenue in the range of $900 million to $920 million; * GAAP earnings per share in the range of $0.07 to $0.08; and * Diluted operating (non-GAAP) earnings per share in the range of $0.19 to $0.20. For the full year, ending March 31, 2005: * Revenue in the range of $3.526 billion to $3.546 billion; * GAAP earnings per share in the range of $0.06 to $0.07; and * Diluted operating (non-GAAP) earnings per share in the range of $0.81 to $0.82. "With solid execution and upside from our recent acquisitions, we are raising the midpoint of both our revenue and earnings guidance," said Clarke. "Cash flow continues to remain on track for modest growth this year." About the Company Computer Associates International, Inc. (NYSE:CA) -- http://ca.com/-- delivers software and services across operations, security, storage, life cycle and service management to optimize the performance, reliability and efficiency of enterprise IT environments. Founded in 1976, CA is headquartered in Islandia, N.Y., and serves customers in more than 140 countries. * * * As reported in the Troubled Company Reporter on Nov. 17, 2004, Moody's Investors Service assigned a Ba1 to Computer Associates International's proposed $750 million senior unsecured notes. Proceeds of the current offering will be used to refinance $825 million senior notes due in April 2005. Concurrently, Moody's assigned a senior implied rating of Ba1. The rating outlook is stable. The Ba1 rating and stable outlook reflect Moody's expectation for sustained growth in client billings and bookings, strengthened corporate governance structure, conservative acquisition strategy and share repurchase policy, and improved liquidity. COPYTELE INC: Auditors Raises Going Concern Doubt ------------------------------------------------- Copytele, Inc., has had net losses and negative cash flows from operations in each year since inception, and it may continue to incur substantial losses and experience substantial negative cash flows from operations. Although payments from Futaba Corporation of Japan, under an agreement with Futaba, provided substantial cash from operations during the year ended October 31, 2002, since the agreement with Futaba terminated in June 2002, Copytele will not receive any further payments under this agreement. The Company has incurred substantial costs and expenses in developing its encryption and flat panel display technologies and in its efforts to produce commercially marketable products incorporating its technology. Copytele has had limited sales of products to support its operations from inception through October 31, 2004. Set forth below are the Company's net losses, research and development expenses and net cash used in operations for the three fiscal years ended October 31, 2004: Fiscal Year Ended October 31, 2004 Net loss.................................. $ 3,360,655 Research and development expenses......... 2,164,427 Net cash used in operations............... 1,025,122 Fiscal Year Ended October 31, 2003 Net loss.................................. $ 3,114,411 Research and development expenses......... 1,807,742 Net cash used in operations............... 958,501 Fiscal Year Ended October 31, 2002 Net loss.................................. $ 3,285,240 Research and development expenses......... 1,625,974 Net cash used in operations............... 431,471 Going Concern Doubt Copytele may need additional funding in the future, which may not be available on acceptable terms and, if available, may result in dilution to its stockholders. Management anticipates that, if cash generated from operations is insufficient to satisfy the Company's requirements, it will require additional funding to continue research and development activities and market its products. The auditor's report on Copytele's financial statements as of October 31, 2004, states that the net loss incurred during the year ended October 31, 2004, the accumulated deficit as of that date, and other factors raise substantial doubt about the Company's ability to continue as a going concern. The auditor's report on the Company's financial statements for the years ended October 31, 2003 and 2002 contained a similar statement. Copytele Inc.'s principal operations are the development, production and marketing of multi-functional encryption products that provide information security for domestic and international users over virtually every communications media and the development, production and marketing of thin, high-brightness, flat panel video displays. DEL MONTE: Fitch Rates $250MM 6-3/4% Sr. Subordinated Notes at BB- ------------------------------------------------------------------ Fitch Ratings assigns a 'BB-' rating to Del Monte Foods Company's new $250 million 6 3/4% privately placed senior subordinated notes due Feb. 15, 2015. Fitch also expects to rate Del Monte's new secured credit facility, projected to close in early February 2005. Fitch currently rates Del Monte's debt: -- Senior secured bank facility 'BB+'; -- Senior subordinated notes 'BB-'. -- Rating Outlook Stable. Del Monte's total debt as of October 31, 2004 was $1.5 billion. Proceeds from Del Monte's $250 million senior subordinated debt issuance will be used to partially fund the repurchase of its 9 1/4% senior subordinated notes due 2011. The newly issued unsecured notes will rank equally with all of Del Monte Corporation's - DMC -- other unsecured senior subordinated indebtedness and junior to DMC's senior indebtedness. The notes will be guaranteed on a subordinated basis by DMC's parent, Del Monte Foods Company -- DMFC, and on a senior subordinated basis by certain of DMC's direct and indirect U.S. subsidiaries. Fitch expects the reduction in Del Monte's average total debt over time and more favorable pricing on the newly issued senior subordinated notes and pending secured credit facility to render material annual interest cost savings. Terms of Del Monte's pending new credit facility are anticipated to be less restrictive than the company's existing credit facility. The new credit facility is expected to include a six-year revolver of $350 million, a six-year term A loan of $200 million, and a seven-year term B loan of $400 million. Initial borrowings of the facility are anticipated to be used to fund a portion of the repurchase of Del Monte's 9 1/4% senior subordinated notes tendered on Jan. 24, 2005. The ratings reflect Del Monte's commitment to continue debt reduction in the near term and the expectation that credit metrics will continue to improve. The Stable outlook encompasses Fitch's expectation that integration-related synergies and selective pricing action will help lessen the effect of the current difficult commodity cost environment. For more information, see Fitch's Nov. 12, 2004, press release upgrading Del Monte's senior secured bank facilities and senior subordinated notes ratings ('Fitch Ratings Upgrades Del Monte; Rating Outlook Stable') and Fitch's Jan. 21, 2005, credit analysis on Del Monte Foods Company, both of which are available on the Fitch Ratings web site at http://www.fitchratings.com/ Del Monte produces, distributes and markets shelf-stable branded and private label food and pet products in the U.S. retail market. Its market shares in: * private-label soup 70%, * canned fruit 42%, * canned seafood 42%, * canned vegetables 23%, * solid tomatoes 21%, and * infant food 12%. Del Monte's consumer brands include: * Del Monte, * StarKist, * S&W, * Contadina, * College Inn, and * Nature's Goodness. Del Monte also has a competitive position in dry and wet dog and cat food and snacks with such brands as 9Lives, Kibbles 'n Bits, Pup-Peroni, and Pounce. On a GAAP-reported basis, Del Monte's Consumer and Pet Products business segments represented 75% and 25% of fiscal 2004 sales and 61% and 39% of fiscal 2004 operating income (excluding corporate expenses), respectively. DEL MONTE: S&P Rates Proposed $950M Senior Sec. Facility at BB -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on food processor Del Monte Corp. to positive from stable. At the same time, Standard & Poor's assigned its 'BB' rating and '1' recovery rating to Del Monte's proposed $950 million senior secured credit facility, indicating Standard & Poor's high expectation of full recovery of principal (100%) in the event of a payment default. n addition, Standard & Poor's assigned a 'B' rating to Del Monte's proposed $250 million senior subordinated notes due in 2015. Standard & Poor's also affirmed its existing ratings on Del Monte and parent company, Del Monte Foods Co., including its 'BB-' corporate credit ratings. San Francisco, California-based Del Monte will have $1.4 billion in lease-adjusted total debt outstanding at closing. The outlook revision reflects the company's successful integration of H.J. Heinz Co.'s North American pet food, seafood, private label soup, and infant feeding operations that were acquired in 2002. In addition, Del Monte has made progress in de-leveraging the balance sheet following the acquisition during a period of rising commodity costs and increased competition. "Both operating margins and credit measures at Del Monte have strengthened, and we believe Del Monte will continue to improve credit measure over the medium term through steady cash flow generation and debt reduction," said Standard & Poor's credit analyst Ronald Neysmith. Proceeds from the proposed note issue, in combination with the credit facility, will be used to refinance certain existing indebtedness, including the company's existing senior secured credit facility and for general corporate purposes. Ratings on Del Monte's existing $1.2 billion of senior secured credit facilities will be withdrawn upon closing of the new facilities. DESA HOLDINGS: Files First Amended Joint Liquidating Plan --------------------------------------------------------- DESA Holdings Corp. and its debtor-affiliate filed their First Amended Joint Plan of Reorganization with the U.S. Bankruptcy Court for the District of Delaware on Jan. 21, 2004. A full-text copy of the Plan and the Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=040812020022 The Plan will consolidate and monetize all of the Debtors' estates. A Post Confirmation Trust will be established where the Debtors will assign and transfer all of their rights, titles, and interests. It will not be deemed as a successor-in-interest to the Debtors but is intended to qualify as a "grantor trust" for income tax purposes. Prepetition lenders owed $154,886 are expected to recover 16% of their allowed claims. General unsecured creditors will see about 5% of the $31.6 million owed to them. These claims will be paid in full: * administrative claims totaling $1,962,819; * priority tax claims totaling $270,349 * other secured claims totaling $922,524 * other priority claims totaling $11,192. Holders of: * intercompany claims; * equity interests; and * subordinated notes amounting to $136,200,000 will not receive anything. The Debtors and the Official Committee of Unsecured creditors agreed to set up a liquidation reserve between $750,000 to $1,000,000 to adequately fund the administration of the Plan. Headquartered in Bowling Green, Kentucky, DESA International, Inc. manufactured and marketed high-quality zone heating products, hearth products, security lighting and specialty tools for use in homes and commercial buildings. The Company and its affiliate filed for chapter 11 protection (Bankr. Del. Case No. 02-11672) on June 8, 2002. James H.M. Sprayregen, Esq., James W. Kapp, III, Esq., and Scott R. Zemnick, Esq., at MKirkland & Ellis, LLP, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl Young Jones & Weintraub, P.C., represent the Company. When the Company filed for protection from its creditors, it listed $50 million in assets and $100 million in debts. DOMTAR INC: Canadian Dollar Appreciation Lowers Profit by $175M --------------------------------------------------------------- Domtar, Inc., reported a net loss of $42 million ($0.19 per common share) in 2004 compared to a net loss of $193 million ($0.86 per common share) in 2003. When excluding specified items, net loss in 2004 was $33 million ($0.15 per common share) compared to a net loss of $10 million ($0.05 per common share) in 2003. Summary of results (In millions of Canadian dollars, unless otherwise noted) 2004 2003 ------------------------------------------------------------------------ - Sales $5,115 $5,167 Operating profit (loss)(1) $49 ($95) Net loss ($42) ($193) Net loss per common share ($0.19) ($0.86) Excluding specified items(1) Operating profit $66 $126 Net loss ($33) ($10) Net loss per common share ($0.15) ($0.05) ------------------------------------------------------------------------ - "These are trying times for companies with a large manufacturing base in Canada whose products are sold in US dollars. Although Domtar has grown its U.S. presence to approximately 50% of its asset base over the last five years, the Company has nonetheless suffered from the sharp increase in the value of the Canadian dollar, leading it to post a loss for 2004. Domtar has also faced unprecedented cost increases for purchased wood and freight, as well as more duties on softwood lumber exports to the U.S. The combined effect of all these factors represents a reduction of $262 million in operating profit when compared to 2003. In fact, these headwinds were so strong that they more than offset benefits from improved market conditions and restructuring initiatives, including an announced reduction of 8% of our workforce," stated Raymond Royer, President and Chief Executive Officer of Domtar. The $131 million decrease in operating profit excluding specified items in the Papers segment was mainly attributable to the negative impact of a weaker US dollar and higher costs, particularly for purchased wood and freight. These factors were partially offset by higher shipments for both paper and pulp, higher average selling prices for pulp, the realization of savings from restructuring activities and lower depreciation expense. The $1 million increase in operating profit excluding specified items in the Paper Merchants segment was primarily due to higher shipments, partially offset by the negative impact of a weaker U.S. dollar. The $53 million improvement in operating profit excluding specified items in the Wood segment was mainly attributable to significantly higher selling prices for lumber. Partially mitigating the rise in operating profit were the negative impact of a weaker US dollar, higher countervailing and antidumping duties imposed on our softwood lumber exports to the U.S. (at a stable rate of 27%), higher road construction and maintenance costs, as well as higher depreciation expense. Since May 22, 2002, Domtar has made and expensed cash deposits of $145 million for export duties. The $4 million increase in operating profit excluding specified items in the Packaging segment (our 50% share of Norampac, Inc.) was attributable to higher average selling prices for both containerboard and corrugated boxes as well as lower chemical and energy costs, partially offset by the negative impact of a weaker US dollar and higher freight costs. Liquidity and Capital 2004 Compared to 2003 Cash flows provided from operating activities in 2004 amounted to $122 million compared to $348 million in 2003. Additions to property, plant and equipment amounted to $204 million in 2004 compared to $236 million in 2003. Free cash flow in 2004 was negative $41 million compared to positive $123 million in 2003. Domtar's total long-term debt decreased by $25 million, largely due to the $127 million positive impact of a weaker US dollar on its US dollar denominated debt, partially offset by additional net borrowings of $102 million. Domtar's net debt-to-total capitalization ratio as at December 31, 2004, stood at 49.5% compared to 48.4% as at December 31, 2003. Outlook "The year 2005 may be just as challenging as 2004, especially given that no cost cutting program can compensate for the rapid rise seen in the value of the Canadian dollar. That being said, Domtar will focus on delivering targeted savings of $100 million stemming from announced restructuring initiatives and will continue to review the viability of each of its Canadian operations as well as investment plans for each of its mills. Finally, Domtar will continue to optimize the use of its assets with initiatives aimed at improving its value proposition to customers such as the development of a full line of papers for environmentally sensitive companies and the deployment of an integrated supply chain, which will allow Domtar to develop customer specific supply programs," added Domtar's President and CEO. Based in Montreal, Quebec, Domtar, Inc., is a major North American producer of fine papers, pulp, and lumber. More than 60% of the company's sales come from its paper segment, which churns out a variety of communication and specialty papers, including offset printing paper, photocopying paper, fine paper, and technical papers. * * * As reported in the Troubled Company Reporter on Oct. 28, 2004, Standard & Poor's Ratings Services revised its outlook on Domtar Inc. to negative from stable. At the same time, the 'BBB-' long- term corporate credit, the 'BBB-' senior unsecured debt, and the 'BB' global scale preferred stock ratings were affirmed. "The outlook revision reflects concerns that profitability and cash flow generation will be weaker-than-expected as a result of the appreciation of the Canadian dollar," said Standard & Poor's credit analyst Daniel Parker. E*TRADE FINANCIAL: Posts $98.4M Net Income for 2004 4th Quarter --------------------------------------------------------------- E*TRADE Financial Corporation (NYSE: ET) reported results for its fourth quarter ended December 31, 2004, reporting net income of $98.4 million, or $0.26 per diluted share, compared to net income of $107.5 million, or $0.27 per share, in the same quarter a year ago. The reported fourth quarter earnings per share include a $0.02 benefit from a lower corporate tax rate. Net revenue for the fourth quarter totaled $409.5 million, a 21 percent increase over the prior quarter and a 10 percent increase over the year ago period. For the year ending December 31, 2004, E*TRADE FINANCIAL reported earnings of $1.01 per share on net income of $389.1 million compared to $0.55 per share and net income of $203.0 million in 2003. Total assets/deposits in customer accounts reached a record level of $100.4 billion at year-end -- an increase of 20 percent sequentially and 21 percent year over year. "In 2004, we proved that you can increase profitability and earnings, while sharing the rewards of financial success with customers," said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. "Our record-breaking year continues to validate the strength of our model and underscores our commitment to passing on unique advantages to customers. In 2005, we intend to deliver continued value to our customers and shareholders by enhancing our customer segmentation and increasing integration." Other selected highlights from the fourth quarter of 2004: -- added 61,000 net new brokerage accounts; -- generated a record-setting consolidated operating margin(1) of 31 percent; -- expanded E*TRADE FINANCIAL Center locations to include Palo Alto, California, and Washington, D.C. -- repurchased approximately 4 million outstanding shares for $56 million at a weighted average price of $13.86 per share; and -- announced an additional $200 million repurchase program in December. Historical monthly metric data from January 2003 to December 2004 can be found on the E*TRADE FINANCIAL investor relations site at http://www.etrade.com/ The E*TRADE FINANCIAL family of companies provide financial services including brokerage, banking and lending for retail, corporate and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries. * * * As reported in the Troubled Company Reporter on Jan 21, 2005, Standard & Poor's Ratings Services affirmed its 'B+' long-term counterparty rating on E*TRADE Financial Corp. E*TRADE Bank's counterparty ratings were affirmed at 'BB/B.' At the same time, the outlook for E*TRADE Financial was revised to positive from stable. The outlook for E*TRADE Bank remains stable. EASTMAN HILL: Moody's Junks Class B-1 Notes & Securities -------------------------------------------------------- Moody's Investors Service announced that it has downgraded its ratings of the Classes of Notes issued by Eastman Hill Funding I, Ltd., a collateralized debt obligation issuance: 1. $10,000,000 Class A-3 Floating Rate Notes Due 2031: from Aa3 on watch for downgrade to A2 no longer on watch for downgrade. 2. $24,000,000 Class B-1 Fixed Rate Notes Due 2031: from Caa2 on watch for downgrade to Ca no longer on watch for downgrade. 3. $25,000,000 Combination Securities Due 2031: from Caa2 on watch for downgrage to Caa3 no longer on watch for downgrade. Moody's stated that these rating downgrades were prompted primarily by deterioration in the credit quality of the underlying collateral pool. Moody's also noted that the transaction, which closed in July 2001, is currently failing its Default Probability Factor Tests. Moody's also announced that it has removed the Classes of Notes issued by Eastman Hill Funding I, Ltd. from the Moody's Watchlist for possible downgrade and has confirmed the current ratings: 1. $512,000,000 Class A-1 Floating Rate Notes Notes Due 2031: Rating confirmed at Aaa. 2. $10,000,000 Class A-1 Fixed Rate Notes Due 2031: Rating confirmed at Aaa. 3. $522,000,000 Class A-2 Interest Only Notes Due 2031: Rating confrmed at Aaa. FAIRFAX FINANCIAL: Will Webcast Year-End Results on February 11 --------------------------------------------------------------- Fairfax Financial Holdings Limited (TSX:FFH.SV) (NYSE:FFH) will hold a conference call at 8:30 a.m. Eastern Time on Friday, February 11, 2005, to discuss its 2004 year-end results which will be announced after the close of markets on Thursday, February 10 and will be available at that time on its website at: http://www.fairfax.ca/ The call, consisting of a presentation by the company followed by a question period, may be accessed at (888) 769-8514 (Canada and U.S.) or 1 (712) 257-2114 (International) with the passcode "Fairfax". A replay of the call will be available from shortly after the termination of the call until 5:00 p.m. Eastern Time on Friday, February 25, 2005. The replay may be accessed at (866) 453-2339 (Canada and U.S.) or 1 (203) 369-1228 (International). Fairfax Financial Holdings Limited is a financial services holding company, which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance, investment management and insurance claims management. * * * As reported in the Troubled Company Reporter on Nov. 12, 2004, Fitch Ratings commented that Fairfax Financial Holdings Limited's ratings and Rating Watch Negative status are unaffected by its recent disclosures via its third-quarter 2004 financial filings and investor conference held on November 8, 2004. These ratings remain on Rating Watch Negative by Fitch: * Fairfax Financial Holdings Limited -- No action on long-term issuer rated 'B+'; -- No action on senior debt rated 'B+'. * Crum & Forster Holdings Corp. -- No action on senior debt rated 'B'. * TIG Holdings, Inc. -- No action on senior debt rated 'B'; -- No action on trust preferred rated 'CCC+'. * Members of the Fairfax Primary Insurance Group -- No action on insurer financial strength rated 'BBB-'. * Members of the Odyssey Re Group -- No action on insurer financial strength rated 'BBB+'. * Members of the Northbridge Financial Insurance Group -- No action on insurer financial strength rated 'BBB-'. * Members of the TIG Insurance Group -- No action on insurer financial strength rated 'BB+'. * Ranger Insurance Co. -- No action on insurer financial strength rated 'BBB-'. The members of the Fairfax Primary Insurance Group include: * Crum & Forster Insurance Co. * Crum & Forster Underwriters of Ohio * Crum & Forster Indemnity Co. * Industrial County Mutual Insurance Co. * The North River Insurance Co. * United States Fire Insurance Co. * Zenith Insurance Co. (Canada) The members of the Odyssey Re Group are: * Odyssey America Reinsurance Corp. * Odyssey Reinsurance Corp. Members of the Northbridge Financial Insurance Group include: * Commonwealth Insurance Co. * Commonwealth Insurance Co. of America * Federated Insurance Co. of Canada * Lombard General Insurance Co. of Canada * Lombard Insurance Co. * Markel Insurance Co. of Canada The members of the TIG Insurance Group are: * Fairmont Insurance Company * TIG American Specialty Ins. Company * TIG Indemnity Company * TIG Insurance Company * TIG Insurance Company of Colorado * TIG Insurance Company of New York * TIG Insurance Company of Texas * TIG Insurance Corporation of America * TIG Lloyds Insurance Company * TIG Specialty Insurance Company FEDERAL-MOGUL: Dr. Peterson Says T&N Asbestos Liability is $11BB ---------------------------------------------------------------- AS reported in the Troubled Company Reporter on Nov. 17, 2004, Federal-Mogul Corporation and its debtor-affiliates, the Official Committee of Unsecured Creditors, the Official Committee of Asbestos Claimants, the Official Committee of Equity Security Holders, the Legal Representative of Future Asbestos Claimants, and JPMorgan Chase Bank, as Administrative Agent for the Debtors' prepetition lenders, ask the U.S. Bankruptcy Court for the District of Delaware to estimate the claims of T&N Pension Trustee Limited and Alexander Forbes Trustee Services Limited relating to the T&N Pension Scheme for the purpose of: -- voting on the Plan; and -- distributions in the Debtors' cases on account of their claims. U.K. Administrators Won't Participate in the Estimation Hearing Christopher S. Sontchi, Esq., at Ashby & Geddes, in Wilmington, Delaware, tells the Bankruptcy Court that the Joint Administrators of the U.K. Debtors will be present at the estimation hearing, but will not participate substantively in the estimation process itself. If the Plan is confirmed in its current form, the Administrators assert that they would not propose parallel Schemes or Company Voluntary Arrangements, which are stated to be a condition to the effectiveness of the Plan. Even if that condition were waived, the Plan would not be effective in the United Kingdom. Rather, a process of controlled realization, in which businesses and assets are sold in the manner judged by the Administrators likely to achieve the best realization, would better serve their constituents. The Administrators are not challenging the Estimation, but believe it necessary to make their position clear that the Bankruptcy Court's rulings concerning the estimation could not be accepted as binding on: -- the Administrators acting under U.K. insolvency laws in reaching their best judgments concerning distributions or reserves; or -- the U.K. Court should it ever be called upon to review the Administrators' actions. Mr. Sontchi relates that in the United Kingdom, the responsibility of determining the likely level of asbestos liabilities affecting the U.K. Debtors, whether regarding distributions or in analyzing the fairness of a Scheme or CVA, falls in the first instance to the Administrators. Any estimation of the Bankruptcy Court will not, and cannot, relieve the Administrators of their responsibility under U.K. law. Furthermore, in the event that a dispute arose that required the U.K. Court to take a view on the likely extent of asbestos liabilities, the U.K. Court would be required to exercise its jurisdiction de novo and could not simply accept and apply a pre- existing decision without further inquiry. Accordingly, the Administrators believe their active participation in the estimation hearing would be unwarranted and inappropriate. PI Claims against T&N is $2.4 Billion, PD Committee Says The Official Committee of Property Damage Claimants will demonstrate at the estimation hearing that the Asbestos Claimants Committee's $11 billion estimate is by far out of the line among a range of estimates previously done by other parties-in-interest: Range of Estimates Asbestos Personal Injury Claims (In Billions) Debtors' Most Recent 10-Q $1.4 Debtors' Disclosure Statement (NERA)(Prepetition) 1.6 Property Damage Committee (Nov. 2004) 2.4 T&N Pension Trustees* 3.8 U.K. Administrators** 5.3 Asbestos Claimants Committee (Feb. 2004) 5.7 Asbestos Claimants Committee (Oct. 2004) 6.6 Asbestos Claimants Committee (Nov. 2004) 11.0 * The U.K. Pension Trustees' estimate ranges from $2.1 to $5.5 billion. The $3.8 figure is the average. ** The U.K. Administrators' estimate is an effort to replicate Mark Peterson's methodology, and thus the actual estimate may be lower. Eagle-Picher Method of Estimation The decision of the bankruptcy court in In re Eagle-Picher Industries, Inc. 189 B.R. 681 (Bankr. S.D. Ohio 1995), aff'd, 1996 U.S. Dist. LEXIS 22742 (S.D. Ohio 1996), provides a comprehensive framework for the estimation of pending asbestos personal injury claims and future demands. The basic methodology for estimating asbestos personal injury claims is not complicated. The exercise requires: (1) determination of the value of claims for each type of disease; (2) determination of the numbers of pending claims, and anticipated future demands of each disease type that likely will be entitled to compensation; (3) multiplication of the value for each disease by the number of projected compensable claims; and (4) adjustment upward for inflation to the date of anticipated payment, and then a discounting of the inflated amount back to present value. In Eagle-Picher case, the asbestos personal injury claims "are to be valued as of the filing date of the petition." Thus, any estimation methodology used in the Debtors' case must value pending claims and future demands as of the October 1, 2001, the Petition Date. The Eagle-Picher court explicitly rejected the suggestion that claims could be estimated based upon the value they might receive through some bankruptcy mechanism, like the Section 524(g) trust. Eagle-Picher also established a basic principle for determining claim values for pending claims, finding that claim value should be based on the closed prepetition claims in the Debtor's claims database. As to future claims, the Eagle-Picher court identifies [seven] considerations that should inform the estimate: (1) The estimate should be based primarily on the history of the company, particularly where there is no definitive showing that any other company had a product line identical to that of the debtor. However, this consideration does not rule out the desirability of considering trends general to the industry, particularly regarding the rate of filing of claims; (2) The total number of claims should be estimated; (3) The estimation of claims should categorize them by disease and occupation, as well as other factors; (4) Valuation of claims should be based upon settlement values for claims close to the filing date of the bankruptcy case; (5) A reasonable rate for indemnity increase with time must be determined so that a future value of filing date indemnity values can be comparable; (6) A lag time gleaned from the tort system must be determined in order that there be accuracy in projecting future values; and (7) A discount rate must then be applied to bring the future nominal value of claims back to the filing date. Peterson v. Cantor Estimates Robin Cantor, the Property Damage Committee's expert, has a Ph.D. in economics and has been a teacher, economist, and consultant for more than 20 years, specializing in liability claims analysis, environmental and energy economics, statistical modeling, and risk management. She has served previously as the Program Director for Decision, Risk, and Management Sciences, a research program of the National Science Foundation. She currently serves as the Director of the Insurance and Financial Services practice of Navigant Consulting, Inc., a publicly traded consulting firm. Theodore J. Tacconelli, Esq., at Ferry, Joseph & Pearce, P.A., in Wilmington, Delaware, relates that Dr. Cantor analyzed and found 108,240 pending claims and 275,550 closed claims. Dr. Cantor found that the Debtors' historic claim values in the years prior to the bankruptcy were increasing for mesothelioma, but essentially were flat or declining for lung cancer, other cancers, asbestosis and pleural disease. Accordingly, she assumed a 14% annual increase in claim value for mesothelioma for the first five years of her forecast, starting from the weighted average value for 1998-2001, and no increase thereafter. Claims values for other diseases were hold at the 1998-2001 weighted average for the entire forecast period. The logic of Dr. Cantor's methodology is compelling and is completely consistent with the framework set forth in Eagle-Picher, Mr. Tacconelli remarks. Dr. Cantor's Claim Values (First Five Years of Forecast Compared to 1998-2001) Lung Other Pleural Year Mesothelioma Cancer Cancers Asbestosis Disease ---- ------------ ------ ------- ---------- ------- 1998-2001 $68,886 $13,011 $5,664 $2,600 $915 2002 81,502 13,011 5,664 2,600 915 2003 96,456 13,011 5,664 2,600 915 2004 114,153 13,011 5,664 2,600 915 2005 135,098 13,011 5,664 2,600 915 2006 159,886 13,011 5,664 2,600 915 In contrast, Mark Peterson is trained as a lawyer and social psychologist. He is retained regularly as an expert on claims estimation by asbestos claimants committees and has reliably produced the highest estimates among all parties, in case after case. In the Debtors' case, Dr. Peterson has rung up over $800,000 in fees, and this was before the preparation of his report for estimation hearing. Mr. Tacconelli notes that contrary to the instruction of Eagle- Picher, the ACC's estimate ignores the Debtors' claims history and derives claim values instead from the scheduled values established in the trust distribution procedures. The TDPs, however, are nothing more than a set of values agreed by the ACC and the Futures Representative, based on Dr. Peterson's own recommendations. The potential for manipulation is self-evident in Federal-Mogul's case, Mr. Tacconelli contends. Representatives of claimants who will recover from the trust set the TDP schedule values. These representatives have a self-interest in setting claim values as high as possible to drive down the distribution ratios for other creditors under the Plan, thereby increasing the value of the stock that the trust will receive. Dr. Peterson makes two fundamental errors in his estimate -- overstating the claim value for mesothelioma and the claiming rate or the propensity to sue for that disease. Then, because Dr. Peterson links the values for other diseases to the skewed mesothelioma forecast, Mr. Tacconelli says, Dr. Peterson's errors cascade through the entire forecast resulting in his preposterous estimate of more than $11 billion. Peterson Claim Values (Forecast v. 2001 Actual) Lung Other Non- Year Mesothelioma Cancer Cancers malignant ---- ------------ ------ ------- --------- 2001 $102,361 $13,065 $3,937 $1,021 (actual) 2002 163,711 27,630 13,170 6,604 (forecast) ------------ ------ ------- --------- DIFFERENCE +59% +211% +334% +647% Dr. Peterson's estimate is premised on the speculative and unproveable allegation that plaintiffs' lawyers would have successfully "racheted up" the litigation pressure on T&N due to the disclosure of certain company documents in 1995 and the publication of a muckraking book in England in 2000, alleging that T&N failed to acknowledge in a timely manner the health risks to its U.K. employees caused by asbestos exposure. "This is not science or anything remotely admissible as expert testimony under Rule 702; it is creative advocacy by a lawyer-turned-expert witness in an effort to provide post hoc justification for massive increases in liability not supported by the company's own claims history," Mr. Tacconelli remarks. Mr. Tacconelli asserts that Dr. Cantor's estimates are far more reasonable than that of Dr. Peterson's. For these reasons, the PD Committee contends, the Court should conclude that asbestos personal injury claims by U.S. claimants against T&N Limited be valued at $2.4 billion. Adopt Dr. Peterson's $11 Billion Estimate, Asbestos Claimants Committee and Futures Representative Insist The only challenge to Dr. Peterson's estimate comes in the proposed expert testimony of Dr. Cantor. Maribeth L. Minella, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, asserts that Dr. Cantor is inexperienced in calculating asbestos liabilities. Dr. Cantor employed an untested and non- standard methodology to support her opinion that T&N's asbestos liabilities in the United States are not likely to exceed $2.4 billion. "Dr. Cantor has brought little more to her task than her background in mathematics, and even those skills have failed her at some points. Her analysis is devoid of any statistical or epidemiological method, and her background and work history are devoid of any experience or knowledge that would support the very aggressive assumptions she makes to support her calculations. The result is an expert report that strays from accepted methodology and generates an absurd result," Ms. Minella remarks. Ms. Minella explains that an estimation of T&N's asbestos personal injury liability is not intended to fix the amount of specific claims, but is merely a "best estimate" for the purpose of permitting the Debtors' cases to go forward. Unlike Dr. Cantor's opinion, Ms. Minella says, Dr. Peterson's opinion is based on sound statistical methodologies that capture T&N's empirical data and forecasts an accurate estimate of T&N's future asbestos personal injury liability. Accordingly, the Official Committee of Asbestos Claimants and the Legal Representative for Future Asbestos Claimants ask the Court to adopt Dr. Peterson's estimate of T&N's asbestos personal injury liability. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) FIBERMARK INC: Confirmation Hearing Continued to February 28 ------------------------------------------------------------ FiberMark, Inc. (OTC Bulletin Board: FMKIQ) reported that the confirmation hearing was scheduled to continue on February 28 at the U.S. Bankruptcy Court for the District of Vermont. In advance of that hearing, the company intends to file Plan implementation documents that reflect the previously announced agreement in principle reached by several members of the Creditors Committee. Once a company's plan of reorganization is confirmed, emergence from chapter 11 typically occurs within a month. Headquartered in Brattleboro, Vermont, FiberMark, Inc. -- http://www.fibermark.com/-- produces filter media for transportation applications and vacuum cleaning; cover stocks and cover materials for books, graphic design, and office supplies and base materials for specialty tapes, wallcoverings and sandpaper. The Company filed for chapter 11 protection on March 30, 2004 (Bankr. D. Vt. Case No. 04-10463). Adam S. Ravin, Esq., D.J. Baker, Esq., David M. Turetsky, Esq., and Rosalie Walker Gray, 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 $329,600,000 in total assets and $405,700,000 in total debts. FIDELITY NATIONAL: Fitch Assigns BB- Rating to Sr. Sec. Facility ---------------------------------------------------------------- Fitch Ratings has affirmed and removed from Rating Watch Negative the 'A-' insurer financial strength ratings of the title insurance underwriting subsidiaries of Fidelity National Financial, Inc. - FNF -- and the 'BBB-' long-term issuer rating of FNF. In addition, Fitch has assigned a 'BB-' rating to the senior secured credit facility entered into by FNF's subsidiary, Fidelity National Information Services -- FIS. The Rating Outlook is Stable for all ratings. These rating actions coincide with the finalization of recapitalization plans for FIS. Under the recapitalization plan, FNF is selling a 25% interest in FIS to Thomas H. Lee Partners and Texas Pacific Group, which is expected to result in a gain of approximately $375 million for FNF. In addition, FIS is borrowing $2.8 billion on a secured basis from a consortium of lenders and distributing nearly all the proceeds to FNF as payment for prior acquisitions to build FIS' business. FNF will use the approximately $2.7 billion in proceeds from FIS to declare a special dividend to stockholders, amounting to roughly $1.8 billion, pay down existing bank debt, and potentially repurchase FNF stock. Upon announcement of the recapitalization plan, Fitch downgraded FNF and placed its ratings on Rating Watch Negative. The rationale was FNF's willingness to leverage its consolidated balance sheet to approximately a 50% debt-to-total capital ratio, which is beyond what Fitch considered appropriate for the rating category. The senior secured credit facility at FIS is not guaranteed by FNF and consequently was rated based primarily on its own strengths and weaknesses. The recapitalization plan will leave FIS highly leveraged with modest fixed-charge coverage. Specifically, debt- to-total capital at FIS will be approximately 85% with pretax earnings expected to cover interest expense by 2.5 times. Additional concerns include the highly acquisitive nature of the company, potential customer erosion through industry consolidation, and the need to maintain a technological advantage in the processing business. Favorable considerations in the FIS rating included the company's leading market share in core processing systems to large banks, good retention over a diversified base of customers, and expectations for strong cash flow generation. Fitch removed FNF's ratings from Rating Watch Negative after analyzing the title operations segregated from information services and determining FNF-only leverage and coverage would be supportive of the current ratings. It is expected that a partial spin-off of FIS will occur in the near future and that FNF will maintain a controlling interest. Fidelity National Title Insurance Co. Fidelity National Title Insurance Co. of NY Alamo Title Insurance Co. of TX Nations Title Insurance of NY Chicago Title Insurance Co. Chicago Title Insurance Co. of OR Security Union Title Insurance Co. Ticor Title Insurance Co.: -- Insurer financial strength affirmed at 'A-'/removed from Rating Watch Negative/Stable Outlook. Fidelity National Financial Inc.: -- Long-term issuer affirmed at 'BBB-'/removed from Rating Watch Negative/Stable Outlook. Fidelity National Information Services, Inc.: -- Senior Secured Credit Facility assigned 'BB-'/Stable Outlook. GMAC COMMERCIAL: Moody's Pares Rating on Class F Certs. to B1 ------------------------------------------------------------- Moody's Investors Service upgraded the ratings of three classes, downgraded the ratings of one class and affirmed the ratings of three classes of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 2003-FL1 as follows: * Class A, $30,473,795, Floating, affirmed at Aaa * Class X, Notional, affirmed at Aaa * Class B, $21,552,477, Floating, upgraded to Aaa from Aa2 * Class C, $19,975,429, Floating, upgraded to Aa3 from A2 * Class D, 22,603,842, Floating, upgraded to Baa1 from Baa2 * Class E, $9,199,191, Floating, affirmed at Baa3 * Class F, $10,250,556, Floating, downgraded to B1 from Ba2 As of the January 11, 2005 distribution date, the transaction's aggregate balance has decreased by approximately 72.3% to $114.1 million from $411.4 million at closing. The Certificates are collateralized by eight senior participation interests in whole mortgage loans secured by commercial properties. The junior participation interests of all the loans are held outside the trust. The aggregate outstanding principal balance of the whole loans is $174.4 million. The senior participations range in size from 1.0% to 28.1% of the pool. There have been no losses to the pool since securitization and there are no loans in special servicing. Three loans, representing 40.9% of the pool balance, are on the master servicer's watchlist. Moody's was provided with full year 2003 borrower financials for 100.0% of the pool and partial year 2004 borrower financials for 91.6% of the pool. Moody's loan to value ratio -- LTV -- for the senior participations and whole loans is 60.7% and 90.9%, respectively, compared to 59.6% and 89.5% at securitization. All of the loans except one are performing in line with Moody's expectations. The upgrade of Classes B, C, and D is due to increased subordination levels and overall stable pool performance. The downgrade of Class F is due to the poorer performance of the Upstate New York Portfolio Loan ($13.0 million -- 11.4%). The top four loans represent 72.9% of the outstanding pool balance. The largest loan is the Hartman Portfolio Loan ($32.1 million -- 28.1%), which is secured by 18 commercial properties located in Houston, Texas. The portfolio consists of eight industrial properties, eight retail properties and two office buildings totaling 1.3 million square feet. Although the overall occupancy of the portfolio has declined since securitization from 96.0% to 88.2%, financial performance has been stable due to increased rents. The current whole loan balance is $34.4 million. The loan is on the master servicer's watchlist due to a tax delinquency on one of the properties. Moody's LTV of the senior participation and whole loan are 64.7% and 69.4% respectively, the same as at securitization. The second largest loan is the Grand Rapids Industrial Portfolio Loan ($20.4 million -- 17.9%), which is secured by 12 industrial properties totaling 1.7 million square feet. All of the properties are located in Grand Rapids, Michigan. The loan was originally secured by 14 properties, but two were released in May 2003. The loan's performance has been stable since securitization. The overall occupancy of the portfolio is 80.8%, compared to 76.0% at securitization. The current whole loan balance is $34.5 million. Moody's LTV of the senior participation and whole loan are 58.4% and 98.6% respectively, compared to 59.9% and 101.2% at securitization. The third largest loan is the Commerce Office Park Loan ($17.6 million -- 15.5%), which is secured by eight office properties located in Commerce, California. The loan was originally secured by 10 properties but two properties have been released from the loan. The overall occupancy of the portfolio is 97.0%, essentially the same as at securitization. The current whole loan balance is $30.0 million. Moody's LTV of the senior participation and total loan are 47.0% and 80.0% respectively, compared to 61.1% and 104.0% at securitization. The fourth largest loan is the Upstate New York Portfolio Loan ($13.0 million -- 11.4%), which is secured by eight office properties located in upstate New York. The portfolio's performance has declined since securitization largely due to lease rollover. The property is currently 71.0% occupied, compared to 77.0% at securitization. The current whole loan balance is $22.5 million. Moody's LTV of the senior participation and whole loan are 81.7% and approximately 140.0% respectively, compared to 59.2% and 102.5% at securitization. The pool collateral consists of a mix of: * office (53.2%), * industrial (41.0%), and * retail (5.8%). The collateral properties are located in: * Texas (34.5%), * California (24.3%), * Michigan (19.8%), * New York (12.8%), and * New Jersey (8.6%). All of the loans are floating rate indexed off one month LIBOR. Three loans, representing 27.0% of the pool, mature by the end of 2005. The remaining five loans mature by the end of 2006. HAWK CORP: Begins AMEX Trading of 8-3/4% Sr. Notes Under HWK.Z -------------------------------------------------------------- The American Stock Exchange -- AMEX -- listed 8-3/4% senior notes issued by Hawk Corporation (Amex: HWK). These notes trade under the symbol HWK.Z. The notes are priced at $1000 per unit based on an initial offering of $110 million and mature on Nov. 1, 2014. Interest on the new notes is payable semi-annually in cash, in arrears, on January 1 and July 1 of each year, beginning on January 1, 2005. The specialist in HWK.Z is AGS Specialist Partners. About Hawk Corp. Hawk Corporation is a leading worldwide supplier of highly engineered products. Its friction products group is a leading supplier of friction materials for brakes, clutches and transmissions used in airplanes, trucks, construction equipment, farm equipment and recreational and performance automotive vehicles. Through its precision components group, Hawk is a leading supplier of powder metal and metal injected molded components used in industrial, consumer and other applications, such as pumps, motors and transmissions, lawn and garden equipment, appliances, small hand tools, trucks and telecommunications equipment. Hawk's performance racing group manufactures clutches and gearboxes for motorsport applications and performance automotive markets. Headquartered in Cleveland, Ohio, Hawk has approximately 1,600 employees and 17 manufacturing, research and administrative sites in 5 countries at its continuing operations. The American Stock Exchange -- http://www.amex.com/-- is the only primary exchange that offers trading across a full range of equities, options and exchange traded funds (ETFs), including structured products and HOLDRS(SM). In addition to its role as a national equities market, the Amex is the pioneer of the ETF, responsible for bringing the first domestic product to market in 1993. Leading the industry in ETF listings, the Amex lists 144 ETFs. The Amex is also one of the largest options exchanges in the U.S., trading options on broad-based and sector indexes as well as domestic and foreign stocks. * * * As reported in the Troubled Company Reporter on Oct. 15, 2004, Standard & Poor's Ratings Services raised its corporate credit rating on Cleveland, Ohio-based Hawk Corp. to 'B+' from 'B'. The outlook is stable. At the same time, Standard & Poor's assigned its 'B' rating to Hawk's proposed $100 million senior unsecured notes due 2014. The proceeds from the offering and the new unrated $30 million, five-year bank facility are being used to refinance the 12% senior unsecured notes due 2006 and repay the existing $53 million credit facility. Pro forma for the transaction, total debt (including the present value of operating leases) for the specialty components manufacturer is expected to be approximately $111 million. HAWKEYE RENEWABLES: Moody's Puts B2 Rating on $185M Sr. Sec. Loan ----------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to the $185 million senior secured term loan of Hawkeye Renewables, LLC, which has a maturity of 2012. The rating outlook is stable. The B2 rating for the credit facility reflects the areas of credit concern: 1. Uncertainty relating to the long-term demand for ethanol for fuel, which is substantially dependent upon federally mandated programs and tax incentives; 2. The possibility that industry expansion could result in excess capacity to produce ethanol or that technological developments could result in lower cost biomass fuels being developed over the longer term; 3. Exposure to fluctuation in commodity prices. Hawkeye does not have contractually fixed pricing and there is not a natural hedge between the prices of its inputs and outputs; 4. The risk that construction could cost more than projected or take longer than expected to be completed; 5. The risk that the plants might not operate as efficiently as expected; 6. A financial structure that has high leverage, with 75% debt to equity at closing; 7. Additional leverage at the parent holding company; and 8. Potential for a working capital facility, which would have a first lien on working capital. The B2 rating is supported by: 1. The current high prices for oil and ethanol and the low price of corn are quite favorable for ethanol production from efficient plants; 2. Continuing strong governmental support for ethanol as a renewable fuel source that uses farm products, as evidenced by the recent extension of the federal tax credit to 2010; 3. The scale and technological advantages of Hawkeye's new facilities, which will be among the largest in the industry when completed; 4. The experience of the construction contractor, which is also lending to Hawkeye's parent company; 5. The use of relatively simple proven technology; 6. Strong projected cash flow coverage in the base case and most sensitivity cases; 7. A cash flow sweep mechanism that is projected to amortize the term loan prior to maturity in the base case; and 8. A one-year cash funded debt service reserve. The rating outlook is stable. The factors that could lead to a downward revision of the rating: * significant delays in construction or increased construction costs, * the inability to operate the project in a manner consistent with the base case projections, and * prolonged dislocations of commodity prices, a significant reduction in federal mandates or incentives for ethanol, replacement of the cash funded debt service reserve with a letter of credit that results in weaker support for the term loan, and financial stress at the parent company. The factors that could lead to an upward revision of the rating: * more rapid amortization of the term loan, * elimination of the debt at Hawkeye Holdings, * prolonged favorable commodity price trends that result in rapid reduction of the term loan through the cash sweep mechanism, and * contracts that could provide a more predictable stream of cash flow over the term of the loan. Proceeds of the term loan will be used to finance the expansion of an existing 40 million gallon per year (MGPY) ethanol plant in Iowa Falls, Iowa to 80 MGPY; construct a new 100 MGPY ethanol plant at Fairbank, Iowa; repay bank debt used by Hawkeye Renewable's parent for the construction of the Iowa Falls plant; fund a one-year debt service reserve; and pay fees and expenses. Hawkeye Renewables is 100% owned by Hawkeye Holdings, LLC, which is owned 58% by Whitney & Co., LLC, 17% by Hawkeye management and 25% by other individuals. Upon closing of the transaction Hawkeye's capitalization structure will consist of the term loan plus approximately $57 million of equity capital. The equity has been contributed by Hawkeye Holdings, and is comprised of a $40 million mezzanine loan from Whitney & Co., and approximately $17 million of other equity, including a loan from the construction contractor. The term loan will be secured by all of the assets of the borrower, including real property, contracts, all project accounts and accounts receivable, to the extent not otherwise pledged for a working capital facility, including a pledge of Hawkeye Holdings' ownership interest. Covenants include maintenance of minimum 1.20x debt service coverage ratio in the preceding and succeeding four quarters, and limitations on additional indebtedness and liens. The terms include amortization of 1% of the original principal amount per annum; in addition, a minimum of 40% of excess cash flow will also be allocated to make quarterly repayments of the term loan. Ethanol sales have grown rapidly in the past few years. However, the primary driver of industry growth has been federal programs that require the oxygenation of gasoline so that it will burn more cleanly and a provision that reduces gasoline excise taxes by 5.1 cents per gallon when the content is at least 10% ethanol. The federal tax incentive has been in place since 1978 and has been extended several times. It was most recently extended in October 2004 to a new expiry date of December 31, 2010. Between 2002 and 2004 demand for ethanol increased by about 50%, to over 3 BGPY, after several key states banned the use of methyl tertiary butyl ether (MTBE), the principal alternative oxygen additive. Industry output capacity is expected to increase sharply over the next several years, when a number of new facilities and expansion projects are expected to come on line, which could result in excess capacity. However, the additional capacity could be absorbed by the market if additional states enact bans on the use of MTBE or if the federal government enacts proposed legislation that mandates usage of renewable fuels. The prices of inputs and outputs of the ethanol production process are not well correlated. Ethanol is priced based upon gasoline prices. In contrast, the prices of corn and Dried Distillers Grains with Solubles (DDGS) are dependent on agriculture market factors that include weather conditions and crop yields. Ethanol production is most profitable when oil and gasoline prices are high and corn prices are low. There are no natural hedges and all of the project's contracts are market based. The Hawkeye facilities are expected to benefit from efficient processes due to their scale and state of the art technology. The facilities will also benefit from an ability to sell DDGS as a bi- product of the ethanol process. Analysis of the economics of the project included a back testing scenario that used historic commodities prices back to 1992. The back testing scenario indicates that in 1996, when corn prices were extremely high, the project would have needed to utilize the debt service reserve to cover expenses and scheduled debt service. However, results of this case also suggest that revenues from ethanol and DGGS would be sufficient to cover debt service in all other years. Moody's notes that historic price trends are often not indicative of future trends, and that the level of pending ethanol capacity additions could cause margins between the prices of ethanol and gasoline to be lower than the historical pattern. The Iowa Falls facility will be expanded to twice its current size, and new construction will occur at Fairbank. Interest on the full amount of the loan is to be paid via cash from operations of the existing 40MGPY Iowa Falls facility while the expansion and second project are being completed. There is a risk the construction could take longer, cost more than anticipated, or that operating difficulties could occur with the existing operations. The independent engineer believes the construction schedule is reasonable based on the past work of the contractor, Fagen, Inc, which recently completed the 40 MGPY Iowa Falls facility on time and within budget. The construction contracts are fixed price turnkey with performance guarantees and liquidated damage provisions. Performance bonds for the full amount of the contracts will be posted. Hawkeye has contracted with United Bio Energy Management, LLC for the oversight of operations. United Bio is a joint venture between the contractor, Fagen, Inc. and the equipment and process technology provider ICM. The B2 rating considers that Hawkeye's parent holding company Hawkeye Holdings LLC will also be highly leveraged. Hawkeye Holdings will rely entirely on cash distributions from Hawkeye to service its debt obligations. Holdings debt will consist of a $40 million mezzanine loan from sponsor Whitney & Co. LLC with a 10% coupon and a 6% pay-in-kind obligation; and a note from Fagen Inc. The Fagen note must be repaid prior to any distributions to the equity holders of Holdings. The Whitney note matures in 2008. At closing, approximately $10 million will be held in escrow at Holdings for the payment of interest on the Whitney notes during construction. Under some adverse scenarios, the underlying project may not provide sufficient cash to service the Holdings notes, and insolvency of Holdings could have an impact on Hawkeye. The rating of the project term loan is predicated upon the final structure and documentation being consistent with Moody's current understanding of the transaction. Hawkeye Renewables, LLC, is a limited liability company formed to develop, own and operate ethanol facilities. Headquartered in Iowa Falls, Iowa, Hawkeye is 100% owned by Iowa Falls Ethanol Plant, LLC, (to be renamed Hawkeye Holdings, LLC (Holdings)). Hawkeye Holdings is owned 58% by Whitney & Co., LLC, 17% by Hawkeye management and 25% by other individuals. HEALTH & NUTRITION: Transfers Name to New Owner After Asset Sale ---------------------------------------------------------------- Ashlin Development Corporation, a Florida corporation f/k/a Health & Nutrition Systems International, Inc. (OTC Bulletin Board: HNNSQ), reported that on January 25, 2005, the sale of substantially all of its assets to TeeZee, Inc., a Florida corporation, was completed pursuant to the Asset Purchase Agreement dated October 15, 2004, between the Company and Purchaser. The Asset Purchase Agreement was entered into as part of the Company's Amended Plan of Reorganization, which was approved on January 10, 2005, by the U.S. Bankruptcy Court, Southern District of Florida, in Fort Lauderdale, Florida. The closing of the sale is a condition precedent to the effectiveness of the Plan. The purchase price for the Assets was $2,191,160.23, which consisted of the assumption by the Purchaser of $1,841,160.23 of liabilities of the Company, a cash payment from the Purchaser to the Company of $250,000, and the release to the Company of $100,000 in cash that had been funded by the Purchaser into escrow in accordance with the terms of the Asset Purchase Agreement. The Company intends to use approximately $25,000 of the cash proceeds received in the transaction to repay amounts owed to Garden State Nutritionals, a division of Vitaquest International, Inc., and to utilize the remaining cash proceeds to fund future operating expenses of the Company as well as the costs, fees, and expenses of the Company that were incurred in connection with the Plan. In connection with the sale, the Company changed its name to "Ashlin Development Corporation" and assigned its rights to the name "Health & Nutrition Systems International, Inc." to the Purchaser. From and after the effective date of the Plan, the Company intends to engage in the business of seeking suitable commercial activities or a strategic alliance with an operating entity. Headquartered in West Palm Beach, Florida, Health & Nutrition Systems International, Inc. -- http://www.hnsglobal.com/-- develops and markets weight management products in over 25,000 health, food and drug store locations. The Company's products can be found in CVS, GNC, Rite Aid, Vitamin Shoppe, Vitamin World, Walgreens, Eckerd and Wal-Mart. The Company's HNS Direct division distributes to independent health food stores, gyms and pharmacies. The Company filed for chapter 11 protection on Oct. 15, 2004 (Bankr. S.D. Fla. Case No. 04-34761). Arthur J. Spector, Esq., at Berger Singerman, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $1,182,382 in total assets and $2,196,129 in total Debts as of June 30, 2004. HELIOS SERIES: Moody's Pares Rating on $24M Class C Notes to B1 --------------------------------------------------------------- Moody's Investors Service has taken rating action on the following tranches of Notes issued by the static pool CDO, Helios Series I Multi Asset CBO, Ltd.: * the U.S.$443,000,000 Class A Floating Rate Notes due December 13, 2036, formerly rated Aaa are now rated Aaa on watch for possible downgrade; * the U.S.27,000,000 Class B Floating Rate Notes due December 13, 2036, formerly rated Aa2 are now rated Aa2 on watch for possible downgrade; and * the U.S.$24,000,000 Class C Floating Rate Notes due December 13, 2036, formerly rated Ba1, have been downgraded to B1 and placed on watch for possible downgrade. Moody's explained that since its last rating action in late 2002, the combination of deteriorating credit quality (as reflected in the increase of the reported weighted average rating factor from 330 to 570) and realized losses of the issuer's underlying portfolio (as shown in the reduction in the reported junior overcollateralization ratio from 100.16% to 99.76%) has outstripped the positive benefits from the amortizations of the Class A Notes and Class C Notes using principal proceeds and excess interest proceeds, respectively. Rating Actions: Downgrade/On Watch for Possible Downgrade Affected Tranches: (1) U.S.$443,000,000 Class A Floating Rate Notes due December 13, 2036, Previous rating: Aaa New rating: Aaa on watch for possible downgrade (2) U.S.27,000,000 Class B Floating Rate Notes due December 13, 2036 Previous rating: Aa2 New rating: Aa2 on watch for possible downgrade (3) U.S.$24,000,000 Class C Floating Rate Notes due December 13, 2036, Previous rating: Ba1 New rating: B1 on watch for possible downgrade HEXCEL CORP: Issuing $200 Million Sr. Notes to Refinance Debts -------------------------------------------------------------- Hexcel Corporation (NYSE/PCX: HXL) intends to issue $200 million of senior subordinated notes that will mature in 2015. The net proceeds of the offering will be used to partially redeem Hexcel's existing 9.75% Senior Subordinated Notes due 2009 in accordance with their terms. The offering of the senior subordinated notes will not be registered under the Securities Act of 1933, as amended, and the notes may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release is neither an offer to sell nor the solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such an offer, solicitation or sale is unlawful. 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. HEXCEL CORP: Moody's Junks Proposed $200 Million Senior Sub. Notes ------------------------------------------------------------------ Moody's Investors Service has upgraded certain ratings of Hexcel Corporation, from senior implied to B2 from B3, and has affirmed the B3 rating on Hexcel's 9-7/8% senior secured notes due 2008. In a related action, Moody's has assigned a Caa1 rating to the Company's proposed $200 million senior subordinated notes, due 2015. The ratings outlook is stable. The ratings upgrades reflect the Hexcel Corp.'s outlook for continued improved financial performance in FY 2005 due to strengthening demand in key market sectors in which the Company operates, particularly the commercial aerospace sector. These expectations are supported by substantial recent improvement in the company's operating performance, which Moody's views as illustrative of a trend towards a stronger credit profile for Hexcel. The stable outlook reflects Moody's expectations that Hexcel Corp. will modestly grow its revenue base and operating profits over the near term, owing primarily to improved prospects in the commercial aerospace sector, in which the company is a major supplier to aircraft OEM's. Ratings or their outlook may improve if, as a result of continued improvement in key business segments, lease- adjusted debt were to fall below 3.0x EBITDAR, EBIT coverage of interest were to exceed 2.5x, and free cash flow were to exceed 10% of debt over a sustained period. Conversely, ratings or their outlook could be subject to downward revision if the company suffers deteriorating operating performance in key business segments, possibly from an unexpected drop in OEM commercial or military aircraft production, such that free cash generation were to be negative over a prolonged period, if adjusted debt/EBITDAR were to exceed 5.0x, or if EBIT/interest were to fall below 2.0x. The purpose of the proposed notes is to repay, by way of call, about $185 million of the Hexcel Corp's existing 9.75% senior subordinated notes due 2009. The new notes will be pari passu in claim to 9.75% notes remaining after the call. Upon close of the proposed notes offering and subsequent call of these notes, Hexcel's debt levels will remain essentially unchanged, while the company operates in an improving business environment with a good liquidity profile. Total pro forma debt of $447 million represents about 3.0x FY (December) 2004 EBITDA (about 3.2x EBITDAR on a lease-adjusted basis). EBIT over this period covered pro forma interest expense by approximately 2.4x, while estimated free cash flow represented about 10% of pro-forma debt. These metrics are strong for this ratings category. However, Hexcel Corp.'s free cash flow in 2004 incorporated a CAPEX level, which is $38 million, or about 73% of depreciation that, Moody's believes, understates future business reinvestment requirements. Moody's believes CAPEX levels going forward will be somewhat higher. In addition, it is considered likely that working capital requirements will increase in line with anticipated revenue growth. The rating agency estimates that free cash flow generation, although positive, will be relatively thin over the near term. If the anticipated levels of revenue growth are not realized in 2005, or if operating margins were to deteriorate unexpectedly, the ensuing reduction in free cash flow could result in additional, short-term borrowings under its revolving credit facilities, which are anticipated to be undrawn upon close. With about $26 million currently used for letters-of-credit purposes, Hexcel Corp. estimates total availability of about $88 million, including foreign facilities, in addition to a cash balance of about $57 million. Should drawings under the bank line be necessary, the Company's liquidity and financial flexibility could become reduced. The ratings upgrade is further supported by improvement in the Hexcel Corp.'s operating results due to a trend towards overall improvement in the commercial aerospace segment (43% of its FY 2004 revenue), continued strength in the space and defense segment (18% of revenue) and growth in the company's industrial revenue segment (33%). Since 2002, which represents the historical low- point in Hexcel's operating results, coinciding with a severely distressed commercial aerospace sector, the Company's revenue has grown 26%, to $1.074 billion in FY 2004. EBITDA has increased more dramatically, up 39%, to about $150 million in FY 2004. This improvement reflects both growth in business volume as well as stronger operating margins, as the company has undertaken a restructuring program involving a reduction in fixed costs and consolidation of manufacturing facilities. Over this period, Hexcel Corp. was able to reduce debt by about 31%, from $622 million to $431 million, through the March 2003 issuance of convertible preferred stock as well as through substantial free cash flow generation. As a result, the Company's credit fundamentals improved significantly, with leverage (lease-adjusted debt/EBITDAR) of about 3.1x and EBIT/interest coverage of about 2.9x as of December 2004. Going forward, Moody's believes that near-term growth in demand from major commercial aircraft OEM's, augmented by possible growth that could be experienced in certain of the industrial segments that the Company serves, should support revenue growth and margin stability. Such stability will be important to retaining or improving the company's credit profile. The ratings on the Hexcel Corp.'s $125 million 9-7/8% senior secured notes due 2008 was affirmed at B3. This affirmation considers Hexcel's recent announcement that it is exploring refinancing some or all of its debt, and that one of the options being considered is the repurchase of the senior secured notes by way of tender offer. Because of uncertainty as to the magnitude of any stub portion of untendered notes that might remain outstanding following the tender or the relative priority of claim that such a stub portion might have in the company's capital structure, the rating on these notes has been affirmed at B3. The Caa1 rating assigned to Hexcel Corp.'s proposed $200 million notes, two notches below the senior implied rating, reflects the structural subordination of these notes to all existing and future senior indebtedness of the Company. These notes will be pari passu in right of payment with Hexcel's existing 9.75% senior subordinated notes due 2009, also rated Caa1. The Caa2 rating on the 7% convertible subordinated notes, one notch below the senior subordinated debt rating, reflects the structural subordination of these notes to both the new and existing senior subordinated notes, as well as lack of guarantees from any of the company's subsidiaries. The ratings upgraded are: * 9.75% senior subordinated notes due 2009, to Caa1 from Caa2, * 7% convertible subordinated debentures due 2011, to Caa2 from Caa3 * Senior implied rating, to B2 from B3, and * Senior unsecured issuer rating, to B3 from Caa1 The ratings affirmed are: * 9-7/8% senior secured notes due 2008, at B3 The ratings assigned are: * $200 million senior subordinated notes, due 2015, Caa1 Hexcel Corporation, headquartered in Stamford, Connecticut, 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. The Company had FY 2004 revenues of $1.074 billion. HIGHWOODS REALTY: Moody's Holds Ba1 Rating on Senior Unsec. Debt ---------------------------------------------------------------- Moody's Investors Service confirmed the ratings of Highwoods Realty Limited Partnership's senior unsecured debt at Ba1 with a stable outlook, concluding its review. Highwoods' ratings were placed on review for possible downgrade on August 5, 2004, following the REIT's announcement that it would be restating its financial results for 1999 through 2003, as well as for the first quarter 2004. The restated adjustments related to the accounting for prior real estate sales transactions, the accounting for debt retirement, the accounting for minority interest in the operating partnership and reclassifications related to discontinued operations. Moody's does not expect these adjustments to have a material impact on future cash flows. According to the rating agency, the rating confirmation and stable outlook reflect the REIT's diversified revenue base, moderate leverage, sizable pool of unencumbered assets and the slowly improving operating fundamentals. Highwoods' occupancy has increased to 83.2% at September 30, 2004, from 81.5% at year-end 2003, and Moody's notes that Highwoods' wholly-owned development pipeline is 100% pre-leased. The REIT's fixed charge coverage has improved to 1.8X at the end of the third quarter, from approximately 1.6X at year end 2003; however, Moody's expects the recovery in Highwoods' core markets to be slow and uneven, which may leave little cushion in the company's bank line financial covenants at times during 2005. Moody's also views the REIT's high dividend payout as a distinct credit negative, but anticipates Highwoods will begin covering its dividend by 2006. As a result of the need for financial restatements, there is a high likelihood, Moody's believes, that the REIT could very well report a material weakness in internal control in its Sarbanes- Oxley 404 implementation and certification processes. Should Highwoods report a material weakness, Moody's believes it would not impact the Company's rating. Highwoods has taken actions to mitigate the control weaknesses that led to the recent restatements. In specific, Highwoods has expanded its accounting department, implemented a sub- certification processes, and enhanced internal controls over property sales and joint venture transactions. Moody's will re- evaluate its opinion upon Highwoods' filing the appropriate documentation. By year-end 2005, should Highwoods make meaningful progress in its operating performance and reduce its overall leverage, as well as resolve any issues that may arise from Sarbanes-Oxley 404 implementation and certification, Moody's would consider a positive outlook. A rating upgrade then would depend on the REIT's ability to improve its coverage measures to at least 2.25X, while over time reducing its secured debt levels below 20%, and implementing its growth strategy. Barring further steep declines in operating performance, or a significant shift in funding strategy, Moody's would not anticipate further downward pressure on the REIT's ratings. The securities were confirmed, with stable outlooks: * Highwoods Realty Limited Partnership: -- Senior debt at Ba1, Senior debt shelf at (P)Ba1 * Highwoods Properties, Inc.: -- Cumulative preferred stock at Ba2, Cumulative preferred stock shelf at (P)Ba2 Highwoods Properties, Inc. [NYSE: HIW], headquartered in Raleigh, North Carolina, USA, is a Real Estate Investment Trust (REIT) and one of the largest developers and owners of Class A suburban office and industrial properties in the Southeastern USA. As of September 30, 2004, the REIT owned or had an interest in 525 in-service office, industrial and retail properties encompassing 41.4 million square feet, and had total assets of $3.3 billion. ICON HEALTH: Moody's Junks $155M Senior Subordinated Notes ---------------------------------------------------------- Moody's Investors Service downgraded all the credit ratings of ICON Health & Fitness, Inc., concluding a review of the Company's ratings for possible downgrade initiated on October 22, 2004. The outlook has been changed to stable. The ratings downgrade reflects continued weak sales, a sharp deterioration in gross and operating margins, continued pressure from commodity price increases and increasing competition. The stable outlook reflects the ICON Health's recent actions to discontinue under performing businesses and reduce its cost structure and improve manufacturing efficiency. The ratings downgraded are: * $155 million 11.25% Senior Subordinated Notes due 2012, downgraded to Caa2 from B3; * Senior Implied Rating, downgraded to B3 from B1; * Senior Unsecured Issuer Rating, downgraded to Caa1 from B2. ICON Health's financial performance has been weak for the last year with a particularly sharp deterioration in the company's two most recently reported fiscal quarters. Sales and gross profit for the six months ended November 27, 2004 were down 14% and 36%, respectively, from the comparable period in the prior year. Sales of both cardiovascular and strength training equipment were down, with particularly weak sales in the direct to consumer business. Due to the weak operating performance and seasonal increases in inventory and accounts receivable levels, cash flow used in operations was $131 million and revolver borrowings increased sharply to about $248 million. The ratings downgrade reflects the difficult business climate and challenges facing ICON Health including sharply increased commodity prices and transportation costs; weak consumer demand; need for constant, rapid, new product introductions that present an ongoing design and manufacturing challenge; limited pricing power; increased competition and industry manufacturing capacity; sales concentration with a few large retailers; and significant capital expenditure requirements. Moody's expects that conditions in the fitness products industry will continue to be challenging and ICON Health will have difficulty increasing its operating margins back to historical levels. However, the stable ratings outlook reflects Moody's belief that the Company's performance has bottomed out and positive actions taken by the company will stabilize its performance over the next year and lead to a gradual improvement in sales, operating margins and cash flow. ICON Health recently announced that it is discontinuing the manufacture and sale of all outdoor recreational equipment, which have historically generated an operating loss and required a large investment in working capital. Moody's understands the reason for this action is to improve financial performance. The Company has also re-designed portions of its product line to minimize the utilization of certain commodities; moved up product development cycles to increase manufacturing efficiency; and increased its focus on working capital management. ICON Health's joint venture in China is expected to be operational during the early part of 2005 and should help improve operating margins as well. ICON indicated that sales for the month of December 2004 increased over the comparable month of 2003 and that demand for products from certain major retailers is increasing. Moody's expects revolver borrowings to decrease significantly in the company's third and fourth fiscal quarters of 2005 reflecting the seasonality of ICON Health's business and cash flow benefits from the discontinuation of the sale of outdoor recreational products. Moody's expects ICON Health to have negative free cash flow in its fiscal year ended May 2005 and a modest level of free cash flow in its 2006 fiscal year. EBITDA less capital expenditures to interest expense is expected to be less than 1 time in fiscal year 2005 and improve to over 1.5 times in fiscal year 2006. The Caa2 rating assigned to the senior subordinated notes reflects the contractual subordination to senior debt and the magnitude of secured debt in the capital structure. On October 11, 2004, ICON amended its credit agreement to increase the amount of availability under its revolver to $275 million from $210 million. Availability under the revolver was about $27 million as of November 27, 2004. The revolver, which is not rated by Moody's, matures in 2007 and contains a material adverse change clause that provides that lenders having more than 66.67% of the commitment or borrowing have the right to block the company's requests for future borrowings. ICON Health & Fitness, Inc., based in Logan, Utah, is one of the largest manufacturers and marketers of home fitness equipment in the United States. Revenue for the fiscal year ended May 31, 2004, was approximately $1 billion. INTEGRATED ELECTRICAL: Completes Internal Investigation ------------------------------------------------------- As Integrated Electrical Services, Inc. (NYSE: IES) previously announced on Nov. 10, 2004, the Staff of the United States Securities and Exchange Commission had been conducting an informal inquiry relating to the company's internal investigation, the investigation conducted by counsel to the Audit Committee of the company's Board of Directors, and the material weaknesses identified by IES' auditors in August 2004. Earlier this week IES received notice of a formal order of a nonpublic investigation issued by the SEC concerning these and related matters. The company's internal investigation and the investigation conducted by counsel have been completed, and the company has filed its fiscal 2004 Form 10-K with the SEC. IES will continue to fully cooperate with the Staff's investigation. About the Company Integrated Electrical Services, Inc., is a leading national provider of electrical solutions to the commercial and industrial, residential and service markets. The company offers electrical system design and installation, contract maintenance and service to large and small customers, including general contractors, developers and corporations of all sizes. * * * As reported in the Troubled Company Reporter on Jan. 12, 2005, Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating and 'CCC' subordinated debt rating to Integrated Electrical Services Inc. -- IES. The outlook is developing. INTERSTATE BAKERIES: JPMorgan Replaces Harris Letters of Credit --------------------------------------------------------------- Harris Trust and Savings Bank was a lender party to Interstate Bakeries Corporation and its debtor-affiliates' Amended and Restated Credit Agreement, dated as of April 25, 2002, but has recently sold its position in the prepetition facility. Harris Bank is also the issuing bank for 17 letters of credit issued on behalf of the Debtors for $78,284,350. The Letters of Credit were for the benefit of various insurance companies and state agencies as collateral support for the Debtors' workers' compensation programs. The Debtors currently pay Harris Bank a fronting fee of 0.125% per annum for issuing the Letters of Credit. J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom, LLP, in Chicago, Illinois, relates that the Letters of Credit contain an "evergreen" renewal provision, which provides for the automatic renewal of the Letter of Credit on an annual basis, provided that a written notice of non-renewal has not been issued by Harris Bank. Under ordinary circumstances, the Letters of Credit would begin to renew automatically in February 2005. The 17 Letters of Credit issued by Harris Bank are: Beneficiary LC Amount LC Number Renewal Date ----------- --------- --------- ------------ Director of Rhode $500,000 SPL90009981 02/12/05 Island Workers' Compensation, Dept. of Labor & Training Kansas Dept. of Human 4,032,000 SPL35713 02/25/05 Resources, Div. of Workers Compensation Louisiana Dept. of 1,150,000 SPL35748 02/25/05 Labor, Officer of Workers' Compensation Oklahoma Workers' 850,000 SPL35602 02/25/05 Compensation Court Travelers/Aetna 1,460,000 SPL34742 02/25/05 Insurance Company Self Insurance Div., 10,600,000 SPL35183 04/01/05 Bureau of Workers' Compensation State of Connecticut, 1,000,000 SPL35247 05/15/05 Workers' Compensation Commission Lumbermens Mutual 3,926,250 SPL35502 06/30/05 Casualty Companies Lumbermens Mutual 3,926,250 SPL35619 06/30/05 Casualty Companies Lumbermens Mutual 2,259,163 SPL90002854 06/30/05 Casualty Companies Lumbermens Mutual 36,574,043 SPL35206 07/19/05 Casualty Companies Lumbermens Mutual 3,950,000 SPL35353 07/19/05 Casualty Companies Lumbermens Mutual 279,155 SPL35795 07/19/05 Casualty Companies Lumbermens Mutual 2,259,163 SPL37243 07/19/05 Casualty Companies Lumbermens Mutual 2,259,163 SPL37351 07/19/05 Casualty Companies Lumbermens Mutual 2,259,163 SPL37126 07/19/05 Casualty Companies State of Michigan, 1,000,000 SPL35054 07/19/05 Dept. of Labor According to Mr. Ivester, since Harris Bank is no longer a lender to the Prepetition Credit Agreement, it feels exposed under the Letters of Credit it has issued and wishes to discontinue fronting the Letters of Credit. Therefore, to ameliorate its exposure, Harris Bank distributed notices of non-renewal to all beneficiaries of the Letters of Credit on November 23, 2004. Because the Letters of Credit contain provisions that allow beneficiaries to draw on them in the event of non-renewal unless substitute letters of credit acceptable to the beneficiaries are provided, the Debtors need to make arrangements to provide substitute collateral to the beneficiaries or risk the beneficiaries drawing on the Letters of Credit. Agreement with JPMorgan The Debtors contacted with beneficiaries regarding the status of the Letters of Credit and the Debtors' intent to provide substitute collateral. The Debtors also negotiated with JPMorgan Chase Bank, N.A., to issue substitute letters of credit in replacement of the Letters of Credit. JPMorgan agreed to issue replacement letters of credit pursuant to a Consent Agreement, dated as of December 17, 2004. Under the Consent Agreement, the Replacement Letters of Credit will remain prepetition obligations of the Debtors and will simply take the place of the existing Letters of Credit. The Consent Agreement will not amend or alter the Prepetition Credit Agreement, which will continue to be in full force and effect, subject to the effects of the Debtors' Chapter 11 cases. The fronting fee charged by JPMorgan for issuing any Letters of Credit would be 0.50% per annum of the face amount of the Letters of Credit issued. In addition, the Debtors will be responsible for the payment or reimbursement of JPMorgan's reasonable out of pocket costs and expenses incurred in connection with the Consent Agreement. "The issuance of the Replacement Letters of Credit by JPMorgan presents a greater benefit to the Debtors and their estates than the non-renewal of the Letters of Credit by Harris Bank," Mr. Ivester states. "If the Letters of Credit are not renewed or replaced the beneficiaries will draw on the Letters of Credit prior to their expiration." Mr. Ivester says a draw on a Letter of Credit will ultimately result in a draw on the Debtors' prepetition credit facility, and therefore, increase the amount of the Debtors' funded prepetition secured debt and the amount of interest the Debtors are paying on the amounts owed under the Prepetition Credit Agreement. The existing Letters of Credit generally support many of the Debtors' self-insured workers' compensation programs or the high deductible insured workers' compensation insurance policies. If the Letters of Credit are not replaced, these programs may be jeopardized. At the Debtors' request, Judge Venters approves the Consent Agreement to replace the Letters of Credit issued by Harris Bank. The Debtors are permitted to pay JPMorgan the fronting fee associated with the issuance of the Replacement Letters of Credit. 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) JOSEPH G. ROCHE: Files Schedules of Assets & Liabilities -------------------------------------------------------- Joseph G. Roche and Genevieve M. Roche filed with the U.S. Bankruptcy Court for the Northern District of California its Schedules of Assets and Liabilities, disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property $50,250,000 B. Personal Property 1,832,652 C. Property Claimed As Exempt D. Creditors Holding Secured Claims $12,005,466 E. Creditors Holding Unsecured Priority Claims 426,564 F. Creditors Holding Unsecured Nonpriority Claims 507,103 ----------- ----------- Total $52,082,652 $12,939,134 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. JOY GLOBAL: Performance Improvement Cues Moody's to Lift Ratings ---------------------------------------------------------------- Moody's Investors Service upgraded its ratings for Joy Global, Inc. The upgrades reflect improvements in the Company's financial performance and credit metrics over the last several years and Moody's expectation that mining equipment sales and service will continue to expand given favorable near-term fundamentals for metals and commodities. Joy Global has demonstrated its commitment to a prudent capital structure and its ability to generate cash and manage costs through a severe downcycle. Joy Global's rating outlook remains stable. The ratings upgraded are: -- 8.75% senior subordinated notes due 2012 -- to Ba2 from B1, -- senior implied rating -- to Ba1 from Ba2, and -- senior unsecured issuer rating -- to Ba1 from Ba3. Joy Global's financial performance has steadily improved over the last three years. Its favorable results, combined with its modest leverage and strong market position, support Moody's upgrade. Joy Global has had positive cash flow in each of the last three years, its fiscal year ends around the end of October. Joy Global has used cash to repay debt and fund its US defined benefit pension plans, but its cash balance has continued to expand and, as of October 30, 2004, reached $232 million, which is greater than debt of $206 million. While it has instituted a common stock dividend and may make acquisitions in the future, there is no apparent reason for large-scale changes to net debt in the foreseeable future. Joy Global's aftermarket sales provide a stable base of recurring sales at attractive margins and should adequately support its conservative leverage, even after recognizing the potential cash needs of its underfunded pension plans. In addition, improving fundamentals for commodities such as coal, copper and iron ore have increased original equipment as well as aftermarket sales and Joy Global's order rate is running well-ahead of sales. As a result, net sales, operating margins, and all financial measures have continued to expand, producing very solid credit metrics. For example, for the year ended October 30, 2004, debt to EBITDA was 1.3 times and retained cash flow to gross debt was 23%, retained cash flow was calculated as cash from operating activities, inclusive of pension contributions, less dividends. In addition to its strong credit metrics, Joy Global also exhibits characteristics of an investment grade company in terms of market position, competitive profile, and geographic reach. With respect to its surface mining equipment business, it is one of two international manufacturers of electric power shovels and draglines. Joy Global has a large share of the worldwide installed equipment base and lately has been winning a majority of the orders for new electric mining shovels. While there are more competitors within the underground mining machinery business, the Company's second segment, the Joy brand is highly regarded and offers the broadest range of products. For these reasons, Joy Global could be upgraded again, thus attaining an investment grade senior unsecured rating. Factors that could lead to a further upgrade include a continuation of solid operating and financial performance, as evidenced by steady growth in aftermarket sales and service and an increase in operating margins and the Company's goal is to achieve a minimum 10% EBIT margin throughout the cycle and it reached 7.5% in 2004, maintenance of a prudent capital structure, and discipline with respect to acquisitions and shareholder dividends. Two factors that constrain the ratings are the underfunded pension plans, approximately $290 million, and the large proportion of net sales and assets represented by the company's foreign subsidiaries, which are non-guarantors of the debt. Factors that could cause a lowering of Moody's ratings or outlook include a decline in market share, increased debt or pension liabilities, and large special dividends, stock buybacks, or debt-financed acquisitions unless accompanied by a commensurate increase in cash flow. Joy Global's rating outlook is stable. Moody's expects the Company's original equipment sales to continue to improve, while aftermarket sales and life cycle management contracts provide a stable underlying base of business. Moody's noted that increased sales are likely to require higher working capital, which was an important source of cash over the last several years. The mix of Joy Global's business, which includes surface mining equipment and underground coal mining machinery sales, adds stability to its long-term performance. Joy Global, Inc., headquartered in Milwaukee, Wisconsin is a world leader in the manufacture and service of surface and underground mining equipment. It had net sales of $1.4 billion in the fiscal year ended October 30, 2004. LB-UBS COMMERCIAL: S&P Places Low-B Ratings on Six Cert. Classes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to LB-UBS Commercial Mortgage Trust 2005-C1's $1.58 billion commercial mortgage pass-through certificates series 2005-C1. The preliminary ratings are based on information as of Jan. 26, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: (1) the credit support provided by the subordinate classes of certificates, (2) the liquidity provided by the trustee, (3) the economics of the underlying mortgage loans, and (4) the geographic and property type diversity of the loans. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.52x, a beginning LTV of 92.2%, and an ending LTV of 84.1%. Classes A-1, A-2, A-3, A-AB, A-4, and A-1A receive interest and principal before class A-J. Losses are borne by the A-J class before classes A-1, A-2, A-3, A-AB, A-4, and A-1A, which will be applied pari passu. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned LB-UBS Commercial Mortgage Trust 2005-C1 Class Rating Amount ($) ----- ------ ---------- A-1 AAA 55,000,000 A-2 AAA 234,000,000 A-3 AAA 162,000,000 A-AB AAA 58,000,000 A-4 AAA 566,962,000 A-1A AAA 186,798,000 A-J AAA 106,546,000 B AA+ 13,811,000 C AA 27,623,000 D AA- 19,731,000 E A 25,650,000 F A- 15,784,000 G BBB+ 17,758,000 H BBB 17,757,000 J BBB- 21,704,000 K BB+ 7,892,000 L BB 7,893,000 M BB- 1,973,000 N B+ 5,919,000 P B 3,946,000 Q B- 3,946,000 S N.R. 17,758,178 X-CL* AAA 1,578,451,178** X-CP* AAA 1,469,894,000** * Interest-only class ** Notional amount N.R. - Not rated. LSI LOGIC: Posts $197 Million GAAP Net Loss in Fourth Quarter ------------------------------------------------------------- LSI Logic Corporation (NYSE: LSI) reported fourth quarter 2004 revenues of $420 million, a sequential increase of 10 percent compared to the $380 million reported in the third quarter of 2004, and a 9 percent decrease compared to the $463 million reported in the fourth quarter of 2003. Cash and short-term investments grew to $815 million at the end of the fourth quarter of 2004. LSI Logic generated positive operating cash flow for the 11th consecutive quarter. Fourth quarter 2004 GAAP net loss was $197 million or 51 cents per diluted share, including a $178 million non-cash charge associated with the company's Gresham manufacturing facility. The fourth quarter GAAP result compares to third quarter GAAP net loss of $282 million including a $206 million non-cash charge associated with the company's Gresham manufacturing facility. Fourth quarter 2003 GAAP net income was $8 million. Fourth quarter 2004 net income, excluding special items, was $15 million, excluding special items. Excluding special items, fourth quarter 2003 net income was $25 million. "In Q4, we saw sequential growth in Storage Systems, Storage Components and Consumer Products," said Wilfred J. Corrigan, LSI Logic chairman and chief executive officer. "The adjustment in our customers' supply chain inventory that began in Q2 appears to be substantially over in Storage Systems, Storage Components and Consumer Products. We are anticipating a small seasonal decline in the first quarter with revenues in the range of $400 million to $415 million. "In semiconductors, LSI Logic has technology and market share leadership positions in several high-growth sectors, including DVD recorders, Ultra320 SCSI controllers, SAS (Serial Attached SCSI), Fibre Channel, RAID adapters and our RapidChip(R) Platform ASICs. Our Engenio storage systems subsidiary demonstrated strong growth in the fourth quarter and expanded its OEM base with its range of leading modular, scalable storage systems. All of these products are expected to drive company revenue growth in 2005." LSI Logic recorded 2004 revenues of $1.70 billion, compared to $1.69 billion in 2003. GAAP 2004 net loss was $464 million or $1.21 per diluted share, which includes the $384 million non-cash charge associated with the Gresham manufacturing facility. The 2003 GAAP net loss was $309 million or 82 cents per diluted share. LSI Logic reported 2004 net income, excluding special items, of $43 million or 11 cents per diluted share compared to a 2003 net loss, excluding special items, of $16 million or 4 cents per diluted share. The company's 2004 gross margin was 43.3 percent, a 330-basis point improvement over 2003. The company generated $91 million in cash from operations in 2004. LSI Logic reduced its convertible debt in 2004 by $69 million through open market purchases. "In the fourth quarter, we generated revenue growth above expectations and our gross margin improved over the prior quarter," said Bryon Look, LSI Logic chief financial officer. "We continued to improve our cost structure and align our resources to the highest value opportunities. We maintained our strong focus on cash flows, continuing to generate positive cash flow as we grew revenues. LSI Logic was profitable, excluding special items, in both our semiconductor and our storage systems segments." About the Company LSI Logic Corporation --http://www.lsilogic.com/--headquartered at 1621 Barber Lane, Milpitas, CA 95035. Focuses on the design and production of high- performance semiconductors for Consumer, Communications and Storage applications that access, interconnect and store data, voice and video. LSI Logic engineers incorporate reusable, industry-standard intellectual property building blocks that serve as the heart of leading-edge systems. LSI Logic serves its global OEM, channel and distribution customers with Platform ASICs, standard-cell ASICs, standard products, host bus adapters, RAID controllers and software. In addition, the company supplies storage network solutions for the enterprise. * * * As reported in the Troubled Company Reporter on Nov. 1, 2004, Standard & Poor's Ratings Services revised its outlook on Milpitas, California-based semiconductor manufacturer LSI Logic Corp. to negative from stable. In addition, Standard & Poor's affirmed its 'BB-' corporate credit rating and other ratings on the company. The company had $1.0 billion of debt and capitalized operating leases at Sept. 30, 2004. MAGNUM HUNTER: S&P Places Low-B Ratings on CreditWatch Developing ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'B+' senior unsecured ratings on oil and gas company Magnum Hunter Resources, Inc., on CreditWatch with developing implications following the company's announcement that it would be acquired by Denver-based Cimarex Energy Co. The CreditWatch developing listing indicates that ratings may be raised, lowered, or affirmed following Standard & Poor's review of the business and financial policies of the combined entity. The stock-for-stock transaction, which includes the assumption of about $645 million of debt, is expected to have a total value of about $2.1 billion. As of Sept. 30, 2004, Irving, Texas-based Magnum Hunter had about $666 million in total debt outstanding, including capital leases and convertible debt. "Following a comprehensive review of the combined entity's business strategy and financial profile, we will determine the ratings impact of the transaction, if any, on Magnum Hunter's debt," said Standard & Poor's credit analyst Kimberly Stokes. As of Sept. 30, 2004, Irving, Texas-based Magnum Hunter had about $666 million in total debt outstanding, including capital leases and convertible debt. Ratings reflect Magnum Hunter's midsize reserve base and its participation in the volatile, cyclical, and capital-intensive exploration and production segment of the petroleum industry, and aggressive financial leverage. MAYTAG CORP: Names P.J. Bognar as Senior Vice President for Sales ----------------------------------------------------------------- Maytag Corporation (NYSE: MYG) reported that Paul J. Bognar will assume a new role as senior vice president, sales, effective Feb. 1, 2005. Mr. Bognar, currently vice president and general manager, Canada, for Maytag International, will replace Christopher D. Wignall, who will assume a new role working on special projects focused on Maytag's growth initiatives. Both will report directly to Ralph F. Hake, Maytag chairman and CEO. In his new assignment, Bognar will be responsible for leading Maytag's field sales organization in developing and executing strategies to achieve profitable sales growth through the organization's various customer channels. "Paul is a very talented member of our senior leadership team, and I am very pleased to announce his new appointment," said Hake. "Paul's demonstrated leadership in his current role with Maytag International, as well as his tremendous customer-focused discipline, will provide our sales organization with new energy and urgency for driving business results." Mr. Bognar, 45, joined Maytag in 2002 as general manager, Canada, for Maytag International. He was named vice president and general manager in 2004. He brings more than 20 years of sales and general management experiences to his new assignment with Maytag, including previous positions at Whirlpool, Panasonic and Kohler. Mr. Wignall, 44, began his career with Admiral in 1983 and served in various executive positions with Maytag Corporation and Maytag Appliances, prior to becoming senior vice president, sales and marketing for Maytag Appliances in 2003. He was named senior vice president, sales, in 2004. Maytag Corporation is a $4.8 billion home and commercial appliance company focused in North America and in targeted international markets. The corporation's primary brands are Maytag(R), Hoover(R), Jenn-Air(R), Amana(R), Dixie-Narco(R) and Jade(R). * * * As reported in the Troubled Company Reporter on Oct. 27, 2004, Fitch Ratings has downgraded the senior unsecured rating on Maytag Corp. to 'BB+' from 'BBB-' and the short-term debt rating to 'B' form 'F3'. The Rating Outlook is Stable. MID-STATE RACEWAY: Majority Stakeholder Wants Directors Kicked-Out ------------------------------------------------------------------ All Vernon Acquisition, LLC, owner of 52% of the issued and outstanding shares of Mid-State Raceway, Inc., asks the U.S. Bankruptcy Court for the Northern District of New York to remove the Debtors' directors. All Vernon Acquisition alleges "repeated, persistent, and inexplicable gross mismanagement and breaches of fiduciary duty" by the Debtors' directors. Deborah Deitsch-Perez, Esq., at Lackey Hershman, L.L.P., in Dallas, Texas, tells the Court that even after Mid-State was clearly insolvent, the directors drove away bona-fide financiers and investors, paid tens of thousands of dollars to cronies, and squandered corporate assets pledged as collateral to its largest creditor. The Debtor owes $28 million to Vestin Mortgage, Inc., which makes Vestin its largest creditor. Shawn Scott, the owner of All Vernon Acquisition, guaranteed the Vestin loan. To protect their interests, Mr. Scott and Vestin offered $9 million to fund the Debtor's reorganization. In connection with the Scott/Vestin offer, Vestin also agreed to reduce its claim, and its interest rate, providing for a significant benefit to the Debtor, and satisfying Vestin, Mid-State's largest creditor. The Debtor, nonetheless, accepted the offer of New York real estate developer, Jeffrey Gural, for $8.5 million. Ms. Perez contends that the Debtors' Board directors' current actions are the last in a long series of actions demonstrating their complete inability to exercise reasonable business judgment. A copy of All Vernon's motion stating its specific allegations is available for a fee at: http://www.researcharchives.com/download?id=040812020022 Headquartered in Vernon, New York, Mid-State Raceway, Inc., -- http://www.vernondowns.com/-- operates a racetrack, restaurant and gaming resort. The Company and its debtor-affiliate filed for chapter 11 protection on August 11, 2004 (Bankr. N.D.N.Y. Case No. 04-65746). Lee E. Woodard, Esq., at Harris Beach LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection, they listed estimated debts of $10 million to $50 million but did not disclose its assets. MID-STATE RACEWAY: J. Gural & TrackPower Acquiring Vernon Downs --------------------------------------------------------------- TrackPower, Inc., (OTCBB:TPWR) will be entering into a Joint Venture with Jeffrey Gural, Chairman of Newmark & Company Real Estate, Inc. of New York City in an attempt to purchase Vernon Downs Raceway, a harness track located in Vernon, New York. On January 14, 2005, the Board of Directors of Mid-State accepted the offer of Jeffrey Gural to contribute $5.4 Million on an interim basis, for the continuation of operations of Vernon Downs and funding of capital improvements. On confirmation of Vernon Downs Chapter 11 Plan, the loans will be converted to 80% of the issued publicly traded common stock of the reorganized debtor. The offer is subject to approval by the United States Bankruptcy Court and in the event of Chapter 11 Plan confirmation, obligates Mr. Gural to loan an additional $3 Million needed to fund video lottery operations. Vernon Downs Raceway is the oldest harness track in the State of New York. Mr. Gural is a major owner and breeder of Standardbred racehorses and has a breeding farm in Stanfordville, New York. If approved by the Bankruptcy Court, TrackPower and Gural will each hold one-half of the 80% interest acquired on confirmation and each will contribute one-half of the funding required. As part of the funding agreement between Mid-State Raceway and Mr. Gural, emergency financing in the amount of $75,000 has been advanced against final lending approval, with an equal advance by a competing lender on the same terms and conditions. The decision of the Bankruptcy Court approval of this lending is expected following the evidentiary hearings scheduled to reconvene on February 2, 2005. TrackPower has already partnered with Mr. Gural in the acquisition of Tioga Downs Racetrack located in Nichols, New York. Renovations of the track and buildings at Tioga Downs are underway and the developers expect to engage in a late season harness racing meet in 2005. Tioga Downs currently has a Track and a Simulcast License application pending before the New York State Racing and Wagering Board. John Simmonds, CEO of TrackPower, and Jeffrey Gural expressed enthusiasm for the concept of operating two tracks in Central New York. The two tracks are approximately 140 miles apart and serve different markets. Yet, these tracks are close enough to share resources of management, horses and horsemen, resulting in significant savings for all parties. It is anticipated that the tracks will develop complimentary schedules, which will allow the horsemen a greater number of racing days without traveling to other parts of the country. As part of the development of these two tracks, Mr. Gural has been leading a coalition of track owners, horseman, and breeders in working with Governor George Pataki and the New York State Legislature to craft legislation to replace the prior New York State VLT legislation which was found unconstitutional last fall. The proposed legislation was introduced on December 7, 2004. The proposed legislation will provide for a greater participation of the Tracks in the takeout share of VLT proceeds and should allow for greater promotional activities, which, in turn, will increase revenue for the State of New York. Mr. Gural, on behalf of virtually all tracks, horsemen's' associations and breeders involved in New York Thoroughbred and Harness Racing submitted the joint request to the Governor and the Legislature requesting consideration of the legislation increasing the tracks' takeout share of VLT proceeds necessary to assure the economic viability of racing in New York. The Governor and the State Legislature are expected to address this problem head on this legislative season to avoid a shut down of one or more operating Racinos in New York. Headquartered in Vernon, New York, Mid-State Raceway, Inc., -- http://www.vernondowns.com/-- operates a racetrack, restaurant and gaming resort. The Company and its debtor-affiliate filed for chapter 11 protection on August 11, 2004 (Bankr. N.D.N.Y. Case No. 04-65746). Lee E. Woodard, Esq., at Harris Beach LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection, they listed estimated debts of $10 million to $50 million but did not disclose its assets. MIRANT CORP: Financial Projections Underpinning Chapter 11 Plan --------------------------------------------------------------- The value of the securities to be issued pursuant to the Debtors' Joint Chapter 11 Plan, and the estimated recoveries by holders of Allowed Claims who receive those securities, depend in part on the Debtors' ability to achieve the financial results projected on the basis of its assumptions," M. Michele Burns, Executive Vice President, Chief Financial Officer and Chief Restructuring Officer of Mirant Corporation, notes. To maximize creditor recoveries, the Debtors must seek to maximize the value of their businesses. Additionally, for the Plan to meet the feasibility test of Section 1129(a)(11) of the Bankruptcy Code, the Bankruptcy Court must conclude that confirmation of the Plan is not reasonably likely to lead to the liquidation or further reorganization of the Debtors. With these considerations in mind, Ms. Burns says, the Debtors formulated their projections and assumptions, which in turn served as the basis for the Plan. The Debtors believe that the assumptions that serve as the basis for the projections are reasonable under the circumstances and that achieving the projections will maximize the value of their businesses. The Debtors have prepared the projected operating and financial results for New Mirant, Mirant Americas Generation LLC, New MAG Holdco, Mirant Americas MidAtlantic Marketing, Inc., and West Georgia Generating Company, LLC, for the period ending December 31, 2011. A full-text copy of the Debtors' Projections is available for free at: http://bankrupt.com/misc/mirantprojections.pdf The Debtors have prepared consolidated pro forma statements of financial position of Mirant, MAG, New MAG Holdco, MIRMA and West Georgia at June 30, 2005. The Pro Forma Statements reflect the Projections with respect to the consolidated financial position of the Reorganized Debtors assuming the effects of certain transactions that will occur in connection with and upon consummation of the Plan. The Pro Forma Statements assume the effectiveness of the Plan and the intercompany transactions will occur on June 30, 2005. The Pro Forma Statements also assume that the Debtors meet the Projections with respect to the balance sheet for the period from June 30, 2004, to the date of consummation of the Plan. For the purposes of the Consolidated Pro Forma Statements of Financial Position, the Consolidated MAG Debtors intend to distribute cash at emergence. The Pro Forma adjustments assume cash at MIRMA will be available for such distributions. To the extent that MIRMA's cash would not be available as a result of a distribution block, MAG would be required to access its exit financing to make those payments. A full-text copy of the Debtors' Pro Forma Statements is available for free at: http://bankrupt.com/misc/mirantproformastatements.pdf 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) MORGAN STANLEY: Moody's Junks Classes G & H Certificates -------------------------------------------------------- Moody's Investors Service downgraded the ratings of two classes of Morgan Stanley Capital I, Inc., Series 1997-XL1 and placed one class on review for possible downgrade: * Class E, $45,271,000 currently rated A2; on review for possible downgrade * Class G, $26,408,000 downgraded to Caa2 from B3 * Class H, $22,638,157 downgraded to C from Caa2 As of the January 5, 2004, distribution date, the transaction's aggregate certificate balance has decreased by approximately 29.3% to $533.8 million from $754.5 million at closing as a result of the payoff of three loans initially in the pool and loan amortization. Three of the nine remaining loans, which comprise 49.0% of the aggregate certificate balance, have been defeased in their entirety - 605 Third Avenue, Edens & Avant, Pool and FGS Pool (Ashford Financial). Moody's downgraded Classes G and H based upon anticipated losses on the two specially serviced loans. Class E has been placed on review for possible downgrade pending the anticipated losses and a full review of the remaining loans in the pool. Currently there are two specially serviced loans representing 10.7% of the pool balance. The Westgate Mall Loan (7.1%) is secured by an enclosed three-anchor mall located in the city of Fairview Park, Ohio, approximately eight miles from downtown Cleveland. This loan was transferred to special servicing in January 2003. A six-month forbearance period began in April 2004 whereby the interest rate on the loan was reduced to 3.5% with an accrual feature as the borrower was attempting to redevelop the mall with several big box users as replacements for Dillard's and a portion of the in-line space. The loan sponsor is Jacobs Group of Cleveland, Ohio. The special servicer has accepted the borrower's discounted payoff offer of $25.5, resulting in a loss of approximately $12.3 million on a current loan balance of $37.8 million. The Westshore Mall Loan represents 3.6% of the pool. The loan is secured by an enclosed four-anchor regional mall located in Holland, Michigan, approximately 35 minutes south of Grand Rapids. The mall is anchored by Younkers, J.C. Penney and Dunham's. Sears vacated in September 2004 and Target, a shadow anchor, has also vacated its space and relocated. The loan sponsors are Wilmorite, Inc., and Ivanhoe (Caisse de Depot et Placement du Quebec). The special servicer is pursuing a deed in lieu of foreclosure. A broker's opinion of value is $15.5 million, resulting in a loss of approximately $3.7 million on a current loan balance of $19.2 million. MORGAN STANLEY: Interest Shortfalls Prompt S&P to Watch Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on seven classes of Morgan Stanley Dean Witter Capital I Trust 2001-PPM's commercial mortgage pass-through certificates on CreditWatch with negative implications due to interest shortfalls on the January 2005 remittance. The aggregate amount of shortfalls for this period was $212,000. As a result, the classes with ratings placed on CreditWatch did not receive their full interest payments. The shortfalls are due to a loan modification on three loans that are cross-collateralized and cross-defaulted and have an aggregate balance of $28.7 million. One of these loans represents the 10th largest exposure in the pool, while another loan represents the 12th largest loan balance. Standard & Poor's will resolve the CreditWatch upon performing a review of the transaction. An analysis of the liquidity impact of the modification upon the trust will be conducted at this time. Ratings Placed on Creditwatch Negative Morgan Stanley Dean Witter Capital I Trust 2001-PPM Commercial Mortgage Pass-Through Certificates Rating Class To From ----- -- ---- G BBB-/Watch Neg BBB- H BB+/Watch Neg BB+ J BB/Watch Neg BB K BB-/Watch Neg BB- L B+/Watch Neg B+ M B/Watch Neg B N B-/Watch Neg B- NATIONAL CENTURY: Trust Files Mega Lawsuit Against 19 Entities -------------------------------------------------------------- The Unencumbered Assets Trust -- successor-in-interest to National Century Financial Enterprises, Inc., and its debtor-affiliates -- and its Trustee, Erwin I. Katz, Ltd., filed a multi-billion dollar lawsuit in the U.S. District Court for the Southern District of Ohio on November 17, 2004, against: * J.P. Morgan Chase Bank, * Bank One, N.A., * Credit Suisse First Boston Corp., * Credit Suisse First Boston (USA), Inc., * Credit Suisse First Boston, LLC, * Deloitte & Touche, LLP, * PricewaterhouseCoopers, LLP, * The Beacon Group III-Focus Value Fund, L.P., * Intercontinental Investment Associates, * Healthcare Capital, L.L.C., * Flohaz Partners, L.L.C., * South Atlantic Investments, L.L.C., * Thor Capital Holdings, L.L.C., * Kachina, Inc., * Lance K. Poulsen, * Barbara I. Poulsen, * Donald H. Ayers, * Rebecca S. Parrett, and * Task Holdings Ltd. A full-text copy of the 362-page, 1,074-paragraph Complaint is available at no charge at: http://bankrupt.com/misc/C2-04-1090.pdf Leon Friedberg, Esq., at Carlile Patchen & Murphy, LLP, in Columbus, Ohio, relates that NPF VI, Inc., and NPF XII, Inc., were formed for the limited purpose of purchasing well-defined, high quality health care accounts receivable and funding those purchases with the proceeds of the issuances of notes to investors. The NPF VI and NPF XII Health Care Securitization Programs were governed by their Master Indentures. JPMorgan acted as the Indenture Trustee for the NPF VI Program, while Bank One served as the Indenture Trustee for the NPF XII Program. National Premier Financial Services was the Servicer for both the NPF VI and NPF XII Programs. NCFE Founders Mr. Poulsen, Mr. Ayers and Ms. Parrett ran the Servicer in their roles as officers and directors. The Founders managed and operated NPF VI and NPF XII, on behalf of the Servicer. The Trust alleged that the Defendants were involved in financial irregularities, fraudulent activities and schemes, which led to the downfall of NPF VI and NPF XII. The Trust asserts Federal RICO Claims, violations of Sections 1962(c) and (d) of the Crimes and Criminal Procedures Code; and claims under the Ohio Corrupt Practices Act (Ohio Revised Code Section 2923) against JPMorgan, Bank One, Mr. and Mrs. Poulsen, Mr. Ayers and Ms. Parrett. The Trust accuses JPMorgan and the Founders of engaging in numerous check kiting and looting schemes and wrongfully transferring tens of millions of dollars from the Securitization facilities. The Trustee has identified thousands of bogus transfers totaling billions of dollars between bank accounts at JPMorgan and Bank One causing "catastrophic financial injury" to creditors. The Trust says that at one point, one particular bank account was supposed to have a $145 million balance; the real balance was $8.6 million. The Trust additionally asserts Breach of Contract, Common Law Conversions, Negligence and Gross Negligence claims against the Banks; Common Law Fraud claims against the Founders and the Banks; and Civil Conspiracy, Concert of Action, Aiding and Abetting, and Breach of Fiduciary Duty claims against the Defendants. The Trustee wants to recover all amounts transferred to the Founders. The Trustee discovered more than $18 million of improper cash transfers. The Trust wants to be compensated for the improper transfer of stock in E-Medsoft.com and Med Diversified valued at around $100 million. Mr. Friedberg asserts that these funds are recoverable under federal and state fraudulent transfer statutes -- Sections 544 and 550 of the Bankruptcy Code and Section 1336 of the Ohio Revised Code. The Trust wants approximately $5 million from Ms. Parrett and Mr. Ayers on account of Promissory Notes they delivered to NCFE and have not paid. The Trust says NCFE paid illegal dividends to the Founders, The Beacon Group, and Task Holdings in violation of Section 1701 of the Ohio Revised Code, and those funds must be returned. The Trustee maintains that the Founders were unjustly enriched in these transactions to the detriment of NPF VI and NPF XII. The Trustee charges that CSFB was NCFE's principal investment banker, knew about the fraud, ignored it, and helped the Debtors raise money from public noteholders "so that the looting . . . could continue and CSFB's role as an investment banker could be further entrenched." The Trustee suggests that CSFB was facing intense competition and this was the investment banker's motivation to bribe Messrs. Ayers and Poulsen "to direct investment banking business to CSFB." The Trustee says that the bribes were paid to buy the Founders' loyalty and keep them from hiring a "real" investment banker that would disclose the fraud. The bribes, the Trustee says, weren't cash. Rather, they were shares of stock issued in dot.com and hot IPOs, parked in accounts established for the Founders for a couple of days and "flipped" out at prices that generated $141,000 of profits for Messrs. Ayers and Poulsen. The Trust asserts additional claims against CSFB for RICO violations, Breach of Agency, Breach of Fiduciary Duty, Fraud, Negligent Misrepresentation, Concert of Action, Civil Conspiracy, Professional Negligence, and Deepening Insolvency. The Trustee says the Auditors knew about the financial irregularities at NCFE, watched the frauds happen and did nothing -- except issue false and misleading financial statements that allowed the fraud to continue. The Trustee charges the Auditors with Deepening Insolvency claims, Common Law Fraud, Aiding and Abetting, Concert of Action, Professional Negligence, Negligent Misrepresentation, and Civil Conspiracy. Headquartered in Dublin, Ohio, National Century Financial Enterprises, Inc. -- http://www.ncfe.com/-- through the CSFB Claims Trust, the Litigation Trust, the VI/XII Collateral Trust, and the Unencumbered Assets Trust, is in the midst of liquidating estate assets. The Company filed for Chapter 11 protection on November 18, 2002 (Bankr. S.D. Ohio Case No. 02-65235). The Court confirmed the Debtors' Fourth Amended Plan of Liquidation on April 16, 2004. Paul E. Harner, Esq., at Jones Day, represents the Debtors. (National Century Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL ENERGY: Asks Court to Approve Plan Voting Procedures ------------------------------------------------------------- NEGT Energy Trading Holdings Corporation and its debtor-affiliates ask Judge Mannes for the United States Bankruptcy Court for the District of Maryland to: -- establish a voting record date and voting procedures; -- approve the proposed solicitation procedures; and -- establish the date and place for the Confirmation Hearing, and deadline for filing objections to confirmation. Voting Record Date The ET Debtors propose that the record date -- for purposes of determining which creditors are entitled to vote on the Plan and for the purpose of determining creditors entitled to receive required notices -- be March 3, 2005. Solicitation Procedures Pursuant to the ET Debtors' Plan of Liquidation, these holders of Claims and Interests are not entitled to vote: (a) holders of Claims in Class 2 (Priority Claims) because they are unimpaired and conclusively presumed to accept the Plan; (b) the holder of Interests in Class 10 (Interests in ET Gas) and Class 11 (Interests in ET Investments) because ET Holdings, a Liquidating Debtor and proponent of the Plan, is the holder of all Interests in ET Gas and ET Investments and, accordingly, is conclusively presumed to accept the Plan; and (c) holders of Claims and Interests in Class 8 (General Unsecured Claims against Quantum), Class 9 (Subordinated Claims) and Class 12 (Other Interests) because they are impaired, not eligible to receive a distribution and are deemed to reject the Plan. Holders of Claims in: -- Class 1 (Secured Claims), -- Class 3 (General Unsecured Claims against ET Gas), -- Class 4 (General Unsecured Claims against ET Investments), -- Class 5 (General Unsecured Claims against ET Holdings), -- Class 6 (General Unsecured Claims against ET Power), and -- Class 7 (General Unsecured Claims against ESV), are entitled to vote because they are impaired and eligible to receive a distribution. Only these holders of Claims in the Voting Classes will be entitled to vote: (a) the holders of filed proofs of claim, as reflected on the official claims register maintained by Bankruptcy Services, LLC, as of the close of business on the Record Date, whose Claims have not been withdrawn, disallowed or expunged; (b) the holders of Disputed Claims, if at all, only to the extent that the Liquidating Debtors' objection to that Claim concedes that a portion of that Claim should be allowed; and (c) the holders of scheduled Claims. The Liquidating Debtors will mail solicitation packages to the Eligible Voters, which will include: a. notice of the Confirmation Hearing, b. a copy of the Court-approved Disclosure Statement; and c. a ballot. The Liquidating Debtors will not send Solicitation Packages to the Unimpaired Class and the Deemed Rejected Classes. Instead, they will a notice, which identifies: (a) the Unimpaired Class or the classes designated as the Deemed Rejected Classes, as applicable; (b) the date and time of the Confirmation Hearing; and (c) the deadline and procedures for filing confirmation objections. Holders of Claims in the Unimpaired Class and the Deemed Rejected Classes may receive a copy of the Plan and Disclosure Statement upon written request to the Balloting Agent. The Liquidating Debtors propose to publish the Confirmation Hearing notice in the national edition of The Wall Street Journal and The Washington Post, at least 20 days prior to the Confirmation Hearing. Voting Procedures The Liquidating Debtors ask the Court to establish April 4, 2005, at 4:00 p.m. (Eastern Daylight Time) as the deadline by which all ballots accepting or rejecting the Plan must be received at the ballot tabulation center. If the Liquidating Debtors file an objection to a Claim at least 20 days before the Voting Deadline, the Liquidating Debtors propose that the Claim be temporarily disallowed for voting purposes only. Any holder of a Claim who seeks to have its Claim allowed for voting purposes in an amount different from what is established, or who seeks to respond to a Voting Objection, must file a motion setting forth the amount that it believes its Claim should be allowed and supporting evidence. The Liquidating Debtors assert that ballots must be properly completed, filed timely, and signed by the claimant. Claimants may not split their votes. Ballots sent by fax, e-mail or other electronic communication will not be counted. Confirmation Hearing and Objection Deadline The Liquidating Debtors ask Judge Mannes to schedule the hearing on confirmation of the plan on April 13, 2005. Confirmation objections must be filed by April 4, 2005, at 4:00 p.m. (Eastern Daylight Time). 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) NEIGHBORCARE INC: Earns $9.7 Million of Net Income in 1st Quarter ----------------------------------------------------------------- NeighborCare, Inc., disclosed its results for the first quarter of fiscal 2005 ended December 31, 2004. Net revenues in the quarter totaled $392.0 million compared with $338.4 million last year. In accordance with generally accepted accounting principles, first quarter of fiscal 2004 revenue numbers exclude inter-segment revenues with Genesis HealthCare Corporation -- GHC -- for the period prior to its spin-off on December 1, 2003. Net revenues, as adjusted for inter-segment transactions with GHC, totaled $351.4 million in the year ago quarter for a year over year increase of 11.6%. For the quarter, income from continuing operations was $9.7 million, or $0.22 per diluted share. In the same quarter of the prior year, loss from continuing operations was ($14.1) million, or ($0.35) per diluted share. Income from continuing operations for the quarter ended December 31, 2004, includes the effect of expenses incurred in connection with our competitor's unsolicited tender offer to purchase all of our outstanding common stock, as well as certain strategic planning, severance and other operating items together aggregating $1.3 million. Income from continuing operations for the quarter ended December 31, 2003, includes certain strategic planning, severance and other operating items aggregating $40.7 million. NeighborCare's income from continuing operations, excluding the effect of expenses incurred in connection with our competitor's unsolicited tender offer to purchase all of our outstanding stock, as well as certain strategic planning, severance and other operating items and including an adjustment to a 40% effective tax rate, was $10.5 million, or $0.24 per diluted share for the current quarter. In the same quarter of the prior year, income from continuing operations adjusted for these charges as well as inter-segment gross profit on sales to GHC was $9.2 million, or $0.21 per diluted share. Adjusted EBITDA for the quarter ended December 31, 2004 was $30.3 million compared with adjusted EBITDA of $25.6 million for the same period last year. Adjusted EBITDA for the first quarter of 2004 may not be considered comparable because it excludes gross profit on intersegment revenues from GHC of $2.7 million. Adjusted EBITDA also excludes the results of discontinued operations. John J. Arlotta, NeighborCare's Chairman, President and CEO, said "I am very pleased with our continued progress executing our business plan this quarter. We remain on track with our growth plans, recording good organic net bed growth for the quarter. In addition, our December acquisition of Belville Pharmacy Services, an institutional pharmacy in San Diego, added approximately 17,000 beds and filled in an important market for us." Mr. Arlotta further noted, "Despite continued Medicaid reimbursement changes and a difficult competitive price environment, we were also able to increase our gross profit margin on a sequential basis for the first time in several quarters. This is a positive sign that our strategy to take cost out of the system is working." At December 31, 2004, NeighborCare served 287,249 beds. Organic net bed growth for the quarter totaled 2,161 beds. Bed counts ending December 31, 2003 and September 30, 2004 were 250,003 and 262,755, respectively. Average revenue per bed per month for the quarter ended December 31, 2004 was $425 compared to $410 for the same quarter of the prior year (adjusted for inter- segment revenue). Quarterly Results Review Net revenues and cost of revenues do not include intersegment revenues and related cost of revenues with GHC for periods prior to the spin-off (October 1, 2003 through December 1, 2003). GAAP requires that intersegment revenues from GHC for periods prior to the spin-off be eliminated in consolidation and that the associated gross profit be included in NeighborCare's discontinued operations. For comparison purposes, the presentation of adjusted net revenues, cost of revenues and gross margin reflects the adjustment to include the intersegment transactions as these transactions with GHC are and will continue to be reflected in continuing operations in all periods subsequent to Dec. 1, 2003. NeighborCare accounts for discontinued operations, including assets distributed, under the provisions of Statement of Financial Accounting Standards, No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". Under SFAS 144, discontinued businesses including assets distributed are removed from the results of continuing operations and presented as a separate line on the statement of operations. Revenues Net revenue growth for the quarter over the year ago period was principally driven by growth in revenue of the Company's institutional pharmacy segment of approximately $56.1 million or 19.9% over the prior year. On an as adjusted basis this growth was $43.1 million, or 14.6% over the same period in the prior year. This growth was driven by an increase in bed census, as well as increased drug trend partially offset by certain state Medicaid reimbursement reductions and competitive price reductions. Cost of Revenues Cost of revenues in the quarter increased by $47.8 million, or 18.2%, to $309.7 million from $262.0 million in the year ago quarter. Cost of revenues in the quarter compared with the as adjusted level last year increased $37.4 million, or 13.7% to $309.7 million from the as adjusted year ago level of $272.3 million. Gross Margin Gross margin in the quarter declined to 21.0% from 22.6% last year. On an as adjusted basis, gross margin declined to 21.0% from 22.5% last year, or 150 basis points. Reduction in the gross margin is primarily attributable to state Medicaid reimbursement reductions and changes in product mix and contract pricing. Selling, General and Administrative SG&A in the current quarter increased $1.1 million to $51.9 million from the year ago level of $50.8 million. As a percentage of net revenues, SG&A declined to 13.3% compared to 15.0% for the same period of the prior year. Liquidity and Capital Resources NeighborCare ended the quarter with $21.1 million of cash and $262.0 million of working capital. Regulatory Update On Friday, January 21, 2005, the Centers for Medicare & Medicaid Services (CMS) published the final rules for the new voluntary prescription drug benefit program that was enacted into law on December 8, 2003 in section 101 of Title I of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). While these final rules layout a framework, there will be additional information provided through sub-regulatory guidance from CMS. Additionally, a study on pharmacy services in nursing homes is expected to be issued mid year 2005 by CMS. Mr. Arlotta commented, "Although we are studying the regulations closely, so far we do not see any major surprises. I have pointed out many times in the past 18 months that we have been planning for a competitive environment in 2006 and we will be well positioned in the marketplace when the Part D program is implemented in January of 2006." About the Company NeighborCare, Inc. (Nasdaq: NCRX) -- http://www.neighborcare.com/ -- is one of the nation's leading institutional pharmacy providers serving long term care and skilled nursing facilities, specialty hospitals, assisted and independent living communities, and other assorted group settings. NeighborCare also provides infusion therapy services, home medical equipment, respiratory therapy services, community-based retail pharmacies and group purchasing. In total, NeighborCare's operations span the nation, providing pharmaceutical services in 32 states and the District of Columbia. * * * Moody's Rating Services and Standard & Poor's assigned their single-B ratings to NeighborCare's 6-7/8% Senior Subordinated Notes last year. NOVA CHEMICALS: Posts $162 Million Net Income for 2004 4th Quarter ------------------------------------------------------------------ NOVA Chemicals Corporation (NYSE:NCX)(TSX:NCX) reported net income to common shareholders of $162 million ($1.78 per share diluted) for the fourth quarter of 2004. This compares to net income to common shareholders of $56 million ($0.60 per share diluted) in the third quarter of 2004. In the fourth quarter of 2003, NOVA Chemicals reported a net loss to common shareholders of $15 million ($0.18 per share loss diluted). For the full year 2004, net income to common shareholders was $252 million ($2.71 per share diluted) compared with a net loss of $1 million ($0.02 per share loss diluted) for 2003. "I am very pleased with our operating results in a quarter that was impacted by a normal seasonal downturn in demand and highly volatile feedstock costs. In addition, our balance sheet strengthened considerably from an asset sale and a tax-related settlement," said Jeff Lipton, NOVA Chemicals' President and Chief Executive Officer. The Olefins/Polyolefins business reported net income of $83 million in the fourth quarter, $5 million higher than the third quarter. Prices increased and contributions from ethylene co- products remained strong. Polyethylene sales volumes were down 2% versus the third quarter but were the second highest in our history. The Styrenics business reported a net loss of $16 million in the fourth quarter, versus a third quarter net loss of $10 million. Overall, polymer prices were able to keep pace with increased feedstock costs. Styrene monomer margins fell as spot prices followed a rapid decline in spot benzene prices. Polymer volumes decreased 12% versus the third quarter on seasonally lower demand. Corporate items increased net income by $97 million in the fourth quarter. These items included a $91 million (after-tax) gain from a tax-related settlement, and a $40 million (after-tax) gain on the sale of our interest in the Alberta Ethane Gathering System. These were offset by $29 million (after-tax) in mark-to-market charges related to our stock-based compensation and profit sharing programs and a $5 million (after-tax) restructuring charge related to the SCLAIR(TM) A-Line closure in the second quarter of 2004. Liquidity and Capital Resources NOVA Chemicals' net debt to total capitalization ratio was 42.9% at Dec. 31, 2004. Cash on hand at the end of the fourth quarter was $245 million, up from $233 million at the end of the third quarter of 2004. During the fourth quarter, $116 million of cash was used to repurchase 2.7 million common shares. NOVA Chemicals' funds from operations were $78 million for the fourth quarter of 2004, down from $129 million in the third quarter of 2004 due to higher operating losses in the Styrenics business, higher current tax expense, as well as higher accruals for corporate expenses and restructuring charges. Operating working capital decreased by $81 million in the fourth quarter of 2004, related primarily to reductions in accounts receivable and increases in payables. Accounts receivable on December 31, 2004, net of the $110 million tax receivable, decreased due to lower sales in December versus September 2004. Receivables were further reduced by the $24 million increase in the usage of our securitization program at the end of Q4 versus the end of Q3. Quarter over quarter inventory increases were more than offset by increases in accounts payable over the same timeframe. NOVA Chemicals assesses its working capital management effectiveness through a Cash Flow Cycle Time -- CFCT -- measure. CFCT measures working capital from operations in terms of the number of days sales (calculated as working capital from operations divided by average daily sales). This metric helps to determine which portion of changes in working capital results from factors other than price movements. CFCT was 35 days as of Dec. 31, 2004, versus our target range of 25 to 30 days, and up from 33 days as of Sept. 30, 2004, due to building of inventories for maintenance turnarounds and a temporary fall off of sales in December. During the fourth quarter, NOVA Chemicals sold its interest in the Alberta Ethane Gathering System (AEGS) for proceeds of $78 million and an after-tax gain of approximately $40 million. Capital expenditures were $94 million (after third-party project advances) in the fourth quarter of 2004, compared to $57 million in the third quarter of 2004 and $49 million in the fourth quarter of 2003. NOVA Chemicals continued its share repurchase program during the fourth quarter. In addition, the Company paid stock option exercise values of $17 million in cash in lieu of issuing stock in the fourth quarter. Selling, general and administrative expenses (SG&A) increased by $2 million from the third quarter of 2004. SG&A was also up $23 million from the fourth quarter of 2003, and $83 million for fiscal 2004 versus fiscal 2003. The increase for the year was primarily due to the $76 million pre-tax impact of NOVA Chemicals' stock appreciation on the mark-to-market liability of our stock-based compensation plans, as well as a $9 million impact from a higher Canadian dollar and a higher euro. A restructuring charge of $8 million ($5 million after-tax) was recorded in the fourth quarter of 2004 due to additional environmental and severance obligations related to the permanent 2004 shutdown of one of our linear low-density polyethylene production lines at our St. Clair River polyethylene plant site. Financing NOVA Chemicals has a $300 million revolving credit facility, expiring April 1, 2007. NOVA Chemicals continues to comply with all financial covenants under the facility. As of Jan. 25, 2005, NOVA Chemicals has utilized $55 million of the revolving credit facility in the form of operating letters of credit. In Sept. 2005, $100 million of debt will mature. As of Dec. 31, 2004, the amount of receivables sold under the accounts receivable securitization program was $250 million, compared to $226 million as of Sept. 30, 2004. Normal Course Issuer Bid On July 21, 2004, NOVA Chemicals announced a share repurchase program for up to approximately 7.5 million common shares. As of Jan. 21, 2005, 5.1 million common shares have been repurchased at an average price of $48.02 Cdn. FIFO Impact NOVA Chemicals uses the first-in, first-out -- FIFO -- method of valuing inventory. Most of NOVA Chemicals' competitors use the last-in, first-out -- LIFO -- method. Because we use FIFO, a portion of the third quarter feedstock purchases flowed through the income statement in the fourth quarter. Fourth quarter average NYMEX natural gas pricing was higher than the third quarter average price by $1.03 per mmBTU and WTI crude was higher by $4.40 per bbl. Benchmark benzene prices fell during the quarter, starting the quarter at $3.95 per gallon and ending the quarter at $3.25 per gallon. We estimate that net income would have been about $14 million higher in the fourth quarter had NOVA Chemicals used the LIFO method of accounting. Feedstock Derivative Positions NOVA Chemicals maintains a derivatives program to manage its feedstock costs. The gain from natural gas and crude oil positions realized in the fourth quarter of 2004 was $6 million after-tax ($5 million gain after-tax for fiscal year 2004). In addition, NOVA Chemicals is required to record on its balance sheet the market value of any outstanding feedstock positions that do not qualify for hedge accounting treatment. The gain or loss resulting from changes in the market value of positions is recorded through earnings each period. NOVA Chemicals has recorded $6 million of after-tax mark-to-market losses on outstanding feedstock derivative positions in the fourth quarter ($5 million gain after-tax for fiscal year 2004.) There was no impact to NOVA Chemicals' income statement as the gain from the derivatives program in the fourth quarter of 2004 was entirely offset by the mark-to-market loss during the same time period. NOVA Chemicals' share price on the New York Stock Exchange increased to U.S. $47.30 at Dec. 31, 2004 from U.S. $38.70 at Sept. 30, 2004. NOVA Chemicals' share value increased 22% for the quarter ending Dec. 31, 2004 on the NYSE and 16% on the Toronto Stock Exchange -- TSX, while peer chemical companies' share values increased 18% on average and the S&P Chemicals Index increased 13%. The S&P/TSX Composite Index was up 7% and the S&P 500 was up 9% in the fourth quarter. As of Jan. 25, 2005, NOVA Chemicals' share price was U.S. $46.90, down 0.8% from Dec. 31, 2004. The S&P Chemicals Index was down 3.8% in the same period. In the fourth quarter, approximately 59% of trading in NOVA Chemicals' shares took place on the TSX and 41% of trading took place in the U.S. For 2004, approximately 65% of trading in NOVA Chemicals' shares took place on the TSX and 35% of trading took place in the U.S. NOVA Chemicals -- http://www.novachemicals.com/-- produces ethylene, polyethylene, styrene monomer and styrenic polymers, which are used in a wide range of consumer and industrial goods. NOVA Chemicals manufactures its products at 18 operating facilities located in the United States, Canada, France, the Netherlands and the United Kingdom. The company also has five technology centers that support research and development initiatives. NOVA Chemicals Corporation shares trade on the Toronto and New York stock exchanges under the trading symbol NCX. As reported in the Troubled Company Reporter on Jan. 27, 2005, 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. As reported in the Troubled Company Reporter on Dec. 23, 2004, Standard & Poor's Ratings Services revised its outlook on petrochemicals producer Nova Chemicals Corp. to stable from negative. At the same time, Standard & Poor's affirmed the 'BB+' long-term corporate credit and senior unsecured debt ratings on Nova. OMNOVA SOLUTIONS: Posts $14.7 Million Net Loss in Fourth Quarter ---------------------------------------------------------------- OMNOVA Solutions Inc. (NYSE: OMN) reported a loss of $14.7 million for the fourth quarter of 2004, compared to a loss of $61.3 million during the fourth quarter of 2003. Included in the fourth quarter of 2004 was a non-cash impairment write-down of $3.9 million for a trademark resulting from the Company's annual evaluation under SFAS 142, "Goodwill and Other Intangible Assets." Excluding this write-down, the Company reported a loss of $0.27 per diluted share for the fourth quarter of 2004. Included in the fourth quarter of 2003 were non-cash charges of $49.6 million related to SFAS 142, "Goodwill and Other Intangible Assets," $5.7 million for the write-off of idle fixed assets, obsolete inventories and intangible assets, and a provision of $1.7 million associated with the restructuring and severance resulting primarily from the Company's exit of its heat transfer product line. Excluding these items, the Company reported a net loss of $4.3 million, or $0.11 per diluted share, for the fourth quarter of 2003. Sales increased 10.4%, or $18.2 million, to $194.0 million for the fourth quarter of 2004 as compared to $175.8 million during the same period a year ago. Contributing to the sales increase were pricing improvements of $18.0 million. Cost of goods sold for the fourth quarter of 2004 increased $22.6 million to $156.1 million versus the same quarter last year, driven primarily by $21.4 million of higher raw material costs. Gross profit declined to $37.9 million in the fourth quarter of 2004 as compared to $42.3 million in 2003 due to higher raw material and warranty costs. Selling, general and administrative costs increased $4.3 million to $37.5 million, or 19.3% of sales, in the fourth quarter of 2004 versus $33.2 million, or 18.9% of sales, in the fourth quarter of 2003 due to higher sales taxes, information technology and Sarbanes-Oxley 404 compliance related spending. Interest expense increased slightly to $5.2 million for the fourth quarter of 2004 as compared to $5.1 million for the same period a year ago, due to higher average borrowing rates. The Company's total debt at the end of the fourth quarter of 2004 was $181.7 million, a decrease of $3.7 million from the third quarter of 2004, and $10.5 million lower than last year. "Additional pricing actions, a strong focus on cash flow, and good top line growth were the highlights of the quarter, but they were not enough to offset record raw material costs," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "Our operating profit was impacted by oil prices at $55 per barrel during the quarter. However, we made significant progress in the fourth quarter in implementing price increases, with more on the way in early 2005. In addition to pricing initiatives, we are taking actions to help offset future raw material risk including leveraging new volume opportunities created by innovative new products and improving markets, restructuring our cost base, and using LEAN SixSigma programs to eliminate waste and improve customer satisfaction. As a result of our strong focus on cash flow actions, average debt declined almost $9 million to $201 million." Performance Chemicals Net sales during the fourth quarter of 2004 increased 20.4% to $100.9 million versus $83.8 million in the fourth quarter of 2003, led by higher average unit selling price. Segment operating profit was $4.0 million in the fourth quarter of 2004 as compared to $2.5 million in the fourth quarter of 2003. Excluding restructuring and severance charges of $0.2 million and a $2.7 million intangible asset write-off, segment operating profit in the fourth quarter of 2003 was $5.4 million. As compared to last year, raw material costs were up $19.7 million during the quarter as a result of higher styrene, butadiene and acrylic costs driven by high oil and natural gas based feedstock costs, especially benzene, ethylene and propylene. Increased pricing to customers totaled $16.9 million versus the same period a year ago. During the Company's first quarter of 2005, raw material prices are expected to escalate in butadiene and acrylic monomers, while styrene is expected to moderate. In response to the continuing raw material inflation, Performance Chemicals achieved price increases totaling almost $30 million in fiscal 2004 and has announced additional price increases across all product lines in early 2005. During the quarter, the Company's RohmNova paper chemicals joint venture captured business with its new High Performance GenCryl(R) Platinum Pt(TM) coating products and continues trialing activity at several potential accounts. The North American coated paper market continues to improve, driven by higher print ad spending and lower imports due to a weaker U.S. currency. The carpet product line is developing new opportunities in carpet latex and expects increased trialing activity in the first quarter of 2005. Sales in nonwovens, tire cord, and adhesive/tape applications generated double digit sales gains for the year. Decorative Products Net sales were $61.1 million during the fourth quarter of 2004, a decrease of $1.9 million, or 3.0%, versus 2003. Last year's sales included $0.3 million related to the heat transfer product line that the Company exited in late 2003, while favorable foreign exchange conversion benefited fourth quarter 2004 sales by $1.1 million. During the fourth quarter of 2004, coated fabrics sales increased versus last year with higher volume due to new product introductions and increased customer penetration in the marine and automotive aftermarket areas. Wallcovering sales declined due to continued weakness in the commercial office market, partially offset by a recovery in the hospitality market. Decorative laminates sales, excluding the exited heat transfer business, declined modestly versus last year. Decorative Products' operating loss totaled $8.9 million for the fourth quarter of 2004, versus a loss of $58.2 million in the same period a year ago. Included in the fourth quarter of 2004 results are non-cash charges totaling $3.9 million for the write-off of a trademark, restructuring and severance provision of $0.1 million, and higher costs related to quality claims and labor contract negotiations, and higher raw material costs of $1.1 million as compared to last year. Included in the fourth quarter of 2003 results were LIFO income of $2.0 million and charges totaling $54.0 million, comprised of a restructuring and severance provision of $1.4 million, a provision of $49.6 million for the write-off of goodwill and trademarks and $3.0 million for the write-off of idle fixed assets, obsolete inventory and intangible assets. For the full year, sales increased modestly after four consecutive years of decline, and revenues for the Company's unconsolidated Asian joint ventures improved 27.8% versus last year as the operations gained market share while serving an increasingly global customer base. In the middle of the first fiscal quarter of 2005, employees represented by United Steelworkers of America Local 22R at OMNOVA's Jeannette, Pennsylvania facility voted to ratify a new contract with the Company. This ended a lockout at the facility that had been in place since December 4, 2004. During the lockout, OMNOVA continued to operate the plant and fully serve customers. Building Products Net sales of the Company's single-ply commercial roofing membrane products were $32.0 million during the fourth quarter of 2004, an increase of 10.3% compared to $29.0 million in the fourth quarter of 2003, led by strong sales of EPDM membrane and accessories. Refurbishment sales continued to be strong as many building owners increased their spending on maintenance requirements and the single-ply roofing market took market share from asphalt-based systems. The segment generated an operating loss of $1.1 million for the fourth quarter of 2004, which was a decrease of $2.6 million versus last year. Higher sales volumes were offset by increased warranty and higher raw material costs. Price increases of approximately 5% were implemented in the single-ply membrane market, effective October 2004, with additional increases announced for January, March and April 2005 to offset the rising costs of raw materials, including EPDM membrane, resins, plasticizer, textile fabrics and steel-based accessories. About the Company OMNOVA Solutions Inc. is a technology-based company with 2004 sales of $746 million and 2,000 employees worldwide. OMNOVA is an innovator of emulsion polymers and specialty chemicals, decorative and functional surfaces, and single-ply roofing systems for a variety of commercial, industrial and residential end uses. * * * As reported in the Troubled Company Reporter on Oct. 20, 2004, Standard & Poor's Ratings Services lowered its ratings on OMNOVA Solutions Inc., including the corporate credit rating to 'B+' from 'BB-'. The downgrade reflects continued weak profitability as a result of elevated raw material costs and the company's subpar financial profile relative to ratings expectations. The outlook is stable. PACIFIC LUMBER: S&P Places Junk Rating on CreditWatch Negative -------------------------------------------------------------- Standard & Poor's Rating Services placed its CCC+ corporate credit rating on Scotia, California-based Pacific Lumber Co. on CreditWatch with negative implications. The company's wholly owned subsidiary and primary log supplier, Scotia Pacific Co. LLC, is having difficulty obtaining approval from the North Coast Regional Water Quality Board to harvest timber on about a dozen tracts of land it owns. This is causing a raw-material shortage at Pacific Lumber, whose production volume, revenues, and cash flow are therefore lower than expected. It is critical that the approvals be received soon because logging is subject to seasonal restrictions later in the year. "If additional approvals are not received by the end of February, it could have serious consequences for Pacific Lumber, including the possibility that it could file for bankruptcy," said Standard & Poor's credit analyst Dominick D'Ascoli. In the interim, reduced log supply will continue to erode an already precarious liquidity position. Current liquidity is below $10 million. In resolving the CreditWatch action, Standard & Poor's will assess the impact on Pacific Lumber's financial profile of the approval, partial approval, or failure to obtain approval of pending logging permits. Standard & Poor's expects to resolve its CreditWatch action by the beginning of March at the latest. PERKINELMER INC: Fourth Qtr. Revenues Up 11% to $478.6 Million -------------------------------------------------------------- PerkinElmer, Inc. (NYSE: PKI), reported GAAP earnings from continuing operations on revenue of $478.6 million for the fourth quarter ended Jan. 2, 2005. The fourth quarter 2004 results include intangibles amortization of $7.2 million, or approximately $.04 per share. The Company reported earnings per share from continuing operations excluding intangibles amortization of $.33, which exceeded the Thomson First Call(TM) consensus earnings per share estimate of $.31 for the fourth quarter of 2004 and also the Company's forecasted range. The Company reported full year 2004 GAAP earnings per share from continuing operations of $.76, an increase of 69% over 2003. Fourth quarter 2004 revenue of $478.6 million increased 11% over the fourth quarter of 2003. Revenue growth excluding the impact of foreign exchange was 8% over the fourth quarter of the prior year. Fourth quarter 2004 revenue in Health Sciences increased 8.5% over the same period of 2003 driven by double digit growth in genetic screening, medical imaging, environmental and service. Industrial Technologies revenue in the fourth quarter of 2004 increased 17.3% over the fourth quarter of 2003 due to strength in nearly all applications, including the Company's aerospace, safety and security, and semiconductor businesses. Full year 2004 revenue of $1.69 billion increased 10% over 2003, with Health Sciences revenue growth of 7.1% and Industrial Technologies revenues up 17.7%. "We delivered a strong quarter to complete an excellent year in 2004, with significant revenue and earnings growth and very good cash flow," said Gregory L. Summe, Chairman and CEO of the Company. "During 2004, a number of businesses achieved double-digit growth, and we enter 2005 with good momentum," added Mr. Summe. The Company generated operating cash flow of $71.0 million in the fourth quarter of 2004 and $200.8 million for the full year of 2004. Free cash flow, defined as operating cash flow of $71.0 million less capital expenditures of $6.4 million, was $64.6 million for the fourth quarter of 2004. Free cash flow for fiscal 2004 was $181.8 million, or approximately $1.40 per share, and was comprised of operating cash flow of $200.8 million less capital expenditures of $19.0 million. During the fourth quarter and full year of 2004, the Company reduced debt by $100 million and $175 million, respectively. Cash and cash equivalents were $197.5 million at the end of the fourth quarter of 2004. Financial Overview by Reporting Segment Life and Analytical Sciences reported revenue of $311.9 million for the fourth quarter of 2004, up 7% from revenue of $290.4 million in the fourth quarter of 2003. The increase in revenue was driven by double digit revenue growth in the Company's genetic screening, service and environmental businesses. The segment's GAAP operating profit for the fourth quarter of 2004 was $46.6 million versus $41.1 million for the same period of 2003. As a percentage of sales, operating profit for the fourth quarters of 2004 and 2003 was 14.9% and 14.2%, respectively. The operating profit for the fourth quarters of 2004 and 2003 included intangibles amortization of $6.6 million. Operating profit excluding intangibles amortization for the fourth quarter of 2004 was $53.2 million, or 17.1% as a percentage of revenue, increasing 70 basis points over the same period of 2003. Optoelectronics reported revenue of $101.5 million for the fourth quarter of 2004, an increase of 12% from revenue of $90.3 million for the fourth quarter of 2003, with the increase in revenue driven by continued strength in the Company's medical imaging and sensors businesses. The segment's GAAP operating profit was $15.6 million for the fourth quarter of 2004, versus $12.9 million for the comparable period of 2003. As a percentage of sales, operating profit for the fourth quarter of 2004 was 15.4%, up 110 basis points over the fourth quarter of 2003. Fluid Sciences reported revenue of $65.2 million for the fourth quarter of 2004, up 27% from revenue of $51.1 million in the fourth quarter of 2003. This increase in revenue was driven by strong growth in the segment's aerospace and semiconductor businesses. The segment's GAAP operating profit for the fourth quarter of 2004 was $10.4 million, versus $6.8 million for the same period last year. As a percentage of sales, operating profit for the fourth quarters of 2004 and 2003 was 15.9% and 13.3%, respectively. "In 2004, we made significant operational improvements and strengthened our organization and market positions," added Mr. Summe. "For 2005, we anticipate significantly higher R&D investments to accelerate innovation. Combined with our significant cash flow, this provides fuel for our growth investments in key health sciences and industrial technology opportunities," continued Mr. Summe. For the first quarter of 2005, the Company projects GAAP earnings per share from continuing operations of between $.13 and $.14. Excluding the impact of intangibles amortization, the Company projects earnings per share from continuing operations of between $.17 and $.18 for the first quarter of 2005. For the full year 2005, the Company reaffirmed its guidance for GAAP earnings per share of between $.90 and $.95, and excluding intangibles amortization, the Company is forecasting a range of $1.05 and $1.10 earnings per share. About the Company PerkinElmer, Inc. -- http://www.perkinelmer.com/-- is a global technology leader focused in the following businesses - Life and Analytical Sciences, Optoelectronics and Fluid Sciences. Combining operational excellence and technology expertise with an intimate understanding of our customers' needs, PerkinElmer provides products and services in health sciences and other advanced technology markets that require innovation, precision and reliability. The Company serves customers in more than 125 countries, and is a component of the S&P 500 Index. * * * As reported in the Troubled Company Reporter on Oct 13, 2004, Moody's Investors Service affirmed PerkinElmer, Inc.'s debt ratings, adjusted the issuer rating to Ba3 from Ba2, and changed the rating outlook to positive from stable. PIPEMASTERS INC: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: Pipemasters, Inc. 3400 Teays Valley Road P.O. Box 1088 Hurricane, West Virginia 25526 Bankruptcy Case No.: 05-20153 Type of Business: The Debtor provides residential and commercial plumbing repair services. Chapter 11 Petition Date: January 25, 2005 Court: Southern District of West Virginia (Charleston) Judge: Ronald G. Pearson Debtor's Counsel: Susan Cannon-Ryan, Esq. P.O. Box 3973 Charleston, WV 25339 Tel: 304-344-8716 Fax: 304-344-1481 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million The Debtor did not file a list of its 20-largest creditors. POGO PRODUCING: S&P Revises Outlook on BB+ Ratings to Stable ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit rating on Pogo Producing Co. At the same time, Standard & Poor's revised its outlook on Pogo to stable from positive, following Pogo's announcement of its 2005 budget plans which will consist of sizable share repurchases, rapid exploration, potential acquisitions, postponed development drilling, and a potential asset sale of its international assets in 2005. Houston, Texas-based Pogo had $755 million of debt as of Dec. 31, 2004. "The revised outlook on Pogo reflects the company's more aggressive financial policies, specifically, its share-repurchase program of between $275 million to $375 million, and an accelerated exploration and seismic expenditures of about $132 million in 2005. Standard & Poor's notes the possibility that Pogo will continue to pursue debt-financed acquisitions and the potential sale of its international assets (which represented about 30% of total production in 2004), comes at a time when Pogo faces increased finding and development costs and declining production," said Standard & Poor's credit analyst Brian Janiak. "Pogo's solid financial measures for the current ratings and expected near-term cash flow generation provide some financial cushion for Pogo to prudently implement its more aggressive initiatives in 2005," added Mr. Janiak. Nevertheless, Standard & Poor's will closely monitor Pogo's more aggressive initiatives in 2005, declining production levels, and increasing costs with the company's ability to maintain appropriate financial metrics and adequate liquidity for the current ratings. The stable outlook on Pogo reflects Standard & Poor's expectations that Pogo will prudently manage its more aggressive financial policies and 2005 budget initiatives, while maintaining its sound financial profile and adequate liquidity for the current ratings. Conversely, significant increases in debt leverage to meet the company's sizable share-repurchase program, exploration expenditures, and failure to reverse its increasing operational costs could lead to an adverse ratings action on the outlook or lower ratings. PQ CORP: Moody's Puts B1 Rating on $410M Sr. Sec. Bank Facility --------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to the $410 million of senior secured credit facilities of PQ Corporation, a Pennsylvania-based corporation. The senior credit facilities consist of a $310 million seven-year secured, term-loan and $100 million six-year, secured revolver. A proposed $300 million eight-year senior subordinated note has been assigned a B3 rating. The credit facilities are guaranteed by PQ Corp.'s parent, Niagara Holdings, Inc. The credit facilities and the notes are guaranteed by all domestic subsidiaries. The senior implied rating of PQ Corp. is B1. The credit facilities, the notes and the equity from JPMorgan Partners and management are being used to fund Holdco's acquisition of PQ Corp. The Company was an unrated private Pennsylvania-based corporation. This is the first time that Moody's has rated the debt of PQ Corp., a leading provider of inorganic specialty chemicals, including sodium silicate and high performance silicate- derivatives, and engineered glass materials. A speculative grade liquidity rating was also assigned at SGL-2. The outlook is stable. The ratings assigned are: * Senior Implied -- B1 * Senior Unsecured Issuer Rating -- B2 * $100 million six-year, guaranteed, secured, revolver -- B1 * $310 million seven-year, guaranteed, secured, term-loan -- B1 * $300 million eight-year, guaranteed, senior subordinated note -- B3 Moody's views PQ Corp.'s strong stable geographically diverse inorganic specialty chemicals and engineered glass materials businesses as its primary credit strength. In addition, the B1 rating recognizes PQ Corp.'s leading market positions and its stable source of revenues and operating cash flow and ability to generate meaningful free cash flow. We believe PQ Corp. operates in a steady field that exhibits constant but modest growth potential. The B1 senior implied rating also reflects the relatively small size of PQ Corp.'s revenue base. Total debt is likely to initially exceed total revenues. The rating also anticipates that PQ may pursue modest bolt-on acquisitions, as it has been a consolidator in its industries. Finally, the rating reflects the risks associated with PQ's debt and equity financed purchase from its former parent and its initially weak credit metrics. Moody's notes that the credit agreement for the credit facility contains many standard covenants. However, the possible level of additional indebtedness and restricted payments allowed under the credit agreement raises concern given PQ Corp.'s already substantial leverage. The credit agreement may allow for substantial additional indebtedness that could further subordinate the notes and a material initial basket for restricted payments and investments that could reduce cash flow available for debt reduction. This concern is somewhat offset by management's credibility and their intent to focus on debt reduction rather than the pursuit of material acquisitions or other transactions. The ratings do anticipate the possibility of a modest level of small bolt-on acquisitions. PQ Corp.'s stable outlook considers the strength of its franchise in terms of its market positions and long-lived customer relationships, offset by the leveraged nature of its balance sheet. More than 85% of sales reflect products in which PQ has a meaningful number one position. If material special dividends to owners occur before substantial debt reduction is achieved, the outlook or rating could turn negative. To the extent that PQ reduces debt faster than expected such that debt/EBITDA metrics improve to 4 times or less on a permanent basis a positive change in outlook or rating could occur. Moody's believes that the purchase price, including debt refinancing and fees of over $770 million represents a multiple of roughly 7 times PQ's normalized EBITDA of $108 million for the twelve months ending September 30, 2004. After the transaction, Moody's estimates projected total debt to EBITDA will slightly exceed 5 times for the year ending December 31, 2005. In addition, interest coverage at PQ is considered modest with Moody's projecting EBITDA covering interest expense in excess of 2.5 times for the year ending December 31, 2005. Moody's expects PQ to generate approximately $630 million in total revenues in 2005. We would expect debt leverage, Total Debt/EBITDA, on a consolidated basis, to drop to about 5 times as of Dec. 31, 2006. Structurally, the B1 assigned to the credit facilities reflects their senior secured position in the capital structure although asset coverage in a distressed scenario does not provide the support necessary to move the B1 rating higher even with its secured position. Moody's views the level of asset coverage in a distressed scenario as marginal. The credit facilities will be secured by perfected first priority pledges of all the equity interests of PQ Corp. and each of the Company's direct and indirect US subsidiaries and 65% of the equity interests of the first tier Foreign Subsidiaries, except Unrestricted Subsidiaries and perfected first priority security interests in and mortgages on all material tangible and intangible assets of PQ Corp. and the guarantors. The credit facilities are fully and unconditionally guaranteed on a joint and several basis by Holdings. The credit facilities and the notes are fully and unconditionally guaranteed on a joint and several basis by all of the existing and future direct and indirect US subsidiaries of PQ Corp. The equity contribution of $164 million will come in the form of cash that will be down-streamed from Holdco. The SGL-2 rating indicates good liquidity. PQ Corp.'s liquidity is supported by its ability to generate positive pro-forma free cash flow, and the anticipated availability under its $100 million committed bank facility, modest near-term debt maturities, and the expectation that it will be well in compliance with its financial covenants with sufficient EBITDA cushion over the next five quarters. Asset sales are not expected to be a significant source of liquidity in the near term. Moody's notes however that a decline in anticipated annual free cash flow to less than $20 million, or a modest reduction in either cash balances or availability on the revolving credit facility could result in a lower liquidity rating. PQ Corporation headquartered in Berwyn, Pennsylvania, is a leading provider of inorganic specialty chemicals, including sodium silicate and high performance silicate-derivatives, and engineered glass materials. Sales for the last twelve months ending September 30, 2004 were $587 million. RELIANCE GROUP: RIC Will Pay $990K to Settle Sandenhill D&O Claims ------------------------------------------------------------------ In 1999, Frank J. Dalicandro commenced a civil action in the United States District Court for the Eastern District of Pennsylvania against Defendants Dennis Costello, Edward Charlton, Lawrence Kwasny and Howard Steinberg. The District Court Action was captioned Dalicandro v. Legalgard, Inc., et al., Civil Action No. 2:99 CV-03778-WY. Mr. Dalicandro alleged violations of Section 10(b) of the Securities and Exchange Act of 1934. Reliance Insurance Company was originally named as a Defendant, but the matter was stayed as to RIC due to the stay provisions of the Liquidation Order issued by the Commonwealth Court of Pennsylvania in 2001. On November 5, 2003, Mr. Dalicandro, on behalf of the Sandenhill Inc. Estate, commenced an adversary proceeding in the Chapter 7 bankruptcy proceedings of Sandenhill, Case No. 02-11232-KJC. The Adversary Action, which was before the United States Bankruptcy Court for the Eastern District of Pennsylvania, was captioned Sandenhill, Inc., v. Reliance Insurance Company, Inc., et al., Adversary No. 03-1162. The Adversary Action was filed against RIC, Albert Benchimol, Dennis O'Leary and Howard Steinberg. The Adversary Action sought the return of $10,900,000 that Sandenhill transferred to RIC as an avoidable transfer, pursuant to Section 548 of the Bankruptcy Code. RIC and the Defendants assert that they are beneficiaries under Insurance Policy Nos. FD9701593, FD9804211, FD9701594, FD9798178 and FD9900896 issued by Underwriters at Lloyd's, London and Companies. The parties dispute whether the Insurance Policies may be used, and to what extent, to satisfy any potential judgment in the District Court Action or the Adversary Action. Proceedings in both Actions have been stayed while Mr. Dalicandro, the Defendants, M. Diane Koken, the Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator of RIC, and the Underwriters conducted settlement discussions. In connection with these negotiations, each party independently assessed the substantial risks and costs of litigation relating to the District Court Action and the Adversary Action. Each party subsequently determined to settle the claims asserted in the District Court Action and the Adversary Action in accordance with the terms of a Final Agreement. The Final Agreement provides that the Underwriters, on behalf of the Defendants, will pay Mr. Dalicandro $990,000 in consideration for the dismissal of the District Court Action and the Adversary Action, with no admission of liability by the Defendants. To effectuate the settlement, the Defendants ask Judge Gonzalez to approve the payment of the Settlement Amount from the proceeds of the Insurance Policies. To the extent the Insurance Policies constitute property of the Debtors' estate, the Defendants ask Judge Gonzalez to lift the automatic stay to allow payment of the Settlement Amount. The Defendants also seek an injunction permanently barring creditors of the Debtors' estate from directly or indirectly taking actions inconsistent with the Final Agreement. The payment of the Settlement Amount is also subject to approval by the Commonwealth Court. Stephen B. Selbst, Esq., at McDermott, Will & Emery, in New York City, tells Judge Gonzalez that the Liquidator is seeking approval of the Agreement from the Commonwealth Court. After the Bankruptcy Court and the Commonwealth Court approves the Agreement, Mr. Dalicandro will move to dismiss the Adversary Action with prejudice. Mr. Selbst contends that the Final Agreement is reasonable in light of the allegations raised in the District Court Action and the Adversary Action, the complexity of the litigation, and the anticipated costs in time and money of prosecuting and defending the litigation. The payment to Mr. Dalicandro will prevent undue erosion of the remaining coverage limits of the Insurance Policies, which are capped at $125,000,000 for the Defendants. 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) RESIDENTIAL ASSET: Moody's Reviewing Ratings & May Downgrade ------------------------------------------------------------ Moody's Investors Service has placed on watch for downgrade five certificates, from Residential Asset Mortgage Products, Inc. Trust asset-backed securitization deals from Series 2002-RS1, Series 2002-RS2 and Series 2002-RS3. The transactions, consists of a fixed rate pool and adjustable rate pool. These pools are made up of mortgages that are not eligible for inclusion in Residential Funding Corporation's (RFC) specific loan program securitization because they do not satisfy the underlying guidelines for those programs. The mortgage loans were originated by a variety of different sellers and serviced by HomeComings Financial Network, Inc., a wholly owned subsidiary of RFC. The most subordinate fixed rate and adjustable rate certificates from the Series 2002-RS1 and 2002-RS2 and the most subordinate adjustable rate certificates from Series 2002-RS3 deal have been placed on watch for downgrade because existing credit enhancement levels may be low given the current projected losses on the underlying pools. The transaction has taken losses and pipeline loss could cause eventual erosion of the over collateralization. The complete rating actions are: -- Issuer: Residential Asset Mortgage Products, Inc. Review for Downgrade: * Series 2002-RS1; Class M-I-3, current rating Baa2, under review for possible downgrade * Series 2002-RS1: Class M-II-3, current rating Baa2, under review for possible downgrade * Series 2002-RS2; Class M-I-3, current rating Ba2, under review for possible downgrade * Series 2002-RS2: Class M-II-3, current rating Ba3, under review for possible downgrade * Series 2002-RS3: Class M-II-3, current rating Baa2, under review for possible downgrade RITE AID: Prices 2.3 Mil. Mandatory Convertible Preferred Shares ---------------------------------------------------------------- Rite Aid Corporation (NYSE, PCX:RAD) has priced its previously announced offering of 2.3 million shares of mandatory convertible preferred stock. The HiMEDS(SM) will be issued pursuant to an effective shelf registration statement previously filed with the Securities and Exchange Commission. In connection with the offering, Rite Aid has granted the underwriters an over-allotment option to purchase up to an additional 200,000 shares of HiMEDS(SM). Shares of HiMEDS(SM) have an annual dividend yield of 7.0% and a threshold appreciation price of $5.36, which is 50% above the closing price of the common stock on January 25, 2005. Each share of HiMEDS(SM) will automatically convert on February 1, 2008, subject to certain adjustments, into no fewer than 9.3371 shares of Rite Aid's common stock, depending on the then-prevailing market price of Rite Aid's common stock. At any time prior to February 1, 2008, the HiMEDS(SM) may be converted at the option of the holders or, under certain circumstances, by Rite Aid. Net proceeds from the offering will total approximately $110.3 million. Rite Aid intends to use the net proceeds from the offering to redeem, at a purchase price of 105% plus any accrued dividends, at least $103 million aggregate liquidation preference (1,030,000 shares) of its Series D Cumulative Convertible Pay-in- Kind Preferred Stock. Any remaining additional net proceeds will be used for working capital and general corporate purposes. The offering is being lead managed by J.P.Morgan and Citigroup will act as a co-manager. Copies of the prospectus and prospectus supplement related to the public offering may be obtained from: J.P. Morgan Securities Inc. Prospectus Department One Chase Manhattan Plaza New York, N.Y. 10081 Telephone Number: 212-552-5164 About the Company Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of $16.6 billion and approximately 3,400 stores in 28 states and the District of Columbia. * * * As reported in the Troubled Company Reporter on Jan 7, 2005 Fitch Ratings assigned a 'B' rating to Rite Aid Corporation's 7.5% $200 million senior secured notes due 2015. The proceeds from the issue will be used to repay the $170.5 million 7.625% senior unsecured notes due April 2005 and the $38.1 million 6% senior notes due December 2005. These notes rank pari passu with the company's outstanding secured notes. Fitch rates Rite Aid: -- $1.7 billion senior unsecured notes 'B-'; -- $800 million senior secured notes 'B'; -- $1.4 billion bank facility 'B+.' The Rating Outlook is Stable. ROGERS & SON CONSTRUCTION: Case Summary & 22 Unsecured Creditors ---------------------------------------------------------------- Debtor: Rogers & Son Construction, Inc. 204 Shady Lane Summerville, South Carolina 29485 Bankruptcy Case No.: 05-00901 Type of Business: The Debtor provides construction services. Chapter 11 Petition Date: January 26, 2005 Court: District of South Carolina (Charleston) Judge: Wm. Thurmond Bishop Debtor's Counsel: Charles S. Bernstein, Esq. Bernstein & Bernstein, P.A. 5418-B Rivers Avenue North Charleston, SC 29406 Tel: 843-529-1111 Fax: 843-529-0035 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 22 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Sanders Bros Const Co. Trade debt $435,492 P.O. Box 60969 North Charleston, SC 29419 Martin Marietta Aggr. Trade debt $422,020 P O Box 75328 Charlotte, NC 28275 Prime Rate Premium Finance Insurance $309,330 P O Box 100507 Florence, SC 29501 National Waterworks Inc. Trade debt $298,934 P O Box 100467 Atlanta, GA 30384 Briggs Equipment- Rental ACC Equipment rental $214,843 Hanson Pipe & Products Inc. Trade debt $197,738 Kuhn Equipment Sales Company Equipment rental $173,233 Hughes Supply Inc. Trade debt $168,150 Blanchard Machinery Co. Equipment rental $159,708 Wando Concrete LLC Trade debt $142,526 C.F.P. Inc. Trade debt $119,440 Thompson Pump Trade debt $115,020 McDirt Trade debt $100,944 W.F. Whitfield Loan $100,000 T&T Contracting and Hauling Trade debt $97,512 W. Frazier Construction Trade debt $94,319 Youmans Gas & Oil Co. Trade debt $66,703 Ferguson Ent. Inc. #23 Trade debt $58,741 L B Smith Inc. Trade debt $50,000 Low Country Concrete & Mat Trade debt $47,085 Internal Revenue Service Taxes Unknown SC Dept. of Revenue Taxes Unknown RSI HOLDINGS: Capital Deficits Trigger Going Concern Doubt ---------------------------------------------------------- RSI Holdings, Inc., during the three months ended Nov. 30, 2004, incurred a loss of $27,401. At November 30, 2004, the Company's liabilities exceeded its assets by $359,080 and it had a working capital deficit of $236,904. These conditions raise substantial doubt about the Company's ability to continue as a going concern. In the Offer to Purchase filed with the SEC by the Mickel siblings -- Buck A. Mickel, President and Chief Executive Officer and a Director of the Company; Charles C. Mickel, Vice President and Director of the Company,; and Minor H. Mickel --. The Mickel siblings indicated that they do not intend to continue to support the Company financially, including advancing any future funds or extending their deferral of interest payments beyond July 2005, unless the Company becomes a private company through a going-private transaction. The Mickel siblings expect the Company to become a private company before July 2005; however, if the Company does not become a private company and the Mickel siblings demand payment of the unpaid accrued interest the Company would in all likelihood not be able to pay the previously deferred interest and be able to continue operations. Management of the Company believes that it is highly likely that the Company will be a private company prior to July 2005 and that the Mickel siblings will not demand payment with respect to the Company notes they hold. There are no assurances that the Company will be a private company prior to July 2005 or that the Mickel siblings will not demand payment with respect to the Company notes they hold. At November 30, 2004, the Company's total liabilities exceeded its assets by $359,080 as compared to $331,679 at August 31, 2004. Buck A. Mickel, Charles C. Mickel and Minor M. Shaw (and, before March 25, 2004, Minor H. Mickel), the creditors of notes payable aggregating $1,200,000, have permitted the deferral of payment of interest since the notes' issuance. Buck A. Mickel is the President and Chief Executive Officer and a Director of the Company. Charles C. Mickel is a Vice President and Director of the Company. Buck A. Mickel, Charles C. Mickel and Minor M. Shaw are siblings. Since November 2003, these creditors also have permitted the deferral of payment of interest under the other notes payable held by them in the aggregate principal amount of $310,000. Subject to the continued deferral of payment of interest on the $1,510,000 in aggregate principal amount of notes payable to the Mickel siblings, the Company expects that its existing cash balances and cash generated by the operations of Employment Solutions will be sufficient to fund its cash requirements during the next twelve months. RSI Holdings Inc., operates through its wholly owned subsidiary, Employment Solutions, and is in the business of locating and providing labor to industrial companies from its facility in Greenwood, South Carolina. The Company makes arrangements with its client companies to provide the client companies with manual labor. The Company's client companies request workers according to their needs and the Company fills the vacancies from a pool of available labor. The client companies pay the Company for the hours worked at a negotiated hourly rate and the Company is responsible for paying the workers for the hours worked plus the related payroll taxes, insurance and other payroll costs. The workers work at the client company's job site under the direction of the client company's personnel. RYERSON TULL: Declares Cash Dividends & Sets Annual Meeting ----------------------------------------------------------- The Board of Directors of Ryerson Tull, Inc., (NYSE: RT) declared cash dividends of 5 cents per share on the company's common stock and 60 cents per share on its Series A $2.40 Cumulative Convertible Preferred Stock. The dividends will be payable May 1, 2005, to stockholders of record at the close of business on April 7, 2005. The Board of Directors of Ryerson Tull, Inc. (NYSE: RT) has set Wednesday, Apr. 20, 2005, as the date for its annual meeting of stockholders. The meeting will be at 9:00 a.m. Central Time, at the Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois. The brief agenda will be limited to review of the proxy voting items. Stockholders of record at the close of business on March 2, 2005, will be entitled to receive notice of, and vote at, the annual meeting of stockholders. About the Company Ryerson Tull, Inc., is North America's leading distributor and processor of metals, with 2003 revenues of $2.1 billion. The company services customers through a network of service centers across the United States and in Canada, Mexico and India. * * * As reported in the Troubled Company Reporter on Dec. 1, 2004, Moody's Investors Service lowered its ratings for Ryerson Tull, Inc. (senior implied to B1) and assigned a B2 rating to the company's proposed $150 million of senior unsecured notes due 2011. The company has a stable rating outlook. This concludes Moody's review of Ryerson, which was placed under review for possible downgrade on November 1, 2004, following the company's announcement of its agreement to acquire Integris Metals, Inc. from Alcoa and BHP Billiton for approximately $660 million. These ratings were lowered: * Senior implied rating, to B1 from Ba3 * Senior unsecured issuer rating, to B2 from B1 * $100 million of 9.125% senior unsecured notes due 2006, to B2 from B1 Also, Moody's assigned a B2 rating to Ryerson's proposed $150 million of senior unsecured notes due 2011. Moody's has not rated Ryerson's 3.5% convertible senior notes due 2024 or its new senior secured revolving credit facility. SECOND CHANCE: BDO Seidman Approved as Financial Consultants ------------------------------------------------------------ The U.S. Bankruptcy Court for the Western District of Michigan gave Second Chance Body Armor, Inc., permission to employ BDO Seidman, LLP as its accountants and business and financial consultants. BDO Seidman will: a. prepare operating and cash flow statements and forecasts, which the Debtor may file in its chapter 11 case and assist the Debtor in the management of its cash receipts and disbursements; b. review and analyze equity interests and claims filed against the Debtor; c. assist the Debtor in various operational improvement initiatives and in preparing and negotiating a plan of reorganization with a likelihood of confirmation; d. attend meetings and conferences with the Debtor, the Creditors' Committee, other creditors, equity interest holders, the U.S. Trustee and their respective counsels; e. provide testimony for the Debtor in its chapter 11 case and in related proceedings; and f. assist the Debtor in any other matters as may be appropriate and necessary in its chapter 11 case. William K. Lenhart, a Partner at BDO Seidman, discloses that the Firm received a $220,000 retainer. Mr. Lenhart reports BDO Seidman's professionals bill: Designation Hourly Rate ----------- ----------- Partners $355 - $700 Senior Managers $230 - $510 Managers $210 - $345 Senior Staff $150 - $255 Staff $95 - $195 BDO Seidman assures the Court that it does not represent any interest adverse to the Debtor or its estate. Based in Central Lake, Michigan, Second Chance Body Armor, Inc. -- http://www.secondchance.com/-- manufactures wearable and soft concealable body armor. The Company filed for chapter 11 protection on Oct. 17, 2004 (Bankr. W.D. Mich. Case No. 04-12515). Stephen B. Grow, Esq., at Warner Norcross & Judd, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets and liabilities of $10 million to $50 million. SEMCO ENERGY: Moody's Revises Outlook on Low-B Ratings to Stable ---------------------------------------------------------------- Moody's Investors Service changed the rating outlooks on SEMCO Energy, Inc.'s and its supported debt (Ba2 senior unsecured) from negative to stable. The change follows SEMCO's announcement that it had settled a dispute with Atlas Pipeline Partners, L.P. for a cash payment of $5.5 million, a much smaller amount than the $94 million in damages Atlas had sought. The stabilization of SEMCO's rating outlook reflects the elimination of this large contingent liability with no material impact to its credit profile or liquidity. The stable outlook also acknowledges SEMCO's efforts to improve its credit quality by reducing debt (6% reduction in long-term debt during 2004) and suspending its common dividend. The company has reduced its business risk by eliminating its unprofitable construction business and narrowing its strategic focus to its stable regulated gas distribution business. The conclusion of its two-year divestiture program should also help to make its financial performance more predictable going forward. Moody's incorporates in the stable outlook benign outcomes in its pending Michigan and Battle Creek rate filings, the chief event risks on the horizon. The stable outlook also is based on the expectation that SEMCO will maintain adequate liquidity, including continued compliance with its bank covenants (in particular, with the minimum interest coverage test which has the least cushion), renewing its $114 million of credit facilities that terminate in June 2005. Nevertheless, with its senior unsecured debt rated Ba2, SEMCO is the lowest rated local gas distribution company within Moody's peer group, reflecting its very high leverage (as of Sept. 30, 2004), 75% adjusted to include leases and convertible preference stock as debt), poor profitability, a string of losses, and weak coverages (as of 9/04, FFO/fixed charges of under 2x, retained cash flow/debt including the convertible preference stock as debt of 7%). SEMCO did demonstrate a capacity to generate positive post-capex free cash flow in 2004 (roughly $20 million, excluding asset sale proceeds). However, an upgrade is unlikely in the foreseeable future. Given SEMCO's substantial debt load, it will take some years of debt reduction before the company achieves meaningful credit accretion from purely organic means. Credit metrics that would cause us to consider an upgrade include: a sustained return to profitability and more substantial earnings, retained cash flow/debt exceeding 10%, FFO/fixed charges of about 3x, and adjusted leverage in the 60% range. The stabilizing factors for SEMCO's credit make a rating downgrade unlikely in the foreseeable near future. However, a downgrade is possible if the mentioned expectations underlying our stable outlook do not hold, or if SEMCO becomes more aggressively capitalized as a result of, among other factors, M&A activity or a change in ownership (an affiliate of K-1 Ventures Limited, a private equity firm, currently owns preference stock that is convertible to common stocks equal to about a fifth of SEMCO's outstanding common stock after giving effect to the conversion). SEMCO Energy, Inc., is a natural gas distribution company, headquartered in Port Huron, Michigan. SOLUTIA INC: Wants to Assume Huntsman Agreements ------------------------------------------------ Solutia, Inc., and debtor-affiliates seek the authority of the U.S. Bankruptcy Court for the Southern District of New York to assume certain Propylene and Cyclohexane Supply Agreements, as amended, with Huntsman Petrochemical Corporation. The agreements will provide for a continuing supply of raw materials at certain of the Debtors' facilities in Texas and Florida related to its nylon business. Solutia, Inc., utilizes a variety of raw components in its nylon manufacturing business including propylene and cyclohexane. With respect to its nylon manufacturing operations in Texas, Solutia and its predecessor-in-interest, Monsanto Company, entered into agreements with Huntsman to provide it with propylene and cyclohexane delivered to specified locations in Texas and Florida. Huntsman is a large chemical supplier that produces, among other things, over 2 billion pounds of propylene and maintains the capacity to produce 90 million gallons of cyclohexane annually. Solutia also has other contractual relationships with Huntsman including other supply agreements and operating agreements pursuant to which Huntsman is a guest operator at certain of Solutia's manufacturing sites. Propylene Agreement Pursuant to the Chemical Grade Propylene Sales and Purchase Agreement dated July 1, 1994, as amended on October 8, 1999, Huntsman will deliver 260 to 300 million pounds of propylene annually to Solutia. The Propylene Agreement had an initial term of three and one-half years and renewed automatically thereafter unless either party gave 24 months' written notice of termination. The Propylene Agreement also provided that Huntsman was to forward its invoice at the end of each calendar month for all propylene delivered during that month and then for credit terms of net 30 days from the date of invoice. M. Natasha Labovitz, Esq., at Gibson, Dunn & Crutcher LLP, in New York, relates that the parties operated under the Propylene Agreement without incident until 2003. Beginning in June 2003, Huntsman was insecure of Solutia's declining financial condition. Huntsman made demands for "adequate assurances" of economic performance from Solutia with respect to both the Propylene Agreement and Cyclohexane Supply Agreement. Solutia disputed Huntsman's claims or that Huntsman was entitled to adequate assurance. However, to ensure uninterrupted supply of these critical raw materials and to avoid business disruption, Solutia had no alternative but to agree with Huntsman that it would, as a temporary and voluntary allowance, limit its purchases of propylene on credit to $1.5 million, with orders in excess of that voluntary credit limit to be paid "cash in advance." This voluntary limit on credit purchases maintained propylene supply, but nevertheless impeded Solutia's cash flow and strained its nylon business operations. As of the bankruptcy petition date, Solutia owed Huntsman $1,098,403 for delivered propylene. Since then, Huntsman has continued to sell, and Solutia has continued to purchase, propylene under the Propylene Agreement and the voluntary credit limit. In February 2004, Solutia reduced its need for propylene due to changing market conditions and its termination of a purchase and sale agreement with DuPont, under which Solutia previously supplied to DuPont much of the propylene purchased from Huntsman. Despite the reduced need, at then current market conditions, Solutia believed it could still sell any excess propylene delivered by Huntsman at a small profit. However, a return to normal credit arrangements was more valuable to Solutia than the resale of excess propylene. For this and other reasons, Solutia and Huntsman entered into negotiations to amend the Propylene Agreement that would reduce the maximum and minimum quantities of propylene to be delivered by Huntsman and revise the credit terms for propylene sales to be more favorable to Solutia. These negotiations were tied to negotiations regarding similar issues with respect to the Cyclohexane Agreement. Ms. Labovitz relates that during the course of the negotiations, a dispute arose among the parties regarding Huntsman's asserted right to reduce the quantity of propylene delivered even in the absence of a signed amendment. For a time, negotiations regarding that dispute reached an impasse and the parties anticipated potential litigation, as well as an interruption in supply of the full volume of propylene nominated by Solutia. However, the parties have now reached an agreement to modify and assume the Propylene Agreement under Section 365 of the Bankruptcy Code, thereby achieving many of Solutia's business objectives while avoiding costly litigation and business disruption. Propylene Amendment The essential terms of the proposed amendment to the Propylene Agreement are: a. The term will be extended from July 1, 1994, to December 31, 2007; b. The amount of propylene to be delivered under the contract will be decreased from between 260 to 300 million pounds annually to between 50 and 60 million pounds annually, effective as of April 1, 2004; c. Huntsman will not be obligated to deliver to Solutia during any calendar month a quantity of propylene in excess of 1/11 of the annual maximum quantity of the agreement; d. The parties will waive all prepetition claims under the Propylene Agreement against the other, except for amounts that Solutia owes Huntsman for propylene invoices totaling $1,098,403 delivered to Solutia prior to December 17, 2003; e. Huntsman will remove the credit limit cap on propylene deliveries and return to payment terms of "net 30 days" from the date of Huntsman's invoice; f. The governing law for the Propylene Agreement will be changed from New York to Delaware; and g. Solutia will move to assume the Propylene Agreement as modified, with the Propylene Cure Amount due to be "paid" by effectuating an offset of mutual prepetition obligations. Cyclohexane Agreement Solutia and Huntsman are also parties to a Cyclohexane Supply Agreement, dated November 27, 2000, and amended on June 17, 2002, pursuant to which Huntsman agreed to sell to Solutia up to a maximum of 42,000,000 gallons of cyclohexane annually, through an initial term of December 31, 2004. The Cyclohexane Agreement contains an "evergreen clause," whereby the Agreement automatically renews on a calendar year basis unless one party delivers written notice of termination to the other party at least one year in advance of the contemplated termination date. As with the Propylene Agreement, beginning in June 2003, Huntsman demanded adequate assurances of performance as to the Cyclohexane Agreement. As it did with respect to propylene, to avoid business disruption, Solutia agreed to a series of prepetition voluntary credit limits with Huntsman during this period. Ultimately, Solutia agreed to a $1.5 million maximum line of credit toward its cyclohexane purchases from Huntsman, with "net 30-day" payment terms for these purchases. As of the Petition Date, Solutia owed Huntsman $1,700,810 for cyclohexane delivered and invoiced. Since the Petition Date, Huntsman has continued to sell, and Solutia has continued to purchase, cyclohexane under the Cyclohexane Agreement. In connection with negotiations regarding the Propylene Agreement, Solutia and Huntsman have been actively negotiating an amendment to the Cyclohexane Agreement for many months. Among other things, Solutia's willingness to reduce its contractual right to propylene supply was contingent on a return to more favorable credit terms on cyclohexane purchases and an extension of the termination date of the Cyclohexane Agreement. On November 23, 2004, Huntsman filed a motion to terminate the Cyclohexane Agreement. Solutia did not oppose that motion, as it essentially preserved Huntsman's right to terminate the Cyclohexane Agreement on December 31, 2005, pursuant to the "evergreen clause." The Court granted Huntsman's request on December 7, 2004. According to Ms. Labovitz, Solutia and Huntsman have now resolved their differences and reached agreement as to a proposed second amendment to the Cyclohexane Agreement, which provides for the modification and assumption of the Cyclohexane Agreement under Section 365. The termination date of December 31, 2005, remains and the parties still intend to negotiate a new contract beyond that period based on different terms and conditions. However, for the remainder of the term of the existing Cyclohexane Agreement, and pending these negotiations, the parties have reached important agreements as to credit and other terms. Cyclohexane Amendment The essential terms of the proposed amendment to the Cyclohexane Agreement are: a. Huntsman will extend Solutia's credit limit to $9 million on cyclohexane purchases; b. Payment terms will effectively be "net 30 days" from the date of shipment; c. Both Huntsman and Solutia will waive all claims under the Cyclohexane Agreement arising before December 17, 2003, except for amounts owed Huntsman by Solutia for cyclohexane invoices totaling $1,700,810 delivered to Solutia prior to that date; d. The credit language in the Cyclohexane Agreement, which previously gave Huntsman the right to require cash payment or satisfactory security if in its judgment Solutia's financial condition became "less than creditworthy," will be deleted; e. Solutia will move to assume the Cyclohexane Agreement as modified, with the Cyclohexane Cure Amount due to be "paid" by effectuating an offset of mutual prepetition obligations; and f. Although the current notice of termination of the Cyclohexane Agreement remains in effect, the parties are continuing to negotiate an extension of the Cyclohexane Agreement beyond December 31, 2005, when it is set to expire. Ms. Labovitz points out that Solutia and Huntsman have reaffirmed their solid working relationship and Solutia is assured of continuity in two of its most important chemical supply contracts, with the Propylene Agreement effective through 2007 and the Cyclohexane Agreement in place currently through 2005. With the modified agreements in place and with the parties on good terms, Solutia can focus on negotiating an extension to the Cyclohexane Agreement with Huntsman without fear that its supply of propylene and cyclohexane will be disrupted in the meantime, with favorable credit terms in place and without the hindrances associated with simultaneous negotiations of multiple agreements. Solutia's liquidity also improves dramatically with the modified agreements, Ms. Labovitz says. Previously, tight credit limits of $1.5 million each for propylene and cyclohexane purchases were imposed on Solutia. These limitations negatively impacted Solutia's nylon business operations and limited Solutia's available cash on hand. With the previous credit limitations eliminated, Solutia now has "net 30 day" terms on propylene and an increase in its credit limit for cyclohexane purchases to $9 million with effectively net 30-day terms. As a result, Solutia has been infused with a $10 million increase in liquidity because of the modified agreements -- liquidity that Solutia previously did not have because it was reserved for propylene and cyclohexane purchases under the previous reduced credit limits. Set-off As of the Petition Date, among their many contractual relationships, Solutia and Huntsman were parties to three guest Operating Agreements concerning Huntsman's operations at Solutia's John F. Queeny, Chocolate Bayou, and Pensacola facilities. Pursuant to the Operating Agreements, Solutia provides among other things services and utilities to Huntsman in connection with Huntsman's operations at those facilities in exchange for a fee payable by Huntsman to Solutia. The parties dispute certain invoices issued under the Operating Agreements, and certain issues and disputes remain to be resolved as to those invoices. However, the parties have agreed that prepetition invoices from Solutia to Huntsman totaling at least $4,223,940 are undisputed. As a result of prepetition amounts owed to Huntsman by Solutia under the Propylene, Cyclohexane and other existing contracts, Huntsman has reserved the right to assert a set-off against the Undisputed Operating Agreement Funds. Solutia now seeks to use the Undisputed Operating Agreement Funds as a non-cash source of payment of the Propylene Cure Amount and the Cyclohexane Cure Amount, by effectuating a set-off of the parties' mutual prepetition obligations. The cure payments will be accomplished through offset: Amounts Solutia owes Huntsman for prepetition deliveries Propylene Cure Amount $1,098,403 Cyclohexane Cure Amount 1,700,810 ---------- Total $2,799,213 This amount will be applied against the invoices relating to services provided by Solutia to Huntsman in connection with the Operating Agreements: Amounts Huntsman owes Solutia under the Operating Agreements Nov. 2003 JFQ Operating Agreement Invoice: $237,037 Nov. 2003 Bayou Operating Agreement Invoice: 1,745,242 Nov. 2003 Pensacola Operating Agreement Invoice: 561,661 Dec. 2003 Partial Pre-Filing Amount Pensacola: 255,273 ---------- Total $2,799,213 Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000) STELCO INC: Steelworkers Director Wants Members' Pensions Secured ----------------------------------------------------------------- As reported in the Troubled Company Reporter on Jan. 17, 2005, United Steelworkers National Director Ken Neumann has challenged Stelco CEO Courtney Pratt to either admit that filing for bankruptcy protection was a sham or else disassociate the company from the Deutsche Bank Proposal, which does not address pension plan deficiencies. The challenge comes in response to statements made by Mr. Pratt in December that pension plan deficiencies are not part of the restructuring under the Companies Creditors Arrangement Act -- CCAA. Mr. Neumann said that inaccuracies in a letter from Stelco CEO Courtney Pratt "would best be described as farcical if they did not involve an issue of such extraordinary importance to the lives of thousands of Canadians." In a follow-up letter to Mr. Pratt, Mr. Neumann challenged the Stelco boss's memory after reading his assertion that the company's sole concern in the area of pensions was the going- concern pension costs. "Do you deny that Hap Stephen and William Vaughn identified the wind-up deficiency as liabilities, which rendered Stelco insolvent?" Mr. Neumann asked, pointing out specifics of a Jan. 29, 2003, affidavit of Mr. Vaughn filed in support of Stelco's request for the initial court order. In it, Mr. Vaughn said he expected that the Stelco restructuring would include "the restructuring of the pension plans and post-employment and other benefit obligations. . . ." Mr. Neumann repeated the question he asked in the first letter to Mr. Pratt, whether given his statement that the restructuring process will not address the pension deficiency, he also takes the position that Stelco will remain insolvent upon its exit from protection under the Companies Creditors Arrangement Act. He challenged Mr. Pratt's earlier statement that "the company has acknowledged throughout this process that the solvency deficiency is a significant concern to be addressed over time. . . ." "As I previously stated, the Deutsche Bank deal which you and the rest of Stelco's entrenched management support, does absolutely nothing to address the wind-up deficiency of the pension, said Mr. Neumann. "Perhaps you could point out how that deal addresses the solvency deficiency "over time". "Is it through highly leveraging the Company, rendering it hostage to lenders with no concern for its future? Perhaps it is by selling off profitable subsidiaries at fire-sale prices? Or, is it through seeking concessions at those subsidiaries and claiming otherwise? Or, maybe it is by leaving in place the entrenched management team that put the company into the trouble it is in?" Mr. Neumann reminded Mr. Pratt that Stelco's pensioners have been forced, against their will, to lend the company hundreds of millions of dollars. "Let me assure you that the United Steelworkers will never rest until those pensions are secure. After a lifetime of difficult and dangerous service, Stelco's pensioners certainly deserve no less." About Stelco Stelco, Inc. -- http://www.stelco.ca/-- which is currently undergoing CCAA restructuring proceedings, is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Consolidated net sales in 2003 were $2.7 billion. STEVENOT WINERY: Wants to Hire Wilke Fleury as Bankruptcy Counsel ----------------------------------------------------------------- Stevenot Winery and Imports, Inc., asks the U.S. Bankruptcy Court for the Eastern District of California for permission to employ Wilke, Fleury, Hoffelt, Gould & Birney, LLP, as its counsel in this bankruptcy proceeding. Wilke Fleury is expected to: a) provide legal advice with respect to the Debtor's powers and duties as a debtor-in-possession in the continued operation of its business and management of its property; b) prepare all necessary applications, answers, orders, reports and other legal papers, including the plan of reorganization and disclosure statement; c) represent the Debtor in all necessary litigation, including, but not limited to, collection of accounts receivable and preferential transfers; and d) perform all other legal services for the Debtor. The Firm will bill the Debtor based on its professionals' current hourly rates: Professional Rate ------------ ---- Alan G. Perkins $285 Daniel L. Egan $280 Megan A. Lewis $160 Erin Weber $160 Megan A. Lewis, Esq., a member at Wilke Fleury, discloses that her Firm received a $49,990 retainer from the Debtor. To the best of the Debtor's knowledge, Wilke Fleury is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Murphys, California, Stevenot Winery and Imports, Inc. -- http://www.stevenotwinery.com/-- operates a winery. The Company filed for chapter 11 protection on Jan. 24, 2005 (Bankr. E.D. Calif. Case No. 05-90138). Daniel L. Egan, Esq., at Wilke, Fleury, Hoffelt, Gould & Birney, LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $7,663,000 and debts of $6,425,281. TATER TIME: Taps Southwell & O'Rourke as Bankruptcy Counsel ----------------------------------------------------------- Tater Time Potato Company, LLC, and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Washington for permission to employ Southwell & O'Rourke, P.S., as its general bankruptcy counsel. Southwell & O'Rourke is expected to: a) advise the Debtors with regards to their powers and duties as debtors-in-possession in the continued operation of their businesses; b) assist the Debtors in formulating a proposed disclosure statement and plan of reorganization and represent the Debtors in obtaining approval of the disclosure statement and confirmation of the plan; and c) provide all other legal services to the Debtors that are necessary and appropriate in their chapter 11 cases. Dan O'Rourke, Esq., and Kevin O'Rourke, Esq., are the lead attorneys for the Debtors. Mr. Dan O'Rourke discloses that Southwell & O'Rourke received a $7,500 retainer. For their professional services, Mr. Dan O'Rourke will bill the Debtors $275 per hour, while Mr. Kevin O'Rourke will charge at $185 per hour. Southwell & O'Rourke assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Warden, Washington, Tater Time Potato Company, LLC, packs and ships potatoes. The Company and its debtor- affiliates filed for chapter 11 protection on January 24, 2005 (Bankr. E.D. Wash. Case No. 05-00509). When the Debtor filed for protection from its creditors, it reported total assets of $11,312,000 and total debts of $7,639,184. TATER TIME: Section 341(a) Meeting Slated for March 22 ------------------------------------------------------ The U.S. Trustee for Region 18 will convene a meeting of Tater Time Potato Company, LLC and its debtor-affiliate's creditors at 10:30 a.m., on March 22, 2005, at 1475 Nelson Road NE, Bldg. B Room 4, Moses Lake, Washington. This is the first meeting of creditors required under 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 Warden, Washington, Tater Time Potato Company, LLC, packs and ships potatoes. The Company and its debtor-affiliates filed for chapter 11 protection on January 24, 2005 (Bankr. E.D. Wash. Case No. 05-00509). Dan O'Rourke, Esq., at Southwell & O'Rourke, P.S., represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it reported total assets of $11,312,000 and total debts of $7,639,184. TECO AFFILIATES: File Chapter 11 Petitions in D. Arizona -------------------------------------------------------- Teco Energy, Inc.'s indirect subsidiaries -- Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co., LLC -- filed voluntary chapter 11 petitions with the United States Bankruptcy Court for the District of Arizona, Phoenix Division, on Jan. 26, 2005, due to their inability to pay existing debts. The Debtors are currently in negotiations with Citibank, N.A., and certain other bank lenders for a $200 million debtor-in-possession credit facility. The Debtors believe that the DIP financing will permit them to maintain stability in its ordinary course of business throughout the bankruptcy process and to engage in meaningful hedging activities. Along with its first day motions, the Debtors also filed their prepackaged Joint Plan of Reorganization and the disclosure statement explaining the Plan. Under the Master Settlement Agreement contained in the Plan, the bank lenders and Teco agree, subject to bankruptcy court approval of the Disclosure Statement, to vote their respective claims in favor of the Plan. On Jan. 24, 2005, the bank lenders holding: (i) 90% in number of the obligations under the credit agreements; and (ii) 90% of the aggregate principal amount of such obligations, executed and delivered the Master Settlement Agreement. Accordingly, the Debtors believe that confirmation of the Plan has substantial support from an overwhelming majority of their creditors. The Debtors said they need to emerge from bankruptcy well before the significant increase in demand for power in the summer months, in order to maximize more revenues. Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co., LLC -- http://www.tecoenergy.com/-- own and operate the two largest combined-cycle natural gas generation facilities in the United States. The Debtors filed for bankruptcy protection on Jan. 26, 2005 (Bank. D. Ariz. Case No. 05-01143, and 05-01149 through 05-01151). Craig D. Hansen, Esq., Thomas J. Salerno, Esq., and Sean T. Cork, Esq., at Squire, Sanders & Dempsey L.L.P., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,196,000,000 in total assets and $2,268,800,000 in total debts. TECO AFFILIATES: Case Summary & 36 Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: Panda Gila River, L.P. 702 North Franklin Street Tampa, Florida 33602 Bankruptcy Case No.: 05-01143 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Union Power Partners, L.P. 05-01149 Trans-Union Interstate Pipeline, L.P. 05-01150 UPP Finance Company, LLC 05-01151 Type of Business: The Debtors are indirect subsidiaries of TECO Energy, Inc. The Debtors own and operate the two largest combined-cycle natural gas generation facilities in the United States. Panda Gila River, L.P., owns and operates a facility located in Gila Bend, Arizona, which has 2,146 megawatts of generating capacity. Union Power Partners, L.P., owns and operates a facility located in El Dorado, Arkansas, which has 2,152 megawatts of generating capacity. See http://www.tecoenergy.com/ Chapter 11 Petition Date: January 26, 2005 Court: District of Arizona (Phoenix) Judge: Charles G. Case II Debtors' Counsel: Craig D. Hansen, Esq. Thomas J. Salerno, Esq. Sean T. Cork, Esq. Squire, Sanders & Dempsey L.L.P. 40 North Central, Suite 2700 Phoenix, Arizona 85004 Tel: (602) 528-4085 Fax: (602) 253-8129 Special Corporate Counsel: Dewey Ballantine LLP Claims, Noticing and Solicitation Agent: Kurtzman Carson Consultants LLC Financial Advisor: Houlihan Lokey Howard & Zukin Financial Advisors, Inc. Financial Condition as of September 30, 2004: Total Assets: $2,196,000,000 Total Debts: $2,268,800,000 Consolidated List of the Debtors' 36 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ TECO Energy, Inc. Bank Loan $190,000,000 702 North Franklin Street Tampa, Florida 33602 General Electric Potential $48,000,000 International, Inc. Rejection Claim Attn: Mike Kalmes Atlanta, Georgia 30339 Franklin Mutual Series Bank Loan $24,673,621 51 JFK Parkway Short Hills, New Jersey 07078 Quadrangle Master Funding Ltd. Bank Loan $21,544,250 375 Park Avenue, 14th Floor New York, New York 10152 Citibank GRB Bank Loan $19,971,476 Citigroup 388 Greenwich Street New York, New York 10013 Societe Generale Bank Loan $19,830,675 1221 Avenue of the Americas New York, New York 10020 Aretex/Ichan Associates Bank Loan $18,9029,331 Corporation [sic] 767 Fifth Avenue, 47th Floor New York, New York 10153 Cargill, Incorporated Bank Loan $17,584,205 Cargill Financial Services International 12700 Whitewater Drive Minnetonka, Minnesota 55343 Norddeutsche Landedbank Bank Loan $16,268,196 Girozentrale 1114 Avenue of the Americas 37th Floor New York, New York 10036 Royal Bank of Canada Bank Loan $16,186,088 1 Liberty Plaza 165 Broadway, 5th Floor New York, New York 10178 Royal Bank of Scotland Bank Loan $15,496,522 101 Park Avenue New York, New York 10178 Barclays Bank PLC Bank Loan $14,526,273 200 Park Avenue New York, New York 10166 Bayerische Hypo-Und Bank Loan $14,526,273 Vereinsbank AG Hypovereinsbank 150 East 42nd Street New York, New York 10017 BNP Paribas Bank Loan $14,526,273 787 Seventh Avenue New York, New York 10019 Dexia Bank Bank Loan $14,526,273 445 Park Avenue New York, New York 10022 ScotiaBanc Inc. Bank Loan $14,526,273 One Liberty Plaza New York, New York 10020 Toronto Dominion (Texas) Inc. Bank Loan $14,526,273 31 West 52nd Street New York, New York 10019 CoBank, ACB Bank Loan $13,834,546 5500 South Quebec Street Greenwood Village, Colorado 80111 Merrill Lynch, Pierce Bank Loan $13,657,211 Fenner & Smith Inc. 4 World Financial Center New York, New York 10080 Stonehill Capital Bank Loan $13,018,527 Management LLC 885 Third Avenue, 30th Floor New York, New York 10022 Satellite Senior Income Bank Loan $11,893,867 Fund, LLC 623 Fifth Avenue, 20th Floor New York, New York 10022 Bank of Montreal Bank Loan $9,799,470 700 Louisiana Street Houston, Texas 77002 CDC Finance - DCD IXIS Bank Loan $9,799,470 254 Boulevard Saint Germain Paris, France 75007-0000 DZ Bank Deutsche Bank Loan $9,799,470 Genossenschaftsbank AG 609 Fifth Avenue New York, New York 10017 KBC Bank N.V. Bank Loan $9,799,470 125 West 55th Street New York, New York 10019 Credit Suisse First Boston Bank Loan $8,314,757 11 Madison Avenue New York, New York 10010 Credit Lyonnais (Calyon) Bank Loan $8,070,152 1301 Avenue of the Americas New York, New York 10019 HSH Nordbank AG Bank Loan $8,070,152 Martensdamm 6 Kiel, Germany 24103-0000 Natexis Banque Populaires Bank Loan $8,070,152 1251 Avenue of the Americas New York, New York 10020 Bear, Stearns & Company, Inc. Bank Loan $6,719,248 383 Madison Avenue New York, New York 10179 ING (US) Capital LLC Bank Loan $4,611,515 1325 Avenue of the Americas New York, New York 10020 Landesbank Rheinland-Pfalz Bank Loan $4,611,515 Girozentrale Department 3-121 Grosse Bleiche 54-56 Mainz, Germany D-55098 Citigroup Financial Bank Loan $2,766,909 Products Inc. 390 Greenwich Street, 1st Floor New York, New York 10013 Lehman Brothers Bank Loan $2,443,005 745 7th Avenue New York, New York 10019 JPMorgan Chase Bank Bank Loan $2,182,111 270 Park Avenue, 17th Floor New York, New York 10017 Aquila Energy Marketing Litigation $1,500,000 Corporation Claim Attn: Contract Administration 1100 Walnut Suite 3300 Kansas City, Missouri 64106 TECO ENERGY: To Host Fourth Quarter Webcast on Feb. 1 ----------------------------------------------------- TECO Energy (NYSE: TE) will host a webcast concurrent with a conference call with the financial community on Tuesday, Feb. 1, 2005 at 9:00 AM EST. Chairman and CEO Sherrill Hudson, President and COO John Ramil, and Executive Vice President and CFO Gordon L. Gillette will discuss the company's fourth quarter results and its 2005 outlook. The company's fourth quarter and year-to-date results, including unaudited income statement, balance sheet and statement of cash flow, will be released Feb. 1, 2005, prior to the call and before the market opens. Investors, shareholders, media and the public can access the webcast through a link on TECO Energy's Web site at: http://www.tecoenergy.com/ The audio portion of the webcast and the accompanying slides will be available for replay through a link on the Web site starting two hours after the conclusion of the live event; the replay will be archived on the website for 30 days. Additional information regarding TECO Energy is available at the Investor Relations section of TECO Energy's Web site at http://www.tecoenergy.com/ About the Company TECO Energy, Inc. (NYSE: TE) is an integrated energy-related holding company with core businesses in the utility sector, complemented by a family of unregulated businesses. Its principal subsidiary, Tampa Electric Company, is a regulated utility with both electric and gas divisions (Tampa Electric and Peoples Gas System). Other subsidiaries are engaged in waterborne transportation, coal and synthetic fuel production and independent power. * * * As reported in the Troubled Company Reporter on Jan. 10, 2005, Fitch Ratings does not expect any changes to the current ratings or Outlook for TECO Energy following their announcement earlier today that they plan to record impairment charges of $480 million (after-tax) in the fourth quarter of 2004 related to the Dell, McAdams, and Commonwealth Chesapeake power plants, as well as some remaining unused steam turbines. The charges come as a result of annual reviews of the carrying values of the assets and will affect both net income and the balance sheet. Fitch rates TECO: -- Senior unsecured debt 'BB+'; -- Preferred stock 'BB'; -- Rating Outlook Stable. TRITON CDO: Moody's Junks $12.5M Class C-1 & $5M Class C-2 Notes ---------------------------------------------------------------- Moody's Investors Service confirmed the rating of one class and lowered the rating of two classes of notes issued by Triton CDO IV, Limited, the Issuer, which were under review for possible downgrade. Moody's confirmed the A1 rating of the Issuer's U.S. $169,000,000 Class A First Priority Senior Floating Rate Notes Due 2010 and lowered the rating of: 1. the U.S. $26,750,000 Class B Second Priority Senior Floating Rate Notes Due 2010 to B1 (from Ba1); and 2. the U.S. $12,500,000 Class C-1 Mezzanine Floating Rate Notes Due 2010 and U.S. $5,000,000 Class C-2 Mezzanine Fixed Rate Notes Due 2010 to Ca (from Caa3). The transaction closed on December 15, 1999. According to Moody's, its action results from significant deterioration in collateral quality and coverage. Moody's noted that, excluding defaulted securities, the weighted average rating factor of the collateral pool has deteriorated to 4413 (2755 limit) and more than 39% of the collateral pool has a Moody's rating of Caa1 or lower. In addition, Moody's indicated that all three over collateralization (OC) tests are out of compliance in the last report, the Class A/B OC ratio is 105.0% (121% required), the Class C OC ratio is 84.3% (111.5% required) and the Class D OC ratio is 74.4% (105.5% required). Moody's noted that the Class A Notes had paid down by more than U.S. $149,345,860. -- Issuer: Triton CDO IV, Limited * Rating Action: Confirmation And Downgrade -- Class Description: U.S. $169,000,000 Class A First Priority Senior Floating Rate Notes Due 2010 * Prior Rating: A1 (under review for downgrade) * Current Rating: A1 -- Class Description: U.S. $26,750,000 Class B Second Priority Senior Floating Rate Notes Due 2010 * Prior Rating: Ba1 (under review for downgrade) * Current Rating: B1 -- Class Description: U.S. $12,500,000 Class C-1 Mezzanine Floating Rate Notes Due 2010 * U.S. $5,000,000 Class C-2 Mezzanine Fixed Rate Notes Due 2010 * Prior Rating: Caa3 (under review for downgrade) * Current Rating: Ca TXU CORP: Board Elects Stan Szlauderbach as SVP & Controller ------------------------------------------------------------ TXU Corp.'s (NYSE: TXU) Board of Directors has elected Stan Szlauderbach senior vice president and controller. Mr. Szlauderbach was formerly assistant controller of the company and has been interim controller since Sept. 30, 2004. Mr. Szlauderbach is a Certified Public Accountant who joined the company in 2001. His previous experience includes 14 years with PepsiCo, Inc., in various accounting and financial reporting management roles. About the Company TXU Corp., a Dallas-based energy company, manages a portfolio of competitive and regulated energy businesses in North America, primarily in Texas. In TXU Corp.'s unregulated business, TXU Energy Retail provides electricity and related services to more than 2.5 million competitive electricity customers in Texas, more customers than any other retail electric provider in the state. TXU Power has over 18,300 megawatts of generation in Texas, including 2,300 MW of nuclear-fired and 5,837 MW of lignite/ coal-fired generation capacity. TXU Corp. is also the largest purchaser of wind- generated electricity in Texas and among the top five purchasers in North America. TXU Corp.'s regulated electric distribution and transmission business, TXU Electric Delivery Company, complements the competitive operations, using asset management skills developed over more than one hundred years, to provide reliable electricity delivery to consumers. TXU Electric Delivery operates the largest distribution and transmission system in Texas, providing power to 2.9 million electric delivery points over more than 98,000 miles of distribution and 14,000 miles of transmission lines. Visit http://www.txucorp.com/for more information about TXU Corp. * * * As reported in the Troubled Company Reporter on Nov. 12, 2004, Fitch Ratings affirmed the senior unsecured and preferred stock ratings of TXU Corp. at 'BBB-' and 'BB+', respectively. The Ratings Outlook for TXU Corp. is Stable. UAL CORP: Wants Court to Approve Master Pact with Gate Gourmet -------------------------------------------------------------- UAL Corporation and its debtor-affiliates are currently parties to three catering services agreements with Gate Gourmet, Inc. Pursuant to these agreements, Gate Gourmet provides catering services to the Debtors for in-flight meals at airports including Denver, San Francisco and Honolulu. At the Denver International Airport, the Debtors will replace Gate Gourmet and must provide access to the premises to another vendor. At the San Francisco and Honolulu Airports, Gate Gourmet is a party to a sublease with the Debtors, using the property for the operation of a flight kitchen and the provision of catering services. Gate Gourmet filed Claim No. 38913 for $19,139,981. Since the bankruptcy petition date, the Debtors and Gate Gourmet have conducted extensive negotiations. Having reached a consensus, the Debtors seek the Court's permission to enter into a Master Domestic Services Agreement with Gate Gourmet, which will supersede the prior agreements. The material terms of the Master Agreement are: a) Mutual termination of the prior agreements, with both parties mutually releasing one another; b) Under the new terms, the Debtors will receive average monthly cost savings of about $500,000; c) The Debtors will have the opportunity to increase the monthly savings; d) If the Master Domestic Services Agreement becomes effective before January 31, 2005, the cost discounts will be retroactively effective to October 2004; e) Gate Gourmet will have a general unsecured claim with the amount under negotiation, but not less than $17,704,495 and not more than $19,139,081; f) The Debtors will assume the San Francisco Airport sublease; g) Gate Gourmet will no longer provide services to the Debtors at Denver Airport, and the parties will terminate the sublease; h) The Debtors and Gate Gourmet will enter into a new sublease at the Honolulu Airport; i) If the Agreement is terminated prior to confirmation or the Debtors convert the proceedings to a Chapter 7, Gate Gourmet will waive its right to damages. Instead, Gate Gourmet will have an allowed administrative expense claim measured by the benefit provided to the Debtors under the Agreement; and j) The Debtors will prepay Gate Gourmet for its services; James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells the Court that entry into the Master Agreement will provide numerous benefits to the Debtors' estate. The Debtors will receive necessary catering services on better economic terms than under the prior agreements. The superior economic terms are valued at in excess of $15,000,000 over the life of the Agreement. This consists primarily of price reductions on goods and services. The Agreement may create administrative liability, but Gate Gourmet has agreed to limit its administrative claims. 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) ULTIMATE ELECTRONICS: Nasdaq Issues Delisting Notice ---------------------------------------------------- On January 19, 2005, Ultimate Electronics, Inc., (Nasdaq: ULTEQ) received a notification from the Listing Qualifications Department at The Nasdaq Stock Market, Inc., that it is in material noncompliance with Marketplace Rules for continued listing on Nasdaq. The notification does not by itself result in immediate delisting of the Company's securities. As discussed in the Company's Current Report on Form 8-K filed Dec. 28, 2004, the Company previously requested a hearing with the Nasdaq Listing Qualifications Panel in connection with a notice of violation of Marketplace Rule 4310(c)(14). An oral hearing is scheduled for Jan. 27, 2005, at which the additional deficiencies listed above will be considered. There can be no assurance that the Panel will grant the Company's request for continued listing. Headquartered in Thornton, Colorado, Ultimate Electronics, Inc. -- http://www.ultimateelectronics.com/-- is a specialty retailer of consumer electronics and home entertainment products located in the Rocky Mountain, Midwest and Southwest regions of the United States. The Company operates 65 stores and focuses on mid- to high-end audio, video, television and mobile electronics products. The Company and its debtor-affiliates filed for chapter 11 protection on January 11, 2005 (Bankr. D. Del. Case No. 05-10104). J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $329,106,000 and total debts of $160,590,000. W.R. GRACE: Wants to Refund Defense Costs & Settle Claims --------------------------------------------------------- Before the bankruptcy petition date of W.R. Grace & Co., and debtor-affiliates, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, issued National Union's Employee Benefit Plan Fiduciary Liability Insurance Policy to W.R. Grace & Co. The Policy provides for the payment, reimbursement or advancement of reasonable and necessary fees, costs and expenses incurred in the defense of "claims," as defined in the Policy. The Policy has a limit of liability for all covered "loss," as defined in the Policy, including defense costs. Settlements of "claims" are included in the Policy's definition of "loss." A lawsuit entitled "Evans v. Akers et al." has been filed in the United States District Court for the District of Massachusetts against members of the Debtors' Board of Directors and certain key employees. A lawsuit entitled "Bunch, et al. v. W.R. Grace & Co., at al." has also been filed in the U.S. District Court for the Eastern District of Kentucky against certain of the Debtors, members of the Debtors' Board of Directors, and certain key employees. Subsequent to the Petition Date, notwithstanding the automatic stay imposed by Section 362 of the Bankruptcy Code, the Defendants have incurred, and likely will continue to incur, significant defense costs in connection with the pending civil actions. National Union has agreed to reimburse the Defendants' Defense Costs and advance funds to settle the Actions. National Union, however, reserves its rights, privileges and defenses under the Policy, at law and in equity with respect to the Actions. Payments, reimbursement or advancement of Defense Costs under the Policy will be limited to the reasonable and necessary fees, costs and expense charges by one "lead" law firm, any reasonable and necessary local or other special counsel, and various other service providers in support of the defense of the Actions for each subset of the Defendants who reasonably require separate counsel. The Debtors ask the U.S. Bankruptcy Court for the District of Delaware to authorize National Union to: (i) pay, reimburse, and advance Defense Costs, subject to a full reservation of rights, to or for the benefit of the Defendants under the Policy, for one lead law firm, any reasonable and necessary local or other special counsel and various other service providers; and (ii) make Settlement Payments under the Policy. The Debtors also ask Judge Fitzgerald to lift the automatic stay for the limited purpose of allowing the payments, reimbursement and advancement of Defense Costs and Settlement Payments. The Debtors assure the Court that the payments, reimbursement and advancements would not prejudice the interests of their creditors. National Union will pay, reimburse or advance Defense Costs and make Settlement Payments from its own funds, not the Debtors' funds, in accordance with the Policy. Granting the Debtors' request also would inure to the benefit of their estates because they are likely to face substantial claims for indemnification from the non-Debtor Defendants for Defense Costs incurred in defense of and amounts paid to settle the Actions. To the extent the non-Debtor Defendants are entitled to indemnification, the Debtors' estates may ultimately be liable to those Defendants if the amounts are not paid by National Union. To the extent that National Union pays, reimburses, or advances the Defense Costs of the non-Debtor Defendants and makes Settlement Payments, the Debtors' estates would be relieved for their indemnification obligations to pay those amounts. Moreover, if National Union does not pay the Defense Costs of the non-Debtor Defendants, the likelihood that the non-Debtor Defendants would be properly represented in the Actions would decrease, and the risk of increased indemnity claims against the Debtors would increase. Any increase in indemnity claims would place a burden on the Debtors' estates and prejudice their creditors. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Asks Court to Approve Continental Settlement Pact ------------------------------------------------------------- W.R. Grace & Co., and debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve a Confidential Settlement Agreement and Release entered into among W.R. Grace & Co.-Conn., W.R. Grace & Co, W.R. Grace & Co.-N.Y. -- now known as Fresenius Medical Care Holdings, Inc. -- and Continental Casualty Company. Pursuant to the Settlement Agreement, Continental will pay the two Grace entities $9 million, and Grace and Fresenius will provide Continental certain releases from potential liability stemming from certain insurance policies. Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., in Wilmington, Delaware, relates that the Settlement Agreement will relieve the Debtors from prospective legal costs and litigation risks associated with the underlying dispute. Previously, Continental issued Grace certain primary policies of insurance that have stated limits for "gradual pollution." In 1988, Maryland Casualty Co. commenced an action in the U.S. District Court for the Southern District of New York to resolve coverage disputes arising out of numerous environmental claims asserted by Grace, in response to which Grace asserted a cross-claim against Continental for coverage of environmental claims under the policies, including claims under the Gradual Pollution Limits. In 2000, Continental filed a complaint against Grace in the same court, which seeks a declaration of no coverage for additional claims tendered. In connection with an action against Hatco Corp. in the U.S. District for the District of New Jersey, the Parties entered into a settlement agreement dated May 30, 1997, pursuant to which the Gradual Pollution Limits stated in the Policies were exhausted and all claims for indemnity and defense costs for claims which come under the Gradual Pollution Limits were extinguished and released, except for Grace's claims for defense costs relating to claims under the Gradual Pollution Limits incurred prior to the date of the Hatco Settlement. After the Hatco Settlement was executed, the Parties continued to litigate Continental's obligations, including the obligation to pay or reimburse Grace for Pre-Hatco Defense costs for claims in connection with the sites at issue in the NY Coverage Actions. In 2001, judgment was entered in the NY Environmental Litigation declaring, among other things, that Continental had no obligation to pay or reimburse Grace for gradual pollution claims. In 2003, the U.S. Court of Appeals for the Second Circuit affirmed the judgment for the 1973-83 policies, and remanded the case for further proceedings regarding Continental's obligations under certain of the Policies. The Parties entered into the Settlement Agreement to resolve the NY Coverage Actions, with the exception of assertion of coverage for personal injury claims arising from Grace-related business operation in Libby, Montana. The Settlement Agreement provides that in consideration of receipt of the Payment, Grace and Fresenius release Continental from all liabilities for: * Pre-Hatco Defense Costs; * Property Damage Pollution Claims and Personal Injury Pollution Claims; and * any alleged wrongdoing by Continental. The Payment is being held in escrow by Pitney Hardin, LLP, pending the Court's approval of the Settlement Agreement. If the Settlement Agreement is not approved on or before March 15, 2005, then the Payment and accrued interest will be returned to Continental, provided, however, that the Parties may agree in writing to extend the time to obtain the Court's approval of the Settlement Agreement. If the Court denies the Settlement Agreement, then it will be void, and the Payment and accrued interest will be returned to Continental. Pitney Hardin may release the Payment and accrued interest to Grace only after either 30 days after the Court's approval, or if an appeal and the Payment is not otherwise returned to Continental, 30 days after the final order approving the Agreement. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Wants Removal Period Extended to Plan Effective Date ---------------------------------------------------------------- W.R. Grace & Co., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to further extend the period within which they may remove actions pursuant to Section 1452 of the Judicial Procedures Code and Rule 9027 of the Federal Rules of Bankruptcy Procedure through the effective date of their Plan of Reorganization. Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., in Wilmington, Delaware, states that given that the Debtors are currently working towards confirmation of their Plan which will necessarily deal with many of the actions that could be removed, it would be most efficient for the decisions with respect to removal to be addressed on the Plan confirmation date. The Debtors are named defendants in thousands of asbestos-related lawsuits in various state and federal courts involving different individual claims, in asbestos-related fraudulent conveyance actions, and in numerous environmental lawsuits. The Debtors' Plan of Reorganization propose procedures for estimating and resolving their liability on accounts of their asbestos claims. The Plan provides for, among other things, the creation of an asbestos trust, to which all allowed asbestos property damage claims and asbestos personal injury claims would be channeled for recovery. Ms. Jones explains that the litigation procedures outlined by the Debtors streamline the claims adjudication process. While this litigation will not completely eliminate the Debtors' need to preserve the option to remove Actions to the Bankruptcy Court, it should minimize the need to do so. Nonetheless, until the claims arising from the Actions have been resolved, whether through these litigation protocols or otherwise, the Debtors must preserve the option of removing Actions to the Court. The extension, Ms. Jones says, will afford the Debtors an opportunity to make fully informed decisions concerning removal of all Actions and assure that they do not forfeit valuable rights under Section 1452. The Debtors remind the Court that their Plan is not a consensual plan. However, the Debtors, the Asbestos Parties, the Official Committee of Equity Holders, and the Official Committee of Unsecured Creditors continue to discuss the potential for a consensual plan. During the December 20, 2004, omnibus hearing, the Debtors announced that they have come to terms with the Equity Committee and the Creditors Committee concerning the structure for a joint plan, which they expect to file shortly. The Debtors' request is without prejudice to (i) any position they may take regarding whether Section 362(b) of the Bankruptcy Code applies to stay any Action, (ii) their right to seek further extensions of time to remove any and all Actions, or (iii) the rights of interested third parties to request that the Removal Period be shortened as to a particular Action. The Court will convene a hearing on February 28, 2005, to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the deadline is automatically extended through the conclusion of that hearing. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) WESTPOINT STEVENS: Court Approves Marianna & Columbia Leases ------------------------------------------------------------ As previously reported, WestPoint Stevens, Inc. and its debtor-affiliates seek the United States Bankruptcy Court for the Southern District of New York's authority to enter into nonresidential real property leases with: (a) Arquette Development Corp. for the lease of a property in Marianna, Florida; and (b) HouseCalls International for the lease of a property in Columbia, Alabama. The Debtors believe that the Marianna Lease and the Columbia Lease will offer them substantial flexibility as they continue to pursue restructuring alternatives. At the Debtor's behest, the Court approves the motion. 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) WILLAMETTE VALLEY: Voluntary Chapter 11 Case Summary ---------------------------------------------------- Debtor: Willamette Valley Distributing, L.L.C. P.O. Box 1444 Oregon City, Oregon 97045 Bankruptcy Case No.: 05-30712 Type of Business: The Debtor is a tobacco distributor. Chapter 11 Petition Date: January 25, 2005 Court: District of Oregon (Portland) Judge: Randall L. Dunn Debtor's Counsel: Stephen T. Boyke, Esq. Greene & Markley, P.C. 1515 South West 5th Avenue, #600 Portland, OR 97201 Tel: 503-295-2668 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20-largest creditors. XEROX CORP: S&P Revises Ratings on BB- Rating to Stable ------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit rating on Stamford, Connecticut-based Xerox Corp., and revised its outlook to stable from negative. The outlook revision reflects improvements in Xerox's nonfinancing operating performance and leverage profile. As of Dec. 31, 2004, Xerox had total outstanding debt of about $10.1 billion. "The ratings on Xerox Corp. and related entities reflect mature and highly competitive industry conditions, continued revenue weakness, and a leveraged financial profile," said Standard & Poor's credit analyst Martha Toll-Reed. These factors partly are offset by the company's good position in its core document processing business, and improving financial flexibility. Xerox reported revenues of $4.3 billion and net income of $240 million in the quarter ended Dec. 31, 2004. Total revenue was up 1% compared with the same period last year (including a 3% currency benefit); however, equipment sales have posted modest, annual constant-currency improvement over the past two years, which is expected to provide the foundation for future revenue growth. Xerox's nonfinancing EBITDA margin stabilized at about 10% in fiscal 2004, bolstered by strength in Xerox's seasonally important fourth quarter. Although we do not expect material improvement in nonfinancing profitability in the absence of revenue growth, results for the December 2004 quarter reversed a two-year trend of flat-to-declining non-financing operating earnings. Annual nonfinancing EBITDA levels are expected to be sustained, based on an ongoing focus on cost controls and operating efficiency. * Fitch: Balanced Rating Changes Signal Stronger U.S. Bond Market ----------------------------------------------------------------- The ratio of par downgrades to upgrades for the U.S. bond market contracted to 1.3 to 1 in 2004, compared with ratios of 4.9 to 1 in 2003 and 10.3 to 1 in 2002, according to Fitch Ratings. The par value of bonds affected by upgrades, totaling $115 billion for the year, was up considerably year over year, rising 143%, while the par value of bonds affected by downgrades, totaling $147.4 billion in 2004, contracted 37%. For the U.S. bond market as a whole, downgrades affected 5.6% of market volume in 2004 while upgrades affected 4.4%, compared with 9.2% and 1.8%, respectively, for downgrades and upgrades, in 2003. 'When examining the mix of rating changes specific to the investment-grade and speculative-grade portions of the market, the smaller speculative-grade sector clearly enjoyed the bulk of the year's rating gains,' said Paul Mancuso, Senior Director, Fitch Credit Market Research. 'More than two thirds of 2004's total par upgrades were due to positive rating drift within the speculative- grade sector.' In fact, for the year, the ratio of par downgrades to upgrades stood at 0.7 to 1 for the speculative-grade sector, compared with 2.5 to 1 for the pool of bonds rated investment grade. New issuance for the U.S. bond market was up again in 2004, rising from 2003's $665 billion to $714 billion. Issuance once again exceeded scheduled bond maturities for the year by a ratio of 2 to 1. However, in contrast to previous years, the market's size grew considerably in 2004, from $2.8 trillion at the end of 2003 to $3.1 trillion at the end of 2004. 'While refinancing dominated use of proceeds within the industrial sectors, the financial sectors borrowed heavily to finance loan growth and this contributed to the bond market's expansion year over year,' said Mariarosa Verde, Managing Director, Fitch Credit Market Research. Overall, issuance growth in 2004 was driven almost exclusively by a stunning 55% year-over-year increase in floating-rate issuance among the financial sectors. Investor demand for floating-rate notes, awakened by the fear of rising rates, ran high in 2004, and companies clearly tried to satisfy the demand. Floating issuance among the industrials was also up in 2004, albeit on a small base, from $12.3 billion in 2003 to $29.2 billion in 2004, a year-over-year increase of 136%. The marked increase among the industrials was broad based. Even speculative-grade companies sold more floating-rate bonds in 2004. Floating issuance totaled 7% of non-investment grade bond sales for the year, up from practically non-existent levels in prior years. Overall, floating-rate issuance totaled $299 billion in 2004, up from $186 billion in 2003 and $143 billion in 2002. Fitch believes that demand for floating-rate bonds will continue to accelerate in 2005 and with it increased issuance of floating- rate bonds. For companies, some of the interest rate risk inherent in these floating instruments can be mitigated through the use of interest rate swaps. It is worth noting that as of year's end, floating notes remained a small portion of overall industrial bond volume (just 3%). Furthermore, the backdrop of improving fundamentals and a positive economic outlook also offset some of the short-term risk posed by these notes. In contrast to floating activity, fixed-rate bond issuance overall declined 13% in 2004, compared with that of 2003 ($415 billion in 2004 versus $479 billion in 2003) and in particular, was down 20% for the industrial sectors. The slowdown was partly due to some refinancing burnout among the industrials and also due to the combination of cash rich balance sheets and spending restraint, which limited the need to access long-term funds. Fitch believes these same trends will depress fixed-rate issuance again in 2005. Fitch's complete analysis of rating and issuance trends for the U.S. Bond Market in 2004 will be available on the Fitch Ratings web site at http://www.fitchratings.com/under 'Credit Market Research' in February. Fitch's U.S. Bond Market Credit Insight looks at macro trends for outstanding U.S. dollar-denominated, nonconvertible bonds issued by companies domiciled in the U.S. (at the end of December the market's size was $3.1 trillion). Downgrades and upgrades noted above refer to broad category changes, i.e. 'BBB' to 'BB'. Ratings are based on a blended average of the ratings assigned by Fitch or one of the other two major rating agencies. * BOOK REVIEW: Full Faith and Credit: The Great S & L Debacle ------------------------------------------------------------- Author: Lewis William Seidman Publisher: Beard Books Softcover: 300 pages List Price: $34.95 Order your personal copy at http://www.amazon.com/exec/obidos/ASIN/1893122492/internetbankrupt Review by Susan Pannell "My friends, there is good news and bad news. The good news is that the full faith and credit of the FDIC and the US government stands behind your money at the bank. But the bad news is that you, my fellow taxpayers, stand behind the US government." Take it from L. William Seidman, former chairman of the FDIC under Reagan and Bush, in his irreverent Washington memoir. Chosen by Congress to lead the S&L cleanup, the author describes how the debacle was created and nurtured and the lawsuits against Charles Keating, Michael Milken, and Neil Bush that it spawned. The story begins in the summer of 1973 when Seidman, then a Grand Rapids, Michigan, businessman and managing partner of one of the country's ten largest accounting firms, which bore his family's name, was tapped by Nixon to be undersecretary of HUD. Seidman had scarcely unpacked his bagswhen "the summer of 1973" took on new meaning in Washington and across the country. Confirmation of any of the precarious president's nominations looked dubious in the extreme, and Seidman prepared to pack up again. Then came a call from the office of newly appointed Vice President Ford. Spiro Agnew, hastily departing, had left the office in shambles. (Not least to be disposed of were large cases of Scotch whiskey, presented to Agnew by supplicants.) Would Seidman lend his managerial expertise for a few weeks to help a fellow Grand Rapidan get organized? One thing led to another in the usual Potomac way, and when Ford advanced to the presidency, Seidman was made his assistant for economic affairs. That job, too, was relatively short-lived, but a decade later he returned to Washington to head the FDIC under Reagan. What the author found was plenty disturbing. The over-optimism of the 1970s ad 1980s- in particular, he believes, a speculative binge of real estate investing -- followed by recession, was resulting in numerous bank failures, more than 1,000 between 1986 and 1991. Worse, disaster loomed in the sister agency that insured savings and loan institutions: a majority of the nation's 4,000 S&Ls were on their way to bankruptcy. What caused the S&L crisis? Seidman, although a small-government advocate, blames a combination of deregulation and cutbacks in the oversight agencies. One of his many battles, for example, was with OMB, which sought to cut the FDIC's bank supervision staff just as it had tried to reduce the number of S&L examiners. But he finds a silver lining in the near catastrophe: proof of resilience. The diversity of the US financial system is also its strength. Seidman's memoir is as much about life inside the Beltway as it is about financial crises, making this book, first published in 1990, no less entertaining today. Included are lively anecdotes of confrontations with heavy-weight White House chief of staff John Sununu, an interview with a wild-eyed Wyoming purchaser of FDIC property from a liquidated bank who arrived in Seidman's office armed with a gun to register his displeasure with the purchase (a valid objection, the author discovered), and ambush by Secret Service agents who converged on Seidman as he opened his window and leaned out to watch the president's helicopter take off. ********* 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. 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