/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050307.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, March 7, 2005, Vol. 9, No. 55 Headlines ADELPHIA COMMS: Objects to Century's Ex-CEO's $13,460,526 Claim ALLIANCE LEASING: Case Summary & 30 Largest Unsecured Creditors ALLIED WASTE: Prices $600 Million of Senior Notes at 7.25% AMERICAN AIRLINES: Tulsa Team to Generate $500 Million by 2006 ASSET SECURITIZATION: Moody's Junks $37.467M Class A-4 Certs. ATA AIRLINES: Court Will Appoint Examiner at Today's Hearing ATA AIRLINES: Gets Court Nod to Lease 3 Engines from GE Engine AVADO BRANDS: Can Start Soliciting Votes from Creditors BANC OF AMERICA: Fitch Puts Low-B Ratings on Two Mortgage Certs. BOYDS COLLECTION: Moody's Junks $34MM 9% Senior Subordinated Notes BRIDGEPORT HOLDINGS: CDW Corp. Says Civil Claim is Without Merit C.A.S. HANDLING: Case Summary & 43 Largest Unsecured Creditors CATHOLIC CHURCH: Request to Retain Pachulski Draws Fire in Spokane CATHOLIC CHURCH: Request to Retain Esposito Draws Fire in Spokane C-BASS: Fitch Affirms Low-B Ratings on Five Series 1999-3 Classes CENTERPOINT ENERGY: Declares $0.10 per Share Common Stock Dividend CENTURY COMMS: Adelphia Says Ex-CEO's $13M Claim Should be Cut CITICORP MORTGAGE: S&P Rates 13 Certificate Classes at Low-B CLEARLY CANADIAN: Completes $1-Mil Short-Term Loan with BG Capital COLLINS & AIKMAN: S&P Slices Rating, Citing Liquidity Concerns CONMED CORP: Schedules May 17 Annual Shareholders' Meeting COOPER TIRE: Moody's Pares Preferred Rating to (P)Ba2 from (P)Ba1 CREDIT SUISSE: Fitch Holds B+ Rating on $5.1MM Mortgage Securities CREDIT SUISSE: Fitch Assigns Low-B Rating on Six Mortgage Certs. DAVITA INC: S&P Puts Low-B Ratings to Proposed $4.5 Billion Loans DLJ MORTGAGE: Fitch Assigns BB+ Rating on $26.9MM Mortgage Cert. DMX MUSIC: Section 341(a) Meeting Slated for Mar. 24 DMX MUSIC: Wants to Hire Giuliani Capital as Financial Consultants DURA AUTOMOTIVE: Insulates New CFO From Any Change in Control EL PASO: Closes Sale of Cedar Brakes Subsidiaries for $94 Million EXIDE TECH: Gordon Ulsh Replaces Craig Muhlhauser as Pres. & CEO FAIRFAX FINANCIAL: Fitch Assigns B+ Rating on Senior Debt FOOTSTAR INC: Court Okays Exclusive Period Extension Until Apr. 13 FRANK'S NURSERY: Files Plan of Reorganization in New York GS MORTGAGE: Moody's Holds Ba2 Rating on $28.183MM Class G Certs. GSR MORTGAGE: Fitch Puts Low-B Ratings on 2 Mortgage Certificates G-STAR: Fitch Affirms BB- Rating on $7,659,366 Class D Notes HATTERAS INCOME: Declares Final Liquidating Distribution HEALTHESSENTIALS SOLUTIONS: Taps Frost Brown as Bankruptcy Counsel H-LINES FINANCE: Moody's Junks $160 Million Senior Discount Notes INTELSAT: Fitch Maintains Junk Rating on Senior Unsecured Notes INTERLINE BRANDS: Earns $18.1 Million of Net Income in FY 2004 INTERSTATE BAKERIES: Court Okays Opening of ADMIS Futures Account INTERSTATE BAKERIES: Trade Creditors Sell 182 Claims Totaling $2MM ISTAR FINANCIAL: Completes Falcon Financial Acquisition J.P. MORGAN: Moody's Holds Ba1 Rating on $11.569MM Class L Certs. JACOBS ENTERTAINMENT: Moody's Rates $23MM Sr. Sec. Notes at B2 JOLIET JUNIOR: Fitch Lowers Rating of $14.5MM Revenue Bonds to D KMART CORP: Secures Five-Year $4 Billion Loan with Sears LB-UBS COMMERCIAL: Moody's Junks $3.025MM Class Q Certificates LEVI STRAUSS: Federated/May Merger Talks Won't Affect S&P's Rating MARIETTA STREET: Case Summary & 4 Largest Unsecured Creditors MARSH SUPERMARKETS: S&P Pares Rating to B & Says Outlook is Stable MCI INC: TMB Comm. Wants More Time to Modify Claim to Class 6A MEGO FINANCIAL: Trustee Taps Algon Capital as Financial Consultant MIRANT CORP: Wants to Provide Unitil with Replacement Guaranty MIRANT CORP: U.S. Trustee Amends MAGi Committee Membership MIRANT CORP: Wants Solicitation Period Extended to June 30 MORGAN STANLEY: Fitch Junks Three Mortgage Certificate Classes MORGAN STANLEY: Fitch Upgrades $21.2 Million Mortgage Cert. to BB+ NORTHROP GRUMMAN: Proposes to Declassify Board of Directors OXFORD INDUSTRIES: S&P Holds Rating Amidst Federated/May Talks PERRY ELLIS: S&P's Rating Unaffected by Federated/May Merger Talks PHELPS DODGE: Moody's Reviews Ratings for Possible Upgrade POIROT PROPERTIES: Case Summary & 20 Largest Unsecured Creditors QWEST COMMS: Completes PCS License Sale to Verizon for $418 Mil. RAVENEAUX LTD: Wants to Hire Weycer Kaplan as Bankruptcy Counsel RAVENEAUX LTD: Section 341(a) Meeting Slated for March 31 RELIANCE GROUP: Court Approves $1.64 Million Pershing Settlement RFC CDO: Fitch Rates $3 Mil. Deferrable Interest Notes at BB RIGGS NATIONAL: Inks Pact to Settle Stockholder Litigation RYLAND GROUP: Declares $0.06 Per Share First Quarter Dividend SAAN STORES: Moves Forward with Plan to Exit CCAA by Apr. 1 SAAN STORES: Gets $28.5 Mil. for Inventory & Pays Congress Debt SAAN STORES: Negotiates $30 Million Exit Financing with GMAC SAAN STORES: Streamlining Operations to 130 Stores on Emergence SALOMON BROTHERS: Fitch Junks Two 2000-C2 Certificate Classes SHAW COMMS: S&P Revises Outlook on Low-B Ratings to Positive SOLUTIA INC: Will Pay $1,277,343 Tax Debt to St. Claire County SPX CORP: Posts $110.8 Million Net Loss in Fourth Quarter TECO AFFILIATES: Judge Case Approves Disclosure Statement TELTRONICS INC: IMN Unable to Close Purchase of 24 Million Shares TOMMY HILFIGER: S&P Holds Rating Amidst Federated/May Merger Talks TRUMP HOTELS: Exclusive Plan Filing Remains Intact TRUMP HOTELS: Ends Talks For Indiana Riverboat Casino TRUMP HOTELS: Wants to Hire Lazard as Financial Advisor UAL CORPORATION: Files 11th Reorganization Status Report US AIRWAYS: Reports 69% Passenger Load Factor in February 2005 VIACELL INC: Equity Deficit Widens to $160 Million at Dec. 31 VITAL LIVING: Inks Manufacturing Pact with Bactolac Pharmaceutical VERESTAR INC: Wants to Walk Away from Twelve Tower Leases WARNACO GROUP: S&P Holds Rating Amidst Federated/May Merger Talks WCI COMMUNITIES: Moody's Puts Ba3 Rating on $200MM Sr. Sub. Notes WESTPOINT STEVENS: Overview of New Textile Purchase Agreement WILLIAM CARTER: S&P Says Federated/May Talks Won't Affect Rating WINN-DIXIE: Hires Logan & Company as Claims Agent YUKOS OIL: What Value's Left After Sale of Yuganskneftegas * Alvarez & Marsal Welcomes Anthony Treccapelli And Mark Paling * Alvarez & Marsal Welcomes Charles Lowrey & James Chvtal * BOND PRICING: For the week of February 28 - March 4, 2005 ********* ADELPHIA COMMS: Objects to Century's Ex-CEO's $13,460,526 Claim --------------------------------------------------------------- On July 1, 1997, Century Communications Corp. entered into an agreement with Leonard Tow, pursuant to which he was employed as Chief Executive Officer for a period through June 30, 1998, followed by an advisory period of five years. Brian E. O'Connor, Esq., at Willkie Farr & Gallagher, LLP, in New York, relates that Mr. Tow had the right to terminate the Employment Agreement upon a "change in control," and will be entitled to the same amounts and benefits he would be entitled if Century terminated the Agreement other than for cause. On March 5, 1999, Century agreed to merge with Adelphia Acquisition Subsidiary, Inc., with Acquisition Subsidiary surviving. The Merger constituted a "change in control" as the term was defined under the Employment Agreement. As a result of the change in control, Mr. Tow exercised his rights under the Employment Agreement and terminated his employment with Century. By agreement dated June 19, 1999, Mr. Tow and Century agreed to fix the amounts of payments and benefits to which he was entitled by virtue of the termination of his employment. Toward that end, the Termination Agreement provided for the creation of a special payment trust, from which Mr. Tow would be paid the severance and other prospective benefits resulting from the termination. On October 1, 1999, the merger of Century into Acquisition Subsidiary became effective. On the Merger Effective Date, Acquisition Subsidiary was renamed Arahova. Under the Merger, Adelphia Communications Corporation agreed to honor, and to cause Arahova to honor, all obligations arising under the Employment Agreement and the Termination Agreement. The Termination Agreement also provides that all Century's obligation to Mr. Tow and Mr. Tow's rights and remedies under the Employment Agreement by reason of the termination, will subsist and survive and remain in full force and effect. On January 7, 2004, Mr. Tow along with his wife Claire Tow, filed three identical claims for $13,460,526 each -- one against each of the estates of ACOM, Arahova and Century. The Employment Claims asserted payments allegedly owed to Mr. Tow pursuant to the Employment Agreement and the Termination Agreement. Based on their books and records, the ACOM Debtors found that only the estates of Century and ACOM bear liability for the Employment Claims. Accordingly, the ACOM Debtors ask the Court to disallow the Employment Claim against Arahova -- Claim No. 9195 for $13,460,526. The Employment Claim against Century and the Employment Claim filed against ACOM as guarantor are claims asserted by an employee for damages resulting from termination of an employment contract, thus, subject to the statutory cap under Section 502(b)(7) of the Bankruptcy Code. Consequently, the ACOM Debtors also ask the Court to: (a) allow the Century Employment Claim as general unsecured claim in Century's case at the reduced amount of $1,324,676, to the extent not otherwise disallowed under Section 502(d); and (b) allow the ACOM Employment Guarantee Claim in the reduced amount equal to the difference between the allowed amount of the Century Employment Claim and the distribution by Century's estate on account of the Claim, to the extent the Tows receive less than a full recovery on any allowed claim in respect of the Century Employment Claim. To the extent any portion of the Century Employment Claim or the ACOM Employment Guarantee Claim is not disallowed, the ACOM Debtors ask the Court to subordinate the claims to a position below all general unsecured claims asserted against Century or ACOM, pursuant to Section 510(c). Century/ML Cable Venture filed for Chapter 11 protection on September 30, 2002 (Bankr. S.D.N.Y. Case No. 02-14838). Century/ML Cable Venture is a New York joint venture of Century Communications Corporation, a wholly owned indirect subsidiary of Adelphia Communications Corporation, and ML Media Partners, LP. It holds the cable franchise in Leviton, Puerto Rico. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIANCE LEASING: Case Summary & 30 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Alliance Leasing Corporation Dba Alliance Leasing Of Tennessee Dba Autoplus 110 East Fowlkes Street Franklin, Tennessee 37064 Bankruptcy Case No.: 05- 02397 Chapter 11 Petition Date: February 28, 2005 Court: Middle District of Tennessee (Nashville) Judge: George C Paine Debtor's Counsel: Steven L. Lefkovitz, Esq. Law Offices Lefkovitz & Lefkovitz 618 Church Street, Suite 410 Nashville, Tennessee 37219 Tel: (615) 256-8300 Fax: (615) 250-4926 Total Assets: $24,190,072 Total Debts: $29,147,788 Debtor's 30 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Acura of Orange Park Unknown Jacksonville, FL 32244 American Coach Sales Unknown Cleveland, OH 44107 Arlington Toyota Unknown Jacksonville, FL 32225 Athens BMW Unknown Athens, GA 30606 Atlanta Classic Cars, Inc. Unknown Atlanta, GA Autoway Chevrolet Unknown Clearwater, FL 33764 Autoway Nissan of Brandon Unknown 9920 Adamo Drive Tampa, FL 33619 Bob Dunn Ford Unknown Greensboro, NC 27405 Coggin Motor Mall Unknown Pierce, FL 34982 Coggin Motor Mall Unknown Pierce, FL 34982 Delray Toyota Unknown Federal Highway Delray Beach, FL 33483 Duval Ford Unknown Jacksonville, FL 32210 Ed Voyles Honda Unknown Marietta, GA 30067 Gene Evans Ford Unknown Union City, GA 30291 Honda Carland Unknown Roswell, GA 30076 Infiniti of Coconut Creek Unknown Coconut Creek, FL 33073 Dodge Unknown Jacksonville, FL 32256 Jim Ellis Mazda Unknown Marietta, GA 30062 King Hyundai Unknown Landmark Dodge Inc. Unknown Jonesboro, GA 30236 Lexus of Pembroke Pines Unknown Pembroke Pines, FL 33027 Marietta Toyota Unknown Marietta, GA 30061 Milton Martin Honda Unknown Gainesville, GA 30504 Nissan of Union City Unknown Union City, GA 30291 Plantation Ford Unknown Plantation, FL 33317 Pompano Honda Unknown Pompano Beach, FL 33064 Prebul Auto Group Unknown Jeep Unknown Valdosta, GA 31602 West Palm Auto Mall Unknown Military Trail Beach, FL 33415 Weston Nissan Volvo Unknown ALLIED WASTE: Prices $600 Million of Senior Notes at 7.25% ---------------------------------------------------------- Allied Waste Industries, Inc.'s (NYSE: AW) wholly owned subsidiary, Allied Waste North America, Inc., has priced its offering of $600 million in aggregate principal amount of senior notes due 2015 at 7.25%. AWNA intends to use the proceeds from the proposed sale of these senior notes to redeem its $600 million of 7-5/8% senior notes due January 2006 pursuant to AWNA's previously announced tender offer. The offering of senior notes is a component of Allied Waste's multifaceted financing plan announced on Feb. 22, 2005. These new notes have been rated BB-, B2 and B+ by Standard & Poor's, Moody's and Fitch, respectively. The senior notes being offered by AWNA will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The senior notes are being offered only to qualified institutional buyers under Rule 144A and outside the United States in compliance with Regulation S under the Securities Act. This press release does not constitute an offer to sell, or a solicitation of an offer to buy, any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such an offer, solicitation, or sale would be unlawful. About the Company Allied Waste Industries, Inc., a leading waste services company, provides collection, recycling and disposal services to residential, commercial and industrial customers in the United States. As of Dec. 31, 2004, the Company served customers through a network of 314 collection companies, 165 transfer stations, 166 active landfills and 58 recycling facilities in 37 states. * * * As reported in the Troubled Company Reporter on Feb. 28, 2005, Fitch Ratings' indicative ratings for Allied Waste's (NYSE: AW) new securities are: * 'BB-' for the new senior secured credit facility, * 'B+' for the new 10-year senior secured, and * 'CCC+' for the new three-year mandatory convertible preferred stock. Existing ratings are: * 'BB-' for senior secured credit facility, * 'B+' for senior secured notes, * 'B' for senior unsecured notes, * 'B-' for senior subordinated notes, and * 'CCC+' for mandatory convertible preferred stock. The Rating Outlook is Negative. AMERICAN AIRLINES: Tulsa Team to Generate $500 Million by 2006 -------------------------------------------------------------- A joint team of management and labor leaders from American Airlines' Tulsa Maintenance & Engineering Base disclosed a "breakthrough" goal to generate $500 million and turn the base into a profit center by the end of 2006. The vision of transforming the base -- which employs more than 7,000 people -- from a traditional cost center into a profit center would be achieved through its highly successful Continuous Improvement process to reduce costs, generating revenue from third-party maintenance contracts, and bringing in-house any currently outsourced work that can be accomplished more efficiently in Tulsa. In early 2005, representatives from both TWU Local 514 and the Tulsa base management convened to set a new paradigm: to transform the world's largest aircraft maintenance base into a world-class, profitable facility. This shared commitment is a first for the Tulsa base, and is one of several large-scale, joint planning sessions that have occurred within American Airlines since the company and its unions launched the Working Together initiative in late 2003. "We are not letting others decide what our future should be -- together we are going to do everything within our ability to control our destiny and success," said Dennis Burchette, President of TWU Local 514. "We're doing that through the process of working together. Tulsa was one of the first sites where this practice began. With this joint vision in place, we are building on this process and breaking new ground -- not only at American Airlines but also in the airline industry." Carmine Romano, Vice President-Tulsa Base Maintenance, said, "We know we are bucking the trend of the aviation industry by keeping most of our maintenance work in house, but we have agreed to take a different approach to address our challenges. A key element in this approach is understanding that our employees represent a huge competitive advantage. The goals we have set forth can be achieved only by working together and empowering our employees. It will require a commitment by everyone -- not just one or two people, but everybody." American Airlines has made tremendous strides in the last year at its Tulsa facility, as well as at its two additional overhaul maintenance bases located in Fort Worth, Texas, and Kansas City, Missouri. From increased efficiencies to numerous cost-savings initiatives, American's maintenance and engineering employees have succeeded in reducing costs and making Maintenance, Repair and Overhaul (MRO) improvements to become a competitive MRO provider. As a result, American has already been competing for and winning bids to perform maintenance and engineering work for outside companies at all three of its bases. The ability to win such bids is a result of those employees' strong focus on working together and using the Continuous Improvement process to generate suggestions of improvements in the MRO processes. In turn, employees use the principles of the Continuous Improvement process to turn those ideas into plans of action that they execute. The American Airlines Tulsa Maintenance & Engineering Base is the headquarters for the airline's maintenance and engineering worldwide. It is the largest of the airline's overhaul bases, and the world's largest maintenance facility. Maintenance work at the Tulsa base is done on American's fleet of MD-80, Boeing 757 and Airbus A300 aircraft. Overhaul work also is conducted on the Pratt and Whitney JT-8 and GE CF6-80 engines. The base also is home to a wheel and brake overhaul facility and composite repair center. About American Airlines American Airlines is the world's largest airline. American, American Eagle and the AmericanConnection regional airlines serve more than 250 cities in over 40 countries with more than 3,800 daily flights. The combined network fleet numbers more than 1,000 aircraft. American's award- winning Web site -- http://www.AA.com/-- provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld Alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members serve more than 600 destinations in over 135 countries and territories. American Airlines, Inc. and American Eagle are subsidiaries of AMR Corporation (NYSE: AMR). * * * As reported in the Troubled Company Reporter on Feb. 28, 2005, Standard & Poor's Ratings Services placed its ratings on American Airlines Inc.'s (B-/Stable/--) equipment trust certificates on CreditWatch with negative implications. The rating action does not affect issues that are supported by bond insurance policies. "The CreditWatch review is prompted by Standard & Poor's concern that a prolonged difficult airline industry environment, characterized by high fuel prices, excess capacity, and intense price competition in the domestic market, has weakened the financial condition of almost all U.S. airlines and increased the risk of widespread simultaneous bankruptcies," said Standard & Poor's credit analyst Philip Baggaley. ASSET SECURITIZATION: Moody's Junks $37.467M Class A-4 Certs. ------------------------------------------------------------- Moody's Investors Service downgraded the rating of Class A-4 of Asset Securitization Corporation, Commercial Mortgage Pass-Through Certificates, Series 1997-MD VII and placed Classes A-2 and A-3 on review for possible. Moody's rating actions are: * Class A-2, $42,463,292, Fixed, currently rated Aa2; on review for possible downgrade * Class A-3, $39,965,452, Fixed, currently rated Baa3; on review for possible downgrade * Class A-4, $37,467,611, Fixed, downgraded to C from Caa1 Class A-4 was downgraded based on a revised estimate of loss on the defaulted Fairfield Inn Loan, which comprises 27.3% of the pool balance. According to estimates from the master and special servicers, an estimated loss of $80.2 million is expected, representing a loss severity of 48.5% on the original loan balance and a 60.1% loss severity on the loan balance at default. Classes A-2 and A-3 were placed on review for possible downgrade due to current interest shortfalls to the Classes and the likelihood that future shortfalls may occur. As of February 25, 2005, 42 of the original 50 Fairfield Inn properties have been sold. The special servicer has qualified offers on the eight remaining properties and has entered into sales contracts for six of the properties. The loan is expected to be fully resolved by mid 2005. The securitization documents do not provide for the recognition of interim losses for a pool of crossed loans, which results in the Fairfield Inn Loan continuing to accrue interest on its current principal balance of approximately $105.9 million. Advancing is limited by a large appraisal reduction, yet shortfalls continue to accrue. Collateral sales proceeds, when available, first reimburse the accrued interest shortfalls and then reduce the loan balance, thereby increasing the principal loss to the loan. Three loans, 101 Hudson Street, M&H Retail and the G&L Medical, which collectively represent 49.0% of the pool balance, have defeased. The Innkeepers Loan, The Insurance Company of the West Loan and the Design Center Loan remain in the pool. ATA AIRLINES: Court Will Appoint Examiner at Today's Hearing ------------------------------------------------------------ To Recall, NatTel, LLC, asked the United States Bankruptcy Court for the Southern District of Indiana to appoint an examiner to investigate and analyze the financial and other dealings between Debtor Chicago Express Airlines, Inc., on the one hand, and ATA Holdings Corp., ATA Airlines, Inc. and the other Debtors, on the other hand. Judge Lorch says that the Court will appoint an Examiner at the March 7, 2005, hearing. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/--is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago-Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04- 19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Gets Court Nod to Lease 3 Engines from GE Engine -------------------------------------------------------------- Pursuant to Section 363 of the Bankruptcy Code, ATA Airlines, Inc., sought and obtained the United States Bankruptcy Court for the Southern District of Indiana's authority to enter into new leases for three spare engines with GE Engine Leasing, as agent or principal. ATA Airlines has concluded its negotiations and has determined that entering into new medium-term leases with GE Engine Leasing for three spare engines still being used by ATA Airlines will allow the Airline to retain sufficient spare engines meeting its requirements at the most reasonable cost. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/--is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago-Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04- 19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) AVADO BRANDS: Can Start Soliciting Votes from Creditors ------------------------------------------------------- The Honorable Steven A. Felsenthal of the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, approved on Thursday, March 3, 2005, Avado Brands, Inc., and its debtor- affiliates' Disclosure Statement explaining their Plan of Reorganization. Jugde Felsenthal determined that the Disclosure Statement contains adequate information -- the right amount of the right kind of information necessary to permit creditors to make informed decisions when they vote to accept or reject the Plan. With a court-approved disclosure document in hand, the Debtors will start asking their creditors to vote to accept the proposed restructuring plan. A confirmation hearing to discuss the merits of the Plan will be held on April 21, 2005, at 10:30 a.m. Objections to the Plan, if any, must be filed and served by April 12. As previously reported, the Plan provides for the substantive consolidation of the Debtors' Estates and for the possible merger of certain debtor-affiliates. The Plan contemplates that the Reorganized Debtors will receive exit financing from three sources: (i) a $45 million New Tranche A Financing Facility; (ii) a $12.5 million New Tranche B Financing Facility from a group of Investors; and (iii) the sale of $17.5 million of New Convertible Preferred Stock to the Investors. The Investors will, subject to the conditions of their commitments and the New Tranche B Credit Agreement and the New Convertible Preferred Purchase Agreement, respectively, fund the New Tranche B Financing Facility and purchase the New Convertible Preferred Stock, but have offered to make available to all holders who will receive New Common Stock the opportunity to participate in the New Tranche B Financing Facility and the New Convertible Preferred Stock on a unitary basis. The Plan groups claims and interests into eight classes. Unimpaired Claims, consisting of Secured Claims and Non-Tax Priority Claims, will be paid in full. The Plan identifies six classes of Impaired Claims and describes how they'll be treated: a) General Unsecured Claims will receive their Pro Rata share of New Common Stock and the Litigation Trust Beneficial Interests; b) Senior Noteholder Claims will receive their Pro Rata share of the New Common Stock, the Subordinated Notes Redistribution Shares, the TECONS Redistribution Shares, the Litigation Trust Beneficial Interests and the TECONS Redistribution Interests; c) Subordinated Noteholder Claims will receive their Pro Rata share of Class A Warrants if those claims and Class 4 Claims vote to accept the Plan, but if those two claims vote to reject the Plan, the Subordinated Noteholder claimants will not receive any Class 1 Warrants; d) TECONS Claims will receive their Pro Rata share of Class B Warrants if those claims, Class 5 claims and Class 6 claims vote to accept the Plan, but if those three claims vote to reject the Plan, the TECONS claimants will not receive any Class B Warrants; e) Allowed Small Claims will receive cash equal to 14.5% of those Claims' amount; and f) Old Avado Stock Interests and Subordinated Claims will not receive or retain any property under the Plan. Objections to the Disclosure Statement, if any, must be filed and served by Feb. 28, 2005. Headquartered in Madison, Georgia, Avado Brands, Inc., owns and operates two proprietary brands comprised of 102 Don Pablo's Mexican Kitchens and 37 Hops Grillhouse & Breweries. The Company and its debtor-affiliates filed a voluntary chapter 11 petition on February 4, 2004 (Bankr. N.D. Tex. Case No. 04-31555). Deborah D. Williamson, Esq., and Thomas Rice, Esq., at Cox & Smith Incorporated, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $228,032,000 in total assets and $263,497,000 in total debts. BANC OF AMERICA: Fitch Puts Low-B Ratings on Two Mortgage Certs. ---------------------------------------------------------------- Banc of America Alternative Loan Trust -- BoAALT -- 2005-2 mortgage pass-through certificates are rated by Fitch Ratings: -- $255,379,363 classes 1-CB-1 through 1-CB-5, 2-CB-1, 3-A-1, 4-A-1, CB-IO, 15-IO, and A-PO 'AAA'; -- $100 class 1-CB-R and 1-CB-LR 'AAA'; -- $5,202,000 class B-1 'AA'; -- $2,134,000 class B-2 'A'; -- $1,200,000 class B-3 'BBB'; -- $1,067,000 class B-4 'BB'; -- $800,000 class B-5 'B'. The 'AAA' ratings on the senior certificates reflect the 4.25% subordination provided by: * the 1.95% class B-1, * the 0.80% class B-2, * the 0.45% class B-3, * the 0.40% privately offered class B-4, * the 0.30% privately offered class B-5, and * the 0.35% privately offered class B-6. Classes B-1, B-2, B-3, and the privately offered classes B-4 and B-5 are rated 'AA', 'A', 'BBB', 'BB', and 'B', respectively, based on their respective subordination. Class B-6 is not rated by Fitch. The ratings also reflect the quality of the underlying collateral, the primary servicing capabilities of Bank of America Mortgage, Inc. (rated 'RPS1' by Fitch), and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction is secured by four pools of mortgage loans. Loan groups 1, 2, 3, and 4 are cross-collateralized and supported by the B-1 through B-6 subordinate certificates. Approximately 32.24%, 45.08%, 38.40%, and 26.12% of the mortgage loans in group 1, 2, 3, and 4, respectively, were underwritten using Bank of America's 'Alternative A' guidelines. These guidelines are less stringent than Bank of America's general underwriting guidelines and could include limited documentation or higher maximum loan-to-value ratios. Mortgage loans underwritten to Alternative A guidelines could experience higher rates of default and losses than loans underwritten using Bank of America's general underwriting guidelines. Loan groups 1, 2, 3, and 4, in the aggregate, consist of 1,824 recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to four-family residential mortgage loans with original terms to stated maturity -- WAM -- ranging from 156 to 360 months. The aggregate outstanding balance of the pool as of Feb. 1, 2005 (the cut-off date) is $266,716,840, with an average balance of $146,226 and a weighted average coupon -- WAC -- of 6.014%. The weighted average original loan-to-value ratio -- OLTV -- for the mortgage loans in the pool is approximately 70.33%. The weighted average FICO credit score is 734. Second homes and investor-occupied properties constitute 3.88% and 51.23% of the loans in the group, respectively. Rate/term and cash-out refinances account for 18.15% and 35.76% of the loans in the group, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (25.17%), Florida (14.95%), and Texas (5.82%). All other states represent less than 5% of the aggregate pool balance as of the cut-off date. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Banc of America Mortgage Securities, Inc., deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, elections will be made to treat the trust as two separate real estate mortgage investment conduits. Wells Fargo Bank, National Association will act as trustee. BOYDS COLLECTION: Moody's Junks $34MM 9% Senior Subordinated Notes ------------------------------------------------------------------ Moody's Investors Service downgraded the debt ratings of The Boyds Collection, Ltd., following the company's release of weak fourth quarter 2004 earnings. The rating action reflects the persistent deterioration in Boyds' financial condition, given its inability to fully offset eroding profit trends in its higher-priced wholesale business, through the development of mass market/gift items and the launch of large format retail stores. While Boyds Collection has resolved near-term refinancing concerns with the signing of its new senior secured credit agreement, liquidity remains constrained by weakening operating cash flows, materially higher interest expense, tight financial covenants, and modest revolver availability. The outlook remains negative. The ratings affected by this action are: * Senior implied rating, downgraded to B3 from B2; * $40 million senior secured revolving credit facility due April 21, 2005, withdrawn; * $28 million senior secured term loan facility due April 21, 2005, withdrawn; * $34 million 9% senior subordinated notes due May 15, 2008, downgraded to Caa3 from Caa1; * Senior unsecured issuer rating, to Caa2 from B3. The ratings action follows Boyds Collection's fourth quarter earnings release, in which the company reported a 9% year-over- year sales decline in its first retail store (Gettysburg, Pennsylvania) and 8% lower wholesale sales. Management attributes the lower sales levels to reduced tourist traffic to Gettysburg and a 44% decline in wholesale bookings related to its sales force realignment. Moody's recognizes the strong rationale for Boyds Collection to shift its operating priorities given the evolving consumer activity in this sector towards national mass retailers, gift products, and high-end specialty stores. Nonetheless, the lower rating levels and negative outlook reflect the significant uncertainty surrounding execution of the strategy given the lower profitability of new products, existing retail and wholesale competition, challenging macro-economic conditions (freight costs and discretionary spending), and modest liquidity. In this last regard, Moody's notes that Boyds Collection has successfully refinanced bank debt maturities that had been scheduled for April 2005, but that revolver availability has declined, borrowing rates are materially higher, and covenant levels are tight relative to current and expected EBITDA. Weakening cash flows, modest revolver availability, and disappointing retail store performance have led the company to revise its retail marketing strategies and delay/rethink its expansion plans. The company expects to recapture lost wholesale sales, particularly through new national retail accounts and the pursuit of licensing opportunities (similar to its NASCAR line). Further, Boyds Collection anticipates that incremental costs associated with its new Pigeon Forge, Tennessee retail store (opened in November 2004) will be offset by $5 million in annualized savings from last year's sales force restructuring, thereby controlling growth in SG&A expenses. The inability to maintain positive cash flow and/or sustain borrowing access through the rapid and successful implementation of these initiatives could lead to further ratings downgrades during fiscal 2005. Moody's views upward rating pressures as unlikely over the coming year, in the absence of a material improvement in profitability and liquidity, or the infusion of equity capital. The rating action is tempered by Boyds Collection's strong collectibles heritage, with a reputation for high quality; by the company's historical debt reduction, which has enabled strong coverage metrics and positive pre-capex cash flows despite earnings declines; and by the credible (albeit challenging) growth and cost-savings initiatives being implemented by the new experienced management team. Headquartered in McSherrytown, Pennsylvania, The Boyds Collection, Ltd., is a designer, importer and distributor of hand-crafted collectibles and other specialty giftware products. Net sales for 2004 were approximately $104 million. BRIDGEPORT HOLDINGS: CDW Corp. Says Civil Claim is Without Merit ---------------------------------------------------------------- CDW Corporation (NASDAQ:CDWC) said that a civil claim filed against it in the United States Bankruptcy Court in Delaware by Bridgeport Holdings, Inc., Liquidating Trust is without merit. The Liquidating Trust alleges that CDW did not pay "reasonably equivalent value" for the Micro Warehouse assets purchased by it in September 2003. "CDW plans to vigorously contest the Liquidating Trust's claim. CDW is confident that it paid fair value for the assets that were purchased in a transaction that provided substantial benefits to Micro Warehouse and its creditors," said Christine A. Leahy, general counsel, CDW. CDW expects the outcome of this claim will not have a material effect on its financial condition. CDW added that Micro Warehouse bankruptcy filings clearly indicate that the CDW transaction was approved by Micro Warehouse's pre- petition secured lenders and the Micro Warehouse board of directors. The same filings indicate Micro Warehouse sought interest in purchasing the company from various strategic industry participants, including CDW. The possibility of a claim being brought had been disclosed in CDW's previous filings with the Securities and Exchange Commission. Statements made in the Liquidating Trustee's claim are consistent with previous public filings made in the bankruptcy court as early as January 2004. In September 2003, CDW paid approximately $22 million for selected assets of Micro Warehouse, including certain inventory, intellectual property and customer information. CDW also provided Micro Warehouse with a put option to purchase certain equipment located in Micro Warehouse's former distribution center for approximately $8 million and agreed to collect Micro Warehouse's existing trade receivables for the benefit of Micro Warehouse. About CDW Corp. CDW(R) (NASDAQ:CDWC), ranked No. 376 on the FORTUNE 500, is a leading provider of technology solutions for business, government and education. CDW is a principal source of technology products and services including top name brands such as Adobe, APC, Apple, Cisco, HP, IBM, Microsoft, Sony, Symantec, Toshiba and ViewSonic. CDW was founded in 1984 and today employs 3,800 coworkers. In 2004, the Company's coworkers generated sales of $5.7 billion. CDW's direct model offers one-on-one relationships with knowledgeable account managers; purchasing by telephone, fax, the company's award-winning CDW.com Web site, customized CDW@work(TM) extranets, CDWG.com Web site, and macwarehouse.com Web site; custom configured solutions and same day shipping; and pre- and post-sales technical support, with more than 120 factory-trained and A+ certified technicians on staff. About Bridgeport Bridgeport Holdings Inc. filed for chapter 11 protection on September 10, 2003 (Bankr. Del. Case No. 03-12825), disclosing more than $100 million in assets and debts. The Debtors are represented by lawyers at Kramer Levin Frankel & Naftalis LLP in New York and Brendan Linehan Shannon, Esq. and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, in Wilmington. C.A.S. HANDLING: Case Summary & 43 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: C.A.S. Handling, Inc. 1188 First Street, Building 140 New Windsor, New York 12553 Bankruptcy Case No.: 05-35455 Type of Business: The Debtor is a fixed base operator in the air travel and commerce industry located at Stewart International Airport in New York. The Company filed its first chapter 11 petition on Nov. 18, 2004 (Bankr. S.D.N.Y. Case No. 04-37669). Judge Cecelia G. Morris dismissed the case on Jan. 4, 2005 at the behest of the U.S. Trustee on the grounds that the workers' compensation insurance for CAS Handling's 29 employees were not paid. See http://www.cashandling.com/ Chapter 11 Petition Date: March 3, 2005 Court: Southern District of New York (Poughkeepsie) Debtor's Counsel: William M. Joyce, Esq. Law Office of William M. Joyce 1188 First Street, Building 140 New Windsor, New York 12553 Tel: (503) 730-7308 Fax: (503) 227-4245 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 43 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Department of the Treasury-I $887,258 P.O. Box 266 Niagra Square Station Buffalo, New York 14201 SWF Airport Acquisitions Inc. $280,747 1180 First Street New Windsor, NY 12553 State of New York Department of L $38,817 Unemployment Insurance Division Building 12, Room 256 Albany, NY 12240 New York State $37,723 Department of Taxation & Finance 90 South Ridge Street Rye Brook, NY 10573 Salandra & Serluca, CPAs $27,473 933 Mamaroneck Avenue Mamaroneck, NY 10543 Central Hudson Gas & Electric $26,895 284 South Avenue Poughkeepsie, NY 12601 Mr. & Mrs. R.C. Boccadoro, Sr. $20,000 6 Orchard Drive Rye, NY 10580 CDS Capital, LLC $16,454 c/o Warren Greher, Esq. 100 Commerce Drive New Windsor, NY 12553 Conoco Phillips $15,774 607 Adams Building Bartlesville, OK 74004 Rifton Aviation Services $15,390 1070 First Street, Building 118 New Windsor, NY 12553 41 North 73 West, Inc. $12,142 d/b/a Avitat Westchester c/o Peter Ackerman, Esq. 202 Mamaroneck Avenue White Plains, NY 10601 $11,603 GSE Services, LLC 240 Lapwing Court Manhasset, NY 11030 Hudson Valley Office Furniture $9,217 375-379 Main Mall Poughkeepsie, NY 12601 Fortbrand Services, Inc. $7,084 50 Fairchild Court Plainview, NY 11803 Sager Electric $6,000 69 Monarch Drive Newburgh, NY 12550 D Freskeeto Frozen Foods, Inc. $4,473 Route 209 Ellenville, NY 12428 LD Holdings, LLC $4,000 57 Riverview St. Walden, NY 12586 Gift Horse Interiors $2,643 259 Main Street Cornwall, NY 12518 Nextel Communications $2,615 P.O. Box 17621 Baltimore, MD 21297 Crudele Communications $2,457 13 Corey Lane Newburgh, NY 12550 Auto Truck Concepts, Inc. $2,300 130 Oakley Avenue White Plains, NY 10601 AA Quality Appliance Repair $2,300 236 South Plank Road Newburgh, NY 12550 WSI Weather Services $2,241 P.O. Box 101332 Atlanta, GA 30392 TLD America $1,877 812 Bloomfield Avenue Windsor, CT 06095 Coffee Systems $1,775 P.O. Box 306 Rifton, NY 12471 Gammon Technical Products, Inc. $1,591 P.O. Box 400 Manasquan, NJ 08736 Boston Aviation Services, Inc. $1,400 104 Mt. Auburn Street, 4th Cambridge, MA 02138 Merrills Office Supply $1,399 190 South Robinson Avenue Newburgh, NY 12550 Quill Office Supply $1,208 100 Shelter Road Lincolnshire, IL 60069 New York State Department of Agriculture $1,140 10-B Airline Drive Albany, NY 12235 Mr. Transmission $1,035 295 Windsor Hwy New Windsor, NY 12553 Oxford Health Plans $992 Imageland $898 A&M Enterprises, Inc. $773 d/b/a United Check Cashing c/o Moss and Associates, P.C. Determan Brownie Inc. $771 W. W. Grainger, Inc. $698 Vassar Brothers Medical Center $672 N.A.S. Security Systems, Inc. $639 Miller Environmental Group $500 Amthor Welding Service, Inc. $462 A-1 Communications Systems, Inc. $215 Champion Industries, Inc. $139 CB/HV, Inc. $25 CATHOLIC CHURCH: Request to Retain Pachulski Draws Fire in Spokane ------------------------------------------------------------------ As previously reported, The Official Tort Litigants Committee seeks authority from the U.S. Bankruptcy Court for the Eastern District of Washington to retain Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, as bankruptcy counsel in the Diocese of Spokane's Chapter 11 case. The Litigants Committee also asks Judge Williams to approve Pachulski's appearance pro hac vice as its attorney. Objections (1) Diocese of Spokane "The Pachulski Firm's rates are far in excess of those charged in the Spokane area," Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller LLP, complains. Mr. Paukert also notes that Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, maintains no office in the state of Washington. Travel expenses will be a significant and unreasonable administrative expense. Mr. Paukert points out that (i) Survivors Network of those Abused by Priests, and (ii) Voice of the Faithful, advocate reformation of the Catholic Church. Spokane's Chapter 11 proceeding is not a forum for reformation of the Catholic Church. Since Pachulski has disclosed that it contributed $5,000 to SNAP, Spokane asserts that the firm should also disclose: -- any contributions made to Voice of the Faithful, any chapters or similar bodies, any representative of SNAP or Voice of the Faithful, as well as any remuneration or promise of remuneration received from these two entities, regardless of whether the remuneration or promise of remuneration was related to representation of the Prepetition Committee; and -- any and all meetings with Barbara Blaine, or other representatives of SNAP or Voice of the Faithful. Without these disclosures, the Court cannot determine whether Pachulski is a disinterested person as required under Section 327 of the Bankruptcy Code. With respect Pachulski members James Stang and Hamid Rafatjoo's prior representation of the so-called Prepetition Committee of Clergy Sexual Abuse Survivors, Mr. Paukert maintains that no disclosure concerning reimbursement of expenses has been provided. Pachulski attempts to circumvent an obvious conflict of interest by representing that the Prepetition Committee is not a creditor, Mr. Paukert contends. It is clear that the substance of the prior representation was personal to the members of the Prepetition Committee. Any assertion that Messrs. Stang and Rafatjoo did not personally represent the members of the Prepetition Committee is simply form over substance. Pachulski's representation continued after the Petition Date. At the Diocese of Spokane's first meeting of creditors on January 5, 2005, Mr. Stang appeared on behalf of the members of the Prepetition Committee and questioned Spokane on various subjects. Therefore, Pachulski is not a disinterested person as required by Section 327(a). Pachulski has an actual conflict of interest in seeking to represent the Committee of Tort Litigants, and its retention must be denied. (2) U.S. Trustee Ilene Lashinsky, the U.S. Trustee for Region 14, wants the Committee of Tort Litigants' retention of Pachulski denied. Ms. Lashinsky explains that the retention of Pachulski and Esposito, George & Campbell, PLLC, appear to be for general counsel purposes, rather than simply one general counsel and one local counsel. Neither application proposes or actually divides the duties, or the scope of duties, or the general division of services to be provided. Because the two applications are written as employment of general counsel, Ms. Lashinsky requested proposed division of duties from both firms. However, she hasn't received a response. Ms. Lashinsky emphasizes that the division of duties should be known at the beginning of the case to facilitate effective communication and reduce administrative expenses, and not be left to the fee application review process. 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. 19; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Request to Retain Esposito Draws Fire in Spokane ----------------------------------------------------------------- The U.S. Trustee is complaining about the Official Tort Litigants Committee's request in the Diocese of Spokane's Chapter 11 case, to retain Esposito, George & Campbell, PLLC, as its counsel. The U.S. Trustee for Region 14, Ilene Lashinsky, contends that the retention of Esposito, George & Campbell, PLLC, is duplicative of the engagement of Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC. "Both the applications from the two firms appear to be for general counsel purposes, rather than simply one general counsel and one local counsel," Ms. Lashinsky explains. "Neither application proposes or actually divides the duties, or the scope of duties, or the general division of services to be provided." Ms. Lashinsky asked for proposed division of duties from both firms. However, she hasn't received a response. Ms. Lashinsky asserts that the division of duties should be known at the beginning of the case to facilitate effective communication and reduce administrative expenses. It shouldn't be left to the fee application review process. 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. 19; Bankruptcy Creditors' Service, Inc., 215/945-7000) C-BASS: Fitch Affirms Low-B Ratings on Five Series 1999-3 Classes ----------------------------------------------------------------- Fitch Ratings has affirmed C-Bass issues, series 1999-3: -- Class A at 'AAA'; -- Class M-1 at 'AA'; -- Class M-2 at 'A'; -- Class M-3 at 'A-'; -- Class M-4 at 'BBB'; -- Class M-5 at 'BBB-'; -- Class B-1 at 'BB+'; -- Class B-2 at 'BB'; -- Class B-3 at 'BB-'; -- Class B-4 at 'B'; -- Class B-5 at 'B-'. The affirmation on the above classes reflects credit enhancement consistent with future loss expectations and affects $34,333,113 of certificates. This transaction is a resecuritization of residential mortgage- backed securities that consist of prime quality mortgage loans. The credit enhancement levels for the above classes have increased from the original levels, and the performance of the underlying deals have been in line with our expectations. The mortgage pool has 27% of the original collateral remaining in the pool balance. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings web site at http://www.fitchratings.com/ CENTERPOINT ENERGY: Declares $0.10 per Share Common Stock Dividend ------------------------------------------------------------------ CenterPoint Energy, Inc.'s (NYSE: CNP) board of directors declared a dividend of $0.10 per common share, payable on March 31, 2005, to shareholders of record as of the close of business on March 16, 2005. This is in addition to the $0.10 per share dividend declared on Jan. 26, 2005, and payable on March 10, 2005. This action was taken to address technical restrictions that might limit the company's ability to pay a regular dividend during the second quarter of this year. Due to the limitations imposed under the Public Utility Holding Company Act, the company may declare and pay dividends only from earnings in the specific quarter in which the dividend is paid, absent specific authorization from the Securities and Exchange Commission. As a result of the seasonal nature of its utility businesses, the second quarter historically provides the smallest contribution to the company's annual earnings. The dividend declared recognizes that first quarter earnings generally provide a significant contribution to the company's annual earnings and are expected to be sufficient to support both the regular and the additional first quarter dividend declared on Thursday. This additional first quarter dividend is in lieu of the company's regular second quarter dividend. About the Company CenterPoint Energy, Inc. -- http://www.CenterPointEnergy.com/-- headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations and an electric generation business that the company is under a contract to sell. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total about $17 billion after giving effect to the first step in the sale of Texas Genco Holdings, Inc. With more than 9,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. * * * As reported in the Troubled Company Reporter on Nov. 16, 2004, Fitch Ratings affirmed the outstanding senior unsecured debt obligations of CenterPoint Energy, Inc., at 'BBB-'. Also affirmed are outstanding ratings of CNP subsidiaries CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. The Rating Outlook for all three companies has been revised to Stable from Negative. The rating action follows Fitch's assessment of the Nov. 10, 2004 determination by the Public Utility Commission of Texas -- PUCT -- that CenterPoint Energy will be permitted to recover a true-up balance of $2.3 billion, including accrued interest. Although this amount is significantly less than the $3.7 billion (excluding interest) true-up sought in CenterPoint Energy's original application with the PUCT, it is in line with Fitch's expectations when taken together with other expected cash proceeds. The conclusion of the true-up proceeding and expected securitization of stranded costs is the second of two highly anticipated deleveraging events factored into Fitch's ratings for CenterPoint Energy and its two wholly owned subsidiaries, CenterPoint Energy Houston Electric and CenterPoint Energy Resources. The first was the definitive agreement reached by CenterPoint Energy on July 21, 2004 to sell its 81% interest in Texas Genco Holdings for after-tax cash proceeds of $2.5 billion in a two-step transaction expected to be completed by the first half of 2005. These transactions, combined with the $177 million retail clawback payment owed by Reliant Energy, Inc., will enable CenterPoint Energy to delever its balance sheet by approximately $5 billion, an amount which will result in consolidated credit measures that are more consistent with CenterPoint Energy's current 'BBB-' rating. Upon completion of CenterPoint Energy's planned monetizations and subsequent retirement of certain debt obligations, Fitch expects CenterPoint Energy'a total debt-to- EBITDA ratio to trend toward the low 4.0 times (x) range, a level which is viewed as appropriate for the rating category given the low cash flow volatility exhibited by CenterPoint Energy's electric and gas distribution and interstate gas pipeline businesses. Fitch notes that the potential $500 million prefunding of CenterPoint Energy's future pension obligations may reduce the amount of funds immediately available for debt repayment. However, such a prefunding would reduce the company's future pension expense by approximately $40 million annually, as well as bolster CenterPoint Energy's equity base by reversing a charge taken in 2002. The Stable Rating Outlook reflects Fitch's expectation that CenterPoint Energy will secure a financing order for its planned securitization in a reasonable amount of time and complete the issuance of bonds by mid-2005. Any prolonged delays would be an unfavorable credit development. Fitch notes that CenterPoint Energy will likely apply for a rehearing of the amount disallowed by the PUCT and appeal to the Texas state courts, if necessary. Importantly, the Texas statute permits CenterPoint Energy to proceed with its plans to securitize the lower $2.3 billion true- up amount, regardless of the appeal status. These ratings are affirmed by Fitch: * CenterPoint Energy, Inc. -- Senior unsecured debt 'BBB-'; -- Unsecured pollution control bonds 'BBB-'; -- Trust originated preferred securities 'BB+'; -- Zero premium exchange notes (ZENS) 'BB+'. * CenterPoint Energy Houston Electric, LLC -- First mortgage bonds 'BBB+'; -- General mortgage bonds 'BBB' -- $1.3 billion secured term loan 'BBB'. * CenterPoint Energy Resources Corp. -- Senior unsecured notes and debentures 'BBB'; -- Convertible preferred securities 'BBB-'. CENTURY COMMS: Adelphia Says Ex-CEO's $13M Claim Should be Cut -------------------------------------------------------------- On July 1, 1997, Century Communications Corp. entered into an agreement with Leonard Tow, pursuant to which he was employed as Chief Executive Officer for a period through June 30, 1998, followed by an advisory period of five years. Brian E. O'Connor, Esq., at Willkie Farr & Gallagher, LLP, in New York, relates that Mr. Tow had the right to terminate the Employment Agreement upon a "change in control," and will be entitled to the same amounts and benefits he would be entitled if Century terminated the Agreement other than for cause. On March 5, 1999, Century agreed to merge with Adelphia Acquisition Subsidiary, Inc., with Acquisition Subsidiary surviving. The Merger constituted a "change in control" as the term was defined under the Employment Agreement. As a result of the change in control, Mr. Tow exercised his rights under the Employment Agreement and terminated his employment with Century. By agreement dated June 19, 1999, Mr. Tow and Century agreed to fix the amounts of payments and benefits to which he was entitled by virtue of the termination of his employment. Toward that end, the Termination Agreement provided for the creation of a special payment trust, from which Mr. Tow would be paid the severance and other prospective benefits resulting from the termination. On October 1, 1999, the merger of Century into Acquisition Subsidiary became effective. On the Merger Effective Date, Acquisition Subsidiary was renamed Arahova. Under the Merger, Adelphia Communications Corporation agreed to honor, and to cause Arahova to honor, all obligations arising under the Employment Agreement and the Termination Agreement. The Termination Agreement also provides that all Century's obligation to Mr. Tow and Mr. Tow's rights and remedies under the Employment Agreement by reason of the termination, will subsist and survive and remain in full force and effect. On January 7, 2004, Mr. Tow along with his wife Claire Tow, filed three identical claims for $13,460,526 each -- one against each of the estates of ACOM, Arahova and Century. The Employment Claims asserted payments allegedly owed to Mr. Tow pursuant to the Employment Agreement and the Termination Agreement. Based on their books and records, the ACOM Debtors found that only the estates of Century and ACOM bear liability for the Employment Claims. Accordingly, the ACOM Debtors ask the Court to disallow the Employment Claim against Arahova -- Claim No. 9195 for $13,460,526. The Employment Claim against Century and the Employment Claim filed against ACOM as guarantor are claims asserted by an employee for damages resulting from termination of an employment contract, thus, subject to the statutory cap under Section 502(b)(7) of the Bankruptcy Code. Consequently, the ACOM Debtors also ask the Court to: (a) allow the Century Employment Claim as general unsecured claim in Century's case at the reduced amount of $1,324,676, to the extent not otherwise disallowed under Section 502(d); and (b) allow the ACOM Employment Guarantee Claim in the reduced amount equal to the difference between the allowed amount of the Century Employment Claim and the distribution by Century's estate on account of the Claim, to the extent the Tows receive less than a full recovery on any allowed claim in respect of the Century Employment Claim. To the extent any portion of the Century Employment Claim or the ACOM Employment Guarantee Claim is not disallowed, the ACOM Debtors ask the Court to subordinate the claims to a position below all general unsecured claims asserted against Century or ACOM, pursuant to Section 510(c). Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. Century/ML Cable Venture filed for Chapter 11 protection on September 30, 2002 (Bankr. S.D.N.Y. Case No. 02-14838). Century/ML Cable Venture is a New York joint venture of Century Communications Corporation, a wholly owned indirect subsidiary of Adelphia Communications Corporation, and ML Media Partners, LP. It holds the cable franchise in Leviton, Puerto Rico. (Adelphia Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) CITICORP MORTGAGE: S&P Rates 13 Certificate Classes at Low-B ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on 10 classes from three series of Citicorp Mortgage Securities Inc.'s (CMSI) REMIC pass-through certificates. Concurrently, ratings are affirmed on 363 classes from 40 series. The raised ratings reflect the good performance of the mortgage loan pools and actual and projected credit support percentages that adequately support the raised ratings. Current credit support for the classes with raised ratings has increased to an average of 2.3x the credit support of the new rating level, ranging from 2.14x for class B-2 of series 2003-4 to 2.8x for class B-1 of series 2003-1. The higher credit support percentages resulted from significant principal prepayments and the shifting interest structure of the transactions. These deals have paid down to well below 35% of their original principal balances. As of the January 2005 remittance date, the upgraded transactions had total delinquencies below 1%, and 0.00% cumulative realized losses. The classes with affirmed ratings have remaining credit support that should be sufficient to support the certificates at their current rating levels. The two series issued in 1990 have experienced significant losses during their lifetime, and the ratings on the series issued through 1989 are limited due to the type of credit support. Credit support for the transactions differs depending upon the year of issuance. All remaining CMSI series through 1989 have a Citicorp-limited guarantee as the sole credit support. Beginning with series 1990-5, subordination and spread accounts were added to the Citicorp guarantee for credit support. Starting in 1991, the Citicorp guarantee was replaced by an initial cash deposit. Each series since 1993-14 has used the senior/subordinate structure without any spread account. Finally, series 1992-7 has certificate guarantee insurance policies issued by MBIA Insurance Corp. ('AAA' insurer financial strength rating). Ratings Raised Citicorp Mortgage Securities, Inc. REMIC Pass-Thru Certs Rating Series Class To From ------ ----- -- ---- 2002-12 B-1 AAA AA 2002-12 B-2 AA+ A 2002-12 B-3 A+ BBB 2003-1 B-1 AA+ AA 2003-1 B-2 AA A 2003-1 B-3 A BBB 2003-4 B-2 AA- A 2003-4 B-3 BBB+ BBB 2003-4 B-4 BB+ BB 2003-4 B-5 B+ B Ratings Affirmed Citicorp Mortgage Securities, Inc. REMIC Pass-Thru Certs Series Classes Rating ------ ------- ------ 1987-1 P-T AA 1987-3 A1 AA 1987-10 A1 AA 1988-1 A-3 AA 1988-11 A-1 AA 1988-17 A-1 AA 1989-1 A-1 AA 1989-13 A1 AA 1989-19 A-1 AA 1990-5 A-4, A-7 CC 1990-9 A-3 B 1992-7 A-1 AAA 1993-14 A-3, A-4, A-5 AAA 1994-3 A-4, A-5, A-13 AAA 1994-5 A-7 AAA 1994-6 A-3, A-4, A-5 AAA 1994-9 A-4, A-6, A-8 AAA 1994-12 A-3 AAA 1995-2 A-7, A-8 AAA 1998-5 A-1, A-3, A-4, M, B-1, B-2 AAA 1999-6 A AAA 1999-8 A-6, A-7 AAA 2001-18 IA-12,IIA-1 AAA 2002-10 IA-4, IIA-1 AAA 2002-11 IA-4, IA-10, IA-13,IA-14,IIA-1 AAA 2002-11 IIA-1, A-PO AAA 2002-12 IA-5, IA-6, IA-7, IA-8, IA-13, IA-14 AAA 2002-12 IA-15, IA-PO, IIA-1 AAA 2003-1 A-2, A-3, A-3A, A-4, A-5, A-6, A-7 AAA 2003-1 A-8, A-9, A-10, A-11, A-12, A-13, A-14 AAA 2003-1 A-15, A-16, A-17, A-18, A-19, A-20, A-21 AAA 2003-1 A-22, A-23, A-24, A-25, A-26, A-27, A-28 AAA 2003-1 A-29, A-30, A-31, A-32, A-33, A-34, A-35 AAA 2003-1 A-36, A-37, A-38, A-39, A-40, A-41, A-42 AAA 2003-1 A-43, A-44, A-45, A-46, A-47, A-48, A-49 AAA 2003-1 A-50, A-51, A-52, A-53, A-54, A-55, A-56 AAA 2003-1 A-57, A-58, A-59, A-65 AAA 2003-3 A-1, A-2, A-3, A-3A, A-4, A-5, A-6, A-7 AAA 2003-3 A-8, A-9, A-10, A-11, A-12, A-13, A-14 AAA 2003-3 A-15, A-16, A-17, A-18, A-19, A-20, A-21 AAA 2003-3 A-22, A-23, A-24, A-26, A-27, A-28, A-29 AAA 2003-3 A-29A, A-30, A-31, A-32, A-33, A-PO AAA 2003-4 A-1, A-2, A-3, A-4, A-5, A-IO AAA 2003-4 B-1 AA 2003-6 IA-1, IA-2, IA-3, IA-4, IA-IO, IA-PO AAA 2003-6 IIA-1, IIA-2, IIA-3, IIA-IO AAA 2003-6 B-1 AA 2003-6 B-2 A 2003-6 B-3 BBB 2003-6 B-4 BB 2003-6 B-5 B 2003-7 A-1, A-PO, A-IO AAA 2003-7 B-1 AA 2003-7 B-2 A 2003-7 B-3 BBB 2003-7 B-4 BB 2003-7 B-5 B 2003-8 A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8 AAA 2003-8 A-9, A-10, A-11, A-12, A-13, A-14, A-15 AAA 2003-8 A-16, A-PO, A-IO AAA 2003-9 A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8 AAA 2003-9 A-9, A-10, A-11, A-12, A-13, A-14, A-15 AAA 2003-9 A-16, A-17, A-18, A-19, A-20, A-21, A-22 AAA 2003-9 A-23, A-24, A-PO, A-IO AAA 2003-9 B-1 AA 2003-9 B-2 A 2003-9 B-3 BBB 2003-9 B-4 BB 2003-9 B-5 B 2003-10 A-1, A-2, A-3, A-4, A-PO AAA 2003-10 B-1 AA 2003-10 B-2 A 2003-10 B-3 BBB 2003-10 B-4 BB 2003-10 B-5 B 2003-11 IA-1, IA-2, IA-3, IA-4, IA-5, IA-6 AAA 2003-11 IA-7, IA-8, IA-PO, IA-IO,IIA-IO,IIA-1 AAA 2003-11 IIA-2, IIA-3, IIA-4, IIA-5, IIA-6 AAA 2003-11 IIA-7, IIA-8, IIA-9, IIA-10, IIA-11 AAA 2003-11 IIA-12, IIA-13, IIA-14 AAA 2004-3 A-1, A-2, A-3, A-4, A-5, A-6, A-7 AAA 2004-3 A-8, A-9, A-10, A-11, A-12, A-PO AAA 2004-4 A-1, A-2, A-3, A-4, A-5, A-6, A-7 AAA 2004-4 A-8, A-9, A-10, A-11, A-12, A-13, A-PO AAA 2004-4 B-1 AA 2004-4 B-2 A 2004-4 B-3 BBB 2004-4 B-4 BB 2004-4 B-5 B 2004-5 IA-1, IA-2, IA-3, IA-4, IA-5, IA-6 AAA 2004-5 IA-7, IA-8, IA-9, IA-10, IA-11, IA-12 AAA 2004-5 IA-13, IA-14, IA-15, IA-16, IA-17, IA-18 AAA 2004-5 IA-19, IA-20, IA-21, IA-22, IA-23, IA-24 AAA 2004-5 IA-25, IA-26, IA-27, IA-28, IA-29, IA-30 AAA 2004-5 IA-31, IA-PO, IIA-1, IIA-2, IIA-3, IIA-4 AAA 2004-5 IIA-5, IIA-6, IIA-PO, IIIA-1, IVA-1 AAA 2004-5 IVA-2 IVA-3, IVA-PO AAA 2004-5 B-4 BB 2004-5 B-5 B 2004-7 IA-1, IA-2, IA-3, IA-4, IA-5, IA-6 AAA 2004-7 IA-7, IA-8, IA-PO, IIA-1, IIA-PO AAA CLEARLY CANADIAN: Completes $1-Mil Short-Term Loan with BG Capital ------------------------------------------------------------------ Clearly Canadian Beverage Corporation (CNQ:CCBC)(OTCBB:CCBC) had completed a US$1,000,000 short term financing facility with BG Capital Group Ltd. The Company said it has since entered into a letter of intent with BG Capital for an additional funding facility. Such additional funding is subject to Clearly Canadian and BG Capital concluding definitive agreements, and thereafter, obtaining any necessary regulatory and shareholder approvals. The Company will issue a further news release once definitive agreements with BG Capital have been concluded. As reported in the Troubled Company Reporter on Feb. 22, 2005, BG Capital has advanced US$1,000,000 to Clearly Canadian under a secured loan agreement and demand note. The BG Capital Loan bears interest at a rate of 10% per annum and is payable within 90 days, if demand for repayment is made by BG Capital. As well, from the Company's perspective, if it chooses to seek additional financing from any third parties, then it will be required to pay a penalty or break fee to BG Capital. Such penalty would require Clearly Canadian to pay all accrued and unpaid interest at the time of such prepayment of the BG Capital Loan at a rate of 50% per annum. About BG Capital BG Capital Group is a merchant bank specializing in small to mid- cap growth opportunities. Its holdings include 100%, 50% and largest shareholder positions in numerous public and private companies throughout the United States and Canada, all of which are profitable, with cumulative revenues in excess of US$100 million. BG Capital has over 20 years of investor relations experience as well as in-depth marketing and financial management expertise. It has an incredible track record of success in identifying promising enterprises and profitably growing them with an effective hands-on management style. About Clearly Canadian Based in Vancouver, B.C., Clearly Canadian Beverage Corporation -- http://www.clearly.ca/-- markets premium alternative beverages and products, including Clearly Canadian(R) sparkling flavoured water, Clearly Canadian O+2(R) oxygen enhanced water beverage and Tre Limone(R) which are distributed in the United States, Canada and various other countries. At September 30, 2004, Clearly Canadian's balance sheet showed a $681,000 stockholders' deficit, compared to $1,125,000 in positive equity at December 31, 2003. COLLINS & AIKMAN: S&P Slices Rating, Citing Liquidity Concerns -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Troy, Michigan-based Collins & Aikman Corp. to 'B' from 'B+' and placed the rating on CreditWatch with negative implications. At the same time, the senior secured, senior unsecured, and subordinated debt ratings on the company were also lowered and placed on CreditWatch. "The rating actions reflect our increased concerns about the company's liquidity and financial flexibility amid an increasingly difficult operating environment for automotive suppliers," said Standard & Poor's credit analyst Martin King. Collins & Aikman has total debt of about $2 billion. The company has been affected by deteriorating industry conditions for automotive suppliers in recent months because of reduced vehicle production, higher raw material costs, and more constrained liquidity. Weak production levels may continue later in the year if the lackluster sales pace does not improve. "Previously, we expected Collins & Aikman to show meaningful improvements in its operating results during 2005 because of new business additions and cost savings. Current industry challenges, however, will likely slow or negate the expected improvement," Mr. King said. Collins & Aikman, which makes vehicle interior products such as instrument panels, carpet, and plastic components, purchases about $1 billion of raw materials that are exposed to cost increases, including steel and plastic-related commodities. CONMED CORP: Schedules May 17 Annual Shareholders' Meeting ---------------------------------------------------------- CONMED Corporation's (Nasdaq: CNMD) Annual Meeting of Shareholders will be held at the company's corporate offices, 525 French Road, Utica, NY 13502 on Tuesday, May 17, 2005 at 3:30 P.M. (New York Time). Shareholders of record at the close of business on March 30, 2005 shall be entitled to vote at the 2005 Annual Meeting. About the Company CONMED is a medical technology company with an emphasis on surgical devices and equipment for minimally invasive procedures and monitoring. The Company's products serve the clinical areas of arthroscopy, powered surgical instruments, electrosurgery, cardiac monitoring disposables, endosurgery and endoscopic technologies. They are used by surgeons and physicians in a variety of specialties including orthopedics, general surgery, gynecology, neurosurgery, and gastroenterology. Headquartered in Utica, New York, the Company's 2,800 employees distribute its products worldwide from eleven manufacturing locations. * * * As reported in the Troubled Company Reporter on Nov. 19, 2004, Moody's Investors Service assigned a rating of B2 for ConMed Corporation's $150 million senior subordinated convertible notes, due 2024. Moody's also affirmed ConMed's existing ratings. The ratings outlook remains stable. Moody's took these rating actions: (i) Assign a B2 rating on ConMed's $150 million senior subordinated convertible notes, due 2024 (ii) Affirm the Ba3 rating on ConMed's $240 million guaranteed senior secured credit facility consisting of a $100 million revolving credit facility, due 2007, and a $140 million Term Loan B, due in 2009; (iii) Affirm ConMed's Senior Implied Rating of Ba3; (iv) Affirm ConMed's Senior Unsecured (non-guaranteed exposure) Issuer Rating of B1; and (v) Affirm a stable ratings outlook. The ratings reflect steady and consistent internal revenue growth, increasing operating cash flow, and a stable level of capital expenditures required to support its business plan. Despite increased debt associated with the recent $80 million acquisition of the Endoscopic Product Line from C. R. Bard and a higher debt to capitalization ratio of 42%, ConMed's credit metrics have improved. By the end of the 2004, the ratio of earnings before interest and taxes to interest is projected to expand to over 7.5 times and the ratio of adjusted free cash flow to adjusted debt should improve to approximately 18%. COOPER TIRE: Moody's Pares Preferred Rating to (P)Ba2 from (P)Ba1 ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Cooper Tire & Rubber Company; senior unsecured to Baa3 from Baa2, and commercial paper to Prime-3 from Prime-2. The action concludes the review announced in January 2005. The downgrade reflects Moody's expectations that Cooper's debt protection measures will remain under pressure through 2005 as a result of the following challenges. First, although the recently concluded sale of Cooper Standard Automotive (CSA) for $1.2 billion will improve Cooper's liquidity, CSA had recently generated over 60% of Cooper's consolidated earnings; the elimination of these earnings, in conjunction with the company's plan to use proceeds to fund a $200 million share repurchase and to reduce debt by $200 million, will result in a material erosion in coverage measures. Second, the operating performance of the remaining tire business has been under pressure as a result of rising commodity prices and supply constraints while it transitions its domestic manufacturing and sources tires from Asia. Cooper Tire's operating performance will likely increase as a result of rising demand for higher margin tires, resolution of its manufacturing transition, and improving availability of lower-cost tires from overseas sources. However, the pace and degree of this improvement remains uncertain, and the near-term investment required to expand its product offering and to complete its international initiatives will be sizable. Third, Cooper Tire will continue to face competitors in the global tire market who benefit from greater size, geographic scope, and financial flexibility. Finally, uncertainties continue as to the remaining application of the CSA sale proceeds. As Cooper contends with these near-term challenges, it will benefit from considerable liquidity in the form of cash balances of over $450 million (pro forma of announced security purchases) and committed bank facilities of $350 million compared with $574 million in debt (pro forma of repurchase activity). The stable outlook anticipates that Cooper Tire's operating margins and debt protection measures will steadily improve as a result of better demand fundamentals and the ability to source product from lower-cost international facilities. The outlook also anticipates that the company will maintain a strong liquidity position as it rebuilds its operating performance. The ratings lowered are: * Senior Unsecured to Baa3 from Baa2 * Commercial Paper to P-3 from P-2 * Shelf filings for: Senior unsecured to (P)Baa3 from (P)Baa2 * Preferred to (P)Ba2 from (P)Ba1 The downgrade reflects higher leverage, which the tire group will have to service going forward. Adjusting for the planned share repurchase, debt reductions, and $107 million investment in Kumho, Cooper's debt (including an estimate of the present value of operating leases) would be approximately $630 million and cash roughly $450 million. On a pro forma basis adjusted debt (ex pension)/ trailing EBITDAR from the continuing tire business would be approximately 3.4 times when debt is measured on a gross basis. However, the pace at which both shares and notes are repurchased is uncertain. In the interim both gross debt and cash balances may be higher than these pro forma calculations. Despite this strong liquidity position Cooper's operating performance from the continuing business has been weak with operating margins under 3% and EBIT/coverage of continuing interest under two times. Cooper Tire's most recent results have been negatively impacted from a combination of rising raw material costs, manufacturing transition and related efficiency issues in its domestic plants, and limited availability of imported tires it had planned to fill its medium and value product line offerings. A price increase to recover higher costs has been announced for March. Transition, sourcing and production efficiency issues are expected to be resolved as 2005 progresses. With North American replacement tire demand expected to grow in the 2.5%-3.0% range in 2005 and the traditional seasonal weighting of sales in the 3rd and 4th quarters, the scope for higher revenues and better results ought to improve through the year, thereby lowering leverage multiples over time. Cooper is also expected to increase its reinvestment in the tire business and joint ventures in Asia such that free cash flow from continuing operations will be constricted. In the interim the company will retain substantial cash balances and is expected to keep substantial committed credit facilities (currently $350 million) to maintain excellent liquidity over the coming year. Cooper Tire continues with a reasonable market share in the North American replacement tire business, which historically (excluding the 2000-2003 period influenced by large re-call programs) has experienced stable demand and prospectively should return to annual growth rates in the 2.5% range. It has established consumer brand names and distribution channels. Further, its balance sheet will continue with substantial liquid assets and tangible net worth. Its pension funding requirements post the recent supplemental contributions are also manageable. Over time the domestic manufacturing transition and international sourcing for medium and value product offerings should result in improved margins and cash flow metrics through expanded product offerings with higher margins and a competitive cost structure. The company continues to face larger global competitors with substantial resources. Cooper Tire is concentrated in the North American market with its international revenues currently representing roughly 10% of revenues. Achieving price realizations to offset rising raw material costs will be an ongoing challenge although all competitors face similar pressures. Uncertainty over the re-investment of the remaining CSA sale proceeds, the timing at which portfolio and other investments in the tire business may generate cash returns, or the potential for further share holder return actions also flavor the risk environment. Further, Cooper's capitalization will be leveraged with gross adjusted debt (ex-pension)/ EBITDAR on a trailing basis at levels unrepresentative of investment grade credits, which in turn focuses attention on the prospective use of the remaining cash and how quickly operating margins improve. In order to become more solidly positioned within the Baa3 rating Cooper will need to make steady progress in strengthening its operating results while maintaining sound liquidity. This progress would be reflected in annual operating margins of 5%, EBIT/I coverage of 4 times, and debt to sustained levels of EBITDA of under 2 times. Factors that could result in lower ratings include: erosion in market share; deterioration in operating margins from an inability to realize pricing actions to offset higher raw material costs; an aggressive use of the remaining liquid assets in additional shareholder return actions that would take debt to capitalization levels towards 50%, or higher, or leave debt/EBITDA significantly higher than 2 times; stagnant or deteriorating EBITDA generation which would cause debt/EBITDA to remain greater than 2 times; or if retained cash flow to balance sheet debt is not being generated in excess of 25%. Cooper Tire & Rubber Company specializes in the design, manufacture and sale of passenger car, light and medium truck, motorcycle and racing tires as well as tread rubber and related equipment. The company is headquartered in Findlay, Ohio and has 39 global manufacturing, sales, distribution, technical and design facilities. CREDIT SUISSE: Fitch Holds B+ Rating on $5.1MM Mortgage Securities ------------------------------------------------------------------ Fitch Ratings affirms the following classes of Credit Suisse First Boston Mortgage Securities 1995-M1: -- $36.1 million class A at 'AAA'; -- $5.5 million class B at 'AA'; -- $7.8 million class C at 'A'; -- $2.8 million class D at 'BBB-'; -- $5.1 million class E at 'B+'; -- Interest-only class AX at 'AAA'. The $1.5 million class F-1 and $1.2 million class F-2 remain rated 'CCC'. Fitch does not rate the $185,355 class G-1 certificates. Class G-2, also not rated by Fitch, has been reduced to zero due to realized losses. The rating affirmations are the result of paydown and ongoing concerns regarding the borrower's ability to meet debt service obligations due to the expiration of their low income housing tax credits -- LIHTC. As of the January 2005 distribution report the transaction balance has decreased 21% to $60 million from $77.9 million at issuance. Twenty of the transaction's 28 original loans remain outstanding. There is one delinquent loan (1.22%), located in Crosby, Minnesota, which is currently with the special servicer. The special servicer is in the process of foreclosing on the property, losses may affect class F-2 upon liquidation of the property. The transaction is composed of LIHTC properties. Tax credits are earned over 15 years and paid out over 10 years. All loans in the transaction have ended their tax-free period. Fitch is concerned that the borrowers may have difficulty funding debt service without the tax credits. The transaction's structure is such that losses are absorbed by classes depending on the originator of the disposed loan, with Dynex originated loans absorbed first by class G-2, then G-1, followed by F-2 and F-1. CBA originated loans first to class G-1, then G-2, followed by classes F-1 and F-2. CREDIT SUISSE: Fitch Assigns Low-B Rating on Six Mortgage Certs. ---------------------------------------------------------------- Fitch Ratings downgrades the Credit Suisse First Boston's - CSFB -- commercial mortgage pass-through certificates, series 2001-CF2: -- $5.5 million class N to 'CCC' from 'B-'. In addition, Fitch affirms these following classes: -- $6.2 million class A-1 'AAA'; -- $153.8 million class A-2 'AAA'; -- $129.8 million class A-3 'AAA'; -- $523.2 million class A-4 'AAA'; -- Interest-only classes A-CP and A-X 'AAA'; -- $43.8 million class B 'AA+'; -- $49.3 million class C 'A+'; -- $10.9 million class D 'A'; -- $16.4 million class E 'A-'; -- $18.9 million class F 'BBB+'; -- $14 million class G 'BBB'. -- $16.4 million class H 'BB+'; -- $21.9 million class J 'BB'; -- $8.2 million class K 'BB-'; -- $9.3 million class L 'B+'; -- $9.9 million class M 'B'. Fitch does not rate the $7.1 million class O, $14.8 million class NM-1, $17.1 million class NM-2, or $1 million class RA certificates. The downgrade is due to the expected losses on several of the specially serviced loans. As of the February 2005 distribution date, the pool's aggregate collateral balance has been reduced by approximately 4.5%, to $1.077 billion from $1.128 billion at issuance. Currently, 10 loans (2.4%) are in special servicing, with losses expected on several of these loans. The largest loan in special servicing (0.9%) is secured by an office property located in Olivette, Missouri, and is 90 plus days delinquent. The loan was transferred to the special servicer in November 2004 as a result of an increase in vacancy due to lease expirations. The three largest tenants of the property, representing 54.3% of the total leasable area, announced they would not renew their leases following their expiration. The second largest specially serviced loan (0.5%) is an office property located in Tampa, Florida, and is 90 plus days delinquent. The loan was transferred to the special servicer in February 2004 as a result of an increase in vacancy. DAVITA INC: S&P Puts Low-B Ratings to Proposed $4.5 Billion Loans ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on dialysis services provider DaVita, Inc., to 'BB-' from 'BB'. At the same time, Standard & Poor's assigned its 'BB-' senior secured debt rating and '2' recovery rating to the company's proposed $250 million senior secured revolving credit facility due in 2011, to its proposed $250 million senior secured term loan A due in 2011, and to its proposed $2.650 billion senior secured term loan B due in 2012. Standard & Poor's also assigned its 'B' unsecured debt rating to DaVita's proposed $500 million of senior unsecured notes due in 2013 and assigned its 'B' subordinated debt rating to the company's proposed $850 million of senior subordinated notes due in 2015. Also, Standard & Poor's removed its ratings on DaVita's existing debt from CreditWatch (where they were placed with developing implications on Dec. 7, 2004) and withdrew all its ratings on that debt, which will be refinanced. The outlook is stable. The company is expected to use the proceeds from the term loans, unsecured notes, and subordinated notes, in addition to $25 million of revolving credit borrowings and about $214 million of on-hand cash, to acquire the U.S. assets of Gambro AB. DaVita will pay nearly $3.1 billion to purchase the U.S. assets, $1.359 billion to repay existing debt, and about $80 million to pay accrued interest and deal-related fees and expenses. Pro forma for the transaction, DaVita will have approximately $4.3 billion of total debt outstanding. "The ratings on DaVita, Inc., reflect its dependence on the treatment of a single disease state, which makes it vulnerable to cuts or insufficient increases in third-party reimbursement rates," said Standard & Poor's credit analyst Jesse Juliano. "The ratings also reflect the company's cost-management challenges, the integration risks associated with the Gambro transaction, and DaVita's aggressive financial policies. These factors are partly offset by the stabilizing effects of DaVita's recurring revenue stream, a large clinic network with a leading U.S. market position, and the company's attractive growth prospects." Pro forma for the Gambro transaction, El Segundo, California-based DaVita will almost double its number of centers to more than 1,200. The company owns and operates dialysis centers throughout the U.S. that provide hemodialysis and ancillary services, mainly on an outpatient basis, to those suffering from chronic kidney failure. DaVita also provides acute inpatient dialysis services. DLJ MORTGAGE: Fitch Assigns BB+ Rating on $26.9MM Mortgage Cert. ---------------------------------------------------------------- DLJ Mortgage Acceptance Corp., commercial mortgage pass-through certificates, series 1997-CF1: -- $97.1 million class A-1B at 'AAA'; -- $24.7 million class A-2 at 'AAA'; -- $31.3 million class A-3 at 'AA-'; -- Interest-only class S at 'AAA'; -- $26.9 million class B-1 at 'BB+'. -- Classes B-2, B-3, B-4 and C are not rated by Fitch. Class A-1A has been paid in full. The rating affirmations reflect the transaction's current stable performance. As of the February 2005 distribution date, the pool's aggregate certificate balance has been reduced 54.3% to $204.9 million from $448 million at issuance. The deal has realized losses in the amount of $38.3 million since issuance. There are currently two loans (2.3%) in special servicing which are real-estate owned -- REO -- and losses are expected. The largest specially serviced loan (1.3%) is a hotel property located in Beaufort, South Carolina. The property is currently under contract with a prospective purchaser. The second largest loan (0.9%) is an industrial property located in Warren, Michigan. The property is currently listed for sale and the special servicer is currently evaluating a purchase order. DMX MUSIC: Section 341(a) Meeting Slated for Mar. 24 ---------------------------------------------------- The U.S. Trustee for Region 3 will convene a meeting of DMX Music Inc., and its debtor-affiliates' creditors at 2:00 p.m., on March 24, 2005, at J. Caleb Boggs Federal Court House, 844 King Street, 2nd Floor, Room 2112, Wilmington, Delaware 19801. 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 Los Angeles, California, DMX MUSIC, Inc., -- http://www.dmxmusic.com/--is majority-owned by Liberty Digital, a subsidiary of Liberty Media Corporation, with operations in more than 100 countries. DMX MUSIC distributes its music and visual services worldwide to more than 11 million homes, 180,000 businesses, and 30 airlines with a worldwide daily listening audience of more than 100 million people. The Company and its debtor-affiliates filed for chapter 11 protection on Feb. 14, 2005 (Bankr. D. Del. Case No. 05-10431). The case is jointly administered under Maxide Acquisition, Inc. (Bankr. D. Del. Case No. 05-10429). Curtis A. Hehn, Esq., and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. DMX MUSIC: Wants to Hire Giuliani Capital as Financial Consultants ------------------------------------------------------------------ DMX Music Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to employ Giuliani Capital Advisors, LLC, as their financial consultants and restructuring advisors. Giuliani Capital is expected to: a) advise the Debtors with strategies regarding the potential sale of their capital stock or all or substantially all of the assets and liabilities of the Debtors' businesses, and assist the Debtors in preparing a descriptive memorandum for the potential sale; b) assist the Debtors in contacting prospective buyers for the potential sale of their assets and advise the Debtors in negotiations regarding the sale of those assets; c) advise the Debtors' management with respect to available capital restructuring and financing alternatives, and in preparing for meeting and presenting information to parties in interest and their respective advisors; d) analyze the Debtors' quality of earnings and cash flow from buyers, balance sheet accounts and working capital trends from prospective buyers; e) assess the Debtors' nonrecurring or unusual transactions and aggressive or conservative accounting policies and facilitate efficiency of buyer due diligence process; f) assist the Debtors' management in responding to buyer questions and in preparation of closing financial schedules; and g) provide all other financial and restructuring advisory services to the Debtors that are necessary in their chapter 11 cases. Marc Bilbao, a Managing Director at Giuliani Capital, discloses that the Firm received a $125,000 retainer. Mr. Bilbao reports Giuliani Capital's terms of compensation: a) upon a completion of a successful asset sales transaction, a Transaction Fee equal to .90% for an asset sale valued at $90 million, a Transaction Fee equal to 1% for a sale valued from $90 million to $115 million, a Transaction Fee equal to 1.5% for a sale valued from $115 million to $125 million, and a Transaction Fee equal to 3% for a sale valued at over $125 million; b) for Restructuring Advisory services: (i) a Monthly Fee of $100,000 commencing from the Petition Date up to a period of five months, and (ii) a $250,000 Restructuring Fee upon confirmation of a plan of reorganization. Giuliani Capital assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Los Angeles, California, DMX MUSIC, Inc., -- http://www.dmxmusic.com/--is majority-owned by Liberty Digital, a subsidiary of Liberty Media Corporation, with operations in more than 100 countries. DMX MUSIC distributes its music and visual services worldwide to more than 11 million homes, 180,000 businesses, and 30 airlines with a worldwide daily listening audience of more than 100 million people. The Company and its debtor-affiliates filed for chapter 11 protection on Feb. 14, 2005 (Bankr. D. Del. Case No. 05-10431). The case is jointly administered under Maxide Acquisition, Inc. (Bankr. D. Del. Case No. 05-10429). Curtis A. Hehn, Esq., and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. DURA AUTOMOTIVE: Insulates New CFO From Any Change in Control ------------------------------------------------------------- Dura Automotive Systems, Inc., entered into a Change of Control Agreement with Keith Marchiando, the Company's newly appointed Chief Financial Officer. The Agreement, signed March 1, 2005, provides that if Mr. Marchiando's employment is terminated within six months preceding (in contemplation of a change of control) or two years following the occurrence of a change of control, then Mr. Marchiando will be entitled to: (i) receive a lump sum severance benefit equal to three year's base salary plus his average annual incentive compensation, (ii) receive all base salary accrued but not paid and any vacation accrued but not used as of the termination date, (iii) receive any unpaid incentive compensation for the year prior to the termination date and the pro rata incentive compensation for the time elapsed during the year in which the termination occurs, (iv) elect to continue health and dental coverage for 36 months, (v) receive a lump sum benefit payment equal to the amount he would have been entitled to receive under the 2003 Supplemental Executive Retirement Plan as of the termination date assuming he had 10 additional years of service, and (vi) extend the exercise period of stock options granted to Mr. Marchiando under the 1998 Stock Incentive Plan that are exercisable as of the termination date or pursuant to the change of control. The Company's obligation to provide severance benefits is conditioned upon Mr. Marchiando's delivery of a general release of claims. This Agreement with Mr. Marchiando is substantially the same as similar agreements executed by other Dura executives previously disclosed in regulatory filings with the Securities and Exchange Commission. About the Company DURA Automotive Systems, Inc. -- http://www.duraauto.com/-- is the world's largest independent designer and manufacturer of driver control systems and a leading global supplier of seating control systems, engineered assemblies, structural door modules and integrated glass systems for the global automotive industry. The company is also a leading supplier of similar products to the North American recreation and specialty vehicle markets. DURA sells its automotive products to every North American, Japanese and European original equipment manufacturer (OEM) and many leading Tier 1 automotive suppliers. DURA is headquartered in Rochester Hills, Mich. * * * Senior Secured Lenders Relax Financial Covenants As reported in the Troubled Company Reporter last week, DURA Automotive Systems, Inc. (Nasdaq:DRRA), completed an amendment to its senior secured revolving credit facility. "The amendment ensures DURA covenant relief over the next six quarters and will provide the company with significantly improved liquidity," the Company said in a press release. The Lenders agree to allow the Company's: (a) Total Debt to EBITDA Ratio to be something higher than 5.0:1.0; (b) Senior Leverage Ratio to be exceed 2.5:1.0 by some amount; and (c) Interest Coverage Ratio to fall below 2.0:1.0. DURA AUTOMOTIVE SYSTEMS, INC., as Parent Guarantor, and DURA OPERATING CORP., TRIDENT AUTOMOTIVE LIMITED, DURA HOLDING GERMANY GMBH, DURA AUTOMOTIVE SYSTEMES EUROPE S.A., DURA AUTOMOTIVE SYSTEMS (CANADA), LTD., as Borrowers, are parties to a U.S.$323,125,000 AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 19, 1999, as amended and restated as of October 31, 2003, under which BANK OF AMERICA, N.A., serves as Collateral Agent and Syndication Agent, THE BANK OF NOVA SCOTIA, BARCLAYS BANK PLC, COMERICA BANK, STANDARD FEDERAL BANK, N.A., U.S. BANK NATIONAL ASSOCIATION, and WACHOVIA BANK, N.A., serve as Co-Documentation Agents, and JPMORGAN CHASE BANK, serves as Administrative Agent. As of Oct. 31, 2003, the members of the Lending Consortium were: * JPMORGAN CHASE BANK * BANK OF AMERICA, N.A. * THE BANK OF NOVA SCOTIA * COMERICA BANK * STANDARD FEDERAL BANK N.A. * U.S. BANK, NATIONAL ASSOCIATION * WACHOVIA BANK, N.A. * BARCLAYS BANK PLC and * FIFTH THIRD BANK, EASTERN MICHIGAN. * * * As reported in the Troubled Company Reporter on Jan. 3, 2005, Moody's Investors Service downgraded certain ratings for Dura Operating Corp., its direct parent Dura Automotive Systems, Inc., and subsidiary Dura Automotive Systems Capital Trust. The outlook following these rating actions was changed to stable from negative. The rating actions were driven by Dura Automotive's persistently high leverage, which Moody's determined to be inconsistent with peers at the Ba3 senior implied level, together with the company's inability to realize material debt reduction over the past year and its weakening effective liquidity, margin compression, and long lead times necessary to realize organic net new business growth. The specific rating actions implemented for Dura Holdings and Dura Operating are: -- Affirmation of the Ba3 rating assigned for Dura Operating's approximately $322 million of guaranteed senior secured credit facilities, consisting of: -- $175 million revolving credit facility due October 2008; -- $146.6 million remaining term loan C due December 2008; -- Downgrade to B2, from B1, of the ratings for Dura's existing $400 million of 8.625% guaranteed senior unsecured notes due April 2012 (consisting of $350 million and $50 million tranches, respectively); -- Downgrade to B3, from B2, of the ratings of Dura's $456 million of 9% guaranteed senior subordinated notes due May 2009; -- Downgrade to B3, from B2, of the rating for Dura's Euro 100 million of 9% guaranteed senior subordinated notes due May 2009; -- Downgrade to Caa1, from B3, of the rating for Dura Automotive Systems Capital Trust's $55.25 million of 7.5% convertible trust preferred securities due 2028; -- Downgrade to B1, from Ba3, of the senior implied rating for Dura Holdings; -- Affirmation of the B2 senior unsecured issuer rating for Dura Holdings; -- Downgrade to SGL-3, from SGL-2 of Dura Holdings' speculative grade liquidity rating. The rating downgrades reflect that Dura Automotive was unsuccessful at achieving meaningful debt or leverage reduction over the past year, despite successful implementation of several actions directed at improving the company's near-term cost structure and future revenue and margin base. EL PASO: Closes Sale of Cedar Brakes Subsidiaries for $94 Million ----------------------------------------------------------------- El Paso Corporation (NYSE: EP) has closed the sale of the equity interests in its Cedar Brakes I and Cedar Brakes II subsidiaries to wholly owned subsidiaries of Arroyo Energy Investors LP, a Houston-based affiliate of The Bear Stearns Companies Inc. (NYSE: BSC), for cash proceeds of approximately $94 million. The purchase price was reduced from the previously announced $106 million by equity distributions of approximately $12 million received by El Paso in 2005. As part of the closing, El Paso Marketing, L.P., El Paso's marketing subsidiary, has paid Constellation Energy Commodities Group, Inc., $240 million and transferred its obligations to supply power to the Cedar Brakes I and II entities to Constellation. The sale eliminates approximately $575 million of associated non- recourse debt from El Paso's balance sheet as of Dec. 31, 2004. The equity sale will result in a book loss of approximately $227 million, and El Paso will also realize an approximate $30 million loss in its trading book from the transfer of the contracts to Constellation, both of which will be reflected in El Paso's Dec. 31, 2004, financial results. This sale is part of El Paso's plan to sell its domestic power restructuring portfolio as part of its long-range plan to reduce the company's debt, net of cash, to approximately $15 billion by year-end 2005. To date, the company has announced or closed approximately $4.2 billion of asset sales. Also, these announced or closed asset sales will eliminate approximately $1.6 billion of associated non-recourse debt from El Paso's balance sheet. An asset sales tracker that shows all of the announced and completed asset sales is posted at http://www.elpaso.com/under Investor Resources. About the Company El Paso Corporation -- http://www.elpaso.com/--provides natural gas and related energy products in a safe, efficient, dependable manner. The company owns North America's largest natural gas pipeline system and one of North America's largest independent natural gas producers. The Cedar Brakes I and II entities supply power to Public Service Electric and Gas Company. They were created as part of El Paso's power restructuring business under which the company restructured above- market, long-term power purchase agreements originally tied to certain older power plants. El Paso is no longer engaged in restructuring power purchase contracts. * * * As reported in the Troubled Company Reporter on March 4, 2005, Standard & Poor's Ratings Services assigned its 'B-' rating to El Paso Corp.'s subsidiary Colorado Interstate Gas Co.'s planned $200 million senior unsecured notes. At the same time, Standard & Poor's affirmed its 'B-' corporate credit ratings on El Paso and its subsidiaries and revised the outlook on the companies to stable from negative. The outlook revision reflects El Paso's progress on restructuring its business and the company's improved liquidity ahead of large debt maturities in the next three years. "The stable outlook reflects the expectation that El Paso will continue to address adequately the company's operational and financial issues," said Standard & Poor's credit analyst Ben Tsocanos. "Although liquidity is not an immediate concern, El Paso will struggle to produce enough cash flow to barely cover its debt service as it tackles the challenges in its plan," said Mr. Tsocanos. El Paso has closed or announced assets sales over the last 18 months including oil refining business, much of its domestic power operations, its ownership of GulfTerra Energy Partners L.P., and certain noncore exploration and production and pipeline assets. The sales have yielded about $4 billion of proceeds, well within management's projected range. The sales are an important step toward streamlining El Paso's business and building adequate liquidity to meet looming debt maturities. Although the majority of the sales are complete, incremental sales, including power generation plants in Asia, are being considered. Once the divestitures are accomplished, El Paso will concentrate on two primary businesses, natural gas pipelines and E&P. EXIDE TECH: Gordon Ulsh Replaces Craig Muhlhauser as Pres. & CEO ---------------------------------------------------------------- The Board of Directors of Exide Technologies (NASDAQ:XIDE), a global leader in stored electrical-energy solutions, has appointed Gordon A. Ulsh, 58, as the Company's new President and Chief Executive Officer, effective April 2, 2005. He succeeds Craig H. Muhlhauser, who is leaving the Company after successfully leading Exide out of Chapter 11 bankruptcy protection. Mr. Ulsh currently is Chairman, President and CEO of Texas-based FleetPride Inc., the nation's largest independent aftermarket distributor of heavy-duty truck parts. John P. Reilly, Exide's Chairman of the Board, said: "Gordon Ulsh is the ideal candidate to build on the solid foundation that Craig Muhlhauser and his team have established during the past few years. Gordon is a seasoned leader who has experience with many of Exide's customers and suppliers, and his practical, no-nonsense approach to business will be invaluable as Exide continues its operational restructuring and pursues new opportunities for growth and improved profitability." Prior to joining FleetPride in 2001, Mr. Ulsh worked with Ripplewood Equity Partners, providing analysis of automotive industry segments for investment opportunities. Earlier, he served as President and Chief Operating Officer of Federal-Mogul Corporation in 1999 and as head of its Worldwide Aftermarket Division in 1998. Prior to Federal-Mogul, he held a number of leadership positions with Cooper Industries, including Executive Vice President of its automotive products segment. Mr. Ulsh joined Cooper's Wagner Lighting business unit in 1984 as Vice President of Operations, following 16 years in manufacturing and engineering management at Ford Motor Company. "I am excited about joining Exide's management team and helping in the task of restructuring and growing its businesses," Mr. Ulsh said. "I look forward to working with the Board, our employees, customers and suppliers to maximize the value of the Company for our shareholders." Headquartered in Princeton, New Jersey, Exide Technologies is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Exide Technologies to 'B+' from 'BB-'. "The action was taken because of the company's weak operating performance amid high commodity costs, and increased debt levels that will result from a proposed new debt offering. It also reflects the difficult operating environment facing the company," said Standard & Poor's credit analyst Martin King. Moody's Investors Service also assigned a Caa1 rating for the proposed $350 million issuance of senior unsecured notes by Exide Technologies, Inc. The proceeds of these notes will be used primarily for the purpose of repaying approximately $250 million of term loan indebtedness under the company's existing guaranteed senior secured credit agreement. The approximately $85 million of excess proceeds expected to be realized after accounting for fees, expenses, and accrued interest will be retained in the company for general corporate purposes. The proposed notes offering should thereby improve Exide's available liquidity to cover increased commodity costs, capital investment, additional restructuring programs, and other operating needs or actions. Moody's confirmed Exide's B1 guaranteed senior secured facility ratings. The confirmations specifically presume that a significant reduction in outstanding term loans will occur as a result of the proposed senior notes issuance. In the event that Exide does not successfully execute the proposed senior notes offering, the guaranteed senior secured debt facility ratings would have to be lowered to B2. FAIRFAX FINANCIAL: Fitch Assigns B+ Rating on Senior Debt --------------------------------------------------------- Fitch Ratings published a detailed report today on Fairfax Financial Holdings Limited. Currently, Fairfax's 'B+' senior debt rating, as well as the ratings of its insurance affiliates is under review with negative implications. The report is available on the free portion of Fitch's web site at http://www.fitchratings.com/and can be located under 'Financial Institutions,' 'Insurance,' and 'Research Highlights.' Fitch plans to consider Fairfax's Rating Watch after a review of Fairfax's detailed annual financial disclosures. Fitch remains concerned with the level and quality of public disclosures by the company, particularly in light of the complexity resulting from the significant volume of intercompany transactions. Fitch will consider withdrawing the ratings if it is determined that the company's year-end 2004 disclosures do not allow for a reasonable assessment of the level or direction of Fairfax's creditworthiness. Excerpt from the report summary: 'Fairfax Financial Holdings Limited's 'B+' senior debt rating and Negative Rating Watch status reflects Fitch's view that the company's long-term credit fundamentals remain challenged. Financial and reinsurance leverage is high. Core operating earnings are weak and realized gains have been the primary earnings source in recent years. The company's ability to service subsidiary and holding company obligations has been reliant on sources other than organic earnings and likely will continue to be. Based on Fairfax's competitive position in the U.S. market, Fitch believes it is more vulnerable to commercial lines price softening and a shifting preference to higher rated insurers than peers. The ratings also consider the company's continued liquidity challenges. These have subsided in recent quarters but only due to substantial funds generated via capital market activity, the realization of material investment gains, and a restructuring of its debt. Furthermore, Fitch believes that a number of management actions, while providing short-term benefits, have further limited future financial flexibility. The very need to take these actions is a reflection of the challenges management faces in maintaining organizational viability. These include: i) the transfer of a support agreement related to a run-off operation's obligation from Fairfax and to a partially owned subsidiary; ii) changes in the structure of the organization's letters of credit, which Fitch believes may provide inferior claims- paying capacity and raises concerns regarding the potential for 'double pledging' of the assets securing the facility; iii) the extensive utilization of internal and external income smoothing/capital enhancing financial reinsurance, which has negatively affected investment income; and sales of minority stakes in profitable operating segments, which has decreased available operating cash flow. Fitch believes that Fairfax will continue to be seriously challenged over the near to mid term. The key to its future success and viability is the return of meaningful and reliable parental dividend flow from its operating subsidiaries in the form of core earnings. Investment gains and repeated access to the capital markets is likely not a viable long-term alternative. However, weak fundamentals and legacy issues represent considerable hurdles at the operating level. Therefore, despite Fairfax's recent replenishment of holding company cash via the sale of subordinated common stock, Fitch would not be surprised by any of these: i) another major restructuring; ii) further asset sales over the near to intermediate term; segregation or consolidation of the runoff operations; and iii) the unwinding of intercompany transactions between run- off and ongoing entities.' Fitch's ratings of Fairfax are based primarily on public information. These have a Negative Rating Watch by Fitch: Fairfax Financial Holdings Limited -- No action on long-term issuer 'B+'; -- No action on senior debt 'B+'. Crum & Forster Holdings Corp. -- No action on senior debt 'B'. TIG Holdings, Inc. -- No action on senior debt 'B'; -- No action on trust preferred 'CCC+'. The members of the Fairfax Primary Insurance Group: 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) -- No action on insurer financial strength 'BBB-'. The members of the Odyssey Re Group: Odyssey America Reinsurance Corp. Odyssey Reinsurance Corp. -- No action on insurer financial strength 'BBB+'. Members of the Northbridge Financial Insurance Group: 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 -- No action on insurer financial strength 'BBB-'. The members of the TIG Insurance Group: Fairmont Insurance Company TIG American Specialty Insurance 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 -- No action on insurer financial strength 'BB+'; Ranger Insurance Co. -- No action on insurer financial strength 'BBB-'. FOOTSTAR INC: Court Okays Exclusive Period Extension Until Apr. 13 ------------------------------------------------------------------ The Honorable Adlai S. Hardin Jr. of the U.S. Bankruptcy Court for the Southern District of New York put his stamp of approval on Footstar Inc. and its debtor-affiliates' request for more time to solicit acceptances of its chapter 11 plan of reorganization. The Court extended Footstar's exclusive solicitation period to Apr. 13, 2005. Footstar and its affiliates filed a Joint Plan of Reorganization in Nov. of 2004. That Plan is dependent on the assumption of the master agreement governing the company's relationship with Kmart Corp. Since Kmart doesn't want the agreement to be assumed, the matter has yet to be resolved in Court. Unless the Court issues a favorable decision regarding the assumption motion, Footstar can't distribute its approved disclosure statement and solicit acceptances of their Plan. Kmart Kerfuffle In a Decision dated February 16, 2005, Judge Hardin rejected Kmart's contention that, as a matter of law, Footstar couldn't assume the contract. Judge Hardin's Feb. 16 Decision left Kmart's complaints about Footstar's breaches of the contract and Kmart's questions about Footstar's ability to provide adequate assurance of future performance on the table. A copy of that 14-page Decision is available at no charge at: http://bankrupt.com/misc/Footstar-Feb-16-Decision.pdf Kmart also met resistance from Judge Hardin when it tried to give Footstar the boot from 50 store locations sold to Sears, Roebuck & Co. last year. Sears converted those stores to Sears Essentials formats. "You might have the right to lift the automatic stay but certainly you have to seek permission to do so," Tom Becker and Bloomberg News, relates Judge Hardin told Kmart at a hearing in White Plains last month. "As of right now, the automatic stay exists and prevents interference with whatever Footstar is doing," Judge Hardin continued. Kmart issued a statement following these rulings expressing its disagreement with Judge Hardin. "We have many additional substantial arguments why the contract cannot be assumed, none of which has as yet been addressed by the court," Kmart said. "Kmart remains confident in the strength of its legal position." Plan Progress The exclusive period extension will give Footstar more time to solicit acceptances of its current Plan or formulate an alternative plan. As reported in the Trouble Company Reporter on November 24, 2004, the two-option Plan contemplates either a reorganization transaction on a stand-alone basis or a sale transaction. Footstar's enterprise value as estimated in the Plan is in the range of $113 to $139 million. Should there be a sale transaction, the Plan provides for the establishment of a Liquidating Trust or the appointment of a Plan Administrator who will take charge of the distributions to creditors and interest holders. The Amended Disclosure Statement states that Kmart Corp. has shareholder agreements relating to its 49% equity interest in certain Shoemart Subsidiaries. Kmart may object to a Sale Transaction as being not appropriate in light of the shareholder agreements and the anti-assignment provisions contained in the shareholder agreements. If Kmart objects to a sale transaction, there could be no assumption that the Bankruptcy Court will approve the sale transaction. Headquartered in West Nyack, New York, Footstar Inc., retails family and athletic footwear. As of August 28, 2004, the Company operated 2,373 Meldisco licensed footwear departments nationwide in Kmart, Rite Aid and Federated Department Stores. The Company also distributes its own Thom McAn brand of quality leather footwear through Kmart, Wal-Mart and Shoe Zone stores. The Company and its debtor-affiliates filed for chapter 11 protection on March 3, 2004 (Bankr. S.D.N.Y. Case No. 04-22350). Paul M. Basta, Esq., at Weil Gotshal & Manges represents the Debtors in their restructuring efforts. When the Debtor filed for protection, it listed $762,500,000 in total assets and $302,200,000 in total debts. FRANK'S NURSERY: Files Plan of Reorganization in New York --------------------------------------------------------- Frank's Nursery & Crafts, Inc. (OTCBB:FNCN) delivered its proposed plan of reorganization and related draft disclosure statement to the United States Bankruptcy Court for the Southern District of New York last week. The Plan is predicated on the Debtor retaining approximately 40 parcels of real estate which will be developed by the reorganized Company. The Plan was developed after extensive negotiations among the Company, its major shareholders, the official committee of unsecured creditors appointed in the Chapter 11 case and the Company's secured lender. Funding for the Plan will be provided by certain existing shareholders of the Company in the form of convertible notes in the aggregate amount of up to $120 million and a $20 million equity investment. If confirmed, the Plan generally will provide that all unsecured claims will be paid in full plus post-petition interest. Shareholders that hold less than 5,000 shares will receive $.75 per existing share in cash. Shareholders who hold greater than 5,000 shares will be provided the option either to receive $.75 per existing share in cash, or to exchange their existing shares for shares in the reorganized Company (subject to dilution) and the right to invest in the convertible notes and equity issued by the reorganized Company, which right may be exercised by shareholders that are accredited investors and hold at least 200,000 shares. Thursday's filing is a major step in the Company's reorganization proceedings. The Disclosure Statement is subject to approval of the Bankruptcy Court before being mailed to parties-in-interest for solicitation of their approval of the Plan. A hearing to consider approval of the Disclosure Statement is currently scheduled for April 7, 2005. If the Disclosure Statement is approved and the Plan is confirmed by the Bankruptcy Court at a subsequent hearing, it is expected that the Company will emerge from Chapter 11 in the summer of 2005. However, there can be no assurance that Disclosure Statement will be approved or that the Plan will be confirmed. The Company operated the largest chain (as measured by sales) in the United States of specialty retail stores devoted to the sale of lawn and garden products. Frank's has concluded an orderly wind-down of its store operations by completing going out of business sales at its locations and has also sold or rejected substantially all of its leasehold interests. Headquartered in Troy, Michigan, Frank's Nursery & Crafts, Inc., operated the largest chain (as measured by sales) in the United States of specialty retail stores devoted to the sale of lawn and garden products. Frank's Nursery and its parent company, FNC Holdings, Inc., each filed a voluntary chapter 11 petition in the U.S. Bankruptcy Court for the District of Maryland on Feb. 19, 2001. The companies emerged under a confirmed chapter 11 plan in May 2002. Frank's Nursery filed another chapter 11 petition on September 8, 2004 (Bankr. S.D.N.Y. Case No. 04-15826). Allan B. Hyman, Esq., at Proskauer Rose LLP, represents the Debtor. In the Company's second bankruptcy filing, it listed $123,829,000 in total assets and $140,460,000 in total debts. GS MORTGAGE: Moody's Holds Ba2 Rating on $28.183MM Class G Certs. ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes and affirmed the ratings of five classes of GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 1998-GL II: * Class A-1, $91,610,002, Fixed, affirmed at Aaa * Class A-2, $694,315,000, Fixed, affirmed at Aaa * Class X, Notional, affirmed at Aaa * Class B, $91,595,000, WAC, upgraded to Aaa from Aa2 * Class C, $84,549,000, WAC, upgraded to Aa2 from A2 * Class D, $98,641,000, WAC, upgraded to A2 from Baa2 * Class E, $70,458,000, WAC, upgraded to Baa2 from Baa3 * Class F, $63,411,000, WAC, affirmed at Ba2 * Class G, $28,183,997, WAC, affirmed at B2 As of the February 15, 2005, distribution date, the transaction's aggregate principal balance has decreased by approximately 13.4% to $1.22 billion from $1.41 billion at closing. The Certificates are collateralized by ten loans, of which eight are secured by commercial properties. The Pier 39 and Showcase Mall Loans, which represent 14.6% of the pool, have defeased and are secured by U.S. Government securities. The remaining loans range in size from 6.7% to21.2% of the undefeased pool balance. Classes B, C, D and E have been upgraded due to the improved performance of the Theraldson Pool B, Theraldson Pool A, Green Acres, Crystal City Pool and One Commerce Square Loans as well as the two defeased loans. The URS Pool Loan represents 21.2% of the pool. The principal balance has amortized by approximately 12.6% since closing to $221.0 million. Mortgages or deeds of trust on 29 cold storage properties totaling approximately 4.4 million square feet secure the loan. While revenue for this portfolio has grown at an approximate annual rate of 3.8%, profit margins have declined due to expense increases. Reported net operating income for calendar year 2003 was approximately 12.8% above that reported for calendar year 1998. Net operating income for calendar year 2004 is expected to be flat to marginally improve. An affiliate of Vornado Realty Trust and Crescent Real Estate Equity Company owns the assets and master leases them to another affiliate. Moody's loan to value ratio ("LTV") is 72.1% and the loan is shadow rated Ba1. The Theraldson Pool Loan B represents 15.2% of the pool. The principal balance has amortized by approximately 13.2% since closing to $159.2 million. The loan is secured by 93 limited service hotels, which are located in 17 states. The portfolio contains approximately 5,858 rooms flagged under the Fairfield Inn, Comfort Inn, Hampton Inn, and Residence Inn brands, as well as others. With the exception of calendar year 2003, performance has been consistent with or better than Moody's expectations. The properties are owned and managed by affiliates of Theraldson Motels, Inc. Moody's LTV is 52.7% and the loan is shadow rated Aa1. The Theraldson Pool Loan A represents 14.9% of the pool. The principal balance has amortized by approximately 13.0% since closing to $155.4 million. The loan is secured by 90 limited service hotels located in 14 states. The portfolio contains approximately 5,848 rooms flagged under the Fairfield Inn, Comfort Inn, Hampton Inn, and Residence Inn brands as well as others. With the exception of calendar year 2003, performance has been consistent with or better than Moody's expectations. The properties are owned and managed by affiliates of Theraldson Motels, Inc. Moody's LTV is 55.9% and the loan is shadow rated Aa2. The Green Acres Loan represents 13.9% of the pool. The principal balance has amortized by approximately 8.8% since closing to $145.5 million. The loan is secured by the fee interest in a 1.8 million square foot regional mall and on the leasehold interest in The Plaza at Green Acres, a 177,000 square foot convenience center. Green Acres Mall, which is located in Valley Stream, New York, is anchored by Macy's, J.C. Penney, Sears, and BJ's. The Plaza at Green Acres is anchored by Wal-Mart. The property was 90.4% occupied as of November 2004. The mall and convenience center are owned by affiliates of Vornado Realty Trust. Moody's LTV is 55.8% and the loan is shadow rated A1. The Americold Pool Loan is a 50.0% pari passu interest in the Total Americold Pool Loan and represents 12.4% of the pool. The principal balance has amortized by approximately 12.7% since closing to $129.7 million. The loan is secured by 29 cold storage properties totaling approximately 5.9 million square feet of space. While revenue for this portfolio in calendar year 2003 has grown at an approximate annual rate of 5.0% since 1998, profit margins have declined significantly due to expense increases. Reported net operating income for calendar year 2003 was approximately 16.7% below that reported for calendar year 1998. Net operating income in 2004 is expected to be somewhat higher. An affiliate of Vornado Realty Trust and Crescent Real Estate Equity Company owns the assets and master leases them to another affiliate. Moody's LTV is 78.3% and the loan is shadow rated Ba3. The One Commerce Square Loan represents 7.0% of the pool. The aggregate principal balance of the loan has amortized by approximately 34.2% since closing to $73.3 million. The loan is secured by a 41-story Class A office building located in the central business district of Philadelphia, Pennsylvania. The property contains approximately 942,800 square feet of office and retail space. As of September 2004, the property was 96.6% occupied, compared to 91% at securitization. The borrower is an affiliate of Lazard Freres Real Estate Investors, L.L.C., and Thomas Development Partners, LLC. Moody's LTV is 62.2% and the loan is shadow rated Baa2. The Marriott Desert Springs Loan represents 8.7% of the pool. The principal balance of the loan has amortized by approximately 11.7% since closing to $90.4 million. The loan is secured by an 884- room resort hotel, which contains five restaurants, two golf courses, a 30,000 square foot spa, and approximately 30,000 square feet of meeting space. Net cash flow for calendar year 2004 was $12.4 million, compared to $20.2 million at securitization, although an 18.0% increase is budgeted for calendar year 2005. The borrower is an affiliate of Host Marriott Corporation. Moody's LTV is 68.1% and the loan is shadow rated Baa3. The Crystal City Pool Loan represents 6.7% of the pool. The aggregate principal balance of the loan has amortized by approximately 8.9% since closing to $69.8 million. The loan is secured by a deed of trust on three Class A office buildings located in Crystal City, Virginia. The properties contain approximately 585,200 square feet of office space. As of September 2004, the properties were 95.7% occupied, compared to 97.0% at securitization. Moody's LTV is 62.9% and the loan is shadow rated Baa2. GSR MORTGAGE: Fitch Puts Low-B Ratings on 2 Mortgage Certificates ----------------------------------------------------------------- Fitch rates GSR Mortgage Loan Trust series 2005-2F residential mortgage pass-through certificates: -- $291 million classes 1A-1 through 1A-6, 2A-1 through 2A-3, 3A-1, 3A-2, A-P and A-X certificates (senior certificates) 'AAA'; -- $5.4 million class B1 certificates 'AA'; -- $1.9 million class B-2 certificates 'A'; -- $1.2 million class B-3 certificates 'BBB'; -- $754,000 class B-4 certificates 'BB'; -- $603,000 class B-5 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 3.50% subordination provided by: * the 1.80% class B-1, * the 0.65% class B-2, * the 0.40% class B-3, * the 0.25% privately offered class B-4 and * the 0.20% privately offered class B-5, and * the 0.20% privately offered class B-6 (not rated by Fitch). Classes B-1, B-2, B-3, B-4 and B-5 are rated 'AA', 'A', 'BBB', 'BB' and 'B' based on their respective subordination only. The ratings also reflect the quality of the underlying collateral, the strength of the legal and financial structures, and the master servicing capabilities of Chase Manhattan Mortgage Corporation (rated 'RMS1-' by Fitch Ratings). The mortgage loan pool is divided into three sub-groups which are cross-collateralized and pay interest and/or principal to respective classes of senior certificates. The subordinate certificates are also cross-collateralized and will receive interest and principal from available funds collected in the aggregate from the mortgage pool. As of the cut-off date (Feb. 1, 2005) the mortgage pool consists of fixed-rate mortgage loans, which have 30-year amortization terms, with an approximate balance of $301,655,635. The mortgage loans were originated by: * ABN AMRO Mortgage Group, Inc. (0.5%), * Bank of America (0.8%), * Chase Home Financial LLC (0.2%), * CitiMortgage (0.6%), * Countrywide Home Loans (28.5%), * Fifth Third Mortgage Company (1.0%), * IndyMac Bank, FSB (40.8%), * KeyBank National Association (0.5%), * National City Mortgage Co. (1.7%), and * PHH Mortgage Corporation (25.3%). The mortgage pool has an average unpaid principal balance of $463,373 and a weighted average FICO score of 735. The weighted average amortized current loan-to-value - CLTV -- ratio is 71.1%. Rate/Term and cashout refinances represent 29.04% and 15.14%, respectively, of the mortgage loans. The states that represent the largest geographic concentration of mortgaged properties are: * California (46.29%), * New York (7.84%), * New Jersey (6.7%), and * Florida (4.6%). All other states comprise fewer than 4% of properties in the pool. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003, entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation.' GS Mortgage Securities Corp. purchased the mortgage loans from each seller and deposited the loans in the trust, which issued the certificates, representing undivided and beneficial ownership in the trust. For federal income tax purposes, the securities administrator will cause multiple REMIC elections to be made for the trust. JPMorgan Chase Bank, N.A., will serve as the Master Servicer. JPMorgan Chase Bank, N.A., will act as Securities Administrator and Wachovia Bank, N.A, will serve as the trustee. G-STAR: Fitch Affirms BB- Rating on $7,659,366 Class D Notes ------------------------------------------------------------ Fitch Ratings upgrades two classes and affirms six classes of notes issued by G-Star 2002-2 Ltd., and are effective immediately. Fitch upgrades these classes: -- $14,000,000 class BFL notes to 'A' from 'A-'; -- $15,000,000 class BFX notes to 'A' from 'A-'. Fitch affirms these classes: -- $114,528,048 class A-1MMa notes at 'AAA/F1+'; -- $95,440,040 class A-1MMb notes at 'AAA/F1+'; -- $97,348,840 class A-2 notes at 'AAA'; -- $21,951,209 class A-3 notes at 'AAA'; -- $10,844,669 class C notes at 'BBB'; -- $7,659,366 class D notes at 'BB-'. This class is withdrawn: -- Combination security 'BBB-'. G-Star is a static pool collateralized debt obligation - CDO -- managed by GMAC Institutional Advisors which closed Nov. 20, 2002. GMAC is rated 'CAM1' by Fitch for managing structured finance CDOs. G-Star is composed of approximately 8% residential mortgage backed securities --- RMBS, 46% commercial mortgage backed securities -- CMBS, 3% consumer asset backed securities -- ABS, 30% REITs, and 11% CDOs. Included in this review, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. Since the last review, the collateral has continued to improve. The weighted average rating factor - WARF -- has decreased to 10.8 ('BBB') from 12.8 ('BBB'). The overcollateralization - OC -- on the classes A, B, and C ratios have increased to 124.6%, 106.9, and 103.7%, respectively, as of the most recent trustee report (dated Jan. 18, 2005) from 123.8%, 106.6, and 103.4% as of Nov. 1, 2003. In addition, 14 bonds have been upgraded since closing compared with only one bond being downgraded. In addition, on the Dec. 20, 2004, payment date, the holders of all the combination note securities exercised their right to exchange the combination notes for their proportionate share of the component securities. The noteholders received proportionate amounts of class BFX notes, class C notes, and class D shares certificates which comprised the combination notes. As a result of this action the combination notes are no longer outstanding, and Fitch has withdrawn the 'BBB-' rating. The rating on the class A notes addresses the timely payment of interest and principal, while the rating on the classes B and C notes addresses the ultimate payment of interest and principal. The rating on the class D preference shares addresses the ultimate receipt of the initial class D share rated balance. As a result of this analysis, Fitch has determined that the original ratings assigned to the class BFL and class BFX notes no longer reflect the current risk to noteholders. This can be observed by the improvement in the credit enhancement of the rated notes and by improvement in the quality of the collateral pool. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ HATTERAS INCOME: Declares Final Liquidating Distribution -------------------------------------------------------- The shareholders and Board of Directors of Hatteras Income Securities, Inc., previously approved a Plan of Liquidation and Termination for the Company. The Plan provides for the Company's complete liquidation and its later termination as a registered investment company and dissolution as a North Carolina corporation. The final liquidating distribution for the Company will be $14.823604 per share. The Company is a closed-end registered investment company advised by Banc of America Capital Management, LLC., a Columbia Management entity. Columbia Management entities are subsidiaries of Bank of America Corporation. HEALTHESSENTIALS SOLUTIONS: Taps Frost Brown as Bankruptcy Counsel ------------------------------------------------------------------ HealthEssentials Solutions, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Western District of Kentucky, Louisville Division, for authority to employ Frost Brown Todd LLC as their counsel in their chapter 11 cases. Frost Brown is expected to: a) advise the Debtors of their powers and duties as debtors- in-possession in the continued operation of their businesses and properties; b) provide assistance, advice and representation concerning a plan of reorganization, a disclosure statement and the solicitation of consents to and confirmation of such plan; c) advise the Debtors in connection with any sale of assets; d) provide assistance, advice and representation concerning any further investigation of the assets, liabilities and financial condition of the Debtors that may be required; e) represent the Debtors at hearings or matters pertaining to their affairs as debtors-in-possession; f) prosecute and defend litigation matters and such other matters that might arise during and related to the cases; g) provide counseling and representation with respect to the assumption or rejection of executory contracts and leases and other bankruptcy-related matters arising from these cases; h) render advice with respect to the myriad general corporate and litigation issues as they relate to these cases, including, real estate, ERISA, securities, corporate finance, tax and commercial matters, health services; and i) perform such other legal services as may be necessary and appropriate for the efficient and economical administration of these cases. C. Edward Glasscock, Esq., a member at Frost Brown, discloses that his Firm received a $75,000 retainer from the Debtors. Mr. Glasscock didn't disclose the current hourly billing rates of professionals at Frost Brown. To the best of the Debtors' knowledge, Frost Brown is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Louisville, Kentucky, HealthEssentials Solutions, Inc. -- http://www.healthessentialsinc.com/-- provides primary care services to elderly patients. The Debtor along with its affiliates filed for chapter 11 protection on March 1, 2005 (Bankr. W.D. Ky. Case No. 05-31218). When the Debtor filed for protection from its creditors, it listed $35,384,953 in total assets and $40,785,376 in total debts. H-LINES FINANCE: Moody's Junks $160 Million Senior Discount Notes ----------------------------------------------------------------- Moody's Investors Service has affirmed all ratings of H-Lines Finance Holdings Corp., (senior implied B2) as well as debt issued by its principal operating subsidiary Horizon Lines, LLC, in response to Horizon Lines' recent announcement regarding its proposed IPO and debt repayment plans. On March 2, 2005, Horizon Lines Inc., the parent company of H- Lines Finance Holdings Corp., announced plans to proceed with a proposed initial public offering of common stock. The proceeds of this offering is intended to be used towards an approximately $131 million return of capital to shareholders, while about $96 million is intended to be used to repay the company's debt. Specifically, the company stated its intention to repay about $39 million of H-Lines Finance Holding Corp.'s $160 million 11% senior discount notes and about $57 million of Horizon Lines Holding Corp.'s $250 million senior unsecured notes. The company further stated that, to the extent that proceeds fall short of targeted amounts, estimated debt reduction from proceeds will be lowered. While Moody's considers the potential debt repayment through the use of publicly-raised equity to be a favorable credit development, the rating agency's initial assessment of the announcement is that the amount of debt reduction planned will not have a sufficient impact on Horizon Lines' credit fundamentals to change our credit opinion at this time. The company, which was purchased by Castle Harlan in June of 2004 for $675 million, has balance sheet debt (as of December 2004) of about $612 million. However, with a substantial portion of Horizon Lines' fleet financed by way of operating leases, Moody's estimates lease-adjusted debt to be about $1 billion, implying a reduction of less than 10% of lease-adjusted debt according to planned use of the IPO's proceeds. The ratings affirmed are: -- H-Lines Finance Holdings Corp.: * $160 million 11% Senior Discount Notes due 2013, at Caa2; * Senior Implied rating at B2; * Senior Unsecured Issuer Rating at Caa2. -- Horizon Lines LLC: * $25 million senior secured revolving credit facility due 2009, at B2 * $250 million senior secured term loan B due 2011, at B2 * $250 million 9% unsecured senior notes due 2012, at B3 The ratings outlook is stable. H-Lines Finance Holding Corp is based in Charlotte, North Carolina. Through its wholly-owned operating subsidiary, Horizon Lines, LLC, the company employs a fleet of 16 U.S.-flag container ships providing liner service between the continental U.S. and Alaska, Hawaii, Guam, and Puerto Rico. Horizon Lines Finance Holdings' subsidiaries had FY December 2004 revenues of $980 million. INTELSAT: Fitch Maintains Junk Rating on Senior Unsecured Notes --------------------------------------------------------------- After the earnings announcement and management conference call by Intelsat, Ltd., Fitch Ratings has maintained the ratings of the company. However, after having obtained certain approvals and completed certain asset transfers, the issuing entities of some of its recently issued debt have changed. Intelsat's wholly owned subsidiary, Intelsat -- Bermuda, Ltd. created a new subsidiary named Intelsat Subsidiary Holding Company Ltd. and transferred substantially all of its assets and liabilities to Intelsat Subsidiary. This included about $3.2 billion of Fitch-rated debt. Additionally, the $478.4 million (face amount) of senior unsecured discount notes due 2015 originally issued by an intermediate holding company named Zeus Special Sub Ltd. have now become obligations of Intelsat Bermuda with Intelsat as a co-obligor. The approximately $1.7 billion of outstanding senior unsecured notes issued by Intelsat remain there. Intelsat also reported its fourth-quarter financial results today. Reported revenues of $283 million and free cash flow after capital spending (including satellite deposits and payments for orbital rights) of $136 million were as expected. There were no major changes in market conditions noted on today's management-led conference call that would lead Fitch to change its expectations for the future as discussed in our Intelsat Credit Analysis report dated Feb. 2, 2005, and as modified to incorporate the issuance of the senior discount notes in our press release dated Feb. 8, 2005. Based on the recent financial performance and no change in our expectations, Fitch's ratings on Intelsat and its subsidiaries remain the same. However, due to the changes described above, we have withdrawn our ratings on Zeus, affirmed Intelsat's ratings, and assigned ratings to Intelsat Bermuda and Intelsat Subsidiary: Intelsat, Ltd. -- No change to senior unsecured notes at 'CCC+'. Intelsat (Bermuda), Ltd. (formerly Zeus Special Sub Ltd.) -- Senior unsecured discount notes at 'B-'. Intelsat Subsidiary Holding Company Ltd. (formerly Intelsat (Bermuda), Ltd. -- Senior unsecured notes at 'B'; -- Senior secured credit facilities at 'BB-'. The Stable Rating Outlook reflects the prospects for stable revenues from its lease backlog and the expected resulting free cash flow offset by a very competitive operating environment and ownership by an investment group. Fitch's rating action affects about $5.4 billion of existing debt including undrawn bank lines. This action is based on existing public information and is being provided as a service to investors. INTERLINE BRANDS: Earns $18.1 Million of Net Income in FY 2004 -------------------------------------------------------------- Interline Brands, Inc. (NYSE: IBI), a leading distributor and direct marketer of maintenance, repair and operations products, reported record sales for the fiscal quarter and fiscal year ended December 31, 2004. Sales for fiscal 2004 increased 16.2% over fiscal 2003. Adjusted pro forma earnings per diluted share were $0.91 for fiscal 2004, an increase of 24.7% over adjusted pro forma earnings per diluted share of $0.73 in fiscal 2003. GAAP loss per diluted share was $25.21 for fiscal 2004 compared to a loss per diluted share of $632.74 in fiscal 2003. Michael Grebe, Interline's President and Chief Executive Officer, commented, "We are very pleased with our sales performance and operating results as we report earnings for the first time after completing our initial public offering on Dec. 21, 2004. We continued to experience strong sales and earnings growth during the fourth quarter, with average daily sales up 15.5%. Our overall business momentum positions us well for sustained success in 2005. I would like to thank all Interline associates for their part in a very successful year." Fourth Quarter 2004 Performance Sales for the fiscal quarter ended December 31, 2004 were $195.5 million, a 23.0% increase over sales of $158.9 million in the comparable 2003 period. The fourth quarter of 2004 included four more shipping days than the prior year period, and also included a full quarter of revenues attributable to Florida Lighting, Inc., which was acquired in November 2003. Average daily sales for the fourth quarter of 2004 increased by 15.5% including Florida Lighting operations compared to the same period in 2003. Excluding Florida Lighting operations in 2003 and 2004 respectively, average organic daily sales for the fourth quarter of 2004 increased by 11.8% compared to the same period in 2003. "The favorable sales environment was marked by continued strength in the professional contractor and facilities maintenance markets. We are very pleased with the continued success of our new product initiatives, as well as growth in our national accounts and supply chain growth programs," remarked William Sanford, Interline's Chief Operating Officer. Gross profit increased $14.3 million to $75.5 million for the fourth quarter of 2004, up from $61.3 million in the 2003 comparable period. As a percentage of net sales, gross profit improved by 10 basis points in the fourth quarter of 2004 to 38.6%, up from 38.5% in the comparable period last year. The improvement in the gross profit percentage was due to better pricing and increased sales of private label products offset by strong sales of heating, ventilation and air conditioning equipment and water heaters, which generally carry lower gross margins. SG&A expenses for the fourth quarter of 2004 were $54.0 million compared to $44.4 million for the fourth quarter of 2003. As a percentage of net sales, SG&A expenses were 27.6% in the fourth quarter of 2004 compared to 27.9% in the fourth quarter of 2003. "The improvement in SG&A expenses as a percentage of net sales was largely due to the work of our operations team in improving distribution center and logistics productivity," remarked Mr. Grebe. Operating income was $9.1 million for the fourth quarter of 2004, which included $9.2 million in IPO-related expenses. Excluding these expenses, adjusted operating income was $18.3 million for the fourth quarter of 2004 compared to operating income of $14.5 million for the fourth quarter of 2003, an increase of 26.0%. Assuming the IPO and related transactions had occurred at the start of the year, adjusted pro forma net income for the fourth quarter of 2004 was $7.7 million, compared to $6.0 million, for the fourth quarter of 2003, representing an increase over the prior year of 26.3%. The fourth quarter net loss attributable to common shares, presented on a basis consistent with generally accepted accounting principles, was $12.3 million, compared to a loss of $8.4 million for the fourth quarter of fiscal 2003. Fiscal Year 2004 Performance Sales for the fiscal year ended December 31, 2004 were $743.9 million, a 16.2% increase over sales of $640.1 million for the fiscal year ended December 26, 2003. Average daily sales increased 14.4% to $2.91 million. Excluding the impact of Florida Lighting in 2003 and 2004, respectively, and a freight reclassification announced in the third quarter of 2003, average organic daily sales increased 9.0% for fiscal year 2004 compared to 2003. This sales increase was primarily due to the success of the company's growth investments that were put in place at the beginning of 2004, as well as improving conditions in its end markets. Gross profit increased $41.2 million to $285.4 million for the 2004 fiscal year from $244.2 for the 2003 fiscal year. As a percentage of net sales, gross profit was 38.4% in fiscal year 2004 compared to 38.2% in fiscal year 2003. The improvement in the gross profit percentage for the year was related to the favorable effect of having a full year of higher margin Florida Lighting sales, sales growth in the private label program, and favorable pricing offset by higher sales of lower margin HVAC equipment and water heaters. SG&A expenses were $202.1 million for fiscal year 2004 compared to $171.1 million for fiscal year 2003. As a percentage of net sales, SG&A expenses were 27.2% in fiscal year 2004 compared to 26.7% in fiscal year 2003. This increase in SG&A expenses as a percentage of net sales was primarily the result of investments in sales growth initiatives put in place at the beginning of 2004. Operating income for 2004 was $61.5 million including the $9.2 million in previously mentioned IPO-related expenses. Excluding these expenses, adjusted operating income was $70.7 million for the 2004 fiscal year, compared to operating income of $61.6 million for the 2003 fiscal year, an increase of 14.8%. Assuming the IPO and related transactions had taken place at the start of the year, adjusted pro forma net income for the 2004 fiscal year was $29.3 million, or $0.91 per diluted share, compared to $23.4 million, or $0.73 per diluted share, for the 2003 fiscal year, representing an increase over the prior year of 24.7%. For the 2004 fiscal year, the net loss attributable to common shares, presented on a basis consistent with generally accepted accounting principles, was $36.3 million, or $25.21 per diluted share, compared to a loss of $41.5 million, or $632.74 per diluted share, for fiscal 2003. Business Outlook "Our initial public offering has provided Interline with additional flexibility to aggressively pursue growth opportunities and benefit from favorable operating trends. I believe 2005 holds significant opportunities for the Company, our shareholders and our associates," said Mr. Grebe. For the first quarter of fiscal year 2005, the Company projects these ranges of performance, excluding the impact of any potential acquisitions: * Sales: $185.0 million - $190.0 million, an average daily sales rate increase of approximately 6% - 8%; and * Pro forma net income per diluted share of $0.20 - $0.22, an increase of approximately 18% - 29% over Q1 2004 adjusted pro forma net income per diluted share of $0.17; and * GAAP net income per diluted share of $0.01 - $0.03 compared to a GAAP loss per diluted share of $153.00 for Q1 2004. For fiscal year 2005, the company projects the following ranges compared to fiscal year 2004, excluding the impact of any potential acquisitions: * Sales: $775.0 million - $790.0 million, an average daily sales rate increase of approximately 5% - 8%; and * Pro forma net income per diluted share of $1.03 - $1.06, an increase of approximately 13% - 16% over fiscal year 2004 adjusted pro forma net income per diluted share of $0.91; and * GAAP net income per diluted share of $0.84 - $0.87 compared to a GAAP loss per diluted share of $25.21 for fiscal 2004. The pro forma net income per diluted share amounts for the first quarter and fiscal year 2005 business outlook exclude a $10.3 million loss on early extinguishment of debt, which was incurred in January 2005 when the Company used part of the proceeds from the IPO to redeem $70.0 million principal amount of its 11.5% senior subordinated notes. This redemption was made thirty days after the closing of the initial public offering, which was in line with the 30-day irrevocable notice period required by the indenture governing the 11.5% senior subordinated notes. About the Company Interline Brands, Inc., is a leading national distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations (MRO) products to over 150,000 professional contractors, facilities maintenance professionals, hardware stores, and other customers across North America and Central America. * * * As reported in the Troubled Company Reporter on Dec. 27, 2004, Standard & Poor's Ratings Services raised its ratings on Interline Brands, Inc., and removed them from CreditWatch where they had been placed with positive implications on June 16, 2004, in connection with the company's planned initial public offering of common stock. The corporate credit rating was raised to 'BB-' from 'B+'. The outlook is stable. "The ratings upgrade reflects our expectations for lower debt leverage and greater financial flexibility following the recent completion of Interline's IPO," said Standard & Poor's credit analyst Lisa Wright. IPO proceeds of about $188 million are being used to repay $100 million of debt, pay a dividend to preferred stockholders, and for fees, expenses, and other general corporate purposes. This transaction will reduce pro forma Sept. 30, 2004, debt leverage to 3.4x. INTERSTATE BAKERIES: Court Okays Opening of ADMIS Futures Account ----------------------------------------------------------------- The United States Bankruptcy Court for the Western District of Missouri gave Interstate Bakeries Corporation and its debtor- affiliates permission to open a commodity futures and option account with ADM Investor Services, Inc., to ensure no disruption of their Future Practices. As reported in the Troubled Company Reporter on Feb. 15, 2005, prior to filing for bankruptcy, the Debtors purchased futures and option contracts to hedge against fluctuations in prices for commodities used in the their businesses like wheat, corn, oil, sugar and other ingredients. The Debtors regularly engaged in the Futures Practices as a means of managing risk. The Debtors did not trade Hedge Contracts for speculative purposes. J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom, LLP, in Chicago, Illinois, informs the U.S. Bankruptcy Court for the Western District of Missouri that the Futures Practices is a critical component of the Debtors' ongoing business operations. In an effort to further clarify the importance of the Futures Practices and the Debtors' ability to undertake the Futures Practices throughout the course of their Chapter 11 cases, the Debtors amended their DIP Agreement on November 1, 2004, to permit the Debtors to continue engaging in their Futures Practices subject to certain conditions. Currently, the Debtors trade Hedge Contracts through REFCO, LLC, a futures and options clearinghouse. As part of the Futures Practices, the Debtors incur three primary types of expenditures: (1) payments to REFCO of less than $100,000 per year as commissions for each Hedge Contract it trades on behalf of the Debtors; (2) expenditures for "open trade equity," which is the unrealized profit or loss on any futures or options positions; and (3) maintenance of adequate margins that generally averages from approximately $1,000,000 to $2,000,000 per quarter, to meet REFCO's margin requirements. According to Mr. Ivester, the margins maintained by the Debtors act as collateral for REFCO. These margins provide REFCO assurance of payment in the event that the Debtors are not able to settle their open trade equity position on a given day. However, REFCO has expressed concern to the Debtors regarding continuing the Futures Practices under the strictures of the Credit Agreement as currently formulated. In response to REFCO's concern, the Debtors considered opening an Account with ADM Investor Services, Inc. ADMIS, Mr. Ivester says, is a clearinghouse with vast experience in handling commodity futures and option accounts. According to Mr. Ivester, the costs associated with maintaining the Account with ADMIS are similar to the costs currently charged by REFCO. 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. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Trade Creditors Sell 182 Claims Totaling $2MM ------------------------------------------------------------------ Between December 12, 2004, and December 14, 2004, the Clerk of the Bankruptcy Court recorded about 182 claim transfers to: (a) Halcyon Fund, L.P. Creditor Claim Amount -------- ------------ Ecolab, Inc. $85,839 (b) Madison Avenue Capital Group II Trust Creditor Claim Amount -------- ------------ William Allen Co. $31,948 (c) Madison Liquidity Investors 123, LLC Creditor Claim Amount -------- ------------ AIC, Inc. $14,108 Blackwood Sheet Metal 3,221 Brithinee Electric 5,244 Crystal Springs Water Co. 1,394 DS Waters of America, LP 2,754 Dunn Mechanical, Inc. 1,933 FL Utility Trailers 6,985 Food For Life 92,878 Hinckley Spring Water Co. 1,906 Hinson Mechanical Co. 3,509 J & K Ingredients 72,928 Kwik Lok Co. 4,556 Manning Search Group 24,900 Metro Truck Center 15,324 Mincing Overseas Spiece Co. 17,814 Moorhead & Company, Inc. 138,140 Pacific Specialties 15,140 Pac Paper, Inc. 20,514 Pilot Air Freight 21,703 Power Chemical 7,277 Sierra Springs 54 Sierra Spring Distributor 30 Sparkletts 562 Tom Nehl Truck Co. 10,056 Tylex, Inc. 24,474 Warren Oil Co. 55,057 White Stokes Co. 10,960 Wilkerson Communications 1,432 (d) Madison Liquidity Investors 124, LLC Creditor Claim Amount -------- ------------ Independent Elec. Machinery Co. $1,509 Northam Distributing 1,051 Northeast Foods, Inc. 13,545 United/Richter Electric Motors 2,700 (e) Madison Niche Opportunities, LLC Creditor Claim Amount -------- ------------ American Pan Co. $20,664 Clover Crest Dairy Co. 790 Crystal Springs 53 Dawn Distribution Services 398,494 Don Julio, Inc. 146,251 Hinckley Schmidt, Inc. 557 Hinkley Springs Water Co. 1,105 Great Lakes Int'l Trading, Inc. 96,358 Intralox, Inc. 63,120 Kentwood Spring Water 1,804 Machinery Moving, Inc. 1,090 Marathon Landscape Services 220 New Horizons Baking Co. 146,868 RS Coating Co. 420 Rudy's Gardening Service 820 (f) Oasis Liquidity Fund, LLC Creditor Claim Amount -------- ------------ Adopt-Atech $1,654 Advance Battery Systems, Inc. 926 Ameritel Inns-Twin Falls 948 Arrington Transmissions 750 Azo Inc. 897 Buds Wrecker Service 923 Craftsmen Industries Inc. 769 Door & Frame Repair 987 East Towne Urgent Care & OCC Health 825 Jevic Transportation, Inc. 940 JP Bryne & Co. Inc. 977 Louisiana Fire Extinguisher, Inc. 782 Metro Machine Works, Inc. 877 S&S Insulation Inc. 770 Shawnee Biscuit Co. 889 Stoker Wholesale, Inc. 1,326 Union City Body Co., LLC 900 (g) Revenue Management Creditor Claim Amount -------- ------------ A-1 Janitorial $3,261 Ace Exterminating 5,004 Accurate Superior Scale 8,599 Ad Lift 5,483 Alton Delivery Service Co. 13,131 Alvey Washing Equipment 12,658 Automotive Specialty Equipment 9,838 Auto Parts & Supply 8,827 Barloworld Freightliner 9,989 Brandon Industrial Parts 6,823 Cayce Co., Inc. 6,255 Chicago Bandag 5,593 Cohen & Goldfried 20,865 Cooperative Gas & Oil Company, Inc. 7,013 D & J Tire, Inc. 17,404 Durham Coca-Cola Bottling Co. 6,978 Electric Motor Shop 12,065 Gory Electric Motors, Inc. 5,276 Gould Engineering 5,300 Grassland Dairy Products 57,087 Innovative Marking Systems 15,077 McCoy National Lease, Inc. 4,056 Midwest Truck & Trailer 5,189 Modern Data Products, Inc. 1,243 Monroe Spring Brake 1,148 Pepsi-Cola Bottling Co. 2,116 Potomac Disposal Services of VAL 1,737 T & W Oil Company 100,849 Trailer Doctor Services, Inc. 6,805 Zeppy's Bagel Bakery 30,008 (h) Sierra Liquidity Fund, LLC Creditor Claim Amount -------- ------------ ABCD Vend, Inc. $3,304 California Sheet Metal 420 Caster Industries 1,570 Clarklift Absolute Storage 1,326 Dairy Valley Distributing 4,159 Eldridge Tire & Wheel 2,308 Franciscan Occupational Health 1,115 Hyman Paper & Chemical 1,755 ILLCO, Inc. 2,301 Nelson & Bob's Auto Care Center, Inc. 2,897 NTT-National Technology Transfer 1,750 Price Chopper/The Golub Corporation 1,270 Scott Kenny (Scott's Electric) 1,110 Security Storage Service, Inc. 1,793 Wagner Floor Service 1,150 Weather Tire Service, Inc. 1,105 (i) Trade-Debt.net Creditor Claim Amount -------- ------------ Abes Auto Glass & Lock, Inc. $321 Acme Lock, Inc. 181 Alsco-American Linen-Boise 144 American Pressure Wash 300 Basin Glass And Aluminum 475 Brooks Lock & Key, Inc. 254 Buzy Bee Board-Up 492 Casner Exterminating, Inc. 250 CBS Personnel Services 7,435 Center Tire Company 235 Cintas Corp. 549 528 Cintas Corp. 524 1,582 City Radiator, Inc. 750 Claude Clark 320 Coca-Cola Bottling 820 Cooneys Locksmith 129 Downtown Ford, Inc. 229 Fleetwood Sales, Inc. 687 Food 4 Less 600 Gabbie Medical Clinic 136 George M0Tts Jr. 184 Gladys Durett 150 Gregg Electrical Company 197 Healthworks Northwest 173 Howe 157 Jason Elliott 225 Jerome Sinquefield 410 Labor Finders Of South Carolina 240 Larry Tennant Allclean 210 Madison Starters & Alternators, Inc. 327 Magic City Janitorial, Inc. 200 Magic Valley Regional Medical Ctr. 210 Marvin Block 270 Media Dev. Co., Inc. d/b/a News at Norman 300 Metal Stock, Inc. 164 MJ Swanson 430 Mowermen Lawncare 390 Neibauer Painting 525 Newport Health Center 139 Norcal Waste Systems of Butte Count 104 Northern Neck Coca-Cola 738 Overhead Door of Tampa Bay 646 Owatonna Public Utilities 998 Pauls Auto Glass 227 Phillip Morelli Ta Superglass Winds 315 Riley Chevrolet of Jefferson City 166 Robertet Flavors, Inc. 568 Rodney R. Ringgenberg 225 Roto Rooter Davenport 142 Royal Pipe & Supply Co. 341 Royer Tire Service 140 Ruston Ac Heat, Inc. 129 Shawnee Biscuit Co. 364 Sheppards Trk Reb., Inc. 418 Skates Auto Glass, Inc. 161 Southern Air Conditioning & Heating 161 Steve Paro 132 Ten Mile Service 1,445 The Great Bend Tribune 181 Terra Electrical, Inc. 615 Terry Hassel 264 Toshiba Business Solutions 285 Transport Services & Brake Sales I 260 United Auto Parts 365 Viatran Corp. 117 William Wenk Jr. 1,905 Woodcock Refrigeration 436 World Class Automotive 113 Xcel Environmental, Inc. 476 Yuba Sutter Disposal 651 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. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) ISTAR FINANCIAL: Completes Falcon Financial Acquisition ------------------------------------------------------- iStar Financial Inc. (NYSE: SFI) completed its acquisition of Falcon Financial Investment Trust. Falcon became a wholly owned subsidiary of iStar Financial effective upon the filing of the Articles of Merger with the State Department of Assessments and Taxation of Maryland in accordance with Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland and the Maryland Limited Liability Company Act, on March 3, 2005. As a result of the acquisition, Falcon shares will no longer be listed on the Nasdaq National Market. At the effective time of the acquisition, all common shares of beneficial interest of Falcon not tendered in the earlier tender offer were canceled and converted into the right to receive $7.50 net in cash, without interest (subject to applicable withholding taxes), subject to the rights shareholders by mail with information on how to receive payment for their Falcon shares not tendered in the tender offer. About the Company iStar Financial -- http://www.istarfinancial.com/-- is the leading publicly traded finance company focused on the commercial real estate industry. The Company provides custom-tailored financing to high-end private and corporate owners of real estate nationwide, including senior and junior mortgage debt, senior and mezzanine corporate capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust, seeks to deliver a strong dividend and superior risk-adjusted returns on equity to shareholders by providing the highest quality financing solutions to its customers. * * * As reported in the Troubled Company Reporter on Jan. 24, 2005, iStar Financial, Inc., plans to acquire Falcon Financial Investment Trust. Fitch expects no change to iStar's rating and Outlook as a result of this transaction. The iStar's ratings are: -- Senior unsecured debt: 'BBB-'; -- Preferred stock 'BB'; -- Rating Outlook Stable. J.P. MORGAN: Moody's Holds Ba1 Rating on $11.569MM Class L Certs. ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of two classes and affirmed the ratings of ten classes of J.P. Morgan-CIBC Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2003-FL2: * Class A, $160,939,183, Floating, affirmed at Aaa * Class X-1A, Notional, affirmed at Aaa * Class B, $16,000,000, Floating, upgraded to Aaa from Aa1 * Class C, $14,500,000, Floating, upgraded to Aa1 from Aa2 * Class D, $12,300,000, Floating, affirmed at Aa3 * Class E, $10,300,000 Floating, affirmed at A1 * Class F, $9,800,000, Floating, affirmed at A2 * Class G, $10,300,000, Floating, affirmed at A3 * Class H, $9,300,000, Floating, affirmed at Baa1 * Class J, $10,300,000, Floating, affirmed at Baa2 * Class K, $8,700,000, Floating, affirmed at Baa3 * Class L, $11,569,459, Floating, affirmed at Ba1 The Certificates are collateralized by four loans, consisting of two whole mortgage loans and two senior participation interests, which range in size from 11.0% to 40.3% based on current principal balances. As of the February 15, 2005 distribution date the transaction's aggregate certificate balance has decreased by approximately 26.9% to $374.0 million from $511.7 million at securitization. The trust consists of two segregated loan groups. Moody's does not rate Loan Group II, which consists of one floating rate mezzanine loan secured by interests in 277 Park Avenue. Moody's was provided with operating results for the nine-month period ending September 2004 for all of the loans and the participation. Moody's current weighted average loan to value ratio ("LTV") is 66.1%, compared to 64.9 % at origination. Moody's is upgrading Classes B and C due to increased credit support and stable pool performance. The largest loan is the FelCor Portfolio Loan ($110.5 million - 40.3%). The loan is secured by first priority mortgages on ten hotels located in eight states. The properties contain 2,455 rooms as: Charleston Mills Holiday Inn, Charleston, South Carolina (214 rooms), Lexington Hilton Suites, Lexington, Kentucky (174 rooms), San Antonio Airport Holiday Inn Select, San Antonio, Texas (397 rooms), DFW Embassy Suites, Irving, Texas (305 rooms), Jacksonville Embassy Suites (277 rooms), Raleigh/Durham Doubletree Guest Suites, Durham, North Carolina (203 rooms), Rocky Point Doubletree Guest Suites, Tampa, Florida (203 rooms), Bloomington Embassy Suites, Bloomington, Minnesota (219 rooms), Tulsa Embassy Suites, Tulsa, Oklahoma (240 rooms) and Old Mill Crowne Plaza, Omaha, Nebraska (223 rooms). The loan sponsor is FelCor Lodging LP. At securitization Moody's recognized average occupancy and an ADR of 68.2% and $98.62 respectively, resulting in RevPAR of $67.22. For the trailing 12- month period ended September 2004, the portfolio had average occupancy and ADR of 68.6% and $100.58 respectively, resulting in RevPAR of $69.04. Moody's LTV is 69.4%, compared to 71.6% at securitization. There is additional debt in the form of senior and junior mezzanine loans with a combined balance of approximately $35.0 million. The loan is shadow rated Baa3, the same as at securitization. The second largest exposure is the Hometown Portfolio Loan ($85.0 million - 31.0%). The loan is secured by first priority mortgages on 21 separate manufactured housing communities located in six states. The largest state concentration is Michigan with 3,086 sites, which represents 48.8% of the total portfolio of 6,084 sites. The second and third largest concentrations are in Indiana and Idaho with 14.8% and 11.8% respectively. The loan sponsor is Hometown America, LLC. Average portfolio occupancy as of September 2004 was 81.4%, compared to 84.2% at securitization. Moody's LTV is 63.0%, compared to 61.5% at securitization. The property is further encumbered by $35.0 million of subordinate debt in the form of a junior portion of the first mortgage. The loan is shadow rated Baa2, the same as at securitization. The third largest loan is the Dolce Portfolio Loan ($48.3 million - 17.6%). The loan is secured by first priority mortgages on three conference center hotels, comprising 594 rooms and approximately 71,000 square feet of meeting space. All three hotels are located in the New York Metropolitan area and include: Dolce Hamilton Park, Florham Park, New Jersey (219 rooms; 26,823 square feet of meeting space), Dolce Tarrytown House, Tarrytown, New York (212 rooms; 23,087 square feet of meeting space) and Dolce Heritage, Southbury, Connecticut (163 rooms; 21,376 square feet of meeting space). The loan sponsor is Dolce International and AEW Properties. At securitization Moody's recognized average occupancy and an ADR of 61.5% and $158.52 respectively, resulting in RevPAR of $97.44. For the trailing 12-month period ended September 2004 the portfolio's average occupancy and ADR were 61.1% and $160.43 respectively, resulting in RevPAR of $98.00. Individual property performance indicates the percentage changes from Moody's RevPAR at securitization: Dolce Tarrytown (- 0.62%), Dolce Hamilton Park (+8.70%) and Dolce Heritage (-13.06%). Moody's LTV is 64.7%, compared to 66.8% at securitization. There is additional debt in the form of a $30.0 million mezzanine loan. The loan is shadow rated Baa3, the same as at securitization. The fourth largest loan exposure is the Phoenix Spectrum Mall Loan ($30.2 million - 11.0%). The loan is secured by a first priority mortgage on fee and leasehold interests in a one-story regional shopping mall and entertainment center containing approximately 1,080,526 square feet of rentable area located in Phoenix, Arizona. The mall is anchored by Wal-Mart (Moody's senior unsecured rating Aa2) and Costco (Moody's senior unsecured rating A2). The mall has a third vacant anchor which had previously been ground leased to Dillard's Clearance Center. During the first quarter of 2004 the property was acquired by a partnership between Developers Diversified Realty and Coventry Real Estate Advisors. The purchase price was approximately $46.5 million. The new owners plan to redevelop the mall and modify the current layout. Since acquisition, the new borrower terminated the Dillard's ground lease and is currently in lease negotiations with two prospective anchor tenants. Additionally, the borrower has entered into a new 15-year lease with one of the property's two existing movie exhibitors at a significantly higher rental rate. The tenant will construct its own building to house a 14-screen theater for which it received a tenant improvement allowance of approximately $6.9 million ($110 PSF) from the borrower. Other significant tenants include Ross Dress for Less, PetsMart, and Walgreens. As of September 30, 2004 the property was 85.2% leased, compared to 91.4% at securitization. Moody's LTV is 64.9%, compared to 61.8% at securitization. The loan is shadow rated Baa3, the same as at securitization. JACOBS ENTERTAINMENT: Moody's Rates $23MM Sr. Sec. Notes at B2 -------------------------------------------------------------- Moody's Investors Service assigned a B2 to Jacobs Entertainment, Inc.'s (JEI) new $23 million 11 7/8% senior secured notes due 2009, and confirmed the company's existing ratings. The new notes are an add-on to the company's existing $125 million 11 7/8% senior secured notes 2009 and were issued under the same indenture. The ratings outlook is stable. Proceeds from the new note offering were used primarily to purchase three truck plaza gaming facilities in Louisiana from a company owned and controlled by Jacobs Entertainment's two directors and sole owners. A portion of the proceeds was also used to pay a consent fee to existing bondholders to allow the transaction to take place. The three truck plazas were pledged as collateral under the indenture governing the 11 7/8% notes. Pro forma for this transaction, total debt, including related party subordinated debt, will be about $173 million, or about 4.7x the company's latest 12-month EBITDA, a level considered appropriate for the company's B2 senior implied rating given its relatively small size. Reported debt/EBITDA for the 12-month period ended Sep. 30, 2004 was about 4.0x. Jacobs Entertainment's B2 senior implied rating also takes into consideration that two of the three truck plazas that the company acquired are not presently licensed, and that obtaining these licenses were not a condition of closing. Louisiana state law requires that truck plaza gaming facilities have to be licensed by the Louisiana State Police. Video poker operations began at the licensed facility in September 2004. One license application has been filed which the company expects to be granted in March 2005. The company expects that the other license will be granted in May 2005. The stable ratings outlook recognizes Jacobs Entertainment's positive year-to-year revenue and EBITDA performance, and that although over 50% of the company's property-level cash flow comes from the Black Hawk, Colorado gaming market, that market is characterized by a relatively high barrier to entry due to the limited availability of approved gaming space. The Black Hawk market has also exhibited a high degree of stability over the years and the overall, long term growth for the market is considered good. Although some EBITDA growth is expected over the next two years, it is not expected that leverage will likely drop to, and sustain itself at, a level that supports a higher rating during that time period. The new rating assigned is: * $23 million 11 7/8% senior secured notes due 2009 -- B2. The existing ratings confirmed are: * $125 million 11 7/8% senior secured notes due 2009, at B2; * Senior implied rating, at B2; * Long term issuer rating, at B3; and * Stable ratings outlook. Jacobs Entertainment, Inc., owns and operates gaming and pari- mutuel facilities in Colorado, Nevada, Louisiana, and Virginia. The company owns three land-based casinos, six truck plaza gaming facilities, a horse racing track with six off-track wagering facilities, and an agreement that entitles the company to a portion of the gaming revenue from an additional truck plaza video gaming facility. Net revenues for the 12-month period ended Sept. 30, 2004 was about $186 million. JOLIET JUNIOR: Fitch Lowers Rating of $14.5MM Revenue Bonds to D ---------------------------------------------------------------- Fitch Ratings-New York-March 3, 2005 Fitch Ratings downgrades Will County, Illinois's $14.5 million student housing revenue bonds (Joliet Junior College project), series 2002A, and taxable series 2002B to 'D' from 'C'. A March 2 disclosure filing for the student housing project indicated that the scheduled March 1 interest payment on the bonds was not made. The filing, the sole source of available information, reported that First Midwest Bank, as trustee, did not make the payment in response to a direction by the holders of 69% of the outstanding bonds. According to the document, these bondholders are replacing First Midwest Bank as trustee with Manufacturers and Traders Trust Co. of Baltimore, Maryland. The statement said that First Midwest Bank currently is holding 'the funds that were to be used to make the scheduled?interest payment' as discussion among holders of 'all' outstanding bonds continues. Fitch has not received a notice that any event of default has yet been declared pursuant to the terms of the bonds relating to the matter of the March 1 payment. The default category rating is assigned in light of the disclosure that the scheduled interest payment on the bonds was not made. The ratings of obligations in Fitch's default rating category are based on prospects for achieving partial or full recovery after the default. Expected recovery values are highly speculative, but the 'D' rating category generally indicates the lowest recovery potential, i.e. below 50%. Because of the housing project's weakening track record and need to deplete debt service reserve funds to make past payments, Fitch believes that the likelihood of project funds being sufficient to repay all obligations is low. KMART CORP: Secures Five-Year $4 Billion Loan with Sears --------------------------------------------------------- Kmart Corporation and Sears Roebuck Acceptance Corp. entered into a Five-Year Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a consortium of bank and institutional lenders. As reported in the Troubled Company Reporter on Nov. 18, 2004, Kmart Holding Corporation and Sears, Roebuck and Co. signed a definitive merger agreement that will combine Sears and Kmart into a major new retail company named Sears Holdings Corporation. Sears Holdings will be the nation's third largest retailer, with approximately $55 billion in annual revenues, 2,350 full-line and off-mall stores, and 1,100 specialty retail stores. The Credit Agreement, dated February 22, 2005, provides Kmart and SRAC, as borrowers, with access to a $4 billion revolving credit facility, available for general corporate purposes and including a $1.5 billion letter of credit sublimit. The facility is to be guaranteed by or secured by the inventory and credit card accounts receivable of Kmart Holding Corporation, Sears, Roebuck and Co., Sears Holdings Corporation and certain of their domestic subsidiaries, subject to collateral release provisions contingent upon the consolidated performance of Sears Holdings. The effectiveness of the Credit Agreement is contingent upon, among other things: 1. the consummation of the Agreement and Plan of Merger, dated as of November 16, 2004, between Kmart and Sears; and 2. the entry into a Guarantee and Collateral Agreement in favor of the Agent by the Loan Parties. The Agreement requires the Borrowers to pay to the Agent for the account of each Lender a 0.175% commitment fee (subject to adjustment over time). The Borrowers will also pay other Agent's Fees "as may from time to time." Kmart Holding, Sears Holding and the Borrowers covenant with the Lenders not to permit: (a) the Consolidated Adjusted Leverage Ratio (calculated by comparing the sum of all debt plus lease obligations to EBITDAR) as of the last day of any period of four consecutive fiscal quarters of Holdings to exceed 3.0 to 1.0; and (b) the Consolidated Inventory Coverage Ratio (calculated by comparing Gross Domestic Inventory to the sum of the total amount owed to the Lenders plus available cash) as of the last day of any fiscal quarter of Holdings to be less than 1.4 to 1.0. The Lenders are: -- Syndication Agents * Citicorp USA, Inc.; and * Bank of America, N.A.; -- Documentation Agents * Barclays Bank PLC; * Lehman Commercial Paper Inc.; * HSBC Bank USA; * Merrill Lynch Bank USA; * Morgan Stanley Bank; * The Royal Bank of Scotland, PLC; and * Wachovia Bank, National Association; and -- Lead Arrangers and Joint Bookrunners * J.P. Morgan Securities Inc.; * Citigroup Global Markets Inc.; and * Banc of America Securities, LLC The Loan will be funded by: Lender Commitment ------ ---------- JPMorgan Chase Bank, N.A. $230,200,000 Citicorp USA, Inc. 230,200,000 Bank of America, N.A. 230,200,000 Barclays Bank PLC 217,200,000 Lehman Brothers Bank, FSB 217,200,000 Wachovia Bank, N.A. 217,200,000 Morgan Stanley Bank 217,200,000 HSBC Bank USA 217,200,000 Merrill Lynch Bank, USA 217,200,000 The Royal Bank of Scotland plc 217,200,000 Goldman Sachs Credit Partners, L.P. 197,400,000 Harris Nesbitt Financing, Inc. 197,400,000 CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch 197,400,000 The Bank of Nova Scotia 197,400,000 Bear Stearns Corporate Lending Inc. 197,400,000 The CIT Group/Business Credit, Inc. 100,000,000 Royal Bank of Canada 100,000,000 National City Bank 75,000,000 The Bank of New York 75,000,000 Banco Popular de Puerto Rico 70,000,000 CIBC, Inc. 50,000,000 Mizuho Corporate Bank 50,000,000 The Northern Trust Company 50,000,000 Banca di Roma, Chicago Branch 35,000,000 Branch Banking and Trust Company 25,000,000 First Hawaiian Bank 25,000,000 KeyBank National Association 25,000,000 United Overseas Bank Limited, New York Agency 25,000,000 U.S. Bank National Association 25,000,000 Siemens Financial Services, Inc. 17,000,000 First Tennessee Bank National Association 15,000,000 The International Commercial Bank of China 15,000,000 Malayan Banking Berhad 15,000,000 Bank of Oklahoma 10,000,000 A full-text copy of the Credit Facility is available at no charge at: http://www.sec.gov/Archives/edgar/data/1229206/000095012405001102/k92595exv99w1.txt About Sears, Roebuck and Co. Sears, Roebuck and Co. is a leading broadline retailer providing merchandise and related services. With revenues in 2004 of $36.1 billion, Sears, Roebuck offers its wide range of home merchandise, apparel and automotive products and services through more than 2,300 Sears-branded and affiliated stores in the U.S. and Canada, which include approximately 870 full-line and 1,100 specialty stores in the U.S. Sears, Roebuck also offers a variety of merchandise and services through sears.com, landsend.com, and specialty catalogs. Sears, Roebuck is the only retailer where consumers can find each of the Kenmore, Craftsman, DieHard and Lands' End brands together -- among the most trusted and preferred brands in the U.S. The company is the largest provider of home services, with more than 14 million service calls made annually. For more information, visit the Sears, Roebuck website at http://www.sears.com/ About Kmart Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/--isa mass merchandising company that offers customers quality products hrough a portfolio of exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Martha Stewart Everyday, Route 66 and Sesame Street. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. LB-UBS COMMERCIAL: Moody's Junks $3.025MM Class Q Certificates -------------------------------------------------------------- Moody's Investors Service upgraded the ratings of two classes and affirmed the ratings of 19 classes of LB-UBS Commercial Mortgage Trust 2001-C7, Commercial Mortgage Pass-Through Certificates, Series 2001-C7: * Class A-1, $18,102,940, Fixed, affirmed at Aaa * Class A-2, $60,674,000, Fixed, affirmed at Aaa * Class A-3, $270,444,882, Fixed, affirmed at Aaa * Class A-4, $57,722,000, Fixed, affirmed at Aaa * Class A-5, $540,708,000, Fixed, affirmed at Aaa * Class X-CL, Notional, affirmed at Aaa * Class X-CP, Notional, affirmed at Aaa * Class B, $49,909,000, Fixed, upgraded to Aa1 from Aa2 * Class C, $16,636,000, WAC, upgraded to Aa2 from Aa3 * Class D, $39,300,000, WAC, affirmed at A2 * Class E, $12,100,000, WAC, affirmed at A3 * Class F, $12,120,000, Fixed, affirmed at Baa1 * Class G, $12,099,000, Fixed, affirmed at Baa2 * Class H, $10,587,000, WAC, affirmed at Baa3 * Class J, $10,587,000, Fixed, affirmed at Ba1 * Class K, $15,124,000, Fixed, affirmed at Ba2 * Class L, $6,049,000, Fixed, affirmed at Ba3 * Class M, $7,562,000, Fixed, affirmed at B1 * Class N, $4,537,000, Fixed, affirmed at B2 * Class P, $3,025,000, Fixed, affirmed at B3 * Class Q, $3,025,000, Fixed, affirmed at Caa2 As of the February 17, 2005 distribution date, the transaction's aggregate principal balance has decreased by 3.7% to $1.17 billion from $1.21 billion at securitization. The Certificates are collateralized by 113 loans, ranging in size from less than 1.0% to 18.5% of the pool, with the top ten loans representing 48.0% of the pool. The pool consists of a large loan shadow rated component, representing 39.4% of the pool, and a conduit component, representing 60.6% of the pool. Four loans, representing 1.9% of the pool, have defeased and been replaced with U.S. government securities. There is one loan representing less than 1.0% of the pool in special servicing. Moody's has estimated a loss of approximately $700,000 for this loan. One loan has been liquidated from the pool resulting in a realized loss of approximately $350,000. Moody's was provided with year-end 2003 operating results for 99.1% of the performing loans and partial year 2004 operating results for 55.0% of the performing loans. Moody's weighted average loan to value ratio ("LTV") for the conduit component is 84.7%, compared to 85.5% at securitization. Based on Moody's analysis, 5.9% of the pool has a LTV greater than 100.0% compared to less than 1.0% at securitization. Moody's is upgrading Classes B and C due to stable overall pool performance and credit support buildup. The large loan component consists of four shadow rated loans. The largest shadow rated loan is the UBS Warburg Building Loan ($215.4 million - 18.5%), which is secured by a 1.1 million square foot office building located in midtown Manhattan. The property's performance has been stable since securitization. It is currently 97.0% occupied, compared to 100.0% at securitization. The largest tenant is UBS (Moody's senior unsecured rating Aa2), which occupies 800,000 square feet under a lease that expires in 2018. Moody's shadow rating is A2, the same as at securitization. The second largest shadow rated loan is the Fashion Centre at Pentagon City Loan ($160.9 million -- 13.8%), which is secured by an 820,000 square foot regional mall located in Arlington, Virginia. The center is anchored by Nordstrom and Macy's, which each own their respective improvements. The center has been virtually 100.0% occupied since securitization. Moody's shadow rating is Aa2, compared to Aa3 at securitization. The third largest shadow rated loan is the Connell Corporate Center Loan ($43.1 million - 3.7%), which is secured by a 415,000 square foot Class A suburban office building located in Berkeley Heights, New Jersey. The building is located within a 170-acre corporate park that contains approximately 1.0 million square feet of Class A space. The largest tenant is American Home Assurance Company (subsidiary of AIG - Moody's senior unsecured rating Aaa), which occupies 52.0% of the premises under a lease expiring in 2013. The property is 92.0% leased, compared to 100.0% at securitization. The loan fully amortizes by its June 2013 maturity date. Moody's shadow rating is A1, the same as at securitization. The fourth largest shadow rated loan is the Amsdell Portfolio Loan ($39.8 million - 3.4%), which is secured by nine self-storage facilities located in New Jersey (5), Connecticut (3) and Ohio (1). Although the portfolio's occupancy has increased, from 79.6% at securitization to 82.0% currently, its performance has been impacted by a decline in rental rates. Moody's shadow rating is Ba1, compared to Baa3 at securitization. The top three conduit loan groups represent 9.9% of the pool. The largest conduit loan is the Plaza Frontenac Loan ($43.8 million - 3.8%), which is secured by a 443,000 square foot upscale regional mall located in suburban St. Louis, Missouri. The center is anchored by Neiman Marcus, which owns its own store, and Saks, which owns its improvements. The center's performance has been stable since securitization. The loan is interest only. Moody's LTV is 74.5%, the same as at securitization. The second largest conduit loan group consists of the Tri-County Business Park Loans ($37.0 million - 3.2%), which are four cross- collateralized loans secured by four industrial properties located in Florida. The properties total 1.1 million square feet. The portfolio's performance has declined slightly since securitization due to a decline in occupancy. Moody's LTV is 95.4%, compared to 91.6% at securitization. The third largest conduit loan group consists of the Torrance Executive Plaza East and West Loans ($33.1 million - 2.9%), which are two cross collateralized loans secured by two office properties located in Torrance, California. The properties total 345,000 square feet. Performance of the two properties has declined slightly since securitization due to a decline in occupancy. The overall occupancy is currently 89.7%, compared to 94.8% at securitization. Moody's LTV is 97.6%, compared to 94.1% at securitization. The pool's collateral is a mix of office (39.3%), retail (35.9%), industrial and self storage (12.7%), multifamily (8.0%), U.S. government securities (1.9%), lodging (1.8%) and healthcare (0.4%). The collateral properties are located in 21 states. The highest state concentrations are New York (22.8%), California (17.6%), Virginia (15.4%), Florida (8.0%) and Maryland (7.3%). All of the loans are fixed rate. LEVI STRAUSS: Federated/May Merger Talks Won't Affect S&P's Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services said that there would be no immediate effect on the ratings or outlook on the rated apparel companies from the proposed merger of Federated Department Stores, Inc., (BBB+/Watch Neg/A-2) and May Department Stores Co. (BBB/Watch Neg/A-3), including those of Levi Strauss & Co. (B-/Stable/--). As reported in the Troubled Company Reporter on Mar. 3, 2005, Standard & Poor's Ratings Services assigned its 'B-' rating to apparel marketer and distributor Levi Strauss & Co.'s proposed $550 million senior unsecured notes with various maturities (to be determined). Proceeds from the notes will be used to refinance the company's 11.625% notes due 2008. The above rating is subject to Standard & Poor's review of the final documentation. At the same time, Standard & Poor's raised its ratings on the San Francisco, California-based company, including its long-term corporate credit rating, to 'B-' from 'CCC'. The ratings were removed from CreditWatch, where they were placed on Feb. 8, 2005. The outlook is stable. Levi Strauss had about $2.3 billion in debt outstanding at Nov. 28, 2004. The proposed merger of Federated and May represents a major consolidation in the retail landscape and will have significant effect on the dynamics of the apparel industry. The combined retailer's concentrated buying and bargaining power would likely pressure the apparel firms' margins. Revenues from the combined operations would also be negatively affected as Federated and May are likely to close retail locations to improve operating efficiency and reduce costs. There could be more emphasis on the retailers' own private labels at the expense of some of the branded merchandise. There may also be added emphasis on exclusive brands as well, which would result in additional investments on the part of the apparel firms. Despite the potential negative fallout from the merger, most investment-grade apparel companies have already diversified their channels of distribution, decreasing their exposure to department stores in recent years. Apparel firms such as Liz Claiborne, Polo Ralph Lauren, Tommy Hilfiger, and Jones Apparel Group remain significant vendors to the department stores. Nonetheless, these companies, such as Liz and Jones, have a portfolio of brands that serve different demographic markets, minimizing their exposure to one particular segment or customer. However, Standard & Poor's notes that Jones has a combined sales concentration of 26% to May and Federated, and could be more vulnerable to the combination than some of the other apparel firms. On the other hand, for some apparel vendors, there could be opportunities as well, as Federated may move to a more upscale retail format, which would benefit those companies with the premium brands. Standard & Poor's expects consolidation in the apparel industry to continue as vendors keep looking for opportunities to expand their brand portfolios to maintain relevance with their customers and the ultimate consumers. While it is too early to assess the effect of the proposed Federated-May Department Store merger on the apparel industry, Standard & Poor's will closely monitor events as they develop. MARIETTA STREET: Case Summary & 4 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Marietta Street Plaza, Inc. 3930 Austell Powder Springs Road Powder Springs, GA 30127 Bankruptcy Case No.: 05-91391 Chapter 11 Petition Date: March 1, 2005 Court: Northern District of Georgia (Atlanta) Judge: James Massey Debtor's Counsel: Paul Reece Marr, Esq. Paul Reece Marr, P.C. 300 Galleria Parkway, N.W., Suite 960 Atlanta, GA 30339 Tel: 770-984-2255 Total Assets: $1,100,424 Total Debts: $7,485,854 Debtor's 4 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Hometown Bank of Villa Rica 2nd lien on strip $3,656,684 1849 Carollton-Villa Rica shopping center, 1st Hwy. Lien on all other Villa Rica, GA 30180 real estate owned by the Debtor Wayne Ingram Marietta Street Plaza $3,734,204 4525 Shipp Road 4093 Marietta St., Powder Springs, GA 30180 Powder Springs, GA. the Debtor acquired this property from Powder Springs Petroleum, LP subject to the lien secured value: $650,000 Cobb County Tax Commissioner Property tax $28,311 Delinquent Tax Department 100 Cherokee St., Ste. 450 Marietta, GA 30090 City of Powder Springs Property tax $4,223 MARSH SUPERMARKETS: S&P Pares Rating to B & Says Outlook is Stable ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on Marsh Supermarkets, Inc. The corporate credit rating was lowered to 'B' from 'B+'. In addition, all ratings are removed from CreditWatch, where they were placed with negative implications Nov. 11, 2004. The outlook is stable. The downgrade reflects the company's weak credit measures and lack of significant progress in turning around its operating performance. Marsh recently reported results for its third quarter ended Jan. 1, 2005. Comparable supermarket and convenience store sales grew 0.6% year over year, while comparable sales (excluding gasoline) declined 1.9%. Despite revenue growth of 3.4%, to $402 million for the quarter, EBITDA declined 8% year over year, to $12.6 million, due to lower margins. Also, debt levels increased to $232 million ($397 million when adjusted for leases), from $206 million at the end of the 2003 fiscal year ended March 2004, because the company funded its capital expenditure needs with additional debt. Hence, credit measures have weakened, with lease-adjusted debt to EBITDA of 6.4x and EBITDA interest coverage of 1.8x at Jan. 1, 2005. In addition, debt to capital is 77%, and funds from operations to total debt is 14%. Availability under Marsh's bank facility declined to $17 million; however, the company did have $47 million of cash on its balance sheet. "The ratings on Marsh reflect the company's heavy debt burden, recent weak sales trends, and below-average operating margins, as well as the highly competitive nature of the supermarket industry," said Standard & Poor's credit analyst Stella Kapur. "These risks are somewhat mitigated by the company's leading position in its primary market of Indianapolis, Indiana" Marsh operates 117 supermarkets and 162 Village Pantry convenience stores in the Indiana and western Ohio area. In Indianapolis, the company has a market share of about 29%, similar to that of Kroger Co., according to the 2003 Market Scope. However, it has faced intense competition in past years from new store openings by Wal-Mart Stores, Inc., Kroger Co., and others. This factor, along with increased promotional activity from competitors and more selective consumer shopping patterns, contributed to a 1.4% same-store retail sales decline for the fiscal year ended March 2004, following a 3.1% drop the previous year. For the three quarters ended Jan. 1, 2005, comparable sales increased 1.2%, while comparable sales excluding gasoline declined 1.5%. MCI INC: TMB Comm. Wants More Time to Modify Claim to Class 6A -------------------------------------------------------------- On September 14, 1995, TMB Communications, Inc., Frank and Janice Mitchell, and MCI Telecommunications Corporation entered into an Authorized Sales Agent Agreement. Under the Agreement, TMB was named an independent authorized sales agent of MCI and was obligated to meet certain annual revenue requirements. In return, MCI agreed to pay commissions based on contractual percentages as stated in the Agreement. Immediately upon MCI's termination of the Agreement in 1996, TMB repeated its longstanding demand for a complete accounting of all of its customers and demanded a resolution of its disputes through a fair process. After several years of great effort and negotiation with MCI, both parties entered into an Arbitration Agreement on August 30, 1999, establishing a detailed procedure for adjudicating the disputes, which included TMB's allegations that: (a) MCI stole or diverted certain customers that were generated by TMB; (b) MCI failed to report, and misrepresented, certain revenues and pay commissions accordingly; and (c) MCI mishandled certain TMB accounts by committing various acts and omissions, including: -- delivering poor service to its customers; -- engaging in improper billing practices; -- processing orders untimely; -- failing to provide to TMB's customers the required level of service; -- installing customer services inaccurately and untimely; and -- failing or delaying in providing to TMB's customers promised discounts. Louis A. Modugno, Esq., at McElroy, Deutsch, Mulvaney & Carpenter, LLP, in Morristown, New Jersey, relates that on January 14, 2003, TMB filed Claim No. 11256, asserting amounts due TMB as of the Petition Date in connection with the Arbitration Agreement. The Debtors objected to TMB's Claim and denied allegations asserted in the Arbitration Agreement. Subsequently, MCI and TMB entered into a stipulation, which provides that: (a) the Debtors' objection was dismissed without prejudice; (b) the Claim was subject to and governed by the Arbitration Agreement; (c) the parties will arbitrate and mediate the amount of the Claim pursuant to the Arbitration Agreement; and (d) TMB's Claim is fixed and allowed as a general unsecured claim, not subject to further objection. On November 19, 2003, the Debtors served a notice of deadline for assertion of MCI Pre-Merger Claims. Under the Deadline Notice, any holder of a general unsecured claim against the Debtors that sought treatment as the holder of a Class 6A MCI Pre-merger Claim was required to serve on MCI and its counsel all supporting documentation establishing the claim within 30 days of the service of the Deadline Notice. TMB's counsel received a copy of the Deadline Notice but due to the pending arbitration and the lack of knowledge of the value of the claim, TMB took no action. Pursuant to the Stipulation, an Arbitration hearing was held on June 15 to 18, 2004, in Miami, Florida, before a panel of arbitrators. By a letter dated September 20, 2004, an arbitration decision was announced. TMB was awarded $1,920,000, which included pre-judgment interest. The time in which TMB could elect to have its claim recognized as a Class 6A Pre-Merger Claim has since closed. Mr. Modugno contends that TMB's Claim qualifies as a MCI Pre- Merger claim because the Claim is related to commission fees and damages stemming form the September 1995 Agreement. Because MCI terminated the Agreement in May 1996, the Claim arises from transactions prior to September 13, 1998, and relies on the credit of MCI prior to September 13, 1998. Accordingly, TMB and the Mitchells ask the Court to extend the time for them to modify their Class 6 General Unsecured Claim to a Class 6A MCI Pre-Merger claim. Mr. Modugno notes that MCI was well aware of all aspects of TMB's Claim long before its merger with WorldCom in 1998 and was aware that TMB qualified for the MCI Pre-merger Class based on the facts contained in the Arbitration Agreement and its knowledge of its relationship with TMB. Mr. Modugno asserts that the extension for modification is justified as "excusable neglect" for two reasons: (a) TMB did not receive proper notice of the Debtors' filings even though the Debtors were well aware of TMB and the status of TMB's claim; and (b) TMB was unable to establish whether it had a claim against the Debtors because the decision was left to the arbitrators, and if it did have a claim, was unable to establish the value of the claim until September 2004, nearly a year from the time in which the right to make the election had closed. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Feb. 22, 2005, Moody's Investors Service has placed the long-term ratings of MCI, Inc., on review for possible upgrade based on Verizon's plan to acquire MCI for about $8.9 billion in cash, stock and assumed debt. These MCI ratings were placed on review for possible upgrade: * B2 Senior Implied * B2 Senior Unsecured Rating * B3 Issuer rating Moody's also affirmed MCI's speculative grade liquidity rating at SGL-1, as near term, MCI's liquidity profile is unchanged. As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. As reported in the Troubled Company Reporter on Feb. 16, 2005, Fitch Ratings has placed the 'A+' rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative, and the 'B' senior unsecured debt rating of MCI, Inc., on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for approximately $4.8 billion in common stock and $488 million in cash. * * * As reported in the Troubled Company Reporter on Feb. 22, 2005, Moody's Investors Service has placed the long-term ratings of MCI, Inc., on review for possible upgrade based on Verizon's plan to acquire MCI for about $8.9 billion in cash, stock and assumed debt. These MCI ratings were placed on review for possible upgrade: * B2 Senior Implied * B2 Senior Unsecured Rating * B3 Issuer rating Moody's also affirmed MCI's speculative grade liquidity rating at SGL-1, as near term, MCI's liquidity profile is unchanged. As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. As reported in the Troubled Company Reporter on Feb. 16, 2005, Fitch Ratings has placed the 'A+' rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative, and the 'B' senior unsecured debt rating of MCI, Inc., on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for approximately $4.8 billion in common stock and $488 million in cash. MEGO FINANCIAL: Trustee Taps Algon Capital as Financial Consultant ------------------------------------------------------------------ C. Alan Bentley, the Chapter 11 Trustee for the estate of Mego Financial Corp., dba Leisure Industries Of America, and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Nevada for permission to employ Algon Capital, LLC, dba Algon Group, as his financial consultant and liquidating agent. Algon Capital is expected to: a) assist Mr. Bentley in evaluating the Debtors' interest in certain real estate in Nye County, Nevada, and in miscellaneous lots in Park and Huerfano Counties, Colorado; b) advise and evaluate in the sale of the Debtors' equipment, including computer and other miscellaneous equipment; c) assist Mr. Bentley in evaluating causes of actions relating to the Debtors' former officers and Board of Directors, their former professionals including legal counsels and accounting firms, and causes of actions relating to Round Valley Capital and Union Square Partners; d) assist and advise Mr. Bentley with regards to the Debtors' collection of default judgments received, Split dollar life insurance policy, the Valley Electric Cooperative dividend payments, and the possible sale of the Debtors' public company shell, Mego Financial Corp.; and e) provide all other services to Mr. Bentley that are necessary in the Debtors' chapter 11 cases. Troy T. Taylor, the President of Algon Capital, discloses the Firm's terms of compensation: a) a monthly fee of $50,000 for the first month up the sixth month of Algon Capital's engagement, to be reduced to $25,000 a month from the seventh month up to the 12th month of the engagement, and finally to $12,500 per month onwards; and b) A contingent fee of 20% of the gross proceeds received by the Debtors' estate from any sale or settlement of physical assets, litigations and settlements, if no contingency law firm has been engaged on the sale or settlement that results in proceeds, and 10% of the gross proceeds received by the estate if a contingency fee law firm has been engaged on the sale or settlement that results in proceeds; Algon Capital assures the Court that it does not represent any interest adverse to Mr. Bentley, the Debtors or their estates. Headquartered in Henderson, Nevada, Mego Financial Corp. -- http://www.leisureindustries.com/-- is in the business of vacation time share resorts sales and management industry. The Company and its debtor-affiliates filed for chapter 11 protection on July 9, 2003 (Bankr. Nev. Case Nos. 03-52300 through 03-2304). Stephen R Harris, Esq., at Belding, Harris & Petroni, Ltd., represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $455,179 in assets and $39,319,861 in liabilities. Its debtor- affiliates estimated more than $100 million in assets and liabilities. MIRANT CORP: Wants to Provide Unitil with Replacement Guaranty -------------------------------------------------------------- On February 25, 2003, Mirant Americas Energy Marketing, LP, entered into a Portfolio Sale and Assignment and Transition Service and Default Service Supply Agreement with Unitil Power Corp. and Unitil Energy Systems, Inc. Under the Unitil Agreement, MAEM agreed to purchase certain entitlements with respect to Capacity and Associated Energy and MAEM agreed to sell to the Unitil Creditors certain wholesale power supplies. In connection with the Unitil Agreement, Mirant Corp. executed a guaranty, dated May 1, 2003, in favor of UPC and UES. Pursuant to the Guaranty, Mirant Corp. guaranteed MAEM's obligations to the Unitil Creditors under the Unitil Agreement for an amount not to exceed $20,000,000. MAEM assumed the Unitil Agreement pursuant to a Court-approved settlement agreement. MAEM provided adequate assurances of future performance of its obligations under the Unitil Agreement. Specifically, the Settlement Agreement provided that, in the event that MAEM subsequently defaulted under the Unitil Agreement, UES and UPC had the right to effect a triangular netting of the amounts due to either UES or UPC by MAEM against the amounts due from either UES or UPC to MAEM. In exchange for the cross-netting provision, the Unitil Creditors waived and released any and all rights, including, but not limited to, common law, bankruptcy or U.C.C. rights to request adequate assurances in connection with the Unitil Agreement until May 1, 2006 -- or so long as UES and UPC had the ability to effect a triangular netting of the amount due to either UES or UPC by MAEM against amounts due from either UES or UPC to MAEM. MIRANT CORP: U.S. Trustee Amends MAGi Committee Membership ---------------------------------------------------------- Pursuant to Section 1102(a)(1) of the Bankruptcy Code, William T. Neary, U.S. Trustee for Region 6, informs the U.S. Bankruptcy Court for the Northern District of Texas that The Royal Bank of Scotland plc, represented by Charles Greer, is no longer a member of the Official Committee of Unsecured Creditors for Mirant Americas Generation, LLC. At February 24, 2005, the MAGi Unsecured Creditors Committee consists of: 1. Tom Baker California Public Employees Retirement System Lincoln Plaza 400 P Street Sacramento, California 95814 Phone: (916) 341-2162 Fax: (916) 326-3330 tom_baker@calPERS.ca.gov 2. Dan Gropper Elliott Associates, L.P. 712 Fifth Avenue, 36th Floor New York, New York 10019 Phone: (212) 506-2999 Fax: (212) 974-2092 Cell: (917) 692-6030 dgropper@elliottmgmt.com 3. Don Morgan Mackay Shields Financial 9 West 57th Street New York, New York 10019 Phone: (212) 230-3911 Fax: (212) 754-9187 don.morgan@mackayshields.com 4. Thomas M. Korsman Wells Fargo Bank Minnesota, National Association MAC N9303-120 Sixth and Marquette Minneapolis, Minnesota 55479 Phone: (612) 466-5890 Fax: (612) 667-9825 thomas.m.korsman@wellsfargo.com 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. 55; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: Wants Solicitation Period Extended to June 30 ---------------------------------------------------------- Pursuant to Section 1121(d) of the Bankruptcy Code, Mirant Corporation and its 82 affiliated Debtors ask the U.S. Bankruptcy Court for the Northern District of Texas to further extend the period during which only the Debtors may solicit acceptances of their plan of reorganization through and including June 30, 2005. Robin Phelan, Esq., at Haynes and Boone, LLP, in Dallas, Texas, informs the Court that the Debtors are currently under an "aggressive" schedule to seek confirmation of the filed Plan and exit from the administratively consolidated Chapter 11 proceedings. The comprehensive schedule currently in place provides for: * The Valuation Hearing set for April 11 to 13, 2005; * The process for objecting to the proposed disclosure statement; * The Disclosure Statement Hearing set for April 20, 2005; * The Voting Deadline, which is May 27, 2005; * The deadline for objections to confirmation; and * The Confirmation Hearing set for June 8, 2005. Although the Debtors are proceeding as expeditiously as possible, the solicitation process cannot be concluded by the currently scheduled April 1, 2005, deadline. Allowing parties-in-interest to file other competing plans before the solicitation process is completed could needlessly exacerbate litigation and result in a waste of estate resources to the detriment of the creditors. According to Mr. Phelan, the extension is "realistic" and "necessary" given the Plan-related dates for the Valuation Hearing to determine the value of the Debtors' business, which will conclude, inter alia: (1) whether the Debtors' unsecured creditors will obtain full recovery under the Plan; and (2) whether the Debtors' equity holders will be entitled to any recovery under the Plan. A 90-day extension of the Exclusive Solicitation Period will permit the Debtors to keep their efforts on track with the Plan-related dates and the dates of the Valuation Hearing. Mr. Phelan assures the Court that the extension will not prejudice the legitimate interest of creditors and other parties-in-interest and will afford the Debtors a meaningful opportunity to seek acceptance of their Plan. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/--together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 215/945-7000) MORGAN STANLEY: Fitch Junks Three Mortgage Certificate Classes -------------------------------------------------------------- Morgan Stanley Capital 1 Inc., commercial mortgage pass-through certificates, series 1999-FNV1 are downgraded by Fitch Ratings: -- $6.3 million class L to 'CCC' from 'B-'; -- $6.3 million class M to 'C' from 'CCC'; -- $9.5 million class N to 'C' from 'CC'. In addition, these classes are affirmed by Fitch: -- $44.3 million class A-1 at 'AAA'; -- $339.9 million class A-2 at 'AAA'; -- Interest-only class X at 'AAA'; -- $33.2 million class B at 'AA'; -- $26.9 million class C at 'A'; -- $12.6 million class D at 'A-'; -- $30 million class E at 'BBB'; -- $14.2 million class F at 'BBB-'; -- $20.5 million class G at 'BB+'; -- $7.9 million class H at 'BB'; -- $9.5 million class J at 'BB-'; -- $7.9 million class K at 'B'. Fitch does not rate the $5.7 million class O certificates. The downgrades are due to increased expected losses associated with some of the specially serviced loans. As realized, losses on the specially serviced loans will deplete classes M, N, and O, thus negatively affecting credit enhancement levels. As of the February 2005 distribution date, the pool's aggregate certificate balance has been reduced 9.1% to $574.8 million from $632.1 million at issuance. In addition, interest shortfalls resulting from appraisal reductions on some specially serviced loans continue to affect classes L, M, N, and O. Fitch is unable to determine at this time when the interest shortfalls will be repaid. Currently, seven loans (7.9%) are in special servicing. The largest loan (3.1%) is secured by an office property located in Quincy, Massachusetts and is real estate owned -- REO. The property has suffered declines in occupancy. The most recent appraisal value on the property indicates a significant loss upon liquidation. The second largest loan (1.5%) is a retail property located in Sevierville, Tennessee currently 90+ days delinquent and in bankruptcy. The third largest loan (1.3%) was originally secured by eight assisted-living facilities located in Alabama with four of the eight facilities remaining. The special servicer is currently exploring listing the properties for sale through a broker. MORGAN STANLEY: Fitch Upgrades $21.2 Million Mortgage Cert. to BB+ ------------------------------------------------------------------ Morgan Stanley Capital Inc.'s commercial mortgage pass-through certificates, series 1996-WF1, are upgraded: -- $21.2 million class F to 'AA-' from 'A-'; -- $21.2 million class G to 'BB+' from 'B+'. In addition, Fitch affirms these classes: -- $27.4 million class A-3 at 'AAA'; -- Interest-only class X at 'AAA'; -- $36.3 million class B at 'AAA'; -- $30.3 million class C at AAA'; -- $33.3 million class D at 'AAA'; -- $9.1 million class E at 'AAA'. The $10.2 million class H certificates are not rated by Fitch. The upgrades are a result of increased subordination levels due to additional loan amortization and prepayments. As of the February 2005 distribution date, the pool's aggregate collateral balance has been reduced 68.8%, to $188.9 million from $605.4 million at issuance. To date, the pool has realized losses in the amount of $7.9 million. Currently, there are no delinquent or specially serviced loans in the deal. NORTHROP GRUMMAN: Proposes to Declassify Board of Directors ----------------------------------------------------------- Northrop Grumman Corporation's (NYSE: NOC) board of directors has voted to submit a proposal to stockholders that would eliminate the company's classified board structure. Stockholders will be asked to vote on the board's recommendation at the company's 2005 Annual Meeting scheduled for May 17, 2005. If stockholders approve the board's recommendation, each class of director up for re-election, commencing in 2006, will stand for re-election on a yearly basis. Under the current structure, each of the three director classes is elected to a three- year term with one third of the board standing for re-election each year. "We are committed to excellence in corporate governance and believe this action is in keeping with that commitment and is responsive to the views of our stockholders," said Ronald D. Sugar, Northrop Grumman chairman, chief executive officer and president. About the Company Northrop Grumman Corporation is a global defense company headquartered in Los Angeles, Calif. Northrop Grumman provides a broad array of technologically advanced, innovative products, services and solutions in systems integration, defense electronics, information technology, advanced aircraft, shipbuilding, and space technology. The company has more than 125,000 employees and operates in all 50 states and 25 countries and serves U.S. and international military, government and commercial customers. * * * As reported in the Troubled Company Reporter on Oct. 6, 2004, Fitch Ratings has affirmed the 'BBB' ratings on Northrop Grumman Corporation's senior unsecured debt and bank facility. The 'BBB' rating also applies to the senior unsecured debt of Northrop Grumman's subsidiaries, including Litton Industries and Northrop Grumman Space & Mission Systems Corporation (formerly TRW Inc.). Fitch has raised the rating on Northrop Grumman's convertible preferred stock to 'BBB-' from 'BB+'. The Rating Outlook has been revised to Positive from Stable for all classes of debt. Approximately $6 billion of securities is affected by these rating actions. The revision to the Rating Outlook reflects continued growth in revenues and free cash flow, additional debt reduction, and improvement in Northrop Grumman's credit protection measures. Fitch expects Northrop to follow a balanced cash deployment strategy, including both debt reduction and share repurchases. Northrop Grumman's ratings are supported by: -- the company's status as a top-tier defense contractor; -- high levels of U.S. defense spending; -- solid organic revenue growth; -- a healthy liquidity position; -- continued debt reduction; and -- an experienced management team with a successful track record of acquisition integration. Concerns focus on the performance of several programs and uncertainty regarding the U.S. Navy's budget plans. Liquidity at June 30, 2004, was approximately $2.7 billion, consisting of $559 million of cash and full availability under the $2.5 billion credit facility, offset by $398 million of short-term debt and current maturities. The bulk of the maturing debt in 2004 consists of $350 million of bonds due later in October. Northrop also has $250 million of bonds, which are callable this month. The company's cash resources will be augmented in November 2004 by the issuance of equity worth $690 million, related to the equity purchase contracts that are part of Northrop's outstanding equity security units -- ESUs. Cash resources could be further boosted if Northrop monetizes any of the securities received in the sale of TRW Automotive. Fitch estimates that these TRW securities (debt and equity) have a market value of at least $800 million. Northrop Grumman's debt-to-EBITDAP ratio for the last 12 months ended June 30, 2004 was 2.1 times (x), an improvement from 2.2x at the end of 2003. Interest coverage for the last 12 months was 6.0x up from 5.3x in 2003. Fitch expects further improvement in these credit statistics in 2004 as a result of additional debt reduction, lower interest expense, and EBITDAP growth. In November 2001, Northrop Grumman issued $690 million of Equity Security Units. These are two part securities. The first part of each unit consists of a contract to purchase $100 of Northrop stock on Nov. 16, 2004 (total inflow will be $690 million). The second part consists of a senior note due in 2006 with a principal amount of $100. These senior notes, which are included in total debt, were remarketed in August 2004, and the interest rate was reset to 4.1% from the original 5.25% rate. OXFORD INDUSTRIES: S&P Holds Rating Amidst Federated/May Talks -------------------------------------------------------------- Standard & Poor's Ratings Services said that there would be no immediate effect on the ratings or outlook on the rated apparel companies from the proposed merger of Federated Department Stores, Inc., (BBB+/Watch Neg/A-2) and May Department Stores Co. (BBB/Watch Neg/A-3), including those of Oxford Industries, Inc. (BB-/Stable/--). In April 2003, Standard & Poor's Ratings Services assigned its 'BB-' long-term corporate credit rating to Oxford Industries Inc. At the same time, Standard & Poor's assigned its 'B' unsecured debt rating to the company's $175 million senior notes due 2011. The ratings outlook on Oxford is stable. The proposed merger of Federated and May represents a major consolidation in the retail landscape and will have significant effect on the dynamics of the apparel industry. The combined retailer's concentrated buying and bargaining power would likely pressure the apparel firms' margins. Revenues from the combined operations would also be negatively affected as Federated and May are likely to close retail locations to improve operating efficiency and reduce costs. There could be more emphasis on the retailers' own private labels at the expense of some of the branded merchandise. There may also be added emphasis on exclusive brands as well, which would result in additional investments on the part of the apparel firms. Despite the potential negative fallout from the merger, most investment-grade apparel companies have already diversified their channels of distribution, decreasing their exposure to department stores in recent years. Apparel firms such as Liz Claiborne, Polo Ralph Lauren, Tommy Hilfiger, and Jones Apparel Group remain significant vendors to the department stores. Nonetheless, these companies, such as Liz and Jones, have a portfolio of brands that serve different demographic markets, minimizing their exposure to one particular segment or customer. However, Standard & Poor's notes that Jones has a combined sales concentration of 26% to May and Federated, and could be more vulnerable to the combination than some of the other apparel firms. On the other hand, for some apparel vendors, there could be opportunities as well, as Federated may move to a more upscale retail format, which would benefit those companies with the premium brands. Standard & Poor's expects consolidation in the apparel industry to continue as vendors keep looking for opportunities to expand their brand portfolios to maintain relevance with their customers and the ultimate consumers. While it is too early to assess the effect of the proposed Federated-May Department Store merger on the apparel industry, Standard & Poor's will closely monitor events as they develop. PERRY ELLIS: S&P's Rating Unaffected by Federated/May Merger Talks ------------------------------------------------------------------ Standard & Poor's Ratings Services said that there would be no immediate effect on the ratings or outlook on the rated apparel companies from the proposed merger of Federated Department Stores, Inc., (BBB+/Watch Neg/A-2) and May Department Stores Co. (BBB/Watch Neg/A-3), including those of Perry Ellis International, Inc. (B+/Negative/--). As reported in the Troubled Company Reporter on Dec. 21, 2004, Standard & Poor's Ratings Services revised its outlook on apparel company Perry Ellis to negative from stable. At the same time, Standard & Poor's affirmed its ratings on the Miami, Florida-based company, including its 'B+' corporate credit rating. Total debt outstanding at Oct. 31, 2004, was about $222 million. The proposed merger of Federated and May represents a major consolidation in the retail landscape and will have significant effect on the dynamics of the apparel industry. The combined retailer's concentrated buying and bargaining power would likely pressure the apparel firms' margins. Revenues from the combined operations would also be negatively affected as Federated and May are likely to close retail locations to improve operating efficiency and reduce costs. There could be more emphasis on the retailers' own private labels at the expense of some of the branded merchandise. There may also be added emphasis on exclusive brands as well, which would result in additional investments on the part of the apparel firms. Despite the potential negative fallout from the merger, most investment-grade apparel companies have already diversified their channels of distribution, decreasing their exposure to department stores in recent years. Apparel firms such as Liz Claiborne, Polo Ralph Lauren, Tommy Hilfiger, and Jones Apparel Group remain significant vendors to the department stores. Nonetheless, these companies, such as Liz and Jones, have a portfolio of brands that serve different demographic markets, minimizing their exposure to one particular segment or customer. However, Standard & Poor's notes that Jones has a combined sales concentration of 26% to May and Federated, and could be more vulnerable to the combination than some of the other apparel firms. On the other hand, for some apparel vendors, there could be opportunities as well, as Federated may move to a more upscale retail format, which would benefit those companies with the premium brands. Standard & Poor's expects consolidation in the apparel industry to continue as vendors keep looking for opportunities to expand their brand portfolios to maintain relevance with their customers and the ultimate consumers. While it is too early to assess the effect of the proposed Federated-May Department Store merger on the apparel industry, Standard & Poor's will closely monitor events as they develop. PHELPS DODGE: Moody's Reviews Ratings for Possible Upgrade ---------------------------------------------------------- Moody's Investors Service placed Phelps Dodge Corporation's ratings (Baa3 senior unsecured) under review for possible upgrade. The review is prompted by the improvement in Phelps Dodge's capital structure and operating performance over the past three years as the company's efforts to reduce debt were accelerated by greatly improved copper and molybdenum prices over the past 18 months. However, Phelps Dodge remains a high cost producer and the review will focus on the company's ability, in a weaker metals price environment, to generate sufficient cash to fund its ongoing investments while maintaining a solid capital structure and favorable debt protection measurements. The review will also focus on the company's ability to move forward with the development of its key growth projects, which are necessary to lower the company's overall cost position. Ratings placed under review for possible upgrade are: -- Phelps Dodge Corporation: * Senior unsecured notes and debentures at Baa3, * Shelf registration for senior unsecured debt at (P)Baa3, junior convertible debt at (P)Ba1, cumulative preferreds, convertible preferreds and jr. participating cumulative preferreds at (P)Ba2, PD Capital Trust I and PD Capital Trust II guaranteed trust preferred's at (P)Ba1 -- Cyprus Amax Minerals Company: * Senior unsecured notes and debentures, legally assumed by Phelps Dodge, at Baa3 Phelps Dodge Corporation produced approximately 2.2 billion pounds of copper for its own account in 2004 and is a leading producer of molybdenum. In 2004, the mining division accounted for 77% of total revenues. Through PD Industries, the company is involved in the manufacture of specialty chemicals, principally carbon black, and wire and cable. Headquartered in Phoenix, Arizona, Phelps Dodge had revenues of $7.1 billion in 2004. POIROT PROPERTIES: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Poirot Properties I, LLC 2680 North First Street, Suite 200 San Jose, California 95134 Bankruptcy Case No.: 05-51147 Chapter 11 Petition Date: March 3, 2005 Court: Northern District of California (San Jose) Debtor's Counsel: Richard Seim, Esq. Law Offices of Richard Seim 133 Race Street San Jose, CA 95126 Tel: 408-279-4435 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Barbara Epis Loan $987,638 26948 Beatrice Lane Los Altos, CA 94022 Alfred L. Rinaldo Jr. Compensation $350,000 2680 N First Street Ste. 200 San Jose, CA 95134 Carl D Trigilio Loan $85,000 125100 Paseo Cerro Saratoga, CA 95070 Intagio Loan $71,096 Department of the Treasury Taxes $37,185 Stuart Kadas Compensation $24,235 George Ballard Co. Trade $8,579 State Fund Trade $7,743 Employment Development Dept. Taxes $6,500 PG&E Trade $5,911 Tri-County Communications Trade $5,000 Pacific Bell Directory Trade $2,221 Monterey Insurance Agency Trade $2,000 Rayne Water Trade $1,944 Carmel Marina Corp. Trade $1,461 Allied Interstate Trade $1,175 Bay Area Credit Trade $1,137 Olga Loeffler Compensation $1,062 SBC Payment Center Trade $984 American Supply Co. Trade $863 QWEST COMMS: Completes PCS License Sale to Verizon for $418 Mil. ---------------------------------------------------------------- Qwest Communications International Inc. (NYSE: Q) and Verizon Wireless completed the sale of Qwest's PCS licenses and related wireless network assets to Verizon Wireless. The transaction, originally announced in July 2004, does not impact any new or existing Qwest Wireless customers. Verizon Wireless paid $418 million in cash to obtain Qwest's PCS licenses (1900 MHz), as well as cell sites, wireless network infrastructure, site leases, and associated network equipment in 14 western states. Qwest offers service under the Qwest Wireless brand to residential and business customers through its relationship with Sprint PCS. Qwest Wireless customers have access to nationwide wireless coverage and features including enhanced voice, photo, video, Web and text applications. Qwest recently transitioned the remainder of its customers to the Sprint network. "We are pleased to complete this transaction in a timely manner. By selling these assets we eliminate associated capital expenditures in 2005 and obtain the full $418 million in cash," said Oren G. Shaffer, Qwest vice chairman and chief financial officer. "Qwest will continue to focus on serving wireless customers well, providing a completely integrated bundle of local, wireless and data services." About Qwest Qwest Communications International Inc. (NYSE:Q) -- http://www.qwest.com/-- is a leading provider of voice, video and data services. With more than 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. At Dec. 31, 2004, Qwest Communications' balance sheet showed a $2,612,000,000 stockholders' deficit, compared to a $1,016,000,000 deficit at Dec. 31, 2003. * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. If Qwest's offer is accepted by MCI's shareholders, Standard & Poor's will evaluate the company's plans for integrating MCI, its financial plans, and longer-term strategy given the competitive and consolidating telecommunications industry. Moreover, the status of the shareholder lawsuits is still uncertain and could be a factor in the rating or outlook even after the CreditWatch listing is resolved under an assumed successful bid by Qwest for MCI at current terms. As such, if Qwest's bid is rejected and it terminates efforts to acquire MCI, ratings on Qwest will be affirmed and removed from CreditWatch, and a developing outlook will be reassigned. RAVENEAUX LTD: Wants to Hire Weycer Kaplan as Bankruptcy Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Texas gave Raveneaux, Ltd., permission to employ Weycer, Kaplan, Pulaski & Zuber, P.C., as its general bankruptcy counsel. Weycer Kaplan will: a) advise the Debtor in its duties and responsibilities as a debtor-in-possession with regards to the continued operation and management of its business; b) assist the Debtor in the analysis of its financial situation and in the preparation and filing of its schedules of assets and liabilities and statements of financial affairs; c) represent the Debtor in the first meeting of creditors and assist in negotiations with its secured and unsecured creditors; d) assist and advise the Debtor in the defense of any stay litigation and in the preparation for a disclosure statement and plan of reorganization; and e) provide all other legal services that are necessary in the Debtor's bankruptcy proceedings. Edward L. Rothberg, Esq., a Shareholder at Weycer Kaplan, is the lead attorney for the Debtor. Mr. Rothberg discloses that the Firm received a $35,000 retainer. Mr. Rothberg will bill the Debtor $300 per hour for his services. Other lead attorneys for the Debtor are Hugh M. Ray, III, Esq., and Melissa Anne Haselden, Esq. Mr. Ray charges at $210 per hour, while Ms. Haselden charges $200 per hour. Legal Assistants and Paralegals who will perform services to the Debtor will charge $100 per hour. Weycer Kaplan assures the Court that it does not represent any interest adverse to the Debtor or its estate. Headquartered in Spring, Texas, Raveneaux, Ltd., -- http://www.raveneaux.com/-- operates a country club, a golf course and tennis courts. The Company filed for chapter 11 protection on Feb. 24, 2005 (Bankr. S.D. Tex. Case No. 05-32734). When the Debtor filed for protection from its creditors, it listed total assets of $15 million and total debts of $11 million. RAVENEAUX LTD: Section 341(a) Meeting Slated for March 31 --------------------------------------------------------- The U.S. Trustee for Region 7 will convene a meeting of Raveneaux, Ltd.'s creditors at 1:00 p.m., on March 31, 2005, at Suite 3401, 515 Rusk Avenue, Houston, Texas 77002. 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 Spring, Texas, Raveneaux, Ltd., -- http://www.raveneaux.com/-- operates a country club, a golf course and tennis courts. The Company filed for chapter 11 protection on Feb. 24, 2005 (Bankr. S.D. Tex. Case No. 05-32734). Edward L. Rothberg, Esq., Hugh M. Ray, III, Esq., and Melissa Anne Haselden, Esq., at Weycer Kaplan Pulaski & Zuber, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $15 million and total debts of $11 million. RELIANCE GROUP: Court Approves $1.64 Million Pershing Settlement ---------------------------------------------------------------- As reported in the Troubled Company Reporter on Jan. 4, 2005, M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator of Reliance Insurance Company, asks the Commonwealth Court to approve a Settlement Agreement with Lloyd's Underwriters and Companies -- other than Zurich Reinsurance (London) Limited. Settlement Agreement The Settlement Agreement provides that Underwriters agree to pay, and RIC agrees to accept, $1,640,000. That amount is to be paid on the "Effective Date" of the Settlement, which is the later of: -- an order from the Commonwealth Court of Pennsylvania overseeing the liquidation of RIC is entered, approving and authorizing the Underwriters to make the $1,640,000 payment to RIC under the Policy; -- an order from the United States Bankruptcy Court for the Southern District of New York overseeing the bankruptcy of Reliance Group Holdings is entered, approving the Settlement Agreement and authorizing the Underwriters to make the $1,640,000 payment to RIC under the Policy; and -- the Orders are not subject to any stay, appeal, request for reconsideration or request for rehearing and for which the time to seek any stay, appeal, reconsideration or rehearing has expired. The Settlement Agreement also preserves the rights of both the Underwriters and RIC to assert that a different amount applies to the Pershing Park Litigation. This provision allows the parties the necessary flexibility to further negotiate a resolution of the coverage issue relating to the Disputed Amount. With respect to the Disputed Amount, the Settlement Agreement allows RIC and the Liquidator 90 days after the Effective Date to advise the Underwriters whether they intend to seek further monies from the Underwriters under the Underwriters Policy for the Pershing Park Litigation. The 90-day period affords the Liquidator time to evaluate RIC's entitlement to coverage for the Disputed Amount and to continue efforts to negotiate a resolution with the Underwriters, while receiving the $1,640,000 undisputed coverage amount on behalf of RIC's estate. The Settlement Agreement was the subject of arm's-length negotiations, according to Jerome R. Richter, Esq., at Blank Rome, in Philadelphia, Pennsylvania. The result is fair and reasonable because RIC will recover the undisputed proceeds of the Policy for the Pershing Park Litigation, while preserving its rights to resolve the disputed amount of that claim. * * * The Court approves the stipulation. 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. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) RFC CDO: Fitch Rates $3 Mil. Deferrable Interest Notes at BB ------------------------------------------------------------ Fitch Ratings assigns the following ratings to RFC CDO II Ltd. and RFC CDO II Corp. (collectively referred to as the co-issuers): -- $213,000,000 class A-1 senior secured floating-rate notes due March 2040 'AAA'; -- $39,000,000 class A-2 senior secured floating-rate notes due March 2040 'AAA'; -- $6,000,000 class B-1 senior secured floating-rate notes due March 2040 'AA'; -- $6,000,000 class B-2 senior secured fixed-rate notes due March 2040 'AA'; -- $13,500,000 class C secured floating-rate deferrable interest notes due March 2040 ' A-'; -- $4,500,000 class D secured floating-rate deferrable interest notes due March 2040 'BBB'; -- $4,500,000 class E secured floating-rate deferrable interest notes due March 2040 'BBB-'; -- $3,000,000 class F secured fixed-rate deferrable interest notes due March 2040 'BB'. The ratings of the class A-1, class A-2, class B-1 and class B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C, class D, class E and class F notes address the likelihood that investors will receive ultimate interest and deferred interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings are based upon the credit quality of the underlying assets and the credit enhancement provided to the capital structure through subordination and excess spread. The net proceeds from the issuance of the notes will be used to purchase a high-grade portfolio consisting of approximately 86% in residential mortgage-backed securities -- RMBS -- and 14% in commercial mortgage-backed securities -- CMBS. The collateral supporting the structure will have a maximum Fitch weighted average rating factor - WARF -- of 3.67 ('BBB+/BBB') and represents $300 million. The collateral was selected and is monitored by Residential Funding Corporation -- RFC, as the asset manager. The notes have a stated maturity of March 15, 2040, and quarterly payments on the notes will begin on June 15, 2005. The collateral manager will purchase all investments for the portfolio on behalf of the co-issuers, which are special purpose companies incorporated under the laws of the Cayman Islands and State of Delaware, respectively. The collateral manager's trading ability will be limited to the sale of defaulted, credit-risk and written-down securities as outlined in the governing documents. For more information on this transaction, see the presale report titled 'RFC CDO II Ltd./Corp.,' available on the Fitch Ratings web site at http://www.fitchratings.com/ RIGGS NATIONAL: Inks Pact to Settle Stockholder Litigation ---------------------------------------------------------- The PNC Financial Services Group, Inc. (NYSE: PNC) and Riggs National Corporation (Nasdaq: RIGS) have entered into an agreement in principle with plaintiffs' counsel to settle previously disclosed litigation asserting purported derivative and class action claims against certain current and former members of the Riggs board of directors. The litigation, which was brought in the Delaware Court of Chancery, relates, among other things, to alleged violations by the Riggs board of directors of their fiduciary duties in connection with compliance by Riggs with various anti-money laundering laws and the proposed merger agreement between PNC and Riggs. "PNC and Riggs have agreed in principle to the settlement of the actions to eliminate the burden and expense of further litigation," Riggs stated. "The settlement is an additional step in our continued progress toward completing the merger and entering the appealing Washington, D.C. marketplace. We are pleased that this matter has been resolved," said PNC Chairman and Chief Executive Officer James E. Rohr. In the settlement, PNC, as successor to Riggs, will contribute $2.7 million in cash into a settlement fund to be distributed to all public stockholders of Riggs (other than the persons named as defendants in the Delaware action and their affiliates). An eligible stockholder will receive a distribution from the fund, following the closing of the pending merger between PNC and Riggs, in proportion to that stockholder's ownership of Riggs common stock held by eligible stockholders. Also, PNC has agreed that the maximum amount of the termination fee payable under the parties' amended merger agreement will be reduced from $30,000,000 to $23,000,000, and plaintiffs' counsel in the action was afforded the opportunity to review and comment on the proxy statement/prospectus filed relating to the merger before it was filed on Feb. 25, 2005. The settlement will provide for a dismissal of the Delaware litigation with prejudice and the complete release of all claims that Riggs and Riggs stockholders during the period from July 15, 2004, through the completion of the merger may have against Riggs, the Riggs director defendants or PNC arising out of or related to Riggs' banking practices or the proposed merger. The settlement is subject to completion of the merger and customary conditions, including negotiation of a definitive settlement agreement and approval by the Delaware Court of Chancery. Upon approval of the proposed settlement by the court, plaintiffs' attorneys are expected to apply for an award of attorneys' fees and expenses of $1.1 million to be paid by PNC, as successor to Riggs. In the event the Delaware Court approves the settlement and enters judgment dismissing the litigation, the shareholder plaintiff in a related derivative lawsuit filed in the District of Columbia will join Riggs and its directors in a motion to dismiss that suit based on the Delaware judgment. The PNC Financial Services Group, Inc., and Riggs have filed a proxy statement/prospectus and other relevant documents concerning the merger with the United States Securities and Exchange Commission. We urge investors to read the proxy statement/prospectus and any other documents to be filed with the SEC in connection with the merger or incorporated by reference in the proxy statement/prospectus, because they will contain important information. Investors will be able to obtain these documents free of charge at the SEC web site -- http://www.sec.gov/In addition, documents filed with the SEC by The PNC Financial Services Group, Inc., will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Riggs will be available free of charge from http://www.riggsbank.com/ The directors, executive officers, and certain other members of management of Riggs may be soliciting proxies in favor of the merger from its shareholders. For information about these directors, executive officers, and members of management, stockholders are asked to refer to Riggs's most recent annual meeting proxy statement, which is available on Riggs's website -- http://www.riggsbank.com/-- and at the addresses provided in the preceding paragraph. About PNC Financial The PNC Financial Services Group, Inc. is one of the nation's largest diversified financial services organizations providing, consumer and business banking; specialized services for corporations and government entities including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services. About Riggs Riggs Bank N.A. is the primary operating subsidiary of Riggs National Corporation, the largest bank holding company headquartered in the nation's capital. Riggs commands the largest market share in the District of Columbia and specializes in banking and financial management products and services for individuals, nonprofit organizations and businesses. * * * As reported in the Troubled Company Reporter on Feb. 15, 2005, Moody's Investors Service announced that it is maintaining the review, direction uncertain, on the ratings of Riggs National Corporation (subordinated at B2) and those of its lead bank subsidiary, Riggs Bank N.A. (deposits at Ba1). Moody's announcement follows the February 10, 2005 announcement by PNC Financial Services Group, Inc., and Riggs National Corporation (Riggs) that the companies had amended and restated the terms and conditions of their July 2004 agreement under which PNC would acquire Riggs. The transaction is expected to close as soon as possible, subject to legal, regulatory and shareholder approvals. Either party, however, may terminate the agreement after May 31, 2005 if the transaction has not closed. On February 7, 2005, Riggs rejected an earlier set of revised terms and conditions proposed by PNC Financial. That rejection, together with the expectation that weakened core profitability would continue for the foreseeable future as a result of increased legal and other expenses, prompted a downgrade in Riggs' ratings on February 8, 2005, Moody's added. While the latest announcement is a positive development, Moody's expects that the situation at Riggs National will continue to be dynamic. Should the transaction not close as expected, Moody's believes that Riggs will very likely suffer deterioration in its franchise value. On the other hand, positive ratings pressure could be triggered by an increase in the probability of a successful transaction. For this reason, Moody's has maintained Riggs' ratings on review, direction uncertain. RYLAND GROUP: Declares $0.06 Per Share First Quarter Dividend ------------------------------------------------------------- The board of directors of The Ryland Group, Inc. (NYSE: RYL), has declared a first-quarter dividend of $0.06 per share, payable on April 30, 2005, to common stock shareholders of record on April 15, 2005. With headquarters in Southern California, Ryland -- http://www.ryland.com/-- is one of the nation's largest homebuilders and a leading mortgage-finance company. The Company currently operates in 27 markets across the country and has built more than 225,000 homes and financed over 195,000 mortgages since its founding in 1967. Ryland is a Fortune 500 company listed on the New York Stock Exchange under the symbol "RYL." * * * As reported in the Troubled Company Reporter on Dec. 29, 2004, Moody's Investors Service raised the ratings on three issues of senior notes of The Ryland Group, Inc., to Baa3 from Ba1 and confirmed the company's other ratings. The ratings outlook remains stable. The upgrades reflect Ryland's decision to attach the guarantees of its major homebuilding subsidiaries to the senior note issues. Previously, the senior notes did not carry upstream subsidiary guarantees and thus were rated one notch below the senior implied rating. These rating actions were taken: * Senior implied rating is confirmed at Baa3 * Senior unsecured issuer rating is raised to Baa3, from Ba1 * $100 million of 8% senior notes due 8/15/2006 is raised to Baa3, from Ba1 * $150 million of 5.375% senior notes due 6/1/2008 is raised to Baa3, from Ba1 * $147 million of 9.75% senior notes due 9/01/2010 is raised to Baa3, from Ba1 * $143.5 million of 9.125% senior subordinated notes due 6/15/2011 is confirmed at Ba2 The rating on the senior subordinated notes was left unchanged because the subsidiary guarantees will not apply to this issue. Ryland's ratings reflect the continuing improvement in its financial profile, a highly disciplined growth strategy that avoids acquisitions, a conservative land policy, tight cost controls, and strong liquidity. At the same time, the ratings consider Ryland's size relative to its peer group, the ongoing share repurchase program, and the cyclical nature of the homebuilding industry. The stable ratings outlook reflects Moody's expectation that Ryland will continue to maintain capital structure discipline while pursuing its expansion opportunities. SAAN STORES: Moves Forward with Plan to Exit CCAA by Apr. 1 ----------------------------------------------------------- As reported in the Troubled Company Reporter on Jan. 19, 2005, SAAN Stores Ltd. sought and obtained a Court order for protection under the Companies' Creditors Arrangement Act. The shares of SAAN were acquired from Winnipeg based Gendis, Inc., the former parent company of SAAN. The Initial Order stays SAAN's creditors from enforcing their claims against the Company. This Stay Period provides a means for SAAN to implement cost savings and negotiate with stakeholders with a view to implementing a restructuring plan with affected creditors. However, during the Stay Period payments are made on a "go-forward" basis for all purchases of goods and services required for ongoing business needs, including employees, landlords, vendors and suppliers, and taxing authorities. SAAN is now moving forward with its proposal to implement its restructuring plan, seeking to emerge from protection on April 1, 2005, twelve weeks from the time of the Initial Order. The Impact of SAAN's Restructuring Proposal for Unsecured Creditors SAAN has scheduled a Motion in its CCAA proceeding to be heard by the Court this week on Thursday, March 3, 2005. SAAN is seeking a further order of the Court extending the Stay Period provided for by the Initial Order, until March 31, 2005. SAAN is also seeking an order authorizing it to make a proposal to its unsecured creditors under the Bankruptcy and Insolvency Act by March 14, 2005, asking that Court-appointed Monitor RSM Richter Inc. be appointed Proposal Trustee. The Company's unsecured creditors include: -- former SAAN employees in respect of their termination and severance claims; -- the claims of landlords in respect of leases that have been terminated in accordance with the Initial Order and any pre- filing claims; and -- suppliers and financiers of goods and services and taxing authorities. The meeting of SAAN's Proposal Creditors to seek their approval of the Proposal is anticipated to be on Tuesday, March 29, 2005, with Court approval of the Proposal anticipated to be on Thursday, March 31, 2005. At present it is not possible to provide the details of SAAN's Proposal as they depend upon a number of matters yet to be finally determined. However, SAAN contemplates a Proposal with two basic components: (1) the Company will make available to SAAN's Proposal Creditors a sum of money for distribution as a first dividend or distribution; and (2) the Company will make further distributions to SAAN's Proposal Creditors, the level of which will be depend upon SAAN's success following emergence from protection. Court related documents relating to the CCAA proceedings can be found at http://www.blgcanada.com/saan SAAN STORES: Gets $28.5 Mil. for Inventory & Pays Congress Debt --------------------------------------------------------------- SAAN Stores Ltd. received $28.5 million as the initial payment under its Agency Agreement with The Hilco Organization HMR Canada I Inc. and Gordon Brothers Retail Partners LLC. The Company used $17.8 million of the amount to fully repay its debt to Congress Financial Corporation (Canada), its first secured lender. Congress's lending facility expires on March 7, 2005. With Congress paid, the risk of it realizing on its security was eliminated, paving the way for a restructuring for SAAN. The balance of the funds received from the Agents is supporting the Company's working capital requirements during the restructuring process. In selling the Company's inventory pursuant to the Agency Agreement and the Inventory Sale Plan, there are 123 of SAAN's stores that the Agents are obliged to continue to operate until March 31, 2005 (and pay occupancy costs), including that the Agent is obliged to maintain the employment of the Company's employees in those stores. The $28.5 million already paid to SAAN by the Agents was 85% of the estimated guaranteed amount payable to the Company under the Agency Agreement. The guaranteed amount is a percentage of the value of the inventory. Based upon the success of the Agency Sales to date, SAAN expects to receive an additional $2 million from the Agents during the month of March to support the Company's operations and its restructuring Proposal. Court related documents relating to the CCAA proceedings can be found at http://www.blgcanada.com/saan SAAN STORES: Negotiates $30 Million Exit Financing with GMAC ------------------------------------------------------------ To successfully implement its CCAA restructuring plan, SAAN Stores Ltd. must obtain additional support financing. The acquisition of inventory required by SAAN during the restructuring, which is to be sold throughout the store chain upon emergence from protection, requires a debtor in possession financing facility. Over the last month, SAAN has devoted a significant amount of time to negotiations and discussions with GMAC Commercial Finance Corporation-Canada, with respect to obtaining a DIP Credit Facility combined with a post-emergence, asset-based lending credit facility. GMAC initially provided SAAN with a draft term sheet for a $7 million DIP Credit Facility, which contemplates a $30 million Post-Emergence Credit Facility. Upon further negotiations with GMAC, the DIP Credit Facility is now proposed to be $20 million. GMAC has undertaken its due diligence and, as negotiations evolve, SAAN anticipates seeking Court approval of GMAC's DIP Credit Facility during the week of March 7, 2005. The Company's discussions with GMAC for the $30 million Post-Emergence Credit Facility are continuing at the same time as the DIP Credit Facility is being finalized. This Post-Emergence Credit Facility, which the Company hopes will be in place in early April 2005, would pay off the DIP Credit Facility and fund the Company's going forward operations on emergence. Doug Elliott, President and Director of SAAN Acquisition Corp. and SAAN, in anticipating SAAN's emergence, commented: "In managing the significant challenges ahead, SAAN recognizes that the objectives for revitalizing this business can only be achieved with the ongoing support of the majority of the Company's stakeholders: employees, landlords, vendors and lenders and financiers alike; all embracing a spirit of compromise and a shared commitment to the vision of a reorganized and restructured operation as the solution for long-term benefit." Court related documents relating to the CCAA proceedings can be found at http://www.blgcanada.com/saan SAAN STORES: Streamlining Operations to 130 Stores on Emergence --------------------------------------------------------------- SAAN Stores Ltd. disclosed the assembly of a team of international retail industry experts and professional advisors to manage the Company's acquisition and restructuring process. Mr. Doug Elliott, President and Director of SAAN Acquisition Corp. and SAAN, commenting on the turnaround team and the restructuring process, said: "SAAN's restructuring team has been given the mandate to expeditiously conduct the necessary investigations and take the necessary steps required to reorganize SAAN's business to achieve a positive turnaround of its operations. The focus of this team is to create a sustainable business model: -- restoring SAAN to profitability as a revitalized Canadian retail network, owned and operated by Canadians, for Canadians; and -- restoring SAAN's heritage and reputation for providing value and community leadership in small towns and rural communities across Canada. "In a reasonably short period of time, we believe we have delivered that sustainable business model -- and the restructuring Proposal we will be asking our creditors to approve, in the best interests of all stakeholders, embodies that model." Upon its emergence from protection with its Proposal approved, the reorganized SAAN is expected to be structured with: -- 130 to 150 stores nationally; -- 1,600 to 1,800 employees across the country; -- $30 million asset based lending credit facility; -- $200 million in annual sales projected; -- Montreal logistics and operations headquarters maintained; -- Toronto management offices established; and -- Winnipeg administration offices and distribution centre exited; Streamlining SAAN's Operations It is apparent from the public reporting of Gendis Inc., the former parent company of SAAN, that without the late intervention of SAAN Acquisition Corp. and its Dec. 16, 2004, purchase of SAAN Stores, SAAN was on the eve of bankruptcy and the imminent end of the SAAN legacy was on the horizon. A regrettable but inevitable consequence of SAAN's restructuring process is the closure of a number of uneconomic SAAN stores and the termination of employees. These are difficult decisions, affecting many, but necessary to restore SAAN to its historic position of retail leadership. SAAN expects, subject to the success of its ongoing negotiations with the Company's landlords, that it will have approximately 130 to 150 stores throughout the country on its emergence from protection. SAAN expects these landlord negotiations to be substantially completed shortly. To date, SAAN has delivered notices of termination in respect of 60 of the 223 stores operated at the time the Initial Order was granted. Store closures have taken place in most provinces in which SAAN operates. The Company continues to consider its options with respect to the remaining stores, including retention, termination, assignment or restructuring of many of the remaining leases. Streamlining Administration, Operations and Distribution Facilities SAAN's day-to-day operations have been headquartered out of a 400,000 square foot administration and distribution facility in Winnipeg leased by the Company from Gendis, supported by a 59,000 square foot merchandising office and distribution facility leased in Montreal. In cost-consciously streamlining SAAN's administration, operations and distribution going forward, the Company expects to maintain the Montreal facilities as its operations headquarters, and to locate management offices in Toronto, while exiting the Winnipeg premises and selling off surplus office and warehouse equipment and property. SAAN expects to shortly finalize its negotiations to exit the Winnipeg premises, to maintain the Montreal facility, and to establish its Toronto management offices. Streamlining Employee Base As a consequence of store closures and exiting the Winnipeg premises, there have been a number of employee terminations. In each case, SAAN has ensured that terminated employees' wages, source deductions, vacation pay and expenses have been paid to the date of termination. At present the Company expects that a number of terminated employees will be offered the opportunity to relocate. As well, SAAN has entered into retention arrangements with a number of non-management staff. SAAN has, where possible, provided independent, professional out placement services to its terminated employees. On the basis of the Company's most recent analysis, it is expected that between 1,450 and 1,800 former employees could have additional claims against SAAN related to termination and severance, and SAAN plans to include those additional claims in its restructuring Proposal. The Company, with the assistance of the Monitor, expects to complete the process of calculating the potential claims of terminated employees shortly. It is expected the Company will calculate individual claims on behalf of all employees to ensure consistent treatment of all employees. Employees will be given notice of their individual claims as calculated by the Company. Employees who disagree with the calculation will have the opportunity to file their own claims. Court related documents relating to the CCAA proceedings can be found at http://www.blgcanada.com/saan SALOMON BROTHERS: Fitch Junks Two 2000-C2 Certificate Classes ------------------------------------------------------------- Fitch Ratings downgrades the following certificates from Salomon Brothers Mortgage Securities VII, Inc., series 2000-C2: -- $5.9 million class L certificates to 'B-' from 'B'; -- $8.8 million class M certificates to 'CC' from 'CCC'; --$6.8 million class N certificates to 'C' from 'CC'. In addition, Fitch affirms these classes: -- $17.3 million class A-1 at 'AAA'; -- $483.3 million class A-2 at 'AAA'; -- Interest-only class X at 'AAA'; -- $33.2 million class B at 'AAA'; -- $33.2 million class C at 'A'; -- $7.8 million class D at 'A-'; -- $11.7 million class E at 'BBB+'; -- $13.7 million class F at 'BBB'; -- $9.8 million class G at 'BBB-'; -- $21.5 million class H at 'BB+'; -- $13.7 million class J at 'BB'; -- $5.9 million class K at 'BB-'. Fitch does not rate the $4.4 million class P. The downgrades of classes L, M, and N reflect an increase in expected losses of several specially serviced loans. Interest shortfalls are currently affecting classes J, K, L, M, N, and P. Eleven loans (11.52%) are currently in special servicing. The largest specially serviced loan (2.7%) is secured by a mixed-use building located in Dublin, Ohio. The loan was transferred to the special servicer due to imminent default arising from the insolvency problems of Metatec International, the former sole tenant of the property. This loan is currently real estate owned and the special servicer is marketing the property for sale. A potential buyer has been identified and the property is under contract. Losses are expected from the sale of this asset which will severely affect the unrated class P. The second largest specially serviced loan (2.5%) is secured by a retail center located in Baltimore, Maryland. Sam's Club, which occupied 56% of net rentable area -- NRA, is dark but continues to pay rent. The property is currently in litigation and the special servicer is reviewing the request by Sam's Club to buy out the remaining term of its lease. Ames, which occupied 31% of NRA, rejected its lease and has vacated the space. Fitch is continuing to closely monitor the resolution of this loan. As of the February 2005 distribution date, the pool's aggregate certificate balance has been reduced 13.4% since issuance, to $676.8 million from $781.5 million. The certificates are collateralized by 178 fixed-rate mortgage loans, consisting primarily of office (37%), retail (22%), and industrial (18%) properties, with concentrations in California (14%), New York (9%) and Florida (8%). SHAW COMMS: S&P Revises Outlook on Low-B Ratings to Positive ------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook to positive from stable on Calgary, Alberta-based Shaw Communications Inc., Western Canada's largest cable operator. At the same time, Standard & Poor's affirmed its 'BB+' long-term corporate credit and senior unsecured debt ratings, and its 'B+' preferred stock rating. "The revised outlook reflects expectations for continued improvement in Shaw's financial risk profile. Shaw has reduced debt by almost C$600 million in the past two years, and has demonstrated modest EBITDA growth," said Standard & Poor's credit analyst Joe Morin. The company's operating performance should continue to show modest improvements for the foreseeable future, which will support further debt reduction from free operating cash flow. The ratings on Shaw reflect the risk profile of the company's consolidated subsidiaries--principally its cable subsidiaries, and satellite subsidiary Canadian Satellite Communications Inc. -- Cancom. Shaw has an investment-grade business risk profile, supported by its stable cable operations; however, the ratings are constrained by a below-investment-grade financial risk profile that is characterized by high leverage and below-average cash flow protection measures. Shaw reduced lease-adjusted debt by about C$100 million for the 12 months ended Nov. 30, 2004; however, the company's leverage is still high with debt to EBITDA at about 3.5x. Although the satellite distribution business, Cancom, and direct-to-home (DTH) video operator, Star Choice Communications, Inc., are not material drivers, these businesses currently have a negative effect on the ratings. As one of the largest and most profitable Canadian cable television operators, Shaw's business position is above average. The company's EBITDA margins are about 47% (service margins only), which are on par with or exceed that of its cable peers. The company has had good success in rolling out new services that improve customer retention, mitigating competitive pressures from DTH satellite operators and telecom operators Sasktel and Manitoba Telecom Services, Inc., entering the video space. The revised outlook also reflects Shaw's recently announced deployment of a digital phone service. The combined satellite operations (Star Choice and Cancom) continue to demonstrate improved performance. On a combined basis, the satellite division generated breakeven free cash flow in 2004, when subsidies for customer premise equipment and an allocation for interest expense are included. The satellite division continues to be a contributing negative factor to Shaw's weak financial risk profile. The outlook is positive. The company's credit metrics should continue to improve in the medium term, the pace of which will depend partially on the use of excess cash flow, with up to 60% expected to be applied toward debt reduction. Ability to reduce adjusted debt to EBITDA to a level approaching 3.0x, and funds from operations to debt of about 25% could lead to a ratings upgrade in the medium term. In addition, the company will need to maintain a stable business profile, by demonstrating stable or growing revenues and EBITDA. Should the company's investment in telephone service, or increased price competition in Shaw's core cable and Internet business result in deterioration in its financial performance, the outlook could be revised to stable. SOLUTIA INC: Will Pay $1,277,343 Tax Debt to St. Claire County -------------------------------------------------------------- Solutia, Inc., and Charles Suarez, as Tax Collector of St. Clair County, Illinois, conducted extensive negotiations with the aim of settling St. Clair County's tax claims. With consent of Judge Beatty of the U.S. Bankruptcy Court for the Southern District of New York, the parties agree to resolve the matter. Solutia acknowledges and agrees that it owes St. Clair County $1,277,343 on account of ad valorem taxes for year 2003 on Solutia's real property located within St. Clair County, Illinois. Solutia further acknowledges and agrees that it does not contest the validity of the Tax Debt and that it has no right of set-off, recoupment or counterclaim in connection with this debt. Moreover, Solutia agrees that St. Clair County has a validly perfected secured claim against its estate for the Tax Debt under Illinois law and under Section 506 of the Bankruptcy Code. Solutia will pay the Tax Debt in this manner: (a) Solutia will immediately pay St. Clair County one-half of the Tax Debt, plus interest at the rate of 6% per annum from June 30, 2004, to the date of payment; (b) On or before May 15, 2005, Solutia will pay St. Clair County the remaining amount of the Tax Debt, plus interest at the rate of 6% per annum from September 1, 2004, to the date of payment; (c) If Solutia fails to make the payments, St. Clair County will be entitled to interest at 1-1/2% from June 30, 2004, or September 1, 2004, as applicable, on any unpaid amount. St. Clair County withdraws its request. 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. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPX CORP: Posts $110.8 Million Net Loss in Fourth Quarter --------------------------------------------------------- SPX Corporation (NYSE: SPW) reported results for the quarter ended December 31, 2004. Revenues increased 5.9% to $1.19 billion from $1.12 billion in the year-ago period. Free cash flow during the quarter was $124.0 million, compared with $323.9 million in the year-ago quarter. The fourth quarter of 2004 includes non-cash impairment charges of $175.3 million, or $2.24 per share, relating to write-downs of the carrying values of certain of the company's businesses. Including these charges, and after classifying the operating results of BOMAG, Kendro and EST to discontinued operations, diluted earnings per share from continuing operations were a loss of ($1.88), compared with income of $0.85 in the year-ago quarter. Including discontinued operations, diluted net earnings per share were a loss of ($1.50), compared with income of $1.19 in the year-ago quarter. Chris Kearney, President and CEO said, "Our fourth quarter results were disappointing on the bottom line. The non-cash impairment charges taken in the quarter were a result of poor operating performance in three of our businesses. On a positive note, our fourth quarter free cash flow was stronger than expected at $124.0 million." Mr. Kearney added, "With the announcement of the definitive agreement to sell Kendro in January 2005, we have substantially completed the divestiture strategy undertaken in 2004. The combined net proceeds of this divestiture strategy, which is expected to be complete in the first half of 2005, are approximately $2 billion. These proceeds will be used primarily to reduce existing debt by approximately 70% in order to achieve investment-grade metrics and provide additional financial flexibility. In addition, we expect to repurchase 10.0 million of the company's outstanding shares, which will reduce outstanding shares by over 13%. We believe this re-capitalization strategy is for the benefit of all of our long-term stakeholders." Mr. Kearney concluded, "2004 was a difficult year for SPX and our shareholders. For 2005, our primary focus will be on good corporate governance and improving the operating performance across SPX. I believe we have the management team and structure in place to stabilize and improve operating margins and cash flow on a long-term basis. Financial Highlights Continuing Operations Revenues Revenues for the fourth quarter 2004 grew 5.9% to $1.19 billion, compared to $1.12 billion in the year-ago quarter. Organic revenues (revenues excluding the effects of foreign currency fluctuations and acquisitions and divestitures) declined 5.1%, compared to the 2003 fourth quarter. The strength of foreign currencies against the U.S. dollar had a favorable impact on reported revenues of approximately 2.6%. The organic revenue decline was attributable primarily to Cooling Technologies and Services, which declined 20.0% in the fourth quarter after growing 24.5% in the third quarter 2004. These fluctuations were due to the timing of large project business in the segment. Operating Margins Fourth quarter operating margins were a negative 10.2%, compared to a positive 11.0% in the year-ago quarter. The margin decrease was attributable primarily to the impairment charges of $189.5 million discussed below, increased legal expenses related to existing litigation and raw material cost increases. Cash Flow Free cash flow, a non-GAAP metric defined as cash flow from operations less capital expenditures, for the quarter was $124.0 million, compared to $323.9 million in the year-ago period. The 2003 fourth quarter included cash inflows of $30.6 million related to accounts receivable factoring and $60.0 related to a favorable patent litigation settlement. Segment Results Cooling Technologies and Services Revenues in the fourth quarter were $203.0 million, compared to $193.9 million in the year-ago period, an increase of $9.1 million, or 4.7%. The increase in revenues was a result of acquisitions completed in 2003, offset by an organic revenue decline of 20.0%. This decline was due primarily to the timing of large project business in the segment, as reflected in the 24.5% organic revenue growth experienced in the segment in the third quarter of 2004. The strength of foreign currencies relative to the U.S. dollar had a favorable impact on revenue of approximately 6.1%. Segment income was $22.0 million, or 10.8%, compared to $23.7 million, or 12.2%, in the fourth quarter of 2003. Fourth quarter segment income in 2004 and 2003 included $2.5 million and $5.6 million, respectively, from operational cost improvements at an environmental remediation site in California. Flow Technology Revenues in the fourth quarter were $296.0 million, compared to $274.7 million in the year-ago period, an increase of $21.3 million, or 7.8%. The increase in revenues was due to a bolt-on acquisition completed in the first quarter of 2004, offset by a 7.1% organic revenue decline in the segment. The strength of foreign currencies relative to the U.S. dollar had a favorable impact on revenue of approximately 2.7%. Segment income was $44.5 million, or 15.0%, compared to $57.1 million, or 20.8% in the fourth quarter of 2003. The segment experienced lower margins in air treatment due to the acquisition completed in the first quarter of 2004 of a business that had historically lower margins than the remainder of the segment and lower operating margins in valves & controls related primarily to increased raw material costs, offset by operating improvements in the boiler business. Service Solutions Revenues in the fourth quarter of 2004 were $253.5 million, compared to $223.2 million in the year-ago period, an increase of $30.3 million, or 13.6%. The increase in revenues was due to bolt- on acquisitions completed in 2004 and organic revenue growth of 3.3%. The strength of foreign currencies relative to the U.S. dollar had a favorable impact on revenue of approximately 2.2%. Segment income was $28.2 million, or 11.1%, compared to $23.3 million, or 10.4% in the fourth quarter of 2003. Segment margins improved due primarily to operating leverage on higher revenue volume. Industrial Products and Services Revenues in the fourth quarter of 2004 were $285.4 million, compared to $270.2 million in the year-ago period, an increase of $15.2 million, or 5.6%. The increase was due primarily to organic revenue growth in power systems and dock products. Segment income was $19.5 million, or 6.8%, compared to $22.8 million, or 8.4%, in the fourth quarter of 2003. The decrease in segment margins was due primarily to raw material price increases. Technical Products and Systems Revenues in the fourth quarter of 2004 were $147.5 million, compared to $157.8 million in the year-ago period, a decrease of $10.3 million, or 6.5%. Organic revenues declined 10.7%, primarily due to lower sales of digital television broadcast equipment and lower service revenues. Segment income was $14.5 million, or 9.8%, compared to $22.1 million, or 14.0%, in the fourth quarter of 2003. The decrease in segment margins was due primarily to an increase in selling, general and administrative expenses, which partially related to an increase in legal expenses. Other Fourth Quarter Items Impairment Charges As part of its annual goodwill impairment testing in the fourth quarter of 2004, the company concluded that an impairment of goodwill existed at its Fluid Power and Radiodetection businesses. Subsequently, in connection with the preparation of its financial statements for 2004, the company concluded that an impairment of goodwill existed at its TPS business. As a result of these impairments, the company recorded non-cash impairment charges in the fourth quarter of 2004 in the aggregate amount of $175.3 million ($165.5 million net of tax), or $2.24 per share. The company performed impairment testing in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." The company, with the assistance of an independent appraisal firm, determined that the carrying value of the businesses exceeded the fair value of the businesses, resulting in the non- cash impairment charges. In addition, the company recorded additional non-cash impairment charges of $14.2 million, or $0.12 per share, during the quarter for the impairment of fixed assets of certain business units. Income Taxes During December 2004, the company repatriated earnings of certain foreign subsidiaries of approximately $58.4 million. The company provided taxes on these earnings of approximately $20.4 million in the fourth quarter of 2004. In 2005, the company intends to repatriate $500.0 million of foreign earnings under the terms of the American Job Creation Act of 2004 and has provided for the estimated tax cost of the repatriation during the fourth quarter of 2004. Prior to 2004, deferred taxes had been provided for undistributed earnings of certain subsidiaries. These taxes totaled approximately $58.0 million and were established at tax rates that are higher than those that will apply under the AJCA provisions. The company currently estimates that the tax cost for the 2005 repatriation will be approximately $38.0 million, including the tax cost on the repatriation of the earnings of certain subsidiaries that were not considered indefinitely reinvested. Accordingly, the company has recorded a net tax benefit of approximately $20.0 million in the fourth quarter of 2004. Accounting for Contingently Convertible Debt In October 2004, the EITF of the FASB reached a consensus on EITF Issue No. 04-8, "The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share." Under the EITF's conclusion, instruments that are convertible to common stock based on achieving a market price trigger are to be included in the calculation of diluted earnings per share regardless of whether the contingency has been met. At its November 2004 meeting, the EITF declared EITF No. 04-08 effective for all periods ending after December 15, 2004, and accordingly the impact of EITF No. 04-08 has been reflected in diluted income per share for all periods presented on the attached consolidated statements of operations. The adoption of EITF No. 04-08 resulted in the restatement of diluted earnings per share for 2003 and 2002 for the inclusion of the contingent convertible common shares associated with the company's Liquid Yield Option Notes while there was no impact on 2004 diluted earnings per share as these instruments are anti-dilutive given the net loss. Dividend On November 17, 2004, the Board of Directors declared a quarterly dividend of $0.25 per common share payable to shareholders of record on December 10, 2004. The fourth quarter dividend, totaling $18.5 million, was paid on January 3, 2005. About the Company SPX Corporation is a global provider of technical products and systems, industrial products and services, flow technology, cooling technologies and services, and service solutions. The Internet address for SPX Corporation's home page is http://www.spx.com/ * * * As reported in the Troubled Company Reporter on Nov. 22, 2004, Fitch affirmed the ratings on SPX Corporation's senior unsecured debt and senior secured bank debt at 'BB' and 'BB+'. The Rating Outlook has been revised to Evolving from Stable. At Sept. 30, 2004, SPX had close to $2.5 billion of debt outstanding. The Rating Outlook revision follows SPX's recently announced, separate agreements to sell BOMAG and Edwards Systems Technology -- EST -- for a combined $1.8 billion in cash. SPX expects the transactions will be completed by the end of the first quarter of 2005 and has stated its intent to use proceeds from the sales to strengthen its balance sheet, pay down debt and buy back equity. The company continues to review its business portfolio for potential additional asset sales. TECO AFFILIATES: Judge Case Approves Disclosure Statement --------------------------------------------------------- The Honorable Charles G. Case of the U.S. Bankruptcy Court for the District of Arizona approved on Thursday, Mar. 3, 2005, the Revised Disclosure Statement explaining the Joint Plan of Reorganization filed Teco Energy, Inc.'s Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co. units. A full-text copy of the Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=050304223726 Judge Case is satisfied that the Disclosure Statement contains adequate information for creditors to make a informed decisions as they vote to accept or reject the Plan. Creditors' Ballots must be returned not later than 5:00 p.m. on Apr. 1, 2005, to: Union Power Partners, L.P. Balloting Attn: Kurtzman Carson Consultants LLC 12910 Culver Boulevard, Suite 1 Los Angeles, California 90066-6709 A confirmation hearing to discuss the merits of the Plan is set for 10:00 a.m. on April 5, 2005, to be held at the U.S. Courthouse, 6th Floor, Courtroom 601, 230 North 1st Avenue in Phoenix, Arizona. About the Plan The Plan contemplates for the transfer of ownership from affiliates of TECO to a new limited liability company -- Entegra Power Group LLC -- which will be wholly-owned by the prepetition Bank Lenders. The Banks' allowed secured claims amount to $1.170 billion with approximately $405 million of unsecured deficiency claims. Although the Debtors' operations are fundamentally sound, the cash debt service obligations need to be reduced. The Plan intends to restructure the existing obligations to the Prepetition Banks, substantially reducing debt until the New Term A & B Loan Notes mature. Under the Plan, only two classes of claims are impaired and entitled to vote: 1. Allowed Secured Claims of the Prepetition Banks; and 2. Impaired General Unsecured Claims -- the allowed deficiency claims of 38 Prepetition Banks for $405,083,550; -- TECO's unsecured claim for $190 million; and -- a nominal amount of general unsecured claims. A group of prepetition bank lenders don't consent to the Plan and believe that the restructured debt in excess of $1.5 billion leaves the Debtors overleveraged with an inability to repay the debt when due. The non-consenting Banks think this will likely lead to another bankruptcy filing. 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. TELTRONICS INC: IMN Unable to Close Purchase of 24 Million Shares ----------------------------------------------------------------- Teltronics, Inc. (OTC Bulletin Board: TELT) has been advised by a representative of International Media Network AG that IMN expects to file for bankruptcy and liquidate, and as a result, IMN won't be unable to close the purchase of up to 24,000,000 shares of Teltronics as agreed to in October 2004, and as described in Teltronics' Form 8-K filed Oct. 22, 2004. About International Media International Media Network AG -- http://www.imnag.com/-- is a Swiss company, based in Zurich, formed in early 2004 to acquire, create and license entertainment and news networks and programming for import and export to audiences worldwide. The content being targeted is programming that is delivered to audiences using the Universal Delivery Network for Cellular, Internet, DBS, and CATV. IMN says it was founded as a "sister" company to Diversified Media Holdings. IMN says it is a separate entity, from a legal perspective, and both companies operate interdependently. Patrick Grotto serves as IMN's Chairman & Chief Executive Officer. Further details about IMN's insolvency proceedings will be reported in the Troubled Company Reporter -- Europe as events unfold. About Teltronics Teltronics, Inc. -- http://www.teltronics.com/-- is a leading global provider of communications solutions and services that help businesses excel. The Company manufactures telephone switching systems and software for small-to-large size businesses, government, and 911 public safety communications centers. Teltronics offers a full suite of Contact Center solutions -- software, services and support -- to help their clients satisfy customer interactions. Teltronics also provides remote maintenance hardware and software solutions to help large organizations and regional telephone companies effectively monitor and maintain their voice and data networks. The Company serves as an electronic contract-manufacturing partner to customers in the U.S. and overseas. Teltronics obtained legal counsel in connection with the IMN deal from: John N. Blair, Esq. Blair & Roach, LLP 2645 Sheridan Drive Tonawanda, New York 14150 Telephone: (716) 834-9181 At Sept. 30, 2004, Teltronics' balance sheet showed a $5,343,850 stockholders' deficit, compared to a $6,124,389 deficit at Dec. 31, 2003. TOMMY HILFIGER: S&P Holds Rating Amidst Federated/May Merger Talks ------------------------------------------------------------------ Standard & Poor's Ratings Services said that there would be no immediate effect on the ratings or outlook on the rated apparel companies from the proposed merger of Federated Department Stores, Inc., (BBB+/Watch Neg/A-2) and May Department Stores Co. (BBB/Watch Neg/A-3), including those of Tommy Hilfiger U.S.A., Inc. (BB-/Watch Neg/--). As reported in the Troubled Company Reporter on Feb. 7, 2005, Standard & Poor's Ratings Services lowered its ratings on Tommy Hilfiger including its corporate credit rating to 'BB-' from 'BB'. The ratings remain on CreditWatch with negative implications, where they were placed on Nov. 3, 2004. The men's and women's sportswear, jeanswear, and childrenswear company had about $343 million in long-term debt outstanding as of Dec. 31, 2004. The proposed merger of Federated and May represents a major consolidation in the retail landscape and will have significant effect on the dynamics of the apparel industry. The combined retailer's concentrated buying and bargaining power would likely pressure the apparel firms' margins. Revenues from the combined operations would also be negatively affected as Federated and May are likely to close retail locations to improve operating efficiency and reduce costs. There could be more emphasis on the retailers' own private labels at the expense of some of the branded merchandise. There may also be added emphasis on exclusive brands as well, which would result in additional investments on the part of the apparel firms. Despite the potential negative fallout from the merger, most investment-grade apparel companies have already diversified their channels of distribution, decreasing their exposure to department stores in recent years. Apparel firms such as Liz Claiborne, Polo Ralph Lauren, Tommy Hilfiger, and Jones Apparel Group remain significant vendors to the department stores. Nonetheless, these companies, such as Liz and Jones, have a portfolio of brands that serve different demographic markets, minimizing their exposure to one particular segment or customer. However, Standard & Poor's notes that Jones has a combined sales concentration of 26% to May and Federated, and could be more vulnerable to the combination than some of the other apparel firms. On the other hand, for some apparel vendors, there could be opportunities as well, as Federated may move to a more upscale retail format, which would benefit those companies with the premium brands. Standard & Poor's expects consolidation in the apparel industry to continue as vendors keep looking for opportunities to expand their brand portfolios to maintain relevance with their customers and the ultimate consumers. While it is too early to assess the effect of the proposed Federated-May Department Store merger on the apparel industry, Standard & Poor's will closely monitor events as they develop. TRUMP HOTELS: Exclusive Plan Filing Remains Intact -------------------------------------------------- Judge Wizmur saw no reason to grant the Official Committee of Equity Security Holders "the dramatic relief" sought in its motion to terminate the Trump Hotels & Casino Resorts, Inc.'s exclusive periods to propose a chapter 11 plan and ask creditors to vote to accept that plan. "The noteholders, who hold the primary stake, must be taken into account," Judge Wizmur said at a hearing on February 23, 2005, according to a report from Bloomberg News. Pursuant to Section 1121(d) of the Bankruptcy Code, the Official Committee of Equity Security Holders asked the U.S. Bankruptcy Court for the District of New Jersey to terminate Trump Hotels & Casino Resorts, Inc., and its debtor-affiliates' exclusive periods to file a plan of reorganization and to solicit acceptances of that plan. "The Debtors' Plan is a sweetheart deal for conflicted insiders and other interested parties, including [Donald J.] Trump and for UBS Securities LLC and its affiliates," Daniel K. Astin, Esq., at The Bayard Firm, in Wilmington, Delaware, said in the Equity Committee's motion papers. "The Equity Committee is entitled to a reasonable opportunity to test in the open market the fairness of the Plan's multitude of insider transactions." Trump Hotels & Casino Resorts, Inc., on September 29, 2003, entered into a confidentiality agreement with DLJ Merchant Banking Partnership III, LP, to develop a recapitalization plan. The confidential agreement later turned into an "exclusivity agreement" barring the Debtors from negotiating or providing confidential information to any party other than DLJ Merchant. Pursuant to the exclusivity agreement, DLJMB is to invest $400 million to sponsor a recapitalization of THCR. The Debtors admitted that the DLJMB transaction would have caused the interests of THCR's shareholders to be "substantially diluted." The Equity Committee believes that the dilution would have also affected Mr. Trump but he would have benefited materially in a multitude of other ways. In September 2004, the Debtors terminated discussions for a potential equity investment by DLJMB. "At this point the Debtors' management could have -- but did not -- seek alternative transactions that would benefit shareholders other than Mr. Trump," Mr. Astin notes. Eventually, the Debtors entered into a Restructuring Support Agreement with Mr. Trump and various noteholders. The Restructuring Support Agreement provided Mr. Trump with virtually the same benefits that he was to have received under the DLJMB transaction. The Restructuring Support Agreement further cemented the Debtors' path toward a reorganization that benefited Mr. Trump at the expense of all other shareholders. The Restructuring Support Agreement outlines the terms of the Debtors' proposed Plan and obligates the Debtors to work diligently toward confirmation of the Plan -- and only the Plan. Furthermore, the Restructuring Agreement permits Mr. Trump to unilaterally pull the plug on the Plan if its terms are not consistent with the Term Sheet or, for any items not otherwise set forth on the Term Sheet, will not be in form or substance reasonably acceptable to him. At Mr. Trump's bidding, the Debtors placed themselves in a position where, unless the Court orders otherwise, all they can do is move forward with a Plan that provides lucrative insider deals to Mr. Trump and virtually wipes out other shareholders' interests. The Plan provides for the virtual elimination of existing non-insider equity interests. "The most pervading theme of the Plan, however, is the omnipresence of Mr. Trump," Mr. Astin observes. The Equity Committee outlines the Debtors' "gift basket" to Mr. Trump: 1) A "Services Agreement," pursuant to which Mr. Trump will receive $2 million per year in cash, plus bonuses and other fringe benefits, in exchange for attending a few board meetings and "promotional events"; 2) Limited partnership interests that Mr. Trump can convert into more than 22% of the common stock of the reorganized Debtors; 3) Mr. Trump's right to veto any sale of any the Debtors' four primary casino assets, which can only be overridden if the Debtors agree to indemnify Mr. Trump for as much as $100 million of Trump's personal income tax liabilities associated with any sale; 4) A three-year right of first refusal to act as contractor for any construction project at the Debtors' properties with an initial budget of more than $35 million; 5) Subject to minimum ownership levels, the right to nominate between one and three of the Debtors' nine directors, plus veto power over an additional director; 6) The Debtors' 24.5% limited partnership interest and 0.5% general partnership interest in Miss Universe LP, LLP; and 7) The fee, leasehold, and easement interests in the former World's Fair site, into which the Debtors sunk over $26 million in demolition costs only five years ago. The Debtors defend Mr. Trump's largess under the Plan by asserting that a "Special Committee" of the Board of Directors has investigated the fairness of these transactions. The "Special Committee," however, appears to have been nothing more than a rubber stamp for Mr. Trump's own grand designs. The Equity Committee believes that the "Special Committee" is not an appropriate substitute for true market testing as required by the Supreme Court's decision in Bank of America v. 203 N. LaSalle St. Partnership, 526 U.S. 434 119 S.Ct.1411 (1999). In the Debtors' Amended Disclosure Statement, they even admit that the "Special Committee has not undertaken an independent valuation of each component of consideration to be received by [Mr. Trump] under the Plan." After reviewing the Plan and Disclosure Statement, the Equity Committee concludes that they are "seriously deficient." The Plan not only wipes out existing shareholder interests, but also provides insider benefits for Mr. Trump. Thus, in proposing the Plan, Mr. Trump and the rest of management are not representing the interests of shareholders, but their own. Mr. Astin contends that the Plan must be contrasted with what could be achieved if it were proposed for the benefit of the estates as whole. However, only the Debtors can propose a plan of reorganization this time with their plan exclusivity period under Section 1121 of the Bankruptcy Code currently extending through May 20, 2005. Only by terminating exclusivity can the Court permit a fair market testing of the Debtors' Plan and allow other parties to propose a competing plan that will bring more value to the Debtors' estates. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. -- http://www.thcrrecap.com/ -- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. TRUMP HOTELS: Ends Talks For Indiana Riverboat Casino ----------------------------------------------------- Trump Hotels & Casino Resorts, Inc. ("THCR" or the "Company") (OTCBB: DJTCQ.OB) announced that it has ceased negotiations with the Indiana Gaming Commission to construct and operate a riverboat casino in Orange County, Indiana. In July 2004, the Commission awarded THCR the right to construct a riverboat-style gaming facility in Orange County. The changing landscape in Indiana, including, in part, a recent decision by the Indiana Tax Court adversely affecting the Indiana casino industry and the potential development of additional gaming facilities in the state, have caused the Company to reassess its willingness to pursue the construction project. Scott C. Butera, the Company's President and Chief Operating Officer, commented, "The financial prospects for a casino in French Lick have changed since the time we were awarded the project. The tax burdens have become more onerous, and the proposition for additional gaming facilities in Indiana appears eminent." Mr. Butera continued, "After having constructive meetings with the Indiana Gaming Commission, we decided that it was in the best interest of the Company and the state of Indiana to cease exclusive discussions at this time. We look forward to continuing our successful business relationship with the state of Indiana through our operation of Trump Indiana in Gary." Statement from Indiana Gaming Commission Ernest E. Yelton, Executive Director of the Indiana Gaming Commission, announced that negotiations with Trump Indiana Casino Management, LLC, for the construction and operation of a riverboat casino in Orange County, Indiana, have ended. "One of my first directives from Governor Daniels was to evaluate the status of this project and then respond with the appropriate action," said Yelton. "After consulting with my attorneys and advisors, I provided the Trump Casino representatives with terms and conditions for the operating agent's agreement which were designed to address the issues reorganization and to facilitate a meaningful discussion." In response to those conditions, Trump officials advised Yelton Monday that the company had reassessed its willingness and ability to proceed with the project at this time. The company cited in part a recent decision by the Indiana Tax Court that create a significant increase in its tax liability. It also expressed concern about the possibility of increased competition for gaming dollars in the future. "While I understand their position, the Orange County project cannot be delayed indefinitely", Yelton said. "I will recommend that the Indiana Gaming Commission reinstitute a selection process for an operating agent. It is in the best interest of the citizens of Orange County specifically, and the citizens of Indiana in general, that this process will be conducted as fairly and quickly as possible." Yelton has already instructed his staff to begin the preliminary work of implementing an expedited procedure. "The Indiana Gaming Commission is dedicated to assuring that the legislative directive that a riverboat be constructed in Orange County be promptly realized," Yelton said. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. -- http://www.thcrrecap.com/ -- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. TRUMP HOTELS: Wants to Hire Lazard as Financial Advisor ------------------------------------------------------- Prior to filing for chapter 11 protection, Trump Hotels & Casino Resorts, Inc., and its debtor-affiliates used the services of UBS Securities, LLC, as their financial advisor in structuring and negotiating their restructuring as set forth in their proposed plan of reorganization. Francis X. McCarthy, Jr., THCR/LP Corporation Chief Financial Officer, relates that the Debtors did not seek to employ UBS as a "professional" under Section 327 or 328 of the Bankruptcy Code, but expect to continue to utilize UBS' services as a senior co- financial advisor with respect to certain matters. The U.S. Bankruptcy Court for the District of New Jersey however identified certain concerns about the Debtors' exclusive reliance on UBS as an unretained professional during the pendency of the Debtors' cases. Accordingly, the Debtors decided to seek the employment of Lazard Freres & Co., LLC, as their co-financial advisor in their Chapter 11 cases. Pursuant to an engagement letter dated January 31, 2005, Lazard as co-financial advisor is expected to: (a) review and analyze the Debtors' business, operations and financial projections; (b) evaluate the Debtors' potential debt capacity in light of the Debtors' projected cash flows; (c) assist in the determination of a capital structure for the Debtors; (d) assist in the determination of a range of values for the Debtors on a going concern basis; (e) assist the Debtors in developing tactics and strategies for negotiating with the Informal Committee of TAC Noteholders, the Informal Committee of TCH Noteholders, the Official Committee of Equity Security Holders and other parties-in-interest in the Debtors' Chapter 11 cases -- the Stakeholders; (f) render financial advice to the Debtors and participate in meetings or negotiations with the Stakeholders or rating agencies, or other appropriate parties in connection with the Debtors' chapter 11 cases and proposed reorganization; (g) advise the Debtors on the timing, nature and terms of new securities, other consideration or other inducements to be offered pursuant to, or in connection with, the Debtors' proposed reorganization; (h) assist the Debtors in preparing documentation within Lazard's areas of expertise that is required in connection with the Debtors' proposed reorganization; (i) attend meetings of the Debtors' Boards of Directors and committees; (j) provide testimony and participate in related depositions, as necessary, with respect to matters which Lazard has been engaged to advise the Debtors on in any proceedings before the Court; (k) advise the Debtors with respect to financing transactions; (l) provide the Debtors with other general restructuring advice and services as reasonably required by the Debtors; and (m) reasonably cooperate with UBS. Mr. McCarthy tells the Court that UBS has agreed to amend its engagement letter to provide that it will be co-financial advisor with Lazard. Lazard is particularly well qualified to perform the services on which it is to be engaged, Lazard Managing Director Daniel Aronson states. "The current managing directors, directors, vice presidents and associates of Lazard have extensive experience working with financially troubled companies in complex financial restructurings out-of-court and in Chapter 11 proceedings." Mr. Aronson further points out that since 1990, Lazard's professionals have been involved in more than 200 restructurings, representing $300 billion in debtor assets. The Debtors will pay Lazard based on this fee and expense structure: a. A monthly fee of $300,000, payable on execution of the Engagement Letter and on the 1st day of each month thereafter through May 31, 2005, payment of which will be credited against the Restructuring Fee. A monthly fee of $200,000 payable on June 1, 2005, and on the 1st day of each month thereafter. These monthly fees will be paid until the earlier of the completion of the Restructuring or the termination of Lazard's engagement. b. A $2,000,000 fee, payable upon the effective date of the Restructuring. c. In addition to any fees that may be payable to Lazard and, regardless of whether any transaction occurs, the Debtors are required to promptly reimburse Lazard for all: (i) reasonable and reasonably documented out-of pocket expenses; and (ii) other reasonable fees and expenses, provided that the expenses, without the Debtor's consent, will not exceed $50,000 during the period until May 31, 2005. d. Certain indemnification and contribution as agreed with the Debtors in that certain Indemnification Letter. The Debtors believe that the Fee and Expense Structure is fair and reasonable pursuant to Section 328(a) of the Bankruptcy Code. In particular, the Debtors believe that the Fee and Expense Structure creates a proper balance between monthly fees and contingency fees based on the successful consummation of a restructuring. The Debtors did not make any payments to Lazard within the one- year period before the Petition Date and has not provided Lazard with a retainer. Lazard, Mr. Aronson believes, has not been retained to assist any entity or person other than the Debtors on matters relating to, or in connection with, the Debtors' chapter 11 cases. But Mr. Aronson discloses that a Lazard Managing Director sits on the board of American Express, one of the Debtors' creditors, and another Lazard Managing Director sits on the board of IGT, another of the Debtors' creditors. These Managing Directors, after being apprised of the firm's proposed employment by the Debtors, agreed to recuse themselves in their capacity as directors of American Express and IGT from any deliberations or decisions taken by the boards of those companies relating to the Debtors. Given Lazard's size and the breadth of its client base, however, it is possible that other principals or employees of Lazard may have been retained by potential parties-in-interest in unrelated matters without knowledge of the firm's professionals. To the extent that Lazard discovers any additional relationships, Mr. Aronson assures the Court that the firm will supplement its disclosure to the Court. As part of its regular business operations, Lazard may trade securities on behalf of or acts as a broker or dealer for some of the Debtors' creditors, equity holders and other parties-in- interest as well. Mr. Aronson relates that Lazard operates a capital markets business, which is run as a separate department within Lazard and is ethically walled off from the firm's investment banking business. Capital Markets regularly engages in trading of debt and equity securities for both clients and the firm's own account. However, as a result of the proposed engagement, the Debtors will be placed on the firm's "Restricted List." According to Mr. Aronson, proprietary trading by Lazard and its publication of research reports and recommendations or solicitations to buy or sell, are prohibited with respect to companies placed on the Restricted List. Placement on the Restricted List does not, however, prohibit the firm from executing unsolicited agency orders and liquidating trades in a company's securities. The firm expects that its asset management affiliate, Lazard Asset Management LLC, may act as investment advisor for or trade securities including on behalf of creditors, equity holders or other parties-in-interest in the Debtors' cases, and Lazard managing directors and employees. Some of these Lazard Asset accounts and funds may now or in the future hold debt or equity securities of the Debtors. To ensure that no confidential or nonpublic information concerning the Debtors has been or will be available to employees of Lazard Asset, the firm put in place compliance procedures. While Lazard receives performance fees generated by certain Lazard Asset funds, Lazard Asset is operated as a separate and distinct affiliate of Lazard by an ethical wall. Lazard represents no interest adverse to the Debtors or their estates in the matters for which Lazard is to be retained. Accordingly, the firm believes it is a "disinterested person," as defined in Section 101(14) of the Bankruptcy Code and as required by Section 327(a). By this application, the Debtors seek the Court's authority to employ Lazard as their co-financial advisor effective as of January 31, 2005. The Debtors also ask Judge Wizmur to approve the proposed Fee and Expense Structure. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. -- http://www.thcrrecap.com/ -- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. UAL CORPORATION: Files 11th Reorganization Status Report -------------------------------------------------------- UAL Corporation and its debtor-affiliates continue to believe that termination and replacement of the defined benefit pension plans is necessary to emerge from Chapter 11. However, the Debtors are willing to explore pension termination alternatives with the unions. If by April 11, 2005, there is no consensual resolution to the pension issues, the Debtors will re-file the Section 1113(c) motion seeking reduction of wages and benefits, and file a motion for distress termination of the defined benefit pension plans. Trial is scheduled to commence on May 11, 2005. The Debtors' anticipated emergence date is the Fall of 2005. The Debtors have begun exploring exit financing possibilities. In response to a request for proposals, the Debtors have received offers for $2,000,000,000 to $2,500,000,000 in exit financing from four different institutions. Each proposal is contingent on the Debtors achieving the cost savings identified in the business plan. On February 7, 2005, the four institutions met with the exit financing subcommittee of the Official Committee of Unsecured Creditors Working Group to present and discuss the proposals. The Debtors are evaluating the proposals. In the area of discussions with the Aircraft Trustees, "material progress cannot be reported," laments James H.M. Sprayregen, Esq., at Kirkland & Ellis. Since the Debtors presented new restructuring proposals, the parties have been unable to establish a meaningful dialogue. The Trustees' consistent and uniform refusal to engage the Debtors in negotiations "is becoming an increasingly large obstacle to the formulation of a plan of reorganization." The lack of meaningful dialogue suggests that inappropriate cartel-like conduct persists. The Debtors continue to meet with advisors to the holders and schedule meetings in an attempt to jumpstart negotiations. The Debtors are considering alternatives in light of the stalemate. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/--throughUnitedAir 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. 76; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Reports 69% Passenger Load Factor in February 2005 -------------------------------------------------------------- US Airways reported its February 2005 passenger traffic last week. Mainline revenue passenger miles for February 2005 increased 3.0 percent on a 1.2 percent increase in available seat miles, compared to February 2004. The 69.7 percent passenger load factor is a 1.2 percentage point increase compared to February 2004. Revenue passenger miles for US Airways mainline during the first two months of 2005 increased 3.4 percent on a 0.4 decrease in available seat miles, compared to the same period in 2004. The passenger load factor for January through February 2005 was 69.0 percent, a 2.6 percentage point increase compared to the same period in 2004. The two wholly owned subsidiaries of US Airways Group, Inc., Piedmont Airlines, Inc., and PSA, Inc., and MidAtlantic Airways, reported a 117.8 percent increase in revenue passenger miles for February 2005, on 104.1 percent more capacity, compared to February 2004. The passenger load factor was 55.0 percent, a 3.5 percentage point increase compared to February 2004. For the first two months of 2005, the two wholly owned subsidiaries of US Airways Group, Inc., Piedmont Airlines, Inc. and PSA, Inc., and MidAtlantic Airways, reported a 127.6 percent increase in revenue passenger miles for February 2005, on 101.4 percent more capacity, compared to February 2004. The passenger load factor was 54.3 percent, a 6.2 percentage point increase compared to February 2004. US Airways ended the month of February 2005 completing 98.4 percent of its scheduled departures compared to 98.9 percent in February 2004, in part due to winter weather in the East. US AIRWAYS, INC. SELECTED TRAFFIC STATISTICS Feb. Feb. Percent 2005 2004 Change Revenue Passenger Miles (000): Domestic* 2,268,023 2,160,614 5.0 International* 663,667 685,641 (3.2) Total -- Scheduled Service 2,931,690 2,846,255 3.0 Total (Including Charter) 2,931,690 2,846,670 3.0 Available Seat Miles (000): Domestic* 3,255,112 3,159,355 3.0 International* 953,190 998,628 (4.6) Total -- Scheduled Service 4,208,301 4,157,983 1.2 Total (Including Charter) 4,208,301 4,159,059 1.2 Passengers Boarded* 3,154,277 3,131,137 0.7 System Load Factor* 69.7 68.5 1.2 Average Passenger Journey* 929.4 909.0 2.2 * scheduled service NOTE: Numbers may not add or calculate due to rounding. US AIRWAYS, INC. YEAR-TO-DATE 2005 Jan. -- Feb. Jan. -- Feb. Percent 2005 2004 Change Revenue Passenger Miles (000): Domestic* 4,469,288 4,252,386 5.1 International* 1,368,528 1,392,001 (1.7) Total -- Scheduled Service 5,837,815 5,644,387 3.4 Total (Including Charter) 5,838,730 5,645,422 3.4 Available Seat Miles (000): Domestic* 6,527,404 6,489,346 0.6 International* 1,937,795 2,013,773 (3.8) Total -- Scheduled Service 8,465,200 8,503,119 (0.4) Total (Including Charter) 8,466,287 8,505,572 (0.5) Passengers Boarded* 6,176,553 6,104,031 1.2 System Load Factor* 69.0 66.4 2.6 Average Passenger Journey* 945.2 924.7 2.2 * scheduled service NOTE: Numbers may not add or calculate due to rounding. US AIRWAYS EXPRESS** SELECTED TRAFFIC STATISTICS Feb. Feb. Percent 2005 2004 Change Revenue Passenger Miles (000) 214,894 98,651 117.8 Available Seat Miles (000) 390,610 191,370 104.1 Passengers Boarded* 611,565 434,498 40.8 System Load Factor* 55.0 51.5 3.5 Average Passenger Journey 351.4 227.0 54.8 US AIRWAYS EXPRESS** YEAR-TO-DATE 2005 Jan. -- Feb. Jan. -- Feb. Percent 2005 2005 Change Revenue Passenger Miles (000) 414,182 182,007 127.6 Available Seat Miles (000) 763,371 379,064 101.4 Passengers Boarded* 1,177,723 811,285 45.2 System Load Factor* 54.3 48.0 6.2 Average Passenger Journey 351.7 224.3 56.8 *scheduled service **Piedmont Airlines, Inc., PSA Airlines, Inc., and MidAtlantic Airways NOTE: Numbers may not add or calculate due to rounding. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. VIACELL INC: Equity Deficit Widens to $160 Million at Dec. 31 ------------------------------------------------------------- ViaCell, Inc. (Nasdaq: VIAC), a clinical-stage biotechnology company dedicated to enabling the widespread application of human cells as medicine in the areas of cancer, cardiac disease, diabetes and infertility, reported financial results for the fourth quarter and year ended Dec. 31, 2004. 2004 Accomplishments * ViaCell achieved 20% year-over-year growth in revenue for the fourth consecutive year * ViaCell advanced its lead compound, CB001, into a Phase I clinical trial for the treatment of hematopoietic stem cell transplantation * ViaCell achieved proof of concept in its cardiac disease program by demonstrating statistical improvement in cardiac function in a porcine pre-clinical model, using its proprietary Unrestricted Somatic Stem Cells (USSCs) technology derived from umbilical cord blood stem cells "2004 has been another record year for our Viacord business, marking the fourth consecutive year of strong revenue growth," said Marc D. Beer, President and Chief Executive Officer of ViaCell, Inc. "We are very pleased with the continued successes of Viacord and will use these achievements to bolster and continue the development of our other therapeutic programs." During 2004, the company also moved its lead therapeutic program, CB001, into the clinic. A proprietary, highly expanded population of stem and progenitor cells, CB001 is currently being studied in a Phase I clinical trial as a substitute for bone marrow and other hematopoietic stem cell transplants. In addition, the company is leveraging its infrastructure in cellular therapy to develop a pipeline of product candidates for a range of unmet needs, including cardiac disease. To this end, the company is currently conducting pre-clinical studies of USSCs for the treatment of cardiac disease. Also, the company plans to enter a clinical trial for approval of its Viacyte product for the cryopreservation of human eggs. The company expects to initiate the Viacyte clinical trial in 2005 and believes that it will receive approval to market Viacyte in 2007. "In the past year, we also continued our strong alliance with Amgen, with whom we participate in a license and collaboration agreement. Under the terms of the agreement, ViaCell receives a non-exclusive license to certain Amgen stem cell growth factors for use in developing and manufacturing cell therapy products and Amgen receives an option to collaborate with us on development and commercialization of CB001, which incorporates two Amgen growth factors. With the recent completion of our first annual review, I am pleased to report that the alliance between ViaCell and Amgen continues to offer our team and technology tremendous support and expertise," continued Mr. Beer. "2004 was an exciting year for ViaCell as we effectively executed on our business strategy. We made progress on achieving our corporate goals and growing the company towards commercial success. The financial and scientific impact of achieving these milestones supported the continued development of our therapeutic pipeline," said Mr. Beer. Building upon the work of the previous year, in January of 2005, ViaCell announced the completion of its initial public offering of 7,500,000 shares of common stock at $7.00 per share. In addition, the offering's underwriters simultaneously exercised their over- allotment option in full and purchased an additional 1,125,000 shares of common stock. Financial Results For the year ended December 31, 2004, revenues were $38.3 million, compared to revenues of $31.9 million for the same period in 2003. Total operating expenses for the twelve months ended December 31, 2004 were $58.4 million, compared to $87.0 million for the same period in 2003. The net loss for the twelve months ended December 31, 2004 was $21.1 million. This compares to a net loss for the same period in 2003 of $55.5 million. ViaCell also reported results of its operations for the fourth quarter of 2004. Revenues for the fourth quarter of 2004 were $9.6 million compared to revenues in the fourth quarter of 2003 of $9.2 million. Total operating expenses in the fourth quarter of 2004 were $14.6 million compared to $20.5 million for the same period in 2003. The net loss for the three months ended December 31, 2004 was $5.2 million. This compares to a net loss for the same period in 2003 of $11.7 million. As of December 31, 2004, ViaCell had cash, cash equivalents and marketable securities of $28.6 million. About the Company ViaCell, Inc. is a clinical-stage biotechnology company dedicated to enabling the widespread application of human cells as medicine. The Company is developing a pipeline of proprietary product candidates intended to address cancer, cardiac disease, diabetes and infertility. ViaCell's portfolio of proprietary technologies includes Selective Amplification technology and USSCs. The Company's lead cord-blood derived stem cell therapy product candidate, CB001, is currently in a Phase I clinical trial. ViaCell also offers expecting families the option of preserving their baby's cord blood stem cells through its Viacord business. At Dec. 31, 2004, ViaCell's balance sheet showed a $160,957,000 stockholders' deficit, compared to a $130,151,000 deficit at Dec. 31, 2003. VITAL LIVING: Inks Manufacturing Pact with Bactolac Pharmaceutical ------------------------------------------------------------------ Vital Living Inc. (OTCBB:VTLV) has contracted with Bactolac Pharmaceutical Inc., a wholly owned subsidiary of Advanced Nutraceuticals Inc. (OTCBB:ANII), to manufacture and package products in sale-ready form that have been developed and are marketed by Doctors For Nutrition Inc. (DFN), a wholly owned subsidiary of Vital Living. Specifically, Bactolac has been engaged to produce DFN's GREENSFirst(TM), Dream Protein(TM) and Complete Essentials(TM). Under the private labeling deal, Bactolac will use the identical ingredients for all DFN products that have been previously utilized to produce these popular nutritional supplements marketed to and through health care providers. Bactolac provides private-label, contract-manufacturing services with more than 1,000 different formulations of vitamins and supplements to various companies engaged in the marketing and distribution of vitamins, mineral supplements, herbs, and other health and nutrition consumer products. Bactolac's customers include direct marketing companies, network marketing companies, retail chain distribution and customers who repackage bulk products for resale. Gregg Linn, chief financial officer at Vital Living, stated, "After giving consideration to several possible candidates, Bactolac was clearly the best choice to produce our DFN product line. Widely heralded as a first-class manufacturing operation serving the nutraceutical industry, our own research revealed that Bactolac is indeed a first-rate shop. Its proven commitment to quality control, production reliability and customer satisfaction was evident immediately. Consequently, we believe we have selected the ideal partner to assume manufacturing and packaging of our DFN products. Outsourcing to Bactolac represents another critical step in Vital Living's efforts toward improving the financial and operational efficiencies of our company." About Vital Living Inc. Headquartered in Phoenix, Vital Living -- http://www.vitalliving.com/-- develops or licenses nutraceuticals and markets them for distribution through physicians, medical groups, chiropractic offices and retail outlets. Vital Living develops and tests its nutraceuticals in collaboration with leading medical experts in the nutraceuticals field and has designed them to be incorporated by physicians into a standard physician-patient program in which patients supplement doctor- prescribed pharmaceuticals with its nutraceuticals. Vital Living is developing unique, safe and naturally derived nutritional products, utilizing advanced drug-delivery technologies, including the Geomatrix(R) technology through its affiliation with SkyePharma PLC. The Geomatrix(R) technology has been provided exclusively for Vital Living's pharmaceutical development in China, and the development of nutraceuticals on a global basis. * * * As reported in the Troubled Company Reporter on Jan. 21, 2005, Vital Living, Inc., has suffered recurring losses from operations, has a working capital deficit, and is dependent on funding from sources other than operations. Since inception, the Company has been required to raise additional capital by the issuance of both equity and debt instruments. There are no commitments from funding sources, debt or equity, should cash flows be insufficient to fund ongoing operations or other cash commitments as they come due. These factors raise substantial doubt about the Company's ability to continue as a going concern. At September 30, 2004, the Company had cash of $210,326, including approximately $275,000 of cash in escrow, that was to be used to make the remaining 2004 interest payments on its December 2003 Senior Secured Convertible Notes. In October 2004, approximately $275,000 of cash held in escrow was released to the Company as a result of an agreement reached with the holders of its senior secured convertible notes to reduce the conversion price of the notes and exercise prices of certain warrants held by these holders. As of September 30, 2004, the Company's subsidiaries' total asset and liabilities were $57,378 and $2,873,214, respectively. As of December 31, 2003, those total assets and liabilities were $1,212,813 and $3,262,417, respectively. For the three and nine months ended September 30, 2004, total revenues for the subsidiaries were $52,809 and $1,502,788, respectively. For the comparative three and nine-month period of 2003, subsidiaries' total revenues were $821,049 and $1,588,232, respectively. The Company's net loss for the quarters ended September 30, 2004, and 2003 was $2,719,949 and $11,437,637, respectively, for a decrease of $9,137,485. A majority of the reduction relates the net effects of downward repricing adjustments. Management will be required to raise additional capital in the near term through offerings of securities to fund operations. No assurance can be given that the financing will be available or, if available, that it will be on commercially favorable terms. Moreover, available financing may be dilutive to current investors. VERESTAR INC: Wants to Walk Away from Twelve Tower Leases --------------------------------------------------------- Verestar Inc. and its debtor-affiliates seek permission from the U.S. Bankruptcy Court for the Southern District of New York to reject twelve unexpired leases. Having sold substantially of all their assets, the Debtors believe that the rejection of the leases will ensure reduction of administrative expenses. These leases include: a) Tower #1 - AMES Lease Extension b) Tower #2 - ENCINO Lease Extension c) Tower #5 - PAWNEE Lease Extension d) Tower #7 - BEEVILLE e) Tower #8 - BISHOP f) Tower #12 - MATHIS g) Tower #21 - LINN h) Tower #24 - BEAUMONT i) Tower #27 - FALFURRIA j) Tower #28 - FLORESVILLE Lease Extension k) Tower #31 - SOUR LAKE l) Tower #36 - VIOLET Lease Extension Headquartered in Fairfax, Virginia, Verestar, Inc., -- http://www.verestar.com/-- was a provider of satellite and terrestrial-based network communication services prior to the sale of substantially all of its assets. Verestar is a wholly-owned subsidiary of American Tower Corporation, a non-debtor. The Company and two of its affiliates filed for chapter 11 protection on December 22, 2003 (Bankr. S.D.N.Y. Case No. 03-18077). Matthew Allen Feldman, Esq., at Willkie Farr & Gallagher LLP represents the Debtors. When the Company filed for protection from its creditors, it listed $114 million in assets and more than $635 million in debts. WARNACO GROUP: S&P Holds Rating Amidst Federated/May Merger Talks ----------------------------------------------------------------- Standard & Poor's Ratings Services said that there would be no immediate effect on the ratings or outlook on the rated apparel companies from the proposed merger of Federated Department Stores, Inc., (BBB+/Watch Neg/A-2) and May Department Stores Co. (BBB/Watch Neg/A-3), including those of Warnaco Group, Inc. (B+/Positive/--). The proposed merger of Federated and May represents a major consolidation in the retail landscape and will have significant effect on the dynamics of the apparel industry. The combined retailer's concentrated buying and bargaining power would likely pressure the apparel firms' margins. Revenues from the combined operations would also be negatively affected as Federated and May are likely to close retail locations to improve operating efficiency and reduce costs. There could be more emphasis on the retailers' own private labels at the expense of some of the branded merchandise. There may also be added emphasis on exclusive brands as well, which would result in additional investments on the part of the apparel firms. Despite the potential negative fallout from the merger, most investment-grade apparel companies have already diversified their channels of distribution, decreasing their exposure to department stores in recent years. Apparel firms such as Liz Claiborne, Polo Ralph Lauren, Tommy Hilfiger, and Jones Apparel Group remain significant vendors to the department stores. Nonetheless, these companies, such as Liz and Jones, have a portfolio of brands that serve different demographic markets, minimizing their exposure to one particular segment or customer. However, Standard & Poor's notes that Jones has a combined sales concentration of 26% to May and Federated, and could be more vulnerable to the combination than some of the other apparel firms. On the other hand, for some apparel vendors, there could be opportunities as well, as Federated may move to a more upscale retail format, which would benefit those companies with the premium brands. Standard & Poor's expects consolidation in the apparel industry to continue as vendors keep looking for opportunities to expand their brand portfolios to maintain relevance with their customers and the ultimate consumers. While it is too early to assess the effect of the proposed Federated-May Department Store merger on the apparel industry, Standard & Poor's will closely monitor events as they develop. WCI COMMUNITIES: Moody's Puts Ba3 Rating on $200MM Sr. Sub. Notes ----------------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating to the new $200 million issue of senior subordinated notes of WCI Communities, Inc., and affirmed the company's senior implied and issuer ratings of Ba2 as well as the Ba3 ratings on the existing issues of senior subordinated notes. The ratings outlook is stable. The stable ratings outlook is based on Moody's expectation that WCI Communities' debt leverage, as measured by total debt/capitalization, will be reduced to below 55% by year-end 2005. The ratings acknowledge the company's valuable land holdings in coastal areas of Florida that have market values exceeding current book values, steady amenities revenues and fee income from related service businesses, the second highest margins in the industry, strong brand name recognition, seasoned management team, favorable demographic trends, and the 58-year history through various cycles. In addition, the ratings recognize that the company's balance sheet is fully stated, requiring little analytical adjustment, in that the company retains on balance sheet 85-90% of its land holdings and associated debt as compared to an industry average ownership percentage of between 40-50%. At the same time, the ratings consider the company's strategy of building master planned communities that creates a need for a long land supply, its geographic concentration in coastal areas of Florida (although this has been reduced by two recent out-of-state acquisitions), the rising number of competitors in its markets, the larger-than-industry-average spec building due to its tower construction segment, its reliance on the luxury/second home niche of the market which could be more vulnerable to an external shock, and the cyclicality of the homebuilding industry. Proceeds of the new debt issue will be used to retire a like amount of bank debt. Pro forma for this new issue and a dollar for dollar reduction in the outstanding revolver, total homebuilding debt/capitalization at year-end 2004 would exceed 56% and total homebuilding debt/EBITDA would exceed 4x. Because of WCI Communities' recent debt-financed acquisition of Renaissance Housing Corp., and seasonal working capital build ups, however, these debt leverage figures will flirt with 60% and 5x, respectively, for a quarter or two before being reduced to acceptable levels by year-end 2005. A failure by the company to achieve its debt leverage target could result in a negative ratings action. Headquartered in Bonita Springs, Florida, WCI Communities, Inc., is a fully integrated homebuilding and real estate services company with 58 years of experience in the design, construction, and operation of leisure-oriented, amenity-rich master planned communities targeting affluent homebuyers. Revenues and earnings for 2004 were $1.8 billion and $120 million, respectively. WESTPOINT STEVENS: Overview of New Textile Purchase Agreement ------------------------------------------------------------- As previously reported, WestPoint Stevens Inc. entered into a definitive agreement for the sale of the Company to an investor group. The investor group consists of WL Ross & Co. LLC, and holders of a majority of the Company's Senior Credit Facility, including Contrarian Capital Management and CP Capital Investments. Purchase Agreement with New Textile WestPoint Stevens, Inc., and certain of its subsidiaries delivered a copy of their asset purchase agreement with New Textile Holding Co. and New Textile Co., a wholly owned subsidiary of New Textile Holding, to the Securities and Exchange Commission on March 3, 2005. The Asset Purchase Agreement provides for the sale to New Textile Co. of substantially all of the WestPoint Stevens' assets pursuant to Section 363 of the Bankruptcy Code. New Textile Holding is owned by an investor group that consists of WL Ross & Co. LLC and holders of a majority of the Company's First Lien Credit Facility, including Contrarian Capital Management and CP Capital Investments. A full-text copy of the Asset Purchase Agreement is available for free at: http://sec.gov/Archives/edgar/data/852952/000090951805000138/mv3-3ex10_1.txt Under the Asset Purchase Agreement, the purchase price for the Assets consists of: (i) newly issued units comprised of 50% of the outstanding shares of common stock of Parent and 50% of the outstanding preferred stock of Purchaser, which will be distributed to the Company's First Lien Credit Facility holders; (ii) rights to acquire additional Units, comprised of the additional 50% of the outstanding shares of common stock of New Textile Holding and 50% of the outstanding preferred stock of New Textile Co., pursuant to a rights offering for an aggregate purchase price of $207.5 million, under which all First Lien Credit Facility holders will have the equal right to participate, and in certain circumstances, the Company's Second Lien Credit Facility holders could participate; (iii) the payment in full of all outstanding indebtedness under the Company's debtor-in-possession credit agreement, dated as of June 2, 2003, as amended, among the Company and certain of its subsidiaries, Bank of America, N.A., Wachovia Bank, National Association and certain other lenders; and (iv) the assumption of liabilities of the Company, as set forth in the Asset Purchase Agreement. Christopher N. Zodrow, Esq., Vice President and Secretary of WestPoint Stevens, Inc., relates that following the completion of the sale of Assets, the Company will wind down its estate and, as a result, its unsecured creditors could receive a small distribution out of proceeds of avoidance actions and other contingent claims and all shares of its common stock would be cancelled with no distribution being made. The consummation of the transactions contemplated by the Asset Purchase Agreement is subject to the receipt of any higher or better offers submitted in accordance with bidding procedures to be approved by the U.S. Bankruptcy Court for the Southern District of New York and is contingent upon the approval of the Asset Purchase Agreement by the Bankruptcy Court. In the event that the Purchase Agreement with New Textile is terminated by either party, the Debtors will pay to New Textile Co. a cash amount equal to: (a) if the Competing Transaction involves the purchase of substantially all the Purchased Assets by an Affiliate of Carl Icahn, up to $3.5 million of the reasonable, documented, out-of-pocket expenses of New Textile Co. incurred, and (b) in any other case, $5.0 million plus up to $1 million of the reasonable, documented, out-of-pocket expenses of New Textile Co. incurred. The Break-Up Fee will be due and payable upon the consummation of a Competing Transaction or, if earlier, December 31, 2005. The Asset Purchase Agreement is also subject to various closing conditions, Mr. Zodrow continues, including the satisfaction of certain closing date minimum working capital requirements and the absence of any events or changes that would reasonably be expected to have a material adverse effect on the Company's business. The closing of the transactions is expected to occur no later than July 31, 2005. Working Capital Threshold Schedule COMPANY ESTIMATE 6/30/05E ---------------- WC ASSETS --------- Cash & Cash Equivalents $6,500,000 Inventories, Net of Reserves 292,784,000 Accounts Receivable, Net of Reserves 179,467,000 Prepaid Expenses & Other Current Assets 18,178,000 ------------ TOTAL WC ASSETS $496,929,000 WC LIABILITIES -------------- Accounts Payable (Post-Petition) 41,994,000 Customer Accommodations 24,737,000 Current Environmental Liabilities 6,000,000 Vacation Pay 6,500,000 Restructuring Reserves 24,664,000 Group Insurance 6,200,000 Accrued Salary & Wages 13,275,000 Property Taxes 3,743,000 Royalties 5,730,000 Payroll Taxes & Fringes 1,800,000 Auditing 780,000 Advertising - Canada 691,000 Sales Tax 645,000 Accrued Rent - Mill Stores 205,000 Manager Incentive - Mill Stores 175,000 Accounts Payable - Canada 344,000 Bath Water Agreement 677,000 Salesmens' Incentive 263,000 Workers Compensation 13,782,000 Other Miscellaneous Items 3,273,000 DIP 94,599,000 Reclamation Claims 1,225,000 Executory Contracts 3,372,000 Tax Claims 1,896,000 Professional Fees 9,393,000 KERP 14,515,000 ------------ TOTAL WC LIABILITIES $280,478,000 CLOSING WC AT 6/30/05E $216,451,000 Closing WC Threshold Amount $184,000,000 ------------ Cushion $ $32,451,000 Cushion % 15.0% Commitment Letter According to Mr. Zodrow, the equity to be issued pursuant to the Asset Purchase Agreement is subject to dilution pursuant to a one-year warrant to be issued to WL Ross & Co. LLC to purchase 10% of the fully diluted common stock of New Textile Holding and preferred stock of New Textile Co., at an exercise price based upon the midpoint of the Company's enterprise value as determined by the Company's financial advisor -- i.e., $642.5 million -- subject to certain adjustments. In connection with the Asset Purchase Agreement, the Investor Group entered into a commitment agreement pursuant to which they agreed, among other things: -- to purchase any Units not purchased in the rights offering, -- to release $10.0 million from escrowed adequate protection payments to the Company's Second Lien Credit Facility holders if they do not object to the transaction; and -- to provide additional consideration in certain other events if the sale of the Assets is completed. A full-text copy of the Commitment Letter is available for free at: http://sec.gov/Archives/edgar/data/852952/000090951805000138/mv3-3ex10_2.txt The Term Sheet attached to the Commitment Letter provides, among other things: WLR WARRANT TERMS: The WLR Warrant will be issued on the Closing Date. The exercise price of the WLR Warrant will be equal to Rothschild's WPS midpoint total enterprise value -- $642.5 million -- adjusted for the cash raised in the Offering, net of the Closing DIP Amount and the following Assumed Liabilities: KERP, accrued and unpaid professional fees through the Closing Date, cure amounts with respect to executory contracts, reclamation claims and pre-petition property tax claims. The exercise price will be subject to standard anti-dilution protection. The WLR Warrant will have a term of 364 days. BOARD REPRESENTATION AND SENIOR MANAGEMENT: New Textile Holding's and New Textile Co.'s initial Boards of Directors will be comprised of: (i) three directors selected by WLR, (ii) three directors selected by the Non-WLR Investors, (iii) one director selected by the First-Lien Holders (other than the Non-WLR Investors), and (iv) two directors selected by mutual agreement of WLR and the Non-WLR Investors. MANAGEMENT AGREEMENT: WLR will enter into a 3-year management agreement with New Textile Co. for $2 million per year. REGISTRATION RIGHTS: On or prior to the Closing Date, New Textile Holding and New Textile Co. will enter into a registration rights agreement with WLR and a registration rights agreement with the Investors and any other person or entity holding as of the Closing more than 5% of the Units. The WLR Registration Rights Agreement will provide that WLR will be entitled to (i) three demand registrations and (ii) unlimited piggy- back registration rights with respect to any Units owned by WLR. The Investor Registration Rights Agreement will provide that (i) each Investor will be entitled to one demand registration and that the Registration Rights Participants (including the Investors), as a group, will be entitled to two additional demand registrations and (ii) each Registration Rights Participant will be entitled to unlimited piggy-back registration rights. 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. 40; Bankruptcy Creditors' Service, Inc., 215/945-7000) WILLIAM CARTER: S&P Says Federated/May Talks Won't Affect Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services said that there would be no immediate effect on the ratings or outlook on the rated apparel companies from the proposed merger of Federated Department Stores, Inc., (BBB+/Watch Neg/A-2) and May Department Stores Co. (BBB/Watch Neg/A-3), including those of The William Carter Co. (BB/Stable/--). The proposed merger of Federated and May represents a major consolidation in the retail landscape and will have significant effect on the dynamics of the apparel industry. The combined retailer's concentrated buying and bargaining power would likely pressure the apparel firms' margins. Revenues from the combined operations would also be negatively affected as Federated and May are likely to close retail locations to improve operating efficiency and reduce costs. There could be more emphasis on the retailers' own private labels at the expense of some of the branded merchandise. There may also be added emphasis on exclusive brands as well, which would result in additional investments on the part of the apparel firms. Despite the potential negative fallout from the merger, most investment-grade apparel companies have already diversified their channels of distribution, decreasing their exposure to department stores in recent years. Apparel firms such as Liz Claiborne, Polo Ralph Lauren, Tommy Hilfiger, and Jones Apparel Group remain significant vendors to the department stores. Nonetheless, these companies, such as Liz and Jones, have a portfolio of brands that serve different demographic markets, minimizing their exposure to one particular segment or customer. However, Standard & Poor's notes that Jones has a combined sales concentration of 26% to May and Federated, and could be more vulnerable to the combination than some of the other apparel firms. On the other hand, for some apparel vendors, there could be opportunities as well, as Federated may move to a more upscale retail format, which would benefit those companies with the premium brands. Standard & Poor's expects consolidation in the apparel industry to continue as vendors keep looking for opportunities to expand their brand portfolios to maintain relevance with their customers and the ultimate consumers. While it is too early to assess the effect of the proposed Federated-May Department Store merger on the apparel industry, Standard & Poor's will closely monitor events as they develop. WINN-DIXIE: Hires Logan & Company as Claims Agent ------------------------------------------------- Winn-Dixie Stores, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to appoint Logan & Company, Inc., as their claims, noticing, and balloting agent. Pursuant to Section 156(c) of the Judiciary Procedures Code, the Court is authorized to utilize facilities other than those of the Clerk's office for the administration of bankruptcy cases. The Debtors believe that it is necessary to engage Logan to act as outside agent to the Clerk of the Bankruptcy Court to assume full responsibility for the distribution of notices and proof of claim forms and the maintenance, secondary processing, and docketing of all proofs of claim filed in the Debtors' bankruptcy cases. The Debtors will also require Logan's services with respect to the mailing of various pleadings and other papers in their Chapter 11 cases. Although the Debtors have not yet filed their Schedules of Assets and Liabilities, they anticipate that there will be thousands of entities that the Debtors will be required to serve with various notices, pleadings, and other documents filed in their cases. The Debtors believe that appointing Logan will expedite the distribution of notices and relieve the Clerk's office of the administrative burden of processing those notices. Logan is a data processing firm that specializes in noticing, claims processing, voting, and other administrative tasks in Chapter 11 cases. As claims, noticing, and balloting agent, Logan will: a. establish and maintain a consolidated list of creditors; b. serve notices to parties-in-interest; c. maintain all proofs of claim and proof of interest filed in the Debtors' cases; d. docket all Claims; e. maintain and transmit to the Clerk's office the official claims registers; f. maintain current mailing lists of all entities that have filed Claims and notices of appearance it receives; g. provide the public access for examination to all the Claims at its premises during regular business hours and without charge; h. record all transfers it receives, pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure; i. provide the Debtors with consulting and computer software support regarding the reporting and management requirements of the bankruptcy administration process; j. provide software education and training as well as consulting and programming support for Debtor-requested reports, program modifications, database modification, and other features; k. provide assistance in preparing the Debtors' Schedules if requested by the Debtors; and l. provide balloting and solicitation services to the Debtors. A detailed summary of Logan's fees is available for free at: http://bankrupt.com/misc/winn-dixie_loganfee.pdf The Debtors paid Logan a $50,000 Retainer. Kathleen M. Logan, President of the company, assures the Court that Logan is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Ms. Logan adds that the company holds no interest adverse to the Debtors' estates. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/ -- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). David J. Baker, Esq., at Skadden Arps Slate Meagher & Flom, LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) YUKOS OIL: What Value's Left After Sale of Yuganskneftegas ---------------------------------------------------------- In support of Yukos Oil Company's failed attempt to gain a new trial on Duetsche Bank's Motion to Dismiss, Alvarez & Marsal, LLC, the company's restructuring advisor, presented the U.S. Bankruptcy Court for the Southern District of Texas with a preliminary assessment of Yukos' remaining value after the sale of Yuganskneftegas: Preliminary Category Assessment ------------------ ----------- Total Proved Oil & Gas Assets $8,100,000,000 Refining 1,000,000,000 Sibneft Shares 5,100,000,000 Other Assets 300,000,000 --------------- Total $14,500,000,000 Value at Risk (Based on Yuganskneftegas Sale at 55% Discount to Appraised Value $8,000,000,000 =============== The assessment is based on valuation information, reports and opinions prepared by others for the Debtor: 1. A summary of the 2004 appraisal prepared by K.O.M.I.T.- Invest, a Russian licensed appraisal firm; 2. Summary data from DeGolyer and MacNaughton's December 31, 2003 audit of Yukos' total proved reserves as referenced in the Debtor's Web site; 3. An October 27, 2004 valuation of Yuganskneftegas prepared by JPMorgan for Yukos' Board of Directors and Management; 4. An October 14, 2004, valuation of Yuganskneftegas prepared by Dresdner Kleinwort Wasserstein, which was submitted to the Russian Minister of Justice; and 5. Bear Stearns' November 18, 2004 Yukos Equity Research. Alvarez compared Yuganskneftegas' sale value to its appraised value using these factors: Reported Sale Price Dec. 19, 2004 $9,400,000,000 DKW Valuation Ave. -- Oct. 14, 2004 19,800,000,000 JPMorgan Valuation Ave. -- Oct. 27, 2004 22,000,000,000 Ave. of DKW and JPMorgan Valuations 20,900,000,000 Reported Sale Price less DKW & JPM Ave. (11,500,000,000) Sale Price Discount to Valuation Range -55% =============== The DeGolyer and MacNaughton audit of Yukos' December 31, 2003 total proved reserves on an SPE basis, reported approximately 16.7 billion BOE's (gas to oil conversion on a 6:1 basis) for all consolidated and affiliated entities. Approximately 11.6 BOE's attributable to Yuganskneftegas were eliminated in addition to 516 million BOE's of estimated 2004 production. No reserve revisions or additions were considered. Net total proved reserves attributable to Yukos after the sale of Yuganskneftegas approximates 4.6 billion BOE's. Based on transaction data for 2000 through 2004 presented in the JPMorgan Valuation, a total proved BOE transaction value range of $1.50 to $2.00 per BOE was indicated. The net total proved reserves remaining was then multiplied by the mid-point transaction value of $1.75 per BOE to indicate potential remaining reserve value. Alvarez informs the Court that the estimate excludes any consideration of the value of Probable and Possible reserves, which is significant and may be in excess of $2 billion. The KOMIT Valuation valued five of Yukos' refineries -- Angarsk, three Samara area refineries, and Achinsk -- with an aggregate value of about $1 billion. KOMIT did not value the Mazeiklu Nafta complex, the Angarsk polymers plant or gas and oil processing plants. Alvarez reports that Yukos currently owns 34.5% of Sibneft's 4.7 billion shares -- 1.62 billion shares. Based on a 30-day average stock price from January 20, 2005, through February 22, 2005, of $3.17 per share, Yukos' holdings in Sibneft approximate $5.1 billion in value. Other Yukos assets include railcars, product terminals, retail sites and interests in electric generating facilities. KOMIT valued only a small portion of these assets. The Debtor believes other assets approximate $300,000,000. Headquartered in Houston, Texas, Yukos Oil Company -- http://www.yukos.com/-- is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. (Yukos Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Alvarez & Marsal Welcomes Anthony Treccapelli And Mark Paling --------------------------------------------------------------- Alvarez & Marsal, a global professional services firm, announced that Anthony Treccapelli has joined the firm as a managing director and Mark Paling has joined as a director. Mr. Treccapelli, who heads the firm's Technology Solutions team, is based in New York. Mr. Paling is based in Dallas. With more than 20 years of experience in technology consulting, Mr. Treccapelli specializes in IT planning, architecture, business intelligence and data warehousing, infrastructure optimization and program management. He has spearheaded large-scale business transformations, systems integrations and custom application development projects and has been responsible for the planning, architecture, and deployment of mission-critical business systems in several industries. Prior to joining A&M, Mr. Treccapelli was a managing director at BearingPoint. Before that, he was in the business consulting practice at Andersen, where he co-led the firm's global Technology Integration practice. Mr. Treccapelli earned a bachelor's degree in accounting from Michigan State University and is a Certified Public Accountant. With over 19 years of IT experience, Mr. Paling has lead complex business transformation and technology integration programs, including a concentration of work in finance operations. His experience includes ERP planning and implementation, shared services implementation, business process outsourcing, credit and collections optimization, and leadership of technology delivery and support organizations. Mr. Paling previously served as a partner with Accenture in the Finance and Performance Management and Enterprise Business Solutions divisions. He earned a bachelor's degree in computer science from The University of Texas at Austin. Alvarez & Marsal's information technology specialists design and implement initiatives that are central to driving the performance of people, processes and technology. The firm's professionals focus on identifying opportunities that reduce cost while increasing the value of information technology to the business. This pragmatic alignment of business and technology helps management understand, plan and execute key IT initiatives to accelerate business results. About Alvarez & Marsal Alvarez & Marsal is a leading global professional services firm with expertise in guiding companies and public sector entities through complex financial, operational and organizational challenges. Employing a unique hands-on approach, the firm works closely with clients to improve performance, identify and resolve problems and unlock value for stakeholders. Founded in 1983, Alvarez & Marsal draws on a strong operational heritage in providing services including turnaround management consulting, crisis and interim management, performance improvement, creditor advisory, financial advisory, dispute analysis and forensics, tax advisory, real estate advisory and business consulting. A network of nearly 400 seasoned professionals in locations across the US, Europe, Asia and Latin America, enables the firm to deliver on its proven reputation for leadership, problem solving and value creation. For more information, visit: http://www.alvarezandmarsal.com. * Alvarez & Marsal Welcomes Charles Lowrey & James Chvtal --------------------------------------------------------- Alvarez & Marsal, a global professional services firm, announced that Charles Lowrey and James Chvatal have joined Alvarez & Marsal Business Consulting as managing director and director, respectively, in the firm's Houston office. With over 18 years of consulting experience, Mr. Lowrey specializes in shared services, finance and accounting improvement, merger integration and business intelligence. Prior to joining A&M, Mr. Lowrey was a managing director at BearingPoint in the Energy Industry Sector. Prior to BearingPoint, he was the partner responsible for finance and accounting consulting services for the Gulf Market at Arthur Andersen. A certified public accountant, Mr. Lowrey earned a Bachelor of Science degree in Economics and Computer Information Systems from Houston Baptist University. He also earned an MBA from the University of Houston. Mr. Chvatal provides overall facilitation and support for the people management and operating functions of Alvarez & Marsal Business Consulting including strategic planning and budgeting, financial management, business development, resource deployment and management, performance management and rewards, employee matters, recruiting, culture and retention, knowledge management, communications, change management and learning and professional growth. He has been involved in professional services operations for the last seven years with a variety of global professional services organizations following nearly a decade of professional client service in the Public Accounting arena. Mr. Chvatal is a certified public accountant and earned a BBA in accounting from Texas A&M University. Alvarez & Marsal Business Consulting, LLC, (A&M BC) works with corporate clients to deliver exceptional improvements in performance. A&M BC is composed of dedicated teams of senior consulting specialists with backgrounds in general management, strategy, functional skills, technology and business processes. Building on the heritage of A&M's turnaround and crisis management capability, A&M BC serves clients with strong competitive and financial positions and also works with the firm's restructuring professionals to assist underperforming companies. About Alvarez & Marsal Alvarez & Marsal is a leading global professional services firm with expertise in guiding companies and public sector entities through complex financial, operational and organizational challenges. Employing a unique hands-on approach, the firm works closely with clients to improve performance, identify and resolve problems and unlock value for stakeholders. Founded in 1983, Alvarez & Marsal draws on a strong operational heritage in providing services including turnaround management consulting, crisis and interim management, performance improvement, creditor advisory, financial advisory, dispute analysis and forensics, tax advisory, real estate advisory and business consulting. A network of nearly 400 seasoned professionals in locations across the US, Europe, Asia and Latin America, enables the firm to deliver on its proven reputation for leadership, problem solving and value creation. For more information, visit: http://www.alvarezandmarsal.com/ * BOND PRICING: For the week of February 28 - March 4, 2005 ----------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- ABC Rail Product 10.500% 12/31/04 0 Adelphia Comm. 3.250% 05/01/21 7 Adelphia Comm. 6.000% 02/15/06 8 Allegiance Tel. 11.750% 02/15/08 33 Allegiance Tel. 12.875% 05/15/08 31 Amer. Comm. LLC 12.000% 07/01/08 5 Amer. Color Graph. 10.000% 06/15/10 71 Amer. Restaurant 11.500% 11/01/06 61 Amer. Tissue Inc. 12.500% 07/15/06 62 American Airline 7.377% 05/23/19 71 American Airline 7.379% 05/23/16 63 American Airline 8.800% 09/16/15 75 American Airline 9.070% 03/11/16 72 American Airline 10.190% 05/26/16 73 American Airline 10.610% 03/04/11 67 AMR Corp. 4.250% 09/23/23 71 AMR Corp. 4.500% 02/15/24 66 AMR Corp. 9.000% 08/01/12 75 AMR Corp. 9.000% 09/15/16 75 AMR Corp. 9.800% 10/01/21 68 AMR Corp. 9.880% 06/15/20 65 AMR Corp. 10.000% 04/15/21 59 AMR Corp. 10.200% 03/15/20 65 AMR Corp. 10.290% 03/08/21 60 AMR Corp. 10.450% 11/15/11 66 AMR Corp. 10.550% 03/12/21 57 Apple South Inc. 9.750% 06/01/06 16 Applied Extrusion 10.750% 07/01/11 59 Armstrong World 6.350% 08/15/03 69 Armstrong World 6.500% 08/15/05 69 Armstrong World 7.450% 05/15/29 70 Armstrong World 9.000% 06/15/04 70 AT Home Corp. 0.525% 12/28/18 3 AT Home Corp. 4.750% 12/15/06 10 ATA Holdings 12.125% 06/15/10 42 ATA Holdings 13.000% 02/01/09 43 Atlantic Coast 6.000% 02/15/34 33 Avado Brands Inc. 11.750% 06/15/09 20 B&G Foods Holding 12.000% 10/30/16 8 Bank New England 8.750% 04/01/99 10 Bank New England 9.500% 02/15/96 10 Bethlehem Steel 10.375% 09/01/03 0 Big V Supermarkets 11.000% 02/15/04 1 Borden Chemical 9.500% 05/01/05 1 Budget Group Inc. 9.125% 04/01/06 1 Burlington Inds. 7.250% 08/01/27 7 Burlington Inds. 7.250% 09/15/05 7 Burlington Northern 3.200% 01/01/45 61 Calpine Corp. 7.750% 04/15/09 71 Calpine Corp. 7.875% 04/01/08 74 Calpine Corp. 8.500% 02/15/11 71 Calpine Corp. 8.625% 08/15/10 71 Cendant Corp. 4.890% 08/17/06 51 Chic East Ill. RR 5.000% 01/01/54 60 Color Tile Inc. 10.750% 12/15/01 0 Comcast Corp. 2.000% 10/15/29 44 Cone Mills Corp. 8.125% 03/15/05 12 Cray Research 6.125% 02/01/11 66 Delta Air Lines 2.875% 02/18/24 48 Delta Air Lines 7.711% 09/18/11 67 Delta Air Lines 7.779% 01/02/12 56 Delta Air Lines 7.900% 12/15/09 47 Delta Air Lines 8.000% 06/03/23 51 Delta Air Lines 8.300% 12/15/29 37 Delta Air Lines 8.540% 01/02/07 72 Delta Air Lines 9.000% 05/15/16 39 Delta Air Lines 9.200% 09/23/14 54 Delta Air Lines 9.250% 03/15/22 38 Delta Air Lines 9.375% 09/11/07 66 Delta Air Lines 9.750% 05/15/21 39 Delta Air Lines 10.000% 05/17/10 73 Delta Air Lines 10.000% 06/01/08 59 Delta Air Lines 10.000% 06/01/09 65 Delta Air Lines 10.000% 06/01/10 64 Delta Air Lines 10.000% 08/15/08 56 Delta Air Lines 10.060% 01/02/16 49 Delta Air Lines 10.125% 05/15/10 47 Delta Air Lines 10.375% 02/01/11 47 Delta Air Lines 10.375% 12/15/22 39 Delta Air Lines 10.430% 01/02/11 73 Delta Air Lines 10.500% 04/30/16 52 Delta Air Lines 10.790% 03/26/14 71 Delta Mills Inc. 9.625% 09/01/07 49 Diva Systems 12.625% 03/01/08 1 E&S Holdings 10.375% 10/01/06 51 Eagle Food Center 11.000% 04/15/05 3 Enron Corp. 6.400% 07/15/06 29 Enron Corp. 6.500% 08/01/02 30 Enron Corp. 6.625% 11/15/05 32 Enron Corp. 6.725% 11/17/08 33 Enron Corp. 6.750% 08/01/09 33 Enron Corp. 6.750% 09/01/04 34 Enron Corp. 6.750% 09/15/04 30 Enron Corp. 6.875% 10/15/07 33 Enron Corp. 6.950% 07/15/28 33 Enron Corp. 7.125% 05/15/07 32 Enron Corp. 7.325% 05/15/19 31 Enron Corp. 7.625% 09/10/04 31 Enron Corp. 7.875% 06/15/03 29 Enron Corp. 9.125% 04/01/03 30 Enron Corp. 9.875% 06/15/03 34 Falcon Products 11.375% 06/15/09 38 Federal-Mogul Co. 7.375% 01/15/06 32 Federal-Mogul Co. 7.500% 01/15/09 32 Federal-Mogul Co. 8.160% 03/06/03 29 Federal-Mogul Co. 8.370% 11/15/01 30 Federal-Mogul Co. 8.800% 04/15/07 32 Fibermark Inc. 10.750% 04/15/11 73 Finova Group 7.500% 11/15/09 45 Fleming Cos. Inc. 10.125% 04/01/08 31 Foamex L.P. 9.875% 06/15/07 70 Golden Books Pub. 10.750% 12/31/04 1 HNG Internorth. 9.625% 03/15/06 66 Imperial Credit 12.000% 06/30/05 0 Impsat Fiber 6.000% 03/15/11 69 Inland Fiber 9.625% 11/15/07 50 Intermet Corp. 9.750% 06/15/09 67 Intermune Inc. 0.250% 03/01/11 75 Iridium LLC/CAP 10.875% 07/15/05 18 Iridium LLC/CAP 11.250% 07/15/05 18 Iridium LLC/CAP 13.000% 07/15/05 18 Iridium LLC/CAP 14.000% 07/15/05 18 IT Group Inc. 11.250% 04/01/09 1 Kaiser Aluminum & Chem. 12.750% 02/01/03 17 Kmart Corp. 6.000% 01/01/08 15 Kmart Funding 9.440% 07/01/18 40 Lehman Bros. Holding 6.000% 05/25/05 68 Lehman Bros. Holding 7.500% 09/03/05 62 Level 3 Comm. Inc. 2.875% 07/15/10 55 Level 3 Comm. Inc. 6.000% 03/15/10 52 Level 3 Comm. Inc. 6.000% 09/15/09 53 Liberty Media 3.750% 02/15/30 67 Liberty Media 4.000% 11/15/29 71 LTV Corp. 8.200% 09/15/07 0 MacSaver Financial 7.400% 02/15/02 9 MacSaver Financial 7.600% 08/01/07 8 MacSaver Financial 7.875% 08/01/03 9 Metro Mortgage 9.000% 12/15/04 0 Mississippi Chem. 7.250% 11/15/17 73 Muzak LLC 9.875% 03/15/09 64 Nat'l Steel Corp. 8.375% 08/01/06 3 Nat'l Steel Corp. 9.875% 03/01/09 3 Northern Pacific Railway 3.000% 01/01/47 60 Northpoint Comm. 12.875% 02/15/10 1 Northwest Airlines 7.248% 01/02/12 73 Northwest Airlines 7.360% 02/01/20 66 Northwest Airlines 7.875% 03/15/08 70 Northwest Airlines 8.070% 01/02/15 65 Northwest Airlines 8.130% 02/01/14 68 Northwest Airlines 10.000% 02/01/09 72 Northwest Steel & Wir. 9.500% 06/15/01 0 Nutritional Src. 10.125% 08/01/09 72 Oakwood Homes 7.875% 03/01/04 41 Oakwood Homes 8.125% 03/01/09 25 Oglebay Norton 10.000% 02/01/09 75 O'Sullivan Ind. 13.375% 10/15/09 30 Owens Corning 7.000% 03/15/09 63 Owens Corning 7.500% 05/01/05 66 Owens Corning 7.500% 08/01/18 63 Owens Corning 7.700% 05/01/08 63 Owens Corning Fiber 8.875% 06/01/02 65 Pegasus Satellite 9.625% 10/15/05 55 Pegasus Satellite 9.750% 12/01/06 62 Pegasus Satellite 12.375% 08/01/06 58 Pegasus Satellite 12.500% 08/01/07 61 Pegasus Satellite 13.500% 03/01/07 1 Pen Holdings Inc. 9.875% 06/15/08 61 Penn Traffic Co. 11.000% 06/29/09 20 Penton Media Inc. 10.375% 06/15/11 74 Piedmont Aviat. 10.300% 03/28/06 7 Piedmont Aviat. 10.300% 03/28/12 0 Polaroid Corp. 6.750% 01/15/02 1 Polaroid Corp. 7.250% 01/15/07 1 Polaroid Corp. 11.500% 02/15/06 2 Primedex Health 11.500% 06/30/08 50 Primus Telecom 3.750% 09/15/10 58 Railworks Corp. 11.500% 04/15/09 1 Read-Rite Corp. 6.500% 09/01/04 55 Realco Inc. 9.500% 12/15/09 30 Reliance Group Holdings 9.000% 11/15/00 24 Reliance Group Holdings 9.750% 11/15/03 2 RDM Sports Group 8.000% 08/15/03 0 RJ Tower Corp. 12.000% 06/01/13 60 S3 Inc. 5.750% 10/01/03 0 Safety-Kleen Corp. 9.250% 05/15/09 0 Safety-Kleen Corp. 9.250% 06/01/08 0 Salton Inc. 12.250% 04/15/08 68 Silverleaf Res. 10.500% 04/01/08 0 Specialty Paperb. 9.375% 10/15/06 75 Syratech Corp. 11.000% 04/15/07 29 Teligent Inc. 11.500% 12/01/07 0 Tower Automotive 5.750% 05/15/24 18 Twin Labs Inc. 10.250% 05/15/06 16 United Air Lines 7.762% 10/01/05 3 United Air Lines 7.811% 10/01/09 29 United Air Lines 8.030% 07/01/11 12 United Air Lines 8.310% 06/17/09 47 United Air Lines 9.000% 12/15/03 9 United Air Lines 9.125% 01/15/12 9 United Air Lines 9.200% 03/22/08 45 United Air Lines 9.750% 08/15/21 38 United Air Lines 9.760% 05/13/06 48 United Air Lines 10.020% 03/22/14 45 United Air Lines 10.250% 01/15/07 1 United Air Lines 10.250% 07/15/21 8 United Air Lines 10.670% 05/01/04 8 Univ. Health Services 0.426% 06/23/20 59 United Homes Inc. 11.000% 03/15/05 0 US Air Inc. 7.500% 04/15/08 0 US Air Inc. 8.930% 04/15/08 0 US Air Inc. 10.250% 01/15/07 1 US Air Inc. 10.490% 06/27/05 3 US Air Inc. 10.900% 01/01/09 5 US Air Inc. 10.900% 01/01/10 5 US Airways Inc. 7.960% 01/20/18 48 Westpoint Stevens 7.875% 06/15/08 0 Winn-Dixie Store 8.875% 04/01/08 59 Winsloew Furniture 12.750% 08/15/07 20 World Access Inc. 13.250% 01/15/08 3 Zurich Reinsurance 7.125% 10/15/23 73 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo and Peter A. Chapman, Editors. Copyright 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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