/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050414.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, April 14, 2005, Vol. 9, No. 87 Headlines AIRTRAN AIRWAYS: Hosting Annual Shareholders Meeting on May 17 ADELPHIA COMMS: Cablevision Considers Increasing Bid ADELPHIA COMMS: Court OKs $8.8B Commitment & Fee Letter Amendments AMERICAN SOUTHWEST: Fitch Affirms B Rating on $2.7 Million Certs. AMERIGAS PARTNERS: Moody's Rates $400M Senior Unsec. Notes at B2 ARGUS CORP: Seeks to Sell 200,000 Hollinger Retractable Shares ASTORIA ENERGY: Refinancing Prompts S&P to Withdraw B+ Ratings BALLY TOTAL: Expects to Report Net Loss in 3rd Qtr. & FY 2004 BANC OF AMERICA: Fitch Puts Low-B Ratings on 14 Mortgage Certs. BILLING CONCEPTS: Moody's Junks New $45M Lien Term Loan Facility BOYDS COLLECTION: S&P Puts B- Corp. Rating on CreditWatch Negative BRILLIAN CORP: Deloitte Expresses Going Concern Doubt CATHOLIC CHURCH: Spokane Removes Actions to Washington Bankr. Ct. CHESAPEAKE ENERGY: Fitch Puts BB Rating on $600MM Note Offering COMMUNITY GENERAL: S&P Lifts Bond Rating to BB+ from BB CONTINENTAL AIRLINES: Debbie McCoy Retires From SVP Position CREDIT SUISSE: Fitch Downgrades Two Mortgage Certs. One Notch DMX MUSIC: Hires Robert L. Berger & Associates as Claims Agent DOCTORS HOSPITAL: Taps Porter & Hedges as Bankruptcy Counsel DOCTORS HOSPITAL: Look for Bankruptcy Schedules on May 31 EASYLINK SERVICES: Auditors Continue to Have Going Concern Doubt ENGINEERING DESIGN: Case Summary & 40 Largest Unsecured Creditors FORD CREDIT: S&P Puts BB Rating on $59.5 Million Class D Certs. GOODYEAR TIRE: Closes $3.65 Billion in New Credit Facilities GREYHOUND LINES: S&P Junks Corporate Credit Rating at CCC+ GRUPO IUSACELL: Receives Frequency Auction Results from COFETEL HAPPY KIDS: Gets Final OK for DIP Financing & Cash Collateral Use HAPPY KIDS: Wants Exclusive Filing Period Extended Until Aug. 31 HUFFY CORP: Hires Marcum & Kleigman as Auditors INSBANC INC.: Case Summary & 7 Largest Unsecured Creditors INTEGRATED HEALTH: Wants Removal Action Period Extended to June 6 ISLAND REFRIGERATION: Case Summary & 34 Largest Creditors JEAN COUTU: Earns $39.9 Million of Net Income in Third Quarter JP MORGAN: Fitch Raises Rating on $51.7MM Mortgage Certs. to BB+ JWJ NORTH: Case Summary & 15 Largest Unsecured Creditors KAISER ALUMINUM: Bear Stearns Supports Kaiser Liquidation Plans KAISER ALUMINUM: Plan Confirmation Hearing to Be Continued LIBERTY MEDIA: Begins Cash Tender Offer for $1B in Debt Securities MANDRA FORESTRY: S&P Puts B Rating on Proposed $235 Million Bonds MATRIX SERVICE: Obtains Another Waiver from Bank Lenders MIRANT CORP: Asks Court to Approve IRS & Southern Co. Agreement MIRANT CORP: CSFB & Citibank Says Disclosure Statement Inadequate MIRANT CORP: Taps Financial Balloting as Solicitation Agent MORGAN STANLEY: Fitch Rates $13.6 Mil. Mortgage Certificates at B NEXTWAVE TELECOM: Verizon Completes $3 Bil. PCS Spectrum Purchase NEXTWAVE TELECOM: Exits Chapter 11 Protection After Six Years NORCRAFT HOLDINGS: S&P Affirms B+ Corporate Credit Rating ORANGEBURG MEMORIAL: Lawyer Says Gravestones Ready for Pick-Up PEACE ARCH: Liquidity & Equity Woes Trigger Going Concern Doubt PEGASUS SATELLITE: Ted Lodge Resigns as President & Director PENN TRAFFIC: Exits Chapter 11 & Closes Two Exit Financings PERGOLA NEVADA: Case Summary & 5 Largest Unsecured Creditors PILLOWTEX CORP: Sells Tunica Property to Staple Cotton for $2.2MM PRIMEDIA INC: Calling Preferred Stock and Debt for Redemption PROSPECT MEDICAL: Earns $1.1 Million of Net Income in 1st Quarter QUALITY WOODWORK: Case Summary & 40 Largest Unsecured Creditors REAL ESTATE: Fitch Puts Low-B Ratings on Two Notes & Two Certs. RELIANCE GROUP: Court Okays James Goodman Employment Pact SEALY MATTRESS: S&P Puts B+ Rating on Amended $690M Sr. Sec. Loan SHELBY COUNTY: Default Cues S&P to Cut Rating on $18.8M Bonds to B SINO-FOREST: Will Operate Anhui Plantation with Mandra Resources SOLUTIA INC: Begins Design of New Saflex(R) PVB Plant in China SPIEGEL INC: Court Permits Committee to Hire Hannafan as Counsel TOM'S FOODS: Taps Corporate Revitalization as Reorg. Consultants TRINITY COUNTY: Fitch Cuts COPs Rating to BB from BBB ULTIMATE ELECTRONICS: Explores Possible Sale or Liquidation ULTIMATE ELECTRONICS: Gets Court Approval to Hire Skadden Arps UNISOURCE ENERGY: Moody's Puts Ba2 Rating on Planned $105M Loan WARREN RECYCLING: Case Summary & 20 Largest Unsecured Creditors WAVEFRONT ENERGY: Buying 90% Working Interest in Okla. Oil Field WESTPOINT STEVENS: Common Stock Symbol Changed to WSPQE WHITING PETROLEUM: S&P Puts B- Rating on $220 Mil. Sr. Sub. Notes ZIFF DAVIS: S&P Junks Proposed $205 Million Senior Secured Notes * CNQ Approves Union Securities Ltd. as a Dealer ********* AIRTRAN AIRWAYS: Hosting Annual Shareholders Meeting on May 17 -------------------------------------------------------------- AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), will host its annual shareholders meeting on May 17, 2005, at the JW Marriott - Orlando Grande Lakes in Orlando, Fla. Shareholders who owned AirTran Holdings stock as of March 31, 2005, are invited to attend the meeting, which will begin at 11:00 a.m. EDT. The annual report and proxy materials for the annual meeting are expected to be mailed to stockholders beginning on or about April 11, 2005. About the Company AirTran Airways -- http://www.airtran.com/-- one of America's largest low-fare airlines with 6,000 friendly, professional Crew Members, operates over 500 daily flights to more than 40 destinations. The airline's hub is at Hartsfield-Jackson Atlanta International Airport, where it is the second largest carrier. AirTran Airways recently added the fuel-efficient Boeing 737-700 aircraft to create America's youngest all-Boeing fleet. The airline is also the first carrier to install XM Satellite Radio on a commercial aircraft. * * * As reported in the Troubled Company Reporter on Jan. 20, 2005, Moody's Investors Service has placed the ratings of AirTran Airways, Inc.'s Enhanced Equipment Trust Certificates -- EETC -- under review for possible downgrade. The review was prompted by a combination of the diminishing value of the aircraft collateralizing the company's EETC's (B717 aircraft) and The Boeing Company's announcement that it has decided to conclude production of the B717 commercial aircraft in 2006. No other ratings assigned to AirTran or its debt are affected by this review. Moody's has been contemplating the secondary market values of the B717 aircraft for some time as the cessation of production of this particular airplane has been possible given the weak market acceptance of this aircraft type. The review will assess the potential for increased risk to EETC debt holders as a result of changes in the value of the aircraft collateral. It will include a consideration of current market values of the B717 aircraft, the impact of the cessation of production on those values currently as well as the impact on the absolute level and the potential for volatility of values going forward. The aircraft has been positively commented upon by many of its users, including AirTran. But, Moody's notes that worldwide there are only eight airlines operating approximately 150 B717 aircraft. Based upon the significance of any deterioration of collateral values, multiple downward notching of the ratings may be possible. Ratings affected by the review: -- Class A Certificates rated Baa2 -- Class B Certificates rated Ba1 -- Class C Certificates rated B2 ADELPHIA COMMS: Cablevision Considers Increasing Bid ---------------------------------------------------- This week, Cablevision Systems Corp. will decide whether it will increase its $16.5 billion bid for Adelphia Communications Corp., a person familiar with the matter told The Wall Street Journal. Cablevision "continues to conduct due diligence on [ACOM]," the Journal's source relates. As previously reported, the alliance of Time Warner Inc. and Comcast Corp. has reached a tentative deal with ACOM creditors to buy ACOM's assets for slightly more than $17.6 billion in cash and stock. The deal requires the approval of the ACOM Board of Directors, the Official Committee of Unsecured Creditors and the Bankruptcy Court. Cablevision could still outbid Time Warner and Comcast, Journal staff reporters Peter Grant and Dennis K. Berman wrote. 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. 86; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: Court OKs $8.8B Commitment & Fee Letter Amendments ------------------------------------------------------------------ At the request of Adelphia Communications Corporation and its debtor-affiliates, the U.S. Bankruptcy Court for the Southern District of New York approved the terms of the Commitment Letter Amendment and the Fee Letter Amendment including the payment of all accrued fees on and as of June 30, 2005. As reported in the Troubled Company Reporter on March 18, 2005, the Debtors inked the Commitment Letter Amendment and a Fee Letter Amendment with the Arranger Group: -- J.P. Morgan Securities, Inc.; -- Citigroup Global Markets, Inc.; -- Credit Suisse First Boston, acting through its Cayman Islands Branch; -- Deutsche Bank Securities, Inc.; and -- their lending affiliates. A full-text copy of the Commitment Letter Amendment is available for free at: http://www.sec.gov/Archives/edgar/data/796486/000104746905006178/a2153411zex-99_1.htm Pursuant to the Commitment Letter Amendment, the commitments will be extended until December 31, 2005, unless the Amended Plan is confirmed by that date, in which case the Debtors may request a deadline extension for up to 180 days as they work towards the goal of consummating the plan. The loan would only be used if the company isn't sold, Adelphia spokeswoman Erica Stull told Bloomberg News in an interview. The $8.8 billion exit financing "would be the largest of its kind approved in a bankruptcy case," Bloomberg notes. 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. 86; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERICAN SOUTHWEST: Fitch Affirms B Rating on $2.7 Million Certs. ----------------------------------------------------------------- Fitch Ratings affirms American Southwest Financial Securities Corp.'s commercial mortgage pass-through certificates, series 1993-2: -- Interest-only class S-1 'AAA'; -- $2.7 million class B-3 'B'. Classes A-1, S-2, A-2, B-1, and B-2 have paid in full. Fitch does not rate the $1.8 million class C certificates. The affirmations are the result of the transaction paydown and subsequent increase in credit enhancement offsetting the increased concentration and deterioration in performance of the remaining loans. As of the March 2005 distribution date, the pool has paid down 96.5% to $4.5 million from $128.7 million at issuance. The two remaining loans, Tucson Airport Center and Oakridge Center, are considered Fitch loans of concern and are secured by mixed use properties containing office and warehouse space located in Tucson, Arizona. Both properties have suffered a decline in net cash flow -- NCF -- as a result of declines in occupancy. As of the third quarter 2004, Tucson Airport Center (55%) was 60.6% occupied, with 24.4% of the net rentable area -- NRA -- leased on a month-to-month basis and the remaining 36.2% expiring in 2008. Oakridge Center (45%) was 46.8% occupied, with 43.5% of the NRA leased on a month-to-month basis and 2.7% of the NRA expiring in November 2005. The Fitch stressed debt service coverage ratios -- DSCRs -- for Tucson Airport Center and Oakridge Center using annualized third quarter 2004 data were 0.75 times and 1.27x, respectively. The DSCRs are calculated using servicer provided net operating income less reserves and capital expenditures divided by a Fitch stressed debt service. Both loans are out of their respective lockout periods and can now prepay without penalty. The loans mature in January 2009. AMERIGAS PARTNERS: Moody's Rates $400M Senior Unsec. Notes at B2 ---------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to AmeriGas Partners, L.P.'s proposed $400 million senior unsecured notes due 2015. Moody's also affirmed AmeriGas's Ba3 senior implied rating and the B2 ratings on its existing senior unsecured notes. The outlook remains stable. Proceeds from the notes offering will be used to fund the company's tender offer announced on April 4, 2005 to purchase all $388 million (principal amount) of its outstanding 8.875% senior notes due 2011 and to cover costs associated with the transactions. Benefits from this refinancing include lower interest expense going forward and a lengthening of the company's debt maturity profile. AmeriGas's senior implied rating continues to reflect: 1) its fully leveraged financial position and high distribution payout rate; 2) its leading position in propane retailing; 3) the seasonality and year-to-year fluctuations of propane volumes due to weather changes; and 4) potential for support from its parent, UGI Corp. (unrated), which has substantial cash resources. Moody's recognizes the favorable trends in AmeriGas's credit metrics over the last couple of years, including a reduction in Debt/EBITDA from 4.5x at the end of fiscal 2002 to 3.5x at the end of fiscal 2004 and an improvement in EBITDA/Interest from 2.4x to 3.1x over those same time periods. However, it appears that this momentum will stall somewhat in fiscal 2005 because of the warmer weather this winter. Moody's believes the rating adequately reflects such fluctuations. That being said, a positive outlook and/or potential upgrade to Ba2 (senior implied) would be considered if additional sustainable improvements are achieved such as maintaining Debt/EBITDA closer to 3.0x and EBITDA/Interest in the 3.5x range, even in periods of warmer weather. Such improvements are well within the range of possibilities if management executes its plans to continue to reduce total debt and leverage from current levels over the next couple of years. Consistent with the master limited partnership model, AmeriGas maintains a high distribution payout rate on its equity units. Distributable cash flow (as measured by EBITDA less interest expense and maintenance capex) has exceeded distributions over the last couple of years while its peers have struggled to do so. AmeriGas is expected to cover distributions in fiscal 2005 despite weather this winter that was warmer than normal. With a market share of about 9%, AmeriGas currently has a leading position in the highly fragmented retail propane marketing industry in the U.S. Its size provides opportunities for it to leverage economies of scale to control operating and supply costs. The wide geographic spread of its locations somewhat mitigates exposure to the weather and economic conditions of any one region. AmeriGas also benefits from non-seasonal business from national commercial and industrial customers as well as counter-seasonal business in its propane tank exchange business. Even so, AmeriGas's results do tend to fluctuate from year-to-year depending on the degree of cold weather during the winter months as most of its propane sales are for space heating. AmeriGas is strategically important to its parent, UGI Corp. Moody's notes that AmeriGas could potentially draw support from UGI, which has no debt outstanding and available cash balances currently in excess of $110 million. The ratings on AmeriGas's senior unsecured notes remains at two notches below its senior implied rating because of structural subordination. Moody's notes that AmeriGas has no operating assets of its own and relies solely on distributions from its wholly owned operating limited partnership to service its debt. The senior unsecured notes are not guaranteed by the OLP and the debt at the OLP, primarily first mortgage notes, is secured by substantially all of the OLP's assets. Moody's also notes that the extent of structural subordination has been slowly diminishing with OLP debt currently comprising approximately 45% of consolidated balance sheet debt vs. approximately 60% at the end of fiscal 2002. Management intends to further reduce OLP debt as a percentage of consolidated debt outstanding over the next couple of years and, to the extent this occurs, Moody's may revisit the notching issue. Headquartered in Valley Forge, Pennsylvania, AmeriGas Partners, L.P. is the largest retail propane marketer in the U.S. ARGUS CORP: Seeks to Sell 200,000 Hollinger Retractable Shares -------------------------------------------------------------- Argus Corporation Limited (TSX:AR.PR.A)(TSX:AR.PR.B)(TSX:AR.PR.D) applied to the Ontario Securities Commission for a variance of the Management and Insider Cease Trade Order issued with respect to Hollinger Inc. A MCTO has also been issued as against Argus and Hollinger International Inc. as well as Hollinger. The MCTO of each of those companies relate to their failure to prepare and file financial statements and related disclosure when due. The variance that Argus, together with its immediate subsidiaries, has requested be made to the Hollinger MCTO is to permit the sale by it of up to 200,000 of the 21,596,387 Retractable Common Shares of Hollinger that it indirectly holds through its subsidiaries. The Shares that Argus proposes to sell represent approximately 0.93 percent of its holding of Shares and 0.57 percent of the total number of outstanding Shares. In its Application, Argus advised the OSC that it is unable to declare and pay dividends that are scheduled to be paid on May 1, 2005, to the holders of its Class A and Class B Preference Shares and its ongoing operational expenses without the requested variance being granted. The anticipated total amount of the dividends that are due to be paid is $251,703. Argus has further advised the OSC that its viability as an operating company and as a going concern will be severely prejudiced should it not be given permission to sell up to 200,000 Shares as it has no other source of income or funds. It presently has $10,240 of cash with outstanding payables totaling $213,914. The Shares of Hollinger that Argus holds have a market value at the close of trading on April 12, 2005 on the Toronto Stock Exchange of C$6.07 per share or an aggregate of C$131,090,069. This amount is subject to a minority interest of The Ravelston Corporation Limited, future income taxes on unrealized net capital gains and other considerations including the Hollinger MCTO. The operating expenses of Argus have significantly increased over the past year. Amongst the increased expenses that Argus has been incurring, and will continue to incur, are related to legal proceedings and regulatory compliance. Argus is a defendant in two class action lawsuits commenced in Illinois and Saskatchewan. It is also a related party for purposes of the ongoing inspection of the related party transactions of Hollinger that is being conducted pursuant to an Order of the Ontario Superior Court of Justice. Argus is further incurring legal costs related to claims that are being made for coverage of certain of its defence costs pursuant to an Executive and Organization Liability Insurance Policy. In accordance with OSC guidelines, Argus publicly files bi-weekly Status Update Reports with respect to its material developments and those of Hollinger and International. Argus has been further providing financial statements prepared on a market valuation basis. These are being filed with its Status Update Reports as alternative financial information in order to keep the public informed of the financial activities of Argus despite its present inability to produce financial statements consolidated with those of Hollinger. On January 31, 2005, Ravelston, Argus' parent, loaned $251,703 to Argus on a non-interest-bearing basis in order to allow Argus to pay dividends on February 1, 2005 to its holders of Class A and Class B Preference Shares. Ravelston has now advised Argus that it will not advance additional funds to assist it to pay its May 1, 2005 dividends or operational expenses. Should the OSC agree to the variance of the Hollinger MCTO to permit Argus to sell up to 200,000 Shares, Argus, as the holder of approximately 61.8 per cent of the Shares of Hollinger, will further file a public notice that it intends to sell Shares from its control block position before any Shares may be sold. Argus will not be able to declare any dividends unless and until the requested variance is granted by the OSC, of which there can be no assurance, and arrangements are in place for the sale of Shares. There will then need to be seven clear trading days between any declaration of dividends and the record date for the payment of such dividends. There will additionally be certain administrative time required after any record date in order to permit the processing of any dividends that may be declared. Argus has accordingly advised that there can be no certainty that the dividends scheduled to be paid on May 1, 2005 can or will be declared and paid and, if declared, that they will be paid when scheduled. Should the requested variance be granted by the OSC, Argus intends, on the required distribution notice being provided and on arrangements being in place to sell the Shares it proposes to sell, to declare and pay the dividends that are presently scheduled to be paid on May 1, 2005. Argus further intends that a sufficient amount of the proceeds of the proposed sale of Shares will be allocated for payment of the dividends that are next scheduled to be paid to the holders of the Class A and Class B Preference Shares on August 1, 2005. About the Company Argus Corporation Limited is a holding company and its assets consist principally of an investment in the retractable common shares of Hollinger, Inc., a Canadian public company listed on the Toronto Stock Exchange, a receivable from The Ravelston Corporation Limited, the Company's parent company and cash. Argus owns or controls 61.8% of the Retractable Common Shares. These Common Shares are the only significant asset held by Argus. Hollinger in turn owns 66.8% of the voting shares and 17.4% of the equity of International. Hollinger and International have both also been subject to Management and Insider Cease Trade Orders for their failure to file financial statements and related reports when required. Those orders were issued on June 1, 2004. Based on the company's alternative financial reporting, as of September 30, 2004, Argus has a $44,034,263 stockholders' deficit compared to $6,522,159 of positive equity at Dec. 31, 2003. ASTORIA ENERGY: Refinancing Prompts S&P to Withdraw B+ Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services withdrew the 'B+' credit rating on Astoria Energy LLC's $500 million senior secured bank loan due 2012. The rating was withdrawn following the successful refinancing of the debt in the private market. BALLY TOTAL: Expects to Report Net Loss in 3rd Qtr. & FY 2004 ------------------------------------------------------------- Bally Total Fitness Holding Corporation (NYSE: BFT) reported selected operating data for the fourth quarter and year ended December 31, 2004, and for the two months ended February 28, 2005. Highlights: -- Achieved record gross committed membership fees of $1.2 billion in 2004, a 14% increase over the prior year. -- Gross committed membership fees increased 8% in the fourth quarter 2004 over the same period in the prior year. -- Same club gross committed membership fees grew 4% during the fourth quarter 2004 and 9% for the year ended December 31, 2004. -- Number of new joining members increased 20% in the fourth quarter 2004 over the prior year quarter and 22% for the full year. -- New joining members increased 10% through February 2005 versus prior year. -- Company expects to report net loss for the quarter and year ended December 31, 2004. "We are starting to see the benefit of our efforts over the past 12 months," said Paul Toback, Chairman and Chief Executive Officer of Bally Total Fitness. "We have put in place a number of initiatives to help drive membership, reduce costs and attract the best talent to return the business to financial health. Our operating metrics show that we are on the right track." "We have strengthened our finance team with three new appointments. Finance veteran Carl Landeck joined us as CFO, Katherine Abbott joined us from J.P. Morgan as Treasurer and David Reynolds joined us from Comdisco, Inc., as Controller. Each of these individuals brings substantial management and financial turnaround experience, building the leadership of our finance department and management team overall." Operational Overview In 2004, Bally made changes to its membership offerings that gave new members more options for joining Bally. In addition to month- to-month memberships, these include an add-on program for friends and family and a results guarantee. A next generation of customized memberships we call our build-your-own-membership plan is also currently being tested in several markets. In addition, Bally benefited from a more effective advertising and marketing program. As a result, membership sales trends continued to show improvement, with gross committed membership fees growing 8% during the fourth quarter of 2004 and 14% for the twelve months ended December 31, 2004 over the comparable prior year periods. New membership joins increased 20% during the fourth quarter of 2004 and 22% for the twelve months ended December 31, 2004 over the comparable prior year periods. Total members grew 1% to 3,992,000 at December 31, 2004 from 3,956,000 at December 31, 2003. The Company expects to report a net loss for the three and twelve months ended December 31, 2004. As of April 11, 2005, the Company had approximately $13.7 million of outstanding advances under the $100 million revolving credit portion of its $275 million credit facility, including $9.7 million in letters of credit. Lenders Waive Technical Defaults On April 5, 2005, the Company said it had secured an amendment and waiver to its existing credit agreement with its revolving credit and term lenders. The amendment provided the Company with additional covenant flexibility by exempting from the calculation of various financial covenants certain costs incurred by Bally in connection with the SEC and Department of Justice investigations and other matters. The amendment also waived certain technical defaults, which generally related to the timing of delivery of financial information and perfection of leasehold mortgages. About Bally Total Fitness Bally Total Fitness is the largest and only nationwide commercial operator of fitness centers, with approximately four million members and 440 facilities located in 29 states, Mexico, Canada, Korea, China and the Caribbean under the Bally Total Fitness(R), Crunch Fitness(SM), Gorilla Sports(SM), Pinnacle Fitness(R), Bally Sports Clubs(R) and Sports Clubs of Canada(R) brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness-conscious adult consumers. * * * As reported in the Troubled Company Reporter on Feb. 15, 2005, Standard & Poor's Rating Services lowered its ratings on Bally Total Fitness Holding Corporation, including lowering the corporate credit rating to 'CCC+' from 'B-'. At the same time, Standard & Poor's changed its outlook on the ratings to negative from developing. Total debt outstanding at Sept. 30, 2004, was $747.7 million. "The rating actions are based on the potential for further delays in the filing of financial statements and on related uncertainties, in light of Bally's Audit Committee's recent findings," said Standard & Poor's credit analyst Andy Liu. BANC OF AMERICA: Fitch Puts Low-B Ratings on 14 Mortgage Certs. --------------------------------------------------------------- Banc of America Commercial Mortgage Inc., series 2005-1 commercial mortgage pass-through certificates are rated by Fitch Ratings: -- $39,800,000 class A-1 'AAA'; -- $185,100,000 class A-2 'AAA'; -- $555,200,000 class A-3 'AAA'; -- $343,141,000 class A-4 'AAA'; -- $134,000,000 class A-SB 'AAA'; -- $381,247,000 class A-5 'AAA'; -- $219,184,000 class A-1A 'AAA'; -- $168,352,000 class A-J 'AAA'; -- $2,322,090,942 class XW* 'AAA'; -- $60,955,000 class B 'AA'; -- $20,318,000 class C 'AA-'; -- $43,539,000 class D 'A'; -- $20,319,000 class E 'A-'; -- $26,123,000 class F 'BBB+'; -- $20,318,000 class G 'BBB'; -- $34,832,000 class H 'BBB-'; -- $5,805,000 class J 'BB+'; -- $8,708,000 class K 'BB'; -- $8,708,000 class L 'BB-'; -- $2,902,000 class M 'B+'; -- $5,805,000 class N 'B'; -- $11,611,000 class O 'B-'; -- $26,123,942 class P 'NR'; -- $5,156,000 class FM-A** 'BBB+'; -- $2,555,216 class FM-B** 'BBB'; -- $9,070,957 class FM-C** 'BBB'; -- $23,217,827 class FM-D** 'BBB-'; -- $2,127,243 class SM-A** 'BB+'; -- $2,073,757 class SM-B** 'BB+'; -- $6,425,000 class SM-C** 'BB'; -- $2,565,043 class SM-D** 'BB-'; -- $2,023,957 class SM-E** 'BB-'; -- $4,859,000 class SM-F** 'B+'; -- $4,180,843 class SM-G** 'B'; -- $5,531,900 class SM-H** 'B-'; -- $6,763,257 class SM-J** 'NR'; -- $407,103 class LM** 'NR'. * Notional Amount and Interest Only ** Non-pooled classes Classes A-1, A-2, A-3, A-4, A-SB, A-5, A-1A, A-J, B, C, and D are offered publicly, while classes XW, E, F, G, H, J, K, L, M, N, O, P, FM-A, FM-B, FM-C, FM-D, SM-A, SM-B, SM-C, SM-D, SM-E, SM-F, SM- G, SM-H, SM-J, and LM are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are 135 fixed-rate loans having an aggregate principal balance of approximately $2,322,090,942, as of the cutoff date. For a detailed description of Fitch's rating analysis, please see the Report titled 'Banc of America Commercial Mortgage Inc., Series 2005-1' dated March 24, 2005, available on the Fitch Ratings Web site at http://www.fitchratings.com/ BILLING CONCEPTS: Moody's Junks New $45M Lien Term Loan Facility ---------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to the proposed $105 million first lien credit facility and a Caa1 rating to the proposed $45 million second lien term loan facility of Billing Concepts, Inc., a primary operating subsidiary of Billing Services Group, LLC, and its co-borrowers. Each of the co-borrowers is a wholly owned subsidiary of BCI Acquisition, LLC, a holding company with limited assets, which in turn is indirectly owned by the ultimate parent, Billing Services Group, LLC. The ratings reflect the significant business risks inherent in the company's operations as a provider of services to primarily second and third tier long distance companies including the weak financial condition of certain members of its customer base, potential pricing pressure and the trend of declining wireline volume. The ratings benefit from historically strong free cash flow generation, solid operating margins, a leading market position and good liquidity in the near term. However, Moody's believes that industry trends will lead to a gradual decline in profitability and cash flow generation over the intermediate term. Moody's assigned to Billing Concepts these first time ratings: * $105 million first lien credit facility due 2010 comprised of a $10 million revolving credit facility and $95 million term loan facility, rated B2 (at Billing Concepts and the co-borrowers); * $45 million second lien term loan facility due 2011, rated Caa1(at Billing Concepts and the co-borrowers); * Senior implied rating, rated B2; * Senior unsecured issuer rating (non-guaranteed exposure), rated Caa3; The ratings outlook is stable. The ratings are subject to the review of the final executed documents. Borrowings under the $95 million first lien term loan and $45 million second lien term loan are expected to be used to repay $66 million of senior secured and subordinated indebtedness, pay an approximately $70 million dividend to Billing Services Group, LLC (majority controlled by ABRY Partners) and related transaction expenses. The revolver is expected to be unused and fully available at closing. The assignment of the B2 senior implied rating and a stable ratings outlook reflects Moody's expectation that revenues, operating margins and cash flow from operations will gradually decline in the next few years. Although Moody's expects that new business generated by the company due to outsourcing and growth in billing for non-regulated services may offset declining wireline volume from its existing customer base in 2005, over the intermediate term revenue pressure from declining wireline volume should lead to declining profitability and free cash flows. The ratings reflect the substantial competition faced by the company's customer base from new technologies, product substitution and deregulation. Wireline volumes have been declining over the last few years and are expected to continue to decline as wireless, cable and internet telephony continue to penetrate US households. The company's revenues are principally derived from the provision of billing clearinghouse and information management services to direct dial long distance resellers and operator service providers. As a result, the company's revenues are dependent on wireline volumes. Moreover, certain of the company's customers are in weak financial condition and pricing pressure on the company's services may grow. The company estimates its customer base at about 400. The ratings benefit from: * the high barriers to entry for new market entrants; * strong levels of historical cash flow generation; and * solid operating margins. Barriers to entry include the company's entrenched relationships and integrated billing systems with over 1,800 local exchange carriers, contract exclusivity in a large portion of its customer contracts and high contract termination costs for its customers. The company's operating margin benefits from a lean cost structure and volume discounts from the LECs. The company believes it is a low cost provider and can attract telecom customers looking to cut costs and outsource non-core areas such as billing. The ratings outlook could be changed to positive if growth in revenues from new outsourced business and non-regulated services is greater than expected and Moody's believes that existing cash flow and profitability levels can be sustained. The ratings or outlook could be pressured if a decline in revenues from its wireline customers is sharper than expected and leads to a greater than expected decline in cash flow generation. The co-borrowers under the proposed first and second lien credit facilities are Billing Concepts (the primary operating subsidiary), Enhanced Services Billing, Inc., ACI Billing Services, Inc. and HBS Billing Services Company. The proposed $105 million first lien and $45 million second lien credit facilities are each guaranteed by BCI Acquisition and all domestic subsidiaries of the co-borrowers and are secured by first and second liens, respectively, on the assets of the co-borrowers and their operating subsidiaries, including 100% of the capital stock of the co-borrowers and their domestic subsidiaries. The first lien term loan is expected to amortize at a rate of 2.5% a quarter for the first 19 quarters after the closing with the balance payable at maturity. The second lien term loan is expected to amortize at a rate of .25% a quarter for the first 23 quarters after the closing with the balance payable at maturity. The credit facility is expected to have a cash flow sweep, initially set at 75%, with a step down if the company achieves specified declines in its leverage ratio. Financial covenants, not yet finalized at the time of Moody's review, are expected to include minimum interest coverage, maximum capital expenditures and maximum total leverage. The B2 rating assigned to the first lien facility, notched at the senior implied level, reflects the preponderance of first lien debt in the company's capital structure. The Caa1 rating assigned to the second lien facility recognizes the effective subordination of second lien debt holders to a substantial level of first security debt and substantially lower expected recovery prospects in the event of default. The company's pro forma combined revenues have increased from $132 million in 2001 to about $144 million in 2003. However revenues declined from $144 million in 2003 to $141 million in 2004 primarily due to a decrease in wireline billing records processed by the company. This decrease was partially offset by increased billing for non-regulated telecommunications-related services through local telephone companies. Pro forma debt to EBITDA for the year ended December 31, 2004 was 4.6 times. Moody's expects free cash flow to total debt in 2005 to be in the 8%-12% range. Billing Services Group, LLC, through its four indirect wholly- owned operating subsidiaries, is the largest LEC billing and settlement clearinghouse in the United States. The company maintains contractual billing arrangements with local telephone companies that provide access lines to, and collect for services from, end users of telecommunication services. The company processes telephone call records and other transactions and collects the related end-user charges from these local telephone companies on behalf of its customers. The company estimates that it has about a 90% market share of the third party LEC billing market. Headquartered in Glenview, Illinois, the company had revenues of about $141 million in the year ended December 31, 2004. BOYDS COLLECTION: S&P Puts B- Corp. Rating on CreditWatch Negative ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on The Boyds Collection Ltd., including the 'B-' corporate credit rating, on CreditWatch with negative implications. Gettysburg, Pennsylvania- based Boyds Collection, a distributor and retailer of collectible gifts, had total debt outstanding of $75 million as of Dec. 31, 2004. "The CreditWatch placement is based on Standard & Poor's concerns regarding Boyds' increasing dependence on its retail stores, especially in light of continued deterioration in its core wholesale gift business," said Standard & Poor's credit analyst Hal F. Diamond. The company incurred a $2.4 million EBITDA loss in the fourth quarter of 2004 after showing a positive $800,000 the prior year, reflecting an 8% decline in the wholesale business and the disruptive restructuring of the sales force. Performance of Boyds' recently opened second store in Pigeon Forge, Tenn., now has become more important because of the 11% decline in 2004 sales of its initial store in Gettysburg, Pennsylvania Boyds' retail business is seasonal, with the majority of its sales generated during the summer vacation months, in the second and third quarters. Standard & Poor's will review the company's business strategies and liquidity position, as well as its operating outlook, in order to resolve the CreditWatch listing. BRILLIAN CORP: Deloitte Expresses Going Concern Doubt ----------------------------------------------------- Brillian Corp.'s (Nasdaq: BRLC) independent auditors, Deloitte & Touche LLP, expressed substantial doubt about the Company's ability to continue as a going concern due to the Company's recurring losses from operations and its net cash used in operating activities. The going concern opinion is included in the Company's Form 10-K for the fiscal year ended 2004 filed with the Securities and Exchange Commission. "We are continuing to take the appropriate steps to address our current financial situation and we believe we will be successful," said Wayne Pratt, Brillian's vice president and chief financial officer. About Brillian Corp. Brillian Corp. -- http://www.brilliancorp.com/-- designs and develops rear-projection HDTVs targeted at high-end video/audio OEMs, high-end video/audio retailers, ProAV/CEDIA distributors, and their base of dealers and custom installers looking for breakthrough performance and image quality. The company is the first and only provider of Gen II LCoS(TM) technology used in these products. In addition to its high-definition televisions, Brillian also offers a broad line of LCoS(TM) microdisplay products and subsystems that OEMs integrate into proprietary HDTV products, multimedia projectors, and near-to-eye products such as monocular and binocular headsets. Brillian's LCoS(TM) microdisplay technologies address the market demand for a high-performance display solution with high image fidelity, high-resolution scalability, and high contrast ratios. CATHOLIC CHURCH: Spokane Removes Actions to Washington Bankr. Ct. ----------------------------------------------------------------- On January 5, 2005, the Diocese of Spokane removed all pending litigation in which it was a party, from state court to the United States Bankruptcy Court for the Eastern District of Washington. Now pending before the Bankruptcy Court are: -- an adversary proceeding filed by creditor Michael Shea on December 22, 2004, seeking a declaratory judgment that parishes, schools, and other property are part of the Diocese's estate; -- 19 adversary proceedings regarding alleged sexual abuse by priests or other employees of the Diocese; -- a declaratory judgment action initiated by various insurers; -- a negligence action involving a playground accident that occurred at St. Patrick's School; and -- an adversary proceeding filed by the Committee of Tort Litigants seeking a declaratory judgment that the property of the parishes and schools located within the Spokane Diocese, and the property of certain other separately incorporated entities are property of the Diocese's estate. Pending Cases Title ------------- ----- 04-00291-PCW Shea v. Catholic Bishop of Spokane 05-80004-PCW DOE et al. v. Catholic Bishop of Spokane 05-80005-PCW DOE v. Catholic Bishop of Spokane 05-80006-PCW Corrigan et al. v. Catholic Bishop of Spokane 05-80007-PCW SB et al. v. Catholic Bishop of Spokane 05-80008-PCW Ross v. Catholic Bishop of Spokane 05-80009-PCW Maguire v. Catholic Bishop of Spokane 05-80010-PCW Shea v. Catholic Bishop of Spokane 05-80011-PCW RF et al. v. Catholic Bishop of Spokane 05-80012-PCW Newbury et al. v. Catholic Bishop of Spokane 05-80013-PCW WM et al. v. Catholic Bishop of Spokane 05-80014-PCW T.C. et al. v. Catholic Bishop of Spokane 05-80015-PCW J.D. v. Catholic Bishop of Spokane 05-80016-PCW Corrigan v. Catholic Bishop of Spokane 05-80017-PCW D.C. v. Catholic Bishop of Spokane 05-80018-PCW DOE v. Catholic Bishop of Spokane 05-80019-PCW Doe v. Catholic Bishop of Spokane 05-80020-PCW DOE v. Catholic Bishop of Spokane 05-80021-PCW JN v. Catholic Bishop of Spokane 05-80022-PCW LK v. Catholic Bishop of Spokane 05-80023-PCW Green et al. v. Catholic Bishop of Spokane 05-80024-PCW Pacific Insurance Company et al. v. Catholic Bishop of Spokane 05-80038-PCW Committee of Tort Litigants v. Catholic Diocese of Spokane 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 Diocese 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. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) CHESAPEAKE ENERGY: Fitch Puts BB Rating on $600MM Note Offering --------------------------------------------------------------- Fitch Ratings has assigned a 'BB' rating to Chesapeake Energy's proposed $600 million senior unsecured note offering and a 'B+' rating to the proposed $400 million convertible preferred stock issuance. Additionally, Fitch has affirmed the ratings of Chesapeake's senior secured revolving credit facility and hedge facility at 'BBB-'. The Rating Outlook is Stable. Chesapeake announced it expects to issue $600 million of senior unsecured notes and $400 million of convertible preferred stock with proceeds used to acquire $686 million of properties, reduce credit facility debt by $293 million and for miscellaneous fees and expenses. Chesapeake announced it had entered into four independent agreements with private sellers of oil and gas assets for an aggregate of $686.4 million in cash. Management estimates that the total proved reserves associated with these acquisitions is approximately 289 billion cubic feet equivalent -- bcfe, which implies a valuation of $2.38 per proved thousand cubic feet equivalent -- mcfe. Similar to recent Chesapeake acquisitions , these reserves are located outside of the Mid-Continent region and have a large proved undeveloped component (64%). The assets being acquired are located in South Texas, the Texas Gulf Coast, East Texas and the Permian Basin. While Fitch does have concerns regarding the high multiple paid for the proved reserves and the low amount of proved developed producing reserves acquired, the transactions will do little to change the overall risk profile of Chesapeake. The ratings are supported by the size and quality of Chesapeake's reserves, the company's strong operations and its conservative funding strategy employed to finance the growth in recent years. Pro forma for the previously mentioned transactions, Chesapeake will have 5.4 trillion cubic feet equivalent -- tcfe -- of proved reserves with a reserve life exceeding 12 years. Approximately 63% of its reserves are proved developed producing -- PDP -- and about 74% of its reserves are externally prepared by a third party. Approximately 65% of its reserves are in the very familiar Mid-Continent region, 14% in the Barnett Shale, 11% in the Permian Basin and 10% in the Gulf Coast. Total debt after completion of the proposed debt offering will be about $3.7 billion, providing debt of approximately $0.68 per mcfe and debt of $1.08 per PDP mcfe, relatively high compared to its peers. Equally important as the risk profile of Chesapeake's reserves is how it has funded its aggressive growth strategy. More than half of Chesapeake's reserve growth in the past three years has come through acquisitions. Notably, it has funded these acquisitions in a relatively balanced manner through internally generated cash flow as well as equity and debt issuances. Chesapeake has raised about $1.7 billion of equity (common and preferred) while issuing $1.7 billion of debt in the last three years. Chesapeake's reserve replacement success, credit profile and dividend payments were also considered in the rating. Chesapeake's reserve replacement over the last three years was more than 400% and its organic replacement during the same period exceeded 200%, demonstrating the company's ability to grow through the drill-bit. While the latest acquisitions are higher than Chesapeake's three year average finding, development and acquisition costs of $1.66 per mcfe, the low lifting costs associated with those properties partially offset Fitch's concern. Chesapeake's latest 12 months adjusted interest coverage exceeded 7.0 times and adjusted debt-to-EBITDA was under 2.0x. In a lower price environment ($4.50 per mcf natural gas and $27 per barrel oil), Fitch estimates that Chesapeake could generate adjusted interest coverage greater than 4.0x and adjusted debt-to-EBITDA of less than 3.5x. The Stable Rating Outlook is based on several factors including a continued conservative funding strategy for future acquisitions, a relatively unchanged risk profile with regards to its reserves and stable lifting and finding costs. Positive rating actions are limited by the company's relatively high debt to reserve ratios and its increasingly high percentage of PUD's. COMMUNITY GENERAL: S&P Lifts Bond Rating to BB+ from BB ------------------------------------------------------- Standard & Poor's Ratings Services raised its rating to 'BB+' from 'BB' on the series 1993B bonds issued by Onondaga County Industrial Development Agency, New York for Community General Hospital (CGH) of Greater Syracuse and the series 1993A bonds issued by CGH. The outlook is stable. The higher rating reflects: (1) two years of improved liquidity, with 72 days' cash on hand for fiscal 2004; (2) a three-year trend of improved operating results, with an operating income of $261,000 for fiscal 2004; (3) continued increases in CGH's overall case mix index; and (4) reductions in its overall average length of stay. The rating remains non-investment grade, however, due to a combination of concerns, including persistent decreases in utilization and the hospital's need for significant capital spending in the near future. In 2004, CGH sold an affiliated durable medical equipment business and the proceeds are currently listed as Community General Foundation's assets. CGH anticipates that about $1 million of those funds will be allocated to the hospital in fiscal 2005. CGH intends to fund a portion of its 2005 capital spending ($4.9 million) through a fixed-rate debt issuance provided by the state issuing authority. If this financing is included, pro forma debt to capital is elevated to 57%. CGH's average age of plant is high at 14.4 years, which creates a credit concern, given the hospital's need for significant capital spending in the near future. CGH is projecting that fiscal 2005's operating performance will be in line with that of 2004. CGH intends to fund its pension plan at the required level of about $2.3 million in fiscal 2005, with possibly an additional payment later in the year. In anticipation of this additional funding, CGH sets aside funds on a weekly basis and they are available on an as-needed basis. "The outlook is stable due to CGH's ability to sustain its profitability and increase its cash reserves in 2003 and 2004, and Standard & Poor's expects that 2005's results will be comparable," said Standard & Poor's credit analyst Jennifer Soule. To achieve a higher rating, the hospital will need to more dramatically improve its operating performance, increase utilization volumes, and continue to build on its existing cash reserves. This may be a challenge because of the hospital's continued need to increase its capital spending. CGH currently maintains a 14% market share in the competitive Syracuse, New York marketplace. It has $15 million in total bonds outstanding and is not currently party to any swap agreements. CONTINENTAL AIRLINES: Debbie McCoy Retires From SVP Position ------------------------------------------------------------ Debbie McCoy, Continental Airlines' (NYSE: CAL) senior vice president-flight operations, informed the company of her intent to retire, following a 26-year career. Ms. McCoy started her Continental career as a pilot and is captain qualified on the DC9, MD80, A300, DC10, B757 and B767. Ms. McCoy later held positions of increasing responsibility including check airman, FAA designated examiner, fleet manager, director of flight standards and training, senior director of operational performance, and vice president of flight training and inflight. In her current role, Ms. McCoy is responsible for pilots, flight attendants, worldwide safety and regulatory compliance, food services and Chelsea Catering, crewmember standards and training, crew resources and System Operations Coordination Center, overseeing more than 16,000 employees and 1,200 daily worldwide flights. "Debbie has been instrumental in helping Continental achieve operational excellence at a level that has really redefined the meaning of a consistent and reliable product for major network airlines," said Chairman and CEO Larry Kellner. "Debbie has established a great team that will guide us for years to come. Along with the rest of the leadership, we thank her for her many years and contributions." Ms. McCoy is the first and only woman to head a major commercial airline pilot group. She has been a role model in the industry and within the company and has played a large role in promoting diversity at Continental, supporting the Women in Aviation Conference and the Organization of Black Airline Pilots. Recently, under Ms. McCoy's leadership, Continental became the only airline to win the Flight Safety Foundation's Richard Teller Crane Founder's Award for flight safety. Ms. McCoy's position will not be filled and her team will report to Mark Moran, executive vice president operations. Continental Airlines -- http://continental.com/-- is the world's sixth-largest airline, serving 128 domestic and 111 international destinations -- more than any other airline in the world -- and serving nearly 200 additional points via codeshare partner airlines. With 42,000 mainline employees, the airline has hubs serving New York, Houston, Cleveland and Guam, and carries approximately 51 million passengers per year. FORTUNE ranks Continental one of the 100 Best Companies to Work For in America, an honor it has earned for six consecutive years. FORTUNE also ranks Continental as the top airline in its Most Admired Global Companies in 2004. * * * Continental Airlines reported a $363 million loss for 2004. In a recorded message on Feb. 11, 2005, Larry Kellner, Continental's Chairman and Chief Executive Officer, told employees that losses in January 2005 continued and are running more than $1.5 million per day. Continental expects to incur a significant loss in 2005. The carrier's balance sheet dated Sept. 30, 2004, shows $10.8 billion in assets and $685 million in shareholder equity. As reported in the Troubled Company Reporter on Feb. 28, 2005, Standard & Poor's Ratings Services placed its single-B ratings on Continental Airlines Inc. equipment trust certificates and enhanced equipment trust certificates on CreditWatch with negative implications. S&P's 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. CREDIT SUISSE: Fitch Downgrades Two Mortgage Certs. One Notch ------------------------------------------------------------- Fitch Ratings downgrades Credit Suisse First Boston Mortgage Securities Corp.'s commercial mortgage pass-through certificates, series 1999-C1: -- $11.7 million class J to 'B+' from 'BB-'; -- $11.7 million class K to 'B-' from 'B' and removed from Rating Watch Negative. In addition, Fitch affirms these classes: -- $79.4 million class A-1 'AAA'; -- $660.5 million class A-2 'AAA'; -- Interest-only class A-X 'AAA'; -- $52.6 million class B 'AA'; -- $58.5 million class C 'A'; -- $14.7 million class D 'A-'; -- $40.9 million class E 'BBB'; -- $20.5 million class F 'BBB-'; -- $32.2 million class G 'BB+'; -- $23.4 million class H 'BB'. The $2 million class N certificates remain at 'C'. Fitch does not rate the $15.8 million class L, the $9.3 million class M, or class O, which has been reduced to zero due to realized losses. The downgrades reflect the expected losses on the specially serviced loans. As of the March 2005 distribution date, the pool has paid down 11.7% to $1.03 billion from $1.17 billion at issuance. Six assets (6.4%) are currently in special servicing: * three real estate owned properties (6%); * one loan that is 90+ days delinquent (0.1%); * one loan that is 30 days delinquent (0.1%); and * one loan that is current (0.2%). The largest REO property (3.1%) is an office located in Canton, Massachusetts. The property is being marketed for sale and current offers, as well as the October 2004 appraisal, indicate sizable losses are likely. The second largest REO property (2.4%) is an offsite airport parking facility located in Edmundson, Missouri. The property is expected to be sold as part of a portfolio, with the allocation toward this property expected to result in losses. Losses are also expected on the third largest REO property (0.4%); however, no losses are expected on the remaining three specially serviced loans (0.4%) at this time. The Binnings Building loan, which was specially serviced and represented 0.6% of the pool, paid off in full in March 2005. Yield maintenance, default interest, and late charges, however, were waived as a condition of the payoff. In addition to the specially serviced loans mentioned above, 33 loans (24.3%) are considered Fitch loans of concern due to decreases in DSCR and occupancy or other performance issues. These loans' higher likelihood of default was incorporated into Fitch's analysis. The largest of these loans is the Tallahassee Mall loan (4.4%), secured by a mall in Tallahassee, Florida, which has seen a drop in net cash flow since issuance due to an increase in operating expenses. DMX MUSIC: Hires Robert L. Berger & Associates as Claims Agent -------------------------------------------------------------- DMX Music, Inc., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the District of Delaware to employ Robert L. Berger & Associates, LLC, as their claims, noticing and balloting agent. The Debtors estimate they have over one thousand potential creditors and they believe that Berger & Associates will be able to help them effectively and efficiently serve notices to these creditors. As claims, noticing and balloting agent, Berger & Associates will: a. maintain the list of the Debtors' creditors; b. be responsible for the mailing of the notice(s) of the commencement and deadline to file Proofs of Claim to all creditors of the Debtors; c. serve as the Court's agent for the receipt and docketing of all proofs of claim filed against the Debtors; d. provide the Debtors with consulting and computer software services and support for the effective organization, management and control of creditors' claims against the Debtors; and e. provide other administrative services that may be requested by the Debtors. The papers filed with the Bankruptcy Court do not indicate how much Berger & Associates will be paid for their work. 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. DOCTORS HOSPITAL: Taps Porter & Hedges as Bankruptcy Counsel ----------------------------------------------------------------- Doctors Hospital 1997 LP, dba Doctors Hospital Parkway-Tidwell, asks the U.S. Bankruptcy Court for the Southern District of Texas for permission to employ Porter & Hedges, L.L.P., as its general bankruptcy counsel. Porter & Hedges is expected to: a) provide legal advice with respect to the Debtor's rights and duties as a debtor-in-possession in the continued operation and management of its business operations; b) assist, advise and represent the Debtor in analyzing its capital structure, the extent and validity of liens, cash collateral stipulations and contested matters; c) assist, advise and represent the Debtor in postpetition financing transactions, in the formulation of a disclosure statement and plan of reorganization and in obtaining confirmation and consummation of that plan; d) assist, advise and represent the Debtor in any manner relevant to preserving and protecting the Debtor's estate, and in investigating and prosecuting preferences, fraudulent transfers and other actions arising under the Debtor's bankruptcy avoiding powers; d) prepare on behalf of the Debtor all necessary applications, motions, answers, orders, reports, and other legal papers, and appear in Court to protect Debtor's interests; e) assist, advise and represent the Debtor in administrative matters, in any litigation matters, and in general corporate matters; and f) perform all other legal services for the Debtor which may be necessary and proper in its bankruptcy proceedings; James M. Vaughn, Esq., a Member of Porter & Hedges, is the lead attorney for the Debtor. Mr. Vaughn discloses that the Firm received a $118,139 retainer. Mr. Vaughn reports Porter & Hedges' professionals bill: Designation Hourly Rate ----------- ----------- Partners $295 - $650 Counsel $240 - $400 Associates/Staff Attorneys $190 - $350 Paralegals/Law Clerks $125 - $175 Porter & Hedges assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Houston, Texas, Doctors Hospital 1997 LP, dba Doctors Hospital Parkway-Tidwell, operates a 101-bed hospital located in Tidwell, Houston, and a 152-bed hospital located in West Parker Road, Houston. The Company filed for chapter 11 protection on April 6, 2005 (Bankr. S.D. Tex. Case No. 05-35291). When the Debtor filed for protection from its creditors, it listed total assets of $41,643.252 and total debts of $66,306.939. DOCTORS HOSPITAL: Look for Bankruptcy Schedules on May 31 --------------------------------------------------------- Doctors Hospital 1997 LP asks the U.S. Bankruptcy Court for the Southern District of Texas for more time to file its Schedules of Assets and Liabilities, Statements of Financial Affairs, and List of Executory Contracts and Unexpired Leases. The Debtor wants until May 31, 2005, to file those documents. The Debtor gives the Court three reasons in support of its request: a) the substantial size, scope and complexity of the Debtor's chapter 11 case and the volume of material that must be compiled and reviewed by its limited staff to complete and prepare the Schedules and Statements; b) since the start of its bankruptcy proceedings, the Debtor's accounting and financial staff have been faced with the demands of negotiating post-petition credit facilities with GE HFS Holdings, Inc., and managing limited accounts receivable and available cash under its pre-petition revolving credit facility with GE HFS; and c) the Debtor's staff had too many pressing demands facing it, including continuing the operations of the Tidwell and Parker hospital facilities and maintaining a minimal level of supplies for those two hospitals. The Court will convene a hearing at 3:30 p.m., on April 20, 2005, to consider the merits of the Debtor's request. Headquartered in Houston, Texas, Doctors Hospital 1997 LP, dba Doctors Hospital Parkway-Tidwell, operates a 101-bed hospital located in Tidwell, Houston, and a 152-bed hospital located in West Parker Road, Houston. The Company filed for chapter 11 protection on April 6, 2005 (Bankr. S.D. Tex. Case No. 05-35291). James M. Vaughn, Esq., at Porter & Hedges, L.L.P., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $41,643.252 and total debts of $66,306.939. EASYLINK SERVICES: Auditors Continue to Have Going Concern Doubt ---------------------------------------------------------------- EasyLink Services Corporation (NASDAQ: EASY) filed its annual report on Form 10-K for the year ended Dec. 31, 2004, with the Securities and Exchange Commission this week. On April 1, 2005, the Company had announced that it had filed a Form 12b-25 indicating that it would complete its Form 10-K filing within 15 days. The Company's 2004 financial results contained in the annual report are the same as those previously announced. Thomas Murawski, President and Chief Executive Officer of EasyLink said: "2004 was another milestone year for EasyLink as we achieved our first full year of profitable operations and we obtained a new $15 million financing from Wells Fargo to refinance all our previous debt and to provide capital for the company's growth." Going Concern Doubt Notwithstanding the significant improvements in EasyLink's financial condition and results of operations over the past three years, the Company has again received a going concern qualification from its auditors stating that EasyLink has a working capital deficiency and an accumulated deficit that raises substantial doubt about the Company's ability to continue as a going concern. The Company also received a going concern qualification from its auditors for each of the years ended December 31, 2000, 2001, 2002 and 2003. About the Company EasyLink Services Corporation (NASDAQ: EASY) -- http://www.EasyLink.com/-- headquartered in Piscataway, New Jersey, is a leading global provider of services that power the exchange of information between enterprises, their trading communities, and their customers. EasyLink's global network handles over 1 million transactions every business day on behalf of over 60 of the Fortune 100 and 20,000 other companies worldwide. EasyLink facilitates transactions that are integral to the movement of money, materials, products, and people in the global economy, such as insurance claims, trade and travel confirmations, purchase orders, invoices, shipping notices and funds transfers, among many others. EasyLink helps companies become more competitive by providing the most secure, efficient, reliable, and flexible means of conducting business electronically. ENGINEERING DESIGN: Case Summary & 40 Largest Unsecured Creditors ----------------------------------------------------------------- Lead Debtor: Engineering Design Group, Inc. c/o Grisanti, Galef & Goldress, Inc. 333 Sandy Springs Circle, Suite 106 Atlanta, Georgia 30328 Bankruptcy Case No.: 05-66857 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Sterling-EDG, Inc. 05-66855 Chapter 11 Petition Date: April 12, 2005 Court: Northern District of Georgia (Atlanta) Judge: Mary Grace Diehl Debtor's Counsel: Karen Fagin White, Esq. Cohen Pollock Merlin Axelrod & Small Suite 1600, 3350 Riverwood Parkway Atlanta, Georgia 30339-6401 Tel: (770) 858-1288 Estimated Assets Estimated Debts ---------------- --------------- Engineering Design $500,000 to $1 Million to Group, Inc $1 Million $10 Million Sterling-EDG, Inc. Less than $50,000 $1 Million to $10 Million A. Engineering Design Group, Inc.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Chatham Investment Value of security: $3,600,000 Fund, LLC $700,000 c/o Michael Haber, Esq. 1230 Peachtree St, Suite 3100 Atlanta, GA 30309 HSI Electric $374,125 2234 Hoonee Place Honolulu, HI 96819 ABB Automation $154,770 501 Merritt 7 Norwalk, CT 06851 Chapman & Intrieri $60,881 Spence Law Firm $30,805 Avis Rent-a-Car $28,962 CGLIC � Phoenix EASC $26,268 WorldCom (now MCI) $19,850 WorldCom (now MCI) $12,411 Automotive Rentals,Inc. $11,633 Oklahoma Natural Gas Company $3,251 Armstrong Relocation $2,993 Vickers Concrete Sawing, Inc. $1,870 Valor Telecom $1,870 Wyandotte NetTel $1,395 Purchase Power $1,350 Ferguson Enterprises $1,126 CT Corporation $980 Phil Porter $795 Starband Communications $699 B. Sterling-EDG, Inc.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Chatham Investment Value of security: $3,600,000 Fund, LLC $700,000 c/o Michael Haber, Esq. 1230 Peachtree St, Suite 3100 Trammell Crow Company $61,968 2001 Ross Avenue Suite 3400 Dallas, TX 75201 DLA Piper Rudnick Gray $58,821 Cary US 203 North La Salle Street, Suite 1900 Chicago, IL 606011293 Randy M Etheridge $15,736 Gambrell & Stolz $8,408 King & Spalding LLP $6,766 Porter & Hedges, LLP $5,751 Therrell Murphy, Jr. $3,158 Neopost USA $789 CT Corporation $694 Imperial Coffee Service $451 UCAC, Inc. $425 Ikon Office Solutions $170 Benner Business Forms $146 Culligan of Tulsa $107 Uptime Comm. Consultants $80 Avis RentaCar $72 Prodata Computer $62 American Electric Power $55 AZ Rubber Stamps $54 FORD CREDIT: S&P Puts BB Rating on $59.5 Million Class D Certs. --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Ford Credit Auto Owner Trust 2005-B's $3.035 billion asset-backed notes and certificates series 2005-B. The preliminary ratings are based on information as of April 12, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: (1) credit support, including subordination of: * 7.0% for class A, * 4.0% for class B, and * 2.0% for class C; and (2) a nonamortizing, fully funded reserve account equal to 0.50% of the initial gross principal balance. The payment structure also features a turbo mechanism through which excess spread, after covering losses and building up the reserve fund to its required level, will be used to pay the securities until the requisite overcollateralization is reached. Further, because interest rates have increased since Ford Motor Credit Co.'s prior securitizations, the discount rate applied to the subvened loans was increased to 8.75% from 8.00% to prevent a decline in excess spread, thus allowing hard credit enhancement to remain unchanged. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Ford Credit Auto Owner Trust 2005-B Class Rating Amount ----- ------ ------ A-1 A-1+ $486,000,000 A-2 AAA $990,000,000 A-3 AAA $881,000,000 A-4 AAA $470,165,000 B A $89,279,000 C BBB $59,519,000 D BB $59,519,000 GOODYEAR TIRE: Closes $3.65 Billion in New Credit Facilities ------------------------------------------------------------ The Goodyear Tire & Rubber Company (NYSE: GT) closed $3.65 billion in new credit facilities, including: -- A $1.5 billion asset-based revolving credit facility due in 2010, with an interest rate of 1.75 percent over LIBOR, which can increase to between 2 percent and 2.25 percent over LIBOR if available undrawn amounts are below $400 million; -- A $1.2 billion second-lien term loan due in 2010, with an interest rate of 2.75 percent over LIBOR; -- A $300 million third-lien secured term loan facility due in 2011, with an interest rate of 3.5 percent over LIBOR; and -- The euro equivalents of an approximately $650 million credit facility for the company's Goodyear Dunlop Tires Europe affiliate consisting of a $450 million revolving credit facility due in 2010, with an interest rate of 2.75 percent over LIBOR, and a $200 million term loan due in 2010, with an interest rate of 2.375 percent over LIBOR. The new credit facilities replace: -- A $1.3 billion asset-based credit facility, due in 2006, with an interest rate of 4 percent over LIBOR; -- A $650 million asset-based term loan, due in 2006, with an interest rate of 4.5 percent over LIBOR; -- A $680 million deposit funded credit facility, due in 2007, with an interest rate of 4.5 percent over LIBOR; and -- $650 million in credit facilities for Goodyear Dunlop Tires Europe, due April 30, 2005, with an interest rate of 4 percent over LIBOR. "Extending our debt maturities is a key component of the company's capital structure improvement plan," said Richard J. Kramer, executive vice president and chief financial officer. "This refinancing addresses the majority of our maturities through 2009 and provides cost-effective financing." Restatement of Financial Statements On November 5, 2004, the Company said it would file an amended 2003 Form 10-K to include summarized financial information related to certain investments in affiliates. The Company also announced a restatement of its previously reported financial statements to reflect adjustments that reduced net income through all periods up to and including the year ended December 31, 2003, by $7.6 million. The restatement also includes an adjustment to correct a misclassification of approximately $360 million of deferred income tax assets and liabilities in its consolidated balance sheet at December 31, 2003. This adjustment had no effect on net income. These adjustments were identified prior to the filing of, and included in, its Form 10-Q for the quarter ending September 30, 2004, and are included in the Company's 2004 Form 10-K. The Company said it intends to file an amended Form 10-K for the year ended December 31, 2003, as expeditiously as possible. Subsequent to the filing of the Form 10-Q for the quarter ended September 30, 2004, on November 9, 2004, the Company identified additional adjustments that resulted in the further restatement of prior-period financial statements. These additional adjustments reduced net income for all periods up to and including the year ended December 31, 2003, by $17.7 million and have been reflected in the Company's 2004 Form 10-K. Certain 2004 and 2003 quarterly financial information has also been restated in the Company's Form 10-K to reflect adjustments to its previously reported financial information included in its Form 10-Q filings for the quarters ended March 31, 2004, June 30, 2004, and September 30, 2004. These adjustments included a benefit of $3.0 million to 2004 year-to-date net income included in the Form 10-Q for the quarter ended September 30, 2004. An additional benefit of $2.5 million to 2004 year-to-date net income was identified subsequent to the filing of the third quarter Form 10-Q and is included in the Company's 2004 Form 10-K. The Company said it intends to file amended Form 10-Qs for these quarterly periods of 2004 as expeditiously as possible. About the Company The Goodyear Tire & Rubber Company (NYSE: GT) is the world's largest tire company. Headquartered in Akron, the company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries. It has marketing operations in almost every country around the world. Goodyear employs more than 80,000 people worldwide. * * * As reported in the Troubled Company Reporter on March 24, 2005, Moody's Investors Service assigned a rating of B3 to a new $300 million junior lien term loan of Goodyear Tire & Rubber Company. The new six-year loan will be pari passu with junior lien notes issued under a March 2004 indenture for a 144A placement of $650 million and takes the total amount of junior lien obligations to approximately $950 million, all of which will mature in March 2011. In a March 7, 2005 rating action, Moody's affirmed the ratings of Goodyear (senior implied at B1, first lien at B1, second lien at B2 and senior unsecured at B3) and maintained a negative outlook. The negative outlook reflected uncertainties and prospective delays associated with the company's need to restate previous financial statements, an examination by its auditors of internal control matters, and a lingering SEC investigation. Moody's acknowledges that the company has completed its filings with the SEC, including an audited financial statement for the year ending December 31, 2004 and earlier restatements. The auditor's opinion and management's assessment cite certain internal control matters. The rating agency will be reviewing these issues in greater detail in the near future, whereupon the outlook will be revisited. GREYHOUND LINES: S&P Junks Corporate Credit Rating at CCC+ ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Greyhound Lines Inc., including the 'CCC+' corporate credit rating. At the same time, the outlook is revised to positive from developing. "The outlook change reflects Greyhound's successful resolution of the default judgment pending against it and the potential for a higher rating if the company's restructuring actions are successful in improving operating performance and credit protection measures," said Standard & Poor's credit analyst Lisa Jenkins. Ratings are currently constrained by competitive market conditions and the company's high debt leverage. Greyhound is owned by Laidlaw International Inc. (BB/Watch Pos/--). Laidlaw does not guarantee Greyhound's debt and its financial support of Greyhound is currently limited to just $15 million. Greyhound, the nation's largest intercity bus company, provides service to more than 2,200 destinations, with a fleet of approximately 2,700 buses. It faces intense competition from airlines offering low fares, automobile travel and, in certain markets, trains and lower-cost regional bus lines. Management acknowledges the need to improve the financial performance of the company and has undertaken a number of initiatives to achieve better results. The company has increased its focus on yields and reduced passenger miles in long-haul markets. In July 2004, management announced a long-range strategy to improve operating performance. The first phase, which began in August 2004, involved the establishment of a smaller, simpler network of routes in the northwestern region of the U.S. Full implementation of the strategy across the U.S. network is expected by the summer of 2006. The important Northeast region will be the last region addressed. When the program is completed, Greyhound expects to achieve a 15%-20% increase in revenue per mile, with a 15%-20% decline in revenue and a 25%-35% decline in bus miles. These restructuring efforts should lead to higher margins and a better return on assets. However, the magnitude of the improvement may be constrained by continuing challenging industry conditions, continuing high fuel prices, and capital requirements. Greyhound has curtailed its spending on buses in recent years in response to profit pressures and restructuring activities that have reduced the requirement for investment in buses. However, the company will eventually have to replace its aging fleet. The average age of Greyhound's fleet, excluding about 150 buses deemed to be excess capacity, was 7.7 years at year-end 2004. Although operating performance has improved somewhat over the past year, the financial profile remains weak. Debt to EBITDA at year- end 2004 was close to 5x. While this is better than the almost 6x level recorded at yearend 2003, it is still aggressive, especially given the capital-intensive and competitive nature of the business. Restructuring actions, yield-improvement strategies, and cost cutting efforts should lead to improved operating performance over time, which could prompt an upgrade of the ratings. However, if competitive pressures, increased capital spending requirements, or an inability to offset higher fuel prices results in a reversal of the improvement trend, the outlook is likely to be revised to stable or negative, depending upon the degree of financial pressure. GRUPO IUSACELL: Receives Frequency Auction Results from COFETEL --------------------------------------------------------------- Grupo Iusacell, S.A. de C.V., (BMV: CEL, NYSE: CEL) received from the Mexican Federal Telecommunications Commission -- COFETEL -- the results of the auction of several frequency bands of the radioelectric spectrum for the furnishing of fixed and mobile wireless service. Grupo Iusacell, through its subsidiary Iusacell PCS de Mexico, was allocated 10 MHZ in the PCS regions 2, 3, 5, 6, 7, 8 and 9. By obtaining these frequencies, Iusacell becomes a company with national coverage, which is the objective Iusacell has been pursuing for some time, and has secured sufficient spectrum to be able to offer more and better services to its customers in the future. About the Company Grupo Iusacell, S.A. de C.V. (Iusacell, NYSE and BMV: CEL) is a wireless cellular and PCS service provider in Mexico encompassing a total of approximately 92 million POPs, representing approximately 90% of the country's total population. Independent of the negotiations towards the restructuring of its debt, Iusacell reinforces its commitment with customers, employees and suppliers and guarantees the highest quality standards in its daily operations offering more and better voice communication and data services through state-of-the-art technology, such as its new 3G network, throughout all of the regions in which it operates. At Dec. 31, 2004, Grupo Iusacell's balance sheet showed a Ps$1,079,166 stockholders' deficit, compared to a Ps$903,927 of positive equity at Dec. 31, 2003. * * * As reported in the Troubled Company Reporter Latin America on March 9, 2005, Fitch Ratings has withdrawn the 'D' foreign and local currency debt ratings for holding Company Grupo Iusacell, S.A. de C.V. and operating Company Grupo Iusacell Celular, S.A. de C.V. (collectively referred to as Iusacell) consistent with Fitch's policies. Fitch also withdraws its 'D' ratings on $500 million in outstanding securities, including $350 million senior notes due 2006 and $150 million senior notes due 2004. The 'D' ratings for these defaulted notes reflect the payment default that took place during 2003 and suggest potential recovery levels for bondholders of less than 50% of principal. Iusacell is a wireless operator in Mexico with 1.46 million subscribers at Dec. 31, 2004. HAPPY KIDS: Gets Final OK for DIP Financing & Cash Collateral Use ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York granted Happy Kids Inc. and its debtor-affiliates final approval: a) to obtain post-petition financing and factoring and grant security interests and superpriority administrative expense status pursuant to pursuant to 11 U.S.C. Sections 105 and 364(c); b) to enter into agreements with the CIT Group/Commercial Services, Inc., in its capacity as Agent and Pre-Petition Collateral Agent for itself and the other Post-Petition Revolving Loan Lenders, and in its capacity as Factor; c) to provide adequate protection to Deutsche Bank Trust Company Americas in its capacity as Agent for the Post- Petition Term Loan Lenders; and d) to use Cash Collateral securing repayment of pre-petition obligations to the Pre-Petition Revolving Loan Lenders and Term Loan Lenders. Pre-Petition Debt Under various loan agreements, the Debtors owe: Pre-Petition Lender Amount Owed ------------------- ----------- Revolving Loan Agent $34,456,000 and Revolving Loan Lenders Term Loan Lenders $21,000,000 ----------- $65,456,000 Use of DIP Loans and Cash Collateral The Debtors will use CIT Group's DIP Loans and the Pre-Petition Revolving Loan Lenders and Term Loan Lenders' Cash Collateral to finance the continued operation of their businesses, to minimize the disruption of their business operations, and to manage and preserve the assets of the estates in order to maximize the recovery for their creditors. Post-Petition Financing & Adequate Protection The Bankruptcy Court authorizes the Debtors to obtain Post- Petition financing from CIT Group for up to $53 million under a DIP Facility. To secure the repayment of any and all Post-Petition Obligations, the Post-Petition Revolving Loan Lenders and Term Loan Lenders are granted valid and perfected first priority security interests and liens, superior to all other liens, claims and security interests on all of the Debtors' Pre-Petition and Post-Petition Collateral. Modification of the Automatic Stay The Court has modified the automatic stay provisions of Section 362 of the Bankruptcy Code. The Court authorizes CIT Group, Deutsche Bank, and the Post-Petition Revolving Loan Lenders and Term Loan Lenders to proceed against the Debtors' Collateral and any other assets and properties to obtain the full repayment of all Post-Petition Obligations upon the occurrence or continuation of an Event of Default. Headquartered in New York, New York, Happy Kids Inc. and its affiliates are leading designers and marketers of licensed, branded and private label garments in the children's apparel industry. The Debtors' current portfolio of licenses includes Izod (TM), Calvin Klein (TM) and And1 (TM). The Company and its debtor-affiliates filed for chapter 11 protection on Jan. 3, 2005 (Bankr. S.D.N.Y. Case No. 05-10016). Sheldon I. Hirshon, Esq., at Proskauer Rose LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $54,719,000 and total debts of $82,108,000. HAPPY KIDS: Wants Exclusive Filing Period Extended Until Aug. 31 ---------------------------------------------------------------- Happy Kids Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York for an extension, through and including August 31, 2005, of the time within which they alone can file a chapter 11 plan. The Debtors also ask the Court for more time to solicit acceptances of that plan from their creditors, through Oct. 31, 2005. The Debtors give the Court four reasons why their exclusive periods should be extended: a) the Debtors' chapter 11 cases are huge and complex, with tens of millions of dollars of pre-petition credit facilities, hundreds of creditors and other parties-in- interest, numerous leases and executory contracts, numerous bank accounts, and substantial business relations with parties throughout the U.S. and abroad; b) the Debtors have made substantial progress in resolving the myriad issues facing their estates, including efforts to ensure the success and vitality of their businesses while under chapter 11 protection; c) the requested extension will not harm the Debtors' creditors because CIT Group, the Debtors' post-petition lender, and the Creditors Committee have continued to be involved in all aspects of the Debtors' reorganization process; and d) the Debtors are paying all their ongoing expenses as they become due. The Court will convene a hearing at 10:00 a.m., on April 21, 2005, to consider the merits of the Debtors' request. Headquartered in New York, New York, Happy Kids Inc. and its affiliates are leading designers and marketers of licensed, branded and private label garments in the children's apparel industry. The Debtors' current portfolio of licenses includes Izod (TM), Calvin Klein (TM) and And1 (TM). The Company and its debtor-affiliates filed for chapter 11 protection on Jan. 3, 2005 (Bankr. S.D.N.Y. Case No. 05-10016). Sheldon I. Hirshon, Esq., at Proskauer Rose LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $54,719,000 and total debts of $82,108,000. HUFFY CORP: Hires Marcum & Kleigman as Auditors ----------------------------------------------- Huffy Corporation and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division, to employ Marcum & Kleigman LLP as their accountants and independent auditors. As previously reported, Huffy withdrew its application to hire KMPG LLP as auditors after the U.S. Trustee and the Official Committee of Unsecured Creditors objected to the firm's retention. Marcum & Kleigman is expected to: a) audit the Debtors' consolidated financial statements for 2003, 2004 and 2005; b) research and advise the Debtors on special bankruptcy issues and accounting issues; c) review tax returns; d) conduct ERISA plan audits; and e) do other related services as may be required by the Debtors. The Debtors will pay Marcum & Kleigman professionals based on their current hourly rates: Designation Rate ----------- ---- Partners & Principals $325 - $435 Managers $200 - $325 Senior Accountants $150 - $200 Assistant Staff $100 - $175 Administrative $75 - $100 David Craig Bukzin, at Marcum & Kleigman, assures the Court that the firm is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. INSBANC INC.: Case Summary & 7 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Insbanc, Inc. 1925 Frederica Street Owensboro, Kentucky 42301 Bankruptcy Case No.: 05-32482 Type of Business: The Debtor is an insurance company. Chapter 11 Petition Date: April 13, 2005 Court: Western District of Kentucky (Louisville) Debtor's Counsel: Peter B. Lewis, Esq. 121 West 2nd Street Owensboro, Kentucky 42303 Tel: (270) 688-0074 Total Assets: $218,678 Total Debts: $3,016,636 Debtor's 7 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ National City Operating capital $850,000 3030 E. 4th Street Owensboro, KY 42301 ING Reliastar Compensation $800,000 20 Washington Avenue S. advance repayment Minneapolis, MN 554011900 arrangement Life Event Advantage Compensation $500,000 One National Life Drive advance repayment Montpelier, VT 05604 arrangement Eric Anderson Loan to company $406,950 1925 Frederica Street for operating Owensboro, KY 42301 capital Hartford Life & Annuity Compensation $209,686 200 Hopmeadow Street advance repayment Simsbury, CT 06089 arrangement Fidelity & Guaranty Life Compensation $200,000 Insurance Co advance repayment 1001 Fleet Street arrangement Baltimore, MD 21202 National City Operating capital $50,000 100 W Third Street Owensboro, KY 42303 INTEGRATED HEALTH: Wants Removal Action Period Extended to June 6 ----------------------------------------------------------------- IHS Liquidating, LLC, the successor-in-interest to Integrated Health Services, Inc., and its debtor-affiliates, asks the U.S. Bankruptcy Court for the District of Delaware to extend the period within which it can file notices of removal with respect to pending prepetition civil actions, through and including June 6, 2005. IHS Liquidating is responsible for, inter alia, litigating, settling or otherwise resolving disputed claims against the Debtors, some of which are the subject of actions currently pending in the courts of various states and federal districts. According to Alfred Villoch, III, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, IHS Liquidating is in the process of investigating the Prepetition Actions to determine which, if any, will be litigated, and if so, whether they should be removed pursuant to Rule 9027(a) of the Federal Rules of Bankruptcy Procedure. A further extension, Mr. Villoch explains, will give IHS Liquidating more time to make more fully informed decisions concerning the removal of each Prepetition Action and will assure that IHS Liquidating does not forfeit the valuable rights afforded to it under Section 1452 of the Judiciary Code. In addition, the rights of IHS Liquidating's adversaries will not be prejudiced by an extension, as any party to a Prepetition Action that is removed may seek to have it remanded to the state court. The Court will convene a hearing on May 24, 2005, to consider IHS Liquidating's request. IHS Liquidating's Removal Period is automatically extended through the conclusion of that hearing by application of Del.Bankr.LR 9006-2. Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- operated local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company and its 437 debtor-affiliates filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical Corporation and its direct and indirect debtor-subsidiaries broke away from IHS and emerged under their own plan of reorganization on March 26, 2002. Abe Briarwood Corp. bought substantially all of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan on May 12, 2003, and that plan took effect September 9, 2003. Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the IHS Debtors. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 90; Bankruptcy Creditors' Service, Inc., 215/945-7000) ISLAND REFRIGERATION: Case Summary & 34 Largest Creditors --------------------------------------------------------- Debtor: Island Refrigeration, Ltd. 1811 Newbridge Road North Bellmore, New York 11710 Bankruptcy Case No.: 05-82440 Type of Business: The Debtor sells restaurant equipment & supplies. See http://www.bbbnewyork.org/businessreports/?id=30962 Chapter 11 Petition Date: April 13, 2005 Court: Eastern District of New York (Central Islip) Debtor's Counsel: Michael J. Macco, Esq. Macco & Stern, LLP 135 Pinelawn Road, Suite 120 South Melville, New York 11747 Tel: (631) 549-7900 Fax: (631) 549-7845 Total Assets: $226,300 Total Debts: $1,031,808 Debtor's 34 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ National Refrigeration $60,297 P.O. Box 82-0107 Philadelphia, PA 19182 Hussmann $44,738 140 East State Street Gloversville, NY 12078 Wayne Puleo $42,951 240 Normandy Road N.Massapequa, NY 11758 Storch $42,179 1435 Watson Avenue Bronx, NY 10472 United $28,423 11402 Roosevelt Boulevard Philadelphia, PA 19154 Blue Air $25,920 15001 South Broadway Gardenia, CA 90248 Abco $22,836 49-70 31st Street Long Island City, NY 1110 Amerikooler $18,648 Navistar $18,434 Saxony $18,222 Navistar $17,745 Lindox $17,394 S&V $16,215 Xerox $14,170 Sure Kol Refrigeration $14,000 Greenfield $13,347 Hoshizaki $13,023 Balter $12,500 Triton $11,753 Blue Flame $11,551 Advantage Air $10,981 Comstock Castle $8,704 Serafino Steven Desimone $5,523 Serafino Steven Desimone $4,925 Wayne Puleo $4,925 Roe Iadevaia $2,219 Sebastian Puleo $1,456 Sebastian Puleo $1,455 Marion Puleo $1,102 Nicole Puleo $1,033 Roe Iadevaia $953 Denise Desimone $772 Bart Gaczol $608 Denise Desimone $606 JEAN COUTU: Earns $39.9 Million of Net Income in Third Quarter -------------------------------------------------------------- For the third quarter ended February 26, 2005, Jean Coutu Group's net earnings were $39.9 million compared with $36.0 million for the third quarter of the previous fiscal year and a net loss of $4.0 million in the second quarter of the current year. There was an unrealized foreign exchange gain on monetary items of $11.9 million recorded during the current quarter. The Company has reviewed these arrangements and their documentation in order to ensure that all significant monetary items are properly hedged against future foreign exchange risk. Earnings before unrealized gains on financing activities were $27.4 million in the third quarter compared with $14.8 million in the second quarter. The acquired Eckerd drugstores contributed to the substantial increases in revenues, cost of goods sold and operating expenses year over year. Year-to-date earnings before unrealized losses on financing activities were $66.4 million compared to $100.1 million for the corresponding period last year. The unrealized foreign exchange loss on monetary items for the first three quarters of fiscal 2005 was $8.2 million, reflecting the loss until the arrangements and documentation became effective. "The Jean Coutu Group made considerable progress this quarter. We are pleased with our performance while we complete the integration of Eckerd and Brooks drugstores," said Fran�ois J. Coutu, President and Chief Executive Officer. "The American network contributed to revenue growth during the quarter while we continued the focused execution of our plan. This quarter's operating results were negatively affected by the costs of running several head office infrastructures. We have made substantial progress at Eckerd and Brooks and are on track to begin to capture the integration cost savings while we continue to improve our US drugstore network performance. At the same time we will continue to build on the strong base of our Canadian network." Revenues The revenues of the Company's Canadian operations for the third quarter reached $359.4 million compared with $317.9 million for the third quarter of the 2003-2004 fiscal year, an increase of $41.5 million or 13.0%. The third quarter revenues decreased slightly from the second quarter revenues of $365.7 million. Third quarter Canadian revenues increased by 6.0% year-over-year excluding the impact of currency exchange rate fluctuations. The Company's American operations generated revenues of $2.456 billion, an increase of $1.988 billion or 424.3% over the third quarter of the previous fiscal year. Third quarter revenues increased $125 million or 5.4% over the second quarter 2005 revenues of $2.331 billion. The acquired Eckerd drugstores contributed to the substantial increase in year-over-year revenues. Year-to-date revenues increased by $4.587 billion or 202.8% to $6.849 billion from $2.262 billion a year ago. Highlights: -- Gross margins improved to 23.1% during the third quarter ended February 26, 2005 from 22.6% in the second quarter. -- General and operating expenses stood at 19.9% of revenue in the third quarter compared with 19.5% in the second quarter, reflecting the cost of running several head office infrastructures for most of the latest quarter. The Eckerd integration is on schedule with key milestones completed during the quarter. -- Third quarter earnings before unrealized losses (gains) on financing activities were $27.4 million ($0.10 per share) compared with $14.8 million ($0.06 per share) in the second quarter. During the current quarter, there was a $11.9 million ($0.05 per share) unrealized foreign exchange gain on monetary items related to the Eckerd acquisition. The Company has reviewed these arrangements and their documentation in order to ensure that all significant monetary items are properly hedged against future foreign exchange risk. Retail Sales Retail sales figures are denominated in local currency in order to exclude the impact of currency rate fluctuations. In the third quarter, the Company's Canadian franchise network showed a 5.7% increase in sales compared with the same period last year. Third quarter network sales increased by 5.3% compared with the second quarter. The American corporate pharmacy network posted a 424.8% increase in sales when compared with the same quarter of the 2003- 2004 fiscal year and a 5.4% increase compared with the second quarter. In terms of comparable stores, the Canadian network's retail sales were up 5.5% and in the United States, retail sales rose by 3.4% compared with the same quarter last year. This measure does not include same-store sales for the acquired Eckerd drugstores, which will be included in same-store sales in August 2005, the Company says. The Jean Coutu Group's Canadian franchise network recorded a 6.4% increase in year-to-date sales. The American corporate pharmacy network posted a 331.4% increase in retail sales when compared with the year-to-date figures of the 2003-2004 fiscal year. OIBA In the third quarter, Operating income before amortization amounted to $125.4 million against $66.7 million for the corresponding quarter last year. Third quarter OIBA increased by $8.3 million or 7.1% over the second quarter figure of $117.1 million. OIBA for the 39-weeks ended February 26, 2005, improved to $304.4 million against $187.4 million for the corresponding period last year. Store Network Development During the third quarter, 28 drugstores were opened, of which 15 were relocations. Also, 7 drugstores were closed. At quarter-end, there were 2,231 stores in the system, comprised of 321 Canadian PJC stores, and 1,910 Eckerd and Brooks drugstores in the United States. Lease Accounting Like several retail companies, the company have begun the review of its methods of amortization of leasehold improvements and related lease incentives following the views expressed by the Office of the Chief Accountant of the Securities and Exchange Commission on certain operating lease matters. Even though the company expects that this review will not have a significant impact on its results or shareholders' equity, there is a possibility that it will result in adjustments to its financial statements for the current and prior years. The company expects to complete this review by the end of the 2005 fiscal year. This review will not have an effect on the Company's cash flows, Mr. Coutu says. Outlook The Company operates its Canadian and US networks with a focus on sales growth, network renovation, relocation and expansion projects and operating efficiency. The Company has completed many aspects of the Eckerd integration, which was focused on three principal areas: -- Reduction of support functions and other initiatives Head and field office head count reductions are substantially complete, with net reductions of approximately 1,130 positions. As a result, accountability and productivity has been enhanced with the streamlining of operations. The Company will continue to move toward the right sized support structure as it reduces dual infrastructures. To date, key financial systems have been converted and integrated, with operating and other systems to come. At the same time, efforts are being made to optimize logistics and supply chain efficiency. The Company closed a distribution warehouse and renewed an expanded pharmaceutical supply agreement with McKesson Corporation. -- Operational improvements The Company continues to implement plans, processes and deploy people to reduce inventory shrink and reallocate store labor hours to better serve customer needs. -- Growth initiatives Customer focused initiatives have been taken and will continue to be implemented to enhance merchandising mix, simplify advertising and initiate new marketing programs, extend store hours, improve pharmacy service, expand the sales of health & beauty categories and private label while continuing to refine its pricing strategy. The goal is to increase sales based on quality of offering and customer service levels. The Eckerd and Brooks drugstore network is operational and making good progress. The Company can now begin to capture the integration cost savings while it continues to improve the performance of its US drugstore network. At the same time, it will continue to build on the strong base of its Canadian network. Dividend The Board of Directors of The Jean Coutu Group declared a quarterly dividend of C$0.03 per share. This dividend is payable on May 12, 2005, to all holders of Class A Subordinate Voting shares and holders of Class B shares listed in the Company's shareholder ledger as of April 28, 2005. The Jean Coutu Group's United States operations employ over 46,000 persons and comprise 1,904 corporate owned stores located in 18 states of the Northeastern, mid-Atlantic and Southeastern United States. The Jean Coutu Group's Canadian operations and drugstores affiliated to its network employ over 14,000 people and comprise 321 PJC Jean Coutu franchised stores in Quebec, New Brunswick and Ontario. * * * As reported in the Troubled Company Reporter on July 21, 2004, Standard & Poor's Ratings Services rated Jean Coutu Group, Inc.'s US$250 million senior unsecured notes 'B'. The 'BB' bank loan ratings and the '1' recovery rating indicate that lenders can expect full recovery of principal in the event of a default. S&P says the outlook is negative. JP MORGAN: Fitch Raises Rating on $51.7MM Mortgage Certs. to BB+ ---------------------------------------------------------------- Fitch Ratings upgrades J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates, series 1997-C5: -- $51.7 million class F to 'BB+' from 'BB'. In addition, Fitch affirms these classes: -- $252.3 million class A-3 'AAA'; -- Interest-only class X 'AAA'; -- $51.7 million class B 'AAA'; -- $56.9 million class C 'AAA'. Fitch does not rate the $56.9 million class D, $15.5 million class E, $36.2 million class G, or the $3 million class H certificates. The upgrade reflects the increased credit enhancement from loan payoffs and amortization. As of the March 2005 distribution date, the pool's aggregate certificate balance has been reduced by 49% to $524.1 million from $1.03 billion at issuance. The pool is well diversified by loan balance and geographic locations. Four loans (1.6%) are being specially serviced, including one 60 days delinquent (0.6%) and two (0.6%) 90 days delinquent. Losses are expected on several of these loans. The largest specially serviced loan (0.6%) is secured by a retail property in Covington, Virginia. The loan is 60 days delinquent and the special servicer is evaluating workout options. The second specially serviced loan (0.43%) is secured by a hotel in Las Cruces, New Mexico. The Holiday Inn franchise has expired and the borrower is trying to sell the property, although the loan remains current. Losses realized to-date total $22.8 million, or 2.2% of the original pool balance. JWJ NORTH: Case Summary & 15 Largest Unsecured Creditors -------------------------------------------------------- Debtor: JWJ North Star Management, L.L.C. dba Best Value Inn & Suites dba Racetrack Inn 6255 IH 37 Highway Corpus Christi, Texas 78409 Bankruptcy Case No.: 05-20450 Type of Business: The Debtor operates a number of inns, suites, and hotels in the U.S. See: http://www.bestvalueinn.com/ Chapter 11 Petition Date: April 1, 2005 Court: Southern District of Texas (Corpus Christi) Judge: Richard S. Schmidt Debtor's Counsel: Harlin C. Womble, Jr., Esq. Jordan Hyden Womble and Culbreth 500 North Shoreline Boulevard, Suite 900 Corpus Christi, Texas 78471 Tel: (361) 884-5678 Fax: (361) 888-5555 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 15 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Gexa Corporation Judgment entered in $50,394 P.O. Box 659410 Cause No. 812540,701 San Antonio, TX 78265-9410 styled Gexa Corp v. JWJ North Star Management, LLC in County Court-at-Law No. 1, Harris County, Texas AmPro Energy, Inc. Utility service $45,000 P.O. Box 973545 Dallas, TX 75397-3545 City of Corpus Christi City occupancy $40,000 Legal Department - taxes Collections 1201 Leopard Corpus Christi, TX 78401 Nationwide Supply, LLC Goods and/or $12,384 services City of Corpus Christi Utilities $12,000 Legal Department- Collections Lodgenet Entertainment Claims alleged in $6,272 Corporation Cause No. 05-60070-1 styled Lodgenet Entertainment Corporation v. JWJ North Star Management, LLC d/b/a Racetrack Hotel and Suites Internal Revenue Service Payroll taxes $4,000 Best Value Inn Brand Any and all Unknown Membership, Inc. potential claims for damages arising out of alleged trademark infringement and unfair competition Direct TV Cable television Unknown service Douglas Mann Attorney's Fess Unknown and expenses Legacy Long distance Unknown telephone service Mcloud USA Telephone service Unknown State Comptroller of Sales & franchise Unknown Public Accounts taxes Texas Workforce Taxes Unknown Thomas Gomez Damages alleged in Unknown Cause No. 04-61967-3 styled Thomas Gomez v., pending in County Court-at-Law No. 3, Nueces County, Texas KAISER ALUMINUM: Bear Stearns Supports Kaiser Liquidation Plans --------------------------------------------------------------- Bear Stearns & Company, Citadel Equity Fund Ltd., Citadel Credit Trading Ltd., and JPMorgan Trust Company, National Association -- in its capacity as the successor-in-interest to Bank One Trust Company as Indenture Trustee on certain bonds issued in 1992 in total face value of $20 million by the Parish of St. James, Louisiana -- commenced an adversary proceeding against Kaiser Aluminum & Chemical Corporation and Law Debenture Trust Company of New York in 2004, seeking (i) a declaration that KACC had taken a contractually mandated ministerial step of issuing a designation of the Gramercy Bonds as "senior indebtedness," or, (ii) in the alternative, an order directing KACC to issue that Designation. The Plaintiffs urge the United States Bankruptcy Court for the District of Delaware to confirm: * the Third Amended Joint Plan of Liquidation for Alpart Jamaica, Inc. and Kaiser Jamaica Corporation; and * the Third Amended Joint Plan of Liquidation for Kaiser Alumina Australia Corporation and Kaiser Finance Corporation. The Plaintiffs point out five points which support confirmation of Third Amended Liquidation Plans: (1) KACC expressly agreed to designate its obligations under an "Installment Sale Agreement" pursuant to which KACC purchased a solid waste disposal facility from St. James Parish, including KACC's obligation to fully fund the payment of the Gramercy Bonds as "Senior Indebtedness" with respect to $400 million in subordinated notes issued by KACC in 1993 and guaranteed by Alpart Jamaica, Kaiser Jamaica, Kaiser Australia, and Kaiser Finance; (2) Law Debenture, the indenture trustee for the Senior Subordinated Notes and the holders of those Notes, indisputably consented to the subordination of the Senior Subordinated Notes to "Senior Indebtedness". (3) The Senior Subordinated Noteholders were put on notice that the "Senior Indebtedness" would include KACC's obligation to fund the Gramercy Bonds. (4) A significant constituency of Senior Noteholders -- parties who would arguably be impacted by the Plaintiffs' assertion of their subordination rights -- negotiated, and indicated their consent to, a settlement agreement between the Plaintiffs and the members of an ad hoc committee composed of holders of senior notes non-subordinated in the face amount of $400 million issued by KACC in 1994 and 1996. (5) By virtue of their incorporation of the Gramercy Settlement, the Third Amended Plans effectuate, to a limited extent, the "Senior Indebtedness" status of the Gramercy Bond. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 66; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Plan Confirmation Hearing to Be Continued ---------------------------------------------------------- Kaiser Aluminum said that yesterday's plan confirmation hearing before the U.S. Bankruptcy Court for the District of Delaware was not completed. The hearing dealt with the confirmation of the two Liquidating Plans -- as defined in Kaiser's Form 10-K for 2004 -- filed in conjunction with the previously announced sale of Kaiser's interests in and related to alumina refineries in Jamaica and Australia. A further hearing will be scheduled to resume the confirmation process. No assurances can be provided as to whether or when the Liquidating Plans will be confirmed by the Court or ultimately consummated or, if confirmed and consummated, as to the amount of distributions to be made to individual creditors of the liquidating subsidiaries or the company. Further, the company cannot predict what the ultimate allocation of distributions among holders of the company's 9-7/8% Senior Notes, 10-7/8% Senior Notes, and the 12-3/4% Senior Subordinated Notes will be, when any such resolution will occur, or what impact any such resolution may have on the company and its ongoing reorganization efforts. The Liquidating Plans relate exclusively to the interests in and related to alumina refineries in Jamaica and Australia and will have no impact on the normal ongoing fabricated products business unit or other continuing operations. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. LIBERTY MEDIA: Begins Cash Tender Offer for $1B in Debt Securities ------------------------------------------------------------------ Liberty Media Corporation (NYSE: L, LMC.B) commenced cash tender offers for up to $1.0 billion in aggregate principal amount of its outstanding debt securities due 2006. The tender offers are, in part, intended to complete Liberty's previously announced debt reduction program. To date, Liberty has retired or obtained rights to retire $725 million of the $1.0 billion in debt scheduled to be retired by the end of 2005. Upon closing of the offers in the maximum amount, Liberty will have completed its $4.5 billion debt reduction program and will have refinanced an additional $725 million in debt. The tender offers consist of two separate offers: * an offer to purchase any and all of its 3.50% Senior Notes due 2006, and * an offer to purchase up to a specified maximum amount of its Floating Rate Senior Notes due 2006, in each case, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 6, 2005 and accompanying Letter of Transmittal. The maximum principal amount of Floating Rate Notes Liberty is offering to purchase will be equal to the difference between the $1.0 billion cap on the aggregate principal amount subject to the tender offers and the aggregate principal amount of 3.50% Notes that Liberty accepts for purchase in the offer for the 3.50% Notes. As of 5:00 p.m. Eastern Time on April 5, 2005, $423.974 million of the 3.50% Notes remained outstanding, and approximately $2.2 billion of the Floating Rate Notes remained outstanding. The Tender Offer Consideration for each $1,000 principal amount of 3.50% Notes validly tendered and accepted for purchase in the offer for those notes will be $988.02, plus any accrued and unpaid interest on the principal amount of the 3.50% Notes purchased in that offer, up to but not including the applicable settlement date for the offer for the 3.50% Notes. The offer for the 3.50% Notes is scheduled to expire at 5:00 p.m., New York City time, on Friday, April 15, 2005, unless extended by Liberty. The settlement date for the offer for the 3.50% Notes is expected to be three business days following the expiration date for such offer. The Tender Offer Consideration for each $1,000 principal amount of Floating Rate Notes validly tendered and accepted for purchase in the offer for those Notes will be $1,012.36, plus any accrued and unpaid interest on the principal amount of the Floating Rate Notes purchased in that offer, up to but not including the applicable settlement date for the offer for the Floating Rate Notes. The offer for the Floating Rate Notes is scheduled to expire at midnight, New York City time, on Tuesday, May 3, 2005, unless extended by Liberty. Liberty will also pay an early tender payment of $2.50 for each $1,000 principal amount of Floating Rate Notes validly tendered and accepted for purchase in that offer. The early tender payment will only be paid in respect of those Floating Rate Notes that are tendered and not withdrawn at or prior to the early tender payment deadline, which is 5:00 p.m., New York City time, on Friday, April 15, 2005. The settlement date for the offer for the Floating Rate Notes is expected to be three business days following the expiration date for such offer. If the amount of Floating Rate Notes that are validly tendered and not withdrawn on or prior to the expiration date for that offer exceeds the maximum principal amount described above, then Liberty will accept Floating Rate Notes for payment on a pro rata basis. Neither of the offers is contingent upon the tender of a minimum principal amount of notes; however, each offer is conditioned on the satisfaction or waiver of certain conditions set forth in the offers to purchase. Subject to and in accordance with applicable law, Liberty reserves the right to amend, extend or terminate either or both offers at any time prior to the applicable expiration date. Liberty has retained UBS Securities LLC to serve as dealer manager for the offers, and D.F. King and Co., Inc., to serve as the information agent. Copies of the offer to purchase and related documents may be obtained from D.F. King & Co. at (888) 628-9011 or (212) 269-5550. Questions regarding the tender offer may be directed to UBS Securities LLC at (888) 722-9555 ext. 4210 (toll- free) or (203) 719-4210. This announcement does not constitute an offer to purchase or a solicitation of any offer to sell with respect to the 3.50% Notes or the Floating Rate Notes. The offers are being made solely by the Offer to Purchase, dated April 6, 2005, and the related Letter of Transmittal, copies of which are available from the Information Agent. About the Company Liberty Media Corporation (NYSE: L, LMC.B) is a holding company owning interests in a broad range of electronic retailing, media, communications and entertainment businesses classified in four groups; Interactive, Networks, Tech/Ventures and Corporate. Liberty Media's businesses include some of the world's most recognized and respected brands, including QVC, Encore, Starz, Discovery, IAC/InterActiveCorp, and News Corporation. * * * As reported in the Troubled Company Reporter on March 21, 2005, Standard & Poor's Ratings Services lowered its ratings on the corporate bond-backed certificates issued by PreferredPLUS Trust Series LMG-1, PreferredPLUS Trust Series LMG-2, PPLUS Trust Series LMG-3, and Corporate Backed Trust Certificates Liberty Media Debenture Backed Series 2001-32 Trust. At the same time, the ratings are removed from CreditWatch negative, where they were placed Feb. 8, 2005. The rating actions and CreditWatch removals reflect the lowered ratings on the underlying securities, the $133.575 million 8.25% senior debentures due Feb. 1, 2030, the $31 million 8.50% senior unsecured notes due July 15, 2029, the $30.55 million 8.25% senior debentures due Feb. 1, 2030, and the $128 million 8.25% senior debentures issued by Liberty Media Corp., and their removal from CreditWatch negative, where they were placed Jan. 21, 2005. MANDRA FORESTRY: S&P Puts B Rating on Proposed $235 Million Bonds ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned is 'B' corporate credit rating to Mandra Forestry Finance Ltd. (Mandra Forestry). At the same time the ratings agency assigned its 'B' issue rating to Mandra Forestry's proposed US$235 million bond issue. The outlook on the corporate credit rating is stable. The proceeds from the issue will be used to acquire up to 270,000 hectares of forest located in Anhui province in mainland China. Covenants under the bond indenture help mitigate the start-up risks associated with Mandra Forestry. At issuance a portion of the proceeds, equal to 18 months of interest, will be placed in an escrow account. Furthermore, after funding the capitalization of mainland China's wholly-owned foreign enterprises, offshore operating expenses, and working capital, proceeds totaling about US$120 million will be placed in an offshore escrow account to fund the acquisition of additional plantations. Proceeds can only be distributed to acquire plantations once the plantations have been certified by independent consultant JP Management Consulting (Asia Pacific) Pte. Ltd. to ensure that they meet certain parameters, and that all the necessary regulatory approvals have been obtained. Foreign currency risk will be hedged for the first few years of the transaction through a forward currency hedging contract. Covenants that allow for equity distribution at 50% of accumulated net profit before the bond is repaid, however, could increase the refinancing risk on the bonds. Distributions may be paid 24 months after the bond is issued provided EBITDA to gross interest is 3x and that the total amount distributed does not exceed US$15 million in any one year and US$50 million before the repayment of the bond. Covenants also allow for the use of amounts remaining in the mainland China escrow accounts after all required transfers to the security accounts are applied, and the acquisition of the targeted 270,000 hectares are complete, to fund payments to acquire a further 50,000 hectares. There are no sinking fund provisions on the debt and there is no time limit for asset acquisitions although acquisitions are expected to be completed within a 24-month period. Mandra Forestry is a start-up company. The company was formed to acquire, grow, and harvest standing timber in commercial forests in Anhui province. Assets acquired by Mandra Forestry will be managed with the assistance of Sino-Forest Corp. (Sino-Forest; BB- /Stable/--) a commercial plantation company that currently operates in southern China. Mandra Capital Ltd., through its wholly owned subsidiary Mandra Resources Ltd., owns 75% of Mandra Forestry Holdings Ltd., Sino- Forest owns 15%, and Morgan Stanley Dean Witter Equity Funding Inc. owns the remaining 10%. Mandra Forestry Holdings Ltd. owns 100% of its subsidiary Mandra Forestry. Pursuant to the shareholders' agreement Sino-Forest has the right to purchase all outstanding equity in Mandra Forestry Holdings Ltd. at the earlier of the third anniversary of the shareholders' agreement or when Mandra Forestry acquires 300,000 hectares of forest. The 'B' rating on Mandra Forestry reflects the following risks: * Execution risks associated with the company's acquisition, harvesting, and replanting schedule. At present Mandra Forestry has no operating history. The company will begin acquiring assets only when proceeds from the issue are in hand. Although Mandra Forestry has established a credible business plan, given the magnitude of the operation about to be undertaken it is possible that current assumptions under the business plan may change. Completion of the plantation acquisition, and the harvesting and replanting of trees according to the assumptions in the company's business plan will be important milestones in terms of reducing execution risks. * Regulatory risk as the company does not currently possess the required government permits to own, harvest, and transport timber products. Mandra Forestry expects to secure the required land lease rights, harvesting, and transport licenses from authorities at the county level. The company will also need to secure an increase in its logging quota from the provincial and central governments before it can meet its planned harvest schedule of 3.2 million cubic meters per year beginning in 2006. Undertakings with forestry bureaus at the city level help mitigate some concern in terms of obtaining the required permits, however, it is recognized that regulation in mainland China is fragmented and unpredictable. * High leverage and limited access to further capital could pressure operations in the start-up phase. Mandra Forestry's ratio of debt to capitalization for 2005 is estimated at about 80%. This high level of debt will significantly reduce the company's financial flexibility if acquisition costs increase or product pricing comes in below estimates. Additional debt is restricted to US$25 million, which can be issued at the subsidiary level for working capital purposes. The main strengths of the transaction include the following: * Strong demand for wood products in mainland China should ensure a ready market for Mandra Forestry's product. This mitigates concerns about the cyclical nature of the industry. In particular, within a 200km radius of the land that is to be acquired there are many small sawmills, plywood factories, medium density fiberboard and particle board plants, and pulp and paper mills. * Sino-Forest's participation as a project manager brings creditable expertise to Mandra Forestry's start-up business plan. The company's participation as the off-taker of timber products also lends certainty to the timely sale of timber products and mitigates concerns about negative working capital associated with slow recovery of accounts receivable. Sino-Forest manages its own accounts receivable so that the outstanding period is 90 days or less. Finally, Sino-Forest's subordinated loan, although small at US$15 million, demonstrates the company's commitment to the Mandra Forestry acquisition. * Undertakings with certain forestry bureaus in Anhui province show regulatory support for the project. The undertakings grant Mandra Forestry scope to negotiate with collectives to acquire plantations in the area. Certain forestry bureaus have also committed to dealing exclusively with Mandra Forestry until the company acquires 270,000 hectares. Mandra Forestry has also been promised assistance in obtaining regulatory licenses and permits, including help in securing an increase in logging quotas required to complete the company's harvesting plan on schedule. * Potential for strong cash flows once the project is executed. The assets to be acquired will be immediately cash generative with standing timber gross margins of about 35%. Assuming the forecast assumptions are met, cash flows should allow Mandra Forestry to support interest payments on the bonds and repay them when due. Forecast assumptions on the price of logs, acquisition costs, and yields are expected to be achievable given strong demand for wood products in the region and limited competition. MATRIX SERVICE: Obtains Another Waiver from Bank Lenders -------------------------------------------------------- Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company, reported total revenues for the third fiscal quarter ended February 28, 2005, were $111.4 million, compared with $145.2 million recorded a year earlier. Net loss for the third quarter of fiscal 2005 was $35.5 million versus net income of $2.3 million in the third quarter a year ago. These results include pre-tax charges of $25.0 million for goodwill impairment, $10.4 million for an additional reserve on previously disclosed disputed contracts, $1.6 million for establishing a valuation reserve for a deferred tax asset related to net operating loss carryforwards and $1.0 million for legal, Sarbanes Oxley and refinancing activities. EBITDA for the third quarter of fiscal 2005 was $(35.5) million, compared with $6.1 million for the same period last year. Gross margins on a consolidated basis were 5.3% versus 8.1% reported for the third quarter a year earlier. In March 2005, the Company began a restructuring program to reduce its cost structure and improve operating results. This restructuring program could include reductions in workforce and changes to business plans including the consolidation and closure of certain facilities or business lines. The Company expects these restructuring efforts to continue into Fiscal 2006 and expects to incur restructuring charges of at least $2.1 million in the fourth quarter of fiscal 2005. President and Chief Executive Officer of Matrix Service, Mike Hall said, "The Company is in a dynamic and changing environment as we work through the current liquidity issues. Matrix is benefiting from positive developments in the Repair and Maintenance sector. Mandated measures in the Downstream Petroleum Industry have sharply expanded activity in this sector." Waiver through June 15 On April 8, 2005, the Company received a waiver from its senior lenders of their rights and remedies arising from any current violations under the Credit Agreement. The waiver expires at the end of the business day on June 15, 2005. In connection with the waiver, the Credit Agreement was amended to increase funds available under the revolving line of credit to the lesser of $32,000,000 or 75% of the borrowing base. In addition, upon the funding of a proposed private placement of convertible subordinated junior securities, the revolving line of credit would increase to the lesser of $35,000,000 or 80% of the borrowing base and the bank group has also indicated they would provide an incremental $10 million of short term financing to provide additional liquidity primarily for trade creditors. "There can be no assurance that the proposed private placement of convertible subordinated junior securities or the proposed incremental $10 million of short-term financing will be completed," Matrix cautions. Matrix Service's Lenders are: * J.P. MORGAN CHASE BANK, N.A., as Agent * WACHOVIA BANK, NATIONAL ASSOCIATION * UMB BANK, N.A. * WELLS FARGO BANK, NA and * INTERNATIONAL BANK OF COMMERCE, successor in interest to LOCAL OKLAHOMA BANK Matrix Service disclosed to the Lenders that it violated one or more of the financial covenants buried in the Credit Agreement (which are detailed in the April 1, 2005, edition of the Troubled Company Reporter) and the Company failed to make a $1,905,853 payment due March 7, 2005, under what are known as the Hake Group Acquisition Documents. Matrix Service has agreed to pay the Lenders, on or before the earlier of (A) the Facility Termination Date, (B) March 31, 2006 or (C) any payment in full of the Term Loan (for purposes of clarity, "Term Loan" does not include Term Loan B): -- $166,667 if the Fee Due Date occurs prior to May 11, 2005, -- $333,333 if the Fee Due Date occurs on or after May 11 but before June 11, 2005, -- $500,000 if the Fee Due Date occurs on or after June 11, 2005 but before July 11, 2005, -- $666,667 if the Fee Due Date occurs on or after July 11, 2005 but before August 11, 2005, -- $833,333 if the Fee Due Date occurs on or after August 11, 2005 but before September 11, 2005, or -- $1,000,000 if the Fee Due Date occurs on or after September 11, 2005. Mr. Hall said, "Based upon the current status of the senior credit facility, total liquidity has been constrained due to shortfalls in operating performance. We believe that the solution to these constraints will be solved by improvement in overall operating performance based upon the restructuring efforts currently underway, by the collection of the disputed contracts and by the raising of additional capital through debt restructuring efforts. The Company has engaged a financial consultant to assist senior management with all restructuring activities. As a result of these efforts, the Company anticipates incurring $1.5 million in professional fees in the fourth quarter of fiscal 2005. Because these changes are still being executed as of this press release, we will not be providing guidance for the balance of the fiscal year." About Matrix Service Company Matrix Service Company -- http://www.matrixservice.com/-- provides general industrial construction and repair and maintenance services principally to the petroleum, petrochemical, power, bulk storage terminal, pipeline and industrial gas industries. The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities located in Oklahoma, Texas, California, Michigan, Pennsylvania, Illinois, Washington and Delaware in the U.S. and Canada. MIRANT CORP: Asks Court to Approve IRS & Southern Co. Agreement --------------------------------------------------------------- From the date of its incorporation until September 27, 2000, Mirant Corporation was a wholly owned subsidiary of The Southern Company. Mirant was later spun off from Southern as an independent, publicly traded company in 2001. The transition was accomplished in two steps. Mirant issued approximately 20% of its stock to the public in an "initial public offering." Then, Southern "spun off" the remaining stock of Mirant as a tax-free stock dividend to its shareholders. Prior to the Spin-Off, Southern was the "common parent" within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended, of a group of affiliated corporations, which included the Debtors and their non-debtor affiliates. As the "common parent," Southern filed a consolidated federal income tax return on behalf of itself and its affiliates on a calendar year basis. Additionally, Southern filed consolidated, combined or unitary state income tax returns on behalf of its affiliates. As a result of, and with respect to tax periods subsequent to, the Spin-Off, Southern is no longer the "common parent" of the Mirant Entities and, therefore, no longer files federal and state returns on behalf of the Mirant Entities. The Tax Indemnification Agreement In conjunction with the Spin-Off, the Mirant Entities and Southern and its affiliates entered into various "separation agreements," including a Tax Indemnification Agreement, dated September 1, 2000. The Tax Indemnification Agreement provides that Mirant will indemnify Southern for tax liabilities attributable to the Mirant Entities prior to the Spin-Off. To date, Southern has filed a number of proofs of claim against the Debtors asserting both contingent and liquidated claims and non- contingent and unliquidated claims under the various separation agreements including the Tax Indemnification Agreement. Mirant's Dual Resident Corporations As of the date of the Spin-Off, Mirant indirectly owned, through its subsidiaries, certain dual resident corporations. A DRC is a domestic corporation or any "separate unit" of a domestic corporation that is subject to the income tax of a foreign country on its worldwide income or on a residence basis. A net operating loss incurred by a DRC in a year in which the corporation is a DRC is a "dual consolidated loss" unless the loss cannot be used by the DRC or any of its affiliates under the foreign country's income tax laws. As a general rule, Section 1503(d) of the Internal Revenue Code provides that, if a member of an affiliated group incurs a DCL, the DCL may not be used to reduce the taxable income of any domestic affiliate for either the taxable year in which the loss occurred or any other taxable year, regardless of whether the loss may be applied to reduce the income of a foreign affiliate under the applicable income tax laws of another country, and regardless of whether the income of the foreign affiliate that the loss may offset is, has been or will be, subject to tax in the United States. Rather, a DCL may only be used to offset the income of the member that incurred the loss. Notwithstanding, DCLs may be utilized by other domestic affiliates within a consolidated group if the group has filed an agreement with the IRS permitting the utilization, in accordance with the elective relief provisions set forth in Treas. Reg. Sections 1.1503-2(g)(2) and 1.1503-2T(g)(2). For the taxable years ending December 31, 1999, and December 31, 2000, and the short year ending April 2, 2001 -- Pre-Spin-Off Years -- Southern filed all of the appropriate elections and agreements with the IRS to take advantage of the elective provisions. Accordingly, Southern applied all of the DCLs generated by the Mirant Entities' DRC subsidiaries during the Pre-Spin-Off Years against income incurred by entities contained in Southern's consolidated group during the time period. Use of the DCLs in accordance with Treas. Reg. Section 1.1503-2(g)(2), however, is not unconditional. Rather, these elective relief provisions delineate various "triggering events," which in the event of their occurrence require a consolidated group to recapture and report as income the amount of any DCL that was previously utilized plus an interest charge in the taxable year in which the triggering event occurred. In the absence of a waiver by the IRS, the Spin-Off itself is considered a "triggering event" and, as the parent of the group, Southern is liable to the IRS for any additional taxes owing as a result of the recapture. The Debtors estimate that if the IRS requires Southern to recapture the Pre-Spin DCLs, this will result in a recapture by Southern of approximately $75 million in income, which would cause an income tax liability of approximately $26.5 million. Upon Southern satisfying its obligations to the IRS, Southern could assert a claim against Mirant for a corresponding amount under the Tax Indemnification Agreement for the Recapture Tax Liability. The Closing Agreement The IRS can waive a "triggering event" that would otherwise require a recapture of the DCLs as income, provided that the consolidated group and the DRC or domestic owner, as the case may be, leaving the group enters into a "closing agreement" with the IRS. Under the Treasury Regulations, the closing agreement must provide that both the parent and the separating subsidiary will be jointly and severally liable for the total amount of the recapture of DCLs and interest charges should a subsequent "triggering event" occur after the date of the closing agreement. Additionally, a domestic corporation separating from its consolidated group must further agree to treat any potential recapture amount as an unrealized built-in gain for purposes of Section 384(a) of the Internal Revenue Code, subject to any applicable exceptions thereunder. To prevent the Spin-Off from being considered a "triggering event" that would otherwise require Southern to recapture the Pre-Spin DCLs, the Mirant Entities entered into the Closing Agreement with the IRS and Southern. Under the Closing Agreement, the IRS agreed that the Spin-Off will not be considered a "triggering event" that would require Southern to report the Recapture Amount. In exchange, Mirant agreed to be liable to the IRS -- and Southern agrees to be jointly liable -- for any Pre-Spin DCLs in the event of the occurrence of a subsequent "triggering event." Closing Agreement Should Be Approved While Mirant has agreed to be jointly and severally liable with Southern on a postpetition basis for the Recapture Tax Liability in the event that a subsequent "triggering event" occurs, Mirant believes that ensuring the "non-occurrence" of a subsequent "triggering event" is wholly within Mirant's control. Furthermore, Mirant's potential liability is not indefinite, as a triggering event will generally only have tax consequences if the event occurs within 15 years after the DCL has been incurred. While entry into the Closing Agreement creates the potential for claims against Mirant in the future that will not be subject to compromise, Mirant also believes that the risk is de minimis and far outweighed by the benefit of eliminating a substantial liquidated claim that would be asserted against the Debtors' estates absent the Closing Agreement. While some of the DCLs identified in the Closing Agreement have already been recaptured, Mirant explains that others are unlikely to materialize since Southern no longer controls the Mirant Entities -- the Debtors now have control over all of their DCLs. Mirant tells Judge Lynn that there is little or no risk of recapture of DCLs after the execution of the agreement by Mirant, provided that (i) it complies with the annual certification requirements of the DCLs regulations, which will not be difficult, and (ii) future transactions involving the hybrid entities separate units are properly executed. By this motion, the Debtors seek the U.S. Bankruptcy Court for the Northern District of Texas' permission to enter into the Closing Agreement. The salient terms of the Closing Agreement are: (a) The parties agree that the Spin-Off constitutes a triggering event under Treas. Reg. Section 1.1503- 2(g)(2)(iii)(A)(2) that would otherwise require the recapture of Pre-Spin DCLs under Treas. Reg. Section 1.1503-2(g) (2) (vii). Notwithstanding, the parties agree that the triggering event does not require the recapture of the Pre-Spin DCLs plus an interest charge; (b) Southern and the Mirant Entities will be jointly and severally liable for the total amount of recapture of the Pre-Spin DCLs caused by any subsequent triggering event, as described under Treas. Reg. Section 1.1503- 2(g)(2)(iii), and any related interest charge, under Treas. Reg. Section 1.1503-2(g)(2)(vii), to the extent the triggering event does not fall under the express exceptions provided in Treas. Reg. Section 1.1503- 2(g)(2)(iv)(A) or (B); (c) Transactions otherwise constituting triggering events applicable to the Pre-Spin DCLs under Treas. Reg. Section 1.1503-2(g)(2)(iii)(A) will not constitute a triggering event if the transactions occur in any taxable year after the 15th taxable year following the year in which the Pre-Spin DCLs were incurred. These events under Section 1.1503(g)(2)(iii)(A) include transactions pursuant to which an affiliated DRC or affiliated "domestic owner" -- a domestic corporation that owns one or more separate units -- ceases to be a member of the consolidated group that filed the election; (d) The Mirant Entities agree to treat any potential recapture amount under Treas. Reg. Section 1.1503-2(g)(2)(vii) as unrealized built-in gain for purposes of Section 384(a) of the IRC, to the extent the amount is not subject to any applicable exceptions. The Mirant Entities agree that the total recapture amount will constitute a recognized built- in gain for the Mirant Entities for purposes of Section 384(a) of the Internal Revenue Code, to the extent the is not subject to any applicable exceptions; (e) The Mirant Entities agree to comply with all of the reporting requirements with respect to the taxable years ended December 31, 1999, December 31, 2000, and the short period ended April 2, 2001; and (f) If the amount of the Pre-Spin DCLs is adjusted by the IRS, judicial authority, or otherwise in a final determination of taxes for taxable years ending December 31, 1999, December 31, 2000, or for the short period ended April 2, 2001, the provisions of the Closing Agreement will apply mutatis mutandis to the final adjusted loss amounts. The Closing Agreement identifies four sources of DCLs that could potentially be the subject of recapture after the Spin-Off, as a result of subsequent triggering events. All the losses are attributable to entities defined in the Section 1503 Regulations as "hybrid entity separate units," which are entities that are not taxable as corporations for United States income tax purposes but are subject to income tax in a foreign country as corporations either on world-wide income or based on their residence. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. 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. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: CSFB & Citibank Says Disclosure Statement Inadequate ----------------------------------------------------------------- Credit Suisse First Boston and Citibank, N.A., as agents to certain of Mirant Corporation and its debtor-affiliates' credit facilities, believe that the Debtors' Disclosure Statement contains inadequate information on various aspects, among others: (a) The Debtors' liquidation analysis is performed on a "consolidated" basis rather than on a debtor-by-debtor basis. Thus, there is no adequate information to assess whether or not distributions under the Amended Plan are at least equal to the amounts that claim holders would receive or retain if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code. (b) The identities of officers and directors that will be employed or retained by the Debtors, as well as the nature of their compensation are not disclosed. (c) There is no calculation how the Debtors came up with a $530 million of Postpetition Accrued Interest for the Consolidated Mirant Debtor Class 4 Unsecured Claims. There is no disclosure at what rate postpetition interest will accrue when allowed. (d) The Amended Disclosure Statement's discussion of the Debtors' Objections to CSFB's Amended Claims and Wachovia Amended Claims should add this language: "CSFB and Wachovia additionally assert that proceeds of certain drawn LC's which may be turned over to the Debtors by the Drawing beneficiaries are not property of the Debtors' estates and should be returned to CSFB." The Disclosure Statement must also contain potentially adverse effect on Plan distributions if the request for substantive consolidation is denied and the right to subrogation is granted. (e) There is no disclosure as to what circumstances: (1) various intercompany transfers were treated as dividends and capital contributions; and (2) various intercompany transactions were evidenced by promissory notes as opposed to the recordation of intercompany receivables and payables. No information is also disclosed regarding the consideration exchanged by Mirant Americas Development Capital, LLC, in respect of: * its Intercompany Claims against Mirant Americas, Inc. and Mirant Americas Procurement, Inc.; * any purported defenses to the Intercompany Claims; and * if the Intercompany Claims are otherwise valid, binding, enforceable and not subject to setoff, that Mirant Americas Development is a solvent entity. (f) The Disclosure Statement does not accurately describe the extent of Mirant Corp.'s guarantee of Mirant Americas Development's obligations under the Equipment Warehouse Facility. (g) There is no disclosure how the Plan Trust will be managed and what oversight provisions may govern to ensure that the Plan Trust is administered to maximize recoveries on Plan Trust assets. (h) The Disclosure Statement fails to disclose the adverse effect of substantive consolidation on the recoveries of those creditors who hold: * guaranty claims against Consolidated Mirant Debtors; and * claims against Consolidated Mirant Debtors holding Intercompany Claims against other Consolidated Mirant Debtors. (i) The Debtors did not adequately explained why substantive consolidation must necessarily include all the Debtors. (j) There is no sufficient information regarding the assets and liabilities of the various debtors proposed to be substantively consolidated to permit an understanding as to which creditors are materially and adversely affected by substantive consolidation. CSFB and Citibank also object to several provisions in the Disclosure Statement that relate to: * the Debtors' assumptions of certain indemnification obligations to their officers, directors and employees; * types of indemnified claims for which certain insurance may be available and the nature and extent of insurance available to cover the claims; * release of "current and former directors, officers, employees, managers, agents and professionals"; * certain Causes of Action to be retained by and vested in the Debtors or the identities of the parties that may be subject to those Causes of Action; and * description of the Trust Preferred Securities and the priority of the claims evidenced by the Trust Preferred Securities. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. 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. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: Taps Financial Balloting as Solicitation Agent ----------------------------------------------------------- Mirant Corporation and its debtor-affiliates sought and obtained the U.S. Bankruptcy Court for the Northern District of Texas' authority to employ Financial Balloting Group LLC as solicitation, balloting, and tabulation agent with respect to the Debtors' public and non-public securities in their Chapter 11 cases. Mirant Securities A. Mirant Corporation Before it filed for bankruptcy, Mirant Corporation maintained three postpetition corporate credit facilities: (1) a $1.125 billion 364-day senior unsecured revolving credit facility for general corporate purposes that was converted into a term loan facility that matured in July 2003; (2) a $1.125 billion four-year senior unsecured revolving credit facility for general corporate purposes, that was to mature in July 2005; and (3) a $450 million five-year senior unsecured revolving credit facility for general corporate purposes that matured in April 2004. Senior unsecured debt securities issued by Mirant Corp. are: -- $200 million of 7.4% Senior Notes due 2004; -- $500 million of 7.9% Senior Notes due 2009; -- $750 million of 2.5% Convertible Senior Debentures due June 2021, but subject to put options in June of 2004, 2006, 2011 and 2016; and -- $370 million of 5.75% Convertible Senior Notes due July 2007. In addition, Mirant issued $356 million of 6.25% Junior Convertible Subordinated Debentures, Series A due 2030, to Mirant Trust I. Mirant Corp. has approximately 300,000 registered holders and beneficial holders of common stock. B. Mirant Americas Generation LLC Before it filed for bankruptcy, Mirant Americas Generation LLC, maintained two corporate credit facilities: (1) a $250 million senior unsecured revolving credit facility, that matured in October 2004; and (2) a $50 million senior unsecured revolving credit facility, that matured in October 2004. Senior unsecured debt securities issued by MAGi: -- $500 million of 7.625% Senior Notes due 2006; -- $300 million of 7.20% Senior Notes due 2008; -- $850 million of 8.300% Senior Notes due 2011; -- $450 million of 8.50% Senior Notes due 2021; and -- $400 million of 9.125% Senior Notes due 2031. C. Mirant Americas Energy Marketing, LP Mirant Americas Energy Marketing, LP, is a party to a forward sale of natural gas and a swap transaction. Pursuant to the Commodity Prepay Facility, MAEM receives the discounted present value of $250 million of notional value of future deliveries of natural gas. D. Mirant Americas Development Capital, LLC Mirant Americas Development Capital, LLC, is a party to a warehouse operating lease facility pursuant to which an MC Equipment Revolver Statutory Trust was established for the purpose of owning certain gas turbines, steam turbines, heat recovery generators and other equipment. The Equipment Warehouse Facility provides for the MC Trust Lessor to fund the acquisition of the Turbine Facility Equipment by issuing: -- Series A1 and A2 Notes and Series B1 and B2 Notes; and -- Series C1 and C2 certificates in respect of the investments in the MC Trust Lessor -- equal to approximately 3% of equipment cost. On the Petition Date, the amount outstanding under the Series A1 Notes, the Series B1 Notes and the Series C1 Certificates was $214 million, of which approximately $192 million was recourse to Mirant Corp. pursuant to its guarantee of certain obligations of Mirant Americas Development. E. West Georgia Generating Company, LLC West Georgia Generating Company, LLC, is party to a senior secured term loan facility that, as of the Petition Date, had a principal balance of $139.5 million. F. Mirant Mid-Atlantic, LLC Mirant Mid-Atlantic, LLC, is the lessee under eleven separate leases of undivided interests in the Dickerson baseload units 1, 2, and 3 and the Morgantown baseload units 1 and 2. The owner lessors of those assets issued a series of pass-through certificates backed by the leases: -- $454,000,000 8.625% Series A Pass-Through Certificates; -- $435,000,000 9.125% Series B Pass-Through Certificates; and -- $335,000,000 10.060% Series C Pass-Through Certificates. The lease payment obligations are unsecured and exclusive obligations of MirMA. Financial Balloting Group's Retention Rule 3017 (e) of the Federal Rules of Bankruptcy Procedure provides that the Court must consider the Debtors' procedures for transmitting plans, disclosure statements, ballots, related notices, and other solicitation-related materials to the beneficial holders of stock, bonds, debentures, notes and other securities. Ian T. Peck, Esq., at Haynes and Boone, LLP, in Dallas, Texas, relates that the Debtors' Chapter 11 cases involve various issues of publicly traded bonds. Furthermore, the Debtors have outstanding common stock, with approximately 150,000 non-registered shareholders. The identity of all those entitled to receive solicitation materials is difficult to obtain as public securities are primarily held in "street name" by a custodian -- a brokerage firm or bank -- who maintains the identity of the individual beneficial owners on a confidential basis. Mr. Peck points out that the procedures for transmitting documents to the beneficial holders of public securities requires a specialized knowledge and familiarity with the custodial holders as well as the specific measures required to transmit documents to the beneficial holders. That knowledge and familiarity is particularly important in the Debtors' Chapter 11 cases where securities play a significant role with regard to the reorganization process. As special balloting agent, Financial Balloting Group will: (a) provide advice to the Debtors and their counsel regarding all aspects of the solicitation of votes, including timing issues, voting and tabulation procedures, and documents required for soliciting and voting; (b) review the voting portions of the Disclosure Statement and ballots, particularly as they may pertain to beneficial holders of securities; (c) work with the Debtors to request appropriate information for all classes of public securities entitled to receive documents relating to the Plan and Disclosure Statement; (d) distribute voting and related documents to registered record holders of securities and other parties, as requested; (e) coordinate the distribution of voting and related documents to "street name" holders of public securities by forwarding the appropriate documents to the banks and brokerage firms holding the securities -- or their agents -- who in turn, will forward them to the beneficial holders; (f) distribute master ballots to the appropriate banks and brokerage firms so that those firms may cast votes on behalf of beneficial holders of securities entitled to vote; (g) prepare a certificate of service for filing with the Court; (h) handle requests for solicitation documents from parties- in-interest, including brokerage firms, bank back-offices and institutional lenders; (i) respond to telephone inquiries from debt and equity security holders and other parties regarding the Disclosure Statement and voting procedures; (j) confirm receipt of solicitation documents by individual security holders and responding to any questions about the voting procedures; (k) receive and examining all ballots and master ballots cast by bondholders and equity holders; and (l) tabulate all ballots and master ballots received before the voting deadline in accordance with established procedures, and preparing a vote certification for filing with the Court. Jane Sullivan, a Director of Financial Balloting Group, attests that the Firm is highly familiar with the relevant procedures, and has a specialty practice in bankruptcy solicitations involving holders of public debt and equity securities, which makes Financial Balloting Group uniquely qualified to perform the services necessary in the Debtors' Chapter 11 cases. Financial Balloting Group is a firm with significantly experienced employees in all areas of bankruptcy balloting and related assignments, and specializes in noticing holders of public debt and equity securities and in soliciting and tabulating the votes of such holders in connection with Chapter 11 plans of reorganization. Ms. Sullivan, who will be primarily responsible for handling the solicitation and vote tabulation process, has over 20 years of experience in public securities transactions -- including solicitations -- and has specialized in bankruptcy solicitations since 1991. Additionally, the Financial Balloting Group team has provided solicitation and balloting services to debtors-in-possession and trustees in numerous other Chapter 11 cases, including, among others: * In re WorldCom Inc., Case No. 02-13533 (AJG) (Bankr. S.D.N.Y. July 21, 2002); * In re United Pan-Europe Communications N.V., Case No. 02- 16020 (BRL) (Bankr. S.D.N.Y. 2002); * In re Global Crossing Ltd., Case No. 02-40188 (REG) (Bankr. S.D.N.Y. 2002); * In re Enron Corp., Case No. 01-16034 (AJG) (Bankr. S.D.N.Y. Dec. 2, 2001); * In re Rhythms Netconnections, Inc., Case No. 01-14283 (BRL) (Bankr. S.D.N.Y. 2001); and * In re Pacific Gas & Elec. Co., Case No. 01-30923 (DFM) (Bankr. N.D.Cal. 2001). In her sworn affidavit, Ms. Sullivan assures that the Court that Financial Balloting Group does not represent or hold any interest adverse to the Debtors, the Debtors' estates, their creditors, and other related parties. Financial Balloting Group is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). Compensation Terms The Debtors will pay Financial Balloting Group on several bases: (a) A $15,000 project fee, plus $2,000 for each debt issue of public securities entitled to vote on the Plan; $1,500 for each debt issue not entitled to vote on the Plan but entitled to receive notice; $12,500 for the common stock if it is entitled to vote; or $6,000 for the common stock if its not entitled to vote but entitled to receive notice; (b) For the mailing of voting materials to creditors and to registered record holders of securities, labor charges at $1.75 to $2.25 per voting package, with a $500 minimum for each file; (c) $0.50 to $0.65 per non-voting notice mailings to any registered holders of securities, with a $250 minimum; (d) $17,000 to all issues of debt and equity for non-voting notice mailings to holders in "street name; (e) $3,500 for 500 telephone calls from creditors and stockholders within a 30-day solicitation period. If more than 500 calls are received within the period, those additional calls will be charged at $7 per call. Any calls to creditors or security holders will be charged at $7 per call; (f) $100 per hour of tabulation of ballots and master ballots, plus set up charges of $1,000 for each tabulation element -- each security or plan class; and (g) Current standard hourly rates applicable to the Firm's senior executives and other personnel involved in providing services to the Debtors: Executive Director $375 Director $325 Senior Case Manager $275 Case Manager $200 Programmer I $165 The Debtors will pay Financial Balloting Group a $25,000 retainer to be applied against the Firm's final invoice for services provided. Furthermore, to reduce the administrative expenses related to Financial Balloting Group's retention, the Debtors will pay the Firm's fees and expenses without the necessity of Financial Balloting Group filing formal fee applications. Moreover, the Debtors will reimburse Financial Balloting Group with all necessary out-of-pocket expenses. Two Balloting Agents in Debtors' Chapter 11 Cases The Court previously authorized the retention of Bankruptcy Services LLC as the Debtors' claims, noticing and balloting agent. The roles to be played by Financial Balloting Group and Bankruptcy Services will be separate and well defined. Mr. Peck clarifies that Bankruptcy Services' responsibilities with regard to voting and tabulation will be limited to general noticing and balloting of the Debtors' general unsecured creditors except for non-financial securities. Financial Balloting Group, on the other hand, will assist the Debtors in connection with the solicitation and tabulation of votes from classes of publicly held equity and public and private debt securities, together with the distribution of related documents. The Debtors believe that the division of responsibilities between Bankruptcy Services and Financial Balloting Group will utilize the expertise of each agent and result in a benefit to the Debtors' estate. Financial Balloting Group and Bankruptcy Services will perform discrete and distinct tasks, thereby ensuring that services will not be duplicated. The Financial Balloting Group and Bankruptcy Services teams have worked together in the past in analogous dual retentions. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. 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. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) MORGAN STANLEY: Fitch Rates $13.6 Mil. Mortgage Certificates at B ----------------------------------------------------------------- Fitch Ratings affirms Morgan Stanley Capital Inc.'s commercial mortgage pass-through certificates, series 1996-C1: -- Interest only class X 'AAA'; -- $20 million class B 'AAA'; -- $18.7 million class C 'AAA'; -- $17 million class D-1 'AAA'; -- $5.1 million class D-2 'AAA'; -- $18.7 million class E 'A'; -- $13.6 million class F 'B'. Fitch does not rate the $3.5 million class G certificates. The rating affirmations reflect pay down and subsequent increases in credit enhancement offsetting the expected losses on the specially serviced loans. As of the March 2005 distribution date, the pool's certificate balance has paid down 72% to $96.7 million from $340.5 million at issuance. Currently two loans (5.1%) are in special servicing. The larger loan (3.5%) is secured by a multifamily property in Kokomo, Indiana. The loan is 90 days delinquent and the special servicer is pursuing foreclosure. Losses are expected. The second loan (1.6%) is secured by a multifamily property in Oak Ridge, Tennessee. The property has been experiencing cash flow problems due to low occupancy. The loan is current and the borrower is trying to sell the property. NEXTWAVE TELECOM: Verizon Completes $3 Bil. PCS Spectrum Purchase ----------------------------------------------------------------- NextWave Telecom Inc. and Verizon Wireless completed the transaction, originally announced in November 2004, for Verizon Wireless to purchase for $3 billion all of NextWave's PCS spectrum licenses, in 23 markets around the country. The 10 and 20 MHz licenses, in the 1.9 GHz PCS frequency range, cover a population of 73 million people. The purchase price equates to $2.85 per MHz POP. The licenses will be used to expand Verizon Wireless' network capacity in 22 key existing markets, including New York, Boston, Washington, D.C., and Los Angeles, as well as to expand the company's footprint into Tulsa, Oklahoma. "We will put this spectrum to work in our network to benefit customers, by having the long-term capacity in place when they need it to meet their growing demand for wireless voice and data services," said Denny Strigl, president and CEO of Verizon Wireless. "This purchase is part of our long-standing strategy of continual network enhancements to provide our customers with the most reliable wireless network and, therefore, the most satisfying wireless experience." The licenses were acquired through the purchase of NextWave Telecom. As a result of Nextwave Telecom's bankruptcy reorganization, the licenses are its only assets. Pursuant to the reorganization, NextWave Telecom's other assets were transferred to the control of a separate entity, NextWave Wireless LLC, which was not acquired by Verizon Wireless. The markets included in this transaction are: -- Spectrum licenses for 20 MHz in: * New York, N.Y. * Washington, D.C. * Boston, Mass. * Baltimore, Md. -- Spectrum licenses for 10 MHz in: * Los Angeles, Calif. * Philadelphia, Pa. * Detroit, Mich. * Denver, Colo. * Portland, Ore. * Tulsa, Okla. * Greenville, S.C. * Madison, Wis. * Columbia, S.C. * Springfield, Mass. * Corpus Christi, Texas * Daytona Beach, Fla. * Provo, Utah * Atlantic City, N.J. * Dover, Del. * Ocala, Fla. * Janesville, Wis. * El Centro, Calif. * Pittsfield, Mass. About Verizon Wireless Verizon Wireless owns and operates the nation's most reliable wireless network, serving 43.8 million voice and data customers. Headquartered in Bedminster, NJ, Verizon Wireless is a joint venture of Verizon Communications (NYSE:VZ) and Vodafone (NYSE and LSE: VOD). Find more information on the Web at http://www.verizonwireless.com.To receive broadcast-quality video footage and high-resolution stills of Verizon Wireless operations, log on to the Verizon Wireless Multimedia Library at http://www.verizonwireless.com/multimedia. Headquartered in Hawthorne, New York, NextWave Telecom, Inc. -- http://www.nextwavetel.com/-- was organized in 1995 to provide high-speed wireless Internet access and voice communications services to consumer and business markets on a nationwide basis. NextWave is currently constructing a third-generation CDMA2000 1X network in all of its 95 PCS markets whose geographic scope covers more than 168 million POPs coast to coast, including all top 10 U.S. markets, 28 of the top 30 markets, and 40 of the top 50 markets. NextWave's "carriers' carrier" strategy allows existing carriers and new service providers to market NextWave's network services through innovative airtime arrangements. The company filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 98-23303) on December 23, 1998. Deborah Lynn Schrier-Rape, Esq. of Andrews & Kurth, LLP represents the Debtor. The Court confirmed the Debtors' Third Joint Chapter 11 Plan on March 1, 2005. NextWave Wireless LLC -- http://www.nextwavetel.com/-- was formed in 2004 to provide the next generation of broadband wireless and other mobile communications products and services to consumer and business markets. NEXTWAVE TELECOM: Exits Chapter 11 Protection After Six Years ------------------------------------------------------------- NextWave Telecom formally emerged from U.S. Chapter 11 proceedings. The company's Plan of Reorganization, which was confirmed on March 1, 2005, by the U.S. Bankruptcy Court for the Southern District of New York, became effective yesterday, April 13, upon the closing of a $3 billion sale of PCS licenses to Verizon Wireless. Pursuant to the Plan, the company has commenced distributing a portion of that transaction's proceeds and new securities to shareholders, and will continue to implement its court-approved blueprint for entering the marketplace as a provider of broadband wireless services. "This is a very special day for me personally and for the entire NextWave family of stakeholders who have traveled a long and challenging road to achieve this result," said Allen Salmasi, NextWave's Chairman and CEO. "While making a very substantial cash distribution to shareholders, at the same time we are emerging with a strong balance sheet, an experienced and creative management team, substantial spectrum and network assets, and an innovative and well-timed plan to enter the broadband wireless market on a fully-funded basis. All of us at NextWave are looking forward to a very exciting future in the brave new world of broadband wireless communications." NextWave believes that new and emerging fourth generation IP-based wireless technologies will provide it with cost advantages and an ability to offer consumers a unique and wider range of services that cannot be offered over existing wireless networks. The company's initial steps include a commercial launch of broadband wireless operations in Las Vegas, Nevada, and in New York City. NextWave will pursue a dual-use network strategy by making its facilities available to government entities for public safety applications at the same time the company offers commercial broadband wireless services to the consumer market. As a result of Nextwave Telecom's bankruptcy reorganization, the Company's PCS licenses are its only assets. Pursuant to the reorganization, NextWave Telecom's other assets were transferred to the control of a separate entity, NextWave Wireless LLC, which was not acquired by Verizon Wireless. Headquartered in Hawthorne, New York, NextWave Telecom, Inc. -- http://www.nextwavetel.com/-- was organized in 1995 to provide high-speed wireless Internet access and voice communications services to consumer and business markets on a nationwide basis. NextWave is currently constructing a third-generation CDMA2000 1X network in all of its 95 PCS markets whose geographic scope covers more than 168 million POPs coast to coast, including all top 10 U.S. markets, 28 of the top 30 markets, and 40 of the top 50 markets. NextWave's "carriers' carrier" strategy allows existing carriers and new service providers to market NextWave's network services through innovative airtime arrangements. The company filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 98-23303) on December 23, 1998. Deborah Lynn Schrier-Rape, Esq. of Andrews & Kurth, LLP represents the Debtor. The Court confirmed the Debtors' Third Joint Chapter 11 Plan on March 1, 2005. NextWave Wireless LLC -- http://www.nextwavetel.com/-- was formed in 2004 to provide the next generation of broadband wireless and other mobile communications products and services to consumer and business markets. NORCRAFT HOLDINGS: S&P Affirms B+ Corporate Credit Rating --------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Norcraft Holdings L.P. and its subsidiary, Norcraft Cos. L.P., to negative from stable and affirmed its other ratings on the company, including the 'B+' corporate credit rating. Norcraft had total debt of $264 million outstanding as of Dec. 31, 2004. Eagan, Minnesota-based Norcraft Holdings manufactures kitchen and bathroom cabinetry and had 2004 sales of $330 million and a tangible asset base of about $100 million, making it the fifth- largest company in the North American cabinet industry. The outlook revision reflects the likelihood that high raw material costs will continue to constrain earnings and cash flows during 2005. Operating margins (before D&A) fell more than 3 basis points from the previous quarter, to 14%, during the fourth quarter of 2004. This resulted primarily from rising raw material costs, particularly for particleboard, although higher labor costs caused by additional overtime needed to meet high sales growth were also a factor. Labor costs should improve in the second half of 2005 because of added plant capacity. "Norcraft's earnings and cash flow are susceptible to fluctuating raw material costs, which are currently at elevated levels," said Standard & Poor's credit analyst Lisa Wright. "Although we expect fairly stable industry demand in the intermediate term, the company's relatively small size and limited end market leave it exposed to downturns in cabinet demand." The ratings could be lowered if earnings and cash flow remain constrained by increasing raw material and labor costs that the company is unable to offset with price increases or operating efficiencies, or if liquidity tightens. The outlook could be revised to stable if price increases or operating improvements return operating margins to historical levels while enough free cash flow is generated to allow for meaningful term loan reduction. ORANGEBURG MEMORIAL: Lawyer Says Gravestones Ready for Pick-Up -------------------------------------------------------------- Paul W. Owen, Jr., Esq., tells Jennifer Miskewicz at WIS-TV in Columbia, South Carolina, that customers who paid Orangeburg Memorial Works, Inc., to make cemetery markers for their loved ones, but never received them, aren't out of luck. "I feel like lots of the creditors are going to get at least a portion of their money back," Mr. Owen said in a television interview. The company projects no distribution will be made to general unsecured creditors. The Honorable John E. Waites presides over the liquidation proceeding. WIS-TV relates that Orangeburg Memorial Works closed in February. A meeting of creditors was scheduled for April 1, 2005. So many of the 120 people who paid deposits for headstones showed up wanting a monument or a refund that the U.S. Trustee continued the meeting to May 11, 2005. Mr. Owen says that many of the monuments are complete and are waiting for pick up, but the Debtor wants that to occur on a designated day in an orderly fashion. Orangeburg Memorial Works, Inc., makes cemetery markers. The Company filed a chapter 7 petition (Bankr. D. S.C. Case No. 05- 02490) on March 3, 2005. Paul W. Owen, Jr., Esq., in Columbia, S.C., represents the Debtor. Ralph C. McCullough, II, Esq., serves as the Chapter 7 Trustee. Mr. McCullough hired the law firm of Finkel & Altman, LLC, as his counsel. PEACE ARCH: Liquidity & Equity Woes Trigger Going Concern Doubt --------------------------------------------------------------- Peace Arch Entertainment Group Inc. (TSX:PAE)(AMEX:PAE), disclosed its unaudited results for the three and six month periods ended Feb. 28, 2005. The Company delivered one feature film Showtime "Our Fathers," 10 episodes of the 13-episode series of "Campus Vets - Season II" and 13 episodes of "Love it or Lose it" in the quarter. This compares to the delivery of 2 feature films - "Direct Action" and "The Keeper" - and 8 episodes of the 13-episode series "Campus Vets," for the same period in the prior year. During the quarter, the Company was in production of 2 television series, and held distribution rights for 2 films, all of which are scheduled for delivery during the 2005 fiscal year. Peace Arch is currently completing delivery to its sales force of "American Soldiers" and "Shadows in the Sun," for which it represents the worldwide exploitation rights. The Company's revenue totaled $7.8 million for the quarter, compared with $7.7 million for the second quarter of FY2004. The increase in revenues reflects a larger budget size of the feature film delivered during the quarter compared to the same period of the prior year. The Company reported a net loss of $136,000 or $0.01 per diluted share, for the three months ended February 28, 2005, compared to net earnings $1.3 million, or $0.06 per diluted earnings per share for FY2004 comparable period. Peace Arch reported a net loss of $719,000, or $0.04 per diluted share, for the six months ended February 28, 2005, compared with net earnings of $1.5 million, or $0.07 per diluted earnings per share, for the prior year's six month period. Going Concern Doubt The company has undergone substantial financial restructuring and requires additional financing until it can generate positive cash flows from operations. While the company continues to maintain its day-to-day activities and produce films and television programming, its working capital situation is severely constrained. Furthermore, the company operates in an industry that has long operating cycles, which require cash injections into new projects significantly ahead of the delivery and exploitation of the final production. These conditions cast substantial doubt on the company's ability to continue as a going concern. Equity has been reduced by 30% from a CDN$2,802,000 equity as of Feb. 28, 2005, from a CDN$3,416,000 equity at Feb. 29, 2004. Fred Fuchs Sits as Executive Vice President Earlier, Peace Arch announced the appointment of acclaimed film and television producer Fred Fuchs to the newly created role of Executive Vice President. The Company also recently disclosed that FremantleMedia exercised a conversion right to acquire 2.9 million Peace Arch shares pursuant to a January 2003 Debt Restructuring Agreement between the parties. Peace Arch had previously provided for the issuance of these shares in June 2004. Based in Toronto, Vancouver, Los Angeles and London, England, Peace Arch Entertainment Group Inc. -- http://www.peacearch.com-- together with its subsidiaries, is an integrated company that creates, develops, produces and distributes film, television and video programming for worldwide markets. PEGASUS SATELLITE: Ted Lodge Resigns as President & Director ------------------------------------------------------------ In a regulatory filing with the Securities and Exchange Commission, Scott A. Blank, Pegasus Communications Corporation's Senior Vice President, disclosed that Ted S. Lodge resigned effective April 7, 2005, as President, Chief Operating Officer and Counsel and a director of the company and its subsidiaries. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) PENN TRAFFIC: Exits Chapter 11 & Closes Two Exit Financings ----------------------------------------------------------- The Penn Traffic Company's (OTC:PNFTQ.PK) Plan of Reorganization became effective yesterday, April 13, 2005, allowing it to formally emerge from Chapter 11 under the U.S. Bankruptcy Code. As reported in the Troubled Company Reporter on March 18, 2005, the U.S. Bankruptcy Court for the Southern District of New York confirmed the Company's Plan on March 17, 2005. The Company said that in connection with its emergence from Chapter 11, it closed on two exit financing facilities consisting of: -- a term and revolving facility of up to $136,000,000 in principal amount, and -- a supplemental real estate facility of up to $28,000,000 in principal amount, as well as a sale-leaseback transaction pursuant to which Penn Traffic sold its five owned distribution centers located in New York and Pennsylvania to Equity Industrial Partners Corp. for $37,000,000. Equity Industrial will lease the distribution centers back to Penn Traffic for an initial term of 15 years, with four consecutive five-year options to renew the lease (except that the lease term will end no later than the 14th anniversary of the expiration of the initial term with respect to the Pennsylvania distribution centers). The initial draw on the exit financing facility was approximately $33 million. The exit financing and proceeds from the sale-leaseback transaction will fund cash distributions required under the Plan as well as Penn Traffic's ongoing operating needs. The Company's emergence debt totals approximately $65 million, including the initial $33 million draw and approximately $32 million of capital leases, mortgages and other debt. Penn Traffic's pre-petition secured debt totaled approximately $233 million, including $82.1 million of capital leases and other debt. Pre-petition unsecured debt totaled approximately $300 million. "We are extremely pleased to exit Chapter 11 today," said Robert Chapman, President and Chief Executive Officer of Penn Traffic. "Penn Traffic is beginning life as a new company with a solid capital structure, greatly reduced debt, disciplined and improved operations and a strengthened management team. Penn Traffic today is a leaner, strong competitor with bright prospects. We are excited to now redirect our attention from the turnaround toward growth and profitability." "Penn Traffic's successful turnaround is the product of a close collaborative effort between the Company, its Board of Directors and its creditor constituencies," Mr. Chapman says. "I would like to personally thank the Board, the Company's Secured Lenders and the Official Committee of Unsecured Creditors for their support and close partnership with me and our entire management team. Our success is a reflection of the skill and commitment of those involved and the collective desire to strengthen Penn Traffic." Headquartered in Rye, New York, The Penn Traffic Company operates 109 supermarkets in Pennsylvania, upstate New York, Vermont and New Hampshire under the BiLo, P&C and Quality trade names. Penn Traffic also operates a wholesale food distribution business serving 80 licensed franchises and 39 independent operators. The Company filed for chapter 11 protection on May 30, 2003 (Bankr. S.D.N.Y. Case No. 03-22945). Kelley Ann Cornish, Esq., at Paul Weiss Rifkind Wharton & Garrison, represents the Debtors in their restructuring efforts. When the grocer filed for protection from their creditors, they listed $736,532,614 in total assets and $736,532,610 in total debts. The Court confirmed the Debtor's First Amended Plan of Reorganization on March 17, 2005. PERGOLA NEVADA: Case Summary & 5 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Pergola Nevada, LLC 2785 Roseavelt Street, Suite C Carlsbad, California 92008 Bankruptcy Case No.: 05-03081 Chapter 11 Petition Date: April 13, 2005 Court: Southern District of California (San Diego) Judge: Louise DeCarl Adler Debtor's Counsel: L. Scott Keehn, Esq. Robbins & Keehn, APC 530 "B" Street, 24th Floor San Diego, California 92101 Tel: (619) 232-1700 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 5 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Emily Peagler $600,000 1229 Las Nubes Court Lake San Marcos, CA 92069 Byrnes Construction $65,000 P. O. Box 4024 Carlsbad, CA 92018 Barbara McLain $50,000 2715 Carlsbad Blvd. Carlsbad, CA 92008 Brian C. Regan $45,000 BRIAN C. REGAN ENGINEERING 1811 Rock Springs Road San Marcos, CA 92069 Sandra Robinson $15,000 6519-B 24th Avenue NE Seattle, WA 98115 PILLOWTEX CORP: Sells Tunica Property to Staple Cotton for $2.2MM ----------------------------------------------------------------- Before filing for bankruptcy protection, Pillowtex Corporation and its debtor-affiliates owned a 22.4-acre real property located at 2650 Highway 61 South, Tunica, in Tunica County, Mississippi. The Tunica Property was used in connection with the Debtors' manufacture and sale of pillow and pad products. The Tunica Property includes a 289,000-square foot manufacturing plant and a warehouse. The Debtors' real estate broker, Hilco Real Estate LLC, began marketing the Tunica Property in January 2004. Together with its local partner firm, NAI Saig Company, Hilco erected sale signage on the Tunica Property, developed marketing materials and posted these materials on Hilco's listing Web site. Hilco also placed multiple advertisements in trade journals and newspapers and conducted e-mail and telephone campaigns to solicit interest among potential financial and industry buyers. As a result, 30 parties either expressed interest in the Tunica Property or viewed the listing details and other information made publicly available by Hilco. After further discussions with these parties, Debtor PTEX, Inc., and Hilco received two formal offers from potential purchasers. Gilbert R. Saydah, Jr., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, relates that after considering each of the offers for the Tunica Property, including purchase prices and other material terms, PTEX entered into negotiations with Ernest Miller regarding definitive documentation for the sale of the Tunica Property. At that time, PTEX determined that Mr. Miller's offer was the highest and best offer. However, in an auction held on March 31, 2005, Staple Cotton Cooperative Association outbid Mr. Miller. Accordingly, PTEX sought and obtained the Court's permission to sell the Tunica Property to Staple Cotton. The salient terms of the Real Estate Purchase Contract between PTEX and Staple Cotton are: (a) Staple Cotton will pay PTEX $2,194,500 in cash, which includes an earnest deposit of $220,246 already set aside in escrow. PTEX will also convey fee title in the Tunica Property to Staple Cotton by deed with special warranty. The sale of the Tunica Property is on an "as is" basis and PTEX is not making any representation or warranty as to its condition; (b) PTEX does not anticipate that the sale of the Tunica Property will require the assumption of any leases or executory contracts to which it is a party, or the assignment of any agreements to Staple Cotton. However, PTEX reserves its rights to file other and further pleadings as may be necessary to assume and assign to Staple Cotton any of the leases and contracts, if necessary to further effectuate the transactions contemplated; (c) PTEX is required to deliver the Tunica Property to Staple Cotton in materially the same condition as existed on March 24, 2005, ordinary wear and tear excepted, subject to the rights of GGST LLC (i) to substantially all of the furniture, furnishings, fixtures, equipment, inventory and other tangible personal property located at the Property, and (ii) to access to the Tunica Property after the closing of the sale of the Property to Staple Cotton. A full-text copy of the Real Estate Purchase Contract is available for free at: http://bankrupt.com/misc/Pillowtex_purchase_contract.pdf Access Rights Pursuant to the GGST Agreement, GGST has the right to access to the Tunica Property for the purpose of disposing of the remaining equipment located on it. In return for the Access Rights, GGST is required to reimburse the Debtors for their costs associated with maintaining the Tunica Property and the equipment located on it. On March 31, 2005, PTEX, Staple Cotton and GGST entered into an Access Agreement, wherein Staple Cotton will assume all of the Debtors' obligations with respect to the Access Rights. In addition, Staple Cotton will indemnify and hold the Debtors harmless from any claims, damages or other losses, including attorneys' fees, arising from the Access Rights relating to the Tunica Property. Upon the closing of the sale of the Tunica Property, all of the Debtors' obligations under the GGST Agreement will be waived and discharged with respect to the Tunica Property. Headquartered in Dallas, Texas, Pillowtex Corporation -- http://www.pillowtex.com/-- sold top-of-the-bed products to virtually every major retailer in the U.S. and Canada. The Company filed for Chapter 11 protection on November 14, 2000 (Bankr. Del. Case No. 00-4211), emerged from bankruptcy under a chapter 11 plan, and filed a second time on July 30, 2003 (Bankr. Del. Case No. 03-12339). The second chapter 11 filing triggered sales of substantially all of the Company's assets. David G. Heiman, Esq., at Jones Day, and William H. Sudell, Jr., Esq., at Morris Nichols Arsht & Tunnel, represent the Debtors. On July 30, 2003, the Company listed $548,003,000 in assets and $475,859,000 in debts. (Pillowtex Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) PRIMEDIA INC: Calling Preferred Stock and Debt for Redemption ------------------------------------------------------------- PRIMEDIA Inc. (NYSE: PRM) is calling for redemption all of its outstanding shares of $10.00 Series D Preferred Stock (with an aggregate liquidation preference of approximately $167 million), all of its outstanding shares of $9.20 Series F Preferred Stock (with an aggregate liquidation preference of approximately $96 million) and $80 million aggregate principal amount of its 7- 5/8% Senior Notes due 2008. The redemption date in each case will be May 11, 2005. The Series D Preferred Stock is callable at 101% of the liquidation preference thereof plus accrued but unpaid dividends, the Series F Preferred Stock is callable at par plus accrued but unpaid dividends and the 7-5/8% Senior Notes are callable at 101.271% of the principal amount plus accrued interest. Following the redemption, there will remain outstanding $146 million aggregate principal amount of the 7-5/8% Senior Notes. In connection with the redemption of the Series D and Series F Preferred Stock, PRIMEDIA obtained the written consent of its bank lenders and has repaid its outstanding Term Loans A and Term Loans B in aggregate principal amounts of $5,000,000 and $35,000,000, respectively, and permanently reduced its total revolving loan commitments in an aggregate amount of $30,000,000. The redemptions of the Preferred Stock and reductions of the bank debt and 7-5/8% Senior Notes will improve free cash flow by approximately $27 million on an annualized basis. The company will not realize the full benefit of the improvement in 2005. About the Company PRIMEDIA Inc. is the leading targeted media company in the United States. With 2004 revenue of $1.3 billion, its properties comprise more than 200 brands that connect buyers and sellers in more markets than any other media company through print publications, Web sites, events, newsletters and video programs in four market segments: -- Enthusiast Media includes more than 120 consumer magazines, 115 Web sites, 100 events, 10 TV programs, 340 branded products, and is the #1 special interest magazine publisher in the U.S. with well-known brands such as Motor Trend, Automobile, Creating Keepsakes, In-Fisherman, Power & Motoryacht, Hot Rod, Snowboarder, Stereophile and Surfer. -- Consumer Guides is the #1 publisher and distributor of free consumer guides in the U.S. with Apartment Guide, Auto Guide and New Home Guide, distributing free consumer publications through its proprietary distribution network, DistribuTech, in more than 16,000 locations. -- Business Information is a leading information provider in more than 18 business market sectors with more than 70 magazines, 100 Web sites, 25 events, and 50 directories and data products. -- Education includes Channel One, a proprietary network to secondary schools; Films Media Group, a leading source of educational videos; and Interactive Medical Network, a continuing medical education business. * * * As reported in the Troubled Company Reporter on April 13, 2005, Moody's Investors Service upgraded the ratings of PRIMEDIA Inc. Details of the rating action are: Ratings upgraded: * $300 million of 8.0% senior notes due 2013 -- to B2 from B3 * $470 million of 8.875% senior notes due 2011 -- to B2 from B3 * $226 million of 7.625% senior notes due 2008 -- to B2 from B3 * $175 million of floating rate notes due 2010 -- to B2 from B3 * $211 million of series H 8.625% exchangeable preferred stock due 2010-- to Caa2 from Ca * Senior implied rating -- to B2 from B3 * Senior unsecured issuer rating -- to Caa1 from Caa2 Rating affirmed: * Speculative grade liquidity rating -- SGL-3 Ratings withdrawn: * $168 million of series D 10.0% exchangeable preferred stock due 2008 * $96 million of series F 9.2% exchangeable preferred stock due 2009 Moody's said the rating outlook is stable. PROSPECT MEDICAL: Earns $1.1 Million of Net Income in 1st Quarter ----------------------------------------------------------------- Prospect Medical Holdings, Inc. (PMHX.PK) reported financial results for its fiscal 2005 first quarter ended December 31, 2004, in conjunction with filing an amended Form 10 Registration Statement with the Securities and Exchange Commission. Revenues for the first quarter increased to $33.3 million from $25.9 million in the same period last year, due primarily to the acquisition of three IPAs effective February 1, 2004. The number of HMO enrollees in California has been declining in recent years. Similarly, the number of HMO enrollees using the Company's provider networks has declined in recent periods, which decline offsets the increased revenue from acquisitions. During the first quarter of fiscal 2005, Prospect Medical's number of enrollees decreased from approximately 198,400 to approximately 191,300. Approximately 97% of revenues in each period were generated from monthly capitation payments made by contracted HMOs to the Company's affiliated IPAs. Cost of revenues increased to $24.8 million from $18.9 million in the same period last year. This increase was due primarily to the February 2004 acquisitions and an increase in the Company's medical loss ratio. Cost of revenues, as a percent of revenues, increased to approximately 74.5% in the first quarter of fiscal 2005, from approximately 73% in the first quarter of fiscal 2004. General and administrative expenses, as a percentage of revenues, decreased slightly, from 20% in the prior year period to 19.7% in the current year period. Depreciation and amortization expense increased from $116,000 in the prior year period to $233,000 in the current year period. Net interest expense increased from $16,000 in the prior year period to $100,000 in the current year period, primarily as a result of the $15 million debt facility entered into with GMAC-RFC in September 2004. The Company anticipates using a portion of the proceeds from this facility to fund future acquisitions. Net income for the first quarter of fiscal 2005 was $1.1 million, or $0.13 per diluted share, on approximately 8.6 million weighted average common and common dilutive shares outstanding, as compared to net income of $1.1 million, or $0.21 per diluted share, on approximately 5.4 million Shares Outstanding in the first quarter of fiscal 2004. The increase in diluted shares outstanding for the fiscal 2005 three-month period was due primarily to the inclusion of convertible preferred shares and warrants issued in connection with the successful completion of private placement transactions on March 31, 2004. RFC Waives Credit Default The Company did not meet the "senior debt to EBITDA ratio" required by its credit facility with Residential Funding Corporation as of September 30, 2004, and December 31, 2004. Effective April 7, 2005, RFC granted the Company a waiver of these covenant violations, and agreed to exclude certain items from the covenant computations for a twelve-month period, which enabled the Company to meet the minimum fixed charge coverage ratio at December 31, 2004. Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect Medical, commented, "We are pleased with our results for the first quarter and enthusiastic about our prospects for 2005. We must, however, continue our disciplined approach to operations and acquisitions. The Southern California market continues to present us with significant consolidation opportunities. We are focusing on several acquisition candidates in this region that meet our criteria and anticipate closing at least one acquisition in calendar 2005." Form 10 Filing Update On April 7, 2005, Prospect Medical filed an Amended Form 10 Registration Statement with the Securities and Exchange Commission to register its common stock under the Securities Exchange Act of 1934. A copy of the Form 10 filing is available at http://www.prospectmedicalholdings.com/and at http://www.sec.gov/ The Form 10 will not become effective until the SEC completes its review of the filing and any amendments to the Form 10. About the Company Prospect Medical Holdings, Inc., is a health care management services organization that provides management services primarily to affiliated IPAs. IPAs are professional corporations that contract with independent physicians and other health care providers to create a medical panel of primary care and specialist physicians, and other health care service providers, capable of providing the full range of medical services to individuals enrolled in health maintenance organization managed care health plans. QUALITY WOODWORK: Case Summary & 40 Largest Unsecured Creditors --------------------------------------------------------------- Lead Debtor: Quality Woodwork Interiors, Inc. 12914 Mula Lane Houston, Texas 77477 Bankruptcy Case No.: 05-35214 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Quantum Designworks L.C. 05-35299 Type of Business: The Debtor manufactures and installs premium architectural woodwork, millwork, casework, wall panel systems and specialty furniture. See http://www.qwiinc.com/ Chapter 11 Petition Date: April 5, 2005 Court: Southern District of Texas (Houston) Judge: Marvin Isgur Debtors' Counsel: H Miles Cohn, Esq. Sheiness Scott et al. 1001 McKinney, Suite 1400 Houston, Texas 77096 Tel: (713) 374-7020 Fax: (713) 374-7049 Estimated Assets Estimated Debts ---------------- --------------- Quality Woodwork Interiors, Inc. $1 Million to $1 Million to $10 Million $10 Million Quantum Designworks L.C. $1 Million to $1 Million to $10 Million $10 Million A. Quality Woodwork Interiors, Inc.'s 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Quantum Designworks $777,998 12111 Swenson Blvd. Elgin, TX 78621 Amegy Bank $89,472 P. O. Box 27459 4400 Post Oak Houston, TX 77227-7459 Wilsonart International $85,410 552 Garden Oaks Houston, TX 77018 Cage Hill & Niehause $44,904 Greenbriar Partners LLC $33,015 Watt, Tieder, Hoffar & Fitzgerald,LLP $30,236 Christmann & Co. $26,044 DuPre Transport $22,898 Guaranty Insurance Service $20,713 Hogan Hardwood & Moulding $20,544 Workrite Ergonimics $20,139 Hafele America Co. $18,617 Southeastern Freight Line $16,507 Jetco Delivery, Inc. $13,345 North Texas Flameproof & Wood $13,255 US Bancorp $13,173 MGC, Inc. $12,098 Reed Construction Data $12,000 Bank of the West $11,951 B & E Reprographics $9,744 B. Quantum Designworks L.C.'s 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Quality Woodwork Interiors, Inc. $48,003 12914 Mula Lane Stafford, TX 77477 Bastrop County Tax Assessor $44,060 P. O. Box 579 Bastrop, TX 78602 General Electric Capital Corporation $39,130 P. O. Box 31001 7421 Pasadena, CA 91110-7421 Internal Revenue Service $36,417 84 Lumber $29,581 Custom Forest Products $23,742 Banc One Leasing $21,800 Wilsonart International, Inc. $15,000 Western Dovetail $13,425 General Hardwoods $13,131 Hafele Co. $10,701 TXU Electric $9,255 City of Elgin $9,188 Dixie Plywood Company $8,542 US Bancorp $7,627 Greenbriar Partners, L.L.C. $7,532 Solid Surfaces, Inc. $7,177 Accountemps $6,292 Carter Design Associates, Inc. $6,277 Dahill Industries $6,218 REAL ESTATE: Fitch Puts Low-B Ratings on Two Notes & Two Certs. --------------------------------------------------------------- Fitch Ratings rates the securities of Real Estate Synthetic Investment Finance Limited Partnership 2005-A and RESI Finance DE Corporation 2005-A (collectively referred to as the issuers) as indicated below. The rating on the securities addresses the timely payment of interest and ultimate repayment of principal upon maturity. -- $42,713,000 class B3 notes 'A'; -- $14,238,000 class B4 notes 'A-'; -- $28,475,000 class B5 notes 'BBB'; -- $12,340,000 class B6 notes 'BBB-'; -- $11,390,000 class B7 notes 'BB'; -- $7,594,000 class B8 notes 'BB-'; -- $9,492,000 class B9 certificates 'B+'; -- $6,645,000 class B10 certificates 'B'. The transaction is a synthetic balance sheet securitization that references a $9.5 billion of diversified portfolio of primarily jumbo, A-quality, fixed-rate, first lien residential mortgage loans. The ratings are based upon the credit quality of the reference portfolio, the credit enhancement provided by subordination for each tranche, the financial strength of Bank of America, National Association -- BOANA -- as swap counterparty, and the sound legal structure of the transaction. The reference portfolio consists of 30-year mortgage loans originated by various lenders. The issuers have entered into a credit default swap -- CDS -- with BOANA, documented under an International Swaps and Derivatives Association agreement, and receive a premium in return for credit protection on the reference portfolio. The proceeds of the issued securities will be used to purchase eligible investments (collateral), pursuant to a forward delivery agreement between the trustee and BOANA, whereby the co-issuers are obligated to purchase eligible investments from BOANA at a specified yield on each determination date. Eligible investments will consist of direct obligations of or guaranteed by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Home Loan Bank, or any other agency backed by the U.S. The collateral is pledged first, to the counterparty to reimburse for credit losses on reference portfolio during the term of the CDS, and second to the noteholders for repayment of principal at maturity. Interest earned on the collateral during the term of the CSD is used in combination with the premium from BOANA to make monthly security payments. RELIANCE GROUP: Court Okays James Goodman Employment Pact --------------------------------------------------------- As reported in the Troubled Company Reporter on March 18, 2005, the Official Unsecured Bank Committee and the Official Unsecured Creditors' Committee appointed in the chapter 11 cases of Reliance Group Holdings, Inc., and Reliance Financial Services Corp. asked Judge Gonzalez to: a) authorize the effectiveness of James A. Goodman's Employment Agreement, nunc pro tunc to February 1, 2005; b) amend the form of Reliance Financial Services Corporation's Amended and Restated Articles of Incorporation; c) authorize RFSC to consent to the assignment of certain Bank Claims. Goodman's Employment Agreement Under the RFSC Plan, Judge Goodman will be the Chief Executive Officer of Reorganized RFSC as of the Effective Date. It was originally contemplated that the Effective Date would be around February 1, 2005. The Committees assert that Judge Goodman's role as CEO of Reorganized RFSC is necessary for RFSC's successful emergence from bankruptcy and Judge Goodman is prepared to commit to undertake that role, even with the understanding that he will not be receiving directors' and officers' liability insurance from the Debtor. In fact, Mr. Goodman has already begun assisting the Debtor by undertaking tasks to facilitate the consummation the RFSC Plan, including: (a) attending to the pre-closing of all RFSC Plan documents, including corporate governance and loan documents, in preparation for his role as CEO and Director; (b) entering into negotiations with a bank to open Reorganized RFSC's various operating accounts; (c) meeting and negotiating with Reorganized RFSC's proposed accounting firm to provide day-to-day accounting services that Reorganized RFSC will require and reviewing with them relevant agreements and guidelines in preparation for their role; and (d) meeting with the proposed auditors and tax accountants for Reorganized RFSC. The effective date of Judge Goodman's Employment Agreement has been delayed in light of certain inadvertent delays with respect to the RFSC Plan process in order to: -- allow the Committees to successfully reach a global settlement with the Pension Benefit Guaranty Corporation; and -- allow the Creditors' Committee to commence a new plan process in order to allow the Debtor to confirm a plan of reorganization. Judge Goodman has requested that his Employment Agreement be made effective, nunc pro tunc to February 1, 2005, so that his time and efforts devoted to consummation of the RFSC Plan will be credited. The Committees believe that Judge Goodman's request is reasonable and appropriate in light of the nature and amount of the services he provided. Amended Articles of Incorporation Upon the Effective Date, the equity interests of Reliance Group Holdings will be cancelled and the common stock of Reorganized RFSC will reside with the holders of Class 2 Bank Claims. Pursuant to the Amended and Restated Articles of Incorporation, High River Limited Partnership will have the exclusive right for the first 35 days after the first anniversary of the Effective Date to purchase Reorganized RFSC common stock. The High River Option was included in the form of Amended and Restated Articles of Incorporation pursuant to a letter agreement, dated July 2, 2004, between High River and the Bank Committee. High River Assignment The holders of the Bank Claims are the agents and lenders that are, or were, from time to time, parties to a Credit Agreement, dated as of November 1, 1993, as amended and restated as of April 25, 1995, and as amended and modified through the Petition Date, with, inter alia, RFSC. Several of the Banks, including, High River, AG Capital Funding Partners, L.P., Amroc Investments, LLC and Silver Oak Capital LLC now wish to assign their positions with respect to the Bank debt under the Bank Credit Agreement to the Jefferies Group, Inc. Pursuant to the terms of the Bank Credit Agreement, the High River Assignment requires the consent of: (i) RFSC, as borrower under the Bank Credit Agreement, and (ii) the holders of 66-2/3% of the Bank Debt. As of March 4, 2005, a unanimous written consent to the High River Assignment has been obtained from the holders of the Bank Debt. RFSC has agreed in principle to the execution of the High River Assignment. Amended Articles of Incorporation & High River Assignment Should be Approved The Committees believe that the Debtor's execution of the consent to the High River Assignment would be an action in the ordinary course of RFSC's business. As the borrower under the Bank Credit Agreement, RFSC had various rights and obligations. Among other things, its written consent is required for any waiver or amendment of a provision or provisions of the Bank Credit Agreement. Without the requisite consent, the High River Assignment would contravene certain limitations in the Bank Credit Agreement regarding the percentage of Bank Debt an assignee may acquire. The execution of a consent allowing that assignment would simply be an ordinary action taken by RFSC under the Bank Credit Agreement. Furthermore, the Debtor has already agreed to execute that consent, subject to Court approval. The Committees propose to clarify the form of Amended and Restated Articles of Incorporation with respect to the provision concerning the High River Option, by making the High River Option expressly conditional upon High River or its affiliates remaining the beneficial owners of the common stock of Reorganized RFSC issued to High River and its affiliates on the Effective Date. Assuming the effectiveness of the High River Assignment, High River will no longer be a Bank and, in fact, will no longer have any outstanding interest in the Debtor after the Effective Date. Thus, the proposed modification of the Amended and Restated Articles of Incorporation should have no material adverse effect on the rights of any party to RFSC's Chapter 11 case. The Official Unsecured Bank Committee is represented by Andrew P. DeNatale, Esq., Richard Horsch, Esq., Daniel P. Ginsberg, Esq., and Elizabeth Feld, Esq., at White & Case LLP, in New York. Arnold Gulkowitz, Esq., and Brian Goldberg, Esq., at Orrick, Herrington & Sutcliffe LLP, in New York are the attorneys for the Official Unsecured Creditors' Committee. * * * The Court approves the Committees' request. 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. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) SEALY MATTRESS: S&P Puts B+ Rating on Amended $690M Sr. Sec. Loan ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to Sealy Mattress Co.'s amended $690 million senior secured term bank loan due 2012 and a '2' recovery rating. The recovery rating reflects our belief that lenders will recover a substantial amount of principal (80%-100%) in the event of a payment default. The proceeds of the bank loan are being used to repay the company's existing $465 million term loan C and a $100 million senior unsecured loan, two obligations with higher interest rates than the amended facility. The ratings are based on preliminary terms and are subject to review upon final documentation. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on Sealy Mattress Co. and its parent company, Sealy Corp. After the refinancing, Standard & Poor's expects pro forma total debt outstanding to be about $1.0 billion. The outlook is stable. "The ratings on Sealy Corp. are based on the company's highly leveraged financial profile, a factor partially mitigated by its No. 1 domestic market share in the stable bedding industry and by its steady cash flow," said Standard & Poor's credit analyst Martin S. Kounitz. The mattress industry has stable demand characteristics and has benefited from improved demographics. About 70% of domestic mattress sales are replacements for existing bedding. Sealy's substantial investment in advertising and promoting its brands have posed a significant barrier to entry. Chinese-manufactured products have entered the market; however, imported mattresses are not very competitive because of the shipping costs involved. Moreover, consumers require fast delivery. Sealy's average business profile is supported by: -- its strong brands (including Sealy, Posturepedic, and Stearns & Foster), -- its top market share, and -- the stable nature of demand for mattresses. In 2004, Sealy retained the No. 1 market position in the U.S. mattress industry, with a 21.8% share, about even with 2003. The company's market share peaked in 2001 at 22.8%. Since 2000, the Three S's -- Sealy, and its major competitors Simmons and Serta -- have seen modest loss in their market shares to specialty mattress manufacturers such as Tempur Pedic and Select Comfort, who have increased their share to nearly 10% from less than 3% in 2000. Sealy and its major competitors have responded with composite mattresses, products that use latex or other specialty materials to enhance traditional innersprings. SHELBY COUNTY: Default Cues S&P to Cut Rating on $18.8M Bonds to B ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on Shelby County Health, Educational and Housing Facility Board, Tennessee's $18.8 million multifamily housing revenue bonds series 1997, issued on behalf of the Stonegate and Autumnwood apartment projects, to 'B' from 'BB', and placed the rating on CreditWatch with negative implications. The rating actions reflect the occurrence of a technical default and the likelihood of a draw on the debt service reserve fund (DSRF) on the next interest payment date (IPD) in July 2005. The trustee informed Standard & Poor's that a technical default has occurred following the lessee's failure to make its monthly, obligated payment due on Feb. 7, 2005, which may result in a draw on the DSRF to make bond principal and interest payments on the next IPD (July 1, 2005). According to audited financial statements for fiscal 2003, the ratio of net operating income to maximum annual debt service was 1.06x. This ratio dropped from the 2002 level of 1.14x and is significantly below the 1.5x pro forma coverage level at which Standard & Poor's originally rated the bonds. Unaudited financial statements through Dec. 31, 2004, indicate that coverage improved slightly to 1.10x in that year. SINO-FOREST: Will Operate Anhui Plantation with Mandra Resources ---------------------------------------------------------------- Sino-Forest Corporation agreed to enter into a series of agreements with Mandra Resources Limited and certain of its subsidiaries that are start-up companies formed to acquire, grow, harvest and replant standing timber on commercial forestry plantations located in Anhui province in the People's Republic of China. Sino-Forest has been provided with a fairness opinion by an investment banking firm of international standing to the effect that the commercial relationship between Sino-Forest and Mandra is fair from a financial point of view to Sino-Forest and its relevant subsidiaries. Mandra has received a report from JP Management Consulting (Asia Pacific) Pte Ltd. relating to the Mandra Project, which includes a review of the suitability of areas around various cities in Anhui province for the development of commercial forestry plantations. The implementation of the proposed agreements is subject to Mandra Forestry Finance Limited raising third party financing sufficient to implement the Mandra Project, which Mandra Finance is currently seeking, and, in connection with the completion of the Financing, the parties will enter into agreements pursuant to which: -- Sino-Forest will advance a US$15 million subordinated loan to Mandra Forestry Holdings Limited, the parent corporation of Mandra Finance, at the completion of the Financing; -- Sino-Forest will acquire, for nominal consideration, a 15% equity investment in Mandra Holdings; -- Sino-Forest will be entitled and obligated to purchase substantially all of the commercially saleable cut logs harvested from the Plantations pursuant to a seven year committed sales agreement at a 3% discount to the then- prevailing market price, which agreement may be extended annually for up to another five years at Mandra's option; -- Sino-Forest will be engaged for a seven year period under an operating management agreement to provide certain management, operating and support services to help operate and manage the Plantations, in return for a quarterly service fee equal to the greater of US$250,000 and 10% of the estimated reimbursable expenses for the quarter, which agreement may be extended annually for up to another five years at Mandra's option; -- Subject to certain conditions, Sino-Forest will have an option to acquire all the other outstanding shares of Mandra Holdings at their then fair market value (subject to certain conditions), which option is exercisable from the third anniversary of the date of the Shareholders Agreement (or earlier in certain circumstance) to the fifth anniversary of the date of the Shareholders Agreement; -- Sino-Forest will be granted a right of first offer to purchase the equity securities of Mandra Holdings from the other shareholders thereof in respect of any proposed sales by such shareholders between the fifth and seventh anniversaries of the date of the Shareholders Agreement, and Mandra Resources Limited (the controlling shareholder of Mandra Holdings) will be granted a drag-along right to compel each of the other shareholders of Mandra Holdings to sell their shares in a sale by Mandra Resources any time after the fifth anniversary of the Shareholders Agreement; and -- Sino-Forest will gain access to potential plantation production in a province of the PRC where Sino-Forest does not currently carry on activities but which Sino-Forest considers to be an important strategic location given its proximity to the Yangzi River Delta. Sino-Forest believes that during the initial term of the agreements with Mandra, the combination of discounts to market prices paid for cut logs, together with fees earned by Sino-Forest under the operating agreement, will enable Sino-Forest to recover the amount of the investment made by it, assuming that the Mandra Project proceeds according to current expectations. Sino-Forest Chairman and CEO Allen Chan said "This strategic transaction is expected to further strengthen Sino-Forest's leadership position as a commercial plantation operator in China, by significantly increasing our access to logs with relatively little capital investment. It will also further diversify our sources of revenue geographically and give us the opportunity to significantly increase our investment in this new venture in the future." Under Mandra Finance's operating plan, Mandra Finance intends to acquire up to 270,000 hectares of mature, half-mature and young Chinese fir and pine trees, to grow and harvest them and to sell them to Sino-Forest. This potential access to significant amounts of cut logs is therefore to be available to Sino-Forest without the capital expenditure, which would be required if Sino-Forest was initiating this project on its own. Mandra may also acquire an additional 50,000 hectares of standing timber. Mandra Finance's current acquisition plan contemplates acquiring standing timber on approximately 133,300 hectares of commercial forests in each of the first two years of its operation, or sooner if possible. While Mandra Finance has undertakings with certain local forestry bureaus to assist in acquiring up to an aggregate of approximately 350,000 hectares of commercial forests from the holders of land use rights in their respective jurisdictions, Mandra Finance must still negotiate the final price and other commercial terms in the definitive agreements with the holders of land use rights. Sino-Forest will agree not to operate forestry plantations or provide forestry plantation services to any other person in Anhui province that could reasonably be expected to have a material adverse effect on the performance of its obligations under the arrangements with Mandra Finance, and Mandra Finance and Mandra Holdings will agree not to operate forestry plantations or provide forestry plantation services to anyone in the PRC outside of Anhui province, in each case during the term of the agreements and for a period of three years thereafter. The rights and obligations of Sino-Forest under all of the foregoing agreements, whether executed prior to or contemporaneously with, the completion of the Financing, will be conditional upon the completion of the Financing. Jaakko Poyry Consulting Report Sino-Forest also announced that Mandra Finance has received a report from JP Management Consulting (Asia Pacific) Pte Ltd. relating to a technical and operational review of the proposed operations of Mandra relating to the Mandra Project, which includes a review of the forestry industry in the PRC and the suitability of areas around various cities in Anhui province for the development of commercial forestry plantations. The Jaakko Poyry Report, contains certain projections of cash flow for the Mandra Project as well as analyses for changes in log prices, yield (recoverable volume) and production, planting and maintenance costs, all of which are subject to the assumptions, limitations and qualifications set out therein. Sino-Forest Corporation (S&P, BB- Credit Rating, Stable Outlook, July 28, 2004) is the largest, foreign-owned, commercial forestry plantation operator in China in terms of plantation area. Sino- Forest cultivates and harvests trees for sale as standing timber, logs and wood fiber for the manufacturing of wood chips for pulp & paper processing, and of engineered wood products for the furniture, construction and decoration industries. Sino-Forest is a Canadian corporation with executive offices in Hong Kong and plantations in south-east China. Sino-Forest operates through two wholly owned subsidiaries - Sino-Panel Holdings Limited and Sino- Wood Partners Limited. Sino-Forest's common shares have been listed on the Toronto Stock Exchange since 1995 and trade under the symbol TRE. SOLUTIA INC: Begins Design of New Saflex(R) PVB Plant in China --------------------------------------------------------------- Solutia Inc. (OTC Bulletin Board: SOLUQ) begun the design and engineering of a new Saflex PVB interlayer plant in China. Upon the successful completion of the design and engineering phase, the company would begin the construction phase, targeting a mid-2007 startup. The plant is being designed to meet the growing demands of the Chinese automotive market by manufacturing PVB interlayers for use in windscreens. "The China plant is a critical component of the global growth strategy for Solutia's Laminated Glazing Interlayers (LGI) business," said Mitch Pulwer, General Manager, LGI, Solutia Inc. "We are dedicated to meeting the growing needs of our customers worldwide, and to building capacity in line with market demand. This announcement reflects our commitment to providing customers in China with an on-the-ground source of the world's premier PVB interlayers. We will continue to invest in all world areas as both technology and capacity needs arise." The new Solutia plant is being designed for location in an industrial community such as the greater Shanghai area, building upon Solutia's current LGI presence in the Asia-Pacific region. Solutia began expanding this presence in 1998 with a finishing center, distribution center and regional customer service center in Singapore. These investments have been instrumental in establishing the high level of logistical support and customer service necessary to meet growing Asian demand. 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 is represented by Conor D. Reilly, Esq., and Richard M. Cieri, Esq., at Gibson, Dunn & Crutcher, LLP. SPIEGEL INC: Court Permits Committee to Hire Hannafan as Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave the Official Committee of Unsecured Creditors appointed in Spiegel, Inc., and its debtor-affiliates' chapter 11 cases permission to retain Michael T. Hannafan & Associates Ltd. as its Illinois local counsel, nunc pro tunc to March 10, 2005. As the Committee's local counsel, Hannafan will assist the Committee's special conflicts counsel Zuckerman Spaeder LLP by: (a) reviewing, investigating, and, if appropriate, prosecuting claims or causes of actions against third parties; (b) appearing before the Court and any other court to protect the interests of the estate; (c) performing all other necessary legal services requested by the Committee in connection with the matters for which it is being retained; and (d) otherwise representing the Committee in matters where it so directs. The Committee assures the Court that in performing the required tasks, Hannafan will coordinate with Zuckerman to avoid duplication of expense to the estate. Michael T. Hannafan, Esq., attests that the firm is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code, and does not hold or represent any interest adverse to the Debtors' estates or creditors. Mr. Hannafan will be paid on an hourly basis. The attorneys and professionals presently designated to represent the Committee, and their hourly rates are: Michael T. Hannafan $500 Blake T. Hannafan $340 Nicholas A. Pavich $300 Paralegal Assistance $50 Hannafan may use one or more additional lawyers in connection with its engagement. The hourly rates are subject to periodic adjustments from time to time. Hannafan will also be reimbursed for actual, necessary expenses incurred. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) TOM'S FOODS: Taps Corporate Revitalization as Reorg. Consultants ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Georgia gave Tom's Foods Inc. permission to employ Corporate Revitalization Partners, LLC, as its reorganization consultants and Gene R. Baldwin as its Chief Restructuring Officer. As Chief Restructuring Officer, Mr. Baldwin will report to the Debtor's Board of Directors and will be responsible for managing, supervising and administering any and all aspects of the Debtor's bankruptcy proceedings. Corporate Revitalization will: a) assist in the preparation of schedules of assets and liabilities, statement of affairs, budget cash flow management charts, and other financial reports that the Debtor requires for the orderly administration of its chapter 11 case; b) consult and advise the Debtor with respect to obtaining post-petition financing, and in connection with any plan of reorganization and disclosure statement; and c) advise the Debtor with respect to the myriad of other business and reorganization issues in relation to its chapter 11 case, and perform other services that are assigned by Mr. Baldwin. Mr. Baldwin, a Managing Partner at Corporate Revitalization, discloses that the Firm received a $75,000 retainer, and the Firm's compensation consists of a $15,000 weekly fee. Mr. Baldwin reports the hourly rates of Corporate Revitalization's principal consultants: Professional Designation Hourly Rate ------------ ----------- ----------- William Snyder Managing Partner $375 Mike Manos Managing Partner $350 Steve Truitt Partner $300 Clint Conduit Associate $175 The hourly rates of Corporate Revitalization's other professionals are: Designation Hourly Rate ------------ ----------- Managing Partners $300 - $400 Partners $250 - $325 Associates $150 - $200 Corporate Revitalization assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Columbus, Georgia, Tom's Foods Inc. manufactures and distributes snack foods. Its product categories include chips, sandwich crackers, baked goods, nuts, and candies. The Company filed for chapter 11 protection on April 6, 2005 (Bankr. M.D. Ga. Case No. 05-40683). David B. Kurzweil, Esq., at Greenberg Traurig, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $93,100,000 and total debts of $79,091,000. TRINITY COUNTY: Fitch Cuts COPs Rating to BB from BBB ----------------------------------------------------- Fitch Ratings has downgraded the rating on $1,025,000 in Trinity County certificates of participation -- COPs -- 1997 Capital Improvements Refunding -- to 'BB' from 'BBB'. The Rating Outlook is Stable. The downgrade is based on the county's weakened financial position and substantial operating losses at its hospital. The downgrade also reflects Fitch's assessment of county management actions to date as weak, evidenced by several years of minimal and insufficient general fund subsidies to the hospital, slow action to alleviate the hospital's operating losses, recent inefficient billings and collections, and general fund operating losses in recent fiscal years. Fitch also views the county's need to restrict its general fund balance to 5% of the prior year's expenses after an upcoming working capital financing as providing too small of a reserve given the area's economic cyclicality. Until February 2005, Trinity County owned and operated a small hospital, which ran sizable operating deficits for several years. General fund contributions were not sufficient to balance operations, resulting in a $3.8 million deficit accumulated by June 30, 2004. This liability rose to $7.3 million by early 2005, as the county's billings and collections systems experienced technical and other problems. The county has borrowed internally for general liquidity, and to make a repayment set-aside required for its $3 million tax and revenue anticipation notes -- TRANs. The county now is planning about a $5.7 million working capital financing, which will repay the interfund loan, provide for the second TRAN repayment, and yield liquidity for upcoming hospital operations. In an effort to keep this hospital operating as is and stem its losses, the county, Trinity Public Utilities District -- TPUD, and Mountain Community Medical Service Authority -- MCMS, a joint powers authority created by the county and TPUD executed a project management agreement whereby MCMS will operate the hospital and TPUD will provide up to $1.8 million in loans. This structure began in February, 2005. The agreement envisions TPUD seeking voter authorization for an electric utility surcharge to subsidize hospital operations in November, 2005. However, passage requires a two-thirds majority, and Fitch cannot ascertain the likelihood of approval. A parcel tax to support hospital operations failed in November 2004, receiving 55% approval instead of the two-thirds required. Also, the agreement does not require the election to take place, and any party can withdraw from the agreement. Should the agreement be terminated, or the electric surcharge fail to be approved by voters, alternatives consist primarily of closing the hospital, reducing services offered making the hospital function only as a health clinic, or creating another means for TPUD to support MCMS in its operations. Ultimately, the county hopes the hospital will regain financial viability with the electric surcharge, at which point a hospital district with property tax levying capacity can be established with voter approval. The district then would execute a new project management agreement. A permanent resolution for the hospital must be reached by Jan. 1, 2008, when special legislation allowing TPUD to operate the facility through MCMS expires. The county's financial position is weak, with the general fund running operating losses in fiscals 2003 and 2004, largely the result of lower state funding. Fiscal 2004 ended with a $0.6 million general fund balance, a low 4.5% of operating expenditures and transfers out. Also, this level is well below fiscal 2002's $1.7 million or 12.5%. Fitch views the county as needing an above average year-end reserve because of the inherent cyclicality in its natural resource-based economy and reliance on sensitive tax revenue. Assuming the planned working capital financing proceeds, federal tax law concerning such financings restricts the county's general fund balance to 5% of the prior years' expenditures. The county has made progress in improving its financial outlook with $400,000 in budget reductions made recently as well as plans to eliminate another $600,000 over the following two years. These reductions will partially offset the new costs of the TPUD loan repayment, the working capital COP debt service, and eventually, reimbursement for the retained $4.3 million hospital deficit accumulated prior to the transfer date. (The hospital deficit reduces to $4.3 million following $3 million in repayment to the county treasury pool from the working capital financing proceeds.) Trinity County's non-financial credit factors are adequate, and could support a return to the 'BBB' rating if the financial position improves. The debt burden, assuming a $5.7 million working capital borrowing, is low and assessed valuation growth has been consistent and moderate. However, the unemployment rate continues to be well above state and national averages, reaching 12.1% in 2004, its highest level since 2001. The county economy is limited, based largely in timber, government, and tourism. Income levels are below average, reflecting a low cost of living and employment seasonality. The tax base is somewhat concentrated in timber production, although the representation is moderate. Fitch will continue to monitor the hospital's operating status including the outcome of the November election, if one is held, and its implications for the county's overall financial position. ULTIMATE ELECTRONICS: Explores Possible Sale or Liquidation ----------------------------------------------------------- Ultimate Electronics, Inc. (OTC: ULTEQ) continues to explore various strategic alternatives in an effort to maximize value for all stakeholders, including a sale of all or part of the company as a going concern or the sale of all or part of the assets of the company through a liquidation. In connection with this process, the company plans to conduct an auction today and tomorrow, April 14 and 15, seeking the highest and best bid or combination of bids from qualified third parties. The company anticipates seeking approval of those bids at a hearing before the U.S. Bankruptcy Court for the District of Delaware on April 19, 2005. DIP Financing Amendment The company and its lenders have also entered into further amendments to the company's debtor-in-possession financing facility. The amendments require the company to conduct an auction and seek Bankruptcy Court approval of qualified third party bids for the company by agreed upon dates. The amendments also permit the company to access $5 million in cash reserves between April 8 and April 19, 2005. Common Stock Deregistration Ultimate intends to file a Form 15 with the Securities and Exchange Commission to deregister its common stock and suspend its reporting obligations under the Securities Exchange Act of 1934 after the close of trading on April 13, 2005. The company expects the deregistration to become effective within 90 days of the filing with the SEC. As a result of the Form 15 filing, the company's obligation to file with the SEC certain reports and forms, including Forms 10-K, 10-Q, and 8-K, will be suspended and upon effectiveness will cease. As previously reported, the company's common stock was delisted from the Nasdaq National Market effective February 25, 2005. Since then, the company's common stock has been trading on the Pink Sheets. The company anticipates that its common stock will continue to be quoted on the Pink Sheets following deregistration to the extent that market makers continue to make a market in its shares. However, the company can provide no assurances that trading of the company's common stock will continue. In making its determination to deregister its common stock and suspend its reporting obligations under the Securities Exchange Act, the company's Board of Directors considered four factors, including: -- The company's ongoing restructuring efforts in connection with its filing under chapter 11 of the United States Bankruptcy Code; -- The company's belief that the outcome of the company's reorganization under chapter 11 of the Bankruptcy Code will not result in any value for the holders of the company's common stock; -- The costs, both direct and indirect, incurred by the company in connection with the preparation and filing of periodic reports and forms with the SEC which the company expects would increase as a result of the Sarbanes-Oxley Act of 2002 and new SEC rules promulgated thereunder; and -- The benefit of allowing senior management to spend less time with SEC report and form preparation will enable them to devote their full attention and effort to the company's operations and financial objectives. Headquartered in Thornton, Colorado, Ultimate Electronics, Inc. -- http://www.ultimateelectronics.com/-- is a specialty retailer of consumer electronics and home entertainment products located in the Rocky Mountain, Midwest and Southwest regions of the United States. The Company operates 65 stores and focuses on mid-to high-end audio, video, television and mobile electronics products. The Company and its debtor-affiliates filed for chapter 11 protection on January 11, 2005 (Bankr. D. Del. Case No. 05-10104). J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $329,106,000 and total debts of $160,590,000. ULTIMATE ELECTRONICS: Gets Court Approval to Hire Skadden Arps -------------------------------------------------------------- Ultimate Electronics, Inc., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the District of Delaware to employ Skadden, Arps, Slate, Meagher & Flom LLP as its general bankruptcy counsel. Skadden Arps will: a) advise the Debtors with respect to their powers and duties as debtors and debtors-in-possession in the continued management and operation of their businesses and properties; b) advise the Debtors with respect to corporate transactions and corporate governance, and in any negotiations with creditors, equity holders, prospective acquirers, and investors and assist the Debtors with respect to employee matters; c) attend meetings and negotiate with representatives of creditors and other parties in interest and advise and consult the Debtors on the conduct of their chapter 11 cases, including all of the legal and administrative requirements of operating in chapter 11; d) take all necessary action to protect and preserve the Debtors' estates, including (i) the prosecution of actions on their behalf, (ii) the defense of any actions commenced against the Debtors' estates and negotiations concerning all litigation in which the Debtors may be involved, and (iii) objections to claims filed against the estates; e) review and prepare on behalf of the Debtors all motions, administrative and procedural applications, answers, orders, reports and papers necessary to the administration of the their estates; f) negotiate and prepare on the Debtors' behalf a plan of reorganization, disclosure statement and all related agreements and documents and take any necessary action on behalf of the Debtors to obtain confirmation of the plan; g) review and object to claims and analyze, recommend, prepare, and bring any causes of action created under the Bankruptcy Code and advise the Debtors in connection with any proposed sale of assets; h) appear before the Court, any appellate courts, and the U.S. Trustee, and protect the interests of the Debtors' estates before those courts and the U.S. Trustee; and i) perform and provide all other necessary legal services and legal advice to the Debtors in connection with their chapter 11 cases. J. Eric Ivester, Esq., a Member of Skadden Arps, is the lead attorney for the Debtors' restructuring. Mr. Ivester discloses that the Firm received a $427,870,000 [sic] postpetition retainer. Mr. Ivester reports Skadden Arps' professionals bill: Designation Hourly Rate ----------- ----------- Partners $540 - 825 Counsel/Special Counsel 535 - 640 Associates 265 - 495 Legal Assistants 90 - 195 Skadden Arps assures the Court that it does not represent any interest adverse to the Debtors or their estates. Headquartered in Thornton, Colorado, Ultimate Electronics, Inc. -- http://www.ultimateelectronics.com/-- is a specialty retailer of consumer electronics and home entertainment products located in the Rocky Mountain, Midwest and Southwest regions of the United States. The Company operates 65 stores and focuses on mid to high-end audio, video, television and mobile electronics products. The Company and its debtor-affiliates filed for chapter 11 protection on January 11, 2005 (Bankr. D. Del. Case No. 05-10104). When the Debtors filed for protection from their creditors, they listed total assets of $329,106,000 and total debts of $160,590,000. UNISOURCE ENERGY: Moody's Puts Ba2 Rating on Planned $105M Loan --------------------------------------------------------------- Moody's Investors Service assigned a Senior Implied rating of Ba2 to UniSource Energy Corporation and assigned a rating of Ba2 to UniSource's proposed $105 million senior secured bank credit facility. This is the first time that Moody's has rated UniSource. Moody's also upgraded the ratings of UniSource's utility subsidiary Tucson Electric Power (TEP: senior unsecured to Ba1 from Ba3), concluding the review for upgrade that was initiated on February 8th. In addition, Moody's assigned a Baa3 rating to TEP's proposed new $400 million 5-year senior secured bank credit facility. The rating outlook is stable for both UniSource and TEP. The rating actions reflect: 1) Improvement in financial performance, which is due in part to recent deleveraging, and expectations that financial results will continue to improve over the next several years; 2) the relatively low business risk and stable cash flow associated with the regulated operations that comprise virtually all of UniSource's earnings and cash flow; 3) the medium term rate clarity that exists as a result of prior decisions by the state commission; and 4) the termination of a proposed leveraged acquisition of the company by a third party which eliminated uncertainty and the potential for additional holding company debt. In February, UniSource announced a plan to reduce debt at subsidiary Tucson Electric Power by approximately $215 million by raising approximately $235 million of debt at the holding company and contributing equity into its utility subsidiaries. This followed the termination of the proposed purchase of UniSource by a third party, which as proposed, would have increased consolidated leverage by approximately $400 million. Consolidated debt was reduced in 2004 as TEP generated strong free cash flow after capital spending, and debt was further reduced by the early redemption of $53 million of TEP first lien securities last month. The rating action considers the stability of UniSource's income and cash flow, virtually all of which is derived from its regulated operations in Arizona. TEP is a vertically integrated electric utility that contributes approximately 90% of UniSource cash from operations. UniSource Energy Services, whose subsidiaries are UNS Electric, Inc. an electric transmission and distribution company and UNS Gas, Inc. a local natural gas distribution company, contributes approximately 10% of UniSource's consolidated cash from operations. UniSource's only non-regulated subsidiary, Millennium Energy Holdings, Inc. comprises approximately 6% of its assets and is in exit mode, which will further reduce the business risk profile of UniSource. Both TEP and the UES subsidiaries have a substantial amount of regulatory rate clarity for the medium term. A 1999 settlement agreement established rates for TEP through 2008 with an interim review in 2004. As part of the Arizona Corporation Commission's 2003 approval of the acquisition of the UES assets, rate increases implemented at both UNS Gas and UNS Electric will be in effect through 2007. The upgrade of TEP incorporates the expectation that its financial performance will continue to improve over the next several years. In 2004, TEP's funds from operations as a percentage of total adjusted debt was approximately 14% and, primarily as a result of planned early debt redemption and reduced interest costs, is expected to be in the range of 16% to 20% for the next several years. TEP anticipates funding all of its capital expenditures and maturing debt obligations from internal sources of cash. UniSource's 2004 funds from operations reflected a full year of UES results, and equaled approximately 14% of total adjusted debt. The rating reflects Moody's expectation that UniSource's FFO as a percentage of debt will be in the range of 15% to 18% for the next few years. The ratings also consider the following risks: 1) TEP is in the midst of a scheduled regulatory rate check that could result in lower rates but not higher rates; 2) significant uncertainty in 2008 when the current rate freeze at TEP will end and a power supply agreement that supports virtually all of UNS Electric's power sales is scheduled to terminate; 3) maintaining high plant availability is a key factor for financial performance and any substantial unplanned outage could be costly since the utility is operating under a rate freeze; 4) UniSource's consolidated debt to capital ratio, as calculated on a GAAP basis, remains quite high for its industry; and 5) UniSource and TEP operate their businesses in a challenging state regulatory environment. TEP is currently in the process of a rate check that was mandated as part of the 1999 settlement agreement. The check could cause rates to be reduced but not increased. As part of filings, TEP has indicated that they could justify a revenue increase of $111 million, and therefore feel that it is unlikely a decrease would be required. According to the company, the bulk of the revenue shortfall is generated by differences in the actual cost of fuel and other operating and lease expense compared to the amounts allowed for these items in its current rates. Based on the procedural schedule established, a decision is not expected until the fourth quarter of 2005. Uncertainty for both TEP and UES will increase as 2008 approaches. Rates at TEP are currently capped through 2007. The terms of the 1999 settlement agreement included the assumption that TEP would begin to charge market based rates in 2008. However, UniSource has indicated that they believe a new agreement could replace the 1999 settlement agreement prior to 2008. Given its low cost predominately coal-fired generating assets, TEP should be well positioned in a market based rate environment but also has flexibility to continue in a negotiated or capped rate environment. The power purchase agreement that supplies virtually all of UES Electric's energy supply is scheduled to terminate in 2008. TEP and UniSource's financial results are dependent on the continued solid performance of their low-cost coal fired generation assets. TEP's rates are currently capped and there is no mechanism to pass through increases in fuel or purchased power costs, such as might result from an unplanned outage of a key generating plant. On a GAAP basis, debt to capital ratios at both TEP and UniSource remain high. Although leverage at TEP is being further reduced in conjunction with the issuance of the UniSource facilities, TEP's adjusted debt-to-capital ratio is projected to be approximately 72%. UniSource debt-to-capital ratio is projected to be approximately 74%. In each case, this is among the highest of U.S. investor owned electric utility companies. The rating outlook is stable for both UniSource and TEP, reflecting their improving financial results, the stability of their predominantly regulated businesses and an expectation of continued solid operating performance. TEP's proposed secured credit facilities will have a five year term and will mature in 2010. They are expected to include a $60 million revolving credit facility for working capital needs and a $340 million letter of credit facility to support $329 million of tax-exempt variable rate remarketed bonds. The proposed facilities are to be secured by a second lien on TEP's plant through the pledge of second mortgage bonds to these creditors. TEP intends to substitute its remaining $138 million of first lien debt into its second mortgage bond indenture on or before June 30, 2005. TEP will not issue any additional first mortgage bonds, so the second mortgage bonds will be TEP's highest ranking obligations. The facilities will prohibit the issuance of new first mortgage bonds. The net book value of assets pledged under TEP's indenture is approximately $1.1 billion. The new credit facilities will replace similarly sized facilities that are scheduled to mature in 2009. Financial covenants will include a minimum EBITDA to interest test and a maximum consolidated debt to EBITDA test. The proposed UniSource secured credit facilities will have a five year term and mature in 2010. They include a $90 million term loan facility and a $15 million revolving credit facility. Proceeds will be used to fund equity contributions to TEP for debt reduction and for general corporate purposes. Security is limited to the capital stock of Millennium and UES, with a negative pledge provided on the capital stock of TEP. Financial covenants include minimum borrower cash flow to debt service (as defined) of 1.25 times and a maximum consolidated total debt to EBITDA (as defined) of 5.25 times declining over time. UniSource's SGL-2 speculative grade liquidity rating is reflective of a good liquidity profile. UniSource's 2004 consolidated cash from operations of about $300 million more than covered capital expenditures of over $150 million and dividends of approximately $22 million. Over the next several years, free cash flow after capital expenditures and dividends is projected to be in the range of $50-$100 million per year. Near term debt maturities are limited to capital lease payments at TEP of approximately $40-$50 million per year. Ratings assigned for UniSource are: -- Senior Implied Rating and senior secured bank credit facility; both Ba2, -- Speculative grade liquidity rating; SGL-2 Ratings assigned for TEP are: -- Senior secured bank facility; Baa3 Ratings upgraded for TEP are: -- Senior secured debt and senior secured bank facility upgraded to Baa3 from Ba2; -- Issuer Rating and senior unsecured debt upgraded to Ba1 from Ba3 Headquartered in Tucson, Arizona, UniSource Energy Corporation is a holding company that provides electricity and natural gas to approximately 593,000 customers across Arizona through its primary subsidiaries, Tucson Electric Power Company, a vertically integrated electric utility, and UniSource Energy Services which owns UNS Gas, Inc. and UNS Electric, Inc. WARREN RECYCLING: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Warren Recycling, Inc. P.O. Box 3647 Warren, Ohio 44482 Bankruptcy Case No.: 05-41620 Type of Business: The Debtor operates a recycling center. Chapter 11 Petition Date: March 28, 2005 Court: Northern District of Ohio (Youngstown) Judge: Judge Kay Woods Debtor's Counsel: Andrew W. Suhar, Esq. P.O. Box 1497 Youngstown, Ohio 44501 Tel: (330) 744-9007 -- and -- Melissa M. Macejko, Esq. 1101 Metropolitan Tower P.O. Box 1497 Youngstown, Ohio 44501 Tel: (330) 744-9007 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ CSX Transportation, Inc. $478,455 500 Water Street SCJ180 Jacksonville, FL 32202-4423 Caterpillar Financial Services Corp $247,980 P.O. Box 730669 Dallas, TX 75373-0669 Browning-Ferris Industries $131,406 8100 South Stateline Road Lowellville, OH 44436 R&J Trucking Co., Inc. $119,674 8063 Souther Boulevard P.O. Box 9454 Youngstown, OH 44513 Ohio Machinery $97,000 P.O. Box 92339-N Cleveland, OH 44193 Geauga/Trumbull Solid Waste $57,075 Management District 2931 Youngstown Road Warren, OH 44484 Sky Bank $38,705 P.O. Box 40 East Liverpool, OH 43920 David R. Snyder, CPA $26,225 4097 Youngstown Road Warren, OH 44484 SLM Equipment & Repair $25,625 11800 Rockhill 9300 Johnson Road Alliance, OH 44601 Waste Management of Ohio $23,075 Mahoning Landfill 3510 Garfield Road New Springfield, OH 44443 Flex-Temp Employment Service $21,928 P.O. Box 2517 Sandusky, OH 44871-2517 The Simon Law Firm $21,290 1717 Penton Media Building 1300 East 9th Street Cleveland, OH 44114-1503 Cashflow Lease $12,965 Suite 101, LB 32, 1600 Redbud Mc Kinney, TX 75069 United Healthcare $12,780 Prime Billing MN015-2838 P.O. Box 41738 Philadelphia, PA 19101-1738 Ravenna Tire Service $9,286 480 Cleveland Road Ravenna, OH 44266-2097 GT Environmental, Inc. $7,541 635 Park Meadow Road, Suite 112 Westerville, OH 43081 Ambrosy & Fredericka $6,752 144 North Park Avenue, Suite 200 Warren, OH 44481-1124 GMAC $6,410 Payment Processing Center P.O. Box 5180 Carol Stream, IL 60197-5180 City of Warren Utility Service $5,810 580 Laird Avenue, Southeast P.O. Box 670 Warren, OH 44482 Ohio Edison $5,747 P.O. Box 3637 Akron, OH 44309-3637 WAVEFRONT ENERGY: Buying 90% Working Interest in Okla. Oil Field ---------------------------------------------------------------- Wavefront Energy and Environmental Services Inc. entered into an option agreement to purchase 90% of the working interest in the existing production, equipment, and mineral lease of an oil field in Rogers County, Oklahoma from an arm's length party for total consideration of US $180,000. In connection with the option agreement the Company has advanced a US $15,000 non-refundable deposit. Should the Company exercise its option the deposit will be applied against the total consideration. An independent geologist report prepared by Robert Sullivan indicates an estimated 15 million barrels of oil in place in the 780-acre lease area. It is reported that conventional production methods may produce up to 15% BIP. There is potential for additional production to be added through development drilling alone. However, management believes that an aggressive Pressure Pulse Technology waterflood program will increase ultimate oil recovery beyond stated values. Though the main goal in acquiring the lease is to actively pursue PPT an additional economic benefit of the acquisition may reside in coal bed methane production. The independent geologist has also identified several zones underlying the oil-bearing formation consistent with on-going CBM production operations in the vicinity of the lease. Brett Davidson, President and CEO of Wavefront, said: "The Rogers County field represents an excellent existing production opportunity for the Company. The successful application of PPT should significantly influence the amount of recoverable oil. The Company is also very intrigued about the possibility of CBM underlying the property. We continue to identify properties that present opportunity to demonstrate the efficacy of PPT and will pursue those which fit within our corporate strategy." Wavefront Energy and Environmental Services, Inc., develops, markets, and licenses proprietary technologies in the energy and environmental sectors. The Company's Pressure Pulse Technology for fluid flow optimization has been demonstrated to increase oil recovery. Within the environmental sector, PPT accelerates contaminant recovery and improves in-ground treatment of groundwater contaminants thereby reducing liabilities and restoring the site to its natural state more rapidly. As of Nov. 30, 2004, the Company's stockholders' deficit narrowed to $36,302 from a $269,928 deficit at Aug. 31, 2004. WESTPOINT STEVENS: Common Stock Symbol Changed to WSPQE ------------------------------------------------------- WestPoint Stevens, Inc. Common Stock, which is traded at the OTC Bulletin Board, has undergone a symbol change. WSPTQ has been changed to WSPQE. All Security Symbols appended with an "E" will be ineligible for quotation and subject to removal from the OTCBB in 30 calendar days if the National Association of Securities Dealers does not receive information indicating that the Company is current in its public reporting obligations pursuant to Rule 6530. 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. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) WHITING PETROLEUM: S&P Puts B- Rating on $220 Mil. Sr. Sub. Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to exploration and production company Whiting Petroleum Corp.'s $220 million senior subordinated notes due 2013. At the same time, Standard & Poor's affirmed all ratings on Whiting. The outlook remains stable. Denver, Colorado-based Whiting will have about $370 million worth of debt pro forma this transaction. "The ratings on Whiting reflect the company's relatively small size, above-average cost structure, leveraged financial profile, and participation in the intensely competitive and highly cyclical oil and gas industry," said Standard & Poor's credit analyst Paul B. Harvey. "These concerns are only partially offset by Whiting's long-lived reserves, which are expected to generate a significant inventory of development projects," he continued. During 2004, Whiting, following an aggressive acquisition and exploitation strategy, completed seven acquisitions that added almost 436 billion cubic feet equivalent (bcfe) of reserves, bringing total reserves to roughly 865 bcfe as of Dec. 31, 2004. The company remains relatively small compared with many of its exploration and production peers. The bulk of reserves are in three geographically diverse regions: (1) Rocky Mountains, (2) Gulf Coast/Permian Basin, and (3) Michigan. The Mid-Continent properties make up the rest of Whiting's reserve base. The stable outlook reflects expectations that recent improvements to debt leverage will be maintained and that Whiting will pursue a more moderate financial profile. Further debt-financed acquisitions that undo recent improvement to the capital structure could lead to lower ratings. Ratings improvement is possible if Whiting's cost structure improves and credit metrics continue to strengthen. ZIFF DAVIS: S&P Junks Proposed $205 Million Senior Secured Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Ziff Davis Media Inc., including the 'CCC' corporate credit rating, on CreditWatch with positive implications. At the same time, Standard & Poor's assigned its 'CCC+' rating to Ziff Davis' proposed $205 million senior secured floating rate notes due 2012. Proceeds from the note issue will be used to refinance $174.1 million in bank debt and add $23.2 million to cash balances. If the refinancing is successful, Ziff Davis' corporate credit rating will be raised to 'CCC+' with a stable outlook. Failure to complete the transaction would result in the ratings being taken off CreditWatch and a negative outlook being assigned. As of Dec. 31, 2004, the New York, New York-based integrated media company, which is analyzed on a consolidated basis with its parent company, Ziff Davis Holdings Inc., had $340 million in pro forma consolidated debt. "The rating actions reflect some easing of pressure on Ziff Davis' capital and maturity structure as a result of the proposed refinancing," said Standard & Poor's credit analyst Steve Wilkinson. The refinancing would substantially reduce the risk of near-term default by eliminating bank maturities that were scheduled to increase to $24 million in 2005 and to $83 million in 2006, and by modestly increasing liquid assets. The rating on Ziff Davis reflects its: (1) high debt leverage, (2) marginal coverage ratios, (3) limited liquid resources, and (4) earnings concentration in a few key technology magazine titles. Also, the company's thin positive discretionary cash flow will turn negative when its compounding notes begin requiring cash interest payments in February 2007, unless the company can significantly improve its profitability and cash flow over the next two years. These risks are not meaningfully offset by Ziff Davis' established position in the computer and electronic game magazine publishing industries. Competition in this niche is fierce; Ziff Davis and two other publishers account for the bulk of technology magazine industry revenues. * CNQ Approves Union Securities Ltd. as a Dealer ------------------------------------------------ CNQ reported that Union Securities Ltd. is joining the exchange as a participating dealer. Union Securities has a long standing history of service to its clients in all markets in Canada and is active in the financing of emerging companies in all major sectors. Union Securities Ltd. is a full service investment dealer with offices in: * Vancouver, * Toronto, * Montreal, * Halifax, * Moncton, * Fredericton, * Thunder Bay, * Oakville, * Timmins, * Kitchener, * Brampton, * Winnipeg, * Regina, * Saskatoon, * Calgary, * Edmonton, and * Kelowna. Union Securities Ltd.'s head office is located at Suite 900-700 West Georgia Street, Vancouver, British Columbia. Additionalinformation about Union Securities Ltd. can be found at http://www.union-securities.com/or by telephone 604-687-2201. CNQ's participating dealers now include: * BMO Nesbitt Burns Inc., * Byron Securities Ltd., * Canaccord Capital Corporation, * First Associates Investments Inc., * Global Securities Corporation, * Haywood Securities Inc., * e3m Investments Inc., * Jones, Gable & Company Ltd., * Leede Financial Markets Inc., * Northern Securities Inc., * Octagon Capital Corporation, * Pacific International Securities Inc., * Research Capital Corporation, * Scotia Capital Inc., * TD Securities Inc., * Union Securities Ltd., * Wolverton Securities Ltd., and * W.D. Latimer Co. Limited. Additional Investment Dealers Association of Canada members participate through correspondent arrangements. CNQ commenced operations in July 2003 and became recognized by the Ontario Securities Commission as a full-fledged stock exchange in May 2004. CNQ's innovative market model is designed to address the needs of emerging companies and their investors by providing a transparent, electronic trading system with full protection of client priority. CNQ's market fosters liquidity through the unique combination of an auction market with a central limit order book and a competitive market making system. There are 44 companies listed, 18 investment dealers from across Canada with direct access to the market and 19 other dealers participating indirectly. To find out more about CNQ and its listings, visit http://www.cnq.ca/ ********* 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, Christian Q. Salta, Jason A. Nieva, and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***