/raid1/www/Hosts/bankrupt/TCR_Public/050517.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, May 17, 2005, Vol. 9, No. 115
Headlines
AAIPHARMA INC.: Chapter 11 Filing Cues S&P to Withdraw Ratings
ACE AVIATION: Mulls Spinoff of Domestic Units
ACE AVIATION: Incurs CN$77 Million Net Loss in First Quarter
AEROGEN INC: March 31 Balance Sheet Upside-Down by $4.761 Million
AESP INC: Terminates Common Stock Registration with SEC
ALDERWOODS GROUP: Shareholders Okay Stock Purchase & Equity Plans
ALLIANCE ONE: Majority of Lenders Agree to Amend Indentures
AMCAST INDUSTRIAL: Wants Keen Realty as Real Estate Consultant
AMERICAN BUSINESS: Sky Bank Wants Stay Lifted to Enforce Rights
AMERICAN TOWER: Increase in Revenues Prompts S&P to Lift Ratings
AMKOR TECHNOLOGY: Moody's Cuts Speculative Grade Rating to SGL-3
ARMSTRONG WORLD: Battle Ensues Over Appeal on Plan Denial Order
ASIA GLOBAL CROSSING: Trustee Hires Goldin for Litigation Support
ASPEN FUNDING: Moody's Junks $5.5 Million Class B-1 Notes
BLOCKBUSTER INC: Board Reappoints John Antioco as Chairman
BLUE DOLPHIN: Posts $196,992 Net Loss in First Quarter 2005
BOLTON CORPORATION: Case Summary & 20 Largest Unsecured Creditors
CATHOLIC CHURCH: Tucson Wants to Fix Solicitation & Voting Actions
CATHOLIC CHURCH: Spokane Files Sexual Abuse Claims Matrix
CIMATEC ENVIROMENTAL: Delays Filing Financial Reports to May 23
CITRUS VALLEY: Moody's Lifts Ba2 Underlying Rating to Ba1
COLLINS & AIKMAN: Moody's Junks $1.7 Billion Debt Ratings
COLUMBUS MCKINNON: Weak Credit Measures Cue S&P to Hold Ratings
CONSECO/GREEN: Fitch Rates 77 Bond Classes at C
DAVITA INC: Moody's Puts B1 Ratings on New $3.2 Billion Facilities
DECISIONONE CORP: Emerges from Chapter 11 in Less than 60 Days
DELPHI CORP: Posts $409 Million Net Loss in First Quarter 2005
DEX MEDIA: S&P Lifts Rating on $2.26 Billion Credit Facility
DEX MEDIA: S&P Lifts Rating on $1.5 Billion Credit Facility
DIVERSIFIED ASSET: Fitch Downgrades $19 Million Notes to B-
DMX MUSIC: Court Okays $75 Million 363 Sale to THP Capstar
DS WATERS: Poor Performance Prompts S&P to Junk Ratings
FALCON FINANCIAL: Moody's Junks Class E & F Loan Trust Certs.
FIDELITY MORTGAGE: Case Summary & 20 Largest Unsecured Creditors
FOAMEX INT'L: Apr. 3 Balance Sheet Upside-Down by $369.2 Million
FONIX CORP: March 31 Balance Sheet Upside-Down by $3.4 Million
HAYES LEMMERZ: Closing Facility in Italy & Terminating 102 Workers
INTEGRATED HEALTH: Gets Court Nod to Delay Entry of Final Decree
JETSGO CORP: Formally Declares Bankruptcy Under BIA in Quebec
JETSGO CORP: First Meeting of Creditors Slated for June 15
JM HILLS: Names Ola Hui as Largest Unsecured Creditor
JUNO LIGHTING: Likely Refinancing Cues S&P to Watch Ratings
KAISER ALUMINUM: March 31 Balance Sheet Upside-Down by $2.4 Bil.
KB TOYS: Files Reorganization Plan & Disclosure Statement in Del.
KMART CORP: Wants to Recover Claims Payment from Simone Saragosi
LEAP WIRELESS: Court Approves Jeffrey A. Davis as Mediator
LIBERTY MEDIA: Board Authorizes Discovery Holding Company Spin Off
LTX CORP: Delays Third Quarter Financial Reporting Due to Probe
MENNONITE GENERAL: Poor Performance Prompts S&P to Pare Ratings
MERIDIAN AUTOMOTIVE: Taps Sidley Austin as Bankruptcy Counsel
MERIDIAN AUTOMOTIVE: Taps Young Conaway as Bankruptcy Co-Counsel
MERIDIAN AUTOMOTIVE: Taps Seyfarth Shaw as Bankr. Special Counsel
METROMEDIA INT'L: May File Annual Financial Report by June 3
MIRANT CORP: Says Dick & St. Paul's $49.7M Claims are Unliquidated
MIRANT CORP: Wants to Extend Letters of Credit to May 31
MIRANT CORP: Says NEGT's Maryland Action Violates Automatic Stay
MOMENTRENDS INC: Case Summary & 20 Largest Unsecured Creditors
MORGAN STANLEY: Fitch Affirms Low-B Ratings on Six Mortgage Certs.
MOUNT SINAI-NYU: Affirms BB+ Rating on $681 Million Revenue Bonds
NATIONAL CENTURY: Agrees to Allow ING's Fee Claim for $362,778
NATIONAL ENERGY: Mirant Says Maryland Action Violates Stay
PACIFIC SANDS: March 31 Balance Sheet Upside-Down by $85,476
PEP BOYS: Reports $2.4 Million Net Loss for First Quarter
PEP BOYS: Weak Results Prompt S&P to Watch Ratings
POLARIS NETWORKS: Case Summary & 19 Largest Unsecured Creditors
QUIGLEY COMPANY: Court OKs Settlement Agreement With Federal-Mogul
RCN CORP: Appoints Michael Sicoli as EVP & Chief Financial Officer
REDDY ICE: Extends 8-7/8% Sr. Sub. Debt Tender Offer Until June 3
ROYAL GROUP: Names Lawrence Blanford as Chief Executive Officer
SALS B: Fitch Rates $9 Million Floating-Rate Notes at BB
SBARRO INC: Improved Cash Flow Cues S&P to Lift Ratings to CCC+
SEARS ROEBUCK: Offering to Purchase 7% & 7-4/10% Notes in Cash
SPIEGEL INC: Has Until June 30 to Decide on Leases
SYRATECH CORP: Bankruptcy Court Approves Reorganization Plan
TEKNI-PLEX: Gets $19 Million Equity Financing from Investors
TERRA INDUSTRIES: Fitch Upgrades Credit Ratings on Three Debts
TOWER AUTOMOTIVE: Visteon Wants Stay Lifted to Effect Set-Off
TOWER AUTOMOTIVE: Wants 1994 Bond Trustee to Return L/C
TOWER AUTOMOTIVE: Wants Deutsche Bank as Second Lien Issuer
UAL CORP: ESOP Plaintiffs Ask Court for Summary Judgment
UNITED AIRLINES: 7th Circuit Allows Trustees to Repossess Aircraft
US AIRWAYS: Hopes to Reach Merger Deal with America West This Week
US AIRWAYS: Has Until August 31 to Make Lease-Related Decisions
USGEN NEW ENGLAND: Court Confirms 2nd Amended Plan of Liquidation
W.R. GRACE: Asks Court to Approve Asbestos Claim Questionnaire
W.R. GRACE: Gets Court Nod to Pay CEO $760K Per Year Base Salary
WARWICK VALLEY: May Seek Another Waiver on Reporting Delay
WESTPOINT STEVENS: Lien Agent Asks Court to Release Escrowed Funds
WHX CORP: Files Amended Disclosure Statement in S.D. New York
WHX CORP: Court Sets Disclosure Statement Hearing on June 2
WHX CORPORATION: Committee Hires Andrews Kurth as Counsel
WILLIAMS SCOTSMAN: Moody's Assigns B2 Rating to New $650M Facility
WINN-DIXIE: Panel Wants to Hire Akerman Senterfitt as Co-Counsel
WINN-DIXIE: Wachovia Consents to Smith Hulsey's Retention
WINN-DIXIE: Wants Dwyer to Release $240,000 in Escrow
XO COMMS: Posts $42.9 Million Net Loss in First Quarter 2005
YUKOS OIL: Ordered to Settle Anstalt's Claim for $357 Million
* Large Companies with Insolvent Balance Sheets
*********
AAIPHARMA INC.: Chapter 11 Filing Cues S&P to Withdraw Ratings
--------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on
Wilmington, North Carolina-based specialty pharmaceutical company
aaiPharma Inc. The company has filed for Chapter 11
reorganization in U.S. Bankruptcy Court.
ACE AVIATION: Mulls Spinoff of Domestic Units
---------------------------------------------
ACE Aviation Holdings, Inc., considers spinning off certain
domestic subsidiaries, according to The Globe and Mail.
Globe and Mail reporter Brent Jang said ACE Chairman and CEO
Robert Milton confirmed at a conference call on May 13, 2005,
that the Company intends to divest a portion of Aeroplan, its
loyalty rewards program. Mr. Milton, however, declined to
comment on whether the Company plans to sell interests in Air
Canada Technical Services and Air Canada Jazz.
Industry observers believe that ACE could play a stronger role as
an international carrier for connecting passengers in the United
States, Mr. Jang said.
ACE Aviation is the parent holding company of Air Canada and
certain other subsidiaries including Aeroplan LP, Jazz Air LP and
ACTS LP. Montreal-based Air Canada provides scheduled and charter
air transportation for passengers and cargo to more than 150
destinations on five continents. Canada's flag carrier is the
14th largest commercial airline in the world and serves 29 million
customers annually with a fleet consisting of 293 aircraft. Air
Canada is a founding member of Star Alliance providing the world's
most comprehensive air transportation network.
* * *
As reported in the Troubled Company Reporter on Oct. 5, 2004,
Standard & Poor's Ratings Services assigned its 'B' long-term
corporate credit rating to Montreal, Quebec-based ACE Aviation
Holdings Inc. and its wholly owned subsidiary, Air Canada. S&P
says the outlook is stable. (Air Canada Bankruptcy News, Issue
No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ACE AVIATION: Incurs CN$77 Million Net Loss in First Quarter
------------------------------------------------------------
ACE Aviation Holdings Inc. reported an operating loss of
$10 million for the first quarter of 2005, an improvement of
$135 million from the operating loss before reorganization and
restructuring items of $145 million recorded in the first quarter
of 2004. EBITDAR improved $56 million over the 2004 quarter
despite a fuel expense increase of $77 million year-over-year.
Operating revenues were up $56 million or 3 per cent. Passenger
traffic, as measured by revenue passenger miles -- RPMs, increased
5 per cent on a capacity decrease of 2 per cent, as measured by
available seat miles -- ASMs, resulting in a passenger load factor
improvement of 5.1 percentage points. Passenger revenue per
available seat mile -- RASM, on a comparable basis, is up 3 per
cent reflecting the significant improvement in the passenger load
factor.
Despite a 23 per cent fuel expense increase in the amount of
$77 million, operating expenses were reduced by $79 million or 3
per cent.
Excluding fuel expense, operating expenses declined $156 million
or 8 per cent over the 2004 quarter reflecting the continued cost
reductions that the Corporation has achieved. Excluding fuel
expense, unit cost is down 6 per cent from the first quarter of
2004 and down 17 per cent compared to the first quarter of 2002.
Including fuel expense, unit cost is down 2 per cent over the
first quarter of 2004. Employee productivity, as measured by
available seat mile per employee, grew 21 per cent when compared
to the first quarter of 2002.
Net loss for the quarter was $77 million, an improvement of
$227 million from the first quarter of 2004, which included
reorganization and restructuring items of $132 million.
"Despite record high fuel costs and low North American yields
throughout the period, we are reporting one of the best operating
results in Air Canada's history for the first quarter," said
Robert Milton, Chairman, President and CEO of ACE Aviation
Holdings Inc. "It is particularly encouraging to note that,
excluding any benefit of fuel hedging, ACE is the only North
American carrier which had improved results for this quarter,
traditionally our worst quarter of the year.
"Looking forward, ongoing cost reduction initiatives are on track
and the revenue picture is improving. The strengthening yields
and record traffic we achieved in April accelerated our year over
year improvement in operating income and bode well for our revenue
performance going forward. We remain committed to achieving our
previously disclosed $1.6 billion EBITDAR target in 2005."
The Corporation continues to expect improved operating and
financial performance during 2005 resulting from revenue
enhancement and cost reduction measures implemented during the
restructuring and from additional measures in the fourth quarter
of 2004 and the full year 2005. The Circular and Proxy Statement
dated July 12, 2004 provided an EBITDAR projection of $1.6 billion
for 2005, which was based on an assumed average 2005 crude oil
price of approximately US $35 per barrel for West Texas
Intermediate (WTI) crude oil. While crude oil prices are now
estimated to be significantly higher than this level, the
Corporation remains committed to achieving its $1.6 billion
EBITDAR target for 2005 as greater revenues and additional cost
savings in specific areas are forecast to offset higher projected
fuel expenses based on internal estimates. The current record
high levels of crude oil and fuel prices exceed internal estimates
and, as fuel prices are subject to many external factors beyond
the Corporation's control, the Corporation may not be able to
fully mitigate the potential adverse effect that this or other
factors could have on the 2005 EBITDAR projection.
"I salute ACE employees who are showing tremendous ownership and
pride in the company's success going forward," said Mr. Milton.
"Through their team effort and hard work, they are winning over
more and more customers and I am proud that throughout the quarter
they handled record volumes with exceptional operational
performance. The month of April marked the beginning of a second
year of consecutive record load factors demonstrating a definite
trend towards increasing customer preference for Air Canada over
and above the market's recovery. I also thank our customers whose
ongoing loyalty and support has made Air Canada the airline of
choice for Canadians with the lowest fares to the greatest number
of destinations, day in, and day out.
"We're moving ahead on all fronts with the implementation of our
fleet renewal program. The wide-body fleet plan announced earlier
in April with Boeing will move Air Canada into a clear leadership
position among North American international carriers with the
acquisition of up to 36 Boeing 777s and up to 60 Boeing 787
Dreamliners."
The agreement with Boeing is very attractive financially as the
operating costs of the 777 and the 787 will be significantly less
than the aircraft they will replace, the acquisition costs will be
spread over several years, and the asset values of the aircraft we
will replace and sell are significant. Both the 777 and 787 are
uniquely suited to meet Air Canada's current route structure and
growth plans, which include long-range, non-stop routes for both
passengers and cargo, with an increasing emphasis on growing
markets in Latin America and China. The operation of the 777 and
787 in the same fleet will allow Air Canada to tailor capacity to
seasonal demand with two aircraft types that fly the same speed
and range yet offer different seating capacities.
"Later this month the initial phase of our North American network
and fleet alignment plan gets underway with the delivery of the
first 15 Bombardier CRJ-705 aircraft to Air Canada Jazz. The
addition of these jet aircraft to the Jazz fleet will allow us to
boost regional jet service to communities across Canada thus
offering superior comfort, choice in non-stop markets served as
well as more frequencies. Air Canada's fleet will expand by 6
additional wide bodies to accommodate international growth this
summer and 17 of the 60 state-of-the-art Embraer aircraft on order
will be introduced to the mainline fleet in the last two quarters
of the year," said Mr. Milton.
Overview
-- Operating loss of $10 million.
-- An improvement of $135 million despite fuel expense being
up by $77 million, compared to an operating loss before
reorganization and restructuring items of $145 million in
the first quarter of 2004.
-- One of the best first quarter operating results in the
Corporation's history.
-- EBITDAR for the quarter of $200 million, an improvement
of $56 million from the prior year.
-- Net loss for the quarter of $77 million compared to a net
loss of $304 million in the first quarter of 2004.
-- Operating revenues up $56 million or 3 per cent
reflecting passenger revenue increases in all markets
with the exception of the US transborder market.
-- Unit cost down 2 per cent, and excluding fuel expense,
unit cost down 6 per cent versus the first quarter of
2004 and down 17 per cent versus the first quarter of
2002.
-- Employee productivity up 21 per cent versus the first
quarter of 2002.
-- System passenger load factor up 5.1 percentage points to
78.0 per cent, a record for the first quarter.
-- Positive cash flow from operations of $314 million in the
quarter.
-- As at May 11, 2005, after the successful completion of
the public offerings completed in April and the repayment
of the Exit Credit Facility with General Electric Capital
Corporation, ACE's consolidated cash balances, measured
on the basis of cash in its bank accounts, and short-term
investments are approximately $2.1 billion.
-- Additional $300 million of liquidity available from
unutilized revolving credit facility.
A full-text copy of ACE's Interim Unaudited First Quarter 2005
Consolidated Financial Statements is available at no charge at:
http://bankrupt.com/misc/ace2005Q1financials.pdf
A full-text copy of ACE Management's Discussion and Analysis is
available at no charge at:
http://bankrupt.com/misc/ace2005Q1MDA.pdf
ACE Aviation Holdings Inc.
Unaudited Consolidated Statement of Financial Position
At March 31, 2005
(CN$ in millions)
ASSETS
Current
Cash and cash equivalents CN$959
Short-term investments 826
---------
1,785
Restricted cash 49
Accounts receivable 632
Spare parts, materials and supplies 221
Prepaid expenses 161
Future income taxes 17
---------
2,865
Property and equipment 5,056
Deferred charges 125
Intangible assets 2,678
Other assets 246
---------
CN$10,970
LIABILITIES
Current
Accounts payable and accrued liabilities 1,275
Advance ticket sales & loyalty program
deferred revenues 1,227
Current portion of long-term debt
and capital lease obligations 288
---------
2,790
Long-term debt and capital lease obligations 3,499
Convertible preferred shares 135
Future income taxes 243
Pension and other benefit liabilities 2,336
Non-controlling interest 192
Other long-term liabilities 1,506
---------
10,701
Commitments and Guarantees
SHAREHOLDERS' EQUITY
Share capital and other equity 187
Contributed surplus 2
Retained earnings 80
---------
269
---------
CN$10,970
=========
ACE Aviation Holdings Inc.
Unaudited Consolidated Statement of Operations
and Retained Earnings (Deficit)
Three Months Ended March 31, 2005
(CN$ in millions)
Operating revenues
Passenger CN$1,739
Cargo 135
Other 303
---------
2,177
Operating expenses
Salaries, wages and benefits 613
Aircraft fuel 415
Aircraft rent 90
Airport and navigation fees 213
Aircraft maintenance, materials and supplies 94
Communications and information technology 77
Food, beverages and supplies 78
Depreciation, amortization and obsolescence 120
Commissions 65
Other 422
---------
2,187
---------
Operating loss before reorganization
and restructuring items (10)
Reorganization and restructuring items -
Non-operating income (expense)
Interest income 12
Interest expense (75)
Interest capitalized 3
Loss on sale of and provisions on assets -
Non-controlling interest (3)
Other (3)
---------
(66)
Loss before foreign exchange on non-compromised
long-term monetary items and income taxes (76)
Foreign exchange gain (loss) on long-term monetary items (15)
---------
Loss before income taxes (91)
Recovery of (provision for) income taxes 14
---------
Loss for the period (CN$77)
=========
ACE Aviation Holdings Inc.
Unaudited Consolidated Statement of Cash Flows
Three Months Ended March 31, 2005
(CN$ in millions)
Cash flows from (used for)
Operating
Loss for the period (CN$77)
Adjustments to reconcile to net cash
provided by operations
Reorganization and restructuring items -
Depreciation, amortization and obsolescence 120
Loss on sale of and provisions on assets -
Foreign exchange 15
Future income taxes (17)
Employee future benefit funding (more than)
less than expense (8)
Decrease (increase) in accounts receivable (91)
Decrease (increase) in spare parts,
materials and supplies 14
Increase in accounts payable & accrued liabilities 100
Increase in advance ticket sales,
net of restricted cash 219
Aircraft lease payments in excess of rent expense (4)
Other 43
---------
314
Financing
GE DIP financing -
Credit facility borrowings -
Reduction of long-term debt and
capital lease obligations (140)
---------
(140)
Investing
Short-term investments (675)
Additions to capital assets (38)
Proceeds from sale of assets 37
Cash collaterization of letters of credit (20)
---------
(696)
Increase (decrease) in cash and cash equivalents (522)
Cash and cash equivalents, beginning of period 1,481
---------
Cash and cash equivalents, end of period CN$959
=========
ACE Aviation is the parent holding company of Air Canada and
certain other subsidiaries including Aeroplan LP, Jazz Air LP and
ACTS LP. Montreal-based Air Canada provides scheduled and charter
air transportation for passengers and cargo to more than 150
destinations on five continents. Canada's flag carrier is the
14th largest commercial airline in the world and serves 29 million
customers annually with a fleet consisting of 293 aircraft. Air
Canada is a founding member of Star Alliance providing the world's
most comprehensive air transportation network.
* * *
As reported in the Troubled Company Reporter on Oct. 5, 2004,
Standard & Poor's Ratings Services assigned its 'B' long-term
corporate credit rating to Montreal, Quebec-based ACE Aviation
Holdings Inc. and its wholly owned subsidiary, Air Canada. S&P
says the outlook is stable. (Air Canada Bankruptcy News, Issue
No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AEROGEN INC: March 31 Balance Sheet Upside-Down by $4.761 Million
-----------------------------------------------------------------
Aerogen, Inc. (Nasdaq: AEGN) reported financial results for the
three months ended March 31, 2005. The net loss attributable to
common stockholders for the three months ended March 31, 2005 was
$0.8 million, compared with a net loss of $11.9 million, for the
same period in 2004.
The results for the three months ended March 31, 2004 included a
charge of $6.4 million, reflecting a deemed dividend imputed from
the difference between the allocated proceeds and the conversion
value of the Company's Series A-1 Convertible Preferred Stock that
was issued during the first half of 2004. There were no deemed
dividends in the three months ended March 31, 2005.
The terms of the Series A-1 Convertible Preferred Stock provide
for a dividend, at the rate of 6% per year, to be paid quarterly
in cash or Aerogen common stock, at the Company's election, to
each holder of Series A-1 Convertible Preferred Stock. During the
three months ended March 31, 2005 and 2004, the Company elected to
pay this dividend in Aerogen common stock, resulting in charges
related to ordinary dividends of $0.4 million, and $20,000,
respectively.
The gain from the decline in the fair market value of the
liability associated with outstanding warrants was $4.0 million
for the three months ended March 31, 2005, as compared to a loss
of $1.1 million for the same period in 2004. The gain in 2005 was
due to a decline in the market value of the Company's common stock
in the first quarter of 2005 while the loss in 2004 was due to an
increase in the market value of its common stock in the first
quarter of 2004.
Aerogen's cash balance as of March 31, 2005 was $13.6 million.
Based on current expectations of sales and royalty levels and
operating costs, existing capital resources will not enable the
Company to maintain current and planned operations beyond the
first quarter of 2006; however, if certain expected product sales
and/or royalties are not realized, the current cash balance may
not sustain planned operations beyond the middle of the fourth
quarter of 2005. The Company is pursuing a number of alternatives
to maximize stockholder value, including strategic transactions,
collaborative partnerships and the licensing or sale of certain of
our intellectual property. If these efforts are not successful,
the Company will need to raise additional capital before the end
of 2005 in order to continue operations. Licensing or
collaborative arrangements, if necessary to raise additional
funds, may require Aerogen to relinquish rights to certain of its
products or technologies, or desirable marketing territories, or
all of these.
Revenues for the three months ended March 31, 2005 were $1.6
million, compared with $1.1 million for the same period in 2004.
The 45% increase in revenues for the three-month period ending
March 31, 2005, as compared with the same period in 2004,
primarily resulted from an increase in product sales of the
Aeroneb(R) Professional Nebulizer System and royalties associated
with a large consumer products company's sales of an air freshener
incorporating our aerosol generator technology. The increase in
Aeroneb Pro sales was slightly offset by a decrease in the sales
of our OnQ(R) Aerosol Generators to Evo Medical Solutions
(formerly Medical Industries America) in the three months ended
March 31, 2005, as compared to the same period in 2004. There
were no shipments to Evo during January or February 2005, but
shipments resumed in March 2005, after design and manufacturing
changes were implemented.
Cost of products sold for the three months ended March 31, 2005
was $1.0 million, compared with $0.7 million for the same period
in 2004. Cost of products sold increased as a percentage of
product sales for the three months ended March 31, 2005 as
compared to the same period in 2004, primarily as a result of
reserves recognized on excess inventories created by a new product
design.
Research and development expenses for the three months ended March
31, 2005 were $3.1 million, compared with $1.9 million for the
same period in 2004. The increase in research and development
spending in the three-month period ended March 31, 2005, as
compared with the same period of 2004, was primarily due to
increased spending related to initiation of a Phase 2 clinical
trial for our aerosolized antibiotic product.
Selling, general and administrative expenses for the three months
ended March 31, 2005 were $1.7 million, as compared with $2.0
million for the same period in 2004. The decrease in selling,
general and administrative spending in the three-month period
ended March 31, 2005, as compared with the same period of 2004,
was primarily due to decreased legal expenses related to the lease
restructuring and financing activities during the first quarter of
2004, partially offset by increases in market research spending
related to our aerosolized antibiotic product, and recruiting
costs related to the search for a new CEO initiated during the
first quarter of 2005.
About the Company
Aerogen, Inc. -- http://www.aerogen.com/-- a specialty
pharmaceutical company, develops products based on its OnQ(R)
Aerosol Generator technology to improve the treatment of
respiratory disorders in the acute care setting.
Aerogen also has development collaborations with pharmaceutical
and biotechnology companies for use of its technology in the
delivery of novel compounds that treat respiratory and other
disorders. Aerogen is headquartered in Mountain View, California,
with a campus in Galway, Ireland.
At Mar. 31, 2005, Aerogen, Inc.'s balance sheet showed a
$4,761,000 stockholders' deficit, compared to a $7,149,000 deficit
at Dec. 31, 2004.
AESP INC: Terminates Common Stock Registration with SEC
-------------------------------------------------------
AESP, Inc. (OTC Bulletin Board: AESP) filed a Form 15 to
voluntarily deregister its common stock under the Securities
Exchange Act of 1934, as amended. Effective with the filing of
the Form 15, AESP's obligation to file reports with the SEC,
including Forms 10-K, 10-Q, and 8K, has been suspended. AESP
expects that the Form 15 will become effective 90 days from
May 13, 2005.
The Company anticipates that following the filing of the Form 15,
its common stock will no longer be quoted on the Bulletin Board
maintained by the NASD. However, the Company expects, but cannot
guarantee, that its common stock will continue to be quoted on the
Pink Sheets. There can also be no assurance that any brokerage
firms will continue to make a market in the common stock after the
delisting.
About the Company
AESP, Inc. -- http://www.aesp.com/and http://www.signamax.com/--
designs, manufactures, markets and distributes network
connectivity products under the brand name Signamax Connectivity
Systems as well as customized solutions for original equipment
manufacturers worldwide.
At Dec. 31, 2004, AESP, Inc.'s balance sheet showed a $1,245,000
stockholders' deficit, compared to a $1,833,000 positive equity at
Dec. 31, 2003.
ALDERWOODS GROUP: Shareholders Okay Stock Purchase & Equity Plans
-----------------------------------------------------------------
In a filing with the Securities and Exchange Commission, Ellen
Neeman, Alderwoods Group, Inc., senior vice president for legal &
compliance, reports that on April 28, 2005, shareholders, upon
recommendation of the Company's Board of Directors, approved the
Alderwoods Group Employee Stock Purchase Plan and the 2005 Equity
Incentive Plan. The Board adopted the ESPP and 2005 Equity Plan
on March 15, 2005, subject to shareholder approval.
Employee Stock Purchase Plan
According to Ms. Neeman, the ESPP is designed to provide employees
of Alderwoods Group and its subsidiaries an opportunity to
purchase shares of the Alderwoods common stock, par value $0.01
per share through payroll deductions. The ESPP was created to
better enable Alderwoods and its subsidiaries to retain and
attract qualified employees and to provide additional incentives
through increased stock ownership.
Alderwoods will make cash contributions as additional compensation
to each participant equal to 50% of the aggregate amount of the
participant's payroll deductions that will be used to purchase
additional shares of Common Stock to be credited to the
participant's account. Up to 1,100,000 shares of Common Stock may
be purchased under the ESPP, subject to adjustment as provided in
the ESPP.
The shares subject to the ESPP are the Common Shares. All Common
Shares purchased under the Plan will be purchased or sold, as the
case may be, on the NASDAQ National Market System. The Shares may
also be purchased or sold on the principal national securities
exchange upon which the Common Shares are traded or quoted, if the
Common Shares are not traded on the NASDAQ.
A full-text copy of Alderwoods' Employee Stock Purchase Plan is
available for free at:
http://www.sec.gov/Archives/edgar/data/927914/000110465905019997/a05-8579_1ex10d1.htm
2005 Equity Plan
The 2005 Equity Plan, Ms. Neeman relates, authorizes the
Compensation Committee of the Board to provide equity-based
compensation in the form of stock options and restricted stock
units for the purpose of attracting and retaining officers,
directors and other key employees of the Company and its
subsidiaries and providing these persons with incentives and
rewards for superior performance. Total awards under the 2005
Equity Plan are limited to 1,800,000 shares of Common Stock,
subject to adjustment as provided in the 2005 Equity Plan.
The Committee may, from time to time, authorize the granting to
the participants of options to purchase Common Shares, and also
authorize the granting or sale of Restricted Stock Units to the
participants.
A full-text copy of Alderwoods' 2005 Equity Plan is available for
free at:
http://www.sec.gov/Archives/edgar/data/927914/000110465905019997/a05-8579_1ex10d2.htm
In separate Form S-8 filings with the Securities and Exchange
Commission, Ms. Neeman discloses that Alderwoods Group registered
these securities under the Employee Stock Purchase Plan and the
2005 Equity Plan.
Proposed Max. Proposed Max.
No. of Offering Aggregate Registration
Plan Shares Price/Share Offering Price Fee Amount
---- ------ ------------- -------------- ------------
ESPP 1,100,000 $12.24 $13,464,000 $1,584.72
Equity
Plan 1,800,000 $12.24 $22,032,000 $2,593.17
The proposed maximum aggregate offering price is estimated solely
for calculating the amount of the registration fee. It is based
on the average of the high and low sale prices of the securities
on the National Market System of NASDAQ Stock Market Inc., on
April 27, 2005, within five business days prior to the filing.
Alderwoods Group is the second largest operator of funeral homes
and cemeteries in North America, based upon total revenue and
number of locations. As of June 19, 2004, the Company operated
716 funeral homes, 130 cemeteries and 61 combination funeral home
and cemetery locations throughout North America. Of the Company's
total locations, 59 funeral homes, 53 cemeteries and four
combination funeral home and cemetery locations were held for
sales as of June 19, 2004. The Company provides funeral and
cemetery services and products on both an at-need and pre-need
basis. In support of the pre-need business, the Company operates
insurance subsidiaries that provide customers with a funding
mechanism for the pre-arrangement of funerals.
* * *
As previously reported in the Troubled Company Reporter on
July 27, 2004, Standard & Poor's Ratings Services it affirmed its
'B+' corporate credit rating on the funeral home and cemetery
operator Alderwoods Group, Inc., and assigned its 'B' debt rating
to the company's proposed $200 million senior unsecured notes due
in 2012. At the same time, Standard & Poor's also assigned its
'BB-' senior secured bank loan rating and its '1' recovery rating
to Alderwoods' proposed $75 million revolving credit facility,
which matures in 2008, and to its proposed term loan B, which
matures in 2009. The existing term loan had $242 million
outstanding at March 27, 2004, but will be increased in size. The
bank loan ratings indicate that Standard & Poor's expects a full
recovery of principal in the event of a default, based on an
assessment of the loan collateral package and estimated asset
values in a distressed default scenario. The company is expected
to use the proceeds from the new financings to redeem $320 million
of 12.25% senior unsecured notes, repay a $25 million subordinated
loan, and fund transaction costs. As of March 27, 2004, the
company had $614 million of debt outstanding. (Loewen Bankruptcy
News, Issue No. 98; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
ALLIANCE ONE: Majority of Lenders Agree to Amend Indentures
-----------------------------------------------------------
Alliance One International, Inc. (NYSE: AOI), the successor by
merger of DIMON Incorporated and Standard Commercial Corporation,
disclosed the expiration of:
(i) DIMON's previously announced cash tender offer to purchase
any and all of its outstanding:
(a) $200.0 million aggregate principal amount of 9-5/8%
Senior Notes due 2011, and
(b) $125.0 million aggregate principal amount of 7-3/4%
Senior Notes due 2013; and
(ii) Standard's previously announced cash tender offer to
purchase any and all of its outstanding $150.0 million
aggregate principal amount of 8% Senior Notes due 2012,
Series B, and the solicitations of consents to proposed
amendments to each of the indentures governing the Notes.
In conjunction with the cash tender offer, DIMON accepted for
payment and paid for a total of approximately $196.6 million in
aggregate principal amount of the 9-5/8% Notes, representing
approximately 98.28% of the outstanding 9-5/8% Notes, and
approximately $124.6 million in aggregate principal amount of the
7-3/4% Notes, representing approximately 99.65% of the outstanding
7-3/4% Notes, and Standard accepted for payment and paid for a
total of approximately $143.7 million in aggregate principal
amount of the Standard Notes, representing approximately 95.81% of
the outstanding Standard Notes, all of which were validly tendered
and not withdrawn prior to 12:01 a.m., New York City time, on
May 13, 2005.
The percentage of consents received for each of the 9-5/8% Notes,
the 7-3/4% Notes and the Standard Notes exceeded the requisite
consents needed to amend each of the indentures governing such
Notes. DIMON, Standard and SunTrust Bank, the trustee under the
indentures, have executed supplemental indentures to effect the
proposed amendments to each of the indentures governing the Notes.
The amendments eliminate, among other things, the principal
restrictive covenants and certain events of default in the
indentures.
DIMON and Standard each engaged Wachovia Securities and Deutsche
Bank Securities Inc. to act as the dealer managers and
solicitation agents in connection with the tender offers and
consent solicitations. Questions regarding the tender offers and
the consent solicitations may be directed to Wachovia Securities
at (866) 309-6316 (U.S. toll free) or (704) 715-8341 (collect) and
Deutsche Bank Securities Inc. at (212) 250-7466 (collect).
Alliance One -- http://www.aointl.com/-- is a leading independent
leaf tobacco merchant. It selects, purchases, processes, stores,
packs and ships tobacco grown in over 45 countries, and serves the
world's large multinational cigarette manufacturers in over 90
countries.
* * *
As reported in the Troubled Company Reporter on May 13, 2005,
Standard & Poor's Ratings Services assigned its 'B' rating to
Alliance One International Inc.'s 12.75% senior subordinated notes
due November 2012. At the same time, Standard & Poor's affirmed
its 'BB-' corporate credit and bank loan ratings on Alliance One
and Intabex Netherlands B.V.
In addition, Standard & Poor's affirmed its 'B' rating on Alliance
One's $315 million 11% senior notes due May 2012. The senior note
transaction was downsized to $315 million from the originally
proposed $450 million that was rated on May 3, 2005. Also, the
maturity date was shortened by one year. The senior note issue is
two notches below the corporate credit rating because of the
amount of priority obligations and secured debt ahead of the
senior unsecured debt issue. Furthermore, Alliance One is both a
holding company and directly owns certain U.S. operating assets of
the merged companies.
S&P said the outlook is negative. Pro forma for the refinancing,
total rated debt on Danville, Virginia-based Alliance One is about
$1.1 billion.
Alliance One results from the planned merger of the number-two and
number-three independent leaf tobacco dealers, DIMON Inc. and
Standard Commercial Corp., respectively. At closing, Standard
Commercial will merge into DIMON, and then DIMON will change its
name to Alliance One.
The ratings on DIMON and Standard Commercial and related entities
will remain on CreditWatch until the closing of the Alliance One
transactions and will then be removed from CreditWatch where they
were placed on May 25, 2004 and Nov. 9, 2004, respectively, and
withdrawn.
AMCAST INDUSTRIAL: Wants Keen Realty as Real Estate Consultant
--------------------------------------------------------------
Amcast Industrial Corporation and its debtor-affiliates ask the
U.S. Bankruptcy Court for Southern District of Ohio, Western
Division, for permission to retain Keen Realty, LLC, as special
real estate consultant, nunc pro tunc to May 9, 2005.
Keen Realty will:
a) develop and implement a marketing program which may
include, as appropriate, newspaper, magazine or journal
advertising, letter and/or flyer solicitation, placement
of signs, direct telemarketing, and such other marketing
methods as may be necessary, and furnish to the Debtors in
advance, a reasonably accurate budget associated with
implementation of that marketing program;
b) communicate with potential users, investors, brokers,
etc., and will endeavor to locate additional parties who
may have an interest in the purchase of the Debtors'
properties;
c) respond and provide information to, negotiate with, and
solicit offers from prospective purchasers and will make
recommendations to the Debtors as to the advisability of
accepting particular offers;
d) meet periodically with the Debtors, their lender, their
accountants and attorneys, in connection with the status
of its efforts;
e) work with the attorneys responsible for the implementation
of the proposed transactions, reviewing documents,
negotiating and assisting in resolving problems which may
arise; and
f) appear in Court during the term of the retention, if
required, to testify or to consult with the Debtors in
connection with the marketing or disposition of the
Properties.
The Debtors intend to pay Keen Realty a commission fee ranging
from 4% to 6% upon the disposition of the Properties. While the
Debtors do not anticipate a situation necessitating use of Keen
Realty's services that would give rise to their Hourly Fee, they
reserve the option to pay Keen Realty an hourly fee ranging from
$125 to $500 should the need arise.
To the best of the Debtors' knowledge, Keen Realty does not hold
interests adverse to the Debtors or their estates.
Headquartered in Dayton, Ohio, Amcast Industrial Corporation --
http://www.amcast.com/-- is a manufacturer and distributor of
technology-intensive metal products to end-users and supplier in
the automotive and plumbing industry. The Company and its debtor-
affiliates filed for chapter 11 protection on Nov. 30, 2004
(Bankr. S.D. Ohio Case No. 04-40504). Jennifer L. Maffett, Esq.,
at Thompson Hine LLP, represents the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed total assets of $104,968,000 and
total debts of $165,221,000.
AMERICAN BUSINESS: Sky Bank Wants Stay Lifted to Enforce Rights
---------------------------------------------------------------
On July 27, 1989, Michael E. McWhorter, doing business as
Creative Plexiglass, and Carol S. McWhorter executed a note
entitled "Cognovit Commercial Real Estate Note Variable Rate" for
$170,000, in favor of Sky Bank, Mid Am Region. The Note was
secured by an Open-End Mortgage on a certain real estate situated
in Lucas County, Ohio.
Sky Bank holds the first and best valid and subsisting lien on
the Ohio Property.
As a result of the McWhorters' default under the Note and
Mortgage, Sky Bank instituted proceedings for summary judgment,
foreclosure and order of sale in the Court of Common Pleas in
Lucas County, Ohio. On November 10, 2004, the State Court issued
a final order approving Sky Bank's request. The State Court
ruled that the McWhorters owed $50,213 as of April 1, 2004, with
costs and interest, and that Sky Bank was entitled to have the
Property foreclosed, to have the premises sold, and to be awarded
with the sale proceeds. Therefore, the Property was scheduled
for foreclosure sale on March 2, 2005.
American Business Credit, Inc., asserts that it holds the second
lien position on the Property and that it is a party to the
foreclosure action. As a result of ABC's bankruptcy filing, the
foreclosure action has been cancelled and Sky Bank has taken no
further action to foreclose on the Property.
Accordingly, Sky Bank asks the U.S. Bankruptcy Court for the
District of Delaware to lift the automatic stay imposed by Section
362(a) of the Bankruptcy Code to enforce its contractual and state
law rights with respect to its mortgage lien interest and to
complete the foreclosure proceedings relating to the McWhorters'
Property.
William F. Taylor, Jr., Esq., at McCarter & English, LLP, in
Wilmington, Delaware, contends that it is in the interest of
judicial economy and fairness to permit Sky Bank to continue in
the pursuit of its remedies including, among other things, an
action in the appropriate court and to relieve the State Court of
the burden of retaining jurisdiction over or adjudicating an
action which can and should be resolved elsewhere.
Mr. Taylor assures Judge Walrath that allowing the foreclosure to
go forward would not interfere with the Debtors' pending
bankruptcy cases.
"If there is any effect on the Debtors' case, it would be a
positive, not a negative result," Mr. Taylor says. "As a second
lien holder, the Debtors may be entitled to some proceeds from
the sale of the Property. Therefore, the proceedings could
provide additional value and benefits to the estate."
Mr. Taylor further discloses that Sky Bank is not adequately
protected as required under Section 363(e) of the Bankruptcy Code
as the value of the Property may be eroding, resulting in Sky
Bank's interest in the Property being impaired.
Headquartered in Philadelphia, Pennsylvania, American Business
Financial Services, Inc., together with its subsidiaries, is a
financial services organization operating mainly in the eastern
and central portions of the United States and California. The
Company originates, sells and services home mortgage loans through
its principal direct and indirect subsidiaries. The Company,
along with four of its subsidiaries, filed for chapter 11
protection on Jan. 21, 2005 (Bankr. D. Del. Case No. 05-10203).
Bonnie Glantz Fatell, Esq., at Blank Rome LLP represents the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed $1,083,396,000 in
total assets and $1,071,537,000 in total debts. (American
Business Bankruptcy News, Issue No. 14; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
AMERICAN TOWER: Increase in Revenues Prompts S&P to Lift Ratings
----------------------------------------------------------------
Standard & Ratings Services raised its ratings on Boston, Mass.-
based wireless tower operator American Tower Corp. and related
entities, including the corporate credit rating, which was
upgraded to 'B' from 'B-'. The ratings remain on CreditWatch,
with positive implications, where they were placed on Jan. 14,
2005.
"The upgrade reflects the ongoing increase in revenues and
operating cash flows from the companies' U.S. tower portfolio,
which represent the vast majority of the company's 15,000 total
owned and/or operated towers," said Standard & Poor's credit
analyst Catherine Cosentino.
Such growth is derived from colocation of additional tenants on
these towers, coupled with tower lease rent escalators with
existing tenants. With consolidated revenue and EBITDA growth of
12% and 17%, respectively for 2004, American Tower was able to
deleverage to about 7.7x debt to annualized EBITDA as of March 31,
2005, from 9.3x for full-year 2003, adjusted for operating leases,
excluding impairment and restructuring charges, and including the
ongoing interest income from TV Azteca.
Given expectations that American Tower's financial profile will
improve even further with continued tower lease growth, the
ratings remain on Credit Watch, with positive implications,
pending Standard & Poor's completion of its review of the rated
tower companies. Moreover, given the company's announced merger
agreement with the less leveraged SpectraSite Inc. (B+/Watch
Developing/--), Standard & Poor's will assess the impact of this
combination on the consolidated financial results and business
prospects of the merged company, and the rating of the combined
company could support a higher credit rating than 'B'.
AMKOR TECHNOLOGY: Moody's Cuts Speculative Grade Rating to SGL-3
----------------------------------------------------------------
Moody's Investors Service lowered the speculative grade liquidity
rating of Amkor Technology, Inc. to SGL-3 from SGL-2, due to
Amkor's heightened 2005 capital expenditure plans of approximately
$250 million from $150 million anticipated at the close of fiscal
2004, which will constitute a significant drain on the company's
cash balances and anticipated cash flow over the next twelve
months.
Further, Amkor accrued a charge of $50 million, $45 million of
which is expected to be paid during the second quarter of 2005
related to epoxy mold compound litigation with Fujitsu and
Seagate, among others.
The SGL-3 rating indicates adequate liquidity over the next twelve
months. The rating considers Amkor's cash balances of
$287 million as of March 2005, expectations of cash drain of about
$180 million through the end of 2005, and a largely undrawn, but
small, backup liquidity facility of $30 million. Amkor's second
quarter guidance includes sequential revenue growth between 10%
and 13% as well as gross margins increasing to 12% to 14% versus
first quarter gross margins of 10% driven by expectations of
increased utilization and a relatively benign pricing environment.
While these expectations suggest an improving operating
environment for Amkor, gross cash flow will not be enough to
satisfy working capital and capital expenditure investment needed
to satisfy incremental flip-chip demand in the short-term. As a
result, Moody's expects the company to consume approximately
$180 million of cash through the end of 2005.
Amkor does not have financial covenants related to its undrawn
$30 million backup liquidity facility; however, the company is
constrained by a debt incurrence test in its senior note
obligations that would limit total additional debt incurred to
approximately $180 million. Alternative liquidity consists of
Amkor's investment in Anam Semiconductors, which is valued at
approximately $12 million as of the first quarter. The inability
to address its June 2006 maturity of $233 million of convertible
debt in coming quarters would place downward pressure on existing
liquidity and long term credit ratings.
Amkor Technology, Inc., headquartered in Chandler, Arizona, is one
of the world's largest providers of contract semiconductor
assembly and test services for integrated semiconductor device
manufacturers as well as fabless semiconductor operators.
Amkor's senior implied rating is B2.
The outlook is negative.
ARMSTRONG WORLD: Battle Ensues Over Appeal on Plan Denial Order
---------------------------------------------------------------
As reported in the Troubled Company Reporter on Mar. 14, 2005,
Armstrong World Industries, Inc., and its debtor-affiliates
appealed to the United States Court of Appeals for the Third
Circuit from the decision and final order, dated Feb. 23, 2005,
issued by District Court Judge Eduardo C. Robreno, which denied
confirmation of AWI's Fourth Amended Plan of Reorganization,
including any technical modifications to the Plan.
Judge Robreno found that the distribution of New Warrants to the
class of Equity Interest Holders over the objection of the class
of Unsecured Creditors violates the "fair and equitable"
requirement of 11 U.S.C. Section 1129(b)(2)(B)(ii), a codification
of the absolute priority rule.
AWI has estimated that the Unsecured Creditors in Class 6 have
claims amounting to approximately $1.651 billion. Under the Plan,
Unsecured Creditors would recover about 59.5% of their claims.
The Asbestos PI Claimants in Class 7 have claims estimated at
$3.146 billion and would recover approximately 20% of their claims
under the Plan. The Equity Interest Holders in Class 12 would be
issued New Warrants valued at approximately $35 million to
$40 million.
The Plan provides that, if the Unsecured Creditors reject the
Plan, the Asbestos PI Claimants will receive the New Warrants, but
then will automatically waive the distribution, causing the Equity
Interest Holders to secure the New Warrants.
Judge Robreno pointed out that the net result of the Asbestos PI
Claimants' waiver is that the Equity Interest Holders -- the old
AWI shareholders -- receive the Debtor's property -- the New
Warrants -- on account of their equity interests, although a
senior class -- the Unsecured Creditors -- would not have full
satisfaction of its allowed claims.
A full-text copy of the District Court's opinion is available at
no charge at:
http://bankrupt.com/misc/00-4471-7899.pdf
Creditors Committee Wants Appeal Dismissed
On March 29, 2005, the Official Committee of Unsecured Creditors
asked the United States Court of Appeals for the Third Circuit to
dismiss the appeal filed by Armstrong World Industries, Inc., from
Judge Robreno's decision and order denying confirmation of AWI's
Fourth Amended Plan of Reorganization.
The Creditors Committee argued that Judge Robreno's order isn't a
final order so no appeal is permitted and the Third Circuit does
not have jurisdiction to consider the Appeal.
AWI Responds
AWI, together with the Asbestos PI Committee and the Futures
Representative, opposes the Creditors Committee's request. AWI
insists that the District Court's order is final and appealable
because the District Court reviewed what was effectively a final
order of the Bankruptcy Court confirming AWI's Plan. The District
Court also denied a channeling injunction that AWI sought as part
of its proposed bankruptcy plan.
Rebecca L. Booth, Esq., at Richards, Layton & Finger, P.A., in
Wilmington, Delaware, asserts that even if the District Court's
order is considered apart from its procedural posture as an
opinion reviewing the Bankruptcy Court's order and its independent
appealability as an order denying an injunction, it is still a
final and appealable order under 28 U.S.C. Section 1291 and the
Court of Appeals' flexible principles of finality in bankruptcy
appeals.
Under its flexible definition of finality in bankruptcy appeals,
the Court of Appeals looks primarily at whether allowing an appeal
will serve the interests of judicial efficiency by preventing the
waste of judicial resources. Specifically, a finality
determination in a bankruptcy appeal "involves consideration of
certain factors as the impact of the matter on the assets of the
bankruptcy estate, the
preclusive effect of a decision on the merits, and whether the
interests of judicial economy will be furthered," Ms. Booth notes.
Ms. Booth says that "[a]llowing an appeal will serve judicial
economy and provide AWI with its only meaningful opportunity to
secure the review of the District Court ruling on the discrete
legal issue that AWI seeks to challenge."
Ms. Booth further relates that AWI devoted intense efforts over
four years to craft a plan that balances the interests of its
competing constituencies and did so with care that, at least
initially, all participating constituencies endorsed the plan.
The creditors, interest holders and claimants who have a stake in
the plan also have worked hard to negotiate an acceptable plan.
The Bankruptcy Court devoted substantial judicial resources to
evaluate AWI's Plan for compliance with the Bankruptcy Code. Ms.
Booth points out that if AWI cannot appeal the District Court's
order denying confirmation of the Plan, AWI's massive efforts,
together with its constituencies and the Bankruptcy Court, will be
largely wasted, because AWI will be forced to start over to try to
craft an acceptable plan. Ms. Booth argues that permitting those
efforts to go to waste without allowing AWI to challenge the
District Court's ruling would turn judicial efficiency on its
head.
Judicial-efficiency concerns are heightened because of the
particularly complex problems presented by the recent spate of
asbestos-related bankruptcies. Both the Court and the District
Court have recognized that AWI's case present unique problems that
require extraordinary
efforts to resolve.
Accordingly, AWI asks the Court to deny the Committee's request to
dismiss its Appeal, or in the alternative, defer ruling on the
jurisdictional issue so that the question of first impressions in
the Third Circuit can be addressed in more depth in the parties'
briefs on the merits.
Ms. Booth insists that AWI's Appeal will not delay the ongoing
proceedings in the Bankruptcy Court, because the legal issue
presented by the Appeal is well suited to review and can be heard
on an expedited basis. In the balance of judicial economy, the
minor delay during the Appeal is far outweighed by the judicial
and party resources that will be saved if AWI is allowed to
appeal, and prevails, so that the parties and the Court are not
required to start over to work to devise an acceptable bankruptcy
plan.
Headquartered in Lancaster, Pennsylvania, Armstrong World
Industries, Inc. -- http://www.armstrong.com/-- the major
operating subsidiary of Armstrong Holdings, Inc., designs,
manufactures and sells interior finishings, most notably floor
coverings and ceiling systems, around the world. The Company and
its debtor-affiliates filed for chapter 11 protection on
December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen
Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C.
Silberglied, Esq., at Richards, Layton & Finger, P.A., represent
the Debtors in their restructuring efforts. When the Debtors
filed for protection from their creditors, they listed
$4,032,200,000 in total assets and $3,296,900,000 in liabilities.
As of March 31, 2005, the Debtors' balance sheet reflected a
$1.42 billion stockholders' deficit. (Armstrong Bankruptcy News,
Issue No. 75; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ASIA GLOBAL CROSSING: Trustee Hires Goldin for Litigation Support
-----------------------------------------------------------------
Robert L. Geltzer, as Chapter 7 Trustee for the estates of Asia
Global Crossing Ltd. and Asia Global Crossing Development Co.,
sought and obtained the Court's authority to employ Goldin
Associates, L.L.C., as of March 10, 2005, to provide litigation
support services in connection with the prosecution of the AGX
Trustee's claims asserted in various adversary proceedings,
including the actions styled Geltzer v. Arthur Andersen LLP, et
al., and Geltzer v. Legere, et al., as well as other related
claims the AGX Trustee may assert.
The AGX Trustee has selected Goldin Associates as his litigation
support consultants in connection with the Adversary Proceedings
because of the firm's considerable experience in matters of that
nature. Mr. Geltzer believes that Goldin is well-qualified to
assist him in matters on which it is to be retained.
Specifically, Goldin will:
(a) assist in reviewing and preparing pleadings and other
litigation documents;
(b) assist in formulating or responding to discovery;
(c) perform damage calculation and other financial and related
analyses;
(d) prepare expert reports and provide expert testimony on
matters deemed necessary and appropriate by counsel; and
(e) render other and further tasks and analyses as may be
necessary to support litigation by the AGX Trustee.
Goldin is not being retained to provide auditing services or to
testify against any law firm, Mr. Geltzer says.
David Pauker, Goldin's Managing Director, attests that the firm
does not hold or represent any adverse interest, and that it is a
"disinterested person" as that term is defined by Section 101(14)
of the Bankruptcy Code.
Goldin will be paid according to its standard hourly rates:
Senior managing director $635
Managing directors $500 to $550
Directors $400 to $500
Vice Presidents $375 to $450
Managers $300 to $400
Senior Analysts $250 to $350
Analysts $150 to $250
Associates $100 to $150
Asia Global Crossing Ltd., through its direct and indirect
subsidiaries, as well as through a number of in-country joint
ventures and commercial arrangements with Asian partners, provides
the Asia Pacific region with a broad range of integrated
telecommunications and IP services. The Company filed for chapter
11 protection on Nov. 17, 2002 (Bankr. S.D.N.Y. Case No.
02-15749). When the Debtor filed for protection from its
creditors, it listed $2,279,771,000 in total assets and
$2,616,316,000 in total debts. David M. Friedman, Esq., at
Kasowitz, Benson, Torres & Friedman LLP, represents the Debtor in
its restructuring efforts. The Court converted the Debtor's
chapter 11 case to a chapter 7 proceeding on June 11, 2003. The
Court appointed Robert L. Geltzer as the Debtor's chapter 7
trustee. Attorneys at Golenbock Eiseman Assor Bell & Peskoe LLP
represent Mr. Geltzer.
ASPEN FUNDING: Moody's Junks $5.5 Million Class B-1 Notes
---------------------=-----------------------------------
Moody's Investors Service lowered its ratings on two classes of
notes issued by Aspen Funding I, Ltd, a static CDO collateralized
by structured finance securities. The affected tranches are:
(1) the $10,000,000 Class A-3L Floating Rate Notes Due 2037;
and
(2) the $5,500,000 Class B-1 9.06% Notes Due 2037.
These notes were placed under review for downgrade in
December 2004. As part of its rating action, Moody's confirmed
the rating of the $12,000,000 Class A-2L Floating Rate Notes Due
2037 and removed it from the watchlist.
According to Moody's, its current rating action reflects a further
deterioration in the credit quality of the collateral pool. The
average credit quality of the portfolio has deteriorated since
closing date from investment-grade to below investment-grade.
According to the surveillance report dated March 2005, the
weighted average Moody's rating factor was approximately 1268.
Moreover, over 12% of the collateral pool consists of assets rated
Caa1 or below.
Issuer: Aspen Funding I, Ltd.
Rating Action: Confirm rating; remove from watchlist
Class Description: U.S. $12,000,000 Class A-2L Floating Rate Notes
Due 2037
* Prior Rating: A1 on watch for possible downgrade
* Current Rating: A1
Rating Action: Downgrade
Class Description: U.S. $10,000,000 Class A-3L Floating Rate
Notes Due 2037
* Prior Rating: Baa2 on watch for possible downgrade
* Current Rating: Ba2
Class Description: U.S. $5,500,000 Class B-1 9.06% Notes Due 2037
* Prior Rating: B1 on watch for possible downgrade
* Current Rating: Ca
BLOCKBUSTER INC: Board Reappoints John Antioco as Chairman
----------------------------------------------------------
Blockbuster Inc.'s (NYSE: BBI, BBI.B) Board of Directors
unanimously agreed to reappoint Chief Executive Officer John
Antioco as its Chairman, expanding the Board's size to eight
directors.
"I am pleased that both the incumbent and new directors have asked
me to continue to serve as Blockbuster's chairman in the interests
of building shareholder value," said John Antioco, Blockbuster
Chairman and CEO. "I believe that Blockbuster has a world-class
brand, great employees and franchisees, and a strong potential for
future success. I look forward to working with the board and our
management team to maximize our many strengths and growth
opportunities in the future."
The independent Inspector of Election has certified the results of
the voting. Based upon that certification, Blockbuster disclosed
the election of Carl C. Icahn, Edward Bleier and Strauss Zelnick
to the Company's Board of Directors.
The Company also reported that, of the votes eligible to be cast
at the meeting, 51.8% of the voting power was present or
represented by proxy at the meeting.
About the Company
Blockbuster Inc. -- http://www.blockbuster.com/-- is a leading
global provider of in-home movie and game entertainment with more
than 9,100 stores throughout the Americas, Europe, Asia and
Australia.
* * *
As reported in the Troubled Company Reporter on May 16, 2005,
Fitch Ratings downgraded Blockbuster, Inc. -- BBI:
-- Senior secured debt to 'BB-' from 'BB';
-- Senior subordinated debt to 'B' from 'B+'.
The Rating Outlook remains Negative. Approximately $1.1 billion
in debt is affected by Fitch's action.
The downgrade and Negative Outlook reflects Fitch's concern
regarding the operational and financial policies of Blockbuster,
the weakened operating performance and liquidity position. Fitch
believes that the uncertainties related to Blockbuster's strategic
direction and fiscal policies brought on by the expected
appointment of Carl Icahn and his two nominees to the Board of
Directors negatively affects bondholders.
BLUE DOLPHIN: Posts $196,992 Net Loss in First Quarter 2005
-----------------------------------------------------------
Blue Dolphin Energy Company (Nasdaq: BDCO) reported a net loss of
$196,992 on revenues of $359,030 for the quarter ended March 31,
2005, compared to a net loss of $519,606 on revenues of $358,931
for the quarter ended March 31, 2004. The improvement in 2005
results was primarily due to gains recorded from the placement of
our interests in certain offshore oil and gas leases of
approximately $140,000, and the elimination of accrued interest
pursuant to the restructuring of a promissory note of
approximately $132,000.
About the Company
Blue Dolphin Energy Company -- http://www.blue-dolphin.com/-- is
engaged in the gathering and transportation of natural gas and
condensate. Questions should be directed to G. Brian Lloyd, Vice
President, Treasurer, at the Company's offices in Houston, Texas,
713-227-7660.
* * *
Going Concern Doubt
As reported in the Troubled Company Reporter on March 29, 2005,
the Company's auditors UHY Mann Frankfort Stein & Lipp CPAs, LLP,
raised substantial doubt about Blue Dolphin's ability to continue
as a going concern due to the Company's on-going liquidity
problems. For the year ended December 31, 2004, the Company
generated total revenues of approximately $1.4 million while
operating costs and general administrative costs, excluding
certain non-cash compensation expense, totaled approximately
$2.8 million.
BOLTON CORPORATION: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------------
Debtor: Bolton Corporation
919 West Morgan Street
Raleigh, North Carolina 27603
Bankruptcy Case No.: 05-01965
Type of Business: The Debtor is a home and building service
contractor. Bolton Corporation specializes in
home heating, air conditioning, plumbing, drain
cleaning and electrical needs.
See http://www.boltoncorp.com/
Chapter 11 Petition Date: May 13, 2005
Court: Eastern District of North Carolina (Raleigh)
Debtor's Counsel: Gregory B. Crampton, Esq.
Nicholls & Crampton, P.A.
P.O. Box 18237
Raleigh, North Carolina 27619
Tel: (919) 781-1311
Fax: (919) 782-0465
Total Assets: $2,500,000
Total Debts: $3,800,000
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
CED/Raleigh Trade Debt $198,908
P.O. Box 1510
Cary, NC 27512
LR Gorrell Co., Inc. Trade Debt $170,000
P.O. Box 33395
Raleigh, NC 27636
GE Supply Inc. Trade Debt $131,078
P.O. Box 15023
Winston-Salem, NC 27113
Murray Supply Inc. Trade Debt $110,713
American Standard Trade Debt $88,480
IIC Corporation Trade Debt $69,191
Coastal Staffing Group Trade Debt $68,501
FEI-Raleigh NC#15 Trade Debt $65,912
Bellsouth Advertising Trade Debt $61,515
Edwards Electric Trade Debt $58,674
Gregory Poole Power Trade Debt $48,410
Quality Fabrication Trade Debt $39,541
Construction Labor Trade Debt $37,443
Contractors, Inc.
GEM Fabrication Trade Debt $36,392
CC Dickson Co., Inc. Trade Debt $34,825
United Rentals, Inc. Trade Debt $32,037
Hughes Supply Inc. Trade Debt $27,017
Yamas Controls Trade Debt $24,976
Custom Controls Trade Debt $24,803
Hertz Equipment Rental Co. Trade Debt $21,780
CATHOLIC CHURCH: Tucson Wants to Fix Solicitation & Voting Actions
------------------------------------------------------------------
The Diocese of Tucson asks the U.S. Bankruptcy Court for the
District of Arizona to:
* approve procedures for solicitation and tabulation of votes
to accept or reject the Diocese's Plan of Reorganization;
* approve the content of the solicitation package;
* set deadlines for filing ballots, plan objections, ballot
report and reply/confirmation hearing brief; and
* approve procedures governing third party solicitation of
votes to accept or reject the Plan.
Susan G. Boswell, Esq., at Quarles & Brady Streich Lang LLP, in
Tucson, Arizona, informs the Court that Tucson will send
solicitation packages to creditors entitled to vote on the Plan.
The solicitation package will contain:
-- a summary of the Plan for Tort Claimants;
-- a Ballot for Tort Claimants and a Ballot for Non-Tort
Claimants; and
-- a Notice of the Plan Confirmation Hearing.
Due to the voluminous nature of the Plan, the Diocese will attach
a summary of the Plan which focuses on plan treatment for Tort
Claims.
"This Reorganization Case and the Plan are both highly complex and
involve substantial numbers of unrepresented parties. It is
essential that the Court ensure that parties receive accurate
information about the Reorganization Case and the Plan," Ms.
Boswell says.
The Diocese will use two forms of Ballot, which are based on
Official Form 14 and Rule 3018(c) Federal Rules Bankruptcy
Procedure, but which have been modified to address the particular
terms of the Plan. Specifically, the Ballot for Tort Claimants
incorporates Tort Claimants rights under the plan to elect to
participate in the Tort Convenience Class and opt out of
participating in the Settlement Trust.
The Notice will inform Creditors of:
(a) the deadline for submitting Ballots to accept or reject
the Plan;
(b) the deadline for filing requests pursuant to Rule 3018 for
temporarily allowance of claims for voting purposes;
(c) the deadlines related to voting by Tort Claimants as set
forth in the request filed by the Committee to establish
Plan voting rights for Tort Claimants;
(d) the deadline for filing objections to confirmation of the
Plan;
(e) any deadlines related to approval of third party
solicitations of acceptance and rejection of the Plan; and
(f) the time, date and place for the Confirmation Hearing; and
(g) the channeling injunction proposed in the Plan.
The Diocese also asks Judge Marlar to set:
* June 17, 2005, 11:59 p.m., as the deadline by which
creditors must file:
-- objections to confirmation of the Plan; and
-- 3018 Motions; and
* June 21, 2005, 4:00 p.m., Mountain Standard Time, as the
deadline for Creditors to return the Ballots;
* June 27, 2005, 11:59 p.m., Mountain Standard Time, as the
deadline to file a Ballot Report; and
* June 28, 2005, 11:59 p.m., Mountain Standard Time, as the
deadline for the Diocese to file a reply to the Confirmation
Objections or to file a Confirmation Hearing Brief.
Vote Tabulation
The Diocese wants to adopt these procedures for tabulating Plan
votes:
(a) Tort Claimant's Ballots will be filed with the Diocese's
counsel. The Diocese will identify each Tort Claimant's
Ballot by cross-reference to the Tort Claimant's Proof of
Claim number so that the confidentiality of the Tort
Claimant can be maintained. Copies of the Ballots so
identified by Proof of Claim Number will be made available
to the Committee, the Unknown Claims Representative and
the Guardian ad Litem. The Committee, the Unknown Claims
Representative and the Guardian ad Litem have redacted
copies of all Proofs of Claim, which contains the Court
assigned Proof of Claim number.
(b) Any Ballot that is not properly completed, executed and
timely returned will not be counted for the purposes of
rejecting and accepting the Plan.
(c) Any Ballot that is properly completed executed and timely
filed with the Court, but either (i) does not indicate an
acceptance or rejection of the Plan, or (ii) indicates
both an acceptance and rejection of the Plan, will not be
counted for purposes of rejecting or accepting the Plan.
(d) If a holder of a Claim casts more than one Ballot voting
the same Claim before the Ballot Deadline, the last Ballot
received before the Ballot Deadline will be deemed to
reflect the voter's intent and thus will supersede any
prior Ballots.
(e) Holders of multiple Claims will be required to vote all
their Claims under the Plan either to accept or reject the
Plan and may not split their votes. A Ballot or group of
Ballots received from a single holder of a Claim that
partially rejects and partially accepts the Plan will not
be counted.
(f) For purposes of determining that numerosity and claim
amount requirements of Sections 1126(c) and (d) of the
Bankruptcy Code have been satisfied, the Diocese will
tabulate only those Ballots cast by the Ballot Deadline.
(g) Any Ballot filed with the Court which casts a vote, or
makes an election, on behalf of a Claim, which (i) cannot
be identified as a Claim entitled to vote on the Plan, or
(ii) cannot be identified as a claim entitled to vote on
the Plan in the Class specified on the Ballot, will not be
counted.
Third Party Solicitation
The Diocese asks the Court to require any third party seeking to
solicit votes accepting or rejecting the Plan to obtain prior
Court approval of any written solicitation materials using this
expedited procedure:
* the party seeking to solicit votes must file a request
attaching as an exhibit the written solicitation proposed
to be sent to Creditors;
* the Court will conduct a hearing on the request on not less
than 48 hours' notice to the Diocese and the Committee. The
Court will then consider, among other things, whether:
-- the party soliciting the vote has standing to participate
in the Reorganization Case and solicit votes on the Plan;
-- the solicitation is materially misleading regarding the
contents of the Plan or the Diocese's assets and
liabilities; and
-- the solicitation essentially proposes a de facto
alternative plan.
The Roman Catholic Church of the Diocese of Tucson filed for
chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on
September 20, 2004, and delivered a plan of reorganization to the
Court on the same day. Susan G. Boswell, Esq., and Kasey C. Nye,
Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson
Diocese. (Catholic Church Bankruptcy News, Issue No. 26;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
CATHOLIC CHURCH: Spokane Files Sexual Abuse Claims Matrix
---------------------------------------------------------
The Diocese of Spokane made available in its Web site a Chart or
"Matrix" of Sexual Abuse Claims filed against it.
Spokane reports that 159 claims have been filed against the
estate. Of those claims:
-- 19 claims were settled prior to the Petition Date;
-- 140 claims remain unresolved and are currently in
litigation; and
-- 20 claimants assert claims of over $1,000,000.
A full-text copy of the Matrix is available for free at:
http://www.dioceseofspokane.org/Chapter11/pdf/Abuse_2004.pdf
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. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CIMATEC ENVIROMENTAL: Delays Filing Financial Reports to May 23
---------------------------------------------------------------
Cimatec Environmental Engineering Inc. (TSX VENTURE:CEG) presently
anticipates filing its comparative financial statements for the
fiscal year ended December 31, 2004, on or before May 23, 2005.
The delay in preparing and filing the financial statements is due
to the early filing deadline this year, the company's small size
and distribution of staff resources. Cimatec is working with its
auditor Smith, Nixon & Co. LLP to complete the audit of Cimatec's
2004 annual financial statements as expeditiously as possible.
Issuer Cease Trade Order
Based on discussions with Cimatec's auditor, it is anticipated
that the annual financial statements will be finalized and filed
on or before May 23, 2005. Should Cimatec fail to file its annual
financial statements by June 30, 2005, an issuer cease trade order
may be imposed by the applicable securities commissions requiring
that all trading in securities of Cimatec cease for such period
specified in the order. An issuer cease trade order may be
imposed sooner if Cimatec fails to file its default status reports
on time. It is anticipated that during the period of time that
the annual financial statements remain outstanding, the insiders
of Cimatec will be subject to a cease trade order prohibiting such
insiders from trading Cimatec securities.
Cimatec intends to satisfy the provisions of the alternate
information guidelines of OSC Policy 57-603 for so long as it
remains in default of the financial statement filing requirements
of applicable securities laws.
About the Company
Cimatec Environmental Engineering Inc. (TSX VENTURE:CEG)
researches, develops and manufactures advanced electronic air
filtration technology for the residential and commercial Indoor
Air Quality (IAQ) marketplace in North America.
CITRUS VALLEY: Moody's Lifts Ba2 Underlying Rating to Ba1
---------------------------------------------------------
Moody's Investors Service has upgraded to Ba1 from Ba2 Citrus
Valley Health Partners' underlying rating affecting $89 million of
the outstanding Series 1998 Certificates of Participation. The
outlook is revised to stable from negative at the higher rating
level. The Series 1998 COPs are insured by MBIA and carry the
insurer's claims paying rating of Aaa.
The Ba1 underlying rating reflects:
Strengths:
* Strong market position in the East San Gabriel Valley with a
stable 36% market share
* Significantly improved operating performance in FY 2004,
returning the organization back to profitability
* Increased liquidity following the monetization of real estate
in FY 2004
* No future debt plans over the near-term
Challenges:
* Competitive and difficult operating environment given state's
unfunded mandates and high Medi-Cal exposure
* Modest operating margins and liquidity balances relative to
size
* Challenging labor environment
* Future capital needs to address deferred maintenance and
seismic requirements, limiting future liquidity growth
Recent Developments:
Moody's believe CVHP has successfully achieved its turnaround in
FY 2004, returning the organization back to profitability for the
first time since 1997. CVHP has significantly improved operating
performance over the past four years, resulting in operating
income of $2.1 million (0.7% margin) in FY 2004 from sizable
operating losses of $27 million in FY 2000 and compared to a loss
of $5.8 million (-2.1% margin) in FY 2003.
As a result, operating cash flow has increased to $17.9 million
from a low of negative $6.6 million in FY 2000, with a marked
increase in FY 2004. The improvement is driven by strong revenue
growth of 8% in 2004 attributable to large commercial rate
increases which were offset by volume decline and unfavorable
shifts in the payer mix. Inpatient admissions dipped by 2.7% in
2004 reflecting capacity constraints due to length of stay
increases. Maintained bed occupancy levels have exceeded 80% for
the past two years.
CVHP also qualified for Medi-Cal Disproportionate Share funding in
FY 2004 and FY 2005. In addition, surgical volume has declined
two consecutive years reflecting increased competition from an
existing physician owned surgery center, issues with
anesthesiology coverage, and due to capacity issues. Management
believes surgical volume is stabilizing with first quarter
surgical volume remaining relatively flat this year. At the same
time, management continues to focus on expense controls through
productivity improvements, supply chain management and closer
monitoring of budget variances within each department.
However, CVHP continues to be challenged on the labor side with
labor costs escalating to remain competitive in the market and due
to continued use of agency nurses to comply with nurse staffing
ratios. Moody's is optimistic that CVHP will continue to make
progress in improving its financial performance and at a minimum
sustain improved levels, particularly given recent successes in
contract negotiations to improve reimbursement.
The improvement in performance levels has strengthened debt
measures. Maximum annual debt service improved to 3.9 times
(based on normalized investment returns) and debt to cash flow
returned to a more solid 4.1 times in FY 2004 from 1.8 and 11.1
times, respectively in FY 2003.
In addition, stronger performance and sale of two properties for
$20.4 in FY 2004 has contributed to stronger liquidity growth.
Unrestricted cash and investments increased to $58.9 million as of
fiscal year end 2004, equating to 74 days cash on hand, from $34.4
million and 46 days at FYE 2003. As a result, CVPH was able to
meet MBIA's liquidity covenant of 60 days for FY 2004. While the
cash has dipped through March 31, 2005 to $53.2 million as a
result of debt service payment at the end of March, we believe
CVPH should be able to sustain improved liquidity position given
expectations of continued solid financial performance. However,
further significant increases are not likely given the system's
deferred capital and seismic requirements.
CVHP has no borrowing plans in the near-term. In the near-term
capital plans are limited to an emergency room replacement project
for the Foothill Campus which will address much of the seismic
requirements for that campus. The project is estimated to cost
$11 million of which the entire amount has been fundraised.
Beyond this project, CVHP is current evaluating capital plans to
meet seismic requirements for the system.
Legal Security:
The outstanding bonds are secured by a pledge of gross revenues of
the obligated group which includes the parent corporation, Citrus
Valley Medical Center, and Foothill Presbyterian Hospital. The
obligated group makes up the bulk of the system's revenues and
assets.
Debt-Related Derivative Instruments: None
Outlook
Moody's outlook is revised to stable from negative, and reflects
our expectation that CVHP will maintain improved cash flow levels
and cash position.
What would change the rating - Up
* Further improvement in financial performance and liquidity
coupled with enhanced market position.
What would change the rating - Down
* A deterioration in financial performance or liquidity
position; loss in market share due to increased competitive
pressures, material increase in debt without commensurate
growth in cash flow.
Key Ratios and Data:
(Based on FY 2004 audited financial statements as of December 31,
2004; investment return normalized at 6%):
* Total hospital admissions: 31,903
* Total operating revenue: $303.1 million
* Net revenues available for debt service: $21.5 million
(excludes one-time gain on sale of property)
* Days-cash-on-hand: 74 days
* Debt-to-cash flow: 4.1 times
* Moody's adjusted maximum annual debt service coverage based
on 6% investment return: 3.2 times (maximum annual debt
service of $6,714)
* Maximum annual debt service coverage based on reported
investment return: 3.1 times
* Total debt outstanding: $91.5 million (includes other non-
rated debt)
* Operating cash flow margin: 5.9%
COLLINS & AIKMAN: Moody's Junks $1.7 Billion Debt Ratings
---------------------------------------------------------
Moody's Investors Service downgraded all debt and corporate
ratings for Collins & Aikman Products Co. by two or more notches.
Moody's additionally confirmed C&A's weak SGL-4 speculative grade
liquidity rating. Moody's outlook after incorporating these
rating changes remains negative.
The rating downgrades reflect several adverse new developments
announced by C&A on May 12, 2005. It is now Moody's expectation
that a reorganization of the company is imminent in the absence of
a material infusion of additional funds -- ideally in the form of
equity. Moody's now believes that the probable recovery by the
company's lenders under the senior secured credit agreement is
somewhat impaired, and that the probable recovery by its unsecured
lenders is severely impaired.
These specific rating actions associated with Collins & Aikman
Products Co. were taken:
-- Downgrade to C, from Caa2, of the rating for C&A's
$415 million of 12.875% guaranteed senior subordinated notes
due August 2012;
-- Downgrade to Ca, from Caa1, of the rating for C&A's
$500 million of 10.75% guaranteed senior unsecured notes due
December 2011;
-- Downgrade to Caa2, from B3, of the ratings for C&A's
$750 million of guaranteed senior secured credit facilities,
consisting of:
* $105 million revolving credit facility due August 2009;
* $170 million supplemental deposit-linked revolving credit
facility due August 2009;
* $475 million (increased from $400 million) term loan B
due August 2011;
-- Downgrade to Caa2, from B3, of C&A's senior implied rating;
-- Downgrade to Ca, from Caa1, of C&A's senior unsecured issuer
rating; and
-- Confirmation of C&A's SGL-4 speculative grade liquidity
rating.
David Stockman, who is also the senior managing director and the
founder of the company's equity sponsor Heartland Industrial
Partners, unexpectedly resigned on May 12, 2005 as C&A's chief
executive officer and chairman. The company simultaneously
alerted the public to a series of additional setbacks, the most
critical of which are highlighted below:
-- C&A cautioned all investors and creditors that any
previously provided forecasts, guidance, or outlook
concerning financial information for all or any part of 2005
should not be relied on at this time;
-- As of May 11, 2005 the company had cash and availability
under its financing arrangements of only about $13.4 million
(after taking into account the $75 million increase to the
term loan obtained in March 2005);
-- C&A expects to operate for the near future on a global basis
with approximately $15 million or less of daily liquidity,
which Moody's considers diminutive relative to the company's
almost $4 billion revenue base;
-- C&A relies on foreign factoring arrangements for almost
$100 million of liquidity, which arrangements are generally
terminable on short notice or may not be renewed at
maturity;
-- C&A faces scheduled cash interest payments for its unsecured
notes aggregating more than $53 million between
June 30, 2005 and August 15, 2005, along with significant
capital expenditures needs;
-- C&A's ongoing investigation of certain accounting matters
has delayed completion of the fiscal year end 2004 results
and first quarter 2005 results;
-- C&A required an amendment and waiver to its accounts
receivable facility to address a financial covenant
violation as well as the immediate liquidity issues arising
from the simultaneous Standard & Poors rating downgrades to
non-investment grade of Ford Motor Company and General
Motors Corporation. Absent the amendment, the required
duction of receivables balances would have been $70 million;
-- C&A expects that it is in violation of the first quarter
05 leverage covenant under its senior secured credit
cility, despite the fact that the covenant requirements were
ly recently reset. The company plans to initiate new
scussions with the lenders.
C&A's liquidity problems have been exacerbated by several company-
specific issues including the capital-intensive nature of its new
business launches and customer concentrations, and by increasingly
negative industry conditions which are affecting the performance
of almost all automotive suppliers. These include declining Big 3
production levels, increasing competitive pressures which are
affecting both C&A and its customers, and rising commodity costs
for resins and other raw materials.
Collins & Aikman Corporation, headquartered in Troy, Michigan, is
a leading designer, engineer, and manufacturer of automotive
interior components, including:
* instrument panels,
* fully assembled cockpit modules,
* floor and acoustic systems,
* automotive fabric,
* interior trim, and
* convertible top systems.
Annual revenues currently approximate $4 billion.
COLUMBUS MCKINNON: Weak Credit Measures Cue S&P to Hold Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B' corporate
credit rating on material handling company Columbus McKinnon Corp.
The outlook was revised to positive to reflect improvement in the
company's operating performance and credit measures.
"The ratings on publicly held Columbus McKinnon reflect its highly
leveraged financial profile, including its weak (albeit improving)
credit protection measures and weak overall business profile,"
said Standard & Poor's credit analyst Natalia Bruslanova.
Material handling is a cyclical and fragmented industry. However,
the company has leading positions in several niche markets:
* It holds either the No. 1 or No. 2 position in the
material-handling, lifting, and positioning-products
industries, and
* 75% of sales come from markets where it is the leading
supplier.
As a result of improving end-market conditions and a focus on cost
reductions, Columbus McKinnon has been able to improve its
operating margins (now at 11%) and cash generation.
In addition, the company has been focusing on selling off noncore
business segments, mainly within its solutions group. Still, it
is being challenged by:
(1) escalating steel prices,
(2) increased health insurance,
(3) workers' compensation insurance, and
(4) pension expenses,
though it has had some success in offsetting some of the
additional costs through the implementation of product price
increases. Management is committed to a continued focus on lean
manufacturing initiatives and divestiture of noncore assets. As a
result, operating margins (before D&A) are expected to continue to
show further modest improvement.
For an upgrade, the company should demonstrate continued
improvement in operating performance and credit protection
measures, sustaining a lease-adjusted total debt to EBITDA ratio
of less than 5x and maintaining sufficient liquidity. However,
the company's leveraged balance sheet and its currently weak
credit protection measures limit this upside ratings potential in
the near term. At the same time, Columbus McKinnon's leading
niche business positions, improving cost structure, and currently
strong end markets also limit downside risk.
CONSECO/GREEN: Fitch Rates 77 Bond Classes at C
-----------------------------------------------
Following an intensive review, Fitch Ratings has upgraded 14
classes ($555 million), affirmed 52 classes ($2.8 billion) and
downgraded 117 classes ($7 billion) of 56 Conseco/Green Tree
manufactured housing RMBS transactions. The total dollar amount
of all rated classes is $11.6 billion.
Fitch has taken numerous rating actions on the company's MH bonds
since Conseco Finance Corp. filed for Chapter 11 bankruptcy in
2002. In June 2003, CFC's MH platform was sold to CFN Investment
Holdings, LLC and the servicing platform was renamed Green Tree
Servicing, LLC. From mid-2003 until mid-2004, the collateral
performance improved notably and has remained generally stable
since mid-2004. However, collateral losses have continued to
exceed excess spread, causing bond writedowns and credit
enhancement deterioration.
Currently, pools issued since 1999 are performing worse than pools
issued prior to 1999. Fitch expects collateral performance to
remain relatively stable for transactions issued prior to 1999.
For transactions issued since 1999, Fitch assumes modest
improvement in collateral performance over the next several years.
However, longer amortization terms, higher percentages of repo-
refinances and generally weaker collateral attributes are expected
to prevent the default rates of recent vintages from declining
substantially.
Although collateral performance is expected to remain stable or
improve modestly, the rating actions reflect the additional
expectation that losses will continue to exceed excess spread for
most transactions and credit enhancement for many bonds will
continue to deteriorate.
When determining a credit rating for a particular bond, Fitch
focused on the relationship between the base-case expected loss
and the amount of loss required to cause the bond to default, or
the 'break-case' loss. Fitch's base-case assumptions resulted in
an expected loss on the remaining pool balance generally ranging
from 15% to 25% for pools issued in years 1992 to 1995, 25% to 35%
for pools issued in years 1996 to 1999, and 35% to 40% for pools
issued in 2000 and 2001. Using the same base-case assumptions,
the expected final cumulative loss as a percentage of the original
pool balance generally ranges from 10% to 20% for pools issued in
years 1992 to 1995, 20% to 30% for pools issued in years 1996 to
1999 vintages, and 30% to 40% for years 2000 and 2001.
To date, cumulative loss on the original pool balance ranges from
approximately 6% to 11% for the pools issued in years 1992 to
1995, 11% to 13% for pools issued in years 1996 to 1998, and 13%
to 18% for pools issued in years 1999 to 2001.
When analyzing the relationship between the base-case loss and the
break-case loss, Fitch considered each transaction's unique
structural features. Transactions issued prior to GT 1996-4 pay
principal to the senior class prior to paying any interest to
mezzanine classes. This structure is often referred to as IPIP
(Interest-Principal, Interest-Principal). IPIP structures
typically result in interest shortfalls (rather than principal
shortfalls) to mezzanine classes when the deal is underperforming.
The IPIP structure does not feature a write-down mechanism; rather
undercollateralized class balances will remain outstanding for the
life of the deal. Many IPIP transactions prior to GT 1995-2 have
experienced interest shortfalls. However, transactions GT 1995-2
through GT 1996-3 have a structural feature which allows funds
collected after the cut-off date but prior to the distribution
date to be used to pay the current month's interest shortfalls.
Available funds which would be used to pay principal in the
subsequent month are used to pay interest in the current month.
The result is that these transactions have principal shortfalls,
rather than interest shortfalls, which will ultimately result in
larger class principal balances which cannot be paid. For classes
with interest shortfalls, the likelihood of recovering the
interest shortfall amount was considered.
An additional structural focus was the payment priority among the
senior classes. For transactions issued after GT 1998-4, senior
classes typically receive principal in sequential order. Fitch
deems those senior classes which are expected to pay-off sooner to
be of lower credit risk than those senior classes which will be
outstanding for a longer period of time.
Fitch has taken these rating actions:
Series 1992-2:
-- Class B downgraded to 'C' from 'CCC'.
Series 1993-1:
-- Class B downgraded to 'C' from 'CCC'.
Series 1993-2:
-- Class B downgraded to 'C' from 'B-'.
Series 1993-4:
-- Class B downgraded to 'C' from 'B-'.
Series 1994-1:
-- Class A-5 upgraded to 'AAA' from 'AA';
-- Class B-2 remains at 'C'.
Series 1994-2:
-- Class A-5 affirmed at 'AA';
-- Class B-2 remains at 'C'.
Series 1994-3:
-- Class A-5 affirmed at 'AA';
-- Class B-2 remains at 'C'.
Series 1994-5:
-- Class A-5 affirmed at 'AA';
-- Class B-2 remains at 'C'.
Series 1994-6:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class B-1 affirmed at 'A-';
-- Class B-2 remains at 'C'.
Series 1994-7:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class B-1 affirmed at 'BBB+';
-- Class B-2 remains at 'C'.
Series 1994-8:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class B-1 affirmed at 'BBB+';
-- Class B-2 remains at 'C'.
Series 1995-1:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class B-1 affirmed at 'BBB+';
-- Class B-2 remains at 'C'.
Series 1995-2:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 upgraded to 'AAA' from 'AA-';
-- Class B-1 upgraded to 'A+' from 'BBB';
-- Class B-2 remains at 'C'.
Series 1995-3:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 upgraded to 'AA+' from 'AA-';
-- Class B-1 upgraded to 'BBB' from 'BBB-';
-- Class B-2 remains at 'C'.
Series 1995-4:
-- Classes A-5 - A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'A-' from 'AA-';
-- Class B-1 downgraded to 'B' from 'BB';
-- Class B-2 remains at 'C'.
Series 1995-5:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'BBB-' from 'A';
-- Class B-1 downgraded to 'B-' from 'B';
-- Class B-2 remains at 'C'.
Series 1995-6:
-- Classes A-5 - A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'B-' from 'BBB-';
-- Class B-1 downgraded to 'CCC' from 'B-';
-- Class B-2 remains at 'C'.
Series 1995-7:
-- Classes A-5 - A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'BBB-' from 'A-';
-- Class B-1 downgraded to 'CCC' from 'B-';
-- Class B-2 remains at 'C'.
Series 1995-8:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 upgraded to 'AA-' from 'A+';
-- Class B-1 downgraded to 'CCC' from 'B-';
-- Class B-2 remains at 'C'.
Series 1995-9:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'B' from 'BBB';
-- Class B-1 downgraded to 'CCC' from 'B-';
-- Class B-2 remains at 'C'.
Series 1995-10:
-- Class A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'BBB-' from 'A';
-- Class B-1 downgraded to 'CCC' from 'B';
-- Class B-2 remains at 'C'.
Series 1996-1:
-- Classes A-4 - A-5 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'BBB';
-- Class B-1 affirmed at 'CCC';
-- Class B-2 remains at 'C'.
Series 1996-2:
-- Classes A-4 - A-5 downgraded to 'AA-' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'BB';
-- Class B-1 downgraded to 'C' from 'CC';
-- Class B-2 remains at 'C'.
Series 1996-3:
-- Classes A-5 - A-6 downgraded to 'AA-' from 'AAA';
-- Class M-1 is downgraded to 'CC' from 'B';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1996-4:
-- Classes A-6 - A-7 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'CCC' from 'B';
-- Class B-1 remains at 'C'
-- Class B-2 remains at 'C'.
Series 1996-5:
-- Classes A-6 - A-7 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'B';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1996-6:
-- Class A-6 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'BB';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1996-7:
-- Class A-6 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'B' from 'BBB-';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1996-8:
-- Classes A-6 - A-7 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'BB';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1996-9:
-- Classes A-5 - A-6 downgraded to 'AA' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'BB';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1996-10:
-- Classes A-5 - A-6 affirmed at 'AAA';
-- Class M-1 downgraded to 'B' from 'BBB-';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1997-1:
-- Classes A-5 - A-6 downgraded to 'AA-' from 'AAA';
-- Class M-1 downgraded to 'B-' from 'BB';
-- Class B-1 remains at 'C'.
Series 1997-2:
-- Classes A-6 - A-7 downgraded to 'A+' from 'AA+';
-- Class M-1 downgraded to 'CCC' from 'B-';
-- Class B-1 remains at 'C'.
Series 1997-3:
-- Classes A-5 - A-7 downgraded to 'A' from 'AA';
-- Class M-1 downgraded to 'CCC' from 'B-';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1997-4:
-- Classes A-5 - A-7 downgraded to 'A+' from 'AA+';
-- Class M-1 downgraded to 'B-' from 'BB-';
-- Class B-1 remains at 'C'.
Series 1997-5:
-- Classes A-5 - A-7 downgraded to 'A+' from 'AA+';
-- Class M-1 downgraded to 'B-' from 'BB';
-- Class B-1 remains at 'C';
-- Class B-2 remains at 'C'.
Series 1997-6:
-- Classes A-6 - A-10 downgraded to 'A' from 'AA';
-- Class M-1 downgraded to 'B-' from 'B+';
-- Class B-1 remains at 'C'.
Series 1997-8:
-- Class A-1 downgraded to 'A-' from 'AA-';
-- Class M-1 downgraded to 'CCC' from 'B';
-- Class B-1 remains at 'C'.
Series 1998-1:
-- Classes A-4 - A-6 downgraded to 'A-' from 'A+';
-- Class M-1 affirmed at 'CCC';
-- Class B-1 remains at 'C'.
Series 1998-3:
-- Classes A-5 - A-6 downgraded to 'BBB-' from 'BBB+';
-- Class M-1 affirmed at 'CCC';
-- Class B-1 remains at 'C'.
Series 1998-4:
-- Classes A-5 - A-7 downgraded to 'BBB-' from 'BBB';
-- Class M-1 downgraded to 'CC' from 'CCC';
-- Class B-1 remains at 'C'.
Series 1998-6:
-- Class A-6 upgraded to 'AAA' from 'AA';
-- Class A-7 downgraded to 'BBB' from 'A';
-- Class A-8 downgraded to 'BBB-' from 'BBB+';
-- Class M-1 downgraded to 'CCC' from 'B-';
-- Class M-2 downgraded to 'C' from 'CC';
-- Class B-1 remains at 'C'.
Series 1998-7:
-- Class A-1 downgraded to 'BB+' from 'BBB+';
-- Class M-1 affirmed at 'B-';
-- Class M-2 affirmed at 'CC';
-- Class B-1 remains at 'C'.
Series 1999-1:
-- Class A-4 upgraded to 'AAA' from 'AA';
-- Class A-5 downgraded to 'BBB-' from 'A-';
-- Class A-6 downgraded to 'B' from 'BBB-';
-- Class A-7 downgraded to 'B' from 'BB';
-- Class M-1 affirmed at 'CCC';
-- Class M-2 downgraded to 'C' from 'CC';
-- Class B-1 remains at 'C'.
Series 1999-2:
-- Class A-3 upgraded to 'AA+' from 'A+';
-- Class A-4 affirmed at 'BBB-';
-- Classes A-5 - A-7 downgraded to 'B' from 'B+';
-- Class M-1 affirmed at 'CCC';
-- Class M-2 downgraded to 'C' from 'CC';
-- Class B-1 remains at 'C'.
Series 1999-3:
-- Class A-5 upgraded to 'A' from 'BBB+';
-- Class A-6 downgraded to 'BBB-' from 'BBB';
-- Classes A-7 - A-9 downgraded to 'B-' from 'B';
-- Class M-1 downgraded to 'CC' from 'CCC';
-- Class M-2 downgraded to 'C' from 'CC'.
Series 1999-4:
-- Class A-5 affirmed at 'BBB-';
-- Class A-6 affirmed at 'BB';
-- Classes A-7 - A-9 affirmed at 'B-';
-- Class M-1 downgraded to 'C' from 'CC';
-- Class M-2 remains at 'C'.
Series 1999-5:
-- Class A-4 upgraded to 'A-' from 'BBB+';
-- Classes A-5 - A-6 affirmed at 'B-';
-- Class M-1 downgraded to 'C' from 'CC';
-- Class M-2 remains at 'C'.
Series 2000-1:
-- Class A-4 downgraded to 'BB-' from 'BBB-';
-- Class A-5 downgraded to 'CCC' from 'B-';
-- Class M-1 remains at 'C'.
Series 2000-2:
-- Class A-4 downgraded to 'B-' from 'BB-';
-- Classes A-5 - A-6 downgraded to 'CC' from 'CCC';
-- Class M-1 remains at 'C'.
Series 2000-4:
-- Class A-4 downgraded to 'CCC' from 'B+';
-- Classes A-5 - A-6 downgraded to 'CC' from 'CCC';
-- Class M-1 remains at 'C'.
Series 2000-5:
-- Class A-4 affirmed at 'BBB';
-- Class A-5 downgraded to 'CCC' from 'BB+';
-- Classes A-6 - A-7 downgraded to 'CCC' from 'B-';
-- Class M-1 remains at 'C';
-- Class M-2 remains at 'C'.
Series 2000-6:
-- Class A-4 upgraded to 'AA+' from 'A-';
-- Class A-5 affirmed at 'BB+';
-- Class M-1 downgraded to 'C' from 'CC';
-- Class M-2 remains at 'C'.
Series 2001-1:
-- Class A-IO affirmed at 'AAA';
-- Class A-4 affirmed at 'A';
-- Class A-5 affirmed at 'BB+';
-- Class M-1 downgraded to 'C' from 'CC';
-- Class M-2 remains at 'C'.
Series 2001-2:
-- Classes A & A-IO affirmed at 'AAA';
-- Class M-1 downgraded to 'C' from 'B-';
-- Class M-2 remains at 'C'.
Series 2001-4:
-- Class A-IO affirmed at 'AAA';
-- Class A-2 upgraded to 'AAA' from 'AA';
-- Class A-3 upgraded to 'AA+' from 'A+';
-- Class A-4 downgraded to 'BB+' from 'BBB';
-- Class M-1 downgraded to 'CCC' from 'B';
-- Class M-2 downgraded to 'C' from 'CC';
-- Class B-1 remains at 'C'.
DAVITA INC: Moody's Puts B1 Ratings on New $3.2 Billion Facilities
------------------------------------------------------------------
Moody's Investors Service assigned ratings to DaVita, Inc.'s
proposed offering of $3.150 billion in senior secured credit
facilities, consisting of:
* a $250 million revolving credit facility;
* a $250 million term loan A; and
* a $2.650 billion term loan B.
These facilities represent the second phase of financing related
to DaVita's proposed acquisition of Gambro Healthcare, the U.S.
dialysis clinics of Sweden's Gambro AB.
On March 22, 2005, DaVita issued $500 million senior unsecured
notes and $850 million senior subordinated notes in the first
phase of financing related to the acquisition. Moody's previous
rating action considered the company's ability to service the new,
and significantly higher, debt burden associated with the proposed
second phase of financing, with free cash flow from operations.
Therefore, the senior implied rating and the ratings assigned to
the notes issued in March have been affirmed at this time.
Risks and concerns reflected in the ratings also include:
* those associated with the company's focus on a single line of
business;
* the high concentration of revenues from the administration of
Epogen;
* the potential for reimbursement changes;
* the company's high reliance on reimbursement from private and
managed care payors coupled with expectations for a tougher
commercial pay contracting environment; and
* risks related to the government's investigation of the
company.
Moody's also notes that the company will face significant
challenges related to the integration of the Gambro operations,
including entering into a ten-year alliance and product supply
agreement with Gambro Renal Products, a subsidiary of Gambro AB,
requiring the purchase of certain products, supplies and equipment
at fixed prices, which could limit flexibility in achieving cost
savings. The rating agency said Davita needs to appoint a new
Chief Financial Officer at a time of heightened change for the
company, which increases the integration challenges for Davita and
Gambro.
Positive factors supporting the ratings include:
* DaVita's good cash flow generation supported by the recurring
nature of revenues;
* the geographic diversification of revenue streams, which will
be enhanced by the acquisition of the Gambro business; and
* continued favorable industry growth trends.
The ratings also consider the company's strong management team and
the fact that the combined company will continue to be one of the
market leaders in a consolidating industry.
The stable outlook anticipates continued favorable operating
performance for the company, with moderate growth in revenues and
EBITDA. Margins may continue to be pressured from flat to
declining government reimbursement for dialysis treatments in the
face of rising labor, supplies and insurance costs, less favorable
contract negotiations with managed care payors, and integration
costs and initiatives. However, Moody's expects cash flow from
operations as well as free cash flow to remain consistent.
Material deleveraging and debt reduction, such that cash flow from
operations and free cash flow to adjusted debt ratios reach
sustainable levels of approximately 15% and 10%, respectively,
could result in upward pressure on the ratings.
Alternatively, Moody's may consider downgrading the ratings if
strains on free cash flow from the increased debt load result in
cash flow from operations and free cash flow to adjusted debt
ratios to remain below 10%. Other developments that could result
in a rating downgrade include:
* unsuccessful integration of acquisitions causing pressure on
operating margins;
* a decline in free cash flow because of reimbursement changes
or reduced pricing for dialysis treatments; or
* a negative outcome to the DOJ investigation resulting in
additional leverage on the company's balance sheet.
On March 7, 2005, the company disclosed that it had received a
subpoena from the U.S. Attorney's Office for the Eastern District
of Missouri in St. Louis.
As Moody's previously reported, pro forma for the acquisition and
giving effect to both phases of financing, DaVita's cash flow
coverage of debt for the year ended December 31, 2004 would have
been moderate for the B1 category. Moody's estimates that
adjusted cash flow from operations to adjusted debt would have
been approximately 10% while adjusted free cash flow to adjusted
debt would have been approximately 6%. EBIT coverage of interest
would have been low at approximately 2.6 times. Leverage, defined
as adjusted debt to EBITDAR, would have been a relatively high 5.8
times. Moody's believes that the use of EBITDA and related EBITDA
ratios as a single measure of cash flow without consideration of
other factors can be misleading.
The senior secured credit facilities are rated at the senior
implied level of B1 reflecting the significant value that these
debt instruments represent to the company's overall debt
capitalization. The B2 rating for the senior unsecured notes
reflects the unsecured nature of this obligation. The B3 rating
for the senior subordinated notes, two notches below the senior
implied rating, reflects the contractual subordination to the
senior secured and senior unsecured debt. Ratings remain subject
to final review of documentation by Moody's.
A summary of the rating actions for DaVita is:
Ratings assigned:
* $250 million guaranteed senior secured revolving credit
facility, rated B1
* $250 million guaranteed senior secured term loan A, rated B1
* $2.650 billion guaranteed senior secured term loan B,
rated B1
Ratings affirmed:
* Senior implied rating, B1
* Senior unsecured issuer rating, B2
* $500 million guaranteed senior unsecured notes due 2013,
rated B2
* $850 million guaranteed senior subordinated notes due 2105,
rated B3
* $115 million senior secured revolving credit facility due
2007, rated B1 (to be withdrawn with the closing of the
proposed offering)
Gambro AB is a global medical technology and healthcare company
with positions in renal care (services and products) and blood
component technology. Gambro generated approximately
$3.23 billion (SEK 26.1 billion) of revenue in 2003, 60 percent of
which was for dialysis services.
DaVita, Inc., headquartered in El Segundo, California, is an
independent provider of dialysis services in the U.S. for patients
suffering from end-stage renal disease (chronic kidney failure).
As of December 31, 2004, the company operated 658 outpatient
dialysis centers located in 37 states and the District of
Columbia, serving over 53,000 patients. For the last twelve
months ended March 31, 2005, DaVita had total revenues of
$2.4 billion.
DECISIONONE CORP: Emerges from Chapter 11 in Less than 60 Days
--------------------------------------------------------------
DecisionOne Corporation emerged from chapter 11 on Friday, May 13,
2005. The Company has completed all financial transactions
related to the implementation of its plan of reorganization, which
was approved by the United States Bankruptcy Court for the
District of Delaware on April 19, 2005.
On March 15, 2005, DecisionOne filed a "pre-packaged" chapter 11
plan with the United States Bankruptcy Court for the District of
Delaware to reduce the Company's debt, strengthen its balance
sheet and improve its liquidity. The filing involved a pre-
packaged plan with holders of 98% of the Company's notes agreeing
to exchange their debt for new equity and a substantially lower
level of new debt.
"We are pleased to emerge from chapter 11 in less than 60 days
with a significantly reduced debt burden and stronger capital
structure," said Neal Bibeau, DecisionOne Chief Executive Officer.
"We now have the solid financial base needed to achieve long-term
growth and success. The restructured organization enhances value
for all of our stakeholders by providing the financial flexibility
to make appropriate investments in our operations, to leverage new
opportunities in the marketplace, and to innovate our leading
customer service capabilities."
"I appreciate the support of our investors, customers, partners
and employees during the past two months and look forward to
building on our leadership position in the industry," added Mr.
Bibeau.
Headquartered in Frazer, Pennsylvania, DecisionOne Corporation --
http://www.decisionone.com/-- serves leading companies and
government agencies with tailored information technology support
services that maximize the return on technology investments,
minimize capital and infrastructure costs and optimize operational
effectiveness. The Company filed for chapter 11 protection on
March 15, 2005 (Bankr. D. Del. Case No. 05-10723). Mark D.
Collins, Esq., and Rebecca L. Booth, Esq., at Richards Layton &
Finger, P.A., and Michael A. Bloom, Esq., and Joel S. Solomon,
Esq., at Morgan, Lewis & Bockius LLP, represent the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed total assets of $107 million and total
debts of $273 million. The Court confirmed the Company's Plan of
Reorganization on April 19, 2005.
DELPHI CORP: Posts $409 Million Net Loss in First Quarter 2005
--------------------------------------------------------------
Delphi Corp. (NYSE: DPH) reported unaudited first quarter 2005
financial results with revenues of $6.9 billion, and a GAAP net
loss of $409 million. The first quarter loss was significantly
impacted by Delphi's inability to record the non-cash deferred tax
benefit of its U.S. losses. The company had previously expected
to record a tax benefit during 2005 of between 40 - 60 percent of
its pre-tax losses. The company generated $112 million in
operating cash flow in the first quarter. Delphi's net liquidity
improved during the quarter with a cash balance of $1.15 billion
at March 31, 2005. Non-GM revenues grew 8 percent year-over-year
to $3.5 billion.
"Versus our expectations for the first quarter, we were
significantly challenged by weaker-than-expected production
volumes with some of our larger North American customers," said
J.T. Battenberg III, Delphi's chairman, and chief executive
officer. "We expect these pressures to continue for the remainder
of the year. Delphi's management team is focused on addressing
these issues while remaining committed to serving our customers'
needs. At the same time as we work to address our short-term
challenges, we continue to grow our business through our ongoing
technology leadership, global expansion and adjacent market
growth. During the quarter, Delphi was able to reach a new
milestone with non-GM revenues reaching 51 percent of total
sales."
"Like many other companies in the automotive sector, Delphi's
first quarter performance was impacted by high commodity costs
year-over-year and low production volumes, particularly with GM
North America," said John D. Sheehan, Delphi's acting chief
financial officer. "We are engaging our entire global workforce
to identify additional opportunities to reduce SG&A and
discretionary spending so that we can focus on our restructuring
activities and overall transformation. Concurrently, we are
successfully growing our non-GM revenues domestically, overseas
and in adjacent markets, evidenced by strong first quarter
bookings. Additionally, 64 percent of Delphi's first quarter
bookings were from non-GM customers -- further proof that our
diversification efforts are working."
U.S. Deferred Tax Assets
In conjunction with Delphi finalizing its Dec. 31, 2004 financial
statements, the company was required to re-assess the
recoverability of its U.S. deferred tax assets, which amounted to
approximately $4.7 billion. Due to the company's history of U.S.
losses over the past three years, combined with its current U.S.
operating outlook for the near to medium term, Delphi determined
that it could no longer support realization of such amounts under
current accounting guidelines. Accordingly, the company will
record a charge to establish a valuation allowance against its
U.S. deferred tax assets in its Dec. 31, 2004 financial statements
when filed. This is not a cash charge; therefore, there is no
impact to Delphi's net liquidity position. Additionally, at such
time that Delphi's U.S. operations return to sustained
profitability, the company will reassess the potential to reverse
the valuation allowance being established.
First Quarter 2005 Financing Activities
During the quarter, Delphi amended certain provisions of its $3
billion revolving credit facilities and intends to amend and
increase its existing $1.5 billion five-year revolving credit
facility, while providing collateral to lenders. These facilities
would replace the company's existing one- and five-year revolving
credit facilities (maturing June 2005 and June 2009,
respectively), which today total $3.0 billion. Delphi is also
seeking to put in place secured term loans to preserve its
liquidity position.
Under the first quarter amendment, the financial covenant ratio
for consolidated leverage was increased and Delphi obtained a
waiver to provide audited financial statements for the year ended
December 31, 2004, by June 30, 2005. Also in the first quarter,
the company increased the borrowing limit of its U.S. trade
receivables securitization program from $600 million to $731
million.
"The amended credit facilities and increased U.S. securitization
program facilitate Delphi maintaining an appropriate level of
liquidity to manage its ongoing operations as we proceed with
financing activities to address the June 2005 expiration of the
364 day revolver. We continue to consider changes to our
liquidity sources to adapt to our current credit standing and
ensure that we have long-term access to liquidity to allow
management to continue to transform our business," Sheehan said.
Cost Structure Actions
One of Delphi's key value drivers of its transformation is
reducing its legacy cost structure by continuing global actions
designed to address under- performing operations and appropriately
size the company's global workforce. During the first quarter,
Delphi continued to address its U.S. legacy sites through further
consolidations. Delphi has completed consolidation activities at
its Foley, Alabama, Tuscaloosa, Alabama and Anaheim, California
sites.
In addition, manufacturing operations have ceased at Delphi's
Olathe, Kansas site. These latest actions bring Delphi's total to
78 business lines or facilities that have been sold or closed
since 1999.
Delphi is also making progress on its 2005 restructuring
initiatives to further reduce its workforce by 8,500 positions, as
announced in Delphi's 2005 outlook in December 2004. In Q1,
Delphi reduced its global workforce by approximately 1,500
positions, including 870 U.S. hourly and 630 international
positions.
"In addition to these restructuring activities, Delphi is
continuing to refine our product portfolio by assessing the
effectiveness of all of our operations, which may include
partnering, joint venturing or sale," Battenberg said. "Most
recently, Delphi signed a non-binding letter of intent with
Johnson Controls Inc. to sell our global lead-acid battery
business for approximately $212 million. Additionally, as
previously disclosed, we continue to pursue other divestitures /
asset sales. We expect total proceeds from all currently-
identified transactions to approximate $400 million."
About the Company
Delphi Corp. -- http://www.delphi.com/-- is the world's largest
automotive component supplier with annual revenues topping $25
billion. Delphi is a world leader in mobile electronics and
transportation components and systems technology. Multi-national
Delphi conducts its business operations through various
subsidiaries and has headquarters in Troy, Michigan, USA, Paris,
Tokyo and Sao Paulo, Brazil. Delphi's two business sectors --
Dynamics, Propulsion, Thermal & Interior Sector and Electrical,
Electronics & Safety Sector -- provide comprehensive product
solutions to complex customer needs. Delphi has approximately
186,500 employees and operates 171 wholly owned manufacturing
sites, 42 joint ventures, 53 customer centers and sales offices
and 34 technical centers in 41 countries.
* * *
As reported in the Troubled Company Reporter on April 25, 2005,
Standard & Poor's Rating Services lowered its corporate credit and
senior unsecured ratings on Delphi Corporation to 'BB' from 'BB+'
and its preferred stock rating (trust preferred rating) to 'B'
from 'B+'. The ratings remain on CreditWatch with negative
implications.
DEX MEDIA: S&P Lifts Rating on $2.26 Billion Credit Facility
------------------------------------------------------------
Standard & Poor's Ratings Services raised its senior secured bank
loan rating for Dex Media West LLC (Dex West) to 'BB' from 'BB-'
and assigned its recovery rating of '1' to the company's original
$2.26 billion credit facility.
The upgrade and the recovery rating reflect improved prospects for
full recovery of principal in a simulated payment default
scenario, following meaningful levels of debt repayment since the
facility's September 2003 issuance date. In the aggregate, Dex
West has repaid almost $750 million of its term A and term B
loans, reducing the total outstanding facility, including the $100
million revolver, to just over $1.5 billion as of March 2005.
At the same time, Standard & Poor's affirmed its other ratings on
the company, including the 'BB-' corporate credit rating.
DEX MEDIA: S&P Lifts Rating on $1.5 Billion Credit Facility
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its senior secured bank
loan rating for Dex Media East LLC (Dex East) to 'BB' from 'BB-'
and assigned its recovery rating of '1' to the company's original
$1.5 billion credit facility.
"The upgrade and the recovery rating reflect improved prospects
for full recovery of principal in a simulated payment default
scenario, following meaningful levels of debt repayment since the
facility's November 2002 issuance date," said Standard & Poor's
credit analyst Emile Courtney. In the aggregate, Dex East has
repaid almost $500 million of its term A and term B loans,
reducing the total outstanding facility, including the $100
million revolver, to just under $1 billion as of March 2005.
At the same time, Standard & Poor's affirmed its other ratings on
the company, including the 'BB-' corporate credit rating.
DIVERSIFIED ASSET: Fitch Downgrades $19 Million Notes to B-
-----------------------------------------------------------
Fitch Ratings downgrades four classes of notes issued by
Diversified Asset Securitization Holdings III, L.P. These rating
actions are effective immediately:
-- $183,825,625 class A-1L notes downgraded to 'AA' from 'AA+';
-- $59,850,203 class A-2 notes downgraded to 'AA' from 'AA+';
-- $30,000,000 class A-3L notes downgraded to 'BBB-' from 'A-';
-- $19,183,302 class B-1L notes downgraded to 'B-' from 'BB+'.
The ratings of the classes A-1L, A-2, and A-3L notes address the
likelihood that investors will receive full and timely payments of
interest, as per the governing documents, as well as the stated
balance of principal by the legal final maturity date. The rating
of the class B-1L notes addresses the likelihood that investors
will receive ultimate and compensating interest payments, as per
the governing documents, as well as the stated balance of
principal by the legal final maturity date.
DASH III is a collateralized debt obligation that was originated
and managed by Asset Allocation & Management, LLC, in June 2001.
TCW Asset Management Co. became the substitute asset manager for
AAMCO in October 2002. DASH III is composed of approximately
57.1% residential mortgage-backed securities, 24.4% asset-backed
securities, 16.7% commercial mortgage-backed securities, 1.3% real
estate investment trusts, and 0.5% CDOs.
Since the rating action in April 2004, the collateral quality has
experienced deterioration. Mezzanine and subordinate tranches
from underperforming manufactured housing securitizations have
taken principal write-downs. Additionally, the transaction is
currently suffering from an underhedged position that increases in
severity in various prepayment projections. As of March 28, 2005,
the class A overcollateralization test decreased to 101.26% from
110.86% in March 2004 and the class B OC test decreased to 94.80%
from 104.51% in March 2004. DASH III has also been failing its
class A OC test and its class B OC test since August 2004, as
measured by the monthly trustee report.
Included in this review, Fitch discussed the current state of the
portfolio with the asset manager. In addition, Fitch conducted
cash flow modeling utilizing various default timing, interest rate
scenarios, and prepayment assumptions. As a result of this
analysis, Fitch has determined that the current ratings assigned
to the classes A-1L, A-2, A-3L, and B-1L notes no longer reflect
the current risk to noteholders.
Fitch will continue to monitor and review this transaction for
future rating adjustments. Additional deal information and
historical data are available on the Fitch Ratings Web site at
http://www.fitchratings.com/
DMX MUSIC: Court Okays $75 Million 363 Sale to THP Capstar
----------------------------------------------------------
DMX MUSIC, Inc., said it has obtained bankruptcy court approval
for the sale of all of its domestic and international operations
to THP Capstar, Inc. The parties have jointly submitted the Sale
Order to the U.S. Bankruptcy Court for the District of Delaware
for entry and anticipate that will happen shortly.
As previously reported in the Troubled Company Reporter, THP
Capstar has offered $75 million to purchase these assets and has
signed an Asset Purchase Agreement. The Debtors told the
Bankruptcy Court that a prompt sale is critical in order to
maintain the going concern value of their operations.
THP Capstar, Inc., is an affiliate of Capstar Partners, LLC, a
private investment company led by Steve Hicks with a focus on
traditional and early stage investments in broadcast/media,
distributed content and media technology. Partnering with Capstar
in THP Capstar, Inc., is Trinity Hunt Partners, a Dallas-based,
regionally-focused private equity firm specializing in investments
in established middle market companies in the media,
manufacturing, business services, healthcare and consumer products
industries. Silver Point Finance, LLC, is providing debt financing
for the transaction.
On Feb. 14, 2005, DMX MUSIC and THP Capstar disclosed that they
had signed an Asset Purchase Agreement for the sale of DMX MUSIC
operations, subject to a court-supervised sale process. THP
Capstar was the successful bidder in an auction that was conducted
on May 9, 2005 in Wilmington, Delaware. The transaction is
subject to customary conditions and is scheduled to close on or
before May 30, 2005.
"We are pleased that the bidding process has confirmed our belief
that we had secured the best and highest bid for DMX MUSIC and its
stakeholders," said Mark Rozells, President and Chief Executive
Officer of DMX MUSIC.
"Under new ownership, DMX MUSIC is well positioned to capitalize
on its leading market position, proprietary technology and
significant operational improvements while having greater access
to financial resources necessary to support future growth," Steve
Hicks, Chairman and CEO of THP Capstar, Inc., commented.
About Capstar Partners, LLC
Capstar Partners, LLC, is a private investment company that
participates in both early stage funding and traditional
investments. Capstar Partners primary seed stage investments are
in the areas of Broadcast/Media, Distributed Content and Media
Technology. Traditional investments include real estate, publicly
traded stocks, and private non-technology companies.
About Trinity Hunt Partners
Trinity Hunt Partners is a Dallas-based, regionally-focused
private equity firm specializing in leveraged acquisitions,
recapitalizations and late stage growth financings of established
middle market companies with enterprise values between $15 million
and $150 million in the media, manufacturing, business services,
healthcare and consumer products industries.
About Silver Point Finance, LLC
Silver Point Finance, LLC, based in Greenwich, Connecticut, is an
independent provider of custom financing to large and middle
market companies. The firm combines extensive experience in
complex financings, cross-disciplinary expertise, streamlined
decision-making, and a commitment to building long-term
relationships with clients. Silver Point Finance is a business of
Silver Point Capital, which specializes in credit analysis and
diversified investments.
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.
DS WATERS: Poor Performance Prompts S&P to Junk Ratings
-------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
and senior secured bank loan ratings on privately owned bottled
water producer and distributor DS Waters LP, and the senior
secured bank loan rating on its subsidiary DS Waters Enterprises
LP, to 'CCC+' from 'B-'.
The outlook is negative. Standard & Poor's estimates DS Waters
had about $409 million of total debt and about $325 million of 12%
pay-in-kind preferred stock outstanding at Dec. 31, 2004.
"The downgrade follows financial performance significantly below
our expectations in 2004, continued uncertainty concerning the
viability of a sustainable business model, and lack of clarity on
future financial policies following recent unexpected management
turnover," said Standard & Poor's credit analyst Alison Birch.
Additionally, Standard & Poor's is concerned that the company may
not be able to comply with financial covenants, as amended, for
the quarter ended Dec. 31, 2005. In the past six months, the
company has already received two credit facility amendments for
covenant relief.
DS Waters' operating performance has continued to deteriorate, and
leverage is very high. Performance has declined as a result of
increased competition from retail outlets selling water coolers,
high levels of customer attrition, and higher-than-expected costs
related to the integration of the bottled water businesses of
Danone Waters of North America. Cooler rentals, which drive the
company's cash flow, have continued to decline and to date, DS
Waters has not been able to replace this declining revenue stream
with more profitable business. For fiscal 2004, EBITDA fell by
45% versus the prior fiscal year.
FALCON FINANCIAL: Moody's Junks Class E & F Loan Trust Certs.
-------------------------------------------------------------
Moody's Investors Service downgraded Falcon Financial, LLC Series
2001-1 securities backed by loans to franchise automobile
dealerships.
The complete rating actions were:
Issuer: Falcon Auto Dealership LLC Auto Dealership Loan Trust
Certificates, Series 2001-1
* Class A-1 $ 44,446,991, downgraded to Aa2, from Aa1
* Class A-2 $ 36,659,000, downgraded to Aa2, from Aa1
* Class B $ 5,617,000, downgraded to A3, from A1
* Class C $ 5,617,000, downgraded to Baa3, from Baa1
* Class D $ 7,021,000, downgraded to B2, from Ba2
* Class E $ 2,809,000, downgraded to Caa1, from B2
* Class F $ 5,617,000, downgraded to Caa3, from Caa1
* Class IO, downgraded to Aa2, from Aa1
The ratings action is due to problems experienced with several
loans in the pool. In February 2002, less than a year from
initial closing of the bonds, Westwood Realty, LLC & Lakeview
Holdings, LLC, which represented 2.2% of the initial pool balance,
filed for bankruptcy. The collateral backing the loans were the
enterprise value of the dealerships and the net recoveries to the
trust was less than 10%.
In January 2004, Tradition Properties, Inc., representing
approximately 4% of the pool, became delinquent. The Tradition
loan was backed by real estate and three dealership franchises.
In March 2004 one of the three collateral franchises was sold but
the real estate collateral remained in the trust.
However, the majority of the $2.0 million sale proceeds from the
one franchise were used by Tradition to pay off its other
obligations and a small portion was used to bring Falcon's loan
current. In June 2004, Falcon consented to the restructuring of
the Tradition's loan, but in August 2004, Tradition informed
Falcon that it would not be able to pay the reduced monthly
payments and defaulted. Falcon foreclosed on the property in
October 2004 and the property was later sold at approximately 71%
net recovery amount against its initial appraised value.
In addition to the fee simple collateral, the bankruptcy trustee
has been in the process of selling Tradition's two remaining
franchises that were not released in March 2004. Falcon expects a
very low net recovery. Overall the trust's net recovery rate from
the sale of Tradition's collateral including real estate and
business value is estimated around 30% of the initial appraised
values.
In addition, Bob Bomer Management Company, LLC, representing
approximately 2% of the collateral pool, is over 460 days
delinquent. Bomer's dealership enterprise collateral, and not the
underlying real estate (which was also collateralizing the loan)
was sold by the dealer in December 2003 to a third party operator
without the consent of Falcon; however, the trust did not receive
any proceeds from this sale. Subsequently, Falcon foreclosed on
Bomer on March 2, 2004 and is currently attempting to sell Bomer's
real estate collateral.
Additionally, several other obligors comprising over 8% of the
current pool balance have reported low fixed charge coverage
ratios for some time. The timing of the turnaround of these
obligors is not certain and the pool's diversification has
suffered since closing. According to Shorie Darnaby, a senior
credit officer at Moody's Asset Finance Group, "the historical
defaults, lower than expected recoveries on the defaulted loans,
weakened financial prospects of several of the other loans in the
pool combined with lower remaining diversification has led to
higher default expectations and the downgrades reflect the
negative impact of these factors on the affected securities."
Falcon, not rated by Moody's, was a specialty finance company that
lent to franchised vehicle dealerships. The 2001-1 transaction
was the third securitization of loans originated by Falcon.
FIDELITY MORTGAGE: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Fidelity Mortgage of Kentucky, Inc.
8847 U.S. Highway 42
Union, Kentucky 41091
Bankruptcy Case No.: 05-21278
Type of Business: The Debtor is a mortgage servicing company.
It services Ohio, Kentucky, Indiana, Tennessee,
West Virginia and Florida.
See http://www.aboutfidelitymortgage.com/
Chapter 11 Petition Date: May 13, 2005
Court: Eastern District of Kentucky (Covington)
Debtor's Counsel: Michael J. McMain, Esq.
Busald Funk Zevely, P.S.C.
226 Main Street
PO Box 6910
Florence, Kentucky 41042-2016
Tel: (859) 371-3600
Total Assets: $30,000
Total Debts: $1,053,218
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Thomas More/Hemmer Business lease $500,000
c/o Hon. John E. Lange, IV
Attorney at Law
4 W. 4th Street, Suite 400
Newport, KY 41071
IPC Office Properties, LLC Business lease $160,000
c/o Hon. Stephen H. Miller
Suite 700 North,
First Trust Centre
200 S. Fifth Street
Louisville, KY 40202
Ms. Terri Hudson Insurance claim $35,000
P. O. Box 324
Harrods Creek, KY 40027-0324
Vorys, Sater, Seymour Legal services $30,000
and Pease
Dicom Marketing Services Marketing services $25,000
Bank One Financial Sums due per $19,000
Services, Inc. agreement
Ms. Barbara Hill Insurance claim $19,000
Norton Audubon Hospital Insurance claim $19,000
Sebaly Shillito & Dyer Legal services $19,000
LSI Credit Services Credit Bur. Serv. $17,000
Farmer Commercial Real Business lease $16,000
Estate
Wells Fargo Financial Copier lease $15,000
Ms. Sharon Osborne Insurance claim $14,000
Stith, Wimsatt & Accounting services $13,000
Associates
iHomeowners, Inc. Internet leads $13,000
Internal Revenue Service 2004 Payroll taxes $12,000
Internal Revenue Service 2004 Payroll taxes $11,000
Internal Revenue Service 2004 Payroll taxes $10,000
Mr. Byron Hyatt Insurance claim $9,000
Goodwin & Goodwin, LLP Legal services $8,750
FOAMEX INT'L: Apr. 3 Balance Sheet Upside-Down by $369.2 Million
----------------------------------------------------------------
Foamex International Inc. (NASDAQ: FMXI) reported its 2005 first
quarter results.
Sales & Gross Profit
Net sales for the first quarter of 2005 were $332.7 million, up 6%
from $313.6 million in the first quarter of 2004. Gross profit in
the first quarter of 2005 was $27.7 million, down 30% from $39.8
million in the first quarter of 2004 primarily due to chemical
cost increases. Gross profit margin for the first quarter of 2005
was 8.3%, down from 12.7% in the first quarter of 2004.
Earnings
Net loss for the first quarter of 2005 was $10.9 million, or $0.44
per diluted share, compared with a net loss of $2.1 million, or
$0.09 per diluted share in the first quarter of 2004.
Income from operations was $9.7 million for the first quarter of
2005, down 27% from $13.2 million in the first quarter of 2004.
Selling, general and administrative expenses for the first quarter
of 2005 were $18.0 million versus $26.0 million in the first
quarter of 2004, which included a $3.7 million charge to bad debt
expense related to a customer bankruptcy. Interest and debt
issuance expense for the first quarter of 2005 was $19.9 million,
an increase from $18.6 million in the first quarter 2004,
primarily due to increases in the base interest rates and a higher
average debt level.
Commenting on the results, Tom Chorman, Foamex's President and
Chief Executive Officer, said: "Our first quarter results were
generally in line with our expectations. Gross margin was
essentially flat when compared with our fourth quarter 2004
performance, despite two raw material price increases in the
period. We expect these two periods will be the low point, as we
continue to implement customer price increases and other actions
to offset the significant increases to our raw material costs over
the past year. In the meantime, we continue to reduce our overhead
expenses and pursue the business and financial strategies that
will strengthen the company longer-term."
Business Segment Performance
Foam Products
Foam Products net sales for the first quarter of 2005 were $156.2
million, up 16% from $134.4 million in the first quarter of 2004,
due primarily to higher selling prices. Income from operations for
the first quarter of 2005 was $10.4 million, down 36% from $16.3
million in the first quarter of 2004. The decrease primarily
reflects the effect of higher raw material costs that could not be
fully recovered by increased selling prices.
Automotive Products
Automotive Products net sales for the first quarter of 2005 were
$87.2 million, down 7% from $94.0 million in the first quarter of
2004. The decrease is the result of soft industry volume and
customer sourcing actions. Income from operations for the first
quarter of 2005 was $4.8 million, essentially flat with the first
quarter of 2004.
Carpet Cushion Products
Carpet Cushion Products net sales for the first quarter of 2005
were $46.6 million, up marginally from $46.1 million in the first
quarter of 2004. Loss from operations in the first quarter of 2005
was $2.1 million as compared to income from operations of $1.3
million in the first quarter of 2004, due primarily to increased
costs and raw material availability, which unfavorably affected
our manufacturing processes. These results include the rubber and
felt product lines, which were recently sold.
Technical Products
Technical Products net sales for the first quarter of 2005 were
$33.2 million, up 7% from $31.1 million in the first quarter of
2004, due to higher selling prices and new business gains, partly
offset by continuing effects of negative product mix. Income from
operations for the first quarter of 2005 was $8.9 million, flat as
compared to the first quarter of 2004 as the sales increase was
offset by higher raw material costs.
About the Company
Headquartered in Linwood, Pa., Foamex International Inc. --
http://www.foamex.com/-- is produces comfort cushioning for
bedding, furniture, carpet cushion and automotive markets. The
Company also manufactures high-performance polymers for diverse
applications in the industrial, aerospace, defense, electronics
and computer industries.
At Apr. 3, 2005, Foamex International's balance sheet showed a
$369.2 million stockholders' deficit, compared to a $358.3 million
deficit at Jan. 2, 2005.
FONIX CORP: March 31 Balance Sheet Upside-Down by $3.4 Million
--------------------------------------------------------------
Fonix Corp. (OTCBB: FNIX) reported financial results for the
quarter ended March 31, 2005.
"Fonix's financial results for the first quarter reflect the merit
of realigning our business operations," said Thomas A. Murdock,
Fonix chairman and CEO. "We expect further improvement in revenue
and cost management as we leverage the operating advantages of
LecStar Telecom, Fonix Telecom and The Fonix Speech Group."
Fonix revenues were $4,223,000 for the quarter ended March 31,
2005, an increase of $2,298,000 compared to $1,925,000 for the
same period in 2004. Operating expenses, exclusive of non-cash
amortization of $1,586,000, decreased by $805,000 from $3,935,000
in the first quarter of 2004 to $3,130,000 in the first quarter of
2005. Net loss was $4,080,000 for the first quarter in 2005
compared to $2,342,000 for the same period in 2004. During the
quarter ended March 31, 2005, the company reduced accrued payroll
and other compensation-related expenses by $445,000. First-quarter
results reflect a full quarter of operations for LecStar Telecom
and a partial quarter for Fonix Telecom.
"We are encouraged by the results of the restructuring and
redirection of our business," said Roger D. Dudley, Fonix
executive VP and CFO. "We have reduced combined operating
expenses, less non-cash amortization, by 20 percent, and we
believe Fonix will continue to improve its operating margin and
increase revenue as we implement aggressive sales and marketing
plans, on both the telecom and speech sides of the business."
Going Concern Doubt
Hansen, Barnett & Maxwell issued a going concern opinion after it
audited the Company's financial statements for the fiscal year
ended Dec. 31, 2004, filed with the Securities and Exchange
Commission. The Company's cash resources, limited to collections
from customers, draws on the Sixth Equity Line and loans, have not
been sufficient to cover operating expenses. As a result,
payments to employees and vendors have been delayed. The Company
has not been declared in default under the terms of any material
agreements.
Bankruptcy Warning
"Until sufficient revenues are generated from operating
activities, we expected to continue to fund our operations through
the sale of our equity securities, primarily in connection with
the Sixth Equity Line," the Company stated in its quarterly
report. "We are currently pursuing additional sources of
liquidity in the form of traditional commercial credit, asset
based lending, or additional sales of our equity securities to
finance our ongoing operations. Additionally, we are pursuing
other types of commercial and private financing, which could
involve sales of our assets or sales of one or more operating
divisions. Our sales and financial condition have been adversely
affected by our reduced credit availability and lack of access to
alternate financing because of our significant ongoing losses and
increasing liabilities and payables. Over the past year, we have
reduced our workforce in our speech business unit by approximately
50%. This reduction may adversely affect our ability to fill
existing orders. As we have noted in our annual report and other
public filings, if additional financing is not obtained in the
near future, we will be required to more significantly curtail our
operations or seek protection under bankruptcy laws."
About the Company
Fonix Corp., based in Salt Lake City, is an innovative
communications and technology company that provides integrated
telecommunications services and value-added speech technologies
through Fonix Telecom Inc., LecStar Telecom Inc. and The Fonix
Speech Group. The combination of interactive speech technology
and integrated telecommunications services allows Fonix to provide
customers with comprehensive cost-effective solutions to enhance
and expand their communications needs.
At March 31, 2005, Fonix Corp.'s balance sheet showed a $3,391,000
stockholders' deficit, compared to a $2,058,000 deficit at
Dec. 31, 2004.
HAYES LEMMERZ: Closing Facility in Italy & Terminating 102 Workers
------------------------------------------------------------------
On April 18, 2005, Hayes Lemmerz International, Inc., approved
plans to close its manufacturing facility in Campiglione, Italy,
and to transfer the production of the aluminum wheels manufactured
at the Italian facility to other facilities. The closure will
result in the elimination of approximately 102 employee positions.
The Company said in a regulatory filing with the Securities and
Exchange Commission that the decision to close the Campiglione
facility was based on improving Hayes' capacity utilization and
overall efficiency.
Hayes estimates that the closure plan will result in a charge to
earnings of approximately $4.5 million in fiscal 2005. Estimates
of the total cost that Hayes expects to incur for each major type
of cost associated with the plan are:
(1) $4.0 million for severance benefits and employee
termination costs; and
(2) $0.5 million for plant closing costs and decommissioning
costs.
Net cash outlays during fiscal 2005 and 2006 related to the
closure are expected to be approximately $4.5 million.
Hayes Lemmerz International, Inc., is a world leading global
supplier of automotive and commercial highway wheels, brakes,
powertrain, suspension, structural and other lightweight
components. The Company filed for chapter 11 protection on
December 5, 2001 (Bankr. D. Del. Case No. 01-11490) and emerged in
June 2003. Eric Ivester, Esq., and Mark S. Chehi, Esq., at
Skadden, Arps, Slate, Meager & Flom represent the Debtors. (Hayes
Lemmerz Bankruptcy News, Issue No. 64; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
* * *
As reported in the Troubled Company Reporter on April 11, 2005,
Moody's Investors Service assigned a B2 rating for HLI Operating
Company, Inc.'s proposed $150 million guaranteed senior secured
second-lien term loan facility. HLI Opco is an indirect
subsidiary of Hayes Lemmerz International, Inc. The rating
outlook remains stable.
While the company has reaffirmed its earning guidance and the
senior implied and guaranteed senior secured first-lien facility
ratings remain unchanged at B1, Moody's determined that widening
of the downward notching of HLI Opco's guaranteed senior unsecured
notes was necessary to reflect additional layering of the
company's debt. The senior unsecured notes are effectively
subordinated to the proposed new senior secured second-lien term
facility, and approximately $75 million of higher-priority debt
will be added to the capital structure.
These specific rating actions were taken by Moody's:
* Assignment of a B2 rating for HLI Operating Company, Inc.'s
proposed $150 million guaranteed senior secured second-lien
credit term loan C due June 2010;
* Downgrade to B3, from B2, of the rating for HLI Operating
Company, Inc.'s $162.5 million remaining balance of 10.5%
guaranteed senior unsecured notes maturing June 2010 (the
original issue amount of $250 million was reduced as a result
of an equity clawback executed in conjunction with Hayes
Lemmerz's February 2004 initial public equity offering);
* Affirmation of the B1 ratings for HLI Operating Company,
Inc.'s approximately $527 million of remaining guaranteed
senior secured first-lien credit facilities, consisting of:
* $100 million revolving credit facility due June 2008;
* $450 million ($427.3 million remaining) bank term loan B
facility due June 2009 (which term loan is still expected to
be partially prepaid through application of about half of the
net proceeds of the proposed incremental debt issuance);
* Affirmation of the B1 senior implied rating;
* Downgrade to Caa1, from B3, of the senior unsecured issuer
rating (which rating does not presume the existence of
subsidiary guarantees).
INTEGRATED HEALTH: Gets Court Nod to Delay Entry of Final Decree
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
the IHS Liquidating LLC's request to:
(1) delay the entry of a final decree closing the Chapter 11
case of Integrated Health Services, Inc., Case No. 00-389
(MWF) until November 3, 2005; and
(2) extend the date for filing a final report and accounting
for all the IHS Debtors' cases until August 2, 2005.
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. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000)
JETSGO CORP: Formally Declares Bankruptcy Under BIA in Quebec
-------------------------------------------------------------
Jetsgo Corporation will liquidate under Canada's Bankruptcy and
Insolvency Act. The Quebec Superior Court denied the Company's
request for one more week to reorganize under the Companies'
Creditors Arrangement Act. Jetsgo filed for CCAA protection on
March 11, 2005, hours after it ceased all of its airline
operations.
The Court appointed RSM Richter Inc. to serve as the Company's
trustee.
The stay extension request was denied after Jetsgo's largest
creditor, Moneris Solutions Corp., refused to accept the Company's
reorganization plan, Yves Vincent, a partner at RSM Richter Inc.
told Bloomberg News.
Jetsgo reportedly owed C$45 million to Moneris, Canada's largest
merchant payment processing company, due to credit card claims
arising out of Jetsgo's cessation of operations.
The Company had 29 aircraft before halting its operations two
months ago. According to the Canadian Press, the Court approved
the sale of five planes last month. Jetsgo's assets, which
include C$4 million in cash, office equipment and aircraft parts,
will be sold to pay creditors, which will be "substantially less"
than the C$135 million owed by Jetsgo, Mr. Vincent told Doug
Alexander at Bloomberg.
Jetsgo previously disclosed plans to resume its flights on
June 23, 2005. The Company had submitted a plan to Transport
Canada to resume operations as a radically smaller carrier with
eight aircraft, the Canadian Press said.
But following Jetsgo's decision to file for bankruptcy protection,
Transport Canada cancelled Jetsgo's air operator certificate
effective 12:01 a.m., Saturday, May 14, 2005. Without an air
operator certificate, the company cannot provide commercial air
services.
Transport Canada issues air operator certificates to companies
wishing to provide commercial airline operation services in
Canada. The certification process includes the requirement that
the applicant demonstrate it has developed an operational and
organizational structure in accordance with Transport Canada
regulations.
Jetsgo Corporation operated a low-cost, low-fare passenger airline
with approximately 1,200 employees, before ceasing all operations
on March 11, 2005. At the same time, the Superior Court of
Justice in Quebec, District of Montreal, entered an Initial Order
providing Jetsgo Corporation protection under the Companies'
Creditors Arrangement Act, and appointed RSM Richter Inc. to act
as Monitor. When Jetsgo sought CCAA protection, it listed
$75.8 million in total assets and $94.5 million in total
liabilities. Attorneys from Ogilvy Renault LLP represent the
carrier.
JETSGO CORP: First Meeting of Creditors Slated for June 15
----------------------------------------------------------
RSM Ritcher, Inc., the court-appointed Trustee of Jetsgo
Corporation, will convene a meeting of Jetsgo's creditors at 10:00
a.m., on June 15, 2005, at 5, Place Ville-Marie, 8e etage in
Montreal, Quebec. This is the first meeting of creditors required
under Sec. 102 of the Bankruptcy and Insolvency Act.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers creditors the opportunity to consider
the affairs of the bankrupt, to affirm the appointment of the
trustee in bankruptcy or substitute another, to appoint inspectors
for the estate and to give such directions to the trustee with
reference to the administration of the bankruptcy estate. In
order to be able to vote on the appointments, a creditor must have
lodged with the trustee a valid proof of claim prior to the
commencement of the meeting of creditors.
Jetsgo Corporation operated a low-cost, low-fare passenger airline
with approximately 1,200 employees, before ceasing all operations
on March 11, 2005. At the same time, the Superior Court of
Justice in Quebec, District of Montreal, entered an Initial Order
providing Jetsgo Corporation protection under the Companies'
Creditors Arrangement Act, and appointed RSM Richter Inc. to act
as Monitor. When Jetsgo sought CCAA protection, it listed
$75.8 million in total assets and $94.5 million in total
liabilities. Attorneys from Ogilvy Renault LLP represent the
carrier.
JM HILLS: Names Ola Hui as Largest Unsecured Creditor
-----------------------------------------------------
JM Hills Project, LLC, identified its Largest Unsecured Creditor:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Ola Hui, LP Loan $100,000
c/o Al Gardner
4301 E. McKellips
Mesa, AZ 85215
Headquartered in Phoenix, Arizona, JM Hills Project, LLC, along
with its affiliates filed for chapter 11 protection on April 7,
2005 (Bankr. D. Ariz. Case No. 05-05686). Dale C. Schian, Esq.,
at Schian Walker P.L.C., represents the Debtors in their
restructuring efforts. When JM Hills filed for protection from
its creditors, it estimated assets and debts from $10 million to
$50 million.
JUNO LIGHTING: Likely Refinancing Cues S&P to Watch Ratings
-----------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on lighting
fixture manufacturer Juno Lighting Inc., including the 'B+'
corporate credit rating, on CreditWatch with developing
implications, indicating that the rating could be raised or
lowered. Juno is currently evaluating various strategic
alternatives to enhance shareholder value, including a possible
refinancing, and its ultimate decision will determine how Standard
& Poor's resolves the CreditWatch listing.
If the company refinances, the ratings on the existing bank loan
could be withdrawn.
Des Plaines, Illinois-based Juno currently has about $200 million
in debt outstanding.
Besides a refinancing, Juno could make an equity offering or
recapitalize. The company could also enter into a strategic
transaction, selling or merging itself or one of its business
units with a third party. Juno commented on a Schedule 13D filed
by Abrams Capital that its board of directors, with Wachovia's
assistance, will review Abrams' proposal to acquire 100% of the
outstanding stock of the company. The board will also review
other strategic alternatives and proposals that have been or may
be proposed in the context of this overall strategic assessment.
"Following completion of the evaluation and a decision by Juno,
the ratings may be lowered if there is a recapitalization and it
results in a very aggressively leveraged structure," said Standard
& Poor's credit analyst John R. Sico. "Alternatively, the rating
may be raised if Juno improves the capital structure or its
business risk profile."
The corporate credit rating on Juno Lighting Inc. reflects:
(1) its weak business position in niche segments of the North
American lighting industry,
(2) the company's small scale in this fragmented and
competitive industry,
(3) its exposure to economic cycles, and
(4) the aggressive financial policies of its sponsor, Fremont
Partners.
These weaknesses are offset somewhat by the:
(1) company's flexible operations, and
(2) its stable cash flows from retrofitting and remodeling.
Standard & Poor's will review management's strategic plans and
financial policies before taking any rating action.
KAISER ALUMINUM: March 31 Balance Sheet Upside-Down by $2.4 Bil.
----------------------------------------------------------------
Kaiser Aluminum reported net income of $8.3 million for the first
quarter of 2005, compared to a net loss of $64.0 million for the
first quarter of 2004.
Results for the first quarter of 2005 included a pre-tax operating
charge of $6.2 million, the majority of which was associated with
the implementation of new defined contribution savings plans for
employees. Results for the year-ago quarter included a non-cash
pre-tax charge (as recorded in discontinued operations) of $33.0
million to reduce the carrying value of the company's 90% interest
in the Valco smelter in Ghana.
Net sales in the first quarter of 2005 were $281.4 million,
compared to $210.2 million in the year-ago period.
Commenting on the first quarter of 2005, Kaiser President and
Chief Executive Officer Jack A. Hockema said, "The company's
strong performance relative to the year-ago quarter was largely
the result of higher shipments, an unusually rich mix, and
improved realized prices in our fabricated products business. In
particular, we reported a 16% rise in shipments of fabricated
products, led by increased demand in the aerospace/high strength
market. Realized prices were higher across the board and reached
near-peak levels for plate products in response to strong near-
term demand."
Mr. Hockema added, "Of particular note is the fact that the rich
product mix and strong plate prices were key factors that lifted
first-quarter operating income in our fabricated products business
to the highest level since the 1998-2000 timeframe, when somewhat
similar market conditions existed. This result is especially
noteworthy in light of a continuing trend of higher costs for
energy and freight. Although we are pleased with the company's
operating income in the first quarter, we currently do not expect
the remaining quarters of 2005 to have as rich a mix of products."
Mr. Hockema added, "We continue to be focused on our objective of
emerging from Chapter 11 in the second half of this year."
At March 31, 2005, Kaiser Aluminum's balance sheet showed a
$2,378,000,000 stockholders' deficit, compared to a $2,384,200,000
deficit at Dec. 31, 2004.
Headquartered in Foothill Ranch, California, Kaiser Aluminum
Corporation -- http://www.kaiseraluminum.com/-- is a leading
producer of fabricated aluminum products for aerospace and high-
strength, general engineering, automotive, and custom industrial
applications. The Company filed for chapter 11 protection on
February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold
off a number of its commodity businesses during course of its
cases. 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. 68; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
KB TOYS: Files Reorganization Plan & Disclosure Statement in Del.
-----------------------------------------------------------------
KB Toys, Inc., filed a proposed Plan of Reorganization and related
Disclosure Statement with the U.S. Bankruptcy Court for Delaware
on May 13, 2005. The Plan, which is endorsed by the statutory
Official Committee of Unsecured Creditors, is based on a Plan
Funding Agreement which the Company has entered into with an
affiliate of Prentice Capital Management, LP. The Prentice
affiliate will invest $20 million in the reorganized KB Toys and
provide a seasonal overadvance credit facility of up to
$25 million in exchange for 90% of the common stock and 100% of
the preferred stock of the reorganized KB Toys. The remaining
common stock will be held by a trust for the benefit of the
unsecured creditors of those KB Toys entities being reorganized
under the Plan of Reorganization.
The Company's agreement with Prentice is subject to the Company's
receipt of a higher and better offer pursuant to an auction
process for the right to acquire either substantially all of the
Company's assets including assuming substantially all of the
Company's leases for its retail stores or the equity interests in
the reorganized Company. The Company also filed a motion on
May 13, 2005, requesting that the Bankruptcy Court authorize the
Company to conduct the auction, and that it approve certain
procedures for the auction and approve a termination fee and
certain expense reimbursement provisions negotiated with Prentice.
Under the Bankruptcy Court hearing schedule the Company has
requested for the plan of reorganization approval process, the
Company expects that it would emerge from Chapter 11 before the
2005 holiday season.
"KB's associates have worked extremely hard over the past year to
strengthen the Company's operations," KB Toys' chief executive
officer, Michael L. Glazer said. "The Creditors Committee has
been very supportive throughout the reorganization. We greatly
appreciate their support and the continued support of the
Company's other creditors, landlords and business partners."
Mr. Glazer continued, "Our customers have responded favorably to
the more inviting store environment and the frequently updated
store themes featuring constantly changing and new merchandise.
We look forward to the prospect of working with Prentice Capital
as we continue to improve the Company's performance and further
solidify KB's presence as the largest mall based toy retailer."
Reorganization Progress
KB Toys, Inc., and 69 of its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code on January 14, 2004. In the past year, KB has
taken a number of steps intended to strengthen its business
operations and enhance its financial performance. These steps
include the closing of more than 600 stores, selling the Company's
Internet business, closing a distribution center, streamlining the
Company's management structure, reducing staffing levels at the
Company's headquarters and introducing more efficient business
practices throughout the organization.
The proposed Plan of Reorganization and Disclosure Statement are
available on the Company's Web site at http://www.kbtinfo.com
One of the largest toy retailers in the United States, KB Toys
-- http://www.kbtoys.com/-- (which once boasted 1,200 stores)
operates about 650 stores under four formats:
* KB Toys mall stores,
* KB Toy Works neighborhood stores,
* KB Toy Outlets and KB Toy Liquidator, and
* KB Toy Express (in malls during the holiday season).
The company along with its affiliates filed for chapter 11
protection on January 14, 2004 (Bankr. Del. Case No. 04-10120).
The chapter 11 filing resulted in nearly 600 store closures and
4,000 layoffs. In March 2004, KB Toys sold its KBToys.com
Internet business to an affiliate of D. E. Shaw, which renamed the
company eToys Direct. Joel A. Waite, Esq., at Young, Conaway,
Stargatt, & Taylor, represents the toy retailer. When the Debtors
filed for protection from its creditors, they listed consolidated
assets of $507 million and consolidated debts of $461 million.
KMART CORP: Wants to Recover Claims Payment from Simone Saragosi
----------------------------------------------------------------
Kmart Corporation seeks to recover from Simone Saragosi payments
made under a Court order that was subsequently vacated.
Andrew Goldman, Esq., at Wilmer Cutler Pickering Hale Dorr LLP, in
New York, relates that under a lease dated March 10, 1978, Milton
Ventures LLP leased to Kmart certain real property located at 1959
Pipestone Road, in Benton Harbor, Michigan. Lennar Partners,
Inc., acting as attorney-in-fact and special servicer for CAPCO
1998-D7 Pipestone LLC, was the mortgagee for the Leased Premises.
On June 29, 2002, Kmart rejected the Lease.
Milton Ventures subsequently filed Claim Nos. 37772 and 53994 for
(i) lease rejection damages, and (ii) postpetition, pre-rejection
unpaid rents. The Claims were assigned to Richard Kushnir, who in
turn assigned them to Mr. Saragosi.
Mr. Goldman relates that, with full knowledge that Lennar asserted
a competing ownership interest in the Claims, Messrs. Kushnir and
Saragosi, nonetheless, pursued settlement of the Claims with
Kmart. On August 3, 2004, Kmart -- then still unaware of the
dispute as to ownership of the Claims -- and Messrs. Kushnir and
Saragosi resolved the Claims and barred Milton Ventures, its
successors and assigns, from bringing further claims with respect
to the Lease, through a Court-approved Agreed Order.
Specifically, the Agreed Order provided that:
(1) the Administrative Claim would be allowed for $41,180; and
(2) the Lease Rejection Claim would be allowed for $827,215
and would be treated as a Class 5 claim under the Plan.
The Plan provides that holders of Class 5 claims will receive
stock in Kmart Holding Corporation, the publicly traded parent of
Kmart.
Kmart made payment in cash on account of the Administrative
Claim to Mr. Saragosi. Mr. Goldman explains that, on account of
the Lease Rejection Claim, before April 1, 2005, Mr. Saragosi
received 4,915 shares of Kmart Holding's stock, representing 80%
of the total stock that Kmart projects will be distributed on
account of the Lease Rejection Claim. Another 5% of the projected
stock distribution is currently due and owing to the owner of the
Lease Rejection Claim. The remaining 15% will likely be available
for distribution when all claims filed against Kmart's Chapter 11
estates have been resolved.
On February 18, 2005, Lennar commenced an action in the United
States District Court for the Northern District of Illinois,
alleging, among other things, conversion of the Claims by Milton
Ventures and Messrs. Kushnir and Saragosi. Milton Ventures and
the Assignees have not filed an answer in the District Court
Action. The Action remains pending.
On April 4, 2005, Lennar asked the Bankruptcy Court to vacate the
Agreed Order; Milton Ventures objected. Lennar responded to the
Objection.
Kmart filed a reservation of rights with respect to the Motion to
Vacate and requested that if the Bankruptcy Court were to vacate
the Agreed Order, all distributions previously made on account of
the Agreed Order should be returned to Kmart until the dispute
among Lennar, Milton Ventures, and Messrs. Kushnir and Saragosi,
as to who the proper owner of the Claims was resolved by the
District Court.
On April 19, 2005, the Bankruptcy Court vacated the Agreed Order
in part, including that part of the Order that directed Kmart to
make distributions on the Administrative Claim and the Lease
Rejection Claim to Mr. Saragosi.
In this regard, Kmart asks Judge Sonderby to direct Mr. Saragosi
to return:
(a) the $41,180 cash distribution made on the Administrative
Claim, including interest, fees, and costs;
(b) all shares of Kmart Holding stock distributed on the Lease
Rejection Claim or its money worth, including interest,
fees, and costs; and
(c) the Plan distributions made by Kmart on the Administrative
Claim and on the Lease Rejection Claim, or the current
money worth of the distribution.
Mr. Goldman contends that Mr. Saragosi has no legal or equitable
right to the cash distribution and Kmart Holding stock
distribution made by Kmart pursuant to the vacated Agreed Order.
Mr. Saragosi received a benefit to which he has not yet been
adjudicated to be legally entitled.
Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART
Holding Corporation) -- http://www.bluelight.com/-- operates
approximately 2,114 stores, primarily under the Big Kmart or Kmart
Supercenter format, in all 50 United States, Puerto Rico, the U.S.
Virgin Islands and Guam. The Company filed for chapter 11
protection on January 22, 2002 (Bankr. N.D. Ill. Case No.
02-02474). Kmart emerged from chapter 11 protection on May 6,
2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate,
Meagher & Flom, LLP, represented the retailer in its restructuring
efforts. The Company's balance sheet showed $16,287,000,000 in
assets and $10,348,000,000 in debts when it sought chapter 11
protection. Kmart bought Sears, Roebuck & Co., for $11 billion to
create the third-largest U.S. retailer, behind Wal-Mart and
Target, and generate $55 billion in annual revenues. The
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act expired on Jan. 27, without complaint by the Department of
Justice. (Kmart Bankruptcy News, Issue No. 94; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
LEAP WIRELESS: Court Approves Jeffrey A. Davis as Mediator
----------------------------------------------------------
Leap Wireless International Inc. Liquidating Trust and unsecured
creditor Kathryn Drucker dba The Cascade Group sought and obtained
authority from the U.S. Bankruptcy Court for the Southern District
of California to hire Jeffrey A. Davis, Esq., at Gray, Cary, Ware
& Freidenrich, as mediator.
Jeffrey A. Davis' office is located at:
401 B Street, Suite 1700
San Diego, CA 92101
Tel: (619) 699-2810
In the event that Jeffrey A. Davis is not available, the Court
also approved Alan Vanderhoff as an alternate mediator.
Headquartered in San Diego, California, Leap Wireless
International Inc. -- http://www.leapwireless.com/-- is a
customer-focused company providing innovative communications
services for the mass market. Leap pioneered the Cricket
Comfortable Wireless(R) service that lets customers make all of
their local calls from within their local calling area and receive
calls from anywhere for one low, flat rate. As of December 31,
2004, the company's consolidated assets show $2,090,482,000 and
consolidated liabilities show $620,632,000.
The Company filed for chapter 11 protection on April 13, 2003
(Bankr. S.D. Calif. Case No. 03-03470). The Honorable Louise
DeCarl Adler entered an order confirming the Company's Fifth
Amended Plan on October 22, 2003, and the plan became effective on
August 17, 2005. Robert A. Klyman, Esq., Michael S. Lurey, Esq.,
and Eric D. Brown, Esq., at Latham and Watkins LLP, represent the
Debtors in their restructuring efforts.
LIBERTY MEDIA: Board Authorizes Discovery Holding Company Spin Off
------------------------------------------------------------------
Liberty Media Corporation filed its Form 10-Q with the Securities
and Exchange Commission for the three months ended March 31, 2005.
Prior to the first quarter of 2005, Liberty had organized its
businesses into three groups -- Interactive Group, Networks Group
and Corporate and Other. In the first quarter of 2005, Liberty's
board of directors approved a resolution authorizing the spin off
of its newly formed subsidiary, Discovery Holding Company (DHC).
DHC's assets will be comprised of Liberty's 100% ownership
interest in Ascent Media Group, Inc., which was included in its
Interactive Group, and its 50% ownership interest in Discovery
Communications, Inc. (DCI), which was included in its Networks
Group. In light of this planned spin off, Liberty now operates and
analyzes its businesses individually, rather than combining them
with other businesses into groups.
As a supplement to Liberty's consolidated statements of
operations, the following is a presentation of financial
information on a stand-alone basis for certain of Liberty's
privately held assets including:
* QVC, Inc., a consolidated, 98.7% owned subsidiary;
* Starz Entertainment Group LLC (SEG), a consolidated,
wholly owned subsidiary; and
* DCI, a privately held equity affiliate.
QVC Inc.
QVC's revenue and operating cash flow increased 14% and 20%,
respectively.
QVC's domestic revenue and operating cash flow increased 10% and
14%, respectively. The domestic revenue increase was attributed to
increased sales to existing subscribers primarily in the areas of
apparel and accessories. The domestic operations shipped
approximately 25.7 million units during the quarter, an increase
of 9%. The average sales price per unit increased 1.5% from $42.33
to $42.97. The domestic operating cash flow margins increased 80
basis points from the prior period due to a higher gross profit
margin. The gross margin increase during the quarter was primarily
the result of a higher initial product margin for all product
categories and an increase in the initial product margin due to a
shift in product mix from lower margin home products to higher
margin apparel and accessories. A lower inventory obsolescence
provision also contributed to improved gross margins.
QVC's international operations experienced continued strong
results for the quarter due to a combination of greater sales to
existing subscribers, new subscriber growth and favorable foreign
currency exchange rates. Revenue from international operations
increased 25% as a result of a strong performance from each of the
international divisions. Excluding the effect of exchange rates,
international revenue increased 21%. Driven primarily by the sales
increase, the operating cash flow of the international operations
increased from $58 million to $82 million, or 41%. The
international cash flow margin increased from 16.5% to 18.7% due
to a favorable gross profit margin and greater operating leverage
of fixed expenses. Excluding the effect of exchange rates, QVC's
international operating cash flow increased 37%.
The Company expects QVC to enter into a bank credit facility in
May 2005 with total commitments of up to $2 billion. This would
be comprised of a $1.6 billion term loan and a $400 million
revolving credit facility. Borrowing would accrue interest at
LIBOR plus and applicable spread, and the final maturity would be
2010.
Starz Entertainment Group LLC
SEG's revenue increased 9% to $254 million while operating cash
flow decreased 30% to $48 million. The increase in revenue was
primarily due to an increase of 19.5 million subscription units,
or 13%, from the first quarter of 2004. While the majority of the
increase in subscription units was related to SEG's Thematic
Multiplexes, which have lower subscription rates than other SEG
services, SEG also saw important increases in the more profitable
Starz and Encore units. Compared to the first quarter of 2004, SEG
had a 14% increase in Starz units and a 12% increase in Encore
units. The increases in subscription units were due in part to
increased participation with distributors in national marketing
campaigns, new affiliation agreements with certain distributors
and other marketing strategies. Under these new affiliation
agreements, SEG obtained benefits such as more favorable
promotional offerings of SEG's services and increased co-operative
marketing commitments. While subscription units increased 13%
compared to March 31, 2004, the increase in subscription units as
compared to December 31, 2004 was lower as a result of cyclical
factors where, as in past years, SEG's channels were not included
in the first quarter promotional offers of many of its customers.
SEG's operating expenses increased 26%. The increases were due
primarily to higher programming costs, which increased from $127
million for the three months ended March 31, 2004 to $165 million
in 2005. Such increases were due to higher costs per title as a
result of new rate cards for movie titles under certain of its
license agreements that were effective for movies made available
to SEG beginning in 2004. While the higher rate card took effect
at the beginning of 2004, programming expense in the first quarter
of 2004 also included the amortization of programming costs
related to movies under the lower rate card in effect prior to
2004 as SEG's first run exhibition window typically runs 15 to 18
months. Amortization of programming costs under these lower rate
cards was substantially complete at the end of March 2005. An
increase in the percentage of first-run movie exhibitions utilized
(which have a relatively higher cost per title) as compared to the
number of library product exhibitions utilized in the first
quarter of 2005 also contributed to higher programming costs as
did higher sales and marketing expenses as a result of the
aforementioned marketing campaigns.
DCI
DCI's revenue of $601 million and operating cash flow of $148
million are 14% and 8% ahead of the same period a year ago,
respectively. DCI's affiliated networks reach more than 1.2
billion cumulative worldwide subscribers.
U.S. Networks revenue increased by 9% primarily due to increases
in affiliate revenue. U.S. Networks had a 14% increase in paying
subscribers which, when combined with lower launch support
amortization, led to a 24% increase in net affiliate revenue.
Lower launch support amortization, a contra-revenue item, is the
result of extensions to certain affiliation agreements. Net
advertising revenues stayed relatively flat as increases in CPM's
were offset by lower audience delivery at certain networks.
Operating expenses increased 11% due to increases in programming
related expenses. Operating cash flow increased by 6% to $147
million.
International Networks revenue increased 25% due to increases in
both affiliate and advertising revenue. Net advertising revenue
increased 40% driven by higher advertising rates and audience
growth in the UK combined with advertising revenue generated by
new channels launched in Europe. Net affiliate revenue increased
by 23% primarily due to subscriber growth of 29%. Subscription
revenue and units increased due to recently launched networks and
the inclusion of Animal Planet Japan as its results are now
consolidated with DCI. Operating expenses increased 21%, and
operating cash flow increased by 56%.
Discovery Commerce, Education and Other revenue increased by 37%
principally as a result of a 20% increase in same store sales and
a $3 million increase in revenue at Discovery Education. Discovery
Education revenue increased due to acquisitions that were made
over the past year and an increase in the number of schools
purchasing its products and services. Operating cash flow
decreased 33% primarily due to additional investment spending for
Discovery Education.
DCI's outstanding debt balance was $2.6 billion at March 31, 2005.
Liberty's Total Consolidated Cash and Liquid Investments decreased
$134 million and Total Debt decreased by $225 million from
December 31, 2004. The decrease in Total Debt was due to
repayments of corporate debt as part of the debt reduction plan
announced in the fourth quarter of 2003 offset partially by short
term borrowings. Total Consolidated Cash and Liquid Investments
decreased as cash flow from operations of Liberty's subsidiaries
were more than offset by the debt repayments and interest expense.
Outstanding Shares
At March 31, 2005, there were approximately 2.8 billion
outstanding shares of L and LMC.B and 80 million shares of L and
LMC.B reserved for issuance pursuant to warrants and employee
stock options. At March 31, 2005, 27 million options had a strike
price that was lower than the closing stock price. Exercise of
these options would result in aggregate proceeds of approximately
$136 million.
Debt Tender Offer
On April 6, 2005, Liberty disclosed that it had commenced a tender
offer for up to $1.0 billion in aggregate principal amount of its
outstanding debt securities due in 2006. The tender offers
consisted of two separate offers. In one offer, we offered to
purchase any and all of our 3.50% Senior Notes and, in the second
offer, we offered to purchase up to a specified maximum amount of
our Floating Rate Senior Notes. The specified maximum amount in
the second offer is equal to the difference between the $1.0
billon cap on the aggregate principal amount subject to the tender
offers and the aggregate principal amount of 3.50% Senior Notes
that we accept for purchase. The offer for the 3.50% Senior Notes
expired on April 15, 2005 and $200 million principal amount were
validly tendered and accepted for payment. The offer for the
Floating Rate Senior Notes expired on May 3, 2005 and $1.4 billion
were validly tendered. Pursuant to the terms of the tender offer,
we accepted $800 million of the Floating Rate Notes for payment.
Discovery Holding Company Spin Off
On March 15, 2005, Liberty said it intends to spin-off to its
shareholders a separate company comprised of its ownership
interests in Ascent Media Group, Inc. and DCI. The transaction,
which is intended to be tax-free to shareholders and Liberty, will
create a new publicly-traded company called Discovery Holding
Company. Completion of the transaction is expected to occur in
the second quarter of 2005.
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 17, 2005,
Standard & Poor's Ratings Services lowered its rating on Liberty
Media Corporation's senior unsecured debt to 'BB+' from 'BBB-',
based on the company's plan to spin off to shareholders its 50%
stake in Discovery Communications Inc. and its 100% ownership of
Ascent Media Group Inc., without a commensurate reduction in
debt.
Ratings have been removed from CreditWatch, where they were placed
with negative implications on Jan. 21, 2005. At the same time,
Standard & Poor's lowered its other ratings on the company,
including its corporate credit rating, to 'BB+' from 'BBB-'. The
outlook is stable. Total principal value debt as of Dec. 31, 2004,
was $10.9 billion.
"With this transaction, Liberty and creditors lose a stable,
high-quality, high-growth asset, on the heels of the spin-off in
2004 of the company's international cable TV and related assets,
into which Liberty had transferred significant cash and other
investments," said Standard & Poor's credit analyst Heather M.
Goodchild.
LTX CORP: Delays Third Quarter Financial Reporting Due to Probe
---------------------------------------------------------------
LTX Corporation (Nasdaq: LTXX) reports that total incoming orders
for the third fiscal quarter were $39.1 million, up 25% from last
quarter.
"First let me apologize for LTX's delay in reporting its third
quarter financial results," Roger W. Blethen, chairman and chief
executive officer, said. "We will work diligently to complete the
investigation announced in our Press Release [Thurs]day. There
is, however, important information that we can disclose regarding
the actions and accomplishments of the third quarter and guidance
for the fourth quarter."
The Company said it will delay the release of financial results
for its third quarter ended April 30, 2005. The Company was made
aware of a whistle-blower allegation relating to its third quarter
financial results from an anonymous caller who appeared to hang-up
before completion of the call. The Company believes the
allegations are without merit, but has decided to delay the
release of its third quarter financial results until an
appropriate investigation can be made consistent with regulations
under Sarbanes-Oxley.
"There are indications that in some market segments, LTX's
business is expanding due to capacity purchases and new
applications ramping into volume production. This led to
significantly higher orders in the quarter, with product orders up
approximately 120% from the second quarter."
"Earlier in the third quarter we took action to realign our
operating expenses with our business strategy. As a result, our
quarterly break-even was reduced to $50M. We also evaluated the
size of our capital asset base and worldwide facilities for the
leaner organization. Following this evaluation, the company
determined that restructuring and asset impairment charges of
approximately $28 million were necessary in order to properly size
its base of assets. After these restructuring actions, our
business model now more accurately reflects the leaner operation,
further reducing the quarterly break-even to $46 million."
"LTX's engineering organization continued to make strong progress
during the quarter on several new versions of Fusion that address
high growth areas of the market, and we plan to make product
announcements in our fourth quarter. We expect that the stepped-
up leverage in our financials and new market opportunities from
our product strategy will make LTX a stronger company."
About the Company
LTX Corporation -- http://www.ltx.com/-- (Nasdaq: LTXX) is a
leading supplier of test solutions for the global semiconductor
industry. Fusion, LTX's patented, scalable, single-platform test
system, uses innovative technology to provide high performance,
cost-effective testing of system-on-a-chip, mixed signal, RF,
digital and analog integrated circuits. Fusion addresses
semiconductor manufacturers' economic and performance requirements
today, while enabling their technology roadmap of tomorrow.
* * *
As reported in the Troubled Company Reporter on March 9, 2005,
Standard & Poor's Ratings Services lowered its corporate credit
rating on Westwood, Massachusetts-based LTX Corporation to 'B-'
from 'B', and its subordinated debt rating to 'CCC' from 'CCC+',
based on expectations for lower earnings and cash flow for the
April 2005 quarter. The outlook remains negative.
"The downgrade also reflects increasing concerns that the
company's use of cash will strain liquidity, in light of the
August 2006 maturity of $150 million," said Standard & Poor's
credit analyst Lucy Patricola.
Revenues have fallen 66% over the past two quarters, to $27
million, and the company has used $50 million in cash because of
committed inventory purchases placed earlier in the year.
Forecasts are for continued weak sales and additional negative
cash flow, eroding cash balances to a level equal to or less than
intermediate term debt maturities.
The ratings on LTX Corporation reflect:
-- highly volatile sales and profitability;
-- large, near-term maturities;
-- substantial customer concentration; and
-- a narrow product line.
These are only partially offset by the company's cash balances and
good technology. LTX supplies leading edge semiconductor
automated test equipment (ATE) to semiconductor manufacturers.
Texas Instruments has accounted for 58% of sales for the past two
years. The ATE market historically has represented only a
fraction of overall semiconductor spending, and remains a highly
volatile segment of the semiconductor capital equipment market.
Revenues continued to fall in the January quarter, slipping 37%
sequentially to $27 million, following a 46% decline in the
October quarter, on weak demand. The company is well below its
breakeven sales levels of about $50 million, and EBITDA is about
$14 million negative for the January quarter. Expectations are
for continued softness in the April quarter.
MENNONITE GENERAL: Poor Performance Prompts S&P to Pare Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating three
notches to 'BB-' from 'BBB-' on Puerto Rico Industrial, Tourism,
Educational, Medical and Environmental Control Facilities
Financing Authority's series 1996A and 1997A bonds, issued on
behalf of Mennonite General Hospital Inc. The outlook is
negative.
"The downgrade and negative outlook reflect Mennonite's continuing
struggle with operating performance," said Standard & Poor's
credit analyst Stephen Infranco.
Fiscal 2004 marked the fifth consecutive year of deficit
operations. In fiscal 2003, Mennonite was in violation of its
debt service ratio covenant requirement (the second time in five
years, with the last violation occurring in fiscal 2000) and, as
such, was required to hire consultants to assess operations and
recommend changes for improvement. Although Mennonite retained
consultants in accordance with the bond documents, performance in
2004 improved only slightly (although no debt service covenant
violation was reported). Consistent operating deficits have
contributed to Mennonite's extremely weak cash position and
drastically low liquidity levels.
Additional rating concerns include:
(1) general cost pressures, particularly in the areas of
staffing and supplies;
(2) higher-than-anticipated contractual allowances; and
(3) an unfavorable payor mix, with a very high Medicaid
population.
Factors supporting the rating are:
(1) recent signs of improvement in operations in fiscal 2005
(12-month unaudited period) that contributed to coverage
of maximum annual debt service in excess of 2x;
(2) a strong market position (although Mennonite operates in a
very limited economic service area with increasing levels
of unemployment);
(3) increased volumes; and
(4) the potential to boost liquidity through a sale of
property, although no definitive action has been taken.
The negative outlook reflects Mennonite's extremely low liquidity
levels and track record of poor operations. Although positive
reimbursement changes, coupled with management's turnaround
initiatives, have positively affected financial performance in
fiscal 2005, a sustained improvement in operations and cash
accumulation will be needed to return the outlook to stable.
Furthermore, a return to operating deficits or any setback could
cause significant financial stress and result in weaker coverage
of maximum annual debt service and further erosion of cash, which
would warrant a further downgrade.
MERIDIAN AUTOMOTIVE: Taps Sidley Austin as Bankruptcy Counsel
-------------------------------------------------------------
Meridian Automotive Systems, Inc., and its debtor-affiliates seek
authority from the U.S. Bankruptcy Court for the District of
Delaware to employ Sidley Austin Brown & Wood, LLP, as their
general reorganization and bankruptcy counsel, nunc pro tunc to
April 26, 2005.
The Debtors want to hire Sidley Austin because of its experience
and expertise in every major substantive area of legal practice
and its clients include leading public companies in a variety of
industries, privately held businesses, and major nonprofit
organizations. Richard E. Newsted, President of Meridian
Automotive Systems, Inc., points out that Sidley Austin is
uniquely well-qualified to represent them in the Chapter 11
cases.
As counsel, Sidley Austin will:
(a) provide legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operation of their businesses;
(b) take all necessary action on the Debtors' behalf to
protect and preserve their estates, including
prosecuting actions on the Debtors' behalf, negotiating
any and all litigation in which the Debtors are involved,
and objecting to claims filed against the Debtors'
estates;
(c) prepare on the Debtors' behalf all necessary motions,
answers, orders, reports and other legal papers in
connection with the administration of their estates;
(d) attend meetings and negotiate with representatives of
creditors and other parties-in-interest, attend court
hearings, and advise the Debtors on the conduct of
their Chapter 11 cases;
(e) perform any and all other legal services for the
Debtors in connection with their Chapter 11 cases and
with the formulation and implementation of the Debtors'
plan of reorganization;
(f) advise and assist the Debtors regarding all aspects of
the plan confirmation process, including, but not
limited to, securing the approval of a disclosure
statement, soliciting votes in support of plan
confirmation, and securing confirmation of the plan;
(g) provide legal advise and representation with respect to
various obligations of the Debtors and their directors
and officers;
(h) provide legal advice and perform legal services with
respect to matters involving the negotiation of the
terms and the issuance of corporate securities, matters
relating to corporate governance and the interpretation,
application or amendment of the Debtors' corporate
documents, including their certificates or articles of
incorporation, bylaws, material contracts, and matters
involving the fiduciary duties of the Debtors and their
officers and directors;
(i) provide legal advice and legal services with respect to
litigation, tax and other general non-bankruptcy legal
issues for the Debtors to the extent requested; and
(j) render other necessary or appropriate legal services in
connection with the Debtors' Chapter 11 cases.
The Debtors will pay Sidley Austin pursuant to the firm's
standard hourly rates:
Partners and senior counsel $425 - $800
Associates $180 - $465
Para-professionals $80 - $200
Mr. Newsted discloses that Sidley Austin received a $500,000
Retainer in connection with preparing for the filing of the
Debtors' Chapter 11 cases and for its proposed postpetition
representation of the Debtors. In addition to the Retainer, the
firm received $945,936 in fees and $25,126 in expenses from the
Debtors on account of legal services rendered in connection with
the filing of their Chapter 11 cases.
James F. Conlan, Esq., member of Sidley Austin, tells the Court
that the firm does not hold or represent any interests adverse to
the Debtors' estates in matters on which it is to be engaged.
Mr. Conlan assures the Court that the firm is a "disinterested
person" within the meaning of Section 101(14) of the Bankruptcy
Code.
Headquartered in Dearborn, Mich., Meridian Automotive Systems,
Inc. -- http://www.meridianautosystems.com/-- supplies
technologically advanced front and rear end modules, lighting,
exterior composites, console modules, instrument panels and other
interior systems to automobile and truck manufacturers. Meridian
operates 22 plants in the United States, Canada and Mexico,
supplying Original Equipment Manufacturers and major Tier One
parts suppliers. The Company and its debtor-affiliates filed
for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case
Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J.
Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at
Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon
L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks,
Esq., at Young Conaway Stargatt & Taylor, LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $530 million in
total assets and approximately $815 million in total liabilities.
(Meridian Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 215/945-7000).
MERIDIAN AUTOMOTIVE: Taps Young Conaway as Bankruptcy Co-Counsel
----------------------------------------------------------------
Meridian Automotive Systems, Inc., and its debtor-affiliates ask
the authority from the U.S. Bankruptcy for the District of
Delaware to hire Young Conaway Stargatt & Taylor, LLP, as their
bankruptcy co-counsel, nunc pro tunc to April 26, 2005.
The Debtors selected Young Conaway because of the firm's
extensive experience and knowledge in the field of debtors' and
creditors' rights and business reorganizations. Young Conaway's
expertise, experience and knowledge practicing in courts, Richard
E. Newsted, President of Meridian Automotive Systems, Inc., says,
will be efficient and cost effective for the Debtors' estates.
Accordingly, the Debtors believe that Young Conaway is both well
qualified and uniquely able to represent them as co-counsel in a
most efficient and timely manner.
As co-counsel, Young Conaway will:
(a) provide legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operation of their businesses and management of their
properties;
(b) prepare and pursue confirmation of one or more plans
and approval of corresponding disclosure statements;
(c) prepare, on the Debtors' behalf, necessary applications,
motions, answers, orders, reports and other legal papers;
(d) appear in Court and protect the Debtors' interests before
the Court; and
(e) perform all other legal services for the Debtors, which
may be necessary and proper.
The attorneys and paralegal at Young Conaway that will primarily
represent the Debtors and their standard hourly rates are:
Robert S. Brady, Esq. $475
Edward J. Kosmowski, Esq. $345
Edmon L. Morton, Esq. $345
Ian S. Fredericks, Esq. $220
Thomas Hartzell, Paralegal $170
Mr. Newsted discloses that Young Conaway received a $250,000
Retainer in connection with the planning and preparation of
initial documents and its proposed postpetition representation of
the Debtors. A part of this payment has been applied to
outstanding balances existing as of the Petition Date. The
remainder will constitute a general retainer as security for
postpetition services and expenses.
Mr. Brady tells Judge Walrath that Young Conaway has not
represented the Debtors, their creditors, or any other parties-
in-interest, in any matter relating to the Debtors or their
estates. Mr. Brady assures the Court that the firm is a
"disinterested person" as that phrase is defined in Section
101(14) of the Bankruptcy Code.
Headquartered in Dearborn, Mich., Meridian Automotive Systems,
Inc. -- http://www.meridianautosystems.com/-- supplies
technologically advanced front and rear end modules, lighting,
exterior composites, console modules, instrument panels and other
interior systems to automobile and truck manufacturers. Meridian
operates 22 plants in the United States, Canada and Mexico,
supplying Original Equipment Manufacturers and major Tier One
parts suppliers. The Company and its debtor-affiliates filed
for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case
Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J.
Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at
Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon
L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks,
Esq., at Young Conaway Stargatt & Taylor, LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $530 million in
total assets and approximately $815 million in total liabilities.
(Meridian Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 215/945-7000).
MERIDIAN AUTOMOTIVE: Taps Seyfarth Shaw as Bankr. Special Counsel
-----------------------------------------------------------------
Meridian Automotive Systems, Inc., and its debtor-affiliates
anticipate that Seyfarth Shaw, which has been their outside
counsel for the past several years, will continue to advise them
with respect to general legal matters as well as matters that may
arise in their Chapter 11 cases. Seyfarth provides services to
the Debtors for a variety of legal matters including labor and
employment, benefits, environmental, finance, corporate,
litigation, and immigration issues.
In this regard, the Debtors seek authority from the U.S.
Bankruptcy Court for the District of Delaware to employ
Seyfarth Shaw as their bankruptcy special counsel, nunc pro tunc
to April 26, 2005.
Richard E. Newsted, President of Meridian Automotive Systems,
Inc., relates that Seyfarth has become very familiar with the
Debtors' business affairs and gained extensive experience in most
aspects of the Debtors' general legal work.
The Debtors will pay Seyfarth pursuant to the firm's standard
hourly rates:
Attorneys $210 - $720
Para-professionals $80 - $210
According to Mr. Newsted, Seyfarth received a $293,467 Retainer
in connection with services rendered to the Debtors before the
Petition Date. Seyfarth also received $1,935,161 from the
Debtors within one year before the Petition Date on account of
services rendered with regard to certain general legal matters.
Robert Weber, Esq., a partner at Seyfarth, tells the Court that
Seyfarth Shaw will conduct an ongoing review of its files to
ensure that it continues to neither hold nor represent any
interests adverse to the Debtors or to their estates. Mr. Weber
assures the Court that the firm is a "disinterested person"
within meaning of Section 101(14) of the Bankruptcy Code.
Headquartered in Dearborn, Mich., Meridian Automotive Systems,
Inc. -- http://www.meridianautosystems.com/-- supplies
technologically advanced front and rear end modules, lighting,
exterior composites, console modules, instrument panels and other
interior systems to automobile and truck manufacturers. Meridian
operates 22 plants in the United States, Canada and Mexico,
supplying Original Equipment Manufacturers and major Tier One
parts suppliers. The Company and its debtor-affiliates filed
for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case
Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J.
Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at
Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon
L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks,
Esq., at Young Conaway Stargatt & Taylor, LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $530 million in
total assets and approximately $815 million in total liabilities.
(Meridian Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 215/945-7000).
METROMEDIA INT'L: May File Annual Financial Report by June 3
------------------------------------------------------------
Metromedia International Group, Inc., (OTCBB: MTRME and PINK
SHEETS: MTRMP), the owner of interests in various communications
and media businesses in the countries of Russia and Georgia, is
still unable to fully complete the preparation of its consolidated
financial statements and footnote disclosures for the annual audit
of the Company, as required for the filing of its Annual Report on
Form 10-K for the fiscal year ended December 31, 2004.
The Company believes that it will file the Form 10-K with the
United States Securities and Exchange Commission no later than
June 3, 2005, the required filing date in order for the Company to
avoid an event of default under the indenture governing the
Company's 10-1/2% senior notes due 2007. If such an event of
default were to occur, the trustee or holders of at least 25% of
the aggregate principal amount of the Senior Notes outstanding
could declare all Senior Notes to be due and payable immediately,
and should that happen, the Company would not have sufficient
corporate cash to meet this obligation.
The Company does not expect that it will file its Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2005, with the
SEC by May 16, 2005, the required date in order for the Form 10-Q
to be timely filed. The delay in filing the Form 10-Q is
attributable to the additional effort and time that has been
required for the Company to prepare and finalize the Form 10-K and
for the finance teams of the Company's PeterStar and Magticom
business ventures to prepare, finalize and submit the final first
quarter US GAAP financial results for PeterStar and Magticom,
respectively, to the Company's corporate finance team. As a
result of the delay in the filing of the Form 10-K and the delay
in the receipt of the PeterStar and Magticom first quarter US GAAP
financial results, the Company's corporate finance team has not
been able to begin the review and analysis of the PeterStar and
Magticom first quarter financial results, and as such, has not
been able to finalize the Company's consolidated financial
statements and management's discussion and analysis of the
Company's financial condition and results of operations. At
present, the Company is uncertain as to when it will complete the
filing of the Form 10-Q with the SEC, but anticipates filing the
Form 10-Q by June 30, 2005.
Delisting
On April 20, 2005, the OTCBB trading system appended the Company's
common stock trading symbol by adding an "E" modifier due to the
Company's delinquency in filing the Form 10-K and that, as
reported on the OTCBB website, the Company has a grace period
until May 20, 2005, to file the Form 10-K and avoid having the
Company's common stock become ineligible for trading on the OTCBB.
If the Company's common stock becomes ineligible for trading on
the OTCBB, it is expected that the Company's common stock will be
traded only in the Pink Sheets.
The Company cannot at this time provide any further guidance as to
when either the Form 10-K or Form 10-Q will be filed with the SEC
or when the annual audited financial statements and first quarter
2005 unaudited financial statements will be completed.
The Company has also failed to timely file with the SEC the
financial information of Magticom required under Item 9.01(a) and
(b) of Form 8-K in respect of the Company's purchase of an
additional interest in Magticom, as previously announced by the
Company in a press release dated February 15, 2005. The Company
will file such financial information by amending the Company's
February 17, 2005 Form 8-K on or around the date the Company files
its Form 10-K.
About the Company
Through its wholly owned subsidiaries, the Company owns interests
in communications businesses in the countries of Russia and
Georgia. Since the first quarter of 2003, the Company has focused
its principal attentions on the continued development of its core
telephony businesses, and has substantially completed a program of
gradual divestiture of its non-core cable television and radio
broadcast businesses. The Company's core telephony businesses
include PeterStar, the leading competitive local exchange carrier
in St. Petersburg, Russia, and Magticom, Ltd., the leading mobile
telephony operator in Tbilisi, Georgia.
At Dec. 31, 2004, Metromedia International's balance sheet showed
a $6,477,000 stockholders' deficit, compared to a $13,155,000
deficit at Dec. 31, 2003.
MIRANT CORP: Says Dick & St. Paul's $49.7M Claims are Unliquidated
------------------------------------------------------------------
Dick Corporation filed Claim No. 7231 for $35,250,208. St. Paul
filed Claim No. 7102 for $14,449,900 in the chapter 11 cases of
Mirant Corporation and its debtor-affiliates. Both claims assert
interest, attorneys' fees, and other charges allegedly owed
pursuant to contract and applicable law.
In December 2000, Dick agreed to act as the designer and builder
of a project to upgrade an existing steam-turbine power plant
facility in downtown Cambridge, Massachusetts, to a combined-
cycle power plant. Mirant Kendall LLC owns the Project.
Dick alleges that Mirant Kendall LLC breached their Design/Build
Agreement and caused Dick and its subcontractors to incur delays
and cost overruns on the Project.
Harding & Smith Corporation is one of the subcontractors for the
Project. St. Paul issued a performance bond to Harding & Smith,
guaranteeing Harding & Smith's performance. Harding & Smith
abandoned its subcontract before it was completed, and St. Paul,
as performance bond surety, was required to finish Harding &
Smith's work.
St. Paul has alleged that Dick breached the H&S Subcontract. St.
Paul claims that it is entitled to recover Harding & Smith's
damages by virtue of assignment and subrogation rights under an
indemnity agreement between St. Paul and Harding & Smith.
The Debtors inform the Court that St. Paul Company's Claim No.
7102 and Dick Corporation's Claim No. 7231 are unliquidated.
Thus, the Debtors assert, resolution of those claims will unduly
delay Mirant Kendall's bankruptcy case.
Accordingly, the Debtors ask the Court to estimate the Claims at
$0 for all purposes, including voting on, feasibility of, and
distribution under a plan of reorganization.
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. 61; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: Wants to Extend Letters of Credit to May 31
--------------------------------------------------------
In 2001, Mirant Corporation entered into a four-year credit
agreement with a consortium of bank and institutional lenders.
Credit Suisse First Boston was the prepetition lenders'
administrative agent. Pursuant to the Credit Agreement, Mirant
Corp. entered into a letter of credit agreement with Wachovia
Bank, N.A., as issuing bank. Wachovia agreed to issue letters of
credit to certain beneficiaries designated by Mirant Corp.
In 2004, the Debtors, Wachovia and Credit Suisse were parties to
a Court-approved stipulation that, among other things, provided
the Debtors the opportunity to request a three-month extension of
the expiration date of each of the outstanding prepetition
letters of credit. Additionally, the Debtors were authorized to
extend the Expiration Date without further order from the Court
and negative notice to the Official Committees provided that no
objection to the extension is interposed.
For some time now, the Debtors have been negotiating with Credit
Suisse for a potential business arrangement that would, among
other things, settle and resolve completely the ongoing
litigation relating to certain of the Prepetition Lenders'
claims.
Mark Elmore, Esq., at Haynes & Boone, in Dallas, Texas, notes
that while the Debtors and Credit Suisse agreed in principle to
the basic terms of an agreement, definitive documents must still
be completed and the parties must obtain the necessary approvals
before the agreement may be presented to the Court for its
consideration.
With no definitive documentation yet in sight, the parties
believe it is valuable and constructive to continue the
settlement process so long as progress is made and the status quo
is maintained with respect to the parties' rights.
On April 11, 2005, the Debtors provided the Official Committees
with written notice of their intention to further extend the
expiration date of the Debtors' remaining Outstanding Letters of
Credit to May 31, 2005.
Contrary to the usual supportive position the Official Committee
of Unsecured Creditors of Mirant Americas Generation, LLC, takes
with regards to previous extensions, the MAGi Committee objected
to the Debtors' request without explanation.
Accordingly, the Debtors ask the Court to approve an extension of
the Outstanding Letters of Credit to May 31, 2005.
The Debtors recognize that unless the Agreement is finalized in
the near term, other alternatives will need to be explored,
including litigating to resolve the Claims. Nevertheless, the
Debtors continue to be engaged in a constructive dialogue with
the Credit Suisse as well as the Official Committee of Unsecured
Creditors of Mirant Corp. -- whose constituents likely will be
more directly impacted by the outcome of the Letter of Credit
Litigation than any other constituents -- regarding the Proposed
Agreement. While the Debtors can provide no assurances that the
outcome of the ongoing dialogue will result in a finalized and
consented to Agreement, the Debtors can identify only potential
benefits and absolutely no harm in pursuing the dialogue for a
relatively brief period of time. The Debtors believe that it
will be most unfortunate if the opportunity is lost, not based on
the merits, but instead based on an unarticulated objection
asserted by a constituency with less at stake than others.
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. 62; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: Says NEGT's Maryland Action Violates Automatic Stay
----------------------------------------------------------------
Mirant Americas Energy Marketing, LP's predecessor-in-interest,
Southern Company Energy Marketing, L.P., sold and delivered
natural gas under a Master Firm Purchase and Sale Agreement dated
as of February 1, 1998, with PG&E Energy Trading - Gas
Corporation, now known as, NEGT Energy Trading - Gas Corporation.
The Contract provided for the parties to net their payment
obligations resulting from gas transactions between them in a
given month. Thus, after all monthly trades were netted, the
party owing the greater aggregate amount was permitted to satisfy
its monthly payment obligations by paying the other party the net
amount.
Moreover, the Contract identified various "Triggering Events"
that gave a party the right to declare an "Early Termination
Date" for termination of the Contract and all outstanding
transactions under that agreement. In the event open
transactions between the parties were terminated, all of those
transactions were closed out and the net amounts due and owing
between the parties were determined.
Specifically, Section 4.1 of the Contract provides that, if an
Early Termination Date occurs, the Notifying Party will calculate
its damages, including its associated costs and attorney's fees,
resulting from the termination of the Transactions. The
Termination Payment will be determined by:
(i) comparing the value of (a) the remaining term, quantities
and prices under each Transaction had it not been
terminated to (b) the equivalent quantities and relevant
market prices for the remaining term either quoted by a
bona fide third party offer or which are reasonably
expected to be available in the market under a replacement
contract for the Transaction; and
(ii) ascertaining the associated costs and attorneys' fees.
To ascertain the market prices of a replacement contract the
Notifying Party may consider, among other valuations, and or all
of the settlement prices of NYMEX Gas futures contracts,
quotations from leading dealers in Gas swap contracts and other
bona fide third party offers, all adjusted for the length of the
remaining term and the basis differential.
ET Gas and certain of its affiliates are debtors in Chapter 11
proceedings pending before the U.S. Bankruptcy Court for the
District of Maryland. Judge Paul B. Mannes presides over the
cases.
Mirant's Termination of the Contract
Meredith Johnson Harbach, Esq., at Smyser, Kaplan & Veselka,
L.L.P., relates that MAEM and ET Gas provided each other with
collateral, including cash and letters of credit to ensure their
performance under the Contract. Additionally, the parties'
established the practice of making "margin calls," where the
parties were required to supplement collateral on demand, as
necessary, to secure the full extent of their exposure on the
open gas transactions.
By letter dated April 15, 2003, MAEM advised ET Gas that the
approximate amount of its total exposure to MAEM under the
Contract exceeded the amount of ET Gas's posted collateral by
approximately $300,000, and demanded that ET Gas supplement its
collateral to cover the deficiency.
Ms. Harbach relates that despite MAEM's demand, ET Gas failed to
post any additional collateral.
In April 2003, MAEM provided ET Gas with a second written notice,
advising ET Gas that the amount of its total exposure to MAEM
exceeded the amount of ET Gas' posted collateral -- now, by more
than $2.25 million -- and demanding ET Gas to supplement its
collateral to cover the deficiency.
Again, ET Gas failed to post the additional collateral.
MAEM subsequently provided ET Gas with written notice declaring
April 26, 2003, as the "Early Termination Date" for the Contract
and all related transactions, citing ET Gas' refusals to post
sufficient collateral as a "Triggering Event" under the Contract.
MAEM calculated the Termination Payment due under the Contract
and provided ET Gas with notice of the Termination Payment amount
and a demand for payment in May 2003. ET Gas disputed MAEM's
Termination Payment calculation and refused to make any payment
to MAEM.
At the time the Contract was terminated, ET Gas had posted
approximately $11 million in collateral to secure its obligations
under the Contract. After the collateral is applied, ET Gas' net
outstanding obligation to MAEM under the Contract, excluding
interest, costs and attorneys' fees, exceed $5,600,000.
Guarantee
Gas Transmission Northwest Corporation "unconditionally and
irrevocably guarantees" the "prompt payment when due of all
amounts payable" under the Contract. GTNC assumed the guaranty
obligation from PG&E Corporation. The Guarantee further provides
that GTNC is liable for "out-of-pocket expenses," including
reasonable attorney's fees and costs, incurred by MAEM in the
enforcement of its rights under the Guarantee.
Demand for Payment
In 2005, MAEM sent written notice to GTNC, demanding payment in
full of ET Gas' obligations under the Contract. GTNC has
refused, and continues to refuse, to pay the amount owed to MAEM.
Accordingly, MAEM alleges that GTNC breached the Guarantee by
failing to satisfy all of ET Gas' liabilities and obligations to
MAEM under the Contract. Accordingly, MAEM seeks a Court's order
awarding MAEM:
(a) all amounts due resulting from damages in excess of
$5,600,000, plus prejudgment interest, which continues to
accrue on all amounts due and unpaid; and
(b) attorney's fees and costs.
NEG's Complaint Against MAEM
On March 21, 2005, National Energy & Gas Transmission, Inc., NEGT
Energy Trading Holdings Corporation, NEGT Energy Trading - Power,
L.P., and ET Gas commenced an adversary proceeding in their own
Chapter 11 cases against MAEM to secure for their estates the
fundamental debtor protections afforded them by Section 362 of
the Bankruptcy Code because their rights under the automatic stay
are being threatened by the GTNC Litigation.
According to Paul M. Nussbaum, Esq., at Whiteford, Taylor &
Preston L.L.P., in Baltimore, Maryland, while the GTNC Litigation
is nominally proceeding only against a non-debtor, the actual
parties-in-interest are the NEG Debtors. The NEG Debtors'
involvement is based on GTNC's assumption of the Guaranty that
guaranteed ET Gas' obligation under the Contract.
Besides violating the automatic stay in their Chapter 11 cases,
the NEG Debtors argue that prosecution of the GTNC Litigation
will circumvent the Maryland Bankruptcy Court-mandated protocol
requiring MAEM to submit certain claims underlying the GTNC
Litigation to mediation.
Consequently, the NEG Debtors asked the Maryland Bankruptcy Court
to declare that the GTNC Litigation is:
(a) subject to the automatic stay pursuant to Sections
362(a)(1) and (a)(3); and
(b) precluded by the discharge provisions under NEG's
confirmed Plan of Reorganization under Section 1141(d)(1).
The NEG Debtors want the Maryland Bankruptcy Court to enjoin MAEM
from pursuing the GTNC Litigation.
Mirant Says Maryland Action Violates Stay
Mirant Corporation and its debtor-affiliates assert that the NEG
Debtors are in contempt for violating the automatic stay in
Mirant's Chapter 11 cases by commencing the Maryland Action.
Ms. Harbach informs Judge Lynn that the NEG Debtors and Mirant
were in ongoing discussions for several weeks to try to come to
an agreement as to how the substantive, claim amount issues could
be resolved. Specifically, the parties discussed submitting the
Termination Payment issues to mediation, and if unsuccessful, to
an arbitrator whose decision would be binding against:
-- MAEM in its Chapter 11 case;
-- the NEG Debtors in their Chapter 11 cases; and
-- GTNC in the GTNC Litigation.
Ms. Harbach states that the benefit of a procedural solution is
that it would be resolved through mediation or a single decision
maker would decide MAEM's claim against the NEG Debtors under the
Contract, including the resolution of GTNC's deficiency claim.
Moreover, the GTNC Litigation would be stayed and the Maryland
Action would be moot.
However, as part of the discussions, the NEG Debtors insisted
that MAEM agree to prospective relief from stay in the event it
is determined that the NEG Debtors have a claim against MAEM with
respect to return of amounts already applied by MAEM in
connection with the Contract. Ms. Harbach contends that the NEG
Debtors have not filed any proof of claim against MAEM on the
basis that MAEM owes money to the NEG Debtors relating to the
Contract. On further investigation of the facts -- and in the
process of trying to work through the details of a consensual
agreement -- MAEM could not agree to any prospective stay relief,
which would be tantamount to inviting an unfounded turnover
action against MAEM in Maryland as a surrogate for the NEG
Debtors' failure to file a proof of claim against MAEM.
Recognizing that no consensual agreement could be reached, and
with the April 27, 2005 hearing to consider the parties' dispute
looming, Mirant requested that the Maryland Action be dismissed
because it violates Section 362, or at a minimum, the April 27
hearing be continued. Counsel for the NEG Debtors refused,
thereby necessitating for Mirant to file the Contempt Motion.
Pursuant to Section 105(a) and Rule 9020 of the Federal Rules of
Bankruptcy Procedure, Mirant asks Judge Lynn to:
(i) find that the NEG Debtors are in civil contempt for
violating the automatic stay in Mirant's Chapter 11
cases;
(ii) find that the Maryland Action and any order related to
the adversary proceeding is void ab initio and
unenforceable against MAEM, or any of the Debtors, or
their estates; and
(iii) assess appropriate sanctions for the civil contempt.
Ms. Harbach states that it is the Texas Court, and not the NEG
Debtors, which will to determine the extent of the automatic stay
and whether a stay violation has occurred. Additionally, the
Maryland Action is clearly an attempt by the NEG Debtors to
exercise control over property of MAEM's Chapter 11 estate.
There can be no dispute that MAEM's cause of action against GTNC
constitutes property of MAEM's estate, because the filing of a
Chapter 11 petition creates an estate that encompasses "all legal
and equitable interests of the debtor in property as of the
commencement of the case," pursuant to Section 541(a).
Ms. Harbach contends that the NEG Debtors seek to exercise
control over the Cause of Action by enjoining the GTNC
Litigation, thereby delaying the lawful exercise of MAEM's rights
and remedies against GTNC -- a third-party guarantor that is not
in Chapter 11. The NEG Debtors appear determined to delay MAEM's
lawful exercise of its creditor rights and remedies against GTNC
under the Guarantee. The NEG Debtors' conduct prejudices not
only MAEM, but also its estate and its creditors.
Mirant expects the NEG Debtors to argue the merits of the
Maryland Action as an excuse for failing to comply with Section
362(d) and seek relief from stay to pursue the Maryland Action.
Ms. Harbach insists that no discussion should be had because the
underlying merits of the Maryland Action are irrelevant to the
Texas Court's determination of whether a stay violation occurred.
According to Ms. Harbach, the Court has the power to conduct
civil contempt proceedings and issue orders in accordance with
those proceedings pursuant to Section 105. Ms. Harbach notes
that in In re Freemyer Industrial Pressure, Inc., 281 B.R. 262,
266-67 (Bankr. N.D. Tex. 2002), the court held that "[a]n award
of sanctions against violators of the stay and receipt of those
sanctions for the benefit of a debtor acting in a fiduciary
capacity serve these ends and is fully consistent with the
Court's equity powers." In re Abercrombie, 156 B.R. 782, 783
(Bankr. N.D. Tex. 1993), teaches that the enforcement of the
automatic stay by contempt-type proceedings constitutes a core
matter over which the Texas Court has jurisdiction to enter a
final order.
Mirant asserts that there is no doubt that the NEG Debtors were
aware that MAEM was a Chapter 11 debtor when they filed the
Maryland Action. The NEG Debtors simply misunderstood the scope
of the automatic stay and the fact that it precludes the filing
of the Maryland Action.
About PG&E National Energy Group
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas
Transmission, Inc.) develops, builds, owns and operates electric
generating and natural gas pipeline facilities and provides energy
trading, marketing and risk-management services. The Company and
its debtor-affiliates filed for Chapter 11 protection on July 8,
2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq.,
Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at
Willkie Farr & Gallagher, and Paul M. Nussbaum, Esq., and Martin
T. Fletcher, Esq., at Whiteford, Taylor & Preston L.L.P.,
represent the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$7,613,000,000 in assets and $9,062,000,000 in debts. NEGT
received bankruptcy court approval of its reorganization plan in
May 2004, and that plan took effect on Oct. 29, 2004.
About Mirant Corporation
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. 61; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MOMENTRENDS INC: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Momentrends, Inc.
aka Essendi
aka Exhibit A
aka Sculpture Silk
530 Seventh Avenue, 10th Floor
New York, New York 10018
Bankruptcy Case No.: 05-13611
Type of Business: The Debtor sells imported women's and children's
clothing.
Chapter 11 Petition Date: May 16, 2005
Court: Southern District of New York (Manhattan)
Judge: Prudence Carter Beatty
Debtor's Counsel: Gilbert A. Lazarus, Esq.
Lazarus & Lazarus, P.C.
240 Madison Avenue, 8th Floor
New York, New York 10016
Tel: (212) 889-7400
Fax: (212) 684-0314
Financial Condition as of March 31, 2005:
Total Assets: $3,249,843
Total Debts: $3,672,970
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Jiaxing Fujuan Clothing Manufacture Company $231,307
48 Nanhu Road
Jiaxing, Zhejiang
People's Republic of China 314000
Tel: 86-573-220-9718
Jason $212,493
12 Toll Station Road
Huzhou (West Chenban Bridge)
People's Republic of China 313000
Tel: 86-572-205-1062
Zhejiang Tongxiang Foreign Trade $149,495
Crossing of Renmin & Zhonghua Road
2nd Ind. Area, Tongxiang Eco Dive
Zone, Tongxiang, Zhejiang, China
Kaili $140,021
#16 Xin Cheng Zhen Dong Road
22 Zhongshan Road, Jiaxing
Zhejiang, China 314015
Hua Xiang Woolen Dressing Company, Ltd. $111,361
#160 Ruixiang Road
Gonglu Town, Pudong New Area
Shanghai, China 200052
Tel: 86-21-5052-0024
Jiaxing Senchuang Fashion Company $93,262
Qixing, Jiaxing
Zhejiang, China 314002
Filpucci S.p.A. $61,404
Via Dei Tigli, 41-500010 Capalle
P.O. Box 17
Camp Besenzia, Italy
Wuxi Yuanyuan Knitting Clothing $50,938
#157 Section B-8 Hubin Road
Wuxi, Jiangsu, China
Jiaxing Zhongjia Knitting Company Ltd. $48,022
#1 Xinyang Road, Xinfeng Town
Jiaxing City, Zhejiang
People's Republic of China 314005
Lora Festa Spa $41,767
c/o Unicredito Italiano
New York Branch
430 Park Avenue
New York, NY 10022
Wuxi South Forwarding Garments Company Ltd. $36,638
1/1 Hou She Qiao
Wuxi, China
G&S Realty 1, LLC $32,308
c/o Kaufman/Adler Realty, LLC
450 Seventh Avenue, Penthouse
New York, NY 10123-0101
New Tex Garments Ltd $32,225
3/F #479 Zongan Bus Center
Hexing Road, Jiaxing
Zhejiang, China
P&O Nedlloyd Logistics LLC $21,286
Gilbert West Division
6725 Kimball Avenue
Chino, CA 91710
Wuxi Pacific Knitting Company $19,994
382-1 Tong Hui Road (E)
People's Republic of China 214041
Air-City $19,183
153-63 Rockaway Boulevard, Suite 200
Jamaica, NY 11434
Zhong-He Knitting Factory $18,694
#57 Zhauzhong Road
Zhaixiang Town, Qingpu
Shanghai, China
Shanghai Dongfang Wool Knitting Company $17,696
489 Pudian Road
Puding, Shanghai, China
Manifattura Sesia $15,804
Via Tosalli, 67/69
38073 Fara Nov.
Italy
Chungweiming Knitting Factory Ltd. $15,703
9C Hang Cheong FTY Building
1 Wing Ming Street, Shamshuipo
Kowloon, Hong Kong
MORGAN STANLEY: Fitch Affirms Low-B Ratings on Six Mortgage Certs.
------------------------------------------------------------------
Fitch Ratings affirms Morgan Stanley Dean Witter Capital I Inc.'s
commercial mortgage pass-through certificates, series 2001-IQ:
-- $62.1 million class A-1 'AAA';
-- $151.7 million class A-2 'AAA';
-- $261 million class A-3 'AAA';
-- Interest-only class X-1 'AAA';
-- Interest-only class X-2 'AAA';
-- $22.3 million class B 'AA';
-- $18.7 million class C 'A';
-- $5.3 million class D 'A-';
-- $5.3 million class E 'BBB+';
-- $8.9 million class F 'BBB';
-- $5.3 million class G 'BBB-';
-- $5.3 million class H 'BB+';
-- $10.7 million class J 'BB';
-- $3.6 million class K 'BB-';
-- $1.8 million class L 'B+';
-- $5.3 million class M 'B';
-- $1.8 million class N 'B-'.
Fitch does not rate the $5.3 million class O certificates.
The rating affirmations reflect the stable pool performance since
issuance. As of the April 2005 distribution date, the pool has
paid down 19.4% to $574.6 million from $713 million at issuance.
Fitch reviewed the credit assessments of these three loans:
* Town Center Plaza (8.9%);
* Turtle Creek Mall (5.3%); and
* Marina Village (3.9%).
Based on their stable to improved performance, all three loans
maintain investment-grade credit assessments.
The Town Center Plaza loan is secured by the fee interest in
388,962 square feet of a 607,700 sf anchored retail center located
in Leawood, Kansas City. Jacobson's, the largest anchor of the
collateral, vacated 120,000 sf in 2002. The Jones Store, part of
the May Department Stores Company, took occupancy of the former
Jacobson's space in November 2004, bringing total occupancy to
95.6%. The Fitch-adjusted debt service coverage ratio for year-
end 2004 improved to 1.45 times compared with 1.37x at issuance.
The Turtle Creek Mall loan is secured by the fee interest in
253,026 sf of an 846,120 sf regional mall located in Hattiesburg,
MS. The noncollateral anchors include Sears, McRae's, Dillard's,
and J.C. Penney. The Fitch-adjusted DSCR for YE 2004 improved to
1.95x compared with 1.44x at issuance.
The Marina Village loan was originally secured by ten office
buildings and one grocery-anchored retail center located in
Alameda, Calif. In September 2004, Marina Village Shopping
Center, a 44,838 sf retail center, was released from the
collateral and the loan was paid down by $6.8 million. Despite a
decline in occupancy, net cash flow for the subject has remained
in line with Fitch's original underwriting.
One 90-day delinquent loan (2%), secured by an office property in
Phoenix, Ariz., is in special servicing. The special servicer,
GMAC Commercial Mortgage Corporation, approved a discounted payoff
for $10 million to close by Aug. 31, 2005. If the DPO does not
close by that date, GMACCM is expected to foreclose on the
property. Based on the current exposure versus the DPO amount,
losses are expected.
MOUNT SINAI-NYU: Affirms BB+ Rating on $681 Million Revenue Bonds
-----------------------------------------------------------------
Fitch Ratings affirms the 'BB+' rating to the approximately $681
million outstanding Dormitory of the State of New York Mount
Sinai-NYU Health System obligated group revenue bonds. The
outstanding bonds are listed below. The Rating Outlook is Stable.
The 'BB+' affirmation of Mount Sinai-NYU Health System is based on
its improved financial performance, solid market share and
clinical reputation, increased admissions, and new strategic
direction. Mount Sinai Hospital and NYU Hospitals Center
acknowledge that their merger attempt was a failure and all
integrated services have been unwound. Fiscal 2004 was the first
full year that each organization operated independently. The only
item binding the two parties is the series 2000 bonds, which each
organization is committed to refinancing to complete the formal
separation.
MS-NYU continues to actively monitor the financial performance of
the members of the obligated group in compliance with bond
covenants. Although financial performance has improved, the
profile of the obligated group is still weak, which has led to
some constraints for the refinancing. The obligated group is also
in discussions with the Dormitory Authority of the State of New
York to potentially amend the language in the master trust
indenture that would allow a member to withdraw from the obligated
group more easily.
The obligated group's financial performance improved in fiscal
2004 across all liquidity and profitability indicators. Although
operating performance is still negative, there was a marked
improvement in fiscal 2004 with an operating margin of negative
2.2% (loss of $43.4 million) from negative 6.6% operating margin
(loss of $105.3 million) in fiscal 2003. The performance has been
mainly driven by improved profitability at MSH and increased
volume at both MSH and NYUHC. Improved profitability led to sound
debt service coverage of 1.9x (excluding one-time gain on sale of
real estate). Days cash on hand increased to 80.2 days at
Dec. 31, 2004, from 67.1 days the prior year.
MSH exceeded its budget for fiscal 2004 and successfully
accomplished the initiatives set last year. Fitch views this
favorably as previous management turnover and failure to meet
budgeted goals and targets had been an issue. The current
management team (CEO, CFO, and COO) has been together for 15
months. MSH had a negative $33 million bottom line in fiscal 2004
compared with negative $59 million the prior year. The improved
performance was driven by increased patient volume, rate increases
with managed care payors, growing referrals from community
hospitals, revenue cycle initiatives, and supply chain management.
Fitch expects the rate of improvement to continue with initiatives
implemented such as physician recruitment in targeted service
lines, improving relationships with affiliated hospitals, and
expense control. Management has conservatively budgeted a
negative $30 million bottom line loss for fiscal 2005, which Fitch
expects MSH to exceed. Through the first three months of fiscal
2005, MSH posted a positive margin of $785,000. Future capital
needs continue to be a concern, and MSH sold a residential
building in fiscal 2004 for $60 million, which will likely fund
capital projects.
NYUHC ended fiscal 2004 with a bottom line of $7.2 million, which
exceeded budget and was an improvement from $2.8 million in 2003.
Improved profitability has been driven by increased volume, better
managed care contract rates, and revenue cycle initiatives.
Volume growth has been attributable to the new cancer center that
opened July of 2004, which has exceeded projections. Through the
first three months of 2005, NYUHC is operating ahead of budget
with a $1.2 million bottom line compared with a budget of negative
$961,000. Fitch believes further operating performance should be
benefited by NYUHC's decision to disaffiliate with NYU-Downtown
(NYUD) as of January 2005. NYUD has been unprofitable and was
historically a financial drain on NYUHC. Beginning in 2006, NYUHC
will complete a full asset merger with Hospital for Joint
Diseases.
Although HJD is a member of the obligated group and has been
closely aligned with NYUHC since 1994, Fitch expects benefits from
the full asset merger. Expected benefits include further
development and branding of the musculoskeletal service line and
increased capacity at NYUHC for higher acuity cases as lower
acuity procedures will be shifted to HJD. NYUHC also has
significant capital needs with the need for a potential
replacement facility or expanded patient services.
Fitch expects the improved performance of the obligated group to
continue as the strategy of each entity operating independently
have shown positive signs. Fitch will continue to monitor the
developments of a potential refinancing of the series 2000 bonds
and ultimate dissolution of the obligated group.
The principle parties of the obligated group are MSH and NYUHC,
which are both academic medical teaching hospitals in New York,
NY. MSH had 55,867 discharges and total revenues of $1.1 billion
while NYUHC had 32,029 discharges and total revenues of $703
million in fiscal 2004. The obligated group covenants to disclose
an annual audit and quarterly financial statements with operating
statistics. Fitch notes that quarterly disclosure has been timely
with consolidated and consolidating utilization statistics,
balance sheet, income statement, and statement of cash flows and
comprehensive management and discussion analysis.
These are the outstanding issues rated 'BB+' by Fitch:
-- $499,940,000 Dormitory Authority of the State of New
York, revenue bonds (Mount Sinai-NYU Health System
Obligated Group), series 2000A;
-- $24,700,000 Dormitory Authority of the State of New York,
periodic auction reset securities (Mount Sinai-NYU Health
System Obligated Group), series 2000B;
-- $95,100,000 Dormitory Authority of the State of New York,
periodic auction reset securities (Mount Sinai-NYU Health
System Obligated Group), series 2000C;
-- $61,500,000 Dormitory Authority of the State of New York,
periodic auction reset securities (Mount Sinai-NYU Health
System Obligated Group), series 2000D.
NATIONAL CENTURY: Agrees to Allow ING's Fee Claim for $362,778
--------------------------------------------------------------
ING Capital Markets, LLC, filed Claim Nos. 530 to 544 against
National Century Financial Enterprises, Inc., and its debtor-
affiliates.
On April 28, 2004, the U.S. Bankruptcy Court for the Southern
District of Ohio:
(a) granted Allowed Note Claims to JP Morgan Chase Bank for
$884,123,360, and to Bank One, N.A., for $2,050,187,966;
(b) disallowed the Contractual Note Claims filed by the
Debtors' noteholders, including ING, as duplicative of the
Allowed Note Claims;
(c) deemed the $387,063 portion of the ING Claims for legal or
advisory fees and costs -- the Fee Claim -- as a Non-
Contractual Note Claim; and
(d) preserved the parties' rights regarding the Non-
Contractual Note Claims filed by the Debtors' noteholders,
including ING.
Pursuant to the Debtors' confirmed Liquidation Plan, all of the
Debtors' assets were contributed to three trusts, including the
Unencumbered Assets Trust and the VI/XII Collateral Trust.
The Trusts and ING want to resolve the ING Claims.
In a Court-approved stipulation, the Trusts and ING agree that:
(1) The Fee Claim will be allowed for $362,778;
(2) The Allowed NPF VI Note Claim will be increased to
$927,618,898 to reflect the allowance of the Fee Claim;
(3) The Fee Claim will be allowed and distributed as if it was
an Allowed Avoidance Recovery Claim pursuant to the Plan;
and
(4) All of the Non-Contractual Note Claims of ING, other than
the allowed Fee Claim, are disallowed.
Headquartered in Dublin, Ohio, National Century Financial
Enterprises, Inc. -- http://www.ncfe.com/-- through the CSFB
Claims Trust, the Litigation Trust, the VI/XII Collateral Trust,
and the Unencumbered Assets Trust, is in the midst of liquidating
estate assets. The Company filed for Chapter 11 protection on
November 18, 2002 (Bankr. S.D. Ohio Case No. 02-65235). The Court
confirmed the Debtors' Fourth Amended Plan of Liquidation on
April 16, 2004. Paul E. Harner, Esq., at Jones Day, represents
the Debtors. (National Century Bankruptcy News, Issue No. 55;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
NATIONAL ENERGY: Mirant Says Maryland Action Violates Stay
----------------------------------------------------------
Mirant Americas Energy Marketing, LP's predecessor-in-interest,
Southern Company Energy Marketing, L.P., sold and delivered
natural gas under a Master Firm Purchase and Sale Agreement dated
as of February 1, 1998, with PG&E Energy Trading - Gas
Corporation, now known as, NEGT Energy Trading - Gas Corporation.
The Contract provided for the parties to net their payment
obligations resulting from gas transactions between them in a
given month. Thus, after all monthly trades were netted, the
party owing the greater aggregate amount was permitted to satisfy
its monthly payment obligations by paying the other party the net
amount.
Moreover, the Contract identified various "Triggering Events"
that gave a party the right to declare an "Early Termination
Date" for termination of the Contract and all outstanding
transactions under that agreement. In the event open
transactions between the parties were terminated, all of those
transactions were closed out and the net amounts due and owing
between the parties were determined.
Specifically, Section 4.1 of the Contract provides that, if an
Early Termination Date occurs, the Notifying Party will calculate
its damages, including its associated costs and attorney's fees,
resulting from the termination of the Transactions. The
Termination Payment will be determined by:
(i) comparing the value of (a) the remaining term, quantities
and prices under each Transaction had it not been
terminated to (b) the equivalent quantities and relevant
market prices for the remaining term either quoted by a
bona fide third party offer or which are reasonably
expected to be available in the market under a replacement
contract for the Transaction; and
(ii) ascertaining the associated costs and attorneys' fees.
To ascertain the market prices of a replacement contract the
Notifying Party may consider, among other valuations, and or all
of the settlement prices of NYMEX Gas futures contracts,
quotations from leading dealers in Gas swap contracts and other
bona fide third party offers, all adjusted for the length of the
remaining term and the basis differential.
ET Gas and certain of its affiliates are debtors in Chapter 11
proceedings pending before the U.S. Bankruptcy Court for the
District of Maryland. Judge Paul B. Mannes presides over the
cases.
Mirant and its certain of its affiliates are also debtors in
Chapter 11 proceedings pending before the U.S. Bankruptcy Court
for the Northern District of Texas. Judge Michael Lynn presides
over Mirant's cases.
Mirant's Termination of the Contract
Meredith Johnson Harbach, Esq., at Smyser, Kaplan & Veselka,
L.L.P., relates that MAEM and ET Gas provided each other with
collateral, including cash and letters of credit to ensure their
performance under the Contract. Additionally, the parties'
established the practice of making "margin calls," where the
parties were required to supplement collateral on demand, as
necessary, to secure the full extent of their exposure on the
open gas transactions.
By letter dated April 15, 2003, MAEM advised ET Gas that the
approximate amount of its total exposure to MAEM under the
Contract exceeded the amount of ET Gas's posted collateral by
approximately $300,000, and demanded that ET Gas supplement its
collateral to cover the deficiency.
Ms. Harbach relates that despite MAEM's demand, ET Gas failed to
post any additional collateral.
In April 2003, MAEM provided ET Gas with a second written notice,
advising ET Gas that the amount of its total exposure to MAEM
exceeded the amount of ET Gas' posted collateral -- now, by more
than $2.25 million -- and demanding ET Gas to supplement its
collateral to cover the deficiency.
Again, ET Gas failed to post the additional collateral.
MAEM subsequently provided ET Gas with written notice declaring
April 26, 2003, as the "Early Termination Date" for the Contract
and all related transactions, citing ET Gas' refusals to post
sufficient collateral as a "Triggering Event" under the Contract.
MAEM calculated the Termination Payment due under the Contract
and provided ET Gas with notice of the Termination Payment amount
and a demand for payment in May 2003. ET Gas disputed MAEM's
Termination Payment calculation and refused to make any payment
to MAEM.
At the time the Contract was terminated, ET Gas had posted
approximately $11 million in collateral to secure its obligations
under the Contract. After the collateral is applied, ET Gas' net
outstanding obligation to MAEM under the Contract, excluding
interest, costs and attorneys' fees, exceed $5,600,000.
Guarantee
Gas Transmission Northwest Corporation "unconditionally and
irrevocably guarantees" the "prompt payment when due of all
amounts payable" under the Contract. GTNC assumed the guaranty
obligation from PG&E Corporation. The Guarantee further provides
that GTNC is liable for "out-of-pocket expenses," including
reasonable attorney's fees and costs, incurred by MAEM in the
enforcement of its rights under the Guarantee.
Demand for Payment
In 2005, MAEM sent written notice to GTNC, demanding payment in
full of ET Gas' obligations under the Contract. GTNC has
refused, and continues to refuse, to pay the amount owed to MAEM.
Accordingly, MAEM alleges that GTNC breached the Guarantee by
failing to satisfy all of ET Gas' liabilities and obligations to
MAEM under the Contract. Accordingly, MAEM seeks a Court's order
awarding MAEM:
(a) all amounts due resulting from damages in excess of
$5,600,000, plus prejudgment interest, which continues to
accrue on all amounts due and unpaid; and
(b) attorney's fees and costs.
NEG's Complaint Against MAEM
On March 21, 2005, National Energy & Gas Transmission, Inc., NEGT
Energy Trading Holdings Corporation, NEGT Energy Trading - Power,
L.P., and ET Gas commenced an adversary proceeding against MAEM to
secure for their estates the fundamental debtor protections
afforded them by Section 362 of the Bankruptcy Code because their
rights under the automatic stay are being threatened by the GTNC
Litigation.
According to Paul M. Nussbaum, Esq., at Whiteford, Taylor &
Preston L.L.P., in Baltimore, Maryland, while the GTNC Litigation
is nominally proceeding only against a non-debtor, the actual
parties-in-interest are the NEG Debtors. The NEG Debtors'
involvement is based on GTNC's assumption of the Guaranty that
guaranteed ET Gas' obligation under the Contract.
Besides violating the automatic stay in their Chapter 11 cases,
the NEG Debtors argue that prosecution of the GTNC Litigation
will circumvent the Maryland Bankruptcy Court-mandated protocol
requiring MAEM to submit certain claims underlying the GTNC
Litigation to mediation.
Consequently, the NEG Debtors asked the Maryland Bankruptcy Court
to declare that the GTNC Litigation is:
(a) subject to the automatic stay pursuant to Sections
362(a)(1) and (a)(3); and
(b) precluded by the discharge provisions under NEG's
confirmed Plan of Reorganization under Section 1141(d)(1).
The NEG Debtors want the Maryland Bankruptcy Court to enjoin MAEM
from pursuing the GTNC Litigation.
Mirant Says Maryland Action Violates Stay
Mirant Corporation and its debtor-affiliates assert that the NEG
Debtors are in contempt for violating the automatic stay in
Mirant's Chapter 11 cases by commencing the Maryland Action.
Ms. Harbach informs Judge Lynn that the NEG Debtors and Mirant
were in ongoing discussions for several weeks to try to come to
an agreement as to how the substantive, claim amount issues could
be resolved. Specifically, the parties discussed submitting the
Termination Payment issues to mediation, and if unsuccessful, to
an arbitrator whose decision would be binding against:
-- MAEM in its Chapter 11 case;
-- the NEG Debtors in their Chapter 11 cases; and
-- GTNC in the GTNC Litigation.
Ms. Harbach states that the benefit of a procedural solution is
that it would be resolved through mediation or a single decision
maker would decide MAEM's claim against the NEG Debtors under the
Contract, including the resolution of GTNC's deficiency claim.
Moreover, the GTNC Litigation would be stayed and the Maryland
Action would be moot.
However, as part of the discussions, the NEG Debtors insisted
that MAEM agree to prospective relief from stay in the event it
is determined that the NEG Debtors have a claim against MAEM with
respect to return of amounts already applied by MAEM in
connection with the Contract. Ms. Harbach contends that the NEG
Debtors have not filed any proof of claim against MAEM on the
basis that MAEM owes money to the NEG Debtors relating to the
Contract. On further investigation of the facts -- and in the
process of trying to work through the details of a consensual
agreement -- MAEM could not agree to any prospective stay relief,
which would be tantamount to inviting an unfounded turnover
action against MAEM in Maryland as a surrogate for the NEG
Debtors' failure to file a proof of claim against MAEM.
Recognizing that no consensual agreement could be reached, and
with the April 27, 2005 hearing to consider the parties' dispute
looming, Mirant requested that the Maryland Action be dismissed
because it violates Section 362, or at a minimum, the April 27
hearing be continued. Counsel for the NEG Debtors refused,
thereby necessitating for Mirant to file the Contempt Motion.
Pursuant to Section 105(a) and Rule 9020 of the Federal Rules of
Bankruptcy Procedure, Mirant asks Judge Lynn to:
(i) find that the NEG Debtors are in civil contempt for
violating the automatic stay in Mirant's Chapter 11
cases;
(ii) find that the Maryland Action and any order related to
the adversary proceeding is void ab initio and
unenforceable against MAEM, or any of the Debtors, or
their estates; and
(iii) assess appropriate sanctions for the civil contempt.
Ms. Harbach states that it is the Texas Court, and not the NEG
Debtors, which will to determine the extent of the automatic stay
and whether a stay violation has occurred. Additionally, the
Maryland Action is clearly an attempt by the NEG Debtors to
exercise control over property of MAEM's Chapter 11 estate.
There can be no dispute that MAEM's cause of action against GTNC
constitutes property of MAEM's estate, because the filing of a
Chapter 11 petition creates an estate that encompasses "all legal
and equitable interests of the debtor in property as of the
commencement of the case," pursuant to Section 541(a).
Ms. Harbach contends that the NEG Debtors seek to exercise
control over the Cause of Action by enjoining the GTNC
Litigation, thereby delaying the lawful exercise of MAEM's rights
and remedies against GTNC -- a third-party guarantor that is not
in Chapter 11. The NEG Debtors appear determined to delay MAEM's
lawful exercise of its creditor rights and remedies against GTNC
under the Guarantee. The NEG Debtors' conduct prejudices not
only MAEM, but also its estate and its creditors.
Mirant expects the NEG Debtors to argue the merits of the
Maryland Action as an excuse for failing to comply with Section
362(d) and seek relief from stay to pursue the Maryland Action.
Ms. Harbach insists that no discussion should be had because the
underlying merits of the Maryland Action are irrelevant to the
Texas Court's determination of whether a stay violation occurred.
According to Ms. Harbach, the Court has the power to conduct
civil contempt proceedings and issue orders in accordance with
those proceedings pursuant to Section 105. Ms. Harbach notes
that in In re Freemyer Industrial Pressure, Inc., 281 B.R. 262,
266-67 (Bankr. N.D. Tex. 2002), the court held that "[a]n award
of sanctions against violators of the stay and receipt of those
sanctions for the benefit of a debtor acting in a fiduciary
capacity serve these ends and is fully consistent with the
Court's equity powers." In re Abercrombie, 156 B.R. 782, 783
(Bankr. N.D. Tex. 1993), teaches that the enforcement of the
automatic stay by contempt-type proceedings constitutes a core
matter over which the Texas Court has jurisdiction to enter a
final order.
Mirant asserts that there is no doubt that the NEG Debtors were
aware that MAEM was a Chapter 11 debtor when they filed the
Maryland Action. The NEG Debtors simply misunderstood the scope
of the automatic stay and the fact that it precludes the filing
of the Maryland Action.
About Mirant Corporation
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.
About PG&E National Energy Group
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas
Transmission, Inc.) develops, builds, owns and operates electric
generating and natural gas pipeline facilities and provides energy
trading, marketing and risk-management services. The Company and
its debtor-affiliates filed for Chapter 11 protection on July 8,
2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq.,
Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at
Willkie Farr & Gallagher, and Paul M. Nussbaum, Esq., and Martin
T. Fletcher, Esq., at Whiteford, Taylor & Preston L.L.P.,
represent the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$7,613,000,000 in assets and $9,062,000,000 in debts. NEGT
received bankruptcy court approval of its reorganization plan in
May 2004, and that plan took effect on Oct. 29, 2004. (Mirant
Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
PACIFIC SANDS: March 31 Balance Sheet Upside-Down by $85,476
------------------------------------------------------------
Pacific Sands, Inc. (OTC BB: PFSD) reported its financial results
for the third quarter of fiscal year 2005 ended March 31, 2005.
Revenues were up 387% over the third quarter of fiscal year 2004
and gross profits were up 220%. For the combined nine months
ending March 31, 2005, net sales were up 235% and gross profits up
146% from the same period the previous fiscal year.
"We're on the right path with revenue growth and an improving
balance sheet," Pacific Sands President and CEO commented. "Our
first two quarters since taking over management in mid-June of
2004 were spent largely laying the groundwork for new marketing
and sales initiatives and establishing a corporate and operations
structure to support those sales. The third quarter results
reflect the very first stages of the type of growth we have
planned for, worked for and expected."
CFO Michael Michie added, "Our third quarter 2005 sales were
within a few thousand dollars of total sales for the entire fiscal
year 2004."
About the Company
Pacific Sands, Inc. develops, manufactures and markets
environmentally safe, nontoxic cleaning and water treatment
solutions. Its Eco OneT and Rainforest BlueT pool and spa
treatment solutions are swiftly becoming standards in the
alternative chemical market.
At Mar. 31, 2005, Pacific Sands, Inc.'s balance sheet showed an
$85,476 stockholders' deficit, compared to a $94,305 deficit at
Jun. 30, 2004.
PEP BOYS: Reports $2.4 Million Net Loss for First Quarter
---------------------------------------------------------
The Pep Boys - Manny, Moe & Jack (NYSE:PBY), reported the
following results for the thirteen weeks ended April 30, 2005.
Operating Results
Sales for the thirteen weeks ended April 30, 2005 were
$564,226,000, 0.3% less than the $566,133,000 recorded last year.
Comparable merchandise sales increased 0.7% and comparable service
revenue decreased 4.6%. Recategorizing Sales to more accurately
reflect the two areas of automotive aftermarket in which the
Company competes, comparable Retail Sales (DIY and Commercial)
increased 1.0% and comparable Service Center Revenue (labor plus
installed merchandise and tires) decreased 2.1%.
Net Earnings from Continuing Operations decreased from Net
Earnings of $15,082,000 to a Net Loss of $2,386,000.
Pep Boys Chairman and CEO, Larry Stevenson, commented, "As I have
repeatedly cautioned investors, the near term results of our
turnaround will continue to be uneven. While Pep Boys has a very
exciting future ahead, achieving fundamental and sustainable
performance improvements will take time. On the Retail side, we
continue to refine our product mix, pricing and promotional
programs to achieve the most appropriate balance between retail
sales growth and profitability. As we continue to work against
our Service Center improvement initiatives, we expect our
financial results to begin to reflect the benefits of these
initiatives during the second half of the year."
He continued, "We are excited about our store refurbishment
program, which has yielded very positive customer response and
incremental sales in the markets that we have renovated to date.
During the first quarter, we grand re-opened 76 stores in our
largest market, Los Angeles. Our second largest market,
Philadelphia, is scheduled to re-grand open in June, with Chicago
to follow in July."
CFO Harry Yanowitz said, "While business conditions remain
difficult, we are working to return our product margins to
historic rates and carefully adjusting elements of our SG&A costs
to more closely fit our current revenues. Our retail comparisons
will continue to be a challenge in the second quarter given last
year's strong results, but the service comparisons will ease
slightly. While we remain concerned about gas prices and product
cost increases, particularly with their effect on our lower-income
customer base, the Pep Boys team is focused on delivering long-
term operating improvement."
About the Company
Pep Boys -- http://www.pepboys.com/-- has 593 stores and more
than 6,000 service bays in 36 states and Puerto Rico. Along with
its vehicle repair and maintenance capabilities, the Company also
serves the commercial auto parts delivery market and is one of the
leading sellers of replacement tires in the United States.
* * *
As reported in the Troubled Company Reporter on Dec. 1, 2004,
Moody's Investors Service assigned a B3 rating to The Pep Boys --
Manny, Moe and Jack's $150 million of senior subordinated notes
due 2014, the proceeds of which will be used to replace existing
indebtedness, and affirmed the existing ratings. Moody's said the
ratings outlook is positive.
PEP BOYS: Weak Results Prompt S&P to Watch Ratings
--------------------------------------------------
Standard & Poor's Ratings Services placed its long-term ratings on
Pep Boys-Manny, Moe & Jack on CreditWatch with negative
implications, including the 'BB-' corporate credit rating.
"This action follows news of the company's poor first-quarter 2005
operating results and deteriorating cash flow protection
measures," said Standard & Poor's credit analyst Diane Shand.
The quarter was negatively impacted by:
(1) the company's store refurbishing program;
(2) changes in field management and supervision of service and
retail managers;
(3) increased spending on training and advertising;
(4) poor consumer response to its branded tire program; and
(5) problems implementing a new point-of-sale system.
It was the fourth consecutive quarter of declining earnings and
cash flow.
Standard & Poor's is increasingly concerned that the Philadelphia,
Pennsylvania-based auto parts retailing and servicing company will
continue to be challenged by business disruptions related to its
store refurbishing and remerchandising program and that it may
face further difficulties at its services operations. Cash flow
protection measures are weak for the rating category, with EBITDA
coverage of interest at 2.3x, while leverage has increased to
4.6x.
Standard & Poor's will meet with Pep Boys' management to discuss
plans for improving sales and margins in their businesses, and to
assess the impact on future credit protection measures.
POLARIS NETWORKS: Case Summary & 19 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Polaris Networks, Inc.
6810 San Teresa Boulevard
San Jose, California 95119
Bankruptcy Case No.: 05-52927
Type of Business: The Debtor is a maker of optical switches.
See: http://www.polarisnetworks.com/
Chapter 11 Petition Date: May 13, 2005
Court: Northern District of California (San Jose)
Judge: Marilyn Morgan
Debtor's Counsel: Anne E. Wells, Esq.
Levene, Neale, Bender, Rankin and Brill
1801 Avenue of the Stars #1120
Los Angeles, California 90067
Tel: (310)-229-1234
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 19 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Redpoint Ventures I, LP Venture capital $2,406,518
John Walecka
3000 Sand Hill Road
Bldg. 2, Suite 290
Menlo Park, CA 94025
Venrock Associates III, LP Venture capital $1,976,146
Tony Sun
Ste 200, 2494 Sand Hill Rd
Menlo Park, CA 94025
Advanced Technology Venture capital $1,137,060
Ventures VII, LP
Jack Harrington
485 Ramona Street
Palo Alto, CA 94301
Storm Ventures Fund II,LLC Venture capital $750,356
Tae Hea Nahm
250 Cambridge Avenue, #200
Palo Alto, CA 94306
CommVest Venture capital $670,000
20 Willima Street, G15
Wellesley Hills, MA 02481
Venrock Associates Venture capital $443,829
Tony Sun
Ste 200, 2494 Sand Hill Rd.
Menlo Park, CA 94025
Riverside Holdings II, LP Venture capital $287,707
Chris Wood
335 Madison Avenue, 16th Fl
New York, NY 10017
Richard M. Moley Venture capital $272,565
Dick Moley
PO Box 4316
Carmel, CA 93921
Oak International, LLC Venture capital $181,710
Presidio Venture Partners, Venture capital $151,425
LLC
Firsthand Technology Venture capital $151,424
Value Fund
KTBnetwork Co., Ltd. Venture capital $151,405
Granite Global Ventures Venture capital $148,881
Chens, LLC Venture capital $121,140
Oriens LLC Venture capital $105,997
WK Technology Fund Venture capital $90,855
WK Technology Fund IV Venture capital $77,227
Venture Lending & Leasing Venture capital $75,712
III LLC
FuYu Venture Capital Venture capital $75,712
Investment Corp.
QUIGLEY COMPANY: Court OKs Settlement Agreement With Federal-Mogul
------------------------------------------------------------------
The Honorable Prudence Carter Beatty of the U.S. Bankruptcy Court
for the Southern District of New York approved the settlement
agreement signed by the Center for Claims Resolution, Inc., its
members, and Federal-Mogul Corporation and its debtor-affiliates.
Under the agreement, Quigley, a former member of the CCR, will be
the beneficiary of a portion of the $29 million Settlement Amount.
Quigley's share of the Settlement Amount will be determined after
the CCR and the CCR Members complete proceedings and negotiations
in other chapter 11 cases.
CCR-Led Asbestos Claims Settlement
The CCR, a non-profit organization set up to administer and
resolve asbestos related claims, executed a series of settlements
prior to the start of Federal-Mogul's chapter 11 proceedings on
October 1, 2000. All CCR member-companies, including Quigley and
Federal Mogul, are required to pay their proportional share of
these settlements to fund payments made to the claimants.
Federal-Mogul, in the midst of its reorganization, was unable to
contribute its share of these settlements thus forcing the
claimants to assert their claims against the other CCR members to
recover the unfunded portion attributable to the Federal-Mogul
debtors.
Surety Bonds
In an attempt to recoup its expenses, the CCR moved to draw on
three surety bonds, with a combined value of $225 million, set up
by the Federal-Mogul debtors to support their obligations under
CCR settlements. The CCR has made demands for:
-- $31,202,604 on October 2001; and
-- $151,449,854 on December 2001.
The Agreement
Federal-Mogul presented in March this year its agreement with the
CCR providing for the payment of the settlement amount to resolve
an estimated $183 million in liabilities stemming from the
asbestos injury claims. This payment will be made to the CCR and
its members as reimbursement for settlements made in behalf of the
Federal-Mogul debtors.
With the approval of the agreement on April 20, 2005, the Federal-
Mogul debtors will pay a guaranteed amount of $29 million in
exchange for its release from further litigation. The payment
will be shouldered by the sureties in this ratio:
Safeco Insurance Co. of America - 30%
Travelers Casualty and Surety Co. of America - 40%
National Fire Insurance Co. of Hartford &
Continental Casualty Co. - 30%
The agreement also provides for the dismissal of the Avoidance
Actions filed by the Federal-Mogul debtors against the CCR and its
members in the amount of $29.8 million.
About Quigley Company
Headquartered in Manhattan, Quigley Company is a subsidiary of
Pfizer, Inc., which used to produce and market a broad range of
refractories and related products to customers in the iron, steel,
glass and other industries. The Company filed for chapter 11
protection on Sept. 3, 2004 (Bankr. S.D.N.Y. Case No. 04-15739) to
resolve legacy asbestos-related liability. When the Debtor filed
for protection from its creditors, it listed $155,187,000 in total
assets and $141,933,000 in total debts. Michael L. Cook, Esq., at
Schulte Roth & Zabel LLP, represents the Company in its
restructuring efforts. Albert Togut, Esq., at Togut Segal &
Segal, serves as the futures representative.
About Federal-Mogul
Headquartered in Southfield, Michigan, Federal-Mogul Corporation -
- http://www.federal-mogul.com/-- is one of the world's largest
automotive parts companies with worldwide revenue of some $6
billion. The Company filed for chapter 11 protection on October
1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq.,
James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin
Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang,
Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from their creditors, they listed US$10.15 billion in
assets and $8.86 billion in liabilities. At Dec. 31, 2004,
Federal-Mogul's balance sheet showed a $1.925 billion
stockholders' deficit. At Mar. 31, 2005, Federal-Mogul's balance
sheet showed a $2.048 billion stockholders' deficit, compared to a
$1.926 billion deficit at Dec. 31, 2004.
RCN CORP: Appoints Michael Sicoli as EVP & Chief Financial Officer
------------------------------------------------------------------
RCN Corporation (NASDAQ: RCNI) reported that Michael T. Sicoli,
34, has joined the company as Executive Vice President and Chief
Financial Officer. Mr. Sicoli comes to RCN from Nextel
Communications, Inc. (NASDAQ: NXTL) where he held the position of
Vice President and Assistant Treasurer. Patrick Hogan, who has
served as RCN's CFO since 2004, has been appointed Executive Vice
President-Corporate. Both Mr. Sicoli and Mr. Hogan will report to
Peter Aquino, RCN's President and CEO.
James Mooney, Chairman of RCN's board of directors, stated "We are
extremely pleased to have Mike join our executive management team.
His experience and expertise are a perfect fit for the new, re-
vitalized RCN and his financial leadership is a valuable asset to
our organization."
Peter Aquino, President and Chief Executive Officer of RCN,
stated, "We hold Mike Sicoli's accomplishments at Nextel in very
high regard. He has played a critical role in planning and
managing corporate financial activities and public company
reporting for Nextel. We look forward to having him guide RCN to
future financial success. I want to thank Pat Hogan for the
pivotal role he played during the restructuring and am very
pleased that he has agreed to stay on and assist me in his new
role."
Prior to joining RCN, Mr. Sicoli spent over seven years at Nextel
Communications, Inc., where he held a number of positions of
increasing authority within the company's finance organization,
including his most recent position of Vice President & Assistant
Treasurer, which he has held since 2002. Prior to joining Nextel,
he worked for both Deloitte Consulting and Accenture in
Washington, D.C.
Mr. Sicoli holds an M.B.A. from The University of Virginia, Darden
Graduate School of Business Administration, and a B.A. in
Economics from The College of William and Mary.
Headquartered in Princeton, New Jersey, RCN Corporation --
http://www.rcn.com/-- provides bundled Telecommunications
services. The Company, along with its affiliates, filed for
chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on
May 27, 2004. The Debtors' confirmed chapter 11 Plan took effect
on December 21, 2004. Frederick D. Morris, Esq., and Jay M.
Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent
the Debtors in their restructuring efforts. When the Debtors
filed for protection from their creditors, they listed
$1,486,782,000 in assets and $1,820,323,000 in liabilities.
The Debtor consummated its plan of reorganization and formally
emerged from Chapter 11 protection. The plan, confirmed on
Dec. 8, 2004, by Judge Robert Drain of the Bankruptcy Court in New
York, converted approximately $1.2 billion in unsecured
obligations into 100% of RCN's new equity, and eliminated
approximately $1.8 billion in preferred share obligations.
REDDY ICE: Extends 8-7/8% Sr. Sub. Debt Tender Offer Until June 3
-----------------------------------------------------------------
Reddy Ice Group, Inc., is extending the Expiration Date to its
previously announced tender offer and consent solicitation for its
outstanding 8-7/8% senior subordinated notes due 2011 to 5:00
p.m., New York City time, on June 3, 2005, unless further extended
or terminated. Reddy Ice will pay the consent payment to all
holders of the Notes who validly tender their Notes prior to 5:00
p.m., New York City time, on June 3, 2005, the new Expiration
Date.
As of 5:00 p.m., New York City time, on May 12, 2005, tenders and
consents had been received with respect to approximately 99.9% of
the outstanding principal amount of the Notes. The consent
condition has been satisfied with respect to the Notes. The
Consent Date was 5:00 p.m., New York City time, on April 12, 2005,
and any Notes that were tendered prior to, or that are tendered
after, the Consent Date may not be withdrawn and the related
consents may not be revoked.
Reddy Ice said that assuming a Payment Date of June 6, 2005, the
first business day after the new Expiration Date, the Total
Consideration for each $1,000 principal amount of Notes validly
tendered and not validly withdrawn prior to the Expiration Date is
$1,118.60. In addition, each tendering holder of Notes will be
paid accrued and unpaid interest from the last interest payment
date up to, but not including, the Payment Date. The Total
Consideration was determined based on the formula set forth in the
Offer to Purchase with a Price Determination Date of
April 13, 2005. The Total Consideration may be higher or lower,
based on this formula, depending on the actual Payment Date.
The Notes are being tendered pursuant to Reddy Ice's Offer to
Purchase and Consent Solicitation Statement dated March 22, 2005,
as amended by the Supplement and Amendment to the Offer to
Purchase and Consent Solicitation Statement, dated April 5, 2005,
which more fully sets forth the terms and conditions of the cash
tender offer to purchase any and all of the outstanding principal
amount of the Notes as well as the consent solicitation to
eliminate substantially all of the restrictive covenants and
certain events of default contained in the Indenture.
The tender offer and consent solicitation are subject to the
satisfaction of certain additional conditions, including Reddy Ice
having available funds sufficient to pay the aggregate Total
Consideration from the anticipated proceeds of a new senior credit
facility and from an offering of equity by Reddy Ice Holdings,
Inc. in connection with the initial public offering of its common
stock. In the event that the tender offer and consent
solicitation are withdrawn or otherwise not completed, the Total
Consideration, including the consent payment, will not be paid or
become payable to holders of the Notes who have tendered their
Notes and delivered consents.
Credit Suisse First Boston LLC is the sole Dealer Manager and
Solicitation Agent for the tender offer and consent solicitation.
Questions regarding the tender offer and consent solicitation may
be directed to Credit Suisse First Boston LLC, Liability
Management Group, at (800) 820-1653 (US toll-free) and (212) 538-
0652 (collect). Copies of the Offer to Purchase and Consent
Solicitation Statement and related documents may be obtained from
the Information Agent for the tender offer and consent
solicitation, Morrow & Co., Inc., at (800) 654-2468 (US toll-free)
and (212) 754-8000 (collect).
Headquartered in Dallas, Texas, Reddy Ice Holdings, Inc., and its
subsidiaries manufacture and distribute packaged ice in the United
States serving approximately 82,000 customer locations in
32 states and the District of Columbia under the Reddy Ice brand
name. The company is the largest of its kind in the United
States. Typical end markets include supermarkets, mass merchants,
and convenience stores. For the last twelve months ended
June 30, 2004, consolidated revenue was approximately
$260 million.
* * *
Reddy Ice Group's 8-7/8% senior subordinated notes due Aug. 11,
2011, carry Moody's B3 rating and Standard & Poor's B- rating.
ROYAL GROUP: Names Lawrence Blanford as Chief Executive Officer
---------------------------------------------------------------
Royal Group Technologies Limited's (RYG.SV-TSX; RYG-NYSE) Board of
Directors selected Lawrence J. Blanford as the company's new
President and Chief Executive Officer. He will formally assume
the position on May 30, 2005.
Mr. Blanford joins Royal Group with solid experience as a senior
executive of leading corporations. Most recently, he held the
position of President and Chief Executive Officer of Philips
Consumer Electronics North America, where he was responsible for
sales of approximately $US 2 billion. During Mr. Blanford's
tenure with Philips North America, he instilled a strong strategic
and operational planning discipline, which helped drive profitable
sales growth.
Previous to Philips, he held positions that included President of
Maytag Appliances, President of Maytag International and Vice
President of Marketing and National Account Sales for the Building
Insulation Division of Johns Manville. Mr. Blanford holds a
degree in Chemical Engineering from the University of Cincinnati
and an MBA from Xavier University in Cincinnati.
"Larry is an outstanding team builder and an accomplished senior
executive, who we believe can drive Royal Group's return to a
position of prominence", commented Robert Lamoureux, Royal Group's
Lead Director. Mr. Blanford is recognized for his successful
positioning and strengthening of both the Philips and Maytag
brands in North America. Royal will appoint Mr. Blanford as a
director at a board meeting immediately following its upcoming
annual meeting on May 25, 2005.
James Sardo, who has been Royal Group's Interim President and CEO
since November 29, 2004, will work with Mr. Blanford during a
transition period, introducing him to a series of improvement and
planning initiatives that have commenced.
About the Company
Royal Group Technologies Limited -- http://www.royalgrouptech.com/
-- is a manufacturer of innovative, polymer-based home
improvement, consumer and construction products. The company has
extensive vertical integration, with operations dedicated to
provision of materials, machinery, tooling, real estate and
transportation services to its plants producing finished products.
Royal Group's manufacturing facilities are primarily located
throughout North America, with international operations in South
America, Europe and Asia.
* * *
As reported in the Troubled Company Reporter on May 11, 2005,
Standard & Poor's Ratings Services lowered its long-term corporate
credit and senior unsecured debt ratings on Royal Group
Technologies Ltd. to 'BB' from 'BBB-'. At the same time, Standard
& Poor's removed its ratings on Royal Group from CreditWatch,
where they were placed with negative implications Oct. 15, 2004.
The outlook is currently negative.
The ratings reflect a transitioning management team, and short-
term problems such as weak liquidity, weak internal controls, and
near-term refinancing requirements. The ratings also reflect
longer-term issues such as weakening profitability and a low
return on capital. These risks are partially offset by the
company's adequate annualized cash flow protection and moderate
leverage.
"Although the moderate debt leverage, steady free cash flow
generation, and an underlying solid business profile have
supported the ratings through a very difficult year, we now
believe that the distractions caused by the criminal
investigations and governance problems have resulted in (and
exposed) both short- and long-term problems," said Standard &
Poor's credit analyst Daniel Parker. "Accordingly, the overall
business and financial profile do not currently support an
investment-grade rating," added Mr. Parker.
Despite significant improvement with regards to corporate
governance, the company is still in transition as it seeks to hire
a permanent chief executive officer and chief financial officer.
The company has also proposed five new independent candidates to
join the board following its annual general meeting. S&P believes
it will take at least several quarters before new management and
the board decide on any major strategic decisions, and before new
management would be able to learn the business. The company has
multiple business lines and requires a continued focus on
efficiencies and operations to maintain its competitive position.
In addition, the required initiatives to address the short-term
issues could take at least several quarters.
The outlook is negative. If the company does not address its weak
liquidity and inefficient debt structure in the next eight months,
the ratings could be lowered further. The current ratings can
tolerate weak profitability and cash flow in the medium term, but
only under the assumption that financial performance trends will
not further deteriorate.
Standard & Poor's believes profitability will be hampered by:
(1) high resin prices,
(2) a strong Canadian dollar, and
(3) the potentially negative effects of rising interest rates
on the housing and home renovation markets
SALS B: Fitch Rates $9 Million Floating-Rate Notes at BB
--------------------------------------------------------
Fitch Ratings assigns a 'BB' rating to SALS B 2005-1 $9,000,000
floating-rate notes due 2012. UBS AG issues credit-linked notes
providing investors leveraged access to the credit risk of a
static portfolio of 100 investment-grade credit default swaps.
There is a first loss component providing investors credit
enhancement. This trade has a scheduled maturity date of June 20,
2012. The rating of the notes addresses the likelihood that
investors will receive full and timely payments of interest and
ultimate receipt of principal by the scheduled maturity date.
The ratings are based upon the credit quality of the reference
portfolio, the financial strength of UBS AG (rated 'F1+/AA+' by
Fitch), and the level of credit enhancement.
Fitch will monitor the performance of this transaction. Deal
information and historical data on SALS B 2005-1 is available on
the Fitch Ratings Web site at http://www.fitchratings.com/
SBARRO INC: Improved Cash Flow Cues S&P to Lift Ratings to CCC+
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit and
senior unsecured debt ratings on Sbarro Inc. to 'CCC+' from 'CCC.'
The outlook is positive.
"The upgrade reflects the company's improving cash flow generation
and credit metrics over the past year," said Standard & Poor's
credit analyst Kristi Broderick.
The ratings on Melville, New York-based Sbarro reflect the risks
associated with operating in the highly competitive restaurant
industry, the company's vulnerability to mall traffic and
seasonality, a highly leveraged capital structure, and limited
liquidity.
Through 927 units (511 owned, 416 franchised) Sbarro offers a
variety of Italian specialty foods in a cafeteria-style format.
However, most of the company's direct competitors are in the
highly competitive pizza segment because pizza by the slice
represents about 50% of revenues. The company is also vulnerable
to mall traffic because about 70% of its units are located in food
courts within shopping malls. This results in a heavy reliance on
the fourth-quarter holiday season when there is increased volume
in shopping malls. Over half of the Sbarro's annual EBITDA is
generated in the fourth quarter.
Operating performance was particularly weak in 2002 and 2003,
driven by:
(1) a reduction in shopping mall traffic,
(2) negative comparable-store sales, and
(3) a subsequent loss of leverage in its cost structure.
However, performance was better in 2004 as mall traffic increased
and comparable-store sales turned positive, increasing 5.2% after
falling 3.4% in 2003. Similarly, system-wide sales were up in 2004
for the first time in several years. Menu price increases,
improved store management, and better cost controls drove modest
gains in operating margins, despite higher cheese costs.
SEARS ROEBUCK: Offering to Purchase 7% & 7-4/10% Notes in Cash
--------------------------------------------------------------
Sears Roebuck Acceptance Corp., a direct wholly owned finance
subsidiary of Sears, Roebuck and Co. and an indirect wholly owned
subsidiary of Sears Holdings Corporation (Nasdaq: SHLD), commenced
tender offers to purchase for cash any and all of its outstanding:
-- 7% Notes due 2042 (NYSE: SRL) at a fixed price of $25.65 per
$25 principal amount of the 7% Notes; and
-- 7.40% Notes due 2043 (NYSE: SRL) at a fixed price of $25.75
per $25 principal amount of the 7.40% Notes.
These fixed prices include all accrued and unpaid interest; no
additional interest will be paid on the tendered Notes. The 7%
Notes have an aggregate principal amount outstanding of
approximately $111 million, and the 7.40% Notes have an aggregate
principal amount outstanding of approximately $94 million.
The Offers are made upon the terms and subject to the conditions
set forth in the Offer to Purchase dated May 13, 2005 and related
documents. Each Offer will expire at 5:00 p.m. New York City time
on Monday, June 13, 2005 unless earlier extended or terminated.
Settlement is expected to occur within three business days of the
acceptance of Notes tendered into the Offer. Each of the Offers
is independent of and not conditioned upon the other Offer. Each
Offer may be amended, extended or terminated individually. The
Offers are not conditioned on any minimum amount of Notes being
tendered.
Merrill Lynch & Co. will act as dealer manager and Global
Bondholder Services Corporation will act as information agent and
depositary for the Offers. If a holder of the 7% Notes or 7.4%
Notes desires to tender those securities pursuant to the Offers,
the holder may do so by following the instructions in the offering
documents.
NYSE Delisting
SRAC disclosed earlier last week that it had filed an application
to voluntarily delist all of its debt securities that are
currently listed on the New York Stock Exchange and deregister
these securities with the Securities and Exchange Commission. The
securities to be delisted and deregistered are the 7% Notes and
7.40% Notes and SRAC's 6.75% Notes due September 2005 (NYSE:
SRAC05). SRAC expects the delisting to be effective in the
beginning of June 2005. Upon delisting of these debt securities,
SRAC expects the suspension of its reporting obligations, and the
related reporting obligations with respect to the guarantor of the
debt, Sears, Roebuck and Co., under the federal securities laws to
occur as soon as practicable following the delisting and prior to
the expiration of the Offers.
About Sears Holdings Corporation
Sears Holdings Corporation -- http://www.searsholdings.com/-- is
the nation's third largest broadline retailer, with approximately
$55 billion in annual revenues, and with approximately 3,800 full-
line and specialty retail stores in the United States and Canada.
Sears Holdings is the leading home appliance retailer as well as a
leader in tools, lawn and garden, home electronics and automotive
repair and maintenance. Key proprietary brands include Kenmore,
Craftsman and DieHard, and a broad apparel offering, including
such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer,
as well as the Apostrophe and Covington brands. It also has
Martha Stewart Everyday products, which are offered exclusively in
the U.S. by Kmart and in Canada by Sears Canada. The company is
the nation's largest provider of home services, with more than 14
million service calls made annually.
About Sears, Roebuck and Co.
Sears, Roebuck and Co., -- http://www.sears.com/-- a wholly owned
subsidiary of Sears Holdings Corporation (Nasdaq: SHLD), is a
leading broadline retailer providing merchandise and related
services. Sears, Roebuck offers its wide range of home
merchandise, apparel and automotive products and services through
more than 2,400 Sears-branded and affiliated stores in the United
States and Canada, which includes approximately 870 full-line and
1,100 specialty stores in the U.S. Sears, Roebuck also offers a
variety of merchandise and services through --
http://www.sears.com/-- , -- http://www.landsend.com/--, and
specialty catalogs. Sears, Roebuck offers consumers leading
proprietary brands including Kenmore, Craftsman, DieHard and
Lands' End -- among the most trusted and preferred brands in the
U.S. The company is the nation's largest provider of home
services, with more than 14 million service calls made annually.
About Sears Roebuck Acceptance Corp.
SRAC is a wholly owned finance subsidiary of Sears, Roebuck and
Co. It raises funds through the issuance of unsecured commercial
paper and long-term debt, which includes medium-term notes and
discrete underwritten debt. SRAC continues to support 100% of its
outstanding commercial paper through its investment portfolio and
committed credit facilities.
* * *
As reported in the Troubled Company Reporter on March 31, 2005,
Moody's Investors Service downgraded the guaranteed senior
unsecured debt rating of Sears Roebuck Acceptance Corp. to Ba1
from Baa2, as well its commercial paper rating to Not Prime from
Prime 2, and affirmed the Ba1 senior implied rating of Sears
Holding Corporation. The rating outlook is stable.
Ratings downgraded:
Sears, Roebuck and Co.
* Senior unsecured shelf to (P) Ba1 from (P) Baa2;
* Preferred shelf to (P) Ba3 from (P) Ba1.
Sears Roebuck Acceptance Corp.
* Senior unsecured debt to Ba1 from Baa2;
* Senior unsecured MTN to Ba1 from Baa2;
* Subordinated MTN to Ba2 from Baa3;
* Senior unsecured shelf to (P) Ba1 from (P) Baa2;
* Subordinate shelf to (P) Ba2 from (P) Baa3; and
* Commercial paper rating to Not Prime from Prime-2.
Sears DC Corp.
* Medium term notes to Ba1 from Baa2.
Ratings assigned:
Sears Holdings Corporation
* Senior implied rating at Ba1;
* Senior unsecured issuer rating at Ba1; and
* $4 billion senior secured revolving credit facility
at Baa3.
Ratings lowered and will be withdrawn:
Sears, Roebuck and Co.
* Long term issuer rating of Baa2 to Ba1 and will be
withdrawn.
Sears Roebuck Acceptance Corp.
* Long term issuer rating of Baa2 to Ba1 and will be
withdrawn.
SPIEGEL INC: Has Until June 30 to Decide on Leases
--------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
extended the deadline by which Spiegel, Inc., and its debtor-
affiliates must assume or reject all of their unexpired non-
residential real property leases through and including June 30,
2005, to ensure that the deadline does not occur prior to the
Effective Date.
As reported in the Troubled Company Reporter on Apr. 22, 2005,
throughout the course of their Chapter 11 cases, Spiegel, Inc.,
and its debtor-affiliates have engaged in an exhaustive financial
review of all their retail stores and approximately 600 non-
residential real property leases. As this process has continued,
the Debtors have timely closed under performing retail locations,
and either rejected the applicable lease or entered into a
termination agreement with the landlord.
Andrew V. Tenzer, Esq., at Shearman & Sterling LLP, in New York,
relates that the Debtors' consistent focus on rationalizing their
non-residential real property leases demonstrates their
commitment towards maximizing creditor recoveries.
In early 2004, the Debtors conducted store closing sales at
29 Eddie Bauer stores. Moreover, in accordance with the Home
Store Closing Program, Eddie Bauer, Inc., anticipates disposing
of approximately 34 additional leases by either negotiating
favorable modifications to or termination of Home Store Leases
and, where necessary, rejecting them.
Mr. Tenzer tells Judge Lifland that the Debtors have also taken
significant steps to rationalize their use of leased office
space. The Debtors closed their call centers located in Bothell,
Washington, and Rapid City, South Dakota. In addition, Spiegel,
Inc., rejected its headquarters' office lease and entered into a
new postpetition lease that resulted in substantial savings to
the Debtors' estates. On December 15, 2004, the Court authorized
the Debtors to enter into a lease satisfaction agreement
satisfying the remaining obligations under the new lease and
authorizing it to enter into a second postpetition lease for
substantially less space at its headquarters office and at
minimal cost.
The Debtors anticipate that their Plan of Reorganization will
become effective on June 6, 2005, provided that it gets confirmed
on time.
Mr. Tenzer assures the Court that the extension will not
prejudice any of the landlords under the Leases as, pursuant to
the terms of the Plan, they will know the Debtors' intention with
respect to the Leases no later than three days prior to the
Confirmation Hearing.
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. 44;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
SYRATECH CORP: Bankruptcy Court Approves Reorganization Plan
------------------------------------------------------------
The United States Bankruptcy Court for the District of
Massachusetts approved Syratech Corp.'s plan of reorganization,
which will become effective in approximately two weeks. At that
point, the company's financial restructuring will be complete,
with approximately 90% of the reorganized company's equity in the
hands of unsecured noteholders and 10% reserved for management.
The company's trade creditors have been or will be paid the full
amount of their claims. The ruling was made on May 12, 2005.
The company will exit Chapter 11 with a new $45 million senior
credit facility from CapitalSource Finance LLC. CapitalSource
also provided the company with debtor-in-possession financing
pursuant to various orders entered by the Bankruptcy Court.
As previously announced, Syratech entered into a voluntary Chapter
11 bankruptcy filing on February 16, 2005, to facilitate the
recapitalization of the company and provide increased financial
flexibility in its ongoing operations.
"The successful completion of our financial restructuring has now
been achieved," said Gregory Hunt, CFO of Syratech, "and the
company expects to emerge from its proceedings on or before
May 23, 2005." He added, "At the outset of this process, in
February, we told our creditors, trade vendors and employees that
Syratech was a vital company with great products and strong market
positions. What was broken was our financial structure. This
recapitalization successfully addresses that issue and puts it
behind us."
Headquartered in Boston, Massachusetts, Syratech Corporation --
http://www.syratech.com/-- manufactures, markets, imports and
sells tabletop giftware and home decor products. The Debtor,
along with its affiliates, filed for chapter 11 protection on
Feb. 16, 2005 (Bankr. D. Mass. Case No. 05-11062). Andrew M.
Troop, Esq. Arthur R. Cormier, Jr., Esq., Christopher R. Mirick,
Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their
restructuring efforts. When the Debtors filed for protection
from their creditors, they listed $86,845,512 in total assets and
$251,387,015 in total debts.
TEKNI-PLEX: Gets $19 Million Equity Financing from Investors
------------------------------------------------------------
Tekni-Plex, Inc., obtained approximately $19 million in equity
financing from its existing investors. It has also received a
commitment from existing investors to contribute an additional
$11 million of equity financing.
As previously reported, the Company has received a signed
agreement from lenders under its credit facility to extend until
June 10, 2005, the waiver on the Company's previously reported
failure to comply with certain of the covenants set forth in the
Company's credit facility. The waiver was conditional upon a
minimum of $18 million of additional equity financing that is
Qualified Additional Equity as defined under the credit agreement.
With the equity financing obtained by the Company today, the
waiver agreement has become effective
Tekni-Plex is based in Coppell, Texas. The Company's balance
sheet dated Dec. 31, 2004, shows $728 million in assets and a
$114 million shareholder deficit.
* * *
As previously reported in the Troubled Company Reporter, as of
December 31, 2004, the Company was in violation of the minimum
fixed charge coverage ratio covenant and the minimum consolidated
EBITDA covenant contained in the Company's credit agreement.
J.P. Morgan serves as the agent for the lenders.
As additionally reported in the Troubled Company Reporter on
Feb. 21, 2005, Standard & Poor's Ratings Services lowered its
corporate credit rating on Tekni-Plex, Inc., to 'CCC+' from 'B-',
and placed the rating on CreditWatch with negative implications.
Other ratings were also lowered and placed on CreditWatch with
negative implications. This action by S&P followed the company's
disappointing operating results for the second quarter of fiscal
2005, strained liquidity, and violation of financial covenants
under its credit agreement for the period ended Dec. 31, 2004.
"The CreditWatch placement reflects heightened concerns regarding
the company's ability to preserve access to its credit facility,
its strained liquidity given its upcoming interest payments, and
deterioration in the company's already stretched and highly
leveraged financial profile," said Standard & Poor's credit
analyst Liley Mehta.
TERRA INDUSTRIES: Fitch Upgrades Credit Ratings on Three Debts
--------------------------------------------------------------
Fitch Ratings has upgraded the credit ratings on Terra Industries
Inc. The Rating Outlook is Positive.
These ratings are:
-- Senior secured credit facilities to 'BB' from 'BB-';
-- 12.875% senior secured notes to 'BB' from 'BB-';
-- 11.5% second priority senior secured notes to 'B+' from
'B';
-- Convertible preferred shares to 'B-' from 'CCC+'.
The rating upgrades are primarily supported by completed and
pending debt reduction. The ratings also assume that book debt
will remain near $331 million in the near-term. The ratings
continue to be supported by Terra's cyclical earnings, high
natural gas cost exposure, low business portfolio diversity, and
leading positions in the domestic fertilizer market.
Terra repaid $50 million of the $125 million Mississippi Chemical
Corp. term loan in March 2005. Moreover, the company has
announced its intention to repay the remaining $75 million of that
term loan in June 2005. These actions would bring Terra's book
debt level to $331 million, constituting 12.875% senior secured
notes and 11.5% second priority senior secured notes. Fitch
anticipates that book debt will remain near this $331 million
level until 2007-2008 when the 12.875% notes mature and the cost
to redeem the 11.5% notes becomes more attractive.
The Positive Rating Outlook indicates that additional ratings
movement is possible as the contribution of MCC earnings over time
is more visible, a manageable debt level is maintained and high
interest debt is paid off or refinanced, and future business
portfolio changes improve the earnings level and/or reduce
earnings volatility.
Terra Industries, based in Sioux City, Iowa, is a major North
American producer of anhydrous ammonia, UAN solutions, and urea
and a leading producer of ammonium nitrate in the U.S. and the
U.K. For the trailing 12-month period ended March 31, 2005, Terra
had revenue of $1.6 billion, EBITDA of approximately $222.9
million, and total balance sheet debt of $394.5 million.
TOWER AUTOMOTIVE: Visteon Wants Stay Lifted to Effect Set-Off
-------------------------------------------------------------
Before the Petition Date, Visteon Corporation provided component
parts to Tower Automotive Inc. and its debtor-affiliates for which
Visteon remains unpaid. According to Dawn R. Copley, Esq., at
Dickinson Wright PLLC, in Ann Arbor, Michigan, the Debtors owe
Visteon $4,620,020 for the component parts.
The Debtors also provided component parts to Visteon prepetition
for which the Debtors remain unpaid. Visteon owes the Debtors
$572,987 for those component parts, Mr. Copeley says.
Mr. Copley asserts that Visteon has a right to set off its
Prepetition Debt against the Debtors' Prepetition Debt because
both were incurred prepetition and are mutual.
Accordingly, Visteon asks the U.S. Bankruptcy Court for the
Southern District of New York to lift the stay so it can exercise
its state law right to set-off.
Mr. Copley contends that the stay should be lifted because
Visteon's security interest in the Debtor Prepetition Debt is not
being adequately protected.
About Visteon Corp.
Visteon Corporation is a leading full-service supplier that
delivers consumer-driven technology solutions to automotive
manufacturers worldwide and through multiple channels within the
global automotive aftermarket. Visteon has about 70,000
employees and a global delivery system of more than 200 technical,
manufacturing, sales and service facilities located in 25
countries.
As reported in the Troubled Company Reporter on Apr. 26, 2005,
Moody's Investors Service has lowered the debt ratings of Visteon
Corporation, Senior Implied to B1 from Ba2, and affirmed the
company's Speculative Grade Liquidity rating at SGL-3.
Moody's specifically downgraded these ratings and remain under
review for possible further downgrade:
-- Visteon Corporation
* Senior Implied to B1 from Ba2
* Senior Unsecured to B1 from Ba2
* Issuer rating to B1 from Ba2
* Unsecured shelf to (P)B1 from (P)Ba2
* Subordinated shelf to (P)B3 from (P)Ba3
* Preferred shelf to (P)Caa1 from (P)B1
-- Visteon Capital
* Preferred shelf to (P)B3 from (P)Ba3
Visteon's Not Prime short-term rating is unchanged.
Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. --
http://www.towerautomotive.com/-- is a global designer and
producer of vehicle structural components and assemblies used by
every major automotive original equipment manufacturer, including
BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan,
Toyota, Volkswagen and Volvo. Products include body structures
and assemblies, lower vehicle frames and structures, chassis
modules and systems, and suspension components. The Company and
25 of its debtor-affiliates filed voluntary chapter 11 petitions
on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-
10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup
Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq.,
at Kirkland & Ellis, LLP, represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $787,948,000 in total assets and
$1,306,949,000 in total debts. (Tower Automotive Bankruptcy News,
Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000)
TOWER AUTOMOTIVE: Wants 1994 Bond Trustee to Return L/C
-------------------------------------------------------
Despite Tower Automotive Inc. and its debtor-affiliates' diligent
efforts over the past several months to avoid any premature draws
of Second Lien Letters of Credit pending the proposed replacement
of Comerica Bank as the Second Lien Issuer by Deutsche Bank Trust
Company Americas, a unique situation has arisen with respect to
the Second Lien L/C issued to a trustee for certain bonds,
according to Anup Sathy, Esq., at Kirkland & Ellis LLP, in New
York.
In June 1994, the City of Bardstown, Kentucky, issued $25 million
in Taxable Variable Rate Demand Industrial Revenue Bonds, Series
1994 for what was commonly known as the R.J. Tower Corporation
project. The 1994 Bonds were issued pursuant to a Trust
Indenture, dated June 1, 1994, by and between Bardstown and PNC
Bank, Kentucky, Inc., as trustee, and were secured by an L/C
issued by Comerica. J.P. Morgan Trust Company, National
Association, is the successor trustee under the 1994 Indenture.
After execution of the Prepetition Credit Agreement, the 1994
Bonds Second Lien L/C was placed under the Second Lien Facility.
Mr. Sathy tells Judge Gropper that the 1994 Bonds Second Lien L/C
will expire on June 16, 2005, but, because it was not renewed or
replace prior to May 1, 2005, the Trustee was required to provide
notice to the bondholders on May 1, 2005, of the Trustee's
mandated draw under the 1994 Bonds Second Lien L/C on June 1,
2005.
Despite the technical mandatory language of the 1994 Indenture,
the Debtors do not believe that either the Trustee or the
bondholders under the indenture will be prejudiced if a
replacement Second Lien L/C is issued prior to June 1, 2005.
To allow Deutsche Bank to replace the existing 1994 Bonds Second
Lien L/C prior to the draw on and payment of the L/C, the Debtors
ask the Court to direct the Trustee to return the 1994 Bonds
Second Lien L/C without drawing on it. The Debtors promise to
provide the replacement Second Lien L/C for the benefit of the
Trustee on or before June 1, 2005.
Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. --
http://www.towerautomotive.com/-- is a global designer and
producer of vehicle structural components and assemblies used by
every major automotive original equipment manufacturer, including
BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan,
Toyota, Volkswagen and Volvo. Products include body structures
and assemblies, lower vehicle frames and structures, chassis
modules and systems, and suspension components. The Company and
25 of its debtor-affiliates filed voluntary chapter 11 petitions
on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-
10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup
Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq.,
at Kirkland & Ellis, LLP, represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $787,948,000 in total assets and
$1,306,949,000 in total debts. (Tower Automotive Bankruptcy News,
Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000)
TOWER AUTOMOTIVE: Wants Deutsche Bank as Second Lien Issuer
-----------------------------------------------------------
On May 24, 2004, R.J. Tower Corporation and certain lenders
entered into a credit agreement, which consist of a First Lien
and Second Lien Facility. The First Lien Facility has been
refinanced by the Revolving Credit, Term, Loan and Guaranty
Agreement, dated as of February 2, 2005. The Second Lien
Facility is a $155 million synthetic letter of credit facility
provided by Comerica Bank and certain Prepetition Secured
Lenders.
Comerica Bank is the issuer of letters of credit for the Debtors
under the Second Lien Facility. As of May 4, 2005, there are
16 outstanding undrawn and unpaid Second Lien L/Cs under the
Second Lien Facility aggregating $140 million. The L/Cs are set
to expire at various times in 2006.
Anup Sathy, Esq., at Kirkland & Ellis LLP, in New York, relates
that soon after the Petition Date, Comerica advised the Debtors
that it would not renew any of the Second Lien L/Cs and wished to
be replaced as the Second Lien Issuer. As a result, the Debtors
began negotiations with Deutsche Bank Trust Company Americas to
replace Comerica as the Second Lien Issuer.
The Debtors propose to amend the Prepetition Credit Agreement to
provide that:
(a) Deutsche Bank will be the Second Lien Issuer, provided
that unless and until the Second Lien L/C Outstandings
with respect to Comerica's Second Lien L/Cs have been
reduced to zero, Comerica will also be the Second Lien
Issuer;
(b) the Second Lien L/Cs and the Reimbursement Obligations
with respect thereto will mature on the earlier of:
(i) February 7, 2007, subject to an extension until
January 29, 2010; and
(ii) the effective date of a confirmed reorganization
plan for the Debtors;
(c) Deutsche Bank will not be required to issue any Second
Lien Letter of Credit:
(i) except to the beneficiary of a Second Lien L/C
previously issued by Comerica and only on a
transaction, or substantially similar transaction,
for which the Second Lien L/C issued by Comerica
was issued;
(ii) in an amount greater than the stated amount of the
Second Lien L/C previously issue by Comerica on the
date it is to be replaced; and
(iii) in an amount greater than the stated amount of the
Second Lien L/C issued by Deutsche Bank as of the
expiration of the Second Lien L/C.
Replacement Second Lien Issuer Is Critical
Mr. Sathy tells Judge Gropper that if Deutsche Bank is not
authorized to act as the Second Lien Issuer, each of the
beneficiaries will most likely draw on their Second Lien L/C.
This could have serious adverse consequences to the Debtors'
estates for two principal reasons:
* there will be increased costs to the Debtors and their
estates; and
* the beneficiaries' draw of their Second Lien L/Cs could
cause a serious disruption in the Debtors' businesses and
operations.
Mr. Sathy explains that the Second Lien Lenders deposited the
full amount of the Second Lien Commitment Amount into an escrow
account held by Standard Federal Bank for the benefit of, and
pledged to, the Second Lien Issuer. The deposited amounts
generate investment income for the Second Lien Lenders that is
used to offset interest payments and fees owed by the Debtors
under the Second Lien Facility.
If the Second Lien L/Cs are drawn, the deposited amounts will be
paid to the Second Lien Issuer as reimbursement for the draws.
As a result, the escrow account will be emptied, and with no
investment income to offset the interest payments and fees, the
Debtors will be forced to pay the entire -- and significantly
increased -- amounts.
Of equal importance, a draw of all the Second Lien Letters of
Credit could severely disrupt the Debtors' business operations
and their chances to reorganize. Because the Debtors are
generally current on amounts owed to the beneficiaries, a full
draw of the Second Lien L/C may over-collateralize certain of the
beneficiaries. Therefore, the Debtors may be required to expend
time and money later on to recover the excess funds, redirecting
resources from where they are required the most -- developing a
business plan to exit Chapter 11. Any efforts to recover the
proceeds would be further complicated if any of the beneficiaries
filed for bankruptcy.
Mr. Sathy informs the Court that this scenario has already
occurred with respect to one beneficiary, American Manufacturers
Mutual Insurance, which is in receivership. If AMMI were to draw
its Second Lien L/C, the proceeds could become part of AMMI's
estate, making it difficult and expensive to recover the excess
funds.
Draws on the Second Lien L/Cs would also strain the Debtors'
coffers. The Debtors believe that the beneficiaries would still
require replacement L/Cs that would have to be issued under the
DIP Credit Agreement. However, the DIP Credit Agreement limits
L/Cs thereunder to $100 million; the DIP budget was negotiated
with the assumption that the Second Lien L/C would continue
undrawn and unpaid through the Chapter 11 cases.
In that case, there will be insufficient availability and
potentially liquidity under the DIP Credit Agreement to not only
issue replacement L/Cs to the beneficiaries under the Second Lien
Facility, but also to issue new L/Cs as may become required
during the course of the Debtors' cases.
The Debtors believe that it is beneficial to have contingent
claims that are supported by L/Cs instead of cash, which would
occur if draws were made.
Deutsche Bank's Terms
In exchange for the replacement of Comerica as the Second Lien
Issuer, the Debtors agree to pay Deutsche Bank:
(x) 0.125% per annum, payable quarterly in arrears, on the
aggregate stated amount of the outstanding undrawn or
unpaid Second Lien L/Cs;
(y) its ordinary course processing fees for L/Cs and the costs
to effectuate the replacement of the new Second Lien L/Cs;
and
(z) its reasonable out-of-pocket expenses, including, but not
limited to, the reasonable legal fees and out-of-pocket
expenses incurred by its counsel, Luskin, Stern & Eisler
LLP, related to the negotiation, documentation and
implementation of the Amendments and other expenses the
payment of which is required under the Prepetition Credit
Agreement.
By this motion, the Debtors ask the Court to approve the proposed
Amendments to replace Comerica with Deutsche Bank as the Second
Lien Issuer. The Debtors also seek permission to pay related
fees and expenses.
Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc.
-- http://www.towerautomotive.com/-- is a global designer and
producer of vehicle structural components and assemblies used by
every major automotive original equipment manufacturer, including
BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan,
Toyota, Volkswagen and Volvo. Products include body structures
and assemblies, lower vehicle frames and structures, chassis
modules and systems, and suspension components. The Company and
25 of its debtor-affiliates filed voluntary chapter 11 petitions
on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-
10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup
Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq.,
at Kirkland & Ellis, LLP, represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $787,948,000 in total assets and
$1,306,949,000 in total debts. (Tower Automotive Bankruptcy News,
Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000)
UAL CORP: ESOP Plaintiffs Ask Court for Summary Judgment
--------------------------------------------------------
As previously reported, in 2003, Jerry R. Summers, George T.
Lenormand, Jeffrey D. Crites, Louise Van Rensburg and James E.
Shambo, former employees of United Air Lines, individually and on
behalf of all others similarly situated, commenced a lawsuit
before the U.S. District Court for the Northern District of
Illinois, Eastern Division, against the UAL Corporation Employee
Stock Ownership Plan, UAL Corporation ESOP Committee and its
members, Marty Torres, Barry Wilson, Doug Walsh, Ira Levy, Don
Clements, Craig Musa, and State Street Bank and Trust Company,
for violation of the Employee Retirement Income Security Act, 29
U.S.C. Section 1302. The ESOP Plaintiffs seek to recover up to
$2,000,000,000 for all past members of the UAL ESOP Plan.
In February 2005, the District Court granted class action status
to the lawsuit.
The ESOP Plaintiffs asked District Court Judge Samuel Der-
Yeghiayan for summary judgment.
Steve W. Berman, Esq., at Hagens, Berman, Sobol, Shapiro, in
Seattle, Washington, asserts that summary judgment should be
granted because the Defendants breached their fiduciary and co-
fiduciary duties. Prudent and loyal fiduciaries would have
directed the Employee Stock Ownership Plan to sell UAL
Corporation stock by November 17, 2001, no more than one month
after James E. Goodwin, former UAL Chairman and Chief Executive
Officer, sent a letter to employees that questioned UAL's future.
As a result of the Defendants' actions, the ESOP and its
participants suffered massive financial losses.
The ESOP Plaintiffs submitted a memorandum of law to the District
Court, supporting their request for summary judgment, but it is
filed under seal.
Objections
(1) ESOP Committee
Howard Shapiro, Esq., at Proskauer Rose, in New Orleans,
Louisiana, states that UAL employees wanted to control the
company through the ESOP. The employee groups appointed their
own members to oversee the ESOP. Many of these employees reaped
financial rewards by retiring or separating employment from the
Debtors when the value of the ESOP was high. However, "following
the tragic and unforeseen events of 9/11, these groups turned on
the co-employees they appointed to oversee the ESOP," by bringing
the lawsuit for hundreds of millions of dollars.
The ESOP Plaintiffs argue that the Committee Defendants should
have sold UAL stock 14 months before the Petition Date. This
ignores the fact that ESOPs serve a different legislative purpose
than ordinary pension benefit plans, are governed by separate
statutory provisions, and are subject to a different body of case
law defining the duties of fiduciaries. Mr. Shapiro contends
that the Plaintiffs' allegations that the Defendants should have
diversified the ESOP 14 months before the Petition Date is
untenable because the purpose of an ESOP is to invest primarily
in the plan sponsor. Congress exempted ESOPs from the duty to
diversify that applies to other types of plans.
The Plaintiffs have failed to establish that the Defendants had a
duty to diversify the ESOP after October 17, 2001. Analyst
reports, financial data and other key indicators did not
unequivocally point to a UAL bankruptcy 14 months before the
Petition Date. As a result, the Plaintiffs cannot carry their
burden of proving that bankruptcy was imminent as of this date.
Mr. Shapiro says the Plaintiffs' request for summary judgment
should be denied.
(2) State Street
The ESOP Plaintiffs hold that, based on the October 17, 2001
letter from Mr. Goodwin, State Street should have disregarded the
express terms of the ESOP and taken the extraordinary and
unprecedented measure of selling UAL stock immediately.
According to Mitchell L. Marinello, Esq., at Novack & Macey, in
Chicago, Illinois, the Plaintiffs make this allegation despite
the showing that a UAL bankruptcy was not imminent at this time.
UAL stock traded at $14.45 per share in January 2002, a price
hardly indicative of a bankruptcy filing. Arthur Andersen &
Company provided a clean audit opinion and did not note any
disagreement with UAL management's going concern status.
Mr. Marinello contends that State Street did everything it was
supposed to do. State Street evaluated the stock, examined UAL's
financial condition, conferred with UAL's management about its
future prospects, consulted with independent financial advisors
and questioned the ESOP Committee members about their planned
course of action. Therefore, State Street did exactly what a
prudent directed trustee should have done.
State Street Wants Summary Judgment
According to Randall J. Sunshine, Esq., at Liner, Yankelevitz,
Sunshine & Regenstreif, in Los Angeles, California, the ESOP
Plaintiffs argued that the UAL Employee Stock Ownership Plan
should have sold the UAL Corporation stock ten months earlier,
because the bankruptcy filing was imminent. This is a case of
"Monday morning quarterbacking," Mr. Sunshine says. Almost one
year in the future is not imminent. Many individuals believed
that UAL would achieve additional concessions from its unions or
government loan guarantees. If either scenario had occurred, UAL
would have averted, or delayed, bankruptcy.
The ESOP Plaintiffs base their imminent bankruptcy argument
solely on hindsight, while ignoring analyst reports, financial
data, economic indicators and investor statements. Mr. Sunshine
explains that as of September 27, 2002, many investors held that
the Debtors' difficulties were temporary, cyclical and
survivable. During the period referred to by the Plaintiffs, the
investment community was not predicting a UAL bankruptcy.
Indeed, UAL entered the third quarter 2001 with over
$6,700,000,000 in cash available to fund future operations. UAL
also received $391,000,000 in cash from the Air Transportation
Stabilization Board.
The ESOP Plaintiffs rely on the letter by James E. Goodwin,
former Chairman and Chief Executive Officer of UAL, sent to
employees 14 months before the Petition Date. The letter
speculated about the prospects for the Debtors if cost cutting
measures were not successful. However, it is common knowledge
that the letter was merely a rallying call to the employees and
the unions to come to the bargaining table," Mr. Sunshine points
out. The Plaintiffs also rely on the opinion of their directed
trustee expert who is not qualified to testify on financial
viability. Since there are no genuine issues as to material
facts, State Street asks District Court Judge Samuel Der-
Yeghiayan for summary judgment in its favor.
Plaintiffs Respond to State Street's Allegations
Steve W. Berman, Esq., at Hagens, Berman, Sobol & Shapiro, in
Seattle, Washington, says that "prudent and loyal fiduciaries
would have begun selling the ESOP's UAL holdings within 30 days"
of CEO James Goodwin's letter, or November 17, 2001. In that
letter, Mr. Goodwin wrote that UAL was "literally hemorrhaging
money" and that the airline was in a "fight for its life." Mr.
Goodwin predicted that unless the economy improved and cost
savings were achieved, the airline would shortly perish. In the
two days following Mr. Goodwin's letter, UAL stock dropped over
20%. Many analysts and commentators predicted bankruptcy and all
agreed that the airline's condition was dire. "Yet State Street
did not sell a single share of UAL stock until September 27,
2002," Mr. Berman notes. By this time, the stock had dropped
from $16.72 to $2.36 on November 19, 2001.
State Street argues that the ESOP Defendants are exempt from the
fiduciary duty of diversification as a matter of law. However,
State Street should have seen the handwriting on the wall,
regardless of historical case law. State Street breached co-
fiduciary duties of loyalty and prudence by permitting the
breaches being committed by its co-fiduciaries, the ESOP
Committee Members.
State Street says it is not liable because the ESOP documents
require the assets to be invested exclusively in UAL stock.
"This statement is both factually false and legally irrelevant,"
Mr. Berman asserts. The Plan authorized the appointment of an
Investment Manager with authority to sell the UAL holdings. In
addition, the Employee Retirement Income Security Act imposes the
duty of prudence on ESOP fiduciaries, which may require the sale
of plan sponsor stock. State Street's arguments are flawed and
the District Court should deny the request for summary judgment.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 86; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UNITED AIRLINES: 7th Circuit Allows Trustees to Repossess Aircraft
------------------------------------------------------------------
As previously reported, in November 2004, U.S. Bank, N.A., and The
Bank of New York, serving as indenture trustees for three
aircraft leases, demanded that United Air Lines immediately
return 14 of the aircraft unless it cured all defaults and
resumed the full rental payments promised by contract.
United neither paid nor returned the planes. Instead, United
filed an adversary action accusing the Indenture Trustees of
violating the Sherman Act, 15 U.S.C. Section 1, by coordinating
their efforts to preserve the lenders' collateral and collect the
promised payments. United argued that the Trustees violate the
antitrust laws by insisting that the Debtor deal with them
collectively about all 175 leased airplanes.
The Hon. Eugene Wedoff of the U.S. Bankruptcy Court for the
Northern District of Illinois entered a temporary restraining
order forbidding the Trustees to repossess the airplanes. Judge
Wedoff stated that despite its reference to "any power of the
court," Section 1110(a)(1) of the Bankruptcy Code does not affect
the court's ability to award injunctive relief under
nonbankruptcy law, such as the Sherman Act.
United then sought discovery into all of the Indenture Trustees'
communications, not only with other trustees and lenders but also
with their lawyers. The Trustees protested, arguing that the
matters United wants are covered by the attorney-client and work
product privileges.
Judge Wedoff, however, held that United's antitrust theory is
strong enough to override these privileges -- for they cannot be
used to shield ongoing crimes, and a violation of the Sherman Act
is a felony. Accordingly, Judge Wedoff demanded that the
materials be produced, either directly to United or to the court
for an in camera inspection.
The Bankruptcy Court also held the Trustees "in contempt," but
did not impose any sanction.
District Court Appeal
The Trustees took an appeal to the U.S. District Court for the
Northern District of Illinois from the TRO and the declaration of
contempt. District Court Judge John W. Darrah dismissed both
appeals, ruling that neither of the Bankruptcy Court's orders is
"final" and declining to exercise jurisdiction to review the
interlocutory orders.
Trustees Turn to 7th Circuit
The Trustees asked the U.S. Court of Appeals for the Seventh
Circuit to issue a writ of mandamus that will lift the
injunction, or at least get the proceedings back on track by
resolving the privilege debate. The Trustees also asked the
Appeals Court to treat their papers as a notice of appeal, should
appellate jurisdiction be available.
Circuit Judges Coffey, Easterbrook and Williams presided over the
proceeding.
(1) The TRO
The Debtors argue that the TRO should remain in effect until the
antitrust claim is decided. Dissolution of the TRO would allow
the Trustees to overwhelm the Debtors with their cartel-inspired
conduct. The Appeals Court dismisses the argument. The Court
holds that the Trustees have the right to repossess their
collateral.
Judges Coffey, Easterbrook and Williams note that coordination is
a normal function of indenture trustees, because individual
lenders may be too diffuse to protect their own interests.
Coordination is common in bankruptcy, which is described as a
collective proceeding among lenders. Antitrust laws do not
preclude cooperation aimed at maximizing financial recovery under
competitively determined contracts. If the Debtors want to
pursue antitrust claims, the Appeals Court points out that there
is an entire body of antitrust law at their disposal, complete
with the potential for treble damages, actions by the Federal
Trade Commission or criminal prosecutions by the United States.
(2) Section 1110
Section 1110(a)(1) gives the Trustees the right to repossess the
aircraft, unless the Debtors pay the full rental or the lessors
accept lower payments. The Appeals Court finds the Trustees'
strategic behavior irrelevant. The Appeals Court explains that
the statute, which treats aircraft differently from other assets,
entitles the Trustees to cooperate. A credible threat to
repossess the aircraft changes the post-bankruptcy negotiating
environment; this prospect makes credit available on better terms
when air carriers shop for financing. The Appeals Court also
notes that the Debtors benefited from the terms offered by
creditors that were secure in their ability to repossess the
collateral. The Debtors must live with those terms now.
(3) The Antitrust Claim
The Appeals Court states that "the antitrust claim is thin to the
point of invisibility." Sellers of new goods or services may not
collude to set prices. In other words, if the Trustees conspired
to set prices for new planes, then the Debtors may have a viable
antitrust claim. However, there is no cartel-like conduct, and
hence no violation of antitrust law, when creditors are trying to
repossess old planes. The Debtors' real issue is how much less
than the contract price will the Trustees accept to forbear from
repossessing the planes. The Appeals Court says negotiating
"discounts on products already sold at competitive prices is not
a form of monopolization."
Judges Coffey, Easterbrook and Williams also hold that, among
creditors when deciding how much of a haircut to accept has no
effect unless the court approves the restructuring. Under the
Debtors' view, a prepackaged bankruptcy, in which creditors reach
agreement before presenting a plan to a court, would be a
colossal cartel. The Debtors are not opposed to the joint
conduct of the Trustees, which benefited the Debtors through
forbearance when they stopped making the scheduled rental
payments. The Debtors are really perturbed by the withdrawal of
some lenders from the package deal who are independently aiming
for better prices from the Debtors, a decision protected by
Section 1110(a)(1).
(4) Debtors Are at Fault
Judges Coffey, Easterbrook and Williams further note that the
Debtors are as much antitrust offenders as the Trustees. The
Trustees want to shop the planes, selling their remaining useful
lives to the highest bidders. The Debtors want to limit the
Trustees to a single bidder, the Debtors themselves, and deny the
Trustees the benefit of competition. The Debtors are unwilling
to pay the price agreed at the end of the competitive financing
process while they are free to shop for better terms and return
the 14 planes. In other words, the Debtors enjoy "the position
of monopsonist, which the antitrust laws forbid on equal terms
with monopoly."
The Appeals Court grants both sides access to competitive
markets, which is achieved by allowing repossession. The
Trustees will get the current market price for their airplanes.
The Debtors may shop for the best prices to rent or buy
airplanes. If, as the Debtors and the Committee of Unsecured
Creditors contend, the spot-market price is below not only the
original rental terms but also the modified terms, then the
Debtors will be better off. The Debtors will scramble if, as the
Trustees are betting, the price of used airplanes is higher than
what the Debtors are now paying for these 14 aircraft. If the
Debtors represent the highest and best use of the airplanes, and
the competitive price is less than what the Debtors are paying,
the threat to repossess is not credible and the Debtors will
retain the airplanes.
The Appeals Court reverses the judgment of the District Court and
remand the case with instructions to vacate the preliminary
injunction and permit the repossessions to proceed, unless the
Debtors immediately cure defaults and pay the full rentals under
Section 1110(a)(2)(B)(iii). With respect to the contempt
citation, the petition for mandamus is denied.
S&P Comments
Standard & Poor's had commented previously on the legal
dispute and its potential to affect bargaining with a bankrupt
airline to the disadvantage of creditors and cited the previous
rulings against creditors as one factor in a recent CreditWatch
review of aircraft-backed debt. As the appeals court noted in its
opinion, "A credible threat to repossess . . . aircraft changes
the terms on which postbankruptcy bargains can be struck; it is
exactly this prospect that makes credit available on better terms
when air carriers shop for financing in the first place." The
ruling, if not reversed by the full Seventh Circuit or the Supreme
Court, should settle the legal issue as it relates to the meaning
of Section 1110, and preserve creditors' rights to repossess
aircraft in bankruptcy if the debtor airline does not agree to
full payment on the original terms of a lease, secured debt, or
conditional sales agreement. The ruling does not affect any
Standard & Poor's ratings on aircraft-backed debt, which include
over $30 billion of rated equipment trust certificates and
enhanced equipment trust certificates issued by U.S. airlines.
The April 21, 2005, downgrades arising from Standard & Poor's
CreditWatch review of those obligations were based mostly on the
risk that multiple bankruptcies of large U.S. airlines could
depress collateral values, particularly for aircraft concentrated
with the six large "legacy carriers," all currently with corporate
credit ratings of 'B' or lower. However, the appeals court ruling
reduces materially the risk that a legal outcome adverse to United
creditors could cause or contribute to further downgrades.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 86; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
US AIRWAYS: Hopes to Reach Merger Deal with America West This Week
------------------------------------------------------------------
US Airways Group Inc. and America West Holdings Corp. hope to
announce a merger this week, according to news reports.
Citing people close to the situation, The Wall Street Journal
reported that both companies are "in advanced negotiations with
potential equity investors to raise as much as $400 million."
The newspaper reported last week that people familiar with the
discussions believe that US Airways and America West need as much
as $500,000,000 to finance (i) the Debtors' exit from bankruptcy
and (ii) the merger.
Journal reporter Susan Carey relates that her sources disclosed
that the two carriers are trying to secure:
-- a $250 million loan from Airbus;
-- a $100 million to $150 million equity investment from Air
Canada;
-- a $125 million equity investment from PAR Capital
Management Inc. and another hedge fund.
To sweeten the deal, US Airways and America West are reportedly
offering to order 20 of Airbus' new A350 model -- which could
give Airbus an edge over its rival Boeing Co.
People familiar with the matter told the Journal that Air
Canada's parent, ACE Aviation Holdings Inc., might be persuaded
to invest, especially since it is interested in "winning
maintenance work from the combined airline and building stronger
relationships with other members of the global Star Alliance
marketing group, which includes US Airways and United Airlines."
Air Canada declined to comment on the rumors.
PAR has a stake in America West. PAR's partner in the
negotiations was not identified.
Later this week, the pilots union at US Airways will hold a
meeting "to consider hiring merger counsel and investment bankers
and staffing up its merger committee," according to Ms. Carey.
The possibility of a special assessment of the membership to pay
for merger expenses also will be discussed.
Headquartered in Arlington, Virginia, US Airways' primary business
activity is the ownership of the common stock of:
* US Airways, Inc.,
* Allegheny Airlines, Inc.,
* Piedmont Airlines, Inc.,
* PSA Airlines, Inc.,
* MidAtlantic Airways, Inc.,
* US Airways Leasing and Sales, Inc.,
* Material Services Company, Inc., and
* Airways Assurance Limited, LLC.
Under a chapter 11 plan declared effective on March 31, 2003,
USAir emerged from bankruptcy with the Retirement Systems of
Alabama taking a 40% equity stake in the deleveraged carrier in
exchange for $240 million infusion of new capital.
US Airways and its subsidiaries filed another chapter 11 petition
on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian
P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning,
Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and
Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors
in their restructuring efforts. In the Company's second
bankruptcy filing, it lists $8,805,972,000 in total assets and
$8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue
No. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000)
US AIRWAYS: Has Until August 31 to Make Lease-Related Decisions
---------------------------------------------------------------
US Airways, Inc., and its debtor-affiliates must make decisions on
their nonresidential real property leases by the earlier of
August 31, 2005, or the date of confirmation of a plan of
reorganization.
As reported in the Troubled Company Reporter on Apr. 15, 2005,
Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado,
told Judge Mitchell of the U.S. Bankruptcy Court for the Eastern
District of Virginia that the Debtors are lessees or sublessors to
approximately 500 unexpired non-residential real property leases
Lease decisions require thorough analysis, evaluation and
responses from third parties. The Debtors' corporate real estate
department has experienced personnel departures and turnover since
2003. The Debtors' employees have worked tirelessly in assessing
the unexpired leases and have contacted numerous lessors to
discuss assumptions or rejections, but much work remains. Many of
the lessors are governmental units, whose deadline for filing
proofs of claim just expired on March 11, 2005. The Debtors must
reconcile alleged cure obligations in recently filed proofs of
claim with their books and records.
While the Debtors have made tremendous progress in their efforts
to become a stronger and more competitive airline, they are still
evaluating their unexpired leases in the context of their
ultimate business plan. Mr. Leitch asserted that it would be
premature and irresponsible to make decisions on the assumption,
assumption and assignment, or rejection of nonresidential real
property leases by April 30, 2005. To maximize value for the
estates, the Debtors must have more time to contemplate these
decisions.
Headquartered in Arlington, Virginia, US Airways' primary business
activity is the ownership of the common stock of:
* US Airways, Inc.,
* Allegheny Airlines, Inc.,
* Piedmont Airlines, Inc.,
* PSA Airlines, Inc.,
* MidAtlantic Airways, Inc.,
* US Airways Leasing and Sales, Inc.,
* Material Services Company, Inc., and
* Airways Assurance Limited, LLC.
Under a chapter 11 plan declared effective on March 31, 2003,
USAir emerged from bankruptcy with the Retirement Systems of
Alabama taking a 40% equity stake in the deleveraged carrier in
exchange for $240 million infusion of new capital.
US Airways and its subsidiaries filed another chapter 11 petition
on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian
P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning,
Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and
Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors
in their restructuring efforts. In the Company's second
bankruptcy filing, it lists $8,805,972,000 in total assets and
$8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue
No. 90; Bankruptcy Creditors' Service, Inc., 215/945-7000)
USGEN NEW ENGLAND: Court Confirms 2nd Amended Plan of Liquidation
-----------------------------------------------------------------
USGen New England, Inc., stepped the Hon. Paul Mannes of the U.S.
Bankruptcy Court for the District of Maryland through the 13
statutory requirements under Section 1129(a) of the Bankruptcy
Code necessary to confirm its Second Amended Plan of Liquidation
dated March 24, 2005:
A. The Second Amended Plan satisfies Section 1129(a)(1), which
requires that a plan comply with "applicable provisions" of
the Bankruptcy Code:
(a) Pursuant to Section 1122, the classification scheme of
Claims and Interests under the Plan is reasonable. Claims
or Interests in each particular Class are substantially
similar to other Claims and Interests in the Class;
(b) Pursuant to Section 1123(a)(1), the Plan designates
Classes of Claims and Interests;
(c) Pursuant to Sections 1123(a)(2) and (a)(3), the treatment
of each of the Classes of Claims and Interests is
specified in Article IV of the Plan;
(d) Pursuant to Section 1123(a)(4), the Plan provides for the
same treatment of each Claim or Interest of a particular
Class;
(e) Pursuant to Section 1123(a)(5), the Plan provides for
adequate means for its implementation;
(f) Pursuant to Section 1123(a)(6), the Plan authorizes,
generally and as necessary, the inclusion, in any amended
and restated certificate of incorporation for USGen, of a
provision prohibiting the issuance of non-voting equity
securities to the extent required by Section 1123(a)(6) of
the Bankruptcy Code;
(g) Pursuant to Section 1123(a)(7), the Plan contains only
provisions that are consistent with the interests of
Creditors and the Shareholder and with public policy, with
respect to the manner of selection of the Plan
Administrator, the Disbursing Agent, and the Board of
Directors of USGen;
B. The Second Amended Plan meets Section 1129(a)(2), which
requires that the proponent of the plan complies with the
applicable provisions of the Bankruptcy Code. The Disclosure
Statement contained adequate information as required by
Section 1125. The solicitation packages containing a copy of
Disclosure Statement and the Plan, and certain other materials
were mailed to all parties required to receive the materials;
C. In accordance with Section 1129(a)(3), the Plan was proposed
in good faith and not by any means prohibited by law;
D. Pursuant to Section 1129(a)(4), any payment made or to be made
by USGen for services or for costs and expenses in, or in
connection with the Plan and incident to its Chapter 11 Case
prior to the Confirmation Date, has been approved by, or is
subject to Court approval;
E. As required by Section 1129(a)(5), USGen disclosed the
identity and affiliations of individuals proposed to serve
after confirmation of the Plan, as the Plan Administrator, the
Disbursing Agent, and directors and officers of the USGen.
The appointment to, or continuance in, the offices of those
individuals is consistent with public policy and the interests
of USGen's Creditors and the Shareholder. USGen also
disclosed the identity of any insiders, if any, it will employ
or retain subsequent to confirmation of the Plan and the
nature of any compensation to be paid to those insiders;
F. Section 1129(a)(6) is inapplicable as USGen is liquidating and
will not set or change utility rates and the Plan does not
effectuate utility rate changes;
G. In accordance with Section 1129(a)(7), each holder of a Claim
or Interest with respect to each impaired Class of Claims or
Interests:
(i) has accepted the Plan, if entitled to vote thereon; or
(ii) will receive or retain under the Plan, on account of
the Claim or Interest, property of a value, as of the
Effective Date of the Plan, that is not less than the
amount that the holder would receive or retain if USGen
were to be liquidated under Chapter 7 of the Bankruptcy
Code on the Effective Date;
H. Pursuant to Section 1129(a)(8), each class of claims and
interests under a plan must either (i) have accepted the plan,
or (ii) be rendered unimpaired under the plan. The Plan meets
this requirement. Classes 1 and 2 are not impaired and,
therefore, are conclusively presumed to have accepted the
Plan. Each of Class 3 and Class 4, the members of which are
entitled to vote to accept or reject the Plan, have voted to
accept the Plan by the requisite majorities required by the
Bankruptcy Code.
Out of the 226 Class 3 members, 225 voted to accept the Plan.
The Accepting Class 3 Members account for 99.56% of that
voting class and represent $992,147,726.10 in Value of
Acceptances. Moreover, the five Class 4 members voted to
accept the Plan. The Accepting Class 4 Members represent the
total aggregate value of Class 4 Claims, which is $1,000.
I. In accordance with Section 1129(a)(9), except to the extent
that a holder has agreed or agrees to a different treatment of
the Claim, the Plan provides that with respect to each Allowed
Claim of a kind specified in Sections 507(a)(1) and 507(a)(8),
the holder of the Claim will receive on account of the Claim,
on the later of the Effective Date and the date the claim
becomes Allowed, or as soon as reasonably practicable, cash
equal to the allowed amount of the Claim, plus applicable
postpetition interest;
J. As required by Section 1129(a)(10), the Plan has been accepted
by Class 3, which acceptances were determined without
including any acceptance of the Plan by any insider holding a
Claim in the Class;
K. Except as provided in the Plan, the confirmation of the Plan
is not likely to be followed by the need for further
liquidation of USGen's financial reorganization. Thus, the
requirement of Section 1129(a)(11) is satisfied;
L. The fees payable by USGen to the U.S. Trustee or the Clerk of
the Court, as provided under Section l930(a)(6) of the
Judicial Procedures Code, constitute administrative expenses
entitled to priority under Section 507(a)(1) of the Bankruptcy
Code. The treatment of those fees in the Plan satisfies
Section 1129(a)(12); and
M. In accordance with Section 1129(a)(13), USGen does not provide
for the payment of any retiree benefits within the meaning of
Section 1114 of the Bankruptcy Code.
Accordingly, Judge Mannes finds that the Second Amended Plan
satisfies the statutory requirements of the Bankruptcy Code. The
Court also finds that the requirements of Section 1129(b) are
inapplicable as Class 3 has voted to accept the Plan.
On May 13, 2005, Judge Mannes confirmed the Plan.
USGen proposed certain modifications to the Plan on the record at
the Confirmation Hearing. The Court finds that the modifications
do not:
(i) affect the classification of Claims or Interests or
adversely affect the treatment afforded holders of Claims
or Interests;
(ii) constitute material modifications of the Plan under
Section 1127;
(iii) cause the Plan to fail to meet the requirements of
Section 1122 or 1123;
(iv) adversely change the treatment of holders of Claims or
Interests who have accepted the Plan; or
(v) require re-solicitation of acceptances or rejections from
any holders nor do they require that any holders be
afforded an opportunity to change previously cast
acceptances or rejections of the Plan.
To the extent not withdrawn, cured or resolved, all confirmation
objections are overruled. The Plan modifications made on the
record at the Confirmation Hearing are also approved.
Subject to any applicable contractual limitations, the Court
authorizes USGen and, as appropriate, the Plan Administrator, to
convert USGen into a limited liability company, as may be needed,
to effectuate the Plan and the corporate purposes of USGen.
Among others, Judge Mannes approves these agreements:
* The Plan Administrator Agreement,
* The Disbursing Agent Agreement,
* The Bear Swamp Land Purchase Agreement,
* The Settlement in respect of the Shareholder, and
* the Settlement in respect of the Postpetition Interest.
A draft copy of the Disbursing Agent Agreement is available at no
charge at:
http://bankrupt.com/misc/USGen_disbursementagencyagreement.pdf
No executory contracts or unexpired leases of USGen will be
deemed assumed, assumed and assigned, or rejected by operation of
the Plan or the Confirmation Order unless and until the Effective
Date will have occurred. If the Effective Date does not occur,
the deadline by which USGen may assume, assume and assign or
reject any executory contracts or unexpired leases will be
governed by any extant orders of the Bankruptcy Court as if no
confirmation of a plan has occurred in USGen's case.
The satisfaction, injunction, release and other provisions
contained in Article IX of the Plan are approved in all respects
and will be effective on the Effective Date.
The duties of the Official Committee of Unsecured Creditors will
continue until the Effective Date when those duties will
terminate except as to any appeal or motion for reconsideration
of the Confirmation Order. However, (i) each of the Committee's
professionals will retain standing after the Effective Date to be
heard on, litigate, or file pleadings with respect to any
professional's fees requested by, awarded to or ruled upon by the
Court; and (ii) if the Holders of Class 3 Claims have received
postpetition interest on their Allowed Claims, which is in an
amount less than 4% per annum, and the Retained Estate is not
fully administered, then the Committee will remain in existence
for the sole purpose of ensuring that the Holders of Allowed
Class 3 Claims receive the balance of the postpetition interests
and thereafter the Committee will dissolve for all purposes.
Headquartered in Bethesda, Maryland, USGen New England, Inc., an
affiliate of PG&E Generating Energy Group, LLC, owns and operates
several electric generating facilities in New England and
purchases and sells electricity and other energy-related products
at wholesale. The Debtor filed for Chapter 11 protection on
July 8, 2003 (Bankr. D. Md. Case No. 03-30465). John E. Lucian,
Esq., Marc E. Richards, Esq., Edward J. LoBello, Esq., and Craig
A. Damast, Esq., at Blank Rome, LLP, represent the Debtor in its
restructuring efforts. When it sought chapter 11 protection, the
Debtor reported assets amounting to $2,337,446,332 and debts
amounting to $1,249,960,731. The Debtor filed its Second Amended
Plan of Liquidation and Disclosure Statement on March 24, 2005
(PG&E National Bankruptcy News, Issue No. 41; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
W.R. GRACE: Asks Court to Approve Asbestos Claim Questionnaire
--------------------------------------------------------------
In connection with their goal of providing an alternative path
for litigating the common asbestos liability issues following the
confirmation of a plan of reorganization, W.R. Grace & Co. and its
debtor-affiliates have designed an asbestos prepetition litigation
proof of claim form and questionnaire that would provide for an
efficient and legally valid process of gathering the evidence
necessary for asbestos claim estimation.
Laura Davis Jones, Esq., Pachulski, Stang, Ziehl, Young, Jones &
Weintraub P.C., in Wilmington, Delaware, relates that an
estimation must, in accordance with the Federal Rules of Evidence
and the bankruptcy law, be based on admissible evidence of
disease and exposure, and distinguish between fraudulent or
invalid asbestos claims and those claims with merit.
Therefore, the Debtors ask the U.S. Bankruptcy Court for the
District of Delaware to approve the new Case Management Order for
the estimation of personal injury liabilities, including the
asbestos prepetition litigation proof of claim form and
questionnaire.
Ms. Jones informs the Court that the Questionnaire would request
claimants to identify with specificity the factual basis for
their claims. This information is obtainable without undue
burden because:
-- the claimants have already retained counsel and undertaken
the burden of litigation; and
-- the claimants have completed other claims forms in
connection with asserted claims against various asbestos
trusts.
A copy of the proposed questionnaire is available for free at:
http://bankrupt.com/misc/Grace_Questionnaire.pdf
According to Ms. Jones, the question portion of the document is
less than 20 pages and the information called for by the
questions is specific and central, not voluminous or tangential.
The Questionnaire is designed to elicit information necessary to
determine the two-threshold evidentiary issues:
1. Whether the claim for an asbestos-related injury is
supported by objective and verifiable medical tests,
performed in accordance with applicable standards; and
2. Whether the claim is supported by objective and verifiable
evidence of an exposure to the Debtors' asbestos-containing
product sufficient to cause disease.
The Debtors maintain, and plan to argue, that the Court should
consider, for estimation purposes, only those claims that can
meet the threshold evidentiary standards. Importantly, Ms. Jones
notes, without the information in the Questionnaire, the Debtors
will be precluded from even presenting their estimation case.
The proposed Questionnaire asks PI claimants who allege that they
have been injured because of exposure to an asbestos-containing
product to disclose:
* the time periods in which they were exposed to the Debtors'
products;
* their industry, occupation, and employer;
* the site locations where they were exposed to the products;
* the name of the asbestos-containing products and how close
they were to those products while they were being installed.
The Debtors assert that objective and reliable exposure
information is essential because without it a claimant cannot
prove, and it will be difficult for the Debtors to refute, that
the claimant was exposed to sufficient levels of asbestos-
containing products such that those asbestos containing products
could be a substantial contributing factor to whatever disease
the claimant suffers.
However, Ms. Jones explains, the mere fact of exposure to an
asbestos-containing product is not sufficient to pass the
threshold evidentiary criteria applicable to the estimation
proceeding. In asbestos litigation history, a significant
problem is the lack of evidence of dose and exposure sufficient
to cause harm. Ms. Jones states that virtually every person in
North America has been exposed to asbestos, thus, in toxic tort
cases, merely working at a site where an asbestos product was
present does not give rise to a cause that is sustainable under
the Federal Rules of Evidence. According to Ms. Jones,
plaintiffs must show that they were exposed to the defendant's
allegedly hazardous product or material at a level that has been
demonstrated, through scientifically reliable evidence, to cause
injury.
Thus, the proposed Questionnaire also asks PI claimants to
provide specific information about the extent of their exposure
to the Debtors' asbestos-containing product. The PI claimants
must list the duration of their employment at a job site in which
they were exposed to the Debtors' asbestos-containing products,
as well as the nature of their employment at that job site,
utilizing a list of industry and occupation codes. In addition,
PI claimants must identify the specific asbestos-containing
product to which they were exposed and the basis of the
identification.
The Questionnaire further asks PI claimants to list all of their
other exposures to asbestos products, their job history, as well
as other information indicating whether they have sued or
recovered from other companies or trusts for the same or similar
alleged injuries. The Debtors believe that these requirements
will provide information about other potential causes of disease.
Moreover, the proposed Questionnaire asks for these medical
information so that the Debtors can put forth an estimation that
values claims alleging no injury or alleging injury that is not
supported by admissible evidence, at zero:
* the claimant's diagnosis, including the name of the
diagnosing physician, the date of the diagnosis, and any
non-asbestos causes identified in the diagnosis;
* the results of any X-rays and Pulmonary Function Tests;
* basic information on the claimant's smoking history, if any;
and
* copies of the medical records relating to the diagnosis,
along with any other X-ray results taken in the prior two
years.
The Debtors point out that the Questionnaire requests each PI
claimant to produce two B-reads, one independent, in support of a
diagnosis of asbestosis, as well as the underlying, supporting X-
rays. The Debtors argue that those requirements are consistent
with the standards set out by the American Thoracic Society and
are the only way to ensure that claims for non-malignant lung
disease are accurately diagnosed for the purpose of estimating
the value of the Debtors' current and future asbestos personal
injury liability.
Ms. Jones notes that one of the greatest threats to the Court
reaching an accurate estimate involves the prevalence of claims
alleging asbestosis or pleural thickening in which the claimant
has no physical impairment. Preliminary assessments of the
claims against the Debtors, for which the alleged asbestos-
related disease has been identified, indicate that there are more
than 29,000 claimants alleging that they have sustained
asbestosis, yet only 1,500 alleging mesothelioma. While
asbestosis -- under certain working conditions, most of which
have not been present in the United States for over 30 years --
may cause lung impairment, many individuals are diagnosed with
asbestosis but do not have any impairment whatsoever.
Accordingly, a PI claimant must demonstrate actual impairment to
recover for an alleged non-malignant disease.
To diagnose "impairment," the medical community relies on
pulmonary function testing. According to the American Medical
Association, Pulmonary Function Tests "performed on standardized
equipment with validated administration techniques provide the
framework for evaluation of respiratory system impairment."
Therefore, the Questionnaire requires a claimant to submit the
full results of all pulmonary function tests, including:
* the PI claimant's total lung capacity (TLC);
* forced vital capacity (FVC);
* the FEV1/FVC ration;
* the name of the doctor who performed the test;
* the date of the test;
* a replication of the test; and
* the reports of the data underlying the tests, results and
interpretations.
The American Thoracic Society has articulated standards governing
the administration and interpretation of all aspects of pulmonary
functions tests. Also, the American Medical Association has
established criteria, based on pulmonary function test results,
for determining impairment. Consequently, Ms. Jones says, the
Questionnaire simply elicits the information sufficient for
determining whether the claimants' evidence of impairment
conforms with the standards and criteria established by the
appropriate governing medical and scientific institutions.
Without the underlying tests and data supporting them, that
analysis cannot be performed.
Ms. Jones contends that the estimation methodology advocated by
the Asbestos PI Committee and Futures Representative does not
attempt in any way to distinguish between valid and invalid
claims for estimation of either current or future liability. Ms.
Jones insist that with their methodology, the PI Committee and
the Futures Representative would have the Court ignore the
failings of past asbestos bankruptcy trusts and allow baseless
claims to go unquestioned by adopting an estimation based solely
on past litigation settlement history.
The Debtors assert that the settlement history cannot be adopted
as the basis for estimation because:
-- it is prohibited by Rule 408 of the Federal Rules of
Evidence;
-- it is prohibited by bankruptcy law's mandate that
estimation be tied to legal liability;
-- it would be particularly inappropriate given that it is now
known, extensively documented and largely undisputed that a
large percentage of the hundreds of thousands of personal
injury asbestos claims in the U.S. civil and bankruptcy
systems are invalid if not fraudulent; and
-- it would ignore the fact that the Debtors' inventory
settlements were not made because the claims they disposed
of were valid.
The Debtors recall that they were compelled to agree to those
settlements before because the tort system offered no means of
limiting settlements to valid claims.
Ms. Jones adds that an estimate based on abusive litigation and
past settlement history could render a debtor insolvent, thus
depriving shareholders of property and decreasing the recoveries
of other unsecured creditors. Estimating asbestos personal
injury claims beyond the amount of actual liability would also
render a plan unconfirmable because Section 1129(b) of the
Bankruptcy Code requires treatment of a dissenting class of
impaired creditors to be "fair and equitable," not allowing
premiums.
The Debtors attest that the proposed Questionnaire under the new
PI CMO is consistent with previous asbestos claim forms and is
neither overly burdensome nor prejudicial to the PI claimants.
The proposed Questionnaire will require far less of PI claimants
than what is demanded of them in an average asbestos trial. In
fact, assuming that all of the actions against the Debtors were
filed with a good faith factual basis, attorneys representing PI
claimants should have reviewed their client's medical,
occupational, and residential history prior to filing a lawsuit
and already should have possession of that information. Ms.
Jones argue that any minimal burden the Questionnaire does
generate is far outweighed by the possibility that it will reduce
the calculation of fraudulent and unsupported claims from
corrupting the estimation process. This, in turn, will benefit
the truly sick as well as the holders of other valid claims
against, and interests in, the Debtors.
The Debtors inform the Court that under the proposed PI CMO, the
estimation of their asbestos prepetition personal injury
liability would proceed in this manner:
(a) The Questionnaire will be sent to those claimants who
filed a lawsuit against the Debtors before the Petition
Date;
(b) The claimants will complete and return the Questionnaire;
(c) Information from the Questionnaire will be compiled into a
navigable database made available to the Debtors and the
official committees and their experts;
(d) The parties will submit expert reports relevant to
estimating the Debtors' asbestos liability and will
conduct discovery;
(e) The Court will hold a trial on the contested issues; and
(f) The Court will weigh the proposed estimations based on the
merits and evidence in the record and issue findings.
Ms. Jones clarifies that the Debtors do not require the Court to
decide on an estimation methodology at this time. The issue that
is before the Court is simply whether the Debtors should be
allowed the opportunity and means of obtaining the information
necessary to present their evidence-based estimation to the
Court, or if, instead, the Debtors should be denied information
and the parties should only present estimations based on
extrapolations from litigation history and past settlements, as
suggested by the PI Committee and the Futures Representative.
Ms. Jones contend that if the PI CMO and Questionnaire are not
approved, it will foreclose the use of any estimation methodology
other than that proposed by the Asbestos PI Committee and the
Futures Representative.
Headquartered in Columbia, Maryland, W.R. Grace & Co. --
http://www.grace.com/-- supplies catalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Company and its debtor-
affiliates filed for chapter 11 protection on April 2, 2001
(Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at
Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the
Debtors in their restructuring efforts. (W.R. Grace Bankruptcy
News, Issue No. 86; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
W.R. GRACE: Gets Court Nod to Pay CEO $760K Per Year Base Salary
----------------------------------------------------------------
On April 25, 2005, the U.S. Bankruptcy Court for the District of
Delaware approved a revised employment agreement between the W.R.
Grace & Co., and its debtor-affiliates and Alfred E. Festa, W.R.
Grace's president and chief executive officer, effective June 1,
2005.
The term of the Festa Agreement is for four years, ending on
May 31, 2009. Under the Festa Agreement, Mr. Festa is entitled
to a $760,000 initial base annual salary. His targeted award
under Grace's annual incentive compensation plan for 2005 and
each subsequent calendar year is 100% of his base salary earned
during the applicable year. Mr. Festa will also continue to
participate in the Grace long-term incentive programs. Under a
proposed 2005 LTIP, which would cover the 2005-2007 performance
period, Mr. Festa's targeted award would be $1,690,000.
If Mr. Festa's employment is terminated by the company without
cause, or by him as a result of constructive discharge, prior to
the expiration of the Festa Agreement, he would be entitled to a
severance payment equal to two times a dollar amount equal to
175% of his annual base salary at the time of his termination.
The Festa Agreement also provides that Mr. Festa will be entitled
to a $1,750,000 retention payment, payable in two installments.
The first installment, for $750,000, would be paid on
November 13, 2007, and the $1,000,000 would be paid a year after.
Mr. Festa would not be entitled to any installment of the
retention payment if his employment with Grace is terminated
prior to the date the installment is scheduled for payment,
except in the case where his termination occurs after Grace
emerges from Chapter 11 and is the result of his resignation as a
result of constructive discharge, termination by Grace not for
cause, or his death or disability. In the event Grace emerges
from Chapter 11 prior to May 13, 2007, the Festa Agreement
provides for $750,000 of the retention payment to be paid six
months after the date Grace emerges from Chapter 11, and the
remaining $1,000,000 of the retention payment to be paid 18
months after emergence.
Headquartered in Columbia, Maryland, W.R. Grace & Co. --
http://www.grace.com/-- supplies catalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Company and its debtor-
affiliates filed for chapter 11 protection on April 2, 2001
(Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at
Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the
Debtors in their restructuring efforts. (W.R. Grace Bankruptcy
News, Issue No. 85; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
WARWICK VALLEY: May Seek Another Waiver on Reporting Delay
----------------------------------------------------------
Warwick Valley Telephone Company (NASDAQ: WWVY) filed a
notification on Form 12b-25 of its inability to file its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2005, by the
prescribed filing deadline without unreasonable effort or expense.
Because it must refer to the Company's financial condition as at
December 31, 2004, the Company's Quarterly Report on Form 10-Q for
the quarter end March 31, 2005, cannot be filed until after the
filing of its Annual Report on Form 10-K for the year ended
December 31, 2004. As previously reported in the Company's Form
12b-25 filing on May 11, 2005, the filing of the Annual Report on
Form 10-K for the year ended December 31, 2004, has been delayed
despite the extensive effort on the part of management to complete
their evaluation of the Company's internal control over financial
reporting as of December 31, 2004, as required by Section 404 of
the Sarbanes-Oxley Act of 2002. Management continues to devote
significant time, effort and expense in preparing its financial
statements for the year ended December 31, 2004, and performing
its evaluation of internal control over financial reporting as of
December 31, 2004. However, due to the continued redirection of
personnel and resources in connection with the ongoing efforts to
complete management's assessment of the effectiveness of the
Company's internal controls over financial reporting, the Company
is still in the process of finalizing its financial statements for
both the Annual Report on Form 10-K for the year ended
December 31, 2004 and the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005. The Company currently expects the
Annual Report to be filed in July and the Quarterly Report on Form
10-Q will be filed shortly thereafter.
Default Waivers
CoBank, the lender under the Company's major credit facility, has
given the Company a waiver from the default which resulted from
the Company's delay in filing audited financial statements for the
year ended December 31, 2004. The waiver is effective through
June 1, 2005. However, based on its progress to date, the Company
does not expect to file audited statements for the year ended
December 31, 2004 until after June 1, 2005. Accordingly, the
Company intends to seek an extension of the waiver. If the waiver
is not further extended, CoBank could declare an Event of Default
that could accelerate the maturity of all amounts then outstanding
and then seek to collect those amounts.
Nasdaq Delisting
In connection with the previously disclosed notice from the Nasdaq
concerning the potential delisting of the Company, the Company met
with a Nasdaq hearing panel on May 5, 2005. The outcome from the
hearing is currently pending.
As previously reported in the Company's Form 12b-25 filing on
May 11, 2005, the Company has identified certain material
weaknesses in the design and operating effectiveness of internal
control over financial reporting. Furthermore, as the Company
continues with its evaluation of internal control over financial
reporting as of December 31, 2004, additional control deficiencies
may be identified and those control deficiencies may also
represent one or more material weaknesses. The existence of one or
more material weaknesses as of December 31, 2004, precludes a
conclusion by management that the Company's internal control over
financial reporting was effective as of that date.
On a year-over-year basis for the quarter ending March 31, 2005,
total Operating Revenues are expected to decline approximately
$0.3 million (-4%) to $6,690, principally due to a decrease in
revenue from network access charges, circuit revenue, reciprocal
compensation, and co-location rent revenues. The Company's
Operating Expense is expected to increase by approximately 1.9%
(or $0.1 million) to $6,590, mostly due to increased video content
costs and increased professional fees for services related to
ongoing efforts to comply with Section 404 of the Sarbanes-Oxley
Act. Consequently, net income is expected to decrease by $0.1
million (7%) to $1,727. Other income for the quarter, which is
derived primarily from the Company's limited partnership interest
in Orange County-Poughkeepsie LP, is expected to increase
approximately $0.1 million (5%). The foregoing results are
preliminary and unaudited and are subject to adjustment.
Warwick Valley Telephone Company is based in Warwick, N.Y. The
Company's Sept. 30, 2004, balance sheet shows $67 million in
assets and $26 million in liabilities.
WESTPOINT STEVENS: Lien Agent Asks Court to Release Escrowed Funds
------------------------------------------------------------------
As previously reported, WestPoint Stevens, Inc. and its debtor-
affiliates sought and obtained a DIP financing secured by liens
and security interests prior to those of both the 1st Lien Lenders
and the 2nd Lien Lenders. In connection with the DIP financing,
the U.S. Bankruptcy Court for the Southern District of New York
granted the 1st Lien Lenders and the 2nd Lien Lenders adequate
protection. The Debtors had acknowledged that the claims of both
the 1st Lien Lenders (principal amount: $484 million) and the 2nd
Lien Lenders (principal amount: $165 million) were oversecured.
The Adequate Protection Order provides for payment to the 2nd Lien
Agent of "current interest and . . . charges". The Adequate
Protection Order further provides that the 2nd Lien Lenders'
claims are allowed as secured claims under Section 506(b) of the
Bankruptcy Code. The Adequate Protection Order provided a sole
and exclusive remedy to the 1st Lien Lenders in case they sought
to stop adequate protection payments -- the application of those
payments to reduce the principal amount of the 2nd Lien
Obligations.
The Escrow Order
Gary M. Becker, Esq., at Kramer Levin Naftalis & Frankel LLP, in
New York, relates that adequate protection payments of $31 million
were made to Wilmington Trust Company, as Agent to the 2nd Lien
Credit Agreement, through July 2004. In August 2004, R2 Top Hat,
as holder of 40% of the 1st Lien claims, objected to the
continuation of adequate protection payments to the 2nd Lien
Lenders. To avoid a distracting fight over the issue at that
time, the 1st Lien Agent, 2nd Lien Agent, the Debtors and the
agent under the DIP Loan agreed, in a Court-approved stipulation,
to escrow future adequate protection payments due the 2nd Lien
Lenders.
Since the entry of the Escrow Order, $2 million per month in
adequate protection payments, starting with the payment due at the
end of August 2004, have been placed in an account with the escrow
agent, Wells Fargo Bank, N.A. As of May 10, 2005, the amount in
escrow exceeds $18 million, with another $2 million due to be
deposited at the end of May. Therefore, the amount in escrow at
the Purchaser Selection Hearing on June 24, 2005, is expected to
be $20 million. Pursuant to the Escrow Order, amounts held in
escrow may be released by the Escrow Agent upon the entry of an
order from the Court adjudicating the relative rights of the DIP
lender, the 1st Lien Lenders, the 2nd Lien Lenders and the Debtors
to the escrowed funds. The Escrow Order also provides that none
of the amounts in escrow may be released to the Debtors or any
other party -- except the DIP Lenders, 1st Lien Lenders or 2nd
Lien Lenders -- until the DIP, the 1st Lien Obligations and the
2nd Lien Obligations have been satisfied in full.
The Escrow Order contemplates that, once a hearing date has been
set for the sale of substantially all the Debtors' assets or for
confirmation of a plan of reorganization, the 2nd Lien Agent may
file a motion seeking a determination as to the allocation of the
amounts held in escrow.
By this motion, the 2nd Lien Agent asks the Court to:
(a) terminate the adequate protection escrow, direct the
Escrow Agent to release the escrowed adequate protection
payments forthwith to the 2nd Lien Agent, and reinstate
direct payments from the Debtors to the 2nd Lien Agent; or
(b) establish a schedule for the submission of expert reports
concerning the valuation of the 2nd Lien Lenders'
collateral as of the Petition Date and set a hearing
for further determination of its Motion.
Valuation of Collateral
Mr. Becker tells the Court that these facts are relevant,
objective evidence of the value of the Debtors, and hence the
value of collateral securing the 2nd Lien Obligations on the
Petition Date:
* The Debtors entered Chapter 11 with a press release
announcing that they had agreed with their major unsecured
bondholders on the terms of a plan which would pay off the
DIP, refinance the 1st Lien Lenders, pay the 2nd Lien
Lenders 100% in cash at consummation, and distribute equity
to unsecured creditors.
* As of the Petition Date, the Debtors' unsecured bonds traded
at a price of 22.5%, reflecting the market's expectation
that the 1st and 2nd Lien Lenders would be paid in full and
that value would be available for distribution to unsecured
creditors.
* On January 20, 2005, the Debtors filed a plan and disclosure
statement. Among other things, the Disclosure Statement
contained a going concern valuation of the Debtors by their
financial advisor, Rothschild, Inc. Rothschild's
conclusion, based on the Debtors' 2004 business plan, was
that the value of the reorganized Debtors -- and thus the
value of collateral securing the DIP loan, the 1st Lien
Obligations and the 2nd Lien Obligations -- ranged between
"$615 million to $670 million as of September 10, 2004"
after distributing cash under the plan. "Rothschild's
methodology, applied to the Debtors' 2003 business plan,
shows that the value of the Debtors as of the Petition Date
ranged between $1.11 billion and $1.24 billion, clearly
sufficient to make the 2nd Lien Lenders oversecured," Mr.
Becker says.
* The Debtors stipulated in connection with the Adequate
Protection Order that the value of the 2nd Lien Lenders'
collateral exceeded $165 million as of the Petition
Date.
Mr. Becker points out that the Debtors have enjoyed the use of the
2nd Lien Lenders' collateral for the duration of their Chapter 11
cases while they have attempted to reorganize. That the assets
can be sold for substantial value today - the principal
beneficiaries of which will be the 1st Lien Lenders -- is possible
only because the 2nd Lien Lenders were not permitted to foreclose
on their collateral when the Debtors filed for Chapter 11
protection, Mr. Becker notes. Under the applicable law, Mr.
Becker says, the 2nd Lien Lenders are entitled to receive the
adequate protection payments currently held in escrow and to have
future adequate protection payments made directly to the 2nd Lien
Agent.
Because the value of the 2nd Lien Lenders' Collateral as of the
Petition Date at the very least exceeds the amount of the paid and
escrowed adequate protection payments, Mr. Becker asserts that the
Court should terminate the adequate protection escrow, direct the
release of the escrowed funds to the 2nd Lien Agent for
distribution to the 2nd Lien Lenders, and reinstate direct payment
to the 2nd Lien Agent. The 2nd Lien Agent believes that the
information currently available to the Court permits this move.
However, to the extent the Court requires further evidence, Mr.
Becker says, the 2nd Lien Agent is prepared to work with any
objectors to set a discovery schedule that will result in the
submission of expert valuation reports.
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. 45; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
WHX CORP: Files Amended Disclosure Statement in S.D. New York
-------------------------------------------------------------
WHX Corporation presented to the U.S. Bankruptcy Court for the
Southern District of New York, on April 26, 2005, its First
Amended Disclosure Statement explaining its Plan of
Reorganization. The Debtor filed its Reorganization Plan on
March 7, 2005.
The Debtor disclosed in the Amended Disclosure Statement the
proposed treatment of WHX Pension Plan and Pension Claims. On the
Effective Date, New WHX will:
(1) assume and continue the WHX Pension Plan;
(2) satisfy the minimum funding standards pursuant to Sec. 412
of the Internal Revenue Code and Sec. 1082 of the Labor
Code; and
(3) administer the WHX Pension Plan in accordance with its
terms and the provisions of ERISA and the Internal Revenue
Code.
Pension Benefit Guaranty Corporation has notified the Debtor that
it estimates the unfunded benefit liabilities of the WHX Pension
Plan on a PBGC termination basis to be $216.2 million. In the
event the WHX Pension Plan were to terminate, PBGC asserts that
WHX and its nondebtor subsidiaries would be jointly and severally
liable to PBGC for:
(i) the unfunded benefit liabilities,
(ii) any unpaid contributions, and
(iii) any unpaid PBGC premiums.
However, the PBGC's claims are contingent upon circumstances that,
under the Plan, are not intended to occur.
The Debtor did not amend the proposed treatment of claims and
interests.
As reported in the Troubled Company Reporter on Mar. 15, 2005,
under the Plan, the estimated recoveries assume that the value of
new WHX Corp. Common Stock to be issued will be $113,722,700.
Holders of Allowed Senior Notes Claims will be entitled to 85% of
the new WHX common stock, with an estimated value of $96,664,295,
and holders of Allowed Preferred Shares will be entitled to 15% of
the new WHX common stock, with an estimated value of $17,058,405.
There can be no assurance, however, that those estimated values
and recoveries relating to the new WHX Common Stock are accurate
or reliable.
The Plan groups claims and interests into seven classes.
The Unimpaired Classes under the Plan consist of:
a) Priority Non-Tax Claims that do not exceed $4,650 will be
paid in full in the ordinary course of the Debtor's
business; and
b) Secured Claims that are secured by a valid, perfected and
enforceable Lien on the Debtor's assets and will be treated
in accordance with Section 1124 of the Bankruptcy Code.
The Impaired Claims under the Plan consist of:
a) Allowed Senior Note Claims with an aggregate amount of
$96,664,295 will be paid with approximately 85% of the
equity in the Reorganized Debtor on the Distribution Date,
and those claims holders will receive their Pro Rata Share
of 8.5 million shares of New WHX Common Stock;
b) Allowed Other Unsecured Claims will receive Cash equal to
the amount of those Allowed Claims;
c) Series A Preferred Equity Interests with an aggregate
estimated recovery amount of $7,811,076 will be cancelled on
the Effective Date, and on the Distribution Date, those
claim holders will receive their Pro Rata Share of 686,853
shares of New WHX Common Stock;
d) Series B Preferred Equity Interests with an aggregate
estimated amount of $9,247,329 will be cancelled on the
Effective Date, and on the Distribution Date, those claim
holders will receive their Pro Rata Share of 813,147 shares
of New WHX Common Stock; and
e) Common Equity Interests will be cancelled on the Effective
Date and will receive no distributions under the Plan.
Full-text copies of the Disclosure Statement and Plan are
available for a fee at:
http://www.researcharchives.com/bin/download?id=050314022537
-- and --
http://www.researcharchives.com/bin/download?id=050314023014
Headquartered in New York City, New York, WHX Corporation --
http://www.whxcorp.com/-- is a holding company structured to
acquire and operate a diverse group of businesses on a
decentralized basis. WHX's primary business is Handy & Harman, a
diversified industrial manufacturing company servicing the
electronic materials, specialty wire and tubing, specialty
fasteners and fittings, and precious metals fabrication markets.
The Company filed for chapter 11 protection on March 7, 2005
(Bankr. S.D.N.Y. Case No. 05-11444). When the Debtor filed for
protection from its creditors, it reported total assets of
$406,875,000 and total debts of $352,852,000.
WHX CORP: Court Sets Disclosure Statement Hearing on June 2
-----------------------------------------------------------
The Honorable Allan L Gropper of the U.S. Bankruptcy Court for the
Southern District of New York will consider approval of WHX
Corporation's First Amended Disclosure statement at 11:00 a.m. on
June 2, 2005, at:
One Bowling Green
New York, New York 10004-1408
The Court will also consider approval of procedures for
solicitation and tabulation of votes on the Plan.
Objections to the Disclosure Statement, if any, must:
* be in writing;
* state the name and address of the objecting party and the
nature of the claim or interest of the party;
* state with particularity the basis and nature of any
objection or proposed modification and provide the specific
language of any proposed modification; and
* be filed with the Court and served so that they are received
no later than 4:00 p.m., Eastern Time, on May 20, 2005 by:
WHX Corporation
110 East 59th Street
New York, New York 10022
Attn: Stewart E. Tabin, Esq.
Debtor's Counsel
Jones Day
222 East 41st Street
New York, New York 10017
Attn: Richard H. Engman, Esq.
Office of the United States Trustee
Southern District of New York
33 Whitehall Street, 21st Floor
New York, New York 10004
Attn: Greg M. Zipes, Esq.
Official Committee of Unsecured Creditors' counsel
Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
New York, New York 10020-1089
Attn: D. Farrington Yates, Esq.
-- and --
Official Committee of
Preferred Equity Securityholders' Counsel
Andrews & Kurth LLP
450 Lexington Avenue
New York, New York 10017
Attn: Paul Silverstein, Esq.
Headquartered in New York City, New York, WHX Corporation --
http://www.whxcorp.com/-- is a holding company structured to
acquire and operate a diverse group of businesses on a
decentralized basis. WHX's primary business is Handy & Harman, a
diversified industrial manufacturing company servicing the
electronic materials, specialty wire and tubing, specialty
fasteners and fittings, and precious metals fabrication markets.
The Company filed for chapter 11 protection on March 7, 2005
(Bankr. S.D.N.Y. Case No. 05-11444). When the Debtor filed for
protection from its creditors, it reported total assets of
$406,875,000 and total debts of $352,852,000.
WHX CORPORATION: Committee Hires Andrews Kurth as Counsel
---------------------------------------------------------
The Official Committee of Preferred Equity Security Holders in WHX
Corporation's chapter 11 case, sought and obtained permission from
the U.S. Bankruptcy Court for the Southern District of New York to
hire Andrews Kurth LLP as its counsel.
As counsel, Andrews Kurth will:
a) consult with the Committee, the Official Committee of
Unsecured Creditors, the Debtor and the Office of the
United States Trustee concerning the administration of
this case;
b) review, analyze and respond to pleadings filed by the
Debtor with this Court and to participate in hearings
concerning such pleadings;
c) investigate the acts, conduct, assets, liabilities and
financial condition of the Debtor, the operation of the
Debtor's business and or proposals to restructure such
business, and any matters relevant to this case in the
event and to the extent required by the Committee;
d) take all necessary action to protect the rights and
interests of the Committee, including, but not limited
to, the negotiation and preparation of the documents
relating to a chapter 11 plan, disclosure statement and
confirmation of such plan;
e) represent the Committee in connection with the exercise
of its powers and duties under the Bankruptcy Code and in
connection with this Bankruptcy Case; and
f) perform all other necessary legal services in connection
with this Bankruptcy Case.
The primary members of the firm's engagement team for the
Committee will be paid based on these hourly rates:
Partners $375 to $695
Associates $195 to $400
Paralegals $125 to $175
To the best of the Committee's knowledge, Andrews Kurth is a
"disinterested person" as the term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in New York City, New York, WHX Corporation --
http://www.whxcorp.com/-- is a holding company structured to
acquire and operate a diverse group of businesses on a
decentralized basis. WHX's primary business is Handy & Harman, a
diversified industrial manufacturing company servicing the
electronic materials, specialty wire and tubing, specialty
fasteners and fittings, and precious metals fabrication markets.
The Company filed for chapter 11 protection on March 7, 2005
(Bankr. S.D.N.Y. Case No. 05-11444). When the Debtor filed for
protection from its creditors, it reported total assets of
$406,875,000 and total debts of $352,852,000.
WILLIAMS SCOTSMAN: Moody's Assigns B2 Rating to New $650M Facility
------------------------------------------------------------------
Moody's Investors Service has assigned a B2 rating to Williams
Scotsman's new $650 million senior secured bank facility. Moody's
also affirmed the firm's B2 senior implied rating. The outlook is
stable. This new facility is expected to replace the company's
existing credit facility, with additional proceeds being used to
pay down senior unsecured debt.
The rating considers Williams Scotsman's intrinsic credit
strengths which are benefiting from an improving operating
environment. The company has gained a leading market share in the
modular space industry over the past few years. Additionally, the
company has a diverse customer base throughout the US and Canada
which limits its exposure to a regional economic downturn. If
continued, a shift in the company's portfolio to more stable
products should also reduce revenue and earnings volatility.
For example, the company's gain in the modular classroom segment,
which typically provides longer lease durations, though at lower
margins, is positive. The experience of upper management is also
viewed as a credit positive.
The credit weaknesses include the high leverage multiples, low
core utilization rates since 2002, and lack of growth in average
rental rates. Pretax interest coverage levels have historically
been below peers, however, the large interest expense burden
should be mitigated after the recapitalization. Consolidated debt
to EBITDA levels have been high and although improvement is
expected due to the equity issuance, continuing leverage will
remain above average. The substantial debt on the balance sheet
and the corresponding expense has been a primary cause of net
losses by the company and thus a core credit weakness.
Moody's views the proposed recapitalization as generally a credit
positive event for the firm as a whole. The additional equity is
beneficial, but Moody's said that the company would remain highly
levered and coverage ratios would remain relatively weak for the
rating category.
The rating on the new senior secured bank credit facility has been
placed at the same level as the firm's Senior Implied rating.
This results from the fact that this facility is expected to
comprise over half of Williams Scotsman's proposed debt
outstanding and capital structure. This is in contrast to the
existing bank credit facility, which benefits from substantially
greater amounts of capital below it in the firm's capital
structure. Moody's did note that Williams Scotsman's access to
liquidity should be stronger given the revised structure and
covenant package on the new bank line.
Williams Scotsman has seen a slow recovery in terms of utilization
and average rental rates. This is due, in part, to the "portfolio
effect" -- the leases that were written in a weaker environment
need to run off and be written in the current stronger environment
for the financial benefits to become apparent. During the middle
of 2004, the company reversed the trend of higher lease prices
coming in and lower lease prices going out. Moody's will
carefully monitor ongoing utilization and average rental rates.
The modular office space industry remains highly competitive,
though Williams Scotsman has gained market share in recent years.
Part of the growth has come from acquisitions of smaller players,
as well as portfolio acquisitions, like the purchase of a
portfolio of classroom assets from GE Capital. Moody's expects
that the firm will continue to be acquisitive, and cautions that a
large debt-financed acquisition would put pressure on the current
rating.
What could change the rating up:
. A fundamental shift in the firm's financial policy such that
leverage would permanently decline as a percentage of total
capital.
. Greater resiliency in utilization and yield as a result of
significant portfolio shift to less cyclical customer types,
e.g. classrooms
What could change the rating down:
. Failure to complete the proposed recapitalization
. Lack of anticipated improvement in utilization and yield that
is expected to lead to strengthened profitability and
coverage measures.
. A major debt financed acquisition or substantial
international expansion without very strong managerial
infrastructure and controls.
Williams Scotsman, Inc. is headquartered in Baltimore, Maryland,
and is a provider of modular space solutions predominantly in
North America.
This rating was assigned:
* Senior Secured Revolving Credit Facility -- B2
This rating was affirmed:
* Senior Implied -- B2
WINN-DIXIE: Panel Wants to Hire Akerman Senterfitt as Co-Counsel
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of Winn-Dixie
Stores, Inc., and its debtor-affiliates seeks authority from the
U.S. Bankruptcy Court for the Middle District of Florida to retain
Akerman Senterfitt, effective as of April 22, 2005, as its local
counsel and co-counsel with Milbank, Tweed, Hadley & McCloy, LLP.
Specifically, Akerman will:
(a) assist the Committee with respect to its rights, powers
and duties in the Debtors' Chapter 11 cases;
(b) assist and advise the Committee in its consultations with
the Debtors regarding the administration of their Chapter
11 cases;
(C) assist the Committee in analyzing the claims of the
Debtors' creditors and in negotiating with those
creditors;
(d) assist with the Committee's investigation of the acts,
conduct, assets, liabilities and financial condition of
Winn-Dixie and of the operation of its business;
(e) assist the Committee in its analysis of, and negotiations
with, the Debtors or any third party concerning matters
related to the terms of a Chapter 11 Plan or Plans for the
Debtors;
(f) assist and advise the Committee with respect to its
communications with the general creditor body regarding
significant matters in the Debtors' Chapter 11 cases;
(g) represent the Committee at all hearings and other
proceedings;
(h) review and analyze all applications, orders, statements of
operations, and schedules filed with the Court and advise
the Committee as to their propriety;
(i) assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the
Committee's interests and objectives; and
(j) perform other legal services as may be required and are
deemed to be in the interests of the Committee in
accordance with the Committee's powers and duties as set
forth in the Bankruptcy Code.
The Committee expects that Akerman and Milbank will institute
appropriate procedures to ensure no duplication of services.
The Committee believes that Akerman possesses extensive knowledge
and expertise in the areas of law relevant to the Debtors'
Chapter 11 cases. In selecting its local counsel, the Committee
sought counsel with offices in the Middle District of Florida
with experience in representing creditor's committees in large
Chapter 11 cases and other debt-restructuring scenarios. Akerman
has that experience having represented a number of creditors and
creditors' committees in significant reorganizations under
Chapter 11 of the Bankruptcy Code.
John B. Macdonald, Esq., a member of Akerman, discloses that the
firm has been engaged by Winn-Dixie Stores, Inc., as an Ordinary
Course Professional for the performance of legal work in
connection with certain labor and employment matters and
regulatory maters unrelated to the Chapter 11 cases. Winn-Dixie
and Akerman have agreed that the firm will withdraw from all
representation of Winn-Dixie in existing matters, with the
exception of certain regulatory and administrative work being
performed solely by Akerman's office in Tallahassee, Florida.
Akerman has agreed to implement and maintain a "Screening Wall"
between those of Akerman's professionals in its Tallahassee
office and those Akerman professionals performing services for
the Committee. Winn-Dixie has agreed to waive all conflicts of
interest arising from the Committee's retention of Akerman.
Akerman will be compensated pursuant to its standard hourly
rates:
Partners $210 to $350
Associates/Of-Counsel $155 to $240
Legal Assistants $115 to $120
In addition, the hourly rates of Akerman's professionals within
its Insolvency and Creditors' Rights Practice Group range from
$170 to $580.
Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. --
http://www.winn-dixie.com/-- is one of the nation's largest food
retailers. The Company operates stores across the Southeastern
United States and in the Bahamas and employs approximately 90,000
people. The Company, along with 23 of its U.S. subsidiaries,
filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y.
Case No. 05-11063). The Honorable Judge Robert D. Drain ordered
the transfer of Winn-Dixie's chapter 11 cases from Manhattan to
Jacksonville. On April 14, 2005, Winn-Dixie and its debtor-
affiliates filed for chapter 11 protection in M.D. Florida (Case
No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps
Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and
Brian C. Walsh, Esq., at King & Spalding LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $2,235,557,000 in
total assets and $1,870,785,000 in total debts. (Winn-Dixie
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 215/945-7000).
WINN-DIXIE: Wachovia Consents to Smith Hulsey's Retention
---------------------------------------------------------
As previously reported on the Troubled Company Reporter on
April 29, 2005, Winn-Dixie Stores, Inc., and its debtor-affiliates
sought and obtained permission from the U.S. Bankruptcy Court for
the Middle District of Florida to hire Smith Hulsey & Busey as
co-counsel to assist Skadden, Arps, Slate, Meagher & Flom, nunc
pro tunc March 28, 2005.
U.S. Trustee's Motion for Reconsideration
In an affidavit supporting the Debtors' employment of Smith
Hulsey & Busey as co-counsel, Cynthia C. Jackson, Esq., a member
of the firm, disclosed that Wachovia Bank, N.A., a secured
creditor in the Debtors' Chapter 11 cases, is a significant
client of Smith Hulsey. Smith Hulsey also represents Wachovia's
affiliate, Wachovia Securities, LLC.
According to Ms. Jackson, Wachovia has provided Smith Hulsey with
a written waiver consenting to Smith Hulsey's representation of
the Debtors in their Chapter 11 cases. In connection with
Wachovia's waiver, Smith Hulsey has agreed not to represent or
provide legal advice to the Debtors in connection with any
dispute involving Wachovia. Skadden, Arps, Slate, Meagher & Flom
will act as sole counsel for the Debtors in those instances.
Felicia S. Turner, the United States Trustee for Region 21, says
she needs more time to obtain information to determine whether
that restriction on Smith Hulsey's representation is detrimental
to the Debtors. The U.S. Trustee is attempting to obtain
additional information from Skadden Arps to determine whether the
firm also has restrictions.
The U.S. Trustee reserves the right to amend or withdraw the
Motion for Reconsideration once additional information is
obtained.
Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. --
http://www.winn-dixie.com/-- is one of the nation's largest food
retailers. The Company operates stores across the Southeastern
United States and in the Bahamas and employs approximately 90,000
people. The Company, along with 23 of its U.S. subsidiaries,
filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y.
Case No. 05-11063). The Honorable Judge Robert D. Drain ordered
the transfer of Winn-Dixie's chapter 11 cases from Manhattan to
Jacksonville. On April 14, 2005, Winn-Dixie and its debtor-
affiliates filed for chapter 11 protection in M.D. Florida (Case
No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps
Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and
Brian C. Walsh, Esq., at King & Spalding LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $2,235,557,000 in
total assets and $1,870,785,000 in total debts. (Winn-Dixie
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 215/945-7000).
WINN-DIXIE: Wants Dwyer to Release $240,000 in Escrow
-----------------------------------------------------
On February 1, 2001, Winn-Dixie Stores, Inc., and its debtor-
affiliates entered into a lease with Basin Street #2, Limited
Partnership. Pursuant to the Lease, the Debtors were to receive
an assignment of 90% of all cash flows from the future development
of an adjacent outparcel. Subsequently, Basin asked the Debtors
to agree to terminate the assignment. On October 26, 2004, the
Debtors agreed to execute the necessary documents to effect the
termination in exchange for electing either to obtain a parcel of
property at a price of $22,000 or to receive a $240,000
termination fee.
By letter dated December 29, 2004, the Debtors informed Basin
that they elect to receive the termination fee. The Debtors
forwarded the executed documents necessary to terminate the
assignment, which were to be held in escrow pending receipt of
the termination fee. Basin then forwarded the executed documents
to Dwyer & Cambre, which had agreed to act as escrow agent
pending the Debtors' receipt of the termination fee. By the
terms of the escrow arrangement, the Debtors await receipt of the
termination fee to perform their only outstanding action as of
the Petition Date, which is to acknowledge receipt of the
termination fee.
The Debtors believe that the funds represent property of the
estate. Therefore, the Debtors believe that ordering the release
of the termination fee and the escrowed documents is appropriate.
"The Chapter 11 filing does not excuse Dwyer & Cambre from
delivering the funds to the Debtors," D.J. Baker, Esq., at
Skadden, Arps, Slate, Meagher & Flom, in New York, says.
Dwyer & Cambre, as escrow agent, has sought instructions from the
parties and does not dispute its obligation to deliver the funds
to the Debtors.
By this motion, the Debtors ask the U.S. Bankruptcy Court for the
Middle District of Florida to:
(a) authorize and direct Dwyer & Cambre to:
(i) release to the Debtors the $240,000 owed by Basin in
consideration for the Debtors' prepetition
termination of an assignment of rents; and
(ii) record the prepetition documents evidencing the
termination; and
(b) authorize the Debtors to take any actions that may be
necessary to facilitate the completion of the escrowed
transaction.
The Debtors believe that all material aspects of this transaction
occurred prepetition and that no Court approval is necessary.
The Debtors are seeking Court approval, however, because the
parties who must rely on this transaction -- including the
construction lender and title insurance company -- are requiring
Court approval to ensure that the documentation to be recorded in
the public records postpetition is valid.
Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. --
http://www.winn-dixie.com/-- is one of the nation's largest food
retailers. The Company operates stores across the Southeastern
United States and in the Bahamas and employs approximately 90,000
people. The Company, along with 23 of its U.S. subsidiaries,
filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y.
Case No. 05-11063). The Honorable Judge Robert D. Drain ordered
the transfer of Winn-Dixie's chapter 11 cases from Manhattan to
Jacksonville. On April 14, 2005, Winn-Dixie and its debtor-
affiliates filed for chapter 11 protection in M.D. Florida (Case
No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps
Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and
Brian C. Walsh, Esq., at King & Spalding LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $2,235,557,000 in
total assets and $1,870,785,000 in total debts. (Winn-Dixie
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 215/945-7000).
XO COMMS: Posts $42.9 Million Net Loss in First Quarter 2005
------------------------------------------------------------
XO Communications, Inc. (OTC Bulletin Board: XOCM.OB) reported its
first quarter 2005 financial and operational results.
Revenue for the first quarter ended March 31, 2005 was
$361.5 million, an increase of 39 percent compared with
$260.9 million in the same period in the prior year. Revenue for
the first quarter of 2005 includes a full quarter of revenue from
the acquired telecommunications services assets of Allegiance
Telecom.
Consolidated net loss for the first quarter of 2005 was
$42.9 million, an improvement of $5.6 million compared to a net
loss of $48.5 million in the same period in the prior year.
Consolidated EBITDA for the first quarter of 2005 was
$21.6 million, an improvement of $39.5 million compared to a
$17.9 million EBITDA loss in the same period in the prior year. A
portion of the EBITDA increase related to $10 million of favorable
settlements with other carriers contributing to a reduction in the
cost of service.
"We're off to a solid start in 2005, demonstrated by our financial
results and the reception by customers to our new IP-based
services," said Carl Grivner, XO Communications CEO. "Our first
quarter results show that we continue to execute on our strategic
plan. We achieved positive EBITDA for the third consecutive
quarter and were able to maintain our cash position with a slight
improvement over the previous quarter. We are also seeing strong
demand for our recently launched VoIP services bundle, XOptions
Flex, for which we've already received more than 230 customer
orders."
Revenue from voice services -- consisting of local, long distance
and other voice services -- was $186.3 million in the first
quarter of 2005 compared with $130.9 million for the same period
in the prior year. Revenue from data services -- consisting of
Internet access, network access and web hosting -- was $108.4
million in the first quarter of 2005 compared with $92.9 million
for the same period in the prior year. Revenue from integrated
services -- consisting of integrated data and voice services --
was $66.8 million in the first quarter of 2005 compared with $37.1
million for the same period in the prior year.
Selling, operating and general (SOG) expenses as a percentage of
revenue for the first quarter of 2005 were 53 percent compared to
65 percent in the same period in the prior year. The improvements
in SOG as a percentage of revenue were primarily due to the
Company's ongoing cost reduction initiatives and greater
efficiencies resulting from the integration of the acquired
Allegiance Telecom operations.
Cash, cash equivalents and marketable securities were $267.3
million at March 31, 2005, an increase of $16.0 million from the
previous quarter.
Waiver
In May of 2005, XO obtained a waiver of compliance with certain
financial covenants contained in its senior secured credit
facility through December 31, 2006. The waiver was obtained from
the affiliate of Mr. Icahn which holds a majority of the loans
outstanding under that agreement. In connection with the waiver,
XO agreed that in the event of a sale of the Company and in the
event of certain other significant sale or divestiture
transactions, it will prepay all amounts outstanding under the
credit facility in cash and offer to repurchase outstanding shares
of XO's outstanding preferred stock at their liquidation value
accrued through the date of redemption for cash or, in certain
events, securities. The affiliate of Mr. Icahn which holds a
majority of such Preferred Stock has agreed to accept this offer,
to the extent it consists of cash.
In March 2005, XO retained Jefferies & Company, Inc., to present
strategic alternatives based on, among other things, the
competitive environment of the telecommunications industry, the
current regulatory environment, and the recent and pending mergers
and acquisitions in the industry. XO has received the Jefferies
report, which addressed potential operational improvements and
disposition possibilities, and is considering all of its strategic
alternatives.
Quarter Highlights
XO has begun offering fixed broadband wireless backhaul services
to mobile wireless telecommunications carriers. In April 2005, XO
reached an agreement to provide fixed broadband wireless services
on a limited basis to one of the national mobile wireless
carriers. The Company will continue to pursue opportunities to
market and sell its fixed wireless solution to mobile wireless
carriers both for primary network connectivity and redundancy.
Following initial market rollouts in Baltimore, Boston, New York
and Washington, D.C. in the first quarter of 2005, XO last month
announced the national availability of XOptions Flex, its new
industry-leading Voice over Internet Protocol (VoIP) services
bundle for businesses. Now available in forty-five markets, which
include more than 1,000 cities nationwide, XOptions Flex is the
industry's first VoIP services bundle for businesses that combines
unlimited local and long distance calling, dedicated Internet
access and web hosting services at a flat monthly price. The
service leverages the latest in VoIP technology to provide
customers with next generation communications capabilities, such
as unlimited voice calling, dynamic bandwidth allocation, voice
virtual private networking (VPN), and a simple Administrative Web
Portal.
In March 2005, XO announced a major contract with The Detroit
Public Schools, the nation's eleventh largest school district.
Under the three-year, $8 million contract, XO will provide the
140,000 student Detroit Public School system with local voice
services as well as high-speed Internet access to over 235 schools
and administrative locations around the City of Detroit.
Headquartered in Reston, Virginia, XO Communications --
http://www.xo.com/-- provides local, long distance, and data
services to small and midsize business customers as well as to
national enterprise accounts. The Company filed for chapter 11
protection on June 17, 2002 (Bankr. S.D.N.Y. Case No. 02-12947).
XO's stand-alone plan of reorganization was confirmed on
Nov. 15. 2002, and the company emerged from bankruptcy in
January 2003. Matthew Allen Feldman, Esq., and Tonny K. Ho,
Esq., at Willkie Farr & Gallagher represented the Debtors in
their restructuring.
YUKOS OIL: Ordered to Settle Anstalt's Claim for $357 Million
-------------------------------------------------------------
Interfax reports that a Moscow court ordered Yukos Oil Company to
pay $357 million in settlement of a claim filed by New Century
Securities Management Anstalt. The claim was filed by Anstalt
based on a $58 million promissory note issued by Yukos' Siberian
unit OAO Angarskaya Petrochemicals. New Century also sought $300
million in penalties and fines.
Headquartered in Houston, Texas, Yukos Oil Company is an open
joint stock company existing under the laws of the Russian
Federation. Yukos is involved in the energy industry
substantially through its ownership of its various subsidiaries,
which own or are otherwise entitled to enjoy certain rights to oil
and gas production, refining and marketing assets. The Company
filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex.
Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq.,
Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton,
Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent
the Debtor in its restructuring efforts. When the Debtor filed
for protection from its creditors, it listed $12,276,000,000 in
total assets and $30,790,000,000 in total debts. (Yukos
Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
* Large Companies with Insolvent Balance Sheets
-----------------------------------------------
Total
Shareholders Total Working
Equity Assets Capital
Company Ticker ($MM) ($MM) ($MM)
------- ------ ------------ ------- --------
Accuride Corp. ACW (48) 553 105
Airgate PCS Inc. PCSA (94) 299 86
Akamai Tech. AKAM (111) 202 75
Alaska Comm. Sys. ALSK (33) 637 71
Alliance Imaging AIQ (63) 622 21
Amazon.com AMZN (162) 2,472 720
AMR Corp. AMR (697) 29,167 (2,311)
Amylin Pharm. Inc. AMLN (87) 358 282
Arbinet-Thexchan. ARBX (1) 70 11
Atherogenics Inc. AGIX (36) 74 60
Blount International BLT (256) 425 98
Biomarin Pharmac BMRN (68) 233 15
CableVision System CVC (2,035) 11,141 411
CCC Information CCCG (113) 93 21
Cell Therapeutic CTIC (71) 185 94
Centennial Comm CYCL (486) 1,467 124
Choice Hotels CHH (203) 276 (23)
Cincinnati Bell CBB (593) 1,919 (8)
Clorox Co. CLX (346) 3,756 (158)
Compass Minerals CMP (88) 724 131
Deluxe Corp DLX (150) 1,556 (331)
Denny's Corporation DENN (265) 500 (93)
Dollar Financial DLLR (51) 319 81
Domino's Pizza DPZ (526) 450 26
Eagle Hospitality EHP (26) 177 N.A.
Echostar Comm-A DISH (1,830) 6,579 148
Fairpoint Comm. FRP (173) 819 (9)
Flow Intl. Corp. FLOW (7) 135 (9)
Foster Wheeler FWHLF (441) 2,268 (212)
Graftech International GTI (23) 1,068 256
ICOS Corp ICOS (38) 285 170
IMAX Corp IMAX (40) 235 24
Investools Inc. IED (7) 50 (19)
Life Sciences LSRI (5) 173 1
Lodgenet Entertainment LNET (68) 301 20
Maytag Corp. MYG (78) 2,954 380
McDermott Int'l MDR (261) 1,387 58
McMoran Exploration MMR (85) 156 29
Neff Corp. NFFCA (43) 270 6
Northwest Airline NWAC (3,273) 13,821 (1,204)
Northwestern Corp. NWEC (603) 2,445 (692)
NPS Pharm Inc. NPSP (13) 397 306
ON Semiconductor ONNN (363) 1,112 237
Owens Corning OWENQ (4,132) 7,567 1,118
Pinnacle Airline PNCL (8) 166 31
Primedia Inc. PRM (1,145) 1,559 (153)
Protection One PONN (178) 461 (372)
Quality Distribution QLTY (26) 377 9
Qwest Communication Q (2,564) 24,129 469
RH Donnelley RHD (127) 3,972 (57)
Riviera Holdings RIV (29) 218 1
SBA Comm. Corp. A SBAC (89) 917 65
Sepracor Inc. SEPR (351) 974 605
St. John Knits Inc. SJKI (52) 213 80
Syntroleum Corp. SYNM (8) 48 11
Tivo Inc. TIVO (3) 160 (50)
US Unwired Inc. UNWR (84) 413 (45)
Vector Group Ltd. VGR (31) 536 122
Vertrue Inc. VTRU (32) 486 31
WR Grace & Co. GRA (118) 3,086 774
*********
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, Lucilo Junior M.
Pinili, 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 ***