/raid1/www/Hosts/bankrupt/TCR_Public/050527.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, May 27, 2005, Vol. 9, No. 124
Headlines
24 HOUR: S&P Rates Proposed $700 Million Senior Secured Loan at B
ACE AVIATION: Files Prospectus for Aeroplan Income Fund IPO
ADELPHIA COMMS: Court Okays DOJ, SEC & Rigas Settlement Agreements
ADELPHIA COMMS: Postpones 7.5% Series E & F Stock Conversion
AIR CANADA: Appoints R. Reid & C. Baril to Executive Posts
AIR CANADA: Westjet's Lawsuit for Judicial System Abuse Dismissed
ALLIANCE ATLANTIS: Appoints David Lazzarato as Exec. VP and CFO
ALLIANCE LEASING: Ch. 11 Trustee Taps Manier & Herod as Counsel
ALLIANCE LEASING: Ch. 11 Trustee Taps Elrod Auction as Auctioneer
ATA AIRLINES: Gets Court Nod to Ink CIT Aircraft Lease Pact
ATA AIRLINES: Wants to Assume GATX Ancillary Agreements
BEAUTYCO INC: Bankruptcy Court Dismisses Chapter 11 Case
BECKMAN COULTER: Moody's Reviews Subordinated Notes' Ba1 Rating
BIRDS EYE: Good Financial Profile Prompts S&P's Stable Outlook
BUEHLER GROUP: Meeting of Creditors Slated for June 24
BUEHLER FOODS: Gets Interim Court Nod on $6 Mil. DIP Financing
BUEHLER FOODS: Wants to Borrow $3.3 Mil. from Associated Wholesale
BURLINGTON IND: Trust Wants Court to Nix $2 Million Hospodor Claim
CALPINE CORP: Plans to Sell Plants & Cut Debt Load by $3 Billion
CALPINE CORP: Commences Tender Offer for $160 Million Senior Notes
CALPINE CORP: Fitch Puts Ratings on Watch Evolving
CART INC: Distributes $450,000 to Championship Auto
CATHOLIC CHURCH: Tucson's Disclosure Statement Faces 6 Objections
CATHOLIC CHURCH: Tucson Diocese Will Revise Disclosure Statement
CB RICHARD: Partial Debt Payment Prompts S&P to Lift Ratings
CHICKASAW WOOD: Voluntary Chapter 11 Case Summary
CITATION CORP: Exits Chapter 11 Bankruptcy
CITIGROUP COMMERCIAL: Fitch Puts Low-B Ratings on 4 Certificates
COLLINS & AIKMAN: Gets Court Authority to Use Cash Collateral
COLLINS & AIKMAN: Gets Interim Access to $300 Mil. DIP Facility
COLLINS & AIKMAN: Wants Kurtzman Carson as Claims Agent
COMDIAL CORP: Files for Chapter 11 Protection in Delaware
COMDIAL CORPORATION: Case Summary & 30 Largest Unsecured Creditors
COMFORCE OPERATING: Moody's Withdraws All Junk Credit Ratings
DELAFIELD 246 CORP: Wants Exclusive Period Extended Until Sept. 26
DORIAN GROUP: Artist Creditors Object to Sale of Assets
DOTRONIX INC: March 31 Balance Sheet Upside-Down by $907,332
DUANE READE: Moody's Junks $195 Million Senior Subordinated Notes
EARLE M. JORGENSEN: Earns $38.6 Million of Net Income in 4th Qtr.
ELANTIC TELECOM: Taps PENTA Advisory as Financial Advisors
ENRON: Kennedy Oil Wants Court to Allow Claim as Admin. Expense
ENTERPRISE PRODUCTS: S&P Rates $500 Mil. Sr. Unsec. Notes at BB+
ESSELTE GROUP: Bank Debt Amendment Prompts S&P to Hold Ratings
FEDERAL-MOGUL: Court Modifies Scope of Ernst & Young's Employment
FEDERAL-MOGUL: U.K. Insurance Dispute Settlement Hearing in July
FIRST UNION: Moody's Affirms Low-B Ratings on Class K to P Certs.
FOOTSTAR INC: Allows ESL Entities to Sell 1,035,241 Common Shares
FORD: Fitch Says Agreement with Visteon Won't Affect Ratings
GEMINI EQUIPMENT: Voluntary Chapter 11 Case Summary
GENEVA STEEL: Chapter 11 Trustee Wants to Make $114 Mil. Payment
GENEVA STEEL: Hires Parr Waddoups as Special Counsel
GLOBAL CROSSING: Ex-Workers Get 25% Back from $84 Mil. Settlement
GS CONSULTING: Case Summary & 25 Largest Unsecured Creditors
INSURANCE AUTO: Shareholders Vote to Accept Kelso Buy-Out
INTEGRATED ELECTRICAL: Amends $56 Million Credit Facility
INTEGRATED ELECTRICAL: Reselling 15.4 Million Common Shares
INTERSTATE BAKERIES: Can Recalculate Non-Union Retiree Premiums
INTERSTATE BAKERIES: First Union Wants Performance Under Lease
INTERSTATE BAKERIES: Wants to Set Trade Claims Resolution Protocol
JAMES RIVER: $150 Mil. Notes Pricing Prompts S&P to Remove Watch
JOHN Q. HAMMONS: Share Purchase Deal Cues S&P to Maintain Watch
KAISER ALUMINUM: Wants Law Debenture's Objections Overruled
KIMBALL CHECK: Case Summary & 6 Largest Unsecured Creditors
LBACK DEVELOPMENT: Receiver Won't Let Debtor Access its Records
LB-UBS: Moody's Affirms $3.02M Class Q Certificate's Junk Rating
LORAL SPACE: Equity Committee Taps Chanin as Financial Advisors
MCI INC: Eight Directors Acquire 9,378.963 Shares of Common Stock
MCI INC: Senior VP Eric Slusser Will Step Down Effective May 30
MERIDIAN AUTOMOTIVE: Has Until June 30 to Access $30M DIP Loan
MIRANT CORP: Asks Court to Approve Wrightsville Settlement Accord
MIRANT: Lovett Violates Pollution Control Act, Says Riverkeeper
MIRANT CORP: Wants Perryville & Enron Edison's Claims Estimated
NATIONAL ENERGY: City of Seattle Holds Allowed $310,100 Claim
NATIONAL ENERGY: Inks Pact to Resolve Fireman's Fund Bond Claim
NRG ENERGY: Can Distribute $1.3 Million of McClain Sale Proceeds
NRG ENERGY: Earns $22.6 Million of Net Income in First Quarter
OCTEL CORP: Likely Tetraethyl Phase-Out Cues S&P to Lower Ratings
PILLOWTEX CORP: Amends Complaint Against Velvet Demo
PHILLIPS-VAN: Earns $25 Million of Net Income in First Quarter
PHYSIOMETRIX INC: Nasdaq to Halt Stock Trading Today
PSS WORLD: Posts $10 Million of Net Income in Fourth Quarter
RELIANCE GROUP: Liquidator Wants to Repurchase & Sell Property
ROTECH HEALTHCARE: Late 10-Q Triggers Default Under Credit Pact
ROYAL GROUP: Cerberus Capital Offers to Buy Shares at $14 Each
SATELITES MEXICANOS: Noteholders File Involuntary Petition in N.Y.
SATELITES MEXICANOS: Involuntary Chapter 11 Case Summary
SCIENTIFIC LEARNING: Form 10-Q Filing Delay Cues Delisting Notice
SOUTHAVEN POWER: Taps Latham & Watkins as Lead Bankruptcy Counsel
SOUTHAVEN POWER: Look for Bankruptcy Schedules on July 19
SPHERION CORP: Board Authorizes Share Repurchase Program
SPIEGEL INC: Can Assume & Assign Netex Software Pact
SPIEGEL INC: Genesee Holds Allowed $265,773 Claim
STRUCTURED ENHANCED: Fitch Downgrades 2004 Series R-GM to BB+
SUNNY DELIGHT: Moody's Affirms $295 Million Debts' Low-B Ratings
SYNAGRO TECH: Soliciting Consents to Eliminate Certain Default
THE MARKET: Brings-In Neligan Tarpley as Bankruptcy Counsel
THORNBURG MORTGAGE: Fitch Expects to Rate $50 Mil. Stock at BB-
TOPPAN PHOTOMASKS: Acquisition Cues S&P to Withdraw Upped Ratings
UAL CORP: AFA Asks Court to Stay Ruling on PBGC Termination Pact
UAL CORP: Flight Attendants to Appeal PBGC Plan Termination Pact
UAL CORP: Machinists to Appeal Pension Plan Termination Pact
US AIRWAYS: Gets Court Approval to Assume Insurance Agreements
US AIRWAYS: Gets Court Nod to Enter $25 Mil. Surety Bond Program
US AIRWAYS: Wants to Reject Three Promotional Service Agreements
USG CORPORATION: Wants to File Request to Use Assets Under Seal
VENTAS INC: Declares $0.36 Per Share Quarterly Dividend
VISTEON: Fitch Revises Watch on Single-B Rating to Positive
W.R. GRACE: Objects to Asbestos PI Comm.'s Hiring of Anderson Kill
WELLCARE HEALTH: S&P Rates $210 Million Secured Facility at B+
WINFIELD CAPITAL: Auditors Express Going Concern Doubt in 10-K
YUKOS OIL: Plans to Dissolve Yukos-Moskva & Layoff 1,200 Employees
* FTI Consulting Appoints Michael Murphy as Sr. Managing Director
* Thacher Proffitt & Wood Elects Six New Partners
* BOOK REVIEW: LING: The Rise, Fall, & Return of a Texas Titan
*********
24 HOUR: S&P Rates Proposed $700 Million Senior Secured Loan at B
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' bank loan
rating to the proposed $700 million senior secured credit
facilities of 24 Hour Fitness Worldwide Inc. (B/Stable/--). The
facilities include a $100 million revolving credit facility due
2011 and a $600 million term loan B due 2012. The rating is the
same as the corporate credit rating, which was affirmed and
removed from CreditWatch, where it was placed with negative
implications on May 4, 2005. The outlook is now stable. Pro
forma for the transaction, 24 Hour Fitness had total debt
outstanding of about $1.1 billion on March 31, 2005.
The rating action weighs Forstmann Little & Co.'s acquisition of
24 Hour Fitness for about $1.6 billion, consisting of $600 million
in bank debt, $500 million in subordinated debt, and about $500
million in equity.
San Ramon, California-based 24 Hour Fitness is the second-largest
operator of fitness clubs in the U.S., with 343 clubs and 2.8
million members. Its geographical footprint of midmarket fitness
clubs extends from the West Coast to the Southeast, with a
concentration in California.
"Although 24 Hour Fitness' club operations have been doing well,
the proposed transaction significantly increases debt leverage and
may limit the company's operating flexibility in a downturn," said
Standard & Poor's credit analyst Andy Liu.
The ratings continue to reflect 24 Hour Fitness' aggressive growth
strategy, its high financial risk, and the competitive pressures
of the fitness club industry. These considerations are partially
offset by the company's geographic diversity and market-leading
club clusters in several metropolitan areas.
The company's aggressive longer term club expansion strategy,
though important to growth, is risky. It plans to increase its
club base on average about 10% per year. This is a significant
commitment to capital expenditures, which could significantly
negatively affect cash flow and margins, given the two-year ramp-
up period for new clubs, if the demand for fitness weakens.
The outlook may be revised to negative if club operations weaken
and debt leverage increases to more than 8x. On the other hand,
if the company can generate discretionary cash flow near its
historical rate of conversion and reduce debt, the outlook may be
revised to positive over the medium term.
ACE AVIATION: Files Prospectus for Aeroplan Income Fund IPO
-----------------------------------------------------------
ACE Aviation Holdings Inc. and Aeroplan LP reported that a
preliminary prospectus has been filed with all securities
regulatory authorities throughout Canada for an initial public
offering of units of the Aeroplan Income Fund, which will hold
an interest of approximately 15% in Aeroplan LP.
Aeroplan is Canada's premier loyalty marketing company, with
approximately 5 million active members. Aeroplan benefits from
its unique strategic relationship with Air Canada, in addition to
its contractual arrangements with leading financial and commercial
partners.
Aeroplan LP will distribute a portion of the net proceeds of the
offering to ACE, while retaining the balance to partially fund a
reserve for Aeroplan Mile redemptions and certain capital
expenditures. ACE will use the proceeds for general corporate
purposes and will retain control of Aeroplan LP.
The underwriting syndicate is being co-led by RBC Capital Markets,
sole bookrunner, CIBC World Markets and Genuity Capital Markets.
Other syndicate members will include BMO Nesbitt Burns Inc., TD
Securities Inc. and Scotia Capital Inc.
In connection with the offering, a commitment letter has been
entered into by Aeroplan LP with the Royal Bank of Canada as
underwriter and lead arranger in respect of the establishment of
$475 million senior secured syndicated credit facilities, subject
to the satisfaction of certain customary conditions including the
completion of the offering.
"With the formation of ACE last year we streamlined and enhanced
our corporate structure with a view to maximizing the inherent
value of our overall franchise and each of our business units,"
said Robert Milton, Chairman, President and CEO of ACE Aviation
Holdings Inc. "The Aeroplan public offering represents a giant
step forward in the implementation of ACE's strategy of unlocking
shareholder value through the monetization of its business units."
"The creation of the Aeroplan Income Fund provides the company
with a strong platform for growth to the benefit of both our
current and future corporate partners, and our members in Canada
and internationally," said Rupert Duchesne, President and CEO,
Aeroplan. "This in turn will further fortify Aeroplan's position
as Canada's premier loyalty marketing company."
The securities offered have not been, and will not be, registered
under the United States Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent
registration or any applicable exemption from the registration
requirement of such Act. (Air Canada Bankruptcy News, Issue No.
66; Bankruptcy Creditors' Service, Inc., 215/945-7000)
About Aeroplan Income Fund
The Fund is an unincorporated, open-ended trust established under
the laws of the Province of Ontario, created to indirectly acquire
an interest in the outstanding limited partnership units of
Aeroplan LP. After completion of the Offering, ACE will continue
to hold a majority interest of the outstanding LP Units.
About Aeroplan
Aeroplan provides its commercial partners with loyalty marketing
services to attract and retain customers and stimulate demand for
these partners' products and services. The Aeroplan Program
offers its approximately 5 million active members the ability to
accumulate Aeroplan Miles through a network of more than 60
commercial partners, representing more than 100 brands, in the
financial, retail and travel sectors and redeem those miles for
rewards, including airline seats to more than 700 destinations
worldwide, other travel rewards such as hotel rooms and car
rentals, selected Future Shop merchandise and a diversified
selection of experiential and specialty rewards. Aeroplan was
founded in 1984 by Air Canada, Canada's largest domestic and
international full-service airline, to manage the airline's
frequent flyer program.
Together with its world-class partners, Aeroplan develops and
executes innovative and appealing member-targeted marketing
programs designed to engage the loyalty of this elite and
prestigious segment of Canadian consumers.
About Ace Aviation Holdings
ACE Aviation is the parent holding company of Air Canada and ACE's
other subsidiaries. Air Canada is Canada's largest domestic and
international full-service airline and the largest provider of
scheduled passenger services in the domestic market, the
transborder market and each of the Canada-Europe, Canada-Pacific,
Canada-Caribbean/Central America and Canada-South America markets.
Air Canada is a founding member of the Star Alliance network, the
world's largest airline alliance group.
In addition, the Corporation owns Jazz Air LP, Aeroplan LP and
Destina.ca, which is an on-line travel site. The Corporation also
provides Technical Services through ACTS LP, Cargo Services
through AC Cargo LP and Air Canada, Groundhandling Services
through ACGHS LP and Air Canada and tour operator services and
leisure vacation packages through Touram LP.
* * *
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.
ADELPHIA COMMS: Court Okays DOJ, SEC & Rigas Settlement Agreements
------------------------------------------------------------------
Judge Gerber of the U.S. Bankruptcy Court for the Southern
District of New York approves Adelphia Communications Corporation
and its debtor-affiliates' three separate interdependent
settlement agreements with the United States Department of
Justice, the Securities and Exchange Commission and the Rigas
Family. According to Judge Gerber, the Settlement Agreements are
"in the best interests of the estate," "fair and equitable," and
fall "well within the range of reasonableness."
The Bankruptcy Court however finds it appropriate to add internal
measures to avoid undue prejudice to creditors as a consequence of
the Settlements.
To address the allocation issues brought about by different
creditor groups, Judge Gerber directs the stakeholders, who wish
to take a position on allocation issues among themselves,
together with professionals for the ACOM Debtors and the Official
Committee of Unsecured Creditors, to establish a game plan for
the resolution of those issues. The game plan, Judge Gerber
points out, should include the creation of an escape valve
litigation mechanism to resolve any disputes if necessary. "The
game plan should provide sufficient time to get these issues
resolved before confirmation, and, if possible, before the
finalization of any reorganization plan."
* * *
To fully address the additional protective provisions that Judge
Gerber authorized, the ACOM Debtors amend the proposed order
approving the three interrelated agreements.
A full-text copy of the Amended Proposed Order is available for
free at:
http://bankrupt.com/misc/AmendedProposedOrder.pdf
Objections to the Amended Proposed Order must be served on the
ACOM Debtors' counsel, Paul V. Shalhoub, Esq., at Willkie Farr &
Gallagher, in New York, not later than 12:00 noon on May 26,
2005. Unless objections are received by that time, Judge Gerber
may sign the Amended Proposed Order.
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than
200 affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue
No. 93; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ADELPHIA COMMS: Postpones 7.5% Series E & F Stock Conversion
------------------------------------------------------------
Adelphia Communications Corporation and its debtor-affiliates, the
Ad Hoc Committee of Senior Preferred Shareholders, Leonard Tow,
Claire Tow, The Claire Tow Trust, et al., and Highbridge Capital
Corporation want to further defer the conversion dates of ACOM's
7.5% Series E Mandatory Convertible Preferred Stock and its 7.5%
Series F Mandatory Convertible Preferred Stock.
In a Court-approved stipulation, the parties agree that:
a. Any conversion of the Series E or Series F Preferred Stock
is postponed and enjoined until June 8, 2005, or until an
earlier date as the Court may set upon notice and motion.
The postponement is without prejudice to the parties'
rights or to any further postponement of the conversion.
b. Any conversion of the Series E or Series F Preferred Stock
in violation of the Stipulation will be null and void ab
initio.
c. The conversion restrictions applicable to ACOM's equity
securities established in the Stipulation will be effective
as to holders of the securities and their transferees.
Accordingly, ACOM formally amends the certificates of
designations relating to its 7.5% Series E and Series F Mandatory
Convertible Preferred Stock to reflect the postponement to
June 8, 2005.
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than
200 affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue
No. 92; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AIR CANADA: Appoints R. Reid & C. Baril to Executive Posts
----------------------------------------------------------
Air Canada reported the following executive appointments effective
immediately.
Rob Reid, formerly Senior Vice President, Operations, is appointed
Executive Vice President and Chief Operating Officer, Air Canada,
with responsibility for Flight Operations, Flight Safety, System
Operations Control, and Customer Service Strategy and Delivery.
Reid will report directly to Montie Brewer, President and CEO of
Air Canada. Reid joined Air Canada in 1976 and has flown a number
of different aircraft types. He was seconded to Corporate Sales
in 1993 and Transport Canada in 1994 before moving into Flight
Operations management. Reid was Director of Flying Operations for
Air Canada's DC-9 and Canadair Regional Jet fleet before being
appointed Vice President, System Operations Control in October
2000. In March 2003, he assumed the role of President and CEO,
Air Canada Technical Services in addition to his responsibilities
as Vice President, System Operations Control.
"Rob's vast airline experience and solid leadership are invaluable
assets to Air Canada as it continues to grow into a profitable,
innovative and competitive airline," said Montie Brewer, President
and Chief Executive Officer, Air Canada. "I'm confident that
Rob's proven abilities will contribute significantly to Air
Canada's leadership in operational performance and customer
service," said Mr. Brewer.
In addition, Chantal Baril, previously General Manager, Airport
Operations-Eastern Canada, is appointed to the position of
President and CEO, Air Canada Ground Handling Services. She will
report to Rob Reid on an operational basis. Brad Moore, currently
in this role, will assume leadership of certain ACE initiatives,
reporting directly to Robert Milton, Chairman, President and CEO
of ACE Aviation Holdings Inc.
Prior to her appointment as General Manager, Airport Operations-
Eastern Canada, Baril was Senior Director, Airport Operations
between 2001-2004, and Director, Resource and Planning between
2000-2001.
Air Canada filed for CCAA protection on April 1, 2003 (Ontario
Superior Court of Justice, Case No. 03-4932) and filed a Section
304 petition in the U.S. Bankruptcy Court for the Southern
District of New York (Case No. 03-11971). Mr. Justice Farley
sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004.
Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman
Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier.
Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie
Farr & Gallagher, serve as the Debtors' U.S. Counsel. When the
Debtors filed for protection from their creditors, they listed
C$7,816,000,000 in assets and C$9,704,000,000 in liabilities.
On September 30, 2004, Air Canada successfully completed its
restructuring process and implemented its Plan of Arrangement.
The airline exited from CCAA protection raising $1.1 billion of
new equity capital and, as of September 30, has approximately
$1.9 billion of cash on hand.
As of December 31, 2004, Air Canada's shareholders' deficit
narrowed to CDN$203 million compared to a $4.155 billion deficit
at December 31, 2003. (Air Canada Bankruptcy News, Issue No. 66;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
AIR CANADA: Westjet's Lawsuit for Judicial System Abuse Dismissed
-----------------------------------------------------------------
The Ontario Superior Court of Justice on May 25, 2005, dismissed
WestJet's lawsuit against Air Canada for abuse of the judicial
system, The Canadian Press reported.
Mr. Justice Ian Nordheimer held in an 11-page decision that
WestJet's statement of claim fails to set forth with any degree
of precision the overt acts that were undertaken by each of the
alleged conspirators, Canadian Press said.
As previously reported, WestJet faces a CN$220,000,000 suit by
Air Canada for alleged corporate espionage. WestJet filed a
counterclaim against Air Canada, ZIP and their private
investigators for unlawful seizure of WestJet's confidential
financial information from an employee's trash.
WestJet's suit also named as defendants:
* Air Canada's defunct subsidiary, Zip Air, Inc.,
* CEO Robert Milton,
* former chief restructuring officer Calin Rovinescu, and
* Vice-President Stephen Smith
Mr. Justice Nordheimer ruled that WestJet may proceed with its
claim of conspiracy under the counterclaim, Canadian Press said.
Air Canada filed for CCAA protection on April 1, 2003 (Ontario
Superior Court of Justice, Case No. 03-4932) and filed a Section
304 petition in the U.S. Bankruptcy Court for the Southern
District of New York (Case No. 03-11971). Mr. Justice Farley
sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004.
Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman
Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier.
Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie
Farr & Gallagher, serve as the Debtors' U.S. Counsel. When the
Debtors filed for protection from their creditors, they listed
C$7,816,000,000 in assets and C$9,704,000,000 in liabilities.
On September 30, 2004, Air Canada successfully completed its
restructuring process and implemented its Plan of Arrangement.
The airline exited from CCAA protection raising $1.1 billion of
new equity capital and, as of September 30, has approximately
$1.9 billion of cash on hand.
As of December 31, 2004, Air Canada's shareholders' deficit
narrowed to CDN$203 million compared to a $4.155 billion deficit
at December 31, 2003. (Air Canada Bankruptcy News, Issue No. 66;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
ALLIANCE ATLANTIS: Appoints David Lazzarato as Exec. VP and CFO
---------------------------------------------------------------
Michael MacMillan, Chairman and Chief Executive Officer of
Alliance Atlantis Communications Inc. appointed David Lazzarato as
Executive Vice President and Chief Financial Officer. Mr.
Lazzarato will be replacing W. Judson Martin, who, as previously
announced, is leaving Alliance Atlantis for health reasons. Mr.
Lazzarato will assume these responsibilities effective May 30th,
2005.
"David's extensive experience will be invaluable to us as we
continue to grow our business," said Mr. MacMillan. "He is also
recognized for his strategic vision and judgment and his addition
to the Senior Management team builds on our efforts to take a
disciplined approach when making and executing critical strategic
decisions."
Mr. Lazzarato was Executive Vice President and Chief Financial
Officer for Allstream (previously AT&T Canada). While with
Allstream, Mr. Lazzarato played a significant leadership role in
the operational and financial restructuring of the Company and its
subsequent sale to Manitoba Telecom. Previously, Mr. Lazzarato
held executive management positions with BCE Mobile Communications
(Bell Mobility) and CAE Electronics.
In addition, Mr. Lazzarato also serves as a Board member for the
Trillium Health Centre Foundation and was the Telecom Chair for
the United Way's 2004 Greater Toronto Area Campaign.
"I would like to thank Jud for his contributions over the past six
years as an integral member of the Senior Management team at
Alliance Atlantis," said Mr. MacMillan. "The Company has
benefited greatly from Jud's expertise and I want to wish him all
the best for an enjoyable and healthy future."
About the Company
Alliance Atlantis Communications Inc. --
http://www.allianceatlantis.com/-- is a leading specialty
broadcaster. The Company also co-produces and distributes a
limited number of television programs in Canada and
internationally, including the hit CSI franchise, and holds a 51%
limited partnership interest in Motion Picture Distribution LP,
Canada's leading motion picture distribution business. The
Company's common shares are listed on the Toronto Stock Exchange -
trading symbols AAC.A, AAC.NV.B and on NASDAQ - trading symbol
AACB.
* * *
As reported in the Troubled Company Reporter on April 25, 2005,
Moody's Investors Service withdrew the senior subordinated debt
rating for Alliance Atlantis Communications Inc. as the company
redeemed that class of debt pursuant to a call option on
December 21, 2004. The senior subordinated notes were refinanced
with proceeds from a new senior secured credit facility arranged
by Merrill Lynch & Co., RBC Capital Markets and TD Securities.
Moody's rates the new loan facility at Ba2 and Standard & Poors'
Ratings Services rates it at BB.
ALLIANCE LEASING: Ch. 11 Trustee Taps Manier & Herod as Counsel
---------------------------------------------------------------
Michael Collins, Esq., the Chapter 11 Trustee appointed in
Alliance Leasing Corporation's chapter 11 case asks the U.S.
Bankruptcy Court for the Middle District of Tennessee for
permission to employ Manier & Herod, P.C., as his counsel.
Manier & Herod is expected to:
a) prepare and file on the Chapter 11 Trustee's behalf all
appropriate pleadings, including reports, applications,
complaints, answers, motions, orders, chapter 11 plans,
disclosure statements and other documents in the Debtor's
chapter 11 case;
b) represent the Chapter 11 Trustee at hearings, proceedings,
meetings and other appearances in the Bankruptcy Court and
before other tribunals and administrative agencies on behalf
of Mr. Collins;
c) negotiate with creditors and other parties in interest and
perform all other legal services to Mr. Collins that are
necessary or appropriate in the Debtor's chapter 11 case.
Mr. Collins and his firm will also serve as his counsel.
Mr. Collins charges $300 per hour for his services. Mr. Collins
reports Manier & Herod's professionals bill:
Designation Hourly Rate
------------ -----------
Principals $250 - $375
Associates $130 - $200
Paralegals $ 90 - $120
To the best of the Chapter 11 Trustee' knowledge, Manier & Herod
is a "disinterested person" as that term is defined in Section
101(14) of the Bankruptcy Code.
Headquartered in Franklin, Tennessee, Alliance Leasing
Corporation, filed for chapter 11 protection on Feb. 28, 2005
(Bankr. M.D. Tenn. Case No. 05-02397). Steven L. Lefkovitz, Esq.,
at Law Offices Lefkovitz & Lefkovitz represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed total assets of $24,190,072 and total
debts of $29,147,788.
ALLIANCE LEASING: Ch. 11 Trustee Taps Elrod Auction as Auctioneer
-----------------------------------------------------------------
Michael Collins, Esq., the Chapter 11 Trustee appointed in
Alliance Leasing Corporation's chapter 11 case asks the U.S.
Bankruptcy Court for the Middle District of Tennessee for
permission to employ Elrod Auction Company as his auctioneer.
Mr. Collins selected Elrod Auction as his auctioneer because the
Firm is well qualified for the task of selling certain automobiles
belonging to the Debtor's estate and has extensive experience in
conducting auctions for automobiles.
Mr. Collins explains that the sale of the Debtor's automobiles is
in the best interest of the Debtor's estate and its creditors
because those automobiles are of no more use to the Debtor and
their continued storage at the Debtor's expense constitutes an
unnecessary burden on the estate.
Mr. Collins reports that Elrod Auction will be paid in accordance
with LBR 6005-1 with 10% on balance and Elrod will also be
reimbursed with $225 for every vehicle from the Debtor that will
be moved and stored at Elrod's auction site in Douglasville,
Georgia.
To the best of Mr. Collins' knowledge, Elrod Auction is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in Franklin, Tennessee, Alliance Leasing
Corporation, filed for chapter 11 protection on Feb. 28, 2005
(Bankr. M.D. Tenn. Case No. 05-02397). Steven L. Lefkovitz, Esq.,
at Law Offices Lefkovitz & Lefkovitz represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed total assets of $24,190,072 and total
debts of $29,147,788.
ATA AIRLINES: Gets Court Nod to Ink CIT Aircraft Lease Pact
-----------------------------------------------------------
Pursuant to Section 363(b)(1) of the Bankruptcy Code, Judge Lorch
authorizes ATA Airlines, Inc. and its debtor-affiliates to enter
into an aircraft lease with CIT Leasing Corporation.
Under a Memorandum of Understanding, ATA Airlines and CIT Leasing
agree to enter into negotiations for ATA's lease of a Boeing
Model B737-300 aircraft and two CFM56-3C1 engines.
ATA Airlines has rejected a number of aircraft leases as part of
its ongoing restructuring efforts. ATA has found it essential for
its continued operations to replace the rejected aircraft.
The MOU contains information that is highly confidential and
proprietary. ATA Airlines will provide copies of the MOU to the
United States Trustee, counsel for Southwest Airlines, the DIP
lender, the Official Committee of Unsecured Creditors, the Air
Transportation and Stabilization Board, and to other parties,
subject to confidentiality conditions.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel-efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 23; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ATA AIRLINES: Wants to Assume GATX Ancillary Agreements
-------------------------------------------------------
As previously reported, ATA Airlines obtained the U.S. Bankruptcy
Court for the Southern District of Indiana's consent to assume the
Boeing B757-200 aircraft lease with GATX Third Aircraft
Corporation. The lease was earlier revised under a Dec. 20, 2004
stipulation between the parties.
Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis,
Indiana, reports that the parties have recently entered into a
definitive amendment to the lease. The terms of the Amendment
are highly confidential and proprietary. The Amendment will be
made available to the United States Trustee, counsels for
Southwest Airlines, the DIP lender, the Official Committee of
Unsecured Creditors, the Air Transportation and Stabilization
Board, and to other parties, subject to confidentiality
restrictions.
By this motion, the Debtors ask the Court to approve the
Amendment.
Mr. Nelson adds that the parties previously signed various
documents in connection with the Lease:
(i) the Tax Reimbursement Agreement, dated as of September 1,
1995, between GATX and ATA Airlines;
(ii) the Aircraft Lease Framework Agreement, dated as of June
30, 1995, between GATX and ATA Airlines; and
(iii) the Guaranty Of The Obligations Of American Trans Air,
Inc., dated as of June 30, 1995, by ATA Holdings.
Pursuant to Section 365 of the Bankruptcy Code, the Debtors seek
the Court's authority to assume the Ancillary Agreements.
GATX has agreed that, upon assumption of the Ancillary
Agreements, the Debtors will not be required to cure any
outstanding defaults under the Ancillary Agreements, provided
that they would comply with the December 20, 2004 Stipulation.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel-efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 23; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
BEAUTYCO INC: Bankruptcy Court Dismisses Chapter 11 Case
--------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Oklahoma
granted LINC Acquisition One, LLC's request to dismiss Beautyco,
Inc.'s chapter 11 proceeding.
Beautyco owes LINC $5,393,857 which is secured by liens on all of
the Debtor's real and personal property.
LINC reminded the Court that the Debtor has been out of business
since December 2004. The Debtor surrendered possession of its
assets after LINC won Court approval to lift the automatic stay
enforced by the bankruptcy code.
Mark A. Craige, Esq., at Morrel West Saffa Craige & Hicks, Inc.,
counsel for LINC, told the Court that after it obtained relief
from the automatic stay and the Debtor surrendered all of the
collateral, there is nothing left in Beautyco's case to
reorganize. The Debtor has no income or ability to generate any.
Administrative claims accrue, and Beautyco has no ability to pay
those claims.
Headquartered in Oklahoma City, Oklahoma, Beautyco, Inc. --
http://www.beautyco.com/-- one of the leading retailers of
professional beauty supplies in the United States, filed for
chapter 11 protection on December 31, 2003 (Bankr. N.D. Okla. Case
No. 03-07621), along with its debtor-affiliate, Beautyco
Investments, Ltd. Neal Tomlins, Esq., and Ronald E. Goins, Esq.,
at Tomlins & Goins represent the Debtors. When the Debtors filed
for protection from their creditors, they listed consolidated
assets totaling $8,559,400 and consolidated debts amounting to
$8,753,200.
BECKMAN COULTER: Moody's Reviews Subordinated Notes' Ba1 Rating
---------------------------------------------------------------
Moody's Investors Service placed the ratings of Beckman Coulter,
Inc. under review for possible upgrade reflecting double digit
revenue growth and an expansion in free cash flow generated by the
core business. In particular, the company continues to gain share
in the immunodiagnostic market and will launch several new
products including two new analyzers for its routine chemistry
business. Moody's anticipates that continued growth in its core
business will lead to higher free cash flow over the next few
years.
These ratings were placed under review for a possible upgrade:
-- $500 Million Universal Shelf Registration (Senior and
Subordinate) at (P) Baa3/ (P) Ba1
-- $240 Million 7.45% Senior Notes due 2008 at Baa3
-- $235 Million 6.875% Senior Notes due 2011 at Baa3
-- $100 Million 7.05% Senior Debentures due 2026 at Baa3
Moody's rating review will primarily focus on the company's
strategy to simplify, automate and innovate across the full
biomedical testing continuum, and its ability to produce higher
cash flow over the next few years. The major factors in that
analysis are expected to be its new product introductions, tuck-in
acquisitions for its Biomedical Research Division, and increased
consumable penetration of its existing clinical diagnostic
systems.
Moody's expects that increased market share, entry into new market
segments, and acquisitions of new technologies will result in
revenue growth of at least 10% a year. A slight improvement in
operating margins and lower non-operating expense will result in
double digit growth in cash flow from operations. Following a
moderation in capital expenditures, free cash flow is expected to
increase from slightly over $100 million in 2004 to a range of
$175 to $200 million in the next two years. On a non-rent
adjusted basis, the ratio of free cash flow to total debt should
increase from 18% to slightly under 30%.
Moody's notes that in the past two years, Beckman's cash flow was
negatively affected by several non-recurring costs. First,
Beckman made pension contributions of $148 million in 2003 and
$40 million in 2004. Since the pension plan is now fully funded,
Moody's anticipates only minimal contributions in 2005 and beyond,
assuming actual investment returns are consistent with the pension
plan's expected rate of return. Second, inventory turns fell from
2.9 in 2003 to 2.7 in 2004 as the company was preparing for
several new product introductions. With higher sales from these
new systems, inventory turns are expected to improve slightly over
the next few years. Third, Beckman has been selling more systems
under operating leases where the company records the equipment as
capital spending and recognizes revenue over the life of the
lease.
Beckman Coulter, Inc., headquartered in Fullerton, California, is
a leading provider of instrument systems and complementary
products that simplify and automate processes in biomedical
research and clinical laboratories.
For the twelve month period ending March 31, 2005 the company had
revenues of about $2.5 billion.
BIRDS EYE: Good Financial Profile Prompts S&P's Stable Outlook
--------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on branded
frozen and dry vegetable producer Birds Eye Foods Inc., to stable
from positive.
At the same time, Standard & Poor's affirmed its ratings,
including its 'B+' corporate credit rating. Rochester, New York-
based Birds Eye had about $379 million of lease-adjusted total
debt outstanding as of March 26, 2005.
"The outlook revision reflects the expectation that the company's
financial profile and credit protection measures will remain
commensurate with the current rating over the outlook period.
Moreover, Birds Eye is in negotiations with its lending group to
amend covenants following a weaker-than-expected third quarter,"
said Standard & Poor's credit analyst Ronald B. Neysmith.
The ratings on Birds Eye reflect its high debt levels relative to
its participation in the variable and commodity dependent frozen
vegetable segment of the packaged food industry. Still, the
company's leading position and solid national consumer franchise
with its "Birds Eye" brand and a portfolio of leading regional
brands provide a competitive advantage. However, recent weakness
in financial measures from its inability to pass along rising
costs is a ratings concern and an important consideration in the
outlook change.
BUEHLER GROUP: Meeting of Creditors Slated for June 24
------------------------------------------------------
The United States Trustee for Region 10 will convene a meeting of
Buehler Foods, Inc.'s creditors at 1:30 p.m., on June 24, 2005, in
Room 359 at the Federal Building in Evansville, Indiana. This is
the first meeting of creditors required under 11 U.S.C. Sec.
341(a) in all bankruptcy cases.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
Headquartered in Jasper, Indiana, Buehler Foods, Inc., owns and
operates grocery stores under the BUY LOW and Save-A-Lot banners
in Illinois, Indiana, and Kentucky, North Carolina, and Virginia.
The Company also sells gas at about a dozen locations. The
Company and its debtor-affiliates filed for chapter 11 protection
on May 4, 2005 (Bankr. S.D. Ind. Case No. 05-70961). Jerald I.
Ancel, Esq., at Sommer Banard Attorneys, P.C., represents the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they estimated between $10
million to $50 million in assets and $50 million to $100 million
in debts.
BUEHLER FOODS: Gets Interim Court Nod on $6 Mil. DIP Financing
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Indiana
gave Buehler Foods, Inc., and its debtor-affiliates interim
approval to obtain debtor-in-possession financing of up to
$6 million from Harris Trust and Savings Bank, and other bank
lenders. Harris Trust act as agent to the DIP Facility.
A final hearing on the Debtors' request is scheduled for June 9,
2005 at 9:30 a.m. (Indianapolis Time).
Prepetition Indebtedness
When it filed for bankruptcy, the Debtor owed Harris Trust and
Savings Bank approximately $47 million under various notes. The
Prepetition Obligations are secured by liens on the Debtors'
property, including, but not limited to:
* all inventory, accounts and other rights to payment,
* general intangibles,
* equipment,
* chattel paper, and
* fixtures.
As of the Petition Date, the Debtor owed Associated Wholesale
Grocers, Inc., approximately $4,379,284 pursuant to certain Notes
excluding trade debt. The AWG Prepetition Obligations were
secured by liens on the Debtor's property including, but not
limited to:
* all inventory, accounts and other rights to payments,
* general intangibles,
* equipment,
* chattel paper,
* fixtures, and
* certain equity rights.
DIP Facility
The key terms of the DIP Facility are:
I. DIP Commitment: Up to $6,000,000 (with the last $3,000,000
subject to consent of the DIP Agent based on demonstrated
need for cash consistent with a Budget approved by the DIP
Agent).
At the option of the DIP Agent, $500,000 of the
$6,000,000 will either be an advance on the DIP Loan by
the DIP Agent or the Bank's consent for the Debtor to use
up to $500,000 of proceeds from the sale of Prepetition
Collateral (from closed operations) pledged to the
Prepetition Lenders.
II. Maturity Date: The maturity date may be agreed upon by the
Company and all of the DIP Lenders.
III. Default: The DIP Facility will be terminated on the
earliest to occur:
(x) the to-be-determined consensual Maturity Date;
(y) the confirmation and effectiveness of any plan of
reorganization of any Loan Party; or
(z) the date the DIP Lenders terminate the DIP Credit
commitment because of an Event of Default.
IV. Purpose: The DIP Credit will be available solely for:
a. loans for payment of normal operating expenses, in the
amounts stated in an approved Budget,
b. loans for the payment of professional fees of the DIP
Agent and the Prepetition Agent related to the DIP
Credit and the Prepetition Credits,
c. loans for the payment of interest, fees and expenses on
the DIP Credit, and
d. loans for payment of an administrative expense carve
out.
V. Budget: The Company will provide to the DIP Lenders a
weekly budget report (by Wednesday of each week) showing
actual weekly receipts and disbursements for the
immediately prior week and a comparison of all actual
receipts and disbursements to the budgeted receipts and
disbursements on both a weekly basis and a cumulative
basis from the Petition Date through the last day of the
immediately preceding week.
The total aggregate disbursements for any week in the
Budget, and the cumulative disbursements to date, will not
have a negative variance from the budgeted amounts.
A full-text copy of the Court's order is available for a fee at:
http://www.researcharchives.com/bin/download?id=050526204039
Headquartered in Jasper, Indiana, Buehler Foods, Inc., owns and
operates grocery stores under the BUY LOW and Save-A-Lot banners
in Illinois, Indiana, and Kentucky, North Carolina, and Virginia.
The company also sells gas at about a dozen locations. In 2004
Buehler Foods acquired 16 Winn-Dixie stores in Louisville,
Kentucky, and renamed them Buehler's Markets. Founded in 1940,
the company is still run by the Buehler family. The Debtor filed
for chapter 11 protection on May 5, 2005 (Bankr. S.D. Ind. Case
No. 05-70961). Jerald I. Ancel, Esq., at Sommer Barnard
Attorneys, PC, represents the Debtors in its restructuring
efforts. When the Debtors filed for protection from its
creditors, it estimated asssets of $10 million to $50 million and
debts of $50 million to $100 million.
BUEHLER FOODS: Wants to Borrow $3.3 Mil. from Associated Wholesale
------------------------------------------------------------------
Buehler Foods, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Southern District of Indiana to approve a
debtor-in-possession financing deal with Associated Wholesale
Grocers, Inc.
When it filed for bankruptcy, the Debtor owed Harris Trust and
Savings Bank approximately $47 million under various notes. The
Prepetition Obligations are secured by liens on the Debtors'
property, including, but not limited to:
* all inventory, accounts and other rights to payment,
* general intangibles,
* equipment,
* chattel paper, and
* fixtures.
As of the Petition Date, the Debtor owed Associated Wholesale
Grocers, Inc., approximately $4,379,284 pursuant to certain Notes
excluding trade debt. The AWG Prepetition Obligations were
secured by liens on the Debtor's property including, but not
limited to:
* all inventory, accounts and other rights to payments,
* general intangibles,
* equipment,
* chattel paper,
* fixtures, and
* certain equity rights.
The Court authorized the Debtors to borrow up to $6 million under
a separate postpetition financing arrangement with Harris Trust.
Jerald I. Ancel, Esq., at Sommer Barnard Attorneys, PC, in
Indianapolis, Indiana, asserts that the Debtors needs additional
funds to purchase inventory, continue its operations, and
administer and preserve the value of its estate. The ability of
Debtors to finance their operations and the availability of
sufficient working capital through under a second DIP arrangement
with Associated Wholesale is vital to their ability to preserve
and maintain their going concern value and their ability to
consummate a successful reorganization, Mr. Ancel contends.
In accordance with Sec. 364 of the Bankruptcy Code and Rule 4001
of the Federal Rules of Bankruptcy Procedure, the Debtors want to
borrow up to $3.3 million from Associated Wholesale under these
key terms and conditions:
I. Amount of Term Loan - Up to $3,300,000
a. Advance of Funds, First 30 Days - Up to $1,300,000.
b. Advance of Funds, Next 30 Days - Additional $1,000,000;
c. Advance of Funds, the Next 60 Days Forward - Up to
$1,000,000.
II. Interest Rate
Term Note -- Base Rate (prime) plus 1.00% -- currently,
the interest rate would be 6.75%.
III. Terms of Repayment
a. Interest -- Payable weekly;
b. Principal -- the entire principal balance will be due
and payable on October 1, 2005, unless a
Plan is confirmed prior thereto, at which
time the DIP Loan will be repaid pursuant
to the Plan, or upon a default that
remains uncured.
IV. DIP Loan Default Provisions and Remedies
a. Dismissal of the Debtors' chapter 11 case or conversion
to a case under chapter 7 constitutes a default;
b. Upon default and after notice the Debtors' exclusivity
period for filing a Plan terminates and AWG and other
creditors can file a Plan; and
c. Upon default, AWG is entitled to relief from stay
unless the Court orders otherwise.
V. Other Covenants
a. the Debtors will file a plan of reorganization by
September 1, 2005; and
b. the Debtors will obtain AWG's consent to any budget
submitted to the court for approval;
Headquartered in Jasper, Indiana, Buehler Foods, Inc., owns and
operates grocery stores under the BUY LOW and Save-A-Lot banners
in Illinois, Indiana, and Kentucky, North Carolina, and Virginia.
The company also sells gas at about a dozen locations. In 2004
Buehler Foods acquired 16 Winn-Dixie stores in Louisville,
Kentucky, and renamed them Buehler's Markets. Founded in 1940,
the company is still run by the Buehler family. The Company filed
for chapter 11 protection on May 5, 2005 (Bankr. S.D. Ind. Case
No. 05-70961). Jerald I. Ancel, Esq., at Sommer Barnard
Attorneys, PC, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it
estimated asssets of $10 million to $50 million and debts of $50
million to $100 million.
BURLINGTON IND: Trust Wants Court to Nix $2 Million Hospodor Claim
------------------------------------------------------------------
The BII Distribution Trust asks the U.S. Bankruptcy Court for the
District of Delaware for summary judgment to disallow and expunge
Claim No. 1326 filed by David E. Hospodor for $1,998,674. The
Trust asserts that there is no genuine issue as to any material
fact and it is entitled to judgment as a matter of law.
Marcos A. Ramos, Esq., at Richards, Layton & Finger, P.A., in
Wilmington, Delaware, contends that Mr. Hospodor failed to
forecast evidence on any of his four claims sufficient to
withstand summary judgment, and at least one of his claims is
time-barred.
Mr. Ramos relates that the Trust pursued additional discovery on
the merits of the claim but has been unable to resolve the claim
on a consensual basis.
Wrongful Discharge Claim
The Trust asserts that Mr. Hospodor's claim for wrongful
discharge from his work at Burlington's Madison Yam Company
division is time-barred. Mr. Hospodor did not file his "wrongful
discharge in violation of public policy claim" within the three
years required under North Carolina's applicable statute of
limitations.
As an at-will employment state, North Carolina does not recognize
a cause of action for wrongful discharge of at-will employees,
except in the very limited and narrow circumstance when a
termination has violated the public policy of the State. Mr.
Ramos explains that for that type of claim to stand, employees
are required to plead the specific public policy of the State
that was violated by their termination.
Mr. Hospodor commenced a lawsuit in December 1997 before the
United States District Court for the Middle District of North
Carolina, asserting disability and age discrimination claims
under federal statutes, and state law claims of simple wrongful
discharge and negligent infliction of emotional distress. Mr.
Hospodor did not plead wrongful discharge "in violation of public
policy."
The District Court ruled that Mr. Hospodor was terminated on
October 24, 1996 -- not June 30, 1997, as Mr. Hospodor alleged.
The District Court also held that the Claimant failed to file a
timely EEOC charge with respect to his federal discrimination
claims within 180 days of October 24, 1996, and granted summary
judgment on these claims. The District Court dismissed the state
law claims, without prejudice to Mr. Hospodor's timely filing
those claims in state court.
However, Mr. Hospodor filed a suit in North Carolina state court
for, among others, wrongful discharge in violation of public
policy on March 23, 2000 -- more than three years after his
judicially determined termination date of October 24, 1996.
Even if the claim was not time-barred, the Trust contends that
Mr. Hospodor cannot show that he was terminated for either his
disability or age. With respect to his disability discrimination
claim, Mr. Hospodor has not produced evidence that:
* at the time of his termination, he was performing to the
satisfaction of his employer;
* he met his duty under North Carolina law to request a
reasonable accommodation that would have allowed him to
perform the essential functions of his job; and
* he was terminated because of a disability.
In contrast, Mr. Ramos says the Trust asserted a legitimate, non-
discriminatory reason for Mr. Hospodor's termination -- his
unsatisfactory performance. Mr. Ramos asserts that Mr. Hospodor
has produced no evidence that this reason was false.
Claim for Benefits Under ERISA Plan
Mr. Hospodor asserts that Burlington's Leave of Absence policy
was a plan governed by the ERISA and that he was denied benefits
under this plan.
However, Mr. Ramos tells Judge Baxter that there exists a payroll
practice exception to ERISA wherein policies that pay an employee
his normal compensation out of the company's general assets do
not qualify as ERISA plans. Under Burlington's Leave of Absence
policy, Mr. Hospodor was paid his normal compensation out of
Burlington's general assets and, therefore, the plan qualifies as
a payroll practice exception to ERISA.
Breach of Contract
The Trust also argues that Mr. Hospodor's breach of contract
claim -- that Burlington violated its contract with him by
failing to honor the terms of its Leave of Absence policy -- is
barred because Mr. Hospodor had no employment contract with
Burlington.
Although Mr. Hospodor implies in his complaint before the
District Court that Burlington's Leave of Absence policy created
an employment contract, Mr. Ramos tells Judge Baxter that under
North Carolina law, a unilaterally implemented benefit policy
does not create an employment contract unless the terms of the
policy are specifically referenced and incorporated into a
separate contract. Mr. Ramos further adds that an at-will
employee, like Mr. Hospodor, cannot simultaneously bring a breach
of contract claim and a claim for wrongful discharge in violation
of public policy.
Infliction of Emotional Distress
Mr. Hospodor's claim for intentional infliction of emotional
distress also fails. Mr. Ramos explains that Mr. Hospodor has
not shown sufficient evidence to survive summary judgment on the
claim. Mr. Hospodor has not shown any conduct by Burlington that
rises to the level of "extreme and outrageous" or that he has
suffered "severe" emotional distress from any actions by
Burlington. He also has not presented any medical evidence of
severe emotional distress.
Claim for Punitive Damages
Mr. Hospodor's claim for punitive damages must also be denied.
Mr. Ramos points out that in North Carolina, punitive damages is
not a standalone claim. It rather serves as a remedy and relief
for violation of some stated cause of action.
Headquartered in Greensboro, North Carolina, Burlington
Industries, Inc. -- http://www.burlington-ind.com/-- was one
of the world's largest and most diversified manufacturers of soft
goods for apparel and interior furnishings. The Company filed
for chapter 11 protection in November 15, 2001 (Bankr. Del. Case
No. 01-11282). Daniel J. DeFranceschi, Esq., at Richards, Layton
& Finger, and David G. Heiman, Esq., at Jones Day, represent the
Debtors. WL Ross & Co. LLC purchased Burlington Industries and
then sold the Lees Carpets business to Mohawk Industries, Inc.
Combining Burlington with Cone Mills, WL Ross created
International Textile Group. Burlington's chapter 11 Plan
confirmed on October 30, 2003, was declared effective on Nov. 10,
2003. (Burlington Bankruptcy News, Issue No. 60; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
CALPINE CORP: Plans to Sell Plants & Cut Debt Load by $3 Billion
----------------------------------------------------------------
Calpine Corporation (NYSE: CPN) rolled out an aggressive strategic
initiative aimed at dramatically enhancing the company's financial
strength. The program is targeting accelerated debt reduction of
more than $3 billion by the end of 2005, $275 million of annual
interest savings, and approximately $200 million in annual
operating cost reductions.
The program will strengthen the company's core North American
power assets and enhance Calpine's financial flexibility by:
-- Optimizing the Power Plant Portfolio -- Selling certain
power and gas assets to reduce debt, lower annual interest
cost and increase cash flow. In addition to previously
announced potential asset sales, the company is targeting
the sale of up to eight plants.
-- Reducing Operating Costs -- Decreasing operating and
maintenance costs and lowering fuel costs to improve the
operating performance of power plants, significantly
boosting operating cash flow and liquidity.
-- Accelerating Debt Reduction -- Reducing total debt by more
than $3 billion, or 16%, by the end of 2005, one year
earlier than planned.
Additional significant debt reductions are planned for 2006 and
beyond.
"Calpine has set an aggressive and timely program to strengthen
our financial and competitive position," stated Calpine Chairman,
President and CEO Peter Cartwright. "To operate effectively in a
business environment that has changed dramatically over the last
few years, we are reviewing all options to provide near-term
results, while continuing to focus on long-term value. We have
already recognized several attractive opportunities, which we
expect will improve our operating cash flow.
"We are refocusing and streamlining our business to take advantage
of market opportunities as industry and economic fundamentals
continue to improve in several of our key power regions. By
taking these decisive actions, we're positioning Calpine to best
capture the strong cash and earnings potential of our efficient,
gas-fired and renewable, geothermal power fleet. The program
we're presenting today is in its early stages. It will serve as a
blueprint for a new and more powerful Calpine," Cartwright
concluded.
Program Overview
The program is designed to improve the value of Calpine's core
power plant assets and strengthen its balance sheet.
Optimizing the Power Plant Portfolio
-- Asset Sales
Calpine is pursuing opportunities to add value to its
portfolio, reduce corporate debt and increase cash flow
through sales of both its gas assets and certain of its
power assets.
* Calpine is finalizing its review of bids received for the
sale of its 1,200-megawatt Saltend Energy Centre in the
United Kingdom.
The proceeds generated from such a sale are expected to be
used to redeem $620 million of preferred equity related to
the project, with the balance to be used in accordance
with the company's existing bond indentures.
* As announced last week, Calpine is evaluating strategic
alternatives for its U.S. oil and gas assets, including
the potential sale of all of or a portion of these
resources. The proceeds generated from such a sale are
expected to be used in accordance with the company's
existing bond indentures.
* The company is also evaluating the sale of up to eight
other power plants to capture stronger market valuations.
-- Mothball Plants
Calpine is considering temporarily shutting down power
plants with negative cash flow, until market conditions
warrant start-up, to further reduce costs and more
effectively focus the company's financial and sales
resources.
-- Credit Enhancement
The company is in discussions with a leading financial
institution to form a partnership that will lower its
collateral requirements and establish a significant third
party customer business. The combination of Calpine Energy
Services' people, systems and processes, and the credit and
financial resources of an investment grade financial
institution, will enable the partnership to provide
customers across the energy industry with unique products,
services and energy solutions.
Reducing Operating Costs
Through technological innovations and other programs, Calpine is
enhancing the operating performance of its power plant fleet and
is working to reduce its operating costs by approximately
$200 million per year:
-- Self-Perform Maintenance
Calpine is in negotiations to terminate all remaining long-
term maintenance agreements. This will allow the company's
plant and turbine maintenance groups to provide major
maintenance and component and parts repairs at considerable
cost savings.
-- Reduce Off-Peak Operating Losses
Calpine plans to incorporate fleet-wide initiatives, some of
which include innovative components that it has developed to
reduce off-peak operating losses, resulting in considerable
fuel cost savings. Further promoting this effort, the
company's manufacturing and parts components subsidiary,
Power Systems Manufacturing (PSM), recently installed its
new combustor system, Flamesheet, at a Calpine plant to
increase the operating range of the gas turbines while
meeting the environmental permitting requirements.
-- Reduce Heat Rate
Calpine will continue to incorporate fuel efficiency
technologies fleet-wide to lower its annual fuel costs. To
capture these cost savings, Calpine is targeting up to a 4%
reduction in fuel costs through incremental improvements in
power plant heat rates. For example, at Calpine's 263-
megawatt Rumford Power Plant, the company recently installed
and tested PSM proprietary parts and low-emissions systems,
and customized plant operating procedures, resulting in a 2%
heat rate improvement that could provide annual savings
approaching $1 million at the plant.
Accelerating Debt Reduction
Through this program of asset sales, credit enhancement, and fuel
and operating cost reductions, Calpine is accelerating by one year
its plans to repurchase more than $3 billion of corporate debt by
the end of 2005. This aggressive debt reduction program will
continue in 2006 and beyond.
Calpine Chief Financial Officer Bob Kelly stated, "Our number one
financial priority is de-levering the balance sheet to bring it in
line with the current and future power markets and the related
spark spread-generating capability of our modern fleet. This
program is the first step toward achieving our long-term target of
total debt equal to six times EBITDA, as adjusted. With the new
financial focus and power initiative outlined, we expect to
significantly strengthen our balance sheet, lower our annual
interest payments and improve our debt coverage ratios."
Headquartered in San Jose, California, Calpine is an independent
power producer that leases and operates a significant fleet of
geothermal plants at The Geysers in California, and has a net
operating portfolio of 92 natural gas fired plants capable of
producing 26,649 megawatts of generation in the US, Canada, and
the United Kingdom.
* * *
As reported in the Troubled Company Reporter on May 16, 2005,
Moody's Investors Service downgraded the debt ratings of Calpine
Corporation (Calpine: Senior Implied to B3 from B2) and its
subsidiaries, including Calpine Generating Company (CalGen: first
priority credit facilities to B2 from B1).
Separately, Moody's affirmed the ratings of Riverside Energy
Center, LLC (Riverside) and Rocky Mountain Energy Center, LLC
(Rocky Mountain) at Ba3. The rating outlook for Calpine and its
subsidiaries is negative.
The rating action reflects:
(1) the company's very weak operating cash flow relative to its
substantial debt leverage;
(2) Moody's view that improvements in the merchant energy
market will be slow and gradual over the next several
years, prolonging the weakness in spark spreads and
utilization rates for natural gas fired generation in most
regions of the U.S.;
(3) the need to raise external funds to fund capital outlays,
meet debt maturities, or enhance liquidity over the next
several years;
(4) execution risk associated with completing various
transactions that could be liquidity enhancing or reduce
debt.
As reported in the Troubled Company Reporter on May 11, 2005,
Standard & Poor's Ratings Services lowered its corporate credit
rating on Calpine Corp. and its subsidiaries to 'B-' from 'B'.
The outlook is negative.
In addition, Standard & Poor's lowered its ratings on debt that
Calpine guarantees.
The ratings for the following debt issues remain unchanged:
(1) the 'BBB-' SPUR rating on Gilroy Energy Center LLC's
bonds,
(2) the 'BB-' rating on the Rocky Mountain Energy Center LLC
and the Riverside Energy Center LLC loans,
(3) the 'CCC+' rating on the third lien Calpine Generating Co.
LLC debt, and
(4) the 'BBB' rating on Power Contract Financing LLC's bonds.
CALPINE CORP: Commences Tender Offer for $160 Million Senior Notes
------------------------------------------------------------------
Calpine Corporation (NYSE: CPN) launched a tender offer for
aggregate cash consideration not to exceed $160,000,000 for all or
a portion of:
-- The outstanding euro-denominated 8-3/8% Senior Notes Due
2008 and British-pound denominated 8-7/8% Senior Notes Due
2011 issued by Calpine's indirect, wholly owned subsidiary
Calpine Canada Energy Finance II ULC, a Nova Scotia
unlimited liability company, and
-- The U.S. dollar-denominated 8-1/2% Senior Notes Due 2008
issued by Calpine's indirect, wholly-owned subsidiary
Calpine Canada Energy Finance ULC, a Nova Scotia unlimited
liability company.
The Finance II Notes will be accepted for purchase before any
tendered Dollar Notes are accepted and each series of the Finance
II Notes will be accepted for purchase pro rata in proportion to
the aggregate principal amount of each such series validly
tendered and not withdrawn. The aggregate amount of Notes
repurchased in the tender offer shall be determined using the
foreign exchange rate in effect on the business day prior to the
date on which Calpine accepts the Notes for purchase.
Calpine is offering to purchase the Notes at a price of 52.5% of
the face value of the Notes purchased, which includes an early
tender premium of 2% of the face value of the Notes, payable only
to holders who tender on or prior to the Early Tender Date as
described.
The consideration for the Notes shall be paid in the currency in
which the Notes are denominated. Accrued and unpaid interest on
all tendered Notes accepted for payment will also be paid to, but
not including, the settlement date for the tender offer, which
will be promptly following the Expiration Date.
The tender offer is scheduled to expire at 5:00 p.m., New York
City time, on Wednesday, June 22, 2005, unless extended or earlier
terminated. Holders who tender their Notes on or prior to 5:00
p.m., New York City time, on Wednesday, June 8, 2005, will receive
the Total Consideration. Holders who tender their Notes after the
Early Tender Date and on or prior to the Expiration Date will
receive the Total Consideration minus the early tender premium,
for a total payment equal to 50.5% of the face value of the Notes.
Holders who validly tender Notes pursuant to the Offer on or prior
to the Early Tender Date may withdraw such Notes at any time on or
prior to the Early Tender Date. Notes validly tendered and not
withdrawn on or prior to the Early Tender Date may not be
withdrawn after the Early Tender Date, except as may be required
by law.
Notwithstanding any other provision of the tender offer, Calpine's
obligation to accept for purchase, and to pay for, Notes validly
tendered pursuant to the tender offer is conditioned upon
satisfaction or waiver of certain conditions as set forth in the
Offer to Purchase. Calpine, in its sole discretion, may waive any
of the conditions of the tender offer in whole or in part, at any
time or from time to time. Calpine reserves the right in its sole
discretion to extend, amend or terminate the Offer.
Calpine Corporation -- http://www.calpine.com/-- supplies
customers and communities with electricity from clean, efficient,
natural gas-fired and geothermal power plants. Calpine owns,
leases and operates integrated systems of plants in 21 U.S.
states, three Canadian provinces and the United Kingdom. Its
customized products and services include wholesale and retail
electricity, natural gas, gas turbine components and services,
energy management, and a wide range of power plant engineering,
construction and operations services. Calpine was founded in
1984. It is included in the S&P 500 Index and is publicly traded
on the New York Stock Exchange under the symbol CPN.
* * *
As reported in the Troubled Company Reporter on May 16, 2005,
Moody's Investors Service downgraded the debt ratings of Calpine
Corporation (Calpine: Senior Implied to B3 from B2) and its
subsidiaries, including Calpine Generating Company (CalGen: first
priority credit facilities to B2 from B1).
Ratings downgraded for which the rating outlook has been changed
to negative:
* Calpine's Senior Implied Rating to B3 from B2;
* Calpine's Senior Unsecured Notes, Issuer Rating, and Senior
Unsecured Convertible Notes to Caa3 from Caa1;
* Calpine Canada Energy Finance Senior Unsecured Notes
(guaranteed by Calpine) to Caa3 from Caa1;
* Calpine Generating Company, LLC first priority senior secured
revolving credit and term loan facilities to B2 from B1;
* CalGen second priority term loans and floating rate notes to
B3 from B2;
* CalGen third priority notes to Caa1 from B3;
* South Point Energy Center, LLC, Broad River Energy LLC and
RockGen Energy LLC Pass Through Certificates to B3 from B2;
* Tiverton Power Associates Ltd. Partnership and Rumford Power
Associates Ltd Partnership Pass Through Certificates to Caa2
from B3;
* Calpine Capital Trust Preferred Securities to Ca from Caa3;
* Shelf registration for the issuance of various senior
unsecured debt, trust preferred, and preferred securities to
(P)Caa3, (P)Ca, and (P)C from (P)Caa1, (P)Caa3, and (P)Ca,
respectively.
As reported in the Troubled Company Reporter on May 11, 2005,
Standard & Poor's Ratings Services lowered its corporate credit
rating on Calpine Corp. and its subsidiaries to 'B-' from 'B'.
The outlook is negative.
In addition, Standard & Poor's lowered its ratings on debt that
Calpine guarantees.
The ratings for the following debt issues remain unchanged:
(1) the 'BBB-' SPUR rating on Gilroy Energy Center LLC's
bonds,
(2) the 'BB-' rating on the Rocky Mountain Energy Center LLC
and the Riverside Energy Center LLC loans,
(3) the 'CCC+' rating on the third lien Calpine Generating Co.
LLC debt, and
(4) the 'BBB' rating on Power Contract Financing LLC's bonds.
CALPINE CORP: Fitch Puts Ratings on Watch Evolving
--------------------------------------------------
Fitch Ratings placed the outstanding credit ratings of Calpine
Corp. on Rating Watch Evolving. Rating Watch Evolving means that
the ratings may be lowered, maintained, or raised in the near-
term. Fitch currently rates CPN's outstanding debt securities as:
* senior unsecured notes 'CCC+';
* second priority senior secured notes 'B+';
* first priority senior secured notes 'BB-'; and
* High Tides III trust preferred securities 'CCC'.
Fitch also placed Calpine Canada Energy Finance ULC's (guaranteed
by CPN) outstanding 'CCC+' rated senior notes on Rating Watch
Evolving.
The rating action follows today's announcement of CPN's strategic
plan to accelerate its $3.0 billion debt reduction target to year-
end 2005, primarily through an expanded asset sale program. CPN
also outlined a strategy to lower operating costs by approximately
$200 million annually through the temporary mothballing of
uneconomic generating facilities, termination of certain equipment
maintenance agreements, and other efficiency measures. Many
elements of Calpine's strategic plan, particularly asset
dispositions, have been previously disclosed or anticipated by
Fitch.
CPN had previously announced intentions to divest the 1,200
megawatt U.K. based Saltend plant and pursue the sale of its
remaining 389 Bcfe of oil and natural gas reserves. These assets
may be among Calpine's most marketable; the new plan also
contemplates the sale of up to eight additional U.S. power plants,
although valuations of such facilities remains pressured.
Achieving the planned asset monetization of $3 billion as well as
effecting related debt reductions by year-end may prove
challenging.
The Rating Watch Evolving status reflects the potential for
financial stability given the benefits of the proposed
restructuring program, including reduced interest expense,
simplification of CPN's capital structure, and lower debt
refinancing burden going into the 2007-2008 timeframe. With
today's announcement, Fitch believes that CPN management has
adopted a greater sense of urgency in addressing the near-term
financial challenges facing the company. In particular, CPN has
fallen somewhat short of its prior liquidity and debt repurchase
targets largely due to the delay in executing planned power
contract monetizations.
At the same time, the new plan carries an obvious above-average
degree of execution risk. While the proposed Saltend sale and
planned monetization of gas reserves appear to be achievable in
the near term, there is uncertainty regarding the ultimate level
of proceeds CPN will generate from the planned sale of certain
U.S. generating capacity given the still depressed market for
merchant power assets. Fitch would consider full realization of
the debt retirements and simplification of Calpine's capital
structure positively, while failure to achieve the full potential
benefits from this initiative will likely lead to more aggressive
restructuring measures that Fitch would consider contrary to its
existing rating levels.
CART INC: Distributes $450,000 to Championship Auto
---------------------------------------------------
Championship Auto Racing Teams, Inc. (Pink Sheets: CPNT.PK)
disclosed that the bankruptcy proceedings for its wholly owned
subsidiary CART, Inc., is estimated to result in a distribution to
the Company of between $400,000 and $450,000, the exact amount to
be dependent upon final administrative expenses and a resolution
of other minor claims. The Company intends to proceed with
winding up its affairs as soon as practicable.
Championship Auto Racing Teams, Inc. previously owned and operated
the Champ Car World Series. The Company has sold all of its
operating assets and is in the process of winding up its affairs.
The Company's formerly wholly owned subsidiary, CART, Inc., filed
a chapter 11 petition on December 16, 2003 (Bankr. S.D. Ind. Case
No. 03-23385). Pursuant to the bankruptcy court order, the
Company sold the operating assets of CART and the stock of Pro-
Motion Agency, Inc., a former wholly owned subsidiary of the
Company and CART Licensed Products, Inc., a former wholly owned
subsidiary of CART, Inc. Also, pursuant to the bankruptcy court
order, the Company cancelled its stock in CART, Inc. and
transferred the remaining assets and liabilities to an
unconsolidated liquidating trust. During 2003, the Company ceased
the operations of its wholly owned subsidiary, Raceworks LLC, and
intends to liquidate its remaining assets.
As reported in the Troubled Company Reporter on May 9, 2005,
Deloitte & Touche LLP audited Championship Auto Racing Teams,
Inc.'s financial statements for the year ending December 31, 2004.
At the conclusion of that engagement, the auditing firm says
there's substantial doubt about the company's ability to continue
as a going concern. The auditors point to the Company's recurring
loses from operations; the sale of substantially all the operating
assets of its CART, Inc., subsidiary; pending or threatened
litigation against the Company and its subsidiaries; and the
Company's intent to liquidate its remaining assets.
Championship Auto Racing Teams, Inc.'s balance sheet dated
Dec. 31, 2004, shows $5.7 million in assets.
CATHOLIC CHURCH: Tucson's Disclosure Statement Faces 6 Objections
-----------------------------------------------------------------
Several parties propounded objections to the Second Amended
Disclosure Statement explaining the Diocese of Tucson's Second
Amended Plan of Reorganization. The Diocese filed corresponding
responses to the objections.
(A) Unknown Claims Representative
The objection filed by A. Bates Butler, III, the Unknown Claims
Representative, has two main thrusts:
(i) issues relating to alleged inadequacies in the information
provided by the Disclosure Statement; and
(ii) issues relating to the alleged discrepancies between the
treatments of Unknown Tort Claimants compared to Tort
Claimants that came forward during the Reorganization
Case.
Mr. Butler argues that the classification and cap on the recovery
of the Unknown Victims impermissibly discriminates against the
Unknown Victims and effectively denies them any voting rights.
Mr. Butler also asserts that the Disclosure Statement fails to
estimate the fees and costs that are anticipated to compensate the
Special Arbitrator, or explain the necessity of the Special
Arbitrator if the Bankruptcy Court will actually determine the
Allowance and Tier Placement of claims that are the subject of
objections by the Reorganized Debtor or the Official Tort
Claimants' Committee in Tucson's case.
Charles L. Arnold, the Guardian ad Litem, agrees with Mr. Butler.
Since the filing of Mr. Butler's Objection, the Diocese and Mr.
Butler have negotiated additional components to the Plan that the
Diocese believes will resolve the issues relating to the alleged
discrepancies between the treatments of Known and Unknown Tort
Claimants. The Diocese anticipates that after the Plan and
Disclosure Statement are amended, Mr. Butler will withdraw his
objection to the Disclosure Statement. The Diocese, however,
reserves its right to respond to the Butler Objection, if not
withdrawn.
(B) Hower, Fahey, Gorda and Gomez
Tort Claimants Hower, Fahey, Gorda and Gomez complain that the
Diocese continues to attempt to hide in plain view its most
valuable assets, including the parish churches, altar societies,
boys ranches, cathedrals, cemeteries, churches, custodial funds,
endowment funds, financial estates, parishes, retirement programs,
retreat centers, schools, seminaries, and thrift stores, which it
continues to claim are properties separate from or not belonging
to the Diocese. The Claimants assert that the properties are not
legal entities separate from or independent of the Diocese, but
rather are merely operating divisions, or real or personal
property of the Diocese.
Ivan Safyan Abrams, Esq., in Tucson, Arizona, tells Judge Marlar
that the Diocese's failure to include the properties in its
Second Amended Disclosure Statement impermissibly hobbles the
creditors and claimants who are required to vote on the Plan and
to decide whether or not to accept its terms.
In response, the Diocese reminds the Court that this issue is
already extensively addressed in the Disclosure Statement as a
subject of dispute. The Diocese submits that no further
disclosure is necessary for creditors to determine how to vote on
the Plan. Moreover, the Diocese notes, the Tort Claimants have
not asked for additional disclosure. Accordingly, the Diocese
believes the objection must be overruled.
(C) Babb, Anderson, and Barcon
On behalf of Kenneth Babb, Edward Anderson, and Frederick Barcon,
Richard T. Treon, Esq., at Treon, Aguirre & Newman, P.C., in
Phoenix, Arizona, asserts that:
* the Diocese only provided a partial copy of the Disclosure
Statement which hampered the Claimants' ability to object to
the Disclosure Statement;
* the amount of the initial minimum tier distributions should
be doubled;
* the Court should "strike" the statute of limitations defense
from the Plan based on the grossly inequitable conduct by
the Diocese; and
* the amount of money reserved for unknown claimants is
excessive and should be cut in half. Available funds should
be dedicated largely to current victims. The Claimants want
the fund for future identified victims limited to
$2,750,000.
The Diocese points out that the Claimants' counsel neglects to
inform the Court that the Claimants only requested a copy of the
Disclosure Statement late in the morning on May 10, 2005, just
three days before the objection deadline. The Diocese agreed to
e-mail the document to Mr. Treon's office. However, Mr. Treon's
e-mail server could not accommodate the size of the pdf files.
The Diocese also does not understand why the parties did not seek
an extension to file objections. As to the remaining objections,
the Diocese tells Judge Marlar that these are objections to the
Plan, and therefore, must be overruled without prejudice to being
reasserted at plan confirmation.
(D) U.S. Trustee
Ilene J. Lashinsky, the United States Trustee for Region 14,
asserts two objections:
(1) the Plan's description of the proposed Channeling
Injunction could be interpreted to provide protection
to Participating Third Parties without contribution
pursuant to "any other agreement." The Diocese must fully
explain the effect of and justification for the permanent
Channeling Injunction; and
(2) the Disclosure Statement provides insufficient disclosure
regarding the basis for certain of the releases in the
Plan. The Diocese should identify the beneficiaries of
the injunction and quantify the contributions to be made
by the entities in exchange for the releases to be
received.
The Diocese, however, argues that neither the Plan nor the
Disclosure Statement is unclear on the issue of the proposed
Channeling Injunction. The Diocese explains that to become a
Participating Third Party protected by the Channeling Injunction,
a party must make a contribution to the Trusts. Any dispute on
the issue, the Diocese maintains, is more appropriately taken up
at confirmation. Furthermore, the objection concerning releases
is an objection to the Plan, not to the Disclosure Statement.
(E) John Doe XXIII, et al.
John Doe XXIII and his mother, and Confidential Claimant #86662
and his spouse object to the Disclosure Statement on these
grounds:
(a) The Diocese is trying to mislead the Court and creditors
by stating that it provides services, including
counseling, to Tort Claimants. G. David DeLozier, Esq.,
informs Judge Marlar that all of the Tort Claimants
Mr. DeLozier represents have not nor ever received any
support, counseling or other services from the Diocese,
even though each of them has been willing to receive the
services, or actively pursued the Diocese to obtain the
services.
(b) The identity of the Special Arbitrator and the method of
selecting the Special Arbitrator must be disclosed;
(c) The description of the "Participating Third Parties" is
too broadly drafted, so that it is impossible to determine
whether certain parties, and specifically the Diocese of
Phoenix, are Participating Third Parties; and
(d) The Plan's provision regarding treatment of attorney's
fees penalizes even further those Tort Claimants who do
not succumb to the Diocese's decision regarding their Tier
placement. The Plan requires a Tort Claimant who elects
to have his or her claim determined through the Settlement
Trust or the Litigation Trust to be responsible for his or
her costs and attorney's fees. The Tort Claimants believe
that they should be responsible for the costs and fees if
the Special Arbitrator agrees with the Tier placement made
by the Diocese or places that Tort Claimant's claim in a
lower Tier than the Diocese. However, if the results of
the Settlement Trust or the Litigation Trust results in
the placement of the Tort Claimant's claim in a Tier
higher than that placed on the claim by the Diocese, the
Diocese should bear the costs and attorney's fees incurred
by that Tort Claimant.
The Diocese assures Judge Marlar that it has done nothing to
mislead the Court or creditors:
-- The Diocese does not have any records that show that John
Doe XXIII has ever requested counseling through the Diocese
or the Diocese's Victim Assistance Program. If requested,
the VAP would provide its Services. Moreover, Claimant
#86662 is presently in the custody of the Arizona
Department of Corrections. When he sought counseling
through the Diocese, it was referred to the VAP. Catholic
Social Services, which operates the VAP, has a policy that
when a victim is in an institution, like a prison, the
VAP will only provide counselors and support through the
institution's health and counseling system. Accordingly,
Claimant #86662 was offered counseling through the Arizona
Department of Corrections. Claimant #86662, however,
refused to accept counseling from anyone associated with
the Department of Corrections.
-- The identity of the Special Arbitrator will be jointly
proposed by the Diocese and the Committee, and agreed to by
Messrs. Butler and Arnold. The Diocese will amend the
Disclosure Statement and the Plan to disclose the identity
of the Special Arbitrator.
-- Whether the Phoenix Diocese became a Participating Third
Party will be the subject of a separate agreement that must
be approved by the Court by motion on notice to creditors.
The Plan does not provide that any particular entity become
a Participating Third Party because the Plan does not go
effective until a minimum plan funding threshold is met.
Whether the Diocese is likely to meet that funding
threshold is a separate plan feasibility issue to be
determined at confirmation. Accordingly, whether a
particular entity is a Participating Third Party need not
be disclosed for voting purposes.
-- The objection on the treatment of attorney's fees relate to
a substantive component of the Plan, and must be overruled
at this time.
(F) Pacific
Pacific Employers Insurance Company asserts that the Disclosure
Statement must not be approved because, among other things:
-- the Diocese has not disclosed the form of the Litigation
Trust Agreement;
-- fails to disclose how the listed criteria will be
weighted and used to allow Tort Claims and place them in
Tiers; and
-- fails to disclose the Plan's intended impact on insurance
rights and why the Diocese objects to inclusion of
insurance neutral language in the Plan and Confirmation
Order.
On the contrary, the Diocese contends that the proposed treatment
of the Tort Claims of the Non-Settling Tort Claimants is described
in the Plan and the Disclosure Statement. The Diocese notes that
it is in the process of negotiating with the Committee and other
relevant constituencies regarding the terms of the Litigation
Trust Agreement or the possibility of combining the Settlement
Trust with the Litigation Trust.
The process for the determination of Tort Claims is likewise
described in the Plan. While that process does not impact
Pacific's rights or obligations in any way, the Special
Arbitrator will use his or her discretion to weigh the criteria in
a manner he or she deems appropriate. Accordingly, the Diocese
says the provision of the Plan that would provide how the Tier
criteria will be weighted will be deleted.
The Diocese points out that all issues relating to the current
status of the rights and obligations of the Diocese and Pacific
under the Insurance Policies issued by Pacific will be determined
in the context of an Insurance Action to be commenced by the
Diocese against Pacific. Whatever rights Pacific has under its
Insurance Policies issued to the Diocese, to the extent not
already waived by Pacific's voluntary participation in the
Reorganization Case, will not be altered by approval of the
Disclosure Statement.
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. 27;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
CATHOLIC CHURCH: Tucson Diocese Will Revise Disclosure Statement
---------------------------------------------------------------
At a hearing on May 18, 2005, Susan G. Boswell, Esq., at Quarles
& Brady Streich Lang LLP, in Tucson, Arizona, advises the U.S.
Bankruptcy Court for the District of Arizona that the Diocese of
Tucson will make some changes or file a supplement to its Second
Amended Disclosure Statement.
The Diocese has been in ongoing negotiations with the Official
Committee of Tort Creditors, A. Bates Butler, III, the Unknown
Claims Representative, Charles L. Arnold, the Guardian ad Litem,
and certain individual tort creditors. The result of these
negotiations will require amendments to the Plan and the
Disclosure Statement.
Among other things, the Diocese will amend the Disclosure
Statement and the Plan to identify the Special Arbitrator who will
be jointly proposed by the Diocese and the Committee, and agreed
to by Messrs. Butler and Arnold. The Special Arbitrator will use
his or her discretion to weigh the criteria in a manner he or she
deems appropriate. Accordingly, the provision of the Plan that
would provide how the Tier criteria will be weighted will be
deleted.
The Diocese will also identify the trustees of the Settlement and
Litigation Trusts. The Diocese's resolution of the parish
property and contribution to the plan is the subject of a separate
agreement that will be submitted for approval by the Court.
Accordingly, all creditors and parties-in-interest, to the extend
they have standing, will have an opportunity to be heard on the
issue. The Diocese has negotiated the terms of a Litigation Trust
Agreement and the amount to be contributed to the trust per tort
claimant that elects the Litigation Trust, which will be
incorporated into the Disclosure Statement.
"The Court will need to consider and approve the revised
disclosure statement," Ms. Boswell tells Judge Marlar.
Ms. Boswell says the changes will only affect the class 10
claimants.
The Court will hold the Confirmation Hearing during the week of
July 11 through 15, 2005.
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. 27;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
CB RICHARD: Partial Debt Payment Prompts S&P to Lift Ratings
------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on CB
Richard Ellis Services Inc., including raising the long-term
counterparty credit rating to 'BB-' from 'B+'.
This action was in response to the company paying down about one-
quarter of its debt during the past year, which, coupled with
healthier operating conditions, has improved interest coverage
ratios to a healthy level. Even after the debt reductions,
acquisition-related debt and goodwill has left the company with a
considerable debt burden and negative tangible equity.
"While the debt reductions and improved operating margins have
improved interest coverage to a healthy level, the ratings
continue to reflect the company's aggressive capitalization and
revenue levels being dependent on cyclical sales and leasing
transaction volume," said Standard & Poor's credit analyst Robert
B. Hoban, Jr.
CB Richard Ellis is the operating subsidiary of CB Richard Ellis
Group Inc., a public company created though its June 2004 IPO.
The company is based in Los Angeles, California, and is a
recognized leader in the commercial real estate sales and services
industry, with 2004 revenue of approximately $2.4 billion. The
company is the largest commercial real estate services company in
the U.S., which is its largest market, and has a strong business
position in U.S. and European sales and leasing, property
management, mortgage brokerage, and investment advising.
CB Richard Ellis' core U.S. commercial sales and leasing
transaction business has done quite well during the past two years
as the overall market has improved, with the company's revenues up
43% in 2004 alone. Margins have benefited from this increased
revenue as well as from the scale gained in the acquisition of
Insignia Financial Group Inc. on July 23, 2003. Debt levels
remain high, but debt service capacity has greatly improved from
both the increased revenues and reduction in total debt
outstanding. Although the company has diversified its revenue
base into some fee-based businesses like property management, real
estate investment advisory, and mortgage banking services,
cyclical and volatile sales and leasing transaction volume remains
the driver of revenue, profitability, and interest coverage.
The stable outlook reflects the company's current good performance
and efforts to pay down its debt. Should management continue to
reduce debt further to low levels during the next two years,
ratings could be raised. Should results reverse and debt levels
or interest coverage trend negative, however, there would be
negative pressure on the rating.
CHICKASAW WOOD: Voluntary Chapter 11 Case Summary
-------------------------------------------------
Debtor: Chickasaw Wood Products, Inc.
1478 County Road 405
Houston, Mississippi 38851
Bankruptcy Case No.: 05-13678
Type of Business: The Debtor is a lumber dealer.
Chapter 11 Petition Date: May 25, 2005
Court: Northern District of Mississippi (Aberdeen)
Judge: David W. Houston III
Debtor's Counsel: Melanie T. Vardaman, Esq.
Harris & Geno, PLLC
P.O. Box 3380
Ridgeland, Mississippi 39158-3380
Tel: (601) 427-0048
Fax: (601) 427-0050
Estimated Assets: $100,000 to $10 Million
Estimated Debts: $100,000 to $10 Million
The Debtor did not file a list of its 20 Largest Unsecured
Creditors.
CITATION CORP: Exits Chapter 11 Bankruptcy
------------------------------------------
Citation Corp. emerged from chapter 11 protection this week. The
company's confirmed chapter 11 plan wipes $340 million of debt
from the company's balance sheet, trimming the company's debt
obligations from $550 million to $210 million.
"With the help of our new board of directors and on the strength
of new customer contracts and supplier agreements, we have every
reason to be optimistic about citation's future," President and
Chief Economic Officer Ed Buker said in a prepared statement.
"Our customers have rewarded our efforts with new contracts that
demonstrate their faith in our ability to meet their
expectations."
Gene Monteith, the company's spokesman, told Brian Gray at The
Timesplus, that the process has been stressful but the company has
tried to keep employees informed. He said there were no layoffs
throughout the corporation's 16 facilities in Alabama, Indiana,
Wisconsin, Michigan, Illinois, Texas and North Carolina plants.
There are 5,600 people employed at the company's 16 plants.
Under the company's confirmed Plan, 1.5 million shares of New
Common Stock and 75,000 shares of New Preferred Stock (valued at
$75 million) will be distributed to various creditors.
Headquartered in Birmingham, Alabama, Citation Corporation --
http://www.citation.net/-- designs, develops and manufactures
cast, forged and machined components for the capital and durable
goods industries, including the automotive and industrial markets.
Citation uses aluminum, steel, gray iron, and ductile iron as the
raw materials in its various manufacturing processes. The Debtors
filed for protection on Sept. 18, 2004 (Bankr. N.D. Ala. Case No.
04-08130). Michael Leo Hall, Esq., and Rita H. Dixon, Esq., at
Burr & Forman LLP, represent the Debtors. When the Company and
its debtor-affiliates filed for protection from their creditors,
they estimated more than $100 million in assets and debts. Judge
Tamara O. Mitchell confirmed the company's Second Amended Joint
Plan of Reorganization on May 18, 2005.
CITIGROUP COMMERCIAL: Fitch Puts Low-B Ratings on 4 Certificates
----------------------------------------------------------------
Citigroup Commercial Mortgage Securities Inc., series 2005-EMG,
commercial mortgage pass-through certificates are rated by Fitch:
-- $278,020,000 class A-1 'AAA';
-- $115,939,000 class A-2 'AAA';
-- $42,513,000 class A-3 'AAA';
-- $199,016,000 class A-4 'AAA';
-- $46,036,000 class A-J 'AAA';
-- $722,145,489 class X* 'AAA';
-- $7,222,000 class B 'AA';
-- $2,708,000 class C 'AA-';
-- $5,416,000 class D 'A';
-- $1,805,000 class E 'A-';
-- $3,611,000 class F 'BBB+';
-- $1,805,000 class G 'BBB';
-- $3,611,000 class H 'BBB-';
-- $8,124,000 class J 'BB+';
-- $2,708,000 class K 'BB';
-- $1,806,000 class L 'BB-';
-- $1,805,489 class M 'B+'.
* Notional amount and interest only.
Classes A-1, A-2, A-3, A-4, A-J, X, B, C, D, E, F, G, H, J, K, L,
and M are all privately placed pursuant to Rule 144A of the
Securities Act of 1933. The certificates represent beneficial
ownership interest in the trust, primary assets of which are 265
fixed-rate loans having an aggregate principal balance of
approximately $722,145,489, as of the cutoff date.
For a detailed description of Fitch's rating analysis, see the
presale report 'Citigroup Commercial Mortgage Securities Inc.,
Series 2005-EMG,' dated May 9, 2005, available on the Fitch
Ratings web site at http://www.fitchratings.com/
COLLINS & AIKMAN: Gets Court Authority to Use Cash Collateral
-------------------------------------------------------------
Prior to their bankruptcy filing, Collins & Aikman Corporation and
its debtor-affiliates borrowed money on a secured basis under a
Credit Agreement, dated December 30, 2001, as amended and restated
as of September 1, 2004, among Collins & Aikman Products Co.,
certain lenders and JPMorgan Chase Bank, N.A., as administrative
agent.
As of the Petition Date, the Debtors owed their Lenders
$686,776,384 in respect of loans made and $61,223,616 in respect
of letters of credit issued, exclusive of interest and fees.
To secure repayment of their obligations, the Debtors granted
their Lenders liens and security interests on all of their cash,
proceeds, and cash equivalents.
Because the Debtors filed for bankruptcy, absent court authority
pursuant to 11 U.S.C. Sec. 363(c), the Debtors have no right to
use their lenders' cash collateral.
According to Jay B. Knoll, vice president of Collins & Aikman
Corporation, the Debtors have an urgent need for the immediate
use of their Lenders' Cash Collateral. "The Debtors require use
of the Cash Collateral to, among other things, pay present
operating expenses, including payroll and pay vendors on a going-
forward basis to ensure a continued supply of materials essential
to the Debtors' continued viability."
The Debtors seek the U.S. Bankruptcy Court for the Eastern
District of Michigan's authority to use Cash Collateral in which
their Pre-Petition Secured Lenders have an interest and grant
adequate protection to their Lenders with respect to the use of
the Cash Collateral and all use and diminution in the value of the
Collateral.
As adequate protection, the Debtors propose to grant the Pre-
Petition Agent a replacement security interest in and lien on all
the collateral, subject and subordinate only to (i) the security
interests and liens granted to postpetition lenders and (ii) the
Carve-Out under a postpetition credit agreement. The Pre-
Petition Agent and Lenders will also be granted a superpriority
claim immediately junior to the claims held by postpetition
lenders. The Debtors will pay in full, in cash to JPMorgan, as
the Pre-Petition Agent:
(1) on June 1, 2005, all accrued and unpaid interest on the
Pre-Petition Debt at the non-default rate provided for in
the Pre-Petition Credit Agreement;
(2) upon interim approval of their request to obtain
postpetition financing, all accrued and unpaid letter of
credit fees, commitment fees, and all other prepetition
fees owing;
(3) promptly upon submission of invoices, all reasonable fees
and expenses incurred to the extent payable or
reimbursable; and
(4) on the first business day of each month, all accrued but
unpaid interest on the Prepetition Debt at the prevailing
LIBOR rate.
The Debtors propose to allow their prepetition lenders to retain
expert consultants and financial advisors to monitor the Debtors'
business and the value of the collateral. The Debtors will pay
the fees and expenses of these consultants.
The Debtors will provide JPMorgan with any written financial
information or periodic reporting that is provided to their
postpetition lenders. The Debtors will retain a chief
restructuring officer reasonably satisfactory to JPMorgan.
* * *
Finding that the Debtors have an urgent need for fresh working
capital financing to fund their day-to-day operating expenses,
Judge Rhodes entered an Interim Cash Collateral Order authorizing
the Debtors to use cash collateral securing repayment of the
prepetition loans through the conclusion of a Final DIP
Financing Hearing scheduled for June 20, 2005, at 10:00 a.m.
Headquartered in Troy, Michigan, Collins & Aikman Corporation --
http://www.collinsaikman.com/-- is a global leader in cockpit
modules and automotive floor and acoustic systems and is a leading
supplier of instrument panels, automotive fabric, plastic-based
trim, and convertible top systems. The Company has a workforce of
approximately 23,000 and a network of more than 100 technical
centers, sales offices and manufacturing sites in 17 countries
throughout the world. The Company and its debtor-affiliates filed
for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case
No. 05-55927). When the Debtors filed for protection from their
creditors, they listed $3,196,700,000 in total assets and
$2,856,600,000 in total debts.
COLLINS & AIKMAN: Gets Interim Access to $300 Mil. DIP Facility
---------------------------------------------------------------
Jay B. Knoll, vice president of Collins & Aikman Corporation,
relates that the Debtors do not have sufficiently reliable
liquidity sources available to ensure continued operations. The
Debtors need to obtain postpetition financing to:
-- permit the orderly continuation of their business,
-- maintain business relationships with vendors, suppliers and
customers,
-- make payroll,
-- make capital expenditures, and
-- satisfy other working capital and operational needs.
In the absence of postpetition financing, Mr. Knoll says, the
Debtors could be compelled to curtail or even terminate their
business operations to the material detriment of creditors,
employees and other parties-in-interest. "Thus, the Debtors need
to ensure that such working capital is available now."
Prior to their bankruptcy filing, the Debtors engaged in
discussions with four potential lenders, including JPMorgan Chase
Bank, N.A., with respect to postpetition financing. The Debtors
received proposals from three of these lenders. The Debtors
determined that JPMC's proposal was the most favorable, so they
decided to accept JPMC's proposal.
After good faith and extensive arm's-length negotiations, JPMC
agreed to provide the Debtors up to $350 million of secured
postpetition financing, on terms and subject to conditions set
forth in a Revolving Credit, Term Loan and Guaranty Agreement, by
and among Collins & Aikman Products Co., Collins & Aikman
Corporation and certain of the domestic subsidiaries of Collins &
Aikman Products as guarantors.
A full-text copy of the 124-page Revolving Credit Agreement is
available for free at:
http://bankrupt.com/misc/collinscreditagreement.pdf
By this motion, the Debtors seek permission from the U.S.
Bankruptcy Court for the Eastern District of Michigan for
authority to obtain postpetition financing on a joint and several
basis, up to the aggregate principal amount of $300 million
comprised of a revolving credit facility and a term loan:
(a) Tranche A will be a revolving commitment of up to $200
million, of which a portion not in excess of $150 million
will be available for the issuance of letters of credit;
and
(b) Tranche B will be a term loan commitment of up to $100
million.
Borrowings must be repaid in full, and the Commitment will
terminate, at the earliest of:
-- 45 days after entry of the Interim DIP Order, if the Final
DIP Order has not been entered prior to the expiration of
that 45-day period;
-- May 17, 2007;
-- the substantial consummation of a confirmed plan of
reorganization; and
-- the acceleration of the DIP Loans and the termination of
the Commitment.
All of the Borrower's obligations will constitute allowed claims
against the Debtors with priority over any and all administrative
expenses and any and all other claims. The DIP Agent is granted
a valid first priority senior security interest in and lien on
all of the Debtors' property, including recoveries on account of
any avoidance actions (e.g., preference claims and fraudulent
conveyance recoveries) under Chapter 5 of the Bankruptcy Code or
other applicable law.
The Debtors agree that, without JP Morgan's consent, they will
not make any payment on account of any reclamation claim nor will
they return any inventory to any creditor for set-off against a
pre-petition claim.
The Debtors admit that all of their borrowings under the
prepetition loan facility are fully secured by valid, perfected
and enforceable liens. The Debtors make it clear they have no
intention of attacking those liens. To the extent anybody else
wants to, the Debtors ask the Bankruptcy Court to restrict the
investigation period to 75 days and prohibit the company from
paying more than $50,000 to fund that investigation.
The superpriority claims and postpetition liens will be subject
to a $7,000,000 Carve-Out for professionals fees and disbursements
incurred, and the payment of fees required to be paid to the clerk
of the Bankruptcy Court and to the office of the United States
Trustee.
Collins & Aikman Products will retain a restructuring chief
executive officer reasonably satisfactory to the DIP Agent.
The DIP Agreement also provides that:
(a) The Commitment Fee is 1/2 of 1% per annum on the unused
amount of the Commitment payable monthly in arrears during
the term of the DIP Financing.
(b) The Letter of Credit Fee is 2.5% per annum on the
outstanding face amount of each Letter of Credit, plus
certain customary fees, payable quarterly in arrears to
the Issuing Lender for its own account.
(c) The Interest Rate is JPMC's Alternate Base Rate plus 1.5%
in the case of Tranche A Loans and 2.5% for Tranche B
Loans.
(d) Default Interest will be payable on demand at 2% above the
then applicable rate.
There are a number of conditions for the extension of credit.
The DIP Credit Agreement contains customary events of default.
By July 17, 2005, the Debtors will execute and delivered an
amendment to the Credit Agreement agreeing to:
(x) limits on Capital Expenditures during the chapter 11
restructuring; and
(y) minimum Global and Domestic EBITDA targets on a month-by-
month basis through May 2006.
* * *
Convinced that the Debtors will be irreparably harmed without
immediate access to cash, Judge Rhodes permits the Debtors to
enter into the DIP Documents. The Debtors are allowed to borrow
and obtain letters of credit pursuant to the DIP Credit Agreement
up to $150,000,000, with a $25,000,000 letter of credit sublimit
to support their foreign and domestic operations, until entry of
the Final DIP Order.
The Debtors will return to Court on June 20, 2005, at 10:00 a.m.,
for a Final DIP Financing Hearing at which time they will ask
Judge Rhodes for authority to borrow up to the full amount
available under the DIP Financing Agreement.
Peter Pantaleo, Esq., at Simpson Thacher & Bartlett, LLP, in New
York, represents JP Morgan in this DIP financing transaction.
Harold Novikoff, Esq., at Wachtell, Lipton, Rosen & Katz, in New
York, represents JP Morgan in its role as the agent to Collins &
Aikman's prepetition lenders.
Headquartered in Troy, Michigan, Collins & Aikman Corporation --
http://www.collinsaikman.com/-- is a global leader in cockpit
modules and automotive floor and acoustic systems and is a leading
supplier of instrument panels, automotive fabric, plastic-based
trim, and convertible top systems. The Company has a workforce of
approximately 23,000 and a network of more than 100 technical
centers, sales offices and manufacturing sites in 17 countries
throughout the world. The Company and its debtor-affiliates filed
for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case
No. 05-55927). When the Debtors filed for protection from their
creditors, they listed $3,196,700,000 in total assets and
$2,856,600,000 in total debts.
COLLINS & AIKMAN: Wants Kurtzman Carson as Claims Agent
-------------------------------------------------------
The Debtors have approximately 75,000 potential creditors, Jay B.
Knoll, vice president and general counsel of Collins & Aikman
Corporation, tells the Court. The Clerk of the U.S. Bankruptcy
Court for the Eastern District of Michigan, Mr. Knoll notes, is
not equipped to efficiently and effectively serve notices on the
large number of creditors and parties-in-interest and administer
claims during the Debtors' Chapter 11 cases. Mr. Knoll adds that
the sheer size and magnitude of the Debtors' creditor body makes
it impracticable for the Clerk's Office to undertake the task.
By this application, the Debtors seek permission from the U.S.
Bankruptcy Court for the Eastern District of Michigan to employ
Kurtzman Carson Consultants, LLC, as their Notice, Claims and
Balloting Agent to:
(a) serve as the Court's noticing agent to mail notices to
certain of the estates' creditors and other parties in
interest;
(b) provide computerized claims, objection and balloting
database services;
(c) provide expertise and consultation and assistance in
claim and ballot processing, reconciliation and
tabulation and with the dissemination of other
administrative information related to the Debtors'
Chapter 11 Cases; and
(d) provide disbursement services.
Specifically, Kurtzman will:
(1) prepare and serve required notices in these Chapter 11
cases, including:
* notice of the commencement of these Chapter 11 cases and
the initial meeting of creditors pursuant to Section
341(a) of the Bankruptcy Code;
* notice of any claims bar date;
* notice of any objections to claims;
* notice of any hearings on a disclosure statement and
confirmation of a reorganization plan, together with
related objection deadlines; and
* any other notices as the Debtors or the Court may deem
necessary or appropriate for an orderly administration
of these Chapter 11 cases;
(2) file with the Court a certificate or affidavit of service
with respect to any notice, within five business days of
serving the notice, that includes:
* a copy of the notice served;
* an alphabetical list of persons upon whom the notice
was served; and
* the date and manner of service;
(3) maintain a list of the Debtors' creditors;
(4) maintain copies of all proofs of claim and proofs of
interest filed in these cases until the cases are closed;
(5) maintain official claims registers in these cases by
docketing all proofs of claim and proofs of interest in a
claims database that includes these information for each
claim or interest asserted:
* the name and address of the claimant or interest holder
and any agent, if the proof of claim or proof of
interest was filed by an agent;
* the date the proof of claim or proof of interest was
received by the Court;
* the claim number assigned to the proof of claim or proof
of interest;
* the asserted amount and classification of the claim; and
* the name of the Debtor against which the claim or
interest is asserted;
(6) implement necessary security measures to ensure the
completeness and integrity of the claims registers;
(7) transmit to the Clerk of the Court a copy of the claims
registers on a weekly basis, unless requested by the Clerk
of the Court on a more or less frequent basis;
(8) maintain an up-to-date mailing list for all entities that
have filed proofs of claim or interest in these cases and
make the list available upon request to the Clerk of the
Court or, at the expense of the requesting party, to any
party-in-interest;
(9) provide access to the public during regular business
hours, without charge, for examining copies of the proofs
of claim or interest filed in these cases;
(10) record all transfers of claims pursuant to Rule 3001(e) of
the Federal Rules of Bankruptcy Procedure and provide
notice of the transfers to the extent required by the
Bankruptcy Rule;
(11) provide temporary employees to process claims, as
necessary;
(12) assist the Debtors with the solicitation and tabulation of
votes in connection with any reorganization plan;
(13) comply promptly with further conditions and requirements
as the Clerk of the Court or the Court may at any time
prescribe;
(14) provide other claims processing, noticing, consulting and
related administrative services as may be requested from
time to time by the Debtors;
(15) assist the Debtors with, among other things, the
preparation of their schedules of assets and liabilities,
statements of financial affairs and master creditor lists,
and any amendments, and the reconciliation and resolution
of claims and other related services and technical support
in connection with all these matters; and
(16) create and maintain a public access website setting forth
pertinent case information and allowing access to
electronic copies of proofs of claim or proofs of
interest.
The Debtors chose Kurtzman based on both its experience in
providing identical or substantially similar services in other
Chapter 11 cases and the competitiveness of its fees.
The Debtors will pay Kurtzman a $50,000 retainer for services to
be performed and expenses to be incurred in the Debtors' Chapter
11 cases.
Eric Kurtzman, CEO of the firm, discloses that Kurtzman employees:
(a) do not have any adverse connection with the Debtors, the
Debtors' creditors or any other party-in-interest; and
(b) do not hold or represent an interest adverse to the
Debtors' estates.
Mr. Kurtzman assures the Court that the firm is a "disinterested
person" pursuant to Section 101(14) of the Bankruptcy Code.
Headquartered in Troy, Michigan, Collins & Aikman Corporation --
http://www.collinsaikman.com/-- is a global leader in cockpit
modules and automotive floor and acoustic systems and is a leading
supplier of instrument panels, automotive fabric, plastic-based
trim, and convertible top systems. The Company has a workforce of
approximately 23,000 and a network of more than 100 technical
centers, sales offices and manufacturing sites in 17 countries
throughout the world. The Company and its debtor-affiliates filed
for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case
No. 05-55927). When the Debtors filed for protection from their
creditors, they listed $3,196,700,000 in total assets and
$2,856,600,000 in total debts.
COMDIAL CORP: Files for Chapter 11 Protection in Delaware
---------------------------------------------------------
Comdial Corporation (OTC Bulletin Board: CMDZE) and its affiliates
filed voluntary chapter 11 petitions in the U.S. Bankruptcy Court
for the District of Delaware on May 26, 2005. As of the petition
date, the Debtors had approximately $15.3 million in senior
secured debt obligations. The chapter 11 filing is prompted by a
decrease in the Debtors' net sales from 2001 to 2004. The primary
causes for the decreases include:
(i) negative trends in the telecommunications equipment
marketplace;
(ii) pricing pressures in a very competitive market;
(iii) significant reduction in sales prices of products due to
technological evolution; and
(iv) contraction of market focus from international to
primarily domestic.
As of Jan. 31, 2005, the Debtors were not in compliance with
certain financial covenants associated with the senior credit
facility and were in default of obligations under the facility.
Also, the Debtors are in default under the 2002 Placement Notes
and the 2004 Bridge Notes after failing to make quarterly interest
payments due on March 31, 2005.
Sale Process
Comdial entered into an agreement to sell substantially all of its
assets under section 363 of the U.S. Bankruptcy Code to Dialcom
Acquisition LLC. Dialcom is an investor group led by Michael
Falk, managing partner of ComVest Investment Partners, a secured
debt holder and major investor in Comdial. Mr. Falk and Inder
Tallur, also a managing director of ComVest, have resigned from
the board of directors of Comdial. The Debtors and Dialcom are in
the process of finalizing the terms of an asset purchase agreement
and anticipate filing a sale and bidding procedures motion next
week.
DIP Financing
In connection with Comdial's imminent reorganization, it has
obtained $3 million in debtor-in-possession funding. The
financing will make the necessary funds available to Comdial
during the reorganization process so that the company will not
experience any disruptions in its business affairs.
"These announcements represent an exciting day for Comdial and its
customers," Comdial President and CEO Neil Lichtman said,
"because, as a result of the asset purchase agreement with Mr.
Falk's group and the establishment of the credit line, Comdial
will continue delivering products, services, and support without
interruption and will emerge as a stronger, more competitive
company."
Headquartered in Sarasota, Florida, Comdial Corporation --
http://www.comdial.com/-- develops and markets sophisticated
communications products and advanced phone systems for small and
medium-sized enterprises. The Company and eight of its affiliates
filed voluntary chapter 11 petitions on May 26, 2005 (Bankr. D.
Del. Case Nos. 05-11492 through 05-11500). Jason M. Madron, Esq.,
and John Henry Knight, 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
$30,379,000 in total assets and $35,420,000 in total debts.
COMDIAL CORPORATION: Case Summary & 30 Largest Unsecured Creditors
------------------------------------------------------------------
Lead Debtor: Comdial Corporation
106 Cattlemen Road
Sarasota, Florida 34232
Bankruptcy Case No.: 05-11492
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Comdial Business Communications Corporation 05-11493
Comdial Enterprise Systems, Inc. 05-11494
Comdial Real Estate Company, Inc. 05-11495
Comdial Telecommunications International, Inc. 05-11496
Comdial Acquisition Corporation 05-11497
Key Voice Technologies, Inc. 05-11498
Aurora Systems, Inc. 05-11499
Array Telecom Corporation 05-11500
Type of Business: The Debtors develop and market sophisticated
communications products and advanced phone
systems for small and medium-sized enterprises.
See http://www.comdial.com/
Chapter 11 Petition Date: May 26, 2005
Court: District of Delaware
Judge: Mary F. Walrath
Debtors' Counsel: Jason M. Madron, Esq.
John Henry Knight, Esq.
Richards, Layton & Finger, P.A.
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Tel: (302) 651-7595
Fax: (302) 651-7701
Consolidated Financial Condition as of December 31, 2004:
Total Assets: $30,379,000
Total Debts: $35,420,000
Consolidated List of Debtors' 30 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
PBGC Benefits $7,933,000
Comdial Pension Plan
Department 4316
Carol Stream, IL 60122
Fax: (202) 326-4112
Microcapital 2004 Note Holder $1,031,781
201 Post Street, Suite 1001
San Francisco, CA 94108
Tel: (415) 625-6820
Fax: (415) 352-3705
William Glover Severance Pay $680,997
1362 Sandown Lane
Keswick, VA 22947
MaxiSwitch Supplier $570,243
2550 North Dragoon, Suite 100
Tucson, AZ 85745
Tel: (520) 294-5450
Fax: (520) 294-6890
Porter Partners 2004 Note Holder $515,890
300 Drakes Landing Road
Suite 175
Greenbrae, CA 94904
Tel: (415) 461-4410
Fax: (415) 461-4405
Pan Investment & Trade 2004 Note Holder $515,890
345 California Street
San Francisco, CA 94104
Tel: (011-41-44) 919-8998
Lauren Carter 2004 Note Holder $515,890
Millenium Trust
6 Lacomar Road
Palm Beach, FL 33480
Tel: (561) 835-3531
Fax: (561) 835-1515
Stephanie Carter 2004 Note Holder $515,890
Millenium Trust
6 Lacomar Road
Palm Beach, FL 33480
Tel: (561) 835-3531
Fax: (561) 835-1515
Harvard Investment 2002 & 2004 Note Holder $515,493
17700 North Palesetter Way
Scottsdale, AZ 85255
Tel: (306) 777-0610
Fax: (480) 348-8976
Harvard Investment 2002 & 2004 Note Holder $515,096
17700 North Palesetter Way
Scottsdale, AZ 85255
Tel: (306) 777-0610
Fax: (480) 348-8976
Barry Kaplan 2002 Note Holder $513,904
51 Brookby Road
Scarsdale, NY 10583
Tel: (203) 661-9265
Fax: (203) 661-9266
Dolphin Offshore Partners LP 2002 Note Holder $513,904
129 East 17th Street
New York, NY 10003
Tel: (212) 982-5071 ext. 29
Fax: (212) 202-3817
Boundless Manufacturing Supplier $467,874
100 Marcus Boulevard
Hauppauge, NY 11788
Tel: (631) 342-7743
Fax: (631) 435-8352
Daniel Och 2002 & 2004 Note Holder $463,110
11 Dolma Road
Scarsdale, NY 10583
Tel: (212) 790-0120
Fax: (212) 790-0020
Nick Branica 2002 Note Holder $445,401
8230 Sanderling Road
Sarasota, FL 34242
Tel: (941) 346-8909
Echo Capital Growth 2002 & 2004 Note Holder $412,116
17700 North Palesetter Way
Scottsdale, AZ 85255
Tel: (306) 777-0670
Fax: (306) 352-7599
Lorimor Corporation 2002 & 2004 Note Holder $411,719
c/o Chadbourne & Parke
30 Rockefeller Plaza
New York, NY 10112
McDonal Technologies Supplier $396,691
1920 Diplomat Drive
Dallas, TX 75234
Tel: (972) 243-6767
Fax: (972) 241-2643
Elks Eye Service 2002 & 2004 Note Holder $360,329
c/o Mellon Securities
120 Broadway, 13th Floor
New York, NY 10271
Tel: (503) 916-8749
Fax: (503) 916-8170
UMPQUA 2002 & 2004 Note Holder $360,329
c/o Benson Association
11 Southwest 4th Avenue
Suite 2130
Portland, OR 97204
Tel: (503) 916-8749
Fax: (503) 916-8170
Regents 2004 Note Holder $309,534
University of Michigan
c/o Mellon Securities
120 Broadway, 13th Floor
New York, NY 10271
Tel: (503) 916-8749
Fax: (503) 916-8170
WCFS 2002 & 2004 Note Holder $257,548
c/o Mellon Securities
120 Broadway, 13th Floor
New York, NY 10271
Tel: (503) 916-8749
Fax: (503) 916-8170
Emmanuel Gerard 2004 Note Holder $206,356
1 East End Avenue
New York, NY 10021
Tel: (212) 885-4007
Fax: (212) 885-4072
Tecom Supplier $204,000
23 R&D Road 2
Science-Based Industrial Park
HSIN-CHU Taiwan
R.O.C., HSIN-CHU TAIWAN
Graybar Customer $190,000
William G. Mustain Severance $188,366
DMB Sarasota I LP Landlord $180,995
c/o JP Morgan Chase Bank
Keith Johnstone Severance $173,931
Adtech-GESI Supplier $166,057
Bicom Supplier $149,834
COMFORCE OPERATING: Moody's Withdraws All Junk Credit Ratings
-------------------------------------------------------------
Moody's Investors Service has withdrawn all the credit ratings of
Comforce Operating, Inc. and Comforce Corporation.
These ratings have been withdrawn:
* $55 million 12% senior notes due 2007, rated Ca;
* Senior Implied, rated Caa3;
* Senior Unsecured Issuer, rated Ca.
Headquarted in Woodbury, New York, Comforce is a provider of:
* staffing,
* consulting and
* outsourcing services.
DELAFIELD 246 CORP: Wants Exclusive Period Extended Until Sept. 26
------------------------------------------------------------------
Delafield 246 Corporation asks the U.S. Bankruptcy Court for the
Southern District of New York for an extension, through and
including Sept. 26, 2005, of the time within which it alone can
file a chapter 11 plan.
The Debtor reminds the Court that it filed a Disclosure Statement
and Plan of Reorganization on March 19, 2005, and a hearing to
consider the adequacy of that Disclosure Statement was originally
scheduled on May 19, 2005. The transfer of the Debtor's
bankruptcy case from the Eastern District of New York to the
Southern District of New York required the company to re-notice a
new disclosure statement hearing.
The Court will convene a hearing at 10:00 a.m., on June 14, 2005,
to consider the Debtor's request for an extension of its exclusive
period.
Headquartered in Plainview, New York, Delafield 246 Corporation is
a real estate investor and developer. The Company filed for
chapter 11 protection on November 29, 2004 (Bankr. E.D.N.Y. Case
No. 04-87515, transferred May 13, 2005, to Bankr. S.D.N.Y. Case
No. 05-13634). Daniel A Zimmerman, Esq., at the Law Offices of
Steven Cohn PC, represents the Company in its restructuring
efforts. When the Debtor filed for protection from its creditors,
it listed $13,000,000 in assets and $9,001,200 in debts
DORIAN GROUP: Artist Creditors Object to Sale of Assets
-------------------------------------------------------
Eight of The Dorian Group, Ltd.'s creditors -- Altramar, Fortune's
Wheel, Ex Umbris, Red Priest, Piffaro Peter Conte, Musica
Pacifica, Angela East and Terra Nova Consort -- tell the U.S.
Bankruptcy Court for the Northern District of New York they object
to the proposed sale of Dorian's recording assets.
The creditors question the ownership of the master recordings that
the Debtor claims are assets of the estate. The recording artist-
creditors contend that the Debtor can't sell what it doesn't own.
The creditors add that the Debtor has failed to assume or reject
any of the recording contracts and can't assign them unless it
first assumes them.
The Artist Creditors have filed multi-faceted claims asserting
multiple breaches of their recording contracts. If the Artists'
claims are sustained, the result of the suits would be the
termination of the contracts and the return of master recording
rights to the Artist Creditors.
Based in Troy, N.Y., Dorian Group Ltd. -- http://www.dorian.com/
-- produces and releases audiophile-quality recordings of fine
classical and acoustic traditional music. The Company filed for
chapter 11 protection on Jan. 5, 2005 (Bankr. S.D.N.Y. Case No.
05-10056). Robert J. Rock, Esq., in Albany, New York, represents
the Debtor in its restructuring efforts. When the Company filed
for protection from its creditors, it listed $10 million to $50
million in assets and $1 million to $10 million in debts.
DOTRONIX INC: March 31 Balance Sheet Upside-Down by $907,332
------------------------------------------------------------
Dotronix, Inc. (OTCBB:DOTX) reported its third quarter results.
Fiscal 2005 third quarter revenues (quarter ended March 31, 2005)
were $110,000, as compared to revenues of $347,000 in the third
quarter of fiscal 2004 (quarter ended March 31, 2004).
The net loss in the third quarter of fiscal 2005 was $245,000, as
compared to a net loss the third quarter of the previous year of
$137,000.
About the Company
Dotronix, Inc.'s principal activities are to design, manufacture
and market Cathode Ray Tube (CRT) displays. The CRT based
products and CRT replacement products include plasma panels,
digital light projectors (DLP), liquid crystal displays (LCD) and
light emitting diode displays (LED). The Group is also developing
a systems approach to product development and marketing to provide
all products and services, including display devices, for an
integrated electronic display system. It supports several types
of CRT based monitors to end use markets, including medical
diagnostic equipment manufactures and transportation hub operators
such as airports and train stations. Internal and external
resources are developed to enable to provide fully integrated
display systems solutions to meet the electronic display needs of
many industries.
At Mar. 31, 2005, Dotronix Inc.'s balance sheet showed a $907,332
stockholders' deficit, compared to a $136,651 deficit at Jun. 30,
2004.
DUANE READE: Moody's Junks $195 Million Senior Subordinated Notes
-----------------------------------------------------------------
Moody's Investors Service downgraded all ratings of Duane Reade
Inc., including the second-lien senior secured notes (2010) to B3
and the 9.75% senior subordinated notes (2011) to Caa2, and
assigned a negative rating outlook.
The rating downgrade was prompted by weak operating performance
even as the New York metro economy has recovered over the previous
year and Moody's belief that the high fixed charge burden will
challenge Duane Reade's ability to soon become free cash flow
positive. The negative rating outlook considers that ratings
could again be lowered within the next 12 to 18 months if working
capital uses cash or liquidity becomes a concern.
Ratings downgraded are:
-- $160 million second-lien senior secured notes (2010) to B3
from B2;
-- $195 million 9.75% senior subordinated notes (2011) to Caa2
from Caa1;
-- Senior implied rating to B3 from B2; and the
-- Long-term issuer rating to Caa3.
Moody's does not rate the $250 million revolving credit facility
that is collateralized by a first-lien on accounts receivable,
inventory, and pharmacy prescription files.
Negatively impacting the ratings are:
* the company's highly leveraged financial condition;
* the exposure to the economic fortunes of a restricted
geographic region (Manhattan and surrounding areas); and
* Moody's belief that free cash flow will remain constrained
even with a scaled-back store development program.
Recent adverse trends for merchandise margins partially from high
shrink and reduced vendor incentives as well as long-term margin
pressures from low margin drugs (relative to general merchandise)
steadily making up a larger proportion of the sales mix also limit
the ratings.
However, the ratings recognize the company's leading market share
in New York City generally (and Manhattan specifically), Moody's
expectation that $38 million of revolving credit facility
availability (assumes that 10% of the commitment is unavailable
because of non-compliance with the fixed charge coverage ratio)
will cover any potential free cash flow deficit over the next four
quarters, and the relatively small maintenance capital expenditure
requirement because of the modern condition of the company's store
base. The expectation that prescription drug sales will
strengthen and Moody's opinion that the company has significant
asset value in the form of accounts receivable, inventory,
prescription drug files, and below-market leases also benefit the
ratings.
The negative rating outlook reflects the challenges in materially
improving operating performance and debt protection measures
during the balance of 2005 and 2006. The ratings would be
adjusted downward if operating margin fails to substantially
improve from current levels within the next 12 months, liquidity
becomes a concern, or management cannot achieve targeted
improvements in working capital efficiency. Over the medium-term,
ratings could stabilize as average unit volume and operating
profit trends reverse, debt protection measures meaningfully
improve (such as lease-adjusted leverage approaching 6 times and
fixed charge coverage coming close to 1 time), and newly opened
stores inside and outside of Manhattan become accretive.
The B3 rating on the senior secured notes considers that, in
addition to guarantees from the operating subsidiaries, this class
of debt has a second priority lien relative to the unrated
revolving credit facility with respect to the most easily
monetizable assets of accounts receivable, inventory, and pharmacy
files. The secured notes have a first-lien on all other tangible
and intangible assets. In spite of the large proportion of the
revolving credit facility in the company's debt structure, the
secured notes are rated at the same level as the senior implied
rating because of Moody's belief that asset fair market value
approximately equals total secured debt.
The Caa2 rating on the 9.75% senior subordinated (2011) note issue
considers that this debt is guaranteed by the company's operating
subsidiaries. However, this subordinated class of debt is
contractually junior to significant amounts of more senior
obligations. The more senior claims principally are comprised of
the revolving credit facility, the secured notes, and $79 million
of trade accounts payable. In a hypothetical default scenario
with the revolving credit facility fully utilized, Moody's
believes that recovery for this subordinated class of debt would
rely on residual enterprise value given likely liquidation
proceeds for tangible assets.
Recent marketing initiatives and efforts to limit shrink on the
front-end have not been successful, and pharmacy sales have been
notably impacted following the introduction of mandatory mail-
order by several local third-party payers. EBITDA margin
(excludes one-time charges) declined to 2.3% in the first quarter
of 2005 from 4.8% and 5.1% in the same periods of 2004 and 2003,
respectively. Relative to earlier expectations, Moody's now
believes that delays in revenue and operating profit growth will
postpone substantial improvements in financial flexibility.
Even assuming the success of initiatives to improve sales and
reduce shrink over the second half of 2005, Moody's expects that
the company will experience a free cash flow deficit in 2005
unless management achieves it target of up to $12 million in
inventory efficiencies. For at least the next twelve months,
Moody's anticipates that excess availability on the revolving
credit facility will remain greater than 10% of the borrowing base
so the sole financial covenant (fixed charge coverage) will not
become a constraint.
Duane Reade Inc., headquartered in New York City, operates 249
drug stores principally in Manhattan and the outer boroughs of New
York City. Revenue for the twelve months ending March 2005
equaled $1.6 billion.
EARLE M. JORGENSEN: Earns $38.6 Million of Net Income in 4th Qtr.
-----------------------------------------------------------------
Earle M. Jorgensen Company (NYSE:JOR) reported strong results for
EMJ's fourth fiscal quarter and twelve months ended March 31,
2005.
For the twelve months ended March 31, 2005, revenues increased
54.6% to $1,608.9 million, compared to $1,040.4 million for the
same period in fiscal 2004. Tons shipped from inventory for the
twelve months of fiscal 2005 increased by approximately 16% from
the same period in fiscal 2004. Operating income increased 93.8%
to $134.7 million for the twelve months of fiscal 2005 compared to
$69.5 million for the same period in fiscal 2004. EBITDA for the
fiscal year was $146.4 million, an 81.2% increase over the $80.8
million for fiscal 2004. Net income increased to $97.5 million
for the twelve months ended March 31, 2005 compared to a net loss
of $23.6 million for the same period in fiscal 2004.
Fiscal 2005 financial results include an increase in our LIFO
(last-in first-out) reserve of $74.2 million versus $14.3 million
in fiscal 2004. The Company recorded a net income tax benefit of
$38.6 million for the year ended March 31, 2005, compared to a tax
provision of $3.1 million for fiscal 2004. The net tax benefit
for the year ended March 31, 2005 included a nonrecurring tax
benefit from the reduction of our deferred tax asset valuation
reserve primarily attributable to the payment of the high-yield
debt interest on the Holding Company Notes and the utilization of
our net operating losses during the year.
Net income for the fourth quarter of fiscal 2005 rose to $59.4
million versus a net loss of $3.5 million for the same period in
fiscal 2004. Revenues increased 41.7% to $456.3 million and
operating income increased 26.1% to $30.9 million for the fourth
quarter of fiscal 2005, compared to $322.1 million and $24.5
million, respectively, for the same period in fiscal 2004. Tons
shipped from inventory for the three months ended March 31, 2005
increased approximately 2% compared to the same period in 2004,
and increased approximately 10% over our third fiscal quarter
ended December 31, 2004. EBITDA for the quarter was $33.9
million, a 24.2% increase over $27.3 million in the prior year
quarter. The financial results for the fourth quarter of fiscal
2005 include an increase in the pre-tax LIFO reserve of $31.7
million compared to $13.8 million for the same period in fiscal
2004. The Company also had $2.6 million of pre-tax income from
the redemption of life insurance policies in the fourth quarter of
fiscal 2005.
Maurice S. Nelson, Jr., EMJ's President and Chief Executive
Officer, stated: "We were very pleased with our results for the
fourth quarter and the fiscal year. We had a historic year with
record revenues and profit which culminated with the merger and
financial restructuring and the initial public offering on April
14, 2005. I am proud of the collective efforts of all EMJ
employees who contributed to the record results."
"In addition, the company significantly de-leveraged during the
quarter with our revolving credit facility decreasing by $74.6
million to a balance of $16.9 million," Mr. Nelson added.
Mr. Nelson went on to state that: "We have completed our Kasto
System upgrades in Schaumburg, Illinois that will allow an
additional 25% increase in throughput at this location in addition
to the 72% capacity increase we experienced from the first phase
of the system expansion. Furthermore, we will be opening our
Spokane, Washington satellite in June and have three more
satellite locations, Hartford, Connecticut, Lafayette, Louisiana,
and Quebec City, Canada approved for completion during fiscal
2006. Additionally, expansion projects are planned in our Kansas
City, Missouri and Toronto, Ontario facilities. Estimated capital
expenditures required to complete these projects will be
approximately $11.6 million. We anticipate funding these
investments with a combination of internally generated cash and
debt.
"Revenues and shipments for April continued at the same record
pace established in the March ending quarter and the price per
pound increased marginally. We have seen, however, some
compression of our pre-LIFO gross margin. We anticipate some
seasonal revenue slow-down as we approach the summer months
consistent with past history. We estimate the range of revenue
for the June 2005 quarter (First Qtr. of FY'06) to be $430 to $440
million, EBITDA to be within a range of $42 to $46 million, after
paying the $8.5 million IPO bonus, and estimated net earnings per
diluted share for the June quarter to be in a range of $0.30 to
$0.34 per share. Our first quarter guidance is based on 52.0
million diluted weighted shares outstanding, and a 35% statutory
tax rate. In addition, guidance assumes no change in the valuation
of the 2.5 million share obligation to the stock bonus plan."
Merger Update
On April 20, 2005, EMJ completed its merger and financial
restructuring, pursuant to which EMJ's parent, Earle M. Jorgensen
Holding Company, Inc., was merged with and into a wholly owned
subsidiary of EMJ. On April 20, 2005 the Company also closed its
initial public offering of 17,600,000 shares of EMJ common stock.
EMJ raised $176.0 million, the net proceeds of which were used to
redeem Holding Company debt and preferred stock. EMJ paid down
$127.1 million of Holding's Series A Variable Rate Senior Notes,
$23.2 million of Holding's Series A Preferred Stock and $13.8
million of Holding's Series B Preferred Stock. The remaining
amounts of $130.0 million of Holding Notes, $23.8 million
Preferred A and $14.1 million Preferred B were exchanged into
approximately 13.0 million, 2.4 million, and 1.4 million common
shares, respectively. After completion of the exchange, EMJ had
approximately 48.5 million shares outstanding. In addition, we
have an obligation to contribute 2.5 million shares to our stock
bonus plan.
Pro forma earnings per diluted share would have been $1.62 for the
year ended March 31, 2005, on 50.4 million diluted weighted
shares, after giving effect to the IPO and the merger and
financial restructuring, eliminating the amounts accrued for
interest on the Holding Notes and dividends for the Holding
Preferred Stock, eliminating the income tax benefit related to
Holding, and including the special contribution to the stock bonus
plan.
About the Company
Earle M. Jorgensen Company is one of the largest distributors of
metal products in North America with 35 service and processing
centers. EMJ inventories more than 25,000 different bar, tubing,
plate, and various other metal products, specializing in cold
finished carbon and alloy bars, mechanical tubing, stainless bars
and shapes, aluminum bars, shapes and tubes, and hot-rolled carbon
and alloy bars.
* * *
As reported in the Troubled Company Reporter on February 14, 2005,
Standard & Poor's Ratings Services raised its secured debt rating
on Brea, California-based Jorgensen (Earle M.) Co.'s 9.75% senior
secured notes due 2012 to 'B' from 'B-'. The corporate credit
rating was affirmed at 'B+'. The outlook is stable. Total debt
was $418 million at Dec. 31, 2004.
The upgrade on the 9.75% notes due 2012 reflects their improved
recovery prospects given the meaningful increase in the company's
asset base due mainly to increased working capital levels from
stronger market conditions and Standard & Poor's assumption that
revolver borrowings will be lower than original estimates in light
of favorable steel industry conditions.
"The ratings on Jorgensen reflect its below-average business
position, aggressive financial management, and volatile cash flow
due to working capital swings," said Standard & Poor's credit
analyst Dominick D'Ascoli.
ELANTIC TELECOM: Taps PENTA Advisory as Financial Advisors
----------------------------------------------------------
Elantic Telecom, Inc., asks the U.S. Bankruptcy Court for the
Eastern District of Virginia for permission to employ PENTA
Advisory Services, LLC, as its financial advisors. PENTA will
pick up where Navigant Consulting Inc. left off.
The Debtor reminds the Court that it authorized the employment of
Navigant Consulting as its financial advisor on Aug. 24, 2004.
PENTA Advisory spun off from Navigant Consulting and became a
freestanding company.
Navigant Consulting ceased providing financial advisory services
to the Debtor when the Firm's term of engagement expired and was
not renewed. The professionals of Navigant Consulting who were
providing services to the Debtor became employees of PENTA
Advisory and have continued to provide services to the Debtor.
PENTA Advisory is expected to:
a) provide general financial advice to the Debtor with respect
to its business operations, properties, financial condition
and restructuring prospects;
b) advise and assist the Debtor in the formulation and review
of business plans and forecasts, and in assessing the value
of certain of its assets and business units;
c) advise and assist the Debtor in developing, identifying and
evaluating any proposed restructuring transactions, and in
the formulation, negotiation, preparation and confirmation
of any plan of reorganization in the Debtor's chapter 11
case;
d) advise and assist the Debtor in negotiating, analyzing and
formulating in any debtor-in-possession facilities or
amendments, any exit financing facilities required in
connection with implementing a chapter 11 plan and in other
financing transactions;
e) advise and assist the Debtor on all bankruptcy-related tax
matters concerning federal, state and local taxing
authorities, and on all bankruptcy-related reports including
monthly operating reports; and
f) provide all other financial advisory services to the
Debtor's that are necessary in its chapter 11 case.
Suzanne B. Roski, a Director at PENTA Advisory, reports the Firm's
professionals bill:
Designation Hourly Rate
------------ -----------
Directors/Managing Directors $300 - $330
Consultants $185 - $280
Analysts $140 - $155
Paraprofessionals $ 60 - $110
PENTA Advisory assures the Court that it does not represent any
interest materially adverse to the Debtor or its estate.
Headquartered in Richmond, Virginia, Elantic Telecom, Inc. --
http://www.elantictelecom.com/-- provides wholesale fiber
bandwidth and carrier services to long-distance, international
wireless carriers and competitive local exchange carriers across
its fiber optic network. The Company filed for chapter 11
protection on July 19, 2004 (Bankr. E.D. Va. Case No. 04-36897).
Lynn L. Tavenner, Esq., and Paula S. Beran, Esq., at Tavenner &
Beran, PLC, represent the Debtor in its restructuring efforts.
The Official Committee of Unsecured Creditors is represented by
Danielle M. Varnell, Esq., and David Neier, Esq., at Winston &
Strawn. When the Company filed for protection from its creditors,
it listed $19,844,000 in total assets and $24,372,000 in total
debts.
ENRON: Kennedy Oil Wants Court to Allow Claim as Admin. Expense
---------------------------------------------------------------
Kennedy Oil, a secured creditor, asks the U.S. Bankruptcy Court
for the Southern District of New York to:
a. require Enron North America Corp. to fully account for its
possession and use of the cash collateral in which Kennedy
had a security interest on the Petition Date; and
b. compel ENA to pay its administrative expense claim to the
extent ENA has failed to account for and segregate
Kennedy's cash collateral or to afford adequate protection
of the Kennedy's interest in any cash collateral that ENA
used between the Petition Date and the effective date of
the Plan.
Kennedy is the owner of working interests in, and is the producer
of, oil and gas production from various wells located in Campbell
County, Wyoming.
On October 15, 2002, Kennedy timely filed Claim No. 15605 against
ENA for $2,910,363 for natural gas production that Kennedy had
sold to ENA pursuant to a gas purchase agreement between them
during the months of October 2001 and November 2001.
Donn J. McCall, Esq., at Brown, Drew & Massey LLP, in Casper,
Wyoming, tells the Court that ENA failed to provide certain
credit assurances to Kennedy as prescribed by their agreement.
As a result, the Gas Purchase Agreement was terminated on
November 29, 2001.
Mr. McCall relates that to the extent ENA resold any of the gas
production it purchased from Kenney under the Gas Purchase
Agreement, Kennedy's security interest attached to and followed
the proceeds. The proceeds resulting from the sale of oil and
gas fall within the definition of cash collateral under Section
363(a) of the Bankruptcy Code, Mr. McCall notes. Accordingly,
Kennedy believes that the proceeds of the gas production in which
it had an automatically perfected security interest on the
Petition Date constituted cash collateral.
Under Section 363(c)(2), a debtor, acting in its capacity as
debtor in possession, is absolutely prohibited from using cash
collateral unless the secured creditor who has an interest in the
cash collateral affirmatively consents to its use, or the
bankruptcy court authorizes that use after notice to the secured
creditor and an opportunity for a hearing.
Between the Petition Date and the effective date of the Plan, Mr.
McCall says, Kennedy never consented to the use of its cash
collateral, and neither ENA, Enron Corp., nor any of the other
Debtors sought or obtained authority from the Court to use
Kennedy's cash collateral.
Absent the consent of Kennedy or authorization of the Court to
the use Kennedy's cash collateral, Mr. McCall asserts that
Section 363(c)(4) imposes an absolute duty upon ENA to segregate
and account to Kennedy for any and all cash collateral that was
in its possession, custody, or control on the Petition Date.
"ENA should be required to account fully for Kennedy's cash
collateral," Mr. McCall argues. "If ENA has failed to segregate
or is unable to account for Kennedy's cash collateral or if it
used any of the cash collateral without obtaining Kennedy's
consent or seeking authorization of [the] Court, upon notice to
Kennedy and an opportunity for a hearing, there would be no doubt
that ENA breached its fundamental duties as debtor in possession
under section 363(c)(2) and (c)(4)."
To the extent the accounting reveals any misuse of Kennedy's cash
collateral by ENA and any of the other Debtors, Kennedy should be
granted a superpriority administrative expense claim as
restitution for the cash collateral that is shown to have
dissipated as the result of the misuse, Mr. McCall adds.
Headquartered in Houston, Texas, Enron Corporation is in the midst
of restructuring various businesses for distribution as ongoing
companies to its creditors and liquidating its remaining
operations. Before the company agreed to be acquired, controversy
over accounting procedures had caused Enron's stock price and
credit rating to drop sharply.
Enron filed for chapter 11 protection on December 2, 2001 (Bankr.
S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the
Company's Modified Fifth Amended Plan on July 15, 2004, and
numerous appeals followed. The Confirmed Plan took effect on
Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen,
Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in
their restructuring efforts. (Enron Bankruptcy News, Issue No.
142; Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENTERPRISE PRODUCTS: S&P Rates $500 Mil. Sr. Unsec. Notes at BB+
----------------------------------------------------------------
Standard & Poor's Rating Services assigned its 'BB+' rating to
Enterprise Products Operating L.P.'s (BB+/Positive/--) $500
million senior unsecured notes due 2010.
Proceeds from the issuance will be used for capital expenditure
programs and repaying almost $230 million of drawn capacity on its
$750 million revolver.
As of March 31, 2005, Houston, Texas-based Enterprise Products
Operating had about $4.3 billion of debt outstanding.
Enterprise Products Partners L.P. (BB+/Positive/--) does not issue
debt but does guarantee Enterprise Products Operating's debt;
therefore, Enterprise Products Partners carries the same rating as
Enterprise Products Operating.
"The positive outlook on Enterprise Products reflects the
expectation that its improved financial performance will
continue," said Standard & Poor's credit analyst Aneesh Prabhu.
"An upgrade to investment grade will depend on further
demonstration of successful merger integration and a reduction in
earnings volatility," said Mr. Prabhu.
ESSELTE GROUP: Bank Debt Amendment Prompts S&P to Hold Ratings
--------------------------------------------------------------
Standard & Poor's Ratings Services affirmed is 'B' corporate
credit and 'CCC+' subordinated debt ratings on office products
manufacturer Esselte Group Holdings AB.
At the same time, the ratings were removed from CreditWatch with
negative implications, where they were placed on Nov. 23, 2004.
The outlook is stable. Total debt outstanding as of April 3, 2005
was $413.8 million.
The ratings affirmation reflects Esselte's progress at controlling
costs and stabilizing its market share, and its amended bank debt
agreement with relaxed covenants.
"The ratings reflect Esselte's high debt leverage, its very
competitive operating environment with recent market share gains
from competitor's private-label products, and the low-growth
segments in which the company operates," said credit analyst
Martin S. Kounitz.
Standard & Poor's expects that Esselte will improve profitability
through cost reductions, manufacturing efficiencies and new
product introductions, and will maintain credit ratios appropriate
for its ratings. If continued pricing pressures from retailers
and raw material inflation cause margins and credit ratios to
deteriorate, the outlook may be changed to negative.
FEDERAL-MOGUL: Court Modifies Scope of Ernst & Young's Employment
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware modified
the scope of Ernst & Young LLP's employment specifying the firm's
terms of services relating to Federal-Mogul Corporation's
international assignment program for calendar year 2005.
E&Y appointed its Senior Manager Elizabeth Keppel to lead the
firm's International Assignment Program Services team for
Federal-Mogul.
The International Assignment Program Services is divided into
three major services:
A. International Tax Advisory Services
E&Y will provide, among others, tax projections, payroll
advisory, net-to-net calculations, compensation advisory
related to structure and delivery, and general international
assignment tax advisory as requested by Federal-Mogul.
Tax Advisory Services will be billed on an hourly basis as
incurred. E&Y's rate schedule for the period January 1, 2005,
through December 31, 2005, provides that:
Professional Hourly Rate
------------ -----------
Partners & Principals $500
Senior Managers $400
Managers $290
Seniors $230
Staff $175
Client Servicing Specialists $90
B. Individual Employee Tax Compliance
(a) Tax Return Services include the preparation of:
Services Cost of Services
-------- ----------------
Annual Basic U.S. Federal
Income Tax Return $1,400 - $2,300
Transfer Year Premium $420
State and Local Basic Income Tax Return(s)
State one (1) $480
Additional states $400
Local one (1) $450
April 15th extensions with tax projection $300
April 15th extensions with no tax projection N/C
Each additional extension $150
Annual Program Administration per Assignee $1000
Tax Equalization Calculation (expatriates) $450
Tax True-up Calculations (inpatriates) $420
Amended returns for Foreign Tax
Credit carry/back $900
(b) Supplemental Tax Assistance Services
* Preparation of annual U.S. federal or state returns
requiring complex calculations or containing complex
forms, multipled K-1s, rentals, and etc.;
* Responding to correspondence audits/inquiries from
federal and state tax authorities;
* Tracking tax equalization settlements;
* Responding to basic tax questions -- returns and TEQs;
* Follow-up of missing tax information (hourly fees apply
after second request); and
* Preparation of NLC letters.
(c) Additional Services cover those services that relate to:
-- State and Local Income Tax Return not due to Company
Assignment;
-- Children's or other dependents' Tax Returns;
-- U.S. Domicile Ruling Requests; and
-- Tax Returns relating to household employees.
C. International Assignment Management Services
(a) Participants Related Services
Cost Per
Services Person
-------- --------
Preassignment tax briefing/
Repatriation meeting $350
Tax equalization briefing $350
Combination briefings $600
Hypothetical Tax Withholding Calculation
Initial $250
Update $150
Balance Sheet Preparation
Initial $300
Update $150
Unblock FIT & SIT Included
Certificate of Coverage - Application $250
Certificate of Coverage - Tracking N/C
ORC Report Management N/C
ITIN applications $250-$350
(b) Supplemental Assignment Management Services includes:
* Adjustment/Consulting/Preparation of W-4;
* Tax equalization tracking;
* Tax gross-ups, as required;
* Response to administrative policy questions
returns/TEQs/gross-ups;
* Analysis of TEQ or gross-up results/explanation of
balance due;
* Assignment of cost projection;
* Compensation tracking; and
* Compensation review.
The Supplemental Assignment Services will be billed at E&Y's
hourly rate schedule. General tax consulting related to
expatriate services will be provided at the hourly rates plus
expenses.
Fee Modifications
The Court also approved an ordinary course annual adjustment to
E&Y's applicable hourly rates as well as an adjustment to the
estimated fee structure for E&Y's 2004 audit of the Debtors.
In accordance with the terms and conditions of an engagement
letter between E&Y and Federal-Mogul dated June 14, 2004,
regarding the audit for the year ending December 31, 2004, they
agreed to modify the 2004 Audit Letter to change the fee
structure. Under the Revised Fee Structure, E&Y will invoice
Federal-Mogul for auditing services using this schedule:
Audit Year Revised Original Difference
--------- ------- -------- ----------
2004
May $400,000 $400,000 -
June 300,000 300,000 -
July 300,000 300,000 -
August 300,000 300,000 -
September 250,000 - $250,000
October 425,000 300,000 125,000
November 375,000 250,000 125,000
December 250,000 250,000 -
2005
January 250,000 250,000 -
February 535,000 235,000 300,000
---------- --------- --------
$3,385,000 2,585,000 $800,000
John P. Gasparovic, Federal-Mogul's Senior Vice President and
General Counsel, told the Court that E&Y has made routine
ordinary course adjustment to its hourly rates and reasonable and
necessary adjustments to its estimated fees for its 2004 audit
services.
Under an engagement letter dated as of June 14, 2004, filed with
E&Y's September 2004 supplemental application, the estimated
monthly fees related to the 2004 Audit were based on certain
assumptions. The 2004 Audit Letter contemplated that the fees
might require adjustment after the work was conducted.
According to Mr. Gasparovic, the adjustments are necessary
because the fee structure set forth in the 2004 Audit Letter was
developed without including any estimated fees for the
remediation of the Debtors' internal controls in 2004. Mr.
Gasparovic notes that 2004 was the initial year of the audit of
the Debtors' internal controls and any fees associated with
remediation efforts would be difficult to estimate. Instead, the
parties contemplated that E&Y would bill for the actual fees
incurred for the remediation matters throughout the audit
process. The Fee Adjustment Letters modify the estimate set
forth in the 2004 Audit Letter to account for the actual fees
related to the remediation of the Debtors' internal controls.
In another engagement letter dated November 22, 2002, E&Y and
Federal-Mogul agree to increase the firm's applicable hourly
rates in the normal course of business effective as of July 1,
2004, with regard to the E&Y's accounting assistance services.
The hourly rates have previously ranged from $45 to $477.
Effective July 1, the hourly rates are therefore modified to
range from $50 to $550.
Ernst & Young Partner Kevin F. Asher said that there are no
additional relationships that would affect the firm's ability to
perform the matters on which it is to be engaged. Mr. Asher
assures the Court that the firm remains a "disinterested person"
as defined in Section 101(14) of the Bankruptcy Code.
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.
(Federal-Mogul Bankruptcy News, Issue Nos. 78 & 79; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
FEDERAL-MOGUL: U.K. Insurance Dispute Settlement Hearing in July
----------------------------------------------------------------
As reported in the Troubled Company Reporter on Apr. 7, 2004,
Federal-Mogul Corporation and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Delaware to approve certain
settlement agreements resolving an asbestos insurance coverage
litigation in England among non-Debtor subsidiary Curzon Insurance
Limited, Curzon's insurance brokers, and a reinsurance firm.
Subsequently, as reported in the Troubled Company Reporter on
Mar 14, 2005, Munchener Ruckversicherungs-Gesellschaft AG and
Centre Reinsurance International Co., a subsidiary of the Zurich
Financial Services Group, notified the Debtors of their belief
that the settlements with European International Reinsurance
Company Ltd. and Sedgwick may breach one or more provisions of
the Reinsurance Agreement. In a Form 10-K filing with the
Securities and Exchange Commission, the Debtors report that the
hearing to review the March 1, 2004 motion has been adjourned
indefinitely as the parties attempt to resolve the issues raised
by Munich Re and Centre Reinsurance. However, the settlement
efforts have been unsuccessful, prompting the Administrators to
file an action in the High Court of Justice, Chancery division in
London, England, seeking a declaration that the settlements with
European International and Sedgwick do not breach provisions of
the Reinsurance Agreement.
Insurance Dispute Settlement is Set for Hearing
As previously reported, the hearing to review the March 1, 2004,
motion seeking the Bankruptcy Court's approval of the U.K.
insurance settlement has been adjourned indefinitely as the
parties attempt to resolve the issues raised by Munchener
Ruckversicherungs-Gesellschaft AG and Centre Reinsurance
International Co., a subsidiary of the Zurich Financial Services
Group. However, the settlement efforts have been unsuccessful,
prompting the Administrators to file an action in the High Court
of Justice, Chancery division in London, England, seeking a
declaration that the settlements with European International
Reinsurance Company Ltd. and Sedgwick do not breach provisions of
the Reinsurance Agreement. According to Federal-Mogul
Corporation in a regulatory filing with the Securities and
Exchange Commission, a hearing has been set for July 13-15, 2005.
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.
(Federal-Mogul Bankruptcy News, Issue No. 78; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
FIRST UNION: Moody's Affirms Low-B Ratings on Class K to P Certs.
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes and
affirmed the ratings of fifteen classes of First Union National
Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2001-C2 as:
-- Class A-1, $138,312,861, Fixed, affirmed at Aaa
-- Class A-2, $590,647,000, Fixed, affirmed at Aaa
-- Class IO, Notional, Floating, affirmed at Aaa
-- Class B, $42,565,000, Fixed, upgraded to Aa1 from Aa2
-- Class C, $12,520,000, Fixed, upgraded to Aa2 from Aa3
-- Class D, $12,519,000, Fixed, affirmed at A1
-- Class E, $20,031,000, Fixed, affirmed at A2
-- Class F, $10,015,000, Fixed, affirmed at A3
-- Class G, $15,023,000, Fixed, affirmed at Baa1
-- Class H, $17,527,000, Fixed, affirmed at Baa2
-- Class J, $12,519,000, WAC, affirmed at Baa3
-- Class K, $15,023,000, Fixed, affirmed at Ba1
-- Class L, $20,031,000, Fixed, affirmed at Ba2
-- Class M, $5,008,000, Fixed, affirmed at Ba3
-- Class N, $6,048,000, Fixed, affirmed at B1
-- Class O, $5,908,000, Fixed, affirmed at B2
-- Class P, $3,939,000, Fixed, affirmed at B3
As of the May 13, 2005 distribution date, the transaction's
aggregate balance has decreased by approximately 5.2% to
$950.2 million from $1.0 billion at securitization. The
Certificates are collateralized by 105 mortgage loans secured by
commercial and multifamily properties. The loans range in size
from less than 1.0% to 6.5% of the pool, with the top ten loans
representing 39.8% of the pool.
The pool includes three shadow rated loans, a conduit component
and a credit tenant lease component, representing 12.2%, 84.4% and
3.4% of the pool, respectively. One loan, representing less than
1.0% of the pool, has defeased and has been replaced with U.S.
Government securities. Two loans have been liquidated from the
trust resulting in realized losses of approximately $608,000.
Two loans, representing less than 1.0% of the pool, are in special
servicing. Moody's has estimated aggregate losses of $3.2 million
for all of the specially serviced loans. Twenty-three loans,
representing 29.6% of the pool, are on the master servicer's
watchlist.
Moody's was provided with partial or full year 2004 operating
results for 84.6% of the performing loans. Moody's loan to value
ratio for the conduit component is 86.0%, compared to 87.9% at
securitization. Based on Moody's analysis, 14.5% of the conduit
pool has a LTV greater than 100.0%, compared to 0.0% at
securitization. The upgrade of Classes B and C is primarily due
to increased subordination levels and stable overall pool
performance.
The largest shadow rated loan is the Innkeepers Portfolio Loan
($49.8 million - 5.2%), which is secured by six extended-stay
hotels totaling 807 guestrooms. The properties, which operate
under the Residence Inn franchise and are managed by Marriott
International, are located in:
* Texas (2),
* Georgia,
* Florida,
* California and
* Connecticut.
The performance of each of the properties has declined since
securitization. Four of the properties are 20+ years old and are
the oldest properties in their competitive set. The portfolio's
most recent reported RevPAR is $61.26, compared to $85.00 at
securitization, causing a significant decease in net cash flow.
The loan is shadow rated B3, compared to A3 at securitization.
The second shadow rated loan is the One Franklin Plaza Loan
($43.1 million - 4.5%), which is secured by a 607,000 square foot
office building located in downtown Philadelphia, Pennsylvania.
The property is 100.0% occupied, the same as at securitization.
GlaxoSmithKline occupies 98.0% of the premises on a lease expiring
in March 2013. The loan is shadow rated Baa2, the same as at
securitization.
The third shadow rated loan is the HR Portfolio Loan
($24.1 million - 2.5%), which consists of eight cross
collateralized loans secured by eight medical office facilities
totaling 528,000 square feet. The properties are located in:
* Alabama (3),
* Texas (3) and
* Virginia (2).
The portfolio's overall occupancy is 98.2%, essentially the same
as at securitization, although each property has experienced an
increase in NCF since securitization due to increased rents and
stable expenses. The loan has amortized 30.8% since
securitization. The loan is shadow rated Aa1, compared to Aa3 at
securitization.
The top three conduit loans represent 15.4% of the outstanding
pool balance. The largest conduit loan is the Cornerstone
Portfolio Loan ($61.3 million - 6.5%), which consists of seven
cross collateralized loans secured by seven multifamily properties
totaling 1,980 units. All of the properties are located in Texas.
Although the portfolio's overall occupancy has increased to 94.2%
from 91.5% at securitization, its financial performance has been
impacted by decreased rents and increased expenses. Moody's LTV
is 83.9%, compared to 74.0% at securitization.
The second largest conduit loan is the 1330 Connecticut Avenue
Loan ($51.3 million - 5.4%), which is secured by a 252,000 square
foot Class A office building located in Washington, D.C. The
property is 99.0% occupied, compared to 95.0% at securitization.
The law firm of Steptoe & Johnson LLP occupies 92.0% of the
premises under a lease that expires in December 2013. Moody's LTV
is 76.5%, compared to 85.1% at securitization.
The third largest conduit loan is the Villa La Jolla Apartments
Loan ($33.0 million - 3.5%), which is secured by 385 units in a
500-unit residential condominium property located in La Jolla,
California. The borrower has the controlling interest in the
operation of the homeowner's association. The units are 97.0%
occupied, compared to 93.0% at securitization, however performance
has been impacted by a significant increase in expenses. Moody's
LTV is 98.3%, compared to 89.6% at securitization.
The pool's collateral is a mix of:
* multifamily (33.7%),
* office and mixed use (29.6%),
* retail (18.0%),
* industrial and self storage (8.6%),
* lodging (6.4%),
* CTL (3.4%) and
* U.S. Government securities (0.3%).
The collateral properties are located in 26 states plus
Washington, D.C. The highest state concentrations are:
* California (22.0%),
* Texas (11.0%),
* Florida (10.2%),
* Pennsylvania (9.4%) and
* New York (8.9%).
All of the loans are fixed rate.
FOOTSTAR INC: Allows ESL Entities to Sell 1,035,241 Common Shares
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
approved a stipulation among Footstar, Inc., and its debtor-
affiliates and ESL Investments Inc. and certain of its affiliates,
including:
* ESL Partners, LP;
* ESL Investors, LLC;
* ESL Institutional Partners, LP; and
* ESL Investment Management, LLC
allowing the ESL entities to sell shares of Footstar common stock
under certain terms.
When Footstar filed for chapter 11 protection, the Debtors asked
the Court to enforce the automatic stay by approving the
implementation of procedures designed to protect the Debtors'
estates against inadvertent stay violations and consequential
damages. Specifically, the Debtors wanted, among other things,
to implement a mechanism whereby any entity that owned 5% or more
of Footstar common stock who proposes to dispose of the Stock must
give the Court and the Debtors 15 days' notice of the sale
transaction. The Court approved the proposed procedures without
prejudice to the Debtors waiving the notification procedures for
certain parties, with the Court's authority.
The ESL Entities own in the aggregate 1,999,800 shares of Stock or
approximately 9.85% of the total outstanding Stock. They want to
sell up to 1,035,241 shares of Stock.
In their Stipulation, the parties agree:
1. Stock Sale.
The ESL Entities will be permitted to sell an aggregate
amount of up to 1,035,241 shares of Stock. After the
completion of the sale transaction, ESL's aggregate
ownership of outstanding Stock will represent not less than
4.75% of the total outstanding Stock.
2. Timing of Stock Sale.
The sale(s) of the ESL Shares will be conducted by the
earlier of:
(a) July 8, 2005; or
(b) entry of an order confirming the Debtors' Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code.
The approval of the proposed sale(s) of the ESL Shares is in
effect for the Approved Sale Period and if the
transaction(s) do not occur within that particular period,
the ESL entities must re-seek approval from the Debtors
prior to conducting the sale(s).
Headquartered in West Nyack, New York, Footstar Inc. retails
family and athletic footwear. As of August 28, 2004, the Company
operated 2,373 Meldisco licensed footwear departments nationwide
in Kmart, Rite Aid and Federated Department Stores. The Company
also distributes its own Thom McAn brand of quality leather
footwear through Kmart, Wal-Mart and Shoe Zone stores. The
Company and its debtor-affiliates filed for chapter 11 protection
on March 3, 2004 (Bankr. S.D.N.Y. Case No. 04-22350).
Paul M. Basta, Esq., at Weil Gotshal & Manges represents the
Debtors in their restructuring efforts. When the Debtor filed for
protection, it listed $762,500,000 in total assets and
$302,200,000 in total debts.
FORD: Fitch Says Agreement with Visteon Won't Affect Ratings
------------------------------------------------------------
The pending agreement between Ford and Visteon, if completed as
outlined, does not have implications for Fitch's ratings for Ford
Motor Company or its affiliates. The significant financial burden
associated with the restructuring will fall on Ford, as previously
expected, with the costs of the restructuring to be spread out
over a number of years. Extensive cash holdings at Ford,
potentially supplemented by proceeds from the sale of Hertz,
provide Ford with more than sufficient liquidity to absorb the
costs related to these outflows.
The driving factor behind any rating actions for Ford during this
period will remain the operating performance of its North American
operations. Since the spinoff of Visteon in 2000, Ford has on
several occasions been forced to step in and provide significant
financial support. Ford's support has been necessitated by the
fact that wages and benefits for approximately 17,500 workers at
Visteon remain the responsibility of Ford. Large portions of
Visteon's assets remain uncompetitive due to high and inflexible
cost structure, and have been a material drag on the cost position
of Ford's North American supply chain.
The ability of Ford to accelerate the restructuring of Visteon
should, over time, to lead to improvement in this portion of
Ford's cost position. This will occur through a combination of
closing uncompetitive businesses, improving the cost position of
the assets remaining at Visteon, and through providing Ford with
the opportunity to source away business that cannot be restored to
a competitive position.
Importantly, the agreement could result in a true arms-length
relationship, providing long-term flexibility to Ford, although at
a meaningful cost. The restructuring of the assets to be held by
Ford will only be accomplished through labor attrition, facility
closures and, potentially, assisted sales, which are likely to
occur over a period of several years. The near-term buyout of
5,000 workers provides a step toward those ends.
GEMINI EQUIPMENT: Voluntary Chapter 11 Case Summary
---------------------------------------------------
Debtor: Gemini Equipment Company Business Trust
R.R. Box E
Bowmansdale, Pennsylvania 17008
Bankruptcy Case No.: 05-03489
Chapter 11 Petition Date: May 25, 2005
Court: Middle District of Pennsylvania (Harrisburg)
Judge: Mary D. France
Debtor's Counsel: Robert E. Chernicoff, Esq.
Cunningham & Chernicoff PC
2320 North Second Street
P.O. Box 60457
Harrisburg, Pennsylvania 17106-0457
Tel: (717) 238-6570
Fax: (717) 238-4809
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20 Largest Unsecured
Creditors.
GENEVA STEEL: Chapter 11 Trustee Wants to Make $114 Mil. Payment
----------------------------------------------------------------
James T. Markus, the Chapter 11 trustee in charge of Geneva Steel
LLC's bankruptcy proceedings, asks the U.S. Bankruptcy Court for
the District of Utah, Central Division, for authority to make a
$114 million pre-confirmation payment to its secured lenders.
Those lenders are:
* the Emergency Steel Loan Guaranty Board,
* Albert Fried and Company, and
* Silver Point Capital LP.
The Court will hear objections to the pre-confirmation payment
motion on June 2, 2005 at 2:00 p.m.
In his motion, Mr. Markus says that a prompt and substantial
payment to the secured lenders is advantageous to the estate
because this will reduce stop interest from accruing. The Trustee
says that it's costing the Debtor $23,206 every day that the $114
million remains unpaid. The Trustee earns 3.02% on cash assets he
invests. The loan agreements require 10.45% interest payments.
The Secured Debt
The Debtors estimate that, by June 3, 2005, its indebtedness to
the secured lenders will be approximately $136,269,133, including
costs and fees. The aggregate amount of the loan was
approximately $108,349,999 when the Debtors filed for bankruptcy
protection on January 25, 2002.
To secure the loan, the Debtor pledged these primary assets:
a) estate cash currently approximating $64.3 million;
b) water rights valued at approximately $74 million; and
c) land valued between $25 million to $60 million or more.
Sources of Cash for Payment
The Debtor plans to fund the $114 million pre-confirmation payment
to the secured lenders with $40 million from the sale of certain
assets identified as part of the secured lenders' collateral. The
cash realized from these sales, approximately $64.3 million as of
May 16, 2005, are now, in effect, the secured lenders' cash
collateral. The remaining $74 million needed to make the payment
will be sourced from the sale of the Debtor's water rights, wells
and easements to the Central Utah Water Conservancy District.
Remaining Loan Balance After Payment
After the proposed $114 million payment to the secured lenders,
the loan balance will amount to approximately $22 million. The
Debtor does not want to pay the full amount of the loan because it
has to use the $24 million left from its cash balances to:
a) cover liability for future environmental remediation;
b) maintain employees to preserve the value of the estate;
c) retain attorneys and other professionals to create a
vehicle for maximizing the value of the estate;
d) conduct ongoing liquidation activities; and
e) meet court-ordered payments.
Proposed Payment Distribution
If granted by the Court, the Debtor intends to divide the $114
million payment to the secured debtors in this manner:
Secured Lender Distribution
-------------- ------------
Emergency Steel Loan Guaranty Board $ 91,134,301
Albert Fried and Company 16,107,760
Silver Point Capital LP 6,757,939
------------
Total $114,000,000
Any final distribution ratio, however, is subject to the approval
of the secured lenders themselves.
Headquartered in Provo, Utah, Geneva Steel LLC owns and operates
an integrated steel mill. The Company filed for chapter 11
protection on January 25, 2002 (Bankr. Utah Case No. 02-21455).
Andrew A. Kress, Esq., Keith R. Murphy, Esq., and Stephen E.
Garcia, Esq., at Kaye Scholer LLP represent the Debtor in its
chapter 11 proceedings. When the Company filed for protection
from its creditors, it listed $262 million in total assets and
$192 million in total debts.
GENEVA STEEL: Hires Parr Waddoups as Special Counsel
----------------------------------------------------
The U.S. Bankruptcy Court for the District of Utah, Central
Division, authorized James T. Markus, the chapter 11 Trustee
appointed in Geneva Steel LLC's bankruptcy case, to retain Parr
Waddoups Brown Gee & Loveless as his special counsel, nunc pro
tunc to April 25, 2005.
Parr Waddoups will provide Geneva with services pertaining to:
a) environment matters;
b) litigation and other proceedings in non-bankruptcy courts
and administrative agencies to the extent not stayed by
Section 362(a) of the bankruptcy Code; and
c) to the extent bankruptcy issues are involved, interface
with the Debtor's bankruptcy counsel on business matters.
The Debtor selected Parr Waddoups because of its past
representation and extensive knowledge about the Debtors' business
and legal affairs. Parr Waddoups will be paid according to the
firm's customary hourly rates presently ranging from $140 to $305.
To the best of the Debtor's knowledge, Parr Waddoups is a
"disinterested person" as the term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in Provo, Utah, Geneva Steel LLC owns and operates
an integrated steel mill. The Company filed for chapter 11
protection on January 25, 2002 (Bankr. Utah Case No. 02-21455).
Andrew A. Kress, Esq., Keith R. Murphy, Esq., and Stephen E.
Garcia, Esq., at Kaye Scholer LLP represent the Debtor in its
chapter 11 proceedings. When the Company filed for protection
from its creditors, it listed $262 million in total assets and
$192 million in total debts.
GLOBAL CROSSING: Ex-Workers Get 25% Back from $84 Mil. Settlement
-----------------------------------------------------------------
Former Global Crossing workers who lost their retirement savings
when the Company went bankrupt received about 25 percent of
their pension funds back last week as part of an $84 million
settlement, The Associated Press reports.
According to Matt Fusco of the law firm Chamberlain D'Amanda,
and attorney for Global Crossing Employees, while it's certainly
unsatisfying to lose 75 percent, the 25 percent payout is one of
the highest he'd ever heard of in a class action suit, that most
such plaintiffs get pennies on the dollar in settlement. He told
AP that the settlement includes some two thousand people in the
Rochester area and another two thousand across the country. Mr.
Fusco also added that employees who filed severance claims
should be getting paid within the next few weeks, while
shareholders will have to wait a little longer. (Class Action
Reporter, Tuesday, May 24, 2005, Vol. 7, Issue No. 101)
Headquartered in Florham Park, New Jersey, Global Crossing Ltd. --
http://www.globalcrossing.com/--provides telecommunications
solutions over the world's first integrated global IP-based
network, which reaches 27 countries and more than 200 major cities
around the globe. Global Crossing serves many of the world's
largest corporations, providing a full range of managed data and
voice products and services. The Company filed for chapter 11
protection on January 28, 2002 (Bankr. S.D.N.Y. Case No.
02-40188). When the Debtors filed for protection from their
creditors, they listed $25,511,000,000 in total assets and
$15,467,000,000 in total debts. Global Crossing emerged from
chapter 11 on December 9, 2003.
GS CONSULTING: Case Summary & 25 Largest Unsecured Creditors
------------------------------------------------------------
Lead Debtor: GS Consulting Services, Inc.
dba The Calends Group, Inc.
dba Benefits Resources Administrators, Inc.
dba PCT Operations, Inc.
dba Horizon Management Group, LLC
dba Health Resources Group
dba Pyramid Benefit Services
dba Med Guard LLC
300 South Saint Louis Boulevard, Suite 100
South Bend, Indiana 46617
Bankruptcy Case No.: 05-11464
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
National Health & Claims Administrators, Inc. 05-11465
Type of Business: The Debtors provide health-care claims
processing and consulting for major Northern
Indiana employers.
Chapter 11 Petition Date: May 23, 2005
Court: District of Delaware
Judge: Mary F. Walrath
Debtors' Counsel: Richard W. Riley, Esq.
Duane Morris LLP
1100 North Market Street, Suite 1200
Wilmington, Delaware 19801
Tel: (302) 657-4900
Fax: (302) 657-4901
Estimated Assets Estimated Debts
---------------- ---------------
GS Consulting $1 Million to $10 Million to
Services, Inc. $10 Million $50 million
National Health & Claims $1 Million to $10 Million to
Administrators, Inc. $10 Million $50 million
Consolidated List of Debtors' 25 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
AM General LLC Customer Litigation $3,000,000
c/o Jim Matthews, Esq. Cause No. 71D07-
Baker & Daniels LLP 0505-PL-160 pending
First Bank Building in the St. Joseph
205 W. Jefferson Boulevard Superior Court
South Bend, IN 46601
Kurt Schneitter Loan $1,350,000
3633 East Broadway, Suite 100
Long Beach, CA 90803
Memorial Health System Provider Claim $1,094,757
615 North Michigan Street
South Bend, IN 46601
Clarian Health Partners I Provider Claim $745,168
2201 Reliable Parkway
Chicago, IL 60686
Preferred Medical Claims Provider Claims $717,000
Systems
17200 North Perimeter Drive
Suite 100
Scottsdale, AZ 85255
Saint Joseph Regular Provider Claim $661,225
Medical Center
Dept CH 10405
Palatine, IL 60055
Saint Joseph County Customer Litigation $661,225
Board of County Cause No. 71D07-
Commissioners 0505-PL-160 pending
c/o Peter D'Gostino in the Saint Joseph
131 South Taylor Street Superior Court
South Bend, IN 46601
Syndicate Systems Customer Litigation $500,000
c/o Thomas A. Herr Cause No. 71D07-
Barrett & McNagny LLP 0505-PL-160 pending
215 East Berry Street in the Saint Joseph
Fort Wayne, IN 46802 Superior Court
Bank One Loan Assumed $392,230
c/o Quarles & Brady
Attn: Patrick Schoen
411 East Wisconsin Avenue
Suite 2040
Milwaukee, WI 53202
Elkhart General Hospital Provider Claim $351,960
600 East Boulevard
Elkhart, IN 46514
Owensboro Mercy Health Provider Claim $344,919
System
811 East Parrish Avenue
Owensboro, KY 42303
The South Bend Clinic Provider Claim $304,537
P.O. Box 1755
South Bend, IN 46634
Memorial Health Customer Litigation $252,330
Systems, Inc. Cause No. 71D07-
615 North Michigan Street 0505-PL-160 pending
South Bend, IN 46601 in the Saint Joseph
Superior Court
Children's Hospital Provider Claim $213,597
Medical Center
P.O. Box 640194
Cincinnati, OH 45264
Lutheran Hospital of Provider Claim $204,363
Indiana
7950 West Jefferson Boulevard
Fort Wayne, IN 46804
Kosair Children's Hospital Provider Claims $203,862
Department 94088
Louisville, KY 40294
Parkview Memorial Hospital Provider Claim $187,885
Goshen General Hospital Provider Claim $146,974
Rafat Ansari Provider Claim $144,843
Spectrum Underwriting Stop Loss Premium $144,621
Bilal Ansari Provider Claim $120,121
(Michiana Hematology)
Woodlawn Hospital Provider Claim $107,925
Community Health Alliance Customer Litigation $63,124
Cause No. 71D07-
0505-PL-160 pending
in the Saint Joseph
Superior Court
University of Notre Dame Customer Litigation Unknown
c/o Office of the General
Counsel
203 Main Building
Notre Dame, IN 46556
City of South Bend Customer Litigation Unknown
c/o Jeff Jankowski, Esq.
City Attorney
1400 County, City Building
South Bend, IN 46601
INSURANCE AUTO: Shareholders Vote to Accept Kelso Buy-Out
---------------------------------------------------------
Shareholders of Insurance Auto Auctions, Inc. (Nasdaq:IAAI) met
this week and voted to accept Kelso & Company's offer to purchase
the company. The New York-based private equity firm is paying
approximately $400 million for IAAI. As previously announced,
IAA's stockholders will receive $28.25 per share in cash as a
result of the transaction.
Tom O'Brien, President and Chief Executive Officer of IAA, said,
"IAA has accomplished many of its financial, operational and
strategic goals over the past few years. Looking ahead, we will
continue to focus on improving the products we offer and the level
of service we provide to both our insurance company suppliers and
our growing network of buyers."
Michael B. Goldberg, Managing Director of Kelso & Company, said,
"We are pleased to have the opportunity to invest in IAA. IAA has
established itself as a leader in the automotive salvage industry,
and we will support IAA's growth objectives, including the
expansion of its geographic footprint, in the years ahead."
All shareholders with questions regarding the conversion of their
IAA shares should refer to the Company's proxy statement, which
was mailed to shareholders of record on April 26, 2005.
One shareholder, as reported in the Troubled Company Reporter on
May 24, 2005, exercised his right under Illinois law to dissent
from the merger transaction. He's demanding more than $50 for
each of his 3,000 shares. His written demand sent to the company
prior to the shareholder meeting is the first step in an appraisal
process that may need to be resolved by the courts.
As previously reported in the Troubled Company Reporter on March
29, 2005, Standard & Poor's Rating Services assigned its 'CCC+'
rating to $150 million of privately placed 11% senior notes due
2013 issued by IAAI Finance Corp. to fund the Kelso merger
transaction. In connection with the merger deal, Kelso also
received commitment letters from Bear, Stearns & Co. Inc. and
Deutsche Bank Securities, Inc., for $165 million of new senior
secured financing comprised of a $50 million Revolving Credit
facility and a $115 million Term Loan B facility. Kelso will
provide up to $148.7 million in equity financing for the merger.
Kelso & Company is represented by Lou R. Kling, Esq., at Skadden,
Arps, Slate, Meagher & Flom LLP, in this merger transaction.
Herbert S. Wander, Esq., at Katten Muchin Zavis Rosenman, provides
legal counsel to IAAI.
Insurance Auto Auctions, Inc., founded in 1982, is the No. 2
automotive total loss and specialty salvage services in the United
States, providing insurance companies with cost-effective, turnkey
solutions to process and sell total-loss and recovered-theft
vehicles. The Company currently has 79 salvage auction facilities
in 32 states, serving 60 of the top 75 metropolitan markets.
INTEGRATED ELECTRICAL: Amends $56 Million Credit Facility
---------------------------------------------------------
Integrated Electrical Services, Inc. (NYSE: IES) successfully
completed an amendment to its credit agreement with its senior
secured lenders.
The terms of the amended agreement that the company reached with
its senior secured lenders include:
-- A maturity date of August 31, 2005
-- A modification of the revolving line of credit to
$56 million, with a company option to increase to
$60 million
-- A requirement to post an additional $3 million cash
collateral with its senior lenders. In addition, minimum
future increases to the amount of cash collateral have been
established.
-- A modification of the monthly minimum EBITDA covenant
-- Increased monthly reporting requirements
-- Increased interest rate on funded borrowings
-- Increased Letter of Credit fees
-- Agreement to engage a consultant to help manage the
divestiture program and refinancing of the credit facility.
Roddy Allen, IES' CEO commented, "I am pleased that we were able
to obtain an amendment to our current credit facility that cures
the default we previously announced. The company is focused on
refinancing its existing credit facility on more favorable terms."
The company's total cash position and unused availability under
this amended facility was approximately $33 million as of May 24,
2005. In addition to the $33 million, the company has posted
$5.6 million cash collateral with its senior lenders.
Integrated Electrical Services, Inc. is a national provider of
electrical solutions to the commercial and industrial, residential
and service markets. The company offers electrical system design
and installation, contract maintenance and service to large and
small customers, including general contractors, developers and
corporations of all sizes.
* * *
As reported in the Troubled Company Reporter on May 19, 2005,
Moody's Investors Service has downgraded the ratings of Integrated
Electrical Services, Inc. one notch to B3 senior implied and to
Caa2 for its guaranteed senior subordinated debt of $173 million
due 2009 and changed the outlook to negative.
Moody's has downgraded these ratings:
* Senior Implied, downgraded to B3 from B2;
* Senior Unsecured Issuer Rating, downgraded to Caa1 from B3;
* $173 million (remaining balance) of 9.375% senior
subordinated notes due 2009 (in two series), downgraded to
Caa2 from Caa1.
The ratings outlook is changed from stable to negative.
INTEGRATED ELECTRICAL: Reselling 15.4 Million Common Shares
-----------------------------------------------------------
Integrated Electrical Services, Inc. (NYSE: IES) filed a
registration statement on Form S-1 with the Securities and
Exchange Commission for a resale of stock to be offered by certain
stockholders.
The company's filing on Form S-1 with the SEC registers the resale
of 15,384,615 common shares by the holders of our $50.0 million
principal amount of 6.5% convertible notes due 2014. IES will not
receive any of the proceeds from the sale of the offered shares by
the selling stockholders.
The offered shares are issuable upon the conversion or repurchase
of IES' 6.5% senior convertible notes due 2014. The number of
shares of common stock that we registered was determined using
several assumptions, including that:
1) all of the convertible notes are converted by the holder(s)
into shares of our common stock,
2) no make-whole premium is paid under the convertible
notes,
3) the conversion price for all convertible notes remains at
$3.25 and
4) accrued interest on the convertible notes is paid on each
semi-annual interest date, and as such, there is not a
restriction on the number of shares IES can issue.
If these assumptions prove to be incorrect, it is possible that
IES will have to register more shares of its common stock. To the
extent the number of shares the company issues to the selling
stockholders exceeds the number of shares registered pursuant to
the registration statement, IES will file an additional
registration statement to increase the number of shares
registered.
This registration statement relating to these securities has been
filed with the SEC but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective. This
news release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of
these securities in any state in which such an offer, solicitation
or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.
Integrated Electrical Services, Inc. is a national provider of
electrical solutions to the commercial and industrial, residential
and service markets. The company offers electrical system design
and installation, contract maintenance and service to large and
small customers, including general contractors, developers and
corporations of all sizes.
* * *
As reported in the Troubled Company Reporter on May 19, 2005,
Moody's Investors Service has downgraded the ratings of Integrated
Electrical Services, Inc. one notch to B3 senior implied and to
Caa2 for its guaranteed senior subordinated debt of $173 million
due 2009 and changed the outlook to negative.
Moody's has downgraded these ratings:
* Senior Implied, downgraded to B3 from B2;
* Senior Unsecured Issuer Rating, downgraded to Caa1 from B3;
* $173 million (remaining balance) of 9.375% senior
subordinated notes due 2009 (in two series), downgraded to
Caa2 from Caa1.
The ratings outlook is changed from stable to negative.
INTERSTATE BAKERIES: Can Recalculate Non-Union Retiree Premiums
---------------------------------------------------------------
The Hon. Jerry W. Venters previously authorized Interstate
Bakeries Corporation and its debtor-affiliates to discontinue the
active employees' contingent healthcare benefits under the Shared
Cost Coverage.
Robert K. Lehman, a retired employee of Continental Baking
Company, tells the Court that Interstate Brands Corporation "has
actively pursued a calculated plan of eliminating health
insurance benefits for retirees."
Mr. Lehman reports that there has been a 500% rate increase in
his health benefits in just three years:
Year Monthly Cost Per Couple
---- -----------------------
2002 $134
2003 200
2004 470
2005 (proposed) 776
"I regret that Interstate Brands had to file bankruptcy, but do
not believe they should try to regain financial stability by
taking a way benefits from retirees like myself who are on fixed
incomes and cannot afford such a drastic increase in the cost of
health benefits," Mr. Lehman wrote in his letter to Judge
Venters.
* * *
As previously reported, Rudy R. Norris and Gordon A. Thomas
proposed the appointment of a committee of retired employees to
investigate the Debtors' claims and negotiate as a group to
counter the Debtors' attempt to bring a de facto end to the
retirees' benefits.
Messrs. Norris and Thomas withdrew their Motion, without
prejudice.
More Objections
(1) Russel and Betty Wiedeman
Russel and Betty Wiedeman are long-time retired employees of
the Debtors and have been covered under the Debtors' non-
bargaining unit retiree coverage.
The Wiedemans believes that there is no justification,
rationale, or basis for increasing the premiums for each
individual to $1,000 per month or 300% over the original
premiums.
"We think such a burden placed on all of us is unconscionable,
and may well be unlawful, and, as suggested above, is not
supported by any facts," the Wiedemans tell the Court.
(2) John Mieding
John Fred Mieding fully supports the Wiedemans' objections to
the Debtors' request. Mr. Mieding suggests that the Court
"should take careful note of the concerns -- and at the very
least -- insist that the company deal with the problem in a
straightforward business matter that will provide continued
coverage in one form or another for retirees that will be
fully competitive with available plans, such as AARP
programs, etc."
* * *
Judge Venters considered (x) Mr. Norris' alternative proposal for
medical coverage by a third party provider independent of the
Debtors, and (y) the withdrawal of the Motion as to certain
individuals not covered by the provisions of the Retiree Benefit
Plan at the April 20, 2005 final hearing.
Consequently, Judge Venters authorizes the Debtors to:
(1) recalculate the premiums for the Retiree Benefit Plan in
accordance with the terms of the Retiree Benefit Plan;
provided, however:
-- the premiums will not become effective prior to
May 1, 2005;
-- the automatic withdrawal from retiree accounts for the
May premiums will not occur prior to May 16, 2005;
-- the Debtors will refund any recalculated premium
collected from a Medicare Carve-Out Retiree in May
2005, if and only if the retiree (x) cancels his or her
participation after May 11, 2005, and before June 1,
2005, and (y) provides the Debtors with proof of
alternative coverage for May 2005, subject to
offsetting any claims for prescription drug benefits
paid to or on behalf of the retiree for services
rendered after May 1, 2005; and
(2) discontinue the active employees' contingent healthcare
benefits under the Retiree Benefit Plan.
"[Mr. Norris'] Alternative Proposal is not sponsored by, or
affiliated with, Debtors, and thus is not part of the Retirement
Benefit Plan and does not need to be approved by this Court under
relevant law," Judge Venters rules.
Mr. Norris's counsel, Judge Venters adds, may file an application
under Section 503(b)(3) of the Bankruptcy Code for recovery of
fees and expenses with respect to any substantial contributions
to the case.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S.
The Company and seven of its debtor-affiliates filed for chapter
11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No.
04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at
Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from their creditors, they listed $1,626,425,000 in
total assets and $1,321,713,000 (excluding the $100,000,000 issue
of 6.0% senior subordinated convertible notes due August 15, 2014,
on August 12, 2004) in total debts. (Interstate Bakeries
Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
INTERSTATE BAKERIES: First Union Wants Performance Under Lease
--------------------------------------------------------------
First Union Commercial Corporation leases "rolling stock"
equipment, comprised of 276 trailers, 318 tractors and 432 route
vans, to Interstate Brands Corporation pursuant to a May 19, 1992
Master Lease agreement.
John W. McClelland, Esq., at Armstrong Teasdale LLP, in St.
Louis, Missouri, informs the U.S. Bankruptcy Court for the Western
District of Missouri that the Master Lease is commonly referred to
as a "TRAC Lease," or a lease that contains a "Terminal Rental
Adjustment Clause." It is a "true lease," not a disguised
financing agreement, creating a "security interest" in the
Equipment as those terms are defined and described in the Uniform
Commercial Code in effect in North Carolina, the situs of
interpretation in the Master Lease.
Pursuant to the Master Lease, First Union and Interstate Brands
entered into four schedules that described and established lease
terms and rental payments for the Equipment. Three schedules
remained in effect as of the Petition Date.
Associated with the Schedules are various Acceptance Certificates
that delineate the specific Equipment leased pursuant to each of
the Schedules. As of the Petition Date, 12 Acceptance
Certificates remained in effect:
Acceptance
Schedule Certificate No. Date Equipment/Model
Qty
-------- --------------- ---- ---------------
---
II 6 Sept. 1, 1999 2000 Trailmobile trailers
97
7 Oct. 1, 1999 2000 Freightliner tractors
41
III 1 June 1, 2000 2000 Volvo tractors
63
2 June 23, 2000 2001 Freightliner route trucks
130
3 June 30, 2000 2001 Freightliner tractors
39
4 Aug. 30, 2000 2001 Trailmobile trailers
126
5 July 31, 2000 2001 Freightliner route trucks
125
6 July 31, 2000 2001 Freightliner route trucks
53
7 Aug. 31, 2000 2000 Freightliner route trucks
24
IV 1 July 20, 2001 2002 miscellaneous tractors
106
2 Sept. 19, 2001 2002 miscellaneous trailers
96
3 Nov. 30, 2001 2002 Volvo tractors
27
After the Petition Date, Interstate Brands has continued to make
rental payments to First Union pursuant to the terms of the
Master Lease Documents.
Interstate Brands Failed to Comply
With the Master Lease
Mr. McClelland maintains that Interstate Brands has not performed
under Acceptance Certificate No. 6 and Acceptance Certificate
No. 7 for the Schedule II Equipment. The initial lease term for
the Schedule II Equipment on Acceptance Certificate No. 6 ended
by its terms on September 1, 2004, and the Basic Term for the
Schedule II Equipment on Acceptance Certificate No. 7 ended by
its terms on October 1, 2004. There are no further scheduled
rent payments for the Matured Certificates.
Mr. McClelland relates that Interstate Brands has had the use of
the Schedule II Equipment for seven months under Acceptance
Certificate No. 6, and for six months under Acceptance
Certificate No. 7, without making any rental payments to
compensate First Union for the use of the Schedule II Equipment,
which is decreasing in value as a result of the passage of time
and the presumed usage in the ordinary course of Interstate
Brands' business.
Mr. McClelland asserts that since the Master Lease is a "true
lease," as defined under Section 365(d)(10) of the Bankruptcy
Code, the Debtors are required to comply with its provisions
pending assumption or rejection through:
(a) payment of Holdover Rent; and
(b) performance of the Termination Requirements, which
involves:
(i) renewal of the lease for of the Schedule II
Equipment, which requires assumption of the Master
Lease;
(ii) purchase of the Schedule II Equipment; or
(iii) return of the Schedule II Equipment to First Union,
in each instance in accordance with the Master
Lease Documents.
Mr. McClelland tells Judge Venters that Interstate Brands has not
assumed the Master Lease, has not purchased the Schedule II
Equipment from First Union, and has not returned the Schedule II
Equipment to First Union. Accordingly, the Debtor has not
complied with the Termination Requirements of the Master Lease
Documents with respect to the Matured Certificates.
Thus, First Union asks the Court to compel Interstate Brands to
pay the unpaid Holdover Rent pursuant to the terms of the Master
Lease Documents for each month since the termination of each of
the Matured Certificates and continued payment for each month
forward until the earlier of Interstate Brands':
-- compliance with the Termination Requirements under the
Matured Certificates and the Master Lease Documents; or
-- assumption of the Master Lease.
First Union also wants Interstate Brands to either purchase or
return the Schedule II Equipment.
In the alternative, in the absence of Interstate Brands'
performance under the Termination Requirements and the Matured
Certificates, First Union asks the Court to lift the stay so it
may take possession of and liquidate the Schedule II Equipment in
accordance with the Master Lease Documents.
First Union believes that Interstate Brands' inability or
unwillingness to perform or comply with the Master Lease
Documents constitute "cause" for lifting the stay.
Mr. McClelland also reports that the Basic Term for all of the
Schedule III Equipment will end in either June, July or August
2005, and the Basic Term for all Schedule IV Equipment will end
in the third or fourth quarters of 2006. First Union is
concerned that Interstate Brands may attempt to use the Schedule
III Equipment beyond the end of its Basic Term without making any
rental payments to compensate First Union for the use while the
Schedule III Equipment will be decreasing in value as a result of
the passage of time and the presumed usage in the ordinary course
of Debtor's business.
In this regard, First Union also asks Judge Venters to compel
Interstate Brands to pay Holdover Rent for each month following
the termination of the Basic Term of the Acceptance Certificates
for Schedule III Equipment and for Schedule IV Equipment, and
continued payment for each month forward until the earlier of
Interstate Brands':
-- compliance with the Termination Requirements under the
Matured Certificates and the Master Lease Documents; or
-- assumption of the Master Lease.
First Union also wants Interstate Brands to perform under the
Termination Requirements as and when required following the
termination of the Basic Term of the Acceptance Certificates for
Schedule III Equipment and Schedule IV Equipment, pursuant to the
terms of the Master Lease Documents.
In the alternative, in the absence of Interstate Brands'
performance under the Termination Requirements as and when
required pursuant to the terms of the relevant Master Lease
Documents, First Union wants the stay lifted so it may to take
possession of and liquidate the relevant Equipment in accordance
with the Master Lease Documents.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S.
The Company and seven of its debtor-affiliates filed for chapter
11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No.
04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at
Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from their creditors, they listed $1,626,425,000 in
total assets and $1,321,713,000 (excluding the $100,000,000 issue
of 6.0% senior subordinated convertible notes due August 15, 2014,
on August 12, 2004) in total debts. (Interstate Bakeries
Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
INTERSTATE BAKERIES: Wants to Set Trade Claims Resolution Protocol
------------------------------------------------------------------
Prior to the Petition Date, Interstate Bakeries Corporation and
its debtor-affiliates maintained, in the ordinary course of
business, books and records that reflected, among other things,
the Debtors' liabilities and the amounts owed to their creditors.
As of May 5, 2005, approximately 8,200 claims have been filed
against the Debtors in their Chapter 11 cases. Approximately
7,900 of these Claims are equal to or less than $400,000,
aggregating more than $140 million, and approximately 300 Claims
are greater than $400,000, aggregating more than $1.3 billion.
The Debtors anticipate that a substantial number of these Claims
will either (a) be objected to, whether due to the asserted class
or amounts of the Claims, or otherwise, or (b) be settled through
consensual negotiations.
By this motion, the Debtors ask the Court to authorize and
establish certain procedures for the Debtors to:
(a) file objections to Disputed Claims; and
(b) consensually resolve Disputed Claims, which have been
filed in the Debtors' cases.
Claims Objection Procedures
Given the large number of claims filed in the Debtors' cases, the
Debtors expect to file numerous omnibus objections to Disputed
Claims. The Omnibus Objections will set forth (x) the basis for
the objections and will (y) list each claim subject to objection
and, where relevant, any remaining claims for the same liability.
The Debtors propose these procedures for objecting to Disputed
Claims:
A. Separate Contested Matters
To the extent that a response is filed to any Claim listed in
an Omnibus Objection and the Debtors are unable to resolve the
response prior to the hearing on the objection, each Claim and
the objection to that Claim will constitute a separate
contested matter as contemplated by Rule 9014 of the Federal
Rules of Bankruptcy Procedure.
Any order entered by the Court with respect to an objection
asserted in an Omnibus Objection will be deemed a separate
order with respect to each Claim.
B. Reservation of Rights
The Debtors expressly reserve the right to amend, modify or
supplement any Omnibus Objection and to file additional
objections to the Proofs of Claim or any other Claims, which
may be asserted against the Debtors. Should one or more of
the grounds of objection stated in an Omnibus Objection be
dismissed, the Debtors reserve their rights to object on other
stated grounds or on any other grounds that the Debtors
discover during the pendency of their cases.
In addition, the Debtors reserve the right to seek further
reduction of any Claim to the extent that the Claim has been
paid.
C. Responses to Objections
1. Filing And Service Of Responses
To contest an objection, a Claimant must file a written
response to an Omnibus Objection with the United States
Bankruptcy Court for the Western District of Missouri,
Kansas City Division. The Response must be served so as to
be received by the objection deadline stated in the Omnibus
Objection, which date will be no earlier than 30 days after
service of the Omnibus Objection, by:
(i) the Debtors;
(ii) Skadden, Arps, Slate, Meagher & Flom LLP, the
Debtors' counsel;
(iii) the Office of the United States Trustee;
(iv) counsel for the agent for prepetition lenders;
(v) counsel for the agent for postpetition lenders;
(vi) the counsel for the Official Committee of Unsecured
Creditors; and
(vii) the counsel for the Official Equity Holders
Committee.
2. Contents Of Responses
Responses to an Omnibus Objection must contain at a
minimum:
(i) a caption setting forth the name of the Court, the
names of the Debtors, the case number and the title
of the Omnibus Objection to which the Response is
directed;
(ii) the name of the Claimant and description of the
basis for the amount of the Claim;
(iii) a concise statement setting forth the reasons why
the Claim should not be disallowed or modified,
including, but not limited to, the specific factual
and legal bases on which the Claimant will rely in
opposing the Omnibus Objection;
(iv) all documentation or other evidence of the Claim, to
the extent not included with the Proof of Claim
previously filed with the Court, on which the
Claimant will rely in opposing the Omnibus
Objection;
(v) the address to which the Debtors must return any
reply to the Response, if different from that
presented in the Claim; and
(vi) the name, address, and telephone number of the
person, possessing ultimate authority to reconcile,
settle, or otherwise resolve the Claim on behalf of
the Claimant.
3. Timely Response Requirement
If a Response is properly and timely filed, and the Debtors
are unable to reach a consensual resolution with the
Claimant, the dispute will be heard at the claims hearing
referred to in the Omnibus Objection, unless the parties
agree to a continuation of the hearing date.
Only those Responses made in writing and timely filed and
received will be considered by the Court at any hearing.
If a Claimant fails to file and serve a timely Response,
the Debtors will present to the Court an appropriate order
with respect to the Claim without further notice to the
Claimant.
4. Service Address
If a Response contains an address for the Claimant
different from that stated on the Proof of Claim the
Debtors will deem it a request under Fed.R.Bankr.P.
2002(g). The address in the Response will constitute the
service address for future service of papers on that
Claimant until the Debtors receive written notice from the
Claimant or its counsel of a changed service address.
D. Replies To Responses
The Debtors may, at their option, file and serve a reply to a
Claimant's Response so that it is received by the Claimant no
later than two days prior to any hearing on the Omnibus
Objection.
E. Further Information
Questions about any Omnibus Objection or requests for
additional information about the proposed disposition of
Claims should be directed to the Debtors' counsel in writing
or by telephone at (312) 407-0599.
Questions regarding the amount of a Claim or the filing of a
Claim should be directed to Kurtzman Carson Consultants, LLC
at 1-866-381-9100 or http://ibcinfo@kcc.com/
F. Notice
The Debtors will serve the Omnibus Objection and the Claims
Objection Exhibit on the U.S. Trustee and all persons filing
notices of appearance in the Debtors' cases. However, in the
interest of clarity, for the Claimants whose claims are
subject to objection, the Debtors will serve a copy of the
First Omnibus Objection without exhibits, the Proposed Order
and a personalized notice by first class U.S. Mail, postage
prepaid.
Claims Settlement Procedures
To streamline the process of resolving Claims and eliminate
unnecessary expenditures of time and money associated with the
resolution of the Claims, the Debtors seek the Court's authority
to compromise, settle and allow these Disputed Claims without
further Court order:
(a) administrative, priority or secured Disputed Claims where
(i) the face amount of the Disputed Claim does not exceed
$50,000 or (ii) the discrepancy between the allowed amount
of the Disputed Claims and the Debtors' Books and Records
does not exceed $50,000; and
(b) general unsecured Disputed Claims where (i) the face
amount of the Disputed Claims does not exceed $400,000 or
(ii) the discrepancy between the allowed amount of the
Disputed Claims and the Debtors' Books and Records does
not exceed $400,000.
With respect to (i) administrative, priority or secured Disputed
Claims where (x) the face amount of the Disputed Claims exceeds
$50,000 and (y) the discrepancy between the allowed amount and
the Debtors' Books and Records exceeds $50,000, or (ii) any
general unsecured Disputed Claims where (x) the face amount of
the Disputed Claims exceeds $400,000 and (y) the discrepancy
between the allowed amount and the Debtors' Books and Records
exceeds $400,000, the Debtors will provide notice of the proposed
resolution to the Notice Parties.
The parties will have 10 days following the date of receipt
within which to object to the proposed allowance of the Disputed
Claim. If no timely objections are received by the Debtors on or
prior to the Objection Deadline, the Debtors will be authorized
to allow the Disputed Claims without further Court order. If a
timely objection is received, to the extent that the parties are
not able to consensually resolve the objection, the Debtors will
file a motion to approve the proposed compromise.
The Debtors also propose to conduct, on a quarterly basis, Claims
reconciliation status hearings to keep the Court apprised of the
status of the Claims reconciliation process generally. The
Debtors anticipate the Status Hearings to coincide with claims
hearing dates in the Debtors' cases.
"Status Hearings will give the Debtors an opportunity to inform
the Court of the progress being made by the Debtors to resolve
Claims going forward as they continue their wind down," According
to J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom
LLP, in Chicago, Illinois. At each Status Hearing, the Debtors
anticipate submitting orders reflecting the status of Disputed
Claims that have been objected to, resolved or continued, as
applicable.
Additionally, as a procedural matter, the Debtors seek the
Court's permission to settle each Disputed Claim pursuant to a
stipulation entered into by the Debtors and the party resolving a
Disputed Claim.
To keep the Court informed of significant Claim settlements
reached going forward, the Debtors propose to submit to the Court
individual Stipulations resolving:
* administrative, priority or secured Disputed Claims for an
allowed amount greater than $100,000; and
* general unsecured Disputed Claims for an allowed amount
greater than $1,000,000.
The Debtors believe that the implementation of the Claims
Settlement Procedures will maximize efficiency and value in the
allowance of Claims and will better enable the Debtors to
administer their estates.
"To individually seek Court approval to resolve the disputes that
may arise in these classes of controversy would be unduly
burdensome on the Court and an unnecessary drain on the time and
other resources of the Debtors and their counsel in seeking
approval of each settlement," Mr. Ivester asserts. "In a case of
this size, the expense of seeking Court approval for every
settlement may significantly reduce the benefits otherwise
incident to many of these settlements."
Thus, for the sake of both judicial efficiency, as well as
maximizing the value of the Debtors' estates, the Debtors urge
the Court to permit the implementation of the Claims Resolution
Procedures.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S.
The Company and seven of its debtor-affiliates filed for chapter
11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No.
04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at
Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in
their restructuring efforts. When the Debtors filed for
protection from their creditors, they listed $1,626,425,000 in
total assets and $1,321,713,000 (excluding the $100,000,000 issue
of 6.0% senior subordinated convertible notes due August 15, 2014,
on August 12, 2004) in total debts. (Interstate Bakeries
Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
JAMES RIVER: $150 Mil. Notes Pricing Prompts S&P to Remove Watch
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B' corporate
credit rating and its other ratings on coal producer James River
Coal Co. and removed them from CreditWatch where they were
originally placed with negative implications on May 9, 2005. The
outlook is stable.
"The rating action follows the company's announcement that it has
priced its $150 million senior unsecured notes," said Standard &
Poor's credit analyst Dominick D'Ascoli. "The CreditWatch
placement had reflected our concerns about JRCC's ability to
successfully complete a proposed bond offering, given the low
rating on the notes and various uncertainties in the capital
markets. If the bond offering had not been completed, the
corporate credit rating could have been lowered because of
liquidity concerns."
Richmond, Virginia-based JRCC is a relatively small coal producer
with operations heavily concentrated in the difficult, high-cost
Central Appalachia region
JRCC's proposed acquisition of Triad is expected to improve the
company's operating and geographic diversity. Triad is located in
the Illinois basin region in Indiana and primarily operates
surface mines. Pro forma for the transaction, JRCC will operate
26 mines and derive about 30% of production from surface mining in
the Illinois basin. However, Triad's expected mine life of about
five years is far lower than JRCC's existing reserve base of 25
years. Also, acquiring mineral rights under economically feasible
arrangements, attaining mining permits, and developing new mines
could pose a challenge.
The company is expected to continue to face a challenging
operating environment in Central Appalachia including thin coal
seams, rising costs, and regulatory issues. However, continued
development in the Central Illinois basin and currently strong
coal prices should provide for ratings stability. A positive
outlook would be a possibility if the company can meaningfully
diversify and increase its reserves, revenues, and asset base
while maintaining a moderate financial profile. The outlook could
be revised to negative if coal prices decline, operating costs or
capital expenditures are higher than expected are incurred, or
liquidity deteriorates materially.
JOHN Q. HAMMONS: Share Purchase Deal Cues S&P to Maintain Watch
---------------------------------------------------------------
Standard & Poor's Ratings Services ratings on John Q. Hammons
Hotels L.P. (JQH LP), including the 'B' corporate credit rating,
remain on CreditWatch with developing implications, where they
were placed on Oct. 18, 2004.
This follows the announcement today by JQH Inc. that a special
committee approved a transaction between principal stockholder
John Q. Hammons and an investor group. The purchase price for
JQH Inc.'s Class A common shares was reiterated at $24 a share.
JQH Inc. has not yet publicly disclosed all details of the
transaction, such as the participants in the investor group and
what the final capital structure will be.
JQH LP is a partnership whose sole general partner is JQH Inc., a
publicly traded company, which exercised control over all
partnership decisions. Mr. John Q. Hammons, the majority
shareholder of JQH Inc. holds about 77% of the voting shares.
In resolving the CreditWatch listing, Standard & Poor's will
monitor developments associated with the ongoing transaction,
including whether the $499 million in outstanding 8.875% first
mortgage notes due 2012, which were jointly issued by JQH LP and
John Q. Hammons Hotels Finance Corporation III, will remain
outstanding. The CreditWatch listing will be resolved when
details of the transaction are fully determined.
KAISER ALUMINUM: Wants Law Debenture's Objections Overruled
-----------------------------------------------------------
Law Debenture Trust Company of New York is the Indenture Trustee'
under the Indenture dated as of February 1, 1993, under which
Kaiser Aluminum & Chemical Corporation issued certain notes
guaranteed by various debtor-subsidiaries of KACC, including
Alpart Jamaica, Inc., Kaiser Jamaica Corporation, Kaiser Alumina
Australia Corporation, and Kaiser Finance Corporation.
Law Debenture objects to:
* the Liquidation Plans' treatment of the 1993 Note Guarantees
as subordinated;
* the discrete subordination issues raised by Liverpool
Limited Partnership; and
* the discrete issue of the Liquidation Plans' treatment of
Law Debenture's fees and expenses.
Law Debenture is the successor indenture trustee to State Street
Bank and Trust Company, which was, in turn, the successor to
First National Bank of Boston.
Monzack and Monaco, P.A. in Wilmington, Delaware, and Bingham
McCutchen, LLP, in Hartford, Connecticut, represent Law Debenture
in the Debtors' Chapter 11 proceedings.
Treatment of 1993 Note Guarantees as Subordinated
According to Francis A. Monaco, Esq., at Monzack and Monaco,
P.A., it should go without saying that a careful analysis of what
is or is not included in the definition of "Senior Debt" is of
paramount importance to any potential lender, senior or junior.
The exact wording of the definition will determine the type and
amount of senior debt, which will be entitled to the benefits of
the subordination.
On February 1, 1993, KACC issued the 1993 Notes pursuant to the
1993 Indenture. Pursuant to Section 16.01 of the 1993 Indenture,
the Subsidiary Guarantors guaranteed repayment of the 1993 Notes.
The 1993 Note Guarantees rank equally with all other obligations
of the Subsidiary Guarantors except for those obligations of the
Subsidiary Guarantors expressly encompassed within the definition
of "Senior Indebtedness."
Mr. Monaco tells the Court that, plainly and unambiguously, the
term "Senior Indebtedness" includes "downstream" guarantees issued
by the Subsidiary Guarantors. Just as plainly and unambiguously,
the term "Senior Indebtedness" does not include "upstream"
guarantees.
KACC subsequently issued the 9-7/8% Senior Notes and the 10-7/8%
Senior Notes. The same Subsidiary Guarantors also guaranteed the
1994/96 Notes. Because the 1994/96 Note Guarantees are upstream
guarantees, Mr. Monaco says they plainly and unambiguously do not
constitute Senior Indebtedness of the Subsidiary Guarantors. As
a result, the 1993 Note Guarantees and the 1994/96 Note
Guarantees rank equally as unsecured obligations of the
Subsidiary Guarantors.
Mr. Monaco states that the Debtors, the 1994/96 Indenture
Trustee, the certain ad hoc group of holders of 1994/96 Notes, and
the Official Committee of Unsecured Creditors agree with Law
Debenture on two fundamental matters:
(1) The 1993 Indenture is unambiguous; and
(2) The 1993 Note Guarantees are subordinated to "Senior
Indebtedness of the Subsidiary Guarantors."
Where the 1994/96 Parties fundamentally disagree, and the reason
for the dispute, is that the Parties assert that the 1994/96 Note
Guarantees are included within "Senior Indebtedness of the
Subsidiary Guarantors," and therefore are senior to the 1993 Note
Guarantees. Because the 1994/96 Parties cannot seriously dispute
that "Senior Indebtedness" is limited to downstream guarantees,
they attempt to demonstrate that the subordination of the 1993
Note Guarantees to the 1994/96 Note Guarantees can be inferred
from various other sources.
Mr. Monaco asserts that the 1994/96 Parties twist the plain
meaning of other provisions of the 1993 Indenture that, in fact,
have nothing to do with the 1993 Note Guarantees or the
Subsidiary Guarantors. "[The 1994/96 Parties] do this by seeking
to introduce dozens of inadmissible, irrelevant and self-serving
documents and affidavits in an attempt to avoid application of the
plain language of the 1993 Indenture itself, even though when
opposing parties agree that the document whose meaning they
dispute is not ambiguous, all they mean is that they are content
to have its meaning determined without the help of any extrinsic
evidence." And, most desperately, the 1994/96 Parties dredge up
every equitable doctrine they can think of, hoping that the Court
will ignore the 1993 Indenture altogether in favor of the 1994/96
Parties' perception of "fairness."
Mr. Monaco describes the 1994/96 Parties' efforts to be nothing
more than the Shakespearean "sound and fury, signifying nothing,"
because the reality is so plainly in sight that it cannot be
ignored.
Subordination Issues Raised By Liverpool
Mr. Monaco relates that in 1994, KACC entered into a series of
financing transactions -- Recapitalization -- which included:
(i) the issuance of the 9-7/8% Senior Notes in the principal
amount of $225 million pursuant to the 1994 Indenture;
(ii) the issuance of 8 million shares of "Preferred
Redeemable Increased Dividend Equity Securities" for net
proceeds of $90.6 million; and
(iii) the replacement of its existing 1989 Credit Agreement.
According to Mr. Monaco, Liverpool agrees with the arguments made
by Law Debenture in the Subordination Dispute that the 1994 Note
Guarantees are not downstream guarantees and, therefore, do not
generally fall within the definition in the 1993 Indenture of
"Senior Indebtedness." However, Liverpool asserts that $100
million of the 1994 Note Guarantees is senior to the 1993 Note
Guarantees pursuant to separate provisions of "Senior
Indebtedness" definition that include replacements, refinancing,
etc., of the 1989 Credit Agreement.
Mr. Monaco notes that Kaiser Aluminum Corporation's 1993 Annual
Report does not share Liverpool's view. The 1993 Annual Report
indicates that "[t]he 1994 Credit Agreement replaced the 1989
Credit Agreement." Mr. Monaco tells Judge Fitzgerald that it was
the 1994 Credit Agreement, not the 1994 Notes, that replaced the
1989 Credit Agreement. Accordingly, the $100 million, like the
rest of the 1994 Note Guarantees, does not constitute Senior
Indebtedness of the Subsidiary Guarantors and, therefore, does not
rank senior to the 1993 Note Guarantees.
Law Debenture believes that the burden of proof is on Liverpool to
demonstrate that the 1993 Indenture unambiguously subordinates the
1993 Note Guarantees to the $100 million, and Liverpool has not
come close to meeting that burden.
Fees and Expenses Issue
Mr. Monaco contends that the Liquidation Plans fail to make
distributions to Law Debenture in respect of its contractual
entitlement to fees, charges and expenses, including professional
fees. Pursuant to the Liquidation Plans, the "Public Note
Distributable Consideration" is to be allocated between the 1993
Noteholders and the 1994/96 Noteholders, depending on the results
of the Subordination Dispute.
Should Law Debenture prevail in the Classification Dispute, Mr.
Monaco presupposes, then the 1993 Noteholders' share of the
Consideration will be distributed through Law Debenture and the
Fee Objection will be moot. On the other had, should the 1994/96
Parties prevail in the Subordination Dispute, the Liquidation
Plans provide that 100% of the Consideration will be distributed
directly to the 1994/96 Noteholders through their indenture
trustees.
A distribution of 100% of the Consideration through the 1994/96
Indenture Trustee would circumvent Law Debenture's charging lien
for the Fees, in violation of the 1993 Indenture and applicable
law. Regardless of the results of the Subordination Dispute, the
subordination provisions in the 1993 Indenture encompass only
distributions with respect to the 1993 Note Guarantees, not with
respect to the Fees. Further, Rule 3021 of the Federal Rules of
Bankruptcy Procedure requires that all plan distributions in
respect of public debt securities be made in the first instance to
the relevant indenture trustee, thus permitting the trustee to
exercise its charging lien even if the trustee is thereafter
required to turn over the remaining of the distributions to a more
senior class of securities.
Mr. Monaco also points out that it is a sound policy to ensure
that the interests of public debt securityholders are
appropriately represented in Chapter 11 cases.
Accordingly, even if the Court determines that the 1993 Note
Guarantees are subordinated to the 1994/96 Note Guarantees, any
distribution under the Liquidation Plans on account of the 1993
Note Guarantees must still be made in the first instance to Law
Debenture. On payment of any distributions, Law Debenture is
entitled to exercise its charging lien on the distributions until
its Fees are paid in full. Thereafter, consistent with both the
1993 Indenture and the 1993 Note Guarantees or the holders of the
1994/96 Note Guarantees, depending on the resolution of the
Subordination Dispute. Absent any treatment and preservation of
Law Debenture's charging lien, the Liquidation Plans cannot be
confirmed under Section 1129(a) or 1129(b) of the Bankruptcy
Code.
Furthermore, the proposed settlement with respect to the Parish of
St. James, State of Louisiana, Solid Waste Disposal Revenue Bonds
Series 1992, should either be rejected or be modified to provide
for the payment of Law Debenture's Fees just as it provides
payment of the 7-3/4% SWD Revenue Bond Indenture Trustee's fees.
Responses
(1) Creditors Committee
The Official Committee of Unsecured Creditors believes that the
Senior Subordinated Notes and the Subordinated Guarantees were
clearly intended to be subordinated in right of payment to the
Senior Notes and the Senior Note Guarantees. The Senior
Subordinated Note Indenture contain several express provisions
which plainly evidence the Debtors' intent to subordinate the
rights of payment of the Senior Subordinated Notes to the prior
payment in full of the Senior Notes, including clause (ii)(A)(1)
of the "Senior Indebtedness" definition:
"All indebtedness of such Person for money borrowed --
including all such indebtedness evidenced by notes,
debentures or other securities issued for money,
whether issued or assumed by such Person."
The Creditors Committee believes that the Subordinated Guarantees
fall within the definition, as they are indebtedness on a note
issued by Kaiser Aluminum & Chemical Corporation for money
borrowed.
William P. Bowden, Esq., at Ashby & Geddes, in Wilmington,
Delaware, presents to the Court the Creditors Committee's response
to the arguments propounded by Law Debenture Trust Company of New
York and Liverpool Limited Partnership:
Arguments Presented by
Law Debenture and Liverpool Creditors Committee' Response
--------------------------- -----------------------------
The term "Senior The argument is wholly
Indebtedness" only includes illogical because:
downstream guarantees of
subsidiary obligations, and 1) it would have precluded any
not upstream guarantees of senior debt from being issued
parent obligations. by the KACC and guaranteed by
its subsidiaries -- which is
completely inconsistent with
the Debtors' other loan
agreements and indentures;
2) it was consistent with the
marketplace; and
3) because the subsidiaries had
substantive earning power.
Moreover, the failure to
specifically state that "Senior
Indebtedness" includes a
subsidiary's guarantee of Senior
Indebtedness is not dispositive
of the scope of the term "Senior
Indebtedness" and certainly does
not effectively exclude a
subsidiary's guarantee of Senior
Indebtedness from being
considered "Senior Indebtedness."
The Court must examine In interpreting the provisions of
specific provisions and set the Senior subordinated Note
aside the more general Indenture, the Court must
provisions of the definition carefully balance the rules of
of "Senior Indebtedness." interpretation to ensure that the
terms of the Senior Subordinated
Note Indenture are reconciled, if
possible, to avoid an
inconsistency.
"Assumed indebtedness" and "Assumed debt" should certainly
"guarantees" are not the include a guarantee as that is
same thing. precisely what a guarantor does
by providing a guarantee -- take
on the obligations incurred by
another party.
The subordination language The provisions of both Article 3
in "Articles 3 and 16" of and 16 must be considered
the Senior Subordinated Note together, as it is clear that the
Indenture do not support two Articles are intertwined and
subordination of the work together to assure full
Subordinated Guarantees. subordination of the Senior
Subordinated Notes and the
Subordinated Guarantees.
Section 16.02 provides that the
". . . Trustee . . . by his
acceptance thereof likewise
covenants and agrees, for the
benefit of all present and future
holders of Senior Indebtedness of
each Subsidiary Guarantor, that
all payments . . . are expressly
subordinated . . . in right of
payment to the prior payment in
full . . . of all Senior
Indebtedness of such Subsidiary
Guarantor."
Similarly, Section 3.01 provides
that Law Debenture, as the
successor trustee, has expressly
agreed to subordinate, for the
benefit of holders of Senior
Indebtedness, all direct or
indirect payments or
distributions on or with respect
to the Senior Subordinated Notes
in right of payment to the prior
payment in full of all of the
Senior Indebtedness of the
company.
Law Debenture and the Senior
Subordinated Noteholders have
explicitly agreed that the
Subordinated Guarantees are
subordinated to the Senior Note
Guarantees. However, even if the
Court were to conclude that the
Subordinated Guarantees are not
subordinated to the Senior Note
Guarantees, Law Debenture is
still contractually obligated
under the Senior Subordinated
Indenture to turn over "any
direct or indirect payments" that
it received until the Senior
Notes are paid in full.
Mr. Bowden notes that for Law Debenture to receive distributions
under the Amended Liquidation Plans and proceed with distributions
to holders of the Senior Subordinated Notes, the Court would have
to conclude that the Subordinated Guarantees do not fall within
the definition of "Senior Indebtedness" and determine that the
exceedingly broad provisions requiring that Law Debenture turn
over any funds received as payment on account of the Senior
Subordinated Notes does not include funds payable by the
Liquidating Debtors on account of the Subordinated Guarantees.
That conclusion and result, Mr. Bowden says, would be "totally
absurd" in light of the language in the Senior Subordinated Note
Indenture and the surrounding facts of the Debtors' Chapter 11
cases.
(2) Bear Stearns, et al.
Bear Stearns & Co. Inc., Citadel Equity Fund Ltd., and Citadel
Credit Trading Ltd. hold Parish of St. James, State of Louisiana,
Solid Waste Disposal Revenue Bonds (Kaiser Aluminum Project)
Series 1992. The Bondholders want the objection of Law Debenture
Trust Company of New York to the subordination of the 1993 Note
Guarantees overruled.
The Bondholders explain that the dispute with regard to the
Gramercy Bonds' seniority vis-a-vis the Senior Subordinated Notes
is no longer effectively in controversy. The proposed settlement
of that dispute as incorporated into the Liquidation Plans and the
stated position of Law Debenture in its brief objecting to the
Plans resolve any issues as to the status of the Gramercy Bonds.
The Bondholders note that Law Debenture's Objection does not
oppose the Bondholders' long-held position that the Gramercy Bonds
constitute Senior Indebtedness under Article 3 of the Senior
Subordinated Note Indenture.
The Bondholders assert that the remaining issue is the contest
over the treatment of Senior Indebtedness of Kaiser Aluminum &
Chemical Corporation under the Senior Subordinated Note
Indenture, and specifically how the subordination provisions of
Article 3 are impacted by payment on the Notes made by the
Guarantors pursuant to Article 16. The Bondholders note that the
briefs submitted in support of the Plans clarified the rights of
Senior Indebtedness of KACC under Articles 3 and 16.
Law Debenture objects to those submissions on a convoluted theory
that payment on the Notes by Subsidiary Guarantors is not in fact
a payment on the Notes. That position is simply wrong. The
Bondholders argue that Article 16 establishes that the Guarantors
will honor KACC's obligation to pay the Notes, which they are
doing via the Plans. Article 3 mandates that the payment on the
Notes triggers the superior rights of KACC's Senior Indebtedness.
Article 3 of the Senior Subordinated Note Indenture opens with
KACC and the Trustee for the Senior Subordinated Notes -- and the
Noteholders themselves -- covenanting that "all direct or indirect
payments or distributions on or with respect to the Notes . . .
[are] hereby expressly subordinated, to the extent and in the
manner hereinafter set forth, in right of payment in full . . . of
all Senior Indebtedness of the Company."
Article 16 begins by acknowledging that each of the Subsidiary
Guarantors "hereby unconditionally guarantees . . . to each holder
of a Note [among other things, including payment of principal and
interest on the Note,] the due and punctual performance of all
other obligations of the Company to the holders of the Notes or
the Trustee in accordance with the terms of such Note and of this
Indenture[.]"
The Bondholders tell Judge Fitzgerald that the provisions together
mean but one thing -- any payment by the Subsidiary Guarantors is
a payment of KACC's obligations on the Notes. To suggest that any
payment is not a "direct or indirect payment or distribution on or
with respect to the Notes" is to ignore reality.
The Bondholders further ask the Court to disregard Law Debenture's
Objection to the proposed settlement of the 7-3/4% SWD Revenue
Bond Dispute. Law Debenture fails to demonstrate how Rule 3021 of
the Federal Rules of Bankruptcy Procedure mandates the diversion
of funds that must be paid to the holders of Senior Indebtedness
for the purpose of paying Law Debenture's legal and related
expenses.
Law Debenture relies on Rule 3021 to obtain payment of its fees.
The Bondholders contends that Rule 3021 merely states that "after
a plan is confirmed, distribution shall be made . . . to indenture
trustees who have filed claims under Rule 3003(c)(5)." Rule 3021
does not, however, address the situation presented in the Debtors'
case -- whether indenture trustees for debt that is wholly
subordinated, and not entitled to any payment, are nonetheless
entitled to payment of their fees and expenses from funds payable
to the senior debt. Law Debenture has offered no relevant or
binding case law addressing how to resolve that situation.
The Bondholders maintain that neither In re NII Holdings, 288
B.R. 356 (Bankr. D. Del. 2002) nor In re Federated Dep't Stores,
No. 1-90-00130, 1991 Bankr. LEXIS 601 (Bankr. S.D. Ohio Apr. 29,
1991) support Law Debenture's statement that Rule 3021 preserves
the participating indenture trustee's rights to fees and expenses,
"which rights typically are protected contractually by a charging
lien." In NII Holdings, the court merely confirmed a plan
preserving indenture provisions authorizing "the Indenture
Trustees to assert a charging lien for unpaid fees and expenses
against distributions to be made to the Holders of the Old
Notes." In the Debtors' case, there will be no distributions to
the Senior Subordinated Noteholders to which a charging lien in
Law Debenture's favor could attach. Moreover, Federated Stores
merely set forth the terms of a Chapter 11 plan; it did not
involve litigation.
Liquidating Debtors Respond
The objection filed by the Law Debenture Trust Company of New
York is meritless and should be overruled, Daniel J.
DeFranceschi, Esq., at Richards, Layton & Finger, P.A., in
Wilmington, Delaware, tells the Court.
Law Debenture previously asserted that Section 7.03 of the
Liquidation Plans "dictates that payments due under Section 8.06
[contains the indenture trustee's right to reasonable compensation
and indemnification for fees and expenses] must be paid first to
[Law Debenture], and only 'thereafter' are moneys received by [Law
Debenture] subject to the provisions."
Kaiser Alumina Australia Corporation, Kaiser Finance Corporation,
Alpart Jamaica, Inc., and Kaiser Jamaica Corporation contend that
Law Debenture misguidedly focused the Court's attention on select
provisions of the Indenture and ignores the fact that:
(i) the Indenture's subordination provisions contain no carve
out for Fees and, in fact, expressly apply to any payment
to which "the Trustee" would be entitled under the
Indenture; and
(ii) Section 7.03 does not even apply unless money is actually
collected by Law Debenture from the Liquidating Debtors,
which the subordination provisions make clear cannot occur
unless and until Senior Indebtedness is paid in full.
Section 8.06 of the Liquidating Plans grants Law Debenture a claim
against KACC for reasonable compensation and for reimbursement of
expenses. While KACC is solely responsible under Section 8.06,
pursuant to Section 16.01 of the Indenture, the Liquidating
Debtors guaranteed the "obligations of [KACC] to holders of the
[Subordinated Notes] of the Trustee," which included KACC's
obligations under Section 8.06.
Although the obligation to pay Law Debentures' Fees may be
"independent of and in addition to the claims of the
[Subordinated] Noteholders," the Indenture is explicit that all
payments of the Liquidating Debtors are required to make under the
subsidiary guarantees are expressly subordinated.
Mr. DeFranceschi also points out that Section 16.03(b) of the
Liquidating Plans requires the Liquidating Debtors to directly pay
to the holders or indenture trustees for the holders of Senior
Indebtedness any amounts to which the holders of the Subordinated
Notes or Law Debenture would be entitled from the subsidiary
guarantors if the obligations to the Subordinated Noteholders were
not subordinated.
Mr. DeFranceschi maintains that Section 7.03 only governs how
amounts actually collected by Law Debenture are to be applied, and
has no application unless money is in fact collected by Law
Debenture. Because the provisions of Section 16.03(b) preclude
any collection of money by Law Debenture from the Liquidating
Debtors prior to payment in full of Senior Indebtedness, Law
Debenture's argument should be rejected.
Additionally, Mr. DeFranceschi tells Judge Fitzgerald that the
Indenture expressly requires the Liquidating Debtors to pay the
holders of the Senior Notes or the Senior Notes indenture trustees
directly. Law Debenture fails to cite a single case supporting
its assertion that all plan distributions to the holders of the
Senior Notes in respect of the subordination rights under the
Indenture must be made through it.
Fees payable to the holders of the 7-3/4% SWD Revenue Bonds and
their indenture trustee, Mr. DeFranceschi notes, are payable from
amounts to which the holders of the Senior Notes are otherwise
entitled. The fact that holders of the Senior Notes have agreed
to share their recoveries in this manner should be of no moment to
Law Debenture. Unlike Law Debenture which continues to incur
substantial fees and expenses to contravene the parties' clear
intent regarding the Indenture's subordination provisions, the
7-3/4% SWD Revenue Bond Indenture Trustee has agreed to a
reasonable settlement. Law Debenture, is therefore not, as it
wrongly contends, similarly situated with the 7-3/4% SWD Revenue
Bond Indenture Trustee.
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)
KIMBALL CHECK: Case Summary & 6 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: Kimball Check Cashing Corporation
441 Buttonwood Lane
Cinnaminson, New Jersey 08077
Bankruptcy Case No.: 05-13832
Type of Business: The Debtor was in the check cashing business but
surrendered its license to the state of New
York. This petition is filed preparatory to
the sale of two parcels of real property owned
by the Debtor.
Chapter 11 Petition Date: May 25, 2005
Court: Southern District of New York (Manhattan)
Judge: Robert D. Drain
Debtor's Counsel: Douglas T. Tabachnik, Esq.
Law Offices of Douglas T. Tabachnik
37 Greenleaf Drive
Manalapan, New Jersey 07726-3705
Tel: (732) 792-2760
Fax: (732) 792-2761
Total Assets: $1,563,192
Total Debts: $1,009,650
Debtor's 6 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
JP Morgan Chase $250,000
Attn: Jim Greenhalgh, Esquire
One Chase Manhattan Plaza, 26th Floor
Voorhees, NJ 08043
Advanta Leasing Services $77,000
1020 Laurel Oak Road
P.O. Box 1228
Voorhees, NJ 08043
Bank of New York, as custodian $32,692
c/o Dreier, LLP
499 Park Avenue
New York, NY 10022
The City of New York $16,263
Department of Finance
P.O. Box 32
New York, NY 10008-0032
City of New York $4,367
Department of Finance
P.O. Box 32
New York, NY 10008-0032
City of New York $4,367
Department of Finance
P.O. Box 32
New York, NY 10008-0032
LBACK DEVELOPMENT: Receiver Won't Let Debtor Access its Records
---------------------------------------------------------------
LBack Development, L.P., sought and obtained permission from the
U.S. Bankruptcy Court for the Eastern District of Texas, to delay
filing its Schedules of Assets and Liabilities and Statement of
Financial Affairs to June 1.
The Debtor explains that in order to prepare the schedules and
statement, it needs access to its books and records.
The Debtor has property that consists of a parcel of land and
improvements located at 6401 West Park, Plano, Texas, and the
records are located there. Prior to the chapter 11 filing, the
debtor was subject to a receivership order in a matter entitled
MLSBF, L.P. v. Matthew Lineback, Lineback/Advantage, Inc.,
LBack Development, L.P., and Exotic Car Rental of Texas, Inc.,
pending in the 416th Judicial District Court of Collin County,
Texas. To date, the receiver, Brent Brown, has refused to provide
the Debtor access to the records.
The Debtor needs additional time to file its schedules and
statement pending resolution of the controversy with Mr. Brown.
Headquartered in Plano, Texas, LBack Development, L.P., filed for
chapter 11 protection on March 31, 2005 (Bankr. E.D. Tex. Case No.
05-41537). Charles R. Chesnutt, Esq., of Dallas, Texas,
represents the Debtor. When the Debtor filed for protection from
its creditors, it estimated $50,000 in assets and more than $10
million in debts.
LB-UBS: Moody's Affirms $3.02M Class Q Certificate's Junk Rating
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes and
affirmed the ratings of 19 classes of LB-UBS Commercial Mortgage
Trust 2001-C7, Commercial Mortgage Pass-Through Certificates,
Series 2001-C7 as:
-- Class A-1, $16,426,129, Fixed, affirmed at Aaa
-- Class A-2, $60,674,000, Fixed, affirmed at Aaa
-- Class A-3, $267,122,622, Fixed, affirmed at Aaa
-- Class A-4, $57,722,000, Fixed, affirmed at Aaa
-- Class A-5, $540,708,000, Fixed, affirmed at Aaa
-- Class X-CL, Notional, affirmed at Aaa
-- Class X-CP, Notional, affirmed at Aaa
-- Class B, $49,909,000, Fixed, upgraded to Aaa from Aa1
-- Class C, $16,636,000, WAC, upgraded to Aa1 from Aa2
-- Class D, $39,300,000, WAC, affirmed at A2
-- Class E, $12,100,000, WAC, affirmed at A3
-- Class F, $12,120,000, Fixed, affirmed at Baa1
-- Class G, $12,099,000, Fixed, affirmed at Baa2
-- Class H, $10,587,000, WAC, affirmed at Baa3
-- Class J, $10,587,000, Fixed, affirmed at Ba1
-- Class K, $15,124,000, Fixed, affirmed at Ba2
-- Class L, $6,049,000, Fixed, affirmed at Ba3
-- Class M, $7,562,000, Fixed, affirmed at B1
-- Class N, $4,537,000, Fixed, affirmed at B2
-- Class P, $3,025,000, Fixed, affirmed at B3
-- Class Q, $3,025,000, Fixed, affirmed at Caa2
The upgrade of Classes B and C is due to an upgrade in the shadow
rating of the largest loan in the pool, the UBS Warburg Building
Loan ($214.6 million - 18.5%). Since Moody's last full review on
March 3, 2005 additional information on the property has become
available including detailed financial and property information
and a full appraisal report dated April 1, 2005.
The UBS Warburg Building Loan is secured by a 1.1 million square
foot Class A office building located in midtown Manhattan. The
property is 99.0% leased, essentially the same as at
securitization. The largest tenant is UBS (Moody's senior
unsecured rating Aa2), which occupies 800,000 square feet under
leases expiring in 2018 (with the exception of a small portion
that expires in 2013). The New York office market has improved
since securitization, resulting in higher rents and lower
capitalization rates.
The property's average in-place rent is approximately $59.00 per
square foot, which is below market. Moody's net cash flow has
increased to $31.2 million from $27.6 million at securitization.
Moody's current shadow rating is Aa2, compared to A2 at
securitization.
As of the May 17, 2005 distribution date, the transaction's
aggregate principal balance has decreased by approximately 4.1% to
$1.16 billion from $1.21 billion at securitization. The
Certificates are collateralized by 113 loans, ranging in size from
less than 1.0% to 18.5% of the pool. One loan has been liquidated
from the pool resulting in a realized loss of approximately
$350,000.
LORAL SPACE: Equity Committee Taps Chanin as Financial Advisors
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave the Official Committee of Equity Security Holders appointed
in Loral Space & Communications Ltd. and its debtor-affiliates'
chapter 11 cases permission to employ Chanin Capital Partners LLC
as their financial advisors.
Chanin Capital is expected to:
a) review and analyze the assets and liabilities of the
Debtors, the financial and operating statements of the
Debtors, and the Debtors' business and financial
projections;
b) evaluate the Debtors' debt capacity and liquidity positions
in light of their projected cash flows and determine a
theoretical range of values for the Debtors on a going
concern basis;
c) advise the Equity Committee on tactics and strategies for
negotiating with the Debtors and other stakeholders, and
participate in meetings or negotiations with the Debtors
and other stakeholders in connection with a Restructuring
Transaction
d) assist the Equity Committee in preparing documentation
required in connection with a Restructuring Transaction and
provide expert testimony in bankruptcy court with respect
to any Restructuring Transaction and related transactions;
e) assist the Equity Committee in procuring and assembling any
necessary validations of asset values of the Debtors; and
f) provide the Equity Committee with all other financial and
restructuring advisory services that are appropriate in the
Debtors' chapter 11 cases.
Russell A. Belinsky, a Senior Managing Director at Chanin Capital,
discloses that the Firm will be paid with:
a) a Monthly Advisory Fee of $150,000; and
b) a Deferred Fee equal to 2% of the Total Consideration of a
consummated Restructuring Transaction and payable upon the
effective date of that Restructuring Transaction;
Chanin Capital assures the Court that it does not represent any
interest materially adverse to the Equity Committee, the Debtors
or their estates.
About Loral Space
Loral Space & Communications is a satellite communications
company. It owns and operates a fleet of telecommunications
satellites used to broadcast video entertainment programming,
distribute broadband data, and provide access to Internet services
and other value-added communications services. Loral also is a
world-class leader in the design and manufacture of satellites and
satellite systems for commercial and government applications
including direct-to-home television, broadband communications,
wireless telephony, weather monitoring and air traffic management.
The Company and various affiliates filed for chapter 11 protection
(Bankr. S.D.N.Y. Case No. 03-41710) on July 15, 2003. Stephen
Karotkin, Esq., and Lori R. Fife, Esq., at Weil, Gotshal & Manges
LLP, represent the Debtors in their restructuring efforts. When
the company filed for bankruptcy, it listed total assets of
$2,654,000,000 and total debts of $3,061,000,000.
MCI INC: Eight Directors Acquire 9,378.963 Shares of Common Stock
-----------------------------------------------------------------
In separate filings with the Securities and Exchange Commission
on May 16, 2005, eight directors of MCI, Inc., disclose that they
recently acquired shares of the Company's common stock:
Officer Amount Price Securities Owned
-------- ------ ----- ----------------
Beresford, Dennis R. 1,280.032 25.39 6,338.458
Grant, Gregory W. 1,156.952 25.39 4,991.065
Haberkorn, Judith R. 1,156.952 25.39 4,991.065
Harris, Laurence 1,083.104 25.39 4,699.694
Holder, Eric H. 984.640 25.39 4,385.331
Katzenbach, Nicholas deB. 1,353.879 25.39 6,685.427
Neoporent, Mark A. 1,083.104 25.39 4,421.702
Rogers, Clarence Jr. 1,280.300 25.39 6,107.146
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom
Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
* * *
As reported in the Troubled Company Reporter on March 1, 2005,
Standard & Poor's Ratings Services placed its ratings on Denver,
Co.-based diversified telecommunications carrier Qwest
Communications International, Inc., and subsidiaries, including
the 'BB-' corporate credit rating, on CreditWatch with negative
implications. This follows the company's counter bid to Verizon
Communications, Inc., for long-distance carrier MCI, Inc., for
$3 billion in cash and $5 billion in stock. MCI also has about
$6 billion of debt outstanding.
The ratings on MCI, including the 'B+' corporate credit rating,
remain on CreditWatch with positive implications, where they were
placed Feb. 14, 2005 following Verizon's announced agreement to
acquire the company. The positive CreditWatch listing for the MCI
ratings reflects the company's potential acquisition by either
Verizon or Qwest, both of which are more creditworthy entities.
However, the positive CreditWatch listing of the 'B+' rating on
MCI's senior unsecured debt assumes no change to the current MCI
corporate and capital structure under an assumed acquisition by
Qwest, such that this debt would become structurally junior to
other material obligations.
"The negative CreditWatch listing of the Qwest ratings reflects
the higher business risk at MCI if its bid is ultimately
successful," explained Standard & Poor's credit analyst Catherine
Cosentino. As a long-distance carrier, MCI is facing ongoing
stiff competition from other carriers, especially AT&T Corp.
Moreover, MCI is considered to be competitively disadvantaged
relative to AT&T in terms of its materially smaller presence in
the enterprise segment and fewer local points of presence -- POPs.
The latter, in particular, results in higher access costs relative
to AT&T. Qwest also faces the challenge of integrating and
strengthening MCI's operations while improving its own
underperforming, net free cash flow negative long-distance
business. These issues overshadow the positive aspects of Qwest's
incumbent local exchange carrier business that were encompassed in
the former developing outlook.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Moody's Investors Service has placed the long-term ratings of MCI,
Inc., on review for possible upgrade based on Verizon's plan to
acquire MCI for about $8.9 billion in cash, stock and assumed
debt.
These MCI ratings were placed on review for possible upgrade:
* B2 Senior Implied
* B2 Senior Unsecured Rating
* B3 Issuer rating
Moody's also affirmed MCI's speculative grade liquidity rating at
SGL-1, as near term, MCI's liquidity profile is unchanged.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Standard & Poor's Ratings Services placed its ratings of Ashburn,
Virginia-based MCI Corp., including the 'B+' corporate credit
rating, on CreditWatch with positive implications. The action
affects approximately $6 billion of MCI debt.
As reported in the Troubled Company Reporter on Feb. 16, 2005,
Fitch Ratings has placed the 'A+' rating on Verizon Global
Funding's outstanding long-term debt securities on Rating Watch
Negative, and the 'B' senior unsecured debt rating of MCI, Inc.,
on Rating Watch Positive following the announcement that Verizon
Communications will acquire MCI for approximately $4.8 billion in
common stock and $488 million in cash.
MCI INC: Senior VP Eric Slusser Will Step Down Effective May 30
---------------------------------------------------------------
In a regulatory filing with the Securities and Exchange
Commission, Robert T. Blakely, executive vice president and chief
financial officer of MCI, Inc., discloses that Senior Vice
President and Controller Eric Slusser has informed MCI that he
plans to resign effective May 30, 2005, to pursue another
opportunity. Mr. Slusser currently serves as MCI's principal
accounting officer.
Mr. Blakely will become MCI's principal accounting officer.
David Case, currently Senior Vice President - Business
Operations, will assume the role of Controller effective May 30,
2005.
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom
Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
* * *
As reported in the Troubled Company Reporter on March 1, 2005,
Standard & Poor's Ratings Services placed its ratings on Denver,
Co.-based diversified telecommunications carrier Qwest
Communications International, Inc., and subsidiaries, including
the 'BB-' corporate credit rating, on CreditWatch with negative
implications. This follows the company's counter bid to Verizon
Communications, Inc., for long-distance carrier MCI, Inc., for
$3 billion in cash and $5 billion in stock. MCI also has about
$6 billion of debt outstanding.
The ratings on MCI, including the 'B+' corporate credit rating,
remain on CreditWatch with positive implications, where they were
placed Feb. 14, 2005 following Verizon's announced agreement to
acquire the company. The positive CreditWatch listing for the MCI
ratings reflects the company's potential acquisition by either
Verizon or Qwest, both of which are more creditworthy entities.
However, the positive CreditWatch listing of the 'B+' rating on
MCI's senior unsecured debt assumes no change to the current MCI
corporate and capital structure under an assumed acquisition by
Qwest, such that this debt would become structurally junior to
other material obligations.
"The negative CreditWatch listing of the Qwest ratings reflects
the higher business risk at MCI if its bid is ultimately
successful," explained Standard & Poor's credit analyst Catherine
Cosentino. As a long-distance carrier, MCI is facing ongoing
stiff competition from other carriers, especially AT&T Corp.
Moreover, MCI is considered to be competitively disadvantaged
relative to AT&T in terms of its materially smaller presence in
the enterprise segment and fewer local points of presence -- POPs.
The latter, in particular, results in higher access costs relative
to AT&T. Qwest also faces the challenge of integrating and
strengthening MCI's operations while improving its own
underperforming, net free cash flow negative long-distance
business. These issues overshadow the positive aspects of Qwest's
incumbent local exchange carrier business that were encompassed in
the former developing outlook.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Moody's Investors Service has placed the long-term ratings of MCI,
Inc., on review for possible upgrade based on Verizon's plan to
acquire MCI for about $8.9 billion in cash, stock and assumed
debt.
These MCI ratings were placed on review for possible upgrade:
* B2 Senior Implied
* B2 Senior Unsecured Rating
* B3 Issuer rating
Moody's also affirmed MCI's speculative grade liquidity rating at
SGL-1, as near term, MCI's liquidity profile is unchanged.
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Standard & Poor's Ratings Services placed its ratings of Ashburn,
Virginia-based MCI Corp., including the 'B+' corporate credit
rating, on CreditWatch with positive implications. The action
affects approximately $6 billion of MCI debt.
As reported in the Troubled Company Reporter on Feb. 16, 2005,
Fitch Ratings has placed the 'A+' rating on Verizon Global
Funding's outstanding long-term debt securities on Rating Watch
Negative, and the 'B' senior unsecured debt rating of MCI, Inc.,
on Rating Watch Positive following the announcement that Verizon
Communications will acquire MCI for approximately $4.8 billion in
common stock and $488 million in cash.
MERIDIAN AUTOMOTIVE: Has Until June 30 to Access $30M DIP Loan
--------------------------------------------------------------
Meridian Automotive Systems, Inc., received approval from the U.S.
Bankruptcy Court for the District of Delaware to extend interim
access to $30 million of its debtor-in-possession financing
through June 30, 2005. As previously announced, interim access to
the DIP financing was originally approved at a hearing held on
April 27, 2005.
The Company said that its request to extend the interim access was
the result of ongoing discussions with its lending group regarding
revisions to its 2005 operating forecasts. These revisions were
driven by recent reductions in production volumes by original
equipment manufacturers (OEMs). The Company is working with its
pre-petition lending group for an appropriate DIP financing that
takes into account the revised 2005 operating forecast. Meridian
believes that its available post-petition liquidity will not be
reduced as a result of any modifications to its final DIP
facility. Meridian said that it expects that the $30 million in
interim DIP financing along with normal cash flow is sufficient
for its current operating needs. A final hearing on the Company's
DIP financing will be held by the end of June.
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.
MIRANT CORP: Asks Court to Approve Wrightsville Settlement Accord
-----------------------------------------------------------------
In a prepetition joint venture with Kinder Morgan Power Company,
Mirant Corporation and its debtor-affiliates, Mirant Wrightsville
Management, Inc., and Mirant Wrightsville Investment, Inc., agreed
to construct and operate a power generating facility in
Wrightsville, Arkansas. Wrightsville Power Facility, LLC, took
care of the development, construction and operation of the
Facility. Funding for the Facility was made through Wrightsville
Development Funding, LLC.
Mirant Management and Mirant Investment own a 51% interest in
both Wrightsville Power and Wrightsville Development. Kinder
Morgan owns a 49% interest in each Wrightsville Power and
Wrightsville Development. Mirant Americas, Inc., owns 100% of
the common stock of each of Mirant Management and Mirant
Investment.
The Pilot Agreement
To obtain certain tax benefits in connection with the development
and construction of the Facility, Wrightsville Power entered into
agreements with three Arkansas municipal entities:
(1) Pulaski County;
(2) the Pulaski County, Arkansas Special School District; and
(3) the City of Wrightsville.
To take advantage of the tax benefits, the Debtors determined to
finance the project through the purchase of industrial
development revenue bonds issued by the County. Under Arkansas
law, a county may not provide tax abatements but may take title
to a facility and enter into a payment in lieu of taxes agreement
in connection with the county's issuance of industrial
development revenue bonds.
Only the property taxes corresponding to the portion of the
project funded through the bonds and owned by the County are
reduced under a payment in lieu of taxes agreement. Accordingly,
to secure the maximum benefit afforded by a payment in lieu of
taxes agreement, the Mirant Parties agreed to finance 100% of the
costs of developing and constructing the Facility through the
industrial development revenue bonds issued by the County.
Hence, the County, as issuer, and Wrightsville Development, as
mortgagee, entered into a mortgage for construction, pursuant to
which the County:
(1) issued three series of bonds amounting to $300 million;
and
(2) mortgaged its ownership interest in the Facility and the
Facility's assets to Wrightsville Development.
Related Agreements
1. The Lease Agreement
In addition to the municipal financing arrangement, the
County and Wrightsville Power entered into a Lease Agreement
dated July 14, 2000. Under the Lease Agreement, the County
leased the project assets back to Wrightsville Power.
Wrightsville Power was granted an option to repurchase the
project assets upon full payment of the Bonds. Under the
Lease, Wrightsville Power is required to pay rent to
Wrightsville Development in an amount equal to the interest
payments to be made on the outstanding Bonds.
2. The School District Agreement
In connection with the Pilot Agreement, Wrightsville Power
entered into an Agreement with the School District.
Wrightsville Power agreed to make certain annual payments to
the School District as consideration for the School District's
approval of the Pilot Agreement and cooperation with
Wrightsville Power's acquisition, construction, equipping and
operation of the Facility within the boundaries of the School
District.
3. The City Agreement
Wrightsville Power also entered into an Agreement with the
City to make certain annual payments to the City as
consideration for, among other things, the City's provision of
various municipal services to the Facility and cooperation
with Wrightsville Power in its acquisition, construction,
equipping operation of the Facility.
Facility on Sale
The Facility was operated from July 2002 until September 2003.
Operations at the Facility were suspended in October 2003. The
Debtors project that they will not operate the Facility
profitably until perhaps 2010. The Debtors forecast that it will
cost between $2.2 million and $2.5 million per year to maintain
the Facility and its related equipment in laid-up status.
Accordingly, the Debtors believe that selling the Facility,
together with certain real property, easements, contracts and
permits, is the best option.
On March 17, 2005, the Debtors asked the Court for permission to
sell the Facility to Arkansas Electric Cooperative Corporation
for $85,000,000, subject to higher or otherwise better offers.
The Settlement Agreement
As a condition precedent to Arkansas Electric's obligations to
close under the Sale Agreement, the Debtors, Wrightsville Power,
and Wrightsville Development entered into a settlement agreement
with Pulaski County, Special School District, and the City of
Wrightsville.
A. The County Settlement Agreement
The County, Wrightsville Power and Wrightsville Development,
as holder of the Bonds, agree that:
(a) the County will transfer the Scheduled Assets to
Wrightsville Power or its designee;
(b) Wrightsville will surrender the Bonds; and
(c) the parties will cancel the Lease, as part of a settlement
of the parties' obligations under (x) the Bonds, (y)
the Lease, and (z) the PILOT Agreement.
The transfer, pursuant to a deed issued by the County, will
occur in connection with the consummation of the Asset Sale.
Upon assignment of the Scheduled Assets to Wrightsville Power
or its designee, the PILOT Agreement, the Bonds, and the Lease
will terminate and the Scheduled Assets will become subject to
assessment and taxation by the County.
The Scheduled Assets will not be eligible for taxation until
taxes are assessed as of January 1, 2006.
B. The School District Settlement Agreement
Under the July 2000 Agreement, Wrightsville Power should have
paid the School District $333,334 in annual payment on or
before October 1 of the years 2001, 2002, and 2003. Payments
were made in the years 2001 and 2002. But the commencement of
the Debtors' Chapter 11 cases stayed the final payment by
Wrightsville Power in October 2003.
To settle all issues and disputes existing between
Wrightsville Power and the School District, the parties
propose that Wrightsville will pay the School District the
final payment owed as soon as reasonably and legally
practicable. The payment will be made from the proceeds of
the Asset Sale.
C. The City Settlement Agreement
Although Wrightsville Power has substantially performed all of
its obligations with the July 2000 Agreement, eight annual
payments to the City for $120,000 remain unpaid over the next
eight years. Thus, the parties propose that Wrightsville
Power will pay the City $480,000 in lump sum to be placed in a
municipal trust fund. The City will withdraw up to $120,000
per year for operations of the municipal government until the
trust fund is depleted. A trustee will administer the trust
to be funded by Wrightsville Power from the proceeds of the
Asset Sale.
In addition, Wrightsville Power will transfer to the City 6.66
acres of unimproved real property located due north of the
Facility location via quitclaim deed.
The Debtors ask Judge Lynn to approve the Settlement Agreement.
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. 64; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT: Lovett Violates Pollution Control Act, Says Riverkeeper
---------------------------------------------------------------
On March 11, 2005, Riverkeeper, Inc., filed a complaint against
Mirant Lovett, LLC, in the United States District Court for the
Southern District of New York under the Federal Water Pollution
Control Act.
Riverkeeper alleges that Mirant Lovett's failure to implement a
marine life exclusion system at its Lovett generating Plant and
to perform monitoring for the exclusion of certain aquatic
organisms from the plant's cooling water intake structures
violated Mirant Lovett's water discharge permit issued by the
State of New York.
Pursuant to the Action, Riverkeeper asks the District Court to:
(a) enjoin Mirant Lovett from continuing to operate the
Lovett Plant in a manner that allegedly violates the
Clean Water Act;
(b) impose civil penalties on Mirant Lovett of $32,500 per day
of violation; and
(c) award Riverkeeper attorney's fees.
In stipulation to be filed with the District Court, Riverkeeper
and Mirant Lovett agree to a stay on the Action until 60 days
after confirmation of Mirant Lovett's plan of reorganization
becomes final and non-appealable.
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: Wants Perryville & Enron Edison's Claims Estimated
---------------------------------------------------------------
Pursuant to Section 502 of the Bankruptcy Code, Rule 3007 of the
Federal Rules of Bankruptcy Procedure and the Claims Estimation
Procedures, Mirant Corporation and its debtor-affiliates ask the
U.S. Bankruptcy Court for the Northern District of Texas to
estimate claims filed by Perryville Energy Partners LLC, Enron
Corporation, Enron Asset Holdings, LLC, Edison Mission Energy, EME
del Caribe, and Potomac Electric Power Company.
(1) Perryville Energy Partners
The Debtors, along with the Official Committee of Unsecured
Creditors of Mirant Corp., and the Official Committee of Equity
Security Holders of Mirant Corp. are currently engaged in active
litigation with PEP over objections to PEP's Claims. The Debtors
anticipate that the Claims can be fully and finally adjudicated
in a timely manner, thereby avoiding the need for estimation of
the Claims.
Out of an abundance of caution, the Debtors seek to preserve all
rights to seek estimation of all or part of the Claims in the
event that the litigation over the Claims is delayed for any
reason.
PEP's Claims arise out of the Debtors' rejection of a long term
Tolling Agreement between PEP and Mirant Americas Energy
Marketing, LP. The Claims, as filed, assert rejection damages in
excess of $1.0 billion.
(2) Enron & Edison
Enron Corporation and Enron Asset Holdings, LLC, filed Claim Nos.
6862, 6863, 6864, 6865, 6866 and 6867.
Edison Mission Energy and EME del Caribe filed Claims Nos. 4608,
4609, 4610, 4611, 4612 and 4613.
The Enron and Edison Claims allege that the Debtors breached two
cross-contingent stock purchase agreements to conditionally
purchase Edison's and Enron's interests in a power plant located
in Puerto Rico. The Claims also allege that Mirant engaged in
fraud in connection with the execution and performance of the
SPAs.
The Debtors note that any uncertainty related to the amount of
the Enron and Edison Claims would inject uncertainty into the
plan process.
Thus, the Debtors seek permission to serve an Estimation Notice
Package if the Claims are not tried as scheduled and the amount
of the Claims are not fixed.
(3) Potomac Electric Power Company
PEPCO filed Claim Nos. 6474, 6475, 6476, 6477, 6478, 6479, 6480,
6481, 6482, and 6496.
Because the Claims are, in whole or in part, contingent and
unliquidated, the Debtors assert that estimation is needed for
all purposes (including voting on, feasibility of and
distribution under, a plan of reorganization) to consummate a
timely and successful emergence from chapter 11.
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. 63; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
NATIONAL ENERGY: City of Seattle Holds Allowed $310,100 Claim
-------------------------------------------------------------
NEGT Energy Trading Holdings Corporation, NEGT Energy Trading -
Power, L.P., and National Energy & Gas Transmission, notify the
U.S. Bankruptcy Court for the District of Maryland of their entry
into a settlement agreement and mutual release with the City of
Seattle, acting by and through the City Light Department. The
Settlement Agreement resolves certain claims arising from
transactions and related guaranties among the parties.
The Debtors agree that City Light will have an allowed general
unsecured claim against ET Power $310,100, and NEGT for $310,100,
provided, however, City Light will not receive an aggregate
recovery from ET Power and NEGT that exceeds the amount of the ET
Power Allowed Claim. The parties will release each other from
any liabilities whatsoever arising out of the Contracts and, to
the extent not already revoked, revoke the Guaranties.
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. 40; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
NATIONAL ENERGY: Inks Pact to Resolve Fireman's Fund Bond Claim
---------------------------------------------------------------
On July 1, 1999, Fireman's Fund Insurance Company executed a
$5,000,000 surety bond in favor of NEGT Energy Trading - Power,
L.P. The Bond was used to secure ET Power's obligation under an
agreement with Bonneville Power Administration governing power
purchases and exchanges and surplus energy sales.
Martin T. Fletcher, Esq., at Whiteford, Taylor & Preston, LLP, in
Baltimore, Maryland, tells the Court that Fireman's Fund timely
filed Claim No. 193 on account of the potential liability on
several surety bonds it issued for ET Power including the
Bonneville Surety Bond. With the exception of the Bonneville
Surety Bond, Mr. Fletcher states that all surety bonds referenced
in Fireman's Fund claim have been released.
On June 8, 2004, ET Power and Bonneville entered into a
settlement agreement whereby Bonneville was allowed a $21,792,000
claim as consideration for the release and settlement of its
claims. However, Bonneville has refused to release the
Bonneville Surety Bond and still has a potential claim against
Fireman's Fund. In January 2005, ET Power asked the Court to
disallow Claim No. 193 pursuant to Section 502(e) of the
Bankruptcy Code.
In an effort to amicably settle all matters relating to
Claim No. 193, ET Power and Fireman's Fund entered into a
settlement agreement pursuant to which, Fireman's Fund agrees to
withdraw Claim No. 193. Furthermore, ET Power agrees that:
(a) Fireman's Fund retains the right to file a claim for
subrogation under Section 509 of the Bankruptcy Code at
any time prior to the entry of a final decree closing ET
Power's Chapter 11 case if it suffers a loss under the
Bonneville Surety Bond;
(b) the Bonneville Settlement Agreement will not be construed
to prevent or prejudice Fireman's Fund from asserting a
right of subrogation pursuant to Section 509; and
(c) to the extent that any subrogation claim is allowed, it
will be treated as a general unsecured non-priority claim.
By this motion, ET Power asks the Court to approve the Settlement
Agreement.
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. 43; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
NRG ENERGY: Can Distribute $1.3 Million of McClain Sale Proceeds
----------------------------------------------------------------
As reported in the Troubled Company Reporter on Feb. 9, 2005, NRG
McClain asked the U.S. Bankruptcy Court for the Southern District
of New York to approve a proposed allocation and authorize it to
distribute the NRG McClain Funds, without further delay.
Ryan Blaine Bennett, Esq., at Kirkland & Ellis, LLP, in New York,
relates that NRG Energy Inc., and its debtor-affiliates previously
sought to dispose of their non-core assets, including a 77%
undivided ownership interest held by NRG McClain LLC in a 520 MW
gas-fired combined-cycle electric generating power plant located
in McClain County, Oklahoma. The McClain Energy Facility, 23%
owned by the Oklahoma Municipal Power Authority, engaged in the
business of generating and selling electric power.
The McClain Facility Sale
The Debtors consulted their financial advisors to identify and
evaluate various potential strategic and financial buyers for the
McClain Interest. Only Oklahoma Gas and Electric Company offered
to buy the McClain Interest. Subsequently on August 18, 2003,
OG&E entered into an asset purchase agreement with NRG McClain
for the McClain Interest. The McClain Sale closed on July 9,
2004, generating $159,950,000 in proceeds.
Prepetition Lenders' Secured Claim
As of its Petition Date, NRG McClain had incurred secured
obligations under the Prepetition Credit Agreement of at least
$160,571,695. NRG McClain also missed its December 31, 2002, and
June 30, 2003, payments to its Secured Lenders, which resulted in
a default under the Prepetition Credit Agreement and the
acceleration of the Prepetition Loan.
Pursuant to the ORCA, the Sale Order and the Cash Collateral
Stipulation, a substantial portion of the Sale Proceeds was
applied to reduce the Lenders' Secured Claim, leaving a remaining
balance of $1,507,528.
The remaining portion of the Sale Proceeds, with the Secured
Lenders' consent, was left with NRG McClain for the purpose of
satisfying certain administrative expense obligations that were
expected to accrue prior to the closing of its bankruptcy case.
As of February 3, 2005, $1,311,537 of the Sale Proceeds still
remains undisbursed.
Under the NRG Guarantee, NRG Energy is obligated to reimburse the
Prepetition Secured Lenders for the difference between the Lender
Balance and the NRG McClain Funds up to a certain amount.
WestLB, on the Prepetition Secured Lenders' behalf, has filed a
timely proof of claim against NRG for the NRG Contribution
Amount. In a subsequent agreement reached among NRG Energy, NRG
McClain and the Prepetition Secured Lenders, and as a settlement
of the NRG Contribution Claim, NRG Energy has agreed to pay the
NRG Contribution Amount, provided that the amount does not exceed
$663,259. In exchange, the Prepetition Secured Lenders agreed to
withdraw with prejudice the NRG Contribution Claim, as well as
all other claims related to NRG McClain filed against the
Debtors.
Mr. Bennett relates that as of February 3, 2005, the NRG
Contribution Amount is estimated at $431,923, based on NRG
McClain's books and records. This figure may change as
additional activity is posted to the Revenue Account in the days
preceding entry of an order granting NRG McClain's request to
distribute its sale proceeds.
* * *
Pursuant to Section 363(b) of the Bankruptcy Code, the Court
authorizes the Debtors to distribute the McClain Funds to:
Claimant Description Distribution
-------- ----------- ------------
Office of the U.S. Trustee Quarterly Fees $5,250
WestLB Interest & Fees $1,507,528
NRG Energy, Inc., owns and operates a diverse portfolio of
power-generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. The company, along with its
affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case
No. 03-13024) on May 14, 2003. The Company emerged from chapter
11 on December 5, 2003, under the terms of its confirmed Second
Amended Plan. James H.M. Sprayregen, Esq., Matthew A. Cantor,
Esq., and Robbin L. Itkin, Esq., at Kirkland & Ellis, represented
NRG Energy in its $10 billion restructuring.
* * *
As reported in the Troubled Company Reporter on Dec. 14, 2004,
Standard & Poor's Ratings Services assigned its 'CCC+' rating to
NRG Energy Inc.'s (NRG; B+/Stable/--) proposed $400 million
convertible perpetual preferred stock. The outlook is stable.
NRG Energy, Inc., owns and operates a diverse portfolio of
power-generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. The company, along with its
affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case
No. 03-13024) on May 14, 2003. The Company emerged from chapter
11 on December 5, 2003, under the terms of its confirmed Second
Amended Plan. James H.M. Sprayregen, Esq., Matthew A. Cantor,
Esq., and Robbin L. Itkin, Esq., at Kirkland & Ellis, represented
NRG Energy in its $10 billion restructuring.
* * *
As reported in the Troubled Company Reporter on Dec. 14, 2004,
Standard & Poor's Ratings Services assigned its 'CCC+' rating to
NRG Energy Inc.'s (NRG; B+/Stable/--) proposed $400 million
convertible perpetual preferred stock. The outlook is stable.
NRG ENERGY: Earns $22.6 Million of Net Income in First Quarter
--------------------------------------------------------------
NRG Energy, Inc. (NYSE: NRG) reported net income for the quarter
ended March 31, 2005 of $22.6 million, versus the prior year of
$30.2 million, or $0.30 per diluted share, which included
$1.2 million loss related to discontinued operations. Weaker
year-on-year performance was largely the result of very mild peak
season weather in the Northeast United States and Australia
relative to 2004 and mark-to-market losses.
Adjusted net income, excluding discontinued operations and other
nonrecurring items, was $14.4 million or $0.16 per diluted share
for the three months ended March 31, 2005 and $36.5 million or
$0.36 per diluted shares for the comparable period ended March 31,
2004. Adjustments were primarily associated with asset
impairments, restructuring and relocation charges and litigation
settlements.
"During the first quarter, we launched internally a cost
improvement initiative called 'F.O.R.@NRG' as the logical follow
on to our highly successful Powder River Basin coal conversion
program," said David Crane, NRG President and CEO. "We are
sufficiently pleased with the progress made to date with
F.O.R.@NRG that we expect a $100 million per year recurring
benefit by the end of its implementation period. Even excluding
the expected first year benefits from F.O.R.@NRG, our continuing
dedication to all phases of portfolio and asset management
enables us to raise our 2005 adjusted EBITDA guidance to $600
million, notwithstanding the soft margins we experienced in the
first quarter."
First Quarter Highlights:
-- $154 million of adjusted EBITDA for 2005 including $39.5
million in mark-to-market losses;
-- 48% net debt to total capital at March 31, 2005;
-- $416 million of high-yield debt redeemed and repurchased;
-- $70.8 million TermoRio arbitration award collected;
-- 100% low-sulfur coal achieved at Huntley 67 and Dunkirk
4; and
-- $63.5 million sale of Enfield completed on April 1, 2005.
Financial Summary
NRG's operating income for the quarter was $46.4 million as
compared to $119.7 million for the first quarter 2004. While
domestic generation output and power prices for the first quarter
of 2005 increased over the first quarter 2004, compressed oil and
dark spark spreads drove operating income lower. Revenues of $601
million for the three months ended March 31, 2005 remained
relatively unchanged compared to first quarter 2004. Increased
generation from our New York City, South Central, and Indian
River facilities drove higher merchant revenues which, combined
with higher financial revenues from settled hedging activity,
offset the mark-to-market losses associated with forward
financial sales of electricity supporting our Northeast assets.
Higher cost of energy of $59.5 million also impacted first
quarter operating income. Of this total increase, $45.4 million
was due to fuel price increases at our Northeast and South
Central regions. Increased generation largely accounted for the
remainder. NRG continues to focus on environmental and operating
improvements at the plants and has begun a number of significant
outages at the South Central, Western New York and Indian River
plants. This work increased operating and maintenance expenses
by $11.6 million, as compared to the first quarter 2004. The
increased expenses were substantially attributable to the
aggressive implementation of our Powder River Basin conversion
program and related environmental remediation at NRG's Big Cajun
II, Huntley and Dunkirk coal-fired plants.
Income from continuing operations for the quarter totaled
$22.6 million versus $31.4 million for the first quarter of 2004.
Offsetting the lower operating income were lower interest
expense, higher equity earnings, higher other income, and lower
income taxes. Lower interest expense of $6.7 million was
primarily due to the Senior Credit Facility refinancing in
December 2004 which reduced the first lien debt interest rate by
212.5 basis points. A $12 million after-tax mark-to-market gain
associated with Enfield's natural gas contract contributed to an
increase in equity earnings. Additionally, the settlement
associated with the TermoRio project resulted in $13.5 million
gain, adding to an increase in other income. The effective tax
rate for the first quarter 2005 was 17.5% due to the
appropriation of a full valuation allowance and earnings in
foreign jurisdictions taxed at rates lower than the U.S.
statutory rate.
Cash flow from operations totaled $64 million for the three months
ended March 31, 2005, as compared to $350 million for the three
months ended March 31, 2004. In the first quarter of 2004, NRG
received $125 million from Xcel Energy, Inc. related to its
emergence from Chapter 11. Additionally, during the first
quarter of 2005, the Company increased its hedging activity which
required increased credit support compared to the same quarter
last year. Prepayments and other current assets increased in the
first quarter of 2005 by $124.5 million, primarily to support the
increased level of hedging transactions. Collateral requirements
will fluctuate throughout the year as forward power prices move
and, since March 31, 2005, approximately $41 million of cash
collateral has been returned as of May 6, 2005.
Adjusted EBITDA
(in millions)
Region 1stQ 2005 1stQ 2004
------ --------- ---------
Northeast $ 54.0 $ 114.8
South Central 25.2 29.7
West Coast 3.5 33.3
Australia 18.1 40.6
Other International 36.7 13.6
Other North America 2.2 12.3
Thermal, Alternative Energy,
Nongenerating and Other 14.7 12.9
--------- ---------
Total $154.4 $ 257.2
Northeast
The Northeast region had first quarter 2005 adjusted EBITDA of
$54.0 million versus $114.8 million in 2004. Mild weather during
the first quarter 2005 kept peak period spark spreads in the
Northeast compressed. Although gas prices were 13% higher than
the first quarter last year, resulting in higher power prices,
overall spreads were compressed for coal and oil in the first
quarter this year versus the same quarter in 2004. Total Northeast
generation for the quarter increased slightly over last year and
partially offset the compressed margins. During the quarter, dark
spreads increased significantly in the forward market and provided
the opportunity for the Company to increase the dark hedge
position for 2006. As the quarter ended with the forward market
at a high point, the existing financial hedges that do not receive
hedge accounting treatment had a $39.5 million unrealized mark-to-
market loss. Subsequent to quarter end, forward prices softened
during April reversing $27 million of the mark-to-market loss
recorded in the first quarter of 2005.
South Central
The South Central region generated $25.2 million in adjusted
EBITDA during the quarter as compared with $29.7 million last
year. The region's power sales are largely contracted, and
normally would not experience swings in year-on-year results.
However during the first quarter 2005, the Big Cajun II facility
experienced unplanned outages that required the purchase of
energy in the merchant market at higher costs than our coal-based
generation to meet contracted full-service load-following
obligations. In spite of these outages, total generation from
the South Central assets increased by 8.8% over last year due to
a higher power price environment.
West Coast
The West Coast region delivered adjusted EBITDA of $3.5 million
versus $33.3 in 2004, primarily reflecting the loss of the equity
earnings contributed by the California Department of Water
Resources (CDWR) contract that expired at the end of 2004.
Australia
Adjusted EBITDA in the first quarter 2005 totaled $18.1 million,
down from $40.6 in 2004. Unseasonably mild weather and
significantly lower pool prices drove the quarter-on-quarter
decline. Average pool prices for the three months ended Mar. 31,
2005 were $23.26 per megawatt hour versus $40.33 per megawatt hour
in 2004. Thirty-five percent of the region's generation was
contracted with a major retailer at a price above the average
clearing market price, helping to offset weak pool prices.
Other North America
First quarter 2005 adjusted EBITDA totaled $2.2 million
versus $12.3 million in 2004. First quarter 2004 reflected an
EBITDA contribution of $11 million from Kendall, which was sold
in the fourth quarter 2004.
Other International
First quarter adjusted EBITDA was $36.7 million versus $13.6
million in 2004. These results were driven primarily by the
Company's German operations, Schkopau and MIBRAG, which are
largely contracted, coupled with a mark-to-market after tax
benefit of $12 million related to our Enfield investment.
On February 25, 2005, the Company collected $70.8 million of an
arbitration award arising out of the Company's participation in
the TermoRio project in Brazil. Previous to its receipt, that
potential award had been carried on the Company's balance sheet
at $57.3 million. As a result, the difference of approximately
$13.5 million was included in the first quarter 2005 earnings.
The entire $70.8 million is included in the Company's first
quarter 2005 net cash flow.
Thermal and Other
Adjusted EBITDA was $14.7 million in first quarter 2005 versus
$12.9 million in the first quarter of 2004. A significant portion
of this segment is driven by NRG Thermal's output which is largely
contracted and which provides steam heating to approximately 565
customers and chilled water to 90 customers. Additionally, this
segment includes corporate costs, which have been fully allocated
out to the regions in 2005, resulting in higher adjusted EBITDA
against the first quarter of 2004.
Liquidity and Capital Resources
The Company completed several significant capital transactions
during the first quarter 2005. NRG redeemed $375 million of 8%
high yield second priority notes and also purchased in the market
an additional $41 million of high yield notes at an average cost
of approximately 108. The Company had $1.31 billion in high yield
notes as of March 31, 2005.
As of March 31, 2005, liquidity continued to be strong with
$1.2 billion at quarter end as shown below:
Corporate Liquidity
(in millions) 3/31/05 12/31/04
------------------- -------- --------
Unrestricted Cash:
Domestic $510 $921
International 253 189
Restricted Cash:
Domestic 60 54
International 18 59
-------- --------
Total Cash 841 1,223
Letter of Credit Availability 176 193
Revolver Availability 150 150
-------- --------
Total Current Liquidity $1,167 $1,566
Focus on Return on Invested Capital@NRG
Focus on ROIC at NRG is a comprehensive cost and margin
improvement program consisting of a large number of asset,
portfolio and headquarters-specific targeted initiatives which
can be implemented over the short to medium term with limited
incremental capital required to be invested. We expect recurring
benefits of $100 million by the end of the three-year
implementation period, from value enhancing improvements made to
plant operations and companywide processes. Some of the projects
underway include recapturing nameplate capacity at the Huntley,
Dunkirk and Indian River coal plants, reducing forced outages at
Big Cajun II and other major baseload facilities, and increasing
fuel efficiency at our higher capacity factor plants.
Portfolio Update
On April 1, 2005, the Company completed the sale of its 25%
interest in the Enfield project to Infrastructure Alliance
Limited for $63.5 million, creating a pretax gain of
approximately $10.0 million which will be recorded in the second
quarter.
2005 Adjusted EBITDA Outlook Raised
During the Company's year-end earnings call, the adjusted
EBITDA guidance, excluding the $60 million mark-to-market gains
recorded in the 2004 results, was $560 million. The updated
adjusted EBITDA guidance, prior to the 2004 and 2005 mark-to-
market impacts, is revised upward to $600 million. The increase
in the adjusted EBITDA guidance includes the updated timing for
asset sales, the Company's first quarter results, and an updated
view on margins and costs.
The first quarter mark-to-market loss of $39.5 million is
excluded from the guidance as it will continue to fluctuate
throughout the year with changes in forward power prices. The
first quarter mark-to-market loss of $39.5 million decreased to
$12 million by the end of April 2005. Our revised adjusted
EBITDA guidance also does not include the targeted first year
financial improvements of up to $30 million arising out of the
F.O.R.@NRG initiative.
The Company's adjusted EBITDA guidance of $600 million
excludes unusual or nonrecurring events and assumes normal
weather patterns in our core regions for the balance of the year.
The gross margin associated with this EBITDA estimate is
substantially hedged in terms of downside protection while the
Company retains the potential to benefit from extreme weather
events, locational supply-demand imbalances and gas price spikes
through its dual fuel-fired peaking units.
A full-text copy of NRG's Form 10-Q Report is available for free
at http://tinyurl.com/7jvn8
NRG Energy, Inc., owns and operates a diverse portfolio of
power-generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. The company, along with its
affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case
No. 03-13024) on May 14, 2003. The Company emerged from chapter
11 on December 5, 2003, under the terms of its confirmed Second
Amended Plan. James H.M. Sprayregen, Esq., Matthew A. Cantor,
Esq., and Robbin L. Itkin, Esq., at Kirkland & Ellis, represented
NRG Energy in its $10 billion restructuring.
* * *
As reported in the Troubled Company Reporter on Dec. 14, 2004,
Standard & Poor's Ratings Services assigned its 'CCC+' rating to
NRG Energy Inc.'s (NRG; B+/Stable/--) proposed $400 million
convertible perpetual preferred stock. The outlook is stable.
OCTEL CORP: Likely Tetraethyl Phase-Out Cues S&P to Lower Ratings
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term corporate
credit rating on specialty-chemicals producer Octel Corp. to 'BB-'
from 'BB'. The outlook is negative. Delaware-registered Octel
produces tetraethyl lead (TEL, a fuel additive) and other
nonrelated chemical products, including fuel additives,
detergents, and aromas.
"The downgrade reflects the challenges faced by Octel in replacing
its lucrative, but shrinking, main cash unit, TEL," said Standard
& Poor's credit analyst Khaled Zitouni.
Specific concerns are:
(1) the group's customer concentration,
(2) the low visibility on countries' decisions to phase out
the use of TEL, and
(3) the group's debt-funded growth strategy.
These factors are partially offset by Octel's very strong market
position and high margin in TEL (40.7 % in first-quarter 2005;
39.5% a year earlier) and, to a lesser extent, some
diversification in other chemicals activities.
The negative outlook reflects Standard & Poor's concerns regarding
the decline and the necessary replacement of TEL. "We will
particularly monitor debt-funded growth, the contribution to
profits of acquisitions, and the exit of key clients," said Mr.
Zitouni. Downward pressure on the rating will increase further
unless the group can transform itself in the next few quarters.
PILLOWTEX CORP: Amends Complaint Against Velvet Demo
----------------------------------------------------
As reported in the Troubled Company Reporter on Apr. 15, 2005,
Joseph M. Barry, Esq., at Young, Conaway Stargatt & Taylor, LLP,
reminds the U.S. Bankruptcy Court for the District of Delaware
that in October 2003, it approved Velvet Demo's request to protect
its contractual right to the Fiber Optic Easement. In December
2004, the Court held that the sale of the Kannapolis Property to
Castle & Cooke Kannapolis LLC would not be approved unless Velvet
Demo's easement rights were guarded.
Velvet Demo does not object to the sale provided its easement
rights are reserved and protected by separate order of the Court.
This resolution, Mr. Barry says, would benefit all parties and
would not prejudice the buyer, since Castle & Cooke has
contractually agreed to buy the Kannapolis Property subject to
Velvet Demo's right to the Fiber Optic Easement.
If the Debtors do not consent to protection of Velvet Demo's
rights through a separate order, Mr. Barry asserts that Pillowtex
Corporation and the Official Committee of Unsecured Creditors'
request for approval to negotiate an easement must be denied.
The Debtors are attempting for the second time to deprive Velvet
Demo of its rights under the First Amendment, this time
purportedly under Section 363(f)(4) of the Bankruptcy Code, Mr.
Barry says.
Debtors Amend Complaint
Gilbert R. Saydah, Esq., at Morris, Nichols, Arsht & Tunnell, in
Wilmington, Delaware, tells the Court that the easement that
Velvet Demo LLC currently seeks would go beyond the terms of the
parties' contract and would substantially interfere with the
ability of Castle & Cooke Kannapolis LLC to develop the
Kannapolis Property.
Since Castle & Cooke has confirmed its intent to demolish the
existing buildings and cables, so that there is no easement that
would be "suitable" to any planned or realistic use of the fiber
optic cables, the Debtors ask the Court to find that:
(a) the agreement to negotiate an easement to the "fiber
optic, data, and communication ring surrounding [the
Property]" is unenforceable; and
(b) there is no reason that could be provided over the
existing fiber optic cables on the Kannapolis Property
that is "suitable to Velvet [Demo]" and reasonable to the
Debtors, and, therefore, Velvet Demo is not entitled to,
and the Debtors are not required to grant, an easement
over the cables.
Velvet Demo and GGST Respond
Velvet Demo and GGST LLC object to the Debtors' Amended Complaint
to the extent "Property" includes the waste treatment facility,
which is not relevant to the matters in the Debtors' Complaint.
Velvet Demo and GGST deny that all equipment that supports data
operations has been removed from the data center at 681 Loop Road
North, Kannapolis, North Carolina.
Both parties believe that the Debtors' Complaint should be
dismissed:
-- because it seeks to modify or set aside a previous Court
order on October 31, 2003, on the grounds of mutual
mistake beyond the one-year limitations period set by Rule
60 of the Federal Rules of Civil Procedure;
-- on grounds of mootness;
-- on grounds that the designation of rights to the Fiber
Optic Easement were previously sold pursuant to the
October 2003 Order, and both parties are entitled to the
finality afforded by Section 363(m) of the Bankruptcy
Code;
-- on grounds of estoppel/judicial estoppel because the Court
approved the sale of the Fiber Optic Easement designation
rights to Velvet Demo at the Debtors' request, and they
are estopped from seeking to impair those rights;
-- on grounds of waiver because the Debtors previously sought
Court approval for granting the Fiber Optic Easement
designation rights to Velvet Demo; and
-- on grounds that the Amended Complaint fails to state a
claim on which relief can be granted pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.
Velvet Demo and GGST ask the Court to:
1. require the Debtors to record an easement in Velvet Demo's
favor over the fiber optic ring on the Plant I Complex;
2. in the alternative, grant full rescission or avoidance of
the First Amendment to the Asset Purchase Agreement and
return the parties to the positions they occupied before
entering into the First Amendment, by returning the
designation rights to the Plant I Complex to GGST; and
3. award them their attorneys' fees, costs, and expenses.
Creditors Committee Wants to Intervene
In a Court-approved stipulation, the Debtors, the Official
Committee of Unsecured Creditors, Velvet Demo, and GGST agree to
permit the Committee to intervene in the Debtors' Complaint as a
nominal plaintiff pursuant to Section 1109 of the Bankruptcy Code
and Rules 2018 and 7024 of the Federal Rules of Bankruptcy
Procedure.
The parties agree that the Committee has an interest in the
Adversary Proceeding as the rights of its constituents could be
affected by the outcome of the Proceeding.
Velvet Demo and GGST will not be required to file any further
answers or responsive pleadings to the Committee as an
intervening nominal plaintiff, and the Debtors' answers will, in
all respects, be considered responsive pleadings to the Committee
as an intervening nominal plaintiff.
Velvet Demo Wants Evidence Excluded
Pursuant to Rule 408 of the Federal Rules of Evidence and the
Court's scheduling order, Velvet Demo asks Judge Walsh to exclude
all evidence regarding its meeting with Castle & Cooke on
December 21, 2004, including all evidence of statements made
during the parties' negotiations.
Joseph M. Barry, Esq., at Young Conaway Stargatt & Taylor LLP, in
Wilmington, Delaware, relates that after the December 14, 2004
hearing, Velvet Demo and Castle & Cooke entered into compromise
and settlement negotiations regarding the Fiber Optic Easement.
The discussions included:
(a) several conference calls between the parties within a week
after the hearing on the Sale Motion;
(b) a December 22, 2004, settlement meeting in Kannapolis,
North Carolina, between Lynne Safrit of Castle & Cooke and
Jimmy Gibbs and John Gieser of Velvet Demo;
(c) subsequent settlement letters between the parties; and
(d) subsequent conference calls regarding potential settlement
in January and February 2005.
Based on the depositions that have taken place and statements of
the Debtors' counsel, Mr. Barry says the Debtors are attempting
to introduce evidence of the Settlement Negotiations, including
statements made during the Settlement Negotiations, despite the
restrictions of Rule 408.
Rule 408 provides in relevant part that:
"Evidence of (1) furnishing or offering or promising
to furnish, or (2) accepting or offering or promising
to accept, a valuable consideration in compromising or
attempting to compromise a claim which was disputed
as to either validity or amount, is not admissible to
prove liability for or invalidity of the claim or its
amount. Evidence of conduct or statements made in
compromise negotiations is likewise not admissible."
Mr. Barry reminds Judge Walsh that the court in Affiliated
Manufacturers, Inc. v. Aluminum Company of America, 56 F.3d 521,
527 (3d Cir. 1995), held that:
"The purpose of Rule 408 is to encourage freedom of
discussion with regard to compromise."
Without freedom from having their conversation later admitted
against them, the parties are unlikely to have the kind of frank
and open discussions, which lead to compromise.
Based on the Court's direction, Mr. Barry explains that the
parties engaged in the Settlement Negotiations in a good faith
attempt to resolve the Sale Motion pending before the Court. All
statements, which were made during the course of those
negotiations and meetings "were intended to be part of the
negotiations toward compromise," and should be excluded.
Velvet Demo Seeks Docs From Debtors
Velvet Demo wants the Debtors to produce certain documents listed
on their privilege log. Specifically, Velvet Demo wants the
Debtors to produce Document Number 1 through 63 -- excluding
Document Numbers 11, 17, 23, 24, 35, 40, 53, and 54.
The Documents relate to the negotiation and drafting of the First
Amendment to the Asset Purchase Agreement in October 2003.
A full-text copy of the Debtors' privilege log is available for
free at:
http://bankrupt.com/misc/pillowtex_privilegelog.pdf
Mr. Barry explains that on April 5, 2005, Velvet Demo served the
Debtors with its First Set of Interrogatories, Requests for
Admissions and Requests for Production of Documents.
In their written responses, the Debtors identified Michael Harmon
and Eric Blough as individuals who were involved in negotiating
and drafting the First Amendment. Despite the fact that Mr.
Blough was the attorney for Pillowtex, the Debtors then revealed
the contents of a conversation that he had with Deborah Poole,
vice president and chief information officer of Pillowtex, and
Dwayne Edwards, a Pillowtex employee, regarding the fiber optic
ring in connection with the First Amendment.
Velvet Demo subsequently took Mr. Blough's deposition on May 3,
2005. The Debtors instructed Mr. Blough that he could answer
questions regarding his one conversation with Ms. Poole and Mr.
Edwards about the fiber optic ring, but specifically instructed
him not to answer any questions regarding communication that he
had with Mr. Harmon regarding the same subject matter.
The Debtors have withheld the Documents by asserting that the
Documents are privileged as attorney-client communication.
However, Mr. Barry notes, the Debtors have waived the attorney-
client privilege with regard to the negotiation and drafting of
the First Amendment.
Velvet Demo, thus, contends that the Debtors cannot claim that
the Documents are privileged and not subject to its waiver. Mr.
Barry argues that the Documents are clearly within the same
subject matter as the matters previously discussed between Mr.
Harmon, Mr. Blough, Ms. Poole, and Mr. Edwards, and should be
produced.
Velvet Demo has conferred in good faith with the Debtors on this
matter, but the parties have been unable to resolve the dispute.
While the Debtors' counsel has offered to reopen the deposition
of Mr. Blough and allow questioning about his conversations with
Mr. Harmon, they have refused to produce the Documents.
Debtors Press for Complete Explanation
The Debtors ask to Court to compel Velvet Demo and GGST to
answer:
(a) Interrogatory No. 6 contained in the Debtors' First Set of
Interrogatories and Requests for Production of Documents
to Velvet Demo; and
(b) Interrogatory No. 2 contained in the Debtors' First Set of
Interrogatories and Requests for Production of Documents
to GGST.
Gilbert R. Saydah, Esq., at Morris, Nichols, Arsht & Tunnell, in
Wilmington, Delaware, says the Interrogatories are nearly
identical. Each asks the respondent to identify the reasons why
it used the phrase "ring surrounding Seller's Real Property" to
describe the Fiber Optic Ring in the First Amendment. The
Interrogatories are based on the fact that it was Velvet Demo and
GGST who described the relevant fiber optic cables as a "ring
surrounding Seller's Real Property."
As the Court is aware, Mr. Saydah explains, there is no "ring" of
cables that "surrounds" the Real Property. According to Mr.
Saydah, several of the causes of action in the Debtors' Amended
Complaint seek relief on the grounds that the parties were
mistaken regarding the location of the relevant cables.
Since GGST and Velvet Demo drafted the relevant language, the
Debtors believe that GGST and Velvet Demo are the only parties
that can explain the origin of the language used and the
understanding on which it was based.
Neither Velvet Demo nor GGST provided an answer to the
Interrogatories by the April 22, 2005 deadline. Instead of
explaining the origin of the language that was actually used,
each merely stated that "the Fiber Optic Ring was the only fiber
optic, data and communication ring of the Plant I Complex" and
that "a more complete legal description of the Fiber Optic was
not available."
Mr. Saydah maintains that Velvet Demo's and GGST's evasiveness
with respect to the Interrogatories has been compounded by the
failure of any of their designated representatives, during
deposition testimony, to identify the person who was the source
of the wording that they chose to use to provide an explanation
as to why those words were chosen.
Headquartered in Dallas, Texas, Pillowtex Corporation --
http://www.pillowtex.com/-- sold top-of-the-bed products to
virtually every major retailer in the U.S. and Canada. The
Company filed for Chapter 11 protection on November 14, 2000
(Bankr. Del. Case No. 00-4211), emerged from bankruptcy under a
chapter 11 plan, and filed a second time on July 30, 2003 (Bankr.
Del. Case No. 03-12339). The second chapter 11 filing triggered
sales of substantially all of the Company's assets. David G.
Heiman, Esq., at Jones Day, and William H. Sudell, Jr., Esq., at
Morris Nichols Arsht & Tunnel, represent the Debtors. On
July 30, 2003, the Company listed $548,003,000 in assets and
$475,859,000 in debts. (Pillowtex Bankruptcy News, Issue No. 79;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
PHILLIPS-VAN: Earns $25 Million of Net Income in First Quarter
--------------------------------------------------------------
Phillips-Van Heusen Corporation reported first quarter 2005 net
income of $25 million, or $0.46 per share, which was $0.03 ahead
of the First Call consensus estimate. First quarter 2005 earnings
per share increased over 150% compared with 2004 first quarter
earnings per share of $0.18, exclusive of restructuring and other
items. First quarter 2004 GAAP net income, inclusive of
restructuring and other items, was $1.6 million and, after
deducting preferred stock dividends resulted in a net loss of
$0.12 per share.
The improvement in first quarter net income was due principally to
sharp revenue increases in the Company's wholesale dress shirt and
sportswear businesses. The quarter benefited from sales of the
new dress shirt lines with BCBG, Michael Kors, Sean John and Chaps
introduced in the second half of last year along with strong core
dress shirt performance. The distribution of the men's Calvin
Klein sportswear collection, which was introduced for Fall 2004
selling, had its first Spring shipments in the first quarter and
has performed very well. Additionally, both the Company's Izod
and Arrow sportswear brands have exceeded expectations.
Overall, total revenues in the first quarter increased 25% to
$472.1 million from $378.2 million in the prior year. As noted,
key drivers were wholesale dress shirt and sportswear increases,
particularly the new dress shirt lines and Calvin Klein men's
sportswear. In addition, an 8% growth in Calvin Klein licensing
revenues as well as the continued rollout of a limited number of
Calvin Klein outlet stores contributed to the increase.
From a balance sheet perspective, inventories at the end of the
current year's first quarter were on plan, with a 21% increase
over last year's levels. This increase supports the additional
volume relating to the Calvin Klein sportswear business and
planned growth in the dress shirt and other sportswear businesses
for the second quarter.
Commenting on these results, Bruce J. Klatsky, Chairman and Chief
Executive Officer, noted, "We are extremely pleased that the
strong growth and momentum from 2004 continued into the first
quarter of this year. The significant revenue and earnings growth
exhibited by our wholesale dress shirt and sportswear businesses
enabled us to exceed our previous earnings guidance and to more
than double the prior year's first quarter earnings. We are also
pleased with the continued growth of our Calvin Klein Licensing
business stemming from existing licensees, as well as growth
initiatives we have undertaken to expand the breadth and reach of
Calvin Klein product offerings. The increased revenue from the
Calvin Klein Licensing business enabled us to increase advertising
expenditures for the Calvin Klein brand, which should benefit that
brand into the future."
Mr. Klatsky continued, "Our focus remains on maximizing the growth
opportunities for Calvin Klein and our wholesale dress shirt and
sportswear businesses. Our Calvin Klein better men's sportswear
line continues to perform well. Our new dress shirt licensing
agreements with BCBG, Michael Kors, Chaps and Sean John also
contributed to our revenue and earnings increases. The
performance of the Arrow brand continues to exceed our
expectations and we are pleased that we will be significantly
increasing our marketing spending in the second half of the year,
investing in the brand in order to further its growth
opportunities."
Mr. Klatsky concluded, "Recognizing our performance in the first
quarter and what we see as the tone of our business through May,
we are projecting second quarter earnings per share of $0.38 to
$0.39 or an increase of 36% to 39% over the prior year's earnings
per share exclusive of restructuring and other items, with
corresponding revenues of $420 to $425 million, or an increase of
12% to 13% over the prior year. Reflecting the actual results of
our first quarter and our second quarter projections, we are
raising our 2005 earnings per share guidance to a range of $1.68
to $1.73, or an increase of 23% to 26% over the prior year's
earnings per share exclusive of restructuring and other items,
with corresponding revenues of $1.80 billion to $1.82 billion,
which represents a revenue increase of 10% to 11% over 2004. Our
2005 guidance continues to be based on a conservative view of the
second half of the year and we have not raised, at this time, our
earnings estimates for the third and fourth quarters. If the
current trends in our business were to continue, we would expect
to exceed these second half estimates. We remain very pleased
with our execution across all segments of our business and with
the prospects for the new Calvin Klein businesses which will fuel
growth in 2005 and beyond. Looking beyond this year, we continue
to be comfortable in our ability to grow earnings at 15-20% per
year."
Phillips-Van Heusen Corporation is one of the world's largest
apparel companies. It owns and markets the Calvin Klein brand
worldwide. It is the world's largest shirt company and markets a
variety of goods under its own brands: Van Heusen, Calvin Klein,
IZOD, Arrow, Bass and G.H. Bass & Co., Geoffrey Beene, Kenneth
Cole New York, Reaction Kenneth Cole, BCBG Max Azria, BCBG
Attitude, Sean John, MICHAEL by Michael Kors, Chaps and Donald J.
Trump Signature.
* * *
As reported in the Troubled Company Reporter on March 29, 2005,
Moody's Investors Service placed Phillips-Van Heusen Corporation's
ratings on review for possible upgrade recognizing the company's
improved operations and financial performance. The company's FY
2004 results showed meaningful improvements in margins, earnings
and cash flow. The review will focus on the sustainability of the
positive trend and the potential impact of the ongoing realignment
of its business, the profitability of its individual brands, and
its future ability to delever and to strengthen its debt servicing
metrics.
The ratings placed under review for possible upgrade are:
* the $100 million issue of 7-3/4% senior secured debentures
due 2023 of B1;
* the $150 million issue of 8-1/8% senior unsecured notes due
2013 of B2;
* the $150 million issue of 7-1/4% senior unsecured notes due
2011 of B2;
* the senior implied rating of B1; and
* the issuer rating of B2.
PVH has made progress in diversifying its revenue sources by
increasing licensing transactions, and it continues to rationalize
its retail operations, including the opening of Calvin Klein
stores, and introduce selective new brands. The results have
included greater licensing royalties, increased overall revenues,
an increase in same store sales, successful brand introductions,
and improved margins, earnings, and leverage. The company has a
dominant market in dress shirts, a large share of the sports shirt
market, and diversified product sourcing and distribution
structures.
For the fiscal year 2004 (ended January 31, 2005) PVH reported a
3% increase in total revenues to $1.6 billion. The company's
gross margin improved to 45% from 38% in 2003, its operating
margin moved up to 7.9% from 3.5%, and EBITDA (unadjusted) rose to
$162 million from $88 million.
The growth in licensing revenues to $181 million, or 11% of total
revenues, has assisted the margin improvement. Even though
adjusted debt / EBITDAR improved to 5.7 times in 2004 from
8.3 times in 2003, it remains high.
PHYSIOMETRIX INC: Nasdaq to Halt Stock Trading Today
----------------------------------------------------
Physiometrix, Inc. (Nasdaq: PHYX) received a letter from Nasdaq on
April 5, 2005, which cited the company's non-compliance with the
requirement that the company maintain either shareholder equity of
a minimum of $2,500,000 or $35,000,000 in listed securities or
$500,000 of net income from continuing operations for two of the
last three fiscal years, as required in marketplace rule 4310(c)
(2)(B). Under these circumstances, the Nasdaq staff has reviewed
the company's eligibility for continued listing. The company
provided a plan of compliance to Nasdaq on April 20, 2005, to
achieve and maintain compliance with all the Nasdaq Smallcap
listing requirements.
After review of this plan, Nasdaq has notified the company on
May 18, 2005, that the plan submitted did not provide a definitive
plan evidencing its ability to achieve near term compliance with
the continued listing requirements or maintain such compliance
over an extended period of time. Nasdaq therefore advised the
company that, its securities are subject to delisting and will be
delisted on May 27, 2005, unless the company requests an appeal
and a hearing before the Nasdaq Listing Qualifications Panel.
This will delay any delisting until the hearing date, which will
be within 45 days of the date the company requests the hearing.
The company filed the request for a hearing on May 23, 2005, and
intends to continue activities designed to achieve compliance with
the continued listing requirements in time to avoid delisting.
About the Company
Physiometrix Inc. -- http://www.physiometrix.com/-- designs,
manufactures and markets noninvasive medical products -- based on
novel gel materials, sophisticated signal-processing electronics
technologies, and proprietary software -- for use in anesthesia-
monitoring during surgical procedures.
* * *
As reporter in the Troubled Company Reporter on April 5, 2005,
Physiometrix, Inc.'s auditors, Ernst & Young LLP, raised
substantial doubts about the Company's ability to continue as a
going concern. The uncertainty described in Physiometrix's
Form 10-K filed with the Securities and Exchange Commission was
based on the company's cash balance as of December 31, 2004, which
was not sufficient to fund projected operations over the next year
and does not take into account any potential future cash inflows.
"Our principal source of liquidity at December 31, 2004 consisted
of cash, cash equivalents and short-term investments, which
aggregated $2.6 million," the Company said in its regulatory
filing. "We anticipate that our existing cash, cash equivalents,
and short-term investments will be sufficient to conduct
operations only until the beginning of the third quarter of 2005,
at which time we will be unable to meet our working capital
requirements."
Bankruptcy Warning
The Company said it is currently engaged in negotiations and
discussions with potential sources of new capital.
"If additional amounts cannot be raised and we are unable to
substantially reduce our expenses," the Company continued, "we
would suffer material adverse consequences to our business,
financial condition and results of operations and would likely be
required to seek other alternatives up to and including the sale
of our technology, filing for protection under the United States
bankruptcy laws or cessation of operations."
PSS WORLD: Posts $10 Million of Net Income in Fourth Quarter
------------------------------------------------------------
PSS World Medical, Inc. (NASDAQ/NM:PSSI) reported its results for
the fiscal fourth quarter and year ended April 1, 2005.
David A. Smith, President and Chief Executive Officer, commented,
"We are successfully transitioning to a team capable of strategic
planning and focused execution for both current and future
periods. The focused determination of our entire team delivered
37.3% year over year growth in income from continuing operations
despite an unexpected vaccine shortage, unusual weather
conditions, rising energy costs, and compliance with new Sarbanes
Oxley regulations. At the same time, we invested heavily in
future revenue and earnings growth opportunities."
Mr. Smith concluded, "We are positioned for continued above-market
growth in revenue and earnings with innovative customer solutions
and leverage from our infrastructure and systems. For fiscal
years 2006-2008, we have established a goal of 20% growth in
earnings per diluted share over the $0.51 earnings per diluted
share base this year, net of a one-time tax benefit. Our goals
include a renewed focus on cash flow."
Net sales for the three months ended April 1, 2005, were $401.3
million, an increase of 14.2%, compared to net sales of $351.4
million for the three months ended April 2, 2004. Net same-day
sales increased by 16.0% for the three months ended April 1, 2005,
including same-day sales increases of 16.7% and 14.5% for the
Physician Business and the Elder Care Business, respectively. The
Company noted that it had one fewer sales day in the three months
ended April 1, 2005 compared to the number of sales days in the
three months ended April 2, 2004. Income from continuing
operations for the three months ended April 1, 2005, was $10.2
million, compared to income from continuing operations for the
three months ended April 2, 2004, of $7.4 million. Net income for
the three months ended April 1, 2005, was $10.2 million, compared
to net income for the three months ended April 2, 2004, of $6.6
million.
Net sales for the year ended April 1, 2005, were $1.47 billion, an
increase of 9.2%, compared to net sales of $1.35 billion for the
year ended April 2, 2004. Net same-day sales increased by 11.3%
for the fiscal year ended April 1, 2005, including same-day sales
increases of 11.0% and 11.9% for the Physician Business and the
Elder Care Business, respectively. The Company noted that it had
five fewer sales days in fiscal year 2005 compared to the number
of sales days in fiscal year 2004. Income from continuing
operations for the year ended April 1, 2005, increased by 37.3% to
$39.4 million, compared to income from continuing operations for
the year ended April 2, 2004, of $28.7 million. Net income for
the year ended April 1, 2005, was $39.0 million compared to net
income for the year ended April 2, 2004, of $27.5 million.
David M. Bronson, Executive Vice President and Chief Financial
Officer, commented, "We invested in an extra layer of inventory
during fiscal year 2005 to ensure service continuation to our
Elder Care customers during the rollout of the new warehouse
system and the integration of the business we acquired mid-year,
Associated Medical Products. Both of these projects have been
successfully completed, and plans are in place to improve working
capital turns in fiscal year 2006 as part of our objective of
increasing operating cash flow this year to $43 - $47 million."
About the Company
PSS World Medical, Inc. is a specialty marketer and distributor of
medical products to physicians and elder care providers through
its two business units. Since its inception in 1983, PSS has
become a leader in the two market segments that it serves with a
focused market approach to customer services, a consultative sales
force, strategic acquisitions, strong arrangements with product
manufacturers and a unique culture of performance. Additional
financial information pertaining to PSS World Medical financial
results may be found by visiting the Company's website at
http://www.pssworldmedical.com/
On March 2, 2004, Standard and Poor's placed its single-B rating
on PSS World Medical, Inc.'s 2-1/4% Convertible Senior Notes due
March 15, 2024. Those notes trade in the low-90's today.
RELIANCE GROUP: Liquidator Wants to Repurchase & Sell Property
--------------------------------------------------------------
M. Diane Koken, Insurance Commissioner of the Commonwealth of
Pennsylvania and Statutory Liquidator of Reliance Insurance
Company, asks Judge James G. Colins of the Commonwealth Court of
Pennsylvania to approve an Agreement of Sale between RIC and
Comstock Loudoun Station L.C. Under the Agreement, RIC will
exercise its Repurchase Option to repurchase 3.0 acres of land
designated as Tax Map 79, Parcel 25D, in the Ryan Park Center,
Loudoun County, Virginia. The Liquidator will convey a
reacquired Parcel 15D to Comstock Loudoun.
Ann B. Laupheimer, Esq., at Blank Rome, in Philadelphia,
Pennsylvania, relates that Parcel 25D was sold in May 2003 as
part of a larger sale of 10.7706 acres in the Ryan Park Center.
At the time, Parcel 25D encompassed 8.1508 acres, comprised of
4.35 acres of usable land and 3.8 acres of unusable land. The
unusable land consisted of 3.0 acres that were reserved for
Loudoun County for future mass transit parking. Another 0.8
acres was designated for a stormwater basin.
Pursuant to the Original Sale to Church Road Limited, RIC
retained a 10-year Repurchase Option for all or part of the
3.8 acres of unusable land. To exercise the Repurchase Option,
RIC will pay Church Road:
1) a pro rata portion of Church Road's closing costs from the
Original Sale;
2) a pro rata portion of any taxes paid by Church Road since
the closing of the Original Sale; and
3) interest on the repurchase price for the period dating back
to the Original Sale.
Under the Repurchase Option, RIC will repurchase the 3.0 acres of
unusable land that was reserved for mass transit parking for
approximately $20,000. RIC will convey the Property to Comstock
Loudoun for $555,390, for an expected profit of $535,390.
Comstock Loudoun has paid an initial deposit of $55,000 into
escrow. RIC's closing costs are limited to payment of Virginia's
Grantor tax and attorney's fees. Comstock Loudoun will pay the
cost of any subdivision waiver, subdivision plot or boundary line
adjustment required by Loudoun County. Since no real estate
broker was utilized, there will be no commission paid.
Ms. Laupheimer assures the Commonwealth Court that the
transaction is in the best interests of the RIC estate. The
Liquidator obtained the advice of a licensed real estate
appraiser, Robert G. Johnson, MAI, of JMSP, Inc., in Herndon,
Virginia. Mr. Johnson's appraisal, dated April 11, 2005, valued
the Property at $526,000. Therefore, Ms. Laupheimer notes, the
purchase price exceeds the appraised fair market value of the
property.
Ms. Laupheimer attests that Comstock Loudoun is financially able
to consummate the transaction. Bank of America has notified the
Liquidator that Comstock Loudoun has a banking relationship that
will provide the financial capacity to complete the transaction.
Headquartered in New York, New York, Reliance Group Holdings, Inc.
-- http://www.rgh.com/-- is a holding company that owns 100% of
Reliance Financial Services Corporation. Reliance Financial, in
turn, owns 100% of Reliance Insurance Company. The holding and
intermediate finance companies filed for chapter 11 protection on
June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing
$12,598,054,000 in assets and $12,877,472,000 in debts. The
insurance unit is being liquidated by the Insurance Commissioner
of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News,
Issue No. 74; Bankruptcy Creditors' Service, Inc., 215/945-7000)
At Apr. 30, 2005, Reliance Group Holdings, Inc.'s balance sheet
showed a $790.3 million stockholders' deficit.
ROTECH HEALTHCARE: Late 10-Q Triggers Default Under Credit Pact
---------------------------------------------------------------
Rotech Healthcare Inc. (Pink Sheets:ROHI) was unable to file its
Form 10-Q for the quarter ended March 31, 2005 within the five-
calendar day extension period provided under Rule 12b-25 of the
Securities Exchange Act of 1934. As previously announced, the
Company currently is evaluating the accounts receivable, related
allowance accounts and the associated methodology it has used
since its predecessor's emergence from bankruptcy in March 2002.
The Company has not yet completed this evaluation. The current
analysis indicates that there is nothing the Company is reviewing
at this time that is expected to have an impact on cash balances.
As a result of the ongoing evaluation, the Company will be delayed
in filing its Form 10-Q for the quarter ended March 31, 2005. The
delay in this filing has resulted in a technical default under the
Company's credit agreement and indenture, which default is subject
to a cure period of 30-days under the credit agreement and 60-days
under the indenture.
Rotech Healthcare Inc. is a leading provider of home respiratory
care and durable medical equipment and services to patients with
breathing disorders such as chronic obstructive pulmonary diseases
(COPD). The Company provides its equipment and services in 48
states through approximately 475 operating centers, located
principally in non-urban markets. The Company's local operating
centers ensure that patients receive individualized care, while
its nationwide coverage allows the Company to benefit from
significant operating efficiencies.
Rotech was part of Integrated Health Services, Inc., and filed for
chapter 11 protection on Feb. 2, 2000 (Bankr. D. Del. Case Nos.
00-00389 through 00-00825). Judge Walrath confirmed a separate
standalone plan of reorganization for Rotech on Feb. 13, 2002, and
Rotech emerged from chapter 11 independent of IHS on March 26,
2002.
Deloitte & Touche LLP serves as Rotech's auditors. Rotech's
balance sheet dated Dec. 31, 2004, shows $1 billion in assets and
$446 million in liabilities.
ROTECH HEALTHCARE INC., is the borrower under a $275,000,000
Credit Agreement, dated as of March 26, 2002 (as twice amended)
with UBS WARBURG LLC and GOLDMAN SACHS CREDIT PARTNERS L.P., as
joint lead arrangers and joint bookrunners, GOLDMAN SACHS CREDIT
PARTNERS L.P., as Syndication Agent, THE BANK OF NOVA SCOTIA,
DEUTSCHE BANK SECURITIES INC. (formerly known as Deutsche Banc
Alex. Brown Inc.) and GENERAL ELECTRIC CAPITAL CORPORATION, as
Co-Documentation Agents, GENERAL ELECTRIC CAPITAL CORPORATION, as
Collateral Agent, and UBS AG, STAMFORD BRANCH, as Administrative
Agent.
ROYAL GROUP: Cerberus Capital Offers to Buy Shares at $14 Each
--------------------------------------------------------------
The special committee of Royal Group Technologies Limited's
(RYG.SV-TSX; RYG-NYSE) board of directors has decided to pursue a
process whereby it will establish a "data room" and make
information available to parties that may have an interest in
exploring a transaction with the company, including Cerberus
Capital Management L.P. The special committee is in the process
of engaging financial advisors to assist with this process. It is
anticipated that the process of compiling and verifying the
requisite information will require between 30 and 60 days. At
this time, the special committee has not made any determination
that any such transaction would be in the best interests of the
company or its shareholders.
Cerberus Capital Offer
On May 15, 2005, Royal Group disclosed that it had received a
letter from Cerberus stating its desire to conduct "due diligence
investigations" in connection with a potential offer. Subject to
Cerberus being satisfied with these investigations and certain
other conditions, Cerberus stated an intention to make an offer
for all shares of the company at a price of $14 per share.
Cerberus also disclosed that it had entered into an agreement with
Mr. Vic De Zen, Mr. Domenic D'Amico and certain of their
affiliates, which provides that if an offer is made Mr. De Zen,
Mr. D'Amico and their affiliates will tender up to 18,600,929
shares to such offer, representing 19.9% of the outstanding equity
of Royal Group.
Since May 15th, Royal Group has received unsolicited expressions
of interest from other parties.
In order to ensure all parties are on a "level playing field" in
the context of any process, the company has entered into an
agreement with Cerberus that, among other things, provides that:
(1) Cerberus will not, subject to certain limited exceptions,
take up shares pursuant to a takeover bid until the expiry
of 60 days from the time it has received access to the
requested information, and
(2) if a transaction is proposed by another party as a result
of the process that is superior to the offer from
Cerberus, Cerberus will either:
(a) match or better the superior proposal,
(b) purchase and tender all of the shares of Vic De Zen,
Domenic D'Amico and their affiliates to the superior
Proposal, or
(c) release them from their obligations pursuant to the
lock-up agreement - in other words, Cerberus will not
use its agreement with those parties to frustrate a
superior proposal.
In exchange for the foregoing agreements from Cerberus, the
company has agreed that it will provide Cerberus with access to
its records and information on the same basis as other parties,
and the company will not enter into any transaction agreement
supporting a competing proposal which contemplates payment of a
termination fee to a third party in excess of 1.9% of equity
value.
The company emphasizes that no offer has yet been made to Royal
Group or its shareholders and there can be no certainty that this
process will result in any transaction.
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.
SATELITES MEXICANOS: Noteholders File Involuntary Petition in N.Y.
------------------------------------------------------------------
A group of secured and unsecured noteholders, holding in excess of
US$379 million of outstanding notes of Satelites Mexicanos, S.A.
de C.V. filed an involuntary Chapter 11 petition against Satmex in
the U.S. Bankruptcy Court for the Southern District of New York on
May 25, 2005. The noteholders are represented by Wilmer Cutler
Pickering Hale and Dorr LLP and Akin Gump Strauss Hauer & Feld
LLP.
The noteholders reached an agreement on a comprehensive debt
restructuring that is supported by creditors holding more than
two-thirds in amount of the Company's liabilities, and have
requested that the court waive the customary exclusivity period
given to the Company in order to implement the agreed-upon
restructuring plan as quickly as possible. The noteholders
believe that implementing the terms of their debt restructuring
through a formal Chapter 11 plan of reorganization would
substantially improve the Company's capital structure and allow it
to better serve the needs of its customers in Mexico, the United
States, and throughout Latin America.
Satmex currently has a principal amount of approximately
US$523.4 million of debt in default.
DIP Financing
Under the restructuring agreement, the petitioning secured and
unsecured noteholders have agreed, subject to certain conditions,
to provide up to US$55 million in debtor-in-possession financing
to Satmex, an amount that would be sufficient to fund the launch
of Satmex 6, the Company's new satellite. Satmex 6 has been
stored at the Arianespace launch facility in French Guiana for the
last 18 months because Satmex has not had sufficient capital to
fund its launch. The Company has two other satellites in orbit.
The noteholders' restructuring agreement contemplates that allowed
claims of trade creditors would be paid in full, permitting the
Company to continue to operate without interruption. The
agreement also provides that current shareholders:
-- including Loral Space & Communications Ltd., itself in a
Chapter 11 proceeding;
-- Principia, S.A. de C.V., led by Sergio Autrey, the Company's
acting chief executive officer; and
-- the Mexican government
will maintain majority control of the reorganized company as of
the Effective Date of the Chapter 11 plan. The Company is not a
party to the restructuring agreement.
"This action by the petitioning holders of the Senior Secured
Floating Rate Notes due 2004 and of the 10-1/8% Senior Notes due
2004 was taken in order to preserve the value of the Company's
assets and to provide a comprehensive and timely solution to its
financial difficulties, which have been on-going since prior to
the Company's first major debt payment default in August 2003,"
said Mitchell A. Harwood, Managing Director of Evercore Partners,
financial advisor to the petitioning holders of Senior Secured
Floating Rate Notes.
"The noteholders have concluded that the extended period of
uncertainty is beginning to take its toll on the Company's
customer base," said Mr. Harwood. "The noteholders believe that
the Chapter 11 restructuring will provide current and potential
customers with comfort that the Company's telecommunications
services will continue uninterrupted," said Mr. Harwood.
"A traditional out-of-court restructuring process to resolve the
Company's balance sheet and funding issues has been on-going for
almost two years, and the creditors do not see that process
resolving matters in the near term," said Skip Victor, Senior
Managing Director of Chanin Capital Partners, financial advisor to
the petitioning holders of the 10-1/8% Senior Notes.
"We therefore believe that a restructuring under Chapter 11 of the
U.S. Bankruptcy Code is now the best alternative to follow,
because it will achieve a fair and equitable restructuring of the
Company's debt and will provide for the critical new funding
needed to launch Satmex 6 in a relatively short time frame," said
Mr. Victor.
"In order for the Company to remain competitive and provide
customers with important services, it is important to resolve the
Company's balance sheet and funding issues promptly, and the
noteholders' action is being taken to achieve that result," said
Mr. Victor.
Headquartered in Mexico, Satelites Mexicanos, S.A. de C.V.,
derives over 50% of its revenues from United States business, and
all of the Company's over US$500 million in debt was issued in the
United States and is governed by New York law. The Company's
largest shareholder, Loral Space & Communications Ltd., is a
United States public company also undergoing a Chapter 11
reorganization in the U.S. Bankruptcy Court for the Southern
District of New York. The Company is forced into chapter 11 by
three noteholders on May 25, 2005 (Bankr. S.D.N.Y. Case No.
05-13862). The noteholders are represented by Wilmer Cutler
Pickering Hale and Dorr LLP and Akin Gump Strauss Hauer & Feld
LLP.
Under U.S. bankruptcy law, Satmex has 20 days to respond to the
involuntary petition, during which time the Company is entitled to
operate its business in the ordinary course. In the event that
the Company or another party contests the involuntary petition, it
will be up to the Bankruptcy Court to determine whether the
Chapter 11 reorganization will proceed.
SATELITES MEXICANOS: Involuntary Chapter 11 Case Summary
--------------------------------------------------------
Alleged Debtor: Satelites Mexicanos, S.A. de C.V.
aka Satmex
CT Corporation Service
111 Eighth Avenue
New York, New York 10011
Involuntary Petition Date: May 25, 2005
Case Number: 05-13862
Chapter: 11
Court: Southern District of New York (Manhattan)
Judge: Robert D. Drain
Petitioners' Counsel: Michael S. Stamer, Esq.
Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, New York 10022
Tel: (212) 872-1000
Fax: (212) 872-1002
-- and --
Andrew Goldman, Esq.
Mark N. Polebaurn, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
399 Park Avenue
New York, NY 1002
Tel: (212) 230-8800
Fax: (212) 230-8888
Petitioners Nature of Claim Amount of Claim
----------- --------------- ---------------
Gramercy Emerging Beneficial interest $125,430,000
Markets Funds in 10-1/8% Senior
20 Dayton Avenue Notes due 2004
Greenwich, CT 06830
Harbert Distressed Beneficial interest $61,110,000
Investment Master Fund, in 10-1/8% Senior
Ltd. Notes due 2004
c/o HMC Distressed
Investment Offshore
Manager, LLC
One Riverchase Parkway
South
Birmingham, AL 35244
Harbert Distressed Beneficial Interest $48,625,800
Investment Master Fund, in Senior Secured
Ltd. Floating Rate Notes
C/O HMC Distressed Due 2004
Investment Offshore
Manager, LLC
One Riverchase Parkway South
Birmingham, AL 35244
Golden Tree High Yield Beneficial interest $25,852,000
Master Fund, Ltd. in Senior Secured
c/o GoldenTree Asset Floating Rate Notes
Management, LP due 2004
300 Park Avenue
New York, NY 10022
Attn: Adam Tuckman
Golden Tree High Yield Beneficial interest $25,852,000
Opportunities II, LP in Senior Secured
c/o GoldenTree Asset Floating Rate Notes
Management, LP due 2004
300 Park Avenue
New York, NY 10022
Attn: Adam Tuckman
Gramercy Emerging Beneficial Interest $16,900,000
Markets Fund in Senior Secured
20 Dayton Avenue Floating Rate Notes
Greenwich, CT 06830 Due 2004
Pam Capital Funding, LP Beneficial interest $14,613,000
c/o Highland Capital in Senior Secured
Investment, Inc. Floating Rate Notes
13455 Noel Road, due 2004
Suite 1300
Dallas, TX 75240
Attn: Kenneth Toudouze
HFR EM Select Master Beneficial interest $11,485,000
Trust in 10-1/8% Senior
C/O: Gramercy Advisors Notes due 2004
20 Dayton Avenue
Greenwich, CT 06830
MLCBO IV (Cayman), Ltd. Beneficial interest $11,237,000
c/o Highland Capital in Senior Secured
Investment, Inc. Floating Rate Notes
13455 Noel Road, due 2004
Suite 1300
Dallas, TX 75240
Attn: Kenneth Toudouze
The Canyon Value Beneficial interest $11,174,000
Realization Fund L.P. in Senior Secured
(Cayman) L.P. Floating Rate Notes
c/o Canyon Capital due 2004
Advisors LLC
9665 Wilshire Blvd.
Beverly Hills, CA 90212
Attn: Jack Hersch
Pamco Cayman, Ltd. Beneficial interest $8,865,000
c/o Highland Capital in Senior Secured
Investment, Inc. Floating Rate Notes
13455 Noel Road, due 2004
Suite 1300
Dallas, TX 75240
Attn: Kenneth Toudouze
Federated Strategic Beneficial interest $8,000,000
Income Fund in 10-1/8% Senior
1001 Liberty Avenue Notes due 2004
Pittsburgh, PA 15222
Golden Tree High Yield Beneficial interest $6,436,000
Master Fund II, Ltd. in Senior Secured
c/o GoldenTree Asset Floating Rate Notes
Management, LP due 2004
300 Park Avenue
New York, NY 10022
Attn: Adam Tuckman
Golden Tree High Yield Beneficial interest $6,436,000
Value Master, LP in Senior Secured
c/o GoldenTree Asset Floating Rate Notes
Management, LP due 2004
300 Park Avenue
New York, NY 10022
Attn: Adam Tuckman
Canyon Value Realization Beneficial interest $3,805,000
Fund L.P. in Senior Secured
c/o Canyon Capital Floating Rate Notes
Advisors LLC due 2004
9665 Wilshire Blvd.
Beverly Hills, CA 90212
Attn: Jack Hersch
Federated International Beneficial interest $2,500,000
High Income Fund in 10-1/8% Senior
1001 Liberty Avenue Notes due 2004
Pittsburgh, PA 15222
Citi Golden Tree Ltd. Beneficial interest $2,278,000
c/o GoldenTree Asset in Senior Secured
Management, LP Floating Rate Notes
300 Park Avenue due 2004
New York, NY 10022
Attn: Adam Tuckman
Golden Tree High Yield Beneficial interest $1,913,000
Opportunities I, LP in Senior Secured
c/o GoldenTree Asset Floating Rate Notes
Management, LP due 2004
300 Park Avenue
New York, NY 10022
Attn: Adam Tuckman
Alpha US Sub Fund VI, LLC Beneficial interest $1,890,000
c/o Harbert Fund Advisors in 10-1/8% Senior
Inc. Notes due 2004
One Riverchase Parkway
South
Birmingham, AL 35244
LMC Recovery Fund LLC Beneficial interest $1,845,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
Alpha US Sub Fund VI, LLC Beneficial Interest $1,504,000
C/O Harbert Fund in Senior Secured
Advisors, Inc. Floating Rate Notes
One Riverchase Parkway Due 2004
South
Birmingham, AL 35244
Golden Tree Credit Beneficial interest $1,500,000
Opportunities Financing in Senior Secured
I, Ltd. Floating Rate Notes
c/o GoldenTree Asset due 2004
Management, LP
300 Park Avenue
New York, NY 10022
Attn: Adam Tuckman
HFR EM Select Master Trust Beneficial Interest $1,440,000
C/O Gramercy Advisors in Senior Secured
20 Dayton Avenue Floating Rate Notes
Greenwich, CT 06830 Due 2004
Atlantic Pacific Beneficial interest $1,270,000
Management Group LLC in 10-1/8% Senior
20 Dayton Avenue Notes due 2004
Greenwich, CT 06830
Canyon Value Realization Beneficial interest $1,265,000
MAC 18, Ltd. in Senior Secured
c/o Canyon Capital Floating Rate Notes
Advisors LLC due 2004
9665 Wilshire Blvd.
Beverly Hills, CA 90212
Attn: Jack Hersch
UVIADO LLC Beneficial interest $1,095,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
Alpha US Sub Fund II, LLC Beneficial interest $713,000
c/o GoldenTree Asset in Senior Secured
Management, LP Floating Rate Notes
300 Park Avenue due 2004
New York, NY 10022
Attn: Adam Tuckman
PALLMALL LLC Beneficial interest $541,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
Institutional Benchmarks Beneficial interest $535,000
Master Fund Ltd. in Senior Secured
c/o Canyon Capital Floating Rate Notes
Advisors LLC due 2004
9665 Wilshire Blvd.
Beverly Hills, CA 90212
Attn: Jack Hersch
LAPALI LLC Beneficial interest $525,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
DRALLI LLC Beneficial interest $320,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
LMC Recovery Fund LLC Beneficial Interest $270,000
20 Dayton Avenue in Senior Secured
Greenwich, CT 06830 Floating Rate Notes
Due 2004
SSGDP LLC Beneficial interest $225,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
LPETE LLC Beneficial interest $210,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
Atlantic Pacific Beneficial Interest $145,000
Management Group LLC in Senior Secured
20 Dayton Avenue Floating Rate Notes
Greenwich, CT 06830 Due 2004
SPhinX Special Situations Beneficial interest $130,000
Fund L.P. in Senior Secured
c/o Canyon Capital Floating Rate Notes
Advisors LLC due 2004
9665 Wilshire Blvd.
Beverly Hills, CA 90212
Attn: Jack Hersch
UVIADO LLC Beneficial Interest $130,000
20 Dayton Avenue in Senior Secured
Greenwich, CT 06830 Floating Rate Notes
Due 2004
PALLMALL LLC Beneficial Interest $90,000
20 Dayton Avenue in Senior Secured
Greenwich, CT 06830 Floating Rate Notes
Due 2004
KADESI LLC Beneficial interest $70,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
GRNPARK LLC Beneficial interest $60,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
Hydra Partners LP Beneficial interest $65,000
20 Dayton Avenue in 10-1/8% Senior
Greenwich, CT 06830 Notes due 2004
KAPALI LLC Beneficial Interest $60,000
20 Dayton Avenue in Senior Secured
Greenwich, CT 06830 Floating Rate Notes
Due 2004
DRALLI LLC Beneficial Interest $40,000
20 Dayton Avenue in Senior Secured
Greenwich, CT 06830 Floating Rate Notes
Due 2004
SCIENTIFIC LEARNING: Form 10-Q Filing Delay Cues Delisting Notice
-----------------------------------------------------------------
Scientific Learning (NASDAQ: SCIL) received a Staff Determination
notice from the Nasdaq Stock Market on May 24, 2005 stating that
the Company is not in compliance with Nasdaq's Marketplace Rule
4310(c)(14) because the Company has not yet filed its Report on
Form 10-Q for the quarter ended March 31, 2005. Therefore, the
Company's securities are subject to delisting. However, the
Company intends to request a hearing to review this determination,
and the Company's stock will continue to be listed on the Nasdaq
National Market pending the outcome of the hearing. At the opening
of business on May 26, 2005, the trading symbol for the Company's
securities will be changed from SCIL to SCILE.
The delay in filing the Form 10-Q resulted from a previously
announced error in certain 2004 balance sheets relating to the
classification of deferred revenue. In preparing the first
quarter 2005 financial statements, the Company's management
determined that the balance sheets at June 30, September 30, and
December 31, 2004 incorrectly classified certain deferred revenue
as long term deferred revenue, when it should have been classified
as current deferred revenue.
"We are working diligently with our outside auditors to complete
the work related to this reclassification as quickly as possible.
We are determined to complete our work, announce our results, and
bring our filings up to date as soon as possible," said Robert C.
Bowen, Chairman and Chief Executive Officer.
As permitted by Nasdaq, the Company intends to request a hearing
before a Nasdaq Listing Qualifications Panel to review the Staff
Determination. Requesting a hearing will stay the delisting until
the hearing panel has rendered a decision. There can be no
assurance that the hearing panel will grant the Company's request
for continued listing.
The Company intends to file, as soon as possible, an amended
Report on Form 10-K/A for the year ended December 31, 2004 that
includes a restatement of the Company's audited balance sheet at
December 31, 2004 and provides the corrected balance sheet
information for June 30, 2004 and September 30, 2004. Therefore,
the Registrant's unaudited balance sheets at June 30, 2004 and
September 30, 2004 and audited balance sheet at December 31, 2004,
which were included in the Registrant's previously filed Quarterly
Reports on Forms 10-Q and 10-Q/A and Annual Report on Form 10-K,
should not be relied upon.
About the Company
Scientific Learning -- http://www.scientificlearning.com/and
http://www.brainconnection.com/-- produces the patented Fast
ForWord(TM) family of products, a series of computer-delivered
reading intervention products that complement reading instruction.
Based on more than 30 years of neuroscience and cognitive
research, Fast ForWord products help children, adolescents, and
adults build the cognitive skills critical for improving reading
and language skills.
At Dec. 31, 2004, Scientific Learning's balance sheet showed an
$8,111,000 stockholders' deficit, compared to an $8,544,000
deficit at Dec. 31, 2003.
SOUTHAVEN POWER: Taps Latham & Watkins as Lead Bankruptcy Counsel
-----------------------------------------------------------------
Southaven Power, LLC, asks the U.S. Bankruptcy Court for the
Western District of North Carolina for permission to employ
Latham & Watkins LLP as its general bankruptcy counsel.
Latham & Watkins is expected to:
a) advise the Debtor of its powers and duties as a debtor-in-
possession in the continued management and operation of its
business and property;
b) assist, advise and represent the Debtor concerning the
confirmation of any proposed plan of reorganization and
solicitation of acceptances for that plan and represent the
Debtor at hearings pertaining to its affairs as a debtor-in-
Possession;
c) advise and represent the Debtor with respect to negotiation,
documentation and Court approval of cash management, cash
collateral and DIP financing arrangements with various
lenders and other entities;
d) advise and represent the Debtor with respect to assumption
or rejection of executory contracts and leases, sale of
assets and other bankruptcy-related matters arising from the
Debtor's chapter 11 case;
e) advise and assist the Debtor with respect to general
corporate and litigation issues relating to its chapter 11
case, including securities, corporate finance, tax and
commercial matters; and
f) perform all other legal services to the Debtor that are
necessary for the efficient and economical administration of
its chapter 11 case.
Mark A. Broude, Esq., a Partner at Latham & Watkins, discloses
that the Firm received a total of $230,413.66 pre-petition
retainer. Mr. Broude charges $685 per hour for his services.
Mr. Broude reports Latham & Watkins' professionals bill:
Professional Designation Hourly Rate
------------ ----------- -----------
Warren Lilien Partner $615
Henry P. Baer, Jr. Associate $520
John Weiss Associate $450
Alan Levitt Associate $395
Beth Arnold Paralegal $210
Leslie Salcedo Paralegal $170
Designation Hourly Rate
------------ -----------
Partners $595 - $825
Counsel $550 - $725
Associates $290 - $550
Paralegals $150 - $240
Paralegal Assistants $160
Latham & Watkins assures the Court that it does not represent any
interest materially adverse to the Debtor or its estate.
Headquartered in Charlotte, North Carolina, Southaven Power, LLC,
operates an 810-megawatt, natural gas-fired electric power plant
located in Southaven, Mississippi. The Company filed for chapter
11 protection on May 20, 2005 (Bankr. W.D.N.C. Case No. 05-32141).
When the Debtor filed for protection from its creditors, it
estimated assets and debts of more than $100 million.
SOUTHAVEN POWER: Look for Bankruptcy Schedules on July 19
---------------------------------------------------------
The U.S. Bankruptcy Court for the Western District of North
Carolina gave Southaven Power, LLC, more time to file its
Schedules of Assets and Liabilities, Statements of Financial
Affairs and Schedules of Executory Contracts and Unexpired Leases.
The Debtor has until July 19, 2005, to file those documents.
The Debtor explains that due to the size and complexity of its
bankruptcy case and the significant amount of information needed
to prepare the Schedules and Statements, the Debtor cannot
complete and file those documents within the 15-day period after
the Petition Date as required by Bankruptcy Rule 1007(c).
The Debtor relates that it has filed a request with the Court to
retain the BMC Group, Inc., as its claims agent for assistance in
reviewing its books and records for the information necessary to
complete the Schedules and Statements and file those documents on
or before July 19.
Headquartered in Charlotte, North Carolina, Southaven Power, LLC,
operates an 810-megawatt, natural gas-fired electric power plant
located in Southaven, Mississippi. The Company filed for chapter
11 protection on May 20, 2005 (Bankr. W.D.N.C. Case No. 05-32141).
Hillary B. Crabtree, Esq., at Moore & Van Allen, PLLC, and Mark A.
Broude, Esq., at Latham & Watkins LLP represent the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it estimated assets and debts of more than $100
million.
SPHERION CORP: Board Authorizes Share Repurchase Program
--------------------------------------------------------
Spherion Corporation's (NYSE:SFN) Board of Directors has
authorized the repurchase of up to 6 million shares or
approximately 10% of the Company's outstanding common stock.
Share repurchases will be made, from time to time, in open-market
transactions, in privately negotiated transactions and through
purchases made in accordance with Rule 10b-18 and/or 10b5-1 under
the Securities and Exchange Act of 1934 based on general business,
market conditions and other factors. The repurchase program does
not require Spherion to acquire any specific number of shares and
may be terminated at any time.
Spherion President and Chief Executive Officer Roy Krause
commented, "The Spherion management team and Board of Directors
remain committed to creating long-term value for our shareholders.
This new program reflects our confidence in the future of our
Company, prospects for continued growth and strong financial
position."
About Spherion
Spherion Corporation -- http://www.spherion.com/-- is a leader in
the staffing industry in North America, providing value-added
staffing, recruiting and workforce solutions. Spherion has helped
companies improve their bottom line by efficiently planning,
acquiring and optimizing talent since 1946.
SPIEGEL INC: Can Assume & Assign Netex Software Pact
----------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Spiegel, Inc., and its debtor-affiliates authority to assume
the NetEx Agreement and assign it to Eddie Bauer Information
Technology, LLC, effective as of the later of the Plan Effective
Date or the date the Court approves the Debtors' request.
Pursuant to an agreement for NSC Licensed Programs between
Network Executive Software, Inc., and Spiegel, Inc., dated May 6,
1984, NetEx granted Spiegel a non-exclusive license to use
certain of NetEx's proprietary software. The NetEx Software is a
user access software that enables the Debtors to transfer data
from their mainframes to their other computer systems.
The NetEx Agreement sets forth each party's various obligations
and duties, including NetEx's provision of support and
maintenance, warranties, and restrictions on the use of the NetEx
Software, as well as Spiegel's payment of taxes on the NetEx
Software.
Eddie Bauer IT is a corporation to be formed pursuant to the
Debtors' Plan to hold and manage all systems and network services
for Reorganized Eddie Bauer, including those related to:
-- product development,
-- merchandising,
-- marketing,
-- planning,
-- store operations,
-- sourcing,
-- finance,
-- accounting,
-- call centers,
-- Internet,
-- inventory, and
-- order fulfillment.
The Debtors believe it would be difficult for them to locate
other software providers capable of meeting their computer
program needs and to enter into agreements that satisfy those
needs on terms similar to or as advantageous as those set forth
in the NetEx Agreement. The Debtors also tell Judge Lifland that
even if they could locate adequate replacement software
providers, the time and cost that would be required to find those
providers, enter into agreements and install and integrate
adequate replacement software and support services, would be
prohibitive.
NetEx previously filed Claim No. 1334 against Spiegel for
$77,015, covering all prepetition amounts due and owing under the
NetEx Agreement. The asserted amount is consistent with the
Debtors' books and records. Therefore, the Debtors assure the
Court that they will fix the cure amount for the NetEx Agreement
at $77,015. The Debtors also ask the Court to expunge the NetEx
Claim in connection with their assumption of the Agreement.
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. The Court confirmed the Debtors'
Modified First Amended Joint Plan of Reorganization filed by
Spiegel Inc. and its debtor-affiliates on May 23, 2005. Spiegel
will emerge from bankruptcy as Eddie Bauer Holdings Inc.
Impaired creditors overwhelmingly voted to accept the Plan.
(Spiegel Bankruptcy News, Issue No. 46; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
SPIEGEL INC: Genesee Holds Allowed $265,773 Claim
-------------------------------------------------
Genesee Investors II, L.L.C., is the owner of the Genesee Valley
Center, located at 3479 S. Linden Road, in Flint, Michigan.
Eddie Bauer, Inc., leased from Genesee certain premises located
within the Genesee Mall and operated an apparel store there.
Pursuant to Court-approved procedures, Spiegel, Inc., and its
debtor-affiliates rejected the unexpired Genesee Lease. Genesee
then filed Claim No. 3594 for $265,773 on account of the
rejection.
On November 24, 2004, the Debtors filed their 23rd Omnibus
Objection to Claims, asking the Court, inter alia, to disallow
and expunge the Genesee Claim in its entirety. The Debtors based
their objection on Genesee's failure to respond to a letter they
sent to each of the landlords of premises in respect of which the
Debtors had previously rejected leases, requesting information as
to any subsequent mitigation. The Debtors had recalculated the
Genesee Claim based on presumed full mitigation and questioned
the amount of the Genesee Claim accordingly.
Genesee did not file a response to the Debtors' 23rd Omnibus
Objection, so the Court disallowed and expunged the Genesee
Claim.
However, immediately prior to the entry of the Court Order,
Genesee contacted the Debtors and explained that it had not
received any notice of the Objection. Genesee subsequently
presented the Debtors with information showing that, while it had
indeed leased the Genesee Premises to a replacement tenant and
therefore mitigated damages, the mitigation amount was not
sufficient to reduce the Genesee Claim below the capped amount of
the lease rejection damage claim pursuant to Section 502(b)(6) of
the Bankruptcy Code.
Specifically, Genesee says it mitigated its damages by leasing
the "Genesee Premises to Furniture For You" for 17 months, at
$3,800 a month, totaling $64,600. Genesee alleges that this
mitigated Genesee's lease rejection damages from $420,807 to
$356,207, an amount which exceeds the Section 502(b)(6) capped
amount of $265,773.
Following arm's-length negotiations, the parties agree, in a
Court-approved stipulation, that the 23rd Omnibus Objection Order
will be vacated insofar as it relates to the Genesee Claim.
Genesee's Claim No. 3594 is also fixed and allowed as an
unsecured non-priority claim for $265,773 on account of lease
rejection damages. The parties also agree that the Debtors'
Objection to the Genesee Claim is withdrawn with prejudice.
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. The Court confirmed the Debtors'
Modified First Amended Joint Plan of Reorganization filed by
Spiegel Inc. and its debtor-affiliates on May 23, 2005. Spiegel
will emerge from bankruptcy as Eddie Bauer Holdings Inc.
Impaired creditors overwhelmingly voted to accept the Plan.
(Spiegel Bankruptcy News, Issue No. 46; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
STRUCTURED ENHANCED: Fitch Downgrades 2004 Series R-GM to BB+
-------------------------------------------------------------
Fitch Ratings downgrades the rating of the debt units of medium-
term Structured Enhanced Return Trust 2004 series R-GM to 'BB+'
from 'BBB-'.
STEERS, which closed on Jan. 16, 2004, is a single name credit-
linked note that enables investors to gain exposure to an
obligation of General Motors Acceptance Corp. The 'BB+' rating is
linked to the ratings of GMAC (rated 'BB+' by Fitch), Merrill
Lynch & Co., Inc. (rated 'AA-/F1+' by Fitch), Merrill Lynch
Derivatives Products AG (rated 'AAA' by Fitch), and the legal
structure of the transaction.
On the closing date, STEERS entered into a fixed-for-fixed
interest rate swap with Merrill Lynch Capital Services, Inc., that
allowed the debt unit holders to receive quarterly distributions
of interest instead of the semi-annual interest payments of the
GMAC obligation. Merrill Lynch & Co., Inc., is the swap guarantor
and Merrill Lynch Derivatives Products AG is the guarantor of the
swap breakage fee, if any.
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/
SUNNY DELIGHT: Moody's Affirms $295 Million Debts' Low-B Ratings
----------------------------------------------------------------
Moody's Investors Service affirmed Sunny Delight Beverages
Company's B1 senior implied and other debt ratings and changed the
outlook to positive from stable.
The outlook change to positive reflects the expectation that Sunny
Delight's debt load will be significantly reduced as a result of
the application of proceeds from the sale of Punica Getranke GmbH
to PepsiCo, resulting in significant improvement in proforma
credit metrics.
Sunny Delight's debt ratings continue to reflect:
* the favorable trends within the company's targeted
demographic;
* the longstanding brand awareness;
* its improving range of product offerings; and
* solid market positions for the Sunny Delight brand across
geographies.
However, the ratings remain constrained by ongoing execution risk
stemming from the recent separation from Procter and Gamble and
the continued weakness of Sunny Delight's brand equity on a
standalone basis.
The ratings affirmed with a positive outlook are:
-- the B1 senior implied rating;
-- the B1 rating on the $40 million first lien revolver due
August 23, 2009 (expected to be reduced to $30 million);
-- the B1 rating on the $170 million first lien term loan due
August 23, 2010 (expected to be reduced to $105 million);
-- the B2 rating on the $85 million second lien term loan due
August 23, 2010 (expected to be repaid and the ratings
subsequently withdrawn); and
-- the B3 senior, unsecured issuer rating.
Punica and Sunny Delight together made up the juice business of
P&G, which was sold to J.W. Childs Associates, L.P. in
August 2004. A portion of the acquisition funding came from a
$295 million debt offering, consisting of:
* a $40 million, 5 year revolver;
* $170 million first lien U.S. term loan due in 7 years; and
* an $85 million second lien term loan due in 7 & half years.
On May 2, 2005, Sunny Delight announced the sale of Punica to
PepsiCo for an undisclosed amount. As a result of the sale, Sunny
Delight will be seeking an amendment from its banks to allow for
the sale of Punica and the use a significant amount of net
proceeds to repay debt. The amendment will also reduce the size
of the $40 million revolver to $30 million, and tighten the
covenants that cap financial leverage and capital expenditures
while continuing to require minimum interest coverage and rapid
debt reduction.
The positive outlook reflects Moody's expectation that a
significant portion of net proceeds will be used to materially
reduce debt, resulting in a significant improvement in proforma
credit metrics. Moody's estimates that proforma debt-to-EBITDA
(for Sunny Delight on a standalone basis versus consolidated) for
the latest twelve month period ending April 30, 2005 will improve
to 2.5x from 3.8x.
Punica was a significant contributor to the recent
underperformance of Sunny Delight's European operations, which
were hurt by:
* lack of product innovation,
* unsuccessful product introductions,
* intense competition and
* adverse weather conditions.
Punica's revenue and gross profit were 16% and 36% below plan in
the first quarter of 2005.
Offsetting these positives, Moody's noted that Sunny Delight will
lose some diversification due to the sale of Punica, which has a
leading market position in Germany and is one of the largest
fruit-based drinks in Europe. However, the sale will allow the
company to focus on growing its remaining brand through new
product introductions and brand support in both North America and
Western Europe.
Sunny Delight's rating is currently constrained by the significant
challenges it faces related to the recent extraction from its
former parent, P&G, including rejuvenating the Sunny Delight brand
without impacting profitability. Moody's recognizes the improved
results in North America during the first quarter of 2005, which
came as a direct result of more focused marketing efforts, new
product introductions and the addition of a major third party
distributor. Moody's expects these trends to continue in North
America, while results in Western Europe should begin to ramp up
in the latter half of 2005 as it lags North America in terms of
implementation of these strategies.
An upgrade would require management to demonstrate a track record
of successfully executing its strategy to turn around the Sunny
Delight brand, including improvement in EBIT margin to at least 5%
and ROA of over 5%. It would also require the company to show a
prudent approach to acquisitions and an ability to sustain
Adjusted FCF/Adjusted Debt of at least 21% and Adjusted
Debt/EBITDAR of 3.0 times.
On the other hand, the outlook would be stabilized if:
* the company failed to show improvement in earnings;
* undertook meaningful debt-financed acquisitions;
* significantly changed its operating strategy; or
* fell short in the execution of its divestiture of Punica.
Sunny Delight Beverages Company is the US operating company of
Beverages Holdings, L.L.C. Together with its Western European
operations, the company is a global manufacturer and distributor
of juice drinks under the Sunny D brand name.
Product is sold in:
* the US,
* Canada,
* the United Kingdom,
* Ireland,
* France,
* Spain and
* Portugal.
SYNAGRO TECH: Soliciting Consents to Eliminate Certain Default
--------------------------------------------------------------
Synagro Technologies, Inc. (NASDAQ Small Cap:SYGR), a national
company focused on water and wastewater residuals management
services in the United States, commenced a cash tender offer and
consent solicitation for all $150 million of its outstanding
9-1/2% Senior Subordinated Notes due 2009.
The total consideration per $1,000 principal amount of Notes
validly tendered and not validly withdrawn prior to 5:00 p.m., New
York City time, on June 9, 2005 will be based on the present value
on the initial payment date of $1,047.50 (the redemption price for
the Notes on April 1, 2006, which is the earliest redemption date
for the Notes), plus the present value of the interest that would
be payable on, or accrue from, the last interest payment date
until the earliest redemption date, determined on the basis of a
fixed spread of 50 basis points over the yield on the Price
Determination Date of the 1-1/2% U.S. Treasury Note due March 31,
2006, minus accrued and unpaid interest from the last interest
payment date to, but not including, the applicable payment date.
The Price Determination Date will be 2:00 p.m., New York City
time, at least ten business days prior to the Expiration Date (as
defined below). The Company expects the Price Determination Date
to be on or about June 15, 2005. Holders who validly tender
Notes, and such Notes are accepted for payment, will receive
payment promptly following the satisfaction or waiver of the
conditions to the offer on the initial payment date. The Company
expects the initial payment date to be on or about June 20, 2005.
In connection with the tender offer, the Company is soliciting
consents to proposed amendments to the indenture governing the
Notes, which would eliminate substantially all of the restrictive
covenants and certain events of default in the indenture. The
proposed amendments require the receipt of consents from holders
of at least a majority in principal amount of the outstanding
Notes. The Company is offering to make a consent payment (which
is included in the total consideration described above) of $30.00
per $1,000 principal amount of Notes to holders who validly tender
their Notes and deliver their consents on or prior to 5:00 p.m.,
New York City time, on June 9, 2005. No consent payments will be
made in respect of Notes tendered after 5:00 p.m., New York City
time, on June 9, 2005. Holders may not tender their Notes without
delivering consents, and may not deliver consents without
tendering their Notes.
The tender offer is scheduled to expire at 5:00 p.m., New York
City time, on June 29, 2005, unless extended or earlier
terminated. Tendered Notes may not be withdrawn and consents may
not be revoked after the time the Company and the trustee for the
Notes execute an amendment to the indenture governing the Notes to
effect the proposed amendments, which is the earlier of (i) 5:00
p.m., New York City time, on June 9, 2005 and (ii) the time and
date the Requisite Consents are received.
The tender offer and consent solicitation are subject to the
satisfaction or waiver of certain conditions, including the
satisfaction of the Minimum Tender Condition, the Supplemental
Indenture Condition, the Transactions Condition and the General
Conditions, each as further described in the Offer to Purchase and
Consent Solicitation Statement and in the Consent and Letter of
Transmittal dated May 25, 2005. There can be no assurance that
any of such conditions will be met.
The complete terms and conditions of the tender offer and consent
solicitation are described in the Offer to Purchase, copies of
which may be obtained by contacting D. F. King & Co., Inc., the
depositary and information agent for the offer, at 212-269-5550
(collect) or 800-659-5550 (U.S. toll-free). Banc of America
Securities LLC and Lehman Brothers Inc. are the dealer managers
and solicitation agents for the tender offer and consent
solicitation. Additional information concerning the tender offer
and consent solicitation may be obtained by contacting Banc of
America Securities LLC, High Yield Special Products, at 704-388-
9217 (collect) or 888-292-0070 (U.S. toll-free) or Lehman Brothers
Inc., Liability Management Group, at 212-528-7581 (collect) or
800-438-3242 (U.S. toll-free).
This announcement is not an offer to purchase, a solicitation of
an offer to purchase or a solicitation of consents with respect to
any securities. The tender offer and consent solicitation are
being made solely by the Offer to Purchase.
Synagro offers a broad range of water and wastewater residuals
management services focusing on the beneficial reuse of organic,
nonhazardous residuals resulting from the wastewater treatment
process, including drying and pelletization, composting, product
marketing, incineration, alkaline stabilization, land application,
collection and transportation, regulatory compliance, dewatering,
and facility cleanout services.
THE MARKET: Brings-In Neligan Tarpley as Bankruptcy Counsel
-----------------------------------------------------------
The Market - Antiques and Home Furnishings, Inc., and its debtor-
affiliate sought and obtained permission from the U.S. Bankruptcy
Court for the Northern District of Texas to employ Neligan Tarpley
Andrews & Foley LLP as their bankruptcy counsel.
Neligan Tarpley will:
(a) advise the Debtors of their rights, powers, and duties as
debtors and debtors-in-possession;
(b) take all necessary actions to protect and preserve the
estates of the Debtors, including the prosecution of
actions on the Debtors' behalf, the defense of actions
commenced against the Debtors, the negotiation of disputes
in which the Debtors are involved and the preparation of
objections to claims filed against the estates;
(c) prepare on behalf of the Debtors, as debtors-in-possession,
all necessary motions, applications, answers, orders,
reports, and papers in connection with the
administration of the estates;
(d) draft, negotiate and prosecute on behalf of the Debtors a
plan or plans of reorganization for the reorganization of
the Debtors' financial affairs, the related
disclosure statement, and any revisions, amendments,
relating to the foregoing documents, and all related
materials;
(e) perform all other necessary legal services in connection
with these chapter 11 cases and any other bankruptcy
related representation that the Debtors require; and
(f) handle all litigation, discovery and other matters for the
Debtors arising in connection with their chapter 11 cases.
The Debtors may request that Neligan Tarpley undertake specific
matters beyond the scope of its responsibilities. The Court also
approved Neligan Tarpley's employment for those unspecified
matters.
Mark E. Andrews, Esq., a partner of Neligan Tarpley, disclosed
that his Firm received a $53,508.96 retainer.
Neligan Tarpley's professionals' current hourly billing rates are:
Designation Hourly Rate
----------- -----------
Mark E. Andrews, Esq., Partner $375
Omar J. Alaniz, Esq., Associate $150
Katherine L. Gradick, Legal Assistant $115
To the best of the Debtors' knowledge, Neligan Tarpley and the
professionals who will work in the engagement:
(a) do not have connections with the Debtors, their creditors,
or other party-in-interest, or their attorneys,
(b) are "disinterested persons" as defined in Section 101(14)
of the U.S. Bankruptcy Code, as modified by Section 1107(b)
of the U.S. Bankruptcy Code, and
(c) do not hold or represent any interest adverse to the
Debtors' estates.
Headquartered in Dallas, Texas, The Market - Antiques and Home
Furnishings, Inc. -- http://www.themarketonline.com/-- sells
antique furniture and accessories from many different periods.
The Company, along with Market Line Wholesale Company, Inc., filed
for chapter 11 protection on April 4, 2005 (Bankr. N.D. Tex. Case
No. 05-33774). Mark Edward Andrews, Esq., and Omar J. Alaniz,
Esq., at Neligan Tarpley Andrews & Foley LLP represent the Debtors
in its restructuring. When the Debtors filed for protection from
their creditors, they estimated assets and debts from $1 million
to $10 million.
THORNBURG MORTGAGE: Fitch Expects to Rate $50 Mil. Stock at BB-
---------------------------------------------------------------
Fitch Ratings expects to rate Thornburg Mortgage, Inc.'s offering
of approximately $50 million of 8.0% series C cumulative
redeemable preferred stock 'BB-'. TMA's senior unsecured debt
rating remains 'BB'. The Rating Outlook is Positive.
TMA's ratings continue to reflect its strong asset quality,
improving funding diversity, and solid risk-adjusted
capitalization. The company also continues to maintain a low
interest rate duration gap on its portfolio of adjustable-rate
mortgage assets of 4.4 months. In addition, Fitch believes that
TMA, with its weighted average original loan-to-value of 66.4% as
of March 31, 2005 for originations, should have some protection in
the event that there are regional or local devaluations of single-
family residential real estate.
The Positive Rating Outlook reflects the company's continued
migration towards a more diverse funding profile. Over the past
18 months, TMA has made strides toward reducing its still
meaningful reliance on reverse repurchase agreements for funding.
The increased use of instruments such as collateralized debt
obligations provide the company with secured funding that is
matched from both an interest-rate duration and term perspective.
Fitch also views TMA's initial and follow-on issuance of preferred
stock as a favorable addition to its capital structure.
Rating concerns focus primarily on TMA's meaningful debt roll-over
risk, its largely encumbered balance sheet, and increasing
competition in the mortgage origination space. In addition, as
short-term interest rates have risen and as the company has
increased its expenditure on hedging instruments, the net interest
margin, and EBITDA to interest expense metrics have declined
consistently over the past eight quarters. Nevertheless, Fitch
acknowledges that a portion of the decrease in margin comes from a
higher cost of funding on longer term financing instruments, which
ultimately benefits the company's funding profile.
The expected offering is a follow-on to Thornburg's $50 million
initial offering of series C cumulative redeemable preferred
stock, which was completed in March 2005. Similar to the March
offering, the new securities will pay dividends at 8.00% per
annum. If dividends are in arrears for more than six quarters,
which need not be consecutive, preferred holders may elect two
additional members to Thornburg's board of directors. The
securities are redeemable after a period of five years. Fitch
expects proceeds to be used to finance TMA's continued asset
growth.
Based in Santa Fe, New Mexico, TMA is among the nation's largest
mortgage real estate investment trusts. The company is focused on
underwriting, purchasing, and holding investments in adjustable-
rate residential mortgages. TMA originates and purchases
adjustable-rate jumbo mortgages backed by single-family
residential properties owned by predominantly high quality
borrowers. The company is also an originator, as well as
purchaser, of mortgage-backed securities from Freddie Mac, Fannie
Mae, and a diverse range of private institutions. As of March 31,
2005, TMA had $30.9 billion of assets and $2.0 billion of
shareholders' equity.
TOPPAN PHOTOMASKS: Acquisition Cues S&P to Withdraw Upped Ratings
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its long-term corporate
credit rating on Toppan Photomasks Inc. to 'A+' from 'B+'
reflecting the company's acquisition by Toppan Printing Co.
Ltd. (A+/Stable/--), and then withdrew the rating as sufficient
financial information on Toppan Photomasks is not likely to be
publicly available in the future. At the same time, Standard &
Poor's also withdrew its 'B-' rating on Toppan Photomasks'
subordinated debt. Both ratings on the company were placed on
CreditWatch with positive implications on Oct. 5, 2004, following
U.S.-based DuPont Photomasks Inc.'s announcement that it had
entered a definitive agreement to be acquired by Toppan Printing.
At the same time, Standard & Poor's affirmed its long-term rating
on Toppan Printing, reflecting progress in the acquisition of
Toppan Photomasks. The outlook on the rating is stable.
The affirmation of the rating on Toppan Printing reflects the
expectation that the Y70.7 billion acquisition, covered mostly by
funds on hand and partly by borrowings, will not significantly
undermine the company's financial profile. In addition, even
though Toppan Photomasks is operating at a loss, the impact of
restructuring costs on Toppan Printing's consolidated financials
is expected to be limited. Following completion of the
acquisition, Toppan Printing is expected to become the industry's
largest photomask supplier, which would enhance Toppan Printing's
business franchise in the photomask business over the medium term,
given the additional production facilities and customer bases in
the U.S. and Europe. However, the photomask business is volatile
in earnings and requires rapid technological advances. Any delay
in earnings improvement by Toppan Photomasks would require support
from Toppan Printing, which would likely burden the company's cash
flow.
Toppan Printing is currently in the process of purchasing shares
in Toppan Photomasks after having obtained regulatory approval.
Standard & Poor's expects Toppan Printing to provide support to
the company as it has already acquired a majority of the shares.
Standard & Poor's withdrew its ratings on Toppan Photomasks as
sufficient financial information on the company is not likely to
be made public in the future, given that it will be unlisted as a
result of the acquisition. Nevertheless, Toppan Photomasks'
subordinated debt rating would have been on par with or one notch
lower than its long-term issuer credit rating, based on Dupont
Photomasks' financial results for the first half of fiscal 2004
(ended Dec. 31, 2004), in line with Standard & Poor's practices
regarding subordinated debt ratings.
Ratings List
Toppan Printing Co. Ltd. A+/Stable/--
Toppan Photomasks Inc. To From
-- ----
Corporate credit rating NR A+/Stable/--
Corporate credit rating A+/Stable/-- B+/Watch Pos/--
Subordinated debt NR B-/Watch Pos
These ratings were initiated by Standard & Poor's and may be based
solely on publicly available information and without the
participation of the issuer's management. Standard & Poor's has
used information from sources believed to be reliable, but does
not guarantee the accuracy, adequacy or completeness of any
information used. Ratings are statements of opinion, not
statements of fact or recommendations to buy, hold, or sell any
securities. Other analytic services performed by Standard & Poor's
may be based on information that was not available for these
ratings and this report.
UAL CORP: AFA Asks Court to Stay Ruling on PBGC Termination Pact
----------------------------------------------------------------
The Association of Flight Attendants-CWA, AFL-CIO, asks the U.S.
Bankruptcy Court for the Northern District of Illinois to stay the
order approving the pension plan termination agreement between UAL
Corporation and its debtor-affiliates and the Pension Benefit
Guaranty Corporation.
A stay is warranted, as there is a substantial likelihood that
the AFA will succeed on the merits of its appeal, asserts Carmen
R. Parcelli, Esq., at Guerrieri, Edmond, Clayman & Bartos, in
Washington, D.C.
The AFA was in the process of negotiating pension alternatives
with the Debtors when the PBGC Agreement was announced. This
development essentially ended discussions and closed litigation
where the Debtors were required to demonstrate that AFA pension
plan termination was critical to a successful reorganization. As
a result, the Agreement deprived the AFA of its legal rights in
litigation to which it was a party.
The Debtors' entry into the PBGC Agreement constituted unilateral
action in violation of Section 1113(f) of the Bankruptcy Code,
Ms. Parcelli asserts. Without the PBGC Agreement, the Section
1113 process would have run its course. This subversion stripped
the AFA of protections that Congress put in place when it enacted
Section 1113.
Without a stay, the AFA's members will suffer irreparable injury
as they make life-altering, intractable decisions in anticipation
of sharply reduced pension benefits. Many will sell their homes,
relocate or pursue other work opportunities. In contrast, the
Debtors will not suffer any significant harm from the stay.
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.87; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: Flight Attendants to Appeal PBGC Plan Termination Pact
----------------------------------------------------------------
The Association of Flight Attendants-CWA, AFL-CIO, will take an
appeal to the United States District Court for the Northern
District of Illinois from Judge Wedoff's Order approving the
agreement between UAL Corporation and its debtor-affiliates and
the Pension Benefit Guaranty Corporation regarding the termination
of the Debtors' pension plans.
As reported in the Troubled Company Reporter on May 12, 2005,
Judge Wedoff put his stamp of approval on United Airlines' plan to
terminate its employees' pension plans -- the largest pension plan
default in U.S. history. About 120,000 current and retired United
employees are affected by the Court's decision.
United Used "Cheap Procedural Maneuver"
CHICAGO, Illinois -- May 18, 2005 -- The Association of
Flight Attendants-CWA, AFL-CIO (AFA) today filed a notice of
appeal to overturn the bankruptcy court's approval of the
agreement between United Airlines and the Pension Benefit
Guarantee Corporation (PBGC). The agreement approved by the
bankruptcy court would terminate the flight attendants' defined
benefit pension plan and set in motion a collapse of the pension
benefit system intended to protect the retirement security of
millions of Americans.
"United's high-priced lawyers used a cheap procedural
maneuver to pre-empt our rightful day in court to defend our plan
under the standards of pension and bankruptcy law," stated Greg
Davidowitch, President of the AFA United Airlines Master
Executive Council. "The PBGC said our plan 'can and should be
maintained' beyond an exit from bankruptcy, only to suddenly
reverse itself and agree to terminate our plan. Now they are
going to have to explain their turnabout to the court."
"Over 120,000 United Airlines employees thought their
company's pension promise was a sacred trust for a lifetime of
service. Glenn Tilton's $4.5 million pension trust remains
untouched, but current executives found a way to dump the
airline's most honored social contract with its employees onto
the PBGC's overburdened balance sheet," Davidowitch continued.
"This maneuver would set a precedent for the rest of corporate
America to follow, likely ending retirement security for millions
of Americans and causing taxpayers to foot the bill. We are
fighting for the long-term viability of our pensions, but this is
a fight that's crucial for every working American."
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. 87; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: Machinists to Appeal Pension Plan Termination Pact
------------------------------------------------------------
The International Association of Machinists and Aerospace Workers
will take an appeal to the United States District Court for the
Northern District of Illinois from Judge Wedoff's Order approving
the agreement between UAL Corporation and its debtor-affiliates
and the Pension Benefit Guaranty Corporation regarding the
termination of the Debtors' pension plans.
As reported in the Troubled Company Reporter on May 12, 2005,
Judge Wedoff put his stamp of approval on United Airlines' plan to
terminate its employees' pension plans -- the largest pension plan
default in U.S. history. About 120,000 current and retired United
employees are affected by the Court's decision.
As reported in the Troubled Company Reporter on May 26, 2005,
Judge Wedoff deferred his final ruling until May 31, 2005, on the
Debtors' request to abrogate contracts with the International
Association of Machinists and Aerospace Workers.
The Court urges both sides to use the time to negotiate a
mutually acceptable cost-saving agreement.
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. 87; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
US AIRWAYS: Gets Court Approval to Assume Insurance Agreements
--------------------------------------------------------------
Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado,
explains that for many years, National Union Fire Insurance
Company of Pittsburgh, Pennsylvania, and certain affiliates, all
member companies of American International Group, Inc., have
provided primary coverage for workers' compensation, employer's
liability insurance and automobile liability insurance for US
Airways, Inc., and its debtor-affiliates. AIG currently provides
primary coverage under several Insurance Policies, along with Risk
Management Services relating to the Policies. The Insurance
Program, comprised of the Insurance Policies and the Services, are
governed by a Payment Agreement for Insurance and Risk Management
Services.
Under the Insurance Program, AIG pays insured losses and expenses
that exceed any deductible/retention amounts owed by the Debtors
under the applicable policies. Since the Insurance Program is a
large deductible/retention program, the Debtors are obligated to
reimburse AIG for losses within the deductible/retained layer.
To support the reimbursement obligations, the Debtors provide
Collateral for AIG's benefit. The Collateral currently totals
approximately $118,000,000, consisting of $50,000,000 in cash
held by AIG, plus an Escrow with in excess of $60,000,000.
The Debtors are required by state law to maintain the coverages
under the Insurance Program. Mr. Leitch says that there are a
limited number of insurance companies, other than AIG, with
sufficient levels of coverage and resources to service claims on
a nationwide basis.
The AIG Insurance Program expired on February 14, 2005. Prior to
that date, the Debtors tried unsuccessfully to reach agreement
with AIG on the terms and conditions of a long term extension of
the Insurance Program. However, so the Debtors were not left
exposed, AIG provided a 60-day extension, through April 20, 2005,
of the Insurance Program. The Extension is contingent upon Court
approval of the Debtors' assumption of the Insurance Program by
March 31, 2005. The premiums and surcharges related to the
Extension are $325,000.
Upon Court approval, AIG will return $10,000,000 in Collateral to
the Debtors. Thereafter, AIG will periodically review and reduce
the Collateral to retain only enough to maintain a 25% buffer
over ultimate incurred losses less paid losses. AIG will
promptly return any excess Collateral to the Debtors. The first
quarterly evaluation will utilize losses valued as of June 30,
2005. Quarterly evaluations will continue for one year ending
June 30, 2006. Thereafter, the parties will conduct semi-annual
collateral reviews. In exchange for AIG's agreement to release
Collateral, the Debtors will not seek any other return of
Collateral for the next four years.
The U.S. Bankruptcy Court for the Eastern District of Virginia
issued an Order that:
a) provides for the Debtors to assume the Insurance Program
and execute all necessary documents;
b) provides that the Debtors will cure all defaults and pay
their obligations under the Insurance Program, and that, if
the Debtors default, AIG may exercise its contractual
rights;
c) provides that the Debtors' obligations under the Insurance
Program will be administrative obligations entitled to
priority under Section 503(b) of the Bankruptcy Code;
d) provides that AIG does not need to file a proof of claim
for administrative expenses or a request for payment of
administrative expenses and that AIG will be exempt from
any bar date for filing proofs of claim relating to
administrative expenses;
e) provides that all Collateral or security held by AIG and
prior payments to AIG under the Insurance Program are
approved, and AIG is authorized to retain and use the
Collateral or security, subject to AIG's obligation to
Return Collateral to the Debtors;
f) allows AIG to adjust, settle and pay insured claims,
utilize funds and carry out the terms and conditions of the
Insurance Program, without further Court order;
g) provides that the Insurance Program may not be altered by
any plan of reorganization and that nothing in any plan
will impair AIG's interests in its Collateral;
h) provides that the Debtors' rights against all Collateral
held by AIG will be governed by the terms of the Insurance
Program, related security documentation and the Order;
i) provides that during these cases, AIG will not be required
to return any of the security it holds for the Insurance
Program without adequate protection; and
j) authorizes the Debtors to take necessary actions to
implement the terms of the Order.
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. 88; Bankruptcy Creditors' Service, Inc., 215/945-7000)
US AIRWAYS: Gets Court Nod to Enter $25 Mil. Surety Bond Program
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Virginia
authorizes US Airways, Inc., and its debtor-affiliates to enter
into the Surety Bond Program, in an aggregate face amount not to
exceed $25 million, in accordance with the Surety Term Sheet and
St. Paul Travelers' underwriting business practice.
The automatic stay is vacated and St. Paul is authorized:
(a) with respect to any Bonds that by their terms and
conditions are cancelable, to cancel the bonds under
certain limited circumstances, as provided for in the
Surety Term Sheet; and
(b) to liquidate the cash collateral it held and draw any
letters of credit issued to it to repay obligations under
the Surety Documents.
The Court grants the Debtors' request to obtain postpetition
credit on an interim basis. The Court will convene a hearing on
May 31, 2005, at 9:30 a.m., to consider any objection to the
Debtors' request. If no Objection is filed or if all objections
have been withdrawn or resolved, the Order will automatically
become a final order, without the necessity of further Court
approval or a final hearing.
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. 93; Bankruptcy Creditors' Service, Inc., 215/945-7000)
US AIRWAYS: Wants to Reject Three Promotional Service Agreements
----------------------------------------------------------------
US Airways, Inc., and its debtor-affiliates participate in certain
promotional activities with contract counterparties. As part of
their restructuring, the Debtors developed a comprehensive plan
for their tens of thousands of creditors. One of the programs
developed analyzes executory contracts to determine which to
assume or reject. The Debtors discovered that three executory
contracts for promotional services have no value beneficial to
their estates.
Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado,
tells the U.S. Bankruptcy Court for the Eastern District of
Virginia that the Debtors want to avoid incurring unnecessary
administrative charges for upholding agreements that provide no
tangible benefit and will play no part in future operations.
Therefore, to reduce postpetition administrative costs and in the
exercise of sound business judgment, the Debtors seek the Court's
authority to reject these executory contracts:
Agreement Contract Party Contract Date
--------- -------------- -------- ----
Space Adventures Space Adventures Promotional Services N/A
MilePoint Points.com Promotional Services 4/11/05
Points.com Points.com Promotional Services 4/11/05
The Debtors ask the Court to require the holder of any related
claim to file a proof of claim within 30 days after the Rejection
Date. This will limit the Debtors' exposure to unwarranted
postpetition administrative expenses.
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. 89; Bankruptcy Creditors' Service, Inc., 215/945-7000)
USG CORPORATION: Wants to File Request to Use Assets Under Seal
---------------------------------------------------------------
USG Corporation seek the U.S. Bankruptcy Court for the District of
Delaware's authority to file a motion to use assets outside of the
ordinary course of their business under seal.
Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in
Wilmington, Delaware, informs Judge Fitzgerald that the Motion
contains confidential strategic, commercial and operational
information related to the Debtors' proposed use of assets.
Mr. Heath explains that the protection of sensitive business
information, including the use of the Debtors' assets proposed in
their Motion, is of critical importance to the preservation
of the Debtors' estates for at least two reasons:
(a) The announcement of the Debtors' intentions with respect
to their operations contained in the Motion is valuable
information to their competitors. The Debtors time the
public announcement of material changes to their business
in a manner than maximizes the value of the business. If
they were forced to make that information public
prematurely, the Debtors' competitors would gain an unfair
advantage and potentially could undercut their strategic
plans. The Debtors could be irreparably harmed by those
actions; and
(b) The Debtors are continuing to negotiate some of the
details with respect to the contemplated use of assets,
and a premature release of their plans could affect those
negotiations.
The Debtors believe that filing their Motion under seal will
ensure that the information it contains is not misused by any
person or entity, including the Debtors' competitors.
Moreover, in connection with the filing of their Motion under
seal, the Debtors seek to establish these uniform procedures:
(a) The Debtors will not be required to serve the Motion on
any party-in-interest other than:
-- the United States Trustee;
-- the counsel to the Committees, and
-- the counsel to the Futures Representative.
(b) The hearing, if any, with respect to the Motion will be
held in camera and may only be attended by those parties
who properly have received the Motion.
(c) All parties who receive a copy of the Motion are
directed to maintain the strict confidentiality of the
information it contains.
(d) Recipients of the Motion that wish to file any
objection or response are required to file it under seal
so that it is only received by the relevant parties.
Mr. Heath notes that by providing the Motion to the U.S. Trustee,
the Committees and the Futures Representative, all of the
principal stakeholders in the Debtors' cases will have an
opportunity to fully review and assess the Debtors' proposed use
of assets.
Headquartered in Chicago, Illinois, USG Corporation --
http://www.usg.com/-- through its subsidiaries, is a leading
manufacturer and distributor of building materials producing a
wide range of products for use in new residential, new
nonresidential and repair and remodel construction, as well as
products used in certain industrial processes. The Company filed
for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No.
01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at
Jones Day represent the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG
Bankruptcy News, Issue No. 88; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
VENTAS INC: Declares $0.36 Per Share Quarterly Dividend
-------------------------------------------------------
Ventas, Inc.'s (NYSE: VTR) Board of Directors declared a regular
quarterly dividend of $0.36 per share, payable in cash on June 29,
2005, to stockholders of record on June 6, 2005. The dividend is
the second quarterly installment of the Company's 2005 annual
dividend. The Company has approximately 85 million shares of
common stock outstanding.
Shareholders Approve Proposals
At Ventas's annual meeting on May 24, 2005, stockholders voted to
re-elect seven Board members to new, one-year terms:
-- Debra A. Cafaro,
-- Douglas Crocker II,
-- Ronald G. Geary,
-- Jay M. Gellert,
-- Christopher T. Hannon,
-- Sheli Z. Rosenberg, and
-- Thomas C. Theobald.
Ventas stockholders also ratified Ernst & Young LLP as the
Company's independent auditors for 2005 and approved the Company's
Employee and Director Stock Purchase Plan.
Board Re-Appoints Leadership
Also, consistent with the Company's commitment to sound corporate
governance, the Ventas Board of Directors re-appointed Mr.
Crocker, an independent director, as the Company's Presiding
Director to chair executive sessions of the Board and otherwise
act as a liaison between the independent members of the Ventas
Board and the Company's management. Additionally, the Ventas
Board re-appointed Ms. Cafaro as Chairman. Ms. Cafaro is also the
Company's President and Chief Executive Officer.
Ventas, Inc. -- http://www.ventasreit.com/-- is a leading
healthcare real estate investment trust that owns and invests in
healthcare and senior housing assets in 40 states. Its properties
include hospitals, skilled nursing facilities and assisted and
independent living facilities.
* * *
As reported in the Troubled Company Reporter on Apr. 15, 2005,
Moody's Investors Service affirmed the ratings of Ventas, Inc.,
and its affiliates following the announcement that Ventas and
Provident Senior Living Trust have decided to merge. The
transaction, valued at $1.2 billion, will be funded by Ventas
common stock, the assumption of debt and cash. Provident is an
unlisted senior living REIT that owns 68 independent and assisted
living facilities in 19 states.
Moody's remarked that the planned merger with Provident would be a
plus for Ventas along several dimensions. First, Ventas' pro
forma exposure to Kindred Healthcare Inc. -- its main tenant --
would be reduced substantially from 76% of revenues in 2004.
Moody's also notes that Ventas' key tenant exposure would now be
with two tenants: Kindred and Brookdale Living Communities Inc.
This material, new exposure to Brookdale is a concern, however.
Continued progress in tenant diversification would be a plus.
In addition, the Provident transaction would reduce substantially
Ventas' exposure to the regulated government reimbursement-based
health care segments of skilled nursing facilities and long-term
acute care facilities from 84% in 2004.
These positive changes to Ventas' portfolio and tenant composition
would be offset by the decline in the REIT's balance sheet
strength resulting from this merger, earmarked by a significant
rise in both leverage and secured debt. While the rating agency
believes this rise in overall and secured debt will be reduced
over time, such anticipated reductions would not be adequate to
achieve a higher rating for Ventas at this time. In specific, a
rating upgrade to Ba2 senior debt would depend on pro forma debt
to gross assets being less than 55%, and near-term efforts to
reduce pro forma secured debt.
These ratings were affirmed, with a positive outlook:
Ventas Realty Limited Partnership:
* Senior debt at Ba3
* senior debt shelf at (P)Ba3
* subordinated debt shelf at (P)B2
Ventas, Inc.:
* Preferred stock shelf at (P)B2
Ventas Capital Corporation:
* senior debt shelf at (P)Ba3
* subordinated debt shelf at (P)B2
Ventas, Inc. [NYSE: VTR] is a health care real estate investment
trust that owns:
* forty long-term acute care hospitals,
* 201 nursing facility,
* thirty assisted and independent living facilities,
* eight medical office buildings, and
* eight other health care assets, in 39 states.
VISTEON: Fitch Revises Watch on Single-B Rating to Positive
-----------------------------------------------------------
Fitch Ratings has revised the Rating Watch on Visteon
Corporation's 'B' senior unsecured debt rating to Positive from
Negative following the announcement that Visteon and Ford Motor
Co. have reached an agreement on the restructuring of Visteon.
If the agreement is finalized as proposed, Visteon would have a
dramatically improved operating profile and capital structure.
Nevertheless, additional restructuring of the assets remaining at
Visteon will occur, and Visteon will still be subject to a number
of stresses facing the automotive supplier universe.
Fitch will review the agreement with management in the near term,
focusing on projected operating profile, capital structure, the
terms of financing agreements and liquidity. Resolution of the
Rating Watch will be based on these factors, the successful
closing of the transaction, which is dependent on ratification by
UAW employees and resolution of accounting issues.
The announced agreement would have 24 Visteon facilities
transferred into a new 'Ford managed entity' with a small number
of facilities directly owned by Ford. The transaction should
reduce Visteon's fixed cost structure through the transfer of
17,400 Ford-UAW employees and their associated pension and
healthcare benefit plans to Newco. This would effectively reduce
Visteon's pension and healthcare liabilities by about $2 billion.
In addition, new Visteon would receive up to $850 million in cash
from Ford for the inventories of Newco and for restructuring
actions at Visteon's residual operations. Ford will also provide
assistance to Visteon for the August 2005 maturity of $250 million
in Visteon debt. In addition, to enhance liquidity, Visteon will
receive accelerated payment terms from Ford which reduces
Visteon's days-receivables-outstanding. Visteon's consideration
for the transaction would consist of the repayment of the Ford
loan at transaction close plus newly issued warrants to Ford for
up to 25 million shares of Visteon stock. Visteon retains its
working capital, excluding certain inventory, and debt.
New Visteon would have annual revenues of about $11 billion. The
company would be focused on three strategically core businesses
including interiors, electronics and climate control. The
retained operations would derive 45% to 50% of its total revenue
from Ford, down from about 67% Ford based revenue of the old
Visteon. Visteon has been successful at growing the non-Ford
portion of these business's revenues. Fitch believes the
operating profile of new Visteon could be greatly enhanced by the
Ford transaction and creates the potential for growth and
moderate, yet sustainable balance sheet improvement.
W.R. GRACE: Objects to Asbestos PI Comm.'s Hiring of Anderson Kill
------------------------------------------------------------------
As reported in the Troubled Company Reporter on Apr. 8, 2005, the
Official Committee of Asbestos Personal Injury Claimants appointed
in the chapter 11 cases of W.R. Grace & Co. and its debtor-
affiliates sought the U.S. Bankruptcy Court for the District of
Delaware's authority to retain Anderson Kill & Olick, P.C., nunc
pro tunc to March 17, 2005, as its special insurance counsel to
evaluate and advise on the Debtors' insurance coverage and any
pending or future motions seeking the resolution of insurance-
related disputes.
Debtors Object
The Debtors contend that the PI Committee's application to retain
Anderson Kill & Olick, P.C., as its special insurance counsel is
premature and not appropriate since insurance proceeds are not
being contributed to the Asbestos Trust from which the asbestos
creditors will be paid.
As a preliminary matter, the Debtors do not see why the PI
Committee needs to employ special insurance counsel at all.
David W. Carickhoff, Jr., Esq., at Pachulski, Stang, Ziehl,
Young, Jones & Weintraub P.C., in Wilmington, Delaware, points
out that the Debtors' Amended Joint Plan of Reorganization
provides that insurance proceeds are not part of the Asbestos
Trust. As a result, the PI Committee should have no particular
concern regarding the resolution of insurance-related matters.
The Debtors argue that the PI Committee's only legitimate
interest in the resolution of insurance-related matters could
stem from the fact that the Asbestos Trust called for in the
current Plan has an equity component. Thus, any insurance
proceeds received by the Debtors indirectly would have an effect
on the value of the Asbestos Trust's equity component in the
company.
However, following the logic of that argument, Mr. Carickhoff
says the Property Damage Committee, the Futures Representative,
the Equity Security Holders Committee and the Unsecured Creditors
Committee, each of whom have equity components granted to their
constituents under the existing Plan, should equally be entitled
to special insurance counsel. Therefore, if Anderson Kill is
appointed as special insurance counsel, the Debtors suggest that
the firm also represent the interests of all those committees,
not just the PI Committee, to avoid even greater expense and
duplication of efforts.
The Debtors are concerned on the scope of Anderson Kill's
proposed retention. The Debtors tell Judge Fitzgerald that they
would be agreeable to Anderson Kill's retention for the limited
purpose of analyzing certain insurance settlements on a go-
forward basis. But, the Debtors note that the Application
reaches much further since:
(a) it draws no distinction between fully resolved, partially
resolved and unresolved insurance settlements, and allows
Anderson Kill to review all insurance settlements;
(b) permits Anderson Kill to review not only asbestos-related
and silica-related insurance issues but all toxic tort
exposure claims;
(c) potentially allows Anderson Kill to review any insurance
matters of any kind; and
(d) places no budget cost limitations on Anderson Kill's
employment.
Mr. Carickhoff points out that the Debtors have been involved in
extensive litigation and settlements for over the past 20 years
and are, therefore, leery that Anderson Kill would be reinventing
the wheel in many instances on an unguided expedition.
Since the Application draws no distinction between the resolution
status of insurance settlements, Anderson Kill may review all
insurance settlements. The Debtors are concerned that the review
would not only be an inefficient use of time, it would also be a
waste of money.
Mr. Carickhoff explains that the Debtors have always been
represented by sophisticated insurance counsel and have pursued,
and will continue to aggressively pursue, insurance settlements.
Reviewing matters that the Debtors already settled years ago will
rehash settlements and produce zero gain while resulting in
significant expense. The Debtors would be willing to provide
Anderson Kill with a detailed explanation regarding which
coverages are fully resolved and why they are so, to avoid
unnecessary duplication of efforts and waste of resources.
If the Court intends to approve Anderson Kill's retention at this
time, the Debtors seek to limit that engagement:
-- Anderson Kill should be employed to represent all of the
Debtors' Committees and the Futures Claims Representative,
not just the PI Committee;
-- The scope of the retention should be limited to:
* reviewing matters regarding the Debtors' insurance
coverage available for payment of asbestos-related clams,
and not silica-related or other toxic exposure claims;
and
* reviewing potential settlements between the Debtors and
the Debtors' insurance carriers on a go-forward basis;
-- Anderson Kill should be required to consult with the
Debtors and their insurance counsel prior to engaging in
any analysis so as to prevent an inefficient and costly
duplication of efforts; and
-- Anderson Kill should submit periodic budgets to the Debtors
and the Committees for their work and be required to adhere
to agreed-upon budgets.
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)
WELLCARE HEALTH: S&P Rates $210 Million Secured Facility at B+
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' counterparty
credit rating to WellCare Health Plans Inc. The outlook is
stable.
At the same time, Standard & Poor's assigned its 'B+' senior
secured debt rating to WellCare's secured bank facility, which
consists of a $160 million term loan due May 2009 and $50 million
revolver due May 2008.
"The ratings reflect WellCare's improved financial condition,
which stems mainly from strengthened underlying health plan
profitability and capitalization, enhanced holding company
liquidity, and a more balanced capital structure overall,"
explained Standard & Poor's credit analyst Joseph Marinucci.
Standard & Poor's expects WellCare to achieve strong near-term
organic growth (one year) and moderate organic growth over the
intermediate term (two-five years). By year-end 2005, total
membership is expected to be 825,000-850,000. If WellCare were to
achieve Standard & Poor's earnings expectations in 2005, pretax
income would likely be $100 million-$110 million, with debt
leverage 30%-35%, debt to EBITDA 1.0x-2.0x, and interest coverage
metrics at 10x-12x, which is considered conservative for the
rating assignment.
The stable outlook reflects Standard & Poor's expectation that the
company's growth and shareholder return objectives can be met
while maintaining balance sheet integrity. The outlook could be
revised to negative if health plan profitability or capital
adequacy were to erode or if the company made an acquisition that
significantly altered its capital structure. An outlook revision
to positive would be a function of financial performance that
exceeded expectation by year-end 2005 and our ongoing
consideration of WellCare tolerance and capacity to manage growth
in a historically more volatile public sector marketplace.
WINFIELD CAPITAL: Auditors Express Going Concern Doubt in 10-K
--------------------------------------------------------------
Lazar Levine & Felix LLP raised substantial doubt about Winfield
Capital Corp.'s ability to continue as a going concern after it
audited the Company's financial statements for the fiscal year
ended March 31, 2005. The Company has suffered recurring losses
from operations and its debentures payable to the SBA are
currently due as a result of an impairment under SBA regulations.
Winfield Capital Corp. (WCAP:OTCBB) reported a net loss of
$970,835 for the fiscal year ended March 31, 2005 versus a net
gain of $1,136,649 for the fiscal year ended March 31, 2004.
The net loss in fiscal year 2005 included a net investment loss of
$1,376,764 for the fiscal year ended March 31, 2005 compared with
a net investment loss of $1,317,216 for the fiscal year ended
March 31, 2004. The fiscal 2005 net loss was also attributable in
large part to a realized net capital loss of $3,809,397 which
reflected loan and equity write-offs of $5,760,643 together with
long-term capital losses on the sale of equity securities of
$1,910,470, partially offset by long-term capital gains on the
sale of equity securities of $3,409,186 and a gain of $452,530 on
the disposition of a loan. There was a realized net capital gain
of $1,191,185 for the year ended March 31, 2004. The fiscal 2005
net loss was partially offset by an unrealized appreciation on
loans and investments of $4,215,326 for the year ended March 31,
2005 (principally related to the sale of shares in publicly held
portfolio companies and loan write-offs which resulted in the
reversal of unrealized depreciation together with the increased
fair value of investments in privately held portfolio companies,
partially offset by the sale of shares in a publicly held
portfolio company which resulted in the reversal of unrealized
appreciation). There was an unrealized appreciation on loans and
investments of $1,262,680 for the year ended March 31, 2004.
The Company's investment income decreased by $766,626, or a
decrease of 49.4%, from $1,550,947 for the year ended March 31,
2004 to $784,321 for the year ended March 31, 2005. This
reflected principally a decrease in interest from small business
concerns of $737,207 as a result of the Company's sale of a loan
investment and the prepayment of another loan investment.
Interest from temporarily invested funds decreased by $20,117 as a
result of a decrease in invested idle funds as well as a decrease
in interest rates. Other income decreased by $9,302. Interest
expense decreased by $603,815, or a decrease of 36.3%, (net of an
interest expense increase of $96,392 due to a cumulative
recalculation by the U.S. Small Business Administration of the
Company's past repayments of debentures) to $1,061,594 for the
year ended March 31, 2005 from $1,665,409 for the year ended March
31, 2004. This decrease resulted from repayments of $14,545,110 of
debentures to the SBA. Operating expenses decreased by $103,263,
or a decrease of 8.6%, to $1,099,491 for the year ended March 31,
2005 from $1,202,754 for the year ended March 31, 2004. Payroll
and payroll-related expenses decreased by $51,430 due to the
termination of a clerical employee, insurance expense decreased by
$53,087, directors fees decreased by $46,500, shareholder
relations and other financial expenses decreased by $10,170 and
accounting fees decreased by $21,899 while legal fees increased by
$82,855 due to negotiations with the SBA in connection with the
Company's capital impairment. There were other miscellaneous
decreases that totaled $3,032.
SBA Regulation Impairment
According to the SBA Regulations, the Company is required to be in
compliance with the capital impairment rules, as defined by
regulation 107.1830 of the SBA Regulations. The Company was
notified by the SBA on April 30, 2003 that the Company was no
longer in compliance with the SBA's capital impairment
requirements and that the SBA had accelerated the maturity date of
the Company's debentures. The aggregate principal, interest and
fees due under the debentures totaled approximately $25.6 million
as of April 30, 2003, including interest and fees due through the
next semi-annual payment date. As a result of subsequent
repayments by the Company, the aggregate principal, interest and
fees due under the debentures totaled approximately $5.0 million
as of March 31, 2005. The SBA has transferred Winfield Capital's
account to liquidation status where any new investments and
material expenses are subject to prior SBA approval. Based on
discussions and meetings that the Company has had with the SBA to
date, the SBA will not afford the Company the flexibility of a
self-managed liquidation to repay its indebtedness. As a result,
the Company anticipates that it will be required to repay all or
substantially all of the principal and interest owing to the SBA
on a schedule acceptable to the SBA.
Going Concern Doubt
On April 6, 2005, subsequent to the balance sheet date, the
Company entered into a Forbearance Agreement with the SBA whereby
the maturity date of the Company's remaining principal
indebtedness to the SBA was extended until June 30, 2005, subject
to a cure period of fifteen days. In connection with the
Forbearance Agreement, the Company entered into a Stipulated
Settlement and a Consent and Judgment whereby the SBA may pursue
any remedies it deems appropriate under the law or the instruments
evidencing the Company's indebtedness, including, without
limitation, initiating proceedings for the appointment of the SBA
or its designee as receiver to the extent that the Company
defaults under its obligations pursuant to the Forbearance
Agreement. If the SBA were to require the Company to immediately
pay back the entire indebtedness including accrued interest,
certain private security investments may need to be disposed of in
a forced sale that may result in proceeds less than their carrying
value at March 31, 2005. As such, this impairment could have a
material adverse effect on the Company's financial position,
results of operations and cash flows that raises substantial doubt
about the Company's ability to continue as a going concern. The
Company continues to explore various strategic alternatives,
including a third party equity infusion, although there can be no
assurance that it will be successful in its ability to consummate
or implement these or any other strategic alternatives.
Winfield Capital -- http://www.winfieldcapital.com/-- is a small
business investment company that makes loans and equity
investments pursuant to funding programs sponsored by the SBA and
is a non-diversified, closed-end investment company that is a
business development company under the Investment Company Act of
1940. The Company's common stock is traded on the Over the
Counter Bulletin Board under the symbol "WCAP".
YUKOS OIL: Plans to Dissolve Yukos-Moskva & Layoff 1,200 Employees
------------------------------------------------------------------
The Moscow Times reported that Yukos Oil will soon terminate its
financial and operational center, Yukos-Moskva, and lay off 1,200
of its Moscow employees. The planned dissolution aims to save
Yukos much needed revenue as well as get rid of consolidated
accounting.
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. 21; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
* FTI Consulting Appoints Michael Murphy as Sr. Managing Director
-----------------------------------------------------------------
FTI Consulting, Inc. (NYSE: FCN) appointed Michael Murphy as a
senior managing director in the Corporate Finance/Restructuring
practice. Mr. Murphy will lead the cable, satellite and content
sectors within FTI's Communications and Media offering.
Mr. Murphy has over 20 years of experience in leadership, strategy
development, start-up enterprises, turnarounds, program
management, mergers & acquisitions, and P&L management within the
communications and content industries. He was previously
president and CEO of Am-Beo Limited, a European software and
services company focused on the telecommunications and content
industries. During Mr. Murphy's leadership at Am-Beo, the company
successfully completed venture capital financing and as part of
the company's turnaround, he led the re-engineering of its
products, service offerings, and go-to-market channels.
Prior to his tenure at Am-Beo, Mr. Murphy was a managing director
at BearingPoint, Inc., where he was responsible for delivering a
wide range of products, broadband solutions, and services to
cable, CLEC and LEC service providers. Prior to that, he was a
partner with Arthur Andersen's business consulting group, where he
led their national cable industry practice, developing and
delivering a wide range of advisory services in operations, new
product launches and cost reductions. Mr. Murphy's other relevant
industry experience includes his tenures at American Management
Systems, Inc, Regenex Inc. and US West Inc. Throughout his career
he has worked extensively in Europe and Asia Pacific.
Commenting on the new appointment, Jack Dunn, president and chief
executive officer said, "We are pleased to welcome Mike to our
team. FTI's commitment to developing and implementing superior
revitalization, restructuring and investment strategies depends on
our ability to recruit the highest caliber professionals in each
industry. Mike's expertise in the broadband and content
industries will consolidate an already distinguished
Communications and Media offering."
About FTI Consulting
FTI Consulting -- http://www.fticonsulting.com/-- is the premier
provider of corporate finance/restructuring, forensic/litigation/
technology, and economic consulting. Located in 24 of the major
U.S. cities, London and Melbourne, FTI's total workforce of more
than 1,000 employees includes numerous PhDs, MBA's, CPAs, CIRAs,
CFEs, and technologists who are committed to delivering the
highest level of service to clients. These clients include the
world's largest corporations, financial institutions and law firms
in matters involving financial and operational improvement and
major litigation.
* Thacher Proffitt & Wood Elects Six New Partners
-------------------------------------------------
Thacher Proffitt & Wood LLP elected six associates to partnership,
effective July 1, 2005. With these admissions, Thacher Proffitt
will have 64 partners.
"The past twelve months have been excellent for us," said Paul
Tvetenstrand, managing partner of Thacher Proffitt. "We've
attracted great talent through our lateral hiring efforts, and our
recent internal class of six new partners is a strong example of
our depth and breadth of intellectual capital across all
practices."
During the early part of 2004, Thacher Proffitt began a campaign
to attract lateral attorneys. Oliver Armas, partner in charge of
the Lateral Partner and Counsel Search Committee, stated, "Since
its inception, the firm has elected three prominent attorneys as
partner and four as counsel." A May 20th article in the New York
Law Journal, discussed attorneys who were recruited from firms
like Paul Weiss, Fried Frank and Shearman and Sterling.
Thacher Proffitt attributes its attorney growth to an increasing
role as a financial services law firm. The firm is preeminent in
mortgage- and asset- backed securitizations in the U.S. and in
Mexico, and consistently ranks among the top five firms as
issuers' and underwriters' counsel for U.S. debt, equity and
equity-related transactions, as reported by Thomson Financial.
They are particularly active as counsel to banks and thrifts.
Within real estate, they counsel on the financing, leasing,
purchasing and selling of commercial and residential property. And
their international platform attracts litigation, arbitration and
bankruptcy matters from across the financial services spectrum.
About The New Partners
Stephen J. Cerniglia -- Real Estate
Mr. Cerniglia joined the Firm in 1996 as an associate. His area
of concentration consists primarily of commercial real estate
lending. He has represented investment banks, insurance
companies, savings banks and mortgage companies in the financing
of office buildings, regional and national shopping malls,
multifamily developments, hotels and mobile home parks located in
New York, across the nation and in Puerto Rico. The financings
vary from single asset loans to multi-asset loans with properties
in multiple states. He has also represented investment banks and
savings banks in originating mezzanine loans and in purchasing,
selling and syndicating mortgage loans and mezzanine loans.
John P. Doherty -- Litigation & Dispute Resolution
Mr. Doherty joined Thacher Proffitt as an associate in 1998. He
has broad experience in complex domestic and international
matters, including litigation and arbitration involving commercial
disputes, contracts, torts, corporations, partnerships, and joint
ventures, insurance, maritime and aviation, employment, real
property, bankruptcy, negotiable instruments, and securities.
Salvatore O. Franco -- Structured Finance
Mr. Franco joined Thacher Proffitt in 1997 as an associate. He
represents issuers, sellers and servicers in public and private
offerings of mortgage-backed securities. His clients also include
purchasers, sellers and servicers of residential and commercial
mortgage loans.
Peter J. Mignone -- Real Estate
Mr. Mignone joined Thacher Proffitt in 1996 as an associate. His
practice focuses on commercial real estate lending and
securitization. He represents commercial and investment banks,
pension funds and other lending institutions in a variety of
permanent and bridge financings involving office buildings,
shopping centers, hotels and multi-family apartment complexes
located throughout the United States. He also represents
institutional investors in connection with mezzanine financings,
loan sales and purchases, and loan syndications and other co-
lending arrangements.
Stephanie G. Nygard -- Corporate & Financial Institutions
Ms. Nygard joined Thacher Proffitt in 1996 as an associate. She
represents public and private companies, including financial
institutions and their holding companies, in a wide variety of
corporate transactions, such as mergers and acquisitions,
purchases and sales of assets and stock, and public and private
offerings of debt and equity securities (both as issuer's counsel
and as underwriters' counsel). Stephanie has a special focus on
acting as issuer's counsel and as underwriters' counsel in
connection with the mutual to stock conversions and holding
company formations of many federal and state chartered financial
institutions. She also advises these holding companies on their
initial public offerings of securities.
Marlo A. Young -- Structured Finance
Mr. Young joined Thacher Proffitt in 1996 as an associate. He
represents issuers and underwriters in the public offering and
private placement of mortgage- and asset-backed pass-through and
debt securities involving various types of credit support and
structures. He also represents sellers, purchasers and servicers
in connection with whole loan transactions.
About Thacher Proffitt & Wood LLP
A firm that focuses on the capital markets and financial services
industries, Thacher Proffitt & Wood LLP -- http://www.tpw.com/--
advises domestic and global clients in a wide range of areas,
including corporate and financial institutions law, securities,
structured finance, swaps and derivatives, cross-border
transactions, real estate, commercial lending, insurance,
admiralty and ship finance, litigation and dispute resolution,
technology and intellectual property, executive compensation and
employee benefits, taxation, trusts and estates, bankruptcy,
reorganizations and restructurings. The Firm has more than 225
lawyers located in New York City, NY, Washington, DC, White
Plains, NY, Summit, NJ and Mexico City, Mexico.
* BOOK REVIEW: LING: The Rise, Fall, & Return of a Texas Titan
--------------------------------------------------------------
Author: Stanley H. Brown
Publisher: Beard Books
Softcover: 308 pages
List Price: $34.95
Order your personal copy at
http://amazon.com/exec/obidos/ASIN/1893122301/internetbankrupt
Summed up neatly, this is Jim Ling, founder and CEO of Ling-Temco-
Vought, once the fourteenth-largest corporation on the Fortune 500
list:
That he was able to get control of - and combine - the sixth
largest steel company, the eighth largest airline, the eighth
largest defense contractor, the third largest meat packer, the
largest sporting-goods maker, and a string of other companies in
an almost random group of industries may well be the most
significant thing to be said about him. Or maybe it is the fact
that he performed all this from a base of little education, no
connections, no money, no status, no leverage of any kind, but
solely on the strength of what he discovered and created.
As fascinating as Ling was, this book offers so much more.
Stanley H. Brown presents a remarkable knowledge of and intriguing
insights into corporate history and institutional behavior. He
understands what makes organizations work, whether corporate,
religious, or military.
Although it has been more than 25 years since Jim Ling was on top
of the world, he and his story remain hard to beat. He was a man
of integrity. Faced with defeat, he conjured up innovative
solutions. He picked up the pieces and tried something else, and
even investors once burned went back for more. He believed in
himself and his ventures absolutely, so much so that he kept all
his won money and his children's money in LTV stock, and was wiped
out when it went bust.
Ling was born one of six in Hugo, Oklahoma. A devout Catholic in
the fundamentalist Bible Belt, his father killed a fellow worker
in a rage after years of enduring anti-Catholic torment and,
although acquitted, was so racked with guilt he left the family to
live in a monastery. Ling's mother died when he was eleven. He
never finished high school. After a short stint in the Navy
during World War II, during which time he became an electrician,
he started Ling Electric in Dallas. Post-war Dallas was good to
bright men who worked hard. The company grew exponentially. Ling
discovered public investors and began infusing them with his
enthusiasm, enthusiasm that made them hand over lots of money to
him. And he began to acquire companies at a dizzying pace, bigger
and bigger companies: meatpacker Wilson & Co., steelmaker Jones &
Laughlin, Braniff Airlines, LTV Aerospace, Wilson Sporting Goods,
and many other, smaller companies. He was masterful financier
with seemingly endless ideas on making money work.
So where did it go wrong? Ling's over-conglomerated conglomerate
spun out of control. He was a micromanager extraordinaire and
kept too much decision-making power to himself. He was a victim
of his own success and overfed ego. He fought long and hard with
the Justice Department in an antitrust suit over Jones & Laughlin,
but the country's suspicion of conglomerates in the late 1960s got
the better of him. In the end, he was ousted by his own people
but, true to form, went on to try something new.
The author researched this book very thoroughly. He convinced
Ling to keep a journal during some critical moments and
interviewed all the major players. Read it for the story of Ling,
but also to learn about what makes people tick.
Stanley H. Brown is a former writer and editor at Business Week,
Fortune, and Forbes. His columns have appeared in numerous
publications.
*********
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 ***