T R O U B L E D C O M P A N Y R E P O R T E R Thursday, June 16, 2005, Vol. 9, No. 141 Headlines ACCIDENT & INJURY: Wants Until August 31 to Decide on Leases ACE AVIATION: Underwriters Wants More Units Issued in Aeroplan IPO ADELPHIA COMMS: Judge Gerber Affirms DOJ, SEC & Rigas Settlements ADELPHIA COMMS: Five Parties Question DOJ, SEC & Rigas Settlements ADVANSTAR COMMS: Raising Equity to Recapitalize Company ALASKA AIR: May 2005 Traffic Up 6 Percent from Last Year ALDERWOODS GROUP: Reports Status of Three 2005 Legal Proceedings AMERICAN AIRLINES: May 2005 Load Factor Up 5 Points From Last Year AMERICAN MEDIA: Moody's Junks $550 Mil. Senior Subordinated Notes AMERICAN MEDIA: Poor Performance Prompts S&P to Lower Ratings AMES DEPARTMENT: Revenue Mgt. & ASM Capital Acquire $800K Claims ANDRE TATIBOUET: Committee Wants to Hire Jerrold Guben as Counsel ATA AIRLINES: Lease Decision Period Hearing Set for July 7 ATHLETE'S FOOT: Has Exclusive Right to File Plan Until August 8 BANCWEST CORP: Fitch Holds BB+ Rating on CFB Subordinated Debt BELLAIRE GENERAL: Sec. 341 Meeting of Creditors Set for July 14 BI-LO LLC: Moody's Rates $345MM Senior Secured Term Loan B at B1 BISYS GROUP: Lenders Waive Default Under Senior Unsec. Loan BONUS STORES: William Kaye Has Until Aug. 16 to Object to Claims BOYD GAMING: Good Performance Prompts S&P's Positive Outlook BUEHLER FOODS: Committee Taps Otterbourg Steinder as Counsel CAESARS ENTERTAINMENT: Moody's Upgrades Senior Sub. Notes to Ba1 CATHOLIC CHURCH: Court Appoints Gayle Bush as Spokane Claims Rep. CATHOLIC CHURCH: Spokane Exclusive Periods Hearing Set for Aug. 1 CEDU EDUCATION: Keen Realty to Market Three School Campuses CHAPARRAL STEEL: Moody's Rates $150 Mil. Credit Facility at Ba2 CIT RV: Interest Payment Default Cues S&P to Junk Rating to CC COMMERCIAL FEDERAL: $1.4B BancWest Sale Cues S&P to Watch Ratings COLLINS & AIKMAN: Independent Auction Determines Recovery Value CONGOLEUM CORP: Files Fifth Modified Chapter 11 Plan in New Jersey CORUS ENT: Good Operating Results Cue S&P's Stable Outlook CROWN CASTLE: Moody's Withdraws B1 Senior Implied Rating DEL GLOBAL: GE Business Amends Credit Facility & Waives Default DOLLAR GENERAL: Moody's Upgrades Sr. Unsecured Debt Rating to Ba1 DOUBLECLICK INC: Moody's Junks $115 Million 2nd Lien Term Loan EAGLEPICHER INC: Committee Taps Milbank Tweed as Lead Counsel EAGLEPICHER INC: Committee Hires Frost Brown as Local Counsel ENVIROSOLUTIONS: Moody's Rates Proposed $215 Mil. Facility at B2 ENVIROSOLUTIONS: S&P Rates $215 Mil. Senior Secured Loans at B- EURAMAX HOLDINGS: Moody's Rates Proposed $255MM Term Loan at B1 EURAMAX INT'L: GSCP EMAX Sale Cues S&P to Cut Credit Rating to B+ FASTENTECH INC: Completes Senior Secured Credit Pact Amendment FEDERAL-MOGUL: Replaces Bank One with Standard Federal & Citibank FIRST REPUBLIC: Declares Initial Preferred Stock Cash Dividend FRANK'S NURSERY: Court Confirms 2nd Amended Reorganization Plan GARY L. LENZ: Case Summary & 10 Largest Unsecured Creditors GENERAL MOTORS: Hopes for a $93 Million Tax Break from Pontiac GEORGETOWN STEEL: Has Until July 1 to Object to Claims GITTO GLOBAL: Chapter 7 Trustee Taps Verdolino as Accountant GITTO GLOBAL: Chapter 7 Trustee Abandons Vitrolite Assets GRAYSTON CLO: Repayment Prompts Moody's to Withdraw Ratings GS MORTGAGE: Fitch Affirms Junk Ratings on $63M Cert. Classes HOLLYWOOD CASINO: Has Until July 31 to Decide on Leases HOME RE CREDIT: S&P Assigns Low-B Ratings on $11 Million Notes INFOUSA INC: Vin Gupta Offer Prompts S&P to Watch Ratings J.L. FRENCH: Reduced Earnings Cues S&P to Junk Credit Rating KAISER ALUMINUM: Steelworkers Ratify New Five-Year Labor Pacts LIBERTY SQUARE: Partial Payment Cues Moody's to Lift Notes Ratings LIVINGSTON COUNTY: Credit Risks Cue S&P to Rate $9.7M Bonds at BB MARKETXT INC: Case Summary & 19 Largest Unsecured Creditors MERIDIAN AUTOMOTIVE: Can Pay Up to $6MM for Shipping & Lien Claims MERIDIAN AUTOMOTIVE: Wants Court to Okay Appleton Papers Sublease MERIDIAN AUTOMOTIVE: Committee Hires Huron as Financial Advisor METHANEX CORP: Moody's Affirms $250M Sr. Unsec. Notes' Ba1 Rating METROPCS INC: Payment Prompts Moody's to Withdraw Low-B Ratings MGM MIRAGE: Fitch Rates MGM Mirage's New Senior Notes at BB MILWAUKEE POLICE: Court Approves Facility Sale to COA for $450K MIRANT CORP: Court Approves Bid Procedures on Gas Turbines Sale MIRANT CORP: U.S. Dept. of Energy Wants Set-Off Rights Untouched MORGAN STANLEY: Fitch Places Low-B Ratings on $49M Mortgage Certs. MORGAN STANLEY: Fitch Lifts $14M Class F Certs. 3 Notches to BB MOUNTAIN CAPITAL: Fitch Affirms BB- Rating on $10M Class B Notes MYLAN LABORATORIES: Moody's Assigns Ba1 Senior Implied Rating NATURAL CARE: John B. Staudt Offers $400,000 to Buy Business NAVISTAR INT'L: Fitch Holds Low-B Rating on 3 Debt Classes NOMURA ASSET: S&P Lifts Rating on Class B-1 Certificates OAKWOOD HOMES: Liquidation Trust Wants Court to Close Ch. 11 Case OUTBOARD MARINE: Chapter 7 Trustee Hires Mercer Oliver as Actuary PEGASUS SATELLITE: Wants Disputed Claims Estimated as Zero PEREGRINE SYSTEMS: Will Pay $1MM to Former Chairman John Moores PONDEROSA PINE: Hires FTI Consulting as Financial Advisor PROXIM CORP: Common Shares Subject to Nasdaq Delisting on June 22 PRUDENTIAL STRUCTURED: Fitch Junks $19.7M Class B Certificates RALEIGH HOUSING: Payment Default Cues S&P's Rating to Tumble to D R.F. CUNNINGHAM: Taps Ruskin Moscou as Bankruptcy Counsel R.F. CUNNINGHAM: Section 341 Meeting Slated for July 15 SAFETY-KLEEN: Maureen Black Wants Relief from Permanent Injunction SAKS INC: Defaults on $230 Million 2% Convertible Senior Notes SAKS INC: Default Notice Prompts S&P to Junk Ratings SAKS INC: Fitch Takes No Rating Action After Default Notice SAMSONITE CORP: Apr. 30 Balance Sheet Upside-Down by $41.9 Million SENIOR HOUSING: Fitch Affirms BB+ Rating on Sr. Unsecured Debt SINCLAIR BROADCAST: Moody's Ups $167M Pref. Stock Rating to B3 SKYWAY COMMUNICATIONS: Case Summary & 20 Largest Unsec. Creditors SOUPER SALAD: Brings-In Bracewell Giuliani as Bankr. Co-Counsel SOUPER SALAD: Hires Bankruptcy Services as Noticing Agent S-TRAN HOLDINGS: Look for Bankruptcy Schedules on June 20 TEAM HEALTH: $68 Mil. Debt Reduction Prompts S&P's Stable Outlook TEXAS BOOT: Selling Assets to McRae Industries for $1.175 Million TEXAS INDUSTRIES: S&P Rates $250 Million Senior Notes at BB- THAMES INVESTMENT: Voluntary Chapter 11 Case Summary TW INC: Hires Jaspan Schlesinger as Special Litigation Counsel WESTPOINT STEVENS: Wants to Enter into Birmingham Store Lease W.R. GRACE: Wants to Contribute $6.6 Million to Lake Charles Plan WYNDHAM INT'L: $3.24B Blackstone Deal Cues S&P to Watch Ratings YESBIK CONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors YUKOS OIL: Files Suit in Moscow for Damages from Yugansk Sale YUKOS OIL: Alvarez & Marsal Wants Reimbursement from Yukos * 3 Partners Join LeBoeuf Lamb's Corporate & Litigation Practices * FTI Consulting Appoints Two New Senior Executives * Gibson Dunn Taps Fred Brown to Lead San Francisco Office ********* ACCIDENT & INJURY: Wants Until August 31 to Decide on Leases ------------------------------------------------------------ Accident & Injury Pain Centers, Inc., dba Accident & Injury Chiropractic and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, for more time to decide whether to assume, assume and assign or reject unexpired non-residential real property leases. The Debtors want their decision period under 11 U.S.C. Sec. 365(d)(4) extended through and including August 31, 2005. The Debtors explain that they have been conducting an on-going analysis of their businesses and operations. Debtors operate a number of clinic locations in leased facilities. The Debtors are not yet in a position to determine whether those clinics should remain open and the applicable leases assumed or whether those clinics should be closed and the leases rejected. Headquartered in Dallas, Texas, Accident & Injury Pain Centers, Inc. -- http://www.accinj.com/-- operates clinics that treat patients with highly advanced therapy equipment and techniques. The Company and its debtor-affiliates filed for chapter 11 protection on Feb. 10, 2005 (Bankr. N.D. Tex. Case No. 05-31688). Glenn A. Portman, Esq., at Bennett, Weston & LaJone, P.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they reported estimated assets and debts of $10 million to $50 million. ACE AVIATION: Underwriters Wants More Units Issued in Aeroplan IPO ------------------------------------------------------------------ A group of Insurance Underwriters are asking ACE Aviation Holdings, Inc., to double the Aeroplan Income Fund units that will be offered to the public to meet surging demand, The Globe and Mail reports. ACE is divesting 15% of Aeroplan through an initial public offering. ACE will be selling 25 million units at CN$10 each. The underwriters and retail brokers said the issue is already oversubscribed. The Globe and Mail says the underwriters want ACE to issue more than CN$500 million worth of Aeroplan units. However, no final decision on the size or the pricing of the IPO will be made until June 20, 2005, an investment banker working for ACE told the Globe and Mail. The underwriting syndicate is co-led by RBC Capital Markets, as 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. 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: Judge Gerber Affirms DOJ, SEC & Rigas Settlements ----------------------------------------------------------------- As reported in the Troubled Company Reporter on June 10, 2005, the Official Committee of Unsecured Creditors in Adelphia Communications Corporation's Chapter 11 cases asked Judge Gerber to reconsider his order approving the ACOM Debtors' three related settlement agreements with the Department of Justice, the Securities and Exchange Commission and the Rigas Family. The parties debate, as a threshold matter, whether the Court has jurisdiction to consider the motion of the Official Committee of Unsecured Creditors, as the Committee had already appealed from the order approving the three related but separate settlement agreements between the Debtors and the Securities and Exchange Commission, the Debtors and the Department of Justice, and the Debtors and the Rigas family. The Creditors' Committee contends that the Court does have jurisdiction. Judge Gerber agrees. "[T]hough the Court has considerable doubt as to whether reconsideration is appropriate under Fed. R. Bankr. P. 9024 and Fed. R. Civ. P. 60(b), it may plausibly be argued that the May 31 issuance by the United States Supreme Court of its decision in Arthur Andersen LLP v. United States, and statements by the DoJ in its June 3 argument before the Second Circuit -- both after the issuance of this Court's May 20 decision -- provide a reasonable basis for assertions that they give rise to a 'change in the law or the facts' upon which this Court made its decision, which has been held under at least some of the law construing Fed. R. Bankr. P. 9023 and Fed. R. Civ. P. 59(a) to be a satisfactory basis for reconsideration." The Court assumes, without deciding, that these contentions are sufficient to permit consideration of their merits. However, upon reexamining its decision in light of the matter the Creditors' Committee proffers, the Court sees nothing to cause it to conclude that it made a "clear error of law," or that there was a change in the controlling law, or that the facts have materially changed. Changes in the Controlling Law Judge Gerber points out that there has been no change in the controlling law with respect to the standards to be applied by a bankruptcy court in determining whether or not to approve a settlement. "Nor did the issuance of Arthur Andersen result in a material change -- assuming there was any change at all -- in the law that would have been taken into account by the Debtors in deciding whether or not to settle, or by the Court in deciding whether the Debtors' settlement was in the best interests of the estate." Judge Gerber notes that he did not issue his decision approving the settlement based on an expectation that Arthur Andersen's conviction would stand. In fact, Judge Gerber says, he suspected that a reversal by the Supreme Court of Arthur Andersen's conviction was likely. "[My] decision was based not on the likelihood that Adelphia would be convicted if indicted, but rather on the damage that an indictment itself would inflict, even with a subsequent acquittal. Even an indictment would result in grave damage to the company, and (among many other things) material risk to Adelphia's now-pending sale to Time-Warner and Comcast, and risk the loss of DIP financing." According to Judge Gerber, Arthur Andersen was in essence a case about defective jury instructions, most significantly, as to the requisite mens rea of the people who acted on the defendant company's behalf. "At this point there is little reason to believe, after the John and Timothy Rigas guilty verdicts, that the Government would have similar problems in that regard. Arthur Andersen does not speak to the fairness or unfairness of convicting a corporation based on the acts of the live people who are a company's agents. Nothing in Arthur Andersen takes away the Government's right to indict, or ability to convict, corporations in cases where the live people acting on those corporations' behalf act with the requisite mens rea -- a matter that was deficient in Arthur Andersen, but that might not be deficient in another case." New Facts Judge Gerber does not agree that facts have materially changed by reason of statements by the Government at its June 3 argument before the Second Circuit. "With a significant caveat, the Court is inclined to agree with the Creditors' Committee's suggestion that when addressing the Second Circuit, the Government acknowledged weaknesses as to its forfeiture claims that Government negotiators did not acknowledge when negotiating with Adelphia representatives. And given its statements to the Circuit, it is likely that when the Government stated to Adelphia's Dean Kronman and others on Adelphia's negotiating team, with little in the way of qualifications or reservations, 'we will prevail,' the Government was stating its likelihood of success with materially greater assurance than it privately believed." "But these points ultimately are immaterial," Judge Gerber says. In approving the settlement, Judge Gerber asserts that he did not rely on the Government's self-serving statements to Adelphia as to the Government's likelihood of success. "Puffery as to the strength of one's litigation position in settlement negotiations is not unheard of, and those on the receiving end of others' litigation predictions tend not to automatically take them at face value." In approving the settlement, Judge Gerber says, he did not assume that the Government necessarily would prevail in its forfeiture claims, even with respect to forfeiture claims that might relate to property beneficially owned by soon to be sentenced John and Timothy Rigas. Rather, the Court found that: -- there were risks that the Government might prevail; -- there were risks as to Adelphia's ability to prevail on its own constructive trust claims, particularly with respect to interests in Rigas Family Entities held by persons other than John, Timothy, Michael and James Rigas (which Adelphia likely would need to do to trump Government forfeiture rights); and -- there were risks as to Adelphia's ability to prevail on constructive trust claims quickly on summary judgment, as contrasted to prevailing only on damages claims, and only after an ultimate trial. The assessments by Adelphia's Board, and by the Court, of the risks to Adelphia with respect to forfeiture trump the assessments by the Government (as articulated to anyone or as privately held) with respect to the potential outcome as to that issue. Finally, but significantly, Judge Gerber says, the risks with respect to the forfeiture of the Rigas Family entities were but one factor in the Court's consideration of the totality of factors considered by the Court in approving the settlement. They were neither the overriding factor nor the factor that tipped the scales in an otherwise close balance. Accordingly, Judge Gerber affirms his decision approving the settlements. 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. 96; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: Five Parties Question DOJ, SEC & Rigas Settlements ------------------------------------------------------------------ These parties-in-interest in Adelphia Communications Corporation and its debtor-affiliates' chapter 11 cases ask the U.S. District Court for the Southern District of New York to review the Bankruptcy Court's approval of the settlement agreements among the Debtors, the Department of Justice, the Securities and Exchange Commission and the Rigases: * W.R. Huff Asset Management Co., LLC; * U.S. Bank National Association, in its capacity as Indenture Trustee for the FrontierVision Notes and the Arahova Notes; * The class plaintiffs in a suit pending before the United States Court for the Southern District of New York captioned In re Adelphia Communication Corp. Securities & Deriv. Litigation, 03 MD 1529 (LMM); * The Ad Hoc Committee of Senior Shareholders of Adelphia Communications Corporation Preferred Stock; and * The Ad Hoc Adelphia Trade Claims Committee. The settlements resolve fraud lawsuits filed by the Securities and Exchange Commission against Adelphia Communications Corporation, et al. A full-text copy of the Bankruptcy Court's Amended Order is available for free at: http://bankrupt.com/misc/AmendedProposedOrder.pdf As reported in the Troubled Company Reporter on June 1, 2005, Judge P. Kevin Castel of the District Court approved the settlement. Judges Leonard B. Sand and Robert Gerber also approved the Settlement. Judge Sand oversees the criminal case against certain of the Rigases while Judge Gerber oversees the ACOM Debtors' Chapter 11 cases. Issues on Appeal (1) W.R. Huff Asset Management Co., LLC 1. Whether the Bankruptcy Court erred in finding that the settlement agreements between the Debtors and the Securities and Exchange Commission, the Debtors and the Department of Justice and the Debtors and the Rigas family were reasonable and in the best interests of the Debtors' estates? 2. Whether the Bankruptcy Court erred in approving the Settlement Agreements that provided substantial benefits to the co-borrowing lenders who are being sued for their participation in the fraud at Adelphia? 3. Whether the Bankruptcy Court erred in approving the Settlement Agreements and permitting a payment by the Debtors of $715 million that will be distributed to statutorily subordinated creditors in violation of the absolute priority rule of the Bankruptcy Code? 4. Whether the establishment of a restitution fund for statutorily subordinated creditors constituted a sub rosa plan that impermissibly avoided the Bankruptcy Code's requirements applicable to chapter 11 plans? (2) U.S. Bank National Association, in its capacity as Indenture Trustee for the FrontierVision Notes and the Arahova Notes 1. Whether the Bankruptcy Court erred in finding that the Settlement Agreements were reasonable and in the best interests of the Debtors' estates. 2. Whether the Bankruptcy Court erred in approving Settlement Agreements that improperly give discretion to the government to administer a restitution fund in a manner that permits distributions to statutorily subordinated claimants in violation of the Bankruptcy Code's absolute priority rule. (3) The class plaintiffs in a suit pending before the United States Court for the Southern District of New York captioned In re Adelphia Communication Corp. Securities & Deriv. Litigation, 03 MD 1529 (LMM) 1. Whether the Bankruptcy Court erred in approving the Settlement Agreements without determining whether the transfer of forfeited assets to the Debtors under the Settlement Agreements violated applicable law? 2. Whether the Bankruptcy Court erred in approving Settlement Agreements that wrongfully provided for the transfer of forfeited assets to the Debtors? (4) The Ad Hoc Committee of Senior Shareholders of Adelphia Communications Corporation Preferred Stock 1. Whether the Bankruptcy Court erred in finding that the Settlement Agreements were reasonable and in the best interests of the Debtors' estates, and otherwise fails to satisfy the requirements of Rule 9019 of the Federal Rules of Bankruptcy Procedure. This general issue includes, but is not limited to, the resolution of four sub-issues: * Whether the automatic stay protects the Debtors against the monetary claims of the SEC and DoJ; * Whether the Settlement Agreements, which resulted from the Government's coercion and threats, are arm's length agreements; * Whether the Settlement Agreements, which effectively waive the right of interest holders and creditors to seek subordination of the Government's claims, and which violate the absolute priority rule, are reasonable and in the best interest of the Debtors' estates; and * Whether the Government's actions and the Settlement Agreements constitute discrimination pursuant to Section 525 of the Bankruptcy Code. 2. Whether the Bankruptcy Court erred in approving the Settlement Agreements that improperly give discretion to the Government to administer a restitution fund in a manner that permits distributions to statutorily subordinated victims in violation of the absolute priority rule set forth in the Bankruptcy Code. This general issue includes, but is not limited to, the resolution of three sub-issues: * Whether upsetting the priority scheme established in the Bankruptcy Code amounts to a judicial amendment to the United States Bankruptcy Code that violates the separation of powers principles built into the United States Constitution; * Whether the specific priority provisions established in the Bankruptcy Code can be superseded and preempted by federal nonbankruptcy statues, such as the Sarbanes Oxley Act or the Federal Securities Acts; and * Whether the creation of the restitution fund is an attempt to administer funds outside of the Bankruptcy Court in violation of SEC v. American Board of Trade, Inc., 830 F.Supp 431 (2nd Cir. 1987) and constitutes overreaching by the executive branch. (5) The Ad Hoc Adelphia Trade Claims Committee 1. Whether the Bankruptcy Court erred in finding that the Settlement Agreements were fair, equitable and appropriate. 2. Whether the Bankruptcy Court erred in finding that the Debtors demonstrated sound business justification in authorizing the Settlement Agreements. 3. Whether the Bankruptcy Court erred in finding that the Settlement Agreements, and payments to be made under the Settlement Agreements, were: (a) an actual and necessary cost of preserving the Debtors' estates within the meaning of Section 503(b) of the Bankruptcy Code, (b) reasonable, and (c) in the best interests of, and provide a benefit to, each of the Debtors' estates. 4. Whether the Bankruptcy Court erred in approving the Settlement Agreements that improperly give discretion to the government to administer a restitution fund in a manner that permits distributions to statutorily subordinated victims in violation of the absolute priority rule set forth in the Bankruptcy Code. Statement of Issue Presented on Cross-Appeal The Official Committee of Equity Security Holders of Adelphia Communications Corporation, et al., wants the District Court to review whether the Bankruptcy Court erred in authorizing the Debtors to grant to certain banks liens in forfeited property that is to be transferred from the Government to the Debtors where, inter alia, the granting of the liens at issue: (a) was never the subject of any motion before the Bankruptcy Court; (b) is not supported by any evidence in the record; (c) is inconsistent with the terms of the settlement agreements that were before the Bankruptcy Court for approval; (d) has no basis in the Bankruptcy Code or other legal authority; and (e) is inconsistent with principles of federal forfeiture law. 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. 96; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVANSTAR COMMS: Raising Equity to Recapitalize Company ------------------------------------------------------- Advanced Communications Technologies, Inc. (OTC BB: ADVC) said it is currently working on plans to recapitalize the company by raising significant equity and boost the value of its stock. The Company is currently working out plans to expand its Cyber-Test business through multiple business acquisitions. The Company disclosed these plans in an open letter to its shareholders: Dear Shareholders, As you may know, we formed Encompass Group in May 2004 to be our principal operating subsidiary through which we expect to grow and implement our strategy in the technology services industry. This industry, often broadly referred to as "reverse logistics," consists of companies that provide repair and upgrade services, new and used parts in support of the repair and upgrades, return services from resellers or for products no longer needed by the original users also known as asset recovery, refurbishment and resale services, and recycling or disposal services. These services are part of the end-of-life-cycle for technology products and are the opposite of "supply- chain-services," hence the name "reverse logistics." The reverse logistics industry is a highly fragmented industry, yet according to analysts at DF Blumberg & Associates, a research firm that has been analyzing this industry for several decades, the reverse logistics industry collectively accounts for more than $60 billion in sales in the U.S. market each year. Growth By Acquisition ... It is Encompass' strategy to acquire, integrate and grow businesses that complement our vision so that our customers experience an extended life for their technology products, and ultimately replace them cost-effectively and in accordance with the legal and moral responsibility to recycle products without damaging the environment. Our acquisition candidates must possess the following minimum financial and business criteria: * Obvious commercial synergies; * Share or buy into our vision for the industry opportunity; * Strong financial position -- cash and other current assets, little or no debt, strong cash flow; * Accretive within the first year; * Superior growth prospects; * Corporate culture and management team highly compatible with ours; * Proprietary technologies or other superior differentiation strategic fit; * Satisfactory owners' background checks; and * Sarbanes-Oxley compliant. The above principles represent our business philosophy of acquiring economically strong, self-sufficient businesses that will not depend on or require our financial support to operate. Cyber-Test, our wholly owned subsidiary that we acquired in June 2004, is an electronic equipment repair company and today is our principal services business. A 17-year-old company, Cyber- Test was acquired to be the platform from which our services business would expand. Its technicians are highly skilled at performing board-level repair for nearly all types of integrated circuit board products. With Cyber-Test's technical proficiency, proven reliability, blue-chip customer base and recently reported record-breaking revenue for March 2005, the Cyber-Test acquisition has already proven to be the suitable platform that we projected will grow our business. When we acquired a 62% controlling interest in Pacific Magtron International, a California-based distributor and reseller of computer systems, components, peripherals and software in December 2004, our strategy was to use Pacific Magtron as a self-sustaining distribution and sourcing engine to support our expansion in the integrated supply of end-of-life-cycle technology products and services. In May 2005, we announced that Pacific Magtron and its wholly owned subsidiaries filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in the District of Nevada. The filing initiative was precipitated by a rapid decline in Pacific Magtron's financial condition, caused in part by the draw back of vendor lines of credit. Pacific Magtron was eventually unable to replenish its inventory and forced to reduce its payroll costs, shut down its Georgia operation and liquidate certain assets in order to pay creditors. Immediately prior to the bankruptcy filing, Pacific Magtron terminated, for cause, Mr. Ted Li, chief financial officer, and Ms. Cynthia Lee, senior vice president. Pacific Magtron is working to develop a plan of reorganization that will allow it to refocus on the business segments we had originally planned for it. We are confident that Pacific Magtron will emerge from bankruptcy financially stronger and with a new and dynamic business operation. Two Years At A Glance ... Looking back, we have taken major strides over the past two years. Once the Securities and Exchange Commission declared effective in July 2003 the registration statement that allowed us to access our equity line of credit, we wasted no time in initiating a reorganization plan for the company. In a short five months, we announced that we had reduced our creditor obligations by over $2 million. Two months later, we acquired a minority interest in Yorkville Advisors that subsequently, over one year's time, generated approximately $1.4 million in cash distributions and approximately $600,000 of net earnings for an overall 23% return on equity. Three months later in May 2004, we formed Encompass Group to become our principal operating subsidiary and expanded our management team with the addition of Martin Nielson. In June 2004, Encompass acquired Cyber-Test, a $6 million computer repair business, and we welcomed Lisa Welton and other top executives on board, including over 100 employees. Two months after the Cyber-Test acquisition, in August 2004 we launched a new website for Advanced Communications describing our new business and provided a more intimate introduction to our newly expanded management team. In November 2004, we were awarded an $8 million judgment from the Supreme Court of California (that we intend to seek recovery of, to the extent it is economically feasible), allowing us to discharge $2,847,000 of debt forgiveness income. In the same month, Cyber-Test unveiled a new technology- driven website to offer end-users nationwide an opportunity to repair, exchange and purchase refurbished computer equipment and services. In December 2004, we acquired a majority interest in Pacific Magtron, and two months later in February 2005, we reported net income of $2.6 million for the second quarter, up from $180,059 for the second quarter from our prior fiscal year. In March 2005, our Yorkville interest was redeemed for the original purchase price of $2,625,000, reducing our obligations by $1,725,000, and Cyber-Test reported record-breaking revenue for the same month, topping out at over $710,000, with year-to-date sales at $5.5 million. We have had a very busy and productive 24 months, cleaning up our balance sheet and establishing and implementing a new business strategy. However, despite all of our accomplishments, we believe our stock remains undervalued. The focus of our energies over the next fiscal year will be to implement a business and financial strategy that we believe will cause our stock's true value to be recognized. Which brings us to our next, and very important discussion. Our Future Vision & Revolutionized Strategy ... While we strongly believe that our business vision is still the right plan for Advanced Communications, our timeline has changed. At our executive management meeting held two weeks ago, we focused on achieving our same objective of becoming a fully integrated technology services company, but at a substantially accelerated pace with plans to reach our goals over the next six to eight months rather than over a longer term as initially designed. More specifically, we are currently working on plans to recapitalize the company, including raising significant equity, and we are in the process of planning for the major expansion of Cyber-Test's business. Our expansion plan includes multiple acquisitions including companies in the e-recycle business, the involvement in new and exciting industry programs, and a national marketing campaign. We plan to fully integrate the companies that we acquire so we can offer our customers a portfolio of seamless and expanded services. Our goal in completing the integration is to create a company that will qualify for trading on Nasdaq or another major exchange. We are convinced that we have the vision, skill sets and dedicated management team to accomplish these goals. We believe that this is the right approach for the current market conditions, and we are working hard to achieve our expansion goals within the time period that we have just shared with you. A Promise To Our Shareholders ... As we near our fiscal year end 2005 and continue our journey of pursuing acquisitions in companies that complement our expansion plan of providing an integrated life-cycle service for the consumer electronics industry, our mandate for organic growth remains a core competency of each company that we acquire. We have a lot to look forward to over our next fiscal year, including an anticipated special meeting of the shareholders and proxy distribution in the fall, a corporate name change, an employee and executive stock option plan, additional acquisitions, a sensible corporate recapitalization strategy, a strategic joint venture with a major national, publicly traded retailer, and a stronger, more valuable company with better, more significant shareholder value. We will keep you informed of our expansion plan progress as information becomes available, and we look forward to a very exciting and prosperous fiscal 2006. We wish to thank you for your continued interest and support as shareholders. Very truly yours, Wayne I. Danson President and Chief Executive Officer Advanced Communications Technologies, Inc. Advanstar Communications Inc. -- http://www.advanstar.com/-- is a leading worldwide media company providing integrated marketing solutions for the Fashion, Life Sciences and Powersports industries. Advanstar serves business professionals and consumers in these industries with its portfolio of 55 expositions and conferences, 55 publications and directories, 75 electronic publications and Web sites, as well as educational and direct marketing products and services. Market leading brands and a commitment to delivering innovative, quality products and services enable Advanstar to "Connect Our Customers With Theirs." Advanstar has approximately 1,000 employees and currently operates from multiple offices in North America and Europe. * * * As reported in the Troubled Company Reporter on Apr. 8, 2005, Standard & Poor's Ratings Services revised its outlook on Advanstar Communications Inc. to negative from stable. At the same time, Standard & Poor's affirmed its existing ratings on the company, including its 'B' corporate credit rating. The Duluth, Minnesota-based business-to-business media firm, which is analyzed on a consolidated basis with its parent company, Advanstar Inc., had $753 million in consolidated debt on Dec. 31, 2004. The outlook change follows Advanstar's announcement that it is selling its trade show, publishing, and other businesses serving five sectors. Gross proceeds for these assets, which produced about 27% of the company's revenue, will total $185 million. Advanstar has not specified for what the proceeds will be used, which creates some concern. "Barring a substantial debt reduction, the lost profit from the sold assets will weaken the company's already marginal total interest coverage, modest discretionary cash flow, and high debt leverage," said Standard & Poor's credit analyst Steve Wilkinson. In addition, using the excess liquidity from the sale for acquisitions may not improve the company's business or financial profile from that which existed prior to the asset sales. ALASKA AIR: May 2005 Traffic Up 6 Percent from Last Year -------------------------------------------------------- Alaska Air Group, Inc. reported May passenger traffic for its subsidiaries, Alaska Airlines and Horizon Air. Alaska Airlines Alaska's May traffic increased 6 percent to 1.387 billion revenue passenger miles (RPMs) from 1.308 billion flown a year earlier. Capacity for May was 1.805 billion available seat miles (ASMs), 3.3 percent lower than the 1.866 billion in May 2004. The passenger load factor (the percentage of available seats occupied by fare-paying passengers) for the month was 76.8 percent, compared to 70.1 percent in May 2004. The airline carried 1,361,100 passengers compared to 1,310,700 in May 2004. RPMs for the five-month period totaled 6.671 billion, an 8.2 percent increase from the 6.164 billion recorded a year earlier. Capacity for the five months ended May 2005 increased 1.8 percent to 8.987 billion ASMs, compared to 8.829 billion in 2004. The passenger load factor for the first five months of 2005 was 74.2 percent, compared to 69.8 percent in 2004. The airline carried 6,574,500 passengers compared to 6,193,100 in 2004. Horizon Air Horizon's May traffic increased 22 percent to 210.8 million RPMs from 172.8 million flown a year earlier. Capacity for May was 291 million ASMs, 9.9 percent higher than the 264.8 million in May 2004. The passenger load factor for the month was 72.4 percent, compared to 65.3 percent in May 2004. The airline carried 555,200 passengers compared to 472,100 in May 2004. RPMs for the five-month period totaled 937.7 million, a 19.4 percent increase from the 785.5 million recorded a year earlier. Capacity for the five months ended May 2005 increased 10.7 percent to 1.341 billion ASMs compared to 1.211 billion in 2004. The passenger load factor for the first five months of 2005 was 69.9 percent, compared to 64.9 percent in 2004. The airline carried 2,535,600 passengers, compared to 2,187,200 in 2004. Horizon's RPMs, passenger load factor and passengers are reported using actual May operating data for flights operated as Horizon Air combined with estimated operating data for Horizon's regional jet service operated as Frontier JetExpress. Seattle-based Alaska Air Group is the parent company of Alaska Airlines and Horizon Air Industries. The company and its sister carrier, Horizon Air, together serve 80 cities in Alaska, the Lower 48, Canada and Mexico. * * * As reported in the Troubled Company Reporter on Apr. 25, 2005, Standard & Poor's Ratings Services lowered its ratings on Alaska Airlines Inc.'s 9.5% equipment trust certificates (ETCs) due April 12, 2012, to 'B+' from 'BB', as part of an industry wide review of aircraft-backed debt. All other ratings on Alaska Airlines and parent Alaska Air Group Inc., including the 'BB-' corporate credit ratings on both, are affirmed. The outlook remains negative. "The lower rating on the ETCs reflects Standard & Poor's concern that repayment prospects for holders of aircraft-backed debt could suffer in a potential scenario of multiple, further bankruptcies of large U.S. airlines weakened by high fuel prices and intense price competition," said Standard & Poor's credit analyst Betsy Snyder. "Downgrades of aircraft-backed debt securities were focused on debt instruments that would be hurt in such a scenario, particularly debt backed by aircraft that are concentrated heavily with large U.S. airlines that would be at greater risk in negotiated restructurings or sale of repossessed collateral," the analyst continued. ALDERWOODS GROUP: Reports Status of Three 2005 Legal Proceedings ---------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, Ellen Neeman, a senior vice president of Alderwoods Group, Inc., provided updates on three legal proceedings involving the Company: (A) Funeral Consumers Alliance, Inc. et al v. Alderwoods Group, Inc. et al; In the United States District Court for the Northern District of California; Case No. C0501804. The Funeral Consumers Alliance lawsuit, filed in April 2005 and served on Alderwoods in May 2005, is a purported class action on behalf of all persons and entities that have purchased caskets in the United States. The lawsuit names as defendants Alderwoods and four other public companies involved in the funeral or casket industry. The plaintiffs allege that the defendants violated federal and state anti-trust laws by engaging in anti-competitive practices with respect to sales of caskets and overcharged for caskets. The lawsuit seeks injunction, an unspecified amount of monetary damages and treble damages. Since the lawsuit is in its preliminary stages, no discovery has occurred and Alderwoods cannot quantify its ultimate liability, if any, for the payment of damages. Alderwoods believes that the plaintiffs' claims are without merit and intends to vigorously defend itself in the FCA Action. (B) Ralph Fancher et al v. Alderwoods Group, Inc. et al; In the United States District Court, Eastern District of Tennessee at Greenville; Case No. 2:05CV145. The Fancher lawsuit, filed and served on Alderwoods in May 2005, makes claims similar to those made in the FCA lawsuit, purporting to allege a national class action and seeking relief which would be essentially duplicative of that sought in the FCA lawsuit. Since the lawsuit is in its preliminary stages, no discovery has occurred and Alderwoods cannot quantify its ultimate liability, if any, for the payment of damages. Alderwoods believes that the plaintiffs' claims are without merit and intends to vigorously defend itself in the Fancher Action. (C) Richard Sanchez et al v. Alderwoods Group, Inc. et al; In the Superior Court of the State of California, for the County of Los Angeles, Central District; Case No. BC328962. The Sanchez lawsuit, filed in February 2005 and served on Alderwoods in April 2005, seeks to certify a nationwide class on behalf of all plaintiffs who purchased funeral goods and services from Alderwoods. The plaintiffs allege that federal and California regulations and statutes required Alderwoods to disclose its mark-ups on all items obtained from third parties in connection with funeral service contracts and that the failure to make certain disclosures of markups resulted in breach of contract and other legal claims. The plaintiffs seek to recover an unspecified amount of monetary damages, attorneys' fees, costs and unspecified "injunctive and declaratory relief." Since the Sanchez lawsuit is in its preliminary stages, no discovery has occurred and Alderwoods cannot quantify its ultimate liability, if any, for the payment of damages. Alderwoods believes that the plaintiffs' claims are without merit and intends to vigorously defend itself in the Sanchez Action. Alderwoods Group is the second largest operator of funeral homes and cemeteries in North America, based upon total revenue and number of locations. As of June 19, 2004, the Company operated 716 funeral homes, 130 cemeteries and 61 combination funeral home and cemetery locations throughout North America. Of the Company's total locations, 59 funeral homes, 53 cemeteries and four combination funeral home and cemetery locations were held for sales as of June 19, 2004. The Company provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, the Company operates insurance subsidiaries that provide customers with a funding mechanism for the pre-arrangement of funerals. (Loewen Bankruptcy News, Issue No. 99; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As previously reported in the Troubled Company Reporter on July 27, 2004, Standard & Poor's Ratings Services it affirmed its 'B+' corporate credit rating on the funeral home and cemetery operator Alderwoods Group, Inc., and assigned its 'B' debt rating to the company's proposed $200 million senior unsecured notes due in 2012. At the same time, Standard & Poor's also assigned its 'BB-' senior secured bank loan rating and its '1' recovery rating to Alderwoods' proposed $75 million revolving credit facility, which matures in 2008, and to its proposed term loan B, which matures in 2009. The existing term loan had $242 million outstanding at March 27, 2004, but will be increased in size. The bank loan ratings indicate that Standard & Poor's expects a full recovery of principal in the event of a default, based on an assessment of the loan collateral package and estimated asset values in a distressed default scenario. The company is expected to use the proceeds from the new financings to redeem $320 million of 12.25% senior unsecured notes, repay a $25 million subordinated loan, and fund transaction costs. As of March 27, 2004, the company had $614 million of debt outstanding. AMERICAN AIRLINES: May 2005 Load Factor Up 5 Points From Last Year ------------------------------------------------------------------ American Airlines, the world's largest airline, reported a May load factor of 78.1 percent -- an increase of 5.0 points compared to the same period last year. Traffic grew by 10.0 percent year over year, while capacity increased by 3.0 percent. International traffic increased 15.7 percent relative to last year on 10.0 percent more capacity. Domestic traffic increased 7.4 percent year over year despite a slight capacity reduction. American boarded 8.4 million passengers in May. About American Airlines American Airlines is the world's largest airline. American, American Eagle and the AmericanConnection regional airlines serve more than 250 cities in over 40 countries with more than 3,800 daily flights. The combined network fleet numbers more than 1,000 aircraft. American's award- winning Web site -- http://www.AA.com/-- provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld Alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members serve more than 600 destinations in over 135 countries and territories. American Airlines, Inc. and American Eagle are subsidiaries of AMR Corporation (NYSE: AMR). * * * As reported in the Troubled Company Reporter on Apr. 27, 2005, Moody's Investors Service commented that the amendments to the liquidity facilities that provide credit support to American Airlines, Inc.'s Series 1999-1 Class A1, A2 and B Enhanced Equipment Trust Certificates would not affect the current ratings assigned to these certificates. The current ratings are Baa3 for the Class A1 and A2 certificates and Ba3 for the Class B certificates. As reported in the Troubled Company Reporter on Feb. 28, 2005, Standard & Poor's Ratings Services placed its ratings on American Airlines Inc.'s (B-/Stable/--) equipment trust certificates on CreditWatch with negative implications. The rating action does not affect issues that are supported by bond insurance policies. "The CreditWatch review is prompted by Standard & Poor's concern that a prolonged difficult airline industry environment, characterized by high fuel prices, excess capacity, and intense price competition in the domestic market, has weakened the financial condition of almost all U.S. airlines and increased the risk of widespread simultaneous bankruptcies," said Standard & Poor's credit analyst Philip Baggaley. At Dec. 31, 2004, AMR Corp.'s balance sheet shows that liabilities exceed assets by $581 million. AMERICAN MEDIA: Moody's Junks $550 Mil. Senior Subordinated Notes ----------------------------------------------------------------- Moody's Investors Service lowered all ratings of American Media Operations, Inc. The ratings affected are: * $60 million senior secured revolving credit facility, due 2006 -- to B1 from Ba3 * $3 million senior secured term loan tranche A, due 2006 -- to B1 from Ba3 * $304 million (remaining amount) senior secured term loan tranche C, due 2007 -- to B1 from Ba3 * $133 million senior secured term loan tranche C-1, due 2007 -- to B1 from Ba3 * $150 million 8.875% senior subordinated notes, due 2011 -- to Caa1 from B3 * $400 million 10.25% senior subordinated notes, due 2009 -- to Caa1 from B3 * Senior implied rating -- to B2 from B1 * Issuer rating -- to B3 from B2 The rating outlook is stable. The downgrade reflects: * the challenges facing the company in its attempts to regain market share; * a decline in the company's tabloid newsstand circulation; * the heavy costs involved in marketing and product development; and * a significant worsening of the company's financial leverage. The rating action follows American Media's fourth quarter and fiscal 2005 earnings release which revealed weaker than expected results for fiscal 2005, and particularly disappointing EBITDA results for 4Q05. Moody's considers that the company's modest free cash flow generation will not permit any meaningful reduction in debt and that it will be unlikely to reduce its debt level below seven times EBITDA before the end of fiscal 2006. Moody's considers that management's product repositioning initiatives may yield longer term value to equity holders, however, the cost of these initiatives has worsened the company's financial profile, which has resulted in a request for covenant relief from its lenders. According to Moody's calculations, American Media's 4Q05 revenues and EBITDA declined by 6% and 36% respectively over the prior year. For the full year 2005, revenues improved by 4%, however, American Media's EBITDA declined by 15% over 2004. Based upon total debt of approximately $970 million (recorded at the end of December 2004), Moody's estimates that American Media's leverage has increased to 7.5 times which is beyond the parameters of a B1 senior implied rating. At the end of March 2005, American Media recorded adequate liquidity of $69 million, largely represented by undrawn availability under a $60 million revolving credit facility. Moody's considers that the company is dependent upon the proposed amendment in order to avoid covenant breach. The proposed amendment will represent the third modification of financial covenants since January 2003. In the face of declining newsstand circulation of its weekly titles and market share losses, American Media has embarked on a number of product repositioning initiatives, most notably a re- launch of Star and National Enquirer, as well the launch of new titles, including Celebrity Living and SLY. After an initial post launch rally, newsstand sales of Star magazine have dipped below 900 thousand during the most recent two quarters. A substantial growth in its subscriber count during fiscal 2005 has compensated for this decline and has provided resilience to Star's rate base. Nonetheless, subscription copies are priced at a substantial discount to newsstand pricing (99 cents vs. $3.29) and provide for relatively poor circulation-based profitability. While Star's new format has attracted significant interest from mainstream retailers, the growth in Star's advertising dollars has been slower than anticipated. The re-launch of National Enquirer (commenced in April 2005) and other new launches, including Celebrity Living and SLY magazines are too recent to demonstrate any meaningful success. Although market circulation of celebrity news magazines continues to enjoy solid growth, Star, National Enquirer and Globe compete for readership of not dissimilar stories covered by: * People (Time Warner), * In Touch (Wenner), * US Weekly (Bauer), and * Entertainment Weekly (Time Warner). The company faces further competition from new celebrity news magazine entrants, including: * Inside TV (Gemstar) and * OK magazine (Northern & Shell). American Media's senior secured credit facility is notched up from the senior implied rating in recognition of the coverage provided to secured lenders through a pledge of stock and assets. The Caa1 rating of the subordinated notes underscores Moody's view that holders of the subordinated notes face less certain recovery prospects in a distress scenario. Ratings lift could result from a sustained recovery in newsstand sales of Star, success in other re-launch initiatives, and stronger advertising sales. Ratings could be further pressured by: * a failure to stem general circulation declines; * an inability to replace circulation revenue losses with advertising dollars; and * a loss of market share to an expanding number of rivals. Headquartered in Boca Raton, Florida, American Media Operations is a leading publisher of consumer magazines. The company recorded sales of $517 million for the fiscal year ending March 2004. AMERICAN MEDIA: Poor Performance Prompts S&P to Lower Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on American Media Operations Inc., including lowering the corporate credit rating to 'B' from 'B+'. The outlook is now stable. The Boca Raton, Florida-based publisher had total debt of slightly under $1 billion as of March 31, 2005. "The rating action reflects the decline in fiscal fourth-quarter operating performance, eroding tabloid circulation and profitability, increased competition in the celebrity magazine market niche, and rising debt leverage," said Standard & Poor's credit analyst Hal F. Diamond. EBITDA declined 31% in the fiscal fourth quarter ended March 31, 2005, despite tabloid cover price increases. This result reflected declining tabloid circulation and market share, investments to relaunch Star magazine, and one less issue of the company's weekly publications compared with the fourth quarter of fiscal 2004. Newsstand sales of the core National Enquirer property and the company's other tabloid publications fell a total of 10% in the fiscal year then ended, reflecting increased competition from lower priced publications focusing on celebrity journalism. The ratings on American Media also reflect high business risk resulting from the ongoing erosion in newsstand circulation of the company's tabloid publications and the company's somewhat limited operational diversity. Over the past two years, cover price hikes and a modest increase in advertising revenues have failed to offset declining tabloid circulation. American Media's ability to stem circulation declines is doubtful, especially given its small subscriber base; its aggressive cover price increases; and the long-term circulation decline resulting from increased competition from other publications, TV and radio programs, and Web sites focusing on celebrity news. Performance of the company's Weider health and fitness special- interest magazine titles, acquired in 2003, has been relatively stable, though these titles also face increased competition. The company has attempted to broaden its business base by introducing new publications, but diversifying internally has not yet improved profitability. American Media has made significant investments to relaunch Star magazine, the company's second-largest publication. Star was nationally relaunched as a glossy magazine from a tabloid newspaper in April 2004. The company's goal is to increase the appeal of Star to a younger audience with higher income levels by refocusing content and format. American Media also increased the newsstand cover price nationally by 10%, to $3.29, and has achieved modest success in increasing subscription levels. The company is seeking to increase national advertising, which historically has not been a significant component of revenue for Star. However, Star's profitability declined in fiscal 2005 because the increase in advertising revenues did not offset increased production costs. The stable outlook reflects Standard & Poor's expectation that the company will amend its credit agreement in a timely manner and have sufficient covenant cushion. However, a continued increase in debt leverage and decline in profitability over the near term would likely result in an outlook revision to negative. We would consider revising the outlook to positive over the intermediate term if the company is able to successfully reposition Star, improve overall profitability, lower debt leverage, and establish an appropriate margin of covenant compliance. AMES DEPARTMENT: Revenue Mgt. & ASM Capital Acquire $800K Claims ---------------------------------------------------------------- Inna Donkin of Liquidity Solutions Inc., doing business as Revenue Management, informs the Court that Revenue Management acquired a $504,096 administrative claim from Xerox Capital Services, LLC. ASM Capital, LP, acquired two claims from: Creditor Claim No. Claim Amount -------- --------- ------------ Allure Home Creation Co., Inc. 5173 $321,472 SAE International Bags & Accessories d/b/a Rugged Equipment 6553 37,895 As reported in the Troubled Company Reporter on April 26, 2005, claim traders Alternative Finance Inc., Capital Advisors, Capital Investors LLC, KT Trust and Liquidity Solutions, Inc., doing business as Capital Markets and Revenue Management, which acquired ownership of certain allowed administrative expense claims aggregating $2,624,963, pressed for the full payment of the administrative claims. The Debtors' suspended payment of the claims to ensure that adequate funds are available to treat the holders of the claims equally. Pursuant Section 2.1 of the Debtors' Chapter 11 Plan, the Debtors will pay 100% of the allowed administrative expense claims. In the Disclosure Statement accompanying the Plan, the Debtors concede that there are adequate funds available to pay all holders of allowed administrative expense claims in full. Ames Department Stores filed for chapter 11 protection on August 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANDRE TATIBOUET: Committee Wants to Hire Jerrold Guben as Counsel ----------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Andre S. Tatibouet's case asks the U.S. Bankruptcy Court for the District of Hawaii for permission to employ Jerrold K. Guben of Reinwald O'Connor & Playdon LLP, as its legal counsel, effective May 3, 2005. Jerrold Guben will: a) give the Committee legal advice with respect to its duties and powers in the Debtor's chapter 11 case; b) assist the Committee in its investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor, the operation of the Debtor's business and the desirability of the continuance of business, and any other matters relevant to the foregoing; c) assist the Committee in the formulation, evaluation, implementation and modification of one or more plans of reorganization that may be proposed by the Debtor, the Committee, or any other entity, and all other matters arising from or related to plans including disclosure statements, voting and confirmation issues; d) assist the Committee in requesting the appointment of a chapter 11 or chapter 7 trustee, or examiner, should action become necessary; and e) perform other legal services as may be necessary or appropriate and in the interests of the unsecured creditors in the Debtor's bankruptcy case. The Debtor will compensate Jerrold Guben's professional fee for $250 per hour. Reinwald O'Connor & Playdon LLP assures the Court that it does not represent any interest adverse to the Debtor's estate or the Committee. Andre S. Tatibouet owns the 246-room Coral Reef Hotel in Hawaii. He also has a 4.8% interest in SWVP Keauhou, LLC, owner of the Keauhou Beach Hotel, and an 80% ownership interest in American Motel Acquisition Company, LLC, which has an ownership interest in 14 hotels and motels on the mainland. He filed for chapter 11 protection on April 5, 2005 (Bankr. D. Hawaii Case No. 05-00829). James A. Wagner, Esq., at Wagner Choi & Evers, represents Mr. Tatibouet. When Mr. Tatibouet filed for protection from his creditors, he estimated $38,000,000 in assets and $50,000,000 in debts. ATA AIRLINES: Lease Decision Period Hearing Set for July 7 ---------------------------------------------------------- Pursuant to Section 365(d)(4) of the Bankruptcy Code, ATA Airlines, Inc. and its debtor-affiliates ask Judge Lorch to extend their deadline to assume, assume and assign or reject unexpired non-residential property leases to the earlier of August 22, 2005, or the date of confirmation of a plan of reorganization. Jeffrey C. Nelson, Esq., at Baker & Daniels, in Indianapolis, Indiana, informs the Court that the Debtors have not yet had adequate time to fully analyze the Leases. The Debtors' decision with respect to each Lease depends in large part on whether the location will play a future role under their reorganization plan. However, at this early stage in the Chapter 11 cases, the Debtors do not know the exact contours of their Plan and which of the Leases the Plan will necessitate the Debtors to assume, assume and assign, or reject. * * * The hearing on the Debtors' request is scheduled for July 7, 2005. Since the present Lease Decision Period expires on July 5, Judge Lorch issues a bridge order extending the Debtors' Lease Decision Period until the date the Court rules on the request. 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. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATHLETE'S FOOT: Has Exclusive Right to File Plan Until August 8 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York extended the period within which Athlete's Foot Stores, LLC, and Delta Pace, LLC, have the exclusive right to file a chapter 11 plan to August 8, 2005. The Court also gave them exclusive right to solicit acceptances of a plan until October 7. The Debtors reminded the Court that their efforts are focused on liquidating their assets. The Debtors also told the Court that they need more time to analyze the claims filed and make meaningful disclosure about the claims against their estates. Company and its debtor-affiliate filed for chapter 11 protection on December 9, 2004 (Bankr. S.D.N.Y. Case No. 04-17779). Bonnie Lynn Pollack, Esq., and John Howard Drucker, Esq., at Angel & Frankel, P.C. represents the Debtors. When the Company filed for protection from its creditors, it listed total assets of $33,672,000 and total debts of $39,452,000. BANCWEST CORP: Fitch Holds BB+ Rating on CFB Subordinated Debt -------------------------------------------------------------- Fitch Ratings has affirmed all of the ratings of BancWest Corporation and its affiliates following the announcement that its bank subsidiary, Bank of the West, has entered into an agreement to buy Commercial Federal Corporation. The Rating Outlook for BWE and its affiliates remains Stable. At the same time, Fitch has revised the Rating Watch on CFB to Positive from Negative, while placing the bank subsidiary, Commercial Federal Bank, on Rating Watch Positive. The definitive agreement announced Tuesday calls for Bank of the West to purchase CFB in a cash transaction valued at $1.36 billion and is expected to close during fourth-quarter 2005 (4Q'05), at which time the CFB franchise will be merged with Bank of the West. The acquisition loosely fits with BWE's strategy to develop its franchise in the Western United States, while further expanding its network into the Midwest. The acquisition is expected to generate moderate cost savings and BWE should realize revenue benefits through offering its relatively broader product line to a larger customer base. That said, Fitch does expect BWE to make meaningful investments into the CFB franchise, as CFB has been struggling with performance issues for sometime. The transaction, which will be financed in conjunction with support of its parent company, BNP Paribas, will add goodwill to BWE's books, which is already burdened by a significant level of intangibles. Fitch is cautious regarding the capital structure of the U.S. holding company; however, some of the concerns regarding its weak tangible capital base are allayed by the implied support of BNP. Nonetheless, weakening of the holding company's capital base will put pressure on its individual rating. Fitch's view toward the differences in the capitalization of the holding company and the bank subsidiaries, which are considered sound, is reflected in the Individual ratings of the respective companies. It should be further noted that the long-term and short-term ratings of BWE reflect the support of its highly rated ('AA/F1+') parent company. Separately, Fitch believes that the proposed transaction is a positive for CFB investors, as CFB becomes part of a larger franchise that is supported by a highly rated global banking company in BNP. For this reason, CFB's ratings are likely to be equalized with those of BWE resulting in CFB's ratings being upgraded several notches when the transaction closes. Prior to this announcement, Fitch had placed CFB's long- and short-term ratings on Rating Watch Negative in March 2005. Ratings affirmed by Fitch: BancWest Corporation -- Senior long-term 'AA-'; -- Senior short-term 'F1+'; -- Individual 'B/C'; -- Support '1'. Bank of the West -- Long-term deposits 'AA-'; -- Senior long-term 'AA-'; -- Short-term deposits 'F1+'; -- Senior short-term 'F1+'; -- Individual 'B'; -- Support '1'. First Hawaiian Bank -- Long-term deposits 'AA-'; -- Senior long-term 'AA-'; -- Short-term deposits 'F1+'; -- Senior short-term 'F1+'; -- Individual 'B'; -- Support '1'. CFB Capital Trust III & IV -- Trust preferred 'A+'. Community First National Bank -- Long-term deposits 'AA-'. Fitch has revised the Rating Watch on the following ratings to Positive from Negative: Commercial Federal Corporation -- Senior long-term 'BBB-'; -- Senior short-term 'F3'. Fitch has also placed the following ratings on Rating Watch Positive: Commercial Federal Corporation -- Individual 'C'; -- Support '5'. Commercial Federal Bank -- Long-term deposits 'BBB'; -- Senior long-term 'BBB-'; -- Subordinated debt 'BB+'; -- Short-term deposits 'F3'; -- Senior short-term 'F3'; -- Individual 'C'; -- Support '5'. BELLAIRE GENERAL: Sec. 341 Meeting of Creditors Set for July 14 --------------------------------------------------------------- Janet S. Casciato-Northrup, the chapter 7 trustee overseeing the liquidation of Bellaire General Hospital, L.P., will convene a creditors meeting at 9:30 a.m. on July 14, 2005, in Suite 3401, 515 Rusk Avenue, in Houston, Texas. This is the first meeting of creditors after the Debtor's chapter 11 case has been converted to a chapter 7 liquidation proceeding. Janet S. Casciato-Northrup is the newly appointed chapter 7 trustee. 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 Houston, Texas, Bellaire General Hospital, L.P. -- http://www.bellairemedicalcenter.com/-- operates a hospital. The Company filed for chapter 11 protection on January 3, 2005 (Bankr. S.D. Tex. Case No. 05-30089). Daniel F. Patchin, Esq., at McClain, Leppert & Maney, P.C. represents the Debtor. When the Debtor filed for protection from its creditors, it listed estimated assets and debts of $10 million to $50 million. The Court converted the Debtor's chapter 11 case to a chapter 7 liquidation proceeding on April 29, 2005. The hospital's secured creditors -- Columbia Hospital of Houston and GE Credit Corp. -- decided to foreclose on the hospital's property after efforts to auction off the assets failed. BI-LO LLC: Moody's Rates $345MM Senior Secured Term Loan B at B1 ---------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to BI-LO, LLC's $75 million senior secured revolving credit facility maturing 2010 and to its $345 million senior secured term loan B maturing 2011, and assigned a senior implied rating of B1. This is the first time that Moody's has rated the debt of BI-LO, LLC. The rating outlook is stable. First-time ratings assigned: * Senior implied rating at B1; * $75 million senior secured revolving credit facility maturing 2010 at B1; and * $345 million senior secured term loan B maturing 2011 at B1. The ratings take into account BI-LO, LLC's January 2005 acquisition by affiliates of Lone Star Funds from Ahold N.V. in a transaction valued at approximately $588 million. The transaction was initially funded with cash equity and a bridge loan. This permanent capital structure will consist of the $345 million term loan, $93 million in sale/leaseback proceeds, and $150 million in equity from Lone Star. The transaction value represents a multiple of roughly 2.5 times pro forma adjusted LTM EBITDA. On a lease adjusted basis, initial pro forma leverage is roughly 4.8x. BI-LO, LLC presently operates 426 grocery stores under the Bruno's, Bi-Lo, and FoodSmart banners in the southeastern U.S., with a concentration in North and South Carolina and Alabama. Once announced divestitures of non-core stores are completed in early 2006, BI-LO, LLC will consist of 310 stores, with 232 operated under the Bi-Lo banner, and 78 operated under the Bruno's and FoodSmart banners. A key rating consideration is the number one or number two market position currently held by BI-LO, LLC in 9 of its 13 principal markets as well as the relatively low leverage due to the reasonable purchase price paid by Lone Star for the two primary franchises balanced by today's fiercely competitive operating environment in the supermarket industry and the separation risk from Ahold. Moody's notes that while Wal-Mart's presence is a key factor, both Bi-Lo and Bruno's banners have been competing effectively, with the immediate Wal-Mart competitive situation perhaps tempering in their region. Other competitors include: * Winn-Dixie, which is operating in Chapter 11, * Ingles, * Food Lion, * Publix, * Harris-Teeter, and * Kroger. While the Bruno's stores are relatively old and will need almost immediate refurbishment, the required capital expenditures necessary can easily be covered out of forecasted cash flows. The stable outlook reflects Moody's expectation that the business will continue to run smoothly during the expected transitions that need to occur, i.e., store closures and divestitures, sale of distribution centers and retail stores to C&S, split from parent's systems, etc. with little negative impact on revenues or operating margins. The B1 rating of the bank credit facility recognizes its minimal asset coverage balanced by its favorable position in the capital structure, with the $150 million in cash equity providing reasonable cushion. Assuming a fully-drawn revolver, a modest enterprise value multiple of slightly over 2 times LTM EBITDA would be required for full repayment. The facilities are guaranteed by all current and future direct and indirect subsidiaries, and are secured by all assets and a pledge of stock. The contractual term loan amortization is nominal at 1% per year, with a bullet at maturity; however, the bank deal requires a 50% excess cash flow sweep. Prospectively, upward rating pressure would occur once the various separation and divestitures have been completed in an orderly manner and the company demonstrates the ability to perform as an independent entity, with positive comp store sales plus an improved operating margin, as well as maintain its present competitive position. Specifically, the key quantitative measure, Adjusted Debt/EBITDAR, would need to reduce below 4.25x for Moody's to consider an upgrade. Conversely, if the separation process does not go smoothly and negatively impacts operating performance or competitive position resulting in Adjusted Debt/EBITDAR exceeding 5.5x, downward rating pressure would be generated. BI-LO, LLC, headquartered in Mauldin, SC, is a leading regional grocery store chain, presently operating 426 grocery stores under the: * Bi-Lo, * FoodSmart, * Bruno's, * Food World, and * Food Fair banners in the southeastern United States. BISYS GROUP: Lenders Waive Default Under Senior Unsec. Loan ----------------------------------------------------------- BISYS obtained a consent and waiver from the lenders under its Senior Unsecured Credit Facility. The consent and waiver relates to the default under the Credit Facility that occurred when the Company was unable to file on a timely basis its Form 10-Q for its third fiscal quarter ended March 31, 2005, and to deliver the related compliance certificate for that fiscal quarter. The filing of this quarterly report is being delayed pending completion of the previously disclosed investigation being conducted by the Company's Audit Committee. Under the terms of the consent and waiver, the cure period for the default with respect to the filing of the aforementioned Form 10-Q and the delivery of the related compliance certificate has been extended to Aug. 1, 2005. In addition, the Company has agreed that it will not request additional credit extensions under the Credit Facility (except for renewals of outstanding letters of credit) during the extension period. The Company believes that its operating cash flows and cash on hand will be sufficient to support its near term working capital and other cash requirements, and that additional credit under the Credit Facility will not be necessary through the extension date. The Credit Agreement On March 31, 2004, THE BISYS GROUP, INC., as Borrower, entered into a CREDIT AGREEMENT with: * BANK OF NEW YORK, individually, as Issuing Bank, as Swingline Lender and as Administrative Agent; * FLEET NATIONAL BANK, individually and as Documentation Agent; * JPMORGAN CHASE BANK, individually and as Documentation Agent; * SUNTRUST BANK, individually and as Documentation Agent; * WACHOVIA BANK, NATIONAL ASSOCIATION, individually and as Documentation Agent; * KEYBANK NATIONAL ASSOCIATION; * PNC BANK, NATIONAL ASSOCIATION; * THE BANK OF NOVA SCOTIA; * SCOTIABANC INC.; * US BANK, N.A.; * ALLIED IRISH BANKS, PLC; * FIFTH THIRD BANK (CENTRAL OHIO); * UFJ BANK LIMITED; * SUMITOMO MITSUI BANKING CORPORATION; and * WELLS FARGO BANK, NATIONAL ASSOCIATION. Lawyers at Bryan Cave LLP in New York represents the Lenders. The $400 million facility contains a $300 million revolving line of credit facility and a $100 million term loan. The facility, which expires March 31, 2008, supports working capital requirements, repurchases of the Company's common stock, and the funding of future acquisitions. The facility is guaranteed by certain subsidiaries of The BISYS Group, Inc. The Company also has $300 million of 4% convertible subordinated notes due March 2006 outstanding. About BISYS The BISYS Group, Inc. (NYSE: BSG) -- http://www.bisys.com/-- provides outsourcing solutions that enable investment firms, insurance companies, and banks to more efficiently serve their customers, grow their businesses, and respond to evolving regulatory requirements. Its Investment Services group provides administration and distribution services for mutual funds, hedge funds, private equity funds, retirement plans and other investment products. Through its Insurance Services group, BISYS is the nation's largest independent wholesale distributor of life insurance and a leading independent wholesale distributor of commercial property/casualty insurance, long-term care, disability, and annuity products. BISYS' Information Services group provides industry-leading information processing, imaging, and back-office services to banks, insurance companies and corporate clients. Headquartered in New York, BISYS generates more than $1 billion in annual revenues worldwide. BONUS STORES: William Kaye Has Until Aug. 16 to Object to Claims ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave William Kaye -- the Liquidating Agent appointed to administer the confirmed chapter 11 Plan of Bonus Stores, Inc. -- further extension, through and including Aug. 16, 2005, to object to proofs of claim filed against the Debtor's estate. The Court confirmed the Debtor's First Amended Liquidating Plan of Reorganization on Sept. 1, 2004, and the Plan took effect on Sept. 20, 2004. Pursuant to the Plan, the Liquidating Agent is vested with the authority to object and settle claims on behalf of the Debtor. Mr. Kaye explains that since the Plan's Effective Date, he has filed objections against a majority of claims that he disputes and he is still negotiating to consensually resolve those disputed claims. Mr. Kaye is also continuing his review of the claims against the Debtor's books and records in an attempt to ensure that any claims that may be subject of an objection are objected to properly. Mr. Kaye relates that while he has made every effort to ensure that any claim that has a basis for objection was included in the Omnibus Objections he submitted with the Court, the extension is necessary to ensure that all of those claims have been the subject of an objection. The extension is also necessary so Mr. Kaye can: 1) reconcile the Orders previously entered by the Court that dispose of a substantial number of claims that were subject to 14 of the 15 omnibus objections to claims; 2) review any remaining claims and file any additional objections to claims; and 3) notice all outstanding claims objection to be heard before the Court in order to complete the claims objection process. Headquartered in Columbia, Mississippi, Bonus Stores, Inc., operated a chain of over 360 stores in 13 Southeastern states offering everyday deep discount prices on basic everyday items. The Company filed for chapter 11 protection on July 25, 2003 (Bankr. Del. Case No. 03-12284). Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor, LLP represents the Debtor. When the Company filed for protection from its creditors, it estimated assets and debts of more than $100 million. Bonus Stores, Inc. (fka Bill's Dollar Stores) declared its First Amended Liquidating Chapter 11 Plan effective on September 20, 2004. William Kaye is the Liquidating Agent under the Debtors' confirmed Plan. Edward J. Kosmowski, Esq., at Young Conaway Stargatt & Taylor, LLP represents the Liquidating Agent. BOYD GAMING: Good Performance Prompts S&P's Positive Outlook ------------------------------------------------------------ Standard & Poor's Ratings Services revised its rating outlook on casino operator Boyd Gaming Corp. to positive from stable. At the same time, Standard & Poor's affirmed its ratings on the Las Vegas, Nevada-based company, including its 'BB' corporate credit rating. Total debt outstanding was approximately $2.26 billion at March 31, 2005. "The outlook revision reflects Boyd's solid operating performance over the past several quarters, which has resulted in pro forma credit measures that have exceeded our previous expectations," said Standard & Poor's credit analyst Michael Scerbo. In addition, with the positive operating momentum expected to continue during the intermediate term, credit measures are likely to remain at a level that Standard & Poor's views would be appropriate for a higher rating, despite the potential for a significant increase in capital spending associated with the commencement of a re-development of the Stardust during this period. More specifically, given Boyd's satisfactory business profile and expected free cash flow generation, Boyd is likely to be able to achieve its development goals while maintaining total debt to EBITDA in the 4.0x-4.5x range (adjusted for operating leases). However, an upgrade is not likely to be considered until Standard & Poor's has an opportunity to fully evaluate Boyd's plans relative to the Stardust. Although Boyd's satisfactory business position may be supportive of an investment-grade rating over a longer time horizon, management's active growth strategy is likely to limit material improvement in its overall financial profile from current levels. Thus, its rating is likely limited to high speculative-grade over the intermediate term. BUEHLER FOODS: Committee Taps Otterbourg Steinder as Counsel ------------------------------------------------------------ The Official Committee of Unsecured Creditors of Buehler Foods, Inc., and its debtor-affiliates asks the U.S. Bankruptcy Court for the Southern District of Indiana for permission to employ Otterbourg, Steindler, Houston & Rosen, P.C., as its counsel. Otterbourg Steinder is expected to: 1) assist and advise the Committee in its consultation with the Debtors in the administration of their chapter 11 cases and in the examination and analysis of the conduct of the Debtors' affairs; 2) assist the Committee in the review, analysis, negotiation and preparation of any proposed plan of reorganization and an accompanying disclosure statement 3) take all necessary action to protect and preserve the Committee's interests, including the prosecution of actions on its behalf, negotiations concerning all litigation in which the Debtors are involved, and review and analyze claims filed against the Debtors' estates; 4) prepare on behalf of the Committee all necessary motions, applications, answers, orders, reports and papers in support of positions taken by the Committee; 5) appear before the Bankruptcy Court, the Appellate Courts and the U.S. Trustee to protect the interests of the Committee before those Courts and the U.S. Trustee; and 6) perform all other legal services to the Committee that necessary in the Debtors' chapter 11 cases. Scott L. Hazan, Esq., a Member at Otterbourg Steinder, is the lead attorney for the Committee. Mr. Hazan reports that Otterbourg Steinder's professionals bill: Designation Hourly Rate ----------- ----------- Partners & Counsel $450 - $695 Associates $240 - $495 Paralegals & Legal Assistants $175 - $185 Otterbourg Steinder assures the Court that it does not represent any interest materially adverse to the Committee, the Debtors or their estates. 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, along with its three affiliates, 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 Debtor filed for protection from its creditors, it estimated assets of $10 million to $50 million and debts of $50 million to $100 million. CAESARS ENTERTAINMENT: Moody's Upgrades Senior Sub. Notes to Ba1 ---------------------------------------------------------------- Moody's Investors Service upgraded Caesars Entertainment Inc.'s senior unsecured rating to Baa3. Caesars Entertainment was acquired by Harrah's Entertainment Inc. on June 13, 2005. As a result, Caesars merged into Harrah's Operating Company Inc. with HOC as the surviving entity which assumed Caesars public debt obligations. Moody's rating action assumes that HET will guaranty each series of Caesars notes outstanding if Caesars bondholders representing a majority in aggregate principal amount of each and all series of bonds outstanding approve the consent and solicitation to amend the reporting covenants in the applicable indentures. If HET does not receive the required consents, the guarantee will not be provided. In this case, Moody's would downgrade Caesars bond ratings by one notch to reflect the structural subordination of Caesars debt relative to HOC's debt that is guaranteed by HET. This completes the review of Caesar's ratings that commenced on July 15, 2004. Ratings upgraded: * Sr. unsecured notes to Baa3 from Ba1. (to be guaranteed by HET) * Sr. subordinated notes to Ba1 from Ba2. (to be guaranteed by HET on a subordinate basis) Ratings upgraded and to be withdrawn * Long-term issuer rating to Baa3 from Ba1. * Senior implied rating to Baa3 from Ba1. * Sr unsecured shelf to (P) Baa3 from (P) Ba1. * Subordinated shelf to (P) Ba1 from (P) Ba2. * Preferred shelf to (P) Ba2 from (P) Ba3. Caesars Entertainment Inc. is a diversified gaming company that was acquired by HET on June 13, 2005. CATHOLIC CHURCH: Court Appoints Gayle Bush as Spokane Claims Rep. ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Washington appoints Gayle E. Bush as legal representative for Unknown Tort Claimants in the Diocese of Spokane's Chapter 11 case. Mr. Bush is authorized to: -- advocate the legal position of the Unknown Tort Claimants in any proceeding before the Court or in any appellate court, including, but not limited to, proceedings concerning the claims bar date, the filing of proofs of claim by or for Unknown Tort Claimants, and the filing of ballots by or for Unknown Tort Claimants; -- file pleadings and present evidence, as necessary, on issues affecting the Unknown Tort Claimants; and -- take all other actions as are reasonably necessary and appropriate to represent the interests of Unknown Tort Claimants. The Unknown Tort Claimants refer to: (a) the Causal Link Claimants -- those persons who know that they had an incident of sexual contact or touching, sexual abuse, or sexual misconduct by an alleged agent of the Diocese while the claimant was a minor yet, prior to any claims bar date established in the Chapter 11 case, and fail to make the connection between the incident and injuries arising from the incident; (b) the Category b Claimants -- those persons who, prior to any claims bar date established in the Chapter 11 case, had not discovered or could not have reasonably discovered that, as a minor, they had an incident of sexual contact or touching, sexual abuse, or sexual misconduct by an alleged agent of the Diocese; and (c) the Minors -- those persons who did not reach the age of 18 prior to any claims bar date established in the Chapter 11 case, who have claims for sexual abuse by an alleged agent of the Diocese. Mr. Bush will participate in the Chapter 11 case on the same basis as a professional person employed under Section 327 of the Bankruptcy Code, with compensation to be paid on an hourly basis. He may, on the same basis as a trustee or examiner, employ experts and other professional persons as may be reasonable and necessary to carry out his duties as the Unknown Claims Representative. Nothing in the Order will constitute a finding that (i) any creditor necessarily qualifies as an Unknown Tort Claimant, or (ii) any Unknown Tort Claimants actually exist. The Order is without prejudice to Spokane or any party-in-interest to challenge the validity of any theory -- medical, legal or otherwise -- associated with the claims held by Causal Link Claimants or Category b Claimants. As previously reported in the Troubled Company Reporter on April 13, 2005, Spokane asked Judge Williams to appoint an unknown claims representative to (i) make appearances, (ii) file pleadings, (iii) file claims, and (iv) take other actions or perform other duties as the Court may authorize, on behalf of Unknown Tort Claimants and those persons with Tort Claims who have not reached the age of 18. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Spokane Exclusive Periods Hearing Set for Aug. 1 ----------------------------------------------------------------- As previously reported in the Troubled Company Reporter on April 13, 2005, Spokane asked the U.S. Bankruptcy Court for the Eastern District of Washington to extend the period within which it has the exclusive right to file a plan until January 6, 2006, and the exclusive right to solicit acceptance of the plan until March 10, 2006. * * * Judge Williams continues the hearing on the Diocese of Spokane's request to August 1, 2005, at 1:30 P.M., in open court. Judge Williams directs the Diocese's counsel to: * notify no later than July 22, 2005, parties-in-interest if witnesses will be called to testify; and * exchange no later than July 27, 2005, witness and exhibit lists. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000) CEDU EDUCATION: Keen Realty to Market Three School Campuses ----------------------------------------------------------- George L. Miller, the interim chapter 7 Trustee overseeing the liquidation of CEDU Education Inc. and its debtor-affiliates, retained Keen Realty, LLC, to market the company's private schools in California, Idaho, and Vermont. The Running Springs, Calif., Bonners Ferry, Idaho, and Naples, Idaho, schools were recently closed, while the Sutton, Vt., school is still operating. The schools provided alternative educational programs in an alternative setting for at-risk students, including those with special education needs. Their programs offered a proven, safe alternative that fully integrated academic, therapeutic, emotional growth and adventure learning. "These properties represent excellent opportunities for turn-key campuses or redevelopment," said Harold Bordwin, Keen Realty's President. "The properties all have significant acreage and are in unique locations. We anticipate signing stalking horse contracts quickly, then auctioning the properties for higher and better offers," Mr. Bordwin added. The Running Springs, California property is located in the San Bernardino mountain area and offers spectacular views of the valley. There are 18 buildings on the property with a total square footage of 56,165+/- on 69.9+/- acres. The current zoning is planned development and single family residential. Additional amenities include soccer fields, volleyball, racquetball, and basketball courts, and a 60' x 30' pool. Bonners Ferry and Naples, Idaho are made up of 2 separate campuses with four academies. Bonners Ferry's Rocky Mountain Academy consists of 19 buildings totaling 96,377+/- square feet. Bonners Ferry's Boulder Creek Academy consists of 21 buildings totaling 52,490+/- square feet. The Bonners Ferry campus is situated on 119+/- acres. The Naples Ascent Wilderness School consists of 24 structures totaling 21,896+/- square feet. The Naples Northwest Academy consists of 18 buildings totaling 33,149+/- square feet. The Naples campus is situated on 328+/- acres. Sutton, Vermont is a currently operating private school with 19 buildings totaling 57,880+/- square feet on 300+/- acres. Located in a serene New England town with rolling hills, this campus features a full theater, 2-story art studio, dance studio, photography lab, student center, and maple sugaring house. For over 22 years, Keen Consultants has had extensive experience solving complex problems and evaluating and selling real estate, leases and businesses. Keen Consultants, a leader in identifying strategic investors and partners for businesses, has consulted with thousands of clients nationwide, evaluated and disposed of over 1,723,300,000 square feet of properties and repositioned more than 18,400 properties across the country. Recent clients include: Spiegel/Eddie Bauer, Arthur Andersen, Service Merchandise, Warnaco, Cable & Wireless, Fleming, Pillowtex, Parmalat, FOL Liquidation Trust (former Fruit of the Loom facilities) and financial institutions like JP Morgan Chase and CIBC. Headquartered in Sandpoint, Idaho, CEDU Education Inc. -- http://www.cedu.com/-- operates schools offering programs for troubled teenagers. The Debtor, along with its affiliates filed for chapter 7 petitions on March 25, 2005 (Bankr. D. Del. Case Nos. 05-10841 through 05-10865). Daniel B. Butz, Esq., at Morris, Nichols, Arsht & Tunnell represents the Debtors. When the Debtor filed for protection from its creditors, it estimated $10 million in assets and $50 million in debts. CHAPARRAL STEEL: Moody's Rates $150 Mil. Credit Facility at Ba2 --------------------------------------------------------------- Moody's Investors Service assigned a B1 Senior Implied rating to Chaparral Steel Company, a B1 rating to Chaparral's guaranteed senior unsecured notes, a Ba2 rating to its $150 million guaranteed secured revolving credit facility, and a speculative grade liquidity rating of SGL-2. This is the first time Moody's has rated Chaparral, which is the company formed from Texas Industries, Inc.'s tax-free spin-off to shareholders of its steel making assets. Proceeds from the notes offering combined with $50 million of bank borrowings will be used to finance a cash distribution of $341 million to TXI. The ratings assume that the transaction will close in the amounts and along the terms as presented. The rating outlook is stable. The B1 Senior Implied rating considers: * Chaparral's operating loss history as a business unit of TXI; * its underutilized and less profitable Virginia mill; * the competitive nature of the structural steel markets in North America; and * the ongoing threat of price erosion from imported steel. However, the rating acknowledges: * Chaparral's position as the second largest producer of structural steel products in North America; * its relatively low-cost mini-mill platform; and * the moderate level of leverage that it will have at inception. The rating also reflects Moody's expectation that the company will be cash generative over the next twelve to fifteen months despite current weakening in steel prices generally, reflective of Chaparral's position in the structural market and SBQ markets. The long-term maturity profile and absence of significant labor, environmental or other off-balance sheet liabilities are further positive rating considerations. The stable outlook reflects the continued acceptable environment in the North American steelmaking industry, despite recent contraction from the volume and price highs experienced in calendar year 2004, and the likelihood that Chaparral's operating and earnings performance over the next 12-15 months should continue to be sound given continued pricing strength in structural steel, improved non-residential construction spending, and positive performance and pricing in the steel bar market. The outlook also anticipates that Chaparral will continue to be able to contain margin pressure from rising raw material costs (scrap and energy) through surcharges and/or price increases. Although Moody's anticipates that steel pricing will continue to ease for the balance of 2005, we would expect Chaparral to generate minimum EBITDA in the $90 million range in its fiscal year ending May 2006, which would imply pro-form leverage, as measured by the debt/EBITDA ratio, of 3.8. Given Moody's expectation that we have seen the peak of the steel cycle, an upgrade or change to positive outlook is unlikely over the next fifteen months. Deleveraging and the ability to demonstrate free cash flow (operating cash flow minus maintenance capital expenditures) during more challenging steel times, together with improved product mix, utilization rates and profitability at the Virginia mill would be necessary for an upgrade to be considered. The outlook could face downward pressure should the primary end-market of non-residential construction spending weaken materially, thereby reducing pricing and shipments, which are key variables given the high fixed costs of Chaparral's operations, or should the company need to increase debt to cover operating losses. These ratings were assigned: 1) B1 Senior Implied Rating 2) B1 - $200 million guaranteed senior fixed rate notes due 2013 3) B1 - $100 million guaranteed senior floating rate notes due 2012 4) Ba2 - $150 million guaranteed senior secured revolving credit facility 5) SGL-2 -- speculative grade liquidity rating The B1 senior implied rating reflects both the industry specific business environment Chaparral operates in as well as the operating profile of its asset base. The steel industry in North America remains highly cyclical and subject to imports despite the apparent discipline achieved through consolidation in recent years. Chaparral, competing in the structural steel segment, effectively holds the second largest position in a niche sector dominated by three producers, which includes Nucor and Steel Dynamics. Operating from its two primary steelmaking locations in Texas and Virginia, Chaparral shipped approximately 2.1 million tons of steel in the year ended May 31, 2004, and 1.3 million tons for the nine months to February 28, 2005, more than 75% of which was considered structural. Given its high concentration of structural products, performance is largely influenced by non-residential construction demand in the U.S. Moody's expects that Chaparral will continue to benefit from the current favorable pricing environment for steel products and continued improvement in fundamentals in the non-residential construction industry. Chaparral's strategy includes expanding product offerings and markets served and it has recently made inroads into the sheet piling products segment with its patented