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/raid1/www/Hosts/bankrupt/TCR_Public/050623.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, June 23, 2005, Vol. 9, No. 147 Headlines AES CORPORATION: Improved Liquidity Cues Fitch to Lift Ratings ACCEPTANCE INSURANCE: Exclusive Plan Filing Intact Until Sept. 5 ADELPHIA COMMS: Founder Sentenced to 15 Years in Prison ADELPHIA COMMS: Reports Forfeiture of Rigas Securities to Gov't. AMC ENTERTAINMENT: Inks Merger Agreement with Loews Cineplex AMERICAN HEARTLAND: SEC Files $2.5 Mil. Fraud Case in N.D. Tex. AMERICAN HEARTLAND: Case Summary & Known Creditors ANTEON INTERNATIONAL: Moody's Upgrades $365MM Debt Rating to Ba2 ATA AIRLINES: Balks at Goodrich's Motion to Allow $2.2MM Claim AVADO BRANDS: Administrative Claims Must Be Filed by July 8 AZCO MINING: Files Amended 2003 Financial Statements B&A CONSTRUCTION: Creditors Must File Proofs of Claim by Aug. 5 BEAR STEARNS: Fitch Places Low-B Ratings on Six Mortgage Certs. CACI INTERNATIONAL: Improved Financials Cue S&P's Stable Outlook CAESARS ENT: Merger With Harrah's Cues Fitch to Lift Ratings CALPINE CORP: S&P Junks Planned $650 Million Convertible Notes CAPITAL ACQUISITIONS: Welland Wants Involuntary Case Dismissed CARAUSTAR INDUSTRIES: Closes Palmer Carton Plant to Save $1.2 Mil. CAROLINA TOBACCO: Hires Cline Williams as Litigation Counsel CAROLINA TOBACCO: Edward Hostmann Approved as Financial Advisor CATHOLIC CHURCH: Spokane Wants to Hire BMC Group as Claims Agent CATHOLIC CHURCH: Tucson Wants to Assume Catholic Foundation Lease CHI-CHI'S: Wants to Pay $4.2 Million to Five Hepatitis A Victims CHIQUITA BRANDS: S&P Rates $275 Million Bank Loans at B+ CII CARBON: Moody's Rates $270MM Senior Secured Term Loan at B1 CII CARBON: S&P Rates Proposed $270 Mil. Sr. Sec. Facility at B+ CIMAREX ENERGY: S&P Rates $320 Million Senior Notes at B+ CITIGROUP MORTGAGE: Fitch Holds Low-B Ratings on 2 Class B Certs. CONSTELLATION BRANDS: S&P Affirms BB Rating and Removes Watch CREDIT SUISSE: Fitch Affirms Low-B Ratings on $64M Mortgage Certs. CREDIT SUISSE: Moody's Rates Class B-2 Sub. Certificates at Ba2 CSC HOLDINGS: Moody's Reviews B1 Rating of $4.2 Bil. Unsec. Notes DLJ MORTGAGE: Fitch Affirms BB- Rating on $17.8MM Class B-4 Certs. DOMTAR INC: Moody's Downgrades Sr. Unsecured Debt Rating to Ba2 DRESSER INC: Weak Credit Measures Prompt S&P to Cut Rating to B+ ENRON CORP: Inks Stipulation Allowing Calpine's $52 Million Claim ENRON CORP: Gets Court Approval on Ecoelectrica Settlement Pact EPOCH 2002-2: Moody's Downgrades $12M Class III Rate Notes to Ba3 EXIDE TECHNOLOGIES: Sandell, et al., Unloads Equity Stake FALCON PRODUCTS: Drafts Joint Plan with Oaktree & Whippoorwill FALCON PRODUCTS: Audit Committee Concludes Investigation FEDERAL-MOGUL: District Ct. Lifts Navigant Fee Cap for Estimation FORD MOTOR: Will Reduce Salary Related Costs Due to Weak Outlook FMC CORPORATION: Executes New $850 Million Unsec. Credit Agreement GARDEN RIDGE: Has Until June 30 to Decide on 32 Remaining Leases GENEVA STEEL: Ch. 11 Trustee Hires Ray Quinney as Local Counsel GLASS GROUP: Committee Taps FTI Consulting as Financial Advisors GOODYEAR TIRE: Fitch Junks Proposed $400 Mil. Senior Unsec. Notes GOODYEAR TIRE: Moody's Rates New $400M Sr. Unsecured Notes at B3 HARRAH'S ENT: Fitch Rates New $4 Billion Credit Facility at BBB- HEALTHSOUTH CORP: Will File 2000 to 2003 Annual Report by June 29 HELLER FINANCIAL: Fitch Holds Junk Rating on $7.6M Class M Certs. HUFFY CORPORATION: Wants More Time to File Chapter 11 Plan INDOSUEZ CAPITAL: Moody's Upgrades $148M Rate Notes to A2 from Ba3 INFOUSA INC: Moody's Affirms $50M Credit Facility Rating at Ba3 INTERSTATE BAKERIES: Selling Boise Lot for $2.3M to R.W. Van Auker INTERSTATE BAKERIES: Selling Sta. Maria Lot for $720K to N. Shore JEROME DUNCAN: Files Chapter 11 Petition in E.D. Michigan JEROME DUNCAN: Voluntary Chapter 11 Case Summary KANSAS GAS: S&P Rates $320 Million Secured Bonds at BB- KMART CORP: Ruth Clingan Wants Stay Lifted to Liquidate Claim KMART CORP: Sears Discloses 13-Week Revenue Ended April 30 KRISPY KREME: Five Officers Resign While One Retires LIFEPOINT HOSPITALS: Loan Add-On Prompts S&P to Hold Ratings LIFEPOINT HOSPITALS: Moody's Affirms Credit Facility's Ba3 Rating M. ANTHONY PROPERTIES: Voluntary Chapter 11 Case Summary MAGELLAN MIDSTREAM: Moody's Rates Proposed $275M Term Loan at Ba3 MANUFACTURING TECH: U.S. Trustee Picks 7-Member Committee MANUFACTURING TECHNOLOGY: Files Schedules of Assets & Liabilities MASTR ALTERNATIVE: Moody's Rates Class B-4 2005-4 Certs. at Ba2 MASTR ALTERNATIVE: Moody's Rates Class B-4 2005-3 Certs. at Ba2 MAYTAG CORP: Bain Proposal Cues Fitch to Affirm BB Rating MCI INC: Deephaven Solicits Proxy Votes Against MCI/Verizon Merger MEDEX INC: Smiths Purchase Cues Moody's to Withdraw Debt Ratings MERIDIAN AUTOMOTIVE: Deutsche Bank Offers $75 Mil. DIP Financing MERIDIAN AUTOMOTIVE: Can Pay $300,000 Work Fee to Deutsche Bank MERIDIAN AUTOMOTIVE: Wants to Release JPMorgan From Claims MIRANT: MAGi Panel Presents Issues on Impairment Order Appeal MUELLER GROUP: Moody's Reviews Junk Sr. Subordinated Notes Rating MYLAN LABORATORIES: Moody's Rates $975 Million Debts at Ba1 NEFF CORP: S&P Rates Proposed $245 Million Sr. Sec. Notes at B- NORCROSS SAFETY: Moody's Junks Proposed $128.7M Fixed Rate Notes NORTHWEST AIRLINES: Moody's Junks Corporate Family Rating O-CEDAR HOLDINGS: Court Okays Rule 2004 Probe on Stonebridge OWENS CORNING: Asks Court to Okay Technical Changes to DIP Order PLAZA GARDENS: Case Summary & 6 Largest Unsecured Creditors PROVIDIAN GATEWAY: Acquisition Plan Cues Moody's to Review Ratings PROXIM CORPORATION: Taps Pachulski Stang as Bankruptcy Counsel QUEENSWAY FIN'L: Creditors Must File Proofs of Claim by Aug. 12 RAINBOW NATIONAL: Moody's Reviews $500MM Sub. Notes' Junk Rating REGIONAL DIAGNOSTICS: Committee Taps Capstone as Financial Advisor REGIONAL DIAGNOSTICS: Panel Hires Traub Bonacquist as Co-Counsel RHODES INC: Files Joint Plan of Reorganization in N.D. Georgia ROYSTER-CLARK: Moody's Junks $200 Million First Mortgage Notes SAINTS MEMORIAL: Moody's Upgrades Long-Term Rating to Ba1 from Ba2 SCOTIA PACIFIC: Moody's Junks $867.248 Million Securities Rating SOUTH DAKOTA: Case Summary & 40 Largest Unsecured Creditors SPIEGEL INC: Agrees to Fund $1.365M Steele & Cannataro Reserve STATE STREET HOTEL: Voluntary Chapter 11 Case Summary STELCO INC: Will Seek Extension of Stay Period to Sept. 23 STRUCTURED ASSET: Moody's Rates Class B4 & B5 Certs. at Low-Bs STRUCTURED ASSET: Moody's Rates Class B1 Sub. Certs. at Ba1 TOWER AUTOMOTIVE: Wants to Advance Fees for ERISA Class Actions TOWER AUTOMOTIVE: New Center Wants Stay Lifted To Effect Set-Off UAL CORPORATION: Court Extends Plan Filing Period to Sept. 1 USG CORP: Triage Management Resigns from Equity Committee UNITED SUBCONTRACTORS: Moody's Rates Proposed $305M Facility at B1 VERY LTD: Has Until Sept. 30 to Decide on Madison Avenue Lease WALTER INDUSTRIES: Acquisition Plan Cues Moody's to Review Ratings WESTPOINT STEVENS: Aretex LLC Wants Escrow Order Dissolved XERIUM TECH: March 31 Balance Sheet Upside-Down by $50.9 Million YUKOS OIL: Losses in First 2005 Quarter Exceed Rub4 Billion ZIM CORPORATION: Negative Cash Flow Spurs Going Concern Doubt * Alfred M. King & Robert E. Kleeman Join Marshall & Stevens * Richard N. Tilton Joins Riker Danzig as Counsel * Seth Palatnik Leads Huron Consulting's Valuation Practice * The Garden City Group Promotes Jennifer M. Keough to Senior VP ********* AES CORPORATION: Improved Liquidity Cues Fitch to Lift Ratings -------------------------------------------------------------- Fitch Ratings has upgraded and removed the ratings of AES Corporation from Rating Watch Positive, where it was initially placed on Jan. 18, 2005 pending review of the company's year-end financial results. The Rating Outlook is Stable. Following the completion of its review, Fitch's upgrade reflects the significant progress AES had made in retiring parent company recourse debt and improving liquidity. In addition, AES has refinanced several near term debt maturities and extended the company's debt maturity profile. The company has successfully accessed both the debt and equity markets in 2004 and 2003. Furthermore, AES has in place a $450 million revolving credit facility which significantly improves the company's liquidity position. Finally, management has affirmed the goal of continued debt reduction committing to $600 million in parent company debt retirements in 2005. In this regard, AES called for early redemption approximately $112 million of notes in May 2005. These notes were redeemed in full on June 1, 2005. While AES has made significant progress in reducing debt and improving liquidity, Fitch recognizes that the company's management emphasis has shifted from debt reduction to a resumed focus on growth. AES recently made two acquisitions in the domestic wind power generation sector. While these acquisitions have been modest, Fitch notes that wind is a new technology for AES and as such, raises some execution risk. Internationally, AES has indicated that growth will be focused on platform extensions (i.e. expansion opportunities around existing assets) and 'emergent' countries (i.e. countries which are approaching developed nation status). Management has stressed that such expansion will be funded with a prudent mix of equity and debt. Fitch's rating and Outlook would be adversely affected if AES' future investments result in escalating parent company leverage. This rating action does not affect the ratings of other AES affiliates rated by Fitch listed below. In general, these rated entities are bankruptcy remote from AES by virtue of their legal structure or by virtue of their country of location. These entities include: * AES Clesa * AES Eastern Energy * AES Gener * AES Puerto Rico * AES Tiete * Electricidad de Caracas * Eletropaulo Metropolitana Eletricidade de Sao Paulo Fitch placed the ratings of IPALCO Enterprises Inc., and Indianapolis Power & Light Company on Rating Watch Positive on Jan. 18, 2005. The ratings of these entities which are potentially affected by the AES ratings upgrade will be resolved in the near future. AES is a leading global power company, with 2004 sales of $9.5 billion. AES operates in 27 countries, generating 44,000 megawatts of electricity through 124 power facilities and delivers electricity through 15 distribution companies. Fitch has upgraded these ratings: AES Corporation -- Senior secured credit facility to 'BB+' from 'BB'; -- Junior secured notes to 'BB+' from 'B+'; -- Senior unsecured notes to 'B+' from 'B'; -- Senior subordinated notes to 'B' from 'B-'; -- Convertible notes to 'B' from 'B-'; -- Rating Outlook Stable. AES Trust III -- Trust preferred securities to 'B-' from 'CCC+' -- Rating Outlook Stable. AES Trust VII -- Trust preferred securities to 'B-' from 'CCC+' -- Rating Outlook Stable. ACCEPTANCE INSURANCE: Exclusive Plan Filing Intact Until Sept. 5 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Nebraska extended until Sept. 7, 2005, Acceptance Insurance Companies, Inc.'s period within which it alone can file a chapter 11 plan. The Court also extended until Nov. 7, 2005, the Debtor's exclusive period to solicit acceptances of that plan. The Debtor has an interest in Acceptance Insurance Company and a Takings Claim against the United States of America. The Debtor is still continuing to diligently manage and resolve claims within Acceptance Insurance to maximize the value of the company for the benefit of the Debtor's creditors. The claims resolution at Acceptance Insurance is not yet at a stage that will permit the Debtor to formulate an optimal chapter 11 plan. The Takings Claim dispute is still in the initial stages of litigation and that will also affect the formulation of a chapter 11 plan. The Debtor related that the Unsecured Creditors Committee has consented to the requested extension of the exclusive periods as proof that the Debtors' request is not a negotiating tactic on its part to force creditors and other parties-in-interest into accepting an unacceptable plan. Headquartered in Council Bluffs, Iowa, Acceptance Insurance Companies Inc. -- http://www.aicins.com/-- owns, either directly or indirectly, several companies, one of which is an insurance company that accounts for substantially all of the business operations and assets of the corporate groups. The Company filed for chapter 11 protection on Jan. 7, 2005 (Bankr. D. Neb. Case No. 05-80059). The Debtor's affiliates -- Acceptance Insurance Services, Inc., and American Agrisurance, Inc. -- filed separate chapter 7 petitions (Bankr. D. Nebr. Case Nos. 05-80056 and 05-80058) on Jan. 7, 2005. John J. Jolley, Esq., at Kutak Rock LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $33,069,446 in total assets and $137,120,541 in total debts. ADELPHIA COMMS: Founder Sentenced to 15 Years in Prison ------------------------------------------------------- Judge Leonard Sand of the U.S. District Court for the Southern District of New York sentenced John Rigas, the 80-year old founder of Adelphia Communications Corporation, to 15 years in prison for looting hundreds of millions of dollars from the company. His son, Timothy Rigas, Adelphia's former chief financial officer, got 20 years. The Rigases are ordered to surrender on September 19 to begin their prison terms. Judge Sand said John Rigas' sentence may be reduced should he become terminally ill in the next two years. John Rigas is suffering from bladder cancer and a heart ailment. Bloomberg News reports that Judge Sand would have sentenced John Rigas to a longer term if not for his age and poor health. John Rigas faced a maximum of 215 years behind bars, effectively a life sentence, David Glovin of Bloomberg wrote. According to Mr. Glovin, before Judge Sand passed the sentence, John Rigas said, "If I did anything wrong, I apologize. It's in your hands, and in God's hands. In my heart and conscience, I'll go to my grave really and truly believing that did nothing but to improve conditions for my employees." The New York Times notes that Judge Sand found John Rigas' insistence of innocence "unacceptable." Judge Sand is not convinced that there was no blatant fraud. 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. 97; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: Reports Forfeiture of Rigas Securities to Gov't. ---------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, Adelphia Communications Corp. reports that under a Consent Order entered by the U.S. District Court for the Southern District of New York on June 8, 2005, all securities of ACOM and its subsidiaries owned by the Rigas family were forfeited to the United States. Pursuant to ACOM's records, the forfeited securities beneficially owned by members of the Rigas family include: -- 60,751,992 shares of Class A Common Stock, par value $0.01 (representing around 22.8% of the outstanding shares of Class A Common Stock based on the shares of Class A Common Stock outstanding as of April 30, 2005); and -- all 25,055,365 outstanding shares of Class B Common Stock, par value $0.01. The Class B Common Stock is a "super-voting" common stock that entitles the holders to 10 votes per share. 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. 97; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMC ENTERTAINMENT: Inks Merger Agreement with Loews Cineplex ------------------------------------------------------------ AMC Entertainment Inc. and Loews Cineplex Entertainment Corporation entered into a definitive merger agreement that would result in the combination of their businesses. The merger agreement also provides for the merger of their respective holding companies, Marquee Holdings Inc. and LCE Holdings, Inc., with Marquee Holdings Inc., which is controlled by affiliates of J.P. Morgan Partners, LLC and Apollo Management, L.P., continuing as the holding company for the merged businesses. The current stockholders of LCE Holdings, Inc., including affiliates of Bain Capital Partners, The Carlyle Group and Spectrum Equity Investors, would hold approximately 40% of the outstanding capital stock of the continuing holding company. The merged company, to be called AMC Entertainment Inc., will be headquartered in Kansas City, Missouri, and will own, manage or have interests in approximately 450 theatres with about 5,900 screens in 30 states and 13 countries. Peter C. Brown, AMC Chairman of the Board, Chief Executive Officer and President, will remain in this role in the merged company. When combined, the company will have approximately 24,000 associates serving more than 280 million guests annually. An integration committee will be formed in which Travis E. Reid, President and Chief Executive Officer of Loews Cineplex Entertainment Corporation, and Brown will serve as co-chairs. The integration committee also will include representatives of the two sponsor groups. "This merger is a combination of the oldest and most respected names in the business -- AMC and Loews," said Brown. "The transaction provides us with a unique opportunity to blend the best practices of two remarkable organizations as we create an extraordinary company." Mr. Reid said: "This merger is a historic moment in the exhibition industry. We are bringing together two companies with long- standing traditions of innovation and leadership, as well as cultures that focus on the highest quality guest service. Peter and his team have done a great job leading AMC, and I look forward to working with them." The companies plan to refinance their senior credit facilities in connection with the closing of the merger. The merger will not constitute a change of control for purposes of the outstanding senior notes of Marquee Holdings Inc. or the outstanding senior notes or senior subordinated notes of AMC Entertainment Inc. While it has not yet been determined whether the merger will require a change of control repurchase offer under Loews Cineplex Entertainment Corporation's outstanding 9% Senior Subordinated Notes due 2014, the companies have secured commitments to refinance such notes to the extent that such an offer is required under the indenture governing such notes. Completion of the merger is subject to the satisfaction of customary closing conditions for transactions of this type, including antitrust approval and completion of financing. It is anticipated that the merger will close within six to nine months. About J.P. Morgan Partners, LLC J.P. Morgan Partners, LLC -- http://www.jpmorganpartners.com/-- is a leading private equity firm with over $12 billion in capital under management as of March 31, 2005. Since its inception in 1984, JPMP has invested over $15 billion in consumer, media, energy, industrial, financial services, healthcare, hardware and software companies. With approximately 95 investment professionals in six principal offices throughout the world, JPMP has significant experience investing in companies with worldwide operations. JPMP is a private equity division of JPMorgan Chase & Co. (NYSE: JPM), one of the largest financial institutions in the United States, and is a registered investment adviser with the Securities and Exchange Commission. About Apollo Management, L.P. Apollo Management, L.P., founded in 1990, is among the most active and successful private investment firms in the United States in terms of both number of investment transactions completed and aggregate dollars invested. Since its inception, Apollo Management, L.P. has managed the investment of an aggregate of approximately $13 billion in equity capital in a wide variety of industries, both domestically and internationally. About Bain Capital Partners Bain Capital -- http://www.baincapital.com/-- is a leading global private investment firm that manages several pools of capital including private equity, venture capital, high-yield assets, mezzanine capital and public equity with more than $25 billion in assets under management. Since its inception in 1984, Bain Capital has made private equity investments and add-on acquisitions in over 225 companies around the world, including media and entertainment companies Warner Music Group, Loews Cineplex Entertainment, ProSiebienSat1. Media AG, and Artisan Entertainment. Headquartered in Boston, Bain Capital has offices in New York, London and Munich. About The Carlyle Group The Carlyle Group -- http://www.carlyle.com/-- is a global private equity firm with nearly $30 billion under management. Carlyle generates extraordinary returns for its investors by employing a conservative, proven and disciplined approach. Carlyle invests in buyouts, venture capital, real estate and leveraged finance in North America, Europe and Asia, focusing on aerospace & defense, automotive & transportation, consumer & retail, energy & power, healthcare, industrial, technology & business services and telecommunications & media. Since 1987, the firm has invested $13.4 billion of equity in 396 transactions. The Carlyle Group employs more than 560 people in 14 countries. In the aggregate, Carlyle portfolio companies have more than $30 billion in revenue and employ more than 131,000 people around the world. About Spectrum Equity Investors Spectrum Equity Investors -- http://www.spectrumequity.com/-- is a private equity investor in established companies in the media, communications, information technology, and information and business services industries. Founded in 1994, Spectrum is one of the largest and fastest-growing private equity investment firms worldwide. Spectrum manages private equity funds representing $4 billion in committed capital. About LCE Holdings and Loews Cineplex LCE Holdings, Inc. -- http://www.enjoytheshow.com/-- is a holding company that conducts its business through its subsidiary Loews Cineplex Entertainment Corporation. Loews Cineplex Entertainment Corporation is one of the world's leading film exhibition companies that owns, operates or, through its subsidiaries and joint ventures, has an interest in 221 theatres with 2,218 screens in the United States, Mexico, South Korea and Spain. Loews Cineplex Entertainment Corporation, headquartered in Manhattan. About Marquee Holdings and AMC Entertainment Marquee Holdings Inc. -- http://www.amctheatres.com/-- is a holding company that conducts its business through its subsidiary AMC Entertainment Inc. AMC Entertainment Inc. is a leader in the theatrical exhibition industry. Through its circuit of AMC Theatres, AMC Entertainment Inc. operates 229 theaters with 3,546 screens in the United States, Canada, France, Hong Kong, Japan, Portugal, Spain and the United Kingdom. AMC Entertainment Inc., headquartered in Kansas City, Missouri. * * * As reported in the Troubled Company Reporter on Aug. 5, 2004, Standard & Poor's Ratings Services revised its outlook on AMC Entertainment, Inc., to stable from positive, based on the increased leverage that will result from the pending sale and recapitalization of the company. At the same time, Standard & Poor's affirmed its ratings, including its 'B' corporate credit rating, on the company. In addition, Standard & Poor's assigned its 'B' corporate credit rating to Marquee Holdings, Inc., and its subsidiary Marquee, Inc. Upon completion of the sale of AMC, Marquee, Inc., will be merged with AMC. All of these companies are analyzed on a consolidated basis. AMERICAN HEARTLAND: SEC Files $2.5 Mil. Fraud Case in N.D. Tex. --------------------------------------------------------------- On Apr. 7, 2005, the Securities and Exchange Commission filed an emergency action in the United States District Court for the Northern District of Texas against Philip D. Phillips dba American Heartland Sagebrush Securities Investments, Inc., and Sagebrush Securities, American Heartland, Inc. The Commission charged that Mr. Phillips, a securities broker, bilked investors out of approximately $2.5 million on the false promise that he would invest their funds in safe income-generating securities. The Court granted a temporary restraining order, asset freeze and other emergency relief against Mr. Phillips and Sagebrush. In its complaint, the Commission alleges that Mr. Phillips lured investors with a number of misrepresentations: 1) Mr. Phillips portrayed Sagebrush to investors, falsely, as a brokerage firm; 2) Mr. Phillips falsely promised investors in "consultations" with them that he will purchase specific securities in their names; 3) Mr. Phillips assured the investors, falsely, that their funds will remain safe, and claimed, falsely, that their "Sagebrush accounts" are SIPC insured; and 4) on a monthly or quarterly basis, as "evidence" of the purported success and safety of the investments, Mr. Phillips prepared and delivered to investors bogus "account statements" purportedly reflecting the composition and value of their investments. The Commission further alleges that Mr. Phillips fraudulently failed to disclose to investors that he misappropriated a large portion of the their funds, and that he did not, in fact, purchase or hold in the investors' names the securities reflected on the investors' "account statements." The Commission also named Kirby J. Curry as a relief defendant in its complaint, based on his alleged improper receipt of investor funds. The Commission seeks to freeze any investor funds under Mr. Curry's control. The Commission alleges in its complaint that Mr. Phillips, dba Sagebrush, violated Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief that has been granted by the Court, the Commission seeks against Mr. Phillips a permanent injunction, disgorgement plus prejudgment interest, and civil money penalties. [SEC v. Philip D. Phillips, et al., Civil Action No. 2-05CV-107-J, USDC, NDTX (Amarillo Division)] (LR-19178). On June 20, 2005, the U.S. District Court for the Northern District of Texas, Amarillo Division, authorized Walter O'Cheskey, the appointed Receiver, to file a chapter 11 petition. American Heartland Sagebrush Securities Investments, Inc., holds investor funds. The Debtor is under receivership and Walter O'Cheskey is the appointed Receiver. The Debtor filed for chapter 11 protection on June 21, 2005 (Bankr. N.D. Tex. Case No. 05- 50761). Max Ralph Tarbox, Esq., at Law Offices of Max R. Tarbox represent the Debtor. When the Debtor filed for protection from its creditors, it listed $185,300 in assets and $1,172,892 in debts. AMERICAN HEARTLAND: Case Summary & Known Creditors -------------------------------------------------- Debtor: American Heartland Sagebrush Securities Investments, Inc. dba Sagebrush Walter O'Cheskey, Receiver P.O. Box 64456 Lubbock, Texas 79464 Bankruptcy Case No.: 05-50761 Type of Business: The Debtor holds investor funds. The Debtor is under receivership and Walter O'Cheskey is the appointed Receiver. Chapter 11 Petition Date: June 21, 2005 Court: Northern District of Texas (Lubbock) Judge: Robert L. Jones Debtor's Counsel: Max Ralph Tarbox, Esq. Law Offices of Max R. Tarbox 3223 South Loop 289, Suite 414 Lubbock, Texas 79423 Tel: (806) 780-5955 Financial Condition as of June 21, 2005: Total Assets: $185,300 Total Debts: $1,172,892 A full-text copy of the 10-page list of the Debtor's known creditors is available for a fee at: http://www.researcharchives.com/bin/download?id=050622023701 ANTEON INTERNATIONAL: Moody's Upgrades $365MM Debt Rating to Ba2 ---------------------------------------------------------------- Moody's Investors Service upgraded ratings on Anteon International Corporation one notch, with both the Corporate Family Rating (formerly known as the "senior implied rating") and the rating on the senior secured credit facility moving to Ba2. The ratings outlook has been changed to stable. The action applies to these ratings: * $200 million senior secured Revolving Credit Facility, due 2008, upgraded to Ba2 from Ba3 * $165 million senior secured Term Loan B, due 2010, upgraded to Ba2 from Ba3 * Corporate Family Rating, upgraded to Ba2 from Ba3 * Senior Unsecured Issuer rating, upgraded to Ba3 from B1 The rating action reflects Anteon's strong financial performance over the last two years. The company's performance continues to benefit from United States government spending on defense and homeland security and increased trends toward government outsourcing of information technology and other services. Anteon experienced overall sales growth of 21.7% in 2004 (14.2% organic) and 26.2% in 2003 (16.2% organic). Operating margin also improved by about 30 basis points in both 2003 and 2004, reaching 8.4% for 2004. Results for the fiscal first quarter ended March 31, 2005 were also positive, with revenues up 21.5% and organic growth up 17.1% year over year. Anteon has improved its credit profile as its business has improved. Total debt to EBITDA improved to about 1.4x in the twelve months ended March 31, 2005 from about 1.8x at year-end 2003. EBIT interest coverage has improved to about 13.4x for the twelve months ended March 31, 2005 from about 3.4x at year-end 2003. Free cash flow from operations to debt was 39% for the twelve months ended March 31, 2005 and 21.6% in the year ended December 31, 2003. Quarterly free cash flows have been volatile due to the timing of collection of accounts receivable from government agencies. The ratings benefit from Anteon's diverse customer base of over 800 active contracts at more than 50 US government agencies (mostly within the Department of Defense). Anteon also benefits from a historical record of winning over 90% of its contracts for which it has been required to recompete. Anteon has an estimated remaining contract value of about $6.4 billion, which includes a funded backlog of $871 million at March 31, 2005. The ratings are limited by: * Anteon's history of acquisitions and the expectation that future acquisitions will likely increase leverage; * the company's modest size relative to its larger industry competitors; and * participation in the highly competitive market for information technology services in which capital requirements are limited and barriers to entry low. In addition, Anteon derives approximately 98% of its revenues from the US government including 89% from the Department of Defense. The largest customer group is the US Navy, which accounted for about 45% of revenues in 2004. The top 10 contracts accounted for 44% of revenue in 2004. Government contracts can be terminated at the will of the US government in response to changes in policies, programs, or administrations. The Ba2 rating on the credit facility, rated the same as the corporate family rating, reflects the preponderance of senior secured debt in the capital structure. The company's existing and future domestic subsidiaries unconditionally guarantee repayment of amounts borrowed. Substantially all assets of the company and its subsidiaries, including the capital stock of the company's subsidiaries, secure borrowings under the facility. The stable outlook anticipates that Anteon will continue to benefit from the US government's increased spending on defense and homeland security, particularly in the areas of operations and maintenance, and increasing utilization of outsourcing of services in the context of an aging government workforce. Moody's expects the company to pursue acquisitions that are modest in size and complementary to Anteon's existing businesses. Moody's also expects that acquisitions are likely to be funded in a way that results in total debt/EBITDA of 2.5x or less. The ratings could be upgraded, if Anteon exhibits continued organic sales growth, consistent free cash generation, and a stable credit profile over the intermediate term, within the context of modest acquisition activity. The ratings could be downgraded, if Anteon: * increases leverage due to a large, debt-financed acquisition or recapitalization that substantially weakens credit metrics; * or suffers a substantial deterioration in revenues and free cash flows due to declines in US defense spending, a loss of key government contracts; * or an inability to pursue new government contracts. Headquartered in Fairfax, Virginia, Anteon International Corporation provides information technology solutions and advanced systems engineering services to US government clients. The company also designs, integrates, maintains, and upgrades information systems for: * national defense, * intelligence, * emergency response, and * other high priority government missions. Revenues for the twelve months ended March 31, 2005 were approximately $1.3 billion. ATA AIRLINES: Balks at Goodrich's Motion to Allow $2.2MM Claim -------------------------------------------------------------- As previously reported in the Troubled Company Reporter on May 13, 2005, Goodrich asked the U.S. Bankruptcy Court for the Southern District of Indiana to allow it a $2,242,380 administrative expense claim for the value of the spare wheels and brakes and cash benefits it has provided to ATA Airlines with respect to aircraft that the Debtor has determined it no longer requires. Debtors Object Goodrich Corporation and ATA Airlines, Inc., are parties to a Wheel and Brake Service and Purchase Agreement, dated as of June 23, 2000. Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis, Indiana, tells Judge Lorch that the Wheel and Brake Service and Purchase Agreement, dated as of June 23, 2000, between Goodrich Corporation and ATA Airlines, Inc., has not expired. Goodrich continues to provide services; ATA is current in its postpetition payments for goods and services purchased under the Agreement. The Wheel & Brake Agreement has not been assumed or rejected under Section 365 of the Bankruptcy Code. Ms. Hall notes that, with absolutely no explanation as to how it arrived at the amount, Goodrich asserts an administrative expense claim and demands immediate payment of $2,242,380 under Sections 503 and 507. Ms. Hall points out that even if ATA Airlines agrees to repay Goodrich for prepetition amounts due, ATA Airlines is under no obligation to pay those amounts immediately and certainly not as administrative expense. "It is completely unsupported in the law to award an administrative claim and to order payment that essentially reimburses Goodrich for prepetition services provided under an executory contract and not for any postpetition benefits conferred," Ms. Hall says. Ms. Hall also argues that Goodrich fails to consider the impact of Section 365 in the time between the Petition Date and the assumption or rejection of the contract. The court in In re Pub. Serv. Co. of N.H., 884 F.2d 11, 14 (1st Cir.1989), held that an executory contract generally remains in effect pending assumption or rejection by the debtor. The courts in Krafsur v. UOP (In re El PasoRefinery, L.P.), 196 B.R. 58, 72 (Bankr.W.D.Tex.1996) and in In re National Steel Corp., 316 B.R. at 305, held that the non- debtor party must continue to perform under the contact prior to assumption or rejection, but the debtor is not bound by the provisions of the executory contract unless the contract is subsequently assumed. According to Ms. Hall, Goodrich has not asserted a valid administrative expense claim. The non-debtor is entitled to an administrative expense claim for any postpetition services beneficial to the estates. Moreover, ATA is current in paying its postpetition obligations. Assuming that Goodrich could assert a claim based upon the terms of the Agreement, Ms. Hall contends that Goodrich still fails both prongs of the Seventh Circuit's two-part test to determine whether a claim should be granted administrative priority. Under the test, the claim will be afforded Section 503 priority if the debt both: (1) arises from a transaction with the debtor; and (2) is beneficial to the debtor in the operation of the business. Goodrich asserts that it has "provided a postpetition benefit to the estate in the amount of the value of the spare wheels and brakes and cash benefits it has provided to ATA with respect to aircraft that ATA has determined it no longer requires." However, Ms. Hall says those equipments and cash benefits in connection with the rejected aircraft were provided prior to the Petition Date. Hence, the claim asserted by Goodrich arises from a prepetition contract with ATA. Goodrich attempts to argue that the "actual and necessary expenses" may include "costs ordinarily incident to operation of a business" and cites Reading Company v. Brown, 391 U.S. 471, 483-84 (1968) for this proposition. In the Reading Case, the Supreme Court ruled that a company operating in bankruptcy that commits a tort is responsible for the damages and that tort claims will not be subordinated or disallowed as being not necessary to the preservation of the estate. Ms. Hall tells Judge Lorch that the Reading Case has nothing to do with a contract party asserting an administrative claim as an alleged right for reimbursement of certain prepetition payments under an executory contract. "Goodrich was not an innocent bystander injured by ATA's negligence. Goodrich occupies the same position as hundreds of others of ATA's creditors and is merely seeking to recover on a claim based upon a prepetition executory contract that has neither been assumed or rejected." The Official Committee of Unsecured Creditors supports the Debtors' argument. 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) AVADO BRANDS: Administrative Claims Must Be Filed by July 8 ----------------------------------------------------------- The United States Bankruptcy Court for the Northern District of Texas, Dallas Division, set July 8, 2005, as the deadline for all creditors owed money on account of administrative claims arising after February 4, 2004, against Avado Brands, Inc., to file proofs of claim. Creditors must file written proofs of claim on or before the July 8 Administrative Claims Bar Date and those forms must be sent either by first class mail, overnight delivery or personal service to the Clerk of Court, U.S. Bankruptcy Court for the Northern District of Texas, United States Courthouse, 1100 Commerce Street located in Dallas, Texas. Copies must be sent to: (a) Avado Brands, Inc., Administrative Claims c/o Bankruptcy Services, LLC Attn: David Malo 757 3rd Avenue, Third Floor New York, NY 10017 (b) Avado Brands, Inc. Hancock at Washington Madison, GA 30650 Attn: General Counsel (c) Cox Smith Matthews Incorporated 112 East Pecan Street, Suite 1800 San Antonio, TX 78205-1521 Attn: Deborah D. Williamson, Esq. Thomas Rice, Esq. Tel: (210) 554-5500 Fax: (210) 226-8395 (d) Skadden, Arps, Slate, Meagher & Flom LLP 333 West Wacker Drive, Suite 2100 Chicago, IL 60606-1285 Attn: George N. Panagakis, Esq. Timothy P. Olson, Esq. Nathan L. Stuart, Esq. Tel: (312) 407-0700 Fax: (312) 407-0411 (e) United States Trustee 1100 Commerce Street, Room 9C60 Dallas, TX 75242 Attn: George F. McElreath, Esq. (f) Counsel for the Creditor's Committee: Anderson Kill & Olick, P.C. 1251 Avenue of the Americas New York, NY 10020 Attn: Andrew Rahl, Esq. Andrea Pincus, Esq. -- and -- Munsch Hardt Kopf & Harr, P.C. 4000 Fountain Place 1445 Ross Avenue Dallas, TX 75202 Attn: E. Lee Morris, Esq. (g) Counsel for the Postpetition Lenders: Goodwin Procter Exchange Place 53 State Street Boston, MA 02109 Attn: Jon D. Schneider, Esq. --and -- Vinson & Elkins LLP 3700 Trammell Crow Center 2001 Ross Avenue Dallas, TX 75201-2975 Attn: Paul Heath, Esq. Headquartered in Madison, Georgia, Avado Brands, Inc. -- http://www.avado.com/-- owns and operates two proprietary brands comprised of 102 Don Pablo's Mexican Kitchens and 37 Hops Grillhouse & Breweries. The Company and its debtor-affiliates filed a voluntary chapter 11 petition on February 4, 2004 (Bankr. N.D. Tex. Case No. 04-1555). Deborah D. Williamson, Esq., and Thomas Rice, Esq., at Cox & Smith Incorporated, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $228,032,000 in total assets and $263,497,000 in total debts. Judge Steven Felsenthal confirmed Avado's Modified Plan of Reorganization on April 26, 2005, and that Plan became effective on May 19, 2005. AZCO MINING: Files Amended 2003 Financial Statements ---------------------------------------------------- Azco Mining Inc. (OTC: AZMN) provided an update on its progress in bringing its financial reporting into compliance with regulatory requirements. The company recently filed an amended 10-K/A annual report for the fiscal year ended June 30, 2003. The company's auditor has completed the audit of the annual financial statement for the period ending June 30, 2004. The company expects to be able to file the 2004 annual report in July 2005, followed by the quarterly reports for fiscal 2005, and to be able to timely file its fiscal 2005 annual financial statement in September 2005. Upon regaining currency in its financial reporting, the company intends to apply for resumption of quotation of its stock on the OTC Bulletin Board. Dr. Pierce Carson, CEO, stated, "Bringing the financial reports current is an important element in management's plan to place the company on an improved financial footing. Other elements of the plan include raising of interim funding, restructuring of debt with secured creditors and arrangement of $4.0-$6.0 million for development of our mica and gold projects." The company has provided for interim financing of its activities by selling mica, on a limited basis, to key customers in the plastics and cosmetic industries, and by selling its common stock to accredited investors in private placements. Dr. Carson said the company has received verbal, non-binding expressions of interest for a larger project financing once it becomes compliant in the filing of its financial statements and its stock resumes trading on the OTC Bulletin Board. He stated, "If we are able to continue to secure interim financing, restructure debt and in 2005 obtain the additional required project financing, we believe that in 2006 the company could be in a position to begin profitable mining operations." The company announced also that a long-term supportive shareholder, a Swiss-based industrialist, recently had increased his stake in the company to more than 10 percent. Two insiders also hold more than 10 percent of the company's stock. The respective shareholdings were disclosed in Section 13-G and 13-D filings. Going Concern Doubt In its Form 10-K for the year ended June 30, 2003, the Company reported that it: * has suffered recurring losses from operations, * is currently in default of all of its financial obligations, and * will require substantial additional funds to continue and develop operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Defaults In September 2001, Azco received a one-year $200,000 loan, currently bearing interest at 12% per annum, from a sophisticated investor and shareholder, Luis Barrenchea. In connection with this loan, Azco issued a warrant to purchase 250,000 shares of Azco's common stock at $.40 per share. In September 2002, the loan was restructured and was payable in September 2003. It currently is in default. The warrant vested in November 2001 and was exercisable through September 4, 2003. In October 2001, Azco received a one-year $100,000 loan, bearing interest at 12% per annum, from Mr. Barrenchea. In connection with this loan, Azco issued a warrant to purchase 125,000 shares of Azco's common stock at $.40 per share. In October 2002, the loan was restructured and was payable in October 2003. It currently is in default. The warrant vested in December 2001 and was exercisable through October 19, 2003. In December 2001, Azco received a one-year $100,000 loan, bearing interest at 12% per annum, from Mr. Barrenchea. In connection with this loan, Azco issued a warrant to purchase 125,000 shares of Azco's common stock at $.40 per share. In December 2002, the loan was restructured and was payable in December 2003. It currently is in default. The warrant vested in February 2002 and was exercisable through December 3, 2003. In March 2001, Lawrence G. Olson, Azco's Chairman and former President and CEO, jointly with his wife, made an unsecured loan to Azco in the amount of $800,000 at an interest rate equal to the prime rate of interest as reported by Imperial Bank plus one percentage point. In conjunction with the loan, Mr. Olson received a warrant to purchase 300,000 shares of common stock for $0.70 per share. In October 2001, Azco restructured the $800,000 loan agreement with Mr. Olson. Mr. Olson agreed to extend the note payable on March 15, 2003, in consideration for 700,000 warrants to purchase common stock at an exercise price of $0.40 per share. The warrants vested in December 2001 and expired in October 2003. In addition, effective October 1, 2001, the interest rate payable on the $800,000 Olson loan was adjusted from prime plus 1% to 12% annually. In June 2002, the loan was extended an additional year and Azco entered into a security agreement with Mr. Olson, whereby Azco's assets secured the loan. The loan became payable in March 2004 and currently is in default. The Company plans to negotiate a restructuring of the four loans, totaling $1.2 million, in conjunction with the procurement of the mica project financing if and when it becomes available. Accountant Disagreements On September 5, 2003, PricewaterhouseCoopers LLP resigned as the independent registered public accounting firm for the Company. In connection with its audits for the fiscal years ending June 30, 2002, and June 30, 2001, and through September 5, 2003, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to the satisfaction of PwC, would have caused them to make reference thereto in their reports on the financial statements for such years. On October 24, 2003 the Company engaged James E. Raftery, Certified Public Accountant PC, located at 606 North Stapley Drive, Mesa, AZ 85203, as the independent registered public accounting firm to audit the Company's financial statements. However, Mr. Raftery was unable to issue an audit report for the Company, for the period ended June 30, 2003, and consequently, on February 13, 2004, he resigned as the independent registered public accounting firm for the Company. Mr. Raftery was unable to issue an audit report due to the fact that, as of the date of his resignation, he had not received the final approval expected from the Public Accounting Oversight Board to audit publicly traded companies. Regulations issued pursuant to the Sarbanes-Oxley Act provide that on or after October 22, 2003, only accounting firms approved by the PCAOB may issue audit reports with respect to publicly traded companies. Pursuant to Item 304 (a) (2) of Regulation S-K, the Company, effective February 14, 2004, engaged Semple & Cooper, LLP, based in Phoenix, Arizona, as the independent registered public accounting firm to audit the Company's financial statements. Azco Mining Inc. is a U.S.- based mining and exploration enterprise with an emphasis on gold, copper and industrial minerals. Azco owns mineral lease rights to 90 square miles at the Ortiz gold property in New Mexico, where previous exploration has identified resources containing 2 million ounces of gold. Azco also owns and operates the Black Canyon mica deposit in Arizona, which contains a large resource of mica and byproduct feldspathic sand. B&A CONSTRUCTION: Creditors Must File Proofs of Claim by Aug. 5 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia, Gainesville Division, set Aug. 5, 2005, as the deadline for all creditors owed money by B&A Construction Co., Inc., on account of claims arising prior to Feb. 18, 2005, to file formal written proofs of claim. Creditors must deliver their claim forms to the: Clerk of Court U.S. Bankruptcy Court for the Northern District of Georgia 121 Spring Street SE, Room 120 Gainesville, GA 30501 A copy of each proof of claim should be furnished to Debtor's counsel: J. Robert Williamson, Esq. Scroggins & Williamson 1500 Candler Building 127 Peachtreee Street, NE Atlanta, GA 30303 Headquartered in Gainesville, Georgia, B&A Construction Co., Inc., is a commercial, highway and residential grading contractor. The Company filed for chapter 11 protection on Feb. 18, 2005 (Bankr. N.D. Ga. Case No. 05-20421). J. Robert Williamson, Esq., at Scroggins & Williamson represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. BEAR STEARNS: Fitch Places Low-B Ratings on Six Mortgage Certs. --------------------------------------------------------------- Bear Stearns Commercial Mortgage Trust 2005-PWR8, commercial mortgage pass-through certificates, are rated by Fitch: -- $104,300,000 class A-1 'AAA'; -- $46,500,000 class A-2 'AAA'; -- $63,000,000 class A-3 'AAA'; -- $128,000,000 class A-AB 'AAA'; -- $1,020,394,000 class A-4 'AAA'; -- $50,000,000 class A-4FL 'AAA'; -- $1,765,243,294 class X-1* 'AAA'; -- $1,721,945,000 class X-2* 'AAA'; -- $150,046,000 class A-J 'AAA'; -- $37,511,000 class B 'AA'; -- $17,653,000 class C 'AA-'; -- $26,478,000 class D 'A'; -- $17,653,000 class E 'A-'; -- $19,859,000 class F 'BBB+'; -- $15,446,000 class G 'BBB'; -- $17,652,000 class H 'BBB-'; -- $8,826,000 class J 'BB+'; -- $4,413,000 class K 'BB'; -- $6,620,000 class L 'BB-'; -- $6,620,000 class M 'B+'; -- $2,206,000 class N 'B'; -- $4,413,000 class P 'B-'. * Notional Amount and Interest Only. Class Q is not rated by Fitch. Classes A-1, A-2, A-3, A-AB, A-4, A-4FL, X-2, A-J, B, C, and D are offered publicly, while classes X-1, E, F, G, H, J, K, L, M, N, and P are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are 193 fixed-rate loans having an aggregate principal balance of approximately $1,765,243,294, as of the cutoff date. CACI INTERNATIONAL: Improved Financials Cue S&P's Stable Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Arlington, Virginia-based CACI International Inc. to stable from negative. "The outlook revision follows several quarters of strong performance, which have resulted in improvement to CACI's financial and liquidity profiles," said Standard & Poor's credit analyst Ben Bubeck. Leverage now provides a cushion in the rating to support ongoing acquisitions and/or a potential resolution to lawsuits surrounding the company's alleged involvement in the abuse of prisoners in Iraq of up to 3.5x operating lease-adjusted debt to EBITDA. The corporate credit and senior secured ratings are affirmed at 'BB'. The ratings reflect the company's second-tier presence in a highly competitive and consolidating market, as well as its acquisitive growth strategy. A predictable revenue stream based on a strong backlog, the expectation that government-related business will remain substantial over the intermediate term, and a moderate financial profile for the rating are partial offsets to these factors. CACI is a provider of information technology services and communications solutions, primarily to the federal government. The company had approximately $457 million in operating lease- adjusted debt as of March 2005. Continued consolidation within the government IT services industry has left CACI facing larger competitors with greater financial resources and broader technical capabilities as the company competes for new contracts. While CACI continues to expand its business, its ability to maintain its historically strong recompete success rate (approximately 95% since 1997) will be important as it faces an increasingly competitive bidding environment. A strong backlog, about $3.4 billion as of June 2004, offers a predictable source of revenue over the near to intermediate term. CAESARS ENT: Merger With Harrah's Cues Fitch to Lift Ratings ------------------------------------------------------------ Fitch Ratings has affirmed the long-term debt ratings of Harrah's Operating Co., a wholly owned operating subsidiary of Harrah's, Entertainment (NYSE: HET) and assigned a 'BBB-' rating to the new $4 billion revolving credit facility due in April 2009. At the same time, Fitch has resolved the Positive Rating Watch status on the senior unsecured and subordinated debt ratings of Caesars Entertainment (CZR) with respective upgrades to 'BBB-' and 'BB+'. The rating action follows completion of Harrah's acquisition of CZR on June 13, 2005. With closing of the CZR acquisition, CZR has been merged into HOC, a wholly owned operating subsidiary of HET, where virtually all the debt and assets reside. Pre-existing debt in the structure currently benefits from a holding company guarantee, and as per the governing indentures, allows HET to file consolidated financial statements as a proxy for HOC. HET is currently soliciting consents from CZR bondholders to also allow HET to file at the parent level, and in exchange will provide CZR debt with the parental guarantee. Fitch believes this to be a technical issue that CZR bondholders will acquiesce to. However, in the event that CZR public debt holders do not consent, the debt will not be guaranteed. Fitch finds the resulting structural subordination of CZR notes not meaningful given the very limited risk that HET would not support the CZR debt ratably, and the fact that there are virtually no assets at the holding company level. As such, regardless of the outcome of the consent offer (which should be resolved in the next few weeks), CZR ratings will be equalized with those of HOC. Strategically, the acquisition allows HET to establish a stronger presence on the Las Vegas Strip and reduces exposure to the more volatile regulatory environments of regional riverboat markets. While HET had expressed interest in building or buying discrete property on the Strip, the purchase allows HET to immediately take advantage of currently strong Las Vegas fundamentals in a more meaningful way. CZR's Las Vegas portfolio should also allow HET to capture Total Rewards members who are bypassing Harrah's current offerings in Las Vegas in favor of alternative properties. Caesars' four prominent Strip properties include Caesars, Paris, Bally's, and Flamingo, which are situated at one of the busiest intersections at the center of the Strip. In addition, HET should be able to improve same store sales and efficiency at CZR properties by implementing its industry-leading player tracking systems and loyalty programs. Returns on CZR's heavy capital investment program over the past several years have been disappointing and the upside exists in better asset utilization. HET financed the cash portion of the CZR acquisition ($1.9 billion) with borrowings under its revolving credit facility, increasing pro forma leverage to 4.3 times (x) at closing. Fitch expects Harrah's to end 2005 with pro forma leverage of approximately 4.2x, versus actual 2004 leverage of 4.3x (which includes just six months of Horseshoe results). Heavy capital expenditure plans in the range of $1.5 billion should preclude significant debt reduction in 2005. However, an anticipated drop-off in spending in 2006 and a full-year of CZR results should produce ample free cash flow for the company to deliver to levels appropriate for the rating (below 4.0x) by the end of 2006. While closing leverage is high for the rating category, Fitch notes that this is consistent with Harrah's historical capital structure policies with rapid improvement in leverage following acquisition-related debt increases. With revolver capacity upsized to $4 billion at closing, liquidity remains solid, with roughly $2 billion remaining in available funds. Based on current projections, cash from operations combined with revolver availability and cash-on-hand appear adequate to support the company's growth initiatives, meet debt maturities, and pay dividends through at least year-end 2006. Ratings reflect the company's large and diversified portfolio of casinos, significant cash flow generation, nationally recognized brands, good quality assets, geographic diversity, marketing/technical prowess, and financially conservative management team. Harrah's achieves strong same-store growth through its industry- leading Total Rewards loyalty program and capital investment in existing properties. Strong external growth has been achieved largely through strategic acquisitions, with numerous large-scale acquisitions successfully closed and integrated into the portfolio over the past five years, including Showboat, Inc. ($1 billion), Rio Hotel & Casino ($987 million), Players International ($439 million), Harvey's Casino Resorts ($712 million), and Horseshoe Gaming ($1.6 billion). Ongoing risks include the potential for further run-up in leverage due to future acquisitions or development opportunities, potential regulatory changes and/or tax increases (particularly in riverboat jurisdictions), and competitive threats to Illinois, Atlantic City, and northern Nevada. As Harrah's largest acquisition to date, integration risks remain a key concern. The Stable Rating Outlook reflects Fitch's expectation that Harrah's will improve credit metrics to levels more appropriate for the credit within 18 months of closing. The rating(s) and Outlook would be adversely affected if HET is unable to reduce debt in a timely manner or chooses to pursue additional large- scale debt-financed acquisitions, growth projects, and/or share repurchases. CALPINE CORP: S&P Junks Planned $650 Million Convertible Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC' rating to Calpine Corp.'s (B-/Negative/--) planned $650 million contingent convertible notes due 2015. Proceeds from the issue will be used to redeem in full its High Tides III preferred securities. The company will use the remaining net proceeds to repurchase a portion of the outstanding principal amount of its 8.5% senior unsecured notes due 2011. The outlook is negative. The San Jose, California-based company, which develops, acquires, owns, and operates power generation facilities, has about $18 billion of total debt outstanding. "The ratings on Calpine reflect the company's reliance on asset sales and contract monetizations to meet its interest payments and other fixed obligations in 2005 and 2006," said Standard & Poor's credit analyst Jeffrey Wolinsky. In addition, Calpine faces uncertain prospects for improvements in power markets, making it unlikely that Calpine will be able to meet these obligations with internal cash flow generation. The negative outlook reflects Calpine's weak financial ratios and expected negative funds from operations for 2005. CAPITAL ACQUISITIONS: Welland Wants Involuntary Case Dismissed -------------------------------------------------------------- Roy G. Welland, a secured creditor of Capital Acquisitions and Management Corporation, asks the U.S. Bankruptcy Court for the Northern District of Illinois to dismiss the Involuntary Chapter 11 Petition filed against the Debtor. The Debtor is under the control of LePetomane XII, Inc., a federal Receiver appointed by the Honorable Judge Robert W. Gettleman of the U.S. District Court for the Northern District of Illinois. In Jan. 2005, LePetomane auctioned the largest assets of the Debtor, a $2.5 billion [sic.] portfolio of consumer accounts, for $6.8 million plus other consideration. The Receivership Court approved LePetomane's sale of the Debtor's portfolio of consumer accounts. The Debtor's business operations had ceased and its main asset had been liquidated into cash. Mr. Welland asserts that he holds a $6.2 million claim against the Debtor. He also acquired other claims in the Receivership Case for $350,000 and $640,000. In the Bankruptcy Case, Mr. Welland acquired the claims of the Petitioning Creditors: Petitioning Amount Amount Creditors of Claim Paid ----------- -------- ------ Bayview Loan $1,646,827 $1,640,000 Servicing, LLC plus interest The TransInvest $999,759 $45,000 Group/75 Canton LLC less landlord Claim of $202,500 Rushmore Northwoods $163,848 $20,000 Business Center, LLC less landlord Claim of $84,000 Proficient Data $56,475 $15,000 Management, Inc. The total amount of Mr. Welland's claim against the Debtor is $10,056,908. LePetomane estimated that the total amount of claims existing against the Debtor range between $12 million to $18 million. If the total claim amount is $18 million, then Mr. Welland owns or controls 60% of all claims. If the total claim amount is $12 million, then Mr. Welland's percentage of ownership is as high as 85%. Mr. Welland lists seven reasons as grounds for the dismissal of the Involuntary Chapter 11 Case: (a) The four Petitioning Creditors have sold their claims and do not wish to continue to prosecute the Involuntary Chapter 11 Case; (b) Mr. Welland, as assignee of the Petitioning Creditors, does not wish to prosecute the Involuntary Chapter 11 Case; (c) Mr. Welland owns at least the majority and probably an overwhelming amount of the debt of the Debtor and does not wish the bankruptcy case to proceed; (d) Mr. Welland holds a security interest on the assets of the Debtor leaving no equity for any other creditor; (e) Under the terms of the Stipulated Preliminary Injunction entered in the Receivership Case, the Debtor's officers and directors are unable to perform the functions and duties of a debtor-in-possession in the Involuntary Case; (f) With the Receiver's closure of the Debtor's business and the sale of the Debtor's main assets in the form of the portfolio of consumer accounts, there is no business or assets left to reorganize for the benefit of creditors, thereby frustrating the purpose of a Chapter 11 case; and (g) A liquidation of the Debtor's remaining assets and a distribution of the proceeds of the liquidation of its assets can be accomplished as quickly and efficiently in the Receivership Case as in the Chapter 11 case. The Honorable Judge Pamela Hollis set the hearing to consider Mr. Welland's request at 10:30 a.m. on July 7, 2005, in Courtroom 644, 219 South Dearborn Street located in Chicago, Illinois. Headquartered in Chicago, Illinois, Capital Acquisitions and Management Corporation is under receivership and LePetomane Companies is the appointed Receiver. On April 4, 2005, an involuntary petition was filed by Bayview Loan Servicing, LLC, The TransInvest Group/75 Canton LLC, Rushmore Northwoods Business Center, LLC, and Proficient Data Management, Inc. (Bankr. N.D. Ill. Case No. 05-12554). Matthew T. Gensburg, Esq., and Sherri Morissette, Esq., at Greenberg Traurig, LLP, Domenic J. Lupo, Esq., at O'Brien & O'Brien, Amy Alcoke Quackenboss, Esq., at Hunton & Williams LLP, and Stephanie Friese, Esq., at Friese & Price Law Firm, LLC, represent the petitioners. The petitioners' total claim against the Debtor is $2,866,909. CARAUSTAR INDUSTRIES: Closes Palmer Carton Plant to Save $1.2 Mil. ------------------------------------------------------------------ Caraustar Industries, Inc. (Nasdaq: CSAR) reported the closure of its Palmer Carton Plant in Thorndike, Massachusetts, a folding carton plant of the Custom Packaging Group. The closure of this facility is a continuation of the previously announced initiative to right-size operations to better utilize capacity and achieve greater cost efficiencies. Associated with this closure, Caraustar will incur total costs of approximately $1.9 million. Of the total costs, $800,000 will be a restructuring charge consisting of severance and other contractual obligations. The remaining $1.1 million will be cash costs that consists of fixed asset impairment and equipment relocation costs and will be expensed over the remainder of 2005. The rationalization of this facility is expected to generate annual pre-tax savings of approximately $1.2 million. This facility will continue to operate until July 15, 2005 to facilitate customer transition, at which time customers will be served by other Caraustar operations. Approximately 70 salaried and hourly employees will be affected by this closure. Caraustar will provide these employees with a separation program including severance pay, benefits continuation and job placement assistance. Caraustar Industries, a recycled packaging company, is one of the world's largest integrated manufacturers of converted recycled paperboard. Caraustar has developed its leadership position in the industry through diversification and integration from raw materials to finished products. Caraustar serves the four principal recycled boxboard product end-use markets: tubes, cores and composite cans; folding cartons; gypsum facing paper and specialty paperboard products. * * * As reported in the Troubled Company Reporter on May 11, 2005, Standard & Poor's Ratings Services lowered its ratings on recycled paperboard producer, Caraustar Industries Inc., including its corporate credit rating, to 'B+' from 'BB-', and its senior secured bank loan rating, to 'BB-' from 'BB'. The outlook is stable. The downgrade reflects Austell, Georgia-based Caraustar's persistent subpar credit metrics because of weak earnings and its aggressive capital structure. Total debt, including capitalized operating leases, at March 31, 2005, was $550 million, with debt to EBITDA of 9x. "Despite noticeably improved industry capacity utilization rates, the potential for modestly higher prices, and ongoing cost-savings efforts, we do not foresee sufficient improvement in Caraustar's financial performance to maintain the former ratings," said Standard & Poor's credit analyst Pamela Rice. "Caraustar's earnings should improve in 2005, resulting in credit protection measures more in line for the current ratings. The outlook could be revised to negative if market conditions worsen, if the company is unable to realize sufficient benefits from its cost reduction efforts, or if it is unable to raise selling prices to at least offset rising raw-material costs. Caraustar's business profile could support a slightly higher rating; however, a positive outlook is unlikely to occur unless the company successfully addresses is highly leveraged capital structure." Caraustar's earnings woes are mostly related to unfavorable industry dynamics despite consolidation and vigorous capacity- rationalization efforts. "We believe that the company will benefit from its efforts to reduce costs and centralize procurement, but realization of its recently announced price increase is necessary to avoid further margin compression," Ms Rice said. CAROLINA TOBACCO: Hires Cline Williams as Litigation Counsel ------------------------------------------------------------ Carolina Tobacco Company sought and obtained permission from the U.S. Bankruptcy Court for the District of Oregon to retain Cline, Williams, Wright, Johnson & Oldfather, LLP, as its litigation counsel. In particular, Cline Williams will represent the Debtor against Mary Jane Egr [Lancaster County District Court for the State of Nebraska Case Nos. C103-3378 and C104-2261]. Cline Williams will prepare and file all documents necessary to stay the cases and take all necessary actions against Mary Jane Egr. The lead attorneys at Cline Williams who will represent the Debtor and their current hourly billing rates are: Professional Rate ------------ ---- Andrew D. Strotman, Esq. $180 Shawn Renner, Esq. $180 Brian Adams, Esq. $130 To the best of the Debtor's knowledge, Cline Williams is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Portland, Oregon, Carolina Tobacco Company -- http://www.carolinatobacco.com/-- manufactures the Roger-brand cigarettes. The Company filed for chapter 11 protection on April 18, 2005 (Bankr. D. Ore. Case No. 05-34156). Tara J. Schleicher, Esq., at Farleigh Wada & Witt P.C. represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $24,408,298 and total debts of $14,929,169. CAROLINA TOBACCO: Edward Hostmann Approved as Financial Advisor --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Oregon gave Carolina Tobacco Company permission to employ Edward Hostmann, Inc., as its financial advisor during its bankruptcy proceeding. Edward Hostmann will: a) prepare a budget as requested by the States [sic]; b) assist the Debtor in preparing projections for dealing with escrow deficiencies; and c) prepare other necessary financial matters as the Debtor will request. The Debtor paid Edward Hostmann a $50,000 retainer. The professionals who will provide financial-related services to the Debtor and their current hourly billing rates are: Professional Rate ------------ ---- Edward C. Hostmann $365 Miles Stover $330 Peter Lahni $295 Joanne Conway $195 To the best of the Debtor's knowledge, Edward Hostmann, Inc., is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Portland, Oregon, Carolina Tobacco Company -- http://www.carolinatobacco.com/-- manufactures the Roger-brand cigarettes. The Company filed for chapter 11 protection on April 18, 2005 (Bankr. D. Ore. Case No. 05-34156). Tara J. Schleicher, Esq., at Farleigh Wada & Witt P.C. represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $24,408,298 and total debts of $14,929,169. CATHOLIC CHURCH: Spokane Wants to Hire BMC Group as Claims Agent ---------------------------------------------------------------- Due to the need for confidentiality of certain proofs of claim and the need for publication of the claims bar date notice, the Diocese of Spokane seeks authority from the U.S. Bankruptcy Court for the Eastern District of Washington to employ BMC Group, Inc., to develop notice procedures for the Claims Bar Date and assist the Diocese in administering the claims. BMC specializes in providing comprehensive consulting and bankruptcy data management services to Chapter 11 debtors to streamline and manage the administrative burdens imposed on them. BMC's services include, but are not limited to, claims receipt and recordation, acting as information agent, reconciliation of claims as well as administration of plan of reorganization votes and distributions under the plan of reorganization. BMC has experience in developing claims notice procedures and administering claims process in cases similar to the Diocese's case, including the bankruptcy of the Archdiocese of Portland in Oregon. As Spokane's Claims Agent, BMC will: (a) assist Spokane and the Office of the Clerk of the Bankruptcy Court with noticing and tort claims docketing; (b) prepare and serve the notices required in the bankruptcy case as requested by the Diocese; (c) receive, record, and maintain copies of all proofs of claim and proofs of interests filed in the Chapter 11 case; (d) create and maintain the official claims register; (e) receive and record all transfers of claims; (f) maintain an up-to-date mailing list for all entities who have filed proofs of claim or requests for notices in the bankruptcy case; (g) assist Spokane with the administrative management, reconciliation, and resolution of claims; (h) mail and tabulate ballots for purposes of plan voting; (i) assist Spokane with the production of reports, exhibits and schedules of information of use by the Diocese or to be delivered to the Court, the Clerk's Office, the U.S. Trustee, or third parties; (j) provide other technical and document management services of a similar nature requested by Spokane or the Clerk's office; and (k) facilitate or perform distributions. BMC will also provide computer software support, educate and train the Diocese in the use of the support software, provide standard reports, as well as consulting and programming support for the Diocese's requested reports, program modifications, database modification, and other features. Spokane will pay BMC based on its hourly consulting fee, which ranges from $45 to $300. Spokane will also reimburse BMC for any necessarily incurred out-of-pocket reasonable expenses. Travel time will be billed at one-half of BMC's applicable hourly rate. In connection with noticing and publication services, upon BMC's request, Spokane agrees to prepay BMC's estimated publication or postage amounts with respect to each notice, or will authorize BMC to cause the courier's charges to be stated to Spokane's own account with the courier. BMC will invoice the Diocese for fees and expenses. If any amount is unpaid as of 30 days from the receipt of the invoice, Spokane will pay a late charge, calculated as 1-1/2% interest on the amount paid, accruing from the invoice date. In case of a dispute in the invoice amounts, notice will be given to BMC within 25 days of receipt of the invoice by Spokane. Interest will not accrue on any amounts in dispute. The balance of the invoice amount is due and payable in the normal course. Tinamarie Feil, vice president of the BMC Group, assures Judge Williams that her firm does not hold or represent any interest adverse to the Diocese, and is "disinterested" within the meaning of Section 101(14) of the Bankruptcy Code. 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Tucson Wants to Assume Catholic Foundation Lease ----------------------------------------------------------------- The Diocese of Tucson seeks authority from the U.S. Bankruptcy Court for the District of Arizona to assume a lease dated June 30, 2003, with the Catholic Foundation for the Diocese of Tucson for the Pastoral Center building located at 111 South Church Avenue in Tucson, Arizona. The Diocese and the Catholic Foundation, an Arizona non-profit corporation, are the only parties with an interest in the Triple Net Lease. Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, in Tucson, Arizona, relates that the Pastoral Center has recently been renovated and houses substantially all of the Diocese's operations. Furthermore, the Diocese is paying below market rent. Based on these and other factors, the Diocese believes that assuming the lease is in the best interest of its operations, ministry, estate and creditors. Mr. Nye says the Diocese has never defaulted under the Lease and emergence from Chapter 11 provides sufficient adequate assurance of future performance. Accordingly, no cure is required for the assumption. The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. (Catholic Church Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) CHI-CHI'S: Wants to Pay $4.2 Million to Five Hepatitis A Victims ---------------------------------------------------------------- Chi-Chi's, Inc., asks the U.S. Bankruptcy Court for the District of Delaware for authority to pay five Hepatitis A claimants for an aggregate amount of $4,202,000. The Hepatitis A outbreak at the Beaver Valley Chi-Chi's arose from exposure to contaminated green onions. Despite the fact that only one of Chi-Chi's restaurant was involved, approximately 600 customers and 13 employees contracted the disease. The number of positive Hepatitis A cases has been ascertained through medical confirmation and investigation protocol performed and verified by the Pennsylvania Department of Health. The settlement will be covered by the Debtors' insurance policies, which provide aggregate coverage of $51 million for the Hepatitis A claims. Headquartered in Irvine California, Chi-Chi's, Inc., is a direct or indirect operating subsidiary of Prandium and FRI-MRD Corporation and each engages in the restaurant business. The Debtors filed for chapter 11 protection on October 8, 2003 (Bankr. Del. Case No. 03-13063-CGC). Bruce Grohsgal, Esq., Laura Davis Jones, Esq., Rachel Lowy Werkheiser, Esq., and Sandra Gail McLamb, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtor filed for bankruptcy, it estimated $50 to $100 million in assets and more than $100 million in liabilities. CHIQUITA BRANDS: S&P Rates $275 Million Bank Loans at B+ -------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' ratings and '3' recovery ratings to Chiquita Brands LLC's $150 million revolving credit facility and $125 million term loan B, due 2010 and 2012, respectively. The recovery rating indicates that lenders can expect meaningful (50% to 80%) recovery of principal in the event of a payment default. In addition, Standard & Poor's assigned its 'BB-' rating and a '1' recovery rating to Chiquita Brands LLC's $375 million term loan B due 2012, indicating that lenders can expect full (100%) recovery of principal in the event of a payment default. Standard & Poor's also assigned its 'B-' rating to Chiquita Brands International Inc.'s $225 million senior unsecured notes due 2015. Standard & Poor's has withdrawn all issue ratings assigned on March 28, 2005, but were not issued. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on Chiquita Brands International. The outlook is negative. The Cincinnati, Ohio-based fresh fruit and vegetable producer and distributor is expected to have about $1.1 billion in total debt outstanding at closing. Proceeds from the new credit facilities and note issuance will be used to finance Chiquita's $855 million acquisition of the Fresh Express unit of Performance Food Group and for other general corporate purposes, including permitted acquisitions. CII CARBON: Moody's Rates $270MM Senior Secured Term Loan at B1 --------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to CII Carbon L.L.C.'s $220 million guaranteed senior secured Term Loan, a B1 rating to its $50 million guaranteed senior secured revolver and a B1 Corporate Family Rating (previously called the Senior Implied). This is the first time Moody's has rated CII. Proceeds from the bank borrowings will be used to fund CII's purchase of Venture Coke Company, a privately owned coke calcining joint venture, and to refinance existing indebtedness. The ratings assume that the transaction will close in the amounts and along the terms as presented to Moodys. The rating outlook is stable. The B1 Corporate Family Rating (previously called the Senior Implied) considers: * CII's relatively small revenue base; * increased leverage following the Venco acquisition; * exposure to cyclical demand and production rates of the primary aluminum industry; and * a relatively small number of both key suppliers for green coke raw material requirements and customers, i.e., aluminum smelters to which calcined coke is sold for use in the production of carbon anodes. The rating is supported by: * the relative stability of CII's revenues; * its free cash flow generating ability, even during the down years for aluminum in 2001-2003; * long-term relationships with customers as well as raw material suppliers; and * ancillary revenues derived from energy sales. In addition, CII's increased capacity (to 1.8 million tons), market share following completion of the Venco acquisition (roughly 17%, second largest global producer behind Great Lakes Carbon) and slightly broader product offerings, with the ability to serve the TiO2 market for calcined petroleum coke, are favorable considerations in the rating. Importantly, the acquisition will also provide CII with a multi-year green coke supply contract with a new supplier. The stable outlook reflects Moody's view that while this acquisition will result in increased financial leverage, the current outlook for CII's end-use markets, principally calcined coke for carbon anode production for the aluminum smelting industry, should remain reasonably robust through 2006, allowing CII to utilize anticipated free cash flow to reduce debt. As aluminum cannot be produced without calcined coke as part of the smelting process, CII's performance is more sensitive to aluminum production levels rather than aluminum prices. Aluminum production has grown every year since 2001 and Moody's does not expect production levels to evidence significant cutbacks. As a result, CII's earnings and cash flow generation are expected to show relative stability over time. Its ratings could be upgraded should the company maintain leverage, as measured by the debt/EBITDA ratio, at less than 3.5x. Ratings could be downgraded if leverage were to increase from existing levels or should free cash flow turn consistently negative. These ratings were assigned: 1) B1 - Corporate Family Rating (previously called the Senior Implied Rating) 2) B1 - $220 million 7-year guaranteed senior secured Term Loan 3) B1 - $50 million 5-year guaranteed senior secured revolver CII is a leading producer of calcined coke, the key raw material required for the production of carbon anodes used in the electrochemical aluminum smelting process with a consumption rate of approximately 0.4 pounds of anode grade calcined coke to each pound of primary aluminum produced. Green coke, a petroleum refining by-product, represents approximately 70% of the cost of making calcined coke, with raw material costs and selling prices tending to move in tandem. There is no known economic substitute for anode grade calcined coke. The company is relatively small with acquisition adjusted pro- forma revenues of $326 million for the LTM period ending June 30, 2005. Leverage following the acquisition will be between 3.75x and 4.5x as measured by the pro-forma debt to LTM EBITDA ratio. Given the current favorable industry operating conditions and strategic benefits from the acquisition of Venco, Moody's expects CII to be able to reduce leverage within a reasonable time frame. Although margin growth on the upside may be limited, relatively stable performance is expected, even during more difficult aluminum industry conditions, given the characteristics of the business. Moody's also considers that CII has a limited number of raw material suppliers. Although the long term nature of these relationships is important, any one would be difficult to replace. CII's customer concentration is also high; however, Moody's recognizes the close relationship between CII and its customers given the stability and critical knowledge required to ensure timely and quality supplies of calcined coke product. Moody's expects that CII's results will continue to demonstrate relative stability in the near term. Current aluminum demand should continue healthy and current calcined coke production globally is nearing capacity. Moody's note the market for calcined coke is a global one, evidenced by the fact that approximately 83% of CII's production is exported, although this will decrease following the acquisition to around 55%. While the end market is global, the supplier base is local and CII's proximity to refineries, which produce the green coke needed, is a strategic benefit to its business. CII's revenue base also gains a degree of stability from the company's ability to sell steam and electricity generated as waste heat in the calcining process to nearby industrial or electrical plants. Energy earnings represent an important contribution to gross profit. The B1 ratings on the guaranteed senior secured bank facilities, secured primarily by all assets of the company, reflect their position as the only financial debt component of the capital structure. The rating also reflects the limited collateral value available in a distressed situation. The $220 million Term Loan amortizes quarterly. The bank facility also requires mandatory prepayments from a portion of excess cash flows and contains financial covenants governing leverage and coverage ratios. Given the existing favorable industry conditions, Moody's expects CII to be able to reduce debt by amounts greater than scheduled amortization over the next two years, thereby improving its leverage position. CII Carbon LLC, headquartered in New Orleans, Louisiana, is a leading producer of anode grade calcined coke for use in the aluminum production process. CII CARBON: S&P Rates Proposed $270 Mil. Sr. Sec. Facility at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating and stable outlook to calcined coke processor CII Carbon LLC. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and '3' recovery rating to the company's proposed $270 million senior secured credit facility. The '3' recovery rating indicates the likelihood of meaningful (50%-80%) recovery of principal in event of a payment default. Proceeds from the credit facility and cash balances will be used by the New Orleans, Louisiana-based company to acquire unrated- Venture Coke Company, a joint venture between ConocoPhilips Co. and a private equity firm. With this acquisition, CII, a relatively small company, will become the second-largest producer of calcined petroleum coke with the capacity to produce 1.8 million tons, accounting for approximately 17% of market share in the western hemisphere. The majority of CII Carbon's CPC production is anode-grade and is sold to the aluminum industry as a key component in carbon anodes, which are used in the aluminum smelting process to produce aluminum. The remaining capacity is used to produce industrial- grade CPC, to make titanium dioxide (widely used as a brilliant white pigment for paint, plastics, and paper) as well as in other non-aluminum applications. "CII benefits from its good position in a niche industry. Long- term customer and supplier relationships, relatively stable spreads between raw petroleum coke and CPC, lack of product substitution for CPC, and cash flow derived from its energy sales, support the ratings," said Standard & Poor's credit analyst Kenneth Farer. "However, given its leverage position, CII still remains vulnerable to the volatile and cyclical aluminum industry, new low-cost CPC capacity and supplier concentration." Mr. Farer added, "We do not expect a significant decline in the aluminum industry over the intermediate term, which should allow for some debt reduction. The outlook could be revised to negative if aluminum production declines significantly or new capacity reduces CPC prices or CII's market share. An outlook revision to positive could occur if the company commits to a very conservative financial policy and profile." CII Carbon's $270 million senior secured bank facility will be comprised of a $50 million revolving credit facility, which matures in 2010, and a $220 million term loan, which matures in 2012. The term loan has quarterly reductions, which total $2.2 million per year. The remaining balance of approximately $205 million will be due in 2012. The rating on the bank facility is based on preliminary terms and conditions. The borrower under the bank facility is CII Carbon, and CII Carbon's current and future subsidiaries guarantee the borrowings under the bank facility. The bank facility is secured by first- priority, perfected liens on substantially all current and future tangible and intangible assets of the company and its capital stock. Future fixed-energy assets may be pledged as collateral to finance the acquisition of the assets. CIMAREX ENERGY: S&P Rates $320 Million Senior Notes at B+ --------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to Cimarex Energy Co. At the same time, Standard & Poor's assigned its 'B+' senior unsecured debt rating to the $195 million senior notes due 2012 and $125 million senior notes due 2023 being assumed from the acquisition of Magnum Hunter Resources Inc. The outlook is stable. Denver, Colorado-based Cimarex has roughly $544 million of debt. "The ratings on Cimarex reflect risks associated with the acquisition of Magnum Hunter, which more than doubles Cimarex's size and a somewhat higher-than-average cost structure for the combined entity relative to peers," said Standard & Poor's credit analyst Paul B. Harvey. "Somewhat mitigating these concerns are a record of good execution by management, a sizable onshore reserve base, relatively conservative reserve accounting, a commitment to maintaining low debt leverage, and a focus on growth through the drillbit," he continued. The stable outlook reflects expectations of near-term debt repayment and the successful integration of Magnum Hunter into Cimarex, mitigated by potentially volatile earnings due to Cimarex's lack of hedging and a high cost structure. Positive rating actions are possible, if Cimarex can lower its cost structure, successfully manage the integration of Magnum Hunter, and reduce debt on a per boe basis to allow it to better perform in a midcycle pricing environment. However, if Cimarex pursues additional acquisitions, causing the company to incur significant additional debt (which Standard & Poor's currently views as unlikely) the outlook could be revised to negative. CITIGROUP MORTGAGE: Fitch Holds Low-B Ratings on 2 Class B Certs. ----------------------------------------------------------------- Fitch Ratings has affirmed these classes of Citigroup Mortgage Loan Trust's two issues: Series 2004-1 -- Class A at 'AAA'. Series 2004-HYB1 -- Class A at 'AAA'; -- Class B-1 at 'AA'; -- Class B-2 at 'A'; -- Class B-3 at 'BBB'; -- Class B-4 at 'BB'; -- Class B-5 at 'B'. The affirmations, affecting approximately $311 million of outstanding certificates, reflect asset performance and credit enhancement levels generally consistent with expectations. As of the May distribution date, the CE levels for all classes from series 2004-1 and 2004-HYB1 have increased modestly since origination. There are currently no loans in series 2004-1 that are 90 plus delinquent (including bankruptcies, foreclosures, and real estate owned), 47% of the collateral has paid down, and there have been no losses. In series 2004-HYB1, there are six loans, totaling $3,162,667, in foreclose and real estate owned. However, Fitch believes that the non-rated B-6 class will absorb any losses that result from the future liquidation of these loans and, thus, these delinquent loans do not present a credit risk to the rated classes of the transaction. As of the May distribution, 46% of the collateral has paid down, and there have been no losses. The collateral for series 2004-1 consists of conventional, fixed- rate seasoned mortgage loans secured by first liens on one- to four-family residential properties. The collateral for series 2004-HYB1 consists of conventional, adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties. CONSTELLATION BRANDS: S&P Affirms BB Rating and Removes Watch ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating and other ratings on alcoholic beverage producer and distributor Constellation Brands Inc. At the same time, ratings were removed from CreditWatch where they were placed with negative implications on April 28, 2005. The CreditWatch listings followed the company's confirmation that it was part of a consortium considering a potential takeover of Allied Domecq PLC (BBB+/Watch Neg/A-2). The ratings affirmation and removal from CreditWatch follows Constellation's recent announcement that it is no longer planning to pursue an offer for Allied Domecq. The outlook is negative. At Feb. 28, 2005, Fairport, New York- based Constellation had about $3.29 billion of total debt outstanding. CREDIT SUISSE: Fitch Affirms Low-B Ratings on $64M Mortgage Certs. ------------------------------------------------------------------ Credit Suisse First Boston's commercial mortgage pass-through certificates, series 2003-CK2, are upgraded by Fitch Ratings: -- $32.1 million class B to 'AA+' from 'AA'; -- $12.4 million class C to 'AA' from 'AA-'; -- $29.6 million class D to 'A+' from 'A'; -- $12.4 million class E to 'A' from 'A-'. In addition, Fitch affirms the following classes: -- $79.6 million class A-1 'AAA'; -- $196 million class A-2 'AAA'; -- $109 million class A-3 'AAA'; -- $364.3 million class A-4 'AAA'; -- Interest-only class A-X 'AAA'; -- Interest-only class A-SP 'AAA'; -- $12.4 million class F 'BBB+'; -- $3.6 million class GLC 'BBB+'; -- $19.8 million class G 'BBB'; -- $14.8 million class H 'BBB-'; -- $17.3 million class J 'BB+'; -- $17.3 million class K 'BB'; -- $4.9 million class L 'BB-'; -- $13.6 million class M 'B+'; -- $6.2 million class N 'B'; -- $4.9 million class O 'B-'. Fitch does not rate the $17.3 million class P or $14.7 million class RCKB certificates. The upgrades are due to an increase in credit enhancement and the pool's stable performance since issuance. As of the June 2005 distribution date, the pool's aggregate certificate balance has decreased 2.4%, to $982 million from $1 billion at issuance. To date, there have been no loan payoffs or losses. The largest loan in the pool, Great Lakes Crossing (8.63%) maintains an investment grade credit assessment. The servicer's year-end 2004 reported net operating income increased 8.5% versus YE 2003 NOI. Occupancy at the 1.14 million square foot retail center declined slightly to 90% from 91% during 2004. Currently, there are two loans totaling 0.69% in special servicing. Fitch does not expect losses on either specially serviced loan. The largest specially serviced loan (0.55%) is a 224-unit multifamily property in Arlington, TX, and is currently 60 days delinquent. The borrower is currently paying delinquent debt service payments following the end of a forbearance agreement. Once the loan's status becomes current in its payments, the special servicer expects to transfer the loan back to the master servicer. CREDIT SUISSE: Moody's Rates Class B-2 Sub. Certificates at Ba2 --------------------------------------------------------------- Moody's Investors Service assigned an Aaa rating to the senior certificates issued by Credit Suisse First Boston Mortgage Securities Corp. and ratings ranging from Aa1 to Ba2 to the mezzanine and subordinate certificates in the deal. The securitization is backed by fixed-rate, conventional, fully amortizing and balloon, primarily second lien residential mortgage loans with original terms to stated maturity of up to 30 years. The loans were originated by various originators and acquired by DLJ Mortgage Capital, Inc. According to Michael Labuskes, Associate Analyst, "The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, overcollateralization, and excess spread." Wilshire Credit Corporation will service the loans. Moody's has assigned to Wilshire Credit Corporation its SQ2 servicer quality rating as a primary servicer of second lien loans. The complete rating actions are: Home Equity Mortgage Trust 2005-1, Home Equity Mortgage Pass- Through Certificates Series 2005-1 * Class A-1 rated Aaa * Class M-1 rated Aa1 * Class M-2 rated Aa2 * Class M-3 rated Aa3 * Class M-4 rated A1 * Class M-5 rated A2 * Class M-6 rated A3 * Class M-7 rated Baa1 * Class M-8 rated Baa2 * Class M-9 rated Baa3 * Class B-1 rated Ba1 * Class B-2 rated Ba2 CSC HOLDINGS: Moody's Reviews B1 Rating of $4.2 Bil. Unsec. Notes ----------------------------------------------------------------- Moody's Investors Service placed all ratings for Cablevision Systems Corporation and CSC Holdings, Inc., a wholly owned subsidiary of CVC, on review for downgrade following the Dolan family's announcement of a proposal to acquire Cablevision's cable assets. Under the proposed transaction, credit metrics would deteriorate meaningfully as debt of the cable operations would increase to approximately 9 times EBITDA from just under 6 times range. These ratings are now under review for downgrade: Cablevision Systems Corporation: -- Corporate Family Rating -- Ba3 -- $500 Million New Floating Rate Notes due 2009 - B3 -- $1 Billion New Senior Unsecured Notes due 2012 - B3 CSC Holdings, Inc.: -- $4.2 billion aggregate senior unsecured notes -- B1 -- $250 Million of 10.5% Senior Subordinated Debentures due 2016 - B2 The proposed transaction includes the spin off of the assets of Rainbow Media Holdings to all Cablevision shareholders on a pro rata basis. In a separate press release, Moody's expanded the review for upgrade of ratings on the debt at Rainbow National Services LLC. Moody's will evaluate the likely effect of the proposed financing, specifically the increase in leverage and the composition of the debt. Moody's estimates debt will increase to approximately 9.1 times EBITDA pro forma for the transaction and based on estimated 2005 EBITDA, from approximately 5.8 times (based on estimated June 2005 cable debt and estimated 12 months EBITDA through June 30, 2005). In analyzing Cablevision's cable operations, Moody's focuses on the debt currently called Restricted Group debt and the bonds at CVC; cash flow from the consumer and business (Lightpath) cable assets service this debt. The extent of the likely downgrade (potentially one notch or two) is unclear at this time. Notwithstanding this substantial increase in leverage, the proposed transaction simplifies the organization and would allow management to focus on the cable operations free from numerous distractions which have to date negatively impacted the rating. Moody's may conclude the review prior to the close of the transaction as the size and structure of the financing and its effect on Cablevision becomes clear. Cablevision Systems Corporation, through its wholly owned subsidiary CSC Holdings, Inc., is a top-ten domestic pay television service provider serving approximately 3 million cable subscribers in and around the New York metropolitan area. The company maintains its headquarters in Bethpage, New York. DLJ MORTGAGE: Fitch Affirms BB- Rating on $17.8MM Class B-4 Certs. ------------------------------------------------------------------ Fitch Ratings upgrades DLJ Mortgage Acceptance Corp.'s commercial mortgage pass-through certificates, series 1996-CF2: -- $30.6 million class B-3 to 'A' from 'BBB+'. In addition, Fitch affirms the following classes: -- Interest-only class S 'AAA'; -- $23.2 million class A-3 'AAA'; -- $25.5 million class B-1 'AAA'; -- $12.7 million class B-2 'AAA'; -- $17.8 million class B-4 'BB-'. Fitch does not rate the $9.7 million class C certificates. The class A1-A, A1-B, and A-2 certificates have paid in full. The rating upgrade is due to the increase in subordination levels resulting from loan payoffs and amortization. As of the June 2005 distribution date, the pool has paid down 76.5% to $119.5 million from $508.6 million at issuance. Two loans (6.7%) are currently in special servicing: one loan that is 90+ days delinquent (5.7%) and one loan that is current (1%). The 90+ day delinquent loan is secured by a multifamily property located in Dallas, Texas. The special servicer is pursuing foreclosure and losses are expected. The other specially serviced loan is pending return to the master servicer. In addition to the specially serviced loans, eight loans (27.7%) are considered Fitch Loans of Concern due to decreases in debt service coverage ratio, occupancy, or other performance issues. These loans' higher likelihood of default was incorporated into Fitch's analysis. The largest of these loans (13.6%) is secured by a retail property in Arcadia, CA. This property has seen a sharp drop in occupancy since issuance due to a tenant vacating 30% of the net rentable area in April 2003. Half of this space remains vacant. DOMTAR INC: Moody's Downgrades Sr. Unsecured Debt Rating to Ba2 --------------------------------------------------------------- Moody's Investors Service downgraded Domtar Inc.'s senior unsecured debt rating to Ba2 from Baa3. In addition, Moody's assigned a Ba2 Corporate Family Rating (formerly known as the Senior Implied Rating). The ratings downgrade was based on: * the company's ongoing depressed cash flow in relation to a relatively high level of debt; * margin pressure from higher fiber, energy, and chemicals costs; * the negative impact of the strong Canadian dollar; and * Moody's expectation that there will be a persistent supply/demand imbalance in the company's key North American uncoated woodfree paper market that will likely inhibit a restoration of cash flow and credit metrics to levels that can support a Baa3 rating over the near to intermediate term. This concludes a ratings review initiated on 10 May 2005. Ratings downgraded: * Senior Unsecured: to Ba2 from Baa3 * Senior Unsecured Shelf: to (P)Ba2 from (P)Baa3 Rating assigned: * Corporate Family Rating (formerly known as the Senior Implied Rating): Ba2 Outlook restored: * Stable The rating downgrade to Ba2 was influenced by two key factors. Firstly, owing to gradually declining North American demand and an excess of installed production capacity, there is a persistent supply/demand imbalance in the company's key North American uncoated woodfree paper market. This has adversely affected paper prices, and despite anticipated supply management activities, is likely to continue to do so for the foreseeable future. Secondly, the entire spectrum of paper making companies is adversely affected by elevated prices for such key inputs as fiber, energy, chemicals, and in many cases, post-retirement labor costs. These influences are not expected to materially abate over the near-to- mid term. This cost side influence adds to the margin pressure created by lower paper prices. In Domtar's case, margin pressure is further augmented from increased input costs resulting from the past three year's Canadian-to-American dollar exchange rate migration. The effect of these forces on Domtar's average through-the-cycle cash flow is sufficient to warrant a ratings' downgrade. At the revised Ba2 ratings level, the outlook is stable. As a matter of routine with the downgrade to speculative grade, a senior implied rating has been assigned; this is equal to the senior unsecured rating at Ba2 Domtar's Ba2 debt ratings result primarily from credit protection metrics that Moody's anticipates in light of relatively depressed output prices and elevated input costs. Moody's anticipates that the persistent supply/demand balance for the company's key output, uncoated woodfree papers, will continue for the foreseeable future. This will cause paper prices to be lower than would otherwise be expected for relatively favorable stages of the business cycle. Given the company's relative concentration in this space, with some 80% of sales derived from the North American uncoated woodfree paper business, this is a particularly significant influence on the rating. As well, and while elevated input costs for fiber, energy, chemicals and labor are likely to install a higher price floor than existed in previous downturns, Moody's expects that cost input pressure is largely permanent, and will -- in concert with lower average through-the-cycle output prices -- result in profit margins that are suppressed when compared to previous cycles. In Domtar's case, with some 50% of its assets located in Canada, the company is also exposed to risks that the Canadian dollar will appreciate relative to the American dollar, placing further pressure on margins. Further, with Domtar's debt level influenced by an earlier acquisition, credit protection measures are affected commensurately. Domtar's dividend is also a relatively large proportion of the average level of profitability that Moody's anticipates, with the cash drain further augmenting negative pressure on certain cash flow based credit metrics. Domtar's generally good backwards integration into fiber supply and favorable manufacturing and logistics/distribution efficiencies are one positive factor that offsets these adverse influences. So too is the latent debt reduction potential provided by the company's ability to monetize assets such as the 50% interest in Norampac Inc., certain hydro electric facilities, lumber operations and certain other non-core assets. While Moody's expects Domtar's credit metrics to lag those generally applicable for a Ba2 rating, this debt reduction flexibility is a significant risk mitigating factor that compensates for the expected shortfall. Domtar also has good liquidity arrangements and has arranged its' debt maturities so there is no near term potential of capital markets related event risk adversely affecting access to capital. Lastly, Domtar has a significant market share with a relatively broad product line in the North American uncoated woodfree papers market. With all of Domtar's publicly traded debt ranking pari passu with its' bank credit facility, there is no need to notch any of the company's debt. Accordingly, the senior unsecured ratings are equal to the senior implied rating of Ba2. At the Ba2 rating level, there is a balance of factors that could affect financial performance and credit protection metrics. Accordingly, the outlook is stable. Owing to the company's ratings being downgraded, a near-to-mid term positive revision in ratings or outlook is unlikely. However, were Domtar's cash flow generating capability to improve such that in Moody's view, the company could generate average through-the-cycle RCF(Adj)/TD(Adj) approaching 15% with the commensurate FCF(Adj)/TD(Adj) approaching 5% while retaining full asset divestiture potential, a positive ratings action could be triggered. Note that these figures account for standard Moody's financial statement adjustments related to pension, recurring operating leases and off-balance sheet accounts receivable programs, and do not correspond with reported figures. It should be also noted that Moody's analysis anticipates the benefits of cost reduction programs and recent asset portfolio restructuring. Should these anticipated near-term benefits not be as large as anticipated, or alternatively, should Moody's view of Domtar's ability to generate average through-the-cycle credit protection metrics result in measures declining below 10% and 5% for RCF(Adj)/TD(Adj) and FCF(Adj)/TD(Adj) respectively, it is likely that negative ratings' actions would result. A dramatic deterioration in liquidity would also likely result in a negative ratings' action. Headquartered in Montreal, Quebec, Domtar is a major North American producer of: * fine papers, * pulp, and * lumber. Domtar owns a 50% interest in Norampac Inc., Canada's leading containerboard and corrugated containers business. DRESSER INC: Weak Credit Measures Prompt S&P to Cut Rating to B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Addison, Texas-based Dresser Inc. to 'B+' from 'BB-'. The company remains on CreditWatch with negative implications. The ratings downgrade reflects weak credit measures and debt leverage that remain elevated for the current ratings level. Despite ongoing efforts to improve operating performance over the past 12 months, debt levels and credit measures have not improved to meet levels that were expected and incorporated into the company's existing ratings. Furthermore, the company has had delays executing a planned IPO that was expected to help deleverage the company. (At this time, it is unclear if this event will occur in the near-to-intermediate term.) Dresser designs and manufactures equipment for the energy industry and has total debt of about $1.075 billion. "The CreditWatch listing will be resolved in the near term, pending the company completing its 2004 audit process and filing its 2004 Form 10K and first-quarter 2005 Form 10Q," said Standard & Poor's credit analyst Jeffrey B. Morrison. "If the company can file statements in the near term and no additional developments occur beyond management's previously announced restatements of previous accounting periods, it is unlikely that ratings would be lowered further," he continued. However, if additional delays in filing persist beyond a reasonable time frame, negative ratings actions could result. ENRON CORP: Inks Stipulation Allowing Calpine's $52 Million Claim ----------------------------------------------------------------- EPC Estate Services, Inc., formerly known as National Energy Production Corp., and Calpine Corporation, as successor-in- interest to Goldendale Energy, Inc., were parties to a certain contract, dated February 13, 2001. Pursuant to the Contract, NEPCO was obligated to design, procure equipment and construct a power generation facility in Goldendale, Washington. Under a Guaranty Agreement, dated and effective February 5, 2001, Enron Corp. guarantied NEPCO's obligations under the Contract. The Contract provides that "Calpine may terminate [the Contract] for its own convenience at any time by written notice to [NEPCO]." Effective November 30, 2001, Calpine cancelled the Contract. At the pendency of Enron Corporation and its debtor-affiliates' bankruptcy cases, Calpine filed Claim No. 4179 against NEPCO for $39,619,036 for alleged overpayment under the Contract. Calpine paid NEPCO $108,034,507, but because NEPCO allegedly failed to, among other things, sufficiently progress on the Project and pay certain subcontractors, NEPCO purportedly incurred only $63,712,847 in costs on the Project. Given the mark up of $4,702,624, NEPCO was only entitled to $68,415,471, according to Calpine's computations. In addition, Calpine filed Claim No. 12730 against Enron for the same amount on account of the Guaranty. Calpine also filed Claim No. 12729 against Enron and Claim No. 22162 against NEPCO for the same amounts in the previous claims. The two claims are based on allegations that Enron, through its centralized cash management system, improperly swept the payments made by Calpine to NEPCO pursuant to Contract and that the alleged $39,619,036 overpayment to NEPCO is held by Enron, NEPCO and their affiliates in a constructive trust or otherwise is owed to Calpine under theories of conversion, fraud unjust enrichment and other equitable principles. In connection with the Project, NEPCO utilized the services of many subcontractors. Between June 19, 2002, and December 5, 2002, certain subcontractors filed proofs of claim for amounts allegedly owed by NEPCO for labor, services, materials, tools, equipment and rentals supplied in connection with the Project. Some, though not all, of these claims, purport to be secured by property at the Project. Through a series of settlements and agreements with certain subcontractors, Calpine paid the Subcontractors in exchange for: -- a release of all claims the subcontractors may have had against Calpine, including a release of liens; and -- an assignment of all or part of the subcontractor's claim against NEPCO to Calpine. Calpine also paid other subcontractors to settle legal claims related to the Project, without entering into formal settlement agreements. Calpine has asserted subrogation rights in the claims filed by the Informal Settlement Subcontractors against NEPCO. The Debtors and Calpine have engaged in negotiations to resolve their differences in connection with the Contract and the Claims. In resolution of all matters between them, the Parties agree that: 1. Claim No. 4179 is allowed as a Class 67 claim against NEPCO for $26 million. Any prior disallowance or expungement of the Claim will be without effect; 2. Claim 12730 is allowed as a Class 185 claim against Enron for $26 million; 3. Claim Nos. 12729 and 22162 are disallowed in full; 4. 31 subcontractor claims are disallowed in full for all purposes in the Debtors' Chapter 11 cases: Claimant Claim No. -------- --------- Brooklyn Iron Works 22227 Cives Corp 21238 Coast Crane & Equipment Co 6255 Delphi Control Systems 2710 Fisher Controls International 12503 General Electric Company 2473 Hood River Sand And Gravel 21934 Industrial Fabrication 21773 J H Kelly, LLC 3061 Johnston Pump 15259 Lampson International, LLC 5199 Matheson Painting 2438 Mullen Crane and Transport Co. 21908 NORCO 6782 North Coast Electric Co 6830 Pacific Det. Diesel-Allison, Inc. 22184 Paco Pumps 15261 Patterson Pump Co 6153 Petrochem Insulation Inc. 22214 Puget Sound Pipe and Supply 22185 Ramsay-Gerding Construction Co. 21540 RED-D-ARC, Inc. 2662 Rosemount, Inc. 12377 Safway Steel Products, Inc 5853 Shaughnessy & Co 3891 Smith Masonry And Contractors 21539 Sulzer Pumps (US) 19230 Tradesmen International, Inc 5541 Wahlco Inc. 12477 Wesco Distribution Inc. 6139 Wesco Distribution Inc. 21388 5. Two subcontractor claims partially assigned to Calpine are expunged to the extent indicated: Claimant Claim No. Claim Amount -------- --------- ------------ Nepcan Engineering Ltd. 22143 $939,495 Wyman-Gordon 15203 136,999 Forgings, Inc. 6. Two subrogation claims are disallowed to the extent of Calpine's subrogation rights: Claimant Claim No. Claim Amount -------- --------- ------------ Stoner Electric, Inc. 4911 $413,924 Crestline Construction 21776 211,092 Company LLC 7. All scheduled liabilities of the Debtors to Calpine, the subcontractors or other parties arising from, related to or connected with the Project, Contract, Guaranty Agreement, Subrogation Claims, Subcontractor Claims or Subcontractors Settlements are expunged. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 146; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Gets Court Approval on Ecoelectrica Settlement Pact --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved the settlement agreement between Enron Corporation and its debtor-affiliates and EcoElectrica, L.P. On October 31, 1997, EcoElectrica, L.P. entered into contracts in connection with its power plant, desalination plant, and liquid natural gas import terminal and storage facility with entities indirectly owned or controlled by Enron Corp. The contracts include these agreements: 1. Tolling Agreement with Enron LNG Power (Atlantic) Ltd., 2. LPG Agreement with The Protane Corporation, 3. Onshore Construction Contract with Enron Power I (Puerto Rico), Inc., and 4. Offshore Supply Contract with Enron Equipment Procurement Company. Enron and Enron Power Corp. guaranteed the Contracts. The second and final phase of the Onshore Contract, Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New York, relates, was completed by Enron Puerto Rico ahead of schedule, entitling it to an early completion bonus for $1,326,968 and other payments for $1,290,000, subject to interests at 2% per annum. EcoElectrica withheld timely payment of the Completion Bonus pending resolution of its general warranty claims against EEPC and Enron Puerto Rico for: -- $851,396 in completing the Warranty Claims, and -- $195,000 paid to the Environmental Protection Agency in response to a Notice of Violation from the Agency. EcoElectrica asserted that it may set off a portion of the Completion Bonus in satisfaction of those claims, and that doing so is not stayed by Section 362(a) of the Bankruptcy Code because Enron Puerto Rico is not a Debtor. EcoElectrica wired $1,864,868 to Enron Puerto Rico, which represented the Completion Bonus plus interest through July 31, 2004, less the alleged offset. In a Settlement Agreement, the Enron Entities, EcoElectrica and ABN AMRO Bank N.V., representing various lenders who financed the Contracts, agree that: a. The Enron Entities will retain the net payment; b. The parties will exchange mutual releases of claims related to the Contracts; c. Each claim filed by or on behalf of EcoElectrica or ABN Amro against the Enron Entities in connection with the Contracts will be deemed irrevocably withdrawn, with prejudice, and to the extent applicable, expunged and disallowed; and d. Each scheduled liability related to EcoElectrica or ABN Amro will be deemed irrevocably withdrawn, with prejudice, and to the extent applicable, expunged and disallowed. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 146; Bankruptcy Creditors' Service, Inc., 15/945-7000) EPOCH 2002-2: Moody's Downgrades $12M Class III Rate Notes to Ba3 ----------------------------------------------------------------- Moody's Investors Service lowered the ratings of two classes of notes issued by EPOCH 2002-2, Ltd.: (1) to A3 (from A2 on Review for Downgrade), the U.S. $50,000,000 Class II Secured Floating Rate Notes Due 2007; (2) to Ba3 (from Ba2 on Review for Downgrade), the U.S. $12,000,000 Class III Secured Floating Rate Notes Due 2007. This transaction closed on May 30th, 2002. According to Moody's, its rating action results primarily from rating migration in the underlying referenced assets. Rating Action: Downgrade Issuer: EPOCH 2002-2, Ltd. Class Descriptions: U.S. $50,000,000 Class II Secured Floating Rate Notes Due 2007 * Previous Rating: A2 on Review for Downgrade * New Rating: A3 U.S. $12,000,000 Class III Secured Floating Rate Notes Due 2007 * Previous Rating: Ba2 on Review for Downgrade * New Rating: Ba3 EXIDE TECHNOLOGIES: Sandell, et al., Unloads Equity Stake --------------------------------------------------------- In a Schedule 13D filing with the Securities and Exchange Commission, Castlerigg Master Investments Ltd., Sandell Asset Management Corp., Castlerigg International Limited, Castlerigg International Holdings Limited, and Thomas E. Sandell disclose that in May 2005, they sold in the open market: (a) 2,434,218 shares of Exide Technologies common stock; and (b) notes convertible into 172,711 shares of Exide common stock. Sandell, et al., no longer own any shares of Exide common stock. Headquartered in Princeton, New Jersey, Exide Technologies is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. * * * As reported in the Troubled Company Reporter on May 23, 2005, Moody's Investors Service placed the ratings for Exide Technologies, Inc. and its foreign subsidiary Exide Global Holdings Netherlands CV on review for possible downgrade. Management announced that a preliminary evaluation of Exide's results for the fourth quarter ended March 2005 strongly indicates that the company will be in violation of its consolidated adjusted EBITDA and leverage ratios as of fiscal year end. Moody's considers this is a significant event, given that these covenants were all very recently reset during February 2005 in connection with Exide's partial refinancing of its balance sheet. The company has initiated amendment negotiations with its lenders, but will not have access to any portion of the $69 million of unused availability under its revolving credit facility until the amendment process is completed. Exide had approximately $76.7 million of cash on hand as of the March 31, 2005 fiscal year end reporting date. However, this amount had declined to about $42 million as of May 17, 2005 due to the company's use of cash to fund seasonally high first quarter working capital needs, as well as approximately $8 million in pension contributions and a required $12 million payment related to a hedge Exide has in effect. These ratings were placed on review for possible downgrade: -- Caa1 rating for Exide Technologies' $290 million of proposed unguaranteed senior unsecured notes due March 2013; -- B1 ratings for approximately $265 million of remaining guaranteed senior secured credit facilities for Exide Technologies and Exide Global Holdings Netherlands CV, consisting of: * $100 million multi-currency Exide Technologies, Inc. shared US and foreign bank revolving credit facility due May 2009; * $89.5 million remaining term loan due May 2010 at Exide Technologies, Inc.; * $89.5 million remaining term loan due May 2010 at Exide Global Holdings Netherlands CV.; * Euro 67.5 million remaining term loan due May 2010 at Exide Global Holdings Netherlands CV.; -- B2 senior implied rating for Exide Technologies, Inc.; -- Caa1 senior unsecured issuer rating for Exide Technologies, Inc. As reported in the Troubled Company Reporter on May 19, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Exide Technologies to 'B-' from 'B+', and placed the rating on CreditWatch with negative implications. The rating action follows Exide's announcement that it likely violated bank financial covenants for the fiscal year ended March 31, 2005. Lawrenceville, New Jersey-based Exide, a manufacturer of automotive and industrial batteries, has total debt of about $750 million. The covenant violations would be a result of lower-than-expected earnings. Exide estimates that its adjusted EBITDA for the fiscal year ended March 31, 2005, will be only $100 million to $107 million, which is substantially below the company's forecast and 40% below the previous year. The EBITDA shortfall stemmed from high lead costs, low overhead absorption due to an inventory reduction initiative, other inventory valuation adjustments, and costs associated with accounting compliance under the Sarbanes- Oxley Act. Exide is working with its bank lenders to secure amendments to its covenants. "The company continues to be challenged by the dramatic rise in the cost of lead, a key component in battery production that now makes up about one-third of Exide's cost of sales," said Standard & Poor's credit analyst Martin King. FALCON PRODUCTS: Drafts Joint Plan with Oaktree & Whippoorwill -------------------------------------------------------------- Falcon Products, Inc. (OTC: FCPR) prepared a joint Plan of Reorganization that it intends to file with the U.S. Bankruptcy Court for the Eastern District of Missouri, Eastern Division. Funds and accounts managed by Oaktree Capital Management, LLC, and Whippoorwill Associates, Inc., will be co-proponents of the Plan. The Company currently expects to file a disclosure statement no later than Aug. 1, 2005. "Filing the Plan of Reorganization represents a critical milestone in our efforts to restructure Falcon, maintain its leadership in the commercial furniture industry and return the business to profitability and growth," Franklin A. Jacobs, the Company's founder said. "Over the past six months I've worked with members of the management team, and more recently with John Sumner, to develop a comprehensive business plan that we believe will enable Falcon to provide superior value and satisfaction to our customers. I am confident that John Sumner and the other members of the management team will successfully implement our business plan which will put Falcon on the right path towards a very bright future." The Plan The Company's Joint Plan provides for a comprehensive reorganization and debt recapitalization. Under the terms of the Plan, debt will be reduced from over $250 million to less than $90 million, thereby significantly lowering the Company's cash interest requirements and allowing more operating cash flow to be utilized in the business. The Plan envisions a significant conversion of debt to equity and an infusion of new capital via a rights offering that will be backstopped by the co-proponents, Oaktree Capital Management, LLC and Whippoorwill Associates. The Plan does not provide for any distributions to: -- unsecured creditors (including trade creditors and holders of the 11-3/8% Senior Subordinated Notes); and -- the junior convertible notes or current equity holders; however, certain unsecured creditors who qualify under Federal Securities Laws will be able to participate in the rights offering. The Plan proponents believe this change from the terms outlined in the non-binding term sheet executed in January 2005 is necessary for the confirmation of a viable plan of reorganization which is based on the comprehensive business plan recently developed by the Company. Upon consummation of the Plan, the majority of Falcon's equity will be held by Oaktree and Whippoorwill and the Company will no longer be a public reporting entity. "We are excited about the plan and believe our investment will provide the Company with the flexibility it needs to execute its business plan," said Shelley Greenhaus, president of Whippoorwill Associates. "We are optimistic about Falcon's business prospects and look forward to our long term involvement with Falcon and its employees." Confirmation and consummation of Falcon's Plan of Reorganization is subject to a number of conditions including approval by certain creditors of the Company and approval by the Bankruptcy Court. Falcon will solicit acceptance of the plan following approval of its disclosure statement by the Bankruptcy Court. A hearing on the confirmation of the Plan is expected to take place in October 2005. There can be no assurance, however, that the Plan as filed will be adopted and approved. Headquartered in Saint Louis, Missouri, Falcon Products, Inc. -- http://www.falconproducts.com/-- designs, manufactures, and markets an extensive line of furniture for the food service, hospitality and lodging, office, healthcare and education segments of the commercial furniture market. The Debtor and its eight debtor-affiliates filed for chapter 11 protection on January 31, 2005 (Bankr. E.D. Mo. Lead Case No. 05-41108). Brian Wade Hockett, Esq., and Mark V. Bossi, Esq., at Thompson Coburn LLP represent the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $264,042,000 in assets and $252,027,000 in debts. FALCON PRODUCTS: Audit Committee Concludes Investigation -------------------------------------------------------- Falcon Products, Inc. (OTC: FCPR) disclosed that a final report relating to the previously announced Audit Committee investigation has been issued. Based on the report, the Audit Committee has concluded that the Company's financial statements for periods dating back to the fiscal year ended Oct. 31, 2003, have been materially misstated. Accordingly, the Company's financial statements for FY 2003 and the first three quarters of FY 2004 should not be relied upon. The Company intends to file a Form 8-K relating to the non-reliance on previously issued financial statements. On Jan. 4, 2005, the Company said it expected to record a significant charge relating to the write-down of inventory during the fourth quarter of FY 2004 and that it believed it was likely that the inventory write-down would impact prior periods. During the course of the FY 2004 yearend financial statement audit, the Company identified additional adjustments that it believed could impact prior periods. The estimated amount of such adjustments will be disclosed in the Form 8-K. As a result of the Company's current financial and internal resource constraints, it has not been able to quantify the impact of the inventory write-down and other adjustments on prior periods. As such the Company is currently unable to restate prior period financial statements. CEO Resignation The Company also disclosed the departure of Franklin A. Jacobs who has resigned and will be retiring from his positions as Falcon's chairman, president and chief executive officer. Falcon's Board of Directors has elected John S. Sumner, Jr., who was named chief restructuring officer in March, as acting president and chief executive officer. "Frank Jacobs has been a dominant presence in the commercial furniture industry for over 40 years and the driving force behind Falcon," Jordon Kruse of Oaktree Capital Management, LLC, who along with Whippoorwill Associates are co-proponents of a Joint Plan of Reorganization, said. "Frank's extraordinary vision and passion for the business were key factors in the development of the business plan that we believe will enable Falcon to reach new heights." Headquartered in Saint Louis, Missouri, Falcon Products, Inc. -- http://www.falconproducts.com/-- designs, manufactures, and markets an extensive line of furniture for the food service, hospitality and lodging, office, healthcare and education segments of the commercial furniture market. The Debtor and its eight debtor-affiliates filed for chapter 11 protection on January 31, 2005 (Bankr. E.D. Mo. Lead Case No. 05-41108). Brian Wade Hockett, Esq., and Mark V. Bossi, Esq., at Thompson Coburn LLP represent the debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $264,042,000 in assets and $252,027,000 in debts. FEDERAL-MOGUL: District Ct. Lifts Navigant Fee Cap for Estimation ----------------------------------------------------------------- As previously reported, the U.S. Bankruptcy Court for the District of Delaware expanded Navigant Consulting, Inc.'s fee cap to $184,207 and reiterated that the cap was without prejudice to the right of the Official Committee of Property Damage Claimants to ask for further modification. As reported in the Troubled Company Reporter on Jan. 17, 2005, the Asbestos Property Damage Committee appointed in Federal-Mogul Corporation and its debtor-affiliates' chapter 11 cases hired Navigant Consulting to serve as its asbestos claims consultant. The Asbestos Property Damage Committee said that valuation of asbestos bodily injury claims is a critical aspect of the plan process in Federal-Mogul's Chapter 11 cases. Under the Plan of Reorganization, recovery for asbestos property damage creditors is tied to the projected value of asbestos bodily injury claims under the proposed trust distribution procedures. Moreover, under the proposed Plan, each creditor and equity holder constituency represented by the Plan Proponents actually stands to gain from a higher estimate of bodily injury claims. Theodore J. Tacconelli, Esq., at Ferry, Joseph & Pearce, P.A., in Wilmington, Delaware, asserts that no cap on Navigant's fees is necessary. Navigant has provided cost-effective services to the PD Committee and has performed its estimate at far less expense than any of the other consultants providing similar services to other constituencies in the Debtors' cases. Mr. Tacconelli notes that Legal Analysis Systems, Inc., the asbestos claims consultant retained by the Official Committee of Asbestos Claimants, has billed over $1.3 million and is subject to no cap on its fees. Similarly, the Analysis Research Planning Corporation, consultant to the Legal Representative for future Asbestos Claimants, has billed over $2 million and similarly is subject to no cap. Mr. Tacconelli, thus points out that the PD Committee's opponents in the asbestos litigation are not hampered by any limitation on the costs their claims consultants incur. In light of the expansion of the scope of estimation hearing and to take account of developments since the preparation of the PD Committee's initial estimate, including new case law on estimation of asbestos bodily injury claims, the PD Committee asks Judge Rodriguez for approval to modify Navigant's retention to perform additional services. The PD Committee asks the District Court to eliminate the limitation on fees previously imposed by the Bankruptcy Court. Accordingly, Judge Rodriguez lifts the Fee Cap for Navigant Consulting with respect to the work performed for the estimation hearing. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some US$6 billion. The Company filed for chapter 11 protection on October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed US$10.15 billion in assets and US$8.86 billion in liabilities. At Dec. 31, 2004, Federal-Mogul's balance sheet showed a US$1.925 billion stockholders' deficit. At Mar. 31, 2005, Federal-Mogul's balance sheet showed a US$2.048 billion stockholders' deficit, compared to a US$1.926 billion deficit at Dec. 31, 2004. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. (Federal-Mogul Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) FORD MOTOR: Will Reduce Salary Related Costs Due to Weak Outlook ---------------------------------------------------------------- Ford Motor Company (NYSE: F) reduced its full-year earnings per share guidance for 2005, as the profit outlook for the Company's North America automotive operations worsened due to a weaker outlook for vehicle sales and continued supplier-related challenges. The Company reported the 2005 full-year earnings guidance was being reduced to a range of $1.00 to $1.25 per share, down from previous guidance of $1.25 to $1.50 per share, each excluding special items and discontinued operations. In addition, the Company raised its second-quarter earnings guidance to a range of $0.30 to $0.35 per share, excluding special items, primarily because of a reduced tax-rate assumption (full- year rate of 15%) and stronger-than- anticipated results from Ford Motor Credit. Previously, second-quarter earnings guidance had been in the range of breakeven to $0.15 per share, excluding special items. (Anticipated special items and charges related to discontinued operations for 2005 are detailed at the end of this release.) During the Company's first-quarter conference call in April, Chairman and Chief Executive Officer Bill Ford said the Company would respond to its significant operating challenges through an acceleration of its business plan. Since then the Company has: * Signed a Memorandum of Understanding with Visteon Corp., its largest supplier. The transaction is expected to close by September 30, 2005, and over time will lead to a steady flow of more competitively priced, high- quality parts, systems and components. * Announced an S-1 filing for its wholly-owned Hertz Corp. -- a first step toward a possible initial public offering of a portion of the rental car company. The filing indicated that, following any initial public offering, Ford would expect to completely divest its stake in Hertz. In addition, the Company reported several actions aimed at further reducing the Company's salaried-related costs this year. They include: * A 5% reduction in salaried positions in Ford's North America operations by October 1, 2005 and a 10% reduction in the operation's use of agency and purchased services by July 1, 2005. This is in addition to actions announced in April which reduced about 1,000 salaried positions. * The elimination of 2005 bonuses for salaried management employees worldwide. * The suspension of the Company's 401(k) matching grant for salaried employees, effective July 1, 2005. The Company also said it is evaluating options for reducing personnel-related costs outside of North America. "Although we have increased our earnings guidance for the second quarter, challenges continue to mount, especially in our North America automotive operations," said Don Leclair, executive vice president and chief financial officer. "We're taking steps immediately to reduce further our salaried- related costs this year; these are a continuation of a series of actions we plan to take to address our operating challenges. We remain committed to improving our cost structure, optimizing our global footprint, and making essential investments for the future." Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan, manufactures and distributes automobiles in 200 markets across six continents. With more than 324,000 employees worldwide, the company's core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Motor Credit Company and The Hertz Corporation. * * * As reported in the Troubled Company Reporter on May 23, 2005, Fitch Ratings downgraded the senior unsecured debt ratings of Ford Motor Corporation and Ford Motor Credit Corporation to 'BBB' from 'BBB+'. Ratings on the Capital Trust II securities have been downgraded to BB+ from BBB-. The rating outlook remains negative. Fitch also affirms the 'F2' commercial paper. The ratings of Hertz have been downgraded to 'BBB' from 'BBB+' and placed on Rating Watch: Evolving. A complete list of ratings is detailed at the end of this release. The downgrade reflects the impact of sales declines in key product categories, relentless price and product competition and higher commodity prices on Ford's automotive operating profitability. Despite relatively successful new product offerings, the support provided by healthy F-Series volumes, steady economic growth and solid industry sales volumes, Ford nevertheless faces breakeven to modestly negative cash flows in the automotive segment. FMC CORPORATION: Executes New $850 Million Unsec. Credit Agreement ------------------------------------------------------------------ FMC Corporation (NYSE: FMC) reported that it has executed a new unsecured credit agreement with a group of lenders providing for extensions of credit in the aggregate amount of $850 million. The new five-year credit agreement provides for a $600 million revolving credit facility ($250 million of which is available for the issuance of letters of credit) and a $250 million term loan. The new credit agreement replaces a $600 million secured credit agreement entered into in October 2004. In addition to the new credit agreement being unsecured, it provides more favorable pricing and greater financial flexibility than the previous credit agreement. The Company also reported that it has called for redemption on July 21, 2005, all of its 10.25% Senior Secured Notes Due 2009 outstanding in the aggregate principal amount of $355 million. The redemption price of the Notes will be 100 percent of the principal amount of the Notes plus accrued interest to the redemption date and a "make-whole" premium that will be determined prior to the redemption date, in accordance with the indenture governing the Notes. During the second and third quarters of 2005, the Company will record losses on debt extinguishments of approximately $2 million and $56 million, respectively, reflecting the write-off of unamortized financing costs and the estimated $45 million premium payable upon redemption of the Notes. As a result of lower interest expense related to the new credit agreement and the redemption of the Notes, the Company now expects full-year earnings before restructuring and other income and charges to be on the higher end of the previously guided range of $4.15-4.30 per diluted share. The balance of the Company's outlook provided on May 3, 2005 remains unchanged. FMC Corporation is a diversified chemical company serving agricultural, industrial and consumer markets globally for more than a century with innovative solutions, applications and quality products. The company employs approximately 5,000 people throughout the world. The company operates its businesses in three segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. * * * As reported in the Troubled Company Reporter on June 8, 2005, Moody's Investors Service placed the ratings of FMC Corporation (FMC -- Ba1 senior implied) on review for possible upgrade. FMC's existing debt ratings will likely be raised to Baa3 upon completion of an amended bank facility. The reviews are prompted by Moody's belief that the company has made significant progress reducing contingent liabilities and improving credit metrics, and that a general economic upturn will translate into improved performance for 2005 and 2006. In addition the review incorporates the new terms of the proposed bank facilities that will be unsecured and reflect the terms and conditions suitable for an investment grade profile. FMC's proposed senior secured credit facility consisting of a $350 million term loan A, and a $500 million revolving credit facility -- both to be extended to June 2010 will likely be raised to Baa3. Proceeds from the amended credit facility will be used to refinance the existing term loan A and to allow for the redemption of the $355 million 10.25% senior secured notes due 2009. FMC's ratings outlook, will be moved to stable. The other debt ratings that will be raised reflect the banks' willingness to forego a secured position such that all debt is now viewed as effectively pari passu. The actions are subject to a final review of the documentation of the proposed bank agreements. The SGL-2 rating was affirmed and will be withdrawn upon completion of the proposed bank agreements. Ratings placed on review for possible upgrade: -- $500 million revolver due 2010 -- currently Ba1 -- will be raised to Baa3 -- $350 million term loan A due 2010 -- currently Ba1 -- will be raised to Baa3 -- $45 million debentures due 2011 -- Ba2 -- will be raised to Baa3 -- Medium-term notes due 2005 to 2008 -- Ba2 -- will be raised to Baa3 -- Senior unsecured industrial revenue bonds due 2007 to 2032 -- Ba3 -- will be raised to Baa3 -- $355 million 10.25% senior secured notes due 2009 -- Ba2 -- will be raised to Baa3 -- $100 million senior secured letters of credit facility due 2009 -- Ba1 -- will be raised to Baa3 -- Senior Implied Rating -- Ba1 -- Issuer Rating -- Ba3 Ratings affirmed -- Speculative Grade Liquidity Rating -- SGL-2 GARDEN RIDGE: Has Until June 30 to Decide on 32 Remaining Leases ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware further extended until June 30, 2005, the period within which Garden Ridge Corporation and its debtor-affiliates can elect to assume, assume and assign, or reject their unexpired nonresidential real property leases. The Court confirmed the Debtors' First Amended Joint Plan of Reorganization on April 29, 2005, and the Plan took effect on May 12, 2005. The Debtors explain that they are parties to 32 unexpired nonresidential real property leases located in 13 different states. The confirmed Plan contemplates the assumption of substantially all of the Debtors' remaining unexpired leases in accordance with negotiated amendments to the lease agreements of those unexpired leases. The Debtors remind the Court that it authorized the retention of Huntley, Mullaney & Spargo, LLC, as their special real estate consultant on April 19, 2004. Since its retention, Huntley Mullaney has evaluated the Debtors' 32 remaining unexpired leases and analyzed the alternatives for each of those leases. The Debtors gave the Court three reasons in support of the extension: 1) they and Huntley Mullaney are still in the process of concluding negotiations and entering into lease amendments with the landlords of the remaining unexpired leases; 2) the remaining unexpired leases are a critical component of their business operations and are vital in their ability to preserve the value of their estates in the post-confirmation process; and 3) the extension will not prejudice the landlords of the remaining unexpired leases because the Debtors are current on all post-petition rent obligations under the leases and to the extent prescribed by Section 365(d)(3) of the Bankruptcy Code. Headquartered in Houston, Texas, Garden Ridge Corporation -- http://www.gardenridge.com/-- is a megastore home decor retailer that offers decorating accessories like baskets, candles, crafts, home accents, housewares, party supplies, pictures and frames, pottery, seasonal items, and silk and dried flowers. The Company and its debtor-affiliates filed for chapter 11 protection on February 2, 2004 (Bankr. D. Del. Case No. 04-10324). Joseph M. Barry, Esq., at Young Conaway Stargatt & Taylor LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed estimated debts and assets of over $100 million. GENEVA STEEL: Ch. 11 Trustee Hires Ray Quinney as Local Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Utah, Central Division, authorized James T. Markus, the chapter 11 Trustee appointed in Geneva Steel LLC's bankruptcy case, to retain Ray, Quinney & Nebeker, PC, as his local counsel. Ray Quinney is one of the oldest and largest law firms in Utah and the Intermountain West. The Firm has 86 attorneys and a comparable number of staff members working in its principal office in Salt Lake City, Utah, and its branch office in Provo, Utah. The Trustee's lead counsel, Block Markus Williams LLC, will consult with Ray Quinney on matters of local practice and procedure. Ray Quinney's duties include: a) advising the Trustee of his rights, powers and duties as duly appointed trustee in a chapter 11 case; b) representing and advising the trustee in any investigation of the acts, conduct, assets, liabilities, financial condition of the Debtor, and operation of the Debtor's business; c) preparing, on behalf of the Trustee, all necessary pleadings, reports and other papers; d) representing and advising the Trustee in all proceedings in this case; e) assisting and advising the Trustee in his administrative duties; f) representing and advising the Trustee regarding any plan of reorganization and assisting the Trustee in the negotiations with representatives of the Debtor and others; and g) providing other services as are customarily provided by counsel to trustees in cases of this kind. The current hourly rates for Ray Quinney's attorneys and paralegals are: Designation Hourly Rate ----------- ----------- Shareholders $320 - $190 Associates $200 - $145 Paralegals $95 - $80 Annette W. Jarvis, Esq., and Steven T. Waterman, Esq., shareholders at Ray Quinney, are the attorneys who will be primarily involved in the Debtor's cases. To the best of the Trustee's knowledge, Ray Quinney is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Provo, Utah, Geneva Steel LLC owns and operates an integrated steel mill. The Company filed for chapter 11 protection on January 25, 2002 (Bankr. Utah Case No. 02-21455). Andrew A. Kress, Esq., Keith R. Murphy, Esq., and Stephen E. Garcia, Esq., at Kaye Scholer LLP represent the Debtor in its chapter 11 proceedings. When the Company filed for protection from its creditors, it listed $262 million in total assets and $192 million in total debts. GLASS GROUP: Committee Taps FTI Consulting as Financial Advisors ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave the Official Committee of Unsecured Creditors of The Glass Group, Inc., permission to employ FTI Consulting, Inc., as its financial advisors. FTI Consulting will: 1) assist the Committee in the review of financially related disclosures required by the Court, and assist in the review of the Debtor's short-term cash management procedures; 2) assist and advise the Committee with respect to the Debtor's identification of core business assets and the disposition of assets or liquidation of unprofitable operations; 3) assist in the review of the Debtor's performance of cost and benefit evaluations with respect to the affirmation or rejection of various executory contracts and unexpired nonresidential real property leases; 4) assist in the valuation of the Debtor's present level of operations and identification of areas or potential cost savings, including overhead and operating expense reductions and efficiency improvements; 5) assist in the review of financial information distributed by the Debtor to creditors and other parties-in-interest, including cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various asset and liability accounts, and analysis of proposed transactions for which Court approval is required; 6) assist in the review and preparation of information and analysis necessary for the confirmation of a chapter 11 plan and approval for an accompanying disclosure statement; 7) assist in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; and 8) render other business and financial advisory services to the Committee or its counsel that is necessary in the Debtor's bankruptcy proceeding. Samuel Star, a member at FTI Consulting, disclosed that the Firm will be paid a $50,000 Monthly Fee, plus reimbursement of other necessary expenses incurred by FTI during its term of engagement by the Debtor. FTI Consulting assures the Court that it does not represent any interest materially adverse to the Committee, the Debtor or its estate. Headquartered in Millville, New Jersey, The Glass Group, Inc. -- http://www.theglassgroup.com/-- manufactures molded glass container and specialty products with plants in New Jersey and Missouri. Its products include cosmetic bottles, pharmaceutical vials, specialty jars, and coated containers. The Company filed for chapter 11 protection on Feb. 28, 2005 (Bankr. D. Del. Case No. 05-10532). Derek C. Abbott, Esq., at Morris, Nichols, Arsht & Tunnell represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of $50 million to $100 million. GOODYEAR TIRE: Fitch Junks Proposed $400 Mil. Senior Unsec. Notes ----------------------------------------------------------------- Fitch Ratings has assigned an indicative rating of 'CCC+' to Goodyear Tire & Rubber Company's (GT) planned $400 million issue of senior unsecured notes. GT intends to issue $400 million of 10-year notes under Rule 144A. Proceeds will be used to repay $200 million outstanding under the company's first lien revolving credit facility and to replace $190 million of cash balances that were used to pay $516 million of 6.375% Euro notes that matured June 6, 2005. The Rating Outlook is Stable. The rating reflects the substantial amount of senior secured debt relative to the planned notes. It also incorporates Fitch's concerns about GT's high leverage, high-cost structure, and weak profitability and cash flow. In addition, GT's pension plans, which were underfunded by $3.1 billion at the end of 2004, are likely to require substantially higher contributions over the near term. Partly mitigating these concerns are the company's $1.7 billion of cash balances at March 31, 2005 and additional flexibility provided by new bank facilities executed in April 2005 that extended maturities out to 2010. The rating considers Goodyear's well-recognized brand name, its position as one of the three largest global tire companies, and progress in addressing its debt structure and operating performance. GT's segment profit has recently benefited from an improved replacement tire market, higher selling prices, cost saving from previous restructuring, and the favorable impact from foreign currency translation. While the company has seen strong acceptance of new products, margins remain pressured by raw material and transportation costs and a highly competitive environment. In addition, GT's key North American Tire segment suffers from a high cost structure related to labor and pension costs that make margin improvement particularly challenging. Operating cash flow has improved in recent quarters and could be supplemented by the pending divestitures of GT's North American Farm tire business and its rubber plantation in Indonesia. However, even after the planned debt issuance, additional debt or equity issuance may be needed to meet cash requirements that include capital expenditures and pension contributions as well as long-term debt maturities of approximately $650 million through the end of 2007. GT's cash and borrowing capacity provide adequate liquidity in the short term, but the rating reflects uncertainty surrounding the company's ability to rebuild and sustain stronger cash flow over the long term. GOODYEAR TIRE: Moody's Rates New $400M Sr. Unsecured Notes at B3 ---------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to the new $400 million ten year senior unsecured notes to be issued by Goodyear Tire & Rubber Company. Proceeds from the notes will initially be used to repay outstandings under the company's revolving credit facility and restore cash balances following the repayment earlier this month of ?400 million (approximately $500 million) of unsecured notes. The issuance increases the total amount of financing Goodyear has raised in 2005 to roughly $4 billion. The capital raised has: * refinanced several maturing obligations; * lengthened the company's debt maturity profile; and * provided additional liquidity to facilitate the company's restructuring strategy and to address required contributions under its domestic pension plan. The rating reflects Moody's expectations that: 1) the company's financial condition has stabilized with recent results, particularly improved margins, confirming positive trends in replacement tire demand in North America; 2) it has good liquidity to cover its operating needs including pension contributions over the next few years; and 3) its competitive position remains solid. The B3 rating to the new notes is level with the current unsecured rating of Goodyear and is two notches below the corporate family rating (previously called senior implied) of B1. The transaction is modestly beneficial to the company's liquidity position. As a result, the liquidity rating of SGL-2 has been affirmed. The notes will be sold in a privately negotiated transaction without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. The issue will be kept pari passu with existing senior unsecured indebtedness through the provision of up-streamed guarantees from certain domestic operating subsidiaries. Compared to indentures for other unsecured obligations of Goodyear, the indenture for the new notes would permit a higher level of domestic assets to be pledged prior to the provision of equal and ratable security to the note holders (subject to the formal terms, conditions, exclusions and other limitations contained in the document). Goodyear recently retired its ?400 million obligation from funds on hand and a $200 million drawing under its $1.5 billion senior secured first lien credit facility. Upon receipt of proceeds from the new notes, the company will repay those borrowings and replenish its cash position. On a pro forma basis for the $3.65 billion of financing completed in April 2005, the repayment of the ?400 million of notes, and the new $400 million unsecured notes and the expected use of proceeds, Goodyear would have approximately $1.8 billion of cash at March 31, 2005 and aggregate balance sheet debt of $5.6 billion. The sum of balance sheet debt plus issued letters of credit to trailing twelve month EBITDA would be approximately 3.9 times, slightly higher adjusted for the present value of operating leases and limited use of off balance sheet securitization facilities. The new financing transaction does not materially impact any of the leverage or coverage ratios that supported the assignment of Goodyear's B1 corporate family rating or B3 senior unsecured obligations earlier this year. Goodyear's credit metrics should remain within the B1 corporate family rating range. The outlook is stable. The new financing benefits Goodyear's liquidity profile through the restoration of its cash position and preservation of availability under its revolving credit. The company faces higher pension contributions in 2005 ($400-$425 million) and 2006 ($600- $650 million) compared to $163 million in 2004. In addition it has debt maturities of approximately $350 million in 2006 ($125 million equivalent of Swiss Franc bonds in March, and $225 million in December). The combination of cash flow from operations, cash on hand, modest asset sale proceeds, comfortable cushion under its the financial covenants contained in its 2005 financing, and access to its revolving credit should allow the company to sufficiently cover these requirements. The SGL-2 rating has been affirmed indicating the company has good liquidity over the next twelve months. Goodyear Tire & Rubber, headquartered in Akron, Ohio, is one of the world's leading manufacturers of tire and rubber products with 2004 revenues of $18.4 billion. The company manufactures tires, engineered rubber products and chemicals in 90 facilities in 28 countries and employs about 80,000 people. HARRAH'S ENT: Fitch Rates New $4 Billion Credit Facility at BBB- ---------------------------------------------------------------- Fitch Ratings has affirmed the long-term debt ratings of Harrah's Operating Co., a wholly owned operating subsidiary of Harrah's, Entertainment (NYSE: HET) and assigned a 'BBB-' rating to the new $4 billion revolving credit facility due in April 2009. At the same time, Fitch has resolved the Positive Rating Watch status on the senior unsecured and subordinated debt ratings of Caesars Entertainment (CZR) with respective upgrades to 'BBB-' and 'BB+'. The rating action follows completion of Harrah's acquisition of CZR on June 13, 2005. With closing of the CZR acquisition, CZR has been merged into HOC, a wholly owned operating subsidiary of HET, where virtually all the debt and assets reside. Pre-existing debt in the structure currently benefits from a holding company guarantee, and as per the governing indentures, allows HET to file consolidated financial statements as a proxy for HOC. HET is currently soliciting consents from CZR bondholders to also allow HET to file at the parent level, and in exchange will provide CZR debt with the parental guarantee. Fitch believes this to be a technical issue that CZR bondholders will acquiesce to. However, in the event that CZR public debt holders do not consent, the debt will not be guaranteed. Fitch finds the resulting structural subordination of CZR notes not meaningful given the very limited risk that HET would not support the CZR debt ratably, and the fact that there are virtually no assets at the holding company level. As such, regardless of the outcome of the consent offer (which should be resolved in the next few weeks), CZR ratings will be equalized with those of HOC. Strategically, the acquisition allows HET to establish a stronger presence on the Las Vegas Strip and reduces exposure to the more volatile regulatory environments of regional riverboat markets. While HET had expressed interest in building or buying discrete property on the Strip, the purchase allows HET to immediately take advantage of currently strong Las Vegas fundamentals in a more meaningful way. CZR's Las Vegas portfolio should also allow HET to capture Total Rewards members who are bypassing Harrah's current offerings in Las Vegas in favor of alternative properties. Caesars' four prominent Strip properties include Caesars, Paris, Bally's, and Flamingo, which are situated at one of the busiest intersections at the center of the Strip. In addition, HET should be able to improve same store sales and efficiency at CZR properties by implementing its industry-leading player tracking systems and loyalty programs. Returns on CZR's heavy capital investment program over the past several years have been disappointing and the upside exists in better asset utilization. HET financed the cash portion of the CZR acquisition ($1.9 billion) with borrowings under its revolving credit facility, increasing pro forma leverage to 4.3 times (x) at closing. Fitch expects Harrah's to end 2005 with pro forma leverage of approximately 4.2x, versus actual 2004 leverage of 4.3x (which includes just six months of Horseshoe results). Heavy capital expenditure plans in the range of $1.5 billion should preclude significant debt reduction in 2005. However, an anticipated drop-off in spending in 2006 and a full-year of CZR results should produce ample free cash flow for the company to deliver to levels appropriate for the rating (below 4.0x) by the end of 2006. While closing leverage is high for the rating category, Fitch notes that this is consistent with Harrah's historical capital structure policies with rapid improvement in leverage following acquisition-related debt increases. With revolver capacity upsized to $4 billion at closing, liquidity remains solid, with roughly $2 billion remaining in available funds. Based on current projections, cash from operations combined with revolver availability and cash-on-hand appear adequate to support the company's growth initiatives, meet debt maturities, and pay dividends through at least year-end 2006. Ratings reflect the company's large and diversified portfolio of casinos, significant cash flow generation, nationally recognized brands, good quality assets, geographic diversity, marketing/technical prowess, and financially conservative management team. Harrah's achieves strong same-store growth through its industry- leading Total Rewards loyalty program and capital investment in existing properties. Strong external growth has been achieved largely through strategic acquisitions, with numerous large-scale acquisitions successfully closed and integrated into the portfolio over the past five years, including Showboat, Inc. ($1 billion), Rio Hotel & Casino ($987 million), Players International ($439 million), Harvey's Casino Resorts ($712 million), and Horseshoe Gaming ($1.6 billion). Ongoing risks include the potential for further run-up in leverage due to future acquisitions or development opportunities, potential regulatory changes and/or tax increases (particularly in riverboat jurisdictions), and competitive threats to Illinois, Atlantic City, and northern Nevada. As Harrah's largest acquisition to date, integration risks remain a key concern. The Stable Rating Outlook reflects Fitch's expectation that Harrah's will improve credit metrics to levels more appropriate for the credit within 18 months of closing. The rating(s) and Outlook would be adversely affected if HET is unable to reduce debt in a timely manner or chooses to pursue additional large- scale debt-financed acquisitions, growth projects, and/or share repurchases. HEALTHSOUTH CORP: Will File 2000 to 2003 Annual Report by June 29 ----------------------------------------------------------------- HealthSouth Corporation (OTC Pink Sheets: HLSH) will hold a meeting for investors in New York City on June 29, 2005, at 4:00 p.m. Eastern Time to provide an update of its current operations, a review of its comprehensive Form 10-K for the years ended Dec. 31, 2000 through Dec. 31, 2003, and a brief overview of its strategic business plan. The Company expects the meeting to conclude by 6 p.m. Eastern Time. The Company affirmed its intent to file its comprehensive Form 10-K with the Securities and Exchange Commission in advance of the June 29 meeting. The Company also stated that it anticipates the filing date for the comprehensive Form 10-K will be closer to the June 29 meeting date than previously expected. This comprehensive Form 10-K will contain restated financial statements for the years 2000-2001 and financial statements for the years 2002-2003. "We are in the final stage of a multi-stage, multi-year process needed to complete the comprehensive Form 10-K," said HealthSouth CFO John Workman. "There have been hundreds of individuals who have assisted in the extensive work that has been done to ensure that our accounting records are reconstructed thoroughly and our financial statements and other disclosures are prepared properly with respect to these historical financial statements." HealthSouth Corporation -- http://www.healthsouth.com/-- is one of the nation's largest providers of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide. * * * 2004 Annual Report Will Be Delayed HealthSouth filed a Form 12b-25 with the Securities and Exchange Commission saying that it will not be filing its 2004 Form 10-K on time due to the company's ongoing accounting reconstruction and restatement efforts. The company is currently targeting the filing of its 2004 Form 10-K in the fourth quarter of 2005. The company says it plans to file a comprehensive Form 10-K for the years ended Dec. 31, 2000, through Dec. 31, 2003, by the middle of the second quarter 2005. This comprehensive Form 10-K will contain restated financial statements for periods which previously had been reported and initial financial statements for the other periods covered by the report. "Our external auditor is now auditing these documents and is taking steps to ensure a thorough review," said HealthSouth CFO John Workman. "We have been working extensively with external resources to ensure that our accounting records are reconstructed thoroughly and our financial statements and other disclosures are prepared properly. This process has consumed more than 500 man- years of external labor resources and required millions of lines of adjusting journal entries. It is our intention to not rush a process of this importance to reach an earlier, self-imposed deadline." HELLER FINANCIAL: Fitch Holds Junk Rating on $7.6M Class M Certs. ----------------------------------------------------------------- Fitch Ratings upgrades Heller Financial Commercial Mortgage Asset Corp.'s mortgage pass-through certificates, series 1999 PH-1: -- $12.6 million class E to 'AAA' from 'AA'; -- $37.9 million class F to 'A+' from 'A'; -- $17.7 million class G to 'A' from 'A-'. In addition, Fitch affirms these classes: -- $73 million class A-1 'AAA'; -- $535.6 million class A-2 'AAA'; -- Interest-only class X 'AAA'; -- $22.7 million class B 'AAA'; -- $20.2 million class C 'AAA'; -- $53 million class D 'AAA'; -- $35.3 million class H 'BBB-'; -- $20.2 million class J 'BB'; -- $7.6 million class K 'BB-'; -- $15.1 million class L 'B'; -- $7.6 million class M remains 'CCC'. The $8.6 million class N is not rated by Fitch. The upgrades reflect the increased subordination levels from amortization and defeasance. As of the June 2005 distribution date, the pool's balance has been reduced 14.1% to $867.1 million from $1 billion at issuance. The trust has incurred approximately $11.6 million in losses due to the disposition of four assets. In addition, 15 loans (7.4%) have been defeased. The pool contains three specially serviced loans (1.2%), of which Fitch expects losses to occur on only one. This loan (0.6%) is secured by a retail center in Watauga, TX. The property's performance has suffered since Winn Dixie rejected its lease in June of 2002. The property was recently sold to the lender in a foreclosure sale. Based on recent appraisal values, losses are expected. Fitch reviewed the performance and underlying collateral of the two credit assessed loans in the pool: South Plains Mall (7.0%) and the Station Plaza Office Complex (2.4%). Based on their stable performance, both credit assessments remain investment grade. The South Plains Mall, located in Lubbock, TX, consists of 1.1 million square feet, of which 1 million sf is collateral for the loan. Based on data provided by the master servicer, Wachovia Securities, the year-end 2004 debt service coverage ratio declined slightly, to 1.95 times (x) from 2.09x at issuance. Occupancy at the property has remained stable at 98%. The Station Plaza Office Complex consists of three office buildings (320,477 sf) located in Trenton, New Jersey. The properties maintain a 100% occupancy level. Based on data supplied by the master servicer, the DSCR has increased slightly since issuance, from 1.26x to 1.27x. HUFFY CORPORATION: Wants More Time to File Chapter 11 Plan ---------------------------------------------------------- Huffy Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division, for an extension of their exclusive periods to file and solicit acceptances of a chapter 11 plan. The Debtors want their exclusive filing period extended to Sept. 10, 2005, and their exclusive solicitation period stretched to Nov. 9, 2005. The Debtors contend they need the extensions to avoid a premature formulation of a chapter 11 plan and to ensure that the plan will take into account the interests of Huffy's employees, creditors and other parties-in-interests. The Debtors tell the Court they are currently engaged in negotiations with the Official Committee of Unsecured Creditors, secured creditors and suppliers in order to draft a viable plan. In fact, Huffy adds, key management personnel traveled to China to meet and negotiate with the Debtors' key suppliers. Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. INDOSUEZ CAPITAL: Moody's Upgrades $148M Rate Notes to A2 from Ba3 ------------------------------------------------------------------ Moody's Investors Service upgraded notes issued by Indosuez Capital Funding IIA, Limited, a collateralized debt obligation issuance. The tranches affected are: 1) U.S. $78,500,000 Class B1 Floating Rate Notes due 2010; and 2) U.S. $70,000,000 Class B2 Fixed Rate Notes due 2010. The Class B1 Notes, currently rated Ba3 on watch for possible upgrade, have been upgraded to A2, and the Class B2 Notes, currently rated Ba3 on watch for possible upgrade, have been upgraded to A2. According to Moody's, the rating action on the Class B1 Notes and the Class B2 Notes is due, in part, to the continuing amortization of the transaction since the end of the reinvestment period in July 2003. Rating Action: Upgrade Issuer: Indosuez Capital Funding IIA, Limited Tranche: U.S. $78,500,000 Class B1 Floating Rate Notes due 2010 * Prior Rating: Ba3 on watch for possible upgrade * Current Rating: A2 Tranche: U.S. $70,000,000 Class B2 Fixed Rate Notes due 2010 * Prior Rating: Ba3 on watch for possible upgrade * Current Rating: A2 INFOUSA INC: Moody's Affirms $50M Credit Facility Rating at Ba3 --------------------------------------------------------------- Moody's Investors Service affirmed all of InfoUSA Inc.'s credit ratings and changed the outlook to negative following the announcement that an entity controlled by the company's founder, chairman and CEO, Vin Gupta, has made an offer to acquire all of the publicly held common shares of InfoUSA in a debt financed transaction. Mr. Gupta currently owns approximately 38% of the common shares of InfoUSA. Under the terms of the proposed offer, the holders of InfoUSA common stock, other than Mr. Gupta, would receive $11.75 in cash per share. The offer letter states that the consideration for the publicly held common shares will be obtained solely from debt financing. The negative outlook reflects the substantial increase in debt levels and weakening of credit metrics that is expected to occur if the offer is accepted. Moody's will evaluate the company's expected capital structure, liquidity position and business strategies upon executing a definitive transaction agreement and consider the extent to which a ratings downgrade is warranted. Moody's affirmed these ratings: * $50 million senior secured revolving credit facility due 2007, rated Ba3 * $105 million senior secured first lien term loan A due 2009, rated Ba3 * $70 million senior secured term loan B due 2010, rated Ba3 Headquartered in Omaha, Nebraska, InfoUSA Inc. is a leading provider of: * business and consumer information; * data processing; and * database marketing services. Revenues for the twelve months ended March 31, 2005 were approximately $359 million. INTERSTATE BAKERIES: Selling Boise Lot for $2.3M to R.W. Van Auker ------------------------------------------------------------------ Interstate Bakeries Corporation and its debtor-affiliates own a parcel of land at 420 North Five Mile Road, in Boise, Idaho, which includes a 63,052-square foot building. The Debtors currently use less than 5% of the total space in the Building for the operation of a thrift store. After evaluating all owned and leased real estate to maximize the value of their businesses and assets, the Debtors determined that they no longer need the Boise Property. Hence, the Debtors ask the U.S. Bankruptcy Court for the Western District of Missouri for authority to sell the Boise Property to Ronald W. Van Auker, through Pioneer 1031 Company, subject to higher or better offers. The Debtors have entered into an Asset Sale Agreement with Mr. Van Auker, as the stalking horse bidder. The Debtors will sell the Property for $2,315,015. Mr. Van Auker has deposited $231,502 in an escrow account. The Asset Sale Agreement also provide that: * The sale of the Boise Property to Mr. Van Auker will include all of the Debtors' right, title and interest in the Property; * The closing will occur within five business days of the Court's approval of the Asset Sale Agreement, subject to the payment of the Purchase Price; * Mr. Van Auker will lease 6,528 rentable square feet of space, including the adjacent parking lot, for the Debtors' exclusive use; * The Debtors will deliver good and marketable fee simple title to the Land and Improvements, free and clear of liens, other than Permitted Exceptions; and * The Boise Property is being sold "as-is, where-is," with no representations or warranties, reasonable wear and tear and casualty and condemnation excepted. Hilco Industrial, LLC, and Hilco Real Estate, LLC, marketed the Boise Property. Hilco will receive $121,813 for its marketing and disposition services. The Debtors require offers for the Property to be delivered by June 17, 2005. The Debtors will conduct an auction on June 24 if a competing bid is received. The Debtors impose a $2,400,000 minimum bid. The Debtors also seek permission to pay Mr. Van Auker a $46,300 termination fee if they consummate the sale with another bidder. The Debtors also seek to reimburse up to $2,500 of Mr. Van Auker's expenses. The Bid Protections are intended to compensate Mr. Van Auker for making the first qualified bid and setting the floor price for the Boise Property. The Debtors propose to serve notice of the Boise Property Sale to all parties-in-interest. Accordingly, the Debtors will publish a weekly notice or advertisement of sale in the Idaho Statesman for the two weeks preceding the Bid Deadline along with a notice or advertisement of sale in The Wall Street Journal. The Boise Property Sale will be considered at the June 28, 2005 omnibus hearing scheduled by the Court in the Debtors' Chapter 11 cases. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Selling Sta. Maria Lot for $720K to N. Shore ----------------------------------------------------------------- Interstate Bakeries Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Western District of Missouri for authority to sell a parcel of real property at 1790 West Betteravia, in Santa Maria, California, for $720,000 to North Shore Holdings, Ltd. The Santa Maria Property includes an approximately 2,250-square foot building that the Debtors are not currently using. The Debtors received three offers for the Santa Maria Property. With the assistance of Hilco Industrial, LLC, and Hilco Real Estate, LLC, the Debtors conducted a telephonic auction on June 3, 2005. North Shore, an Illinois Corporation, emerged as the highest and best bidder. The unsuccessful bidders -- California Pro Painting, Inc., and Guadalupe Alvarez -- offered $501,000. The salient terms of the Debtors' Asset Purchase Agreement with North Shore are: * North Shore has deposited $50,100 in an escrow account. The Deposit will be held by the escrow agent until the Debtors satisfy all conditions to closing; * The sale of the Santa Maria Property will include all of the Debtors' right, title and interest in the Property; * The closing will occur within five business days of the Court's approval of the Asset Purchase Agreement, subject to the payment of the Purchase Price; * The Debtors will deliver good and marketable fee simple title to the Land and Improvements, free and clear of liens, other than Permitted Exceptions; and * The Santa Maria Property is being sold "as-is, where-is," with no representations or warranties, reasonable wear and tear and casualty and condemnation excepted. The Debtors will pay Hilco $39,600 -- 5.5% of the Purchase Price -- for its marketing and disposition services. The Debtors believe that the sale of Santa Maria Property to North Shore is the best way to maximize the value of the Property, reduce indebtedness, improve liquidity to facilitate the formulation and ultimate confirmation of a reorganization plan, and yield the highest possible returns to creditors. In the event North Shore fails to close the sale for any reason, the Debtors seek permission to consummate the sale with the next highest and best bidder. The Debtors also want the Sale exempted from transfer, stamp or similar taxes, conveyance fees and recording fees, and costs and expenses imposed by any federal, state, county or other local law in connection with the Property's transfer or conveyance. The Court will consider the Santa Maria Property Sale at the June 28, 2005 omnibus hearing in the Debtors' Chapter 11 cases. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) JEROME DUNCAN: Files Chapter 11 Petition in E.D. Michigan --------------------------------------------------------- Jerome-Duncan Inc., Michigan's largest Ford dealership and one of the five largest Ford dealerships in the country, filed for chapter 11 protection in the United States Bankruptcy Court for the Eastern District of Michigan on June 17, 2005. The filing resulted from a shareholder dispute between Gail Duncan, who operates the dealership, and her father, Richard Duncan, who co-founded the dealership and still holds a significant ownership stake, the dealership's general manager, Scott Reas, told The Detroit News. Gail Duncan is the majority owner by a small percentage, and Richard Duncan is the minority owner, Mr. Reas said. According to The Detroit News, Jerome-Duncan's annual revenue regularly tops $100 million. It has employed more than 200 people in recent years and is listed among the top female-owned businesses in the country. Headquartered in Sterling Heights, Michigan, Jerome Duncan, Inc., is a Ford Motor dealer. The Company filed for chapter 11 protection on June 17, 2005 (Bankr. E.D. Mich. Case No. 05-59728). Arnold S. Schafer, Esq., at Schafer and Weiner, PLLC, represents the Debtor in its restructuring efforts. JEROME DUNCAN: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Jerome Duncan, Inc. 8000 Ford Country Lane Sterling Heights, Michigan 48313 Bankruptcy Case No.: 05-59728 Type of Business: The Debtor is a Ford Motor dealer. Chapter 11 Petition Date: June 17, 2005 Court: Eastern District of Michigan (Detroit) Judge: Marci B. McIvor Debtor's Counsel: Arnold S. Schafer, Esq. Schafer and Weiner, PLLC 40950 Woodward Avenue, Suite 100 Bloomfield Hills, Michigan 48304 Tel: (248) 540-3340 Total Assets: Unknown Total Debts: Unknown The Debtor's list of its 20 Largest Unsecured Creditors was not available at press time. KANSAS GAS: S&P Rates $320 Million Secured Bonds at BB- ------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit ratings on electric generation and transmission company Westar Energy Inc. and its subsidiary Kansas Gas & Electric Co. At the same time, Standard & Poor's assigned its 'BB-' rating to KG&E's $320 million secured facility bonds series 2005 due 2021. The outlook remains positive. As of March 31, 2005, the Topeka, Kansas-based company had $1.5 billion of consolidated long-term debt outstanding. "The ratings on KG&E reflect Westar's consolidated credit profile, which includes a business profile based on the core vertically integrated electric utility operations in Kansas and a weak but improving financial profile," said Standard & Poor's credit analyst Barbara Eiseman. The company has taken significant actions during the past two years to reduce its business risk and strengthen its aggressively leveraged balance sheet. The positive outlook on KG&E mirrors that on Westar and recognizes the significant actions management has taken to strengthen the company's financial condition and reduce its business risk. However, to make the transition to investment grade, Westar must achieve and sustain cash flow measures that are solidly investment grade and receive a reasonable rate decision in its pending rate case. KMART CORP: Ruth Clingan Wants Stay Lifted to Liquidate Claim ------------------------------------------------------------- Ruth M. Clingan is the surviving spouse of decedent Thomas R. Clingan, on whose behalf she brought a complaint for medical malpractice and wrongful death. The complaint sought relief against treating doctors as well as against Kmart Corporation, through its pharmacy operation, and Jack C. Sharp, the pharmacist employed by Kmart. Ms. Clingan filed Claim No. 30705 asserting in excess of $3,000,000 in damages. The claim was submitted to mediation process and Kmart later offered to compromise the claim for $100,000. Ms. Clingan's attorneys rejected the offer. Based on the Kmart's 21st Omnibus Objection, the value of the claim was set at $100,000. Ms. Clingan clarified the Court's April 1, 2004 order ruling on the 21st Omnibus Objection and on May 6, 2005, the Court entered an Agreed Order vacating its April 1, 2004 order as to Ms. Clingan's claim. Ms. Clingan wants to proceed to judgment and liquidate her claim solely against Mr. Sharp. Kmart's counsel has advised Ms. Clingan that Kmart will not oppose her request. By this motion, Ms. Clingan asks the Court to lift the stay as to Claim No. 30705 and allow her to liquidate her claim as to Kmart and obtain a judgment against Mr. Sharp. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART CORP: Sears Discloses 13-Week Revenue Ended April 30 ---------------------------------------------------------- In a Form 10-K filed with the Securities and Exchange Commission, Sears Holdings Corporation discloses Kmart Corporation's sales for 13 weeks ended April 30, 2005. Sears Holdings is in the process of integrating Kmart and Sears, Roebuck and Co. William K. Phelan, vice president and controller of Sears Holdings Corporation, relates that, for purposes of reviewing the results of operations and making asset-allocation decisions during the first quarter 2005, Sears Holdings' new senior management team continued to utilize the reporting structures, which existed independently for Sears Roebuck and Kmart prior to the merger. Kmart's Results and Key Statistics (In millions, except number of stores) 13 Weeks Ended ------------------- 04/30/05 04/28/04 -------- -------- Merchandise sales and services $4,522 $4,627 Cost of sales, buying and occupancy 3,462 3,545 Gross margin rate 23.4% 23.4% Selling and administrative 947 945 Selling and administrative expenses as a percentage of total revenues 20.9% 20.4% Depreciation and amortization 10 4 Gain on sales of assets (6) (32) ------- ------- Total costs and expenses 4,413 4,462 ------- ------- Operating income $109 $165 ======= ======== Number of stores 1,479 1,505 According to Mr. Phelan, comparable store sales and total sales decreased by 3.7% for the 13-weeks ended April 30, 2005 as compared to 2.3% of the 13-weeks ended April 28, 2004. Mr. Phelan explains that the decline in same-store and total sales is due to: -- lower transaction volumes; -- the impact of poor weather conditions on Sears Holdings' seasonal product lines; and -- the unfavorable impact of ongoing construction activity in stores, which are converting to the Sears Essentials format. Total sales benefited from an additional $153 million of sales as a result of three additional days in the current quarter due to Sears Holdings' change from a Wednesday to Saturday month end. However, total sales were negatively impacted by a reduction in the total number of operating Kmart stores, which more than offset the additional three days of revenue. Mr. Phelan explains that improvements reflecting greater use of import goods, favorable vendor negotiations and a reduction in clearance markdowns due to improved inventory management were offset by higher promotional markdowns and the impact of fixed store occupancy expenses. Selling and administrative expenses increased slightly as decreases in payroll and related expenditures resulting from cost saving initiatives were more than offset by an increase in advertising expenses for local advertising programs. The current year's selling and administrative expenses also include a $3 million charge related to employee termination costs associated with Sears Holdings' home office integration efforts. Kmart's operating income for the 13-weeks ended April 30, 2005, decreased as compared to the 13-weeks ended April 28, 2004, primarily due to the 2.3% decline in merchandise sales and services revenues and the additional $26 million of gains on the sale of assets recognized during the same period in the prior year. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., 215/945-7000) KRISPY KREME: Five Officers Resign While One Retires ---------------------------------------------------- Five Krispy Kreme Doughnuts, Inc., officers resigned and one retired after the Company's Special Committee of independent directors told the Company's senior management on June 15, 2005, that those officers should be fired. The Special Committee is cooperating with the Government, which is investigating the Company's accounting and financial statements, and claims of negligence asserted in a pending shareholders' lawsuit. The Company is keeping the identity of these six officers a secret. According to news reports, these officers worked in Krispy Kreme's operations, finance, business development, and manufacturing and distribution departments. They include four senior vice presidents. The Associated Press observed that Krispy Kreme removed the names of five senior vice presidents from its Web site on June 21. The AP identified these senior vice presidents: -- chief information officer Frank Hood; -- Fred Mitchell of manufacturing and distribution; -- Sherry Polonsky of finance; -- Jimmy Strickland of area developer operations; and -- Robert H. Vaughn Jr. of business development. The Company said it will fill the vacant positions with existing personnel. "I'm very pleased they're taking such serious action," Peter James Hall told Bloomberg News. Mr. James oversees $1 billion at Sydney, Australia-based Hunter Hall Investment Management, Krispy Kreme's biggest shareholder with 5.3 million shares. "The most important thing is that the special committee reports and the company reports its financial statements. Then we move on to the next phase of the evolution of the company." Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme -- http://www.krispykreme.com/-- is a leading branded specialty retailer of premium quality doughnuts, including the Company's signature Hot Original Glazed. Krispy Kreme currently operates approximately 400 stores in 45 U.S. states, Australia, Canada, Mexico, the Republic of South Korea and the United Kingdom. * * * Internal Investigation As reported in the Troubled Company Reporter on May 2, 2005, Krispy Kreme Doughnuts, Inc., was unable to file its Form 10-K for the fiscal year ended January 30, 2005, within the prescribed time period and provided a financial update. The Company is undergoing analysis related to the proper application of generally accepted accounting principles to certain transactions, which occurred in the fiscal year ended Feb. 1, 2004, and earlier years as well as in fiscal 2005. Until that analyses are complete, the Company is unable to finalize its financial statements for fiscal 2005. The Company's Audit Committee and management have concluded that the Company's financial statements for fiscal 2001, 2002 and 2003 and the first three quarters of fiscal 2005, in addition to the financial statements for fiscal 2004, should no longer be relied upon. In December 2004, the Company's Board of Directors concluded that the Company's previously issued financial statements for fiscal 2004 should be restated to correct certain errors. The company formed the special committee to investigate. Lawsuits and Investigations As reported in the Class Action Reporter on March 14, 2005, Krispy Kreme workers, who say they lost retirement savings because the Company executives hid evidence of declining sales and profits, have initiated a class action lawsuit in Greensboro federal court. Court documents reveal that the suit was filed on behalf of workers who owned stock in the Company's retirement or stock ownership plans after January 1, 2003, which was around the time the Company's sales allegedly began to decline. Specifically, the workers are contending in their suit that because the executives said nothing about the Company's troubles, workers who bought Krispy Kreme stock for their 401(k) accounts, or were paid stock in bonus plans, had no way of knowing what those executives knew. Former chief executive officer Scott Livengood, who was forced out in January, is among those named as defendants in the lawsuit. As reported in the Troubled Company Reporter on Mar 23, 2005, Krispy Kreme Doughnuts, Inc.'s wholly owned subsidiary, Krispy Kreme Doughnut Corporation, was served with a purported class action lawsuit filed in the U.S. District Court for the Middle District of North Carolina that asserts claims under Section 502 of the Employee Retirement Income Security Act against KKDC and certain of its current and former officers, styled Smith v. Krispy Kreme Doughnut Corporation et al., No. 1:05CV00187. Company officers also were cooperating with the U.S. Attorney's Office for the Southern District of New York and the Securities and Exchange Commission in their separate investigations. LIFEPOINT HOSPITALS: Loan Add-On Prompts S&P to Hold Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on Brentwood, Tennessee-based hospital operator LifePoint Hospitals, Inc. (BB/Negative/--). The affirmation follows the company's increase in the size of its senior secured term loan B by $150 million, to $1.4 billion. While the 'BB' bank loan rating and '3' recovery rating on the loan (indicating the expectation for meaningful {50%-80%} recovery of principal in the event of a payment default) were affirmed, the recovery rating is now considered a weak '3' with the additional term debt. LifePoint will use the proceeds of this loan, along with a $192 million privately placed senior subordinated loan (unrated), to help refinance its existing convertible notes and finance a hospital acquisition. Pro forma for the transaction, debt will be approximately $1.65 billion. "The ratings on LifePoint are based on the company's aggressive growth strategy and moderately high leverage since the recent completion of the acquisition of Province Healthcare," said Standard & Poor's credit analyst David Peknay. The closing of this acquisition in April 2005 strengthened the company's business profile and increased the size of its hospital portfolio to 50 facilities from 30. The diversity of the portfolio improved, as the company's largest state of operation, Kentucky, should now generate less than 20% of revenues, where it previously contributed 30%. Notwithstanding its reduced geographic and facility concentration, LifePoint's near doubling in size creates the challenge of effectively operating the much enlarged organization. The company also remains subject to uncertain third-party reimbursement, particularly in Kentucky and Tennessee, which together generate nearly one-third of revenues. Lease-adjusted debt to EBITDA, which more than doubled to about 3.6x with the Province transaction, will likely increase slightly more, to about 3.7x, when the proposed acquisition of the Danville Regional Medical Center is completed. LifePoint's management has been averse to such use of debt leverage in the past. The rating incorporates Standard & Poor's expectation that the company's lease-adjusted debt to EBITDA will fall to about 3.5x by the end of 2005, and to less than 3.5x in 2006. Return on capital is expected to be about 15% for 2005. LifePoint's anticipated benefits from acquisition synergies, such as lower corporate overhead costs, should help the company achieve these targets. If earnings fall or if cash flow is weak, management is expected to alter its plans accordingly to avoid a large amount of debt in the capital structure. LIFEPOINT HOSPITALS: Moody's Affirms Credit Facility's Ba3 Rating ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of LifePoint Hospitals, Inc. following the announcement of a proposed $150 million add-on term loan B. Moody's also withdrew the ratings on the 4.50% convertible subordinated notes that were redeemed June 15, 2005. The proceeds from the add-on term loan will be used, along with cash on hand, to finance the previously announced acquisition of Danville Regional Medical Center (Danville). The company also recently announced that it had entered into a $192 million senior subordinated credit facility, which has not been rated to fund the redemption of its convertible subordinated notes. Below is a summary of Moody's actions: LifePoint Hospitals, Inc. (parent): * Affirmed Ba3 rating on senior secured Term Loan B * Affirmed Ba3 rating on senior secured revolving credit facility * Affirmed Ba3 corporate family rating (formerly the senior implied rating) * Affirmed B2 senior unsecured issuer rating LifePoint (former parent): * Withdrew B3 rating on 4.50% convertible subordinated notes due 2009 The outlook for the ratings is stable. The ratings reflect: * the company's high leverage following the acquisition of Province Healthcare in April 2005; * the likelihood that the company will continue with its acquisitive strategy; and * Moody's concern over LifePoint's ability to capture out- migration of services to larger urban facilities or non- affiliated outpatient centers. Additionally, while results for the first quarter appear to show improvement in bad debt expense and same-store admission growth trends, it is not yet clear if these trends will be sustainable. Following the acquisition of Province, the company will have: * increased geographic and revenue diversification; * increased scale that will allow the company to compete more effectively with other non-urban hospital players; and * solid market share (92% sole community hospital providers). The stable outlook reflects Moody's view that positive demographic trends will continue, and rates for Medicare reimbursement will remain stable in the near term. Moody's expects the company to have good operating cash flow and free cash flow allowing for debt repayment. The announced transactions, a $150 million add-on term loan, a $192 million senior subordinated credit facility, and the redemption of $221 million of convertible subordinated debt, continue to add, although not significantly, to the company's overall leverage. The high leverage and the expectation that the company will continue with its strategy of acquiring non-urban, not-for-profit hospitals are expected to constrain the already modest ratios of adjusted cash flows from operations to adjusted debt and adjusted free cash flow to adjusted debt. Therefore, an upgrade of the ratings is not expected in the near term. If the company experiences operating challenges caused by softening admission trends or adverse reimbursement developments and is not expected to attain and sustain ratios of adjusted operating cash flow to adjusted debt and adjusted free cash flow to adjusted debt of 15% and 10%, respectively, there could be downward pressure on the ratings. Moody's would also likely downgrade the ratings if the company were to make another debt financed acquisition or fail to rapidly reduce leverage below current levels. Moody's is concerned that LifePoint's acquisition strategy will focus on larger targets in the future, as evidenced by the $235 million purchase price for the 350 bed Danville facility, in order to continue to show the same relative growth from acquisitions. Pro forma for the Province and Danville acquisitions and a $40 million agreement to lease Wythe County Community Hospital, funded with cash on hand, LifePoint would have had cash flow coverage of debt that is weak to moderate for the Ba3 category. Moody's estimates that adjusted cash flow from operations to adjusted debt and adjusted free cash flow to adjusted debt would have been approximately 17% and 7%, respectively, for the twelve months ended March 31, 2005. Moody's estimates that pro forma adjusted debt to EBITDAR would have been approximately 3.7 times. Moody's notes that the use of EBITDA and related EBITDA ratios as a single measure of cash flow without consideration of other factors can be misleading (see Moody's Special Comment, "Putting EBITDA in Perspective," dated June 2000). Moody's expects LifePoint to have good liquidity and does not expect the company to draw on its $300 million revolving credit facility to complete the announced transactions. The senior secured credit facility is held at the level of the corporate family rating due to its preponderance in the capital structure and the belief that total collateral value would not cover the level of debt. Ratings remain subject to final review of documentation by Moody's. LifePoint Hospitals, Inc. operates 51 hospitals in non-urban communities with a total of 5,321 licensed beds. Combined revenues for the twelve months ended March 31, 2005 approximated $1,900 million. M. ANTHONY PROPERTIES: Voluntary Chapter 11 Case Summary -------------------------------------------------------- Debtor: M. Anthony Properties, LLC 108 North Bridge Street Linden, Michigan 48451 Bankruptcy Case No.: 05-33179 Chapter 11 Petition Date: June 22, 2005 Court: Eastern District of Michigan (Flint) Judge: Walter Shapero Flint Debtor's Counsel: Dennis M. Haley, Esq. G-9460 South Saginaw Street, Suite A Grand Blanc, Michigan 48439 Total Assets: Unknown Total Debts: Unknown The Debtor's List of its 20 Largest Unsecured Creditors was not available at press time. MAGELLAN MIDSTREAM: Moody's Rates Proposed $275M Term Loan at Ba3 ----------------------------------------------------------------- Moody's Investors Service placed under review for possible upgrade the debt ratings of Magellan Midstream Partners, L.P. (MMP, Ba1corporate family/senior unsecured ratings). With respect to its general partner sponsor Magellan Midstream Holdings, L.P., Moody's affirmed MMH's Ba3 senior secured rating with a stable outlook, assigned a Ba3 senior secured rating to MMH's proposed $275 million term loan, assigned a Ba3 MMH corporate family rating (formerly known as the senior implied rating), and withdrew its B1 issuer rating. The review of MMP's ratings is prompted by a preliminary assessment that indicate that the assets acquired from Shell Oil, since closing in October 2004, are performing generally in line with the company's initial forecasts. Its other base assets (more than 80% of MMP's 2005 projected operating margin) are continuing their strong performance driven by the results of Magellan Pipeline, its anchor asset (approximately 60% of the projected operating margin). We could consider MMH's ratings for possible downgrade and end the review of MMP's ratings for possible upgrade, should MMH implement a new term loan that turns out to be significantly more liberal than the draft terms we have reviewed. Over the next couple of months, Moody's could upgrade MMP's senior unsecured ratings to Baa3, subject to further analysis of the company's updated financial forecast and satisfactory progress in its operating and financial results in the third quarter toward its 2005 plan. Moody's will assess the likelihood of MMP realizing the level of incremental margins in the near term from a number of expansion projects and commercial efforts under way on the Shell assets. The Shell acquisition had been fully valued in anticipation of returns on such projects. Growth capex on its base business in the near-term is higher than we expected. (However, Moody's note that the company has substantial cash and equivalents -- $136 million at March 31, 2005 -- to help finance growth capex.) Other factors in Moody's rating decision will be: * the amount of implicit leverage that debt at MMH imparts on MMP, analyzing MMP and MMH on a consolidated basis; * the degree of separateness MMP has from MMH from its partnership agreement and corporate governance practices; and * the potential for dividend pressure on MMP from MMH for the latter's debt service and dividend needs. Higher than expected leverage at MMH from the proposed refinancing could preclude an upgrade of MMP's ratings. Moody's had changed MMP's rating outlook from stable to a positive on November 19 , 2004, shortly after the conclusion of its $543 million acquisition of Shell Oil's Midwest products logistics system, and had indicated that an upgrade was possible if the company realized the incremental volumes and margins it initially had forecast from the Shell assets. Based on the numbers for the first quarter, MMP's credit metrics so far remain on par with those of its investment-grade MLP peers, with adjusted debt/gross cash flow at 4x. Since its formation five years ago, the company has: * gained critical mass and adequate liquidity of its securities; * re-capitalized more suitably as an investment-grade credit by eliminating secured debt; and * accrued a track record of sound financial policy. It ended its affiliation with its original GP sponsor The Williams Companies, Inc. in a credit-neutral manner, and now has some experience under MMH's sponsorship. The company has shown a consistent strategic focus on product pipelines and terminals. These assets have low business risk relative to the investment- grade MLP peer group. Rating Actions on MMH The affirmation of MMH's Ba3 senior secured rating reflects Moody's view that ongoing organic credit accretion is unlikely, given the likelihood that it will re-leverage from time to time to accelerate the sponsors' returns and to adjust for an increase in its expected cash inflows and decrease in debt from mandatory pre- payments. A corporate family rating, on par with MMH's senior secured bank loan rating is assigned, because the collateral for loan is MMH's GP interests, which comprise its sole asset and value of the enterprise. MMH's issuer rating is withdrawn, following the sale of MMH's remaining MMP LP interests this month. This sale eliminated the need for us to have a senior unsecured issuer rating (denoting MMH's un-enhanced debt service capacity), separate from the secured rating enhanced by highly liquid collateral (publicly-traded MMP LP interests). MMH's ownership by private equity firms makes it likely that it will keep a fair amount of leverage over time. MMH did a leveraged distribution in the last refinancing of its term loan in December 2004. In six months, MMH paid down this loan from $250 million initially to $100 million currently, resulting in the company's considering re-leveraging with the proposed term loan. Net proceeds from the proposed term loan, after repaying the existing loan, will be used to make a distribution to MMH's owners, as with its previous loans, allowing MMH to realize upfront the value of GP distributions forecast over the next few years. Otherwise, MMH's owners will receive little in way of distributions during this period, since the cash sweep mechanism under the term loan (similar to those in its 2 previous term loans) requires MMH to use half of its free cash flows for debt repayment rather than for distributions. This is particularly true, since, with the sale of last of its LP units, MMH no longer has liquid assets to sell to generate additional cash for debt repayment or distributions. On a standalone basis, our MMH's ratings anticipate a limited range of future re-leveraging. They accommodate a temporary spike in debt/gross cash flow (GP distributions received) of no higher than 8x following a re-leveraging (vs. 6.0x at 1Q05), so long as there is a high likelihood that it will be reduced speedily from incremental cash flow (most likely from a new investment at MMP) to run-rates of around 6x at most. So long as the company does not exceed the 6x threshold, the proposed term loan allows it to borrow up to an additional $100 million under an accordion feature. MMH's ratings assume gross cash flow/interest at no lower than the mid-1x range (2.3x at 1Q05). MMH's standalone metrics will be monitored in conjunction with consolidated metrics for the Magellan companies. Comparing the debt of MMP and MMH against MMP's cash flows (the sole source of MMH's cash flows), Magellan's consolidated leverage (MMP+MMH debt/MMP EBITDA quarterly annualized of 3.3x at 1Q05) is currently lower than those of other MLPs sponsored by financial investors, because MMP has relatively less leverage. MMH's ratings assume MMP/MMH's consolidated leverage in the low 4x range and consolidated interest coverage (MMP EBITDA/MMP+MMH interest) of about 4x (it was 4.5x in 1Q05). Significant deviation from the above ranges will cause us to re-assess the ratings of not only MMH but also MMP. Headquartered in Tulsa, Oklahoma, Magellan Midstream Partners, L.P. is an MLP that is engaged in the transportation, storage, and distribution of: * refined petroleum products, * crude oil, and * ammonia. Magellan Midstream Holdings, L.P. is a limited partnership primarily between Madison Dearborn Capital Partners IV, L.P. and Carlyle/Riverstone MLP Holdings, L.P. that own general partner interests representing about 2% of the MLP. MANUFACTURING TECH: U.S. Trustee Picks 7-Member Committee --------------------------------------------------------- The United States Trustee for Region 21 appointed seven creditors to serve on an Official Committee of Unsecured Creditors in Manufacturing Technology Services, Inc.'s chapter 11 case: 1. Zoppas Industries de Mexico, S.A. de C.V. c/o Col�n, Col�n & Mart�nez Temporary Chairman P.O. Box 9023355 San Juan, PR 00902-3355 2. Future Electronics c/o Joe Prudente, Credit Director 41 Main Street Bolton, MA 01740 3. Jos, Ram�n Cruz Delgado d/b/a Cruz Fire Sprinkler Repair P.O. Box 5301 Caguas, PR 00726 4. CNC 2000 c/o Johnny Ramos Mel,ndez P.O. Box 8009 Caguas, PR 00726 5. Kawai Electric (H.K.) Ltd. c/o Arthur F. Davis III, Salesman 7 Stonier Road Tunkhannock, PA 18657 6. Reltran, Inc. c/o David S. Robbins 702 17th Street East Palmetto, Fl 34221 7. Nationwide Electronics, Inc. c/o David Robbins, President 1611 12th Street East Unit C Palmetto, Fl 34221 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the chapter 11 cases to a liquidation proceeding. Headquartered in Caguas, Puerto Rico, Manufacturing Services Inc. -- http://www.mtspr.com/-- manufactures biometric devices, digital and electronic meters, and special-purpose computers and laptops. The company filed for chapter 11 protection on April 18, 2005 (Bankr. D. Puerto Rico Case No. 05-03663). Jose Raul Cancio Bigas, Esq., of Hato Rey, Puerto Rico, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $6,000,098 in assets and $10,509,773 in debts. MANUFACTURING TECHNOLOGY: Files Schedules of Assets & Liabilities ----------------------------------------------------------------- Manufacturing Services, Inc., delivered its Schedules of Assets and Liabilities to the U.S. Bankruptcy Court for the District of Puerto Rico, disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property B. Personal Property $6,000,098 C. Property Claimed as Exempt D. Creditors Holding $3,191,610 Secured Claims E. Creditors Holding $1,100,565 Unsecured Priority Claims F. Creditors Holding $6,217,597 Unsecured Nonpriority Claims ---------- ----------- Total $6,000,098 $10,509,773 Headquartered in Caguas, Puerto Rico, Manufacturing Services Inc. -- http://www.mtspr.com/-- manufactures biometric devices, digital and electronic meters, and special-purpose computers and laptops. The company filed for chapter 11 protection on April 18, 2005 (Bankr. D. Puerto Rico Case No. 05-03663). Jose Raul Cancio Bigas, Esq., of Hato Rey, Puerto Rico, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $6,000,098 in assets and $10,509,773 in debts. MASTR ALTERNATIVE: Moody's Rates Class B-4 2005-4 Certs. at Ba2 --------------------------------------------------------------- Moody's Investors Service assigned Aaa ratings to the non- residual, senior certificates issued by MASTR Alternative Loan Trust 2005-4, and ratings ranging from A2 and Ba2 to certain subordinate certificates in the deal. The Aaa ratings of the certificates are based primarily on: * the credit quality of the loans; * the structural and legal protections; and * on the protection from subordination. The ratings of the subordinate certificates are based on the subordination of the respective certificates. The securitization is backed by multiple originators' fixed-rate Alt-A mortgage loans with a weighted-average FICO of 687 and an average loan-to-value ratio of approximately 81%. Moody's expects losses on the collateral to range between 1.00% and 1.30%. Wells Fargo Bank, N.A. will act as master servicer. The Complete Rating Actions are: Issuer: MASTR Alternative Loan Trust 2005-4 * Class 1-A-1 , rated Aaa * Class 2-A-1 , rated Aaa * Class 3-A-1 , rated Aaa * Class 4-A-1 , rated Aaa * Class 5-A-1 , rated Aaa * Class A-LR , rated NR * Class A-UR , rated NR * Class A-X-1 , rated Aaa * Class A-X-2 , rated Aaa * Class 15-PO , rated Aaa * Class 30-PO , rated Aaa * Class B-2 , rated A2 * Class B-3 , rated Baa2 * Class B-4 , rated Ba2 MASTR ALTERNATIVE: Moody's Rates Class B-4 2005-3 Certs. at Ba2 --------------------------------------------------------------- Moody's Investors Service assigned Aaa ratings to the non- residual, senior certificates issued by MASTR Alternative Mortgage Trust 2005-3, and ratings ranging between of A2 and Ba2 to certain subordinate certificates in the deal. The Aaa ratings of the certificates are based primarily on: * the credit quality of the loans; * the structural and legal protections; and * on the protection from subordination. The securitization is backed by multiple originators' fixed-rate Alt-A mortgage loans with a weighted-average FICO of 718 and an average loan-to-value ratio of approximately 73%. Wells Fargo Bank, N.A. will act as master servicer. The complete rating actions are: Issuer: MASTR Alternative Loan Trust 2005-3 * Class 1-A-1 , rated Aaa * Class 1-A-2 , rated Aaa * Class 1-A-3 , rated Aaa * Class 1-A-4 , rated Aaa * Class 2-A-1 , rated Aaa * Class 3-A-1 , rated Aaa * Class 4-A-1 , rated Aaa * Class 5-A-1 , rated Aaa * Class 5-A-2 , rated Aaa * Class 6-A-1 , rated Aaa * Class 6-A-2 , rated Aaa * Class 6-A-3 , rated Aaa * Class 6-A-4 , rated Aaa * Class 7-A-1 , rated Aaa * Class A-X-1 , rated Aaa * Class A-X-2 , rated Aaa * Class 15-PO , rated Aaa * Class 30-PO , rated Aaa * Class B-2 , rated A2 * Class B-3 , rated Baa2 * Class B-4 , rated Ba2 MAYTAG CORP: Bain Proposal Cues Fitch to Affirm BB Rating --------------------------------------------------------- Maytag Corporation's 'BB' senior unsecured debt remains on Rating Watch Negative by Fitch Ratings following the company's announcement that it has received a preliminary non-binding proposal from Bain Capital Partners LLC, Blackstone Capital Partners IV L.P. and Haier America Trading, L.L.C. to acquire all outstanding shares of Maytag for $16 per share cash. On May 19, 2005, Maytag entered into a definitive agreement to be acquired by a private investor group led by Ripplewood Holdings LLC for $14 per share cash. Fitch originally placed Maytag on Rating Watch Negative on May 20, affecting approximately $976 million of the company's senior unsecured notes. According to the preliminary non-binding proposal, completion of due diligence is expected to take six-to-eight weeks, and the proposal is conditioned, among other things, on the due diligence, along with the negotiation of a definitive agreement and necessary approvals. The proposal contemplates debt financing provided by Merrill Lynch & Co. on terms and conditions to be agreed upon among Merrill Lynch, Bain, Blackstone and Haier America. The Negative Rating Watch primarily reflects the uncertainty regarding operating control, resulting capital structure, the expectation of continuing high leverage, steps new owners will take to improve manufacturing efficiencies, ongoing weakness from operations, and relentless competition. In addition, plans to refinance/repay $412 million of debt maturities are unknown and the potential for a credit facility securing receivables and inventories is high, which would subordinate existing bondholders. MCI INC: Deephaven Solicits Proxy Votes Against MCI/Verizon Merger ------------------------------------------------------------------ Deephaven Capital Management LLC filed a proxy statement with the Securities and Exchange Commission in an effort to solicit other MCI, Inc., shareholders to vote against Verizon Communications, Inc.'s $8.44 billion merger proposal. Deephaven, a fund manager that beneficially own MCI shares, intends to vote its 16,118,185 shares, representing approximately 4.96% of the outstanding MCI shares, against the Verizon merger. As of June 13, 2005, Deephaven had beneficial ownership interest in bonds of both MCI and Qwest: No. of Shares Aggregate Entity Beneficially Owned Principal Amount ------ ------------------ ---------------- MCI 16,118,185 $194,453,656 Qwest 800,100 78,887,000 Deephaven believes that the revoked $9.74 billion bid from Qwest Communications International, Inc., would be in the interest of MCI stockholders. The Wall Street Journal reports that several large hedge funds intend to give their proxy votes to Deephaven, but will revoke them if Qwest doesn't come up with a new offer. "If Qwest told shareholders of MCI 'if you reject the deal, we will come to you with this offer,' Verizon will not get the vote," Leon Cooperman of Omega Advisors told Jesse Drucker of The Journal. "If, on the other hand, I am asked to withhold my vote with no specific proposal, I'm voting for Verizon. It's as simple as that." Mr. Cooperman owns about 3% of MCI shares. Deephaven has retained D.F. King & Co., Inc., to solicit proxies from other MCI shareholders. Deephaven has agreed to reimburse D.F. King for its reasonable expenses; to indemnify it against certain losses, costs and expenses; and to pay it fees in connection with the proxy solicitation. Deephaven expects to pay D.F. King fees not exceeding $250,000 in connection with the proxy solicitation. MCI has not yet announced a date for the meeting to vote on Verizon's offer. Deephaven says it will use the proxies it gets whenever the meeting may be held. A full-text copy of Deephaven's Proxy Statement is available at the Securities and Exchange Commission at: http://ResearchArchives.com/t/s?32 Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 93; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. As reported in the Troubled Company Reporter on Feb. 22, 2005, Moody's Investors Service has placed the long-term ratings of MCI, Inc., on review for possible upgrade based on Verizon's plan to acquire MCI for about $8.9 billion in cash, stock and assumed debt. These MCI ratings were placed on review for possible upgrade: * B2 Senior Implied * B2 Senior Unsecured Rating * B3 Issuer rating Moody's also affirmed MCI's speculative grade liquidity rating at SGL-1, as near term, MCI's liquidity profile is unchanged. As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. As reported in the Troubled Company Reporter on Feb. 16, 2005, Fitch Ratings has placed the 'A+' rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative, and the 'B' senior unsecured debt rating of MCI, Inc., on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for approximately $4.8 billion in common stock and $488 million in cash. MEDEX INC: Smiths Purchase Cues Moody's to Withdraw Debt Ratings ---------------------------------------------------------------- Moody's has withdrawn the ratings of Medex, Inc. following the acquisition of the company by Smiths Group plc (rated A3) and the expiration of the tender offer for the company's outstanding 8.875% senior subordinated notes. The company no longer has any debt rated by Moody's. Ratings withdrawn: * Senior secured revolving credit facility, rated B1 * Senior secured term loan B, rated B1 * 8.875% senior subordinated notes, rated B3 * Corporate family rating, B1 * Senior unsecured issuer rating, B2 Medex is a global manufacturer and marketer of critical care and alternate care medical products used in both acute and alternate care settings for a variety of therapeutic, diagnostic and long- term procedures. Medex markets and sells critical care systems and products to over 5,500 hospitals, health care systems, and alternate healthcare settings in more than 75 countries through a global sales force and distribution network. The company was acquired by Smiths Group PLC on March 21, 2005, and is now a wholly-owned subsidiary of Smiths Group. Smiths Group designs and manufactures safety-critical systems and products, and has market leading positions in: * aerospace, * detection systems, * medical devices, * mechanical seals, and * interconnect products. MERIDIAN AUTOMOTIVE: Deutsche Bank Offers $75 Mil. DIP Financing ---------------------------------------------------------------- As previously reported, Meridian Automotive Systems, Inc., and its debtor-affiliates did not proceed with the $375,000,000 financing facility with JPMorgan Chase Bank, N.A., as the Administrative Agent, after certain of the Debtors' original equipment manufacturers proposed curtailments in production that are projected to take effect primarily in the Fourth Quarter 2005. The Debtors decided to restructure their proposed DIP Financing to accommodate any potential impact on their earnings. The Debtors, however, obtained authority from the U.S. Bankruptcy Court for the District of Delaware to use $30,000,000 from the JPMorgan Facility through June 30, 2005, while they sought new, permanent financing. The Debtors have concluded that any new financing would not be sized adequately to allow repayment of the $310 million of obligations outstanding under the First Lien Credit Agreement, but would instead be tailored more narrowly to supplement the Debtors' current liquidity resources. The Debtors have had negotiations with Credit Suisse First Boston, the First Lien Administrative Agent for the First Lien Secured Lenders, regarding the terms for a new financing facility. The Debtors, however, find CSFB's terms unacceptable. At this time, no agreement between the Debtors and the First Lien Administrative Agent has been reached. Thus, the Debtors have had no alternative but to contact potential financing sources other than CSFB. Deutsche Bank Trust Company Americas submitted an initial proposal to provide financing. Subsequently, the parties engaged in extensive negotiations that culminated in a proposal to provide up to $75 million of secured financing, inclusive of a letter of credit facility. After carefully evaluating various financing proposals received, the Debtors concluded that Deutsche Bank's offer was superior. The principal provisions of the Deutsche Bank Facility are: A. Borrowers Meridian Automotive Systems - Composite Operations, Inc., and each of its affiliated Debtors. B. Guarantors The Debtors' existing and future domestic subsidiaries. C. Agent & Banks A syndicate of financial institutions and other accredited investors, including Deutsche Bank as DIP Agent, to be arranged by Deutsche Bank Securities, Inc., as sole lead arranger and book manager. D. Commitment Revolving credit facility and letter of credit subfacility in an original principal amount of up to $75,000,000. E. Closing Date Not later than June 30, 2005. F. Purpose Initial proceeds would be used on the Closing Date to fund: (i) any outstanding fees and expenses under the Existing DIP Facility and the payment in full of all amounts borrowed under the Existing DIP Facility; (ii) the fees and expenses associated with the Deutsche Bank Facility, as agreed by the Credit Parties; and (iii) other amounts described in a budget as being paid on the Closing Date, including certain adequate protection payments. Thereafter, Loan proceeds will be used to fund the Debtors' general corporate and working capital requirements. G. Term Eighteen months after the Closing Date. H. Security All of the Credit Parties' obligations will at all times, subject to the Carve-Out, be: (i) entitled to superpriority claim status in the Debtors' Chapter 11 cases; (ii) secured by a perfected first priority lien in favor of Deutsche Bank on behalf of the DIP Lenders on all the Credit Parties' property that is not subject to valid, perfected and non-avoidable liens; (iii) secured by a perfected junior lien in favor of Deutsche Bank on behalf of the DIP Lenders on all the Credit Parties' property that is subject to valid, perfected and non-avoidable liens in existence on the Petition Date other than liens held by the Prepetition Secured Creditors; and (iv) secured by perfected first priority, senior priming security interests and liens in favor of Deutsche Bank on behalf of the DIP Lenders in all of the Credit Parties' presently encumbered property. I. Carve-Out The superpriority claims and postpetition liens in favor of Deutsche Bank will be subject to: (i) in the event of the occurrence and during the continuance of an Event of Default, the payment of allowed and unpaid professional fees and disbursements incurred by the Debtors and the Official Committee of Unsecured Creditors in an aggregate amount not in excess of $5,000,000, plus all unpaid professional fees and disbursements incurred prior to the occurrence of an event of Default; and (ii) the payment of trustee fees pursuant to 28 U.S.C. Section 1930(a)(6). J. Commitment Fee Commitment fees equal to 0.50% per annum times the daily average unused portion of the DIP Facility will accrue from the Closing Date, will be computed on the basis of a 360-day year and will be payable monthly in arrears during the term of the Deutsche Bank Facility and on the maturity or termination of the DIP Facility; K. Letter of Credit Fees Letter of credit fee equal to the applicable margin for Eurodollar Rate Loans under the DIP Facility, will be payable to Deutsche Bank, and a fronting fee with respect to L/Cs equal to the greater of $500 per annum and 0.25% per annum, will be payable to the DIP Lender issuing the L/C. Customary drawing and administration fees will be charged by each issuing DIP Lender. L. Interest Rates At the Debtors' option, the adjusted Eurodollar Rate plus 3% per annum or Base Rate plus 2% per annum on the daily outstanding balance. M. Default Interest After the occurrence and during the continuance of an Event of Default, interest on the Loans will bear interest at a rate equal to 2% per annum plus the otherwise applicable rate. N. Events of Default The Events of Default, subject to customary and appropriate grace periods, include without limitation: -- failure to make payments when due; -- defaults under other pacts or instruments of indebtedness; -- non-compliance with covenants; -- breaches of representations and warranties; -- judgments in excess of specified amounts; -- invalidity of guaranties; -- impairments of security interests in collateral; -- material adverse change; -- "changes of control"; and -- customary bankruptcy defaults. The Debtors believe that the Deutsche Bank Facility will enable them to pursue their reorganization efforts in a manner that will maximize value for all parties-in-interest in their bankruptcy cases. By this motion, the Debtors ask Judge Walrath for authority to: (1) obtain up to $75,000,000 in secured postpetition financing from Deutsche Bank; (2) grant superpriority liens and claims to the DIP Lenders payable from, and having recourse to, all property of the Debtors' estates and all proceeds thereof; and (3) execute and enter into the DIP Credit Agreement and related documents with Deutsche Bank and to perform other and further acts as may be reasonable required in connection with the DIP Documents. The Court will convene a hearing on June 29, 2005, at 12:30 p.m. to consider approval of the Deutsche Bank Facility. The Lead Arranger and the DIP Agent are represented in the case by O'Melveny & Myers, LLP. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Can Pay $300,000 Work Fee to Deutsche Bank --------------------------------------------------------------- Meridian Automotive Systems, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the District of Delaware to pay Deutsche Bank Trust Company Americas a $300,000 non-refundable work fee to defray the costs and expenses Deutsche Bank incurred in evaluating, preparing and submitting a postpetition financing proposal. Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, explains that in pursuing a financing package with the Debtors in the limited time available, Deutsche Bank devoted intensive time and resources to due diligence and to the legal, financial and other preparatory work attendant to submission of a definitive financing package. "Understandably, Deutsche Bank does not wish to undertake a costly and accelerated work schedule to achieve a final financing package if it must bear all of the execution risk attendant to its deal not closing. . . ." Mr. Brady says. Deutsche Bank notified the Debtors that its willingness to complete its due diligence and underwriting process is conditioned on the Debtors' payment of the Work Fee. Any portion of the Work Fee in excess of the fees and expenses incurred by Deutsche Bank as of the closing will be credited against other facility fees payable to the DIP Agent, if the proposed DIP Facility is closed. Similarly, if the DIP Financing is not consummated and Deutsche Bank has incurred reasonable fees and expenses in excess of the Work Fee, the Debtors will support payment of the excess amounts as administrative expenses. Committee Responds Given the accelerated time frame within which Deutsche Bank must complete its due diligence and consummate the proposed replacement facility, the Official Committee of Unsecured Creditors believes the $300,000 is appropriate to be paid as the Work Fee. The Committee agrees that the Deutsche Bank Facility is superior to all other proposals received by the Debtors to date. The Committee, however, reserves its right to object to the allowance of any amounts in excess of the $300,000 Work Fee to the extent the amounts are not reasonable. * * * Judge Walrath authorizes the Debtors to pay the $300,000 Work Fee to Deutsche Bank. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Wants to Release JPMorgan From Claims ---------------------------------------------------------- Meridian Automotive Systems, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for authority to release JPMorgan Chase Bank, M.A., as administrative agent, and the existing lenders under the Revolving Credit, Term Loan and Guaranty Agreement dated as of April 28, 2005, from all claims and causes of action. Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, explains that the termination of all liens and security interests in favor of JPMorgan and the existing DIP Lenders is a condition precedent to the effectiveness of the $75 million DIP financing facility with Deutsche Bank Trust Company Americas, as agent. The Release includes a waiver of potential causes of action belonging to the Debtors' estates. At the May 26, 2005 hearing, certain parties have expressly "reserved their rights" to bring claims against JPMorgan and the existing DIP Lenders. Mr. Morton relates that the Lenders are not willing to consensually release their liens and claims against the Debtors unless the DIP Order is modified to include the Release. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000). MIRANT: MAGi Panel Presents Issues on Impairment Order Appeal ------------------------------------------------------------- On June 9, 2005, Judge Lynn sent out a report in relation to the Appeals taken by the Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC, and the Ad Hoc Committee of MAG Bondholders from the Bankruptcy Court's Order finding that MAGi's Long-Term Noteholders are not impaired. Mirant Americas Generation, LLC, is a Mirant Corporation debtor-affiliate. In his Report, Judge Lynn offered his observations: -- to aid the District Court in assessing the likelihood that granting the MAGi Committee and the Ad Hoc Committee's Appeal requests would delay confirmation of the Plan; and -- to assist the District Court in establishing any expedited briefing schedule on appeal. According to Judge Lynn, "hearing on the Debtors' disclosure statement will be deferred . . . until I complete a valuation hearing now in progress. I do not expect I will be able to complete that hearing and issue a ruling on valuation prior to June 23. I do not, therefore, believe the disclosure statement hearing could be concluded and a ruling on disclosure made before July 15." "This would indicate that a confirmation hearing on the Plan . . . would not be commenced earlier than the second half of September." "If the [MAGi Committee and the Ad Hoc Committee's] requests are granted, it may be the best course not to conduct the hearing on the disclosure statement, and certainly would be necessary not to commence a confirmation hearing, until after a ruling on the appeal by the District Court." Appellants Deliver Statement of Issues The Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC, present to the District Court 12 issues to be resolved on appeal: 1. Did the Bankruptcy Court err in not concluding that the Debtors' proposed substantive consolidation of MAGi and its subsidiaries is a transfer of MAGi's assets "substantially as an entirety" under Sections 801 and 802 of the Indenture? 2. Did the Bankruptcy Court err in not concluding that the transfer of MAGi's direct equity interest in MIRMA is a transfer of MAGi's assets "substantially as an entirety" under Section 801 of the Indenture? 3. Did the Bankruptcy Court err in concluding that the substantive consolidation of MAGi and its subsidiaries is not a merger or consolidation of MAGi pursuant to Sections 801 and 802 of the Indenture? 4. Did the Bankruptcy Court err in concluding that the merger of MAGi's subsidiaries is not a transfer of MAGi's assets "substantially as an entirety" under Sections 801 and 802 of the Indenture? 5. Did the Bankruptcy Court err in not concluding that the transfer of MIRMA is prohibited by Section 110 of the Supplemental Indentures? 6. Did the Bankruptcy Court err in failing to conclude that the substance of the transaction by which MIRMA is transferred to New MAG Holdco and subsequently encumbered by liens to secure the Exit Financing violates Section 109 of the Indenture? 7. Did the Bankruptcy Court err in concluding that MAGi's failure under the Indenture to comply with the financial reporting requirements of Section 1005 of the Indenture is not a material default? 8. Did the Bankruptcy Court err in ascribing any significance to whether MAGi's undisputed failure to comply with the financial reporting requirements of Section 1005 of the Indenture is a "material default", when the cure requirements of Section 1124 of the Bankruptcy Code are not limited to "material defaults"? 9. Did the Bankruptcy Court err in concluding that the cross- default of indebtedness defaults under the Indenture are cured by the Plan? 10. Did the Bankruptcy Court err in concluding that, in the case of a continuing default, if a creditor's rights respecting that a default are preserved so that, post- confirmation, the creditor may act on the continuing default, failure to cure does not impair the creditors' rights? 11. Did the Bankruptcy Court err in concluding that Section 1124(2)(D) of the Bankruptcy Code does not confer an equitable right requiring a Plan to be fundamentally fair to the creditors to be reinstated? 12. Did the Bankruptcy Court err in not concluding that the release of claims against third parties and the Debtors and the related injunctions contained in the Plan do not alter creditors' rights? The Ad Hoc Committee of Bondholders of Mirant Americas Generation, LLC, asks the District Court to review: 1. Whether the Bankruptcy Court erred in ruling that the Long- term Noteholders are not entitled to vote on the Plan, even though the Court determined that it lacked sufficient facts to conclude that the Debtors had carried their evidentiary burden of proving that the Long-Term Noteholders' rights were unimpaired under Section 1124 of the Bankruptcy Code. 2. Whether the Bankruptcy Court erred in concluding that, even though the Plan plainly alters the Long-term Noteholders' legal and equitable rights, the Plan does not impair the Long-term Noteholders' claims and interests, because it purportedly does not trigger a technical default or fail to cure an existing default under the Indentures. 3. Whether the Bankruptcy Court erred in disregarding basic principles of contract interpretation in holding that the proposed Plan provisions do not violate the Indentures. 4. Whether the Bankruptcy Court erred in concluding that the Plan can provide for the substantive consolidation of the Debtors without impairing the Long-term Noteholders' claims and interests. 5. Whether the Bankruptcy Court erred in its interpretation and application of the "cure" provisions of Section 1124 of the Bankruptcy Code, by concluding: (a) that the Debtors are not required to cure defaults under the Indentures before the effective date of the Plan; and (b) that cross-defaults under the Indentures are cured by confirmation of the Plan. The Debtors ask Judge Lynn to approve the Settlement Agreement. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) MUELLER GROUP: Moody's Reviews Junk Sr. Subordinated Notes Rating ----------------------------------------------------------------- Moody's placed the ratings of Mueller Group, Inc. ("Mueller" - B2 Corporate Family rating, formerly known as senior implied rating), a wholly-owned subsidiary of Mueller Water Products, Inc., under review; direction uncertain. The review was prompted by Walter Industries, Inc.'s ("Walter Industries" -- Ba2 Corporate Family rating, formerly known as senior implied rating) announcement that it has entered into a definitive agreement to purchase Mueller Water Products, Inc. for approximately $1.91 billion. The consideration will consist of approximately $860 million in cash and the assumption of approximately $1.05 billion in Mueller debt. The transaction is expected to be completed in the third quarter of 2005. Walter Industries plans to combine its U.S. Pipe business with Mueller, creating a separate wholly-owned public reporting subsidiary with $1.68 billion of pro forma revenues. The ratings action recognizes that the pro forma leverage of the combined entity will significantly exceed Mueller's current debt load. Specifically, pro forma debt increases to $1.55 billion from $1.05 billion (pro forma amount assumes a portion of Mueller's debt is refinanced). U.S. Pipe adds a moderate amount of EBITDA ($45 million) relative to $500 million of additional acquisition-related debt. Moody's plans to meet with Walter Industries' management in the short-term to further analyze if Mueller debt holder's position will be materially changed, post-acquisition. Walter Industries has stated that downstream guarantees would not be provided to Mueller's debt holders and that it will likely tender for Mueller's $100 million second lien secured notes this year, while leaving the senior subordinated notes and discount notes in place. The review will focus on the details of the financing for completing the transaction, including the anticipated terms of the acquisition-related debt. Moody's will also review the potential $25 to $35 million of synergies to be realized between the businesses, and the combined company's financial flexibility and liquidity. Most importantly, Moody's will examine the combined company's ability to generate free cash flow and reduce the additional acquisition related-debt. These ratings were placed under review: * Second lien senior secured notes, due 2011 - B3 * Senior subordinated notes, due 2012 - Caa1 * First lien senior secured term loan and revolving credit facility - B2 * Corporate Family (previously call the Senior Implied) rating - B2 * Senior unsecured issuer rating - Caa1 Headquartered in Decatur, Illinois, Mueller Water Products, Inc., produces a wide range of flow control products including: * hydrants, * valves, * pipe fittings, * pipe hangers, * pipe nipples, and * other related products. The company reported revenues of $1.1 billion for the LTM ended April 2, 2005. MYLAN LABORATORIES: Moody's Rates $975 Million Debts at Ba1 ----------------------------------------------------------- Moody's Investors Service assigned Ba1 ratings to the new senior secured credit facilities of Mylan Laboratories Inc. Moody's also assigned a Ba1 rating to Mylan's new senior unsecured notes, and an SGL-1 speculative grade liquidity rating. Mylan's Corporate Family Rating (formerly known as the senior implied rating) is affirmed at Ba1, and the rating outlook is stable. Ratings assigned to Mylan Laboratories Inc.: * Ba1 senior secured term loan of $275 million due 2010 * Ba1 senior secured revolving credit facility of $200 million due 2010 * Ba1 senior unsecured notes of $500 million * SGL-1 speculative grade liquidity rating Rating affirmed: * Ba1 corporate family rating The ratings are being assigned in conjunction with Mylan's recent announcement that it will perform a partial recapitalization involving share repurchases of approximately $1.25 billion. Mylan has announced that it will use approximately $500 million of existing cash and $775 million of new debt to fund the transaction. Moody's understands that both the senior secured bank credit facilities and the senior unsecured notes are to be guaranteed by each of Mylan's direct and indirect wholly owned domestic subsidiaries (other than an insurance subsidiary). The bank credit facilities are secured by a perfected lien on and pledge of all of the capital stock of each direct and indirect subsidiaries (limited to 65% of the voting stock of foreign subsidiaries). Moody's believes the collateral package for bank lenders is meaningful because Mylan's subsidiaries own fixed assets as well as intellectual property related to Nebivolol and transdermal technologies, and Moody's estimates higher expected recovery levels for bank lenders than for senior unsecured note holders. However, Moody's does not currently believe the difference in estimated recovery levels for unsecured note holders is significant enough to warrant different ratings. This belief considers Mylan's enterprise value in relation to its debt, its current rating level, as well as the subsidiary guarantees provided to unsecured note holders. As a result, Moody's is assigning Ba1 ratings to both the senior secured bank facility and the senior unsecured notes. The ratings of the proposed bank facility and senior notes reflect Moody's understanding of the transaction terms as contemplated, and are subject to final documentation. Mylan's SGL-1 liquidity rating reflects Moody's belief that Mylan will have a high degree of liquidity after the transaction. Mylan has a long history of internally funding capital expenditures and dividends without reliance on debt, and Moody's expect positive free cash flow to continue. Moody's expects that Mylan will maintain cash balances of several hundred million dollars, and additional liquidity is provided by the $200 million credit facility, expected to be undrawn at the close of the transaction. Moody's anticipate ample headroom under the financial covenants. The Ba1 ratings reflect Moody's assumption that Mylan's cash flow during the current fiscal year ending March 31, 2006 will improve compared to fiscal year 2005 levels, driven in part by sales of transdermal fentanyl, which Mylan launched in January 2005. The Ba1 ratings also reflect the expectation that Mylan will utilize a portion of its free cash flow to deleverage over the next several years. These factors are discussed in greater depth below. Moody's has assigned Mylan's ratings in the context of Moody's Global Pharmaceutical Rating Methodology, published in November 2004. The published methodology is oriented more towards branded pharmaceutical companies. Although challenged by exposure to blockbuster patent expirations, branded companies still enjoy much higher margins, better pricing flexibility, significantly higher barriers to entry, and substantial amounts of cash on their balance sheets relative to generic companies. In applying the rating methodology to generic drug companies, Moody's therefore expects financial metrics to be sustainable at the higher end of the ranges indicated. Within the broad "Ba" rating category, Moody's expects cash flow from operations to adjusted debt of 15-25%, and free cash flow to debt of 10-15%. For the "Baa" rating category, Moody's expects cash flow from operations to adjusted debt of 25-40%, and free cash flow to adjusted debt of 15-25%. Pro forma for the new debt issuance, Moody's estimates that Mylan's fiscal year 2005 adjusted cash flow from operations to adjusted debt and free cash flow to adjusted debt were 24% and 9%, respectively. Positive credit considerations include: * Mylan's leading position in the U.S. generic market; * its long history funding growth entirely with internal funds; and * its investment in generic R&D, which has led to successful product launches. Rising demand for generic drugs should be fueled by upcoming blockbuster patent expirations, ongoing cost containment pressures, and the Medicare drug benefit, which becomes effective in 2006. Mylan has several near-term potential opportunities from First-to-File Paragraph-IV patent challenges, including topiramate and levofloxacin, which could result in launches in late fiscal year 2006 or fiscal year 2007. Longer term, Mylan's Nebivolol branded product for hypertension and potentially for congestive heart failure also presents upside opportunity. Mylan recently announced it would seek a strategic partner to market the product. Moody's believes this strategy is less risky than building or acquiring a sales force. Nebivolol's FDA approval and market acceptance remain uncertain, however. Offsetting these strengths, Moody's has several concerns about the generic drug industry, which has faced intensifying competition, margin erosion, and reduced opportunities for 6-month exclusive launches because of the "authorized generics" strategy of branded companies. Existing products of most generic companies face declining sales over time because of new entrants and pricing erosion, but the level of erosion is difficult to forecast. New product launches may offset these sales declines. However, limited pipeline visibility, and a reliance on successful patent challenges make these sales difficult to predict as well. Overall, Moody's believes that the sustainability of revenues and cash flow are much less certain compared to a typical branded pharmaceutical company, especially over a period longer than one year. Mylan has been affected by these challenges, with a revenue decline of 8% in fiscal year 2005 and gross margin contraction from 56% in fiscal year 2004 to 50% in fiscal year 2005. In addition, Moody's believes that Mylan is at somewhat of a crossroads in its strategy. The proposed acquisition of King Pharmaceuticals last year represented a departure from Mylan's former strategy. King operates in the branded drug industry, and maintains a salesforce that markets products to physicians. Now that the King acquisition agreement has been terminated, Mylan's strategy involves refocusing on its generics business. Mylan's financial policies have also changed, evidenced by the recapitalization strategy and the assumption of financial leverage. An unresolved purported offer for the company from one of its shareholders adds additional uncertainty about changes in financial policy. On a reported basis, Mylan's cash flow from operating activities declined from $226 million in fiscal year 2004 to $204 million in fiscal year 2005. Moody's adjusts Mylan's fiscal year 2005 cash flows by removing $17 million of litigation payments received, deducting an estimated $20 million of interest cost (net of taxes) for the new debt being issued, and adding back approximately $25 million of one-time expenses related to the proposed King acquisition. These adjustments result in adjusted cash flow from operating activities of $192 million during fiscal year 2005, and adjusted free cash flow (after dividends and capital expenditures) of $69 million. Using estimated debt of $789 million pro forma for the transaction ($775 million of debt and $14 million to represent the present value of operating leases), pro forma cash flow from operations to adjusted debt was approximately 24%; free cash flow to adjusted debt was approximately 9%. The pro forma free cash flow ratio is below the level Moody's would expect for Mylan's Ba1 rating. Mylan's cash flow in fiscal year 2005 was negatively affected by large sales of transdermal fentanyl in the fourth quarter, which led to a substantial increase in accounts receivable balances. Moody's believes that future product launches of size could similarly affect Mylan's cash flow. In assessing the prospects for Mylan's future cash flow, Moody's considered the revenue and gross profit from Mylan's portfolio of existing products, and the potential from its pipeline products. For existing products, key projection assumptions include: * the number of competitors currently; * potential future competitors; and * the rate of market share erosion and gross margin erosion. For pipeline products, these same assumptions are necessary as well as additional assumptions regarding timing of launch and whether or not there will be an "authorized generic." Launch timing may depend on either Mylan or a different generic company prevailing in a patent lawsuit. Because of the multitude of assumptions, the predictability and sustainability of Mylan's cash flows is somewhat uncertain, arguing for financial metrics at the high end of the ranges specified in Moody's rating methodology. Under Moody's baseline scenario, the rating agency currently project cash flow from operations in the range of $200 to $300 million for both fiscal year 2006 and fiscal year 2007, and free cash flow in the range of $50 million to $150 million each year. These estimates could be subject to variability, however, based on deviation from the assumptions discussed. Higher ratings could be attained with a faster launch, the absence of an authorized generic, or delays in other generic companies launching products. Lower ratings could become probable if competitive conditions exacerbate and faster price erosion occurs, or if brand companies prevail in patent challenge cases. To maintain the Ba1 ratings, Moody's expects Mylan to sustain cash flow from operations to adjusted debt of 25% to 35%, and free cash flow to adjusted debt of 10% to 20%. The ratings could face upward pressure if Mylan exceeds these ranges, and Moody's believes the improvement is sustainable. To consider an upgrade to Baa3, Moody's would expect cash flow from operations sustainable at approximately 40% and free cash flow sustainable at approximately 25%, i.e. the high end of the ranges outlined for the "Baa" category in Moody's methodology. Conversely, the ratings could face downward pressure if Mylan's metrics fall below the stated ranges. This could occur if competitive pressures in the generic drug industry intensify, or if Mylan is not successful in launching new products to offset sales erosion of its existing products. Headquartered in Canonsburg, Pennsylvania, Mylan Laboratories Inc. is a pharmaceutical company. During the fiscal year ended March 31, 2005, Mylan reported net revenue of $1.25 billion, of which 81% was attributable to its generic drug segment. NEFF CORP: S&P Rates Proposed $245 Million Sr. Sec. Notes at B- --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on equipment rental company Neff Corp., including the 'B+' corporate credit rating. At the same time, Standard & Poor's assigned its 'B-' secured debt rating to the company's proposed offering of $245 million in second-priority senior secured notes due in 2012 (under Rule 144A with registration rights). The notes are being issued through Neff Rental LLC and Neff Finance Corp. The recovery rating on these notes is '5', indicating negligible recovery of principal in the event of a payment default. Also, Standard & Poor's assigned its 'B+' corporate credit rating to Neff Rental Inc., an operating subsidiary and guarantor of the $245 million secured notes. The outlook is stable. The new notes will partly fund the recent purchase of the company by Odyssey Investment Partners in a transaction that was valued at about $500 million. The purchase was partly funded with unrated financing, including a new $225 million asset-backed lending facility and $80 million of privately placed subordinated notes. Miami, Florida-based Neff operates mainly in the Sunbelt through 67 locations. The ratings reflect its weak business position in the cyclical (albeit improving) equipment rental industry and its aggressive financial profile. "There has been an improvement in industry fundamentals reflected in Neff's operations, and the company's EBITDA has grown considerably," said Standard & Poor's credit analyst John R. Sico. "Standard & Poor's expects some further industry improvement in the near term. Rental rates have recently increased, a trend that continued through the first quarter of 2005. Also, the oversupply of construction equipment has diminished, following the industrywide practice that deliberately aged fleets and reduced capital spending. The industry has also benefited from higher utilization rates. Nonresidential construction spending began to recover in 2004 after declining about 20% from 2000 to 2003. This spending has increased modestly so far in 2005, and it is expected to improve seasonally. We expect a tempered pace of recovery in the second half," Mr. Sico added. The increases in rental rates and equipment utilization have helped Neff. The company's sales improved about 20% in 2004, and adjusted EBITDA margins are now more than 30%. Credit protection measures have also improved. The company has held down its capital spending and generated positive free cash flow (after capital spending and net of equipment sales). However, the aging of its fleet, especially its core earthmoving equipment, has moderately increased maintenance and repair costs. Such aging also eventually leads to increased capital spending. Given the improved industry conditions and higher rental utilization, fleet modernization is in order. Neff is expected to continue to improve its operating efficiency and focus on organic growth. These tendencies should help the company keep its credit metrics within Standard & Poor's expectations -- total debt to EBITDA of about 4.5x-5x over the business cycle and EBITDA (less capital expenditures) to cash interest coverage of about 1.5x (adjusted for operating leases). NORCROSS SAFETY: Moody's Junks Proposed $128.7M Fixed Rate Notes ---------------------------------------------------------------- (June 21, 2005) Moody's Investors Service affirmed the ratings of Norcross Safety Products L.L.C., a leading manufacturer of personal protection equipment, following the recent announcement of its acquisition by Odyssey Investment Partners LLC, a private equity investor. At the same time, Moody's has rated its proposed new financing transactions as follows. The rating outlook remains stable. New ratings assigned: * B1 for the proposed US $40 million senior secured revolving credit facility, due 2010; * B1 for the proposed US $87.3 million senior secured term loan, due 2011; and * Caa1 for the proposed US$128.7 million 11.75% senior fixed rate pay in kind notes, due 2012, by the holding company, Safety Products Holdings, Inc., including the assumption of approximately $103.7 million of existing holdco notes. Ratings affirmed: * B1 corporate family rating; * B2 senior unsecured issuer rating; and * B3 for the US$152.5 million 9.875% senior subordinated notes, due 2011 The ratings on the company's existing senior secured credit facility and existing holdco notes will be withdrawn upon completion of the acquisition. Norcross is being acquired by Odyssey Investment Partners for a net price of $472 million, or 7.3 times LTM April 2, 2005 adjusted EBITDA. As part of the transaction, the company is soliciting consents from its existing senior subordinated note holders as well as the Holdco note holders to agree to waive their respective change of control provision, among other provisions in respect of the acquisition, thereby allowing the assumption of the notes by the new shareholders. Additional funding will come from a new $127 million senior secured credit facility and approximately $110 million of equity investment from Odyssey. The ratings reflect: * Norcross' leading position in the personal protection equipment market; * a relatively stable revenue base supported by a diverse customer base and broad product offerings with established brands; * favorable industry trends and growth dynamics; and * a track record of solid profit margins and cash flow generation. On the other hand, the ratings are constrained by: * its significant debt level and high initial financial leverage; * acquisitive growth strategy; and * its private equity ownership which may limit de-leveraging potentials. The stable rating outlook reflects Moody's expectation of improving operating performance at Norcross, offset by potential acquisition and integration risks as well as potential shareholder-friendly transactions. Factors that could cause Moody's to consider a negative rating action include large-sized acquisitions that increase debt leverage and alter the company's business and risk profile. Factors that could cause Moody's to consider a positive rating action include substantially reduced debt leverage supported by a more conservative long-term financial policy. Norcross Safety Products is one of the world's largest manufacturers of personal protection equipment for the general industrial, fire service and utility/high voltage markets. For the LTM March 2005 period, the company generated roughly: * 70.2% of its revenues ($317.1 million) from the general industrial markets (respiratory, footwear, gloves, etc.); * 18.1% ($81.6 million) from the fire service market (bunker gear, helmets, etc.); and * 11.7% ($52.9 million) from the utility/high voltage market. The company holds a strong position in a number of niche markets in which it competes. It also enjoys a reputation for producing quality and highly engineered products and has built a relatively loyal customer base, particularly in the fire service and utility markets. Profit margins vary in the different end-markets. The company's EBITDA margin is about 12.8% in the more fragmented and competitive general industrial market, whereas EBITDA margins are as high as 19.4% in the fire service market and 26% in the utility market due to the more highly-engineered nature of the products and stronger barriers to entry. Given that the use of personal protection equipment is needed and often mandated by government regulations in dangerous work environment, demand is relatively stable, especially in the fire service and utility markets. Increased demands for worker protection by workers compensation insurers and increasing spending on preparedness against future terrorist attacks and catastrophic events are also driving demand for personal protection equipment. The gradual reduction in north American manufacturing workforce is an on-going concern, but this appears to be more than offset by the growth in the overall PPE market and increasing product penetration. Both the PPE market size and Norcross' revenue increased through the most recent manufacturing recession -- a testimony to the diversity of the customer base and the revenue stability of the business. Moody's notes, however, that since 1995 when the private equity arms of John Hancock and CIBC, together with the management, acquired a controlling interest in the company's predecessor, Norcross has grown rapidly mainly through acquisitions, increasing its annual revenues of approximately $35 million in 1995 to today's $452 million. Given that the personal protection market is highly fragmented, Moody's expects Norcross to continue its acquisitive growth strategy. The company's private equity ownership also makes it prone to use debt capital to finance future acquisitions. Moody's therefore expects its debt leverage to be maintained at a relatively high level in order to maximize returns to equity sponsors. Subsequent to the refinancing, Norcross will remain highly leveraged. Funded debt would total approximately $368 million, or 5.7 times estimated LTM 4/02/2005 EBITDA of $64.6 million. Pro forma LTM EBITDA would cover cash interest expense and total interest expense (including PIK interest on Holdco notes) 3.2 times and 1.8 times, respectively. The company's capex requirement is low, at $8-9 million a year, or 2% of sales. This has contributed to the company's relatively good track record of free cash flow generation. Moody's estimates free cash flow (cash from operations minus capex) in the first couple of years to be roughly 8-9% of total debt outstanding. Short-term liquidity, to be provided by an undrawn $40 million revolver, is expected to be adequate over the next twelve months. The B1 rating on the $127.3 million senior secured credit facility reflects its senior secured status in the debt structure but weak asset coverage. The facility will be secured by a first priority lien on the capital stock as well as all assets of Norcross and subsidiaries, and will be guaranteed by all material domestic subsidiaries and its parent, Safety Products Holdings, Inc. The Caa1 rating on the $128.7 million senior pay in kind notes issued by the HoldCo reflects their unsecured nature, structural and effective subordination to senior debt, including those at Norcross. The HoldCo notes are un-guaranteed and will PIK at 11.75% payable semi-annually for the first five years. However, the company has the option to make the interest payment in cash or in kind although its current intention is to pay in kind. Norcross Safety Products L.L.C., headquartered in Oak Brook, Illinois, is a leading manufacturer of personal protection equipment. NORTHWEST AIRLINES: Moody's Junks Corporate Family Rating --------------------------------------------------------- Moody's Investors Service downgraded the debt ratings of Northwest Airlines Corporation and its primary operating subsidiary, Northwest Airlines, Inc. The Corporate Family Rating (previously called the Senior Implied rating) was lowered to Caa1 from B2, and the Senior Unsecured rating was downgraded to Caa3 from Caa1. Ratings assigned to Enhanced Equipment Trust Certificates were downgraded as noted below. In addition, the company's Speculative Grade Liquidity Rating was downgraded to SGL-3 from SGL-2. The rating actions complete a review of Northwest's ratings initiated April 8, 2005. The outlook is negative. The downgrade of Northwest's Corporate Family and Senior Unsecured ratings reflects the company's continuing operating losses and negative cash flow. Higher than expected fuel costs accompanied by limited progress in achieving needed labor cost reductions has left the company with an uncompetitive cost structure and will preclude any near term improvement in the company's operating performance. Additionally, Northwest has significantly underfunded defined benefit pension plans and faces large required contributions for the remainder of 2005 and in 2006. The company supports proposed pension reform that would provide legislative relief to extend the period of time to fund its pension plans from the current 3 to 5 year period of time to 25 years. In Moody's view, should Northwest fail to achieve the labor concessions it seeks as well as pension contribution relief, the company could need to reorganize its obligations through bankruptcy proceedings. The ratings take into account: * the company's current liquidity; * its ongoing efforts to negotiate cost reductions with its unions; and * its obligations related to its underfunded pension plans. While Northwest maintains a strong route system including its domestic hubs in Minneapolis and Detroit, a significant Asian network supported by fifth freedom flying rights out of Tokyo Narita, and an important alliance with KLM, the company's operating cost structure and upcoming cash calls for pension funding and debt maturities remain significant credit challenges. Northwest's cost structure is among the highest in the U.S. airline industry, and renders the company unable to effectively compete with the growing cadre of low cost carriers in the marketplace. Northwest, like other major airlines, has sought concessions from its labor unions to reduce its operating costs, but to date only limited progress has been achieved. Moreover, the company's continuing high labor costs have been exacerbated by persistent high fuel costs, resulting in continued cash operating losses for the company. The company's cash operating losses are a particular concern in relation to its ability to sustain an adequate liquidity profile because of ongoing cash needs for pension funding, business reinvestment and upcoming debt maturities. Northwest's balance sheet liquidity currently remains sound today; Moody's estimates unrestricted cash will be approximately $2.0 billion at the end of the second quarter. However, in the absence of changes in Northwest's cost structure and the airline pricing environment, liquidity is likely to erode over the next several quarters due to ongoing cash operating losses, pension contribution requirements and large debt maturities during 2006. The downgrade of the company's Speculative Grade Liquidity Rating to SGL-3 from SGL-2 reflects continued negative cash flow and the outlook for erosion of balance sheet liquidity, which was the primary driver of the former SGL-2 rating. Additionally, the SGL- 3 rating reflects the limited access to external financial markets and the limited amount of unencumbered assets. Debt maturities for the remainder of 2005 are approximately $280 million but increase in 2006 to approximately $830 million. In addition, pension contributions for the remainder of 2005 will be approximately $244 million, and Moody's estimates that 2006 contribution requirements will be substantial. In late 2004, the company restructured and extended its fully drawn $975 million bank line of credit that was due to mature in October 2005. The original facility consisted of a $575 million Term Loan A that matures in November 2009, and a $400 million Term Loan B that matures in November 2010. The Term Loan A amortizes over five years through 2009, with the first amortized payment of $148 million due in November 2005. In April 2005, the company successfully refinanced this first payment and created a new Term Loan C for $148 million payable in six years. Moody's assigned a B3 rating to the new Term Loan C, the same ratings Term Loans A and B currently have as a result of the rating downgrade. In addition, as part of this renegotiation, Northwest also obtained an amendment that waived the fixed charges coverage covenant from June 30, 2005 to June 30, 2006 due to the higher than expected fuel charges and labor costs which might have caused non-compliance with the covenant. The bank facility is guaranteed by Northwest Airlines Corporation and collateralized Northwest Airlines, Inc.'s Pacific division route rights and slots and by aircraft. Selected EETC ratings were adjusted downward. The rating actions were the result of a combination of the change in the underlying ratings of Northwest and increased loan to value stress due to Moody's view of current market values of certain aircraft types in the collateral pool. Northwest's ratings are supported by its near term liquidity profile, but could be subject to further downgrade if the liquidity position further erodes. Moreover, inability to meaningfully improve its cost structure through labor negotiations and other actions, restore profitable operations, and achieve sufficient cash flow generation to address upcoming pension and debt maturities without reducing available liquidity could also adversely affect the rating. Any potential for rating upgrade would require sustained profitable operations and free cash flow generation sufficient to address upcoming cash calls, as well as a reduction of indebtedness. Ratings affected include: Northwest Airlines Corporation -- * Corporate Family (previously called Senior Implied) rating: to Caa1 from B2 * LT Issuer rating: to Ca from Caa2 * Speculative Grade Liquidity Rating: to SGL-3 from SGL-2 * Guaranteed Convertible Notes to Caa3 from Caa1. Northwest Airlines, Inc. -- * Senior Unsecured debt: to Caa3 from Caa1 * Senior Unsecured and Subordinated debt to be issued under the multiple seniority shelf: to (P)Caa3 from (P)Caa1 and to (P) C from (P)Caa3 Secured Bank Credit Facility: - Term Loan A: to B3 from B1 - Term Loan B: to B3 from B1 - Term Loan C: B3 rating Assigned - Industrial Revenue Bonds (Series 1997): to Caa3 from Caa1 Enhanced Equipment Trust Certificates, except for Aaa ratings supported by monoline insurance policies: Series 1994-1 (Trust No.1) - Class A: to B1 from Ba2 - Class B: to Caa2 from B1 - Series 1994-2 (Trust No.2) - Class A: to Ba1 from Baa2 - Class B: to B1 from Baa3 - Class C: to B3 from Ba2 - Class D: to Caa3 from Ba3 Series 1996-1 - Class A: to B2 from Ba2 - Class B: to Caa3 from B2 - Class C: to Ca from Caa1 Series 1997-1 - Class A: to Caa1 from Ba2 - Class B: to Caa3 from B2 - Class C: to Ca from Caa1 Series 1999-1 - Class A: to Ba3 from Baa3 - Class B: to Caa2 from Ba3 - Class C: to Caa3 from B3 Series 1999-2 - Class A: to Ba1 from Baa2 - Class B: to B2 from Ba1 - Class C: to B3 from B1 Series 1999-3 - Class G: Aaa* - Class B: to Caa3 from B1 - Class C: to Ca from B3 Series 2000-1 - Class G: Aaa* - Class C: to Caa2 from B3 Series 2001-1 - Class A1 and A2: to Ba2 from Baa3 - Class B: to B3 from Ba2 - Class C: to Caa2 from B2 Series 2001-2 - Class A: to Ba1 from Baa1 - Class B: to Caa2 from Ba1 Series 2002-1 - Class G1 and G2: Aaa* - Class C: to B3 from B1 Series 2003-1 - Class D: to Caa3 from Caa1 * Enhanced Equipment Trust Certificates supported by monoline insurance policies remain rated Aaa. Northwest Airlines Corporation and Northwest Airlines, Inc. are headquartered in Eagan, MN. O-CEDAR HOLDINGS: Court Okays Rule 2004 Probe on Stonebridge ------------------------------------------------------------ The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware gave Jeoffrey L. Burtch -- the chapter 7 trustee overseeing the liquidation of O-Cedar Holdings, Inc., and O-Cedar Brands, Inc. -- permission to conduct examinations under Bankruptcy Rule 2004. Mr. Burtch can now question and obtain documents from Stonebridgre Partners L.P. and its four affiliates, and 20 individuals associated with Stonebridge. The Stonebridge entities are private equity investment firms which purchased the Debtors in 2000. The 20 individuals participated in the management of the Debtors' business operations prior to the bankruptcy filing. The 20 individuals the Trustee wants to examined are: * Andrew Thomas, * Michael S. Bruno, Jr., * Robert M. Raziano, * Gerald Erickson, * Jack Gainer, * Mark Carr, * Fred Leventhal, * Todd Leventhal, * Wayne G. Fethke, * Richard L. Heggelund, * Frank M. Schossler, * Barry Vickers, * Steven Koschnick, * Bradley E. Scher, * Francis Novak, * Robert E. Beasley, * Frank LaManna, * Frank DiCesare, * Frank Callan and * Mark Hollopeter. Having reviewed the Debtors' financial documents, the Trustee wants to know whether: -- the Debtors were insolvent in the fourth quarter of 2002, and -- the continued operations of the Debtors' businesses until the bankruptcy filing plunged the Debtors deeper into insolvency. The Trustee wants to determine whether the Stonebridge board members knew or should have known about the Debtors' insolvent condition and ignored financial data showing significant losses to the estates. The Trustee contends that if the Debtors' assets were sold before the fourth quarter of 2002, the estates' creditors would have obtained a higher recovery on account of their claims. Headquartered in Springfield, Ohio, O-Cedar Holdings, Inc., through its debtor-affiliate, manufactures brooms, mops, and scrub brushes for household and industrial use. The Company filed for chapter 11 protection on August 25, 2003 (Bankr. Del. Case No. 03- 12667). John Henry Knight, Esq., at Richards, Layton & Finger, P.A., and Adam C. Harris, Esq., at O'Melveny & Myers LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed over $50 million in both assets and debts. On May 26, 2004, the cases were converted to chapter 7 and Jeoffrey L. Burtch was appointed trustee. OWENS CORNING: Asks Court to Okay Technical Changes to DIP Order ---------------------------------------------------------------- On October 28, 2004, the U.S. Bankruptcy Court for the District of Delaware approved an extension of Owens Corning and its debtor- affiliates' postpetition credit agreement with Bank of America, N.A. and certain other lenders for an additional two years. The Court also authorized the Debtors to amend their postpetition financing to terminate the Commitments of the Existing Lenders other than BofA and add new Lenders, pursuant to the Second Amendment to Postpetition Credit Agreement. The Second Amendment specifically expanded the spectrum of available providers from whom the Debtors could obtain "Bank Products" -- credit cards, automatic clearing house transactions, cash management, hedge agreements and the like -- from just BofA to any Lender, including BofA, and any Lender's affiliates. J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington, Delaware, relates that the Agent and the Lenders have requested a technical amendment to the definition of "Obligations" to reconcile two potential discrepancies between the Second Amended DIP Order and the Amended Credit Agreement. The Agent and the Lenders have raised concern that the definition of "Obligations" in the Second Amended DIP Order: -- does not expressly include liabilities of the Debtors under the Amended Credit Agreement to the Lenders' affiliates, as opposed to the Agent and the Lenders. The Agent and the Lenders noted that the Amended Credit Agreement permits the Debtors to incur liabilities to the Lenders' affiliates through the use of the affiliates' Bank Products. To resolve any uncertainty as to this issue, the Agent and the Lenders have asked the Debtors to obtain clarification from the Court that the term "Obligations," as defined in the Second Amended DIP Order, may include liabilities of the Debtors to the Lenders' affiliates; and -- fails to expressly reference "Bank Products," which are included within the definition of "Obligations" in the Amended Credit Agreement. The Amended Credit Agreement defines "Obligations" to "include[], without limitation, . . . all debts, liabilities and obligations now or hereafter arising from or in connection with Bank Products." Accordingly, the Agent and the Lenders have asked the Debtors to obtain clarification that "Bank Products" -- which are a key benefit to the Debtors under the Credit Agreement -- are included within the definition of "Obligations" in the Second Amended DIP Order. The Debtors discussed the issue with the Agent and the Lenders and agreed that the Second Amended DIP Order should be modified to provide that all loans made under the Credit Agreement and interest thereon, together with all reimbursement and other obligations in respect of letters of credit issued under the Credit Agreement, and all fees, costs, expenses, indebtedness, obligations and liabilities of the Debtors to the Agent, the Lenders and any affiliate of any Lender under or in respect of the Loan Documents, any Bank Product or the DIP Order, including, without limitation, "Obligations" as defined in the Credit Agreement, are referred to as the "Obligations". The Debtors ask the Court to approve the modified definition of "Obligations" in the Second Amended DIP Order. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in assets and a $4.2 billion stockholders' deficit. The company reported $132 million of net income in the nine-month period ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No. 110; Bankruptcy Creditors' Service, Inc., 215/945-7000) PLAZA GARDENS: Case Summary & 6 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Plaza Gardens South of Overland Park, Inc. 7100 West 141st Street Overland Park, Kansas 66223 Bankruptcy Case No.: 05-22876 Type of Business: The Debtor owns and operates apartments. Chapter 11 Petition Date: June 22, 2005 Court: District of Kansas (Kansas City) Debtor's Counsel: Donald G. Scott, Esq. McDowell Rice Smith and Buchanan 350 Skelly Building 605 West 47th Street Kansas City, MO 64112-1905 Total Assets: $24,000,000 Total Debts: $23,656,284 Debtor's 6 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Michael G. Schlup $2,000,000 7100 West 141st Street Overland Park, KS 66223 Village Gardens TownHomes, Inc. $1,500,000 3900 Newton Overland park, KS 66213 EEI $136,500 c/o Thomas F. McGraw III Mark Owens 4400 West 109th Street, Suite 111 Overland Park, KS 66211 Gerald Jerserich $11,784 Boal & Jeserich 748 Ann Avenue Kansas City, KS 66101 KCPL $4,000 P.O. Box 418679 Kansas City, MO 64141 Johnson County Waste Water $4,000 Water District #1 10747 Renner Boulevard Lenexa, KS 66219 PROVIDIAN GATEWAY: Acquisition Plan Cues Moody's to Review Ratings ------------------------------------------------------------------ Moody's Investors Service placed the ratings on 23 classes of credit card receivables-backed securities issued from the Providian Gateway Master Trust and the related Providian owner trusts under review for possible upgrade. Moody's said that this rating action follows the June 6, 2005 announcement by Washington Mutual, Inc. that it had entered into a definitive agreement to acquire Providian Financial Corporation. On the same day, Moody's affirmed the ratings and stable outlook of Washington Mutual, Inc. (Senior Debt at A3) and its thrift subsidiaries (Deposits at A2). The rating agency also put the ratings of Providian National Bank (Deposits at Ba2, Issuer Strength at Ba3, and Bank Financial Strength at D) under review for possible upgrade. The ratings of Providian (Senior Debt at B2) were placed under review in January, and remain under review for upgrade. Moody's review of Providian's receivables-backed securities will focus primarily on the financial strength of the seller/servicer as well as the integration of Providian's credit card business with Washington Mutual's mortgage-based business model. Upon acquisition, it is expected that Providian National Bank will merge with one of Washington Mutual's thrift subsidiaries, Washington Mutual Bank, FSA. Washington Mutual Bank will be the surviving entity and assume the role of seller/servicer for the related asset-backed programs. The current rating of Washington Mutual Bank is considerably stronger than that of Providian National Bank. The credit strength of the seller/servicer is an important consideration in Moody's credit opinion of the related asset-backed securities due to the correlation between the viability of the revolving securitization program and that of the related seller/servicer. It is Moody's opinion that higher-rated seller/servicers are more likely to maintain the ongoing servicing and origination requirements of such a program. Furthermore, the relatively strong credit profile of Washington Mutual Bank will provide the credit card business with access to broader and cheaper sources of financing, which may allow Providian to compete more effectively in the middle and prime segments of the credit card market. Over the past three years, current Providian management have successfully grown the middle-market segment of their business and may benefit further from cross-sale opportunities with Washington Mutual's customer base. However, Providian has had more difficulty in expanding the much more price-sensitive prime segment of their card business. Competition in the prime segment of the market is formidable and includes issuers with much greater scale and/or financial resources than the pro forma combined Providian and Washington Mutual entity; therefore, Moody's believes the company's forays in to the prime card market will continue to be a challenge. The ratings review will conclude after all the necessary approvals for the acquisition have been received, at which point Moody's expects Providian's ratings will be raised to the level of Washington Mutual's for similar instruments. The complete rating action is: Under Review for Possible Upgrade: Issuer: Providian Gateway Master Trust * $29,605,000 Class B Certificate, Series 2002-B, rated Baa3 * $118,422,000 Class C Certificate, Series 2002-B, rated Ba3 * $63,694,000 Class B Certificate, Series 2003-A, rated Ba3 Issuer: Providian Gateway Owner Trust * $73,200,000 Class B Certificate, Series 2004-A, rated Aa2 * $112,020,000 Class C Certificate, Series 2004-A, rated A2 * $84,630,000 Class D Certificate, Series 2004-A, rated Baa2 * $100,605,000 Class E Certificate, Series 2004-A, rated Ba3 * $68,200,000 Class B Certificate, Series 2004-B, rated Aa2 * $96,300,000 Class C Certificate, Series 2004-B, rated A2 * $80,250,000 Class D Certificate, Series 2004-B, rated Baa2 * $72,220,000 Class E Certificate, Series 2004-B, rated Ba3 * $50,600,000 Class B Certificate, Series 2004-D, rated Aa2 * $89,500,000 Class C Certificate, Series 2004-D, rated A2 * $70,100,000 Class D Certificate, Series 2004-D, rated Baa2 * $68,113,000 Class E Certificate, Series 2004-D, rated Ba3 * $49,383,000 Class B Certificate, Series 2004-E, rated Aa2 * $61,728,000 Class C Certificate, Series 2004-E, rated A2 * $61,728,000 Class D Certificate, Series 2004-E, rated Baa2 * $64,814,800 Class E Certificate, Series 2004-E, rated Ba2 * $27,410,000 Class B Certificate, Series 2004-F, rated Aa2 * $48,494,000 Class C Certificate, Series 2004-F, rated A2 * $37,951,000 Class D Certificate, Series 2004-F, rated Baa2 * $35,843,500 Class E Certificate, Series 2004-F, rated Ba2 Collateral Performance The performance of the securitized Providian credit card portfolio remains within the bounds of Moody's expectations and is not a principal factor in the ratings review. The long-term average yield, charge-off rate and payment rate have remained above the industry average as measured by Moody's Credit Card Index. Background Providian Financial Corporation, headquartered in San Francisco, California, is the ninth largest credit card issuer in the U.S. with managed credit card receivables of $18.4 billion at May 31, 2005. Providian National Bank, the originator and servicer of the Providian credit card receivables, is a San Francisco based, FDIC- insured bank and a direct subsidiary of Providian Financial Corp. Providian National Bank has a long-term deposit rating of Ba2, and a bank financial strength rating of C, all of which are under review for possible upgrade. Washington Mutual, Inc., headquartered in Seattle, Washington, is the largest thrift holding company in the U.S. and sixth largest among U.S. bank and thrift companies, with assets of $320 billion at September. PROXIM CORPORATION: Taps Pachulski Stang as Bankruptcy Counsel -------------------------------------------------------------- Proxim Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to retain Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. as their restructuring counsel. Pachulski Stang is expected to: a) provide legal advice with respect to its powers and duties as debtors-in-possession in the continued operation of their businesses and management of their properties, including the contemplated sale of the Debtors' assets and proposed DIP financing; b) prepare and pursue confirmation of a plan of reorganization; c) prepare necessary applications, motions, answers, orders, reports and other legal papers on behalf of the Debtors; d) appear and protect the interests of the Debtors before the Court; and e) perform all other legal services for the Debtors which may be necessary and proper in this proceeding. The principal professionals who will represent the Debtors and their current hourly billing rates are: Professional Rate ------------ ---- Laura Davis Jones, Esq. $595 Tobias S. Keller, Esq. $450 Bruce Grohsgal, Esq. $435 Maxim B. Litvak, Esq. $365 Rachel Lowy Werkheiser, Esq. $295 Patricia J. Jeffries $160 Louise Tuschak $145 To the best of the Debtors' knowledge, Pachulski Stang is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in San Jose, California, Proxim Corporation -- http://www.proxim.com/-- designs and sells wireless networking equipment for Wi-Fi and broadband wireless networks. The Debtors provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. The Debtor along with its affiliates filed for chapter 11 protection on June 11, 2005 (Bankr. D. Del. Case No. 05-11639). When the Debtor filed for protection from its creditors, it listed $55,361,000 in assets and $101,807,000 in debts. QUEENSWAY FIN'L: Creditors Must File Proofs of Claim by Aug. 12 --------------------------------------------------------------- The Superior Court of Justice of Toronto, pursuant to its Claims Procedure order dated May 27, 2005, set Aug. 12, 2005, as the deadline for all creditors owed money by Queensway Financial Holdings Limited and its affiliate, Queensway Holdings, Inc., on account of claims existing at the present or commenced in the future. Creditors must file their written proofs of claim on or before the Aug. 12 Bar Date, and those forms must be delivered only to Ernst & Young Inc. in its capacity as Court-Appointed Interim Receiver of Queensway Financial Holdings Limited and Queensway Holdings, Inc. The proofs of claims must be delivered to: Ernst & Young Inc. Attn: Rahn Dodick 222 Bay Street Ernst & Young Tower Toronto-Dominion Centre Tel: 416-943-3034, Fax: 416-943-3300 P.O. Box 251 Toronto, Ontario, Canada M5K 1J7 Queensway Financial Holdings Limited is a specialty insurance group that provides a range of individual and commercial insurance coverages. The Company is also a property and casualty insurance holding company and attains its objective through the selective acquisition and development of niche property and casualty insurance Companies in Canada and the United States RAINBOW NATIONAL: Moody's Reviews $500MM Sub. Notes' Junk Rating ---------------------------------------------------------------- According to Moody's Investors Service, the ratings of Rainbow National Services LLC remain on review for possible upgrade following Cablevision Systems Corporation's announcement that Rainbow Media Holdings will be spun off. Moody's believes Rainbow would benefit from: * the simplified capital structure; * lower event risk; and * the likelihood of no incremental debt at Rainbow Media or Rainbow. On that premise, the debt at Rainbow would be supported by attractive assets, primarily the national cable networks, AMC, IFC and WE with good cash flow generation; it will also no longer be as burdened by the cash demands at VOOM, a sister subsidiary now in the process of shutting down. As noted when Moody's originally put Rainbow on review, Moody's views Rainbow Media's strategy to exit the satellite business as a credit positive, since Rainbow Media planned to fund the DBS segment's development with Rainbow National's cash flow. The review will focus on Moody's assessment of the improvement to credit metrics as Rainbow National will no longer be funding the large capital expenditures necessary to develop the DBS segment and the potential for somewhat lower event risk following the spin-off from Cablevision Systems Corporation. In addition, the review will include an analysis of: * the financial position post spin, in part to assess the remaining cash, which historically has been quite high; * the ultimate cost associated with closing down the operations of VOOM and the likelihood that VOOM will remain a cash drain to Rainbow Media over the near term as the company services its existing customers; and * the potential for the parent company to continue to utilize Rainbow National as a funding vehicle for speculative investments, including VOOM21. These ratings are under review for possible upgrade: (1) B1 rating on the $350 million senior secured revolving credit facility; (2) B1 rating on the $600 million senior secured Term Loan B; (3) B3 rating on the $300 million of senior unsecured notes due 2012; (4) Caa1 rating on the $500 million of senior subordinated notes due 2014; (5) B2 corporate rating; and (6) B3 senior unsecured issuer rating. In a separate press release, Moody's placed under review for possible downgrade the ratings on the debt of Cablevision Systems Corporation and CSC Holdings following the announcement that the Dolan family would take the cable assets private via debt financing . Rainbow National Services LLC, headquartered in Jericho, New York, supplies television programming to cable television and direct broadcast service providers throughout the United States. The company operates three entertainment programming networks: * American Movie Classics; * WE: Women's Entertainment; and * The Independent Film Channel. REGIONAL DIAGNOSTICS: Committee Taps Capstone as Financial Advisor ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Northern District of Ohio gave the Official Committee of Unsecured Creditors of Regional Diagnostics, L.L.C., and its debtor-affiliates permission to employ Capstone Advisory Group, LLC as its financial advisors. Capstone Advisory will: a) advise and assist the Committee in its analysis of historical performance identifying issues impacting earnings deterioration, evaluate near and long-term business prospect under various restructuring or sale options and evaluate near and long-term cash forecasts and adequacy of capital; b) evaluate the adequacy of the Debtors' and their advisors marketing efforts in identifying the appropriate slate of potential acquirers and provide the Committee with analysis and advice on the adequacy of possible bids from those acquirers; c) assist and advise the Committee in the analysis of the terms and conditions of any DIP financing arrangements and in evaluating the retention arrangements for advisors to be retained be the Debtors; d) assist and advise the Committee and its counsel in identifying and reviewing preference payments, fraudulent conveyances and other causes of action; e) analyze the Debtors' assets and unsecured creditors recovery under various recovery scenarios and analyze alternative reorganization scenarios in order to maximize the recovery to general unsecured creditors; f) develop a monitoring process that will enable the Committee to effectively evaluate the Debtors' performance on an ongoing basis; and g) perform other financial advisory services to the Committee that are consistent with its roles and duties in the Debtors' chapter 11 cases. Sean M. Cunningham, a member at Capstone Advisory, reports that the Firm's professionals' bill: Designation Hourly Rate ----------- ----------- Members & Managers $505 - $530 Professional Staff $275 - $425 Support Staff $50 - $175 Capstone Advisory assures the Court that it does not represent any interest materially adverse to the Committee, the Debtors or their estates. Headquartered in Warrensville Heights, Ohio, Regional Diagnostics, L.L.C. -- http://www.regionaldiagnostic.com/-- owns and operates 27 medical clinics located in Florida, Illinois, Indiana, Ohio and Pennsylvania. The Company and its debtor-affiliates filed for chapter 11 protection on April 20, 2005 (Bankr. N.D. Ohio Case No. 05-15262). Jeffrey Baddeley, Esq., at Baker & Hostetler LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of $10 million to $50 million and debts of $50 million to $100 million. REGIONAL DIAGNOSTICS: Panel Hires Traub Bonacquist as Co-Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Regional Diagnostics, LLC, and its debtor-affiliates, sought and obtained permission from the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division, to employ Traub, Bonacquist & Fox LLP as its local bankruptcy counsel, nunc pro tunc to May 10, 2005. Traub Bonacquist will: a) provide legal advice to the Committee with respect to its duties and power in the Debtors' cases; b) assist the Committee in its investigation of the acts, conducts, assets, liabilities, and financial condition of the Debtors, the disposition of the Debtors' assets, and other significant pre-petition transactions. c) participate in the formulation of a plan of reorganization; d) assist and advise the Committee in its examination and analysis of the conduct of the Debtors' affairs and causes of their insolvency; and e) perform such other legal services as may be required and in the interest of the creditors, including, but not limited to, the commencement and pursuit of such adversary proceedings as may be authorized. Michael S. Fox, Esq., a partner at Traub Bonacquist, discloses the rates of the professionals at his Firm: Designation Hourly Rate ----------- ----------- Partners $395 - $675 Counsel $395 Associates $265 - $285 Paraprofessionals $90 - $165 Mr. Fox assures the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Warrensville Heights, Ohio, Regional Diagnostics, L.L.C. -- http://www.regionaldiagnostic.com/-- owns and operates 27 medical clinics located in Florida, Illinois, Indiana, Ohio and Pennsylvania. The Company and its debtor-affiliates filed for chapter 11 protection on April 20, 2005 (Bankr. N.D. Ohio Case No. 05-15262). Jeffrey Baddeley, Esq., at Baker & Hostetler LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of $10 million to $50 million and debts of $50 million to $100 million. RHODES INC: Files Joint Plan of Reorganization in N.D. Georgia -------------------------------------------------------------- Rhodes, Inc., Rhodes Holdings and Rhodes Holdings II filed a joint chapter 11 plan of reorganization and its accompanying disclosure statement explaining the Plan with the United States Bankruptcy Court for the Northern District of Georgia on June 20, 2005. Rhodes expects to emerge from bankruptcy by early fall. "The filing of a chapter 11 plan by Rhodes is an important, first step towards exiting bankruptcy," Joel H. Dugan, who has been named Chief Executive Officer and President of Rhodes effective July 5, 2005, said. "Rhodes continues to implement its reorganization strategy and looks forward to concluding its chapter 11 case soon." "We appreciate very much all the support from our vendors and the hard work by our employees," Rhodes' current CEO, Steven S. Fishman, commented. "This major development would not have been possible without them." Terms of the Plan Under the Plan, general unsecured creditors owed $59.5 million will receive pro rata shares of 30,000,000 New Common Stock. Unsecured claims less than $2,500 will be paid in cash. Secured claims for $3,578,950, unsecured priority claims totaling $3,349,066, postpetition administrative expenses and priority tax claims will be paid in full. Equity interest holders won't receive any distribution pursuant to the Plan. Rhodes Holdings and Rhodes Holdings II, which hold unsecured claims totaling $85,920,639, won't receive any distribution. Headquartered in Atlanta, Georgia, Rhodes, Inc., will continue to offer brand-name residential furniture to middle- and upper- middle-income customers through 63 stores located in 11 southern and midwestern states (after disposing of the locations listed above). The Company and two of its debtor-affiliates filed for chapter 11 protection on Nov. 4, 2004 (Bankr. N.D. Ga. Case No. 04-78434). Paul K. Ferdinands, Esq., and Sarah Robinson Borders, Esq., at King & Spalding represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated less than $50,000 in assets and more than $10 million in total debts. ROYSTER-CLARK: Moody's Junks $200 Million First Mortgage Notes -------------------------------------------------------------- Moody's Investors Service changed Royster-Clark, Inc.'s ("RCT" -- B3 Long-term Corporate Family Rating) outlook to developing. The outlook revision follows the company's announcement that it has proposed an initial public offering of Income Deposit Securities. RCT together with its parent Royster-Clark Group, Inc. on June 16th, 2005 announced the proposed initial public offering, in Canada, of IDSs to be issued by RCI's affiliates Royster-Clark Ltd., a newly formed Ontario company, and Royster-Clark ULC, a newly formed Nova Scotia unlimited liability corporation. The Company will hold all of the Class A Common Shares of RCG which will represent a controlling interest in RCG. Proceeds from the IDS issuance will be used to redeem all first mortgage notes due 2009. RCT announced, (on June 16th, 2005), that it is commencing a cash tender offer for any and all of its 10 1/4 % First Mortgage Notes due 2009. These summarizes the current ratings: Royster-Clark, Inc.: * Long-term Corporate Family Rating -- B3 * Senior Unsecured Issuer Rating -- Caa2 * $200 million first mortgage notes, due 2009 -- Caa1 Moody's believes that RCT will not seek a rating for the IDSs. Therefore, Moody's will withdraw all ratings upon completion of the first mortgage notes redemption. Royster-Clark, Inc., headquartered in New York, New York, is a privately owned supplier and distributor of: * Fertilizers' * crop protection products' * seed, and * services to farmers in the South, Midwest and East regions of the United States. The company reported revenues of $1.1 billion for the LTM ended March 31, 2005. SAINTS MEMORIAL: Moody's Upgrades Long-Term Rating to Ba1 from Ba2 ------------------------------------------------------------------ Moody's Investors Service upgraded Saints Memorial Medical Center's long-term rating to Ba1 from Ba2. The outlook for the rating is stable. The rating applies to $62.7 million of Series 1993A bonds issued through the Massachusetts Health & Educational Facilities Authority. Debt-Related Derivative Instruments: None. Strengths: * Healthy and improving operating performance (2.3% operating margin in FY2004) sustained through first 7 months of FY2005, driven by volume growth especially in higher acuity services (inpatient admissions up 6.8%, outpatient surgeries up 6.7% in FY2004) and growing active medical staff including several cardiologists and neurologists expected to be added this year. * Stable liquidity levels ($38.4 million in 2004) held by both the Medical Center and affiliated Foundation (Foundation is not part of the obligated group) provide solid cushion to annual operations (129 days cash on hand). Challenges: * Debt levels remain very high relative to size of operations (debt to cash flow of 7.3x in 2004) and balance sheet liquidity (cash to debt 56%), although debt service is primarily fixed rate and additional borrowing and capital plans remain limited. * Competitive market position in Lowell, Massachusetts with primary competition coming from Lowell General Hospital (rated Baa1, 10,819 admissions in 2004) located just a few miles away; significant migration to the academic medical centers of Boston for highest acuity services remains a challenge. Recent Developments/Results Saints Memorial, despite operating in a competitive market in Lowell, Massachusetts, has maintained growth in inpatient admissions and surgeries performed over the last two years, a trend continuing through seven months of FY2005. Growth has been experienced across service lines, although newborn admissions have declined modestly. Saints has generated growth through active recruitment of physicians including specialists in surgery, endoscopy, cardiology, and neurology. Most of the active specialists refer both to Saints and nearby Lowell General. Saints maintains a large outpatient service array, with more than 60% of revenues generated by outpatient activities. Volume growth, along with well managed expenses, has led to improved operating performance and cash flow available for debt service. Saints' operating margin improved from 0.7% in 2002 to 2.3% in 2004, a level of profitability exceeded in the first seven months of FY2005. Operating cash flow and investment returns have also boosted liquidity with unrestricted cash growing from $30.9 million in 2002 to $38.4 million in 2004, a 24% rise. Days cash on hand stood at 129 days at the end of FY2004. A portion of Saints cash ($12.8 million) is held at the related foundation (Saints Memorial Health System) not included in the obligated group. However, the funds are unrestricted and could be used to pay debt service or other expenses at the Board's discretion and Moody's has included these funds in our ratio calculations. The Board of the foundation and the Medical Center are identical. Saints does remain highly leveraged as demonstrated by a very high debt to cash-flow ratio of 7.3 times despite operating improvements and precludes a higher rating at this time. Total debt remains at over $68 million, including small financings for equipment through capital leases. Cash to debt was adequate at 56 percent. Saints does not have any near-term significant capital plans, but may consider additional small financings including potentially borrowing $3 to $5 million within the next year. Saints' maximum annual debt service of $7.5 million in 2006 declines to $6.3 million in 2008 reflecting a decline in debt service on the Series 1993 bonds and the short-term nature of capital leases. Outlook Moody's stable outlook reflects the rating agency's expectations for maintenance of: * improved operating performance, * stable liquidity, and * very limited additional borrowing. What Could Change the Rating - Up Sustained improvement in operating performance; reduction of debt outstanding or significant growth in liquidity What Could Change the Rating - Down * Substantial unexpected new borrowing; * operating losses over multi-year period; and * significant reduction in cash balances Key Indicators (based on FY 2004 audited results; investment returns smoothed at 6%): * Total Admissions: 6,935 * Total Operating Revenues: $115.7 million * Net Revenue Available for Debt Service: $13.5 million * Total Debt Outstanding: $68.7 * Maximum Annual Debt Service: $ 7.5 million * Maximum Annual Debt Service Coverage with actual investment income as reported: 1.66 times * Moody's Adjusted Maximum Annual Debt Service Coverage with investment income normalized at 6%: 1.81 times * Days Cash-on-Hand: 129.2 days * Cash-to-Debt: 56.0% * Debt-to-Cash Flow: 7.33 times * Operating Cash Flow Margin: 9.6% SCOTIA PACIFIC: Moody's Junks $867.248 Million Securities Rating ---------------------------------------------------------------- Moody's lowered the ratings on the three outstanding classes of Timber Collateralized Notes issued by Scotia Pacific Company LLC. The rating action reflects: * concern over continued weak cash flow from timber operations; * recent regulatory decision by the California State Water Resources Control Board; and * the announcement by the Company that it was unlikely to be able to pay in full the $27.9 million interest payment due on July 20. The regulatory and cash flow problems have been ongoing for a number of years, due to: * changes in regulations that govern timber harvesting; * changes in the regulatory bodies that oversee environmental and timber matters; and * pending court actions. The complete rating action is: Scotia Pacific Company LLC Timber Collateralized Notes, Final Maturity July 2028: * $160.700 million Class A-1 Notes Scheduled Maturity January 2007, rating lowered to Caa1, from a rating of Ba3; * $243.200 million Class A-2 Notes, Scheduled Maturity January 2014, rating lowered to Caa1, from a rating of B1; and * $463.348 million Class A3 Notes, Scheduled Maturity January 2014, rating lowered to Caa1, from a rating of B1. If there is insufficient cash to make full payment of interest on the July payment date and an event of default is declared, repayment will be made on a pari passu, pro rata basis to all investors based on their principal amount outstanding. Currently repayment is on a sequential basis, with Class A-1 principal repaid before Class A-2 principal, and Class A-2 principal repaid prior to Class A-3 principal. The proximate cause of the cash flow problems is low harvest volume recently aggravated by poor weather conditions. However, the Company's flexibility is limited due to the inability to harvest in areas already approved by regulatory bodies other than the State Water Resources Control Board. On June 17 the State Board ruled that the North Coast Regional Water Quality Control Board had approved the Company's harvesting plans without sufficient environmental review. This places the disputed plans into a further process of review and appeal of indeterminate duration. Moody's rating, while primarily addressing the expected losse posed to investors, also reflects the likelihood of default on July 20, as well as the possibility of continued timber harvests and revenue generation after default. The primary asset underlying the transaction, over 200,000 acres of timber property in northern California, is unique and provides investors with considerable protection. Unlike other structured finance assets, timber that is not harvested today remains available to be harvested and provide cash flow at a later time. In addition, Scotia Pacific and its parent, The Pacific Lumber Company, are required to manage the property on a sustained yield basis. This means that if harvesting occurs at maximum permitted levels, on average, timber growth tends to replace the harvested amount at a rate that permits harvest levels to be maintained. Scotia Pacific Company LLC is a wholly owned subsidiary of The Pacific Lumber Company. It is structured to be a bankruptcy- remote entity and its assets are segregated from those of PALCO and PALCO's parent corporations. Scotia Pacific's principal asset consists of timber property and an associated database integral to managing the property. PALCO is a 140-year old lumber and timber products company located in Scotia, CA. In addition to owning Scotia Pacific, PALCO is the primary purchaser of the timber harvested by Scotia Pacific. PALCO is a wholly owned subsidiary of Houston-based Maxxam Inc. Neither PALCO nor Maxxam are currently rated by Moody's. SOUTH DAKOTA: Case Summary & 40 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: South Dakota Acceptance Corporation dba CNAC dba Mr. Payroll dba First Midwest Fidelity 2900 West 12th Street Sioux Falls, South Dakota 57104 Bankruptcy Case No.: 05-40866 Debtor affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Dan Nelson Automotive Group, Inc. 05-40865 Type of Business: The Debtor is a moneylender. Chapter 11 Petition Date: June 20, 2005 Court: South Dakota (Southern (Sioux Falls) Debtors' Counsel: Clair R. Gerry, Esq. Stuart, Gerry, & Schlimgen, Prof. LLC P.O. Box 966 Sioux Falls, South Dakota 57101-0966 Tel: (605) 336-6400 Estimated Assets Estimated Debts ---------------- --------------- South Dakota $10 Million to $10 Million to Acceptance Corporation $50 Million $50 Million Dan Nelson Automotive $1 Million to $10 Million to Group, Inc. $10 Million $50 Million A. South Dakota Acceptance Corporation's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Meta Bank $28,015,328 P.O. Box 520 Sioux Falls, SD 57101 SV Health $4,046 P.O. Box 91110 SIOUX FALLS, SD 57109 Calfirst $3,179 18201 Von Karman Avenue, Suite 800 Irvine, CA 92612 Action Recovery $1,096 1021 S 17th Council Bluffs, IA 51501 Trans Union $831 P.O. Box 99506 Chicago, IL 60693 Delta $751 P.O. Box 1157 Pierre, SD 55439 DHL Worldwide $445 P.O. Box 4723 Houston, TX 77210-4723 Miller Recovery $410 15205 Burt Street Omaha, NE 68154 CSC Credit Service $376 652 North Sam Houston Parkway Houston, TX 77060 ALSCO of NAC $371 P.O. Drawer 4758 Odessa, TX 79760-4758 HBB & Associates $310 97 Meadowpark Avenue Stamford, CT 06905 Mid American Energy $209 P.O. Box 8020 Davenport, IA 52808-8020 ACA $165 Box 390106 Minneapolis, MN 55439 Big Red Locksmith $130 629 North 46th Street Omaha, NE 68132 American Lenders $125 P.O. Box 390293 Omaha, NE 68139 Security Locksmith $81 4410 Southeast 14th Street Des Moines, IA 50320 Sandcastle $65 13825 West National Avenue New Berlin, WI 53151 Global Information $60 P.O. Box 16682 Temple Terrace, FL 33687 Dicks Body Shop $36 2021 West Havens Mitchell, SD 57301 Credit Bureau Of SF $28 P.O. Box 535595 Pittsburg, PA 15253 B. Dan Nelson Automotive Group, Inc.'s 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Meta Bank $28,015,328 P.O. Box 520 Sioux Falls, SD 57101 Mid America Leasing $321,506 P.O. Box 5000 Sioux Falls, SD 57117-5000 First Savings Bank $253,209 2301 East 10th Street Sioux Falls, SD 57103-5076 Mudd Group $218,643 6919 Chancellor Drive Cedar Falls, IA 50613 US Bancorp $170,766 1310 Madrid Street, Suite 101 Marshall, MN 56258-4002 ADP Commercial Leasing $123,348 15 Waterview Boulevard Parsippany, NJ 07054 New Equipment Leasing $64,795 P.O. Box 97 Ada, MI 49301-0097 GE Capital $40,797 P.O. Box 740441 Atlanta, GA 30374-0441 First Midwest $39,218 1113 South Minnesota Avenue Sioux Falls, SD 57105 Pitney Bowes $38,197 2225 American Drive Neenah, WI 54956-1005 Trinity Capital $36,544 P.O. Box 515487 Los Angeles, CA 90051-6787 Snap-On $36,517 P.O. Box 98850 Chicago, IL 60693-8850 Universal Underwriters $35,341 7045 College Boulevard Overland Park, KS 66211-1523 ADP Dealer Service $26,898 P.O. Box 88921 Chicago, IL 60695-1921 Automotive Warranty $23,642 P.O. Box 70961 Chicago, IL 60673-0961 AON $23,067 P.O. Box 70961 Chicago, IL 60673-0961 Resource Life $19,757 1345 River Bend Drive Dallas, TX 75247 SV Health $16,855 P.O. Box 91110 Sioux Falls, SD 57109 Wellmark-May Interim Rate $16,674 1601 Madison Street Sioux Falls, SD 57104 Centrix $14,895 6782 South Potomac Street Centennial, CO 80112 SPIEGEL INC: Agrees to Fund $1.365M Steele & Cannataro Reserve -------------------------------------------------------------- John Steele and James Cannataro filed separate claims against Spiegel, Inc., and its debtor-affiliates relating to the Debtors' indemnification obligations. Pursuant to a previously filed request, the Debtors sought to estimate the Steele Claim and the Cannataro Claim for purposes of funding the Disputed Claims Reserve to be maintained and administered by the Creditor Trust pursuant to the Debtors' First Amended Plan. In April 2005, Mr. Steele and Mr. Cannataro informed the Debtors and the Official Committee of Unsecured Creditors of potential objections they had regarding the Plan, including objections to the third party releases. Mr. Steele and Mr. Cannataro asserted that the Plan could not be confirmed over their objections. Moreover, in May 2005, Mr. Steele and Mr. Cannataro disclosed to the Debtors and the Creditors Committee further potential objections related to the Debtors' Estimation Motion. Both Mr. Steele and Mr. Cannataro assert that they are entitled to indemnification and advancement by the Debtors pursuant to Delaware law and the Debtors' by-laws. Mr. Steele and Mr. Cannataro said that they intend to object to the Plan and to the Estimation Motion to the extent those limit their indemnification rights. The parties engaged in arm's-length negotiations to resolve Mr. Steele's and Mr. Cannataro's objections. In a Court-approved stipulation, the parties agree that: (a) On the Effective Date of the Confirmed Plan of Reorganization, the Debtors will transfer to the Creditor Trust $1.365 million each for the Steele Reserve and the Cannataro Reserve. (b) The Reserve Amounts will be separately advanced to Mr. Steele and Mr. Cannataro for post-Effective Date attorneys' fees and expenses actually and reasonably incurred by the claimants in connection with: -- any action in which Mr. Steele and Mr. Cannataro were parties because of their employment with any of the Debtors, and given that Mr. Steele and Mr. Cannataro acted in good faith; and -- the defense or settlement of any action by or in the right of any of the Debtors to procure a judgment in its favor, provided that the Debtors and the Creditor Trust will have no obligation to advance any sums to Mr. Steele and Mr. Cannataro. (c) Mr. Steele and Mr. Cannataro may seek advancement on a monthly basis, beginning no earlier than the end of the month that follows the Effective Date. Prior to the payment of any sums to Mr. Steele and Mr. Cannataro from the Steele and Cannataro Reserves, Mr. Steele and Mr. Cannataro will submit to the Creditor Trust: -- any information required by the Creditor Trust demonstrating that the Claimant has taken all reasonable actions to obtain payment under applicable insurance policies, and that all insurers have denied or disclaimed coverage or have informed the Claimant that any available proceeds up to applicable limits of liability have been exhausted; and -- an undertaking by the Claimant to promptly repay the Creditor Trust all amounts paid to him in the event that it is determined that he is not entitled to advancement. (d) To receive advancement, Mr. Steele and Mr. Cannataro will submit to the Creditor Trust a statement of legal fees and expenses reasonably procured during each applicable monthly period, containing a detailed breakdown of legal fees and expenses, together with copies of relevant invoices and backup. (e) Mr. Steele's and Mr. Cannataro's rights to advancement will terminate on the first to occur of: -- payment of the Claimant's final request for advancement following conclusion of the last of any action or proceeding described; -- disbursement of the full amount of the Steele and Cannataro Reserves; or -- five years from May 2005, provided, however, that if the Claimant's rights to advancement would otherwise terminate after five years, and if warranted by the facts and circumstances, the Claimant's rights to advancement under the Stipulation may be extended for a finite term based on the particular facts and circumstances. Upon termination of the Claimant's rights to advancement, any amounts remaining in the Reserve will vest immediately with the Creditor Trust for the benefit of all beneficiaries in accordance with the Plan, and the Debtors and the Creditor Trust will have no further obligations to Mr. Steele or Mr. Cannataro. (f) On the Effective Date, Mr. Steele and Mr. Cannataro unconditionally release the Debtors and the Creditor Trust from all claims that arose before the Effective Date. (g) Mr. Steele's and Mr. Cannataro's rights under any insurance policy to indemnification or reimbursement from the insurance proceeds will not be altered or waived by reason of the Stipulation. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and $1,706,761,176 in debts. The Court confirmed the Debtors' Modified First Amended Joint Plan of Reorganization on May 23, 2005. Impaired creditors overwhelmingly voted to accept the Plan. Spiegel emerged from bankruptcy as Eddie Bauer Holdings Inc. STATE STREET HOTEL: Voluntary Chapter 11 Case Summary ----------------------------------------------------- Lead Debtor: State Street Hotel Investors LLC 8609 West Bryn Mawr, Suite 209 Chicago, Illinois 60631 Bankruptcy Case No.: 05-24703 Debtor affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- State Street Hotel Manager LLC 05-24707 Chapter 11 Petition Date: June 22, 2005 Court: Northern District of Illinois (Chicago) Judge: Pamela S. Hollis Debtors' Counsel: David K. Welch, Esq. Crane Heyman Simon Welch & Clar 135 South Lasalle Street, Suite 3705 Chicago, Illinois 60603 Tel: (312) 641-6777 Fax: (312) 641-7114 Estimated Assets Estimated Debts ---------------- --------------- State Street Hotel $1 Million to $1 Million to Investors LLC $10 Million $10 Million State Street Hotel $100,000 to $0 to $50,000 Manager LLC $500,000 The Debtors do not have unsecured creditors who are not insiders. STELCO INC: Will Seek Extension of Stay Period to Sept. 23 ---------------------------------------------------------- Stelco Inc. (TSX:STE) reported that the Monitor's Thirty-Second Report in the matter of the Company's Court-supervised restructuring was filed on June 21, 2005. The Report provides an update on a number of matters. These include an update on the issuance of Stelco's guidance update on June 1, 2005; cash flow results for the entities that filed under CCAA, including variances from the forecast included in the Monitor's 26th Report; and the mediation process. Production and Shipping The Report noted that production of semi-finished steel has decreased during 2005 in response to a softening in steel market demand and operational issues at the Hamilton facility. Total consolidated semi-finished production for the year-to-date ended May 31, 2005, was 2,166,000 net tons, compared to 2,292,000 net tons during the same period in 2004. The Monitor noted that product shipment volumes have declined during 2005 in response to a softening of steel markets. On a consolidated basis, total shipments for the year-to-date ended May 31, 2005 were 1,967,000 net tons, compared to 2,065,000 net tons during the same period in 2004. Market Conditions The Monitor noted Stelco's indication that the softening in steel market demand and pricing has continued through 2005, especially in the construction sector and, to a lesser extent, the automotive sector. The Report also noted the volatility of raw material and energy input costs such as scrap, coke, coal, iron ore, electricity and natural gas. The Monitor added that Stelco's future financial results will be highly dependent on the direction of those input costs and the strength of North American steel markets. Cash Flow Forecasts The Monitor noted that Appendix F to the Report contains cash flow forecasts for the applicants that filed under CCAA for the period ended June 11, 2005 through to September 23, 2005. The Report noted that Stelco is forecasting that the total facility utilization of the Existing Stelco Financing Agreement will increase by $39.8 million during this period to stand at $113 million as at September 23, 2005. This marks a reversal from previous months, during which the total facility utilization had declined. This reversal is attributable in large part to a relative reduction in accounts receivable collection caused by forecast lower shipping volumes and reduced spot market selling prices (see market conditions above) as well as to continued capital expenditure disbursements related to the Phase II upgrade at the Lake Erie hot strip mill and two mini-cogeneration projects at Lake Erie and Hamilton. The Report noted that Stelco will not need to draw upon the DIP Facility during the period in question. The Asset Sale Process The Report provided an update on various initiatives under the asset sale process. The transactions for the sale of Welland Pipe's U&O mill and for the plate mill assets of Plateco have closed. Stelpipe, Stelco and Romspen are currently negotiating the terms of a definitive agreement concerning the sale of the assets of Stelpipe. The Monitor noted that Stelco currently expects to seek Court approval of that transaction in July 2005. The Report added that Stelco is continuing its review of offers it has received for other non-core subsidiaries and is currently pursuing discussions with a number of bidders with respect to their offers. The Monitor noted that the proceeds from any sale of the non-core subsidiaries will provide Stelco with additional funds to assist in the recapitalization of the integrated steel business. Stay Period Extension The Report noted that Stelco will seek an extension of the stay period, which expires at midnight on July 8, 2005, to Sept. 23, 2005. The Monitor added that the extension is necessary for Stelco to continue discussions with stakeholders, including through the mediation process, to develop and file a plan of arrangement or compromise, and to complete the claims procedure. The Monitor stated that such an extension is in the interest of all stakeholders and recommended that the request be granted. Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. In early 2004, after a thorough financial and strategic review, Stelco concluded that it faced a serious viability issue. The Corporation incurred significant operating and cash losses in 2003 and believed that it would have exhausted available sources of liquidity before the end of 2004 if it did not obtain legal protection and other benefits provided by a Court-supervised restructuring process. Accordingly, on Jan. 29, 2004, Stelco Inc. and certain related entities filed for protection under the Companies' Creditors Arrangement Act. STRUCTURED ASSET: Moody's Rates Class B4 & B5 Certs. at Low-Bs -------------------------------------------------------------- Moody's Investors Service assigned Aaa to B2 ratings to the senior and subordinate classes of the Structured Asset Securities Corporation Mortgage Pass-Though Certificates, Series 2005-RF1. The transaction consists of the securitization of FHA insured and VA guaranteed reperforming loans, virtually all of which were repurchased from GNMA pools. The credit quality of the mortgage loans underlying the securitization is comparable to that of mortgage loans underlying sub-prime securitizations. However, after the FHA and VA insurance is applied to the loans, the credit enhancement levels are comparable to the credit enhancement levels for prime-quality residential mortgage loan securitizations. The insurance covers a large percent of any losses incurred as a result of borrower defaults. The Federal Housing Administration is a federal agency within the Department of Housing and Urban Development whose mission is to expand opportunities for affordable home ownership, rental housing, and healthcare facilities. The Department of Veterans Affairs, formerly known as the Veterans Administration, is a cabinet-level agency of the federal government. The rating of this pool is based on the credit quality of the underlying loans and the insurance provided by FHA and the guarantee provided by VA. Specifically, approximately 76% of the loans have insurance provided by FHA, 18% from the VA, and 6% from the Rural Housing Service. The rating is also based on the structural and legal integrity of the transaction. The complete rating action is: Structured Asset Securities Corporation Mortgage Pass-Though Certificates, Series 2005-RF1: * Class Amount ($) Rate Rating * Class A $186,508,000 Aaa * Class AIO Notional Aaa * Class B1 $1,336,000 Aa2 * Class B2 $763,000 A2 * Class B3 $668,000 Baa2 * Class B4 $477,000 Ba2 * Class B5 $381,000 B2 * Class R $100 Aaa STRUCTURED ASSET: Moody's Rates Class B1 Sub. Certs. at Ba1 ----------------------------------------------------------- Moody's Investors Service assigned an Aaa rating to the senior certificates issued by Structured Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 2005-WF2, and ratings ranging from Aa1 to Ba1 to the subordinate certificates in the deal. The securitization is backed by Wells Fargo originated adjustable- rate (approximately 83%) and fixed-rate (approximately 17%) subprime mortgage loans acquired by Structured Asset Securities Corporation. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, mortgage insurance, overcollateralization and excess spread. The credit quality of the loan pool is stronger than the average loan pool backing recent subprime securitizations. Moody's expects collateral loss to range from 3.4% to 3.65%. Wells Fargo Bank, N. A. will service the loans. Moody's has assigned its top servicer quality rating (SQ1) to Wells Fargo as a primary servicer of subprime loans. Aurora Loan Services LLC will act as Master Servicer on the deal. The complete rating actions are: Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2005-WF2 * Class A1, rated Aaa * Class A2, rated Aaa * Class A3, rated Aaa * Class M1, rated Aa1 * Class M2, rated Aa2 * Class M3, rated Aa3 * Class M4, rated A1 * Class M5, rated A2 * Class M6, rated A3 * Class M7, rated Baa1 * Class M8, rated Baa2 * Class M9, rated Baa3 * Class B1, rated Ba1 TOWER AUTOMOTIVE: Wants to Advance Fees for ERISA Class Actions --------------------------------------------------------------- Eleven purported class action lawsuits have been filed against Tower Automotive Inc. and its debtor-affiliates' current and former officers, directors and employees since the Debtors' bankruptcy filing. The Class Action Lawsuits sought hundreds of millions of dollars in potential damages for a variety of alleged violations of the Securities and Exchange Act of 1934 and the Employee Retirement Income Security Act. The Securities Class Actions are: Plaintiff Case No. Filing Date --------- ------------- ----------- George Keritsis, et al. 1:05-cv-01926 02/04/2005 Leland Wayne, et al. 1:05-cv-01934 02/07/2005 Tim Poplin 05-cv-2188 02/16/2005 Robert C. Josepayt, et al. 05-cv-2229 02/17/2005 Nathan F. Brand, et al. 05-cv-03494 04/04/2005 The ERISA Class Actions are: Plaintiff Case No. Filing Date --------- ------------- ----------- David Kowalewski, et al. 05-cv-2215 02/17/2005 Forrest Hill, et al. 05-cv-2182 02/17/2005 James McMillion, et al. 05-cv-2762 03/10/2005 Peter Vanderhoof, et al. 05-cv-3637 04/08/2005 Victor Angove, et al. 05-cv-3641 04/08/2005 Gryzelak, et al. 05-cv-3496 04/08/2005 To prevent the Class Action Plaintiffs from unleashing a flurry of subpoenas, document demands, deposition notices and other discovery devices against the Individual Defendants and other employees and personnel essential to stabilizing the Debtors' operations, the Debtors sought to enjoin the continuation of the Class Action Lawsuits. The Debtors have filed a complaint and request to extend the automatic stay or, alternatively, for an injunction to enjoin the Securities Litigation, as well as other actions based on violations of ERISA. Federal Insurance Company, the Debtors' insurance carrier, has acknowledged coverage of the Securities Class Actions. Because the ERISA Class Actions allege ERISA violations, the Debtors promptly notified Federal and sought access to the insurance policy to cover defense costs related to the Class Action Lawsuits. Federal, however, denied coverage for the ERISA Class Actions. Subsequently, the Debtors filed a complaint against Federal seeking, among other things, declaratory relief to establish Federal's obligations to advance defense costs under Federal Policy No. 8151-5430. Federal has sought dismissal of the ERISA Coverage Litigation. By this motion, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York for authority to honor their indemnification obligations to the Individual Defendants by paying their legal fees and expenses incurred in connection with defending against the ERISA Class Action and any action that may arise from or is related to the ERISA Class Actions. In the alternative, the Debtors ask the Court to lift the stay to permit the Individual Defendants to collect on their prepetition indemnification claims against the Debtors to the extent of the Defense Costs. Matthew A. Cantor, Esq., at Kirkland & Ellis LLP, in New York, explains that the Debtors are in the critical early stages of restructuring their businesses as a prelude to developing a plan of reorganization. Thus, the Debtors require the full and undivided attention, effort and energies of the Individual Defendants to focus on developing and implementing the Debtors' restructuring and preserve, if not enhance, value for all constituents. If the Debtors are unable to advance the Defense Costs, the Individual Defendants, Mr. Cantor asserts, will be forced to defend themselves with their own resources against an avalanche of complex litigation that will consume all of their time and expend their personal assets, while also facing the risk that they will not be reimbursed for legal expenses. "The distractions of having to defend against the Class Action Lawsuits will be harmful enough since this will diminish the Individual Defendants' ability to devote all of their energies to the Debtors' chapter 11 restructuring," Mr. Cantor notes. "But if the Individual Defendants must also expend their personal resources to defend the ERISA Class Actions (while trying to preserve value for the debtors' constituents, including the plaintiffs), the Debtors undoubtedly would be materially and adversely affected." The Brand Group Responds The Brand Group takes no position with respect to the Debtors' request to advance the costs to certain current and former officers, directors and employees incurred in connection with the defense of the ERISA Class Actions. However, the Brand Group disputes the allegations set forth in the Debtors' request to the extent they purport to establish or argue in support of the Debtors' request to stay the Class Actions. The Brand Group maintains that the Debtors have not and cannot establish a basis for the extraordinary relief requested in the Stay Request. The Brand Group is comprised of Nathan F. Brand, Dorothea C. Brand, Tombstone Limited Partnership, Frederic Mohs and Pamela A. Mohs. The five members lost more than $16 million from the purchase of the Debtors' Securities. The Brand Group is the lead plaintiff in the federal securities fraud class action entitled "In Re Tower Automotive Securities Litigation," Case No. 1:05-cv-01926-RWS. * * * Judge Gropper authorizes the Debtors to advance payment for the reimbursement of certain legal fees, costs and related expenses incurred by certain of the Debtors' current and former officers, directors and employees in connection with the ERISA Class Actions or any action that may arise from, or that are related to, the ERISA Class Actions, up to $500,000. Judge Gropper will consider an increase of the Reimbursement Cap at a final hearing to be held at 11:00 a.m. on July 13, 2005. The Final Hearing Date may be extended if the Reimbursement Cap has not been reached. To the extent that the Debtors pay any Defense Costs, and any of the Individual Defendants are subsequently found to have engaged in conduct for which they are not entitled to reimbursement, the Debtors or any successor-in-interest, can, at that time, seek recovery of any Defense Costs paid on account of the Individual Defendant. If the Debtors prevail in the ERISA Coverage Litigation, the Debtors are allowed to seek reimbursement from Federal for any Defense Costs they advanced to the Individual Defendants. Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) TOWER AUTOMOTIVE: New Center Wants Stay Lifted To Effect Set-Off ---------------------------------------------------------------- Prior to the Petition Date, New Center Stamping, Inc., sold certain component parts to Tower Automotive Inc. and its debtor- affiliates for which it remains unpaid. New Center says the Debtors owe $160,976 for the purchased component parts. The Debtors also provided component parts to New Center prior to the Petition Date for which they remain unpaid. New Center says it owes the Debtors $82,316 for the component parts. Thomas J. Strobl, Esq., at Strobl Cunningham & Sharp, P.C., in Bloomfield Hills, Michigan, contends that New Center has a valid right of set-off because each of the parties' Prepetition Debts are mutual. However, New Center has not been able to exercise its right of set-off because of the automatic stay imposed in the Debtors' Chapter 11 cases. Mr. Strobl asserts that New Center is entitled to exercise its set-off rights because its interest in the Debtors' Prepetition Debt is not being adequately protected. "New Center has a security interest in the New Center Prepetition Debt to the extent of the amount of the Tower Prepetition Debt and the amounts that New Center owes to the Debtor serve as collateral for the amounts owing to New Center by the Debtor," according to Mr. Strobl. By this motion, New Center asks the U.S. Bankruptcy Court for the Southern District of New York to lift the stay to exercise its set-off right. Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORPORATION: Court Extends Plan Filing Period to Sept. 1 ------------------------------------------------------------ As reported in the Troubled Company Reporter on June 13, 2005, UAL Corporation and its debtor-affiliates asked the U.S. Bankruptcy Court for the Northern District of Illinois for another extension of the exclusive period to file and solicit acceptances for a Chapter 11 Plan of Reorganization. The Debtors want their Exclusive Plan Filing Period extended until Sept. 1, 2005, and their Exclusive Solicitation Period extended until Nov. 1, 2005. Objections (1) HSBC Bank It is "unfortunate" that the Debtors are seeking another extension of the Exclusive Periods, William W. Kannel, Esq., at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, in Boston, Massachusetts, says on behalf of HSBC Bank USA, as Indenture Trustee and Paying Agent. Given the repeated requests for extension, the Debtors are obviously not in a position to suggest the framework of a Chapter 11 plan. This request is simply another precursor for additional requests, "with no end in sight," laments Mr. Kannel. If the Court grants the request, Mr. Kannel says it should be only for 60 days. The Court should compel the Debtors to file a plan prior to September 1, 2005. Extension of the Exclusive Periods beyond that point should not be granted. (2) U.S. Bank and Bank of New York On behalf of U.S. Bank and the Bank of New York, as Indenture Trustees, Patrick J. McLaughlin, Esq., at Dorsey & Whitney, in Minneapolis, Minnesota, reminds the Court that in the last request for an extension, the Debtors needed time to resolve pension issues, labor issues and exit financing issues. The Debtors have gone a long way on these fronts, but still have not produced a Chapter 11 plan. During 30 months of bankruptcy law protection, "the Debtors have been unable to provide even a basic timetable for when they will obtain exit financing and be in a position to propose a Chapter 11 plan," complains Mr. McLaughlin. The Debtors provide assurances that a plan is forthcoming, but based on history and recent experience, there is much reason for doubt. At the rate these proceedings are going, the Debtors will not proffer a plan until 2006. A delay of this length was not expected when the numerous past extensions of the Exclusive Periods were granted. Mr. McLaughlin observes that the Debtors are silent on the status of their exit financing and revised business plan. The Debtors also fail to provide an update on the status of negotiations with other unsecured creditors. In previous requests, the Debtors argued that these important matters demanded more time for resolution. It is telling that the Debtors fail to elaborate on these issues now. Mr. McLaughlin says that the Debtors' reliance on conclusory statements does not satisfy the requirement of "cause" for an extension contained in Section 1121(d) of the Bankruptcy Code. Therefore, the Court should deny the request. (3) AFA The Association of Flight Attendants-CWA, AFL-CIO, wants the Court to deny the request. The Debtors' Exclusive Periods have lasted 914 days. The Debtors have achieved all the goals previously cited as justification for past requests for extension. This request contains few welcome assurances, Carmen R. Parcelli, Esq., at Guerrieri, Edmond, Clayman & Bartos, in Washington, D.C., says. Among the slim pickings, the Debtors assure the Court that they will ask for another extension at the August 26 omnibus hearing. At that time, the Debtors promise to provide a timetable for emergence from bankruptcy. Interested parties cannot be pleased with such lowly targets at this stage in the proceedings, Ms. Parcelli tells Judge Wedoff. The Debtors appear to believe that as long as they carry out the responsibilities of a debtor-in-possession, they are entitled to an endless stream of extensions. However, the threshold for maintaining exclusivity is much higher, Ms. Parcelli says. The Committee Sides With Debtors The Official Committee of Unsecured Creditors, represented by Carole Neville, Esq., at Sonnenschein, Nath & Rosenthal, in New York City, supports the Debtors' request for another extension of their Exclusive Periods. However, the Committee does not sanction the Debtors' implication that there are not qualified parties interested in submitting alternate plans. * * * The Court grants the Debtors' request. The Debtors' Exclusive Plan Filing Period is extended until Sept. 1, 2005, and their Exclusive Solicitation Period is extended until Nov. 1, 2005. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 90; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Triage Management Resigns from Equity Committee --------------------------------------------------------- Kelly Beaudin Stapleton, the United States Trustee for Region 3, notifies parties-in-interest in the Debtors' Chapter 11 cases that effective May 20, 2005, Triage Management L.P. has resigned from the Statutory Committee of Equity Security Holders, thus reducing the Committee members to six. The Equity Committee is currently composed of: 1. Berkshire Hathaway, Inc. Marc Hamburg, Chief Financial Officer c/o: Thomas B. Walper, Munger, Tolles & Olson LLP 355 S. Grand Ave., 35th Floor, Los Angeles, CA 90071 Phone: 213-683-9193 Fax: 213-683-5193; 2. Gebr. Knauf Attn: Robert H. Claxton, SR VP Finance 2 Knauf Dr., Shelbyville, IN 46176 Phone: 317-398-4434 Ext. 8501 Fax: 317-398-3675; 3. Fidelity Low Priced Stock Fund c/o Fidelity Management and Research Co. Attn: Nate Van Duzer, Esq., Director of Restructuring 82 Devonshire St., E31C, Boston, MA 02109 Phone: 617-392-8129 Fax: 617-476-5174; 4. Frank W. Cawood & Associates., Inc. c/o: Timothy W. Anders, Esq. 103 Clover Green, Peachtree City, GA 30269 Phone: 770-632-3129 Fax: 770-632-9438; 5. Moody Aldrich Partners LLC Attn: Michael Pierre 18 Sewall St., Marblehead, MA 01945 Phone: 781-639-2750 Fax: 781-639-2751; and 6. Andrew L. Sole, Esq. 500 Fifth Avenue, Suite 2620, New York, NY 10110 Phone: 212-302-7214 Fax: 212-302-7353. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 89; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNITED SUBCONTRACTORS: Moody's Rates Proposed $305M Facility at B1 ------------------------------------------------------------------ Moody's Investors Service assigned a B1 rating to United Subcontractors, Inc's proposed $305 million senior secured credit facilities. The ratings reflect: * the company's aggressive balance sheet management including the financing of a one time distribution; * significant leverage; * high level of goodwill; and * cyclical business. The ratings also consider the benefits and detriments of: * the company's acquisition based growth strategy; * leading market position in its key markets; * positive free cash flow; and * a mostly variable cost structure. The ratings outlook is stable. Moody's has taken these ratings actions: * $40 million senior secured revolving credit facilities, due 2011, rated B1; * $265 million senior secured term loan B, due 2012, rated B1; * Corporate Family Rating (previously called the Senior Implied rating), affirmed at B1; * Senior Unsecured Issuer upgraded to B3. Moody's has withdrawn these ratings: * $30 million senior secured revolving credit facilities, due 2010; * $155 million senior secured term loan B, due 2010; * $26 million second lien term loan, due 2011. The ratings are subject to the review of executed documents. Proceeds from the $305 million first lien credit facilities will be used to: * refinance existing debt; * pay a $20 million dividend; and * acquire Construction Services and Consultants, Inc. for or about four times April 30, 2005's LTM EBITDA. CSCI is a large shell contractor in the state of Florida. The ratings are constrained by the company's: * aggressive financial policy; * high leverage; * low tangible net worth; and * the cyclical nature of the construction industry. In the September 29, 2004 press release on USI, Moody's stated that it "considers the company to be thinly capitalized and weakly positioned in its rating category." Furthermore, although the company's recent performance has been above Moody's expectations, the company is applying $20 million of the transactions proceeds towards dividends thereby reducing the improvement to the company's balance sheet that had accrued through its recent performance. The company's revenue concentration is significant and its business is highly cyclical. With this acquisition, USI will increase its revenue concentration in Florida to over 40% of total revenues. The company's purchase of CSCI (shell contractor) increases the company's reliance on the new construction market. The company's insulation business is cyclical and would suffer if weakness in new home construction was not offset by demand from the remodeling market. The ratings are supported by the company's strong margins and healthy free cash flow. The company's EBITDA margin has been growing steadily over the past four years and for 2004 it reached 19% from the 17% level achieved in 2002. Free cash flow has also been improving, increasing to $49 million in 2004 from $39 million in 2003. Supporting USI's healthy cash flows are its low capital expenditure requirements and typically low working capital swings. USI's performance has benefited from strong growth in homebuilding and remodeling. The company is geographically diversified with 50 branches across 15 states but, as mentioned, USI has low customer concentration with no single customer accounting for more than 5% of 2004's revenues on a proforma basis. The company's relationships include eight of the ten largest homebuilders. The ratings also benefit from a highly variable cost structure. Per Moody's understanding, approximately 80% of the company's costs are variable and 20% are fixed. This provides the company with the flexibility to cut costs quickly in the event of a construction downturn. The company remains weakly positioned in the B1 rating category due to its weak balance sheet. USI's stable ratings outlook could improve if the improvement in cash flows in the coming quarters allows the company to de-leverage itself more rapidly and build its equity base. Conversely, the ratings could deteriorate: * if the housing market conditions weaken; * if the company were to lose market share; * if free cash flow to total debt was to decline below 8%; or * if the company's balance sheet were to weaken further. An upgrade in the ratings or outlook may occur if the company's free cash flow to total debt was above 12% on a sustainable basis and its debt to capital improved to less than 55%. Projected fiscal year end 2005 debt to EBITDA is expected to be around 3.0 times and, while strong for the rating category, is before adjusting for $70 million of preferred equity on its balance sheet that has certain debt like characteristics. Excluding the preferred instrument, projected EBITDA coverage of interest for 2005 is expected to be around 4.0 times. The company's debt covenants, subject to final documentation, are anticipated to include: * a total leverage ratio, * cash interest coverage ratio, and * a fixed charge coverage ratio. Moody's expects USI to be in compliance with the debt covenants throughout the coming quarters. The senior secured credit facilities will be guaranteed by: * senior holdings, * intermediate holdings, and * each existing direct and indirect subsidiary. The facilities will be secured by a first priority lien on substantially all tangible and intangible assets and stock of USI and its subsidiaries. The early retirement of the $26 million second lien facilities is the reason why Moody's has upgraded the company's issuer rating to B3 from Caa1. United Subcontractors, Inc., is headquartered in Minneapolis, Minnesota. Proforma revenues for 2004 were $315 million. VERY LTD: Has Until Sept. 30 to Decide on Madison Avenue Lease --------------------------------------------------------------- The Honorable Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York granted Very, Ltd.'s request for more time to decide whether to assume, assume and assign, or reject its unexpired nonresidential real property lease with SGL 625 Lesee LLC. The extension gives the Debtor until September 30, 2005, to make a decision on the unexpired nonresidential lease property located at 625 Madison Avenue in New York City. The Debtor currently operates the Au Bar, Le Jazz Au Bar and 58 within the leased property. The lessor, SGL 625, collects approximately $44,000 per month in rent under the lease. The Debtor says that it has made steady progress in rehabilitating its business and acting prematurely with respect to the lease could have a drastic affect on the rights and claims of its creditors. The Debtor assures Judge Lifland that the extension will not prejudice its creditors and that it is current on all postpetition rent obligations. Headquartered in New York, Very, Ltd., owns and operates a high- class, first-rate nightclub. The Debtor filed for chapter 11 protection on April 5, 2005 (Bankr. S.D.N.Y. Case No. 05-12248). When the Debtor filed for protection from its creditors, it listed $100,000 is assets and total debts of more than $1 million in debts. WALTER INDUSTRIES: Acquisition Plan Cues Moody's to Review Ratings ------------------------------------------------------------------ Moody's Investors Service placed the ratings of Walter Industries, Inc., on review for possible downgrade. The review was prompted by Walter's announcement that it has entered into a definitive agreement to acquire Mueller Water Products. The affected ratings are: * Corporate Family Rating (previously called the Senior Implied), rated Ba2; * $265 million senior secured revolving credit facility, due 2008, rated Ba2; * $175 million senior subordinated notes, due 2024, rated B1; * Issuer Rating, rated Ba3. In its review, Moody's will access the impact of the $1.9 billion purchase price, which is comprised of $860 million in cash plus the $1.05 billion in existing debt at Mueller Water Products, on Walter's overall credit quality and capital structure. Moody's noted in its March 18, 2005 press release that continued maintenance of the stable outlook was subject to an improvement in the company's homebuilding business. Hence, Moody's will also access the performance and outlook for Walter's other operations where an increase in metallurgical coal prices during 2004 allowed the company to generate significantly higher free cash flow even though its homebuilding business deteriorated. Walter Industries operates a total of five separate business segments with its U.S. Pipe operations being the largest comprising 37% of total revenues. While Walter's acquisition of Mueller will complement and strengthen Walter's market share in the pipe and related equipment segment, demand for its pipe related products will continue to be primarily driven by new construction and the replacement of aging pipe. Headquartered in Tampa, FL., Walter Industries is a diversified company that operates in five reportable segments: * Homebuilding, * Financing, * Industrial Products, * Natural Resources, and * Other. Revenue was approximately $1.5 billion in FY2004. WESTPOINT STEVENS: Aretex LLC Wants Escrow Order Dissolved ---------------------------------------------------------- As previously reported in the Troubled Company Reporter on May 17, 2005, the 2nd Lien Agent asked the U.S. Bankruptcy Court for the Southern District of New York to: (a) terminate the adequate protection escrow, direct the Escrow Agent to release the escrowed adequate protection payments forthwith to the 2nd Lien Agent, and reinstate direct payments from WestPoint Stevens, Inc. and its debtor-affiliates to the 2nd Lien Agent; or (b) establish a schedule for the submission of expert reports concerning the valuation of the 2nd Lien Lenders' collateral as of the Petition Date and set a hearing for further determination of its Motion. The Escrow Order Gary M. Becker, Esq., at Kramer Levin Naftalis & Frankel LLP, in New York, relates that adequate protection payments of $31 million were made to Wilmington Trust Company, as Agent to the 2nd Lien Credit Agreement, through July 2004. In August 2004, R2 Top Hat, as holder of 40% of the 1st Lien claims, objected to the continuation of adequate protection payments to the 2nd Lien Lenders. To avoid a distracting fight over the issue at that time, the 1st Lien Agent, 2nd Lien Agent, the Debtors and the agent under the DIP Loan agreed, in a Court-approved stipulation, to escrow future adequate protection payments due the 2nd Lien Lenders. Since the entry of the Escrow Order, $2 million per month in adequate protection payments, starting with the payment due at the end of August 2004, have been placed in an account with the escrow agent, Wells Fargo Bank, N.A. As of May 10, 2005, the amount in escrow exceeds $18 million, with another $2 million due to be deposited at the end of May. Therefore, the amount in escrow at the Purchaser Selection Hearing on June 24, 2005, is expected to be $20 million. Pursuant to the Escrow Order, amounts held in escrow may be released by the Escrow Agent upon the entry of an order from the Court adjudicating the relative rights of the DIP lender, the 1st Lien Lenders, the 2nd Lien Lenders and the Debtors to the escrowed funds. The Escrow Order also provides that none of the amounts in escrow may be released to the Debtors or any other party -- except the DIP Lenders, 1st Lien Lenders or 2nd Lien Lenders -- until the DIP, the 1st Lien Obligations and the 2nd Lien Obligations have been satisfied in full. The Escrow Order contemplates that, once a hearing date has been set for the sale of substantially all the Debtors' assets or for confirmation of a plan of reorganization, the 2nd Lien Agent may file a motion seeking a determination as to the allocation of the amounts held in escrow. Objections (1) Bank of America Bank of America, N.A., as Administrative Agent under the DIP Credit Agreement, believes that the request of Wilmington Trust Company, as Agent to the Second Lien Credit Agreement, is premature because it violates the letter and the spirit of the agreed Escrow Order. The Escrow Order, Bank of America relates, made specific provisions for the timing of the release of the Escrowed Interest Payments from the escrow. The Request seeks to disturb that scheme. Pursuant to the Escrow Order, the Escrow Payments are to remain in escrow until no earlier than the first to occur of a confirmation hearing, a sale hearing, or a hearing or a conversion hearing in the Chapter 11 cases, unless otherwise agreed by the First Lien Agent, the First Lien Lenders holding a majority of the First Lien Credit Facility, the DIP Agent, and the Second Line Agent. None of those hearings has occurred. Bank of America notes that depending on the results of the auction and confirmation hearing, it is quite possible that the Request will be moot. If the anticipated sale and plan generate proceeds sufficient to pay the DIP Loans and the First Lien Lenders' loans, the disposition of the Escrowed Interest Payments will not likely be controversial and will be governed by the terms of the Escrowed Order. Bank of America believes that to conduct a full-blown hearing on the Request at this point potentially would be a waste of judicial resources. (2) First Lien Agent Beal Bank, S.S.B., in its capacity as Successor First Lien Agent, objects to the Second Lien Lenders' request to release escrowed funds. The consummation of a sale of the assets or, failing that, a motion to convert the Debtors' cases to Chapter 7 will allow the DIP Agent, the First Lien Lenders and the Second Lien Lenders to determine: (a) whether their interests are adequately protected; and (b) the relative rights among the DIP Agent, the First Lien Lenders and the Second Lien Lenders to the Escrowed Interest Payments as provided in the Escrow Order. The First Lien Agent believes that the Request is premature, and that the Second Lien Lenders' interests are adequately protected by the continuation of the Escrow Order and the escrow agreement provided therein until the conditions for disbursement from the escrow are met in accordance with the terms of the Escrow Order. (3) Steering Committee The Steering Committee for the First Lien Lenders contend that the Second Lien Agent incorrectly asserts that the First Lien Lenders' sole remedy with respect to the escrowed amounts is to require application of the escrowed amounts to the principal amount of the Second Lien Indebtedness. The Steering Committee believes that Adequate Protection Order is inapplicable with respect to the escrowed funds. Given that the First Lien Lenders have senior rights to the escrowed funds, the issue is whether the Court should conduct a valuation hearing to determine how to distribute those funds now. In all events, there is no need to have judicial determination of value. A sale of the Debtors' business is going to occur and an auction will be held on June 21, 2005. A purchaser will be selected on June 24, 2005. That process should generate cash proceeds. Those proceeds will be distributed according to the priorities of the parties' claims. If the proceeds are insufficient to repay the First Lien Indebtedness then, under the Intercreditor Agreement, the First Lien Lenders have the right to look to the escrowed funds before the Second Lien Lenders receive any further payment. If the First Lien Lenders receive payment in full, then the Second Lien Lenders will have rights to the escrowed funds. Accordingly, the Steering Committee asks the Court to deny the Request. Aretex Wants Escrow Order Dissolved Aretex LLC supports the Second Lien Lenders' Request. Aretex asks the Court to: -- approve the Request; -- dissolve the Adequate Protection Escrow; -- directing the escrow agent to pay amounts in the Adequate Protection Escrow to the Second Lien Agent; and -- directing the Debtors to make adequate protection payments directly to the Second Lien Agent for the benefit of the Second Lien Lenders. Headquartered in West Point, Georgia, WestPoint Stevens, Inc., -- http://www.westpointstevens.com/-- is the #1 US maker of bed linens and bath towels and also makes comforters, blankets, pillows, table covers, and window trimmings. It makes the Martex, Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux brands, as well as the Martha Stewart bed and bath lines; other licensed brands include Ralph Lauren, Disney, and Joe Boxer. Department stores, mass retailers, and bed and bath stores are its main customers. (Federated, J.C. Penney, Kmart, Sears, and Target account for more than half of sales.) It also has nearly 60 outlet stores. Chairman and CEO Holcombe Green controls 8% of WestPoint Stevens. The Company filed for chapter 11 protection on June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the Debtors in their restructuring efforts. (WestPoint Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 215/945-7000) XERIUM TECH: March 31 Balance Sheet Upside-Down by $50.9 Million ---------------------------------------------------------------- Xerium Technologies, Inc. (NYSE: XRM) reported results for the first quarter of 2005, ended March 31, 2005. Net income was $8.3 million in the first quarter of 2005, compared to $8.4 million in the first quarter of 2004. The first quarter of 2005 reflects incremental public company related costs of $1.3 million and incremental restructuring costs of $4.0 million that were not incurred in the first quarter of 2004. Net sales increased $6.2 million, or 4.2%, to $153.0 million, from $146.8 million for the first quarter of 2004. Net cash provided by operating activities increased $5.0 million, or 39.1%, to $17.8 million, from $12.8 million in the first quarter of 2004. Cash on hand at March 31, 2005 was $39.8 million, a $15.8 million increase from $24.0 million at December 31, 2004. Operating income was $26.0 million, compared to $29.6 million in the first quarter of 2004. Operating income for the first quarter of 2005 reflects the same $1.3 million of costs associated with becoming a public company as well as $4.0 million of incremental restructuring costs related to cost reduction programs as compared to the first quarter of 2004. Thomas Gutierrez, Chief Executive Officer of Xerium Technologies, said, "During the first quarter this year, our company continued its strong performance despite continued marketplace challenges. Net sales increased 4.2%, and we are especially pleased with the strong operating cash flow the business generated. The results in our clothing segment, where net sales increased by 9.3% and Segment Earnings increased by 14.2% compared to the first quarter of 2004, were particularly satisfying given the investments in technology and restructuring that we have made in this segment over the last several years. We believe that we continue to gain market share in the clothing segment." He continued, "In the roll covers segment, consistent with our general expectations, net sales decreased by 4.2% and Segment Earnings fell 12.9% from first quarter 2004 levels. We believe that our global market share in the roll covers segment has remained stable as the market has contracted due to mill closures and paper machine shutdowns. These mill closures and machine shutdowns started to significantly impact our business in the second half of 2004 and this impact has been amplified by the fact that the machines that have been taken out of service utilized some of our more profitable roll cover products. We believe that planned new product introductions, starting in July of this year, and the restructuring actions that we have taken in the rolls covers segment, will drive results in the second half of the year." He added, "Cash generation is one of the principal strengths of our business and we were pleased with our working capital performance and cash flow generation in the first quarter of this year. As has been the case in the past, we expect that Xerium will continue to deliver strong cash flows to provide investment in the business, improve our capital structure and support the Company's stated initial dividend policy." Mr. Gutierrez continued, "It is clear that on a global basis, the paper industry recovery that many have expected has not yet occurred. We believe that the market for our products is still reflecting the impact of the numerous mill closures that have occurred and the significant number of paper machines that have been taken out of service over the last several years. It also appears that the early effects of the labor unrest at paper mills in Finland resulted in lower paper production operating rates and impacted sales for Xerium Technologies in that region during the first quarter of 2005. Putting aside the labor issues in Finland, we believe that the market for our products, on a global basis, has stabilized. "Looking ahead," he added, "we continue to be a technical leader in the market with a demonstrated ability to identify and deliver cost, efficiency and quality improvement programs that our customers value highly as they strive to improve their profitability. Our success in building these strong customer relationships has enabled us to improve our position even in difficult market conditions, and we expect this to continue going forward. In addition, we have continued to improve our cost structure and have several restructuring programs under way that we expect will generate significant benefits in the coming quarters." IPO Completion On May 19, 2005 the Company completed its initial public offering. Xerium Technologies was formerly an indirect, wholly owned- subsidiary of Xerium S.A., and after a reorganization undertaken prior to the offering, Xerium Technologies directly or indirectly holds all of the operating subsidiaries and related holding companies of the prior Xerium S.A. group excluding the former parent, Xerium S.A., and its two immediate holding company subsidiaries, Xerium 2 S.A. and Xerium 3 S.A. In connection with the offering, the Company effected a 31,013,482-for-1 stock split. All share and per share amounts related to common stock included in the accompanying consolidated financial statements have been restated to reflect the stock split. After Xerium Technologies' issuance of 13,399,233 shares of common stock at $12.00 per share in the offering and other related transactions, there were approximately 43.7 million shares of common stock of Xerium Technologies outstanding. Credit Facility In connection with the initial public offering, Xerium Technologies also entered into a new $750 million credit facility agreement, of which $650 million was borrowed in connection with the offering. Xerium Technologies repaid approximately $753 million of indebtedness under its previously existing debt facilities in connection with the offering. Cost Reduction Programs Xerium Technologies' cost reduction programs, including plant closures designed to rationalize production among facilities and headcount reductions, have been proceeding on schedule. These cost reduction efforts eliminated approximately $2.0 million in cash costs that would have otherwise been incurred in the first quarter of 2005 as compared to the Company's cost structure in the first quarter of 2004. Xerium Technologies, Inc. (NYSE: XRM) is a leading global manufacturer and supplier of two types of consumable products used primarily in the production of paper: clothing and roll covers. The Company, which operates around the world under a variety of brand names, utilizes a broad portfolio of patented and proprietary technologies to provide customers with tailored solutions and products integral to production, all designed to optimize performance and reduce operational costs. With 35 manufacturing facilities in 15 countries around the world, Xerium Technologies has approximately 3,900 employees. At Mar. 31, 2005, Xerium Technologies, Inc.'s balance sheet showed a $50,868,000 stockholders' deficit, compared to a $55,096,000 deficit at Dec. 31, 2004. YUKOS OIL: Losses in First 2005 Quarter Exceed Rub4 Billion ----------------------------------------------------------- The oil company YUKOS sustained a net loss of 4.864 billion rubles in the first quarter of 2005, according to Russian accounting standards. In the first quarter of 2004, the company had a profit of 2.4 billion rubles, YUKOS said in a press release on Wednesday. Its net loss in the fourth quarter of 2004 was 234.780 billion rubles. The company explained the dramatic change in its net losses by the reduction of operating and non-sales expenses. Headquartered in Houston, Texas, Yukos Oil Company is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. On Feb. 24, 2005, Judge Letitia Z. Clark dismissed the Chapter 11 case. (Yukos Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) ZIM CORPORATION: Negative Cash Flow Spurs Going Concern Doubt ------------------------------------------------------------- ZIM Corporation (OTCBB: ZIMCF) reported results for the fiscal year ended March 31, 2005. Revenue for the year ended March 31, 2005 was $10,027,045, a significant increase from $2,107,099 for the ten months ended March 31, 2004. ZIM's revenue growth this year is predominantly a result of providing messaging services to mobile content providers, including premium and bulk SMS. Net loss for the year ended March 31, 2005 was $3,964,107. The net loss for the ten months ended March 31, 2004 was $1,672,597. Included in the net loss for the year ended March 31, 2005 are non-cash amounts of $1,199,453 relating to the impairment of the technology and the customer list purchased in the EPL acquisition. Due to changes in the technology being used for ZIM's aggregator services and the development of new strategic partnerships, management does not expect future value from these assets and as a result an impairment was recorded. In addition, there has been an impairment of $530,270 in the goodwill relating to our Brazilian operations. ZIM's balance sheet remained relatively stable with cash of $737,888 at March 31, 2005 as compared to $870,520 at March 31, 2004. During the fiscal year ended March 31, 2005, ZIM raised $1,621,236 through financing activities, including private placements and share option exercises. During the ten months ended March 31, 2004, ZIM raised $2,423,332 through financing activities. Going Concern Doubt The Company has generated negative cash flows from operations during each of the last five years. For the year ended March 31, 2005, the Company used $1,762,459 of cash from operations. These factors, among others, prompted Raymond Chabot Grant Thornton LLP, to express substantial doubt about the Company's ability to continue as a going concern after it audited its financial statements for the fiscal year ended March 31, 2005. Management's plans to address these issues by continuing to raise capital through the placement of equity, obtaining advances from related parties and, if necessary, renegotiating the repayment terms of accounts payable and accrued liabilities. The Company's ability to continue as a going concern is subject to management's ability to successfully implement the above plans. Failure to implement these plans could have a material adverse effect on the Company's position and results of operations and may necessitate a reduction in operating activities. ZIM Corporation -- http://www.zim.biz/-- is a leading mobile service provider, aggregator and application developer for the global SMS channel. ZIM's products include mobile e-mail and office tools, such as ZIM SMS Chat, and its message delivery services include Bulk SMS, Premium SMS and Location Based Services. ZIM is also a provider of enterprise-class software and tools for designing, developing and manipulating database systems and applications. Through its two-way SMS expertise and mobile- enabling technologies, ZIM bridges the gap between data and mobility. * Alfred M. King & Robert E. Kleeman Join Marshall & Stevens ------------------------------------------------------------ Mark Santarsiero, president of Marshall & Stevens, reported that two recognized leaders in the valuation industry have joined Marshall & Stevens and have assumed prominent roles within the firm: Alfred M. King, CMA, and Robert E. Kleeman, Jr., CPA, ABV, ASA, CVA. Mr. King will serve as the firm's vice chairman and national technical manager, financial valuation and consulting. Mr. Kleeman is the new executive vice president, national practice leader for financial valuation and consulting. Both men bring more than 35 years of valuation experience with mergers, acquisitions, divestitures, financings and litigation to their roles at Marshall & Stevens. Mr. King will consult on the valuation of intangible assets, complex allocations-of-purchase-price, business combinations, and analyses relating to domestic and international taxes and financial reporting. He has provided litigation support specific to trademark infringement and business valuation issues, and testified in bankruptcy court. Four years ago, through the AICPA, King spearheaded the Appraisal Issues Task Force for the SEC in which he is still actively involved. A former managing director of the Institute of Management Accountants, King currently serves on its Financial Reporting Committee. King has authored numerous books and articles related to valuation. Several of his editorials have been awarded certificates of merit by the Institute for Management Accountants. His most recent book, "Valuation: What Assets Are Really Worth," was published in 2002. Robert Kleeman's primary focus at Marshall & Stevens will be the issuance of fairness and solvency opinions, complex financial valuations, and litigation support. His litigation support experience includes assignments for U.S. Department of Justice, FDIC, the IRS, and the RTC. In addition, his experience includes consulting with major law firms in numerous states. A member of the AICPA, Kleeman has served on its Business Valuation Subcommittee and chaired its Business Valuation Conference, along with serving on the ABV Credential Subcommittee. He has also served three years on the Education Board of NACVA (National Association of Certified Valuation Analysts). Kleeman has taught continuing professional education courses on valuation and expert testimony. He has served on numerous committees within the state CPA societies of Colorado and Illinois. Marshall & Stevens is one of the premier, independent, multidisciplinary valuation firms in the world. Its professionals provide fairness and solvency opinions, and the valuation of businesses and business assets, both tangible and intangible, to public and private corporations. Headquartered in Los Angeles, California, Marshall & Stevens has offices in Atlanta, Chicago, Denver, Houston, New York, Philadelphia, San Francisco, St. Louis, and Tampa. * Richard N. Tilton Joins Riker Danzig as Counsel ------------------------------------------------- Riker Danzig Scherer Hyland & Perretti LLP is pleased to welcome Richard N. Tilton as counsel in its Morristown office. Richard N. Tilton, of Wall, will practice in the firm's bankruptcy and reorganization group. He brings twenty-five years of experience in corporate restructurings, turnarounds, workouts and bankruptcy cases. Dennis O'Grady, the Chairman of Riker Danzig's bankruptcy group, said, "Rick brings tremendous experience in national reorganization cases in which he has represented creditors, lenders, indenture trustees, debtors and other parties." O'Grady added, "For private equity investors looking to do deals in the complex world of distressed investing in insolvent companies, Rick is one of the 'go to' lawyers in the country. His business and legal skills are reflected in two books he has written and edited on the subject of buying and selling companies in financial distress. His most recent book, Bankruptcy Business Acquisitions (Lex Med Publications), which he edited and co-wrote, is widely acknowledged as the definitive work on the business and legal issues that investors encounter in doing deals. We look forward to expanding our work with our financial and bank clients in the area of distressed mergers and acquisitions." Mr. Tilton is a well-known commentator on insolvency/bankruptcy issues and has appeared on television and national public radio. He is frequently interviewed and quoted on the business insolvency issues that arise in cases of national interest, and has been quoted in publications such as Reuters, Bloomberg News, USA Today, Investors Business Daily, dowjones.com, and the Los Angeles Times. He has written over fifty articles published in journals such as Business Credit, Commercial Lending Review, the New Jersey Law Journal, and the New York Law Journal. Mr. Tilton is a graduate of Cornell Law School and Wesleyan University. He is admitted to practice law in New Jersey and New York, and represents clients in bankruptcy cases throughout the United States. Riker Danzig Scherer Hyland & Perretti LLP, has earned a national reputation for expertise in commercial law, trial and appellate litigation and bankruptcy, and have highly-respected practices in insurance and reinsurance disputes, banking law, environmental law, employment law, family practice, tax and trusts and estates, corporate law, governmental affairs, public finance, public utilities, and real estate. * Seth Palatnik Leads Huron Consulting's Valuation Practice ----------------------------------------------------------- Huron Consulting Group (NASDAQ:HURN) taps Seth Palatnik, managing director, to lead the company's Valuation practice. "Seth has played a key role in Huron's growth and success. Our clients have greatly benefited from his extensive experience in valuation and corporate finance," said Gary E. Holdren, chairman and chief executive officer, Huron Consulting Group. "We look forward to his leadership in his new role as the national practice leader of Huron's Valuation practice." For more than 20 years, Mr. Palatnik has been actively involved in valuation and corporate finance matters. He has a broad depth of experience valuing companies, partnerships and intangible assets. Prior to joining Huron Consulting Group in 2003, Mr. Palatnik was a partner and national director of the Valuation Services Practice at BDO Seidman, LLP. Before BDO, Mr. Palatnik was a senior manager at KPMG Peat Marwick and spent several years in the industry as a financial analyst. Mr. Palatnik received his B.S. in Accounting and M.B.A., with a concentration in finance and marketing, from the University of Illinois. He is an accredited senior member of the American Society of Appraisers. He is also a member of the Turnaround Management Association -- TMA, American Bankruptcy Institute -- ABI, Business Valuation Association, the Chicago Business Forum, and other local and national associations. As part of his civic involvement, Mr. Palatnik is a member of the Finance Committee of the Greater Chicago Food Depository. About Huron Consulting Group Huron Consulting Group -- http://www.huronconsultinggroup.com/-- helps clients effectively address complex challenges that arise from litigation, disputes, investigations, regulation, financial distress, and other sources of significant conflict or change. The company also helps clients improve the overall efficiency and effectiveness of their operations, reduce costs, manage regulatory compliance, and maximize procurement efficiency. Huron provides services to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium- sized businesses, leading academic institutions, healthcare organizations, and the law firms that represent these various organizations. * The Garden City Group Promotes Jennifer M. Keough to Senior VP ---------------------------------------------------------------- David A. Isaac, president of The Garden City Group, Inc., reported the promotion of Jennifer M. Keough to senior vice president and managing director of the company's west coast operations. Ms. Keough previously held the title of vice president and managing director, west coast operations. "Since joining the firm two years ago, Jennifer has made significant contributions to the extraordinary success of our west coast operations," said Mr. Isaac. "She brings to our organization an extensive background in managing class action administration that will continue to serve our clients well." As a former GCG client and class action business analyst, Keough has an insider's experience of the class action processes. She was responsible for managing the settlement implementation and administration process for large class action settlements at the Perkins Coie law firm and prior to that, she gained her legal expertise while working for a highly regarded civil litigation firm in Seattle. "Our west coast operations complement our regional offices throughout the country, and enable us to provide high quality, cost-effective service to clients and claimants coast-to-coast," said Keough. "Since I joined GCG, we have successfully expanded our west coast operations team -- a team comprised of people who stand behind their work, keep their word, and meet their deadlines. These are the same qualities that impressed me when I was a GCG client," added Ms. Keough. "I am proud to be part of the GCG team." Ms. Keough did her undergraduate and business graduate work at Seattle University Albers School of Business, where she graduated cum laude with a B.A. in Business Management and a Masters in Finance and Valuation. She received her J.D. from Seattle University, where she authored the article "Navigating the Ethical Challenges of Representing Older Clients." The Garden City Group, Inc., -- http://www.gardencitygroup.com/-- is a subsidiary of Crawford & Company. It administers class action settlements, designs legal notice programs, manages Chapter 11 administrations, and provides expert consultation services. Based in Atlanta, Georgia, Crawford & Company -- http://www.crawfordandcompany.com/-- is the world's largest independent provider of claims management solutions to insurance companies and self-insured entities, with a global network of more than 700 offices in 63 countries. Major service lines include workers' compensation claims administration and healthcare management services, property and casualty claims management, and risk management information services. The Company's shares are traded on the NYSE under the symbols CRDA and CRDB. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M. Pinili, and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***