/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050718.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, July 18, 2005, Vol. 9, No. 168 Headlines ACURA PHARMACEUTICALS: Equity Deficit Widens to $3.6MM at June 30 AMERUS GROUP: S&P Assigns BB+ Stock Rating on $1.5 Billion Shelf ARIAS ACQUISITIONS: Moody's Rates Planned $200MM Debt at (P)B2 BAY HARBOUR: Case Summary & 20 Largest Unsecured Creditors BRIDGEWATER SPORTS: Court Formally Closes Chapter 11 Case BUITRON ENTERPRISES: Case Summary & 18 Largest Unsecured Creditors CALPINE CORP: Accepts $139 Mil. of Sr. Sec. Notes in Tender Offer CALPINE CORP: Redeems $517.5M HIGH TIDES III Preferred Securities CALPINE CORP: Sells 50% of Grays Ferry to Thermal for $37.4MM CATHOLIC CHURCH: Court Approves Portland's Nation Union Settlement CATHOLIC CHURCH: Court Sets Aug. 23 to Hear Tucson's Abuse Claims CATHOLIC CHURCH: Tucson Wants Settlement with Insurers Approved CELLSTAR CORP: Stanford Won't Pursue $25M Convertible Debt Deal DELTA AIR: 12,000 Employees Petition Congress on Pension Reform DELTA AIR: Highbridge & Satellite Asset Selling $97.85M Sr. Notes DELTA AIR: Raises Fare Cap by $100 & Other Airlines Follow Suit DIGITAL VIDEO: Nasdaq SmallCap Halts Common Stock Trading ENRON CORP: Settles Civil Disputes in Western Energy Market EPCO HOLDINGS: S&P Rates $1.9 Billion Loans at B+ FARMLAND IND: Court Okays Auction of FC Stone Common Shares FEDERAL-MOGUL: Wants to Hire Hanly & Conroy as Asbestos Counsel FELTS FINE: Case Summary & 20 Largest Unsecured Creditors GE COMMERCIAL: Moody's Affirms $2.96MM Class O Cert.'s B3 Rating GENOA HEALTHCARE: Moody's Junks Proposed $50MM 2nd Lien Term Loan GEOLOGISTICS: Questor Partners Sells Company to PWC Logistics GRANT PRIDECO: Moody's Rates $175 Million Sr. Unsec. Notes at Ba2 GRANT PRIDECO: Prices $200 Million of 6-1/8% Senior Notes GT BRANDS: Wants Interim Access to DIP Loan & Cash Collateral HCA INC: Inks Pact to Sell Five Hospitals to LifePoint HERITAGE VILLAGE: Voluntary Chapter 11 Case Summary INTEGRATED PERFORMANCE: Pays $500K to Resolve Legacy Bank Dispute JO-ANN STORES: Good Performance Prompts S&P to Lift Ratings KB TOYS: Bankruptcy Court Approves Disclosure Statement KB TOYS: PKBT Funding Wins Bid to Finance Reorganization Plan KMART CORP: Lennar Wants to Withdraw Reference of Milton Issues KMART CORP: Michal Sanford Asks Court for Leave to File Claim LEROY WICKLUND: Voluntary Chapter 11 Case Summary LIFEPOINT HOSPITALS: Buying Five Hospitals from HCA for $285 Mil. LOCATEPLUS HOLDINGS: Completes $8 Million Financing LONG BEACH: S&P Pares Ratings on Two Certificate Classes to B MADISON RIVER: Moody's Rates Proposed $525MM Facilities at B1 MADISON RIVER: S&P Rates $525 Million Loans at B+ MERCADO EL: Voluntary Chapter 11 Case Summary MIRANT CORP: Asks Court to Disallow Avon Park's $1.25M Claim MIRANT CORP: Bankr. Court Approves Mirant Canal's Consent Order MOREHEAD MEMORIAL: Moody's Withdraws Ba1 Rating on $7 Mil. Bonds NAPIER ENVIRONMENTAL: Inks New $5 Million Loan Agreements NCD INC: Wants to Hire Jennings Strouss as Bankruptcy Counsel NEWCARE HEALTH: Court Denies Ch. 7 Trustee's Settlement Agreement NORTHWEST AIRLINES: Says Labor Cuts & Pension Reforms Necessary NORTHWESTERN CORP: Shareholders Re-Elect Six Directors to Board NUTRAQUEST: Pays $1 Million to New Jersey to Settle Ad Suit O'SULLIVAN IND: Uses 30-Day Grace Period to Evaluate Alternatives OR-CAN LLC: Voluntary Chapter 11 Case Summary PARMALAT GROUP: Citigroup, BofA, et al., Dismissed from Suit PJC FOODS: Case Summary & 20 Largest Unsecured Creditors POLARIS NETWORKS: Hires Levene Neale as Bankruptcy Counsel PONDERLODGE INC: Wants to Hire Obermayer Rebmann as Bankr. Counsel PRICELINE.COM: Acquires Bookings B.V. for $133 Million PRICELINE.COM: Updates 2005 Guidance Following Asset Purchase RUSSELL CORP: Downward Earnings Revision Cues S&P's Negative Watch S-TRAN HOLDINGS: Wants More Time to Decide on Leases SAINT VINCENTS: Asks Court to Grant Priority To Outstanding Goods SAINT VINCENTS: Wants to Maintain Workers' Compensation Programs SALTON INC: S&P Withdraws D Ratings After Interest Payment STELCO INC: Files CCAA Plan of Arrangement Outline in Ontario STELCO INC: Might Not Get Shareholder Consensus on Plan Today TRIM TRENDS: Can Continue Hiring Ordinary Course Professionals TRIM TRENDS: Gets Final Court Order on Post-Petition Financing TRUMP HOTELS: 19 Former Shareowners Want to Enforce Record Date TRUMP HOTELS: Agrees With Thermal to Expunge $2,784,852 Claim TRUMP HOTELS: Objects to 30 Bondholders' Proofs of Claim UNITED RENTALS: Expects Self-Insurance Reserve Restatement UNITED RENTALS: Gives CFO 30 Days to Cooperate or Be Fired UNITED RENTAL: Moody's Junks Quarterly Income Preferred Securities UNITED RENTALS: CFO's Likely Termination Cues S&P to Retain Watch US AIRWAYS: Asks Court to Fix Solicitation & Voting Procedures US AIRWAYS: Executive Vice President Bruce Ashby Resigns VARTEC TELECOM: Asks Court to Extend Exclusive Periods VARTEC TELECOM: Modifies Kane Russell's Retention Terms WILLIAM CARTER: Parent Completes $312MM OshKosh B'Gosh Acquisition WILLIAM CARTER: Pays $132.9 Million in Cash Tender Offer WINN-DIXIE: Committee Wants Until Aug. 25 to Challenge DIP Liens WINN-DIXIE: Landlord Argues Lease Buyout Pact Can't Be Rejected WORLDCOM INC: Court Denies Move to Expunge Litigants' $690M Claims WORLDCOM INC: Wants Summary Judgment on 121 Opt-Out Claims YUKOS OIL: Moscow Court Suspends Yugansk's Compensation Lawsuit YUKOS OIL: Oil Production Drops to 13 Million Tons * LeBoeuf Lamb Adds Timothy Moran & Vanessa Wilson in Washington * BOND PRICING: For the week of July 11 - July 15, 2005 ********* ACURA PHARMACEUTICALS: Equity Deficit Widens to $3.6MM at June 30 ----------------------------------------------------------------- Acura Pharmaceuticals, Inc. (OTCBB:ACUR) reported a net loss of $1.4 million for the quarter ended June 30, 2005, compared to a net loss of $17.1 million for the same period in 2004. Included in the quarter ended June 30, 2004, is a non-cash charge of $13.8 million for amortization of debt discount and private debt offering costs. For the six months ended June 30, 2005, the Company's net loss was $3.3 million or $0.15 per share compared to a net loss of $16.4 million or $0.76 per share for the same period in 2004. During the six months ended June 30, 2004, the Company recorded gains of $12.4 million from debt restructuring and $1.8 million from the divestment of certain non-revenue generating assets. Expenses for the six month period ended June 30, 2004 included, among other things, a non-cash charge for amortization of debt discount and private debt offering costs of $24.7 million or $1.14 per share. Commercial Strategy and Cash Reserves Update The Company plans to enter into development and commercialization agreements with strategically focused pharmaceutical company partners providing that such Partners license the Company's Aversion(TM) Technology and further develop, register and commercialize multiple formulations and strengths of orally administered opioid containing finished dosage products utilizing the Aversion(TM) Technology. The Company believes it will derive revenues through licensing fees, milestone payments, profit sharing and/or royalties on net sales of such products. To date the Company does not have any such collaborative agreements. The Company can make no assurance that it will be able to negotiate such agreements on favorable terms and, even assuming that such agreements are successfully executed, that the milestones will be achieved and the milestone payments will be subsequently made by our Partners. Accordingly, the Company must rely on its current cash reserves to fund the development of its Aversion(TM) Technology and related ongoing administrative and operating expenses. The Company estimates that its current cash reserves will be sufficient through late August 2005 and that additional funding will be required. No assurance can be given that the Company will be successful in obtaining any such additional funding or in securing licensing agreement fees with Partners on acceptable terms, if at all, or if secured, that such financing or licensing agreement fees will provide for payments to the Company sufficient to fund continuing operations. Bankruptcy Warning Acura Pharmaceuticals, Inc., warns that in the absence of financing or fees from third-party licensing agreements, it will be required to scale back or terminate operations, seek protection under applicable bankruptcy laws, or both. Acura Pharmaceuticals, Inc., together with its subsidiaries, is an emerging pharmaceutical technology development company specializing in proprietary opioid abuse deterrent formulation technology. At June 30, 2005, Acura Pharmaceutical's balance sheet showed a $3,569,000 stockholders' deficit, compared to a $1,085,000 deficit at Dec. 31, 2004. AMERUS GROUP: S&P Assigns BB+ Stock Rating on $1.5 Billion Shelf ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary 'BBB+' senior unsecured debt, 'BBB' subordinated debt, 'BBB-' preferred stock, and 'BB+' perpetual preferred stock ratings to AmerUs Group Co.'s (NYSE:AMH) $1.5 billion shelf registered securities. The ratings on this shelf are based on the ratings on AMH. "The AMH ratings reflect its insurance subsidiaries' very strong competitive position in the equity-indexed life and equity-indexed annuity markets, improving cash flows and earnings capacity, very strong liquidity, and moderate debt leverage," said Standard & Poor's credit analyst Jose Siberon. "Offsetting these positive factors are significant amounts of hybrid debt in its capital structure and high double leverage for the rating." Proceeds from the sales of these registered securities is expected to be used for general corporate purposes. AMH is the holding company for AmerUs Life Insurance Co., American Investors Life Insurance Co. (KS), Indianapolis Life Insurance Co., Bankers Life Insurance Co. of NY, and Financial Benefit Life Insurance Co. ARIAS ACQUISITIONS: Moody's Rates Planned $200MM Debt at (P)B2 -------------------------------------------------------------- Moody's Investors Service has assigned a B2 corporate family rating to Arias Acquisitions Inc., the holding company for HBW Services, LLC. In addition, Moody's assigned a prospective B2 rating to Arias' planned $200 million senior secured bank credit facility, and a prospective Caa1 rating to Arias' planned $50 million senior subordinated notes. The credit facility is expected to consist of a $175 million term loan and a $25 million revolving credit facility. The proceeds from the proposed financing are expected to be used to: * pay a substantial dividend to the company's private equity owners; * pay a bonus to management; and * refinance existing indebtedness. The outlook for the company's ratings is stable. The ratings assigned by Moody's reflect: * HBW Services' leading market position; * its unique strengths; * experience; and * expertise in its niche market of home warranty coverage. In addition, the relatively low level of penetration within the home warranty coverage market creates opportunities for growth. These strengths, however, are offset by an aggressive financial leverage profile (pro forma debt-to-EBITDA of 4.3), as well as the transition uncertainties associated with the intended separation of HBW Services (the group's sales and services operations) from the insurance companies that retain the primary insurance risk for HBW Services' new home warranty product. In spite of a separation of the legal entities that own the insurance companies from those that own the services companies, Moody's believes that HBW Services will remain dependent, at least in part, on the acceptance of underwriting risk by related insurance entitles whose historic financial results appear to have been highly volatile and somewhat unprofitable (though Moody's notes that HBW has historically been able to obtain reinsurance coverage from third parties). The rating agency further believes that HBW Services faces limitations in its ability to find other primary third party insurers willing to underwrite its new home warranty product under terms and rates similar to those of its related insurers (i.e. at loss ratios well above 100% at the primary level). Moody's is also concerned about HBW Services' dependence on the housing market which is potentially near a cyclical peak and which could face a decline over the medium term. A decline in either market prices or real-estate transaction volume could pressure HBW Services' margins, leading to the possible triggering of debt covenants or an inability to meet fixed obligations. Also factored into Moody's analysis is the limited disclosure regarding the historic performance of HBW Services and its various related insurance operations given private ownership of the company. The outlook for the ratings is stable and reflects Moody's expectations that HBW Service's financial profile will continue to be strained over the medium term. The company's ratings, however, could be positively impacted if financial leverage were to moderate (e.g. debt-to-EBITDA below 3.5x on a sustained basis) while revenue and earnings continued to exhibit healthy organic growth (e.g. greater than 8% annually). Ratings could be negatively impacted if the company was not able to maintain a healthy level of growth or if it were to trigger its financial covenants, which currently allow little room for a slowdown in earnings. Arias Acquisitions Inc. is the holding company for HBW Services LLC, an Aurora, Colorado-based provider of home warranty products. Arias Acquisitions is in turn majority-owned by private equity firm Brera Capital Partners, LLC. HBW Services reported $156 million in total revenue and $130 million in owners' equity for the year ended December 31, 2004. BAY HARBOUR: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Bay Harbour Electric, Inc. 1606 Harper Drive Erie, Pennsylvania 16505 Bankruptcy Case No.: 05-12309 Type of Business: The Debtor is an electrical contractor. See http://www.bheinc.com/ Chapter 11 Petition Date: July 14, 2005 Court: Western District of Pennsylvania (Erie) Debtor's Counsel: Robert S. Bernstein, Esq. Bernstein Law Firm, P.C. 2200 Gulf Tower Pittsburgh, Pennsylvania 15219 Tel: (412) 456-8101 Fax: (412) 456-8251 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Atlantic Mutual Complaint in $1,800,000 Insurance Co. District Court of c/o Thomas M. Moore, Esq. New Jersey McElroy Deutsch Mulvaney & Carpenter P.O. Box 2075 Morristown, NJ 07962-2075 Hunton & Williams $258,800 Attn: David Beall Riverfront Plaza 2, East Tower 951 East Bryd Street Richmond, VA 23219 Scott Electric - Erie $244,879 1840 East 10th Street Erie, PA 16511 Benefit Administrators, Inc. $193,376 Cohen Seglias Pallas $184,346 Greenhall & Furman American Express - NJ $131,217 Hite Co. - Beaver $88,353 Weber Electric Supply $68,801 Citibank - Nevada $48,466 Cardello Electric - WV $36,195 Capital Lighting, Inc. $33,920 Hite Co. - Cleveland $28,765 CED - Leader Electric, Inc. $26,732 Hill Phoenix, Inc. $23,685 Zimmer Concrete & Excavating $21,354 MBNA America $20,817 Citi Cards $18,505 PA Dept. of Revenue Sales tax $18,025 Chase Platinum Visa $18,005 Calvert Wire & Cable $17,587 BRIDGEWATER SPORTS: Court Formally Closes Chapter 11 Case --------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey entered a final decree closing Bridgewater Sports Arena, L.P.'s chapter 11 case. As previously reported in the Troubled Company Reporter on March 21, 2005, the Debtor asked the Court to close its chapter 11 case after disbursing the $8.1 million of cash generated from the sale of its assets to DJD Amusements LLC pursuant to the confirmed modified Second Amended Plan of Reorganization. Headquartered in Bridgewater, New Jersey, Bridgewater Sports Arena, L.P., is a recreational facility in Central New Jersey. The Company filed for chapter 11 protection on August 5, 2003 (Bankr. N.J. Case No. 03-35809). Brian L. Baker, Esq., and Morris S. Bauer, Esq., at Ravin Greenberg, PC, represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $50 million each. The Company's Second Amended Plan of Reorganization was confirmed in November 23, 2005. BUITRON ENTERPRISES: Case Summary & 18 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Buitron Enterprises, Inc. dba Lopez Supermarket 1221 North 7th Street Harlingen, Texas 78550 Bankruptcy Case No.: 05-10915 Type of Business: The Debtor owns and operates a grocery store located in Harlingen, Texas. Chapter 11 Petition Date: July 15, 2005 Court: Southern District of Texas (Brownsville) Judge: Richard S. Schmidt Debtor's Counsel: Richard S. Hoffman, Esq. Andarza & Hoffman, P.C. 500 West 16th Street, Suite 103 Austin, Texas 78701 Tel: (956) 544-2345 Fax: (512) 322-9802 Total Assets: $1,045,000 Total Debts: $1,271,839 Debtor's 18 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Grocers Supply Supplies $487,000 P.O. Box 14200 Value of security: Houston, TX 77007 $400,000 Internal Revenue Service 941 taxes $174,000 300 East 8th Street STOP5026AUS Austin, TX 78701 City of Harlingen Property taxes $26,973 CISD P.O. Box 2643 Harlingen, TX 78551-2643 First Choice Meats Supplies $25,000 E De La Garza Loan $20,400 Nicko Produce Supplies $20,125 Freedom Dist. Supplies $14,297 Action Meat Dist. Supplies $13,814 Morfort Meat Co. Supplies $11,716 Big Red, Seven Up Supplies $10,131 Texas Comptroller of Credit Card $7,500 Public AC US Bank Loan $6,810 Andarza & Hoffman, P.C. Attorney Fees $5,839 Hino Electric Utilities $4,500 Pepsi Cola Supplies $4,000 Carts & Parts Supplies $3,412 C.I.T. Fin Services Professional $3,224 One Source Magazine Advertisement $3,007 CALPINE CORP: Accepts $139 Mil. of Sr. Sec. Notes in Tender Offer ----------------------------------------------------------------- Calpine Corporation (NYSE: CPN) has accepted for payment $138,895,000 aggregate principal amount of its outstanding 9-5/8% First Priority Senior Secured Notes due 2014 under the terms of the tender offer commenced June 9, 2005, to purchase for cash any and all of the outstanding Notes. Payment for the Notes accepted for purchase and return of all other Notes tendered and not accepted for purchase will be carried out promptly by the tender agent. With completion of the tender offer, the Company now has approximately $646,105,000 aggregate principal amount of Notes outstanding. The Company recently completed the disposition of its remaining U.S. gas assets. The consummation of the Gas Divestiture qualifies as an "Asset Sale" under the Indenture, dated as of September 30, 2004, between the Company and Wilmington Trust Company, as Trustee, pursuant to which the Notes were issued. Accordingly, the Offer was made in compliance with the Indenture's requirements applicable to repurchases and repayment of the Notes using the proceeds of "Asset Sales" such as the Gas Divestiture. For questions and information about the tender offer, contact the information agent: MacKenzie Partners, Inc. Telephone 877-278-6310 Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states, three Canadian provinces and the United Kingdom. Its customized products and services include wholesale and retail electricity, natural gas, gas turbine components and services, energy management, and a wide range of power plant engineering, construction and operations services. Calpine was founded in 1984. It is included in the S&P 500 Index and is publicly traded on the New York Stock Exchange under the symbol CPN. * * * As reported in the Troubled Company Reporter on June 23, 2005, Standard & Poor's Ratings Services assigned its 'CCC' rating to Calpine Corp.'s (B-/Negative/--) planned $650 million contingent convertible notes due 2015. The proceeds from that convertible debt 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. S&P said its rating outlook is negative on Calpine's $18 billion of total debt outstanding. As reported in the Troubled Company Reporter on May 16, 2005, Moody's Investors Service downgraded the debt ratings of Calpine Corporation (Calpine: Senior Implied to B3 from B2) and its subsidiaries, including Calpine Generating Company (CalGen: first priority credit facilities to B2 from B1). CALPINE CORP: Redeems $517.5M HIGH TIDES III Preferred Securities ----------------------------------------------------------------- Calpine Corporation (NYSE: CPN) completed the redemption of its outstanding 5% HIGH TIDES III preferred securities, totaling $517.5 million, of which $115.0 million was held by Calpine Corporation. The redemption price paid per each $50 principal amount of HIGH TIDES III security was $50 plus accrued and unpaid distributions to the redemption date in the amount of $0.50. All rights of holders of the HIGH TIDES III have ceased, except the right of such holders to receive the redemption price, which has been deposited with The Depository Trust Company, and such HIGH TIDES III preferred securities have ceased to be outstanding. Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states, three Canadian provinces and the United Kingdom. Its customized products and services include wholesale and retail electricity, natural gas, gas turbine components and services, energy management, and a wide range of power plant engineering, construction and operations services. Calpine was founded in 1984. It is included in the S&P 500 Index and is publicly traded on the New York Stock Exchange under the symbol CPN. * * * As reported in the Troubled Company Reporter on June 23, 2005, Standard & Poor's Ratings Services assigned its 'CCC' rating to Calpine Corp.'s (B-/Negative/--) planned $650 million contingent convertible notes due 2015. The proceeds from that convertible debt 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. S&P said its rating outlook is negative on Calpine's $18 billion of total debt outstanding. As reported in the Troubled Company Reporter on May 16, 2005, Moody's Investors Service downgraded the debt ratings of Calpine Corporation (Calpine: Senior Implied to B3 from B2) and its subsidiaries, including Calpine Generating Company (CalGen: first priority credit facilities to B2 from B1). * * * As reported in the Troubled Company Reporter on June 22, 2005, Standard & Poor's Ratings Services placed its long-term ratings for Bethpage, N.Y.-based cable TV operator Cablevision Systems Corp. on CreditWatch with negative implications, including the 'BB' corporate credit rating. Standard & Poor's also placed its ratings on Cablevision's Rainbow Media Enterprises Inc. unit on CreditWatch, with negative implications, including the 'BB' corporate credit rating. However, our "1" recovery rating of the bank loan at unit Rainbow National Services LLC is not on Watch. CALPINE CORP: Sells 50% of Grays Ferry to Thermal for $37.4MM ------------------------------------------------------------- Calpine Corporation (NYSE: CPN) completed the sale of its 50- percent interest in the 175-megawatt Grays Ferry Cogeneration Facility to an affiliate of Thermal North America, Inc., for $37.4 million. Calpine announced plans for the sale of Grays Ferry and three additional non-strategic power plants in June as part of the company's program to reduce debt, increase cash flow and optimize its power plant portfolio. Calpine expects to use net proceeds from the sale for corporate purposes, including the repurchase of existing Calpine debt. "This transaction represents another non-strategic asset sale and advances our initiative to de-lever Calpine's balance sheet, strengthen cash flow and enhance the long-term value of our power plant portfolio," stated Calpine Chief Financial Officer Bob Kelly. "At $425 per kilowatt, we believe this asset sale represents a very good value for Calpine's 50% interest in Gray's Ferry. And, while this is non-strategic asset for Calpine, it provides TNAI with an opportunity to own a 100% interest in the plant." The asset sale also eliminates Calpine's 50% share of the cogeneration facility's debt, representing a reduction of approximately $21.6 million of Calpine's unconsolidated, non- recourse project debt as of March 31, 2005. The company expects to record a loss on the sale of Grays Ferry totaling approximately $20 million in the quarter ended June 30, 2005. Grays Ferry entered operations in 1996 and delivers electricity to PECO Energy Company under a long-term contract that expires in 2017. As a cogeneration plant, it is contracted to supply steam for Trigen-Philadelphia through 2022. Calpine acquired its 50% interest in Grays Ferry in 1999. Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states, three Canadian provinces and the United Kingdom. Its customized products and services include wholesale and retail electricity, natural gas, gas turbine components and services, energy management, and a wide range of power plant engineering, construction and operations services. Calpine was founded in 1984. It is included in the S&P 500 Index and is publicly traded on the New York Stock Exchange under the symbol CPN. * * * As reported in the Troubled Company Reporter on June 23, 2005, Standard & Poor's Ratings Services assigned its 'CCC' rating to Calpine Corp.'s (B-/Negative/--) planned $650 million contingent convertible notes due 2015. The proceeds from that convertible debt 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. S&P said its rating outlook is negative on Calpine's $18 billion of total debt outstanding. As reported in the Troubled Company Reporter on May 16, 2005, Moody's Investors Service downgraded the debt ratings of Calpine Corporation (Calpine: Senior Implied to B3 from B2) and its subsidiaries, including Calpine Generating Company (CalGen: first priority credit facilities to B2 from B1). CATHOLIC CHURCH: Court Approves Portland's Nation Union Settlement ------------------------------------------------------------------ As previously reported, the Archdiocese of Portland asked the U.S. Bankruptcy Court for the District of Oregon to approve a settlement and release agreement with National Union Fire Insurance Company of Pittsburgh. Under the proposed settlement, National Union will be paying the Archdiocese $250,000, which is the maximum amount the Archdiocese believes is currently due under the National Union policy. On September 14, 2004, the Archdiocese of Portland in Oregon filed an adversary proceeding with the U.S. Bankruptcy Court for the District of Oregon against various insurance companies, particularly: 1. ACE USA, Inc., 2. Centennial Insurance Company, 3. Fireman's Fund Insurance Company, 4. General Insurance Company of America, 5. Interstate Fire & Casualty Company, 6. Interstate Insurance Group, 7. National Union Fire Insurance Company of Pittsburgh, 8. One Beacon America Insurance Company, 9. St. Paul Fire and Marine Insurance, and 10. Certain John Doe Insurance Companies Portland demanded insurance coverage for tort claims asserted against the Archdiocese. National Union issues a claims-made excess policy to Portland that covered abuse claims asserted against the Archdiocese up to the expiration date of August 31, 2000. The policy was excess of a similar claims-made policy issued by Lexington Insurance Company, with a self-insured retention of $150,000. The Lexington policy limits were exhausted by payments made to settle claims in 2000. Therefore, National Union dropped down to take the place of Lexington. A Tort Claimant asserted a claim during National Union's policy period in 2000. The Tort Claimant settled his case against the Archdiocese for $400,000. Therefore, Portland asserts that National Union would be responsible for $250,000 above the $150,000 self-insured retention. * * * At the debtor's behest, the Court approves the motion. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Court Sets Aug. 23 to Hear Tucson's Abuse Claims ----------------------------------------------------------------- The confirmation of the Roman Catholic Archdiocese of Tucson Arizona's Plan of Reorganization last week does not spell the end of the Diocese's woes. Some victims will still be heard in the sex abuse settlement hearing on August 23, 2005, at 10:00 a.m. Susan Boswell, Esq., at Quarles & Brady Streich Lang LLP, the Diocese's counsel, said that six cases of alleged sexual abuse by Diocesan clergy are headed for trial in the U.S. District Court. Details of the sex abuse claims are sealed by the Court to protect the privacy of the claimants. Retired Pima County Superior Court Judge Lena Rodriguez has been called to serve as special master to review sex abuse cases that were rejected by the Tort Claims Committee. Two classes of claimants will be allowed to come forward for an undetermined period: those who are minors and those who are adults with repressed memory. Under the confirmed Plan, the Diocese expects to pay $22.2 million to settle the sex abuse claims committed by priests and church workers. Eight alleged child molester priests are expected to be named. 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. The Honorable James Marlar approved the Diocese of Tucson's Third Amended Plan on July 11, 2005. CATHOLIC CHURCH: Tucson Wants Settlement with Insurers Approved --------------------------------------------------------------- Before the Petition Date, Pacific Employers Insurance Co., Century Indemnity Insurance, and Motor Vehicle Casualty Company issued to, or for the benefit of the Diocese of Tucson and certain other parties, six insurance policies: Insurance Policy No. Policy Period --------- --------- ------------- Century Indemnity Insurance CP-04-96-78 06/17/77 - 06/01/78 Pacific Employers Insurance Co. CP-DO-03-33-71-2 06/01/78 - 06/01/80 Pacific Employers Insurance Co. DO-28-03-82-3 06/01/81 - 07/01/83 Pacific Employers Insurance Co. INP-DO-80-41-143 07/01/83 - 07/01/84 Motor Vehicle Casualty Company MU-103969 07/01/82 - 07/01/83 Susan G. Boswell, Esq., at Quarles & Brady Streich Lang LLP, in Tucson, Arizona, relates that numerous individuals have asserted claims against the Diocese for injuries allegedly suffered due to sexual abuse by priests hired, supervised, or maintained by the Diocese. According to Ms. Boswell, certain disputes between the Diocese and the insurers have arisen and would be likely to arise in the future concerning the insurers' position regarding the nature and scope of their responsibilities, if any, to provide coverage to the Diocese and other parties under the Policies for the Tort Claims. This includes: -- the sufficiency of the evidence of the existence and terms of the Policies; -- whether policy terms of exclusions provide or preclude coverage for the Tort Claims; -- whether the Diocese has complied with certain conditions precedent to coverage contained in the Policies; and -- whether and to what extent the costs incurred in connection with the Tort Claims are allocable to the Policies. Mindful of the (i) significant costs to the estate to litigate its coverage claims against the insurers either through an adversary proceeding or in a piecemeal basis, (ii) the risks of the outcome of the litigation and the time to obtain a final determination, (iii) the possibility that coverage under the Policies may not be implicated, (iv) and the desire to obtain maximum value from its insurers under the Policies for the purpose of making payments to the holders of the Tort Claims, the Diocese has determined to reach an expedited resolution of the all the disputes with the insurers. After extensive, good faith, and arm's-length negotiations, the Diocese and the insurers entered into a settlement and insurance policy repurchase agreement and release. By this motion, the Diocese asks the U.S. Bankruptcy Court for the District of Arizona to approve the Settlement and Release with the insurers. The salient terms of the Settlement and Release are: (a) the Diocese and the other releasing parties will sell, and the insurers will purchase, the Policies for $3.5 million, to be paid to the Estate; (b) the Diocese and the Other Releasing Parties will provide a full release to the insurers with respect to and in connection with the Insurers' Policies, which release specifically include any other unknown insurance policies issued by the insurers under which the bankruptcy estate may have insurance coverage. The release will represent fair consideration for the purchase price paid by the insurers to buy back the Policies in view of the various disputes between the parties, and in no way constitute an annulment of the Policies within the meaning of A.R.S. Section 20-1123; and (c) the insurers will provide full releases to the Diocese and the Other Releasing Parties with respect to and in connection with any claims in connection with the Policies. Tucson further asks the Court to: * approve the sale of the Policies to the insurers clear and free of all liens, claims, encumbrances, and other interests asserted; and * issue a supplemental injunction necessary and appropriate to protect the integrity of the settlement and sale contemplated by the Settlement. Ms. Boswell explains that without the supplemental injunction, the insurers will not consummate the Settlement and purchase the Policies -- and the Diocese will not receive the contemplated consideration. In addition, all persons holding claims against the Diocese, including Tort claims, are protected in that they have the right to pursue their claims against the proceeds of the sale of the Policies. Accordingly, the Court should issue a supplemental injunction permanently enjoining all claimants to assert their claims only against the Diocese and not the insurers. Ms. Boswell informs Judge Marlar that the proposed settlement is well within the range of likely outcomes of the litigants' dispute, and reflects an appropriate balance of costs, risks, and potential rewards of litigation. A full-text copy of the Agreement is available for free at: http://bankrupt.com/misc/pacific_settlement.pdf 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. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) CELLSTAR CORP: Stanford Won't Pursue $25M Convertible Debt Deal --------------------------------------------------------------- CellStar (OTC Pink Sheets: CLST), a value-added wireless logistics services leader, received notification from Stanford Financial Group Company and its affiliates that it does not plan to proceed with the previously announced proposal to purchase up to $25 million of the Company's convertible debentures. On June 17, 2005, the Company disclosed a proposal to sell up to $50 million of Debentures and the signing of a non-binding letter of intent to sell up to $25 million of Debentures to Stanford. The Debentures will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Accounting Problems The Company has been unable to file its Form 10-K for fiscal 2004 and Form 10-Q for the first quarter of 2005 as a result of "accounting issues related to certain accounts receivable and revenues in its Asia Pacific Region." On May 26, 2005, the Company announced that it would be unable to file its Form 10-K for fiscal 2004 by May 31, 2005. The Audit Committee of the Company's Board of Directors needs more time to complete its independent review of certain accounts receivable and revenue issues in the Asia Pacific Region. Reporting Delays Trigger Delisting As reported in the Troubled Company Reporter on June 21, 2005, CellStar received notification from the Nasdaq Listing Qualifications Panel that its request for an extension to file its Form 10-K for fiscal 2004 and Form 10-Q for the first quarter of 2005 was denied. Accordingly, the Company's common stock was delisted from The Nasdaq Stock Market on June 10, 2005. The company's shares now trade in the Pink Sheets. Lenders Grant Second Waiver CellStar's delay in delivering its annual and quarterly reports to the SEC constitutes an event of default under a revolving credit facility with Wells Fargo Foothill, Inc., as agent and a lender, Fleet Capital Corporation, Textron Financial Corporation, and PNC National Bank Association, as lenders, and the Company and certain of its subsidiaries as borrowers, including CellStar, Ltd., National Auto Center, Inc., CellStar Financo, Inc., CellStar International Corporation/SA, CellStar Fulfillment, Inc., CellStar International Corporation/Asia, Audiomex Export Corp., NAC Holdings, Inc., CellStar Global Satellite Services, Ltd., and CellStar Fulfillment Ltd. On June 1, 2005, the Agent and the Lenders waived the reporting default through July 15, 2005. Last week, CellStar obtained a second waiver from the Bank Group extending the deadline for the Company to file its Form 10-K and First Quarter Form 10-Q to September 6, 2005. About CellStar CellStar Corporation -- http://www.cellstar.com/-- provides value-added logistics services to the wireless communications industry, with operations primarily in the North American, Latin American and Asia-Pacific regions. CellStar facilitates the effective and efficient distribution of handsets, related accessories and other wireless products from leading manufacturers to network operators, agents, resellers, dealers and retailers. CellStar also provides activation services in some of its markets that generate new subscribers for wireless carriers. DELTA AIR: 12,000 Employees Petition Congress on Pension Reform --------------------------------------------------------------- Delta Air Lines (NYSE: DAL) employees recently visited Capitol Hill to present petitions to members in the House and Senate from Kentucky, Ohio and Utah asking for their support on pension reform legislation. The petitions were signed by more than 12,000 employees and retirees in support of S. 861 and H.R. 2106, the Employee Pension Preservation and Taxpayer Protection Act of 2005. "We commend our employees, retirees and the Air Line Pilots Association who have worked tirelessly to educate Congress on the importance of passing airline-specific pension reform legislation during the current session," said Scott Yohe, senior vice president of Government Affairs for Delta. "The success that we have had in generating support in Congress is directly attributable to their efforts." Among the Senate offices being visited include: -- Mitch McConnell (R-KY); -- Mike DeWine (R-OH); -- Orrin Hatch (R-UT); -- George Voinovich (R-OH); -- Robert Bennett (R-UT); and -- Jim Bunning (R-KY). On the House side, employees visited: -- Reps. Rob Bishop (R-UT); -- Chris Cannon (R-UT); -- Jim Matheson (D-UT); -- Geoff Davis (R-KY); and -- Steve Chabot (R-OH). Delta Air Lines -- http://delta.com/-- is the world's second- largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 490 destinations in 85 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. At March 31, 2005, Delta Air's balance sheet showed a $6.6 billion stockholders' deficit, compared to a $5.8 billion deficit at Dec. 31, 2004. * * * As reported in the Troubled Company Reporter on June 29, 2005, Moody's Investors Service commented that the recent amendments to the liquidity facilities that provide credit support to the Series 2000-1 (Class A-1, A-2, B and C) and Series 2002-1 (Class G-1, G-2 and C) Enhanced Equipment Trust Certificates of Delta Air Lines, Inc. would not affect the current ratings assigned to these Certificates: Series 2000-1: * Ba1 for Class A-1 and A-2; * B3 for Class B; and * Caa2 for Class C; Series 2002-1: * Aaa for Class G-1 and G-2; and * B3 for Class C. The Aaa ratings for the Series 2002-1 Class G-1 and G-2 is based upon the financial guaranty insurance policy issued by MBIA Insurance Corporation to support the timely payment of interest when due and the ultimate payment of principal on the Class G Certificates. DELTA AIR: Highbridge & Satellite Asset Selling $97.85M Sr. Notes ----------------------------------------------------------------- Highbridge International LLC and Satellite Asset Management, LP, will be selling Delta Air Lines, Inc., securities, according to a prospectus filed in the Securities and Exchange Commission on July 12, 2005. Highbridge International wants to sell $20 million of 2-7/8% Convertible Senior Notes due 2024 that can be converted to 1,472,212 shares of common stock. These notes comprise 6.15% of the total notes outstanding. Satellite Asset Management plans to sell $77.85 million worth of the Convertible Senior Notes, comprising 23.95% of the total notes outstanding. These notes can be converted to 5,730,585 shares of common stock Total notes outstanding amount to $325 million. As reported in the Troubled Company Reporter on July 11, 2004, these notes currently trade at 34% of their face value. As reported in the Troubled Company Reporter on Feb. 10, 2004, interest on the notes will be 2-7/8 percent per $1,000 principal amount and will be payable in cash in arrears semi-annually through Feb. 18, 2024. Each note will be convertible into Delta common stock at a conversion rate of 73.6106 shares per $1,000 principal amount of notes (subject to adjustment in certain circumstances), which is equivalent to a conversion price of approximately $13.59 per share of Delta common stock. Holders of the notes may convert their notes only if: (i) the price of Delta's common stock reaches a specified threshold; (ii) the trading price for the notes falls below certain thresholds; (iii) the notes have been called for redemption; or (iv) specified corporate transactions occur. Delta may redeem all or some of the notes for cash at any time on or after Feb. 21, 2009, at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest to the redemption date. Holders may require Delta to repurchase the notes on Feb. 18 of 2009, 2014 and 2019, or in other specified circumstances, at a repurchase price equal to the principal amount due plus any accrued and unpaid interest to the repurchase date. Delta Air Lines -- http://delta.com/-- is the world's second- largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 490 destinations in 85 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. At March 31, 2005, Delta Air's balance sheet showed a $6.6 billion stockholders' deficit, compared to a $5.8 billion deficit at Dec. 31, 2004. DELTA AIR: Raises Fare Cap by $100 & Other Airlines Follow Suit --------------------------------------------------------------- Delta Air Lines Inc., raised the cap on its domestic fares by $100 last week. The fare hike is aimed at helping the struggling companies keep up with soaring fuel costs. United Airlines, US Airways and Continental Airlines, followed suit. The Associated Press reports Atlanta-based Delta boosted the cap on one-way walk-up fares to $599, up from $499, for economy class and to $699 for first class. The move comes six months after the company announced a ticket price overhaul designed to draw in more business travelers. "When Delta launched SimpliFares in January, crude oil was selling at $43 per barrel compared to as much as $61 per barrel in recent weeks," Paul Matsen, Delta's chief marketing officer, told the AP. "Despite our best intentions to keep the current fare caps in place, we have been forced to find ways to offset this dramatic spike in costs." "The cap was merely part of the package so that people would know that they would never travel for more than this amount, and we've simply adjusted that," Delta Spokesman Kennedy said in published reports. When Delta launched SimpliFares, jet fuel prices was a little over $43 per barrel. As of July 14, oil closed at $61 per barrel. Aviation analyst Ray Neidl of Calyon Securities in New York said in a prepared statement that Delta "has finally caved into reality and is raising fares and caps due to higher fuel costs. Still, the airline is at significant risk of a bankruptcy filing this year." The fare hike announcement comes a week before Delta releases its second-quarter results. Analysts expect it to record another heavy loss. It lost nearly $1.1 billion in the first quarter and $5.2 billion for all of 2004. Delta Air Lines -- http://delta.com/-- is the world's second- largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 490 destinations in 85 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. At March 31, 2005, Delta Air's balance sheet showed a $6.6 billion stockholders' deficit, compared to a $5.8 billion deficit at Dec. 31, 2004. DIGITAL VIDEO: Nasdaq SmallCap Halts Common Stock Trading --------------------------------------------------------- Digital Video Systems, Inc (Nasdaq: DVIDE) received a letter from the Nasdaq Listings Qualification Panel denying the Company's request for continued inclusion on The Nasdaq SmallCap Market. The Company's common stock was delisted from The Nasdaq SmallCap Market effective with the open of business on Friday, July 15, 2005. This action follows the Company's appeal to the Panel for a listing exception for the Company's inability to meet Nasdaq's stockholders' equity requirements and the Company's failure to have its quarterly report on Form 10- Q for the fiscal quarter ended March 31, 2005 reviewed by its auditors prior to filing. The Company intends to appeal the Panel's decision to the Nasdaq Listing and Hearing Review Counsel within the 15-day period provided for such appeals. The Company's common stock is not currently eligible to trade on the OTC Bulletin Board because, as described above, the Company is not current in its reporting obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company expects that quotations for its common stock will appear in the National Daily Quotations Journal, often referred to as the "pink sheets," where subscribing dealers can submit bid and ask prices on a daily basis. However, there can be no assurances that the Company's common stock will be eligible for trading or quotation on any alternative exchanges or markets. The Company will disclose further timing and trading symbol information regarding the trading of its common stock when such information becomes available. Upon the completion of the auditors' review of the Company's quarterly report for the fiscal quarter ended March 31, 2005, the Company's common stock may be eligible for trading on the OTC Bulletin Board. The Company is committed to regaining compliance with all listing requirements and relisting its common stock as soon as possible. Established in 1992, Digital Video Systems, Inc. -- http://www.dvsystems.com/-- is a publicly held company specializing in the development and application of digital video technologies enabling the convergence of data, digital audio, digital video and high-end graphics. DVS is headquartered in Palo Alto, California, with subsidiaries and manufacturing facilities in South Korea and China and a subsidiary in India. * * * As reported in the Troubled Company Reporter on Apr. 27, 2005, Stonefield Josephson, Inc., raised substantial doubt about Digital Video Systems, Inc.'s ability to continue as a going concern after it audited the Company's Form 10-K for the year ended Dec. 31, 2004. The Company suffered recurring losses from operations and has a negative working capital and a stockholders' deficit. "Our continued existence will depend in large part upon our ability to successfully secure additional financing to fund future operations," the Company said in its Annual Report. DVS Chairman and CEO Tom Spanier commented, "We are taking steps to address our current financial situation, and we continue to believe we will be successful." At March 31, 2005, Digital Video's balance sheet showed a $2,699,000 stockholders' deficit, compared to a $311,000 deficit at Dec. 31, 2004. ENRON CORP: Settles Civil Disputes in Western Energy Market ----------------------------------------------------------- Enron Corp. reached an agreement to settle civil claims between the company (and certain of its subsidiaries) and certain other parties related to natural gas and electricity transactions in the Western United States from 1997-2003, including claims filed in proceedings with the Federal Energy Regulatory Commission. The parties entering into the settlement agreement with Enron are: -- Pacific Gas & Electric Company, -- Southern California Edison Company, -- San Diego Gas & Electric Company, -- the People of the State of California, -- the California Department of Water Resources, -- the California Electricity Oversight Board, and -- the Attorneys General of the States of Oregon and Washington. Other potential Western U.S. energy market participants may determine to opt-in to the settlement at a later date. In consideration of their dismissal and release of claims against Enron, the parties settling with Enron will receive a shared allowed unsecured bankruptcy claim of $875 million against Enron Power Marketing, Inc., an Enron subsidiary, and will receive distributions on such claim pursuant to Enron's confirmed Chapter 11 Plan of Reorganization. The settling parties also will receive an assignment from Enron of up to $47.3 million in receivables and cash collateral owing to Enron. The settling parties that are governmental units will also receive a civil penalty claim against EPMI for $600 million. Enron has not admitted to any wrongdoing with respect to any matter covered in this settlement. "This settlement represents the latest in a series of significant issues that have been resolved in Enron's bankruptcy proceedings," said Stephen Cooper, Enron's interim CEO and chief restructuring officer. "Settlements such as this one allow us to remove claims against the estate so that we can accelerate distributions to all other creditors." The settlement remains subject to the approval of the FERC, the California Public Utilities Commission, and the Bankruptcy Court for the Southern District of New York. Headquartered in Houston, Texas, Enron Corporation -- http://www.enron.com/-- 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. EPCO HOLDINGS: S&P Rates $1.9 Billion Loans at B+ ------------------------------------------------- Standard & Poor's Rating Services assigned its 'B+' corporate credit rating to EPCO Holdings Inc. At the same time, Standard & Poor's assigned its 'B+' rating and '4' recovery rating to: * EPCO Holdings' $600 million term loan A maturing 2008, * its $1 billion term loan B maturing 2010, and * its $300 million revolver facility maturing 2008. The 'B+' rating and '4' recovery rating on the term loans indicate the expectation for marginal (25%-40%) recovery of principal in the event of a payment default. EPCO Holdings, a newly formed intermediate holding company, is 100% owned by EPCO Inc., a private company controlled by Dan Duncan. As part of a restructuring within the group, EPCO Inc., is transferring its indirect ownership interests in the general partner of TEPPCO Partners L.P. (BBB-/Stable/--) and the general partner of Enterprise Products Partners L.P. (BB+/Stable/--) to EPCO Holdings. The transfer also includes EPCO Inc.'s indirect ownership of about 118 million (or 31% of total outstanding) common limited partner units of Enterprise Products and about 3.7% of total common limited partner units of TEPPCO. "The ratings reflect the speculative-grade cash flow servicing the term loans and the double leverage," said Standard & Poor's credit analyst Aneesh Prabhu. "EPCO Holdings' debt is paid from cash flow after servicing about $5.5 billion of debt at the two MLPs." "The material refinancing requirement of almost $1.4 billion in 2009 under our base case scenario and the reliance by the group on one person, Mr. Duncan, are also concerns," said Mr. Prabhu. However, Standard & Poor's also said that the buoyant commodity environment has resulted in strong cash from operations and increasing distributions by the MLPs. Furthermore, the provider of about 75% to 80% of revenues to EPCO Holdings, Enterprise Products, has strong distribution coverage of about 1.2x. The stable outlook on EPCO Holdings mirrors the stable outlook on Enterprise Products and TEPPCO. FARMLAND IND: Court Okays Auction of FC Stone Common Shares ----------------------------------------------------------- The Honorable Jerry W. Venters of the U.S. Bankruptcy Court for the Western District of Missouri approved the auction, bid procedures and break-up fee for the sale of Farmland Industries, Inc.'s 103,922 shares in FC Stone Group, Inc. The common stock has a book value of $1,039,210. FC Stone is an Iowa corporation engaged in the commodities risk management business. J.P. Morgan Trust Company, N.A., as Liquidating Trustee for the FI Liquidating Trust, entered into an asset purchase agreement with Cooperative Producers, Inc. Cooperative offers to buy the stock for $290,982. An auction to solicit higher and better offers will be held on August 8, 2005, at 1:30 p.m. at the Offices of Bryan Cave in Kansas City, Missouri. In the event that Cooperative's offer is topped by a competing bidder, it is entitled to an $8,700 break-up fee. Competing bids, if any, must be submitted by August 2, 2005, at 5:00 p.m. The Court will convene a sale hearing on August 9, 2005, at 2:30 p.m. A full-text copy of the Auction and Bid Procedures is available for a fee at: http://www.researcharchives.com/bin/download?id=050715234028 Farmland Industries, Inc., was one of the largest agricultural cooperatives in North America with about 600,000 members. The firm operates in three principal business segments: fertilizer production; pork processing, packing and marketing; and beef processing, packing and marketing. The company, along with its affiliates, filed for chapter 11 protection (Bankr. W.D. Mo. Case No. 02-50557) on May 31, 2002 before the Honorable Jerry W. Venters. The Debtors' Counsel is Laurence M. Frazen, Esq. of Bryan Cave LLP. When the Debtors filed for chapter 11 protection, they listed total assets of $2.7 billion and total debts of $1.9 billion. Pursuant to the Second Amended Joint Plan of Reorganization filed by Farmland Industries, Inc. and its debtor- affiliates, the court declared May 1, 2004 as the Effective Date of the Plan. FEDERAL-MOGUL: Wants to Hire Hanly & Conroy as Asbestos Counsel --------------------------------------------------------------- On January 14, 2002, the U.S. Bankruptcy Court for the District of Delaware approved Federal-Mogul Corporation and its debtor- affiliates' application to retain and employ Coblence & Warner, P.C., as their special asbestos litigation counsel subject to certain limitations. Barely a month later, the Debtors asked the Court for authority to substitute C&W with Hanly & Conroy LLP as their special asbestos litigation counsel. John J. Gasparovic, Federal Mogul Corporation's Senior Vice President and General Counsel, relates that the request for substitution was necessitated by the departure of a number of attorneys from C&W who ultimately formed their own firm, now known as Hanly Conroy Bierstein & Sheridan LLP. According to Mr. Gasparovic, those attorneys and their staff were the only members and employees of C&W who had worked on the matters related to the Debtors' bankruptcy cases since the Petition Date. The Court subsequently approved the request for substitution and authorized the retention of Hanly Conroy. Pharmacy Benefits Manager Litigation Over the past several years, various institutions have been involved in the litigation of claims against certain entities engaged in the management of pharmacy benefits. A Pharmacy Benefit Manager is engaged by a self-funded employee health insurance plan to negotiate favorable prices of prescription drugs with pharmacy chains or pharmaceutical manufacturers. A PBM manages myriad aspects of the prescription drug portion of the health insurance plans, including processing individual employee prescription drug transactions. Mr. Gasparovic relates that several of the U.S. Debtors' employee health insurance plans utilize a PBM known as Medco Health Solutions, Inc. Medco has been involved in litigation in various fora around the country brought by other self-funded health insurance plans, in which it has been claimed that Medco violated the Employee Retirement Income Security Act of 1974 as well as the governing contracts between Medco and those health insurance plans. The litigation against Medco includes a purported nationwide class action against Medco-managed health insurance plans, in which the United States District Court for the Southern District of New York, MDL No. 1508 (CLB), rendered a decision certifying a class and approving a settlement of that case. The District Court's decision is currently on appeal to the United States Court of Appeals for the Second Circuit. The Medco Class Action is an opt-out class. Although the Debtors believe that one or more of the U.S. Debtors may have claims against Medco arising from Medco's provision of pharmacy benefit management services to the U.S. Debtors, none of the U.S. Debtors was a named party to the Medco Class Action. Instead, the U.S. Debtors timely exercised their right to opt out of the class because they did not believe the purported class action settlement was beneficial to them. Those U.S. Debtors, Mr. Gasparovic notes, are now free to pursue any claims they may have against Medco arising out of their PBM arrangements. Hence, the Debtors ask the Court to expand the scope of Hanly Conroy's employment to encompass legal services related to the investigation, evaluation, negotiation and pursuit, including, if warranted, arbitration and litigation of certain claims of the U.S. Debtors against the pharmacy benefits manager. Hanly Conroy's Services and Fees Hanly Conroy will perform the additional services pursuant to a contingency fee arrangement. The firm will receive a 33-1/3% recovery of the gross amount, if any, recovered by the U.S. Debtors, whether by litigation or otherwise, in connection with their pursuit of PBM-related claims against Medco. The Atlanta firm of Herman Mathis Casey Kitchens & Gerel, LLP, and other members of the Herman Mathis Group will serve as co- counsel to Hanly Conroy. Hanly Conroy and Herman Mathis will share the 33-1/3% contingency fee, which is the limit of the Debtors' fee obligation in the event of success. Hanly Conroy and Herman Mathis will advance to the Debtors: -- all costs and disbursements associated with the additional services, including expenses in its own retention of highly specialized PBM auditors and other professionals in connection with the services; and -- cost of a professional audit of the Debtors' Medco relationship, estimated to range between $50,000 to $100,000. Hanly Conroy will only recover its costs from the Debtors, in addition to the contingency fees, in the event that the Debtors' pursuit of the PBM claims against Medco is successful. Hanly Conroy will then share those fees and reimbursed costs with the Herman Mathis Group and any other co-counsel that may be associated by Hanly Conroy. Mr. Gasparovic believes that Hanly Conroy's professionals are well qualified to provide the additional services due to their extensive experience. The firm has been actively involved in the investigation and analysis of claims on behalf of various other institutions against PBMs. Hanly Conroy is familiar with the Debtors and the aspects of their businesses relevant to the litigation. Hanly Conroy Partner Paul J. Hanly reaffirms that the firm and its partners and employees do not represent or hold any material adverse interest to the Debtors or their estates, and are disinterested pursuant to Section 327(e) of the Bankruptcy Code. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some 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. 86; Bankruptcy Creditors' Service, Inc., 215/945-7000) FELTS FINE: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Felts Fine Jewelry, Inc. dba Felts Fine Jewelry and Designs dba Felts Diamonds and Designs 6136 East 51st Street Tulsa, Oklahoma 74135 Bankruptcy Case No.: 05-14499 Type of Business: The Debtor designs and sells jewelry. See http://www.feltsdesigns.com/ Chapter 11 Petition Date: July 15, 2005 Court: Northern District of Oklahoma (Tulsa) Judge: Dana L. Rasure Debtor's Counsel: Mark A. Craige, Esq. Morrel, West, Saffa, Craige & Hicks 3501 South Yale Tulsa, Oklahoma 74135 Tel: (918) 664-0800 Fax: (918) 663-1383 Total Assets: $1,515,880 Total Debts: $1,554,438 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ American Express Credit card lawsuit $342,704 P.O. Box 53852 Phoenix, AZ 85072 Internal Revenue Service 941 taxes $133,860 P.O. Box 660264 Dallas, TX 752660264 Sam & Patsy Orcutt Capital loan $45,000 5552 South 78 East Avenue Tulsa, OK 74145 Oklahoma Tax Commission Permit #429314 $39,600 First Image Design Corp. Jewelry $28,085 Simon Golub & Sons Inc. Jewelry $24,241 Michael Werdiger Inc. Diamonds $23,963 Drummond Law Firm Legal services $20,487 Gordon & McCurley P.C. Accounting services $18,871 Stuller Supplies $15,692 Jerry Felts Capital loan $15,000 Diamond Days Inc. Diamonds $10,691 Jeweler's Mutual Insurance premiums $9,153 Insurance Co. Raico Jewelry $8,755 KOTV Advertising $7,482 Camelot Bridal Co. Jewelry $5,553 Steven Litvak & Assoc. Jewelry $5,181 A. Jaffe Company Jewelry $4,690 Heart & Co., Inc. Jewelry $4,659 Nili Jewelry Corp. Jewelry $4,361 GE COMMERCIAL: Moody's Affirms $2.96MM Class O Cert.'s B3 Rating ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of two classes and affirmed the ratings of twenty-three classes of GE Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2003-C2. The affected ratings are: -- Class A-1, $45,802,975, Fixed, affirmed at Aaa -- Class A-1A, $277,417,474, Fixed, affirmed at Aaa -- Class A-2, $165,053,000, Fixed, affirmed at Aaa -- Class A-3, $54,285,000, Fixed, affirmed at Aaa -- Class A-4, $406,087,000, Fixed, affirmed at Aaa -- Class X-1, Notional, affirmed at Aaa -- Class X-2, Notional, affirmed at Aaa -- Class B, $35,493,000, WAC Cap, upgraded to Aa1 from Aa2 -- Class C, $14,788,000, WAC Cap, upgraded to Aa2 from Aa3 -- Class D, $26,620,000, WAC Cap, affirmed at A2 -- Class E, $14,788,000, WAC Cap, affirmed at A3 -- Class F, $14,789,000, WAC, affirmed at Baa1 -- Class G, $14,788,000, WAC, affirmed at Baa2 -- Class H, $14,789,000, WAC, affirmed at Baa3 -- Class J, $19,225,000, WAC Cap, affirmed at Ba1 -- Class K, $7,394,000, WAC Cap, affirmed at Ba2 -- Class L, $8,873,000, WAC Cap, affirmed at Ba3 -- Class M, $4,437,000, WAC Cap, affirmed at B1 -- Class N, $7,394,000, WAC Cap, affirmed at B2 -- Class O, $2,958,000, WAC Cap, affirmed at B3 -- Class BLVD-1, $3,287,324, WAC, affirmed at A2 -- Class BLVD-2, $2,501,000, WAC, affirmed at A3 -- Class BLVD-3, $4,502,000, WAC, affirmed at Baa1 -- Class BLVD-4, $3,549,000, WAC, affirmed at Baa2 -- Class BLVD-5, $7,960,750, WAC, affirmed at Baa3 As of the July 11, 2005 distribution date, the transaction's aggregate balance has decreased by approximately 2.3% to $1.18 billion from $1.21 billion at securitization. The Certificates are collateralized by 139 mortgage loans. The loans range in size from less than 1.0% to 6.3% of the pool, with the top ten loans representing 30.4% of the pool. The pool consists of three shadow-rated loans, representing 12.2% of the pool, and a conduit component representing 87.8% of the pool. The pool has not experienced any realized losses since securitization. One loan, representing less than 1.0% of the pool, is in special servicing. Moody's has estimated aggregate losses of approximately $900,000 for the specially serviced loan. Eighteen loans, representing 10.4% of the pool, are on the master servicer's watchlist. Moody's was provided with partial or full year 2004 operating results for 94.4% of the performing loans. Moody's loan to value ratio for the conduit component is 88.4%, compared to 90.8% at securitization. The upgrade of Classes B and C is primarily due to stable performance and increased subordination levels. Although the overall LTV has improved since securitization, the pool has experienced increased LTV dispersion. Based on Moody's analysis, 6.4% of the conduit pool has a LTV greater than 100.0%, compared to 5.6% at securitization. The largest shadow rated loan is the DDR Portfolio Loan ($74.5 million - 6.3%), which is secured by seven anchored retail centers containing 1.5 million square feet. The centers are located in: * Ohio (24.3% allocated loan amount); * California (23.3%); * Indiana (19.5%); * Virginia (14.3%); and * Florida (18.6%). The portfolio's overall occupancy is 94.7%, compared to 99.1% at securitization. The loan sponsor is Developers Diversified Realty Corporation (Moody's senior unsecured rating Baa3), a publicly traded REIT. The portfolio is also encumbered by a $35.5 million B-note which is held outside the trust. Moody's current shadow rating is Aa2, the same as at securitization. The second shadow rated loan is the Boulevard Mall Loan ($47.1 million - 4.0%), which represents the A-1 note of a $94.2 million first mortgage loan. The loan is secured by a 1.2 million square foot shopping center located in Las Vegas, Nevada. The shopping center is anchored by Sears, Dillard's, Macy's, which are not part of the collateral, and J.C. Penney. In-line occupancy is 87.6%, compared to 85.0% at securitization. Average in-line sales were $358 per square foot for calendar year 2004, compared to $338 at securitization. The loan sponsor is General Growth Properties Inc. (Moody's senior unsecured shelf rating (P)Ba2), a publicly traded REIT. The property is also encumbered by a $21.8 million B-note which is held within the trust and is the security for: * Classes BLVD-1, * BLVD-2, * BLVD-3, * BLVD-4, and * BLVD-5. Moody's current shadow ratings for the A-1 and B notes are A1 and Baa3, respectively, the same as at securitization. The third shadow rated loan is the Wellbridge Portfolio Loan ($22.4 million - 1.9%), which represents the A-3 note of a $57.0 million first mortgage loan. Notes A-1, A-2 and a $29.1 million B-note are held outside the trust. The loan is secured by a portfolio of 15 health clubs located in: * Minnesota (9); * New Mexico (3); * Florida (2); and * Massachusetts. The portfolio's performance has improved since securitization. Moody's current shadow rating of the A-3 loan is Aa2, compared to Aa3 at securitization. The top three conduit loans represent 9.4% of the outstanding pool balance. The largest conduit loan is the Clinton Manor Apartments Loan ($40.8 million - 3.5%), which is secured by two midrise apartment buildings located in midtown Manhattan. The two buildings contain 240 units. A majority of the units are leased pursuant to a Housing Assistance Payments contract under which HUD provides rental subsidies to cover the difference between HUD's approved market rent and the rent contribution from eligible tenants. The current contract expires in December 2007. The property is 98.3% occupied, compared to 97.5% at securitization. Moody's LTV is 81.1%, compared to 86.2% at securitization. The second largest conduit loan is the Prosperity Office Park -- Buildings B&C Loan ($35.2 million - 3.0%), which is secured by a 180,000 square foot medical office building located in Fairfax, Virginia. The property is 100.0% occupied, the same as at securitization. Moody's LTV is 87.3%, compared to 89.6% at securitization. The third largest conduit loan is the Charleston Commons Loan ($33.6 million - 2.9%), which is secured by a 329,000 square foot power center located in Las Vegas, Nevada. Major tenants include: * Wal-Mart (35.0% GLA; expiration October 2010); * Office Max (9.0% GLA; expiration December 2005); * Petsmart (8% GLA; expiration January 2009); and * Ross Dress for Less (7.0%; expiration January 2007). The property is 95.0% occupied, compared to 96.5% at securitization. Net income has declined since securitization due to declines in rental income. Moody's LTV is 96.4%, compared to 92.8% at securitization. The pool's collateral is a mix of: * retail (41.3%); * multifamily (27.7%); * office (17.5%); * industrial and self storage (11.1%); * special purpose (1.9%); and * lodging (0.5%). The collateral properties are located in 33 states. The highest state concentrations are: * Texas (14.7%); * New York (12.7%); * California (8.9%); * Nevada (8.9%); and * Virginia (8.2%). All of the loans are fixed rate. GENOA HEALTHCARE: Moody's Junks Proposed $50MM 2nd Lien Term Loan ----------------------------------------------------------------- Moody's assigned a B2 rating to Genoa Healthcare Group, Inc.'s proposed first lien credit facilities, consisting of a $20 million revolver and a $90 million first lien term loan, and a Caa1 rating to the proposed $50 million second lien term loan. Moody's also assigned a corporate family rating of B2 to Genoa. This is the first time Moody's has assigned a rating to the company. The outlook for the ratings is stable. The rating action follows the announcement by Genoa that it will use the proceeds from the new credit facilities to repay existing indebtedness, pay related fees and expenses, and fund a dividend of approximately $120 million to its shareholders. These ratings were assigned: * $20 million guaranteed senior secured first lien revolving credit facility due 2010, rated B2 * $90 million guaranteed senior secured first lien term loan due 2012, rated B2 * $50 million guaranteed senior secured second lien term loan due 2013, rated Caa1 * Corporate family rating, B2 The ratings reflect the company's high level of debt following: * the transaction; * the decreased financial flexibility resulting from the conversion to debt of a significant portion of the company's equity; and * the weak collateral position of the proposed debt. It also reflects the lack of geographic diversification and the resulting exposure to potential changes in Florida's Medicaid reimbursement. Additionally, although the company has recently demonstrated a substantial increase in profitability of its facilities it is unclear whether those types of returns will be sustainable. The company also has a limited track record of operating under the current structure and operating agreements that promise a significant reduction in administrative costs. The ratings also reflect: * Genoa's leading market position in the Florida market and the attractive demographics of that state; * the added stability in the market resulting from a freeze on the development of new long-term care facilities in the state; * the company's low cost position resulting in strong margin performance and cash flow generation; * improvements in occupancy and quality mix; and * significant improvement in medical malpractice claims experience in comparison to the prior operators of the company's facilities. The stable outlook anticipates continued favorable operating performance and the ability to quickly reduce leverage. A stable near-term reimbursement environment related to both Florida's Medicaid program and Medicare should aid in the company's continued growth. Additionally, low capital expenditure needs due to the fact that the company does not own its facilities should provide ample free cash flow to repay debt. Moody's adjusts the reported leverage of the company to reflect the financing of its facilities through operating leases. This adjustment represents a significant portion of the company's adjusted leverage. The ratings could be upgraded if Genoa reduces debt or demonstrates sustainable cash flow generation so that the ratios of adjusted cash flow from operations and adjusted free cash flow to adjusted debt can remain above 10% and 7%, respectively. However, factors such as limited geographic diversity and the company's relative small size would likely constrain the rating in the near-term. Moody's could downward the ratings if the company is unable to sustain its strong margin performance and cash flow generation. Factors that might indicate a change in the ability to maintain the current operating performance include: * changes in medical malpractice experience; * budgetary concerns in the state of Florida; or * an inability to sustain the company's lower than industry average overhead costs and days revenue outstanding. The company's current rate of overhead is approximately 50% of the industry average and days revenue outstanding is 28 days. Additionally, downward pressure could result if the company were to use a significant amount of free cash flow to fund expansion into new markets instead of repaying outstanding debt. Moody's could downgrade the ratings if a combination of the aforementioned factors was expected to result in ratios of adjusted cash flows from operations and adjusted free cash flow to adjusted debt below 5% and 3%, respectively. The ratios of adjusted cash flow from operations and adjusted free cash flow to adjusted debt for the twelve months ended March 31, 2005 would have been between 9% and 10% on a pro forma basis after giving effect to the transaction, changes in the corporate structure, and certain non-recurring items. Moody's anticipates Genoa will require small amounts of capital expenditures and, therefore, operating cash flow will differ very little from free cash flow. It should be noted that adjusted debt includes Moody's adjustment to recognize the obligation related to operating leases. Moody's uses the total rent expense as would be reported by the company in accordance with Generally Accepted Accounting Principles in developing the amount of adjustment. The GAAP rent expense includes amounts paid to the lessor that are contingent on the operations of the leased facilities. The company currently pays contingent rent in conjunction with the lease of 53 of its facilities. EBIT coverage of interest would have been approximately 3.5 times for the twelve months ended March 31, 2005. Leverage, defined as adjusted debt to EBITDAR, would have been approximately 5.5 times for the same period. Adjusted debt and EBITDAR have been adjusted by use of total rent expense, including contingent rent expense. Moody's believes that the use of EBITDA and related EBITDA ratios as a single measure of cash flow without consideration of other factors can be misleading. (See Moody's Special Comment, "Putting EBITDA in Perspective," dated June 2000). Pro forma for the transaction, Genoa is expected to have good liquidity. Moody's anticipates Genoa to maintain a relatively small cash balance and use available free cash flow to pay down debt as the company is not expected to have significant capital expenditure needs. Genoa will also have access to a modest $20 million revolving credit facility with no amounts drawn at closing. Additionally, Moody's does not expect covenants to constrain availability of the undrawn revolver balance in the near-term. The revolver and first lien term loan are notched at the level of the corporate family rating due to their preponderance in the debt capitalization and expected recovery based on an estimate of enterprise value. The second lien term loan is notched two levels below the corporate family rating reflecting its second priority behind the revolver and first lien term loan and the deep subordination due to a lack of tangible net worth of the company on an adjusted leverage basis. Moody's ratings are subject to our review of final documentation for the transaction. Headquartered in Tampa, FL, Genoa, through its subsidiaries, provides skilled nursing, medically complex and specialty healthcare services in 61 skilled nursing facilities throughout the state of Florida comprising approximately 7,500 beds. The company also provides consulting and administrative services to an additional 66 facilities in 16 states and the District of Columbia through contractual arrangements. For the twelve months ended March 31, 2005, Genoa recognized revenue of approximately $454 million. GEOLOGISTICS: Questor Partners Sells Company to PWC Logistics ------------------------------------------------------------- Questor Partners Fund II, L.P., a leading private equity fund, signed an agreement to sell GeoLogistics Corporation, a major international freight forwarder and logistics services provider, to PWC Logistics. Under terms of the agreement, Kuwait-based PWC Logistics will purchase GeoLogistics from its principal shareholders, including lead investor Questor for approximately US $454 million on a debt- free basis. GeoLogistics' senior management team will remain in place under PWC Logistics' ownership, Questor said, and no material organizational changes are expected as a result of the acquisition. GeoLogistics, based in Santa Ana, Calif., with more than 5,700 employees and an extensive global network in nearly 100 countries around the world, specializes in a range of freight management and customized logistics solutions and has revenues of approximately $1.6 billion. Bill Flynn is the company's president and chief executive officer. "We are very pleased with PWC Logistics' offer and the strategic direction it will offer GeoLogistics," said Rob Denious, a managing director of Questor Management Company. "With GeoLogistics in a strong financial position, we've explored several options, including an initial public offering, but PWC Logistics' world-class contract logistics capabilities and its access to Middle Eastern markets made this a perfect fit," added Kevin Prokop, a director of Questor Management Company. John Janitz, Co-Managing Principal of Questor Management Company, added, "GeoLogistics is a great example of the value Questor can create by bringing capital and services to bear on troubled and underperforming companies. The Questor deal team and the GeoLogistics management team have done a remarkable job of driving improved operating performance at GeoLogistics." Over the last three years under Questor's ownership, GeoLogistics has implemented a broad-based operational turnaround that refocused its business on core international freight forwarding operations. It also improved productivity and reduced costs by lowering overhead expenses and by consolidating underperforming offices. Questor said that these initiatives improved operating performance and margins. In addition, investments made in sales capabilities contributed to substantial growth in 2004. "We are very pleased to have acquired GeoLogistics," said Tarek Sultan, Chairman of PWC Logistics. "The company is a recognized leader in global freight forwarding with a significant presence in key Asian, European and Americas markets. GeoLogistics' global presence and experienced management team will strengthen PWC Logistics' existing logistics capabilities and greatly expand both the scope and range of our service offering, including our ability to deliver high-end contract logistics solutions globally. Freight forwarding is a service that will continue to grow at impressive rates and one where strong market participants will continue to distance themselves from their midsize competitors. By acquiring GeoLogistics we significantly increase our global forwarding capabilities, especially within, to, and from the Middle East. Bill Flynn and his management team have done an outstanding job over the past few years, and we are delighted that GeoLogistics is now joining us." Professionals GeoLogistics engaged Citigroup and Bear Stearns as financial advisors and Drinker Biddle & Reath as legal advisor. Banc of America Securities and Shearman & Sterling advised PWC Logistics on the transaction. About Questor Questor Management Company LLC, with offices in Southfield, Michigan, Chicago and New York, manages the Questor Partners Funds, which have more than $1.1 billion of committed equity capital. Questor's objective is to acquire underperforming businesses that are in transition and offer the potential for superior returns with the application of appropriate levels of capital and management expertise. Since it was founded in 1995, the company has successfully completed more than 20 acquisitions worldwide. In addition to GeoLogistics, these include PinnOak Resources, a leading producer of metallurgical coal, which the fund purchased from US Steel; and Chef Solutions, a nationwide manufacturer of prepared foods, purchased from Lufthansa. About PWC Logistics PWC Logistics is a global provider of end-to-end supply chain solutions. Through its network of warehousing facilities and transportation and freight management services, PWC Logistics provides its customers with flexible solutions tailored to meet their business needs. PWC Logistics' customers span a wide range of industries, including apparel and footwear; automotive; consumer and industrial electronics; consumer packaged goods; engineering and construction; exhibits and entertainment; food and grocery; governmental and military organizations; and oil and petrochemicals. PWC Logistics is traded on the Kuwait Stock Exchange, ticker symbol WARE. For more information about PWC Logistics, please visit http://www.pwclogistics.com/ About GeoLogistics GeoLogistics Corporation is a global leader in non-asset based logistics, with an extensive network of operations in nearly 100 countries around the world. GeoLogistics offers its customers a broad range of freight management and customized solutions backed by a single, company-wide IT system. With experienced and dedicated people, GeoLogistics meets customers' specific local logistics needs on a truly global basis. GeoLogistics combines more than 150 years of history with the latest technology and practices. More information may be obtained at the Company's Web site at http://www.geo-logistics.com/ GRANT PRIDECO: Moody's Rates $175 Million Sr. Unsec. Notes at Ba2 ----------------------------------------------------------------- Moody's assigned a Ba2 rating to Grant Prideco, Inc.'s pending $175 million of senior unsecured notes due 2015, to be guaranteed by GRP's operating subsidiaries. Proceeds will fund the tender for and retirement of the $175 million of 9% senior unsecured notes due 2009. GRP expects the tender premium and costs to add another $22 million to the transaction cost. GRP is the industry leader in drill pipe products and is one of four market leaders in premium diamond drillbits. Moody's confirmed GRP's existing Ba2 Corporate Family Rating (formerly the Senior Implied Rating) and upgraded to Ba2 from Ba3 the existing 9% notes (to be retired). Moody's did not rate a recent $350 million bank revolver secured by U.S and U.K. fixed assets, receivables, and inventory, plus 65% of stock of other foreign subsidiaries. GRP has a one time option to increase that facility by $50 million. Moody's actions remove the notch between the note ratings and Corporate Family Rating due to the notes' very substantially reduced risk of significant effective subordination to secured bank debt. However, since the bank facility is secured by both working capital and fixed assets, GRP will need to either contemporaneously fund acquisitions with unsecured debt, or more junior capital, or quickly thereafter refinance material secured acquisition debt with unsecured debt or more junior capital. The indenture permits up to $400 million of secured debt. GRP does not have an ongoing working capital need for bank borrowings and is quickly repaying secured debt previously drawn to tender for senior unsecured notes. If that fundamental condition were to change significantly, the notes could be re- notched at that time. Also, if GRP were to ever borrow under its secured revolver to fund stock buybacks, such action would be incompatible with today's removal of the notes' rating's notch. The ratings are supported partly due to: * a seasoned, disciplined business and financial management team that is sensitive to the risks of up-cycle acquisitions; * to suitable acquisition funding strategies; and * to continuing to reduce leverage in advance of an inevitable sector down-cycle. This is particularly vital given the extreme cyclicality of the drilling products and services and Tubular Technology and Services segment. In that regard, the ratings also benefit from a comparatively low level of maintenance capital spending and rising diversification through a rising level of international activity where demand tends to be less cyclical. Importantly, the ratings are also supported by: * substantial debt reduction since the vital December 2002 ReedHycalog acquisition; * sound prospects for continuing debt reduction well into 2006 on significant free cash flow after an expected $70 million to $75 million of annual combined interest expense and capital spending in 2005 and 2006; * a stronger earnings base through the cycle after the ReedHycalog acquisition and integration and the June 2004 Drilling Products, International acquisition; and * Moody's view that, after falling to just $7 million of EBITDA in 1999, GRP's larger and more diversified business mix may now readily support trough EBITDA exceeding $70 million. However, the ratings are restrained by: * significant lease-adjusted leverage relative to our estimates of mid-cycle and down-cycle EBITDA; * GRP's substantial exposure to very price sensitive North American drilling activity levels; * exposure to a shift in demand patterns from premium tubular and drillbit products to lower margin products; * the fact that tubulars demand is extremely cyclical within a highly cyclical oil and gas sector; * the difficulty GRP has forecasting customers' drillpipe inventories, where those inventory trends are within the cycle, and estimating turning points in the demand cycle; * exposure to steel cost escalation; and * a risk that GRP's main tubulars supplier (Austrian) is inherently exposed to U.S. anti-dumping regulations. Further restraint stems from our view that GRP will continually assess whether to begin a more aggressive stock buyback program. It would be an especially unwelcome sign if GRP were to borrow under its secured revolver to repurchase stock. Further ratings restraint resides in GRP's very heavy working capital investment that expands and consumes cash during up-turns. More specifically, the removal of the one notch difference between the senior notes and the Corporate Family rating reflects substantial working capital and fixed asset scale relative to expected levels of secured debt. GRP carries over $500 million of receivables and inventory, the book value of hard assets is approximately $240 million, and the market value of hard assets is likely to be considerably above that figure. GRP's results will be sensitive to intra-cycle demand trends for premium and commodity drillpipe products, driven by customer inventories of those products and the shifting nature of their drilling activity during the up-cycle. On the other hand, GRP appears to have been successful in pushing through three price increases in the last year, including a 7.5% increase in May, 2005. Moody's believes that GRP's backlog is currently in the $500 million range, up from $411 million since first quarter 2005 and $292 million since year-end 2004. At this point, Moody's estimates a material rise in second quarter 2005 EBITDA in spite of fairly flat drillpipe footage sold. Though Moody's currently expects a supportive sector environment moving through 2005 and into 2006, the actual impact on GRP will partly depend on: 1) the degree to which its customers have filled their near and intermediate term inventory needs (drillpipe, heavyweight drillpipe, and drill collars); 2) the product demand mix between premium versus lower margin products; 3) steel and other raw materials cost pressures on GRP's tubulars suppliers; and 4) cyclical or secular shifts in producer capital spending to coal bed methane and certain other unconventional plays that reduce demand for premium products and boost demand for lower margin products. One mitigant is the rising need for premium products in basins or plays requiring increasingly complex drilling activity and premium downhole hardware in order to be commercial. Factors that could move the ratings up would include a sizable diversifying acquisition amply funded with common equity. Otherwise, the business portfolio would remain very exposed to volatile North American drilling activity. Furthermore, given GRP's current business portfolio and sector outlook, Moody's would consider an upgrade if the current up-cycle can be sustained long enough to reduce debt to roughly $175 million and lease adjusted debt to roughly $275 million. Factors that could result in a downgrade would include a relatively sizable leveraged acquisition, especially if the sector outlook softens. Moody's believes that GRP's current Corporate Family Rating is compatible with average down-cycle conditions. The note ratings could be re-notched and downgraded, even if the Corporate Family Rating is not downgraded, if the secured debt component rises very substantially and is not expected to be refinanced quickly with senior unsecured debt or more junior capital. In second quarter 2005, GRP tendered for and retired its $200 million of 9.625% senior unsecured notes due 2007, incurring substantial tender premiums and costs, funding the transaction with $165 million of secured bank borrowings and balance sheet cash. Barring acquisitions, the current $119 million of bank debt should be repaid by first-half 2006. This bank debt does not reflect an embedded working capital funding need. If GRP incurs softer business conditions, Moody's expects a resulting working capital contraction to free cash for debt repayment. Pro-forma for the note offering and pending tender transaction costs, Moody's estimates pro-forma June 30, 2005 cash balances in the range of $11 million, bank borrowings of roughly $140 million, and $175 million of secured notes. Adjusting balance sheet debt for operating lease obligations, total June 30, 2005 lease- adjusted debt would be in the range of $400 million. Moody's expects GRP's 2005 EBITDA to be in the $300 million to $330 million range (EBITDAR of $310 million to $340 million), with fourth quarter 2005 likely to be the strongest quarter due to stepped up Canadian winter drilling season demand. Moody's does note that the back-ended nature of 2005 EBITDA does pose a risk to its forecast. Moody's believes that 2005 pro-forma interest expense would approximate $26 million ($20 million in 2006) and capital spending would approximate $40 million ($45 million in 2006), excluding acquisitions. Pro-forma June 30, 2005 Debt/Total Capital was roughly 31%, Debt/Tangible Capital was roughly 49%, pro-forma EBITDA/Interest Expense appears be in the range of 12x and EBITDAR coverage of interest and rent appears to be in the range of 9x. GRP carries a strong current ratio in the range of 2.9x due to substantial long- term debt and equity funding of short-term assets. Moody's currently believes that trough EBITDA should readily cover interest expense plus roughly $40 million of capital spending. GRP is the world's largest tubulars and connections supplier. ReedHycalog is a leading provider of roller-cone and natural and artificial diamond fixed-cutter drill bits, supplying the North American and global markets. The sector is consolidated, with the top four competitors controlling roughly 90% of the drillbit market. Reed is the third largest supplier, with a reported market share of approximately 20%. Grant Prideco, Inc. is headquartered in Houston, Texas. GRANT PRIDECO: Prices $200 Million of 6-1/8% Senior Notes --------------------------------------------------------- Grant Prideco, Inc. (NYSE: GRP) has priced an offering of $200 million aggregate principal amount of 6-1/8% Senior Notes due 2015 pursuant to Rule 144A and Regulation S of the Securities Act of 1933, as amended. The Company elected to upsize the offering, which was priced at par, from $175 million to $200 million. This transaction is expected to close on July 27, 2005. The proceeds of the offering will be used to finance the cash tender offer and consent solicitation launched on July 13, 2005 for the Company's outstanding 9% Senior Notes due 2009 and to repay a portion of the outstanding borrowings under the Company's senior secured credit facility drawn to fund the redemption of the Company's 9 5/8% Notes retired on June 17, 2005. The Company expects to record non-recurring pre-tax charges related to the Tender of approximately $22 million during the third quarter of 2005. Upon closing of this transaction and the Tender, the Company will have completed a comprehensive restructuring of its balance sheet. Along with its new bank credit facility and earlier redemption of its 9-5/8% Notes, the Company will have extended debt maturities, improved debt covenant structure and reduced annual interest expense by approximately $19 million at current interest rates, assuming the Tender is fully subscribed. The Notes being offered have not been registered under the Act and may not be offered or sold in the United States absent registration or pursuant to an applicable exemption from the registration requirements of the Act. The Notes will be offered and sold only to qualified institutional buyers in reliance on Rule 144A of the Act and certain persons in offshore transactions in reliance on Regulation S under the Act. Grant Prideco -- http://www.grantprideco.com/-- headquartered in Houston, Texas, is the world leader in drill stem technology development and drill pipe manufacturing, sales and service; a global leader in drill bit technology, manufacturing, sales and service; and a leading provider of high-performance engineered connections and premium tubular products and services. * * * As reported in the Troubled Company Reporter on July 15, 2005, Standard & Poor's Rating Services assigned its 'BB' rating to Grant Prideco Inc.'s $175 million senior unsecured notes due 2015. In addition, Standard & Poor's affirmed its 'BB' corporate credit rating on the company. The outlook remains stable. As of March 31, 2005, Houston, Texas- based Grant Prideco had $373 million in long-term debt on a pro forma basis. GT BRANDS: Wants Interim Access to DIP Loan & Cash Collateral ------------------------------------------------------------- GT Brands Holdings LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York for authority to enter into a $1.1 million debtor-in-possession financing agreement with a consortium of lenders led by JPMorgan Chase Bank, N.A., as documentation and administrative agent, and Bank of America, N.A., and HSBC Bank USA as co-syndication agents. The Debtors also ask the Court for permission to use cash collateral securing repayment of prepetition obligations to their lenders. The Debtors need access to the cash collateral and the DIP loan to finance their day-to-day ordinary course business expenses pending consummation of a proposed sale of substantially all of their assets to Gaiam, Inc. Prepetition Indebtedness As of July 11, 2005, the Debtors' principal indebtedness include: -- $58 million in principal, plus $1.8 million accrued and unpaid interest under revolving and term loans made by the lenders; -- $341,000 in letter of credit reimbursement obligations; and -- fees and expenses incurred under the credit agreement. Cash Collateral The cash collateral will be used in accordance with a 12-week budget provided to the Lenders covering the period from July 15, 2005, to Sept. 30, 2005. In addition, the Debtors have also agreed to provide the lenders: (i) eight-week rolling cash flow projections; (ii) monthly financial statements; and (iii) reports with respect to gross product sales and actual returns based on the sale systems reports and estimated media costs based on internal management reports. The liens on the prepetition collateral, the replacement liens and the 507(b) claims granted to the lenders are subject and subordinate to a carve-out for the payment of: -- unpaid statutory fees; -- professional fees and disbursements; -- expense reimbursement of not more than $500,000 pursuant to the bidding procedures order; -- severance and bonus obligations; and -- administrative costs and expenses. An event of default will occur under the interim DIP financing order if the Debtors will not be able to consummate the proposed sale before Sept. 30, 2005. Adequate Protection & Security To provide the Lenders with adequate protection required under 11 U.S.C. Sec. 363 for any diminution in the value of their cash collateral, the Debtors will grant: -- a first priority perfected lien on all of the Debtors' otherwise unencumbered assets; -- a first priority, senior, priming and perfected lien upon: (a) that portion of the postpetition collateral that is comprised of the prepetition collateral and (b) postpetition collateral subject to a lien that is junior to the liens securing the prepetition obligations; and -- a second priority, junior perfected lien upon all postpetition collateral which is subject to a validly perfected lien as of July 11, 2005. The Lenders will receive superpriority liens on account of all DIP loans. Subject to the carve out, the DIP liens are prior and senior to all liens and encumbrances of all other secured creditors and will constitute valid and duly perfected security interests and liens. As additional adequate protection, the Debtors also ask the Court for authority to pay or reimburse all reasonable fees, costs and charges incurred after July 1, 2005, by the lenders. Headquartered in New York, New York, GT Brands Holdings LLC, supplies home video titles to mass retailers. The Debtors also develop and market branded consumer, lifestyle and entertainment products. The Company and its affiliates filed for chapter 11 protection on July 11, 2005 (Bankr. S.D.N.Y. Case No. 05-15167). Brian W. Harvey, Esq., at Goodwin Procter LLP, represents the Debtors in their chapter 11 proceedings. When the Debtors filed for protection from their creditors, they estimated between $50 million to $100 million in assets and more than $100 million in debts. HCA INC: Inks Pact to Sell Five Hospitals to LifePoint ------------------------------------------------------ HCA Inc. (NYSE: HCA) disclosed the signing of a definitive agreement to sell five rural hospitals in Virginia and West Virginia to LifePoint Hospitals, Inc., for approximately $285 million, plus working capital and other adjustments estimated to be $45 million as of March 31, 2005. The five facilities are part of a planned divestiture of 10 hospitals previously announced by HCA in March of 2005. The five facilities involved in the LifePoint agreement are: * Clinch Valley Medical Center, Richlands, Va. 200 beds * St. Joseph's Hospital, Parkersburg, W. Va. 325 beds * Saint Francis Hospital, Charleston, W. Va. 155 beds * Raleigh General Hospital, Beckley, W. Va. 369 beds * Putnam General Hospital, Hurricane, W. Va. 68 beds Like all of the hospitals in the divestiture plan, these facilities are located primarily in rural and non urban markets, in contrast to the majority of the company's remaining hospitals which are primarily located in larger urban and suburban areas. LifePoint currently owns a hospital in Martinsville, Va., one in Wytheville, Va., one in Danville, Va. and two in Logan, W.Va. "I am extremely pleased that these five facilities will be part of LifePoint. We believe LifePoint can focus the necessary resources on these hospitals and enable them to compete more successfully for capital thereby allowing them the best opportunity for success in the future," stated Jack O. Bovender, Jr. HCA's Chairman and CEO. "The divestitures will allow HCA to redeploy capital to support our hospitals in growing urban markets," concluded Bovender. The company is still pursuing discussions with various parties for the divestiture of the remaining five hospitals and anticipates completion of the divestitures by the end of 2005. The remaining five hospitals are: * Grandview Medical Center, Jasper, Tenn. 70 beds * River Park Hospital, McMinnville, Tenn. 127 beds * North Monroe Medical Center, Monroe, La. 255 beds * Southwestern Medical Center, Lawton, Okla. 212 beds * Capital Medical Center, Olympia, Wash. 119 beds HCA believes the divestitures will not have a material effect on its future financial position or results of operations. The transaction is expected to be completed in the fourth quarter of 2005 and is subject to customary regulatory approvals. * * * As reported in the Troubled Company Reporter on May 11, 2005, Moody's Investors Service upgraded HCA Inc.'s speculative grade liquidity rating to an SGL-1 from SGL-2. The rating upgrade reflects the company's excellent liquidity position with strong cash flows, an undrawn $1.75 billion, five year revolver, and improved cushion in its financial covenants following the repayment of $700 million in debt during the first quarter of 2005. HCA benefits from having a largely unencumbered asset base, and Moody's notes that HCA recently announced plans to divest ten hospitals that are located in non-strategic markets during 2005. HCA's SGL-1 rating incorporates its relatively strong cash flow generating capabilities. Moody's notes that improvements in HCA's equivalent admission growth rate due to increases in outpatient volume, combined with the recent moderation of bad debt expense due to a declining growth rate of uninsured patients contributed to solid operating performance during the first quarter of 2005. The company's senior implied rating is Ba2 with a stable outlook. HERITAGE VILLAGE: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: Heritage Village Ventures II, Inc. c/o Charles Bowes International Plaza, Suite 430 Philadelphia, Pennsylvania 19113 Bankruptcy Case No.: 05-19698 Chapter 11 Petition Date: July 15, 2005 Court: Eastern District of Pennsylvania (Philadelphia) Debtor's Counsel: Albert A. Ciardi, III, Esq. Ciardi & Ciardi, P.C. One Commerce Square 2005 Market Street, Suite 2020 Philadelphia, Pennsylvania 19103 Tel: (215) 557-3550 Fax: (215) 557-3551 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. INTEGRATED PERFORMANCE: Pays $500K to Resolve Legacy Bank Dispute ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Texas approved a settlement agreement resolving the lease dispute between Illinois-based electronics manufacturer Integrated Performance Systems, Inc. (OTCBB: IPFS) and Legacy Bank of Texas. Integrated Performance will pay Legacy Bank $500,000 to secure its release from a leasehold agreement signed with C-Gate Construction, Inc. The payment also discharges Integrated Performance from all claims arising out of the disputed lease. Under the terms of the settlement, Integrated Performance will pay Legacy Bank $100,000 by June 24, 2005. The balance is payable upon the Bankruptcy Court's approval of the agreement, but not later than July 31, 2005. If Integrated Performance fails to pay the balance, Legacy Bank may apply the $100,000 to Integrated Performance's obligations under the lease, and the Company will remain fully liable under the lease. The Lease Dispute Integrated Performance signed a 20-year lease with C-Gate Construction for a 60,000 sq. ft. manufacturing facility in Frisco, Texas, years ago. Prior to Integrated Performance's merger with Best Circuit Boards, Inc., on November 2004, C-Gate Construction reduced Integrated Performance's monthly rent on the facility to $17,000 from $35,000 and changed the 20-year lease term to a month-to-month tenancy. Legacy Bank, a secured creditor in C-Gate Construction's bankruptcy case, complained that the lease modification was made without its approval and questioned whether: a) C-Gate Construction had the authority to execute the lease modification without the prior approval of the bankruptcy court; and d) an attornment agreement executed by C-Gate Construction in their favor would prevent C-Gate Construction from modifying the lease without their consent. A copy of the lease agreement is available for free at: http://bankrupt.com/misc/leaseAgree.pdf About Integrated Performance Integrated Performance optimizes the performance of people by leveraging technology to drive individual and organizational results. The company's iPerform Human Capital Performance Platform integrates Learning Management, Performance Management, Talent Management, and Organizational Development Systems into one scalable and highly functional platform. Leading organizations like GE Capital, Perot Systems, McGraw Hill, and Square D Company use iPerform to optimize performance and drive results. IPS is also a leading developer of custom, web-based, multi-media courseware for companies such as Achieve Global, Michelin Tire, Cigna Insurance, Becton Dickinson, Potlatch Corp, Transamerica Finance, Corbett Health, and Kemper Insurance. JO-ANN STORES: Good Performance Prompts S&P to Lift Ratings ----------------------------------------------------------- Standard & Poor's Ratings Service raised its ratings on Hudson, Ohio-based specialty retailer Jo-Ann Stores Inc. The corporate credit rating was raised to 'BB-' from 'B+' and the subordinated debt rating was raised to 'B' from 'B-'. The ratings were removed from CreditWatch, where they were placed with positive implications on March 14, 2005. The outlook is stable. "The upgrade reflects the company's improved operating performance despite inconsistent quarterly results, and good credit protection measures for the rating category," said Standard & Poor's credit analyst Robert Lichtenstein. Operating performance has been driven by good execution and favorable industry trends in crafts. Jo-Ann has reduced debt over the past two years, with total debt to EBITDA of 3.7x at April 30, 2005. Moreover, Standard & Poor's believes the company will be able to maintain credit measures commensurate with the rating category as capital expenditures are largely financed through internally generated funds. The ratings on Jo-Ann Stores reflect: * the risks associated with the company's participation in the competitive and fragmented craft and hobby industry, * its store conversion strategy, and * highly leveraged capital structure. Jo-Ann Stores maintains a leading market position in the fabric segment of the hobby industry, but trails Michaels Stores Inc. in the crafts segment. Because of better growth prospects for the crafts industry, management's strategy is to reposition the company as a fabric and crafts retailer from a predominantly fabric retailer, by replacing existing stores with its Jo-Ann etc. superstore format. However, the company faces the challenges of competing with crafts industry leader Michaels and managing a higher level of inventory. KB TOYS: Bankruptcy Court Approves Disclosure Statement ------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved KB Toys, Inc.'s Disclosure Statement explaining the Company's Plan of Reorganization. Following Friday's ruling, the Debtor will now ask its creditors to vote to accept the plan. Aug. 12, 2005, is the deadline for creditors to cast their ballots. The bankruptcy court has scheduled a plan confirmation hearing for Aug. 18, 2005. Terms of the Plan The Plan, which is proposed jointly by the Company and its statutory Official Committee of Unsecured Creditors, is based on a Plan Funding Agreement between the Company and PKBT Funding LLC, an affiliate of Prentice Capital Management, LP. Pursuant to the Agreement, PKBT will invest $20 million in a reorganized KB Toys and provide a seasonal over-advance credit facility of up to $25 million in exchange for 90% of the common stock and 100% of the preferred stock of the reorganized Company. The remaining common stock will be held by a trust for the benefit of the unsecured creditors of those KB Toys entities being reorganized under the Plan of Reorganization. "KB's associates have worked extremely hard to strengthen the Company's operations," KB Toys' chief executive officer, Michael L. Glazer said. "The Creditors Committee has supported our efforts. We greatly appreciate their encouragement and the continued confidence displayed by the Company's creditors, landlords and business partners." Jonathan Duskin, a managing director of Prentice Capital said: "We look forward to becoming the majority owners of KB Toys and are excited about the Company's opportunities to improve its performance and solidify its presence as America's neighborhood toy store." Under the Bankruptcy Court hearing schedule, the Company expects that it will emerge from Chapter 11 before the 2005 holiday season. Reorganization Progress KB Toys, Inc., and 69 of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on January 14, 2004. In the past year, KB has taken a number of steps intended to strengthen its business operations and enhance its financial performance. These steps include the closing of more than 600 stores, selling the Company's Internet business, closing a distribution center, streamlining the Company's management structure, reducing staffing levels at the Company's headquarters and introducing more efficient business practices throughout the organization. The proposed Plan of Reorganization and Disclosure Statement are available on the Company's Web site at http://www.kbtinfo.com/ One of the largest toy retailers in the United States, KB Toys -- http://www.kbtoys.com/-- (which once boasted 1,200 stores) operates about 650 stores under four formats: * KB Toys mall stores, * KB Toy Works neighborhood stores, * KB Toy Outlets and KB Toy Liquidator, and * KB Toy Express (in malls during the holiday season). The company along with its affiliates filed for chapter 11 protection on January 14, 2004 (Bankr. Del. Case No. 04-10120). The chapter 11 filing resulted in nearly 600 store closures and 4,000 layoffs. In March 2004, KB Toys sold its KBToys.com Internet business to an affiliate of D. E. Shaw, which renamed the company eToys Direct. Joel A. Waite, Esq., at Young, Conaway, Stargatt, & Taylor, represents the toy retailer. When the Debtors filed for protection from its creditors, they listed consolidated assets of $507 million and consolidated debts of $461 million. KB TOYS: PKBT Funding Wins Bid to Finance Reorganization Plan ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved PKBT Funding LLC's bid to fund KB Toys, Inc.'s Plan of Reorganization. PKBT, an affiliate of Prentice Capital Management, LP, is poised to take control of the Company upon the Plan's effective date, which is expected to occur shortly after its confirmation. The Court also approved KB Toys' Disclosure Statement explaining the Company's Plan of Reorganization. The Plan is based on a Plan Funding Agreement between the Company and PKBT, pursuant to which the Prentice affiliate will invest $20 million in a reorganized KB Toys and provide a seasonal overadvance credit facility of up to $25 million in exchange for 90% of the common stock and 100% of the preferred stock of the reorganized Company. The remaining common stock will be held by a trust for the benefit of the unsecured creditors of those KB Toys entities being reorganized under the Plan of Reorganization. "We look forward to becoming the majority owners of KB Toys and are excited about the Company's opportunities to improve its performance and solidify its presence as America's neighborhood toy store," Jonathan Duskin, a managing director of Prentice Capital said. Under the Bankruptcy Court hearing schedule, the Company expects that it will emerge from Chapter 11 before the 2005 holiday season. Reorganization Progress KB Toys, Inc., and 69 of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on January 14, 2004. In the past year, KB has taken a number of steps intended to strengthen its business operations and enhance its financial performance. These steps include the closing of more than 600 stores, selling the Company's Internet business, closing a distribution center, streamlining the Company's management structure, reducing staffing levels at the Company's headquarters and introducing more efficient business practices throughout the organization. The proposed Plan of Reorganization and Disclosure Statement are available on the Company's Web site at http://www.kbtinfo.com/ One of the largest toy retailers in the United States, KB Toys -- http://www.kbtoys.com/-- (which once boasted 1,200 stores) operates about 650 stores under four formats: * KB Toys mall stores, * KB Toy Works neighborhood stores, * KB Toy Outlets and KB Toy Liquidator, and * KB Toy Express (in malls during the holiday season). The company along with its affiliates filed for chapter 11 protection on January 14, 2004 (Bankr. Del. Case No. 04-10120). The chapter 11 filing resulted in nearly 600 store closures and 4,000 layoffs. In March 2004, KB Toys sold its KBToys.com Internet business to an affiliate of D. E. Shaw, which renamed the company eToys Direct. Joel A. Waite, Esq., at Young, Conaway, Stargatt, & Taylor, represents the toy retailer. When the Debtors filed for protection from its creditors, they listed consolidated assets of $507 million and consolidated debts of $461 million. KMART CORP: Lennar Wants to Withdraw Reference of Milton Issues --------------------------------------------------------------- Pursuant to Section 157(d) of the Bankruptcy Code and Rule 5011(a) of the Federal Rules of Bankruptcy Procedure, LNR Partners, Inc., formerly known as Lennar Partners, Inc., as special servicer and attorney-in-fact for CAPCO 1998-D7 Pipestone, LLC, asks the U.S. District Court for the Northern District of Illinois to withdraw the reference of a contested matter with Milton Ventures, L.L.P. Lennar wants the case consolidated with a pending civil action filed by CAPCO against Milton Ventures and certain related defendants, pending before District Judge William Hibbler. By virtue of a $5.5 million loan to Milton Ventures by CAPCO, Milton Ventures granted CAPCO a mortgage, which encumbered real estate and improvements located at 1959 Pipestone Road, Benton Harbor, Michigan. Milton Ventures also granted CAPCO an Assignment of Leases and Rents, which granted CAPCO a lien and security interest in, and an absolute and unconditional assignment of, the Leases and the Rents. According to Jerry L. Switzer, Jr., at Jenner & Block LLP, in Chicago, Illinois, the Rents Assignment prohibited Milton Ventures from collecting the Rents more than one month in advance, or from assigning its interest in the Leases or the Rents. One of the leases subject to the Rents Assignment was a lease between Milton Ventures and Kmart Corporation for Kmart Store No. 3421. On July 29 and 30, 2002, Milton Ventures filed in the Bankruptcy Court two proofs of claim against Kmart's estate for: (i) future rents arising from Kmart's rejection of the Lease; and (ii) postpetition and pre-rejection rents. In August 2002, Milton Ventures defaulted on its loan obligations to CAPCO by ceasing debt service payments. Upon default, CAPCO was automatically entitled to and owned the Rents, pursuant to the Rents Assignment and Section 554.231 of the Michigan Compiled Laws. Mr. Switzer relates that on October 6, 2003, Milton Ventures filed in the Bankruptcy Court an Assignment of Claims -- Claim Nos. 3772 and 53944 -- which purported to assign the Rent Claims to Richard Kushnir. Mr. Kushnir is a friend and business acquaintance of Moshe Shalteil, a part owner and manager of Milton Ventures. CAPCO did not receive notice of the First Claims Assignment. In March 2004, CAPCO initiated and subsequently purchased the Pipestone Property at a non-judicial foreclosure sale pursuant to its rights under the Mortgage, which resulted in a deficiency of $1,526,537. Then, on April 13, 2004, CAPCO -- through Lennar -- filed in the Bankruptcy Court a notice of interest in the Rent Claims to satisfy the deficiency. The Notice stated that absent a timely, valid objection, the Rent Claims would be transferred to CAPCO. On April 29, 2004, Milton Ventures objected to the Notice, asserting for the first time that it had transferred the Rent Claims to Mr. Kushnir and, thus, the Rent Claims were not owned by CAPCO. Milton Ventures did not set the Objection for hearing, as required by Section 3001(e)(5) of the Federal Rules of Bankruptcy Procedure. On August 5, 2004, Milton Ventures caused an ex parte Agreed Order Resolving Lease Rejection Rent Claim and Administrative Expense for Kmart Store No. 3421 to be entered by the Bankruptcy Court, which purported to settle the Contested Matter regarding ownership of the Rent Claims by: -- allowing the Rent Claims in favor of Milton for $827,215; and -- directing payment on the Claims to Simone Shalteil, also known as Simone Saragosi. Mr. Switzer says that while the Ex Parte Order was denominated as "Agreed," CAPCO did not agree to and had no notice of its entry. On learning of the Ex Parte Order, CAPCO filed: (a) a complaint against Milton Ventures, Messrs. Moshe Shalteil and Kushnir, and Ms. Saragosi in the District Court, alleging causes of action for conversion, avoidance and recovery of fraudulent transfer, waste, fraud, and tortuous interference of contract. The Civil Action is pending before Judge Hibbler; and (b) a motion in the Bankruptcy Court to vacate the Ex Parte Order pursuant to Rule 9014 of the Federal Rules of Bankruptcy Procedure and Rule 60(b) of the Federal Rules of Civil Procedure. The Bankruptcy Court vacated the Ex Parte Order on April 19, 2005. On May 6, 2005, Kmart filed in the Bankruptcy Court an adversary complaint against Ms. Saragosi alleging claims for, among other things, replevin and unjust enrichment. At the April 19, 2005 hearing, the Bankruptcy Court suggested that CAPCO request withdrawal of the reference of the Contested Matter regarding ownership of the Rent Claims. Mr. Switzer explains that judicial economy is served by withdrawing the reference of the Contested Matter so that the District Court can decide all of the related factual and legal issues in both the Contested Matter and the Civil Action, thus resulting in significant cost savings. Having the District Court decide both the Civil Action and the Contested Matter will also avoid the possibility of inconsistent findings of fact and conclusions of law by the Bankruptcy and District Courts. Withdrawal will not adversely affect the administration of Kmart's estate because the estate's liability on account of the Rent Claims has already been established. Rather, the sole issue in the Contested Matter is the ownership of the Rent Claims, which must be determined so that Kmart knows to whom distributions should be made. Mr. Switzer says that the relative familiarity of the Bankruptcy and District Courts to the issues in the Contested Matter supports withdrawal, or at worst is a neutral factor. 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. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART CORP: Michal Sanford Asks Court for Leave to File Claim ------------------------------------------------------------- Michal Ann Sanford asks the U.S. Bankruptcy Court for the Northern District of Illinois for leave to file a late proof of claim against Kmart Corporation. On August 28, 2002, Ms. Sanford slipped and fell at a Big Kmart in Oak Lawn, County of Cook, State of Illinois. Ms. Sanford filed a complaint with the Illinois state court on August 28, 2004, alleging negligence and premises liability against Kmart. Rodrick F. Wimberly, Esq., in Chicago, Illinois, tells the Court that Ms. Sanford did not have proper notice of Kmart's bankruptcy, nor its effect on her claim against Kmart. While Kmart's First Amended Joint Plan of Reorganization may provide adequate notice to those creditors that have business relationships with Kmart and would have known of its bankruptcy, Ms. Sanford did not have that relationship, as she was just a prospective shopper in the store and would not have any particular reason to know of Kmart's bankruptcy. As a result, Mr. Wimberly maintains, Ms. Sanford was unable to submit a notice of, and request for payment of a claim within the proscribed time frame under the Plan. Ms. Sanford contacted Kmart on several occasions, but she was never contacted back. As her counsel, Mr. Wimberly attempted to contact Kmart on several occasions regarding Ms. Sanford's claim as a pre-litigation step in state court, but Kmart never responded. Mr. Wimberly argues that Kmart must show that Ms. Sanford was notified of its Chapter 11 petition and failed to file a request for payment after receiving the notice. According to Mr. Wimberly, there is absolutely no evidence to suggest that Kmart properly notified Ms. Sanford to allow her claim to be denied as untimely under the Plan. Ms. Sanford should also not be punished for Kmart's negligence or deceptive conduct for its notification of its bankruptcy status after the deadline. Mr. Wimberly assures the Court that granting Ms. Sanford's request would not create undue prejudice against Kmart. On the other hand, denial of the request would deprive Ms. Sanford recovery on a legitimate claim for her injuries against Kmart. Though Kmart failed to notify Ms. Sanford, it notified certain prospective claimants of its bankruptcy filing and any claimants of the bar date. Mr. Wimberly contends that Kmart had the same duty to notify Ms. Sanford but failed to do so, and as a result, her claim should not be time-barred. 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. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) LEROY WICKLUND: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: LeRoy Rudolph & Anita Caramba Wicklund 18904 Burke Avenue North Seattle, Washington 98133 Bankruptcy Case No.: 05-19000 Chapter 11 Petition Date: July 14, 2005 Court: Western District of Washington (Seattle) Debtor's Counsel: Christopher C. Meleney, Esq. 12811 8th Avenue West, Suite A201 Everett, Washington 98204 Tel: (425) 355-7575 Fax: (425) 353-5209 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtors did not file a list of their 20 Largest Unsecured Creditors. LIFEPOINT HOSPITALS: Buying Five Hospitals from HCA for $285 Mil. ----------------------------------------------------------------- HCA Inc. (NYSE: HCA) signed a definitive agreement to sell five rural hospitals in Virginia and West Virginia to LifePoint Hospitals, Inc., for approximately $285 million, plus working capital and other adjustments estimated to be $45 million as of March 31, 2005. The five facilities are part of a planned divestiture of 10 hospitals previously announced by HCA in March of 2005. The five facilities involved in the LifePoint agreement are: * Clinch Valley Medical Center, Richlands, Va. 200 beds * St. Joseph's Hospital, Parkersburg, W. Va. 325 beds * Saint Francis Hospital, Charleston, W. Va. 155 beds * Raleigh General Hospital, Beckley, W. Va. 369 beds * Putnam General Hospital, Hurricane, W. Va. 68 beds Like all of the hospitals in the divestiture plan, these facilities are located primarily in rural and non urban markets, in contrast to the majority of the company's remaining hospitals which are primarily located in larger urban and suburban areas. LifePoint currently owns a hospital in Martinsville, Va., one in Wytheville, Va., one in Danville, Va. and two in Logan, W.Va. "I am extremely pleased that these five facilities will be part of LifePoint. We believe LifePoint can focus the necessary resources on these hospitals and enable them to compete more successfully for capital thereby allowing them the best opportunity for success in the future," stated Jack O. Bovender, Jr. HCA's Chairman and CEO. "The divestitures will allow HCA to redeploy capital to support our hospitals in growing urban markets," concluded Bovender. The company is still pursuing discussions with various parties for the divestiture of the remaining five hospitals and anticipates completion of the divestitures by the end of 2005. The remaining five hospitals are: * Grandview Medical Center, Jasper, Tenn. 70 beds * River Park Hospital, McMinnville, Tenn. 127 beds * North Monroe Medical Center, Monroe, La. 255 beds * Southwestern Medical Center, Lawton, Okla. 212 beds * Capital Medical Center, Olympia, Wash. 119 beds HCA believes the divestitures will not have a material effect on its future financial position or results of operations. The transaction is expected to be completed in the fourth quarter of 2005 and is subject to customary regulatory approvals. LifePoint Hospitals, Inc., is a leading hospital company focused on providing healthcare services in non-urban communities, with 50 hospitals, approximately 5,285 licensed beds and combined revenues of approximately $1.9 billion in 2004. Of the combined 50 hospitals, 46 are in markets where LifePoint Hospitals is the sole community hospital provider. LifePoint Hospitals' non-urban operating strategy offers continued operational improvement by focusing on its five core values: delivering high quality patient care, supporting physicians, creating excellent workplaces for its employees, providing community value and ensuring fiscal responsibility. Headquartered in Brentwood, Tennessee, LifePoint Hospitals is affiliated with approximately 18,000 employees. * * * As reported in the Troubled Company Reporter on June 23, 2005, 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%. LOCATEPLUS HOLDINGS: Completes $8 Million Financing --------------------------------------------------- LocatePLUS Holdings Corp. (OTC Bulletin Board: LPLHA, LPLHB, LPLHW) has closed on an aggregate $8 million financing. The financing consists of 3% senior convertible notes which are convertible into the Company's common stock at a conversion price of $0.10 per share and warrants to acquire an aggregate of 32,000,000 shares of common stock at an exercise price of $0.15 per share. The investment was led by the Special Situations Funds, which invested a total of $5,000,000 and included $1,000,000 from Greenway Capital. Laidlaw & Company (UK) Ltd., a New York-based investment and merchant banking company, acted as placement agent for the transaction. Proceeds of the investment will be used to retire outstanding debt owed to Laurus Master Fund, Ltd. and for working capital purposes. Stock Recapitalization In connection with the financing, the Company has agreed to pursue a recapitalization of its capital stock by combining shares of the Company's Class A Voting Common Stock and Class B Nonvoting Common Stock into a single class of voting common stock and by seeking to effect a 1-for-50 reverse stock split. "We are taking these actions at this time to simplify our capital structure so that we can make the Company more attractive to potential investors," LocatePLUS CEO Jon Latorella, said. "We hope that the recapitalization will allow us to qualify to include our shares in a national trading market, thereby increasing the liquidity of our shares and simplifying future capital raising activities." Mr. Latorella concluded, "We believe the combination of our recent financing, substantial debt reduction, double-digit annual revenue growth, technological advancements and strong infrastructure, along with a proposed simplified capital structure, position LocatePLUS to emerge as a new and powerful player in the identity validation space." LocatePLUS Holdings Corp. -- http://www.locateplus.com/-- and its subsidiaries, are industry-leading providers of public information and investigative solutions that are used in homeland security, anti-terrorism and crime fighting initiatives. The Company's proprietary, Internet-accessible database is marketed to business- to-business and business- to-government sectors worldwide. LocatePLUS' online customer base numbers approximately 20,000 members, including over 2,000 law enforcement agencies and many major police departments across the country. Clients include leading U.S. agencies, including the FBI (Federal Bureau of Investigation), ATF (Bureau of Alcohol, Tobacco, Firearms and Explosives) and DEA (Drug Enforcement Administration). Channel partners include Loislaw, Earthlink, Imaging Automation, AssureTec, Metro Risk Management LLC, and the nation's leading recruitment site. * * * As reported in the Troubled Company Reporter on July 7, 2005, Livingston & Haynes, P.C., of Wellesley, Massachusetts, expressed substantial doubt about LocatePLUS Holdings Corporation's ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended Dec. 31, 2004. The auditors point to the Company's accumulated deficit and substantial net losses in each of the past three years. Auditors at Carlin, Charron & Rosen LLP expressed similar doubts after they looked at LocatePLUS' 2003 financial statements. At Mar. 31, 2005, LocatePLUS Holdings Corporation's balance sheet showed a $1,769,007 stockholders' deficit, compared to a $1,223,608 deficit at Dec. 31, 2004. LONG BEACH: S&P Pares Ratings on Two Certificate Classes to B ------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on class II- M1 of Long Beach Mortgage Loan Trust 2002-2 to 'AAA' from 'AA'. At the same time, the ratings on three classes from the same transaction are lowered, and the rating on one class is affirmed. The raised rating is based on a projected credit support percentage that is sufficient to protect the class from losses at the higher rating level, despite the poor performance of the mortgage pool. Based solely on the amount of subordination available to this class, the projected credit support percentage is 2.40x the level associated with the higher rating. In addition, cumulative losses are above the cumulative loss trigger threshold, which prevents principal from being paid to the subordinate classes. Class II-M1 is the most senior outstanding class in this pool. The lowered ratings are based on pool performance that has led to losses that have outpaced excess interest for the past eight months. On average, losses have been approximately 3x excess interest during this period. This trend has led to an erosion of overcollateralization. In addition, since the senior II-A class paid off in June 2005 and the cumulative loss trigger did not go into effect until July 2005, this pool was able to step down its subordination and its overcollateralization target during that month. Starting July 25, 2005, the cumulative loss trigger will be 2.25% of the original pool balance and will increase each month. Currently, cumulative losses are at 2.61% of the original pool balance. Ninety-plus-day delinquencies (including foreclosures and REOs) are 20.42% of the current pool balance. The rating affirmation is based on a credit support percentage that is sufficient to maintain the current rating on the securities. Based solely on the subordination available to this class, the projected credit support is 1.95x the credit support level associated with the current rating. Long Beach Mortgage Co. either originated or acquired all of the mortgage loans used as collateral in this pool in accordance with its underwriting standards. The underlying collateral for these transactions consists primarily of fixed- and adjustable-rate, first-lien, 30-year mortgage loans on single-family homes, which do not conform to the purchase guidelines of Fannie Mae. Credit support for this transaction comes from a combination of subordination, excess interest, and overcollateralization. Rating Raised Long Beach Mortgage Loan Trust 2002-2 Rating ------ Class To From ----- -- ---- II-M1 AAA AA Ratings Lowered Long Beach Mortgage Loan Trust 2002-2 Rating ------ Class To From ----- -- ---- M3 BBB- BBB M4A B BBB- M4B B BBB- Rating Affirmed Long Beach Mortgage Loan Trust 2002-2 Class Rating ----- ------ M2 A MADISON RIVER: Moody's Rates Proposed $525MM Facilities at B1 ------------------------------------------------------------- Moody's Investors Service has assigned a B1 rating to Madison River Capital, LLC's proposed senior secured credit facilities. The ratings for the new proposed credit facilities reflect: * the company's relatively high leverage; * nominal organic growth prospects; and * growing competition offset by strong and stable cash flow generation, high and slightly improving margins, and a favorable regulatory environment. Moody's has assigned these ratings: * $75 Million Senior Secured Revolving Credit Facility (matures 7 years from closing) -- B1 * $450 Million Senior Secured Term B Loan (matures 7 years from closing) -- B1 Moody's has affirmed these ratings: * Corporate family rating (formerly known as the senior implied rating) -- B1 * $200 million 13.25% Senior Notes due 2010 -- B3 The ratings outlook is stable. The B1 corporate family rating reflects: * Madison River's high leverage (roughly 5.5x total debt to EBITDA); * vulnerability to heightened wireless or cable telephony competition in its rural markets; and * its relatively flat top-line growth prospects. Stable and dependable operating cash flow, a favorable regulatory environment, and barriers to competitive entry support the ratings. The ratings also reflect Moody's expectation that Madison River will launch its delayed initial public offering within the next twelve months and will use the proceeds to reduce leverage to below 4.5x total debt to EBITDA. The ratings also acknowledge Madison River's slightly improving margins and operating cash flow generation. EBITDA margins have improved from 47% at year-end 2002 to over 50% (51% as of Q1'05). Rather low capital spending (i.e. compared to other rural local exchange carrier, RLEC, peers) has enabled the company to generate significant free cash flow relative to its revenues. Madison River's ability to sustain capital expenditures at or below 7% of revenues is predicated on the company's recent network upgrades and is supported by high DSL penetration rates (23% as of Q1'05). Capital spending levels are a key rating driver for Madison River. The stable outlook reflects Moody's view that Madison River's improved cash flow capacity is sustainable and that operational challenges stemming from network quality, regulatory changes or cable competition will be slow to develop. An IPO similarly sized to the one the company has been contemplating would provide Madison River with $150-200 million of proceeds with which to reduce leverage. Since Moody's believes further ratings improvements requires a material leverage reduction, completing an IPO within the next twelve months could change the ratings outlook to positive if coupled with improving financial performance (e.g. revenue stability and margin improvement). Subsequent to an IPO, Moody's expects that Madison River will pay a common dividend equal to roughly 75% of its free cash flow, which is typical of similar recent RLEC IPO transactions. Though IPO proceeds would be used to reduce leverage, the high dividend payout also reduce free cash flow, thereby impeding the company's ability to reduce debt and limiting potential upwards rating movement. Relatively high pro forma leverage, which implies a slim level of asset coverage of total debt obligations, constrains the B1 corporate family rating. Nonetheless, the rating incorporates Moody's belief that Madison River will continue to generate strong and predictable operating cash flow, and benefit from a favorable regulatory environment and barriers to competition. Until the company launches its high dividend payout IPO, Moody's expects that Madison River will use excess free cash flow, which had been earmarked to pay common dividends, to reduce debt. Moody's understands, to the extent that free cash flow is not used to call its 13.25% notes, that the credit agreement will require that 50% of excess cash flow (to be defined) be used to prepay bank debt. Moody's believes further ratings improvements would require a material reduction of the company's pro forma debt load. Subsequent to the IPO, the company's payment of a substantial common dividend would significantly reduce free cash flow generation thereby impeding further debt reduction. Additionally, increased capital spending, which is currently running at less than 7% of annual revenues and far lower than industry average, would also impede the company's ability to reduce leverage. Such an increase could be required to meet competitive challenges or improve service quality. Moody's would likely raise Madison River's ratings if the company can sustain free cash flow to debt around 5% - pro forma for an IPO. Conversely, if EBITDA margins fall below 50% for a prolonged period or total leverage continues to exceed 5.0x due to protracted delays with the company's planned IPO, the ratings could fall. In late December 2004, Madison River Communications Corp. announced an IPO of its common equity. In February 2005, the company secured commitments for a $530 million senior secured credit facility. A condition precedent to drawing the facility ($455 million in term loans, plus a $75 million revolver) was the successful launching of the IPO. However, because of unfavorable market conditions, the company delayed its IPO and allowed the credit facility commitments to lapse (i.e. the company did not apply for a commitment extension). The proposed $525 million credit facility effectively replaces the former credit facility. However, drawing under the proposed facility is not contingent upon a concurrent IPO (as it had been with the former facility), thereby freeing the company to pursue an IPO when it is opportunistic to do so. Madison River will use the proceeds from the proposed credit facility to refinance $375 million of Rural Telephone Finance Cooperative debt and to call nearly $80 million of the 13.25% senior notes due 2010. Moody's expects that Madison River Telephone Company, LLC and each of the borrower's Tier 1 domestic subsidiaries (collectively, the "guarantors") will jointly, severally and unconditionally guarantee the credit facilities. Moody's further understands that 1) all assets of the borrower and Tier 1 domestic subsidiaries; and 2) a perfected security interest in all the capital stock of the borrower and Tier 1 domestic subsidiaries will secure the credit facilities. Moody's does not notch up the credit facility rating relative to the corporate family rating. The proposed credit facilities will comprise a large percentage (over 75%) of Madison River's pro forma total debt -- assuming that roughly $80 million of the 13.25% senior unsecured notes are called. The 13.25% senior notes are currently rated two notches below the B1 corporate family rating since these notes are unsecured, do not benefit from upstream operating subsidiary guarantees, and are effectively subordinated to all of the company's subsidiaries' payables. The notes' lower priority claim on the company's assets increases likelihood of impairment in a distress scenario. Although the company has faced limited threats from wireless and technology substitution, cable, and VoIP services to date, Moody's believes these will present increasing challenges to Madison River over time. As a result, Moody's expects continued secondary access line losses (total access lines have been declining at roughly 2-3% per year, though year-over-year access lines losses at Q1'05 were nearly 3.3% part of which is due to non-recurring events such as Hurricane Ivan and the full deployment of troops from Fort Stewart in Georgia) and slow margin erosion, as the company's bundled "No Limits" offering and its position as the rural incumbent carrier moderates some of the competitive challenges. Madison River Capital LLC is a rural local exchange carrier headquartered in Mebane, North Carolina. MADISON RIVER: S&P Rates $525 Million Loans at B+ ------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Mebane, North Carolina-based Madison River Telephone Co. LLC to 'B+' from 'B'. All other ratings for Madison and its related entities, Madison River Capital LLC and Madison River Finance Corp., also were raised. At the same time, Standard and Poor's assigned a 'B+' rating to Madison River Capital LLC's $525 million of secured bank facilities, including a $75 million revolving credit and a $450 million term loan B. A '4' recovery rating was also assigned to these bank loans, indicating prospects for recovery of 25% to 50% of principal in a payment default. The bank loan rating is based on preliminary information, subject to receipt of final bank loan documents. The outlook is stable. Madison River is a rural local exchange carrier with a very modest sized competitor local exchange carrier business. Proceeds of the new bank facilities will be used primarily to repay debt. Ratings for holding company Madison River Communications Corp. have been withdrawn. This entity was formed for the planned initial public equity offering which this bank financing is currently replacing. Pro forma for the refinancing, Madison River will have about $594 million of total debt and preferred stock outstanding as of June 30, 2005. "The upgrade is based on the company's good operating performance in the last year, especially its success in marketing DSL and limiting access line losses, despite an increasingly competitive business environment," said Standard & Poor's credit analyst Catherine Cosentino. The company's nearly ubiquitous DSL footprint has helped it achieve a residential DSL penetration of primary residential access lines well above its peers, at 34% as of March 31, 2005. The company's access-line losses totaled 2.5% for 2004, and 3.3% on a year-over-year basis as of March 31, 2005. While these levels are only average for the rural local exchange carrier industry, they include a significant amount of losses because of damage from a hurricane in late 2004, much of which are expected to eventually return to service. Excluding hurricane related losses, the year over year access line decline was a modest 1.7% as of March 31, 2005. These characteristics provide a degree of revenue and EBITDA stability. MERCADO EL: Voluntary Chapter 11 Case Summary --------------------------------------------- Debtor: Mercado El Mirage Indoor Swap Meet, LLC P.O. Box 23 El Mirage, Arizona 85335 Bankruptcy Case No.: 05-12690 Type of Business: The Debtor operates (or operated) an indoor flea market. See directory listing and pictures from SwapMeetNews.com at http://ResearchArchives.com/t/s?73 Chapter 11 Petition Date: July 13, 2005 Court: District of Arizona (Phoenix) Judge: James M. Marlar Debtor's Counsel: David Allegrucci, Esq. Allegrucci Law Office PLLC 18001 North 79th Avenue, Suite B-46 Glendale, Arizona 85308 Tel: (623) 412-2330 Fax: (623) 878-9153 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. MIRANT CORP: Asks Court to Disallow Avon Park's $1.25M Claim ------------------------------------------------------------ Mirant Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Texas to disallow in its entirety Claim No. 3974 filed by IPS Avon Park Corporation. IPS filed the claim on October 14, 2003, against Debtor Shady Hills Power Company LLC for $1,250,000. IPS alleged that Shady Hills owed IPS $1,250,000 based on an Agreement, dated September 5, 2000, entered into between and among IPS, D.E. Jones Consulting, Inc., El Paso Merchant Energy Holding Company, Shady Hills Power and Shady Hills Holding Company, L.L.C. At the time the IPS Agreement was entered into, Shady Hills Holding held a 95% equity interest in Shady Hills Power and IPS and DEJ each owned 2.5%. Pursuant to the IPS Agreement, Shady Hills Holding purchased the equity interests held by IPS and DEJ, at which time Shady Hills Power became a wholly owned subsidiary of Shady Hills Holding. Also pursuant to the IPS Agreement, Shady Hills Power agreed to pay IPS and DEJ a "development fee": (i) $750,000 upon issuance of a notice to proceed with certain construction; and (ii) $750,000 on January 5, 2001. Shady Hills Power also agreed, in the event of an expansion of the development project, to make a one-time payment of $1,250,000 to each of IPS and DEJ. This expansion has not yet occurred. On July 30, 2001, Shady Hills Holding and Mirant Americas, Inc., entered into a Purchase and Sale Agreement. Pursuant to the P&S Agreement, Shady Hills Holding agreed to sell its equity interest in Shady Hills Power to MAI. The P&S Agreement specifically provided that the IPS Agreement was excluded from the sale of Shady Hills Power and would be assigned to Shady Hills Holding or an affiliate. As the evidence clearly demonstrates, the Debtors assert that they have no liability to IPS. Thus, the Claim lacks a basis in fact or law and should be disallowed in its entirety. Moreover, in order to have any claim, IPS Avon must have suffered damages. The amount owing, if any, under the IPS Agreement is due only upon the expansion of the Shady Hills Power plant. At this time, the Debtors point out, no expansion has occurred, and the Debtors are not currently planning an expansion. Hence, the Debtors contend, IPS Avon's Claim is contingent, speculative, not cognizable under applicable law and should be disallowed in its entirety. 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. 79; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: Bankr. Court Approves Mirant Canal's Consent Order --------------------------------------------------------------- Thomas E. Lauria, Esq., at White & Case LLP, in Miami, Florida, recounts that Mirant Canal, LLC, owns a power plant in Sandwich, Massachusetts. The Plant has two generating units -- Unit No. 1 is fueled by oil and Unit No. 2 is fueled by both oil and natural gas. In December 2001, Mirant Canal submitted an Emission Control Plan application to the Commonwealth of Massachusetts' Department of Environmental Protection, in compliance with Section 7.29 of Chapter 310 of the Code of Massachusetts Regulations, which section relates to emission standards for power plants. Mr. Lauria explains that the purpose of Section 7.29 is to control emissions of, among others, nitrogen oxide and sulfur dioxide from certain facilities in Massachusetts, including Mirant Canal, by establishing output-based emission rates. In part, Section 7.29 contains these emission requirements: Compliance required Compliance required Type of Emission by October 1, 2004 by October 1, 2006 ---------------- ------------------- ------------------- Nitrogen Oxide Will not exceed Will not exceed 1.5 lbs./MWh 3.0 lbs./MWh calculated over any calculated over any consecutive 12-month individual calendar period, recalculated month. monthly. Sulfur Dioxide Will not exceed Will not exceed 6.0 lbs./MWh 3.0 lbs./MWh calculated over any calculated over any consecutive 12-month consecutive 12-month period, recalculated period, recalculated monthly. monthly. Will not exceed 6.0 lbs./MWh calculated over any individual calendar month. Mr. Lauria relates that the First ECP proposed that Mirant Canal achieve compliance with Section 7.29, in part, through repowering Mirant Canal's Unit No. 2. The proposed plan made Mirant Canal eligible for emissions-compliance dates beginning in October 2006. Business conditions later prevented Mirant Canal from repowering Unit No. 2, Mr. Lauria notes. Consequently, Mirant Canal submitted a revised ECP to the Department in March 2002. The Department approved the revised ECP, but advanced Mirant Canal's emissions-compliance date by two years, to October 1, 2004. On June 28, 2002, Mirant Canal appealed the Approved ECP to the Commonwealth's Office of Administrative Appeals. Thirteen individuals, known collectively as Cape Clean Air, intervened in the Appeal. Simultaneously, Mirant Canal also commenced an action in Suffolk Superior Court against the Department. In the Appeal and the Superior Court Action, Mirant Canal asserted that operational data from 2001, 2002, and 2003 demonstrated that it was not technically feasible for Mirant Canal to comply with the requirements of Section 7.29 unless it made significant and unduly costly improvements to the generating units of the Plant. To make the improvements, Mirant Canal would need to obtain state and local permits, undertake engineering activities, and purchase and install the emission reduction equipment. Mirant Canal argued that compliance prior to October 1, 2004, was not feasible because, among other reasons, there would be insufficient time to satisfy the regulatory conditions. Through negotiations, Mirant Canal, the Department, and Cape Clean Air eventually reached an agreement resolving the Appeal and the Superior Court Action. The Agreement is memorialized in an Administrative Consent Order, with these pertinent terms: (a) Prior to October 1, 2006, Mirant Canal will make reasonable efforts to control nitrogen oxide emissions at the Plant so that the emissions do not exceed a facility- wide average of 1.7 lbs./MWh calculated over a rolling 12-month period. However, the nitrogen oxide emissions will not exceed an average of 2.0 lbs./MWh, calculated over a rolling 12-month period; (b) Between June 1, 2006, and October 1, 2006, sulfur dioxide emissions from the Plant will not exceed a 9.0 lbs./MWh facility-wide average rate; (c) With regard to Unit No. 1, Mirant Canal will: -- prosecute pending applications to the Cape Cod Commission for necessary permits to install a permanent system to supply aqueous ammonia to Unit No. 1's selective catalytic reduction system; -- on or before May 1, 2005, install and begin continuous operation of that ammonia supply system; and -- make reasonable efforts to control ammonia emissions from the Unit No. 1 selective catalytic reduction system so that the emissions do not exceed two parts per million by volume, dry basis correct to three percent oxygen, and in no event will ammonia slip exceed five parts per million by volume, dry basis corrected to three percent oxygen; (d) With regard to Unit No. 2, Mirant Canal will: -- submit to the Department an application for the installation and operation of a selective non-catalytic reduction system on or before September 15, 2006; -- file applications for all other permits required to implement the application; -- install all of the components for that system on or before September 20, 2006; and -- after installation of that system, Mirant Canal will operate the system to achieve compliance with the emissions limits; (e) Mirant Canal will designate an in-house Environmental Representative to address any complaints from the public or local, state or federal officials concerning Mirant Canal's air emissions; (f) Mirant Canal will provide quarterly reports to the Department, which will set forth: -- the status of permitting and installation of the emission reduction systems; and -- the status of Mirant Canal's progress towards achieving the agreed emissions rates; and (g) The parties will dismiss the Superior Court Action within 14 days after approval of the Consent Order in the Appeal and the subsequent dismissal of the Appeal. Although Mirant Canal believes strongly in its position with respect to the Approved ECP, there is a lack of clarity and uncertainty with respect to the resolution of that issue in litigation. Therefore, Mirant Corporation and its debtor- affiliates determined that the prudent course is to enter into the Consent Order in an expedient and cost-effective manner. Moreover, Mr. Lauria contends that because of the complexity of the legal and factual issues regarding the Appeal and the Superior Court Action, resolution of those actions could further delay the Debtors' Chapter 11 cases. Some of the Debtors' key personnel and management would be focused on managing the litigation rather than the Debtors' emergence from Chapter 11. In addition, the expense of any litigation would be an unnecessary expense and burden on the Debtors. Litigation could take several years to finally resolve and could potentially be subject to various appeals. The Debtors attest that they strive to achieve the appropriate balance of supplying dependable, low-cost energy in an environmentally responsible manner. The Debtors state that they have specifically committed to pursing emission control technology and operating strategies to reduce air emissions. The Consent Order appropriately balances the Debtors' commitment to environmental stewardship and their fiduciary duties to creditors, Mr. Lauria says. Accordingly, at the Debtors' request, the Court approves the Consent Order. 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. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) MOREHEAD MEMORIAL: Moody's Withdraws Ba1 Rating on $7 Mil. Bonds ---------------------------------------------------------------- Moody's Investors Service has withdrawn the Ba1 rating assigned to approximately $7 million of outstanding Series 1993 bonds issued by Morehead Memorial Hospital. On June 15, 2005, MMH refinanced all of its rated debt with approximately $48 million of FHA Insured Mortgage Revenue Bonds, Series 2005. These bonds are rated Aaa by virtue of bond insurance issued by FSA. MMH no longer has any unenhanced or underlying rated debt outstanding. NAPIER ENVIRONMENTAL: Inks New $5 Million Loan Agreements --------------------------------------------------------- Napier Environmental Technologies Inc. (TSX:NIR) entered into loan agreements in an aggregate amount not to exceed $5 million, pursuant to a transaction involving a combination of secured debt and share purchase warrants. On July 5, 2005, Napier's unsecured creditors, subject to judicial approval, accepted a proposal whereby $3 million of the above loan transaction would be used to satisfy all of the liabilities of Napier. On July 8, 2005, the Supreme Court of British Columbia granted the approval under the Bankruptcy and Insolvency Act. The $3 million will be used to pay all fees and related costs and to satisfy all amounts owing by Napier to its secured, preferred, unsecured and post-filing creditors as of the closing date and as approved by the Court. The balance of the loans will be used as working capital. The loans will have a first and only registered charge on all of the assets of Napier and are a combination of $1.5 million term loans and $3.5 million revolving working capital loans, subject to the applicable margin calculations provided for therein. Both of the term loans and both of the revolving loans will bear interest at prime plus 10% and will each initially involve a 364-day term, which terms are extendable in accordance with the governing loan agreements. The term loans are each extendable for an additional four years, subject to the applicable extension requirements provided for therein. The revolving loans are extendable for successive 364-day terms, subject to Napier's written request of the lenders for subsequent 364-day term extensions at least 90 days prior to the expiry of the then applicable term expiry dates and the consent of the lenders. As additional consideration for the granting of these loans, Napier has agreed to grant to the lenders, subject to approval by the Toronto Stock Exchange, warrants entitling the lenders to purchase, from treasury, up to 60% of the shares of Napier, calculated on a fully-diluted basis upon payment of $0.01 per share at any time up to Aug. 31, 2010. Should such warrants be granted, the interest rate on the loans will immediately be adjusted to prime plus 2%. As the aggregate number of common shares issuable in connection with these loan transactions will exceed the maximum number of securities issuable without security holder approval under the rules of the Toronto Stock Exchange, Napier is relying on an exemption from the security holder approval requirements provided for under subsection 604(e) of the Toronto Stock Exchange Company Manual on the basis of its serious financial difficulty. The board of directors of Napier has determined that Napier is in serious financial difficulty, that the transaction is designed to improve its financial situation and is reasonable in the circumstances, and has authorized Napier to make the application to the Toronto Stock Exchange. Effective July 15, 2005, Steve Balmer, Anthony Traub and Marc Mercier have been appointed to the Napier board and each of Lionel Dodd, Sue Anne Linde and Peter Jeffrey have resigned from the board. The financing enables Napier to complete its restructuring under the provisions of the Bankruptcy and Insolvency Act (Canada). This positions the company to move forward with the objective of being a major supplier of environmentally friendly "green" products. Napier is currently operating under the protection of the Bankruptcy and Insolvency Act. The Company cautions that it is not in a position to provide any assurance that shareholders will receive any value under the Further Amended Proposal. Napier develops and manufactures highly effective, safe and environmentally advantaged surface preparation products for stripping paints and coatings, as well as a complete line of wood restoration products. Napier's products are protected by a portfolio of patents and trademarks, including 'Bio-wash and RemovALL'. NCD INC: Wants to Hire Jennings Strouss as Bankruptcy Counsel ------------------------------------------------------------- NCD Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Arizona for permission to employ Jennings, Strouss & Salmon, P.L.C., as their general bankruptcy counsel. Jennings Strouss will: a) advise and assist the Debtors of their duties and obligations as debtors and debtors-in-possession under chapter 11; and b) perform all other legal services that are appropriate and necessary in the Debtors' chapter 11 cases Danelle G. Kelling, Esq., a Member of Jennings Strouss, is one of the lead attorneys for the Debtors. Mr. Kelling discloses that his Firm received a $5,042 retainer. Mr. Kelling reports Jennings Strouss's professionals bill: Designation Hourly Rate ----------- ----------- Counsels $140 - 550 Paralegals $110 - 140 Jennings Strouss assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in Glendale, Arizona, NCD Inc., owns and operates three car wash services. The Company filed a voluntary chapter 11 petition on July 13, 2005 (05-12659). When the Debtor filed for protection from its creditors, it estimated between $10 million to $50 million in assets and debts. On Apr. 20, 2005, the Company's stockholder, Larry Bjurlin, filed a voluntary chapter 11 petition pending before the Honorable Charles G. Case (Bankr. Ariz. Case No. 05-06793)). On May 30, 2005, a related entity, Bjurob, LLC, filed a voluntary chapter 11 petition pending before the Arizona Bankruptcy Court (Case No. 05- 09745). Following the consolidation of the two bankruptcy cases, the Court appointed Mark Roberts as chapter 11 trustee on June 7, 2005. NEWCARE HEALTH: Court Denies Ch. 7 Trustee's Settlement Agreement ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Massachusetts denied a request by Gary M. Weiner to approve a Revised Settlement Agreement with defendants in five adversary proceedings in the bankruptcy case of NewCare Health Corporation. Mr. Weiner is the chapter 7 Trustee overseeing the liquidation proceeding for NewCare Health's estate. The Court entered its order denying the settlement on June 23, 2005. The five adversary proceedings are: 1) Gary M. Weiner, Trustee v. Christopher Brogdon, et al., Adversary Proceeding No. 01-4188; 2) Gary M. Weiner, Trustee v. Pleasant View Nursing, Adversary Proceeding No. 01-4252; 3) Gary M. Weiner Trustee v. Midway Health Care Center, Adversary Proceeding No. 01-4251; 4) Gary M. Weiner, Trustee v. Kingsport, Adversary Proceeding No. 01-4250; and 5) Chamber Health Care Society, Inc. v. NewCare Health Corporation, et al., Adversary Proceeding No. 99-4310. On Sept. 27, 2004, Mr. Weiner asked the Court to approve a prior Settlement Agreement with the parties to the five adversary proceedings. The Court denied Mr. Weiner's initial request on Nov. 24, 2004, questioning four issues: 1) the total settlement amount and the settlement payment schedule, including absence of interest payments; 2) the methods of delivery for notices of default and the defendants' cure rights; 3) the amount of agreement for judgment and the jurisdiction over enforcement proceedings; and 4) certain release language in the settlement. After negotiations with the parties to the adversary proceedings, Mr. Weiner and those parties entered into a Revised Settlement Agreement. The Revised Settlement Agreement was filed with the Court on May 16, 2005. The Revised Settlement Agreement provided that the Paying Parties, who are the remaining defendants in the five adversary proceedings, will pay the chapter 7 Trustee $1,350,000 in 60 equal monthly installments without additional interest or fees, so long as no event of default occurs on the part of the Paying Parties. The Court denied Mr. Weiner's request to approve the Revised Settlement Agreement on the grounds that the Revised Agreement fails to provide sufficient motivation for the defendants' timely payment and fails to compensate the Debtor's estate for the time value of the payment stream. Headquartered in Pittsfield, Massachusetts, NewCare Health Corporation operated 22 nursing homes located in Georgia, Florida, Massachusetts, Texas, Tennessee and Kansas. The Company filed for chapter 11 protection on June 22, 2005 (Bankr. D. Mass. Case No. 99-44161). The Court converted the case to a chapter 7 liquidation proceeding on March 18, 2002. Victor G. Milione, Esq., at Nixon Peabody LLP, represents the Debtor. Gary M. Weiner is the chapter 7 Trustee for the Debtor's estate. Paula M. Bagger, Esq., and Richard S. Nicholson, Esq., at Cooke, Clancy & Gruenthal, LLP represents the chapter 7 Trustee. NORTHWEST AIRLINES: Says Labor Cuts & Pension Reforms Necessary --------------------------------------------------------------- Northwest Airlines Corporation disclosed in a regulatory filing last week the company's need to cut labor costs and pension funding to keep bankruptcy at bay. The company also plans to improve liquidity through new financings and restructuring of debts. Since the beginning of 2001, the Company lost over $3.3 billion. Even as the Company has incurred these substantial losses, it has maintained adequate liquidity through the sale of non-strategic assets or by obtaining new financing. However, Northwest has limited unencumbered assets and has a high level of indebtedness. As such, only two options are left: labor cost cutting and freezing of defined benefit plans. The airline stated it is up to date on payments to its three traditional defined benefit pension plans for 2005 but will owe $800 million in 2006 and $1.7 billion in 2007. The company is currently in labor negotiations with the Aircraft Mechanics Fraternal Association, the International Association of Machinists and Aerospace Workers, the Professional Flight Attendant Association and the Air Line Pilots Association. Northwest hopes the U.S. Congress will approve some pension reforms including the Employee Pension Preservation Act of 2005. The proposed reform will allow airlines to extend to 25 years the time during which payments can be made of any unfunded liability existing under its qualified defined benefit pension plans at the date of the airline's election to comply with the Pension Preservation Act. Such an extension of payments could occur under the Pension Preservation Act if an airline elected to freeze its qualified defined benefit pension plans. Northwest is the world's fifth largest airline with hubs in Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,600 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. * * * 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. 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. Moody's said the outlook is negative. Northwest Airlines Corp.'s common shares are trading at $5 this week. The stock was at $11 per share in December. NORTHWESTERN CORP: Shareholders Re-Elect Six Directors to Board --------------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) reported that its shareholders re-elected five independent directors and one management director to its Board for a one-year term at the annual meeting of shareholders held on July 14, 2005, in Sioux Falls, S.D. Shareholders voted to approve the re- election of: -- E. Linn Draper, Jr. as director. Mr. Draper is the retired Chairman, President and Chief Executive Officer of American Electric Power Company, one of the nation's largest public utility holding companies. Mr. Draper serves as NorthWestern's Chairman of the Board. Mr. Draper was elected to the Board on Nov. 1, 2004. -- Stephen P. Adik as director. Mr. Adik is the retired Vice Chairman of NiSource, Inc., an electric and natural gas production, transmission and distribution company. Mr. Adik was elected to the Board on Nov. 1, 2004. -- Jon S. Fossel as director. Mr. Fossel is the retired Chairman, President and Chief Executive Officer of Oppenheimer Management Corporation, a mutual fund investment company. Mr. Fossel was elected to the Board on Nov. 1, 2004. -- Michael J. Hanson as director. Mr. Hanson is President and Chief Executive Officer of NorthWestern Corporation. Mr. Hanson was elected to the Board on May 23, 2005. -- Julia L. Johnson as director. Ms. Johnson is President and Founder of NetCommunications, LLC, a strategy consulting firm, and former Chair of the Florida Public Service Commission. Ms. Johnson was elected to the Board on Nov. 1, 2004. -- Philip L. Maslowe as director. Mr. Maslowe was formerly nonexecutive Chairman of the Board for AMF Bowling Worldwide, Inc., and Executive Vice President and Chief Financial Officer of The Wackenhut Corporation. Mr. Maslowe was elected to the Board on Nov. 1, 2004. The shareholders also approved the ratification of Deloitte & Touche LLP as independent auditor. During the annual meeting, President and Chief Executive Officer Mr. Hanson reviewed NorthWestern's recent accomplishments and reviewed opportunities to improve shareholder value. "Our transformation to a solid utility-focused company is ahead of schedule. Since we completed our reorganization in late 2004, which dramatically reduced our debt burden, we have continued to pay down debt, reduced our borrowing costs, lowered our operating costs and improved our operating performance," Mr. Hanson said. "Our improving performance and strong cash flow now puts us in a position to work with our Board to explore further opportunities to improve shareholder value." Board Increases Dividend NorthWestern's Board's Board of Directors increased by 14 percent its quarterly common stock dividend from 22 cents to 25 cents per share. The dividend is payable on Sept. 30, 2005, to common shareholders of record as of Sept. 15, 2005. "The Board increased the dividend based on the Company's strong performance thus far in 2005," said Mr. Hanson. "Further review of the dividend is expected as the Company prepares 2006 earnings guidance later this year." Board Rejection of MPPI Proposal Mr. Hanson also detailed NorthWestern's Board of Directors' rationale for its decision to reject an unsolicited proposal by Montana Public Power, Inc., a nonprofit corporation, to acquire all the stock of the Company. "After evaluating MPPI's proposal with its legal counsel and financial advisor, NorthWestern's Board concluded that the MPPI acquisition proposal presents unacceptable risks that raise doubt as to whether the transaction would close and the financial consideration offered by MPPI is not compelling when compared with NorthWestern's stand-alone prospects," Mr. Hanson said. Mr. Hanson outlined three risks associated with the MPPI proposal: -- Significant legal, regulatory, financial and potential tax risks exist to the transaction's complex structure: * The proposal involves untested legal questions. * There are no precedents for the transaction. * Montana state law may not permit MPPI to own and operate a utility that operates outside the jurisdiction of its members and state of Montana. * The proposal requires unprecedented regulatory flexibility and cooperation. -- All closing risk would be borne by NorthWestern's shareholders: * Because MPPI is a shell company with no assets, there is no legal recourse in the event the transaction fails to close. * No termination fee is provided to cover costs and risks to NorthWestern's shareholders if the transaction fails to close. -- MPPI's proposal relies upon 100 percent leverage and would increase the Company's debt to more than $2 billion. * The "no equity" leveraged buyout would be financed by NorthWestern's customers and assets. * Citigroup has offered only a "best efforts" commitment for financing that is subject to a myriad of market and transaction risks and uncertainties. * The financing would be at best weak investment grade which may not be attainable if the regulatory authorities are unable or unwilling to provide sufficient regulatory flexibility A copy of Hanson's annual meeting presentation is available at http://www.northwesternenergy.com/Click under "presentations and webcasts" in the "Investor Information" section. Headquartered in Sioux Falls, South Dakota, NorthWestern Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/ -- provides electricity and natural gas in the Upper Midwest and Northwest, serving approximately 608,000 customers in Montana, South Dakota and Nebraska. The Debtors filed for chapter 11 protection on September 14, 2003 (Bankr. Del. Case No. 03-12872). Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul, Hastings, Janofsky & Walker, LLP, represent the Debtors in their restructuring efforts. On the Petition Date, the Debtors reported $2,624,886,000 in assets and liabilities totaling $2,758,578,000. The Court entered a written order confirming the Debtors' Second Amended and Restated Plan of Reorganization, which took effect on Nov. 1, 2004. * * * As reported in the Troubled Company Reporter on July 5, 2005, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating on NorthWestern Corp. on CreditWatch with negative implications pending clarity on Montana Public Power Inc.'s June 30, 2005, offer to buy NorthWestern for $1.18 billion plus the assumption of $825 million in debt. Montana Public Power is a newly formed single-purpose entity organized to purchase NorthWestern and is ultimately composed of the Montana cities of Bozeman, Great Falls, Helena, Missoula, and Butte. "The CreditWatch listing reflects Standard & Poor's lack of information about Montana Public Power and the financing and legal structure of its bid for NorthWestern," said Standard & Poor's credit analyst Gerrit Jepsen. NUTRAQUEST: Pays $1 Million to New Jersey to Settle Ad Suit ----------------------------------------------------------- Nutraquest Inc. fka Cytodyne Technologies agrees to pay the State of New Jersey $1 million to settle a lawsuit over misleading weight loss advertisements. The state alleged that Nutraquest exaggerated the benefits of its weigh loss products, Xenadrine RFA-1 and Xenadrine EFX, but understated the risks. According to the Federal Trade Commission, Nutraquest along with Evergood Products Corp. and Melvin Rich advertised Xenadrine EFX heavily in print and on TV, including in such publications as People, TV Guide, Cosmopolitan, Glamour, Let's Live, Men's Fitness, and Women's World. They also disseminated Spanish language ads for Xenadrine EFX. The advertisements claimed that Xenadrine EFX causes rapid and substantial weight and fat loss without the need to diet or exercise, that the weight loss is permanent or long-term, and that it is clinically proven to work. The ads relied heavily on testimonials from supposedly satisfied customers, some of whom claimed to have lost over 100 pounds. According to studies, subjects taking Xenadrine EFX lost an average of only 1.5 pounds over the 10-week study, while a control group taking a placebo lost an average of 2.5 pounds over the same period. The persons appearing in the ads did not achieve the reported weight loss solely by using Xenadrine EFX. According to the FTC complaint, consumer endorsers, in fact, lost weight by engaging in rigorous diet and exercise programs. The complaint alleges that the defendants also failed to disclose that the endorsers were paid from $1,000 to $20,000 in connection with their testimonials. Under the settlement, the Company also agreed not to make unsubstantiated claims in advertising. In a written statement, the company said it settled the case "to avoid the uncertainty and cost of litigation." It claimed it had 10 clinical studies that proved the products were safe and effective when used as directed. Headquartered in Manasquan, New Jersey, Nutraquest, Inc., is the marketer of the ephedra-based weight loss supplement, Xenadrine RFA-1. The Company filed for chapter 11 protection on October 16, 2003 (Bankr. N.J. Case No. 03-44147). Andrea Dobin, Esq., and Simon Kimmelman, Esq., at Sterns & Weinroth, P.C., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $50 million to $100 million. O'SULLIVAN IND: Uses 30-Day Grace Period to Evaluate Alternatives ----------------------------------------------------------------- O'Sullivan Industries, Inc. (OTC: OSULP) will utilize its 30-day grace period relating to the $5.3 million interest payment due July 15, 2005, on its $100 million 10.63% Senior Secured Notes. Utilization of this grace period does not constitute an event of default under the indenture. No decision has been made whether O'Sullivan will make the interest payment prior to the expiration of the grace period. O'Sullivan plans to use the grace period to address its current capital structure and to continue initiatives it has undertaken to improve its liquidity position and operations. O'Sullivan fully intends to continue to serve its customers and to pay its employees and vendors in the ordinary course. All of O'Sullivan's facilities are continuing to operate and to fill customer orders. O'Sullivan has initiated discussions with representatives of its major stakeholders regarding O'Sullivan's strategic alternatives, including potentially a consensual restructuring of its capital structure. As with any negotiation, no assurance can be given as to when and if O'Sullivan will succeed in concluding any such agreement with its stakeholders. O'Sullivan has retained Lazard Freres & Co. LLC to serve as its financial advisor and Dechert LLP as its legal advisor to assist with its evaluation of strategic alternatives and restructuring efforts. O'Sullivan Industries Holdings, Inc. (OTC Bulletin Board: OSULP) reports a $197.5 million stockholders' deficit at March 31, 2005, compared to a $154 million deficit at March 31, 2004. O'Sullivan is a leading manufacturer of ready-to-assemble furniture. * * * As reported in the Troubled Company Reporter on Feb. 9, 2005, Standard & Poor's Ratings Services lowered its ratings on O'Sullivan Industries Holdings Inc., and on the company's wholly owned operating subsidiary, O'Sullivan Industries Inc., including its corporate credit ratings to 'CCC+' from 'B-'. S&P said the outlook is negative. The furniture manufacturer's total debt as of Dec. 31, 2004, was $222.6 million. "The downgrade reflects continuing challenging operating conditions and Standard & Poor's expectation that liquidity will be weak relative to cash needs," said Standard & Poor's credit analyst Martin Kounitz. OR-CAN LLC: Voluntary Chapter 11 Case Summary --------------------------------------------- Debtor: OR-CAN, LLC aka Boston's The Gourmet Pizza Restaurant & Sports Bar 1107 Northeast 95th Avenue Vancouver, Washington 98664 Bankruptcy Case No.: 05-38239 Type of Business: The Debtor operates two restaurants located in Vancouver, Washington. Chapter 11 Petition Date: July 15, 2005 Court: District of Oregon (Portland) Judge: Elizabeth L. Perris Debtor's Counsel: Stephen T. Boyke, Esq. Greene & Markley, P.C. 1515 Southwest 5th Avenue #600 Portland, Oregon 97201 Tel: (503) 295-2668 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. PARMALAT GROUP: Citigroup, BofA, et al., Dismissed from Suit ------------------------------------------------------------ The United States District Court for the Southern District of New York dismisses the complaint commenced by investors of securities of Parmalat Finanziaria S.p.A. as against Citigroup Inc., Citibank, N.A., Bank of America Corporation, Bank of America, N.A., Banc of America Securities Limited, Banca Nazionale del Lavoro S.p.A., and Credit Suisse First Boston. A. Citigroup As previously reported, the Investor-Plaintiffs asserted that Citigroup knowingly and actively participated in the fraudulent scheme, and has had "intimate knowledge" of Parmalat's finances through its "close relationship with its important client" and its direct participation in the fraudulent activities of the company. The Complaint alleged three specific arrangements involving Citigroup: (1) Securitization of Invoices; (2) The Geslat/Busonero Arrangement; and (3) Parmalat Canada Arrangement. Under certain agreements entered into in 1995, 1999, 2000, and 2001, invoices for goods sold by various Parmalat subsidiaries were purchased by defendant Eureka Securitisation plc -- a Citigroup affiliate -- as well as by Eureka's Italian subsidiary, Archimede Securitization S.r.l. Archimede then sold commercial paper secured by invoices. The deception supposedly stemmed from Parmalat's billing system, under which many of the invoices were in effect duplicates that did not represent anything actually due. However, Judge Kaplan finds that there is nothing remarkable or deceptive about the company's billing system, which the Complaint implies had been used for 40 years, standing alone. According to Judge Kaplan, the problem was that Parmalat assigned to Archimedes and Eureka, and they then securitized, both supermarket invoices -- which represent receivables -- and the corresponding dealer invoices for the goods sold and delivered. The invoices did not represent a real revenue stream for Parmalat because it was obligated to reimburse the dealers the same amounts that they owed Parmalat. The Complaint further held that Citigroup structured the program and had detailed knowledge as early as 1995 of Parmalat's invoicing system, including the duplicate invoices. Citibank installed proprietary software on Parmalat's computer network that allowed Citibank to determine which receivables were eligible for the securitization program and to regularly audit Parmalat's sales. Thus, Citibank knew that the securitization program would create a false impression about Parmalat's cash flow from its operations, and therefore mislead the market about Parmalat's real financial condition. Citigroup allegedly received $35 million in fees for its role in the securitization program. Judge Kaplan notes that the applicable regulations governing securitization permitted only independent financial institutions, not the entities generating the receivables, to collect on them. Eureka and Archimede, however, were alleged to have assigned back to Parmalat the right to collect payment on the invoices. Parmalat's characterization on its balance sheets of the arrangement with Eureka and Archimede as a securitization rather than as debt was therefore misleading. The Plaintiffs also asserted that Citibank structured transactions in which several of its subsidiaries made loans to Parmalat that were disguised as equity investments. The Plaintiffs noted that the reason for the scheme was that Parmalat was performing poorly, but it did not want to damage its credit rating by issuing debt through the bond markets. Citibank allegedly knew that Parmalat would use the arrangement to mask the company's debt on its financial statements. The arrangement began in 1995, when Parmalat and Citibank entered into an agreement styled as a joint venture. In connection with the agreement, Parmalat set up a Swiss branch of its subsidiary, Gestione Centrale Latte S.r.l., to which Citibank contributed funds. The Swiss branch of Geslat was to make loans to other companies in the Parmalat group, with Citibank receiving a proportional share of the profits from those loans. At the same time, Parmalat gave Citibank a put option that allowed Citibank to sell its interest in Geslat back to Parmalat at a price that guaranteed that Citibank would receive a return on its investment. On December 9, 1999, Citibank altered the arrangement so that the funds would be provided by two Citibank subsidiaries, defendants Buconero LLC and Vialattea LLC, both Delaware limited liability companies. Geslat guaranteed that Citibank would receive at least a certain fixed rate of return. Buconero would be responsible for Geslat's losses if they exceeded a certain threshold, but Citibank could avoid that condition entirely because it had the right to dismantle the relationship with Geslat and require the repayment of its contribution if Geslat's performance or Parmalat's creditworthiness declined. >From 1999 to 2001, Buconero and Vialattea contributed as much as $120 million to Geslat. Parmalat recorded these funds as equity on its balance sheets. The funds, however, were in reality loans at favorable interest rates and therefore should have been recorded as debt. The result was to understate Parmalat's liabilities by $137 million, permitting the conglomerate to conceal its troubles in South America and elsewhere. Following Parmalat's collapse, Citibank publicly characterized the investments as debt. Citibank, which regarded the Geslat transactions as a financing arrangement rather than as equity investments, received annual returns of approximately $5 million to $6 million as well as approximately $7 million in fees for structuring the transactions. The final set of allegations against Citigroup also involved the alleged classification of debt as equity. In 1997 and 1998, Parmalat purchased three Canadian food and dairy companies. Citibank helped finance the purchase with capital contributions of CND171.9 million. The agreement between Parmalat and Citibank provided that Parmalat Canada either would be publicly listed or that Citibank could put its interest back to Parmalat for a specified amount. Parmalat recorded Citibank's investments as equity on its financial statements when they should have been recorded as high- interest loans because the put option meant that Citibank bore no risk. The Plaintiffs contended that Parmalat's financial statements failed to disclose the put option after 1999. A senior Citibank executive misrepresented the nature of Citibank's involvement in Parmalat Canada in statements to the press in 1997 and 1998. Moreover, the Complaint asserted that Citibank designed the financing transactions to enable Parmalat to characterize them as equity and thereby maintain the false appearance of a lower debt- to-equity ratio. The bank received CND1.3 million in subscription fees and CND5.6 million in financial advisory fees as well as a net tax-free gain of CND47.82 million upon the exercise of the put option. According to the Complaint, "this abnormally high return can only be explained by the illegal nature of the activity." Citigroup argued that it was not a primary violator, the allegations are deficient as to scienter, causation, and reliance, and the Complaint fails to state a claim for controlling person liability under Section 20(a) of the Securities Act. B. Bank of America The Complaint described two arrangements involving the BofA Defendants: (1) The Parmalat Administracao Private Placement; and (2) Loans Backed by Funds Raised Through Private Placements. The Plaintiffs alleged that in 1999, BofA proposed and arranged what appeared to be the sale of an 18% interest in Parmalat Empreendimentos e Administracao, a Brazilian Parmalat subsidiary, to a group of investors for $300 million. In reality, however, the investors purchased four-year notes issued by two special purpose Cayman Islands entities and guaranteed by Parmalat. Furthermore, the investors had the right to put their investments back to Parmalat if Parmalat Administracao did not become publicly listed. BofA and Parmalat allegedly knew that the listing was economically impractical and therefore would not occur. The Complaint further alleged that BofA entered into an agreement with Parmalat pursuant to which BofA fronted to the Cayman Islands companies the funds needed to make interest payments on the four-year notes. When it became clear that Parmalat could not raise the money to redeem the notes, BofA assumed some of the exposure and attempted to offer another private placement to cover it. The Plaintiffs contended that BofA and an Italian bank received as much as $38.5 million in fees and commissions for their role in the Parmalat Administracao private placement. The Complaint said BofA extended loans to Parmalat subsidiaries and required that the loans be secured with funds raised from private placements of debt. In essence, BofA transferred the risk of default on these loans from itself to purchasers of Parmalat's debt. The Complaint included three types of loans: -- $80 million to Parmalat subsidiaries in Venezuela, -- $100 million to a Brazilian subsidiary, and -- $80 million to Parmalat Capital Finance. Judge Kaplan says that, with full disclosure, there would have been nothing deceptive about these transactions. The Complaint, however, alleged that: (1) Neither BofA nor Parmalat disclosed that a $80 million offering in 1998 was related to the Venezuelan loan, or that the $80 million loan was done to pay off a 1997 BofA loan in the same amount to Parmalat Venezuela that lacked the same security for Bank of America; (2) In each instance, BofA publicly announced it had made a conventional loan in the stated amount to Parmalat; and (3) Side letter agreements that required Parmalat to pay additional interest on its loans were not disclosed. BofA was believed to have earned over $30 million in fees and interest from the transactions. BofA argued that the claims asserted by the Plaintiffs under Rule 10b-5(b) of the Securities Exchange Act of 1934 fail because BofA made no misstatements or actionable omissions, any alleged misstatements or omissions and scienter are not pled with the required specificity, and the allegations regarding causation are deficient. Furthermore, BofA said the Rule 10b-5(a) and (c) claims fail because the Plaintiffs have not alleged any manipulation or deception, and the allegations regarding reliance and scienter are deficient. The Plaintiffs also failed to state claims for controlling person liability under Section 20(a) of the Exchange Act. C. Banca Nazionale The core allegation against Banca Nazionale was that its factoring arm and 99.6%-owned subsidiary, Ifitalia S.p.A., along with other institutions, repeatedly paid Parmalat cash in exchange for assignment of invoices that both parties knew were bad. The Plaintiffs alleged that Parmalat booked the cash as an asset. Judge Kaplan finds the allegation misleading. In a normal factoring transaction, one party purchases, at a discount, receivables from the party that issued them and then attempts to collect the face amount of the invoices. The Complaint, however, indicated that Parmalat had guaranteed to Banca Nazionale or Ifitalia, and the other banks, payment of the full face value of the invoices. Moreover, Parmalat invariably made good on that guarantee, at least while the arrangement was in place. The receivables thus played no economic role in the transaction. In fact, they were simply a device or excuse that permitted Parmalat to record the revenue and to conceal the liability on the guarantees. The Court notes that the Complaint suggested that the scheme in substance involved loans by Banca Nazionale to Parmalat rather than factoring of receivables. The Complaint alleged that Parmalat used old invoices for the arrangement and that each time payment on the invoices came due, Parmalat would pay Banca Nazionale and the other banks the full amount for the previous set. The Complaint further suggested that, at the same time, Parmalat would assign to the banks, in exchange for another payment, a new set of invoices that were the same as the previous ones except that a single digit on each one had been changed to avoid detection and exclusion by Banca Nazionale's computers. If Parmalat's payment to the banks of the full amount on the previous set of invoices occurred at the same time as the banks' payment to Parmalat for assignment of the next set, then presumably the two payments would have been offset such that Parmalat in effect paid interest on a loan. However, this point is not made entirely clear in the complaint, Judge Kaplan says. The arrangement began in December 1999 and was renewed every six months. It allegedly resulted in Parmalat overstating its assets and receivables and understating its debt by EUR103 million each year during the Class Period. Banca Nazionale was believed to have supposedly benefited by receiving returns from that scheme that were far greater than returns earned in typical factoring transactions, and from bearing Parmalat's credit risk rather than that of third parties owing payment on invoices. Furthermore, Banca Nazionale was co- managing underwriter for two large bond offerings by Parmalat during the Class Period. The profits from the factoring scheme and the underwriting fees were the alleged payoffs for Banca Nazionale's participation in the fraud. The Plaintiffs argued that Banca Nazionale had intimate knowledge of the fraud because it shared two directors with Parmalat, one of whom was the president of Ifitalia. The Plaintiffs further stated that Banca Nazionale's knowledge of the fraud was also apparent in its acceptance of numerous invoices which were identical except for a change in one digit -- a change made to elude Banca Nazionale's fraud-sensitive software. The Complaint said Ifitalia acted as Banca Nazionale's agent in the scheme. Banca Nazionale asked the Court to dismiss the Complaint on the grounds that the Court does not have subject matter jurisdiction, Banca Nazionale is not a primary violator, the allegations of scienter and causation are deficient, and the Plaintiffs failed to state a claim for controlling person responsibility under Section 20(a). D. CSFB The core allegation against CSFB was that it designed and participated in a set of transactions in late 2001 and January 2002 that CSFB knew Parmalat would use to conceal debt on its financial statements. In particular, CSFB executed a subscription agreement with Parmalat pursuant to which CSFB paid almost EUR500 million to Parmalat Participacoes do Brasile for the entirety of a EUR500 million issue of Parmalat Brasile bonds underwritten by CSFB. The bonds were convertible into equity and had an expiration date of 2008. At the same time, Parmalat and CSFB executed an agreement pursuant to which CSFB transferred back to Parmalat the right of conversion, which was priced at EUR248.3 million. Parmalat raised the funds to pay CSFB under the agreement through a separate EUR250 million bond issue underwritten by CSFB jointly with two other institutions. The Eurobond Issue produced EUR246.5 million, which was deposited in a CSFB checking account. Parmalat then recorded both the "right" it had purchased from CSFB to convert the Parmalat Brasile bonds, and the proceeds of the Parmalat Brasile bond issue as assets each worth about EUR250 million. The accounting treatment was improper. The net result of the transactions, according to the Complaint, was that Parmalat obtained EUR500 million in financing -- EUR250 million each from the Parmalat Brasile bonds and the Eurobond Issue -- and manufactured EUR248 million in assets and concealed EUR248 million of debt. The Complaint alleged that CSFB received millions of dollars in commissions and fees from the transactions. Furthermore, 50% of the risk from underwriting the Parmalat Brasile bond issue was transferred back to Parmalat under the Forward Sale Agreement. CSFB transferred the remaining risk to the market by selling the Parmalat Brasile bonds or by executing credit default swap agreements. The Complaint alleged as well that as a reward for designing and participating in the scheme, CSFB received lucrative underwriting roles for at least three debt offerings during the Class Period. CSFB lashed back. CSFB argued that the Plaintiffs have failed to allege that it is a primary violator, the Complaint does not adequately allege scienter, and the Court lacks subject matter jurisdiction over the allegations against it. Loan-Related Transactions Are Not Deceptive The Court accepts all well-pleaded factual allegations in the Complaint and draws all reasonable inferences in the Plaintiffs' favor. Judge Kaplan says that dismissal is inappropriate unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. According to Judge Kaplan, the term "substantially participated" does not appear in the text of Section 10(b) or Rule 10b-5, and it invites dispute over whether a particular defendant's role was or was not substantial. The text asks only whether a defendant directly or indirectly used or employed a manipulative or deceptive device or contrivance. The Court adheres to that language. Judge Kaplan concludes that the arrangements involving the regular factoring and securitization of worthless invoices were deceptive devices or contrivances for purposes of Section 10(b). Those were inventions, projects, or schemes with the tendency to deceive because they created the appearance of a conventional factoring or securitization operation when, in fact, the reality was quite different. Judge Kaplan notes that Banca Nazionale knew when it paid Parmalat for the invoices that they were worth nothing and were in fact a trick to disguise its loan to Parmalat. The same is true of Citigroup's purchase of certain invoices. If the allegations of the Complaint are accepted, the banks used the deceiving devices. In the language of Rule 10b-5(c), the banks engaged in acts, practices, or courses of business that would operate as a fraud or deceit upon others. In these circumstances, it cannot be said that the banks' conduct fell outside of Rule 10b-5 or Section 10(b). The Court also finds that the Bank Defendants' argument that they were at most aides and abettors of a program pursuant to which Parmalat made misrepresentations on its financial statements misses the mark. The transactions in which the Defendants engaged were by nature deceptive. They depended on a fiction, namely that the invoices had value. It is impossible to separate the deceptive nature of the transactions from the deception actually practiced upon Parmalat's investors. Neither the statute nor the rule requires such a distinction. Judge Kaplan, however, points out that a number of transactions in which the banks made loans allegedly disguised as equity investments or assets were not deceptions. There is no suggestion that Citigroup did not own the equity stakes in the relevant Parmalat entities that it purported to buy. The same is true of the investments made by the purchasers of the Parmalat Administracao debt privately placed by BofA. The put options established floors on Citigroup's and the private investors' potential losses, but there is no suggestion that the transactions were something other than what they appeared to be. Those arrangements, therefore, were not schemes with the tendency to deceive. Dismissal Terms Consequently, Judge Kaplan dismisses the Complaint to the extent that it seeks to hold the Bank Defendants liable for participating in the loan transactions. However, the Court disagrees with Citigroup's, Banca Nazionale's, and CSFB's argument that the Complaint fails to plead scienter adequately. The Plaintiffs have set forth with particularity facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness. The Complaint asserts that Citigroup was intimately familiar with Parmalat's billing system and structured the invoice securitization program. Judge Kaplan also points out that Banca Nazionale and Ifitalia's very participation in the factoring arrangement, which depended on the recycling of stale invoices, if proven, would constitute strong circumstantial evidence that they understood exactly what they were receiving in exchange for their loans to Parmalat. Likewise, the practice of altering a single digit on the invoices to avoid detection by Banca Nazionale's computers would constitute strong circumstantial evidence of conscious misbehavior. CSFB likewise is said to have structured the transactions, participated in them as Parmalat's counterparty, and underwritten the relevant bond issues, all so that Parmalat could overstate its assets and understate its debt. The allegations against CSFB, if proven, are more than sufficient to give rise to an inference of conscious misbehavior, let alone recklessness. In light of the issue of causation, Judge Kaplan denies the Bank Defendants' Motion to Dismiss the Complaint insofar as the Complaint seeks to hold: -- Citigroup and Banca Nazionale liable for participating in transactions involving allegedly worthless invoices; and -- CSFB liable for participating in the scheme set forth in the Complaint. The Complaint will be dismissed to the extent that it asserts claims against Banca Nazionale and CSFB on behalf of purchasers not resident in the United States. The Court also finds that the Complaint fails to state a claim based on BofA's alleged misrepresentations and omissions connected with the private placements used to back BofA's loans to Parmalat. The allegation that BofA and Parmalat failed to disclose that an $80 million offering in 1998 was related to the Venezuelan loan is time-barred. The allegation that "in each instance, BofA publicly announced it had made a conventional loan in the stated amount to Parmalat" when "the reality of these transactions was much different" fails to specify where and when BofA made these announcements. As for the allegation that BofA omitted to disclose in connection with its loans "side letter agreements that required Parmalat to pay additional interest on its loans," the Complaint fails to allege or show that BofA owed a duty to disclose that would have made an omission actionable. Judge Kaplan says the Court need consider only whether the Complaint states claims for controlling person liability against Banca Nazionale and Citigroup. The only remaining issue is the sufficiency of the allegations as to control of Ifitalia by Banca Nazionale and control of the relevant Citigroup entities. Judge Kaplan rules that: (1) Citigroup's Dismissal Motion is denied insofar as the Complaint seek to hold Citigroup liable for participating in transactions involving allegedly worthless invoices, and otherwise granted. (2) BofA's Dismissal Motion is granted. (3) Banca Nazionale's Dismissal Motion is granted to the extent that the complaint asserts claims on behalf of purchasers of Parmalat securities not resident in the United States and otherwise denied. (4) CSFB's Dismissal Motion is granted to the extent that the Complaint asserts claims on behalf of purchasers of Parmalat securities not resident in the United States and otherwise denied. Judge Kaplan grants the Plaintiffs leave to amend their Complaint on or before August 8, 2005. A full-text copy of Judge Kaplan's Opinion is available at no charge at: http://bankrupt.com/misc/Kaplan_memorandum_of_opinion.pdf Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. The U.S. Debtors emerged from bankruptcy on April 13, 2005. (Parmalat Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 215/945-7000) PJC FOODS: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------- Debtor: PJC Foods, Inc. dba Subzone P.O. Box 1188 Madison, Alabama 35758 Bankruptcy Case No.: 05-83458 Type of Business: The Debtor operates a restaurant. Chapter 11 Petition Date: July 14, 2005 Court: Northern District of Alabama (Decatur) Debtor's Counsel: Michael E. Lee, Esq. 200 West Side Square, Suite 803 Huntsville, Alabama 35801-4816 Tel: (256) 536-8213 Fax: (256) 536-8262 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Compass Bank/SBA Equipment $579,487 P.O. Box 797808 Value of security: Dallas, TX 75379-7808 $200,000 AmSouth Bank Unsecured $307,808 P.O. Box 11407 Birmingham, AL 35246-0009 USFood Unsecured $90,637 P.O. Box 117 Montgomery, AL 36108 Winland Development Unsecured $29,212 CBL & Associates Unsecured $20,815 Mrs. Elfriede Rucker Unsecured $15,743 Hunstville Green Partnership Unsecured $12,152 AmSouth Bank Unsecured $11,242 Warren Properties Unsecured $10,943 Adams Brothers Unsecured $9,786 Forestwood Farm, Inc. Unsecured $8,402 AmSouth Bank Flex line $6,948 AmSouth Bank Unsecured $6,709 Hunnington Plaza Unsecured $4,275 Fountain Parker Harbarger Unsecured $3,989 ITC Delta Com Unsecured $3,664 Diversified Services Unsecured $2,892 Meiying Forney Unsecured $2,850 Blue Cross Shield Unsecured $2,173 Turpin and Associates, PC Unsecured $2,100 POLARIS NETWORKS: Hires Levene Neale as Bankruptcy Counsel ---------------------------------------------------------- Polaris Networks, Inc., asks the U.S. Bankruptcy Court for the Northern District of California in San Jose for authority to employ Levene, Neale, Bender, Rankin & Brill LLP as its bankruptcy counsel. In this engagement, Levene Neale will: a) advise the Debtor with regard to the requirements of the Bankruptcy Court, Bankruptcy Code, Bankruptcy Rules and the Office of the United States Trustee as they pertain to the Debtor; b) advise the Debtor with regard to certain rights and remedies of its bankruptcy estate and the rights, claims and interests of creditors; c) represent the Debtor in any proceeding or hearing in the Bankruptcy Court involving its estate unless the Debtor is represented in such proceeding or hearing by other special counsel; d) conduct examinations of witnesses, claimants or adverse parties and representing the Debtor in any adversary proceeding except to the extent that any such adversary proceeding is in an area outside of the Firm's expertise or which is beyond the Firm's staffing capabilities; e) prepare and assist the Debtor in the preparation of reports, applications, pleadings and orders including, but not limited to, applications to employ professionals, interim statements and operating reports, initial filing requirements, schedules and statement of financial affairs, lease pleadings, cash collateral pleadings, financing pleadings, and pleadings with respect to the Debtor's use, sale or lease of property outside the ordinary course of business; f) represent the Debtor with regard to obtaining use of cash collateral and/or post-petition financing including, but not limited to, negotiating and seeking Bankruptcy Court approval of any cash collateral/post-petition financing pleading or stipulation and preparing any pleadings relating to obtaining use of cash collateral/post-petition financing; g) assist the Debtor in the negotiation, formulation, preparation and confirmation of a plan of reorganization and the preparation and approval of a disclosure statement in respect of the plan and/or the sale of the Debtor's assets; and h) perform any other services which may be appropriate in the Firm's representation of the Debtor during its bankruptcy case. Levene Neale's professionals will bill the Debtor at these hourly rates: Professional Hourly Rate ------------ ----------- David W. Levene, Esq. $565 Martin J. Brill, Esg. 565 David L. Neale, Esq. 495 Ron Bender, Esq. 495 Craig M. Rankin, Esq. 495 Anne E. Wells 450 Nellwyn W. Voorhies 425 Daniel H. Reiss 450 Monica Y. Kim 450 David B. Golubchik 450 Beth Ann R. Young 450 Jacqueline L. Rodriguez 365 Juliet Y. Oh 335 Susan K. Seflin 335 Ovsanna Takvoryan 290 Todd M. Arnold 280 Paraprofessionals 175 Max Turqueza, Polaris Networks' Chief Financial Officer, discloses that Levene Neale received a $10,000 retainer during the one-year period prior to the Debtor's chapter 11 filing. The Firm holds approximately $2,867 of the retainer as of May 13, 2005. Ron Bender, Esq., a partner at Levene Neale, assures the Court that his Firm does not hold any interest adverse to the Debtor or its estate ant that his Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Why Polaris Networks Went Bankrupt The Debtor tumbled into bankruptcy in May 2005 after failing to get more funding for its operations. The reluctance of existing and new buyers to purchase additional units of the Debtor's proprietary OMX Optical Transport Switch and IntelliOp Software, due to its shaky finances, worsened the Debtor's money woes. The OMX Optical Transport Switch, and its operating software, IntelliOp Management Solution, is a suite of new generation networking hardware and software, developed by the Debtor, that streamlines current complex telecommunications networks. The technology promises reduced capital and operational expenses, reduced power consumption, and increased network speed and reliability. The Debtor believes that it will be able to rebuild the confidence of existing and new OMX and IntelliOp Software clients as well as develop a business plan that will enable it to emerge from bankruptcy as a financially healthy company. About Levene Neale Levene Neale is a 'boutique' law firm specializing exclusively in matters of bankruptcy, insolvency, and business reorganization. The members of LNBR&B share a common approach to problem-solving which involves both an understanding of the legal issues pertaining to a particular situation and the practical realities of commercial dealings between parties. The members of LNBR&B have represented clients involved in all aspect of bankruptcy and insolvency practice including debtors, creditors' committees, equity committees, purchasers, principals and secured and unsecured creditors from a broad spectrum of industries including retail, real estate, entertainment, manufacturing, distribution and service. About Polaris Networks Headquartered in San Jose, California, Polaris Networks, Inc., -- http://www.polarisnetworks.com/-- provides a new generation optical transport switch for metro core networks. The Company filed for chapter 11 protection on May 13, 2005 (Bankr. N.D. Ca. Case No. 05-52927). When the Company filed for protection from its creditors, it listed $1 to $10 million in assets and $10 to $50 million in debts. PONDERLODGE INC: Wants to Hire Obermayer Rebmann as Bankr. Counsel ------------------------------------------------------------------ Ponderlodge, Inc. asks the U.S. Bankruptcy Court for the District of New Jersey for permission to employ Obermayer Rebmann Maxwell & Hippel LLP, as its general bankruptcy counsel. Obermayer Rebmann will: 1) provide the Debtor with legal advice regarding its powers and duties as a debtor-in-possession under chapter 11; 2) assist the Debtor in the preparation and filing of any legal papers required in its bankruptcy case; and 3) perform all other legal services for the Debtor that are appropriate and necessary in its chapter 11 case. Edmond George, Esq., a Partner at Obermayer Rebmann, discloses that his Firm received a $50,000 retainer. Mr. George reports Obermayer Rebmann professionals bill: Designation Hourly Rate ----------- ----------- Counsels $250 - $650 Paralegals $100 Obermayer Rebmann assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Villas, New Jersey, Ponderlodge, Inc., -- http://www.ponderlodge.com/-- operates a golf course. The Company filed for chapter 11 protection on July 13, 2005 (Bankr. D.N.J. Case No. 05-32731). When the Debtor filed for protection from its creditors, it estimated assets of $10 million to $50 million and debts of $1 million to $10 million. PRICELINE.COM: Acquires Bookings B.V. for $133 Million ------------------------------------------------------ Priceline.com(R) (Nasdaq: PCLN) acquired Amsterdam-based Bookings B.V., one of Europe's leading Internet hotel reservation services, in a cash transaction valued at approximately EUR110 million, or US$133 million. The deal follows priceline.com's recent acquisition of Cambridge-based Active Hotels in September 2004. In total, Bookings B.V. and Active Hotels have negotiated exclusive rates with almost 18,000 properties, which the companies believe is more than any other European Internet hotel reservation service. Priceline.com said it intends to retain Bookings' current management team, which will continue to manage Bookings as part of the Priceline.com Europe portfolio. Priceline.com also said that Bookings' six top executives reinvested a portion of the acquisition proceeds back into the Bookings business. Bookings works with a range of chain- and independently owned hotels across Europe and in major cities around the world. Established in 1996, the company has approximately 130 full-time employees and offices in Amsterdam, Barcelona, Berlin, Paris and Pisa. Bookings' customer service team offers its services in Dutch, English, French, German, Italian, Japanese, Spanish and Portuguese. "Bookings' management and employee teams have built a rapidly growing business in continental Europe, with a geographic reach and supplier- and customer-friendly model that we believe nicely complements Active Hotel's business," said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "Bookings CEO Stef Norden will work with Andrew Phillipps, CEO of Priceline Europe, to help secure their market leadership and provide great value for all priceline.com customers, including consumers, hotels and our partner web sites." Features of the combined Active/Bookings operations include: -- Publishing over 8,000 guest reviews every week to help consumers choose the best hotel for them. Unlike many sites, reviews are provided only by guests who have stayed at the hotels. -- 30 full time staffers focused on negotiating the best rates for guests booking the 18,000 hotels available through Priceline.com's European operations. Stef Norden, CEO of Bookings, commented on the acquisition, "This deal will benefit our customers, suppliers and distribution partners, and our employees. We believe that the additional demand from working with priceline.com and Active Hotels will enable us to provide extra business for our suppliers; and distribution partners and customers will benefit from access to additional hotel supply. In the context of a larger European business, there should also be additional opportunities for our staff." Bookings' gross travel bookings for the 12 months ended June 30, 2005 are expected to be approximately US$225 million, up approximately 110% year-over-year. Bookings' revenues for the 12 months ended June 30, 2005 are expected to be approximately US$25 million, up approximately 100% year over year. Gross bookings refer to the total dollar value, inclusive of taxes and fees, of all hotel room nights purchased by consumers, based on current foreign exchange rates. Priceline.com said that it expected the acquisition to be accretive to its earnings (before non-cash amortization expense associated with the acquisition) for the 2nd half of 2005 and for calendar year 2006. Priceline.com is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages and cruises. Priceline.com recently expanded its services so customers now have a choice: they can pick from a broad selection of published flights, hotels, rental cars and packages at published prices or, for deeper savings, they can use priceline.com's Name Your Own Price service for their travel needs. Priceline.com also has a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee. Priceline.com operates one of Europe's fastest growing hotel reservation services through Activehotels.com, Activereservations.com, Bookings.net and priceline.co.uk. The company also operates the following travel sites: Travelweb.com, Lowestfare.com, Rentalcars.com and Breezenet.com. Priceline.com licenses its business model to independent licensees, including priceline mortgage and certain international licensees. Priceline.com licenses its business model to independent licensees, including priceline mortgage and certain international licensees. * * * Priceline.com's 1% convertible senior notes due 2010 carry Standard & Poor's single-B rating. PRICELINE.COM: Updates 2005 Guidance Following Asset Purchase ------------------------------------------------------------- Priceline.com(R) (Nasdaq: PCLN) updated its financial guidance for the 2nd quarter 2005, which ended on June 30, 2005, and increased its guidance for the 2nd half 2005 to reflect its acquisition of Bookings B.V. For the second quarter, priceline.com said that it expects gross travel bookings to be in the range of $566 million to $570 million. Gross travel bookings refer to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers. Second quarter revenue and pro forma gross profit are expected to be approximately $265 million to $270 million and $65 million to $67 million, respectively. Pro forma net income per diluted share in the 2nd quarter is expected to be between $0.36 and $0.40 per diluted share. When it announced its 1st quarter financial results on May 9, 2005, priceline.com gave pro forma net income per diluted share guidance for the 2nd quarter of between $0.34 and $0.40 per diluted share. The section below entitled "Non-GAAP Financial Measures" provides a definition and information about the use of pro forma financial information used in this press release. Priceline.com issued guidance for the full-year 2005 to reflect the acquisition by priceline.com of the European online travel company Bookings B.V. Priceline.com said it now expects pro forma net income per diluted share for full-year 2005 to be in the range of $1.20 to $1.28 per diluted share. Previously, priceline.com stated that it was comfortable with First Call analyst consensus estimates of pro forma net income of $1.21 per diluted share for full-year 2005. Pro forma gross profit and pro forma net income per diluted share estimates for the 2nd quarter 2005 exclude the after-tax effects of non-cash amortization expense of acquisition-related intangibles (primarily associated with the acquisition of Travelweb and Active Hotels), stock-based compensation expense and option payroll tax expense, which, when aggregated, are expected to total approximately $4.5 million. In addition, pro forma net income per diluted share estimates for the 2nd quarter 2005 exclude the anticipated impact of EITF 04-08, which was effective as of December 15, 2004, and which revises the method for calculating diluted shares outstanding for purposes of computing GAAP net income per diluted share. Priceline.com said it will give more details on the 2nd quarter and on its 3rd quarter forecast when it reports 2nd quarter 2005 financial results. Priceline.com at this time is unable to forecast the combined company's full-year GAAP-basis net income without unreasonable effort and is still evaluating how the acquisition will affect the company's non-cash amortization expense of intangibles acquired in the acquisition of Bookings B.V. This calculation is expected to be completed by the time of the announcement of priceline.com's 2nd quarter financial results at which time priceline.com will provide GAAP-basis net income guidance. Priceline.com is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages and cruises. Priceline.com recently expanded its services so customers now have a choice: they can pick from a broad selection of published flights, hotels, rental cars and packages at published prices or, for deeper savings, they can use priceline.com's Name Your Own Price service for their travel needs. Priceline.com also has a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee. Priceline.com operates one of Europe's fastest growing hotel reservation services through Activehotels.com, Activereservations.com, Bookings.net and priceline.co.uk. The company also operates the following travel sites: Travelweb.com, Lowestfare.com, Rentalcars.com and Breezenet.com. Priceline.com licenses its business model to independent licensees, including priceline mortgage and certain international licensees. Priceline.com licenses its business model to independent licensees, including priceline mortgage and certain international licensees. * * * Priceline.com's 1% convertible senior notes due 2010 carry Standard & Poor's single-B rating. RUSSELL CORP: Downward Earnings Revision Cues S&P's Negative Watch ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on Atlanta, Georgia-based athletic apparel and sports equipment manufacturer Russell Corp. on CreditWatch with negative implications, including the company's 'BB-' long-term corporate credit rating. Russell Corp.'s total debt outstanding at April 3, 2005, was $466.3 million. "The CreditWatch placement follows the company's announcement that it is revising earnings guidance downward for the second fiscal quarter as a result of short-term operational issues and lower- than-anticipated cost reductions. The company also said it would not be able to make up the earnings shortfall for the full year," said Standard & Poor's credit analyst Susan H. Ding. Standard & Poor's will conduct a full review after the company releases its second quarter earnings on July 28. The analysis will focus on Russell's ability to maintain its cost reduction momentum and its credit protection measures commensurate with its current ratings. S-TRAN HOLDINGS: Wants More Time to Decide on Leases ---------------------------------------------------- S-Tran Holdings, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend the period within which it can elect to assume, assume and assign, or reject unexpired nonresidential real property leases to September 12, 2005. The Debtors want to extend its lease decision period on these leases: Site Address Use Lessor Address ------------ --- -------------- 728 Jefferson Avenue General Office Dartmoor Realty Cookville, Tennessee 38501 PO Box 2709 Cookville, Tennessee 38502 120 E. Main St. Salvage Store William A. Algood, Tennessee 38506 & James W. Benson 909 Hillside Drive Cookville, Tennessee 38501 The Debtors explain that they need these locations to continue the orderly wind-down of their operations and sell damaged cargo rejected by recipients. The Court will consider the Debtors' request during a hearing scheduled at 11:00 a.m. on July 27, 2005 in Wilmington, Delaware. Headquartered in Cookeville, Tennessee, S-Tran Holdings, Inc., provides common carrier services and specialized in less-than- truckload shipments and also supplies overnight and second-day service to shippers in 11 states in the Southeast and Midwestern United States. The Company and its debtor-affiliates filed for chapter 11 protection on May 13, 2005 (Bankr. D. Del. Case No. 05- 11391). Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $22,508,000 and total debts of $30,891,000. SAINT VINCENTS: Asks Court to Grant Priority To Outstanding Goods ----------------------------------------------------------------- Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to: (i) grant administrative expense status to undisputed obligations owing to the vendors and common carriers for the delivery of the outstanding goods; and (ii) authorize, but not require, them to pay for those obligations in the ordinary course of business. In the ordinary course of business, numerous vendors and suppliers provide the Debtors with over-the-counter and prescription medicines and medical supplies, equipment, food and beverage supplies and sanitary items. The Debtors' outstanding obligations to the vendors and to the common carriers that deliver the goods aggregate to $1.4 million per month. Stephen B. Selbst, Esq., at McDermott Will & Emery LLP, in Chicago, Illinois, tells the Court that any refusal or delay by the vendors and the common carriers in providing and delivering those goods could impede the Debtors' ability to provide their customers the full range of the goods and services necessary for the continued operations and uninterrupted supply of fresh, saleable inventory. As of the Petition Date, the Debtors had numerous prepetition purchase orders outstanding with the vendors. Concerned that their postpetition delivery for those outstanding prepetition orders will leave them as general unsecured creditors with respect to those shipment, the vendors may refuse to ship or deliver those goods unless the Debtors: (1) issue substitute purchase orders, or (2) obtain a Court order providing that those outstanding goods delivered postpetition will be afforded administrative expense priority. Mr. Selbst notes that the obligations that arise for goods delivered postpetition on account of the prepetition orders are in fact administrative expense priority claims under Section 503(b)(1)(A) of the Bankruptcy Code. Any delay in payment to the common carriers may also entitle the carriers to cancel the delivery of the outstanding goods. Nonpayment of the carrier charges may give rise to claims secured by various liens, including liens on goods and supplies or possessory liens under state and other applicable law. Depending on the circumstances of a particular case, these liens may give rise to claims that the Estates would be required to pay in full. According to Mr. Selbst, the immediate payment for the outstanding goods will affect only the timing of the payments and will not prejudice the rights of general unsecured creditors or other parties-in-interest because: (1) the obligations to the vendors are entitled to administrative priority status, and (2) the common carriers are entitled to full payment of their charges. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, represent the Debtors in their restructuring efforts. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 03; Bankruptcy Creditors' Service, Inc., 215/945- 7000) SAINT VINCENTS: Wants to Maintain Workers' Compensation Programs ---------------------------------------------------------------- Stephen B. Selbst, Esq., at McDermott Will & Emery LLP, in Chicago, Illinois, relates that, in the ordinary course of business, Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates maintain various workers' compensation programs, insurance policies and bonds through several different insurance carriers. Prior to the Petition Date, the Debtors entered into an insurance brokerage agreement with Willis Group Holdings for the administration of the majority of the insurance policies. Willis sends the Debtors a consolidated monthly statement for amounts due to the Insurance Carriers and, once paid by the Debtors, the Broker submits the payments to the Carriers. The Debtors pay for the broker fees not covered by commissions on insurance premiums. The Debtors also typically purchase their bonds from Willis. The Debtors pay Willis directly for all premiums and other amounts due under the bonds, after which, the Bond Broker forwards the payment to the Bond Carriers. Willis is paid a fee for placing the Debtors' bonds, which is paid out of commissions earned on bond premiums. Workers' Compensation Programs In accordance with the laws of the State of New York, the Debtors maintain workers' compensation policies and programs, which provide their employees coverage for claims arising from or related to their employment with the Debtors. The Debtors' affiliate, Queensbrook Offshore Insurance LLC, has issued a deductible reimbursement policy for the Debtors' first $250,000 in coverage. Excess insurance above the Retention is provided in accordance with New York State statutory limits by New Hampshire Insurance Company, a division of AIG. Premiums for the current Compensation Programs are based on a fixed rate of estimated payroll and are paid quarterly. Following an annual audit of the Debtors' payroll, the Debtors either pay a retrospective premium owed or receive back overpayments that were made. On certain of the former insurance programs, there are annual retrospective audits and annual "true-ups" of the premiums owed. The Debtors propose to pay any and all amounts due and owing with respect to any Workers' Compensation Program, and maintain and continue prepetition practices with respect to the Programs. Liability and Property Insurance The Debtors also maintain many general liability and property insurance policies, which provide the Debtors with insurance coverage for claims relating to, among other things, commercial, general and professional malpractice liability, commercial umbrella liability, automobile liability, directors' and officers' liability, fiduciary liability, commercial crime, boiler and machinery, property, floods, earthquakes, and pollution. Several of the liability, property, and workers' compensation policies and certain of the bonds expire during the period from the Petition Date through August 31, 2005. To pursue renewal of these policies, collateral and potential premium payments are required. The Debtors estimate that these obligations for the first month after the Petition Date aggregate $5,395,637. The Debtors are required to pay premiums based on a fixed rate established and billed by each Insurance Carrier. The premiums for most of these policies are determined annually and are paid at policy inception either directly to the Insurance Carrier, or to the Broker, or are financed through A.I. Credit Corp. who pays the premium to the Insurance Carrier on the Debtors' behalf. With respect to the premiums on the commercial, general and professional liability policies, and the directors' and officers' liability policies, the premiums are financed through AI Credit who prepays the premiums to the Insurance Carriers. The Debtors make either monthly or quarterly payments to AI Credit for amounts it paid to the Insurance Carriers. In addition, all insurance policies require payment deductible or self-insured retention amounts. In the commercial, general and professional malpractice liability policies and certain of the workers' compensation policies, the retention amounts under each policy year are capped. Claim losses and expenses are paid by the Insurance Carriers directly to claimants, attorneys, investigators, and health care providers as incurred. The Insurance Carriers then bill the Debtors quarterly for reimbursement of those losses and expenses, which fall under the deductible or self-insured retention amounts. Deductibles under the property and automobile insurance policies are subtracted from the amounts that the Insurance Carriers reimburse the Debtors after the Debtors have paid the claim losses. As of the Petition Date, the Debtors believe they were current on their prepetition premiums and deductible reimbursements with respect to applicable policies. To the extent a premium or deductible reimbursement arising prior to the Petition Date is outstanding or becomes due, including any renewal, extension or replacement with respect to any policy, the Debtors seek the Court's permission to make those payments in accordance with the established practices. Mr. Selbst asserts that the Debtors must continue the Insurance Programs. If these policies or bonds were allowed to lapse, the Debtors would be exposed to substantial liability for any damages resulting to persons and property of the Debtors and others. Maintenance of the D&O liability policy also is necessary to the retention of the Debtors' senior management who are critical to the success of the Debtors' businesses and reorganization and to enable the Debtors to financially indemnify their officers and directors per the requirements set forth in their corporate bylaws. Moreover, the federal government and various state governments require that the Debtors maintain bonds in order to operate hospitals and nursing homes. The proposed Debtor-in- Possession Financing and the guidelines of the Office of the United States Trustee also require the Debtors to maintain their Insurance Programs. In addition, the Debtors need to satisfy all bond obligations and pay all Workers' Compensation Claims and state fees and assessments on a timely basis. The risk that eligible claimants will not receive payments with respect to employment-related injuries may have a devastating effect on the financial well- being and morale of the Debtors' employees and their willingness to remain in the Debtors' employ. Departures by employees at this critical time may result in a severe disruption of the Debtors' businesses to the detriment of all parties-in-interest and may place the health and safety of the Debtors' patients and residents at risk. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, represent the Debtors in their restructuring efforts. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 03; Bankruptcy Creditors' Service, Inc., 215/945- 7000) SALTON INC: S&P Withdraws D Ratings After Interest Payment ---------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'D' corporate credit and 'D' subordinated debt ratings on Salton Inc. Salton announced that it has made the June interest payment on its 10.75% senior subordinated notes within the 30-day grace period provided under the indenture governing the notes. Salton also announced that it has entered into support agreements with holders of its 10.75% senior subordinated notes due 2005 and its 12.25% senior subordinated notes due 2008. Subject to the terms and conditions of the support agreements, the note holders have agreed to tender their notes to Salton in an exchange offer scheduled to expire on Aug. 2, 2005. STELCO INC: Files CCAA Plan of Arrangement Outline in Ontario ------------------------------------------------------------- Stelco Inc. (TSX:STE) filed with the Superior Court of Justice (Ontario) a restructuring plan outline designed to ensure a viable Company over the long term and provide lasting benefits for its stakeholders. Courtney Pratt, Stelco President and Chief Executive Officer, said, "Our plan outline is reasonable, realistic and responsible. It's reasonable because it treats stakeholders fairly and in accordance with their rights. It's realistic because we believe it is financially achievable. And it's responsible because we are the only party with a legal obligation to balance the interests and competing demands of stakeholders. I invite all stakeholders to consider this plan outline from everybody's perspective, not just their own, and to conclude that it is fair and reasonable. After so many months of negotiating we should start working together to secure the approval and implementation of a fair and reasonable plan." The plan provides for the recapitalization of Stelco by arranging new loans, selling non-core assets and issuing new securities. The plan is designed to treat the interests of creditors and other stakeholders in a fair and balanced manner: -- Pension beneficiaries, current employees, the union and the Government of Ontario will benefit from a plan to retire the Company's pension plan solvency deficiencies of about $1.3 billion by 2015. It is intended that the pension plans will receive approximately $900 million in upfront contributions and annual cash payments before the first new debt instrument matures in 2012. -- Secured operating lenders will be refinanced at the time of plan implementation. -- Unsecured creditors will receive full recovery on approximately $665 million owed to them by conversion of part of their obligations to equity and the balance to new debt, some of which will be secured. -- Current equity holders will be offered less than 2% of the fully-diluted shares outstanding, the right to purchase shares under a $100 million rights offering and will receive warrants to purchase 10% of the Company on a fully-diluted basis. "We've worked long and hard to find a middle ground between competing demands," Mr. Pratt noted. "Various stakeholders may criticize the plan because it does not provide them with everything they want. There is not enough value in the Company to give every group everything it wants. The key is to provide enough that everyone can support. We believe this plan strikes that balance, that it is achievable, and that it will result in a viable Stelco over the long term. This balance and achievability reflects the fact that the plan outline does not propose to expropriate one party's interest to satisfy the demands of another." "The plan also provides a reasonable and financially responsible solution to the pension funding issue," Mr. Pratt noted. "This has been one of our stated objectives throughout the restructuring process. We believe that the 10-year deficiency retirement plan balances the competing interests of responsibly funding Stelco's pension obligations and ensuring that the Company has the funds needed to carry on its business. Those funds include the $425 million to be invested in our critical capital expenditure program under the plan outline." The plan is also designed to provide the Company with the liquidity and leverage that are appropriate and in-line with industry peers. It envisions $600 million in new credit facilities, approximately $650 million of net liquidity and a significant reduction in the Company's total debt. There follows a backgrounder to and summary of the plan outline. The plan outline documents can be accessed through a link available on Stelco's Web site. Stelco's Restructuring Plan Outline Background Stelco has tried to achieve consensus: Stelco has worked to secure consensus among stakeholders for nearly 17 months. The Company has initiated, accepted and participated in a number of consultative processes. The goal has been to achieve the consensus of stakeholders around a plan that will receive the necessary votes required for approval of a restructuring plan that will enable Stelco to emerge from CCAA protection. There is not enough value to meet every stakeholder's demands: Some stakeholders have indicated their desire to improve upon their pre-CCAA position at the expense of others. Stelco has indicated on many occasions that there is insufficient value in the Company to meet all of the demands being made by every stakeholder group. No group can get everything it wants. The key is to find a middle ground that everyone can support. Stelco has a legal obligation to balance the interests of stakeholders: Stelco is the only stakeholder with a legal obligation to balance the interests and competing demands of other stakeholders. Other parties have the luxury of making demands designed only to benefit their own interests. As well, the law states that a restructuring plan can only be implemented if it secures the approval of affected creditors and the Court. Key to obtaining those approvals is a plan that takes into account and treats the interests of all stakeholders in a reasonable manner. It's time to move forward: Stelco believes that stakeholders have clearly enunciated their demands and negotiating positions. The continuation of this posturing without resolution will not result in a timely outcome. At the same time, the Company's competitive circumstance has suffered as a result of such factors as falling steel prices, softening market conditions, and increased raw material, energy and other costs. It's time for stakeholders to decide the outcome of this process. The goal - a viable company for the long term: Stelco is committed to achieving a restructuring plan that: (1) enables it to emerge from CCAA as a viable company for the long term; (2) is competitive throughout the market cycle; (3) preserves jobs; (4) meets its obligations to retirees and other stakeholders; and (5) has the capital structure to support the Company in achieving these objectives. Other stakeholders, depending on their particular situations, may or may not necessarily be fully committed to these same goals. A Plan Outline that can achieve this goal: Stelco has developed a plan outline it believes is appropriate to submit to stakeholders for their approval. The Company plans to meet next week with stakeholders to discuss the plan outline, which is offered as a reasonable plan that is fair to all stakeholders. It undoubtedly will be criticized by stakeholder groups that are not getting everything they want or demand. However, it has the support of the Company's Board, management, financial advisors and Chief Restructuring Officer, all of whom view the plan outline as fair and reasonable. A Two-Phased Plan The plan will be implemented in two phases. Phase One: Immediately upon the Company's exit from CCAA. This phase includes the issuance to creditors of $566 million of new debt and $100 million of new equity. This phase will also see the payment of contributions to the Company's four main pension plans of $100 million in Senior Secured Notes and up to $100 million in cash from the proceeds of the sale of the non- core assets. Phase Two: Following a pension funding agreement with the Government of Ontario and the conclusion of renewal collective bargaining agreements at Lake Erie and Hamilton, $200 million of debt will be converted to equity and a $100 million rights offering will be completed. It is anticipated that the plan implementation will occur on or about September 30, 2005. New Financing New financing will be raised to address the claims of creditors. This will include: (1) Senior Secured Floating Rate Notes: The US$ equivalent of $250 million, due in 2012. (2) Secured Convertible 6.25% Notes: $116 million, due in 2015. These Notes become unsecured upon completion of the pension funding agreement and the renewal collective bargaining agreements at Hamilton and Lake Erie. The Notes are convertible into common shares. (3) Unsecured Convertible 1% Notes: $200 million, due in 2010. These Notes are, among other features, convertible into common shares at the option of Stelco upon completion of the pension funding agreement and the renewal collective bargaining agreements. New Equity (1) New Common Shares: 11 million New Common Shares of Stelco will be outstanding immediately after plan implementation, 10 million of which will go to the creditor group and 1 million to existing equity holders. (2) Rights: Rights to purchase New Common Shares pursuant to a $100 million rights offering expected to be completed within 18 months and to be added to liquidity. (3) Warrants: Warrants, with a 10-year maturity, to purchase 6.0 million New Common Shares or about 10% of all New Common Shares to be issued on a fully- diluted basis. New Cash (1) $175 million net proceeds anticipated from the sale of non- core assets (2) $100 million from the Rights offering (3) $90 million from the Warrants A Reasonable Plan, A Viable Company The plan outline offers the prospect of a Stelco that is viable over the long term: (1) approximately $650 million in net liquidity ($550 million Phase One plus $100 million Phase Two); (2) assumed enterprise value of $885 million; (3) positions of nearly all stakeholders will be enhanced, with potential upside value; (4) funding for $425 million in critical capital expenditures over 18-24 months; (5) an affordable pension funding schedule; and (6) the plan has a reasonable prospect of being achieved if stakeholders react responsibly. An Appropriate Capital Structure (1) liquidity, leverage, balance sheet structure that are appropriate, in-line with peers; (2) up to $600 million of operating credit facilities; (3) balance sheet improved by $300 million in equity (debt conversion + new equity); (4) near-term maturities replaced with long-term debt; and (5) leverage reflects that of the peer group. Treatment of Stakeholders -- Treatment of existing secured operating lenders Secured operating lenders will be repaid in full. -- Treatment of creditors Stelco's senior debentureholders, subordinated debentureholders, plus trade and other unsecured creditors having claims totaling some $666 million receive pro rata share of: a. the US$ equivalent of $250 million of the Senior Secured Floating Rate Notes b. $116 million of Secured Convertible 6.25% Notes c. $200 million of Unsecured Convertible 1% Notes d. $100 million of New Common Shares -- Treatment of pension plans Stelco's four main pension plans will receive the following contributions once Stelco and the government of Ontario have entered into a pension funding agreement consistent with the terms of the Stelco plan: a. an upfront contribution of the US$ equivalent of $100 million of Senior Secured Floating Rate Notes b. 2/3 of the net proceeds from the sale of the non-core assets, up to a maximum of $100 million in cash c. annual cash payments of approximately $98 million d. The pension plan solvency deficiencies of about $1.3 billion will be retired by 2015 e. As a result, the pension plan deficiencies will be addressed in a manner that will reasonably secure the benefits of current retirees and plan members. -- Treatment of employees and retirees a. Stelco's salaried and bargaining unit employees and retirees are unaffected by the plan b. They are not being requested to make any concessions in terms of salaries and wages or pension and other benefits c. They will benefit from the proposed accelerated pension funding plan -- Treatment of existing shareholders In exchange for their existing common shares, existing shareholders will receive a pro rata share of: a. 1 million New Common Shares b. The Rights c. The Warrants As a result, existing shareholders have the opportunity to retain value if they are prepared to invest new money in Stelco by exercising the Rights and Warrants. Equity Ownership On exit from CCAA, the general unsecured creditors will hold 90.9% of the equity while existing equity holders will hold 9.1%. If existing equity holders do nothing more, their holdings will decline to less than 2%. After the exercise of their Rights and their contribution of $100 million, existing equity holders will have 29.8% of the equity while the general unsecured creditors will hold 70.2% (pre-exercise of Warrants). 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. STELCO INC: Might Not Get Shareholder Consensus on Plan Today ------------------------------------------------------------- Stelco Inc. (TSX:STE) reported that the Thirty-Third Report of the Monitor in the matter of the Company's Court-supervised restructuring was filed on July 14, 2005. The Report reviews these matters: (1) Monitor's discussions with stakeholders The Monitor arranged and held meetings with representatives of stakeholder groups to discuss, among other things, views on moving the restructuring process forward. At the beginning of those meetings Stelco management reviewed the Company's updated financial forecast. Based on those meetings, the Monitor reports that most stakeholders expressed the view that it was unlikely that any consensus on the substance of a CCAA plan outline could be reached by July 18, 2005 and that, in general terms, the next step should be the production of a plan leading to a vote. The Monitor notes that there is no consensus on the best party to bring forward a plan or on the content of such a plan. Noting that the Company has indicated its intention to file a plan outline on July 15, 2005, the Report recommends that the Monitor arrange and direct meetings between the Company and stakeholders beginning the week of July 18, 2005 for the purpose of discussing Stelco's plan outline. (2) Market conditions The Monitor notes that the North American steel industry continues to remain soft from in terms of price and demand. The Report adds that the current spot market price for hot roll black coils, Stelco's largest product category, has declined approximately 9.1% to approximately $500/net ton since June 21, 2005. The Monitor notes, as it has before, that Stelco's future financial results will be highly dependent on the direction of the Company's input costs and the strength of North American steel markets. (3) Request to extend the stay period The Monitor recommends that the Company's request for an extension of the stay period until September 9, 2005, be granted, stating that an extension is in the interest of all stakeholders on these grounds: (a) to allow discussions concerning Stelco's plan outline; (b) to provide time for the subsequent development and filing of a formal restructuring plan; (c) to complete the claims procedure; and, to maintain Stelco's operational and financial stability. 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. TRIM TRENDS: Can Continue Hiring Ordinary Course Professionals -------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Michigan gave Trim Trends Company, LLC, and its debtor-affiliates, permission to continue to retain, employ and pay professionals they turn to in the ordinary course of their business without bringing formal employment applications to the Court. In their day-to-day business operations, the Debtors regularly employ various professionals in the ordinary course of their business to render services in a variety of discrete areas, including corporate and intellectual counsels and tax professionals. The Debtors explain that their business operations would be hindered if they were required to submit to the Court separate employment and compensation applications for each Ordinary Course Professional they will retain. The uninterrupted services of those Professionals are required in the Debtors' continuing operations and ultimate ability to reorganize under chapter 11. The Debtors assure the Court that: 1) no Ordinary Course Professional will be paid in excess of $10,000 per month, and in the event that Professional's monthly fees and expenses exceed $10,000, the Debtors will file with the Court a formal compensation application for that Professional; 2) every Aug. 31, Nov. 30, Feb. 28 and May 31 of every year that their chapter 11 cases are pending, they will file with the Court and serve upon the U.S. Trustee, counsel for the Official Committee of Unsecured Creditors, counsel for the DIP Lender and counsel for the Pre-Petition Lenders, a statement that contains information of: a) the name of the Ordinary Course Professional; b) the aggregate amount paid as compensation for services rendered and reimbursement of expenses ; and c) the general description of the services rendered by each Ordinary Course Professional retained by the Court; and 3) each Ordinary Course Professional will file with the Court and serve upon the U.S. Trustee, counsel for the Official Committee of Unsecured Creditors, counsel for the Debtors, counsel for the DIP Lender and counsel for the Pre- Petition Lenders, an Affidavit of Disinterestedness at least 10 days before the submission of the first invoice to the Debtors. Although some of the Ordinary Course Professionals may hold minor amounts of unsecured claims, the Debtors do not believe that any of them have an interest materially adverse to the Debtors, their creditors and other parties-in-interest. Headquartered in Farmington Hills, Michigan, Trim Trends Company, LLC -- http://www.trimtrendsco.com/-- manufactures automobile and light truck component parts for both original equipment manufacturers and Tier 1 suppliers. The Company and its debtor- affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-56108). Joseph M. Fischer, Esq., at Carson Fischer, P.L.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $65 million and total liabilities of $81 million. TRIM TRENDS: Gets Final Court Order on Post-Petition Financing -------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Michigan granted Trim Trends Company, LLC, and its debtor-affiliates, final approval to obtain post-petition financing from GMAC Commercial Finance LLC. Pre-Petition Loan Agreements The Debtors are a party to: 1) a Loan and Security Agreement with Wells Fargo Foothill, Inc. dated Dec. 30, 2002; 2) a Financing Agreement and related Loan Documents with Hilco Capital LP and Fortress Credit Corp. dated May 7, 2004; and 3) an Intercreditor and Subordination Agreement with Wells Fargo, Hilco Capital and Fortress Credit dated May 7, 2004. Post-Petition Financing & Use of DIP Loans The Court authorizes the Debtors to obtain a revolving working capital line of credit of up to $15 million under a Post-Petition Loan Agreement, based on a formula applied to post-petition accounts and inventory, including an out-of-formula allowance of up to $6 million. The Debtors will use the proceeds of the DIP loans to meet payroll, purchase, merchandise and equipment lease payments. The salient terms of the DIP Loan Agreement are: 1) the Borrowing Base Formula is 90% of Designated Customer Eligible Accounts plus up to 75% of the cost of Eligible Inventory plus up to 84% against Other Customer Eligible Accounts plus up to $6 million of Overformula Advances minus the Borrowing Base Reserves; 2) Overformula Advances will only be made if they are conditionally guaranteed by one or more of the Designated Customers on terms satisfactory to GMAC Commercial; 3) the interest rates under the Post-Petition Loans are: a) a rate equal to the Prime Rate for all Post-Petition Loans that are nor an Overformula Allowance plus 0.5% per annum on the outstanding day-to-day principal balance; b) interest rate equal to the Prime Rate per annum on the outstanding day-to-day principal balance for the Overformula Advances; c) 2% per annum above the other applicable interest rates in the Event of Default; and d) all interest rates will be due and payable on the first business day of each month in arrears and will be calculated based on a 360 day year; 4) GMAC Commercial will receive a $5,000 Collateral Monitoring Fee to be paid on the first business day of each month and a 0.5% fee times the average daily unused portion of the loan to be paid in the first day of each month in arrears; 5) the Overformula Advances will be paid pursuant to the Court- approved Budget; and 6) if the Debtors ceases to operate as a result of a sale of substantially all of their assets provided no Event of Default occurs, GMAC Commercial will fund the Debtors an amount equal to the lesser of the amount of unpaid expenses provide for in the Budget or any unfunded excess Borrowing Base availability immediately prior to the cessation of operations. The proceeds of the Post-Petition Loans will be used in accordance with a 14-week Budget from June 16, to Sept. 9, 2005. A full-text copy of the Budget is available at no charge at: http://bankrupt.com/misc/TrimTrendsDIPFinancingBudget.pdf To adequately protect its interests, GMAC Commercial is granted a perfected lien and security interest in all pre-petition assets and property of the Debtors, except Pre-Petition Collateral and proceeds, products, profits or rent of that Collateral. Headquartered in Farmington Hills, Michigan, Trim Trends Company, LLC -- http://www.trimtrendsco.com/-- manufactures automobile and light truck component parts for both original equipment manufacturers and Tier 1 suppliers. The Company and its debtor- affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-56108). Joseph M. Fischer, Esq., at Carson Fischer, P.L.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $65 million and total liabilities of $81 million. TRUMP HOTELS: 19 Former Shareowners Want to Enforce Record Date --------------------------------------------------------------- Nineteen former owners of shares in Trump Hotels & Casino Resorts, Inc.'s common stock ask the U.S. Bankruptcy Court for the District of New Jersey to compel Trump Hotels & Casino Resorts, Inc. nka Trump Entertainment Resorts, Inc., and its debtor-affiliate to comply with the terms of the Second Amended Plan of Reorganization and the Confirmation Order: 1. Evan Karathanasis 2. Anna Maria T. Ciminello 3. Alan C. Pilla 4. Daniel A. Amicucci 5. Dominick D'Apice 6. Emanuel Ciminello, III 7. Emanuel Ciminello, Jr. 8. Mary Anna Carotenuto 9. Salvatore Ciminello 10. Thomas Ciminello 11. Joel Freidburg 12. Joel H. Friedman 13. IME Partnership Plan 14. Sebastian Pignatello 15. Chris Reslock 16. Phillip Sternberg 17 Doris Sternberg 18. Michael Yacyk, Jr. 19. Andrea D. Yacyk Michael J. Viscount, Jr., Esq., at Fox Rothschild LLP, in Atlantic City, New Jersey, relates that these parties were record owners of the THCR common stock as of March 28, 2005. Under the Plan, the warrants, the cash and the proceeds from the sale of the World's Fair Site are to be distributed to the owners of the Old Equity Shares as of March 28, 2005, the Record Date, Mr. Viscount notes. Nonetheless, without explanation or notice, on the Effective Date of the Plan, distributions of warrants and cash made on account of the Old Equity Shares did not go to the holders on the Record Date, but instead went to the holders as of the Effective Date, Mr. Viscount says. Mr. Viscount argues that the Former Shareowners are entitled to the distributions to the equity security holders called for under the Plan. By this motion, the Former Shareowners specifically ask the Court to: a. order the Debtors to distribute to each of the Former Shareowners their pro rata share of the distributions to the equity security holders called for under the confirmed Plan; and b. award them their costs, expenses and attorney fees incurred in the prosecution of their request. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. nka Trump Entertainment Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their successful chapter 11 restructuring. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Apr. 5, 2005, and the plan took effect on May 20, 2005. (Trump Hotels Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) TRUMP HOTELS: Agrees With Thermal to Expunge $2,784,852 Claim ------------------------------------------------------------- On January 18, 2005, Conectiv Thermal Systems, Inc., or Thermal Energy Limited Partnership I and Atlantic Jersey Thermal Systems, Inc., filed Claim Nos. 1792 and 1920 for $2,784,852 each. Thermal asserts payment for prepetition goods and services. Trump Hotels & Casino Resorts, Inc. nka Trump Entertainment Resorts, Inc., and its debtor-affiliates allege that Claim No. 1792 is duplicative of Claim 1920. The Debtors also contend that Claim No. 1792 has already been fully paid. The Debtors insist that they have satisfied all of Thermal's prepetition claims including those asserted in the Claims. Accordingly, the Debtors and Thermal stipulate and agree that: 1. The Claims will be expunged in their entirety; and 2. In the event any of the Debtors or any representative of the Debtors' estates seeks repayment or disgorgement of any sums paid to Thermal since the Petition Date, Thermal reserves and retains its right to assert a claim against the Debtors' estates for any amounts that it is required to repay or disgorge. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. nka Trump Entertainment Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their successful chapter 11 restructuring. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Apr. 5, 2005, and the plan took effect on May 20, 2005. (Trump Hotels Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) TRUMP HOTELS: Objects to 30 Bondholders' Proofs of Claim -------------------------------------------------------- Trump Hotels & Casino Resorts, Inc. nka Trump Entertainment Resorts, Inc., and its debtor-affiliates ask Judge Wizmur to disallow 30 proofs of claim filed by individual bondholders. Among the largest Individual Bondholder Claims are: Bondholder Claim No. Claim Amount ---------- --------- ------------ Belmonte, Peter 02201 $60,000 Binzel, Katrin 02082 30,000 Brenman, Sally & Mark 02045 75,000 Carter, William & Lucile 02167 30,000 Gudwin, Cory 02128 44,223 Mann, Frederic & Katherine 02155 100,000 Murray, Allan & Florence 01969 100,000 Samia, Leonard 02165 47,625 Webster, Jerry 02133 33,375 Charles A. Stanziale, Jr., Esq., at Schwartz Tobia Stanziale Sedita & Campisano, in Montclair, New Jersey, relates that U.S. Bank National Association, in its capacity as the indenture trustee for the benefit of all of the Debtors' bondholders, filed claims on behalf of all of the Debtors' bondholders. The Individual Bondholder Claims thus assert a claim based on the same liability asserted in the U. S. Bank Claims and are therefore duplicative. The Debtors further object to the Individual Bondholder Claims because each was filed after the Bar Date. The Debtors do not believe that any of the Individual Bondholder Claims are amendments to the U.S. Bank Claims. Stock Claims The Debtors found 31 proofs of claim evidencing equity interests in the Debtors rather than "claims" as the term is defined in Section 101(5) of the Bankruptcy Code. The Stock Claims were also filed after the Bar Date and do not amend previously filed claims. Mr. Stanziale notes that while the holder of an equity security is entitled to file a proof of interest, the Stock Claims were filed using "proof of claim" forms. Pursuant to the Bar Date Notice and the Bar Date Order, any entity holding an equity interest in any of the Debtors need not file a proof of interest on or before the Bar Date, unless the holder wished to assert claims against the Debtors relating to the ownership or purchase of its equity securities. Based on the Debtors' review of Stock Claims, it does not appear that the entities that filed those claims intended to assert Securities- Related Claims against the Debtors, but rather merely intended to evidence their equity securities in the Debtors. Accordingly, the Debtors ask the Court to disallow the Stock Claims. Among the largest of the Stock Claims are: Claimant Claim No. Claim Amount -------- --------- ------------ Barrasso, Joseph 02055 $60,589 Barrasso, Joseph & Judith 02057 44,735 Barrasso, Judith Ann 02056 11,535 McQuaide, Margaret 02074 11,521 Morgan, Bill & Doris Vaught 02127 10,875 Individual Stockholder Claims The Debtors object to five individual stockholder claims pursuant to Section 502(b)(1): Claimant Claim No. Claim Amount -------- --------- ------------ Nickold, Marcus 01979 $1,000,000 Pignatello, Sebastian 01907 unknown RS Holdings 01978 10,000,000 Sternberg, Phillip 01994 1,500,000 Yacyk, Michael, Jr. 01963 1,500,000 Except for Claim No. 019944, each of the Individual Stockholder Claims explicitly assert claims arising from the purchase or sale of stock in Trump Hotels & Casino Resorts, Inc., and from the acts or omissions of THCR, its officers, directors and majority shareholder, Mr. Stanziale states. Mr. Stanziale tells Judge Wizmur that the Individual Stockholder Claims do not provide any supporting evidence or documentation. After reviewing their books and records, the Debtors also determined that there is no amount due and owing on account of any of the Individual Stockholder Claims. The Debtors ask Judge Wizmur to disallow the Individual Stockholder Claims in their entirety. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc. nka Trump Entertainment Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their successful chapter 11 restructuring. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Apr. 5, 2005, and the plan took effect on May 20, 2005. (Trump Hotels Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNITED RENTALS: Expects Self-Insurance Reserve Restatement ---------------------------------------------------------- United Rentals, Inc. (NYSE:URI) said it expects to restate its financial statements for 2000 through 2003 and the first nine months of 2004 after reviewing its self-insurance reserve recorded in 2004 and prior years. Based on work completed to date, the company has concluded that, although the reserve level at year-end 2004 is appropriate, a portion of the reserve recorded in 2003 and 2004 should have been recorded in prior periods. As a result, the expense associated with the self-insurance reserve was too high in 2003 and 2004 and too low in 2002 and prior years. The company retained an independent actuary to assist with this matter. The company is presently quantifying by reporting period the financial restatement necessary. The expected restatement will correct the expense associated with the self-insurance reserve. This restatement, the Company said, will have a positive impact on pre-tax results for 2003 and 2004 and a negative impact on pre-tax results for prior years. Material Weakness In the third quarter of 2004 the company identified a material weakness relating partially to its self-insurance reserve estimation and evaluation process. Self-insurance reserves reflect the company's estimate of the liability associated with workers' compensation claims and claims by third parties for damage or injury caused by the company. The company subsequently retained an independent actuary to assist in reviewing its historical reserve levels. The company has determined that deficiencies relating to its self-insurance reserve estimation process represented a material weakness in the company's internal control over financial reporting at Dec. 31, 2004. The company believes that it has taken adequate measures to remedy this weakness. Income Tax Restatement Update The company announced in March 2005 that it expected to restate its financial statements for years prior to 2004 to correct the provision for income taxes. The company's initial estimate was that this restatement would decrease the provision for income taxes by a total of approximately $25 million for years prior to 2004. Subsequently, the company determined that additional analysis is required to quantify the restatement for periods prior to 2004. Accordingly, the company is withdrawing its prior estimates relating to this matter. The company continues to believe the restatement is likely to decrease aggregate income tax expense for periods prior to 2004, although the expense in particular periods could increase. Further analysis is required to confirm this conclusion. The company believes that this restatement will not impact 2004. Caution on Historical Financial Statements In view of the expected restatements for income tax and self insurance, as well as the matters discussed above relating to certain sale-leaseback transactions, investors are cautioned not to rely on the company's historical financial statements. "The board and management are committed to ensuring full cooperation with the board's special committee and the SEC inquiry," Wayland Hicks, chief executive officer, said. "We are working to resolve outstanding issues and file our financial statements as soon as possible. "While we address these challenges, we remain focused on driving revenue growth, improving our margins and increasing our return on capital, as we continue to benefit from favorable business conditions. Our full year 2005 outlook continues to be for total revenues of $3.4 billion, diluted earnings per share of $1.60 to $1.70 and free cash flow of at least $200 million." United Rentals, Inc. -- http://www.unitedrentals.com/-- is the largest equipment rental company in the world, with an integrated network of more than 730 rental locations in 48 states, 10 Canadian provinces and Mexico. The company's 12,900 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 600 different types of equipment with a total original cost of $3.7 billion. United Rentals is a member of the Standard & Poor's MidCap 400 Index and the Russell 2000 Index(R) and is headquartered in Greenwich, Conn. * * * Standard & Poor's Ratings Services ratings on equipment rental company United Rentals (North America) Inc., including its 'BB' corporate credit rating, remain on CreditWatch with negative implications. The ratings were originally placed on CreditWatch on Aug. 30, 2004. UNITED RENTALS: Gives CFO 30 Days to Cooperate or Be Fired ---------------------------------------------------------- United Rentals, Inc.'s (NYSE:URI) board of directors determined that John Milne, the company's president and Chief Financial Officer, failed to perform his duties and this failure would constitute cause for termination if not cured in accordance with his employment agreement. This action, the company said in a news release last week, was taken on the recommendation of the special committee of the board reviewing matters relating to the previously disclosed SEC inquiry of the company, after Mr. Milne informed the committee he was not willing at this time to respond to the committee's questions. The board notified Mr. Milne that, to the extent his failure of performance may be curable, he would be afforded the thirty-day cure period provided by his employment agreement. Rip Watson at Bloomberg News simplified the company's statement: Mr. Milne has 30 days to cooperate in an accounting review or he'll be fired. United Rental's latest proxy statement reported that John N. Milne has been vice chairman, chief acquisition officer and a director of United Rentals since its formation in September 1997, has been president since June 2001 and has been chief financial officer since December 2002. Mr. Milne was vice chairman and chief acquisition officer of United Waste Systems, Inc. from 1993 until August 1997 and held other senior executive positions at United Waste from 1990 until 1993. From September 1987 to March 1990, Mr. Milne was employed in the Corporate Finance Department of Drexel Burnham Lambert Incorporated. The proxy statement reported that Mr. Milne earned $761,000 in 2003. A full-text copy of the EMPLOYMENT AGREEMENT dated as of Sept. 19, 1997, between UNITED RENTALS, INC., and JOHN N. MILNE, is annexed to an Amended Registration Statement available at no charge at http://ResearchArchives.com/t/s?74as Exhibit 10(h). Mr. Watson relates that Todd Fogarty, a spokesman for Mr. Milne, says the 46-year-old CFO "remains open to assisting the special committee and speaking with its members if mutually agreeable circumstances can be reached." Mr. Fogarty stressed that Mr. Milne "is committed to doing everything he can do to help the company achieve an orderly transition" if he's dismissed. Special Committee Review Update In the years 2000, 2001, and 2002, the company was party to several short-term, equipment sale-leaseback transactions that resulted in the company reporting aggregate gross profit from these transactions of $12.5 million, $20.2 million and $1.5 million in those respective years. Although no final conclusion has been reached, the special committee has developed information that suggests the accounting for at least some of these transactions was incorrect. The special committee is continuing to review these transactions as part of its broader review relating to the SEC inquiry. As previously disclosed, the SEC inquiry appears to relate to a broad range of the company's accounting practices and is not confined to a specific period or the matters discussed in this release. United Rentals, Inc. -- http://www.unitedrentals.com/-- is the largest equipment rental company in the world, with an integrated network of more than 730 rental locations in 48 states, 10 Canadian provinces and Mexico. The company's 12,900 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 600 different types of equipment with a total original cost of $3.7 billion. United Rentals is a member of the Standard & Poor's MidCap 400 Index and the Russell 2000 Index(R) and is headquartered in Greenwich, Conn. * * * Standard & Poor's Ratings Services ratings on equipment rental company United Rentals (North America) Inc., including its 'BB' corporate credit rating, remain on CreditWatch with negative implications. The ratings were originally placed on CreditWatch on Aug. 30, 2004. UNITED RENTAL: Moody's Junks Quarterly Income Preferred Securities ------------------------------------------------------------------ Moody's Investors Service lowered the long-term ratings of United Rental (North America) Inc. and its related entities: * Corporate Family Rating (previously called Senior Implied) to B1 from Ba3; * Senior Unsecured to B2 from B1; Senior Subordinate to B3 from B2; and * Quarterly Income Preferred Securities to Caa1 from B3. The rating action is prompted by the continuing challenges facing the company in resolving the pending SEC investigation and certain accounting irregularities. These challenges are accentuated by today's announcement regarding the employment status of the company's President and Chief Financial Officer. URI's board determined that refusal by the President and CFO to answer questions at this time by the special committee of the board constitutes a failure to perform his duties, and would constitute grounds for termination if not cured within the thirty-day cure period provided by his employment agreement. The special committee of the board is reviewing matters relating to the previously disclosed SEC inquiry of the company. Moody's notes that as a result of the ongoing SEC investigation and expected restatements, URI has cautioned investors not to rely on the company's historical financial statements. The rating action reflects Moody's concerns that the ongoing investigations and resulting findings could be disruptive to the company's operating performance and financing strategy, and that there could be material weakness in the company's internal controls and accounting procedures. The SEC is continuing its inquiry which the company reports appears to relate to a broad range of the company's accounting practices and which is not confined to a specific period or to matters which have been disclosed to date. As a result of the inquiry URI is unable to file audited financial statements. Although the company has negotiated amendments to its bank agreement, further delay in filing audited statements could negatively impact URI's ability to meet provisions contained in its bank agreement and its bond indentures, and could adversely affect the company's liquidity. Moody's review is focusing on the nature and degree of any accounting restatements and other changes that may be necessary as a result of the pending investigations, and the company's ability to maintain an adequate liquidity profile while the matters are being resolved. The review will also consider the degree to which URI can: 1) maintain an effective operating strategy and achieve adequate financial performance during the period of internal review; 2) address management issues attendant to the possible termination of its president and CFO; 3) implement more effective internal control and accounting practices in a timely manner; 4) preserve adequate liquidity in the face of the delays in filing audited financial statements; and 5) resolve the pending SEC investigation and bring its financial reporting current. The SGL-3 Speculative Grade liquidity Rating considers that URI has bank waivers for its $1.55 billion secured facilities allowing the company until December 31, 2005, to provide 2004 audited financial statements as well as delaying its 2005 10Qs until after the after the company's 2004 results are finalized. Moody's also notes United Rentals is party to various indentures under which an aggregate of approximately $2.28 billion of securities are outstanding. These indentures require the company to timely file required annual and other periodic reports. Further delays in meeting its filing requirements could negatively affect the company's liquidity profile, and result in downward adjustment of the Speculative Grade liquidity Rating. The ratings downgraded and under review for possible further downgrade are: United Rentals (North America), Inc.: * Corporate Family Rating at to B1 from Ba3 * Senior Secured Bank Credit Facility rating to B1 from Ba3 * Senior Unsecured debt rating to B2 from B1 * Senior Subordinated debt to B3 from B2 * 10.75% guaranteed notes to B3 from B2 United Rentals Trust I: * Quarterly Income Preferred Securities to Caa1 from B3 United Rentals, headquartered in Greenwich, CT, is the world's largest equipment rental company. The company also sells new and used equipment and contractor supplies. United Rentals' 2004 revenues were approximately $3.1 billion. UNITED RENTALS: CFO's Likely Termination Cues S&P to Retain Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services ratings on equipment rental company United Rentals (North America) Inc., including its 'BB' corporate credit rating, remain on CreditWatch with negative implications. The ratings were originally placed on CreditWatch on Aug. 30, 2004. The ratings remain on CreditWatch following the company's announcement that the board of directors has found cause for the termination of John Milne, the company's president and CFO, for failing to cooperate with a special committee reviewing matters relating to an SEC investigation into a broad range of the company's accounting practices. The company has delayed reporting its 2004 audited results and filing its Form 10-K amid the ongoing investigation. URI has not given any specific reason for the SEC's inquiry, though the original notice was accompanied by a subpoena for certain company accounting records. The filing delay has required the company to obtain a waiver extension from the senior lenders under its credit facility to Dec. 31, 2005. URI's bond indentures also require the timely filing of reports, and continued delay in filing could lead to a default if the company receives a notice from the trustees or from 25% of bondholders. "URI is continuing to cooperate with the SEC on the non-public, fact-finding inquiry," said Standard & Poor's credit analyst John R. Sico. "The lack of specific information and the possibly broad parameters of the investigation, however, remain a cause of concern to us and are the reason for the CreditWatch listing. We will continue to review events as further information becomes available, and we could lower the ratings by multiple notches if any subsequent developments harm the company's credit quality or its liquidity, including its ability to retain access to its bank facility." The company has, however, disclosed a new issue relating to the special committee review of the inquiry. This regards the accounting treatment for sale-leaseback transactions occurring from 2000 to 2002, for which the company recorded a gross profit of approximately $33 million. These transactions are currently being reviewed, as the committee may deem the accounting treatment as incorrect. The company has updated other matters already disclosed, but these do not have any cash implication. These issues have stemmed from ongoing internal controls testing required by the Sarbanes-Oxley Act. The company has disclosed the presence of other control weaknesses as well. URI reported preliminary unaudited results for 2004 that exceeded its expectations, as well as continued momentum in the first quarter of 2005. Standard & Poor's expects sustained, modest recovery in non-residential construction spending in 2005, and this should support company results in the second and third quarters of the year, which typically benefit from seasonal strength. According to the company's unaudited financial information, cash on hand was more than $340 million on March 31, 2005, up $40 million from year-end 2004. This cash, along with the company's continued access to its mostly unused $650 million revolving credit facility, provides URI with sufficient near-term liquidity. Greenwich, Connecticut-based URI offers a broad range of construction and industrial equipment through a network of 730 locations in the U.S., Canada, and Mexico. It had sales of about $3 billion in 2004 and total debt outstanding of about $3 billion. US AIRWAYS: Asks Court to Fix Solicitation & Voting Procedures -------------------------------------------------------------- US Airways, Inc., and its debtor-affiliates ask Judge Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia to: * fix a record date for voting, solicitation and subscription rights; * fix a voting deadline and subscription rights exercise deadline, and; * establish procedures for temporary allowance of certain claims for voting and subscription rights exercise; * approve procedures and materials for the solicitation of votes on the plan, its confirmation, and the exercise of subscription rights. Record Date To determining the number of (i) creditors and interest holders entitled to receive solicitation packages and other notices, (ii) creditors entitled to vote to accept or reject their Plan of Reorganization, and (iii) creditors entitled to participate in the Rights Offering, the Debtors ask the Court to establish August 1, 2005, as the Record Date. Since it is estimated that over 25,000 individuals hold the Debtors' existing equity securities, Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado, asserts that the Debtors need time to complete a comprehensive list of claim and security holders. The Debtors must distribute the solicitation packages and other notices to the parties several days prior to the Disclosure Statement Hearing. Thus, the Debtors have instructed their claims and securities registrars to start generating ownership lists as of August 1, 2005. Voting Deadline The Debtors ask the Court to set September 12, 2005, 4:00 p.m., Eastern time, as the deadline by which ballots must be received by the Voting Agent so as to be counted. The Voting Deadline is 28 days from the date the solicitation packages are distributed. Ballots must be returned to the Voting Agent before the Voting Deadline by: -- mail in the return envelope provided with each ballot; -- overnight delivery; or -- hand delivery. Ballots submitted by facsimile or other electronic transmission will not be counted. Subscription Rights Deadline Since participation in the Rights Offering is determined based on a creditor's classification as a general unsecured creditor entitled to vote on the Plan, the Debtors ask the Court to set September 12, 2005, 4:00 p.m., Eastern time, as the Subscription Rights Deadline by which Subscription Rights Forms must be received by the Subscription Agent. The holder of a claim that the Debtors have objected to will not be entitled to vote on the plan or participate in the Rights Offering: (a) unless the claim has been temporarily allowed for voting purposes; or (b) the objection to the claim has been withdrawn or resolved in favor of the creditor. Rule 3018(a) Motion Deadline The Court should fix August 29, 2005, 4:00 p.m., Eastern time, as the deadline for filing and serving motions requesting the temporary allowance claims or interests for voting and participating in the Rights Offering. The Clerk of the Court and the Notice Parties must receive the Rule 3018(a) Motion by the August 29 Deadline. Any party filing a Rule 3018(a) Motion will be provided a ballot and a Subscription Rights Form. The party will be permitted to cast a provisional vote on the plan and participate in the Rights Offering on a provisional basis. If the Rule 3018(a) Motion cannot be resolved prior to the Voting Deadline and Subscription Rights Deadline, the Court will convene a hearing on September 15, 2005, 9:30 a.m., Eastern time, to determine whether the provisional ballot should be counted and whether the creditor should be allowed to participate in the Rights Offering. Claims and Voting Agent The Debtors will continue to employ Donlin, Recano & Company, Inc., as Claims and Noticing Agent and Voting Agent to assist in the solicitation of votes on the plan. Specifically, Donlin Recano will assist in: (1) mailing solicitation packages; (2) receiving, tabulating, and reporting ballots cast by holders of claims against the Debtors; (3) responding to inquiries from creditors and stakeholders on the Plan, the Disclosure Statement, the ballots, the procedures and voting requirements; (4) soliciting votes on the Plan; and (5) if necessary, contacting creditors and equity security holders. Ballots The Debtors will distribute ballots to creditors entitled to vote on the Plan, except for Classes Group-10 and Group-11 who are not receiving a distribution and who are presumed to have rejected the Plan. All creditor ballots will be accompanied by pre- addressed, postage prepaid return envelopes addressed to the Voting Agent. Solicitation Package Before August 16, 2005 -- the Solicitation Mailing Date -- the Debtors will transmit a solicitation package by U.S. mail, first- class postage prepaid, or by hand or overnight courier, containing a copy of: (a) the Notice of: -- approval of Disclosure Statement; -- the Confirmation Hearing; -- the Deadline and Procedures for Filing Objections to Confirmation of plan; -- the Deadline and Procedures for Temporary Allowance of Certain Claims for Voting Purposes and Subscription Rights; -- the Treatment of Certain Unliquidated, Contingent or Disputed Claims for Notice, Voting and Distribution Purposes; -- the Record Date; and -- the Voting Deadline for receipt of ballots and deadline for receipt of Subscription Rights Forms; (b) the Disclosure Statement; (c) the Plan; (d) the Solicitation Procedures Order; (e) solicitation letters from the Creditors' Committee; (f) a ballot and envelope or notice; and (g) all appendices to the Disclosure Statement, and if applicable, the Rights Offering prospectus, a Subscription Rights Form and return envelope to the Subscription Agent. The Debtors will publish the Confirmation Hearing Notice 25 days before the Confirmation Hearing in the national and European editions of The Wall Street Journal and USA Today (worldwide). This publication schedule will give sufficient notice of the Confirmation Hearing to those who do not receive notice by mail. Deemed to Reject the Plan Holders of interests in Classes Group-10 and Group-11 will neither receive nor retain any property under the plan and are deemed to reject the Plan. The Debtors will send these holders notices informing them: -- of their treatment under the plan; -- that they may not vote on the plan and are deemed to have voted to reject the plan; -- of instructions on the ways to obtain or examine the Disclosure Statement, plan and other plan documents and exhibits; -- of information on the Confirmation Hearing; and -- of directions for filing objections to confirmation of the Plan. Public Security Holders Mr. Leitch maintains that there are no beneficial holders of public securities that are entitled to vote on the Plan. However, the Debtors have two types of public securities outstanding: * There are airport development bonds that are issued by governmental agencies. The governmental agencies are the only direct creditor of the Debtors. Therefore, holders of airport development bonds are not creditors of the Debtors and are not entitled to vote on the plan. * There are complex aircraft financing arrangements pursuant to which public debt was issued. However, under the financing documents, these public debt holders are merely creditors of creditors of the Debtors and, therefore, not entitled to vote on the Plan. Vote Tabulation An original ballot with an original signature; timely received with sufficient information to identify the claimant entitled to vote to accept or reject the Plan, will be counted, subject to these exceptions: (a) if a Claim is deemed allowed, the Claim is allowed for voting purposes in the allowed amount; (b) if a Claim has been estimated or allowed for voting purposes, the Claim is temporarily allowed in the amount estimated or allowed for voting purposes only, and not for allowance or distribution; (c) if a Claim is listed in the Schedules as contingent, unliquidated, or disputed, or for an unknown amount, and a proof of claim was not (i) filed by the Bar Date or (ii) deemed timely filed by a Court order prior to the Voting Deadline, the Claimants will not be given ballots and their claims will be disallowed for voting purposes; (d) if the Debtors have objected to a Claim at least 10 days before the Confirmation Hearing, the Claim will be disallowed for voting and subscription rights purposes only and not for allowance or distribution; (e) if a ballot is completed, executed and filed, but does not indicate acceptance or rejection of the plan, or indicates both, the Debtors will count the Claim as acceptance of the Plan; and (f) ballots cast in amounts in excess of their allowed amount will only be counted per the creditors' allowed Claim. The Debtors will not count: (1) any ballot received after the Voting Deadline without a Court-approved extension; (2) any ballot that is illegible or contains insufficient information to identify the claimant; (3) any ballot cast by a person or entity that does not hold a claim in a class that is entitled to vote on the Plan; (4) any duplicate ballot will be counted once; (5) any ballot submitted by facsimile or other electronic transmission; or (6) any unsigned ballot, including any ballot without an original signature. These procedures will help avoid uncertainty and provide guidance to the Voting Agent and ensure consistent results, Mr. Leitch says. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Executive Vice President Bruce Ashby Resigns -------------------------------------------------------- US Airways (OTC Bulletin Board: UAIRQ) disclosed that Bruce Ashby, its executive vice president-marketing and planning, will be resigning from the company later this month to accept a position as chief executive officer of IndiGo. IndiGo is a start-up low-cost airline that will be based in India and will focus on the domestic inter-India aviation market. Mr. Ashby has been with US Airways for over nine years, and has held a series of senior management positions in finance, planning, operations, corporate development, and marketing. He currently has responsibility for US Airways marketing, planning, alliances and US Airways Express. His duties will be split amongst the existing US Airways management team as they begin planning for the merger and integration process with America West (NYSE: AWA). US Airways disclosed its intention to merge with America West on May 19, 2005, and its plan to complete the merger by late September or early October of this year remains on track, having already cleared initial regulatory and bankruptcy court reviews. "Bruce Ashby has been personally responsible for many of US Airways' accomplishments. He is a brilliant individual and has played a pivotal role in our reorganization, and the financial backers of IndiGo clearly recognize his many talents," said Bruce Lakefield, US Airways president and chief executive officer. "We wish him the absolute best in his new endeavor." Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. VARTEC TELECOM: Asks Court to Extend Exclusive Periods ------------------------------------------------------ VarTec Telecom Inc. and its debtor-affiliates ask the Honorable Steven A. Felsenthal of the U.S. Bankruptcy Court for the Northern District of Texas to extend the time within which they have the exclusive right to file a plan of reorganization. The Debtors want their exclusive plan filing period extended to October 3, 2005. They also ask the Court to extend their exclusive period to solicit plan acceptances to December 1, 2005. The Debtors will use the extension period to finalize ongoing negotiations for a global settlement of claims asserted by independent representatives and complete the sale of some of its assets. Vartec's assets are up for auction on July 25, 2005. Leucadia National Corporation has offered $61.5 million. The Debtors anticipate securing Federal Communications Commission approval of the sale by October 1, 2005. Once the sale process is completed, the Debtors will have the information and time needed to analyze the likely distribution to their unsecured creditors and formulate a plan of reorganization. The Debtors assure the Court that the extension will not prejudice its creditors and other parties-in-interest in this chapter 11 case. Headquartered in Dallas, Texas, VarTec Telecom Inc. -- http://www.vartec.com/-- provides local and long distance service and is considered a pioneer in promoting 10-10 calling plans. The Company and its affiliates filed for chapter 11 protection on November 1, 2004 (Bankr. N.D. Tex. Case No. 04-81694. Daniel C. Stewart, Esq., William L. Wallander, Esq., and Richard H. London, Esq., at Vinson & Elkins, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed more than $100 million in assets and debts. VARTEC TELECOM: Modifies Kane Russell's Retention Terms ------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Texas allowed Vartec Telecom Inc. and its debtor-affiliates to modify the employment terms of their special counsel, Kane, Russell, Coleman & Logan, PC. The Debtors hired Kane Russell on November 19, 2004, as special counsel to provide advise on bankruptcy issues that might arise in connection with litigation involving SBC Communications, Inc. SBC filed suit against VarTec Telecom, Inc. and several other entities in the United States District Court for the Eastern District of Missouri, Eastern Division, in September 2004. In that lawsuit, SBC alleged that VarTec failed to pay legally required charges for use of SBC's local network facilities to complete long-distance calls. Kane Russell's expanded retention contract will include representation in: a) all matters arising in or related to these bankruptcy cases that involve SBC entities, including matters related to contract and lease assumption and rejection matters, and the negotiation of new or modified agreements between Debtors and SBC; and b) matters relating to the Master Lease Agreement between VarTec Telecom, Inc. and General Electric Capital Corporation. Kane Russell's original retention agreement stipulated these hourly rates for its professionals: Professionals Hourly Rates ------------- ------------ Partners & Associates $200 - $400 Paraprofessionals 50 - 125 To the best of the Debtors' knowledge, Kane Russell is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code. About Kane Russell Kane, Russell, Coleman & Logan, P.C. offers a full range of legal services primarily in the areas of corporate, real estate, tax, telecommunications, stadium development and financing, bankruptcy and litigation. The firm was formed on January 2, 1992 and is currently comprised of thirty-nine attorneys. The firm bases its practice on combining the experience and sophistication of a large law firm with the responsiveness and economic efficiency of a mid-sized law firm to provide the highest quality legal services in an efficient, responsive manner. It is this combination of large law firm sophistication with mid-sized cost-effectiveness and responsiveness that distinguishes Kane, Russell, Coleman & Logan, P.C. from other law firms. About Vartec Telecom Headquartered in Dallas, Texas, Vartec Telecom Inc. -- http://www.vartec.com/-- provides local and long distance service and is considered a pioneer in promoting 10-10 calling plans. The Company and its affiliates filed for chapter 11 protection on November 1, 2004 (Bankr. N.D. Tex. Case No. 04- 81694. Daniel C. Stewart, Esq., William L. Wallander, Esq., and Richard H. London, Esq., at Vinson & Elkins, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed more than $100 million in assets and debts. WILLIAM CARTER: Parent Completes $312MM OshKosh B'Gosh Acquisition ------------------------------------------------------------------ Carter's, Inc. (NYSE: CRI), the parent company of The William Carter Company, completed the acquisition of OshKosh B'Gosh, Inc. Under the final terms of the transaction, originally announced on May 10, 2005, a subsidiary of Carter's purchased 100 percent of the common stock of OshKosh B'Gosh for approximately $312 million, which includes payment for vested stock options. "We are excited to bring together two of America's most trusted children's apparel brands," said Fred Rowan, Carter's Chairman and CEO. "We are eager to realize the tremendous potential of the Carter's and OshKosh brands. By leveraging our proven brand management and supply chain skills, we believe we can create significant, long-term value for Carter's shareholders, customers, and consumers." Financing for the acquisition was provided by borrowings under TWCC's new credit facility consisting of: (i) a term loan facility of $500 million and (ii) a committed revolving credit facility in an aggregate principal amount of up to $125 million for working capital and general corporate purposes and for the issuance of letters of credit. Berkshire Partners LLC, a Boston-based private equity firm who has been a significant investor in Carter's since 2001, Banc of America Securities LLC, and Credit Suisse First Boston served as financial advisors to Carter's on the transaction. Ropes & Gray LLP served as legal advisor to Carter's on the transaction. OshKosh B'Gosh -- http://www.oshkoshbgosh.com/-- is a premier global marketer of quality children's apparel and accessories. OshKosh B'Gosh products are available in over 50 countries around the world. The brand is sold through department and national chain stores as well through more than 170 OshKosh B'Gosh-operated retail stores. OshKosh B'Gosh also markets Genuine Kids from OshKosh, at Target. OshKosh B'Gosh is headquartered in Oshkosh, Wisconsin. Carter's Inc. -- http://www.carters.com/-- is the nation's largest branded marketer of children's apparel for ages newborn to six years old. The Carter's brand is sold through over 4,000 department and national chain stores and through more than 180 Carter's- operated retail stores. Carter's Child of Mine and Just One Year brands are available at Wal-Mart and Target, respectively. Carter's is headquartered in Atlanta, Georgia. The William Carter Company markets baby and toddler apparel. * * * The William Carter Co.'s 10.875% Series B Senior Subordinated Notes due 2011 carry Moody's Investors Service's B3 rating and Standard & Poor's B+ rating. WILLIAM CARTER: Pays $132.9 Million in Cash Tender Offer -------------------------------------------------------- The William Carter Company disclosed the expiration of its previously announced cash tender offer and consent solicitation for its outstanding 10.875% Senior Subordinated Notes due 2011, paying approximately $132.9 million of total consideration for the Notes including a redemption premium of approximately $14 million and accrued and unpaid interest. A total of $113.75 million in aggregate principal amount of the Notes (100% of the outstanding Notes) was tendered prior to the expiration date of 9:00 a.m., New York City time, July 14, 2005. The amendments to the indenture governing the Notes that were proposed by TWCC in connection with the tender offer, which eliminate substantially all of the restrictive covenants and certain events of default contained in the indenture governing the Notes, were approved by written consent of the tendering holders of the Notes and became operative today upon TWCC's acceptance of the tendered Notes for purchase. New Credit Facility Financing Financing for the tender offer and consent solicitation, was provided by borrowings under TWCC's new credit facility consisting of: (i) a term loan facility of $500 million and (ii) a committed revolving credit facility in an aggregate principal amount of up to $125 million for working capital and general corporate purposes and for the issuance of letters of credit. Berkshire Partners LLC, a Boston-based private equity firm who has been a significant investor in Carter's since 2001, Banc of America Securities LLC, and Credit Suisse First Boston served as financial advisors to Carter's on the transaction. Ropes & Gray LLP served as legal advisor to Carter's on the transaction. OshKosh B'Gosh -- http://www.oshkoshbgosh.com/-- is a premier global marketer of quality children's apparel and accessories. OshKosh B'Gosh products are available in over 50 countries around the world. The brand is sold through department and national chain stores as well through more than 170 OshKosh B'Gosh-operated retail stores. OshKosh B'Gosh also markets Genuine Kids from OshKosh, at Target. OshKosh B'Gosh is headquartered in Oshkosh, Wisconsin. Carter's Inc. -- http://www.carters.com/-- is the nation's largest branded marketer of children's apparel for ages newborn to six years old. The Carter's brand is sold through over 4,000 department and national chain stores and through more than 180 Carter's- operated retail stores. Carter's Child of Mine and Just One Year brands are available at Wal-Mart and Target, respectively. Carter's is headquartered in Atlanta, Georgia. The William Carter Company markets baby and toddler apparel. * * * The William Carter Co.'s 10.875% Series B Senior Subordinated Notes due 2011 carry Moody's Investors Service's B3 rating and Standard & Poor's B+ rating. WINN-DIXIE: Committee Wants Until Aug. 25 to Challenge DIP Liens ---------------------------------------------------------------- As previously reported, the U.S. Bankruptcy Court for the Southern District of New York entered a Final Order authorizing the Debtors to enter into the DIP Credit Facility. The Final Order provides in pertinent part that: The Committee or Trustee, as referred to above, shall have seventy-five (75) calendar days from the date of appointment of counsel for the Committee within which to commence an adversary proceeding (collectively, a "Pre-Petition Lien/Claim Challenge") with respect to the Pre-Petition Lender's claims in respect of the Pre-Petition Lender Debt or security interest in the Pre-Petition Lender Collateral, or any other claims or causes of action against the Pre-Petition Lender relating to the Pre-Petition Loan Documents. The Committee retained Milbank, Tweed, Hadley & McCloy, LLP, as its counsel in Winn-Dixie Stores, Inc., and its debtor-affiliates' Chapter 11 cases, and 75 calendar days from the date of the Order of its appointment was June 26, 2005. Therefore, pursuant to Rule 9006(a) of the Federal Rules of Bankruptcy Procedure, the deadline to commence a Prepetition Lien/Claim Challenge was June 27, 2005. On May 3, 2005, due to the venue transfer of the Debtors' Chapter 11 cases, the Committee sought to retain Florida-based law firm Akerman Senterfitt as its local co-counsel. The Court permitted the Committee to retain Akerman on June 13, 2005. Accordingly, the Committee asks the Court to enlarge the deadline within which to commence a Prepetition Lien/Claim Challenge to and including August 25, 2005. The Committee would utilize Akerman, its local co-counsel, to review the Prepetition Lender Debt as set forth in the Final DIP Order. The Committee and Milbank determined that Akerman is qualified to perform the review, and has sufficient resources and experience to accomplish the review effectively. Most importantly, the Committee and the Debtors' estates would save money due to the generally lower rate structure of Akerman's professionals. Milbank will not start the review of the Prepetition Lender Debt pending approval of the retention of Akerman to avoid any duplication of services. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). The Honorable Judge Robert D. Drain ordered the transfer of Winn-Dixie's chapter 11 cases from Manhattan to Jacksonville. On April 14, 2005, Winn- Dixie and its debtor-affiliates filed for chapter 11 protection in M.D. Florida (Case No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000). WINN-DIXIE: Landlord Argues Lease Buyout Pact Can't Be Rejected --------------------------------------------------------------- Winn-Dixie Stores, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Middle District of Florida to reject a Lease Buyout Agreement, dated as of July 8, 2004, with Frankford Dallas, LLC, as of July 14, 2005. Cynthia C. Jackson, Esq., at Smith Hulsey & Busey, in Jacksonville, Florida, tells Judge Funk that Store No. 2409 is not essential to the Debtors' ongoing operations, and rejecting the Lease Buyout Agreement, assuming it's even enforceable, will save the Debtors' estates $60,416 per month. "By rejecting the Contract," Ms. Jackson says, "the Debtors will avoid unnecessary expense and burdensome obligations that provide no tangible benefit to [their] estates or creditors." Frankford Responds Frankford does not believe that the Lease Buyout Agreement is executory because the only remaining material unperformed obligation under the Agreement is the Debtors' obligation to make payments. Frankford does not oppose the rejection only to the extent the Agreement is executory, with determination to be made, if necessary, at a later date. Frankford and the Debtors are discussing the resolution of this issue. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). The Honorable Judge Robert D. Drain ordered the transfer of Winn-Dixie's chapter 11 cases from Manhattan to Jacksonville. On April 14, 2005, Winn- Dixie and its debtor-affiliates filed for chapter 11 protection in M.D. Florida (Case No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000). WORLDCOM INC: Court Denies Move to Expunge Litigants' $690M Claims ------------------------------------------------------------------ As previously reported in the Troubled Company Reporter on September 20, 2004, Worldcom, Inc. and its debtor-affiliates asked the United States Bankruptcy Court for the Southern District of New York to disallow and expunge Claim Nos. 17111, 17112, 22573, 22574, 24817, 24818 and 24819 filed by Abbott Litigants against WorldCom for $690 million. The Claims are predicated on a state court action commenced by the Abbott Litigants before the Superior Court of California on May 29, 2001, which was amended on June 21, 2001, against: (1) a dozen officers of World Access, Inc.; (2) 100 "John Does"; (3) MCI WorldCom, Inc.; and (4) WorldCom Chief Executive Officer Bernard Ebbers, Controller David Myers, and Chief Financial Officer Scott Sullivan The Abbott Litigants are: (1) Roger B. Abbott; (2) Atocha, LP; (3) Gold & Appel Transfer, S.A.; (4) Edward Heimrich; (5) William S. Miller III, individually and as trustee; (6) Joanne T. Miller, individually and as a trustee; and (7) Edward Soren The Abbott Litigants seek to recover from WorldCom damages arising out of the merger of WorldxChange, Inc., a company formerly owned by Mr. Abbott, and World Access, Inc., a telecommunications company, which filed a Chapter 11 petition in 2001 before the U.S. Bankruptcy Court for the Northern District of Illinois. WorldCom owned 6.7% of World Access' stock before World Access' bankruptcy. The Abbott Litigants allege that the State Action Defendants participated in an allegedly fraudulent scheme to induce WorldxChange to merge with World Access by misrepresenting World Access' financial ties to WorldCom. WorldCom allegedly entered into a sham transaction to purchase services from World Access, thereby bolstering World Access' financial position making its stock a more valuable currency for use in acquiring other companies like WorldxChange. The Abbott Litigants allege that a Carrier Service Agreement entered into by a company later acquired by World Access and WorldCom in 1998 was the instrument of the purported fraud. * * * Judge Gonzalez denies the Debtors' request for reasons stated in open court. The Court finds that further discovery is necessary and lifts the stay on discovery. The Court sets a status hearing for the matter for October 18, 2005. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 95; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Wants Summary Judgment on 121 Opt-Out Claims ---------------------------------------------------------- Angela G. Hepner, Esq., at Stinson Morrison Hecker LLP, in Kansas City, Missouri, relates that 121 individuals filed claims for $5,000 each and asserted as basis of the claim "litigation for excess fees". The Claimants filed Claim Nos. 20301-20311, 20313-20357, 20359, 20361-20366, 20368-20379, 20381, 20383-20384, 20389-20393, 20395- 20404, 20407-20425, 20767-20774, and 20995. Some or all of the Claimants opted out of a prepetition settlement of a class action in which it was alleged that MCI subscribers were charged non-subscriber rates when they accessed MCI's network to place long distance calls. The Claimants attached to their proofs of claim the first page of seven separate complaints filed in the Circuit Court of Noxubee County, Mississippi, in July 2002. The Noxubee County Complaints alleged that MCI, Inc., misrepresented facts pertaining to the Claimants' long distance telephone service. The allegations rested on the assertion that MCI charged the Claimants non- subscriber rates and surcharges even though the Claimants were MCI subscribers. Upon investigation of the Claimants' telephone numbers provided by the Claimants' counsel, the Reorganized WorldCom, Inc. and its debtor-affiliates found out that they did not charge any of 121 Claimants non-subscriber rates or surcharges. Accordingly, the Reorganized Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to grant them summary judgment and disallow the claims filed by the 121 Claimants. Ms. Hepner argues that summary judgment is appropriate on the Claimants' claims because the Claimants cannot demonstrate that they suffered any injury. Regardless of the theory that the Claimants rely upon for relief, the Claimants must show a "proximate injury" or that they suffered damages. 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. 95; Bankruptcy Creditors' Service, Inc., 215/945-7000) YUKOS OIL: Moscow Court Suspends Yugansk's Compensation Lawsuit --------------------------------------------------------------- The Moscow Arbitration Court has suspended proceedings of the compensation suit brought by Yuganskneftegas against its former parent Yukos Oil Company, according to Kommersant. Yukos asked for the suspension, citing that the pending appeals filed by Yuganskneftegas regarding the recovery of back taxes haven't been resolved. Yuganskneftegas is demanding RUB141.17 billion in compensation for losses sustained while Yukos battled tax claims that resulted to the unit being auctioned in December 2004. Yuganskneftegas previously sought to recover RUB62.4 billion for crude delivered in 2004 that was not paid by Yukos. Early in May 2005, the Moscow Court sustained the lawsuit. Yuganskneftegas claimed victory in the Tyumen Region weeks ago when the Arbitration Court upheld its case versus Yukos' Energotrade to collect more than RUB6 billion in settlement for crude delivered in 2004. Yuganskneftegas has brought lawsuits against Yukos asserting $13 billion in damages. 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. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) YUKOS OIL: Oil Production Drops to 13 Million Tons -------------------------------------------------- AK&M Information Agency reports that Yukos Oil Company's oil production decreased for the first half of the 2005, producing only 13.464 million tons against 42.511 million tons for the same period last year. Yukos produced only 1.914 million tons of oil in June 2005 alone, compared to 7.065 million tons a year ago. Yukos also booked a big drop in first-half oil export via the Transneft system, delivering only 678,000 tons this year against 18.042 million tons in 2004. Yukos' first quarter revenues plunged to RUB665,000,000 this year, from RUB1,450,000,000 last year. Yukos' first-quarter net debt swelled from RUB57.5 billion to RUB299.02 billion. 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. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) * LeBoeuf Lamb Adds Timothy Moran & Vanessa Wilson in Washington ---------------------------------------------------------------- The international law firm of LeBoeuf, Lamb, Greene & MacRae LLP announced that Timothy Moran and Vanessa Richelle Wilson have joined the Firm as a partner and a senior counsel, respectively, in the corporate department of the Washington, DC office. "We are pleased to expand our project finance and corporate practice capabilities with these additions," said the Firm's Chairman, Steven H. Davis. "LeBoeuf Lamb is a preeminent legal service provider to the energy industry, which has historically been one of our core strengths." "Our project finance group works in collaboration with the global network of attorneys at LeBoeuf Lamb to serve developers in Latin America, Europe, the U.S. and Africa," said Joseph A. Tato, head of the project finance practice group. "We welcome Tim and Vanessa to the Firm." Both Mr. Moran and Ms. Wilson are joining LeBoeuf Lamb from Winston & Strawn. They specialize in energy project finance and acquisitions, both domestic and international. Mr. Moran and Ms. Wilson have represented sponsors in the development, financing and acquisition of gas-fired power plants and wind and other renewable power facilities as well as gas storage facilities, gas pipelines and other energy projects. They also regularly represent lenders in connection with loans for the construction or acquisition of such energy projects and 144a offerings relating to the energy sector. A former partner in that firm's Washington office, Mr. Moran has represented The AES Corporation, Calyon, The CIT Group, Sempra, Prudential and WestLB. He has worked in the energy sector for more than ten years and has particular expertise in structuring complex financings. Mr. Moran is a graduate of the University of Virginia and the University of Virginia School of Law. Ms. Wilson became a partner at Winston & Strawn in 2004. Her clients have included Calyon, InterGen North America, WestLB, The CIT Group, KBC Bank and The AES Corporation. She has spent significant time representing clients in the development and evaluation of energy projects with a special emphasis on fuel- related matters. Ms. Wilson is a graduate of Tulane University School of Law. LeBoeuf, Lamb, Greene & MacRae LLP has more than 600 lawyers practicing in 20 offices worldwide. Well known as one of the preeminent legal services providers to the insurance/financial services and energy and utilities industries, the Firm has built upon these strengths to gain prominence in litigation, corporate, bankruptcy, taxation, environmental, real estate and technology/intellectual property practices. * BOND PRICING: For the week of July 11 - July 15, 2005 ------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- AAIPharma Inc. 11.000% 04/01/10 75 ABC Rail Product 10.500% 01/15/04 0 ABC Rail Product 10.500% 12/31/04 0 Adelphia Comm. 3.250% 05/01/21 5 Adelphia Comm. 6.000% 02/15/06 5 Allegiance Tel. 11.750% 02/15/08 30 Allegiance Tel. 12.875% 05/15/08 1 Allied Holdings 8.625% 10/01/07 47 Amer. Color Graph. 10.000% 06/15/10 71 Amer. Plumbing 11.625% 10/15/08 16 Amer. Restaurant 11.500% 11/01/06 64 Amer. Tissue Inc. 12.500% 07/15/06 2 American Airline 7.377% 05/23/19 71 American Airline 7.379% 05/23/16 70 American Airline 10.180% 01/02/13 72 AMR Corp. 9.200% 01/30/12 70 AMR Corp. 9.750% 08/15/21 67 AMR Corp. 9.800% 10/01/21 65 AMR Corp. 9.820% 10/25/11 73 AMR Corp. 9.880% 06/15/20 61 AMR Corp. 10.000% 04/15/21 72 AMR Corp. 10.200% 03/15/20 67 AMR Corp. 10.400% 03/15/11 62 AMR Corp. 10.550% 03/12/21 72 Anchor Glass 11.000% 02/15/13 72 Antigenics 5.250% 02/01/25 60 Anvil Knitwear 10.875% 03/15/07 58 AP Holdings Inc. 11.250% 03/15/08 15 Apple South Inc. 9.750% 06/01/06 10 Archibald Candy 10.000% 11/01/07 2 Armstrong World 6.500% 08/15/05 75 Asarco Inc. 8.500% 05/01/25 71 AT Home Corp. 0.525% 12/28/18 7 AT Home Corp. 4.750% 12/15/06 32 ATA Holdings 12.125% 06/15/10 18 ATA Holdings 13.000% 02/01/09 21 Atlantic Coast 6.000% 02/15/34 15 Atlas Air Inc. 8.770% 01/02/11 57 Atlas Air Inc. 9.702% 01/02/08 61 Autocam Corp. 10.875% 06/15/14 64 B&G Foods Hldg. 12.000% 10/30/16 8 Bank New England 8.750% 04/01/99 10 Bank New England 9.500% 02/15/96 9 BBN Corp. 6.000% 04/01/12 0 Burlington North 3.200% 01/01/45 62 Burlington Inds. 7.250% 08/01/27 4 Calpine Corp. 4.750% 11/15/23 67 Calpine Corp. 7.750% 04/15/09 66 Calpine Corp. 7.875% 04/01/08 67 Calpine Corp. 8.500% 02/15/11 67 Calpine Corp. 8.625% 08/15/10 66 Cendant Corp. 4.890% 08/17/06 50 Charter Comm Hld. 10.000% 05/15/11 75 Charter Comm Inc. 5.875% 11/16/09 73 Ciphergen 4.500% 09/01/08 72 Coeur D'Alene 1.250% 01/15/24 75 Collins & Aikman 10.750% 12/31/11 27 Comcast Corp. 2.000% 10/15/29 43 Cons Container 10.125% 07/15/09 74 Covad Communication 3.000% 03/15/24 70 Covant-Call 07/05 7.500% 03/15/12 69 Cray Research 6.125% 02/01/11 43 Delta Air Lines 2.875% 02/18/24 32 Delta Air Lines 7.299% 09/18/06 52 Delta Air Lines 7.711% 09/18/11 53 Delta Air Lines 7.779% 01/02/12 52 Delta Air Lines 7.900% 12/15/09 34 Delta Air Lines 7.920% 11/18/10 57 Delta Air Lines 8.000% 06/03/23 34 Delta Air Lines 8.300% 12/15/29 26 Delta Air Lines 8.540% 01/02/07 61 Delta Air Lines 8.540% 01/02/07 63 Delta Air Lines 8.540% 01/02/07 33 Delta Air Lines 9.000% 05/15/16 28 Delta Air Lines 9.200% 09/23/14 31 Delta Air Lines 9.250% 03/15/22 29 Delta Air Lines 9.300% 01/02/11 32 Delta Air Lines 9.320% 01/02/09 42 Delta Air Lines 9.375% 09/11/07 56 Delta Air Lines 9.480% 06/05/06 66 Delta Air Lines 9.750% 05/15/21 27 Delta Air Lines 9.875% 04/30/08 69 Delta Air Lines 10.000% 08/15/08 38 Delta Air Lines 10.000% 12/05/14 35 Delta Air Lines 10.125% 05/15/10 39 Delta Air Lines 10.140% 08/26/12 47 Delta Air Lines 10.375% 02/01/11 37 Delta Air Lines 10.375% 12/15/22 27 Delta Air Lines 10.430% 01/02/11 53 Delta Air Lines 10.500% 04/30/16 45 Delta Air Lines 10.790% 09/26/13 36 Delta Air Lines 10.790% 09/26/13 37 Delta Air Lines 10.790% 03/26/14 26 Delphi Auto System 7.125% 05/01/29 74 Delphi Trust II 6.197% 11/15/33 55 Diva Systems 12.625% 03/01/08 0 Dura Operating 9.000% 05/01/09 70 Dura Operating 9.000% 05/01/09 73 DVI Inc. 9.875% 02/01/04 8 Dyersburg Corp. 9.750% 09/01/07 0 Eagle-Picher Inc. 9.750% 09/01/13 72 Eagle Food Center 11.000% 04/15/05 0 Emergent Group 10.750% 09/15/04 0 Empire Gas Corp. 9.000% 12/31/07 3 Evergreen Intl. Avi. 12.000% 05/15/10 72 Exodus Comm. Inc. 5.250% 02/15/08 0 Fedders North Am. 9.875% 03/01/14 68 Federal-Mogul Co. 7.375% 01/15/06 26 Federal-Mogul Co. 7.500% 01/15/09 27 Federal-Mogul Co. 8.160% 03/06/03 24 Federal-Mogul Co. 8.370% 11/15/01 24 Federal-Mogul Co. 8.800% 04/15/07 25 Fibermark Inc. 10.750% 04/15/11 61 Finisar Corp. 5.250% 10/15/08 74 Finova Group 7.500% 11/15/09 44 Firstworld Comm 13.000% 04/15/08 0 Foamex L.P. 9.875% 06/15/07 28 Foamex L.P. 13.500% 06/15/07 46 GMAC 5.900% 01/15/19 74 GMAC 5.900% 01/15/19 74 GMAC 5.900% 02/15/19 74 GMAC 6.000% 02/15/19 74 GMAC 6.000% 03/15/19 75 GMAC 6.000% 04/15/19 74 GMAC 6.000% 09/15/19 74 GMAC 6.000% 09/15/19 74 GMAC 6.050% 10/15/19 75 GMAC 6.100% 09/15/19 74 GMAC 6.125% 10/15/19 74 GMAC 6.150% 10/15/19 73 GMAC 6.250% 07/15/19 73 Golden Books Pub 10.750% 12/31/04 0 Graftech Int'l 1.625% 01/15/24 68 Graftech Int'l 1.625% 01/15/24 68 Gulf States STL 13.500% 04/15/03 0 Home Interiors 10.125% 06/01/08 55 Holt Group 9.750% 01/15/06 0 Icos Corp. 2.000% 07/01/23 74 Impsat Fiber 6.000% 03/15/11 70 Inland Fiber 9.625% 11/15/07 47 Interep Natl. Rad 10.000% 07/01/08 75 Intermet Corp. 9.750% 06/15/09 44 Iridium LLC/CAP 10.875% 07/15/05 17 Iridium LLC/CAP 11.250% 07/15/05 17 Iridium LLC/CAP 13.000% 07/15/05 17 Iridium LLC/CAP 14.000% 07/15/05 17 Jordan Industries 10.375% 08/01/07 50 Kaiser Aluminum & Chem. 12.750% 02/01/03 4 Kellstorm Inds 5.750% 10/15/02 0 Kmart Corp. 6.000% 01/01/08 12 Kmart Corp. 8.990% 07/05/10 71 Kmart Corp. 9.350% 01/02/20 26 Level 3 Comm. Inc. 2.875% 07/15/10 54 Level 3 Comm. Inc. 5.250% 12/15/11 72 Level 3 Comm. Inc. 5.250% 12/15/11 75 Level 3 Comm. Inc. 6.000% 09/15/09 56 Level 3 Comm. Inc. 6.000% 03/15/10 53 Liberty Media 3.750% 02/15/30 58 Liberty Media 4.000% 11/15/29 61 Lukens Inc. 7.625% 08/01/04 0 Metaldyne Corp. 11.000% 06/15/12 69 Motels of Amer. 12.000% 04/15/04 35 Muzak LLC 9.875% 03/15/09 45 MSX Intl. Inc. 11.375% 01/15/08 64 Natl Steel Corp. 8.375% 08/01/06 3 Natl Steel Corp. 9.875% 03/01/09 1 New World Pasta 9.250% 02/15/09 8 Nexprise Inc. 6.000% 04/01/07 0 North Atl. Trading 9.250% 03/15/09 45 Northern Pacific Railway 3.000% 01/01/47 60 Northwest Airlines 7.248% 01/02/12 51 Northwest Airlines 7.360% 02/01/20 55 Northwest Airlines 7.626% 04/01/10 72 Northwest Airlines 7.691% 04/01/17 71 Northwest Airlines 7.875% 03/15/08 42 Northwest Airlines 8.070% 01/02/15 47 Northwest Airlines 8.130% 02/01/14 52 Northwest Airlines 8.700% 03/15/07 47 Northwest Airlines 8.875% 06/01/06 65 Northwest Airlines 8.970% 01/02/15 62 Northwest Airlines 9.875% 03/15/07 49 Northwest Airlines 10.000% 02/01/09 43 Northwest Airlines 10.500% 04/01/09 50 Nutritional Src. 10.125% 08/01/09 74 NWA Trust 9.360% 03/10/06 75 NWA Trust 11.300% 12/21/12 67 Oakwood Homes 7.875% 03/01/04 16 Oakwood Homes 8.125% 03/01/09 20 O'Sullivan Ind. 13.375% 10/15/09 34 Orion Network 11.250% 01/15/07 54 Outboard Marine 9.125% 04/15/17 0 Owens Corning 7.000% 03/15/09 74 Owens Corning 7.500% 05/01/05 75 Owens Corning 7.500% 08/01/18 74 Owens Corning 7.700% 05/01/08 68 Owens-Crng Fiber 8.875% 06/01/02 71 Pegasus Satellite 9.750% 12/01/06 54 Pegasus Satellite 12.375% 08/01/06 54 Pegasus Satellite 12.500% 08/01/07 54 Pen Holdings Inc. 9.875% 06/15/08 60 Polaroid Corp. 6.750% 01/15/02 0 Polaroid Corp. 7.250% 01/15/07 0 Polaroid Corp. 11.500% 02/15/06 0 Portola Packaging 8.250% 02/01/12 73 Primedex Health 11.500% 06/30/08 46 Primus Telecom 3.750% 09/15/10 24 Primus Telecom 5.750% 02/15/07 34 Primus Telecom 8.000% 01/15/14 53 Primus Telecom 12.750% 10/15/09 38 Radnor Holdings 11.000% 03/15/10 69 Realco Inc. 9.500% 12/15/07 44 Reliance Group Holdings 9.000% 11/15/00 24 Reliance Group Holdings 9.750% 11/15/03 2 RJ Tower Corp. 12.000% 06/01/13 69 Salton Inc. 10.750% 12/15/05 67 Salton Inc. 12.250% 04/15/08 43 Silicon Graphics 6.500% 06/01/09 58 Solectron Corp. 0.500% 02/15/34 70 Specialty Paperb. 9.375% 10/15/06 69 Tekni-Plex Inc. 12.750% 06/15/10 72 Teligent Inc. 11.500% 03/01/08 1 Tom's Foods Inc. 10.500% 11/01/04 71 Tower Automotive 5.750% 05/15/24 21 Trans Mfg Oper 11.250% 05/01/09 56 Triton PCS Inc. 8.750% 11/15/11 70 Triton PCS Inc. 9.375% 02/01/11 71 Tropical SportsW 11.000% 06/15/08 40 Twin Labs Inc. 10.250% 05/15/06 14 United Air Lines 6.831% 09/01/08 43 United Air Lines 6.932% 09/01/11 65 United Air Lines 7.270% 01/30/13 43 United Air Lines 7.762% 10/01/05 23 United Air Lines 7.811% 10/01/09 60 United Air Lines 8.030% 07/01/11 37 United Air Lines 8.390% 01/21/11 54 United Air Lines 8.700% 10/07/08 50 United Air Lines 9.000% 12/15/03 14 United Air Lines 9.020% 04/19/12 36 United Air Lines 9.060% 09/26/14 45 United Air Lines 9.125% 01/15/12 12 United Air Lines 9.200% 03/22/08 45 United Air Lines 9.210% 01/21/17 53 United Air Lines 9.300% 03/22/08 35 United Air Lines 9.350% 04/07/16 51 United Air Lines 9.560% 10/19/18 41 United Air Lines 9.750% 08/15/21 15 United Air Lines 10.110% 01/05/06 44 United Air Lines 10.110% 02/19/06 44 United Air Lines 10.125% 03/22/15 47 United Air Lines 10.250% 07/15/21 15 United Air Lines 10.670% 05/01/04 14 United Air Lines 11.210% 05/01/14 14 Univ. Health Services 0.426% 06/23/20 66 US Air Inc. 10.250% 01/15/07 4 US Air Inc. 10.250% 01/15/07 2 US Air Inc. 10.300% 01/15/08 15 US Air Inc. 10.300% 07/15/08 15 US Air Inc. 10.610% 06/27/07 0 US Air Inc. 10.610% 06/27/07 2 US Air Inc. 10.900% 01/01/08 2 US Airways Pass 6.820% 01/30/14 44 Utstarcom 0.875% 03/01/08 75 Venture Hldgs 9.500% 07/01/05 0 Venture Hldgs 11.000% 06/01/07 0 WCI Steel Inc. 10.000% 12/01/04 65 Werner Holdings 10.000% 11/15/07 69 Westpoint Steven 7.875% 06/15/08 0 Wheeling-Pitt St. 5.000% 08/01/11 65 Wheeling-Pitt St. 6.000% 08/01/10 65 Winn-Dixie Store 8.875% 04/01/08 74 Winsloew Furniture 12.750% 08/15/07 28 World Access Inc. 13.250% 01/15/08 6 Xerox Corp. 0.570% 04/21/18 30 ********* 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 ***