/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050801.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, August 1, 2005, Vol. 9, No. 180 Headlines 110 MEDIA: Board & Stockholders Okay 1-for-15 Stock Split ACCERIS COMMS: Annual Stockholders' Meeting Slated for Aug. 5 ACCERIS COMMS: Lenders Extend Loan Maturity Date to Dec. 31 ADELPHIA COMMS: Sues J&J Telecommunications to Recover $390,193 ADESA INC: Earns $28.6 Million of Net Income in Second Quarter AIR CANADA: Bid to Offer Cargo Services in Calgary Denied AMARIN CORP: Posts $5.5 Million Net Loss in Second Quarter 2005 AMERICAN LOCKER: Talks with Lenders to Restructure Debt AMERICAN LOCKER: Five Directors Resign AMERICAN TOWER: Posts $31.8 Million Net Loss in Second Quarter ATKINS NUTRITIONALS: Files Chapter 11 Petition in S.D. New York ATKINS NUTRITIONALS: Case Summary & 30 Largest Unsecured Creditors BANC OF AMERICA: Fitch Places Low-B Rating on 2 Cert. Classes BANC OF AMERICA: Fitch Puts Low-B Rating on $916K Cert. Classes BANC OF AMERICA: Fitch Rates $1.44MM Class B Certificates at BB BILLINGS YMCA: Secures Debt Repayment Extension BRASOTA MORTGAGE: Court Authorizes Termination of 401(k) Plan BROADBAND OFFICE: Asks Court to Approve Plan Voting Procedures BUILDERS FIRSTSOURCE: Debt Reduction Cues S&P's Positive Outlook CAPITAL TRUST: Fitch Affirms Low-B Rating on 3 Certificate Classes CARDTRONICS INC: Moody's Junks Proposed $150 Million Sr. Sub Notes CATHOLIC CHURCH: Ronald Dandar Wants Stay Lifted to Pursue Claim CLASSIC WORLD: Case Summary & 8 Largest Unsecured Creditors COLLATERALIZED SYNTHETIC: S&P Retains Watch on Junk-Rated Notes CONSOLIDATED COTTON: List of 20 Largest Unsecured Creditors CONTINENTAL AIRLINES: Field Employees Reject TWU Representation CUMMINS INC: Improved Performance Prompts S&P to Lift Ratings CWMBS INC: Fitch Places Low-B Rating on 2 Certificate Classes CWMBS INC: Fitch Puts BB Rating on $1.6MM Class B Mortgage Certs. ENRON CORP: Hired Weil Lobbyist to Oppose Energy Bill Amendment ENRON CORP: Court Wants Court Nod on American Express Settlement ESSELTE GROUP: Selling DYMO Unit to Newell Rubbermaid for $730MM EXIDE TECH: Posts $35.7 Million Net Loss in First Quarter 2005 FEDERAL-MOGUL: Court Approves Insurance Settlement Agreement FIBERMARK INC: U.S. Trustee Disbands Creditors Committee FLOWSERVE CORP: Moody's Rates New $1 Billion Facilities at Ba3 FLOWSERVE CORP: Provides Updates on Five Key Items GABLES REALTY: Moody's Chips Preferred Stock Rating to B1 GABLES REALTY: S&P Rates Proposed $2.125 Billion Bank Loan at BB+ GEORGIA-PACIFIC: 2nd Qtr. $194M Net Income Lower than Last Year's GETTY IMAGES: Good Performance Prompts S&P to Upgrade Ratings GS CONSULTING: Ch. 7 Trustee Taps Thorne Grodnik as Gen. Counsel HARVEST OPERATIONS: Moody's Confirms $250 Million Notes' B3 Rating IKON OFFICE: Earns $24.4 Million of Net Income in Third Quarter IMPERO INC: Wants to Sell Obsolete Inventory to Retail Customers IMPERO INC: Wants to Walk Away from Burdensome Executory Contracts INTERSTATE BAKERIES: Charles Sullivan Holds $4.2M Allowed Claim INTERSTATE BAKERIES: Court Okays $720K Sta. Maria Property Sale JP MORGAN: Fitch Puts BB+ Rating on $15.10MM Private Class Certs. JP MORGAN: Fitch Rates $2.9MM Private Class Certs at BB KAISER ALUMINUM: Trustee Wants Ernst & Young's Retention Denied KELLWOOD COMPANY: Moody's Pares $270 Million Notes' Rating to Ba2 LA MODE: Case Summary & Largest Unsecured Creditors MAGELLAN HEALTH: Bankruptcy Professionals Get $20,358,431 in Fees MERIDIAN AUTOMOTIVE: Wants Annual Incentive Program Approved MERIDIAN AUTOMOTIVE: Proposes $9 Mil. Key Employee Retention Plan MERIDIAN AUTOMOTIVE: Proposes $6 Mil. Key Employee Severance Plan MIRANT CORP: Court OKs Cutting Dynegy's Claim from $2.7M to $125K MIRANT CORP: Says Multi-Mil. Guarantees Avoidable as "Fraudulent" MONEY CENTERS: Settles Breach of Contract Suit Against Equitex MORGAN STANLEY: Fitch Assigns Low-B Rating to Six Cert. Classes MORGAN STANLEY: Fitch Holds Low-B Rating on 6 Certificate Classes NATURADE INC: Completes $4 Million Financing with Laurus Funds NOLAND-DECOTO: Case Summary & 20 Largest Unsecured Creditors NORTH AMERICAN: Inks Settlement Agreement with Howard Properties OAKWOOD PACKAGING: Case Summary & 20 Largest Unsecured Creditors OWENS CORNING: Objects to Shintech's $39 Million Claim PANTRY INC: Earns $16.7 Million of Net Income in Third Quarter PANTRY INC: Restating Financials for Sale-Leaseback Transactions PANTRY INC: Default Prompts S&P to Junk Subordinated Debt Rating PHHMC MORTGAGE: Fitch Rates $342,453 Class B Certificates at BB PROXIM INC: Court Approves Pachulski Stang as Bankruptcy Counsel PROXIM CORP: Wilson Sonsini Approved as Special Counsel RAYMOND HOLDER: Voluntary Chapter 11 Case Summary REGIONAL DIAGNOSTICS: Court Approves Term Sheet with DIP Lenders RECYCLED PAPERBOARD: Gets Final OK to Use Lender's Cash Collateral RECYCLED PAPERBOARD: Sells Non-Real Estate Assets for $535,000 RESIDENTIAL ACCREDIT: Fitch Places Low-B Rating on 2 Cert. Classes RESIDENTIAL ACCREDIT: Fitch Rates $854,600 Class B Certs. at BB RESIDENTIAL FUNDING: Fitch Puts Low-B Rating on 2 Class B Certs. RYAN'S RESTAURANT: Asking Lenders for Covenant Waivers RYDAHL INDUSTRIES: Case Summary & 20 Largest Unsecured Creditors ROBERT CHARLES: Case Summary & 20 Largest Unsecured Creditors ROSLYN TORAH: List of 9 Largest Unsecured Creditors ROUGE INDUSTRIES: Wants Removal Period Extended to Oct. 17 SATMEX: Creditors Reach Pact Resolving Involuntary Ch. 11 Petition SECURITY CAPITAL: Taps McGladrey & Pullen to Audit 2005 Financials SHURGARD STORAGE: Fitch Cuts Rating on Sr. Unsecured Debt to BBB- SIRVA WORLDWIDE: Moody's Cuts $665 Million Debts' Rating to Ba3 SOLUTIA INC: Court OKs Extension of $500MM DIP Pact to June 2006 SOUTHWEST RECREATIONAL: Court Okays Committee's Rule 2004 Probe SSA GLOBAL: S&P Rates Proposed $225 Million Senior Loan at BB- SUMMIT GENERAL: List of 20 Largest Unsecured Creditors SUNGARD DATA: Moody's Junks Proposed $1 Billion Subordinated Notes SWISS MEDICA: Company Points to Many Improvements Since Dec. 31 TEMBEC INC: 2nd Qtr. $142.5MM Net Loss 11x More than Last Year's UAL CORP: Committee Wants to Tap Farr & Taranto as Counsel UAL CORP: Posts $1.43 Billion Net Loss in Second Quarter 2005 US AIRWAYS: Liquidation Analysis under Plan of Reorganization USG CORP: Wants to Pay Greco & Lander 10% Contingency Fee VALLEY PRIDE: Judge Utschig Dismisses Chapter 11 Case VICENCIO PROPERTIES: Case Summary & 20 Largest Unsecured Creditors WELLS FARGO: Fitch Places Low-B Rating on Two Certificate Classes WESTPOINT STEVENS: Silver Sands Balks at Disclosure Statement WHITING PETROLEUM: Moody's Reviews $220 Million Notes' B2 Rating WHITING PETROLEUM: Reserves Purchases Prompt S&P's Negative Watch WHOLE AUTO: Low Delinquencies Prompt S&P's Positive Watch WINDCREST NURSING: Case Summary & 20 Largest Unsecured Creditors XYBERNAUT CORP: Look for Bankruptcy Schedules on Sept. 8 * Emilio Palazuelos Joins Alvarez & Marsal's REA Services Group * Frank Vo Joins Alvarez & Marsal's DA&F Group * BOND PRICING: For the week of July 25 - July 29, 2005 ********* 110 MEDIA: Board & Stockholders Okay 1-for-15 Stock Split --------------------------------------------------------- 110 Media Group, Inc.'s Board of Directors and stockholders owning or having voting authority for 12,155,713 shares of outstanding common stock have voted in favor of the taking of corporate actions by consent in lieu of a meeting of stockholders. Holders of 12,155,713 of 110's common stock gave their written consent to two corporate actions: 1) an amendment to 110's Certificate of Incorporation to effect a reverse stock split of all of the outstanding shares of common stock, at a ratio of between one-for-five and one-for-fifteen. 2) an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock the Company is authorized to issue to 100,000,000 and decrease the par value of the Company's common stock to $.001. The written consent of the stockholders were obtained pursuant to Section 228(a) of the Delaware General Corporation Law, as amended. The stockholders who consented to the corporate actions represent approximately 55.1% of the total outstanding common stock of 110 Media, which is sufficient to take the proposed action on the record date of July 15, 2005. Dissenting stockholders did not have any statutory appraisal rights as a result of the actions taken. The Board of Directors did not solicit any proxies or consents from any other stockholders in connection with the actions. On June 16, 2005, 13 shareholders, who collectively own 55.1% of the Company's common stock, consented in writing to the proposed Amendment: Name No. of Shares Percentage ---- ------------- ---------- Snapper Partners, LLC 993,525 4.5% Steven A. Horowitz 1,750,000 7.9% Raymond Barton 2,861,452 13.0% Timothy Schmidt 1,430,736 6.5 Mark Figula 2,500,000 11.3% RES Holdings 275,000 1.2% Epifanio Almodovar 470,000 2.1% Lawrence Wiener 350,000 1.6% Aizik Wolf 475,000 2.2% Ed Gordon 150,000 0.7% Wu Chih Chun 550,000 2.5% Andrew Schenker 175,000 0.8% George Sandhu 175,000 0.8% ------------ --------- Total 12,155,713 55.1% Headquartered in Melville, New York, 110 Media Group, Inc., -- http://www.110mediagroup.com-- fka Dominix, Inc., is a media marketing company specializing in marketing of products utilizing direct email, online exposure and traditional methods positioned to be the fastest growing media firm in the world. The company offers manufacturers, resellers and service providers a reliable, high-quality resource for business development, market development, and channel development. 110 Media targets large Internet retailers and adult entertainment firms within the US and worldwide. * * * Going Concern Doubt Marcum & Kliegman LLP expressed substantial doubt about 110 Media's ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended Dec. 31, 2004, and Dec. 31, 2003. The accounting firm pointed to the company's $2.1 million loss in 2004 and a $186,000 loss in 2003. ACCERIS COMMS: Annual Stockholders' Meeting Slated for Aug. 5 ------------------------------------------------------------- Acceris Communications Inc. will hold its Annual Stockholders' Meeting on Aug. 5, 2005, at 2:00 p.m. Eastern Standard Time, at 1001 Brinton Road, in Pittsburgh, Pennsylvania. The annual meeting will be held in order to: (1) elect three Class II directors, each to serve for three years, and until their successors have been duly elected and qualified; (2) approve the sale of substantially all assets of the Company's wholly owned subsidiary, Acceris Communications Corp.; (3) approve an amendment to the Articles of Incorporation changing the Company's name to "C2 Technologies Inc."; (4) ratify the appointment of BDO Seidman LLP, as independent auditors for the year ended December 31, 2005; and (5) transact any other business that may properly be presented at the Annual Meeting, or any adjournment or postponement thereof. Only stockholders of record at the close of business on June 9, 2005, are entitled to notice of, and to vote at, the Annual Meeting. Acceris Communications Inc. -- http://www.acceris.com/-- is a broad based communications company serving residential, small- and medium-sized business and large enterprise customers in the United States. A facilities-based carrier, it provides a range of products including local dial tone and 1+ domestic and international long distance voice services, as well as fully managed and fully integrated data and enhanced services. Acceris offers its communications products and services both directly and through a network of independent agents, primarily via multi-level marketing and commercial agent programs. Acceris also offers a proven network convergence solution for voice and data in Voice over Internet Protocol communications technology and holds two foundational patents in the VoIP space. At Mar. 31, 2005, Acceris Communications Inc.'s balance sheet showed a $69,707,000 stockholders' deficit, compared to a $61,965,000 deficit at Dec. 31, 2004. ACCERIS COMMS: Lenders Extend Loan Maturity Date to Dec. 31 ----------------------------------------------------------- Acceris Communications Inc., and its wholly owned subsidiary, Acceris Communications Corp., amended a loan and security agreement with their lender, Acceris Management and Acquisition, LLC, on June 30, 2005. The terms of the amended senior lending facility include: -- an extension of maturity date from June 30, 2005, to Dec. 31, 2005; -- an added provision to cause acceleration of the senior lending facility's maturity should the asset purchase agreement and the management services agreement terminate; -- a fixed interest rate at 10% per annum, as compared to the previous floating interest rate of prime rate plus 1.75% with an interest rate floor of 6%; -- a $5 million maximum borrowing available under the $18 million senior lending facility; and -- advances under the senior lending facility to be made at the sole discretion of the lender as compared to the various advance rates that were previously in effect. The parties amended the agreement to: -- reaffirm the Company's existing indebtedness under an assignment and acceptance agreement between Acceris Management and Wells Fargo Foothill, Inc., and -- induce the lender to enter into the assignment agreement. Under the terms and provisions of the assignment agreement, Foothill sold to Acceris Management the Foothill agreement along with all security interests and loan documents. Asset Purchase Agreement On May 19, 2005, Acceris Management entered into an asset purchase agreement and a management services agreement with the Company and its majority stockholder, Counsel Corporation. Under the terms of the agreement, the lender will acquire substantially all of the assets and assume certain liabilities of ACC on the closing date. Acceris Management was organized as a subsidiary of North Central Equity, LLC, a Minnesota limited liability company, to acquire certain assets of ACC pursuant to the asset purchase agreement. Foothill has already consented to the disposition of substantially all of ACC's assets to the lender. As a result of the execution of the amendment and the assignment agreement, Acceris Management has become the Company's senior lender under the terms and provisions of the Foothill loan documents. Acceris Communications Inc. -- http://www.acceris.com/-- is a broad based communications company serving residential, small- and medium-sized business and large enterprise customers in the United States. A facilities-based carrier, it provides a range of products including local dial tone and 1+ domestic and international long distance voice services, as well as fully managed and fully integrated data and enhanced services. Acceris offers its communications products and services both directly and through a network of independent agents, primarily via multi-level marketing and commercial agent programs. Acceris also offers a proven network convergence solution for voice and data in Voice over Internet Protocol communications technology and holds two foundational patents in the VoIP space. At Mar. 31, 2005, Acceris Communications Inc.'s balance sheet showed a $69,707,000 stockholders' deficit, compared to a $61,965,000 deficit at Dec. 31, 2004. ADELPHIA COMMS: Sues J&J Telecommunications to Recover $390,193 --------------------------------------------------------------- Adelphia Communications Corporation and its debtor-affiliates want to avoid and recover preferential or, in the alternative, fraudulent transfers against J&J Telecommunications, Inc. Susan F. Balaschak, Esq., at Traub Bonacquist & Fox LLP, in New York, tells the Court that, within 90 days before the they filed for bankruptcy, the ACOM Debtors made transfers, aggregating $390,173, to J&J Telecom on account of antecedent debt the ACOM Debtors owed to J&J Telecom. The ACOM Debtors received less than reasonably equivalent value in exchange for the Transfers, Ms. Balaschak says. The ACOM Debtors also: -- were insolvent on the date the Transfers were made; -- were engaged in business or a transaction, or were about to engage in business or a transaction, for which any property remaining with them was an unreasonably small capital; or -- intended to incur, or believed each would incur, debts that would be beyond each of the ACOM Debtors' ability to pay as the debts matured. The Transfers constitute avoidable and fraudulent conveyances. The ACOM Debtors ask the Court to: a. avoid and recover the Transfers, pursuant to Sections 547(b) and 550 of the Bankruptcy Code; b. avoid and recover the Transfers, pursuant Sections 548 and 550 of the Bankruptcy Code; c. disallow any claims of J&J Telecommunications until it turns over any Transfers to the ACOM Debtors pursuant to Section 502(d); and d. award them prejudgment interest and costs of the lawsuit. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADESA INC: Earns $28.6 Million of Net Income in Second Quarter -------------------------------------------------------------- ADESA, Inc. (NYSE: KAR) reported its second quarter financial results for the period ended June 30, 2005. For the second quarter of 2005, the company reported net income of $35.9 million on revenue of $247.7 million. For the second quarter of 2004, ADESA reported net income of $28.6 million on revenue of $231.0 million. Results for the second quarter of 2004 included a $4.0 million after-tax charge resulting from litigation related to the company's discontinued vehicle importation business. Second Quarter and Recent Highlights: * achieved second quarter 2005 operating profit increases of eight percent for Auction and Related Services segment and 24 percent for Dealer Financing segment -- AFC; * achieved all-time record volume of more than 280,000 AFC loan transactions; * reinitiated strategic growth program as demonstrated by acquisitions of a used vehicle auction near Washington, D.C. and a salvage auction near Charlotte, North Carolina; * appointed Brent Huisman to Vice President of Dealer Relations, further strengthening focus on growing ADESA's dealer consignment business; and * completed debt refinancing in July, providing increased financial flexibility and a reduction in effective interest rates. "ADESA's second quarter results and recent accomplishments demonstrate our ability to both tactically grow our business while strategically pursuing new growth initiatives," stated ADESA, Inc. Chairman, President and Chief Executive Officer, David Gartzke. "In addition to growing our revenue and operating profit at both business segments, the recent strategic actions we've implemented demonstrate our commitment to growing our dealer consignment business, enhancing alternative remarketing channels for our customers, expanding our geographic footprint, reducing debt costs and seeking new growth avenues that leverage our core competencies, customer relationships and vehicle remarketing expertise." Quarterly Consolidated Results For the second quarter of 2005, the company reported revenue of $247.7 million as compared with revenue of $231.0 million in the second quarter of 2004. The $16.7 million increase in revenue for the second quarter of 2005 was primarily due to benefits from higher revenues per vehicle sold, favorable Canadian currency translation, revenues from the company's recently acquired Washington, D.C. auction and increased loan transaction volume and revenue per loan transaction at AFC. Net income for the second quarter was $35.9 million as compared with net income of $28.6 million, or $0.32 per diluted share in the second quarter of 2004. Results for the second quarter of 2005 include $4.8 million pre-tax ($2.9 million after-tax) of incremental interest and corporate expenses resulting from the company's June 2004 recapitalization and need for additional infrastructure required to operate as an independent public company. Results for the second quarter of 2004 included a $4.0 million after-tax charge related to the company's discontinued vehicle importation business and $1.4 million pre-tax of non-recurring transaction costs related to the company's June 2004 initial public offering (IPO) and subsequent separation from former parent company, ALLETE, Inc. Quarterly Segment Results The company's Auction and Related Services segment second quarter 2005 revenue increased $12.9 million, or over six percent, to $215.5 million compared with $202.6 million in the second quarter of 2004. Operating profit for the company's Auction and Related Services segment increased eight percent, or $3.5 million, to $49.8 million, as compared with $46.3 million in the second quarter of 2004. Revenue per vehicle sold increased six percent to $436 as compared with $410 for the second quarter of 2004, primarily due to selective fee increases, favorable Canadian currency translation of $4.0 million (or eight dollars per vehicle sold) and revenue related to the company's growing Internet service offerings and other ancillary services. For the second quarter of 2005, the company's Dealer Financing segment reported a thirteen percent increase in revenues to $32.2 million compared with $28.4 million in the second quarter of 2004. Operating profit for AFC rose 24 percent to $19.7 million as compared with $15.9 million in the second quarter of 2004. The increases in revenue and operating profit for the second quarter were primarily due to achieving record volume of over 280,000 loan transactions in tandem with an eleven-dollar increase in revenue per loan transaction to $115. Year-to-Date Consolidated Results For the six months ended June 30, 2005, the company reported revenue of $491.7 million and net income of $70.9 million compared with revenue of $478.3 million and net income of $61.9 million for 2004. Net income for fiscal 2005 and 2004, includes discontinued operations charges of $0.1 million and $4.0 million respectively. Results for the first six months of fiscal 2004 also include $2.6 million pre-tax ($1.6 million after-tax) of non-recurring transaction costs related to the company's June 2004 IPO and subsequent separation from former parent company, ALLETE, Inc. Canadian currency translation favorably impacted revenue by $7.5 million for the first six months of fiscal 2005. Year-to- date financial results for fiscal 2005 also include incremental interest and corporate expenses of approximately $11.8 million ($7.2 million net of tax). 2005 Outlook As outlined on both the company's February and April 2005 earnings conference calls, ADESA continues to expect fiscal 2005 income from continuing operations to be approximately $126 million to $131 million. As a result of the company's recent share repurchases, ADESA now anticipates its fiscal 2005 weighted average diluted share count will be approximately 90.5 million shares. Due to the change in weighted average share count, the company has revised upward its fiscal 2005 earnings per share range by $0.02, to $1.39 to $1.45. Previously, the company had provided fiscal 2005 earnings per share guidance of $1.37 to $1.43, which was based upon 92 million weighted average diluted shares outstanding. The company's guidance also reflects the impact of the year-to- date performance relative to vehicle volumes, revenue per vehicle, loan transaction volume and revenue per loan transaction, but does not reflect potential benefits from the company's recently completed debt refinancing. The guidance also excludes the impact of a one-time pre-tax charge of approximately $2.8 million for the write-off of unamortized debt financing costs and related expenses related to the previously mentioned debt refinancing in the third quarter of 2005. Headquartered in Carmel, Indiana, ADESA, Inc. (NYSE: KAR) -- http://www.adesainc.com/-- is North America's largest publicly traded provider of wholesale vehicle auctions and used vehicle dealer floorplan financing. The Company's operations span North America with 53 ADESA used vehicle auction sites, 32 Impact salvage vehicle auction sites and 84 AFC loan production offices. * * * As reported in the Troubled Company Reporter on June 4, 2004, Standard & Poor's Rating Services assigned its 'B+' rating to ADESA Inc.'s proposed $125 million senior subordinated notes due 2012, and affirmed its 'BB' corporate credit and senior secured ratings on the Carmel, Indiana-based operator of wholesale used-vehicle auctions and provider of used-vehicle floorplan financing. Moody's affirmed its B1 rating on those 7-5/8% senior unsecured subordinated notes due June 15, 2012, on Nov. 2, 2004. AIR CANADA: Bid to Offer Cargo Services in Calgary Denied --------------------------------------------------------- The Minister of Transport, Jean Lapierre, on July 19, 2005, denied Air Canada's application to utilize and offer domestic cargo service between Toronto and Calgary, in Alberta, on a wet lease basis from foreign air cargo operators, Gemini and World Airways. Air Canada will not be able to pick up and drop off cargo in Calgary using a leased plane and crew en route between Toronto and Shanghai, China. Air Canada spokeswoman Laura Cooke said the airline is disappointed and surprised at the decision. According to Ms. Cooke, the flight must make a technical stop in Calgary. Rival Cargojet praised the decision. "We find the Honorable Minister's ruling to be just and fair," Ajay K. Virmani, president & chief executive officer of Cargojet, said in a press release. "Cargojet is extremely satisfied with the ruling as the application for exemption was met with heavy opposition from all major industry stakeholders, all of whom cited lack of economic benefits for Canadian shippers and the aviation industry. "We are pleased that the Minister has endorsed the views of the industry acknowledging that this application does not meet public interest requirements nor is it beneficial to Canadian consumers," adds Virmani. Cargojet provides overnight air cargo service to 13 major cities in Canada. Air Canada filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and filed a Section 304 petition in the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Mr. Justice Farley sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004. Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier. Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher, serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from their creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. On September 30, 2004, Air Canada successfully completed its restructuring process and implemented its Plan of Arrangement. The airline exited from CCAA protection raising $1.1 billion of new equity capital. As of December 31, 2004, Air Canada's shareholders' deficit narrowed to CDN$203 million compared to a $4.155 billion deficit at December 31, 2003. AMARIN CORP: Posts $5.5 Million Net Loss in Second Quarter 2005 --------------------------------------------------------------- Amarin Corporation plc (NASDAQSC: AMRN) reported its second quarter financial results for the period ended June 30, 2005. For the quarter ended June 30, 2005, Amarin reported a net loss of $5.5 million, compared with a net loss of $3.2 million in the quarter ended June 30, 2004. Key Highlights -- Second quarter operating loss from continuing activities of $5.7 million (2004 - $1.6 million); increase primarily due to inclusion of Amarin Neuroscience's expenses of $3.4 million, following its acquisition in October 2004 -- Gross proceeds of $17.8 million raised through equity issue in May, 2005; directors and officers of Amarin invested $4.5 million in the offering -- Amarin now debt-free -- U.S. Phase III clinical trial of Miraxion(TM) in Huntington's disease commenced; patient recruitment and pre- screening on-going and dosing expected to commence shortly -- European phase III clinical trial will be conducted in collaboration with EURO-HD and Icon plc, a leading global contract research organization; this trial is scheduled to commence in the autumn "We have been successful in achieving our key objectives in the first half of the year," Rick Stewart, chief executive officer of Amarin, said. "The completion of our $17.8 million financing significantly strengthens our balance sheet and leaves Amarin debt-free. Our critical development programs have made excellent progress. The commencement of recruitment for the U.S. Huntington's disease Phase III clinical trial is a major milestone for the company. We look forward to the commencement of the European trial in the autumn. The planning for the Phase II clinical trial program in melancholic depression is progressing well and we are now commencing early stage discussions with potential partners for this program." Three months Ended June 30, 2005 The results for the quarter ended June 30, 2005 entirely represent continuing activities. The results for the comparative quarter ended June 30, 2004, reflect continuing and discontinued activities. Continuing activities For the quarter ended June 30, 2005, the operating loss was $5.7 million, compared with an operating loss of $1.6 million from continuing activities for the same period in 2004. The increase is primarily due to the inclusion of Amarin Neuroscience Limited's expenses of $3.4 million, following its acquisition in October 2004. Research and development costs for the second quarter were $2.9 million (2004 - $nil) and reflect staff costs, third party research contract costs, preclinical study costs, clinical supplies and significant set up costs associated with commencing the phase III trials in Huntington's Disease. These costs include amounts payable to the two organizations running the HD trials, namely, the Huntington's Study Group and Icon plc. Selling, general and administrative costs for the second quarter were $2.6 million (2004 - $1.5 million) and primarily represent Amarin's general and administrative costs, business and corporate development costs and the cost of maintaining and renewing Amarin's portfolio of intellectual property. The increase in selling, general and administrative costs was principally due to the inclusion of Amarin Neuroscience's general and administrative costs of $0.5 million for the quarter and increases in business and corporate development costs. Discontinued activities For the quarter ended June 30, 2005, there were no amounts relating to discontinued activities. The results for the comparative quarter ended June 30, 2004 for discontinued activities primarily represent research and development costs incurred by Amarin on behalf of Valeant Pharmaceutical International of $1.4 million. Amarin has no further obligation to incur costs on Valeant's behalf. Six Months Ended June 30, 2005 The results for the six-month period ended June 30, 2005 entirely represent continuing activities. The results for the comparative six-month period ended June 30, 2004 reflect continuing and discontinued activities. Continuing activities For the six month period ended June 30, 2005, the operating loss was $9.0 million, compared with an operating loss of $3.3 million from continuing activities for the same period in 2004. As for the second quarter, the increase is primarily due to the inclusion of Amarin Neuroscience's expenses of $4.8 million, including significant costs associated with commencing Miraxion's phase III trials in HD. Discontinued activities For the six-month period ended June 30, 2005, there were no amounts relating to discontinued activities. For the comparative six-month period ended June 30, 2004, Amarin earned a profit before interest of $21.4 million on discontinued activities reflecting: (1) the results of Amarin's disposed US business for the period from January 1, 2004 to February 25, 2004, being the date upon which the business was sold to Valeant; (2) research and development costs incurred by Amarin on behalf of Valeant of $1.4 million. Amarin has no further obligation to incur costs on Valeant's behalf. (3) an exceptional loss of $2.4 million on the disposal of Amarin's U.S. operations and certain products to Valeant; (4) an exceptional gain of $0.35 million, representing receipt during the quarter of an installment of the proceeds of sale of our Swedish drug delivery business to Watson in October 2003; and (5) an exceptional gain of $25.6 million on the settlement of debt obligations to Elan in February 2004. Also, a non-cash deferred tax accounting charge of $7.5 million arose in the comparative six-month period on the exceptional gain in (5) above which offset a deferred tax asset of an equivalent amount included in the balance sheet as at December 31, 2003. Balance Sheet Intangible fixed assets At June 30, 2005, Miraxion had an intangible carrying value of $10.0 million, an increase of $6.2 million from $3.8 million at June 30, 2004. The increase in the carrying value arises primarily from the acquisition accounting for Amarin Neuroscience, which was acquired in October 2004. U.K. Tax Under United Kingdom tax legislation, Amarin Neuroscience is eligible for research and development tax relief. As the company is loss making, it can elect to surrender its eligible research and development tax losses and in return receive a payment from the Inland Revenue in respect of this research and development tax relief. In Q2, 2005, Amarin recognized a tax credit of $300,000 in respect of such research and development tax relief. At June 30, 2005, included in debtors, is a total research and development tax relief receivable of $1.4 million. Cash At June 30, 2005, Amarin had cash of $16.4 million compared to $7.2 million at June 30, 2004. On May 24, 2005, Amarin raised gross proceeds of $17.8 million through the completion of a registered offering of 13.7 million ADS's with institutional and other accredited investors, including certain directors and executive officers of Amarin. Directors and executive officers of Amarin invested approximately $4.5 million in the offering for the purchase of an aggregate of 3.5 million ADS's, inclusive of the 1.5 million ADS's issued in connection with the redemption of the loan notes. After offering fees, expenses and the redemption of the remaining $2 million of loan notes in connection with the purchase of shares by Amarin's chairman, Mr. Thomas Lynch, the net proceeds were approximately $14.8 million. At June 30, 2005, Amarin had no debt compared to $5.0 million at June 30, 2004. On May 24, 2005, simultaneous with the registered offering, Amarin's remaining $2 million loan notes, owed to Amarin's Chairman, Mr. Thomas Lynch, were redeemed for $2 million and the proceeds used by Mr. Lynch to subscribe for approximately 1.5 million ADS's. This followed the conversion of the first $3 million of loan notes to equity by Mr. Lynch on October 7, 2004. Amarin now has no debt other than working capital liabilities. Amarin's future financing strategy will depend on the timing of clinical trial expenditure on its development pipeline and on the level of revenue generated from its licensing and partnering activities. Amarin Corporation plc -- http://www.amarincorp.com/-- is a neuroscience company focused on the development and commercialization of novel drugs for the treatment of central nervous system disorders. Miraxion, Amarin's lead development compound, is in phase III development for Huntington's disease and in phase II development for depression. * * * Going Concern Doubt PricewaterhouseCoopers LLP expressed a going concern opinion after it audited Amarin Corporation plc's (NASDAQSC: AMRN) financial statements for the fiscal year ended Dec. 31, 2004. PwC states that Amarin needs to secure further financing to allow the Company to fund its ongoing operational needs and meet its debt obligations, raising substantial doubt about its ability to continue as a going concern. AMERICAN LOCKER: Talks with Lenders to Restructure Debt ------------------------------------------------------- American Locker Group Incorporated filed its Annual Report on Form 10-K for its fiscal year ended Dec. 31, 2004, and also plans to file amended quarterly reports for the first three quarters of 2004 to reflect increases in net income in each period from that previously reported as a result of corrections in inventory accounting. The operating results for 2004 reflect a full year of revenues from the Company's long-term contract with the United States Postal Service for polycarbonate and aluminum Cluster Box Units, which was not renewed by USPS and expired on May 31, 2005. The Company expects that its sales and operating results will decline substantially in 2005 as compared to 2004, as a result of the loss of USPS as a customer. In addition, the Company will record an impairment charge of approximately $6.4 million including a goodwill write-down of $6.1 million against its operating results in the first quarter of 2005. After the Company received notification in February 2005 that the USPS would not renew the CBU contract, the Company's Board of Directors reviewed the Company's strategic alternatives, with the assistance of outside advisors, and adopted a restructuring plan, summarized in the Annual Report, to reduce annual selling, general and administrative expenses significantly, primarily though personnel reductions in Jamestown, New York and the relocation of the Company's headquarters to its owned facilities in Grapevine, Texas, by the end of 2005. In addition, the Company is seeking to restructure its term and revolving credit loans. As a result of the non-renewal of the USPS contract, the Company's lender notified the Company that it was in default on its outstanding bank indebtedness. In 2004, the Company recorded its largest sales volume ever, with consolidated net sales of $49,023,417, an increase of $9,766,979, or 24.9%, over the prior year. This increase was attributable primarily to an approximately $7,000,000 bulk order of CBUs from the USPS delivered in the third quarter of 2004. Sales to USPS accounted for 53.9% of consolidated net sales in 2004, compared to 52.7% of consolidated net sales in 2003. Pre-tax income rose from $3,545,379 in 2003 to $4,500,938 in 2004, an increase of 27.0%, after accounting for a one-time charge of $1,102,500 for an environmental settlement. Net income rose from $2,147,132 in 2003 to $2,702,948 in 2004, an increase of 25.9%. Earnings per share on a diluted basis were $1.73 per share, up $0.35 from the previous year, an increase of 25.4%. Default On March 18, 2005, the Company received a notice of default and reservation of rights letter from its lender regarding the Company's term loan as a result of the non-renewal of its aluminum Cluster Box Units contract with the United States Postal Service. To date, the Company has made all scheduled payments on its term loan and its outstanding mortgage loan. In addition, the lender has verbally advised the Company that its revolving line of credit is not available. The Company has no long-term capital commitments or obligations, although this situation may require re-evaluation upon receipt of the USPS drawing and design package for the new 1118F CBU. Retains Compass Advisory Partners The Board of Directors formed a Restructuring Committee for the purposes of selecting a financial advisor and evaluating a restructuring plan. On March 17, 2005, following Board approval, the Company announced that it had retained Compass Advisory Partners, LLC to provide strategic consulting services to the Company with respect to potential restructuring and cost reductions necessitated by the non-renewal of the USPS CBU contract. The Restructuring Committee, in consultation with Compass, undertook a review of the Company's financial position and business and operations. In particular, the Restructuring Committee and Compass reviewed (i) the financial impact of the loss of the Company's CBU contract with the USPS; (ii) the economics of the Signore manufacturing agreement; (iii) the prospects for new product development, including emphasis on the 1118F series aluminum CBUs and development of laptop lockers; (iii) the potential impact of the restructuring plan on the Company's financial position, with an emphasis on cash generation and retention. Lender Talks The Company is in discussions with its lender -- Manufacturers and Traders Trust Company -- to restructure the Company's term and revolving debt with a new loan agreement to be in effect for approximately one year, during which time the Company expects to seek a new lender in Texas, where the Company will be relocating its headquarters by the end of 2005. The lender's initial proposal provides that the Company: (i) pay down the remaining balance of its term loan, which is approximately $2,700,000, in 2005; (ii) maintain its mortgage loan due in 2006, which has an outstanding balance of approximately $2,300,000; and (iii) have available a revolving line of credit of $1,000,000, subject to terms and conditions to be negotiated. The real property and building which secures the Company's mortgage loan have been appraised by the lender at a value of approximately $3,000,000. The Company expects to have sufficient cash on hand to pay off its term loan and further expects to be able to refinance its mortgage loan with a new lender in Texas. If the Company is unable to restructure its term and revolving debt with its current lender or to refinance its mortgage loan and obtain financing from a new lender on terms acceptable to the Company, the financial position of the Company would be materially adversely affected. American Locker Group Incorporated is an engineering, assembling, manufacturing and marketing enterprise engaged primarily in the sale of lockers. This includes coin, key-only, and electronically controlled checking lockers and related locks and plastic and aluminum centralized mail and parcel distribution lockers. AMERICAN LOCKER: Five Directors Resign -------------------------------------- Five directors for American Locker Group Incorporated resigned on July 28, 2005, after the company filed its Annual Report on Form 10-K for its fiscal year ended December 31, 2004. Anthony J. Crisafio, Donald I. Dussing, Jr., Roy J. Glosser, Thomas Lynch, IV, and Jeffrey C. Swoveland are the five directors that resigned. Edward F. Ruttenberg, Alan H. Finegold and Steven Bregman, the remaining Directors, are recruiting qualified candidates for appointment to the Board as promptly as practical. Mr. Ruttenberg, the Company's Chairman and Chief Executive Officer, stated, "American Locker Group greatly appreciates the dedicated service of Messrs. Crisafio, Dussing, Glosser, Lynch and Swoveland on its Board of Directors and, particularly, for their leadership through the difficult process this spring that led to the Board's adoption of a strategic plan to reduce annual selling, general and administrative expenses primarily through personnel reductions in Jamestown, New York, and the relocation of the Company's headquarters to its owned facilities in Grapevine, Texas, by the end of 2005. We currently are recruiting qualified candidates to become new Directors to serve the Company as it implements that strategic plan." On March 18, 2005, the Company received a notice of default and reservation of rights letter from its lender, Manufacturers and Traders Trust Company, regarding the Company's term loan as a result of the non-renewal of its aluminum Cluster Box Units contract with the United States Postal Service. Compass Advisory Partners, LLC, is providing the company with strategic consulting services with respect to potential restructuring and cost reductions necessitated by the non-renewal of the USPS CBU contract. The Company is in discussions with its lender to restructure the Company's term and revolving debt with a new loan agreement to be in effect for approximately one year, during which time the Company expects to seek a new lender in Texas, where the Company will be relocating its headquarters by the end of 2005. American Locker Group Incorporated is an engineering, assembling, manufacturing and marketing enterprise engaged primarily in the sale of lockers. This includes coin, key-only, and electronically controlled checking lockers and related locks and plastic and aluminum centralized mail and parcel distribution lockers. AMERICAN TOWER: Posts $31.8 Million Net Loss in Second Quarter -------------------------------------------------------------- American Tower Corporation (NYSE: AMT) reported financial results for the quarter ended June 30, 2005. Total revenues increased 9% to $188.1 million and rental and management segment revenue increased 10% to $184.6 million for the quarter ended June 30, 2005, as compared to the same period in 2004. Rental and management segment operating profit increased 14% to $128.8 million for the quarter ended June 30, 2005, as compared to the same period in 2004. Adjusted EBITDA (defined as income from operations before depreciation, amortization and accretion and impairments, net loss on sale of long-lived assets and restructuring expense, plus interest income, TV Azteca, net) increased 14% to $122.5 million for the quarter ended June 30, 2005, as compared to the same period in 2004. Adjusted EBITDA margin was 65% for the quarter ended June 30, 2005. Income from operations increased to $32.6 million for the quarter ended June 30, 2005, as compared to $13.1 million for the same period in 2004. Loss from continuing operations was $30.7 million for the quarter ended June 30, 2005, as compared to $64.0 million for the same period in 2004. Loss from continuing operations for the quarter ended June 30, 2005, includes a $16.4 million pre-tax loss on retirement of long-term obligations related to the refinancing of certain of the Company's outstanding indebtedness, as compared to $31.4 million for the same period in 2004. Net loss decreased to $31.8 million for the quarter ended June 30, 2005, from $65.2 million for the same period in 2004. Net cash provided by operating activities was $72.5 million and payments for purchases of property and equipment and construction activities were $20.6 million for the quarter ended June 30, 2005. The Company completed the construction of 56 towers during the quarter. "During the second quarter, the wireless industry continued to demonstrate strong growth in subscribers and minutes of use, as well as the continued development of broadband data applications," stated Jim Taiclet, American Tower's Chairman and Chief Executive Officer. "As a result, our wireless carrier customers continued their efforts to further expand network capacity, coverage and quality. Our strong relationships with these carriers, combined with our industry-leading scale, contributed to the growth in our core tower leasing revenue and Adjusted EBITDA in the quarter. "In addition, we have been diligently planning for our integration with SpectraSite. As the largest tower operator, with over 22,000 tower sites available for collocation, the combined company will continue our commitment to meeting our customers network needs as the best tower owner and operator by providing safe, compliant towers with the highest level of service. "Since the beginning of 2005 we have made significant progress in strengthening our balance sheet and increasing our financial flexibility. We ended the second quarter near our target leverage range of four to six times net debt to annualized EBITDA. As we look to the future, we are excited about the opportunities to capitalize on the current momentum of the wireless industry through our expanded tower portfolio and to utilize our improved financial position to continue providing solid returns to our shareholders." Financing Highlights The Company continued to utilize its available cash on hand to repurchase in privately negotiated transactions, a portion of its outstanding 12.25% senior subordinated discount notes due 2008 during and subsequent to the second quarter of 2005. The Company repurchased a total of $122 million face amount ($78 million of accreted value, net of $5 million fair value allocated to warrants) of its 12.25% senior subordinated discount notes for an aggregate purchase price of $94 million in cash, $117 million face amount of which were repurchased in the second quarter of 2005 and $5 million face amount of which were repurchased subsequent to the end of the second quarter of 2005. As of July 28, 2005 the Company had outstanding $339 million face amount ($225 million accreted value, net of $12 million fair value allocated to warrants) of its 12.25% senior subordinated discount notes. Notes Redemption As previously announced, the Company redeemed $75 million principal amount of its 9.375% senior notes due 2009 in July 2005. The total aggregate redemption price was approximately $82 million, including approximately $3 million in accrued interest, which the Company financed through a combination of internally generated funds and borrowings under the revolving loan of its credit facility. As of July 28, 2005, the Company had outstanding $67 million principal amount of its 9.375% senior notes. The Company reduced its Net Leverage Ratio (defined as total debt less cash and cash equivalents on hand divided by second quarter annualized Adjusted EBITDA) to 6.1x as of June 30, 2005. Board of Director Nominees Pursuant to its May 3, 2005, merger agreement with SpectraSite, the Company has agreed to expand the size of its board of directors from six to ten members and appoint four new board members from the SpectraSite board of directors, effective at the closing of the merger. The nominating and corporate governance committees of each company unanimously recommended that each of Stephen Clark, Paul Albert, Jr., Dean Douglas and Samme Thompson be appointed to the Company's board at the closing. In the joint proxy statement/prospectus mailed to stockholders in connection with the merger, the companies had previously identified Timothy Biltz as an anticipated director nominee. Mr. Biltz has indicated to the companies that, due to personal reasons, he has declined to be nominated as a director. The Company and SpectraSite will each hold a special meeting of stockholders on Aug. 3, 2005, to vote on the proposed merger and other related proposals. Once stockholder approval for the merger is obtained and the companies complete the merger, the new directors will be formally appointed to the Company's board of directors, each to serve until the next annual meeting of stockholders. American Tower -- http://www.americantower.com/-- is the leading independent owner, operator and developer of broadcast and wireless communications sites in North America. American Tower operates over 14,800 sites in the United States, Mexico, and Brazil, including approximately 300 broadcast tower sites. * * * As reported in the Troubled Company Reporter on May 17, 2005, Standard & Ratings Services raised its ratings on Boston, Mass.- based wireless tower operator American Tower Corp. and related entities, including the corporate credit rating, which was upgraded to 'B' from 'B-'. The ratings remain on CreditWatch, with positive implications, where they were placed on Jan. 14, 2005. "The upgrade reflects the ongoing increase in revenues and operating cash flows from the companies' U.S. tower portfolio, which represent the vast majority of the company's 15,000 total owned and/or operated towers," said Standard & Poor's credit analyst Catherine Cosentino. ATKINS NUTRITIONALS: Files Chapter 11 Petition in S.D. New York --------------------------------------------------------------- Atkins Nutritionals, Inc., along with its three affiliates, filed for chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York on July 31, 2005. The Debtors entered bankruptcy in order to effectuate a debt restructuring agreement with their prepetition lenders. The company sells nutritional supplements based on Dr. Robert Atkins' low-carbohydrate philosophy. Following the popularity of the Atkins diet, which eliminates carbohydrate as a means to achieve greater weight loss, mainstream companies entered the market attempting to stake a claim in what was projected to be a multi-billion market for controlled-carbohydrate products. Revenues in 2004 were dramatically less than forecast for Atkins, and in June 2004, Atkins was forced to write off approximately $75 million of unsold, returned, and expired food and supplements inventory. Significant Indebtedness As of July 31, 2005, the Debtors owe their lenders $300.6 million under the prepetition credit agreement with UBS AG, Stamford Branch as prepetition agent. The outstanding amount consists of: (i) $208 million under the first lien term loans; (ii) $84.1 million under the second lien term loans; and (iii) $8.4 million under the revolving loans. The Debtors granted the lenders first and second priority liens against, and security interests in, substantially all of the Debtors' properties, including pledge of the stock of non-debtor subsidiaries of Atkins. As of July 31, 2005, the Debtors also had $720,000 in outstanding secured capital lease obligations and $36.3 million in trade payables and other unsecured obligations. Restructuring Talks The Debtors engaged in protracted negotiations with: -- their lenders; -- a steering committee of prepetition lenders holding approximately 50% of the debt outstanding under the prepetition credit agreement; -- Parthenon Capital, Inc.; and -- Goldman Sachs Capital Partners. Following the negotiations, the parties reached an agreement in principle on the terms of the Debtors' restructuring to be effectuated pursuant to a confirmed chapter 11 plan of reorganization. The agreement is embodied in a restructuring term sheet and lock-up agreement executed by at least 50% in number and 66.67% in amount for each of the two tranches of secured debt under the prepetition credit agreement, Parthenon and Goldman Sachs. DIP Financing UBS AG agreed to provide a $25 million working capital facility and consensual use of the cash collateral in order to provide the Debtors with necessary liquidity to continue their operations. Headquartered in New York, New York, Atkins Nutritionals, Inc. -- http://atkins.com/-- sell nutritional supplements based on its founder, Dr. Robert C. Atkins' nutritional philosophy of controlled-carbohydrate lifestyle. The Debtors also sell more than 100 food products and nutritional supplements, as well as informational products such as diet books and cookbooks. Atkins' products are sold in more than 30,000 stores in North America under numerous trademarks. The Company along with Atkins Nutritionals Holdings, Inc., Atkins Nutritionals Holdings II, Inc., and Atkins Nutritionals (Canada) Limited, filed for chapter 11 protection on July 31, 2005 (Bankr. S.D.N.Y. Case Nos. 05-15913 through 05-15916). Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represents the Debtors in the United States, while lawyers at Osler, Hoskin & Harcourt, LLP, represents the Debtors in Canada. As of May 28, 2005, they listed $265.6 million in total assets and $323.2 million in total debts. ATKINS NUTRITIONALS: Case Summary & 30 Largest Unsecured Creditors ------------------------------------------------------------------ Lead Debtor: Atkins Nutritionals, Inc. fka Leanco, Inc. fka Lean Holdings, Inc. 100 Park Avenue New York, New York 10017 Bankruptcy Case No.: 05-15913 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Atkins Nutritionals Holdings, Inc. 05-15914 Atkins Nutritionals Holdings II, Inc. 05-15915 Atkins Nutritionals (Canada) Limited 05-15916 Type of Business: The Debtors sell nutritional supplements based on Dr. Robert C. Atkins' nutritional philosophy of controlled-carbohydrate lifestyle. The Debtors also sell more than 100 food products and nutritional supplements, as well as informational products such as diet books and cookbooks. Atkins' products are sold in more than 30,000 stores in North America under numerous trademarks. See http://atkins.com/ Chapter 11 Petition Date: July 31, 2005 Court: Southern District of New York (Manhattan) Debtors' Counsel: Marcia L. Goldstein, Esq. Weil Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Tel: (212) 310-8214 Fax: (212) 735-4919 Debtors' Canadian Counsel: Osler, Hoskin & Harcourt, LLP 1 First Canadian Place Toronto, Ontario M5X 1B8, Canada Debtors' Restructuring Consultants: AP Services, LLC 9 West 57th Street New York, New York 10019 Debtors' Financial Advisor: Jefferies & Company, Inc. 520 Madison Avenue New York, New York 10022 Financial Condition as of May 28, 2005: Total Assets: $265,590,767 Total Debts: $323,294,571 Consolidated List of Debtors' 30 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ CVS Pharmacy, Inc. Customer $2,395,938 1 CVS Drive obligations Woonsocket, RI 02895-6146 Attn: Thomas Sullivan Tel: (866) 222-0438 United Natural Foods, Inc. Customer $1,375,423 260 Lake Road obligations Dayville, CT 06241-1548 Attn: Daniel V. Atwood Tel: (860) 779-5678 BAL Global Finance, LLC Financing $1,286,097 231 South LaSalle Street agreement 16th Floor Chicago, IL 60697 Attn: Raymond Ratliff Tel: (312) 828-8546 Bremner, Inc. Trade debt $1,278,516 c/o Bank One 21684 Network Place Chicago, IL 60673-1216 Attn: Mike O'Neil Tel: (800) 538-1778 Parthenon Capital Management fees $1,158,254 200 State Street Boston, MA 02109 Attn: John Rutherford Tel: (617) 960-4000 Albertson's, Inc. Customer $966,000 250 Park Center Boulevard obligations P.O. Box 20 Boise, ID 83726 Attn: General Counsel Tel: (208) 395-6200 Walgreens Company Customer $534,038 200 Wilmot Road obligations Deerfield, IL 60015 Attn: Jeff Gormanous Tel: (847) 914-2500 Wakefern Food Corp. Customer $500,000 600 York Street obligations Elizabeth, NJ 07207 Attn: Bill Mayo Tel: (908) 527-3466 Value Merchandisers Customer $418,327 624 Westport Road obligations Kansas City, MO 64111 Attn: Jay Goble Tel: (620) 223-8707 Taction/New England 800 Trade debt $408,064 251 Jefferson Street Waldoboro, ME 04572 Attn: General Counsel Tel: (800) 258 4100 Premier Retail Networks, Inc. Trade debt $248,900 600 Harrison Street, 4th Floor San Francisco, CA 94107 Attn: General Counsel Tel: (415) 808-3500 Nature's Best Customer $221,830 105 South Puente Street obligations Brea, CA 92821 Attn: General Counsel Tel: (714) 441-2378 Hannaford Retail Services Customer $220,098 P.O. Box 1196 obligations Portland, ME 04104-5096 Attn: David Ham Tel: (207) 885-2860 Contemporary Marketing Trade debt $220,000 1569 Barclay Blvd. Buffalo Grove, IL 60089 Attn: Michael Okun Tel: (847) 541-0330 News America Marketing Trade debt $176,059 1 PPG Place, Suite 3131 Pittsburgh, PA 15222 Attn: General Counsel Tel: (412) 918-8000 Life Med Marketing, Inc. Trade debt $168,750 15 Ketchum Street Westport, CT 06880 Attn: General Counsel Tel: (203) 454-6985 Retailtainment Trade debt $161,916 103 Southeast 22nd Sreett Bentonville, AR 72712 Attn: General Counsel Tel: (479) 271-8201 Standard Candy Co., Inc. Trade debt $160,000 P.O. Box 440309 Nashville, TN 37244-0309 Attn: Rita Woodward Tel: (615) 889-6360 FedEx Trade debt $146,832 P.O. Box 371461 Pittsburgh, PA 15250-7461 Attn: Glenda Harris Tel: (800) 622-1147 Commercenter #22, LLC Real property $118,208 c/o Majestic Realty, 6th Floor lease 13191 Crossroads Parkway North City of Industry, CA 91746 ReDex, LLC Real property $116,869 P.O. Box 643776 lease Pittsburgh, PA 15264-3776 Widmeyer Communications Trade debt $112,500 895 Broadway, Fifth Floor New York, NY 10003 Gertrude Hawk Chocolates Trade debt $108,258 9 Keystone Park Dunmore, PA 18512 UNC SPH Department of Nutrition Trade debt $100,000 104 Airport Drive, Suite 2200 Chapel Hill, NC 27599-7641 Advantage Logistics USA, Inc. Trade debt $97,717 11840 Valley View Road Eden Prairie, MN 55344 American Italian Pasta Co. Trade debt $94,862 4100 North Mulberry Drive Suite 200 Kansas City, MO 64116-1696 SAP America, Inc. Trade debt $86,703 3999 West Chester Poke Newtown Square, PA 19073 Seligman Data Corp. Real property $85,179 100 Park Avenue lease New York, NY 10017 The Moroney Company Trade debt $79,494 241 Village Street Medway, MA 02053 News Marketing Canada Trade debt $77,662 P.O. BOX 19008 Postal Station A Toronto, ON M5W2W8 Canada BANC OF AMERICA: Fitch Places Low-B Rating on 2 Cert. Classes ------------------------------------------------------------- Banc of America Alternative Loan Trust 2005-7 mortgage pass- through certificates are rated by Fitch Ratings: -- $360,210,514 Classes CB-1 through CB-5, CB-R, 2-CB-1, 3-CB- 1, CB-IO, and CB-PO, 'AAA'; -- $5,998,000 class B-1, 'AA'; -- $2,811,000 class B-2, 'A'; -- $2,249,000 class B-3, 'BBB'; -- $1,312,000 class B-4, 'BB'; -- $1,312,000 class B-5, 'B'. The 'AAA' ratings on the senior certificates reflect the 3.90% subordination provided by the 1.60% class B-1, 0.75% class B-2, 0.60% class B-3, 0.35% privately offered class B-4, 0.35% privately offered class B-5, and 0.25% privately offered class B- 6. Classes B-1, B-2, B-3, and the privately offered classes B-4 and B-5 are rated 'AA', 'A', 'BBB', 'BB', and 'B', respectively, based on their respective subordination. Fitch does not rate Class B-6. The ratings also reflect the quality of the underlying collateral, the primary servicing capabilities of Bank of America Mortgage, Inc. (rated 'RPS1-' by Fitch), and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction is secured by three pools of mortgage loans. Loan groups 1, 2, and 3 are cross-collateralized and supported by the B-1 through B-6 subordinate certificates. Approximately 20.29%, 15.84%, and 44.90% of the mortgage loans in groups 1, 2, and 3, respectively, were underwritten using Bank of America's 'Alternative A' guidelines. These guidelines are less stringent than Bank of America's general underwriting guidelines and could include limited documentation or higher maximum loan-to- value ratios. Mortgage loans underwritten to 'Alternative A' guidelines could experience higher rates of default and losses than loans underwritten using Bank of America's general underwriting guidelines. Loan groups 1, 2, and 3 in the aggregate consist of 2,526 recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to four-family residential mortgage loans with original terms to stated maturity ranging from 240 to 360 months. The aggregate outstanding balance of the pool as of July 1, 2005 (the cut-off date) is $374,829,899, with an average balance of $148,389 and a weighted average coupon of 6.168%. The weighted average original loan-to-value ratio for the mortgage loans in the pool is approximately 74.05%. The weighted average FICO credit score is 739. Second homes and investor-occupied properties comprise 2.74% and 46.62% of the loans in the group, respectively. Rate/Term and cash-out refinances account for 8.52% and 22.98% of the loans in the group, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (15.67%), Florida (15.50%), and Texas (7.52%). All other states represent less than 5% of the aggregate pool balance as of the cut-off date. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003 entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' available on the Fitch Ratings web site at http://www.fitchratings.com/ Banc of America Mortgage Securities, Inc. deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, elections will be made to treat the trust as three separate real estate mortgage investment conduits. Wells Fargo Bank, National Association will act as trustee. BANC OF AMERICA: Fitch Puts Low-B Rating on $916K Cert. Classes --------------------------------------------------------------- Banc of America Mortgage Securities, Inc.'s mortgage pass-through certificates, series 2005-7, are rated by Fitch Ratings: Group 1 and 2 certificates: -- $297,746,130.00 classes 1-A-1 through 1-A-7, 1-A-R, 2-A-1, 2-A-2, 2-A-3, 30-IO, 15-IO, and A-PO senior certificates 'AAA'; -- $3,816,000 class B-1 'AA'; -- $1,373,000 class B-2 'A'; -- $916,000 class B-3 'BBB'; -- $610,000 class B-4 'BB'; -- $306,000 class B-5 'B'; The 'AAA' ratings on the senior certificates reflects the 2.45% subordination provided by the 1.25% class B-1, 0.45% class B-2, 0.30% class B-3, 0.20% privately offered class B-4, 0.10% privately offered class B-5, and 0.15% privately offered class B- 6. Classes B-1, B-2, B-3, B-4, and B-5 are rated 'AA', 'A', 'BBB', 'BB', and 'B', respectively, based on their respective subordination. Class B-6 is not rated by Fitch. The ratings also reflect the quality of the underlying collateral, the primary servicing capabilities of Bank of America Mortgage, Inc. (rated 'RPS1' by Fitch), and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction is secured by two pools of mortgage loans. Loan groups 1 and 2, the 30-year loan group and the 15-year loan group, respectively, are cross-collateralized and supported by the B-1 through B-6 subordinate certificates. Loan groups 1 and 2 in the aggregate consist of 606 recently originated, conventional, fixed-rate, fully amortizing, first lien, one- to four-family residential mortgage loans with original terms to stated maturity ranging from 120 to 360 months. The aggregate outstanding balance of the pool as of July 1, 2005 (the cut-off date) is $305,224,988, with an average balance of $503,672 and a weighted average coupon of 5.809%. The weighted average original loan-to-value ratio for the mortgage loans in the pool is approximately 65.70%. The weighted average FICO credit score is 752. Second homes constitute 7.48%, and there are no investor occupied properties. Rate/term and cash-out refinances account for 28.20% and 26.93% of the loans in the groups, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (44.53%), Florida (9.74%), and Virginia (5.20%). All other states represent less than 5% of the aggregate pool balance as of the cut-off date. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Banc of America Mortgage Securities, Inc. deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, elections will be made to treat the trust as two real estate mortgage investment conduits. Wells Fargo Bank, National Association will act as trustee. BANC OF AMERICA: Fitch Rates $1.44MM Class B Certificates at BB --------------------------------------------------------------- Banc of America Mortgage Securities, Inc., series 2005-G, mortgage pass-through certificates, are rated by Fitch Ratings: -- $692,072,100 1-A-1, 1-A-2, 1-A-R, 2-A-1 through 2-A-5, 3-A-1, 3-A-2, and 4-A-1 through 4-A-4 (senior certificates) 'AAA'; -- $16,177,000 class B-1 'AA'; -- $4,314,000 class B-2 'A'; -- $2,517,000 class B-3 'BBB'; -- $1,438,000 class B-4 'BB'; -- $1,079,000 class B-5 'B'. The 'AAA' rating on the senior certificates reflects the 3.75% subordination provided by the 2.25% class B-1, the 0.60% class B-2, the 0.35% class B-3, the 0.20% privately offered class B-4, the 0.15% privately offered class B-5, and the 0.20% privately offered class B-6. The ratings on class B-1, B-2, B-3, B-4, and B-5 certificates reflect each certificate's respective level of subordination. Class B-6 and class 1-IO are not rated by Fitch. The ratings also reflect the quality of the underlying mortgage collateral, the primary servicing capabilities of Bank of America Mortgage, Inc. (rated 'RPS1' by Fitch), and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction consists of four groups of adjustable interest rate, fully amortizing mortgage loans, secured by first liens on one- to four-family properties, with a total of 1,362 loans and an aggregate principal balance of $719,036,456 as of July 1, 2005 (the cut-off date). The four loan groups are cross- collateralized. The group 1 collateral consists of 3/1 hybrid adjustable-rate mortgage loans. After the initial fixed interest rate period of three years, the interest rate will adjust annually based on the sum of one-year LIBOR index and a gross margin specified in the applicable mortgage note. Approximately 63.16% of group 1 loans require interest-only payments until the month following the first adjustment date. As of the cut-off date, the group has an aggregate principal balance of approximately $38,627,618 and an average balance of $495,226. The weighted average original loan-to-value ratio for the mortgage loans is approximately 71.29%. The weighted average remaining term to maturity is 359 months, and the weighted average FICO credit score for the group is 744. Second homes and investor- occupied properties constitute 12.27% and 3.67% of the loans in group 1, respectively. Rate/term and cashout refinances account for 14.05% and 20.55% of the loans in group 1, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (42.17%), Florida (14.62%), and South Carolina (9.04%). All other states represent less than 5% of the outstanding balance of the group. The group 2 collateral consists of 5/1 hybrid ARM mortgage loans. After the initial fixed interest rate period of five years, the interest rate will adjust annually based on the sum of one-year LIBOR index and a gross margin specified in the applicable mortgage note. Approximately 73.43% of group 2 loans require interest-only payments until the month following the first adjustment date. As of the cut-off date, the group has an aggregate principal balance of approximately $509,896,889 and an average balance of $521,901. The weighted average OLTV for the mortgage loans is approximately 72.51%. The WAM is 359 months, and the weighted average FICO credit score for the group is 746. Second homes and investor-occupied properties constitute 11.01% and 0.25% of the loans in group 2, respectively. Rate/term and cashout refinances account for 20.41% and 14.69% of the loans in group 2, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (52.28%), Florida (8.21%), and Virginia (5.98%). All other states represent less than 5% of the outstanding balance of the pool. The group 3 collateral consists of 7/1 hybrid ARM mortgage loans. After the initial fixed interest rate period of seven years, the interest rate will adjust annually based on the sum of one-year LIBOR index and a gross margin specified in the applicable mortgage note. Approximately 52.56% of group 3 loans require interest-only payments until the month following the first adjustment date. As of the cut-off date, the group has an aggregate principal balance of approximately $61,191,561 and an average balance of $527,513. The weighted average OLTV for the mortgage loans is approximately 72.17%. The WAM is 359 months, and the weighted average FICO credit score for the group is 749. Second homes constitute 11.29% of the loans, and there are no investor-occupied properties in group 3. Rate/term and cashout refinances account for 13.79% and 22.12% of the loans in group 3, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (40.25%), Florida (10.86%), Virginia (9.97%), and Maryland (6.50 %). All other states represent less than 5% of the outstanding balance of the pool. The group 4 collateral consists of 10/1 hybrid ARM mortgage loans. After the initial fixed interest rate period of 10 years, the interest rate will adjust annually based on the sum of one-year LIBOR index and a gross margin specified in the applicable mortgage note. Approximately 75.00% of group 4 loans require interest-only payments until the month following the first adjustment date. As of the cut-off date, the group has an aggregate principal balance of approximately $ $109,320,387 and an average balance of $572,358. The weighted average OLTV for the mortgage loans is approximately 67.47%. The WAM is 360 months, and the weighted average FICO credit score for the group is 752. Second homes constitute 8.45% of the loans and there are no investor-occupied properties in group 4. Rate/term and cashout refinances account for 30.78% and 17.26% of the loans in group 4, respectively. The states that represent the largest geographic concentration of mortgaged properties are California (63.33%), and Florida (7.76%). All other states represent less than 5% of the outstanding balance of the pool. Approximately 62.61% of the group 1 mortgage loans, approximately 68.43% of the group 2 mortgage loans, approximately 76.97% of the group 3 mortgage loans, approximately 79.45% of the group 4 mortgage loans, and approximately 70.52% of all of the mortgage loans were originated under the accelerated processing programs. None of the group 1 mortgage loans, approximately 0.37% of the group 2 mortgage loans, none of the group 3 mortgage loans, none of the group 4 mortgage loans, and approximately 0.26% of all of the mortgage loans were originated under the accelerated processing programs of All-Ready Home and Rate Reduction Refinance. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Banc of America Mortgage Securities, Inc. deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, elections will be made to treat the trust as two separate real estate mortgage investment conduits. Wells Fargo Bank, National Association will act as trustee. BILLINGS YMCA: Secures Debt Repayment Extension ----------------------------------------------- The Billings Family YMCA gained more time to repay approximately $1.8 million of bond debt after creditors agreed to another repayment extension, the Billings Gazette reports. The bonds were originally due in July 2004. The Indenture Trustee gave the YMCA a one-year extension, with the understanding that the YMCA would attempt to raise money from other sources. The YMCA managed to raise $700,000 during the past year. The YMCA went back to the Indenture Trustee for an extension of the July 2005 maturity date. A default could have forced the YMCA into bankruptcy. The bondholders opted to give the YMCA some leeway to fix it finances. Other creditors have also been generous. First Interstate Bank has cancelled $160,000 of the YMCA's debt and made a $90,000 cash donation to its fund drive. The City of Billings has also said it's willing to renegotiate the terms of a $280,000 debt. The YMCA Board anticipates being debt free in three to five years. According to their recovery plan, the Y will use part of the $700,000 from the fund drive to cure its $432,000 default on previous payments. The remaining amount will fund the next bond payment due in October 2005. The Y will then try to secure bridge financing to pay its remaining bond debt. In the next few years, the board is optimistic that they can raise enough money to purchase its building in Billings, Montana. Central to the YMCA's recovery is its ability to attract new members and retain existing ones. The board recognizes this and has worked to improve and add to the YMCA's facilities and equipment. The YMCA building at 402 N. 32nd St, built in 1951, has 100,000 square-feet of floor space. The YMCA recently expanded and purchased new equipment for its Life Center and repaired its deep- water pool. Ed Slater, the YMCA director, tells Ed Kemmick at the Billings Gazette that people are responding to the improvements. The YMCA recorded 7,800 members as of July 2005, up from 6,900 in January. About The Billings Family YMCA Billings Family YMCA is an independent and autonomous organization recognized but separate from the YMCA of the USA. It seeks to put Christian principles into practice through programs that build healthy spirit, mind and body for all. The Billings Family YMCA is the largest youth service organization in Billings serving well over 10,000 youth in sports, aquatics, childcare, summer camps and special interest programs. It provides a financial assistance program based on a sliding scale. This scholarship program allows everyone to participate without regard to their financial situation. The Billings Family YMCA will celebrate its 100th anniversary this August. BRASOTA MORTGAGE: Court Authorizes Termination of 401(k) Plan ------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida in Tampa authorized the termination of Brasota Mortgage Company, Inc.'s 401(k) plan. The Court further authorized Gerald A. McHale Jr., the chapter 11 Trustee appointed in Brasota Mortgage and its debtor-affiliates' bankruptcy case, to complete ministerial tasks related to the 401(k) plan termination. A 401(k) plan is an employer-sponsored group retirement plan that permits employees to contribute a portion of their salary on a tax-deferred basis. Hartford Life Insurance Companies manages the debtors' 401(k) plan. Mr. McHale wants to terminate the 401(k) plan in the interest of administration of the Debtors' estate. Funds under the 401(k) plan is not property of the estate and will be segregated for the benefit of the plan participants. However, any distributions to the plan participants must be made pursuant to a Court order. The 401(k) plan termination requires a Plan Administrator who will perform the tasks necessary to close the Plan. Mr. McHale is unwilling to take the Plan Administrator post because of potential liability stemming from the Debtors' acts prior to his appointment as chapter 11 Trustee. Mr. McHale will instead serve as a ministerial person and conduct the plan closure. Hartford Life will provide the Trustee with an accounting of contributions and distributions made to the debtors' 401(k) in support of his review of any potential causes of action existing against any plan participant. Headquartered in Bradenton, Florida, Brasota Mortgage Company Inc. is a full service mortgage lender. The Company and its affiliates filed for chapter 11 protection on April 4, 2005 (Bankr. M.D. Fla. Case No. 05-06215). Heath A. Denoncourt, Esq., at Hinshaw & Culbertson LLP, represents the Debtors in their restructuring efforts. Gerard A. McHale, Jr., was appointed as chapter 11 trustee on April 14, 2005. When the Company filed for protection from its creditors, it estimated more than $100 million in assets and debts. BROADBAND OFFICE: Asks Court to Approve Plan Voting Procedures -------------------------------------------------------------- Broadband Office, Inc., and the Official Committee of Unsecured Creditors, the Plan Proponents of the Debtor's chapter 11 plan, asks the Court for permission to establish and approve: 1) procedures for confirmation of the Plan, 2) solicitation procedures and notices, and 3) forms of ballots and voting procedures. The Plan Proponents want to employ Bankruptcy Services, LLC, as their claims agent to assist the estate with various administrative functions associated with plan confirmation. The Debtor and the Committee also wants to establish June 24, 2005, as the record date to determine who can and who can't vote on the Plan. As previously reported, Broadband Office, Inc., along with its Official Committee of Unsecured Creditors, delivered a Disclosure Statement explaining their Joint Liquidating Plan to the Court. A full-text copy of the proposed solicitation procedures is available for free at: http://bankrupt.com/misc/BroadbandOfficeSolicitationProcedures.pdf Headquartered in San Mateo, California, Broadband Office, Inc., filed for chapter 11 protection on May 9, 2001 (Bankr. D. Del. Case No. 01-1720). BBO is now a non-operating company in the process of liquidating its assets. Adam Hiller, Esq., and David M. Fournier, Esq., at Pepper Hamilton LLP represent the company. When the Company filed for protection from its creditors, it listed $100 million in assets and debts. BUILDERS FIRSTSOURCE: Debt Reduction Cues S&P's Positive Outlook ---------------------------------------------------------------- Standard & Poor's Rating Services affirmed its 'B+' corporate credit rating on Builders FirstSource Inc. and revised its outlook to positive from negative. "The actions followed the company's recent debt reduction resulting from IPO proceeds and free cash flow generation," said Standard & Poor's credit analyst Lisa Wright. At the same time, Standard & Poor's raised its senior secured and recovery ratings on the company's $350 million first-lien credit facilities to 'BB-' and '1' from 'B+' and '3'. The new ratings indicate the expectation of a full recovery of principal in the event of a payment default. In addition, Standard & Poor's raised its senior secured rating on the company's $275 million second- lien floating rate notes to 'B' from 'B-' and assigned its recovery rating of '3'. These ratings indicate the expectation of a meaningful (50%-80%) recovery of principal in the event of a payment default. "These actions reflect the improved recovery prospects on these securities based on the company's lower level of senior secured debt in the capital structure," Ms. Wright said. Balance-sheet debt outstanding was $365 million as of June 30, 2005, for the Dallas, Texas-based the building materials distributor and manufacturer. CAPITAL TRUST: Fitch Affirms Low-B Rating on 3 Certificate Classes ------------------------------------------------------------------ Fitch Ratings affirms eight classes of notes issued by Capital Trust RE CDO 2004-1 Ltd. The affirmations are the result of Fitch's review process and are effective immediately: -- $100,463,000 class A-1 notes affirm at 'AAA'; -- $79,398,000 class A-2 notes affirm at 'AAA'; -- $29,167,000 class B notes affirm at 'AA'; -- $19,444,000 class C notes affirm at 'A-'; -- $21,065,000 class D notes affirm at 'BBB'; -- $3,241,000 class E notes affirm at 'BBB-'; -- $6,481,000 class F notes affirm at 'BB'; -- $16,204,000 class G notes affirm at 'B'. Capital Trust is a collateralized debt obligation, which closed July 20, 2004, supported by a revolving pool of commercial mortgage B-notes and mezzanine loans. The portfolio was originally selected and is currently managed by CT Investment Management Co., LLC. Capital Trust will remain in its revolving period through July 2008. Since closing, the portfolio has continued to perform as expected. Both the class A/B and class C/D/E overcollateralization ratios have remained at 155% and 128.2% respectively, versus triggers of 130% and 115.4%. The class A/B and C/D/E interest coverage ratios have also remained well above their respective performance triggers of 140% and 120%, and were 298.6% and 234.5% respectively, as of the May 2005 trustee report. Based on the consistent performance of Capital Trust and the stable coverage levels, Fitch has determined that the current ratings of the notes continue to reflect the current risk to the noteholders. The ratings of the class A-1, A-2 and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C, D, E, F and G notes address the likelihood that investors will receive ultimate interest and deferred interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at http://www.fitchratings.com/ For more information on the Fitch VECTOR model, see 'Global Rating Criteria for Collateralized Debt Obligations,' dated Sept. 13, 2004, also available at http://www.fitchratings.com/ CARDTRONICS INC: Moody's Junks Proposed $150 Million Sr. Sub Notes ------------------------------------------------------------------ Moody's Investors Service assigned a B2 Corporate Family Rating (formerly Senior Implied Rating) to Cardtronics, Inc. and a Caa1 rating to its proposed $150 million senior subordinated notes due 2013. The ratings outlook is stable. The net proceeds of this offering, along with the use of a senior secured revolver, will be used to permanently retire approximately $75 million of an existing second lien term loan and repay its first lien term loan of approximately $95 million. The B2 corporate family rating reflects: * high debt leverage relative to its small business scale (total debt approximating $242 million); * moderate customer concentration; * very modest asset coverage due to a low proportion of fixed assets and a high level of intangible assets and goodwill; and * the company' relatively high acquisition appetite. However, the rating also reflects: * Cardtronics leading position in the growing ATM industry; * stability provided by recurring revenues from long term service contracts; * favorable credit profile of large national; * retail and convenience store clients; and * strong service delivery performance as measured by system availability in excess of 99% for fiscal year 2004, which supports high client retention. The increased diversity of Cardtronic's revenue base is a result of the acquisition of BankMachine based in UK and is a further supporting factor for the ratings. The assigned Caa1 rating for the proposed note offering incorporates the contractual and effective subordination of the notes to the existing senior secured bank debt (approximately $92 million will be outstanding post transaction), a portion of which will be refinanced with the proceeds from the pending offering but much of which will still remain available. The Caa1 senior subordinated rating reflects the likelihood that this junior class of creditors, would likely absorb a disproportionately larger share of any credit losses under a potential default scenario. Moody's evaluated Cardtronics, Inc. in the context of its principal performance and ratings drivers, including: 1) Market Position. Currently, Cardtronics owns and operates the largest network of ATMs, primarily in the fragmented US market but also in the UK; the top 10 ATM network providers, including financial institutions have approximately 26% of the total US market share as of May 31, 2005. Cardtronics' network includes approximately 26,000 ATM machines, out of which 11,000 machines are company owned, making Cardtronics' a low cost operator. However, Moody's believes that the company faces a highly competitive landscape, with competition not only from independent ATM network providers but also from large and well capitalized national and regional financial institutions and other payment methods, including cash back on debit card transactions. 2) Client Concentration. The company has a moderate degree of customer concentration; as of April 2005 its top five clients contributed approximately 22% of the total revenue. Moody's notes that the company has recently entered into arrangements with financial institutions and others to brand certain company owned machines, which is viewed as an opportunity for additional revenue. 3) Acquisition Strategy. Cardtronics has acquired several competitors and other ATM networks over the past four years, a strategy which has generated approximately one-half of the company's revenue growth. The company's acquisition spending amounted to $23 million in 2003, $106 million in 2004, and $112 million year-to-date for 2005. Moody's notes that the ATM industry in the US is fragmented industry, where the top ten players have only 26% of the total market share. Moody's expects Cardtronics to make lower sized domestic as well as international acquisitions to gain market share. 4) Recurring Revenue. The company has a large number of the ATM's under multi-year contracts that provide recurring transaction-based revenue. As of December 31, 2004, Cardtronics top ten clients had an average of 4.7 years remaining on their contracts, providing the company with recurring cash flows. 5) Debt Leverage. Including the proposed $150 million senior subordinated notes, $62 million drawn on the revolver, and $30 million term loan, Cardtronics' post-transaction debt to EBITDA is a levered 4.4x. Cardtronics also has $75 million of Series B preferred equity outstanding. While the terms of the preferred stock and Cardtronics' certificate of incorporation have been amended to prohibit any redemption or call of the preferred or any cash dividends on the preferred prior to the subordinated notes' maturity, Moody's has assigned a 25% debt weighting and 75% equity weighting to the preferred stock. This assessment results in an adjusted leverage ratio of 4.7x. 6) Liquidity. The company's cash and cash equivalents amounted to only $300 thousand at March 31, 2005. Upon the issuance of the notes, the current credit facility will allow greater financial flexibility over the near term, improving access to back-up liquidity. Moody's notes that for the trailing twelve months ended March 31, 2005, the company generated a low $6 million in free cash flow, (defined as cash flow from operations less capital expenditures). However, free cash flow excluding growth capital expenditure is significantly greater. Rating Outlook The stable outlook anticipates relative cash flow stability and expects continued growth for Cardtronics business, driven by growth in bank branding and outsourcing, small acquisitions, new contract wins and a similar level of free cash flow generation. The BankMachine acquisition (which closed on May, 2005) will enable Cardtronics to expand and gain market share internationally. Moody's believes the UK ATM market is growing more rapidly than the US market. A positive rating outlook could result upon continued evidence of successful integration of the BankMachine acquisition, sustained organic ATM business revenue growth, contained capital spending (including the additional capital expenditures needed to upgrade ATM security encryption), such that debt leverage as measured by debt to EBITDA falls below 3.5x. Conversely, poor integration of the BankMachine acquisition, a significant increase in acquisition spending leading to debt to EBITDA exceeding 5.0x and weakening cash flow relative to debt service coverage and capital spending needs could result in negative ratings pressure. These ratings are assigned: * B2 Corporate Family Rating * Caa1 Senior Subordinated Notes Headquartered in Houston, Texas, Cardtronics Inc is a leading ATM operator. CATHOLIC CHURCH: Ronald Dandar Wants Stay Lifted to Pursue Claim ---------------------------------------------------------------- Ronald G. Dandar has filed a statement of claim in the Diocese of Spokane's Chapter 11 case. Mr. Dandar asks the U.S. Bankruptcy Court for the Eastern District of Washington to lift the automatic stay so he may pursue compensation of his claim. Mr. Dandar is a plaintiff in a personal injury lawsuit against, among others, Bishop Sean P. O'Malley of the Diocese of Fall River, Massachusetts, the Fall River Diocese, and James R. Porter, a priest in Fall River. The Action is pending in the Superior Court of Taunton, Bristol County, in the Commonwealth of Massachusetts. Mr. Dandar asserts that his claim should be regarded as a default judgment duly recorded as a "secured debt. "The late Pope John Paul II derided sexual abuse as criminal," Mr. Dandar says. Mr. Dandar contends that he is qualified as a handicapped person pursuant to both state and federal law. Mr. Dandar says the Bankruptcy Court should rule in the interest of fairness and justice. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 215/945-7000) CLASSIC WORLD: Case Summary & 8 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Classic World Productions, Inc. 2760 Beverly Drive Unit # 9 Aurora, Illinois 60502 Bankruptcy Case No.: 05-29921 Type of Business: The Debtor is one of the most respected and resourceful entertainment companies for back catalogue music. The catalog features a diverse range of legendary artists, spanning all genres, including: Judy Garland, the Chi-Lites, Little Richard, Jose Feliciano, Kenny Rogers, and a host of others. The Debtor also carries an impressive collection of vintage television programs. Classic World Productions posted its record label online at MP3.com. See http://www.classicworldproductions.com/ Chapter 11 Petition Date: July 30, 2005 Court: Northern District of Illinois (Chicago) Judge: Pamela S. Hollis Debtor's Counsel: Richard L. Hirsh, Esq. Richard L. Hirsh & Associates PC 15 Spinning Wheel Road #128 Hinsdale, Illinois 60521 Tel: (630) 655-2600 Fax: (630) 655-2636 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 8 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ C/F International Inc. Judgment entered $1,030,446 c/o Novack & Macey 303 West Madison Street #1500 Chicago, IL 60606 IRS All assets of debtor $160,000 STOP 5013CHI 230 South Dearborn Street Chicago, IL 60604 Illinois Department of Revenue All assets of debtor $27,000 P.O. BOX 64338 Chicago, IL 60664-0338 Wings Digital Corp. Trade debt $7,233 c/o Abrams & Abrams Reduced to judgment 75 East Wacker Drive #320 Chicago, IL 60601 Com Ed Utilities Unknown Exelon Corporation 10 South Dearborn Street Attn: Legal Department P.O. Box 805398 Chicago, IL 606805398 Nicor Gas Utilities Unknown P.O. Box 2020 Aurora, IL 605072020 Wallace Collins Attorney Fees Unknown 254 West 54th Street New York, NY 10019 William Goldberg, Esq. Attorney Fees Unknown 30 Hudson Street Hackensack, NJ 07601 COLLATERALIZED SYNTHETIC: S&P Retains Watch on Junk-Rated Notes --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' rating on the mezzanine notes issued by Collateralized Synthetic Obligation series 2000-1, a corporate synthetic CDO originated in August 2000, and removed it from CreditWatch with negative implications, where it was placed Sept. 24, 2004. At the same time, the 'BBB+' rating on the senior notes is affirmed, while the 'CCC-' rating on the junior mezzanine notes remains on CreditWatch with negative implications. The rating on the mezzanine notes was removed from CreditWatch negative because the synthetic rated overcollateralization ratio of the notes was calculated at 100.21%, indicating that there is sufficient credit enhancement available to support expected losses at the 'B' rating level. Standard & Poor's will continue to closely monitor the performance of this transaction to ensure that the ratings assigned remain consistent with the credit enhancement available. Rating Affirmed And Removed From Creditwatch Negative Collateralized Synthetic Obligation Series 2000-1 Rating ------ Class To From Initial ----- -- ---- ------- Mezzanine notes B B/Watch Neg AA- Rating Affirmed Collateralized Synthetic Obligation Series 2000-1 Rating ------ Class Current Initial ----- ------- ------- Senior notes BBB+ AAA Rating Remaining On Creditwatch Negative Collateralized Synthetic Obligation Series 2000-1 Rating ------ Class Current Initial ----- ------- ------- Junior mezzanine notes CCC-/Watch Neg BBB- CONSOLIDATED COTTON: List of 20 Largest Unsecured Creditors ----------------------------------------------------------- Consolidated Cotton Gin Co., Inc., released a list of its 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Walking X, Inc. $2,229,734 P.O. Box 175 Whiteface, TX 79379 Internal Revenue Service FICA/MC: $1,699,202 Special Procedures $1,698,076 Mail Code 5020-DAL FUTA: 1100 Commerce St., Rm. 9B8 $1,126 Lubbock Electric Electric components $638,511 1108 34th Street Lubbock, TX 79405 General Steel Steel purchase $347,932 P.O. Box 2037 Lubbock, TX 79408 Caprock Metal Works Trade $307,642 2121 East 50th Street Lubbock, TX 79404 Scott Manufacturing, Inc. Trade $241,811 Lubbock Electric Co. Electric service $215,852 for High Plains Gin, Pratt Kansas Dimitris Georgantis Commissions $204,625 Miguel Warnier Commissions $175,302 American Saw & Brush, Inc. $127,622 Fryar Construction $95,000 Samuel Jackson, Inc. Trade $73,222 John Forrest Commissions $70,460 IBT, Inc. Trade $48,281 A.L. Vandergrif Royalty payments $28,133 Jose J. Yaque Commissions $27,114 N.C. Department of Revenue Sales tax $26,968 Texas Workforce Commission Unemployment taxes $25,756 (1st Quarter 2005- $17,505) (2nd Quarter 2005- $8,251) Bruton Manufacturing Co. Trade $22,777 South Plains Electric Coop Utilities $22,752 Headquartered in Lubbock, Texas, Consolidated Cotton Gin Co., Inc., -- http://www.consolidatedcottongin.com/-- manufactured cotton ginning equipment and machinery. The Company filed for chapter 11 protection on May 20, 2005 (Bankr. N.D. Tex. Case No. 05-50630). David R. Langston, Esq., at Mullin, Hoard & Brown, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of $1 million to $10 million. CONTINENTAL AIRLINES: Field Employees Reject TWU Representation --------------------------------------------------------------- Continental Airlines (NYSE: CAL) disclosed that its field service employees rejected representation sought by the Transport Workers Union of America. "We will continue to earn our employees' trust and maintain our culture of treating each other with dignity and respect," said Larry Kellner, chairman and chief executive officer of Continental Airlines. "These are unprecedented times in the airline industry, and our employees have shown again that by working together we can succeed." The TWU filed an application with the National Mediation Board in April for an election. Thursday's results represent the voice of Continental's field service employees, including ramp, operations and cargo agents. Continental Airlines -- http://continental.com/-- is the world's sixth-largest airline, serving 128 domestic and 111 international destinations -- more than any other airline in the world -- and serving nearly 200 additional points via codeshare partner airlines. With 42,000 mainline employees, the airline has hubs serving New York, Houston, Cleveland and Guam, and carries approximately 51 million passengers per year. FORTUNE ranks Continental one of the 100 Best Companies to Work For in America, an honor it has earned for six consecutive years. FORTUNE also ranks Continental as the top airline in its Most Admired Global Companies in 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 1999-1 (Class A, B and C) and Series 1999-2 (Class A-1, A-2, B, and C-1) Enhanced Equipment Trust Certificates of Continental Airlines Inc. would not affect the current ratings assigned to these Certificates: Series 1999-1: * Baa3 for Class A; * Ba2 for Class B; and * B2 for Class C; Series 1999-2: * Baa3 for Class A-1 and A-2; * Ba2 for Class B; and * B2 for Class C-1. CUMMINS INC: Improved Performance Prompts S&P to Lift Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services raised all of its ratings on diesel engine manufacturer Cummins Inc., including the corporate credit rating, which was raised to 'BBB-', or investment grade, from 'BB+'. The upgrade reflects the company's much-improved operating performance and favorable near-term prospects as well as its strengthened financial profile. "While the company's business will remain very cyclical, Cummins should be able to maintain an acceptable financial profile and ample liquidity throughout the economic cycle," said Standard & Poor's credit analyst Daniel R. DiSenso. The outlook is stable. Total debt at June 26, 2005, stood at about $1.4 billion. The ratings on Columbus, Indiana-based Cummins reflect its: * position as a major global manufacturer of diesel engines, * electric power-generation systems, and * engine-filtration and exhaust systems. The ratings also reflect the company's satisfactory financial profile, which takes into account credit ratio adjustments for debt-like postretirement benefit obligations. Cummins' products serve a number of end markets including: * heavy-and medium-duty truck manufacturers; * bus manufacturers; * light commercial vehicle makers; and * general industrial companies. Cummins has good geographic diversity, as about 50% of its sales are generated outside the U.S. The company will remain heavily exposed to the volatile North American heavy-duty truck market. Although this volatility can affect Cummins' financial performance, the effect will be muted in the future by the growth of the company's engine business in other markets and by the separate growth of its non-engine business. Operating performance rebounded sharply in 2004 following several years of weak performance, and near-term earnings prospects are favorable. Year over year for the first half of 2005, net income more than doubled to $238 million. This reflected increased demand for heavy- and medium-duty truck engines and power generation equipment. Performance also benefited from the growth of Cummins' distribution business and reflected the company's increased income from joint ventures. Earnings and cash generation are expected to be strong for 2005 and 2006. They will weaken in 2007 when stricter truck engine emissions standards in North America go into effect, but Standard & Poor's expects the decline to be less severe than in the last downturn. Cummins' growth plan is expected to be organically driven, though niche acquisitions are possible. CWMBS INC: Fitch Places Low-B Rating on 2 Certificate Classes ------------------------------------------------------------- Fitch rates CWMBS, Inc.'s mortgage pass-through certificates, CHL mortgage pass-through trust 2005-16: -- $399.2 million classes A-1 through A-31, PO and A-R certificates (senior certificates) 'AAA'; -- $10.0 million class M certificates 'AA'; -- $2.5 million class B-1 certificates 'A'; -- $1.2 million class B-2 certificates 'BBB'; -- $830,000 class B-3 certificates 'BB'; -- $623,000 class B-4 certificates 'B'; The 'AAA' rating on the senior certificates reflects the 3.80% subordination provided by the 2.40% class M, the 0.60% class B-1, the 0.30% class B-2, the 0.20% privately offered class B-3, the 0.15% privately offered class B-4, and the 0.15% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB', and 'B', based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, and the master servicing capabilities of Countrywide Home Loans Servicing LP, rated 'RMS2+' by Fitch, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. The certificates represent an ownership interest in a group of 30- year conventional, fully amortizing mortgage loans. The pool consists of 30-year fixed-rate mortgage loans totaling $370,535,152 as of the cut-off date, July 1, 2005, secured by first liens on one- to four-family residential properties. The mortgage pool, as of the cut-off date, demonstrates an approximate weighted-average loan-to-value ratio of 72.23%. The weighted average FICO credit score is approximately 746. Cash-out refinance loans represent 23.70% of the mortgage pool and second homes 7.36%. The average loan balance is $548,129. The three states that represent the largest portion of mortgage loans are California (41.71%), New Jersey (7.51%), and Virginia (4.99%). Subsequent to the cut-off date, additional loans were purchased prior to the closing date, July 28, 2005. The aggregate stated principal balance of the mortgage loans transferred to the trust fund on the closing date is $414,999,914. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release dated May 1, 2003 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' available at http://www.fitchratings.com/ Approximately 99.57% and 0.43% of the mortgage loans were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios, and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. CWMBS INC: Fitch Puts BB Rating on $1.6MM Class B Mortgage Certs. ----------------------------------------------------------------- Fitch rates CWMBS, Inc.'s mortgage pass-through certificates, CHL mortgage pass-through trust 2005-17: -- $607.7 million classes 1-A-1 through 1-A-12, 2-A-1, 2-A-2, PO, and A-R certificates (senior certificates) 'AAA'; -- $15.5 million class M certificates 'AA'; -- $4.1 million class B-1 certificates 'A'; -- $1.9 million class B-2 certificates 'BBB'; -- $1.6 million class B-3 certificates 'BB'; -- $949,500 class B-4 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 4.0% subordination provided by the 2.45% class M, the 0.65% class B-1, the 0.30% class B-2, the 0.25% privately offered class B-3, the 0.15% privately offered class B-4, and the 0.20% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB', and 'B', based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, and the master servicing capabilities of Countrywide Home Loans Servicing LP, rated 'RMS2+' by Fitch, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. The certificates represent an ownership interest in two groups of conventional mortgage loans. Loan group 1 consists of 30-year fixed-rate mortgage loans totaling $411,136,257, as of the cut-off date, July 1, 2005, secured by first liens on one- to four-family residential properties. The mortgage pool demonstrates an approximate weighted-average loan-to-value ratio of 71.99%. Approximately 60.65% of the loans were originated under a reduced documentation program. The weighted average FICO credit score is approximately 744. Cash-out refinance loans represent 26.12% of the mortgage pool and second homes 6.27%. The average loan balance is $549,647. The three states that represent the largest portion of mortgage loans are California (41.81%), New York (6.68%), and New Jersey (6.43%). Loan group 2 consists of 30-year fixed-rate interest-only mortgage loans totaling $209,346,541, as of the cut-off date, secured by first liens on one-to four-family residential properties. The mortgage pool demonstrates an approximate weighted-average OLTV of 74.53%. Approximately 64.83% of the loans were originated under a reduced documentation program. The weighted average FICO credit score is approximately 745. Cash-out refinance loans represent 20.04% of the mortgage pool and second homes 6.50%. The average loan balance is $571,985. The three states that represent the largest portion of mortgage loans are California (44.46%), Florida (7.56%), and Virginia (5.33%). None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available at http://www.fitchratings.com/ Approximately 99.72% and 0.23% of the mortgage loans were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios, and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. ENRON CORP: Hired Weil Lobbyist to Oppose Energy Bill Amendment --------------------------------------------------------------- Enron Corporation has hired Robert C. Odle, Jr., Esq., of Weil Gotshal and Manges LLP as its new lobbyist and bankruptcy representative. Mr. Odle will represent Enron's interests in the U.S. Senate. Enron wants Mr. Odle to help overturn an amendment to an energy bill sponsored by Senator Maria Cantwell, District of Washington. Mr. Odle joined Weil's Washington office in 1985, after serving as Assistant Secretary of the United States Department of Energy. Senators Cantwell & Reid Decried Enron's Lobbying U.S. Senator Maria Cantwell (D-WA) and Democratic Leader Harry Reid (D-NV) blasted Enron's efforts to undermine a Senate energy bill provision that would protect Western consumers from more gouging by Enron. The Senate-passed energy bill contains a provision authored by Cantwell that would prohibit a bankruptcy court from enforcing fraudulent Enron power contracts with Western utilities, including entities in Washington, Nevada and California. In a letter sent today, the Senators asked lead energy negotiators to "look past Enron's misleading arguments" and said that Congress "must not condone Enron's efforts to once again game the system." "This is the height of greed and arrogance," said Sen. Cantwell, a member of the Senate Energy Committee. "Somehow this corrupt corporation can find the money to hire a lobbyist, vote themselves a pay raise and go after even more money from Washington state consumers. It makes me even angrier when I think about Enron's lobbying firm charging even more money than what Snohomish PUD's Enron contract is worth. It is past time for Congress to stand with consumers and give Washington ratepayers a fair shot at getting the justice they deserve." "It is beyond absurd to think that now, some four years after the Enron scandal stripped the retirement security from thousands of Americans, that Congress would see fit to go to bat for this corrupt company," said Reid. "The people of Nevada and the American people deserve to know that Congress will stand with consumers, not a manipulative, fraudulent corporation. I join Senator Cantwell in expressing outrage and hope my Senate and House colleagues will stand with us." During the Senate Energy Committee's debate on energy legislation, Cantwell authored a measure that gained bipartisan support, which would prohibit the Enron bankruptcy court from enforcing payments on power contracts that are unjust, unreasonable, or contrary to the public interest. Sen. Cantwell wrote the provision to target manipulated power contracts between Enron and utilities such as Washington state's Snohomish PUD and others in the West. The contracts were cancelled when the energy giant began its slide into bankruptcy. But once they were cancelled, Enron turned around and sued utilities for "termination payments," including $122 million from Snohomish PUD. Less than a month after the Energy Committee passed Sen. Cantwell's Enron relief provision, Mr. Robert C. Odle, Jr. filed papers with the Secretary of the Senate and Clerk of the House of Representatives, indicating his intent to lobby on behalf of Enron on energy matters. In their letter to energy bill negotiators, Senators Cantwell and Reid called Enron's arguments against the provision "shockingly disingenuous" -- particularly given the fact that its lobbying firm has filed claims in the bankruptcy court for more than $160 million in fees. The Senators also noted that Enron's board of directors earlier this month voted to increase their own salaries as much as sixfold. These funds would be paid out of the Enron bankruptcy estate-and, if Enron has its way, out of the pockets of Western ratepayers. Energy Bill Passes The U.S. Senate approved the H.R. 6 Conference Report by a vote of 74-26 Friday afternoon. "The Senate today has passed a bipartisan energy bill that will make a real difference to every American," said Sen. Pete V. Domenici, Chairman of the Energy & Natural Resources Committee. I believe that five years from now, we will look back on an energy bill that will have stabilized energy prices, created hundreds of thousands of jobs, boosted our economy and protected our environment. "I am proud to have helped write this bill. I'm proud of the open and bipartisan process we used to write it, debate it and conference it. I left the Budget Committee to take the helm of the Energy Committee because I welcomed the challenge of passing a comprehensive energy bill. This is one of the proudest days of my Senate career -- one I will always remember." "I think in years to come we'll look back and see this piece of legislation as the birth of clean energy in this country," said U.S. Rep. Joe Barton, R-Texas, chairman of the House Energy & Commerce Committee. "We got there through the most open, fair process that I've ever witnessed in the 20 years I've been in Congress. Both the House and the Senate got the job done, and Sens. Domenici and Bingaman and their staffs should be commended. This is a very good bill and it was created in a way that should make the American people proud. It was Sen. Domenici's trust, knowledge and determination, in particular that made possible one of the great legislative achievements of the decade." The H.R. 6 Conference Report now goes to President Bush for his signature. At a White House Press Briefing Friday, Scott McClellan indicated that President Bush intends to sign the legislation. The date for signing has not yet been announced. 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. (Enron Bankruptcy News, Issue No. 152; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Court Wants Court Nod on American Express Settlement ---------------------------------------------------------------- On June 16, 1999, American Express Bank Ltd. and Enron Corp. entered into a Master Letter of Credit and Reimbursement Agreement. In connection with the Agreement, on January 17, 2001, AMEX issued a standby Letter of credit on behalf of Enron Canada Power Corp, naming ESBI Alberta Ltd. as beneficiary. On March 27, 2002, at ESBI's demand, AMEX paid CN$6,000,000 under the Standby L/C. On May 27, 2002, AMEX commenced an action against ECPC and ESBI in the Court of Queen's Bench of Alberta, Judicial District of Calgary. The action seeks: -- a declaration that AMEX is subrogated to the rights of ESBI by paying the Standby L/C; and -- a judgment against ECPC for CN$6 million plus interest. ESBI and ECPC deny any liability to AMEX. On October 15, 2002, AMEX filed Claim No. 13144 against Enron for $21,688,118. AMEX subsequently filed Claim No. 24287, amending and reducing the Original Claim to $5,188,118, and asserting these general unsecured claims against Enron: (i) CN$6 million arising from its payment to ESBI; and (ii) $1,400,000 arising from its payment on a Standby L/C issued on behalf of Enron North America Corp. On April 25, 2003, AMEX commenced an adversary proceeding against Enron, seeking a declaratory judgment that AMEX is subrogated to the rights of Enron arising out of ESBI's draw on the Standby L/C. Enron denied any liability to AMEX and asserted affirmative defenses to the allegations. On December 30, 2003, the Alberta Electric System Operator, as successor to ESBI, delivered correspondence to ECPC indicating that: (a) ESBI held CN$7,000,000 for the account of ECPC; (b) ECPC owes ESBI CN$3,273,379 for energy usage in 2002; (c) ESBI owes ECPC CN$1,979,979 as a refund for service in 2000, 2001 and 2002; and (d) after applying all available amounts to ECPC's outstanding debts, ESBI holds CN$5,706,600 above any obligations that ECPC owes to ESBI. On March 11, 2004, Enron Canada Corp. and ECPC completed an amalgamation pursuant to Section 185 of the Canada Business Corporations Act. On July 8, 2004, the Canadian Court directed AESO to pay CN$5,867,560 plus interest to the Clerk of the Canadian Court to be held in an interest bearing account pending resolution of the Canadian Litigation between AMEX and ECPC. On March 8, 2005, Judge Gonzalez directed the parties to resolve the Adversary Proceeding and the Canadian Litigation through mediation. During mediation, Enron, ECPC, ECC and AMEX reached a settlement agreement resolving their disputes. The salient terms of the settlement are: (1) AMEX and ECPC will file in the Canadian Litigation an order providing that the Clerk of the Canadian Court will immediately pay CN$3,655,000 from the Registry Funds to AMEX. AMEX and ECPC will then pay the balance of the Registry Funds, including all interest, to ECPC. Thereafter, the Canadian Litigation will be wholly dismissed with prejudice, with each party to bear its own costs; (2) AMEX and Enron will execute and file a stipulation and order in the Adversary Proceeding dismissing the Original AMEX Claim, the Settlement Order, and the Amended AMEX Claim with prejudice, and will execute and file a notice of withdrawal of the Original Amex Claim. AMEX and ECC will execute and file in the Enron Chapter 11 Case a stipulation, which will: (i) vacate the Settlement Order in its entirety with respect to the Amended AMEX Claim; (ii) bifurcate the Amended AMEX Claim into two separate claims, the first of which will consist of the ECPC Standby L/C Claim, and second of which will consist of the ENA Standby L/C Claim; (iii) allow and assign the ECPC Standby L/C Claim to ECC; and (iv) provide that AMEX will remain the holder of the ENA Standby L/C Claim, which claim will be allowed. (3) The Parties will release each other from all claims and obligations in connection with the disputes. Melanie Gray, Esq., at Weil, Gotshal & Manges LLP, in New York, attests that the Settlement is the product of arm's-length bargaining, without fraud or collusion. The Settlement will avoid protracted litigation with AMEX, bring significant value to the Enron Entities' estates, and resolve all claims, obligations, demands, actions, causes of action and liabilities relating to the dispute. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, Enron asks the Court to approve the Settlement. 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. (Enron Bankruptcy News, Issue No. 152; Bankruptcy Creditors' Service, Inc., 15/945-7000) ESSELTE GROUP: Selling DYMO Unit to Newell Rubbermaid for $730MM ---------------------------------------------------------------- Newell Rubbermaid Inc. (NYSE: NWL) reached a definitive agreement to acquire DYMO, a global leader in designing, manufacturing and marketing on-demand labeling solutions, for approximately $730 million in cash. The acquisition, which is expected to close by year-end, is subject to applicable regulatory approvals and other customary closing conditions. Newell Rubbermaid expects the acquisition to be neutral to earnings in 2005 and approximately $0.06 per share accretive in 2006. DYMO is a division of Esselte Group Holdings AB. Joseph Galli, chief executive officer of Newell Rubbermaid, said, "The combination of DYMO and our writing instruments and office products business represents a significant opportunity given the complementary nature of the product lines, distribution networks and geographies. This is an excellent example of our commitment to transform our portfolio into a focused group of leadership platforms through investment in high-quality brands with a proven track record of bringing innovative new products to the category." Magnus Nicolin, chief executive officer of Esselte, said, "Over the last three years we have invested heavily in DYMO to substantially build the business. The announcement is a confirmation of our success in this effort." Newell Rubbermaid Office Products Group President, Steve Marton added, "We are excited about the opportunity to add DYMO to our leadership portfolio of branded writing instruments and office products. The talented team at DYMO has done a tremendous job developing category-leading products and technologies. By leveraging this portfolio and our strong distribution capabilities, we believe we can maximize this compelling growth opportunity." Phil Damiano, president of DYMO, will remain with the organization and lead this strategic business unit within Newell Rubbermaid's Office Products Group. Mr. Damiano said, "DYMO has an impressive track record of growth. The combined strengths of DYMO and Newell Rubbermaid in the consumer, office and industrial channels will allow us to build on this success." Newell Rubbermaid's Office Products Group accounted for $1.7 billion of the company's $6.5 billion in sales in 2004. The group manufactures and markets writing instruments, art products and office organization supplies, led by a powerful brand family including Sharpie(R), Paper Mate(R), Parker(R), Waterman(R), EXPO(R), uni-ball(R), and Rolodex(R). Esselte plans to use the proceeds of this transaction to substantially repay all of its current outstanding debt. In that connection, Esselte plans on the closing date to call for redemption its then outstanding 7.625% senior notes due in 2011, in accordance with Article III of the note indenture. Esselte will focus its energies on supporting its global filing and organization business, which consists of Pendaflex and Oxford in the U.S. and Esselte and Leitz throughout the rest of the world. Additionally, it is expected that Esselte will devote increasingly more resources to building its creative division which is made up of the Xyron craft and hobby business. The crafting industry has been rapidly growing for the past four years. Esselte sees this business as its next growth engine. About Newell Rubbermaid Newell Rubbermaid Inc. -- http://www.newellrubbermaid.com/-- is a global marketer of consumer and commercial products with 2004 sales of $6.5 billion and a powerful brand family including Sharpie(R), Paper Mate(R), Parker(R), Waterman(R), Rubbermaid(R), Calphalon(R), Little Tikes(R), Graco(R), Levolor(R), BernzOmatic(R), VISE-GRIP(R), IRWIN(R) and LENOX(R). The company is headquartered in Atlanta, Ga., and has over 31,000 employees worldwide. About DYMO Through its well-known product lines including LabelWriter(R), LabelManager(R), LetraTAG(R) and RhinoPro, DYMO has built a strong position in consumer, office and industrial channels in North America, Europe and Australia, supported by innovative, patented new products and broad distribution. DYMO offers a comprehensive range of manual and electronic labelmakers, PC and Macintosh connected label printers and related consumables for all its products. DYMO, headquartered in Stamford, Conn., generated global net sales of approximately $225 million in 2004. About Esselte Esselte Group Holdings AB -- http://www.esselte.com/--, whose registered office is in Solna, Sweden, and whose executive office is in Stamford, Conn., USA, is a leading global office supplies manufacturer with 2004 annual sales of approximately $1.2 billion, operations in 33 countries (including Hong Kong) and approximately 5,600 employees worldwide. The Company develops, manufactures and sells products that simplify the modern home and workplace. Esselte sells more than 20,000 different office product SKUs in over 120 countries. In addition to DYMO its principal brands include Esselte, Leitz, Pendaflex and Xyron. * * * As reported in the Troubled Company Reporter on May 27, 2005, Standard & Poor's Ratings Services affirmed is 'B' corporate credit and 'CCC+' subordinated debt ratings on office products manufacturer Esselte Group Holdings AB. At the same time, the ratings were removed from CreditWatch with negative implications, where they were placed on Nov. 23, 2004. The outlook is stable. Total debt outstanding as of April 3, 2005 was $413.8 million. EXIDE TECH: Posts $35.7 Million Net Loss in First Quarter 2005 -------------------------------------------------------------- Exide Technologies (NASDAQ: XIDE) reported financial results for the first quarter of fiscal 2006 ended June 30, 2005. Consolidated net sales for the first quarter of fiscal 2006 rose 9.2% to $669.3 million from $612.5 million in the first quarter of fiscal 2005. Quarterly net sales results benefited from higher average selling prices as a result of lead-related pricing actions across the business, as well as continued strong Motive Power demand worldwide. Favorable currency exchange rates also benefited net sales Company-wide. "While all of our divisions contributed to the increase in sales, three out of the four divisions delivered better operating performance. During the first quarter and in the month of July, we began taking a number of steps to make Exide a stronger and more competitive organization," said Gordon Ulsh, President and Chief Executive Officer. "Although progress is being made, there clearly remains much more to do. Looking forward to the full year, we remain focused on delivering profitable revenue growth and continued expense rationalization to enhance shareholder value." The Company reported a consolidated net loss of $35.7 million, which include restructuring costs and reorganization items of approximately $4.3 million, a $10.6 million currency remeasurement losses and a loss on sale of capital assets of $1.5 million. The results were offset by an unrealized gain on the re-evaluation of warrants of $8.1 million. The results compare to reported first quarter fiscal 2005 net income of $1,782.2 million, which includes the impact of Fresh Start accounting and a gain on the discharge of indebtedness totaling $1,787.2 million. The Company uses adjusted EBITDA as a key measure of the Company's operational and financial performance because the Company believes it provides useful information for investors. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and restructuring charges. The Company's adjusted EBITDA definition also adjusts reported earnings for the effect of non-cash currency re-measurement gains or losses, the non-cash gain or loss from revaluation of the Company's warrants liability, impairment charges and non-cash gains or losses on asset sales. Adjusted EBITDA for the first quarter of fiscal 2006 declined $6.7 million to $19 million principally driven by higher commodity prices. Average lead prices increased 16.5% over the prior-year period to EUR784 ($987) per metric tonne. The strength of the Euro against the U.S. dollar offset lower results by $0.5 million. Headquartered in Princeton, New Jersey, Exide Technologies -- http://www.exide.com/-- is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on July 8, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Exide Technologies to 'CCC+' from 'B-', and removed the rating from CreditWatch with negative implications, where it was placed on May 17, 2005. "The rating action reflects Exide's weak earnings and cash flow, which have resulted in very high debt leverage, thin liquidity, and poor credit statistics," said Standard & Poor's credit analyst Martin King. Lawrenceville, New Jersey-based Exide, a manufacturer of automotive and industrial batteries, has total debt of about $740 million, and underfunded post employment benefit liabilities of $380 million. FEDERAL-MOGUL: Court Approves Insurance Settlement Agreement ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware approved the settlement agreement inked between a. Federal-Mogul Products, Inc., and DII Industries, LLC; and b. KWELM Management Services Limited, as the appointed run-off agent for: * Kingscroft Insurance Company Limited; * Walbrook Insurance Company Limited; * El Paso Insurance Company Limited; * Lime Street Insurance Company Limited and Mutual Reinsurance Company Limited and The Bermuda Fire & Marine Insurance Company Limited (In Liquidation); and * Southern American Insurance Company in liquidation, solely in respect of its participation in the pool operated by H S Weavers (Underwriting) Agencies Ltd. The Settlement Agreement was inked on September 27, 2004,and was the product of various policies of insurance that the Settling Insurers issued or subscribed to provide coverage for, among other things, asbestos-related bodily injury claims against: (1) Federal-Mogul Products, as successor-in-interest to Wagner Electric Company; and (2) DII Industries, as successor-in-interest to Turbodyne Corporation and Worthington Corporation. As reported in the Troubled Company Reporter on July 15, 2005, each of the Settling Insurers is insolvent and operating in run- off mode. These Insurers have ceased to underwrite new liabilities, and are in the process of liquidating and paying, to the extent possible, their outstanding liabilities in connection with Schemes of Arrangement with their creditors being implemented under English law, with the exception of South American Insurance Company. South American Insurance Company is being liquidated under the supervision of the Third Judicial District Court in the State of Utah. The FM Products and DII Industries have submitted claims against the Settling Insurers in the Settling Insurers' liquidation proceedings, which are ongoing in England or, in the case of South American Insurance Company, in Utah state court. The material terms of the Settlement Agreement are: (a) FM Products and DII Industries will have a joint allowed claim against the Settling Insurers for $7,000,000 to be apportioned among the Settling Insurers; (b) After the passage of the Bar Date in the Settling Insurers' Schemes of Arrangement, and assuming that no competing claims are asserted under the Subject Insurance Policies, the Settling Insurers agree to make payment as provided by the Settling Insurers' Schemes of Arrangement to an escrow account under the joint control of FM Products and DII Industries. In the case of South American Insurance Company, it must seek approval from the Utah state court to make the payment after the passage of the Bar Date. The Settling Insurers have agreed that FM Products and DII Industries will submit adequate supporting documentation in the Settling Insurers' Schemes of Arrangement relating to their claims against the Settling Insurers; and (c) In the event a competing claim were brought against the Settling Insurers prior to payment of the $7 million settlement amount, the Settling Insurers would evaluate the claim. If the claim appeared to be valid under the Subject Insurance Policies, the Settling Insurers would attempt to negotiate an appropriate revised value for the settlement with FM Products and DII Industries. If the negotiations were unable to arrive at an agreed amount among the parties, then the matter would be referred to the Scheme Adjudicator for the Settling Insurers' Schemes of Arrangement and to the South American Insurance Company for adjudication. The Bar Date in the Settling Insurers' Schemes of Arrangement had passed on September 29, 2004. The Debtors have verified that no competing claims have been brought in the Schemes of Arrangement that would dilute the recovery available to FM Products. Accordingly, the Debtors believe that the $7 million joint allowed claim of FM Products and DII Industries against the Settling Insurers is the basis on which distributions to FM Products will be determined. 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. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) FIBERMARK INC: U.S. Trustee Disbands Creditors Committee -------------------------------------------------------- Kim F. Lefebvre, the Assistant U.S. Trustee for Region 2 tells the U.S. Bankruptcy Court for the District of Vermont that the Official Committee of Unsecured Creditors appointed in FiberMark, Inc., and its debtor-affiliate's chapter 11 cases has been disbanded effective July 13, 2005. The U.S. trustee disbanded the creditors committee after an Examiner conducted an investigation. The investigation was initiated in order to look into the disputes among Committee members and the Debtor concerning corporate governance issues and fiduciary duties. The Examiner indicated that his "investigation as to the dispute among Committee members and the Debtors concerning corporate governance issues and fiduciary duties is more complicated and extends over a greater period of time than that which may have been originally anticipated." As previously reported in the Troubled Company Reporter on Apr. 16, 2004, the United States Trustee for Region 2 appointed 5 creditors to serve on an Official Committee of Unsecured Creditors in FiberMark, Inc.'s Chapter 11 cases: 1. AIG Global Investment Group, Inc. 2. Wilmington Trust Company As Indenture Trustee for the 10.75% Senior Notes Due 2011 and 9.375% Senior Notes Due 2006 3. Solution Dispersions, Inc. 4. Post Advisory Group, LLC 5. E.I. DuPont de Nemours & Company Headquartered in Brattleboro, Vermont, FiberMark, Inc. -- http://www.fibermark.com/-- produces filter media for transportation applications and vacuum cleaning; cover stocks and cover materials for books, graphic design, and office supplies and base materials for specialty tapes, wall coverings and sandpaper. The Company filed for chapter 11 protection on March 30, 2004 (Bankr. D. Vt. Case No. 04-10463). Adam S. Ravin, Esq., D.J. Baker, Esq., David M. Turetsky, Esq., and Rosalie Walker Gray, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $329,600,000 in total assets and $405,700,000 in total debts. At Mar. 31, 2005, FiberMark, Inc.'s balance sheet showed a $105,404,000 stockholders' deficit, compared to a $101,876,000 deficit at Dec. 31, 2004. FLOWSERVE CORP: Moody's Rates New $1 Billion Facilities at Ba3 -------------------------------------------------------------- Moody's Investors Service has assigned a Ba3 rating to Flowserve Corp.'s new $1 billion senior secured credit facilities. The corporate family rating was affirmed at Ba3. The outlook remains negative. Ratings assigned: * Ba3 for the $400 million revolving credit facility, due 2010 * Ba3 for the $600 million term loan, due 2012 Ratings affirmed: * Ba3 corporate family rating The rating assignment and affirmation reflect the potential benefits of the new credit facility that will lower Flowserve's financing costs, extend its debt maturity, and improve liquidity conditions. Fundamentally, the Ba3 corporate family rating is supported by: * Flowserve's strong market position in the global fluid management industry; * broad product offering and global reach; and * improving credit metrics and demonstrated ability to generate cash flow for debt de-leveraging. The rating, however, is constrained by: * the company's exposure to cyclical end-markets; * recent management turnovers; and * the managerial challenges that the company faces in operating a global business in an increasingly complex and demanding regulatory and business environment. The negative rating outlook continues to reflect concerns associated with a number of internal control weaknesses that the company disclosed in May 2005, as well as the fact that the company has not publicly filed its financial results since the end of the first quarter of 2004. Although Flowserve has publicly reported favorable bookings and backlog trends in recent quarters, its operating and financial performance cannot be fully assessed until it files its 2004 Form 10-K report, which it currently expects to be in October 2005. Flowserve's new $1 billion senior secured credit facility will consist of a $600 million senior secured term loan, due 2012, and a 5-year $400 million senior secured revolving credit facility. The company plans to use the proceeds from the borrowing, assuming completion, to refinance at a lower blended interest rate its existing terms A and C debt, its existing revolving credit facility and its outstanding 12.25% senior subordinated notes. In addition to expected substantial savings in interest expense, the new financing will significantly extend Flowserve's debt maturity and improve its liquidity conditions with a larger revolving credit facility The Ba3 rating on the credit facility, at the same level as the corporate family rating, reflects its preponderance of the new debt structure. The facility will be fully secured by a first- priority lien on all assets of Flowserve and its domestic subsidiaries (and to the extent available, foreign subsidiaries). The credit facility will be guaranteed on a senior secured basis by all existing and future direct and indirect domestic subsidiaries of the company (subject to a to-be-agreed upon materiality threshold), Flowserve International Limited, and, to the extent no material adverse tax consequences would result, other foreign subsidiaries. Flowserve Corporation, headquartered in Dallas, Texas, is one of the world's leading providers of fluid motion and control products and services. Operating in 56 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. FLOWSERVE CORP: Provides Updates on Five Key Items -------------------------------------------------- Flowserve Corp. (NYSE: FLS) issued a news release last week providing updated on five key items: Debt Repayment -------------- In the second quarter of 2005, the company repaid $23.5 million of debt, including a $4.5 million reduction in its asset securitization facility, in addition to paying $9 million in professional fees related to compliance issues and the restatement and making a planned $8 million pension contribution. The company, which previously announced an initiative to complete a major refinancing of up to $1 billion, expects to have a lower blended interest rate for debt if this refinancing is completed as planned. "We are continuing to generate cash flow from operations and still expect to further reduce total debt levels in 2005," said Chief Financial Officer Mark A. Blinn. 2004 Financial Results Announcement Timing ---------------------- The company expects to announce its 2004 financial results in a news release to be issued late in the third quarter of 2005. The company now expects to file its 2004 Form 10-K report in October instead of September, as previously planned, due to the ongoing restatement work and audit process. As previously announced, Flowserve is restating annual financial results for 2000 through 2003 and quarterly results for the first quarter of 2004. The company also anticipates, as previously announced, that it will report that it had material weaknesses in internal controls as of Dec. 31, 2004, which are being actively addressed. The company's analysis of its internal controls is ongoing and additional material weaknesses could be identified. The company is also continuing to work with the IRS to address its previously announced potential liabilities from the pending audit of its 1999 - 2001 tax returns, which remains open. Excluding any of the tax audit's potential impact, which is still being analyzed by amount and affected period, the company continues to expect that the cumulative net reduction in net income, which is still being finalized, should be less than $20 million for the periods being restated. CEO Search Moving Forward ------------------------- The board of directors' Transition Committee is continuing to move forward productively in its search for a new CEO. "We are very pleased with our progress and expect to complete the search soon," Interim-Chairman, President and Chief Executive Officer Kevin E. Sheehan said. General Services Divestiture Progress ------------------------------------- The company is conducting negotiations with several potential buyers of its General Services operations of its Flow Control Division. As previously announced, the company's 2005 financial statements will reflect General Services as a discontinued operation. Second Quarter Bookings Increase, Backlog Stable ------------------------ Second quarter 2005 consolidated bookings increased 8 percent, including positive currency effects of 2 percent, to approximately $723 million compared with approximately $670 million in the second quarter of 2004. For the first six months of 2005, bookings increased 8 percent, including positive currency effects of 3 percent, to approximately $1.4 billion compared with approximately $1.3 billion in the first six months of the prior year. Second quarter 2005 backlog decreased 1 percent, including positive currency effects of less than 1 percent, to approximately $866 million compared with approximately $873 million at the end of the second quarter of the prior year. "This increase in bookings is broad-based across all three of our operating divisions and most of our key end-markets," Mr. Sheehan said. "Our operational excellence initiatives are also showing solid evidence of increasing our operating efficiencies across the company. These developments should bode very well for our future results. However, as we have previously said, our results will continue to be affected by the significant costs of Sarbanes-Oxley compliance, professional fees arising from our comprehensive review of our internal financial processes, the 2004 audits of our financial statements and internal controls, the restatement and our ongoing work to address internal controls issues." Flowserve Corp. is one of the world's leading providers of fluid motion and control products and services. Operating in 56 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. GABLES REALTY: Moody's Chips Preferred Stock Rating to B1 --------------------------------------------------------- Moody's Investors Service announced that it has assigned a (P)Ba2 prospective rating to the proposed $2.125 billion senior secured credit facility of Lion Gables Realty Limited Partnership, the surviving operating partnership following the closing of Gables' previously announced transaction to be acquired by ING Clarion. In addition, Moody's has downgraded the current ratings of Gables Residential Trust (senior unsecured to Ba3). The outlook is developing for the planned credit facility, due to the execution risk in closing the merger transaction and the associated recapitalization plan, with the outlook for the now-outstanding senior unsecured debt and preferred stock of Gables Residential Trust being stable. Under the terms of the agreement, a partnership sponsored by ING Clarion Partners will acquire Gables for total consideration of approximately $2.8 billion; this includes the assumption and refinancing of approximately $1.2 billion of Gables' outstanding debt and preferred shares. Moody's rated both portions of the planned $2.125 billion senior secured credit facility consisting of: 1) a three-year $300 million revolving credit facility; and 2) a 12-month $1.825 billion term loan, which includes two 6- month extension options. The transaction is expected to close by the end of September 2005, at which time Moody's would withdraw its ratings of Gables' unsecured notes and preferred stock, when these securities are fully repaid. These rating actions presume that the deal closes with the associated changes in Gables' capital structure. Moody's stated that after the closing of the merger, Gables will be managed with a more highly-leveraged capital structure that includes 100% secured debt. Moody's rated the prospective credit facility and term loan (P)Ba2, reflecting the adequate quality and diversity of apartment property collateral supporting these facilities. Based on this transaction, there is roughly $3 billion in collateral value supporting $2 billion of secured debt -- approximately 136% asset coverage. Furthermore, the senior secured facility is supported by its mandatory prepayment terms from asset sales and similar events. Moody's indicated that an upgrade of the Gables Residential Trust senior unsecured debt and preferred stock ratings is unlikely given this strategic turn of events. An upgrade of the Lion Gables' ratings on the senior credit facilities would require success in reducing leverage. A downgrade from (P)Ba2 for the credit facilities would reflect a lack of success in reducing leverage and a challenging refinance environment. Moody's last rating action regarding Gables occurred on June 7, 2005, when the ratings were placed under review. Moody's will also be withdrawing its ratings on Gables' shelf registrations. These ratings were assigned on a prospective basis: Lion Gables Realty Limited Partnership: * (P)Ba2 to senior secured term loan and revolving credit facility These ratings were downgraded: Gables Realty Limited Partnership: * senior unsecured debt to Ba3, from Ba1. Gables Residential Trust: * preferred stock to B1, from Ba2; preferred stock shelf to (P)B1, from (P)Ba2. Gables Residential Trust [NYSE: GBP] is a multifamily REIT headquartered in Boca Raton, Florida, USA. As of March 31, 2005, the REIT had assets of $1.8 billion and equity of $600 million. GABLES REALTY: S&P Rates Proposed $2.125 Billion Bank Loan at BB+ ----------------------------------------------------------------- Standard & Poor's Ratings Services ratings on Gables Residential Trust and Gables Realty L.P. remain on CreditWatch with negative implications following yesterday's filing of a preliminary proxy statement regarding Gables' pending merger transaction with a private partnership sponsored by ING Clarion Partners. At the same time, a preliminary 'BB+' rating is assigned to Gables Realty L.P.'s proposed $2.125 billion secured credit facility. Proceeds of the credit facility are expected to repay all existing rated securities. The preliminary proxy statement details expected plans by ING Clarion to repay Gables' existing preferred stock and call the existing senior unsecured notes for redemption ($585 million aggregate securities) in connection with the close of its planned acquisition of Gables. The ratings on Gables were initially placed on CreditWatch negative on June 8, 2005, following the June 7, 2005, announcement that Gables had entered into a definitive agreement to be acquired by a partnership sponsored by ING Clarion. Gables Realty L.P. is expected to be the surviving operating partnership entity after the merger, although it will ultimately carry a different name. Meanwhile, the bank loan rating assigned to Gables Realty L.P.'s proposed $2.125 billion secured credit facility is preliminary because the transaction's final terms have not been confirmed and its actual closing has yet to occur (but is anticipated to take place in September 2005). The assignment follows Standard & Poor's review of the expected business profile and more highly leveraged pro forma capital structure of Gables Realty L.P. after the transaction closes. If the transaction closes as proposed, Standard & Poor's anticipates withdrawing the ratings on Gables' existing preferred stock and senior unsecured notes and lowering the corporate credit rating to 'BB', as well as assigning a final 'BB+' rating to Gables Realty L.P.'s secured credit facility. If the transaction does not move forward, Standard & Poor's will reevaluate Gables' credit profile, which could result in a lower rating. Preliminary Rating Assigned Gables Realty L.P. Rating ------ Secured credit facility BB+ Ratings Remaining On Creditwatch Negative Gables Residential Trust/Gables Realty L.P. Rating ------ Corporate credit BBB/Watch Neg/-- Senior unsecured BBB/Watch Neg Preferred stock BBB-/Watch Neg GEORGIA-PACIFIC: 2nd Qtr. $194M Net Income Lower than Last Year's ----------------------------------------------------------------- Georgia-Pacific Corp. (NYSE: GP) reported second quarter 2005 net income of $194 million compared with net income of $220 million in second quarter 2004. Following are highlights of the second quarter results: (in millions, except per share amounts) 2Q-2005 2Q-2004 Net income $194 $220 Net income per diluted share $0.73 $0.84 Net income before unusual items $217 $239 Net income before unusual items per diluted share $0.82 $0.91 Income from continuing operations $194 $230 Income from continuing operations per diluted share $0.73 $0.88 Income from continuing operations before unusual items $217 $234 Income from continuing operations before unusual items per diluted share $0.82 $0.89 "Our North America consumer products business achieved a 49 percent improvement in operating profit compared with the second quarter last year and our building products manufacturing business continued its near-record performance," said A.D. (Pete) Correll, chief executive officer and chairman of Georgia-Pacific. "During the most recent quarter, raw materials and energy inflation increased our operating costs company wide by approximately $105 million compared with the second quarter in 2004," Correll said. "In addition, our operations were affected by planned and unplanned mill maintenance outages. In spite of these factors, we remain on track to achieve significant cost improvements and reach our North America consumer products operating profit goal by the end of 2006." Second quarter 2005 net income before unusual items was $217 million. Unusual items included: * a $13 million charge ($8 million after tax, or 3 cents diluted loss per share) related to the early extinguishment of debt; * an $11 million charge ($11 million after tax) to establish a liability reserve related to an Internal Revenue Service challenge of the tax-exempt status of several series of bonds issued to finance construction of solid waste recycling and disposal facilities at certain of the company's mills; * a $4 million charge ($2 million after tax) for closure of the Caledonia, Ontario, gypsum mine and other closure costs; and * a $3 million charge ($2 million after tax) for settlement of an asbestos insurance receivable. In addition, second quarter 2005 results include a pretax credit of $5 million ($3 million after tax) related to the expensing of stock-based compensation versus a pretax charge of $36 million ($23 million after tax) in second quarter 2004. Second quarter 2004 net income before unusual items was $239 million (91 cents diluted earnings per share). Unusual items included: * a $60 million gain ($13 million after tax, or 5 cents diluted earnings per share) on non-strategic asset sales; * a $27 million charge ($17 million after tax) for the early extinguishment of debt; and * a $24 million charge ($15 million after tax) for asset impairment and restructuring. Georgia-Pacific's net sales were $4.8 billion for the second quarter 2005, compared with $5.2 billion for the second quarter 2004. Excluding sales from the building products distribution business, which was sold in May 2004, net sales for the second quarter 2005 increased $56 million, compared with second quarter 2004. While building products sales were strong in the quarter, they were down from the record levels experienced in the second quarter of 2004. This decline was more than offset by higher sales in our North America consumer products segment resulting from price increases realized in 2004 and 2005. Net sales for the first six months of 2005 were $9.4 billion, compared with $10.4 billion in the same period a year ago. Excluding sales from the building products distribution business, which was sold in May 2004, net sales for the first six months of 2005 increased $332 million, or 4 percent, compared with the first six months of 2004. For the first six months of 2005, Georgia-Pacific reported net income of $399 million, compared with $367 million in the same period of 2004. For the first six months of 2005, the company reported net income excluding unusual items of $421 million, compared with $402 million in the same period of 2004. Total debt was $8.5 billion at the end of the second quarter, down $230 million versus the first quarter of this year. North America Consumer Products The North America consumer products segment includes the company's retail and commercial tissue businesses. Familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-Dri(R) and Vanity Fair(R), as well as the Dixie(R) brand of disposable cups, plates and cutlery. The segment recorded second quarter 2005 operating profit of $220 million versus $148 million in second quarter 2004. Included in the second quarter 2004 results were pretax charges of $19 million for asset impairment and restructuring charges related primarily to the Bellingham, Wash., property. Improved performance for the segment was driven by favorable price and mix versus the same quarter one year ago, with overall tissue prices up 11 percent per ton. As anticipated, volume in tons declined 4 percent due to the disciplined implementation of previously announced price increases as well as product reformulations. The company has announced a price increase for its commercial business effective Oct. 1. Higher prices for purchased pulp, energy and chemicals, while partially offset by lower wastepaper costs during the quarter, masked continued progress in the company's ongoing cost reduction efforts. The company also experienced planned and unplanned mill outages in several key integrated manufacturing operations, which negatively affected maintenance and other costs. International Consumer Products The international consumer products segment markets both retail and commercial products such as bathroom and facial tissue, handkerchiefs and paper towels, as well as personal care products in Europe and other locations. Market-leading brands include Lotus(R), Moltonel(R), Colhogar(R), Tenderly,(R) Delica(R) and Demak'Up(R). The segment recorded a second quarter 2005 operating profit of $22 million, compared with $38 million during the same quarter a year ago. Competitive market conditions and industry overcapacity continued to impact this business. Prices were down 2 percent in Euros and total volume was down 3 percent. Costs associated with a delayed startup following the rebuild of a paper machine in the United Kingdom and raw material inflation contributed to the decline in operating profit. A pulp and paper industry strike in Finland impacted both volume and operating profit negatively. These factors were partially offset by ongoing cost reduction. Changes in the currency exchange rate between the U.S. dollar and the Euro since the second quarter 2004 benefited second quarter 2005 results by approximately $1 million. Packaging Georgia-Pacific's packaging segment includes four containerboard manufacturing facilities and 55 converting operations. Its Color-Box subsidiary is the leading high-graphics, litho-laminated corrugated manufacturer in North America. The segment recorded an operating profit of $68 million in the second quarter 2005, compared with $82 million in the second quarter 2004. Results in second quarter 2005 include a $1 million charge for additional closure costs for three packaging facilities, closed in previous quarters. Second quarter 2004 results include a $23 million pretax gain on the sale of the South San Francisco, Calif., facility that was partially offset by asset impairment and pretax restructuring charges of $5 million. Box prices were up 7 percent versus the second quarter 2004. Higher costs for fiber, energy, chemicals and maintenance partially offset price gains from the second quarter 2004. Corrugated shipments were flat compared with a year ago, which is slightly better than Fibre Box Association-reported industry shipments, while containerboard shipments declined due to slowback and maintenance downtime to maintain appropriate inventory levels. Bleached Pulp and Paper The bleached pulp and paper segment is comprised of the company's communication papers, bleached board and kraft businesses, and its 40 percent minority ownership in Unisource. The segment recorded a second quarter 2005 operating profit of $2 million, compared with an operating profit of $27 million in the second quarter 2004. Second quarter 2004 results included a $26 million pretax gain on the sale of an interest in three Brazilian companies that owned a minority, non-voting interest in the Brazilian pulp company, Aracruz Celulose S.A. Operating profit was impacted by lower volume, and maintenance and other costs related to planned and unplanned outages at several of the company's key manufacturing facilities. Prices for all paper grades were up compared with the second quarter 2004, while volumes were down. Building Products The company's diversified building products segment includes structural panels, gypsum, lumber, industrial wood products and chemical manufacturing businesses. The segment continued near-record performance with second quarter 2005 operating profit of $228 million versus $366 million in the second quarter 2004. Second quarter 2005 results include a $3 million charge ($2 million after tax) for closure of the Caledonia, Ontario, gypsum mine. Demand remained strong for structural panels, lumber and gypsum products due to robust residential and non-residential construction activity. Volume was up almost 10 percent for both plywood and oriented strand board compared with the second quarter last year. Prices for these structural panels were off from 2004 record levels but remained strong. OSB shipments included volume from the new Hosford, Fla., facility, which successfully started up in May. Lumber prices strengthened, and particleboard prices held firm although volume was down. All businesses were impacted by higher wood and resin costs. The gypsum business achieved both price and volume increases driven by the strength of residential and commercial demand. Total gypsum volumes were up 14 percent due to increases in both ToughRock(R) and the DENS(R) line of glass mat gypsum products. In keeping with its strategy to increase its sales of diversified specialty building products, the company introduced its mold- resistant DensArmor Plus(R) interior wallboard in retail outlets during the quarter. A price increase for ToughRock went into effect at the end of the second quarter and an increase for several DENS products was announced for the third quarter of this year. Other The company's Other segment primarily includes unallocated corporate expenses and the elimination of intersegment sales and profits. The segment reported second quarter 2005 expenses of $84 million, compared with expenses of $144 million for the same period in 2004 due primarily to significantly lower costs for stock-based compensation and other incentives, insurance and benefits, and foreign currency translation. A $5 million pretax credit was recorded for stock-based compensation due to lower stock prices versus a $36 million charge a year ago, which included the recognition in 2004 of expenses related to 2002 performance awards. Second quarter 2005 unusual items included: * a $13 million charge for the early extinguishment of debt; * an $11 million charge to establish a liability reserve related to an Internal Revenue Service challenge of the tax-exempt status of several series of bonds issued to finance construction of solid waste recycling and disposal facilities at certain of the company's mills; and * a $3 million charge for settlement of an asbestos insurance receivable. Included in the second quarter 2004 results were an unusual $27 million pretax charge for early extinguishment of debt and a $2 million gain related to miscellaneous asset sales. Summary "Georgia-Pacific remains focused on our commitment to earn acceptable returns across our businesses," Mr. Correll said. "We will exercise manufacturing discipline in the face of cost and price pressures while continuing to strive for operational excellence. Our financial goal remains to realize solid investment-grade metrics." Headquartered at Atlanta, Georgia-Pacific -- http://www.gp.com/-- is one of the world's leading manufacturers and marketers of tissue, packaging, paper, building products and related chemicals. With 2004 annual sales of approximately $20 billion, the company employs 55,000 people at more than 300 locations in North America and Europe. Its familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-Dri(R) and Vanity Fair(R), as well as the Dixie(R) brand of disposable cups, plates and cutlery. Georgia-Pacific's building products business has long been among the nation's leading supplier of building products to lumber and building materials dealers and large do-it-yourself warehouse retailers. * * * As reported in the Troubled Company Reporter on May 24, 2005, Standard & Poor's Ratings Services revised its outlook on Georgia- Pacific Corp. to positive from stable and affirmed all its ratings on the company and its subsidiaries, including its 'BB+' corporate credit rating. As reported in the Troubled Company Reporter on Dec. 20, 2004, Moody's Investors Service changed the outlook on Georgia-Pacific Corporation's ratings to positive from stable, with similar outlook changes initiated for the other entities through which Georgia-Pacific and its subsidiaries and predecessor companies have issued debt. At the same time, Moody's affirmed Georgia- Pacific's senior implied rating at Ba2, and the senior unsecured and issuer ratings at Ba3. Moody's continued its practice of rating debt that is either issued or guaranteed by Fort James Corporation at a level equivalent with the Ba2 senior implied rating, with all other debt rated one notch below at Ba3. Georgia- Pacific's Speculative Grade Liquidity -- SGL -- rating was also affirmed at SGL-2, which indicates good liquidity. * Georgia-Pacific Corporation: -- Outlook changed to positive from stable Ratings affirmed: -- Senior Implied: Ba2 -- Senior unsecured: Ba3 -- Issuer rating: Ba3 -- Speculative Grade Liquidity Rating: SGL-2 * Fort James Corporation: -- Outlook changed: to positive from stable Rating affirmed: -- Senior Unsecured: Ba2 * G-P Canada Finance Company: -- Outlook changed: to positive from stable Rating affirmed: -- Backed Senior Unsecured: Ba3 * Fort James Operating Company: -- Outlook changed: to positive from stable Rating affirmed: -- Backed Senior Unsecured: Ba2 As reported in the Troubled Company Reporter on May 6, 2004, Standard & Poor's Ratings Services revised its outlook on Atlanta, Ga.-based Georgia-Pacific Corp. (GP) and its subsidiaries to stable from negative, and affirmed its 'BB+' corporate credit and senior unsecured debt ratings. GETTY IMAGES: Good Performance Prompts S&P to Upgrade Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Getty Images Inc. to 'BB' from 'BB-' and its subordinated debt rating to 'B+' from 'B'. The outlook is stable. As of June 30, 2005, the Seattle, Washington-based visual imagery company had $265 million in debt. "The upgrade is based on the company's continued robust operating results, good competitive position, and strengthened financial profile," said Standard & Poor's credit analyst Steve Wilkinson. The ratings on Getty reflect its: * good competitive position in the niche market for noncommissioned (or "stock") visual imagery, * strong operating performance, * customer and geographic diversity, * significant liquidity, and * moderate financial policies. These strengths are partially offset by risks related to its limited business diversity, its reliance on sales to the cyclical advertising and publishing industries, and competition. Getty is the leading global provider of noncommissioned visual content to advertising and design agencies, publishing and media companies, and corporate and business users. Getty is about three times larger than its nearest competitor, by revenue, as a result of its purchase of several leading image collections from 1995 to 2000. Getty benefits from its: * broad collection of stock images, * extensive customer and partner relationships, and * an international distribution network. About 56% of the company's sales are outside of the U.S., which provides geographic diversity but also exposure to foreign currency fluctuations. Office consolidations and staff reductions, largely completed in 2001, have lowered Getty's fixed costs substantially. Also, Getty's integrated Web site allows customers to search, select, and download images online from all of its collections, a process that is much faster for its customers and has improved the company's efficiency and costs. Competition in this still-fragmented market is likely to increase as Getty's other sizable competitors expand their image offerings through acquisitions and partnerships, and improve their Web site functionality. Getty's average price per image has increased in recent years, but its pricing power is limited by competitive alternatives. Overall demand for visual content is growing along with online usage, broadband penetration, and the outsourcing of image gathering by news and creative organizations. Still, revenue visibility is limited and is subject to cyclical swings in demand from the advertising and publishing industries. These risks would be exacerbated if rising competition or flagging demand were to pressure image prices. Standard & Poor's stable outlook on Getty incorporates S&P's expectation that the company will adhere to prudent financial policies that enable it to continue to generate significant free operating cash flow, and that it will maintain sufficient liquidity to meet any potential put of its $265 million in convertible bonds. The outlook also reflects the expectation that Getty will maintain a strong competitive position and that further industry consolidation will not meaningfully hinder the industry's pricing or profit potential. Shortfalls from these expectations could lead to a revision in the outlook to negative. Achieving a positive outlook is unlikely in the near term because of the company's narrow business focus and related business risks. Over the intermediate term, a positive outlook is possible if Getty further strengthens its business profile and demonstrates a firm commitment to conservative financial policies. GS CONSULTING: Ch. 7 Trustee Taps Thorne Grodnik as Gen. Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave Joseph D. Bradley, Esq., the chapter 7 Trustee overseeing the liquidation of GS Consulting Services, Inc. and its debtor affiliates' estates, permission to employ Thorne Grodnik, LLP as his general counsel. Thorne Grodnik will: a) prepare on behalf of the chapter 7 Trustee all necessary applications, answers, orders, reports, adversary pleadings and other papers necessary in the Debtors chapter 7 cases; and b) assist the chapter 7 Trustee in the prosecution and defense of the legal proceedings for the Debtors' estates; and c) perform all other legal services to the chapter 7 Trustee that are necessary for the Debtors' chapter 7 liquidation proceedings. J. Richard Ransel, Esq., a Member of Thorne Grodnik, is one of the lead attorneys for the Trustee. Mr. Ransel charges $250 per hour for his services. Mr. Bradley will employ Thorne Grodnik under a general retainer. Thorne Grodnik had not yet submitted its retainer amount to the chapter 7 Trustee when the Trustee filed his request with the Court to employ the Firm as his general counsel. To the best of the chapter 7 Trustee' knowledge, Thorne Grodnik is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in South Bend, Indiana, GS Consulting Services, Inc., provided health-care claims processing and consulting for major Northern Indiana employers. The Company and its debtor- affiliates filed for chapter 7 liquidation proceeding on May 23, 2005 (Bankr. D. Del. Case No. 05-11464). The Debtors' chapter 7 cases were transferred to the U.S. Bankruptcy Court for the Northern District of Indiana on June 28, 2005 (Bankr. N.D. Ind. Case No. 05-33646). Christopher M. Winter, Esq., at Duane Morris LLP represents the Debtors. When the Debtors filed for a chapter 7 liquidation proceeding, it estimated assets of $1 million to $10 million and debts of $10 million to $50 million. Joseph D. Bradley, Esq., is the chapter 7 Trustee for the Debtors' estates. HARVEST OPERATIONS: Moody's Confirms $250 Million Notes' B3 Rating ------------------------------------------------------------------ Moody's confirmed the B2 Corporate Family Rating (formerly the senior implied rating) and the B3 notes rating on Harvest Operations Corp. US$250 million of 7-year senior unsecured notes. The outlook is stable. The ratings confirmation completes the ratings review commenced June 28, 2005. Moody's confirmed the ratings but will monitor the company's ability to avoid re-leveraging given the amount of cash flow it can generate relative to the capex and distributions expected throughout the rest of the year. The confirmation of the existing ratings reflects the company's issuance of C$175 million (US$140 million) of new common units along with CAD $75 million (US$60 million) of subordinated convertible debentures to fund the announced C$260 million (US$210 million) acquisition of properties in Northeast British Columbia. The equity and convertible debenture offerings are expected to close in conjunction with the acquisition on August 2, 2005. Moody's also affirmed the company's Speculative Grade Liquidity rating of SGL-3. Upon the announcement of the acquisition, Moody's placed Harvest's ratings under review for possible downgrade as the company indicated that the acquisition was to be all-debt funded, at least initially. An all debt funded acquisition would have pushed leverage (debt/proven developed reserves) to about C$9.07/boe (US$7.34/boe), which would have been unsustainable for the current ratings. However, with the subsequent equity offering, the company's leverage will be approximately C$6.80/boe, (US $5.44/boe) including the convertible notes offering. This level of leverage is actually lower than the reported Q1'05 leverage of C$6.88/boe and continues a trend of lower leverage over the past three quarters since it levered up to C$8.11/boe in Q3'04. The stable outlook reflects the expectation that the company will maintain leverage below C$ 7.00/boe and that material future acquisitions will be amply funded with equity. However, a negative outlook and/or ratings downgrade would be considered: * if leverage rises above C$7.00/boe (US $5.60/boe) given the unit distributions that need to be made; * if the company cannot mount sustainable sequential quarter organic production gains; or * if capital productivity deteriorates as measured by all- sources finding and development costs materially rising above the C$12.76/boe (US $10.20/boe) reported for year-end 2004. A positive outlook would require: * additional scale in its proven developed reserve base at competitive F&D costs that results in enhanced durability and diversification of the existing asset portfolio and is substantially equity funded; * sustainable quarterly production gains; and * sustainable leverage on the PD reserve base around C$5.00/boe. The B2 Corporate Family Rating reflects: * the increased scale of the company's reserve base with the addition of a new core area; * expected improvement in price realizations with new hedges and the higher realizations of the new properties; * improved cash flow cover of its reserve replacement costs under still very supportive commodity prices; * a high degree of ownership (21%) by the Chairman and his demonstrated willingness and capacity to invest new second secured funding for acquisitions; and * the Chairman's prior participation in building and successfully selling an exploration and production company. The ratings are restrained by: * still full leverage; * declining organic production trends prior to the acquisition; * rising total full cycle costs; * still low price realizations of its heavy oil production and hedges put in place last year; * the unit trust structure which entails significant cash distributions to unit holders; * a relatively short proven developed reserve life; and * the reliance on acquisitions to fuel growth that is typical under the unit trust business model. The SGL-3 rating reflects the cash flow and outlook supported by still strong commodity prices and the additional production from the acquired properties; significant availability under the secured revolving credit facility and the ample room under the facility's maintenance covenants over the next twelve months. However, the SGL-3 rating is tempered by the high amount of planned capex and unit distributions that could utilize all projected cash flow and may even require additional revolver funding if: * production levels are disappointing; * the exposure of the revolver availability to commodity price declines; and * the encumbrance of the asset base by the revolver lenders. Moody's confirmed these ratings for HOC: * B2 - Corporate Family Rating (formerly the senior implied rating) * B3 - $250 million 7.875% senior unsecured notes due 2011 While the acquisition provides additional production and potential growth opportunities, the existing property base had been showing declining production trends. After closing the Encana acquisition in September 2004, Harvest's quarterly production has declined, with Q1'05 seeing a 7% drop from Q4'04 and Q2'05 is not likely to be any better. The production decline is due to the relatively short lived properties in the core asset base and the limited ability to complete some needed workovers in some flooded areas of Alberta. From a cost perspective, the company's total full cycle costs have been rising. Though still amply covered despite the wide differentials, they have been on an increasing trend since Q1'04. For Q1'05, total full cycle costs were C$28.72/boe (US $22.98/boe), which consists of a high C$10.35/boe (US $8.28/boe) for lease operating expenses, C$2.07/boe (US $1.65/boe) for G&A expenses, and C$3.54/boe (US $2.83/boe) of interest expense, reflecting higher debt levels. The full cycle costs also include C$12.76/boe (US $10.18/boe) of all sources F&D. which increased from the prior year as 2004, one- year all sources F&D rose to C$15.87/boe from C$13.39 in 2003. With this acquisition, Moody's expects the unit costs to be higher given the interest expense tied to new convertible debentures, though Harvest will have the option to issue units in place of cash interest expense on those new convertibles. LOE is expected to also be higher in Q2'05 due to flooding in Alberta that resulted in delayed workovers and resulted in some production outages. Given the price paid for the acquired properties, we expect that 2005 all-sources F&D will also be higher that 2004. The acquisition consists of 14.3 mmboe of total proved reserves including 12.3 mmboe of proved producing reserves, and net daily production of approximately 4,160 mboe. Based on the $260 million announced price (before any adjustments), the price per daily boe of production, net of royalties, is C$62,500/boe (US$50,625/boe), and a high C$21.20/boe (US$17.17/boe) of proved developed reserves also net of royalties. Fully loaded for the engineered development capex to bring the proven undeveloped reserves to the producing stage, the purchase price is C$22.65/boe (US$18.35/boe). The acquired properties are located in N.E. British Columbia, and consist of sweet medium oil, and therefore has historically had a narrower differential than most of the company's existing oil production which should help overall realizations. The acquisition offers the company diversification of the existing production and reserve base, however, it is a new area and therefore could have a bit of a learning curve before meeting management's expectations. The notes remain one rating notch below the Corporate Family Rating due to substantial existing and expected effective subordination to senior secured bank debt. However, asset coverage is also cushioned to a degree by C$85 million of subordinated debt junior to the rated notes. Moody's expects growth to be driven by acquisitions funded by HTE's C$400 million of committed secured bank revolver. The SGL-3 rating is based on Moody's expectation of Harvest's EBITDA ranging between C$250 million and C$300 million which combined with the secured revolver, should be sufficient to cover C$120 million of planned capex, C$32 million of interest expense, about C$100 million to C$150 million of unit distributions (depending on the DRIP and Premium DRIP participation levels) and working capital needs. While there is expected to be ample availability under the company's new senior secured revolver that will be in place at close of the acquisition. Harvest will have a C$400 million borrowing base with approximately $107 million drawn, leaving the company with ample external liquidity. The new facility will have a one-year maturity, and will have the same maintenance covenants, with an EBITDA/interest minimum requirement of 3.5x. Given the earnings and cash flow outlook over the next year, Harvest should be able to easily meet this test. The facility will also have a working capital measurement which will either add to or subtract from availability depending on whether there is a working capital surplus or deficit. In addition, the facility is secured by essentially all of the assets of the Trust, limiting alternate sources of liquidity. Harvest Operations Corp. is a wholly-owned subsidiary of Harvest Energy Trust which is headquartered in Calgary, Alberta, Canada. IKON OFFICE: Earns $24.4 Million of Net Income in Third Quarter --------------------------------------------------------------- IKON Office Solutions (NYSE:IKN), the world's largest independent channel for document management systems and services, reported results for the third fiscal quarter ended June 30, 2005. Net income for the third quarter 2005 is $24.4 million, compared to an $8.3 million net income for the same period last year. Total revenues for the third quarter were $1.1 billion, which represents a decline of 4% compared to the same period a year ago, primarily due to the transition out of captive leasing in North America. Targeted revenues, which represent 98% of total revenues and exclude revenues from U.S. and Canadian lease financing and deemphasized technology hardware, declined by 1% versus the prior year. Foreign currency translation provided a 0.8% benefit to total revenues. "We made significant progress on a number of our key initiatives during the third quarter," stated Matthew J. Espe, IKON's chairman and chief executive officer. "We grew digital office placements in both the black and white and color equipment segments. Customer Services improved sequentially, driven by increased copy volumes and a more favorable mix of color. In addition, Europe had another strong quarter of revenue and earnings growth." "While our core business continues to grow, we are focused on cost and expense management in a market where average selling prices and margins remain under pressure," continued Mr. Espe. "The ongoing reductions in selling and administrative expenses, as well as the restructuring actions taken earlier in the year, continue to benefit our bottom line. Other operational improvements in the quarter included the development of a strategy to improve billing quality, based upon the completion of our billing review, and additional headcount and facilities reductions. In addition, we closed on the sale of substantially all of our operations in France shortly after the quarter end. We will continue to serve our pan-European customers through an ongoing presence in Paris in a more cost-effective manner." Financial Analysis Net Sales of $487 million, which includes the sale of copier/printer multifunction equipment and supplies, decreased 5% from the third quarter of fiscal 2004. Targeted Net Sales, which excludes deemphasized technology hardware revenues and represents approximately 99% of Net Sales, decreased 3%, including a decline in Equipment revenues of 2%. The equipment decline was primarily driven by lower average selling prices and the continued shift from the light production to the office equipment segment, partially offset by an 8% increase in color. Gross profit margin on Net Sales declined to 24.6% from 28.5%, due primarily to competitive pricing, aggressive promotions, and a higher percentage of state and local government business. Services revenues of $586 million, which includes Customer Services revenues from the servicing of copier/printer equipment, on- and off-site Managed Services, Professional Services, rentals and other fees, decreased 0.3% from the third quarter of fiscal 2004. The decline in overall Services revenues was driven by a 2% decrease in Managed Services, partially offset by 0.2% growth in Customer Services, which represents approximately 61% of Services revenues. The modest growth in Customer Services resulted from increased copy volumes due to strength in digital and color equipment. The decline in Managed Services was driven by a decline in Legal Document Services, due to site closings in the second quarter designed to improve profitability, partially offset by growth in on-site Managed Services. Gross profit margin on Services increased to 42.8% from 42.1% a year ago, driven by a 2 point increase in Customer Services margins due to a lower cost structure as a result of the restructuring actions taken in the second quarter of fiscal 2005. Finance Income of $25 million declined 40% from the prior year due to the Company's transition out of captive lease financing in North America. Most of the finance income from the retained U.S. portfolio is expected to run off by fiscal 2007. Gross profit margin on finance income increased to 75.3% for the third quarter from 72.6% for the same period a year ago. Selling and Administrative Expenses declined $24 million from the third quarter of the prior year, due to aggressive expense management and lower administrative expenses resulting from the benefit of restructuring actions taken in the second quarter. As a result of the reduction in administrative expenses, selling and administrative expenses as a percentage of revenues declined to 30.9% from 31.7% in the third quarter a year ago. Balance Sheet and Liquidity Unrestricted cash was $289 million as of June 30, 2005, with cash used for continuing operations in the third quarter totaling approximately $34 million compared to $444 million for the third quarter of fiscal 2004. Capital expenditures on operating rentals and property and equipment, net of proceeds, totaled $10 million for the quarter compared to $19 million for the same period a year ago. The total debt to capital ratio decreased to 43% at the end of this quarter from 50% as of September 30, 2004. Cumulative share repurchases under the Company's fiscal 2004 Board authorization remain at 9.8 million shares, or $112 million, leaving $138 million remaining under the share repurchase program, subject to the terms of the Company's Credit Facility. The Company expects its fourth quarter repurchase activity to be above recent trends. IKON's Board of Directors approved the Company's regular quarterly cash dividend of $0.04 per common share, payable on Sept. 10, 2005, to holders of record at the close of business on August 22, 2005. Outlook "As the aggressive actions we are taking to grow our volumes will affect margins in the near term, for fiscal 2005 we now expect earnings from continuing operations to be in the range of $0.60 to $0.63, excluding any charges we may take to improve our business and any actions regarding stock option expensing," said Mr. Espe. "We will continue our diligent focus on cost and expense control to offset pricing pressures in an effort to achieve an operating margin greater than 5% in fiscal 2006, which would put us on track for our goal of 6% or greater in fiscal 2007. As we drive improvements in our sales coverage model, we are taking steps to align our cost structure and selling and administrative expenses to ensure we meet these goals." IKON Office Solutions, Inc. -- http://www.ikon.com/-- the world's largest independent channel for copier, printer and MFP technologies, delivers integrated document management solutions and systems, enabling customers worldwide to improve document workflow and increase efficiency. IKON integrates best-in-class systems from leading manufacturers, such as Canon, Ricoh, Konica Minolta, EFI and HP, and document management software from companies like Captaris, EMC (Documentum), Kofax and others, to deliver tailored, high-value solutions implemented and supported by its global services organization--IKON Enterprise Services. With fiscal 2004 revenues of $4.6 billion, IKON has approximately 27,000 employees in 500 locations throughout North America and Western Europe. * * * As reported in the Troubled Company Reporter on June 10, 2005, Moody's Investors Service changed the ratings outlook for IKON Office Solutions (senior implied at Ba2) to negative from stable. The change in outlook to negative reflects: (1) weak revenue patterns and strong pricing competition that continues to pressure margins, which in turn is necessitating cost reduction efforts and a streamlining of certain business activities; and (2) an accounting review of its US trade receivable balances that has delayed its ability to file its most recent financial statements. The rating action reflects Moody's expectation that revenue growth will remain challenging and that competitive pricing and/or product mix may continue to exert pressure on operating profitability over the intermediate term. IKON's revenue has declined between 1% and 7% over each of the last four quarters although the decline has been less if revenues are normalized for discontinued or deemphasized operations. IMPERO INC: Wants to Sell Obsolete Inventory to Retail Customers ---------------------------------------------------------------- Impero, Inc., dba Quest Redline Products, asks the U.S. Bankruptcy Court for the Northern District of Illinois for authority to sell its obsolete, outdated, discontinued or returned merchandise to retail customers. In its efforts to maintain a current inventory of new and desirable products for its retail customers, the Debtor wants to sell the obsolete merchandise at discounted rates free and clear of all liens, claims and interests. The obsolete merchandise serves as collateral under a loan agreement with the Debtor's lender, LaSalle Business Credit, LLC. The Debtor assures the Court that any sale of the merchandise will be subject to LaSalle's approval. Because it is impracticable for the Debtor to assign any specific, proposed discount rate to the merchandise, the Debtor says it will use its business judgment to fix the price on case-by-case basis. The Debtor has adopted uniform terms and conditions to govern the postpetition sale of its obsolete merchandise. These terms will establish payment and shipping terms for postpetition sales. Accordingly, the Debtor seeks to implement the postpetition purchase terms that will facilitate the prompt payment of any goods sold during its bankruptcy case. Headquartered in Chicago, Illinois, Impero, Inc., manufactures Neon Ultrabrights -- small, ultra bright neon tubes. The Company filed for chapter 11 protection on July 12, 2005 (Bankr. N.D. Ill. Case No. 05-27502). Ann E. Stockman, Esq., and Matthew A. Swanson, Esq., at Shaw, Gussis, Fishman, Glantz, Wolfson & Towbin LLC represent the debtor. When the Company filed for protection from its creditors, it estimated $1 million to $10 million in assets and $10 million to $50 million in debts. IMPERO INC: Wants to Walk Away from Burdensome Executory Contracts ------------------------------------------------------------------ Impero, Inc., dba Quest Redline Products, asks the U.S. Bankruptcy Court for the Northern District of Illinois for permission to reject some executory contracts with its customers. The Debtor believes that these customer contracts no longer provide any benefit to the Debtor or its estate. Under some of the contracts, the Debtor is compelled to issue rebates and credits and may be subject to certain claims on account of goods shipped to the Debtor's customers subsequent to the petition date. Other contracts include extended payment terms that are not conducive to the timely sale of the Debtor's inventory in bankruptcy. For these reasons, rejecting the contracts will help the Debtor to eliminate any prepetition restrictions on the Debtor's postpetition sales. Headquartered in Chicago, Illinois, Impero, Inc., manufactures Neon Ultrabrights -- small, ultra bright neon tubes. The Company filed for chapter 11 protection on July 12, 2005 (Bankr. N.D. Ill. Case No. 05-27502). Ann E. Stockman, Esq., and Matthew A. Swanson, Esq., at Shaw, Gussis, Fishman, Glantz, Wolfson & Towbin LLC represent the debtor. When the Company filed for protection from its creditors, it estimated $1 million to $10 million in assets and $10 million to $50 million in debts. INTERSTATE BAKERIES: Charles Sullivan Holds $4.2M Allowed Claim --------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Missouri approved a claims settlement agreement between the Interstate Bakeries Corporation Debtors and Charles A. Sullivan. Mr. Sullivan will receive an allowed general unsecured claim against the Debtors for $4,215,037, to be treated as a prepetition, general unsecured claim. However, the Debtors will withhold or deduct all necessary federal, state, and local income, payroll, employment or other tax obligations that they may have in connection with the satisfaction of Mr. Sullivan's claim. As reported in the Troubled Company Reporter on July 11, 2005, Mr. Sullivan served as director of Interstate Bakeries Corporation and several related entities, and was also Chief Executive Officer until September 30, 2002. During his tenure as CEO, Mr. Sullivan participated in the IBC Supplemental Executive Retirement Plan and the Interstate Brands Corporation Amended and Restated 1993 Non- Qualified Deferred Compensation Plan. However, both Plans were terminated in November 2004. Mr. Sullivan has since retired as CEO. Since stepping down as CEO, Mr. Sullivan also served as a consultant to Interstate Bakeries and Interstate Brands Corporation pursuant to an October 2, 2002 Consulting Agreement by and among Interstate Bakeries, Interstate Brands, Interstate Brands West Corporation and Mr. Sullivan, as amended on June 24, 2004. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Court Okays $720K Sta. Maria Property Sale --------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Missouri gave Interstate Bakeries Corporation and its debtor-affiliates permission to sell a parcel of real property at 1790 West Betteravia, in Santa Maria, California, for $720,000 to North Shore Holdings, Ltd. The Santa Maria Property includes an approximately 2,250-square foot building that the Debtors are not currently using. The salient terms of the Debtors' Asset Purchase Agreement with North Shore are: * North Shore has deposited $50,100 in an escrow account. The Deposit will be held by the escrow agent until the Debtors satisfy all conditions to closing; * The sale of the Santa Maria Property will include all of the Debtors' right, title and interest in the Property; * The closing will occur within five business days of the Court's approval of the Asset Purchase Agreement, subject to the payment of the Purchase Price; * The Debtors will deliver good and marketable fee simple title to the Land and Improvements, free and clear of liens, other than Permitted Exceptions; and * The Santa Maria Property is being sold "as-is, where-is," with no representations or warranties, reasonable wear and tear and casualty and condemnation excepted. The Debtors will pay Hilco $39,600 -- 5.5% of the Purchase Price -- for its marketing and disposition services. The Debtors believe that the sale of Santa Maria Property to North Shore is the best way to maximize the value of the Property, reduce indebtedness, improve liquidity to facilitate the formulation and ultimate confirmation of a reorganization plan, and yield the highest possible returns to creditors. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 215/945-7000) JP MORGAN: Fitch Puts BB+ Rating on $15.10MM Private Class Certs. ----------------------------------------------------------------- Fitch Ratings has rated the J.P. Morgan Mortgage Acquisition Corp. 2005-OPT1, asset-backed pass-through certificates, series 2005- OPT1, which closed on July 26, 2005: -- $1.18 billion classes A-1 through A-4 'AAA'; -- $60.40 million class M-1 'AA+'; -- $46.81 million class M-2 'AA'; -- $29.45 million class M-3 'AA-'; -- $27.18 million class M-4 'A+'; -- $24.92 million class M-5 'A'; -- $23.41 million class M-6 'A-'; -- $21.14 million class M-7 'BBB+'; -- $18.88 million class M-8 'BBB'; -- $15.10 million class M-9 'BBB-'; -- $15.10 million privately-offered class M-10 'BB+'. The 'AAA' rating on the senior certificates reflects the 21.90% total credit enhancement provided by the 4.00% class M-1, the 3.10% class M-2, the 1.95% class M-3, the 1.80% class M-4, the 1.65% class M-5, the 1.55% class M-6, the 1.40% class M-7, the 1.25% class M-8, the 1.00% M-9, the 1.00% privately offered class M-10 and the initial and target overcollateralization of 3.20%. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the quality of the loans, the integrity of the transaction's legal structure as well as the capabilities of Option One Mortgage Corp. as servicer, U.S. Bank National Association as trustee and JPMorgan Chase Bank as Securities Administrator. The certificates are supported by two collateral groups. Group I Mortgage Loans consist of fixed-rate and adjustable-rate, first and second lien mortgage loans with principle balances that conform to Fannie Mae and Freddie Mac loan limits. The mortgage loans have a cut-off date pool balance of $784,698,105. Approximately 19.46% of the mortgage loans are fixed-rate mortgage loans and 80.54% are adjustable-rate mortgage loans. The weighted average loan rate is approximately 7.300%. The weighted average remaining term to maturity is 356 months. The average principal balance of the loans is approximately $151,985. The weighted average original loan-to-value ratio is 79.10%. The properties are primarily located in California (15.11%), Massachusetts (8.05%) and Florida (7.79%). Group II Mortgage Loans consist of fixed-rate and adjustable-rate, first and second lien mortgage loans with principle balances that may or may not conform to Fannie Mae and Freddie Mac loan limits. The mortgage loans have a cut-off date pool balance of $725,397,207. Approximately 13.18% of the mortgage loans are fixed-rate mortgage loans and 86.82% are adjustable-rate mortgage loans. The weighted average loan rate is approximately 7.336%. The WAM is 357 months. The average principal balance of the loans is approximately $237,524. The weighted average OLTV ratio is 78.37%. The properties are primarily located in California (26.53%), New York (11.67%) and Florida (10.05%). For federal income tax purposes, multiple real estate mortgage investment conduit elections will be made with respect to the trust estate. Option One was incorporated in 1992, and began originating and servicing subprime loans in February 1993. Option One is a subsidiary of Block Financial, which is in turn a subsidiary of H & R Block, Inc. JP MORGAN: Fitch Rates $2.9MM Private Class Certs at BB ------------------------------------------------------- J.P. Morgan Mortgage Trust $1.196 billion mortgage pass-through certificates, series 2005-A5, are rated by Fitch Ratings: Aggregate Pool I -- Classes 1-A-1, 1-A-2, 2-A-1, 2-A-2, 2-A-3, 3-A-1, 3-A-2, 3-A-3, 3-A-4, 4-A-1, 5-A-1 and A-R, senior classes, ($820,303,300) 'AAA'; -- Class I-B-1 certificates ($13,601,200) 'AA'; -- Class I-B-2 certificates ($5,950,300) 'A'; -- Class I-B-3 certificates ($3,400,200) 'BBB'; -- Privately offered class I-B-4 certificates ($2,975,100) 'BB'; -- Privately offered class I-B-5 certificates ($2,125,100) 'B'; -- Privately offered class I-B-6 certificates ($1,700,381) are not rated. Pool 6 -- T-A-1 senior class ($333,748,100) 'AAA', -- Class T-B-1 certificates ($5,346,900) 'AA', -- Class T-B-2 certificates ($2,069,700) 'A', -- Class T-B-3 certificates ($1,379,800) 'BBB', -- Privately offered class T-B-4 certificates ($1,034,800) 'BB', -- Privately offered class T-B-5 certificates ($689,900) 'B', -- Privately offered class T-B-6 certificates ($690,141) are not rated. The 'AAA' rating on the Aggregate Pool I senior classes reflects the 3.50% subordination provided by the 1.60% class I-B-1, the 0.70% class I-B-2, the 0.40% class I-B-3, the 0.35% privately offered class I-B-4, the 0.25% privately offered class I-B-5 and the 0.20% privately offered class I-B-6 certificates. The 'AAA' rating on the Pool 6 senior class reflects the 3.25% subordination provided by the 1.45% class T-B-1, the 0.70% class T-B-2, the 0.40% class T-B-3, the 0.30% privately offered class T- B-4, the 0.20% privately offered class T-A-5 and the 0.20% privately offered class T-A-6 certificates. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, the primary servicing capabilities of PHH Mortgage Corporation and J.P. Morgan Chase Bank, N.A. (both rated 'RPS1' by Fitch), and the master servicing capabilities of Wells Fargo Bank, N.A., (rated 'RMS1' by Fitch). As of the cut-off date (July 1st, 2005) the assets of the trust consisted of six mortgage pools. These pools have further been aggregated into two groups, Aggregate Pool I, consisting of mortgage pools 1 through 5; and Pool 6. Aggregate Pool I and Pool 6 have their respective subordination. Wachovia Bank, N.A. will serve as trustee. J.P. Morgan Acceptance Corporation I, a special purpose corporation, deposited the loans in the trust that issued the certificates. For federal income tax purposes, the trustee will elect to treat all or portion of the assets of the trust funds as comprising multiple real estate mortgage investment conduits. KAISER ALUMINUM: Trustee Wants Ernst & Young's Retention Denied --------------------------------------------------------------- As previously reported, Kaiser Aluminum Corporation and its debtor-affiliates sought the U.S. Bankruptcy Court for the District of Delaware's authority to employ Ernst & Young to provide them with the Tax Services, nunc pro tunc to Mar. 1, 2005. Founded in 1989, Ernst & Young is a global services firm with over 100,000 professionals in 140 countries who provide a range of advisory services in the areas of accounting, auditing, tax compliance, business planning and security risk technology, transaction advisory and human capital services. The Debtors believe that Ernst & Young has the requisite expertise and ability to perform the Tax Services expeditiously. U.S. Trustee Objects Kelly Beaudin Stapleton, the United States Trustee for Region 3, asks the Court to deny the Debtors' request on these grounds: (a) The nunc pro tunc request does not meet the standards set out in relevant Third Circuit law. (b) The services to be performed by Ernst & Young LLP appear to be duplicative of those already performed by Deloitte Tax LLP, and thus, Ernst & Young's retention is "unnecessary." (c) There is no indication of the standard of review for Ernst & Young's fees. (d) Ernst & Young has connections with numerous parties-in- interest in the Debtors' cases with no explanations as to the nature of those representations. The U.S. Trustee reminds the Court that in In Re Arkansas, 798 F. 2d at 649-50, the United States Court of Appeals for the Third Circuit has unequivocally stated that nunc pro tunc employments require "extraordinary circumstances" outside of the applicant's control, and not mere "oversight" or "inadvertence." The U.S. Trustee argues that the Debtors' justification that they requested Ernst & Young to commence tax compliance services prior to the approval of its retention evinces no "extraordinary circumstances," and thus, is not adequate to support a nunc pro tunc request of March 1, 2005, which is over 100 days before the Application was filed on June 21, 2005. The Debtors indicated that Ernst & Young will prepare and file tax returns and perform tax compliance services for the U.S.-based debtors, while Delloitte Tax and Jones Day Reavis & Pogue will continue to provide general tax planning advice and tax compliance services and consulting regarding restructuring matters and tax strategies. "If Ernst & Young is really performing different services from Deloitte Tax, Jones Day, or other professionals of the Debtors, then the Debtors must specifically identify how each professional's services differ and explain why one of the other retained professionals cannot perform these services," the U.S. Trustee says. In addition, the U.S. Trustee notes that the Application is silent on the standard review for those fees when fee applications are filed. The U.S. Trustee believes it is not appropriate for the fees to be pre-approved under Section 328 of the Bankruptcy Code when it is exactly unclear what Ernst & Young is doing. The U.S. Trustee wants the fee applications to be detailed enough to allow the appropriate parties and the Court to conduct a meaningful reasonableness review. While the U.S. Trustee is comforted by the fact that those "current" or "prior" connections are unrelated to the Debtors, she ascertains there is still more information that must be gleaned from those connections before it can be determined that Ernst & Young does not have a disabling conflict of interest. Because the Application was filed on shortened notice and because Ernst & Young has connections to many significant parties in the Debtors' cases, the U.S. Trustee has not been able to conduct the appropriate due diligence regarding those connections. The U.S. Trustee wants ruling on the Application deferred until the disputed factors are further researched. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 73; Bankruptcy Creditors' Service, Inc., 215/945-7000) KELLWOOD COMPANY: Moody's Pares $270 Million Notes' Rating to Ba2 ----------------------------------------------------------------- Moody's Investors Service has downgraded Kellwood Company's corporate family rating and senior unsecured rating to Ba2 from Ba1, and revised the outlook to negative from stable. The downgrades reflect: * Kellwood's repeated difficulties experienced in launching new products; * ongoing weakness in its key dress business; and * expectation of continued weakness in operating results indicated by repeated restructuring charges and earnings surprises. The ratings continue to be supported by the company's diversified brands and extensive distribution. These ratings were downgraded: * Corporate Family rating (formerly senior implied rating) to Ba2 from Ba1, * $270 million senior unsecured notes to Ba2 from Ba1, The outlook is negative. In addition to ongoing weakness in the dress business, two key product lines have performed below expectations. Kellwood has indicated that spring sell-through of the Calvin Klein and the Oscar de la Renta women's sportswear lines were below expectations. Significant discounting was required in the Calvin Klein business and the performance of the line is not expected to improve until the spring of 2006, at the earliest. The Oscar de la Renta women's line, launched in the spring of 2005 at higher price points in the moderate category, has also been a disappointment and has been pulled from the market. The brand will not be relaunched until the fall of 2006. Kellwood has announced a significant restructuring program to eliminate weak business units and write down the intangible assets associated with its dress business. The restructuring is expected to generate primarily non-cash after-tax charges of approximately $155 million. As part of the proposed restructuring, the company is expecting to shut down or sell its private label menswear, Kellwood New England, and Kellwood Intimate Apparel segments. At the same time Kellwood is working to reposition the Oscar de la Renta line, improve the performance of its Calvin Klein women's sportswear, and revitalize its overall dress business. The company is also planning to use up to $75 million of cash to repurchase a portion of its outstanding common equity. The restructuring will not consume significant levels of cash or increase debt balances, but sales levels, profit margins and debt metrics are expected to remain depressed at levels which are inappropriate for the prior rating levels. Moody's projects that fiscal 2005 interest coverage, as measured by EBIT/interest, will be approximately three times, debt will be approximately four times EBITDA, and free cash flow (cash flow from operations minus capex and dividends) will be approximately 25% of the outstanding debt balance. Ratings will continue to be supported by the expectation that Kellwood will continue to generate satisfactory free cash flow despite the announced restructuring and operating difficulties, and by its diverse product offering and customer base. The ratings are constrained by: * the continued sales decline in the dress business; * the continued weakness in popular to moderate apparel; and * the increased fashion risk as the company increases its reliance on better apparel. Kellwood's ample liquidity will be boosted by the announced repatriation of approximately $150 million in cash from its Asian subsidiary. To implement the planned repatriation of cash, Kellwood is expected to borrow approximately $50 million at its Kellwood Asia subsidiary. Pursuant to Moody's methodology for evaluating subsidiary borrowings to execute repatriations, the rating agency does not expect the additional borrowing to have a material impact on its corporate family rating or the notching of its rated debt. Kellwood is expected to use the repatriated cash for various corporate purposes. Liquidity will be high through the end of the 2005 fiscal year as working capital will be released from the discontinued operations. Moody's expects that free cash flow will fall to levels that reflect Kellwood's smaller scale in the 2006 fiscal year. The negative outlook reflects: * Moody's concern that the company's operating margin may remain below 5% for a prolonged period; * that the dress business may deteriorate at a faster than expected rate; and * that Kellwood will continue to find its entry into the better women's sportswear market to be difficult. The negative outlook also reflects Moody's concern that excess free cash flow will be applied towards dividends and stock repurchases that go beyond the planned $75 million buyback announced as part of the restructuring. The outlook could be stabilized if Kellwood's sales level out or show growth, if operating margins improve and are sustained at levels above 5.5% (which would indicate improved levels of full- priced sales), or if debt/EBITDA falls below 3.5x. Negative rating action could result from a continued deterioration in Kellwood's ongoing operations that results in a significant loss of sales or further erosion in operating margin. The ratings may also be cut if debt/EBITDA exceeds 4.0x for a sustained period, if interest coverage falls below 2.75x, or if FFO/debt falls below 10% for a sustained period. Kellwood designs, sources, distributes, and markets women's and men's apparel. The company is the largest marketer of women's dresses in the United States and its Smart Shirts subsidiary is a leading manufacturer of shirts and blouses at a number of facilities in the Far East. Fiscal 2004 sales of $2.56 billion generated approximately $172.2 million in operating income for a 5.2% reported EBIT margin. Sales grew 8.9% in 2004 as the company acquired additional brands and launch its Calvin Klein womenswear line. The Calvin Klein careerwear, launched in the fall of 2004 posted disappointing results due to its pricing and styling. The casual collection, launched in the spring of 2005 was also priced too aggressively and required significant markdowns to sell. Kellwood, based in St. Louis, Missouri, designs, sources, and markets women's sportswear and dresses under a multitude of brand names including: * Calvin Klein, * Sag Harbor, and * XOXO. The company's menswear division is a major manufacturer of both private label and branded woven and knit shirts. Fiscal 2004 sales were $2.56 billion and reported operating income was $132.5 million. LA MODE: Case Summary & Largest Unsecured Creditors --------------------------------------------------- Debtor: La Mode Inc. 13301 South Main Street Los Angeles, California 90061 Bankruptcy Case No.: 05-26740 Type of Business: The Debtor is a garment manufacturer. The Debtor shuttered its operations in Saipan on April 25, 2005, and 121 former workers filed suit in U.S. District Court. See http://ResearchArchives.com/t/s?9b Chapter 7 Petition Date: July 25, 2005 Court: Central District of California (Los Angeles) Judge: T. Albert Debtor's Counsel: David W. Levene, Esq. Levene, Neale, Bender & Rankin LLP 1801 Avenue of Stars, Suite 1120 Los Angeles, California 90067 Tel: (310) 229-1234 Total Assets: $37,334 Total Debts: $1,915,724 A full-text copy of the 33-page list of La Mode Inc.'s unsecured nonpriority creditors is available for a fee at http://www.researcharchives.com/bin/download?id=050729230755 MAGELLAN HEALTH: Bankruptcy Professionals Get $20,358,431 in Fees ----------------------------------------------------------------- Reorganized Magellan Health Services, Inc., and its debtor- affiliates delivered their amended professional fees' closing report to the U.S. Bankruptcy Court for the Southern District of New York, disclosing: Professional Designation Fees ------------ ----------- ---- Weil, Gotshal & Manges LLP General Counsel $3,508,057 Gleacher Partners LLC Financial Advisors $6,691,493 PricewaterhouseCoopers LLP Accountant, Auditor $ 884,401 Tax Advisor Ernst & Young LLP Independent Auditors $3,838,369 and Tax Advisors Accenture LLP Operations Consultants $1,572,458 Buchanan Ingersoll P.C. Ordinary Course Prof. $ 53,715 Dickstein Shapiro Morin Ordinary Course Prof. $ 79,616 & Oshinsky LLP Akin Gump Strauss Hauer Counsel for the $1,566,761 & Feld LLP Official Committee of Unsecured Creditors Houlihan Lokey Howard Financial Advisor for $1,833,926 & Zukin Capital the Official Committee of Unsecured Creditors Morrison & Foerster LLP Counsel for Bank $ 205,270 Debt Holders Nightingale & Associates LLC Financial Advisor $ 124,365 for Bank Debt Holders ---------- Total $20,358,431 Magellan Health Services is headquartered in Columbia, Maryland, and is the leading behavioral managed healthcare organization in the United States. Its customers include health plans, corporations and government agencies. The Company filed for chapter 11 protection on March 11, 2003, and confirmed its Third Amended Plan on October 8, 2003. Under the Third Amended Plan, nearly $600 million of debt dropped from the Company's balance sheet and Onex Corporation invested more than $100 million in new equity. MERIDIAN AUTOMOTIVE: Wants Annual Incentive Program Approved ------------------------------------------------------------ To further align the interests of their management employees with their established financial goals, Meridian Automotive Systems, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve an Annual Incentive Program that is tied to the achievement of a financial benchmark for fiscal year 2005. The salient features of the Annual Incentive Program are: (a) The Debtors' Chief Executive Officer and the President have the discretion to select among eligible employees to participate in the AIP; (b) To be eligible to participate in the AIP, a current employee must: -- be in a salaried management position; -- have completed one year of service on or before December 31, 2004; and -- have been actively at work on that date; (c) AIP Participants will be eligible for bonus payments, at the discretion of the CEO and President, if the Debtors reach the established financial benchmark; (d) For fiscal year 2005, the financial target that must be met for any payments to be made under the AIP is $75 million of consolidated earnings before interest, taxes, depreciation, amortization, and restructuring costs and before payments under the AIP; (e) The Debtors' projections for fiscal year 2005 call for an EBITDAR of $69.9 million. However, only if the Debtors achieve the Performance Target of at least $75 million will the CEO and President distribute bonus payments from a bonus pool of $1.0 million to AIP Participants in recognition of their individual contributions to the Debtors' achievement of the Performance Target; (f) The AIP is restricted in that any individual cannot receive more than 10% of the AIP bonus pool. The CEO and President have the sole discretion to determine which AIP Participants will receive bonuses and the amount of each individual AIP Participant's bonus; and (g) The maximum aggregate cost of the AIP would be $1.0 million, but payments will only be made if the Debtors demonstrate their ability to pay through successful financial performance. "The AIP provides strong incentives for management employees to exceed the Debtors' financial goals, and provides means to retain qualified personnel," Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, asserts. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Proposes $9 Mil. Key Employee Retention Plan ----------------------------------------------------------------- Edward J. Kosmowski, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that Meridian Automotive Systems, Inc., and its debtor-affiliates' employees have historically benefited from various policies and practices relating to performance-based compensation. However, the Debtors' performance-based bonuses have diminished due to the slippage of the Debtors' financial condition and the deterioration of the automotive industry in general. The Debtors have historically instituted an annual salary increase to recognize and reward employees for their individual accomplishments and performance throughout the prior year. In 2004, the Debtors' financial condition forced them to delay the salary increases for 90 days. The Debtors were also forced to cut contributions to their employees' individual 401(k) retirement accounts by approximately $2.8 million. This, Mr. Kosmowski says, dramatically impacted a majority of the Debtors' U.S. salaries and non-union hourly employees. As a result, the Debtors have committed not to re-institute the 401(k) contributions at any time prior to their emergence from bankruptcy. "The signs of distress -- plummeting stock values, credit ratings cuts, profit warnings and chapter 11 filings -- have become increasingly evident," Mr. Kosmowski notes. "In light of these industry conditions, the stigma of uncertainty that attaches to any chapter 11 filing, and the recent reductions in the Debtors' employee compensation, the Debtors believe that it is imperative that they retain and keep those employees who are essential to the successful reorganization of the Debtors' business." Key Employee Retention Plan The Debtors employed compensation and benefits consultants, Mercer Human Resource Consulting, Inc., to advise them regarding their compensation practices and the development of a key employee retention program to retain Key Employees for the duration of the Debtors' Chapter 11 cases and thereafter. According to Mr. Kosmowski, the Debtors cannot afford to lose their Key Employees because: (i) the loss of Key Employees could cause a "talent exodus," whereby the Debtors would experience mass resignations as a result of diminished morale and panic caused by the departure of even a small number of Key Employees; (ii) the Debtors would lose the knowledge and know-how of the Key Employees; (iii) the Debtors would need to spend significant time and resources in training replacement employees, whose learning curves may cause temporary inefficiencies that will make it more difficult for the Debtors to reach their financial targets; (iv) the recruitment of replacement employees would likely be difficult due to the current uncertainty in the automobile industry, and the Debtors would likely need to join a company in bankruptcy; (v) the Debtors would likely have to retain search firms and pay fees that typically approximate 25% to 33% of proposed first-year salaries and target bonus compensation to replace Key Employees; and (vi) the Debtors would incur other standard recruitment expenses, such as allowances for house hunting, moving expenses, and closing costs for home purchases by new employees. The KERP, Mr. Kosmowski explains, has been tailored to ensure that the interests of the Key Employees are aligned with the Debtors' restructuring goals. The KERP includes two separate retention funds -- specific retention incentives for 64 Key Employees and a discretionary fund available to address unanticipated retention needs throughout the Debtors' cases. The maximum aggregate costs of the KERP will be $4.71 million. Specific Retention Incentives The Debtors have identified 64 Key Employees that comprise 1.19% of the total employees. The Debtors have divided them into three tiers: Tier Tier Participants ---- ------------------------------------------------ 1(a) Richard E. Newsted, as Meridian's President 1(b) four of the Debtors' most senior officers and executives at the Debtors' national level 2 five executives at the Debtors' national level 3 54 executives and other employees The retention incentives to be paid under the KERP will range from 20% to 200% of a Key Employee's base salary, based on several factors, including the importance of each employee's job function and individual employee performance. The Debtors estimate the total cost of the retention incentives to be $4.46 million. The specific retention incentives for Key Employees by tier are: Percentage Cost Tier of Base Salary Key Employees (Thousands) ---- -------------- ------------- ----------- 1(a) 200 1 $1,000 1(b) 175 4 1,624 2 40 5 418 3 20 54 1,320 Mr. Kosmowski reports that the four payments under the KERP's payment schedule are heavily weighted by "back-ending" 80% of KERP compensation, since 20% is not payable until a Chapter 11 plan of reorganization is filed and 60% is not payable until 90 days post-emergence from bankruptcy. Two other periodic payments of 10% each will be made prior to the filing of a reorganization plan. The payment schedule and corresponding requirements are: Percentage of Total Payment Timing of Payment Payment ------- ---------------------- ------------------- 1st Later of 09/30/05 or 10% delivery of a business 2nd Later of 12/31/05 or 10% production of a reorg plan term sheet 3rd Filing of a Reorg Plan 20% 4th Emergence plus 90 days 60% The payments are expressly contingent on the Debtors achieving specified goals that correlate to successful emergence and are also required under the DIP Facility. The first payment will be contingent upon the Debtors producing a reasonably detailed business plan and will occur no earlier than September 30, 2005, while the second payment will be contingent upon the Debtors producing a reorganization plan term sheet and will occur no earlier than December 31, 2005. Key Employees who are terminated for any reason other than death or disability forfeit their rights to unpaid amounts under the KERP. In the case of death or disability, any unpaid amounts of the KERP will be paid in accordance with the normal KERP schedule. In the event that a Key Employee works at a business unit that is sold, all remaining KERP payments will be paid upon the closing of that sale. This, according to Mr. Kosmowski, will incentivize the affected Key Employee to continue to work for the units during the sale process and to actively facilitate the sales as well as to remove any ongoing obligation that otherwise might be imposed on the buyer. Discretionary Incentive Pool As part of the KERP, the Debtors will also establish a $250,000 discretionary pool, which will be used by the Debtors' Chief Executive Officer and President to address specific retention issues that are anticipated to arise over the life of the KERP. "The Discretionary Pool is not designed to compensate the top executives," Mr. Kosmowski clarifies. "In fact, the Discretionary Pool cannot be used to compensate Tier 1 Key Employees." The Discretionary Pool, Mr. Kosmowski adds, is below the amounts of discretionary funds approved by courts in other large chapter 11 cases. Accordingly, the Debtors ask the Court for authority to implement the Key Employee Retention Plan. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Proposes $6 Mil. Key Employee Severance Plan ----------------------------------------------------------------- Meridian Automotive Systems, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve a severance plan that expands severance protection to the remainder of their Key Employees and to a select group of other critical employees. The new Severance Plan is designed to: (x) offer reasonable benefits, reflecting competitive practice, to employees who may be terminated due to the Debtor' reorganization, and (y) enable the Debtors to attract the necessary talent for a successful reorganization of their businesses. Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, reports that the Debtors currently maintain two types of severance agreements for eight of their Tier 1 and Tier 2 executives: (1) Continuity Agreements, which provide six employees with 24 months of salary, a target bonus and benefits continuation; and (2) A Severance Agreement that provides two employees with 18 months of salary, a maximum bonus and benefits continuation. However, the Debtors intend to replace and supersede the Existing Severance Agreements as to those qualifying employees who are currently covered by the Existing Severance Agreements. Thus, as a condition for participation in the Key Employee Retention Plan and the proposed Severance Plan, employees with Existing Severance Agreements would be required to forfeit their participation in the Existing Severance Agreements. Proposed Severance Plan The Debtors seek to offer the Severance Plan for involuntary termination without cause to all 64 of the Key Employees who are included in the KERP, as well as a select group of 24 employees who provide important services to the Debtors. The Severance Plan has Tiers 1(a), 1(b), 2, and 3, comprised of the same Key Employees included in the KERP tiers, plus a fourth tier, comprised of the additional important employees who are not included in the KERP. The specific payment structure for the Severance Plan Participants is: Tier No. of Employees Severance Multiple Total Payout ---- ---------------- ------------------ ------------ 1(a) 1 2.0x annual salary $1,100,000 2 5 1.0x annual salary 1,044,000 3 54 0.5 annual salary 3,301,000 4 24 0.5 annual salary 1,304,000 In addition to cash payouts, employees would continue to be eligible to receive health care benefits for the lesser of: (i) six months to 24 months, in parallel to the length of salary coverage by each of their tiers; and (ii) the period of time between the termination of the employee's tenure with the Debtors and the point at which the employee is eligible to receive health care benefits from a subsequent employer to the Debtors. According to Mr. Morton, a Severance Plan participant who is involuntarily terminated for a reason other than Cause would receive full severance payment, but would cease receiving any further benefits under the KERP. Any employee who is terminated for Cause will not be eligible to receive any subsequent KERP, AIP, or severance payments. All Severance Plan participants are subject to reasonable non- competition restrictions ranging from six moths to one year. This will prevent them from unfairly damaging the Debtors' legitimate business interests and prospects following their departures from the Debtors. "In the event a Severance Plan participants works at a business unit that is sold, in order for severance benefits to be paid, the employee would have to be terminated by the Debtors, and the buyer would have to refuse to offer the employee on no less favorable terms and conditions as his or her employment with the Debtors," Mr. Morton says. "However, severance benefits still would not be triggered if the buyer offered employment on less favorable terms and the participant elected to accept such employment offer." Except for the individuals in Tier 1 and Tier 2 who currently have Existing Severance Agreements, the failure of a buyer to assume the Severance Plan, Mr. Morton adds, would not trigger severance benefits under the Severance Plan. "The aggregate potential cost to the Debtors under the Severance Plan is well within the range of severance benefits approved in other large chapter 11 cases," Mr. Morton concludes. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000). MIRANT CORP: Court OKs Cutting Dynegy's Claim from $2.7M to $125K ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Texas approved the joint stipulation inked between Mirant Corporation and its debtor-affiliates and Dynegy Marketing and Trade, which resolves their dispute relating to a Master Netting, Setoff and Margining Agreement, dated June 25, 2002. Dynegy, Mirant Americas Energy Marketing, LP, and Mirant Canada Energy Marketing, Ltd., are parties to that contract. On December 16, 2003, Dynegy filed Claim Nos. 7145 and 7146 for at least $2,742,370.50 each against Mirant Americas Development, Inc., and MAEM, each Claim asserting a "Power Sale Claim" and a "Litigation Claim." The Claims each refer to the Contract. On July 14, 2004, MAEM assumed the Contract. The parties initially disputed the cure amount owing by MAEM to Dynegy with respect to MAEM's assumption of the Contract and the proper application of offsets and deductions in connection therewith. The Debtors also objected to Dynegy's proofs of claim. In their Joint Stipulation, the parties agreed that: (a) the Cure Amount owing by MAEM to Dynegy with respect to the Contract is $125,000; (b) upon payment of the Cure Amount, the Claims will be deemed withdrawn in their entirety, with prejudice without further Court order or action by the parties; and (c) Dynegy and MAEM have agreed to release any claims they may have against each other in regard to the Contract and amounts owed under the Contract. 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) MIRANT CORP: Says Multi-Mil. Guarantees Avoidable as "Fraudulent" ----------------------------------------------------------------- El Paso North America, through its affiliates Mesquite Investors, L.L.C., and Shady Hills Holding Company, L.L.C., sold its interests in: -- West Georgia Generating Company, LLC, Mesquite's wholly owned subsidiary; and -- Shady Hills Power Company, LLC, Shady Hills' wholly owned subsidiary, to Mirant Americas, Inc., pursuant to two purchase and sale agreements dated July 30, 2001. The laws of the State of New York govern the transactions. Jeff P. Prostok, Esq., at Forshey & Prostok, LLP, in Fort Worth, Texas, relates that the Purchase and Sale Agreements contemplated that MAI would assign to MAGi its obligations under the Purchase and Sale Agreements and the two wholly owned subsidiaries. But MAI assigned neither. Mirant Corp. guaranteed MAI's obligations under the Purchase and Sale Agreements. In October 2002, pursuant to the Guarantees, Mirant paid Mesquite $13,650,000, and Shady Hills Power $7,350,000. Mesquite filed four proofs of claim relating to installment payments due and owing pursuant to the Mesquite Purchase Agreement and the Mesquite Guaranty: Claim No. Claim Amount Mirant Entity --------- ------------ ------------- 7250 $29,250,000 MAGi 7251 29,250,000 Mirant 7252 29,250,000 Mirant 7254 29,250,000 MAI Shady Hills Power also filed four claims relating to installment payments due and owing pursuant to the Shady Hills Power Purchase Agreement and the Shady Hills Power Guaranty: Claim No. Claim Amount Mirant Entity --------- ------------ ------------- 7255 $15,750,000 MAI 7257 15,750,000 MAGi 7258 15,750,000 Mirant 7259 15,750,000 Mirant Subsequently, Mesquite and Shady Hills Power assigned their proofs of claim to Deutsche Bank Securities, Inc. Mirant objected to the proofs of claim. Mr. Prostok alleges that at the time the Guarantees were executed, both MAI and Mirant were either insolvent, or their remaining property was unreasonably small, or each was rendered unable to pay its debts as they became due. Mr. Prostok adds that the obligations under the Guarantees were incurred without fair consideration. Thus, the Guarantees are avoidable as fraudulent conveyances under Section 273 of the N.Y. Debt. & Cred. Law. The Guarantees, Mr. Prostok contends, are also avoidable pursuant to Section 544(b). The payments made under the Guarantees were made within one year before the Petition Date. Mirant received less than a reasonably equivalent value in exchange for the payments. Each of the payments, Mr. Prostok asserts, is avoidable as a fraudulent transfer pursuant to Section 548. Pursuant to Section 550, Mirant is entitled to recover its payments from Mesquite and Shady Hills Power, plus post-judgment interests at the legal rate. For these reasons, Mirant asks the U.S. Bankruptcy Court for the Northern District of Texas to: a. permit it to avoid the Guarantees as fraudulent conveyances and the payments as fraudulent transfers; and b. permit it to recover the payments, plus interests and legal costs. 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. 71; Bankruptcy Creditors' Service, Inc., 215/945-7000) MONEY CENTERS: Settles Breach of Contract Suit Against Equitex -------------------------------------------------------------- Money Centers of America, Inc., fka iGames Entertainment, Inc., has agreed to settle the breach of contract lawsuit it filed against Equitex, Inc., and Equitex's wholly owned subsidiary, Chex Services, Inc. The Company entered into a settlement agreement with Equitex on July 21, 2005, to resolve all pending litigation between the parties. In March 2004, Money Centers filed a complaint in United States District Court for the District of Delaware against Equitex and Chex Services. Money Centers alleged that Equitex and Chex had committed numerous breaches of the terms of the Nov. 3, 2003, Stock Purchase Agreement pursuant to which they would have acquired Chex from Equitex. The complaint alleges: a) false representations and warranties related to terminated Chex casino contracts and over $600,000 in bad debts; b) material misrepresentations in SEC filings; c) entering into a material financing transaction in violation of the covenant not to enter into transactions outside the ordinary course of business; and d) failure to proceed in good faith toward closing, including secretly entering into a reverse merger in violation of the express terms of the Stock Purchase Agreement In the same lawsuit, Money Centers also accused Equitex of wrongfully declaring a default under the $2,000,000 promissory note that the Company issued in connection with the its acquisition of Available Money. According to Money Centers, the breach entitled them to terminate the Stock Purchase Agreement and receive a $1,000,000 termination fee, reimbursement of over $600,000 in transaction and collection costs from Equitex plus damages resulting from Equitex's conduct. Equitex responded to Money Center's allegations by filing a counter suit in the Delaware State Court. In that suit, Equitex said that it, in fact, was entitled to terminate the Stock Purchase Agreement and receive a $1,000,000 termination fee and reimbursement of transaction costs. Under the Settlement Agreement, Equitex agreed to cancel an outstanding $2,000,000 principal liability under a $2,000,000 promissory note, dated Jan. 6, 2004, as well as any liability for accrued but unpaid interest under that promissory note. Money Centers agreed to pay Chex $500,000 within the 60-day period after July 21, 2005. To secure its obligations under the Settlement Agreement, Money Centers entered into a Security Agreement with Chex and Equitex pursuant to which it granted Chex and Equitex a junior security interest in substantially all of its assets. In addition, Money Centers agreed to deliver to Fastfunds Financial, Inc., Chex's corporate parent, a contingent warrant to purchase up to 500,000 shares of its common stock at a purchase price of $0.50 per share. The warrant is not exercisable until Money Centers achieves $1,000,000 in net income during a fiscal year. No party to the Settlement Agreement admitted any wrongdoing or liability related to the litigation. The litigation was dismissed with prejudice on July 22, 2005. New CFO The Company's Board of Directors appointed Jason P. Walsh as the Company's Chief Financial Officer and Vice President--Finance, effective June 14, 2005. From 1997 until his employment with the Company, Mr. Walsh worked for Robert J. Kratz & Company, a certified public accounting firm located in Paoli, Pennsylvania. At Robert J. Kratz & Company, Mr. Walsh was responsible for the compilation of financial statements, the preparation of individual, corporate, partnership and trust tax returns, setting up new businesses, and performing various accounting and consulting services. Mr. Walsh is a Pennsylvania Certified Public Accountant. Mr. Walsh received a Bachelors of Science degree in Accounting from Drexel University. Equitex, Inc., is a holding company operating through its majority owned subsidiaries FastFunds Financial Corporation of Minnetonka, Minnesota and Denaris Corporation. FastFunds Financial Corporation provides comprehensive cash access services to casinos and other gaming facilities through its wholly-owned subsidiary, Chex Services, Inc. Denaris Corporation was formed to provide stored value card services. Money Centers of America, Inc., fka iGames Entertainment, Inc. -- http://www.igamesentertainment.com/-- is a single source provider of cash access services to the gaming industry. The Company has combined advanced technology with personalized customer services to deliver ATM, Credit Card Advance, POS Debit, Check Cashing Services, CreditPlus outsourced marker services, and merchant card processing. The Company's growth strategy is to become the innovator in cash access and financial management systems for the gaming industry. The business model is specifically focused on specialty transactions in the cash access segment of the funds transfer industry. * * * Going Concern Doubt Sherb & Co., LLP, expressed substantial doubt about Money Centers of America, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended Dec. 31, 2004, due to Money Centers' losses and deficit. The Company reported a $15.5 million accumulated deficit at March 31, 2005, and posted a $739,253 net loss for the quarter ended March 31, 2005. MORGAN STANLEY: Fitch Assigns Low-B Rating to Six Cert. Classes --------------------------------------------------------------- Morgan Stanley Capital I Trust 2005-TOP19, commercial mortgage pass-through certificates are rated by Fitch Ratings: -- $75,400,000 class A-1 'AAA'; -- $84,600,000 class A-2 'AAA'; -- $44,700,000 class A-3 'AAA'; -- $84,100,000 class A-AB 'AAA'; -- $642,754,000 class A-4A 'AAA'; -- $88,050,000 class A-4B 'AAA'; -- $87,526,000 class A-J 'AAA'; -- $1,228,438,747 class X-1* 'AAA'; -- $1,202,407,000 class X-2* 'AAA'; -- $23,033,000 class B 'AA'; -- $12,285,000 class C 'AA-'; -- $15,355,000 class D 'A'; -- $12,284,000 class E 'A-'; -- $9,214,000 class F 'BBB+'; -- $9,213,000 class G 'BBB'; -- $10,749,000 class H 'BBB-'; -- $3,071,000 class J 'BB+'; -- $3,071,000 class K 'BB'; -- $6,142,000 class L 'BB-'; -- $1,536,000 class M 'B+'; -- $3,071,000 class N 'B'; -- $3,071,000 class 0 'B-'. * Notional Amount and Interest-Only. Class P is not rated by Fitch Ratings. Classes A-1, A-2, A-3, A- AB, A-4A, A-4B, A-J, B, C, and D are offered publicly, while classes X-1, X-2, E, F, G, H, J, K, L, M, N, and O are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are 156 fixed-rate loans having an aggregate principal balance of approximately $1,228,438,747, as of the cutoff date. For a detailed description of Fitch's rating analysis, please see the report titled Morgan Stanley Capital I Trust 2005-TOP19 dated July 12, 2005 available on the Fitch Ratings web site at http://www.fitchratings.com/ MORGAN STANLEY: Fitch Holds Low-B Rating on 6 Certificate Classes ----------------------------------------------------------------- Fitch Ratings affirms Morgan Stanley Capital I Trust commercial mortgage pass-through certificates, series 2003-IQ5: -- $86.0 million class A-1 at 'AAA'; -- $120.0 million class A-2 at 'AAA'; -- $60.0 million class A-3 at 'AAA'; -- $373.7 million class A-4 at 'AAA'; -- Interest-only classes X-1 and X-2 at 'AAA'; -- $22.4 million class B at 'AA'; -- $30.2 million class C at 'A'; -- $7.8 million class D at 'A-'; -- $5.8 million class E at 'BBB+'; -- $6.8 million class F at 'BBB'; -- $7.8 million class G at 'BBB-'; -- $5.8 million class H at 'BB+'; -- $2.9 million class J at 'BB'; -- $4.9 million class K at 'BB-'; -- $2.9 million class L at 'B+'; -- $1.9 million class M at 'B'; -- $1.0 class N at 'B-'. Fitch does not rate the $7.8 million class O. The affirmations are due to the stable pool performance and minimum paydown since issuance. As of the July 2005 distribution date, the pool's aggregate principal balance has decreased 3.8% to $747.8 million from $778.8 million at issuance. There are currently two specially serviced loans (6.1%). The largest specially serviced loan (3.4%) is a multifamily property located in Merrillville, IN, and is currently 90-plus days delinquent. A receiver has been appointed and the special servicer is currently evaluating workout options. The other specially serviced loan (2.6%) is an industrial property located in Otay Mesa, CA. The special servicer expects the loan to be assumed in the imminent future and returned to the master servicer. The six credit-assessed loans (31.6% of the pool) remain investment grade. Fitch reviewed operating statement analysis reports and other performance information provided by GMACCM. The debt service coverage ratio for the loans are calculated based on a Fitch-adjusted net cash flow and a stressed debt service based on the current loan balance and a hypothetical mortgage constant. Two Commerce Square (8.2%) is secured by a 40-story class A office building totaling 953,276 square feet located in Philadelphia, PA. As of July 2005, the whole loan had an outstanding principal balance of $122.3 million, of which two of the four pari-passu notes totaling $61.1 million serve as collateral for this transaction. As of May 31 2005, occupancy has increased to 98.74% from 97.4% at issuance. The DSCR as of year-end 2004 increased to 1.77 times (x) compared to 1.65x at issuance. 55 East Monroe (7.8%) is secured by a 50-story office building totaling 1,602,749 sf located in the East Loop submarket of Chicago, IL. As of July 2005, the whole loan was $117 million, of which one of the two pari-passu notes totaling $58.5 million serves as collateral for this transaction. The DSCR as of YE 2004 has decreased to 1.61x from 1.84x at issuance. As of Sept. 30, 2004, occupancy dropped to 79.4% compared to 89.0% in December 2003 and 92.7% at issuance. At issuance, the borrower funded approximately $2.8 million into a lender-controlled account for future leasing costs. In addition, the loan has a springing monthly reserve for leasing and replacement costs. The property benefits from the experienced sponsorship and management through Tishman Speyer/Travelers Real Estate Venture, L.P. Fitch will continue to monitor the leasing activity at the property. International Plaza (4.9%) is secured by a two-level super regional mall that consists of approximately 1.2 million sf, of which 583,490 sf is collateral for the loan. The property is located in Tampa, FL. As of July 2005, the whole loan balance was $183.9 million, of which one of the three pari-passu notes totaling $36.5 million serves as collateral for this transaction. Although in-line occupancy as of March 2005 declined to 88.5% compared to 92.4% at issuance, the DSCR as of YE 2004 increased to 1.43x compared to 1.40x at issuance. Fitch will continue to monitor the leasing activity at the property. 200 Berkeley & Stephen L. Brown Buildings (3.3%) is secured by two office buildings located in Boston, MA, totaling 1,137,331 sf. As of July 2005, the whole loan balance was $150 million, of which one of the three pari-passu notes totaling $25 million serves as collateral. As of April 30, 2005, occupancy increased to 98.4% compared to 96.4% at issuance. The DSCR as of YE 2004 is 1.54x compared to 1.59x at issuance. The performance of Invesco Funds Corporate Campus (5.2%) and 3 Times Square (4.4%) remains stable demonstrated by their occupancies of 100% and 98.8%, respectively, same as at issuance. Invesco Funds Corporate Campus is secured by a 263,770 sf office building located in Denver, CO. As of July 2005, the loan balance as $39,000,000. 3 Times Square is secured by an 883,405 sf office building located in Manhattan. As of July 2005, the whole loan balance was $160.5 million, of which one of the three pari-passu notes totaling $33 million serves as collateral for this transaction. NATURADE INC: Completes $4 Million Financing with Laurus Funds -------------------------------------------------------------- Naturade Inc. (OTCBB:NRDC) disclosed the closing of a $4 million convertible financing facility with Laurus Master Fund Ltd., a New York-based institutional equity fund that specializes in making direct investments in growth-stage public companies. The $4 million facility consists of a $1 million three-year term note and a $3 million revolving line of credit based on eligible accounts receivable and inventory. The financing is convertible into shares of NRDC common stock at $0.80 per share (subject to adjustment to protect against dilution). In addition, NRDC granted Laurus Funds a common stock option to purchase up to 8,721,375 shares of NRDC common stock at $0.02. A portion of the proceeds of the financing were used to retire the company's existing bank facility while the remainder will be utilized for working capital and acquisition financing. The company's financing facility with Laurus Funds consist of a term loan and revolving loans, which allows for maximum borrowings of up to $4 million based on certain percentage of eligible accounts receivable and inventories at an interest rate of prime plus 2 percent per annum, subject to certain reductions based upon growth in the company's stock price. The financing facility has a term of three years ending on July 26, 2008. The company is subject to certain reporting covenants such as the timely filing of financial reports with the Securities and Exchange Commission, monthly financial reporting deadlines and collateral reporting. "The Laurus credit facility will enable Naturade to focus on business expansion and take us well beyond the day-to-day management of cash flow by supporting growth internally and through acquisition," said Bill Stewart, Naturade CEO. "We chose Laurus Funds from several other alternatives because they offered us a flexible credit instrument. We are exceptionally pleased to have a financing partner who can support our long-term vision of maintaining and growing our portfolio of leading natural brands marketed under the Naturade umbrella." Naturade Inc. -- http://www.naturade.com/-- is a branded natural products marketing company focused on growth through innovative, scientifically supported products designed to nourish the health and well being of consumers. The Company primarily competes in the overall market for natural, nutritional supplements. Going Concern Doubt At December 31, 2004, Naturade Inc. had a $22,023,470 accumulated deficit, a $1,859,320 net working capital deficit and a $3,031,547 stockholders' capital deficiency. The Company anticipates that it will incur net losses for the foreseeable future and will need access to additional financing for working capital and to expand its business. If unsuccessful in those efforts, Naturade could be forced to cease operations and investors in Naturade's common Stock could lose their entire investment. Based on this situation, the Company's independent registered public accounting firm qualified their opinion on the Company's December 31, 2004, financial statements by including an explanatory paragraph in which they expressed substantial doubt about the Company's ability to continue as a going concern. At Mar. 31, 2005, Naturade Inc.'s balance sheet showed a $3,486,739 stockholders' deficit, compared to a $3,031,548 deficit at Dec. 31, 2004. NOLAND-DECOTO: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Noland-Decoto Flying Service, Inc. P.O. Box 9816 Yakima, Washington 98909 Tel: (509) 248-1370 Bankruptcy Case No.: 05-06027 Type of Business: The Debtor offers corporate and scenic tours, flexible charter scheduling, FAA approved flight training, and aerial photography services. See http://www.noland-decoto.com/ Chapter 11 Petition Date: July 28, 2005 Court: Eastern District of Washington (Spokane/Yakima) Debtor's Counsel: James P. Hurley, Esq. Hurley, Lara & Hehir 411 North Second Street Yakima, Washington 98901 Tel: (509) 248-4282 Fax: (509) 575-5661 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ John Holp Unknown 15609 88th Drive Northwest Stanwood, WA 98292 Bank of America Unknown Chris Morris P.O. Box 53155 Phoenix, AZ 85072 Bank of America Unknown P.O. Box 21848 Greensboro, NC 27420 Bank of America Unknown Roger Coon P.O. Box 53155 Phoenix, AZ 85072 Air BP/Epic Aviation Unknown 1790 16th Street Southeast Salem, OR 97302 Burrows Tractor Unknown 1308 East Mead Avenue Yakima, WA 96903 Cascade Fire Equipment Unknown 123 South Front Street Yakima, WA 98901 Chem-Dry of Yakima Unknown P.O. Box 31 Yakima, WA 98907 Columbia Ready-Mix, Inc. Unknown P.O. Box 9337 Yakima, WA 98909 Bank of America Unknown Chris Casteel P.O. Box 53155 Phoenix, AZ 85072 Helliesen Lumber & Supply Unknown 102 West B. Street Yakima, WA 98902 Tractor Solutions Unknown 1308 East Mead Avenue Yakima, WA 98903 Kinsley Ezhaust Systems Unknown 3450 Swetzer Road Loomis, CA 95650 Marquis Development Unknown P.O. Box 2154 Richland, WA 99352 Pacific Power & Light Unknown 1033 Northeast 6th Avenue Portland, OR 97256 Premier Aircraft Engines, Inc. Unknown 1000 Northwest Perimeter Way Troutdale, OR 97060 R.E. Powell Distributing Co. Unknown P.O. Box 98 Grandview, WA 98930 Raisbeck Engineering Inc. Unknown 4411 South Ryan Way Seattle, WA 98178 Revitalization Partners Unknown Susan Nettleship 2825 Eastlake Avenue East #300 Seattle, WA 98102 Servpro of Yakima County Unknown P.O. Box 8302 Yakima, WA 98908 NORTH AMERICAN: Inks Settlement Agreement with Howard Properties ---------------------------------------------------------------- North American Refractories Company asks the U.S. Bankruptcy Court for the Western District of Pennsylvania for authority to enter into a settlement agreement with Howard Properties. Land and Mineral Rights Lease In 1948, Gladding, McBean & Company entered into a lease agreement with the Charles Howard Company as the lessor for approximately 33,000 acres of land and mineral rights located in Amador County in Northern California. North American Refractories and Howard Properties are successors-in-interest to the original lessee and lessor respectively. The Lease supported the Debtor's clay processing and refractory production facilities at Ione and Indian Hill, California. Soon after it went bankrupt, the Debtor concluded that it was no longer profitable nor feasible to continue operations at the Ione and Indian Hill Plants. Accordingly, the lease was rejected pursuant to a Court order dated June 24, 2002. Howard Claims In February 2003, Howard Properties filed unsecured claims totaling $8,908,058 against the Debtor's estate. The claims include unpaid royalties, unpaid property taxes, removal of hazardous tanks and leasehold reclamation obligations. A large portion of Howard's claims involve reclamation obligations allegedly owed by the Debtor under the lease. In particular, Howard Properties says that the Debtor was required to perform extensive work on several mine sites by re-grading stockpiles, terracing pit walls, importing topsoil, and seeding the affected areas with grasses. The Debtor objected on the basis that the Howard Claims were overstated and imposed obligations not required under the lease agreement. The Debtors asserted that Howard failed to account for ongoing mining operations on the site as well as the presence of endangered vegetation and economically recoverable materials which alter the method and manner of any reclamation activity. Discovery and Mediation Howard's claims involved complex legal and factual issues which need extensive discovery. After the discovery process, the Court referred the dispute to the Honorable Thomas P. Agresti for the purpose of conducting a mediation conference with the parties. Judge Agresti convened two mediation sessions on March 30 and May 20, 2005. Compromise and Settlement As a result of the two mediation sessions, the parties reached a settlement agreement which resolves Howard's claims. Under the agreement, Howard Properties will be given an allowed $4,000,000 general unsecured claim provided that the total sum of all distributions payable to the lessor is less than the $3.2 million threshold amount. Otherwise, the lessor has the option to rescind the settlement agreement. The Court will convene a hearing on August 16, 2005, at 2:00 p.m. to consider the request. Howard Properties Howard Properties is comprised of: * Charles S. Howard, III, the trustee of the Charles S. Howard III 1999 Trust, * Robert S. Howard, Jr., * Frank Howard, * Scott Stewart Leask, * Cynthia Leask, * Lynne Wilson, as trustee of Heritage Equity Trust, * Kami Asgar, as trustee of Miggie Equity Trust, * S. Kittredge Collins, trustee of "The Collins Family Trust", * Marita Collins Biven, settlor and trustee of "The Marita C. Biven Revocable Living Trust", * Michael C. Howard, trustee of the Howard Family Trust, * Malinda Howard Myers, trustee of the Malinda Howard Myers 1996 Trust and * Lisa L. Howard, trustee of the Lisa Lindsay Howard Trust. Headquartered in Pittsburgh, Pennsylvania, North American Refractories Company, was engaged in the manufacture and nonretail sale of refractory bricks and related products. The Company filed for chapter 11 protection on January 4, 2002 (Bankr. W.D. Pa. Case No. 02-20198). Paul M. Singer, Esq., of Pittsburgh represents the Debtor. When the Debtor filed for protection from its creditors, it listed $27,559,000,000 in assets and $18,634,000,000 in debts. OAKWOOD PACKAGING: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Oakwood Packaging Company, LLC 400 Technology Drive Coal Center, Pennsylvania 15423 Bankruptcy Case No.: 05-29818 Chapter 11 Petition Date: July 29, 2005 Court: Western District of Pennsylvania (Pittsburgh) Debtor's Counsel: John M. Steiner, Esq. Leech Tishman Fuscaldo & Lampl, LLC Citizens Bank Building, 30th Floor 525 William Penn Place Pittsburgh, Pennsylvania 15219 Tel: (412) 261-1600 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Ohio Realty Advisors $76,757 4199 Kinross Lakes Parkway, Suite 275 Richfield, OH 44286 Combined Containerboard, Inc. $70,129 7741 School Road Cincinnati, OH 45249 International Paper $54,817 1851 Tamarack Road Newark, OH 43055 Weyerhaeuser $53,039 Viking Paper Corporation $39,866 Georgia Pacific $30,230 Precision Fab Products $27,197 Halliday Lumber $21,503 Kline, Kepple & Koryak $17,620 Sunoco $16,588 Preferred Staffing $16,415 Pratt Industries $15,797 Dynamic Dies $11,468 Penske Truck Leasing $9,136 Allstrap Steel & Poly $7,739 NAL Company $7,583 Jet Corr $7,248 Willis Insurance Agency $6,304 Breckenridge Paper $5,824 ODJFS $5,429 OWENS CORNING: Objects to Shintech's $39 Million Claim ------------------------------------------------------ Owens Corning and its debtor-affiliates and Shintech Incorporated are parties to a supply contract dated December 7, 1999, wherein Shintech agreed to supply polyvinyl chloride resin to the predecessors of Debtor Exterior Systems, Inc.: 1. Norandex, Inc.; 2. Fabwel, Inc.; and 3. AmeriMark Building Products Inc. The term of the Contract was from January 1, 2000, to December 31, 2001. The Debtors rejected the Contract effective June 19, 2001. On August 20, 2001, Shintech asserted against the Debtors Claim No. 12105 for $38,942,063, allegedly due under the supply contract. Claim No. 12105 is comprised of: (a) a claim for prepetition accounts receivable for $5,298,751; and (b) a "Claim Based on Failure to Accept Contract Volume" for $33,643,312. J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington, Delaware, argues that the Rejection Claim portion of the Claim No. 12105 grossly overstates the amount of damages, if any, to which Shintech may be entitled due to the Debtors' rejection of the Contract. It is implausible that Shintech could have suffered $33,643,312 in damages in a five-month period between the rejection of the Contract and the expiration of the Contract's term, Ms. Stickles points out. Although Shintech does not explain how it calculated its Rejection Claim, the Debtors object to the Rejection Claim to the extent that it does not reflect that: (a) The parties agreed to modify the Contract to reduce the number of hopper cars to be supplied to Exterior; (b) The parties agreed to modify the Contract to reduce the volume of Resin to be purchased by Exterior; (c) Exterior was entitled to a one cent per pound rebate based on the reduced volume of resin to be purchased by Exterior; (d) The parties agreed to modify the Contract to reduce the Contract price of resin to correspond to the market price for resin; (e) Shintech had a duty to mitigate its damages, if any; (f) Shintech resold to other parties the resin that Shintech would have sold to Exterior absent rejection; (g) The appropriate measure of recoverable damages is lost profits, as opposed to lost revenues; (h) Shintech avoided costs and expenses as a result of the Debtors' rejection of the Contract; and (i) Consequential damages are not an element of recoverable damages for breach of a contract for the sale of goods. The Debtors object to the Prepetition Claim to the extent it does not take into account that the parties agreed to modify the Contract to reduce the: * number of hopper cars to be supplied to Exterior; and * contract price of resin to correspond to the market price for resin. Depending on how Shintech calculated its alleged claims and the facts relative to the appropriate measure of recoverable damages, Ms. Stickles contends that Shintech may not be entitled to any recovery that is much less than the amount of Claim No. 12105. The Debtors, however, cannot discern without discovery the amount to which the Disputed Claim should be reduced, Ms. Stickles informs the U.S. Bankruptcy Court for the District of Delaware. According to Ms. Stickles, Shintech submitted insufficient documentation to support its Claim. "Other than attaching a redacted version of the Contract, Shintech failed to attach any supporting documentation for its alleged Rejection Claim and failed to provide any information or detail explaining how Shintech calculated its purported damages in the amount of $33,643,312." Shintech also failed to attach copies of the invoices and credit memoranda comprising the Prepetition Claim. The Debtors object to the Claim being asserted against "Owens Corning, et al.", which presumably means all of the Debtors. To the extent the claim is allowed, Ms. Stickles contends that Claim No. 12105 should only be allowed against Exterior. The Debtors therefore ask the Court to: (1) reduce the amount of Claim No. 12105 to the amount, if any, to which Shintech proves it is entitled; and (2) disallow Claim No. 12105 against any of the Debtors other than Exterior. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. At Sept. 30, 2004, the Company's balance sheet shows $7.5 billion in assets and a $4.2 billion stockholders' deficit. The company reported $132 million of net income in the nine-month period ending Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No. 112; Bankruptcy Creditors' Service, Inc., 215/945-7000) PANTRY INC: Earns $16.7 Million of Net Income in Third Quarter -------------------------------------------------------------- The Pantry, Inc. (NASDAQ: PTRY) reported preliminary financial results for its third fiscal quarter and nine months ended June 30, 2005. Revenues for the third quarter were $1,166.5 million, up 25.7% from $928.3 million in the corresponding period a year ago. Net income was $16.7 million, a 25.9% increase from $13.2 million in last year's third quarter. "Operating performance in our core stores remained strong in the third quarter, with solid growth in comparable store merchandise sales and gasoline gallons sold, as well as a substantial increase in our merchandise gross margin," said Peter J. Sodini, President and Chief Executive Officer. "These results reflect the positive impact of our store conversion and rebranding programs, as well as our increased focus on higher-margin merchandise categories such as food service and private label products." Merchandise revenue for the quarter increased 7.0% overall and 4.1% on a comparable store basis. The merchandise gross margin of 36.6% was up 50 basis points from last year's third quarter. Total merchandise gross profits rose 8.5% to $118.6 million, and again accounted for more than 70% of the Company's total gross profits. Comparable store gasoline gallons increased 5.6% from a year ago, and total gallons sold rose 15.2%. Gasoline revenues were up 34.7%, partly due to a 17.0% increase in the average retail price per gallon, to $2.13. The gross margin per gallon was 12.3 cents, compared with 13.0 cents in last year's third quarter. Gasoline gross profits for the quarter totaled $48.4 million, up 9.0% from a year ago. During the third fiscal quarter, the Company completed the acquisition of 53 Cowboys convenience stores located mostly in Georgia and Alabama. In addition, it announced a definitive agreement to acquire 23 convenience stores in Virginia that are currently operating under the Sentry Food Mart banner. That acquisition is expected to close in the fourth fiscal quarter. Mr. Sodini commented, "Both of these transactions are excellent examples of our strategy of focusing on tuck-in acquisitions that leverage our existing market presence across the Southeast, and both are expected to be immediately accretive to our earnings per share." For the nine-month period, total revenues were approximately $3.1 billion, up 24.2% from the corresponding period last year. Net income for the nine months was $32.5 million, up sharply from $3.2 million a year ago. Net income for the first nine months of fiscal 2004 included $0.69 per share in early debt extinguishment costs, as well as $0.04 per share in expenses related to a secondary stock offering. In addition, there was duplicate interest expense of $0.05 per share on two issues of senior subordinated notes for a one-month period when both were outstanding. Net income excluding these financing-related items for the first nine months of fiscal 2004 was $19.3 million, or $0.93 per share. EBITDA for the first nine months of fiscal 2005 was $141.1 million, a 15.6% increase from a year ago. Mr. Sodini said, "We are pleased with the year-to-date performance of our core business and with the two outstanding acquisitions we have negotiated. We are improving our guidance for the year and now target diluted earnings per share for the full fiscal year in a range between $2.10 and $2.15, after giving effect to the restatement described below. This is up from our previously targeted range of $2.05 to $2.15." Headquartered in Sanford, North Carolina, The Pantry, Inc. -- http://www.thepantry.com/-- is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country, with net sales for fiscal 2004 of approximately $3.5 billion. As of June 30, 2005, the Company operated 1,386 stores in 11 states under a number of banners including Kangaroo Express(SM), The Pantry(R), Golden Gallon(R), Cowboys and Lil Champ Food Store(R). The Pantry's stores offer a broad selection of merchandise, as well as gasoline and other ancillary services designed to appeal to the convenience needs of its customers. * * * Standard & Poor's Ratings Services lowered its ratings on Sanford, N.C-based The Pantry Inc. and placed them on CreditWatch with developing implications. Both the corporate credit rating and the senior secured bank loan ratings were lowered to 'B-' from 'B+', while the senior subordinated debt rating was lowered to 'CCC' from 'B-'. "The rating actions follow the company's disclosure that an event of default occurred under its senior credit facility as a result of a restatement of sale-leaseback transactions to financing transactions, with the assets and related liabilities carried on the balance sheet," said Standard & Poor's credit analyst Gerald Hirschberg. PANTRY INC: Restating Financials for Sale-Leaseback Transactions ---------------------------------------------------------------- The Pantry, Inc. (NASDAQ: PTRY) intends to restate certain of its prior period financial statements to correct its accounting for transactions that it characterized as sale-leaseback transactions. This change is the result of the determination by the Company in consultation with its independent registered public accountants that such transactions must be accounted for as financing transactions rather than sale-leaseback transactions. The change will not affect the Company's cash flow and will have a minimal impact on earnings per share and retained earnings. The restatement recharacterizes the transactions as financing transactions, with the assets and related financing obligation carried on the balance sheet. As a result, approximately $177 million in additional debt will be recorded as of June 30, 2005, with a similar increase in assets. Default While the Company is in compliance with all of the financial ratio covenants of the loan agreement under its credit facilities, the increase in debt will put it in default because of provisions that limit the Company's ability to incur additional indebtedness. The Company currently is in the process of obtaining an amendment to the loan agreement. Based on its discussions with lenders, the Company expects to enter into an amendment in the first half of August that would put it in compliance with the agreement and obtain any necessary waivers. The Company also is taking steps to address the impact of the restatement on other financing arrangements where there may be a breach and anticipates no material consequences arising from them. The expected annual impact of the restatements on the Company's previously reported diluted earnings per share for fiscal years 1999 (the earliest year affected by the restatement) to 2003 ranges from approximately $0.01 to $0.03. The Company expects the restatement to reduce fiscal 2004 net income and diluted earnings per share by approximately $1.7 million and $0.08, respectively. For the first nine months of fiscal 2005, the impact is partially offset by reversing certain straight-line rent charges recorded earlier in the year, resulting in a decrease in net income of approximately $400,000, or $0.02 per share. Audit Review During the third fiscal quarter, the Company's independent registered public accountants advised management that they were reviewing the accounting the Company had previously applied to sale-leaseback transactions - which the registered public accountants had previously considered in their periodic audits and reviews. Certain technical issues were identified that had the potential to cause certain of these transactions to not qualify for sale-leaseback accounting treatment. One of these issues impacts almost all of the Company's previously reported sale- leaseback transactions - whether the retention by the Company of ownership of underground fuel storage tanks represents a continuing involvement in the leased property that precludes treating these leases as operating leases pursuant to sale- leaseback accounting rules. Although generally accepted accounting principles on this topic are not clear, the Company has concluded at this time that a restatement is appropriate. The Company had previously believed that its sale-leaseback accounting treatment was appropriate under Generally Accepted Accounting Principles. The Company is unaware of any evidence that these restatements are due to any intentional noncompliance with GAAP by the Company. However, after further review of various interpretations of these technical accounting matters and discussions with its independent registered public accountants, the Company has concluded that the restatements were appropriate. The preliminary results announced in this release utilize the accounting treatment, which will be reflected in the restatement of our historical financial statements. Because the restatement is not yet completed, the expected impact of the restatement contained herein is preliminary and subject to a final review by management and the audit committee and the audit or review by the Company's independent registered public accountants. Headquartered in Sanford, North Carolina, The Pantry, Inc. -- http://www.thepantry.com/-- is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country, with net sales for fiscal 2004 of approximately $3.5 billion. As of June 30, 2005, the Company operated 1,386 stores in 11 states under a number of banners including Kangaroo Express(SM), The Pantry(R), Golden Gallon(R), Cowboys and Lil Champ Food Store(R). The Pantry's stores offer a broad selection of merchandise, as well as gasoline and other ancillary services designed to appeal to the convenience needs of its customers. * * * Standard & Poor's Ratings Services lowered its ratings on Sanford, N.C-based The Pantry Inc. and placed them on CreditWatch with developing implications. Both the corporate credit rating and the senior secured bank loan ratings were lowered to 'B-' from 'B+', while the senior subordinated debt rating was lowered to 'CCC' from 'B-'. "The rating actions follow the company's disclosure that an event of default occurred under its senior credit facility as a result of a restatement of sale-leaseback transactions to financing transactions, with the assets and related liabilities carried on the balance sheet," said Standard & Poor's credit analyst Gerald Hirschberg. PANTRY INC: Default Prompts S&P to Junk Subordinated Debt Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Sanford, N.C.-based The Pantry Inc. and placed them on CreditWatch with developing implications. Both the corporate credit rating and the senior secured bank loan ratings were lowered to 'B-' from 'B+', while the senior subordinated debt rating was lowered to 'CCC' from 'B-'. "The rating actions follow the company's disclosure that an event of default occurred under its senior credit facility as a result of a restatement of sale-leaseback transactions to financing transactions, with the assets and related liabilities carried on the balance sheet," said Standard & Poor's credit analyst Gerald Hirschberg. As a result, about $177 million in additional debt will be recorded as of June 30, 2005. This increase in debt puts the company in default since provisions of the loan agreement limit the incurrence of additional debt. The Pantry is now in discussions with its lenders and has said that it expects to enter into an amendment and obtain necessary waivers in the first half of August 2005 that would put it in compliance. If the company is able to secure an amendment and waivers, the ratings will likely be restored to the level from which they were changed. However, in the event the company is not able to secure these changes, ratings may be lowered further. In either situation, the ratings would also be subject to further review of the company's financial controls and policies. The Pantry is a leading independently operated convenience store chain in the Southeast with about 1,386 stores in 11 states. PHHMC MORTGAGE: Fitch Rates $342,453 Class B Certificates at BB --------------------------------------------------------------- PHH Mortgage Capital LLC $128,762,344 mortgage pass-through certificates, series 2005-5, classes A-1 through A-6, R-I, and R- II certificates (senior certificates) are rated 'AAA' by Fitch. In addition Fitch rates these issues: -- $6,164,155 privately offered class B-1 certificates 'AA'; -- $890,378 privately offered class B-2 certificates 'A'; -- $410,944 privately offered class B-3 certificates 'BBB'; -- $342,453 privately offered class B-4 certificates 'BB'; -- $205,472 privately offered class B-5 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 6.00% subordination provided by the 4.50% privately offered class B-1, the 0.65% privately offered class B-2, the 0.30% privately offered class B-3, the 0.25% privately offered class B-4, the 0.15% privately offered class B-5, and the 0.15% privately offered class B-6 (which is not rated by Fitch). Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud, and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, and the servicing capabilities of PHH Mortgage Corporation, which is rated 'RPS1' by Fitch. The certificates represent ownership in a trust fund, which consists primarily of 260 one- to four-family conventional, fixed- rate mortgage loans secured by first liens on residential mortgage properties. As of the cut-off date (July 1, 2005), the mortgage pool has an aggregate principal balance of approximately $136,981,216, a weighted average original loan-to-value ratio of 69.29%, a weighted average coupon of 5.820%, a weighted average remaining term of 341 months, and an average balance of $526,851. The loans are primarily located in California (19.06%), New Jersey (11.55%), and Maryland (7.19%). None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Citibank N.A. will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as two real estate mortgage investment conduits. PROXIM INC: Court Approves Pachulski Stang as Bankruptcy Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved Proxim Corporation and its debtor-affiliates' employment of Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. as their restructuring counsel. Pachulski Stang will: a) provide legal advice with respect to its powers and duties as debtors-in-possession in the continued operation of their businesses and management of their properties, including the contemplated sale of the Debtors' assets and proposed DIP financing; b) prepare and pursue confirmation of a plan of reorganization; c) prepare necessary applications, motions, answers, orders, reports and other legal papers on behalf of the Debtors; d) appear and protect the interests of the Debtors before the Court; and e) perform all other legal services for the Debtors which may be necessary and proper in this proceeding. The principal professionals who will represent the Debtors and their current hourly billing rates are: Professional Rate ------------ ---- Laura Davis Jones, Esq. $595 Tobias S. Keller, Esq. $450 Bruce Grohsgal, Esq. $435 Maxim B. Litvak, Esq. $365 Rachel Lowy Werkheiser, Esq. $295 Patricia J. Jeffries $160 Louise Tuschak $145 To the best of the Debtors' knowledge, Pachulski Stang is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in San Jose, California, Proxim Corporation -- http://www.proxim.com/-- designs and sells wireless networking equipment for Wi-Fi and broadband wireless networks. The Debtors provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. The Debtor along with its affiliates filed for chapter 11 protection on June 11, 2005 (Bankr. D. Del. Case No. 05-11639). When the Debtor filed for protection from its creditors, it listed $55,361,000 in assets and $101,807,000 in debts. PROXIM CORP: Wilson Sonsini Approved as Special Counsel ------------------------------------------------------- The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware gave his stamp of approval to Proxim Corporation and its debtor-affiliates retention of Wilson Sonsini Goodrich & Rosati as their special corporate, securities and transactional counsel. Wilson Sonsini will: 1) assist the Debtors in negotiating and effecting a sale of the Debtors' assets and advise the Debtors with regards to general corporate representation and corporate governance counseling; 2) represent the Debtors before the SEC and in connection with the Debtors' SEC reporting; 3) assist and advise the Debtors with regards to employment law advice, real estate law advice, intellectual property counseling and litigation law advice; and 4) perform all other special legal corporate, securities and transactional counseling services as agreed from time to time between the Debtors and Wilson Sonsini. Robert G. Day, Esq., a Partner at Wilson Sonsini, discloses that the Firm received a $175,000 retainer. Mr. Day charges $450 per hour for his services. Mr. Day reports Wilson Sonsini's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- David R. Gerson Partner $590 Roger D. Stern Partner $570 Stephanie L. Sharron Partner $540 Daniel J. Weiser Partner $500 Allison B. Spinner Associate $430 Michael J. Montfort Associate $390 Lia Rose Alioto Associate $360 Shannon E. Melville Associate $330 Michael J. Lousteau Associate $290 Jessica E. Bliss Associate $240 Wilson Sonsini assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in San Jose, California, Proxim Corporation -- http://www.proxim.com/-- designs and sells wireless networking equipment for Wi-Fi and broadband wireless networks. The Debtors provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. The Debtor along with its affiliates filed for chapter 11 protection on June 11, 2005 (Bankr. D. Del. Case No. 05-11639). When the Debtor filed for protection from its creditors, it listed $55,361,000 in assets and $101,807,000 in debts. RAYMOND HOLDER: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Raymond E. Holder aka Ray E. Holder dba Holder Properties, LLC P.O. Box 1242 Silver City, New Mexico 88062 Bankruptcy Case No.: 05-16046 Chapter 11 Petition Date: July 28, 2005 Court: District of New Mexico Judge: James S. Starzynski Debtor's Counsel: R. "Trey" Arvizu, III, Esq. Arvizu Law Office P.O. Box 1479 Las Cruces, New Mexico 88004 Tel: (505) 527-8600 Fax: (505) 527-1199 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. REGIONAL DIAGNOSTICS: Court Approves Term Sheet with DIP Lenders ---------------------------------------------------------------- As previously reported, Regional Diagnostics, LLC, and its debtor- affiliates asked the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division, to approve a term sheet resolving certain controversies with their DIP lenders and the Official Committee of Unsecured Creditors. On June 28, 2005, the Court approved the Term Sheet. The DIP lenders are comprised of Merrill Lynch Capital, as Agent, and Royal Bank of Canada. The Committee's members are: * Hitachi Medical Systems * Centura X-Ray, Inc. * Toshiba America Medical Systems, Inc. * MXR * Sourceone Healthcare Tech. Inc. As previously reported, the Court approved the auction of substantially all of the Debtors' assets on August 9, 2005. To resolve some objections the Committee and the DIP lenders have regarding the sale, the parties met, conferred, negotiated, and memorialized their agreements in a written Term Sheet. The Term Sheet provides for: -- extension of the DIP loan maturity to July 28, 2005; -- the Debtors' filing of a liquidating plan not later than August 15, 2005, and a disclosure statement by August 22; -- the establishment of a Creditor Trust that will assume all of the Debtors' assets, claims and rights not sold on August 9; -- the establishment of Newco (optional), an entity formed or funded by the lenders as the successful purchaser of the Debtors' operating assets; -- a stipulation regarding the TriVest Note which states that, should the lenders acquire the TriVest $1.1 million promissory note, they won't receive any distribution from the Debtors or Newco; -- withdrawal of the Committee's objection to the sale of the Debtors' operating assets and the entry of a final decree allowing the DIP loan; -- the lenders approval of an $825,000 carve out from the sale proceeds of their collateral; the fund will be deposited in the Creditor Trust; -- that 50% of Newco Preferred Stock ($3 million liquidation preference) will be distributed to the Creditor Trust and the other half will be distributed to Newco Management and lenders; -- that 35% of Newco common stock will be distributed to the creditor trust; -- that 65% of Newco common stock will be distributed to the lenders; and -- the Creditor Trust's distribution to the lenders 10% of the first $8.25 million of cash recoveries on any litigation claims. Headquartered in Warrensville Heights, Ohio, Regional Diagnostics, L.L.C. -- http://www.regionaldiagnostic.com/-- owns and operates 27 medical clinics located in Florida, Illinois, Indiana, Ohio and Pennsylvania. The Company and its debtor-affiliates filed for chapter 11 protection on April 20, 2005 (Bankr. N.D. Ohio Case No. 05-15262). Jeffrey Baddeley, Esq., at Baker & Hostetler LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of $10 million to $50 million and debts of $50 million to $100 million. RECYCLED PAPERBOARD: Gets Final OK to Use Lender's Cash Collateral ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of New Jersey granted Recycled Paperboard Inc. final approval: a) to use Cash Collateral pursuant to 11 U.S.C. Section 363(c))2) securing repayment of pre-petition obligations to Valley National Bank and Ackerman Realty Group, LLC; b) to grant and continue senior post-petition liens to Ackerman Realty Group, LLC; and c) to provide carveouts for professionals. Pre-Petition Debt Under various pre-petition credit and loan agreements with Valley National, the Debtor owes: Loan Agreement Amount Owed -------------- ------------- Letter of Credit $3,374,000.00 Pre-Petition Loan Documents $601,630.08 ------------- $3,975,630.08 Use of Cash Collateral & Adequate Protection Ackerman Realty has a secured interest in substantially all of the Debtor's real and personal property, subsequently, it holds an interest in the Cash Collateral pursuant to Section 363 of the Bankruptcy Code. The Debtor will use the proceeds of the Cash Collateral: 1) to meet payroll expenses, manage and preserve its assets and property, and to pay continuing expenses necessary for the orderly liquidation of its business; and 2) to pay administrative expenses for professionals, including accrual of fees to its attorney and accountant at $20,000 per month, Creditors Committee's counsel and accountant at $10,000 per month, and other Court-approved professionals to be retained by the Debtor to assist in the liquidation of its assets. Ackerman Realty has consented to the Debtor's use of the Cash Collateral. Ackerman and the Debtor have agreed that the payment for the Debtor's administrative expenses will be paid or carved out from the proceeds of a sale of Ackerman's Collateral, including sale of the Debtor's machinery, equipment, furnishings and salvage rights, and real estate. The Court authorizes the Debtor to use the Cash Collateral in which Ackerman Realty holds an interest in accordance with a Court-approved two-month Budget for July and August, 2005. A copy of the two-page Budget is available for free at: http://bankrupt.com/misc/RecycledPaperboardCashCollateralBudget.pdf As adequate protection for its interests, Ackerman is granted a continuing, additional and replacement lien and security interest in all of the Debtor's post-petition assets to secure its obligations to Valley National pursuant to 11 U.S.C. Section 361. As further adequate protection to Ackerman, the Debtor is directed to timely make the principal and interests payments totaling $31,000 per month required under the Pre-Petition Loan Documents. The Court orders that in Event of a Default or if the Debtor fails to comply with any provision of its Final Order, Ackerman is authorized to move on shortened time to seek termination of the Debtor's authority to use Cash Collateral and for vacation of the automatic stay provisions of 11 U.S.C. Section 362. Headquartered in Clifton, New Jersey, Recycled Paperboard Inc., manufactures recycled mixed paper and newspaper to make index, tag & bristol, and blanks. The Company filed for chapter 11 protection on November 29, 2004 (Bankr. D.N.J. Case No. 04-47475). David L. Bruck, Esq., at Greenbaum, Rowe, Smith & Davis LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $17,800,000 and total debts of $41,316,455. RECYCLED PAPERBOARD: Sells Non-Real Estate Assets for $535,000 -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey approved Recycled Paperboard Inc.'s request to sell its non-real estate assets, free and clear of liens, claims, encumbrances, and other interests to GB Fixed Asset Solutions, LLC, Clearbid, LLC and Global Equipment and Machinery Sales, Inc. The Court approved the sale transaction on June 24, 2005. GB Fixed, Clearbid and Global Equipment formed a Joint Venture to purchase the Debtor's non-real estate assets. The non-real estate assets that were sold consist of the Debtor's machinery, equipment, furnishings and salvage rights. The Debtor and the Joint Venture entered into a Purchase Agreement that calls for the sale of the Debtor's non-real estate assets for $535,000, subject to higher and better offers in a public auction. Under that Agreement, the Joint Venture will not assign or assume any of the Debtor's obligations or liabilities for the non-real estate assets. The Debtor explains that the sale transaction is in the best interest of its estate, its creditors and other parties-in- interest. Additionally, the Joint Venture is a good faith purchaser and the Purchase Agreement was the result of arms-length negotiations between the Debtor and the Joint Venture. In an auction conducted on May 23, 2005, no competitor topped Joint Venture's bid. Headquartered in Clifton, New Jersey, Recycled Paperboard Inc., manufactures recycled mixed paper and newspaper to make index, tag & bristol, and blanks. The Company filed for chapter 11 protection on November 29, 2004 (Bankr. D.N.J. Case No. 04-47475). David L. Bruck, Esq., at Greenbaum, Rowe, Smith & Davis LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $17,800,000 and total debts of $41,316,455. RESIDENTIAL ACCREDIT: Fitch Places Low-B Rating on 2 Cert. Classes ------------------------------------------------------------------ Fitch rates Residential Accredit Loans, Inc. mortgage pass-through certificates, series 2005-QS10: -- $251,794,197 classes I-A, II-A, III-A-1 through III-A-4, A-P, A-V and R-I through R-III certificates (senior certificates) 'AAA'; -- $6,909,500 class M-1 'AA'; -- $2,391,800 class M-2 'A'; -- $1,594,500 class M-3 'BBB'; In addition, Fitch rates the following privately offered subordinate certificates: -- $1,195,900 class B-1 'BB'; -- $930,200 class B-2 'B'. The $931,424 class B-3 is not rated by Fitch. The 'AAA' rating on the senior certificates reflects the 5.25% subordination provided by the 2.60% class M-1, the 0.90% class M- 2, the 0.60% class M-3, the privately offered 0.45% class B-1, the 0.35% privately offered class B-2, and the 0.35% privately offered class B-3. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Residential Funding Corp.'s servicing capabilities (rated 'RMS1' by Fitch) as master servicer. The certificates are collateralized by three loan groups. As of the cut-off date (July 1, 2005), Loan Group I consists of 361 conventional, fully amortizing, 30-year fixed-rate, mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of $57,893,837. The mortgage pool has a weighted average original loan-to-value ratio of 75.9%. The pool has a weighted average FICO score of 730, and approximately 59.34% and 4.52% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Equity refinance loans account for 21.06%, and second homes account for 17.21%. The average loan balance of the loans in the pool is $160,371. The three states that represent the largest portion of the loans in the pool are Florida (16.65%), California (12.89%) and Washington (6.35%). Loan Group II consists of 382 conventional, fully amortizing, 30- year fixed-rate, mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of $75,015,291. The mortgage pool has a weighted average OLTV ratio of 77.2%. The pool has a weighted average FICO score of 722, and approximately 51.49% and 5.06% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Equity refinance loans account for 32.63%, and there are no second homes. The average loan balance of the loans in the pool is $196,375. The three states that represent the largest portion of the loans in the pool are Florida (14.89%), Texas (9.09%) and California (8.77%). Loan Group III consists of 538 conventional, fully amortizing, 30- year fixed-rate, mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of $132,838,393. The mortgage pool has a weighted average OLTV ratio of 76.3%. The pool has a weighted average FICO score of 721, and approximately 48.42% and 7.53% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Equity refinance loans account for 32.68%, and there are no second homes. The average loan balance of the loans in the pool is $246,912. The three states that represent the largest portion of the loans in the pool are California (29.03%), Florida (14.93%) and Arizona (5.22%). All of the group I loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers as in the prospectus, except in the case of 41.3% of the group I loans, which were purchased by the depositor from HomeComings Financial Network, Inc., or HomeComings, a wholly owned subsidiary of the master servicer. Approximately 10.1% of the group I loans were purchased from First National Bank of Nevada, an unaffiliated seller. Except as described in the preceding sentence, no unaffiliated seller sold more than 7.4% of the group I loans to Residential Funding. Approximately 84.7 and 0.8% of the group I loans are being or will be subserviced by HomeComings and GMAC Mortgage Corporation, respectively. GMAC Mortgage Corporation is an affiliate of the master servicer and the depositor. All of the group II loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers as described in the prospectus, except in the case of 11.0% of the group II loans, which were also purchased by the depositor from HomeComings. Approximately 22.0%, 12.2%, and 10.7% of the group II loans were purchased from First National Bank of Nevada, National City Mortgage Company, and CTX Mortgage Company, LLC, respectively, each unaffiliated sellers. Except as described in the preceding sentence, no unaffiliated seller sold more than 8.4% of the group II loans to Residential Funding. Approximately 80.0% of the group II loans are being or will be subserviced by HomeComings. All of the group III loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers as described in the prospectus, except in the case of 17.7% of the group III loans, which were also purchased by the depositor from HomeComings. Approximately 15.8%, 13.7%, and 10.0% of the group III loans were purchased from CTX Mortgage Company, LLC, Universal American Mtg. Co., LLC, and Wachovia Mortgage Corp., respectively, each an unaffiliated seller. Except as described in the preceding sentence, no unaffiliated seller sold more than 6.8% of the group III loans to Residential Funding. Approximately 81% of the group I loans are being or will be subserviced by HomeComings. None of the mortgage loans were subject to the Home Ownership and Equity Protection Act of 1994. Furthermore, none of the mortgage loans are loans that, under applicable state or local law in effect at the time of origination are referred to as 'high-cost' or 'covered' loans, or any other similar designation if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points and/or fees. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003 entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' available on the Fitch Ratings web site at http://www.fitchratings.com/ The mortgage loans were originated under GMAC-RFC's Expanded Criteria Mortgage Program (Alt-A program). Alt-A program loans are often marked by one or more of the following attributes: a non-owner-occupied property, the absence of income verification, or a loan-to-value ratio or debt service/income ratio that is higher than other guidelines permit. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. Deutsche Bank Trust Company Americas will serve as trustee. RALI, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as three real estate mortgage investment conduits. RESIDENTIAL ACCREDIT: Fitch Rates $854,600 Class B Certs. at BB --------------------------------------------------------------- Fitch rates Residential Accredit Loans, Inc. mortgage pass-through certificates, series 2005-QS11: -- $202,961,402 classes A-1 through A-5, A-P, A-V, R-I, and R- II certificates (senior certificates) 'AAA'; -- $5,341,600 class M-1 'AA'; -- $1,816,000 class M-2 'A'; -- $1,281,800 class M-3 'BBB'. -- In addition, the following privately offered subordinate certificates are rated by Fitch as follows: -- $854,600 class B-1 'BB'; -- $747,800 class B-2 'B'; -- $641,035 class B-3 and is not rated by Fitch. The 'AAA' rating on the senior certificates reflects the 5.00% subordination provided by the 2.50% class M-1, the 0.85% class M- 2, the 0.60% class M-3, the privately offered 0.40% class B-1, the 0.35% privately offered class B-2 and the 0.30% privately offered class B-3. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Residential Funding Corp.'s servicing capabilities (rated 'RMS1' by Fitch) as master servicer. As of the cut-off date, July 1, 2005, the mortgage pool consists of 1,105 conventional, fully amortizing, 30-year fixed-rate, mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of $213,644,237. The mortgage pool has a weighted average original loan-to-value ratio of 75.5%. The pool has a weighted average FICO score of 726, and approximately 54.44% and 4.71% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Equity refinance loans account for 31.21%, and second homes account for 2.98%. The average loan balance of the loans in the pool is $193,343. The three states that represent the largest portion of the loans in the pool are California (20.74%), Florida (13.10%) and Texas (10.69%). All of the mortgage loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers as described in this prospectus supplement and in the prospectus, except in the case of 19.2% of the mortgage loans, which were purchased by the depositor through its affiliate, Residential Funding, from HomeComings Financial Network, Inc., or HomeComings, a wholly owned subsidiary of the master servicer. Approximately 15.1% and 10.2% of the mortgage loans were purchased from CTX Mortgage Company, LLC and Universal American Mortgage Co., LLC, respectively, each an unaffiliated seller. Except as described in the preceding sentence, no unaffiliated seller sold more than 9.7% of the mortgage loans to Residential Funding. Approximately 82.1% of the mortgage loans are being subserviced by HomeComings. None of the mortgage loans were subject to the Home Ownership and Equity Protection Act of 1994. Furthermore, none of the mortgage loans are loans that, under applicable state or local law in effect at the time of origination of the loan are referred to as (1) 'high-cost' or 'covered' loans or (2) any other similar designation if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points and/or fees. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003 entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation', available on the Fitch Ratings web site at http://www.fitchratings.com/ The mortgage loans were originated under GMAC-RFC's Expanded Criteria Mortgage Program (Alt-A program). Alt-A program loans are often marked by one or more of the following attributes: a non-owner-occupied property; the absence of income verification; or a loan-to-value ratio or debt service/income ratio that is higher than other guidelines permit. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. Deutsche Bank Trust Company Americas will serve as trustee. RALI, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as two real estate mortgage investment conduits. RESIDENTIAL FUNDING: Fitch Puts Low-B Rating on 2 Class B Certs. ---------------------------------------------------------------- Fitch rates Residential Funding Mortgage Securities I, Inc.'s mortgage pass-through certificates, series 2005-S5: -- $251,004,573 classes A-1 through A-8, A-P, A-V, R-I, and R- II certificates (senior certificates) 'AAA'; -- $3,744,900 class M-1 'AA'; -- $1,420,300 class M-2 'A' -- $774,700 class M-3 'BBB'. -- $516,500 class B-1 'BB'; -- $387,400 class B-2 'B'. The $387,364 class B-3 is not rated by Fitch. The 'AAA' rating on the senior certificates reflects the 2.80% subordination provided by the 1.45% class M-1, the 0.55% class M- 2, the 0.30% class M-3, the 0.20% privately offered class B-1, the 0.15% privately offered class B-2, and the 0.15% privately offered class B-3. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults, as well as bankruptcy, fraud, and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Residential Funding Corp.'s master servicing capabilities (rated 'RMS1' by Fitch). As of the cut-off date, July 1, 2005, the mortgage pool consists of 541 conventional, fully amortizing, fixed-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of approximately $258,235,737. The mortgage pool has a weighted average original loan-to-value ratio of 69.39%. The weighted-average FICO score of the loans in the pool is 747, and approximately 76.03% and 4.23% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Loans originated under a reduced loan documentation program account for approximately 15.91% of the pool, equity refinance loans account for 26.01%, and second homes account for 3.28%. The average loan balance of the loans in the pool is approximately $477,330. The three states that represent the largest portion of the loans in the pool are California (22.63%), Virginia (13.75%), and Maryland (7.36%). None of the mortgage loans were subject to the Home Ownership and Equity Protection Act of 1994. Furthermore, none of the mortgage loans in the pool are mortgage loans that are referred to as 'high-cost' or 'covered" loans or any other similar designation under applicable state or local law in effect at the time of origination of such loan if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points, and/or fees. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation, dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ All of the mortgage loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers except in the case of 17.2% of the mortgage loans, which were purchased by the depositor through its affiliate, Residential Funding, from HomeComings Financial Network, Inc., a wholly owned subsidiary of the master servicer. Approximately 26.3% and 18.7% of the mortgage loans were purchased from Provident Funding Association and First Savings Mortgage Corporation, respectively, each an unaffiliated seller. Except as described in the preceding sentence, no unaffiliated seller sold more than approximately 8.1% of the mortgage loans to Residential Funding. Approximately 26.3% of the mortgage loans are being subserviced by Provident Funding Association. Approximately 67.8% of the mortgage loans are being subserviced by HomeComings Financial Network, Inc. (rated 'RPS1' by Fitch). U.S. Bank National Association will serve as trustee. RFMSI, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as one real estate mortgage investment conduit. RYAN'S RESTAURANT: Asking Lenders for Covenant Waivers ------------------------------------------------------ Ryan's Restaurant Group, Inc. (Nasdaq: RYAN) disclosed that it has not met the fixed charge coverage ratio covenants in its various debt agreements, as a result of lower net earnings in the present and prior quarters. At June 29, 2005, the Company's fixed charge coverage ratio, which is defined consistently in all of its debt agreements, was 2.05 times compared to the minimum requirement of 2.25 times. The Company stated that it has been in contact with its lenders throughout the quarter regarding this possibility and have been informed that they intend to grant the restaurant group a waiver for this covenant violation. Based on the Company's projections, it appears likely that it will not be able to meet the 2.25 times requirement for the next several quarters. The Company met all other debt covenants at June 29, 2005, and do not anticipate having any trouble complying with the other covenants in its debt agreements in the foreseeable future. "Our lenders have indicated that they will work with us to amend the minimum fixed charge coverage ratio requirement and possibly other requirements and limitations for our third quarter and forward," Charles D. Way, CEO of the Company, said. "Until the credit agreements are amended, our debt will be classified as current on our balance sheet." Ryan's Restaurant Group, Inc. (a South Carolina corporation formerly known as Ryan's Family Steak Houses, Inc.) and Fire Mountain Restaurants, Inc. (a Delaware corporation formerly known as Ryan's Family Steak Houses East, Inc.) are the borrowers under a Credit Agreement dated as of December 20, 2004, with a consortium of lenders led by Bank of America, N.A. Ryan's also has $75,000,000 of 9.02% Senior Notes due January 28, 2008, and $100,000,000 of 4.65% Senior Notes due July 25, 2013, outstanding. Second Quarter 2005 Second quarter restaurant sales were $215,510,000 in 2005 compared to $216,546,000 for the comparable quarter in 2004. Net earnings for the quarter amounted to $6,260,000 in 2005 and $14,170,000 in 2004. Earnings per share (diluted) amounted to 15 cents in 2005 compared to 33 cents in 2004. For the six months ended June 29, 2005, restaurant sales amounted to $425,149,000 compared to $428,203,000 for the comparable period in 2004. Net earnings were $18,073,000 in 2005 and $29,530,000 in 2004. Earnings per share (diluted) were 42 cents in 2005 compared to 68 cents in 2004. "Our financial results for the second quarter were affected by weak sales and higher costs," Mr. Way said. "During the quarter, we also took a $5 million charge to reflect the estimated minimum settlement of ongoing wage/hour litigation. In spite of promising sales results during the second quarter's holiday periods, we were disappointed with our same-store sales, which decreased by 4% for the quarter. "While we believe that our customers' discretionary spending continues to be adversely impacted by high energy costs, we also understand that we must continually examine our strategies in order to attract and retain customers. Accordingly, our operations leadership team has held numerous meetings to re-focus on our restaurant operations standards, particularly those concerning staffing and exterior appearance. We continue to implement "theme nights" at our restaurants and are testing a buffet breakfast on Saturdays and Sundays at selected locations. We believe that breakfast represents an excellent way to increase sales that produce good margins without a significant investment, and we are excited about its potential impact on sales and profits." Restaurant-level margins for the second quarter were impacted by higher hourly labor charges as well as by higher energy and general liability insurance costs. Mr. Way added: "We continue to believe that higher staffing levels, which we implemented at the beginning of 2005, contribute to better customer service, which is obviously important for customer retention. Just like our customers, Ryan's is also impacted by higher electricity and natural gas costs. General liability insurance costs, which are based largely on the estimated future costs of claims, increased due to higher cost projections and by a $750,000 favorable adjustment in the second quarter of 2004. Restaurant-level costs were also affected by an $838,000 impairment charge related to an under-performing restaurant, which we have decided to close and sell. This charge is included in other restaurant expenses in the accompanying consolidated financial statements. Food costs increased slightly from the second quarter of 2004. Beef costs decreased slightly during the quarter, and we are very encouraged by the recent U.S. Circuit Court decision that may allow Canadian beef imports in the future. This development could potentially increase beef supplies and therefore lower our operating costs." General and administrative expenses increased principally due to a $5 million charge to reflect the estimated minimum settlement for a wage/hour lawsuit that was filed in November 2002. At this time, the Company disclosed that it is negotiating a potential settlement with the plantiffs' attorney in order to avoid lengthy and costly court proceedings and will soon enter into a mediation process in hopes of reaching a mutually acceptable settlement. New Restaurants So far in 2005 the Company has opened nine restaurants, including two relocations, and plan to open another six restaurants, including two potential relocations, during the remainder of the year for a total of 15 new restaurants during 2005. All six restaurants planned for the remainder of 2005 are currently under construction. The Company plans to build nine new restaurants, including three potential relocations, in 2006. "We believe that this reduction in new store expenditures will not only conserve cash flow, but will also allow us to spend more time to focus on building same-store sales at our existing restaurants," Mr. Way said. At June 29, 2005, the Company owned and operated 346 restaurants. As disclosed in the Company's reports filed with the Securities and Exchange Commission, the franchise relationship with the Company's remaining franchisee terminated on June 30, 2005. Accordingly, there will be no franchised restaurants operating after the second quarter of 2005. Ryan's Restaurant Group, Inc. -- http://www.ryans.com/-- operates a restaurant chain consisting of 344 Company-owned restaurants located principally in the southern and midwestern United States and receives franchise royalties from an unrelated third-party franchisee that operates four restaurants (as of March 30, 2005) in Florida. The Company's restaurants operate under the Ryan's or Fire Mountain brand names, but are viewed as a single business unit for management and reporting purposes. A Fire Mountain restaurant offers a selection of foods similar to a Ryan's restaurant with display cooking and also features updated interior furnishings, an upscale food presentation and a lodge- look exterior. The Company was organized in 1977, opened its first restaurant in 1978 and completed its initial public offering in 1982. The Company does not operate or franchise any international units. RYDAHL INDUSTRIES: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Rydahl Industries, Inc. 8116 Ride All Drive Greenville, Michigan 48838 Bankruptcy Case No.: 05-10428 Type of Business: The Debtor operates a portable stone crushing and screening plant. Chapter 11 Petition Date: July 27, 2005 Court: Western District of Michigan (Grand Rapids) Judge: Jo Ann C. Stevenson Debtor's Counsel: Perry G. Pastula, Esq. Dunn Schouten & Snoap PC 2745 DeHoop Avenue Southwest Wyoming, Michigan 49509 Tel: (616) 538-6380 Total Assets: $3,915,500 Total Debts: $2,623,582 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ J & H Oil Company $51,400 P.O. Box 9464 Wyoming, MI 49509-0464 AIS $24,000 600-44th Street Southwest Grand Rapids, Michigan 49548 Wonderland Tire Company $18,589 294-84th Street Southwest Byron Center, Michigan 49315 Barber Creek Sand and Gravel $13,000 Superior Asphalt Inc. $12,655 AIS $12,000 Michigan Valley Irrigation $11,948 Hammer Builders $6,800 Michigan Dept. of Environment $6,800 Wolverine Tractor & Equipment Co. $6,108 Meekhof Tire Sales & Service Inc. $5,868 Law Weathers & Richardson $4,862 Greenville Truck & Welding $3,485 Certified Laboratories $2,935 STS Consultant $2,737 Barrie Electric $2,278 RPM, Inc. $1,854 Transport Repair Service Inc. $1,800 Law Offices of Ryan Villet PC $1,787 Yellow Book USA $1,753 ROBERT CHARLES: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Robert Charles Enterprises, Inc. 2533 Brunswick Avenue Linden, New Jersey 07036 Tel: (908) 523-0330 Bankruptcy Case No.: 05-34339 Type of Business: The Debtor is a contractor. Chapter 11 Petition Date: July 29, 2005 Court: District of New Jersey (Newark) Debtor's Counsel: Morris S. Bauer, Esq. Ravin Greenberg PC 101 Eisenhower Parkway Roseland, New Jersey 07068-1028 Tel: (973) 226-1500 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Ohio Bridge Corporation $325,000 Cambridge, OH 43725-0757 Skyline Steel Corporation $307,000 8 Woodhollow Road Parsippany, NJ 07054 Steadfast Bridges $105,801 4021 Gault Avenue Fort Payne, AL 35967 Schuylkill Products, Inc. $80,186 The Hartford $64,127 Davidson Pipe Supply Company $56,692 Carpenters Benefit Fund $53,676 Steel Services, LLC $49,780 Laborers' Local Union #472 & 172 Fund $44,753 H&GL Welfare $44,753 Nobel Equipment $42,183 D.S. Brown Company $41,732 Jensen Koerner $41,107 Hiway & Safety Service I $40,469 TT Industrial Welding $39,000 Savastano & Kaufam $36,905 Pekar Abramson $32,441 State of New Jersey $32,285 American Pile Driving Equipment $30,641 New Jersey Carpenters Fund $24,493 ROSLYN TORAH: List of 9 Largest Unsecured Creditors --------------------------------------------------- Roslyn Torah Foundation, released a list of its 9 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Toshiba $12,229 P.O. Box 642000 Pittsburgh, PA 15264-2000 LIPA $11,063 P.O. Box 886 Hicksville, NY 11802-0886 Castle $5,350 P.O. Box 329 Harrison, NY 10528-0329 Kandi King $786 Garden City Park Water District $500 Galil Roofing $375 Marlin Leasing Corp. $212 Spectrotel $198 Cablevision of LI $149 Headquartered in Roslyn, New York, Roslyn Torah Foundation operated a Jewish synagogue. The Company filed for chapter 11 protection on May 24, 2005 (Bankr. E.D.N.Y. Case No. 05-83632). Floyd G. Grossman, Esq., at Dollinger, Gonski & Grossman, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of $1 million to $10 million. ROUGE INDUSTRIES: Wants Removal Period Extended to Oct. 17 ---------------------------------------------------------- Rouge Industries, Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend by three months -- to October 17, 2005 -- the time within which they may file notices of removal of related proceedings. The Debtors are party to approximately 61 civil actions and proceedings pending in various state and federal courts. For these reasons, they have been unable to make an informed decision regarding the removal of any claims, proceedings or civil causes of action prior to the current deadline. Headquartered in Dearborn, Michigan, Rouge Industries, Inc., an integrated producer of flat-rolled steel, filed for chapter 11 protection on October 23, 2003 (Bankr. D. Del. Case No. 03-13272). Donna L. Harris, Esq., Robert J. Dehney, Esq., Eric D. Schwartz, Esq., Gregory W. Werkheiser, Esq., and Alicia B. Davis, Esq., at Morris, Nichols, Arsht & Tunnell represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $558,131,000 in total assets and $558,131,000 in total debts. On Dec. 19, 2003, the Court approved the sale of substantially all of the Debtors' assets to SeverStal N.A. for $285.5 million. The Asset Sale closed on Jan. 30, 2005. SATMEX: Creditors Reach Pact Resolving Involuntary Ch. 11 Petition ------------------------------------------------------------------ The group of petitioning secured and unsecured noteholders reached a settlement with Satelites Mexicanos, S.A. de C.V. regarding the noteholders' involuntary chapter 11 petition and Satmex's motion to dismiss the petition on jurisdictional grounds. The ad hoc committees of holders of the: -- Senior Secured Floating Rate Notes due 2004, and -- 10-1/8% Senior Notes due 2004, are made up of U.S.-based creditors holding collectively in excess of $385 million of Satmex's outstanding debt. Settlement Terms As part of the settlement, Satmex has committed to present a restructuring proposal to the creditors by Oct. 31, 2005. Under the agreement in principle reached between the parties, Satmex will file a petition under section 304 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. Upon the commencement of a 304 proceeding, the creditors will withdraw their involuntary petition. Section 304 of the Bankruptcy Code allows a foreign debtor (such as Satmex) to commence a proceeding that is ancillary (or related) to a foreign proceeding (such as Satmex's Concurso Mercantil). Section 304 also allows a U.S. Bankruptcy Court to protect assets or property of a debtor that are in the U.S. by issuing an injunction preventing any action against that property. Under the terms of the agreement in principle, the creditors have reserved the right to make a motion to the U.S. Bankruptcy Court seeking the dismissal of the 304 petition or the termination of any injunction ordered by the Court upon the occurrence of certain conditions. These conditions include any attempt to revoke or terminate Satmex's concessions, and any failure of Satmex to present a restructuring proposal to the Creditors by Oct. 31, 2005. The creditors also have the right to come back to the U.S. Bankruptcy Court seeking relief if Satmex 6 is not launched by June 30, 2006. The creditors are pleased that the parties reached this consensual resolution of the involuntary Chapter 11 petition. They are also pleased that the U.S. Bankruptcy Court will have a role in the restructuring of Satmex, providing a forum for the creditors to seek relief if there is any misconduct or other improper activities in connection with the Concurso Mercantil proceedings. Among other things, section 304 provides that U.S. Bankruptcy Courts should be "guided by what will best assure an economical and expeditious administration of [the debtor's] estate, consistent with ... protection of claim holders in the United States against prejudice and inconvenience in the processing of claims in such foreign proceeding." 11 U.S.C. section 304 (c)(2). Nevertheless, the creditors echo the sentiments of presiding U.S. Bankruptcy Court Judge Robert Drain, who said at the hearing, "It is my hope, that I hold very strongly, that it will proceed smoothly now and all of the key parties will be able to work together to facilitate Satmex's restructuring." By removing procedural question-marks, the Creditors are hopeful that Satmex, its equity holders, and especially the Mexican Government are now willing to engage in good faith restructuring talks, which were terminated by the Company after an agreement-in-principle had been reached with the Creditors in December 2004. While the creditors continue to believe that a Chapter 11 restructuring in the U.S. would have been the best process for restructuring the Company's debt, the Creditors are prepared to engage in a Mexican proceeding if that is what is required to achieve a restructuring of Satmex in a timely manner. At the conclusion of Friday's hearing, Judge Drain commented on the creditors' concerns about the Mexican restructuring process and the potential for misconduct or inappropriate behavior, "I recognize the fears the bondholders have. But I have confidence and hope those fears will be unfounded." The creditors also echo these sentiments from Judge Drain. Headquartered in Mexico, Satelites Mexicanos, S.A. de C.V., derives over 50% of its revenues from United States business, and all of the Company's over US$500 million in debt was issued in the United States and is governed by New York law. The Company's largest shareholder, Loral Space & Communications Ltd., is a United States public company also undergoing a Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. The Company is forced into chapter 11 by a group of secured and unsecured noteholders on May 25, 2005 (Bankr. S.D.N.Y. Case No. 05-13862). The noteholders are represented by Wilmer Cutler Pickering Hale and Dorr LLP and Akin Gump Strauss Hauer & Feld LLP. Evercore Partners is the financial advisor to the Senior Secured Floating Rate Noteholders. Chanin Capital Partners is the financial advisor to the 10-1/8% Senior Noteholders. On June 29, 2005, the Debtor filed a voluntary concurso mercantil to restructure under Mexican laws, and later moved to dismiss the involuntary Chapter 11 petition in the U.S. SECURITY CAPITAL: Taps McGladrey & Pullen to Audit 2005 Financials ------------------------------------------------------------------ Security Capital Corporation (AMEX: SCC) disclosed that the Audit Committee of the Board of Directors has engaged McGladrey & Pullen, LLP, an independent registered public accounting firm, to audit and report on the financial statements of the Company for the fiscal year ended Dec. 31, 2005, and to perform a review of the Company's interim financial information for the 2005 first, second and third quarters. The Company's engagement of McGladrey was effective on July 25, 2005. Quarterly Filing Delay On July 22, 2005, the Company notified the American Stock Exchange that it will be unable to file its Form 10-Q for the quarter ended March 31, 2005, by July 29, 2005, as the Company had previously reported. The further delay in the filing of the First Quarter Form 10-Q is due, in part, to the necessary time needed in order for McGladrey to review of the Company's financial statements. The Company informed the AMEX that it currently expects that it will be in a position to file the First Quarter Form 10-Q by Aug. 31, 2005. As a result of the delayed filing of the First Quarter Form 10-Q, the Company will not be able to timely file its Form 10-Q for the quarter ended June 30, 2005 and has informed the AMEX that it currently expects to be in a position to file the Second Quarter Form 10-Q by Sept. 15, 2005. The Company said it currently expects to announce estimated operating results for the second quarter of 2005 by Aug. 15, 2005. Waivers At Dec. 31, 2004, WC Holdings, Inc., maintained an $8,000 revolving line of credit, and Primrose maintained a $1,000 revolving line of credit. The WC Revolver was replaced with the Amended WC Revolver on March 31, 2005. There were no borrowings under the WC Revolver or the Primrose Revolver at Dec. 31, 2004. Management believes that cash flow from operations along with the available borrowing capacity under the Revolvers will be sufficient to fund Security Capital's operations and service its debt for the next 12 to 24 months. As a result of the transactional, financial and operational relationships between the CompManagement, Inc., companies and certain members of CMI Management, and the failure to obtain the lender's prior written consent for certain acquisitions and other actions taken during 2004, WC was in default of certain covenants under the WC Revolver and the WC Term Debt. WC had obtained a waiver from the lender for these events of default prior to the filing of its Form 10-Q for the quarter ended Sept. 30, 2004. The Term Loan and Amended WC Revolver contain restrictive covenants that prohibit or limit certain actions, including specified levels of capital expenditures, investments and incurrence of additional debt, and require the maintenance of a minimum fixed charge ratio. Borrowings are secured by a pledge of substantially all assets at the subsidiary level, as well as a pledge of the Company's ownership in the subsidiary. The Credit Agreement contains provisions that required WC to deliver audited financial statements for 2004 to the lender by the end of April and require WC to deliver monthly financial statements beginning April 2005. WC has obtained a waiver from the lender until June 30, 2005, to deliver audited financial statements for 2004 and until Aug. 31, 2005, to begin delivering monthly financial statements. Security Capital Corporation operates as a holding company and participates in the management of its subsidiaries, WC Holdings, Primrose Holdings Inc. and Pumpkin Masters Holdings Inc. The Company's two reportable segments are employer cost containment and health services, and educational services. The employer cost containment and health services segment consists of WC Holdings, Inc., which provides services to employers and their employees primarily relating to industrial health and safety, industrial medical care, workers' compensation insurance and the direct and indirect costs associated therewith. The educational segment consists of Primrose Holdings, Inc., which is engaged in the franchising of educational child-care centers, with related activities in real estate consulting and site selection services in the Southeast, Southwest and Midwest. WC is an 80%-owned subsidiary that provides cost-containment services relative to direct and indirect costs of corporations and their employees primarily relating to industrial health and safety, industrial medical care and workers' compensation insurance. WC's activities are primarily centered in California, Ohio, Virginia, Maryland and, to a lesser extent, in other Middle Atlantic states, Indiana and Washington. Primrose is a 98.5%- owned subsidiary involved in the franchising of educational childcare centers. Primrose schools are located throughout the United States, except in the Northeast and Northwest. Pumpkin is a wholly owned subsidiary engaged in the business of designing and distributing Halloween-oriented pumpkin carving kits and related accessories. SHURGARD STORAGE: Fitch Cuts Rating on Sr. Unsecured Debt to BBB- ----------------------------------------------------------------- Fitch Ratings downgraded these ratings for Shurgard Storage Centers, Inc.: -- Senior unsecured debt to 'BBB-' from 'BBB'; -- Preferred stock to 'BB+' from 'BBB-'. The Rating Outlook remains Negative. Approximately $585 million of debt and preferred securities are affected by Fitch's action. The lowering of Shurgard Storage Centers, Inc.'s senior unsecured and preferred stock ratings reflect a weakening trend in interest coverage metrics over the past two years to 1.8 times (x) as of March 31, 2005. This is coupled with the company's progression to 53% debt leverage as of March 31, 2005 from 43% at the end of 2003. The company's heightened leverage metrics are further exacerbated by the recent buyout of their last remaining partner, Fremont Realty Capital, in Shurgard Europe, the company's 100% owned division in Europe. These metrics coupled with the continued slower than expected ramp-up in Europe suggest a 'BBB-' stance. The Rating Outlook remaining on Negative indicates Fitch's view that there is possible further downside risk in the company's credit metrics as SHU continues to expand in Europe. The company's coverage levels have been trending negatively for much of the past 12 months due in part to increased interest expense as well as increased operating expense. Additionally, with approximately $135 million remaining available on the company's line (pro forma the Fremont acquisition); Fitch views this level of liquidity low for an investment grade company. Fitch believes Shurgard currently has an over reliance on their revolving credit facility and would prefer to see consistent demonstrated access to multiple forms of capital. As a result of the company's previous non-timely filer status on its Form 10-K, Shurgard's shelf registration statement remains invalid until the end of 2005 and while alternative capital raising options are available, such as a private placement via 144A, execution on these transactions is less than optimal. With that said, Fitch notes that the company does have liquidity through the sale of assets. The storage sector has received a lot of focus from the capital markets lately with two IPO's of storage companies (U-Store-It Trust and Extra Storage Space Inc.) in the last 12 months and a large M & A transaction with Extra Storage Space and Prudential Real Estate acquiring GE Commercial Finance's Storage USA unit for $2.3 billion. Fitch recognizes that the company has successfully undertaken several key initiatives to improve financial management and internal controls. In the last 12 months, Shurgard has hired: a new CFO; a new CAO; a new director of internal audit; a new tax director; and made other improvements to its reporting and controls. All of the professionals added to the company's roster have the requisite experience in the public and private sector to successfully build a strong financial infrastructure. Additionally, the company now has approximately 20 CPAs on staff and has implemented many technology related programs to bolster the reporting infrastructure. Finally, Fitch acknowledges the strength of company's board of directors with 70% of the board being independent with significant experience being contributed by executives (current or former) from Ernst & Young, Touche Ross & Co., Starbucks and Nordstrom. Earnings before interest, taxes, depreciation and amortization coverage ratios for the last 12 months ending March 31, 2005 weakened on a quarter-over-quarter basis as the company began to fully consolidate its European operations. For the quarter ended March 31, 2005, the company recorded total interest coverage of 1.8x down from year-end 2004 coverage of 2.2x. These measures are down significantly from 2003 interest coverage of 3.2x (the 2003 coverage does not include the consolidation of Shurgard Europe). Although occupancy continues to grow in Europe, the company maintains large infrastructure costs put in place ahead of each European roll-out that are expensed across the portfolio. From a leverage standpoint, Shurgard's leverage has increased consistently since 2003. Total effective leverage (measured as total debt plus total preferred securities as a percent of total undepreciated capital) measured 56.6% as of the end of the first quarter of 2005. This represents a 300 bps increase from the same period in 2004. Additionally, secured debt has become a major component of the company's capital structure following the European CMBS financing in 2004. As a percent of total debt capital of the company, secured debt represents 48.2%. As a percent of undepreciated book capital, secured debt measures 25.3%. The company's leverage level and secured component is more reflective of the profile of a 'BBB-' rating. Pro forma the Fremont transaction, Fitch estimates the company has approximately $135 million available under their $350 million unsecured revolving credit facility. The company does have commitments to purchase properties and domestic construction commitments that will likely be funded with borrowings on their line. These commitments estimated to be between $30 million and $40 million further diminish capital and leaves approximately $100 million available to address debt maturities and other capital needs associated with operating a global portfolio. Fitch estimates unencumbered asset coverage of total unsecured debt outstanding to be 1.9x. This metric includes the value for the domestic assets only due to the fact that the European assets are pledged to the European CMBS financing. The 1.9x coverage is an adequate measure for the 'BBB-' rating category. Shurgard Storage Centers, Inc. is one of the world's largest owners and operators in the self-storage industry with 634 properties containing approximately 40 million net rentable square feet under management in 22 states as well as Belgium, France, the Netherlands, the United Kingdom, Sweden, and Denmark. The company has a diversified revenue base with the company's top five domestic markets being California (12.3% of 2004 revenue), Washington State (9.4%), Texas (9.1%), Virginia (5.8%) and Florida (5.7%). Domestically, no other single market accounts for more than 4.1% of revenue. Combined, Shurgard's seven European regions accounted for 24% of 2004 revenue, with France being the largest contributor at 6.4%. Shurgard, a $3.2 billion (undepreciated book capitalization) real estate investment trust, has its invested capital split 64% (of asset value) in the United States with Europe accounting for 36%. More information about Shurgard Storage Centers, Inc. can be found on the Fitch Ratings web site at http://www.fitchratings.com/ SIRVA WORLDWIDE: Moody's Cuts $665 Million Debts' Rating to Ba3 --------------------------------------------------------------- Moody's Investors Service has lowered the ratings of SIRVA Worldwide Inc., Corporate Family (previously called Senior Implied) Rating to B2 from Ba3. The rating outlook is negative. This concludes the ratings review commenced on February 22, 2005 following SIRVA, Inc.'s (parent of SWI) disclosure of series of financial charges at SWI's Insurance and European business units, as well as lower than expected operating margins. The downgrade reflects: * an increased level of uncertainty in assessing the company's financial condition and long-term earnings prospects given the continuing delay by SIRVA, Inc.; * in filing the required Form 10-K for fiscal year 2004 and the interim financial information; * Moody's view of diminished financial strength at SWI as implied by the nature of the financial charges announced by SIRVA Inc.; and * the negative effects that the recently disclosed material weaknesses in accounting controls and reporting systems have on the quality of the company's management information systems and reported financial results. SIRVA has disclosed that its internal controls over financial reporting were ineffective as of December 31, 2004, causing it to evaluate the its internal control structure and financial reporting procedures to comply with reporting requirements prescribed by Section 404 of the Sarbanes-Oxley Act. Moody's views the weakness cited to be sufficient to impact ratings, as the adequacy of financial reporting systems, personnel and training is called into question. Moreover, as the company's business model is one that focuses on providing moving services by way of a broad network of affiliates globally, as opposed to a centralized and asset-intensive transportation operation, Moody's views the integrity of the oversight of these businesses and the various services they provide to be paramount to the financial success and credit strength of the company. As such, the uncertainty as to adequacy of controls over operations or financial reporting of SIRVA's business units, regardless of the effect charges will have on financial statements, has a significant negative impact on the company's credit profile. The negative outlook reflects uncertainty of the long term financial strength of the company as a result of the disclosed inadequate financial controls. Moody's also notes that the full impact from any restructuring that the company undertakes to remediate problems associated with its management controls and financial reporting systems are not yet fully known. Ratings could be subject to further downward revision with any further delay in filing audited FY 2004 financial statements beyond SIRVA's September 30, 2005 estimated filing date, or with a significant further increase in the financial charges which could suggest additional issues from its operational reviews that are more serious than expected. Ratings could also be lowered if SWI's lenders do not agree to additional waivers or amendments to terms of the senior credit facility, if needed, or if the now- formal SEC investigation, or any lawsuit, were to result in a judgment against the company. The outlook could be changed to stable if: * the company files the required financial reports within the time schedule specified with a clean audit opinion, along with bank facility covenant compliance certificates, with no further unanticipated charges to report; * demonstrates a level of financial controls sufficient to operate its diverse business operations; and * is able to quickly restore strong operating margins in its core business units. According to the company, the continuing delay in filing the required Form 10-K by SIRVA, Inc. is caused by the on-going preparation of restated financial statements. On January 31, the company announced that it had identified $21 to $25 million in pre-tax charges that would be recorded in the fourth quarter of 2004 relating to, among other items, certain accounting errors. On June 20, 2005, the company revised its estimate of fourth quarter 2004 pre-tax charges to approximately $45 million, $27 million of which would require the restatement of prior quarterly and annual financial statements. As a result of the restatement, pre-tax income for the first nine months of 2004 is expected to reduce by about $17 million. Prior-years' income is estimated to be reduced by smaller increments. The $45 million charge represents a significant increase from the original estimate of $21-25 million, announced in January 2005. While modest relative to the company's revenue base ($2.6 billion in sales, LTM September 2004), the charge is a substantial portion of LTM EBITDA. Moreover, Moody's believes that the nature of the charges, which are still subject to revision until reports are actually filed, may suggest that the company's long-term operating profitability and cash flow levels for on-going business operations may not be as robust as originally considered. These ratings have been downgraded: SIRVA Worldwide, Inc.: * $175 million senior secured revolving credit facility, to B2 from Ba3; * $490 million senior secured term loan B, to B2 from Ba3; * Corporate family rating to B2 from Ba3 SIRVA Worldwide, Inc., headquartered in Westmont, Illinois, is a wholly-owned operating subsidiary of SIRVA, Inc. SIRVA, Inc., is a leader in providing relocation solutions to a diverse customer base around the world. The company operates in more than 40 countries with approximately 7,000 employees and an extensive network of agents and other service providers. SIRVA's brands include: * Allied, northAmerican, Global, and SIRVA Relocation in North America; * Pickfords, Huet International, Kungsholms, ADAM, Majortrans, Allied Arthur Pierre, Rettenmayer, and Allied Varekamp in Europe; and * Allied Pickfords in the Asia Pacific region. SIRVA Worldwide had LTM September 2004 revenues of $2.6 billion. SOLUTIA INC: Court OKs Extension of $500MM DIP Pact to June 2006 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approves the third amendment to Solutia, Inc., and its debtor- affiliates' DIP Credit Agreement. The Third Amendment provides for: (a) a lower interest rate on the Term Loans; (b) a six-month extension of the term of the DIP Agreement to June 19, 2006; (c) an increase in the amount of cash proceeds Solutia may retain in connection with certain asset sales and Extraordinary Receipts before mandatory prepayment obligations are triggered; and (d) other miscellaneous modifications. Citicorp USA, Inc., as collateral agent, administrative agent, and documentation agent, obtained approval for the Third Amendment from 100% of the DIP Lenders. To secure the terms of the Third Amendment, Solutia is required to pay an arranging fee to the DIP Agent, as well as certain other costs, fees and expenses described in the Third Amendment. The Debtors, the DIP Lenders and the DIP Agent have negotiated these fees at arm's-length and in good faith. The Debtors have determined that the Amendment-Related Fees and Expenses are significantly less than the up to $8 million in annual interest savings that they could receive pursuant to the lower interest rates in the Third Amendment. As reported in the Troubled Company Reporter on June 24, 2005, the DIP Agreement is set to expire on December 19, 2005. While Solutia intends to make every effort to emerge from its Chapter 11 cases prior to that date, it is not certain that it can do so. Thus, Solutia wanted a six-month extension of the term of the DIP Agreement to provide it with additional time, if needed, to formulate and seek confirmation of its plan of reorganization. Solutia's management believes that Solutia should extend the facility now given the favorable lending market, rather than possibly being required later in the year to secure financing under significant time pressures. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. (Solutia Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOUTHWEST RECREATIONAL: Court Okays Committee's Rule 2004 Probe --------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia in Rome gave its stamp of approval to the request of the Official Committee of Unsecured Creditors of Southwest Recreational Industries, Inc., to conduct an examination under Rule 2004 of the Federal Rules of Bankruptcy Procedure. As previously reported, the Committee will conduct the probe in order to maximize recoveries for the Debtor's estate. The Committee will investigate: a) pre-petition contracts and the relationship between the Debtors and Zurich American Insurance Company; b) claims Zurich may hold against the Debtors and other matters relevant to the administration of the Debtors' bankruptcy estates. Zurich American allegedly provided workers' compensation, automobile liability and general liability insurance to the Debtors prior to their chapter 11 filings. The Committee claims that the insurance company holds certain property of the Debtors' estate as security for the payment of these insurance premiums. On May 18, 2005, Zurich requested payment of its administrative expense claim and asked the Court for priority treatment of a portion its claims. As part of its investigation, the Committee asks the Court to compel Zurich American to produce several documents related to its transactions with the Debtors. A list of these documents is available for free at http://bankrupt.com/misc/SouthwestDocs.pdf Headquartered in Leander, Texas, Southwest Recreational Industries, Inc. -- http://www.srisports.com/-- designs, manufactures, builds and installs stadium and arena running tracks for schools, colleges, universities, and sport centers. The company filed for chapter 11 protection on February 13, 2004 (Bankr. N.D. Ga. Case No. 04-40656). Jennifer Meir Meyerowitz, Esq., Mark I. Duedall, Esq., and Matthew W. Levin, Esq., at Alston & Bird, LLP, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, they listed $101,919,000 in total assets and $88,052,000 in total debts. On Aug. 11, 2004, Ronald L. Glass was appointed as Chapter 11 Trustee for the Debtors. Henry F. Sewell, Jr., Esq., Gary W. Marsh, Esq., at McKenna Long & Aldridge LLP represent the Chapter 11 Trustee. SSA GLOBAL: S&P Rates Proposed $225 Million Senior Loan at BB- -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to Chicago, Illinois-based SSA Global Technologies Inc. At the same time, Standard & Poor's assigned its 'BB-' rating, with a recovery rating of '3', to SSA Global's proposed $225 million senior secured bank facility, which will consist of a $25 million revolving credit facility (due 2010) and a $200 million term loan (due 2011). The bank loan rating, which is the same as the corporate credit rating, along with the recovery rating, reflect our expectation of meaningful (50%-80%) recovery of principal by creditors in the event of a payment default or bankruptcy. The proceeds from this facility will be used to refinance existing debt, and to add cash to the balance sheet. The outlook is negative. "The ratings reflect SSA Global's second-tier presence in a highly competitive and consolidating industry, rapid growth, and limited track record," said Standard & Poor's credit analyst Ben Bubeck. "These are only partially offset by a solid presence within its mid-market niche, a largely recurring revenue base across a broad customer base, and moderate debt leverage for the rating," he continued. SSA Global is a provider of enterprise software applications and services designed to increase operating efficiency and productivity by automating key business processes, such as accounting, inventory management, and payroll. SSA Global also offers extensions to these core functions, such as customer relationship, supplier relationship and product lifecycle management products. Pro forma for the proposed bank facility and the company's IPO in May 2005, SSA Global had approximately $265 million in operating lease-adjusted total debt as of April 2005. SUMMIT GENERAL: List of 20 Largest Unsecured Creditors ------------------------------------------------------ Summit General Contractors, Inc. N.W., d/b/a Summit, Inc., released a list of its 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service $780,000 Special Procedures 915 Second Avenue, M/S 244 Seattle, WA 98174 Hughes Supply, Inc. $527,725 P.O. Box 79382 City of Industry, CA 91716-9382 State of Washington $283,000 Department of Revenue P.O. Box 34051 Seattle, WA 98124 Active Excavator $176,081 Continental Western Group $114,288 Granite Precasting & Concrete, Inc. $89,163 Northwest Erosion Control, Inc. $62,989 Caterpillar Financial Services $54,015 Hertz Equipment Rental $39,327 Associated Petroleum $37,217 Machinery, Power & Equipment $33,122 Salinas Construction, Inc. $25,670 Nelson Petroleum $25,505 Fenceco, Inc. $23,742 Washington State $23,526 Department of Revenue Clyde West $23,440 National Barricade Co. $21,394 Department of L & I $21,000 Joplin Concrete, Inc. $18,058 AABCO Barricade $17,913 Headquartered in Issaquah, Washington, Summit General Contractors, Inc. N.W., d/b/a Summit, Inc., operated as a general contractor. The Company filed for chapter 11 protection on June 16, 2005 (Bankr. W.D. Wash. Case No. 05-17771). Larry B. Feinstein, Esq., at Vortman & Feinstein, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets of less than $50,000 and debts of $1 million to $10 million. SUNGARD DATA: Moody's Junks Proposed $1 Billion Subordinated Notes ------------------------------------------------------------------ Moody's Investors Service assigned a Caa1 rating to SunGard Data Systems' proposed offering of $1 billion subordinated notes due 2015, and affirmed the company's B3 senior unsecured rating, (P)B2 corporate family rating and (P)B1 senior secured bank credit facility rating. The company's Baa3 ratings for its $500 million existing senior notes due 2009 and 2014 and $600 million existing bank credit facility remain on review for possible downgrade, pending completion of the acquisition of SunGard by a consortium of private equity investors expected to close on August 11, 2005. Moody's expects the review for possible downgrade will be concluded with a downgrade of the rating for the $500 million existing notes to B2 and withdrawal of the $600 million existing bank facility rating. The proposed subordinated note offering is part of a financing package to consummate the $11 billion acquisition of SunGard by a consortium of private equity investors. The Caa1 subordinated notes rating reflects the contractual subordination of the notes to all of the company's senior obligations. In addition, the proposed subordinated notes rating and the existing ratings reflect SunGard's: 1) significant debt to EBITDA leverage approximating 7x pro forma (including off-balance sheet securitization) for the transaction; 2) challenges to improve and sustain the rate of organic revenue growth in Availability Services and Financial Systems businesses; and 3) exposure to financial services clients and competitors which continue to develop rival in-house services and systems. These risks are mitigated by the company's: 1) leading market positions in business continuity services as well as in broad sectors of financial institution, higher education and public sector software and processing systems markets; 2) recurring revenue base from processing fees and multi-year outsourcing contracts; and 3) widely diversified customer base. The anticipated downgrade of the existing $500 million notes to B2 reflects all of the above noted factors as well as the value of the security collateral that is expected to be granted to the existing note holders; upon successful closing of the transaction, the security collateral for the existing notes is expected to consist of tangible assets as well as capital stock of subsidiaries. In contrast, the collateral package for the new bank facilities is expected to consist of the collateral securing the existing notes as well as intangible assets. In Moody's opinion, SunGard's intangible assets have value on a going concern basis and provide a technical advantage to the collateral package covering the new credit facility. In addition, Moody's expects the existing notes, the new bank facilities, the newly issued senior unsecured notes and the proposed subordinated notes to receive upstream guarantees (the proposed subordinated notes to be guaranteed on a subordinated basis) from an identical set of U.S. operating subsidiaries. As a group, the U.S. guarantor subsidiaries exclude broker dealer subsidiaries, non-wholly owned subsidiaries, and subsidiaries of the company's proposed A/R securitization facility. For fiscal year 2004, U.S. subsidiaries represented approximately: * 73% of total assets; * 70% of revenues; and * 79%, or $954 million, of EBITDA. As part of the rating process, Moody's considered: 1) Market Position. SunGard has market leading positions across broad areas of financial services software and systems, business continuity, and is a leading provider of IT solutions to higher education institutions and the public sector. In Financial Systems (FS), approximately 80% of EBITA is generated by sector leading positions in the various divisions, calculated as at least one times revenues of the second largest competitor. However, Moody's believes the company faces ongoing competition from large financial institutions, which continue to develop systems in competition with FS solutions. 2) Recurring Versus Non-Recurring Revenue. SunGard has an extensive portfolio of businesses with substantial recurring revenue. Over 80% of the company's total revenues, excluding FS' software licenses and professional service fees, are recurring. Over 90% of Availability Services revenue, provided by monthly subscription and software maintenance fees, is recurring. In Availability Services, the company signs multi year contracts with onerous termination fees for early termination in excess of contract investment. 3) Internal Revenue Growth. The Company faces a challenge to improve and sustain its internal revenue growth in its Availability Services and FS businesses. For fiscal year 2004, excluding benefits from foreign exchange, AS' internal revenue growth was flat and FS' growth approximated 0.5%. For the first quarter of fiscal year 2005 and excluding benefits from foreign exchange, internal revenue growth for AS and FS improved to growth of about 2% and 5%, respectively. Moody's notes that FS has shown steadily improving internal revenue growth momentum beginning with the third fiscal quarter of 2004. The company's overall increase in internal revenue in the first quarter of 2005 is due primarily to an improvement in professional services fee revenue and an increase in license fees, both of which Moody's does not view as recurring revenue sources. 4) Client Concentration. SunGard has a highly diversified customer base. The company serves over 20,000 customers, including the world's 50 largest financial services firms, with no customer representing more than 2% of revenues in 2004. Nonetheless, the company's FS business is exposed to a consolidating financial services industry. In addition, the AS business has a financial services sector business concentration, excluding insurance companies, approximating 20% of its revenues. Large financial service firms have taken their business continuity systems in-house in recent years. Therefore, Moody's believes SunGard AS remains vulnerable to further in-housing by the financial services sector, though Moody's anticipates the negative effects of further in-housing will be mitigated by SunGard's breadth of clients as no AS client represents more than approximately 3% of AS revenues. 5) Acquisition Strategy. SunGard has been an acquisitive company, achieving growth primarily through acquisitions in recent years. Moody's anticipates Sungard's prospective acquisition appetite will approximate $150 million to $200 million per year. If pursued, this appetite may conflict with the company's plans for optional debt repayment. Since fiscal year 2002, SunGard's cash spending for acquisitions has ranged between $236 million and $800 million per year. 6) Debt Leverage. Pro-forma for the acquisition, SunGard's debt to trailing twelve month March 2005 EBITDA, excluding negative EBITDA of the divested BRUT business, is expected to be very high at roughly 7x (including A/R securitization). 7) Liquidity. At closing, the company is expected to have approximately $200 million cash balance as well as access to $1 billion revolving credit facilities. As a condition of any borrowing under the proposed revolving credit facility, the company must re-represent no material adverse effect has occurred. The company has cushion under the facilities' financial covenants and therefore availability from this revolver. Moody's expects SunGard to generate free cash flow approximating $200 million or more per year, subsequent to mandatory debt repayment of about $40 million per year and prior to cash acquisition spending. In addition, SunGard's $375 million accounts receivable securitization facility, to be fully drawn upon closing of the transaction, supports its liquidity needs. These new rating has been assigned: -- Caa1 rating for $1 billion subordinated notes due 2015 These ratings have been affirmed: -- B3 rating for $2 billion senior unsecured notes due 2013 -- (P)B2 corporate family rating (formerly Senior Implied rating) -- (P)B1 rating on proposed $1 billion senior secured revolving credit facility due 2011 -- (P)B1 rating on proposed $4 billion senior secured term loan due 2013 These ratings remain on review for possible downgrade: -- Baa3 rating on $600 million senior unsecured bank credit facility due 2009 -- Baa3 rating on $250 million senior unsecured notes due 2009 -- Baa3 rating on $250 million senior unsecured notes due 2014 Headquartered in Wayne, Pennsylvania, SunGard Data Systems provides business continuity and business processing services. SWISS MEDICA: Company Points to Many Improvements Since Dec. 31 --------------------------------------------------------------- Rob Klein, VP Strategy for Swiss Medica, says a number of improvements have occurred since its auditors at Russell Bedford Stefanou Mirchandani LLP issued a qualified opinion after reviewing the company's 2004 financial statements. Specifically, Mr. Klein points to these six facts: -- Swiss Medica's raised $4 million of equity since Dec. 31; -- Swiss Medica is selling its O24 Pain Neutralizer product in Canada and the United States (tapping into the $12 billion U.S. over-the-counter and prescription-only market for pain relief products); -- Swiss Medica's revenues for the first half of 2005 are approximately $2.5 million; -- Swiss Medica is projecting $12 to $14 million in sales in 2005 and projecting it will be EBITDA positive by Q4; -- Swiss Medica's O24 Fibromyalgia and PMS Escape products are in the pipeline and expects to launch them in the second half of 2005; and -- On January 20, 2005, Swiss Medica announced that it had cancelled debt agreements and redeemed debentures related to a $1 million debt financing, which was part of the $1.5 million financing announced on December 30, 2004. "We now have sufficient capital in place to move forward," Chief Executive Officer, Raghu Kilambi, stated in January 2005 when the company paid down $1 million of debt in January 2005. Swiss Medica Inc. is a consumer healthcare company, which commercializes proprietary 100% pure bioscience products, or all- natural compounds, that have health promoting, disease preventing or medicinal properties. TEMBEC INC: 2nd Qtr. $142.5MM Net Loss 11x More than Last Year's ---------------------------------------------------------------- Consolidated sales for the third quarter ended June 25, 2005, were $957.9 million, down from $1.03 billion in the comparable period last year. The Company generated a net loss of $142.5 million compared to a net loss of $12.6 million in the corresponding quarter ended June 26, 2004, and a net loss of $26.2 million in the previous quarter. Earnings before interest, income taxes, depreciation, amortization and other non-operating expenses was $27.5 million as compared to EBITDA of $91.2 million a year ago and EBITDA of $15.6 million in the prior quarter. Cash flow from operating activities before changes in non-cash working capital balances less capital expenditures was negative $26.4 million as compared to $49.7 million generated a year ago and negative $11.7 million in the previous quarter. The June 2005 quarterly financial results include an after-tax loss of $91.7 million or $1.07 per share related to mill closures and an after-tax loss of $16.8 million or $0.20 per share on the translation of its US dollar denominated debt. After adjusting for these items and certain specific items, the Company would have generated a net loss of $49.8 million. This compares to a net loss of $2.1 million in the corresponding quarter ended June 26, 2004 and a net loss of $61.8 million in the previous quarter. The impact of foreign exchange and certain specific items on the Company's financial results is discussed further in the Management Discussion and Analysis of its financial results. Business Segment Results The Forest Products segment generated EBITDA of $18.5 million on sales of $360.6 million. This compares to EBITDA of $19.5 million on sales of $360.8 million in the prior quarter. Sales were relatively unchanged from the prior quarter with higher volumes of specialty and engineered wood offsetting lower SPF lumber and OSB prices. US dollar reference prices for random lumber decreased by approximately US $36 per mfbm while stud lumber decreased by US $32 per mfbm. Currency was slightly favourable as the Canadian dollar averaged US $0.804, down from US $0.815 in the prior quarter. The net effect was a decrease in EBITDA of $3.5 million or $9 per mfbm. Lower selling prices for OSB decreased EBITDA by a further $1.2 million. The margins in Forest Products continued to be subject to lumber export duties. The decrease in SPF revenues was offset by lower processing costs. During the quarter, countervailing and antidumping duties totaled $23.4 million, compared to $24.4 million in the prior quarter. Since May 2002, the Company has incurred $291.9 million of duties, which remain subject to the resolution of the softwood lumber dispute. The Pulp segment generated EBITDA of $9.8 million on sales of $354.8 million for the quarter ended June 2005 compared to EBITDA of $4.3 million on sales of $347.0 million in the March 2005 quarter. Sales increased primarily as a result of higher hardwood pulp prices and a small decline in the Canadian $, which averaged US $0.804, down from US $0.815 in the prior quarter. US dollar reference prices for hardwood pulp increased while reference prices for softwood pulp declined. The net price effect was an increase of $21 per tonne, increasing EBITDA by $10.5 million. The higher revenues were partially offset by higher manufacturing costs resulting primarily from more production curtailments in the current quarter versus the prior quarter. Total downtime in the June quarter was 15,400 tonnes compared to 2,400 tonnes in the prior quarter. The Paper segment generated negative EBITDA of $1.7 million on sales of $254.7 million. This compares to negative EBITDA of $9.4 million on sales of $224.9 million in the prior quarter. Sales increased by $29.8 million as a result of higher shipments and higher prices for newsprint and coated paper. US dollar reference prices for newsprint and coated paper increased by US $18 per tonne and US $48 per short ton respectively. Currency was slightly favourable as the Canadian $ averaged US $0.804, down from US $0.815 in the prior quarter. The net price effect was an increase of $23 per tonne, increasing EBITDA by $6.4 million. Manufacturing costs were relatively unchanged from the prior quarter. Outlook In summary, although the interim financial results reflect an improvement in operating earnings over the March quarter, margins in our three main businesses remain below normalized levels. In the case of forest products, the lumber export duties are the primary cause of the reduced margins. While US dollar pulp and paper prices have increased, their net effect is being muted by a relatively weak US dollar. Although some seasonal weakening in pulp prices is anticipated, the high operating rates indicate that pricing should improve before year-end. As well, paper prices are expected to be stronger as the year progresses. The challenges faced by the industry are the strength of the Canadian $ and rising chemical, energy and wood costs, particularly in Eastern Canada. These issues are being addressed as part of the Company's aggressive cost reduction program. The recently announced mill closures will improve the Company's future profitability. The Company continues to work for a timely resolution of the lumber dispute with the United States as well as a more competitive approach to electricity rates in the province of Ontario. Tembec Inc. -- http://www.tembec.com/-- is a leading integrated forest products company well established in North America and France, with sales of approximately $4 billion and some 11,000 employees. Tembec's common shares are listed on the Toronto Stock Exchange under the symbol TBC. * * * As reported in the Troubled Company Reporter on May 5, 2005, Standard & Poor's Ratings Services revised its outlook on pulp and lumber producer Tembec Inc. and its subsidiary, Tembec Industries Inc., to negative from stable following the release of the company's second-quarter 2005 results. At the same time, Standard & Poor's affirmed its 'B' long-term corporate credit rating on Tembec and its subsidiary. UAL CORP: Committee Wants to Tap Farr & Taranto as Counsel ---------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in UAL Corporation and its debtor-affiliates' chapter 11 proceedings seeks the U.S. Bankruptcy Court for the Northern District of Illinois' authority to retain Farr & Taranto of Washington, D.C., as special counsel, effective July 13, 2005, to handle a petition for certiorari to the U.S. Supreme Court. The petition for certiorari seeks a review of Seventh Circuit decisions involving antitrust claims brought against the Aircraft Trustees. Farr & Taranto specializes in appellate practice and has participated in dozens of Supreme Court cases. The retention of Farr & Taranto is imperative to a successful certiorari petition. Farr and Taranto will assist and advise the Committee and its counsel, Sperling & Slater, on matters pertaining to the certiorari process. If the Committee's petition is granted, Farr & Taranto will advise the Committee on Supreme Court practice and provide assistance and guidance in the briefing and argument phase. "The certiorari process is highly complex and specialized," Paul S. Slater, Esq., at Sperling & Slater, in Chicago, Illinois, says. Farr & Taranto is headed by H. Bartow Farr, III, and Richard Taranto, former Supreme Court clerks and assistants to the Solicitor General. Farr & Taranto "is one of the few firms capable of providing the exceptional guidance needed to steer the Committee through the pitfalls of Supreme Court appellate practice," Mr. Slater tells the Bankruptcy Court. Farr & Taranto will be compensated on an hourly basis, plus reimbursement of actual, necessary expenses and other charges. Both Mr. Farr and Mr. Taranto charge $550 per hour. Mr. Slater says the Committee will appeal to the Supreme Court if its petition for an en banc review is denied. The Committee will appeal to the Supreme Court because the Seventh Circuit's rulings directly contravene established law. The Committee has a large financial interest in a successful resolution of the appeal. The petition for a writ of certiorari is due on August 4, 2005. Mr. Farr ascertains that his firm does not represent or hold any interest adverse to the Debtors' estates or the Committee, and is disinterested as the term is defined in Section 101(14) of the Bankruptcy Code. Trustees Object On behalf of U.S. Bank, the Bank of New York and Wells Fargo Bank, Ann Acker, Esq., at Chapman and Cutler, in Chicago, Illinois, argues that the May 6, 2005 Opinion by the Seventh Circuit ended the antitrust action. Rather than expending additional resources in litigation, the Debtors have refocused on negotiating resolutions with the Trustees and the public debtholders. The Debtors are now conserving estate assets and the Committee must do the same, Ms. Acker tells Judge Wedoff. "The Committee's obsession with this action began almost 16 months ago when it first sought to retain economic experts, then special counsel and then leave to prosecute the antitrust action," Ms. Acker says. The Debtors' estates have already spent over $3,000,000 on the Committee's experts in this matter. It has cost millions of dollars more for the Debtors, the Trustees and the holders they represent. Mr. Acker maintains that the Committee must not be permitted to retain special Supreme Court counsel at the expense of the estate. The Trustees, on behalf of their constituents, are substantial unsecured creditors of the estate. Money spent in "fruitless litigation" reduces the resources available to unsecured creditors. The proposed retention will only diminish any potential dividend to unsecured creditors. If the retention is allowed, the Committee should absorb the costs, not the Debtors' estate. Debtors Don't Like It Either The Creditors' Committee wants to retain another law firm to pursue the Debtors' antitrust cause of action -- in addition to the two firms already working on this issue, James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, relates. Mr. Sprayregen notes that the Committee's pursuit of the rejected antitrust theories continue to chill the negotiations between the Debtors and the Aircraft Trustees. The Debtors need to devote their energies to talks to retain the aircraft that are the subject of the litigation, rather than engage in further prosecution of the antitrust claim. Mr. Sprayregen further notes that the Supreme Court only grants about 3% of certiorari requests. Therefore, there is a 97% chance that the Committee will expend the estate's funds pursuing an appeal that has a miniscule chance of being heard. The Debtors would rather focus their energies on negotiations to maximize contractual concessions from the Trustees, rather than continue low odds, high-risk litigation, Mr. Sprayregen asserts. Accordingly, the Committee should not be allowed to expend estate resources on the almost non-existent chance that certiorari will be granted. Even if certiorari were granted, the Committee's investment of the estate's money would only pay off if the Committee prevails on the merits, which is far from certain. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 95; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Posts $1.43 Billion Net Loss in Second Quarter 2005 ------------------------------------------------------------- UAL Corporation (OTC Bulletin Board: UALAQ) reported its second- quarter 2005 financial results. UAL reported second-quarter operating earnings of $48 million. Excluding an impairment charge of $18 million for regional aircraft, operating earnings were $66 million, $59 million better than the $7 million reported in the same quarter last year, despite fuel expenses $262 million higher in 2005 than in 2004. UAL reported a net loss of $1.43 billion, or a loss per basic share of $12.33, which includes $1.39 billion in reorganization items. Reorganization items include a number of large non-cash items: -- curtailment and settlement losses of $602 million related to the Pension Benefit Guaranty Corporation's (PBGC) takeover of the company's defined benefit pension plans for ground employees, management and public contact employees, and flight attendants; -- $212 million in charges related to the rejection of aircraft; and -- $509 million in contract rejection charges. These reorganization items are expected to be resolved in the bankruptcy process and settled for a minor fraction of the amount of the charges. It is common for the results of operations of companies progressing through Chapter 11 to be impacted by non- cash charges related to their reorganization, especially as restructuring work nears completion. Excluding the special and reorganization items, UAL's net loss for the second quarter totaled $26 million. "We now have the foundation in place that enables us to continue to build a much more competitive enterprise," said Glenn Tilton, United's chairman, CEO and president. "We have reduced United's costs, we are posting industry- competitive revenue performance and our employees are delivering excellent operational performance. Although the harsh economic environment, including very high fuel costs, presents difficult challenges for the industry, United's restructuring has earned us the opportunity to compete for a place among the leading network carriers." Restructuring Efforts In the second quarter of 2005, United achieved significant milestones in its restructuring activities. As part of the recent restructuring efforts, United: -- Achieved consensual labor agreements with the Aircraft Mechanics Fraternal Association (AMFA) and the International Association of Machinists and Aerospace Workers (IAM); -- Reached agreement with the PBGC on the necessity of taking over the company's defined benefit pension plans and put in place replacement retirement plans for all labor groups, except the Association of Flight Attendants (AFA); -- Amended the DIP agreement to increase the size of the DIP facility from $1 billion to $1.3 billion, extended loan maturity to Dec. 30, 2005, and lowered the interest rate by 25 basis points; -- Proposed a schedule with the Bankruptcy Court to file the Plan of Reorganization and exit in the fall. "Our restructuring is progressing well as we continue to put in place the important elements to increasing competitiveness. The amended DIP facility was substantially over-subscribed, despite an increase in size and a reduction in the interest rate. This clearly reflects the financial community's recognition of the progress we have made," said Jake Brace, United's executive vice president and chief financial officer. Revenue Results Results for the second quarter of 2005 reflect a 3 percent reduction in system capacity compared with the same period last year. During the quarter, mainline passenger unit revenue increased 5 percent and yield increased 3 percent, compared to second quarter last year. System load factor increased 1 point to 83 percent, as traffic decreased 1 percent. "United is delivering industry competitive revenue performance and we are pleased with the results of our 2005 capacity reallocation," said John Tague, executive vice president marketing, sales, and revenue. "United is determined to be an industry leader in revenue performance. We believe the ongoing transformation of our sales force, continuing improvements in revenue management and recently enhanced marketing initiatives will move us steadily in that direction." Besides United's reallocation of aircraft capacity to international markets, the company has been testing further optimization of its domestic schedule. United is pleased with the initial results. During the second quarter, both initiatives contributed to an increase in fleet utilization of 7 percent. As a result, the company reduced the number of aircraft in its fleet by 13 percent, while reducing system available seat miles by only 3 percent. Operating Expenses Largely driven by fuel, mainline operating expense per available seat mile was up 6 percent from the year-ago quarter on a 3 percent decrease in capacity. Excluding the aircraft impairment charge, UAFC, and fuel, mainline operating expenses per available seat mile decreased 3 percent. Salaries and related costs were down 13 percent, or $156 million, primarily reflecting recent labor and management cost reductions and a 7 percent reduction in manpower. Fuel expense was $262 million higher than in the second quarter 2004. Average fuel price for the quarter was $1.71 per gallon (including taxes), up 45 percent year-over-year. The company had an effective tax rate of zero for all periods presented, which makes UAL's pre-tax loss the same as its net loss. Cash The company ended the quarter with an unrestricted cash balance of $1.7 billion, and a restricted cash balance of $968 million, for a total cash balance of $2.6 billion. The unrestricted cash balance increased by $295 million during the quarter. Subsequently in July 2005, the company added an additional $310 million to its unrestricted cash balance by utilizing the amended DIP facility. Operations In the most recent data available from the U.S. Department of Transportation, United was ranked Number 2 in on-time performance among the seven major network carriers for the 12 months ending May 2005. In addition, employee productivity (available seat miles divided by employee equivalents) was up 4 percent for the quarter compared to the same period in 2004. "United's improved productivity is a credit to the dedication and resilience of our employees. They have continued to deliver the reliability and service our customers expect during what could have been a very distracting period in our restructuring," said Pete McDonald, United's chief operating officer. "While our schedule optimization has improved asset utilization, we continue to believe significant benefits are available throughout United's operations by reducing aircraft turn times, reducing actual block time performance, expanded de-peaking of hubs and major stations, and reengineering our use of airport facilities." Outlook United expects third-quarter system mainline capacity to be down about 5 percent year-over-year. System mainline capacity for 2005 is expected to be about 3 percent lower than 2004. The company projects fuel prices for the third quarter, including taxes and excluding the impact of hedges, to average $1.83 per gallon. The company has 6.5 percent of its expected fuel consumption for the third quarter hedged at an average of $1.29 per gallon, including taxes. In the third quarter, the company expects to recognize other large non-cash reorganization items as we move toward exit from bankruptcy. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 94; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Liquidation Analysis under Plan of Reorganization ------------------------------------------------------------- Under Section 1129(a)(7)(A) of the Bankruptcy Code, a bankruptcy court may not confirm a plan of reorganization unless it provides creditors and equity holders with at least the value they would receive if a debtor was liquidated in a hypothetical case under Chapter 7. With the assistance of FTI Consulting, Inc., US Airways, Inc., its debtor-affiliates' prepared a liquidation analysis, which presents estimated amounts that would be paid to claimants and equity interest holders under a hypothetical Chapter 7 liquidation. The Debtors' Liquidation Analysis envisions the Debtors ceasing operations and converting to a Chapter 7, commencing September 1, 2005. A trustee would liquidate the Debtors' assets within six to 12 months. However, a complete wind-down of operations could take longer, impacting creditor recoveries. The Liquidation Analysis assumes that each of the Debtor's assets are liquidated with proceeds applied to its obligations, including the ATSB loan. There are no assumed sales of businesses as "going concerns." US Airways, Inc.'s captive insurance subsidiary, Airways Assurance Limited LLC, is assumed to remain viable to satisfy insured claims. There would be no proceeds available to pay unsecured claims from Airways Assurance Limited LLC. The Debtors made these principal assumptions in preparing the Liquidation Analysis: 1) Cash (Restricted and Unrestricted) Cash and Cash Equivalents include operating cash, Investments, securities and restricted cash. Cash would be realized in full except for restricted deposits held for selected vendors, fuel service providers, trust fund accounts, Port Authorities and other governmental agencies, which would offset related liabilities. Credit card processing reserves are not included as these would refund unflown tickets. 2) Receivables Receivables consist of air-traffic activities, which are assumed to be offset by third parties for related liabilities. There are miscellaneous receivables for cargo, government refunds and travel agents. With the exception of cargo, these receivables would yield low recoveries due to the high volume and low individual value of the receivable balances. 3) Materials & Supplies Materials and Supplies include fuel and expendable, repairable and rotable inventory. In June 2005, the Debtors derived a fair market value estimate of repair inventory and supplies through consultation with independent valuation experts, industry trends, market rates and transactions. This value was discounted to reflect a sale of the assets in a liquidation. Fuel was not independently valued, but is assumed to realize between 80% to 90% of book value. Other inventory like de-icing fluid, tools, and uniforms are assumed to realize a range of recoveries up to half of book value. 4) Prepayments & Other Current Assets Prepayments and Other Current Assets are prepaid fuel, space rental, advertising and insurance, which are assumed to be either consumed or refunded. 5) Flight Equipment Flight Equipment includes aircraft and engines, work-in- process flight equipment and aircraft leasehold improvements, excluding aircraft in the GE sale/leaseback transaction. Liquidation values for aircraft and engines not subject to the ATSB security agreement were estimated by Seabury Securities LLC. Aircraft and engines subject to the ATSB security agreement were assigned recovery values based on appraisals by Back Aviation Solutions in February 2005. 6) Ground Property & Equipment Ground Property and Equipment includes simulators, real property, ground service equipment, aircraft power and air conditioning units and passenger loading bridges. In June 2005, the Debtors received a market value opinion of ground property and equipment after consultation with independent valuation experts, industry trends, reference to market rates and transactions. The value was discounted to reflect a sale through a liquidation. 7) Intangibles Intangibles include slots, gates, foreign routes, trademarks, copyrights and capitalized software costs. Slot values are based on the fair market value opinion in June 2005, discounted 25% for the lower value, and 10% for the higher value. The analysis excludes 102 slots at New York LaGuardia airport that secure a bond facility between Continental Airlines and The New York Port Authority. Gates were valued in the Back Appraisal and include a 25% discount for the lower value and a 10% for the higher value. 8) Other Non-Current Assets Other Non-Current Assets include capitalized debt issuance costs, manufacturers' credits and other miscellaneous investments in airline industry entities like Sabre and Galileo. These assets are assumed to have minimal or no recovery value. 9) Wind-down Costs Proceeds from a Chapter 7 liquidation available to claimholders would be reduced by administrative costs of a wind-down and sale of assets. These costs include professional fees, trustee fees of $500,000 per month, auction fees of 5% of assets, salaries, severance and retention and other wind-down costs. Operating costs would decline monthly over the liquidation. The costs were estimated for 12 months, with the majority of sales consummated in the first six months. All planes would be relocated during the first month. Leased aircraft would be moved to the heavy maintenance facilities and picked up by lessors. Owned aircraft would be moved to storage facilities until sold. The estimated distributions available to each class of claim are: 1) Secured Claims - Aircraft Secured Claims - Aircraft consist of outstanding debt secured by individual aircraft. The allowed secured claim amount is equal to the liquidation value ascribed to the underlying collateral. Any debt not satisfied by the value of the underlying collateral would become an unsecured aircraft deficiency claim and included in General Unsecured Claims. The assumed recovery to Secured Aircraft Claims is estimated at $1,700,000,000 to $1,800,000,000 or 92% to 100% of the estimated allowed claim amount. 2) Air Transportation Stabilization Board The $721,300,000 ATSB claim is allocated to each of the operating subsidiaries. The ATSB claim consists of $708,000,000 in principal, plus accrued interest. The claim was allocated based on the pro rata share of the operating expenses of each Debtor. Due to the joint and several nature of the claim, the excess would be satisfied by proceeds from US Airways, Inc. The ATSB would recover 100% of its estimated allowed claim. 3) Eastshore Junior DIP The Debtors procured DIP Financing from Eastshore Aviation, LLC. The assumed recovery is $125,000,000, or 100% of the estimated allowed claim amount. 4) General Electric Secured Claims The Debtors are parties to agreements with General Electric, with numerous obligations cross-collateralized or guaranteed by one or more of the Debtors. These liabilities and guarantees are secured by existing collateral. The secured claim includes $28,200,000 under the 2001 GE Credit Facility, for which GE is estimated to receive a 100% recovery. If the collateral did not satisfy the remaining GE claims, then, except for certain postpetition aircraft rental and return condition claims for which the parties have agreed to administrative expense status, these claims have been included as unsecured claims. 5) Superpriority Claims Superpriority Claims include the GE Bridge Facility and a superpriority claim granted to Electronic Data Systems. The assumed recovery for Superpriority Claims is $85,700,000, or 100% of the estimated allowed claim amount. 6) Administrative Claims Administrative Claims include unpaid claims from the Chapter 11 cases in the ordinary course of business, including postpetition employee wages and benefits, trade payables, accrued aircraft rent, taxes, and claims from postpetition agreements with General Electric. Unflown air traffic liability would be offset by receivables and deposits. The Analysis assumes that return conditions and aircraft deficiency claims in a liquidation are general unsecured claims. There is no guarantee that the Court would rule that these and other claims are general unsecured claims, so additional administrative claims may arise in a liquidation. The assumed recovery for administrative claims is $226,500,000 to $642,800,000, or 33% to 94% of estimated allowed claims. 7) Priority Claims Priority Claims include prepetition federal and state tax claims and other miscellaneous taxes. The assumed recovery for priority claims is $100,000 to $19,900,000, or 0% to 32% of the estimated allowed claim amount. 8) Pension Benefit Guaranty Corporation Claims PBGC claims are pari passu to General Unsecured Claims. All Debtors are jointly and severally liable for the PBGC Claims. It is assumed that the PBGC would assert a claim against all Debtors until the claim is satisfied. The Analysis assumes no recovery to the PBGC, as there is no value for Unsecured Creditors in a liquidation. 9) General Unsecured Claims General Unsecured claims include prepetition trade payables, under-secured aircraft and deficiency claims, aircraft return conditions and real property lease rejection claims. The difference between claims estimated in the Disclosure Statement of $500,000,000 to $1,300,000,000 and claims estimated in this Analysis of $2,200,000,000 to $3,200,000,000, is attributable to additional rejections of executory and real property contracts -- as all contracts would be rejected in a liquidation -- aircraft return conditions and claims related to undersecured aircraft obligations. Best Interest of Creditors Test Based on the Liquidation Analysis, Unsecured Creditors will receive no recovery on their claims in a Chapter 7 liquidation. Based on the Debtors' Plan of Reorganization, Unsecured Creditors are projected to receive a 3.3% to 8.3% recovery on their claims. Therefore, if any Unsecured Creditor votes no, it will not be able to block Plan confirmation, since the Plan provides a recovery of some value, while liquidation offers no value. The Plan clearly meets the Best Interests Test under Section 1129(a)(7)(A). A full-text copy of the Debtors' Liquidation Analysis is available for free at: http://bankrupt.com/misc/liquidation_analysis.pdf 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. 99; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Wants to Pay Greco & Lander 10% Contingency Fee --------------------------------------------------------- USG Corporation and its debtor-affiliates recently retained Greco & Lander, P.C. to assist them in marketing and selling specialized assets like the Natural Gas Assets. G&L's services include: (a) identifying and contacting potential purchasers of the Natural Gas Assets; (b) negotiating and drafting transaction documents with respect to the Sale; (c) performing a variety of title work and other due diligence with respect to the Natural Gas Assets; (d) procuring a geologist report; and (e) providing various other related services to the Debtors to prepare the Natural Gas Assets for sale, conducting a sale process for the assets, and ultimately negotiating and consummating that sale. Daniel DeFranceschi, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, informs the U.S. Bankruptcy Court for the District of Delaware that G&L advised the Debtors that the total consideration for the Gas Wells should not be less than $2,000,000. However, G&L emphasized that the Debtors can still obtain the highest possible offers for the Natural Gas Assets only if prospective buyers know that the Debtors will not be required to seek a further Court order to sell the Natural Gas Assets. G&L explained that if prospective buyers believe that there will or may be a further "bankruptcy auction" for the Natural Gas Assets, they will be hesitant to make their best offer for those assets until that auction occurs. The Debtors are authorized pursuant to an amended and restated order dated August 23, 2004, to employ and pay certain professionals in the ordinary course of their businesses without further application to or approval of the Court. However, for ordinary course professionals paid on a contingency fee basis, the Debtors are required to seek Court sanction before paying any contingency fee in excess of $250,000. In consideration for G&L's services, the Debtors agreed to pay G&L 10% of the gross amount they receive in connection with the Sale or other disposition of the Natural Gas Assets. The Contingency Fee is equal to or less than: -- the prevailing market rate in the relevant geographical area for similar services; and -- the rate G&L typically charges other clients for similar services. Mr. DeFranceschi says that if the Natural Gas Assets were sold for $2 million, G&L's contingency fee would be $200,000, and the Debtors would be permitted to make that payment to G&L under the OCP Order since it is below the Contingency Fee Limit. However, since the Debtors intend to seek more than $2 million for the Natural Gas Assets, G&L's Contingency Fee could exceed the $250,000 Contingency Fee Limit. To the extent required, the Debtors ask Judge Fitzgerald for permission to pay G&L the contingency fee due even if the fee exceeds the limit. Mr. DeFranceschi contends that the payment of a contingency fee to G&L in excess of the Contingency Fee Limit will not deplete the assets of the Debtors' estates. Instead, G&L will be owed a contingency fee in excess of the Contingency Fee Limit only if it is successful in obtaining a favorable sale price for the Natural Gas Assets. In addition, the Debtors' proposed payment will avoid the need for G&L to file retention and fee applications with the Court, which will be an added burden and expense to the Debtors' estates. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/ -- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 92; Bankruptcy Creditors' Service, Inc., 215/945-7000) VALLEY PRIDE: Judge Utschig Dismisses Chapter 11 Case ----------------------------------------------------- The Honorable Judge Thomas S. Utschig of the U.S. Bankruptcy Court for the Western District of Wisconsin approved Ira Bodenstein's request to dismiss the chapter 11 bankruptcy case filed by Valley Pride Pack, Inc. Mr. Bodenstein is the U.S. Trustee for Region 11. Judge Utschig approved Mr. Bodenstein's request on June 30, 2005. Mr. Bodenstein explains that Frederick Stewart owns all of the stock of the Debtor, and he also owns a corporation known as FRS Farms, Inc. Mr. Stewart's son, Montana Stewart, owns three corporations, Criss Cross Express of Wisconsin Inc., Criss Cross Express of Illinois, Inc. and Big Sky Farms, LLC, all of which have business and financial transactions with the Debtor and FRS Farms. Mr. Bodenstein's investigations of financial statements submitted to the Bank of Rantoul by Frederick Stewart revealed that he loaned $600,000 to Criss Cross in November 2001; loaned $300,000 to Big Sky in October 2002; and loaned $698,000 to Montana Stewart during 2002 and 2003. Mr. Bodenstein believed that in consideration for loans from Frederick Stewart, Criss Cross Wisconsin, Criss Cross Illinois and Big Sky Farms have entered into stock pledge agreements or similar agreements with Frederick Stewart which give him de facto control over those three entities. Mr. Bodenstein has requested copies of those agreements, but Mr. Stewart never cooperated in providing those agreements. Due to his personal, financial and legal relationships with FRS Farms, Big Sky, Montana Stewart, Criss Cross Wisconsin and Criss Cross Illinois, Frederick Stewart determines and controls the price that the Debtor pays to FRS Farms for trucking and to Big Sky Farms for cattle, and controls the price that Criss Cross Illinois pays to the Debtor for meat. The pricing of these transactions has a direct and material effect on the Debtor's net income. Judge Utschig dismissed the Debtor's case based on the facts cited by Mr. Bodenstein in his request: 1) the Debtor's chapter 11 case has been pending for over three and one-half years, and it has not filed a disclosure statement or plan of reorganization; 2) since March 2003, the Debtor has operated essentially on a break-even basis, does not have any funds available to fund a plan of reorganization, and the Debtor's monthly report for March 2005, shows a loss of $241,000, indicating that the Debtor is administratively insolvent; 3) During the first 17 months after the Petition Date, the Debtor paid off substantially all of its secured debt, but in the absence of a commitment by the Debtor to make payments to its unsecured creditors, the elimination of its secured debt inures only to the benefit of its shareholder, Frederick Stewart; 4) the three entities owned by Montana Stewart have engaged in transactions with the Debtor which involve tens of millions of dollars, but Mr. Stewart has refused to provide the basic documents that would allow the U.S. Trustee to attempt to verify whether those related entities are generating net income at the expense of the Debtor, and whether the Debtor has the ability to generate additional net income to fund a a chapter 11 plan; and 5) the Debtor is administering its chapter 11 case solely for the benefit of Frederick Stewart and Montana Stewart. Judge Utschig concludes that these facts constitute cause to dismiss the Debtor's chapter 11 case pursuant to 11 U.S.C. Section 1112(b). Headquartered in Norwalk, Wisconsin, Valley Pride Pack, Inc., filed for chapter 11 protection on Oct. 15, 2001 (Bankr. W.D. Wisc. Case No. 01-25918). Wessels & Pautsch, PC represents the Debtor. The Court dismissed the Debtor's chapter 11 case on June 30, 2005. When the Debtor filed for chapter 11 protection, it estimated assets and debts of $10 million to $50 million. VICENCIO PROPERTIES: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Vicencio Properties, Inc. 1212 East Dallas, #B-5 McAllen, Texas 78501 Bankruptcy Case No.: 05-70752 Type of Business: The Debtor owns three rental properties located in McAllen, Texas. Chapter 11 Petition Date: July 28, 2005 Court: Southern District of Texas (McAllen) Debtor's Counsel: John Kurt Stephen, Esq. Cardena, Whitis, & Stephen L.L.P. 100 South Bicentennial Boulevard McAllen, Texas 78501-7050 Tel: (956) 631-3381 Total Assets: $4,875,366 Total Debts: $5,248,882 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Luis A. Romero/Miriam Leticia Alcala $687,672 Individually and as Next Friend of Luis Romero, Jr. 4100 North 24th Lane, Apartment 7 McAllen, TX 78504 Ana Maria de Caro $350,000 C Presa Falcon 2503 Int. A Col Lomas Del Santuario 31280 Chihuahua, Chih. Ana Maria de Caro $300,000 C Presa Falcon 2503 Int. A Col Lomas Del Santuario 31280 Chihuahua, Chih. Ana Maria de Caro $190,000 Armando Barrera Jr., RTA $87,601 PSJA Tax Office $87,124 City of Pharr Tax Office $35,370 Hidalgo County Tax Office $24,194 Hidalgo County Tax Office $23,503 Hidalgo County $21,629 Hidalgo County Tax Office $11,789 Hidalgo County Tax Office $8,538 City Of McAllen Tax Office $7,918 City of McAllen Tax Office $7,679 City Of McAllen Tax Office $3,852 City Of McAllen Tax Office $2,763 Texas Workforce Commission $1,968 Diana R. Garza $1,450 Mark Freeland, Esq. $550 Mark Freeland $275 WELLS FARGO: Fitch Places Low-B Rating on Two Certificate Classes ----------------------------------------------------------------- Wells Fargo mortgage pass-through certificates, series 2005-6, are rated by Fitch Ratings: -- $582,530,080 classes A-1 through A-16, A-PO, A-R, and A-LR 'AAA' (senior certificates); -- $9,603,000 class B-1 'AA'; -- $3,302,000 class B-2 'A'; -- $1,800,000 class B-3 'BBB'; -- $1,201,000 class B-4 'BB'; -- $900,000 class B-5 'B'. The 'AAA' ratings on the senior certificates reflect the 2.95% subordination provided by the 1.60% class B-1, the 0.55% class B- 2, the 0.30% class B-3, the 0.20% privately offered class B-4, the 0.15% privately offered class B-5, and the 0.15% privately offered class B-6. The ratings on the class B-1, B-2, B-3, B-4, and B-5 certificates are based on their respective subordination. Fitch believes the amount of credit enhancement available will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral, the integrity of the legal and financial structures, and the primary servicing capabilities of Wells Fargo Bank, N.A. (WFB; rated 'RPS1' by Fitch). The transaction consists of one group of 1,130 fully amortizing, fixed interest rate, first lien mortgage loans, with an original weighted average term to maturity of approximately 30 years. The aggregate unpaid principal balance of the pool is $600,237,078 as of July 1, 2005 (the cut-off date), and the average principal balance is $531,183. The weighted average original loan-to-value ratio of the loan pool is approximately 69.13%; approximately 1.52% of the loans have an OLTV greater than 80%. The weighted average coupon of the mortgage loans is 5.853%, and the weighted average FICO score is 747. Cash-out and rate/term refinance loans represent 29.73% and 17.44% of the loan pool, respectively. The states that represent the largest geographic concentration are California (38.77%), New York (6.87%), and Virginia (5.38%). All other states represent less than 5% of the outstanding balance of the pool. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ All of the mortgage loans were generally originated in conformity with underwriting standards of WFB. WFB sold the loans to Wells Fargo Asset Securities Corporation, a special purpose corporation, who deposited the loans into the trust. The trust issued the certificates in exchange for the mortgage loans. WFB will act as servicer and custodian, and Wachovia Bank, N.A. will act as trustee. Elections will be made to treat the trust as two separate real estate mortgage investment conduits for federal income tax purposes. WESTPOINT STEVENS: Silver Sands Balks at Disclosure Statement ------------------------------------------------------------- WestPoint Stevens, Inc., and its debtor-affiliates lease a 12,000 square-foot retail store in a shopping center known as Silver Sands Factory Stores Outlet in Destin, Florida, from Silver Sands Joint Venture Partners II. The lease expires on April 30, 2008. According to Patrick E. Mears, Esq., at Barnes & Thornburg LLP, in Grand Rapids, Michigan, the Debtors have not assumed or rejected the Lease. Mr. Mears argues that the Debtors' Amended Disclosure Statement does not meet the requirements of "adequate information" set forth under Section 1125 of the Bankruptcy Code. Adequate information has not been provided as to which unexpired leases and executory contracts will be assumed or rejected. Furthermore, Mr. Mears points out that the Disclosure Statement does not provide lessors with adequate time to: -- object to the Confirmation of the Debtors' Amended Plan of Reorganization; and -- determine whether the purchaser of the Debtors' assets can satisfy the requirements of providing adequate assurance of future performance. Moreover, the Debtors do not disclose how obligations under assumed leases and executory contracts would be met, Mr. Mears says. Headquartered in West Point, Georgia, WestPoint Stevens, Inc., -- http://www.westpointstevens.com/-- is the #1 US maker of bed linens and bath towels and also makes comforters, blankets, pillows, table covers, and window trimmings. It makes the Martex, Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux brands, as well as the Martha Stewart bed and bath lines; other licensed brands include Ralph Lauren, Disney, and Joe Boxer. Department stores, mass retailers, and bed and bath stores are its main customers. (Federated, J.C. Penney, Kmart, Sears, and Target account for more than half of sales.) It also has nearly 60 outlet stores. Chairman and CEO Holcombe Green controls 8% of WestPoint Stevens. The Company filed for chapter 11 protection on June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the Debtors in their restructuring efforts. (WestPoint Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) WHITING PETROLEUM: Moody's Reviews $220 Million Notes' B2 Rating ---------------------------------------------------------------- Moody's placed Whiting Petroleum's ratings under review for downgrade, affecting Whiting's B2 rated $220 million of eight year senior subordinated notes and Ba3 Corporate Family Rating (former Senior Implied Rating). Whiting's liquidity rating is SGL-2. This reflects Whiting's pending important but highly leveraged, initially expensive, $802 million acquisition of 122.3 million barrels-of-oil-equivalent (mmboe) of proven reserves from private Celero Energy. Whiting will operate roughly 95% of the properties. The properties have a low 43% proven developed reserve component and a low 28% proven developed producing reserve component (PDP reserves are a subset of PD reserves). Thus, the properties now generate a proportionately low 7,977 BOE of daily production. The PDP reserve life is, however, a durable 11.8 years. Whiting is paying a very high $100,543 per BOE of current daily production. Including $534 million in future capital needed to bring the large 57% component of proven undeveloped reserves and 15% component of proven developed non-producing reserves to production, Whiting is paying roughly $11/boe all-in for total proven reserves (PD reserves and PUD reserves). Moody's also notes that Whiting's second quarter 2005 production was essentially flat with first quarter 2005 which, in turn, was down 4% sequentially from fourth quarter 2004. The ratings would likely be downgraded if Whiting does not launch substantial common equity to support the acquisition. Due to the relative acquisition scale, capital needs, and execution risk to retain the ratings, Moody's believes a substantial common equity offering is needed to adequately spread acquisition valuation and execution risk across the capital structure and to generally contain leverage on PD reserves. While the acquisition may prove to be favorably transforming for Whiting, a high initial price is being paid and the properties require substantial capital spending, a high level of sustained drilling and completion success, and attainment of expected production rates to deliver the targeted economics. Until Whiting's structural, reservoir, areal extent, and secondary recovery assumptions for the Celero properties are validated by performance, escalated execution risk has been inserted into Whiting's credit profile. To retain the ratings, leverage on PD reserves will need to be reduced with common equity to at least a range enabling Whiting to quickly reach, with further internal debt reduction or PD reserve growth, leverage suitable for a Ba3 Corporate Family Rating. The review will rest on: 1) a decision by Whiting to launch or not launch a common equity offering of roughly at least $275 million; and 2) continued reduction of leverage on PD reserves thereafter. Whiting has so far not made such a decision. Whiting will pay $343 million in cash to Celero on August 4, 2005 for the first property package, spread across five property units in Texas County, Oklahoma. It will pay $442 million in cash and issue 441,500 Whiting common shares to Celero on October 4, 2005 for the second package, located in West Texas. It appears that the October, 4 2005 closing is the earliest that an equity offering could be launched. If Whiting issues roughly $275 million of common equity, the ratings may be retained as long as debt can continue to be significantly reduced from that point. Notwithstanding the very strong price environment, pro-forma interest expense and capital spending may limit debt reduction with internal cash flow. If no equity is launched, Moody's projects that pro-forma Debt/PD Reserves would approximate a very high $7.55/PD BOE and that debt plus total future development capital spending would approximate $6.80/BOE of total reserves. Issuing roughly $275 million in common equity reduces these figures to roughly $5.75/PD BOE and $5.82/BOE, respectively. Debt is currently of $370 million. Leverage had been sound relative to Whiting's ratings and reserve scale. Moody's estimates pro-forma leveraged total full-cycle costs to now be approaching $28/boe. Whiting now operates on a much larger scale and diversification after its 2004 and 2005 acquisitions. Second quarter 2005 average daily production was in the range of 30,000 mmboe/day and pro- forma production would approximate 38,000 mmboe/day. Pro forma for all 2005 acquisitions, total reserves approximate 277 mmboe, of which approximately 153 mmboe are PD reserves. Year-end 2004 proven reserves totaled 144.2 mmboe and PD reserves totaled 100.9 mmboe. At year-end 2003, reserves totaled a far smaller 73.1 mmboe, of which 54.8 mmboe was PD reserves. Whiting Petroleum Corporation is headquartered in Denver, Colorado. WHITING PETROLEUM: Reserves Purchases Prompt S&P's Negative Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' corporate credit rating on Whiting Petroleum Corp. on CreditWatch with negative implications. "The rating action follows the announcement that Whiting intends to purchase 734 billion cubic feet equivalent of proved reserves from Celero Energy LP for roughly $802 million, with $785 million to be funded with borrowings from an expanded credit facility," said Standard & Poor's credit analyst Paul B. Harvey. "Although the acquisition price appears very reasonable at $1.09 per thousand cubic feet equivalent (mcfe), Whiting's debt leverage will increase to more than $4 per barrel of oil equivalent, as well as boosting debt as a percent of total capital to more than 60%, both of which are aggressive for the current rating," he continued. In addition, the large undeveloped component to the properties, 57%, will result in significant development costs, estimated at $534 million, bringing the total cost of the acquisition to $1.82 million per mcfe. To help ensure cash flow for this development and proposed debt repayment, Whiting has entered into hedges on roughly 55% of current production from the Celero properties through 2008, with floors of $48 to $50 and ceilings around $70 to $77. The acquisition is planned to take place in two parts, with the Postle field ($343 million) expected to close on August 4, followed by the North Ward Estes field and other properties on October 4 ($459 million). To fund the debt portion of the financing, Whiting's borrowing base on its credit facility is being raised to $850 million from the current level of $550 million. Standard & Poor's plans to meet with Whiting in the near term to further discuss this acquisition and its plans to repay debt to a level more consistent with its current rating. WHOLE AUTO: Low Delinquencies Prompt S&P's Positive Watch --------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class B notes issued by Whole Auto Loan Trust 2002-1 and the class B, C, and D notes issued by Whole Auto Loan Trust 2003-1 on CreditWatch with positive implications. The positive CreditWatch placements reflect the low level of delinquencies and low cumulative net losses experienced by each trust. In addition, overcollateralization for each transaction is at its required level. An underlying collateral pool of automobile loan contracts supports each transaction. Whole Auto Loan Trust 2002-1 and 2003- 1 have pool factors of 15.41% and 38.03%, respectively. Over the next month, Standard & Poor's will conduct a detailed review of the credit performance and remaining credit support for each of the transactions and determine whether upgrades are warranted. The ratings for each class could move approximately one to two rating categories. Ratings Placed On Creditwatch Positive Whole Auto Loan Trust 2002-1 Rating ------ Class To From ----- -- ---- B A/Watch Pos A Whole Auto Loan Trust 2003-1 Rating ------ Class To From ----- -- ---- B A/Watch Pos A C BBB/Watch Pos BBB D BB-/Watch Pos BB- WINDCREST NURSING: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Windcrest Nursing & Rehabilitation Center, Inc. dba Windcrest Nursing and Rehabilitation Center 6633 Highway 290 East #202 Austin, Texas 78723 Bankruptcy Case No.: 05-14279 Type of Business: The Debtor operates a nursing home. Windcrest offers physical therapy, occupational therapy, speech therapy, nursing care services, and nursing home services. Chapter 11 Petition Date: July 27, 2005 Court: Western District of Texas (Austin) Judge: Frank R. Monroe Debtor's Counsel: Stephen A. Roberts, Esq. Strasburger & Price, LLP 600 Congress Avenue, Suite 1600 Austin, Texas 78701 Tel: (512) 499-3600 Fax: (512) 499-3660 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 ------ --------------- ------------ James Cotter $900,000 c/o Goode Casseb Jones Riklin Choate & Watson, PC P.O. Box 120480 San Antonio, TX 78212-9680 Hidalgo Nursing Home Ltd. Trade Debt $832,987 Partnership 6633 Highway 290 East, #202 Ausitin, TX 78723 Complete Care Center Inc. Trade Debt $519,565 6633 Highway 290 East, #210 Ausitin, TX 78723 Polk Nursing Home Ltd. Trade Debt $255,877 Partnership 6633 Highway 290 East, #202 Ausitin, TX 78723 1st Windcrest Nursing Trade Debt $155,000 Home Ltd. John McDuff Attorney Fees $68,204 Leola Broderick, RTA/CTA Trade Debt $52,000 ONR, Inc. Trade Debt $44,710 Teamcare Rehab Trade Debt $22,916 Nurses Care Staffing Agency Trade Debt $14,850 Mary Ann Wofford Trade Debt $3,190 Sysco Food Services Trade Debt $2,887 Mckesson Med-Surg Supply Trade Debt $1,620 Direct Supply Inc. Trade Debt $1,563 Stephen L. Smith, DO Trade Debt $1,200 Allied Dietary Consultants Trade Debt $1,035 Sherry Justus Trade Debt $1,007 City of Fredericksburg EMS Trade Debt $570 Quality Charge Trade Debt $452 Total Fire & Safety Inc. Trade Debt $391 XYBERNAUT CORP: Look for Bankruptcy Schedules on Sept. 8 -------------------------------------------------------- Xybernaut Corporation and its debtor-affiliate ask the U.S. Bankruptcy Court for the Eastern District of Virginia for more time to file their Schedules of Assets and Liabilities, Statements of Financial Affairs, Schedules of Current Income and Expenditures and Statements of Executory Contracts and Unexpired Leases. The Debtors want until Sept. 8, 2005, to file those documents. The Debtors give the Court three reasons why the extension is warranted: 1) the size and complexity of their chapter 11 cases, with over 72,000 equity holders, a large portfolio of intellectual property assets and many executory contracts, including detailed and complex licensing agreements; 2) the limited staff of accounting and legal personnel available to address the initial days of their chapter 11 cases and the immediate focus on preserving the going concern value of their businesses; and 3) the requested extension will provide the U.S. Trustee and other interested parties more opportunity to review the Schedules and Statements before the Section 341(a) meeting of creditors of the Debtors is held. Headquartered in Fairfax, Virginia, Xybernaut Corporation, develops and markets small, wearable, mobile computing and communications devices and a variety of other innovative products and services all over the world. The corporation never turned a profit in its 15-year history. The Company and its affiliate, Xybernaut Solutions, Inc., filed for chapter 11 protection on July 25, 2005 (Bankr. E.D. Va. Case Nos. 05-12801 and 05-12802). John H. Maddock III, Esq., at McGuireWoods LLP, represents the Debtors in their chapter 11 proceedings. When the Debtors filed for protection from their creditors, they listed $40 million in total assets and $3.2 million in total debts. * Emilio Palazuelos Joins Alvarez & Marsal's REA Services Group --------------------------------------------------------------- Alvarez & Marsal, a global professional services firm, announced that Emilio Palazuelos, who has more than 20 years of hospitality and real estate experience in the U.S. and Latin America, has joined the firm's Real Estate Advisory Services Group as a director in the firm's Dallas office. Over the course of his career, Mr. Palazuelos has worked for clients in the U.S., Mexico, Costa Rica, Panama, the Dominican Republic and Brazil advising on hotel and resort projects . He has assisted developers, operators, investors, lenders, and governments in the area of real estate, hospitality, tourism, and other leisure related industries. His advisory assignments have included strategic planning for Consorcio Ara, managing the strategic marketing alliance between Viva Resorts and Wyndham Hotels and Resorts, portfolio due diligence for Apax Partners, selection of a plant site for Electrolux and multiple market analyses for home builder Centex to expand its business into Mexico and other countries in Latin America. Prior to joining A&M, Mr. Palazuelos served as a real estate and hospitality consultant for Ernst & Young and PricewaterhouseCoopers. Previously, he worked in top hotel management positions for various international companies, such as Hyatt Hotels, Divi Resorts, Continental Plaza Hotels and Resorts and Jack Tar Village in the U.S., Mexico and the Caribbean. "I have had the pleasure of working with Emilio for more than a decade in connection with a variety of major real estate and hospitality projects in the Latin America market," said Chuck Bedsole, head of the hospitality practice of A&M's Real Estate Advisory Services Group. "His breadth and depth of industry and market experience further strengthens our ability to provide a range of transactional and advisory services to real estate and hospitality clients in the Americas and beyond." Mr. Palazuelos earned a bachelor's degree in business administration from Instituto Superior de Estudios Comerciales in Mexico City and a master's degree in hospitality management at Cornell University School of Hotel Administration. He is a member of the Cornell Hotel Society and regional director for the Mexico & Central America chapters as well as the U.S./Mexico Chamber of Commerce. Alvarez & Marsal's Real Estate Advisory Services group provides a range of services including: transaction advisory services for real estate buyers, sellers, investors and lenders; restructuring and real estate litigation services, including consulting and expert witness services related to real estate matters; strategy and operations services, including executive management consulting to institutional owners, investors, lenders and users of real estate; and owner advisory services, including financial strategies and execution for private companies and institutional owners of real estate. About Alvarez & Marsal Alvarez & Marsal is a leading global professional services firm with expertise in guiding companies and public sector entities through complex financial, operational and organizational challenges. Employing a unique hands-on approach, A&M works closely with clients to improve performance, identify and resolve problems and unlock value for stakeholders. Founded in 1983, Alvarez & Marsal draws on a strong operational heritage in providing services including turnaround management consulting, crisis and interim management, performance improvement, creditor advisory, financial advisory, dispute analysis and forensics, tax advisory, real estate advisory and business consulting. A network of more than 500 experienced professionals in locations across the US, Europe, Asia and Latin America, enables the firm to deliver on its proven reputation for leadership, problem solving and value creation. * Frank Vo Joins Alvarez & Marsal's DA&F Group ---------------------------------------------- Alvarez & Marsal, a global professional services firm, announced that Frank Vo has joined the firm's Dispute Analysis and Forensics group as a director in the Dallas office. With more than 14 years of experience, Mr. Vo specializes in fraud, forensic analysis, data extraction and analysis, computer technology, computer information security and computer forensics. In addition, he is skilled in a variety of data mining techniques, including Online Analytical Processing to perform trend analyses, identification of outliers and generation of complex pricing models. Over the course of his career, he has created and managed enterprise grade databases and is well versed in mapping and migrating data from disparate sources into an easy-to-use electronic repository. He also has performed forensic investigations involving intellectual property infringement, email reconstructions and large volume data analysis. Prior to joining A&M, Mr. Vo worked for FTI Consulting. Before that, he served as a manager and senior manager in the Information Security practices at two Big Four accounting firms. Mr. Vo earned a bachelor's degree in computer information systems from the University of Tulsa. He is a Microsoft Certified Database Administrator for SQL Server 2000, Microsoft Certified Systems Engineer, and a Certified Information Systems Security Professional. Alvarez & Marsal's Dispute Analysis and Forensics group (DA&F) provides a range of analytical and investigative services to major law firms, corporate counsel and management of companies involved in complex financial disputes. Its growing team consists of highly experienced experts, all of whom have significant expertise in analyzing complicated financial and operational information and a unique ability to frame problems and articulate findings in a clear and meaningful way. About Alvarez & Marsal Alvarez & Marsal is a leading global professional services firm with expertise in guiding companies and public sector entities through complex financial, operational and organizational challenges. Employing a unique hands-on approach, the firm works closely with clients to improve performance, identify and resolve problems and unlock value for stakeholders. Founded in 1983, Alvarez & Marsal draws on a strong operational heritage in providing services including turnaround management consulting, crisis and interim management, performance improvement, creditor advisory, financial advisory, dispute analysis and forensics, tax advisory, real estate advisory and business consulting. A network of experienced professionals in locations across the US, Europe, Asia and Latin America, enables the firm to deliver on its proven reputation for leadership, problem solving and value creation. * BOND PRICING: For the week of July 25 - July 29, 2005 ------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- ABC Rail Product 10.500% 01/15/04 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 Allied Holdings 8.625% 10/01/07 51 Amer. Color Graph. 10.000% 06/15/10 70 Amer. Plumbing 11.625% 10/15/08 16 Amer. Restaurant 11.500% 11/01/06 66 American Airline 7.377% 05/23/19 74 American Airline 7.379% 05/23/16 72 American Airline 10.180% 01/02/13 72 American Airline 10.680% 03/04/13 65 American Airline 11.000% 05/06/15 69 AMR Corp. 9.200% 01/30/12 70 AMR Corp. 9.750% 08/15/21 65 AMR Corp. 9.800% 10/01/21 66 AMR Corp. 9.820% 10/25/11 73 AMR Corp. 9.880% 06/15/20 73 AMR Corp. 10.000% 04/15/21 70 AMR Corp. 10.200% 03/15/20 73 AMR Corp. 10.400% 03/15/11 62 AMR Corp. 10.550% 03/12/21 69 Anchor Glass 11.000% 02/15/13 63 Antigenics 5.250% 02/01/25 60 Anvil Knitwear 10.875% 03/15/07 55 AP Holdings Inc. 11.250% 03/15/08 15 Apple South Inc. 9.750% 06/01/06 5 Archibald Candy 10.000% 11/01/07 2 Asarco Inc. 7.875% 04/15/13 70 Asarco Inc. 8.500% 05/01/25 69 AT Home Corp. 0.525% 12/28/18 7 AT Home Corp. 4.750% 12/15/06 34 ATA Holdings 12.125% 06/15/10 20 ATA Holdings 13.000% 02/01/09 20 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 58 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 Calpine Corp. 4.750% 11/15/23 68 Calpine Corp. 7.750% 04/15/09 66 Calpine Corp. 7.875% 04/01/08 68 Calpine Corp. 8.500% 02/15/11 68 Calpine Corp. 8.625% 08/15/10 68 Calpine Corp. 8.750% 07/15/13 72 Cell Therapeutic 5.750% 06/15/08 71 Cellstar Corp. 12.000% 01/15/07 72 Cendant Corp. 4.890% 08/17/06 50 Charter Comm Inc. 5.875% 11/16/09 72 Charter Comm Inc. 5.875% 11/16/09 70 Ciphergen 4.500% 09/01/08 72 Coeur D'Alene 1.250% 01/15/24 75 Collins & Aikman 10.750% 12/31/11 29 Color Tile Inc. 10.750% 12/15/01 0 Comcast Corp. 2.000% 10/15/29 43 Comprehens Care 7.500% 04/15/10 23 Cons Container 10.125% 07/15/09 69 Conseco Inc. 9.000% 10/15/06 0 Covad Communication 3.000% 03/15/24 69 Covant-Call 07/05 7.500% 03/15/12 69 Cray Inc. 3.000% 12/01/24 53 Cray Research 6.125% 02/01/11 43 Cummins Engine 5.650% 03/01/98 73 Delta Air Lines 2.875% 02/18/24 33 Delta Air Lines 7.299% 09/18/06 58 Delta Air Lines 7.700% 12/15/05 68 Delta Air Lines 7.711% 09/18/11 59 Delta Air Lines 7.779% 01/02/12 50 Delta Air Lines 7.900% 12/15/09 26 Delta Air Lines 7.920% 11/18/10 56 Delta Air Lines 8.000% 06/03/23 30 Delta Air Lines 8.300% 12/15/29 24 Delta Air Lines 8.540% 01/02/07 44 Delta Air Lines 8.540% 01/02/07 61 Delta Air Lines 8.540% 01/02/07 36 Delta Air Lines 8.540% 01/02/07 63 Delta Air Lines 9.000% 05/15/16 23 Delta Air Lines 9.200% 09/23/14 31 Delta Air Lines 9.250% 03/15/22 23 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 25 Delta Air Lines 9.875% 04/30/08 69 Delta Air Lines 10.000% 08/15/08 34 Delta Air Lines 10.000% 06/01/11 43 Delta Air Lines 10.000% 12/05/14 35 Delta Air Lines 10.125% 05/15/10 30 Delta Air Lines 10.375% 02/01/11 29 Delta Air Lines 10.375% 12/15/22 27 Delta Air Lines 10.790% 09/26/13 37 Delta Air Lines 10.790% 09/26/13 36 Delta Air Lines 10.790% 03/26/14 24 Delphi Auto System 7.125% 05/01/29 73 Delphi Trust II 6.197% 11/15/33 55 Dura Operating 9.000% 05/01/09 70 DVI Inc. 9.875% 02/01/04 8 Dyersburg Corp. 9.750% 09/01/07 0 Eagle-Picher Inc. 9.750% 09/01/13 73 Edison Brothers 11.000% 09/26/07 0 Emergent Group 10.750% 09/15/04 0 Empire Gas Corp. 9.000% 12/31/07 3 Evergreen Int'l. Avi 12.000% 05/15/10 74 Exodus Comm. Inc. 5.250% 02/15/08 0 Fedders North Am. 9.875% 03/01/14 72 Federal-Mogul Co. 7.375% 01/15/06 27 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 27 Fibermark Inc. 10.750% 04/15/11 64 Finisar Corp. 5.250% 10/15/08 74 Finova Group 7.500% 11/15/09 46 Firstworld Comm 13.000% 04/15/08 0 Foamex L.P. 9.875% 06/15/07 29 Foamex L.P. 13.500% 08/15/05 55 Ford Motor Cred. 6.050% 02/20/15 75 GMAC 6.000% 09/15/19 74 GMAC 6.250% 05/15/19 74 Golden Books Pub 10.750% 12/31/04 0 Graftech Int'l 1.625% 01/15/24 68 Gulf States STL 13.500% 04/15/03 0 HNG Internorth 9.625% 03/15/06 37 Home Interiors 10.125% 06/01/08 66 Holt Group 9.750% 01/15/06 0 Impsat Fiber 6.000% 03/15/11 70 Inland Fiber 9.625% 11/15/07 45 Integrated Elec. Sv 9.375% 02/01/09 73 Integrated Elec. Sv 9.375% 02/01/09 74 Interep Natl. Rad 10.000% 07/01/08 75 Intermet Corp. 9.750% 06/15/09 45 Iridium LLC/CAP 10.875% 07/15/05 20 Iridium LLC/CAP 11.250% 07/15/05 19 Iridium LLC/CAP 13.000% 07/15/05 17 Iridium LLC/CAP 14.000% 07/15/05 20 Kaiser Aluminum & Chem. 12.750% 02/01/03 6 Kellstorm Inds 5.750% 10/15/02 0 Kmart Corp. 8.990% 07/05/10 75 Kmart Corp. 9.350% 01/02/20 26 Kmart Funding 8.800% 07/01/10 35 Level 3 Comm. Inc. 2.875% 07/15/10 54 Level 3 Comm. Inc. 5.250% 12/15/11 73 Level 3 Comm. Inc. 6.000% 09/15/09 55 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 62 Lukens Inc. 7.625% 08/01/04 0 Metaldyne Corp. 11.000% 06/15/12 74 Mississippi Chem 7.250% 11/15/17 4 Motels of Amer. 12.000% 04/15/04 35 Muzak LLC 9.875% 03/15/09 46 MSX Intl. Inc. 11.375% 01/15/08 64 Natl Steel Corp. 8.375% 08/01/06 2 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 Northern Pacific Railway 3.000% 01/01/47 60 Northwest Airlines 7.248% 01/02/12 51 Northwest Airlines 7.360% 02/01/20 52 Northwest Airlines 7.626% 04/01/10 54 Northwest Airlines 7.691% 04/01/17 62 Northwest Airlines 7.875% 03/15/08 40 Northwest Airlines 8.070% 01/02/15 41 Northwest Airlines 8.130% 02/01/14 47 Northwest Airlines 8.700% 03/15/07 44 Northwest Airlines 8.875% 06/01/06 66 Northwest Airlines 9.875% 03/15/07 46 Northwest Airlines 10.000% 02/01/09 43 Northwest Airlines 10.500% 04/01/09 50 Nutritional Src. 10.125% 08/01/09 74 Oakwood Homes 7.875% 03/01/04 16 Oakwood Homes 8.125% 03/01/09 20 O'Sullivan Ind. 13.375% 10/15/09 5 Orion Network 11.250% 01/15/07 54 Outboard Marine 7.000% 07/01/02 0 Outboard Marine 9.125% 04/15/17 0 Owens Corning 7.000% 03/15/09 71 Owens Corning 7.500% 05/01/05 74 Owens Corning 7.700% 05/01/08 74 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 61 Polaroid Corp. 6.750% 01/15/02 0 Polaroid Corp. 7.250% 01/15/07 0 Polaroid Corp. 11.500% 02/15/06 0 Primedex Health 11.500% 06/30/08 50 Primus Telecom 3.750% 09/15/10 24 Primus Telecom 5.750% 02/15/07 35 Primus Telecom 8.000% 01/15/14 52 Primus Telecom 12.750% 10/15/09 42 Radnor Holdings 11.000% 03/15/10 67 Raintree Resorts 13.000% 12/01/04 13 RDM Sports Group 8.000% 08/15/03 0 Realco Inc. 9.500% 12/15/07 45 Reliance Group Holdings 9.000% 11/15/00 24 Reliance Group Holdings 9.750% 11/15/03 0 RJ Tower Corp. 12.000% 06/01/13 68 Salton Inc. 12.250% 04/15/08 51 Silicon Graphics 6.500% 06/01/09 68 Solectron Corp. 0.500% 02/15/34 70 Specialty Paperb. 9.375% 10/15/06 69 Sun World Int'l. 11.250% 04/15/04 11 Tekni-Plex Inc. 12.750% 06/15/10 70 Teligent Inc. 11.500% 03/01/08 1 Tom's Foods Inc. 10.500% 11/01/04 70 Tower Automotive 5.750% 05/15/24 21 Trans Mfg Oper 11.250% 05/01/09 58 Triton PCS Inc. 8.750% 11/15/11 70 Triton PCS Inc. 9.375% 02/01/11 74 Tropical SportsW 11.000% 06/15/08 40 United Air Lines 6.831% 09/01/08 44 United Air Lines 6.932% 09/01/11 73 United Air Lines 7.270% 01/30/13 43 United Air Lines 7.811% 10/01/09 60 United Air Lines 8.030% 07/01/11 45 United Air Lines 8.700% 10/07/08 50 United Air Lines 9.000% 12/15/03 15 United Air Lines 9.020% 04/19/12 41 United Air Lines 9.125% 01/15/12 15 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 14 United Air Lines 10.670% 05/01/04 16 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 5 US Air Inc. 10.250% 01/15/07 5 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 Inc. 7.960% 01/20/18 70 UTStarcom 0.875% 03/01/08 74 Venture Hldgs 9.500% 07/01/05 0 Venture Hldgs 11.000% 06/01/07 0 WCI Steel Inc. 10.000% 12/01/04 66 Werner Holdings 10.000% 11/15/07 68 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 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 ***