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/raid1/www/Hosts/bankrupt/TCR_Public/050818.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, August 18, 2005, Vol. 9, No. 195 Headlines ABLE LABS: Intends to Liquidate Assets Instead of Reorganizing ABLE LABORATORIES: U.S Trustee Appoints 7-Member Creditors Panel ABLE LABORATORIES: Committee Wants to Hire Duane Morris as Counsel ABRAXAS PETROLEUM: Releases Prospectus for Sale of 5 Mil. Shares ACCESS WORLDWIDE: June 30 Balance Sheet Upside-Down by $3.8 Mil. ADELPHIA COMMS: Arahova Noteholders Intend to Appeal Rulings ADVOCAT INC: Earns $16 Million of Net Income in Second Quarter AES IRONWOOD: S&P Has Positive Outlook on $308 Million Bonds ALLIANCE LAUNDRY: Incurs $2.7 Million Net Loss for Second Quarter ALL STAR: Case Summary & 20 Largest Unsecured Creditors AMERICAN HOMEPATIENT: 6th Circuit Affirms Bankruptcy Ruling ANCHOR GLASS: Arranges $15 Million DIP Secured Term Facility ARCAP 2005: Fitch Places Low-B Ratings on Six Certificate Classes ASARCO LLC: Gets Court Nod to Employ Jordan Hyden as Local Counsel ATA AIRLINES: Wants to Walk Away from Pilots' Union Agreement ATG INC: Ch. 7 Trustee Taps Gadsby Hannah as Special Local Counsel BANC OF AMERICA: Fitch Lifts Class B Cert. Rating 3 Notches to BBB BROOKSTONE FINE: Case Summary & 48 Largest Unsecured Creditors CATHOLIC CHURCH: Montali Appointed as Settlement Judge in Portland CELLEGY PHARMACEUTICALS: June 30 Equity Deficit Narrows to $1.7MM CENVEO INC: S&P Revises Corporate Credit Rating Watch to Negative CLOVERLEAF TRANSPORTATION: Wants Drake Sommers as Counsel CNA FINANCIAL: S&P Assigns BB Preferred Stock Rating DELTA AIR: S&P Places Ratings on Watch with Negative Implications EASTMAN KODAK: Fitch Chips Rating on Sr. Debt One Notch to BB- EMERITUS ASSISTED: Equity Deficit Narrows to $123 Mil. at June 30 ENRON CORP: Inks Pact Resolving Brooklyn Union Gas Claims ENRON: EEMC Demands Summary Judgment on CCLC's Claims ENRON CORP: Looking Glass Holds $1 Million Allowed Unsecured Claim FIBERMARK INC: Court Rules in Favor of Unsealing Examiner's Report FIRST UNION: Negative Loan Performance Cues Fitch's Downgrade GMAC COMMERCIAL: Loan Defeasance Prompts Fitch to Lift Ratings GOLDMAN SACHS: Fitch Affirms B Rating on Class IB-5 Certificates GOLF CLUB: Case Summary & 20 Largest Unsecured Creditors GOODYEAR TIRE: SEC May File Charges for Accounting Violations GSI GROUP: Wants to Exchange $110M Sr. Notes with Registered Notes H. LIEBLICH: Case Summary & 13 Largest Unsecured Creditors HAYES LEMMERZ: Sells Equipment & Engineering Division HOME INTERIORS: S&P Lowers Corporate Credit Rating to CCC HUFFY CORP: Bankruptcy Court Approves Disclosure Statement HUFFY CORP: Court Okays Distress Termination of Retirement Plan INTERMET CORP: Begins Plan Solicitation & Balloting Procedures IT GROUP: Final Decree Closing Ch. 11 Cases Delayed Until Oct. 31 IT GROUP: Trustee Has Until Oct. 31 to Object to Proofs of Claim JACUZZI BRANDS: S&P Affirms B+ Corporate Credit Rating KERR-MCGEE: Selling North Sea Operations to Maersk for $3.5 Bil. KERR-MCGEE: Taking Bids for Gulf of Mexico Shelf Properties K&F INDUSTRIES: Reports Second Quarter Financial Results LEAP WIRELESS: Earns $2.5 Million of Net Income in Second Quarter MAYTAG CORP: Moody's Reviews Ba2 Sr. Implied & Sr. Unsec. Ratings MEDIACOM BROADBAND: Moody's Rates New $300 Million Sr. Notes at B2 METCO PROPERTIES: Logan Russack Wants Case Converted to Chapter 7 MIRANT CORP: Court Rules on Wachovia & CSFB Claim Disputes MIRANT CORP: Wants to Pay Mirant Sugar's Prepetition Taxes MOHAMED ALI: Voluntary Chapter 11 Case Summary NANNACO INC: Convertible Debenture Holders Deliver Default Notice NATIONAL CENTURY: Releases Docs to U.S. Attorney for the S.D. Ohio NATIONAL R.V.: Closes New 3-Year Loan with UPS & Wells Fargo NATIONAL R.V.: Reports Preliminary Financial 2nd Quarter Results NEWS CORP: Board Extends Stockholders Rights Plan to Nov. 2007 NORTEL NETWORKS: Inks Joint Venture Pact with LG Electronics OCEAN JOURNEY: Court Reopens Case for Administration of Assets OPTINREALBIG.COM: Wants Case Dismissed After Settling SPAM Suits ORBIMAGE HOLDINGS: Posts $5.4 Million Net Loss in Second Quarter PEGASUS SATELLITE: Trust Gets Cash Investment Requirements Waived PEGASUS SATELLITE: C&TA Gets Final Fees for Advisory Services RADNOR HOLDINGS: Posts $100,000 Net Loss for the Second Quarter REGIONAL DIAGNOSTICS: Wants Exclusive Period Stretched to Oct. 19 REGIONAL DIAGNOSTICS: Panel Wants to Recover Assets from Lenders R.F. CUNNINGHAM: U.S. Trustee Picks 5-Member Creditors Committee R.F. CUNNINGHAM: Committee Taps Halperin Battaglia as Counsel R.F. CUNNINGHAM: Committee Hires Mahoney Cohen as Finance Advisor RISK MANAGEMENT: Committee Taps Halperin Battaglia as Counsel RISK MANAGEMENT: Section 341(a) Meeting Slated for Sept. 1 ROTECH HEALTHCARE: S&P Lowers Corporate Credit Rating to BB- SAACO: Fitch Assigns BB+ Rating on $5.6 Million Private Certs. SATCON TECHNOLOGY: Completes $5.8 Million Financing Transaction SATCON TECHNOLOGY: Posts $2 Million Net Loss in Second Quarter SCOTT DESERT: Voluntary Chapter 11 Case Summary SECURITY CAPITAL: Estimates $3.7 Million Second Quarter Net Income SIRIUS SATELLITE: Sells $500M Senior Notes to Institutional Buyers SMURFIT-STONE: S&P Puts B+ Corporate Credit Rating on Watch SOREY FARMS: Voluntary Chapter 11 Case Summary SOUTH DAKOTA: Files Schedules of Assets & Liabilities SPECIAL DEVICES: S&P Withdraws Junk Corporate Credit Rating STATION CASINOS: Exchanging $200M Sr. Notes for Transferable Notes STATION CASINOS: SC Sonoma Buys Property for New Resort Facility SUN HEALTHCARE: Lenders Allow $4MM Short-Term Overadvance on Loan TECO AFFILIATES: Wants National Union's Claims Disallowed TECO AFFILIATES: Wants Graylon Hughes' $200K PI Claims Rejected TRM CORP: Earns $2.9 Million of Net Income in Second Quarter UNISYS CORP: S&P Puts BB+ Corporate Credit Rating on CreditWatch URANIUM RESOURCES: Registers 84.4 Million Shares for Resale VARTEC TELECOM: Wants to Close Reno Call Center & Reject Contracts WESTPOINT STEVENS: Wants Avoidance Action Procedures Modified WINSTAR COMMS: Case Management Conference Slated for Aug. 22 WORLDCOM INC: Judge Jones Sentences Two Ex-Worldcom Accountants XTREME COS: June 30 Balance Sheet Upside-Down by $1.1 Million YUKOS OIL: Cuts Investment in Two Oil Units By 88% * Proskauer Rose Names L. Solomon & B. Fader as Department Chairs * Proskauer Rose Names Bert Deixler to Head Los Angeles Office ********* ABLE LABS: Intends to Liquidate Assets Instead of Reorganizing -------------------------------------------------------------- Able Laboratories, Inc., says it intends to sell its business and assets to one or more third-party purchasers instead of reorganizing under chapter 11 of the U.S. Bankruptcy Code. The Company has determined that its business plan for a reorganization is not feasible because it is dependent on obtaining significant external financing, which in turn was predicated on its being able to return certain products to the market in a more timely manner. FDA Rejects Proposal The U.S. Food and Drug Administration rejected the Debtor's proposal to revalidate the product development data included in the Company's previously approved Abbreviated New Drug Applications, under new management and with the data being verified by an independent outside consultant. The proposal would have allowed the Company to re-launch its products to the market and thus generate income or revenue. On May 23, 2005, the company disclosed that it had suspended manufacturing operations and had recalled its product line due to concerns about laboratory practices and compliance with standard operating procedures. The company's chapter 11 filing on July 18, 2005, was intended to assist the company to continue while it works with the FDA to address inspectional observations, improve the quality of its systems and controls and, subject to FDA authorization, reintroduce products to the market. No Stockholder Value, Able Says While it is possible for shareholders of the company's common stock to receive proceeds from the sale of its assets, there can be no guarantee that this will occur. In fact, Able believes it is unlikely to occur, because the aggregate sale proceeds would, in Able's view, be insufficient to pay all of the liabilities owed to secured and unsecured creditors of the company. Accordingly, in Able's view, it is not likely that the common stock has any value. CRO Resigns In light of the FDA's decision and the need of the company to reduce overhead and expenses, Paul D. Cottone, the company's Chief Restructuring Officer has resigned. Mr. Cottone will continue to assist the company on a consulting basis. Richard M. Shepperd, the company's Director of Restructuring, will continue with the company's efforts to reduce expenses and to market assets. Headquartered in Cranbury, New Jersey, Able Laboratories, Inc. -- http://www.ablelabs.com/-- develops and manufactures generic pharmaceutical products in tablet, capsule, liquid and suppository dosage forms. The Company filed for chapter 11 protection on July 18, 2005 (Bankr. D. N.J. Case No. 05-33129) after it halted manufacturing operations and recalled all of its products not meeting FDA regulatory standards. Deborah Piazza, Esq., and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $59.5 million in total assets and $9.5 million in total debts. ABLE LABORATORIES: U.S Trustee Appoints 7-Member Creditors Panel ---------------------------------------------------------------- The United States Trustee for Region 3 appointed seven creditors to serve on the Official Committee of Unsecured Creditors in Able Laboratories, Inc.'s chapter 11 case: 1. Cardinal Health Attn: Thomas Gerhart 7000 Cardinal Place Dublin, Ohio 43017 Tel: 614-757-5433, Fax: 614-757-6653 2. McKesson Corporation Attn: Jennifer Jenkins One Post Street San Francisco, California 94104 Tel: 415-983-9333, Fax: 415-732-2967 3. Waters Corporation Attn: Michelle A. Hardiman 34 Maple Street Milford, Massachusetts 01757 Tel: 508-482-3775, Fax: 508-482-2320 4. Criterion Software, LLC Attn: Alag Saravanan 3830 Park Ave., # 205 Edison, New Jersey 08820 Tel: 732-635-9450, Fax: 732-635-9452 5. Siegfried (USA), Inc. Attn: Rich Barkasy 33 Industrial Park Avenue Pennsville, New Jersey 08070 Tel: 856-540-6313, Fax: 856-678-8206 6. Ivax Corporation Attn: Eric Mittleberg 4400 Biscayne Blvd. Miami, Florida 33137 Tel: 305-575-6000, Fax: 305-575-6048 7. Rite Aid Corporation Attn: Robert B. Sari P.O. Box 3165 Harrisburg, Pennsylvania 17105 Tel: 717-975-5833, Fax: 717-760-7867 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Cranbury, New Jersey, Able Laboratories, Inc. -- http://www.ablelabs.com/-- develops and manufactures generic pharmaceutical products in tablet, capsule, liquid and suppository dosage forms. The Company filed for chapter 11 protection on July 18, 2005 (Bankr. N.J. Case No. 05-33129) after it halted manufacturing operations and recalled all of its products not meeting FDA regulatory standards. Deborah Piazza, Esq., and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $59.5 million in total assets and $9.5 million in total debts. ABLE LABORATORIES: Committee Wants to Hire Duane Morris as Counsel ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of Able Laboratories, Inc., asks the U.S. Bankruptcy Court for the District of New Jersey for permission to employ Duane Morris LLP as its counsel. Duane Morris will: a) provide legal advice with respect to the Committee's rights and interests in the review and negotiation of any plan of reorganization, its accompanying disclosure statement and related corporate documents and in the confirmation and implementation of that plan; b) respond on behalf of the Committee to any and all applications, motions, answers, orders, reports and other pleadings in connection with the administration of the Debtor's estate in its chapter 11 case; and c) perform any other legal services requested by the Committee in connection with the Debtor's chapter 11 case. David H. Stein, Esq., a Partner of Duane Morris, is one of the lead attorneys for the Committee. Mr. Stein charges $370 per hour for his services. Mr. Stein reports Duane Morris' professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Walter J. Greenhalgh Partner $490 Diane E. Vuocolo Partner $455 Michael R. Lastowski Partner $525 Mairi V. Luce Associate $385 Kevin P. Ray Associate $295 Joseph H. Lemkin Associate $310 Mathew M. Carucci Associate $225 Denice M. Sosnoski Paralegal $160 Robin D. Thomas Paralegal $160 Thelma J. Santorelli Legal Assistant $115 Duane Morris assures the Court that it does not represent any interest materially adverse to the Committee, the Debtor or its estate. Headquartered in Cranbury, New Jersey, Able Laboratories, Inc. -- http://www.ablelabs.com/-- develops and manufactures generic pharmaceutical products in tablet, capsule, liquid and suppository dosage forms. The Company filed for chapter 11 protection on July 18, 2005 (Bankr. N.J. Case No. 05-33129) after it halted manufacturing operations and recalled all of its products not meeting FDA regulatory standards. Deborah Piazza, Esq., and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $59.5 million in total assets and $9.5 million in total debts. ABRAXAS PETROLEUM: Releases Prospectus for Sale of 5 Mil. Shares ---------------------------------------------------------------- Abraxas Petroleum Corporation filed a prospectus with the Securities and Exchange Commission relating to the offer and sale of up to an aggregate of 5,096,479 shares of its common stock. The Company's common stock trades on The American Stock Exchange under the symbol "ABP." Early this year, shares in ABP traded in the $2.00 to $2.50 range. The stock's topped $4.50 per share most days this month. Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas exploitation and production company with operations in Texas and Wyoming. As of June 30, 2005, Abraxas Petroleum's equity deficit narrowed to $43,244,000 from a $53,464,000 deficit at Dec.31, 2004. ACCESS WORLDWIDE: June 30 Balance Sheet Upside-Down by $3.8 Mil. ---------------------------------------------------------------- Access Worldwide Communications, Inc. (OTC Bulletin Board: AWWC), a leading marketing services company, reported financial results for the quarter ended June 30, 2005. Revenues for the second quarter of 2005 decreased 32.1% to $9.5 million from revenues of $14.0 million for the second quarter of 2004. The Company reported a loss from operations for the second quarter of 2005 of $300,000, compared with income from operations of $800,000 for the second quarter of 2004. The Company reported a net loss of $700,000, for the quarter ended June 30, 2005, compared with net income of $400,000, for the quarter ended June 30, 2004. Total weighted average diluted shares outstanding for the quarters ended June 30, 2005 and June 30, 2004 were 11,286,219 and 11,392,684, respectively. Lower consolidated revenues in the second quarter of 2005 were driven primarily by the decrease in revenues from our Business Services segment, which was the result of the lengthy lead time necessary for our two new business development professionals to replace the revenues lost from a prior client due to regulatory changes. This was amplified slightly by a decrease in revenues in our Pharmaceutical Services segment, due to the launch of a major DTC program for one of our clients in 2004 with no similar launch in 2005. The loss from operations was primarily attributed to the decrease in revenues in our Business Services Segment. For the Six Months Ended June 30, 2005 Our revenues decreased $7.0 million, or 26.0%, to $19.9 million for the six months ended June 30, 2005, compared with $26.9 million for the six months ended June 30, 2004. Revenues for the Pharmaceutical Segment decreased $0.6 million, or 4.4%, to $13.0 million for the six months ended June 30, 2005, compared with $13.6 million for the six months ended June 30, 2004. Revenues for the Business Segment decreased $6.4 million, or 48.1%, to $6.9 million for the six months ended June 30, 2005, compared to $13.3 million for the six months ended June 30, 2004. The Company reported net loss and diluted earnings per share of $(1.3) million and $(0.11), respectively, for the six months ended June 30, 2005, compared with net income and diluted earnings per share of $0.2 million and $0.01, respectively, for the six months ended June 30, 2004. Total weighted average diluted shares outstanding for the six months ended June 30, 2005 and June 30, 2004 were 11,064,969 and 11,264,974, respectively. "We continue to remain focused on continuing momentum at our pharmaceutical services division while investing in Business Development professionals to improve our revenue performance at our other divisions," stated Richard Lyew, the Company's Chief Financial Officer. Founded in 1983, Access Worldwide -- http://www.accessww.com/-- provides a variety of sales, marketing and medical education services. Services include product stocking, medical education, database management, clinical trial recruitment and teleservices. Access Worldwide is headquartered in Boca Raton, Florida and has about 800 employees in offices throughout the United States and Asia. At June 30, 2005, Access Worldwide's balance sheet showed a $3,864,961 stockholders' deficit, compared to a $3,865,118 deficit at Dec. 31, 2004. ADELPHIA COMMS: Arahova Noteholders Intend to Appeal Rulings ------------------------------------------------------------ The Ad Hoc Committee of Arahova Noteholders, as holders of more than $550 million in senior notes issued by Arahova Communications, Inc., asks the U.S. Bankruptcy Court for the Southern District of New York for leave to file appeals to the U.S. District Court for the Southern District of New York regarding: 1. Order denying the Arahova Committee's motion to strike the ACOM Debtors' 2005 Amended Schedules; 2. Order denying the Arahova Committee's motion to prosecute intercompany claims and causes of action; 3. Order denying the Arahova Committee's motion to compel or to strike the Debtors' factual assertions; and 4. Order approving the Debtors' proposed Resolution Procedures. As reported in the Troubled Company Reporter yesterday, the Bankruptcy Court denied the Arahova Noteholders' request for leave, standing and authority to prosecute intercompany claims and causes of actions, on behalf of Arahova and its debtor subsidiaries in the ACOM Debtors' Chapter 11 cases. The Court also denied their request to strike the Amended Schedules filed by Adelphia Communications Corporation and its debtor-affiliates. The appeals have substantial merit, John K. Cunningham, Esq., at White & Case LLP, in New York, attests. However, Mr. Cunningham says, even if the Arahova Committee were to obtain a favorable ruling from the Bankruptcy Court on a normal briefing and argument schedule, the Court will not be able to return the parties to the status quo. The resolution of billons of dollars of claims will take every day the interested parties have available to them between now and the deadline the Court set for a large portion of intercompany issues to be resolved. Thus, the Arahova Committee further asks the Court for an expedited briefing and argument schedule that permits a resolution of their appeals as quickly as the Court's dockets will allow, or a stay of certain aspects of the Orders pending a more deliberate briefing schedule. Mr. Cunningham gives Judge Gerber five factors that reinforce the need for an expedited appeal: 1. The requirement that the sale of the ACOM Debtors' assets to Time Warner, Inc., and Comcast Corp. be consummated by July 31, 2006; 2. The materiality of the inter-Debtor issues to achieving a confirmable Plan of Reorganization that implements the Time Warner/Comcast Sale; 3. The complexity of the inter-Debtor issues; 4. The amount of time it will take to resolve the inter-Debtor issues in a fashion that will accommodate the Plan confirmation process and the Time Warner/Comcast Sale; and 5. The need of the parties to know that the procedures utilized to address the inter-Debtor issues will withstand challenge and that they will produce sufficiently final resolutions to permit the plan to proceed. The appellate review of all the Orders is too important to be denied review and too independent of the cause itself to wait until final resolution of the inter-Debtor issues, Mr. Cunningham says. With substantive and quite possible outcome-determinative deadlines approaching within a few short months, the Arahova Committee believes an expedited appeal is necessary to avoid the significant due process issues that will inevitably result from the implementation of the Bankruptcy Court's procedures. Consolidated Appeals Mr. Cunningham notes that all four appeals concern certain inter- Debtor disputes and the operative facts are essentially the same for each. The separate resolution of the appeals, he says, would involve the duplication of judicial labor. Therefore, the Arahova Committee asks the Court to hear the appeals on a consolidated basis. 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. 102; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVOCAT INC: Earns $16 Million of Net Income in Second Quarter -------------------------------------------------------------- Advocat Inc. (NASDAQ OTC: AVCA) reported its results for the second quarter ended June 30, 2005. Advocat reported net income from continuing operations of $1.6 million, or $0.25 per diluted common share, for the second quarter of 2005 compared with a net income from continuing operations of $3.6 million, or $0.55 per diluted common share, in 2004. Net income for common stock for the second quarter was $1.6 million, or $0.25 per diluted share, compared with $2.4 million, or $0.38 per diluted share, in the second quarter of 2004. The 2005 results included a $1.5 million expense for professional liability costs compared with a $1.7 million net benefit in 2004. The 2004 results also included a $1.1 million loss from discontinued operations. Second Quarter Results Advocat's net revenues from continuing operations increased 7.5% to $52.6 million compared with $49.0 million in the second quarter of 2004. The increase in second quarter net revenues was primarily due to patient revenues that increased 7.8% to $49.5 million compared with $45.9 million in the second quarter of 2004. Patient revenues benefited from Medicare rate increases that were effective October 1, 2004, increased Medicare utilization, and increased Medicaid rates in certain states, partially offset by a 0.2% decline in census in 2005 compared with 2004. Medicare revenues increased to 30.8% of patient revenues in 2005, up from 29.5% in 2004. Resident revenues increased to $3.2 million in 2005 from $3.1 million in the second quarter of 2004. Ancillary service revenues, prior to contractual allowances, increased 12.9% to $10.3 million in 2005 from $9.1 million in the second quarter of 2004. Operating expenses increased to $40.0 million and represented 75.9% of patient and resident revenues for the second quarter of 2005 compared with $38.6 million, or 78.7% of such revenues, in the second quarter of 2004. The increase in operating expenses was primarily due to higher wage and benefit costs. The Company's results of continuing operations for the second quarter of 2005 included $1.5 million in professional liability costs compared with a net benefit of $1.7 million in 2004. The 2004 benefit resulted from downward adjustments in the Company's self-insured reserves associated with professional liability claims. The self-insurance reserves are assessed on a quarterly basis, with changes in estimated losses being recorded in the consolidated statements of operations in the period identified. Professional liability costs include cash and non-cash charges recorded based on current actuarial reviews. The actuarial reviews include estimates of known claims and an estimate of claims that may have occurred, but have not yet been reported to the Company. As of June 30, 2005, the Company has recorded total liabilities for reported professional liability claims and estimates for incurred but unreported claims of $34.5 million, and has current debt obligations of $43.9 million. The Company does not have cash or available resources to pay in full this current debt, the accrued professional liability claims or any significant portion of either and has limited resources available to meet its anticipated operating, capital expenditure and debt service requirements during 2005. Six Months Results Net revenues increased to $104.5 million in the first six months of 2005 compared with $97.5 million in 2004. Patient revenues were $98.2 million in 2005 compared with $91.4 million in the first six months of 2004. Resident revenues were $6.3 million compared with $6.0 million. Ancillary service revenues, prior to contractual allowances, increased to $20.2 million in 2005 from $18.5 million in 2004. Operating expenses were $80.8 million in 2005 and represented 77.3% of patient and resident revenues compared with $76.7 million, or 78.6% of such revenues, in 2004. The increase in operating expenses was primarily due to higher wage and benefit costs. Net income from continuing operations for the first six months of 2005 was $10.5 million, or $1.60 per diluted common share, compared with $8.1 million, or $1.27 per share, in the first six months of 2004. Net income for common stock for the first six months of 2005 was $10.4 million, or $1.62 per diluted share, compared with $7.0 million, or $1.12 per diluted share, in the same period of 2004. The 2005 results include income of $0.1 million from discontinued operations compared with a loss of $1.0 million in the same period of 2004. Reimbursement Update The President's proposed budget for the fiscal year beginning October 1, 2005, includes the effects of the refinement of the Resource Utilization Group system and provides for the elimination of the reimbursement add-ons for high acuity patients. The final rule issued by the Centers for Medicare and Medicaid ("CMS") includes the elimination of the add-ons and other offsetting adjustments to the reimbursement received, including a market basket adjustment of approximately 3.1% designed to increase reimbursement for the effects of inflation. The market basket adjustment will become effective October 1, 2005, and will increase the Company's revenue and operating cash flow by approximately $1.6 million annually. The eliminations of the add-ons and other offsetting adjustments will be effective January 1, 2006, and will decrease the Company's revenue and operating cash flow by approximately $2.5 million annually. The net effect of the CMS rule, once all adjustments are in effect, will be to reduce the Company's revenue and operating cash flow by approximately $0.9 million per year. Advocat Inc. -- http://www.irinfo.com/avc-- provides long-term care services to nursing home patients and residents of assisted living facilities in nine states, primarily in the Southeast. * * * As reported in the Troubled Company Reporter on Apr. 25, 2005, BDO Seidman LLP raised substantial doubt about Advocat Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2004. The Company incurred operating losses in two of the three years in the period ended December 31, 2004, and although the Company reported a profit for the year ended December 31, 2004, that profit primarily resulted from non-cash expense reductions caused by downward adjustments in the Company's accrual for self-insured risks associated with professional liability claims. AES IRONWOOD: S&P Has Positive Outlook on $308 Million Bonds ------------------------------------------------------------ Standard & Poor's Ratings Services revised the outlook on AES Ironwood LLC's 'B+'-rated $308.5 million senior secured bonds (about $292 million outstanding) to positive from stable, following its similar action on The Williams Cos. Inc. (Williams; B+/Positive/B-2). Williams guarantees the obligations of the project's primary power purchaser, Williams Power Co. Inc. The rating on AES Ironwood's bonds is constrained by the rating on Williams. Standard & Poor's has concluded that in the absence of the power-purchase agreement with Williams Power, the project would be forced to operate under merchant conditions and would likely not be able to service its debt in a timely manner. AES Ironwood is a 705-MW, combined-cycle, natural gas-fired generation station in South Lebanon Township, Pennsylvania that sells its entire capacity and energy to Williams Power, a subsidiary of Williams, through a 20-year PPA. The project achieved commercial operation on Dec. 28, 2001, and granted final acceptance to Siemens Westinghouse, the engineering, procurement, and construction contractor, on March 12, 2003. The AES Corp. (B+/Positive/--) indirectly owns 100% of AES Ironwood. "The positive outlook reflects that of guarantor Williams," said Standard & Poor's credit analyst Scott Taylor. "The project rating will be tied to the rating on Williams in the near term, if market conditions still prevent the project from generating adequate cash flow to cover its debt service obligations at adequate levels, without the benefit of a PPA," he continued. For the project rating to return to an investment-grade level, it would need to resolve its outstanding disputes and improve its debt service coverage ratio, in addition to Williams being rated investment grade. ALLIANCE LAUNDRY: Incurs $2.7 Million Net Loss for Second Quarter ----------------------------------------------------------------- Alliance Laundry Holdings LLC reported results for the quarter and six months ended June 30, 2005. Net revenues for the quarter ended June 30, 2005 increased $12.3 million, or 16.8%, to $85.7 million from $73.4 million for the quarter ended June 30, 2004. The company's net loss for the quarter ended June 30, 2005, was $2.7 million as compared to net income of $6.2 million for the quarter ended June 30, 2004. Adjusted EBITDA for the quarter ended June 30, 2005 was $16.6 million compared with Adjusted EBITDA of $16.1 million for the quarter ended June 30, 2004. The overall net revenue increase of $12.3 million was attributable to higher commercial and consumer laundry revenue of $11.7 million and service parts revenue of $0.6 million. The company's net loss for the quarter ended June 30, 2005, included $8.0 million of transaction costs incurred in establishing a new asset backed facility for the sale of equipment notes and trade receivables, and amortization of $0.6 million related to an inventory step-up to fair market value recorded on the acquisition date, with no similar costs in 2004. Net revenues for the six months ended June 30, 2005, increased $15.9 million, or 11.4%, to $155.6 million from $139.7 million for the six months ended June 30, 2004. The company's net loss for the six months ended June 30, 2005, was $34.1 million as compared to net income of $10.4 million for the six months ended June 30, 2004. Adjusted EBITDA for the six months ended June 30, 2005, was $29.2 million as compared with Adjusted EBITDA of $31.2 million for the six months ended June 30, 2004. In announcing the Company's results, CEO and President Thomas F. L'Esperance said, "We are extremely pleased with our top line revenue growth of 16.8% for the quarter ended June 30, 2005. Leading the way for the quarter was higher international equipment revenue of $4.4 million, higher North American commercial equipment revenue of $4.1 million and higher consumer laundry revenue of $2.2 million." "We are very pleased to have the purchase of Alliance by Ontario Teachers and the establishment of our new asset backed facility behind us and look forward to focusing our efforts on growing the business and delevering the Company," said L'Esperance. Alliance Laundry Holdings LLC is the parent company of Alliance Laundry Systems LLC -- http://www.comlaundry.com--, a leading North American manufacturer of commercial laundry products and provider of services for laundromats, multi-housing laundries, on- premise laundries and drycleaners. Alliance offers a full line of washers and dryers for light commercial use as well as large frontloading washers, heavy duty tumbler dryers, and presses and finishing equipment for heavy commercial use. The Company's products are sold under the well known brand names Speed Queen(R), UniMac(R), Huebsch(R) and Ajax(R). * * * As reported in the Troubled Company Reporter on Jan. 7, 2005, Moody's Investors Service assigned a B3 rating to Alliance Laundry Systems LLC's proposed guaranteed senior subordinated notes (the notes will be co-issued by Alliance Laundry Corporation) and a B1 rating to Alliance Laundry Systems LLC's proposed senior secured revolving credit facility and senior secured term loan. Additionally, Moody's assigned a B1 senior implied rating to Alliance Laundry Systems LLC and withdrew the B2 senior implied rating of Alliance Laundry Holdings, Inc. Ratings assigned: * $150 million guaranteed senior subordinated notes, due 2013 -- B3 * $50 million guaranteed senior secured revolver, due 2011 -- B1 * $200 million guaranteed senior secured term loan B, due 2012 -- B1 * Senior implied rating -- B1 * Senior unsecured issuer rating -- B2 Ratings to be withdrawn: * $110 million senior subordinated notes, due 2008 -- B3 * $45 million senior secured revolver, due 2007 -- B1 * $136 million senior secured term loan, due 2007 -- B1 ALL STAR: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------- Debtor: All Star Neon, Inc. dba All Star Neon & Sign Specialists dba All Star Signs and Electric 406 Industrial Drive Maryland Heights, Missouri 63043 Bankruptcy Case No.: 05-51432 Type of Business: The Debtor is a full service sign, lighting and electrical contractor. The Company's services include simple repairs, engineering, fabrication, and installation. See http://www.allstar-inc.com/ Chapter 11 Petition Date: August 16, 205 Court: Eastern District of Missouri (St. Louis) Judge: Barry S. Schermer Debtor's Counsel: Steven Goldstein, Esq. Goldstein & Pressman, P.C. 121 Hunter Avenue, Suite 101 Saint Louis, Missouri 63124 Tel: (314) 727-1717 Fax: (314) 727-1447 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service Tax period ending $185,193 122 Spruce Street 09/30/2004 Saint Louis, MO 63103 IBEW Local 1 Union dues $105,882 c/o Rhona S. Lyons Schuchat, Cook & Werner 1221 Locust Street, 2nd Floor Saint Louis, MO 63103 Titan Contractors Services, $62,423 Inc. c/o Bryan D. Nicholson, Esq. Armstrong Teasdale LLP One Metropolitan Squire, Suite 2600 Saint Louis, MO 63102 Old Republic Surety Company $60,000 Welsch Flatness & Lutz, Inc. $42,300 Stuart Allan & Associates $29,820 Rental Service Corporation $24,085 Budrovich Contracting Co., $23,242 Inc. Heritage Reformed $18,658 Presbyterian Church Missouri Division of Unemployment tax $17,018 Employment Security 2005-01 Earthworx Excavating & Bobcat $16,330 Black Box Network Services $14,419 Collector of Revenue Real estate tax $13,304 American Express $13,027 Collins & Herman, Inc. $12,760 SBC SW Bell Yellow Pages $12,004 Confidential Credits $11,157 Consultants Corp. WW Grainger, Inc. $11,078 Rexel United Electric $9,651 Supplies, Inc. Crescent Electric Supply $8,829 AMERICAN HOMEPATIENT: 6th Circuit Affirms Bankruptcy Ruling ----------------------------------------------------------- The United States Court of Appeals for the Sixth Circuit affirmed the ruling by the United States Bankruptcy Court for the Middle District of Tennessee and subsequently affirmed by the United States District Court approving American HomePatient, Inc.'s (OTC:AHOM) plan of reorganization that became effective July 1, 2003. The holders of the Company's senior debt had appealed the ruling on the approved plan, and, as previously announced, oral argument before the United States Court of Appeals for the Sixth Circuit was held on July 20, 2005 (Case Number 03-6500). The approved plan allowed the Company to continue its business operations uninterrupted, led by its current management team, and accomplished the Company's primary goal of restructuring its long- term debt obligations to its lenders. In addition, the approved plan provided that the Company's shareholders retained their equity interest in the Company and that all of the Company's creditors and vendors were to be paid 100% of all amounts they are owed, either immediately or over time with interest. Pursuant to the approved plan, the Company's secured debt to the lenders was quantified at $250 million and was evidenced by a promissory note in that amount and was secured by various security agreements. The Company is no longer a party to a credit agreement. The remainder of the amounts due to the lenders as of July 1, 2003 over and above the $250.0 million was treated as unsecured. A full-text copy of the Sixth Circuit's 10-page Slip Opinion is available at no charge at: http://www.ca6.uscourts.gov/opinions.pdf/05a0345p-06.pdf American HomePatient, Inc., is one of the United States' largest home health care providers with 274 centers in 35 states. Its product and service offerings include respiratory services, infusion therapy, parenteral and enteral nutrition, and medical equipment for patients in their home. American HomePatient, Inc.'s common stock is currently traded in the over-the-counter market or, on application by broker-dealers, in the NASD's Electronic Bulletin Board under the symbol AHOM or AHOM.OB. American HomePatient and its debtor-affiliates filed for chapter 11 protection on August 5, 2002 (Bankr. M.D. Tenn. Case No. 02-08915). Glenn B. Rose, Esq., at Harwell Howard Hyne Gabbert & Manner, PC, represents the Debtors. Houlihan Lokey Howard & Zukin Capital served as the Company's Financial Advisors. As previously reported in the Troubled Company Reporter, American HomePatient sought and obtained confirmation of a chapter 11 plan in May 2003 that forced a restructuring its long term debt obligations to its secured lenders, promised to full payment to unsecured creditors with interest, and left shareholders unimpaired. The plan took effect in July 2003. At Mar. 31, 2005, American HomePatient, Inc.'s balance sheet showed a $19,330,000 stockholders' deficit, compared to a $20,729,000 deficit at Dec. 31, 2004. ANCHOR GLASS: Arranges $15 Million DIP Secured Term Facility ------------------------------------------------------------ Anchor Glass Container Corporation (Nasdaq:AGCCQ) arranged a $15 million debtor-in-possession secured term financing facility effective Aug. 10, 2005. The facility is provided by a group of financial institutions that are members of an ad hoc committee consisting of holders of a majority in principal amount of the Company's $350 million 11% Senior Secured Notes due 2013. This new facility supplements the secured revolving debtor-in- possession facility provided by Wachovia Capital Finance, for itself and as agent for other lenders, in the maximum amount of $115 million, subject to availability. Members of the same ad hoc committee have expressed a willingness, subject to negotiation of documentation and completion of due diligence, to provide a $125 million term facility. Part of the loan will be used to repay the existing pre- and post-petition credit facilities, with the balance to be used for working capital. "This additional credit facility provides us with additional liquidity and flexibility to operate our business while we work through the reorganization of the Company," said Mark Burgess, Chief Executive Officer. Proceeds of the Facility will be used to pay the Debtor's post- petition operating expenses. The Facility matures upon the earlier of 45 days from the closing date or the date on which an event of default occurs. The Facility provides for, among other things: -- cash interest payable on the maturity date of LIBOR plus 700 bps per annum; -- cash interest payable during the continuance of an event of default of an additional 200 bps per annum; -- a commitment fee equal to 100 bps payable upon entry of the interim financing order; -- an allowed super-priority administrative expense claim for all amounts owing under the Facility, subject to the carve- out as defined in the Facility; -- a first priority perfected priming security interest in, and lien on, all of the assets (tangible, intangible, real personal or mixed) of the Registrant, whether now owned or hereafter acquired, which currently secure the Senior Secured Notes; and -- events of default that include, among others: * the filing of a plan or motion seeking approval of a sale of substantial assets on terms not acceptable to Note Purchasers; * the conversion or dismissal of the Debtor's Chapter 11 case; * the appointment of a trustee or examiner with expanded powers; * the granting of relief from the automatic stay as to the Debtor's assets in excess of $1 million; * the cessation of liens or super-priority claims granted with respect to the Facility; * the reversal, vacation or stay of the effectiveness of the financing orders; * the granting of any prior lien or administrative claim; and * the failure of the Debtor to retain a chief restructuring officer. A full-text copy of the Debtor's $15 million DIP Note Term Sheet is available at no charge at http://ResearchArchives.com/t/s?d9 Headquartered in Tampa, Florida, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The Company filed for chapter 11 protection on Aug. 8, 2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano, Esq., at Carlton Fields PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts. ARCAP 2005: Fitch Places Low-B Ratings on Six Certificate Classes ----------------------------------------------------------------- ARCap 2005-RR5 Resecuritization, Inc., commercial mortgage-backed securities pass-through certificates are rated by Fitch Ratings: -- $26,100,000 class A-1 'AAA'; -- $26,100,000 class A-2 'AAA'; -- $26,150,000 class A-3 'AAA'; -- $21,938,000 class B 'AA'; -- $21,938,000 class C 'A'; -- $3,134,000 class D 'A-'; -- $12,536,000 class E 'BBB+'; -- $9,402,000 class F 'BBB'; -- $9,402,000 class G 'BBB-'; -- $15,670,000 class H 'BB+'; -- $6,268,000 class J 'BB'; -- $9,402,000 class K 'BB-'; -- $9,402,000 class L 'B+'; -- $9,402,000 class M 'B'; -- $9,402,000 class N 'B-'; -- $97,155,127 class O 'NR'; -- $78,350,000 class X* 'NR'. * Notional Amount and Interest-Only All classes 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 all or a portion of 26 classes of fixed-rate commercial mortgage and re-REMIC-backed securities having an aggregate principal balance of approximately $313,401,127, as of the cutoff date. For a detailed description of Fitch's rating analysis, please see the Report titled 'ARCap 2005-RR5 Resecuritization, Inc., Series 2005-RR5' dated August 1, 2005, available on the Fitch Ratings web site at http://www.fitchratings.com/ ASARCO LLC: Gets Court Nod to Employ Jordan Hyden as Local Counsel ------------------------------------------------------------------ ASARCO LLC seeks the Court's authority to employ Jordan, Hyden, Womble & Culbreth, P.C., as bankruptcy co-counsel. In the operation and management of the assets of the Debtor, and in connection with continuing duties and responsibilities of the Debtor, numerous legal questions and matters will arise, which require the services and advice of attorneys. The Debtor has selected Jordan Hyden to serve as its co-counsel because the firm's members have had much experience in matters of this character and are well qualified to represent the Debtor. Jordan Hyden's services will include: (a) assist the Debtor and Baker Botts in the counseling and professional advice regarding continued operation of its businesses and management of its property and duties and responsibilities as Debtor; (b) assist in preparing the schedules and statements required pursuant to the Bankruptcy Code; (c) assist in preparing on the Debtor's behalf all necessary applications, notices, answers, adversaries, orders, reports and other legal papers regarding the Debtor's obligations and operations under Chapter 11; (d) assist the Debtor and Baker Botts in the negotiation of a Plan satisfactory to parties-in-interest, and to prepare a Disclosure Statement which will be submitted to parties-in-interest; and (e) assist the Debtor and Baker Botts in performing all other legal services as may be necessary and appropriate to advise, instruct, assist or otherwise perform in the debtor's chapter 11 case. Karen C. Paul, Senior Associate General Counsel at ASARCO, informs the Court that Jordan Hyden was retained by two of the Debtor's subsidiaries, Capco Pipe Company, Inc. in Alabama, and Lake Asbestos of Quebec, Ltd., in June 2004, for the purpose of filing chapter 11 bankruptcy proceedings for Capco and LAQ. The firm received a $75,000 retainer from the Debtor on behalf of Capco and LAQ. Jordan Hyden provided legal services to Capco and LAQ, and sent them monthly bills, which were paid on a regular basis by the Debtor. In April 2005, immediately prior to filing their bankruptcy cases, Jordan Hyden was also retained by three other subsidiaries of ASARCO -- Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. The firm filed the Chapter 11 cases for the five ASARCO subsidiaries on April 11, 2005. In the Subsidiary Debtors' cases, the bankruptcy court entered an Interim Compensation Order, and then subsequently approved both a Stipulation and an Escrow Agreement regarding the payment of attorneys fees, among ASARCO and the five Subsidiary Debtors. Jordan Hyden has been paid current in accordance with the Court- approved compensation arrangements in the Subsidiary Debtors' cases. The firm currently holds in its trust account a $75,000 retainer plus the 20% holdback portion of its prior bills that have been paid, as required under the Interim Order. Jordan Hyden expects those compensation arrangements will continue on substantially the same terms. The firm has not previously represented ASARCO other than during the few days before the Debtor's Petition Date to prepare the Chapter 11 filing. The Debtor proposes to compensate Jordan Hyden in accordance with the firm's standard hourly rates: Attorney Hourly Rates ------------ ------------ Shelby A. Jordan $375 Harlin C. Womble, Jr. $350 Nathaniel Peter Holzer $300 Michael Urbis $250 James Evans $165 Legal Assistants Hourly Rate ------------ ----------- Barbara Smith $125 Grace Duplessis, C.L.A. $125 Shaun Claybourn $95 Brandi Barrier $70 ASARCO has filed a complaint against the five Subsidiary Debtors and the Future Claims Representative appointed in the Subsidiary Debtors' cases seeking a declaratory judgment that ASARCO is not liable to the Subsidiary Debtors, their bankruptcy estates, or any of their present or future creditors for any liabilities, asbestos-related or otherwise, under various alter ego theories. As such, ASARCO and the Subsidiary Debtors are adverse with respect to the Complaint. The Subsidiary Debtors have not filed any responsive pleadings to the Complaint or taken any formal position with respect to the allegations in the Complaint. Jordan Hyden has not engaged in any substantive work on behalf of the Subsidiary Debtors with respect to the Complaint, other than to review it, to accept service of the summons on behalf of the five Subsidiary Debtors, and to accept an extension until September 13, 2005, of the deadline for the Subsidiary Debtors to file a responsive pleading to the Complaint. The current and future creditors of the Subsidiary Debtors are the parties who will benefit from any recovery on the Alter Ego Claims. Hence, the Subsidiary Debtors have determined to seek court approval to permit their interests and the interests of their estates to be represented by the Official Committee of Unsecured Creditors, the Future Claims Representative, and their counsel, and not by the Debtors or Jordan Hyden. Nathaniel Peter Holzer, Esq., assures the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). The firm has no connection with the creditors or other parties to ASARCO's case, or their attorneys, which is adverse to the Debtor's interests. * * * The Court approves ASARCO's application to employ Jordan Hyden on an interim basis. The order will be final if no party files an objection by Sept. 11, 2005. Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 thru 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos Of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos- driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. ASARCO has asked that the five subsidiary cases be jointly administered with its chapter 11 case. (ASARCO Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants to Walk Away from Pilots' Union Agreement ------------------------------------------------------------- Pursuant to Section 1113(c) of the Bankruptcy Code, ATA Airlines, Inc., seeks the U.S. Bankruptcy Court for the Southern District of Indiana's authority to reject its collective bargaining agreement with the Air Line Pilots Association, International, representing 833 ATA cockpit crewmembers, including pilots and flight engineers. Melissa M. Hinds, Esq., at Baker & Daniels, in Indianapolis, Indiana, relates that beginning August 8, 2005, ATA submitted a business plan to the investment community to begin a process to secure an investment of up to $100 million of new capital needed for its reorganization. Without a new investment, ATA cannot emerge from Chapter 11. The Business Plan projects a return to profitability only if ATA achieves a level of labor costs consistent with the long-term relief that ATA has proposed, along with the successful implementation of a number of other initiatives. The Business Plan is based upon, among other things, the $37.6 million per year reduction in crewmember labor costs in 2006 and the ongoing savings generated by an August 5, 2005 Proposal presented by ATA to ALPA under Section 1113(b)(1) of the Bankruptcy Code. The provisions of the 1113 Proposal include: (A) Duration. ATA proposes a five-year agreement -- one year shorter than ALPA agreed to in the recent US Airways and United bankruptcies. To attract a suitable investor, a new crewmember agreement must have a duration long enough to allow time for a full recovery of ATA's financial strength. (B) Compensation (1) Pay Rates ATA has proposed a 20% reduction in base hourly pay rates from the July 2003 rates -- the same level of pay that ALPA agreed to in Letter of Agreement No. 36. This change alone initially would save $24 million per year. So that crewmembers may participate in the eventual modest recovery that ATA projects under its Business Plan, ATA also has proposed pay increases of 1.5% to take effect on each July 1 from 2007 though 2010. Without relief on pay rates, on October 1, 2005, the crewmembers would receive more than a 40% increase over the pay rates that they are now receiving. (2) Profit Sharing Recognizing the sacrifices being asked of crewmembers and of all employees, ATA has proposed to the crewmembers two programs, which would provide the opportunity to share in the profits of a reorganized ATA. The crewmember bonus program would pay a lump sum cash bonus payment to each crewmember that is a percentage of the crewmember's base pay actually paid during a calendar year, provided that ATA achieves certain minimum annual pre-tax income levels. ATA also proposes to allow crewmembers and other employees to participate in the Company's recovery through a profit sharing program. ATA proposes to delete the Profit Sharing Program set forth in Letter of Agreement No. 31 in favor of the Company-wide program. Thus, if ATA's financial projections turn out to have been too conservative, it is more than willing to share the profits that result with its employees, with the crewmembers sharing profits in greater amounts than other employees. (3) Per Diem ATA proposes to retain the levels set forth in Letter of Agreement No. 27 that were effective on July 1, 2004 -- $1.50 Domestic, $2.40 International, $2.70 Pacific Rim -- and to increase the Domestic rate by 10 cents on July 1, 2006, and July 1, 2007. The Company has also proposed to eliminate Per Diem for turnaround trips. (4) Adjustments to Premium Pay ATA proposes to modify or eliminate a number of contractual provisions that provide crewmembers with premium pay in certain circumstances. ATA plans to: -- eliminate the International Trip Supplement Pay, established under the ALPA CBA that provides that a crewmember who flies an international trip that operates for more than seven consecutive days receives two extra hours of pay for each day of the trip that operates beyond the seventh day; -- clarify that the provision that the premium applying to Check Airmen is paid only in months in which a crewmember actually performs duties as a Check Airman or Instructor -- not when he/she simply flies the line; and -- eliminate "encroachment pay," which provides additional pay to crewmembers when irregular operations cause them to fly below their minimum scheduled days off. (C) Benefits (1) CMPP ATA would accomplish the second largest savings by suspending Company contributions to the Crewmember Money Purchase Plan. ATA proposes to suspend its pension contributions altogether. (2) 401(k) Crewmembers have a 401(k) Plan, a defined contribution retirement plan whereby the Company matches 60% of a crewmember's contribution up to 6% -- a maximum ATA contribution of 3.6% of pay. ATA does not propose to reduce the amount of the Company match, but merely to make the match procedures -- how and when ATA makes the payments -- identical to those in effect for all non-contract ATA employees. Moreover, while ATA has suspended matching payment to non-contract employees, the Company proposes to continue its matching contributions for participating crewmembers. (3) Welfare Benefits Crewmembers receive health benefits under the FOCUS plan -- where ATA pays 100% of the premiums. Management and non-contract employees are covered by the COMPASS plan, wherein premiums are partly employee-paid. ATA's goal is to have all employees company-wide covered by the COMPASS plan, which would result in significant savings. ATA, therefore, proposes to amend the ALPA CBA as necessary to provide that crewmembers shift to COMPASS benefits options. (4) Moving Expenses ATA proposes to suspend eligibility for moving expenses until January 1, 2007. As the Company continues to rationalize its flight operations, it must have the flexibility of determining the number of crewmembers to be assigned to what crewmember domicile without the added expense of providing moving expenses. (5) Vacation ATA proposes to change the vacation entitlement, which results in significant headcount savings. (D) Work Rules ATA could save money by limiting the amount of Open Time that is available for general bidding among ATA line crewmembers. For example, ATA has under-utilized Reserve crewmembers, who are guaranteed pay for a certain number of hours each month, but who generally fly less than the hours covered by their monthly minimum pay guarantee. ATA proposes to permit the Company to control the assignment of Open Time, to shift the flying to Reserve crewmembers, or to use Open Time for training or reassignment. Agreement Nos. 36 and 38 allowed ATA control of the allocation of daily open time assignments; ATA merely seeks to retain this flexibility. (E) 100-110 Seat Aircraft Acquisition Snapback At the execution of the package of Agreement Nos. 27 - 31 in June 30, 2004, ATA planned to acquire a new aircraft type with 100-110 seats. ATA's adverse circumstances and its Chapter 11 filing made it impossible to satisfy the commitment within this time frame, and the equipment type no longer matches the business plan. Therefore, ATA proposes that the snapback provision be deleted wherever it appears. A full text copy of the 1113 Proposal is available for free at: http://bankrupt.com/misc/2711_%20ex42_PROP.pdf ATA has Pursued Negotiations with ALPA Section 1113(c) provides that the Court must approve rejection of the ALPA CBA if it determines that: (1) ATA has submitted proposals to ALPA; (2) ALPA has rejected ATA's proposals without good cause; and (3) "the balance of the equities clearly favors rejection of such agreement." Ms. Hinds recounts that ALPA has only been willing to agree to a series of interim concessionary agreements that do not provide the level of relief necessary to attract the needed capital investment. Upon the expiration of the current interim agreement -- Letter of Agreement No. 36 -- the concessions granted to ATA will "snap back," immediately increasing ATA's crewmember costs by approximately $4 million per month. The increase will not only inhibit attracting needed investment, it would likely push this estate into liquidation. Richard W. Meyer, ATA's senior vice president for employee relations, relates that ATA has devoted many months to educating ALPA on ATA's financial and competitive position and need for labor cost reductions. Most recently, under Agreement No. 38, the parties agreed to bargain over ATA's proposals for long-term relief starting no later than July 7, 2005, and ending no later than August 10, 2005. Consistent with prior bargaining, ATA opened its books to ALPA. ATA responded to seriatim requests by ALPA for information regarding the Company's bargaining proposals. ATA conducted a "road show" during which senior executives discussed the Company's financial circumstances and business plan in open forums with crewmembers during eight meetings in four cities; most if not all of the ATA Master Executive Council attended at least one of those presentations. ALPA, as a member of the Official Committee of Unsecured Creditors, has also been privy to confidential information provided to the Committee. When ALPA's negotiating committee requested a special business plan presentation, senior company executives again provided a briefing to ALPA. Attempting to come to a lasting solution, ATA and ALPA renewed bargaining pursuant to Letter No. 38 on June 27, 2005, and ATA renewed its proposal for long-term relief originally provided to ALPA on May 17, 2005. After five weeks of bargaining, ALPA and ATA were not, however, able to reach agreement on ATA's proposals for long-term relief, leaving no alternative but to pursue the resolution under Section 1113(c). On August 5, 2005, ATA gave ALPA a copy of the 1113 Proposal, wherein it reduced its proposals to those that are essential to its reorganization. Relief from CBA Necessary Ms. Hinds explains that the 1113 Proposal rests upon business plans and financial projections that assure that all creditors, the Debtor, and all of the affected parties are treated fairly and equitably. ATA's business plan rests upon reduced labor costs across the entire workforce, not just ALPA. ATA is also implementing initiatives that reduce maintenance expenditures and consolidate office space; it is continually assessing costs related to vendor spending and administrative headcount to reduce unnecessary expense whenever it can. Notwithstanding the failed efforts to reach agreement on long term relief, ATA has offered to meet with ALPA with respect to the 1113 Proposal, as and when requested to do so by ALPA, and to confer in good faith to reach mutually satisfactory modifications to the ALPA CBA. There is no dispute, however, that ALPA thus far has expressed no willingness to agree to the necessary level of permanent savings, Ms. Hinds points out. Ms. Hinds asserts that the pay and benefits provided under ATA's proposals are equitable. In considering the cost-spreading abilities of the parties, Ms. Hinds tells the Court it is important to bear in mind that, even if ATA implements the 1113 Proposal, the ATA crewmembers will still have pay and benefits that are better than most other workers in the United States, and, considering ATA's financial health, fair and equitable in comparison to pilots at other comparable airlines. According to Ms. Hinds, in the absence of rejection, all ATA employees are likely to lose their jobs. Since the other major carriers also have recently laid off employees, few ATA employees who lost their jobs would be able to find other jobs in the airline industry. And, because ATA has a senior workforce, even if some of those employees did find airline jobs, they would take a substantial pay cut, because they would find themselves at the bottom of the seniority list at their new employers and at the lowest pay steps. Pilot Union Leader Blasts ATA 1113 Filing Capt. Jim Anderson, Chairman of the ATA Airlines unit of the Air Line Pilots Association, International, issues a statement in response to ATA's filing of an 1113(c) motion in U.S. Bankruptcy Court in Indianapolis: "ALPA is very disappointed that ATA management has decided to use the 'nuclear option' by asking the bankruptcy court to throw out our contract and replace it with their own arbitrary proposal. We are not unmindful of ATA's cash problems, and we were willing to continue negotiating. But the company has refused to budge from its initial demands, even after we offered a counterproposal that would have saved ATA $18 million per year. "ATA pilots and flight engineers have already contributed more than $66 million in concessions in the past 14 months to help our airline survive. This is far more than any other employee group at the company, and more than Southwest Airlines has contributed so far in exchange for a future 27 percent share of the airline. More than 260 crewmembers have lost their jobs, and another 166 have seen their pay cut by as much as 60 percent due to being displaced from Captain to First Officer positions. "ATA's own Chief Financial Officer has acknowledged in open court that ALPA has always been willing to help the Company. Now they are asking for another $37 million per year in cuts, or $44 million annually if we forgo the 2006 pay increase written into our contract, and they want to freeze our pensions and force us into a substandard health care program. Every ATA flight crewmember has already given up his or her 2004 and 2005 raises, and taken a minimum 18 percent pay cut from our 2003 rates. "ATA cannot chainsaw its way to profitability by gouging the pilots again and again. The company may claim its corporate survival is at stake, but we are fighting for the economic survival of our crewmembers and their families. We believe we have a strong case and we will oppose the Company's 1113 motion in court." The Air Line Pilots Association, International, is the world's largest pilots union, representing 64,000 pilots at 41 airline carriers in the United States and Canada. Visit the ALPA Web site at http://www.alpa.org/ Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATG INC: Ch. 7 Trustee Taps Gadsby Hannah as Special Local Counsel ------------------------------------------------------------------ Robert I. Hanfling, the chapter 7 Trustee overseeing the liquidation proceedings of ATG, Inc., asks the U.S. Bankruptcy Court for the Northern District of California for permission to employ Gadsby Hannah LLP as his special local counsel in an action currently pending in the U.S. District Court for the District of Massachusetts. Mr. Hanfling explains that he hired Gadsby Hannah as his local counsel because his lead counsel, Jacobs Partners LLC, is not admitted to practice in Massachusetts. On Dec. 2, 2003, Mr. Hanfling commenced an adversary proceeding in the Bankruptcy Court against Epstein, Becker & Green, P.C. and certain other defendants (Adv. Pro. No. 03-804806), collectively called the EBG Litigation. On July 19, 2004, the U.S. District Court for the Northern District of California granted Epstein Becker's motion to withdraw the reference. In November 2004, the Northern District of California District Court withdrew the reference as to the remaining 11 defendants and transferred the venue to the U.S. District Court for the District of Massachusetts. The EBG Litigation is currently proceeding before the Massachusetts District Court. Gadsby Hannah will: 1) provide advice and counsel to the Trustee concerning practice and procedure before the Massachusetts District Court; 2) file pleadings, motions and other papers required with the Massachusetts District Court and appear at hearings before that Court; and 3) provide all other necessary legal assistance to the Trustee and Jacobs Partners as may be required in connection with the EBG Litigation. The services rendered by Gadsby Hannah will not overlap or be duplicative of the services rendered by Jacobs Partners. William A. Zucker, Esq., and David Himelfarb, Esq., are the lead attorneys representing Mr. Hanfling in the EBG Litigation. Mr. Zucker disclosed that his Firm does not require a retainer for representing the chapter 7 Trustee. Mr. Zucker charges $475 per hour for his services, while Mr. Himelfarb charges $290 per hour. Paralegals who will perform services to the chapter 7 Trustee will charge from $120 to $150 per hour. Gadsby Hannah assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Hayward, California, ATG, Inc., was a radioactive and hazardous waste management company that offered comprehensive thermal and non-thermal treatment solutions for low-level radioactive and low-level mixed waste generated by commercial, institutional and government clients such as nuclear power plants, medical facilities, research institutions and the U.S. Departments of Defense and Energy. The Company filed for chapter 11 protection on Dec. 3, 2001 (Bankr. N.D. Calif. Case No. 01-46389). Aaron Paul, Esq., at Kornfield, Paul and Nyberg represents the Debtor. The Court converted the Debtor's chapter 11 case to a chapter 7 liquidation proceeding on April 27, 2004. Robert I. Hanfling was appointed as chapter 7 Trustee for the Debtor's estate on April 27, 2004. Leslie L. Lane, Esq., and Mark R. Jacobs, Esq., at Jacob Partners LLC represents the chapter 7 Trustee. BANC OF AMERICA: Fitch Lifts Class B Cert. Rating 3 Notches to BBB ------------------------------------------------------------------ Fitch Ratings has taken rating actions on these Banc of America Mortgage Securities, Inc., mortgage pass-through certificates: Banc of America Mortgage Securities, Inc. mortgage pass- through certificates, series 2002-L -- Class 1A, 2A, 3A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 upgraded to 'AA+' from 'AA'; -- Class B-3 upgraded to 'AA-' from 'A'; -- Class B-4 upgraded to 'A' from 'BBB'; -- Class B-5 upgraded to 'BBB' from 'BB'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-A -- Class 1-A-1, 2-A-1 through 2-A-9, 3-A-1 affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 upgraded to 'AA' from 'AA-'; -- Class B-3 upgraded to 'A' from 'A-'; -- Class B-4 upgraded to 'BBB' from 'BBB-'; -- Class B-5 upgraded to 'BB' from 'BB-'. Banc of America Mortgage Securities, Inc. mortgage pass-through certificates, series 2003-4 Group 2 -- Class 2-A-1, 2-A-2, 2-A-3, 2-A-4 affirmed at 'AAA'; -- Class 2-B-1 affirmed at 'AA'; -- Class 2-B-2 affirmed at 'A'; -- Class 2-B-3 affirmed at 'BBB'; -- Class 2-B-4 affirmed at 'BB'; -- Class 2-B-5 affirmed at 'B'. The affirmations, affecting $461.2 million of outstanding certificates, reflect performance and credit enhancement levels that are generally consistent with expectations. The upgrades reflect a substantial increase in CE relative to future loss expectations and affect approximately $15.7 million of outstanding certificates. The mortgage loans in series 2002-L consist of 30-year adjustable- rate mortgages (traditional and hybrid) extended to prime borrowers. The CE levels have substantially increased since closing. The current CE levels for all classes have nearly tripled from their original CE levels. Class B-2 currently benefits from a 2.59% subordination (0.85%); class B-3 currently benefits from 1.68% subordination (originally 0.55%); class B-4 currently benefits from 1.07% (originally 0.35%); class B-5 currently benefits from 0.61% subordination (originally 0.20%). The transaction currently has a 19% pool factor (i.e., current mortgage loans outstanding as a percentage of the initial pool) and is 30 months seasoned. The cumulative loss is less than one basis point of the original collateral balance and currently, no loans are delinquent. The mortgage loans in series 2003-A consist of 30-year adjustable- rate mortgages (traditional and hybrid) extended to prime borrowers. The CE levels have substantially increased since closing. The current CE levels for all classes have nearly tripled from their original CE levels. Class B-2 currently benefits from 2.42% subordination (0.90%); class B-3 currently benefits from 1.48% subordination (originally 0.55%); class B-4 currently benefits from 0.94% (originally 0.35%); class B-5 currently benefits from 0.54% subordination (originally 0.20%). The transaction currently has a 28% pool factor and is 29 months seasoned. The cumulative loss is less than one basis point of the original collateral balance. As of the last distribution date, approximately $3.5 million of loans were delinquent between 30 and 90 days. The mortgage loans in series 2003-4 Group 2 consist of 15-year fixed-rate mortgages extended to prime borrowers. The CE levels have increased since closing. The current CE levels grew at a rate that was generally consistent with expectations and therefore were affirmed at their previous ratings. The transaction currently has a 45% pool factor and is 25 months seasoned and has not incurred any losses to date. Further information regarding current delinquency, loss and credit enhancement statistics is available on the Fitch Ratings web site at http://www.fitchratings.com/ BROOKSTONE FINE: Case Summary & 48 Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: Brookstone Fine Wood Products, Inc. dba Custom Shutter & Blind Store 510 Pennroyal Lane Alpharetta, Georgia 30004 Bankruptcy Case No.: 05-95216 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Charles Randall & Janet Smith Hamblen 05-95215 Closet & Storage Solutions, LLC 05-95217 Chapter 11 Petition Date: August 15, 2005 Court: Northern District of Georgia Judge: Joyce Bihary Debtor's Counsel: Paul Reece Marr, Esq. Paul Reece Marr, P.C. 300 Galleria Parkway, Northwest, Suite 960 Atlanta, Georgia 30339 Tel: (770) 984-2255 Estimated Assets Estimated Debts ---------------- --------------- Brookstone Fine Wood $1 Million to $1 Million to Products, Inc. $10 Million $10 Million Charles Randall & Less than $50,000 $500,000 to Janet Smith Hamblen $1 Million Closet & Storage $100,000 to $1 Million Solutions, LLC $500,000 $10 Million A. Brookstone Fine Wood Products, Inc.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Merril Lynch Note and loan $196,000 Attn: Phillip Engstrom, V.P. agreement 222 North LaSalle Street 17th Floor Chicago, IL 60601 Internal Revenue Service Withholding $50,000 Insolvency-Room 400- Stop 334D 401 West Peachtree Street Atlanta, GA 30308 Richmond Lumber Sales, Inc. Account payable $42,156 P.O. Box 3165 Augusta, GA 30914 Georgia Dept. of Revenue Withholding, sales $30,692 tax, education homestead exempt taxes Cumberland Wood Products, $27,500 Inc. Associated Hardwoods, Inc. $25,283 Tarica & Whitemore PC Account payable $12,694 Scott A. Schweber Account payable $10,580 The Hardwood Group, Inc. Account payable $8,887 Ross Gelfand Account payable $7,225 Cherokee County Tax $6,837 G&G Sanitation Systems Account payable $6,540 BellSouth Advertising Account payable $5,795 Croft Builders Hardware, Inc. Account payable $4,165 Ford Credit Deficiency balance $4,146 regarding repossessed truck Julie Kreyling, Esq. Account payable $3,592 for Georgia Power Georgia Power Account payable $3,592 American Express Merchant account $2,821 Transcom Payment Services Account payable $2,676 Yellow Book USA Account payable $2,252 B. Charles Randall & Janet Smith Hamblen's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ First Capital Bank $806,129 3320 Holcomb Bridge Road Suite A Norcross, GA 30092 Merril Lynch Securities account $196,000 Attn: Phillip Engstrom, V.P. #701-15B11 222 North LaSalle Street (forclosed on or Chicago, IL 60601 about 2/8/05) The CIT Group Personal guaranty $27,053 File #54224 of corporate debt Los Angeles, CA 90074-4224 CRLI Acceptance Corp. Personal guaranty $12,342 of corporate debt Chrysler Financial 2002 Jeep Cherokee $9,760 Platinum Plus for Business Credit card account $8,603 Westfield Group Account payable $5,720 Ford Credit Personal guaranty $4,146 of corporate debt Transcom Payment Services Personal guaranty $2,676 of corporate debt Nextel Communications Account payable $1,210 Chase Manhattan Auto Finance Personal guaranty $1,029 of corporate debt Chase Platinum Visa Credit card account $976 Northeast Gastroenterology Account payable $850 CitiCorp Leasing, Inc. Personal guaranty $704 of corporate debt Sears Charge Plus Credit card account $654 GE Money Bank Credit card account $279 Tarica & Whitemore PC Account payable $64 Credit Collection Services Account payable $42 for Allstate Insurance Co. BB&T Leasing Corporation Personal guaranty Unknown of corporate debt- possible deficiency balance as to repossessed van Dyslexia Institutes of Account payable Unknown America C. Closet & Storage Solutions, LLC's 8 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ First Capital Bank $806,129 3320 Holcomb Bridge Road Suite A Norcross, GA 30092 Tarica & Whitemore PC Account payable $8,067 1050 Crown Pointe Parkway Suite 1400 Atlanta, GA 30338 Internal Revenue Service Withholding $6,100 Insolvency-Room 400- Stop 334D 401 West Peachtree Street Atlanta, GA 30308 Platinum Plus for Business Credit card account $3,829 Georgia Dept. of Revenue Withholding $967 Oxford Management Services Account payable $704 For Telecheck Services CS 9018 Melville, NY 11747 Georgia Department of Labor Unemployment $694 insurance tax American Express Travel Credit card account $25 CATHOLIC CHURCH: Montali Appointed as Settlement Judge in Portland ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Oregon appoints Judge Dennis Montali of the U.S. Bankruptcy Court for the Northern District of California as settlement judge, by agreement of: * the Tort Claimants Committee, * the Archdiocese of Portland in Oregon, * the Future Claimants Representative, * the Committee of Catholic Parishes, Parishioners, and Interested Parties, * the Central Catholic High School Parents' Association, * the Central Catholic High School Alumni Association, * the Marist High School Parents and Alumni Service Club, * the Marist High School Foundation, and * the Friends of Regis High School. Judge Perris denies the Archdiocese of Portland's request for abatement of proceedings and for judicially supervised mediation at this time without prejudice to renewing the requests at a later date. Court Certifies Complaint as a Class Action In a separate order, Judge Perris authorizes the Tort Claimants Committee to file its First Amended Complaint. The Tort Committee is granted standing to assert the claims and causes of action arising under Section 544(a)(3) of the Bankruptcy code alleged in the First Amended Complaint. The First Amended Complaint and the causes of action alleged in the Complaint are certified as a class action. The class of defendants will consist of two subclasses: (1) Subclass One -- consisting of all Parishes including their schools and missions located in the Territory, other than Parishes that from time to time are specifically named as defendants or intervenors; and (2) Subclass Two -- consisting of: (a) each person who is, or at any time has been a Roman Catholic parishioner in the Territory; (b) each person or entity that has at any time made gifts, donations, tithes or other contributions of money or other property to or for the benefit of any Parish or any Disputed property in which any Parish claims any interest; and (c) each person or entity alleging interest in respect of Parish Property. Subclass Two specifically does not include: (i) any person or entity to the extent they allege claims or interests in or to Disputed Property of Central Catholic High School, Regis High School or Marist High School; (ii) any person or entity that from time to time is specifically named as a defendant or intervenor; or (iii) any person or entity to the extent they hold a specific lien of record in relation to Disputed Property. Judge Perris says the Adversary Proceeding involves claims or potential claims by class members that relate to the Disputed Property. The Adversary Proceeding does not involve claims that could result in personal liability or affirmative recoveries from class members. In no event will any class member be subject to personal liability or affirmative recoveries solely as a result of their status as a class member. The Court designates St. Andrews Church (Portland), as represented by its pastor, Rev. Charles Lienert, St. Anthony Church (Tigard), as represented by its pastor, Rev. Leslie M. Sieg, and St. Juan Diego Church, as represented by its pastor, Rev. John Kerns, as Class Representatives for Subclass One. The Court designates John Rickman, Glenn Pelikan and Johnston Mitchell as class representatives for Subclass Two. Judge Perris further rules that: (a) No Class Representative will have or incur any liability to any member of the Class for any action taken or omitted to be taken in serving a Class Representative except for liability for claims, losses and damages resulting from willful misconduct or gross negligence. Each Class Representative will be entitled to rely on the advice of counsel with respect to the person's duties and responsibilities with respect to the Class or Subclass represented by the person. In addition, no Class Representative will have or incur any liability with regard to expenses, legal or otherwise, arising out of or relating to the Class representation in the Adversary Proceeding. (b) Portland and its estate will indemnify and hold harmless each Class Representative from and against, and reimburse each Class Representative with respect to all claims, costs and expenses, including reasonable attorney's fees incurred in connection with actions taken in serving as Class Representative. (c) Neither Portland nor the estate will be liable or responsible for any Class Representatives' Liability that results from willful misconduct or gross negligence. (d) Portland and its estate's maximum amount of liability for indemnification to all Class Representatives is $1,000,000 in the aggregate, including attorney's fees and costs. (e) Perkins Coie LLP is appointed as class counsel for both Subclass One and Subclass Two. (f) Class members will be allowed to opt out of the class or subclasses or in any other respect object or provide input regarding the class. (g) The Tort Committee's filing of the First Amended Complaint, and the addition of Parishes as defendants or as a defendant subclass, are without prejudice to the Tort Committee's position that the Parishes are not legal entities separate from or independent of Portland, but rather are divisions of the Archdiocese. Tort Committee Re-asserts Request The Tort Claimants Committee asks the Court to issue a summary judgment: (1) dismissing Portland's Third Affirmative Defense -- Lack of Subject Matter Jurisdiction -- and any similar affirmative defense alleged in response to the First Amended Complaint; (2) dismissing Portland's Fifth Affirmative Defense -- Religious Freedom -- and any similar affirmative defense alleged in response to the First Amended Complaint; (3) dismissing Central Catholic High School Alumni and Parents Association's Third Affirmative Defense and any similar affirmative defense alleged in response to the First Amended Complaint; and (4) declaring that Portland's parishes and schools have no legal existence separate from or independent of Portland and do not have the capacity to sue or be sued. Responses to the Tort Committee's restated request for summary judgment are due September 19, 2005. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 215/945-7000) CELLEGY PHARMACEUTICALS: June 30 Equity Deficit Narrows to $1.7MM ----------------------------------------------------------------- Cellegy Pharmaceuticals, Inc. (Nasdaq: CLGY) reported its financial results for the second quarter ended June 30, 2005. Revenues for the three months ended June 30, 2005 were $7,749,000 compared to $430,000 during the same period in 2004. The $7,319,000 increase in revenue was primarily attributable to the settlement of Cellegy's lawsuit with PDI, Inc. (PDI) in April, which terminated the licensing agreement between the two companies and resulted in the recognition of the remaining $6.5 million of deferred licensing revenue from PDI. During three months ended June 30, 2005, revenues consisted of $6,519,000 in licensing revenue (including $6,489,000 from PDI), $955,000 in grant revenue received by Biosyn from various organizations and $275,000 in Rectogesic product sales ($90,000 of which were initial sales to our marketing partner, ProStrakan). The second quarter of last year's consolidated results did not include Biosyn which Cellegy acquired in October 2004. Prior year's revenues for the same period consisted primarily of $130,000 in Rectogesic(R) (nitroglycerin ointment) sales in Australia, $92,000 in skin care product sales, and $208,000 in licensing revenue from PDI. Revenues for the six months ended June 30, 2005 were $9,355,000 compared to $768,000 for the same period in 2004. These included licensing revenues of $6,759,000 and $416,000 for the six months ended June 30, 2005 and 2004, respectively. Revenues other than licensing revenue from PDI of $6.5 million during the first half of 2005 increased by $2,098,000. The increase was due in large part to Biosyn's grant revenue of $2,168,000 and a modest increase in Rectogesic product sales. The Company's licensing revenue is expected to decrease significantly during the remainder of 2005 primarily as a result of the termination of its licensing agreement with PDI in April 2005. Cellegy may no longer derive any revenue from the licensing of its Fortigel product, unless it is able to sell or license the technology to a new partner. Current discussions are ongoing with various parties concerning the sale or out-licensing of Fortigel(TM). Cellegy expects a modest increase in product sales and related cost of sales during the second half of 2005 as compared to 2004 due to the recent launch of Rectogesic product in the United Kingdom through its European marketing partner, ProStrakan. Research and development expenses for the three months ended June 30, 2005 and 2004, were $2,284,000 and $2,189,000, respectively. Expenses for the second quarter of this year included Biosyn expenses of $1,483,000 in connection with its continuing development of its products. Biosyn expenses were not a component of Cellegy's results for the comparable period of last year. The increase attributable to Biosyn was partly offset by a decrease of $1,204,000 in clinical testing and related professional fees due to a reduction in clinical activities and $297,000 in rent expense resulting largely from the termination of Cellegy's sublease contract at the Company's previous headquarters offices in South San Francisco in April 2005. Research and development expenses for the six months ended June 30, 2005 were $5,061,000, an increase of $714,000 from $4,347,000 during the same period in 2004. The increase was also primarily attributable to Biosyn's expenses of $2,691,000, partly offset by a $1,897,000 decrease in Cellegy's professional fees and other related costs for clinical testing relating to existing products. Selling, general and administrative expenses for the quarter ended June 30, 2005 were $456,000, compared to $1,022,000 for the same period in 2004. The decrease year to year was due to recording a $1.1 million sublease termination fee in April 2005, offset primarily by $460,000 of expenses related to Biosyn, which was not part of the consolidated entity in 2004. For the six months ended June 30, 2005 and 2004, selling, general and administrative expenses were $4,474,000 and $2,427,000, respectively. The $2,047,000 increase included $877,000 relating to Biosyn. The remaining increase of $1,170,000 was primarily attributable to increases of $1,140,000 in legal fees, $414,000 in other professional fees and $563,000 in salary expense. The increase in legal expense was principally due to the PDI litigation which was settled in April 2005. The increase in salary expenses was due primarily to the payment of severance benefits during the early part of this year, and the accrual of retention bonuses to employees. The increase in expenses was partly offset by the $1.1 million sublease termination fee and a decrease of $251,000 in rent expense, both resulting from the termination of Cellegy's sublease contract at the Company's previous headquarters. Net income for the quarter ended June 30, 2005 was $4,835,000 or $0.17 per basic common share based on 28,135,000 weighted average common shares outstanding. Diluted net income after adding back interest charges of $74,000 relating to the PDI convertible note for the same period was $4,909,000 or $0.16 per diluted common share based on 30,103,000 shares. Diluted shares include the weighted average common shares outstanding during the second quarter of 2005 plus outstanding stock options that are in the money as of June 30, 2005 and the equivalent number of common shares relating to the $3.5 million convertible note issued to PDI. Cellegy had a net loss of $2,708,000 or $(0.13) per basic and diluted common share during the same three-month period in 2004. The net income during the second quarter of 2005 resulted primarily from the recognition of the remaining $6.5 million of the $15.0 million upfront payment received from PDI in December 2002. This helped reduced Cellegy's cumulative net loss for the first half of 2005 to $251,000 or $(0.01) per common share compared to a net loss of $(0.29) per common share during the same period last year. The Company had cash and cash equivalents of $4.1 million at June 30, 2005 compared to $8.7 million at December 31, 2004 and $5.6 million (including $2.2 million in short-term investments) at June 30, 2004. Cash used in operations during the first six months of 2005 was $10.4 million as compared to $6.0 million during the same period in the prior year. The $4.4 million increase in the use of cash in operations in 2005 was due primarily to the settlement of PDI's lawsuit and its associated legal costs, officer severance expenses and the inclusion of Biosyn in Cellegy's 2005 consolidated results, partly offset by approximately $1.1 million sublease termination fee received in April 2005. The settlement with PDI included a $2.0 million cash payment and the issuance of two non-interest bearing long-term notes with an aggregate face value of $6.5 million which Cellegy recorded at their net present value of approximately $4.7 million at June 30, 2005. The use of cash for the first six months of 2005 was partially offset by approximately $5.7 million in net proceeds provided by financing activities from the May 2005 issuance of common stock and warrants. The Company feels that its cash balances are sufficient to meets its capital and operating requirements into the first quarter of 2006. Going Concern Doubt Due to its cash position and negative operating cash flows, Cellegy received a going concern qualification in the report of its independent registered public accounting firm included in the Annual Report on Form 10-K for the year ended December 31, 2004. The Company's plans, with regard to its cash position, include raising additional required funds through one or more of the following options, among others: making further Kingsbridge SSO draw downs, seeking partnerships with other pharmaceutical companies to co-develop and fund research and development efforts, pursuing additional out-licensing arrangements with third parties, re-licensing and monetizing future milestone and royalty payments expected from existing licensees and seeking equity or debt financing. However, there is no assurance that any of these options will be implemented on a timely basis or that the Company will be able to obtain additional financing on acceptable terms. In addition to these options, Cellegy will continue to implement further cost reduction programs and reduce discretionary spending, if necessary, to meet its obligations. In April 2005, the Company submitted a written response to the FDA containing new analyses of data from its Cellegesic Phase 3 trials. The FDA, which had previously issued a Not Approvable Letter for Cellegesic in December 2004, had initially indicated a target response date of June 15 concerning the results of its analysis of the data. As of the date of this press release, the Company has not received the FDA's response; however, the FDA has indicated that it is currently reviewing the submission and will advise the Company of its findings once its review is completed. There are no assurances as to when the FDA will respond. Nasdaq Delisting Cellegy previously disclosed in a Report on Form 8-K on July 11, 2005, that the Company received a letter from The Nasdaq Stock Market indicating that for ten consecutive trading days prior to the date of the Letter, the market value of the common stock had been below $50 million as required for continued inclusion on the Nasdaq National Market by Marketplace Rule 4450(b)(1)(A), and that Cellegy had until August 8, 2005 to regain compliance. The Letter indicated that if, at any time before August 8, 2005, the aggregate market value of Cellegy's common stock remained at $50 million or more for a minimum of ten consecutive business days, the Nasdaq staff would determine if Cellegy is in compliance with Marketplace Rule 4450(b)(1)(A). The Company received a second letter from The Nasdaq Stock Market dated August 9, 2005 indicating that for ten consecutive trading days prior to August 8, 2005, the market value of the common stock had failed to remain at or above $50 million as required for continued inclusion on the Nasdaq National Market by Marketplace Rule 4450(b)(1)(A). Cellegy intends to appeal the determination to a Nasdaq Stock Market Listing Qualifications Panel or to transfer listing to the Nasdaq SmallCap Market. The common stock will remain listed on the Nasdaq National Market during the pendency of its appeal. Cellegy cannot estimate with certainty how long this process will take or its eventual outcome. "We are very pleased with the progress the Company has made this quarter," according to Richard C. Williams, Cellegy's Chairman and Interim CEO. These accomplishments include the following: -- Settlement of the lawsuit with PDI in April -- Completion of a $6 million "PIPE" financing in May -- Successful launch of Rectogesic in the UK in May -- Announcement of the relocation of the Company's headquarters to Pennsylvania by the end of the third quarter "The May launch of Rectogesic in the UK has been very successful. Our marketing partner, ProStrakan, has reported that end sales have averaged 50% above plan since the launch of the product. We are diligently working on expanding our presence in Europe," reports Mr. Williams. Cellegy Pharmaceuticals is a specialty biopharmaceutical company that develops and commercializes prescription drugs for the treatment of women's health care conditions, including reduction in the transmission of HIV and sexual dysfunction, as well as, gastrointestinal disorders. In October 2004, Cellegy acquired Biosyn, Inc., a privately held biopharmaceutical company in Huntingdon Valley, Pennsylvania. The addition of Biosyn, a leader in the development of novel microbicide gel products for contraception and the reduction in transmission of HIV in women, expands Cellegy's near term product pipeline and complements Cellegy's women's health care focus. Cellegy believes that Savvy(R) (C31G vaginal gel), currently undergoing Phase 3 clinical studies in the United States and Africa, is one of the most clinically advanced products in development for the reduction in transmission of HIV. Cellegesic(TM) (nitroglycerin ointment), branded Rectogesic outside the United States, is approved in the United Kingdom for the treatment of pain associated with chronic anal fissures. A similar formulation of Rectogesic is currently being sold in Australia, New Zealand, Singapore and South Korea. Fortigel, branded Tostrex outside the United States, for the treatment of male hypogonadism, was approved by the Medical Products Agency (MPA) in Sweden in December 2004. ProStrakan will also distribute Tostrex in Sweden and the European Union. Approvals of Rectogesic and Tostrex by the other member states of the European Union will be pursued by Cellegy and ProStrakan through the Mutual Recognition Procedure. At June 30, 2005, Cellegy Pharmaceuticals' balance sheet showed a $1,734,000 stockholders' deficit, compared to a $6,743,000 deficit at Dec. 31, 2004. CENVEO INC: S&P Revises Corporate Credit Rating Watch to Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its CreditWatch listing on ratings on Cenveo Inc., including its 'B+' corporate credit rating, to negative implications from developing following the company's announcement it had concluded its review of strategic alternatives. The ratings were originally placed on CreditWatch on April 18, 2005, following the company's announcement it was exploring strategic alternatives, which could have included a sale of the company. The Englewood, Colorado-based commercial printer had more than $850 million in lease-adjusted debt outstanding as of June 2005. "Cenveo's announcement removes potential upside pressure on ratings stemming from an acquisition by a higher-rated entity," said Standard & Poor's credit analyst Emile Courtney. However, downside pressure on ratings remains following the company's July 2005 proxy filing related to change of control provisions in creditor agreements. Cenveo stated that the election of a new board of directors at the special meeting of stockholders, scheduled for September 2005, would trigger change of control provisions in the company's agreements. If bondholders in turn exercise their put rights, the company could face the need to refinance a meaningful portion of the capital structure within a relatively short period of time. In the absence of an adequate refinancing plan, ratings could be lowered. CLOVERLEAF TRANSPORTATION: Wants Drake Sommers as Counsel --------------------------------------------------------- Cloverleaf Transportation, Inc., asks the Honorable Cecelia G. Morris of the U.S. Bankruptcy Court for the Southern District of New York for permission to employ Drake, Sommers, Loeb, Tarshis, Catania, PLLC, as its bankruptcy counsel. Drake Sommers is expected to: (a) take all necessary action to protect and preserve the estate of the Debtor, including the prosecution of actions on the Debtor's behalf, the defense of any actions commenced against the Debtor, the negotiation of disputes in which the Debtor is involved, and the preparation of objections to claims filed against the Debtor's estate; (b) prepare on behalf of the Debtor, as debtor-in-possession, all necessary motions, applications, answers, orders, reports, and other papers in connection with the administration of the Debtor's estate; (c) negotiate and prepare, on behalf of the Debtor, a plan of reorganization and all related documents; and (d) perform all other necessary legal services in connection with the prosecution of the Debtor's chapter 11 case. Lawrence M. Klein, Esq., a member at Drake, Sommers, Loeb, Tarshis, Catania, PLLC, discloses that the Firm received a $35,000 retainer, and will bill at these hourly rates: Designation Hourly Rate ----------- ----------- Members & Counsel $275 - $325 Associates $175 - $275 Paraprofessionals $85 - $125 The Debtor believes that Drake, Sommers, Loeb, Tarshis, Catania, PLLC, is disinterested as that term is defined in Section 101(14) of the U.S. Bankruptcy Code. Headquartered in Chester, New York, Cloverleaf Transportation, Inc. -- http://www.cloverleaftransport.com/-- is known as the premier shorthaul carrier in the Northeast. The Debtor is a dry van truckload carrier. It also offers refrigerated equipment and trailers to handle temperature-controlled products. The Debtor filed for chapter 11 protection on August 16, 2005 (Bankr. S.D.N.Y. Case No. 05-37287). Lawrence M. Klein, Esq., at Drake, Sommers, Loeb, Tarshis, Catania, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $1,387,574 in assets and $7,344,386 in debts. CNA FINANCIAL: S&P Assigns BB Preferred Stock Rating ---------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BBB-' senior debt rating, 'BB+' subordinated debt rating, and 'BB' preferred stock rating to CNA Financial Corp.'s (CNA; BBB-/Negative/--) preliminary $1.5 billion universal shelf registration filed with the SEC on Aug. 15. "CNA has no immediate plans to issue securities under this shelf, but the shelf gives the company the flexibility to issue new debt or equity securities to meet its capital needs, including the replacement of existing notes as they come due," noted Standard & Poor's credit analyst John Iten. The company has $304 million of debt maturing in 2006. About $1.75 billion of total debt was outstanding at CNA as of June 30, 2005, down from $2.25 billion at year-end 2004. The company repaid $500 million of maturing notes on April 15, 2005, with the proceeds of a $549 million senior debt issue on Dec. 15, 2004. Debt leverage as of June 30, 2005, was 17.8%, down from 21.0% as of Dec. 31, 2004. Interest coverage, excluding net realized gains/(losses), improved to 9.5x through the first six months of 2005 from 7.0x for full-year 2004. Based on Standard & Poor's group rating methodology, the ratings on CNA and its affiliates are closely tied to the rating on Loews Corp. (NYSE:LTR; A/Negative/--), which owns 91% of CNA's common stock. "Because the ratings on CNA are supported by Loews, and the financial strength ratings on the core CNA insurance companies are currently only one notch below the senior debt rating on Loews, any downgrade of Loews would result in the same change to the financial strength ratings on CNA's property/casualty operating companies," Mr. Iten added. The outlook assigned to the ratings on CNA is therefore negative, which reflects the negative outlook on Loews. CNA is an insurance holding company whose primary insurance subsidiary is Continental Casualty Co., which in turn owns several other primary property/casualty insurance companies. CNA has divested most of its life insurance operations and its reinsurance business and is now focused solely on the commercial lines market. The group is the seventh-largest U.S. commercial lines property/casualty insurer in the U.S. based on 2004 net premiums written. DELTA AIR: S&P Places Ratings on Watch with Negative Implications ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Delta Air Lines Inc. (CC/Watch Neg/--) on CreditWatch with negative implications, reflecting a very high risk of near-term bankruptcy. Ratings, which were lowered to current levels Sept. 16, 2004, already reflect a high likelihood of default. Atlanta, Georgia- based Delta has about $21 billion of lease-adjusted debt. "The recent surge in fuel prices and Delta's disclosure that it will have to post $750 million of cash collateral to extend its credit card processing agreement indicate that the airline's already slim chances of avoiding bankruptcy are dwindling rapidly," said Standard & Poor's credit analyst Philip Baggaley. Delta also disclosed an agreement to sell its Atlantic Southeast Airlines Inc. (ASA) regional unit for $350 million immediately ($100 million of which will be applied to partly prepaying a credit facility), plus $125 million later upon fulfillment of certain conditions. Despite this, the company expects its cash reserves "will decline substantially during the remainder of 2005." Accordingly, and despite other efforts to raise funds, the company acknowledges "significant uncertainty" as to whether it will be able to "maintain adequate liquidity." Even if Delta is able to address near-term liquidity concerns, it needs also legislative relief from substantial upcoming pension funding requirements. Delta will likely have to decide whether it can avoid bankruptcy by October 17, at the latest, after which amendments to the federal bankruptcy code implement less favorable terms for debtors. Unfortunately, new pension legislation may not be passed until November or December, leaving Delta with a difficult decision even if it does meet the other conditions to remain solvent. More likely, Delta will file for Chapter 11 as soon as it has closed the sale of ASA, concluded new credit card processing agreements (crucial to continuing operations either outside or inside bankruptcy), and arranged debtor-in-possession financing. Ratings on Delta, the third-largest airline in the U.S., reflect a material near-term risk of bankruptcy, due to: * heavy losses; * declining cash reserves; and * substantial debt and pension obligations. Delta, like other traditional, hub-and-spoke airlines ("legacy carriers") in the U.S., has incurred heavy losses due to rapidly increasing price competition from low-cost airlines in the U.S. domestic market and from escalating fuel prices since the second half of 2004. Delta has made considerable progress reducing operating costs within its control, but much higher fuel prices have largely offset improvements this year, and revenue generation continues to trail that of most peer airlines. Delta has about $21 billion in lease-adjusted debt, and defined benefit pension plans are underfunded by more than $5 billion. Unrestricted cash totaled $1.7 billion at June 30, 2005, but is expected to decline substantially over the remainder of the year. In addition to the cash that will be required for a credit card processing agreement, Delta has $420 million of debt maturities (mostly in the fourth quarter) and $135 million pension funding requirements over the remainder of 2005 (an amount that could be increased by high levels of early retirements by pilots). Capital expenditures for the rest of the year are about $270 million, $160 million of which is covered by committed financing for regional jets or will be recovered through committed sale of an aircraft. EASTMAN KODAK: Fitch Chips Rating on Sr. Debt One Notch to BB- -------------------------------------------------------------- Fitch Ratings has downgraded Eastman Kodak Company's senior unsecured debt to 'BB-' from 'BB'. The Rating Outlook remains Negative reflecting uncertainties regarding the structure and collateral package of the new secured facilities, timing and uncertainty surrounding the stability of earnings and digital profitability, and the financial impact from restructuring costs. Approximately $1.9 billion of debt is affected by Fitch's action. The rating downgrade reflects a higher-than-expected amount of secured debt and greater subordination of current senior unsecured bondholders resulting in lower recovery prospects. Fitch's action follows Kodak's recent announcement that it has concluded negotiations on an underwritten commitment for $2.7 billion of senior secured credit facilities. The facilities will be comprised of a $1 to $1.2 billion five-year revolving credit facility to be used for general corporate purposes, which will replace the existing five-year credit facility expiring in July 2006, and the remainder will be term loans to be used to repay existing company debt primarily from the acquisition of Creo. Bank documentation or terms and conditions are still unavailable as the company expects to complete the syndication of these facilities over the next two months. Upon completion of the syndication and final documentation, Fitch will assign a rating to the secured facilities. Kodak's liquidity and financial flexibility continues to be pressured, with cash declining to $553 million as of June 30, 2005, compared to $1.3 billion at the end of fiscal 2004; however, Kodak has historically experienced seasonality in its cash flow and the company expects to generate cash in the second half of fiscal 2005. While completion of the aforementioned secured facilities enhances near-term liquidity, Fitch will determine if further negative rating actions are necessary upon clarification of the security granted to the facilities and uses of the proceeds. Fitch notes that the existing senior unsecured bond indentures state that Kodak is prohibited, except in certain specific circumstances, such as assuming existing mortgages from an acquired company, from issuing debt secured by any Principal Property of Kodak, which is defined as any manufacturing plant or facility owned by Kodak that is located within the continental U.S. and is materially important to Kodak, without ratably securing existing outstanding debt securities. However, Kodak is permitted to issue secured debt without ratably securing existing outstanding unsecured debt if the aggregate amount of all secured debt issued does not exceed 10% of Consolidated Net Tangible Assets. Based on Fitch's estimates, Consolidated Net Tangible Assets as defined totaled $8.3 billion as of year-end 2004, implying $830 million of secured debt could be issued without ratably securing the existing senior unsecured debt. However, the amount of secured debt issued by Kodak may exceed $830 million if it is secured by the company's substantial manufacturing facilities outside the continental U.S. or other assets, such as inventories and accounts receivables, which totaled $4.5 billion, as of June 30, 2005. EMERITUS ASSISTED: Equity Deficit Narrows to $123 Mil. at June 30 ----------------------------------------------------------------- Emeritus Assisted Living (AMEX: ESC) aka Emeritus Corporation reported its second quarter net income to common shareholders of $9.7 million. Included in the current quarter's net income is a gain of $20.5 million, net of estimated taxes of $835,000, related to the sale of 50 percent of the Company's interest in Alterra Healthcare, a Milwaukee based assisted living company, and a charge for impairment of a single community of $4 million; excluding the gain and impairment charge, the Company's loss for the quarter was $6.7 million compared to a loss of $4.6 million for the second quarter of 2004. Total operating revenues for the second quarter of 2005 were $96.6 million compared to $77.7 million for the second quarter of 2004, an increase of $18.9 million, or 24.3%. Approximately $15.3 million of the increase resulted from the acquisition or lease of 25 additional communities. The company's revenue also increased approximately $4.3 million due primarily to increases in occupancy. The average occupancy rate for the second quarter increased 3.6 percentage points to 84.4% from 80.8%. Of the 25 additional communities acquired by the Company, 22 were managed by the company prior to acquisition and, as a result, management revenue declined from $1.2 million to $462,000. Community operating expenses for the three months ended June 30, 2005, increased by $14.2 million to $62.3 million from $48.1 million in the second quarter of 2004, or 29.4%. The change was primarily due to the acquisition or lease of 25 communities, which accounted for approximately $9.8 million of the increased expense. The remaining increase of $4.4 million, or 9.1%, was attributable to a number of factors. Census-based increases to staffing, raw food costs, utilities, and supplies accounted for $1.7 million and increased facility maintenance costs accounted for $600,000 of the increase. The comparison between the two quarters also reflects a $400,000 net favorable effect of credits in 2004 relating to employee benefit and workers' compensation programs, partially offset by increases in liability insurance accruals. The balance is comprised of general increases in operating costs, including community management personnel, real estate taxes, and contracted services. On a cost per resident basis, our operating expenses increased 1.9 percent. General and administrative (G&A) expenses for the three months ended June 30, 2005, increased $1.3 million to $7.8 million from $6.5 million for the comparable period in 2004, or 20%. Of the increase, approximately $550,000 related to costs associated with the conversion of Series B Preferred Stock, project costs relating to initial compliance with internal controls requirements under Sarbanes Oxley Act of 2002 and an adjustment in 2004 decreasing our incentive compensation accrual. Of the remaining increase of $750,000, the most significant factors were staffing additions, primarily associated with regional functions of sales and marketing and risk prevention, as well as routine compensation increases for all personnel. Other factors included accounting and other fees associated with increased corporate governance requirements. The increase of $21.4 million in other, net for the second quarter of 2005, reflects the $21.3 million gain associated with the sale of 50 percent of the Company's interest in Alterra. The provision for income tax increased $974,000, primarily related to the impact on taxable income from the sale of half our interest in Alterra. In comparing the net income for 2005 and the net loss for 2004, it is important to consider our property-related expenses, which include depreciation and amortization, facility lease expense, and interest expense that are directly related to our communities, and which include capital lease accounting treatment, finance accounting treatment, or straight-line accounting treatment of rent escalators for many of our leases. These accounting treatments all result in greater property-related expense than actual lease payments made in the early years of the affected leases and less property-related expense than actual lease payments made in later years. The difference between our property-related expense vs. actual lease payments increased $2.4 million for the quarter compared against quarter 2 last year. The net income reflected in the Company's consolidated statement of operations for the three months ended June 30, 2005, was $9.4 million. The Company's property-related expense for this period was $34.3 million, of which $30.8 million was associated with our leases due to the effects of lease accounting referred to above. The Company's actual capital, finance and operating lease payments during this period were $24.6 million. Correspondingly, the net loss of $3.6 million for the three months ended June 30, 2004, reflected property-related expense of $27.5 million, of which $21.5 million was associated with our leases. The Company's actual capital, finance, and operating lease payments for the three months ended June 30, 2005, were $17.7 million. The increase in total property-related expense is due primarily to the acquisition and lease of 25 additional communities. The amount by which the property-related expense associated with our leases exceeded our actual lease payments was $6.2 million for the three months ended June 30, 2005, compared to $3.8 million for the three months ended June 30, 2004, an increase of $2.4 million. This increase is primarily attributable to capital and finance lease accounting treatment of 24 of the 25 communities. It should be noted that, notwithstanding the effects of lease accounting treatment, the actual lease payments required under most of the Company's leases will continue to increase annually and, as a result, the Company will need to increase our revenues and our results from community operations to cover these increases. Six Months Ending June 30 For the six months ending June 30, total operating revenue increased $48.5 million to $191.8 million, an increase of 33.8%. Approximately $40.7 million of the increase resulted from the acquisition or lease of 41 additional communities. The Company's revenue also increased approximately $9.2 million due primarily to increases in occupancy. The average occupancy rate for the second quarter increased 5.0 percentage points to 84.7% from 79.7%. Of the 41 additional communities acquired by the Company, 30 were managed by us prior to acquisition and, as a result, management revenue declined from $2.8 million to $1.1 million. Community operating expenses for the six months ended June 30, 2005, increased by $33.1 million to $123.0 million from $89.9 million for the first six months of 2004, or 36.9%. The change was primarily due to the acquisition or lease of 41 communities, which accounted for approximately $26.3 million of the increased expense. The remaining increase of $6.8 million, or 7.6%, was attributable to a number of factors. Census-based increases to staffing, raw food costs, utilities, and supplies accounted for $3.1 million and increased facility maintenance costs accounted for $1.0 million of the increase. The comparison between the first six months of 2005 to the first six months of 2004 also reflects a $400,000 net favorable effect in 2004 of credits relating to employee benefit and workers' compensation programs, partially offset by increases in liability insurance accruals. The balance is comprised of general increases in operating costs, including community management personnel, real estate taxes, and contracted services. On a cost per resident basis, our community operating expenses were flat with the prior year period. General and administrative (G&A) expenses for the six months ended June 30, 2005, increased $2.4 million to $15.2 million from $12.8 million for the comparable period in 2004, or 18.9%. Of the increase, approximately $700,000 related to costs associated with the conversion of Series B Preferred Stock, compliance with internal controls requirements under Sarbanes Oxley Act of 2002 and an adjustment in 2004 decreasing our incentive compensation accrual. Of the remaining increase of $1.7 million, the most significant factor was staffing additions, primarily associated with regional functions of sales and marketing and risk prevention, and resident relations and accounting, as well as routine compensation increases for all personnel. Other factors included accounting and other fees associated with increased corporate governance requirements. The increase of $22.3 million in other, net for the six months ending June 30, 2005, reflects the $21.3 million gain associated with the sale of 50 percent of the Company's interest in Alterra Healthcare. The provision for income tax increased $1.1 million, primarily related to the impact on taxable income from the sale of half our interest in Alterra. In comparing the net income for 2005 and the net loss for 2004, it is important to consider our property-related expenses, which include depreciation and amortization, facility lease expense, and interest expense that are directly related to our communities, and which include capital lease accounting treatment, finance accounting treatment, or straight-line accounting treatment of rent escalators for many of our leases. These accounting treatments all result in greater property-related expense than actual lease payments made in the early years of the affected leases and less property-related expense than actual lease payments made in later years. The difference between our property-related expense vs. actual lease payments increased $6.1 million for the six months ending June 30, 2005, compared against the same period last year The net income reflected in the Company's consolidated statement of operations for the six months ended June 30, 2005, was $5.3 million. Our property-related expense for this period was $67.5 million, of which $60.6 million was associated with our leases due to the effects of lease accounting. The Company's actual capital, finance and operating lease payments during this period were $48.5 million. Correspondingly, the net loss of $8.6 million for the six months ended June 30, 2004, reflected property-related expense of $50.1 million, of which $38.4 million was associated with our leases. The Company's actual capital, finance, and operating lease payments for the six months ended June 30, 2005, were $32.4 million. The increase in total property-related expense is due primarily to the acquisition and lease of 41 additional communities since Dec. 31, 2003. The amount by which the property-related expense associated with our leases exceeded our actual lease payments was $12.1 million for the six months ended June 30, 2005, compared to $6.0 million for the six months ended June 30, 2004, an increase of $6.1 million. This increase is primarily attributable to capital and finance lease accounting treatment of leases for 40 of the 41 communities referred to above and the finance lease treatment of 11 communities, which were acquired in the comparable period in 2004. It should be remembered that, notwithstanding the effects of lease accounting treatment, the actual lease payments required under most of our leases will continue to increase annually and, as a result, we will need to increase our revenues and our results from community operations to cover these increases. Income from discontinued operations increased $1.1 million for the six months ending June 30, 2005, primarily due to a $1.3 million gain from the disposition of a single community in January. Same Community Results Emeritus operated 125 communities in both 2004 and 2005. The revenue for those communities in quarter 2, 2005 increased $3.8 million from the prior year quarter, primarily due to improvements in occupancy. Average occupancy increased by 3.7 percentage points from 79.5% in the second quarter of 2004, to 83.2% in the second quarter of 2005. Community operating expenses increased $3.7 million primarily from increased costs related to direct care labor, maintenance of facilities, marketing, as well as related employee benefits. Property-related expenses (depreciation and amortization, facility lease expense, and interest expense, net) increased $254,000, which reflects primarily the effect of rent escalators in operating leases, which are in part performance based, the impact of changing one community from an operating lease to a capital lease at a higher financing rate, increasing depreciation and amortization, and a reduction in interest resulting from partial repayment of debt in August 2004, and a lower interest rate on that debt commencing in March 2005. Operating income after interest expense decreased $61,000 from the second quarter of 2004. Emeritus Assisted Living -- http://www.emeritus.com/-- is a national provider of assisted living and related services to seniors. Emeritus is one of the largest developers and operators of freestanding assisted living communities throughout the United States. These communities provide a residential housing alternative for senior citizens who need help with the activities of daily living with an emphasis on assistance with personal care services to provide residents with an opportunity for support in the aging process. Emeritus currently holds interests in 182 communities representing capacity for approximately 18,400 residents in 34 states. Emeritus's common stock is traded on the American Stock Exchange under the symbol ESC. As of June 30, 2005, Emeritus Assisted's equity deficit narrowed to $122,990,000 from a $128,319,000 deficit at Dec. 31, 2004. ENRON CORP: Inks Pact Resolving Brooklyn Union Gas Claims --------------------------------------------------------- The Brooklyn Union Gas Company, dba KeySpan Energy Delivery New York, filed multiple proofs of claim in Enron Corporation and its debtor-affiliates' Chapter 11 cases: (a) Claim No. 14308, filed against Enron for $9,551,836 plus contractual interest to the Petition Date, is based on a Guaranty Agreement, dated as of February 6, 1998, pursuant to which Enron guaranteed ENA's performance under these agreements: -- Amended and Restated Gas Supply Asset Assignment and Agency Agreement dated as of February 6, 1998, as amended, and -- Amended and Restated Gas Purchase Agreement dated as of Feb. 6, 1998, as amended; (b) Claim No. 14310 asserts a claim against ENA for $9,551,836 plus contractual interest to the Petition Date based on amounts allegedly owed under the Outsourcing Agreements; (c) Claim No. 14309 asserts a claim against ENA for $2,926,220 plus contractual interest accrued to the Petition Date based on an alleged gas imbalance created during the period of May 1987 to July 1991 from the sale and delivery of natural gas to Brooklyn Gas under a Gas Sales Agreement dated as of December 1, 1988, as amended; (d) Claim No. 14326 asserts a claim against Enron for $2,926,220 plus contractual interest to the Petition Date based on a Guaranty Agreement dated as of January 14, 1987, pursuant to which Enron guaranteed ENA's performance under the 1988 Gas Sales Agreement. (e) Claim No. 14327 asserts a claim against ENA for $74,020 plus contractual interest accrued to the Petition Date based on the alleged sale and delivery of natural gas to ENA during the month of November 2001. The Reorganized Debtors objected to the Brooklyn Gas Claims. Transcontinental Gas Pipe Line Corporation Transco filed Claim No. 13089 against ENA for $4,296,896 for alleged historical gas imbalances owed by ENA to Transco arising, among other things, under contracts between ENA and Brooklyn Gas. The Imbalances were included, as amounts owed to Brooklyn Gas in Claim Nos. 14309 and 14326. The Reorganized Debtors dispute the Transco Claim. To resolve the Claims, the parties agree that: (1) Claim No. 14308 will be allowed as a Class 4 General Unsecured Claim against Enron for $3,164,206 with all deductions and setoffs deemed to have been taken or made; (2) Claim No. 14310 will be allowed as a Class 5 General Unsecured Claim against ENA for $3,164,206 with all deductions and setoffs deemed to have been taken or made; (3) Claim No. 14309 will be allowed as a Class 5 General Unsecured Claim against ENA for $2,926,220 with all deductions and setoffs deemed to have been taken or made; and (4) Claim No. 14326 will be allowed as a Class 4 General Unsecured Claim for $2,926,220 with all deductions and setoffs deemed to have been taken or made. (5) Claim No. 14327 will be disallowed and expunged in its entirety. All Scheduled Liabilities related to Brooklyn Gas are disallowed in their entirety in favor of the Allowed Claims. 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. 154; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON: EEMC Demands Summary Judgment on CCLC's Claims ----------------------------------------------------- Enron Energy Marketing Corp., as successor-in-interest to PG&E Energy Services Corporation, objects to the proofs of claim filed by members of the Community College League of California and the proof of claim filed by the Community College League of California. CCLC is a non-profit public benefit corporation located in Sacramento, California. A full-text copy of the list of Claimants and their locations is available for free at http://bankrupt.com/misc/colleges.pdf Each Claimant and Obligor was a party to a Member Power Supply Agreement between each CCLC Entity and EEMC dated on or about April and May 1998, as amended from time to time. The material provisions of each Power Agreement are substantially the same. EEMC, among other things, agreed to provide for each CCLC Entity to receive power during a term expiring five years from the beginning of service by EEMC. The parties later fixed the end of the Delivery Term at March 31, 2003. Subsequently, the parties extended the term of each Power Agreement through July 15, 2003. The rate EEMC was to charge, and each CCLC Entity was to pay, under each Power Agreement was 94.5% of the AB 1890 Frozen Tariff rate per Kilowatt Hour of power consumed. CCLC Claims On October 15, 2002, each CCLC Claimant filed a claim against EEMC: Claim CCLC Claimant No. Claim Amount ------------- ----- ------------ Allan Hancock Joint Community College 15680 $1,809,553 Barstow College 18257 692,215 Butte-Glenn Community College 16357 2,951,840 Cerritos Community College 15431 7,299,675 Coast Community College 14788 7,624,976 College of the Sequoias 15678 644,108 Community College League of California 15422 42,500 Contra Costa Community College 15967 7,846,007 El Camino Community College 17647 5,119,279 Feather River College 15978 694,164 Foothill-De Anza Community College 18598 4,299,330 Fremont-Newark Community College 15755 3,076,232 Gavilan Joint Community College 18265 1,263,955 Grossmont-Cuyamaca Community College 15630 372,769 Hartnell Community College 14865 2,713,625 Los Angeles Community College 25113 5,654,028 Mira Costa College 15840 174,707 North Orange County Community College 15391 12,594,975 Palomar Community College 16647 447,822 Rio Hondo Community College 14871 3,444,266 San Joaquin Delta Community College 16351 6,822,690 San Jose Evergreen Community College 16650 5,512,391 San Luis Obispo County Community - College District Cuesta College 16541 3,022,765 San Mateo County Community College 16352 6,383,923 Santa Clarita Community College 14926 3,928,155 Santa Monica Community College 16008 4,656,558 Shasta-Tehama-Trinity Community 14861 3,071,315 Sierra Joint Community College 14981 4,243,792 Sonoma County Jr. College 17320 5,038,155 Southwestern Community College 15695 252,966 Victor Valley College 16545 4,226,145 West Valley-Mission Community College 14744 3,327,884 Yuba Community College 17333 2,631,429 The CCLC Claims are based on damages allegedly suffered by each CCLC Claimant as a result of alleged breaches of the applicable Power Agreement. The CCLC Claims are substantially the same in all material respects. The only material differences are due to differences in charges between the Utility Distribution Companies in whose territory a CCLC Claimant is located. The CCLC Claims allege that no Power Agreement allowed EEMC to switch any CCLC Claimant's service from Direct Access to Bundled Service and that, in so doing, EEMC breached each Power Agreement. Bundled Service refers to the arrangement, under which the UDC both sold power to the consumer and transported the power to the consumer's electric meter over the UDC's own distribution network. In Direct Access service, retail consumers buy electricity and other related services from entities other than their local UDC. Each CCLC Claimant alleges that EEMC is obligated for the DA Cost Responsibility Surcharge because each CCLC Claimant's liability for the DA CRS is a consequence of EEMC's alleged breach of each Power Agreement by placing each CCLC Claimant on Bundled Service. The CRS was imposed by the California Public Utilities Commission in November 2002, on the power consumed on and after January 1, 2003, by any entity on DA service after that date if that entity had been on Bundled Service at any time on or after February 1, 2001. Substantially all of the CCLC Claimants estimate that they will be liable for the DA CRS for 20 years. The CCLC Claimants collectively allege $110,675,254 of their total claim for damages against EEMC results from their obligation to pay the DA CRS. The CCLC Claims also allege damages in an unspecified amount for certain payments paid by EEMC to UDCs on behalf of each CCLC Claimant, which payments may have been refunded to EEMC, and are now being charged to each CCLC Claimant by the UDCs. Certain of the CCLC Claims further allege that those certain CCLC Claimants suffered $2,586,419 in damages as a result of the Historic Procurement Charge. The CPUC authorized Southern California Edison in July 2002, to charge the HPC to DA customers in the SCE service territory. The HPC is intended to allow SCE to recover the DA customers' share of SCE's procurement related obligations during the 2000-2001 California energy crisis. Certain of the CCLC Claims further allege that EEMC would be liable for any SCE One-Cent Surcharge, should SCE elect to begin billing customers for this charge. In January 2001, the CPUC ordered SCE to establish a one-cent per kWh surcharge, subject to refund and adjustment, on all electricity consumers within SCE's service area, whether on Bundled Service or DA service. SCE has not billed DA customers for the SCE One-Cent Surcharge since June 2001 and has given no indication that it intends to bill the SCE One-Cent Surcharge in the future. The CCLC Claims further allege that each CCLC Claimant suffered: -- replacement damages as a result of EEMC's rejection of each Power Agreement; -- damages relating to its audits and corrections of bills from EEMC; and -- damages in the form of attorney's fees and costs in enforcing its rights under each Power Agreement. Marketing Agreement Claim On October 15, 2002, CCLC filed Claim No. 15422 against EEMC for $42,500 based on damages allegedly suffered by CCLC as a result of alleged breaches of a Marketing Agreement between EEMC and CCLC, dated January 16, 1998. Among other things, the Marketing Agreement Claim alleges that CCLC suffered damages in the form of attorneys' fees and costs in enforcing its rights under the Marketing Agreement. The CCLC Claims, together with the Marketing Agreement Claim, collectively exceed $121,884,162. CCLC Obligors EEMC arranged for each CCLC Obligor to receive power pursuant to each Power Agreement during the period April 22, 1998, through October 3, 2002. Each CCLC Obligor accepted and utilized the power that EEMC arranged for it to receive. Each CCLC Obligor is obligated to pay EEMC for that power. EEMC invoiced each CCLC Obligor for the power provided to each CCLC Obligor under its Power Agreement. Presently, the CCLC Obligors collectively owe EEMC $9,208,973 for power delivered by EEMC to each CCLC Obligor pursuant to its Power Agreement, plus $1,393,043 in interest, to the extent provided for by each Power Agreement or applicable law. The Matured Debt includes $1,930,464 for power delivered prepetition and $7,278,507 for power delivered postpetition. CCLC Obligor Amount Owed ------------ ----------- Allan Hancock College $161,362 Barstow College 19,457 Butte Glenn Community College 88,743 Cerritos Community College 353,715 Coast Community College 495,572 College Of The Sequoias 25,418 Contra Costa Community College 798,902 Cuesta College 55,454 East Los Angeles College 457,060 El Camino Community College 251,901 Feather River Community College 6,992 Foothill-Deanza Community College 288,625 Fremont Newark Community College 424,400 Grossmont-Cuyamaca Community College 30,527 Hartnell Community College 121,569 Long Beach Community College 30,233 Los Angeles Southwest College 425,892 Mendocino Lake Community College 42,123 Mira Costa College 107,607 Monterey Peninsula College 114,481 Mt. San Antonio Community College 715,995 North Orange County Community College 775,780 Palomar Community College 92,510 Rio Hondo Community College 85,429 San Joaquin Delta Community College 430,435 San Jose Evergreen Community College 213,732 San Mateo County Community College 319,621 Santa Clarita Community College 209,362 Santa Monica Community College 385,557 Shasta Tehama Trinity Joint Community College 268,275 Sierra Joint Community College 551,667 Sonoma County Jr. College 90,594 Southwestern Community College 53,984 Victor Valley College 26,961 West Los Angeles College 261,311 West Valley Mission Community College 251,824 Yuba Community College District 175,903 ---------- TOTAL $9,208,973 ========== Objection to the Claims The Debtor objects to Claim No. 25113 filed by Los Angeles Community College because it was filed nearly two years after the Bar Date and after confirmation of the Plan. EEMC objects to each CCLC Claimant's CCLC Claim pursuant to Section 502(d) of the Bankruptcy Code, which requires that all claims by each Obligor Claimant be disallowed because the Obligor Claimants have failed to turnover a matured debt as required by Section 542(b) of the Bankruptcy Code. Counterclaims EEMC asserts five counterclaims against the CCLC Obligors and Claimants: (1) turnover of property to the estate under Section 542(b); (2) declaratory relief that the Obligor Claimants may not refuse to pay for power delivered postpetition as a result of claims for prepetition damages; (3) declaratory relief that the CCLC Obligors violated the automatic stay of Section 362; (4) breach of contract; and (5) damages resulting from CCLC Obligors' unjust enrichment. EEMC asserts that the matured debt owed by each CCLC Obligor is property of its estate. EEMC complains that each CCLC Obligor has failed and refused to pay any of its Matured Debt. EEMC argues that the claims asserted by each Obligor Claimant do not relieve that Obligor Claimant from any obligation to pay for power provided by EEMC after the Petition Date. Neither do the claims allow the Obligor Claimant to reduce the amount of its obligation to EEMC. Absent relief from the automatic stay, EEMC points out, each CCLC Obligor exercised control over property of the estate by withholding payment of the Matured Debt. This withholding of funds represents an unjust benefit to the CCLC Obligors because they received power without paying for it, EEMC asserts. As a result, EEMC and its creditors have suffered substantial damages (proximately caused by the CCLC Obligors) in an amount to be proven at trial. Accordingly, EEMC demands judgment: (a) that the Court enter an Order disallowing and expunging the CCLC Claims; (b) declaring that each CCLC Obligor owes a matured debt, as that term is used in Section 542(b), to EEMC, plus interest, and that each CCLC Obligor should be ordered to pay and turnover to EEMC those amounts, including interest, immediately; (c) declaring that the obligations asserted in the CCLC Claims do not relieve any Obligor Claimant from any obligation it otherwise has to pay for power provided by EEMC after it filed for protection under the Bankruptcy Code and that no Obligor Claimant may reduce the amount each owes EEMC for power provided to each by EEMC after it filed for protection under the Bankruptcy Code by virtue of any claim asserted in that Obligor Claimant's CCLC Claim; (d) declaring that each CCLC Obligor's conduct in refusing to turnover its Matured Debt, or at least the Postpetition portion of its Matured Debt, constitutes a violation of Sections 362(a)(3), 362(a)(7) and 542(b) and that EEMC is entitled to sanctions in an amount to be determined at trial; (e) awarding damages against each CCLC Obligor, resulting from each CCLC Obligor's breach of its obligations under each Power Agreement; (f) awarding damages resulting from each CCLC Obligor's unjust enrichment in an amount to be determined at trial; and (g) awarding EEMC its costs and expenses, including attorney's fees, incurred in connection with its efforts to obtain compliance by the CCLC Obligors with their obligations under the Bankruptcy Code, together with interest accrued. 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. 153; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Looking Glass Holds $1 Million Allowed Unsecured Claim ------------------------------------------------------------------ Pursuant to a Collocation Agreement, dated April 16, 2001, Looking Glass Networks, Inc., collocated at a facility of Enron Broadband Services, Inc., located at 60 Florida Avenue, N.E. in Washington, D.C. EBS rejected the Agreement on April 10, 2002. Looking Glass filed Claim No. 4029 against EBS for $4,116,579. EBS filed an estimation objection to the Claim. On March 17, 2005, EBS commenced an adversary proceeding against Looking Glass seeking, among other things, the turnover of $98,742. After extensive negotiations, the parties stipulate that: (1) Claim No. 4092 will be allowed as Class 9 general unsecured claim for $1,000,000; (2) as settlement of the Adversary Proceeding, EBS will retain the first $23,000 in cash to be distributed to Looking Glass on account of the Allowed Claim; (3) the Estimation Objection will be deemed withdrawn with prejudice; (4) the Adversary Proceeding will be dismissed with prejudice pursuant to Rule 7041 of the Federal Rules of Bankruptcy Procedure; and (5) the terms agreed by the parties are mutually interdependent, indivisible and non-severable. 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. 154; Bankruptcy Creditors' Service, Inc., 15/945-7000) FIBERMARK INC: Court Rules in Favor of Unsealing Examiner's Report ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Vermont has determined that the report of the independent examiner appointed in FiberMark, Inc.'s (OTC Bulletin Board: FMKIQ) chapter 11 case should be unsealed, subject to certain minimal redactions. The report details the examiner's findings with respect to certain issues involving the Official Creditors Committee, which has since been disbanded by the United States Trustee. The Court, however, concurrently established a schedule by which certain parties who oppose the unsealing may seek a stay of the unsealing order pending appeal. Under that schedule, the redacted report will be unsealed tomorrow, Aug. 19, 2005, if no motion for a stay is filed. Alternatively, if a motion for a stay is filed, the Court will rule on the motion by Aug. 24, 2005, and if the Court denies the motion, the redacted report will be immediately unsealed. If, on the other hand, the Court grants the motion, a temporary stay will be in place until Aug. 29, 2005, to allow the opposing parties to seek relief on appeal. If no such relief is obtained, the redacted report will be unsealed on Aug. 29, 2005. Harvey R. Miller, the chapter 11 examiner appointed in the Debtors' chapter 11 cases, was appointed in order look into the disputes among Committee members and the Debtors concerning corporate governance issue and fiduciary duties. Mr. Miller is represented by Weil, Gotshall & Manges LLP. The U.S. trustee disbanded the creditors committee effective July 13, 2005, after Mr. Miller conducted the investigation. Mr. Miller 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 reported in the Troubled Company Reporter on Apr. 16, 2004, the United States Trustee for Region 2 appointed five creditors to serve on an Official Committee of Unsecured Creditors in the Debtors' 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 June 30, 2005, FiberMark, Inc.'s balance sheet showed a $108,891,000 stockholders' deficit, compared to a $101,876,000 deficit at Dec. 31, 2004. FIRST UNION: Negative Loan Performance Cues Fitch's Downgrade ------------------------------------------------------------- Fitch Ratings downgraded the rating on First Union HEL, mortgage pass-through certificates, series 1997-3 to 'B' from 'BB'. The transaction consists of 15-year fixed-rate mortgages extended to sub-prime borrowers. The downgrade reflects the potential negative impact of loan performance issues on this bond and affects approximately $1.0 million in outstanding principal. Poor collateral performance has caused a reduction of credit enhancement in the form of overcollateralization. Over the last six months, the monthly average in realized losses (after the application of excess interest) is approximately $75,000. The high percentage of loans more than 60 days delinquent (approximately 25% of the current pool) suggests continued poor performance. There is currently an 8.19% pool factor (i.e., current mortgage loans outstanding as a percentage of the initial pool). Further information regarding current delinquency, loss and credit enhancement statistics is available on the Fitch Ratings web site at http://www.fitchratings.com/ GMAC COMMERCIAL: Loan Defeasance Prompts Fitch to Lift Ratings -------------------------------------------------------------- Fitch Ratings upgraded GMAC Commercial Mortgage Securities, Inc.'s commercial mortgage pass-through certificates series 1999-CTL1, and removed these classes from Rating Watch Positive: -- $7.7 million class B to 'AAA' from 'AA'; -- $8.7 million class C to 'AAA' from 'A'; -- $9.6 million class D to 'AAA' from 'BBB'; -- $4.8 million class E to 'AAA' from 'BB'; -- $3.9 million class F to 'AAA' from 'B'. In addition, Fitch affirms these ratings: -- $99.2 million class A at 'AAA'; -- Interest-only class X at 'AAA'. Fitch does not rate the $5.8 million class G certificates. The rating upgrades are due to the defeasance of 24 loans with an unpaid principal balance totaling $118.3 million, or 84.9% of the remaining pool. As of the August 2005 distribution date, the pool has paid down 63.8% to $139.8 million from $386 million at issuance. Excluding the defeased loans, the remaining pool consists of five loans secured by seven properties, which are leased to four credit tenants. Three of the tenants (97.8%) are considered investment grade credits, while one tenant (2.2%) is considered below investment grade. The remaining loans are all fully amortizing and each of the remaining seven properties is 100% occupied. GOLDMAN SACHS: Fitch Affirms B Rating on Class IB-5 Certificates ---------------------------------------------------------------- Fitch Ratings has taken rating actions on these Goldman Sachs Mortgage issues: Series 2002-3F, Group 1 -- Class IA affirmed at 'AAA'; -- Class IB-1 affirmed at 'AAA'; -- Class IB-2 upgraded to 'AA+' from 'AA'; -- Class IB-3 affirmed at 'BBB'; -- Class IB-4 affirmed at 'BB'; -- Class IB-5 affirmed at 'B'. Series 2003-1 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 upgraded to 'AA+' from 'AA'; -- Class B-3 affirmed at 'A'; -- Class B-4 affirmed at 'BBB'; -- Class B-5 affirmed at 'BB'. Series 2003-3F -- Class A affirmed at 'AAA'. Series 2003-4F -- Class A affirmed at 'AAA'. Series 20 03-5F -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 upgraded to 'AAA' from 'AA'; -- Class B-3 upgraded to 'AA+' from 'A'; -- Class B-4 upgraded to 'A+' from 'BBB-'; -- Class B-5 upgraded to 'BBB+' from 'BB-'. Series 2003-7F -- Class A affirmed at 'AAA'. Series 2003-6F -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AA+'; -- Class B-3 upgraded to 'AA' from 'A'; -- Class B-4 upgraded to 'A' from 'BBB'; -- Class B-5 upgraded to 'BBB' from 'BB'. Series 2003-9 -- Class A affirmed at 'AAA'. Series 2004-2F Group 1 -- Class A affirmed at 'AAA'. Series 2004-2F Group 2 -- Class A affirmed at 'AAA'. Series 2004-4 -- Class A affirmed at 'AAA'. Series 2004-6F -- Class A affirmed at 'AAA'. The affirmations on the above classes, which affect approximately $1.92 billion of certificates, reflect deal performance consistent with expectations and adequate credit enhancement in light of future loss expectations. The upgrades reflect an increase in current CE levels relative to future loss expectations and affect $15.27 million of outstanding certificates. The current CE levels for all classes in series 2002-3F Group 1 have increased by more than nine times (x) the original CE levels since the closing date (May 29, 2002). Class IB-2 benefits from 6.23% subordination (originally 0.65%). Currently, only 8% of the original collateral is remaining in the pool balance, and no losses have been incurred since date of issuance. There is one loan with $543,945 outstanding in the 90 or more days delinquency bucket (6.90% of the pool), and one loan with $44,053 outstanding in foreclosure (0.56% of the pool). The current CE levels for all classes in series 2003-1 have increased by more than 3x the original CE levels since the closing date (Feb. 27, 2003). Class B-2 benefits from 3.15% subordination (originally 1.0%). Currently, 20% of the original collateral is remaining in the pool balance and there have been $3,119 in cumulative losses. There is only one loan with $635,644 outstanding in the 90 or more days delinquency bucket (0.49% of the pool), and there are no loans in bankruptcy, foreclosure or REO. The current CE levels for all classes in series 2003-5F have increased by more than 6x the original CE levels since the closing date (May 30, 2003). Class B-2 benefits from 5.91% subordination (originally 0.85%); class B-3 benefits from 3.48% subordination (originally 0.5%); class B-4 benefits from 2.09% subordination (originally 0.3%); and class B-5 benefits from 1.04% subordination (originally 0.15%). Currently, 14% of the original collateral is remaining in the pool balance, and no losses have been incurred since date of issuance. Also, there are no delinquent loans. The current CE levels for all classes in series 2003-6F have increased by more than 5x the original CE levels since the closing date (June 30, 2003). Class B-3 benefits from 2.99% subordination (originally 0.5%); class B-4 benefits from 1.78% subordination (originally 0.3%); and class B-5 benefits from 0.88% subordination (originally 0.15%). Currently, 16% of the original collateral is remaining in the pool balance and there have been $28,275 in cumulative losses. There is one loan with $396,814 outstanding in foreclosure (0.38% of the pool), and one loan with $347,296 outstanding in bankruptcy (0.24% of the pool). The mortgage pools in the above transactions consist of prime quality, traditional, and hybrid adjustable-rate mortgage loans secured by residential properties on one- to four-family residential properties, substantially all of which have original terms to maturity of 30 years. Further information regarding current delinquency, loss and credit enhancement statistics is available on the Fitch Ratings web site at http://www.fitchratings.com/ GOLF CLUB: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------- Debtor: The Golf Club at Hidden Hills, Inc. 5001 Biffle Road Stone Mountain, Georgia 30088 Bankruptcy Case No.: 05-74957 Type of Business: The Debtor operates a golf club. Chapter 11 Petition Date: August 17, 2005 Court: Northern District of Georgia (Atlanta) Debtor's Counsel: Ralph Goldberg, Esq. Ralph Goldberg, PC 1766 Lawrenceville Highway Decatur, Georgia 30033 Tel: (404) 636-0331 Total Assets: $500,000 Total Debts: $1,287,796 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Southern Credit $550,000 5855 Sandy Springs, Suite 150 Atlanta, GA 30328 Long Drive Realty $370,000 5855 Sandy Springs, Suite 150 Atlanta, GA ADP $60,316 11411 Red Run Boulevard Owings Mills, MD 21117 ACSYS, Inc. $10,500 DeKalb County Treasury $9,077 Pitney Bowes $9,005 Atlanta Journal-Constitution $7,772 Home Depot $6,397 Sysco Food Services $6,182 Accuhurt $5,991 Corporate Payroll $5,614 AH Security $4,825 CRC Printing Corp. $4,705 Ecolab Industrial $3,974 Atlanta Check Cashing $3,479 Georgia Power $3,272 Muzak $3,077 Sprint PCS $2,400 Georgia Power $2,075 Georgia Fairway $1,756 GOODYEAR TIRE: SEC May File Charges for Accounting Violations ------------------------------------------------------------- The Securities and Exchange Commission's staff intends to recommend the filing of a civil or administrative suit against The Goodyear Tire & Rubber Company (NYSE: GT) for alleged violations of the Securities and Exchange Act of 1934 relating to: * the maintenance of books, records and internal accounting controls, * the establishment of disclosure controls and procedures, and * the periodic SEC filing requirements. Goodyear received a Wells Notice in connection with the Commission's investigation into accounting matters included in the company's restatement of financial results. The restatement was initially announced on Oct. 22, 2003. Goodyear first disclosed the existence of the investigation on November 19, 2003. The Wall Street Journal reports that companies usually seek settlements in these situations, rather than battling it out. Talks between the Company and SEC have not started. Opportunity to Respond Under SEC procedures, a Wells Notice indicates that the staff has made a preliminary decision to recommend the Commission authorize the staff to bring a civil or administrative action against the recipient or recipients of the notice. Recipients of Wells Notices have the opportunity to respond to the SEC staff before the staff makes a formal recommendation on whether any action should be brought by the SEC. The company's former Chief Financial Officer, Robert Tieken, and former accounting head, Stephanie Bergeron, also received Wells Notices. Mr. Tieken retired May 31, 2004. Ms. Bergeron retired Dec. 31, 2003. Both retirements came after the SEC started its informal probe of the company. Goodyear and its former officers are continuing to cooperate with the SEC in connection with this matter. Accounting Restatements Goodyear's restatements include additional financial disclosures related to overseas affiliates and to fix errors in its financial statements that led to the overstatement of income tax assets and liabilities by about $360 million each. Goodyear rebounded to a profit in 2004 after losses totaling more than $2 billion over the previous two years. It is involved in a five-year turnaround plan of plant closings, debt refinancing and job cuts. The Goodyear Tire & Rubber Company (NYSE: GT) is the world's largest tire company. Headquartered in Akron, Ohio, the company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries. It has marketing operations in almost every country around the world. Goodyear employs more than 80,000 people worldwide. * * * As reported in the Troubled Company Reporter on June 23, 2005, Fitch Ratings has assigned an indicative rating of 'CCC+' to Goodyear Tire & Rubber Company's (GT) planned $400 million issue of senior unsecured notes. GT intends to issue $400 million of 10-year notes under Rule 144A. Proceeds will be used to repay $200 million outstanding under the company's first lien revolving credit facility and to replace $190 million of cash balances that were used to pay $516 million of 6.375% Euro notes that matured June 6, 2005. The Rating Outlook is Stable. The rating reflects the substantial amount of senior secured debt relative to the planned notes. It also incorporates Fitch's concerns about GT's high leverage, high-cost structure, and weak profitability and cash flow. In addition, GT's pension plans, which were underfunded by $3.1 billion at the end of 2004, are likely to require substantially higher contributions over the near term. GSI GROUP: Wants to Exchange $110M Sr. Notes with Registered Notes ------------------------------------------------------------------ The GSI Group, Inc., is offering to exchange $110 million in aggregate principal amount of its 12% Senior Notes due 2013, for any and all outstanding unregistered 12% Senior Notes due 2013. The terms of the exchange notes will be identical in all material respects to the respective terms of the original notes except that the exchange notes will be registered under the Securities Act of 1933 and, therefore, the transfer restrictions applicable to the original notes will not be applicable to the exchange notes. The exchange of original notes for exchange notes pursuant to the exchange offer generally will not be a taxable event for U.S. federal income tax purposes. The Company will not receive any proceeds from the exchange offer. The Company informed the Securities and Exchange Commission that no public market currently exists for the outstanding notes or the exchange notes. The Company does not intend to list the exchange notes on any national securities exchange or the Nasdaq Stock Market. Covington & Burling, the Company's counsel, has reviewed the documents filed by the Company to the Securities and Exchange Commission in support of its filing of the prospectus. BKD, LLP's March 18, 2005, report on its audits on the company's financial statements is included in the filings. A full-text copy of the prospectus is available for free at: http://ResearchArchives.com/t/s?d3 GSI Group is a leading manufacturer and supplier of agricultural equipment and services worldwide. The Company is also one of the largest global providers of poultry feed storage, feed delivery, watering, ventilation and nesting systems. The Company markets its agricultural products in approximately 75 countries through a network of over 2,500 independent dealers to grain, swine and poultry producers primarily under its GSI, DMC, FFI, Zimmerman, AP and Cumberland brand names. The Company's current market position in the industry reflects both the strong, long-term relationships the Company has developed with its customers as well the quality and reliability of its products. * * * As reported in the Troubled Company Reporter on May 3, 2005, Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to GSI Group Inc. At the same time, Standard & Poor's assigned its 'B-' senior secured rating to the proposed $125 million senior unsecured notes due in 2013, issued to redeem GSI's existing senior subordinated notes and other debt. GSI is the primary operating company. All of the company's subsidiaries will be designated restricted subsidiaries. S&P says the outlook is stable. As reported in the Troubled Company Reporter on May 2, 2005, Moody's Investors Service has assigned a B3 rating to the proposed senior notes of The GSI Group, Inc., which will be used to refinance existing indebtedness in connection with the company's pending acquisition by GSI Holdings Corp. (an affiliate of Charlesbank Capital Partners, LLC). In addition, Moody's has affirmed GSI's existing ratings, including its B2 senior implied rating, and assigned a speculative grade liquidity rating of SGL-2. Approximately $125 Million of rated debt is affected. Moody's says the rating outlook is stable. These ratings were assigned: * $125 million senior notes due 2013, at B3; * Speculative grade liquidity rating, at SGL-2. These ratings were affirmed: * Senior implied, at B2; * $100 million senior subordinated notes, at Caa1; * Senior unsecured issuer rating, at B3. H. LIEBLICH: Case Summary & 13 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: H. Lieblich & Company, Inc. 149 East Kingsbridge Road Mount Vernon, New York 10550 Bankruptcy Case No.: 05-22732 Type of Business: The Debtor is a mechanical contractor. The Debtor previously filed for chapter 11 protection on April 20, 2005 (Bankr. S.D.N.Y. Case No. 05-22732) was reported in the Troubled Company Reporter on Apr. 21, 2005. Chapter 11 Petition Date: August 17, 2005 Court: Southern District of New York (White Plains) Judge: Adlai S. Hardin Jr. Debtor's Counsel: Arthur Morrison, Esq. 11 Skyline Drive Hawthorne, New York 10532 Tel: (914) 592-8282 Fax: (914) 592-3482 Financial Condition as of August 15, 2005: Total Assets: $735,495 Total Debts: $2,634,808 Debtor's 13 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service Taxes $1,871,985 Bankruptcy Unit 110 West 44th Street New York, NY 10036 New York State $532,641 Department of Taxation & Finance P.O. Box 5300 Albany, NY 12205-0300 The State Insurance Fund Premiums $53,250 199 Church Street New York, NY 10007-1100 Gargiulo Bros. Inc. Rent Arrears $19,771 Oxford Health Insurance Insurance Premiums $4,168 Horizon Healthcare Co. Insurance Premiums $1,992 Exxon Mobil Oil Delivery $1,516 Dynamo Development Services $909 Pitney Bowes Services $734 Pitney Bowes Credit Corp. Services $454 J & P Cleaning Co. Services $275 CIT Technology Services $175 C.B.S. Business CB Radio $113 HAYES LEMMERZ: Sells Equipment & Engineering Division ----------------------------------------------------- Hayes Lemmerz International, Inc. (NASDAQ: HAYZ) reported the sale of its wholly owned Equipment and Engineering subsidiary, located in Au Gres, Michigan. The equipment business was sold to Todd G. Carlson and former Hayes Lemmerz employee Daniel D. Minor. The business will be renamed CMI - Equipment and Engineering, Inc. Terms of the transaction were not disclosed. The business engineers and manufactures a wide range of foundry equipment and systems for molding, coremaking, melting and finishing operations. It has approximately 50 employees. "This division has a broad customer base and an excellent reputation in the marketplace," said John A. Salvette, Vice President of Business Development. "The divestiture is part of our strategy to streamline Hayes Lemmerz, and still retaining CMI-Equipment and Engineering as a valued supplier." "I am excited about this transaction," commented CMI - Equipment and Engineering, Inc.'s President Daniel Minor. "This will encourage continued growth in the business. We look forward to continuing to support Hayes Lemmerz while creating greater opportunities to secure business with a wider range of equipment users." Hayes Lemmerz International, Inc., is a world leading global supplier of automotive and commercial highway wheels, brakes, powertrain, suspension, structural and other lightweight components. The Company filed for chapter 11 protection on December 5, 2001 (Bankr. D. Del. Case No. 01-11490) and emerged in June 2003. Eric Ivester, Esq., and Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meager & Flom represent the Debtors. (Hayes Lemmerz Bankruptcy News, Issue No. 68; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on April 11, 2005, Moody's Investors Service assigned a B2 rating for HLI Operating Company, Inc.'s proposed $150 million guaranteed senior secured second-lien term loan facility. HLI Opco is an indirect subsidiary of Hayes Lemmerz International, Inc. The rating outlook remains stable. While the company has reaffirmed its earning guidance and the senior implied and guaranteed senior secured first-lien facility ratings remain unchanged at B1, Moody's determined that widening of the downward notching of HLI Opco's guaranteed senior unsecured notes was necessary to reflect additional layering of the company's debt. The senior unsecured notes are effectively subordinated to the proposed new senior secured second-lien term facility, and approximately $75 million of higher-priority debt will be added to the capital structure. These specific rating actions were taken by Moody's: * Assignment of a B2 rating for HLI Operating Company, Inc.'s proposed $150 million guaranteed senior secured second-lien credit term loan C due June 2010; * Downgrade to B3, from B2, of the rating for HLI Operating Company, Inc.'s $162.5 million remaining balance of 10.5% guaranteed senior unsecured notes maturing June 2010 (the original issue amount of $250 million was reduced as a result of an equity clawback executed in conjunction with Hayes Lemmerz's February 2004 initial public equity offering); * Affirmation of the B1 ratings for HLI Operating Company, Inc.'s approximately $527 million of remaining guaranteed senior secured first-lien credit facilities, consisting of: * $100 million revolving credit facility due June 2008; * $450 million ($427.3 million remaining) bank term loan B facility due June 2009 (which term loan is still expected to be partially prepaid through application of about half of the net proceeds of the proposed incremental debt issuance); * Affirmation of the B1 senior implied rating; * Downgrade to Caa1, from B3, of the senior unsecured issuer rating (which rating does not presume the existence of subsidiary guarantees). HOME INTERIORS: S&P Lowers Corporate Credit Rating to CCC --------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on decorative home accessories direct seller Home Interiors & Gifts Inc., including its corporate credit rating to 'CCC' from 'CCC+'. At the same time, Standard & Poor's affirmed its '3' recovery rating on the company's senior secured bank loan. The outlook is negative. Carrollton, Texas-based Home Interiors had about $484.4 million of total debt outstanding at June 30, 2005. The downgrade reflects weaker-than-expected operating performance for the second quarter of fiscal 2005 ended June 30, and the disclosure in the company's recent 10Q filing that it may breach debt covenants on its senior bank loan for the quarter ending Sept. 30, 2005, despite the company's recent bank loan waiver and amendment, which provided relief from financial covenants only through the second quarter of fiscal 2005. For the six months ended June 30, 2005, sales and operating income declined 4.9% and 54.1%, respectively, versus the same period in 2004. Profitability declined because of: * lower unit volumes of orders; * a lower average order size per sales representative; and * a decrease in the number of orders per sales representative. Direct sellers face increasingly challenging conditions from recent entrants into the direct selling market. Additionally, higher gas prices and inflation have reduced the discretionary income of Home Interiors' target consumer. The company is highly leveraged and its credit measures are very weak. "We are concerned that continued weak operating performance may well lead to another violation of bank covenants in the next quarter," said Standard & Poor's credit analyst David Kang. HUFFY CORP: Bankruptcy Court Approves Disclosure Statement ---------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Ohio approved the Disclosure Statement explaining Huffy Corporation's (OTC: HUFCQ) Joint Plan of Reorganization. The Bankruptcy Court also authorized the Company to begin soliciting approval from its creditors for its Plan. With this action, the Company remains on schedule to emerge from Chapter 11 protection on or about the first week of October 2005. At a hearing Tuesday in Dayton, Ohio, the Honorable Lawrence S. Walter ruled that the Company's Disclosure Statement contained adequate information for the purposes of soliciting creditor approval for the Plan. A confirmation hearing for the Court to consider approval of the Plan has been scheduled for Sept. 22, 2005. By Aug. 26, 2005, the Company will mail notice of the proposed confirmation hearing and begin the process of soliciting approvals for the Plan from qualified claim holders. Assuming that the requisite approvals are received and the Court confirms the Plan under the current timetable, the Company intends to emerge from Chapter 11 reorganization on or about the first week of October 2005. "This is positive news for our employees, customers and suppliers, all of whom have given us tremendous support throughout this process," John A. Muskovich, President and Chief Executive Officer, said. About the Plan The proposed Plan of Reorganization, which has been the subject of negotiations with the China Export & Credit Insurance Corporation and Huffy's primary bicycle suppliers, the Sinosure Group, and the Official Unsecured Creditors Committee is consistent with the agreement in principle between these parties that was announced on June 27, 2005. The Plan of Reorganization provides that substantially all of Huffy's pre-petition unsecured liabilities will be discharged in exchange for notes and new voting common equity of the reorganized company. Initial distributions to the Sinosure Group will be 30 percent of the new voting common equity of the Company (in the form of new Class A shares) and a $3 million note to the Sinosure Group. Initial distributions to most of the other general unsecured creditors will be 70 percent of the new common equity (in the form of new Class B shares) (subject to later dilution by the Performance Shares) and a $9 million note. The Sinosure Group as holders of Class A shares will elect a majority of Huffy's Board of Directors and, through the provision of trade credit to Huffy on favorable terms, have the ability to earn over 5 years up to 51% of the aggregate new common voting stock of the reorganized entity. The notes and post-confirmation trade credit will be secured by a lien on Huffy's intangible assets and on Huffy's other assets. The reorganized entity will emerge as a private company. Current equity holders will not receive any distributions and their equity interests will be cancelled. Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. HUFFY CORP: Court Okays Distress Termination of Retirement Plan --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Ohio gave Huffy Corporation and its debtor-affiliates permission to terminate its employee retirement plan. The Court determined that the Debtors met the requirements for a voluntary distress termination of their retirement plan pursuant to Section 363(b) of the Bankruptcy Code and Section 4041 of the Employee Retirement Income Security Act of 1974. There are 3,686 participants or beneficiaries covered by Huffy's retirement plan. Out of those plan participants, 87% are no longer employed by the Debtors. About the Retirement Plan The retirement plan is a single-employee defined benefit plan established on October 31, 1952. From 1952 to 1997, the plan only covered salaried employees. Between 1967 and 1997, Huffy established three other pension plans governing different groups of employees: * hourly-rate employees (the Bicycle Hourly Plan); * office and clerical employees of Huffy Bicycle Division (the Bicycle Office Plan); and * the Huffy Service First, Inc. Retirement Plan. In 1997, the company merged the Service First Plan into the Salaried Employees Plan, and later on, merged the Bicycle Hourly Plan and the Bicycle Office Plan into the Salaried Employees Plan. The combination of the different groups gave rise to the Huffy Corporation Retirement Plan. When the company faced financial problems in April 2004, the terms were amended to end future benefit accruals under the Plan. Huffy's Obligations Under the Retirement Plan As of January 1, 2005, the Plan's assets have a market value of $72,171,000 with accumulated benefits calculated on a pension termination basis at $135,400,000. Under the funding requirements set by ERISA and the Internal Revenue Code, Huffy is required to contribute $20,751,000 to the Plan between 2007 and 2010. Effect of Plan Termination The Debtors' actuaries have calculated that 99% of the participants and beneficiaries under the Plan will suffer no reduction in benefits. Only 18 people are projected to be adversely affected by the proposed termination. Based on the Pension Benefit Guaranty Corporation guarantee, if the Plan terminates in 2005, a retiree who begins drawing benefits at age 65 will receive $45,385 per year. Why Terminate the Plan? As reported in the Troubled Company Reporter on July 20, 2005, the existence of a $20 million liability will prevent Huffy from implementing a successful reorganization. As shown in Court documents, the company's estimated cash flows are lower than the estimated funding obligations for 2007 to 2010. The company stands to lose $10.7 million during those periods if the pension plan won't be terminated. Absent the retirement plan funding, the company projects a positive cash flow during the same period, allowing it to remain in business. Huffy reminded the Court of the DIP credit facility extended by Congress Financial Corporation which it approved. Under an Amended DIP Agreement, Congress Financial increased Huffy's available borrowings by $2.8 million. The new loan will be exhausted by November 2005 and Huffy believes it will be the end of its business. Huffy said it can't obtain additional credit so long as the pension obligations exceed its projected profit through 2010. The Sinosure Group, Huffy's largest Chinese bicycle supplier, promised the Debtors more liberal trade terms provided that the retirement plan is terminated. Sinosure also agreed to extend Huffy's credit term to 90 days in exchange for 30% ownership of the reorganized Huffy. Headquartered in Miamisburg, Ohio, Huffy Corporation -- http://www.huffy.com/-- designs and supplies wheeled and related products, including bicycles, scooters and tricycles. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 20, 2004 (Bankr. S.D. Ohio Case No. 04-39148). Kim Martin Lewis, Esq., and Donald W. Mallory, Esq., at Dinsmore & Shohl LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $138,700,000 in total assets and $161,200,000 in total debts. INTERMET CORP: Begins Plan Solicitation & Balloting Procedures -------------------------------------------------------------- Intermet Corporation (INMTQ: PK) has begun distributing solicitation materials in connection with its proposed Plan of Reorganization. The United States Bankruptcy Court for the Eastern District of Michigan approved the Company's amended Disclosure Statement and the proposed solicitation and balloting process on Aug. 12, 2005. Intermet is distributing the Disclosure Statement and balloting materials to all eligible creditors in order to solicit their votes in support of the Plan. Depending on the type and amount of their claim, holders of general unsecured claims may be eligible to select a variety of elections under the proposed Plan, including: -- a cash-out amount election; -- a convenience class election; -- an inducement cash election; and -- a new common stock and rights offering election. Eligible claimants must vote on the Plan and make all relevant elections on or before Sept. 20, 2005. An eligible claimant wishing to participate in the rights offering contemplated by the new common stock and rights offering election must hold their claim from the close of business on Sept. 1, 2005, the record date for the rights offering, through the effective date of the Plan. In the absence of any other election, an eligible claimant will be deemed to have made the cash-out election. A full-text copy of the Debtor's Amended Plan of Reorganization is available at no charge at: http://ResearchArchives.com/t/s?c5 A full-text copy of the Disclosure Statement explaining the Amended Plan is available at no charge at: http://ResearchArchives.com/t/s?c6 The confirmation hearing with respect to the Plan of Reorganization is scheduled to begin on Sept. 26, 2005. Headquartered in Troy, Michigan, Intermet Corporation -- http://www.intermet.com/-- provides machining and tooling services for the automotive and industrial markets specializing in the design and manufacture of highly engineered, cast automotive components for the global light truck, passenger car, light vehicle and heavy-duty vehicle markets. Intermet, along with its debtor-affiliates, filed for chapter 11 protection on Sept. 29, 2004 (Bankr. E.D. Mich. Case Nos. 04-67597 through 04-67614). Salvatore A. Barbatano, Esq., at Foley & Lardner LLP represents the Debtors. When the Debtors filed for protection from their creditors, they listed $735,821,000 in total assets and $592,816,000 in total debts. IT GROUP: Final Decree Closing Ch. 11 Cases Delayed Until Oct. 31 ----------------------------------------------------------------- Alix Partners LLC, the Trustee of the IT Litigation Trust formed under the confirmed First Amended Joint Plan of Reorganization of The IT Group, Inc., and its debtor-affiliates, sought and obtained approval from the U.S. Bankruptcy Court District of Delaware to delay until Oct. 31, 2005, the entry of a final decree in the Debtors' chapter 11 cases. Alix Partners gave the Court three reasons in support of the extension: 1) it anticipates to file more omnibus objections to additional disputed claims, including unsecured claims, in the near future and the extension will allow more time to complete the claims administration process; 2) several hundred remaining adversary proceedings are either set for trial in October or subject to pending dispositive motions, which will be time consuming and labor intensive on the part of the Trust Trustee and its professionals to resolve; and 3) it continues to address various other important matters relating to the administration of the Debtors' chapter 11 cases. Headquartered in Monroeville, Pennsylvania, The IT Group, Inc. -- http://www.theitgroup.com/ -- together with its 92 direct and indirect subsidiaries, is a leading provider of diversified, value-added services in the areas of consulting, engineering and construction, remediation, and facilities management. The Company filed for chapter 11 protection on Jan. 16, 2002 (Bankr. Del. Case No. 02-10118). David S. Kurtz, Esq., at Skadden Arps Slate Meagher & Flom LLP, represents the Debtors. On Sept. 30, 2001, the Debtors listed $1,344,800,000 in assets and 1,086,500,000 in debts. The Court confirmed the Debtors' chapter 11 Plan on April 5, 2004, and the Plan took effect on April 30, 2004. Alix Partners LLC is the IT Litigation Trust Trustee appointed under the confirmed Plan. John K. Cunningham, Esq., and Ileana Cruz, Esq., at White Case LLP represents the Trustee. IT GROUP: Trustee Has Until Oct. 31 to Object to Proofs of Claim ---------------------------------------------------------------- The U.S. Bankruptcy Court District of Delaware gave Alix Partners LLC, the Trustee of the IT Litigation Trust formed under the confirmed First Amended Joint Plan of Reorganization of The IT Group, Inc., and its debtor-affiliates, a further extension, until Oct. 31, 2005, to object to proofs of claim filed against the Debtors' estates. The Court confirmed the Debtors and the Official Committee of Unsecured Creditors' Joint Plan on April 5, 2004, and the Plan took effect on April 30, 2004. Pursuant to the confirmed Plan, the IT Litigation Trust was established as successor to the Debtors and Alix Partners was appointed as the Trustee. Since the Effective Date, Alix Partners and its professionals have focused their efforts on reviewing and analyzing claims and prosecuting objections to those claims when appropriate, particularly administrative, secured and priority claims. As a result of their efforts, over 20 omnibus objections to claims have been filed and the claims pool, particularly the administrative, secured and priority claims have been significantly reduced. Alix Partners gave the Court three reasons in support of the extension: 1) there is a continuing need to object to some claims within the administrative, secured and priority claims category, and the claims administration with respect to unsecured creditors needs to continue so that a distribution for those creditors is possible; 2) because of the size of the claims pool and the complexity of the claims asserted against the Debtors, the extension will enable the Trustee to complete its analysis and review of the entire claims pool, file additional objections and make distributions to unpaid creditors; and 3) the extension will not prejudice the Debtors' creditors and other parties-in-interest and it is in the best interest of their estates and their creditors. Headquartered in Monroeville, Pennsylvania, The IT Group, Inc. -- http://www.theitgroup.com/ -- together with its 92 direct and indirect subsidiaries, is a leading provider of diversified, value-added services in the areas of consulting, engineering and construction, remediation, and facilities management. The Company filed for chapter 11 protection on Jan. 16, 2002 (Bankr. Del. Case No. 02-10118). David S. Kurtz, Esq., at Skadden Arps Slate Meagher & Flom LLP, represents the Debtors. On Sept. 30, 2001, the Debtors listed $1,344,800,000 in assets and 1,086,500,000 in debts. The Court confirmed the Debtors' chapter 11 Plan on April 5, 2004, and the Plan took effect on April 30, 2004. Alix Partners LLC is the IT Litigation Trust Trustee appointed under the confirmed Plan. John K. Cunningham, Esq., and Ileana Cruz, Esq., at White Case LLP represents the Trustee. JACUZZI BRANDS: S&P Affirms B+ Corporate Credit Rating ------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating and its other ratings on West Palm Beach, Florida- based Jacuzzi Brands Inc. and removed them from CreditWatch, where they were placed on May 26, 2005, with developing implications. The outlook is stable. "Jacuzzi's ratings were removed from CreditWatch because we expect that the company will now take additional time to explore strategic alternatives and commit to a strategy," said Standard & Poor's credit analyst Lisa Wright. "A sale of its bath products segment appears to be the company's favored first step, but not until this segment's operations have been improved. In addition, weak recent results in the bath business, combined with the more remote likelihood that the entire company will be purchased by a larger, better capitalized company, make a ratings upgrade less likely." The stable outlook is supported by S&P's expectations for continuing favorable results by Jacuzzi's plumbing products segment and relatively good end-market demand for its bath products segment in the U.S. These elements should support the current ratings if Jacuzzi does not sell either of its two remaining segments. If Jacuzzi does sell the bath products segment, S&P expects that a majority of the proceeds would be used to reduce debt. Although the sale would reduce business diversity, size and scope, the business profile of the plumbing products segment should still support the current ratings, and the expected debt reduction should leave the plumbing products segment with a comfortable debt load for the current ratings. The outlook could be revised to negative if the bath segment experiences further sales or margin deterioration, or if the company initiates a substantial share buyback or dividend program, currently limited by provisions in its credit agreement. Although it does not appear likely that the entire company will be sold to a larger and better-capitalized strategic buyer, such an event could cause us to revise the outlook to positive or to raise the ratings. KERR-MCGEE: Selling North Sea Operations to Maersk for $3.5 Bil. ---------------------------------------------------------------- Kerr-McGee Corp.'s (NYSE: KMG) wholly owned affiliate entered into purchase and sale agreements to sell all of the company's North Sea operations to Maersk AS, a Danish company for: * approximately $3.5 billion in cash, * the assumption by the purchasers of all related abandonment obligations, which had a carrying value of $182 million at June 30, 2005, and * the assumption of all related derivative liabilities totaling $175 million after taxes. The agreements are subject to approval from appropriate government agencies and customary closing conditions. The transactions include: -- The sale of interests in four nonoperated fields and related exploratory acreage and facilities to Centrica plc for approximately US$566 million (318.6 million pounds sterling) -- The sale of all remaining North Sea assets through the sale of 100% of the stock of Kerr-McGee (G.B.) Ltd. and other affiliated entities to Maersk Olie og Gas AS, a subsidiary of A.P. Moller -- Maersk A/S, for US$2.95 billion The North Sea assets include proved reserves of approximately 231 million barrels of oil equivalent (BOE) at June 30, 2005, and produced a daily average of approximately 77,700 BOE during the second quarter of 2005, representing approximately 21% of Kerr- McGee's total production during that period. "These transactions enhance our strategic plan to high grade our oil and gas portfolio to focus on assets that have the greatest growth opportunities," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "Market valuations and the tax- efficient nature of these transactions led us to the decision to divest of all of our North Sea operations, maximizing the value of these assets to our stockholders. Divestiture of the North Sea assets will facilitate the company's plan to spend a reduced amount of capital while achieving a higher per-share production growth rate." The Deal reports that the proposed transaction is the Company's latest step of its restructuring to fend off Carl Icahn, a well- known "corporate raider." Mr. Icahn became its largest shareholder in March, with a 4.68% stake. Since then, the Company tried to ward off efforts to increase that stake. At about the same time, Kerr-McGee started marketed its chemicals business. The Company is said to be in talks with Apollo Management LP for the operations, which Kerr-McGee had considered selling via an IPO. Kerr-McGee's restructuring also includes the sale of its Gulf of Mexico shelf assets and certain U.S. onshore properties. These transactions, which will be deemed effective as of July 1, 2005, are expected to be completed by Oct. 1, early in the fourth quarter. At closings, Kerr-McGee will receive cash proceeds of approximately $3.5 billion and expects net after-tax cash proceeds will be approximately $3.1 billion. The sale's effect on 2005 earnings will be "modest but positive." The company plans to use all net proceeds to reduce debt to restructure its asset portfolio. Kerr-McGee -- http://www.kerr-mcgee.com/-- is an Oklahoma City- based energy and inorganic chemical company with worldwide operations and assets of more than $15 billion. * * * As reported in the Troubled Company Reporter on July 21, 2005, Standard & Poor's Ratings Services affirmed its 'BB+' long-term corporate credit rating on oil and gas exploration and production company Kerr-McGee Corp. and removed the rating from CreditWatch with negative implications. The rating was originally placed on CreditWatch March 4, 2005. Standard & Poor's also affirmed its 'B' short-term corporate credit rating on the company. The short-term rating was not on CreditWatch. S&P says the outlook is negative. As reported in the Troubled Company Reporter on Apr. 18, 2005, Fitch Ratings has downgraded and removed from Rating Watch Negative the ratings of Kerr-McGee: -- Senior unsecured debt to 'B' from 'BBB'; -- Commercial paper to 'B' from 'F2'. Fitch has also assigned a 'BB' senior secured rating to Kerr McGee. Fitch says the Rating Outlook is Stable. As reported in the Troubled Company Reporter on Apr. 18, 2005, Moody's Investors Service lowered the long-term and short-term debt ratings of Kerr-McGee Corporation to below investment grade. Moody's assigned a Ba3 Senior Implied and lowered KMG's Senior Unsecured notes to Ba3 from Baa3. Moody's expects that KMG's existing notes will be secured equally and ratably with new secured term loans that the company has arranged. The company's short-term ratings were lowered to Not Prime from Prime-3. This action concludes the review begun March 4 that had reflected "material event risk" resulting from a more activist shareholder base. Moody's says the outlook is stable. KERR-MCGEE: Taking Bids for Gulf of Mexico Shelf Properties ----------------------------------------------------------- Kerr-McGee Corp.'s (NYSE: KMG) is putting its Gulf of Mexico shelf properties and selected U.S. onshore properties in the market for grabs in its effort to high grade its asset portfolio. Data rooms currently are open to prospective buyers. The total combined divestitures are now expected to represent approximately 25% to 30% of the company's proved reserves as of Dec. 31, 2004, and approximately 30% to 35% of its projected 2005 average pre- divestment production of approximately 360,000 BOE per day. In addition, the company is proceeding with the separation of its chemical business through a dual track process as a sale or IPO/spinoff. The company expects to complete the chemical separation and the majority of the divestments prior to year-end. "Our remaining oil and gas property portfolio will be weighted toward longer-life, less capital-intensive properties, with a large inventory of repeatable low-risk development projects, while still providing high-potential exploration prospects for future per-share growth," said Dave Hager, Kerr-McGee Chief Operating Officer. "We are accelerating development drilling activities at our two large resource plays, located in the Rockies in the Wattenberg and Greater Natural Buttes areas, by approximately 20%. We also are focusing our exploratory program on high-impact targets in the deepwater Gulf of Mexico and other select proven hydrocarbon basins." Other Asset Sales The Company is also selling its North Sea operations to Maersk AS, a Danish company for $3.5 billion in cash. In a separate deal, Centrica plc, a U.K. company, agreed to buy four North Sea oil fields from Kerr-McGee for EUR318.6 million or $566.4 million. Kerr-McGee -- http://www.kerr-mcgee.com/-- is an Oklahoma City- based energy and inorganic chemical company with worldwide operations and assets of more than $15 billion. * * * As reported in the Troubled Company Reporter on July 21, 2005, Standard & Poor's Ratings Services affirmed its 'BB+' long-term corporate credit rating on oil and gas exploration and production company Kerr-McGee Corp. and removed the rating from CreditWatch with negative implications. The rating was originally placed on CreditWatch March 4, 2005. Standard & Poor's also affirmed its 'B' short-term corporate credit rating on the company. The short-term rating was not on CreditWatch. S&P says the outlook is negative. As reported in the Troubled Company Reporter on Apr. 18, 2005, Fitch Ratings has downgraded and removed from Rating Watch Negative the ratings of Kerr-McGee: -- Senior unsecured debt to 'B' from 'BBB'; -- Commercial paper to 'B' from 'F2'. Fitch has also assigned a 'BB' senior secured rating to Kerr McGee. Fitch says the Rating Outlook is Stable. As reported in the Troubled Company Reporter on Apr. 18, 2005, Moody's Investors Service lowered the long-term and short-term debt ratings of Kerr-McGee Corporation to below investment grade. Moody's assigned a Ba3 Senior Implied and lowered KMG's Senior Unsecured notes to Ba3 from Baa3. Moody's expects that KMG's existing notes will be secured equally and ratably with new secured term loans that the company has arranged. The company's short-term ratings were lowered to Not Prime from Prime-3. This action concludes the review begun March 4 that had reflected "material event risk" resulting from a more activist shareholder base. Moody's says the outlook is stable. K&F INDUSTRIES: Reports Second Quarter Financial Results -------------------------------------------------------- K & F Industries Holdings, Inc. (NYSE: KFI) reported its financial results for the second quarter and six months ended June 30, 2005. For the second quarter of 2005, sales rose 8 percent over the year earlier period to $90 million. EBITDA (earnings before interest, taxes, depreciation, and amortization) adjusted for non-recurring inventory purchase accounting adjustments, a change in accounting policy, non-recurring salary and benefit expense and non-recurring non-cash income, increased to $34 million from the prior year period's $33 million. Adjusted EBITDA margins for the second quarter 2005 remained strong at 39% after adding back to the $34 million of Adjusted EBITDA $1 million of cost related to productivity improvements. "Our productivity enhancement program remains on target to reduce our cost run rate by $8 million per year by December 31, 2005," stated Kenneth M. Schwartz, president and chief executive officer of K & F Industries Holdings, Inc. For the six months ended June 30, 2005, sales rose 7 percent to $179 million from $167 million last year. "Sales across all market sectors were up over the first half of 2004, led by general aviation market sector sales which increased by 17 percent," stated Mr. Schwartz. "We expect general aviation to be our fastest growing market over the next few years, given the new wheel and brake programs that we have recently won," continued Mr. Schwartz. Adjusted EBITDA was $66 million versus $65 million in last year's first half. Results for Second Quarter 2005 Compared with Second Quarter 2004 * Bookings rose 20 percent to $90 million from $75 million. * Sales increased $7 million to $90 million. * General aviation revenues were $19 million, up 20 percent from $16 million. * Revenue from the commercial transport sector improved 5 percent to $49 million. * Military revenues remained strong at $22 million versus $21 million. * Operating income was $28 million versus $22 million. * Adjusted EBITDA increased $1 million to $34 million. Results for Six Months ended June 30, 2005 Compared with Six Months ended June 30, 2004 * Bookings rose 14 percent to $188 million from $165 million and backlog increased 26 percent to $162 million. * Sales increased $12 million to $179 million. * General aviation revenues were $36 million, up 17 percent from $31 million. * Revenue from the commercial transport sector improved 6 percent to $97 million. * Military revenues remained strong at $46 million versus $45 million. * Excluding the non-recurring inventory purchase accounting charge of $12 million in the first quarter of 2005, operating income was $54 million versus $45 million. * Adjusted EBITDA increased $1 million to $66 million. Segment Results Revenues for Aircraft Braking Systems were $74 million for the three months and $148 million for the six months ended June 30, 2005, versus $69 million and $138 million in the comparable periods of 2004. Revenues for Engineered Fabrics Corporation were $17 million for the three months and $31 million for the six months ended June 30, 2005 versus $14 million and $29 million in the comparable periods of 2004. Strong Military Orders in 2005 Drive Growth In the second quarter of 2005, military orders increased by $22 million, or 138 percent over the prior year. As a result, total bookings and backlog were up 14 percent and 26 percent, respectively, in the first half of 2005 compared to the first half of 2004, a strong indicator that the company will achieve the higher end of its guidance for 2005. "Longer term, the company's expanding fleet of Embraer and Bombardier regional jets, along with several new business jet awards, including the Dassault F-7X, Falcon 900DX and 900EX, Gulfstream's G-150, G-350 and G-450, Raytheon Hawker Horizon and Embraer's VLJ (Very Light Jet) are expected to further drive revenue and earnings growth into the foreseeable future," stated Mr. Schwartz. 2005 Outlook Reaffirmed The company expects its 2005 financial performance to be at the high end of its previously issued guidance as follows: * Revenues are expected to increase by 6 to 8 percent. * Adjusted EBITDA after adding back $3 million of cost related to productivity improvements, is expected to increase by 4 to 6 percent to between $149 million and $152 million vs. last year's adjusted EBITDA of $143 million (which includes an add back of $22 million in 2004 related to program participation costs and non-recurring expenses. * Free cash flow, after all scheduled debt service, is expected to be $35 to $40 million. K&F Industries Holdings, Inc., the indirect parent company of K&F Industries, Inc., completed an initial public offering of its common stock on August 12, 2005. The common stock of K&F Industries Holdings, Inc. is traded under the symbol "KFI" on the New York Stock Exchange. Other than administrative costs, interest expense related to the 11-1/2% Senior PIK Notes and interest expense related to the Senior Preferred Stock, the operating results of K & F Industries Holdings, Inc., conform to the operating results of K & F Industries, Inc., and subsidiaries. K & F Industries Inc., through its Aircraft Braking Systems Corporation subsidiary, is a worldwide leader in the manufacture of wheels, brakes and brake control systems for commercial transport, general aviation and military aircraft. K & F Industries Inc.'s other subsidiary, Engineered Fabrics Corporation, is a major producer of aircraft fuel tanks, de-icing equipment and specialty coated fabrics used for storage, shipping, environmental and rescue applications for commercial and military use. * * * As reported in the Troubled Company Reporter on Nov. 4, 2004, Moody's Investors Service downgraded the senior implied rating of K&F Industries, Inc., to B2 from B1, and has assigned ratings to the company's proposed senior secured credit facilities and senior subordinated notes. The purpose of the proposed facilities is to partially fund the acquisition of K&F by Aurora Capital Group for $1.06 billion in cash, including re-financing of existing debt. Aurora and certain investors will contribute approximately $315 million in equity (PIK preferred and common stock) for the purchase. LEAP WIRELESS: Earns $2.5 Million of Net Income in Second Quarter ----------------------------------------------------------------- Leap Wireless International, Inc. (NASDAQ:LEAP) reported strong financial results for the second quarter of 2005. These results reflect strong year-over-year growth in total revenues and record adjusted consolidated earnings before interest, taxes, depreciation and amortization. Total consolidated revenues for the second quarter were $226.8 million, an increase of $21.1 million over the total consolidated revenues of $205.7 million for the second quarter of 2004. Consolidated operating income for the second quarter was $8.6 million, an increase of $23.6 million over the consolidated operating loss of $15.0 million for the second quarter of 2004. Consolidated net income totaled $2.5 million for the second quarter, representing a $20.6 million improvement over the consolidated net loss of $18.1 million for the second quarter of 2004. Adjusted consolidated EBITDA for the second quarter of 2005 was a record $74.3 million, representing a 21 percent increase over the adjusted consolidated EBITDA of $61.4 million for the second quarter of 2004. Adjusted consolidated EBITDA represents EBITDA adjusted to exclude the effects of: -- reorganization items, net; -- other income (expense), net; -- gains on sale of wireless licenses; -- impairment of indefinite-lived intangible assets; -- impairment of long-lived assets and related charges; and -- stock-based compensation expense. The adoption of fresh-start reporting as of July 31, 2004 resulted in material adjustments to the historical carrying values of the Company's assets and liabilities. As a result, the Company's post-emergence balance sheets, statements of operations and statements of cash flows are not comparable in many respects to the Company's financial statements for periods ending prior to the Company's emergence from Chapter 11. "As evidenced by the results we have reported today, Leap produced another successful quarter balancing growth with solid operating cash-flow generation," said Doug Hutcheson, president and chief executive officer of Leap. "As we move into the remainder of 2005, we are pleased with the overall momentum that has been established for our business. During the first half of the year, we have concentrated on three key operating priorities: maintaining our strict focus on cost leadership; executing on our planned marketing and product development initiatives; and preparing for the first new market launch for our business in over three years. In the second half, we will work toward leveraging the platform for growth we have created by continuing to strengthen our marketing and customer service initiatives while expanding our channels of distribution for both our core Cricket(R) service and our new Jump(TM) pre-paid product. "Our strong financial performance during the first half of the year places Leap in a solid position to achieve its overall goals for 2005. We remain optimistic about our long-term business prospects and believe that the actions we have taken to date will produce increasingly positive effects over time. As a result, we are increasing our outlook for adjusted EBITDA during 2005 to reflect our expectation for continued strong financial performance. While we have tightened the range on our customer activity by lowering the upper end of the forecast, we anticipate that we will see improvements in customer retention and net customer growth later this year as our new initiatives begin to gain traction in the marketplace and we see continued positive performance in our new Central Valley market cluster," concluded Hutcheson. "Our results continue to demonstrate the fundamental strength of our business model and serve to reaffirm the value-creating potential of our customer segment as we execute on our strategies for growth in both our existing markets and through the development of our new, high-potential markets," said Dean Luvisa, Leap's acting chief financial officer. "In addition, the Company continues to have a solid liquidity position that has been further reinforced by our recent $100 million increase in our senior secured term loan and the completion of our sale of certain spectrum licenses and operating assets to Verizon Wireless. We believe that the steps we have taken to strengthen our capital structure, combined with our expectations for continued strong cash-flow generation, will put us in a solid position to achieve our strategic goals and help realize the significant opportunity for growth that exists within our business." Leap Wireless International, Inc. -- http://www.leapwireless.com/ -- headquartered in San Diego, Calif., is a customer-focused company providing innovative mobile wireless services that are targeted to meet the needs of customers who are under-served by traditional communications companies. With a commitment to predictability, simplicity and value as the foundation of our business, Leap pioneered Cricket service, a simple and affordable wireless alternative to traditional landline service. Cricket service offers customers unlimited anytime minutes within the Cricket calling area over a high-quality, all-digital CDMA network. * * * Moody's Investors Service affirmed the B1 corporate family rating (formerly known as the senior implied rating) of Leap Wireless International, Inc., and the B1 ratings on the senior secured credit facilities of its principal subsidiary Cricket Communications, Inc. The outlook for these ratings remains stable. However, Moody's lowered Leap's speculative grade liquidity rating to SGL-2 from SGL-1. The affected ratings are: Leap Wireless International, Inc.: * Corporate family affirmed at B1 * Speculative Grade Liquidity downgraded to SGL-2 from SGL-1 Moody's said the rating outlook is stable. MAYTAG CORP: Moody's Reviews Ba2 Sr. Implied & Sr. Unsec. Ratings ----------------------------------------------------------------- Moody's Investors Service placed the ratings of Whirlpool Corp. and its subsidiaries under review for possible downgrade and revised its rating review of Maytag Corporation to direction uncertain from review for possible downgrade. On August 12, 2005, Maytag announced that it has endorsed Whirlpool's $2.7 billion bid for 100% control of Maytag. While the terms of Whirlpool's offer have not been finalized, Moody's expects that the bid will be financed with $1.7 billion split equally between equity and debt plus the assumption of approximately $1 billion of Maytag's debt. The reviews will focus on: * the final structure of the financing package; * the integration and restructuring plan for Maytag; and * the projected operating and financial performances and cost saving synergies for the combined entity. The reviews will also incorporate the historically strong brand names of both Whirlpool and Maytag and assess how Whirlpool will leverage the diverse brands, while maintaining key customer relationships. Specifically, the review of Whirlpool's ratings will consider the likely increase in financial leverage as well as the significant integration challenges stemming from the largely similar business profiles of the two companies and the operating difficulties that Maytag has experienced in recent years. While Moody's expects significant cost saving synergies in this transaction, to the extent such synergies are not expected to materialize within the near term,Whirlpool's debt ratings could be subject to multiple notch downgrades. The Maytag review will focus on the legal entity positioning of Maytag within the Whirlpool organization and the potential for subordination of Maytag's existing debt in Whirlpool's new capital structure. The review will also consider any credit support provided by Whirlpool. Maytag's ratings could come under increasing downward pressure to the extent the transaction is protracted and the operating performance of the company continues to deteriorate. Whirlpool's bid is contingent upon the receipt of certain regulatory approvals and the consent of Maytag's shareholders. In the event that regulatory approval is not received, Whirlpool has agreed to pay a reverse break-up fee of $120 million. Whirlpool has also agreed to pay a $40 million break-up fee to terminate the merger agreement that exists between Triton Acquisition Company and Maytag. These ratings have been placed under review for possible downgrade: Whirlpool Corporation: * Senior debt rated Baa1 * Subordinated debt rated Baa2 * Senior Term Bank Loan Facilities rated Baa1 * Senior shelf rating of (P) Baa1 * Subordinated shelf rating of (P) Baa2 * Commercial paper rating at P-2 Whirlpool Canada, Inc. (guaranteed by Whirlpool Corp.): * Commercial paper rating at P-2 Whirlpool Finance BV (guaranteed by Whirlpool Corp): * Commercial paper rating at P-2 Whirlpool Financial Corp.: * Preferred stock at Baa3. These Maytag ratings have been placed under review direction uncertain: * Senior Implied rating of Ba2 * Senior unsecured rating of Ba2 Whirlpool Corporation, based in Benton Harbor, Michigan, is a global manufacturer and marketer of home appliances under the: * Whirlpool, * KitchenAid, * Brastemp, * Bauknecht, * Consul, and * other brand names. Maytag, based in Newton, Iowa is the third largest US-based appliance company. The corporation's primary brands are: * Maytag, * Hoover, * Jenn-Air, * Amana, * Dixie-Narco, and * Jade. MEDIACOM BROADBAND: Moody's Rates New $300 Million Sr. Notes at B2 ------------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to Mediacom Broadband LLC's proposed $300 million senior notes. Moody's anticipates Broadband will use proceeds to repay bank debt in the short term and ultimately to repay more junior securities over time. Moody's views the proposed transaction as mostly neutral. It will modestly alter Mediacom's capital structure but represents no change in consolidated leverage, and Moody's does not consider the increased reliance on Broadband senior notes sizable enough to warrant a change in the notching of its securities off the corporate family rating. In Moody's view, the proposed transaction enhances financial flexibility somewhat because it effectively increases revolving credit facility availability and extends the debt maturity profile, but the increased flexibility comes at the cost of higher interest expense. Moody's also affirmed Mediacom's B1 corporate family rating, which reflects the company's high leverage (7.5 times debt-to-EBITDA), operational challenges, and industry competition; offset somewhat by meaningful asset coverage, an improving technological profile, and solid liquidity. The outlook remains stable. A summary of today's rating action and existing ratings: Mediacom Broadband: * $300mm Senior Notes due August 2015 -- B2 assigned * $400mm 11% Senior Notes due July 2013 -- B2 affirmed * $600mm Sr. Secured Revolving Credit Facility -- Ba3 affirmed * $300mm Sr. Secured Term Loan A due March 2010 -- Ba3 affirmed * $500mm Sr. Secured Term Loan C due February 2014 -- Ba3 affirmed Mediacom Communications: * Corporate Family Rating -- B1 affirmed * $172.5mm 5.25% Convertible Senior Notes due July 2006 -- Caa1 affirmed Outlook - Stable Mediacom LLC: * $400mm Sr Secured Revolving Credit Facility -- Ba3 affirmed * $200mm Sr Secured Term Loan A due September 2012 -- Ba3 affirmed * $550mm Sr Secured Term Loan B due March 2013 -- Ba3 affirmed * $125 million of 7.875% Senior Unsecured Notes due 2011 -- B3 affirmed * $500 million of 9.5% Senior Unsecured Notes due 2013 -- B3 affirmed Mediacom's B1 corporate family rating reflects: * the company's high financial leverage of 7.5 times debt-to- EBITDA and modest EBITDA coverage of interest (approximately 2 times); * execution risk related to the rollout of telephony and continued efforts to drive penetration of advanced services (high speed data, video-on-demand, DVRs); and * sustained competition from direct broadcast satellite. Mediacom's substantial subscriber loss of the past two years, representing performance that lags peers, combined with reduced pricing power in a competitive environment and high capital expenditures to retain subscribers, will pressure its ability to grow cash flow over the intermediate term, in Moody's view. Mediacom's rating benefits, however, from: * the high loan-to-value coverage inherent in its incumbent cable assets; * the company's large size; * improving technological profile; * good liquidity; and * geographic diversification. Notwithstanding the execution risk and expectations for modest cash flow growth over the intermediate term, the anticipated increase in penetration of new services has the potential to drive incremental revenue and cash flow growth and improve asset returns over the long term. Management's commitment to refrain from any increase in leverage prior to reducing outstanding debt to less than 6 times EBITDA also supports the rating. The Ba3 senior secured ratings on the bank facilities reflect the effective and structural (by virtue of upstream subsidiary guarantees) seniority of this debt to all the unsecured debt of the company, even though the bank group holding this debt does not benefit from a security interest in the company's assets (security in stock only). This senior-most debt class also benefits from a still fairly large layer of junior capital beneath it in the form of both public debt and common equity, although the bank debt represents a considerable (slightly over half) portion of the capital structure. The B2 and B3 senior unsecured ratings for the intermediate holding company notes of Broadband and LLC, respectively, reflect their structural and effective subordination to the large subsidiary bank credit facilities and all other claims at the subsidiary level. The proposed transaction represents a modest increase in leverage at Mediacom's Broadband subsidiary, but Moody's believes the higher quality of its assets relative to LLC warrants the higher (B2) rating for the Broadband notes, and Broadband's debt-to-EBITDA is likely to remain below LLC's. As of the June quarter, LLC's basic subscriber penetration has fallen to 50.0% of homes passed, compared to 53.2% for Broadband, and Broadband's high speed data and digital penetration are also higher. Finally, the Caa1 rating for the convertible notes of the ultimate parent company (Mediacom Communications) reflects its junior most status. Mediacom Communications Corporation is a domestic multiple system cable operator serving approximately 1.45 million subscribers in a wide variety of small markets. Mediacom LLC and Mediacom Broadband are wholly-owned intermediate holding company subsidiaries of Mediacom Communications. The company maintains its headquarters in Middletown, New York. METCO PROPERTIES: Logan Russack Wants Case Converted to Chapter 7 ----------------------------------------------------------------- Logan Russack, L.L.C., the successor agent for secured creditors of Metco Properties, Inc., asks the U.S. Bankruptcy Court for the District of Arizona to convert the Debtor's chapter 11 case to a chapter 7 liquidation proceeding. Logan Russack informs the Court that the Debtor has no revenue for two years, unable to pay prepetition or postpetition debts and its inability to restructure its financial affairs or propose a confirmable Chapter 11 plan of reorganization. Moreover, the bankruptcy case was filed simply to delay Logan's foreclosure and forum shop for a Court which will hear the allegations against Logan's predecessor, Cambridge Capital, Inc., regarding loans to a third party. Logan Russack also explains that the grounds for conversion under section 1112(b) of the Bankruptcy Code are present in this case: 1) Metco generates no income, therefore, it will continue to lose or cause a diminution of the estate, and there is no reasonable likelihood that it will be able to rehabilitate its business affairs; 2) Metco's failure by and inability to generate income will cause an unreasonable delay which is prejudicial to the creditors, including Logan; and 3) Metco is unable to effectuate a Chapter 11 plan and pay creditors through a plan due to its inability to earn revenue. Headquartered in Avondale, Arizona, Metco Properties, Inc., and James Thomas & Sheila Sue Mattingly filed for chapter 11 protection on June 8, 2005 (Bankr. D. Ariz. Case No. 05-10372). Dennis J. Wortman, Esq., at Dennis J. Wortman, P.C., in Phoenix, Arizona, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets between $500,000 to $10 million and debts between $1 million to $50 million. MIRANT CORP: Court Rules on Wachovia & CSFB Claim Disputes ---------------------------------------------------------- As previously reported, Mirant Corporation and its debtor- affiliates filed requests for partial summary judgment relating to alleged administrative claims, subrogation claims, and reimbursement claims and interests in certain drawn Letter of Credit proceeds, asserted by Wachovia Bank, N.A., and Credit Suisse First Boston, individually and as Agents pursuant to a Four-Year Credit Agreement. The Bankruptcy Court, after a hearing on February 18, 2005, took the issues of res judicata, subrogation, and equitable reversion under advisement. However, at the parties' request, the Court postponed consideration of the issues while negotiations toward settlement were in progress. The parties were unable to reach a settlement. Consequently, Judge Lynn, in a 12-page Memorandum Opinion and Order, addressed the Debtors' summary judgment requests and related extension orders. A full-text copy of the Memorandum Opinion is available for free at http://bankrupt.com/misc/memopinion.pdf Res Judicata Judge Lynn agrees with the contention of Wachovia and CSFB that because the issues of subrogation were not addressed by the Court's extension orders, the doctrine of res judicata does not apply. "The doctrine of res judicata, or claim preclusion, forecloses relitigation of claims that were or could have been raised in a prior action." Judge Lynn notes that four elements must be met for a claim to be barred by the doctrine of res judicata: 1. the parties in both the prior suit and current suit must be identical; 2. a court of competent jurisdiction must have rendered the prior judgment; 3. the prior judgment must have been final and on the merits; and 4. the plaintiff must raise the same cause of action in both suits. Assuming that the first two elements of the res judicata test have been met, Judge Lynn disagrees that: (1) the Extension Orders rendered final judgment on the merits of Wachovia and CSFB's subrogation claims; or (2) Wachovia and CSFB must have raised subrogation claims in connection with the Extension Orders. "The court is not convinced, as urged by Debtors, that Mirant's reimbursement obligations pursuant to the Extension Orders encompass 'all forms of reimbursement claims, including subrogation claims,'" Judge Lynn says. Judge Lynn concludes that the Extension Orders must be interpreted in light of the provisions of the Bankruptcy Code then in effect. "The plain language of the [Bankruptcy] Code makes specific distinctions among reimbursement, contribution, and subrogation." Because the Extension Orders may have been subject to differing interpretations, Judge Lynn does not believe that Wachovia and CSFB should be penalized if they reasonably relied on the Court's Extension Orders as entered. Accordingly, Judge Lynn finds that the Debtors have failed to show that the doctrine of res judicata bars Wachovia and CSFB from pursuing any subrogation claims. Subrogation The Debtors argue that Wachovia and CSFB are precluded from asserting subrogation claims because: (1) the Letters of Credit incorporate the Uniform Customs and Practices for Documentary Credits of the International Chamber of Commerce, which preempt application of nearly all of the New York Uniform Commercial Code; (2) subrogation is inconsistent with the independence principle; and (3) Section 509 of the Bankruptcy Code preempts state law doctrines of subrogation and is the sole means by which a creditor may assert subrogation rights in bankruptcy. Wachovia and CSFB respond by arguing that: (1) Section 5-117 of the Uniform Commercial Code rejects the previous majority view that subrogation should be unavailable in the L/C context; (2) although the independence principle ensures payment of an L/C draw, the independence principle ceases to apply once payment has been made; (3) the UCP does not preclude the assertion of subrogation rights; (4) ambiguity exists with regard to whether Wachovia and CSFB are "liable with the debtor on" or "codebtors" as required under Section 509(a) and that the ambiguity must be resolved by reference to the New York Uniform Commercial Code; and (5) even if subrogation is unavailable under Section 509(a), claims for equitable subrogation may still be asserted. The parties agree that amendments to the NYUCC cannot change the Bankruptcy Code and that the plain meaning of the Code should prevail. However, the parties dispute what constitutes the "plain meaning" of Section 509(a). Judge Lynn agrees that Section 509's meaning is at best opaque. Moreover, Judge Lynn averred that it is not apparent whether Wachovia and CSFB must make an election of remedies between: (1) asserting a claim pursuant to the Credit Agreement and the L/C Agreement; or (2) assuming, through subrogation, the position of the parties drawing on the L/Cs. Because genuine issues of material fact exist with regard to the existence and extent of Wachovia and CSFB's rights of subrogation, and because the Court must make all justifiable inferences in favor of the nonmoving party (Wachovia and CSFB), summary judgment, Judge Lynn concludes, is inappropriate. Equitable Reversion Judge Lynn disagrees with Wachovia and CSFB's assertion that: -- various L/C beneficiaries drew down on the L/Cs, not because of payment default but because of impending expiration, and then either gave all of the proceeds to the Debtors or agreed with the Debtors to split those proceeds; and -- they should recover the Proceeds drawn against the L/Cs based on the doctrine of equitable reversion because the Proceeds were not applied against amounts owed by the Debtors to the beneficiaries. Moreover, Judge Lynn notes that Wachovia and CSFB acknowledged: * at the hearing held February 18, 2005, that they drafted the L/Cs and related documents; * that the "beneficiary of the [L/C] has an unfettered right to make a draw"; * that they "can't point to a provision [Debtors and beneficiaries] are breaching"; and * "this is not necessarily wrong as a matter of law." Because the credit documents do not restrict (x) draws made against the L/Cs based on impending expiration and (y) the beneficiaries' application of the Proceeds once drawn, Judge Lynn prohibits Wachovia and CSFB from asserting reversionary interest in the Proceeds. 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. 73; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: Wants to Pay Mirant Sugar's Prepetition Taxes ---------------------------------------------------------- Mirant Sugar Creek, LLC, an indirect subsidiary of Mirant Corporation, owns and operates a natural gas-powered electrical generating plant, in Vigo County, Indiana. Mirant has sought and obtained approval from Vigo County to establish and designate the area as an Economic Revitalization Area for a ten-year period. An ERA is an area "which has become undesirable for, or impossible of, normal development and occupancy because of a lack of development, cessation of growth, deterioration of improvements or character of occupancy, age, obsolescence, substandard buildings, or other factors which have impaired values or prevent a normal development of property or use of property." Because the Sugar Creek facility was constructed in an ERA, Vigo County was able to grant a ten-year tax abatement on certain property taxes that would otherwise accrue on both the real estate improvements and equipment on the Sugar Creek facility. The Debtors estimate $27 million in benefits derived from the tax abatement. According to Ian T. Peck, Esq., at Haynes and Boone, LLP, in Dallas, Texas, in accordance with Section 6-1.1-12.1-3(a)(2) of Indiana Code, the maintenance of the tax abatement was conditioned in part on the creation and preservation of a certain number of full-time jobs at certain salary levels, based on the level of completion of the Sugar Creek Facility. Notwithstanding that requirement, as a result of the eroding energy market in 2001, Sugar Creek was unable to employ the number of full-time employees required to fulfill its obligations to maintain the tax abatement. Mr. Peck relates that as a result of that failure, Sugar Creek was at risk of losing the ERA designation and, consequently, the tax abatement. Sugar Creek have not filed certain reports required to maintain the ERA deductions on new manufacturing equipment for the March 2004 assessment, Mr. Peck adds. As a consequence of the commencement of Sugar Creek's Chapter 11 case, it did not pay Vigo County $376,703 for property taxes due for the tax years 2002 and 2003. Recognizing the risk of potential loss of the benefits, the Debtors approached Vigo County to obtain concessions in exchange for seeking authority to pay the prepetition taxes. Mr. Peck notes that as a result, Vigo County made several significant concessions in favor of Sugar Creek. Vigo County further resolved: a. to reduce the number of employees required in maintaining the ERA designation and tax abatement benefits to a level that is maintainable; and b. to accept Sugar Creek's late-filed ERA deduction application as timely. Mr. Peck believes that because of the concessions, any danger of Sugar Creek losing the ERA designation and the tax abatement is eliminated. But in the event that the Debtors do not pay the prepetition taxes, Vigo County may rescind the Resolutions, thereby placing Sugar Creek at risk of losing the ERA, Mr. Peck points out. Thus, the Debtors seek the Court's permission to pay Sugar Creek's prepetition taxes. 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. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) MOHAMED ALI: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Mohamed Shaffin Ali 311 Pine Haven Houston, Texas 77024 Bankruptcy Case No.: 05-42695 Chapter 11 Petition Date: August 15, 2005 Court: Southern District of Texas (Houston) Judge: Wesley W. Steen Debtor's Counsel: Dean W. Ferguson, Esq. Adams & Reese, LLP 1221 McKinney, Suite 4400 Houston, Texas 77010 Tel: (713) 308-0385 Fax: (713) 652-5152 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of his 20 Largest Unsecured Creditors. NANNACO INC: Convertible Debenture Holders Deliver Default Notice ----------------------------------------------------------------- Holders of Nannaco, Inc. (OTC BB: NNNC) 2003 convertible debentures issued a notice of default to Nannaco, Divine Capital Markets LLC, a registered broker dealer located in New York, New York, said. The debentures are convertible by the holders on demand into Nannaco common stock at a 25% discount to the lowest closing bid price of the 20 trading days immediately preceding the date of conversion. Divine Capital Markets LLC acted as Nannaco's placement agent in connection with the issuance of the debentures. Divine Capital is making this news release to ensure that the issuance to Nannaco of a notice of default is publicly disclosed. Nannaco, Inc., provided surface cleaning, surface protection, surface restoration, and other services to commercial businesses, as well as to the owners of historical buildings. The Company operated in the past under the trade name of Surface Pro in order to align the name of the company with its principal business activity. Until September of 2003, Nannaco focused on surface cleaning, surface protection and restoration. However, sales from these products were not sufficient to enable the company to continue operations. In September of 2003, the Company changed its strategy due to poor operating conditions and operating results coupled with difficulties in raising capital through debt and equity sources. The Company adopted a new strategy during the fiscal fourth quarter of 2003 that committed to the disposal of its current business and to seek a merger or acquisition transaction with a Company having better financial resources. As of September of 2003, the Company ceased all operating activities and has disposed of most of its assets. The Company has entered a new development phase, while formulating a plan to improve its financial position. NATIONAL CENTURY: Releases Docs to U.S. Attorney for the S.D. Ohio ------------------------------------------------------------------ National Century Financial Enterprises, Inc., and its debtor- affiliates and the Unencumbered Assets Trust, the Debtors' successor-in-interest, and its trustee, Erwin I. Katz, Ltd., and Kaye Scholer LLP, consent to the release of certain documents to the United States Attorney's Office for the Southern District of Ohio. The Documents have previously been produced by Kaye Scholer in response to the Debtors' Rule 2004 Subpoena dated May 13, 2004. The U.S. Attorney's Office covenants that it will treat all documents produced to it pursuant to the secrecy requirements, disclosure prohibitions and protections of Rule 6(e) of the Federal Rules of Criminal Procedure as interpreted by the Sixth Circuit. As reported in the Troubled Company Reporter on Jan. 7, 2005, the U.S. Bankruptcy Court for the District of Ohio approves protective agreements entered into by the Debtors and nine additional individuals and entities: (1) Lance K. Poulsen, (2) Barbara L. Poulsen, (3) KULD Partners, (4) Intercontinental Investment Associates, (5) Healthcare Capital LLC, (6) Flohaz Partners LLC, (7) South Atlantic Investments, LLC, (8) Thor Capital Holdings LLC, and (9) Kachina Inc. The agreements were necessary to protect the confidentiality of certain documents and information produced by the Entities in response to the Subpoena and Orders issued by various courts in connection with Rule 2004 discovery. The parties agree that the Debtors will use all non-public material solely for the investigation, prosecution or defense of lawsuits by, on behalf of, or against the Debtors' estates. Headquartered in Dublin, Ohio, National Century Financial Enterprises, Inc. -- http://www.ncfe.com/-- through the CSFB Claims Trust, the Litigation Trust, the VI/XII Collateral Trust, and the Unencumbered Assets Trust, is in the midst of liquidating estate assets. The Company filed for Chapter 11 protection on November 18, 2002 (Bankr. S.D. Ohio Case No. 02-65235). The Court confirmed the Debtors' Fourth Amended Plan of Liquidation on April 16, 2004. Paul E. Harner, Esq., at Jones Day, represents the Debtors. When it filed for bankruptcy, National Century listed $3,800,000,000 in assets and $3,600,000,000 in debts. NATIONAL R.V.: Closes New 3-Year Loan with UPS & Wells Fargo ------------------------------------------------------------ National R.V. Holdings, Inc. (NYSE: NVH) closed on a new three- year asset-based revolving credit facility with UPS Capital Corporation and Wells Fargo Bank. The amount of the new facility, which expires on Aug. 12, 2008, provides for a revolving credit facility in the initial amount of $25 million, with a standby letter of credit sub-limit of $8 million. The facility also includes a provision whereby NVH can increase the amount of the facility, in $5 million increments, to a total of $40 million. Amounts available under the Credit Facility will depend on certain specified percentages of the Borrowers' eligible accounts receivable and inventory. The Credit Agreement replaces the Company's existing Loan and Security Agreement dated as of Aug. 28, 2002, with UPS. Borrowings under the Credit Facility will bear interest at either: (1) the London interbank offering rate, plus a margin rate ranging from 1.50% to 2.50%; or (2) a base rate which is either: (x) the prime rate or (y) the federal funds rate plus 0.50%, plus a margin rate ranging from 0% to 0.50%. The margin rates are based on certain leverage ratios, as provided in the Credit Facility. The Borrowers are subject to compliance with certain financial covenants set forth in the Credit Facility, including: -- maintenance of a leverage ratio and a fixed charge coverage ratio; and -- limitations on capital expenditures. Borrowings under the Credit Facility will be used to refinance the Borrowers' existing indebtedness with UPS and to provide general working capital. The Credit Facility will be secured by a first priority, senior security interest in substantially all the personal property, excluding real estate, of the Company and its subsidiaries. Going Concern Qualification In light of the Company's continuing losses and the overall industry decline, the Company is continuing to assess its ongoing liquidity and ability to continue to operate as a going-concern. In this regard, the liquidity provided by the Company's new credit facility would not be affected by an independent auditor's opinion that could include an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern. The Company is currently addressing this issue and finalizing its consolidated financial statements and Form 10-K for the fiscal year ended December 31, 2004 and will file this Form 10-K and the Form 10-Q for the quarters ended March 31, 2005 and June 30, 2005 as soon as practicable. Financial Restatements On Apr. 1, 2005, the Company disclosed that it was restating its previously reported financial information and that it was in the process of finalizing its review of the Company's 2004 financial statements and assessing its internal controls over financial reporting. While undergoing this review, the Company determined that an additional restatement is required in order to reflect the restatement of certain dealer sales incentives, which include: -- rebates and floorplan interest reimbursement paid to dealers to promote the sale of product; and -- retail sales incentives paid directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. As a result, the statements of operations for the three and six- months ended June 30, 2004, have been restated to reclassify these sales incentives from selling expenses to a reduction of revenue, as required by generally accepted accounting principles. As a result of this restatement, net sales, gross profit and selling expenses for the three and six-months ended June 30, 2004 presented in the accompanying statements of operations have been reduced by $0.5 million and $1.1 million, respectively, from what was previously reported. This adjustment has no impact on net (loss) income as previously reported. Also, the Company reported that it will restate its previously issued financial statements for 2002 and financial information for the fiscal years 2001 and 2000 in its Form 10-K for the year ended December 31, 2004, to correct an error in the accounting for workers' compensation self-insured reserves. The Company will also restate its financial statements for the third quarter of 2004 by amending its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, and will adjust previously announced fourth quarter financial information to correct for an error in the timing of recognizing revenue. Sarbanes-Oxley On July 28, 2005, the Company incorrectly reported that it would record a non-cash charge $8 million to establish a full valuation allowance against its December 31, 2004 net deferred tax asset in its December 31, 2004 Form 10-K which has not yet been filed. The $8 million charge represented a full valuation reserve on the tax benefit for the net operating loss carryforwards. On Aug. 5, 2005, the Company disclosed that the amount of the non-cash charge was subsequently adjusted to $11.1 million and includes all of the Company's deferred tax assets at December 31, 2004. The Company has determined that this tax accounting error constituted a material weakness in its financial reporting process and will include this material weakness in its Form 10-K at December 31, 2004 along with the following other material weaknesses identified to date: 1. Insufficient personnel resources and technical expertise within its accounting function -- The Company did not maintain effective controls over the financial reporting process at its NRV division and at corporate because of insufficient personnel resources and technical expertise within the accounting function. This material weakness contributed to three individual material weaknesses: (a) errors in the preparation and review of schedules and reconciliations supporting certain general ledger account balances. As a result, errors were not detected in certain accrued liability accounts, including sales and marketing, warranty, legal and workers' compensation, and the related income statement accounts, including cost of goods sold, selling and general and administrative expenses at the NRV division; (b) inadequate financial statement disclosures, primarily related to the sale of a division and capital leases were not identified by the corporate accounting staff; and (c) accounting cutoff errors primarily related to marketing accrued expenses and an inability to properly and timely account for capital leases entered into during the year were not identified at the NRV division. This control deficiency resulted in audit adjustments to the 2004 annual consolidated financial statements affecting accrued liabilities, property, plant and equipment, and the related income statement accounts, primarily cost of goods sold, selling, general and administrative, amortization and interest. Insufficient personnel resources and technical expertise also contributed to the other material weaknesses discussed below. Additionally, these control deficiencies could result in misstatements in the aforementioned accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. 2. Revenue recognition -- The Company's NRV division did not maintain effective controls over the timing of the revenue recognition related to the sale of certain motorhomes. Specifically, under a deferred payment arrangement the Company held the manufacturer's certificate of origin as security for payment. This control deficiency resulted in the restatement of the Company's third quarter 2004 consolidated financial statements to correct the timing of revenue recognition. This control deficiency also resulted in audit adjustments to the 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and deferred revenue that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. 3. Accounting for sales incentives -- The Company did not maintain effective controls over the accounting for sales incentives. Specifically, certain sales incentive programs which are paid directly to the dealer or dealers' sales representatives were improperly classified as selling expenses and should have been classified as a reduction of revenue. This control deficiency resulted in the restatement of the Company's 2003 and 2002 consolidated financial statements. This control deficiency also resulted in audit adjustments to the 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and selling expenses that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. 4. Physical inventory process -- The Company did not maintain effective controls over the accuracy of the physical inventory process at its NRV division. Specifically, the NRV division did not have controls to ensure all of the individuals involved in the physical inventory count were properly trained and supervised and that discrepancies between quantities counted and the accounting records were properly investigated. Further, the NRV division did not have controls to ensure the accounting records were adjusted to reflect the actual quantities counted during the physical inventory process. This control deficiency resulted in an audit adjustment to the fourth quarter 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of inventory and cost of goods sold that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented of detected. 5. Unrestricted access to programs and data -- The Company did not maintain effective controls over access to certain financial application programs and data at its NRV division. Specifically, there were instances in which information technology personnel and users with accounting and reporting responsibilities had access to financial accounting application programs and data that was incompatible with their functional business requirements. Further, the activities of these individuals were not subject to independent monitoring. These control deficiencies applied to certain systems and processes including the financial statement preparation, human resources, payroll, purchasing, receiving and revenue and billing. These control deficiencies did not result in an adjustment to the 2004 interim or annual consolidated financial statements. However, these control deficiencies could result in a misstatement to financial statement accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. The existence of one or more material weaknesses as of Dec. 31, 2004, would preclude a conclusion that the Company's internal control over financial reporting was effective as of that date. Upon completion of its assessment, management expects to conclude that the Company did not maintain effective internal control over financial reporting as of Dec. 31, 2004, based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control -- Integrated Framework. The Company also expects that the report of its independent registered public accounting firm will contain an adverse opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2004. Management's evaluation of its internal control over financial reporting as of December 31, 2004 is not complete. Upon completion of its ongoing evaluation of internal control over financial reporting the Company may identify additional control deficiencies, and those deficiencies, alone or in combination with others, may be considered additional material weaknesses. National R.V. Holdings, Inc., through its two wholly owned subsidiaries, National RV, Inc. (NRV) and Country Coach, Inc. (CCI), is one of the nation's leading producers of motorized recreation vehicles. NRV is located in Perris, California where it produces Class A gas and diesel motor homes under model names Dolphin, Islander, Sea Breeze, Tradewinds and Tropi-Cal. CCI is located in Junction City, Oregon where it produces high-end Class A diesel motor homes under the model names Affinity, Allure, Inspire, Intrigue, Lexa and Magna, and bus conversions under the Country Coach Prevost brand. NATIONAL R.V.: Reports Preliminary Financial 2nd Quarter Results ---------------------------------------------------------------- National R.V. Holdings, Inc. (NYSE: NVH) reported preliminary financial results for the second quarter ended June 30, 2005. Net sales grew 3% to $123.2 million in the second quarter ended June 30, 2005, from $119.3 million in the second quarter of 2004. For the six months ended June 30, 2005, net sales increased 12% to $248.9 million, from $222.4 million in the first half of 2004. The Company recorded a net loss of $5.4 million for the second quarter, compared with net income of $2.5 million in the same period in 2004. For the six months ended June 30, 2005, the Company reported a $6.9 million net income, compared with a $3.2 million net income for the same period in 2004. As previously announced, the Company will record a non-cash charge of $11.1 million in its December 31, 2004 Form 10-K, which has not yet been filed, to establish a full valuation allowance against its December 31, 2004 deferred tax asset. Accordingly, the 2005 second quarter and year-to-date results do not include an income tax benefit. The Company's gross profit margin was 1.7% in the second quarter of 2005 and 3.1% in the first half of 2005 compared with 8.1% and 7.5% in the same periods of 2004, respectively. The benefit of higher sales was more than offset by higher sales incentives and overhead costs. "This quarter's net sales increase marks National's eighth consecutive quarter with year-over-year increases," said Brad Albrechtsen, National R.V. Holdings' president and chief executive officer. "However, as industry-wide demand for Class A motorhomes weakened, these sales increases were achieved at the expense of higher discounts and incentives on our lower priced gasoline- powered and diesel motor homes. Consequently, we are maintaining reduced production rates on these products. We are encouraged, however, by the relatively robust demand that we have seen for our highline products in our operations at Junction City, Oregon." Operating expenses for the second quarter of 2005 were $7.2 million, or 5.8% of net sales, and $14.1 million, or 5.7% of sales, for the first half of 2005, which compares to $5.7 million, or 4.8% of net sales, for the second quarter of 2004 and $10.9 million, or 4.9% of net sales, for the first half of 2004. Higher selling and marketing expenses, the new dealer marketing programs, higher audit and professional fees as well as higher costs related to compliance with the Sarbanes-Oxley Act, including increased personnel expenses, were the major contributors to the higher operating costs for the quarter. In September 2004, the Company sold its travel trailer business, which is presented as a discontinued operation for the three and six months ended June 30, 2004. Additionally, as further discussed below, prior year results have been restated to correct several accounting errors. Under development are several new products designed to augment NVH's product offering to appeal to a broader market and enhance its dealers' competitive advantage in the marketplace. A new entry-level Class A motorhome is expected to be previewed by consumers and dealers in the Fall, with production expected to commence in the fourth quarter of 2005. Two new diesel pushers are also under development and will provide a broader array of highline diesel products that are currently in high demand. Financial Restatements On Apr. 1, 2005, the Company disclosed that it was restating its previously reported financial information and that it was in the process of finalizing its review of the Company's 2004 financial statements and assessing its internal controls over financial reporting. While undergoing this review, the Company determined that an additional restatement is required in order to reflect the restatement of certain dealer sales incentives, which include: -- rebates and floorplan interest reimbursement paid to dealers to promote the sale of product; and -- retail sales incentives paid directly to dealer retail salespersons to promote the sale of the product and the return of sale and warranty information. As a result, the statements of operations for the three and six- months ended June 30, 2004, have been restated to reclassify these sales incentives from selling expenses to a reduction of revenue, as required by generally accepted accounting principles. As a result of this restatement, net sales, gross profit and selling expenses for the three and six-months ended June 30, 2004 presented in the accompanying statements of operations have been reduced by $0.5 million and $1.1 million, respectively, from what was previously reported. This adjustment has no impact on net (loss) income as previously reported. Also, the Company reported that it will restate its previously issued financial statements for 2002 and financial information for the fiscal years 2001 and 2000 in its Form 10-K for the year ended December 31, 2004, to correct an error in the accounting for workers' compensation self-insured reserves. The Company will also restate its financial statements for the third quarter of 2004 by amending its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, and will adjust previously announced fourth quarter financial information to correct for an error in the timing of recognizing revenue. Sarbanes-Oxley On July 28, 2005, the Company incorrectly reported that it would record a non-cash charge $8 million to establish a full valuation allowance against its December 31, 2004 net deferred tax asset in its December 31, 2004 Form 10-K which has not yet been filed. The $8 million charge represented a full valuation reserve on the tax benefit for the net operating loss carryforwards. On Aug. 5, 2005, the Company disclosed that the amount of the non-cash charge was subsequently adjusted to $11.1 million and includes all of the Company's deferred tax assets at December 31, 2004. The Company has determined that this tax accounting error constituted a material weakness in its financial reporting process and will include this material weakness in its Form 10-K at December 31, 2004 along with the following other material weaknesses identified to date: 1. Insufficient personnel resources and technical expertise within its accounting function -- The Company did not maintain effective controls over the financial reporting process at its NRV division and at corporate because of insufficient personnel resources and technical expertise within the accounting function. This material weakness contributed to three individual material weaknesses: (a) errors in the preparation and review of schedules and reconciliations supporting certain general ledger account balances. As a result, errors were not detected in certain accrued liability accounts, including sales and marketing, warranty, legal and workers' compensation, and the related income statement accounts, including cost of goods sold, selling and general and administrative expenses at the NRV division; (b) inadequate financial statement disclosures, primarily related to the sale of a division and capital leases were not identified by the corporate accounting staff; and (c) accounting cutoff errors primarily related to marketing accrued expenses and an inability to properly and timely account for capital leases entered into during the year were not identified at the NRV division. This control deficiency resulted in audit adjustments to the 2004 annual consolidated financial statements affecting accrued liabilities, property, plant and equipment, and the related income statement accounts, primarily cost of goods sold, selling, general and administrative, amortization and interest. Insufficient personnel resources and technical expertise also contributed to the other material weaknesses discussed below. Additionally, these control deficiencies could result in misstatements in the aforementioned accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. 2. Revenue recognition -- The Company's NRV division did not maintain effective controls over the timing of the revenue recognition related to the sale of certain motorhomes. Specifically, under a deferred payment arrangement the Company held the manufacturer's certificate of origin as security for payment. This control deficiency resulted in the restatement of the Company's third quarter 2004 consolidated financial statements to correct the timing of revenue recognition. This control deficiency also resulted in audit adjustments to the 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and deferred revenue that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. 3. Accounting for sales incentives -- The Company did not maintain effective controls over the accounting for sales incentives. Specifically, certain sales incentive programs which are paid directly to the dealer or dealers' sales representatives were improperly classified as selling expenses and should have been classified as a reduction of revenue. This control deficiency resulted in the restatement of the Company's 2003 and 2002 consolidated financial statements. This control deficiency also resulted in audit adjustments to the 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of revenue and selling expenses that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. 4. Physical inventory process -- The Company did not maintain effective controls over the accuracy of the physical inventory process at its NRV division. Specifically, the NRV division did not have controls to ensure all of the individuals involved in the physical inventory count were properly trained and supervised and that discrepancies between quantities counted and the accounting records were properly investigated. Further, the NRV division did not have controls to ensure the accounting records were adjusted to reflect the actual quantities counted during the physical inventory process. This control deficiency resulted in an audit adjustment to the fourth quarter 2004 annual consolidated financial statements. Additionally, this control deficiency could result in a misstatement of inventory and cost of goods sold that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented of detected. 5. Unrestricted access to programs and data -- The Company did not maintain effective controls over access to certain financial application programs and data at its NRV division. Specifically, there were instances in which information technology personnel and users with accounting and reporting responsibilities had access to financial accounting application programs and data that was incompatible with their functional business requirements. Further, the activities of these individuals were not subject to independent monitoring. These control deficiencies applied to certain systems and processes including the financial statement preparation, human resources, payroll, purchasing, receiving and revenue and billing. These control deficiencies did not result in an adjustment to the 2004 interim or annual consolidated financial statements. However, these control deficiencies could result in a misstatement to financial statement accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. The existence of one or more material weaknesses as of Dec. 31, 2004, would preclude a conclusion that the Company's internal control over financial reporting was effective as of that date. Upon completion of its assessment, management expects to conclude that the Company did not maintain effective internal control over financial reporting as of Dec. 31, 2004, based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control -- Integrated Framework. The Company also expects that the report of its independent registered public accounting firm will contain an adverse opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2004. Management's evaluation of its internal control over financial reporting as of December 31, 2004 is not complete. Upon completion of its ongoing evaluation of internal control over financial reporting the Company may identify additional control deficiencies, and those deficiencies, alone or in combination with others, may be considered additional material weaknesses. National R.V. Holdings, Inc., through its two wholly owned subsidiaries, National RV, Inc. (NRV) and Country Coach, Inc. (CCI), is one of the nation's leading producers of motorized recreation vehicles. NRV is located in Perris, California where it produces Class A gas and diesel motor homes under model names Dolphin, Islander, Sea Breeze, Tradewinds and Tropi-Cal. CCI is located in Junction City, Oregon where it produces high-end Class A diesel motor homes under the model names Affinity, Allure, Inspire, Intrigue, Lexa and Magna, and bus conversions under the Country Coach Prevost brand. NEWS CORP: Board Extends Stockholders Rights Plan to Nov. 2007 -------------------------------------------------------------- News Corporation's Board of Directors has determined to extend the expiration date of the Company's stockholder rights plan for an additional two-year period. The rights plan, which was originally adopted on November 8, 2004, was scheduled to expire by its terms on November 8, 2005. One reason for the initial adoption of the rights plan was Liberty Media Corporation's decision to enter into arrangements to acquire substantial amounts of News Corporation's voting stock without prior discussions with, or notice to, News Corporation. As Liberty continues to own approximately 18% of the Company's Class B Common Stock, and to prevent potential future acquisitions of significant amounts of News Corporation voting stock by Liberty without consultation with the Board, the Board has determined to extend the expiration of the stockholder rights plan until Liberty Media Corporation and the Company reach a favorable resolution with respect to Liberty's ownership stake. In that event, the Board of Directors expects to redeem the existing stockholder rights plan and will also consider eliminating the Company's classified board structure. A full-text copy of the Amendment to the Rights Agreement is available for free at http://ResearchArchives.com/t/s?d7 News Corporation is a diversified international media and entertainment company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; magazines and inserts; newspapers; book publishing; and other. The activities of News Corporation are conducted principally in the United States, Continental Europe, the United Kingdom, Australia, Asia and the Pacific Basin. * * * As reported in the Troubled Company Reporter on Jan. 27, 2005, Moody's Investors Service confirmed News Corporation's debt ratings of Baa3 senior unsecured. The rating outlook was changed to positive. This rating action concludes the review initiated on April 26, 2004. NORTEL NETWORKS: Inks Joint Venture Pact with LG Electronics ------------------------------------------------------------ Nortel Networks (NYSE:NT)(TSX:NT) and LG Electronics (KSE:06657) signed a definitive agreement to form a joint venture that will offer telecom and networking solutions in the wireline, optical, wireless and enterprise areas for South Korean and global customers. The agreement was signed in Seoul, South Korea by S.S. Kim, chief executive officer and vice-chairman of LG Electronics and Bill Owens, vice-chairman and chief executive officer of Nortel. The joint venture will be tentatively named LG-Nortel Co. Ltd. This entity will combine the telecommunication infrastructure business of LG Electronics and the distribution and service business of Nortel in South Korea. The LG-Nortel joint venture will support the strategies of both companies for ongoing development of leading-edge wireline, optical, wireless and enterprise communications and networking solutions to ignite and power global commerce. It will also reflect the companies' commitment to leveraging best-in-class resources and expertise by joining forces with leading players in key markets, while harnessing the technology leadership of South Korea. "Today is another milestone for Nortel as we continue to demonstrate our commitment to open up the Asia region with a best- in-class technology leader," Mr. Owens said. "South Korea leads the world in embracing technology that enhances the human experience. Our relationship with LG better positions Nortel in the dynamic and growing Asia market, will expedite research and development, and will benefit our global customers. Nortel is clearly playing to win." "LG Electronics' R&D excellence coupled with Nortel's global presence will make this joint venture a top-ranking player in the telecommunications equipment market," Kim said. "Our relationship will further strengthen the two companies' collaboration in setting standards for next generation infrastructure and improving time-to-market in this competitive environment." Nortel will own 50 percent plus one share in the joint venture, in exchange for which Nortel will contribute its South Korean distribution and services business and pay US$145 million and other non-monetary consideration. Separately, LG Electronics may be entitled to payments over a two-year period based on achievement by the joint venture of certain business goals. LG Electronics and Nortel will nominate certain key executives to the management team of the joint venture. It is the intention of the parties to nominate J. R. Lee from LG Electronics to be chief executive officer and Paul House from Nortel to be chief operating officer. The LG Electronics Infrastructure business and Nortel's South Korean operations had aggregate revenues of KRW 600 billion (US$530 million) in 2004. Closing of the transaction is subject to satisfaction of certain conditions, including regulatory and other approvals, and is anticipated by year-end. J. P. Morgan advised Nortel and Lehman Brothers and Woori Securities advised LG Electronics in this transaction. LG Electronics -- http://www.lge.com/-- is a global leader in providing cutting-edge convergent electronics, information and communications products designed to meet the diverse needs of fast-changing consumers. With consolidated sales of US$37.7 billion and overseas sales of US$ 32.6 billion (86% of total sales), LG Electronics employs more than 70,000 employees in 76 subsidiaries located in 39 countries and operates four business units including Mobile Communications, Digital Appliance, Digital Display and Digital Media. LG Electronics Mobile Communications Company is the world's leading manufacturer of WCDMA (UMTS), CDMA and GSM handsets, and the fastest growing manufacturer of mobile phones worldwide. The company provides a total range of wired and wireless solutions, and is rapidly establishing a global presence as it cultivates international market share in 3G handsets. Nortel Networks -- http://www.nortel.com/-- is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world's most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world's greatest challenges. Nortel does business in more than 150 countries. Nortel does business in more than 150 countries. * * * As reported in the Troubled Company Reporter on July 8, 2005, Moody's Investors Service confirmed the ratings of Nortel Networks Corporation (holding company) and Nortel Networks Limited (principal operating subsidiary and debt guarantor). The ratings confirmation concludes a ratings review for possible downgrade under effect since April 28, 2004. Moody's also assigned a new Speculative Grade Liquidity rating of SGL-3 to Nortel, reflecting adequate liquidity to fund debt maturities and other cash outflows over the next 12 months. The ratings outlook is negative. The ratings confirmed include: Nortel Networks Corporation: -- Senior Secured rating at B3 (guaranteed by Nortel Networks Limited) Nortel Networks Limited: -- Corporate Family Rating (formerly known as the Senior Implied rating) at B3 -- Senior Secured rating at B3 -- Issuer rating (senior unsecured) at Caa1 -- Preferred Stock rating at Caa3 Nortel Networks Capital Corporation: -- Senior Secured rating at B3 (guaranteed by Nortel Networks Limited). This new rating was assigned: -- Speculative Grade Liquidity rating of SGL-3. As reported in the Troubled Company Reporter on Jan. 31, 2005, Standard & Poor's Ratings Services affirmed its 'B-' credit rating on Nortel Networks Lease Pass-Through Trust certificates series 2001-1 and removed it from CreditWatch with negative implications, where it was placed Dec. 8, 2004. The affirmation was based on a valuation analysis of properties that provide security for the two notes that serve as collateral for the pass through trust certificates. The initial rating on the securities relied upon the ratings assigned to both Nortel Networks Ltd. and ZC Specialty Insurance Co. The Dec. 8, 2004, CreditWatch placement followed the Dec. 3, 2004 withdrawal of the rating assigned to ZC. OCEAN JOURNEY: Court Reopens Case for Administration of Assets -------------------------------------------------------------- The Honorable A. Bruce Campbell of the U.S. Bankruptcy Court for the District of Colorado reopened the chapter 11 case of Ocean Journey, Inc., n/k/a COJ Liquidation Inc. COJ Liquidation sought the reopening when it recently learned that small portions of real property were still unadministered assets. COJ wanted the case reopened so that it can appropriately administer these recently discovered assets. Asset Sale & Foreclosure The Debtor sold substantially all of its assets to Landry's Downtown Aquarium, Inc., in early 2003, including parcels of real property identified as Parcel B and Parcel D on a Survey performed by Bell Surveying Company dated January 29, 1997. Excluded from the assets sold to Landry's were parcels of real property identified as Parcel A, Parcel C, and Parcel E on the Survey, upon each of which the City and County of Denver held a first deed of trust. Parcels A, C, and E were undeveloped parcels of real property surrounding the aquarium. The City has foreclosed on Parcels A, C, and E and title to those parcels has vested in the City. Carl A. Eklund, Esq., at Ballard Spahr Andrews & Ingersoll, LLP, in Denver, Colorado, informed the Court that these newly found assets were neither sold to Landry's nor foreclosed upon by the City. Denver's Ocean Journey, Inc., filed for chapter 11 protection on April 1, 2002 (Bankr. Colo. Case No. 02-14424). Carl A. Eklund, Esq., at Ballard Spahr Andrews & Ingersoll, LLP, in Denver, Colorado, represents Ocean Journey. Steven T. Hoort, Esq., at Ropes & Gray, represents a group of secured ondholders. The Debtor sold its assets, and the Court confirmed the Debtors' Plan on March 24, 2004. On March 9, 2005, the Court entered a Final Decree closing the case. Ocean Journey, presented by Qwest, is the Rocky Mountain Region's only aquarium. The million-gallon adventure allows visitors to come within inches of thousands of fish, birds, invertebrates and mammals that rely upon water. More than 500 species are featured in re-creations of river-to-ocean journeys, special touch pools and family activities. Ocean Journey -- a not-for-profit organization with a mission to inspire guests to discover, explore, enjoy and protect our aquatic world -- is open 10 a.m. to 5 p.m. daily and maintains a Web site at http://www.oceanjourney.org OPTINREALBIG.COM: Wants Case Dismissed After Settling SPAM Suits ---------------------------------------------------------------- OptInRealBig.com, LLC, and its owner, Scott Allen Richter, ask the U.S. Bankruptcy Court for the District of Colorado to dismiss their chapter 11 cases. The Debtors remind the Court that they sought protection under chapter 11 to stay 13 legal actions filed against them, particularly those of Microsoft Corporation and American Family Mutual Insurance Co. Pending Litigation Prior to its bankruptcy filing, Microsoft sued the company for sending unsolicited e-mail. The software giant sought a $50 million judgment against OptIn. There are eight cases pending against the Debtors in Lake County, Utah, three in King County, Washington, and one in Santa Barbara, California. All of these suits allege unsolicited e-mail violations. Furthermore, the company's insurer, American Family Mutual Insurance Co., filed an action against OptIn and Mr. Richter seeking declaratory relief denying insurance coverage for costs of defense and liability associated with the various lawsuits pending against it. The Microsoft Settlement Microsoft commenced litigation against the Debtors on Dec. 17, 2003. The suit alleges: -- trespass to chattels; -- conversion; -- violation of the Washington Commercial Electronic Mail Act; -- violation of the Washington Consumer Protecion Act; -- violation of the Federal Computer Fraud and Abuse Act; -- violation of the New York Gen. Bus. Law Section 349; and -- violation of the Lanham Act (false designation of origin). Microsoft also filed a complaint seeking to have any judgment against Mr. Richter deemed non-dischargeable. Since the litigation is costly and time consuming for both parties, OptIn, Mr. Richter and Microsoft engaged in settlement discussions. After several meetings and negotiations, the parties agree that: a) the Debtors will pay Microsoft $7 million within 24 hours after the chapter 11 cases are dismissed; b) the Debtors will consent to a permanent injunction requiring their continued compliance with certain applicable laws; c) the Debtors and Microsoft will issue a press release announcing the terms of the settlement and will refrain from giving any statements which are not in conformity with the prepared statement. According to the Debtors, the settlement will dramatically increase the company's internet market. The settlement will brand OptIn as the most legitimate independent internet advertising service in the United States. The American Family Settlement OptIn and Mr. Richter has also reached a settlement with American Family Mutual Insurance. The terms of the settlement include: -- a payment to OptIn for an undisclosed amount; -- mutual releases of all claims between the parties including the insurers potential future obligations under prepetition insurance policies; and -- American Family will release the Debtors from a $2.6 million claim. Other Lawsuits The Debtors are confident that the other pending litigation will have minimal effect on the company. As such, they believe that their counsel can easily resolve the cases. An entity known as Infinite Monkeys & Co., LLC, filed a $49,168,000 claim against the Debtors. OptIn does not believe that this claim has any merit. The Debtors believe that with the resolution of the American Family and the Microsoft lawsuits, they can now go back to business in a better financial position. Headquartered in Westminster, Colorado, OptinRealBig.com, LLC, is an e-mail marketing company. The Company filed for chapter 11 protection on March 25, 2005 (Bankr. D. Colo. Case No. 05-16304). John C. Smiley, Esq., at Lindquist & Vennum P., LLP, represents the Debtor. When the Debtor filed for protection from its creditors, it listed estimated assets of $1 million to $10 million and estimated debts of $50 million to $100 million. ORBIMAGE HOLDINGS: Posts $5.4 Million Net Loss in Second Quarter ---------------------------------------------------------------- ORBIMAGE Holdings Inc. (OTC Bulletin Board: ORBM) reported its financial results for the second quarter of 2005 and for the six months ended June 30, 2005. Total revenues for the second quarter of 2005 and 2004 were $8.5 million and $9.7 million, respectively. Total revenues for the six months ended June 30, 2005 and 2004 were $17.2 million and $11.8 million, respectively. Net loss for the second quarter of 2005 was $5.4 million, compared with $4.4 million for the second quarter of 2004. Net loss for the six months ended June 30, 2005 was $11.0 million, compared with $12.8 million for the six months ended June 30, 2004. "Unfortunately our revenues have developed more slowly than we anticipated largely as a result of international customers delaying their purchasing decisions pending the outcome of the consolidation currently underway in our industry," said ORBIMAGE's President and Chief Executive Officer Matthew O'Connell. "We will continue our efforts to manage costs in the mean time. On the positive side, the construction of our OrbView-5 satellite for the National Geospatial-Intelligence Agency's NextView program is progressing on schedule and within budget. We met our debt commitment for NextView in the second quarter by raising $250 million of additional long-term debt to fund the next phase of the program and refinance the debt we incurred when we reorganized at the end of 2003 on more favorable terms." Operating Results Revenues for the second quarter of 2005 were $8.5 million as compared to $9.7 million in the same period in 2004. Revenues for the six months ended June 30, 2005 were approximately $17.2 million, compared to $11.8 million for the same period in 2004. The decrease in revenue for the quarter resulted principally from a reduction in contract revenues on an international imagery contract renewed in 2005 at a lower amount and from a surge in production activities that took place during the second quarter of 2004 to compensate for first quarter 2004 delays in receiving source materials from our customers. The increase in 2005 year-to-date revenues as compared to 2004 was primarily due to commencement of OrbView-3 operations for the U.S. Government effective in March 2004 under the NGA ClearView program for imagery and infrastructure enhancements and in June 2004 for production services, and the commencement of OrbView-3 operations for international customers in the second quarter of 2004. Revenues generated from OrbView-3 products and services were $6.9 million and $7.2 million for the second quarter of 2005 and 2004, respectively, and $14.4 million and $7.8 million for the six months ended June 30, 2005 and 2004, respectively. Loss from operations for the second quarter of 2005 was $3.9 million as compared to $2.0 million in the same period in 2004, which is attributable to increased sales and marketing expenditures to pursue business opportunities, increased staffing of sales and administrative functions and increased expenses associated with regulatory compliance. Loss from operations for the six months ended June 30, 2005 was $6.6 million as compared to $7.9 million in 2004. The decrease in this loss from the prior year is principally attributable to depreciation expense on the OrbView-3 satellite and related ground station assets which commenced in February 2004. Total depreciation expense recorded for these assets was $10.5 million in 2005 and $8.6 million in 2004. This increase is offset by the increased selling, general and administrative expenses in 2005 versus 2004 described above. Net loss for the second quarter of 2005 was $5.5 million versus a net loss of $4.4 million in the same 2004 period. Net loss for the first six months of 2005 was $11.0 million versus a net loss of $12.8 million a year ago. ORBIMAGE recorded net interest expense of $1.6 million and $2.5 million during the three months ended June 30, 2005 and 2004, respectively, and $3.7 million and $4.9 million during the six months ended June 30, 2005 and 2004, respectively. On March 31, 2005, ORBIMAGE repaid its then outstanding Senior Notes due 2008 out of existing cash received pursuant to the exercise of warrants by certain investors during the first quarter of 2005. This payment included an amount representing interest expense that would have been payable through June 30, 2005, the date of the initial interest payment. ORBIMAGE recorded a loss of $0.6 million associated with the early extinguishment of the Senior Notes in the first quarter of 2005. Cash Flow and Leverage As of June 30, 2005, ORBIMAGE had $185.4 million of cash and cash equivalents and $126.8 million of restricted cash resulting from the issuance of long-term debt as discussed below. Net cash provided by operating activities for the six months ended June 30, 2005 was $54.9 million. During 2005, ORBIMAGE received approximately $45.3 million of milestone payments from the National Geospatial-Intelligence Agency related to the construction of the OrbView-5 satellite. Capital expenditures for the first six months of 2005 were $88.4 million, much of which represents expenditures associated with the OrbView-5 satellite and related systems. Net cash provided by financing activities were $158.3 million for the first six months of 2005. During the first quarter ORBIMAGE received approximately $74.0 million of proceeds from the exercise of warrants by certain of its investors and from the issuance of shares in conjunction with a subscription rights offering which concluded in March 2005. Approximately $22.2 million of the warrant proceeds were used to redeem the Senior Notes on March 31, 2005 as discussed above. Private Debt Placement On June 29, 2005, ORBIMAGE Holdings Inc. issued $250 million aggregate principal amount of Senior Secured Floating Rate Notes due 2012. The Notes were offered in a private placement to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The purpose of the offering was to contribute the proceeds to the capital of its wholly-owned subsidiary, ORBIMAGE Inc., to be used for construction costs for the OrbView-5 satellite, to mandatorily redeem all of the outstanding Senior Subordinated Notes of ORBIMAGE Inc. that were to mature in 2008 and for general working capital purposes. In connection with this issuance, on June 29, 2005, ORBIMAGE Holdings entered into a Security Agreement with The Bank of New York, as Collateral Agent, pursuant to which ORBIMAGE Holdings granted a first priority lien on and security interest in substantially all of the assets of ORBIMAGE Holdings. ORBIMAGE Inc. was prohibited from issuing a guarantee of the Notes at the date of issuance due to restrictions in the indenture governing its Senior Subordinated Notes. The Notes were issued at a discount of two percent of total principal; consequently, ORBIMAGE Holdings received $245 million of cash proceeds at closing. Concurrently with the closing of the offering, ORBIMAGE Holdings entered into an escrow agreement with BONY as Trustee and Escrow Agent whereby ORBIMAGE Holdings deposited $126.8 million into an escrow account, to remain until such time as ORBIMAGE Inc. could issue a guarantee of the Notes. This amount was classified as restricted cash in the Company's balance sheet as of June 30, 2005. Approximately $8.7 million was used to pay certain transaction-related expenses. The remaining $109.5 million was contributed by ORBIMAGE Holdings to the capital of ORBIMAGE Inc. As a result of this capital contribution, on June 30, 2005, ORBIMAGE Inc. had "Unrestricted Cash" as defined in the indenture governing its existing Senior Subordinated Notes in an amount sufficient to require ORBIMAGE Inc. to redeem the Senior Subordinated Notes pursuant to the mandatory redemption provisions of that indenture. ORBIMAGE Inc. redeemed the Senior Subordinated Notes on July 6, 2005. Upon redemption of the Senior Subordinated Notes, ORBIMAGE Inc. provided its guarantee of the Notes, and the escrow was released to ORBIMAGE Holdings on July 11, 2005. The Notes will bear interest at a rate per annum, reset semi-annually, equal to the greater of six-month LIBOR or three percent, plus a margin of 9.5 percent. ORBIMAGE Holdings has entered into an interest rate swap arrangement pursuant to which it has fixed its effective interest rate under the Notes at 13.75 percent through July 1, 2008. * * * As reported in the Troubled Company Reporter on July 29, 2005, Standard & Poor's Ratings Services raised its rating on the $250 million senior secured floating rate notes due 2012 of Dulles, Virginia-based satellite imaging company ORBIMAGE Holdings Inc. to 'B-' from 'CCC+' and removed the rating from CreditWatch, where it was placed with positive implications on June 22, 2005. The action follows the repayment of the senior subordinated notes due 2008 of the company's subsidiary, ORBIMAGE Inc., upon which this entity became a guarantor of the senior secured notes. The guarantee is secured by a first priority lien on, and security interest in substantially all assets of ORBIMAGE Inc. The rating on the senior secured notes was placed on CreditWatch at the time of the initial offering, to reflect the pending guarantee of the notes by ORBIMAGE Inc. following the planned redemption of the senior subordinated notes using proceeds from the new notes. Standard & Poor's B-/negative/-- corporate credit rating (which was not on CreditWatch) on ORBIMAGE Holdings and its subsidiary ORBIMAGE Inc., was affirmed. Total debt outstanding is $250 million. "The ratings on ORBIMAGE reflect a high degree of business risk because of revenue concentration from a government contract, high debt leverage, weak near-term cash flow, relatively small asset size, and dependence on the successful launch of the new satellite," said Standard & Poor's credit analyst Eric Geil. Somewhat tempering these factors are the rising demand for commercial satellite imagery services, the company's young satellite fleet, and experienced management. PEGASUS SATELLITE: Trust Gets Cash Investment Requirements Waived ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Maine grants Pegasus Satellite Communications, Inc., its debtor-affiliates and the Liquidating Trustee of the PSC Liquidating Trust's request to waive the investment and deposit requirements of Section 345(b) of the Bankruptcy Code with respect to the PSC Liquidating Trust. As previously reported in the Troubled Company Reporter on July 7, 2005, the Debtors' First Amended Joint Plan of Reorganization provided for the transfer of the Debtors' assets into the PSC Liquidating Trust which is charged with resolving claims and making distributions on the Debtors' account. The Liquidating Trustee will distribute at least annually all Liquidating Trust Available Cash on hand and permitted investments, except those amounts necessary to maintain the Reserves established by the terms of the Plan. The Liquidating Trustee is contemplating the transfer of $90,000,000 in Liquidating Trust Assets from the Debtors' existing money market accounts to a newly established money market account with BancorpSouth, Inc. BancorpSouth is a $10.8 billion-asset bank holding company operating 250 banking and mortgage locations in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Maine Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEGASUS SATELLITE: C&TA Gets Final Fees for Advisory Services ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Maine allows Capital & Technology Advisors, LLC's monthly fees equal to $1,135,000 and reasonable and necessary reimbursable expenses incurred by C&TA equal to $13,414 from June 14, 2004, through Jan. 31, 2005. The Court directs The PSC Liquidating Trust to pay C&TA $75,000 as compensation for services rendered during the Fee Period and not yet paid. C&TA provided financial advisory services to the Official Committee of Unsecured Creditors. The Trust is also directed to pay C&TA a Transaction Fee in accordance with the terms of the Engagement Letter on the initial distribution date and each subsequent date distributions are made to unsecured creditors in the Chapter 11 case. C&TA's engagement letter states that C&TA is eligible for a Transaction Fee, which will be determined with reference to the Unsecured Creditors' Recovery. Because the Unsecured Creditors' Recovery is not yet determinable, the Estate is directed to pay the fee to C&TA as soon as it is determinable. Unsecured Creditors' Recovery is equal to the fair market value of all cash or other securities to be received by the unsecured creditors as a result of a Restructuring or sale of the company and its subsidiaries. If, and when, distributions are made to unsecured creditors in excess of $400 million, C&TA is entitled to a recovery of 75 basis points for every dollar distributed in excess of $400 million up to $500 million. C&TA is also entitled to a recovery equal to 150 basis points for all amounts distributed to the unsecured creditors in excess of $500 million. Wayne Barr, Jr., Esq., SVP and general counsel at C&TA, says the Committee relied on the firm's experience and expertise in dealing with matters relating to Pegasus Satellite Communications, Inc. and its debtor-affiliates' restructuring, including due diligence issues, monitoring the Debtors' business operations, business planning and strategy, negotiating and consummating the sale of the Debtors' satellite television assets and interfacing with the Debtors, their advisors and other parties-in-interest. C&TA's professionals devoted time and effort to perform properly and expeditiously the required professional services. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Maine Case No. 04-20889) on June 2, 2004. Larry J. Nyhan, Esq., James F. Conlan, Esq., and Paul S. Caruso, Esq., at Sidley Austin Brown & Wood, LLP, and Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 215/945-7000) RADNOR HOLDINGS: Posts $100,000 Net Loss for the Second Quarter --------------------------------------------------------------- Radnor Holdings Corporation reported a 12.4 percent increase in net sales to $121.5 million from $108.1 million in the comparable prior year quarter primarily due to increased selling prices of 13.0% and strong unit volume growth in the North American food packaging business of 12.2%, for the second fiscal quarter ended July 1, 2005. "Our financial results for the quarter reflect the challenging raw material and energy cost environment, the outcome of pricing actions and solid volume increases in our packaging business, resulting from our new product introductions, which led to a 21.5% gain in net sales at the segment. We began shipments of new products to customers in January and anticipate additional volume gains and profit improvements as we introduce more products for the institutional and consumer markets as we move through the year. We continue to raise selling prices due to rising costs, improve manufacturing efficiencies, implement cost reductions and grow our business through the introduction of new and innovative products," said Michael T. Kennedy, Radnor's Chairman and Chief Executive Officer. While net sales increased $13.4 million, or 12.4%, during the three months ended July 1, 2005 compared to the three months ended June 25, 2004, gross profit decreased by $4.7 million. The Company's European operations reported disappointing results due to volatile raw material markets that reduced volumes during the quarter as increased raw material costs and reduced sales volumes were only partially offset by higher selling prices, accounting for much of the decrease in gross profit. In North America, increases in raw material and energy-related costs were partially offset by higher across-the-board selling prices and increased sales volumes at our food packaging operations. Results of Operations Three Months Ended July 1, 2005 Net sales for the three months ended July 1, 2005 were $121.5 million, a 12.4% increase from $108.1 million for the three months ended June 25, 2004. This increase was primarily a result of higher average selling prices at both the packaging and specialty chemicals operations of 9.9% and 16.2%, respectively, and higher sales volumes at the packaging segment ($6.8 million), partially offset by lower sales volumes at the specialty chemicals operations ($10.0 million). Gross profit decreased $4.7 million to $16.2 million for the three months ended July 1, 2005 from $20.9 million for the similar three-month period in 2004. This decrease was primarily due to lower gross profit at our European specialty chemicals operations ($3.5 million), resulting from higher raw material costs and reduced sales volumes. In the North American operations, higher raw materials and energy-related costs were only partially offset by the benefits of increased selling prices and higher sales volumes in the foodservice packaging operations. During the three months ended July 1, 2005, operating expenses of $16.3 million were the same as the three months ended June 25, 2004 as lower selling, general and administrative costs ($1.1 million) related to our cost reduction program were offset by higher depreciation and amortization expenses ($0.8 million) and distribution costs ($0.3 million). As a percentage of net sales, operating costs decreased to 13.4% for the three months ended July 1, 2005 as compared to 15.1% for the three months ended June 25, 2004. Income (loss) from operations decreased by $4.7 million for the three months ended July 1, 2005 to an operating loss of $0.1 million from operating income of $4.6 million for the comparable period in 2004 due to a $3.1 million decrease at our European specialty chemicals operations, and a $1.4 million increase in depreciation and amortization expense. Income from operations at our North American operations, excluding depreciation and amortization, decreased by $1.7 million for the three months ended July 1, 2005. Interest expense increased $1.4 million to $7.8 million during the three months ended July 1, 2005 from $6.4 million in the prior year period primarily due to higher average debt levels and higher interest rates. Radnor Holdings Corporation -- http://www.radnorholdings.com/-- is a leading manufacturer and distributor of a broad line of disposable foodservice products in the United States and specialty chemical products worldwide. We operate 15 plants in North America and 3 in Europe and distribute our foodservice products from 10 distribution centers throughout the United States. * * * As reported in the Troubled Company Reporter on May 30, 2005, Moody's Investors Service downgraded the ratings of Radnor Holdings Corporation due to lingering concern regarding the prolonged depression of its financial and operating performance and the rating agencies' view of run rate financials, which are likely to remain weak relative to the company's sizable obligations. The ratings acknowledge management's commitment and ongoing efforts to improve liquidity (approximately $19 million recently received from the divestiture of an investment), to reduce costs, and to lower financial leverage. The ratings are supported by continued volume growth. Moody's downgraded these ratings for Radnor: -- $70 million floating rate senior secured note, due 2009, lowered to Caa1 from B3 -- $135 million 11% senior unsecured note, due 2010, lowered to Caa3 from Caa1 -- Senior implied rating lowered to Caa1 from B3 -- Senior unsecured issuer rating (non-guaranteed exposure), lowered to Ca from Caa2 Moody's says the ratings outlook remains negative. As reported in the Troubled Company Reporter on March 10, 2005, Standard & Poor's Ratings Services lowered its 'B-' corporate credit and senior secured note ratings on Radnor Holdings Corporation to 'CCC+'. The 'CCC' senior unsecured note rating was lowered to 'CCC-'. All ratings remain on CreditWatch with negative implications, where they were placed on Nov. 20, 2003. The CreditWatch placement followed the company's debt-financed acquisition of Polar Plastics, Inc., but has focused subsequently on Radnor's deteriorating financial performance and business challenges. REGIONAL DIAGNOSTICS: Wants Exclusive Period Stretched to Oct. 19 ----------------------------------------------------------------- Regional Diagnostics, LLC, and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division, to extend, until Oct. 19, 2005, the time within which it has the exclusive right to file a plan of reorganization and disclosure statement. The Debtor also wants the Court to extend, until Nov. 18, 2005, their exclusive period to solicit acceptances of their plan. The Debtors tell the Court they have made significant progress in consensually resolving disputes with their major creditor constituencies, and have endeavored to move their bankruptcy cases forward. The Debtors have also signed a compromise and settlement agreement with its DIP lenders, Merrill Lynch Capital and the Royal Bank of Canada, and the Official Committee of Unsecured Creditors. The settlement agreement resolves the objections raised by the Committee and the DIP lenders with regard to the sale of substantially all of the Debtors' assets on August 9, 2005. As previously reported, the settlement agreement 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. The Debtors explain that the exclusivity extensions will eliminate the risk that the compromises embodied in the settlement agreement will be derailed as a result of the filing of a competing plan. The exclusivity extensions will also allow the Debtors to propose and confirm a plan that incorporates the provisions of the settlement agreement. Headquartered in Warrensville Heights, Ohio, Regional Diagnostics, L.L.C. -- http://www.regionaldiagnostic.com/-- owns and operates 27 medical clinics located in Florida, Illinois, Indiana, Ohio and Pennsylvania. The Company and its debtor-affiliates filed for chapter 11 protection on April 20, 2005 (Bankr. N.D. Ohio Case No. 05-15262). Jeffrey Baddeley, Esq., at Baker & Hostetler LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of $10 million to $50 million and debts of $50 million to $100 million. REGIONAL DIAGNOSTICS: Panel Wants to Recover Assets from Lenders ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Regional Diagnostics, LLC, and its debtor-affiliates asks the U.S. Bankruptcy Court for the Northern District of Ohio to declare certain transfers of property made to Merrill Lynch Capital and Royal Bank of Canada, as agent for a group of foreign lenders, as avoidable. The Committee argues that Royal Bank of Canada and Merrill Lynch Capital do not hold valid, perfected security interest on: a) several dozen motor vehicles; b) several deposit accounts; c) assets owned by TR Radiology, Regional Diagnostics' debtor affiliate; and d) the Pineapple Grove Office Building. The Committee wants the liens avoided and wants the Lenders to return the property or its equivalent value to the Debtors' estates. Pre-Petition Debt In April 2003, Regional Diagnostics entered into a Revolving and Term Loan Facility with the Royal Bank of Canada and Merrill Lynch Capital. The Lenders provided Regional Diagnostics with a $34 million Revolving and Term Loan Facility. The loan was secured by a security interest in substantially all of the Debtor's assets. However, the Committee argues that the loan agreement did not grant any mortgage or lien upon any real property, whether then owned, or thereafter acquired by the Debtors. Also the Lenders did not take any steps to perfect their purported interests on the assets. Based on the loan agreement, Regional Diagnostics only pledged a security interest in all shares of common stock, membership interests, partnership interests and all other equity interests that it owns. In addition, TR Radiology was not a co-obligor under the loan agreement and therefore never granted any security interest in any of its assets to the Lenders. Post-Petition Debt Apart from the misrepresentations made in connection with the Debtors' pre-petition debt, the Committee also contests the Lenders' claims that the post-petition loan they extended is secured by a security interest in all "Pre-Petition Collateral" as a component of the "Post-Petition Collateral." The post-petition financing also calls for the application of "Pre-Petition Collateral" to the payment of post-petition indebtedness to the Lenders. The Committee says that the provision implies that the pre-petition collateral, in which the Lenders do not hold a valid, perfected security interest at the Petition Date, will be converted to "Post-Petition Collateral" and used to pay the post-petition debt. The Committee claims that the Debtors' move to convey the rights to their properties, including but not limited to the Vehicles, the Deposit Accounts, the TRR Assets and the Pineapple Grove Office Building, was made with a design to prefer one or more creditors to the exclusion, in whole or in part, of others. 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. R.F. CUNNINGHAM: U.S. Trustee Picks 5-Member Creditors Committee ---------------------------------------------------------------- The United States Trustee for Region 2 appointed five creditors to serve on an Official Committee of Unsecured Creditors in R.F. Cunningham & Company's chapter 11 case: 1. Fulton-Marshall L.P. 1496 North Meridian Road P.O. Box 568 Rochester, Indiana 46975 2. Kaufman Grain Company 301 Hollowood Drive West Lafayette, Indiana 47906 3. Agland Grain 1136 Clark Avenue Bluffton, Indiana 46714 4. Central Ohio Farmers Co-op, Inc. 730 Bellefontaine Avenue P.O. Box 936 Marion, Ohio 43302 5. Howlett Farms Inc. 1112 East River Road Avon, New York 14414 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the chapter 11 cases to a liquidation proceeding. Headquartered in Smithtown, New York, R.F. Cunningham & Company, is a grain dealer, licensed under the Agriculture and Markets Law of New York. The company filed for chapter 11 protection on June 13, 2005 (Bankr. E.D.N.Y. Case No. 05-84105). Harold S. Berzow, Esq., at Ruskin Moscou Faltischek, P.C., represents the Debtor in its restructuring efforts. When The Debtor filed for protection from its creditors, it listed $8,416,240 in total assets and $10,218,229 in total debts. R.F. CUNNINGHAM: Committee Taps Halperin Battaglia as Counsel ------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in R.F. Cunningham & Co., Inc.'s chapter 11 case sought and obtained permission from the U.S. Bankruptcy Court for the Eastern District of New York to employ and retain Halperin Battaglia Raicht, LLP, as its bankruptcy counsel, nunc pro tunc to July 11, 2005. Halperin Battaglia will: (a) advise the Committee with respect to its rights, duties, and powers; (b) assist the Committee in its consultations with the Debtor relative to the administration of these cases; (c) assist the Committee in analyzing the claims of the Debtor's creditors and in negotiations with such creditors; (d) assist with the Committee's investigation of the acts, conduct, assets, liabilities and financial condition of the Debtor and the operation of the Debtor's businesses; (e) assist the Committee in its analysis and negotiations with the Debtor or any third party concerning matters related to the realization by creditors of a recovery on claims and other means of realizing value in these cases; (f) review with the Committee whether a plan of reorganization should be filed by the Committee or some other third party and, if necessary, draft a plan and disclosure statement; (g) assist the Committee with respect to consideration by the Court of any disclosure statement or plan prepared or filed pursuant to Sections 1125 or 1121 of the Bankruptcy Code; (h) assist and advise the Committee with regard to its communications to the general creditor body regarding the Committee's recommendations on any proposed plan of reorganization or other significant matters in these cases; (i) represent the Committee at all hearings and other proceedings; (j) assist the Committee in its analysis of matters relating to the legal rights and obligations of the Debtor in respect of various agreements and applicable laws; (k) review and analyze all applications, orders, statements of operations, and schedules filed with the Court and advise the Committee as to their propriety; (l) assist the Committee in preparing pleadings and applications as may be necessary in furtherance of the Committee's interests and objectives; and (m) perform such other legal services as may be required and deemed to be in the interest of the Committee in accordance with its powers and duties as set forth in the Bankruptcy Code. Alan D. Halperin, Esq., discloses that his Firm's professionals bill: Designation Hourly Rate ----------- ----------- Attorneys $165 - $385 Law Clerks $100 Paraprofessionals $75 - $95 Mr. Halperin also disclosed that it has represented various subsidiaries of The CIT Group in connection with assorted leasing and small business loan matters not related to the Debtor or its chapter 11 case. CIT Group/Business Credit Inc. was a secured lender of the Debtor but was repaid in full. The CIT Group/Equipment is presently a party to an equipment lease with the Debtors concerning rail cars. Mr. Halperin tells the COurt that there is no conflict between the Committee and CIT Gruop. Mr. Halperin assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Smithtown, New York, R.F. Cunningham & Company, is a grain dealer, licensed under the Agriculture and Markets Law of New York. The company filed for chapter 11 protection on June 13, 2005 (Bankr. E.D.N.Y. Case No. 05-84105). Harold S. Berzow, Esq., at Ruskin Moscou Faltischek, P.C., represents the Debtor in its restructuring efforts. When The Debtor filed for protection from its creditors, it listed $8,416,240 in total assets and $10,218,229 in total debts. R.F. CUNNINGHAM: Committee Hires Mahoney Cohen as Finance Advisor ----------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in R.F. Cunningham & Co., Inc.'s chapter 11 case sought and obtained permission from the U.S. Bankruptcy Court for the Eastern District of New York to employ and retain Mahoney Cohen & Company, CPA, P.C., Certified Public Accountants, as its financial advisor, nunc pro tunc to July 11, 2005. Mahoney Cohen will: (a) assist the Committee in the analysis of financial operations of the Debtor from the date of the filing of the petition under chapter 11, as necessary; (b) assist with the analysis of the financial information of the Debtor prior to the date of the filing of the petition under chapter 11, as necessary; (c) assist in analyzing transactions with vendors, insiders, related and affiliated companies, subsequent and prior to the date of the filing of the petition under chapter 11, as necessary; (d) assistance in evaluating cash flow and other projections prepared by the debtor-in-possession; (e) assist in scrutinizing cash disbursements on an ongoing basis for the period subsequent to filing of the petition under chapter 11; (f) assist the Committee in is review of monthly statements of operations to be submitted by the debtor-in-possession; (g) assist the Committee in its review of the financial aspects of a plan of reorganization to be submitted by the Debtor, or in arriving at a proposed plan of reorganization; (h) performance any other services that may be necessary in the role of financial advisors to the Committee or that may be requested by the Committee or counsel to the Committee. Jeffrey T. Sutton, at Mahoney Cohen, discloses that the Firm's professionals bill: Designation Hourly Rate ----------- ----------- Shareholders $390 - $520 Managers and Directors $220 - $390 Staff and Senior Accountants $110 - $210 Mr. Sutton assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Smithtown, New York, R.F. Cunningham & Company, is a grain dealer, licensed under the Agriculture and Markets Law of New York. The company filed for chapter 11 protection on June 13, 2005 (Bankr. E.D.N.Y. Case No. 05-84105). Harold S. Berzow, Esq., at Ruskin Moscou Faltischek, P.C., represents the Debtor in its restructuring efforts. When The Debtor filed for protection from its creditors, it listed $8,416,240 in total assets and $10,218,229 in total debts. RISK MANAGEMENT: Committee Taps Halperin Battaglia as Counsel ------------------------------------------------------------- The Official Committee of Unsecured Creditors of Risk Management Alternatives, Inc., and its debtor-affiliates, asks the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division, for permission to employ Halperin Battaglia Raicht, LLP, as its counsel during the Debtors' chapter 11 cases, nunc pro tunc to July 15, 2005. Halperin Battaglia is expected to: a) advise the Committee with respect to its rights, duties and powers in this case; b) assist and advise the Committee in its consultations with the Debtors relative to the administration of these cases; c) assist the Committee in analyzing the claims of Debtors' creditors and in negotiating with such creditors; d) assist with the Committee's investigation of the acts, conduct, assets, liabilities and financial condition of the Debtors, the operation of the Debtors' businesses, and the proposed sale thereof; e) assist the Committee in its analysis of and negotiations with the Debtors or any third party concerning matters related to the realization by creditors of a recovery on claims and other means of realizing value in these cases, including, without limitation, the proposed asset sale; f) review with the Committee whether a plan of reorganization should be filed by the Committee or some other third party and, if necessary, draft a plan and disclosure statement; g) assist the Committee with respect to consideration by the Court of any disclosure statement or plan prepared or filed pursuant to 1125 or 1121 of the Bankruptcy Code; h) assist and advise the Committee with regard to its communications to the general creditor body regarding the Committee's recommendations on any proposed plan of reorganization or other significant matters in this case; i) represent the Committee at all hearings and other proceedings; j) assist the Committee in its analysis of matters relating to the legal rights and obligations of the Debtors in respect of various agreements and applicable laws; k) review and analyze all applications, orders, statements of operations and schedules filed with the Court and advise the Committee as to their propriety; l) assist the Committee in preparing pleadings and applications as may be necessary in furtherance of the Committee's interests and objectives; and m) perform such other legal services as may be required and/or deemed to be in the interest of the Committee in accordance with its powers and duties as set forth in the Bankruptcy Code. Christopher J. Battaglia, Esq., discloses his Firm's professionals' current hourly rates: Designation Rate ----------- ---- Attorneys $385-$150 Law Clerks $100 Paraprofessionals $95 - $60 To the best of the Committee's knowledge, Halperin Battaglia is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Duluth, Georgia, Risk Management Alternatives, Inc. -- http://www.rmainc.net/-- provides consumer and commercial debt collections, accounts receivable management, call center operations, and other back-office support to firms in the financial services, telecommunications, utilities, and healthcare sectors, as well as government entities. The Company and ten affiliates filed for chapter 11 protection on July 7, 2005 (Bankr. N.D. Ohio Case Nos. 05-43959 through 05-43969). Shawn M. Riley, Esq., at McDonald, Hopkins, Burke & Haber Co., LPA, represents the Debtors in their chapter 11 proceedings. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and between $50 million to $100 million in debts. RISK MANAGEMENT: Section 341(a) Meeting Slated for Sept. 1 ---------------------------------------------------------- The United States Trustee for Region 9 will convene a meeting of Risk Management Alternatives, Inc., and its debtor-affiliates' creditors at 10:30 a.m., on Sept. 1, 2005, at the Federal Building and U.S. Courthouse located in 10 East Commerce Street, Room 340 in Youngstown, Ohio. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Duluth, Georgia, Risk Management Alternatives, Inc. -- http://www.rmainc.net/-- provides consumer and commercial debt collections, accounts receivable management, call center operations, and other back-office support to firms in the financial services, telecommunications, utilities, and healthcare sectors, as well as government entities. The Company and ten affiliates filed for chapter 11 protection on July 7, 2005 (Bankr. N.D. Ohio Case Nos. 05-43959 through 05-43969). Shawn M. Riley, Esq., at McDonald, Hopkins, Burke & Haber Co., LPA, represents the Debtors in their chapter 11 proceedings. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and between $50 million to $100 million in debts. ROTECH HEALTHCARE: S&P Lowers Corporate Credit Rating to BB- ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on Orlando, Florida-based home respiratory care and durable medical equipment and services provider Rotech Healthcare Inc. The corporate credit rating was lowered to 'BB-' from 'BB'. All ratings on the company were removed from CreditWatch, where they were originally placed with negative implications Dec. 12, 2003. The outlook is stable. "The downgrade reflects Rotech's more clouded operating prospects, given the greater-than-anticipated impact of Medicare reimbursement reductions for respiratory drugs," explained Standard & Poor's credit analyst Jesse Juliano. Ratings on the company, which emerged from its parent's bankruptcy as an independent company in March 2002, reflect its: * narrow business focus; * vulnerability to third-party reimbursement and reimbursement reform; and * its aggressive financial profile. These challenges are partly offset by Rotech's position as the third-largest provider in its niche industry segment and its strong liquidity. Rotech provides home respiratory care services (which represent about 88% of revenue) and durable medical equipment (about 12%) to patients with breathing disorders. The company currently operates approximately 500 centers, principally in non-urban markets throughout the U.S. Rotech's lack of meaningful diversity across disease states exposes the company to changes in the respiratory care industry, including reimbursement pressures. Medicare, Medicaid, and the Veterans Administration constituted 71% of company sales in 2004. SAACO: Fitch Assigns BB+ Rating on $5.6 Million Private Certs. -------------------------------------------------------------- Fitch rates these SAACO series 2005-NC4 Trust certificates: -- $513.1 million classes A-1, A-2 and A-3 'AAA'; -- $29.1 million class M-1 'AA+'; -- $44 million class M-2 and M-3 'AA'; -- $27 million class M-4 'A+'; -- $11.8 million class M-5 'A'; -- $11.4 million class M-6 'A-'; -- $9.4 million class M-7 'BBB+'; -- $6.9 million class M-8 (privately offered) 'BBB'; -- $13.2 million class M-9 (privately offered) 'BBB-'; -- $5.6 million class M-10 (privately offered) 'BB+'. The 'AAA' rating on the senior certificates reflects the 25.90% total credit enhancement provided by the 4.20% class M-1, the 3.75% class M-2, the 2.60% class M-3, the 3.90% class M-4, the 1.70% class M-5, the 1.65% class M-6, the 1.35% class M-7, the 1.00% class M-8, the 1.90% class M-9, the 0.80% class M-10, and the 3.05% initial overcollateralization . All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the integrity of the transaction's legal structure as well as the primary servicing capabilities of New Century Mortgage Corporation (rated 'RPS3' by Fitch). Deutsche Bank National Trust Company will act as Trustee. As of the cut-off date (Aug. 1, 2005), the mortgage loans have an aggregate balance of $702,638,786; 100% of the loans have interest-only periods of three years. The weighted average mortgage rate is approximately 6.358% and the weighted average remaining term to maturity is 357 months. The average cut-off date principal balance of the mortgage loans is approximately $266,859. The weighted average original loan-to-value ratio is 81.80% and the weighted average Fair, Isaac & Co. score is 646. The properties are primarily located in California (43.68%), Florida (6.36%) and Illinois (4.93%). SATCON TECHNOLOGY: Completes $5.8 Million Financing Transaction --------------------------------------------------------------- On August 15, 2005, SatCon Technology Corporation consummated an equity financing transaction with several unrelated accredited investors involving the sale of approximately 4.7 million shares of common stock and warrants to purchase 1.2 million additional shares of common stock. The Company received proceeds from the sale of these shares and warrants equal to approximately $5.8 million less the Company's expenses relating to the sale. The stated use of proceeds is to expand the Company's sales and marketing efforts to exploit the opportunity for significant growth within the Solar, Hybrid Electric Vehicles, Wind, Stationary Power and Grid Support sectors. SatCon President and Chief Operating Officer, Millard Firebaugh stated, "The proceeds from this sale of common stock and warrants will allow SatCon to continue aggressive growth in the Alternative Energy, Hybrid-Electric Vehicle and Grid Support markets. These markets are growing at accelerating rates. The Energy Policy Act further reinforces the future market potential. SatCon already has successful products in these markets from which we are experiencing our most rapid growth in product revenue. We are positioning for success with appropriate investment." Ardour Capital Investments, LLC has been retained to act as the Company's financial advisor in connection with these capital raising activities, including introducing potential investors and negotiations regarding pricing and structure of the shares of common stock and warrants issued in the financing transaction. The shares of common stock and warrants issued in the equity financing transaction have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. However, as part of the transaction, the Company has agreed to use its best efforts to prepare and file a registration statement with the Securities and Exchange Commission to enable the resale of the shares issued and sold in the transaction. SatCon Technology Corporation -- http://www.satcon.com/-- is a developer and manufacturer of electronics and motors for the Alternative Energy, Hybrid-Electric Vehicle, Grid Support, High Reliability Electronics and Advanced Power Technology markets. * * * Going Concern Doubt Satcon's financial statements for its fiscal year ended Sept. 30, 2004, contain an audit report from Grant Thornton LLP. The audit report contains a going concern qualification, which raises substantial doubt with respect to Satcon's ability to continue as a going concern. SATCON TECHNOLOGY: Posts $2 Million Net Loss in Second Quarter -------------------------------------------------------------- SatCon Technology Corporation (Nasdaq NM: SATC) reported its financial results for fiscal 2005 third quarter, which ended July 2, 2005. "Our revenue for the quarter was $8.2 million dollars compared to $8.6 million in 2004," said David Eisenhaure, SatCon Chairman and Chief Executive Officer. "However, we have an additional $1.3 million in deferred revenue related to the shipment of a Rotary UPS made during the quarter, and $1.5 million in revenue deferred from Q2 for the EDO program. Our operating loss for the third quarter was $2.2 million, compared to $700,000 in 2004. That loss was primarily due to higher costs of manufacturing as we ramp up our support in the Power Systems Division for planned increased production in the Alternative Energy, HEV and Grid Support market sector." "Our first nine months of fiscal 2005 showed revenue increasing from $25.0 million to $25.6 million, excluding $2.8 million in deferrals noted above. The operating loss for the first nine months of fiscal 2005 was $5.6 million, which was an increase over 2004's operating loss of $2.5 million, primarily due to manufacturing costs, as noted above, and corporate legal and other costs." The Company also reported a net loss of $2,273,901 for the quarter ended July 2, 2005 compared with a net loss of $795,109 for the quarter ended June 26, 2005. The Company incurred significant costs to develop its technologies and products, which exceeded total revenue. As a result, the Company has incurred losses in each of the past ten years. As of July 2, 2005, it had an accumulated deficit of $133,732,614 since inception. During the nine months ended July 2, 2005, the Company incurred a loss from operations of $5,557,075 and used cash in operations of $6,712,151. The Company's restricted cash balances at July 2, 2005, was $84,000 while restricted cash balances at September 30, 2004, was $1,011,900. Silicon Valley Bank Credit Line As of July 2, 2005, the Company had approximately $2.6 million of cash, of which approximately $0.1 million was restricted. At this time no funds had been drawn against its $7.0 million line of credit with Silicon Valley Bank. The maximum amount the Company can borrow under this agreement is $7.0 million based upon 80% of eligible receivables and eligible inventory. As of July 2, 2005, approximately $3.4 million could have been borrowed based on the level of eligible receivables. The Company's trade payables, at July 2, 2005, totaled approximately $3.1 million, of which approximately $900,000 was for invoices over 60 days old. In addition, the Company had approximately $400,000 million of accrued accounts payable at July 2, 2005 for goods and services received but not yet invoiced. Going Concern Doubt The Company's financial statements for the fiscal year ended September 30, 2004, contained an audit report from Grant Thornton LLP raising substantial doubt to the Company's ability to continue as a going concern. "Our business plan envisions a significant improvement in results from the recent past and contemplates sufficient liquidity to fund operations at least through September 30, 2005. However, the receipt of a going concern qualification may create a concern among our current and future customers and vendors as to whether we will be able to fulfill our contractual obligations" the Company said. SatCon Technology Corporation -- http://www.satcon.com/-- is a developer and manufacturer of electronics and motors for the Alternative Energy, Hybrid-Electric Vehicle, Grid Support, High Reliability Electronics and Advanced Power Technology markets. SCOTT DESERT: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Scott Desert Shadows, LLC 2141 East Highland Avenue, Suite 160 Phoenix, Arizona 85016 Bankruptcy Case No.: 05-14892 Chapter 11 Petition Date: August 15, 2005 Court: District of Arizona (Phoenix) Judge: Charles G. Case II Debtor's Counsel: Steven N. Berger, Esq. Engelman Berger, P.C. One Columbus Plaza, Suite 700 3636 North Central Avenue Phoenix, Arizona 85012-1985 Tel: (602) 271-9090 Fax: (602) 222-4999 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. SECURITY CAPITAL: Estimates $3.7 Million Second Quarter Net Income ------------------------------------------------------------------ Security Capital Corporation (AMEX: SCC) estimated results for the second quarter and six months ended June 30, 2005. As previously announced, the Company currently expects to file its Form 10-Q for the second quarter by Sept. 15, 2005, and its Form 10-Q for the first quarter ended March 31, 2005, by Aug. 31, 2005. The Company's 2005 financial statements to be reported in the First Quarter Form 10-Q and the Second Quarter Form 10-Q will not include the results of discontinued operations and preferred stock accretion reported in the 2004 financial statements. In the fourth quarter of 2004, the Company completed the sale of substantially all of the assets of Pumpkin Masters Holdings, Inc., and settled the bankruptcy proceedings of Possible Dreams, Ltd., each of which had been reported as discontinued operations in the 2004 periods. In addition, due to the redemption of the Company's outstanding preferred stock in the third quarter of 2004, the Company no longer reports preferred stock accretion, which had reduced net income in the 2004 periods. Also, the results for the 2004 periods have been restated to reflect changes in the Company's accounting for operating leases as disclosed in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2004, filed on June 28, 2005. The Company estimates that, for the quarter ended June 30, 2005, net income will be approximately $3,750,000, compared to $777,000 for the quarter ended June 30, 2004. The second quarter of 2004 included a loss from discontinued operations of $247,000 and preferred stock accretion of $133,000. The quarter ended June 30, 2005 includes the operations of Caronia Corporation, which the Company acquired on March 31, 2005. Caronia's net income contribution to the second quarter was approximately $300,000. For the six months ended June 30, 2005, the Company estimates that net income will be approximately $5,300,000, compared to $1,280,000 for the six months ended June 30, 2004. The six months ended June 30, 2004 included a loss from discontinued operations of $819,000, and preferred stock accretion of $252,000. The estimated results for the six months ended June 30, 2005 include the net income contribution from Caronia and $2,100,000 of expenses incurred in connection with the Company's independent internal investigation, which concluded in March 2005. Change of Auditors As reported in the Troubled Company Reporter on Aug. 1, 2005, the Company 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. 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. * * * 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. SIRIUS SATELLITE: Sells $500M Senior Notes to Institutional Buyers ------------------------------------------------------------------ SIRIUS Satellite Radio Inc. issued and sold $500 million in aggregate principal amount of 9-5/8% Senior Notes due 2013 to qualified institutional buyers on August 9, 2005, pursuant to Rule 144A under the Securities Act of 1933, as amended, and outside the United States in compliance with Regulation S under the Securities Act. The Notes were issued pursuant to an indenture, dated as of August 9, 2005, between the Company and The Bank of New York, as trustee. The Notes mature on August 1, 2013 and bear interest at 9-5/8% per annum, payable semi-annually on August 1 and February 1 of each year, beginning February 1, 2006. The Notes are unsecured senior obligations. The Notes are not guaranteed by any of the Company's subsidiaries. The Indenture contains customary covenants and events of default which would permit the Trustee or the holders of at least 25% in principal amount of the Notes to declare the principal of and accrued but unpaid interest, if any, on the Notes to be due and payable. The Company may redeem some or all of the Notes on and after August 1, 2009, at the redemption prices set forth in the Indenture. Additionally, at any time prior to August 1, 2009, the Company may redeem up to 35% of the principal amount of the Notes using proceeds of certain equity offerings. If the Company sell certain of its assets or experience specific kinds of changes of control, the Company must offer to purchase the Notes. A full-text copy of the Indenture is available for free at: http://ResearchArchives.com/t/s?d4 SIRIUS Satellite Radio Inc. delivers more than 120 channels of the best commercial-free music, compelling talk shows, news and information, and the most exciting sports programming to listeners across the country in digital quality sound. SIRIUS offers 65 channels of 100% commercial-free music, and features over 55 channels of sports, news, talk, entertainment, traffic and weather for a monthly subscription fee of only $12.95. SIRIUS also broadcasts live play-by-play games of the NFL and NBA, and is the Official Satellite Radio partner of the NFL. * * * As reported in the Troubled Company Reporter on Aug. 4, 2005, Standard & Poor's Ratings Services assigned its 'CCC' rating to Sirius Satellite Radio Inc.'s proposed $500 million Rule 144A senior unsecured notes maturing in 2013. At the same time, Standard & Poor's affirmed its existing ratings on the New York, New York-based satellite radio broadcasting company, including its 'CCC' corporate credit rating. The new proposed notes will replace the company's previously proposed $250 million senior unsecured note offering, which was postponed in the second quarter of 2005. Standard & Poor's 'CCC' rating on the $250 million senior note issue was withdrawn. S&P says the outlook remains stable. Proceeds will be used to repay $57.4 million in debt and to boost liquidity. On a June 30, 2005, pro forma basis, Sirius had nearly $1.1 billion in debt. SMURFIT-STONE: S&P Puts B+ Corporate Credit Rating on Watch ----------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including its 'B+' long-term corporate credit rating, on containerboard manufacturer, Smurfit-Stone Container Corp. and its subsidiaries on CreditWatch with negative implications. "The action reflects our concerns about near-term market conditions that may cause free cash flow to turn negative over the next few quarters, Smurfit-Stone's inability to reduce its heavy debt burden despite good general economic conditions, and the potential for significant spending and operational disruptions stemming from the company's restructuring efforts," said Standard & Poor's credit analyst Pamela Rice. Chicago, Illinois-based Smurfit-Stone had total debt, including off-balance-sheet lease and accounts receivable financing, of $5.3 billion at June 30, 2005. This was before tax-effecting and including $870 million of debt-like unfunded pension and $283 million of other postretirement obligations. As a sign of difficult end markets, Smurfit-Stone earlier this month announced the closure of three mills representing about 8.5% of its containerboard capacity and is expected to announce the outcome of a broader strategic review in the next few months. The closure of additional capacity in a segment that remains oversupplied even after years of meaningful consolidation and rationalization should improve industry fundamentals over the intermediate term. However, containerboard prices continue to slide, demand is soft, costs for energy, fiber, chemicals, and freight continue to rise, and Smurfit-Stone could face the additional challenges often created by major restructuring actions. Moreover, in the longer term, growing overseas capacity and the threat of substitute packaging materials such as plastics are likely to continue to pose challenges for North American producers. Standard & Poor's plans a full review of Smurfit-Stone within the next few months, incorporating the results of the company's strategic review, or sooner, if market conditions worsen or other events cause us to take a rating action. SOREY FARMS: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Sorey Farms, Inc. 2983 Highway 489 Lake, Mississippi 39092 Bankruptcy Case No.: 05-53693 Chapter 11 Petition Date: August 17, 2005 Court: Southern District of Mississippi (Gulfport) Judge: Edward Gaines Debtor's Counsel: Jeffrey K. Tyree, Esq. Harris & Geno, PLLC P.O. Box 3380 Ridgeland, Mississippi 39158-3380 Tel: (601) 427-0048 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. SOUTH DAKOTA: Files Schedules of Assets & Liabilities ----------------------------------------------------- South Dakota Acceptance Corporation, delivered its Schedules of Assets and Liabilities to the U.S. Bankruptcy Court for the District of South Dakota, disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property B. Personal Property $15,624,000 C. Property Claimed as Exempt D. Creditors Holding $28,015,328 Secured Claims E. Creditors Holding Unsecured Priority Claims F. Creditors Holding $12,730 Unsecured Nonpriority Claims ----------- ---------- Total $15,624,000 $28,028,058 Headquartered in Sioux Falls, South Dakota, South Dakota Acceptance Corporation dba CNAC, dba Mr. Payroll, dba First Midwest Fidelity, and Dan Nelson Automotive Group, Inc., filed for chapter 11 protection on June 20, 2005 (Bankr. D. S.D. Case No. 05-40866). When the Debtor filed for protection from its creditors, it listed $15,624,000 in assets and $28,028,058 in debts. SPECIAL DEVICES: S&P Withdraws Junk Corporate Credit Rating ----------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'CCC' corporate credit rating and 'CC' subordinated debt rating on Special Devices Inc. at the company's request. Moorpark, California-based Special Devices manufactures pyrotechnic devices used in automotive light-vehicle airbag systems and in seat-belt systems. STATION CASINOS: Exchanging $200M Sr. Notes for Transferable Notes ------------------------------------------------------------------ Stations Casinos, Inc., is offering to exchange up to $200 million aggregate principal amount of new 6-7/8% Senior Subordinated Notes due 2016, for any and all outstanding 6-7/8% Senior Subordinated Notes due 2016 issued in a private offering on June 15, 2005. The Old Notes have certain transfer restrictions. The terms of the New Notes are substantially identical to the Old Notes, except that the New Notes will be freely transferable and issued free of any covenants regarding exchange and registration rights. All Old Notes that are validly tendered and not validly withdrawn will be exchanged. The exchange of Old Notes for New Notes should not be a taxable event for United States Federal income tax purposes. Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the exchange offer. Old Notes not exchanged in the exchange offer will remain outstanding and be entitled to the benefits of the applicable Indenture, but, except under certain circumstances, will have no further exchange or registration rights under the Registration Rights Agreement. Affiliates of Station Casinos, Inc., may not participate in the exchange offer. Las Vegas, Nevada-based Station Casinos, is the largest owner of off-Strip casino properties. * * * As reported in the Troubled Company Reporter on June 14, 2005, Moody's Investors Service placed the long-term debt ratings of Station Casinos, Inc.'s on review for possible upgrade and affirmed the company's SGL-2 speculative grade liquidity rating. These ratings were placed on review for possible upgrade: -- Senior implied rating -- Ba2; -- Long-term issuer rating -- Ba3; -- $450 mil. 6% senior notes due 2012 -- Ba3; -- $450 mil. 6 ½% senior subordinated notes due 2014 -- B1; -- $350 mil. 6 7/8% senior subordinated notes due 2016 -- B1; and -- $17.3 mil. 9 7/8% senior subordinated notes due 2010 -- B1. This rating was affirmed: -- Speculative grade liquidity rating -- SGL-2. As reported in the Troubled Company Reporter on Mar. 29, 2005, Standard & Poor's Ratings Services revised its rating outlook on Las Vegas, Nevada-based Station Casinos, Inc. to positive from stable. At the same time, Standard & Poor's affirmed its ratings on the owner of off-Strip casino properties, including its 'BB' corporate credit rating. STATION CASINOS: SC Sonoma Buys Property for New Resort Facility ---------------------------------------------------------------- Station Casinos, Inc.'s wholly owned subsidiary, SC Sonoma Development, purchased approximately 271 acres of real property located near the intersection of Dowdell Avenue and Wilfred Avenue near the City of Rohnert Park in Sonoma County, California, on Aug. 11, 2005. Subject to the receipt of certain governmental approvals, a portion of the property will be taken into trust for the Federated Indians of the Graton Rancheria for the development and operation of a resort hotel, gaming and entertainment facility. The Company and the Tribe are parties to development and management agreements, pursuant to which the Company will assist the Tribe in developing and operating such resort hotel, gaming and entertainment facility. Las Vegas, Nevada-based Station Casinos, is the largest owner of off-Strip casino properties. * * * As reported in the Troubled Company Reporter on June 14, 2005, Moody's Investors Service placed the long-term debt ratings of Station Casinos, Inc.'s on review for possible upgrade and affirmed the company's SGL-2 speculative grade liquidity rating. These ratings were placed on review for possible upgrade: -- Senior implied rating -- Ba2; -- Long-term issuer rating -- Ba3; -- $450 mil. 6% senior notes due 2012 -- Ba3; -- $450 mil. 6 ½% senior subordinated notes due 2014 -- B1; -- $350 mil. 6 7/8% senior subordinated notes due 2016 -- B1; and -- $17.3 mil. 9 7/8% senior subordinated notes due 2010 -- B1. This rating was affirmed: -- Speculative grade liquidity rating -- SGL-2. As reported in the Troubled Company Reporter on Mar. 29, 2005, Standard & Poor's Ratings Services revised its rating outlook on Las Vegas, Nevada-based Station Casinos, Inc. to positive from stable. At the same time, Standard & Poor's affirmed its ratings on the owner of off-Strip casino properties, including its 'BB' corporate credit rating. SUN HEALTHCARE: Lenders Allow $4MM Short-Term Overadvance on Loan ----------------------------------------------------------------- Sun Healthcare Group, Inc. entered into a Sixth Amendment to its Loan and Security Agreement with CapitalSource Finance LLC and Wells Fargo Foothill, Inc., effective August 10, 2005. The Sixth Amendment, which terminates on August 19, 2005, provides the Company with a short-term overadvance of up to $4 million. The Sixth Amendment was entered into in order to provide the Company with additional liquidity consistent with the previously calculated borrowing base. A full-text copy of the Sixth Amendment is available for free at http://ResearchArchives.com/t/s?d2 The Fifth Amendment of the Agreement, which became effective on April 8, 2005, provided the Company with an overadvance of up to $10 million. The Company provided mortgages on three of its facilities as additional collateral under the Loan Agreement. This overadvance facility terminated upon the refinancing of those facilities with CapitalSource Finance LLC on August 3, 2005, and the borrowing base was adjusted accordingly. Sun Healthcare Group, Inc., with executive offices located in Irvine, California, owns SunBridge Healthcare Corporation and other affiliated companies that operate long-term and postacute care facilities in many states. In addition, the Sun Healthcare Group family of companies provides therapy through SunDance Rehabilitation Corporation, medical staffing through CareerStaff Unlimited, Inc., home care through SunPlus Home Health Services, Inc., and medical laboratory and mobile radiology services through SunAlliance Healthcare Services, Inc. At June 30,2005, Sun Healthcare's balance sheet showed a $117,463,000 stockholders' deficit, compared to a $123,380,000 deficit at Dec. 31, 2004. TECO AFFILIATES: Wants National Union's Claims Disallowed --------------------------------------------------------- Union Power Partners, L.P., Panda Gila River, L.P., Trans-Union Interstate Pipeline, L.P., and UPP Finance Co., LLC, object to Claim Nos. 58 and 59 filed by National Union Fire Insurance Company of Pittsburgh, P.A., and other entities related to American International Group, Inc. The Reorganized Debtors contend that the National Union Claims are unliquidated, contingent claims based on unspecified insurance, bond, or related obligations, and therefore should be disallowed. The Reorganized Debtors say that no debts or other obligations are owing to National Union, either because the Debtors were unable to substantiate any valid obligations or because the National Union Claims do not correspond to anything in their books and records. If the Court finds that the National Union Claims do assert valid insurance and other obligations, the Reorganized Debtors want the Claims disallowed and expunged to the extent they seek recovery in excess of amounts actually incurred by or due to National Union under the terms of applicable governing documents between the parties. The National Union Claims also contain insufficient supporting documentation, or the attached documentation is unclear or unrevealing, Craig D. Hansen, Esq., at Squire, Sanders & Dempsey L.L.P., in Phoenix, Arizona, notes. As a result, the Reorganized Debtors are unable to determine if any amounts are properly due and owing on account of the Claims. Moreover, Mr. Hansen tells the Court that the National Union Claims improperly assert secured status and set-off right. There exists no factual or legal basis for the assertions. Thus, to the extent they do assert valid obligations, and to the extent they are allowed, the National Union Claims should be reclassified as non-priority general unsecured claims. Mr. Hansen further contends that to the extent the National Union Claims assert administrative expense status, they should be disallowed and expunged as improperly filed. The proof of claim forms used to file the National Claims cannot be utilized to file administrative claims. National Union must file an appropriate request under Section 503 of the Bankruptcy Code along with required bases and documentation. Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co., LLC -- http://www.tecoenergy.com/-- own and operate the two largest combined-cycle natural gas generation facilities in the United States. The Debtors filed for bankruptcy protection on Jan. 26, 2005 (Bank. D. Ariz. Case No. 05-01143, and 05-01149 through 05-01151). Craig D. Hansen, Esq., Thomas J. Salerno, Esq., and Sean T. Cork, Esq., at Squire, Sanders & Dempsey L.L.P., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,196,000,000 in total assets and $2,268,800,000 in total debts. (TECO Affiliates Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000). The Debtors' Amended Joint Plan of Reorganization became effective on June 1, 2005. TECO AFFILIATES: Wants Graylon Hughes' $200K PI Claims Rejected --------------------------------------------------------------- Graylon Hughes filed two claims asserting general unsecured personal injury claims for $200,000 against Panda Gila River, LP. Craig D. Hansen, Esq., at Squire, Sanders & Dempsey L.L.P., in Phoenix, Arizona, notes that the Hughes Claims do not specify the nature of the alleged personal injury, other than asserting that it occurred on October 17, 2002. Moreover, the Reorganized Debtors are not aware of any litigation commenced by Mr. Hughes on account of the injuries. The Reorganized Debtors believe that the Claims may relate to Mr. Hughes' assertion that the Debtors have allegedly violated one or more patents held by Mr. Hughes. The Reorganized Debtors strongly dispute the allegations. The Debtors have not violated any patents or any rights held by Mr. Hughes, and they have not harmed or damaged him in any way. Absent any sufficient information to ascertain the Hughes Claims, and absent any liabilities to the claimant, the Reorganized Debtors ask the Court to disallow Claim Nos. 19 and 31. Mr. Hansen adds that because the alleged injuries arose almost three years before the Petition Date, the Court's order confirming the Debtors' Plan of Reorganization prohibits Mr. Hughes from commencing any litigation or other action to assess or collect damages for his alleged injuries. As a result, the Claims are wholly contingent and incapable of being liquidated. Moreover, the Claims appear to be duplicative -- Claim No. 31 sets forth the same amount, status, and basis as Claim No. 19. Thus, Claim No. 31 must also be disallowed on grounds that it is duplicative of Claim No. 19. Panda Gila River, L.P., Union Power Partners, L.P., Trans-Union Pipeline, L.P., and UPP Finance Co., LLC -- http://www.tecoenergy.com/-- own and operate the two largest combined-cycle natural gas generation facilities in the United States. The Debtors filed for bankruptcy protection on Jan. 26, 2005 (Bank. D. Ariz. Case No. 05-01143, and 05-01149 through 05-01151). Craig D. Hansen, Esq., Thomas J. Salerno, Esq., and Sean T. Cork, Esq., at Squire, Sanders & Dempsey L.L.P., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,196,000,000 in total assets and $2,268,800,000 in total debts. (TECO Affiliates Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000). The Debtors' Amended Joint Plan of Reorganization became effective on June 1, 2005. TRM CORP: Earns $2.9 Million of Net Income in Second Quarter ------------------------------------------------------------ TRM Corporation (NASDAQ: TRMM) reported financial results for the second quarter ended June 30, 2005, which include record earnings of $2.9 million for the period. Recent highlights include the following, as compared to Q2 2004: * Gross sales more than doubled to $61.4 million from $28.8 million; * Net sales increased 47% to $33.2 million from $22.5 million; * EBITDA increased 73% to $11.0 million compared to $6.4 million; * Operating income increased 26% to $5.2 million from $4.1 million; * ATM operating income quadrupled to $5.0 million from $1.2 million During Q2 2005, gross sales increased 113% to $61.4 million from $28.8 million in Q2 2004. The increase was generated by the Company's ATM business, which had total gross sales of $50.3 million for the quarter compared to $15.4 million for the same period in 2004. Consolidated net sales were $33.2 million, a 47% increase compared to $22.5 million for the prior year period. The increase in net sales during the quarter as compared to the prior year period reflects the addition of approximately 15,700 ATM's resulting from the acquisition of the eFunds Corporation ATM network offset by a $1.8 million or 17% decline in net sales from the photocopy business. Net sales also reflects increased sales discounts, as the ATM revenue mix shifted from primarily full placement to predominately merchant owned ATMs due to the acquisition of the eFunds ATM portfolio. Cost of sales during Q2 2005 increased 38% to $16.7 million from $12.1 million in Q2 2004. The increase in cost of sales reflects increased ATM unit count and transaction volume. As a result of the growth in net sales, offset by the increase in cost of sales as described above, gross profit increased 58% to $16.5 million from $10.4 million last year. Selling, general and administrative (SG&A) expenses were $11.3 million, up 79%, compared to $6.3 million in Q2 2004. The increase in SG&A primarily reflects increased labor expense necessary to accommodate the Company's expanding business, a $2.1 million increase in amortization expense relating to ATM contracts acquired in 2004, and a $1.0 million increase related to the existing services agreement with eFunds Corporation. EBITDA was $11.0 million in Q2 2005 as compared to $6.4 million for the prior year period, an increase of 73%. In Q2 2005 net income from continuing operations available to common shareholders increased 40% to $2.9 million compared to $2.0 million in Q2 2004. Net income included interest expense of $2.5 million and $0.9 million of expenses associated with the transition of the eFunds ATM portfolio, partially offset by a $0.7 million settlement gain with our directors and officers' insurer and a $0.7 million tax benefit. Net income was $0.19 per diluted share in Q2 2005 compared to $0.23 in Q2 2004. There was an average of 14.8 million diluted shares outstanding in Q2 2005 compared to 8.7 million in Q2 2004. During Q2 2005, the Company incurred certain expenses related to the eFunds ATM network transition, which continue to decline since the date of acquisition: * $0.6 million in Cost of Sales expenses related to operational expenses associated primarily with inefficiencies in armored car, cost of vault cash and third party service; * $0.3 million in SG&A expenses due to delayed staffing reductions and temporary labor needs during the quarter. For the six months ended June 30, 2005, the Company reported gross sales of $120.2 million, up 120% from $54.8 million in the prior year's comparable period. Net sales were $66.6 million, up 53% from $43.5 million in the first six months of 2004. Gross profit increased 56% to $32.4 million from $20.8 million last year, and operating income was $9.8 million, up 17% from $8.4 million in the first six months of 2004. The Company reported EBITDA of $20.7 million for the first six months of 2005, up 65% compared to $12.6 million in the first six months of 2004. For the first six months of 2005, income from continuing operations was $4.5 million as compared to $5.4 million in the prior year's comparable period. Net income from continuing operations available to common shareholders increased to $4.3 million for the six-month period compared to $3.9 million in last year's comparable period. Net income was $0.30 per diluted share compared to $0.45 in the first half of 2004. There was an average of 14.6 million diluted shares outstanding in the first six months of 2005 compared to 8.4 million for the same period in 2004. Segment Highlights ATM The increase in ATM sales and net sales reflects significantly more ATM units overall, a result of acquisitions during 2004 (in particular the eFunds ATM network acquisition) as well as organic net new unit growth. Specifically, the average number of ATMs in the TRM network during the second quarter of 2005 increased to nearly five times the average in the same period in 2004. ATM operating income increased to $5.0 million, an operating margin of 20.8%, from $1.2 million, an operating margin of 10.4%, in the second quarter of 2004. This reflects increasing economies of scale in the ATM business, as net new units are integrated into the Company's existing cost structure. The difference in growth rate between gross sales and net sales reflects sales discounts, which represent the portion of gross sales retained by merchants, which increase as the ATM revenue mix shifts from primarily full placement to mostly merchant owned ATMs. The majority of contracts acquired in 2004 were with retail partners who own their ATMs, provide their own cash, and as a result, receive the majority of the surcharge. The decreases in average monthly withdrawals per unit, average sales per withdrawal, and average monthly sales per unit are an expected result of the acquisition of the eFunds ATM portfolio. The ATMs acquired from eFunds are largely merchant owned, and have substantially fewer withdrawals per ATM per month and lower sales per ATM than the Company's historical averages. Organic growth in the ATM business consisted of 676 net new ATM placements in the first six months of 2005. Management expects limited growth of net new unit placements in the second half of 2005, excluding new unit gains that may result from possible acquisitions. The Company expects to focus upon redeployment and optimization of existing ATM units during the third and fourth quarters of 2005. Photocopy The decrease in net sales for Q2 2005 reflects a reduction in deployed units as TRM continued a program of eliminating lower volume sites that were unprofitable, and experienced lower transaction volumes per unit when compared to the prior year period. The 14% decline in average monthly copies per unit is due primarily to price increases that became effective in late 2003. The decline in operating income was primarily the result of lower copy volumes. Photocopy operating income for the second quarter 2005 increased to $2.1 million from $0.5 million during Q1 2005. Photocopy price increases now underway had no material impact on photocopy performance during the period. Management anticipates that the Company will continue to implement photocopy price increases in the third and fourth quarters of 2005 with full impact being realized in early 2006. TRM Corp. continues to experience multinational expansion in its ATM operation and remains among the largest independent ATM networks in the United Kingdom. Currently employing over 400 people throughout the United States, Canada, and the United Kingdom, TRM manages over 30,000 locations in deployment, processing, and maintenance for both ATM and Photocopy services. * * * As reported in the Troubled Company Reporter on Oct. 25, 2004, Moody's Investors Service assigned a B2 rating to the proposed $150 million senior secured bank credit facilities of TRM Corporation. The ratings outlook is stable. These ratings are assigned: * B2 Senior Secured Bank Credit Facility Rating * B2 Senior Implied Rating * Caa1 Issuer Rating * SGL-2 speculative grade liquidity rating As reported in the Troubled Company Reporter on Oct 21, 2004, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Portland, Oregon-based TRM Corporation. At the same time, Standard & Poor's also assigned its 'B+' senior secured debt rating to the company's proposed $150 million in senior secured credit facilities. UNISYS CORP: S&P Puts BB+ Corporate Credit Rating on CreditWatch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB+' corporate credit and senior unsecured debt ratings on Blue Bell, Pennsylvania-based Unisys Corp. on CreditWatch, with negative implications. "The CreditWatch listing reflects deteriorating operating performance and credit protection measures, coupled with uncertainties regarding the company's ability to improve profitability and cash flows over the near term in light of challenging market conditions and problematic contracts," said Standard & Poor's credit analyst Philip Schrank. For the six months ending June 30, 2005, Unisys reported a net loss of $73 million, compared with net income of $48 million in the year-ago period. Although Unisys' Services segment grew revenues 7% in the second quarter, operating income (excluding the impact of pension expenses) had a loss of $8 million. Additionally, the company's technology segment revenues declined 12% with a $6 million operating loss. While Unisys expects to generate $50 million of free cash flow in fiscal 2005, the company reported $118 million of negative free cash flow in the first half of 2005, which included a $39 million tax refund. Unisys' debt protection metrics have declined materially because of weakened cash flow generation and the lack of profitability. Adjusted total debt to EBITDA (including pension liability, outstanding balances under the accounts receivable securitization facility, and operating leases) exceeds 5x. Standard & Poor's will meet with management to assess Unisys strategy for improving operating performance over the near term, as well as expectations for future performance. URANIUM RESOURCES: Registers 84.4 Million Shares for Resale ----------------------------------------------------------- Uranium Resources, Inc., filed a prospectus to the Securities and Exchange Commission relating to the resale of up to 84,411,893 shares of the Company's Common Stock, par value $0.001 per share. Uranium Resources will not receive any of the proceeds from sales of shares by Selling Stockholders. Uranium Resources will pay substantially all the expenses incident to the registration of the shares, except for sales commissions and other expenses of Selling Stockholders applicable to sales of their respective shares. Uranium Resources' Common Stock is not currently listed on any national securities exchange or the NASDAQ Stock Market. Uranium Resources' Common Stock is quoted on the Over the Counter Bulletin Board under the symbol URIX. A full-text copy of the prospectus is available for free at http://ResearchArchives.com/t/s?d5 As of June 30, 2005, Uranium Resources' balance sheet showed a $25,743,368 equity deficit. The deficit was $15,292,696 at Dec. 31, 2004. VARTEC TELECOM: Wants to Close Reno Call Center & Reject Contracts ------------------------------------------------------------------ VarTec Telecom Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Texas for permission to: a) close the Call Center operation in Reno, Nevada and terminate its employees; b) reject executory contracts and unexpired leases associated with the Reno call center; and c) sell surplus personal property located at the Reno call center free and clear of liens, claims, interests and encumbrances. The Debtors have decided to close the Reno call center effective as of September 9, 2005, to reduce overhead expenses and otherwise realize cost savings. To accommodate the customer calls formerly serviced by the Reno Call Center, the Debtors have outsourced services relating to, among other things, wireless and commercial long distance customers to Aegis Communications Group pursuant to the Court- approved order to enter into contract with Aegis Communications as reported in the Troubled Company Reporter on August 3, 2005. They intend to route remaining calls to other vendors who currently provides other call center services to the Debtors under existing agreements. The Debtors have determined that the lease agreements dated August 28, 1996, by and between Corporate Properties Associates 2 and 3, as well as the real property lease with Excel Teleservices, Inc., are no longer necessary to their operations or to effect successful reorganizations of their businesses. VarTec wants to reject the Corporate Properties agreements on September 9 and to walk away from the Excel agreement on September 30, 2005. Furthermore, the Debtors ask the Court to set October 31, 2005 as the deadline by which any rejection damage claims must be filed. The Debtors contemplate holding an online auction of the surplus property on or about September 20, 2005. Rosen Systems, Inc. will conduct the auction. Headquartered in Dallas, Texas, VarTec Telecom Inc. -- http://www.vartec.com/-- provides local and long distance service and is considered a pioneer in promoting 10-10 calling plans. The Company and its affiliates filed for chapter 11 protection on November 1, 2004 (Bankr. N.D. Tex. Case No. 04-81694. Daniel C. Stewart, Esq., William L. Wallander, Esq., and Richard H. London, Esq., at Vinson & Elkins LLP, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed more than $100 million in assets and debts. WESTPOINT STEVENS: Wants Avoidance Action Procedures Modified ------------------------------------------------------------- As previously reported, the U.S. Bankruptcy Court for the Southern District of New York, at WestPoint Stevens, Inc. and its debtor- affiliates' request, established certain procedures governing discovery in connection with adversary proceedings brought by them. Pursuant to the Discovery Order, the Debtors have commenced about 350 adversary proceedings. In each Avoidance Action, once an answer is filed by a defendant, deadlines are set within which further discovery must take place. A number of these time periods began to run as of July 27, 2005. The Debtors sought the dismissal of their Chapter 11 cases, a consequence of which is the dismissal of the Avoidance Actions and the repayment of any amounts collected in connection therewith to Avoidance Action defendants. Thus, if the Court approves the Dismissal Motion, no further discovery will be necessary. In this regard, the Debtors ask the Court to modify the Discovery Order and stay the time periods for all discovery in connection with the Avoidance Actions pending the Court's determination of the Dismissal Motion. Mark Chinitz, Esq., at Stein Riso Mantel, LLP, in New York, points out that in the event that dismissal is not granted and the parties elect not to pursue discovery prior to the resolution of the Dismissal Motion, many of the discovery time periods will have run and foreclose any further discovery by the parties. Modifying the Discovery Order to stay all discovery-related time periods, nunc pro tunc to July 27, 2005, will preserve the status quo and prevent the expiration of the time periods in effect with respect to the Avoidance Actions. Moreover, Mr. Chinitz discloses that employees of the Debtors who have previously worked with counsel with respect to producing information and documentation with regard to the Avoidance Actions, have for the past several months been entirely focused on working with the Purchaser of the Debtors' assets, and have been unavailable to assist in discovery matters relating to the Avoidance Actions. The work with the Purchaser continues and is not expected to abate any time soon. "Entry of a stay will serve to minimize the costs and expenses to all parties should the Avoidance Actions be dismissed," Mr. Chinitz asserts. "Moreover, if the Avoidance Actions are not dismissed, a stay of the discovery time periods will prevent prejudice to all of the parties." 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. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) WINSTAR COMMS: Case Management Conference Slated for Aug. 22 ------------------------------------------------------------ The Hon. Baxter schedules a case management conference for Winstar Communications and its debtor-affiliates' Chapter 7 cases on Aug. 22, 2005, at 10:00 a.m. The conference will take place at Courtroom 6 of the United States Bankruptcy Court for the District of Delaware. Headquartered in New York, New York, Winstar Communications, Inc., provides broadband services to business customers. The Company and its debtor-affiliates filed for chapter 11 protection on April 18, 2001 (Bankr. D. Del. Case Nos. 01-01430 through 01-01462). The Debtors obtained the Court's approval converting their case to a chapter 7 liquidation proceeding in January 2002. Christine C. Shubert serves as the Debtors' chapter 7 trustee. When the Debtors filed for bankruptcy, they listed $4,975,437,068 in total assets and $4,994,467,530 in total debts. (Winstar Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Judge Jones Sentences Two Ex-Worldcom Accountants --------------------------------------------------------------- U.S. District Judge Barbara Jones sentenced former WorldCom, Inc., accountants Betty Vinson and Troy Normand for their participation in the $11 billion fraud that led to WorldCom's bankruptcy. Bloomberg News reports that Ms. Vinson is sentenced to five months in jail and five months of home detention plus three years probation, while Mr. Normand got probation. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., 215/945-7000) XTREME COS: June 30 Balance Sheet Upside-Down by $1.1 Million ------------------------------------------------------------- Xtreme Companies, Inc. (OTC Bulletin Board: XTME) manufacturer of mission-specific Fire-Rescue and Patrol boats and the exclusive marketer and distributor of the 'Challenger Offshore' line of boats, announced today that it posted record revenue of $552,300 for the quarter ended June 30, 2005 vs. $16,801 for the quarter ended June 30, 2004. The loss per share also decreased to (.03) per share for the quarter ended June 30, 2005 vs. (.06) per share for the quarter ended June 30, 2004. The Company's complete financial results are available on its Form 10-QSB for the period ended June 30, 2005. Xtreme CEO Kevin Ryan stated, "We are extremely pleased to announce these record results. It is clear our business model, which had taken some time to roll out is beginning to pay big dividends. This past quarter we started to gain traction with Fire & Rescue boat sales through Homeland Security grants and increased our efficiency in marketing, sales and production of the Challenger Offshore line. We also added a top tier financial professional as our CFO to assist us in managing what I believe will continue to be a significant period of growth for Xtreme." Xtreme Companies, Inc. -- http://www.xtremecos.com/-- is engaged in manufacturing and marketing of mission-specific Fire-Rescue and Patrol boats used in emergency, surveillance and defense deployments. The boats have been marketed and sold directly to fire and police departments, the U.S. Military and coastal port authorities throughout the United States. Additionally, Xtreme is the exclusive marketer and distributor for Marine Holdings, Inc. (MHI) d/b/a Challenger Offshore which manufactures semi-custom fiberglass boats of 19' to 97' in length, which include leisure, performance, fishing and motor yachts. MHI is best known for their products that compete directly with the industry's largest boat producers. Internationally known race driver and designer Don Aronow, credited as being the architect of the performance boat industry, designed and created some of the hull technologies today used by Challenger Offshore. Mr. Aronow has also been credited with creating companies such as Cigarette, Donzi, Formula, Apache and Magnum. Xtreme holds an option to purchase 100% of the outstanding shares of MHI by March 2006. At June 30, 2005, Xtreme Cos.' balance sheet showed a $1,184,534 stockholders' deficit, compared to a $894,853 deficit at Dec. 31, 2004. YUKOS OIL: Cuts Investment in Two Oil Units By 88% -------------------------------------------------- Interfax reports that Yukos Oil Company reduced investments in OAO Tomskneft and OAO Samaraneftegaz, two of the company's biggest oil units, by 88% in the first half of 2005. Tomskneft's capital expenditures decreased to RUB481 million in 2005 from RUB3.7 billion in 2004, while Samaraneftegaz's fell from RUB315 million in 2004 to RUB16 million. Headquartered in Houston, Texas, Yukos Oil Company is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in the energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for chapter 11 protection on Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742). Zack A. Clement, Esq., C. Mark Baker, Esq., Evelyn H. Biery, Esq., John A. Barrett, Esq., Johnathan C. Bolton, Esq., R. Andrew Black, Esq., Fulbright & Jaworski, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,276,000,000 in total assets and $30,790,000,000 in total debts. On Feb. 24, 2005, Judge Letitia Z. Clark dismissed the Chapter 11 case. (Yukos Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Proskauer Rose Names L. Solomon & B. Fader as Department Chairs ----------------------------------------------------------------- Proskauer Rose LLP, an international law firm with over 625 lawyers in the U.S. and Europe, disclosed that Louis M. Solomon and Bruce E. Fader have been named new co-Chairs of the Firm's Litigation Department. The veteran litigators will look to continue the impressive growth of the department, which has experienced a three-fold increase in revenue over the past seven years, and, at more than 200 attorneys in three practice areas and more than 15 distinct practice groups, has among the highest percentages of litigators among international or national law firms. Mr. Solomon joined Proskauer Rose in 2003, when attorneys from the prominent litigation boutique, Solomon, Zauderer, Ellenhorn, Frischer & Sharp, merged with Proskauer. He has tried over 50 complex commercial cases to courts, juries, and regulatory and arbitral tribunals nationally and internationally. Most recently, Mr. Solomon represented the New York Jets in a string of important litigation victories against Cablevision related to the development of Manhattan's West Side. Other notable clients have included PepsiCo and W.R. Huff Companies, for whom he recently achieved post-trial a precedent-setting result in the area of cross-boarder restructurings. Mr. Fader has been part of Proskauer Rose's Litigation Department since joining the Firm in 1976 and has served as a member of the Firm's six person Executive Committee. He regularly represents U.S., French, Italian, and Japanese companies in both court proceedings and international arbitrations. His clients include several significant life sciences and pharmaceutical product companies. On the plaintiff's side, he has recovered more than $100 million after trial three times and has dozens of other multi-million dollar recoveries. On the defense side, he has handled significant securities and antitrust matters for U.S. and foreign companies, including the successful defense of a 10b-5 class action during an eight week jury trial. "Proskauer has built an extraordinarily powerful litigation department by attracting or training talented attorneys who have extensive experience in trying cases and substantive expertise in a number of critically important practice areas," said Proskauer Chairman Allen I. Fagin. "No two people are more illustrative of the litigation talent at this firm than Lou and Bruce, attorneys who have built their careers in the courtroom, litigating high-stakes cases with exceptional skill and insightful and persuasive arguments," he added. "As we look to the future and continue to build our department to even greater breadth and depth, we are fortunate to have them leading the way." Mr. Solomon also serves as litigation head of the firm's International Practice Group and co-head of the firm's Antitrust and Trade Regulation Practice Group. His international litigations involving U.S. and foreign clients have included matters in numerous EU countries, Latin America (Argentina, Peru), the Far East (Thailand, Taiwan, the Philippines), and the former Soviet Union. Mr. Solomon earned his law degree, magna cum laude, from Harvard Law School in 1979. Mr. Fader has been extensively involved with the Legal Aid Society, where he now serves as a Director, and with the Association of the Bar of the City of New York, where he has served on the Judiciary Committee, the State Court Committee, the Federal Courts Committee and the Committee on the Second Century. He also served as part of an American Judicature Society team that produced an extensive report that led to major changes in the jurisdiction of the New York Court of Appeals. He earned his law degree from Brooklyn Law School in 1974. Proskauer Rose -- http://www.proskauer.com/-- founded in 1875, is one of the nation's largest law firms, providing a wide variety of legal services to clients throughout the United States and around the world from offices in New York, Los Angeles, Washington, D.C., Boston, Boca Raton, Newark, New Orleans and Paris. The firm has wide experience in all areas of practice important to businesses, including corporate finance, mergers and acquisitions, general commercial litigation, private equity and fund formation, patent and intellectual property litigation and prosecution, labor and employment law, real estate transactions, bankruptcy and reorganizations and taxation. Its clients span industries including chemicals, entertainment, financial services, health care, hospitality, information technology, insurance, internet, manufacturing, media and communications, pharmaceuticals, real estate investment, sports, and transportation. * Proskauer Rose Names Bert Deixler to Head Los Angeles Office -------------------------------------------------------------- Proskauer Rose LLP, an international law firm with over 625 lawyers in the U.S. and Europe, named Bert H. Deixler to head the firm's Los Angeles office. A veteran litigator who has represented entities and individuals in a wide variety of industries including the entertainment, consumer goods, real estate, and securities businesses, Mr. Deixler will guide an office that has enjoyed exceptional growth since it was opened in 1979 as Proskauer's first office outside of New York. "This is a great time in Proskauer's history and in the history of our Los Angeles office," said Mr. Deixler. "The last five years of growth and record profitability, coupled with the increasing depth in our litigation, corporate and labor and employment practices, have created a platform that has allowed our Los Angeles office to provide first rate client service and a harmonious environment in which our lawyers and staff can thrive and enjoy their work. "Over the course of the next five years, we will continue our dynamic course of success and maintain the special feeling that distinguishes Proskauer," he added. "I am thrilled at the opportunity to lead this effort." "For years, Bert has been one of our best litigators and I have no doubt he will have equal success with the growth of our Los Angeles office as he has had in the courtroom on behalf of our clients," said Proskauer Chairman Allen I. Fagin. In addition to his work on behalf of clients such as American Honda, Bed, Bath and Beyond, DIC Entertainment, Mattel Inc., V-2 Records, Sanctuary Music Group, Emmis Radio, City of Simi Valley, Tom Petty, Snoop Dogg, Guns N' Roses, and No Doubt, to name just a few, Mr. Deixler has been actively involved in pro bono legal and civic matters. One of his most recent pro bono cases took him before the United States Supreme Court this term, where he successfully argued that the California Department of Corrections' practice of segregating male prisoners by race was unconstitutional. In addition, he has acted as counsel on a host of police conduct investigative commissions in the City of Los Angeles and serves as a Board Trustee for legal and charitable organizations. Before joining Proskauer in 2000, Mr. Deixler was a partner in McCambridge, Deixler & Marmaro and, prior to that, was an associate and partner at Manatt, Phelps. Before re-entering private practice, he served as an Assistant United States Attorney for the Central District of California, where he prosecuted, among many other significant matters, securities fraud cases against the founder of the Mattel Corporation, bribery cases against senior executives of Hughes Aircraft, and regulatory violations against Santa Fe Railroad. Proskauer Rose -- http://www.proskauer.com/-- founded in 1875, is one of the nation's largest law firms, providing a wide variety of legal services to clients throughout the United States and around the world from offices in New York, Los Angeles, Washington, D.C., Boston, Boca Raton, Newark, New Orleans and Paris. The firm has wide experience in all areas of practice important to businesses, including corporate finance, mergers and acquisitions, general commercial litigation, private equity and fund formation, patent and intellectual property litigation and prosecution, labor and employment law, real estate transactions, bankruptcy and reorganizations and taxation. Its clients span industries including chemicals, entertainment, financial services, health care, hospitality, information technology, insurance, internet, manufacturing, media and communications, pharmaceuticals, real estate investment, sports, and transportation. ********* 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 ***