T R O U B L E D C O M P A N Y R E P O R T E R Monday, August 29, 2005, Vol. 9, No. 204 Headlines ACETEX CORP: S&P Withdraws B+ Senior Unsecured Debt Ratings AFFINIA GROUP: Moody's Affirms Sr. Subordinated Notes' Junk Rating ALLIED HOLDINGS: Court Grants Final Access to $230 Mil. DIP Loan ALLIED HOLDINGS: Court Approves Assignment of Timberland Lease AMERISOURCEBERGEN: Refinancing Debt & Expanding Repurchase Program AR UTILITY: Co-Owner Asks Court to Withdraw Strojnik Retention ARMSTRONG WORLD: Bank One Resigns from Creditors Committee ATA AIRLINES: Can Use ATSB Lenders' Cash Collateral Until Sept. 28 ATA AIRLINES: Chicago Express Creditors Want an Official Committee ATLANTICA NY YACHT: Voluntary Chapter 11 Case Summary AUTO BEAUTY: Case Summary & 24 Largest Unsecured Creditors AVITAR INC: AMEX to Halt Common Stock Trading Today BALLY TOTAL: Stephen Swid Resigns From Board of Directors BEVERLY ENTERPRISES: NASC Increases Take-Over Bid to $1.9 Billion BIOVAIL CORP: S&P Affirms BB+ Long-Term Corporate Credit Rating BIRCH TELECOM: Wants to Hire Skadden Arps as Bankruptcy Counsel BIRCH TELECOM: Wants to Continue Engagement of AEG Partners BRASS CITY: Case Summary & 20 Largest Unsecured Creditors BROCKWAY PRESSED: Gets Court Nod to Employ Perkins Coie as Counsel BUEHLER FOODS: Wants Until Oct. 31 to File Chapter 11 Plan BUEHLER FOODS: Kentucky Unit Taps SSG Capital as Financial Advisor CARGO CONNECTION: June 30 Balance Sheet Upside-Down by $3.9 Mil. CATHOLIC CHURCH: Portland Lays Down Treatment of Private Documents CHARTER COMMS: S&P Places Junk Corporate Credit Rating on Watch CIRCUS & ELDORADO: S&P Lowers Issuer Credit Rating to B from B+ CITGO PETROLEUM: S&P Affirms BB Corporate Credit Rating CRESCENT CAPITAL: Case Summary & 5 Largest Unsecured Creditors CROWN HOLDINGS: Selling Global Plastic Closures Unit to Financiere EASYLINK SERVICES: Seeks NASDAQ Hearing to Address Non-Compliance ELDORADO RESORTS: S&P Lowers Corporate Credit Rating to B from B+ ESCHELON TELECOM: Equity Deficit Widens to $22.98 Mil. at June 30 EURAMAX INT'L: Moody's Junks 2nd Lien Sr. Sec. Credit Facility GE COMMERCIAL: Fitch Rates 3 Certificate Classes at Low-B GITTO GLOBAL: Chapter 7 Trustee Wants 401(k) Plan Trustee Replaced GLOBAL IMAGING: Moody's Lifts $57.5 Million Notes' Rating to Ba3 GREGORY TIFT: Case Summary & 14 Largest Unsecured Creditors GUGGENHEIM STRUCTURED: Fitch Puts BB Rating on $10MM Fixed Notes HILITE INDUSTRIES: Moody's Junks $30 Million Senior Sub. Notes HASCO: Fitch Assigns BB Rating to $5.1MM Private Certificates HOLLINGER INC: Inspection Costs Top $11M as Access Problems Stir HOLLINGER INC: Has $65.9 Million of Cash on Hand at Aug. 19 HOLLINGER INC: Court OKs Rattee & Drinkwater Appointments to Board HUNTSMAN INT'L: Moody's Assigns B1 Corporate Family Rating HUSMANN-PEREZ: Judge Paskay Dismisses Bad Faith Chapter 22 Filing INFOUSA INC: Looks for Other Options After Rejecting $390-Mil Bid INFOUSA INC: S&P Revises CreditWatch Implications to Developing INSEQ CORPORATION: June 30 Balance Sheet Upside-Down by $414,700 INTERACTIVE MOTORSPORTS: Equity Deficit Tops $2 Mil. at June 30 KAISER ALUMINUM: Files First Amended Plan & Disclosure Statement KMART CORP: Stay Partially Lifted to Allow Donna Norton Action KMART CORP: Court Approves Critical Vendor Settlement LAND O'LAKES: S&P Raises Corporate Credit Rating to B+ from B LB-UBS COMMERCIAL: Fitch Puts Low-B Rating on Three Cert. Classes LIN TV: S&P Lowers Long-Term Corporate Credit Rating to B+ MARIA PARHAM: Poor Performance Prompts Fitch to Downgrade Rating MCI INC: Eight Officers Acquire 4,600 Shares of Common Stock MCKESSON CORP: Moody's Rates Senior Subordinated Shelf at (P)Ba1 MERIDIAN AUTOMOTIVE: Evaluates 95 Reclamation Claims from Vendors MERIDIAN AUTOMOTIVE: Panel Wants Clarification on Huron's Fee Cap MERIDIAN AUTOMOTIVE: Union & UST Object to KERP Implementation METALFORMING TECH: Arranges Private Sale of Lexington Assets METALFORMING TECH: Wants Lease Decision Period Extended to Nov. 15 METALFORMING TECHNOLOGIES: Hires Fisher Phillips as Labor Counsel MIKE TEOFILOVICH: Case Summary & 7 Largest Unsecured Creditors MORGAN STANLEY: Fitch Lowers Rating on Seven Certificate Classes NBTY INC: Buying Back 8-5/8% Senior Subordinated Notes for Cash NEW WORLD PASTA: Wants Financial Balloting as Solicitation Agent PATHMARK STORES: John Standley Replaces Eileen Scott as CEO PATTEN TOWERS: Case Summary & 20 Largest Unsecured Creditors PLYMOUTH RUBBER: Releases List of Equity Security Holders POUNDS & FRANCS: Case Summary & 20 Largest Unsecured Creditors PROVIDIAN FIN'L: Regulator OKs $6.5-Bil Sale to Washington Mutual RISK MANAGEMENT: Retains Finley & Buckley as Special Counsel RITE AID: Kevin Twomey Replaces John Standley as CFO ROBEWORKS INC: Files for Chapter 11 Protection in C.D. California ROBEWORKS INC: Case Summary & 20 Largest Unsecured Creditors RUSSELL-STANLEY: Files Schedules of Assets and Liabilities S-TRAN HOLDINGS: Wants DIP Loan & Cash Collateral Use Extended SCIENTIFIC GAMES: Extends 6-1/4% Exchange Offer Until Tomorrow SEA CONTAINERS: Losses Cue S&P to Place Ratings on Negative Watch SEQUOIA: Increased Credit Support Cues Fitch's Rating Upgrades SIX FLAGS: Board Soliciting Bids To Compete with Red Zone Offer SIX FLAGS: S&P Places B- Corporate Credit Rating on CreditWatch SOLUTIA INC: Roux Associates Holds $1.5M Allowed Unsecured Claim STATION CASINOS: Issuing $150MM 6-7/8% Senior Subordinated Notes TENET HEALTHCARE: Non-Filing of Financials Prompt Default Notice TFS ELECTRONIC: Section 341 Meeting Slated for Sept. 27 TFS ELECTRONIC: Wants to Access $2.5 Million DIP Financing TOWER AUTOMOTIVE: Court Okays General Motors' Settlement Pact TOWER AUTOMOTIVE: Court Okays Steel Supply Pact & Cure Payment TOWER AUTOMOTIVE: Commercial Agreements with Trim Trends Approved TRICOM S.A.: Posts $20.8 Million Net Loss in Second Quarter TRIM TRENDS: Commercial Agreements with Tower Automotive Approved UNICAL INT'L: Ch. 7 Trustee Gets Court Nod to Hire ASK Financial UNITED RENTALS: Noteholders Band to Negotiate Consent Offer Terms UNUMPROVIDENT CORP: S&P Affirms BB+ Counterparty Credit Rating USG CORP: Joint Discovery Plan Hearing Slated for Sept. 20 VALLEY CITY: Committee Gets Court OK to Hire Thorp Reed as Counsel VARTEC TELECOM: IR Committee Wants to Modify Scouler's Retention W.R. GRACE: Wants to Hire Foley Hoag as Environmental Counsel WELLCARE HEALTH: Moody's Reviews B2 Senior Secured Debt Rating WESTERN SKIES: Voluntary Chapter 11 Case Summary WINMAX TRADING: Equity Deficit Nears $2 Million at June 30 WORLDCOM INC: Moves for Summary Judgment on Deutsche Bank's Claim * BOND PRICING: For the week of Aug. 22 - Aug. 26, 2005 ********* ACETEX CORP: S&P Withdraws B+ Senior Unsecured Debt Ratings ----------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'B+' corporate credit and senior unsecured debt ratings on Acetex Corp. following the redemption of the outstanding 10-7/8% notes on Aug. 19, 2005, by its new parent, Celanese Corp. Celanese, the parent of BCP Crystal US Holdings Corp. (B+/Positive/--), acquired Acetex for $492 million on July 20, 2005. Vancouver, British Columbia-based Acetex is the second-largest producer of acetic acid in Europe. AFFINIA GROUP: Moody's Affirms Sr. Subordinated Notes' Junk Rating ------------------------------------------------------------------ Moody's Investors Service has lowered the speculative grade liquidity rating of Affinia Group Inc. to SGL-4 from SGL-3. At the same time, the rating agency affirmed the company's long-term ratings and stable outlook. The actions reflect: * Affinia's weaker-than-planned operating earnings year-to-date in 2005; * the negative impact to available external liquidity arising from financial covenant calculations based on trailing EBITDA; and * step-downs in the maximum leverage ratio under its bank credit agreement that occur over the next 6 months. However, Affinia has been able to reduce actual levels of indebtedness from year-end 2004 through improved working capital management and lower than plan cash restructuring costs. Going forward, completed restructuring actions should yield savings and improved operating performance. Anticipated seasonal unwinding of working capital in the second half of 2005 will also facilitate debt reduction until seasonal working capital requirements arise in the first half of 2006, when higher levels of free cash flow are expected. Consequently, the company faces uncertainty regarding access to its external committed facilities and financial covenant compliance, but should develop improved cushion under those covenants and stronger profitability over the intermediate term. Ratings changed: * Speculative Grade Liquidity to SGL-4 from SGL-3 Ratings affirmed: * Corporate Family, B2 * Senior Secured 1st lien bank credit facilities, B2 * Senior Subordinated Notes, Caa1 In the first half of 2005 Affinia generated adjusted EBITDA of approximately $57 million and reduced aggregate indebtedness roughly $30 million during a period that typically experiences an increase in external financing due to seasonal working capital requirements. In addition, during the second quarter it incurred incremental purchase price and working capital settlements from the company's leveraged acquisition in late 2004. The company has completed a number of restructuring actions in the first half. The time lag in recovering higher steel costs through pricing actions has run most of its course with metal prices having retreated from earlier highs. Combined, savings from restructuring actions, lower raw material costs, the return of cash from the sale of its Beck-Arnley unit, and the seasonal unwinding of working capital in the second half of 2005 are anticipated to lower debt levels and generate stronger performance. On a fully adjusted basis (using Moody's standard adjustments for accounts receivable securitization, the modified present value of operating leases and a seller PIK note), Affinia's debt/EBITDA will be in excess of 5 times. EBIT/Interest coverage in 2005 is anticipated to be greater than 1.5 times. Aftermarket replacement demand for Affinia's core filter, chassis and brake parts remains fairly stable but continues to be subject to levels of aggregate miles driven and disposable income, both of which can be affected by higher fuel prices. Margins are also exposed to the sales mix between premium and value parts, pressure from lower cost offshore competitors and changes in raw material costs. Consequently, the existing long term ratings and outlook have been affirmed. At the end of June, Affinia had approximately $34 million of cash. The sale of Beck Arnley at the end of the first quarter resulted in the return of some $17 million of cash to the parent and eliminated the potential need for further support for that operating unit. Quarterly free cash flow will have some variation due to working capital seasonality, but is expected to be positive over the next twelve months. Planned restructuring activities for 2005 have been substantially completed, but will involve some on- going cash disbursements. External liquidity is provided by a $125 million term revolving credit facility (no borrowings at June 3 but $7 million of letters of credit had been issued at March 31), and a $100 million accounts receivable securitization facility which also has a term commitment ($27 million was utilized at the end of June). The ability to develop alternate liquidity arrangements is constrained due to the extent of the bank liens over the asset base and asset sale recapture provisions under the bank credit facilities. Bank financial covenants include a debt/EBITDA ceiling, maximum capital expenditures and a minimum interest coverage ratio. Affinia was in compliance with these covenants at the end of June. However, the permissible debt/EBITDA ratio reduces at the end of the 3rd quarter and again at the end of the 4th quarter. Given the operating performance of the company and the effect of calculating the ratio on a last twelve months basis with stronger historical results being replaced with weaker current quarters, headroom for compliance with the leverage covenant is anticipated to reduce and constrict effective available amounts under the revolving credit. Should there be a violation of the revolving credit facility's financial covenants, access to the accounts receivable securitization facility may also be impacted. As a result, Affinia's speculative grade liquidity rating has been reduced to SGL-4 from SGL-3. The rating reflects: * modest cash balances; * expectations for internal cash flow and balance sheet liquidity to cover working capital and capital expenditures over the next twelve months; * limited availability under its revolving credit facility due to financial covenant constraints; * the potential for covenant compliance issues to affect access to its accounts receivable securitization facility; and * minimal scope to arrange alternative liquidity given the secured nature of the bank credit facilities. Affinia Group Inc. is a leading designer, manufacturer and distributor of: * automotive aftermarket components for passenger cars, * SUVs, * light and heavy trucks, and * off-highway vehicles. Its principal product range includes brake, filtration and chassis products and is sold across: * North America, * Europe, and * South America. Its annual revenues are approximately $2.1 billion. ALLIED HOLDINGS: Court Grants Final Access to $230 Mil. DIP Loan ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia gave its final approval to Allied Holdings, Inc., and its debtor affiliates' request to borrow up to $230 million from General Electric Capital Corp., Morgan Stanley Senior Funding, Inc., and Marathon Structured Finance Fund. The DIP Credit Facility includes a $130 million revolving credit line and $100 million in two term loans. The Official Committee of Unsecured Creditors and all non-debtor parties-in-interest will have until September 29, 2005, to investigate the validity, perfection and enforceability of the Prepetition Liens and the amount and allowability of the Prepetition Indebtedness, or to assert any other claims or causes of action against the Prepetition Agents or Prepetition Lenders. Committee Objections Richard B. Herzog, Jr., Esq., at Nelson, Mullins Riley & Scarborough, LLP, Atlanta, Georgia, tells the Court that from the beginning of the Debtors' Chapter 11 cases, the Official Committee of Unsecured Creditors has worked constructively with the Debtors and their counsel toward understanding fully the terms of the DIP Facility Agreement and have provided comments to both the DIP Facility Agreement and the Proposed Final Order. Mr. Herzog adds that the Committee has not seen a proposed amendment to the DIP Facility Agreement and therefore, has not had the opportunity to confirm that their comments are indeed accurately reflected in the documentation and that any additional modifications to the DIP Facility Agreement and the Final Order are acceptable to the Committee. The Committee wants to reserve any and all rights to object to the extent that its comments are not accepted or to the extent further modifications are made to the DIP Agreement or the Final Order. United States Trustee The United States Trustee notes that the Debtors proposed that financing under the DIP Facility would have priority over all administrative expenses other than the Carve-Out. The U.S. Trustee contends that this provision evidences overreaching by the lenders and is not in the best interest of the estate. If approved, the DIP Facility would prevent the administration of the Debtors' Chapter 11 cases by a trustee, as it would be impossible to compensate professionals and reimburse expenses of administration pursuant to the priorities set forth in the Bankruptcy Code. A full-text copy of the Final DIP Order is available for free at: http://bankrupt.com/misc/alliedfinalDIPorder.pdf Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIED HOLDINGS: Court Approves Assignment of Timberland Lease -------------------------------------------------------------- As previously reported in the Troubled Company Reporter, Allied Holdings, Inc., and its debtor-affiliates asked the U.S. Bankruptcy Court for the Northern District of Georgia for authority to reject a non-residential real property lease dated February 14, 1991, for 12,427 square feet of general office space located at Troy, Michigan, by and between Timberland Four Limited Partnership, as lessor, and Complete Auto Transit, Inc., as lessee. Complete Auto later assigned its rights under the lease to Allied Automotive Group, Inc. In a Consent Order, Judge Drake rules that effective as of July 31, 2005, Allied Automotive Group, Inc., will assume and assign its interests under these subleases to Timberland Four Limited Partnership, now known as Timberland Four, LLC, or its designee -- Timberland Four Holdings LLC: (a) the sublease agreement dated January 9, 2003, between Allied Automotive, as sublessor, and Title Source, Inc., as sublessee for a portion of the Premises; (b) the sublease agreement dated March 1, 2005, between Allied Automotive, as sublessor, and Kirby Services LLC, as sublessee for a portion of the Premises; and (c) the sublease agreement dated May 1, 2005, between Allied Automotive, as sublessor, and Associated Technologies Group, as sublessee for a portion of the Premises. Furthermore, effective as of July 31, 2005: -- the Lease is deemed to be amended to exclude all square footage of the Premises not currently subleased pursuant to any of the Subleases; and -- Allied Automotive does assign its interests under the Lease to Timberland Four or its designee. Timberland Four is deemed released from any and all claims that Allied Automotive may have pursuant to the Lease. All security deposits previously paid to Allied Automotive will be assigned to Timberland Four. All rents under the Subleases payable from and after August 1, 2005, will be assigned and paid to Timberland Four. Timberland Four will have an administrative expense claim for any of Allied Automotive's obligations under the Lease, in the maximum amount of one-month's rent obligations, subject to reductions. The Debtors are required to promptly pay the Administrative Expense Claim. Timberland Four will also be permitted to file a prepetition general unsecured claim for an amount equal to any unpaid prepetition amounts due under the Lease, plus damages incurred. But that claim will be capped and will be reduced by the amount of any rent received by Timberland Four by any new tenant for occupancy of any portion of the Excluded Premises from August 1, 2005, to March 31, 2006. The Subtenants have until September 13, 2005, to object to the Consent Order. If no objections are timely filed, the Consent Order will be deemed final. The Consent Order was prepared and presented by Harris B. Winsberg, Esq., at Troutman Sanders LLP, representing the Debtors, and Howard N. Luckoff, Esq., at Honigman Miller Schwartz and Cohn, counsel for Timberland Four LLC and Timberland Four Holding LLC. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case No. 05-12515). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMERISOURCEBERGEN: Refinancing Debt & Expanding Repurchase Program ------------------------------------------------------------------ AmerisourceBergen Corporation (NYSE:ABC) is commencing a cash tender offer for its $500 million 8.125% senior notes due in 2008 and its $300 million 7.25% senior notes due in 2012, which the Company intends to finance with the proceeds of a private placement of debt. Further, provided the tender is completed, the Company's Board of Directors has authorized an increase to the amount available under its current common stock repurchase program to a total availability of $750 million. "Successful refinancing of our current senior notes will increase our financial flexibility by allowing AmerisourceBergen to obtain long-term, lower interest rates and improved terms," said R. David Yost, AmerisourceBergen's Chief Executive Officer. "Repurchasing our shares reflects AmerisourceBergen's strong cash position." Michael D. DiCandilo, AmerisourceBergen's Executive Vice President and Chief Financial Officer said, "With long-term interest rates at historically low levels, this is an opportune time to refinance these notes and lower our interest expense for the future. "Excluding the anticipated refinancing charge of approximately $70 million after-tax related to the tender offer premium and the write-off of unamortized deferred financing costs, our diluted earnings per share expectations for fiscal 2005 remain unchanged. Those expectations are diluted earnings per share from continuing operations before the cumulative effect of an accounting change of between $3.30 and $3.50 on a GAAP basis. "We continue to estimate that diluted earnings per share in fiscal 2006 will be between $3.60 and $4.40, on a GAAP basis. We are currently in the middle of our extensive annual planning process, and we expect to update our guidance for fiscal year 2006 in early November, when we announce results for fiscal year 2005." The cash tender offer is for any and all $500 million of AmerisourceBergen's outstanding 8.125 percent senior notes due 2008 and any and all $300 million of its outstanding 7.25 percent senior notes due 2012 and includes a solicitation of consents to eliminate certain restrictive covenants from the indentures governing the notes. The offer is also conditioned on, among other things, the execution of financing for the cash tender price. The offer and consent solicitation are being made pursuant to an Offer to Purchase and Consent Solicitation Statement dated Aug. 25, 2005. The total consideration will be determined by pricing both notes, using standard market practice, to the maturity dates at: * a fixed spread of 50 basis points over the bid side yield on the 4.125% U.S. Treasury Note due Aug. 15, 2008, for the 8.125% notes, and * a fixed spread of 50 basis points over the bid side yield on the 4.00% U.S. Treasury Note due Nov. 15, 2012, for the 7.25% notes, determined at 2:00 p.m. Eastern Daylight Time on the business day immediately following the consent date, which the Company expects to be Sept. 8, 2005, by reference to the Bloomberg Government Pricing Monitor. Holders who tender and deliver their consents to the proposed amendments to the indenture governing the notes by 5:00 p.m. Eastern Daylight Time on Sept. 8, 2005, will be eligible to receive the total consideration, which includes a consent payment equal to $30 per $1,000 principal amount of notes tendered. Holders who tender and deliver their consents to the proposed amendments to the indenture governing the notes by 5:00 p.m. Eastern Daylight Time on Sept. 8, 2005, will be eligible to receive the total consideration, which includes a consent payment equal to $30 per $1,000 principal amount of notes tendered. Holders who tender after the consent date but by 5:00 p.m. Eastern Daylight Time on Sept. 23, 2005, will be eligible to receive the tender offer consideration, which equals the total consideration less the consent payment. The offer and consent solicitation are subject to, and conditioned upon, the satisfaction or, where applicable, waiver of certain conditions, as described in the Offer to Purchase and Consent Solicitation Statement. There can be no assurance that any of such conditions will be met. Lehman Brothers Inc. is the Dealer Manager and Solicitation Agent, and D.F. King & Co., Inc. is the Information Agent, in connection with the offer and consent solicitation. Requests for information should be directed to Lehman Brothers Inc. at (212) 528-7581 (call collect) or (800) 438-3242 (toll free). Requests for documents should be directed to D.F. King & Co., Inc. at (212) 269-5550 or (800) 859-8508 (toll free). This news release is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of consents with respect to any securities. The offer and consent solicitation are being made solely by the Offer to Purchase and Consent Solicitation Statement. Subject to completion of the tender offer and the related debt financing, the AmerisourceBergen Board of Directors has authorized an increase in the current stock repurchase program begun in May to a total availability of $750 million. The Company currently has used $94 million of the initial $450 million authorization and would add $394 million to the program. AmerisourceBergen will repurchase the shares from time to time for cash in open market transactions in accordance with applicable federal securities laws and in accordance with any terms of its debt instruments. The Company will hold any repurchased shares as treasury shares, which will be available for general corporate purposes. AmerisourceBergen (NYSE:ABC) -- http://www.amerisourcebergen.com/ -- is one of the largest pharmaceutical services companies in the United States. Servicing both pharmaceutical manufacturers and healthcare providers in the pharmaceutical supply channel, the Company provides drug distribution and related services designed to reduce costs and improve patient outcomes. AmerisourceBergen's service solutions range from pharmacy automation and pharmaceutical packaging to pharmacy services for skilled nursing and assisted living facilities, reimbursement and pharmaceutical consulting services, and physician education. With more than $54 billion in revenue, AmerisourceBergen is headquartered in Valley Forge, PA, and employs more than 14,000 people. AmerisourceBergen is ranked #23 on the Fortune 500 list. * * * As reported in the Troubled Company Reporter on Apr. 18, 2005, Moody's Investors Service confirmed AmerisourceBergen Corporation's Ba2 senior implied rating and upgraded the company's senior unsecured notes to Ba2 from Ba3. Moody's withdrew the B1 rating on January 3, 2005, Amerisource Health Corporation's 5% convertible subordinated notes, following the conversion of substantially all of these notes to equity. Moody's also upgraded ABC's speculative grade liquidity rating to SGL-1 from SGL-2. The rating outlook is stable. This concludes Moody's rating review for possible upgrade that was initiated on December 10, 2004. The confirmation of ABC's Ba2 senior implied rating is supported by: (1) ABC's unanticipated and reduced earnings and cash flow guidance (excluding one time liquidation benefits) for fiscal year 2005; (2) the likelihood that excess cash generated from recent inventory liquidation will be used for shareholder initiatives; and (3) uncertainty associated with changes in PharMerica reimbursement. The senior unsecured notes are being upgraded to Ba2 from Ba3 because of the elimination of secured bank debt. As a result, all senior creditors are pari-passu with no preferential standing in the capital structure. AR UTILITY: Co-Owner Asks Court to Withdraw Strojnik Retention -------------------------------------------------------------- Cynthia Reynoso, who owns a 49% equity stake in AR Utility Specialists, Inc., asks the U.S. Bankruptcy Court for the District of Arizona to set aside its June 29, 2005, order approving the Debtor's retention of Peter Strojnik, Esq., as special counsel. The Debtor hired Mr. Strojnik to pursue potential claims against Ms. Reynoso and two former senior-level officers of AR Utility, Eduardo Alonzo and Ruben Hinojos. The Debtor has filed a separate lawsuit in Maricopa County Superior Court in connection with these claims. Ms. Reynoso has also lodged a counter suit in the same court. Ms. Reynoso raises two objections to Mr. Strojnik's engagement: a) Mr. Strojnik had a direct financial interest in the unlawful merger transaction between his company, Binary Mass Propulsion Systems, Inc., and the Debtor; b) the Debtor has not identified any compelling reason for Mr. Strojnik's retention. Unlawful Merger Ms. Reynoso's counsel, Christopher H. Bayley, Esq., at Snell & Wilmer LLP, says that Mr. Strojnik and Alejandro Reynoso attempted a merger between the Debtor and Binary Mass that would have deprived Ms. Reynoso of her entire ownership interest in AR Utility. The merger proposal, approved without Ms. Reynoso's knowledge and consent, purported to give Ms. Reynoso a miniscule non-voting interest in Binary Mass that would be purchased at an artificially low price unilaterally selected by Mr. Reynoso. Mr. Bayley claims that, through the proposed merger: a) Binary Mass executed a three-year contract with CSK Partnership, in which Mr. Strojnik is a partner, whereby Binary Mass agreed to pay CSK Partnership $180,000 per year, plus 25% of the company's annual gross profits before taxes, for unspecified consulting services. Ms. Reynoso says the Debtor made a $15,000 payment in June under this agreement and intends to continue paying CSK Partnership the $15,000 monthly fee. b) Binary Mass signed an agreement retaining Mr. Strojnik as as General Counsel following its purported merger with the Debtor. Ms. Reynoso says that Mr. Strojnik has received $39,000 from the Debtor under this agreement. No Compelling Reason for Strojnik Appointment Ms. Reynoso also argues that the Debtor hired Mr. Strojnik to perform general corporate counsel services without providing any detail as to the nature of these services or why the debtor's bankruptcy counsel, Lewis & Roca, LLP, cannot perform them. Ms. Reynoso explains that the Debtor should hire an independent counsel with no proprietary or financial interest in the claims if it wishes to pursue valid claims against her in the Bankruptcy Court. Debtor Responds The Debtor defends Mr. Strojnik's retention, saying that his knowledge of the issues involved in the state court suit against Ms. Reynoso and others qualify him as special counsel. The Debtor explains that Lewis & Roca would need to expend estate resources to educate themselves about the facts underpinning the litigation. Henk Taylor, Esq., at Lewis & Roca, reminds the Court that Ms. Reynoso is pointing to a merger that was ultimately undone prior to the petition date. Mr. Taylor contends that Mr. Strojnik's involvement in those events has no impact on his employment. Mr. Taylor further says that the issues presented by Ms. Reynoso were fully disclosed in the Debtor's retention application and none of them prevent Mr. Strojnik's employment. According to Mr. Taylor: a) Mr. Strojnik, though a member of CSK Partnership, has agreed not receive any compensation from that partnership; b) Mr. Strojnik resigned as the Debtor's secretary on June 14, 2005; c) the $39,000 prepetition payment refers to pre-petition legal services provided by Mr. Strojnik and does not create any interest adverse to the estate. Based on these facts, Mr. Taylor says the Court should reject Ms. Reynoso's objections and uphold the retention of Peter Strojnik. Headquartered in Phoenix, Arizona, AR Utility Specialists, Inc. -- http://www.arusi.net/-- is an engineering and design firm for utilities serving the metropolitan Phoenix area. The Debtor filed for chapter 11 protection on June 10, 2005 (Bankr. D. Ariz. Case No. 05-10489). J. Henk Taylor, Esq., at Lewis And Roca LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $1 million to $10 million. ARMSTRONG WORLD: Bank One Resigns from Creditors Committee ---------------------------------------------------------- Kelly Beaudin Stapleton, the United States Trustee for Region 3, informs the Court that Bank One, N.A., as Successor Indenture Trustee, has resigned from the Official Committee of Unsecured Creditors in Armstrong World Industries, Inc., and its debtor- affiliates' chapter 11 cases effective August 24, 2005. The Creditors Committee is currently composed of eight members: (1) Wachovia Bank, N.A. Attention: James S. Barwis 191 Peachtree Street, 23rd Floor Atlanta, GA 30303 (404) 443-1326 (2) Deutsche Bank Attention: Barbara Eppolito 130 Liberty Street, MS 2707 New York, NY 10006 (212) 250-5446 (3) Wells Fargo Bank Minnesota, N.A., as Indenture Trustee Attention: Craig D. Litsey Sixth Street and Marquette Avenue, MAC No. N9303-120 Minneapolis, MN 55479 (612) 667-4160 (4) Law Debenture Trust Company of New York Attention: Adarn Berman 767 Third Avenue, 31st Floor New York, NY 10017 (212) 750-6474 (5) OCM Opportunities Fund III, L.P. c/o Oaktree Capital Management LLC Attention: Brian Berman 1301 Avenue of the Americas, 34th Floor New York, NY 10019 (212) 885-8680 (6) Third Avenue Value Fund Attention: Peter M. Faulkner 767 Third Avenue, 5th Floor New York, NY 10017 (212) 888-2290 (7) Oxy Vinyls, LP Attention: Timothy J. Joyce 5005 LBJ Freeway Dallas, TX 72544 (972) 404-3388 (8) Exxon Mobil Chemical Attention: Patricia F. Shenfelt 13501 Katy Freeway Houston, TX 77079 (281) 584-7662 Frank J. Perch, III, Esq., is the attorney for the Office of the U.S. Trustee assigned to the Debtors' Chapter 11 cases. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. As of March 31, 2005, the Debtors' balance sheet reflected a $1.42 billion stockholders' deficit. (Armstrong Bankruptcy News, Issue No. 81; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Can Use ATSB Lenders' Cash Collateral Until Sept. 28 ------------------------------------------------------------------ ATA Airlines, Inc., its debtor-affiliates and the ATSB Lenders agree that the Debtors may use the ATSB Lenders' cash collateral and other collateral through the earliest of: (i) the close of business on September 28, 2005; (ii) the occurrence of any event of default set forth in the December 10, 2004 Cash Collateral Order; or (iii) the time the Debtors' settlement agreement with the ATSB Lenders and the Official Committee of Unsecured Creditors, approved by the U.S. Bankruptcy Court for the Southern District of Indiana on April 15, 2005, will be materially breached or rendered null and avoid. The parties stipulate that the Debtors will continue paying for the services of Sage-Popovich, Inc., and Lazard Freres & Co. LLC. The Debtors covenant with the ATSB Lenders to maintain: (i) at least $29,815,904 in Available Cash during the Extension Period; and (ii) at least 90% of the Available Cash amount forecasted at each weekend in the Debtors' 13-week cash forecast dated August 16, 2005: Week Ending Available Cash 90% of Available Cash ----------- -------------- --------------------- 08/26/05 $82,842,906 $74,558,615 09/02/05 $62,568,588 $56,311,729 09/09/05 $65,934,145 $59,340,731 09/16/05 $51,534,184 $46,380,765 09/23/05 $55,594,005 $50,034,604 09/30/05 $43,748,652 $39,373,787 The Bankruptcy Court approved this stipulation in all respects. 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. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Chicago Express Creditors Want an Official Committee ------------------------------------------------------------------ Pursuant to Section 1102(a)(2) of the Bankruptcy Code, an ad hoc committee of unsecured creditors, which holds $800,000 in claims against Chicago Express Airlines, Inc., asks the Court to direct the U.S. Trustee to appoint an official committee of unsecured creditors of Chicago Express. The Chicago Express creditors allege that they have been denied adequate representation in the Debtors' jointly administered bankruptcy cases. Aaron L. Hammer, Esq., Esq., at Freeborn & Peters LLP, in Chicago, Illinois, tells the Court that neither the non-Chicago Express Debtors nor the present Creditors Committee have taken any action to avoid the $481 million in guarantee obligations which Chicago Express was required to provide to certain bondholders on account of the non-Chicago Express Debtors' various prepetition financing transactions, although Chicago Express did not benefit from the Guarantees. Mr. Hammer points out that, unsurprisingly, the Creditors Committee -- which has two ATA bondholder members that hold the Chicago Express Guarantee claims -- has not clamored for avoidance of the fraudulent Guarantees. In addition, the non-Chicago Express Debtors siphoned significant value from Chicago Express in the period immediately prior to the Petition Date, which resulted in the $15.6 million net intercompany receivable due from ATA Airlines, Inc., to Chicago Express. Jeffrey Zappone, Esq., at Conway MacKenzie & Dunleavy, in Chicago Illinois, also reports that approximately $2.5 million in administrative expense claims went unpaid by the non-Chicago Express Debtors for ticket sales and other revenue collected on behalf of Chicago Express. While ATA attempted to "zero out" the substantial administrative claim due to Chicago Express by creating a bookkeeping entry reflecting a $4 million tax expense against Chicago Express, this accounting treatment needs to be examined. Mr. Hammer further relates that the non-Chicago Express Debtors ran Chicago Express into the ground and then liquidated a functional, profitable company with over 500 employees for the sole and exclusive benefit of the Non-Chicago Express Parties. Mr. Hammer informs the Court the non-Chicago Express Debtors were reluctant to pursue a going concern sale transaction for Chicago Express and announced in January 2005 that Chicago Express' shutdown even prior to its retention of Compass Advisors LLP to explore Chicago Express sales options. Notwithstanding this "after thought" sales process, and despite the conclusion of Kenneth J. Malek, Esq., the examiner appointed by the U.S. Trustee, that Chicago Express should be sold as a going concern, the Non-Chicago Express Parties conducted an auction for Chicago Express after its shutdown. This flawed decision cost Chicago Express its valuable FAA Operating Certificates and caused it to become unsaleable as an operating airline, Mr. Hammer asserts. Although the Non-Chicago Express Parties ultimately liquidated Chicago Express' equipment and other assets for $1.25 million, the failure to sell the commuter airline as a going concern ultimately cost its creditors substantial amounts of money and further magnified claims against Chicago Express' estate through unnecessary rejection damage claims. Mr. Hammer points that the creditors of the non-Chicago Express Debtors stand to materially benefit at the expense of Chicago Express' creditors upon the extinguishment of the Chicago Express Intercompany Claims, whether by the non-Chicago Express Debtors' questionable bookkeeping entries which "zeroed out" the Chicago Express Administrative Claim, or under a substantive consolidation plan. The creditors of the non-Chicago Express Debtors also stand to benefit from the non-Chicago Express Debtors either: (a) distributing the Liquidation Proceeds to the creditors of the non-Chicago Express Debtors under a substantive consolidation plan; or (b) allowing the non-Chicago Express Debtors' bondholders to siphon over 99% of Chicago Express' value upstream under a non-substantive consolidation plan, by simply not taking any action to avoid the Chicago Express Guarantees. Mr. Hammer tells Judge Lorch that either of these outcomes would be catastrophic for the true Chicago Express creditors, which stand to recover at least 25% on account of their claims from the Liquidation Proceeds alone, assuming appropriate action is taken to protect their rights. The estimated recovery should be further enhanced from collections on the Chicago Express Intercompany Claims and possible additional claims against the Non-Chicago Express Parties. 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. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATLANTICA NY YACHT: Voluntary Chapter 11 Case Summary ----------------------------------------------------- Lead Debtor: Atlantica NY Yacht Cruises, Inc. 1500 Harbor Boulevard Weehawken, New Jersey 07086 Bankruptcy Case No.: 05-17047 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- DMV International Yachts, Inc. 05-17048 VIP Yacht Cruises, Inc. 05-17049 Camelot/DMV, Inc. 05-17050 Type of Business: Chapter 11 Petition Date: August 28, 2005 Court: Southern District of New York (Manhattan) Debtors' Counsel: Barton Nachamie, Esq. Todtman, Nachamie, Spizz & Johns, P.C. 425 Park Avenue New York, New York 10022 Tel: (212) 754-9400 Fax: (212) 754-6262 -- and -- Lewis A. Sassoon, Esq. Sassoon & Cymrot LLP 84 State Street Boston, Massachusetts 02109 Tel: (617) 720-0099 Estimated Assets Estimated Debts ---------------- --------------- Atlantica NY Yacht Less than $50,000 Less than $50,000 Cruises, Inc. DMV International $1 Million to $50,000 to Yachts, Inc. $10 Million $100,000 VIP Yacht Cruises, Inc. Less than $50,000 Less than $50,000 Camelot/DMV, Inc. $1 Million to Less than $50,000 $10 Million The Debtors did not file a list of their 20 largest unsecured creditors. AUTO BEAUTY: Case Summary & 24 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Auto Beauty Shops of Alabama, Inc. 2001 Highway 14 East Selma, Alabama 36703 Bankruptcy Case No.: 05-14778 Chapter 11 Petition Date: August 26, 2005 Court: Southern District of Alabama (Selma) Debtor's Counsel: James L. Day, Esq. Von G. Memory, P.A. P.O. Box 4054 Montgomery, Alabama 36103-4054 Tel: (334) 834-8000 Fax: (334) 834-8001 Estimated Assets: Unknown Estimated Debts: $500,000 to $1 Million Debtor's 24 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service $87,000 801 Tom Martin Drive Birmingham, AL 35211 Alabama Department of Revenue $45,000 Business Tax Division 50 North Ripley Montgomery, AL 36132 American Express Co. $26,987 Dishunch Lacoste & Smith P.O. Box 20677 Tuscaloosa, AL 35402 Compass Bank $13,693 Demopolis Auto Parts $6,327 Specialty Products $5,759 EPI Automotive Supply $4,203 Alabama Gas Company $3,554 Bell South Advertising $3,321 Alabama Power $2,644 Al's Towing $2,182 MBNA $2,157 Parnell & Crum, PA $1,800 Drive Train Specialist $1,500 Jays Pontiac Buick $1,363 Rubber Seal $1,256 Pauls Glass, Co. $1,187 Performance Products Inc. $999 D.H.L. Express Inc. $825 Ross Plumbing $765 Alabama Auto Carriage, Inc. $750 Arrow Disposal Service $745 Davis Glass Shops, Inc. $428 NAPA Auto Parts $1 AVITAR INC: AMEX to Halt Common Stock Trading Today --------------------------------------------------- Avitar, Inc. (Amex: AVR) received notice from the American Stock Exchange indicating that the common stock of Avitar will be delisted from the Exchange effective today, Aug. 29, 2005. As previously announced, the delisting was determined by the AMEX Staff and was based upon the failure of the Company to achieve compliance with the continued listing standards of AMEX, particularly due to losses and the resulting deficit of shareholders' equity. The Company will continue to file reports in accordance with the regulations of the Securities and Exchange Commission. The Company intends that its common stock will be quoted for trading on the OTC Bulletin Board. Until the stock is quoted on the OTC Bulletin Board, it will be quoted on the Pink Sheets under the symbol "AVR." Avitar, Inc. -- http://www.avitarinc.com/-- develops, manufactures and markets innovative and proprietary products. Their field includes the oral fluid diagnostic market, the disease and clinical testing market, and customized polyurethane applications used in the wound dressing industry. Avitar manufactures ORALscreen(R), the world's first non-invasive, rapid, onsite oral fluid test for drugs-of-abuse, as well as HYDRASORB(R), an absorbent topical dressing for moderate to heavy exudating wounds. Avitar is also developing diagnostic strategies for disease and clinical testing in the estimated $25 billion in- vitro diagnostics market. Conditions targeted include influenza, diabetes, and pregnancy. At June 30, 2005, Avitar Inc.'s balance sheet showed a $1,628,144 stockholders' deficit, compared to a $1,512,001 deficit at Mar. 31, 2004. BALLY TOTAL: Stephen Swid Resigns From Board of Directors --------------------------------------------------------- Bally Total Fitness Holding Corporation (NYSE: BFT) disclosed the resignation of Stephen C. Swid from the Company's Board of Directors. Marc D. Bassewitz, the Company's Senior Vice President, Secretary and General Counsel, disclosed in a regulatory filing with the Securities and Exchange Commission that Mr. Swid's resignation was not due to any disagreement with the Company. The Company and its Board of Directors express their appreciation to Mr. Swid for his valuable contribution to the Company during his service on the Board of Directors. As reported in the Troubled Company Reporter on Aug. 26, 2005, the Company reached an agreement with holders of a majority of its outstanding 9-7/8% Senior Subordinated Notes due 2007 to an extension through Nov. 30, 2005, of the waiver of the financial reporting covenant default under the indenture governing the notes. The agreement to consent to the waiver of the financial reporting covenant default under the Subordinated Note indenture is subject to: -- the Company receiving a similar waiver extension from the holders of the Company's 10-1/2% Senior Notes due 2011; and -- approval by the lenders under the Company's $275 million senior secured credit facility. The agreement with the holders of the Subordinated Notes will automatically terminate if these conditions are not satisfied by the close of business on Sept. 2, 2005, and, at the option of a significant holder, after close of business tomorrow, Aug. 30, 2005, or prior thereto under certain other circumstances. Bally Total Fitness is the largest and only nationwide commercial operator of fitness centers, with approximately four million members and 440 facilities located in 29 states, Mexico, Canada, Korea, China and the Caribbean under the Bally Total Fitness(R), Crunch Fitness(SM), Gorilla Sports(SM), Pinnacle Fitness(R), Bally Sports Clubs(R) and Sports Clubs of Canada(R) brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness-conscious adult consumers. * * * As reported in the Troubled Company Reporter on Aug. 11, 2005, Moody's Investors Service affirmed the Caa1 corporate family (formerly senior implied) rating and debt ratings of Bally Total Fitness Holding Corporation. The affirmation reflects continued high risk of default and Moody's estimate of recovery values of the various classes of debt in a default scenario. The ratings outlook remains negative. Moody's affirmed these ratings: * $175 million senior secured term loan B facility due 2009, rated B3 * $100 million senior secured revolving credit facility due 2008, rated B3 * $235 million 10.5% senior unsecured notes (guaranteed) due 2011, rated Caa1 * $300 million 9.875% senior subordinated notes due 2007, rated Ca * Corporate family rating, rated Caa1 BEVERLY ENTERPRISES: NASC Increases Take-Over Bid to $1.9 Billion ----------------------------------------------------------------- Beverly Enterprises, Inc., (NYSE: BEV) amended its merger agreement with North American Senior Care, Inc., in which NASC agreed to increase its purchase price for Beverly Enterprises from $12.80 per share to $13.00 per share, in cash. On a fully diluted basis, the transaction is valued at more than $1.9 billion, including BEI's $339 million of debt. Bidding War BEI and NASC first forged a deal on Aug. 17 at a $12.80 per share transaction. On Aug. 18, a group of investors led by Formation Capital amended its $1.24 billion bid, putting in a $12.90 offer for every share of BEI's stock instead. Formation, Franklin Mutual Advisers LLC, Appaloosa Management LP and Northbrook NBV LLC, which together own about 8% of Beverly, first made an unsolicited take-over offer for $11.50 per share in January 2005. BEI rejected the offer and placed itself on the auction block for other merger propositions. "This has been a lengthy and very comprehensive process, involving detailed financial and legal analyses that the Board of Directors has conducted in close consultation with its independent advisors," William R. Floyd, BEI Chairman and Chief Executive Officer, said. "It is not uncommon in auction situations for proposals and counter-proposals to be received, but from the outset the Board has been guided by the paramount goal of selecting the bidder that offers stockholders the best combination of price, terms and conditions. Based on these criteria, the Board concluded that the increased offer from NASC was in the best interests of BEI shareholders. As a result, BEI has entered into an amendment to the original merger agreement with North American Senior Care." Financing The amended agreement contemplates that the financing of the transaction will consist of approximately $330 million in equity provided by a private investor group, together with approximately $1.325 billion in debt financing from Wachovia Bank and $550 million in operating loans from CapitalSource Financing LLC. The merger is subject to the approval of BEI's shareholders, as well as customary legal conditions, including receipt of certain regulatory, governmental and licensing approvals. Also under the amended agreement, in certain circumstances NASC would be entitled to a termination fee of $40 million, which is subject to increase upon the provision of additional security by NASC. Professionals BEI is advised by: * Lehman Brothers Inc., led by Brian McCarthy, * J.P. Morgan Chase & Co., led by Douglas Braunstein, * CIBC World Markets Corp. led by Peter Crowley, John Capano and William Stitt. BEI tapped Paul Dawes, Esq., John Sorkin, Esq., and Charles Nathan, Esq., from Latham & Watkins LLP as its counsel. Bruce Wilson, Esq., and Leonard Chazen, Esq., from Covington & Burling serve as the legal adviser to BEI's board of directors. Wachovia Securities LLC is advising NASC on the deal. Troutman Sanders LLP serves as NASC' counsel. Beverly Enterprises, Inc., and its operating subsidiaries are leading providers of healthcare services to the elderly in the United States. At July 31, 2005, BEI operated 345 skilled nursing facilities, as well as 18 assisted living centers, and 64 hospice/home care centers. Through Aegis Therapies, the company offers rehabilitative services on a contract basis to nursing facilities operated by other care providers. * * * As reported in the Troubled Company Reporter on Mar. 28, 2005, Standard & Poor's Ratings Services placed its ratings on Beverly Enterprises Inc. on CreditWatch with negative implications. The CreditWatch listing reflects the announcement that Beverly's board of directors has voted to sell the company through an auction process. This is in response to the possibility that an investor group, the Whitman/Appaloosa group, may take control of the company if it is successful at the upcoming board elections at the company's shareholder meeting in April. The CreditWatch listing reflects the apparent likelihood that a sale of the company will take place. Regardless of who acquires Beverly, it is likely that the company's credit profile will weaken. As reported in the Troubled Company Reporter, on June 16, 2004, Standard & Poor's Ratings Services assigned its 'B' rating to Beverly's the $225 million senior subordinated notes due 2014. The existing ratings on the company were affirmed. The company's bank facility, which is rated 'BB', or one notch above the 'BB-' corporate credit rating, has been assigned a recovery rating of '1'. As reported in the Troubled Company Reporter on Mar. 28, 2005, Moody's Investors Service affirmed the ratings of Beverly Enterprises, Inc., and changed the outlook to developing. This action follows the announcement by Beverly that its Board of Directors voted unanimously to pursue the sale of the company through an auction process. This announcement follows the expression of interest from and ensuing proxy battle with the Whitman/Appaloosa investor group. These ratings were affirmed: * Senior implied rating, Ba3 * Senior unsecured issuer rating, B1 * $90 million senior secured revolving credit facility due 2007, Ba3 * $135 million senior secured term loan B due 2008, rated Ba3 * $215 million 7.875% senior subordinated notes due 2014, rated B2 * $115 million 2.75% convertible subordinated notes, rated B2 As reported in the Troubled Company Reporter on Mar. 24, 2005, Fitch Ratings has placed Beverly Enterprises, Inc., on Rating Watch Evolving. Beverly's Board of Directors announced they were putting the company up for sale. Beverly is currently in the midst of a Proxy contest with a group led by Formation Capital, LLC, which includes a host of investors that have collectively acquired 8.1% of BEV common shares. Formation has provided an indication of interest of $11.50 per share of BEV common stock, or approximately $1.8 billion. Fitch's ratings on Beverly affected by this action include: -- Secured bank facility 'BB'; -- Senior unsecured debt (indicative) 'BB-'; -- Senior secured subordinated notes 'B+'; -- Senior subordinated convertible notes 'B+'. BIOVAIL CORP: S&P Affirms BB+ Long-Term Corporate Credit Rating --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Mississauga, Ont.-based Biovail Corp. to stable from negative based on the company's improving operational performance and strengthening capital structure. At the same time Standard & Poor's affirmed its 'BB+' long-term corporate credit rating on Biovail. Standard & Poor's also assigned its 'BBB-' bank loan rating with a recovery rating of '1', indicating a high expectation of full recovery of principal in the event of a payment default, to Biovail's US$250 million credit facility. "The stable outlook reflects our expectation that the company's recently formulated growth strategy yields the anticipated results, and that the various regulatory inquiries presently underway will be settled without financial damages so material that the company's credit protection measures would be affected," said Standard & Poor's credit analyst Don Povilaitis. "Upside to the ratings would be contingent upon these issues being completely resolved. An unfavorable outcome in either case could result in the outlook being revised to negative," Mr. Povilaitis added. The ratings on Biovail reflect: * the risks inherent with its newly formulated strategic growth plan; * a strong reliance on Wellbutrin XL revenues; and * several ongoing accounting inquiries, yet to be resolved. These factors are partially offset by improving credit protection measures and the strong cash flow generated from the company's promoted products. In May 2005, as part of a newly formulated strategic growth plan, Biovail announced the restructuring of its marketing and sales force in the U.S. primary-care market and entered into a strategic alliance with Kos Pharmaceuticals Inc. The agreement resulted in the disposal of all rights to the company's Teveten and Teveten HCT hypertensive product portfolio. In addition, Biovail will retain a financial interest in Cardizem LA, a calcium channel blocker, with Biovail receiving US$104 million up front for the transaction. Biovail's operating results continue to improve as second-quarter (ended June 30, 2005) revenues increased 5.4% compared with the same period last year, reflecting a 4% increase in product revenues. This increase was offset by foregone revenues of Cardizem LA and Teveten, two drugs now controlled by Kos. Biovail's second-quarter EBITDA of C$88.6 million rose 8.3% versus the same quarter last year. S&P expects that Biovail's operating margins will improve materially, as early as this year-end, as a result of this restructuring. BIRCH TELECOM: Wants to Hire Skadden Arps as Bankruptcy Counsel --------------------------------------------------------------- Birch Telecom, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to employ Skadden, Arps, Slate, Meagher & Flom LLP as their general bankruptcy counsel. Skadden Arps will: 1) advise the Debtors with respect to their powers and duties as debtors and debtors-in-possession in the continued management and operation of their business and properties; 2) attend meetings, negotiate with representatives of creditors and other parties-in-interest and advise and consult the Debtors on the conduct of their chapter 11 cases, including all of the administrative and legal requirements of operating under chapter 11 bankruptcy; 3) take all necessary actions to protect and preserve the Debtors' estates, including the prosecution of actions on their behalf, the defense of any actions commenced against their estates, negotiations concerning litigation in which the Debtors may be involved and objections to claims filed against their estates; 4) prepare on behalf of the Debtors all motions, answers, orders reports and other papers necessary to the administration of their estates; 5) prepare and negotiate on the Debtors' behalf plan or plans or reorganization, disclosure statements or statements and all related agreements and documents and take necessary actions to obtain confirmation of that plan; 6) advise the Debtors in connections with any sale of assets and appear before the Bankruptcy Court, any appellate courts and the U.S. Trustee and protect the interests of the Debtors before those courts and the U.S. Trustee; and 7) provide all other necessary legal services to the Debtors in connection with their chapter 11 cases. Mark S. Chehi, Esq., a Member of Skadden Arps, disclosed that his Firm received a $400,000 evergreen on-account amount for professional services and expenses to be incurred and charged by the Firm. Mr. Chehi reports Skadden Arps's professionals bill: Designation Hourly Rate ----------- ----------- Partners $585 - $835 Associates & Counsel $295 - $640 Legal Assistants $90 - $230 Skadden Arps assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in Kansas City, Missouri, Birch Telecom, Inc. and its subsidiaries -- http://www.birch.com/-- owns and operates an integrated voice and data network, and offers a broad portfolio of local, long distance and Internet services. The Debtors provide local telephone service, long-distance, DSL, T1, ISDN, dial-up Internet access, web hosting, VPN and phone system equipment for small- and mid-sized businesses. Birch Telecom and 28 affiliates filed for chapter 11 protection on Aug. 12, 2005 (Bankr. D. Del. Case Nos. 05-12237 through 05-12265). When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. BIRCH TELECOM: Wants to Continue Engagement of AEG Partners ----------------------------------------------------------- Birch Telecom, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to continue their engagement of AEG Partners LLC. The Debtors and AEG Partners entered into a pre-petition Engagement Agreement whereby AEG Partners provides certain temporary employees to assist the Debtors' restructuring efforts, including persons to fill the positions of Chief Restructuring Officer, Assistant Restructuring Officer and Chief Financial Officer. The AEG staff who have assumed management positions with the Debtors are: Individual Designation ---------- ----------- Lawrence M. Adelman Chief Restructuring Officer Michael Goldman Chief Financial Officer Stephen Kunkel Assistant Restructuring Officer Mr. Adelman will: 1) assist in preparing the Debtors' business plans, cash flow forecasts and financial projections, challenge the Debtors' critical assumptions, identify opportunities for improvement and assist management in the implementation of those programs; 2) assist in projecting and managing the Debtors' cash position and trade credit, reports, budgets and analyses as maybe required by the Debtors' lenders or investors; 3) assist in assuring suitable productivity of the working group of professionals who are assisting the Debtors in their reorganization process and in negotiations with stakeholders and their representatives; 4) assist in negotiations with potential acquirers of the Debtors' assets, evaluate the Debtors' businesses and dispositions of any non-core assets or operations, and in developing alternative strategies for improving liquidity; and 5) provide the Debtors with all other services that fall within his duties as Chief Restructuring Officer and as mutually agreed by the Debtors' Board of Directors and AEG Partners. Mr. Goldman will: 1) assist the Debtors' core financial function and existing financial organization and competencies, including cash management and general accounting and reporting skills; and 2) provide the Debtors with all services that fall within his duties as Chief Financial Officer and as mutually agreed by the Debtors' Board of Directors and AEG Partners. Mr. Kunkel will assist Mr. Adelman in the performance of his duties and will work collaboratively with the Debtors' counsel and their other professionals. Mr. Adelman disclosed that pursuant to the Engagement Agreement, his Firm received a $250,000 retainer and will be paid with a Weekly Fee of $50,000. To the best of the Debtors' knowledge, AEG Partners is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The Court will convene a hearing at 3:00 p.m., on Sept. 14, 2005, to consider the Debtors' request. Headquartered in Kansas City, Missouri, Birch Telecom, Inc. and its subsidiaries -- http://www.birch.com/-- owns and operates an integrated voice and data network, and offers a broad portfolio of local, long distance and Internet services. The Debtors provide local telephone service, long-distance, DSL, T1, ISDN, dial-up Internet access, web hosting, VPN and phone system equipment for small- and mid-sized businesses. Birch Telecom and 28 affiliates filed for chapter 11 protection on Aug. 12, 2005 (Bankr. D. Del. Case Nos. 05-12237 through 05-12265). When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. BRASS CITY: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: The Brass City Printery, Inc. 329 Thomaston Avenue Waterbury, Connecticut 06720 Bankruptcy Case No.: 05-34260 Type of Business: The Debtor offers a full menu of pre-press, printing and fulfillment, tailored to the customer's need and budget. See http://www.brasscityprintery.com/ Chapter 11 Petition Date: August 26, 2005 Court: District of Connecticut (New Haven) Judge: Chief Judge Albert S. Dabrowski Debtor's Counsel: Peter L. Ressler, Esq. Groob Ressler & Mulqueen 123 York Street, Suite 1B New Haven, Connecticut 06511-0001 Tel: (203) 777-5741 Fax: (203) 777-4206 Total Assets: $1,257,842 Total Debts: $857,222 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Man Portfolio Services Inc. $422,199 17 State Street, 18th Floor New York, NY 10004 P. DiPietro Officer loan $98,835 329 Thomaston Avenue Waterbury, CT 06702 M. DiPietro Officer note payable $78,221 329 Thomaston Avenue Waterbury, CT 06702 Lindenmyer Munroe $46,226 Flash Prepress $20,403 City of Waterbury MV taxes $20,332 Office of the Tax Collector McKesson Federal Credit Union $17,503 Berkshire-Westwood Graphic $16,032 Inc. M. Delgaizo Loan payable $13,000 T. DiPietro $11,000 Connecticut Valley Bindery $10,041 Inc. MBNA America Business Card $8,394 Colonial Business Forms $7,551 Francis DiGiovanna CPA Accounting $6,026 M. DiPietro Officer loan $6,000 Conn. Die Cutting Service $5,945 Inc. Priority Graphics LLC $5,559 Selective Insurance $5,106 Madjic Colour $4,773 Northeast Utilities $3,200 Credit and Collection Center BROCKWAY PRESSED: Gets Court Nod to Employ Perkins Coie as Counsel ------------------------------------------------------------------ Brockway Pressed Metals, Inc., sought and obtained permission from the U.S. Bankruptcy Court for the Western District of Pennsylvania to employ Perkins Coie LLP as its general bankruptcy counsel. As previously reported in the Troubled Company Reporter on June 14, 2005, Daniel A. Zazove, Esq., a Partner at Perkins Coie, is the lead attorney for the Debtor. Mr. Zazove disclosed that the Firm received an $85,000 retainer. Mr. Zazove charges $555 per hour for his services. Mr. Zazove reports Perkins Coie's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Stacey Ravetta Associate $275 Attila Kovacs-Szabo Paralegal $165 Headquartered in Brockway, Pennsylvania, Brockway Pressed Metals, Inc. -- http://www.brockwaypm.com/-- manufactures a wide range of highly engineered metal parts and sub-assemblies. The Company specializes in automotive applications, including engine and transmission components, electronic actuators, steering components, cruise control devices, assembled camshafts, and gas springs. The Company filed for chapter 11 protection on June 8, 2005 (Bankr. W.D. Pa. Case No. 05-11891). Robert S. Bernstein, Esq., at Bernstein Law Firm, P.C., and Daniel A. Zazove, Esq., at Perkins Coie LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. BUEHLER FOODS: Wants Until Oct. 31 to File Chapter 11 Plan ---------------------------------------------------------- Buehler Foods, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Indiana to extend, until Oct. 31, 2005, the time within which they alone can file a chapter 11 plan. The Debtors also ask the Court for more time to solicit acceptances of that plan from their creditors, until Dec. 30, 2005. The Debtors give the Court three reasons in support of the extension: 1) they have made good faith progress towards the reorganization process, with their senior secured pre- petition and post-petition lenders, and the Unsecured Creditors Committee and other parties of interest involved in continuing negotiations toward a viable and consensual plan of reorganization; 2) they are paying all their post-petition bills as they become due while their chapter 11 cases are pending; and 3) the requested extension is not being sought to pressure the creditors and other parties-in-interest to submit to their reorganization demands or accept an unacceptable plan. Headquartered in Jasper, Indiana, Buehler Foods, Inc., owns and operates grocery stores under the BUY LOW and Save-A-Lot banners in Illinois, Indiana, and Kentucky, North Carolina, and Virginia. The company also sells gas at about a dozen locations. In 2004 Buehler Foods acquired 16 Winn-Dixie stores in Louisville, Kentucky, and renamed them Buehler's Markets. Founded in 1940, the company is still run by the Buehler family. The Company, along with its three affiliates, filed for chapter 11 protection on May 5, 2005 (Bankr. S.D. Ind. Case No. 05-70961). Jerald I. Ancel, Esq., at Sommer Barnard Attorneys, PC, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets of $10 million to $50 million and debts of $50 million to $100 million. BUEHLER FOODS: Kentucky Unit Taps SSG Capital as Financial Advisor ------------------------------------------------------------------ Buehler of Kentucky, LLC, a debtor-affiliate of Buehler Foods, Inc., asks the U.S. Bankruptcy Court for the Southern District of Indiana for permission to employ SSG Capital Advisors, L.P., as its financial advisor and investment banker. Buehler of Kentucky owns and operates 16 grocery stores located primarily in Louisville, Kentucky under the name Buehler Markets. Buehler of Kentucky explains that it employed SSG Capital because of its experience in providing general financial advice and investment banking services to middle market companies facing financial distress and the Firm has extensive experience in providing those services to retailers, grocery stores and related types of businesses. SSG Capital will assist Buehler of Kentucky in evaluating its assets and forming an exit strategy in its restructuring and provide all other financial advisory and investment banking advisory services. Robert Smith, a Managing Director of SSG Capital, disclosed that his Firm received an Initial Fee of $20,000. Mr. Smith reports that SSG Capital will be paid with: 1) a Monthly Fee of $20,000 beginning on Sept. 1, 2005, and to be paid on the first day of each month; and 2) in the event that SSG Capital's engagement results in a sale of some or all of Buehler of Kentucky's assets, a payment equal to: a) 3% of the total consideration of a sale that is less than or equal to $12 million, b) 4% of the total sale consideration in excess of $12 million up to and including $15 million, and c) 5% of the total sale consideration in excess of $15 million. SSG Capital assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in Jasper, Indiana, Buehler Foods, Inc., owns and operates grocery stores under the BUY LOW and Save-A-Lot banners in Illinois, Indiana, and Kentucky, North Carolina, and Virginia. The company also sells gas at about a dozen locations. In 2004 Buehler Foods acquired 16 Winn-Dixie stores in Louisville, Kentucky, and renamed them Buehler's Markets. Founded in 1940, the company is still run by the Buehler family. The Company, along with its three affiliates, filed for chapter 11 protection on May 5, 2005 (Bankr. S.D. Ind. Case No. 05-70961). Jerald I. Ancel, Esq., at Sommer Barnard Attorneys, PC, represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets of $10 million to $50 million and debts of $50 million to $100 million. CARGO CONNECTION: June 30 Balance Sheet Upside-Down by $3.9 Mil. ---------------------------------------------------------------- Cargo Connection Logistics Holding, Inc., f/k/a Championlyte Holdings, Inc., reported its financial results for the quarter ending June 30, 2005, in a Form 10-Q delivered to the Securities and Exchange Commission last week. Revenues Revenues from operations for the six months ended June 30, 2005, were $6,758,987 compared with $8,293,240 for the six months ended June 30, 2004. The decrease in revenue was specifically due to the change in the Company's Container Freight Station operations run under the Mid-Coast Management division. In specific, if the Company looks at each operation independently, revenues generated from the operations of its Cargo Connection Logistics Corp. division for the six months ended June 30, 2005, were $5,772,945 compared with $5,649,002 for the six months ended June 30, 2004, for the trucking operation. This is an increase of $123,943 in gross revenue over the same time period. This 2% increase in transportation revenue was due to: (1) an increase in core service offering and client acceptance of those offerings, (2) expansion of the Atlanta-Miami (southern route) to include Charlotte, Raleigh-Durham and Greensboro service areas, and (3) various expansion into related business lines and contract based freight relationships. While 2% is low, the company has managed to replace business generated from two key customers in 2004 with other business customers in 2005. Conversely, revenues generated from the operations in the Company's Mid-Coast Management, Inc., division for the six months ended June 30, 2005, were $986,042 compared with $2,644,238 for the six months ended June 30, 2004 for the Container Freight Operations. This reflects a decrease in gross revenue of $1,658,196 or 62% over the same time period for the previous year. The reason for the decrease is due to a change in business relationship with a major customer. Under its prior relationship, Mid-Coast was restricted in obtaining new customers in certain markets whereas a result of this change caused a loss of revenues. Mid-Coast presently approved to look for new customers in those markets. Due to seasonality Mid-Coast expects to regain a portion of the lost revenues. In comparing the operations for the second quarter (three months ended June 30, 2005) to the first quarter of 2005 (three months ended March 31, 2005), the Company showed total revenue of $3,376,227 versus $3,382,759 for those quarters. Transportation revenue, which was stable during both quarters, had higher costs associated to it in the second quarter. These higher costs were in the areas of fuel and purchased transportation. Expenses Selling, general and administrative expenses decreased to $3,326,378 for the six months ended June 30, 2005, from $3,358,014 for the six months ended June 30, 2004. The $31,639 or a .9% decrease in selling, general and administrative expenses and is primarily the result of decreased consulting and professional fees and of a reduction in payroll expenses, especially in our Mid- Coast division. The net result of these efforts was an increase in loss from operations before other income (expense) of $1,343,944 for the six months ended June 30, 2005, from a loss of $30,078 for the six months ended June 30, 2004. Interest and financing expense amounted to $176,530 for the six months ended June 30, 2005, versus $96,698 for the six months ended June 30, 2004. This $79,832 increase is primarily due to an increase in debt for payback of funds advanced through the Company's factor for a customer which were determined uncollectible by the factor upon the customer's bankruptcy filing in December of 2004. Net Loss The net effect is a net loss for the six months ended June 30, 2005, of $1,800,348 compared to a net loss of $50,757 for the six months ended June 30, 2004. The increase in the net loss of $1,750,091 is mostly due to an increase in administrative costs of $374,090 an increase of approximately 400,000 in financing expenses, and direct operating expenses of $254,646 on Cargo Connection associated with a decrease in revenue generated in the Mid-Coast operation due to the change in business. Liquidity and Capital Resources The Company incurred a net loss in the year ended December 31, 2004, and through June 30, 2005, and has had working capital deficiency in prior years. The Company has devoted substantially all of its efforts to increasing revenues, achieving profitability, and obtaining long-term financing and raising equity. The Company's available cash at June 30, 2005 was $8,220. In addition there is an additional $99,406 in escrowed funds being held by Cargo Connection's factor used to assist in the payment of transportation costs. Convertible notes at June 30, 2005, consist of promissory notes to an investment fund, Advantage Fund I, LLC, and four investment companies Alpha Capital AG, Gamma Opportunity Capital Partners, L.P., Cornell Capital Partners, LLP and Highgate House, LLC. Some of the owners of the investment fund are also shareholders of the Company. Going Concern Doubt The Company's management is seeking various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures or other forms of debt will be pursued. The funding should alleviate the Company's working capital deficiency and increase profitability. However, it is not possible to predict the success of management's efforts to achieve profitability. Also, there can be no assurance that additional funding will be available when needed or, if available, that its terms will be favorable or acceptable. If the additional financing or arrangements cannot be obtained, the Company would be materially and adversely affected and there would be substantial doubt about the Company's ability to continue as a going concern. These financing uncertainties raise substantial doubt about the Company's ability to continue as a going concern, the Company cautions in its quarterly report. Pointing to the company's recurring losses from operations, negative cash flows from operating activities, negative working capital and stockholders' deficit, MASSELLA & ASSOCIATES, CPA, PLLC, expressed doubt about the company's ability to continue as a going concern after reviewing the company's 2004 financial statements. A full-text copy of Cargo Connection's Quarterly Report is available for free at http://ResearchArchives.com/t/s?115 Cargo Connection Logistics Holding, Inc. (f/k/a Championlyte Holdings, Inc.) is a public entity operating in the transportation and logistics industry as a third party logistics provider of transportation and management services, through its subsidiaries, Cargo Connection Logistics Corp. and Mid-Coast Management, Inc., to its target client base, ranging from mid-sized to Fortune 100(TM) companies. This is accomplished through its network of terminals and transportation services. As of June 30, 2005, Cargo Connection's balance sheet reflected a $3,912,013 stockholders' deficit. CATHOLIC CHURCH: Portland Lays Down Treatment of Private Documents ------------------------------------------------------------------ The Archdiocese of Portland in Oregon and three insurance carriers are parties to three separate insurance coverage adversary proceedings: * In Roman Catholic Archbishop of Portland in Oregon, doing business as the Archdiocese of Portland in Oregon v. ACE USA, Inc., et al., Adv. Pro. No. 04-3373; * In Roman Catholic Archbishop of Portland in Oregon, doing business as the Archdiocese of Portland in Oregon v. Oregon Insurance Guaranty Association, Adv. Pro. No. 04-3375; and * Certain Underwriters at Lloyd's London, et al., v. The Archdiocese of Portland in Oregon, Case No. 0209-09053, which was brought in the Circuit Court of Multnomah County in the Circuit Court of Multnomah County in Oregon, and removed by the Archdiocese to the U.S. Bankruptcy Court for the District of Oregon, where it is now pending as an adversary proceeding, captioned as Adv. Pro. No. 04-3326. Portland and the insurance carriers drafted a stipulated protective order governing the designation and handling of confidential documents produced by the Archdiocese and any insurance carrier in the main bankruptcy case or in one of the insurance Coverage Actions. Among other things, the Protective Order provides that the Archdiocese must produce copies of prior settlement agreements with tort claimants in the underlying actions. For those agreements with confidentiality provisions, both parties will take reasonable measures to avoid disclosure of the tort claimant's identity, including but not limited to filing the documents under seal in any public filings or by identifying the tort claimants by initials. Furthermore, nothing will foreclose the insurers from cooperating and sharing documents and information between and among themselves in the course of conducting their participation in the main bankruptcy or the insurance coverage adversary proceedings, except that, for purposes of the protective order, tort claimants' medical records will only be produced to, and shared with, those insurers whose policies were allegedly in force at the time of the alleged abuse. In May 2005, the Bankruptcy Court approved the Stipulated Protective Order in its entirety. Tort Claimants Want Order Vacated Tort Claimants Kenneth Nail, Gary Mitts, F.B., S.D., K.L., J.R., M.S., J.W., and P.C. ask Judge Perris to vacate the Protective Order. The Tort Claimants' attorney, Erin Olson, Esq., argues that many of the Tort Claimants' records are protected by state or federal statutes and rules, and are exempt from public record laws. The Tort Claimants also do not wish to have their personal information available to insurers who have no legitimate interest in their claims, particularly when the personal information is to be included in a searchable database available to several insurance companies in the country. The Tort Claimants believe that the insurers appearing in Portland's bankruptcy proceeding have created, or intend to create a searchable database containing all the records produced to any of them relating to the claims. For this reason, the Tort Claimants ask the Court to enter an appropriately tailored protective order permitting Portland to share the Tort Claimants' documentary discovery only with those insurers who have coverage over their particular claims, unless good cause as determined by the Court or stipulated to by the affected tort claimants are shown for sharing with others. Insurers Clarify Issues On behalf of the insurers, Joseph A. Field, Esq., at Field & Associates, in Portland, Oregon, contends that the Tort Claimants' objection seems to have little to do with the agreed confidentiality that should be afforded the documents. The objection seeks to disadvantage the insurance carriers in the context of both the Accelerated Claims Resolution Process and the coverage adversary proceedings. To the extent the Protective Order does not sufficiently restrict the subject documents for use exclusively in the present case and related adversary proceedings, it should be amended by a supplemental order, Mr. Field suggests. As for the documents governed by state law, Mr. Field tells Judge Perris that counsel for ACE, along with Erin K. Olson for the Tort Claimants; Margaret Hoffman, Esq., at Schwabe, Williamson & Wyatt, PC, for the Archdiocese; and William C. Tharp of the State of Oregon Department of Human Services, for the State of Oregon Defendants, have commenced work on separate protective orders to address the matter. Judge Perris Amends Protective Order To address the Tort Claimants' concerns, Judge Perris issues an amended Protective Order, which provides that certain documents and other records pertaining to tort claimants may only be distributed pursuant to certain terms. Specifically: (a) All documents and other records may be distributed to the insurers who assert in good faith that their policies may be or alleged to be at risk on a claim; (b) Documents and other records pertaining to tort claimants that contain these information will not be distributed without certain written consent of the individual tort claimant, except: -- Protected Health Information as this is defined in Health Insurance Portability and Accountability Act and its effecting regulations, 45 C.F.R. 160 and 154; -- health records protected by Oregon Revised Statutes 179.505 and 192.518; -- financial information including federal and state tax records and returns; -- juvenile information afforded confidentiality by Oregon Revised Statutes 419A.255; and -- documents and other records