/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/050830.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, August 30, 2005, Vol. 9, No. 205 Headlines 265 BELLEFONTAINE: Case Summary & 6 Largest Unsecured Creditors ACTION REAL: Case Summary & 2 Largest Unsecured Creditors ADVANCED ENERGY: Will Redeem 5% Convertible Sub. Debt on Sept. 28 ALLIED HOLDINGS: Banc of America Wants to Exercise Lease Rights ALLIED HOLDINGS: DaimlerChrysler Demands Lease Decision ALOHA AIRGROUP: Court Approves Redelivery Pact With GE Entities AMERIDEBT INC: Court Approves Chapter 11 Trustee's Lease Renewal ANCHOR GLASS: Bank of New York Wants DIP Hearing Moved to Sept. 8 ANCHOR GLASS: Hires Houlihan Lokey as Financial Advisor ANCHOR GLASS: Wants to Assume Sales Contract with OCI Chemicals ASARCO LLC: Wants to Enter Into Bank One Credit Card Pact ASARCO LLC: Wants Approval of Reclamation Claim Procedures ASARCO LLC: Utilities Want Court Order Vacated ATA AIRLINES: Motion to Reject Pilot's Union Agreement Draws Fire ATKINS NUTRITIONALS: Files Plan & Disclosure Statement in New York ATKINS NUTRITIONALS: Gets Final Court Nod on DIP Financing Access AXEDA SYSTEMS: Posts $1.5 Million Net Loss in Second Quarter BELDEN & BLAKE: Buying Back 8.75% Senior Secured Notes for Cash BIG 5: Nasdaq Extends Financial Filing Deadline Until Tomorrow BUFFALO MOLDED: Files Liquidating Plan & Disclosure Statement CAPITAL BEVERAGE: June 30 Balance Sheet Upside-Down by $4.8 Mil. CATHOLIC CHURCH: Court Rules Parish Property Belongs to Spokane CATHOLIC CHURCH: Tucson Wants Four Tort Claim Settlements Approved CERVANTES ORCHARDS: Section 341(a) Meeting Slated for Oct. 6 CITICORP MORTGAGE: Fitch Puts Low-B Rating on Two Cert. Classes CLAREMONT TECHNOLOGIES: Consents to Ch. 11 Petition & Files Plan CLEVELAND COLD: Voluntary Chapter 11 Case Summary CRYOCOR INC: June 30 Balance Sheet Upside-Down by $39 Million DELPHI CORP: Reiterates Demands in Light of New Bankruptcy Laws DIVERSIFIED CORPORATE: Equity Deficit Widens to $3.72M at June 30 DIVERSIFIED CORPORATE: Negotiating Sale of Traveling Nurse Unit DJ ORTHOPEDICS: Credit Amendments Cue Moody's to Withdraw Ratings DOCTORS HOSPITAL: Hires Wellspring Valuation to Perform Appraisals E.SPIRE COMMS: DIP Financing Pact Extended to Sept. 30 EAST TEXAS MEDICAL: Moody's Affirms Ba2 Rating on $220-Mil Bonds EASTMAN KODAK: Cuts More Jobs, Pares Film Manufacturing Operations ENCYCLE/TEXAS: Case Summary & 22 Largest Unsecured Creditors ENRON CORP: Court Approves JEDI II & CalPERS Settlement Pact ENRON CORP: AEGON, et al., Agree to Withdraw Amended Claims EXCALIBUR IND: Balance Sheet Upside-Down by $14.1 Mil. at June 30 FIRST FRANKLIN: Fitch Puts BB+ Rating on $3MM Private Certificates H&E EQUIPMENT: To Restate 2002 and 2003 Financial Statements HUNTSMAN INT'L: Moody's Rates $1.56 Billion Sr. Sec. Debts at Ba3 INFOUSA INC: Gupta Bid Rejection Cues Moody's to Hold Ratings INTERSTATE BAKERIES: PI Claimant Wants Stay Lifted to Pursue Claim INTERSTATE BAKERIES: Wants to Ink Long-Term Extension of CBAs INTERSTATE BAKERIES: Names Richard Seban as Chief Mktg. Officer ISTAR FINANCIAL: CEO Adopts New Rule 10b5-1 Stock Trading Plan J.P. MORGAN: Moody's Places Low-B Ratings on Nine Cert. Classes JOHN Q. HAMMONS: JQH Finance to Buy 8-7/8% First Mortgage Notes KAISER ALUMINUM: Wants Underwriters Settlement Pact Approved KEY3MEDIA GROUP: Has Until Sept. 30 to Object to Claims KMART CORP: Court Nixes McHugh's Move to Reopen Discharge Trial KPMG LLP: Paying $456 Million Over Fraudulent Tax Shelters MARIE COLLARO: Case Summary & 3 Largest Unsecured Creditors MARKWEST ENERGY: Taps Ehrhardt Keefe to Provide Internal Audit MCI INC: Inks $1.3 Mil. Three-Year Service Pact with AMF Bowling MERIDIAN AUTOMOTIVE: Court Approves De Minimis Asset Sale Protocol MOLECULAR DIAGNOSTICS: June 30 Balance Sheet Upside-Down by $13MM NATIONAL ENERGY: Court Clarifies Plan Distribution Definition NEW ENGLAND COLLEGE: Moody's Revises Ratings Outlook to Positive NORTHWEST AIRLINES: AMFA Strike Doesn't Have Large Scale Support PACIFIC GAS: Asks Court to Enforce Confirmation Order on 3 Suits PANOLAM INDUSTRIES: Moody's Junks Proposed $150M Sr. Sub. Notes PROLOGIC MANAGEMENT: Equity Deficit Tops $2 Million at June 30 PROVIDENT PACIFIC: MKA Can Foreclose on Timber Ridge Townhomes PROXIM CORP: Wants Until December 31 to Decide on Unexpired Leases PROXIM CORP: Committee Prepares to Challenge Warburg Pincus Claims PROXIM CORP: Secures Interim Okay to Use $573,500 Cash Collateral QUEBECOR WORLD: Moody's Downgrades Senior Unsec. Rating to Ba2 QUEBECOR WORLD: Has Weak Liquidity, Moody's Says RELIANCE GROUP: Committee Wants Court to OK Solicitation Protocol RHODE ISLAND: New Gas Plant Cues Fitch to Raise Single-B Rating RISK MANAGEMENT: Wants Lease Decision Period Stretched to Nov. 4 S-TRAN: Court Okays DIP Loan & Cash Collateral Use Extension SAINT VINCENTS: Committee Wants Thelen Reid as Counsel SAINT VINCENTS: Wants to Make $200,000 Due Diligence Payment SALOMON BROTHERS: Poor Performance Prompts Fitch to Junk Ratings SCARLET OAKS: Voluntary Chapter 11 Case Summary SEAN HORNBECK: Case Summary & 20 Largest Unsecured Creditors SOUTHWEST FLORIDA: Case Summary & 20 Largest Unsecured Creditors SPECIAL METALS: Precision Castparts Acquiring Assets for $303MM TECNET INC: Trustee Wants Bar Date for Newly Discovered Creditors TENET HEALTHCARE: Default Notice Prompts Fitch's Negative Watch TEREVE HOLDINGS: Bowring Retail Chain Seeks CCAA Protection TERMOEMCALI FUNDING: Soliciting Consents on Chapter 11 Prepack TITAN CRUISE: Section 341(a) Meeting Slated for Sept. 9 TOWER AUTOMOTIVE: Court Approves Seagull Software Licensing Pact TOYS R US: Fitch Junks $2 Billion Domestic Unsecured Bridge Loan TRANSCOM ENHANCED: Court Approves $400,000 Additional DIP Loan TRANSMETA CORP: Audit Panel Taps Burr Pilger to Audit Financials UAL CORP: Court Extends Exclusive Plan Filing Period Until Nov. 1 UAL CORP: Four Banks Submit $3 Billion Exit Financing Proposals UNISYS CORP: Decline in Profitability Spurs Moody's to Cut Ratings VENCOR INT'L: Case Summary & 15 Largest Unsecured Creditors WORLDCOM INC: Wants Court to Nix & Limit Parus Holding's Claims * Large Companies with Insolvent Balance Sheets ********* 265 BELLEFONTAINE: Case Summary & 6 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: 265 Bellefontaine LP P.O. Box 570627 Tarzana, California 91356 Bankruptcy Case No.: 05-15910 Chapter 11 Petition Date: August 25, 2005 Court: Central District of California (San Fernando Valley) Judge: Maureen A. Tighe Debtor's Counsel: Simon Aron, Esq. Wolf, Rifkin & Shapiro, LLP 11400 West Olympic Boulevard, 9th Floor Los Angeles, California 90064 Tel: (310) 478-4100 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 6 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Brad Kaye Member $568,000 265 Bellefontaine Street Pasadena, CA 91105 Private Properties Group Inc. $70,000 David Zuckerman P.O. Box 570627 Tarzana, CA 91357 Donikian Construction $7,000 11288 Ventura Boulevard #203 Studio City, CA 91604 Carr Landscaping $4,000 P.O. Box 8149 Porter Ranch, CA 91327 Pasadena Water & Power $1,500 P.O. Box 7120 Pasadena, CA 91109 Mr. Poolman $800 336 East Front Street Covina, CA 91723 ACTION REAL: Case Summary & 2 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Action Real Estate Inc. 16300 Lindbergh Street Van Nuys, California 91406 Bankruptcy Case No.: 05-15917 Type of Business: The Debtor first filed for chapter 11 protection on Dec. 29, 2004 (Bankr. C.D. Calif. Case No. 04-18163). The Honorable Kathleen T. Thompson dismissed that case on Aug. 3, 2005. Action Real's first chapter 11 filing was reported in the Troubled Company Reporter on Jan. 5, 2005. Chapter 11 Petition Date: August 25, 2005 Court: Central District of California (San Fernando Valley) Judge: Kathleen Thompson Debtor's Counsel: M. Jonathan Hayes, Esq. 21800 Oxnard Street, Suite 840 Woodland Hills, California 91367 Tel: (818) 710-3656 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 2 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ All Century Inc. $2,012,000 15910 Ventura Boulevard, Suite 1505 Encino, California 91436 Los Angeles County Tax Collector $10,077 P.O. Box 54018 Los Angeles, California 90054-0018 ADVANCED ENERGY: Will Redeem 5% Convertible Sub. Debt on Sept. 28 ----------------------------------------------------------------- Advanced Energy Industries, Inc. (Nasdaq: AEIS) will redeem all of its outstanding 5% Convertible Subordinated Notes due Sept. 1, 2006. The redemption date will be Sept. 28, 2005. The Company sent notice of redemption on its 5-1/4% Convertible Subordinated Notes due 2006, on Aug. 17, 2005. The notes shall be redeemed at a price of 101% of the principal amount, together with accrued and unpaid interest to the redemption date. On the redemption date, the redemption price and the interest, if any, will become due and payable upon each of the notes. Interest shall cease to accrue on the notes from and after the Redemption Date. The notes may be converted into common stock of the Company at any time prior to 5:00 p.m. on Sept. 27, 2005, which is the close of business on the business day immediately preceding the Redemption Date. The rate at which the notes may be converted into common stock is 33.5289 shares of common stock for each $1,000 principal amount of the notes, or approximately $29.83 per share. A notice of redemption containing information required by the terms of the indenture governing the notes will be mailed to the shareholders. The address of the paying agent for purposes of surrendering notes in connection with the redemption is: U.S. Bank National Association West Side Flats Operations Center 60 Livingston Ave. St. Paul, MN 55107 Attention: Specialized Finance Headquartered in Fort Collins, Colorado, Advanced Energy Industries, Inc. -- http://www.advanced-energy.com/-- is a global leader in the development and support of technologies critical to high-technology manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, compact discs, digital video discs, architectural glass, and other advanced product applications. * * * Material Weaknesses As reported in the Troubled Company Reporter on May 11, 2005, Advanced Energy identified two material weaknesses in its internal control over financial reporting as of Dec. 31, 2004, which are described in the Company's annual report: (i) a lack of appropriate segregation of duties defined within our enterprise resource planning system; and (ii) the combination of a lack of information system integration and uniformity regarding the Company's Japan operations and a lack of sufficient human resources for proper segregation of duties and oversight in Japan. The Company received notification from the Listing Qualifications Department of The Nasdaq Stock Market that the Company's common stock will be listed for trading on Nasdaq under its ticker symbol "AEIS" as of the open of business on July 14, 2005. ALLIED HOLDINGS: Banc of America Wants to Exercise Lease Rights --------------------------------------------------------------- Banc of America Leasing & Capital, LLC, asks the U.S. Bankruptcy Court for the Northern District of Georgia to lift the automatic stay to so it can take possession of all equipment and exercise any and all of its contractual and state-law rights with respect to the equipment held by Allied Systems Ltd. pursuant to a Master Equipment Lease Agreement. Allied Systems Ltd. leased automobile transport equipment from BancBoston Leasing, Inc., under a Master Equipment Lease Agreement dated June 30, 1998. Allied Holdings, Inc., executed an Equipment Lease Guaranty in favor of BancBoston and agreed to be liable for the payment and performance of all of the Debtors' obligations under the Master Lease. James S. Rankin, Jr., Esq., at Parker, Hudson, Rainer & Dobbs, LLP, in Atlanta, Georgia, relates that pursuant to various lease supplements, Allied Systems leased additional equipment from BancBoston: Lease Supplement No. Leased Equipment Expiry Date ---------- ---------------- ----------- 1 14 Volvo Truck Tractors July 31, 2005 14 Cottrell Car Haul Trailers 2 15 Volvo Truck Tractors August 31, 2005 15 Cottrell Car Haul Trailers 3 16 Volvo Truck Tractors September 30, 2005 16 Cottrell Car Haul Trailers 5 22 Volvo Truck Tractors April 30, 2006 22 Cottrell Car Haul Trailers Additional lease supplements exist under the Master Lease and have been assigned to other lessors. Effective as of December 31, 2000, BancBoston merged into Fleet Capital Corporation. Fleet Capital Corporation merged into FCC Transition, LLC, which merged into Banc of America Leasing & Capital, LLC, each effective as of July 31, 2005. As a result, BALC is now the owner and the holder of the Master Lease, the Guaranty, the First Supplement, the Second Supplement, the Third Supplement, the Fifth Supplement and all related documents and properties, Mr. Rankin says. To provide notice of the lessor's ownership interest in the Equipment, BancBoston and Fleet filed certain UCC-1 financing statements, amendments and continuation statements in county records within the State of Georgia. According to Mr. Rankin, BALC possesses original certificates of title for the Equipment. Mr. Rankin relates that the Lease Documents evidence what are generally known as TRAC leases, which refers to "terminal rental adjustment clause." Under TRAC leases, at the end of the term of the lease, the lessee has two options: (1) the lessee may elect to acquire the leased property for an established residual value plus taxes and any other amounts provided in the lease; or (2) the lessee may return the leased property, which will be sold by the lessor. Any excess sales proceeds above the established residual value will be paid by the lessee to the lessor. On the Petition Date, the term of the First Supplement expired. Mr. Rankin asserts that Allied Systems has not returned the Leased Equipment to BALC pursuant to the First Supplement. According to Mr. Rankin, Allied Systems also failed and refused to pay the amount owed to BALC under the TRAC provisions in the Master Lease and the First Supplement, which, as of the Petition Date, was $150,883. Furthermore, Allied Systems has failed to make any of the rent payments due to BALC on August 1, 2005. Mr. Rankin notes that the term of the Second Supplement will expire soon, yet Allied Systems has been unable or unwilling to commit as to its intentions with respect to the Equipment in general and the lease supplements that have expired or will soon expire in particular. "Despite the fact that the Debtor continues to use the Equipment in its business, [Allied Systems] had made no offer of adequate protection to BALC," Mr. Rankin says. "Clearly, the Equipment is depreciating and BALC is entitled to adequate protection of its ownership interest in the Equipment." Unless Allied Systems is willing to comply with the Lease Documents, the Equipment will not be available to it to support a reorganization of its business. With respect to the Lease Supplements, there is or soon will be no unexpired lease for Allied Systems to assume or reject. BALC owns the Equipment, and because the various lease supplements will soon expire, the Equipment will not be available to Allied Systems unless it is willing and able to comply with the TRAC provisions in the Lease Documents. Therefore, Mr. Rankin concludes, there is no equity in Allied Systems' interest in the Equipment and the Equipment is not necessary for an effective reorganization. In the alternative, BALC asks the Court to compel Allied Systems to grant it adequate protection by: a. either paying all end-of-lease TRAC amounts to BALC as when they come due or immediately surrender possession of any Equipment that is subject to an expired lease supplement to BALC; b. making all monthly lease payments to BALC as and when they come due under the Lease Documents; c. certifying in writing to BALC that each item of the Equipment is in the possession and control of Allied Systems and is not missing, stole, destroyed, or otherwise unaccounted for; d. providing to BALC evidence of hazard insurance covering all of the Equipment; and e. complying with all of the provisions of the Lease Documents relating to audit and inspection rights in favor of BALC. 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: DaimlerChrysler Demands Lease Decision ------------------------------------------------------- DaimlerChrysler Services North America LLC, successor by merger to Mercedes-Benz Credit Corporation, as a lessor, asks the U.S. Bankruptcy Court for the Northern District of Georgia to compel Allied Holdings, Inc., and its debtor-affiliates to: -- immediately either reject or assume unexpired leases, or -- in the alternative, provide adequate protection. On June 25, 1999, the Debtors entered into a Master Equipment Lease Agreement with Mercedes-Benz Credit Corporation, now known as DaimlerChrysler Services. The Debtors and DaimlerChrysler Services executed three Lease Supplements: -- Under Lease Supplement No. 1, the Debtors leased 58 items of Equipment for $3,875,767. Monthly rental payments total $48,292. -- Under Lease Supplement No. 2, the Debtors leased 18 items of Equipment for $1,202,824. Monthly rental payments total $15,011. -- Under Lease Supplement No. 3, the Debtors leased 48 items of Equipment for $3,406,788. Monthly rental payments total $44,050. Rent is due and payable on the 1st day of each month. The rent due totals $107,353 as of August 1, 2005, plus $5,280 in accrued late charges. The Debtors' obligation to DaimlerChrysler Services is further secured by an Equipment Lease Guaranty executed by Allied Holdings, Inc. Erich N. Durlacher, Esq., at Burr & Forman, LLP, in Atlanta, Georgia, notes that given the nature of the property being used by the Estate, which property is subject to depreciation, ordinary and extraordinary wear and tear, and casualty losses beyond the control of the Debtors, DaimlerChrysler Services wants to know right away what the Debtors intend to do with the Master Lease and all the Lease Supplements. DaimlerChrysler Services also wants adequate protection of its interest in the Leased Equipment considering that the Debtors continue to use them postpetition. Mr. Durlacher asserts that pursuant to Section 363(e), or alternatively, Section 503(b)(1)(A) and Section 365(d)(10) of the Bankruptcy Code, DaimlerChrysler Services is entitled to the timely payment of rents due and owing under the Master Lease and three Lease Supplements from the Petition Date going forward until the Debtors decide to assume or reject the Master Lease and all Lease Supplements. If the Debtors elect to assume the Master Lease, DaimlerChrysler Services asks the Court to compel the Debtors to promptly cure all defaults under the Master Lease and all Lease Supplements. According to Mr. Durlacher, under the Master Lease, the Debtors are required to provide both physical damage and liability insurance, with all insurance designating DaimlerChrysler Services as an additional insured and loss-payee. The Debtors have not confirmed that insurance coverage with DaimlerChrysler Services, Mr. Durlacher says. Under Section 365(b)(1)(B) of the Bankruptcy Code, Mr. Durlacher asserts, the Debtors are required to compensate DaimlerChrysler Services for any actual pecuniary loss resulting from the defaults. Specifically, Mr. Durlacher says, the Debtors are obligated to reimburse DaimlerChrysler Services its actual attorneys' fees incurred in preparing and filing its request. The Debtors are further required to provide adequate assurance of future performance under the Master Lease and timely rental payments, Mr. Durlacher adds. Thus, DaimlerChrysler Services asks the Court to compel the Debtors to provide adequate assurance of future performance, through appropriate means, including, but not limited to, escrow deposits to cover one or more month's rental, "drop dead" default remedies, among others. In the alternative, if the Court won't approve DaimlerChrysler Services' request or if the Debtor fails to remit timely the due and owing postpetition rent payments under the Master Lease and the three Lease Supplements, DaimlerChrysler Services asks Judge Drake to terminate the automatic stay with respect to the Leased Equipment either for lack of adequate protection or because the Debtors do not have any equity in the Leased Equipment and it is not necessary to an effective reorganization. In the event that the Debtors reject the Master Lease or the Court terminates the automatic stay with respect to the Leased Equipment, DaimlerChrysler Services asks Judge Drake to direct the Debtors to abandon the Leased Equipment pursuant to Section 554(b) of the Bankruptcy Code. The Leased Equipment is burdensome and of inconsequential value to the Estate since the Debtors do not have any equity or ownership interest in the Leased Equipment, Mr. Durlacher says. 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) ALOHA AIRGROUP: Court Approves Redelivery Pact With GE Entities --------------------------------------------------------------- The Honorable Robert J. Faris of the U.S. Bankruptcy Court for the District of Hawaii approved the Redelivery Agreements among Aloha Airgroup, Inc., Aloha Airlines, Inc., General Electric Capital Corporation and some of its affiliates concerning three 737-700 Boeing aircraft. Prior to the Debtors' bankruptcy filing, Aloha Airlines and some of the GE Entities have entered into three Aircraft Lease Agreements: (a) Aircraft Lease Agreement, dated Dec. 14, 2001, between Aircraft 28654, LLC, as lessor, and Aloha Airlines, as lessee, incorporating Aircraft Lease Common Terms Agreement, dated May 12, 2000, between GECC and Aloha Airlines, as supplemented and amended from time to time, respecting the Boeing 737-700 Aircraft bearing manufacture's Serial No. 28654 and U.S. Registration No. N743AL, and equipped with CFM56-7B26 engines bearing Manufactures Serial Nos. 88639 and 889655; (b) Aircraft Lease Agreement, dated Dec. 14, 2001, between Aircraft 32582, LLC, as lessor, and Aloha Airlines, as lessee, incorporating Aircraft Lease Common Terms Agreement, dated May 12, 2000, between GECC and Aloha Airlines as supplemented and amended, respecting that certain Boeing 737-700 aircraft bearing manufacturer's Serial No. 32582 and U.S. Registration No. N744AL, and equipped with CM56-7B26 engines bearing Manufactures Serial Nos. 88699 and 88702; and (c) Aircraft Lease Agreement, dated June 26, 2002 between AFS Investments XXVIII, LLC, as lessor, and Aloha Airlines, as lessee, incorporating Aircraft Lease Common Terms Agreement, dated May 12, 2000, between GECC and Aloha Airlines, as supplemented and amended, respecting that certain Boeing 737-700 aircraft bearing manufacturer's Serial No. 32743 and U.S. Registration No. N750AL, and equipped with CFM56-7B26 engines bearing manufacturer's Serial Nos. 890832 and 890833. In connection with the Debtors' ongoing review of their business plan, including the profitability of some of their routes, the Debtors concluded to terminate some of their routes and services. The canceled services include service from Vancouver, Canada to the State of Hawaii, and service between Reno, Nevada and San Diego, California. The Debtors also determined that they no longer require all of the aircraft leased by Aloha Airlines from the GE Entities. Accordingly, the Debtors approached the GE Entities regarding the possible early redelivery of some of the aircraft that are subject of the Assumed Aircraft Agreements. The Debtors want the approval of the Redelivery Agreements: -- authorizing Aloha Airlines to undertake the transactions contemplated by the Redelivery Agreements, -- authorizing Aloha Airlines to execute and deliver the Replacement Deferral Notes, and -- allowing the General Unsecured Claims. The General Unsecured Claims consist of: -- $146,758.38 with respect to the lease for N744AL; -- $201,731.58 with respect to the lease for N750AL; and -- $152,185.56 with respect to the lease for N743AL. The Debtors' early redelivery of the Redelivered Aircraft will facilitate the Debtors' fleet rationalization efforts and their contemplated reorganization efforts. The Debtors says that the Redelivery Agreements give the Debtors and their estates significant benefits because: (a) The GE Entities have agreed to accept delivery of the aircraft now, notwithstanding the prior assumption of the Redelivered Aircraft Leases. (b) The GE Entities have agreed to assert the Lease Termination Fees solely as general unsecured claims, and not as administrative expense claim. (c) The lessors have also agreed to provide to restructure the obligations under the Original Deferral Notes and permit Aloha Airlines to pay the amounts due over time as provided in the Substitute Deferral Notes. Headquartered in Honolulu, Hawaii, Aloha Airgroup, Inc. -- http://www.alohaairlines.com/-- provides air carrier service connecting the five major airports in the State of Hawaii. Aloha Airgroup and its subsidiary Aloha Airlines, Inc., filed for chapter 11 protection on Dec. 30, 2004 (Bankr. D. Hawaii Case No. 04-03063). Alika L. Piper, Esq., Don Jeffrey Gelber, Esq., and Simon Klevansky, Esq., at Gelber Gelber Ingersoll & Klevansky represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors it listed more than $50 million in estimated assets and debts. AMERIDEBT INC: Court Approves Chapter 11 Trustee's Lease Renewal ---------------------------------------------------------------- The Honorable Paul Mannes of the U.S. Bankruptcy Court for the District of Maryland approved the request of Mark D. Taylor, the Chapter 11 Trustee appointed in AmeriDebt, Inc.'s chapter 11 case to: -- enter into a Real Property Lease effective July 1, 2005; and -- enter into subsequent Lease Renewals as necessary and appropriate. The Lease commenced on July 1, 2004, and expired on June 30, 2005. The Chapter 11 Trustee renewed the Lease at a rate of $3,208.45 per month for another six months from July 1, 2005, to Dec. 31, 2005. Under the Court's order, Mr. Taylor has the authority to enter into subsequent renewals, as necessary and appropriate. The Debtor maintains a significant portion of its business records at its leased premises located at 444 North Frederick Avenue, in Gaithersburg, Maryland. The Debtor still has two employees and maintains a substantial business records on the premises. The Chapter 11 Trustee is currently in the process of preparing a plan of liquidation. The remaining significant piece of the plan will be the resolution of issues with the IRS. The Trustee is currently negotiating with the IRS. Headquartered in Germantown, Maryland, AmeriDebt, Inc. -- http://ameridebt.org/-- is a credit counseling company. The Company filed for chapter 11 protection on June 5, 2004 (Bankr. D. Md. Case No. 04-23649). When the Company filed for protection from its creditors, it listed $8,387,748 in total assets and $12,362,695 in total debts. ANCHOR GLASS: Bank of New York Wants DIP Hearing Moved to Sept. 8 ----------------------------------------------------------------- The Bank of New York, as Indenture Trustee and Collateral Agent for Anchor Glass Container Corp.'s $350,000,000 11% Senior Secured Notes due 2013, asks the Court to continue the final hearing to consider approval of a proposed $15,000,000 Noteholder Financing to September 8, 2005. As previously reported in the Troubled Company Reporter on Aug. 18, 2005, the Debtor 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 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. Amy E. Lowen, Esq., at Greenberg Traurig, PA, in Orlando, Florida, asserts that BNY and its professionals must be afforded sufficient time and opportunity to assess: -- the impact of the Noteholder Financing on its collateral position; and -- the adequacy of the adequate protection proposed in consideration for the grant of the priming lien on that Noteholders' Collateral. Ms. Lowen explains that the Second Amended Interim Priming Order provides that the advances and indebtedness are to be secured by a priming lien on the Noteholders' Collateral, the very same package of collateral pledged by the Debtor to secure the indebtedness owed under the Senior Secured Notes and Indentures. Ms. Lowen reminds Judge Paskay that Section 364(d)(1)(B) requires that a priming lien on the collateral of any other lien holder can be granted only upon a showing that the interests of the prior lien holder are adequately protected. Absent a prior agreement with the Debtor and Purchasers, BNY believes that the final hearing on the Noteholder Financing is likely to require the presentation of evidence and expert testimony on the issue of adequate protection, in particular the value of the junior lien proposed to be granted as Noteholder Adequate Protection in favor of BNY on the Collateral described in the Wachovia DIP Order. BNY has retained the services of a financial advisor, who has requested certain due diligence materials from professionals retained by the Debtor and Noteholders. Ms. Lowen further argues that, as a matter of common interest to all parties affected by the proposed Noteholder Financing, a continuance of the final hearing is necessary to allow for negotiations among the Debtor, BNY and the Note Purchasers in an effort to avoid an evidentiary hearing on the issue of adequate protection. The Noteholder Financing appears to be subsumed in the $125 million postpetition financing the Debtor seeks under an expanded facility to be provided by the same Noteholders and Purchasers. In the interests of judicial efficiency and economy, Ms. Lowen says the final hearing on the Noteholder Financing should be deferred until September 8, the same date the Court is scheduled to consider the Debtor's request to borrow $125,000,000. 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. (Anchor Glass Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANCHOR GLASS: Hires Houlihan Lokey as Financial Advisor ------------------------------------------------------- On July 25, 2005, Anchor Glass Container Corporation and its Special Committee of the Board of Directors entered into a letter agreement with Houlihan Lokey Howard & Zukin Capital, pursuant to which the firm will serve as the Debtor and the Special Committee's financial advisor. The Debtor has selected Houlihan Lokey as its financial advisor because of Houlihan Lokey's extensive experience in providing financial advisory services. The Debtor submits that Houlihan Lokey is well-qualified and uniquely able to perform the services for which it is to be retained in a most efficient and timely manner. Accordingly, pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, and Rule 2014 of the Federal Rules of Bankruptcy Procedure, the Debtor seeks the Court's permission to employ Houlihan Lokey, nunc pro tunc to the Petition Date. Among others, the firm will: (a) assist with the development, negotiation and implementation of either a Restructuring Transaction, Merger and Acquisition Transaction, Financing Transaction or a combination thereof; (b) assist in valuing the Debtor and, as appropriate, valuing the Debtor's assets or operations; (c) provide expert advice and testimony relating to financial matters associated with the Transactions, including the feasibility of any Transaction and the valuation of any securities issued in connection with a Transaction; (d) to the extent specifically requested by the Debtor or the Special Committee, as the case may be: -- advise the Debtor and the Special Committee, as to mergers or acquisitions, the sale or other disposition of any of the Debtor's assets or business, alternative restructuring or reorganization strategies, and the potential availability of new debt or equity financing; -- develop a list of potential lenders, equity investors, acquirers and strategic partners, and interact with the investors in an effort to create interest in the Debtor; or -- prepare an offering memorandum to provide to interested investors and submit and discuss such offering memorandum with interested parties, and coordinate the negotiation of any Transaction with interested parties; -- assist with any due diligence investigations conducted in connection with any Transaction; (e) assist with any due diligence investigations conducted in connection with any Transaction; (f) assist in preparing proposals to creditors, shareholders and other parties-in-interest in connection with any Transaction; (g) assist with presentations to the Debtor's creditors, investors and other parties-in-interest regarding potential Transactions or other related issues; and (h) render other financial advisory and investment banking services as may be mutually agreed upon by the parties. The Debtor has offered Houlihan Lokey this compensation package: (A) Monthly Fee: $150,000 per month for six months; and $125,000 per month thereafter The Monthly Fee will be payable for a minimum of three Months. After the first six months, 50% of the Monthly Fees actually paid will be credited against the Restructuring Transaction Fee or the M&A Transaction Fee. (B) Transaction Fees to be paid on the closing of a Transaction: * Restructuring Transaction Fee equal to the lesser of: $3,250,000; or 0.75% of the face amount of outstanding Company Obligations that are restructured, modified, amended, forgiven or otherwise compromised. * M&A Transaction Fee equal to the lesser of: $3,250,000; or 1% of Aggregate Gross Consideration. However, if an M&A Transaction is consummated as part of a Restructuring Transaction, Houlihan Lokey will be entitled to the greater of the M&A Transaction Fee or the Restructuring Transaction Fee, but not both. * Financing Transaction Fee equal to the sum of: 1% of all senior secured notes and bank debt raised or committed; 2% of the aggregate principal amount of all second lien or junior secured debt financing raised or committed; 3% of all unsecured, non- senior and subordinate debt raised or committed; and 5% of all equity of equity equivalents raised. The fees will be paid immediately out of the proceeds of the placement. However, no Financing Transaction Fee will be payable on amounts raised either: (i) as part of a DIP financing facility under Chapter 11; or (ii) from Cerberus Capital Management, L.P. or any Cerberus affiliates or in connection with a Cerberus-sponsored transaction other than to the extent requested by the Debtor or the Special Committee. * Fairness Opinion Fee: The fees will be market fees mutually agreed upon by Houlihan Lokey and the Debtor. (C) Expense Reimbursement: All out of-pocket expenses reasonably incurred by Houlihan Lokey before termination. The Debtor proposes that Houlihan Lokey be paid 100% of the amount due for Monthly Fees and expenses incurred upon submission of an acceptable invoice to the Debtor, provided that the firm will submit a separate application to the Court for approval of a Transaction Fee if and when the fee becomes due and payable. The Debtor will indemnify and hold Houlihan Lokey harmless against any and all losses, claims, damages or liabilities in connection with the engagement, except to the extent they arise as a result of any gross negligence or willful misconduct on the part of the firm in the performance of its services. David R. Hilty, Managing Director at Houlihan Lokey, attests that the firm does not hold or represent an interest adverse to the estate that would impair its ability to objectively perform professional services to the Debtor. Mr. Hilty assures the Court that Houlihan Lokey has not provided, and will not provide, professional services to any of the creditors, other parties-in-interest, or their attorneys with regard to any matter related to the Debtor's Chapter 11 case. Mr. Hilty, however, discloses that before the Petition Date, the Debtor paid Houlihan Lokey $150,000 for services provided and $13,378 as reimbursement for out-of-pocket expenses. These amounts were for services provided prior to the commencement of the Debtor's bankruptcy case and cover full payment for all prepetition fees and expenses. Accordingly, Houlihan Lokey is not a prepetition creditor of the Debtor. 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. (Anchor Glass Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANCHOR GLASS: Wants to Assume Sales Contract with OCI Chemicals --------------------------------------------------------------- Anchor Glass Container Corporation seeks authority from the U.S. Bankruptcy Court for the Middle District of Florida to assume a Sales Agreement dated 7, 2004, with OCI Chemical. As reported in the Troubled Company Reporter on Aug. 24, 2005, OCI informed the Debtor that it will decline further performance under the agreement because the Debtor had failed to make payments due. OCI asserts a balance due in excess of $1,800,000 as of the Petition Date. The Debtor informed OCI that it was obligated to continue to perform under the Agreement notwithstanding any prepetition defaults. The Debtor notified OCI that as debtor-in-possession, Anchor had the right to assume or reject the Agreement under Section 365(d)(2), at any time prior to confirmation. Pursuant to the Agreement, OCI supplies substantially all of the soda ash requirements for six of Anchor Glass' eight plants. Soda ash is an essential raw material for the manufacture of glass. There are few suppliers of soda ash in the United States. Anchor Glass' management does not believe that a replacement source is available that could meet Anchor's needs for quantity, timeliness and frequency of delivery to each of its plants. Robert M. Quinn, Esq., at Carlton Fields PA, in Tampa, Florida, informs the Court that the OCI Agreement provides that OCI will ship approximately 240,000 tons of soda ash to Anchor annually, at prices established in January of each year for the coming year. Mr. Quinn adds that under the terms of the OCI Agreement, the price for soda ash is adjusted annually at the start of each year. Anchor now pays $79.20 per ton under the terms of the OCI Agreement. The price will remain in effect until January 2006, at which time the price will adjust to a market price. The 2005 price under the OCI Agreement is substantially less than the current market price for soda ash. Anchor Glass owes OCI a substantial prepetition unpaid balance under the OCI Agreement. OCI asserts that Anchor Glass owes $2.5 million for unpaid invoices arising from sales of soda ash, and additional disputed amounts of $400,000 arising from increased shipping costs incurred by OCI, and approximately $23,000 which is subject to other disputes. The OCI Agreement provides for 30-day terms. In the event Anchor cures and reinstates the OCI Agreement, and provided Anchor is not in breach of the OCI Agreement at the end of the term, Anchor will be entitled to payment from OCI of a rebate of $1.13 per ton purchased from OCI, not to exceed $840,000. 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. (Anchor Glass Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Wants to Enter Into Bank One Credit Card Pact --------------------------------------------------------- ASARCO LLC seeks authority from the U.S. Bankruptcy Court for the Southern District of Texas pursuant to Section 364(c)(2) of the Bankruptcy Code to enter into a corporate credit card agreement with Bank One and grant a lien on a newly created segregated cash account to secure obligations arising under the credit card program. The American Express Program Before the Petition Date, ASARCO had a company credit card program sponsored by American Express Company, which provided business credit cards to certain key employees of the Debtor for their business-related expenses and for purchasing necessary goods and services. Upon learning of the Chapter 11 filing, American Express cancelled ASARCO's credit card program, freezing all cards under it. James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, states that even before the Petition Date the Debtor was unsatisfied with the credit card program offered by American Express. According to Mr. Prince, ASARCO had contacted other providers, prepetition, including Bank One, one of ASARCO's main banking and financial institutions, about the possibility of migrating ASARCO's credit card program to another provider. Due to American Express' cancellation of the existing credit card program, the Debtor found it necessary to expedite its negotiations for a replacement credit card program. Migration to Bank One ASARCO has selected Bank One's $250,000 Commercial Card Classic program, which will provide key employees with up to 100 business charge cards to replace the cancelled American Express program. Annual fees for the credit cards vary depending on annual usage, but in no event are the fees greater than $35 per card. The finance charge rate, which applies only to past-due accounts, is equal to the prime rate plus 2%. As a condition to entering into the credit card agreement, Bank One is requiring ASARCO to: (a) set aside $250,000 in a segregated savings account at Bank One; and (b) grant Bank One a lien against the segregated savings account to secure ASARCO's obligations arising under the credit card program. ASARCO will fund the account with unencumbered cash, not cash collateral. The segregated savings account will remain in ASARCO's name and control. Bank One Credit Card Program Is Necessary ASARCO believes that the credit agreement with Bank One is necessary for the operation of its business and is in the best interest of the estate. Mr. Prince explains that the Debtor needs to provide certain of its key employees with a business charge card to be used: (1) for the purchase of supplies used in the daily operations of the business; (2) for business-related travel expenses; and (3) other business-related needs. Section 364 authorizes a debtor who is unable to obtain unsecured credit to obtain credit, after notice and a hearing, secured by a lien on property of the estate that is not otherwise subject to a lien. Mr. Prince notes that ASARCO has otherwise been unable to obtain the type of credit that Bank One is offering on an unsecured basis. In fact, even American Express sought similar protections in order to continue to service ASARCO's procurement card program postpetition. Mr. Prince further informs the Court that, unless the Debtor is authorized to enter into the credit arrangement with Bank One and grant a lien on a $250,000 segregated cash account, ASARCO's business operations will be disrupted by the loss of its corporate credit card program. Texas Commission Objects The Texas Commission on Environmental Quality contests ASARCO's request to migrate its Credit Card Program to Bank One on the grounds that the Commission's counsel did not receive notice of the emergency hearing on the Motion until August 18, 2005, at 5:33 p.m., after close of business, when he received an e-mail from an employee of the Debtor's counsel. ASARCO has sought expedited consideration of the request. A hearing on the Motion was scheduled for August 19, 2005. The Texas Commission asserts that it is inappropriate for its counsel to receive less than one business day's notice of a hearing without a true emergency. The Commission's counsel is extremely concerned that the expedited consideration of the Debtor's request is a window into what creditors can expect in the case. "The Debtor should not be permitted to abuse the Court's graciousness with respect to the setting of emergency hearings," Hal F. Morris, Esq., Assistant Attorneys General, Bankruptcy & Collections Division, in Austin, Texas, argues, "unless they can demonstrate a true emergency which would require immediate court action and justify the denial of due process to other parties in interest." The Texas Commission also asserts that the Debtor's Motion lacks sufficient detail about the nature of the alleged emergency, stating that the Motion itself does not contain substance creating a problem with regard to the employees' inability to avail of Credit Card Services. Mr. Morris points out that one of the key facts the Debtor should disclose is the date and time it received notice that its account was being frozen by American Express. The Texas Commission requests that any order entered by the Court on less than one day's notice to parties-in-interest, be an interim order. This would allow all parties-in-interest an opportunity to review the Debtor's pleading and consider the Debtor's request. The Texas Commission also asks the Court to establish a procedure for the setting of emergency hearings in the bankruptcy proceedings, stating that not all requests by the Debtor are true emergencies and that the due process rights of parties-in- interest must be balanced against the Debtor's desire for expeditious resolution of its motions. The Texas Commission suggests a procedure for the Court's consideration: (1) Any order entered on an emergency motion be interim; (2) Parties-in-interest have 20 days to challenge the entry of the interim order; (3) If an objection is filed, the matter be requested by the Debtor be set for hearing within 20 days of the date the objection was filed; and (4) If there are no objections filed, the order becomes final in 25 days of the entry of the interim order. Notice James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, advises parties-in-interest that the hearing to consider the Debtor's request, originally scheduled for Aug. 19, 2005, has been adjourned to a later date still to be set. 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. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Wants Approval of Reclamation Claim Procedures ---------------------------------------------------------- Since filing for bankruptcy, ASARCO LLC has received reclamation demands from various suppliers and other creditors. ASARCO expects to receive more of these demands. Pursuant to Section 546(c) of the Bankruptcy Code, the Debtors ask the Court to establish these guidelines and procedures for the treatment of timely asserted reclamation claims: (a) Any supplier or other creditor asserting a reclamation claim must do so in compliance with the requirements of Section 546(c) and applicable state law; (b) Notwithstanding any reclamation demand that would require ASARCO to segregate the assets subject to the reclamation demand, ASARCO would be authorized to use the goods, products, and raw materials provided by suppliers and other trade creditors that may be subject to reclamation claims; (c) In lieu of physical reclamation, if ASARCO determines that a particular supplier or other trade creditor has a valid reclamation claim and ASARCO desires to pay the creditor on account of the goods, then ASARCO will provide written notice of its intent, along with the supporting invoices, to: (i) the official committee of unsecured creditors appointed in ASARCO's case; (ii) the official committee of unsecured creditors appointed in the Subsidiary Cases; and (iii) the United States Trustee. Unless a written objection is filed and served on ASARCO within five business days from the date of delivery of the notice, the creditor will be deemed to hold an administrative expense claim under Section 503(b), and ASARCO is authorized to pay the creditor without further Court order; (d) In lieu of physical reclamation, if the Court determines, upon request of a particular supplier or other trade creditor, and after notice and a hearing, that a creditor has asserted a valid reclamation claim, then the creditor will be granted an administrative expense claim under Section 503(b) for the amount of the reclamation claim; and (e) In any proceeding commenced to determine the validity or amount of any reclamation claim, the supplier or the trade creditor asserting the claim will bear the initial evidentiary burden of establishing the validity of its reclamation claim under Section 546(c) and applicable state law by a preponderance of the evidence. Jack L. Kinzie, Esq., at Baker Botts LLP, in Dallas, Texas, tells the Court that the procedures for resolving reclamation claims are necessary to prevent supply interruptions and severe and irreparable injury to the Debtors' business operations. The success and ultimate viability of the Debtors' businesses depend on the immediate utilization of the goods, products, and raw materials that may be the subject of reclamation claims. "If suppliers or other trade creditors are allowed to reclaim certain assets or if the Debtors are required to segregate those assets, there could be disastrous interruption in the Debtors' business operations," Mr. Kinzie says. Mr. Kinzie further asserts that the disruption and adverse publicity that would result could impact the Debtors' relationship with other trade creditors and force an effective shut down of their business operations, which could severely impair, or possibly eliminate, any possibility for a successful reorganization. Any payment to be made will be subject to any cash collateral or postpetition financing documents or orders approved or entered in the Debtors' cases. 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. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Utilities Want Court Order Vacated ---------------------------------------------- ASARCO LLC obtains electricity, water, natural gas, telephone services, and similar services through accounts with numerous utility companies in connection with the normal operation of its business. Under Section 366 of the Bankruptcy Code, utility companies are prohibited from discontinuing, altering, or refusing service to a debtor during the first 20 days of the bankruptcy case. Upon expiration of the Stay Period, however, a Utility Company has the option of terminating its services if a debtor has not furnished adequate assurance of payment. Karen C. Paul, Senior Assistant General Counsel of ASARCO, relates that it is vitally important to the Debtor's business, and thus to the Debtor's successful reorganization, that utility services continue uninterrupted after the expiration of the Stay Period. If utility services were discontinued or altered, even briefly, the Debtor's ongoing operations would be severely disrupted, causing substantial and perhaps irreparable harm, and the Debtor's reorganization efforts would be jeopardized. For this reason, the Debtor wants to prevent Utility Companies from terminating services or requiring additional deposits in connection with their provision of services. The Utility Companies would not be prejudiced by the absence of additional deposits, Ms. Paul says. ASARCO has timely paid most of its undisputed prepetition invoices, and is prepared to pay all undisputed postpetition charges for Utility Services. The timely payment of prepetition invoices and prompt payment of all undisputed postpetition invoices for Utility Services after the Petition Date, together with existing deposits and the statutory administrative priority provisions constitute adequate assurance of payment under the Bankruptcy Code, Ms. Paul asserts. Moreover, if the Utility Companies require additional deposits to secure continued services, the Debtor may face a severe cash shortage. Shelby A. Jordan, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., in Corpus Christi, Texas, points out that courts have held that a debtor's ability to pay postpetition bills promptly is most determinative of adequate assurances for utility companies. In In re George C. Frye Co., 7 B.R. 856 (Bankr. D. Me. 1980), Mr. Jordan says the court found that a utility company's demand that a Chapter 11 debtor post a deposit or suffer termination of service, if permitted, would jeopardize the debtor's reorganization efforts. Additionally, the court noted that the administrative expense priority provisions of Sections 503(b) and 507(a) constituted adequate assurance of payment to the utility. At the Debtor's behest, the U.S. Bankruptcy Court for the Southern District of Texas enjoins and restrains Utility Companies from discontinuing, altering, or otherwise refusing service on account of any unpaid prepetition charges. A Utility Company, however, may request additional assurances of payment in the form of deposits or other security within 30 days after the Court enters a Utility Injunction Order. If the Debtor believes that the Additional Assurance Request is not reasonable, the Debtor may schedule a hearing to determine if additional assurances are necessary. Judge Schmidt holds that a Utility Company will be deemed to have adequate assurance of payment until a further Court order is entered in connection with a Determination Hearing. Utility Companies will be prohibited from applying any prepetition deposit to a postpetition invoice, but instead be required to hold any deposits postpetition as additional adequate assurance. A schedule of the Debtor's utility service accounts is available at no charge at: http://bankrupt.com/misc/Utility_Service_Accounts.pdf Utilities Want Order Vacated (1) Chevron Rhett G. Campbell, Esq., at Thompson & Knight LLP, in Houston, Texas, informs the Court that Chevron Natural Gas, a division of Chevron U.S.A. Inc., is not a utility but rather a forward contract merchant entitled to the protection of Section 556 of the Bankruptcy Code. Before the Petition Date, Chevron and the Debtor had entered into a Base Contract for Sale and Purchase of Natural Gas dated April 1, 2003, by which Chevron agreed to deliver natural gas to the Debtor. Pursuant to the terms of the contract and Tex. Bus. Com. Code section 2.702(a), the Debtor was prepaying for the gas prior to delivery. Section 556 expressly provides that a forward contract may not be "stayed, avoided or otherwise limited by operation of any provision of this title or by order of a court in any proceeding under [the Bankruptcy Code]." The Utility Order seeks to modify Chevron's contractual rights with respect to payment and dispute resolution pursuant to the provision of Section 366, Mr. Campbell points out. That action is expressly forbidden by the provision of Section 556. Accordingly, Chevron asks the Court to modify the Utility Order to delete Chevron from the list of Utility Companies or to provide that the Order does not apply to Chevron. (2) El Paso Philip G. Eisenberg, Esq., at Locke Liddell & Sapp LLP, in Houston, Texas, asserts that El Paso Natural Gas Company is not a utility company subject to the provision of Section 366 of the Bankruptcy Code. Mr. Eisenberg notes that "utility," as used in Section 366, is not defined in the Bankruptcy Code. However, the legislative history of Section 366 contemplates application only to utilities that are "monopolies in the area" and debtors who "cannot easily obtain comparable service." In this regard, Mr. Eisenberg says the Debtor has wholly failed to meet its burden of proving that El Paso is a monopoly, and proving that it has no choice but to enter into gas supply contracts with El Paso because it could not otherwise obtain comparable service. Moreover, the Debtor has disclosed in an exhibit to the Utility Motion that it obtains natural gas from seven suppliers. "El Paso expressly avers that it is not a monopoly in any of the areas where the Debtors operate, and the Debtors could (and did) obtain comparable service from other natural gas suppliers," Mr. Eisenberg tells Judge Schmidt. "If the Debtors, or their affiliates who have actually contracted with El Paso, did not find the terms and condition of the Gas Supply Contracts acceptable, it could have negotiated with another natural gas supplier." Mr. Eisenberg further notes that El Paso's records indicate that its gas supply contract is with ASARCO, Inc., not the Debtor. Mr. Eisenberg also contends that the Gas Supply Contracts are forward contracts subject to termination or liquidation under Section 556. By classifying El Paso as a utility, Mr. Eisenberg says, the Debtor is merely attempting to avoid the possibility of termination or liquidation of the Gas Supply Contracts or its obligations to cure prepetition defaults in the event of assumption of the Gas Supply Contracts, as would be required by Section 365(b)(1)(A). Furthermore, Section 365 does not enjoin the alteration, refusal or discontinuation of service to, or discrimination against, the Debtor, as does the Utility Order relying upon Section 366, Mr. Eisenberg adds. The Debtor should be required on rehearing to substantiate its claim that El Paso should be subject to the Utility Order, Mr. Eisenberg argues. The Utility Order should be vacated to provide El Paso an adequate opportunity to demonstrate that the Order is inapplicable. Absent the Court vacating the Utility Order, El Paso will be subjected to the provisions of Section 366, without the Debtor having first put to the task of demonstrating that it is entitled to any of the protections provided. 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. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Motion to Reject Pilot's Union Agreement Draws Fire ----------------------------------------------------------------- As previously reported in the Troubled Company Reporter on August 18, 2005, ATA Airlines, Inc., sought 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. Responses (A) ALPA The Air Line Pilots Association, International, objects to ATA Airlines, Inc.'s request to reject their 2002 collective bargaining agreement under Section 1113 of the Bankruptcy Code. Frederick W. Dennerline III, Esq., at Fillenwarth, Dennerline, Groth & Towe, in Indianapolis, Indiana, asserts that ATA attempts to minimize the tremendous sacrifices already made by the ALPA crewmembers. Not unmindful of the Debtors' financial conditions, ALPA has thrice agreed to modify the CBA to generate about $70 million in savings to ATA. In addition, ATA attempts to down play the enormity of the concessions ATA seeks to impose on the crewmembers. ATA repeatedly asserts that is has a viable business plan that requires the carrier to reduce pilot costs by $37.5 million in 2006. In a footnote in the Motion, however, ATA admitted that, in fact, its proposal would generate $43.2 million in savings in 2006. ATA did not explain why it is asking the crewmembers to give more than its business plan contemplates, Mr. Dennerline points out. ATA similarly seeks to mask the severity of the concessions it seeks by repeatedly citing "20%" as the reduction in crewmember pay. Comparing the wages ATA is obligated to pay under the ALPA CBA with the wages it wants to pay under the 1113 Proposal would reveal that the difference is approximately 42%. Additionally, while ATA refers to ALPA's need to "share with other stakeholders" in reducing costs, the Debtor never bothers to provide any detail as to the sacrifices by the other stakeholders. According to Mr. Dennerline, the proposed concessions would dramatically outpace those of other interested parties. He asserts that the ALPA-represented crewmembers are being asked to accept pay reductions that are approximately double that of any other employee group. Under ATA's business plan, Southwest Airlines, Inc., will receive 27.5% of the equity in the reorganized ATA in exchange for $30 million in exit financing, whereas ALPA, in stark contrast, will receive no equity for its approximate $80 million in concessions for July 2004 through July 2007. ALPA believes that it has bargained in good faith. The current version of ATA's ever-evolving business plan was not presented to ALPA until July 18, 2005. Thus, it is ridiculous to suggest that ALPA should have concluded negotiations in June or early July without waiting to see the plan, Mr. Dennerline remarks. ALPA has rejected ATA's proposal in favor of its own reasonable proposal that provides the concessions that are needed to allow reorganization. ALPA has offered to forego "snapbacks" set to take place October 1, 2005, and has agreed that ATA can pay its crewmembers at rates below the frozen July 2003 rates. Rather than the 20% reduction from July 2003 rates proposed by ATA, however, ALPA offered 8% reductions. And rather than suspending contributions to the Crewmember Money Purchase Plan as proposed by ATA, ALPA offered to continue the plan at the 50% contribution level that the parties previously agreed to in May 2005. Through wage reductions and other means, ALPA's proposal would provide ATA with savings of approximately $18 million in 2006 and a total of $36 million for the period October 1, 2005, through June 30, 2007. Nonetheless, ALPA has not walked away from negotiations for alternative and compromise proposals with ATA. In that light, ALPA asks the Court to deny the Motion on these grounds: (1) ATA's proposal does not meet the strict standards under Section 1113(b); (2) ATA has not proved that the proposed modifications are "necessary" to reorganization and that ATA has negotiated in good faith concerning the proposal; (3) ATA has failed to demonstrate that all affected parties are treated fairly and equitably; (4) ATA has failed to demonstrate that ALPA rejected its proposal without good cause; (5) ATA has not demonstrated that the balance of equities clearly favors rejection; and (6) ATA cannot condition relief upon speculations as to prospective investors. (B) AFA The Association of Flight Attendants tells the Court that all of the unions representing the employees of ATA have been called on to make sacrifices as part of the Debtors' reorganization. AFA believes that the concessions requested by ATA are not necessary for its reorganization. AFA believes that the CBA should be honored, and thus, opposes to the Motion. (C) Creditors Committee The Official Committee of Unsecured Creditors believes that the Debtors need to secure additional capital and reduce operational costs to be able to successfully reorganize. The Debtors' ability to obtain the much needed financing is, in part, dependent upon the long term labor concessions being sought in the 1113 Proposal, which is an essential part of the Debtors' business plan. C. R. Bowles, Jr., Esq., at Greenebaum Doll & McDonald, PLLC, in Louisville, Kentucky, explains that lender or equity investor will not commit to provide additional funds unless it believes that the Debtors' business plan is viable. Without a long-term arrangement with the crewmembers, the Debtors' current business plan is not viable. Although there are no guarantees that the Debtors will be able to obtain the additional capital, and there is continued uncertainty relating to fuel costs, the Debtors will incur approximately $4 million per month under the "snapback" provisions of the CBA, unless the 1113 Proposal is approved. As the Debtors have correctly noted, the increase will not only inhibit attracting the required investment, it would likely push their estates into liquidation. The Debtors have implemented significant cost cutting measures during their Chapter 11 cases including: (i) eliminating non-core assets, including a captive regional carrier based in Chicago -- the Chicago Express market -- and exiting several scheduled service routes from Indianapolis; (ii) reducing aircraft and aircraft-engine expenses through the rejection and renegotiation of leases; (iii) reducing the gauge of their fleet to improve load factors and yields; (iv) obtaining an agreement in principle with their landlord to substantially reduce occupancy costs for the Debtors' corporate headquarters; (v) reducing pay of the Debtors' officers, directors, and other employees; and (vi) announcing the outsourcing of maintenance and reservations functions which is expected to generate approximately $20 million in annual savings. "The unfortunate reality is that the Debtors must now look to ALPA for help in achieving their remaining, or at least a significant part of, their cost-cutting goals," the Creditors Committee states. While it acknowledges and is mindful of the immense sacrifices being sought of the ALPA crewmembers, the Creditors Committee believes that the future of the Debtors is plainly and inextricably tied to the concessions provided under the 1113 Proposal. Debtors Defend Motion Melissa M. Hinds, Esq., at Baker & Daniels, in Indianapolis, Indiana, asserts that ATA indisputably needs the relief sought in the 1113 Proposal based on these facts: -- Without a new collective bargaining agreement with ALPA, ATA's current crewmember labor costs will increase by $4 million per month beginning October 1, 2005; -- Even under ALPA's last proposal, ATA's current crewmember labor costs will increase by almost $1 million per month beginning October 1, 2005; -- Either increase would hasten ATA's already perilous cash burn, and sound the death knell for ATA's efforts to raise necessary new investment; and -- Without that new investment, ATA cannot survive. Ms. Hinds points out that ALPA failed to acknowledge that its proposal would actually cause an immediate increase in ATA's crewmember labor cost. The crewmembers are currently being paid in accordance with the 18% pay scale reduction that ALPA agreed to on an interim basis in Letter of Agreement No. 38. Under ALPA's latest proposal, the scale reduction would change to only 8%, providing crewmembers an immediate 10% pay rate increase. The cost to ATA of that increase, after offsetting a small savings in the ALPA Proposal, would be almost $900,000 per month. On the other hand, the 1113 Proposal would go back to the 20% scale reduction that ALPA agreed to in January 2005 and extend it on a long-term basis. This change from the current interim 18% reduction would result in roughly a $200,000 per month expense reduction for ATA. Counting other savings in the Proposal, ATA's crewmember labor costs would decrease by about $700,000 per month from current levels. Frank Conway, chief financial officer of ATA, and Sean Frick, chief restructuring officer of ATA, have filed affidavits with the Court defending the Debtors' request. Mr. Conway and Mr. Frick concur that the labor concessions granted under the 1113 Proposal are necessary to the Debtors' reorganization and for prospects of acquiring additional capital. It is not accurate to say that ALPA crewmembers' sacrifices have been materially greater than other employees, according to Ms. Hinds. Ms. Hinds relates that employees of ATA other than cockpit crewmembers have had an average salary increase of 14% since September 11, 2001. They had the Company match to their 401(k) account suspended for 2005. Also, they have had their medical insurance premiums increase in each year. In contrast, the crewmembers on average have seen a 38% increase in their pay, taking into account the step increases and general rate increases since September 11, 2001. Since 2002 they have also received a 3.6% Company match to their contributions to their 401(k) accounts plus a Company contribution to their CMPP accounts. The crewmembers continue to be covered under a premium medical insurance program without contribution for individual or dependent medical coverage after two years of employment. Also, of approximately 440 employees who will earn in excess of $100,000 in 2005, approximately 400 of them will be the crewmembers. The accusation that ATA is trying to hide the fact that its 1113 Proposal generates $43.2 million in concessions in 2006 rather than the $37.6 million is a complete red herring, Ms. Hinds tells Judge Lorch. ATA explained in the Motion and the supporting declarations that its valuation did not include a value for a 2006 pay rate increase, because it focused on current costs, not costs to be incurred in the future, Ms. Hinds says. More importantly, complete details on the costing of the Company proposal were provided to ALPA during the negotiations. It is clear that ALPA understood these details, Ms. Hinds maintains. In a statement reported by the Aviation Daily, "[t]he union said the concessions would actually be worth $44 million a year because the airline proposal would cancel pay increases scheduled for next year," according to Ms. Hinds. 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) ATKINS NUTRITIONALS: Files Plan & Disclosure Statement in New York ------------------------------------------------------------------ Atkins Nutritionals, Inc., and its debtor-affiliates delivered their Joint Plan of Reorganization and an accompanying Disclosure Statement to the U.S. Bankruptcy Court for the Southern District of New York on Aug. 26, 2005. The Plan provides for the substantive consolidation of the Debtors and the transfer of ownership and control of the reorganized company to Atkins' secured creditors. On the Plan's Effective Date, Reorganized Atkins Holdings is authorized to issue the New Common Interests without any further action by holders of Claims or Equity Interests. The New Common Interests will consist of 15 million authorized shares or units, as applicable, of Reorganized Atkins Holdings, 10 million of which will be issued and distributed to the holders of Allowed First Lien Claims and Allowed Second Lien Claims pursuant to Article IV of the Plan. The remainder of the authorized New Common Interests will be reserved for future purposes, as determined by the Board of Reorganized Atkins Holdings, consistent with its New Organizational Documents. The Plan groups claims and interests into six classes. Unimpaired Claims consist of: 1) Priority Non-Tax Claims, totaling approximately $40,000, which will be paid in full in Cash together with post- petition interest; and 2) Other Secured Claims, totaling approximately $720,000, which will receive five options in the treatment of their Claims. Allowed Other Secured Claims will either be: a) reinstated or paid in full in cash, together with post- petition interest, or b) satisfied by the surrender of the underlying collateral, or c) otherwise rendered unimpaired in accordance with Section 1124 of the Bankruptcy Code, or d) accorded a treatment, including deferred cash payments, as consistent with Section 1129(b) of the Bankruptcy Code, or e) paid at other terms as the Debtors and the Holders of Allowed Other Secure Claims may agree. Impaired Claims consist of: 1) First Lien Claims, totaling approximately $216.4 million, to receive their Ratable Proportion of the New Tranche A Senior Notes and 8,400,000 shares or units of the New Common Interests; and 2) Second Lien Claims, to receive their Ratable Proportion of 1,600,000 shares or units of the New Common Interests and the New CVR Interests. The Plan delivers nothing to General Unsecured Creditors. General Unsecured Creditors will not be entitled to and will not receive or retain any property or interest in property on account of those Claims and on the Effective Date, according to the Plan, and the Debtors will be discharged from any obligations to holders of General Unsecured Claims. Old Equity Interests will be cancelled on the Effective Date and the holders of Old Equity Interests will not be entitled to and will not receive or retain any property or interest in property on account of those interests. A full-text copy of the Disclosure Statement and Plan is available for a fee at: http://www.researcharchives.com/bin/download?id=050829021507 Headquartered in New York, New York, Atkins Nutritionals, Inc. -- http://atkins.com/-- sell nutritional supplements based on its founder, Dr. Robert C. Atkins' nutritional philosophy of controlled-carbohydrate lifestyle. The Debtors also sell more than 100 food products and nutritional supplements, as well as informational products such as diet books and cookbooks. Atkins' products are sold in more than 30,000 stores in North America under numerous trademarks. The Company along with Atkins Nutritionals Holdings, Inc., Atkins Nutritionals Holdings II, Inc., and Atkins Nutritionals (Canada) Limited, filed for chapter 11 protection on July 31, 2005 (Bankr. S.D.N.Y. Case No. 05-15913). Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represents the Debtors in the United States, while lawyers at Osler, Hoskin & Harcourt, LLP, represents the Debtors in Canada. As of May 28, 2005, they listed $265.6 million in total assets and $323.2 million in total debts. ATKINS NUTRITIONALS: Gets Final Court Nod on DIP Financing Access ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York granted Atkins Nutritionals, Inc., and its debtor-affiliates, final approval to: a) obtain secured post-petition financing on a superpriority basis pursuant to the terms and conditions of the Senior Secured DIP Credit Agreement entered into between the Debtors and UBS AG, Stamford Branch as the DIP Agent for itself and on behalf of the DIP Lenders; b) grant adequate protection to UBS AG and the DIP Lenders and authorize the Debtors to perform the obligations pursuant to the DIP Credit Agreement and the DIP Facility Documents; and c) vacate and modify the automatic stay imposed by Section 362 of the Bankruptcy Code to the extent necessary to implement and effectuate the terms and provisions of the DIP Facility Documents and Court's Final Order. DIP Financing & Use of DIP Loans The Court authorizes the Debtors to obtain up to $25 million in aggregate amount of the DIP Financing, including a sub-limit for letters of credit having a maximum drawing amount of not more than $5 million, subject to the limitations on availability and reserves pursuant to the DIP Credit Agreement. The DIP Loans will mature on April 30, 2006. The Debtors will use the proceeds of the DIP Loan for the continued operation of their businesses, to maintain business relationships with their vendors, suppliers and customers, to pay for employees' payroll and finance their operations. Adequate Protection & Modification of the Automatic Stay The Debtors will grant UBS AG and the DIP Lenders continuing, valid, binding, enforceable, and automatically perfected post- petition security interests and liens on all of the Debtors' pre- petition and post-petition assets. The automatic stay imposed by Section 362(a) of the Bankruptcy Code is modified to permit: a) the granting of the Adequate Protection Liens and the Adequate Protection Superpriority Claims and to perform other acts as the UBS AG may request to assure the perfection and priority of the Adequate Protection Liens, b) the granting of the DIP Liens and the DIP Superpriority Claim, and to perform other acts as the DIP Agent may request to assure the perfection and priority of the DIP Liens, and c) to implement the terms of the Court's Final Order. Headquartered in New York, New York, Atkins Nutritionals, Inc. -- http://atkins.com/-- sell nutritional supplements based on its founder, Dr. Robert C. Atkins' nutritional philosophy of controlled-carbohydrate lifestyle. The Debtors also sell more than 100 food products and nutritional supplements, as well as informational products such as diet books and cookbooks. Atkins' products are sold in more than 30,000 stores in North America under numerous trademarks. The Company along with Atkins Nutritionals Holdings, Inc., Atkins Nutritionals Holdings II, Inc., and Atkins Nutritionals (Canada) Limited, filed for chapter 11 protection on July 31, 2005 (Bankr. S.D.N.Y. Case No. 05-15913). Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represents the Debtors in the United States, while lawyers at Osler, Hoskin & Harcourt, LLP, represents the Debtors in Canada. As of May 28, 2005, they listed $265.6 million in total assets and $323.2 million in total debts. AXEDA SYSTEMS: Posts $1.5 Million Net Loss in Second Quarter ------------------------------------------------------------ Axeda Systems Inc. reported financial results for the quarter ended June 30, 2005. The Company reported a net loss of $1,549,000 for the quarter ended June 30, 2005 compared with a net loss of $2,424,000 for the same period in 2004. As of June 30, 2005 we had approximately $1.2 million in cash and cash equivalents. Asset Sale On June 29, 2005, the Company entered into a non-binding letter of intent to sell its Axeda DRM system business and related assets to JMI Equity Fund V, L.P., a Baltimore and San Diego-based private equity firm. The letter of intent contemplates that JMI will purchase substantially all of the assets of its Axeda DRM system business, with the exception of its Supervisor product family business, for a total of $7,000,000 in cash plus the assumption of certain liabilities. In addition, JMI committed to provide up to a $1,500,000 bridge loan to Axeda, of which $600,000 was advanced in July 2005. The bridge loan bears interest at the rate of 7% per annum and is secured by the assets of the Company's Axeda DRM system business. Sublease Agreements On July 11, 2005 Axeda entered into a Letter of Intent to sublease 14,711 square feet of space in Foxborough, Massachusetts, which is in the same industrial complex as its current offices. The Company is currently finalizing the sublease agreement for this space, or Sublease Agreement, which currently proposes annual rent of $125,000 plus operating expenses, for the term of September 1, 2005 to March 31, 2007. In July 2005, Axeda entered into a Sublease Termination Agreement for its offices in Mansfield, Massachusetts under which it will surrender these premises on, or before, October 1, 2005 or the Termination Date, rather than the current lease termination date of July 2007. This termination agreement provided for no rental liability from July 1, 2005 to the Termination Date. The security deposit of $150,000 was reduced by $100,000 upon the signing of the Termination Agreement, and will be reduced by another $25,000 upon a signed lease for alternate space, and the final $25,000 will be returned after surrendering the premises and the final inspection. The current monthly base rent for this office is $26,000, plus $14,000 monthly for operating expenses. As a result this lease termination, the Company expects to amortize in full the recorded amount of leasehold improvements made to the Mansfield office as of June 30, 2005 of $400,000 in the third quarter of 2005. With the finalizing of the Sublease Agreement for its office in Foxborough, Massachusetts the Company's lease commitments, including rent, utilities and taxes, will be reduced by approximately $608,000 over the remaining lease term, compared to the Mansfield, Massachusetts sublease. If the sale of the Axeda DRM system business to JMI is consummated, substantially all of Axeda's revenue will be derived from its remaining assets, the Supervisor product family business. The Company does not have experience operating its business with this single products family, however, management does not expect that the revenues to be generated from the Supervisor product family business will be sufficient to allow the Company to continue to operate its business as a going concern. Axeda has recently received some inquiries from third parties who have indicated that they may be interested in acquiring the Supervisor product family business. The Company would consider selling the Supervisor product family business if it were offered favorable terms. However, there can be no assurances that a suitable acquirer will be identified and that Axeda could negotiate a favorable price and terms for such transaction. Laurus Notes Default As of August 22, 2005, the Company was in default under the Laurus Secured Convertible Term Note issued to Laurus Master Fund, Ltd, or Laurus, for failing to pay interest due under the Note for May, June, July, and August 2005, as well as the July and August 2005 principal payments when due. Article IV of the Note defines "Events of Default" as the failure to pay any installment of principal or interest within three days of the due date, and that upon the occurrence and continuance of an Event of Default, Laurus may make all sums of principal, interest and other fees then remaining unpaid immediately due and payable. In the event of such an acceleration, the amount due and owing to Laurus shall be 120% of the outstanding principal amount, plus accrued and unpaid interest and fees. In addition, the registration rights agreement entered into in connection with the Note states that if the Company's shares are not traded on a "Trading Market", which does not include the "Pink Sheets", where the Company's shares of common stock currently trade, then Axeda is obligated to issue certain warrants to Laurus, and failure to do so also constitutes a default under the Note. In a Letter Agreement dated July 8, 2005 between the Company and Laurus, Laurus agreed to accept payment in full in cash of the outstanding principal and accrued and unpaid interest simultaneously with the closing of the JMI Asset Sale, in full satisfaction of the Company's obligations. Nasdaq Delisting As reported in the Troubled Company Reporter on July 12, 2005, Axeda Systems Inc. reported that its common stock was delisted from The Nasdaq SmallCap Market effective with the opening of business on July 7, 2005. This follows the Company's announcement that a Nasdaq Listing Qualifications Panel had approved the Company's request for continued listing of its common stock on The Nasdaq SmallCap Market, via an exception from Nasdaq's stockholders' equity and minimum bid price requirements. While the Company was able to demonstrate compliance with the stockholders' equity requirement in accordance with the terms of the exception, it failed to achieve a $1 stock price by June 30, 2005, as required by the Panel's decision. The Company's quotation for its common stock now appears in the "Pink Sheets." The trading symbol for its common stock has changed from XEDAC to XEDA effective with the removal from NASDAQ. The Company's common stock may also be quoted in the future on the OTC Bulletin Board provided a market maker files the necessary application with the NASD and such application is cleared. The Company will disclose further trading venue information for its common stock when such information becomes available. Bankruptcy Warning If sales of both the Axeda DRM system business and the Supervisor product family business are consummated, the Company would expect to use the proceeds to pay its creditors, including Laurus. To the extent that not all of its obligations to creditors were satisfied, management indicates that Axeda may elect to file for bankruptcy, or be forced into bankruptcy. Axeda Systems Inc. -- http://www.axeda.com/-- is the world's leading provider of Device Relationship Management (DRM) software and services. The Company's flagship product, the Axeda(R) DRM system helps manufacturing and service organizations increase revenue while lowering costs, by proactively monitoring and managing devices deployed at customer sites around the world. Axeda DRM is a highly scalable, field-proven, and comprehensive remote management solution that leverages its patented Firewall- Friendly(TM) technology to enable Machine-to-Machine (M2M) communication by utilizing the public Internet. Axeda customers include Global 2000 companies in many markets including Medical Instrument, Enterprise Technology, Office and Print Production Systems, and Industrial and Building Automation industries. Axeda has sales and service offices in the U.S. and Europe, and distribution partners worldwide. Going Concern Doubt KPMG LLP raised substantial doubt about Axeda Systems Inc.'s ability to continue as a going concern after it audited the Company's 2004 financials. KPMG stated that the Company's recurring losses from operations and negative cash flows from operations since inception triggered that doubt. "Management has developed and begun to implement a plan to address these issues and allow the Company to continue as a going concern through at least the end of 2005," the Company said in its Annual Report. "This plan includes fundraising from new and current investors, continued cost-cutting, and stabilizing and growing our revenue streams. Although we believe the plan will be realized, there is no assurance that these events will occur." BELDEN & BLAKE: Buying Back 8.75% Senior Secured Notes for Cash --------------------------------------------------------------- Belden & Blake Corporation commenced a tender offer to purchase for cash any and all of its outstanding 8.75% Senior Secured Notes due 2012 in the aggregate principal amount of $192,500,000. Belden & Blake is offering to purchase the outstanding Securities at 101% of the principal amount tendered from all holders of Securities who validly tender their Securities at or prior to 9:00 a.m., New York City time, on Monday, Sept. 26, 2005, the expiration of the Tender Offer. Holders who validly tender their Securities at any time during the tender offer period will also be paid accrued and unpaid interest up to, but not including, the applicable date of payment for such Securities. On Aug. 16, 2005, Capital C Energy Operations, LP, the Company's parent, was acquired by certain institutional funds managed by EnerVest Management Partners, Ltd., a Houston-based privately held oil and gas operator and institutional funds manager. Because the acquisition resulted in a change of control of the Company, the indenture governing the Securities requires the Company to make the Tender Offer. The Tender Offer is conditioned upon compliance of the Tender Offer with all applicable laws. The purchase price for Securities tendered in the Tender Offer will be paid by the Company using borrowings under its new credit facility, cash on hand and subordinated loans or equity investments provided by the Funds. Requests for documentation may be directed to Global Bondholder Services Corporation, at (212) 430-3774 (collect; for banks and brokers) or (866) 795-2200 (toll free; for all other than banks and brokers). Belden & Blake engages in the exploitation, development, production, operation and acquisition of oil and natural gas properties in the Appalachian and Michigan Basins (a region which includes Ohio, Pennsylvania, New York and Michigan). Belden & Blake is a subsidiary of Capital C Energy Operations, LP, an affiliate of Carlyle/Riverstone Global Energy and Power Fund II, L.P. * * * As reported in the Troubled Company Reporter on Apr. 7, 2005, Moody's downgraded Belden & Blake's senior implied rating from B3 to Caa1 and its note rating from B3 to Caa2. The outlook is changed to negative. The downgrade, which concludes Moody's review that commenced on December 28, 2004, is a result of Moody's review of the company's 10-K which confirmed the credit deterioration through a combination of: * a greater than expected reserve revision; * poor capital productivity evidenced by drillbit F&D of $62.23/boe (excluding revisions) and only replacing 15% of production through extensions and discoveries; * very high leverage on the proved developed (PD) reserves of $7.64/boe; * B&B's very high full cycle costs that are unsustainable long- term; and * the free cash flow drain from currently out-of-the-money hedging that could otherwise be used for debt repayment or reinvestment. The notes are notched down from the senior implied rating due a combination of: * asset deterioration which impacts the coverage for the bondholders; * the increased use of the credit facilities (including L/C's) to support underwater hedging; and * the carveouts in the indenture that could permit additional secured debt to be layered in ahead of the notes. BIG 5: Nasdaq Extends Financial Filing Deadline Until Tomorrow -------------------------------------------------------------- The Nasdaq Listing Qualifications Panel has granted Big 5 Sporting Goods Corporation's (Nasdaq: BGFVE) request to extend the deadline for the Company to file its Annual Report on Form 10-K for fiscal 2004 and its Quarterly Reports on Form 10-Q for the first quarter and second quarter of fiscal 2005 and to continue the listing of the Company's common stock on the Nasdaq National Market pending those filings. The Panel has granted the Company an extension until tomorrow, Aug. 31, 2005, to file its fiscal 2004 Form 10-K and an extension until September 30, 2005 to file its first quarter and second quarter fiscal 2005 Forms 10-Q. These dates are an additional extension from the August 12, 2005 extension date previously granted by the Panel for the Company to file its fiscal 2004 Form 10-K and its first quarter fiscal 2005 Form 10-Q. As previously announced, the Company is not in compliance with Nasdaq requirements for continued listing as a result of its failure to file with the Securities and Exchange Commission its fiscal 2004 Form 10-K and its first quarter and second quarter fiscal 2005 Forms 10-Q. In granting this additional extension, the Panel advised the Company that in the event that the Company is unable to file its fiscal 2004 Form 10-K by August 31, 2005, no further requests for extension to file the Form 10-K would be considered. Work on the review and associated audit of the Company's fiscal 2004 Form 10-K has been substantially completed, and while no assurances can be given, the Company expects to be able to file its Form 10-K by August 31, 2005. The Company also expects that the review of its first quarter and second quarter fiscal 2005 Forms 10-Q will be completed, and that those reports will be filed, soon after the Form 10-K is filed. The Company also received a notice on August 25, 2005 of a determination by Nasdaq's Listing Qualifications Staff that it fails to comply with Nasdaq listing standards set forth in Nasdaq Marketplace Rule 4310(c)(14) due to the delayed filing of its second quarter fiscal 2005 Form 10-Q with the SEC and that this deficiency is an additional basis for delisting its securities from the Nasdaq National Market. The Company filed a Form 12b-25 with the SEC on August 15, 2005 to report that it was unable to file its second quarter fiscal 2005 Form 10-Q by the August 12, 2005 deadline. The Company previously announced that it had notified Nasdaq of its inability to timely file the second quarter fiscal 2005 Form 10-Q and had requested an extension of time to file this Form 10-Q. As discussed, the Panel considered this request and granted the Company an extension to September 30, 2005 to file its second quarter fiscal 2005 Form 10-Q. In the event that the Company is unable to file its fiscal 2004 Form 10-K by August 31, 2005, or its first quarter and second quarter fiscal 2005 Forms 10-Q by September 30, 2005, the Company's shares may be delisted from the Nasdaq National Market. Big 5 is a leading sporting goods retailer in the United States, operating 311 stores in 10 states under the "Big 5 Sporting Goods" name. Big 5 provides a full-line product offering in a traditional sporting goods store format that averages 11,000 square feet. Big 5's product mix includes athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, snowboarding and in-line skating. * * * Waiver As reported in the Troubled Company Reporter on Aug. 17, 2005, Big 5 Sporting Goods Corporation obtained an extension to Aug. 31, 2005, from the lenders under its financing agreement, to deliver its audited financial statements for fiscal 2004 as required by its financing agreement. While the Company expects to be able to deliver these audited financial statements by then, if the Company is not able to do so, it intends to seek another extension, although there is no assurance that one will be granted. The Company is in compliance with all of the covenants contained in its financing agreement. BUFFALO MOLDED: Files Liquidating Plan & Disclosure Statement ------------------------------------------------------------- Buffalo Molded Plastics, Inc., dba Andover Industries, delivered its Chapter 11 Plan of Liquidation and accompanying Disclosure Statement to the U.S. Bankruptcy Court for the Western District of Pennsylvania, Erie Division. The Debtor's Plan sets forth the process by which Buffalo proposes to liquidate and distribute its remaining assets to creditors. As previously reported, the Company sold substantially all of its assets to Plastech Engineered Products, Inc., for an undisclosed amount. On the Effective Date of the Plan, all right, title and interest in all of the assets of the Debtor's estate will be assigned to a Liquidating Trustee. The Trustee will be responsible for the liquidation of all remaining assets. The Trustee will also have the authority to commence, continue, preserve, litigate and settle causes of action. Pursuant to the Plan, administrative claim holders, Comerica Bank and PMT will be paid in full. However, if there is an insufficient proceeds from the liquidation of the Debtor's assets to pay the three classes, payment made to administrative claim holders will be pro rated. General unsecured creditors will share pro rata from a $240,000 carve-out from the proceeds of the sale of the Debtor's assets. They will also share in whatever's left after the administrative claim holders, Comerica Bank and PMT are paid in full. Equity interest holders take nothing under the Plan. The Court will convene a hearing to discuss the adequacy of the information contained in Buffalo's Disclosure Statement on Oct. 20, 2005, at 1:30 p.m. Objections to the Disclosure Statement, if any, must be filed by Oct. 13. Headquartered in Andover, Ohio, Buffalo Molded Plastics, Inc., dba Andover Industries, -- http://www.andoverplastics.com/-- manufactures rocker panels, grilles, pillars and body side molding components for General Motors Corp. and DaimlerChrysler. The Company filed for chapter 11 protection on Oct. 21, 2004 (Bankr. W.D. Pa. Case No. 04-12782). David Bruce Salzman, Esq., at Campbell & Levine, LLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts in the $10 million to $50 million range. David W. Lampl, Esq., at Leech Tishman Fuscaldo & Lampl, LLC, represents the Official Committee of Unsecured Creditors in the Debtor's chapter 11 case. CAPITAL BEVERAGE: June 30 Balance Sheet Upside-Down by $4.8 Mil. ---------------------------------------------------------------- Capital Beverage Corporation reported financial results for the quarter ended June 30, 2005. The Company had a $726,736 net loss for the quarter ended June 30, 2005 compared with a net loss of $38,859 for the same period of 2004 At June 30, 2005, the Company's primary sources of liquidity were $120,044 in cash, $417,239 in accounts receivable and $1,463,269 in inventories. Cash provided by operations for the six months ended June 30, 2005 was $840,037. This was primarily due to a decrease in beer and beverage inventories and accounts receivable of $634,069 and 281,553, respectively and an increase in accounts payable of $947,370, offset by the Company's net loss for the six months ended June 30, 2005 of $1,276,846. Cash used in financing activities resulted primarily from paying down revolving loans of $865,176 and the decrease in Capital's cash overdraft of $278,171, offset primarily by proceeds from a loan payable of $350,531. Working capital deficiency increased from $4,915,762 at December 31, 2004 to $5,950,738 at June 30, 2005, due primarily to the net loss incurred for the six months. The Company also reported an accumulated deficit of $10,776,155 at June 30, 2005. Revolving Loan The Company has a revolving loan with Entrepreneur Growth Capital, LLC. The loan limit is $2,500,000 and carries an interest rate of prime plus 2%. The Company could be materially adversely affected if there is a significant rise in interest rates, due to the fact that this revolving loan carries a rate of prime plus 2%. The loan is collateralized by the Company's accounts receivable, inventory, pledged property, and distribution rights. The outstanding balance was $1,142,180 at June 30, 2005. Going Concern Doubt Sherb & Co., LLP, expressed substantial doubt about Capital Beverage's ability to continue as a going concern after it audited the Company's financial for the year ended Dec. 31, 2004. The auditing firm points to the Company's significant losses. The Company's continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. Capital Beverage Corporation engages in the wholesale distribution of beer and malt liquor products throughout the state of New York. The company distributes various brands, including Brigade, Brigade Light, Brigade Ice, Brigade N/A, Prime Time Lager, Prime Time Malt Liquor. Its wholly owned subsidiary, CAP Communications, Ltd., markets domestic and long distance prepaid telephone calling cards to distributors and general public. Capital Beverage was formed in 1995 and is based in Brooklyn, New York. At June 30, 2005, Capital Beverage Corporation's balance sheet showed a $4,786,113 stockholders' deficit, compared to a $3,509,266 deficit at Dec. 31, 2004. CATHOLIC CHURCH: Court Rules Parish Property Belongs to Spokane --------------------------------------------------------------- The Hon. Patricia C. Williams of the United States Bankruptcy Court for the Eastern District of Washington finds that the real and personal properties that the Diocese of Spokane listed on its schedules as "property held for another" actually constitute property of the Diocese's estate. The Committee of Tort Litigants did not believe that all entities affiliated with or related to the Diocese of Spokane, including custodial, endowment, insurance, and monetary funds, parishes, and schools, are legal entities and properties separate from, or not belonging to, the Diocese. Rather, the Committee argues, the Diocese-Related Entities are operating divisions of the Diocese, and therefore, are real or personal property of Spokane. The Litigants Committee identified 154 real properties located in Washington that are supposedly belonging to Diocese-Related Entities but are, in fact, under the Diocese's complete control and domination: 1. All Saints School in Spokane, WA 2. Assumption Church in Spokane, WA 3. Assumption Church in Walla Walla, WA 4. Bishop White Seminary in Spokane, WA 5. Cataldo Catholic School in Spokane, WA 6. Cathedral of Our Lady of Lourdes in Spokane, WA 7. Catholic Cemeteries of Spokane 8. Catholic Cemeteries - Holy Cross in Spokane, WA 9. Catholic Charities, Inc. in Spokane, WA 10. Catholic Newman Center in Cheney, WA 11. Comunidad Hispana De Spoke in Spokane, WA 12. De Sales Prep High School in Walla Walla, WA 13. Hispanic Ministry in Oroville, WA 14. Hispanic Ministry of Our Lady of Valley in Okanogan, WA 15. Holy Family Church in Clarkston, WA 16. Holy Family School in Clarkston, WA 17. Holy Ghost Church in Valley, WA 18. Holy Rosary Church in Pomeroy, WA 19. Holy Rosary Church in Rosalia, WA 20. Holy Rosary Church in Tonasket, WA 21. Holy Rosary Parish in Tonasket, WA 22. Holy Trinity Church in Washtucna, WA 23. Immaculate Conception - Colville in Colville, WA 24. Immaculate Conception - Davenport in Davenport, WA 25. Immaculate Conception - Oroville in Oroville, WA 26. Immaculate Conception - Republic in Republic, WA 27. Immaculate Conception Church in Colville, WA 28. Immaculate Heart Retreat Center in Spokane, WA 29. La Comunidad Catolica De Spokane in Spokane, WA 30. Mary Queen of Heaven Church in Spokane, WA 31. Mary Queen of Heaven Church in Sprague, WA 32. Morning Star Boys Ranch in Spokane, WA 33. Our Lady of Fatima in Spokane, WA 34. Our Lady of Fatima Church in Spokane, WA 35. Our Lady of Fatima Parish in Spokane, WA 36. Our Lady of the Lake in Suncrest, WA 37. Our Lady of the Lake Church in Suncrest, WA 38. Our Lady of Lourdes in West End, WA 39. Our Lady of Lourdes Cathedral in Spokane, WA 40. Our Lady of Lourdes West in Fruitland, WA 41. Our Lady of Perpetual Help in St. John, WA 42. Our Lady of the Valley in Okanogan, WA 43. Parish Services Office in Spokane, WA 44. Pure Heart of Mary Church in Northport, WA 45. St. Agnes Church in Ritzville, WA 46. St. Aloysius Church in Spokane, WA 47. St. Aloysius School in Spokane, WA 48. St. Ambrose in Lind, WA 49. St. Ambrose Church in Lind, WA 50. St. Ann Church in Medical Lake, WA 51. St. Anne Church in Spokane, WA 52. St. Anne's Children & Family Center in Spokane, WA 53. St. Anthony - Newport in Newport, WA 54. St. Anthony Church in Newport, WA 55. St. Anthony Church in Spokane, WA 56. St. Anthony Parish - Newport in Newport, WA 57. St. Anthony's Altar Society in Newport, WA 58. St. Augustine Church in Spokane, WA 59. St. Bernard in Ione, WA 60. St. Bernard Church in Ione, WA 61. St. Boniface in Uniontown, WA 62. St. Boniface Church in Uniontown, WA 63. St. Catherine Church in Oakesdale, WA 64. St. Charles in Spokane, WA 65. St. Charles Church in Spokane, WA 66. St. Francis Assisi - Harrington in Harrington, WA 67. St. Francis Assisi - Walla Walla in Walla Walla, WA 68. St. Francis Assisi Church in Spokane, WA 69. St. Francis of Assisi Church in Walla Walla, WA 70. St. Francis Xavier in Spokane, WA 71. St. Francis Xavier Church in Spokane, WA 72. St. Gall Church in Colton, WA 73. St. Genevieve in Twisp, WA 74. St. Genevieve Church in Twisp, WA 75. St. John Vianney in Spokane Valley, WA 76. St. John Vianney - Seminary in Spokane, WA 77. St. John Vianney Church in Spokane Valley, WA 78. St. John Vianney School in Spokane, WA 79. St. Joseph in Spokane, WA 80. St. Joseph - Colbert in Colbert, WA 81. St. Joseph - Dayton in Dayton, WA 82. St. Joseph - Jump Off Joe in Valley, WA 83. St. Joseph - Metaline Falls in Metaline Falls, WA 84. St. Joseph - Odessa in Odessa, WA 85. St. Joseph Church in Colbert, WA 86. St. Joseph Church in Lacrosse, WA 87. St. Joseph Church in Metaline Falls, WA 88. St. Joseph Church in Odessa, WA 89. St. Joseph Church in Omak, WA 90. St. Joseph Church in Otis Orchards, WA 91. St. Joseph Church in Rockford, WA 92. St. Joseph Church in Spokane, WA 93. St. Joseph's Cemetery in Spokane, WA 94. St. Joseph's Church in Dayton, WA 95. St. Jude Church in Usk, WA 96. St. Mark Church in Waitsburg, WA 97. St. Marks in Dayton, WA 98. St. Marks in Waitsburg, WA 99. St. Mary Church in Spokane Valley, WA 100. St. Mary Mission in Omak, WA 101. St. Mary of the Rosary in Chewelah, WA 102. St. Mary of the Rosary Church in Chewelah, WA 103. St. Mary Presentation in Deer Park, WA 104. St. Mary Presentation Church in Deer Park, WA 105. St. Mary's Parish in Spokane Valley, WA 106. St. Michael - Reardan in Reardan, WA 107. St. Michael Church in Reardan, WA 108. St. Michael's in Inchelium, WA 109. St. Michael's Mission in Inchelium, WA 110. St. Pascal Church in Spokane, WA 111. St. Patrick - Colfax in Colfax, WA 112. St. Patrick - Pasco in Pasco, WA 113. St. Patrick Church in Colfax, WA 114. St. Patrick Church in Pasco, WA 115. St. Patrick Church in Spokane, WA 116. St. Patrick Church in Walla Walla, WA 117. St. Patrick Parish - Walla Walla in Walla Walla, WA 118. St. Patrick's Church in Curlew, WA 119. St. Paul the Apostle - Eltopia in Eltopia, WA 120. St. Peter Church in Spokane, WA 121. St. Phillip Benizi in Ford, WA 122. St. Phillip's Villa in Spokane, WA 123. St. Rose of Lima - Cheney in Cheney, WA 124. St. Rose of Lima in Keller, WA 125. St. Rose of Lima Church in Cheney, WA 126. St. Thomas Moore Parish in Spokane, WA 127. St. Thomas More in Pullman, WA 128. St. Thomas More Church in Spokane, WA 129. St. Thomas More School in Spokane, WA 130. St. Vincent in Connell, WA 131. St. Vincent Church in Connell, WA 132. St. Vincent Church (Basin City Mission) in Connell, WA 133. St. Vincent De Paul Parish in Connell, WA 134. St. Vincent Thrift Store in Dayton, WA 135. Sacred Heart - Brewster in Brewster, WA 136. Sacred Heart - Nespelem in Nespelem, WA 137. Sacred Heart - Othello in Othello, WA 138. Sacred Heart - Pullman in Pullman, WA 139. Sacred Heart - Valley in Springdale, WA 140. Sacred Heart - Wilbur in Wilbur, WA 141. Sacred Heart Church in Brewster, WA 142. Sacred Heart Church in Kettle Falls, WA 143. Sacred Heart Church in Othello, WA 144. Sacred Heart Church in Pullman, WA 145. Sacred Heart Church in Spokane, WA 146. Sacred Heart Church in Springdale, WA 147. Sacred Heart Church in Tekoa, WA 148. Sacred Heart Church in Wellpinit, WA 149. Sacred Heart Church in Wilbur, WA 150. Sacred Heart Parish - Nespelem in Nespelem, WA 151. Sacred Heart Parish - Othello in Othello, WA 152. Walla Walla Catholic Schools in Walla Walla, WA 153. Walla Walla Schools in Walla Walla, WA 154. Wenning Estate in Spokane, WA The Litigants Committee also identified personal properties ostensibly claimed by the Diocese-Related Entities or located at, or on, the Disputed Real Properties, which are under the Diocese's complete control and domination. The Disputed Personal Properties includes appurtenances to the Disputed Real Properties, furniture, books, relies, artwork, cash, bank accounts, investments, trusts, estates, balances in Diocesan Deposit & Loan Funds, endowment funds, and custodial funds. In particular, the Disputed Personal Properties include: A. Custodial funds 1. Baronti Church Fund 2. Catholic Church U S 3. Guatemala Maintenance & Legal Fund 4. Mass Stipends 5. Nelson Property/Fr. Hein 6. Pension Plan & State Industrial Funds 7. Region XII-Youth Ministry 8. St. Michael's Mission Fund 9. Sprietzer - Cash Invested Fund 10. Society for the Propagation of Faith 11. Special Cost Reserve 12. Tri. Conf. Ret. Program 13. World Mission Collection B. Endowment funds 1. Guse Trust for the Poor 2. Mater Cleri Fund 3. Special People Fund 4. Walla Walla Orphanages C. Other personal properties 1. Campbell Estate in Walla Walla, WA 2. Spokane Catholic Investment Trust in Spokane, WA 3. Sprietzer Estate in Walla Walla, WA 4. Sprietzer Estate/DeSales Prep in Walla Walla, WA 5. Sprietzer Estate/St. Patrick Church in Walla Walla, WA 6. Self Insurance Fund in Spokane, WA Spokane has not scheduled the Disputed Real Property or the Disputed Personal Property as assets of the estate. Court's Opinion Judge Williams grants the Committee of Tort Litigants' request for partial summary judgment. Judge Williams holds that, as authorized by the Revised Code of Washington 24.12, et seq., an express trust was created whereby the Bishop, a natural person, holds legal title to the Disputed Real Property in trust for the benefit of the Diocese who holds the beneficial interest. There are disputed material facts regarding the nature of the parishes and the other members of the diocesan family, Judge Williams points out. For purposes of the Court's decision, it has been assumed that the Diocese and other defendants are correct in their contention that the parishes and other members of the diocesan family have the legal capacity to hold the beneficial interest under a trust. There are also disputed material facts regarding the nature and extent of the Diocese's interest under the state law in certain cash and investment accounts as well as other personal property. The Court's decision does not address that issue, Judge Williams explains. According to Judge Williams, the matter is not an intra-church dispute. Hence, the legal analysis differs. Judge Williams maintains that the issue is a purely secular dispute between creditors and a bankruptcy debtor, albeit one which is a religious organization. "It is not a violation of the First Amendment to determine the nature and extent of the [Diocese's] interest in property by application of state law rather than internal church doctrine," Judge Williams says. Judge Williams denies the request of the Association of Parishes to dismiss the complaint for lack of standing and lack of jurisdiction. Judge Williams finds that the Tort Litigants Committee has standing to investigate the Diocese's assets and any other matters relevant to the reorganization case. "The right to investigate the financial affairs of the debtor, including the assets of the estate, would have limited usefulness if a committee were not empowered to disagree with the debtor's characterization of its assets and bring that disagreement to the Bankruptcy Court for resolution," Judge Williams says. The matter is also a core proceeding relevant to the bankruptcy case. Judge Williams notes that the adversary proceeding has been repeatedly likened to a "turnover action," as much of the disputed property is in the possession of the non-debtor defendants. Requests to "turnover" property of the estate are core proceedings under 28 U.S.C. Section 157(2)(E). The Diocese's cross-motion for summary judgment is likewise denied. A full-text copy of the Bankruptcy Court's Memorandum Opinion dated Aug. 26, 2005, is available at no charge at: http://bankrupt.com/misc/parish_property_memo.pdf The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. CATHOLIC CHURCH: Tucson Wants Four Tort Claim Settlements Approved ------------------------------------------------------------------ The Diocese of Tucson asks the U.S. Bankruptcy Court for the District of Arizona to approve stipulations resolving Claim Nos. 64, 65, 207 and 208. Susan G. Boswell, Esq., at Quarles & Brady Streich Lang LLP, in Tucson, Arizona, relates that the holders of Claim Nos. 64, 65, 207 and 208 are plaintiffs in actions filed in the Superior Court of Pima County, Arizona, which were removed from the State Court and are presently pending before the Arizona Bankruptcy Court. Ms. Boswell notes that Tucson's confirmed Plan of Reorganization provides for minimum initial funding of Settlement Trust, and for minimum distributions to be made to the holders of Allowed Tort Claims. A Settling Tort Claimant will be entitled to an Initial Distribution Amount for the Tier in which the Tort Claimant's Tort Claim is placed. The distribution will be made on the later of funding of the Settlement Trust or entry of a Final Order Allowing the Tort Claim. The Initial Distribution Amount is only the initial distribution to be made to a Settling Tort Claimant and does not represent the value of the Tort Claim. If the Tort Claim of a Settling Tort Claimant was to be litigated, the likelihood is that the value of certain Tort Claims would be greater. Ms. Boswell informs Judge Marlar that the parties to the Stipulations agree and acknowledge that in accepting the Initial Distribution Amounts, the liability of the Diocese is not being extinguished nor does the Initial Distribution Amount represent the value of the Tort Claim if the Tort Claim of Claimant was to be determined in a proceeding before a Court or jury. The parties further agree that regardless of the amount of the Diocese's liability, the parties will be bound by the terms of the Plan and will not seek further relief or recovery from the Diocese except to the extent specifically provided for in the Plan. In light of the risks of litigation, the parties wish to enter into the Stipulations to resolve the Claimants' claims in the context of a mutually acceptable plan of reorganization. In addition, the parties acknowledge that it may become necessary to determine the value of the Tort Claim of a Claimant. The parties have agreed to the manner in which the determination may be made. Under the Stipulations, the parties agree that: (a) The Claimants will be allowed claims in specified tiers: Claim No. Agreed Tier Placement --------- --------------------- 64 Tier 1 65 Relationship Tier 1 207 Relationship Tier 2 208 Tier 2 (b) The Claimants will receive on account of their Allowed Tort Claims Initial Distribution Amounts within 30 days of the funding the Settlement Trust. The Initial Distribution Amounts for each Tier are: (i) Tier 1: $100,000; (ii) Tier 2: $200,000; (iii) Tier 3: $425,000; (iv) Tier 4: $600,000; and (v) California Tier: $300,000. (c) The Claims of parents or spouses of direct victims who have Tort Claims, will receive 5% of the highest amount recovered by a son or daughter with an Allowed Tort Claim as more fully explained in the Plan. (d) The Claimants will be entitled to subsequent distributions from the Settlement Trust as all other allowed Tort Claims as provided under the Plan as these may be amended so long as the amendments are acceptable to the Claimants. (e) The distributions and any other compensation being made to Claimants pursuant to the Stipulations and the Plan are for compensation of physical injuries. Tucson will cooperate with the Claimants and their attorneys to draft and execute the appropriate documents to allow the Claimants or their attorneys to place all or any portion of the distributions in an annuity or structured settlement, if so elected by Claimants. (f) If it is necessary to determine the full extent of the Diocese's liability to a Claimant on account of Tier 1, Tier 2, Tier 3, Tier 4, California Tier Claims and Relationship Tort Claims, the determinations will be made in a proceeding which may be before the Bankruptcy Court. However, notwithstanding the amount of the liability, the Claimants agree to be bound by the terms of the Plan in accordance with the Stipulations and not seek further or additional recovery from the Diocese so long as the Plan provides for treatment of the Claimants' Tort Claims in accordance with the terms of the Stipulations. Once the Court approves the Stipulations, the Diocese and each of the Claimants will jointly seek to remand to the appropriate Arizona Superior Court, any portion of the Claimant's case that is not settled pursuant to the Stipulations. The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. (Catholic Church Bankruptcy News, Issue No. 39 Bankruptcy Creditors' Service, Inc., 215/945-7000) CERVANTES ORCHARDS: Section 341(a) Meeting Slated for Oct. 6 ------------------------------------------------------------ The U.S. Trustee for Region 18 will convene a meeting of Cervantes Orchards and Vineyards LLC's creditors at 2:30 p.m., on Oct. 6, 2005, at the Tower Bldg., 402 East Yakima Ave, 2nd Floor Courtroom, Yakima, Washington 98901. 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 Sunnyside, Washington, Cervantes Orchards and Vineyards LLC, filed for chapter 11 protection on Aug. 19, 2005 (Bankr. E.D. Wash. Case No. 05-06600). R. Bruce Johnston, Esq., at Law Offices of R. Bruce Johnston represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $1 million to $10 million. CITICORP MORTGAGE: Fitch Puts Low-B Rating on Two Cert. Classes --------------------------------------------------------------- Fitch rates Citicorp Mortgage Securities, Inc.'s, REMIC pass- through certificates, series 2005-5: -- $444,144,902 classes IA-1 through IA-13, IIA-1 through IIA-3, IIA-PO, IIIA-1, and A-PO certificates 'AAA'; -- $6,152,000 class B-1 'AA'; -- $2,278,000 class B-2 'A'; -- $1,139,000 class B-3 'BBB'; -- $911,000 class B-4 'BB'; -- $455,000 class B-5 'B'. The $687,060 class B-6 is not rated by Fitch. The 'AAA' rating on the senior certificates reflects the 2.55% subordination provided by the 1.35% class B-1, the 0.50% class B- 2, the 0.25% class B-3, the 0.20% privately offered class B-4, the 0.10% privately offered class B-5, and the 0.15% privately offered class B-6. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and CitiMortgage, Inc.'s servicing capabilities (rated 'RPS1' by Fitch) as primary servicer. The mortgage loans have been divided into three pools of mortgage loans. Pool I, with an unpaid aggregate principal balance of $354,161,307, consists of 658 recently originated, 20-30-year fixed-rate mortgage loans secured by one- to four-family residential properties located primarily in California (33.45%) and New York (18.98%). The weighted average current loan to value ratio of the mortgage loans is 66.41%. Condo properties account for 8.21% of the total pool and co-ops account for 6.93%. Cash- out refinance loans and investor properties represent 24.03% and 0.3% of the pool, respectively. The average balance of the mortgage loans in the pool is approximately $538,239. The weighted average coupon of the loans is 5.897% and the weighted average remaining term is 358 months. Pool II, with an unpaid aggregate principal balance of $61,114,160, consists of 110 recently originated, 15-year fixed- rate mortgage loans secured by one- to four-family residential properties located primarily in California (35.14%). The weighted average CLTV of the mortgage loans is 60.25%. Condo properties account for 5.99% of the total pool and co-ops account for 1.43%. Cash-out refinance loans represent 23.2% and there are no investor properties. The average balance of the mortgage loans in the pool is approximately $555,583. The WAC of the loans is 5.397% and the weighted average remaining term is 178 months. Pool III, with an unpaid aggregate principal balance of $40,491,496, consists of 73 recently originated, 25-30-year fixed- rate relocation mortgage loans secured by one- to four-family residential properties located primarily in New Jersey (20.43%) and California (16.93%). The weighted average CLTV of the mortgage loans is 73.84%. Condo properties account for 3.0% of the total pool. There are no co-op, cash-out refinance loans, or investor properties. The average balance of the mortgage loans in the pool is approximately $554,678. The WAC of the loans is 5.490% and the weighted average remaining term is 358 months. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003 entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' available on the Fitch Ratings web site at http://www.fitchratings.com/ The mortgage loans were originated or acquired by CMI and in turn sold to CMSI. A special purpose corporation, CMSI deposited the loans into the trust, which then issued the certificates. U.S. Bank NA will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. CLAREMONT TECHNOLOGIES: Consents to Ch. 11 Petition & Files Plan ---------------------------------------------------------------- Claremont Technologies Corp (OTCBB:CTTG) agreed to reorganize under chapter 11 of the U.S. Bankruptcy Code after facing an involuntary chapter 7 petition filed by two noteholders in the U.S. Bankruptcy Court for the District of Nevada on March 25, 2005. The Company will remain as debtor-in-possession and the management appointed after March 25, 2005, will continue in place. The Debtor strenuously contested the involuntary petition and at a hearing on May 4, 2005, two more noteholders joined the petition. The parties then began extensive discovery with seven depositions scheduled and taken over a three-week period. On the eve of trial, the parties reached a tentative settlement and began an ongoing dialogue, which led to the negotiation of a Plan of Reorganization. On Aug. 24, 2005, the Debtor consented to the entry of an order for relief and filed its Plan of Reorganization and accompanying Disclosure Statement. About the Plan The Plan provides that the Debtor will retain its assets. The Plan proposes to pay allowed claims in order of priority under the Bankruptcy Code and to pay Claremont's largest creditors over a period of up to 15 years. Under the terms of the Plan, the Debtor will acquire the assets of Wataire Industries, Inc., for 45 million shares of the Reorganized Debtor's restricted stock. In addition, Wataire will contribute sufficient funds to allow the Debtor to pay sums required to meet the plan obligations to administrative claims, priority tax claims, and general unsecured claims. Wataire will become the largest shareholder owning approximately 70% of the Reorganized Debtor's issued and outstanding stock. Treatment of Claims The claims of the petitioning creditors will be allowed for $112,822 and will be fully satisfied with 10 million shares of the Reorganized Debtor's stock. The claims of the Involuntary Gap creditors will be determined by the Court and will be fully satisfied with 10 million shares of the Reorganized Debtor's stock. General unsecured creditors will recover 10% of their claim. In addition, holders of allowed unsecured claims will receive 1 share of the Reorganized Debtor's restricted stock for every $1.00 of claim. The existing shares of outstanding stock will be cancelled on the effective date and the Reorganized Debtor will distribute 50,000 shares to Equity holders pro-rata. The Court will convene a hearing to consider the adequacy of the Debtor's Disclosure Statement at 9:30 a.m. on Sept. 19, 2005. Objections, if any, must be filed no later than Sept. 12, 2005 at 5:00 PM PST. If the Court approves the adequacy of the Disclosure Statement, then creditors, shareholders and parties in interest will be given the opportunity to vote on the Plan. A full-text copy of the Debtor's Plan of Reorganization is available at no charge at http://ResearchArchives.com/t/s?11f A full-text copy of the Disclosure Statement explaining the Plan is available at no charge at http://ResearchArchives.com/t/s?120 Headquartered in Las Vegas, Nevada, Claremont Technologies Corp. develops the first and only independent lab certified device, the Safe Cell Tab, which helps eradicate all cancer-causing radiation from electromagnetic frequencies. The Company was subject to an involuntary chapter 7 petition on March 25, 2005 (Bankr. D. Nev. Case No. 05-12235). The Debtor consented to an entry of an order for relief under chapter 11 on Aug. 24, 2005. Matthew L. Johnson, Esq., at Matthew L. Johnson & Associates, P.C., represents the Debtor in its bankruptcy proceeding. CLEVELAND COLD: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Cleveland Cold Storage 2000 West 14th Street Cleveland, Ohio 44113 Bankruptcy Case No.: 05-22997 Type of Business: The Debtor operates a cold storage warehouse. Chapter 11 Petition Date: August 27, 2005 Court: Northern District of Ohio (Cleveland) Judge: Arthur I. Harris Debtor's Counsel: Donald C. Williams, Esq. Donald C. Williams & Assoc. The Standard Building 1370 Ontario Street, #330 Cleveland, Ohio 44113 Tel: (216) 696-4345 Total Assets: $775,050 Total Debts: $1,515,574 The Debtor does not have any Unsecured Creditors who are not insiders. CRYOCOR INC: June 30 Balance Sheet Upside-Down by $39 Million ------------------------------------------------------------- CryoCor, Inc. (Nasdaq: CRYO) reported financial results for the three months ended June 30, 2005. CryoCor markets its Cardiac Cryoablation System in Europe, where it has received CE mark approval. Revenues for the three months ended June 30, 2005 was $201,000 compared with $160,000 for the same period in 2004. Revenues for the six months ended June 30, 2005 was $530,000 compared with $317,000 for the six months ended June 30, 2004. The revenue increase was primarily due to a modest increase in catheter shipments in 2005. Second quarter 2005 revenues were impacted by the recall of the Company's Model 1200 catheter, resulting in a five week period during which catheters were not shipped or commercially available. Cost of sales for the three months ended June 30, 2005, was $850,000 compared with $639,000 for the three months ended June 30, 2004. For the six months ended June 30, 2005, cost of sales was $1.6 million compared with $1.3 million for the same period in 2004. The increase reflected the increased sales activity during the related periods. It also included additional costs of approximately $200,000 to recall the Model 1200 catheter in Europe and to withdraw the use of the Model 1200 catheter from use in clinical trials in the United States during the three months ended June 30, 2005. Research and development expenses for the three months ended June 30, 2005 was $2.4 million and $4.2 million for the six months ended June 30, 2005. The increase for the three and six months ended June 30, 2005 was due to an increase in non-cash stock-based compensation expenses of $422,000 and $606,000, respectively. General and administrative expenses for the three months ended June 30, 2005 was $1.4 million compared with $1 million for the same period in 2004. For the six months ended June 30, 2005, general and administrative expenses were $2.8 million compared with $2 million for the same period in 2004. The increase for the three months ended June 30, 2005 was primarily related to an increase in non-cash stock-based compensation expenses of $198,000, and $109,000 in other compensation related costs. The increase for the six months ended June 30, 2005 was primarily due to an increase in non-cash stock-based compensation expenses of $395,000, and $317,000 in other compensation related costs. Net loss applicable to common stockholders was $6.1 million for the three months ended June 30, 2005, and $11.2 million for the six months ended June 30, 2005. Included in the net loss applicable to common stockholders for the three and six months ended June 30, 2005 were dividends and accretion to redemption value of Series D redeemable convertible preferred stock as well as cumulative dividends on Series C preferred stock of $1.4 million and $2.8 million, respectively, compared to $1.0 million and $1.7 million for the same periods ended in 2004. Cash and cash equivalents as of June 30, 2005 were $2.2 million, prior the completion of the initial public offering in July, which generated net proceeds of $35.5 million. After the sale of 3.7 million shares of common stock in the Company's initial public offering and the conversion of all preferred shares to common shares, CryoCor had 10,598,319 shares of common stock outstanding. CryoCor Inc. -- htpp://www/cryocor.com/ -- is a medical technology company that has developed and manufactures a disposable catheter system based on its proprietary cryoablation technology for the minimally invasive treatment of cardiac arrhythmias. The Company's product, the CryoCor Cardiac Cryoablation System, is designed to treat cardiac arrhythmias through the use of cryoenergy, or extreme cold, to destroy targeted cardiac tissue. The CryoCor System has been approved in Europe for the treatment of atrial fibrillation and atrial flutter, the two most common and difficult to treat arrhythmias, since 2002. In the United States, CryoCor is conducting a pivotal trial to evaluate the safety and efficacy of the CryoCor Cardiac Cryoablation System for the treatment of atrial fibrillation, and has submitted a PMA for the treatment of atrial flutter. At June 30, 2005, CryoCor Inc.'s balance sheet showed a $39,275,000 stockholders' deficit, compared to a $30,004,000 deficit at Dec. 31, 2004. DELPHI CORP: Reiterates Demands in Light of New Bankruptcy Laws --------------------------------------------------------------- Delphi Corporation may file for bankruptcy by Oct. 17, 2005, if its talks with General Motors Corporation and Delphi's employee's union, United Auto Workers, fail. That's what the Company's Chairman of the Board, Robert S. "Steve" Miller, reiterated last week, The Detroit News reports. The Company issued the same warning at the start of its talks with GM, its major client, and the UAW, three weeks ago. GM is represented by its Chairman Rick Wagoner. UAW President, Ron Gettelfinger, represents UAW. Delphi is a 1999 spin-off from General Motors. While General Motors and Delphi are separate entities, GM retains indemnification obligations for some employee obligations. Chairman Steve Miller, Federal-Mogul's former non-executive chairman is a turnaround pro who came to Delphi from Bethlehem Steel. Mr. Miller didn't mince any words, demanding wage cuts of at least $5 an hour, other benefit reductions and work rule changes from the UAW. Those concession total around $2.5 billion in savings for the Company. The Company also wants the freedom to close plants and to divest or shut down money-losing business units, in the shortest time possible. Mr. Miller said the Company is spending $130,000 per worker annually. The UAW contests that figure and is reported unlikely to give way to the Company's demands. The Company's contract with the UAW will expire on 2007. Delphi Corp. -- http://www.delphi.com/-- is the world's largest automotive component supplier with annual revenues topping $25 billion. Delphi is a world leader in mobile electronics and transportation components and systems technology. Multi- national Delphi conducts its business operations through various subsidiaries and has headquarters in Troy, Michigan, USA, Paris, Tokyo and Sao Paulo, Brazil. Delphi's two business sectors -- Dynamics, Propulsion, Thermal & Interior Sector and Electrical, Electronics & Safety Sector -- provide comprehensive product solutions to complex customer needs. Delphi has approximately 186,500 employees and operates 171 wholly owned manufacturing sites, 42 joint ventures, 53 customer centers and sales offices and 34 technical centers in 41 countries. At June 30, 2005, Delphi Corporation's balance sheet showed a $4.56 billion stockholders' deficit, compared to a $3.54 billion deficit at Dec. 31, 2004. Delphi is rated by the three major rating agencies: Senior Senior Preferred Secured Unsecured Stock Rating Agency Rating Rating Rating ------------- -------- --------- --------- Standard & Poor's B- CCC- CC Moody's B3 Ca C Fitch Ratings B CCC CCC- As a result of recent downgrades, Delphi's facility fee and borrowing costs under its credit facilities increased. DIVERSIFIED CORPORATE: Equity Deficit Widens to $3.72M at June 30 ----------------------------------------------------------------- Diversified Corporate Resources, Inc., reported its financial results for the quarter ending June 30, 2005, in a Form 10-Q delivered to the Securities and Exchange Commission earlier this month. Liquidity and Capital Resources Cash on hand at June 30, 2005 was $3,000. Because all cash receipts are deposited into the Company's lockboxes and swept daily by its lender, combined with its policy of maintaining zero balances in its operating accounts, the Company maintains only a minimal amount of cash on hand. Cash flows from financing activities during the year totaled $727,000, principally from an increase in borrowings under debt obligations of $1,075,000, repayment of a note receivable from a related party of $311,000, and an increase in obligations not liquidated because of outstanding checks of $187,000. These increases were partially offset by net repayments under factoring arrangements of $396,000, net repayments on revolving lines of credit of $254,000, and principal payments under debt and lease obligations of $196,000. Cash used by investing activities of $13,000 represented funds used for capital expenditures. Cash used in operating activities was $715,000. If a sale of Datatek is consummated, the cash received should be adequate to repay most, if not all, of the Company's past due payroll tax liabilities. The Company cannot give any assurance at this time that a sale will occur. Datatek is primarily involved in information technology temporary and contract staffing and represents approximately 53% of our 2005 year to date temporary and contract staffing revenue. The Company is continuing to evaluate various other financing and restructuring strategies, including merger candidates and investments through private placements, to maximize shareholder value and to provide assistance in pursuing alternative financing options in connection with our capital requirements and business strategy. The Company will also seek acquisitions to replace the revenues lost from a Datatek sale by acquiring small companies where we can absorb their back office operations into its own. There can be no assurance that it will be successful in implementing the changes necessary to accomplish these objectives, or if it is successful, that the changes will improve our cash flow and liquidity. If a Datatek sale takes place, management believes it will be able to secure other financing that will allow it to pursue the Company's acquisition strategy, which, when combined with improving market conditions and the restructuring of its present businesses, should eventually produce enough new revenues and gross profit to cover the operating funds shortfall the Company are currently experiencing. However, the Company cannot guarantee that funds will be available, that any acquisitions will, if made, be accretive to its cash flow, or that its creditors will give it the time needed to implement its plan. Bankruptcy Warning The Company's common stock was delisted on Feb. 9, 2005, and has since been trading sporadically on the "pink sheets" inter-dealer trading network. The loss of the AMEX listing has made the Company's ability to use is common stock in acquisitions substantially more difficult. The inability to obtain additional financing will have a material adverse effect on its financial condition. It may cause the Company to delay or curtail its business plans or to seek protection under bankruptcy laws. The Company has initiated the process leading to the trading of our common stock on the OTC Bulletin Board. The Company said its continuation as a going concern is dependent upon its ability to obtain additional financing and, ultimately, to attain and maintain profitable operations. A full-text copy of Diversified Corporate's Quarterly Report is available for free at http://ResearchArchives.com/t/s?11d Diversified Corporate Resources, Inc., is a national employment services and consulting firm, servicing Fortune 500 and larger regional companies with permanent recruiting and staff augmentation in the fields of Engineering, Information Technology, Healthcare, BioMed and Finance and Accounting. The Company currently operates a nationwide network of eight regional offices. As of June 30, 2005, Diversified Corporate's equity deficit widened to $3,716,000, from a $1,899,000 deficit at Dec. 31, 2004. DIVERSIFIED CORPORATE: Negotiating Sale of Traveling Nurse Unit --------------------------------------------------------------- Diversified Corporate Resources, Inc. (OTC Pink Sheets: HIRD.PK) is reviewing its strategic options whether or not to sell its traveling nurse division. MT Ultimate Healthcare Corp. (OTCBB: MTHC) signed a binding agreement to purchase the business and assets of the Company's traveling nurse division, which conducts business under the name Magic Healthcare and is located in Palm Desert, California. However, the exclusivity period under that agreement, during which the parties agreed to use their reasonable efforts to close the transaction, has expired. Accordingly, although these discussions are continuing, no assurances can be provided that a final, definitive agreement with MT will be reached or that a sale is otherwise imminent. Diversified Corporate Resources, Inc., is a national employment services and consulting firm, servicing Fortune 500 and larger regional companies with permanent recruiting and staff augmentation in the fields of Engineering, Information Technology, Healthcare, BioMed and Finance and Accounting. The Company currently operates a nationwide network of eight regional offices. As of June 30, 2005, Diversified Corporate's equity deficit widened to $3,716,000, from a $1,899,000 deficit at Dec. 31, 2004. DJ ORTHOPEDICS: Credit Amendments Cue Moody's to Withdraw Ratings ----------------------------------------------------------------- Moody's Investors Service has withdrawn the Ba3 Corporate Family Rating of dj Orthopedics, LLC, the Ba3 rating for the company's $100 million guaranteed senior secured term loan and the Ba3 rating for its $30 million guaranteed senior secured revolving credit. On May 5, 2005, dj Orthopedics entered into an amended agreement that consists of a $50 million term loan and $75 million revolving credit facility. This amended agreement is not rated by Moody's. Dj Orthopedics, LLC, based in Vista, California, specializes in the design, manufacture and marketing of products that rehabilitate soft tissue and bone injuries, protect against injury, and treat osteoarthritis of the knee. DOCTORS HOSPITAL: Hires Wellspring Valuation to Perform Appraisals ------------------------------------------------------------------ The Hon. Jeff Bohm of the U.S. Bankruptcy Court for the Southern District of Texas in Houston gave Doctors Hospital 1997 LP permission to employ Wellspring Valuation Ltd. as its professional appraiser. The Debtor selected Wellspring Valuation because of the Firm's reputation for offering objective, independent business judgment and professionalism, as well as its extensive experience in conducting fixed asset and real estate valuations of hospitals. Wellspring Valuation will perform a building and equipment appraisal at the Debtor's Tidwell and Parkway Facilities, utilizing the income and cost valuation approaches to produce an estimated market value of the land. The Debtor tells the Bankruptcy Court that it needs to determine the market value of these assets so it can properly formulate a viable long-term business plan and explore strategic Alternatives that add value to its business. The Debtor estimates the overall cost for Wellspring Valuation's services at $30,000. Wellspring Valuation has agreed to cap all services and expenses related to the appraisal at $33,000. The Debtor will pay a $10,000 retainer, to be credited to Wellspring Valuation's total charges. To the best of the Debtor's knowledge, Wellspring Valuation does not hold any interest adverse to its estate and is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code. Wellspring Valuation Ltd. -- http://www.wellspringvaluation.com/ -- is the nationally recognized leader in providing independent valuation and financial advisory services specifically tailored to the healthcare industry. The Firm is a national, full service valuation and financial advisory firm, with senior level healthcare expertise in finance, equipment and real estate. Wellspring Valuation's clients include hospitals, ambulatory surgery centers, diagnostic imaging centers, laboratories, dialysis centers, long-term care facilities, medical office buildings, and all types of ancillary operations. Financial advisory services are used for transaction due diligence and valuation, corporate compliance, and financial reporting. Headquartered in Houston, Texas, Doctors Hospital 1997 LP, dba Doctors Hospital Parkway-Tidwell, operates a 101-bed hospital located in Tidwell, Houston, and a 152-bed hospital located in West Parker Road, Houston. The Company filed for chapter 11 protection on April 6, 2005 (Bankr. S.D. Tex. Case No. 05-35291). James M. Vaughn, Esq., at Porter & Hedges, L.L.P., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $41,643,252 and total debts of $66,306,939. E.SPIRE COMMS: DIP Financing Pact Extended to Sept. 30 ------------------------------------------------------ Gary F. Seitz, Esq., the Chapter 11 Trustee appointed in e.Spire Communications, Inc., and its debtor-affiliates' chapter 11 cases sought and obtained permission from the U.S. Bankruptcy Court for the District of Delaware to further extend and amend their debtor- in-possession financing until Sept. 30, 2005. The DIP Facility is provided by Ableco Finance LLC, as lender, and Wells Fargo Foothill, Inc., as agent. The Debtors will use the financing to continue: -- funding the expenses of liquidating their remaining assets; -- resolving disputed liabilities; -- pursuing avoidance actions; -- investigating potential estate causes of action; -- resolving cure claims associated with the sale to Thermo Telecom Partners LLC and Expedius Management Co., LLC; -- collecting miscellaneous accounts receivable; -- resolving disputed liens asserted by mechanics lienors and taxing authorities; and -- winding-up the Debtors' 401(k) plan and other wind-down activities. John D. McLaughlin, Jr., Esq., the chapter 11 Trustee's Counsel, tells the Court that absent the DIP financing, the Debtors' entire liquidation effort will be terminated. Use of Cash Collateral The Court authorizes Mr. Seitz to use up to $310,500 of the DIP Lenders' cash collateral that is on deposit in the Trustee's accounts. The amount will be deducted from the Revolver and then re-advanced by the DIP Lenders as loans under the DIP facility. To provide the Lenders with adequate protection, the Debtors agree to: -- pay the prepetition agent all accrued and unpaid prepetition and postpetition interest and expenses under the Prepetition Credit Agreement; -- grant the prepetition agent valid, perfected, first priority postpetition security interests in all liens, subordinate only to the liens of the DIP Lenders upon all property of the Debtors acquired postpetition; and -- grant to the prepetition agent an administrative claim to the extent there shall be any diminution in the value of the prepetition collateral. The Court approves the use of cash collateral in accordance with a monthly budget from July 2005 through September 2005, projecting: Monthly Budget July 2005 through September 2005 July August Sept. Total ------ -------- ------- ------- Monthly Administrative Costs $17,500 $17,500 $17,500 $52,500 Professional Fees 86,000 86,000 86,000 $258,000 Total $103,500 $103,500 $103,500 $310,500 The Court also approved a modified method of calculating Mr. Seitz's voluntarily reduced commission. Pursuant to this agreement, the Trustee is entitled to a 3% commission on all current distributions of Reduced Commission Assets, provided that this increased commission will be subtracted from the Trustee's commission derived from the future distribution of the Note from Xspedius Management Co., LLP, dated as of Aug. 30, 2002. Headquartered in Columbia, Maryland, e.Spire Communications is a facilities-based integrated communications provider, offering traditional local and long distance internet access throughout the United States. The Company and its debtor-affiliates filed for chapter 11 protection on March 22, 2001 (Bankr. Del. Case No. 01-00974). Chad Joseph Toms, Esq., and Domenic E. Pacitti, Esq., at Saul Ewing LLP, and James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young & Jones, represent the Debtors in their chapter 11 proceedings. When the Debtors filed for protection from their creditors, they listed $911.2 million in total assets and $1.4 billion in total debts. Gary F. Seitz, Esq., is the Court-appointed Chapter 11 Trustee in the Debtors' bankruptcy proceedings. Daniel K. Astin, Esq., and Anthony M. Saccullo, Esq., at The Bayard Firm; Erin Edwards, Esq., at Young Conaway Stargatt & Taylor LLP; and Deirdre M. Richards, Esq., at Obermayer Rebmann Maxwell & Hippel LLP, represent Mr. Seitz. EAST TEXAS MEDICAL: Moody's Affirms Ba2 Rating on $220-Mil Bonds ---------------------------------------------------------------- Moody's Investors Service has affirmed the Ba2 rating on East Texas Medical Center Regional Health System's Series 1993 A&B bonds ($43 million) and Series 1997A-E bonds ($177 million) issued through Tyler Health Facilities Development Corporation. The Series 1997A bonds are insured by MBIA and the Series 1997B-E bonds are insured by FSA; all of the Series 1997 bonds carry primary ratings of Aaa. The rating outlook has been revised to stable from positive due to increased competitive pressures and an unexpected and recent decline in volume, both of which contributed to lower profit margins following record performance in FY 2003. Legal Security Security interest in revenues and receipts of the Tyler facility and all affiliate hospitals. The mortgage on the Tyler facility was pledged to the master trustee in favor of the bondholders in FY 2004. The mortgage pledge was part of an agreement with FSA which no longer requires the system to meet the 91 days cash on hand liquidity covenant. The system also agreed to fund the Special Reserve Fund (which is akin to a debt service reserve fund) at the lesser of $50 million or half of the Series 1997 current par amount while the bonds remain outstanding. Strengths: (1) continuation of good financial performance with profitable earnings since fiscal year 2001, although FY 2005 results will be below FY 2004, denoting the second year of a decline in earnings; (2) market share has remained stable in spite of the presence of a sizable competitor; East Texas maintains the leading market share in the 12-county primary service area due to its expansive network of affiliate hospitals; and (3) moderate capital spending in the near term which indicates a spending discipline within the organization and the willingness to pull back on capital given recent volume declines. Weaknesses: (1) presence of a physician-owned specialty hospital in Tyler which has impacted surgical volumes and financial performance; (2) unexpected decline in volumes over the past three months which has impacted financial results; and (3) material rate reduction from one of the system's larger payers; (4) decline in liquidity following a peak of $95 million in FY 2003; unrestricted cash is expected to decline to $68 million or 31 days cash by the end of FY 2005; and (5) highly leveraged balance sheet with $285 million bonds, notes and capital leases as well as sizeable operating leases and an expected future pension benefit obligation of $46 million as of October 31, 2004; the plan assets are currently above the present value of the accrued pension benefits. Recent Results/Developments The rating affirmation and revision of the outlook to stable from positive reflects recent declines in East Texas Medical Center Regional Healthcare System's financial performance. Following a record year of performance in FY 2003 with $90 million of operating cash flow (13.3% operating cash flow margin), financial results declined to $75 million operating cash flow (10.1% operating cash flow margin) in FY 2004. Management expects performance to again decline in FY 2005 with $67 million operating cash flow (8.0% operating cash flow margin). While these levels remain respectable and represent a higher level of earnings for the system since weaker performance in the late 1990s, Moody's believes that the decline represents new financial pressures that the organization must absorb. These pressures include the presence of a physician-owned 20-bed specialty surgical hospital (Texas Spine and Joint Hospital) that opened in Tyler in January 2003. Management estimates that the specialty hospital has resulted in a $9 million reduction in net income and represents a greater competitive threat than 465 licensed-bed Trinity Mother Francis Health System, also located in Tyler. While management moved quickly to replace the trauma orthopedic surgeons through ETMCRHS' employed physician 501(a) corporation, the outmigration to this competing facility has impacted hospital financial performance and increased the subsidy levels required at the 501(a) corporation. Aside from the specialty hospital, volumes at several of the system's facilities (including Tyler) have unexpectedly declined in recent months. Management is uncertain as to whether this is a non-recurring trend or a permanent decline but it is nonetheless included in the FY 2005 forecast. Finally, the system incurred a material rate reduction from one of its larger payers, contributing to a $12 million revenue reduction in FY 2005. Liquidity has also declined since FY 2003 from a peak of $95 million or 57 days cash on hand to a projected $69 million or 32 days cash by the end of FY 2005. Capital spending has been funded with cash flow as well as notes and leases; future capital spending will hover between $35 million to $40 million per annum which approximates depreciation expense. The decline in liquidity from FY 2003 to FY 2004 ($57 million or 30 days) reflects, in part, the $20 million funding into the Special Reserve Fund. Under the prior liquidity covenant, ETMCRHS was required to fund 50% of free cash flow (after debt service payments) until the system reached 91 days cash on hand. The covenant has since been revised and now requires ETMCRHS to maintain the lesser of $50 million or half of the outstanding Series 1997 bonds in the SRF in exchange for the mortgage pledge. While the SRF is akin to a debt service reserve fund and not included in our liquidity calculations, it does represent the overall improvement in earnings at the system in recent years. Absolute levels of long-term debt have not declined due to the increased use of notes, as well as leases and other lending vehicles to fund capital needs. Projected FY 2005 cash-to-debt is below average, 24% while projected debt-to-cash flow is modest, 5.30 times. Moody's notes that the system also has large non-cancelable operating leases for its affiliate hospitals that further adds to the overall debt burden. Increased funding into the pension plan has been on par with pension expense. We note that ETMCRHS is involved as a defendant and counter plaintiff in a legal action in federal district court in Marshall, Texas filed by Trinity Mother Frances Health System. The trial is expected to begin in October 2005 barring any unforeseen delays. Moody's will monitor the outcome and any impact on financial performance. Outlook The rating outlook is stable and reflects our belief that financial performance should produce adequate debt service coverage levels. What could change the rating - UP -- Improved liquidity; -- stable financial performance; and -- volume trends What could change the rating - DOWN -- Departure from profitable earnings; -- loss in market share; and -- decline in liquidity Key Facts East Texas Medical Center Regional Healthcare System and Affiliates ended October 31, 2004 Admissions: 45,765 Total Revenues: $743.0 MM Net Revenues Available for Debt Service: $78.0 MM (investment income normalized at 5%) Maximum Annual debt service coverage based on actual reported investment income: 2.80 times Moody's-Adjusted Maximum Annual Debt service coverage: 2.84 times (investment income normalized at 5%) Total Debt Outstanding: $283.1 MM Days cash on hand: 30.4 days (excludes Special Reserve Funds) Operating Cash flow Margin: 10.1% EASTMAN KODAK: Cuts More Jobs, Pares Film Manufacturing Operations ------------------------------------------------------------------ Eastman Kodak Company is closing various operations in Rochester, New York, and downsizing its film manufacturing business in China in a bid to address the worldwide decline in demand for consumer film and photographic paper. Pursuant to a restructuring program originally announced in January 2004 and expanded in July 2005, the imaging giant will consolidate photographic paper manufacturing for North America at plants in Windsor, Colorado and Harrow, England, resulting in the closure of an operation in Rochester by the end of October. The consolidation will cost approximately $95 million and will affect an estimated 900 jobs. Costs associated with the restructuring include termination benefits of approximately $33 million and accelerated equipment depreciation and inventory write-offs of approximately $62 million. Kodak will also record approximately $3 million in operating charges related to the consolidation, which it expects to complete by the end of 2005. Kodak further anticipates the closure of its polyester processing and recycling operations in Rochester by the end of the year. To reduce operating costs, the Company will opt to purchase finished raw material and outsource the recycling of its polyester waste. As a result of this action, the Company will incur restructuring- related charges of approximately $25 million. Included in these charges are accelerated depreciation on equipment and inventory write-offs of approximately $21 million, employee severance of approximately $3 million, and other exit costs of approximately $1 million. Kodak will also reduce output and staff at its plant in Xiamen, China. The Xiamen plant is the Company's largest production base in Asia. As a result of this action, the Company will incur restructuring-related charges of approximately $30 million. Included in these charges is accelerated depreciation on equipment of approximately $29 million and other exit costs of approximately $1 million. This action will be completed by July 31, 2006. Kodak reports that all severance and exit costs require a cash outlay, while the accelerated depreciation and inventory write- offs represent non-cash charges. Based in Rochester, New York, Eastman Kodak Company -- http://www.kodak.com/-- is a worldwide vendor of imaging products and services. The company is committed to a digitally oriented growth strategy focused on four businesses: Digital & Film Imaging Systems - providing consumers, professionals, and cinematographers with digital and traditional products and services; Health - supplying the medical and dental professions with traditional and digital imaging and information systems, IT solutions, and services; Graphic Communications - providing customers with a range of solutions for prepress, traditional and digital printing, document scanning, and multi-vendor IT services; and Display & Components - supplying original equipment manufacturers with imaging sensors as well as intellectual property and materials for the organic light-emitting diode and LCD display industries. * * * As reported in the Troubled Company Reporter on Aug. 18, 2005, Fitch Ratings downgraded Kodak's senior unsecured debt to 'BB-' from 'BB' with a negative outlook. The rating action reflects 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. As reported in the Troubled Company Reporter on Aug. 17, 2005, Standard & Poor's Ratings Services lowered its senior unsecured debt rating on Kodak to 'BB-' from 'BB', based on the company's plan to add $2.7 billion in secured credit facilities to its capital structure. As reported in the Troubled Company Reporter on July 25, 2005, Moody's Investors Service has downgraded Eastman Kodak Company's corporate family rating to Ba2 from Ba1 and its senior unsecured rating to Ba3 from Ba1 and has placed both ratings on review for further possible downgrade. Ratings on review for possible downgrade: * Corporate Family Rating (formerly senior implied rating) at Ba2 * Senior Unsecured Rating at Ba3 ENCYCLE/TEXAS: Case Summary & 22 Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: Encycle/Texas, Inc. 1150 North 7th Avenue Tucson, Arizona 85705 Bankruptcy Case No.: 05-21304 Debtor affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Encycle, Inc. 05-21305 Type of Business: The Debtor operates a large hydrometallurgical processing complex that chemically recovers the metals in waste and by-product materials that are received from a variety of manufacturing companies nationwide. The recovered metals are returned to commerce, either in metallic form or as inorganic chemicals. Encycle/Texas, Inc. is affiliated with ASARCO LLC (Bankr. S.D. Tex. Case No. 05-21207). ASARCO LLC filed for chapter 11 protection on August 9, 2005, and its case is pending before Hon. Richard Schmidt. See http://www.asarco.com/ The other debtor-affiliates who filed for chapter 11 protection are: Lac d'Amiante du Qu,bec Lt,e (Bankr. S.D. Tex. Case No. 05- 20521); CAPCO Pipe Company, Inc. (Bankr. S.D. Tex. Case No. 05-20522); Cement Asbestos Products Co. (Bankr. S.D. Case No. 05-20523); Lake Asbestos of Quebec, Ltd. (Bankr. S.D. Case No. 05-20524); and LAQ Canada, Ltd. (Bankr. Case No. 05-20525). All of these Debtor-affiliates filed for chapter 11 protection on April 11, 2005, and their case are pending before Hon. Richard Schmidt. Chapter 11 Petition Date: August 26, 2005 Court: Southern District of Texas (Corpus Christi) Judge: Richard S. Schmidt Debtor's Counsel: C. Luckey McDowell, Esq. Jack L. Kinzie, Esq. James R. Prince, Esq. Baker Botts L.L.P. 2001 Ross Avenue Dallas, Texas 75201 Tel: (214) 953-6500 Fax: (214) 953-6503 Estimated Assets Estimated Debts ---------------- --------------- Encycle/Texas, Inc. $50,000 to $100,000 $10 Million to $50 Million Encycle, Inc. $1 Million to $1 Million to $10 Million $10 Million A. Encycle/Texas, Inc.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ State of Texas Judgment $1,125,000 Natural Resources Division Hazardous waste $50,000 Attorney General's Office generator fee P.O. Box 12548 Austin, TX 78711 United States of America Judgment $1,125,000 Financial Litigation Unit Office of the United States Attorney P.O. Box 61129 Houston, TX 77208 Meaney-Walsh Properties Judgment $510,000 No. 1 Ltd. 3360 San Antonio Street Corpus Christi, TX 78412 Nueces County Tax Property taxes $50,971 Assessor-Collector SBC Communications, Inc. Telephone provider $14,317 City of Corpus Christi Property taxes $12,041 Water utility provider $1,711 US Ecology Texas Trade $11,472 Suez Energy Resources Electrical provider $7,249 Ram Consultants Environmental services $1,800 STL Corpus Christi Outside lab analysis $1,032 PSC Industrial Outsourcing Inc. Trade $466 Continental Battery Co. Trade $356 Unifirst Holdings, LP Trade $321 Grainger Trade $224 Allied Waste Services Trade $205 Purvis Bearing Service Corpus Trade $198 Christi United Steel Workers of America Union dues, payroll $96 deduction Xerox Capital Services LLC Trade $81 Reddy Ice Corpus Christi Trade $71 Arcadis G&M, Inc. Trade $63 B. Encycle, Inc.'s 2 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ State of Texas Environmental Unknown Natural Resources Division Attorney General's Office P.O. Box 12548 Austin, TX 78711 Department of Justice Environmental Unknown Environmental and Natural Resources Division P.O. Box 7611 Washington, D.C. 20044-7611 ENRON CORP: Court Approves JEDI II & CalPERS Settlement Pact ------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of New York approved a settlement agreement among JEDI II, Enron Corporation, Enron North America Corp., and CalPERS. Pursuant to a partnership agreement dated as of Dec. 30, 1997, Enron Capital Management II Limited Partnership, Enron Capital Management III Limited Partnership, and California Public Employees' Retirement System formed the Joint Energy Development Investments II Limited Partnership. JEDI II's general partner is ECM II, and its two limited partners are ECM III and CalPERS. Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that, in return for its $10 million capital commitment to JEDI II, ECM II was granted a 1% interest in the Partnership. In return for its $490 million capital commitment to JEDI II, ECM III was granted a 49% interest in the Partnership. In return for its $500 million capital commitment to JEDI II, CalPERS was granted a 50% interest in the Partnership. JEDI II filed proofs of claim in the Debtors' Chapter 11 cases: Amended Claim No. Claim No. Debtor --------- --------- ------- 24653 14668 ENA 24654 23847 ECT Merchant Investments Corp. 24655 N/A Enron Corp. 24656 23849 ECT Securities LP Corp. 24657 23846 ECT Securities GP Corp. 24658 23850 TLS Investors, L.L.C. 24679 23848 ECT Securities Limited Partnership The Reorganized Debtors strongly dispute the JEDI II Claims. In addition, ENA maintains claims against the Partnership arising from various commodity swap transactions and for various unpaid fees allegedly due and owing to the General Partner pursuant to the Partnership Agreement. Over a period of several months, JEDI II, Enron, ENA, and CalPERS engaged in discussions regarding the dissolution of JEDI II and, in connection therewith, resolution of the issues related to the Partnership Agreement, the JEDI II Claims, the Claims Objection and the ENA Claims, including various liabilities of JEDI II. As a result of these discussions, the parties have reached a Settlement Agreement: (A) On the Closing Date, the cash of the Partnership will be treated in this manner: -- the General Partner will create a reserve for each of the matters, and in the amounts not to exceed $5,620,000; -- the General Partner will cause the Partnership to pay $16,000,000, at the direction of ENA, in full and complete satisfaction of the ENA Claims and other claims that any of the Enron Parties may have against the Partnership; -- the General Partner will cause the Partnership to pay CalPERS all unpaid legal fees and expenses incurred up to and including May 31, 2005, and all unpaid monitoring fees through the Closing Date; and -- the balance of the Partnership's cash will be distributed to the Partners in accordance with the terms and provisions of the Partnership Agreement. (B) In the event that any future proceeds are received by the Partnership in respect of its investment in East Coast Power, the proceeds will be distributed to the Partners as soon as practicable after the later to occur of: (x) the Closing, and (y) the receipt of the proceeds in accordance with the terms and provisions of the Partnership Agreement. (C) The funds reserved in the Costilla Reserve will be used solely for liabilities and fees and expenses incurred in connection with the Costilla Litigation. Upon final resolution of the Litigation, any funds remaining in the Reserve will be distributed as soon as practicable after the Closing and in accordance with the terms and provisions of the Partnership Agreement. (D) In the event the Partnership receives cash from any other source or the General Partner reasonably determines that the cash in any Reserve is no longer necessary to fund the liability for which such Reserve was created, the General Partner will cause the Partnership to distribute such cash to the Partners in accordance with the Partnership Agreement; provided, however, that notwithstanding the foregoing and with the exception of the amounts necessary to reimburse the Partnership for payments to the law firm of Morris James Hitchens & Williams to be made by or on behalf of the Partnership, the Partnership will distribute any and all proceeds received by the Partnership in connection with the Venoco settlement directly to Enron, and no such proceeds will be considered to be Partnership assets or distributed to the Partners. (E) ENA will hold in reserve the General Partner's and ECM III's Distributable Share until the earliest to occur of: 1. the third anniversary of the Closing Date, 2. entry of an order of the Bankruptcy Court, upon notice to CalPERS and a hearing, 3. the written agreement of CalPERS, and 4. the payment of any amounts required to be paid in connection with the final resolution of the Costilla Litigation, and at that time, ENA will release the Distributable Shares to each of the General Partner and ECM III. (F) On the Closing Date, each claim by the Partnership against the Reorganized Debtors, including, but not limited to, the JEDI II claims, other than the Partnership's Claim No. 2253 for $486,526, which claim was assigned to the Partnership by Andex Resources, will be deemed irrevocably withdrawn, with prejudice, and to the extent applicable expunged and disallowed in their entirety. (G) Upon resolution of the Costilla Litigation, and to the extent that that resolution is a compromise and settlement of the claims and causes of action asserted, that resolution will be approved in accordance with the terms of the Partnership Agreement. (H) The liability of each Partner under the Settlement Agreement and the Partnership Agreement to return any distributions will be limited solely to the amount of that Partner's Distributable Share and no return of distributions will be required for any reason other than in connection with any judgment or settlement of the Costilla Litigation. The parties agree that the Bankruptcy Court will retain jurisdiction over disputes arising out of the Settlement Agreement and further provides that disputes arising from or related to the Partnership Agreement will be subject to the jurisdiction provision in the Partnership Agreement. 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. 156; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: AEGON, et al., Agree to Withdraw Amended Claims ----------------------------------------------------------- Three entities filed statutory securities and common law fraud claims against Enron Corp.: Claimant Claim No. -------- --------- Principal Capital Management LLC 7602 Pacific Investment Management Company LLC 8044 AEGON USA Investment Management, LLC 8133 The Claims alleged misrepresentations and omissions in connection with the Claimants' purchases of certain senior secured notes sponsored by Enron and issued by Osprey Trust and Osprey I, Inc., of: (i) $1.4 billion aggregate principal amount of 8.31% Senior Secured Notes due 2003; (ii) $750 million aggregate principal amount of 7.79% Senior Secured Notes due 2003; and (iii) EUR315 million aggregate principal amount of 6.375% Senior Secured Notes due 2003. On February 21, 2003, Enron commenced an adversary proceeding against, among others, Whitewing Associates, L.P., in connection with the Osprey Note structure. Enron later filed an amended complaint to include the Claimants as defendants. On February 26, 2004, the parties to the Whitewing Litigation entered into a settlement agreement, providing, among other things, Enron's payment of an aggregate $75 million as cash settlement consideration and an allowed $3.6 billion general unsecured claim against Enron. The Court-approved Settlement also provided that the Fraud Claims asserted by Claimants in their Original Proofs of Claims were expressly preserved. Pursuant to the Settlement Agreement and Enron's express agreement, the Claimants amended the Claims to eliminate all claims other than the Osprey Fraud Claims, which were realleged in their entirety. On April 13, 2004, Principal, PIMCO and Aegon filed Amended Claim Nos. 24743, 24741 and 24742. The Debtors objected to the Amended Claims. Pursuant to a settlement agreement with various third parties, the Claimants have agreed to withdraw the Amended Claims. Pursuant to Rule 3006 of the Federal Rules of Bankruptcy Procedure, the Claimants seek the Court's authority to withdraw the Amended Claims. A. Brent Truitt, Esq., at Hennigan, Bennett & Dorman LLP, in New York, argues that the Claimants should be allowed to withdraw the Amended Claims without prejudice, based on these factors: (i) The Claimants exercised diligence in bringing the Motion to Withdraw. The Claimants reached the Third Party Settlement, which obviated the need for continued prosecution of the Amended Claims, only within the last few months. Furthermore, since the time the Settlement was reached, Enron has not had to take any further court action with respect the Amended Claims. (ii) There has been no "undue vexatiousness" on the Claimants' part. To the contrary, the Claimants filed the Amended Claims to preserve their rights and claims as against Enron. The only action Enron has been required to take in court with respect to those claims was the filing of an objection back in March, before the Third Party Settlement was reached. Now that they have reached that settlement, the Claimants are promptly seeking to withdraw the Amended Claims with prejudice, without the need for further litigation and without any payment or distribution by Enron. (iii) The resolution of the Amended Claims has not progressed to the extent that would necessitate a great deal of effort and expense on Enron's part. To the contrary, all that Enron has had to do up to this point is to prepare and file the Objection. (iv) There will be no duplicative expense of relitigation, as there will be no relitigation -- the Claimants are seeking to withdraw their claims with prejudice. (v) The Claimants' explanation for the need to withdraw the Amended Claims warrants the Court's authorizing them to do so. Their settlement with third parties requires them to do so and they no longer intend to continue to prosecute the 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. 156; Bankruptcy Creditors' Service, Inc., 15/945-7000) EXCALIBUR IND: Balance Sheet Upside-Down by $14.1 Mil. at June 30 ----------------------------------------------------------------- Excalibur Industries, 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. Net Sales Net sales for continued operations of Shumate Machine Works increased by $67,156, or an increase of 7.4%, to $979,410, for the three months ended June 30, 2005, from $912,254 for the three months ended June 30, 2004. This increase in sales results primarily from overall increased demand for oil and gas drilling products and components that Shumate produces. This increased demand resulted in higher volumes and higher pricing of the products and components that Shumate manufactures during the second quarter of 2005. Operating Loss The Company incurred an operating loss of $1,017,673 for the three months ended June 30, 2005, an increase of $362,122 as compared to an operating loss of $655,551 for the three months ended June 30, 2004. The Company had larger operating losses in 2005 as compared to 2004 primarily because of higher general and administrative expenses and research and development expenses partially offset by higher revenues and lower depreciation expenses. Liquidity and Capital Resources The Company financed its operations, acquisitions, debt service and capital requirements through cash flows generated from operations, debt financing, capital leases, and issuance of equity securities. The Company's working capital deficit at June 30, 2005 was $15,912,901. The Company had cash of $231,459 and a bank overdraft of $873,757 as of June 30, 2005, compared to having cash of $82,904 and a bank overdraft of $1,985,940 at June 30, 2004. The difference results primarily from additional borrowings. A full-text copy of Excalibur's Quarterly Report is available for free at http://ResearchArchives.com/t/s?11e Excalibur Industries, Inc., serves the energy field services market through its Shumate Machine Works operating subsidiary. With its roots going back more than 25 years, Shumate is a contract machining and manufacturing company that makes products, parts, components, assemblies and sub-assemblies for its customers designed to their specifications. The Company's state-of-the-art 3-D modeling software, computer numeric controlled machinery and manufacturing expertise are contracted by its customers' research and development, engineering and manufacturing departments to ensure optimization and timely desired results for their products. The diverse line of products Shumate manufactures includes expandable tubular launchers and liner hangers for oil & gas field service applications, blow-out preventers, top drive assemblies, directional drilling products, natural gas measurement equipment, control & check valves and sub-sea control equipment used in energy field service. The Company employs about 35 people at its 23,000 square foot plant in Conroe, Texas, north of Houston. As of June 30, 2005, Excalibur Industries' total liabilities exceed its total assets by $14,128,939. As reported in the Troubled Company Reporter on May 26, 2005, Excalibur Industries entered into a restructuring agreement with Stillwater National Bank, its secured lender. That loan is secured by a pledge of 100% of Excalibur Holdings, Inc.'s stock in Shumate Machine Works, Inc. Excalibur Holdings is a subsidiary of Excalibur Industries, and filed a voluntary petition for protection under Chapter 7 of the U.S. Bankruptcy Code (Bankr. S.D. Tex. Case No. 05-33543) on March 9, 2005. Excalibur Holdings is represented in its chapter 7 proceeding by: Jean Petersen Sumers, Esq. 19901 Southwest Freeway Sugar Land, TX 77479 Telephone (713) 850-7955 Fax (713) 850-8917 The Chapter 7 Trustee overseeing the liquidation of Excalibur Holdings' estate is: Kenneth R. Havis 114 N. 10th St. P.O. Box 750 Navasota, TX 77868 Telephone (936) 825-7982 Stillwater, represented by: Thomas S. Henderson, Esq. Munsch Hardt Kopf & Harr, P.C. 700 Louisiana, Suite 4600 Houston, TX 77002-2732 Telephone (713) 222-1470 has obtained relief from the automatic stay in Excalibur Holdings' chapter 7 case. The United States Trustee will convene a meeting of Excalibur Holdings' creditors under Sec. 341(a) of the Bankruptcy Code on September 20, 2005, at 10:00 a.m., at 515 Rusk, Suite 3401, in Houston, Texas. FIRST FRANKLIN: Fitch Puts BB+ Rating on $3MM Private Certificates ------------------------------------------------------------------ First Franklin Mortgage Loan Trust, mortgage pass-through certificates, series 2005-FF7, are rated by Fitch Ratings: -- $706,258,000 classes A-1, A-2, A-3, A-4 and A-5 'AAA'; -- $32,631,000 class M-1 certificates 'AA+'; -- $29,949,000 class M-2 certificates 'AA+'; -- $18,327,000 class M-3 certificates 'AA'; -- $16,092,000 class M-4 certificates 'AA-'; -- $14,751,000 class M-5 certificates 'A+'; -- $13,410,000 class M-6 certificates 'A'; -- $12,069,000 class M-7 certificates 'A-'; -- $10,728,000 class M-8 certificates 'BBB+'; -- $9,387,000 class M-9 certificates 'BBB'; -- $6,705,000 class M-10 certificates 'BBB'; -- $6,705,000 class M-11 certificates 'BBB-'; -- $3,129,000 privately offered class M-12 certificates 'BB+'. The 'AAA' rating on the senior certificates reflects the 21.00% total credit enhancement provided by the 3.65% class M-1, the 3.35% class M-2, the 2.05% class M-3, the 1.80% class M-4, the 1.65% class M-5, the 1.50% class M-6, the 1.35% class M-7, the 1.20% class M-8, the 1.05% class M-9, the 0.75% class M-10, the 0.75% class M-11, the 0.35% class M-12 and the 1.55% initial overcollateralization. All certificates have the benefit of monthly excess cash flow to absorb losses. An interest rate swap agreement with Swiss Re Financial Products Corporation guaranteed by Swiss Re (rated 'AA+'/Stable Outlook by Fitch) is also available to cover interest shortfalls and losses. In addition, the ratings reflect the quality of the loans, the integrity of the transaction's legal structure as well as the primary servicing capabilities of Countrywide Home Loans Servicing LP (rated 'RPS1' by Fitch) and U.S. Bank National Association as trustee. The mortgage loans are divided into two groups of first-lien, fixed-rate and adjustable mortgage loans. The weighted average loan rate of the Group I mortgage loans is approximately 6.836%. The weighted average remaining term to maturity is 354 months. The average cut-off date principal balance of the mortgage loans is approximately $169,300. The weighted average original loan-to- value ratio is 82.41% and the weighted average Fair, Isaac & Co. score was 638. The properties are primarily located in California (30.38%), Illinois (9.56%) and Florida (6.45%). The weighted average loan rate of the Group II mortgage loans is approximately 6.721%. The WAM is 356 months. The average cut-off date principal balance of the mortgage loans is approximately $303,213. The weighted average OLTV ratio is 82.69% and the weighted average Fair, Isaac & Co. score was 660. The properties are primarily located in California (47.69%), Florida (6.60%) and New York (5.44%). H&E EQUIPMENT: To Restate 2002 and 2003 Financial Statements ------------------------------------------------------------ H&E Equipment Services L.L.C. (H&E) will restate its audited financial results for the fiscal years ended December 31, 2002 and 2003, to reflect certain adjustments relating primarily to the treatment of deferred taxes in connection with its combination with ICM Equipment Company LLC in 2002. The Company estimates that the impact of these adjustments on net income for 2003 and 2002 will be positive, and that the adjustments will have no impact to EBITDA or Adjusted EBITDA for 2003 and 2002. The Company estimates that these adjustments will decrease its net loss by approximately $5.4 million to $46.1 million for 2003 and $4.8 million to $8.2 million for 2002. While the Company has not completed its financial statements for 2004, it currently expects to report net loss for 2004 of approximately $13.7 million, as compared to its original guidance of a net loss of $13.6 million. The Company currently expects that it will report EBITDA for 2004 of approximately $79.6 million, as compared to its original guidance of $79.8 million. The Company expects to report net income for the first quarter of 2005 of approximately $1.0 million, as compared to its original guidance of $1.3 million. Pending completion of the review of these adjustments, the Company is delaying announcing earnings for the second quarter ended June 30, 2005. Second quarter revenue is expected to be approximately $137.7 million, an increase of $24.0 million, or 21.1%, from the prior year period. Net income is expected to be in the range of $4.0 million to $4.5 million. Lender Waivers The Company has discussed the accounting adjustments with the lenders under its revolving credit facility, and its revolving credit facility lenders have waived the non-compliance by the Company with, and the effects of non-compliance under, various representations and non-financial covenants affected by the accounting adjustments in connection with the restatements. Accordingly, the Company has full access to its revolving credit facility. These adjustments to the Company's accounting practices have been discussed with its independent registered public accounting firm, BDO Seidman L.L.P. The Company will include the restated results for the fiscal years ended December 31, 2003 and 2002 in its 2004 Annual Report on Form 10-K. In addition to the principal adjustments described above, the restatement will impact individual line items within the Company's financial statements. In the interim, investors should no longer rely on the financial statements currently on file with the SEC in the Company's Forms 10-K for the fiscal years ended December 31, 2003 and 2002 and the related auditor's report thereon, and the unaudited financial statements for all interim periods through September 30, 2004. Form 10-Q Filing Delay As previously reported, the Company delayed filing of its 2004 Form 10-K and Forms 10-Q for the quarters ended March 31, 2005 and June 30, 2005 pending completion by BDO of the re-audit of its 2002 and 2003 annual financial statements and the issuance of new audit opinions thereon. The Company will delay finalizing results for the second quarter of 2005 and the filing of our 10-Q for the quarter ended June 30, 2005 until the work necessary to restate our financial results for prior fiscal year and the re-audits are completed, and the Company reports its final results for 2004 and its unaudited results for first quarter 2005. The estimates, earnings, other selected financial data and 2005 outlook provided in this press release are preliminary and subject to change based on completion of prior year audits. H&E Equipment Services L.L.C. is one of the largest integrated equipment rental, service and sales companies in the United States of America, with an integrated network of 39 facilities, all of which have full service capabilities, and a workforce that includes a highly-skilled group of service technicians and separate and distinct rental and equipment sales forces. In addition to renting equipment, the Company also sells new and used equipment and provides extensive parts and service support. This integrated model enables the Company to effectively manage key aspects of its rental fleet through reduced equipment acquisition costs, efficient maintenance and profitable disposition of rental equipment. The Company generates a significant portion of its gross profit from parts sales and service revenues. At Mar. 31, 2005, H&E Equipment Services L.L.C.'s balance sheet showed a $39,368,000 stockholders' deficit, compared to a $40,403,000 deficit at Dec. 31, 2004. HUNTSMAN INT'L: Moody's Rates $1.56 Billion Sr. Sec. Debts at Ba3 ----------------------------------------------------------------- Moody's Investors Service assigned a B1 corporate family rating to Huntsman International LLC. The B1 rating was related to the recent merger of two of Huntsman Corporation's subsidiaries (Huntsman, which also has a B1 corporate family rating). Huntsman recently completed an all-stock merger of two of its wholly owned subsidiaries, Huntsman LLC (HLLC) and Huntsman International LLC (HI). HLLC merged with and into HI, with HI being the surviving entity. HI now holds the combined assets and liabilities of HI and HLLC. HI is the direct obligor of all of HI and HLLC existing debt securities and the recently executed and rated credit facilities totaling $2.5 billion. These rated credit facilities replaced the prior credit facilities located at HI and HLLC. Moody's also made a variety of ratings adjustments as a result of the merger. The outlook for Huntsman and HI is positive. Ratings withdrawn: -- Huntsman International LLC * Guaranteed senior secured revolving credit facility, $375 million due 2008 -- Ba3 * Guaranteed senior secured multi currency facility, $50 million due 2008 -- Ba3 * Guaranteed senior secured term loan B, $1.136 billion due 2010 -- Ba3 -- Huntsman LLC * Guaranteed senior secured revolving credit facility, $350 million due 2009 -- Ba3 * Guaranteed senior secured term loan B, $665 million due 2010 -- B1 * Corporate Family Rating -- B1 -- Huntsman International Holdings LLC * Corporate Family Rating -- B1 Ratings Assigned: -- Huntsman International LLC * Corporate Family Rating -- B1 Huntsman Corporation is a global manufacturer of differentiated and commodity chemical products. Huntsman's products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining and synthetic fiber industries. Huntsman had revenues for the year ended December 31, 2004 of $11.5 billion. INFOUSA INC: Gupta Bid Rejection Cues Moody's to Hold Ratings ------------------------------------------------------------- Moody's Investors Service affirmed all of InfoUSA Inc.'s credit ratings. The affirmation follows the company's recent announcement that a special committee of the board of InfoUSA determined that it did not intend to move forward with an acquisition proposal by Vin Gupta, chairman and CEO of the company. Mr. Gupta announced that he intends to withdraw his proposal to acquire all of the publicly held common shares of InfoUSA in a debt-financed transaction. The negative ratings outlook remains unchanged reflecting InfoUSA's announcement that it will continue to explore strategic alternatives. If the company decides not to pursue a strategic transaction, the rating outlook could be changed to stable. Moody's affirmed these ratings: * $50 million senior secured revolving credit facility due 2007, rated Ba3 * $94 million senior secured first lien term loan A due 2009, rated Ba3 * $69 million senior secured term loan B due 2010, rated Ba3 Headquartered in Omaha, Nebraska, InfoUSA Inc. is a leading provider of business and consumer information, data processing and database marketing services. Revenues for the twelve months ended June 30, 2005 were approximately $369 million. INTERSTATE BAKERIES: PI Claimant Wants Stay Lifted to Pursue Claim ------------------------------------------------------------------ As previously reported, the U.S. Bankruptcy Court for the Western District of Missouri authorized Brenda Sieckmann to proceed to trial a personal injury matter then pending in the Circuit Court of the City of St. Louis. On July 13, 2005, Ms. Sieckmann obtained a $9,750,500 judgment. The Debtors and their insurance carriers advised Ms. Sieckmann that their obligation was limited to a $1,000,000 self-insured retention. Ms. Sieckmann intended to collect $8,750,500 from the insurance companies. "Notwithstanding testimony and representations elicited during discovery and trial of the matter, the insurance companies are now contending that their coverage is not as represented," Joanne B. Stutz, Esq., at Evans & Mullinix, P.A., in Shawnee, Kansas, points out. In addition, Ms. Sieckmann has learned that a $1,000,000 insurance policy was issued that would potentially cover, as primary coverage, the initial $1,000,000 SIR. The parties' dispute has prompted one of the insurers, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, to request and receive relief from the automatic stay to pursue a declaratory judgment action to determine the Debtors' liability, Ms. Stutz reminds the Court. According to Ms. Stutz, Ms. Sieckmann intends to file a petition with the St. Louis Circuit Court, alleging negligent and fraudulent misrepresentations against the Debtors and other parties, concerning the extent of her insurance coverage. Ms. Sieckmann believes that the Debtors are necessary parties to the St. Louis Action and may even have their own cause of action against their insurers. By this motion, Ms. Sieckmann asks the Bankruptcy Court to lift the automatic stay to proceed against the Debtors on the issues of negligent and fraudulent misrepresentation. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Wants to Ink Long-Term Extension of CBAs ------------------------------------------------------------- J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, relates that during the last several months, Interstate Bakeries Corporation and its debtor-affiliates have negotiated and entered into side agreements and extensions with respect to their Collective Bargaining Agreements on a frequent basis in the ordinary course of their business, all as permitted by the Court's Nov. 12, 2004 Order authorizing the Debtors to: (a) comply with existing grievance procedures under the CBAs; (b) engage in arbitration; (c) pay the fees and costs of the arbitrators; (d) liquidate union grievances; (e) implement existing agreements and enter into and implement ongoing agreements with unions in connection with CBAs; and (f) extend certain expired or expiring CBAs for up to one year. The Debtors, Mr. Ivester continues, have also made significant progress in their restructuring efforts. In particular, the Debtors have already begun an exhaustive review of each of their 10 profit centers. By the time the profit center review process is concluded, the Debtors hope to have achieved an operational structure on which they can base a long-term business plan, negotiate a plan of reorganization and, ultimately, emerge from Chapter 11. By this motion, the Debtors seek the Court's permission to enter into and implement agreements that extend the terms of related CBAs up to five years and may modify, amend, replace or otherwise change the terms and conditions of employment, including changing wages and benefits and changing work rules or operational guidelines. The Debtors do not seek to assume, modify or reject any CBAs or related agreements, or modify retiree benefits as of this time. The Debtors reserve all of their rights with respect to the final treatment of their CBAs in their Chapter 11 cases. Given the number of CBAs and their confidential nature, the Debtors believe that it is impractical to file individual motions seeking approval of each and every Long-term Extension. The Debtors seek to implement a process that: -- allows for efficient negotiation and approval of Long-term Extensions; -- makes clear that notwithstanding the postpetition negotiation of the Extensions, all parties' rights are preserved until a critical mass of agreements is reached and would warrant assumption; and -- preserves an appropriate level of confidentiality in respect of public disclosure of the terms of the CBAs while allowing the Debtors' stakeholders an appropriate opportunity to be apprised of and comment on the Long-term Extensions as they are finalized. Accordingly, the Debtors propose: (1) to establish notice procedures for approval of Long-term Extensions comparable to that currently in use under the Collective Bargaining Procedures Order; and (2) that certain provisions be required to be a part of any Long-term Extension. Notice Procedures The Debtor ask the Court to approve these Notice Procedures for the approval of Long-term Extensions: (a) The Debtors will provide the Notice Parties and each of the CBA bargaining unit 10 calendar days before implementing a Long-term Extension; (b) Any objection to a Long-term Extension must be delivered to the Debtors and the CBA bargaining unit within 10 calendar days of the Notice Party's receipt of the Notice; (c) If no objection is received within the 10-day period, the Long-term Extension will be deemed approved without any further action by the Debtors or the Court; (d) If a Notice Party objects before the expiration of the objection period, and the Debtors and the Notice Party are unable to resolve the objection, the Debtors will not be authorized to implement the Long-term Extension without further Court order, which the Debtors may seek in their sole discretion. Long-Term Extension Provisions The Debtors also seek the Court's authority to include term provisions that: (i) extend the term of the relevant CBA for up to five years, irrespective of whether the term of the CBA has previously expired by its terms; (ii) establish new or revised rates for wages, salaries, commissions and benefits of all kinds which may include reductions of current rates and establishing controls on the inflation of these rates; (iii) modify existing work rules or operational guidelines, including establishing work rules or operational guidelines related to the profit center restructurings and their future operations; (iv) provide for a commitment by the Debtors to assume the CBA as amended by the Long-term Extension in connection with a plan of reorganization in the event that all of the various CBA bargaining units of a particular union have agreed to Long-term Extensions; and (v) provide for a commitment by the Debtors to seek approval in connection with a plan of reorganization of a program whereby a portion of the reorganized Debtors' profits over a certain level would be used to reimburse union members for the economic value of concessions given by them as a part of the Long-term Extension. "[T]hese procedures strike the desired balance of providing the Debtors and the Unions with sufficient flexibility to address applicable circumstances while giving key parties-in-interest notice and an opportunity to object to any Long-term Extensions," Mr. Ivester maintains. "Moreover, the aforementioned process protects the confidentiality of the sensitive commercial information likely to be included in the Long-term Extensions." Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Names Richard Seban as Chief Mktg. Officer --------------------------------------------------------------- Richard C. Seban, a veteran executive in the consumer packaged goods field, with 30 years experience in sales, marketing and new product development, has been named chief marketing officer at Interstate Bakeries Corporation. The appointment comes at a time when IBC is reinvigorating product development and reenergizing sales and marketing by placing a premium on speed, focus and innovation. Most recently, Mr. Seban was president and chief operating officer of High Liner Foods, Inc. (TSX: HLF), a Nova Scotia-based processor and marketer of superior frozen seafood and pasta products. From 1983 to 1995, he held several positions at Sara Lee Bakery, including serving as vice president of customer marketing. From 1995 to 2000, Mr. Seban was vice president of consumer products at Rich Seapak Corporation, where he managed sales, marketing and customer service functions for the company's warehouse clubs and consumer products divisions. Earlier in his career, he held positions at the Campbell Soup Company and Henri's Food Products. Jacques Roizen, a director with Alvarez & Marsal who has been serving as interim chief marketing officer at IBC, will move into the position of executive vice president of marketing. "Rich Seban has an excellent sales and marketing background, a superb reputation and strong relationships in the retail and wholesale trade," said Tony Alvarez, chief executive officer of IBC. "IBC's future depends on building a strong marketing platform that ensures that our products resonate in the marketplace, with both retailers and consumers alike. Rich's depth of experience will enable us to continue to build a solid platform for long-term growth and success." While at High Liner Foods, Mr. Seban, who had full responsibility for the U.S. division, led the company into new strategic business channels and successfully launched major new products. At Sara Lee, he had a significant impact - restaging the core product line, creating and executing a new advertising campaign, introducing new products and re-engineering the sales, pricing and promotion systems. IBC recently has been embarking on a major effort to optimize its powerful brands and reconnect the company with market trends, executing a number of significant marketing, sales and development initiatives over the past seven months alone. In July, IBC re-launched its iconic Wonder(R) brand, the top selling brand of bread in the United States. Leveraging robust R&D capabilities, the company introduced Wonder(R) White Bread Fans 100% Whole Grain, the first bread designed specifically for people who love the taste and texture of white bread. IBC also rolled out Wonder(R) Kids, an enriched white bread, and re- launched existing Wonder(R) SKUs under, Wonder Classic(R) and Wonder(R) Classic Sandwich. In addition, the company mounted a national television and magazine advertising campaign to capitalize and build on the success of Baker's Inn(TM), its brand of super premium bread. With outstanding consumer feedback and strong sales, Baker's Inn(TM) was named a top 10 "brand to watch" by Information Resources and the best new product of the year at FMI in 2004. In the sweet snack division, IBC established promotional partnerships with organizations including Warner Bros., launching limited-edition Chocolicious Wonka Cakes in connection with the premier of Charlie and the Chocolate Factory. The partnership, which is the first of several planned for the next few years, comes on the heels of the highly successful promotion of green creme-filled Hostess(R) Twinkies(R) in connection with the DVD release of Shrek 2 last November. Other major initiatives included redesigning packaging for the entire Hostess(R) line, fusing the brand's traditional colors with new graphic elements and product photography to create a new contemporary feel, and mounting a major promotional and public relations campaign in connection with Twinkies' 75th anniversary. Again taking advantage of the company's strength in R&D, IBC also has plans underway to roll out new products under the Hostess(R) brand in select markets over the next several months. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) ISTAR FINANCIAL: CEO Adopts New Rule 10b5-1 Stock Trading Plan -------------------------------------------------------------- iStar Financial Inc. (NYSE: SFI) disclosed that Jay Sugarman, chairman and chief executive officer, has adopted a new stock trading plan to sell a portion of his company stock over time as part of a strategy for asset diversification and liquidity. The trading plan was adopted in accordance with guidelines specified by the Securities and Exchange Commission's Rule 10b5-1 under the Securities Exchange Act of 1934. Rule 10b5-1 allows corporate officers and directors to adopt written, pre-arranged stock trading plans when they do not have material, non- public information. Using these plans, insiders can gradually diversify their investment portfolios, can spread stock trades out over an extended period of time to reduce any market impact and can avoid concerns about whether they had material, non-public information when they sold their stock. Under this plan, Mr. Sugarman may sell up to 480,000 shares, subject to the satisfaction of minimum price conditions and other contingencies. Sales under the plan may commence in September 2005 and will end in July 2007. The plan contemplates sales of up to 12,000 shares during each of the first six calendar months of the plan, and up to 24,000 shares during each of the remaining calendar months of the plan. Any shares not sold during a particular month will be added to the number of shares available for sale in subsequent months. The 480,000 shares available for sale under the plan represent approximately 13.4% of the total number of shares held by Mr. Sugarman, including shares subject to currently exercisable stock options. If Mr. Sugarman completes all the planned sales of shares under his Rule 10b5-1 Plan, he would beneficially own approximately 3.1 million shares of iStar Financial's outstanding stock including exercisable stock options. In accordance with Mr. Sugarman's trading plan, the sales will occur from time to time, and will be under the direction of Mr. Sugarman's broker. The transactions under his plan will commence no earlier than Sept. 12, 2005, and will be disclosed publicly through Form 144 and Form 4 filings with the Securities and Exchange Commission. iStar Financial -- http://www.istarfinancial.com/-- is the leading publicly traded finance company focused on the commercial real estate industry. The Company provides custom-tailored financing to high-end private and corporate owners of real estate nationwide, including senior and junior mortgage debt, senior and mezzanine corporate capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust, seeks to deliver a strong dividend and superior risk-adjusted returns on equity to shareholders by providing the highest quality financing solutions to its customers. * * * As reported in the Troubled Company Reporter on June 24, 2005, Fitch Ratings has revised iStar Financial Inc.'s Rating Outlook to Positive from Stable. Fitch also affirmed: -- Senior Unsecured Debt 'BBB-'; -- Preferred Stock 'BB'. iStar's rating strengths are centered on its high-quality portfolio of triple-net credit tenant leases and first mortgages. As of March 31, 2005, nearly 50% of the base rents in the CTL portfolio were from investment grade tenants, while the overall portfolio was 95.2% leased and had a remaining average lease term of 11.5 years. In addition, the weighted average loan-to-value of the company's mortgage portfolio continues to decline and was at 66.0% as of March 31, 2005. These characteristics substantially mitigate many concerns related to high property appraisals in the current commercial real estate market. J.P. MORGAN: Moody's Places Low-B Ratings on Nine Cert. Classes --------------------------------------------------------------- Moody's Investors Service upgraded the ratings of two classes and affirmed the ratings of seventeen classes of J.P. Morgan Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2002-C2 as follows: * Class A-1, $186,763,481, Fixed, affirmed at Aaa * Class A-2, $606,587,000, Fixed, affirmed at Aaa * Class X-1, Notional, affirmed at Aaa * Class X-2, Notional, affirmed at Aaa * Class B, $41,256,000, WAC Cap, upgraded to Aa1 from Aa2 * Class C, $10,314,000, WAC Cap, upgraded to Aa2 from Aa3 * Class D, $28,363,000, WAC Cap, affirmed at A2 * Class E, $14,182,000, WAC, affirmed at A3 * Class F, $19,339,000, WAC, affirmed at Baa2 * Class G, $12,892,000, WAC, affirmed at Baa3 * Class H, $15,471,000, WAC Cap, affirmed at Ba1 * Class J, $11,603,000, WAC Cap, affirmed at Ba2 * Class K, $3,868,000, WAC Cap, affirmed at Ba3 * Class L, $7,736,000, WAC Cap, affirmed at B1 * Class M, $3,867,000, WAC Cap, affirmed at B2 * Class N, $5,157,000, WAC Cap, affirmed at B3 * Class SP-1, $5,337,032, Fixed, affirmed at Ba1 * Class SP-2, $8,139,264, Fixed, affirmed at Ba2 * Class SP-3, $5,482,125, Fixed, affirmed at Ba3 As of the August 12, 2005 distribution date, the transaction's aggregate balance has decreased by approximately 4.6% to $1.0 billion from $1.1 billion at securitization. The Certificates are collateralized by 108 mortgage loans. The loans range in size from less than 1.0% to 11.7% of the pool, with the top ten loans representing 44.1% of the pool. The pool consists of four shadow rated loans, representing 25.4% of the pool, and a conduit component, representing 74.6% of the pool. Two loans, representing 2.2% of the pool, have defeased and are collateralized by U.S. Government securities. One loan has been liquidated from the pool resulting in a realized loss of approximately $775,000. There are no loans currently in special servicing. Twenty-two loans, representing 24.9% of the pool, are on the master servicer's watchlist. Moody's was provided with partial or full year 2004 operating results for 95.3% of the performing loans. Moody's loan to value ratio for the conduit component is 87.1%, compared to 89.8% at securitization. Based on Moody's analysis, 3.6% of the conduit pool has a LTV greater than 100.0% compared to 0.0% at securitization. The upgrade of Classes B and C is due to stable overall pool performance and increased subordination levels. The largest shadow rated loan is the Simon Portfolio II Loan ($115.5 million - 11.7%), which is secured by portions of two regional malls totaling 1.9 million square feet and a 494,000 square foot power center. The collateral securing the loan totals 1.0 million square feet. The portfolio includes: -- Century III Mall (Pittsburg, Pennsylvania; 64.0% allocated balance; 559,000 square feet); -- Longview Mall (Longview, Texas; 24.1%; 207,800 square feet); and -- Highland Lakes Shopping Center (Orlando, Florida; 11.9%; 281,000 square feet). The portfolio is 79.6% occupied as of March 2005, compared to 86.0% at securitization. In-line tenant sales have declined to $261.00 per square foot for calendar year 2004 from $287.00 per square foot in calendar year 2001. The loan sponsor is the Simon Property Group (Moody's preferred stock rating Baa3; on review for possible upgrade), a publicly traded REIT. The portfolio is also encumbered by three subordinate loans totaling $19.0 million, which secure Classes SP-1, SP-2 and SP-3. Moody's current shadow rating on the senior loan is Baa3, the same as at securitization. The second shadow rated loan is the 75/101 Federal Street Loan ($96.0 million - 9.8%), which is secured by an 812,000 square foot office property located in the financial district of Boston, Massachusetts. The property is approximately 78.7% leased, compared to 95.0% at securitization. The decline in occupancy is largely due to the loss of two tenants at lease expiration which occupied a combined 21.6% of the property at securitization. The property's largest tenants are Edwards and Angell (8.7% NRA; March 2008 expiration) and Sherin and Lodgen, LLC (5.0% NRA; July 2014 expiration). Property performance has been impacted by a decline in the Boston office market. Market rents have declined by approximately 15.0% since securitization. The loan sponsors are Equity Office Properties (Moody's preferred stock rating Baa3; stable outlook) and General Motors Employees Pension Trust. Moody's current shadow rating is Ba1, compared to Aa3 at securitization. The third shadow rated loan is the 600 Fifth Avenue Loan ($24.0 million - 2.4%), which is secured by a leased fee interest in a land parcel located on the northwest corner of Fifth Avenue and 48th Street in New York City. The parcel is improved with a 354,000 square foot office building that is part of the Rockefeller Center Complex. Moody's current shadow rating is Aaa, the same as at securitization. The fourth shadow rated loan is the U-Haul Portfolio Loan ($14.9 million - 1.5%), which is secured by five self storage facilities located in California (2), Florida (2) and South Dakota. The portfolio is 80.1% occupied, compared to 88.6% at securitization. Despite the decline in occupancy the portfolio's net cash flow has been stable since securitization. Moody's current shadow rating is Baa1, the same as at securitization. The top three conduit loans represent 11.0% of the outstanding pool balance. The largest conduit loan is the ARC Portfolio A Loan ($44.4 million - 4.5%), which is secured by 11 manufactured housing communities containing 2,222 pads. The communities are located in Texas (5), Colorado (3), California, Kansas and Illinois. The portfolio is 82.8% occupied, compared to 95.5% at securitization. Despite the drop in occupancy, the portfolio's net cash flow has been stable since securitization. The loan sponsor is Affordable Residential Communities, a major owner of manufactured housing communities. Moody's LTV is 85.6%, compared to 88.1% at securitization. The second largest conduit loan is the Long Island Industrial Portfolio II Loan ($38.2 million - 3.9%), which is secured by a portfolio of seven industrial properties located in Long Island, New York. The portfolio totals 859,000 square feet, with properties ranging in size from 57,700 to 241,000 square feet. The portfolio is 91.4% occupied, compared to 97.9% at securitization. Major tenants include: -- Air Techniques (12.1% NRA; September 2008 expiration); -- J.C. Penney (11.6% NRA; July 2011 expiration); and -- Ultimate Precision Metal (7.6% NRA; September 2006 expiration). Moody's LTV is 99.7%, compared to 92.6% at securitization. The third largest conduit loan is the Cameo Apartments Loan ($25.5 million - 2.6%), which is secured by a 102-unit multifamily property located in New York City. The property was constructed in 2001 and is 100.0% occupied, the same as at securitization. Moody's LTV is 88.5%, compared to 97.0% at securitization. The pool's collateral is a mix of: * retail (29.5%), * multifamily (25.3%), * industrial and self storage (16.9%), * office (15.5%), * manufactured housing (7.3%), * ground lease (2.4%), * U.S. Government securities (2.2%), and * other (0.9%). The collateral properties are located in 31 states. The highest state concentrations are: * Massachusetts (11.3%), * New York (11.2%), * Texas (10.6%), * Illinois (9.9%), and * Florida (9.1%). All of the loans are fixed rate. JOHN Q. HAMMONS: JQH Finance to Buy 8-7/8% First Mortgage Notes --------------------------------------------------------------- JQH Finance, LLC, is commencing an offer to purchase for cash any and all of the outstanding $499 million principal amount of Series B 8-7/8% First Mortgage Notes due 2012 issued by John Q. Hammons Hotels, L.P. and John Q. Hammons Hotels Finance Corporation III, affiliates of John Q. Hammons Hotels, Inc., in connection with the pending merger between an affiliate and John Q. Hammons Hotels, Inc. JQH Finance is also soliciting consents from the holders of the notes to approve certain amendments to the indenture under which the notes were issued. The tender offer is contingent on, among other things: -- the receipt of consents necessary to approve such amendments to the indenture; -- at least a majority of the notes being validly tendered and not withdrawn; -- the consummation of the pending merger; -- the availability of funds necessary to complete the tender offer; and -- other conditions described in the Offer to Purchase and Consent Solicitation Statement and the Consent and Letter of Transmittal, each dated Aug. 26, 2005, and related documents. The total consideration to be paid for each $1,000 principal amount of notes tendered and accepted for payment will be determined on the second business day preceding the consent date of the tender offer, using the present value on the payment date of the sum of $1,044.38 plus interest that would be paid from the payment date through May 15, 2007. The present value will be determined using the yield to maturity of the 3.125% U.S. Treasury Note due May 15, 2007, plus a fixed spread of 50 basis points. The total consideration for each note tendered includes a consent payment of $30.00 per $1,000 principal amount of notes to holders who validly tender their notes and deliver their consents prior to 5:00 p.m., New York City time, on the consent date, which will be Sept. 9, 2005, unless extended. Holders who tender their notes after the consent date will not receive the consent payment. The tender offer will expire at 10:00 a.m., New York City time, on Sept. 26, 2005, unless extended or earlier terminated. The consents being solicited will eliminate substantially all of the restrictive covenants, the provision requiring the Issuers to make an offer to repurchase the notes upon a change of control, certain opinion delivery obligations in the event of a defeasance and certain events of default in the indenture governing the notes. JQH Finance, LLC currently intends to defease the remaining notes not purchased pursuant to the tender offer. Information regarding the pricing, tender and delivery procedures and conditions of the tender offer and consent solicitation is contained in the Offer to Purchase and Consent Solicitation Statement and the Consent and Letter of Transmittal. JQH Finance, LLC has received a financial commitment from Goldman Sachs Mortgage Company for the funds necessary to complete the tender offer. Goldman, Sachs & Co. has been appointed as dealer manager and solicitation agent for the tender offer and consent solicitation. Global Bondholder Services Corporation has been appointed the information agent and depositary for the tender offer and consent solicitation. The Offer to Purchase and Consent Solicitation Statement, the Consent and Letter of Transmittal and any additional documents related to the tender offer and consent solicitation may be obtained by contacting Global Bondholder Services Corporation, 65 Broadway -- Suite 74, New York, New York 10006, Attention: Corporate Actions (telephone: 866-873-6300). Information concerning the terms and conditions of the tender offer and consent solicitation may be obtained by contacting Goldman, Sachs & Co., Credit Liability Management Group, 85 Broad Street, 29th Floor, New York, New York, 10004 (telephone: 800-828- 3182). John Q. Hammons Hotels, Inc. -- http://www.jqh.com/-- is a leading independent owner and manager of affordable upscale, full service hotels located primarily in key secondary markets. The Company owns 46 hotels located in 20 states, containing 11,370 guest rooms or suites, and manages 14 additional hotels located in seven states containing 3,158 guest rooms or suites. The majority of these 60 hotels operate under the Embassy Suites, Holiday Inn and Marriott trade names. Most of the hotels are located near a state capitol, university, convention center, corporate headquarters, office park or other stable demand generator. * * * As reported in the Troubled Company Reporter on May 27, 2005, Standard & Poor's Ratings Services ratings on John Q. Hammons Hotels L.P. (JQH LP), including the 'B' corporate credit rating, remain on CreditWatch with developing implications, where they were placed on Oct. 18, 2004. This follows the announcement today by JQH Inc. that a special committee approved a transaction between principal stockholder John Q. Hammons and an investor group. The purchase price for JQH Inc.'s Class A common shares was reiterated at $24 a share. JQH Inc. has not yet publicly disclosed all details of the transaction, such as the participants in the investor group and what the final capital structure will be. JQH LP is a partnership whose sole general partner is JQH Inc., a publicly traded company, which exercised control over all partnership decisions. Mr. John Q. Hammons, the majority shareholder of JQH Inc. holds about 77% of the voting shares. In resolving the CreditWatch listing, Standard & Poor's will monitor developments associated with the ongoing transaction, including whether the $499 million in outstanding 8.875% first mortgage notes due 2012, which were jointly issued by JQH LP and John Q. Hammons Hotels Finance Corporation III, will remain outstanding. The CreditWatch listing will be resolved when details of the transaction are fully determined. KAISER ALUMINUM: Wants Underwriters Settlement Pact Approved ------------------------------------------------------------ In September 1988, Kaiser Aluminum & Chemical Corporation instituted an insurance coverage action against certain of the underwriters and members at Lloyd's London, styled "Kaiser Aluminum & Chemical Corp. v. Mended & Mount, et al.," Case No. 897055, in the Superior Court of California for the Country of San Francisco. The coverage at issue in the Ships Coverage Action spans from 1945 to 1959 and involved 14 policies. In the Ships Coverage Action, KACC sought a declaratory judgment that certain Underwriters are obliged to cover asbestos-related bodily injury claims asserted against KACC relating to ships built by, or shipyards owned and operated by, KACC. The Ship Coverage Action also sought damages for: * breach of contract; * breach of the covenant of good faith and fair dealings; * violations of the applicable Insurance Code; * conspiracy to violate the applicable Insurance Code; and * tortious inducement to breach contract and injunctive relief. KACC and the Underwriters subsequently entered into a tolling agreement staying the prosecution of the lawsuit. The tolling agreement is still in effect, and the Underwriters have not been dismissed from the Ships Coverage Action. In May 2000, KACC instituted an insurance coverage action against certain insurers, including the Underwriters, styled "Kaiser Aluminum & Chemical Corporation v. Certain Underwriters at Lloyds, London," Case No. 31241 in the Superior Court of California for the County of San Francisco. Involving more than 300 insurance policies, KACC sought a declaratory judgment that the Insurers are obligated to cover the asbestos-related bodily injury products liability claims that have been asserted against KACC. In addition, the Products Coverage Action sought damages for breach of contract and breach of the covenant of good faith and fair dealing against several of the Insurers. Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, tells the Court that the Products Coverage Action, if successful, would establish KACC's rights, and the Insurers' obligations, with respect to the Asbestos Products Claims and would allow KACC to recover its costs in connection with the defense and settlement of the Asbestos Products Claims from the Insurers. Furthermore, KACC has also sued more limited number of insurers, including certain Underwriters, on premises claims in a companion action, styled "Kaiser Aluminum & Chemical Corp. v. Certain Underwriters at Lloyds, London," Case No. 322710, which is also pending in San Francisco Superior Court. In general, Ms. Newmarch explains, a product claim is a "claim for injury resulting from a product manufactured or sold by KACC," while a premises claim is a "claim for injury resulting from exposure to an allegedly hazardous product or condition at a facility owned and operated by KACC." The Underwriters each severally subscribe as an insurer on certain London Market Insurance Policies, including 59 policies providing excess insurance coverage to KACC from 1945 to 1986. Ms. Newmarch notes that certain of Underwriters had already made payments on certain Asbestos Products Claims and Asbestos Ship Claims. Following extensive discussions, KACC and Underwriters have reached a settlement resolving all claims against Underwriters with respect to the subject policies, including coverage for Channeled Personal Injury Claims pursuant to the Debtors' Plan of Reorganization, as well as other present and future liabilities, except for certain potential future claims under Aviation Products Policies. The salient terms of the Underwriters Settlement Agreement are: (1) Underwriters will pay $137 million into a settlement account, which will be established pursuant to a Settlement Account Agreement. (2) On the trigger date, the Settlement Fund will be transferred to the Insurance Escrow Account established pursuant to the Court's December 29, 2004, Order. Upon the transfer of the Settlement Fund to the Insurance Escrow Account, legal and equitable title to the Settlement Fund will pass irrevocably to the Insurance Escrow Agent to be distributed pursuant to the Plan. (3) KACC will release all of its rights under the Subject Policies and to dismiss Underwriters from the Products Coverage Action, the Premise Coverage Action, and the Ships Coverage Action. (4) The Settlement Agreement encompasses all claims that might be covered by the Subject Policies and constitutes a policy buy-out of Underwriters respective participation shares in those policies, except for the Aviation Products Policies as to which KACC retains certain rights. (5) The Settlement Agreement contains certain rights of termination, including if Asbestos Legislation were to be enacted into law by December 31, 2005. Ms. Newmarch asserts that the effect of the Settlement Agreement is to: (a) eliminate KACC's continuing costs of prosecuting the Products Coverage Action and Premises Coverage Action against Underwriters; (b) eliminate uncertainty regarding future payments by the Underwriters; and (c) secure the payment of a total fixed amount from Underwriters without further delay and costs to KACC. Accordingly, the Debtors ask the Court to approve the Underwriters Settlement Agreement pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 76; Bankruptcy Creditors' Service, Inc., 215/945-7000) KEY3MEDIA GROUP: Has Until Sept. 30 to Object to Claims ------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended, until Sept. 30, 2005, the period within which Key3Media Group, Inc., its debtor-affiliates or the Creditor Representative appointed under Key3Media's confirmed chapter 11 plan can object to proofs of claims. As previously reported in the Troubled Company Reporter, the Reorganized Debtors have substantially completed the review and reconciliation of approximately 380 claims filed against their estates. The extension will give the Debtors more time to review and reconcile remaining claims that are potentially objectionable. Headquartered in Los Angeles, California, Key3Media Group, Inc., produces, manages and promotes a portfolio of trade shows, conferences and other events for the information technology industry. The Company and its debtor-affiliates filed for chapter 11 protection on Feb. 3, 2003 (Bankr. D. Del. Case No. 03-10323). Christina M. Houston, Esq., at Richards, Layton & Finger, P.A., and David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman, LLP, represent the Debtor. When the Debtors filed for protection from their creditors, they listed $241,202,000 in total assets and $441,033,000 in total liabilities. The Court confirmed the Debtors' First Amended Joint Plan of Reorganization on June 4, 2003, and the Plan took effect on June 20, 2003. KMART CORP: Court Nixes McHugh's Move to Reopen Discharge Trial --------------------------------------------------------------- As reported in the Troubled Company Reporter on July 13, 2005, Katherine McHugh asked Judge Sonderby to reopen the proceedings regarding her discharged claim -- based on the fact that she timely filed her Claim, which preserved her rights and placed Kmart on notice of the Action. Ms. McHugh also sought an extension of time or a stay in the Supreme Court of the State of New York to allow the Bankruptcy Court to rule on her request to reopen the discharge proceedings. Ms. McHugh sustained injuries when she slipped and fell in a Kmart store at 33 West State St., in Binghamton, New York. Ms. McHugh filed Claim No. 35011 with the U.S. Bankruptcy Court for the Northern District of Illinois and a complaint in the Supreme Court of the State of New York, County of Broome. Kmart Corporation asserted that Ms. McHugh's claims were barred, having been disallowed by the Bankruptcy Court. Kmart sought dismissal of Ms. McHugh's underlying action upon the discharge of the matter in bankruptcy, for Ms. McHugh's failure to submit a questionnaire. Mary Jane Murphy, Esq., at the Law Office of Ronald R. Benjamin, in Binghamton, New York, points out that Kmart was notified of the events from which Ms. McHugh's action arose from the outset. Ms. McHugh filled out an incident report at the scene of the accident, and communication began immediately between Ms. McHugh and Kmart's claims adjuster. * * * As negotiated by Katherine McHugh and Kmart Corporation, Judge Sonderby vacates the order expunging Claim No. 35011. The Court's resolution is without prejudice to Kmart's right to object to the Claim. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) KPMG LLP: Paying $456 Million Over Fraudulent Tax Shelters ---------------------------------------------------------- According to published reports, KPMG LLP agrees to pay a $456 million penalty at the end of the Internal Revenue Service's probe of its tax shelter called Bond Linked Issue Premium Structure. The government concluded that the accounting firm's BLIP tax shelter product is fraudulent. The agreement also called for the Firm's acknowledgment of wrongdoing. The move will save KPMG from a criminal indictment and from suffering the fate of the now defunct accounting giant, Arthur Andersen. However, former partners at the firm are expected to be indicted on criminal charges, possibly this week, the New York Times reports. The Firm's acknowledgment of wrongdoing will bolster the state prosecutors' case against former KPMG partners and others involved in the scam. The prosecutors are expected to build a case against the former partners' misrepresentations in connection with selling the tax shelters. Reports also say that although KPMG conceded that some of its conduct in promoting two other tax shelters -- known as Foreign Leveraged Investment Program, and Offshore Portfolio Investment Strategy -- was fraudulent, the transactions themselves were not done in bad faith. Robert S. Bennett, Esq., at Skadden Arps Slate Meagher & Flom, represents KPMG. The Department of Justice has been investigating certain tax services that KPMG offered from 1996 to 2002. This is part of a larger tax shelter investigation into the role of accounting firms, law firms, large banks and taxpayers who participated in the development, promotion and implementation of tax shelters. On July 9, 2002, the Justice Department, on behalf of the Internal Revenue Service, filed a lawsuit in the U.S. District Court for the District of Columbia (Dist. D.C. Case No. 1:02-mc-00295) against KPMG LLP. In that the proceeding, the Government asked the court to compel the public accounting firm to disclose to the IRS information about all tax shelters it marketed since 1998. On Sept. 7, 2004, the DOJ and KPMG advised Judge Hogan that the accounting firm had produced all of the documents sought by the IRS. Robert S. Bennett, Esq., and Kenneth W. Gideon, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, and John M. Bray, Esq., at King & Spaulding LLP, represent KPMG in this civil proceeding. KPMG LLP is a global network of professional services firms providing Audit, Tax and Advisory services. It operates in 148 countries and have around 6,500 partners, 70,000 client service professionals, and 17,000 administration and support staff working in member firms around the world. MARIE COLLARO: Case Summary & 3 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Marie A. Collaro 7 Hadley Drive Smithtown, New York 11787 Bankruptcy Case No.: 05-85949 Chapter 11 Petition Date: August 29, 2005 Court: Eastern District of New York (Central Islip) Debtor's Counsel: Edward Zinker, Esq. 278 East Main Street P.O. Box 866 Smithtown, New York 11787-0866 Tel: (631) 265-2133 Total Assets: $1,969,000 Total Debts: $1,045,996 Debtor's 3 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ MBNA America Credit Card $14,711 P.O. Box 15026 Wilmigton, DE 19850-5026 Discover Financial Credit Card $13,242 P.O. Box 15316 Wilmington, DE 19850 Chase Platinum Visa Cash Advances $12,404 P.O. Box 15650 Wilmington, DE 19886-5650 MARKWEST ENERGY: Taps Ehrhardt Keefe to Provide Internal Audit -------------------------------------------------------------- MarkWest Energy Partners, LP (Amex: MWE) entered into a service agreement with Ehrhardt, Keefe, Steiner & Hottman, PC, Certified Public Accountants and Consultants to provide internal audit services. Under the terms of the agreement, EKS&H will provide these services along with other accounting and consultation services on an as needed basis and will be compensated for actual time and expenses. "EKS&H will provide another key resource in our ongoing efforts to strengthen our accounting, controls and financial reporting processes," said Frank Semple, President and Chief Executive Officer. "I am also pleased to announce the addition of Richard Ostberg to our senior management team. Richard, as the Vice President of Compliance, will manage the EKS&H engagement and also be responsible for our Sarbanes-Oxley 404 compliance program. He and his team will also provide key support for our back office integration project and corporate development due diligence processes. "Richard comes to us with a very strong technical background in accounting, auditing and compliance developed in his former positions including those with Black Hills Corporation where he spent four years, most recently as Vice President and Controller of Black Hills Energy, the company's non-regulated energy operations." Prior to Black Hills, Mr. Ostberg spent four years with Pacific Minerals, Inc, the operator of the Bridger Coal mine and spent eight years with Deloitte & Touche in their audit practice, including two years consulting from his national office assignment in Washington DC. "These enhancements to our accounting, control and compliance capabilities reinforce our continued focus and commitment to rapidly improve the accuracy and efficiency of the financial reporting required by the SEC and expected by our shareholders," said Mr. Semple. "We are intent on continuing to strengthen our organizational capabilities and implementing the changes required to ensure proper accounting and financial reporting. As one example, we are deep in the process of an intensive search for a new chief accounting officer. As we continue to grow our business it is essential that our accounting and financial reporting functions receive a high level of focus and support and this has become an overarching priority for our ongoing business." MarkWest Energy Partners, L.P. is a publicly traded master limited partnership with a solid core of midstream assets and a growing core of gas transmission assets. It is the largest processor of natural gas in the Northeast and is the largest gas gatherer of natural gas in the prolific Carthage field in east Texas. It also has a growing number of other gas gathering and intrastate gas transmission assets in the Southwest, primarily in Texas and Oklahoma. * * * As reported in the Troubled Company Reporter on May 11, 2005, Standard & Poor's Rating Services placed its 'B+' corporate credit rating on MarkWest Energy Partners L.P. on CreditWatch with negative implications after the company's announcement that its Form 10-K filing would be further delayed and that it would be required to restate its 2002 through 2004 financial statements. MWE has not filed its Form 10-K on time as a consequence of identifying material weaknesses under Section 404 of the Sarbanes- Oxley Act, primarily involving reporting processes in its Southwest business unit. In addition, both MWE and MarkWest Hydrocarbon Inc., the majority interest holder in MWE's general partner, have now determined that they must file restatements for 2002 through 2004 to reflect compensation expense for the sale of interests in MWE's general partner. "The CreditWatch listing reflects concern about repeated and protracted delays in the company's Form 10-K filing, uncertainty about the magnitude of impending restatements, the possibility that further delays could reduce the partnership's liquidity, and the risk of material weaknesses being greater in scope than expected," said Standard & Poor's credit analyst Plana Lee. MWE has obtained covenant waivers from its banks under its revolving credit facilities until June 30, 2005. The company was previously granted a waiver through April 30, 2005, which it was unable to meet. MWE has also received an extension to regain compliance from the American Stock Exchange until May 31, 2005, having missed its previous May 2 deadline. MCI INC: Inks $1.3 Mil. Three-Year Service Pact with AMF Bowling ---------------------------------------------------------------- MCI, Inc. (NASDAQ: MCIP) and AMF Bowling, the world's largest owner and operator of bowling centers, reported a new three-year $1.275 million agreement for MCI to deploy and manage AMF's global communications network. MCI will connect more than 350 bowling centers and 12,000 employees around the nation to enhance AMF's business operations and better serve customers. Utilizing MCI's fully-managed, cost-effective IP VPN Broadband Service, AMF will modernize its existing satellite communications system to increase reliability, performance and security at each location, while reducing the costs associated with network equipment investment, maintenance and management. MCI's Internet Protocol (IP) services also will support AMF's new Online Reservation System, a Web-based tool under development that will enable bowlers to make lane reservations in real-time for bowling parties and other special events via the AMF Web site. "MCI is providing a comprehensive IP-based solution that will help us take our business to the next level as we move more self- service customer functions to the Web," said Rohana Meade, vice president of Information Technology for AMF. "As a valued communications and IT partner, we know we can rely on MCI to run our network and keep our business rolling 365 days a year." In addition to using MCI's high-speed, always-on IP VPN Broadband Services, AMF is further safeguarding its network with MCI's NetSec Managed Firewall Service. As a result, AMF can increase the security and productivity of its employees and customers while eliminating the complexities associated with managing advanced enterprise-wide security solutions. "With MCI's Managed Network Services, large enterprise customers, like AMF, can leverage their existing resources and enjoy flexible, reliable and secure IP-based solutions that will meet their rapidly evolving business needs," said Steve Young, senior vice president, MCI Commercial Markets. "MCI, through the power of our IP capabilities, is providing solutions that enable AMF to better focus on its core business operations." Today, MCI manages nearly 3,100 customer networks in 149 countries, including overseeing 22,000-plus non-MCI connections from more than 60 network service providers globally. About AMF Bowling Worldwide, Inc. AMF Bowling Worldwide Inc. is the world's largest owner and operator of bowling centers. Over the past 60 years, AMF has been proud of its contributions to the sport of bowling as well as its place in delivering the traditional bowling experience to millions of enthusiasts each year. For additional information, visit https://www.amf.com/ or call 804-730-4000. 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. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on March 1, 2005, Standard & Poor's Ratings Services placed its ratings on Denver, Co.-based diversified telecommunications carrier Qwest Communications International, Inc., and subsidiaries, including the 'BB-' corporate credit rating, on CreditWatch with negative implications. This follows the company's counter bid to Verizon Communications, Inc., for long-distance carrier MCI, Inc., for $3 billion in cash and $5 billion in stock. MCI also has about $6 billion of debt outstanding. The ratings on MCI, including the 'B+' corporate credit rating, remain on CreditWatch with positive implications, where they were placed Feb. 14, 2005 following Verizon's announced agreement to acquire the company. The positive CreditWatch listing for the MCI ratings reflects the company's potential acquisition by either Verizon or Qwest, both of which are more creditworthy entities. However, the positive CreditWatch listing of the 'B+' rating on MCI's senior unsecured debt assumes no change to the current MCI corporate and capital structure under an assumed acquisition by Qwest, such that this debt would become structurally junior to other material obligations. "The negative CreditWatch listing of the Qwest ratings reflects the higher business risk at MCI if its bid is ultimately successful," explained Standard & Poor's credit analyst Catherine Cosentino. As a long-distance carrier, MCI is facing ongoing stiff competition from other carriers, especially AT&T Corp. Moreover, MCI is considered to be competitively disadvantaged relative to AT&T in terms of its materially smaller presence in the enterprise segment and fewer local points of presence -- POPs. The latter, in particular, results in higher access costs relative to AT&T. Qwest also faces the challenge of integrating and strengthening MCI's operations while improving its own underperforming, net free cash flow negative long-distance business. These issues overshadow the positive aspects of Qwest's incumbent local exchange carrier business that were encompassed in the former developing outlook. As reported in the Troubled Company Reporter on Feb. 22, 2005, Moody's Investors Service has placed the long-term ratings of MCI, Inc., on review for possible upgrade based on Verizon's plan to acquire MCI for about $8.9 billion in cash, stock and assumed debt. These MCI ratings were placed on review for possible upgrade: * B2 Senior Implied * B2 Senior Unsecured Rating * B3 Issuer rating Moody's also affirmed MCI's speculative grade liquidity rating at SGL-1, as near term, MCI's liquidity profile is unchanged. As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. As reported in the Troubled Company Reporter on Feb. 16, 2005, Fitch Ratings has placed the 'A+' rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative, and the 'B' senior unsecured debt rating of MCI, Inc., on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for approximately $4.8 billion in common stock and $488 million in cash. MERIDIAN AUTOMOTIVE: Court Approves De Minimis Asset Sale Protocol ------------------------------------------------------------------ Meridian Automotive Systems, Inc., and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to implement these procedures for the sale of any De Minimis Asset with a value of up to but not more than $1,000,000: (1) The Debtors will be authorized to consummate any Sale without further Court order; (2) Any Sale will be free and clear of all Liens with the Liens attaching only to the Net Proceeds to the extent of their validity and priority immediately prior to the Sale; (3) At least 10 days prior to the closing of any Sale, the Debtors will notify: (i) the U.S. Trustee; (ii) Credit Suisse, Cayman Island Branch, as administrative agent under the DIP Facility; (iii) the Official Committee of Unsecured Creditors; (iv) the administrative agent for the prepetition lenders under the First Lien Credit Agreement; (v) the administrative agent for the prepetition lenders under the Second Lien Credit Agreement; (vi) U.S. Bank National Association, as collateral agent for the subordinated noteholders; and (vii) any creditor who has a Lien on a De Minimis Asset to be sold; (4) The Sale Notice will, in reasonable detail: (i) identify the De Minimis Assets being sold; (ii) identify the purchaser; (iii) provide the purchase price; and (iv) provide the significant terms of the sale agreement; (5) A Sale Notice Party may object to a Sale within 10 days of the date of the Sale Notice; (6) If a Sale Notice Party objects to a Sale, the Sale will not proceed except upon (x) resolution of the objection by the parties in question or (y) further Court order after a hearing; and (7) If there are no objections, the Debtors may consummate a Sale without further notice or a hearing. As previously reported in the Troubled Company Reporter on Aug. 3, 2005, the Debtors also propose that the De Minimis Value of a De Minimis Asset will be the dollar amount, including the amount of any assumed liabilities, of the estimated selling price for each De Minimis Asset, provided that parties-in-interest will in good faith refrain from structuring transactions solely to cause a Sale to fall within or outside of the Sale Procedures. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000). MOLECULAR DIAGNOSTICS: June 30 Balance Sheet Upside-Down by $13MM ----------------------------------------------------------------- Molecular Diagnostics, Inc., fka Ampersand Medical Corporation, reported its financial results for the quarter ending June 30, 2005, in a Form 10-Q delivered to the Securities and Exchange Commission. Revenues for the three months ended June 30, 2005 decreased $72,000, or 71.3%, to $29,000 from revenues of $101,000 for the same period in 2004. This decrease was the result of a reduction in revenue from the sale of the Company's slide-based installed systems and AcCell instruments. The net loss for the three-month period ended June 30, 2005, before preferred dividends totaled $791,000, compared with $1,621,000 for the same period in 2004, a decrease of $830,000 or 51.2%. The decrease was primarily the result of reduced operating capacity due to capital and liquidity constraints as well as a reduction in interest expense. In addition, cumulative dividends on the Company's outstanding Series B, Series C, Series D and Series E convertible preferred stock totaled $228,000 for the quarter ended June 30, 2005, compared with $258,000 for the same period in 2004. The net loss applicable to common stockholders for the three months ended June 30, 2005 was $1,019,000 on 111,463,812 weighted average common shares outstanding. This compared with the net loss applicable to common stockholders for the three-month period ended June 30, 2004 of $1,879,000, on 73,839,577 weighted average common shares outstanding. Liquidity and Capital Resources The Company experienced severe liquidity problems during the six months ended June 30, 2005. As a result, the Company was forced to cut staff and reduce its operations to a minimum level. Officers refrained from drawing salaries during portions of the first and second quarters of 2005 in order to reduce demands on the Company's limited cash position. The Company was able to raise funds through the sale of common stock during the quarter, although the proceeds of the common stock offerings were used to satisfy certain obligations coming due as well as for the payment of a limited amount of current operational expenses. At June 30, 2005, the Company had $1,000 cash on hand, a decrease of $10,000 over cash on hand at December 31, 2004 of $11,000. This cash position results from our loss from operations and our inability to raise sufficient new capital due to very unfavorable conditions in financing markets, both public and private, for small life sciences companies such as ours. The Company was unable to raise sufficient funds during the six months ended June 30, 2005, in order to maintain adequate cash reserves and to meet the ongoing operational needs of the business. The Company incurred $10,000 in capital expenditures during the first six months of 2005 versus capital expenditures of $198,000 for the first six months of 2004, a decrease of 94.9%. Capital expenditures are defined as disbursements for laboratory equipment, leasehold improvements, software, and furniture/fixtures with a purchase price in excess of $1,000 per item and useful life in excess of one year. MDI is striving to keep capital expenditures to a minimum due to capital and liquidity constraints, and the Company has no plans for material commitments for capital expenditures in the near-term. Going Concern Doubt The Company said its operations have been, and will continue to be, dependent upon management's ability to raise operating capital in the form of debt or equity. The Company has incurred significant operating losses since inception of the business. The Company expects that significant on-going operating expenditures will be necessary to successfully implement our business plan and develop, manufacture and market its products. The Company's managements says these circumstances raise substantial doubt about the Company's ability to continue as a going concern. Pointing to the company's substantial net losses from operations and limited financial resources, ALTSCHULER, MELVOIN AND GLASSER LLP, expressed similar doubts when it completed its review of the company's 2004 financials on April 13, 2005. Bankruptcy Warning During the six months ended June 30, 2005, the Company was unable to raise sufficient adequate capital or generate profitable sales revenues, and was forced to curtail its product development and other activities. If the Company continues to be unable to obtain adequate financing, it will be forced to cease operations and may seek bankruptcy protection. Molecular Diagnostics, Inc., formerly Ampersand Medical Corporation, is a biomolecular diagnostics company focused on the design, development and commercialization of cost-effective screening systems to assist in the early detection of cancer. MDI has currently curtailed its operations focused on the design, development and marketing of its InPath(TM) System and related image analysis systems, and expects to resume such operations only when additional capital has been obtained by the Company. The InPath System and related products are intended to detect cancer and cancer-related diseases, and may be used in a laboratory, clinic or doctor's office. As of June 30, 2005, Molecular Diagnostics' balance sheet showed a $12,998,000 equity deficit, compared to a $12,123,000 deficit at Dec. 31, 2004. NATIONAL ENERGY: Court Clarifies Plan Distribution Definition ------------------------------------------------------------- On May 13, 2005, the U.S. Bankruptcy Court for the District of Maryland confirmed the Second Amended Plan of Liquidation for USGen New England, Inc., as modified. USGen received about $1,148,000 from the sales of its hydro and fossil assets. The liquidation analysis under the USGen Plan indicates that as of June 2005, the total allowed claims in the USGen Chapter 11 case, plus postpetition interest, equal $1,385,000. Only $20 million of that amount was for administrative and priority claims. Thus, the vast majority of funds to be distributed under the USGen Plan are from the proceeds of the USGen Sales. Matthew A. Feldman, Esq., at Willkie Farr & Gallagher LLP, in New York, relates that in accordance with the USGen Plan, USGen distributed the $72 million portion of the $485 million Bear Swamp Claim assigned to National Energy & Gas Transmission, Inc., and NEGT Generating Company, LLC, NEGT Energy Company, LLC, National Energy Holding Corporation and NEGT Enterprises, Inc., each a wholly owned subsidiary of NEGT, as Shareholder pursuant to the USGen Plan. USGen gave the $72 million directly to NEGT Generating Company, LLC, the direct owner of USGen's issued and outstanding stock. Pursuant to Section 5.04 of the USGen Plan, USGen will distribute to the Shareholder the remainder, if any, of all amounts in the USGen estate after payment of allowed claims, plus postpetition interest, and all necessary and sufficient funds have been reserved. Ultimately all sums received from USGen, less any amounts required to satisfy or reserve for obligations owing by each Intermediate Subsidiary, will be distributed through the Intermediate Subsidiary to NEG. Additional Sale Distributions The Modified Third Amended Plan of Reorganization filed by NEG defines Additional Sale Distributions as: "distributions out of net proceeds of certain sales of assets or equity interests of the Reorganized Debtor or certain of its subsidiaries other than the Sale Transactions, which sales occur within one year of the Effective Date." To the extent a NEG subsidiary sells assets prior to October 29, 2005, and all or a portion of the net proceeds of that sale are given to NEG, any proceeds received are to be distributed to holders of Allowed Class 3 Claims in accordance with the provisions of the NEG Plan. While NEG believes that the definition of Additional Sale Distributions clearly would encompass proceeds it received through the sales of USGen assets, the definition of "Additional Sale Distributions," as well as the NEG Plan generally, is otherwise silent respecting distributions from a subsidiary that are primarily comprised of sale proceeds but which may, because of the use of funds and the fungibility of cash, include funds from other sources. As a result, NEG asked Judge Mannes to clarify that the definition of Additional Sale Distributions includes the proceeds it received from distributions made under the USGen Plan. Mr. Feldman assures the Court that the clarification requested would not change any terms of the NEG Plan. "Clarifying that the definition of Additional Sale Distributions includes the proceeds received from distributions made under the USGen Plan will facilitate Distributions to holders of Allowed Class 3 Claims in accordance with the provisions and intent of the NEGT Plan," Mr. Feldman tells the Court. * * * Judge Mannes granted the Debtors' request for clarification and declares that the definition of Additional Sale Distributions includes proceeds received from distributions made under USGen New England's plan of reorganization by NEG's intermediate subsidiaries. Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company and its debtor-affiliates filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher, and Paul M. Nussbaum, Esq., and Martin T. Fletcher, Esq., at Whiteford, Taylor & Preston, L.L.P., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and that plan took effect on Oct. 29, 2004. The Hon. Paul Mannes confirmed NEGT Energy Trading Holdings Corporation, NEGT Energy Trading - Gas Corporation, NEGT ET Investments Corporation, NEGT Energy Trading - Power, L.P., Energy Services Ventures, Inc., and Quantum Ventures' First Amended Plan of Liquidation on Apr. 19, 2005. The Plan took effect on May 2, 2005. (PG&E National Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 215/945-7000) NEW ENGLAND COLLEGE: Moody's Revises Ratings Outlook to Positive ---------------------------------------------------------------- Moody's Investors Service has affirmed the B1 rating on New England College's $5.2 million of Series 1999 bonds. The rating outlook has been revised to positive from stable. The Series 1999 bonds were issued through the New Hampshire Higher Education and Health Facilities Authority. Strengths: * improved financial controls and discipline, lead by new President and Chief Financial Officer, should continue recent trend of balanced operating performance (1.8% operating margin in 2004; average operating margin -3.0%) leading to sufficient cash flow to meet debt service obligations (11.7% operating cash flow margin). * recruitment and marketing strategies appear successful as enrollment expands rapidly (1,298 full-time equivalent students), especially in graduate programs provided off-site (graduate enrollment up 165% since 2002). Challenges: * small revenue ($19.8 million) and financial resource (total financial resources of $2.9 million) base leaves College vulnerable to unexpected shifts in demand or financial performance. * cash and endowment funds ($1.5 million) are pledged as collateral to bank line of credit, weakening position of long-term bond holders, and broad liquidity measures are still very thin. * market remains vulnerable, with much of recent enrollment growth experienced in competitive graduate training on location at corporations throughout state. Recent Developments/Results The College hired a new President as of May 2005 after a prior president resigned. The new President is reportedly focused on continuing to expand the College's market position with a healthy focus on financial performance. The College has continued to see expanding enrollment, with undergraduate FTE reaching 900 students in fall 2004 and potentially over 950 in fall 2005. New England College's market remains somewhat challenging as competitors include very low priced public institutions including area community colleges. Graduate enrollment has risen rapidly as the College expands its program offerings, especially through delivering courses on location at area corporations. Graduate enrollment accounted for nearly 400 full time equivalents during FY2005, or nearly a third of total credits. These graduate programs are run in cohort models and do not necessarily coincide with typical semesters. Although the programs are clearly beneficial to the College's reputation and financial performance, they are highly competitive in nature and require significant flexibility and ability to respond quickly to a changing environment. After several years of significant deficits, culminating in a 12 percent deficit in FY2002, New England College has generated several years of positive operating performance, which reportedly continued in FY2005. As tuition revenue continues to grow rapidly, Moody's believes the College should be able to maintain solid cash flow and debt service coverage. Ability to maintain this degree of improved cash flow to invest in capital and moderately enhance liquidity will be an important factor for improvement in credit quality. NEC's liquidity profile remains a significant concern as the College has essentially no expendable financial resources and less than $6 million of cash and investments. The College's total debt of $7.3 million is comprised primarily of the fixed rate Series 1999 bonds. NEC also carries several small capital lease and HUD loans. The College's $1.5 million line of credit is collateralized by endowment funds (nearly all of the College's cash and investments), essentially providing the Bank a senior lien on the College's liquidity relative to long-term bond holders. The balance on the line as of June 30, 2005 was $408,000. Outlook Moody's positive outlook reflects our expectation that the College will continue to generate essentially balanced operations through growing enrollment and tuition revenue, but may be challenged to significantly expand liquidity. What could change the rating - Up -- Liquidity growth; -- improved cash flow from operations; and -- continued enrollment growth. What could change the rating - Down -- Additional debt without growth in financial resources; -- operating deficits; and -- substantial declines in enrollment. Key Data and Ratios Fiscal Year 2004 Financial Data Fall 2004 Enrollment Data Total Enrollment: 1,298 full-time equivalent students Selectivity: 87.2% Matriculation: 19.2% Total Financial Resources: $2.9 million Total Debt: $7.3 million Expendable Resources to Debt: -0.07x Cash and Investments to Debt: 0.81x Three-Year Average Operating Margin: -3.0% Operating Cash Flow Margin: 11.7% NORTHWEST AIRLINES: AMFA Strike Doesn't Have Large Scale Support ---------------------------------------------------------------- Northwest Airlines Corporation scored a point last week when mechanics from Aircraft Mechanics Fraternal Association failed to get other unions on board in their strike against the airline. Mechanics and other maintenance workers at Northwest Airlines walked off the job on August 20 after labor talks failed to produce a deal to help the carrier cut costs and avert possible bankruptcy. The union said the airline's best proposal would have cut more than half the AMFA jobs and imposed hefty pay cuts for remaining workers. The labor group said its final counteroffer would have met the cost-cutting target and preserved jobs. The Company's pilots have agreed to reductions, accepting a 15% pay cut worth $300 million when combined with cuts for salaried employees. The Company needs $1.1 billion in labor concessions. The Company is still negotiating with ground workers and flight attendants. AMFA's strike also failed to ground the Company's planes as the Company hired replacements. No new talks are scheduled between Northwest and AMFA. The mechanics averaged about $70,000 a year in pay, and cleaners and custodians made around $40,000. The Aircraft Mechanics Fraternal Association -- http://www.amfanatl.org/-- represents more aircraft technicians than any other union. AMFA's craft union represents aircraft maintenance technicians and related support personnel at Alaska Airlines, ATA, Horizon Air, Independence Airlines, Mesaba Airlines, Northwest Airlines, Southwest Airlines and United Airlines. AMFA's credo is "Safety in the air begins with quality maintenance on the ground." About Northwest Airlines Northwest Airlines Corp. is the world's fifth largest airline with hubs in Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,600 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. At June 30, 2005, Northwest Airlines' balance sheet showed a $3,752,000,000 stockholders' deficit, compared to a $3,087,000,000 deficit at Dec. 31, 2004. * * * As reported in the Troubled Company Reporter on June 23, 2005, Moody's Investors Service downgraded the debt ratings of Northwest Airlines Corporation and its primary operating subsidiary, Northwest Airlines, Inc. The Corporate Family Rating (previously called the Senior Implied rating) was lowered to Caa1 from B2, and the Senior Unsecured rating was downgraded to Caa3 from Caa1. Ratings assigned to Enhanced Equipment Trust Certificates were downgraded. In addition, the company's Speculative Grade Liquidity Rating was downgraded to SGL-3 from SGL-2. The rating actions complete a review of Northwest's ratings initiated April 8, 2005. Moody's said the outlook is negative. PACIFIC GAS: Asks Court to Enforce Confirmation Order on 3 Suits ---------------------------------------------------------------- Pacific Gas and Electric Company asks the U.S. Bankruptcy Court for the Northern District of California to enforce its Confirmation Order by compelling three plaintiffs to promptly dismiss their lawsuit against Pacific Gas, with prejudice, or face sanctions: Plaintiff Lawsuit --------- ------- Johnson, Sinclair Sinclair Johnson, Jr. v. Asbestos Defendants San Francisco Superior Court Case No. 427818 Lerda, Lawrence Lawrence Lerda v. Asbestos Defendants San Francisco Superior Court Case No. 438389 Slack, Charles Charles Slack v. Asbestos Defendants San Francisco Superior Court Case No. 420271 Gary M. Kaplan, Esq., at Howard Rice Nemerovski Canady Falk & Rabkin, in San Francisco, California, argues that the Lawsuits are subject to both the discharge and the injunction imposed by Pacific Gas' Plan of Reorganization and the Confirmation Order. The Lawsuits are based on claims that arose prior to the Confirmation Date, Mr. Kaplan points out. The Plaintiffs either failed to timely file proofs of claim or their claims have been disallowed by a Court order. Pursuant to the Confirmation Order, as of the Effective Date of the Plan, Pacific Gas was discharged from all claims or debts that arose prior to the Confirmation Date, except as otherwise expressly provided in the Plan. Headquartered in San Francisco, California, Pacific Gas and Electric Company -- http://www.pge.com/-- a wholly owned subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest combination natural gas and electric utilities in the United States. The Company filed for Chapter 11 protection on April 6, 2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes, Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the Debtors in their restructuring efforts. On June 30, 2001, the Company listed $23,216,000,000 in assets and $22,152,000,000 in debts. Pacific Gas and Electric emerged from chapter 11 protection on April 12, 2004, paying all creditors 100 cents-on- the-dollar plus post-petition interest. (Pacific Gas Bankruptcy News, Issue No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) PANOLAM INDUSTRIES: Moody's Junks Proposed $150M Sr. Sub. Notes --------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Panolam Industries International, Inc., proposed $155 million senior secured credit facility and a Caa1 rating to its proposed $150 million senior subordinate notes. The assigned ratings reflect the company's high leverage, slow sales growth, and uncertainty surrounding raw material costs. The ratings also consider the benefits derived from the company's extensive geographical presence, strong brand recognition, and low customer concentration. The ratings outlook is stable. Moody's has assigned these ratings: * $20 million senior secured revolving credit facility, due 2010, rated B2; * $135 million senior secured term loan, due 2012, rated B2; * $150 million senior subordinate notes, due 2013, rated Caa1; * Speculative Grade Liquidity Rating of SGL-3; * Corporate Family Rating, assigned B2. Moody's has withdrawn these ratings: * $20 million first lien senior secured revolving credit facility, due 2010, rated B1; * $130 million senior secured term loan B, due 2010, rated B1; * $75 million second lien term loan C, due 2011, rated B3. The ratings outlook is stable. Panolam's recapitalization is being initiated by a proposed acquisition of the company by Genstar Capital Partners and The Sterling Group. The sponsors have agreed to acquire Panolam for $345 million or approximately 6.6 times adjusted EBITDA for the LTM period ended June 30, 2005. The ratings are constrained by Panolam's high leverage ratios, low free cash flow (FCF) generation, and slow sales growth. The company's total debt to EBITDA after the financing is expected to increase to approximately 5.3 times from 3.8 times for the year ended 2004. Total debt to revenues after the acquisition will rise to nearly 106% from 75% for the year ended 2004. Based on the current construction activity, Moody's anticipates Panolam's 2006 FCF to total debt to be around 5%; thus the improvement in the company's credit metrics is anticipated to be gradual. The company's revenue is generated from the sale of decorative overlay products used in a wide variety of indoor surfacing applications. Sales to the commercial market represent 80% of Panolam's revenues while the residential market only represents 20% of revenues. Anticipated revenue growth over the next couple of years is expected to be in the low single digits while free cash flow will probably only grow modestly faster. The company's ability to de-lever is anticipated to highly correlate with corporate construction spending. The ratings are positively impacted by the company's competitive advantage of having the broadest product line in the North American decorative surfacing industry and also by having the most widely recognized brand name in the North American thermally fused melamine (TFM) panels market. The vast product array enables the company to cross-sell its products and provide a complete solution for its customers' decorative overlay and decorative panel needs. The company's wide North American distribution network consisting of over 200 distributors allows the company to provide its customers with a shorter lead time than its competitors and lower the company's shipping costs. The combination of having an expansive product breadth and a large distribution network has thus far helped the company to reduce the impact of foreign competition on the company's mid to high end product line. The ratings also benefit from the company's strong operating and gross margin. Moody's expects Panolam's gross margin and operating margin for 2005 to be similar to recent years'. Panolam's speculative grade liquidity rating of SGL-3 indicates expected adequate liquidity for the coming 12-month period. The rating reflects the anticipation that during the next 12-month period the company's internal cash generation is adequate to cover basic cash requirements including the company's seasonal working capital needs. Additionally, the SGL-3 rating takes into consideration the company's small revolver size relative to the company's size and leverage. Moody's notes that the company does not expect to draw on its revolver over the next 12 months. The rating also considers the company to have adequate room under its covenants; however, Moody's believes some of the covenants to be moderately tight. The company's covenants are expected to comprise of a net leverage ratio set initially at 6 times with step-down provisions to 3.5 times and a cash interest coverage ratio set initially at 1.7 times with step-up provisions to 2.5 times. The company's net leverage ratio and cash interest coverage ratio for the third quarter of 2005 are projected to be approximately 5.3 times and 2.2 times, respectively. The company is not believed to have significant unencumbered assets that could be sold. The outlook and or ratings may improve if the company is able to improve its cash flow generation to total debt to over 8% on an annual basis and if its EBITDA coverage of interest was over 3 times. The outlook may deteriorate if FCF to total debt was to decline to under 3% while the rating would likely decline if FCF to total debt was under 1%. The $155 million senior secured credit facilities are comprised of a $20 million revolver (unused at closing) and a $135 million term loan. The credit facilities are unconditionally guaranteed by holdings and by each existing and subsequently acquired or organized domestic subsidiary. The credit facilities are secured by substantially all the assets of holdings, the borrower and each domestic subsidiary guarantor and 65% of the voting stock in the company's Canadian subsidiary. Moody's notes that Panolam's Canadian subsidiary represented approximately 32% of the company's 2004 net sales. The $150 million senior subordinated notes are guaranteed, jointly and severally, on a senior subordinated basis by the existing and future domestic subsidiaries. The notes and the guarantees rank junior to all of the company's and the company's guarantors' existing and future senior indebtedness, and are effectively junior to the indebtedness and other liabilities of Panolam's Canadian subsidiary that is not guaranteeing the notes. Headquartered in Shelton, Connecticut, Panolam is an integrated manufacturer of thermally fused melamine panels and high pressure laminates. Revenue for the year ended 2004 was approximately $281 million. PROLOGIC MANAGEMENT: Equity Deficit Tops $2 Million at June 30 -------------------------------------------------------------- Prologic Management Systems Inc. reported its financial results for the quarter ending June 30, 2005, in a Form 10-Q delivered to the Securities and Exchange Commission. General and administrative expenses for the quarter ended June 30, 2005, were $35,984 as compared to $60,850 for the same period of the previous year. The decrease in these expenses is attributable to the reduction in efforts related to the accounting and audit expenses related to the foreclosure that occurred in the prior year. Operating loss for the quarter ended June 30, 2005, was $35,984, as compared to an operating loss of $60,850 for the same period of the previous year. Due to the insolvency of the Company, no interest expense was accrued for the current quarter ended June 30, 2005, or for the same period of the previous year. The loss from continued operations for the quarter ended June 30, 2005, was $35,984, as compared to $60,850 for the same period of the prior fiscal year. The Company had no income tax expense for the first quarters of fiscal 2005 and 2004. As of June 30, 2005, the Company had Federal net operating loss carry forwards of approximately $8,870,000. The utilization of net operating loss carry forwards will be limited pursuant to the applicable provisions of the Internal Revenue Code and Treasury regulations. Net loss for the quarter ended June 30, 2005 was $35,984, or a loss of approximately $0.005 per share, compared to a loss of $60,850, or a loss of approximately $0.01 per share, for the same period of the previous year. The decrease in net loss was attributable to the reduction in efforts related to the accounting and audit expenses related to the foreclosure that occurred in the prior year. Liquidity and Capital Resources At June 30, 2005, the Company had a working capital deficit of approximately $2,120,000 versus a deficit of approximately $2,084,000 at March 31, 2005. As a result of the working capital deficit at March 31, 2005 -- the Company's fiscal year end, the Company's independent certified public accountants -- Epstein, Weber & Conover, PLC -- have expressed substantial doubt about the Company's ability to continue as a going concern. The total cash balance at June 30, 2005 was $62 Cash used by continuing operations for the quarter ended June 30, 2005 was approximately $280 compared to cash used by continuing operations of $1,000 in the same period of the previous year. Historically the Company has been unable to generate sufficient internal cash flows to support operations, and has been dependent upon outside capital sources to supplement cash flow. New equity investments, lines of credit and other borrowings, and credit granted by its suppliers have enabled the Company to sustain operations over the past several years. In August 1998, the Company had failed to meet the "continued listing criteria" established by NASDAQ and the Company's securities were delisted from the NASDAQ Small Cap Market. The Company said that the subsequent lack of shareholder liquidity in its securities has materially adversely affected its ability to attract equity capital. Additionally, the lack of capital resources has precluded the Company from effectively executing its strategic business plan. The ability to raise capital and maintain credit sources is critical to the Company's continued viability. At June 30, 2005, the Company had current debt obligations, or debt that will become due within twelve months, of $1,411,757. The Company will not be able to service or repay any of this debt. As a result, the Company will need to renegotiate the terms of these obligations, either to: -- convert it to equity; or -- any other means to eliminate the debt to allow the Company to attract additional capital. The Company continues to review its strategic alternatives, including raising capital through debt or equity financing in conjunction with the conversion of the existing debt. A full-text copy of Prologic's Quarterly Report is available for free at http://ResearchArchives.com/t/s?11b Headquartered in Tucson, Arizona, Prologic Management Systems Inc. -- http://www.prologic.com-- provides a full range of hardware and commercial software solutions, with a focus on a UNIX-based products, as well as Microsoft NT. The products and services provided by the Company include system integration, software development, proprietary software products and related services. As of June 30, 2005, Prologic Management's equity deficit widened to $2,138,783, from a $2,084,461 deficit at March 31, 2005. PROVIDENT PACIFIC: MKA Can Foreclose on Timber Ridge Townhomes -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of California, Santa Rosa Division, lifted the automatic stay in Provident Pacific Corporation's chapter 11 case at the behest of MKA Capital Group, Inc. The lender asked the Court to lift the automatic stay so that it can foreclose on its collateral. According to MKA, its collateral isn't adequately protected because the Debtor's liability insurance policy expired on July 27, 2005. Provident has no resources to replace it. In a hearing on July 28, the Court ordered the Debtor to provide MKA with proof of replacement liability insurance by Aug. 2. On Aug. 2, the Debtor delivered an Insurance Binder. MKA isn't satisfied with the binder because it doesn't insure the improvements on the property. The Collateral is the Timber Ridge Townhomes located at 39 Palisade Drive in Kirkwood, California. Headquartered in Belvedere, California, Provident Pacific Corporation, filed for chapter 11 protection on June 8, 2005 (Bankr. N.D. Calif. Case No. 05-11435). Michael H. Lewis, Esq., at Law Offices of Michael H. Lewis, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $39,545,023 and total liabilities of $28,495,982. PROXIM CORP: Wants Until December 31 to Decide on Unexpired Leases ------------------------------------------------------------------ Proxim Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend the period within which they can assume, assume and assign, or reject unexpired non-residential real property lease and sublease in Mountain View, California through and including Dec. 31, 2005. As reported in the Troubled Company Reporter on July 29, 2005, Terabeam Wireless completed its purchase of substantially all of the assets of Proxim Corporation, pursuant to an asset purchase agreement. The Debtors' non-residential real property leases were assumed and assigned to Terabeam except for two unexpired leases: a) a lease dated Aug. 28, 1992, between Vanni Business Park Partnership, as lessor and the Debtor as lessee; and b) sublease dated as of Aug. 23, 1999, between the Debtor as sublessor, and PlaceWare, Inc., as sublessee. Under the master lease, Proxim leased the premises from Vanni with its current rent and other obligations for approximately a total of $86,000 per month. The Debtors are substantially current on all obligations under the master lease except to the rent payment for August 2005, which has not been paid pending authority to use their cash collateral. Pursuant to the sublease, Proxim subleased the premises to PlaceWare. Proxim receives approximately $104,000 per month on account of the Sublease. Proxim will pay 50% of the premium received from PlaceWare on the sublease account to Vanni. Both master lease and sublease currently expire on March 31, 2006. The Debtors believe that an extension to decide on leases will allow them to evaluate and maximize the value of the unexpired leases. Headquartered in San Jose, California, Proxim Corporation -- http://www.proxim.com/-- designs and sells wireless networking equipment for Wi-Fi and broadband wireless networks. The Debtors provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. The Debtor along with its affiliates filed for chapter 11 protection on June 11, 2005 (Bankr. D. Del. Case No. 05-11639). When the Debtor filed for protection from its creditors, it listed $55,361,000 in assets and $101,807,000 in debts. PROXIM CORP: Committee Prepares to Challenge Warburg Pincus Claims ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of Proxim Corporation and its debtor-affiliates asks the U.S. Bankruptcy Court for the District of Delaware for authority to commence an adversary proceeding against Warburg Pincus Private Equity VIII, L.P., and its affiliates. The Warburg Group asserts a $17,334,246 claim against the Debtors. The debt is secured by an interest in substantially all of Proxim's assets, including a $16.6 million cash on hand realized from the sale of the Company's assets to Terabeam Wireless in July. The Committee wants to challenge the validity, extent and priority of the Warburg entities' claims in the Debtors' cases. The Committee also wants to recharacterize, reclassify and subordinate Warburg's alleged claims. Lawyers at Drinker Biddle & Reath LLP represent the Committee. Headquartered in San Jose, California, Proxim Corporation -- http://www.proxim.com/-- designs and sells wireless networking equipment for Wi-Fi and broadband wireless networks. The company is providing its enterprise and service provider customers with wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. The Company and three of its affiliates filed for chapter 11 protection on June 11, 2005 (Bankr. Del. Case No. 05-11639). Laura Davis Jones, Esq., and Tobias S. Keller, Esq., at Pachulski, Stang, Ziehl, Young, represent the Debtors in their restructuring efforts. As of Apr. 1, 2005, the Debtors reported $55,361,000 in total assets and $101,807,000 in total debts. PROXIM CORP: Secures Interim Okay to Use $573,500 Cash Collateral ----------------------------------------------------------------- The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware gave Proxim Corporation and its debtor- affiliates interim approval to use $573,000 cash collateral securing repayment of debt obligations to Warburg Pincus Private Equity VIII, L.P., as agent for itself and a consortium of lenders, Moseley Associates, Inc., and Silicon Valley Bank. The Debtors can use cash collateral until September 6, 2005. The Debtors require immediate access to encumbered cash to fund their wind-down efforts and remaining business affairs. The Warburg Group asserts a $17,334,246 claim against the Debtors. The debt is secured by an interest in substantially all of Proxim's assets, including a $16.6 million cash on hand realized from the sale of the Company's assets to Terabeam Wireless in July. The Debtors have outstanding secured obligations to Moseley and Silicon Valley for less than $100,000 each. To provide the lenders with adequate protection required under 11 U.S.C. Sec. 363 for any diminution in the value of their collateral, the Debtors will grant the Warburg Group, Moseley and Silicon Valley replacement liens to the same extent, validity and priority as the prepetition lien. The liens will be subject to carve-out expenses of at least $400,000. Headquartered in San Jose, California, Proxim Corporation -- http://www.proxim.com/-- designs and sells wireless networking equipment for Wi-Fi and broadband wireless networks. The Debtors provide wireless solutions for the mobile enterprise, security and surveillance, last mile access, voice and data backhaul, public hot spots, and metropolitan area networks. The Debtor along with its affiliates filed for chapter 11 protection on June 11, 2005 (Bankr. D. Del. Case No. 05-11639). When the Debtor filed for protection from its creditors, it listed $55,361,000 in assets and $101,807,000 in debts. QUEBECOR WORLD: Moody's Downgrades Senior Unsec. Rating to Ba2 -------------------------------------------------------------- Moody's Investors Service lowered the senior unsecured rating of Quebecor World Inc. to Ba2 from Baa3, and assigned a Corporate Family Rating of Ba2, concluding the review initiated in May 2005. The outlook is negative. The rating was lowered reflecting the effect of continuing difficult industry conditions on QWI's performance and credit metrics, coupled with Moody's expectation that debt is unlikely to reduce as previously anticipated. Despite an initially successful effort in 2004 by a new management team to improve operating performance, results in the first half of 2005 were weaker than expected by Moody's. Moody's anticipates that, in order to improve its competitive position in the longer term, QWI will incur further restructuring charges, which will limit debt reduction over a two year rating horizon. Despite higher reinvestment plans in the business, and increasing industry competition, management has recently decided to buy back its own shares. Moody's believes this reflects management's priority toward shareholders over creditors. The outlook is negative as Moody's expectations for QWI's financial metrics in 2007 are weak for the Ba2 rating. Moody's expects net debt to EBITDA (after Moody's standard adjustments) of approximately 4.2X, funds from operations to net debt of 15%, retained cash flow to net debt of 13%, EBITDA-Capex/interest of 2X, and free cash flow to net debt of 4-5%. QWI will need to outperform on Moody's expectations in order to retain a Ba2 rating, which might occur if the new printing presses result in improved operating results, or if management's ongoing restructuring produces a meaningful margin improvement. The rating will be considered for downgrade if management undertakes additional share buybacks or a significant acquisition or if operating results underperform due to a loss in revenues or shrinkage in QWI's margin, reflecting worsening industry conditions or inability to control costs. A rating upgrade is not considered likely over the next 18-24 months. The assigned Corporate Family Rating of Ba2 is constrained by: (1) global industry overcapacity, (2) high leverage and related credit metrics, (3) increasing capital expenditures which will limit debt reduction from free cash flow, (4) management focus on shareholder returns which limit debt reduction, (5) acquisition risk, and (6) poor liquidity. The rating is supported by: (1) QWI's position as one of the two largest commercial printers in the world, (2) geographic, industry and product diversity, (3) long-term contractual relationships with major print customers, and (4) a focus on cost-cutting to address poor industry demand, which produced improved results in 2004. Moody's assumes that QWI's top line will be relatively flat over the next few years, as industry pricing pressures continue. While management is very focused on both incremental as well as strategic operational improvements, Moody's assumes that the EBITDA margin (after Moody's standard adjustments and including restructuring costs) will remain in the 12-13% range demonstrated through the difficult first half of 2005. Although QWI's operating margin may benefit from the 22 new offset presses which will start arriving in North America in late 2005 and continuing through 2007, Moody's will not include such improvement in its expectations until there is tangible evidence to that effect. Moody's does expect, however, that QWI will likely incur future restructuring costs that will dampen margin improvement for the intermediate term. As QWI has announced a $330 million North American press modernization program, Moody's believes that the company may also choose to further increase capital expenditures to modernize its European press platform and address protracted profitability problems in that region. Moody's believes that the share buyback program now under way, in an amount of up to approximately US$140 million, demonstrates management's focus on returning cash to shareholders and supporting its share price. Moody's considers this to be detrimental to creditors, particularly given continuing industry pressures and the need for QWI to reinvest in order to remain competitive. Moody's believes that management is more focused on its strategic positioning within the industry and on its share price than improving credit metrics. Strategic repositioning currently involves capital expenditures for new presses, but Moody's also believes that QWI could choose to make future acquisitions in this very fragmented industry, as it has done frequently in the past. Ratings affected by this action: -- Quebecor World Inc. * Corporate Family Rating, Ba2 (assigned) * Senior Unsecured, rated Ba2 (lowered from Baa3) -- US$1 billion bank facility due November 2007 -- Quebecor World (USA) Inc. * Senior Subordinated, rated Ba3 (lowered from Ba1) * 6% due October 2007 US$113 million -- Quebecor World Capital Corporation * Senior Unsecured, rated Ba2 (lowered from Baa3) * 6.5% debentures due August 2007 * (puttable August 2004) US$3 million (a) 7.25% debentures due January 2007 US$150 million (b) 4.875% debentures due November 2008 US$200 million (c) 6.125% debentures due November 2013 US$397 million Quebecor World Inc. is one of the world's largest commercial printers, headquartered in Montreal, Quebec, Canada. QUEBECOR WORLD: Has Weak Liquidity, Moody's Says ------------------------------------------------ Moody's Investors Service assigned a speculative grade liquidity rating of SGL-4 to Quebecor World Inc. The liquidity rating was assigned in conjunction with the downgrade of QWI's long-term debt ratings to speculative grade (Corporate Family Rating of Ba2). Moody's says issuers rated SGL-4 possess weak liquidity. They rely on external sources of financing and the availability of that financing is, in Moody's opinion, highly uncertain. For the five quarters ending September 30, 2006, Moody's expects QWI will likely have cash sources that total about US$650 million compared to possible claims on cash of about US$880 million. Moody's believes this cash deficiency of approximately US$230 million represents poor liquidity. QWI's US$71 million cash balance at June 30, 2005 is not considered a source of liquidity as Moody's believes these funds are required for normal operating requirements or for use in QWI's captive insurance subsidiary. Moody's expects that QWI may generate about US$150 million of annual free cash flow in each of calendar 2005 and 2006. However, because of working capital inflows are likely to reverse to a use of cash in the second half of 2005, and because QWI typically generates 50% of its cash flow in the fourth quarter, Moody's believes QWI may not actually generate any free cash flow over the liquidity forecast period to September 30, 2006. At June 30, 2005, Moody's estimates that QWI had US$650 million of unused availability under its US$1 billion bank revolver, which is committed until November 2007. Against this sole source of liquidity, QWI will potentially use approximately US$880 million of cash: $260 million to fund debt maturities and $617 million to fund maturing accounts receivable securitization outstandings. Additionally, Moody's notes that QWI may have two contingent uses of cash and one contingent source, none of which are included in the liquidity analysis due to their uncertain nature. In June 2006, $160 million of preferred shares become retractable by the holders, and QWI can settle in shares or cash. Moody's believes that QWI intends to settle in cash, as they are currently buying back shares. However, Moody's believes that management is unlikely to use cash in June 2006 without being assured of their liquidity at least through September 2006. Moody's also expects that most or all of the proceeds from the sale of their Commercial division will be used to fund future share buybacks. While the sale is not assured prior to September 2006 neither are the share buybacks. Of the US$260 million in debt maturities, US$250 million is composed of one issue, which matures in March 2006. QWI operates three accounts receivable programs. The US$400 million outstanding in QWI's U.S. accounts receivable securitization program matures in September 2005 with a one-year term out option. The US$140 million outstanding in the European program matures in the next twelve months, unless renewed. Finally, the US$75 million outstanding in the Canadian program is cancelable at any time. The company's bank availability is subject to an EBITDA coverage ratio and a debt-to-capitalization ratio; however the specific levels of these ratios are not public. Moody's notes that the existence of any material adverse change clause would limit liquidity under adverse circumstances, which is typically when a company most needs it. Quebecor World Inc. is one of the world's largest commercial printers, with headquarters in Montreal, Quebec, Canada. RELIANCE GROUP: Committee Wants Court to OK Solicitation Protocol ----------------------------------------------------------------- As reported in the Troubled Company Reporter on Aug. 24, 2005, the Official Committee of Unsecured Creditors appointed in Reliance Group Holdings, Inc.'s chapter 11 proceedings filed a Plan of Reorganization for RGH and an accompanying Disclosure Statement explaining the Plan in the U.S. Bankruptcy Court for the Southern District of New York on Aug. 18, 2005. The Official Committee asks the U.S. Bankruptcy Court for the Southern District of New York to: a) approve solicitation and tabulation procedures to process votes to accept or reject the Plan of Reorganization for Reliance Group Holdings, Inc.; b) establish a record date to determine which Holders of Claims against RGH are entitled to receive Solicitation Materials and to vote on the Plan; c) establish a voting deadline; d) schedule and approve the form and manner of notice of the Confirmation Hearing; and e) establish a deadline for filing objections to confirmation of the Plan. The Creditors' Committee wants the Court to set the date on which an order approving the Disclosure Statement is entered as the Voting Record Date. "Setting a Voting Record Date will assist the Creditors' Committee and RGH's Voting Agent -- Bankruptcy Services, Inc. -- in preparing and distributing the Solicitation Materials," Arnold Gulkowitz, Esq., at Orrick, Herrington & Sutcliffe, in New York City, tells Judge Gonzalez. In addition, the Court should approve the Creditors' Committee's form of Ballots for voting on the Plan. Mr. Gulkowitz notes that the Ballots have been modified from established form to permit holders of Claims in Classes 3a, 3b and 3c to indicate whether they will opt-out of assigning certain claims in exchange for receiving additional distributions. Although the Ballots may not exactly mirror the official form, the modifications are necessary to efficiently implement the Plan. Solicitation Materials and Ballots The Committee wants permission to provide the Ballots only to parties entitled to vote on the Plan. Classes 1 and 2 are unimpaired and are deemed to accept the Plan. Classes 5 and 6 are impaired and are deemed to reject the Plan. Therefore, only Classes 3a, 3b, 3c and 4 should receive Ballots. The Solicitation Materials will be distributed by the Voting Agent to: -- the U.S. Trustee; -- RGH; -- the Securities and Exchange Commission; -- the Internal Revenue Service; and -- Claimholders entitled to vote on the Plan. Since the Creditors' Committee may not be able to determine the identity of all Beneficial Holders of Claims, the Committee will distribute the Solicitation Materials only to known Record Holders. Record Holders are obligated to distribute the Solicitation Materials to their Beneficial Holders within five days of receipt. RGH will reimburse Record Holders for any out- of-pocket expenses incurred in distributing the Solicitation Materials to Beneficial Holders. Ballots must be submitted to: Bankruptcy Services LLC 757 Third Avenue New York, NY 10017-2072 Attn: Reliance Group Holdings The Creditors' Committee will not provide the Disclosure Statement and Plan to Equity Holders. According to Mr. Gulkowitz, there is no reason to require distribution of these materials to Equity Holders who are not entitled to vote on the Plan. Impaired parties can acquire the documents on their own. Instead, the Creditors' Committee will send these parties a Non- Voting Notice. Notices Approximately 25 days before the Confirmation Objection Deadline, the Creditors' Committee will publish the Confirmation Hearing Notice in The Wall Street Journal (National Edition). This notification will satisfy the notice provisions of Rule 3017(d) of the Federal Rules of Bankruptcy Procedure, while eliminating substantial and needless expense to RGH's estate and minimizing the risk of confusion to parties unaffected by the Plan. Mr. Gulkowitz states that the Creditors' Committee is not responsible for Disclosure Statement Notices that are returned by the U.S. Postal Service as undeliverable. Amounts for Voting Purposes Claimholders in Classes 3a, 3b, 3c, and 4 are impaired and entitled to vote on the Plan. For voting purposes only, each holder of a Voting Claim will have an allowed claim in an amount equal to the lesser of: a) the amount of the Claim as set forth in the schedules of liabilities filed by RGH; or b) the amount of the Claim as set forth in a proof of claim. The procedures are subject to these exceptions: 1) If a Claim is contingent, unliquidated or disputed, it will be allowed temporarily for voting at $1; 2) Any Claim that has been estimated or allowed by the Court will be temporarily allowed in that amount; 3) If a Claim is listed in the Schedules as contingent, unliquidated or disputed without a timely filed proof of claim, the Claim should be temporarily disallowed for voting purposes; 4) If a Claim is not listed in the Schedules and a proof of claim is timely filed, the Claim should be temporarily allowed in the amount set forth in the proof of claim, for voting purposes only; and 5) If the Creditors' Committee, the Bank Committee, RGH or RFSC have objected to the Claim at least 10 days prior to the Voting Deadline, the Claim should be temporarily disallowed for voting purposes. Classes 3a, 3b and 3c Claimholders who do not check the "Opt-Out" box on their Ballot will be deemed to have agreed to the assignment of their D&O Litigation Claims and Creditor Litigation Claims to RGH on the Effective Date. The Confirmation Hearing The Creditors' Committee will request at the Disclosure Statement Hearing that the Court schedule the Confirmation Hearing seven days after the Voting Deadline. Notice of the Confirmation Hearing will be given to: a) the Office of the U.S. Trustee, b) counsel to RGH, c) counsel to the Official Unsecured Bank Committee, d) counsel to M. Diane Koken, Insurance Commissioner of Pennsylvania and Statutory Liquidator of Reliance Insurance Company, e) the Indenture Trustees for RGH's 9% Notes and 9.75% Notes, f) counsel to the Pension Benefit Guaranty Corporation, g) the Internal Revenue Service, h) the Securities Exchange Commission, i) the Office of the United States Attorney, and j) any other governmental agency as required and all parties that requested notices. The Creditors' Committee asks the Court to set 28 days after the Confirmation Hearing Notice is mailed as the last date for filing and serving Objections to confirmation of the Plan. Confirmation Objections should be delivered to: Counsel to the Creditors' Committee Orrick, Herrington & Sutcliffe 666 Fifth Avenue New York, New York 10103 Attn: Arnold Gulkowitz, Esq. Counsel to RGH Debevoise & Plimpton 919 Third Avenue New York, New York 10022 Attn: Steven R. Gross, Esq. Counsel to the Bank Committee White & Case 1155 Avenue of the Americas New York, New York 10036 Attn: Andrew P. DeNatale, Esq. Counsel to the Liquidator Blank Rome The Chrysler Building 405 Lexington Avenue New York, New York 10174 Attn: Michael Z. Brownstein, Esq. The Office of the U.S. Trustee 33 Whitehall Street, Suite 2100 New York, New York 10004 Attn: Mary Tom, Esq. Mr. Gulkowitz tells Judge Gonzalez that the Creditors' Committee will solicit votes on the Plan immediately upon approval of the Disclosure Statement. The Creditors' Committee will seek confirmation of the Plan once voting is concluded. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 78; Bankruptcy Creditors' Service, Inc., 215/945-7000) RHODE ISLAND: New Gas Plant Cues Fitch to Raise Single-B Rating --------------------------------------------------------------- Fitch assigns an underlying 'BBB' rating to approximately $26.2 million Providence, RI, special obligation tax increment refunding bonds series E and F. The bonds are scheduled for negotiation the week of Sept. 19 with Bank of America as underwriter. In addition, Fitch upgrades to 'BBB-' from 'B' and removes from Rating Watch Positive the underlying rating on $30.7 million outstanding special obligation bonds series A-D. Series E and F bond proceeds will refund all outstanding series A- D bonds and at closing, the 'BBB-' rating will be withdrawn. The bonds mature through 2016. The Rating Outlook is Stable. The upgrade to 'BBB-' on the outstanding series A-D bonds reflects Dominion Resources, Inc.'s acquisition of the 495-megawatt combined-cycle natural gas-fired Manchester Street Station located in the city of Providence, from which the tax revenues securing the bonds are generated. Dominion Resources purchased the plant in January of this year from bankrupt US Gen New England, Inc. Fitch rates the senior-unsecured debt of Dominion Resources, Inc. 'BBB+'; Stable Outlook. The 'BBB' rating on the series E and F bonds additionally reflects a covenant by the city (GO bonds rated 'A' by Fitch) to budget any required replenishment of the debt service reserve fund on the series E and F bonds. Payment of this obligation is subject to appropriation. The series E and F bonds are secured by net tax increment revenues of the property as well as the covenant to replenish the debt service reserve fund. Net tax increment is currently derived from a single taxpayer, the company, pursuant to an amended five-year tax stabilization agreement that expires in June 2008. While the amended agreement was entered into between the city and US Gen New England, the original agreement from 1992 states that its provisions will transfer with any transfer of ownership of the plant during the term covered by the agreement. The city continues to receive full and timely payment of revenues under the agreement, quarterly, totaling $6.6 million per year including the three payments made by the company in January and April and July of this year. Coverage of the $3.7 million maximum annual debt service from net tax increments is stable at 1.58 times (x), but subject to change, and possibly a decline, upon expiration of the agreement. A preliminary assessment indicates that the value of the plant would generate property taxes yielding about 1.27x. Additional security is generated from the fully funded debt service reserve fund. The MADS payment totals approximately 1% of the city's general fund budget, and the city has a history of appropriating like payments for another facility under a similar debt service reserve fund replenishment commitment. Fitch lowered the underlying rating to 'B' from 'BBB-' and placed the rating on Rating Watch Negative in July 2003 following the bankruptcy filing of the then current owner, US Gen New England Inc. Fitch later revised the Rating Watch to Positive when the company was identified by the bankruptcy court as the highest bidder for the plant, with a rating upgrade pending the closing of the sale of the plant. RISK MANAGEMENT: Wants Lease Decision Period Stretched to Nov. 4 ---------------------------------------------------------------- Risk Management Alternatives, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division, to extend, until Nov. 4, 2005, the period within which they can elect to assume, assume and assign, or reject 20 unexpired non-residential real property leases. The Debtors tell the Bankruptcy Court that they have been unable to sufficiently review the importance of these leases to their reorganization because they have focused their time on operating their businesses and negotiating a sale of substantially all of their assets to NCO Group, Inc. Matthew A. Salerno, Esq., at McDonald Hopkins Co., LPA, states that the leases are essential assets of the Debtors' estates and integral to the continued operation of their businesses in the face of an impending sale. Mr. Salerno explains that the extension will give the Debtors more time to make an intelligent decision as to which of these leases to assume or reject. The Debtors assure the Bankruptcy Court that the requested extension will not prejudice any of their lessors because they are current and will continue to pay all postpetition rent. A list of the Debtor's unexpired non-residential real property leases is available for free at: http://researcharchives.com/t/s?11c 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. S-TRAN: Court Okays DIP Loan & Cash Collateral Use Extension ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware authorized S-Tran Holdings, Inc., and its debtor-affiliates to obtain more funds from LaSalle Business Credit, LLC, through a secured post- petition financing facility. The Debtors can also continue accessing cash collateral securing repayment of debt obligations to LaSalle and American Capital. S-Tran Holdings has until Nov. 11 to use the lenders' encumbered fund and to obtain fresh capital from LaSalle. As previously reported, the Debtors owe LaSalle, under a senior secured credit facility: a) a term loan of approximately $4,100,000; b) a revolver with an outstanding balance of $4,200,000; and c) certain letters of credit issued in favor of Protective Insurance for $3,500,000. The Debtors also owe $7.5 million to American Capital Financial Services, Inc., as agent for American Capital Strategies, Ltd., and ACS Funding Trust I. Postpetition Financing On June 14, 2005, the Court gave the Debtors authority to obtain approximately $9 million in secured postpetition financing from LaSalle. At the same time, the Debtors were also given permission to use their lenders' cash collateral. The DIP loan is secured by interests in all of the Debtors' presently owned and after-acquired personal property and prepetition collateral. In addition, LaSalle was granted a superpriority administrative claim. To provide the lenders with adequate protection required under 11 U.S.C. Sec. 363 for any diminution in the value of their collateral, the Debtors grant LaSalle and American Capital replacement liens to the same extent, validity and priority as the prepetition lien. As previously reported, S-Tran recently concluded the sale of its personal property. The Court authorized S-Tran to pay the $8,780,000 net proceeds from the sale to LaSalle. Additional Financing The Debtors have reached an agreement with LaSalle and American Capital for the extension of the postpetition financing and the use of the cash collateral in accordance with a proposed weekly budget through Nov. 11: Week Ending ----------- Sept. 2 Sept. 9 Sept. 16 Sept. 23 Sept. 30 ------- ------- -------- -------- -------- Total Cash Receipts $175,000 $150,000 $160,000 $125,000 $120,000 Total Payroll $25,693 $25,693 $35,219 $25,094 $21,983 Total Disbursement $119,443 $98,443 $129,590 $33,094 $51,233 Oct. 7 Oct. 14 Oct. 21 Oct. 28 Nov. 4 Nov. 11 ------ ------- ------- ------- ------ -------- Total Cash $120,000 $170,000 $115,000 $115,000 $245,000 $100,000 Receipts Total Payroll $20,277 $27,862 $36,812 $13,079 $13,079 $70,400 Total Disbursement $32,027 $38,362 $48,812 $18,079 $23,579 $18,400 Headquartered in Cookeville, Tennessee, S-Tran Holdings, Inc., provides common carrier services and specialized in less-than- truckload shipments and also supplies overnight and second-day service to shippers in 11 states in the Southeast and Midwestern United States. The Company and its debtor-affiliates filed for chapter 11 protection on May 13, 2005 (Bankr. D. Del. Case No. 05-11391). Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $22,508,000 and total debts of $30,891,000. SAINT VINCENTS: Committee Wants Thelen Reid as Counsel ------------------------------------------------------ The Official Committee of Unsecured Creditors of Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates has selected Thelen Reid & Priest LLP as its counsel. According to the Committee, Thelen Reid's broad-based practice, which includes expertise in the areas of finance, litigation, tax, health care, real estate, as well as bankruptcy, will permit it to fully represent the creditors' interests in an efficient and effective manner. In addition to acting as primary spokesman for the Committee, Thelen Reid will also assist, advise and represent the Committee with respect to: (a) the administration of the Debtors' cases and the exercise of oversight with respect to the Debtors' affairs including all issues arising from or impacting the Debtors or the Committee; (b) the preparation on the Committee's behalf all necessary applications, motions, order, reports, and other legal papers; (c) appearances in the Bankruptcy Court to represent the Committee's interests; (d) the negotiation, formulation, drafting, and confirmation of any plan of reorganization or liquidation and related matters; (e) the exercise of oversight with respect to any transfer, pledge, conveyance, sale, or other liquidation of the Debtors' assets; (f) such investigation, if any, as the Committee may desire concerning, among other things, the assets, liabilities, financial condition, and operating issues concerning the Debtors that may be relevant; (g) such communication with the Committee's constituents and others, as the Committee may consider desirable in furtherance of its responsibilities; (h) negotiations regarding the Debtors' management; and (i) the performance of all the Committee's duties and powers under the Bankruptcy Code and the Bankruptcy Rules and the performance of other services that is in the interests of those represented by the Committee or as may be ordered by the Court. Martin G. Bunin, Esq., a partner at Thelen Reid informs the Court that the firm is willing to serve as counsel to the Committee and to receive compensation on an hourly basis. Its current hourly rates for attorneys and legal assistants are: Partner $330 - $685 Counsel $320 - $600 Associate $210 - $460 Paralegal $95 - $320 Thelen Reid is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, in that the firm: (a) is not a creditor, an equity security holder or an insider of the Debtors; (b) is not and has not been an investment banker for any outstanding security of the Debtors; (c) has not been, within three years before the Petition Date, an investment banker for a security of the Debtors, or an attorney for an investment banker in connection with an offer, sale, or issuance of a security of the Debtors; and (d) is not and was not, within two years before the Petition Date, a director, officer, or employee of the Debtors or of an investment banker. Thus, the Committee seeks the Court's permission to retain Thelen Reid, nunc pro tunc to July 18, 2005. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, represent the Debtors in their restructuring efforts. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) SAINT VINCENTS: Wants to Make $200,000 Due Diligence Payment ------------------------------------------------------------ Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York for authority to pay Due Diligence Fees totaling $200,000. The Debtors are currently negotiating with three potential lenders to obtain a final DIP funding, which would be larger and would replace the $100,000,000 HFG Healthco-4 LLC facility. Each Potential Lender has requested payment of certain due diligence and related fees totaling $200,000 to fund the process required to evaluate the benefits and risks of providing a loan commitment to the Debtors. Certain of the Potential Lenders have advised the Debtors that they will not conduct any further due diligence without Court approval of the Due Diligence Fees. After a thorough analysis of (i) the scope of the due diligence to be performed by the Potential Lenders in connection with the Final DIP Loan, and (ii) the standard due diligence fees required by lenders for a DIP loan, the Debtors have concluded that payment of up to $200,000 for reimbursement of reasonable out-of- pocket due diligence expenses to each of the three Potential Lenders is necessary and reasonable under the circumstances and will ensure that the Debtors will be able to obtain sufficient liquidity when needed to fund their Chapter 11 cases. Unused portions of the Due Diligence Fees may be returned to the Debtors if the Potential Lender is unable to close on the Final DIP Loan. The Due Diligence Fees may also be credited against other fees due at the closing of the Final DIP Loan. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, represent the Debtors in their restructuring efforts. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) SALOMON BROTHERS: Poor Performance Prompts Fitch to Junk Ratings ---------------------------------------------------------------- Fitch Ratings has taken rating actions on these Salomon Brothers Mortgage Securities VII, Inc., mortgage pass-through certificates: Series 2000-UP1 -- Class A1 and A2, PO affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AA+'; -- Class B-3 affirmed at 'BBB+'; -- Class B-4 downgraded to 'B' from 'BB'; -- Class B-5 downgraded to 'C' from 'CC'. Series 2003-NBC1 Group 1 -- Class AV1 affirmed at 'AAA'; -- Class BV-1 affirmed at 'AAA'; -- Class BV-2 affirmed at 'AAA'; -- Class BV-3 affirmed at 'AA'; -- Class BV-4 affirmed at 'A'; -- Class BV-5 affirmed at 'B+'. Series 2003-NBC1 Group 2 -- Class AV2 affirmed at 'AAA'. Series 2003-NBC1 Group 3 -- Class AV3 affirmed at 'AAA'. Series 2003-NBC1 Group 4 -- Class AV4 affirmed at 'AAA'. Series 2003-NBC1 Group 5 -- Class AF affirmed at 'AAA'; -- Class BF-1 affirmed at 'AAA'; -- Class BF-2 affirmed at 'AA'; -- Class BF-3 affirmed at 'BBB+'; -- Class BF-4 affirmed at 'BB'; -- Class BF-5 affirmed at 'B'. The affirmations, affecting $319.82 million of debt, are due to stable collateral performance and moderate growth in credit enhancement. The above deals have pool factors (i.e., current mortgage loans outstanding as a percentage of the initial pool) ranging from 12% to 40%. The negative rating actions on series 2000-UP1 are the result of poor collateral performance and the deterioration of asset quality beyond original expectations, and affect $2,289,913 of outstanding certificates. The transaction is collateralized by prime 30-year fixed-rate mortgage loans. As of the July 2005 distribution, the current pool balance is $70,348,590 and there are 1,791 mortgage loans remaining. The 90-plus delinquencies represent 11.48% of the mortgage pool, and foreclosures and real estate owned represent 2.43% and 1.95%, respectively. The series 2000-UP1 mortgage loans are being serviced by Regions Mortgage, a division of Union Planters Bank, N.A., which is rated 'RPS2-' by Fitch. The National Bank of Commerce is the master servicer for the series 2003-NBC1. Further information regarding current delinquency, loss and credit enhancement statistics is available on the Fitch Ratings web site at http://www.fitchratings.com/ SCARLET OAKS: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Scarlet Oaks Country Club, LLC 2 Dairy Road Poca, West Virginia 25159-9643 Bankruptcy Case No.: 05-22713 Type of Business: The Debtor operates a facility which consists of an 18-hole golf course, tennis courts, swimming pool, and clubhouse. Chapter 11 Petition Date: August 26, 2005 Court: Southern District of West Virginia (Charleston) Debtor's Counsel: Joseph W. Caldwell, Esq. Caldwell & Riffee P.O. Box 4427 Charleston, West Virginia 25364-4427 Tel: (304) 925-2100 Fax: (304) 925-2193 Estimated Assets: $0 to $50,000 Estimated Debts: $0 to $50,000 The Debtor does not have Unsecured Creditors who are not insiders. SEAN HORNBECK: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Sean Keith Hornbeck 125 Tattnall Court Gallatin, Tennessee 37066 Bankruptcy Case No.: 05-10302 Type of Business: The Debtor previously filed for chapter 11 protection on May 2005 (Bankr. M.D. Tenn. Case No. 05-5952). Chapter 11 Petition Date: August 27, 2005 Court: Middle District of Tennessee (Nashville) Judge: George C. Paine Debtor's Counsel: William Ashby Smith, Jr., Esq. Law Offices of William Ashby Smith Jr. P.O. Box 1358 Fairview, Tennessee 37062 Tel: (615) 799-3328 Fax: (615) 799-0329 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ American Express $40,582 P.O. Box 650448 Dallas, TX 75265-0448 MBNA America $36,000 P.O. Box 15102 Wilmington, DE 19886-5102 MBNA America $25,000 P.O. Box 15102 Wilmington, DE 19886-5102 MBNA America $15,000 P.O. Box 15102 Wilmington, DE 19886-5102 Discover $9,282 P.O. Box 15251 Wilmington, DE 19886-5251 The Governors Club $3,821 9681 Concord Road Brentwood, TN 37027 T-Mobile $2,894 c/o Sunrise Credit Service 200 Airport Plaza Farmington, NY 11735 The Governors Club $2,882 9681 Concord Road Brentwood, TN 37027 Union College $2,840 c/o ECSI 181 Montrose Run Road Corapolis, PA 15108 Nolensville/College Grove $2,383 P.O. Box 127 Nolensville, TN 37135 Albany Law School $1,500 c/o University Accounting Service P.O. Box 5291 Carol Stream, IL 60197-5291 Atomos Energy $1,225 P.O. Box 9001949 Louisville, KY 40290-1949 Mercedes Benz Credit $1,031 P.O. Box 551080 Jacksonville, FL 32255 GC Landscaping $948 9681 Concord Road Brentwood, TN 37027 Barnes Plumbing $899 207 Century Court Franklin, TN 37064 American Express $681 c/o Nationwide Credit Inc. P.O. Box 740640 Atlanta, GA 30374-0640 Four Seasons $300 P.O. Box 836 Nashville, TN 37135 Middle Tennessee Electric Co. $154 P.O. Box 681709 Franklin, TN 37068 Federal Express $74 c/o OSF P.O. Box 965 Brookfield, WI 53008-0965 Federal Express $51 c/o OSF P.O. Box 965 Brookfield, WI 53008-0965 SOUTHWEST FLORIDA: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Southwest Florida Heart Group, P.A. aka Southwest Florida Heart Group 8540 College Parkway Fort Myers, Florida 33919 Bankruptcy Case No.: 05-17167 Type of Business: The Debtor provides a comprehensive range of in-office and hospital-based services. See http://www.swfheartgroup.com/ Chapter 11 Petition Date: August 29, 2005 Court: Middle District of Florida (Fort Myers) Debtor's Counsel: Jeffrey W. Leasure, Esq. Jeffrey W. Leasure, PA P.O. Box 61169 Fort Myers, Florida 33906 Tel: (239) 275-7797 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Southwest Florida Heart Group $324,997 Employee 401(k) Profit Sharing Plan 8010 Summerlin Lakes Drive Fort Myers, FL 33907-1817 Lawrence A. Kline, D.O. $316,599 3950 E. Patrick Lane Phoenix, AZ 85050-5442 Daniel R. Schwartz, M.D. $295,974 67 New England Avenue, #D Summit, NJ 07901-1800 Eliot B. Hoffman, M.D. $295,974 14171 Metropolis Avenue, Suite 101 Fort Myers, FL 33912 Steven R. West, M.D. $295,974 14171 Metropolis Avenue, Suite 101 Fort Myers, FL 33912 Richard A. Chazal, M.D. $275,079 671 North Town & River Drive Fort Myers, FL 33919 James A. Conrad, M.D. $275,079 9041 Ligon Court Fort Myers, FL 33908 Michael D. Danzig, M.D. $275,079 5010 Royal Shores Drive, #201 Estero, FL 33928 David R. Axline, M.D. $275,079 1755 3rd Street South Naples, FL 34102 M. Erick Burton, M.D. $275,079 6181 Tidewater Island Circle Fort Myers, FL 33908 William M. Miles, M.D. $275,079 11510 Compass Point Drive Fort Myers, FL 33908 Herman L. Spilker, M.D. $275,079 292 Bahia Point Naples, FL 34103 Paul A. Hanna, M.D. $112,703 US Cardio Vascular Incorporated $51,000 Lee County Tax Collector $32,112 Carlo D. Santos-Ocampo, M.D. $27,589 Brian A. Hanlon, M.D. $27,589 Steven T. Lee, M.D. $27,589 Michael A. Corbellini, D.O. $27,589 Cardinal Health Nuclear Pharmacy Services $18,000 SPECIAL METALS: Precision Castparts Acquiring Assets for $303MM --------------------------------------------------------------- Precision Castparts Corp. proposes to buy substantially all of Special Metals Corp.'s assets for $303 million, the Buffalo News reports. The deal also includes Precision's assumption of Special Metal's $237 million debt. Mark Donegan, Precision's Chief Executive Officer, told the Buffalo News that the transaction will give his company an internal supply of nickel-based billet for its forged products. As a result of the acquisition, Special Metals' Dunkirk, N.Y., operation is expected to increase production. William J. Pienta, the United Steelworkers of America, District 4 director, told the Buffalo News that the deal means more security for union members. Precision Castparts, based in Portland, Ore., makes metal components and products for the aerospace, power generation, automotive and general industrial markets. The proposed acquisition boost Precision's stock price on the New York Stock Exchange by 6.73%. The shares closed at $96.75 on Friday. Special Metals is the world's largest and most-diversified producer of high-performance nickel-based alloys. Its specialty metals are used in some of the world's most technically demanding industries and applications, including: aerospace, power generation, chemical processing, and oil exploration. Through its 10 U.S. and European production facilities and a global distribution network, Special Metals supplies over 5,000 customers and every major world market for high-performance nickel-based alloys. Special Metals filed for chapter 11 protection on March 27, 2002 (Bankr. E.D. Ky. Case No. 02-10335). Gregory R. Schaaf, Esq., at Greenebaum Doll & McDonald PLLC represented the Company while in bankruptcy. As of Sept. 30, 2001, Special Metals listed $790,462,000 in total assets and $774,306,000 in total debts. The Company emerged from bankruptcy on October 20, 2003. TECNET INC: Trustee Wants Bar Date for Newly Discovered Creditors ----------------------------------------------------------------- Scott M. Seidel, the Chapter 7 Trustee overseeing the liquidation of TecNet, Inc., asks the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, to establish a bar date for newly discovered creditors. Mr. Seidel discloses that through his investigation, he discovered additional creditors that have not been provided with a Notice to File Claims and have not had the opportunity to file their proofs of claim. The trustee tells the Court a bar date must be established for the newly discovered creditors so that they may be given a chance to file their claims. Headquartered in Garland, Texas, TecNet, Inc., provides telecommunication services, filed for chapter 11 protection on April 8, 2004 (Bankr. N.D. Tex. Case No. 04-34162) and its case was converted to a chapter 7 liquidation proceeding on June 4, 2004. Scott M. Siedel serves as the chapter 7 Trustee. Mark A. Weisbart, Esq., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts of over $10 million and estimated debts of over $100 million. On June 7, 2005, the Court converted the chapter 11 case to a chapter 7 proceeding. Scott M. Seidel was appointed as the Chapter 7 Trustee. TENET HEALTHCARE: Default Notice Prompts Fitch's Negative Watch --------------------------------------------------------------- Fitch Ratings has placed Tenet Healthcare Corp.'s ratings on Rating Watch Negative after the company announced that it received a notice of default from holders of $139.9 million (of the $450 million outstanding principal) of the company's 6 7/8% senior unsecured notes due 2031. The notice was delivered pursuant to the terms of the indenture governing the notes and cites Tenet's failure to file its Form 10- Q (for the three months ended June 30, 2005) on a timely basis with the Securities and Exchange Commission and the notes' trustee. Receipt of the notice starts a 90-day cure period (through Nov. 23, 2005). Tenet will avoid an event of default if it files its Form 10-Q within this cure period. If the default is not cured within the 90-day period, bondholders may elect to declare the principal amount of the notes to be due and payable immediately. Such an action could trigger a cross default under the company's other outstanding bond issuances. The company has stated that it believes that it will be able to cure the default by filing the 10-Q within the 90-day cure period. Fitch will monitor the company's progress towards filing its 10-Q. If Tenet files the 10-Q within the 90-day cure period, no event of default will have occurred and the ratings will be removed from Rating Watch Negative, and the Negative Rating Outlook (reflecting ongoing, longer-term operational, and legal concerns) would be re- instated. If the company fails to file in the 90-day cure period a negative rating action may be warranted. Tenet has approximately $4.8 billion in debt outstanding, mostly senior unsecured notes with the earliest maturity being the 6 3/8% senior unsecured notes due 2011. Tenet's unrestricted cash balance at June 30, 2005 was approximately $1.6 billion. Tenet's current ratings include the following: -- Senior unsecured notes 'B-'; -- Issuer default rating 'B-'; -- Recovery rating 'R4'. TEREVE HOLDINGS: Bowring Retail Chain Seeks CCAA Protection ----------------------------------------------------------- Bowrings, a chain of retail gift stores operating 64 locations in Canada, filed for protection under the Companies' Creditors Arrangement Act, according to a report by the National Post. Most of the Company's mall stores have incurred significant financial losses since last year. The Company cited intense competition from other domestic and U.S.-based retail chains, which have moved into the retail segments previously dominated by Bowrings, the changing shopping habits of their primary customers and the increasing lease costs of their mall-based stores as reasons for declining sales since last year. Tereve Holdings Ltd., the operator of the Bowrings chain of stores, stated in its court filings that it owes creditors approximately C$20.6 million, with C$8,820,000 owed to the Bank of Nova Scotia, its main secured lender, according to the National Post. As part of its reorganization efforts, Tereve Holdings will close 34 mall-based stores this year and intends to restructure or sell 30 stores located in suburban big-box stores. Tereve says it will concentrate on its suburban big-box stores because they operate at a profit. Established in Newfoundland, Canada, Bowring is one of the oldest and most respected names in Canadian retailing. Bowring stores are located in most major malls in larger cities across Canada. Bowring mall stores sell a wide array of gifts, fashion tableware, decorative home accessories and other home and gift items. TERMOEMCALI FUNDING: Soliciting Consents on Chapter 11 Prepack -------------------------------------------------------------- TermoEmcali Funding Corp. launched an offer to exchange all outstanding 10.125% Senior Secured Notes Due 2014 for Senior Secured Notes Due 2019, a consent solicitation and solicitation of acceptances of a prepackaged plan of reorganization, on Aug. 11, 2005. The out-of-court restructuring will consist of an offer to exchange each $1,000 of outstanding principal amount of 10-1/8% Senior Secured Notes Due 2014 for $968.58 in principal amount of new Restructured Senior Secured Notes Due 2019. The Restructured Notes will bear interest rates escalating from 6% per annum effective as of the first day of the month in which the exchange offer is effective to 10-1/8% per annum effective from July 1, 2009, plus $31.42 in Cash. The payment recognizes that if $1,000 principal amount of Existing Senior Secured Notes had been exchanged for $1,000 principal amount of Restructured Senior Secured Notes on June 16, 2004, an additional $31.42 in principal would have been amortized since that exchange is based on the actual interest payments exceeding the interest that would have been paid at the applicable restructured interest rates to the holders of the Existing Senior Secured Notes since June 16, 2004. The Restructured Senior Secured Notes are expected to have the opportunity for principal prepayments, monthly installment payments, and certain security that would not be available to the Existing Senior Secured Notes. The financial restructuring will also consist of a consent solicitation for the New Indenture, the New Common Agreement and to amend, waive or terminate certain agreements or provisions thereof, including, but not limited to, the Existing Indenture and the Existing Common Agreement applicable to the Existing Senior Secured Notes. By validly tendering the Existing Senior Secured Notes, noteholders will automatically be deemed to have: (a) given consent to the proposed amendments, waivers and terminations with respect to all of the Existing Senior Secured Notes tendered; (b) agreed to the exchange; (c) authorized and directed the Existing Indenture Trustee to execute the proposed amendments, waivers and terminations and to take such further necessary action to effectuate the exchange, including directing the Collateral Agent to execute the amendments, waivers and terminations and to take such further action necessary on its part to effectuate the exchange; (d) accepted the Prepackaged Plan and (e) accepted the releases. The proposed amendments, waivers and terminations will become operative only if the Exchange Offer closes. Obtaining the requisite consent of the holders of at least 94.5% of the aggregate outstanding principal balance of the Existing Senior Secured Notes is one of the conditions to the closing of the Exchange Offer. Existing vs. Restructured Senior Secured Notes If the Exchange Offer is completed, there will be a number of differences between the Existing Senior Secured Notes that are not tendered in the Exchange Offer and the Restructured Senior Secured Notes that will be issued through the Exchange Offer, including: Non-Tendering Existing Restructured Sr. Characteristic Sr. Secured Notes Secured Notes -------------- ---------------------- ---------------- Payment Frequency Quarterly Monthly Interest Rate 10-1/8% Escalating from 6% at per annum closing of the Exchange Offer or the effectiveness of the Prepackaged Plan to 10-1/8% commencing July 1, 2009 Maturity 2014 2019, subject to potential shortening of maturity through mandatory prepayments Principal prepayment at No Yes closing Opportunity for mandatory principal No Yes prepayments after closing Additional security No Yes through equity pledge Guarantee of Yes, but the right Yes underlying cash to the proceeds of flow by Emcali any draw will fall below those of the holders of Restructured Senior Secured Notes Rated No Yes, expected from Fitch and/or Standard & Poor's Luxembourg No, such a listing Yes, such a listing Listing is not to be is expected to be retained for obtained for the the Existing Senior Restructured Senior Secured Notes Secured Notes Benefits of continuing affirmative and negative covenants No Yes Redemption Yes No premium Holder receives No, except through Yes releases on the Prepackaged Plan exchange As of Aug. 11, 2005, there is a total of $144,080,024 in aggregate principal amount of Existing Senior Secured Notes outstanding. Delivery of the Restructured Senior Secured Notes and payment to tendering holders will be made promptly following the expiration date and the satisfaction or waiver of all conditions to the Exchange Offer. The Prepackaged Plan The Claims held by holders of its Existing Senior Secured Notes constitute the only impaired class under the Prepackaged Plan. In the event that less than 94.5% of the aggregate outstanding principal balance of the Existing Senior Secured Notes are tendered in connection with the Exchange Offer, but if the Prepackaged Plan is accepted by holders of at least 66% of the aggregate principal amount of the Existing Senior Secured Notes who vote and who represent at least 50% of the total number of beneficial holders of the Existing Senior Secured Notes who vote, the Company may commence a voluntary case under Chapter 11 of the Bankruptcy Code for purposes of effectuating the restructuring through the Prepackaged Plan. The exchange offer and consent solicitation will expire at 5:00 p.m. on Sept. 9, 2005. Deutsche Bank Trust Company Americas serves as the Indenture Trustee for the Restructured Senior Secured Notes. The Company and Emcali are parties to a 20-year power purchase agreement pursuant to which the Company sold electric generating capacity and energy to Emcali. The Power Purchase Agreement has been suspended pending the effectiveness of the exchange offer and the issuance of notes payable by Emcali to TermoEmcali. At such time, the PPA is to be terminated. Full-text copies of the Company's Offering Memorandum and Disclosure Statement and related documents are available at no charge at its exchange agent's website at http://www.bondcom.com/termoemcalior at these addresses: Bondholder Communications Group -- New York Attn: Trina Caliveri 30 Broad Street, 46th Floor New York, NY 10004 Telephone: (212) 809-2663 Fax: (212) 437-8727 E-mail: tcaliveri@bondcom.com Bondholder Communications Group -- London Attn: Trina Caliveri 3rd Floor, Prince Rupert House 64 Queen Street London, EC4R 1AD Telephone: +44 20 7236 0788 Fax: +44 20 7236 0779 E-mail: tcaliveri@bondcom.com TermoEmcali Funding Corp. was formed to develop, construct, own and operate a natural gas-fired electric power generation facility, which is located near Cali, Colombia. The Company is owned by Leaseco, Cauca Valley Holdings Ltd., TermoEmcali Holdings Ltd., Emcali E.I.C.E. E.S.P., and Inversiones Inca S.A. Leaseco, a Cayman Islands company, is owned and controlled by Cauca Valley and Holdings, both of which are Cayman Islands companies. * * * As reported in the Troubled Company Reporter-Latin America on July 28, 2005, Standard & Poor's 'D' rating on TermoEmcali Funding Corp.'s US$165 million senior secured notes due 2014 reflects the Colombian company's failure to make its September 2004 debt- service payment. Since then, the project-financed entity also failed to make its debt-service payments through June 2005. TermoEmcali operates a 234 MW combined-cycle, natural-gas-fired power generation facility, and sells capacity and energy to Empresas Municipales de Cali (Emcali), a Colombian municipal utility that provides diversified services to two million residents in and around Santiago de Cali. TermoEmcali entered a 20-year purchased-power agreement (PPA) with Emcali to provide capacity and energy, and eventually transfer the facility to Emcali at no cost. However, after Emcali defaulted on March 6, 2003, the PPA has not been honored. As of June 2005, Emcali continues to fail to meet its financial obligations due under the PPA for more than $85 million. In November 2003, TermoEmcali and Emcali, the project's offtaker, signed a memorandum of understanding (MOU) while pursuing an orderly restructuring of the obligations under the PPA. The MOU expired on June 2004, and although the parties discussed extending it, Emcali indicated it would not continue payments under the MOU until an energy-purchase agreement (EPA), replacing the former PPA, is signed. Despite the expiration of the MOU and Emcali's failure to perform its obligations under the PPA, Emcali and TermoEmcali continued to negotiate a restructuring of the PPA. On June 2005, TermoEmcali reached agreement to restructure Emcali's obligations to the project and settle certain disputes with Emcali. The deadline to achieve the restructuring is May 17, 2006. In parallel with those negotiations, TermoEmcali and a committee of restricted bondholders and other lenders have held discussions about restructuring the financing documents on a basis consistent with cash flows anticipated under a restructured PPA. After the restructuring of the financing documents is finalized Standard & Poor's Ratings Services will reassess the transaction's credit rating. TITAN CRUISE: Section 341(a) Meeting Slated for Sept. 9 ------------------------------------------------------- The U.S. Trustee for Region 21 will convene a meeting of Titan Cruise Lines and its debtor-affiliate's creditors at 1:30 p.m., on Sept. 9, 2005, at Room 100-A, Timberlake Annex, 501 E. Polk Street, Tampa, Florida. 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 Saint Petersburg, Florida, Titan Cruise Lines and its subsidiary owns and operates an offshore casino gaming operation. The Company and its subsidiary filed for chapter 11 protection on August 1, 2005 (Bankr. M.D. Fla. Case Nos. 05-15154 and 05-15188). Gregory M. McCoskey, Esq., at Glenn Rasmussen & Fogarty, P.A., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million to $50 million. TOWER AUTOMOTIVE: Court Approves Seagull Software Licensing Pact ---------------------------------------------------------------- Tower Automotive, Inc., is a party to several software licensing agreements with Seagull Software Systems, Inc., pursuant to which Tower uses and duplicates Seagull's proprietary software in connection with Tower's business operations, subject to certain limitations and restrictions. A composite copy of the Seagull Agreements with related documentation is available for free at: http://bankrupt.com/misc/seagullagreements.pdf The Seagull applications, according to Anup Sathy, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, allow personnel in the field to enter data into Tower's system via an interface as opposed to requiring each user to sit at Tower's central terminal and enter the data manually. As a result, these applications provide Tower's purchasing and receiving departments with a means by which to obtain accurate reports as to Tower's entire manufacturing process at any given time. Seagull also provides Tower with certain critical maintenance and training services related to the Seagull software applications. These services include a hotline and 24-hour on-line trouble- shooting service, in addition to technical support staff whom Seagull will dispatch to Tower's location to train Tower personnel and respond to inquiries and problems regarding installation, general use, connectivity, and reproducible problems that may arise with respect to the software. The total estimated cost to Tower for continued maintenance service under the Seagull Agreements is approximately $10,000 per year. No additional licensing fees are required. The Debtors believe that their continued use of the Seagull software is integral to their ongoing business operations. Tower's day-to-day inventory management process is dependent on the Seagull software and its data entry applications. Without the continued dedicated and prompt availability of technical support, training and service from Seagull, Tower, Mr. Sathy tells the Court, will be unable to properly utilize the Seagull software, and further risks incurring significant administrative costs to replace and install alternate software. Upon Court approval of the Debtors' request, the Debtors will pay Seagull $62,648, on account of all outstanding prepetition amounts owing to Seagull by Tower. The Cure Amount, Mr. Sathy reports, arises from unpaid prepetition amounts owed to Seagull pursuant to the Seagull Agreements for the Seagull software, and related maintenance and advisory services. Tower is not obligated to pay for any additional charge related to re-installation of services under the Seagull Agreements. Mr. Sathy informs the Court that the Official Committee of Unsecured Creditors has reviewed the Seagull Agreements and has raised no objection to the Debtors' assumption of the Seagull Agreements and payment of the Cure Amount. * * * The U.S. Bankruptcy Court for the Southern District of New York approved the Debtors' request to assume the software licensing agreements with Seagull Software. Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) TOYS R US: Fitch Junks $2 Billion Domestic Unsecured Bridge Loan ---------------------------------------------------------------- Fitch Ratings has assigned credit and recovery ratings to Toys 'R' Us, Inc.'s new revolving credit facilities and bridge loans: -- $2 billion domestic secured revolver: credit rating of 'B' and recovery rating of 'R3'; -- $350 million European multicurrency secured revolvers: credit rating of 'B' and recovery rating of 'R3'; -- $1 billion European secured bridge facility: credit rating of 'B' and recovery rating of 'R3'; -- $2 billion domestic unsecured bridge loan: credit rating of 'CCC' and recovery rating of 'R6'. The $2 billion domestic secured revolver is secured by TOY's North American inventories and receivables while the company's European revolvers and bridge facility are secured by the company's European assets. Additionally, Fitch affirms the existing ratings of TOY: -- IDR credit rating of 'B-'; -- Senior unsecured notes: credit rating of 'CCC' and recovery rating of 'R6'. The Rating Outlook is Negative. For more information on the rating of TOY's senior unsecured notes, see the press release dated July 22, 2005. For more information on recovery ratings, see Fitch's criteria report 'Retail and Apparel Recovery Ratings Guidelines,' dated Aug. 9, 2005, available on the Fitch web site at http://www.fitchratings.com/ TRANSCOM ENHANCED: Court Approves $400,000 Additional DIP Loan -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, gave its stamp of approval to Transcom Enhanced Services, LLC's request to obtain an additional $400,000 fund from First Capital Group of Texas III, LP, increasing its total available post-petition line of credit to $1,250,000. The Debtor says it needs access to the additional post-petition financing to meet short-term cash obligations. The additional $400,000 will be used to pay ordinary course of business expenses. The new loan under the enlarged line of credit will accrue interest at 10% annually. The Debtor related that the proposed financing is necessary to avoid immediate and irreparable harm to its estate. The additional funds will ensure that the Debtor's business will continue as a going concern and will facilitate its proposed reorganization. First Capital, a private investment firm that provides equity capital to companies throughout Texas and the Southwest, holds a first priority lien on all of the Debtor's assets pursuant to a $2,200,000 pre-petition loan agreement dated May 25, 2004. First Capital also holds a minority equity interest in the Debtor consisting of one-half of the outstanding voting preferred stock of Transcom Holdings, Inc., Transcom Enhanced's parent company. First Capital also holds warrants entitling it to purchase up to 17.5% of Transcom Holding's common stock if the pre-petition loan is not paid on time. Headquartered in Irving, Texas, Transcom Enhanced Services -- http://www.transcomus.com/-- specializes in the modification of the form and content of telephone calls and other communications to improve bandwidth efficiency, reduce costs and facilitate the development and provision of advanced applications. Established in 2003, TES uses state-of-the-art technology and a secure, privately managed packet-switched network to deliver cost- effective custom voice-over-IP solutions and converged IP applications to carriers and enterprise customers all over the world. The Company filed for chapter 11 protection on Feb. 18, 2005 (Bankr. N.D. Tex. Case No. 05-31929). John Mark Chevallier, Esq., at McGuire, Craddock & Strother represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated between $1 million to $10 million in total assets and debts. TRANSMETA CORP: Audit Panel Taps Burr Pilger to Audit Financials ---------------------------------------------------------------- The Audit Committee of Transmeta Corporation's (NASDAQ: TMTA) Board of Directors has selected Burr, Pilger & Mayer LLP as its new independent registered public accounting firm. BPM's engagement will commence with the review of the Company's financial results for the third quarter ending Sept. 30, 2005. "We interviewed a number of highly qualified accounting firms, and we believe that Burr, Pilger & Mayer, a regional firm based in San Francisco, is a good fit for Transmeta," commented Mark R. Kent, chief financial officer. "BPM understands the specific and complex requirements of technology companies like Transmeta, and they will help us to ensure that we maintain the highest standards of accuracy in our accounting, financial reporting and Sarbanes- Oxley compliance." Transmeta Corporation -- http://www.transmeta.com/-- develops and licenses innovative computing, microprocessor and semiconductor technologies and related intellectual property. Founded in 1995, Transmeta first became known for designing, developing and selling its highly efficient x86-compatible software-based microprocessors, which deliver a balance of low power consumption, high performance, low cost and small size suited for diverse computing platforms. The Company also develops advanced power management technologies for controlling leakage and increasing power efficiency in semiconductor and computing devices. * * * Going Concern Doubt "[T]he Company's recurring losses from operations raise substantial doubt about its ability to continue as a going concern," ERNST & YOUNG LLP says in its audit report dated March 25, 2005, addressed to the company's Board of Directors and Stockholders. At Dec. 31, 2004, the Company had $53.7 million in cash, cash equivalents and short-term investments compared to $120.8 million and $129.5 million at December 31, 2003 and December 31, 2002, respectively. The Company believes that its existing cash and cash equivalents and short-term investment balances and cash from operations would not be sufficient to fund its operations. UAL CORP: Court Extends Exclusive Plan Filing Period Until Nov. 1 ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois further extended the period within which UAL Corporation and its debtor-affiliates may: (a) file a plan to Nov. 1, 2005; and (b) solicit acceptances of the plan to Jan. 2, 2006. The Hon. Eugene Wedoff said this would be the last extension that he will grant for the Debtors "in the absence of compelling and unforeseeable circumstances," the Associated Press reports. The Official Committee of Unsecured Creditors supported the Debtors' request. The Debtors anticipate filing a Plan and Disclosure Statement in early September 2005. United to Exit Bankruptcy in 2006 The Debtors expect to finalize a complete exit financing package in the near future. According to James J. Mazza, Jr., Esq., at Kirkland & Ellis, in Chicago, Illinois, the Debtors were prepared to file both a plan and disclosure statement on Aug. 2, 2005. However, the Debtors agreed to delay the filings by approximately one month at the request of the Creditors' Committee to allow it more time to review and provide input on these documents. The Debtors continue to provide the Creditors' Committee with plan- related materials for its comment and review. There have also been numerous meetings and telephone conferences with the Creditors' Committee and its professionals covering a multitude of topics, including the Debtors' business plan, exit financing, the plan of reorganization, BTO and BII savings progress, revenue updates and near term outlooks, PDG negotiations, and recent financial performance. In conjunction with this process, Mr. Mazza says the Debtors, with the Creditors' Committee's affirmative support, sought a 60-day extension of their exclusivity periods. Despite this request, the Debtors are still targeting to emerge from Chapter 11 in late 2005 or early 2006. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Four Banks Submit $3 Billion Exit Financing Proposals --------------------------------------------------------------- UAL Corporation and its debtor-affiliates have made significant strides in their restructuring efforts since July, including, among other things: 1. finalizing their business plan; 2. executing comprehensive term sheets covering all but 14 of the aircraft controlled by the Public Debt Group, which coupled with other aircraft restructuring efforts, will result in the Debtors reducing their fleet costs by approximately $850 million annually; and 3. amending their Club DIP Facility to obtain the necessary financing to purchase Class A Certificates which will enable United to have a controlling position in the 1997-1 EETC Transaction covering the 14 aircraft. James J. Mazza, Jr., Esq., at Kirkland & Ellis, in Chicago, Illinois, tells Judge Wedoff that resolution of the PDG aircraft issues, including the 1997-1 EETC Transaction, will effectively bring the Section 1110 process to a close, leaving exit financing and the filing and confirmation of the Debtors' plan of reorganization and disclosure statement as the remaining tasks on the Debtors' path to emergence from Chapter 11. United Gets Pledges for $3-Bil Funding Mr. Mazza relates that the Debtors went back to the same four financial institutions -- Citibank, JPMorgan Chase & Co., Deutsche Bank and GE Commercial Finance -- who had earlier in the year submitted preliminary exit financing proposals. The Debtors shared their updated business plan with the potential lenders. The potential lenders performed their due diligence on the business plan, and as a result of their thorough review, the Debtors received fully underwritten commitments for all-debt exit financing packages with competitive terms and conditions. At the same time, these commitments accommodate the Debtors' aggressive timetable for exit. While the Debtors asked the financial institutions for up to $2,500,000,000 in exit financing, they received commitments for up to $3,000,000,000 in all-debt financing, including funds sufficient to refinance the 14 planes from the 1997-1 EETC Transaction if the Debtors purchases the Class A Certificates. "Now that United has received these exit financing commitments, it is working with the lenders and the Creditors' Committee to further improve the terms and conditions in these proposals," Mr. Mazza relates. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNISYS CORP: Decline in Profitability Spurs Moody's to Cut Ratings ------------------------------------------------------------------ Moody's Investors Service lowered the long-term credit ratings of Unisys Corporation (Corporate Family Rating to Ba3 from Ba1) and affirmed the SGL-3 short-term liquidity rating. The rating action concludes a review for possible downgrade initiated on August 1, 2005. The ratings outlook for the Corporate Family Rating is stable. However, the ratings outlook for the senior unsecured notes and shelf registration is negative, reflecting the possibility that the securities could be notched below the Corporate Family Rating for effective subordination should the company choose to renew its current $500 million senior unsecured credit facility maturing May 2006 and future lenders require a pledge of collateral security as a result of the rating action. Ratings downgraded include: * Corporate Family rating (formerly Senior Implied rating) to Ba3 from Ba1 * Senior unsecured rating to Ba3 from Ba1 * Shelf registration for senior unsecured debt to (P)Ba3 from (P)Ba1, * Shelf registration for subordinated debt to (P)B1 from (P)Ba2, and * Shelf registration for preferred stock to (P)B2 from (P)Ba3. The rating action reflects weakened credit protection measures that result from sustained declines in the company's profitability, as higher margin Technology segment revenue continues to fall and the company addresses loss-generating problem outsourcing contracts. Low operating margins over the past several quarters have pressured interest coverage ratios, while free cash flow generation over the past few years has been inconsistent due to varying profitability levels and increasing capital expenditures relative to revenue. The rating action also considers the continuing challenges the company faces to improve its competitive position in its Services and Technology segments that will create sustainable revenue growth and profitability over the intermediate term. Moody's believes that the margin profile of Unisys's current Services businesses limits the prospects for offsetting contraction in operating income contribution from the Technology segment, given continued fall off in Technology segment revenue and high research and development costs. Over the past several years, Technology segment revenue has steadily declined, particularly in the company's high margin legacy ClearPath large enterprise server business. In 2004, the Technology segment represented 19% of consolidated revenue (versus 31% in 2000), while contributing over 75% of total operating income (prior to asset impairment and restructuring charges). Consolidated profitability has also been challenged by higher than expected costs related to several large business process outsourcing contracts within the Services segment, which the company has been addressing over the past few quarters. The company is in the process of renegotiating terms of a major underperforming outsourcing engagement, which if unsuccessful could result in a write down of up to $235 million of related outsourcing assets. In addition, increases in pension expenses have negatively impacted consolidated operating profits. The stable CFR outlook reflects progress the company has made to remediate problem outsourcing contracts, expected benefits of prior restructuring efforts and ongoing investment in its Technology segment that could improve longer term prospects. The stable CFR outlook also considers Moody's expectation that the company should achieve its target of $50 million free cash flow for 2005, and that it will look to refinance its $400 million 8-1/8% senior notes due June 2006. The negative outlook for the senior unsecured notes and shelf registration ratings reflects the possibility that the securities could be notched below the Corporate Family Rating for effective subordination should the company choose to renew its current $500 million senior unsecured credit facility maturing May 2006 and future lenders require a pledge of collateral security as a result of the rating action. The CFR rating outlook could experience upward pressure to the extent the company is able to demonstrate moderate and sustainable revenue growth and solid improvements in consolidated operating margins, which are currently below 5% on a reported LTM basis. The ability to generate consistent reported free cash flow at levels approximating 10% of reported debt could also lead to a positive ratings momentum. Alternatively, the CFR rating could face downward pressure to the extent revenue declines in Technology are not offset by profitable growth in Services, cash flow generation attenuates, consolidated margin levels do not show meaningful improvement or the company announces further material charges from write downs or restructurings. In the second quarter ended June 30, 2005, the company reported a net loss of $27 million on revenue of $1.4 billion. Pension expense was $46 million. As a result of declines in profits and cash flow, interest coverage and leverage metrics have steadily weakened over the past several quarters. Based on Moody's standard adjustments to $901 million of reported debt as of June 30, 2005, adjusted debt of $3.0 billion results in adjusted debt to EBITDA leverage of 5.8 times (versus 2.5 times based on reported figures). Moody's adjustments to reported debt include $844 million of pension, $1.1 billion present value of operating lease adjustments and $217 million of accounts receivable securitization outstanding. Accordingly, adjusted free cash flow to debt stood at -1.1% (versus -10.3% based on reported figures). Adjusted EBITDA of $518 million leads to adjusted EBITDA to interest coverage of 2.5 times (versus 6.0 times based on reported figures). The company has a $500 million credit facility that expires in May 2006. As of June 30, 2005, there were no borrowings under the facility. Unisys, based in Blue Bell, Pennsylvania, is a worldwide provider of IT services and technology hardware. The company generated $5.8 billion of revenue in 2004. VENCOR INT'L: Case Summary & 15 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Vencor International Inc. aka Regal Apparel Group, Inc. 1545 Newton Street Los Angeles, California 90021 Bankruptcy Case No.: 05-29524 Type of Business: The Debtor's subsidiary, Robeworks Inc., filed for chapter 11 protection on Aug. 24, 2005 (Bankr. C.D. Calif. Case No. 05-29275), the Honorable Vincent P. Zurzolo presiding. Robeworks Inc.'s chapter 11 filing was reported in the Troubled Company Reporter on Aug. 29, 2005. Chapter 11 Petition Date: August 25, 2005 Court: Central District of California (Los Angeles) Judge: Barry Russell Debtor's Counsel: Robert B. Shanner, Esq. Shanner & Shanner 3200 Fourth Avenue, Suite 203 San Diego, California 92103 Tel: (619) 232-3057 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 15 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ The McGrath Family Trust $3,348,492 [address not provided] Judy Nagler $2,133,778 [address not provided] Norman Solomon $1,800,000 929 East 2nd St., Ste. 101 Los Angeles, CA 90012 Star Insurance Co. $1,139,888 [address not provided] GLJ Holdings LLC Loan $850,000 1611 W. Rosecrans Avenue Gardena, CA 90249 MPI Ltd. Office rent $250,000 11300 West Olympic Boulevard Suite 770 Los Angeles, CA 90064 Gary Nathanson $55,619 Hanjin International $22,289 Multi Media Productions Advertising $14,900 Hutchinson & Bloodgood LLP Professional fee $12,928 The Job Shop Service contract $10,550 Getz & Associates Professional $6,621 Magnum Fulfillment & Service contract $5,868 Logistics LLC Quill Corporation Trade debt $1,580 Tel-Us Call Center Service contract $726 WORLDCOM INC: Wants Court to Nix & Limit Parus Holding's Claims --------------------------------------------------------------- WorldCom, Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to: (a) dismiss Parus Holding, Inc.'s statutory and tort based claims; and (b) limit Parus Holdings' recovery for breach of contract to $460,442. Robert L. Driscoll, Esq., at Stinson Morrison Hecker, LLP, in Kansas City, Missouri, relates that on November 20, 2000, EffectNet, Inc., and EffectNet, LLC, entered into a Unified Communications Services General Agreement with Intermedia Communications, Inc. Pursuant to the UC Contract, EffectNet agreed to supply Intermedia with unified messaging, wholesale communications and related services that Intermedia could resell to its end user customers. Parus Holdings, as successor-by-merger to EffectNet, asserted claims alleging Intermedia's failure to perform its obligations under the UC Contract and breach of the Contract: (1) Claim No. 11242, amending Claim No. 9291; and (2) Claim No. 11173, amending Claim No. 9293. According to Mr. Driscoll, Parus Holdings alleged that: (1) Intermedia and WorldCom engaged in a civil conspiracy by "act[ing] in concert to breach the UC Contract . . . with the knowledge that a breach . . . would have a devastating impact on EffectNet;" (2) WorldCom tortiously interfered with Intermedia's UC Contract; (3) Intermedia and WorldCom made a conscious decision not to perform under the UC Contract so that WorldCom could offer its own competing similar products; and (4) Intermedia and WorldCom engaged in deceptive trade practices related to Intermedia's alleged breach of the UC Contract. "Parus Holdings, through Claim Nos. 11242 and 11173, attempts to transform a relatively straightforward breach of contract claim into numerous torts claims," Mr. Driscoll contends. "Such tort claims, however, are barred by the parties' agreement prohibiting recovery of damages from such claims and as a matter of law." Mr. Driscoll argues that Parus Holdings' Claims fail as a matter of law for these reasons: (1) The tort theories of civil conspiracy and tortious interference with contract fail because the alleged conspiratorial or interfering conduct was between a parent corporation, WorldCom, and its wholly owned subsidiary, Intermedia, a unified interest relationship that precludes the claims. (2) The claim for breach of an implied covenant of good faith and fair dealing fails because the UC Contract was an ordinary private commercial agreement between two business entities, whose contractual relationship did not embrace public interest, arise from a position of adhesion or involve fiduciary responsibilities. (3) The claim that WorldCom and Intermedia engaged in deceptive trade practice fails because neither WorldCom nor Intermedia sold any service or product to EffectNet. Moreover, EffectNet was not the target of any deceptive advertising. Therefore, Parus Holdings cannot maintain an action under the Arizona Consumer Fraud Act. Mr. Driscoll further notes that EffectNet terminated the UC Contract on April 12, 2002. Thus, damages for breach are limited to the obligations that accrued prior to the date of the termination. Mr. Driscoll tells the Court that the amounts accrued prior to April 12, 2002, include the adjusted amounts for three past due invoices and the minimum commitment amount for March 2002. The minimum commitment provision of the contract obligated Intermedia to deliver 10,000 subscribers per month starting December 18, 2001. The reconciliation provision of the contract provided that if Intermedia failed to deliver the minimum commitment for a month, it must pay a reconciliation payment for the shortfall "equal to the volume Shortfall multiplied by the base monthly price applicable to the Intermedia UC Service per subscriber." Mr. Driscoll relates that applying the basic rate, the accrued amounts are: Billing Cycle Adjustment Damages ------------- ---------- ------- December 2001 Unpaid invoice #1010 $115,271 adjusted to $11.45 for shortfall of 9,953 January 2002 Unpaid invoice #1011 115,271 adjusted to $11.45 for shortfall of 9,953 February 2002 Unpaid invoice #1018 115,401 adjusted to $11.45 for shortfall of 9,958 March 2002 One month at $11.45 114,500 for 10,000 -------- TOTAL $460,442 ======== 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 $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Abraxas Petro ABP (43) 106 (5) AFC Enterprises AFCE (44) 216 52 Alliance Imaging AIQ (52) 621 43 Amazon.com Inc. AMZN (64) 2,601 782 AMR Corp. AMR (615) 29,494 (2,230) Atherogenics Inc. AGIX (76) 235 213 Biomarin Pharmac BMRN (110) 167 (4) Blount International BLT (220) 446 126 CableVision System CVC (2,430) 10,111 (1,607) CCC Information CCCG (107) 96 20 Centennial Comm CYCL (480) 1,447 59 Choice Hotels CHH (185) 283 (36) Cincinnati Bell CBB (625) 1,891 (18) Clorox Co. CLX (346) 3,756 (158) Compass Minerals CMP (81) 667 129 Crown Media HL-A CRWN (34) 1,289 (130) Delphi Corp. DPH (4,392) 16,511 256 Deluxe Corp DLX (124) 1,508 (276) Denny's Corporation DENN (260) 494 (73) Domino's Pizza DPZ (574) 420 (21) Echostar Comm-A DISH (972) 7,281 269 Emeritus Corp. ESC (123) 720 (43) Foster Wheeler FWLT (490) 2,012 (175) Guilford Pharm GLFD (20) 136 60 Graftech International GTI (34) 1,006 264 I2 Technologies ITWO (153) 386 124 ICOS Corp ICOS (57) 243 160 IMAX Corp IMAX (38) 241 27 Intermune Inc. ITMN (7) 219 133 Investools Inc. IED (22) 56 (47) Isis Pharm. ISIS (124) 147 46 Kulicke & Soffa KLIC (44) 365 182 Lodgenet Entertainment LNET (72) 275 15 Lucent Tech Inc. LU (70) 16,437 2,517 Maxxam Inc. MXM (681) 1,024 103 Maytag Corp. MYG (77) 3,019 398 McDermott Int'l MDR (140) 1,489 123 McMoran Exploration MMR (39) 377 135 Nexstar Broadc - A NXST (51) 684 27 Northwest Airline NWAC (3,563) 14,352 (1,392) NPS Pharm Inc. NPSP (98) 310 215 ON Semiconductor ONNN (346) 1,132 270 Owens Corning OWENQ (8,225) 7,766 1,391 Primedia Inc. PRM (771) 1,506 16 Quality Distrib. QLTY (26) 380 18 Qwest Communication Q (2,663) 24,070 1,248 Revlon Inc. - A REV (1,102) 925 70 Riviera Holdings RIV (27) 216 5 Rural/Metro Corp. RURL (184) 221 18 SBA Comm. Corp.-A SBAC (50) 857 19 Sepracor Inc. SEPR (201) 1,175 717 St. John Knits Inc. SJKI (52) 213 80 Tivo Inc. TIVO (1) 151 48 US Unwired Inc. UNWR (76) 414 56 Vector Group Ltd. VGR (33) 527 173 Verifone Holding PAY (36) 248 48 Vertrue Inc. VTRU (50) 451 (81) Weight Watchers WTW (36) 938 (266) Worldspace Inc.-A WRSP (1,698) 592 47 WR Grace & Co. GRA (605) 3,423 811 ********* 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 ***