/raid1/www/Hosts/bankrupt/TCR_Public/051202.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, December 2, 2005, Vol. 9, No. 286
Headlines
ADAM CORP: Voluntary Chapter 11 Case Summary
ADVANCED COMMS: Posts $424,971 Net Loss in First Quarter 2006
ADVOCAT INC: Selling Twelve N.C. Facilities for $14.5 Million
AEARO CORP: Improved Credit Profile Earns S&P's Stable B+ Rating
AES DOMINICANA: S&P Assigns B- Rating to $160 Million Senior Notes
AMERICAN PACIFIC: Completes Acquisition of Aerojet Fine Chemicals
AMKOR TECH: Enters Into $100 Million Revolving Credit Facility
ANCHOR GLASS: Court Denies Arkema's Lift Stay Plea
ANCHOR GLASS: United Steelworkers Object to KERP
AOL LATIN AMERICA: Has Until Feb. 23 to Decide on Leases
APPTIS INC: Modest Industry Niche Prompts S&P to Affirm B+ Rating
AXIA INC: Moody's Rates Corporate Family & $175 Mil. Debts at B2
B/E AEROSPACE: Moody's Reviews Sr. Subordinated Bonds' Caa2 Rating
BALLY TOTAL: Completes Restatements of 2000-2003 Financials
BEAR STEARNS: Interest Shortfalls Prompt S&P to Junk Class Certs.
BEAR STEARNS: S&P Affirms Low-B Ratings on Six Certificate Classes
BELVEDERE DEVELOPERS: Voluntary Chapter 11 Case Summary
BERKLINE/BENCHCRAFT: Weak Performance Spurs S&P's Watch Negative
BOYDS COLLECTION: Moody's Withdraws Junk Corporate Family Rating
BROOKFIELD PROPERTIES: Consortium Closes Buy-Out Deal on O&Y REIT
BUCKEYE TECH: Names Elizabeth Welter as Chief Accounting Officer
CAPITAL AUTO: S&P Puts Low-B Ratings on Proposed $2.17-Bil Debts
CARGO CONNECTION: Sept. 30 Balance Sheet Upside-Down by $3.2 Mil.
CATHOLIC CHURCH: Spokane Gets Limited OK to Hire GVA as Appraiser
CATHOLIC CHURCH: Court Okays Amended Terms of Traxi's Retention
CCMG ACQUISITION: Moody's Rates $600 Million Sr. Sub. Notes at B3
CHESTER COUNTY: S&P Shaves Revenue Bonds' Rating to B from BBB-
CITIGROUP MORTGAGE: Fitch Rates $16.9 Mil. Class Certs. at Low-B
CLARION TECHNOLOGIES: Oct. 1 Balance Sheet Upside-Down by $80 Mil.
COLISEUM FUNDING: Moody's Places Class A-2 Notes' Rating on Watch
COLUMBUS LOAN: Moody's Places Class C Notes' Ba3 Rating on Watch
COMPASS MINERALS: Moody's Rates $450 Million Sr. Facilities at B1
CRYSTAL RIVER: Fitch Puts Low-B Ratings on $15.5 Mil. Class Notes
DDL INC: Case Summary & 20 Largest Unsecured Creditors
DOMTAR INC: Implements Measures to Return to Profitability
EXPRESS BUS: Case Summary & 19 Largest Unsecured Creditors
FRIEDMAN'S INC: Court Confirms Joint Reorganization Plan
GENTEK INC: Warrants Tender Offer by Abrams Capital et al. Expires
GENTEK INC: Selling Canadian CableTech Operations for $33 Million
GLOBAL CASH: High Leverage Spurs S&P to Affirm Low-B Debt Ratings
GRAY TELEVISION: Completes Acquisition of WSAZ-TV for $186 Mil.
HARRY & DAVID: Sept. 24 Balance Sheet Upside-Down by $36 Million
HERTZ CORP: Moody's Rates $3.4 Billion Loan Facilities at Ba2
ICEWEB INC: Amends Financial Statements to Fix Accounting Error
IVOICE INC: Posts $182,518 Net Loss in Quarter Ended Sept. 30
JAG MEDIA: Going Concern Doubt Continues Amid Losses & Deficits
JOSEPH GREENBLATT: Case Summary & 20 Largest Unsecured Creditors
KAISER ALUMINUM: Confirmation Objections to Amended Ch. 11 Plan
KAISER ALUMINUM: Wants Fourth Old Republic Stipulation Approved
KATUN CORP: Term Loan Repayment Cues S&P to Raise Bank Loan Rating
KERR-MCGEE: Fitch Withdraws Rating After $4.25-Bil Loan Repayment
KMART CORP: Court OKs Dept. of Health's Move for Protective Order
KMART CORP: Claimants Want Plan Injunction Lifted to Pursue Action
L-3 COMMS: Moody's Affirms Senior Subordinated Notes' Ba3 Rating
LEVITZ HOME: Final Hearing for Asset Sale Set on December 6
LONG BEACH: Fitch Assigns Low-B Ratings to $43.82MM Cert. Classes
MAPCO EXPRESS: S&P Affirms Low-B Ratings After $30MM Add-On Loan
MASSEY ENERGY: Offering $725-Mil Sr. Notes via Private Placement
MCLEODUSA INC: SBC Entities Ask Court to Amend Utility Order
MCLEODUSA INC: SBC Entities Want $23.4 Million Payment or Deposit
MERRILL LYNCH: Moody's Lowers $78 Million Notes' Ratings to Caa2
MILLENNIUM BIOTECH: Sept. 30 Balance Sheet Upside-Down by $2.1MM
MIRANT CORP: Confirmation Hearing on 2nd Amended Plan Slated Today
MIRANT CORP: EPA Says Plan Provisions Preclude Law Enforcement
MIRANT CORP: Inks Pact to Settle Sierra Liquidity's Plan Objection
MIRANT CORP: Ch. 11 Examiner Wants 105 Claims Transfer Nixed
MOHEGAN TRIBAL: Posts $77.4MM Net Loss in Quarter Ended Sept. 30
MON VIEW: Voluntary Chapter 11 Case Summary
NOBEX CORPORATION: Case Summary & 20 Largest Unsecured Creditors
NORTHWEST AIRLINES: Court Establishes Claims Resolution Procedure
NORTHWEST AIRLINES: Seabury Group Approved as Financial Advisor
NORTHWEST PARKWAY: S&P Affirms BB+ Rating on Subordinate-Lien Debt
OCCAM NETWORKS: Sept. 30 Balance Sheet Upside-Down by $14 Million
OMI TRUST: S&P's Ratings on Two Housing Transactions Tumbles To D
ON TOP COMMUNICATIONS: Taps Sciarrino & Associates as FCC Counsel
ORCAL GEOTHERMAL: Moody's Rates New $165 Mil. Sec. Notes at Ba1
PACIFIC MAGTRON: Subsidiary Sells Real Estate for $4.9 Million
PARKWAY HOSPITAL: Has Continued Access to GE's Cash Collateral
PER-SE: S&P Assigns B+ Rating to $485MM Senior Credit Facilities
PLASTIPAK HOLDINGS: Moody's Rates Proposed $250 Mil. Notes at B2
PLASTIPAK HOLDINGS: S&P Rates Planned $250M Sr. Unsec. Bonds at B
PLIANT CORP: Moody's Lowers $314 Million Sub. Notes' Rating to C
PRECISION TOOL: Emerges From Chapter 11 Protection
PROLONG INTERNATIONAL: NewGen Tech. Backs Out From Merger Talks
SAINT VINCENTS: Wants to Ink Hospital League Agreement
SAINT VINCENTS: Mallinckrodt Withdraws Payment Request
SAINT VINCENTS: CIR/SEIU Objects to Pursuit of Malpractice Claims
SHC INC: Administrator Gets Until Feb. 22 to Object to Claims
SHC INC: Plan Administrator Wants to Delay Case Closing to June
SHOPKO STORES: Extends Tender Offer for Sr. Notes Until Dec. 23
SILICON GRAPHICS: Delays Meeting Over Reverse Stock Split Plan
SMURFIT-STONE: S&P Junks Subsidiaries' Senior Unsecured Debts
SOUNDVIEW HOME: Fitch Places Low-B Ratings on $28MM Cert. Classes
SOUTHWEST HOSPITAL: Court Confirms Liquidating Chapter 11 Plan
STELCO INC: Informal Noteholders Committee Submit Plan Proposal
STELCO INC: Resuming Creditors' Meetings Today
STELCO INC: Selling AltaSteel Assets to Africa's Scaw Metals
SYMPHONY CLO: Moody's Rates $13.5 Million Class D Notes at Ba2
TEXAS PETROCHEMICALS: Soliciting Consents to Amend Indenture
TRADEMOTION SOFTWARE: Case Summary & 23 Largest Unsec. Creditors
TRANSAX INT'L: Sept. 30 Balance Sheet Upside-Down by $1.4 Million
TRM CORP: S&P Affirms B+ Bank Loan and Corporate Credit Ratings
TRUCK ENGINE: Moody's Reviews $100 Million Notes' Ba1 Rating
TW INC: Has Until February 22 to File Final Report
TYCORP PIZZA: Case Summary & 66 Largest Unsecured Creditors
U.S. MEDSYS: Miller & Mccollom Raises Going Concern Doubt
UGS CORP: High Leverage Prompts S&P to Affirm B+ Debt Ratings
UNITED SUBCONTRACTORS: Moody's Rates Proposed $65MM Debt at Caa1
VERIFONE INC: Growth Strategy Spurs S&P to Affirm B+ Debt Ratings
WHITEHALL JEWELLERS: Newcastle to Launch Cash Tender Offer
WI-TRON INC: Posts $395,479 Net Loss in Third Quarter 2005
WILLBROS GROUP: Bank Group Waives Financial Covenants
WORLD HEART: Receives Non-Compliance Notice from Nasdaq
WORLDGATE COMMUNICATIONS: Grant Thornton Resigns as Auditor
WORLDGATE COMMS: Faces Possible Nasdaq Delisting Due to 10-Q Delay
WYLE LAB: S&P Affirms Low-B Ratings on $180 Million Bank Loans
* AlixPartners Adds Doug Jung, Former Chase Exec., to NY Office
* Cadwalader Names Douglas J. Landy as Special Counsel in New York
* BOOK REVIEW: Corporate Recovery - Managing Companies in Distress
*********
ADAM CORP: Voluntary Chapter 11 Case Summary
--------------------------------------------
Debtor: Adam Corporation
1744 Liberty Street
Braintree, Massachusetts 02184
Bankruptcy Case No.: 05-30110
Type of Business: The Debtor is a real estate developer.
Chapter 11 Petition Date: November 21, 2005
Court: District of Massachusetts (Boston)
Judge: Joan N. Feeney
Debtor's Counsel: Frank D. Kirby, Esq.
Frank D. Kirby & Associates, P.C.
111 West 8th Street, Unit G
South Boston, Massachusetts 02127
Tel: (617) 269-5444
Fax: (860) 257-3398
Total Assets: $1,300,000
Total Debts: $4,100,000
The Debtor's list of its 20 largest unsecured creditors was not
available at press time.
ADVANCED COMMS: Posts $424,971 Net Loss in First Quarter 2006
-------------------------------------------------------------
Advanced Communications Technologies, Inc., delivered its
financial statements for the quarter ended Sept. 30, 2005, to the
Securities and Exchange Commission on Nov. 14, 2005.
The company reported a $424,971 net loss on $2,288,683 of gross
revenues for the quarter ended Sept. 30, 2005. At Sept. 30, 2005,
the company's balance sheet showed $4,891,224 in total assets,
$2,327,606 in total liabilities, and $2,563,618 of positive
stockholders' equity. Advanced Communications' Sept. 30 balance
sheet also shows strained liquidity with $1,633,607 in current
assets available to satisfy $2,127,953 of liabilities coming due
within the next 12 months.
A full-text copy of Advanced Communications' financial statements
for the quarter ended Sept. 30, 2005, is available at no charge at
http://ResearchArchives.com/t/s?369
Going Concern Doubt
Weinberg & Company, PA, expressed substantial doubt about
Advanced Communications Technologies, Inc.'s ability to continue
as a going concern after it audited the Company's financial
statements for the fiscal years ended June 30, 2005 and 2004. The
auditing firm pointed to the Company's net loss and negative cash
flow from operations in fiscal 2005 as well as a working capital
deficiency at June 30, 2005.
Based in New York, Advanced Communications Technologies, Inc.,
specializes in the technology aftermarket service and supply
chain, known as reverse logistics. Its wholly owned subsidiary
and principal operating unit, Encompass Group Affiliates, Inc.,
acquires and operates businesses that provide computer and
electronics repair and end-of-life cycle services.
ADVOCAT INC: Selling Twelve N.C. Facilities for $14.5 Million
-------------------------------------------------------------
Advocat Inc. (NASDAQ OTC: AVCA) has signed a definitive agreement
to sell eleven assisted living facilities located in North
Carolina to Agemark Acquisition, LLC, a North Carolina limited
liability company.
The sales price is approximately $11 million, to be paid at
closing. Closing is contingent on the purchaser's ability to
obtain licenses to operate the buildings. The closing is expected
to occur during the first quarter of 2006. A pre-tax charge of
approximately $4.5 million to $5 million will be recorded in the
fourth quarter of 2005 to reduce the carrying value of these
11 facilities to the amount expected to be realized from the
proceeds of the sale, after payment of estimated transaction
costs.
Advocat operates one additional assisted living facility in North
Carolina. The Company has executed an agreement to sell this
facility for a sales price of approximately $3.5 million, subject
to the satisfactory completion of due diligence. The buyer of
this facility has until the end of the year to conduct due
diligence. If completed, this transaction will result in a pre-
tax gain of approximately $1.3 million in the quarter the facility
is sold.
"This sale will allow us to focus on our nursing home operations
and reduce our overall debt," stated William R. Council, Chief
Executive Officer. "Though we worked to stabilize the North
Carolina operations, we were not making meaningful progress toward
positive operating results, as the facilities continued to produce
negative cash flow and operate at a loss."
Mortgage debt on the North Carolina buildings is approximately
$18 million. The company expects net proceeds (after costs and
commissions) from these transactions will leave a debt balance of
approximately $4.5 million to $5 million, which it intends to
finance with a term loan from the existing lender, secured by
other properties currently financed by this lender.
Advocat Inc. -- http://www.irinfo.com/avc-- provides long-term
care services to nursing home patients and residents of assisted
living facilities in nine states, primarily in the Southeast.
* * *
As reported in the Troubled Company Reporter on Apr. 25, 2005,
BDO Seidman LLP raised substantial doubt about Advocat Inc.'s
ability to continue as a going concern after it audited the
Company's financial statements for the year ended Dec. 31, 2004.
The Company incurred operating losses in two of the three years in
the period ended December 31, 2004, and although the Company
reported a profit for the year ended December 31, 2004, that
profit primarily resulted from non-cash expense reductions caused
by downward adjustments in the Company's accrual for self-insured
risks associated with professional liability claims.
AEARO CORP: Improved Credit Profile Earns S&P's Stable B+ Rating
----------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on personal
protection equipment manufacturer Aearo Corp. to stable from
negative. All the ratings were affirmed, including the 'B+'
corporate credit rating. The outlook revision reflects the
company's improved credit profile, which stems from its better
operating performance.
"Aearo's operating leverage is benefiting from strong organic
sales growth and higher volumes," said Standard & Poor's credit
analyst John R. Sico. "With these strengths come improved
manufacturing efficiencies and higher operating margins."
Indianapolis, Indiana-based Aearo Corp., with sales of more than
$400 million, is a niche manufacturer of personal protection
equipment serving competitive and fragmented markets. It is a
private holding company principally owned by Bear Stearns Merchant
Banking after a leveraged recapitalization in April 2004.
The ratings on the company reflect:
* its weak business risk profile in a competitive industry,
* its relatively heavy debt burden,
* an aggressive financial policy, demonstrated by its
debt-financed August 2005 dividend payment, and
* good niche positions within the large, $15 billion
industry.
The business is highly fragmented, but Aearo:
* maintains good geographic, product, and customer diversity;
* has stable earnings; and
* generates relatively good free cash flow.
Aearo participates in the $3 billion global hearing, eye, face,
head, and respiratory equipment niches of the personal protection
equipment industry, and it registered fiscal 2005 sales of about
$420 million. The company manufactures and sells safety products
in more than 70 countries under well-known brand names. It also
makes a wide array of energy-absorbing materials that are
incorporated into other manufacturers' products to control noise,
vibration, and shock.
Despite the competitive nature of its industry, Aearo has been
able to stabilize earnings and generate positive free cash flow
because it produces good margins and benefits from limited working
and fixed-capital needs that reduce its exposure to business
cyclicality. Furthermore, a significant portion of its revenues
stem from consumable products. Aearo also benefits from stable
demand because of government and industry regulations requiring
safety equipment.
Part of the demand for the company's products is tied to
manufacturing employment. Though this has been flat, especially
in the U.S., the company also sells through the consumer,
construction, and utility markets. The economy is currently
improving and Aearo's sales in the fiscal year ended September
2005 rose more than 15% from the year earlier, almost entirely
from internal growth. The company has a good pipeline of new
products that will be introduced in the near future. Given the
new products and good industry conditions, momentum is expected to
continue into the next fiscal year. Adjusted operating margins
were about 19% for the fiscal year ended Sept. 30, 2005.
AES DOMINICANA: S&P Assigns B- Rating to $160 Million Senior Notes
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B-' rating to AES
Dominicana Energia Finance S.A.'s $160 million senior notes due
2015. The outlook is stable.
AES Dominicana is a special purpose financing entity that will
issue the bonds and on-lend the funds to its parent AES Andres
B.V.:
* to repay with AES Andres' loan facility, for working
capital, and
* to return a $26 million security deposit to Dominican Power
Partners, which in turn will repay its loan facility.
AES Dominicana manages two of The AES Corp.'s (B+/Positive/--)
wholly owned generating facilities, Andres and DPP.
"The stable outlook reflects that of the Dominican Republic and
AES Dominicana's improved prospects given improved conditions in
the Dominican electric sector," said Standard & Poor's credit
analyst Scott Taylor.
The rating is capped by and highly dependent on the rating of the
Dominican Republic.
Incorporated in the Netherlands, Andres owns a 304 MW gas-fired
combined-cycle plant located outside of Santo Domingo. The
facility also includes an liquefied natural gas regasification
terminal.
DPP is incorporated under the laws of the Cayman Islands, and it
owns two open cycle gas turbines of 118 MW each, Los Mina V and
Los Mina VI.
AMERICAN PACIFIC: Completes Acquisition of Aerojet Fine Chemicals
-----------------------------------------------------------------
American Pacific Corporation (Nasdaq: APFC) completed its purchase
of substantially all of the assets of GenCorp Inc.'s fine
chemicals business, Aerojet Fine Chemicals, LLC, which includes
the assumption of certain liabilities.
The purchase price for AFC was $114 million plus a contingent
payment of up to $5 million and the assumption by American Pacific
of certain liabilities. Of this purchase price, $88.5 million was
paid in cash at closing and $25.5 million was a subordinated
seller note (which accrues interest on a payment-in-kind basis)
issued at closing. The contingent payment of up to
$5 million will be based on AFC achieving specified earnings
targets in the twelve-month period ending Sept. 30, 2006.
Depending on the performance of AFC, there may be an interim
adjustment. In addition, American Pacific reimbursed the seller
$17.4 million, subject to adjustments, for the capital investment
that the seller incurred in excess of the $19 million threshold.
Furthermore, American Pacific paid the seller $2.4 million,
subject to adjustments, for net working capital received in excess
of $10.0 million pursuant to the working capital adjustment set
forth in the amended purchase agreement.
"We are very excited about the closing of this transaction. The
fine chemicals business we have acquired complements our existing
specialty chemical and energetic product portfolio. I am
confident that this acquisition provides us with a strong presence
in fast growing pharmaceutical markets," said John R. Gibson, CEO
of American Pacific.
Credit Agreement
Concurrent with the closing of this transaction, the company
entered into a first lien credit agreement with Wachovia Bank,
National Association, as administrative agent, Bank of America,
N.A., as syndication agent, Wachovia Capital Markets, LLC, as sole
lead arranger and sole book runner and certain other lenders for a
$75 million secured revolving credit and term loan facility and a
second lien credit agreement with Wachovia Bank, National
Association, as administrative agent, Bank of America, N.A., as
syndication agent, Wachovia Capital Markets, LLC, as sole lead
arranger and sole book runner and certain other lenders for a
$20 million secured term loan facility. The company borrowed
$85 million from these two credit facilities to finance the
acquisition of Aerojet Fine.
New CFO
Concurrent with the closing of the transaction, the company
entered into an employment agreement with Seth Van Voorhees, the
company's ice President and Chief Financial Officer, to be
effective Dec. 1, 2005, with an initial term until Oct. 1, 2008.
About Aerojet Fine Chemicals
Aerojet Fine Chemicals is a leading manufacturer of active
pharmaceutical ingredients and registered intermediates under cGMP
guidelines for commercial customers in the pharmaceutical
industry. Its facilities in California offer specialized
engineering capabilities including high containment for high
potency compounds, energetic and nucleoside chemistries, and
chiral separation using the first commercial-scale simulated
moving bed in the United States. In fiscal 2004, AFC reported
sales of approximately $66 million.
About American Pacific Corporation
American Pacific Corporation -- http://www.apfc.com/-- is a
specialty chemical company that produces energetic products used
primarily in space flight and defense systems, automotive airbag
safety systems and explosives, Halotron, a clean fire
extinguishing agent and water treatment equipment. In 2004 it
acquired the former Atlantic Research Corporation liquid in-space
propulsion business. Ampac-ISP, as it is now known, is a leading
supplier of commercial and military propulsion products and the
world's largest producer of bipropellant thrusters.
* * *
As reported in the Troubled Company Reporter on Nov. 2, 2005,
Moody's Investors Service affirmed the B2 corporate family rating
of American Pacific Corporation. Moody's also affirmed its:
* B2 ratings on the company's revised first lien term loan and
revolver,
* the Caa1 rating on its second lien term loan, and
* a speculative grade liquidity rating of SGL-3.
Moody's said the rating outlook remains stable.
AMKOR TECH: Enters Into $100 Million Revolving Credit Facility
--------------------------------------------------------------
Amkor Technology, Inc. (Nasdaq: AMKR) completed two financing
initiatives designed to improve the company's liquidity.
Taiwan Term Loan
In the first transaction, Amkor's subsidiary, Amkor Technology
Taiwan, Ltd., has closed on a syndicated NT$1.8 billion
(approximately $54 million) secured term loan through a group of
institutional lenders, with Chinatrust Commercial Bank, Ltd. and
Ta Chong Commercial Bank acting as coordinating arrangers.
The term loan will be repaid in 10 equal semi-annual installments
with a final maturity of Nov. 30, 2010 and will bear interest at a
floating rate based on the Taiwan 90-day commercial paper rate
plus a margin of 1.2% (currently 2.8% inclusive of the margin).
In September 2005 Amkor received NT$1 billion (approximately $30
million) in interim financing pending completion of the term loan.
Amkor intends to use the net proceeds of the term loan to repay
the interim financing and for general corporate purposes,
including capital expenditures.
"Amkor is a global company with an expanding presence in Asia and
the Greater China region. We are pleased to be working with an
outstanding group of banking professionals in Taiwan to support
the company's working capital and capital expenditure needs in
Asia," said Joanne Solomon, Amkor's corporate treasurer.
Key Terms:
Description: NT$1.8 billion (approx. $54 million)
senior secured term loan
Availability: Through November 30, 2010
Lead Arrangers: Chinatrust and Ta Chong Commercial Bank
Pricing: Taiwan 90-day Primary Market Commercial
Paper Fixing Rate plus 1.20%
Financial covenants: Relating to Amkor Taiwan: Minimum
Current Ratio; Maximum Leverage Ratio;
and Minimum Tangible Net Worth
$100 Million Credit Facility
In the second transaction, Amkor has entered into a new $100
million senior secured revolving credit facility on Nov. 28, 2005
arranged by Bank of America, N.A., and Wachovia Capital Finance
Corporation, as co-lead arrangers.
The new $100 million revolver, which is available through Nov. 28,
2009, replaces Amkor's prior $30 million secured revolving line of
credit, which was scheduled to mature on June 29, 2007. The
available funds, if drawn, would be used for general corporate
purposes. Availability under the revolver is determined on a
formula based on Amkor's accounts receivable.
Key Terms:
Description: $100 million senior secured revolving
credit facility
Availability: Through November 28, 2009
Co-Lead Arrangers: Bank of America, N.A. and Wachovia
Capital Finance Corp.
Pricing: Libor + 1.50% (or Libor + 2.25% based
on minimum liquidity requirements).
The facility also provides for base rate
borrowings.
Financial covenants: None
"These initiatives, together with the recent private placement of
$100 million in convertible subordinated notes due 2013 and the
subsequent repurchase of $100 million in convertible notes due
2006, are consistent with our strategy of improving our financial
liquidity. The expansion of our revolving credit from $30 million
to $100 million provides additional support, if needed, to finance
our operating and debt service requirements through 2007," said
Ken Joyce, Amkor's chief financial officer.
Amkor Technology, Inc. -- http://www.amkor.com/-- is a leading
provider of contract semiconductor assembly and test services.
The company offers semiconductor companies and electronics OEMs a
complete set of microelectronic design and manufacturing services.
* * *
As reported in the Troubled Company Reporter on Aug. 25, 2005,
Moody's Investors Service lowered the long term ratings and
speculative grade liquidity rating of Amkor Technology, and
maintains a negative rating outlook.
The downgrade of the long term debt ratings reflects concerns
about Amkor's ability to support its existing debt load at its
current operating performance levels. The burden of fixed
expenses and continued high capex levels make it challenging for
Amkor to generate positive cash flow without meaningful growth in
revenues and operating margin which has been absent so far.
Amkor's subordinated notes were downgraded by two notches, versus
one notch for other ratings, reflecting the magnifying of
debtholders' weaker recovery position relative to more senior
obligations as the company's overall credit profile deteriorates.
The downgrade of the liquidity rating to SGL-4, indicating weak
liquidity, specifically reflects concerns about Amkor's ability to
meet its $233 million debt maturity in June 2006 from existing
sources of funds or cash generation over the next 12 months.
These ratings were lowered:
* Corporate family rating (formerly Senior implied rating)
to B3 from B2;
* Senior unsecured debt rating to Caa1 from B3;
* Senior secured (2nd lien) term loan to B2 from B1;
* Subordinated notes lowered to Caa3 from Caa1; and
* Speculative grade liquidity rating lowered to SGL-4
from SGL-3.
Moody's said the rating outlook remains negative.
ANCHOR GLASS: Court Denies Arkema's Lift Stay Plea
--------------------------------------------------
The U.S. Bankruptcy Court for the Middle District of Florida
denied Arkema, Inc., fka ATOFINA Chemicals, Inc.'s request to lift
the automatic stay so it can terminate the contract allowing
Anchor Glass Container Corporation to use its CERTINCOAT glass
coating system. However, the Court grants Arkema's request for
adequate protection.
As reported in the Troubled Company Reporter on Oct. 17, 2005,
Arkema and Anchor Glass entered into a contract wherein Arkema
agreed to impart on the Debtor the handling, processing and
manufacturing techniques, abilities and capacities needed to
utilize the CERTINCOAT System to apply a coating composition to
glass containers. Arkema also agreed to sell to the Debtor the
"Formulation" -- organotin chemicals used in the process of
depositing a hot tin oxide on glass.
Under the Contract, the Debtor was permitted to purchase certain
formulation and spare parts, lease necessary equipment, and
license certain of Arkema's technology and patents in return for
payments specified in a Lease Fee.
Arkema told the Court that that the Debtor has a prepetition debt
exceeding $120,000, of which $18,581 is delinquent. Before the
Petition Date, the Debtor had defaulted under the Contract by,
among other things, failing to pay amounts due to Arkema in a
timely fashion. Arkema added that the Debtor continues to order
additional Formulation and Spare Parts under the Contract, but has
given no assurance of payment.
Arkema's Demands
As an alternative to its request to lift the automatic stay,
Arkema sought adequate protection of its interests, including:
* a requirement that the Debtor pay all postpetition amounts
owed immediately;
* a requirement that the Debtor pay all future payments within
15 days of being invoiced;
* a requirement that the Debtor submit OU's to Arkema for all
of its plants not less than once a week; and
* a requirement that the Debtor assume or reject the Contract
within 30 days.
The Court directs the Debtor to provide adequate protection to
Arkema:
(a) The Debtor will provide a usage report to Arkema, in the
format presently required under the Contract, every 15
days.
(b) Payments due under the Contract will be made within 30
days of the date the Debtor supplies the usage report.
(c) In the event the Debtor defaults in any of its
obligations, and the default is not cured within 72 hours
of the time that counsel for Arkema provides telephonic,
facsimile or e-mail notice of the default to counsel for
the Debtor, on the filing of an Affidavit of Default,
Arkema will be entitled to ex parte relief from the
automatic stay. The affidavit will affirmatively state
that notice of the default was given 72 hours in advance
to the Debtor's attorney and that the default has not been
cured.
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. 13;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
ANCHOR GLASS: United Steelworkers Object to KERP
------------------------------------------------
The United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied Industrial and Service Workers International Union
asks the U.S. Bankruptcy Court for the Middle District of Florida
deny Anchor Glass Container Corporation's motion to approve a
severance plan for a portion of its Key Employees and a separation
plan for all of its remaining salaried employees.
United Steelworkers' Position
While key employee retention programs were, at one time, de riguer
in chapter 11 cases, the Debtor has no basis for obtaining
approval of the program, particularly where it refuses to comply
with the terms of its labor agreement with the United Steel, Paper
and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and
Service Workers International Union, Glen M. Connor, Esq., at
Whatley Drake, LLC, in Birmingham, Alabama, contends.
The United Steelworkers represents 7% to 10% of the Debtor's
bargaining unit of mold makers and mold-making apprentices, Mr.
Connor tells the Court.
According to Mr. Connor, the Debtor and the United Steelworkers
are parties to a master labor agreement covering 10 bargaining
units in nine States. The Master Agreement was to have expired
on August 31, 2005, but the parties extended the agreement
through September 30, 2005, with the agreement to automatically
renew for successive 30-day periods unless either party provides
10 days' notice of an intent to terminate.
Part of the collective bargaining agreement between the Debtor
and the United Steelworkers is a letter agreement dated Sept. 17,
2004, which provides a schedule of contributions to the
Steelworkers Pension Trust, a multi-employer pension trust in
which the Company participates, through 2008. The parties agreed
that Pensions will not be reopened until the later of August 31,
2008, or the expiration of the successor contracts to the current
CBAs. The September 17, 2004 Agreement waives all bargaining
rights and obligations with respect to pensions during that
period.
In exchange for the waiver of the right to bargain over
additional pension improvements in the future, the parties agreed
to match the industry economic settlement contained in the
agreement that succeeds the current industry agreement with
respect to all economic provisions except Pensions of the CBAs.
The industry agreement with respect to mold-making employees was
concluded in August 2005. On several occasions, the United
Steelworkers asked the Debtor to schedule a meeting to implement
the industry economic agreement, Mr. Connor relates. A
conference call between the parties did not occur until
October 25, 2005, coincidentally, the date that the Debtor filed
the KERP Motion. The parties were unable to reach any agreement
during the October 25 conference call.
To preserve its position with respect to the violation of the
collective bargaining agreements, the United Steelworkers filed a
grievance on October 27, 2005, which demanded that the Debtor
implement the terms of the industry economic settlement
retroactive to September 1, 2005.
The United Steelworkers contends it is mindful of the Debtor's
concerns about maintaining management stability during its
Chapter 11 case, however, the Union asserts that the KERP may be
addressing a problem that may not be real.
"There is no evidence, or even a credible suggestion, that the
KERP is meant to address an actual risk of managers leaving the
[Debtor]," Mr. Connor says.
The United Steelworkers believes that the Debtor did not suffer
any meaningful loss of managers in either of its prior bankruptcy
cases and, in any event, does not describe the losses in the
Motion. The KERP also ignores the troubles generally within the
glass industry, a factor that decreases the likelihood that the
Debtor's managers may depart for greener pastures.
The KERP, in large part, bears no relation to providing
meaningful incentives to achieving a successful outcome in the
Debtor's Chapter 11 case, Mr. Connor adds.
The United Steelworkers also observes that the severance and
separation payments under the KERP would be made in all
circumstances, even if the Debtor shuts its operations or
liquidates its assets. The Union also expects that the first two
retention payments to the 80 so-called "Key" employees will be
made on fixed dates and will not be subject to disgorgement, even
if the Debtor liquidates.
KERP Does Not Protect USW-represented Employees
The Debtor "is clearly blind to the incendiary effect of the KERP
on its hourly employees," Mr. Connor says. "The KERP sends the
message that the [Debtor] intends to take care of its executive
and salaried work force, to the exclusion of its hourly employees
who have no similar protections against the vicissitudes of
bankruptcy."
The only employees not protected in the Debtor's chapter 11 case
are the USW-represented employees who are being denied the
economic improvements of the industry pattern that the Debtor
agreed to adopt, Mr. Connor points out.
According to Mr. Connor, the Debtor did not discuss the KERP with
the United Steelworkers before the filing of the Motion, thus
illustrating the Debtor's failure to appropriately exercise its
business judgment.
"All of the [Debtor's] hourly workers have suffered through three
Chapter 11 cases through no fault of their own," Mr. Connor says.
"It is not the [Debtor's] workers that have made the managerial
decisions that have led to this third bankruptcy case.
Nevertheless, it is the [Debtor's] management that seeks to seize
for itself substantial protection against uncertainty while
denying the United Steelworkers members the protections of their
labor agreement."
"The KERP," Mr. Connor concludes, "is unnecessary, excessive, and
smacks of an arrogance that will ultimately imperil the
[Debtor's] reorganization efforts."
Court Authorizes Debtor to File KERP Under Seal
Pursuant to Section 107(b) of the Bankruptcy Code, the Court
authorizes the Debtor to file the details of their proposed Key
Employee Retention Program under seal.
Judge Paskay rules that the details of the proposed Retention
Program will remain under seal, confidential and will not be made
available to anyone, except to the U.S. Trustee, the Debtor, the
counsel for the Official Committee of Unsecured Creditors, or
others at the Debtor's discretion or on further Court order.
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. 13;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
AOL LATIN AMERICA: Has Until Feb. 23 to Decide on Leases
--------------------------------------------------------
America Online Latin America, Inc., and its debtor-affiliates
sought and obtained an extension from the U.S. Bankruptcy Court
for the District of Delaware of their time to decide whether to
assume, assume and assign, or reject unexpired leases of
nonresidential property pursuant to Section 365(d)(4) of the
Bankruptcy Code.
The Honorable Mary F. Walrath gave AOL Latin America until
Feb. 23, 2006, to decide on the unexpired leases.
The Debtors are party to a number of non-residential property
lease agreements. The Debtors assured Judge Walrath that all
postpetition obligations under the leases are being met.
AOL anticipates assuming some of the leases. However, as they are
in the process of winding down their businesses, it is critical
for the Debtors to maintain appropriate flexibility to make
specific decisions about the real property leases. The Debtors say
they have not had sufficient time to formulate and prosecute a
winding down plan and have not had sufficient time to analyze each
location and its purpose in the wind down process.
Headquartered in Fort Lauderdale, Florida, America Online Latin
America, Inc. -- http://www.aola.com/-- offers AOL-branded
Internet service in Argentina, Brazil, Mexico, and Puerto Rico, as
well as localized content and online shopping over its proprietary
network. AOL Latin America filed for Chapter 11
protection June 24, listing assets of US$28.5 million and debts of
US$181.8 million.
APPTIS INC: Modest Industry Niche Prompts S&P to Affirm B+ Rating
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
Chantilly, Virginia-based Apptis Inc.'s senior secured bank loan
to a '2' from a '3'. This indicates that lenders can expect
substantial recovery of principal in the event of a payment
default or bankruptcy.
The 'B+' bank loan and corporate credit ratings were affirmed.
The outlook remains negative.
The recovery rating action is based predominantly on a substantial
increase in LIBOR rates since this bank facility was initially
rated, which drives improved recovery prospects under our current
methodology.
"The ratings reflect the company's relatively modest position in
the highly competitive and consolidating government IT services
market, an acquisitive growth strategy, and high debt leverage,"
said Standard & Poor's credit analyst Ben Bubeck.
A predictable revenue stream based upon a strong backlog and the
expectation that government-related services business will remain
solid over the intermediate term are partial offsets to these
factors.
Apptis provides IT services and communications solutions primarily
to the federal government. The company also generates a
significant portion of operating income from its hardware
business, although revenue from this business has lower margins
than on the services side. Apptis had approximately $210 million
in operating lease-adjusted debt as of September 2005, including
approximately $54 million of pay-in-kind notes.
A continued trend of consolidation within the government IT
services industry has left Apptis facing many larger competitors
with greater financial resources and broader technical
capabilities as the company competes for new contracts.
Apptis' ability to maintain its historically strong recompete
success rate will be important as it faces an increasingly
competitive bidding environment. A strong backlog -- nearly
$2 billion as of June 2005 -- combined with only one major
recompete over the intermediate term, offer a predictable source
of revenue.
AXIA INC: Moody's Rates Corporate Family & $175 Mil. Debts at B2
----------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to Axia, Inc.'s
$175 million senior secured credit facilities as well as a B2
corporate family rating. The ratings outlook is stable.
The assigned ratings take into consideration Axia's high leverage,
weak free cash flow generation relative to debt levels and low
tangible asset levels. Additionally, the ratings consider the
company's exposure to the cyclical new residential and commercial
construction markets, representing approximately 60% and 40% of
sales, respectively. At the same time, the company's ratings
reflect Axia's low customer concentration, market dominance, and
exceptionally high margins in the ATF (Automatic Taping and
Finishing) tools market.
These ratings have been assigned to Axia, Inc.:
* $25 million revolving credit facility, due 2010, rated B2;
* $150 million term loan, due 2012, rated B2; and
* Corporate Family Rating, rated B2.
The outlook is stable.
Moody's notes that the assigned ratings are subject to a review of
final documentation.
The senior secured credit facilities are comprised of a $150
million term loan and a $25 million revolving credit facility.
The proceeds of the term loan will be primarily used by Aurora
Capital Group to fund the purchase of Axia Holdings, Inc.
including the "new" Axia Inc. and Ames Taping Tools, Inc. the
primary and wholly owned subsidiary of Axia, Inc.
The purchase price is approximately 8.5x pro forma adjusted LTM
September 30, 2005 EBITDA. Moody's notes that Ames constituted
approximately 12% and 41% of old Axia's FYE 2004 assets and sales,
respectively. Moody's will withdraw the ratings for "old" Axia,
Inc. upon the completion of the transaction.
The ratings reflect the company's high adjusted leverage at close
and Moody's expectation that relatively low free cash flow
generation, expected in the initial years, should result in modest
deleveraging. The company's pro forma debt to adjusted EBITDA and
debt to revenues for the LTM period ended September 30, 2005 were
over 5 times and over 175%, respectively. Free cash flow to total
debt for FYE 2006 is projected to be approximately 5% and is not
expected to rise above 8% before 2008 in Moody's view. Moody's
notes that the company's financial statements are adjusted by
using standard adjustments per Moody's Ratings Methodology report
dated July 2005. In addition, the ratings are negatively
influenced by the direct relationship between the company's
revenue generation and residential/commercial construction market
activity as the company derives all of its revenues from the
construction sector of the economy.
The company's newly assigned ratings benefit from the company's
dominant market position in the ATF tools market that allows the
company to enjoy:
* significant pricing power,
* high margins,
* low customer concentration, and
* strong brand recognition with its national network of nearly
400 store locations and distribution outlets split among its
two divisions.
Axia has been able to successfully pass through price increases
for over five years without experiencing decline in demand. The
company's EBITDA margin has been around 35% for the past three
years and Moody's expects the margin to remain similar for the
next four to five years. In terms of customer concentration, no
single customer represents more than 3% of revenues. Axia's
current distribution network consists of:
* 95 company-managed stores;
* 87 franchises and 6 rental locations in the North American
rental business; and
* approximately 200 dealers/distribution outlets in the sold
tool business.
The sold tool network extends into:
* Europe,
* Asia, and
* Australia
with an additional 23 outlets.
The stable ratings outlook reflects Moody's expectation for the
company's continued success in new market penetration and product
innovation. Moody's also expects the company's annual sales
growth to be in the mid single digits. The primary driver behind
the strong sales growth is the fact that the ATF tools market is
currently underserved with the company in a unique position to
take advantage of these market opportunities. Axia believes that
the total available market for ATF tools is 750,000 tools,
approximately 5.5 times greater than the number of ATF tools
currently sold and/or rented by the company.
The ratings and/or outlook may deteriorate if the company's
operating cash flow were to decline significantly or the company
were to experience negative free cash flow resulting in the debt
to EBITDA ratio rising above 6 times. At the same time, the
ratings could be upgraded or the outlook changed to positive if
the company's free cash flow were to increase to above 8% of debt
on a sustainable basis and/or if debt to EBITDA would fall to
below 4.5 times.
The senior secured credit facility is guaranteed fully and
unconditionally on a joint and several basis by Axia Holdings and
all of the existing and future direct and indirect domestic
subsidiaries of Axia, Inc. The senior secured credit facility is
secured by a first priority pledge of all of equity interests of
borrower and each of borrower's direct and indirect domestic
subsidiaries with 100% of the voting stock plus 66% of the voting
stock of any "first-tier" foreign subsidiaries plus perfected
first priority interests in all tangible and intangible assets of
borrower and guarantors. The covenants governing the credit
facility include, but are not limited to:
1) total leverage ratio;
2) interest coverage ratio;
3) limitations on dividend payments; and
4) limitations on acquisitions.
Axia, Inc., headquartered in Duluth, Georgia, is a leading
manufacturer, marketer and distributor of ATF tools in North
America. Revenues for FYE 2005 are projected to be approximately
$90 million.
B/E AEROSPACE: Moody's Reviews Sr. Subordinated Bonds' Caa2 Rating
------------------------------------------------------------------
Moody's Investors Service placed the long term debt ratings of
B/E Aerospace, Inc. under review for possible upgrade. The
company's SGL-2 Speculative Grade Liquidity Rating has been
affirmed. The review of the long-term ratings is prompted by the
recent announcement by the company of its plans to make a public
offering of 13 million shares of its common stock. B/E intends to
use the proceeds from this offering to redeem, at par, its $250
million 8% senior subordinated notes due 2008.
Moody's recognizes the planned sale of equity to reduce debt as a
significantly positive credit event, occurring at a point when the
company has exhibited generally improved operating results in the
strengthening commercial aerospace sector. The proposed
re-financing will substantially lower leverage, which had already
improved from debt/EBITDA (as measured per Moody's standard
methodology) of over 8 times as of FY 2004 to about 6.5 times as
of LTM September 2005. With the redemption of the $250 million of
public debt, Moody's estimates that pro forma leverage would fall
below 5 times. In addition, the contemplated redemption of the
senior subordinated notes would substantially improve B/E's free
cash flow, reducing interest expense by about $20 million
annually.
The review will focus on the timing and success of the equity
offering, and the extent to which proceeds will actually be
applied to debt repayment. Moody's will also continue to assess
the expected financial performance of the company's operations,
and the effect that likely lower debt levels will have on B/E's
credit metrics and liquidity position.
The ratings under review for upgrade include:
* Senior subordinated notes due 2008 through 2011 of Caa2
* Senior unsecured notes due 2010 of B3
* Corporate Family Rating of B3
The company's Speculative Grade Liquidity Rating of SGL-2 has been
affirmed.
Headquartered in Wellington, Florida, B/E Aerospace, Inc. is the
world's largest manufacturer of commercial and general aviation
cabin interior products and a major independent distributor of
aerospace fasteners. The company had LTM September 2005 revenues
of $811 million.
BALLY TOTAL: Completes Restatements of 2000-2003 Financials
-----------------------------------------------------------
Bally Total Fitness Corporation (NYSE:BFT) reported financial
results for the nine months ended September 30, 2005, and the
year-ended December 31, 2004. The Company also completed
restatements for years 2000 through 2003. With Wednesday's
filings, Bally is current with its federal securities filing and
bond indenture requirements.
"Our financial results for the past 21 months reflect our
monumental undertaking in literally transforming our entire
company, including putting a new management team in place,
revamping our financial organization, changing our accounting,
implementing strategic initiatives and creating and introducing a
new business model that we believe should continue to improve the
financial performance and returns of Bally Total Fitness," Paul
Toback, Chairman and Chief Executive officer, said.
"We're also gratified to have completed the arduous and demanding
task of restating our financial results. I specifically want to
thank our employees, whose focus, energy and time were taxed with
this burden, yet they never took their focus off our primary goal
of ensuring the continued improvement of operations in order to
enhance shareholder value."
Mr. Toback added, "We're pleased that results for the first nine
months of 2005 and the year-end 2004 show revenue and operating
income improvement. These results reflect the initial impact of
our growth initiatives -- including new membership sales
strategies such as our Build Your Own Membership Plan and our
Family-add-on program, further emphasis on add-on services such as
personal training, and a renewed focus on customer service to
improve member retention -- as well as stricter expense
management."
Third-Quarter 2005 Financial Results
For the third quarter ended September 30, 2005, net revenues were
$261.8 million, down slightly from $264.8 million a year ago,
primarily as a result of a 2 percent decline in membership revenue
based on a one percent decrease in the average number of members
in the 2005 quarter, as well as a 1 percent decrease in average
revenue per member. This was offset, in part, by continued growth
in personal training revenue, up six percent in the quarter,
versus the same period a year ago.
Operating income for the third quarter was $18.8 million versus
$23.0 million in 2004, primarily reflecting write-downs of retail
inventory increased, information technology expenses, and an
increase of $3 million in costs incurred in connection with the
restatements and related investigations and litigation.
Membership services expense continued on a positive trend, down
1.5 percent from 2004. The company reported a net loss for the
quarter of $1.6 million, compared with net income of $6.8 million
in 2004.
Commenting on the quarter, Mr. Toback said, "Our stringent focus
on cost management in the third quarter was, unfortunately, more
than offset by a number of costs associated with investing in
information technology upgrades and all of the costs associated
with restating our financials and complying with the Sarbanes-
Oxley Act. Flat revenue for the period reflects the transitional
effects on our business model of our new initiatives. However, we
believe as our new marketing campaign kicks off and improved
service takes hold throughout the clubs, customer satisfaction and
retention will improve, as will customer referrals from existing
members, driving future revenue growth and, ultimately, greater
profitability."
Cash and Liquidity
As of Nov. 30, 2005, Bally had $40 million of borrowings and
$13.9 million in letters of credit outstanding under its $100
million revolving credit facility. As of Sept. 30, 2005, Bally
had $20 million of borrowings and $13.9 million in letters of
credit issued under its $100 million revolving credit facility.
Beginning in August 2005, the Company drew more heavily on its
revolving credit facility. This utilization is primarily related
to the $14.9 million payment arising out of an arbitration dispute
with Household Credit, $8 million paid for consents to bondholders
and banks relating to extending financial reporting deadlines,
$3.5 million paid to professional advisors in connection with the
restatements, and the Oct. 17, 2005 interest payment on the 9-7/8%
Senior Subordinated Notes.
2004 Vs. Restated 2003 Financial Results
For the year ended December 31, 2004, net revenues, bolstered by
record memberships sold and record personal training revenue, were
$1.04 billion, up 4.5 percent, compared with restated net revenues
of $1 billion in 2003, which included a one-time revenue increase
of $11 million from the sales of written-off accounts. During
2004, average monthly membership revenue recognized per member was
relatively stable at $19.17 versus $19.11 in the prior-year
period. The average number of monthly members grew 2 percent to
3.697 million, compared with 3.622 million average monthly members
in 2003. The Company also saw a significant increase in personal
training revenue, up 26 percent.
Operating income in 2004 was $38.2 million, up $77.1 million from
a 2003 restated operating loss of $38.9 million. The operating
income improvement is the result of the aforementioned
$45.1 million increase in revenue as well as a $58.9 million
decrease in impairment charges against long-lived assets and
goodwill.
Also, in 2004 operating income before non-cash impairment charges
of $15.2 million was $53.4 million, up 52 percent compared with
the prior year. Impairment charges of $74.1 million in 2003 were
primarily related to the Company's Crunch Fitness division
acquired in December 2001. The Company believes this non-GAAP
financial metric more accurately reflects results of operations in
2004 compared to the prior year because of the significant non-
cash impairment charges that occurred in 2003. The Company
reported a lower net loss of $30.3 million for the year-end 2004
compared with a restated 2003 net loss of $106 million.
Restated 2003 and 2002 Results
The Company also completed its restatement of historical results
for years 2000 through 2003, which reflects the correction of
numerous errors in our previous financial accounting and
reporting. The more than two dozen restatement items included
corrections related to the recognition of revenue, valuation
adjustments of long-lived assets and goodwill and other intangible
assets, lease accounting and income taxes.
These restatement adjustments resulted in an increase in
previously reported net loss of approximately $96.4 million for
the year ended December 31, 2002 and a decrease of $540 million in
net loss for the year ended December 31, 2003. The decrease in
2003 reported net loss includes the reversal of the cumulative
effect of a change in accounting previously reported in 2003 of
$581 million. The Company also increased the January 1, 2002
opening accumulated stockholders' deficit by $1.7 billion to
recognize the effects of corrections in financial statements prior
to 2002.
Bally Total Fitness is the largest and only nationwide
commercial operator of fitness centers, with approximately four
million members and 440 facilities located in 29 states,
Mexico, Canada, Korea, China and the Caribbean under the Bally
Total Fitness(R), Crunch Fitness(SM), Gorilla Sports(SM),
Pinnacle Fitness(R), Bally Sports Clubs(R) and Sports Clubs of
Canada(R) brands. With an estimated 150 million annual visits
to its clubs, Bally offers a unique platform for distribution
of a wide range of products and services targeted to active,
fitness-conscious adult consumers.
* * *
As reported in the Troubled Company Reporter on Aug. 11, 2005,
Moody's Investors Service affirmed the Caa1 corporate family
(formerly senior implied) rating and debt ratings of Bally
Total Fitness Holding Corporation. The affirmation reflects
continued high risk of default and Moody's estimate of recovery
values of the various classes of debt in a default scenario.
Moody's said the ratings outlook remains negative.
Moody's affirmed these ratings:
* $175 million senior secured term loan B facility
due 2009, rated B3
* $100 million senior secured revolving credit facility
due 2008, rated B3
* $235 million 10.5% senior unsecured notes (guaranteed)
due 2011, rated Caa1
* $300 million 9.875% senior subordinated notes due 2007,
rated Ca
* Corporate family rating, rated Caa1.
BEAR STEARNS: Interest Shortfalls Prompt S&P to Junk Class Certs.
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on classes
G, H, and J of Bear Stearns Commercial Mortgage Securities Inc.'s
commercial mortgage certificates series 2001-TOP2. At the same
time, the ratings are removed from CreditWatch negative, where
they were placed May 19, 2005.
The lowered ratings are due to ongoing interest shortfalls due to
litigation expenses related to the 1601 McCarthy litigation that
are being recovered from the trust.
The rating actions reflect Standard & Poor's expectation that
these classes will continue to suffer additional shortfalls due to
future legal expenses, as the litigation is ongoing. Standard &
Poor's will continue to monitor the situation. The magnitude and
timing of future litigation expenses may result in additional
rating actions, as will the outcome of the final judgment.
Ratings Lowered And Removed From Creditwatch Negative
Bear Stearns Commercial Mortgage Securities Inc.
Mortgage Pass-Thru Certs Series 2001-TOP2
Rating
------
Class To From Credit Enhancement
----- -- ---- ------------------
G CCC+ BB/Watch Neg 3.65%
H CCC B+/Watch Neg 2.95%
J CCC- B/Watch Neg 2.10%
BEAR STEARNS: S&P Affirms Low-B Ratings on Six Certificate Classes
------------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on five
classes of Bear Stearns Commercial Mortgage Securities Trust
2002-TOP6's commercial mortgage pass-through certificates.
Concurrently, ratings are affirmed on the remaining 10 classes
from the same transaction.
The raised and affirmed ratings reflect the stable performance of
the pool as well as credit enhancement levels that provide
adequate support through various stress scenarios. The upgrades
were constrained by uncertainty surrounding the third-largest
loan, which is secured by an asset in New Orleans, Louisiana.
As of the remittance report dated Nov. 15, 2005, the collateral
pool consisted of 149 loans with an aggregate principal balance of
$1.05 billion, compared with 150 loans totaling $1.12 billion at
issuance. The master servicer, Wells Fargo Bank N.A., provided
year-end 2004 net cash flow debt service coverage figures for 92%
of the pool, which excludes seven defeased loans. Based on this
information, Standard & Poor's calculated a weighted average DSC
of 1.83x, up from 1.71x at issuance. All of the loans in the pool
are current with the exception of the third-largest loan, which is
nearly 30-days delinquent. The trust has not experienced a loss
to date.
The top 10 loans have an aggregate outstanding balance of $423
million. The weighted average DSC for the top 10 loans is 1.69x,
up from 1.58x at issuance. The improved DSC occurred despite the
decline in performance of the New Orleans property securing the
third-largest loan, which is discussed further below. Standard &
Poor's reviewed property inspections provided by the master
servicer for the collateral securing the top 10 loans and all were
characterized as "excellent" or "good."
At issuance, four loans exhibited credit characteristics
consistent with investment-grade rated obligations in the context
of their inclusion in the pool. The largest, second-largest,
ninth-largest, and 10th-largest loans in the pool have maintained
respective credit characteristics of 'BBB+', 'BBB-', 'BBB+', and
'A-'.
The third-largest loan is on Wells Fargo's watchlist and is in the
process of being transferred to the special servicer, GMAC
Commercial Mortgage Corp. The 1 million sq. ft. Bank One Center
in New Orleans secures the loan, which is being transferred to
GMACCM for imminent default after becoming 30-days delinquent.
Prior to Hurricane Katrina, the office building was struggling
with respect to occupancy, and reported a 2004 year-end rate of
66%. DSC for the same period was 1.19x. While the property
suffered relatively minor damage from the hurricane and has
adequate insurance coverage, the borrower did not make the October
2005 principal and interest payment until early November 2005.
Additionally, the asset's weak performance before the hurricane
magnifies the building's problems, given the context of the more
uncertain economic environment in New Orleans. No other loans are
with the special servicer.
Wells Fargo reported a watchlist of 15 loans with an aggregate
outstanding balance of $119.9 million, which includes the
third-largest loan referenced above. Standard & Poor's stressed
the loans on the watchlist, along with other loans with credit
issues, as part of its pool analysis. The resultant credit
enhancement levels support the raised and affirmed ratings.
Ratings Raised
Bear Stearns Commercial Mortgage Securities Trust 2002-TOP6
Mortgage Pass-through Certs Series 2002-TOP6
Rating
------
Class To From Credit enhancement
----- -- ---- ------------------
B AA+ AA 12.74%
C A+ A 9.82%
D A A- 8.63%
E BBB+ BBB 6.24%
F BBB BBB- 5.31%
Ratings Affirmed
Bear Stearns Commercial Mortgage Securities Trust 2002-TOP6
Mortgage Pass-through Certs Series 2002-TOP6
Class Rating Credit enhancement
----- ------ ------------------
A-1 AAA 15.66%
A-2 AAA 15.66%
G BB+ 4.12%
H BB 3.19%
J BB- 2.39%
K B+ 1.86%
L B 1.33%
M B- 1.06%
X-1 AAA N/A
X-2 AAA N/A
N/A - Not applicable.
BELVEDERE DEVELOPERS: Voluntary Chapter 11 Case Summary
-------------------------------------------------------
Debtor: Belvedere Developers LLC
fka Bristol Hotel Partners LLC
41 Ridge Road
Bristol, RI 02809
Bankruptcy Case No.: 05-bk-15710
Chapter 11 Petition Date: November 25, 2005
Court: District of Rhode Island (Providence)
Debtor's Counsel: Edward J. Bertozzi, Jr., Esq.
Edwards Angell Palmer & Dodge LLP
2800 Financial Plaza
Providence, Rhode Island 02903
Tel: (401) 276-6457
Fax: (401) 276-6611
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20 largest unsecured
creditors.
BERKLINE/BENCHCRAFT: Weak Performance Spurs S&P's Watch Negative
----------------------------------------------------------------
Standard & Poor's Ratings Services revised its CreditWatch
listing on the ratings of Berkline/BenchCraft Holdings LLC to
negative from positive.
CreditWatch with negative implications means that the ratings
could be lowered or affirmed following the completion of
Standard & Poor's review. Ratings, including 'B+' corporate
credit and senior secured bank loan ratings, had originally been
placed on Creditwatch with positive implications on April 15,
2005, following Berkline's filing of a registration statement for
an IPO of about $138 million in common stock and expectations for
a reduction in leverage from IPO proceeds.
The revised CreditWatch listing reflects Standard & Poor's
concerns about Berkline's weaker-than-expected operating
performance through its third fiscal quarter ended Oct. 1, 2005,
and likely inability to meet the financial covenants required by
its bank credit facilities. While net sales for the nine
months ended Oct. 1, 2005, improved by 13% versus last year,
EBITDA declined by about 30% to about $20.2 million from
$29.3 million. The decline in operating performance was driven
largely by a $7 million write-off of receivables from a major
customer that recently filed for bankruptcy, as well as higher raw
material and fuel costs.
"It is unclear, given Berkline's recent decline in operating
performance, whether the company will be able to proceed
with the IPO as planned," said Standard & Poor's credit analyst
David Kang.
Morristown, Tennessee-based Berkline manufactures upholstered
furniture, including recliners, sofas, and other residential
furniture products.
BOYDS COLLECTION: Moody's Withdraws Junk Corporate Family Rating
----------------------------------------------------------------
Moody's Investors Service withdrew all ratings for The Boyds
Collection Ltd. in conjunction with the October 2005 voluntary
filing by the company to reorganize under Chapter 11 of the
Bankruptcy Code.
The company intends to work with its lenders to develop a
Reorganization Plan that will address its debt burdens and
challenges in its current distribution channels. Boyds has
received a commitment for an $8 million debtor-in-possession
financing to provide funding for ongoing operations.
These specific ratings associated with Boyds were withdrawn:
* Corporate family rating, Caa3
* $34 million 9% senior subordinated notes due May 15, 2008, C
Headquartered in McSherrystown, Pennsylvania, The Boyds
Collection, Ltd. -- http://www.boydsstuff.com/-- designs and
manufactures unique, whimsical and "Folksy with Attitude(SM)"
gifts and collectibles, known for their high quality and
affordable pricing. The Company and its debtor-affiliates filed
for chapter 11 protection on Oct. 16, 2005 (Bankr. Md. Case No.
05-43793). Matthew A. Cantor, Esq., at Kirkland & Ellis LLP
represents the Debtors in their restructuring efforts. As of
June 30, 2005, Boyds reported $66.9 million in total assets and
$101.7 million in total debts. Net sales for the twelve-month
period ended June 2005 were approximately $90 million.
BROOKFIELD PROPERTIES: Consortium Closes Buy-Out Deal on O&Y REIT
-----------------------------------------------------------------
Brookfield Properties Corporation (BPO:NYSE,TSX) and its
Canadian-based subsidiary, BPO Properties Ltd. (BPP:TSX), reported
that the Brookfield Consortium, which consists of:
* BPO Properties and its institutional partners,
* the CPP Investment Board, and
* Arca Investments Inc.,
has closed the previously announced subsequent acquisition
transaction for O&Y Real Estate Investment Trust.
Under the transaction, all issued and outstanding voting units of
O&Y REIT have been redeemed for C$16.25 in cash per unit and the
properties held by O&Y REIT have been transferred to the members
of the Consortium directly.
"The closure of the subsequent transaction for O&Y REIT represents
a significant milestone in Canadian real estate and for the
Brookfield Consortium. We are excited by the opportunity to build
upon the track record established by the management teams and
employees of O&Y Properties and O&Y REIT. We look forward to
working together to maximize the value of this high-quality
portfolio," said Ric Clark, President & CEO of Brookfield
Properties.
Brookfield Properties Corporation --
http://www.brookfieldproperties.com/-- owns, develops and manages
premier North American office properties. The Brookfield
portfolio comprises 47 commercial properties and development sites
totaling 46 million square feet, including landmark properties
such as the World Financial Center in New York City and BCE Place
in Toronto. Brookfield is inter-listed on the New York and
Toronto Stock Exchanges under the symbol BPO.
* * *
As reported in the Troubled Company Reporter on Oct. 6, 2004,
Standard & Poor's Ratings Services assigned its 'P-3(High)'
Canadian national scale and 'BB+' global scale preferred share
ratings to Brookfield Properties Corp.'s C$150 million -- with an
underwriter's option of up to an additional C$50 million -- 5.20%
cumulative class AAA redeemable preferred shares, series K.
At the same time, Standard & Poor's affirmed its ratings
outstanding on the company, including the 'BBB' long-term issuer
credit rating. S&P said the outlook is stable.
BUCKEYE TECH: Names Elizabeth Welter as Chief Accounting Officer
----------------------------------------------------------------
Buckeye Technologies Inc. (NYSE:BKI) reported that Elizabeth J.
Welter would sit as Vice President and Chief Accounting Officer.
Ms. Welter, who previously served as the Company's Vice President,
Corporate Accounting and Treasurer, will provide overall
leadership for the Finance and Accounting organization. Ms.
Welter graduated from Ohio Northern University, obtained an MBA
from the University of Toledo and is a Certified Management
Accountant. After holding various financial positions in the
elevator industry, she joined Buckeye in 1993 and was elected Vice
President, Corporate Accounting in 1997.
The Company also disclosed other management changes:
F. Gray Carter will become Vice President, Purchasing and
Logistics. Mr. Carter, who previously served as the Company's
Vice President, Commercial Development-Cotton, will lead the
Company's Purchasing and Logistics organization. Mr. Carter
graduated from North Carolina State University with degrees in
Chemical Engineering and Pulp & Paper Science & Technology. He
joined Procter & Gamble, Buckeye's predecessor company, in 1984
and has held positions of increasing responsibility in both
manufacturing and commercial operations.
Chad P. Foreman was elected Treasurer and Investor Relations
Manager. Mr. Foreman, who previously served as Corporate
Controller and Investor Relations Manager, will lead the Company's
treasury activities, serve as the primary interface with the
external financial community and support business development
efforts. Mr. Foreman graduated from the University of Central
Florida, obtained an MBA from the University of Georgia and is a
Certified Public Accountant. Prior to joining Buckeye in 2000, he
was a financial analyst at Federal Express and has experience in
public accounting.
Steven G. Dean will become Controller for the Company. Mr. Dean,
who previously served as Specialty Fibers Division Controller,
will provide overall financial leadership for business operations.
Mr. Dean graduated from Millsaps College and obtained an MBA from
Northwestern University. Prior to joining Buckeye in 1999, he
held various financial positions at Thomas & Betts and
Hewlett-Packard.
Buckeye Technologies, a leading manufacturer and marketer of
specialty fibers and nonwoven materials, is headquartered in
Memphis, Tennessee, USA. The Company currently operates
facilities in the United States, Germany, Canada, and Brazil. Its
products are sold worldwide to makers of consumer and industrial
goods.
* * *
As reported in the Troubled Company Reporter on Feb 2, 2005,
Moody's Investors Service assigns a B1 rating to Buckeye
Technologies Inc.'s (Buckeye) $85 million increase of its senior
secured term loan B, affirms all other ratings, and changes
outlook to stable from negative.
Moody's also affirmed these ratings:
* Senior implied rated B2
* Senior unsecured issuer rating rated Caa1
* US$150 million, guaranteed senior secured term loan B, due
October 15, 2008, rated B1
* US$70 million, guaranteed senior secured revolver, due
September 15, 2008, rated B1
* US$200 million, 8.5%, guaranteed senior unsecured notes, due
2013, rated B3
* US$100 million, 9.25% senior subordinated notes, due 2008,
rated Caa1
* US$150 million, 8.0% senior subordinated notes, due 2010,
rated Caa1
As reported in the Troubled Company Reporter on Feb. 1, 2005,
Standard & Poor's Ratings Services assigned its 'BB-' secured bank
loan rating to specialty pulp producer Buckeye Technologies Inc.'s
proposed $85 million term loan B add-on, based on preliminary
terms and conditions. All other ratings were affirmed. S&P says
the outlook is stable.
CAPITAL AUTO: S&P Puts Low-B Ratings on Proposed $2.17-Bil Debts
----------------------------------------------------------------
Standard & Poor's Ratings Services said its 'BBB-' corporate
credit and senior unsecured debt ratings and its 'BB+' preferred
stock rating on Capital Automotive REIT and Capital Automotive
L.P. remain on CreditWatch with negative implications, where they
were placed Sept. 7, 2005.
The CreditWatch placements followed the company's Sept. 6, 2005,
announcement that it had agreed to be acquired by Flag Fund V LLC
in a transaction expected to close in late 2005.
At the same time, preliminary ratings of 'BB+' and 'BB-' are
assigned to Capital Automotive L.P.'s proposed $1.670 billion
secured credit facility and Capital Automotive REIT's proposed
$500 million senior unsecured notes, respectively.
Proceeds of the two debt instruments will help fund the
$3.4 billion acquisition of CARS and repay all existing rated
senior unsecured debt securities.
"If the transaction closes as proposed, Standard & Poor's expects
to lower CARS' corporate credit rating to 'BB+' from 'BBB-' and to
withdraw the ratings on CARS' existing rated securities,"
explained Standard & Poor's credit analyst George Skoufis. "The
prospective lowering of the corporate credit rating reflects the
more aggressive financial profile that will result from this
go-private transaction."
The 'BB+' preliminary rating assigned to the company's
$1.42 billion term loan facility and $250 million revolving credit
facility is the same as the prospective lower corporate credit
rating, and the combined facilities also were assigned a '3'
recovery rating.
"The '3' recovery rating indicates that lenders can expect a
meaningful recovery of 50%-80% of principal in the event of a
default," Mr. Skoufis noted.
The corporate credit, senior unsecured, and preferred stock
ratings will remain on CreditWatch negative until the completion
of the merger, which is expected to occur in December 2005.
CARGO CONNECTION: Sept. 30 Balance Sheet Upside-Down by $3.2 Mil.
-----------------------------------------------------------------
Cargo Connection Logistics Holding, Inc., fka Championlyte
Holdings, Inc., delivered its financial results for the quarter
ended Sept. 30, 2005, to the Securities and Exchange Commission on
Nov. 21, 2005.
Cargo Connection incurred a $1,118,096 net loss on $3,833,413 of
revenues for the three months ended Sept. 30, 2005, in contrast to
$350,545 of net income on $5,101,322 of revenues for the
comparable period in 2004.
Business Change
In recent months, Cargo Connection has changed its focus from
Beverage to Transportation and Logistics. The first entry into
the logistics industry was through the acquisition on Cargo
Connection Logistics Corp. and Mid-Coast Management, Inc. These
companies give the Company a solid base in becoming a partner of
the logistics community.
Mid-Coast has the facilities to assist companies with their
freight by either holding the freight in their bonded facilities
or possibly sorting freight for the client while the goods are
clearing customs in its Customs approved Container Freight
Stations.
The Company will be looking at other areas to become involved in
that complement the needs of the industry, either by adding
additional services, helping to form entities that have specific
attributes or through acquisitions.
Effective May 23, 2005 the name Championlyte Holdings, Inc. was
changed to Cargo Connection Logistics Holding, Inc. to better
reflect the new nature and focus of the entity and its operations.
Working Capital Deficit
Cargo Connection's balance sheet showed $2,824,440 in total assets
at Sept. 30, 2005, and liabilities of $6,102,605, resulting in a
$3,278,165 stockholders' deficit.
At Sept. 30, 2005, the Company had working capital deficiency of
$3,158,000 versus $1,617,500 as of Dec. 31, 2004. The increase in
working capital deficit is due to:
1. a change in the revenue stream from the Mid-Coast
subsidiary. One of Mid-Coast's major customers changed
their business model. This impacted Mid-Coast's revenue
stream which had been a guaranteed monthly fee tied to a
per usage of services fee subjecting Mid-Coast to
seasonality;
2. a note (and its reduction) that was established with the
Company's factor to pay-off the receivable financing due
from Air Cargo, Inc., one of Cargo Connection's customers,
which has filed for bankruptcy protection. The receivable
for that client was approximately $800,000, of which 60%
has been reserved. The note established with the factor
was $523,120 which has been reduced on a daily basis since
Dec. 2004; and
3. amounts due to the contractors that serviced the ACI
account for approximately $400,000 which payments are
being made.
Additionally, as a result of the reverse merger the company
assumed a negative working capital position at May 11, 2005 of
$1,671,876 from Championlyte Holdings.
Going Concern Doubt
Massella & Associates, CPA, PLLC, expressed substantial doubt
about Championlyte's ability to continue as a going concern after
it audited the Company's financial statements for the years ended
Dec. 31, 2004 and 2003. The auditing firm pointed to the
Company's recurring losses and working capital deficiency.
Management is seeking various types of additional funding such as
issuance of additional common or preferred stock, additional lines
of credit, or issuance of subordinated debentures or other forms
of debt will be pursued. The funding will assist in alleviating
the Company's working capital deficiency and increase
profitability.
Cargo Connection Logistics Corp. -- http://www.cargocon.com/-- is
a leader in world trade logistics. Headquartered adjacent to JFK
International Airport, the company is a transportation logistics
provider for shipments importing into and exporting out of the
United States, especially through the Gateways of Chicago,
Illinois; JFK, New York; Miami, Florida or Atlanta, Georgia, with
service areas throughout the Unites States and North America.
Mid-Coast Management, Inc. has container freight stations
specifically designed to handle internationally arriving freight
for the major retail suppliers through its CFS facilities in
Florida, Georgia, Illinois, New York and Ohio. Since its
inception, Mid-Coast Management has developed relationships with
many retailers and also works with Freight Forwarders from around
the world.
CATHOLIC CHURCH: Spokane Gets Limited OK to Hire GVA as Appraiser
-----------------------------------------------------------------
As previously reported in the Troubled Company Reporter on
November 23, 2005, The Tort Litigants Committee, the Tort
Claimants Committee, and Gayle E. Bush, the Future Claims
Representative, appointed in the Diocese of Spokane's bankruptcy
case, sought authority from the U.S. Bankruptcy Court for the
Eastern District of Washington to retain GVA Kidder Mathews as
their appraiser and consultant.
GVA will provide appraisal services for real property identified
by the FCR and the Committees, and will be available to testify on
behalf of the FCR and the Committees in any litigation. In
addition, GVA will consult with the FCR and the Committees
regarding specific real estate issues as they arise in the case.
GVA will prepare appraisal and consulting services in accordance
with the appraisal reporting standards of the Uniform Standards of
Professional Appraisal Practice of the Appraisal Institute. GVA
will also provide Complete Summary appraisal reports for
properties as directed by the FCR and the Committees.
FCR and Committees Respond
James I. Stang, Esq., at Pachulski, Stang, Ziehl, Young, Jones &
Weintraub, PC, argues that the Parishes' objection to GVA Kidder
Mathews's retention is not well founded.
GVA's retention is timely, Mr. Stang asserts.
The Committee of Tort Claimants, the Committee of Tort Litigants,
and Gayle E. Bush, the Future Claims Representative, do not
believe that the Diocese has any current valuation, market or
otherwise, of the properties involved in the Property of the
Estate Dispute.
Mr. Stang contends that the Diocese's proposed Disclosure
Statement is absolutely silent as to the valuation of the
properties. In a settlement discussion among the Litigants
Committee, the Parishes and the Diocese, the Parishes have tossed
around an opinion as to the liquidation value of the properties
but have not provided the Litigants Committee with a single expert
or even broker, valuation documents that support their statements.
The FCR and the Committees are not aware of any professional
retained at the expense of the estate who is engaged in the
valuation of the properties. If the Parishes have retained a
professional, they have not told the FCR and the Committees, and
the retention would not be an administrative expense of the
estate, Mr. Stang says.
To address the Diocese's concerns, the FCR and the Committees
clarify that:
(a) GVA will opine on the fair market of the properties based
on Highest and Best Use. The appraisal will incorporate
all appropriate methods of valuation that are commonly
used in the valuation of the property types, and that
includes consideration of the three traditional approaches
to value -- the Cost, Sales Comparison, and Income
Capitalization approaches, if they are applicable.
In determining Highest and Best Use, GVA will consider:
(1) continued use by the Diocese as an owner occupant or
as a paying tenant; or
(2) its highest and best use if there is a better use for
the property other than its continued use by the
Diocese.
(b) The appraisals will be prepared in conformance with the
Uniform Standards of Professional Appraisal Practice as
adopted by the Appraisal Foundation, the governing body
for appraisal professionals. The appraisal "report" will
be a Complete Summary, which will be brief but detailed.
(c) The FCR and the Committees retained GVA based on a
40-property project with an average cost of $4,000 per
appraisal. The FCR and the Committees will:
(1) consult with GVA on which of the properties should be
appraised; and
(2) will try to identify the most valuable properties and
also those properties, which would be representative
of the lower value properties.
Mr. Stang notes that the FCR and the Committees do not intend to
seek appraisal of the properties that are purportedly owned by the
separately incorporated defendants in the Property of the Estate
Dispute at this time.
* * *
Judge Williams authorizes the FCR and the Committees to retain GVA
for the limited purpose of creating a protocol for evaluating
specific Parish property. The Court will convene another hearing
to determine GVA's continued retention.
The Roman Catholic Church of the Diocese of Spokane filed for
chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on
Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen,
Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed $11,162,938 in total assets and
$81,364,055 in total debts. (Catholic Church Bankruptcy News,
Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CATHOLIC CHURCH: Court Okays Amended Terms of Traxi's Retention
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Washington
authorizes the Official Committee of Tort Litigants to amend the
terms of Traxi LLP's retention, provided that Traxi will not
provide:
(a) any services related to opining on the fair market value
of the real property of the bankruptcy estate; and
(b) investment banking services related to securing capital.
The Litigants Committee, the Tort Claimants Committee and Gayle
E. Bush, the Future Claims Representative, will enter into an
agreement under which the Litigants Committee will share
information and services rendered by Traxi with the Tort Committee
and the FCR.
Judge Williams clarifies that entry into the Joint Use Agreement
will not act as a breach of confidentiality and will not
constitute the waiver of any privileges, which may apply to the
service rendered by Traxi.
Traxi may seek compensation and cost reimbursement from the estate
in the same manner as other professionals retained in the case,
provided that subject to further Court order, Traxi's fees for the
period commencing November 1, 2005, will not exceed $50,000 and
its reimbursable expenses will be in compliance with the
guidelines of the Office of the U.S. Trustee.
Nothing will expand or contract the Litigant Committee's discovery
rights in Adversary Case No. 05-80038-PCW, captioned Committee of
Tort Litigants v. The Catholic Diocese of Spokane.
As previously reported, the Court authorized the Committee of Tort
Litigants in the Diocese of Spokane's Chapter 11 case to retain
Traxi LLC as financial advisors as of March 30, 2005. Judge
Williams temporarily denied the application to the extent that the
Tort Litigants sought Traxi's retention to analyze the assets of
the Diocese's affiliated entities, without prejudice to the Tort
Litigants' right to renew the application after the Court rules on
the Tort Litigants' request for summary judgment.
In light of the Court's recent decision granting the Litigants
Committee's request for partial summary judgment on the "property
of the estate dispute," John W. Campbell, Esq., at Esposito,
George & Campbell, PLLC, in Spokane, Washington, contends that it
is appropriate to submit an amended order approving Traxi's
retention. The Amended Order will eliminate the Court's
limitation on Traxi's ability to analyze the financial
relationship between the Diocese and its affiliate entities, Mr.
Campbell says.
The Litigants Committee sought the Court's permission to file the
proposed Amended Order, without fixing Traxi's specific
compensation.
The Roman Catholic Church of the Diocese of Spokane filed for
chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on
Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen,
Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed $11,162,938 in total assets and
$81,364,055 in total debts. (Catholic Church Bankruptcy News,
Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CCMG ACQUISITION: Moody's Rates $600 Million Sr. Sub. Notes at B3
-----------------------------------------------------------------
Moody's Investors Service assigned these ratings to The Hertz
Corporation and CCMG Acquisition Corporation in connection with
the proposed acquisition of Hertz from Ford Motor Company by a
private equity group consisting of:
* Clayton, Dubilier & Rice, Inc.,
* The Carlyle Group, and
* Merrill Lynch Global Private Equity.
Ratings assigned are CCMG:
* Corporate Family Rating - Ba3; $2.2 billion senior unsecured
notes - B1;
* $0.6 billion senior subordinated notes - B3; and
* Speculative Grade Liquidity rating of SGL-2.
The Hertz Corporation:
* $1.8 billion secured term loan facility - Ba2; and
* $1.6 billion asset based loan facility (ABL) with
$400 million expected to be outstanding -- Ba2.
The outlook for the ratings is stable. Subsequent to the closing
of the transaction, CCMG will be merged with The Hertz
Corporation, and Hertz will be the surviving entity and the
obligor for the newly rated securities. Moody's also noted that
as part of the proposed acquisition, Hertz has made a tender offer
and consent solicitation for its existing public debt securities.
To the extent that any stub pieces of existing debt issues remain
outstanding following the acquisition, they will be stripped of
protective covenants under the terms of the consent solicitation.
Consequently, at the closing of the transaction Moody's expects to
either withdraw the ratings of any existing Hertz debt instruments
that are fully redeemed or lower the senior unsecured rating of
any untended Hertz debt to B2 from Baa3. The ratings for those
instruments currently remain under review for possible downgrade
pending the outcome of the tender offers and the close of the
transaction.
The Ba3 Corporate Family Rating reflects the considerable increase
in leverage and the related erosion in credit metrics that will
result from the transaction. This erosion is reflected in Hertz's
pro forma financial metrics (LTM through September 2005)
calculated using Moody's standard adjustments:
* total debt will increase from $11.1 billion to $13.2 billion;
* interest coverage will deteriorate from 2.2 times to
1.3 times;
* debt to EBITDA will increase from 4.0 times to 4.8 times; and
* debt to revenues will increase from 1.5 times to 1.8 times.
Moody's notes that a strong balance sheet and ample levels of
financial flexibility had historically been one of Hertz's key
competitive advantages relative to other equipment rental
companies and, to a lesser degree, other car rental companies.
They also provided an important cushion against the ongoing
cyclicality in both rental markets. As Hertz begins to operate
with much narrower levels of financial flexibility, it must also
contend with the eroding credit quality of the domestic automobile
OEM's from whom it has purchased program vehicles on a non-risk
basis.
The company's strategy of maintaining an automotive fleet
consisting of approximately 85% program vehicles, which benefit
from manufacturer repurchase obligations, has been a positive
rating consideration. Although this relationship between Hertz
and the domestic car manufacturers is likely to continue through
the intermediate term, the seriously diminished credit quality of
Ford and GM adds an additional element of risk, and lessens the
degree of assurance that can be ascribed to these OEM repurchase
obligations. It is also likely that the increased operating
pressure facing Ford and GM will contribute to vehicle purchase
prices continuing to rise as the two companies attempt to address
the historically low profitability generated by sales to the daily
rental sector.
Notwithstanding these operating and financial risks, Hertz retains
some formidable strengths. These include:
* leading market positions in both the on-airport car rental
and the equipment rental sectors;
* an expanding presence in the domestic off-airport market;
* a robust recovery in the equipment rental sector; and
* a highly capable and deep management team that will remain in
place.
Moody's expects that the equity sponsors will continue to support
the investment, growth and operating strategies that have been
embraced by Hertz's management and that have helped the company
establish a highly competitive business model.
The stable rating outlook anticipates that the company will
maintain its solid competitive position in all of its markets, and
that management will continue to make modest but steady
improvement in operating efficiency, margins and credit metrics.
Notwithstanding this progress, ongoing expansion of the rental
fleet, primarily automobiles, will likely result in total debt
continuing to rise. However, the expansion of the car rental
fleet should be funded almost entirely through the continued
securitization of vehicles. This should allow for the generation
of cash flow available to reduce outstandings under the term loan
and the ABL.
The Ba2 ratings of the ABL and term loan reflect the solid
security packages and asset coverage that will be available to
both classes of debt after giving effect for the approximately
$7.0 billion in ABS debt that will have claims on Hertz's car
rental fleet.
The B1 rating of the $2.2 billion unsecured notes and the B3
rating of the $0.6 billion subordinated notes take into account
the well secured and superior positions of Hertz's $7.0 billion in
ABS fleet debt, its $1.8 billion secured term-loan, and its $0.4
billion secured ABL. These secured obligations represent over 70%
of Hertz's total pro forma debt, and result in relatively modest
levels of asset coverage for the unsecured notes.
The ratings for the company's existing notes remain under review
for possible downgrade pending the outcome of the tender offer and
completion of the transaction. To the extent that individual
issues are fully redeemed pursuant to the tender offer the ratings
will be withdrawn. Any stub pieces of debt that remain
outstanding following the completion of the transaction will be
subject to downgrade. As of November 28th, Hertz had received
tender commitments for approximately 88% ($4.1 billion) of its
currently outstanding senior notes. The company estimates that
$500 million will remain outstanding at closing, subsequent to
which these notes will be stripped of restrictive covenants
pursuant to the consent solicitation.
Moreover, unlike the proposed senior and subordinated notes, the
untendered securities will not benefit from guarantees from
Hertz's domestic subsidiaries. The principal domestic subsidiary,
Hertz Equipment Rental Company (HERC), currently generates
approximately 30% of Hertz's earnings and HERC will also have a
less encumbered asset base than Hertz's direct operations.
Consequently, the earnings and asset coverage of the untendered
notes will be weaker than that of the new senior notes which are
rated B1. Consequently, Moody's believes that the untendered
notes will be downgraded to the B2 level upon closing of the
transaction.
The SGL-2 rating anticipates that during the coming twelve months
Hertz's EBITDA and operating margins will remain near current
levels of 38% and 14% respectively. This level of profitability
should enable the company to generate cash flow sufficient to
internally fund a level of expenditures that maintain its fleet at
current levels, with incremental borrowing required to fund
expansion. During this period, the company's liquidity profile
will continue to benefit from having a large portion of its car
rental fleet (over 80%) covered by OEM repurchase agreements.
Moody's also expects that Hertz will have approximately $1 billion
in availability under its ABL facility, and that the covenant
package ultimately agreed upon for this borrowing arrangement will
afford Hertz ample head room. Hertz's $475 million cash position
provides an additional liquidity cushion.
Factors that could contribute to improvement in the Hertz ratings
over the long term include steady progress in improving return
measures and credit metrics by achieving its stated objectives of:
* growing its Premier Car Rental operations;
* achieving greater operating efficiencies so that margins
remain on track to hitting pre 2000 levels;
* expanding its share position in the domestic off-airport and
on-airport car rental markets, as well as the European
market; and
* improving its share of the highly fragmented North American
equipment rental market.
An ability to achieve these operational objectives and to sustain
improvement in these metrics would be viewed favorably:
* interest coverage -- above 1.3 times;
* debt to EBITDA below - 4.8 times; and
* debt to revenues below 1.8 times
Conversely, persistent or material lack of progress in any of
these areas could result in pressure on Hertz's rating. The
company's credit profile could also be hurt by further erosion in
the financial or operating condition of Ford or GM.
CCMG Acquisition Corporation was formed to issue the senior and
subordinated notes. Following the acquisition CCMG will be merged
into Hertz which will become the obligor for the notes.
The Hertz Corporation, headquartered in Park Ridge, New Jersey,
operates the largest general use car rental business in the world,
and one of the largest industrial, construction and material
handling rental businesses in North America.
CHESTER COUNTY: S&P Shaves Revenue Bonds' Rating to B from BBB-
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on Chester
County Industrial Development Authority, Pennsylvania's revenue
bonds, issued for the Collegium Charter School, to 'B' from
'BBB-', reflecting a large drop in enrollment that has affected
debt service coverage and resulted in additional draws on the
school's already-thin financial position. Debt service coverage
in fiscal 2005 was 0.34x; actual audited financial results in
fiscal 2004 show a financial loss, compared with unaudited
positive financial results provided by the school at the time of
the initial rating. The outlook is negative.
Additional credit concerns include the overall deterioration of
the financial position, caused primarily by enrollment levels that
are falling short of initial projections due to high attrition
rates. Additional financial challenges were posed by a
miscalculation by one of the feeder districts that resulted in a
$300,000 onetime repayment to that district, further reducing
the available fund balance for 2005-2006.
The downgrade also reflects:
* the school's need to significantly increase enrollment next
year in order to meet debt service requirements that will
increase significantly in fiscal 2007;
* a small waiting list that holds little potential for
generating additional students without a successful new
marketing campaign;
* the potential for competition from new charter schools;
* the short operating history of the school; and
* the inherent risk associated with the charter school,
including the risk of nonrenewal or revocation of the
charter, along with the need for sustained demand for the
facility.
Limited future capital plans partially offset these concerns.
The negative outlook reflects the need to substantially increase
pupil levels in order to be able to meet debt service requirements
that increase significantly in fiscal 2007.
"Given the school's historical trend of declines, attracting and
retaining sufficient enrollment is likely to pose a challenge.
Should the school's enrollment continue to fall, or not rise
enough to generate sufficient revenues for debt service coverage,
or should the financial position not improve, the rating will be
adjusted downward," said Standard & Poor's credit analyst Jane
Hudson Ridley. "If enrollment trends reverse themselves and
revenues stabilize to the point of generating operating surpluses
that would improve the school's financial condition and provide
adequate debt service coverage, the outlook could return to
stable," she added.
The bonds are secured by a loan agreement between the authority
and the charter school, in which the school is obligated to make
loan payments to the trustee. There is also a debt service
reserve fund funded at the standard three-prong test.
Collegium Charter School is located west of Philadelphia in
Chester County and opened in 1999 with an enrollment of 147 in
grades K-6.
CITIGROUP MORTGAGE: Fitch Rates $16.9 Mil. Class Certs. at Low-B
----------------------------------------------------------------
Fitch has rated the Citigroup Mortgage Loan Trust Inc.
asset-backed pass-through certificates, series 2005-HE4, which
closed on Nov. 30, 2005:
-- $737.1 million, classes A-1, A-2A through A-2D, 'AAA',
-- $34.2 million class M-1 'AA+';
-- $31.4 million class M-2 'AA';
-- $22 million class M-3 'AA'
-- $14.5 million class M-4 'AA-';
-- $15 million class M-5 'A+';
-- $12.7 million class M-6 'A';
-- $11.2 million class M-7 'A-';
-- $11.2 million class M-8 'BBB+';
-- $11.2 million class M-9 'BBB';
-- $6.1 million class M-10 'BBB-';
-- $4.7 million privately offered class M-11 'BB+';
-- $12.2 million privately offered class M-12 'BB'.
The 'AAA' ratings on the class A certificates reflect the 21.35%
total credit enhancement provided by the 3.65% class M-1, the
3.35% class M-2, the 2.35% class M-3, the 1.55% class M-4, the
1.60% class M-5, the 1.35% class M-6, the 1.20% class M-7, the
1.20% class M-8, the 1.20% class M-9, the 0.65% class M-10, the
0.50% privately offered class M-11, the 1.30% privately offered
class M-12, the 0.50% privately offered, nonrated class M-13, and
the 0.95% initial overcollateralization. The ratings on the class
M certificates are based on their respective subordination and
initial OC. All certificates have the benefit of monthly excess
cash flow to absorb losses. In addition, the ratings reflect the
integrity of the transaction's legal structure as well as the
primary servicing capabilities of Ocwen Loan Servicing, LLC. U.S.
Bank, N.A. will act as trustee.
The certificates are supported by two collateral groups. The
group I mortgage loans consist of fixed-rate and adjustable-rate
mortgage loans with principal balances that conform to Freddie Mac
loan limits and has a cut-off date pool balance of $438,363,426.
Approximately 19.87% of the mortgage loans are fixed-rate mortgage
loans, and 80.13% are adjustable-rate mortgage loans. The
weighted average loan rate is approximately 7.451%. The weighted
average remaining term to maturity is 351 months. The average
principal balance of the loans is approximately $151,108.
Approximately 1.57% of the group I mortgage loans are second
liens. The weighted average combined loan-to-value ratio is
83.52%. The properties are primarily located in California,
Florida, Illinois, New York, Arizona, and Texas.
The group II mortgage pool consists of fixed-rate and
adjustable-rate mortgage loans that may or may not conform to
Freddie Mac loan limits and has a cut-off date pool balance of
$498,781,254. Approximately 20.13% of the mortgage loans are
fixed-rate mortgage loans, and 79.87% are adjustable-rate mortgage
loans. The weighted average loan rate is approximately 7.288%.
The weighted average WAM is 350 months. The average principal
balance of the loans is approximately $218,668. Approximately
3.25% of the group II mortgage loans are second liens. The
weighted average CLTV is 87.09%. The properties are primarily
located in California, Florida, New York, and Illinois.
The group I mortgage loans originators were Argent and MortgageIT,
Inc. The group II mortgage loans originators were Argent and
MortgageIT, Inc.
For federal income tax purposes, multiple real estate mortgage
investment conduit elections will be made with respect to the
trust estate.
CLARION TECHNOLOGIES: Oct. 1 Balance Sheet Upside-Down by $80 Mil.
------------------------------------------------------------------
Clarion Technologies, Inc., delivered its financial results for
the quarter ended Oct. 1, 2005, to the Securities and Exchange
Commission on Nov. 21, 2005.
Clarion recorded $392,000 of net income for the quarter ended
Oct. 1, 2005, and a $3,097,000 net loss for the first nine months
of 2005, compared to a $747,000 net loss and net income of
$558,000 in the corresponding periods of 2004, respectively. The
increase for the third quarter is due to converting income on
increased sales and to an impairment loss recorded in 2004. The
year to date decrease is a result of lower gross profit from the
increased cost of sales and our slightly higher interest expense.
Net sales of $40,981,000 in the third quarter of 2005 were
$10,389,000, or 34%, higher than net sales of $30,592,000 in the
third quarter of 2004. Net sales of $112,235,000 for the first
nine months of 2005 were $23,922,000, or 27.1%, higher than the
comparable period of 2004. The increase is primarily driven by
new business from a major consumer goods customer.
At Oct. 1, 2005, the Company had a stockholder's deficit of
$80,006,000 and working capital deficit of $16,859,000.
A full text copy of Clarion's quarterly report for the period
ended Oct. 1, 2005, is available for free at
http://researcharchives.com/t/s?372
Revolving Credit Facility Amendment
Clarion's senior lenders have agreed in principle to extend the
Company's senior revolving credit facility from Oct. 31, 2005
through Dec. 9, 2005, and waive all existing defaults.
As amended, the revolving credit facility allows for aggregate
borrowings of $10,000,000 at the prime rate plus 0.75% or, at the
Company's option, one, two, three or six-month LIBOR plus 3.50%,
subject to certain borrowing base limitations related to accounts
receivable and inventory.
In addition, an unused facility fee of 0.375% per annum is payable
on the unused portion of the credit line. The term debt matures
on April 15, 2007 and bears interest at the prime rate plus 0.75%
or, at the Company's option, one, two, three or six month LIBOR
plus 3.5% plus an applicable margin.
The senior credit facility also permits draws to be made on a
capital expenditure line of credit in the maximum amount of
$3,000,000 at one-month LIBOR. All of Clarion's tangible and
intangible assets are collateralized under the senior credit
facility.
Further, the senior lenders have also agree to amend the senior
credit facility on or before Dec. 9, 2005. This amendment would
involve establishing the maturity date of the revolving credit
facility at one year from the date of the amendment and increasing
certain borrowing base limitations related to inventory and
aggregate borrowings. This amendment would also involve certain
credit enhancements.
The senior credit facility requires the Company's subordinated
debt holders and preferred shareholders to forego interest and
dividend payments, respectively, unless approved by the bank. The
senior credit facility and senior subordinated term notes also
prohibit the payment of dividends on common stock.
Clarion Technologies, Inc., -- http://www.clariontechnologies.com/
-- operates four manufacturing facilities in Michigan, one in
South Carolina, and one in Iowa with approximately 170 injection
molding machines ranging in size from 55 to 1500 tons of clamping
force. The Company's headquarters are located in Grand Rapids,
Michigan.
COLISEUM FUNDING: Moody's Places Class A-2 Notes' Rating on Watch
-----------------------------------------------------------------
Moody's Investors Service, as part of the rating monitoring
process, placed these classes of Notes issued by Coliseum Funding
Ltd., a collateralized debt obligiation issuance, on the Moody's
Watchlist for possible upgrade:
1) $485,000,000 Class A-1 Floating Rate Senior Notes due 2012
currently rated Aa2.
2) $48,000,000 Class A-2 Floating Rate Senior Notes due 2012
currently rated Ba1.
Moody's noted that the transaction, which closed in July of 2000,
is experiencing increased overcollateralization due to the
reduction in the outstanding principal balance of the
transaction's most senior liabilities. Moody's explained that
watchlist status is intended to inform investors of Moody's
opinion that the credit quality of the Class A-1 Notes and the
Class A-2 Notes may be improving.
COLUMBUS LOAN: Moody's Places Class C Notes' Ba3 Rating on Watch
----------------------------------------------------------------
Moody's Investors Service, as part of the rating monitoring
process, placed these classes of Notes issued by Columbus Loan
Funding Ltd., a collateralized debt obligation issuance, on the
Moody's Watchlist for possible upgrade:
1) $27,500,000 Class A-II Floating Rate Senior Subordinate
Notes due October 12, 2012 rated Aa2.
2) $10,000,000 Class A-III Floating Rate Senior Subordinate
Notes due October 12, 2012 rated A2.
3) $41,750,000 Class B Floating Rate Senior Subordinate Notes
due October 12, 2012 rated Baa2.
4) $11,500,000 Class C Floating Rate Senior Subordinate Notes
due October 12, 2012 rated Ba3.
Moody's noted that the transaction, which closed in April of 2001,
is experiencing increased overcollateralization due to the
reduction in the outstanding principal balance of the
transaction's most senior liabilities. Moody's explained that
watchlist status is intended to inform investors of Moody's
opinion that the credit quality of the Class A-II Notes, the Class
A-III Notes, the Class B Notes and the Class C Notes may be
improving.
COMPASS MINERALS: Moody's Rates $450 Million Sr. Facilities at B1
-----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of Compass Minerals
Group, Inc., including the B1 Corporate Family Rating. Compass
Minerals Group, Inc. is a wholly-owned subsidiary of Compass
Minerals International, Inc. A B1 rating was assigned to the new
$350 million senior secured term loan facility, due 2012, and the
$100 million senior secured revolving credit facility due 2010.
Proceeds from the new debt facilities will be applied towards:
* repayment of the existing revolving credit facility;
* repayment of the 10% senior subordinated notes; and
* payment of accrued interest, the tender premium and
transaction fees.
The rating outlook is maintained at positive.
The outlook recognizes Compass Minerals' improving credit metrics,
reflecting the company's efforts to grow the General Trade Salt
Products and Specialty Potash businesses without increasing
financial leverage. The outlook also reflects Moody's expectation
that the company's credit metrics will continue to strengthen
based on continued, albeit moderating, growth in these businesses.
Although many of Compass Minerals' credit metrics are consistent
with the Ba3 corporate family rating, free cash flow for 2005 is
expected to be slightly negative, an unfavorable swing from the
$50 million in free cash flow generated in 2004. (Moody's free
cash flow calculations include cash flow from operations and the
impact of working capital changes, capital expenditures and
dividends.) Moody's does note that 2005 free cash flow will
include one-time items such as a debt redemption premium and
acceleration of interest expense on the called debt.
These ratings were affirmed:
Compass Minerals Group, Inc.:
-- Corporate family rating at B1
-- $325 million guaranteed senior subordinated notes, due 2011
at B3*
-- $8 million guaranteed senior secured term loan, due 2009
at B1*
-- $135 million guaranteed senior secured revolving credit
facility, due 2008 at B1*
*These ratings are expected to be withdrawn upon the completion of
a successful refinancing
These ratings were assigned:
Compass Minerals Group, Inc.:
-- $350 million guaranteed senior secured term loan facility,
due 2012 at B1
-- $100 million guaranteed senior secured revolving credit
facility, due 2010 at B1
Debt not rated by Moody's (amounts as of September 30, 2005):
Compass Mineral International, Inc.:
-- $94.2 million senior discount notes, due 2012
-- $131.9 million senior subordinated discount notes, due 2013
The ratings continue to reflect:
* Compass Mineral's moderate leverage with debt to EBITDA of
3.8 times for the LTM ended September 30, 2005 (ratios
incorporate Moody's Standard Analytical Adjustments);
* the company's entrenched position as the leading
North American producer of highway deicing salt with an
annual production capacity of 9.2 millions tons/year
(14.6 million tons including purchased salt and European
operations);
* its access to extensive and high quality salt deposits;
* its efficient distribution network characterized by access to
low cost barge transportation; and
* its position as the leading North American producer of SOP.
The ratings also consider:
* favorable weather patterns within the North American regions
(Canada and Midwestern United States) in which it operates,
which reduces the volatility of operating results;
* capital expenditures of approximately $30-40 million annually
over the near-term;
* a diverse customer base with no customer accounting for more
than 5% of sales; and
* substantial barriers to entry, including the extensive time
required for planning and obtaining zoning approval for a new
rock salt mine, and the substantial amount of capital
required for the acquisition of mineral rights and mine
construction.
However, the ratings also consider:
* the mature nature of the highway deicing business,
characterized by low single digit growth rates, which in
Moody's view may increase the likelihood for strategic
acquisitions or shareholder enhancement activities;
* the overall effect of weather conditions on demand for road
salt deicing; and
* the seasonal nature of SOP sales to agricultural markets.
Additionally, the ratings recognize that volatile natural gas and
energy costs (which represent about 11% of the company's North
American salt production costs) have somewhat pressured operating
margins, although recognizing that the company has made
significant efforts to improve the energy efficiency of its
manufacturing and mining facilities. This cost pressure is
evidenced by the company reporting relatively flat EBITDA in the
first nine months of 2005 despite strong revenue growth over the
same period last year. Moody's also notes that the Holding
Company pays a significant dividend to shareholders (estimated to
be $35 million in 2005), which is required to be funded out of
Compass Minerals' cash flow.
The positive outlook reflects Moody's expectation that Compass
Minerals will generate free cash flow in 2006 in excess of $40
million, and that it will sustain or increase the current volume
of business. The ratings could be upgraded if the company
achieves debt to EBITDA below 3.5 times while sustaining free cash
flow to debt around 7.5%.
Conversely, the ratings or outlook could be lowered if a material
debt financed acquisition or a reversal in recent positive demand
trends results in debt to EBITDA exceeding 4.5 times. A
significant debt financed acquisition or aggressive share
repurchase program would also apply negative pressure to the
ratings and/or outlook.
Moody's believes that Compass Minerals' new capital structure will
accommodate material debt reduction over the near-term.
Specifically, the company will be able to make optional
prepayments under the revolving and term facilities.
Compass Minerals Group, Inc., headquartered in Overland Park,
Kansas:
* is a global producer of salt used for:
-- highway deicing,
-- food grade applications,
-- water conditioning, and
-- other industrial uses; and
* a producer of sulfate of potash used in specialty
fertilizers.
The company had revenues of $734 million over the LTM ended
September 30, 2005.
CRYSTAL RIVER: Fitch Puts Low-B Ratings on $15.5 Mil. Class Notes
-----------------------------------------------------------------
Fitch Ratings assigns these ratings to Crystal River CDO 2005-1,
Ltd. and Crystal River CDO 2005-1 LLC:
-- $109,750,000 class A floating-rate notes due 2046 'AAA';
-- $44,750,000 class B floating-rate notes due 2046 'AAA';
-- $20,500,000 class C floating-rate notes due 2046 'AA';
-- $42,500,000 class D-1 floating-rate notes due 2046 'AA';
-- $10,000,000 class D-2 fixed-rate notes due 2046 'AA';
-- $23,250,000 class E deferrable floating-rate notes due
2046 'A';
-- $29,000,000 class F deferrable floating-rate notes due
2046 'BBB';
-- $10,750,000 class G deferrable fixed-rate notes due 2046
'BB+';
-- $4,750,000 class H deferrable fixed-rate notes due 2046
'BB'.
Crystal River is an arbitrage cash flow collateralized debt
obligation managed by Hyperion Crystal River Capital Advisors,
LLC.
The ratings of the class A, class B, class C, class D-1, and class
D-2 notes address the likelihood that investors will receive full
and timely payments of interest, as per the governing documents,
as well as the aggregate outstanding amount of principal by the
stated maturity date. The ratings of the class E, class F, class
G, and class H notes address the likelihood that investors will
receive ultimate interest payments, as per the governing
documents, as well as the aggregate outstanding amount of
principal by the stated maturity date.
The ratings are based upon the credit quality of the underlying
assets, 100% of which will be purchased by the transaction's
close, in addition to credit enhancement provided by support from
subordination, excess spread, and protections incorporated in the
structure.
Proceeds from the issuance will be invested primarily in a
portfolio of residential mortgage-backed securities, commercial
mortgage-backed securities, and commercial real estate loans. The
collateral supporting the capital structure will have a maximum
Fitch weighted average rating factor of 21.72 (rated 'BB-'/'B+' by
Fitch). The collateral currently has a Fitch WARF of 20.58 (rated
'BB-'/'B+' by Fitch).
Crystal River will have a three-year replenishment period, during
which Hyperion Crystal River may replenish proceeds from the sale
of credit risk securities, spread appreciated assets, and
defaulted securities in 'like asset type' additional debt
collateral or may use the proceeds to pay down the notes
sequentially. Principal payments will be used to pay down notes
immediately.
Hyperion Crystal River is a wholly owned subsidiary of Hyperion
Capital Management, Inc. and is staffed by professionals from both
Hyperion Capital and Brascan Corp., Hyperion Capital's parent.
Hyperion Crystal River also maintains sub-advisory relationships
with Brascan Asset Management, Inc. and Ranieri & Co. as
additional resources to assist in its origination, underwriting,
and portfolio management duties.
Crystal River CDO 2005-1 LLC is a special purpose company,
incorporated under the laws of the State of Delaware. Crystal
River CDO 2005-1, Ltd. is a Cayman Islands limited-liability
company.
For more information, see the presale report 'Crystal River
CDO 2005-1', available on the Fitch Ratings Web site at
http://www.fitchratings.com/
DDL INC: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------
Debtor: DDL, Inc.
dba The DDL Company
4529 Stonewall Street, Suite 180
Greenville, Texas 75401
Bankruptcy Case No.: 05-86896
Chapter 11 Petition Date: November 30, 2005
Court: Northern District of Texas (Dallas)
Judge: Barbara J. Houser
Debtor's Counsel: Eric A. Liepins, Esq.
Eric A. Liepins, P.C.
12770 Coit Road, Suite 1100
Dallas, Texas 75251
Tel: (972) 991-5591
Total Assets: $30,648
Total Debts: $1,685,324
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Lyon Mercantile Group, Ltd. $226,124
330 Seventh Avenue
New York, NY 10001-5010
IBM $220,487
500 First Avenue
Pittsburgh, PA 15219
Dell Computer $87,773
P.O. Box 120001
Dallas, TX 75312-0729
TeleDirect International, Inc. $77,062
17255 North 82nd Street
Scottsdale, AZ 85255
The Chaet Kaplan Baim Firm $72,204
30 North LaSalle Street, Suite 1520
Chicago, IL 60502
CDW $69,501
200 North Milwaukee Avenue
Vernon Hills, IL 60061
Amcat $69,445
1603 SE 19th Street, Suite 112
Edmond, OK 73013
Neal C. Swensen $52,903
1011 East Kenwood Avenue
Anaheim, CA 92805
De La Garza & Wallace, P.C. $49,669
350 North Saint Paul Street, Suite 2650
Dallas, TX 75201
Stratus Technologies $47,970
P.O. Box 945773
Atlanta, GA 30394-9997
Southwest General Service $45,000
12025 Shiloh Road, Suite 230
Dallas, TX 75228
Benton and Centeno, LLP $42,356
2019 Thrird Avenue North
Birmingham, AL 35203
McLeod Software $42,356
2550 Acton Raod
P.O. Box 43200
Birmingham, AL 35243-0200
Wan Communications $38,679
7344 SW 48th Street, Suite 203
Miami, FL 33155
Bay Area $37,728
50 Airport Parkway, Suite 100
San Jose, CA 95110
SBC Pacific Bell $37,728
P.O. Box 5069
Saginaw, MI 48605-5069
ICU Investigations $35,867
4070 Walker Road
Lone Oak, TX 75453
Penguin Computing LLC $35,813
300 California Street, Suite 600
San Francisco, CA 94104
Vital Works $31,895
44 Invemess Center Parkway, Suite 500
Bimingham, AL 35252
PCMall $29,210
MacMall
2555 West 190th Street
Torrance, CA 90504
DOMTAR INC: Implements Measures to Return to Profitability
----------------------------------------------------------
Domtar Inc. reported a series of targeted measures aimed at
returning the company to profitability. The plan includes
closures of paper mills and sawmills, the sale of a paper mill and
cost-cutting initiatives.
Key measures are:
-- Permanent closure of the Cornwall, Ontario mill;
-- Permanent closure of PM No.10 and PM No.11 of the Ottawa,
Ontario mill;
-- The decision to sell the Vancouver, BC mill;
-- Closure of the sawmills at Grand Remous and Malartic, Quebec
with the intention of creating a value-added project using
the existing infrastructures; and
-- A cost reduction program that aims to:
-- Reduce selling, general, and administrative expenses by
eliminating approximately 100 additional corporate and
divisional positions, as well as other SG&A expenses;
-- Implement further cost reductions at the mill level by
eliminating approximately 200 additional operational
positions; and
-- Consolidate North American administrative offices in
Montreal and Cincinnati.
"The strengthening of the Canadian dollar has pushed some of our
Canadian mills to negative cash flow generation, and we must focus
on our most efficient mills in order to return to profitability in
the foreseeable future. We are sad to announce that this plan
will translate into a permanent workforce reduction of
approximately 1,800 positions across the Company, that includes
the reorganization announced in December 2004 at the Cornwall
mill. We believe that these actions, our previously announced
dividend cut, and other measures to reinforce our support to
customers, should improve our cash flow by approximately C$160
million, and constitute an important step toward improving our
margins," said Richard Garneau, Executive Vice-President,
Operations.
These measures will result in pre-tax restructuring costs of
approximately C$505 million, including fixed asset write-offs of
approximately C$313 million.
Difficult Decisions
"Mill closures are very difficult decisions to make, since they
impact our employees, their families, and the communities where we
operate. The measures that we announced today are necessary
actions that will help the Corporation return to profitability.
Unfortunately, sustained actions and dedicated efforts by our
employees as well as capital investments by the company were not
sufficient to guarantee the long-term viability of these
operations within Domtar," said Raymond Royer, President and Chief
Executive Officer.
"Some of our facilities face significant challenges posed by high
cost structures and the ever-strengthening Canadian dollar. Our
market pulp operations will remain under particular scrutiny. We
are calling for the cooperation of employees, union
representatives, community leaders, and government officials to
help us improve our competitive position. Domtar is determined to
emerge from this difficult period a stronger organization. In
keeping with the Company's corporate values, all employees
impacted by today's announcement will receive financial assistance
and be offered access to outplacement services," added Raymond
Royer, President and Chief Executive Officer.
Cornwall Mill
The Cornwall mill will be permanently shut down, effective
March 31, 2006. This decision will result in the elimination of
approximately 910 positions, including the 390 positions already
affected by the indefinite shutdown of the pulp mill, PM No. 6,
and one sheeter announced in December 2004. Total annual capacity
of 265,000 tons of uncoated and coated printing grades on three
paper machines as well as 160,000 tons of pulp will be permanently
taken off the market.
Ottawa Mill
The Company will also proceed with the permanent closure of PM
No.10 and PM No.11 at its non-integrated Ottawa-Hull complex,
effective Mar. 31, 2006. Consequently, approximately 185
positions will be eliminated and 65,000 tons of paper capacity
will be removed from the market.
Vancouver Mill
Domtar also reported its intention to sell its Vancouver coated
paper mill, and is currently seeking a buyer. This mill employs
approximately 285 workers and produces 120,000 tons of coated
paper. Mill operations will continue during the sale process.
Grand Remous and Malartic Sawmills
Domtar will close its sawmills at Grand Remous and Malartic
effective Feb. 28, 2006 due to the softwood fiber reduction and
high fiber costs in Quebec. There are approximately 200 employees
working at these facilities. Subject to government approval, the
wood fiber allocation for Grand Remous and Malartic will be
transferred to Domtar's other Quebec sawmills. This will ensure
more efficient operations by going to three shifts, and will offer
about 80 employees from Grand Remous and Malartic the possibility
of transferring to new positions created by the addition of these
extra shifts. Domtar is also working with a partner in
collaboration with the government on a value-added project that
would create over 300 new positions using the Grand Remous and
Malartic infrastructures, therefore mitigating most of the job
losses.
Banking Arrangements
Domtar has amended its credit facility maturing in 2010 in order
to improve financial flexibility. This facility requires
compliance with certain financial covenants, which include:
(a) a minimum EBITDA to interest ratio of 1.05 : 1.0 in early
2006, increasing gradually over time to 2.5 : 1.0 at the
beginning of 2008, excluding from the calculation charges
related to the current restructuring plan,
(b) the requirement to maintain a minimum EBITDA, and
(c) a maximum debt to total capitalization ratio of 60%,
excluding from the calculation charges resulting from the
current restructuring plan.
The amendment also includes a reduction in the size of the
facility from C$700 million to C$600 million, and provides for
guarantees by Domtar's subsidiaries.
Other Actions
In addition to these measures, the company will also improve
profitability by implementing supply chain initiatives that reduce
operational costs and improve customer satisfaction. These
initiatives will increase the efficiency of the converting and
distribution centers and the cost effectiveness of transportation
for just-in-time deliveries. Furthermore, the company will be
moving some of its paper grades to more profitable papermaking
facilities and machines within its network. Above all, Domtar
will continue to provide its customers with products, services,
and solutions that meet their needs.
Domtar Inc. is the third largest producer of uncoated freesheet
paper in North America. It is also a leading manufacturer of
business papers, commercial printing and publication papers, and
technical and specialty papers. Domtar manages according to
internationally recognized standards 18 million acres of
forestland in Canada and the United States, and produces lumber
and other wood products. Domtar has 10,000 employees across North
America. The company also has a 50% investment interest in
Norampac Inc., the largest canadian producer of containerboard.
* * *
As reported in the Troubled Company Reporter on Nov 4, 2005,
Moody's Investors Service placed Domtar Inc.'s Ba2 senior
unsecured debt rating on review for possible downgrade. The
rating action was prompted by the company's announcement that it
had initiated a comprehensive review of its asset portfolio so as
to rectify ongoing negative free cash flow. In turn, this results
from a dramatic acceleration in adverse extraneous influences.
EXPRESS BUS: Case Summary & 19 Largest Unsecured Creditors
----------------------------------------------------------
Debtor: Express Bus Tours, Inc.
14 C Hawkins Avenue
Ronkonkoma, New York 11779
Bankruptcy Case No.: 05-70136
Type of Business: The Debtor is a motorcoach company that
provides both line run and charter services.
See http://www.northforkexpress.com
Chapter 11 Petition Date: November 30, 2005
Court: Eastern District of New York (Central Islip)
Debtor's Counsel: Marc A. Pergament, Esq.
Weinberg Gross & Pergament LLP
400 Garden City Plaza
Garden City, New York 11530
Tel: (516) 877-2424
Total Assets: $859,326
Total Debts: $1,904,224
Debtor's 19 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
American Express $30,622
P.O. Box 1270
Newark, NJ 07101-1270
Capacity Coverage Co. of New Jersey Inc. $25,242
One International Boulevard, 3rd Floor
Mahwah, NJ 07495
Montauk Bus Company $18,315
556 Mastic Road
Mastic Beach, NY 11951
Prime Petroleum $12,000
Steve Goldman Charter Buses $12,000
Atlantic Detroit Diesel Allison, LLC $11,865
Verizon $8,611
ExxonMobil Fleet/GECC $7,515
JMR Graphics $7,384
New York State Workers' Compensation Board $7,311
American AGIP Co., Inc. $5,232
Sprint $3,798
Choice Distribution, Inc. $3,008
EZ Pass $3,000
American Express $2,734
University Directories $2,624
College Directory Publishing, Inc. $2,255
New York City of Department of Finance $1,910
Parking Violations
Transportation Industry WC Trust $1,697
FRIEDMAN'S INC: Court Confirms Joint Reorganization Plan
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The United States Bankruptcy Court for the Southern District of
Georgia, Savannah Division, confirmed Friedman's Inc. and its
affiliates' First Amended Joint Plan of Reorganization on Nov. 23,
2005.
As previously reported, the Debtors' Amended Plan and Disclosure
Statement have the consent and support of the Company's
Official Committee of Unsecured Creditors as well as the agreement
of Harbert Distressed Investment Master Fund, Ltd., the plan
investor under the Amended Plan.
Under the terms of the Plan:
* the remaining $1.9 million allowed secured claim arising
under Friedman's prepetition senior secured credit facility,
which is now held by Harbert, will be fully satisfied
through the issuance of shares of new common stock of
Reorganized Friedman's;
* claims under the Company's secured vendor program, in which
Harbert holds a participation interest, will be fully
satisfied through the issuance of shares of new common stock
of Reorganized Friedman's. Other secured vendor program
claims will be satisfied by cash payments in the amount of
75% of such claims with the remaining face amount of such
claims treated as general unsecured claims.
* any recoveries for general unsecured creditors will be
realized from any net recoveries generated from a creditor
trust that will be established for the benefit of the
Company's general unsecured creditors, to which the Company
will transfer initial funding of $500,000 and the right to
prosecute causes of action and recover amounts in connection
with claims relating to certain prepetition events involving
the Company currently under joint investigation by the
Company and the Company's Official Committee of Unsecured
Creditors;
* all existing equity interests will be cancelled upon the
Company's emergence from chapter 11. The Plan provides that
Harbert will receive substantially all of the new equity
interests in Reorganized Friedman's, except for management
grants, on account of its additional anticipated equity
investment and in satisfaction of all claims held by Harbert
in the Company's chapter 11 cases including its
$25.5 million Term DIP Loan and other claims described
above.
Exit Financing
As reported in the Troubled Company Reporter on Sept. 29, 2005,
the Debtors received a commitment letter from CIT to provide, upon
the Company's exit from chapter 11, a fully underwritten revolving
credit facility providing for up to $125 million in financing.
The facility has a five-year term and will be used to fund the
Amended Plan, for ongoing working capital needs, and for general
corporate purposes. In addition, CIT has agreed to provide a
committed factoring line of up to $20 million, available upon exit
from Chapter 11, through Dec. 31, 2006.
Harbert Investment Agreement
In addition, Friedman's reached another important milestone in its
restructuring by entering into an investment agreement with
Harbert. Previously, Harbert purchased a junior term loan in the
amount of $25.5 million that was used by the Company to pay down
borrowings under the Company's DIP Credit Facility.
Under the terms of the Investment Agreement, the Company will sell
100% of the Company's new equity interests to Harbert in exchange
for the full satisfaction and discharge of amounts due pursuant to
claims participation rights and vendor claims purchased by Harbert
from Friedman's vendors, for satisfaction and discharge of the
Company's existing $25.5 million term loan, and for Harbert's
additional investment of $25 million. The new equity interests
are subject to dilution only by the issuance of new equity
pursuant to existing commitments under the Company's Key Employee
Compensation Plan. Harbert's $25 million investment will be used
by Friedman's to consummate the Amended Plan and for general
corporate purposes.
The Investment Agreement will close on the effective date of the
Company's Amended Plan, and is subject to a variety of conditions,
including, among other things:
-- the entry of a final confirmation order and satisfaction of
all conditions precedent to the effectiveness of the Amended
Plan;
-- reaching settlements with the Securities and Exchange
Commission and the U.S. Attorney's Office for the Eastern
District of New York;
-- resolution of claims filed by the Internal Revenue Service
in form and substance reasonably satisfactory to Harbert;
and
-- the absence of any occurrence or development or state of
circumstances that would have a material adverse effect on
the Company's business, operations or condition.
Mr. Cusano stated that, "Harbert's significant investment clearly
demonstrates the level of its commitment to Friedman's, and its
belief in the strategic direction of the Company. We expect
Harbert's investment to enable the Company to emerge from chapter
11 and to return Friedman's to its status as a leader in the fine
jewelry retail marketplace."
The Company's Plan and Disclosure Statement are available at no
charge at http://www.kccllc.net/friedmans
Headquartered in Savannah, Georgia, Friedman's Inc. --
http://www.friedmans.com/-- is the parent company of a group of
companies that operate fine jewelry stores located in strip
centers and regional malls in the southeastern United States.
The Company and its affiliates filed for chapter 11 protection on
Jan. 14, 2005 (Bankr. S.D. Ga. Case No. 05-40129). John W.
Butler, Jr., Esq., George N. Panagakis, Esq., Timothy P. Olson,
Esq., and Alexa N. Paliwal, 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 $395,897,000 in total assets and $215,751,000 in total
debts.
GENTEK INC: Warrants Tender Offer by Abrams Capital et al. Expires
------------------------------------------------------------------
Abrams Capital, LLC, together with ACP Acquisition, LLC and Great
Hollow Partners, LLC, reported the expiration of the subsequent
offering period of Abrams' cash tender offer to purchase all of
the outstanding Tranche B Warrants and Tranche C Warrants of
GenTek Inc. The subsequent offering period expired, as scheduled,
at 5:00 p.m., New York City time, on Tuesday, Nov. 29, 2005.
Based on information provided by Mellon Investor Services, LLC,
the depositary for the offer, including Warrants tendered in the
initial offering period, an aggregate of 156,265 Tranche B
Warrants, representing 25.24% of the outstanding Tranche B
Warrants, and an aggregate of 75,276 Tranche C Warrants,
representing 24.90% of the outstanding Tranche C Warrants, were
validly tendered prior to the expiration of the subsequent
offering period. All such Warrants validly tendered have been
accepted for purchase in accordance with the terms of the offer.
Headquartered in Hampton, New Hampshire, GenTek Inc. (NASDAQ:GETI)
-- http://www.gentek-global.com/-- is a technology-driven
manufacturer of communications products, automotive and industrial
components, and performance chemicals. The Company filed for
Chapter 11 protection on October 11, 2002 (Bankr. D. Del. Case No.
02-12986) and emerged on Nov. 10, 2003 under the terms of a
confirmed plan that eliminated $670 million of debt and delivered
94% of the equity in Reorganized GenTek to the Company's secured
lenders. Old subordinated bondholders took a 4% slice of the
equity pie and prepetition unsecured creditors shared a 2% stake
in the Reorganized Company. Old Equity Interests were wiped out.
Mark S. Chehi, Esq., and D.J. Baker, Esq., at Skadden, Arps,
Slate, Meagher & Flom LLP, represented the Debtors in their
restructuring. When the Debtors filed for protection from its
creditors, they listed $1,219,554,000 in assets and $1,456,000,000
in liabilities.
* * *
As reported in the Troubled Company Reporter on Feb. 24, 2005,
Moody's Investors Service has assigned the following new ratings
to GenTek Inc., a diversified industrial company. The rating
outlook is stable. The ratings and outlook are subject to review
of the final documentation of the financing transaction.
The new ratings assigned are:
* B2 for the $60 million senior secured revolving credit
facility, due 2010,
* B2 for the $235 million senior secured term loan B, due 2011,
* Caa1 for the $135 million second-lien term loan, due 2012,
* B2 senior implied rating, and
* Caa2 issuer rating.
GENTEK INC: Selling Canadian CableTech Operations for $33 Million
-----------------------------------------------------------------
GenTek Inc. (NASDAQ: GETI) has executed a non-binding letter of
intent to sell its NOMA CableTech business in Stouffville, Canada
to Southwire Company of Carrollton, Georgia.
The operations in Stouffville, Canada, one of two plants
comprising the NOMA CableTech business, is dedicated principally
to the manufacture and sale of industrial building wire in the
Canadian market. The business represents approximately 11% of
GenTek's year-to-date revenues and is non-strategic to GenTek's
core businesses. The other plant, located at Mineral Wells, Texas
largely manufactures product for the wire harness business and is
not part of this transaction.
The transaction is valued by GenTek at approximately $33 million,
based upon a purchase price estimated by GenTek to be $21 million,
subject to normal post closing adjustments, plus an estimated
$12 million which the company expects to generate from the
liquidation of certain retained assets, including 45 acres of
unimproved real estate not included in the sale transaction. The
company expects to record an estimated pre-tax book loss of
$9 million in the quarter in connection with entering into this
transaction and expects to classify this business as a
discontinued operation. The book basis of the Canadian business
had been increased for fresh start accounting upon the company's
emergence from bankruptcy in 2003. Cash proceeds, when received,
will be used by GenTek to further reduce long-term debt and fund
working capital needs.
"This transaction is a significant step in GenTek's efforts to
focus on our core chemicals and manufacturing businesses," William
E. Redmond, Jr., GenTek's President and Chief Executive Officer
said. "We believe the transaction will provide significant
benefits to GenTek shareholders by unlocking the value of the
Canadian CableTech business, further reducing the company's
outstanding long term debt and by better positioning the company
for future growth."
The proposed transaction is subject to negotiation and execution
of definitive agreements and customary conditions The sale is
expected to close early in the first quarter of 2006.
GenTek Inc. -- http://www.gentek-global.com/-- provides specialty
inorganic chemical products and services for treating water and
wastewater, petroleum refining, and the manufacture of personal-
care products, valve-train systems and components for automotive
engines and wire harnesses for large home appliance and automotive
suppliers. GenTek operates over 60 manufacturing facilities and
technical centers and has approximately 6,900 employees.
* * *
As reported in the Troubled Company Reporter on Feb. 24, 2005,
Moody's Investors Service has assigned the following new ratings
to GenTek Inc., a diversified industrial company. The rating
outlook is stable. The ratings and outlook are subject to review
of the final documentation of the financing transaction.
The new ratings assigned are:
* B2 for the $60 million senior secured revolving credit
facility, due 2010,
* B2 for the $235 million senior secured term loan B, due 2011,
* Caa1 for the $135 million second-lien term loan, due 2012,
* B2 senior implied rating, and
* Caa2 issuer rating.
GLOBAL CASH: High Leverage Spurs S&P to Affirm Low-B Debt Ratings
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
Las Vegas, Nevada-based Global Cash Access, Inc.'s senior secured
bank loan to a '2' from a '3'. This indicates that lenders can
expect substantial recovery of principal in the event of a payment
default or bankruptcy.
The 'B+' bank loan and corporate credit and the 'B-' subordinated
ratings were affirmed. The outlook remains positive.
The recovery rating action predominantly is based on a substantial
increase in LIBOR rates since this bank facility was initially
rated, which drives improved recovery prospects under our current
methodology.
"The ratings on the company reflect leverage that remains high,
post IPO; a narrow product focus relative to the overall software
and services industry; and the company's limited track record
operating as an independent company," said Standard & Poor's
credit analyst Lucy Patricola.
These factors somewhat are offset by Global Cash Access' good
customer relationships, recurring revenues stemming from long-term
contracts with good renewal rates, and a 60% share of U.S. and
other major gaming markets in terms of sales.
Global Cash Access is the gaming industry's leading provider of
transaction-processing services and technology products that
dispense cash to customers on the casino floor. Global Cash
Access' ATM machines and cash access services distribute cash and
advances through ATM, debit, and credit card transactions.
In addition, the company's software platforms, its gaming patron
database, and its workstations for casino cashiers help casinos
manage credit risk and enhance marketing efforts. Total debt
outstanding as of June 30, 2005, was $447 million. Pro forma for
the IPO, debt will be reduced to $365 million.
GRAY TELEVISION: Completes Acquisition of WSAZ-TV for $186 Mil.
---------------------------------------------------------------
Gray Television, Inc. (NYSE: GTN and GTN.A) completed the
acquisition of the assets of WSAZ-TV, the NBC affiliate in
Charleston-Huntington, West Virginia (the Nation's 64th largest
Designated Market Area) from Emmis Communications Corp. (Nasdaq:
EMMS).
Bob Prather, President of Gray, said, "The acquisition of WSAZ-TV
is consistent with the Company's strategy of acquiring dominant
television stations. WSAZ-TV, located in the state capital and
largest city in West Virginia, is ranked #1 in overall share and
news. This station has a proud heritage of serving the local
communities of Charleston, Huntington and surrounding areas
including portions of Ohio and Kentucky."
The purchase price was $186 million and Gray financed the purchase
by borrowing $185 million under its senior credit facility ($150
million of term loan A borrowings and $35 million of revolving
loan borrowings) and applying $1 million of cash on hand.
Gray Television, Inc. is a television broadcast company
headquartered in Atlanta, Georgia. Including the pending
acquisitions of WSAZ-TV and WNDU-TV, Gray operates 36 television
stations serving 30 markets. Each of the stations are affiliated
with either CBS, NBC, ABC or FOX. In addition Gray currently
operates seven digital multi-cast television channels which are
affiliated with either UPN or FOX.
* * *
As reported in the Troubled Company Reporter on Oct. 10, 2005,
Moody's Investors Service assigned Ba2 ratings to Gray Television,
Inc.'s $600 million in new senior secured credit facilities ($100
million revolving credit facility, $150 million senior secured
term loan A, $350 million senior secured term loan B).
Additionally, Moody's affirmed the existing ratings, including the
Ba2 corporate family rating, and changed the outlook to stable.
The proceeds from the transaction will be used to refinance the
company's existing $400 million in senior secured credit
facilities and to finance the acquisition of WSAZ-TV in
Charleston-Huntington, WV from Emmis Communications Corporation
for $186 million in cash.
HARRY & DAVID: Sept. 24 Balance Sheet Upside-Down by $36 Million
----------------------------------------------------------------
Harry & David Holdings, Inc., formerly known as Bear Creek
Holdings, Inc., reported financial results for the first fiscal
quarter ended Sept. 24, 2005.
Net sales for the first quarter of fiscal 2006 were $57.7 million,
an increase of 7.5%, or $4.0 million, from $53.7 million recorded
in the first quarter of fiscal 2005, primarily due to strong
catalog and Internet sales from the company's Harry and David
direct marketing and Jackson & Perkins operating segments, as well
as higher wholesale division sales of Harry and David(R) products,
including Moose Munch(R) snacks.
For the first quarter of fiscal 2006, EBITDA net loss was
$19.6 million compared to a $17.6 million EBITDA net loss in the
same period last year. The increase in first quarter fiscal 2006
net sales was offset by rising delivery and transportation costs
due to increased fuel surcharges, higher raw material and product
costs, and greater selling, general and administrative expenses.
The pre-tax loss for the first quarter was $31.2 million, compared
to a pre-tax loss of $26.5 million reported in the same period
last year, driven by the aforementioned increased operating costs
and higher interest expense, which resulted from the issuance of
senior notes in February 2005. Net loss for the first quarter of
2006 was $17.3 million, reflecting an effective tax rate of 44.6%,
compared to net loss of $20.7 million, reflecting an effective tax
rate of 21.8%, reported in the same period last year. The tax
rate change is principally the result of net operating losses at
the state level for which less tax benefit was recorded for the
quarter ended September 2004.
As of Sept. 24, 2005, the company had total debt outstanding of
$308.1 million, representing the aggregate principal amount
outstanding under the Company's senior credit facility, as well as
the company's outstanding senior unsecured notes and floating rate
notes. The company had cash and cash equivalents of approximately
$13.7 million and total assets of approximately $395 million,
which includes a planned inventory build in preparation for the
2005 holiday selling season. Inventories were $117.2 million at
Sept. 24, 2005, up from $99.5 million in the same period in the
prior year.
Headquartered in Medford, Oregon, Harry & David Holdings, Inc.,
fka Bear Creek Holdings Inc., is a leading multi-channel specialty
retailer and producer of branded premium gift-quality fruit and
gourmet food products and gifts marketed under the Harry and
David(R) brand, and premium rose plants, horticultural products
and home and garden decor, marketed under the Jackson & Perkins(R)
brand.
At Sept. 24, 2005, Harry & David Holdings, Inc.'s balance sheet
showed a $36,150,000 stockholders deficit compared to a
$61,919,000 positive equity at Sept. 25, 2004.
HERTZ CORP: Moody's Rates $3.4 Billion Loan Facilities at Ba2
-------------------------------------------------------------
Moody's Investors Service assigned these ratings to The Hertz
Corporation and CCMG Acquisition Corporation in connection with
the proposed acquisition of Hertz from Ford Motor Company by a
private equity group consisting of:
* Clayton, Dubilier & Rice, Inc.,
* The Carlyle Group, and
* Merrill Lynch Global Private Equity.
Ratings assigned are CCMG:
* Corporate Family Rating - Ba3; $2.2 billion senior unsecured
notes - B1;
* $600 million subordinated notes - B3; and
* Speculative Grade Liquidity rating of SGL-2.
The Hertz Corporation:
* $1.8 billion secured term loan facility - Ba2; and
* $1.6 billion asset based loan facility (ABL) with
$400 million expected to be outstanding -- Ba2.
The outlook for the ratings is stable. Subsequent to the closing
of the transaction, CCMG will be merged with The Hertz
Corporation, and Hertz will be the surviving entity and the
obligor for the newly rated securities. Moody's also noted that
as part of the proposed acquisition, Hertz has made a tender offer
and consent solicitation for its existing public debt securities.
To the extent that any stub pieces of existing debt issues remain
outstanding following the acquisition, they will be stripped of
protective covenants under the terms of the consent solicitation.
Consequently, at the closing of the transaction Moody's expects to
either withdraw the ratings of any existing Hertz debt instruments
that are fully redeemed or lower the senior unsecured rating of
any untended Hertz debt to B2 from Baa3. The ratings for those
instruments currently remain under review for possible downgrade
pending the outcome of the tender offers and the close of the
transaction.
The Ba3 Corporate Family Rating reflects the considerable increase
in leverage and the related erosion in credit metrics that will
result from the transaction. This erosion is reflected in Hertz's
pro forma financial metrics (LTM through September 2005)
calculated using Moody's standard adjustments:
* total debt will increase from $11.1 billion to $13.2 billion;
* interest coverage will deteriorate from 2.2 times to
1.3 times;
* debt to EBITDA will increase from 4.0 times to 4.8 times; and
* debt to revenues will increase from 1.5 times to 1.8 times.
Moody's notes that a strong balance sheet and ample levels of
financial flexibility had historically been one of Hertz's key
competitive advantages relative to other equipment rental
companies and, to a lesser degree, other car rental companies.
They also provided an important cushion against the ongoing
cyclicality in both rental markets. As Hertz begins to operate
with much narrower levels of financial flexibility, it must also
contend with the eroding credit quality of the domestic automobile
OEM's from whom it has purchased program vehicles on a non-risk
basis.
The company's strategy of maintaining an automotive fleet
consisting of approximately 85% program vehicles, which benefit
from manufacturer repurchase obligations, has been a positive
rating consideration. Although this relationship between Hertz
and the domestic car manufacturers is likely to continue through
the intermediate term, the seriously diminished credit quality of
Ford and GM adds an additional element of risk, and lessens the
degree of assurance that can be ascribed to these OEM repurchase
obligations. It is also likely that the increased operating
pressure facing Ford and GM will contribute to vehicle purchase
prices continuing to rise as the two companies attempt to address
the historically low profitability generated by sales to the daily
rental sector.
Notwithstanding these operating and financial risks, Hertz retains
some formidable strengths. These include:
* leading market positions in both the on-airport car rental
and the equipment rental sectors;
* an expanding presence in the domestic off-airport market;
* a robust recovery in the equipment rental sector; and
* a highly capable and deep management team that will remain in
place.
Moody's expects that the equity sponsors will continue to support
the investment, growth and operating strategies that have been
embraced by Hertz's management and that have helped the company
establish a highly competitive business model.
The stable rating outlook anticipates that the company will
maintain its solid competitive position in all of its markets, and
that management will continue to make modest but steady
improvement in operating efficiency, margins and credit metrics.
Notwithstanding this progress, ongoing expansion of the rental
fleet, primarily automobiles, will likely result in total debt
continuing to rise. However, the expansion of the car rental
fleet should be funded almost entirely through the continued
securitization of vehicles. This should allow for the generation
of cash flow available to reduce outstandings under the term loan
and the ABL.
The Ba2 ratings of the ABL and term loan reflect the solid
security packages and asset coverage that will be available to
both classes of debt after giving effect for the approximately
$7.0 billion in ABS debt that will have claims on Hertz's car
rental fleet.
The B1 rating of the $2.2 billion unsecured notes and the B3
rating of the $0.6 billion subordinated notes take into account
the well secured and superior positions of Hertz's $7.0 billion in
ABS fleet debt, its $1.8 billion secured term-loan, and its $0.4
billion secured ABL. These secured obligations represent over 70%
of Hertz's total pro forma debt, and result in relatively modest
levels of asset coverage for the unsecured notes.
The ratings for the company's existing notes remain under review
for possible downgrade pending the outcome of the tender offer and
completion of the transaction. To the extent that individual
issues are fully redeemed pursuant to the tender offer the ratings
will be withdrawn. Any stub pieces of debt that remain
outstanding following the completion of the transaction will be
subject to downgrade. As of November 28th, Hertz had received
tender commitments for approximately 88% ($4.1 billion) of its
currently outstanding senior notes. The company estimates that
$500 million will remain outstanding at closing, subsequent to
which these notes will be stripped of restrictive covenants
pursuant to the consent solicitation.
Moreover, unlike the proposed senior and subordinated notes, the
untendered securities will not benefit from guarantees from
Hertz's domestic subsidiaries. The principal domestic subsidiary,
Hertz Equipment Rental Company (HERC), currently generates
approximately 30% of Hertz's earnings and HERC will also have a
less encumbered asset base than Hertz's direct operations.
Consequently, the earnings and asset coverage of the untendered
notes will be weaker than that of the new senior notes which are
rated B1. Consequently, Moody's believes that the untendered
notes will be downgraded to the B2 level upon closing of the
transaction.
The SGL-2 rating anticipates that during the coming twelve months
Hertz's EBITDA and operating margins will remain near current
levels of 38% and 14% respectively. This level of profitability
should enable the company to generate cash flow sufficient to
internally fund a level of expenditures that maintain its fleet at
current levels, with incremental borrowing required to fund
expansion. During this period, the company's liquidity profile
will continue to benefit from having a large portion of its car
rental fleet (over 80%) covered by OEM repurchase agreements.
Moody's also expects that Hertz will have approximately $1 billion
in availability under its ABL facility, and that the covenant
package ultimately agreed upon for this borrowing arrangement will
afford Hertz ample head room. Hertz's $475 million cash position
provides an additional liquidity cushion.
Factors that could contribute to improvement in the Hertz ratings
over the long term include steady progress in improving return
measures and credit metrics by achieving its stated objectives of:
* growing its Premier Car Rental operations;
* achieving greater operating efficiencies so that margins
remain on track to hitting pre 2000 levels;
* expanding its share position in the domestic off-airport and
on-airport car rental markets, as well as the European
market; and
* improving its share of the highly fragmented North American
equipment rental market.
An ability to achieve these operational objectives and to sustain
improvement in these metrics would be viewed favorably:
* interest coverage -- above 1.3 times;
* debt to EBITDA below - 4.8 times; and
* debt to revenues below 1.8 times
Conversely, persistent or material lack of progress in any of
these areas could result in pressure on Hertz's rating. The
company's credit profile could also be hurt by further erosion in
the financial or operating condition of Ford or GM.
CCMG Acquisition Corporation was formed to issue the senior and
subordinated notes. Following the acquisition CCMG will be merged
into Hertz which will become the obligor for the notes.
The Hertz Corporation, headquartered in Park Ridge, New Jersey,
operates the largest general use car rental business in the world,
and one of the largest industrial, construction and material
handling rental businesses in North America.
ICEWEB INC: Amends Financial Statements to Fix Accounting Error
---------------------------------------------------------------
The Board of Directors for IceWEB, Inc., concluded that certain of
its previously issued financial statements for the fiscal year
ended Sept. 30, 2004, contained accounting errors and should no
longer be relied upon.
The errors relate to IceWEB's acquisitions of Seven Corporation,
Iplicity, Inc. and DevElements, Inc. The Company recorded an
aggregate of approximately $1,769,133 as goodwill which should
have been recorded as intangible assets. The erroneously recorded
goodwill includes:
-- $134,000 which will be reclassified as software product;
-- $100,000 which will be reclassified as software library;
and
-- $1,535,133 which will be reclassified as customer
contracts/relationships.
The amortization periods for these intangibles will be two years
for customer contracts/relationships, three years for software
product and five years for software library.
The reclassification will have the effect of reducing IceWEB's
total assets in the balance sheets for each of the periods ended
Dec. 31, 2004, March 30, 2005 and June 30, 2005. It will also
increase net losses for the fiscal year ended Sept. 30, 2004 and
the subsequent periods.
Amended Results
In its amended Form 10-KSB for the fiscal year ended Sept. 30,
2004, submitted to the SEC on Nov. 14, 2005, IceWEB reported a
$2,035,443 net loss versus a $105,844 net loss in the prior year.
At Sept. 30, 2005, the Company's balance sheet showed $2,208,473
in total assets and liabilities of $2,291,045, resulting in an
$82,572 stockholders' deficit.
Due to the correction of the accounting error, the Company's
previously recorded $88,612 of net income for the three months
ended June 30, 2005, has been adjusted to a $102,079 net loss.
Net loss for the nine-months ended June 30, 2005, has been
adjusted from $1,241,795 to a net loss of $1,813,868.
Going Concern Doubt
Sherb & Co., LLP, expressed substantial doubt about IceWEB's
ability to continue as a going concern after it audited the
Company's financial statements for the fiscal year ended Sept. 30,
2004, due to the Company's net losses.
Headquartered in Herndon, Virginia, IceWEB, Inc. --
http://www.IceWEB.com/-- enables small and medium sized
organizations with its, hardware, software and professional
services. The Company's application service provider software
delivery model reduces the customer's Total Cost of Ownership and
improves the efficiency of IT environments. IceWEB packaged
solutions and uniquely tailored services ensure business value in
the Small and Medium Size business environment.
IVOICE INC: Posts $182,518 Net Loss in Quarter Ended Sept. 30
-------------------------------------------------------------
iVoice, Inc. (OTCB: IVOC) delivered its financial statements for
the quarter ended Sept. 30, 2005, to the Securities and Exchange
Commission on Nov. 14, 2005.
The company reported a $182,518 net loss on $173 of net sales for
the quarter ended Sept. 30, 2005. At Sept. 30, 2005, the
company's balance sheet showed $12,344,852 in total assets,
$5,879,248 in total liabilities and $6,465,604 in positive
stockholders' equity.
A full-text copy of iVoice, Inc.'s financial statements for the
quarter ended Sept. 30, 2005, is available at no charge at
http://ResearchArchives.com/t/s?36b
Going Concern Doubt
Bagell, Josephs & Company, LLC, in Gibbsboro, New Jersey raised
substantial doubt about iVoice's ability to continue as a going
concern after it audited the company's financial statements for
the year ended Dec. 31, 2004. Bagell Josephs points to
substantial accumulated deficits and spinning out of subsidiaries.
iVoice, Inc. (OTCB: IVOC) -- http://www.ivoice.com/index2.htm--
designs, manufactures, and markets innovative speech-enabled
applications and computer telephony communications systems.
JAG MEDIA: Going Concern Doubt Continues Amid Losses & Deficits
---------------------------------------------------------------
J.H. Cohn LLP expressed substantial doubt about JAG Media
Holdings, Inc.'s ability to continue as a going concern after it
audited the Company's financial statements for the fiscal years
ended July 31, 2005 and 2004. The auditing firm pointed to the
Company's recurring losses and cash flow deficiencies from
operating activities.
Fiscal 2005 Results
In its Form 10-KSB for the fiscal year ended July 31, 2005,
delivered to the Securities and Exchange Commission last month,
JAG Media reported a $1,889,000 net loss on $240,000 of revenues,
as compared to a $2,006,000 net loss on $253,000 of revenues for
the same period in 2004.
The Company's balance sheet showed $838,102 in total assets at
July 31, 2005, and liabilities pf $2,169,570, resulting in a
stockholders' deficit of $1,331,472.
JAG Media reported cash flow deficiencies from operating
activities of approximately $1,524,000 and $1,700,000 for the
years ended July 31, 2005 and 2004. As of July 31, 2005, the
Company only had working capital of $500,000.
Equity Line Of Credit
The Company has a standing Equity Line Purchase Agreement with
Cornell Capital Partners, LP, for a $10 million equity line
pursuant to which it is able to sell shares of Common Stock to
Cornell Capital from time to time over a 48-month period ending on
Aug. 28, 2006.
The purpose of the offering is to provide general working capital
for JAG Media, including working capital which might be required
by virtue of its strategic plan. As of July 31, 2005 and
Sept. 16, 2005, $4,035,000 of the Company's existing equity line
with Cornell Capital had been utilized.
Promissory Note
On Jan. 25, 2005, Jag Media entered into a Promissory Note
Agreement with Cornell Capital for a loan of $2,000,000. On
Aug. 5, 2005, Cornell Capital agreed to extend for three months
the date by which the Company must pay all amounts due under the
Promissory Note.
The face amount of the Promissory Note plus interest will be
payable either:
a) out of the net proceeds to be received by the Company upon
delivery of put notices under the Equity Line Agreement;
or
b) in full within 753 calendar days of Jan. 25, 2005,
regardless of the availability of proceeds under the
Equity Line Agreement, unless an extension is mutually
agreed to by the parties in writing.
If the Promissory Note is not paid in full when due, the
outstanding principal owed will be due and payable in full
together with interest at a rate of 14% per year or the highest
permitted by applicable law, if lower.
Bankruptcy Warning
As reported in the Troubled Company Reporter on July 26, 2005,
management believes that the Company will be able to generate
sufficient revenues from its remaining facsimile transmission and
web site operations and obtain sufficient financing from its
equity line agreement with the investment partnership prior to its
expiration in Aug. 2006, or through other financing agreements, to
enable it to continue as a going concern through at least
April 30, 2006. However, if the Company cannot generate
sufficient revenues and obtain sufficient additional financing, if
necessary, by that date, the Company has indicated that it may be
forced thereafter to restructure its operations, file for
bankruptcy or entirely cease its operations.
JAG Media Holdings, Inc., is a provider of Internet-based equities
research and financial information that offers its subscribers a
variety of stock market research, news, commentary and analysis,
including "JAG Notes", the Company's flagship early morning
consolidated research product. Through the Company's wholly owned
subsidiary TComm (UK) Limited, the Company also provides various
video streaming software solutions for organizations and
individuals. The Company's Web sites are located at
http://www.jagnotes.com/and http://www.tcomm.co.uk/and
http://www.tcomm.tv/
JOSEPH GREENBLATT: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Joseph Greenblatt
188 East 70th Street
New York, New York 10021
Bankruptcy Case No.: 05-60142
Type of Business: The Debtor acquires, operates and develops real
property. The Debtor's affiliates, Maywood
Consolidated Properties, Inc., and 44 affiliates
filed for chapter 11 protection on Feb. 19, 2005
(Bankr. S.D.N.Y. Case No. 05-10986).
Chapter 11 Petition Date: November 29, 2005
Court: Southern District of New York (Manhattan)
Judge: Robert D. Drain
Debtor's Counsel: Wayne M. Greenwald, Esq.
Wayne M. Greenwald, P.C.
99 Park Avenue, Suite 800
New York, New York 10016
Tel: (212) 983-1922
Fax: (212) 953-7755
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Allen Lewis $3,814,715
[Address not provided]
Edwin Cooksey $3,643,000
[Address not provided]
653-655 Rogers Avenue $1,165,000
2082 Madison Avenue
New York, NY 10035
121 West 122nd Street $1,139,821
2082 Madison Avenue
New York, NY 10035
Harriet Cooksey Trust $932,000
[Address not provided]
1055 Herkimer Avenue RA $783,385
2082 Madison Avenue
New York, NY 10035
206 Honneywell Avenue $714,952
2082 Madison Avenue
New York, NY 10035
190-01-113 Hollis Avenue $583,538
2082 Madison Avenue
New York, NY 10035
162 Central Avenue RA $573,326
2082 Madison Avenue
New York, NY 10035
243 East 18th Street $570,050
2082 Madison Avenue
New York, NY 10035
957 Saint Nicholas Avenue $563,804
2082 Madison Avenue
New York, NY 10035
164 Central Avenue $540,769
2082 Madison Avenue
New York, NY 10035
Selma Winston Trust $505,954
[Address not provided]
Olympic Diamond $425,000
[Address not provided]
2093 Madison Avenue $424,589
2082 Madison Avenue
New York, NY 10035
242 Lennox Avenue $392,650
2082 Madison Avenue
New York, NY 10035
133 Suydam Street RA $386,031
2082 Madison Avenue
New York, NY 10035
544 West 160th Street $365,500
2082 Madison Avenue
New York, NY 10035
360 West 127th Street $355,360
2082 Madison Avenue
New York, NY 10035
1230 Franklin Avenue $346,700
2082 Madison Avenue
New York, NY 10035
KAISER ALUMINUM: Confirmation Objections to Amended Ch. 11 Plan
---------------------------------------------------------------
Several parties-in-interest in Kaiser Aluminum Corporation and its
debtor-affiliates' cases filed objections to the confirmation of
the Remaining Debtors' second amended plan of reorganization filed
on September 7, 2005:
1. Santown Limited Partnership;
2. United States Trustee;
3 Internal Revenue Service;
4. Official Committee of Retired Salaried Employees;
5. Texas Comptroller of Public Accounts;
6. Clark Public Utilities; and
7. Law Debenture Trust Company of New York.
Judge Fitzgerald will hold a status conference on the Plan
Confirmation December 19, 2005, at 1:30 p.m. at U.S. Bankruptcy
Court for the District of Delaware in Pittsburgh, Pennsylvania.
Confirmation Objections
A. Santown
Santown Limited Partnership is the owner of certain improved
commercial real property located at 6250 Bandini Boulevard, in
Commerce, California. Pursuant to a Lease dated December 1,
1964, Santown has leased the Property to Kaiser Aluminum &
Chemical Corporation.
On October 28, 2005, the Remaining Debtors filed a schedule of the
executory contracts and unexpired leases to be assumed or assumed
and assigned pursuant to the Second Amended Plan. The Santown
Lease is included in the Exhibit. However, the exhibit did not
specify whether the Santown Lease is proposed to be assumed by
KACC, or assumed by KACC and then assigned to a third party, nor
did it set forth the Debtors' proposed cure amount in connection
with the assumption.
Santown asserts that pursuant to Section 365(b)(1) of the
Bankruptcy Code, the Debtors may only assume the Lease if, at the
time of assumption, the Debtors:
1. cure any default, or provide adequate assurance that any
default will be promptly cured;
2. compensate, or provide adequate assurance that they will
promptly compensate Santown for the actual pecuniary loss
resulting from the default; and
3. provide adequate assurance of future performance.
According to Thomas G. Macauley, Esq., at Zuckerman Spaeder LLP,
in Wilmington, Delaware, there are certain defaults under the
Santown Lease that the Debtors will be required to cure to assume
the Lease. The defaults relate to the Debtors' repair and
maintenance obligations under the Santown Lease. The Lease
requires that KACC keep the buildings and premises in good
condition and repair.
The roof of the building located on the Property and the HVAC
system for the building are damaged and require significant
repairs or replacement, Mr. Macauley reports. The parking lot
located on the Property is also damaged and requires significant
repairs.
As of March 26, 2003, when Santown filed an amended claim, the
estimated repair costs was $2,400,000. In addition, based on the
nature of KACC's business and its use of the Property, Santown is
concerned that there may be environmental contamination that would
also have to be remedied under the provisions of the Lease and
applicable law.
Mr. Macauley contends that the Debtors' proposed treatment of the
Santown Lease does not comply with Section 365(b)(1). The Plan
contemplates a "conditional" assumption of the Lease. The Plan
would also give the Debtors the right to assume or reject
contracts or leases after entry of the Confirmation Order.
Accordingly, Santown asks Judge Fitzgerald to deny the Remaining
Debtors' Plan.
B. United States Trustee
Kelly Beaudin Stapleton, the United States Trustee for Region 3,
highlights a potential issue for the Court relating to the
substantive consolidation provisions of the Remaining Debtors'
Plan of Reorganization.
The U.S. Trustee notes that the Plan indicates that the Debtors
will seek approval of a substantive consolidation order for the
purpose of implementing the Plan, but will not effect their legal
and corporate structure. In essence, the Debtors are seeking a
deemed consolidation.
The U.S. Trustee reminds Judge Fitzgerald that substantive
consolidation, deemed or otherwise, is governed by the newly
articulated standard as set out in the decision of the U.S. Court
of Appeals for the Third Circuit in "In re Owens Corning, 419
F.3d 195 (3d Cir. 2005)." The Third Circuit stated that to
receive a substantive consolidation order, what must be proven,
absent consent, concerning the entities for whom substantive
consolidation is sought is that:
(i) before the Petition Date, they disregarded separateness,
so significantly, their creditors relied on the breakdown
of entity borders and treated them as one legal entity; or
(ii) postpetition, their assets and liabilities are so
scrambled that separating them is prohibitive and hurts
all creditors.
When addressing the fact that the debtors in Owens Corning were
not seeking a true substantive consolidation but simply a deemed
consolidation, the Third Circuit pulled no punches, the U.S.
Trustee says. The Owens Corning Debtors stated that the deemed
consolidation was the "flaw most fatal to the Plan" and that it
"fails even to qualify for consideration."
Under the backdrop of the Third Circuit's ruling in Owens
Corning, it is unclear whether this relief is available, the U.S.
Trustee states. In the context of the Owens Corning case, the
Third Circuit clearly showed dislike for the deemed consolidation
principle.
"It certainly appears that the Third Circuit has eliminated the
principle of deemed consolidation. At the very least, the ruling
makes it questionable that deemed consolidation is a valid form of
relief," the U.S. Trustee says.
To receive the relief requested in the Debtors' the Plan, the
U.S. Trustee points out that the Debtors must prove that either
deemed consolidation is a valid remedy or that the new substantive
consolidation standard has been met.
The U.S. Trustee leaves the Debtors to their burden, and reserves
any and all of her rights to, inter alia, conduct discovery and to
modify, amend, supplement or augment her objection and take
whatever other actions are deemed necessary and appropriate.
C. IRS
On behalf of the Internal Revenue Service, David M. Katinsky,
Esq., of the Tax Division of the U.S. Department of Justice, tells
the Court that the Plan permanently enjoins the Debtors' creditors
from asserting set-off or recoupment. He says the provision is
impermissible since Section 553 of the Bankruptcy Code governs
set-off in bankruptcy and confirmation of a plan does not
extinguish set-off claims when they are timely asserted.
Mr. Katinsky also notes that the right to recoupment does not
constitute a debt which is dischargeable and that the United
States Government also has a long recognized, common law right to
recoup federal funds. Like other creditors, the Government has
the common law right to set off mutual debts.
Mr. Katinsky relates that the IRS timely filed a proof of claim
against the Debtors for tax years 2000 and 2001. After the IRS'
claim was filed, Kaiser Aluminum Corporation filed a subsequent
year return with losses which were carried back to the years on
the proof of claim and which eliminated the liability for the tax
but did not eliminate the liability for interest from the due date
of the returns for the years on the claim until the due date of
the return for the year of the loss.
The IRS has claims for deficiency interest for those two years
aggregating $600,000.
Subsequent to the filing of the IRS' claims, the Debtors filed
claims for refund, and the IRS allowed them for $1,635,077.
Consequently, there are funds available against which to set off
and fully satisfy the IRS' claims.
Mr. Katinsky also points out that the stipulation between the
Debtors and the Government entered by the Court on February 1,
2005, provided for the U.S. Government to set off claims of the
Bonneville Power Administration, the Department of Interior, the
National Oceanic and Atmospheric Administration, and the
Environmental Protection Agency against the tax refund after first
allowing the IRS to administratively freeze the amount it intended
to set off against the tax refund.
The IRS, the Debtors, and the four other federal agencies -- the
BPA, the DOI, the NOAH, and the EPA -- are in the process of
working out for filing with the Court a stipulation to permit set-
off of the IRS claim, Mr. Katinsky says.
D. Retirees Committee
In accordance with the Revised Settlement Agreement between the
Retirees Committee and the Debtors, the retiree benefits for
salaried retirees -- in effect since the Debtors reduced their
contributions to the payment of premiums for medical insurance in
2002 -- were terminated on May 31, 2004. The Revised Settlement
Agreement provides two things to Salaried Retirees in compensation
for the loss of retiree benefits:
1. The contractual right to pay for COBRA-style coverage; and
2. The right to share in the value to be contributed by the
Debtors to a trust for the Salaried Retirees.
Frederick B. Rosner, Esq., at Jaspan Schlesinger Hoffman LLP, in
Wilmington, Delaware, tells the Court that the Revised Settlement
Agreement contemplates that Salaried Retirees may utilize both
benefits. But the Debtors have refused to so state in the Plan
and have stated they might, at any time in the future, assert that
receiving benefits from the trust will cause a Salaried Retiree to
lose his or her contractual COBRA coverage.
Mr. Rosner relates that that "thoroughly frightening prospect" has
caused Salaried Retirees who depend on COBRA coverage to forego
sharing in the benefits of the trust. As a result, the Plan, if
confirmed and implemented as the Debtors have announced they will
implement it, would deprive many Salaried Retirees of a key
benefit to which the Plan must assure them.
The Retiree Committee, therefore, objects to the Plan because it
would cause the Salaried Retirees to lose material benefits under
their settlement with the Debtors.
Mr. Rosner also notes that the parties' initial settlement
agreement was based very closely on the settlement reached a day
or so before with the United Steelworkers and later with all other
unions. Those settlements had two basic components:
* the right of retirees to pay premiums to continue to be
part of the Debtors' group medical insurance policies for
active employees, in the manner provided by COBRA; and
* the creation of a voluntary employee beneficiary
association to which the Debtors would contribute a
portion of the equity to be issued under the Plan, plus
cash.
The cash and stock was allocated between hourly retirees, on the
one hand, and the Salaried Retirees, on the other.
The COBRA, on the other hand, provides that when one who has lost
coverage becomes covered under a new medical insurance plan, the
former employer may terminate the COBRA coverage. The settlement
agreements with the USW and other unions incorporate that concept
and are clear that a retiree will not be entitled to enroll for
COBRA coverage, if he or she is receiving the coverage provided by
the Union VEBA.
The Debtors apparently view the Revised Settlement Agreement as
having no implied terms, like the covenant of good faith and fair
dealing. By refusing to confirm that they will never disqualify a
Salaried Retiree from contractual COBRA coverage, solely because
the Salaried Retiree is entitled to receive benefits -- merely
premium reimbursements -- from the Salaried VEBA, the Debtors are
requiring that the trustees of the Salaried VEBA not allow the
COBRA participants to be beneficiaries of the Salaried VEBA.
Mr. Rosner notes that by the Debtors' threat of a future change in
its position, they are prohibiting prudent trustees from doing
precisely what the Debtors agreed those trustees could do. The
Debtors are thereby lacking good faith and fair dealing in the
implementation of the Revised Settlement Agreement.
Additionally, the Retiree Committee objects to the Plan because
confirmation of the Plan would result in confusion over the terms
of the settlement.
One of the more significant events under the Plan would be the
implementation of new ownership of KAC, as non-tort claimants are
to be compensated primarily by receipt of newly issued common
stock in KAC. This distribution of stock, together with the cash
that is to be paid on the effective date of the Plan and
periodically thereafter to the Salaried VEBA, is laid out in the
Plan. However, there is no other mention of the Settlement
Agreement in the Plan after this.
Mr. Rosner also contends that Plan confirmation will render the
stock in the Salaried VEBA potentially unsaleable. The stock
certificate permits transfers by holders of at least 5% of KAC's
common stock only if KAC's Board of Directors gives its written
approval or the holder requests that the Board of Directors
determine that the transfer will not cause KAC to lose the benefit
of any net operating tax loss carryforward.
He notes that no prudent lawyer can opine that a proposed stock
transfer, when combined with past, proposed and all possible
future transfers and issuances, will not result in the loss of any
net operating tax loss benefits. Hence, the Salaried VEBA will
not be able to deliver the opinion contemplated by the
Certificate.
E. Texas Comptroller
On behalf of the Comptroller of Public Accounts of the State of
Texas, Assistant Attorney General Jay W. Hurst, Esq., in Austin,
Texas, argues that the Plan seeks to alter or impair the set-off
rights of the Texas Comptroller. The Plan appears to provide that
set-off rights of creditors may be impaired.
Mr. Hurst points out that Section 553 of the Bankruptcy Code
creates a general rule that any right of set-off that a creditor
possessed prior to the bankruptcy case is not affected by the
Bankruptcy Code.
F. Clark Public Utilities
Public Utility District No. 1 of Clark County, doing business as
Clark Public Utilities, objects to the Plan to the extent it
purports to divest other adjudicative bodies of their exclusive
jurisdiction to hear and determine certain matters.
Frederick B. Rosner, Esq., at Jaspan Schlesinger & Hoffman LLP, in
Wilmington, Delaware, points out that the Retention of
Jurisdiction provision under the Plan may be construed to
eliminate exclusive jurisdiction of the Federal Energy Regulatory
Commission to establish rates and order refunds in the interstate
wholesale energy market.
Clark also contends that the Plan does not provide a mechanism to
compensate Class 9 Claims that the Court may allow, but do not
otherwise meet the definition of a Disputed Claim. According to
Mr. Rosner, the Plan currently only protects Disputed Claims
through the creation and use of the Unsecured Claims Reserve, as
outlined in the Plan. However, the definition of "Disputed Claim"
excludes claims on which the Bankruptcy Court has previously
disallowed.
The Debtors have previously asked the Bankruptcy Court to expunge
both of Clark's Claim Nos. 3122 and 7245 on the theory of res
judicata notwithstanding the fact that the judgment the Debtors
allege controls the allowance of these claims, is currently
pending appeal. If the judgment on which the Debtors base their
objection is overturned or is subject to a remand, Mr. Rosner says
Clark will have the right to and may ask the Bankruptcy Court to
reconsider any action taken on its claims and those claims may be
allowed. In that event, the Plan does not provide for any reserve
to make distributions to Clark's claims, and those claims will not
receive treatment under the Plan equal to other Allowed Claims in
Class 9.
Clark reserves its rights to seek appropriate resolution of its
claims from the Bankruptcy Court, the District Court, or the
FERC.
G. Law Debenture
Francis A. Monaco, Jr., Esq., at Monzack and Monaco P.A., in
Wilmington, Delaware, tells the Court that the Plan fails to make
distributions to Law Debenture Trust Company of New York with
respect to its contractual entitlement to fees, charges and
expenses, including professional fees.
Law Debenture Trust Company of New York is the trustee under an
Indenture dated February 1, 1993, pursuant to which Kaiser
Aluminum & Chemical Corporation issued certain notes.
Mr. Monaco explains that under the Plan, any consideration that
would be paid to the 1993 Noteholders as holders of Allowed Class
9 Claims will be distributed directly to the holders of notes
under the Indenture dated February 17, 1994, and the Indenture
dated October 23, 1996, through their indenture trustees.
Mr. Monaco contends that a distribution of the consideration
through the 1994/96 Indenture Trustees would circumvent Law
Debenture's charging lien for the Fees in violation of the 1993
Indenture. The subordination provisions of the 1993 Indenture do
not encompass distributions with respect to the Fees.
Mr. Monaco also points out that Rue 3021 of the Federal Rules of
Bankruptcy Procedure requires that all plan distributions with
respect to public debt securities be made in the first instance to
the relevant indenture trustee, thus permitting the trustee to
exercise its charging lien even if the trustee is later required
to turn over the remainder of the distributions to a more senior
class of securities.
"In addition to this being a proper interpretation of the 1993
Indenture and Bankruptcy Rule 3021, it is also a sound policy to
ensure that the interests of public debt securityholders are
appropriately represented in Chapter 11 cases," Mr. Monaco says.
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. 83; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
KAISER ALUMINUM: Wants Fourth Old Republic Stipulation Approved
---------------------------------------------------------------
Old Republic Insurance Company has issued new workers'
compensation, automobile liability and general liability insurance
coverage to Kaiser Aluminum Corporation and its debtor-affiliates,
which will be effective until October 14, 2006, and has
essentially the same terms and conditions as the policies Old
Republic issued through October 2005.
Old Republic did not require that any additional collateral be
posted in connection with the issuance of the New Policies but
required the Debtors to enter into another stipulation.
The principal terms of the parties' Fourth Stipulation are:
(a) Old Republic will be entitled to an unliquidated
administrative claim against the Debtors -- other than
Debtors Alpart Jamaica, Inc., Kaiser Jamaica Corporation,
Kaiser Alumina Australia Corporation, Kaiser Finance
Corporation and Kaiser Bauxite Company -- on account of
the possibility that the Debtors fail to make:
-- premium payments or pay any other amounts due with
respect to the Policies;
-- payments within the deductible layer of the Policies
with respect to claims covered by the Policies; or
-- payments to the third-party administrator that is
administering the covered claims;
(b) The administrative claims will (i) survive confirmation of
the applicable Debtors' plan or plans of reorganization,
(ii) not be liquidated or adjudicated by the Court, and
(iii) not be payable upon the effective date of the plan,
unless the confirmed plan or plans for the applicable
Debtors provides for a complete liquidation of the
Debtors, in which event Old Republic's administrative
claim against the applicable Debtors is to be estimated
or adjudicated by the Court, as appropriate, and paid when
allowed by the Court. In addition, in the event these
cases are converted to Chapter 7 cases, Old Republic's
administrative claim against the applicable Debtors is
to be estimated or adjudicated by the Court, as
appropriate, and paid when allowed by the Court;
(c) To the extent that Old Republic draws down on the
$9,644,219 Amended Letter of Credit pursuant to the terms
of the parties' Program Agreement, the Debtors will not
seek before October 14, 2009, to exercise their rights
under the Program Agreement, if any, to recover from Old
Republic any portion of the draws on the Amended Letter of
Credit, unless otherwise agreed to by the parties;
(d) If the Debtors do not make all required premium payments
or do not make all required deductible payments on account
of the claims covered by the Policies or fail to pay all
amounts owed to the TPA, Old Republic will be entitled,
but only after providing the Debtors, the Creditors'
Committee, the Asbestos Committee, the Retirees'
Committee, the Asbestos Representative and the Silica
Representative with no less than 20 business days' prior
written notice, to exercise its state law rights to cancel
the new policies; and
(e) The terms of the Fourth Stipulation will not prejudice any
rights of Old Republic to pursue other claims that might
arise under various workers' compensation, excess workers'
compensation, general liability and automobile insurance
policies that were issued prior to the parties' entry into
the Program Agreement against any of the Debtors other
than Kaiser Bauxite, Kaiser Jamaica, Alpart Jamaica,
Kaiser Finance and Kaiser Australia. Additionally, the
terms of the Fourth Stipulation will not prejudice any
rights of Old Republic to draw upon the Amended Letter of
Credit.
To put the New Policies into effect, the Debtors ask the U.S.
Bankruptcy Court for the District of Delaware to approve the
Fourth Stipulation.
As previously reported in the Troubled Company Reporter on
January 24, 2005, Judge Fitzgerald approved the Third Stipulation
between the Debtors and Old Republic Insurance Company.
Daniel J. DeFranceschi, Esq., at Richards, Layton &
Finger, P.A., local counsel to Kaiser Aluminum, relates that Old
Republic has issued or shortly will issue new insurance coverage
in accordance with the terms of binders delivered to the Debtors,
which will continue this array of insurance coverage through
October 14, 2005, on essentially the same terms and conditions as
the 2003-2004 Policies. The Letter of Credit securing the
Debtors' obligations to Old Republic will be increased from
$8,720,000 to $9,644,219.
As a condition to the issuance of the New Policies, the Debtors
agreed to enter into a third stipulation, the basic terms of
which, are similar to conditions agreed to in connection with the
2003-2004 Policies.
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. 83; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
KATUN CORP: Term Loan Repayment Cues S&P to Raise Bank Loan Rating
------------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
Minneapolis, Minnesota-based Katun Corp.'s senior secured bank
loan to '1' from '3'. This indicates that lenders can expect full
recovery of principal in the event of a payment default or
bankruptcy.
S&P also raised the bank loan rating for the company to 'BB-' from
'B+', given our expectation for full recovery of principal.
The higher bank loan and recovery ratings reflect:
* both term loan repayment, which has reduced the bank
facility to $85 million from $137 million, and
* the application of our current interest rate and default
scenario methodology.
The outlook remains stable.
"Our ratings on Katun Corp. reflect relatively modest revenue and
earnings base, increasingly competitive market conditions, and
lack of revenue growth," said Standard & Poor's credit analyst
Martha Toll-Reed.
These factors are partly offset by the company's good position as
a niche office equipment parts distributor, and a moderately
leveraged financial profile.
Privately held Katun distributes copier and laser printer
replacement parts and supplies, and had fiscal 2004 revenues of
$403.4 million. Revenues and earnings in this relatively mature,
fragmented industry sector have been pressured over the past year
by increased competition from original equipment manufacturers, as
well as new market entrants.
Although Katun benefits from a geographically diversified market
position, and international growth opportunities remain strong,
EBITDA margins have fallen to low double-digit levels in 2005 from
the mid-teens as a percent of fiscal 2004 revenues. Recent senior
management changes and cost reduction actions are expected to
restore revenue growth and EBITDA margins over the intermediate
term.
KERR-MCGEE: Fitch Withdraws Rating After $4.25-Bil Loan Repayment
-----------------------------------------------------------------
With the repayment of the $4.25 billion in term loans, Fitch
Ratings withdraws the 'BB' rating on Kerr-McGee Corporation's
senior secured term loans. Following the initial public offering
of the class A common stock of Tronox Inc. and concurrent debt
offering by Tronox, Kerr-McGee received an approximately
$800 million distribution from Tronox, which was used to repay the
remaining term loan balance. The Rating Outlook on Kerr-McGee is
Positive.
The debt ratings of Kerr-McGee are:
-- Kerr-McGee IDR of 'BB-';
-- Senior secured credit facility rating of 'BB';
-- Senior secured term loan rating of 'BB' withdrawn;
-- Senior secured note rating of 'BB';
-- Commercial paper rating of 'B'.
Fitch rates the debt of Tronox Inc.:
-- Tronox IDR of 'B';
-- Tronox Worldwide LLC's and Tronox Finance's $350 million
of senior unsecured notes rating of 'B+';
-- Tronox's $250 million senior secured revolving credit
facility and $200 million senior secured term loan rating
of 'BB'.
The Rating Outlook for Tronox is Stable.
KMART CORP: Court OKs Dept. of Health's Move for Protective Order
-----------------------------------------------------------------
Pursuant to Rules 9014(c) and 7026 of the Federal Rules of
Bankruptcy Procedure, the United States Department of Health and
Human Services asks the U.S. Bankruptcy Court for the Northern
District of Illinois to issue a protective order that would
preserve the privacy of the records of Medicare beneficiaries that
Kmart Corporation has requested the DOH to produce.
The DOH filed Claim No. 37637 against Kmart for amounts owed under
the Medicare Secondary Payer provisions of the Public Health and
Welfare Code. As a result of the continuing examination of the
Medicare beneficiaries' file, the DOH has found out that Kmart's
total debt is $473,467, of which $99,590 represents prepetition
interest.
According to Patrick J. Fitzgerald, Esq., the Medicare Secondary
Payer provides that when a third party has made payment or can
reasonably be expected to make payment under a primary plan,
including a self-insured plan, Medicare payment should not be
made. However, if it has already made payment for the expenses,
Medicare is entitled to be reimbursed for the conditional payments
if the third party insurer later makes payment with regard to the
services.
In conjunction with Kmart's 19th Omnibus Claims Objection
pertaining to Claim No. 37637, Kmart served on the DOH its first
request for production of documents.
The DOH objected to Kmart's request for documents that are
protected from disclosure by the Privacy Act and the Health
Insurance Portability and Accountability Act Privacy Rule. In
accordance with Rule 33(d) of the Federal Rules Civil Procedure,
the DOH provided Kmart with a Document Production Index and
Privilege Log.
According to Mr. Fitzgerald, the Protective Order provides Kmart
with the discoverable information it seeks while providing the
Medicare beneficiaries with the privacy that they are entitled to
under federal laws.
Mr. Fitzgerald tells the Court that Kmart has never complained
that a protective order will deprive it of relevant information,
and even expressed its willingness to agree to a protective order.
While Rule 26(b)(1) of the Federal Rules of Civil Procedure
provides that parties may obtain discovery regarding any matter,
not privileged, that is relevant to the claim or defense of any
party, Civil Rules 26(b)(2) and 26(c) require that the right of
discovery must be balanced against other interests.
Mr. Fitzgerald says Kmart conditioned its agreement on the DOH
waiving its discovery or accepting whatever Kmart produced.
However, Mr. Fitzgerald argues that the DOH's waiver of discovery
or blind acceptance of what the company produces is clearly not an
interest that Rule 26 is intended to protect. Kmart's actions
demonstrate that further good efforts to resolve the discovery
dispute are unlikely to be productive.
* * *
The Court grants the DOH's request. The DOH and Kmart are
prohibited from publicly disclosing Protected Documents or
Confidential Information in any format.
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. 104; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
KMART CORP: Claimants Want Plan Injunction Lifted to Pursue Action
------------------------------------------------------------------
According to Barbara L. Yong, Esq., at Field & Golan LLP, in
Chicago, Illinois, 16 residents of the United States Virgin
Islands assert prepetition personal injury claims against Kmart
Corporation:
* Arelias Arrendell,
* Lisa Dean Braitwaite,
* Leonardo Castillo,
* Jesse Celestine,
* Sandra Charles,
* Elroy Clark,
* Elizabeth Diaz,
* Ernestine Gittens,
* Donna Heywood,
* Theresa Johnson,
* Vilma Jones,
* Carolyn Joseph,
* Yolanda Linares,
* Marsha Stanislas,
* Maria Valdivia, and
* Jahmeca Weston.
In addition, 10 Virgin Islands residents also assert personal
injury claims against Kmart, which claims arose after the
Petition Date and prior to the confirmation of Kmart's Plan of
Reorganization:
* Valencia Acoy,
* Emma Diaz,
* Shedrine Leomine,
* Alfred Lopez,
* Jannella Parris,
* Bobby Ferris,
* Pearly Rhymer,
* Joseph Spadaro,
* Josephine Vigilant, and
* Idona Wallace.
Ms. Yong tells the U.S. Bankruptcy Court for the Northern District
of Illinois that, pursuant to the Court-approved Alternative
Dispute Resolution Procedures for Personal Injury Claims,
mediation for the Virgin Island Claimants was to be conducted in
the Virgin Islands. Ms. Yong says that the Virgin Island
Claimants have, at all times, complied with the Claims Resolution
Procedures. In accordance with these Procedures, they have
requested that Kmart's counsel schedule their claims for
mediation.
However, Ms. Yong relates, Kmart has failed or refused to comply
with the Virgin Island Claimants' requests for mediation. Thus,
the Court should find that Kmart has waived its right to mediate
with the Claimant, Ms. Yong argues.
Ms. Yong tells Judge Sonderby that Kmart's continued delay in
complying with the Claims Resolution Procedures has prejudiced:
(a) the Virgin Island Claimants, as each of their claims
remains unliquidated and continues to be on hold in the
District Court; and
(b) Kmart and its other creditors by preventing Kmart from
determining the amount of the Virgin Island Claimants'
claims and making the appropriate distributions.
Accordingly, the Virgin Island Claimants ask the Court to lift the
Plan Injunction to allow them to adjudicate their personal injury
claims against Kmart to judgment.
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. 104; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
L-3 COMMS: Moody's Affirms Senior Subordinated Notes' Ba3 Rating
----------------------------------------------------------------
Moody's Investors Service affirmed the debt ratings of L-3
Communications Holdings, Inc., Corporate Family Rating of Ba2,
and has changed L-3 Communications Corporation's Speculative Grade
Liquidity Rating to SGL-1 from SGL-2, reflecting restoration of
L-3's cash and available liquidity position and operating cushion
relative to covenants under the amended credit facility covenants,
as well as prospects for substantial free cash flow generation
over the next 12 months.
L-3 Communication Corporation's SGL-1 speculative grade liquidity
rating reflects:
* the company's strong liquidity position (cash and committed
credit availability);
* the absence of immediately maturing long term debt; and
* Moody's expectations that the company will continue to
generate cash flow amply in excess of interest and CAPEX over
the next 12 months.
The SGL rating also considers the cushion the company has restored
under its amended financial covenants following the levered
acquisition of Titan Corporation for $2.65 billion in July 2005.
Moody's expects that any near-term acquisitions during 2006 could
be funded by the company's cash balances and strong cash flow
rather than through use of additional debt.
Despite the company's improved liquidity position reflected in the
SGL rating, L-3's ratings outlook remains negative, owing largely
to the high degree of leverage that has ensued from the debt-
financed acquisition of Titan. For the LTM September period,
Moody's estimates leverage to be about 5.3 times debt/EBITDA (as
measured per Moody's standard methodology) based on reported
results, and approximately 4.7 times on a pro forma basis, taking
into account a full year of Titan results.
However, Moody's believes that strong expected levels of cash flow
generation and substantial cash balances support expectations for
reduction in debt levels over the longer term. As such, Moody's
anticipates that the outlook could be stabilized:
* if the company were to restore leverage to about
3.5 times EBITDA;
* if EBIT/interest again exceeds 3.5 times; or
* if free cash flow exceeds 15% of debt for a sustained period.
Conversely, ratings would be subject to downward revision:
* if the company were unable to reduce leverage to less than 4
times within the next 12-18 months, as is currently expected;
* if free cash flow falls below 10% of total debt; or
* if EBIT coverage of interest falls below 2 times.
As of September 2005, the company had about $887 million available
under its $1 billion senior secured bank credit facilities; there
were no drawings but there were $113 million in letters of credit
issued against these facilities. Cash balances were $226 million
as of September 2005, resulting in total liquidity of almost $1.1
billion at that time. Moody's outlook on L-3's liquidity has
improved as a result of the strong liquidity and the minimal use
of revolving credit capacity to partially fund the Titan
acquisition.
Following the acquisition of Titan and a corresponding increase in
debt, the Company has amended the maximum leverage ratio to
provide a cushion under the covenant levels. At the revised
maximum leverage covenant of 4.5 times, L-3 had total leverage of
3.7 times as of September 2005. The covenant calculation permits
the inclusion of pro forma earnings from recent acquisitions. The
Company has restored substantial cushion under remaining covenants
with interest coverage calculated at 4.5 times versus a minimum
covenant level of 3.0. Maximum senior leverage also shows
substantial cushion. The amendment of the total leverage covenant
restores L-3 to compliance levels that the company experienced
prior to the Titan acquisition.
L-3's LTM September 2005 financial results, which include two
months of earnings from Titan, reveal continued strong cash flow
generation. Despite the substantial increase in interest expense
related to acquisition financing, capital expenditures of
approximately $100 million, and dividend payments on common stock
of $56 million, the company generated free cash flow of $640
million. Moody's expects L-3 to continue to generate strong cash
flows both from existing operations as well as from acquired
companies, Titan in particular.
L-3's LTM September 2005 EBITDA was approximately $1.1 billion on
sales of about $8.5 billion, and is expected to grow, reflecting
the impact of acquisition-related earnings as well as organic
growth reflecting a strong defense contracting sector. Going
forward, Moody's expects that Titan will contribute to L-3's
EBITDA above levels suggested by its financial performance in FY
2004: Titan generated less than $100 million in EBITDA in that
year, reflecting significant restructuring and impairment charges.
The combined EBITDA of the two companies is expected to
comfortably exceed CAPEX and cash interest expense in 2005 and
2006.
These ratings have been affirmed:
L-3 Communications Corporation:
* Senior subordinated notes due 2012-2015 of Ba3
L-3 Communications Holdings, Inc.:
* Convertible Contingent Debt Securities due 2035 of Ba3
* Corporate Family Rating of Ba2
L-3 Communications Corporation, headquartered in New York City and
a wholly-owned subsidiary of L-3 Communications Holdings, Inc.:
* is a leading provider of:
-- Intelligence, Surveillance and Reconnaissance systems,
-- secure communications systems,
-- aircraft modernization,
-- training and government services; and
* is a merchant supplier of a broad array of high technology
products.
Its customers include the:
* Department of Defense,
* Department of Homeland Security,
* selected U.S. government intelligence agencies, and
* aerospace prime contractors.
LEVITZ HOME: Final Hearing for Asset Sale Set on December 6
-----------------------------------------------------------
As previously reported in the Troubled Company Reporter on
Nov. 18, 2005, Levitz Home Furnishings, Inc., and its debtor-
affiliates asked the U.S. Bankruptcy Court for the Southern
District of New York to approve bidding procedures that will
provide an appropriate framework for selling the Offered Assets
that make up the Debtors' business in a uniform fashion and enable
the Debtors to review, analyze, and compare all Bids received to
determine which Bid is in the best interests of the Debtors'
estates and creditors.
* * *
In view of the objections raised by 24 landlords of the Debtors,
Pinnacle Flooring, L.L.C., the Pension Benefit Guaranty
Corporation and U.S. Bank National Association to the asset sale
procedures proposed by the Debtors, the Court overruled the
objections and approve the Bidding Procedures, subject to these
changes:
(a) Objections to whether a proposed assignee of any executory
contract or unexpired lease are due December 5, 2005, at
12:00 p.m. (Eastern Time);
(b) Objections to any sale of Offered Assets to a Successful
Bidder, or the assumption and assignment of any executory
contracts or unexpired Leases are due on or before
November 30, 2005, at 4:00 p.m. (Eastern Time);
(c) The Debtors will provide each Landlord with notice of bids
affecting the Landlord's Leases and adequate assurance of
future performance information for those bidders;
(d) The Debtors will provide Landlords with notice of the
Successful Bidders on the Landlord's Leases with the
Debtors, and the results of the Auction not later than 24
hours after the conclusion of the Auction, by overnight
mail or e-mail when possible, along with contact
information for a representative of each Successful Bidder
that Landlords may contact with respect to adequate
assurance of future performance information;
(e) Any entitlement to an Expense Reimbursement will be
subject to and paid in accordance with the agreement
between the Debtors and the Potential Bidder and any order
of the Court approving the Expense Reimbursement;
(f) A lessor will be:
(1) a Qualified Bidder with respect to the Debtors'
interest in the Lease;
(2) entitled to credit bid any and all amounts due and
owing or that otherwise must be paid to cure any
defaults exiting under the Lease; and
(3) deemed to have submitted a Qualified Bid upon its
delivery of a written summary of the terms by which it
would acquire the Debtors' interest in the Lease that
is received prior to the Bid Deadline by each of the
persons described; and
(g) Any Landlord will be entitled to credit bid the
outstanding amounts on its Leases with the Debtors as part
of a bid for the Leases.
An Auction was held on November 30, 2005. The hearing to consider
approval of the Debtors' entry into and consummation of a
transaction with a Successful Bidder will be held on Dec. 6, 2005,
at 10:00 a.m.
Debtors Get Offer from Chrysalis
The Debtors have received an offer from Chrysalis Capital
Partners, Inc. Pursuant to the Bidding Procedures Order, the
Court approves the Debtors' agreement to reimburse up to $150,000
of Chrysalis' expenses.
If the cash component of the purchase price of any bid made by
Chrysalis exceeds $82,000,000, Chrysalis will be entitled to
additional Expense Reimbursements of up to $100,000 payable upon
the closing of a transaction with a Successful Bidder.
Klaff-Adler Eyeing Levitz Assets
Furniture Today reports that Klaff-Adler, a real estate
investment partnership, is interested in Levitz's assets.
Newsday.com staff writer Lauren Weber says Klaff-Adler is the
frontrunner for Levitz's assets.
Furniture Today also notes that Klaff-Adler teamed with Levitz in
2005 to acquire the leases on 18 stores formerly operated by
Breuners Home Furnishings Corp. In 1999, when Levitz was going
through its first bankruptcy, Klaff Realty and Lubert-Adler
purchased properties and lease rights to 34 store locations from
Levitz for $93,500,000 and leased back some of those locations to
Levitz.
Klaff-Adler is based in Chicago, Illinois.
Headquartered in Woodbury, New York, Levitz Home Furnishings, Inc.
-- http://www.levitz.com/-- is a leading specialty retailer of
furniture in the United States with 121 locations in major
metropolitan areas principally the Northeast and on the West Coast
of the United States. The Company and its 12 affiliates filed for
chapter 11 protection on Oct. 11, 2005 (Bank. S.D.N.Y. Lead Case
No. 05-45189). David G. Heiman, Esq., and Richard Engman, Esq.,
at Jones Day, represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they reported $245 million in assets and $456 million
in debts. (Levitz Bankruptcy News, Issue No. 5; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
LONG BEACH: Fitch Assigns Low-B Ratings to $43.82MM Cert. Classes
-----------------------------------------------------------------
Long Beach Securities Corporation's asset-backed certificates,
series 2005-WL3, composed of two groups, are rated by Fitch
Ratings:
-- $1.63 billion classes I-A1, I-A2, I-A3, I-A4, II-A1,
II-A2A, II-A2B, and II-A3 senior certificates 'AAA';
-- $108.47 million class M-1 'AA+';
-- $106.28 million class M-2 'AA';
-- $35.06 million class M-3 'AA-';
-- $52.59 million class M-4 'A+';
-- $33.96 million class M-5 'A';
-- $26.3 million class M-6 'A-';
-- $33.96 million class M-7 'BBB+';
-- $25.2 million class M-8 'BBB';
-- $24.1 million class M-9 'BBB-';
-- $21.91 million privately offered class B-1 'BB+';
-- $21.91 million privately offered class B-2 'BB'.
Group I and II mortgage loans consists of first lien,
adjustable-rate and fixed-rate residential mortgage loans. Group
I mortgage loans have principal balances that conform to Fannie
Mae and Freddie Mac loan limits. Group II mortgage loans have
principal balances that may or may not conform to Fannie Mae and
Freddie Mac loan limits. All groups consist of mortgage loans
with original terms to maturity of not more than 40 years.
The groups I and II 'AAA' rating on the senior certificates
reflects the 25.35% credit enhancement provided by the 4.95% class
M-1, 4.85% class M-2, 1.60% class M-3, 2.40% class M-4, 1.55%
class M-5, 1.20% class M-6, 1.55% class M-7, 1.15% class M-8,
1.10% class M-9, 1.00% class B-1, 1.00% class B-2, as well as the
3.00% over-collateralization.
Additionally, all classes have the benefit of monthly excess cash
flow to absorb losses. The ratings also reflect the quality of
the mortgage collateral, strength of the legal and financial
structures, and Long Beach Mortgage Company's servicing
capabilities as master servicer.
As of the cut-off date, the group I mortgage loans have an
aggregate balance of $1,248,941,626. The weighted average
mortgage rate is approximately 7.44% and the weighted average
remaining term to maturity is 402 months. The average cut-off
date principal balance of the mortgage loans is $175,413. The
weighted average original loan-to-value is 82.87% and the weighted
average Fair, Isaac & Co. score is 641. The properties are
primarily located in California, Florida, and Illinois. All other
states represent less than 5% of the pool as of the cut-off date.
As of the cut-off date, the group II mortgage loans have an
aggregate balance of $942,315,382. The weighted average mortgage
rate is approximately 7.346% and the weighted average remaining
term to maturity is 412 months. The average cut-off date
principal balance of the mortgage loans is $379,354. The weighted
average original loan-to-value is 82.58% and the weighted average
Fair, Isaac & Co. score is 641. The properties are primarily
located in California and Florida. All other states represent
less than 5% of the pool as of the cut-off date.
All of the mortgage loans were originated by Long Beach Mortgage
Company. Long Beach Securities Corporation, a subsidiary of LBMC,
deposited the loans into the trust, which issued the certificates.
For federal income tax purposes, one or more elections will be
made to treat the trust fund as a real estate mortgage investment
conduit.
MAPCO EXPRESS: S&P Affirms Low-B Ratings After $30MM Add-On Loan
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed convenience store
operator MAPCO Express Inc.'s 'B+' corporate credit rating and
'B+' bank loan rating. This action follows the company's addition
of $30 million to its existing $40 million revolving credit
facility. Proceeds will be used to partly finance the acquisition
of about 30 retail gas stations in the Nashville market.
The recovery rating on the bank loan remains unchanged at '2',
indicating a substantial recovery of principal in the event of a
default. Pro forma for the transaction, the company will have
about $210 million of funded debt outstanding. The acquisition
does not materially affect the company's credit profile. The
rating outlook is negative.
"The ratings reflect Franklin-Tenn.-based MAPCO Express Inc.'s
participation as a relatively small regional player in the
competitive and highly fragmented convenience store industry and
significant exposure to the volatility of gasoline prices," said
Standard & Poor's credit analyst Kristi Broderick.
Another factor is market concentrations in a few key markets in
the Southeastern U.S. in which economic slowdowns can affect
operations. The company also is highly leveraged, and has a
relatively small EBITDA base.
MASSEY ENERGY: Offering $725-Mil Sr. Notes via Private Placement
----------------------------------------------------------------
Massey Energy Company (NYSE: MEE) proposes to make a private
offering of $725 million in aggregate principal amount of senior
notes due 2013 as part of its current refinancing efforts.
The company intends to use the proceeds of the proposed offering
to fund:
* the purchase of any and all of its 6.95% senior notes due
2007 with an outstanding aggregate principal amount of
$220.1 million,
* the redemption of any of its 6.95% senior notes due 2007
that are not tendered,
* the purchase of any and all of its 4.75% convertible notes
due 2024 with an outstanding aggregate principal amount of
$132.0 million,
* the cash payment related to the exchange offer for its 2.25%
convertible senior notes due 2024 with an outstanding
aggregate principal amount of $175.0 million, and
* general corporate purposes.
The securities proposed to be offered have not been and will not
be registered under the Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements of the Securities Act and applicable state securities
laws.
Massey Energy Company, headquartered in Richmond, Virginia, with
operations in West Virginia, Kentucky and Virginia, is the fourth
largest coal company in the United States based on produced coal
revenue.
* * *
As reported in the Troubled Company Reporter on Nov. 28, 2005,
Moody's Investors Service placed Massey Energy Company's Ba3
corporate family rating and all other ratings under review for
possible downgrade. The review follows Massey's announcement that
it will issue $725 million of senior notes and undertake tender
and exchange offers for $527 million of senior and convertible
notes. Moody's estimates that Massey's debt will increase by
approximately $200 million if the tender and exchange offers are
successful.
The review for possible downgrade reflects:
* the higher debt level;
* Massey's continued inability to meet production targets; and
* its intention to use free cash flow to buy back shares.
The review is expected to conclude within the next week to 10
days.
Ratings placed under review are:
* $360 million of 6.625% Guaranteed Senior Unsecured Notes due
November 15, 2010, Ba3
* $175 million of 2.25% Guaranteed Senior Unsecured Convertible
Notes due April 1, 2024, Ba3
* $220 million of 6.95% Guaranteed Senior Unsecured Notes due
March 1, 2007, B1
* $132 million of 4.75% Guaranteed Senior Unsecured Convertible
Notes due May 15, 2023, B1
* Corporate family rating, Ba3.
MCLEODUSA INC: SBC Entities Ask Court to Amend Utility Order
------------------------------------------------------------
As previously reported in the Troubled Company Reporter on
Nov. 16, 2005, at McLeodUSA Incorporated and its debtor-
affiliates' request, the U.S. Bankruptcy Court for the Northern
District of Illinois, Chicago Division:
(a) prohibits the Utility Companies from altering, refusing,
or discontinuing services of prepetition claims; and
(b) provides that the Utility Companies have "adequate
assurance of payment" within the meaning of Section 366
based on the acceptance of payment of prepetition
undisputed amounts in the ordinary course of business,
without the need for payment of additional deposits or
security.
The Debtors do not anticipate that there will be any defaults or
arrearages owed to a Utility Company due to the commencement of
their Chapter 11 cases because:
(i) they were current prepetition; and
(ii) they are seeking authority to pay all undisputed
prepetition amounts due to unsecured creditors, including
the Utility Companies, in the ordinary course of
business.
Furthermore, upon consummation of their Plan, the Debtors expect
to enter into an exit facility credit agreement, which will
provide for a secured, revolving credit facility of up to
$50,000,000, with a letter of credit sub-facility of up to
$15,000,000, to refinance outstanding obligations under the DIP
Financing and for general corporate purposes and working capital.
To the extent a Utility Company disagrees that the ongoing cash
payment of its undisputed prepetition claims in the ordinary
course of business constitutes sufficient adequate assurance and
thus seeks additional adequate assurance, the Utility Companies
will have until Nov. 30, 2005, to inform the Debtors that they are
requesting additional adequate assurance.
SBC Entities Seek Reconsideration of Utility Order
Joji Takada, Esq., at Freeborn & Peters LLP, in Chicago,
Illinois, asserts that the Debtors' assurances of future payment
to their utility providers, including the SBC Entities, conflict
with Section 366 of the Bankruptcy Code, as amended by the
Bankruptcy Abuse Prevention and Consumer Protection Act, and are
inadequate as a matter of law.
The SBC Entities are:
1. Illinois Bell Telephone Company doing business as SBC
Illinois;
2. Indiana Bell Telephone Company Incorporated doing business
as SBC Indiana;
3. Michigan Bell Telephone Company doing business as SBC
Michigan;
4. Wisconsin Bell, Inc., doing business as SBC Wisconsin;
5. The Ohio Bell Telephone Company doing business as SBC Ohio;
and
6. Southwestern Bell Telephone L.P. doing business as:
* SBC Arkansas;
* SBC Kansas;
* SBC Missouri;
* SBC Oklahoma; and
* SBC Texas.
While the Debtors have the collective burden under Section 366 to
adequately assure their utility providers from "an unreasonable
risk of nonpayment for postpetition services," they have
completely failed to meet their burden, Mr. Takada contends.
Mr. Takada argues that the Utility Order "unfairly shifts the
burden of proof to the Debtors' utilities in contravention of
section 366, as amended, and further provides the Debtors with
other tactical and procedural advantages not granted to them
under law."
Under the revised Section 366, debtors are required to provide
"adequate assurance" of future payment to their utility companies
in the form set by statute, or as otherwise agreed between the
parties, Mr. Takada explains. Certain typical pre-BAPCPA forms
of "assurances," like an administrative expense claim for future
services, no longer qualify as "assurance of future payment," and
bankruptcy courts are now prohibited from considering the
debtor's "timely" payment of prepetition utility charges when
considering requests for adequate assurance.
Mr. Takada points out that the Debtors have ignored the
fundamental changes to Section 366 in their Utility Order and
have vitiated the SBC Entities' rights and protections under
revised Section 366. "Notably, by operation of the Utility
Order, the SBC Entities are deemed 'adequately assured of future
payment' if they merely accept payment from the Debtors for
prepetition services. The SBC Entities do not consent to such
treatment as providing meaningful assurance of future payment,
and while the SBC Entities acknowledge that the Utility Order
permits [the Bankruptcy Court] to order additional assurances,
the SBC Entities are prohibited from exercising their statutory
right to discontinue service to these Debtors under section
366(c)(2), if not provided adequate assurance "that is
satisfactory to the utility," unless [the Bankruptcy Court]
orders otherwise."
Moreover, the Debtors also retain virtual total control over the
presentment of any adequate assurance dispute before the Court
thereby further degrading the SBC Entities' rights under Section
366, Mr. Takada says. Under the Utility Order, the Debtors are
empowered to "file a motion for determination of adequate
assurance of payment and set such motion for hearing on a hearing
date agreed to by the parties or ordered by the Court."
Mr. Takada believes that the Utility Order effectively precludes
the SBC Entities from exercising their statutory right under
Section 366(c)(2) to discontinue service to the Debtors on
November 30, 2005, unless the SBC Entities take extraordinary and
"costly" measures to obtain affirmative relief from the
Bankruptcy Court prior to that time.
Mr. Takada believes that the SBC Entities have the affirmative
right under Section 366(c)(2) to discontinue service to the
Debtors if not provided with adequate assurance of future payment
that is 100% satisfactory to the SBC Entities, unless the
Bankruptcy Court orders otherwise.
For these reasons, the SBC Entities ask the Court to amend the
Utility Order to provide that:
a. within 20 days of the Petition Date, the Debtors must
provide adequate assurance of payment to the SBC Entities
as contemplated by Section 366(c)(1)(A);
b. the timely payment by the Debtors of prepetition balances
due to the SBC Entities does not constitute adequate
assurance of future payment pursuant to Section 366;
c. they may request at any time, upon notice commensurate with
the local rules, a hearing before the Court to determine
the sufficiency of the adequate assurance payments proposed
by the Debtors;
d. the acceptance of payments by the SBC Entities for
prepetition date balances does not constitute the SBC
Entities' agreement as to the form of security to be
provided by the Debtors pursuant to Section 366(b); and
e. in the absence of the furnishing of adequate assurance
payments, the SBC Entities may, in their sole discretion,
alter, refuse, or discontinue service to the Debtors on
November 30, 2005.
Headquartered in Cedar Rapids, Iowa, McLeodUSA Incorporated --
http://www.mcleodusa.com/-- provides integrated communications
services, including local services in 25 Midwest, Southwest,
Northwest and Rocky Mountain states. The Debtor and its
affiliates filed for chapter 11 protection on Oct. 28, 2005
(Bankr. N.D. Ill. Case Nos. 05-53229 through 05-63234). Peter
Krebs, Esq., and Timothy R. Pohl, Esq., at Skadden, Arps, Slate,
Meagher and Flom, represent the Debtors in their restructuring
efforts. As of June 30, 2005, McLeodUSA Incorporated reported
$674,000,000 in total assets and $1,011,000,000 in total debts.
McLeodUSA Inc. previously filed for chapter 11 protection on
January 30, 2002 (Bankr. D. Del. Case No. 02-10288). The Court
confirmed the Debtor's chapter 11 plan on April 5, 2003, and
that Plan took effect on April 16, 2002. The Court formally
closed the case on May 20, 2005. (McLeodUSA Bankruptcy News,
Issue No. 5 Bankruptcy Creditors' Service, Inc., 215/945-7000).
MCLEODUSA INC: SBC Entities Want $23.4 Million Payment or Deposit
-----------------------------------------------------------------
The SBC Entities provide McLeodUSA Incorporated and its debtor-
affiliates with a wide array of integrated telecommunications
services, including local and long distance telephone and Internet
services. The SBC Entities include:
a. Illinois Bell Telephone Company doing business as SBC
Illinois;
b. Indiana Bell Telephone Company Incorporated doing business
as SBC Indiana;
c. Michigan Bell Telephone Company doing business as SBC
Michigan;
d. Wisconsin Bell, Inc., doing business as SBC Wisconsin;
e. The Ohio Bell Telephone Company doing business as SBC Ohio;
and
f. Southwestern Bell Telephone L.P. doing business as SBC
Arkansas, SBC Kansas, SBC Missouri, SBC Oklahoma and SBC
Texas.
Joji Takada, Esq., at Freeborn & Peters LLP, in Chicago,
Illinois, relates that McLeodUSA Telecommunications Services,
Inc., as a certified Competitive Local Exchange Carrier,
purchases telecommunication services from the SBC Entities for
resale to business and residential customers in 10 states
pursuant to certain tariffs and 10 separate interconnection
agreements.
Under the Tariffs and ICAs, the SBC Entities bill MTSI for
services provided to it on a per line basis or a usage basis, Mr.
Takada notes. Before the bankruptcy filing, monthly service
charges under the Tariffs and ICAs averaged approximately
$11,700,000.
As a result of the Debtors' second Chapter 11 filing, the SBC
Entities have incurred significant pre-bankruptcy claims against
the Debtors, Mr. Takada further relates. As of the Petition
Date, the SBC Entities were, in the aggregate, the largest
unsecured creditors of the Debtors, with claims aggregating
$14,300,000 based on the SBC Entities' best estimate as of
Nov. 15, 2005.
According to Mr. Takada, the Prepetition SBC Claim includes
additional unpaid amounts owed to the SBC Entities under a
settlement agreement between the SBC Entities and the Debtors.
Under the Settlement Agreement, the SBC Entities, as an
accommodation to the Debtors in their restructuring efforts,
agreed to release a significant portion of the arrearage due to
them by the Debtors, upon satisfaction of the Debtors' various
obligations. In the event that the Debtors do not assume the
Settlement Agreement under Section 365 of the Bankruptcy Code,
the SBC Entities' various claims against those estates will
increase substantially.
Mr. Takada adds that that postpetition service charges under the
Tariffs and ICAs are accruing, and will continue to accrue, at a
rate of $11,700,000 per month. The SBC Entities estimate that
the Debtors currently owe them $5,800,000 for postpetition
services.
Mr. Takada informs the Court that the SBC Entities are concerned
about the Debtors' assurances of future payment to their utility
providers because their assurances conflicts with Section 366, as
amended by the Bankruptcy Abuse Prevention and Consumer
Protection Act and are wholly inadequate as a matter of law.
Because of the substantial postpetition arrearage due to the SBC
Entities from the Debtors, as well as the SBC Entities' concern
that they may suffer substantial economic harm as a result of the
Debtors' Chapter 11 filing, the SBC Entities ask the U.S.
Bankruptcy Court for the Northern District of Illinois, Chicago
Division, to:
(a) compel the Debtors to:
* immediately pay the postpetition arrearage; and
* tender a cash deposit reflecting two months of charges
incurred by the Debtors to the SBC Entities under the
Tariffs and ICAs amounting to $23,400,000 for services
to be provided to the Debtors by the SBC Entities under
the Tariffs and ICAs; and
(b) permit SBC Entities to terminate services under the
Tariffs and ICAs without further Court Order, or other
administrative or judicial authority upon:
* a payment or other default by the Debtors under either
the Tariffs or the ICAs; or
* a failure to provide assurances as mandated by the
Bankruptcy Court.
Headquartered in Cedar Rapids, Iowa, McLeodUSA Incorporated --
http://www.mcleodusa.com/-- provides integrated communications
services, including local services in 25 Midwest, Southwest,
Northwest and Rocky Mountain states. The Debtor and its
affiliates filed for chapter 11 protection on Oct. 28, 2005
(Bankr. N.D. Ill. Case Nos. 05-53229 through 05-63234). Peter
Krebs, Esq., and Timothy R. Pohl, Esq., at Skadden, Arps, Slate,
Meagher and Flom, represent the Debtors in their restructuring
efforts. As of June 30, 2005, McLeodUSA Incorporated reported
$674,000,000 in total assets and $1,011,000,000 in total debts.
McLeodUSA Inc. previously filed for chapter 11 protection on
January 30, 2002 (Bankr. D. Del. Case No. 02-10288). The Court
confirmed the Debtor's chapter 11 plan on April 5, 2003, and
that Plan took effect on April 16, 2002. The Court formally
closed the case on May 20, 2005. (McLeodUSA Bankruptcy News,
Issue No. 5 Bankruptcy Creditors' Service, Inc., 215/945-7000).
MERRILL LYNCH: Moody's Lowers $78 Million Notes' Ratings to Caa2
----------------------------------------------------------------
Moody's Investors Service downgraded two classes of notes issued
by Merrill Lynch CLO XVI, Series 1998-Delano-1. The Class B-1
Third Senior Secured Floating Rate Global Notes, Due December 2009
were downgraded from B1 (on watch for possible downgrade) to Caa2.
The Class B-2 Third Senior Secured Fixed Rate Global Notes, Due
December 2009 were also downgraded from B1 (on watch for possible
downgrade) to Caa2. This transaction closed on June 16, 1998.
According to Moody's, its rating actions result primarily from a
decline in the transaction's par coverage and collateral pool
diversity and an increase in the Moody's Weighted Average Rating
Factor of the collateral pool.
Rating Action: Downgrade
Issuer: ML CLO XVI, Series 1998-Delano-1
Class Description: U.S. $31,500,000 B-1 Third Senior Secured
Floating Rate Global Notes, Due December 2009
* Prior Rating: B1 (On Watch for Downgrade)
* Current Rating: Caa2
Class Description: U.S. $47,000,000 Class B-2 Third Senior Secured
Fixed Rate Global Notes, Due December 2009.
* Prior Rating: B1 (On Watch for Downgrade)
* Current Rating: Caa2
MILLENNIUM BIOTECH: Sept. 30 Balance Sheet Upside-Down by $2.1MM
----------------------------------------------------------------
Millennium Biotechnologies Group, Inc., delivered its financial
statements for the quarter ending Sept. 30, 2005, to the
Securities and Exchange Commission on Nov. 16, 2005.
For the three months ended Sept. 30, 2005, the company posted a
$1,387,069 net loss on $184,279 of revenues, compared to a
$1,301,136 net loss on $307,140 of revenues.
At Sept. 30, 2005, the company's total liabilities exceeded total
assets by $2,126,399.
Liquidity and Capital Resources
"The Company's operations were generally financed by new debt and
equity investments through private placements with accredited
investors," Frank Guarino, the company's chief financial officer,
said.
During the third quarter of 2005, the Company obtained new working
capital primarily though the issuance of common stock to
accredited private investors and the placement of short-term debt.
Together the capital supplied provided the majority of the funds
that were needed to finance operations and provide capital
required to finance the nationwide product launch during the
reporting period. These transactions resulted in the receipt by
the Company of $1,827,598.
"These funds were adequate to fund ongoing operations although
they were not sufficient to build up a liquidity reserve," Mr.
Guarino said. "The Company's financial position at the end of the
quarter shows a $2,166,514 working capital deficit.
Going Concern Doubt
Rosenberg Rich Baker Berman & Company expressed substantial doubt
about Millennium's ability to continue as a going concern after it
audited the company's financial statements for the fiscal year
ended Dec. 31, 2004. The auditing firm pointed to the company's:
-- substantial losses during the last two fiscal years;
-- working capital deficit;
-- dependence on increasing sales and obtaining additional
capital and financing.
"Management's plans are to fund future operations by seeking
additional working capital through equity and debt placements with
private and institutional investors," Mr. Guarino said, "until
cash flow from operations grows to a level sufficient to supply
adequate working capital."
A full-text copy of the company's Form 10QSB for the quarterly
period ending Sept. 30, 2005, is available at no charge at
http://ResearchArchives.com/t/s?36f
Millennium Biotechnologies Group, Inc., fka Regent Group, Inc., is
a research-based bio-nutraceutical corporation involved in the
field of nutritional science.
MIRANT CORP: Confirmation Hearing on 2nd Amended Plan Slated Today
------------------------------------------------------------------
The Hon. D. Michael Lynn of the U.S. Bankruptcy Court for the
Northern District of Texas will start the hearing to consider
confirmation of the Second Amended Joint Chapter 11 Plan of
Reorganization for Mirant Corporation and its debtor-affiliates at
9:00 a.m. today.
The Debtors delivered to the Court yesterday their first
modifications to their Second Amended Plan. A full-text copy of
the First Modifications is available for free at
http://ResearchArchives.com/t/s?377
Robin E. Phelan, Esq., at Haynes and Boone, LLP, in Dallas,
Texas, notes that despite the broad base of support for the
Debtors' Plan of Reorganization, 41 formal and informal
objections to the Plan were filed.
The issues raised by the Objections, which, by and large, are
technical in nature, are generally discrete, insufficient to
defeat the Plan and should be overruled in their entirety, Mr.
Phelan tells the Court.
Mr. Phelan asserts that the Debtors' Plan should be confirmed
because it complies with the applicable provisions of the
Bankruptcy Code, particularly Section 1129.
Mr. Phelan contends that:
a. the Plan's release and injunction provisions are consistent
with applicable law;
b. the Debtors need not pay interest to the Convenience
Classes;
c. the Federal Judgment Rate is the proper rate of interest
for unsecured creditors with no contractual rates;
d. the Debtors are entitled to assign their estate causes of
Action to New Mirant;
e. the Federal and State environmental agencies' objections
will not bar confirmation;
f. the Objections regarding substantive consolidation are
misguided;
g. Secured Tax Claims are properly treated under the Plan;
h. the "best interests of creditors test" is satisfied under
the Plan; and
i. the Plan provisions concerning the retention of
jurisdiction are consistent with the Bankruptcy Code and
applicable law.
Mr. Phelan tells the Court that the Debtors will attempt to
resolve all timely objections regarding cure amounts. If no
agreement can be reached, the Court will resolve those
objections. Any objections regarding adequate assurances of
future performance, however, must be denied at the Confirmation
Hearing.
With respect to Potomac Electric Power Company's Objections, Mr.
Phelan insists that the Debtors' Plan:
-- properly provides for performance of the Asset Purchase and
Sale Agreement, Back-to-Back Agreement, and
Assumption/Assignment Agreement by Mirant Oregon, LLC, on
an interim basis;
-- is feasible with respect to any of PEPCO's rejection
damages; and
-- does not terminate the Assumption/Assignment Agreement.
To resolve The Southern Company's and Siemens Westinghouse Power
Corporation's Plan objections on the grounds that the Plan does
not provide a separate bar date for claims arising under Section
502(h) of the Bankruptcy Code, Mr. Phelan informs the Court that
the Debtors are prepared to insert a language into the
Confirmation Order or into a separate stipulation.
Mr. Phelan clarifies that, among other things:
-- a Contested Claim can become an Allowed Claim post-
Effective Date;
-- the Plan clearly preserves valid rights of setoff; and
-- a 180-day period for the Debtors to object to certain
claims post-Effective Date is reasonable under the
circumstances.
The Debtors ask the Court to overrule the untimely Objections
filed by:
1. State of New York;
2. City of Alexandria, Virginia;
3. Chesapeake Bay Foundation, et al.
4. Nevada Department of Taxation
5. Local Texas Authorities;
6. City of Vernon;
7. Gerald R. Hack and Constance V. Iscaro-Hack;
8. Vernon J. Gregory and Sandra Gregory; and
9. The Southern Company.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- is a competitive energy company that
produces and sells electricity in North America, the Caribbean,
and the Philippines. Mirant owns or leases more than 18,000
megawatts of electric generating capacity globally. Mirant
Corporation filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represents the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 85 Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: EPA Says Plan Provisions Preclude Law Enforcement
--------------------------------------------------------------
The U.S. Environmental Protection Agency object to several
provisions in Mirant Corporation and its debtor-affiliates' Plan
of Reorganization that preclude the U.S. government from enforcing
environmental laws against the reorganized Debtors and their
properties.
The EPA believes that the Debtors' Plan should not be confirmed
because it is asking the Bankruptcy Court to countenance
illegality and it presents a danger to public health and safety.
The EPA's primary concern relates to hazardous conditions or
defects that may exist on the Debtors' properties or equipment,
Alan S. Tenenbaum, Esq., National Bankruptcy Coordinator of the
U.S. Department of Justice, tells the U.S. Bankruptcy Court for
the Northern District of Texas. If those conditions worsen or
become evident to the Government after confirmation and thereby
threaten grievous harm like a risk of explosion, the Reorganized
Debtors may contend that the Court's approval of the Plan means
that they have no liability or obligation to protect public health
and safety because the conditions originated before the Effective
Date of the Plan.
If the Court is nonetheless inclined to approve a Plan with the
ambiguous and objectionable provisions, the EPA asserts that the
Court should clearly instruct the Reorganized Debtors, among
others, that nothing in the Plan or the Confirmation Order
releases, discharges, enjoins, or precludes any liability that
any entity would be subject to as the owner or operator of
property after the Effective Date of the Plan.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- is a competitive energy company that
produces and sells electricity in North America, the Caribbean,
and the Philippines. Mirant owns or leases more than 18,000
megawatts of electric generating capacity globally. Mirant
Corporation filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represents the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 82 Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: Inks Pact to Settle Sierra Liquidity's Plan Objection
------------------------------------------------------------------
As previously reported, a number of creditors objected to Mirant
Corporation and its debtor-affiliates' Plan of Reorganization,
arguing, among other things, that the Plan violates Sections
1129(a)(7) and 1129(b) of the Bankruptcy Code.
The Creditors are:
-- Sierra Liquidity Fund, LLC,
-- Sierra Nevada Liquidity Fund, LLC,
-- Sierra Nevada Liquidity Fund & The Coast Fund LP,
-- Contrarian Funds LLC,
-- Argo Partners,
-- Longacre Master Fund, Ltd.,
-- Madison Distressed Strategies LLC,
-- Madison Liquidity Investors 116, LLC,
-- Madison Liquidity Investors 123, LLC,
-- Madison Liquidity Investors 124, LLC, and
-- Madison Niche Opportunities, LLC.
Sierra Liquidity, et al., believe that:
(a) the Plan fails to provide interest to Allowed MAG Debtor
Class 7 - Convenience Claims; and
(b) the Federal Judgment Rate provided to Allowed MAG Debtor
Class 5 - Unsecured Claims is insufficient.
To resolve the Objection, the Debtors and Sierra Liquidity, et
al., entered into a settlement agreement. Among others, the
parties agree that:
(a) The Plan will be modified to provide simple interest
accruing at 4% per annum to the holders of:
i. Allowed Mirant Debtor Class 4 - Convenience Claims and
Allowed MAG Debtor Class 7 - Convenience Claims; and
ii. Allowed Mirant Debtor Class 3 - Unsecured Claims and
Allowed MAG Debtor Class 5 - Unsecured Claims that
would have otherwise received the Federal Judgment
Rate under Section 10.14 of the Plan;
(b) Sierra Liquidity, et al., will withdraw their Objection
and will agree to change any rejecting votes on the Plan
to acceptances; and
(c) Sierra Liquidity, et al., will receive reimbursement from
the bankruptcy estates of the professional fees and
expenses they have incurred in connection with their
activities in the Chapter 11 cases. The Debtors and the
committees will not object to the professional fees and
expenses to the extent they do not exceed $75,000 in the
aggregate.
Thus, the Debtors ask the U.S. Bankruptcy Court for the Northern
District of Texas to approve the parties' Settlement Agreement.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- is a competitive energy company that
produces and sells electricity in North America, the Caribbean,
and the Philippines. Mirant owns or leases more than 18,000
megawatts of electric generating capacity globally. Mirant
Corporation filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represents the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 84 Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: Ch. 11 Examiner Wants 105 Claims Transfer Nixed
------------------------------------------------------------
William K. Snyder, the Court-appointed examiner in Mirant
Corporation and its debtor-affiliates' chapter 11 cases ask the
U.S. Bankruptcy Court for the Northern District of Texas for:
(i) an order expunging from the record in the Mirant Case all
notices purporting to transfer unsecured claims to Debt
Settlement Associates, LLC, pursuant to Rule 3001(e)(1) of
the Federal Rules of Bankruptcy Procedure; and
(ii) a temporary restraining order and preliminary and
permanent injunction, pursuant to Rule 65 of the Federal
Rules of Civil Procedure, Bankruptcy Rule 7065 and Section
105(a) of the Bankruptcy Code, enjoining Richard J.
Feferman and Debt Settlement Associates, LLC, and any
other entity owned, operated or controlled by, or
otherwise affiliated with, either Defendant from filing in
the Mirant Case any document purporting to transfer a
claim pursuant to any subsection of Bankruptcy Rule
3001(e)(1), unless that notice of transfer is accompanied
by explicit evidence of the knowledge and consent of the
transferor to that transfer.
In addition, the Examiner seeks a temporary restraining order and
preliminary and permanent injunction enjoining Mr. Feferman and
DSA from filing, in any bankruptcy court in the United States,
any document purporting to transfer a claim pursuant to any
subsection of Bankruptcy Rule 3001(e)(1), unless that notice of
transfer is accompanied by explicit evidence of the knowledge and
consent of the transferor to that transfer.
Mr. Snyder relates that between August 30, 2005, and September 3,
2005, a large number of notices purporting to transfer various
unsecured claims to DSA pursuant to Bankruptcy Rule 3001(e)(1)
were filed on the Court's docket in the Mirant Case. In total,
approximately 105 Transfer Notices were filed over that five-day
period.
During an in-chambers status conference on September 7, 2005, the
Court directed the Examiner to commence an investigation to
ascertain the existence of any impropriety in connection with the
claim transfers evidenced by the Transfer Notices.
In a sealed hearing on October 5, 2005, the Examiner presented
his written report to the Court. The Court permitted the
Examiner to commence an adversary proceeding to address the
causes of action addressed in his Claims Trading Report, provided
that the Examiner confers with the Debtors, the official
committees and the U.S. Trustee. After the required
consultation, the Examiner and Mirant agreed to commence an
adversary proceeding.
Mr. Snyder reports that the DSA Transfer Notices are virtually
identical in all respects, and contain these characteristics:
(a) Each Transfer Notice identifies the original creditor
(i.e., the transferor), its address, and the amount of its
claim.
(b) Each Transfer Notice references the unique number assigned
to the transferred claim in the Debtors' schedules as they
are maintained by BSI LLC, the Debtors' claims manager.
(c) Each Transfer Notice included a detailed certificate of
service indicating that Defendants mailed the Transfer
Notice to the indicated address.
(d) None of the Transfer Notices contains any explicit
evidence of the transfer, including a signature or other
acknowledgement by the transferor, or a copy of a bill of
sale or assignment agreement.
Claims Transferred to DSA
Total Creditors Affected 62
Total Claims Transferred to DSA 105
Total addresses listed as post office box 94
Total Claims less than $1,500 80
Total Claims evidenced by proof of claim 0
Total Face Amount of Claims Transferred to DSA $339,536.30
Average Claim Amount $3,233.68
Median Claim Amount $680.22
"Although eleven of the Transfer Notices (and, presumably,
Solicitation Letters) were mailed to actual street addresses,
this fact does not necessarily indicate actual receipt of the
correspondence by the affected creditor," Mr. Snyder says.
The Scheme
Mr. Snyder alleges that Mr. Feferman and DSA target creditors
with small, scheduled, unsecured claims, for which no proof of
claim has been filed and no mailing address given other than a
post office box.
According to Mr. Snyder, in order to effectuate the transfer of a
claim without the knowledge or consent of the original creditor,
Mr. Feferman and DSA mail each creditor a Solicitation Letter
offering to purchase the creditor's claim. Accompanying the
solicitation letter is a check tendered in the amount of 1% of
the face amount of each claim to be transferred to Mr. Feferman
and DSA.
To accept the offer, the letter instructs the creditor to "simply
deposit the check," at which point Mr. Feferman and DSA propose
to prepare and file the remaining documents necessary to complete
the transfer and notify the bankruptcy court.
The Examiner and Mirant believe that the key to the scheme lies
in the routing of the Solicitation Letters and checks through
lockboxes. A lockbox is simply a mechanism for accelerating
deposits and streamlining the collection of receivables by a
company. The bank administering the lockbox opens incoming mail,
deposits funds received and forwards the remaining paper to the
client company. The bank makes no qualitative analysis of
incoming correspondence, nor is it empowered with any authority
to respond to requests, demands or offers tendered to the
lockbox. The bank is simply a vehicle for the collection and
deposit of funds.
As a result, Mr. Snyder says, when DSA's checks are received in a
bank-administered lockbox, the receiving bank deposits the check
automatically -- without any analysis or consideration of the
accompanying letter or the offer contained. Upon information and
belief, Mr. Feferman and DSA's practice at that point is to treat
the negotiation of DSA's checks by the bank as a knowing
acceptance by the creditor of the offer contained in the
accompanying letter.
It further appears, Mr. Snyder relates, that Mr. Feferman and
DSA's scheme is premised on targeting only claims that are
scheduled, but for which no proofs of claim have been filed.
Bankruptcy Rule 3001(e) regulates the transfer of claims between
parties in a bankruptcy case, and provides distinct procedures
based upon whether or not the claim is transferred for the
purpose of security and whether or not a proof of claim has yet
been filed. Whereas Bankruptcy Rule 3001(e)(2) requires
"evidence of the transfer" to be filed with the Court in
connection with claims transferred after a proof of claim has
been filed, Bankruptcy Rule 3001(e)(1) requires no evidentiary
showing for claims transferred before a proof of claim has been
filed.
Accordingly, Bankruptcy Rule 3001(e)(1) did not require Mr.
Feferman and DSA to accompany the filed Transfer Notices with
evidence that would indicate the transferring creditor's
knowledge of or consent to the transfer.
In making contact with affected creditors, the Examiner's counsel
spoke directly with account and credit managers and, in several
cases, the creditor's in-house counsel. In some cases, the
Examiner's counsel spoke directly to the creditor's general
counsel. In each case, the Examiner's counsel advised the
creditor that the Examiner had reason to believe that the
creditor's claim had been transferred to DSA without the
creditor's knowledge. The creditor was provided with the address
or post office box listed on the Transfer Notice, and asked to
confirm that the post office box was in fact a lockbox. The
creditor was then directed to search the cash sweep accounts
associated with that lockbox for checks deposited in amounts
equal to 1% of the amount of the creditor's claim or claims.
The Examiner is represented by Richard M. Roberson, Esq., and
Michael P. Cooley, Esq., at Gardere Wynne Sewell LLP, in Dallas,
Texas.
As of October 25, 2005, 14 creditors representing 31 claims have
confirmed that the addresses listed on the Transfer Notices
corresponding to their claims are a bank-administered lockboxes:
1. Atlantech Distribution, Inc.
2. Broadview Networks
3. Cingular Interactive
4. Control Components, Inc.
5. Copper and Brass Sales
6. General Chemical Corp.
7. Global Crossing
8. Industrial Process Solutions
9. Insight Corporate Solutions, Inc.
10. Keller Canyon
11. Lawson Products
12. Maxim Crane
13. Minolta Business Systems
14. Prime Power
According to Mr. Snyder, they have been informed further and
believe that Mr. Feferman and DSA have engaged in a similar
scheme to obtain the transfer of claims without the knowledge or
consent of the original creditors in 15 other bankruptcy cases in
five districts, including the Southern and Northern Districts of
California, the Southern District of New York and the District of
Massachusetts.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- is a competitive energy company that
produces and sells electricity in North America, the Caribbean,
and the Philippines. Mirant owns or leases more than 18,000
megawatts of electric generating capacity globally. Mirant
Corporation filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represents the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 83 Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MOHEGAN TRIBAL: Posts $77.4MM Net Loss in Quarter Ended Sept. 30
----------------------------------------------------------------
The Mohegan Tribal Gaming Authority, the operator of a gaming and
entertainment complex located near Uncasville, Connecticut, known
as Mohegan Sun, and a harness racetrack located in Plains
Township, Pennsylvania, known as Mohegan Sun at Pocono Downs, or
Pocono Downs, reported its operating results for the quarter and
fiscal year ended Sept. 30, 2005.
Fiscal Year 2005 highlights include:
-- record gaming revenues of $1.20 billion, a 6.8% increase
over the prior fiscal year;
-- gross slot revenues of $860.9 million, a 3.4% increase
over the prior fiscal year;
-- table games revenues of $334.2 million, a 9.1% increase
over the prior fiscal year;
-- non-gaming revenues of $254.6 million, a 4.8% increase
over the prior fiscal year;
-- income from operations of $139.4 million, a 43.5% decrease
from the prior fiscal year due to a non-cash
relinquishment liability reassessment charge of $123.6
million; and
-- net income of $23.7 million, a 77.0% decrease from the
prior fiscal year due to a non-cash relinquishment
liability reassessment charge of $123.6 million;
Quarter highlights include:
-- net loss of $77.4 million, an $86.7 million decrease from
net income of $9.3 million in the corresponding period in
the prior year due to a non-cash relinquishment liability
reassessment charge of $123.6 million;
-- record gaming revenues of $320.3 million, a 7.9% increase
over the corresponding period in the prior year;
-- gross slot revenues of $231.4 million, a 4.2% increase
over the corresponding period in the prior year;
-- table games revenues of $85.5 million, a 9.4% increase
over the corresponding period in the prior year;
-- non-gaming revenues of $72.0 million, a 4.5% increase over
the corresponding period in the prior year; and
-- loss from operations of $47.8 million, a $117.3 million
decrease from income from operations of $69.5 million in
the corresponding period in the prior year due to a non-
cash relinquishment liability reassessment charge of
$123.6 million;
"The entire Management Board is extremely pleased with our fourth
quarter performance and remains focused on our long term growth
strategy, specifically Mohegan Sun and the opening of Pocono
Downs," said Bruce S. Bozsum, Chairman of the Authority's
Management Board. "Our commitment in Pennsylvania is a great
opportunity for our team to learn and grow in order to provide for
the future generations of the Mohegan Tribe."
The Mohegan Tribal Gaming Authority -- http://www.mtga.com/-- is
an instrumentality of the Mohegan Tribe of Indians of Connecticut
a federally recognized Indian tribe with an approximately 405-acre
reservation situated in southeastern Connecticut, adjacent to
Uncasville, Connecticut. The Authority has been granted the
exclusive power to conduct and regulate gaming activities on the
existing reservation of the Tribe, and the non-exclusive authority
to conduct such activities elsewhere, including the operation of
Mohegan Sun, a gaming and entertainment complex that is situated
on a 240-acre site on the Tribe's reservation. The Tribe's gaming
operation is one of only two legally authorized gaming operations
in New England offering traditional slot machines and table games.
* * *
As reported in the Troubled Company Reporter on Feb. 8, 2005,
Moody's Investors Service assigned a Ba2 rating to Mohegan Tribal
Gaming Authority's new $250 million 6.125% guaranteed senior notes
due 2013 and a Ba3 rating to its new $200 million 6.875%
guaranteed senior subordinated notes due 2015.
Existing ratings were affirmed. Proceeds from the new note
offerings will be used to repay Mohegan Tribal's outstanding bank
borrowings. Moody's said the rating outlook is stable.
As reported in the Troubled Company Reporter on Feb. 7, 2005,
Standard & Poor's Ratings Services assigned its 'BB-' rating to
the Mohegan Tribal Gaming Authority's -- MTGA -- proposed
$200 million senior unsecured notes due 2013.
At the same time, Standard & Poor's assigned its 'B+' rating to
MTGA's proposed $200 million senior subordinated notes due 2015.
In addition, Standard & Poor's affirmed its ratings on MTGA,
including its 'BB' corporate credit rating. S&P said the outlook
is stable.
MON VIEW: Voluntary Chapter 11 Case Summary
-------------------------------------------
Debtor: Mon View Mining Company
1200 Mingo Creek Road
Finleyville, Pennsylvania 15332
Bankruptcy Case No.: 05-50219
Type of Business: The Debtor is a mining company.
Chapter 11 Petition Date: November 22, 2005
Court: Western District of Pennsylvania (Pittsburgh)
Judge: Bernard Markovitz
Debtor's Counsel: Donald R. Calaiaro, Esq.
Calaiaro, Corbett & Brungo, P.C.
Grant Building, Suite 1105
330 Grant Street
Pittsburgh, Pennsylvania 15219-2202
Tel: (412) 232-0930
Fax: (412) 232-3858
Estimated Assets: $500,000 to $1 Million
Estimated Debts: $1 Million to $10 Million
The Debtor's list of its 20 largest unsecured creditors is not yet
available as of press time.
NOBEX CORPORATION: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Nobex Corporation
aka Protein Delivery, Inc.
617 Davis Drive, Suite 100
Durham, North Carolina 27713
Bankruptcy Case No.: 05-20050
Type of Business: The Debtor is a drug delivery company
developing modified drug molecules to
improve medications for chronic diseases.
See http://www.nobexcorp.com/
Chapter 11 Petition Date: December 1, 2005
Court: District of Delaware
Debtor's Counsel: Derek C. Abbott, Esq.
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899
Tel: (302) 658-9200
Fax: (302) 658-3989
-- and --
Ben Hawfield, Esq.
Moore & Van Allen PLLC
100 North Tryon, Suite 4700
Charlotte, North Carolina 28202
Tel: (704) 331-1000
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Elan Pharma International Ltd. Loan $6,019,311
Wil House
Shannon Business Park
Shannon Co.
Clare, Ireland
Attn: Debbie Buryj
102 Saint James Court
Flatts, Smiths FL04
Bermuda
Tel: (441) 292-9169 ext. 223
Fax: (441) 292-2224
Biocon Ltd. Loan $4,862,411
20th KM Hosur Road
Electronic City
PO Bangalore
India 560100
Attn: M.B. Chinappa
Tel: 91-80-2808-2060
Fax: 91-80-2852-3423
Cardinal Health Trade Debt $256,424
Packaging Services
3001 Red Lion Road
Philadelphia, PA 19114
Oxford Venture Finance Equipment Lease $188,513
Bryan Cave Professional Fees $118,171
Fulcrum Pharma Developments Trade Debt $84,970
American Peptide Co. Trade Debt $46,452
Smith, Anderson, Blount, Professional Fees $26,899
Dorsett, Mitchell & Jernigan
Mayo Foundation Trade Debt $23,265
Calvert Laboratories, Inc. Trade Debt $17,000
PricewaterhouseCoopers Professional Fees $15,550
Waters Corporation Trade Debt $10,869
Joseph Daugherty Trade Debt $6,133
ADT Security Services, Inc. Trade Debt $5,069
Phenomenex Trade Debt $4,247
PerkinElmer Trade Debt $4,173
Alan Cherrington Trade Debt $3,900
Rodger Liddle Trade Debt $2,400
Molecular Devices Trade Debt $1,938
Dialog Corporation Trade Debt $1,430
NORTHWEST AIRLINES: Court Establishes Claims Resolution Procedure
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
approved Northwest Airlines Corp. and its debtor-affiliates'
application for an order to:
(i) establish procedures for the resolution and payment of
reclamation claims;
(ii) provide administrative treatment for certain holders of
valid reclamation claims; and
(iii) prohibit third parties from interfering with delivery of
the Debtors' goods.
Section 546(c)(1) of the Bankruptcy Code authorizes vendors who
have sold goods to a debtor in the ordinary course of business to
reclaim the goods if:
(a) the debtor was insolvent when the goods were delivered;
(b) the seller demands reclamation in writing;
(c) the demand is made within 10 days after the debtor
received possession of the goods or within 20 days if the
10-day period would expire after the Petition Date; and
(d) the Seller is otherwise entitled to reclamation under
applicable state law.
To reclaim goods, the debtor must have had actual possession of
the goods at the time the debtor received the written reclamation
demand.
According to Gregory M. Petrick, Esq., at Cadwalader, Wickersham
& Taft LLP, in New York, the Debtors are faced with the prospect
of simultaneously defending multiple reclamation adversary
proceedings at a time when they need to focus on critical aspects
of the reorganization process.
Accordingly, the Debtors propose to adopt a uniform procedure for
determining and settling all valid reclamation claims.
Administrative Status to Claims
Pursuant to Section 546(c)(2) of the Bankruptcy Code, the Court
may deny reclamation to a seller if the Court grants the seller's
claim an administrative expense priority pursuant to Section
503(b).
The Debtors propose that administrative treatment be granted to a
valid claim of any seller:
(a) who timely demands in writing reclamation of Goods;
(b) whose Goods the Debtors have accepted for delivery;
(c) who properly identifies the Goods to be reclaimed; and
(d) whose goods the Debtors do not agree to make available for
pick-up by the seller.
Return of Goods
The Debtors will make goods available for pickup by any
reclamation claimant:
(1) who properly and timely makes a written demand for the
reclamation of goods;
(2) whose goods the Debtors have accepted for delivery; and
(3) who properly identifies the goods to be reclaimed.
To avoid any interruptions to their business operations, the
Debtors want the Court to enjoin the Reclamation Claimants from
seeking to reclaim any goods or interfering with the delivery of
any of the goods.
Reconciliation of Claims
The Debtors will reconcile and pay reclamation claims under these
terms:
(a) Any vendor asserting a reclamation claim must demonstrate
that it has satisfied all requirements entitling it to a
right of reclamation under applicable state law and
Section 546(c)(1);
(b) The Debtors will file a report, on notice to the
reclamation claimants, stating the asserted reclamation
claims, and whether they believe the claims are valid;
(c) Absent further Court order, the Debtors will file the
Report within 120 days of the Court's ruling on the
request;
(d) If the Debtors fail to file the Report within the required
period of time, any reclamation claimant may make a motion
for allowance of its reclamation claim;
(e) All parties-in-interest may object to the treatment of any
asserted reclamation claim within 20 days after the Report
is filed;
(f) The reclamation claims deemed invalid in the Report that
are not the subject of a timely filed objection, will be
deemed invalid without further Court order; and
(g) All valid reclamation claims allowed under the Report will
be paid by the Debtors as administrative expenses of their
estates.
In the event that an allowed reclamation claim is paid earlier
than the effective date of a confirmed plan of reorganization,
any payments will be subject to any reserved defenses.
By the payment and acceptance under the reclamation procedures,
the Debtors do not in any way waive any claims they may have
against any vendor relating to preferential or fraudulent
transfers, or other potential claims, counterclaims or offsets
with respect to those vendors.
By accepting payment in accordance with the reclamation
procedures, the holder of holder to a reclamation claim is deemed
to warrant that it has not assigned any of its rights to its
claim.
Northwest Airlines Corporation -- http://www.nwa.com/-- is the
world's fourth largest airline with hubs at Detroit,
Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and
approximately 1,400 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. The Company and 12 affiliates filed for chapter
11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-
17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at
Cadwalader, Wickersham & Taft LLP in New York, and Mark C.
Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in
Washington represent the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $14.4 billion in total assets and $17.9 billion in total
debts. (Northwest Airlines Bankruptcy News, Issue No. 8;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
NORTHWEST AIRLINES: Seabury Group Approved as Financial Advisor
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
approved the retention of Seabury Group, LLC, as financial
advisors to Northwest Airlines Corporation and its debtor-
affiliates.
Seabury Group has rendered financial advisory services to the
Debtors in connection with their restructuring efforts since July
13, 2005.
According to Barry Simon, executive vice president and general
counsel for Northwest Airlines Corporation, Seabury has become
familiar with the Debtors' operations and is well qualified to
represent the Debtors as financial advisors in connection with
matters in a cost-effective and efficient manner.
Mr. Simon related that Seabury has one of the largest investment
banking, restructuring, and management consulting practices in
the world dedicated to the transportation sector, with principal
focus on the aviation and aerospace industries. Seabury also has
extensive experience working with financially troubled companies
in complex financial restructurings both out-of-court and during
Chapter 11 cases. Seabury served as advisors with respect to
financial restructurings, new capital raising, aircraft advisory
services or other advisory assignments, to some of the world's
largest and most sophisticated airlines, including Air Canada,
America West Airlines, Avianca, Continental Airlines and US
Airways Group, among others.
Seabury's Services
Seabury will provide certain strategic and financial advisory
services with respect to developing and implementing programs,
negotiations or transactions to restructure certain obligations
of the Debtors. Specifically, Seabury will:
(a) assist in the evaluation of the Debtors' businesses and
prospects;
(b) assist in the development of the Debtors' long-term
business plan and related financial projections;
(c) assist in the development of financial data and
presentations to the Debtors' Board of Directors, various
creditors and other third parties;
(d) analyze the Debtors' financial liquidity and evaluate
alternatives to improve the liquidity;
(e) evaluate the Debtors' debt capacity and alternative
capital structures;
(f) analyze various restructuring scenarios on the value of
the Debtors and the recoveries of those stakeholders
impacted by the Restructuring.
(g) provide strategic advice with regard to restructuring or
refinancing the Debtors' Obligations;
(h) participate in negotiations among the Debtor and its
creditors, supplies, lenders, lessors and other interested
parties;
(i) value securities offered by the Debtors in connection with
a Restructuring;
(j) if requested by the Debtors, assist in arranging debtor-
in-possession financing;
(k) if requested by the Debtors, assist in the arranging of
exit financing, including identifying potential sources of
equity and debt capital, assisting in the due diligence
process and negotiating the terms of any proposed
financing;
(l) if requested by the Debtors, assist in executing a sale of
assets, including identifying potential buyers or parties-
in-interest, assisting in the due diligence process and
negotiating the terms of any proposed transaction, as
requested;
(m) if requested by the Debtors, assist in evaluating one or
more strategic transactions, including identifying
potential strategic partners, assisting in the due
diligence process and negotiating the terms of any
proposed transaction;
(n) if required, provide fairness opinions related to
Transactions, Financings or Restructurings for which
Seabury will have earned a fee;
(o) provide testimony in any Chapter 11 case concerning any of
the subjects encompassed by the other financial advisory
services, if appropriate and as required; and
(p) provide other advisory services as are customarily
provided in connection with the analysis and negotiation
of a Restructuring, Transaction or Financing, as requested
and mutually agreed.
Compensation Package
The Debtors agree to pay Seabury:
(a) $150,000 in cash per month, as Restructuring Retainer Fee,
commencing September 1, 2005, payable with the execution
of the engagement agreement and each month after that, on
the first business day of the month. Of the first
12 months of the Restructuring Retainer Fee, 50% will be
creditable against any Restructuring Success Fee. The
Restructuring Retainer Fee will not be subject to any
"holdbacks";
(b) $75,000 in cash per month, as Corporate Finance Retainer
Fee, commencing October 1, 2005, payable on the first
business day of October 2005 and each subsequent month.
Of the first 12 months of the Corporate Finance Retainer
Fee, 50% will be creditable against any M&A, Debt or
Equity Success Fee as outlined in the Engagement
Agreement. The Corporate Finance Retainer Fee will not be
subject to any "holdbacks";
(c) A Success Fee for arranging a sale of non-aircraft assets
or for a substantial portion of the company's operations
as one or more going concerns, calculated as:
M&A Transaction Value M&A Fee
--------------------- -------
$0 - $1,000M Lesser of $0.25M & 0.75%
$1,001M - $2,000M $0.25M plus 0.27% over $1,000M
$2,001M - $3,000M $3.0M plus 0.25% over $2,000M
$3,001M - $5,000M $5.5M plus 0.15% over $3,000M
$5,001M or more $8.5M plus 0.10% over $5,000M
However, in no event will the fees aggregate more than
$10,000,000 for a single Sale or M&A Transaction and no
more than $12,000,000 for Sale Transactions and M&A
Transactions taken as a whole;
(d) An Equity Success Fee as equal to the aggregate of:
* 1.50% of the first $200 million of equity raised;
* 1.25% of the next $200 million; and
* 1% of all amount of equity raised beyond that amount.
(e) A DIP Success Fee equal to 0.375% of any DIP commitment
amounts;
(f) A Debt Success Fee equal to 0.20% of any debt financing
transaction, after subtracting from the facility amount
the use of proceeds to repay any DIP Loan; and
(g) Any M&A, Equity, or Debt Success Fees payable to Seabury
will be reduced by 50% of the first 12 months of Corporate
Finance Retainer Fees paid to Seabury;
The total of any Restructuring, M&A, Equity, DIP and Debt Success
Fees, net of credits of Monthly Restructuring and Corporate
Finance Retainer Fees, will be capped at $13,500,000.
The Debtors will also pay Seabury fees for the establishment of a
vendor control center, network planning, and contract
optimization program. The fees will be based on hourly rates
subject to a 10% discount and an additional mandatory 5%
holdback, after calculation of any discount, to the billing rates.
The firm's current hourly rates are:
Professional Hourly Rate
------------ -----------
Managing director $600
Executive director 575
SVP/Director 525
VP 450
Sr. Associate 375
Associate 350
Sr. Analyst 225
Analyst 200
The Debtors will have the right, but not the obligation, to pay
to Seabury some or all of the Holdback Amounts, based on the
Debtors' determination of the success of Seabury in completing
the services outlined in the Agreement.
From time to time, the Debtors may request in writing that
Seabury undertake additional services under:
* supplemental retainer fees and success fee-based
compensation; or
* hourly billed compensation.
The Debtors have paid Seabury a $1,500,000 filing retainer that
Seabury will be allowed to hold in its treasury until final
settlement of all fees and expenses owing to Seabury under the
Engagement Agreement. The Filing Retainer may be applied by
Seabury to any prepetition or postpetition fees or expenses.
However, Seabury will not be obligated to apply it to any fees
and expenses except on full payment of all fees and expenses
owing to Seabury under the Agreement.
In the event of a termination of the Agreement by the Debtors
without cause, the Agreement provides that if the Debtors close a
Restructuring or Financing transaction with 12 months of
Termination, then the Debtors are obligated to pay to Seabury
100% of any Restructuring, M&A, Equity, DIP and Debt Success Fees
that Seabury would otherwise have been paid under the Agreement.
The Debtors also agree to indemnify Seabury.
Prepetition Payments to Seabury
John E. Luth, president and chief executive officer of Seabury
Group LLC, disclosed that before the Petition Date, Seabury
invoiced for $2,401,063 for fees, inclusive of the $1,500,000
retainer fee, through the period September 14, 2005, and $73,415
in expenses incurred and processed to date. Seabury received
payments totaling $2,401,063 for fees invoiced and $73,415 in
expenses.
Mr. Luth clarified that the Financial Advisory Services set forth
in the Engagement Agreement do not encompass other financial
advisory services or transactions that may be undertaken by
Seabury at the request of the Debtors not set forth in the
Agreement.
Disinterestedness
Mr. Luth assured the Court that Seabury is a "disinterested
person" as the term is defined in Section 101(14) of the
Bankruptcy Code, as modified by Section 1107(b). Neither Seabury
nor its members and employees:
(a) are not creditors, equity security holders or insiders of
the Debtors;
(b) are not and were not investment bankers for any
outstanding security of the Debtors;
(c) have not been, within three years before the Petition Date
investment bankers for a security of the Debtors; and
(d) were not, within two years before the Petition Date of
the, a director, officer, or employee of the Debtors or of
any investment banker.
Northwest Airlines Corporation -- http://www.nwa.com/-- is
the world's fourth largest airline with hubs at Detroit,
Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and
approximately 1,400 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. The Company and 12 affiliates filed for chapter
11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No.
05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq.,
at Cadwalader, Wickersham & Taft LLP in New York, and Mark C.
Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in
Washington represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they listed $14.4 billion in total assets and $17.9
billion in total debts. (Northwest Airlines Bankruptcy News,
Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000)
NORTHWEST PARKWAY: S&P Affirms BB+ Rating on Subordinate-Lien Debt
------------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BBB-' and 'BB+'
ratings on Northwest Parkway Public Highway Authority, Colorado's
senior- and subordinate-lien debt, respectively, and removed the
ratings from CreditWatch with negative implications, where they
had been placed Sept. 2. The outlook is now stable.
At the same time, Standard & Poor's assigned its 'BBB-' rating to
the authority's $100 million senior revenue refunding bonds series
2005-A and $112 million senior revenue refunding series 2005-B.
The CreditWatch removal follows the expected refunding of all of
the authority's series 2001-A senior-lien bonds and portions of
its series 2001-B and 2001-C senior-lien bonds. In addition, all
of the authority's subordinate-lien series 2001-D bonds will be
refunded with this issuance.
The ratings were originally placed on CreditWatch due to concerns
regarding the startup toll road's traffic and revenue performance
since opening. In fiscal 2004, the first year of operation,
revenues were 37% lower than forecast, and are anticipated to be
44% lower than forecast for fiscal 2005.
The outlook is stable based on the expectation:
* that traffic and revenue growth will continue to grow as
expected in the 2005 base case and
* that senior-lien debt service coverage will remain adequate
to meet all senior obligations.
"A rating change could occur if excess revenues are not sufficient
to make early redemptions of the series 2005B bonds as expected in
the 2005 base case," said Standard & Poor's credit analyst Laura
Macdonald.
The series 2001 bonds were issued to help finance the construction
of an 11-mile toll road in the Denver area from State Highway 128
in the west to Interstate 25 in the east. On Nov. 2, the board of
the Northwest Parkway Public Highway Authority, acting on
recommendations of the staff and the authority's financial
advisors, approved a plan to refund a portion of the outstanding
bonds, restructuring its debt obligations. The restructuring is
necessary to avoid a revenue covenant violation on the outstanding
bonds due to the lower than expected traffic and revenues.
OCCAM NETWORKS: Sept. 30 Balance Sheet Upside-Down by $14 Million
-----------------------------------------------------------------
Occam Networks Inc., fka Accelerated Networks Inc., delivered its
financial statements for the quarter ended Sept. 30, 2005, to the
Securities and Exchange Commission on Nov. 14, 2005.
The company reported $2,967,000 net loss on $10,663,000 of sales
for the quarter ended Sept. 30, 2005.
At Sept. 30, 2005, the company' balance sheet showed $23,304,000
in total assets, and $9,274,000 in total liabilities, resulting
in a $14,030,000 in total stockholders' equity.
A full-text copy of Occam Networks' financial statements for the
quarter ended Sept. 30, 2005, is available at no charge at
http://ResearchArchives.com/t/s?36c
Occam Networks Inc. -- http://www.occamnetworks.com/-- develops
and markets innovative Broadband Loop Carrier networking equipment
that enable telephone companies to deliver voice, data and video
services. Based on Ethernet and Internet Protocol technologies,
Occam's equipment allows telecommunications service providers to
profitably deliver traditional phone services, as well as advanced
voice-over-IP, residential and business broadband, and digital
television services through a single, all-packet access network.
Occam is headquartered in Santa Barbara, Calif.
OMI TRUST: S&P's Ratings on Two Housing Transactions Tumbles To D
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on the
class M-1 certificates issued by OMI Trust 2000-C and the class
B-1 certificates issued by OMI Trust 2002-C to 'D' from 'CCC-'.
Each manufactured housing transaction is related to Oakwood Homes
Corp.
The lowered ratings reflect:
* the unlikelihood that investors will receive timely
interest and
* the ultimate repayment of their original principal
investment.
OMI Trust 2000-C and OMI Trust 2002-C each reported outstanding
liquidation loss interest shortfalls for the downgraded classes on
the November 2005 payment date.
Standard & Poor's believes that interest shortfalls for these
transactions will continue to be prevalent in the future, given
the adverse performance trends displayed by the underlying pools
of collateral, as well as the location of mezzanine class and the
subordinate class write-down interest at the bottom of the
transactions' payment priorities.
Standard & Poor's will continue to monitor the outstanding ratings
associated with these transactions in anticipation of future
defaults.
ON TOP COMMUNICATIONS: Taps Sciarrino & Associates as FCC Counsel
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Maryland approved On
Top Communications, LLC, and its debtor-affiliates' request to
retain Sciarrino & Associates, PLLC, as their special counsel to
represent them in Federal Communication Commission matters.
Sciarrino & Associates will:
1) assist and advise the Debtors with respect to FCC matters
and appear before the FCC and protect the interests of the
Debtors before the FCC; and
2) perform all other legal services to the Debtor that may be
necessary in connection with FCC matters.
Dawn M. Sciarrino, Esq., a member of Sciarrino & Associates, is
the principal attorney from the Firm performing services to the
Debtors. Mr. Sciarrino disclosed that his Firm received a
$6,044.66 retainer. Mr. Sciarrino charges $250 per hour for his
services.
Mr. Sciarrino reported that Sciarrino & Associates' attorneys
performing services to the Debtors will charge from $100 to $250
per hour.
Sciarrino & Associates assured the Court that it does not
represent any interest materially adverse to the Debtors or their
estates.
Headquartered in Lanham, Maryland, On Top Communications, LLC, and
its affiliates acquire, own and operate FM radio stations located
in the Southeastern United States. The Company and its debtor-
affiliates filed for chapter 11 protection on July 29, 2005
(Bankr. D. Md. Case No. 05-27037). Thomas L. Lackey, Esq., of
Bowie, Maryland, represents the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they estimated assets and debts of $10 million to $50
million.
ORCAL GEOTHERMAL: Moody's Rates New $165 Mil. Sec. Notes at Ba1
---------------------------------------------------------------
Moody's Investors Service assigned a Ba1 rating to approximately
$165 million of senior secured notes due 2020 to be issued by
OrCal Geothermal, Inc. The rating outlook is stable.
The Ba1 senior secured rating reflects supportive factors that
include:
1. A high degree of cash flow predictability, with cash flow
derived from contracts with Southern California Edison
Company (SCE: Baa1 senior unsecured debt) providing the
primary source of debt repayment through two separate power
purchase agreements that expire in 2015 and 2023;
2. While one of the SCE PPA's expires five years before the
final maturity of the bonds, contract extension risk is
considered to be low due to the operating history of the two
underlying power projects, the reasonable cost of the power,
and the importance of renewable resources to California's
energy policy;
3. Ormat Nevada, the operator and Ormat Technologies, Inc., its
parent, have a long track record of successfully operating
and developing geothermal assets in various countries;
4. Structural protections for bondholders that include secured
upstream guarantees from the underlying operating companies,
a trustee administered series of revenue and expense
accounts, an independent director, and a cash funded at
close six month debt service reserve.
These credit strengths are balanced against credit challenges that
include:
1. Substantial leverage at OrCal, with debt per net megawatt of
$1,919 that is higher than some similar projects, which also
contributes to a higher break-even cost for OrCal;
2. A reliance upon affiliated companies for operations,
management, and technology support, which coupled with
common management and overlapping directors with affiliates,
leads Moody's to view OrCal as being less well insulated
from its affiliates than some other projects;
3. Single asset risk and high concentration of the revenue
source from SCE, as the principal off-taker;
4. The expectation that OrCal's future revenues are likely to
exhibit greater volatility after April 2007 when the energy
compensation payments revert to a short run avoided cost
calculation (SRAC), incorporating Moody's view that
regulatory decisions with regard to changes in SRAC in
California are likely to be highly contentious.
The Ba1 rating reflects the predictable source of cash flow
expected to be generated from energy and capacity payments
received under two PPAs that expire at 2015 and 2023 with SCE and
under a third PPA with Southern California Public Power Authority
(SCPPA) that expires in 2030. While one of the three PPA's expire
five years before the final maturity of the bonds, extension risk
is considered to be low due to the importance of geothermal power
resources to the state of California and the currently competitive
cost structure of this resource compared to natural gas fired
power plants in California.
The rating also incorporates the long operating history of these
plants, as well as the relatively stable financial performance at
OrCal since the December 2003 purchase of these assets from
Covanta Energy. This performance reflects a contractually based
5.37 cent/kwh fixed energy rate from SCE that expires in April
2007. While financial performance may be more volatile when the
energy rate reverts to SRAC in May 2007, Moody's views OrCal's
exposure to this risk to be manageable given the cost structure
for most geothermal assets and expectations for natural gas
prices. The rating further acknowledges the experience of Ormat
Nevada and ORA as global operators and developers of geothermal
resources, and considers the importance of these existing
geothermal assets to the California electric market, given the
state's focus on renewable resources as a core component of its
energy policy.
The Ba1 rating also reflects the substantial debt burden that will
exist at OrCal as debt per net mw is relatively high at $1,919 mw
when compared to some similar projects. The modest size of
OrCal's operations contributes to higher break-even costs.
OrCal's financial performance is expected to be fairly stable but
could be more volatile after 2007, particularly if natural gas
prices eventually decline to a level that is closer to the
historic average. Under the current tariff arrangement with SCE,
the utility pays the project companies a capacity payment and an
energy payment of 5.37 cents/kWh. The energy payment arrangement
expires at the end of April 2007. Thereafter, OrCal is expected
to receive compensation for energy based upon SCE's SRAC, an
amount which is indexed to natural gas prices.
The issuer and its underlying projects are separate legal entities
from ORA and other affiliated companies, and the structure of the
proposed financing includes investor protections that are typical
for power project finance transactions, including:
* a trustee administered waterfall of revenue and expense
accounts;
* an independent director; and
* a cash funded at close debt service reserve.
However, the rating considers the possibility that the issuer
could be affected by the performance of its affiliates. OrCal's
assets represent about 25% of ORA's total consolidated assets at
December 31, 2004, which is a substantial portion. The rating
also considers OrCal's substantial reliance on Ormat Nevada and
ORA for operating and management decisions, as well as common
management that exists at several levels of the organization,
including at Ormat Nevada, ORA, and its parent, Ormat Industries.
OrCal is a funding company without direct ownership of the
operating assets. However, operating subsidiaries Heber
Geothermal Company, Second Imperial Geothermal Company, OrHeber 1,
OrHeber 2, and Heber Field Company will provide unconditional
upstream guarantees of OrCal's debt on a joint and several basis.
OrCal's senior debt will be secured by a first lien on all of its
assets and its contracts, including the three off-take PPAs.
The stable rating outlook incorporates an expectation of
relatively stable cash flows, particularly through 2007, given:
* the existence of the fixed energy payment from SCE;
* the politically favorable position of renewable generating
sources; and
* the expectation that natural gas prices are likely to be
above the historic average.
Limited prospects exist for the rating to be upgraded in the
short-run, due to the leverage of the issuer and the substantial
reliance on OrCal's affiliates to operate its business. However,
the rating could be upgraded if the credit quality of affiliates
strengthened or if SRAC pricing was fixed at favorable levels for
an extended term. Similarly a downgrade is not likely due to the
expected stability of cash flows. However, the rating could be
downgraded in the event of sustained operating shortfalls at the
underlying projects.
OrCal is wholly-owned by Ormat Nevada, a holding company and the
operator of the Heber geothermal power projects in California.
Ormat Nevada is a wholly-owned subsidiary of Ormat Technologies,
Inc, a publicly traded company listed on the NYSE under the symbol
ORA. Approximately 85% of ORA's 2004 revenues are from domestic
operations with the remainder being from international operations.
ORA is about 23% owned by the public and 77% owned by Ormat
Industries, Inc. Ormat Industries is an Israeli company that is
publicly traded on the Tel Aviv Stock Exchange.
PACIFIC MAGTRON: Subsidiary Sells Real Estate for $4.9 Million
--------------------------------------------------------------
Pacific Magtron International Corp.'s wholly owned subsidiary,
Pacific Magtron, Inc., sold the land and office/warehouse building
located at 1600 California Circle, Milpitas, California pursuant
to an agreement with Everlasting Private Foundation for the gross
amount of $4,990,000.
Everlasting Private Foundation is not related to PMI, its
affiliates, its shareholders, officers or directors.
As part of the purchase price contemplated by the Agreement, PMI
paid-off the outstanding principal balances of its first mortgage
with Wells Fargo Bank in the amount of $2,302,340 and its second
mortgage with the Small Business Administration in the amount of
$752,849.99.
After payment of these debts and related transaction expenses, PMI
received net proceeds in the amount of $1,602,559.38. These
proceeds will be subject to the jurisdiction of the United States
Bankruptcy Court for the District of Nevada, Southern Division and
any Plan of Reorganization that may be eventually approved by the
Court.
Headquartered in Milpitas, California, Pacific Magtron
International Corp. -- http://www.pacificmagtron.com/--
distributes some 1,800 computer hardware, software, peripheral,
and accessory items that it buys directly from 30 manufacturers
like Creative Labs, Logitech, and Yamaha. The Company, along with
its subsidiaries, filed for chapter 11 protection on May 11, 2005
(Bankr. D. Nev. Case No. 05-14326). As of Dec. 31, 2004, the
Company reported $11,740,700 in total assets and $11,105,200 in
total debts.
PARKWAY HOSPITAL: Has Continued Access to GE's Cash Collateral
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
allowed The Parkway Hospital Inc.'s continued access to cash
collateral securing repayment of pre-petition debts to GE HFS
Holdings, Inc.
The Court will hold a hearing on Dec. 6 to consider final approval
of the Debtor's use of the encumbered fund.
As previously reported Parkway owed GE HFS approximately
$8,642,433 (including interest through June 30, 2005). GE holds a
first-priority security interest in certain collateral, including
but not limited to, accounts, accounts receivable, contract
rights, deposits, intangibles, inventory and equipment.
Continued access to GE's cash collateral will allow the Debtor
to meet payroll and payroll expenses, obtain required services,
and provide working capital to continue the estate's ongoing
operations, and grant replacement security interests and liens
to GE.
To secure and provide adequate protection, GE is granted a valid
and perfected continuing replacement first-priority lien and
security interest upon the property of the Debtor's estate without
the necessity of filing, recording or serving any financing
statements, mortgages or other documents. The liens will be
subject to carve-out expenses of at least $40,000 for fees payable
to the U.S. Trustee, the Creditors' Committee and its
professionals.
The Parkway Hospital, Inc., operates a 251-bed proprietary, acute
care community hospital located in Forest Hills, New York. The
Company filed for chapter 11 protection on July 1, 2005 (Bankr.
S.D.N.Y. Case No. 05-14876). Timothy W. Walsh, Esq., at DLA Piper
Rudnick Gray Cary US LLP, represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed $28,859,000 in total assets and
$47,566,000 in total debts.
PER-SE: S&P Assigns B+ Rating to $485MM Senior Credit Facilities
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B+' corporate
credit rating and 'B-' subordinated rating on Alpharetta,
Georgia-based Per-Se Technologies, Inc. and removed the ratings
from CreditWatch, where they were placed with negative
implications on Aug. 29, 2005.
At the same time, S&P assigned its 'B+' senior secured rating and
'3' recovery rating to the company's new $485 million senior
credit facilities, indicating a meaningful recovery of principal
in the event of a payment default or bankruptcy scenario. All
ratings for NDCHealth will be withdrawn at the close of the
acquisition. The outlook is negative.
"The affirmation of our corporate credit rating for Per-Se is
based on a modestly enhanced business profile, following the
acquisition of NDC's complementary portfolio, offset by an
increase in leverage," said Standard & Poor's credit analyst Lucy
Patricola.
Both companies provide revenue cycle management services and
software to different end users within the health care community.
While NDC has experienced some customer attrition because of slow
new product development in its physician and hospital businesses,
it is a market leader in retail pharmaceutical claims processing.
Per-Se will finance the cash portion of the acquisition and
refinance existing NDC debt with a $435 million term loan. Pro
forma for the acquisition, debt/EBITDA will be about 4.7x.
The rating on Per-Se reflects:
* a still-small share of the competitive and
* rapidly evolving healthcare services market, and high
leverage.
These factors partly are offset by:
* diversified end markets within the healthcare community,
* NDC's leading pharmacy position, and
* recurring revenue streams.
PLASTIPAK HOLDINGS: Moody's Rates Proposed $250 Mil. Notes at B2
----------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to the proposed
$250 million senior unsecured notes of Plastipak Holdings, Inc.
and affirmed Plastipak's B2 corporate family rating.
The proceeds from the proposed offering, together with borrowings
under its $300 million revolver (recently amended and not rated by
Moody's) and cash on hand, are intended to repurchase Plastipak's
outstanding 10.75% senior notes, due 2011, rated B3. Upon
execution of the tender and assuming that the overwhelming
majority of the notes are tendered, Moody's will withdraw the
rating on the 10.75% notes. The ratings also incorporate the
expected results of Plastipak's acquisition of 100% of the shares
of LuxPET that closed on October 31, 2005.
The affirmation of the B2 corporate family rating and the
assignment of a B2 rating for the proposed senior unsecured notes
acknowledge Plastipak's improved enterprise value since initial
ratings were assigned in August 2001. However, the ratings remain
constrained by the absence of free cash flow and high financial
leverage with debt to EBIT at approximately 9 times (debt to
EBITDA approximately 3.5 times, however Moody's notes that capital
expenditures consistently exceed depreciation). Additionally pro
forma for the proposed offering, EBIT coverage of pro forma
interest expense is expected to be adequate at approximately 1
times. The ratings also reflect margin pressure as the industry
continues to wrestle with high resin costs and some limitations on
resin supply after the effect from the 2005 hurricanes.
Benefiting the ratings are Plastipak's:
* strong unit volume,
* established customer relationships, and
* global manufacturing.
Moody's views positively the recent acquisition of LuxPET which
should ensure the supply and reduce the cost of pre-forms for
Plastipak in Central and Eastern Europe.
The ratings outlook is stable, which reflects some tolerance at
the B2 corporate family rating level for modest adverse
fluctuation in credit statistics. However, any use of cash
outside of current expectations could result in a change in the
ratings outlook to negative - specifically, any further debt
financed acquisition, prolonged working capital requirement, or
increased capital expenditures. A positive change to the ratings
or outlook would likely require several consecutive quarters of
positive free cash flow and improvement in annual free cash flow
to debt close to or above 5%.
The assignment of a B2 rating to the proposed guaranteed senior
unsecured notes reflects the effective subordination to
outstanding secured indebtedness of approximately $250 million
(consisting of approximately $80 million outstanding under the
revolver, the $100 million PNC Mortgage loan - not rated by
Moody's, and approximately $70 million of other debt).
Guarantees, on a senior unsecured basis, are provided by
Plastipak's existing and future material domestic subsidiaries.
Given the improvement in Plastipak's enterprise value, there is no
downward notching despite the potential for approximately $217
million of incremental indebtedness, assuming that there is
availability under the borrowing base for the $300 million
committed revolver. Additionally, the rating gives consideration
to the approximately $100 million of senior liabilities at non-
guarantor subsidiaries. Non-guarantor subsidiaries account for
approximately 6% of consolidated EBITDA.
However, the B2 rating for the notes is highly sensitive to any
decrease in earnings, negative variance under cash flow
expectations, and to incremental debt above the level previously
discussed. Any of these could trigger a downgrade in the
instrument rating.
Today, Moody's took these ratings actions:
* Assigned B2 to the proposed $250 million guaranteed senior
unsecured notes, due 2015.
* Assigned B2 corporate family rating to Plastipak Holdings, Inc.
(moved from Plastipak Packaging, Inc.).
* B3 rating of the 10.75% existing senior notes will be withdrawn
upon execution of the tender.
The ratings outlook is stable.
Based in Plymouth, Michigan, Plastipak Holdings, Inc. is a leading
manufacturer of plastic packaging containers used in the:
* beverage,
* food,
* personal care,
* industrial, and
* automotive industries by branded companies worldwide.
For the twelve months ended July 30, 2005, consolidated net
revenue was approximately $1.2 billion.
PLASTIPAK HOLDINGS: S&P Rates Planned $250M Sr. Unsec. Bonds at B
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' rating to
Plastipak Holdings Inc.'s proposed $250 million senior unsecured
notes due 2015, which will be sold under Rule 144A without
registration rights.
At the same time, Standard & Poor's affirmed its 'BB-' corporate
credit rating. The outlook is stable.
"The rating on the proposed senior unsecured notes is two notches
below the corporate credit rating to reflect an expected increase
in priority obligations because of a $100 million secured note
transaction and an expected increase in revolving credit facility
utilization," said Standard & Poor's credit analyst Paul Kurias.
Proceeds from these transactions, along with those from the
proposed notes offering, are being used to pay down the existing
$325 million unsecured notes and to fund the Oct. 31, 2005,
acquisition of Luxembourg-based LuxPET A.G./S.A.
With annual revenues of about $1.1 billion, privately held
Plastipak is a leading producer of rigid, blow-molded plastic
containers for various end markets. At July 30, 2005, the company
had $427 million of debt outstanding, adjusted for capitalized
operating leases.
The ratings on Plastipak Holdings and its wholly owned subsidiary,
Plastipak Packaging Inc., reflect:
* a weak business position in the fragmented and
* highly competitive rigid plastic packaging industry, and
* an aggressive financial profile.
Plastipak's business position is supported by:
* its decent market shares in plastic packaging for
carbonated beverages and liquid laundry detergents;
* strategically located facilities in proximity to customers;
and
* long-standing and mostly contractual relationships with
well-established customers.
In addition, the company has a proven track record of innovative
process and technology developments, and maintains numerous
patents on product designs and enhancements. Contractual
provisions that allow for raw-material costs to be passed through
to customers generally mitigate vulnerability to plastic resin
price increases.
The business profile incorporates Plastipak's dependence on a
relatively narrow product line as containers for carbonated
beverages and consumer cleaning products account for a significant
75% of its revenues.
Additional factors limiting credit quality include the company's
limited geographic diversity, and high customer concentration; the
top 10 customers contribute about 66% of revenues, and the largest
customer, Procter & Gamble Co., represents 27% of revenues.
Competition is high and pricing pressures have intensified, as
customers consolidate and focus on cost reduction. These factors,
along with the strong negotiating power of Plastipak's customers
-- mostly large consumer product companies -- necessitate ongoing
process improvement and cost-reduction efforts to preserve the
company's operating margins.
PLIANT CORP: Moody's Lowers $314 Million Sub. Notes' Rating to C
----------------------------------------------------------------
Moody's Investors Service lowered ratings on Pliant Corporation
one notch with the ratings on the senior secured first lien notes
falling to Caa2, the second lien notes to Ca, and the subordinated
notes to C. The ratings actions were taken due to the company's
recent announcement regarding measures to cope with near-term
liquidity issues and its consideration of a number of strategic
options that include the possibility of filing for protection
under Chapter 11 of the US Bankruptcy Code.
In order to cope with near term liquidity issues Pliant entered
into a new $140 million first lien revolving credit facility (not
rated by Moody's) that has replaced the previous $100 million
first lien revolver (also not rated by Moody's). The company also
may not fund the $20.8 million interest payment on the
subordinated notes that is due December 1, 2005. Pliant has
entered discussions regarding a debt for equity conversion with an
ad hoc committee of the subordinated noteholders in an effort to
reduce financial leverage.
Moody's took these rating actions.
* $262 million 11 5/8% Senior Secured 1st Lien Notes due
June 15, 2009 (PIK until 2009), lowered to Caa2 from Caa1
* $7 million 11 1/8% Senior Secured Discount 1st Lien Notes due
June 15, 2009 (PIK until 2007), lowered to Caa2 from Caa1
* $250 million Senior Secured 2nd Lien Notes due
September 1, 2009, lowered to Ca from Caa3
* $314 million 13% Senior Subordinated Notes due June 1, 2010,
lowered to C from Ca
* Corporate Family Rating, lowered to Caa2 from Caa1
The ratings outlook is negative.
The ratings reflect the high risk of default and Moody's estimates
of recovery values of the various classes of debt in a default
scenario. Moody's views Pliant has having a viable business that
is carrying an excessive amount of financial leverage. The high
financial leverage and the difficult raw materials cost
environment led Pliant's trade creditors to restrict terms and
necessitated increased investment in working capital which has
precipitated the company's efforts to enhance liquidity. Moody's
notes that Pliant has over $1 billion in annual revenue and
leading market positions in flexible packaging and films.
The Caa2 rating on the on the senior secured first lien notes,
notched at the same level as the corporate family rating, reflects
their priority position in the capital structure and secured
status, as well as the effective subordination to the $140 million
bank revolver, which has a first priority claim on the company's
most liquid assets. The revolver, which matures on May 21, 2007
and has essentially the same guarantees and security as the
facility that it replaced, is secured by:
* a first lien on:
-- inventory,
-- receivables,
-- deposit accounts,
-- capital stock of existing and future domestic
subsidiaries, and
-- 65% of the capital stock of foreign subsidiaries; and
* a second lien on:
-- real property,
-- fixtures, equipment, and
-- other assets.
The senior secured first lien notes are secured by a first
priority claim on substantially all of Pliant's real property,
fixtures, and equipment, in which Pliant has invested over $200
million in the last five years, as well as Pliant's intellectual
property and other assets (excluding inventory, receivables, and
deposit accounts). The notes also are secured by:
* a second lien on inventory,
* receivables,
* deposit accounts,
* the capital stock of existing and future domestic
subsidiaries, and
* 65% of the capital stock of foreign subsidiaries.
The first lien notes are guaranteed by each of Pliant's existing
and future domestic restricted subsidiaries and, to the extent
they also guarantee any debt of the domestic subsidiaries, by each
of the existing and future foreign restricted subsidiaries. The
notes are effectively subordinated to all liabilities (including
trade payables) of non-guarantor subsidiaries, which generated
about 13% of Pliant's net sales in 2004. There is an
intercreditor agreement governing claims among first and second
lien creditors.
The Ca rating on the $250 million senior secured second lien notes
due September 1, 2009 reflects the subordination to the first lien
revolver and notes and relatively modest coverage by enterprise
value or eligible collateral in a distressed scenario.
The C rating on the $314 million subordinated notes reflects the
deep structural and contractual subordination of the notes, as
well as their first loss position in a restructuring scenario.
The negative outlook is based on expectation that Pliant will miss
the scheduled December 1, 2005 interest payment and reflects the
risk of deterioration of enterprise value in a restructuring
scenario.
Headquartered in Schaumburg, Illinois, Pliant Corporation is a
manufacturer of value-added films and flexible packaging for:
* food,
* personal care,
* medical,
* agricultural, and
* industrial applications.
For the twelve months ended September 30, 2005, Pliant had revenue
of approximately $1.0 billion and EBITDA of about $85 million.
PRECISION TOOL: Emerges From Chapter 11 Protection
--------------------------------------------------
Precision Tool, Die and Machine Co., Inc., which supplies General
Electric's appliance business, has emerged from chapter 11
protection, Robert Schoenberger of The Courier-Journal reports.
The Hon. David T. Stosberg of the U.S. Bankruptcy Court for the
Western District of Kentucky confirmed the Debtor's Amended Plan
of Reorganization on Oct. 7, 2005.
Mr. Schoenberger reported that GE agreed to continue buying
supplies from Precision, guaranteed up to $4 million in loans from
National City Bank, and agreed to waive collection of a $1.6
million debt.
Reorganized Precision will be initially authorized to issue
pursuant to the terms of the Plan and the Amended Certificate of
Incorporation:
(a) 5,878,000 shares of Class A Common Stock:
-- 200,000 will be issued on the Effective Date to those
individuals identified by Precision's current board of
directors as Key Employees;
-- 800,000 will be issued to Key Employees as determined by
Precision's post-Effective Date board of directors;
-- 1,211,000 will be issued on the Effective Date to
holders of Allowed Class 2 Claims in accordance with
Section 6.01(b) of the Plan;
-- the remainder of Class A shares are being reserved for
issuance as provided in the Plan.
(b) 1,555,000 shares of Class B Common Stock:
-- 555,000 will be issued to GE on the Effective Date; and
-- 1,000,000 will be reserved for the ESOP in the event
Reorganized Precision's Board of Directors votes to
establish an ESOP as a substitute for the Employee Bonus
Plan and it is determined that Class B Common Stock is a
qualified employer security under the Internal Revenue
Code.
(c) 2,233,000 shares of Class C Common Stock
-- 1,233,000 will be issued to Thomson Hudson on the
Effective Date; and
-- 1,000,000 shares will be reserved for issuance in
connection with the Employee Bonus Plan,
(d) 1,500,000 shares of Class A voting Convertible Preferred
Stock to be issued to holders of Allowed Class 2 Claims on
the Effective Date or as otherwise permitted under
Section 6.01(b) of the Plan.
(e) 500,000 shares of Class B voting Convertible Preferred
Stock to be issued to GE on the Effective Date of the Plan.
A full-text copy of the order confirming Precision Tool, Die
and Machine Co.'s Amended Plan of Reorganization is available
for a fee at:
http://www.researcharchives.com/bin/download?id=051011033918
Headquartered in Louisville, Kentucky, Precision Tool, Die and
Machine Co., Inc. filed for chapter 11 protection on Dec. 18, 2003
(Bankr. W.D. Ky. Case No. 03-38707). Laurence May, Esq., and
Frederick E. Schmidt, Esq., at Angel & Frankel, P.C., represents
the Debtor in its restructuring efforts. When the Debtor filed
for chapter 11 protection, it estimated assets and debts of
$10 million to $50 million.
PROLONG INTERNATIONAL: NewGen Tech. Backs Out From Merger Talks
---------------------------------------------------------------
NewGen Technologies, Inc. (OTC BB: NWGN) terminated merger
negotiations with Prolong International Corporation. NewGen
decided not to pursue the merger based upon recent developments,
including Prolong's delisting from the American Stock Exchange.
S. Bruce Wunner, chairman and CEO of NewGen Technologies, stated,
"While we view Prolong as a potentially advantageous strategic
partner, we don't believe that a merger at this time is in the
best interests of our shareholders or the current operations of
NewGen."
As previously reported in the Troubled Company Reporter, the
American Stock Exchange notified Prolong International
that it was not in compliance with the minimum listing standards
for trading on the Exchange. Except for the company making a
successful appeal demonstrating compliance, the Exchange has
become obliged by its rules to initiate delisting proceedings.
The company has decided not to make an appeal, but rather it has
begun the process for trading its shares through the Over the
Counter Bulletin Board, commonly known as the OTCBB. Prolong
shares formerly traded on the OTCBB, prior to being listed on
AMEX. Prolong shares will continue to trade on the AMEX until the
delisting process is completed. At this time, it is not
anticipated that there will be any interruption in the trading of
Prolong shares.
About NewGen Technologies Inc.
NewGen's mission is to be a leading manufacturer, processor and
distributor of premium biofuels that are intended to dramatically
reduce the ecological and economic impact of world petroleum use.
NewGen believes that it has developed the cleanest burning and
highest performing fuels in the world by utilizing technology that
allows for more complete combustion, which NewGen believes will
result in improved miles per gallon and significantly decreased
harmful emissions, including reduced carbon monoxide, carbon
dioxide, nitrous oxides, particulates and black smoke. The
company's fuel products include proprietary and complex
technology, substantially and predominantly derived from petroleum
sources, which are intended to improve the performance of gasoline
and diesel fuels, as well as domestically produced and
environmentally friendly alternative fuels such as Ethanol-based
E85 and Biodiesel-based B20. The vision of NewGen and ReFuel
America, NewGen's wholly owned U.S. subsidiary, is a world less
dependent on oil, using secure, homegrown fuels which better
preserve our most important resources -- the air we breathe and
water we drink.
About Prolong International Corporation
Headquartered in Irvine, California, Prolong International
Corporation -- http://www.prolong.com/-- is a technology-driven
consumer products holding company and parent of Prolong Super
Lubricants, Inc., manufacturer and marketer of patented consumer
automotive, commercial/industrial and household products. The
company's products are marketed and sold under the brand name
Prolong Super Lubricants(r) and are used in consumer, automotive
and industrial applications. Prolong products are sold throughout
the United States at major chain stores and auto retailers and in
international markets.
* * *
Going Concern Doubt
The Company's auditors have expressed substantial doubt about the
company's financial statements for the year ended Dec. 31, 2004.
The auditors point to the company's past losses and working
capital deficiencies.
"The Company's board and management agree with their assessment
and have been and continue to be actively engaged in the process
of seeking to secure such new financing on the best available
terms," Elton Alderman, CEO of Prolong International Corporation
said.
SAINT VINCENTS: Wants to Ink Hospital League Agreement
------------------------------------------------------
Saint Vincents Catholic Medical Centers of New York and its
debtor-affiliates seek authority from the U.S. Bankruptcy Court
for the Southern District of New York to:
-- assume an agreement with the Hospital League/l199 Training
and Upgrading Fund; and
-- enter into a deal with Hospital League/1199 TUF as
supplement to the 1199 Fund Agreement.
The CHCCDP Grants
Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New
York, recounts that pursuant to a program under the Community
Health Care Conversion Demonstration Project, which is
administered by the New York State Department of Health,
federally funded grants are provided to hospitals in New York
State pursuant to the terms and conditions of New York State's
Partnership Plan Medical waiver. The CHCCDP Grants assist
qualifying hospitals in strengthening the health care
infrastructure, which serves Medicaid eligible and uninsured New
Yorkers. The CHCCDP Grants are available to support workforce
retraining, primary care expansion and other initiatives, which
will enable hospitals and their community-based partners to
transition to managed care environment.
Hospitals that receive a CHCCDP Grant for $1,000,000 or more in a
given cycle must devote at least 25% of that cycle's award to
workforce retraining. The remaining 75% of grant funds received
may be allocated to other infrastructure projects.
The TUF Agreement
To administer retraining funds received under the CHCCDP Grants,
the Debtors entered into the 1199 Fund Agreement with TUF. The
Debtors agreed to transfer the Retraining Funds to TUF, and TUF
agreed to administer and provide training to qualifying employees
for the period from October 1, 1997, through September 30, 1999.
In the 1199 Fund Agreement, the Debtors and TUF expressed their
intention to enter into future contracts for subsequent one-year
periods commencing on October 1 and ending September 30 of the
following year.
Subsequent to the Initial Grant Period, the Debtors entered into
several supplemental agreements with TUF and the other parties
that participate in facilitating the retraining portion of the
CHCCDP Grant. Each supplemental agreement incorporates the
previous agreements, including the 1199 Fund Agreement, subject
to modifications tailored to the current year or cycle of the
CHCCDP Grant.
The Supplemental Agreement
According to Mr. Troop, the Debtors have been awarded a CHCCDP
Grant for Cycle 5 and have entered into the Supplemental
Agreement with TUF, as well as with the Health & Human Service
Union, the Registered Nurse Training and Upgrading Fund, and the
League of Voluntary Hospitals and Homes of New York to govern
the transmittal and administration of Retraining Funds during
Cycle 5. As in the previous agreement, the Fourth Supplemental
Agreement states a schedule according to which the Debtors are
required to remit Retraining Funds to 1199 SEIU/League Grant
Corporation.
The Debtors have received Retraining Funds equal to $1,300,000
from the DOH in connection with grant Cycles 2, 3, 4, and 5, both
before and after the Petition Date, but have not yet remitted to
TUF, as required by the 1199 Fund Agreement and the related
supplements.
Mr. Troop asserts that the CHCCDP Grants are an important source
of revenue and support for the Debtors' hospital system.
Employee retraining, in addition to the infrastructure support,
provided by the CHCCDP Grants, facilitates the provision of
quality healthcare and promotes good will among employees.
Continued participation in the CHCCDP is essential to the smooth
workings of the Debtors' facilities. Failure to abide by the
terms of the CHCCDP Grant and the 1199 Fund Agreement could
jeopardize the Debtors' ability to participate in the CHCCDP
program going forward.
According to Mr. Troop, to continue to participate in the CHCCDP
program, it is essential that the Debtors abide by the terms of
the 1199 Fund Agreement and related supplements and immediately
transmit to TUF all Retraining Funds received to date
corresponding to grant cycles 2 to 5 which are not yet remitted
to TUF, aggregating $1,300,000.
Mr. Troop tells the Court that the Debtors have discussed their
request with other parties-in-interest, who did not raise any
objections:
(a) representatives of the Official Committee of Unsecured
Creditors;
(b) counsel for the DOH;
(c) counsel for Health and Human Service Union;
(d) counsel for the United States Department of Housing and
Urban Development and the Dormitory Authority of the State
of New York; and
(e) counsel for HFG Healthco 4 LLC.
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. 15; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
SAINT VINCENTS: Mallinckrodt Withdraws Payment Request
------------------------------------------------------
Mallinckrodt, Inc., withdrew its motion asking the U.S. Bankruptcy
Court for the Southern District of New York to rule that the
automatic stay does not prevent its from enforcing its interest in
the certain equipment currently in the possession of Saint
Vincents Catholic Medical Centers of New York and its debtor-
affiliates. Mallinckrodt had contended that the equipment is not
is not property of the estates.
Before the Petition Date, Saint Vincents Catholic Medical Centers
of New York inadvertently shipped 840 ventilators belonging to
Mallinckrodt -- a Tyco Healthcare company -- to Debtor Puritan
Bennett.
As reported in the Troubled Company Reporter on Oct. 10, 2005,
Lisa A. Epps, Esq., at Spencer Fane Britt & Browne LLP, said that
while the Debtors intended to purchase the Equipment through a
lease agreement with a third party, there was no executed lease
agreement, and Mallinckrodt has not received payment for the
Equipment:
Number of Collective
Debtor Ventilators Price
------ ----------- ----------
St. Vincent's Catholic
Medical Center-Staten Island 10 $286,231
St. John's Queens Hospital 10 $310,661
Mary Immaculate Hospital 8 $249,128
Ms. Epps contended that the Debtors currently have no legal or
equitable interest in the equipment, and their interest is merely
bare possession. She adds that, without a legal or equitable
interest, the equipment is not property of the bankruptcy estate.
Ms. Epps noted that the parties are currently on the negotiating
table to discuss the circumstances in which they can continue to
do business on a postpetition basis.
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. 15; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
SAINT VINCENTS: CIR/SEIU Objects to Pursuit of Malpractice Claims
-----------------------------------------------------------------
The Committee of Interns and Residents/Service Employees
International Union asks the U.S. Bankruptcy Court for the
Southern District of New York to deny all lift stay motions by
medical malpractice claimants at this time to allow Saint Vincents
Catholic Medical Centers of New York and its debtor-affiliates to
proceed further into the reorganization process and to assure that
the rights of House Staff Officers at St. Vincent's Manhattan will
be protected.
CIR/SEIU is the recognized collective bargaining representative
for interns, residents and fellows employed by the Debtors at St.
Vincent's Hospital, Manhattan, and hospitals within the Brooklyn
and Queens area.
CIR/SEIU represents 175 members in St. Vincent's Manhattan
collective bargaining unit and 186 members presently in the
Brooklyn/Queens collective bargaining unit.
Michael D. Brofman, Esq., at Weiss, Zarett & Hirshfeld, P.C.,
in New Hyde Park, New York, tells the Court that CIR/SEIU has
a collective bargaining agreement for the period covering
November 1, 2004, through October 31, 2007, with Brooklyn/Queens.
The Union is also presently negotiating with the Debtors for a
collective bargaining agreement for the House Staff Officers.
As teaching hospitals, the Debtors' various medical centers
require accreditation for their programs through the
Accreditation Council for Graduate Medical Education. The
ACGME Council is a private, non-profit council, which evaluates
and accredits medical residency programs in the United States.
Its mission is to improve the quality of healthcare in the United
States by improving the quality of graduate medical education
physicians in training.
Mr. Brofman explains that pursuant to ACGME regulations, to
obtain accreditation, a hospital, denoted as a "Sponsoring
Institution," must insure that residents in the accredited
programs are provided with professional liability coverage for
the duration of the training. The coverage must provide legal
defense and protection against claims reported or filed.
Moreover, the professional liability coverage is also required to
be consistent with the Sponsoring Institution's coverage for
other medical/professional practitioners.
The Debtors have filed an insurance report dated November 2,
2005, which detailed the coverage for malpractice claims in their
various hospital units. Nothing in that report clearly indicates
whether or not there is adequate coverage, as required by both
the ACGME and the CBA, for the House Staff Officers that are part
of the CIR/SEIU collective bargaining units.
Mr. Brofman says that the Debtors' Insurance Report indicates
that assets, in what is called the "PRM Trust" for Manhattan and
Westchester, as of September 30, 2005, are adequate to cover not
more than 62% of the potential malpractice liability for the
hospitals that would reach the self insurance level. An even
greater concern is the Insurance Report's indication that for the
Brooklyn/Queens region, which is fully self-insured, the PRM
Trust is funded at only 14.4% of the potential liabilities.
The names of House Staff Officers, as one of the first physicians
to see a patient, almost always appear on the medical charts in a
hospital. Mr. Brofman asserts that in the event of a medical
malpractice claim, claimants invariably name the House Staff
Officers as defendants. Those House Staff Officers must then be
defended and indemnified by the Hospital.
According to Mr. Brofman, the lack of coverage, particularly as
to Brooklyn/Queens, will also require that former House Staff
Officers file claims against the estate for an unliquidated sum
equal to the amount of potential claims against them.
Mr. Brofman further tells Judge Beatty that the Insurance Report
does not indicate what coverage, if any, is afforded House Staff
Officers for both St. Vincent's Manhattan and Brooklyn/Queens.
There is also no information presently available indicating
pending claims and lawsuits against past or present House Staff
Officers. Mr. Brofman asserts that this information is critical
for CIR/SEIU to be able to properly negotiate with the Debtors on
a plan of reorganization and in collective bargaining.
Given these issues, Mr. Brofman contends that lifting the
automatic stay in favor of the medical malpractice claimants is,
at this time, premature. The relief will merely create further
tension amongst the House Staff Officers, who will then be unsure
as to whether or not they will be able to be properly indemnified
by the Debtors on claims made against them. It may also cause
issues concerning the continued accreditation of the Debtors'
hospital units as teaching hospitals under the ACGME Regulations.
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. 15; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
SHC INC: Administrator Gets Until Feb. 22 to Object to Claims
-------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware extended
Walker Truesdell & Associates, Inc., the Plan Administrator, and
Carroll Services, LLC, the Liquidation Trustee, appointed pursuant
to the confirmed Plan of SHC, Inc., and its debtor-affiliates,
until Feb. 22, 2006, the period to object to claims.
As reported in the Troubled Company Reporter on Sept. 29, 2005,
the Court extended the period for the Plan Trustee and Liquidating
Trustee to object to claims to Oct. 25, 2005.
The Plan Administrator told the Court that since the date of the
approval of the original extension, the Plan Administrator has:
(i) filed two notices of satisfaction addressing pending
priority claims;
(ii) filed, together with the Liquidation Trustee, an omnibus
claim objection to certain late-filed claims;
(iii) achieved, together with the Liquidation Trustee, an
agreement in principle -- pending the agreement of the
parties on acceptable language for a proposed form of
order -- a joint objection to the claims of the U.S.
Customs and Border Protection;
(iv) obtained, together with the Liquidation Trustee, an order
approving the settlement of the claims of the Pension
Benefit Guaranty against the Debtors; and
(v) obtained as extension of the deadline by which actions
may be removed.
The Plan Administrator and Liquidation Trustee related that along
with PBGC, they have conducted extensive settlement discussions,
which culminated in a global settlement and resolution of PBGC's
claims.
The Plan Administrator and Liquidation Trustee said that given the
magnitude and complexity of the PBGC Claims, they have devoted
much of their time and attention to negotiating and resolving the
PBGC Claims and obtaining an order approving the settlement of the
PBGC Claims.
The Plan Administrator told the court that more time is needed to
analyze and resolve the remaining priority claims.
The Liquidation Trustee, on the other hand, tells the Court that
since the effective date, Carroll Services, in addition to
performing many tasks, has been conducting a review and analysis
of General Unsecured Claims. The Liquidation Trustee discloses
that the Debtors' schedules listed approximately 2000 creditors
holding General Unsecured Claims and in addition, approximately
360 proofs of claim have been filed asserting General Unsecured
Claims. The aggregate amount of all General Unsecured Claims, as
filed, is estimated to total $156,000,000, the Liquidation Trustee
says.
The Liquidation Trustee reminded the Court that Carroll Services
has:
(a) with the cooperation and assistance of the Plan
Administrator, filed eleven objections to general
unsecured claims;
(b) actively participated in the settlement of the PBGC
Claims and Customs Claims; and
(c) filed a notice of satisfaction seeking to expunge over $4
million in general unsecured claims.
The Liquidation Trustee told the Court that although many of the
General Unsecured Claims have been resolved, Carroll Services is
continuing to perform a careful and thorough analysis of the
remaining General Unsecured Claims to determine whether any
objections should be filed to invalid of deficient claims. The
Liquidation Trustee disclosed that in light of recent
developments, more time is needed to complete this critical
analysis.
The Liquidation Trustee said that it has learned that certain
potential creditors might not have received adequate notice of the
Debtors' chapter 11 cases or the claims bar date in the cases.
Together with the Plan Administrator, the Liquidation Trustee said
that they have investigated this complex issues and determined
that these parties should receive, after the Debtors' schedules
are amended, notice and an opportunity to file claims. The
Liquidation Trustee told that Court that it will address any
resulting claims received from such parties.
The Plan Administrator and Liquidation Trustee said that extending
the period to object to claims would provide them with sufficient
time to:
(1) analyze claims;
(2) prepare and file additional objection to claims; and
(3) where appropriate, attempt to consensually resolve
disputed claims.
Headquartered in Chicopee, Massachusetts, SHC, Inc., is a
manufacturer of golf balls and clubs and other sporting goods.
The Company and its debtor-affiliates filed for chapter 11
protection on June 30, 2003 (Bankr. Del. Case No. 03-12002).
Pauline K. Morgan, Esq., at Young, Conaway, Stargatt & Taylor,
LLP, represents the Debtors. When the Debtors filed for chapter
11 protection, they listed estimated assets of more than $50,000
and estimated debts of more than $100 million. The Court
confirmed the Debtors' Joint Plan on July 8, 2004, and the Plan
took effect on Aug. 2, 2004. Walker Truesdell & Associates, Inc.,
is the Plan Administrator pursuant to the confirmed Plan.
SHC INC: Plan Administrator Wants to Delay Case Closing to June
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware delayed the
entry of a final decree formally closing the bankruptcy cases of
SHC, Inc., and its debtor-affiliates, as requested by Walker
Truesdell & Associates, Inc., the Plan Administrator appointed
pursuant to the Debtors' confirmed Plan.
Walker Truesdell wanted to delay the entry of a final decree,
through and including June 30, 2006, and wants until May 1, 2006,
to file a Final Report and Accounting for the Debtors' chapter 11
cases.
The Court's approval of Walker Truesdell previous request for
extensions of these deadlines was reported in the Troubled Company
Reporter on June 17, 2005.
Walker Truesdell told the Court that significant progress was
made in prosecuting the post-confirmation Debtors' chapter 11
cases since the confirmation of the Plan and the date of the
previous motion for extension.
Walker Truesdell, in coordination with Carroll Services, LLC, the
Liquidation Trustee, said that he filed and successfully
prosecuted two omnibus objections to claims. Walker Truesdell
also said that together with the Liquidation Trustee, he has filed
and resolved a joint objection to the claims filed by the U.S.
Customs and Border Protection and Customs' response, pending the
submission of a proposed form of order that is acceptable to the
parties. Walker Truesdell further said that along with the
Liquidation Trustee, he has resolved the claims of the Pension
Benefit and Guaranty Corporation and successfully prosecuted a
motion seeking approval of that settlement.
Walker Truesdell told the Court that he has also filed several
notices of satisfaction with respect to certain priority unsecured
claims.
Walker Truesdell said that the extension is needed because the
claims administration and distribution processes have not yet
concluded due to the recent discovery that certain general
unsecured creditors may not have received adequate notice in the
Debtors' chapter 11 cases or the bar date for claims in those
cases. Walker Truesdell said that in coordination with the
Liquidating Trustee, they have determined that these creditors
should receive, after the Debtors' schedules are amended, notice
and an opportunity to file claims.
Walker Truesdell disclosed that he will need more time to
determine the most appropriate and practicable course of action
for drafting, filing and prosecuting future objections to these
potential claims.
Walker Truesdell teold the Court that delaying the entry of a
final decree will help ensure that any distributions made under
the Plan are only made to those actual creditors and in such
amounts as appropriate. Walker Truesdell also said that a final
report and accounting would be inaccurate until the claims
administration process and other pending disputes are brought to a
conclusion.
Headquartered in Chicopee, Massachusetts, SHC, Inc., is a
manufacturer of golf balls and clubs and other sporting goods.
The Company and its debtor-affiliates filed for chapter 11
protection on June 30, 2003 (Bankr. Del. Case No. 03-12002).
Pauline K. Morgan, Esq., at Young, Conaway, Stargatt & Taylor,
LLP, represents the Debtors. When the Debtors filed for chapter
11 protection, they listed estimated assets of more than $50,000
and estimated debts of more than $100 million. The Court
confirmed the Debtors' Joint Plan on July 8, 2004, and the Plan
took effect on Aug. 2, 2004. Walker Truesdell & Associates, Inc.,
is the Plan Administrator pursuant to the confirmed Plan.
SHOPKO STORES: Extends Tender Offer for Sr. Notes Until Dec. 23
---------------------------------------------------------------
ShopKo Stores, Inc. (NYSE: SKO) supplemented and extended its
offer to purchase any and all of its outstanding $100 million
principal amount of 9-1/4% Senior Notes due 2022.
The Offer was scheduled to expire on Thursday, Dec. 8, 2005 at
9:30 a.m., New York City time. The Offer will now expire at 9:30
a.m., New York City time, on Friday, Dec. 23, 2005, unless further
extended by ShopKo or earlier terminated.
The Offer has been supplemented to reflect the terms of the
previously announced definitive merger agreement that provides for
the acquisition of ShopKo by SKO Group Holding and SKO
Acquisition, which are affiliates of Sun Capital Partners, and to
describe litigation commenced by certain holders of the Notes and
ShopKo's intent to defend the litigation vigorously and explore
all alternatives available to it, including the termination of the
Solicitation and the Offer.
Except as described above, all terms, provisions and conditions of
the Offer will remain in full force and effect. The Company
currently intends to waive the merger condition contained in the
Offer to Purchase and Consent Solicitation Statement in connection
with the closing of the Company's proposed merger transaction with
SKO Acquisition Corp. The Company continues to believe the merger
will close in December of 2005 or January of 2006.
The terms of the Offer and Solicitation are described in the Offer
to Purchase and Consent Solicitation Statement dated June 30,
2005, as amended by the Supplements dated Aug. 10, 2005 and Nov.
29, 2005. ShopKo reported on Aug. 15, 2005 that it had received
the requisite consents to amend the indenture governing the Notes.
ShopKo executed the supplemental indenture on Aug. 16, 2005,
eliminating substantially all of the restrictive covenants and
certain events of default in the indenture governing the Notes.
Copies of the Offer to Purchase and Consent Solicitation Statement
may be obtained from Global Bondholder Services Corporation, the
information agent for the Offer, at (866) 736-2200 (US toll free)
or (212) 430-3774 (collect).
ShopKo said it has been informed by the information agent that, as
of 5:00 p.m., New York City time, on November 29, 2005,
approximately $94.2 million in aggregate principal amount of Notes
had been tendered in the Offer. This amount represents
approximately 94.2% of the outstanding principal amount of the
Notes.
Banc of America Securities LLC is acting as the sole dealer
manager for the Offer. Questions regarding the Offer may be
directed to Banc of America Securities LLC at (212) 847-5834 or
(888) 292-0070.
ShopKo Stores, Inc. -- http://www.shopko.com/-- is a retailer of
quality goods and services headquartered in Green Bay, Wisconsin,
with stores located throughout the Midwest, Mountain and Pacific
Northwest regions. Retail formats include 140 ShopKo stores,
providing quality name-brand merchandise, great values, pharmacy
and optical services in mid-sized to larger cities; 223 Pamida
stores, 116 of which contain pharmacies, bringing value and
convenience close to home in small, rural communities; and three
ShopKo Express Rx stores, a new and convenient neighborhood
drugstore concept. With more than $3 billion in annual sales,
ShopKo Stores, Inc., is listed on the New York Stock Exchange
under the symbol SKO.
* * *
As reported in the Troubled Company Reporter on Oct 26, 2005,
Standard & Poor's Ratings Services said its ratings on Shopko
Stores Inc., including the 'BB-' corporate credit rating, remain
on CreditWatch with negative implications, where they were placed
April 8, 2005, based on its leveraged buyout agreement.
SILICON GRAPHICS: Delays Meeting Over Reverse Stock Split Plan
--------------------------------------------------------------
Silicon Graphics, Inc. (OTC: SGID) intends to postpone its annual
meeting of stockholders until early 2006 in order to include an
additional proposal for stockholders to approve an amendment to
the Company's Restated Certificate of Incorporation which will
effect a reverse stock split of the common stock of the Company.
The Company is currently considering a reverse stock split at
ratios in the range of 1-for-10 to 1-for-20. The Company believes
that a reverse stock split will improve the trading
characteristics of its common stock as well as facilitate efforts
by the Company to seek additional investment or strategic
alternatives with the goal of preserving and creating value for
the benefit of stockholders and creditors.
The Company expects to file an amended proxy statement with the
Securities and Exchange Commission in the near future and will
distribute this proxy statement to its stockholders after the
applicable review period has expired.
The annual meeting was originally scheduled to be held on Tuesday,
December 6, 2005.
Silicon Graphics, Inc. -- http://www.sgi.com/-- is a leader in
high-performance computing, visualization and storage. SGI's
vision is to provide technology that enables the most significant
scientific and creative breakthroughs of the 21st century.
Whether it's sharing images to aid in brain surgery, finding oil
more efficiently, studying global climate, providing technologies
for homeland security and defense or enabling the transition from
analog to digital broadcasting, SGI is dedicated to addressing the
next class of challenges for scientific, engineering and creative
users.
At Sept. 30, 2005, Silicon Graphics, Inc.'s balance sheet showed a
$222,501,000 stockholders' deficit.
SMURFIT-STONE: S&P Junks Subsidiaries' Senior Unsecured Debts
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term corporate
credit ratings on Smurfit-Stone Container Corp. and its
subsidiaries to 'B' from 'B+' and lowered its senior secured bank
loan rating on Smurfit-Stone Container Enterprises Inc. and
Smurfit-Stone Container Canada Inc. to 'B+' from 'BB-'.
Other ratings were also lowered. All ratings, except the bank
loan recovery rating of '1', indicating the expectation of a full
recovery of principal in the event of a payment default, remain on
CreditWatch with negative implications, pending the outcome of the
company's efforts to amend its bank credit agreement to loosen
financial covenants. If the company obtains adequate covenant
relief, the CreditWatch will be removed, and the outlook will be
stable. The ratings were originally placed on CreditWatch on
Aug. 16, 2005, in connection with weak financial results and
concerns about the company's planned strategic review.
Included in the rating actions, were Standard & Poor's lowering of
its senior unsecured debt ratings on the company's subsidiaries by
two notches to 'CCC+' from 'B'.
The Chicago, Illinois-based containerboard manufacturer's debt,
including off-balance-sheet lease and accounts receivable
financing and debt-like pension and other postretirement
obligations, was $6 billion at Sept. 30, 2005.
"The rating actions reflect weaker-than-expected credit measures
and our expectations that Smurfit-Stone's heavy debt burden will
increase over the next two years while the company faces
meaningful risks in executing its broad strategic agenda," said
Standard & Poor's credit analyst Pamela Rice. "Although we
believe that the company should benefit from these initiatives
over the intermediate term, the strain on its highly leveraged
financial profile from the incremental spending necessary to carry
out these restructuring actions leaves little room for unforeseen
difficulties, such as an economic slowdown, operational
inefficiencies, or potential customer turnover."
SOUNDVIEW HOME: Fitch Places Low-B Ratings on $28MM Cert. Classes
-----------------------------------------------------------------
Soundview Home Loan Trust 2005-OPT4, asset-backed certificates,
series 2005-OPT4, are rated by Fitch Ratings:
-- $1,276,861,000 classes I-A-1 to I-A-2, and II-A-1 to
II-A-4 senior certificates 'AAA';
-- $70,937,000 class M-1 'AA+';
-- $53,787,000 class M-2 'AA';
-- $18,709,000 class M-3 'AA-';
-- $18,709,000 class M-4 'A+';
-- $17,929,000 class M-5 'A';
-- $19,488,000 class M-6 'A-';
-- $14,811,000 class M-7 'BBB+';
-- $10,913,000 class M-8 'BBB';
-- $13,252,000 class M-9 'BBB-';
-- $19,488,000 privately offered class M-10 'BB+';
-- $8,575,000 privately offered class M-11 'BB'.
The 'AAA' rating on the senior certificates reflects the 18.10%
total credit enhancement provided by the 4.55% class M-1, the
3.45% class M-2, the 1.20% class M-3, the 1.20% class M-4, the
1.15% class M-5, the 1.25% class M-6, the 0.95% class M-7, the
0.70% class M-8, the 0.85% class M-9, the 1.25% privately offered
class M-10, the 0.55% privately offered class M-11, and
overcollateralization. The initial and target OC is 1.00%. All
certificates have the benefit of excess interest.
In addition, the ratings also reflect the quality of the loans,
the soundness of the legal and financial structures, and the
capabilities of Option One Mortgage Corporation as servicer and
Deutsche Bank National Trust Company as trustee.
The certificates are supported by two groups of mortgage loans.
Group I Mortgage Loans, which totals $800,122,249 as of the
cut-off date, consists of 4,914 fixed-rate and adjustable-rate
mortgage loans with principal balances that conform to Fannie Mae
and Freddie Mac loan limits. Approximately 24.47% of the mortgage
loans have fixed interest rates, and approximately 75.53% of the
mortgage loans have adjustable interest rates. The average
outstanding principal balance is $162,825. The weighted average
original loan-to-value ratio is 77.84%, the weighted average
coupon is 7.562%, and the weighted average remaining term to
maturity is 357 months. The weighted average credit score is 621.
The loans are geographically concentrated in California, Florida,
and New York.
Group II Mortgage Loans, which totals $758,927,609 as of the
cut-off date, consists of 3,182 fixed-rate and adjustable-rate
mortgage loans with principal balances that may or may not conform
to Fannie Mae and Freddie Mac loan limits. Approximately 23.68%
of the mortgage loans have fixed interest rates, and approximately
76.32% of the mortgage loans have adjustable interest rates. The
average outstanding principal balance is $238,506. The OLTV ratio
is 79.67%, the WAC is 7.163%, and the WAM is 358 months. The
weighted average credit score is 642. The loans are
geographically concentrated in California, New York, and Florida.
All of the mortgage loans were originated by Option One Mortgage
Corporation and purchased by Financial Asset Securities Corp., the
depositor. Incorporated in 1992, Option One began originating and
servicing subprime loans in February 1993. Option One is a
subsidiary of Block Financial, which is a subsidiary of H&R Block,
Inc.
SOUTHWEST HOSPITAL: Court Confirms Liquidating Chapter 11 Plan
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Georgia,
Atlanta Division, confirmed Southwest Hospital and Medical Center,
Inc.'s First Amended Joint Liquidating Chapter 11 Plan on Nov. 29,
2005. The Plan is co-proposed by the Official Committee of
Unsecured Creditors.
The Honorable James E. Massey determined that the Plan met the 13
standards for confirmation required under Section 1129(a) of the
Bankruptcy Code.
The Debtors' assets were sold on July 5 to Southwest Doctors
Group, LLC, for $14,750,000. Part of the sale proceeds was used
to pay the DIP lender, DVI Business Credit Corporation and
Citizens Trust Bank.
Under the Plan, these claims are paid in full:
Creditor/Class Claim Amount
-------------- ------------
Administrative Expense $1.5M to $4.5M
Priority Tax $1.8M to $3.5M
Priority Claims $100,000
Medical Capital Holdings $1,000,000
Capitol City $530,000
Fulton County $19,000
Unsecured creditors, owed at least $18 million, are expected to
recover not more than 15% of their claims.
Convenience claim holders are expected to recover 15% of their
claims totaling $165,000.
J. Michael Weathers, appointed in August 2005 as estate
consultant, will become liquidating agent on the Effective Date.
Mr. Weathers will be responsible for liquidating the Debtor's
remaining assets for distribution to creditors. He will also be
authorized to invest funds, pay taxes and engage and compensate
professionals. A hundred and twenty days after the final
distribution date, the Liquidating Agent will file a request for
the dissolution of the Debtor under the laws of the State of
Georgia.
A Distribution Reserve will be set up to hold cash for
distribution to creditors. The Debtor will fund the Reserve with:
a) cash in an amount sufficient to pay in full all
unimpaired claims;
b) cash in an amount sufficient to pay a fraction of the
allowed convenience claims; and
c) remaining available cash.
An Oversight Committee will also be established, on the Effective
Date, to provide the Liquidating Agent advice on:
a) the timing and amount of distributions under the Plan;
b) retention and compensation of professionals;
c) pursuit and settlement of claim objections and causes of
action.
The Oversight Committee members will be:
* Fulton Emergency Physicians, LLC,
* Productivity Network Innovations, LLC,
* RLS Med-Support, Inc.
A full-text copy of the Disclosure Statement is available for a
fee at:
http://www.researcharchives.com/bin/download?id=051025024445
Headquartered in Atlanta, Georgia, Southwest Hospital and Medical
Center, Inc., operates a hospital. The Company filed for chapter
11 protection on September 9, 2004 (Bankr. N.D. Ga. Case
No. 04-74967). G. Frank Nason, IV, Esq., at Lamberth, Cifelli,
Stokes & Stout, PA, represents the Debtor in its restructuring
efforts. When the Debtor filed for protection from its creditors,
it listed both estimated assets and debts of
$10 million to $50 million.
STELCO INC: Informal Noteholders Committee Submit Plan Proposal
---------------------------------------------------------------
The Informal Committee of Independent Convertible Noteholders of
Stelco, Inc., has submitted a proposal to the company that would
treat creditors fairly than Stelco's most recently announced
revised plan. If approved, Stelco's senior bondholders will
receive a 100% recovery on their claims.
The Informal Committee proposes that:
-- the existing convertible noteholders and the standby
commitment provider would be entitled to purchase
approximately $172 million of new convertible notes to be
issued by Stelco under the plan at 55% of face principal
value for cash, a significant premium over the 37.5% offered
by Tricap under the proposed Stelco plan. A standby
commitment would ensure that all $172 million of new
convertible notes would be purchased for cash, with the
standby commitment provider being entitled to purchase a
minimum threshold amount of the new convertible notes.
-- all cash generated from the purchase of the new convertible
notes would be distributed by Stelco to the senior
bondholders under the plan with the result that the senior
bondholders, would receive 100% recovery on their claims.
-- the existing convertible noteholders would receive fairer
value on their claims.
-- if the proposal is accepted, material issues that would
otherwise be the subject of significant litigation would be
resolved without litigation.
The Informal Committee submitted its proposal to Stelco in an
effort to be constructive and to improve Stelco's announced
revised plan, which the Informal Committee views as being
inherently unfair to all creditors, and in particular, the
existing convertible noteholders. The Informal Committee believes
that its proposal more accurately reflects the current and future
conditions of the steel industry and Stelco's prospects.
The Informal Committee has invited Stelco to enter into
negotiations in respect of the proposal.
About The Informal Committee
The Informal Committee consists of holders of Stelco's 9.5%
Convertible Debentures due in 2007.
Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified
steel producer. Stelco is involved in all major segments of the
steel industry through its integrated steel business, mini-mills,
and manufactured products businesses.
In early 2004, after a thorough financial and strategic review,
Stelco concluded that it faced a serious viability issue. The
Corporation incurred significant operating and cash losses in 2003
and believed that it would have exhausted available sources of
liquidity before the end of 2004 if it did not obtain legal
protection and other benefits provided by a Court-supervised
restructuring process. Accordingly, on Jan. 29, 2004, Stelco and
certain related entities filed for protection under the Companies'
Creditors Arrangement Act.
The Court has extended Stelco's CCAA stay period until Dec. 5,
2005, in order to accommodate the creditors' meetings and a
sanction hearing.
STELCO INC: Resuming Creditors' Meetings Today
----------------------------------------------
Stelco Inc. (TSX:STE) recommended the adjournment of the
creditors' meetings in the matter of the Company's restructuring
under the Companies' Creditors Arrangement Act. The Company want
the meetings to continue when they resume today, Dec. 2.
The Company also recommended to Ernst & Young, the Court-appointed
Monitor in the company's CCAA proceedings, that the meetings of
its affected subsidiaries be adjourned as well.
The Company believes that the recommended adjournments are
appropriate so that details of the restructuring plan to be voted
upon at the meetings can be finalized and Board approval can be
sought. The details being finalized relate to, among other
things, the substance of the agreement between certain
stakeholders on a restructuring plan announced on Nov. 23, 2005.
The Monitor has indicated that it will likely exercise its
discretion and allow the adjournments on Dec. 2, 2005. If the
adjournments are allowed, no other business would be conducted on
that day.
Stelco indicated that it is making this announcement now in order
to minimize any inconvenience to stakeholders who might otherwise
have travelled to the meetings on Dec. 2, 2005, expecting to vote
on a plan. The Company added that details of an amended
restructuring plan will be circulated and posted to a link
available on its Web site in advance of the meetings to consider
and vote on a plan.
"With input from stakeholders, Stelco is in the process of
finalizing the details of a plan that will be submitted to
affected creditors for their consideration," Courtney Pratt,
Stelco President and Chief Executive Officer, said. "While
progress is being made, the process is taking longer to conclude
than was envisioned a week ago."
Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified
steel producer. Stelco is involved in all major segments of the
steel industry through its integrated steel business, mini-mills,
and manufactured products businesses.
In early 2004, after a thorough financial and strategic review,
Stelco concluded that it faced a serious viability issue. The
Corporation incurred significant operating and cash losses in 2003
and believed that it would have exhausted available sources of
liquidity before the end of 2004 if it did not obtain legal
protection and other benefits provided by a Court-supervised
restructuring process. Accordingly, on Jan. 29, 2004, Stelco and
certain related entities filed for protection under the Companies'
Creditors Arrangement Act.
The Court has extended Stelco's CCAA stay period until Dec. 5,
2005, in order to accommodate the creditors' meetings and a
sanction hearing.
STELCO INC: Selling AltaSteel Assets to Africa's Scaw Metals
------------------------------------------------------------
Stelco Inc. (TSX:STE) entered into a definitive agreement for the
sale of the assets of AltaSteel Ltd. to Scaw Metals Group, one of
Africa's largest diversified iron, steel and engineering works,
subject to Court approval.
The transaction is subject to a number of conditions, including
obtaining the required regulatory and lenders' consent. It is
anticipated that, if all conditions are satisfied as planned, the
sale will close early in 2006.
The pursuit of the sale of AltaSteel, as in the case of Stelco's
other non-core subsidiaries, reflects Stelco's previously
announced decision to focus on its integrated steel business going
forward. That approach was outlined in the four-point strategy
announced in July 2004.
Scaw has indicated its intention to continue operating AltaSteel
in its current lines of business and in its current location near
Edmonton, Alberta. Scaw has also indicated that it looks forward
to building upon the strong business platform that AltaSteel has
established, while making focused capital investments to provide
for increasing demand in the growing Alberta economy.
"This marks an important step in our pursuit of a transaction that
will be good for AltaSteel, for its employees and retirees, and
for Stelco," Courtney Pratt, Stelco President and Chief Executive
Officer, said. "A successfully completed transaction will provide
AltaSteel with ownership that views it as a strategic asset. It
will provide employees and retirees with greater certainty. And
it will assist Stelco in focusing on its integrated steel
business."
Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified
steel producer. Stelco is involved in all major segments of the
steel industry through its integrated steel business, mini-mills,
and manufactured products businesses.
In early 2004, after a thorough financial and strategic review,
Stelco concluded that it faced a serious viability issue. The
Corporation incurred significant operating and cash losses in 2003
and believed that it would have exhausted available sources of
liquidity before the end of 2004 if it did not obtain legal
protection and other benefits provided by a Court-supervised
restructuring process. Accordingly, on Jan. 29, 2004, Stelco and
certain related entities filed for protection under the Companies'
Creditors Arrangement Act.
The Court has extended Stelco's CCAA stay period until Dec. 5,
2005, in order to accommodate the creditors' meetings and a
sanction hearing.
SYMPHONY CLO: Moody's Rates $13.5 Million Class D Notes at Ba2
--------------------------------------------------------------
Moody's Investors Service assigned these ratings to six classes of
Notes issued by Symphony CLO I, Ltd.:
* Aaa to the U.S. $60,000,000 Class A-1A Senior Revolving Notes
Due 2019;
* Aaa to the U.S. $250,000,000 Class A-1B Senior Notes
Due 2019;
* Aa2 to the U.S. $15,000,000 Class A-2 Senior Notes Due 2019;
* A2 to the U.S. $22,000,000 Class B Deferrable Mezzanine Notes
Due 2019;
* Baa2 to the U.S. $21,000,000 Class C Deferrable Mezzanine
Notes Due 2019; and
* Ba2 to the U.S. $13,500,000 Class D Deferrable Mezzanine
Notes Due 2019.
The Moody's ratings of the Notes address the ultimate cash receipt
of all required interest and principal payments, as provided by
the Notes' governing documents, and are based on the expected loss
posed to Noteholders, relative to the promise of receiving the
present value of such payments.
The ratings of the Notes of this cash flow CLO reflect the credit
quality of the underlying assets, which consist primarily of:
* senior secured loans,
* the credit enhancement for the Notes inherent in the capital
structure, and
* the transaction's legal structure.
This transaction is managed by Symphony Asset Management LLC.
TEXAS PETROCHEMICALS: Soliciting Consents to Amend Indenture
------------------------------------------------------------
Texas Petrochemicals LP (OTC: TXPI) and its subsidiary, TP Capital
Corp., are soliciting consents to amend the Indenture pursuant to
which the Issuers' $60,000,000 7-1/4% Senior Secured Convertible
Notes due April 30, 2009 were issued to remove substantially all
of the restrictive covenants contained therein.
In addition, the Issuers and Texas Petrochemicals, Inc., which
directly or indirectly owns all of the partnership interests of
the c, are offering holders of Notes the opportunity to
participate in a special conversion whereby their Notes would be
converted into shares of common stock of the Parent pursuant to
the existing conversion terms of the Indenture and such holders
would also receive, as an inducement to convert, a special
conversion fee consisting of additional shares of common stock and
cash. Consummation of the consent solicitation and the special
conversion are subject to a number of conditions, including the
absence of certain adverse legal and market developments, the
receipt of the required consent from holders of the outstanding
Notes pursuant to the terms of the Indenture and the conversion
of at least $50 million aggregate principal amount of the Notes.
The consent solicitation and the special conversion are only made
available to, and copies of the consent solicitation documents and
the special conversion documents will only be distributed to,
holders of Notes as of 5:00 P.M., Nov. 29, 2005. A consent
solicitation statement and a notice of special conversion, both
dated today, will be distributed to Eligible Holders and are
available to Eligible Holders through the information agent,
Global Bondholder Services Corporation, at 866-470-3800 or
212-430-3774.
The following provides a brief summary of key elements of the
consent solicitation and the special conversion:
* Both the consent solicitation and the special conversion
will expire at 5:00 P.M., New York City time, on Dec. 28,
2005, unless extended or terminated.
* If the Issuers receive the required consent from holders of
the outstanding Notes pursuant to the terms of the Indenture
and certain other conditions are satisfied, the Indenture
will be amended to remove substantially all of the
restrictive covenants therein.
* All holders may elect to convert their Notes and, subject to
the satisfaction of certain conditions, receive:
* common stock of the Parent at the current conversion
price of $9.340033 per share in accordance with the
existing conversion terms of the Indenture, and
* a special conversion fee consisting of:
(i) a cash payment of $232.58 per $1,000 principal
amount of Notes (which includes interest accruing
from Nov. 1, 2005) and
(ii) an additional amount equal, at the election of the
Holder, to 5% of the Conversion Shares that a
Holder receives or the cash equivalent thereof
(based upon the closing price of the common stock
of the Parent on November 28, 2005, which was
$19.50 per share).
If the Special Conversion were to occur on Dec. 30, 2005, a Holder
who converted $1,000 principal amount of Notes would receive:
(i) 107 Conversion Shares and
(ii) a Conversion Fee consisting of:
(a) a Fee Payment of $232.58 and
(b) either 5 Fee Shares or $97.50.
Holders will receive cash in lieu of any fractional shares of the
Parent's common stock based upon the market price of such common
stock at the time of conversion.
Neither the Notes nor any shares issuable upon their conversion in
the special conversion have been registered under the Securities
Act of 1933 or any state securities laws. Therefore, neither the
Notes nor any shares issuable upon their conversion in the special
conversion may be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements of the Securities Act and applicable state securities
laws.
Texas Petrochemical, L.P. produced C4 chemical products widely
used as chemical building blocks for synthetic rubber, nylon
carpets, adhesives, catalysts and additives used in high-
performance polymers. The company has manufacturing facilities in
the industrial corridor adjacent to the Houston Ship Channel and
operates product terminals in Baytown, Texas and Lake Charles,
Louisiana. After filing for chapter 11 protection on July 20,
2003 (Bankr. S.D. Tex. Case No. 03-40258), the parent company
emerged from bankruptcy in May 2004. The Court confirmed the
Plan filed by Huff Alternative Income Fund LP for Texas
Petrochemical Holdings, Inc., and TPC Holdings LLC on April 24,
2005. When the Debtors filed for protection from their creditors,
they listed $512,417,000 in total assets and $448,866,000 in total
debts on a consolidated basis. Mark W. Wege, Esq., at Bracewell &
Patterson, LLP represents the Debtors.
TRADEMOTION SOFTWARE: Case Summary & 23 Largest Unsec. Creditors
----------------------------------------------------------------
Debtor: Trademotion Software Inc.
23901 Calabasas Road, Suite 2010
Calabasas, California 91302
Bankruptcy Case No.: 05-50097
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Parts.com Inc. 05-50098
Type of Business: The TradeMotion suite of products -- Octane &
Raptor -- offers B2B e-commerce solutions that
benefit buyers, distributors and suppliers.
TradeMotion provides suppliers with real-time
catalog, inventory, order and payment
information. TradeMotion OCTANE is an order
control, tracking and networking environment to
manage online sales. TradeMotion Raptor is a
procurement system for insurance partners.
Parts.com provides a marketplace where buyers
and sellers can conduct transactions
electronically. See http://www.trademotion.com/
Chapter 11 Petition Date: November 30, 2005
Court: Central District of California (San Fernando Valley)
Judge: Maureen Tighe
Debtors' Counsel: Philip A. Kramer, Esq.
Kramer & Kaslow
23901 Calabasas Road, Suite 1078
Calabasas, California 91302
Tel: (818) 224-3900
- and -
M. Jonathan Hayes, Esq.
21800 Oxnard Street, Suite 840
Woodland Hills, California 91367
Tel: (818) 710-3656
Total Assets Total Debts
------------ -----------
Trademotion Software Inc. $2,000,000 $100,000
Parts.com Inc. $0 $0
Trademotion Software Inc.'s 3 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Shawn Lucas Payroll $38,250
23901 Calabasas Road, Suite 2010
Calabasas, CA 91302
Scott Anderson Contract Labor $13,750
23901 Calabasas Road, Suite 2010
Calabasas, CA 91302
Select Personnel Services Trade Debts $2,044
P.O. Box 60607
Los Angeles, CA 90060
Parts.com Inc.'s 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Scott Anderson Settlement/Payroll $797,391
23679 Calabasas Road, Suite 250
Calabasas, CA 91302
Shawn D. Lucas Settlement/Payroll $727,390
23901 Calabasas Road, Suite 2010
Calabasas, CA 91302
Internal Revenue Service 941 Taxes $408,521
Memphis, TN 37501
Creditors Adjustment Bureau Labor Fee $71,976
Telignet Inc. T1 Line $22,137
National Automobile Dealers Convention $15,000
Association
Francis Lakel Legal Fees $5,000
Seminole County Tax Collector Tangible Property $2,066
Tax
Bell South Small Telephone $1,385
Business Account
Iron Mountain Records Storage $1,250
Keith Watts Credit Card Debt $317
Stephen Guarino Unsecured Loan $250
Photios Cougentakis Unsecured Loan $100
AT&T Telephone $86
Blue Ridge Finance Company Inc. Settlement Unknown
Agreement
Dan Valladao Settlement Unknown
Agreement
Douglas Nagel URL Unknown
George Demakos Unsecured Loan Unknown
James Hall Secured Loan Unknown
James S. Bryd, Jr. Settlement Unknown
Agreement
TRANSAX INT'L: Sept. 30 Balance Sheet Upside-Down by $1.4 Million
-----------------------------------------------------------------
Transax International Limited (OTC BB: TNSX) delivered its
financial results for the quarter ended Sept. 30, 2005, to the
Securities and Exchange Commission on Nov. 14, 2005.
For the three months ended Sept. 30, 2005, Transax incurred a
$234,644 net loss, compared to a $708,564 net loss during the
three-month period ended Sept. 30, 2004.
The Company generated $948,993 in net revenues in the quarter
ended Sept. 30, 2005, as compared to $322,377 for the same period
in 2004 -- an increase of $626,616, or 194.3%. The sharp increase
in revenues is due to the roll out of new solutions on current
contracts and corresponding transaction volume increases.
Transax President and CEO Stephen Walters said, "We are extremely
pleased with Transax's continued positive trajectory. While
growing revenues close to 200% over last year, we were able to
lower our operating expenses significantly, generating positive
cash flow for continued growth."
Mr. Walters continued, "Our outlook for the remainder of the year
is positive as we expect to triple revenues in 2005 over 2004. In
addition to continued roll out of current contracts, Transax is
undertaking development to make its product HIPAA-compliant for
the U.S. market and we are actively pursuing strategic financing
opportunities to ensure continued development and implementation
of our products in the international marketplace during 2006."
During the third quarter 2005, Transax completed 1.75 million
"real time" transactions. Also during the quarter, Transax
installed an additional 350 solutions to medical provider
locations in Brazil. At the end of the third quarter, Transax had
over 5000 solutions operational nationwide throughout Brazil,
including more than 2500 POS solutions and 630 overlapping POS
solutions undertaking transactions on behalf of multiple clients.
At Sept. 30, 2005, Transax's balance sheet showed $1,725,095 in
total assets and $3,196,204 in liabilities, resulting in a
$1,471,109 stockholder's deficit. At Sept. 30, 2005, the Company
had a working capital deficit of $2,011,572 and an accumulated
deficit of $8,995,886.
Going Concern Doubt
Moore Stephens, PC, expressed substantial doubt about Transax's
ability to continue as a going concern after it audited the
Company's financial statements for the year ended Dec. 31, 2004.
The auditing firm pointed to the Company's accumulated losses from
operations and working capital and net capital deficiencies.
Based in Miami, Transax -- http://www.transax.com/-- provides
network solutions to healthcare providers and health insurance
companies. Utilizing its proprietary technology, Transax provides
a service similar to a credit card processing for the health
insurance industry. A Transax transaction consists of: approving
eligibility, authorization, auto-adjudication of the health claim
and generating the claim payable files -- all instantaneously in
"real time" -- regardless of method of claim generation. Transax
maintains a major operations office in Rio de Janeiro, Brazil with
approximately 35 staff. The Company has contracts in place with
major health insurers for up to 2,500,000 transactions per month
and currently undertakes approximately 600,000 transactions per
month.
TRM CORP: S&P Affirms B+ Bank Loan and Corporate Credit Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
Portland, Oregon-based TRM Corporation's senior secured bank loan
to '3' from '4'. This indicates that lenders can expect
meaningful recovery of principal in the event of a payment default
or bankruptcy. The 'B+' bank loan and corporate credit
ratings were affirmed.
"The ratings remain on CreditWatch, where they were placed on
Sept. 6, 2005, with negative implications, following the company's
announcement that it intends to acquire the ATM business of
Travelex," said Standard & Poor's credit analyst Lucy Patricola.
"The recovery rating action is based predominantly on a
substantial increase in LIBOR rates since this bank facility was
initially rated, which drives improved recovery prospects under
our current methodology," she continued.
TRM reported a sharp and unanticipated decline in earnings for the
quarter ended Sept. 30, 2005, primarily because of an unusually
high level of ATM theft and vandalism in the U.K., and to a lesser
extent, lost revenue from certain photocopiers. EBITDA dropped to
about $6.3 million from the prior-period level of $10.6 million.
It remains unclear if TRM can rapidly and effectively shore up
weaker profitability over the near to middle term.
Because of reduced profitability, the company's cash flow remains
under pressure. Capital spending requirements, which run in the
$2 million to $3 million range per quarter, absorb the majority of
cash flow. The company also faces term loan amortization of about
$7.5 million per year.
While leverage has been reduced because of an equity offering,
proceeds of which were applied to debt reduction, the company
intends to finance its $78 million acquisition of Travelex with
debt, which likely will increase leverage from the current level
of 3.2x, pro forma for a recent private placement of equity.
TRUCK ENGINE: Moody's Reviews $100 Million Notes' Ba1 Rating
------------------------------------------------------------
Moody's Investors Service placed under review for possible
downgrade the US $100,000,000 Floating Rate Trade Receivables
Backed Notes, Series 2000-1 issued by Truck Engine Receivables
Master Trust. The current rating of Ba1 was initiated on
September 9, 2005.
The Truck Engine Receivables Master Trust assets are trade
receivables generated from the sale of diesel engines and engine
service parts by International Truck and Engine Corporation, an
unrated subsidiary of Navistar International Corp (Navistar --
rated Ba3 for senior unsecured debt), to Ford Motor Company (Ford
-- rated Ba1 for senior unsecured on watch for possible
downgrade). Ford, who uses the diesel engines in its trucks and
vans, is the sole obligor of the receivables.
Moody's review of the Notes will focus on the financial strength
of Ford - an important factor in Moody's overall credit assessment
of the Notes issued by Truck Engine Receivables Master Trust.
Rating Action: On watch for possible downgrade
Issuer: Truck Engine Receivables Master Trust
Tranche Description: US $100,000,000 Floating Rate Trade
Receivables Backed Notes, Series 2000-1
* Current Rating: Ba1
* New Rating: Ba1 on watch for possible downgrade
TW INC: Has Until February 22 to File Final Report
--------------------------------------------------
The Honorable Mary F. Walrath of the U.S. Bankruptcy Court for the
District of Delaware extended TW, Inc., fka Cablevision
Electronics Investments, Inc.'s time, until Feb. 22, 2006, to file
a final report. The Court will also enter a final decree formally
closing the case on that same date.
The Court confirmed the Debtor's Third Amended Plan of Liquidation
on May 27, 2005, and the Plan took effect on July 1, 2005.
The Debtor explained that it is premature to close its chapter
case now because there are still approximately 40 adversary
actions and numerous claim objections that need to be resolved,
which will increase the size of the estate and reduce the number
of claims against the estate.
Additionally, a delay will not prejudice any creditors and
parties-in-interest but will ensure that creditor recoveries will
be maximized under the confirmed Plan.
TW, Inc., filed for chapter 11 protection on March 14, 2003
(Bankr. Del. Case No. 03-10785). Jeremy W. Ryan, Esq., and Mark
Minuti, Esq., at Saul Ewing LLP represent the Debtors. When the
Company filed for protection from its creditors, it listed assets
of over $50 million and debts of more than $100 million. The
Court confirmed the Debtor's Plan of Liquidation on May 27, 2005,
and the Plan took effect on July 1, 2005.
TYCORP PIZZA: Case Summary & 66 Largest Unsecured Creditors
-----------------------------------------------------------
Lead Debtor: Tycorp Pizza, Inc.
850 Tidewater Drive, Suite B
Norfolk, Virginia 23504
Bankruptcy Case No.: 05-77910
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Tycorp Pizza III, Inc. 05-77907
Tycorp Pizza of N.C., Inc. 05-77908
Tycorp Pizza of VA, Inc. 05-77909
Type of Business: The Debtors are Pizza Hut franchisees.
See http://www.pizzahut.com/
Chapter 11 Petition Date: November 21, 2005
Court: Eastern District of Virginia (Norfolk)
Judge: Stephen C. St. John
Debtors' Counsel: Kelly Megan Barnhart, Esq.
Karen M. Crowley, Esq.
Marcus, Santoro & Kozak, P.C.
1435 Crossways Boulevard, Suite 300
Chesapeake, Virginia 23320
Tel: (757) 222-2224
Fax: (757) 333-3390
Estimated Assets Estimated Debts
---------------- ---------------
Tycorp Pizza, Inc. $1 Million to $1 Million to
$10 Million $10 Million
Tycorp Pizza III, Inc. $1 Million to $10 Million to
$10 Million $50 Million
Tycorp Pizza of N.C., Inc. $1 Million to $10 Million to
$10 Million $50 Million
Tycorp Pizza of VA., Inc. $1 Million to $10 Million to
$10 Million $50 Million
A. Tycorp Pizza, Inc.'s 6 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
The Bank of N.Y., $13,499,000
Asset Solutions
c/o R. Tuman
600 East Colinas Boulevard,
Suite 1300
Irving, TX 75039
GMAC Commercial Mortgage $6,896,000
Corp.
c/o David Hodge
5730 Colenridge Drive,
Suite 104
Atlanta, GA 30328
Pizza Hut, Inc. $2,300,000
c/o John Murphy
14841 Dallas Parkway
Dallas, TX 75254
Internal Revenue Service Tax lien $1,223,498
Insolvency Unit
P.O. Box 10025
Richmond, VA 23240
Prudential Insurance Co. $1,000,000
of America
751 Broad Street
Newark, NJ 071023777
Burstone, LLC $704,133
c/o Joseph Godley
108 Corporate Park Drive
West Harrison, NY 10604
B. Tycorp Pizza III, Inc.'s 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
GMAC Commercial Mortgage $6,896,000
c/o David Hodge
5730 Colenridge Drive,
Suite 104
Atlanta, GA 30328
Burstone, LLC $4,779,169
c/o Joseph Godley
108 Corporate Park Drive
West Harrison, NY 10604
International Pizza Hut $2,500,000
Franchise Holder Association
P.O. Box 931600
Kansas City, MO 64193
Pizza Hut Inc. $2,300,000
John Murphy
14841 Dallas Parkway
Dallas, TX 75254
IRS Special Procedures Payroll taxes, $829,603
Support Staff including penalty
P.O. Box 10025 & interest
Richmond, VA 232400025
Virginia Dept of Taxation Sales taxes, $482,030
P.O. Box 27264 including penalties
Richmond, VA 232617264 & interest
Virginia Dept of Taxation Payroll/withholding $118,555
taxes, including
penalty & interest
Mclane Goods provided $23,242
Cardinal Sign Corporation $22,900
RSM FPO $13,409
AIC Credit Corp. $5,143
City Of Franklin $4,571
Dominion Virginia Power $3,111
Granite Telecommunications $2,936
Pepsi Cola (Illinois) $1,992
HRUBS $1,546
Treasurer of VA $1,191
Primesource Foodservice Inc. $1,110
Virginia Natural Gas $994
Hobart Corporation $966
C. Tycorp Pizza of N.C., Inc.'s 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
The Bank of N.Y., $13,499,000
Asset Solution
c/o R. Tuman
600 East las Colinas Boulevard,
Suite 1300
Irving, TX 75039
GMAC Commercial Mortgage Corp. $6,896,000
c/o David Hodge
5730 Colenridge Drive,
Suite 104
Atlanta, GA 30328
International Pizza Hut $2,500,000
Franchise Holder Association
P.O. Box 931600
Kansas City, MO 64193
Pizza Hut, Inc. $2,300,000
c/o John Murphy
14841 Dallas Parkway
Dallas, TX 75254
Internal Revenue Service Payroll taxes, $1,223,498
Insolvency Unit including penalty
P.O. Box 10025 & interest
Richmond, VA 232400025
Burstone, LLC $704,133
c/o Joseph Godley
108 Corporate Park Drive
West Harrison, NY 10604
North Carolina Dept of Sales/use taxes $30,421
Revenue
North Carolina Agricultural $9,000
& Technical State University
Duke Power Services provided $6,751
Piedmont Natural Gas Co. Services provided $4,852
Menico Mechanical Services provided $4,657
to store number 1105
A.I. Credit Corp. $4,547
Ecolab $3,591
Birch Telecom $2,577
First Rep. Corp. of America $2,458
North Carolina Dept of Payroll taxes $2,047
Revenue
Pepsicola of Chicago IL $1,958
City of Greensboro Water & sewer $1,244
services
Republic Waste Services $1,232
James Dubose Accrued vacation $1,113
earned by employee
& will be used by
employee in the
ordinary course of
business
D. Tycorp Pizza of VA., Inc.'s 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
The Bank of N.Y., $13,499,000
Asset Solution
c/o R. Tuman
600 East Las Colinas
Boulevard,
Suite 1300
Irving, TX 75039
GMAC Commercial Mortgage Corp. $6,896,000
c/o David Hodge
5730 Colenridge Drive,
Suite 104
Atlanta, GA 30328
International Pizza Hut $2,500,000
Franchise Holder Association
P.O. Box 931600
Kansas City, MO 64193
Pizza Hut, Inc. $2,300,000
c/o John Murphy
14841 Dallas Parkway
Dallas, TX 75254
IRS Special Procedures Payroll taxes, $1,223,498
Support Staff including penalty
P.O. Box 10025 & interest
Richmond, VA 232400025
Burstone, LLC $704,133
c/o Joseph Godley
108 Corporate Park Drive
Virginia Dept. of Taxation Sales/use taxes, $577,245
Attn. Ms. Perry including penalty
P.O. Box 27264 & interest
NFLK Dist. Office
Norfolk, VA 23516
A.I. Credit Corp Workers' compensation $9,715
Town of Orange $8,862
Pepsi Cola (Chicago) $7,516
Moores Electric Inc. $6,099
American Telephone Hardware $5,390
Henry County Commissioner Personal property $3,923
of the Revenue taxes
Dominion Virginia Power Services provided $3,596
Sean Scotts Roofing Services provided $3,025
Ronnie Ritchie Serv. Co. Inc. $2,625
E. Grant Cosner Barbara Cosner $2,333
City of Harrisonburg 2005 Personal $2,076
property tax
Department of ABC License renewal $2,030
Ecolab $1,961
U.S. MEDSYS: Miller & Mccollom Raises Going Concern Doubt
---------------------------------------------------------
Miller & Mccollom, CPAs, expressed substantial doubt about U.S.
MedSys Corp.'s ability to continue as a going concern after it
audited the Company's financial statements for the fiscal year
ended June 30, 2005 and 2004. The auditing firm pointed to the
Company's limited working capital and continued operation losses.
Fiscal 2005 Results
In its Form 10-KSB for the fiscal year ended June 30, 2005,
submitted to the Securities and Exchange Commission on Nov. 15,
2005, U.S. MedSys (OTCBB:UMSY) reported a $7,139,224 net loss,
versus a $1,891,495 net loss in the prior fiscal year.
Revenues continue to be primarily driven by the Company's Disease
Management Division, Global Medical Direct. GMD accounted for
approximately 80% of the revenue for the year ended June 30, 2005
as compared to 0% for the same period for the prior year. The
increase in revenue is due the start in mid February 2005 of
providing disease management services on two client contracts. The
Company also realized $112,500 in revenue from the "Wound Care
Program" launched in January.
At June 30, 2005, the Company's balance sheet showed $3,691,026 in
total assets and liabilities of $1,204,938. At June 30, 2005, the
Company's current assets exceed current liabilities by
approximately $1,839,258.
Material Weakness
During the preparation of U.S. MedSys' financial statements for
the year ended June 30, 2005, Anthony Rubino, the Company's Chief
Executive Officer and Chief Accounting Officer, concluded that the
current system of disclosure controls and procedures was not
effective because of internal control weaknesses related to the
lack of adequate accounting staff.
In addition, as a result of a change in management, the number of
members serving on the Board of Directors was reduced. The
Company is actively recruiting additional members, including
prospective independent directors, to permit greater oversight to
an enhanced Finance and Accounting team.
The Company believes that additional directors and an enhanced
Finance and Accounting team will improve the quality and
timeliness of future period financial reporting.
SEC Investigation
U.S. MedSys is the subject of a formal investigation being
conducted by the Central Regional Office of the Securities and
Exchange Commission. The Company has received a subpoena for
documents from the SEC office. While management is not aware of
the exact scope of the inquiry, it intends to cooperate fully with
the SEC staff.
The investigation may include inquiry into the offer and sale of
the company's securities, its public disclosures, its financial
statements, as well as its internal controls and books and
records, and filings made by the company and its directors and
officers with the SEC. The Company has retained John M. Fedders,
Esq., former director of the Division of Enforcement at the SEC,
to represent and assist the company in connection with the
investigation.
As of June 30, 2005, there has been no resolution in this matter
and last communication with the SEC enforcement office in Denver,
Colorado was May 21, 2005.
Fiscal First Quarter Results
U.S. MedSys showed continued growth in the first quarter of fiscal
2006. For the first three months of fiscal 2006, the company
recognized net revenue of $726,127 compared to net revenue of
$106,885 for the first three months of fiscal 2005.
The increased revenue represents the implementation of various new
customer contracts, continued expansion of existing contracts that
became revenue producing, and maintaining a relatively consistent
spending pattern despite the implementation of new contracts.
Net loss for the same period increased to $838,620 as compared to
an $833,190 net loss in the first three months of fiscal 2005.
The company reported total assets of $3,671,695 at Sept. 30, 2005,
a decrease compared to the total assets of $3,691,026 reported as
of June 30, 2005. Total shareholder's equity decreased to
$1,647,448 as of Sept. 30, 2005, representing a decrease from
$2,486,089 as of June 30, 2005.
U.S. MedSys Corp. - http://www.usMedSyscorp.com/-- is a
marketing, distribution organization and medical network
development company which provides medical technology and support
services to the healthcare industry. UMSY is focusing on its core
competencies in sales, medical network development, marketing and
healthcare delivery. The UMSY business network consists of
PMC/Foot Care, LLC; PMC Ocular, LLC; Global Medical Direct and New
England Orthotic and Diabetic Shoe Manufacturing Company Inc. The
company has contractual relationships with PMC Corp., a third
party administrator; New York Home Health Care, which provides
comprehensive services to hospital, long-term care facilities and
home care patients in the New York and New Jersey area; Wills Eye
Surgical Group and Sav-Rx.
UGS CORP: High Leverage Prompts S&P to Affirm B+ Debt Ratings
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
Plano, Texas-based UGS Corp.'s senior secured bank loan to '2'
from '3'. This indicates that lenders can expect substantial
recovery of principal in the event of a payment default or
bankruptcy. The 'B+' bank loan and corporate credit ratings
were affirmed. The outlook remains stable.
"The recovery rating action is reflective of meaningful debt
repayment and application of our current interest rate assumptions
and recovery methodology, as this bank facility was originally
rated in April 2004," said Standard & Poor's credit analyst Philip
Schrank.
The ratings on UGS Corp. reflect:
* its high leverage,
* a narrow product focus relative to the overall software and
services industry, and
* the company's limited track record operating as an
independent company.
These are somewhat offset by:
* UGS Corp.'s entrenched customer relationships,
* recurring revenues stemming from long-term contracts, and
* good profitability and cash flow.
UGS Corp. is a provider of product lifecycle management software
and services to a diversified customer base, that enables
customers to reduce development and manufacturing costs, expedite
time-to-market cycles, and enhance product quality and innovation.
UGS Corp. grew from a series of acquisitions by former parent
Electronic Data Systems Corp., and now through a leveraged buyout
will become an independent company.
Although UGS Corp. has a relatively narrow product portfolio and
its markets remain competitive, the company has achieved a leading
market position in a consolidated market. The company has
performed well, even through a weak economy and the IT investment
downturn, because of its low churn rate and high portion of
professional services and maintenance, which represents more than
65% of its revenue base.
UNITED SUBCONTRACTORS: Moody's Rates Proposed $65MM Debt at Caa1
----------------------------------------------------------------
Moody's Investors Service downgraded United Subcontractors'
corporate family rating to B2 from B1, and assigned B2 to the
company's proposed $335 million senior credit facility and Caa1 to
the proposed $65 million second lien term loan. The ratings
downgrade reflects USI's aggressive balance sheet management
policy as reflected by its proposed re-leveraging to pay
significant dividends and repurchase its preferred stock.
The ratings also reflect:
* high levels of goodwill,
* a growth strategy that relies on acquisitions, and
* the likelihood of greater leverage.
The ratings favorably consider the benefits of:
* the company's leading market position in its key markets;
* its geographic diversity;
* positive cash flow; and
* in particular, its variable cost structure.
The ratings outlook is stable.
Moody's took these rating actions:
* $40 million senior secured revolving credit facilities,
due 2011, rated B2;
* $295 million senior secured term loan, due 2012, rated B2;
* $65 million second lien term loan, due 2013, rated Caa1; and
* Corporate Family Rating, downgraded to B2 from B1.
The ratings outlook is stable.
These ratings will be withdrawn upon completion of the
transaction:
* $40 million senior secured revolving credit facilities,
due 2011, rated B1;
* $265 million senior secured term loan B, due 2012, rated B1.
Proceeds from the $400 million credit facilities will primarily go
towards refinancing the company's current debt balances and
towards funding a $20 million dividend payment and the repurchase
of $70 million of its preferred stock (including dividends). This
dividend payment would be the second made in 2005. The company
had refinanced its debt balances in July of 2005 to pay a $20
million dividend and fund an acquisition.
The ratings downgrade follows Moody's comment, in a press release
dated June 21, 2005, that a further weakening of the balance sheet
could result in ratings deterioration. The ratings downgrade also
reflects Moody's belief that the company is willing to maintain
and even increase its leverage levels to fund acquisitions and
additional dividends. The ratings downgrade also reflects the
higher than expected leverage levels that the company is currently
operating with and the negative adverse effect on the company's
credit metrics from the new dividend. The ratings are also
constrained by the cyclicality of the construction business.
The ratings are supported by the company's strong competitive
position in its key markets and strong margins. The company's
operating margins are currently in the mid-teens and are expected
to remain near this level over the next 12 months. The company
competitive position benefits from its relationships with eight of
the top ten homebuilders. Moreover, the company's cost structure
is mostly variable with labor being the largest single component.
Moody's understands that 80% of the company's costs are variable
in nature.
As a result, the company should be able to reduce its labor
expense during a slowdown and thereby largely insulate its
operating margins. The ratings are also supported by its
geographic diversification with 50 branches across 15 states,
though Moody's notes that over 45% of the company's revenues come
from its operations in Florida and that weakness in that market,
were it to occur, would be a concern. USI also has low customer
concentration with no customer representing over 5% of revenues.
Moody's considers USI to be well positioned in the B2 ratings
category. USI's ratings outlook could improve if the company were
to reduce its leverage multiple to below 3.8 times or improve its
free cash flow to debt to over 8% on a sustainable basis. The
second lien facility has been rated Caa1 to reflect the low level
of tangible assets that would be available in a distressed
scenario to the holders of the second lien term loan.
United Subcontractors, Inc., headquartered in Minneapolis,
Minnesota, is a independent insulation and shell subcontractor.
Revenues for 2004 were $306 million.
VERIFONE INC: Growth Strategy Spurs S&P to Affirm B+ Debt Ratings
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
San Jose, California-based Verifone, Inc.'s senior secured bank
loan to '3' from '4'. This indicates that lenders can expect
meaningful recovery of principal in the event of a payment default
or bankruptcy. The 'B+' bank loan and corporate credit
rating were affirmed. The outlook remains positive.
"The recovery rating action reflects Verifone's improved capital
structure, and the application of our current interest rate and
default scenario methodology," said Standard & Poor's credit
analyst Martha Toll-Reed.
The ratings reflect Verifone's:
* modest size,
* short financial history as an independent entity, and
* acquisitive growth strategy.
These factors are partially offset by Verifone's:
* leading position in the niche market for electronic payment
devices,
* a diversified customer base, and
* improving financial profile.
Verifone designs, markets and services transaction automation
systems that enable secure electronic payments. After being
acquired from Hewlett-Packard Co. in July 2001, Verifone operated
as a privately held company until its IPO in May 2005.
Following a period of essentially flat revenues from fiscal 2000
through 2003, revenue growth has accelerated over the past two
years, benefiting from management's focus on increasing
penetration of electronic payments in international markets,
replacement of existing devices to accommodate newer payment
applications, and an overall market shift from paper-based
transactions to electronic transactions at the point of sale. The
company reported revenues of $125.7 million in the quarter ended
July 31, 2005, up 21% over the prior-year period. EBITDA margins
have benefited from operating leverage and an emphasis on cost
reductions, and are expected to remain good for the rating in the
mid-to-high teens as a percent of revenues.
With an outsourced manufacturing model and minimal capital
expenditures, free operating cash flow is expected to be modestly
positive.
WHITEHALL JEWELLERS: Newcastle to Launch Cash Tender Offer
----------------------------------------------------------
JWL Acquisition Corp., a wholly owned subsidiary of Newcastle
Partners, L.P., will commence a cash tender offer to purchase all
of the outstanding shares of Whitehall for $1.20 per share.
Newcastle Partners owns an aggregate of 2,018,400 shares or
approximately 14.5% of common stock of Whitehall Jewellers, Inc.
(OTC: JWLR.PK).
The Board of Directors for Whitehall Jewellers notes that the
proposed tender offer will be subject to a number of conditions
including either the refinancing of the $140 million senior credit
facility or the consent to the tender offer and notes by the
senior lenders.
The tender offer will be subject to several conditions, including:
(i) a majority of Whitehall's shares on a fully diluted basis
being tendered and not withdrawn;
(ii) the termination of the Securities Purchase Agreement,
dated as of Oct. 3, 2005, between Whitehall, PWJ Funding
LLC, PWJ Lending LLC and Holtzman Opportunity Fund, L.P.
pursuant to which Whitehall would sell up to $50 million
in convertible notes;
(iii) stockholder rejection of the conditions to consummation
of such Securities Purchase Agreement;
(iv) a refinancing, acceptable to Newcastle, of Whitehall's
senior credit facility or a consent to the Offer to
Purchase and the potential merger thereafter by the
lenders under Whitehall's senior credit facility;
(v) Whitehall's Board of Directors redeeming the associated
preferred stock purchase rights or Newcastle being
satisfied that the rights have been invalidated or are
otherwise inapplicable to the offer and the potential
merger thereafter, as described in the Offer to Purchase;
(vi) Whitehall's Board of Directors approving replacement
financing to be provided by Newcastle of Whitehall's
existing bridge loan financing with financial terms no
less favorable to Whitehall than the existing financing,
but with no warrants, conversion rights or other equity
related components; and
(vii) Newcastle being satisfied that Section 203 of the
Delaware General Corporation Law is inapplicable to the
Offer to Purchase and the potential merger thereafter.
The offer will not be subject to or conditioned upon any financing
arrangements other than as provided above. Newcastle expects to
commence the tender offer on or about Monday, Dec. 5, 2005.
Solicitation Proxies
Newcastle is filing a preliminary proxy statement with the U.S.
Securities and Exchange Commission relating to Newcastle's
solicitation of proxies in opposition to the proposals relating to
a pending financing transaction between Whitehall and investment
funds managed by Prentice Capital Management, L.P. and Holtzman
Opportunity Fund, L.P. to be voted on at a special meeting of
stockholders.
As of this time, neither a record date nor a meeting date has been
set by Whitehall for this special meeting of stockholders. Upon
completion of the SEC review process, Newcastle intends to file
and mail to stockholders a definitive proxy statement. Steven
Pully has also announced his resignation as a director of
Whitehall on Nov. 30, 2005.
Whitehall Jewellers, Inc., is a national specialty retailer of
fine jewelry, operating 389 stores in 38 states. The Company
operates stores in regional and super regional shopping malls
under the names Whitehall Co. Jewellers, Lundstrom Jewelers and
Marks Bros. Jewelers.
* * *
Needs Additional Capital
As previously reported, Whitehall is reviewing its financial
situation in light of current and forecasted operating results and
management changes. The Company believes it needs additional
capital to support its operations. The Company is evaluating
various alternatives to meet these needs, including the raising of
additional debt or equity financing. The Company has requested
temporary extensions of payment terms from some of its key
suppliers in order to manage liquidity and has also slowed its
accounts payable schedules generally. In addition, the Company
plans to retain restructuring professionals to assist it.
Lender Talks
The Company is actively engaged in discussing alternatives with
its bank lenders and other parties. There is no assurance that
the discussions will result in additional financing or that an
alternative transaction will be available. If the Company is not
able to procure additional financing or otherwise able to obtain
additional liquidity, it may be forced to pursue other
alternatives, such as a restructuring of its obligations.
WI-TRON INC: Posts $395,479 Net Loss in Third Quarter 2005
----------------------------------------------------------
Wi-Tron, Inc. (OTCBB: WTRO.OB), fka Amplidyne, Inc., reported a
$395,479 net loss for the quarter ended Sept. 30, 2005 compared
with a $241,475 net loss for the same quarter in 2004.
Revenues for the three months ended Sept. 30, 2005 declined by
$10,076 from $115,439 to $105,363% compared to the three months
ended Sept. 30, 2004. The sales decreases were primarily in
amplifiers. The majority of the amplifier sales for the three
months ended Sept. 30, 2005, were obtained from the Wireless Local
Loop amplifier products to a major European customer. Sales of
amplifiers were approximately 97% of total sales compared to 93%
of total sales for the same period last year.
Wi-Tron's balance sheet showed $474,112 in total assets at
Sept. 30, 2005, and liabilities of $1,391,589, resulting in a
stockholders' deficit of $917,477.
Phoenix Default
In January 2004, Wi-Tron entered into a Subscription Agreement
with Phoenix Opportunity Fund II, LP, pursuant to which Phoenix
agreed to make investments in the Company in exchange for notes
and preferred shares.
The preferred shares were never issued to Phoenix due to a dispute
among the Parties with respect to the terms of the loan
transaction. The Company and Phoenix agreed to rescind their
agreement, and the Company agreed to pay Phoenix:
a) $20,000 in cash for the funds Phoenix invested;
b) $80,000 in cash for the funds which Phoenix lent to the
Company, and
c) $40,000 for expenses incurred by Phoenix on behalf of the
Company.
Wi-Tron delivered a secured promissory note due March 31, 2005, as
payment for the $40,000. The note, secured by substantially all
the Company's assets, bears interest at 8% per annum.
The Company failed to make the required $40,000 payment due on
March 31, 2005, and currently remains delinquent on this payment.
Phoenix has not taken any action concerning this default.
Going Concern Doubt
Kahn Boyd Levychin, LLP, expressed substantial doubt about Wi-
Tron's ability to continue as a going concern after it audited the
Company's financial statements for the year ended Dec. 31, 2004
and 2003. The auditing firm pointed to the Company's losses from
operations and limited financial resources.
Wi-Tron's liquidity has been adversely affected in recent years by
significant losses from operations. The Company has incurred
losses of $836,939 and $746,337 for the nine months ended
September 30, 2005 and 2004, respectively.
With insufficient cash reserves and reduced revenues, management
says that it faces great difficulty in meeting working capital
needs over the next 12 months.
Management's plans to address liquidity problems include:
-- increasing sales of its amplifier products by developing
newer products for the Multimedia Broadcast market place
through both individual customers, strategic alliances and
mergers.
-- decreasing the dependency on certain major customers by
aggressively seeking other customers in the amplifier
markets;
-- partnering with significant companies to jointly develop
innovative products, which has yielded orders with
multinational companies to date, and which are expected to
further expand such relationships;
-- reducing costs through a more streamlined operation by
using automated machinery to produce components for our
products, restructuring the Company and its operations;
-- deferral of payments of officers' salaries, as needed;
-- selling remaining net operating losses applicable to the
State of New Jersey, pursuant to a special government
high-technology incentive program in order to provide
working capital, if possible;
-- reducing overhead costs and general expenditures;
-- obtaining financing through private placements of common
stock;
-- merging with another company to provide adequate working
capital and jointly develop innovative products.
About Wi-Tron
Wi-Tron, Inc. -- http://www.amplidyneinc.com/home.html-- designs,
manufactures and sells ultra linear single and multi-channel power
amplifiers and broadband high-speed wireless products to the
worldwide wireless telecommunications market. The single and
multi-carrier linear power amplifiers, which are a key component
in cellular base stations, increase the power of radio frequency
and microwave signals with low distortion. The Company's products
are marketed to the cellular, PCS, X-band, wireless local loop
segments of the wireless telecommunications industry.
WILLBROS GROUP: Bank Group Waives Financial Covenants
-----------------------------------------------------
Willbros Group, Inc. (NYSE: WG) entered into an Amendment and
Waiver Agreement with its syndicated bank group led by Calyon
Corporate and Investment Bank to waive its non-compliance with
certain financial and non-financial covenants.
The Amendment provides that:
* The facility will be available immediately for the issuance
of letters of credit and for cash borrowings.
* The total amount of the facility remains $100 million to
reflect the anticipated utilization of the facility.
* Certain financial covenants and reporting obligations were
waived and/or modified to reflect the Company's current and
anticipated operating performance.
* The maximum cash borrowings allowed under the amended
facility are $30 million and the maximum letter of credit
obligations are $70 million.
All cash borrowings have a maturity date of May 23, 2006.
The overall facility is scheduled to mature on Mar. 12, 2007.
However, the company anticipates negotiating a new credit facility
in the first quarter of 2006. The company has historically put a
new credit facility in place approximately a year ahead of the
maturity of the existing facility due to the nature and extended
term of the letters of credit it is required to issue in
connection with its construction and EPC projects.
Willbros Group, Inc. -- http://www.willbros.com/-- is a leading
independent contractor serving the oil, gas and power industries,
providing construction, engineering and other specialty oilfield-
related services to industry and government entities worldwide.
WORLD HEART: Receives Non-Compliance Notice from Nasdaq
-------------------------------------------------------
World Heart Corporation (Nasdaq: WHRT; TSX: WHT) received a notice
from the Listing Qualifications Department of the Nasdaq Stock
Market stating that for the last 30 consecutive business days, the
bid price of the company's common stock has closed below the
minimum $1.00 per share requirement for continued inclusion under
Marketplace Rule 4450(a)(5). The notice further states that
pursuant to Marketplace Rule 4450(e)(2), the company will be
provided 180 calendar days (or until May 30, 2006) to regain
compliance. If, at anytime before May 30, 2006, the bid price of
the company's common stock closes at $1.00 per share or more for a
minimum of 10 consecutive business days, the company may regain
compliance with the Marketplace Rules.
The Nasdaq staff may, in its discretion, require the company to
maintain a bid price of at least $1.00 per share for a period in
excess of 10 consecutive business days (but generally no more than
20 consecutive business days) before determining that the Company
has demonstrated the ability to maintain long-term compliance.
The notice indicates that, if compliance with the Minimum Bid
Price Rule is not regained by May 30, 2006, the Nasdaq staff will
provide written notification that the Company's common stock will
be delisted, and at the time the Company may appeal the staff's
determination to a Listing Qualifications Panel.
The notice also states that, alternatively, the company may apply
to transfer its common stock to The Nasdaq Capital Market if the
company satisfies the requirements for initial inclusion on The
Nasdaq Capital Market, other than the Minimum Bid Price Rule. If
the application is approved, the company will be afforded the
remainder of the Nasdaq Capital Market's additional 180-day
compliance period to regain compliance with the Minimum Bid Price
Rule while on the Nasdaq Capital Market.
World Heart Corporation is a global technology leader in
mechanical circulatory support systems headquartered in Oakland,
California, USA with additional facilities in Heesch, Netherlands
and in Salt Lake City, Utah. WorldHeart's registered office is
Ottawa, Ontario, Canada.
* * *
As reported in the Troubled Company Reporter on Apr. 11, 2005,
World Heart Corporation filed its annual report on Form 10-KSB
in the United States with the Securities and Exchange Commission.
In accordance with Rule 4350 (b) of the NASDAQ Marketplace Rules,
WorldHeart reports that the financial statements for the year
ended December 31, 2004, included in the Form 10-KSB contained
PricewaterhouseCoopers LLP's note describing the going concern
assumption as it relates to the financial statements and
requirements for WorldHeart to raise additional capital.
WORLDGATE COMMUNICATIONS: Grant Thornton Resigns as Auditor
-----------------------------------------------------------
Grant Thornton LLP, WorldGate Communications, Inc.'s
independent registered public accounting firm, will not
stand for re-appointment for the audit of the year ending
December 31, 2005. The Company's resignation will be effective
upon the completion of its current engagement, which ends with the
review of the Company's financial statements included in its
Quarterly Report on Form 10-Q for the quarter ended September 30,
2005.
The Company has withheld any decision as to the retention of an
independent registered public accounting firm for fiscal year
2005. The Company has elected to not seek the re-engagement of
Grant Thornton and anticipates announcing within the next few
weeks the retention of a new accounting firm to serve as the
Company's independent registered public accounting firm for the
fiscal year 2005.
Going Concern Doubt
As reported in the Troubled Company Reporter on April 5, 2005,
Grant Thornton expressed substantial doubt about the Company's
ability to continue as a going concern after it audited the
Company's financial statements for the fiscal year ended
Dec. 31, 2004. The auditing firm pointed to the Company's
recurring losses from operations and a $220 million net
accumulated deficit.
WorldGate Communications, Inc. -- http://www.wgate.com/-- is in
the business of developing, manufacturing and distributing video
phones for personal and business use, to be marketed with the Ojo
brand name. The Ojo video phone is designed to conform with
industry standard protocols, and utilizes proprietary enhancements
to the latest technology for voice and video compression to
deliver quality, real-time video images that are synchronized with
the accompanying sounds. Ojo video phones are designed to operate
on the high-speed data infrastructures of cable and DSL providers.
WorldGate has applied for patent protection for its unique
technology and techno-futuristic design that contribute to the
functionality and consumer appeal offered by the Ojo video phone.
WorldGate believes that this unique combination of design,
technology and availability of broadband networks allow for real-
life video communication experiences that were not economically or
technically viable a short time ago.
WORLDGATE COMMS: Faces Possible Nasdaq Delisting Due to 10-Q Delay
------------------------------------------------------------------
WorldGate Communications, Inc. (Nasdaq: WGATE) received notice
from the staff of the NASDAQ Stock Market indicating that the
company is subject to potential delisting from the NASDAQ National
Market for failure to comply with NASDAQ's requirements to file
its Form 10-Q for the quarter ended Sept. 30, 2005 in a timely
fashion, as required under Marketplace Rule 4310(c)(14).
NASDAQ stated in the notice that, unless the company requests a
hearing on NASDAQ's delisting notice by Nov. 29, 2005, the
Company's securities will be delisted from the NASDAQ National
Market at the opening of business on Dec. 1, 2005. The Company
has already requested this hearing and pending the results of such
hearing, the Company's securities will remain listed on The NASDAQ
Stock Market. As a result of such notice, however, an "E" was
appended to the end of the trading symbol "WGAT" for the Company's
common stock.
Form 10-Q Filing Delay
The Company previously indicated that it might not be able to file
its Form 10-Q within the required time frame to allow for the
amendment and restatement of its financial statements to correctly
account for warrants and additional investment rights issued in
private placements of the company's common stock during the fourth
quarter of 2003 and the first and fourth quarters of 2004. These
changes with respect to the accounting for these securities impact
the Company's financial statements for the years ended Dec. 31,
2003 and 2004 as included in the Company's Annual Report on
Form 10-K/A filed on Aug. 30, 2005, and the interim financial
statements for the periods ended March 31, 2004 through June 30,
2005 included in the Company's Quarterly Reports on Form 10-Q. As
previously announced the financial statements included within
these reports will be impacted by decreasing the accumulated
deficit and correspondingly decreasing the paid in capital while
total net stockholders' equity remains unchanged. There is no
cash impact associated with these amendments and restatements and
the most significant effect is to reduce our previously reported
loss.
The Company has been working to finalize the amended and restated
filings. The amendment and restatement process has led to
additional delays in filing the interim financial statement for
the period ended Sept. 30, 2005 on Form 10-Q.
Hal Krisbergh, Chairman and CEO of the Company, commented,
"Although the finalization of the restatements and amendments, and
accordingly, the filing of our Form 10-Q for the third quarter
2005 is taking longer than we anticipated, we are doing everything
we reasonably can to bring our SEC filings up to date." Mr.
Krisbergh continued, "While we are not able to issue our full
third quarter earnings release until we finalize these pending
restatements and amendments I can tell you that we exited the
third quarter with $21.9 million of cash and cash equivalents, and
during the quarter ended Sept. 30, 2005 the net revenues for Ojo
videophones shipped to our partner Motorola increased 79% versus
the prior quarter. I remain comfortable with the Company's
financial condition and excited about it prospects for the
future."
WorldGate Communications, Inc. -- http://www.wgate.com/-- is in
the business of developing, manufacturing and distributing video
phones for personal and business use, to be marketed with the Ojo
brand name. The Ojo video phone is designed to conform with
industry standard protocols, and utilizes proprietary enhancements
to the latest technology for voice and video compression to
deliver quality, real-time video images that are synchronized with
the accompanying sounds. Ojo video phones are designed to operate
on the high-speed data infrastructures of cable and DSL providers.
WorldGate has applied for patent protection for its unique
technology and techno-futuristic design that contribute to the
functionality and consumer appeal offered by the Ojo video phone.
WorldGate believes that this unique combination of design,
technology and availability of broadband networks allow for real-
life video communication experiences that were not economically or
technically viable a short time ago.
* * *
Grant Thornton LLP, expressed substantial doubt about WorldGate
Communications, Inc.'s ability to continue as a going concern
after it audited the Company's financial statements for the fiscal
year ended Dec. 31, 2004. The auditing firm pointed to the
Company's recurring losses from operations and a $220 million net
accumulated deficit. At Dec. 31, 2004, WorldGate's balance sheet
showed $13,822,000 in total assets and a $5,572,000 stockholders'
deficit.
The Company incurred a $2.6 million first quarter net loss and a
$2.9 million net loss in second quarter.
WYLE LAB: S&P Affirms Low-B Ratings on $180 Million Bank Loans
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its recovery rating on
El Segundo, California-based Wyle Laboratories, Inc.'s
first-priority $140 million senior secured bank facility to '2'
from '3'. This indicates that lenders can expect substantial
recovery of principal in the event of a payment default or
bankruptcy. The second-priority $40 million term loan recovery
rating of '5' was affirmed. The 'B+' first-priority bank loan and
corporate credit ratings and 'B-' second-priority bank loan rating
were all affirmed. The outlook remains negative.
"The recovery rating action is based predominantly on a
substantial increase in LIBOR rates since this bank facility was
initially rated, which drives improved recovery prospects under
our current methodology," said Standard & Poor's credit analyst
Joshua Davis.
The ratings reflect:
* modest profitability inherent in the government services
business,
* reliance on budgets of key Federal government agencies, and
* high financial leverage.
These factors partly are offset by:
* a strong niche position providing technical support;
* test and evaluation services;
* a broader and deeper business profile resulting from the
acquisition; and
* a predictable revenue stream based on contractual backlogs
of business.
Wyle is a supplier of test, engineering, technical services, and
life science solutions and services to Federal government
agencies, including the Department of Defense and the National
Aeronautics and Space Administration, and prime contractors to the
Federal government.
Wyle's business profile is supported by expertise in aerospace
test and engineering services, and longstanding contractual
relationships with key government agencies.
The Aeronautics acquisition broadens and deepens Wyle's customer
relationships with government agencies, reducing customer
concentration, adding modestly to growth opportunities and
increasing operating scale. The combined business will have high
customer concentration with the U.S. Navy and NASA, although the
presence of multiple independent contracts with each customer
somewhat mitigates concentration risk.
Modest profitability, as evidenced by EBITDA margins of 8% or
less, is typical of the kind of government services the combined
company provides. This partly is offset by the predictable nature
of revenues, which are subject to funded and unfunded backlogs
under multi-year contracts.
* AlixPartners Adds Doug Jung, Former Chase Exec., to NY Office
-------------------------------------------------------------
AlixPartners, the international corporate restructuring,
turnaround, performance improvement, and financial advisory firm,
today announced the appointment of a new director, Doug Jung, in
the firm's New York office.
With over 25 years of experience, Jung is a seasoned professional
with diverse audit, due diligence, management, finance and credit
expertise. He was most recently with JPMorgan Chase in New York
where he was Chief Operating Officer for Chase Business Credit,
involved in integrating three asset-based lending businesses from
predecessor organizations.
Prior to holding this position, Jung led a team of diligence
professionals who performed a variety of diligence and deal
structuring activities for prospective, existing and distressed
credit. In addition to other duties, he advised the firm's
credit, workout, restructuring, structured finance or asset
securitization teams on asset values for accounts receivable and
inventory, borrowing base structure and documentation. He also
led diligence reviews on financial operating systems and controls,
financial reporting and a variety of other deal-specific matters.
Jung holds a bachelor's degree in accounting from Syracuse
University and is a Certified Public Accountant.
About AlixPartners
AlixPartners -- http://www.alixpartners.com/-- is internationally
recognized for its hands-on, results-oriented approach to solving
operational and financial challenges for large and middle market
companies globally. Since 1981, the firm has become the "industry
standard" for performance improvement aimed at producing bottom-
line results quickly and helping clients achieve a more positive
outcome during times of transition. The firm has over 450
employees in its Chicago, Dallas, Detroit, Dusseldorf, London, Los
Angeles, Milan, Munich, New York, San Francisco, and Tokyo
offices.
* Cadwalader Names Douglas J. Landy as Special Counsel in New York
------------------------------------------------------------------
Douglas J. Landy has joined Cadwalader, Wickersham & Taft LLP as
special counsel in the Securities and Financial Institutions
Regulation Department, resident in New York. Mr. Landy was
formerly a partner in the Finance Group in the New York office of
Mayer, Brown, Rowe & Maw LLP.
Mr. Landy focuses his practice on domestic and foreign financial
institution regulation, compliance, risk management, insolvency,
mergers and acquisitions, securitizations and structured finance.
Mr. Landy has represented financial institutions in the regulatory
aspects of over $125 billion of mergers, acquisitions and
reorganizations. Mr. Landy's areas of expertise include the Bank
Holding Company Act, the National Bank Act, the Federal Deposit
Insurance Act, the New York Banking Law, the USA Patriot Act and
the Bank Secrecy Act.
"Doug is an outstanding addition to our team. We are delighted to
welcome him to the firm," stated Robert O. Link, Jr., Cadwalader's
Chairman and Managing Partner.
"Doug has a tremendous wealth of knowledge and experience in all
areas of financial institutions regulation. As banking and
securities activities continue to intersect, he will be
instrumental in helping us to provide legal counsel to our
clients," stated Bruce A. Hiler, Chairman of the Securities and
Financial Institution Regulations Department.
Prior to his tenure with Mayer Brown, Mr. Landy was with Sherman &
Sterling LLP from 1997 to 2000 and from 2001 to 2005, and was a
staff attorney with the Federal Reserve Bank of New York from 1993
to 1997. Mr. Landy received his B.A. from the University of
Pennsylvania and his J.D., cum laude, from Boston College Law
School. Mr. Landy is admitted to practice in New York.
About Cadwalader, Wickersham & Taft LLP
Established in 1792, Cadwalader, Wickersham & Taft LLP --
http://www.cadwalader.com/--, is one of the world's leading
international law firms, with offices in New York, London,
Charlotte, Washington and Beijing. Cadwalader serves a diverse
client base, including many of the worlds top financial
institutions, undertaking business in more than 50 countries in
six continents. The firm offers legal expertise in antitrust,
banking, business fraud, corporate finance, corporate governance,
environmental, healthcare, insolvency, insurance and reinsurance,
litigation, mergers and acquisitions, private client, private
equity, project finance, real estate, securities and financial
institutions regulation, securitization, structured finance, and
tax.
* BOOK REVIEW: Corporate Recovery - Managing Companies in Distress
------------------------------------------------------------------
Author: Stuart Slatter & David Lovett
Publisher: Beard Books
Hardcover: 356 pages
List Price: $34.95
Order your personal copy at
http://amazon.com/exec/obidos/ASIN/1587982420/internetbankrupt
According to the authors, "turnaround management is everyday
management." There are no miraculous remedies for bringing a
company out of its troubles; no formulas to apply that will
guarantee recovery. Management has to be alert and flexible
to adapt to ever-changing business conditions both outside
and within a company.
Although turnaround management (or "crisis management" as the
authors also call it) is often regarded as a specialized type
of management or a gifted set of management skills, Slatter
and Lovett argue that any good manager should have the skills
to be able to move his or her company toward recovery.
Managers often fail because they do not recognize or
acknowledge the warning signs of a crisis, not because they
lacked the relevant management skills.
Corporate Recovery does not teach managers how to become
"crisis managers." While the book does provide guidance on
what management skills are required if a company slips into a
crisis, for the most part the authors take a broader view.
Crisis management involves applying traditional management
techniques in an environment where the patient is seriously
ill, both cash and time are in short supply, and rapid
recovery is required. The authors suggest that these same
skills are necessary when a company has been acquired and is
inevitably undergoing some changes, improvement of short-time
financial performance is sought, and a company is trying to
head off a crisis rather than pull itself out of one.
The authors give attention to both external and internal
factors and their interrelationship. The reader is taken
chapter by chapter through all of the stages of distress in a
company, from early warning signs through pervasive problems
to moving onto solid ground and emerging from a turnaround.
The book does not offer merely an academic analysis of the
distinguishing factors of each stage. The authors provide
relevant, effective action for each stage of distress.
Different stages require different actions. Under
circumstances of distress, the enthusiasm and morale that are
signs of a healthy company in normal times cannot fix the
causes of the problems. Ordinary leadership skills such as
setting a good example and inspiring loyalty will not effect
a turnaround. Fundamental in a successful turnaround is the
actions taken by a company's key decisionmakers. Only they
are in a position to make the crucial decisions that can
bring an organization out of distress.
Corporate Recovery is an incomparable guide for managers of
companies in distress. The book brings clarity to what is
often a clouded, disturbing, and stressful situation, even
for the most experienced decisionmakers. This book can help
an organization's decisionmakers ward off or minimize hazards
to its well being. For ones who find themselves already in
worrisome crisis situations, it can be an invaluable
handbook, no matter what stage of the crisis.
Slatter is founding member of the Society of Turnaround
Professionals. He works with corporations on turnarounds and
provides training for managers and executives. Lovett has
extensive experience in turnarounds and heads his own firm
helping companies improve their operations and financial
performance and restore or increase corporate value.
*********
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 A. Soriano-Baaclo, Marjorie C. Sabijon, Terence
Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo
Junior M. Pinili, Tara Marie A. Martin 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-
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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 ***