T R O U B L E D C O M P A N Y R E P O R T E R Monday, December 5, 2005, Vol. 9, No. 288 Headlines ABITIBI-CONSOLIDATED: Low Earnings Spur S&P to Pare Ratings to B+ ACE SECURITIES: Fitch Rates $3 Mil. Privately Offered Class at BB AMCAST INDUSTRIAL: Case Summary & 20 Largest Unsecured Creditors AMERICAN PACIFIC: S&P Rates Proposed $75MM Senior Sec. Loan at B ANCHOR GLASS: Court Issues Order on Adequate Assurance Dispute ARCH COAL: Commences Offer for 5% Perpetual Pref. Stock Conversion AT&T CORP: S&P Upgrades Ratings on 12 Transactions to A from BB+ ATA AIRLINES: Files First Amended Plan and Disclosure Statement ATA AIRLINES: Discloses MatlinPatterson Amended Commitment Letter AUGA HUDSON: Voluntary Chapter 11 Case Summary AUXILIO INC: Net Loss & Deficit Trigger Going Concern Doubt AXEDA SYSTEMS: Working Capital Deficit is $5.4 Mil. at Sept. 30 BEAR STEARNS: Fitch Puts Low-B Rating on $8 Mil. Class B-4 Certs. BIO-KEY INT'L: Incurs $2,957,541 Net Loss in Third Quarter BOWATER INC: S&P Lowers Corporate Credit Rating to B+ from BB BROADCAST INT'L: Releases Third Quarter Financial Results CALPINE CORP: Must Restore $313 Million Deposit by January 22 CALPINE CORP: Evaluating Options, Including Bankruptcy Filing CALPINE CORP: Insists 6% Convertible Notes Aren't in Default CALPINE CORP: Fitch Slices Junk Ratings on $5.6 Billion Debts CALPINE CORP: Moody's Downgrades Sr. Unsecured Notes' Rating to Ca CAL-BAY INT'L: Releases Third Quarter 2005 Financial Results CATHOLIC CHURCH: Tucson's Parish Incorporation Formally Begins CEDRIC KUSHNER: Sept. 30 Balance Sheet Upside-Down by $12.9 Mil. CIRCUIT RESEARCH: Working Capital Deficit is $1.5MM at Sept. 30 COLLINS & AIKMAN: Wants to Walk Away From Six Leases and Contracts COLLINS & AIKMAN: Breitkreuz Wants Adequate Protection Payments COMM 2001-FL5: Fitch Affirms Junk Ratings on $4.7MM Cert. Classes CONSOLIDATED ENERGY: Posts $1.4 Million Net Loss in Second Quarter CONSOLIDATED ENERGY: Limited Capital Triggers Going Concern Doubt CONTEMPO INDUSTRIES: Case Summary & 20 Largest Unsecured Creditors CREDIT SUISSE: Credit Erosion Cues S&P to Junk Class D-B-5 Certs. CREDIT SUISSE: Fitch Affirms Low-B Ratings on $36.3M Cert. Classes CREDIT SUISSE: Fitch Places BB Rating on $700K Class C-B-4 Certs. CRESCENT REAL: S&P Affirms $625 Mil. Senior Unsec. Notes' B Rating DIALOG GROUP: Sept. 30 Balance Sheet Upside-Down by $3.1 Million DIAMONDHEAD CASINO: Posts $172K Net Loss in Quarter Ended Sept. 30 DIGITAL VIDEO: Sept. 30 Balance Sheet Upside-Down by $1.48 Million DLJ COMMERCIAL: Fitch Affirms Low-B Ratings on $99.7M Class Certs. DOANE PET: Change of Control Offers for Rev. Bonds Ends on Dec. 19 DOMTAR INC: Cost Position Decline Cues S&P to Shave Rating to BB- DRESSER INC: KPS Completes Acquisition on Instruments Business DRUG ASSIST: Soliciting Bids for Sec. 363 Sale Transaction DYNEGY HOLDINGS: Tender Offer for $1.75 Bil. Notes Expires Dec. 12 DYNEGY INC: Names Holli C. Nichols Chief Financial Officer ECHOSTAR COMMS: Fitch Puts B Rating on Convertible Sub. Notes EDGEN CORP: Moody's Affirms Senior Secured Notes' Rating at B3 ENERGY EXPLORATION: Sept. 30 Balance Sheet Upside-Down by $248K EMISPHERE TECHNOLOGIES: Equity Deficit Narrows as Losses Continue FIBERMARK INC: Court Confirms Chapter 11 Plan of Reorganization FRANCHISE STUDIOS: Case Summary & 7 Largest Unsecured Creditors FREESCALE SEMICONDUCTOR: Moody's Ups $1 Bil. Notes' Rating to Ba1 GARDENBURGER INC: Court Approves $15 Million DIP Credit Facilities GB HOLDINGS: Committee Wants to Retain Kasowitz Benson as Counsel GRUPO POSADAS: Fitch Assigns BB- Foreign & Local Currency Rating GRUPO POSADAS: Grupo Mexicana Buy-Out Prompts S&P's Watch Negative GUARDIAN TECHNOLOGIES: Incurs $2.4MM Net Loss in Third Quarter HARBORVIEW MORTGAGE: Fitch Rates $11.8MM Class B-10 Certs. at BB HERTZ CORPORATION: Discloses Results of Tender Offers HONDO TRUST: Case Summary & 10 Known Creditors ICF CORP: Balance Sheet Upside-Down by $2.31 Million at Sept. 30 IMEDIA INTERNATIONAL: Net Losses Continue in Third Quarter IMPERIAL HOME: Wants Court to Approve Avoidance Action Settlements INNOVA PURE: Incurs $60,600 Net Loss in Quarter Ended Sept. 30 INTERNATIONAL PAPER: Inks $800 Million Credit Facility INTERSTATE BAKERIES: Four Tort Claimants Hold $900K Allowed Claim J INCORPORATED: Case Summary & 3 Largest Unsecured Creditors JANKRIS VINEYARDS: Case Summary & 20 Largest Unsecured Creditors JP MORGAN: Fitch Affirms Low-B Ratings on Class J through P Certs. KAISER ALUMINUM: Wants Court to Approve Sherwin Alumina Settlement KMART CORP: Settles Dispute Over Hurst's Lease Rejection Claim KMART CORP: Court Allows Travis County's Tax Claim for $264,000 LEVITZ HOME: Three Utilities Want Press for Cash Deposits MARKEL CORP: Moody's Withdraws Preferred Stock's (P)Ba2 Rating MASSEY ENERGY: S&P Assigns BB- Rating to Proposed $725 Mil. Notes MCDERMOTT INT'L: S&P Lifts Unit's Credit Rating to B+ from CCC+ MERIDIAN AUTOMOTIVE: Wants Until April 21 to File Chapter 11 Plan MERIDIAN AUTOMOTIVE: Hearing on Ford Motor Lease Set for Dec. 8 MERRILL LYNCH: Fitch Upgrades Low-B Ratings on Two Cert. Classes METRIS COS: Fitch Lifts Ratings to AA from B- After HSBC Purchase MIRANT CORP: Court Confirms Second Amended Plan of Reorganization MIRANT CORP: Court Approves $13-Mil. Sale of Maryland Property MIRANT CORP: Court Okays Pact Settling PEPCO's Lawsuit & Claims NATIONAL ENERGY: Wants Court to Nix Citibank's Additional Claims OCEANTRADE CORP: U.S. Trustee Appoints 2-Member Creditors Panel ON TOP COMMUNICATIONS: Taps Miles & Stockbridge as Counsel PARADIGM MEDICAL: Accumulated Deficit Tops $60.8-Mil. at Sept. 30 PENN OCTANE: Accumulated Deficit Tops $26.7MM in Third Quarter PLIANT CORPORATION: Noteholders Agree to Equity-for-Debt Swap POWERLINX INC: Balance Sheet Upside-Down by $210,369 at Sept. 30 PROVIDENTIAL HOLDINGS: Auditors Raise Going Concern Doubt REFCO INC: UBS Wants Debtors to Return More Than $13 Mil. in Funds REFCO INC: Wants to Continue Employing Ordinary Course Profs. REFCO INC: Court Permits Continuance of Intercompany Transactions SALIVA DIAGNOSTICS: Has $2.7MM Equity Deficit as of September 30 SBARRO INC: Incurs $323,000 Net Loss in Quarter Ended October 9 SECURAC INC: Discloses CDN$1,525,071 Net Loss at Sept. 30 SHOPSMITH INC: Posts $236,000 Net Loss in Period Ended Oct. 1 SPORTS CLUB: Posts $5.3 Million Net Loss in Quarter Ended Sept. 30 SPORTS CLUB: Selling Five Clubs to Millennium for $80 Million SPORTS CLUB: Plans to Borrow $60 Million to Pay for Sr. Sec. Notes SYMBOLLON PHARMACEUTICALS: Reports Third Quarter Financial Results TECHNIGLOVE INT'L: Case Summary & 20 Largest Unsecured Creditors TRANSTEL INTERMEDIA: Fitch Junks Proposed $180 Mil. Sr. Sec. Notes TREMONIA CDO: Moody's Rates $7.5 Million Subordinated Notes at B3 TRINITY LEARNING: June 30 Balance Sheet Upside-Down by $6.4 Mil. VENTAS REALTY: Moody's Upgrades Sr. Debt's Rating to Ba2 from Ba3 VENTURE HOLDINGS: Wants Plan Filing Deadline Stretched to Dec. 19 VENTURE HOLDINGS: Clark Hill Approved as Committee's Co-Counsel VERIDIUM CORP: Incurs $3.3 Mil Net Loss in Quarter Ended Sept. 30 VERTIS, INC: Sept. 30 Balance Sheet Upside-Down by $534 Million VERTIS INC: Inks New $130 Mil. GE Trade Receivables Securitization WINDSWEPT ENVIRONMENTAL: Amends Laurus Debt & Equity Agreements WINN-DIXIE: Postpones Annual Meeting At Equity Panel's Request XERIUM TECH: Weak Performance Cues S&P to Chip Debt Ratings to B+ * Scott Stuart Joins Donlin Recano as Vice President * BOND PRICING: For the week of Nov. 28 - Dec. 2, 2005 ********* ABITIBI-CONSOLIDATED: Low Earnings Spur S&P to Pare Ratings to B+ ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on Montreal-based newsprint manufacturer Abitibi-Consolidated Inc. to 'B+' from 'BB-'. At the same time, the outlook was revised to stable. "The ratings were lowered because despite improving newsprint prices, Abitibi's profitability and cash flow generation have not improved as much as expected due to a stronger Canadian dollar, and high energy and fiber costs," said Standard & Poor's credit analyst Daniel Parker. "The company continues to earn low returns on its invested capital of about 2.2% in the trailing 12 months, and we estimate that Abitibi would have to at least quadruple its pro forma operating income of about CDN$160 million to even earn its cost of capital," Mr. Parker added. This is not likely to happen in the short term, absent a material weakening in the Canadian dollar, as the company already has some of the most efficient operating mills in the industry; the economy is reasonably strong, and newsprint and uncoated groundwood pricing are at historically high levels. The ratings on Abitibi reflect: * its high leverage, * heavy exposure to cyclical commodity-oriented groundwood papers and lumber, and * weak financial performance in the wake of several years of highly unfavorable industry conditions. These risks are partially offset by the company's leading market share position in newsprint and groundwood papers, and by its competitive cost position in North America. The cost pressures have been the latest challenge in an industry that has suffered from chronic oversupply and cyclical demand. North American newsprint consumption has been declining for more than five years, a trend that is expected to continue. In response to declining demand, newsprint producers, led by Abitibi, have gradually closed substantial capacity to improve industry-operating rates, which are currently at about 95%. The response by producers has slowly led to improved newsprint prices and there is the possibility that structural demand changes might have reduced some of the cyclicality. The outlook is stable. S&P expects that the North American newsprint industry will continue to slowly decline, but improved industry supply iscipline will continue to support stronger pricing. Although Abitibi's credit metrics will improve in 2006, S&P believes the company's profitability will continue to be challenged by the strong Canadian dollar, and continued high energy and fiber costs. For the ratings to improve Abitibi must demonstrate sustained improvement in operating margins and cash flow generation, in addition to further reducing leverage. If newsprint fundamentals and pricing deteriorate substantially, the outlook could be revised to negative. ACE SECURITIES: Fitch Rates $3 Mil. Privately Offered Class at BB ----------------------------------------------------------------- Fitch rates ACE Securities Corp. Home Equity Loan Trust, series 2005-SD3: -- $151,751,000 class A 'AAA'; -- $17,242,000 class M-1 'AA'; -- $9,907,000 class M-2 'A'; -- $4,573,000 class M-3 'BBB+'; -- $2,286,000 class M-4 'BBB'; -- $1,715,000 class M-5 'BBB-'; -- $3,048,000 privately offered class B-1 'BB'. The 'AAA' rating on the senior certificates reflects the 22.65% credit enhancement provided by the 9.05% class M-1, 5.20% class M-2, 2.40% class M-3, 1.20% class M-4, 0.90% class M-5, and 1.60% class B-1, along with target overcollateralization of 2.30%. In addition, the ratings on the certificates reflect the quality of the underlying collateral, and Fitch's level of confidence in the integrity of the legal and financial structure of the transaction. The mortgage pool consists of fixed- and adjustable-rate mortgage loans secured by first and second liens on one- to four-family residential properties, with an aggregate principal balance of $190,522,233. As of the cut-off dates, Oct. 31, 2005, with respect to 85.41% of the loans and Nov. 1, 2005 with respect to 14.59% of the loans, the mortgage loans had a weighted average loan-to-value ratio of 72.13%, weighted average coupon of 8.606%, weighted average remaining term of 282 months and an average principal balance of $99,698. Single-family properties account for approximately 84.11% of the mortgage pool, two-to four- family properties 6.03%, and condos 3.08%; 54.31% of the properties are owner occupied. The four largest state concentrations are California, Florida, New York, and New Jersey. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the releases issued May 1, 2003, entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' and Feb. 23, 2005, entitled, 'Fitch Revises RMBS Guidelines for Antipredatory Lending Laws', available on the Fitch Ratings Web site at http://www.fitchratings.com/ Ace Securities Corp. deposited the loans into the trust, which issued the certificates, representing beneficial ownership in the trust. For federal income tax purposes, the Trust Fund will consist of multiple real estate mortgage investment conduits. HSBC Bank USA will act as trustee. Ocwen Federal Bank FSB, rated 'RSS2' by Fitch; Wells Fargo Bank NA, rated 'RSS2+'; and Washington Mutual Bank, rated 'RPS2' will act as servicers for this transaction, with Wells Fargo Bank NA, rated 'RMS1' acting as master servicer. AMCAST INDUSTRIAL: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Lead Debtor: Amcast Industrial Corporation 706 East Depot Street Fremont, Indiana 46737 Bankruptcy Case No.: 05-33323 Debtor-affiliate filing separate chapter 11 petitions: Entity Case No. ------ -------- Amcast Automotive of Indiana, Inc. 05-33322 Type of Business: The Debtors manufactures and distributes technology-intensive metal products to end-users and suppliers in the automotive and plumbing industry. The Company and four debtor-affiliates previously filed for chapter 11 protection on Nov. 30, 2004 (Bankr. S.D. Ohio Case No. 04-40504). The U.S. Bankruptcy Court for the Southern District of Ohio confirmed the Debtors' Third Amended Joint Plan of Reorganization on July 29, 2005. The Debtors emerged from bankruptcy on Aug. 4, 2005. Chapter 11 Petition Date: December 1, 2005 Court: Southern District of Indiana (Indianapolis) Judge: Anthony J. Metz III Debtors' Counsel: David H. Kleiman, Esq. James P. Moloy, Esq. Dann Pecar Newman & Kleiman Box 82008 1 American Square, Suite 2300 Indianapolis, Indiana 46282-0001 Tel: (317) 632-3232 Total Assets Total Debts ------------ ----------- Amcast Industrial Corporation $16,207,349 $20,462,248 Amcast Automotive of Indiana, Inc. $81,572,882 $80,158,607 A. Amcast Industrial Corporation's 14 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Thompson Hine LLP Trade $297,811 2000 Courthouse Plaza NE P.O. Box 8801 Dayton, OH 45401-8801 Plante Moran, PLLC Trade $210,000 750 Trade Centre Way, Suite 300 Portage, MI 49002 FTI Consulting Inc. Trade $127,531 Park 80 West, Plaza One Saddlebrook, NJ 07663 Glass & Associates Trade $40,992 Ernst & Young Trade $40,133 T Rowe Price Retirement Services Trade $29,306 Del & Leona Renfroe Trade $12,495 ENSR International Trade $12,456 Graczyk, Norman Trade $9,640 Haynes and Boone, LLP Trade $8,818 Barnes & Thornberg Trade $2,674 Iron Mountain Records Management Trade $497 Ikon Office Solutions Trade $251 ADP, Inc. Trade $10 B. Amcast Automotive of Indiana, Inc.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Zhujiang Wenfeng Auto Wheel Trade $989,381 Company Limited 175 West 9 Mile Road, Suite 1200 Southfield, MI 48075 Transmetco Corporation Trade $954,770 1750 East Riverforks Drive Huntington, IN 46750 D&R Industries Inc. Trade $553,857 901 Seville Road Wadsworth, OH 44281 Ace Companies LLC Trade $488,306 5534 Greensboro SE P.O. Box 8711 Grand Rapids, MI 49518 Grant County Treasurer Tax $327,630 County Complex Room 229, 401 South Adams Marion, IN 46953 Akzo Nobel/Interpon Trade $325,031 P.O. Box 91629 Cleveland, OH 44101-3629 Back Aluminum Corporation Trade $208,097 Production Mold Inc. Trade $191,929 Lacks Wheel Trim Systems Trade $139,993 Quantum Metals Inc. Trade $136,381 Laurand Associates Inc. Trade $125,056 Tancon Trade $96,686 Carpenter Industrial Supply Trade $96,188 Johnson County Treasurer Tax $93,244 Spraylat Corp. Trade $83,091 Intrametco Trade $75,713 Kuntz Electroplating Trade $64,368 Refractory Engineers Inc. Trade $64,193 Toyoda Machinery USA Inc. Trade $49,714 Automation Specialties, Inc. Trade $49,080 AMERICAN PACIFIC: S&P Rates Proposed $75MM Senior Sec. Loan at B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Las Vegas, Nevada-based American Pacific Corp. The outlook is negative. At the same time, Standard & Poor's assigned a 'B' bank loan rating and its recovery rating of '2' to American Pacific's proposed $75 million senior secured first-lien credit facility, based on preliminary terms and conditions. The rating on the first-lien bank loan is the same as the corporate credit Rating. This and the '2' recovery rating indicate that bank lenders can expect a substantial recovery of principal in the event of a payment default. In addition, Standard & Poor's assigned its 'CCC+' rating and a recovery rating of '5' to the proposed $20 million second-lien term loan. The second-lien facility is rated two notches below the corporate credit rating due to the level of priority debt ahead of the loan that limits recovery prospects. The '5' recovery rating indicates negligible recovery of principal. Pro forma for the acquisition of Aerojet Fine Chemicals, American Pacific will have about $111 million in debt outstanding. "The ratings reflect American Pacific's position as the sole domestic supplier of ammonium perchlorate and decent growth opportunities within AFC's active pharmaceutical ingredients markets," said Standard & Poor's credit analyst George Williams. These positives are more than offset by the small, specialized AP market, uncertainty regarding the future of the Space Shuttle program, a narrow customer and product base, demand dependent on governmental appropriations, and a leveraged financial profile that is susceptible to litigation risks and additional environmental costs related to perchlorate contamination of groundwater supplies. AP is used as an oxidizing agent for composite solid propellants for rockets and booster motors. Demand in this declining market is driven by a relatively small number of Department of Defense and National Aeronautics and Space Administration contractors. Risks inherent in government contracts and dependence on congressional appropriations are negative considerations in the long-term demand outlook. Moreover, the company's single operating facility for AP is subject to the hazards associated with chemical manufacturing and other potential disruptions that could limit production. American Pacific also makes sodium azide, the primary component of a gas generant used in certain automotive airbag safety systems, propulsion products and bipropellant thrusters, and Halotron, a chemical used in fire extinguishing systems ranging from portable fire extinguishers to airport firefighting vehicles. ANCHOR GLASS: Court Issues Order on Adequate Assurance Dispute -------------------------------------------------------------- As reported in the Troubled Company Reporter on Oct. 3, 2005, the Official Committee of Unsecured Creditors of Anchor Glass Container Corporation asked the U.S. Bankruptcy Court for the Middle District of Florida to: a. modify the adequate assurance order so that the Debtor is no longer authorized to pay the prepetition claims of utility companies as adequate assurance of future performance; and b. direct that all the Debtor's payments made as of Sept. 21, 2005, be applied to postpetition bills The Bankruptcy Court had allowed the Debtor to provide adequate assurance of future performance to ensure that they do not alter, refuse or discontinue their services. As part of adequate assurance, the Bankruptcy Court permitted the Debtor to pay prepetition obligations owed to the utility companies in the ordinary course of business. The Debtor estimates owing $8 million in outstanding prepetition obligations to utility companies as of the Petition Date. Six utility companies asked the Court to overrule the Committee's objection or, in the alternative, if the Court sustains the objection, the utilities asked the Court to allow them to retain the prepetition payments until they reach a new agreement with the Debtor for the provision of adequate assurance of payment. Pepco's Response The Court sustained the Committee's objection to the utility companies who did not respond to the panel's request. Pepco Energy Services, Inc., is one of the non-responding utilities. Gregory P. Brown, Esq., at Hill Ward & Henderson, P.A., in Tampa, Florida, notes that the order sustaining the Committee's oijection reverses all of the benefits that Pepco received under the Utility Order and enables the Debtor to recover more than $1,500,000 from Pepco. While there may be many reasons why many utility companies did not respond to the Committee's Objection, Pepco's failure to respond was inadvertent and impacts a substantial amount of its money, Mr. Brown says. According to Mr. Brown, Pepco was unable to file a response due to its volume of mail and the complex nature of its business. Pepco is uncertain whether it received all motions and orders affecting its position. However, Pepco does not deny the receipt of the Order Sustaining Objection. Pepco believes that there is a significant element of unfairness to the Order Sustaining Objection when the Decision did not realize that Pepco could potentially be ordered to disgorge the receipt of more than $1,500,000 that the Court authorized the Debtor to pay to Pepco. There will be no prejudice to the Debtor, the Committee or the general unsecured creditors by allowing Pepco to oppose the Objection, but there is substantial prejudice to Pepco as a result of entry of the Order Sustaining Objection, Mr. Brown asserts. Accordingly, Pepco asks the Court to reconsider or revise the Order Sustaining Objection by striking its applicability to Pepco and overruling the Objection as to Pepco. Court Order Judge Paskay sustains in part and overrules in part the Committee's objection to these responding Utilities: * American Electric Power; * CenterPoint Energy Services; * CenterPoint Energy Resources Corp., doing business as CenterPoint Energy Minnesota Gas; * New York State Electric and Gas Corporation; * Georgia Power Company; * Atlantic City Electric; * JEA; and * Peoples Gas Company. The Responding Utilities, Judge Paskay rules, will retain the funds paid by the Debtor on account of undisputed prepetition invoices as a deposit against future services. In the event any amount of the deposits are not applied, the Court directs the Responding Utilities to refund the amount to the Debtor. UGI Energy Services, Inc., which also filed a response to the Committee Objection, has already reached a settlement with the Committee. The Court orders that Noble Energy Marketing, Inc., is deleted from the list of entities classified as Utility Companies subject to the Utility 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) ARCH COAL: Commences Offer for 5% Perpetual Pref. Stock Conversion ------------------------------------------------------------------ Arch Coal, Inc. (NYSE: ACI), commenced an offer to pay a premium to holders of any and all of its 5% Perpetual Cumulative Convertible Preferred Stock who elect to convert their preferred stock to shares of the company's common stock subject to the terms of the offer. Arch expects the conversion offer to reduce its fixed dividend obligations and to improve its overall credit standing. The offer is scheduled to expire at 12:00 midnight, Eastern Standard Time, on Thursday, Dec. 29, 2005, unless extended or earlier terminated. In addition to the shares of common stock to be issued upon conversion pursuant to the documents governing the terms of the preferred stock, holders who surrender their preferred stock on or prior to the expiration date will receive a per share premium in an amount of shares of common stock valued at $3.50, as determined by dividing: (i) $3.50, by (ii) the volume-weighted average of the reported closing sales prices on the New York Stock Exchange of the common stock during the five trading days ending at the close of the second trading day prior to the expiration of the conversion offer. Under the terms of the governing documents, each share of preferred stock is currently convertible into 2.3985 shares of common stock. The offer is being made pursuant to an offering circular and related documents, each dated Nov. 30, 2005. The completion of the offer is subject to conditions described in the conversion offer documents. Subject to applicable law, Arch may waive the conditions applicable to the offer or extend, terminate or otherwise amend the offer. St. Louis-based Arch Coal, Inc., is the second largest coal producer in the United States, with subsidiary operations in West Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah. Through these operations, Arch provides the fuel for approximately 7% of the electricity generated in the United States. * * * As reported in the Troubled Company Reporter on Aug. 11, 2005, Moody's Investors Service affirmed Arch Coal, Inc.'s Ba3 corporate family rating. All other ratings of Arch Coal Inc., and its subsidiary, Arch Western Finance LLC, were affirmed. AWF's notes are guaranteed by its parent, Arch Western Resources, a subsidiary of Arch Coal. The affirmation follows Arch's announcement of its intention to contribute four of its central Appalachian mining operations to a new company, which will also have mining operations (known as Trout Coal) contributed to it by ArcLight. The new company will file for an initial public offering and it is expected that Arch Coal will initially own approximately 37.5% of this company. The rating outlook for both Arch Coal and AWF is stable. These ratings are affirmed: Arch Coal, Inc.: * $700 million five-year guaranteed senior secured revolving credit facility, Ba2 * $145 million of Perpetual Cumulative Convertible Preferred Stock, B3 * Corporate Family rating, Ba3 Arch Western Finance, LLC: * $961 million of 6.75% guaranteed senior notes due 2013, Ba3 AT&T CORP: S&P Upgrades Ratings on 12 Transactions to A from BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 12 AT&T Corp.-related synthetic transactions and removed them from CreditWatch, where they were placed with positive implications Feb. 16, 2005. The rating actions follow the Nov. 18, 2005, raising of the long-term corporate credit and senior unsecured debt ratings on AT&T Corp. and their removal from CreditWatch with positive implications. With the exception of SATURNS Trust No. 2001-8, which is a swap-dependent synthetic transaction, each of the remaining synthetics affected by the AT&T Corp. upgrades is swap-independent. All of the transactions are weak-linked to the underlying securities, AT&T Corp.'s senior unsecured debt. The rating actions reflect the credit quality of the underlying securities issued by AT&T Corp. A copy of the AT&T Corp.-related research update, dated Nov. 18, 2005, is available on RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/ Ratings Raised and Removed from Creditwatch Positive Corporate Backed Trust Certificates Series 2001-21 Trust $28 Million Corporate Backed Trust Certificates Series 2001-21 Rating Class To From ----- -- ---- A-1 A BB+/Watch Pos A-2 A BB+/Watch Pos Corporate Backed Trust Certificates, AT&T Note-Backed Series 2001-33 Trust $33 Million Corporate-Backed Trust Certificates Series 2001-33 Rating Class To From ----- -- ---- A-1 A BB+/Watch Pos A-2 A BB+/Watch Pos Corporate Backed Trust Certificates AT&T Note Backed Series 2003-18 $40 Million Certificates Series 2003-18 Rating Class To From ----- -- ---- A-1 A BB+/Watch Pos A-2 A BB+/Watch Pos Corporate Backed Trust Certificates AT&T Note Backed Series 2004-2 $50 Million Certificates Series 2004-2 Rating Class To From ----- -- ---- A-1 A BB+/Watch Pos A-2 A BB+/Watch Pos Preferred PLUS Trust Series ATT-1 $35 Million Trust Certs Series ATT-1 Rating Class To From ----- -- ---- Certs A BB+/Watch Pos SATURNS Trust No. 2001-8 $44 Million Callable Units Series 2001-8 Rating Class To From ----- -- ---- Certs A BB+/Watch Pos SATURNS Trust No. 2003-14 $35 Million Callable Units Series 2003-14 Rating Class To From ----- -- ---- A units A BB+/Watch Pos B units A BB+/Watch Pos SATURNS Trust No. 2003-17 $30 Million Callable Units Series 2003-17 Rating Class To From ----- -- ---- A A BB+/Watch Pos B A BB+/Watch Pos SATURNS Trust No. 2004-3 $45 Million Adjustable-Rate Callable Units Series 2004-3 Rating Class To From ----- -- ---- A A BB+/Watch Pos B A BB+/Watch Pos SATURNS Trust No. 2004-7 $26 Million Adjustable-Rate Callable Units Series 2004-7 Rating Class To From ----- -- ---- A A BB+/Watch Pos B A BB+/Watch Pos STRATS Trust For AT&T Corp. Securities Series 2004-4 $25 Million Certificates Series 2004-4 Rating Class To From ----- -- ---- A-1 A BB+/Watch Pos A-2 A BB+/Watch Pos Trust Certificates Series 2001-1 $25 Million Corporate Bond Backed Certificates Series 2001-1 Rating ------ ----- -- ---- A-1 A BB+/Watch Pos ATA AIRLINES: Files First Amended Plan and Disclosure Statement --------------------------------------------------------------- ATA Holdings Corp., ATA Airlines, Inc., ATA Leisure Corp., and ATA Cargo, Inc., delivered their first amended joint plan of reorganization and disclosure statement explaining the plan to the U.S. Bankruptcy Court for the Southern District of Indiana on November 23, 2005. MatlinPatterson Global Advisers LLC, a Delaware limited liability company, is a co-proponent of the Plan. A full-text copy of Reorganizing Debtors' Amended Plan of Reorganization is available at no charge at: http://ResearchArchives.com/t/s?383 A full-text copy of Reorganizing Debtors' Amended Disclosure Statement is available at no charge at: http://ResearchArchives.com/t/s?384 The Amended Plan provides for the incorporation of a New Holding Company prior to the Effective Date, as the ultimate parent of Reorganized ATA Airlines and certain other Reorganizing Debtors, except ATA Holdings, and as the issuer of New Shares under the Plan. The assets of the other four Debtors -- Ambassadair Travel Club, Inc., Amber Travel, Inc., American Trans Air Execujet, Inc. and C8 Airlines Inc., formerly named Chicago Express, Inc. -- will be sold or otherwise liquidated. The Amended Plan does not deal with Claims against or Interests in or the assets of the Liquidating Debtors. The Amended Plan contemplates the substantive consolidation of the Estates of ATA Holdings, ATA Cargo, and ATA Leisure into the Estate of ATA Airlines for purposes related to the Amended Plan, including voting, confirmation, and distribution. However, except as expressly provided with respect to and following the post-Effective Date merger of ATA Cargo and ATA Leisure into ATA Airlines, each of the Reorganizing Debtors, each of the Reorganized Companies, and Reorganized Holdings will remain at all times an entity separate from the others. As agreed by the proponents of the Amended Plan, the Effective Date of the Plan must occur on or prior to February 28, 2006, unless the date is extended by the Reorganizing Debtors, MatlinPatterson, and Southwest, with the consent of the Official Committee of Unsecured Creditors not to be unreasonably withheld. MatlinPatterson The Amended Plan provides that MatlinPatterson has committed to provide up to $120,000,000 in equity and debt financing to the Reorganized Companies. The financing consists of: (i) the New DIP Facility of up to $30,000,000, the outstanding balance of which on the Effective Date would be converted into DIP New Shares, (ii) a cash investment of up to $50,000,000 on the Effective Date in New Shares and (iii) a commitment to act as the exclusive standby purchaser for the remainder of any Rights Offering New Shares that were not subscribed for in the $20,000,000 Rights Offering. MatlinPatterson has agreed to provide an additional $20,000,000 to the Reorganizing Debtors by way of the New Investor Exit Facility. As a result of its investment in the New Holding Company, MatlinPatterson will hold between 78.2% and 97.8% of the outstanding New Shares as of the Effective Date, and between 71.2% and 89.0% on a fully diluted basis. According to ATA Holdings President and Chief Executive Officer John G. Denison, MatlinPatterson will have significant ownership and control of the Reorganized Companies. MatlinPatterson will designate five of the seven initial members of New Holding Company's board of directors. Rights Offering Holders of allowed general unsecured claims may purchase a Pro Rata Share of Rights Offering New Shares representing 19.6% of the outstanding New Shares as of the Effective Date and 17.8% on a Fully Diluted Basis of the New Holding Company at the same per share value as paid by the New Investor for its equity investment. Each Qualified Holder that exercises its Subscription Rights will be required to pay the holder's Subscription Purchase Price of $10 per share for Rights Offering New Shares. The Plan notes that MatlinPatterson is the Backstop Purchaser of the Rights Offering. As the Backstop Purchaser, it is required to purchase any Rights Offering New Shares in the Rights Offering that are not subscribed for pursuant to Subscription Rights. In the event MatlinPatterson is required to purchase all the Rights Offering New Shares, its ownership interest in the New Holding Company would increase to approximately 98%. New Business Plan Mr. Denison says that ATA Airlines' long term liability and its shorter cash requirements mandated that it obtain infusion of $100,000,000 in connection with its emergence from Chapter 11 and up to $50,000,000 to provide the liquidity necessary to continue as a going concern through the end of 2005. Given material, on-going uncertainties in the domestic airline passenger business, driven primarily by excess capacity and unprecedented fuel cost escalation which was not abating, ATA Airlines determined, in consultation with its financial advisors, that it was improbable to obtain, at an acceptable cost and terms and within the limited time remaining, equity capital commitments in the aggregate amount needed unless the ATA business plan reduced its reliance on its projected scheduled service business. Accordingly, ATA Airlines developed a modified business plan calling for a further downsizing of its scheduled service business in late 2005, and with that business being rebuilt over the following years based on an enhanced codeshare arrangement with Southwest. The New Business Plan serves as the foundation for the MatlinPatterson commitments. Under the New Business Plan, the Debtors project that in 2006 scheduled service will comprise approximately 44% of total annual revenues, and the military charter business will comprise approximately 52% of total annual revenues. The remaining 4% of the annual revenues will be generated from the charter business. The Debtors anticipate that the percentage share of military charter business will decline each year thereafter primarily due to increases in scheduled service revenue. The New Business Plan calls for ATA Airlines to downsize its scheduled service business, with its scheduled service business being more specifically focused to achieve the revenue and other benefits provided for in the Amended and Restated Codeshare Agreement, and with an elimination of unprofitable scheduled service routes, additional reductions in ATA's fleet and network and a decrease in unit costs. The New Business Plan also calls for ATA Airlines to rebuild scheduled service over time, with additional flights being added in 2007 and 2008 with respect to certain markets that are adequate to support sustainable, profitable operations and provide additional codesharing opportunities. The military charter business has historically been profitable for ATA Airlines, and is a key component of the New Business Plan. Under the New Business Plan, ATA will continue to sell downtime on its military and scheduled service aircraft to tour operators on an ad hoc basis. Valuation Analysis At the Debtors' request, Navigant Capital Advisors, LLC, estimated the Reorganizing Debtors' enterprise values in the range of $200,000,000 to $235,000,000 based on available information as of November 23, 2005. Navigant arrived at the values using Discounted Cash Flow Method based on management's three year business plan and forecast, and Market Multiples Method using management's three-year forecast and business plan. A full-text copy of Navigant's Valuation Analysis is available at no charge at http://ResearchArchives.com/t/s?385 Liquidation Analysis The Reorganizing Debtors believe that the Amended Plan provides the best recoveries possible for the holders of Allowed Claims. The Reorganizing Debtors believe that any alternative to Confirmation of the Plan, like liquidation or attempts by another party-in-interest to file a plan of reorganization, could result in significant delays, litigation, and additional costs. Based on MatlinPatterson's financial commitments, and after careful review of the current business operations of the Reorganizing Debtors, their prospects as ongoing business enterprises, and the estimated recoveries of creditors in various liquidation scenarios, the Reorganizing Debtors -- other than ATA Holdings -- believe that their businesses and assets have significant value that would not be realized in a liquidation scenario. The Debtors have prepared a Hypothetical Liquidation Analysis which reflects values for which assets might be liquidated in a Chapter 7 as of December 31, 2005. A full-text copy of the Liquidation Analysis is available at no charge at http://ResearchArchives.com/t/s?386 Financial Projections For purposes of developing the Plan and evaluating its feasibility, the Reorganizing Procedures have prepared financial projections for 2005 through 2008. A full-text copy of the Reorganizing Debtors' four-year financial projections is available at no charge at http://ResearchArchives.com/t/s?387 Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Discloses MatlinPatterson Amended Commitment Letter ----------------------------------------------------------------- To recall, MatlinPatterson Global Opportunities Partners II L.P., and MatlinPatterson Global Opportunities Partners (Cayman) II L.P. have offered to provide $30,000,000 DIP Financing to ATA Airlines, Inc., and its debtor-affiliates, and up to $70,000,000 exit financing to Reorganized ATA in the form of equity investment and a standby purchase commitment for a rights offering to the Debtors' unsecured creditors. Pursuant to a Commitment Letter, dated November 10, 2005, all principal and accrued interest on the DIP Loan will become due and payable in cash on the earlier of: (i) a DIP Loan Event of Default; and (ii) March 15, 2006. Objections (a) Creditors Committee The Official Committee of Unsecured Creditors says that the onerous interrelated transactions entered into by the Debtors will only benefit Southwest Airlines Co., and MatlinPatterson Global Opportunities Partners II L.P., and MatlinPatterson Global Opportunities Partners (Cayman) II L.P. MatlinPatterson's commitment to provide equity and debt financing to the reorganized Debtors is conditioned upon the entry of an amended codeshare agreement between the Reorganizing Debtors and Southwest. In a separate pleading, the Debtors have sought the U.S. Bankruptcy Court for the Southern District of Indiana's approval to enter into the Amended Codeshare Agreement. As part of their agreements, ATA Airlines will transfer its rights to eight gates at Midway International Airport to Southwest and the City of Chicago while ATA will receive rights to one Midway gate previously owned by Southwest. The Creditors Committee complains that the transactions will deliver the Debtors' businesses to MatlinPatterson on a silver platter for substantially less than they are worth and will permit Southwest to drive the Debtors almost completely out of Midway for less consideration than they paid for the gates at Midway in 2004. Andrew D. Stosberg, Esq., at Greenebaum Doll & McDonald PLLC, in Louisville, Kentucky, argues that, among others, the "no shop" clause is unacceptable and will guarantee that no competitive bidding occurs. The "no shop" clause precludes the Reorganizing Debtors from soliciting alternate proposals, encouraging or initiating negotiations with respect to any investment or restructuring proposals competing with the MatlinPatterson Bid. Although not precluded from seeking alternative investment proposals, the Creditors Committee says that it has had not sufficient access to the essential information necessary to seek alternative proposals. Mr. Stosberg notes that, even if the Committee did have access to the information, it is absurd to think that a party would not want access to the Debtors' management prior to committing substantial sums of money, which the "no shop" provision clearly prohibits. The Creditors Committee also complains that the fees to MatlinPatterson are excessive. MatlinPatterson has consensually received $1,500,000 expense reimbursement from the Debtors. Mr. Stosberg argues that is wholly inappropriate for MatlinPatterson to be paid any fees in connection with its $50,000,000 equity investment. He avers that MatlinPatterson should not be given an additional 3% discount of the money that it invests to control ATA. The Creditors Committee believes that a funding fee of 1% to 2% of the $30,000,000 DIP Financing would be appropriate. Mr. Stosberg contends that it is inappropriate to obligate the Debtors to pay a break-up fee where the investor has been paid substantial fees and expenses and will then be entitled to the funding fee. Moreover, the Creditors Committee asserts that the unsecured creditors should be granted unlimited participation in the Rights Offering. The Committee also wants the Debtors to allow the unsecured creditors to participate with respect to entire financing. According to Mr. Stosberg, all of the "negotiated" transactions took place in secret in Dallas, New York and Chicago, choreographed by MatlinPatterson and Southwest, without any participation by the Creditors Committee, despite its repeated requests to participate. Mr. Stosberg asserts that those actions are confounding and inappropriate given that it is the Debtors' unsecured creditors who are most at risk of (i) dilution of their recoveries from any potential financing/investment, (ii) erosion in value and, in the case of the Debtors' employees, loss of employment, due to sudden or poorly thought-out changes to the Debtors' business plan, and (iii) a liquidation, since the Debtors' secured creditors have significant collateral to look to in that situation. (b) Wells Fargo Wells Fargo Bank Northwest, N.A., a member of the Creditors Committee, supports the Committee's objection to the MatlinPatterson Proposal. Wells Fargo is the indenture trustee under the ATA Holdings Corp. 9-5/8% Senior Notes Due 2005, 13% Senior Notes Due 2009, and Senior Notes Due 2010. Mark A. Robinson, Esq., at Valenti, Hanley & Crooks, PLLC, in Louisville, Kentucky, argues that, although styled as a motion seeking authority to obtain postpetition financing, the proposed transaction, if approved, would determine the entire framework for a plan of reorganization. "As such, the [MatlinPatterson] proposal constitutes a sub rosa plan, effectively determining the classification and treatment of creditors' claims, all without approval of a disclosure statement or voting on a plan of reorganization," Mr. Robinson points out. If the MatlinPatterson Proposal were approved prior to approval of a disclosure statement in accordance with Section 1125 of the Bankruptcy Code, any subsequent plan process would be a charade, making solicitation and voting essentially meaningless, he says. Mr. Robinson adds that the MatlinPatterson Proposal contravenes with Section 1123(a)(4) of the Bankruptcy Code by proposing to treat unsecured creditors in an inconsistent and discriminatory manner. Wells Fargo notes that the MatlinPatterson Proposal would give one group of unsecured creditors -- members of the Air Line Pilots Association, International -- substantially more than other unsecured creditors. Wells Fargo says that it does not challenge the proposal to give members of ALPA the right to acquire an additional 4% of the new common stock. However, it opposes the MatlinPatterson Proposal unless all unsecured creditors, including individual Noteholders, are treated on an equal basis. Parties Resolve Dispute The Debtors, MatlinPatterson and Creditors Committee have agreed to modify the Commitment Letter and Term Sheet to address the concerns being raised. The parties described the modifications in open court. Consequently, Judge Lorch authorizes the Reorganizing Debtors to: (i) execute the Commitment Letter as modified; and (ii) pay MatlinPatterson the Break-Up Fee, the Funding Fee and reimbursement of expenses in accordance with the Commitment Letter, the MatlinPatterson Term Sheet and the modifications. The Court will address the remaining items of the Debtors' request at a hearing on December 6, 2005. Terms of New Commitment Letter In a regulatory filing with the U.S. Securities and Exchange Commission, Brian T. Hunt, vice president and general counsel of ATA Holdings, discloses that the Reorganizing Debtors and MatlinPatterson executed an amended Commitment Letter dated November 29, 2005. The salient terms of the Commitment Letter are: (A) MatlinPatterson Financing MatlinPatterson agrees to provide DIP Financing to the Reorganizing Debtors. An aggregate principal amount of $30,000,000 will be made available, in one or more tranches, by December 6, 2005. On the Effective Date of the Debtors' Plan of Reorganization, MatlinPatterson will invest $45,000,000 in ATA Holdings, or a new holding company that will hold all of the stock of the other Reorganizing Debtors in exchange for shares of ATA Holdings' common stock. In the event that the outstanding principal amount of the DIP Loan, the Funding Fee and interest exceeds $30,000,000 on the Effective Date, the amount of the Additional Equity Investment required to be made by MatlinPatterson will be reduced by the amount of the excess. (B) Participation Rights In addition, it is contemplated that the Amended Plan will provide for the offering of $25,000,000 worth of shares of New Common Stock, in which non-transferable rights will be issued to holders of allowed unsecured claims against the Debtors who are accredited investors and who meet certain criteria concerning U.S. citizenship. MatlinPatterson will act as the exclusive standby purchaser of Rights Offering Shares not subscribed by any Eligible Holder so as to ensure that the Rights Offering, when added to the Additional Equity Investment, generates gross proceeds to ATA Holdings Corp. equal to $70,000,000. In addition to having the right to subscribe to all of the Rights Offering Shares, unsecured creditors in Class 6 will receive: (i) shares representing 7% of the New Common Stock outstanding on the Effective Date; (ii) warrants to acquire up to 2% of the New Common Stock outstanding on the Effective Date, at an exercise price per share equal to the price paid by MatlinPatterson and on other terms acceptable to MatlinPatterson; and (iii) additional warrants to acquire up to 2% of the New Common Stock outstanding on the Effective Date, at an exercise price per share equal to the price paid by MatlinPatterson and on other terms acceptable to MatlinPatterson. Management and Members of the Air Line Pilots Association, International, will have the right to acquire up to 5% and 4%, on a fully diluted basis, of the New Common Stock, through the exercise of stock options. (C) Payment of Obligations If no DIP Loan Event of Default occurs, then subject to the satisfaction of the Plan Conditions, the outstanding principal and interest of the DIP Loan will be repaid by the issuance to MatlinPatterson on the Effective Date of New Common Stock, at a conversion ratio of $10.75 to one share of New Common Stock. Interest on each DIP Loan will accrue from the applicable funding date at the rate of 10% per annum and will be payable on the applicable Maturity Date. The Debtors' obligations with respect to the MatlinPatterson DIP Financing will be entitled to superpriority claim status, subordinate to that of the existing Southwest DIP facility and the ATSB Loan. (D) Fees The Debtors will pay to MatlinPatterson a funding fee equal to 3% of the amount available under the Exit Financing. In the event that, without the consent of MatlinPatterson, any person other than MatlinPatterson is selected as the lead investor and plan sponsor in the Debtors, or the Debtors propose or the Bankruptcy Court otherwise confirms a Plan in which MatlinPatterson is not the Lead Investor, then so long as MatlinPatterson has not breached its obligations, MatlinPatterson will be entitled to receive, in addition to the MP Funding Fee, a cash payment equal to 3% of the total amount available under the Additional Equity Investment, the Purchase Commitment and the Exit Loan. The Reorganizing Debtors will reimburse MatlinPatterson its initial due diligence investigation of the Debtors, the negotiation of the Commitment Letter and the Term Sheet, the structuring of the proposed transaction, and the seeking of Court Approval. (E) Execution of the Definitive Documentation The Parties agree to complete and execute a DIP Credit Agreement and related documentation in respect of the New DIP, which will be submitted to the Bankruptcy Court for approval on or before December 6, 2005. The Parties agree to execute an Investment Agreement and related documentation implementing, among others, the Equity Financing provisions set forth in the Term Sheet, which will be submitted to the Bankruptcy Court for approval as part of the confirmation of the Amended Plan. Moreover, the parties will complete other documentation as necessary to reflect their agreements with respect to the Rights Offering and matters relating to the amendments to the Debtors' Codeshare Agreements with Southwest. (F) Conditions to Closing The MatlinPatterson DIP Financing is subject to various closing conditions, including: -- The Debtors will have continued to implement the operating plan for scheduled airline passenger services provided to MatlinPatterson and dated as of October 8, 2005; -- The Debtors will have filed an amended Plan substantially consistent with "OpPlan 6" no later than December 6, 2005; and -- The Reorganizing Debtors and Southwest will have executed an Amended and Restated Codeshare Agreement and related documentation on terms acceptable to MatlinPatterson. (G) Non-Solicitation From and after the execution of this Commitment Letter, the Debtors will not (i) solicit, encourage or initiate any negotiations or discussions with respect to any investment or restructuring proposals competing with the MP Financing, or (ii) except as is required by law or Bankruptcy Court order, or based on the advice of counsel, as is required pursuant to the fiduciary duties of the Debtors: -- disclose any information to any potential sponsor or proponent of a Competing Proposal or afford any such person with access to the properties, books or records of the Debtors or -- participate in any negotiations or discussions with respect to a Competing Proposal, or otherwise negotiate with or cooperate with any person for the purpose of enabling such person to submit a Competing Proposal. A full-text copy of the Commitment Letter is available at http://ResearchArchives.com/t/s?388 Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) AUGA HUDSON: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Auga Lynn Hudson aka Auga Lynn Lucien aka Auga Lynn Hudson-Lucien 56 East 130th Street, Suite 1 New York, New York 10037 Tel: (646) 302-1384 Bankruptcy Case No.: 05-60147 Type of Business: The Debtor is an associate staff analyst for the New York City Transit for 24 years. She previously filed for bankruptcy protection in July 2005 (Bankr. S.D.N.Y. Case No. 05-15888). Chapter 11 Petition Date: December 1, 2005 Court: Southern District of New York (Manhattan) Debtor's Counsel: Joseph Fleming, Esq. Joseph Fleming, P.C. 45 John Street, Suite 205 New York, New York 10038 Tel: (212) 385-8036 Fax: (212) 406-2045 Total Assets: $1,961,810 Total Debts: $1,057,351 The Debtor did not file a list of her 20 largest unsecured creditors. AUXILIO INC: Net Loss & Deficit Trigger Going Concern Doubt ----------------------------------------------------------- Auxilio Inc. delivered its quarterly report on Form 10-QSB for the quarterly period ending Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 21, 2005. Auxilio Inc. reported a net loss of $2,324,168 for the nine months ended September 30, 2005, compared to a net income of $1,152,099 for the nine months ended September 30, 2004. At September 30, 2005, the Company has an accumulated deficit of $11,198,903. The Company's September 30 balance sheet shows total assets of $5,372,047 and total liabilities of $1,667,962. Going Concern Doubt The Company's management expressed substantial doubt about the Company's ability to continue as a going concern pointing to the Company's net loss and accumulated deficit. The Company warns that it may also not generate sufficient revenues from its operations to cover its cash operating expenses. As a result, Auxilio management says, the Company may not be able to continue as a going concern. The Company's management also said that the loss of any of the Company's key customer could have a material adverse effect upon its financial condition, business, prospects and results of operation. The Company's two largest customers represent approximately 79% of its revenues for the nine months ended September 30, 2005. Although the Company anticipates that those customers will represent less than 45% of revenue for the 2005 fiscal year and less than 18% of revenue for the 2006 fiscal year, the loss of those customers may contribute to the Company's inability to operate as a going concern and may require it to obtain additional equity funding or debt financing to continue its operations. The Company is not sure it will be able to obtain additional financing on commercially reasonable terms, or at all. Stonefield Josephson, Inc., in Irvine, California, audited the company's 2004 financials and issued a clean and unqualified opinion on April 1, 2005. Auxilio Inc. -- http://www.auxilioinc.com/-- provides integration strategies and outsourced services for document image management to healthcare facilities. The Company manages the back-office processes of hospitals and health systems. Auxilio's target market includes medium to large hospitals, health plans and health care systems. Auxilio's customer list includes health systems such as St. Joseph's Health System, Memorial Health Services, Catholic Healthcare West and Huntington Memorial Hospital. AXEDA SYSTEMS: Working Capital Deficit is $5.4 Mil. at Sept. 30 --------------------------------------------------------------- Axeda Systems Inc. delivered its quarterly financials for the period ended Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 21, 2005. At Sept. 30, 2005, the company's balance sheet showed $11.5 million in total assets and $11.8 million in total liabilities, which resulted in a $358,000 stockholders' deficit. Axeda Systems' Sept. 30 balance sheet also shows strained liquidity with $6.4 million in current assets available to satisfy $11.8 million of liabilities coming due within the next 12 months. Going Concern Doubt KPMG LLP raised substantial doubt about Axeda Systems' ability to continue as a going concern after it audited the Company's 2004 financials. KPMG stated that the Company's recurring losses from operations and negative cash flows from operations since inception triggered that doubt. "Management has developed and begun to implement a plan to address these issues and allow the Company to continue as a going concern through at least the end of 2005," the Company said in its Annual Report. "This plan includes fundraising from new and current investors, continued cost-cutting, and stabilizing and growing our revenue streams. Although we believe the plan will be realized, there is no assurance that these events will occur." Asset Sale On June 29, 2005, the Company entered into a non-binding letter of intent to sell its Axeda DRM system business and related assets to JMI Equity Fund V, L.P., a Baltimore and San Diego-based private equity firm. The letter of intent contemplates that JMI will purchase substantially all of the assets of its Axeda DRM system business, with the exception of its Supervisor product family business, for a total of $7,000,000 in cash plus the assumption of certain liabilities. In addition, JMI committed to provide up to a $1,500,000 bridge loan to Axeda, of which $600,000 was advanced in July 2005. The bridge loan bears interest at the rate of 7% per annum and is secured by the assets of the Company's Axeda DRM system business. Laurus Debt Default The company has been in default under the Laurus Secured Convertible Term Note since July 1, 2005, issued to Laurus Master Fund, Ltd., for failing to pay when due interest under the note for June, July, August and September 2005, as well as the July, August and September 2005 principal payments. Article IV of the Note defines "Events of Default" as the failure to pay any installment of principal or interest within three days of the due date, and that upon the occurrence and continuance of an Event of Default, Laurus may make all sums of principal, interest and other fees then remaining unpaid immediately due and payable. In the event of such an acceleration, the amount due and owing to Laurus shall be 120% of the outstanding principal amount, plus accrued and unpaid interest and fees. In addition, the registration rights agreement entered into in connection with the Note states that if the Company's shares are not traded on a "Trading Market", which does not include the "Pink Sheets", where the Company's shares of common stock currently trade, then Axeda is obligated to issue certain warrants to Laurus, and failure to do so also constitutes a default under the Note. In a Letter Agreement dated July 8, 2005, between the Company and Laurus, Laurus agreed to accept payment in full in cash of the outstanding principal and accrued and unpaid interest simultaneously with the closing of the JMI Asset Sale, in full satisfaction of the Company's obligations. However, the default penalties would resume in the event bankruptcy proceedings are initiated by or against the company prior to the closing of the asset sale. Axeda Systems Inc. -- http://www.axeda.com/-- is the world's leading provider of Device Relationship Management (DRM) software and services. The Company's flagship product, the Axeda(R) DRM system helps manufacturing and service organizations increase revenue while lowering costs, by proactively monitoring and managing devices deployed at customer sites around the world. Axeda DRM is a highly scalable, field-proven, and comprehensive remote management solution that leverages its patented Firewall- Friendly(TM) technology to enable Machine-to-Machine (M2M) communication by utilizing the public Internet. Axeda customers include Global 2000 companies in many markets including Medical Instrument, Enterprise Technology, Office and Print Production Systems, and Industrial and Building Automation industries. Axeda has sales and service offices in the U.S. and Europe, and distribution partners worldwide. BEAR STEARNS: Fitch Puts Low-B Rating on $8 Mil. Class B-4 Certs. ----------------------------------------------------------------- Bear Stearns SACO I Trust mortgage-backed certificates, series 2005-9, are rated by Fitch Ratings: -- $331.93 million class A 'AAA'; -- $26.53 million class M-1 'AA+'; -- $24.58 million class M-2 'AA'; -- $9.25 million class M-3 'AA-'; -- $15.09 million class M-4 'A+'; -- $10.71 million class M-5 'A'; -- $8.27 million class M-6 'A-'; -- $9.73 million class B-1 'BBB+'; -- $6.33 million class B-2 'BBB'; -- $7.06 million class B-3 'BBB-'; -- $8.03 million privately offered class B-4 'BB+'. The mortgage loans consist of fixed-rate, conventional, closed-end subprime and Alt-A mortgage loans that are secured by second liens on one-to four-family residential properties. The 'AAA' rating on the senior certificates reflects the 31.80% credit enhancement provided by the 5.45% class M-1, 5.05% class M-2, 1.90% class M-3, 3.10% class M-4, 2.20% class M-5, 1.70% class M-6 2.00% class B-1, 1.30% class B-2, 1.45% class B-3, and 1.65% privately held class B-4, as well as 6.00% target overcollateralization. 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 * EMC Mortgage Corporation's servicing capabilities as servicer. As of the cut-off date, the mortgage loans have an aggregate balance of $486,705,502. The weighted average mortgage rate is approximately 11.098 % and the weighted average remaining term to maturity is 268 months. The average cut-off date principal balance of the mortgage loans is $51,033. The weighted average original loan-to-value ratio is 97.62%. The properties are primarily located in California, Arizona, Florida, Georgia, Virginia, and Maryland. The principal originator of the mortgage loans is: Waterfield Mortgage Company, with respect to 19.97% of the loans. The remainder of the loans were originated by various originators. BIO-KEY INT'L: Incurs $2,957,541 Net Loss in Third Quarter ---------------------------------------------------------- BIO-key International, Inc., delivered its quarterly report on Form 10-QSB for the quarterly period ending Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 21, 2005 (as amended on Nov. 23, 2005). BIO-key International reports positive equity of $7,448,843 as of Sept. 30, 2005 -- a 35% erosion of shareholder equity since Dec. 31, 2004. The Company reported a net loss of $2,957,541 for the three months ended Sept. 30, 2005, compared to a net loss of $1,860,164 for the three months ended Sept. 30, 2004. For the nine months ended Sept. 30, 2005, the Company incurred a net loss of $8,716,279 compared to a net loss $4,032,750 for the same period last year. At Sept. 30, 2005, the Company had a working capital deficit of approximately $2,674,000 compared to a working capital deficit of approximately $3,016,000 at Dec. 31, 2004. At Sept. 30, 2005, the Company had an accumulated deficit of $44,116,496 compared to an accumulated deficit of $35,268,159 at Dec. 31, 2004. Going Concern Doubt The Company reports that it has only recently begun to generate significant revenues but it continues to suffer recurring losses from operations and has a working capital deficit. The Company is in need of additional capital and is currently considering various alternatives related to raising additional capital, including continued funding from an investment group and new funding from other sources. No assurance can be given that any form of additional financing will be available on terms acceptable to the Company, or that adequate financing will be obtained to meet its needs, or that financing would not be dilutive to existing shareholders. Problems of obtaining additional capital have raised substantial doubt about the Company's ability to continue as a going concern. BIO-key's independent auditors, Divine, Scherzer & Brody, Ltd., expressed substantial doubt about the Company's ability to continue as a going concern after auditing the Company's financial statements for the year ended December 31, 2004, due to several factors, including its history of losses and limited revenue. The Company's long-term viability and growth will depend on the successful commercialization of its technologies and ability to obtain adequate financing. BIO-key International, Inc., delivers advanced finger based biometric identification and security solutions and information services to law enforcement, fire service, and emergency medical service agencies as well as other government and private sector customers. BIO-key's mobile wireless technology provides first responders with critical, reliable, real-time data and images from local, state, and national databases. More than 2,500 police, fire, and emergency services departments in North America currently use BIO-key solutions, making the company a leading supplier of mobile and wireless solutions for public safety. BIO-key has four major product lines: biometrics, handheld mobile software/devices, mobile information software and records management software for fire service/EMS agencies. BOWATER INC: S&P Lowers Corporate Credit Rating to B+ from BB ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on pulp and paper producer Bowater Inc. and subsidiary Bowater Canadian Forest Products Inc., including the corporate credit rating on each entity to 'B+' from 'BB'. All ratings were removed from CreditWatch, where they were placed on Oct. 12, 2005, with negative implications. The outlook is stable. At Sept. 30, 2005, the Greenville, South Carolina-based company had $2.48 billion in debt outstanding. "The downgrade reflects continued concerns regarding Bowater's still-high debt burden, the negative effect of an appreciating Canadian dollar, and other cost pressures on the company's cash flow generation and earnings, despite relatively favorable newsprint prices," said Standard & Poor's credit analyst Kenneth Farer. "Even after the planned debt reduction of $300 million from the company's planned asset sales and $80 million cost-reduction program, we expect Bowater's debt burden to remain significantly higher than its previously stated target of $1.7 billion-$1.8 billion and credit measures to remain materially weaker than previously anticipated." S&P expects that the North American newsprint industry will continue to slowly decline, but improved industry supply discipline will continue to support current pricing. Bowater's credit metrics will improve in 2006, as a result of asset-sale proceeds to reduce debt and cost-reduction efforts. Still, S&P believes the company's profitability and cash flow will continue to be challenged by the strong Canadian dollar, continued high input costs, and expiration of favorable cost hedges. If further progress stalls because of market reversals, price declines, or higher-than-expected cost increases, the outlook could be revised to negative. To achieve a higher rating, Bowater would have to have a more conservative financial profile -- sustained improvement in operating margins, cash flow generation, and debt reduction -- than that anticipated in the current ratings. BROADCAST INT'L: Releases Third Quarter Financial Results --------------------------------------------------------- Broadcast International, Inc., delivered its financial results for the quarter ended Sept. 30, 2005. The Company generated approximately $1,065,000 in net sales during the three months ended September 30, 2005, compared to net sales of approximately $1,285,000 for the quarter ended September 30, 2004, which represents a 17% decrease in revenue in the current period. The Company entered into a services contract with a new customer, in the second quarter of 2005. Management believed this contract would replace much of the revenue lost in the third quarter as discussed above. Revenue from the new customer aggregated only $230,000 in the quarter ended September 30, 2005 due to slower than expected delivery of equipment supplied by the customer. The Company realized a net profit of approximately $310,000 compared with a $1,852,000 net loss for the same period last year. Going Concern Doubt Tanner LC raised substantial doubt about the Company's ability to continue as a going concern after it audited its consolidated financial statements for the year ended Dec. 31, 2004. The Company has incurred losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. Broadcast International Inc. provides communication network and related services for large retailers and other organizations with widely dispersed locations and operations. As an integrator of broadband delivery technologies, including satellite, Internet streaming and WiFi, the Company offers turnkey communication solutions based on the specific needs of its customers. Companies such as Caterpillar, Albertsons, Safeway, Sprint Communications, Chevron and other customers use the Company's services to communicate with their personnel and others regarding training programs, product announcements, news releases and other applications. As of Sept. 30, 2005, the Company has a $2,985,000 equity deficit compared to a $14,827 equity deficit at Dec. 31, 2004. CALPINE CORP: Must Restore $313 Million Deposit by January 22 ------------------------------------------------------------- Delaware Chancery Court Judge Leo Strine, Jr., told Calpine Corporation (NYSE: CPN) Friday that it must deposit $313 million into a collateral account for the benefit of second-lien bondholders by January 22, 2006. Rather than depositing the proceeds from a sale of some natural gas assets into the collateral account in July 2005, Calpine used the funds for other purposes. Calpine tried to argue that, given the delay of the second lien bondholders in asserting their rights, an appropriate remedy would be the restoration of $199 million, plus accrued interest at a rate of 3.5% per annum, within 90 days to the collateral account or the use of that amount for reinvestment in qualifying designated assets or repurchase of secured debt. Wilmington Trust Company, in its capacity as trustee for the second lien bondholders, asked the court direct Calpine to restore the full $313 million in cash, plus interest at the Delaware statutory pre- judgment rate to the collateral account, without further delay. Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces and is building a plant in Mexico. Calpine was founded in 1984. It is publicly traded on the New York Stock Exchange under the symbol CPN. CALPINE CORP: Evaluating Options, Including Bankruptcy Filing ------------------------------------------------------------- Calpine Corporation (NYSE: CPN) says that recent developments, including an adverse ruling from the Delaware Chancery Court last week, have undermined its ability to complete planned financial transactions to meet its cash-flow requirements. Calpine's management says there is a substantial risk that the Company will not have sufficient cash to pay $313 million to second-lien bondholders by January 22, as ordered by the court, and to fund ongoing debt service obligations and operating expenses. As a consequence, Calpine continues to evaluate its options, including the possibility of filing for bankruptcy. Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces and is building a plant in Mexico. Calpine was founded in 1984. It is publicly traded on the New York Stock Exchange under the symbol CPN. CALPINE CORP: Insists 6% Convertible Notes Aren't in Default ------------------------------------------------------------ Calpine Corporation (NYSE: CPN) informed the Supreme Court, New York County, State of New York, that it continues to believe that there had been no default under its 6% Contingent Convertible Notes due 2014. In a suit filed in Court, Harbert Convertible Arbitrage Master Fund, Ltd. and related entities, holders of Contingent Convertible Notes, joined by Wilmington Trust Company, the trustee under the Indenture for the Convertible Notes, acting on behalf of all holders of the Convertible Notes, contend that Calpine breached an obligation under the Convertible Notes Indenture. Specifically, the plaintiffs allege that Calpine failed to engage the Bid Solicitation Agent to determine the trading price of the Convertible Notes after Harbert presented to Calpine what the plaintiffs assert was reasonable evidence that the Trading Price (as defined by the Convertible Notes Indenture) of the Notes was below 95% of parity in relation to the market price of Calpine's common stock. However, in an effort to remove the uncertainty raised by the claims in the litigation and by a purported default notice based on the same assertions, Calpine has taken actions, which it believes have effected a cure of the alleged default. In this regard, at the request of Calpine, American Stock Transfer and Trust Company, the Bid Solicitation Agent for the Convertible Notes, determined in accordance with the Convertible Notes Indenture the Trading Price of the Convertible Notes at all of the relevant times cited by Harbert and another holder in their purported notice of default. Based on the Trading Prices determined by the Bid Solicitation Agent, Calpine has calculated that at all relevant times the relationship of the Trading Price of the Convertible Notes to the market price of Calpine's common stock was such that the Convertible Notes did not become convertible under the terms of the Convertible Notes Indenture. While Calpine believes that it has at all times been in full compliance with its obligations under the Convertible Notes Indenture, there is no assurance that Harbert and the Trustee will not continue to press their claim that Calpine has breached the Convertible Notes Indenture by failing to engage on a timely basis the Bid Solicitation Agent, including by contending that Calpine's cure of the alleged breach was ineffective. If it is determined that Calpine has defaulted in its obligation under the Convertible Notes Indenture as alleged by Harbert and the Trustee, and if such a default were found to be material and not to have been cured, then all of the Convertible Notes would become immediately due and payable at the election of the holders. Moreover, such acceleration under the Convertible Notes Indenture would constitute a default under other debt obligations of Calpine. Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces and is building a plant in Mexico. Calpine was founded in 1984. It is publicly traded on the New York Stock Exchange under the symbol CPN. CALPINE CORP: Fitch Slices Junk Ratings on $5.6 Billion Debts ------------------------------------------------------------- Fitch has assigned an issuer default rating of 'CC' to Calpine Corp. and downgraded CPN's outstanding $5.6 billion senior unsecured notes and convertible debt to 'CC' from 'CCC-'. CPN's outstanding $642 million first-priority secured notes are affirmed at 'B' and outstanding $3.7 billion second-lien priority secured notes and term loans at 'B-'. In addition, Fitch has assigned recovery ratings to CPN's outstanding debt obligations: -- First-priority secured notes 'RR1'; -- Second-priority secured notes 'RR1'; -- Senior unsecured notes and convertible debt 'RR5'. The Rating Outlook for CPN remains Negative. The assigned IDR of 'CC' reflects uncertainty over CPN's ability to meet their financial obligations on a timely basis and indicates that a default of some kind appears probable in the near term. Since Fitch's last rating action on Nov. 4, 2005, following the release of CPN's third-quarter 2005 financial results, further negative developments have occurred. Most notably, the Delaware Court of Chancery ruled on Nov. 22, 2005, that CPN violated the terms of its second-lien indenture by improperly utilizing $313 million of asset sale proceeds to purchase natural gas inventory. While the appropriate remedy for bondholders has yet to be determined, a near-term order for CPN to remit these funds would placed further pressure on the company's already stressed cash position. In addition, the announced departure of CPN's long-standing CEO and CFO on Nov. 29, 2005, will allow more effective negotiations with bankers, investors, and other parties and provides a clearer indication that the company will pursue more aggressive restructuring measures in the near-term to address CPN's strained liquidity position, excess debt leverage, and continued deterioration in the company's core operating performance. In the face of these developments, successful completion of the CalBear trading joint venture and monetization of CPN's geothermal assets now appear questionable. In conjunction with this rating action, Fitch has published a detailed recovery analysis of CPN available at http://www.fitchratings.com/ The report focuses on the estimated recovery values for CPN's various holding company creditor classes assuming a Chapter 11 scenario. For a more detailed discussion of the methodology and procedures used in the recovery analysis, see the criteria reports, 'Issuer Default Ratings and Recovery Ratings in the Power and Gas Sector,' dated Nov. 7, 2005, 'Recovery Ratings: Exposing the Components of Credit Risk,' dated July 26, 2005, and 'Recovery Ratings-Approach and Process for Corporate Finance,' dated Aug. 9, 2005. CALPINE CORP: Moody's Downgrades Sr. Unsecured Notes' Rating to Ca ------------------------------------------------------------------ Moody's Investors Service downgraded the debt ratings of Calpine Corporation (Calpine: senior unsecured debt to Ca from Caa3) and the ratings of several of its subsidiaries. This action concludes the review for possible downgrade that was initiated on Nov. 30. The rating outlook is negative. The downgrade reflects deterioration in the company's liquidity position and expectations that poor results will continue in the near term due to difficult market conditions for the company's natural gas fired generating fleet. The company announced that it may not have sufficient cash to meet its on-going debt service obligations in addition to amounts that it may be instructed to pay as early as next week as a result of a ruling by the Delaware Chancery Court. The court decision could require Calpine to return $313 million plus interest to the second mortgage trustee and also requires that about $400 million of proceeds from asset sales remain with the trustee for the benefit of second mortgage bondholders. The company also stated that bankruptcy is among the options that it is considering to address the pressure on its liquidity. Calpine's financial performance has been very weak this year, with funds from operations equaling negative $203 million during the first nine months of 2005, and it has relied upon asset sales to generate needed cash. The rating action considers that the court's decision on the use of proceeds from asset sales may reduce the company's flexibility to meet its cash needs for operations and debt service through additional asset sales. The downgrade reflects Moody's opinion that a default is likely. The new rating levels incorporate Moody's expectation for recovery in the event of a Calpine bankruptcy or other form of debt restructuring. Moody's believes that holders of Calpine Generating Company's (CalGen) secured debt will ultimately realize high levels of recovery. This view reflects an assessment of collateral that includes power purchase agreements with various credit worthy third parties and power plants located in California and Texas. The new rating level for the first lien bank debt (downgraded to B3 from B2) reflects an assessment that full recovery is likely. By contrast, the Ca rating for Calpine's $4.6 billion of unsecured debt reflects the likelihood of substantial loss and considers that secured debt and project finance debt represents more than half of Calpine's consolidated debt. The downgrade of Riverside Energy Center and Rocky Mountain Energy Center to B1 from Ba3 reflects the relationship with Calpine as 100% owner and operator of the project. However, the B1 rating also considers the project finance structure of this debt and that the cash flows for debt service are provided by long-term purchase power agreements with investment grade off-takers under terms and conditions that are favorable to the respective projects. The downgrade of South Point to Caa2 from B3 considers the collateral package that includes project assets with contracted power purchase agreements with various load serving entities. The downgrade of Tiverton to Ca from Caa2 reflects Moody's view that the collateral coverage may be weaker because it includes power plants that sell electricity on a merchant basis in the NEPOOL energy market. The new ratings also consider that the underlying leases could be rejected as executory contracts in a Calpine bankruptcy, and damages for the rejection of the leases may be limited under law. Ratings downgraded include: * Calpine's senior unsecured notes and senior unsecured convertible notes to Ca from Caa3; * Calpine Canada Energy Finance's senior unsecured notes (guaranteed by Calpine) to Ca from Caa3; * Calpine's Corporate Family Rating to Caa1 from B3; * Calpine Generating Company, LLC's first priority senior secured revolving credit and term loan facilities to B3 from B2; * CalGen second priority term loans and floating rate notes to Caa1 from B3; * CalGen third priority notes to Caa2 from Caa1; * Riverside Energy Center and Rocky Mountain Energy Center secured term loans to B1 from Ba3; * South Point Energy Center, LLC, Broad River Energy LLC and RockGen Energy LLC Pass Through Certificates to Caa2 from B3; * Tiverton Power Associates Ltd. Partnership and Rumford Power Associates Ltd Partnership Pass Through Certificates to Ca from Caa2; and * Shelf registration for the issuance of various senior unsecured debt and trust preferred to (P)Ca and (P)C, from (P)Caa3 and (P)Ca, respectively. The negative rating outlook reflects: * weak near term prospects for the company due to its tight liquidity position; * high natural gas prices; * limitations on its ability to raise cash through additional asset sales; and * on-going litigation with debtholders. Headquartered in San Jose, California, Calpine is an independent power producer that has a net operating portfolio of more than 90 natural gas fired plants capable of producing about 27,000 megawatts of generation in the: * US, * Canada, and * Mexico; and which leases and operates a significant fleet of geothermal plants at The Geysers in California. CAL-BAY INT'L: Releases Third Quarter 2005 Financial Results ------------------------------------------------------------ Cal-Bay International, Inc., delivered its quarterly report on Form 10-QSB for the quarter ending September 30, 2005, to the Securities and Exchange Commission on November 18, 2005. The company generated $31,706 in revenues for the three months ended September 30, 2005 compared to $111,132 in revenues for the same period in 2004. Operating expenses for the three months ended September 30, 2005 was $45,536 compared to $69,463 for the same period in 2004. Total net loss for the three months ended September 30, 2005 was $913,830 compared to $41,119. The significant increase in net loss was due to the Company acquiring real estate. As of September 30, 2005, the company's balance sheet showed total assets of $11,490,085. These assets are comprised primarily of the real estate the company acquired. The company had a loan receivable in the amount of $50,000 and cash in hand of $201,471. Its current liabilities totaled $1,895,327 and include $1,550,000 in Trust deeds and $339,771 in loans. A full-text copy of the regulatory filing is available at no charge at http://researcharchives.com/t/s?371 Going Concern Doubt Cal-Bay's management expressed substantial doubt about the Company's ability to continue as a going concern because of its losses and its net deficit as of Sept 30, 2005. The Company's continued existence is dependent upon its ability to generate more profitable business activities from its customers. Cal-Bay International, Inc., originally incorporated in the State of Nevada on December 9, 1998, under the name Var-Jazz Entertainment, Inc. Var-Jazz was organized to engage in the business of music production and sales. Var-Jazz did not succeed in the music business and the board of directors determined it was in the best interest of the Company to seek additional business opportunities. On