/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/060131.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, January 31, 2006, Vol. 10, No. 26 Headlines AAR CORP: S&P Rates $125 Million Convertible Senior Notes at BB- ADELPHIA COMMS: Devon Trustee Wants $80M Claim Allowed for Voting ADELPHIA COMMS: PG&E Can Litigate Claims Arising from Lawsuit ADVANCED MICRO: $500 Mil. Equity Offering Cues S&P to Up Ratings ALLEN-VANGUARD: Posts CDN$23.3 Million Net Loss in 4th Qtr. 2005 ARMSTRONG WORLD: Court Approves Sale Pact with EDC Finance and F&M ARMSTRONG WORLD: Asks Court to Approve Frederick Settlement Accord ATA AIRLINES: Bankruptcy Court to Confirm Plan of Reorganization ATA AIRLINES: Wants to Purchase N194AT Aircraft from GECC ATA AIRLINES: Can Walk Away from Sabre Work Order No. 1 BANC OF AMERICA: Fitch Puts Low-B Ratings on Classes B-4 & B-5 BANKATLANTIC BANCORP: Earns $59.1 Million of Net Income in 2005 BERRY-HILL GALLERIES: Employs AMJ as Restructuring Consultant BLUE BIRD: Judge Zive Confirms Prepackaged Chapter 11 Plan BLUE BIRD: Exits Chapter 11 as Reorganized Company BOWATER INCORPORATED: Incurs $120.6 Million Net Loss in 2005 CALPINE CORP: Wants Stay Modified to Apply ISO Cash Collateral CALPINE CORP: Wants Court to Okay Interim Compensation Procedures CALPINE CORP: Gets Court OK to Reject Two Almaden Office Leases CATHOLIC CHURCH: Foraker Balks at Portland's Disclosure Statement CATHOLIC CHURCH: Claimants Balk at Portland Estimation Protocol CELESTICA INC: Posts $28 Million Net Loss in Quarter Ended Dec. 31 CENTURY THEATRES: S&P Rates Proposed Secured Credit Facility at B+ CENVEO INC: Cost Cutting Measures Prompt S&P to Hold B+ Rating CHARTER COMMS: S&P Junks Rating on Proposed $400 Mil. Senior Notes COMPUTER SERVICES: Dutch Auction Cues S&P to Cut Ratings to BB+ CONJUCHEM INC: Oct. 31 Balance Sheet Upside-Down by CDN$23 Million CORNELL TRADING: Committee Hires Gadsby Hannah as Local Counsel COTT CORP: Posts $6.9 Million Net Loss in Quarter Ending Dec. 31 COTT CORP: Weak Earnings Prompt S&P to Downgrade Ratings to BB- COVALENCE SPECIALTY: S&P Rates Proposed $500 Mil. Sr. Loan at B+ DIAMOND TRIUMPH: Lack of Info Prompts S&P to Withdraw B- Ratings DRS TECHNOLOGIES: S&P Rates Proposed $300 Mil. Senior Notes at B+ DRYDEN III: Optional Redemption Prompts S&P to Withdraw Ratings ENDURANCE SPECIALTY: S&P Assigns BB+ Rating on Preferred Stock ENTERGY NEW ORLEANS: Wants Court to OK Bank of New York Settlement ENTERGY NEW ORLEANS: Wants Court to Set Apr. 19 as Claims Bar Date FUTURE BEACH: Files Notice of Intention Under BIA in Canada G+G RETAIL: Taps Pachulski Stang as Bankruptcy Counsel GAINEY CORPORATION: S&P Rates $260 Million Credit Facility at BB- HURLEY MEDICAL: Fitch Cuts Ratings on $67.1 Million Bonds to BB+ J.P. MORGAN: Fitch Puts Low-B Ratings on Cert. Classes M-10 & M-11 KMART CORP: Court Reinstates Manuel Lomas' $2-Million Claim KMART CORP: Judi Davis Wants Injunction Lifted to Pursue Claims METALFORMING TECH: Has Until March 13 to Remove Civil Actions MIRANT CORPORATION: Settles HSBC's $1.1 Billion Indenture Claims MIRANT CORPORATION: Settles Citibank's Multi-Million Unsec. Claims MIRANT CORPORATION: Settles Law Debenture's Multi-Million Claim MORTGAGE ASSET: Fitch Holds BB Ratings on Two Certificate Classes MUSICLAND HOLDING: Taps Retail Consulting as Real Estate Advisor MUSICLAND HOLDING: Gets Court Nod to Pay Prepetition Taxes & Fees NATIONAL ENERGY: Asks Court to Approve Columbia Settlement Pact NELLSON NUTRACEUTICAL: Case Summary & 20 Largest Unsec. Creditors O'SULLIVAN IND: Disclosure Statement Hearing Continues to Feb. 2 O'SULLIVAN IND: Wants to Honor Potential Exit Lenders' Expenses OWENS CORNING: Slams Equity Panel's Insistence to Hold Meeting OWENS CORNING: Ohio Asbestos Claimants Want to Litigate Claims OWENS CORNING: Resolving AT Plastics' Preference Action PLIANT CORP: Wants to Hire Sidley Austin as Bankruptcy Counsel PLIANT CORP: Wants to Tap Young Conaway as Local Bankr. Counsel PLIANT CORP: Wants to Employ McMillan Binch as Canadian Counsel RESIDENTIAL ACCREDIT: Fitch Holds Low-B Ratings on 22 Class Certs. SOLUTIA INC: Wants Until May 10 Make Lease-Related Decisions SOLUTIA INCORPORATED: Wants More Time to Serve Complaints SOLUTIA INC: Court Clerk Records 13 Claim Transfers in Nov. & Dec. STRUCTURED ASSET: Fitch Holds Low-B Rating on Four Cert. Classes UAL CORP: Inks Multi-Mil. Settlement with London Market Insurers UAL CORP: Wants to Settle Tax Claims of 23 California Counties UAL CORP: Kevakian Wants to Prosecute Whistle Blowers Act Lawsuit W.R. GRACE: Court Fixes Compensation Procedures for Mediator W.R. GRACE: Court Modifies Property Damage Estimation CMO W.R. GRACE: Anderson Memorial Wants Stay Lifted on S.C. Lawsuit W.R. GRACE: Wants to Hire Steptoe & Johnson as Tax Counsel WINDOW ROCK: Taps Fulbright & Jaworski as Special Counsel WINDOW ROCK: Committee Taps FTI Consulting as Financial Advisors WINDOW ROCK: Wants Court OK to Hire Squar Milner as Accountants WINN-DIXIE: Backs U.S. Trustee Decree to Disband Equity Committee WORLDCOM INC: SAVVIS Insists It Can Recover Postpetition Charges WORLDCOM INC: Parus Holdings Slams Move to Disallow Its Claims * Large Companies with Insolvent Balance Sheets ********* AAR CORP: S&P Rates $125 Million Convertible Senior Notes at BB- ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to AAR Corp.'s 1.75% $125 million convertible senior notes due 2026 sold via SEC Rule 144A with registration rights. At the same time, Standard & Poor's affirmed its ratings, including the 'BB-' corporate credit rating, on the aviation support services provider. The outlook is stable. About $275 million of debt is outstanding, pro forma for the new issue and conversion of $38 million of debt into equity in January 2006. About $60 million of proceeds from the notes will be used to: * repurchase accounts receivable that have been securitized, * repay secured short-term debt, and * pay off an operating lease associated with aviation equipment. The balance of proceeds will augment cash balances and will be available for general corporate purposes. "The ratings on AAR reflect the risks associated with highly cyclical and competitive conditions in the airline industry, the firm's primary market, and modest profitability," said Standard & Poor's credit analyst Roman Szuper. "Those factors are offset in part by the company's established business position and moderately leveraged balance sheet." The global airline industry stabilized in 2004 and continued to recover in 2005, spurred by a healthier economy and a noticeable recovery in air traffic, despite problems in the U.S. This follows a severe downturn in the aftermath of the Sept. 11, 2001, attacks and other shocks to the aviation system, which caused a significant decline in AAR's business and resulted in weak financial performance in the 2002-2004 period. The company's extensive cost reductions, strength in the defense-related manufacturing and logistics business (about 35% of revenues), a diversified customer base, and a strategy to expand operations in Asia and Europe have helped cushion the impact. Profitability remains relatively modest, despite a material recovery in sales and earnings. Wood Dale, Illinois-based AAR is the largest independent provider of aviation support services, operating in four groups: * aviation supply chain (50%-55% of revenues); * maintenance, repair, and overhaul (15%-20%); * structures and systems (25%-30%); and * aircraft sales and leasing (less than 5%). North America is the largest market, accounting for around 75% of sales. AAR is well positioned for continued outsourcing by airlines in view of its broad service offerings, investment in new capabilities, low cost structure, good reputation, and the customers' focus on core activities and operating efficiency. Generally improved market conditions, AAR's initiatives to strengthen its competitive position, and sufficient liquidity should support current credit quality. Sustained recovery in the airline industry and further meaningful gains in the firm's profitability could warrant an outlook revision to positive in the near to intermediate term. An outlook revision to negative is a less likely scenario, given a better operating environment and AAR's upward trending financial performance. ADELPHIA COMMS: Devon Trustee Wants $80M Claim Allowed for Voting ----------------------------------------------------------------- As previously reported, Adelphia Communications and its debtor-affiliates objected to the claims filed by Devon Mobile Communications, L.P. and amended by the Devon Mobile Communications Liquidation Trust. The Devon Liquidation Trustee asks the U.S. Bankruptcy Court for the Southern District of New York to temporarily allow Claim No. 15910 for $80,000,000 against ACOM for the sole purpose of voting on the Plan. Michael R. Nestor, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that the Liquidation Trustee and the Debtors are currently engaged in litigation, which will likely not be completed before the voting process has concluded. If the Court does not temporarily allow Claim No. 15910 for the limited purpose of voting on the Plan, the Liquidation Trustee will be unable to exercise its right to participate in the reorganization process, notwithstanding that the Litigation may ultimately result in the allowance in full of the Devon Amended Claims. Mr. Nestor asserts that the $80,000,000 amount is appropriate because it reflects the Liquidation Trustee's calculation of the amounts owed by the Debtors to the Liquidation Trustee. "Additionally, temporarily allowing Claim No. 15910 solely for voting purposes with respect to the Plan will not prejudice any other claimants, and will enable the Debtors to accurately and appropriately tabulate votes on the Plan and otherwise dedicate their time and energy to maximizing value for all creditors, and emerging from Chapter 11 as quickly as is possible and appropriate," Mr. Nestor says. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 119; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: PG&E Can Litigate Claims Arising from Lawsuit ------------------------------------------------------------- On May 1, 2002, Sifa Tuiaki, one of Adelphia Communication's subcontractors, suffered catastrophic injuries when he and his equipment allegedly came in contact with high voltage lines while installing fiber optic cable for the ACOM Debtors. At the time of the accident, Adelphia and its debtor-affiliates were covered under an insurance policy issued by Royal Insurance Company and an umbrella policy issued by Liberty Mutual Insurance Company. The automatic stay prohibited the Claimant and his spouse Lupe Tuiaki from pursuing their claims arising from the Accident against the ACOM Debtors. In April 2003, and in violation of the automatic stay, the Claimants filed a complaint in the San Francisco County Superior Court against Adelphia Telecommunications, Inc., and certain other parties, including Pacific Gas & Electric Company, as the cross-claimant, seeking damages for negligence, strict liability, breach of warranty and loss of consortium and among others. On September 5, 2003, and in violation of the automatic stay, the Claimants filed an amended complaint in the State Court Action On January 6, 2004, PG&E filed Claim No. 7155 and on June 29, 2004, PG&E filed Claim Nos. 17638, 17639 and 17640 asserting claims against the ACOM Debtors for any and all rights of PG&E in connection with the State Court Action including contribution and reimbursement. On January 9, 2004, the Claimants' Complaint was dismissed without prejudice as to Adelphia Telecommunications Inc. due to the pendency of Adelphia Telecommunications' Chapter 11 Case and the application of the automatic stay. On April 19, 2004, the Claimants sought relief from the automatic stay to prosecute the Claims and recover any judgment on those claims from the ACOM Debtors' insurance as well as the ACOM Debtors' estates. The ACOM Debtors entered into a stipulation with the Claimants, pursuant to which the Court partially lifted the automatic stay for the Claimants to initiate actions against third party insurance proceeds. Subsequently, the ACOM Debtors sought to disallow and expunge the PG&E claims. In a stipulation, the ACOM Debtors and PG&E agreed that: a. the automatic stay will be modified for the sole purpose of permitting PG&E to assert and fully litigate any claims arising the State Court Action against the Debtors, provided however that any recovery by PG&E pursuant to an action, including costs and recovery of punitive damages, if any, will be limited to the proceeds available under the Insurance Policies; b. other than the modified automatic stay, all protections afforded by Section 362 of the Bankruptcy Code will remain in full force and effect; c. the PG&E Claims are deemed withdrawn; d. PG&E will not enforce any judgment in an action or the Claims arising by reason of the Accident against the assets of the Debtors except to the extent of proceeds available under the Insurance Policies; and e. PG&E further agrees to limit recovery of any damages against the Debtors from the Accident, including costs recoverable in an action, to the total insurance proceeds available pursuant to the Insurance Policies. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 119; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADVANCED MICRO: $500 Mil. Equity Offering Cues S&P to Up Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Sunnyvale, California-based Advanced Micro Devices Inc., including its corporate credit rating, to 'B+' from 'B'. In addition, the ratings on the microprocessor manufacturer were removed from CreditWatch with positive implications, where they were placed on Jan. 24, 2006. The ratings outlook is stable. "The rating actions reflect completion of an announced $500 million equity offering at $35.20 per share, and the company's improving business and financial profile, notwithstanding aggressive competition," said Standard & Poor's credit analyst Bruce Hyman. The ratings continue to reflect aggressive competition from dominant supplier Intel Corp. and possible continued negative free cash flows over the intermediate term. ALLEN-VANGUARD: Posts CDN$23.3 Million Net Loss in 4th Qtr. 2005 ---------------------------------------------------------------- Allen-Vanguard Corporation (TSX:VRS) of Ottawa, Canada, reported its financial results for the fiscal year ended Sept. 30, 2005. Revenue was CDN$9.1 million in Q4 2005 and CDN$51.4 million in FY 2005, compared to CDN$11.6 million in Q4 2004 and CDN$20.3 million in FY 2004. Allen-Vanguard recorded a net foreign exchange loss of CDN$200,000 in Q4 2005 and CDN$500,000 in FY 2005, compared to a gain of CDN$200,000 in Q4 2004 and FY 2004. Company operations have become increasingly integrated in the second half of FY 2005. The net loss for Q4 2005 was CDN$23.3 million and CDN$28.6 million in FY 2005. These figures compare to net earnings of CDN$900,000 in Q4 2004, and net earnings of CDN$100,000 in FY 2004. Working capital totaled CDN$18.4 million at the end of FY 2005, including a CDN$4.3 million receivable in respect of the Iraq Contract. This compares to working capital of CDN$4.2 million at the end of FY 2004. The Company stated that its financial position remains healthy, with orders and backlog now increasing. The company was in compliance with its bank covenants at fiscal year end and expects to be in compliance with all bank covenants as at the end of the first quarter of fiscal 2006 ended Dec. 31, 2005. Last October the Company reported its integration plan and financing initiatives. The plan included achieving approximately CDN$5 million in annualized cost reductions. This process began in Q4 of fiscal 2005 and has continued through Q1 and into Q2 of fiscal 2006. The Company anticipates that it will be substantially completed by the end of March 2006. Associated restructuring charges were accrued at fiscal year end 2005. "We intend to achieve the full amount of savings in the original plan and we continue to look for further economies as we work to restore profitability through lower costs and increased revenues," said Mr. Luxton. "We expect to be able to provide an update on our progress in the very near future." Allen-Vanguard Corporation -- http://www.allen-vanguard.com/-- develops and markets technologies, tools and training for defeating and minimizing the effects of hazardous devices and materials, whether Chemical, Biological, Radiological, Nuclear or Explosive (CBRNE). The Company's equipment is in service with leading security and military forces in more than 120 countries. This includes a complete range of remote intervention robots for hazardous applications, vehicle barrier systems, suspect package containers and Electronic Counter-Measures equipment. Its Head office operations are located in Ottawa, Ontario, Canada, with manufacturing operations in Ottawa and Stoney Creek, Ontario; Tewkesbury, U.K.; and Cork, Ireland, and sales offices in Canada, the U.S., the U.K. and Asia. The Company's shares are listed on The Toronto Stock Exchange (TSX: VRS). * * * As reported in the Troubled Company Reporter on Jan. 3, 2006, Allen-Vanguard Corporation (TSX:VRS) issued a notice of default on Dec. 30, 2005. The company disclosed that it was unable to file its financial statements for the year ended Sept. 30, 2005, on or before Dec. 29, 2005 due to these circumstances: (a) There has been a delay in completing the audits of Allen- Vanguard Limited, a United Kingdom corporation, and Allen- Vanguard (Ireland) Limited, a Republic of Ireland corporation. AVL and AVI are indirect wholly owned subsidiaries of the Company which were acquired by the Company on Aug. 12, 2004. Fiscal year 2005 therefore represents the first full year audit for AVL and AVI as public company subsidiaries. (b) The Company has a September 30 fiscal year end while AVL and AVI had December 31 fiscal year ends. It was therefore decided to change the fiscal year end of AVL and AVI to correspond with the fiscal year end of the Company. The fiscal year 2005 consolidated financial statements of the Company must therefore include the results of AVL and AVI for the stub periods of Oct. 1, 2004 to Dec. 31, 2004 and Jan. 1, 2005 to Sept. 30, 2005. (c) Soberman LLP is the external auditor for the Company, while Ernst & Young, LLP was the external auditor for AVL and AVI. In late September 2005, E&Y informed the Company that it did not wish to continue as auditor of AVL and AVI beyond the fiscal year 2004 engagement if it could not also be appointed auditor for the Company. This request was not acceptable to the Company and, with the agreement of E&Y, the Company selected Blick Rothenberg as the new auditor of AVL and AVI. BR must therefore rely on the statutory audit reports of E&Y covering the fiscal year 2004 accounts for AVL and AVI for the opening balance sheets at Jan. 1, 2005 to audit the 2005 Stub Period. Soberman must rely on the audit report of E&Y for assurance on the 2004 Stub Period and on the audit report of BR for assurance on the 2005 Stub Period. (d) The completion of the fiscal year 2004 statutory audits by E&Y was delayed, primarily due to uncertainties concerning the collectibility of a material receivable by AVL. The collectibility of this receivable was referenced in notes to prior quarterly financial statements. This uncertainty was successfully resolved on Dec. 20, 2005, but there is insufficient time, given the pending Christmas holiday season, for E&Y to complete its final audit procedures and issue an unqualified opinion on the statutory accounts of AVL and AVI. (e) Without such an opinion, BR and Soberman are themselves not in position to issue unqualified opinions. ARMSTRONG WORLD: Court Approves Sale Pact with EDC Finance and F&M ------------------------------------------------------------------ Armstrong World Industries, Inc., owns a flooring plant located at 401 West Liberty Street in the northwest section of Lancaster, Pennsylvania. The Plant occupies approximately 63.81 acres with 2,650,000 square feet of floor space. It contains 196 buildings and has been AWI's largest manufacturing facility. Rebecca L Booth, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that the Plant was built in 1906 for the production of linoleum. In recent years, the Plant has manufactured residential and commercial sheet vinyl flooring as well as residential and commercial tile. At its peak in 1943 during World War II, more than 7,000 people were employed at the Plant. Over the past few decades, however, AWI has reduced the scale of manufacturing activities at the Plant and has discontinued some product lines manufactured there. In November 2004, AWI announced its intention to phase out the manufacture of two of the three remaining product lines at the Plant by the end of 2005. AWI intends to continue business operations on 19.37 acres of the Plant to manufacture rotogravure residential sheet flooring products. As a result of AWI's business decision, Ms. Booth notes that around 45 acres of the Plant have become available for other uses. However, the Property's structures were constructed for specific industrial purposes and, given the unique prior use, materials, age and structural design of those buildings, they are not adaptable for modern day reuse. Consequently, the Property must be cleared of all structures if it is to be made available for other uses. Ms. Booth tells Judge Fitzgerald that despite AWI's selective demolition of buildings over the last five years, the cost, however, is prohibitive, as it is greater than the value of the Property without structures. The estimated cost per acre for structure demolition is $420,000 an acre for off-site debris removal or $390,000 per acre for on-site. In addition, AWI has substantial costs and liabilities associated with the continued maintenance of the Property, including environmental remediation costs. "Therefore, even if the Property remains unused, it would generate a significant cost to the estate," Ms. Booth asserts. "In sum, the Property is nonproductive and has a negative value to AWI." Revitalization of Lancaster Property Immediately to the Property's south, east and west, the northwest section of Lancaster is undergoing a large community revitalization initiative, characterized by more than $230,000,000 in public and private investment. That economic rebirth adjacent to the Plant has resulted in the construction of: (i) a $28,000,000, 5,700-seat minor league multipurpose Clipper Stadium; (ii) the future home of Franklin & Marshall College's new $45,000,000 Life Sciences building and its $30,000,000 mixed-use retail project; (iii) a recently completed $120,000,000 capital investment by Lancaster General Hospital in its facilities; and (iv) several brick warehouse renovations underway for retail, residential and hotel uses. The Plant is located within the James Street Improvement District, a two-year old community development effort anchored by Franklin & Marshall and Lancaster General Hospital. The area is also one of Pennsylvania's first Keystone Innovation Zones and has been awarded an Elm Street grant in conjunction with Lancaster City. Ms. Booth tells Judge Fitzgerald that the significant investment and urban renewal projects surrounding the Plant have created a unique opportunity for AWI to transfer the Property at a cost less than the net present value of AWI's carrying costs while also participating in the historic revitalization of Lancaster City and, thus, helping to improve the area that has been AWI's home for close to 100 years. To that end, Ms. Booth continues, AWI entered into a non-binding letter of intent with EDC Finance Corporation and Franklin & Marshall, dated November 29, 2004, pursuant to which the parties expressed their willingness to work together to evaluate and pursue productive re-use of the Property that would benefit all parties involved. EDC Finance, a membership-supported nonprofit organization, is a certified industrial development agency under the laws of the Commonwealth of Pennsylvania and a wholly owned subsidiary of the Economic Development Company of Lancaster County. Ms. Booth explains that EDC Finance's mission is to foster and coordinate community development and to provide private and public entities in Lancaster County with access to federal, state and local funding and business resources, to encourage and strengthen the Lancaster County's economic growth and prosperity. EDC Finance was involved in assembling and purchasing land for the Clipper Stadium, located several blocks from the Property. Because of EDC Finance's organizational goals, its active participation in the development of the areas surrounding the Plant, and its ability to raise public funds necessary for demolition and remediation, EDC Finance is particularly well suited to participate in the transfer and development of the Property. Because Franklin & Marshall recently developed mixed use retail and student residences on Harrisburg Avenue, adjacent to the Property, Franklin & Marshall is also uniquely situated to participate in the transfer and development of the Property, as it has a strong interest in acquiring contiguous property and can raise significant public and private funds necessary for demolition and remediation. The BIOS Grant On January 19, 2005, EDC Finance and Franklin & Marshall received a $175,000 "Business In Our Sites" planning grant from the Commonwealth of Pennsylvania for contracting professional firms to: (a) develop a master plan for the Property to transform it into an urban area with institutional, commercial, retail and residential uses; (b) conduct a market analysis for those uses, absorption rates, tax revenues, and job creation; (c) assess the current environmental records of the Property to determine existing conditions, suggest additional testing required to define appropriate clean-up standards, and estimate costs for the relevant remediation to allow a change of use from heavy industrial to residential and commercial uses; and (d) determine costs to demolish and dispose of structures on the Property. After considering the initial results of the Feasibility Studies, the parties entered into good faith and at arm's-length negotiations to determine how best to divest AWI of the Property at a minimal cost and liability to the estate while achieving the necessary funding for the demolition and remediation to convert the Property from an idle industrial site into a revitalized mixed use site. The Sale Agreement In furtherance of AWI's goal of transferring the Property at a minimal cost and liability to the estate, AWI entered into a Sale Agreement with EDC Finance and Franklin & Marshall. The salient terms of the Sale Agreement are: (1) AWI will sell the Property, together with any improvements, to EDC Finance and Franklin & Marshall, which will have the right to: * allocate the Property's acreage between them; and * require AWI to convey all of the Property to EDC Finance pursuant to a separate agreement between EDC Finance and Franklin & Marshall. (2) The purchase price for the Property will be $1 paid by EDC Finance to AWI at closing date. (3) The Property will be sold in "as-is, where-is" condition, without any representation, as to the condition or merchantability of the Property or its fitness for any particular use. AWI will not be liable for any damages occasioned by or arising in connection with the Property's environmental condition. (3) AWI will contribute, on a dollar-for-dollar match, an amount equal to the amount contributed by Franklin & Marshall up to $6,000,000, to be used to fund demolition and disposal of existing structures on the Property, characterization and remediation of environmental conditions currently existing at the Property and the Retained Property, utility and infrastructure relocation and installation, and redevelopment site preparation. (4) EDC Finance will contribute its administrative and over- sight costs to the Project and have the primary responsibility for securing funding for the Project through governmentally assisted funding programs, loans and grants. (5) Franklin & Marshall will contribute an amount equal to the Contribution. It will also be responsible to pay any and all Project funds not otherwise available. (6) After EDC Finance and Franklin & Marshall have provided AWI with evidence of the availability and commitment of the Government Funding for a 90-day period, Purchasers may inspect the Property's environmental condition. If the results of the Inspection reveal environmental contamination beyond that which is reflected in the Supplemental Characterization Plan of Groundwater Sciences Corporation and those conditions are not reasonably acceptable to EDC Finance or Franklin & Marshall, either may terminate the sale agreement on written notice to AWI by the 90th day of the Inspection Period. (7) As expeditiously as possible after Closing, EDC Finance and Franklin & Marshall will attain cleanup standards provided under the Land Recycling and Environmental Remediation Standards Act to address any and all identified contamination exceeding the statewide health standards in soils or groundwater. EDC Finance and Franklin & Marshall acknowledge that AWI will have the right to include the Retained Property in the Project and to attain an Act 2 standard for the Retained Property. Any and all known existing environmental releases or threats of releases will be covered by the Act 2 response action undertaken under the Sale Agreement. Existing environmental releases or threats of releases migrating from the Property will no longer be AWI's responsibility, but will be the sole responsibility of EDC Finance and Franklin & Marshall. AWI will pay all real estate taxes, water, sewer and other current lienable charges on the Property through the Closing date. Ms. Booth attests that AWI is not aware of any other entity that may assert an interest in the Property. AWI will be required to pay for the subdivision of the property allowing for the transfer, which is estimated to cost $50,000. In addition, if real estate transfer tax is payable, the parties will equally split the 2% local real estate transfer tax in connection with the transfer of title by AWI. Sale Agreement Divests Negative Value Property The implementation of the Sale Agreement, Ms. Booth contends, is conditioned on the determination by EDC Finance and Franklin & Marshall that they have received an acceptable level of commitments for government funding. Pursuant to the terms of a proposed additional agreement between EDC Finance and Franklin & Marshall, title to the Property will initially be transferred to EDC Finance. At the completion of the Project, EDC Finance will transfer 26.25 acres to Franklin & Marshall for its development of an athletic and recreational complex. The remaining 15.22 acres will be marketed for institutional, commercial, retail and residential uses per the master plan created from the BIOS Grant. AWI sought and obtained Judge Fitzgerald's approval of the Sale Agreement. AWI believes that the transaction will allow it to divest non-productive, negative value property, which, given the unique prior use, materials, age and structural design of the buildings located on the Property, is not adaptable for modern day reuse. If the Sale Agreement is not approved, AWI maintains that it will not be able to find another party willing to provide the same value, particularly in light of the unique confluence of events that have made the current transaction feasible. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 85; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARMSTRONG WORLD: Asks Court to Approve Frederick Settlement Accord ------------------------------------------------------------------ In 1991 and in 1995, Todd W. Frederick incurred injuries while working for American Olean Tile Company, which at that time, was a wholly owned subsidiary of Armstrong World Industries, Inc. Mr. Frederick filed workers' compensation claims against American Olean for, and received workers' compensation benefits in connection with, the injuries. On December 21, 1995, pursuant to a Stock Purchase Agreement, AWI sold American Olean to Dal-Tile, Inc. After the sale, the parties began to dispute whether Dal-Tile or AWI was responsible for certain self-insured workers' compensation claims that arose prior to the execution of the Purchase Agreement. The 1997 Civil Action On July 15, 1997, Mr. Frederick commenced a civil action against AWI, Swartley Bros Engineering Inc. and Star Engineering, Inc., in the Court of Common Pleas of Montgomery County, Pennsylvania, seeking to recover damages for a personal injury arising out of the same event that lead to the 1995 Compensation Claim. Mr. Frederick alleged that AWI engineers had improperly designed the equipment that allegedly contributed to the accident that caused his injury. Accordingly, Mr. Frederick asserted that AWI was liable for the Personal Injury Claim, as well as the 1995 Compensation Claim. AWI disputed that it is liable to Mr. Frederick for either of the claims. The Civil Action was later removed to the United States District Court for the Eastern District of Pennsylvania. The Frederick Claim On January 10, 2001, Mr. Frederick filed Claim No. 13, a general unsecured claim for more than $1,000,000, for damages incurred in connection with the Personal Injury Claim and sought to be recovered to the Civil Action. AWI objected to Claim No. 13 on grounds that it did not contain any documentation to support the claim amount. In lieu of prosecuting the Claim Objection, AWI agreed to have the automatic stay modified to allow Mr. Frederick to prosecute the Civil Action to settlement or judgment. The Dal-Tile Settlement Agreement During the course of AWI's Chapter 11 case, AWI and Dal-Tile continued to dispute a number of issues arising of the Purchase agreement, including which party was liable for workers' compensation claims arising prior to the Petition Date. After a lengthy negotiation, on February 24, 2005, the Court approved a settlement agreement between AWI and DAL-Tile, pursuant to which: (a) AWI would be responsible for the insured American Olean workers' compensation claims; (b) Dal-Tile would be responsible for self-insured American Olean workers' compensation claims; (c) AWI is responsible for any liability arising under the 1991 Compensation Claim; and (d) Dal-Tile is responsible for any liability arising under the 1995 Compensation Claim; and (e) AWI assigned to Dal-Tile all of its rights in the unused funds that the State Self-Insurance Division collected from the Wachovia Letter of Credit. AWI was recently advised that if Dal-Tile's parent company issues a separate guaranty for the American Olean self-insured workers' compensation claims, the State Self-Insurance Division will release to Dal-Tile the unused funds from the $1,000,000 draw down on the Wachovia L/C currently held in trust by JP Morgan Trust Company, N.A. The Frederick Settlement Agreement According to Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, AWI, Dal-tile and Mr. Frederick have engaged in extensive, arm's-length negotiations. To resolve their dispute on a consensual basis, the Parties agree that: (1) AWI will pay Mr. Frederick $54,500 in full and final settlement of the 1991 Compensation Claim, and Dal-Tile will pay Mr. Frederick $190,500 in full and final settlement of the 1995 Compensation Claim; (2) The Frederick Claim will be reduced and allowed as a general unsecured claim against AWI for $225,000. Mr. Frederick will assign $125,000 of the Allowed Claim to Dal-Tile; (3) Mr. Frederick will take all necessary actions to dismiss or otherwise dissolve the Civil Action, with prejudice; and (4) The Parties will mutually release each other from all claims and liabilities in connection with the Civil Action, the Workers' Compensation Claims, and the Frederick Claim. The Parties further agree that the terms of the Settlement Agreement will not become effective until: (1) the Bankruptcy Court enters a final, non-appealable order approving the Settlement Agreement; and (2) the compromise and release contemplated by the Settlement Agreement is approved by a workers' compensation judge pursuant to Section 449 of the Pennsylvania Workers' Compensation Act. Mr. Collins relates that on October 12, 2005, Judge Bruce K. Doman, a workers' compensation judge, approved the compromise and release related to the Workers' Compensation Claims. Accordingly, the Debtors ask the Bankruptcy Court to approve their Settlement Agreement with Mr. Frederick and Dal-Tile. If the Settlement Agreement is not approved, the Parties will continue to incur attorneys' fees, costs and expenses unnecessarily, Mr. Collins asserts. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Bankruptcy Court to Confirm Plan of Reorganization ---------------------------------------------------------------- ATA Holdings Corp. (Pink Sheets:ATAHQ) and four of its subsidiaries, including ATA Airlines, Inc., received oral confirmation by the U.S. Bankruptcy Court for the Southern District of Indiana of their First Amended Plan of Reorganization. The Judge indicated that he would enter a written order confirming the POR today, Jan. 31, 2006. This approval clears the way for the Company to emerge from Chapter 11 by late February 2006. "Throughout this process, I have never doubted that our employees were contributing everything they had to making our restructuring a success," ATA Chairman, President and CEO John Denison, said. "Yesterday's ruling reflects their incredible accomplishments. Thanks to their hard work in developing an effective business plan, ATA has been able to transform itself into a more viable airline ready to emerge from Chapter 11. I believe the same efforts our employees applied during this challenging period will allow us to exceed the expectations of customers for many years to come." During yesterday's hearing, the Reorganizing Debtors revealed that both classes of unsecured creditors eligible to vote accepted the Plan. Independent of these results, the Hon. Judge Basil Lorch III confirmed that the Plan fulfills all requirements of the U.S. Bankruptcy Code and allows for fair and equitable treatment of all creditors. As part of the last steps in achieving this confirmation, ATA recently finalized certain outstanding agreements relative to the Plan, including settlement terms on its loan from the Air Transportation Stabilization Board. The judge stated he plans to enter his official order confirming the First Amended POR sometime today, Jan. 31, 2006. "Reaching this positive end to the restructuring process is even more rewarding because it is the result of consensual agreements reached between ATA, various stakeholders, interested parties and the Unsecured Creditors' Committee," ATA Interim Chief Financial Officer Frank Conway, explained. "Reaching such agreements so quickly is an unusual achievement and has contributed greatly toward allowing ATA to regain a solid operational and financial footing in a remarkably short amount of time." Doug Yakola, who will assume the role of ATA's Chief Financial Officer upon emergence, agreed with Conway. "With a strengthened cash balance thanks to our new investment partner MatlinPatterson, a substantially lower CASM due to several cost-saving initiatives, and the right operational plan to leverage our strengths, all the pieces are in place to help secure the Company's future," Mr. Yakola, said. "As we anticipate emergence, we look forward with a renewed sense of confidence in ATA's enduring success." Settlement Distribution As part of the settlement of their claims, unsecured creditors will receive upon emergence distributions of common stock representing seven percent of the outstanding equity in the newly formed privately held holding company, which will become the ultimate parent company of ATA Airlines. In addition, unsecured creditors will receive warrants to acquire two percent of the New Common Stock outstanding upon emergence. Finally, ballots have revealed that a rights offering providing qualifying Class 6 unsecured creditors the opportunity to purchase approximately $25 million in value of New Common Stock has been fully subscribed. As a result, these qualifying unsecured creditors will also receive an additional two percent of the New Common Stock. In accordance with the confirmed POR, ATA Holdings common and preferred stock will be cancelled upon the emergence date and no distribution will be made to current holders of those securities. Investor Commitment As previously outlined, the Plan includes an investment of $95 million from ATA's new investor, MatlinPatterson. This investment consists of: (i) $30 million in debtor-in-possession financing, which will be converted into equity upon emergence, and (ii) upon emergence, $45 million to New ATA Holdings Corp. in the form of an equity investment reflecting the full subscription of New Common Stock in the rights offering. Upon emergence, MatlinPatterson will also provide an additional $20 million of exit debt financing. Airline Flight Expansion Yesterday's ruling comes exactly one week following ATA's announcement that it is expanding its codeshare agreement with Southwest Airlines to increase service between Hawaii and the West Coast and introduce new flights between Houston and New York. Earlier in the year, the U.S. Department of Transportation approved both carriers entering into the seven-year expanded codeshare agreement as a crucial part of ATA's restructuring efforts. A full-text copy of the 147-page Disclosure Statement with respect to the First Amended Joint Chapter 11 Plan For Reorganizing Debtors is available at no charge at http://ResearchArchives.com/t/s?4c5 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: Wants to Purchase N194AT Aircraft from GECC --------------------------------------------------------- Pursuant to Section 363 of the Bankruptcy Code, ATA Airlines, Inc., and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of Indiana's authority to purchase a Lockheed L-1011 aircraft, bearing serial number 1230 and U.S. Registration Number N194AT, for nominal consideration pursuant to a purchase agreement. On December 21, 2004, ATA Holdings Corp., General Electric Capital Corporation, and U.S. Bank National Association entered into a stipulation providing rejection of certain equipment relating to several aircraft and engines. Among the aircraft covered by the Stipulation was N194AT. GECC is the beneficial owner with respect to N194AT, whereas U.S. Bank, as trustee, is the sublessor and registered owner of N194AT. Pursuant to that Court-approved Stipulation, the Reorganizing Debtors were authorized to use N194AT pursuant through Dec. 15, 2005. In the event that ATA Holdings: (a) timely returned all of the Group A Aircraft to GECC; (b) did not reject the lease pertaining to the use of N194AT; and (c) complied with all other provisions in the Stipulation, the Reorganizing Debtors would purchase N194AT from GECC and U.S. Bank, pursuant to the terms of a purchase agreement to be executed by the parties and submitted to the Court no later than today, January 31, 2005. Jeffrey J. Graham, Esq., in Indianapolis, Indiana, tells the Court that the Reorganizing Debtors have neither rejected nor abandoned the Aircraft. Mr. Graham further reports that the Reorganizing Debtors have complied with all the provisions of the Stipulation other than obtaining Court approval for the purchase of N194AT, which could not occur until the re-delivery of the final Group A Aircraft on December 15, 2005. 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. 46; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Can Walk Away from Sabre Work Order No. 1 ------------------------------------------------------- ATA Airlines, Inc., and its debtor-affiliates sought and obtained the United States Bankruptcy Court for the Southern District of Indiana's authority to reject a work order for information technology services. ATA Airlines, and Sabre, Inc., are parties to an Information Technology Services Agreement, under which the parties agreed to enter into individual work orders for specific services and for the license of licensed or hosted software. The parties executed Work Order No. 1, effective October 2, 2003. ATA Airlines was granted the right to use certain hosted and licensed software, including the Sabre Passenger Reservation System, Sabre Reservation and Departure Control Interface, and Sabre Qik-Schedule. ATA Airlines and Sabre, Inc., are also parties to an Information Technology Services Agreement, under which the parties agreed to enter into individual work orders for specific software services. Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis, Indiana, clarifies that Work Order No. 1 consists of two distinct agreements: (i) an agreement for access to and use of Hosted Software; and (ii) an agreement for the use of Licensed Software, specifically the Sabre Reservations and Departure Control Interface and Sabre Qik-Schedule. Ms. Hall relates that since November 2004, ATA Airlines has not used the Software or any ancillary services provided under the Licensed Software Agreement. However, ATA Airlines is required to pay a minimum monthly fee of almost $5,000 for those services. While the Licensed Software Agreement imposes significant burdens without any benefit, the Hosted Software Agreement continues to provide important benefits to ATA Airlines. Pursuant to Section 365 of the Bankruptcy Code, ATA Airlines sought and obtained Court's authority to reject the Licensed Software Agreement, without effect on the IT Agreement, Work Order No. 1, or the Hosted Software Agreement. 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. 46; Bankruptcy Creditors' Service, Inc., 215/945-7000) BANC OF AMERICA: Fitch Puts Low-B Ratings on Classes B-4 & B-5 -------------------------------------------------------------- Banc of America Mortgage Securities, Inc., series 2006-A, mortgage pass-through certificates, are rated by Fitch Ratings as follows: -- $309,988,100 classes 1-A-1, 1-A-2, 1-A-R, 2-A-1, 2-A-2, 3-A-1, 3-A-2, 4-A-1, and 4-A-2(senior certificates) 'AAA'; -- $7,247,000 class B-1 'AA'; -- $1,933,000 class B-2 'A'; -- $1,127,000 class B-3 'BBB'; -- $644,000 class B-4 'BB'; -- $483,000 class B-5 'B'. The 'AAA' rating on the senior certificates reflects the 3.75% subordination provided by the 2.25% class B-1, the 0.60% class B-2, the 0.35% class B-3, the 0.20% privately offered class B-4, the 0.15% privately offered class B-5, and the 0.20% privately offered class B-6. The ratings on class B-1, B-2, B-3, B-4, and B-5 certificates reflect each certificate's respective level of subordination. Class B-6 is not rated by Fitch. The ratings also reflect the quality of the underlying mortgage collateral, the primary servicing capabilities of Bank of America Mortgage, Inc. (rated 'RPS1' by Fitch) and Fitch's confidence in the integrity of the legal and financial structure of the transaction. The transaction consists of four groups of adjustable interest rate, fully amortizing mortgage loans, secured by first liens on one- to four-family properties, with a total of 545 loans and an aggregate principal balance of $322,066,721 as of Jan. 1, 2006, (the cut-off date). The four loan groups are cross- collateralized. The collateral consists of 3/1 (Group 1), 5/1 (Group 2), and 7/1 (Group 3), 10/1 (Group 4) hybrid adjustable-rate mortgage (ARM) loans. After the initial fixed interest rate period of three, five, seven, and 10 years respectively, the interest rate will adjust annually based on the sum of one-year LIBOR index and a gross margin specified in the applicable mortgage note. Approximately 71.97% of all the loans require interest-only payments until the month following the first adjustment date. As of the cut-off date, the deal has an aggregate principal balance of approximately $322,066,721 and an average balance of $590,948. The weighted average original loan-to-value ratio (OLTV) for the mortgage loans is approximately 71.21%. The weighted average remaining term to maturity (WAM) is 359 months, and the weighted average FICO credit score for the group is 751. Second constitute 10.26 and 0% of the loans. Rate/term and cashout refinances account for 18.78% and 13.48% of the loans respectively. The states that represent the largest geographic concentration of mortgaged properties are California (45.51%), Florida (8.70%), and Virginia (7.16%). All other states represent less than 5% of the outstanding balance of the group. Approximately 66.21% of the Group 1 Mortgage Loans, approximately 81.49% of the Group 2 Mortgage Loans, approximately 67.06% of the Group 3 Mortgage Loans, approximately 83.40% of the Group 4 Mortgage Loans and approximately 78.00% of all of the Mortgage Loans were originated under the Accelerated Processing Programs, which require less documentation. A total of 0.64% of the Mortgage Loans were originated under the Accelerated Processing Programs of All-Ready Home. None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com/ Banc of America Mortgage Securities, Inc. deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, elections will be made to treat the trust as one or more real estate mortgage investment conduits. Wells Fargo Bank, National Association will act as trustee. BANKATLANTIC BANCORP: Earns $59.1 Million of Net Income in 2005 --------------------------------------------------------------- BankAtlantic Bancorp, Inc. (NYSE: BBX), the parent company of BankAtlantic and Ryan Beck & Co., reported a $59.1 million net income for the year ended December 31, 2005, compared to $70.8 million reported in 2004. For the fourth quarter 2005, a ($1.6) million net loss was recorded compared to earnings of $17.3 million for the fourth quarter, 2004. Operating income, which excludes a $10 million charge relating to the compliance matter discussed and a $2.4 million facilities charge earlier in 2005 was $71.5 million for the full year, up 12% from operating income in 2004, which excluded items relating to the early redemption of debt and a litigation settlement. Operating income for the fourth quarter, 2005 was down 52% from the corresponding quarter in 2004. Chairman and Chief Executive Officer Alan B. Levan commented "As we previously have disclosed, deficiencies in our Anti Money-Laundering and Bank Secrecy Act ('AML- BSA') compliance were identified in mid-2004. With the assistance of our Audit Committee, we embarked on a complete review of our AML-BSA compliance policies and procedures. We engaged a nationally recognized consulting firm with specific expertise in this area, which reviewed the identified deficiencies in our operating systems and procedures and our employee training programs. In connection with their review, which was completed in late 2004, we incurred expenses of approximately $4 million. Following their review and recommendations, we internally created a separate AML-BSA Department, which resulted in a staff increase of approximately 30 employees and made significant improvements to our systems, processes, and training programs. The on-going financial impact of those changes and additions was to increase recurring expenses by approximately $3.5 million annually. "We believe that the Bank is currently in full compliance with all AML-BSA laws and regulations. Notwithstanding our current compliance status, as we have previously reported, many financial institutions have been the subject of proceedings which have resulted in substantial fines and penalties and have been required to enter into cease and desist orders with their primary regulators based on AML-BSA deficiencies. Under these circumstances, we determined that it was appropriate at this time to establish a $10 million reserve with respect to these matters, and we anticipate that we will be required to enter into a cease and desist order under which we agree to maintain satisfactory compliance status. Accomplishments and highlights include: BankAtlantic "BankAtlantic's 'Florida's Most Convenient Bank' initiative combined with the fourth quarter introduction of our aggressive new marketing and advertising campaigns brought unprecedented growth in new customer accounts. As the result of these initiatives, we opened 67,000 low cost deposit accounts in the fourth quarter, representing an increase of 69% over the same period in 2004, and an all-time high for BankAtlantic. Driving this growth were the results for November and December 2005, when new accounts rose 107% and 90%, respectively, from the same 2004 periods. We believe this strong growth in new account openings is directly attributable to the new advertising and marketing program, which we launched in November. Ending low cost deposit balances increased to an all time high of $2.1 billion, up 15% over 2004, and average low cost deposit balances for 2005 increased 23% over 2004. "As we discussed in our third quarter, 2005 release, we continue to believe the creation of long-term value lies in sustaining high growth rates in core deposits. Additional marketing outlays of approximately $5 million per quarter were spent in the fourth quarter, 2005, and will continue throughout 2006, which will have an impact on earnings in the short run. We believe this short- term negative impact on earnings will be compensated by above average 'top line' (low cost deposit) growth that over the long run is vitally important to our franchise value and achieving superior profitability. "Earnings within the bank declined in the fourth quarter, principally as the result of the increase in marketing expenses, and an increase in personnel expense (up $3.3 million, or 12%, from the third quarter, 2005). These personnel costs were directly related to longer store hours, the opening of new stores, and personnel necessary to maintain the service levels from increased account volume. "The tax equivalent net interest margin improved to 4.05% during the fourth quarter, compared with 3.91% in the same period in 2004, and 3.96% in the third quarter of 2005. Year-over-year, the net interest margin improved to 3.95%, up from 3.79% in 2004. "Total loans were $4.5 billion at year-end. Loans are down $300 million and total earning assets are down approximately $450 million from their midyear peaks in 2005, consistent with our strategy of limiting earning asset growth due to the relative flatness of the current yield curve. The decline in loans is concentrated in residential real estate, the direct result of our decision to delay purchases of mortgages in light of the current yield curve; and in commercial real estate, because of runoff in our high-rise condominium portfolio. We remain comfortable with the commercial real estate market in our trade area, and expect the decline in our commercial real estate loan balances to prove temporary. Small business and consumer loans continued to grow, with linked quarter increases of 18% and 15%, respectively. "Borrowings, principally advances from the Federal Home Loan Bank, are approximately $400 million lower than at year-end 2004, as we utilized the funds associated with the increased levels of low cost deposits to reduce borrowings rather than to fund earning asset growth. We anticipate following this strategy over the course of 2006, reflecting our belief that reduction of leverage, particularly given the yields available in the market today, is the most appropriate use of these funds. "Credit quality remained strong in the fourth quarter, with total non-performing loans declining to $6.8 million at Dec. 31, 2005, compared to $7.9 million at Dec. 31, 2004, and relatively flat compared to the $6.9 million level at Sept. 30, 2005. The ratio of non-performing loans to total loans declined to 0.15% at Dec. 31, 2005 from 0.17% at Dec. 31, 2004. In 2005, the Bank continued to experience net recoveries -- which totaled $606,000 for the fourth quarter and $1.8 million for the year. As a result, negative provisions of $109,000 and $6.6 million were recorded for the quarter and year, respectively. Most significantly, our coverage of non-performing loans remained extremely high, with the ratio of the allowance for loan losses to non-performing loans at 606% at December 31, 2005. "During 2005 we experienced continued growth throughout the organization. BankAtlantic expanded its 'branch' network with the opening of five new stores during the year, including two that were opened during the fourth quarter. One of the new stores is a midnight location, open from 7:30 AM to midnight, seven days a week, bringing the total number of our stores with this unprecedented level of convenience to seven. Additionally, in December BankAtlantic reached the 100,000 online customers milestone for our award-winning Internet banking service. We anticipate surpassing 1,000,000 monthly logins in 2006. Ryan Beck & Co. "During the quarter, Ryan Beck's Private Client Group opened two new Central Pennsylvania offices in Camp Hill and Lebanon, and also relocated its Scarsdale office to White Plains, New York. Over the course of 2005, Ryan Beck added 63 experienced financial consultants to its Private Client Group, with assets under management totaling $2.3 billion and production of $18 million, bringing the total number of financial consultants to 450. Total assets of Ryan Beck's customers reached a new record of $18.3 billion. "Ryan Beck & Co. was ranked as the number one mutual to stock conversion advisor (based upon proceeds) by SNL Securities for the fourth consecutive year, and second in SNL Securities' Bank and Thrift 2005 Capital Offerings rankings. "Additionally, Ryan Beck continued expansion of its Capital Markets Division with the hiring of 18 new associates during the fourth quarter, covering several industry sectors. Included in this move is the addition of a wholesale mortgage-backed securities desk to deal in origination and trading of mortgage backed securities. Ryan Beck also expanded its Investment Banking Division through the hiring of three senior bankers in its Middle Markets Group. The new associates included David P. Lazar, Managing Director covering a broad range of industries, Robert von Furth, Managing Director covering companies in the consumer sector with a primary focus on retailing and restaurants, and Jay Gaydosh, Managing Director responsible for REIT transactions. This year's expansion brought Ryan Beck to a year-end level of approximately 1,100 employees, in 42 offices across the nation," Mr. Levan concluded. Through these subsidiaries, BankAtlantic Bancorp provides a full line of products and services encompassing consumer and commercial banking, and brokerage and investment banking. * * * As reported in the Troubled Company Reporter on Aug. 5, 2004, Fitch affirmed the ratings of BankAtlantic Bancorp, Inc., (BBX; long-term senior 'BB+', short-term senior 'B') and its bank subsidiary, BankAtlantic FSB, and said its Rating Outlook is Stable. BERRY-HILL GALLERIES: Employs AMJ as Restructuring Consultant ------------------------------------------------------------- Berry-Hill Galleries, Inc., and its affiliate, Coram Capital LLC, sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to hire Alan M. Jacobs as Chief Restructuring Officer and AMJ Advisors, LLC, as Restructuring Consultant. As CRO, Mr. Jacobs is authorized to make final and binding decisions with respect to all aspects of the management and operation of the Debtors' businesses, subject to approval of Berry-Hill's board of directors. Additionally, Mr. Jacobs will: (a) oversee all financial and operational aspects of the Debtors; (b) develop and implement business and litigation strategies; (c) oversee day-to-day cash management, disbursements, collections and operations; (d) explore and implement restructuring options including a plan of reorganization; and (e) investigate potential affiliate and third party claims including potential avoidance actions. Where necessary, Mr. Jacobs may determine to utilize the services of independent contractors through AMJ from time-to-time to assist him in carrying out his duties as CRO, James Berry Hill, Berry- Hill's President, says. Mr. Jacobs' hourly rate is $450, with a monthly fee capped at $25,000. Mr. Jacobs and AMJ are not being employed as professionals under Section 327 of the Bankruptcy Code, hence, Mr. Berry Hill relates, they will not be submitting quarterly fee applications pursuant to Sections 330 and 331 of the Bankruptcy Code. However, Mr. Berry Hill says, AMJ will submit periodic reports of compensation paid. Mr. Berry Hill assures the Court that Mr. Jacobs and AMJ do not hold any interest adverse to the Debtors. Headquartered in New York, New York, Berry-Hill Galleries, Inc., - - http://www.berry-hill.com/-- buys paintings and sculpture through outright purchase or on a commision basis and also exhibits artworks. The Debtor and its affiliate, Coram Capital LLC, filed for chapter 11 protection on Dec. 8, 2005 (Bankr. S.D.N.Y. Case Nos. 05-60169 & 05-60170). Robert T. Schmidt, Esq., at Kramer, Levin, Naftalis & Frankel, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and debts between $1 million and $50 million. BLUE BIRD: Judge Zive Confirms Prepackaged Chapter 11 Plan ---------------------------------------------------------- The Honorable Gregg W. Zive of the U.S. Bankruptcy Court for the District of Nevada confirmed Blue Bird Body Company and its debtor-affiliates' Prepackaged Plan of Reorganization on Jan. 27, 2006, a day after the Debtors filed for chapter 11 protection. The approved restructuring plan was supported by 93% of the company's lenders, increased Blue Bird's borrowing availability by $52.5 million through a new and expanded loan agreement and included a debt-for-equity conversion plan that is said to dramatically strengthen the company's balance sheet. Treatment of Claims All administrative claims and priority tax claims are unimpaired and will be fully paid in cash. The claims of Lloyds TSB Bank plc and The Royal Bank of Scotland plc, and other lenders under a bank loan will be discharged in full satisfaction of Blue Bird's debts. The Bank Group will receive: (a) its pro rata share of the Converted Term Loan, and (b) its pro rata share of the New Peach County Stock Distribution. All Other Secured Claims will be reinstated on the Effective Date and will continue with all contractual terms of any agreements until those claims will be satisfied in full. All Other Priority Claims are unimpaired and will be discharged in full satisfaction of Blue Bird's debts. The Priority Claimants will receive: (a) unaltered treatment of the holders' contractual rights, and (b) other treatment that the Debtors and the holders have agreed in writing. All Allowed General Unsecured Claims will be paid in full on the date those claims become payable. Holders of Interests in Peach County Holdings, Inc., will not be impaired by the Plan. Specifically, the holders will receive: (a) the Interests of any holder who accepted the Restructuring Agreement as of the Confirmation Date will be cancelled in accordance with the Restructuring Agreement, and (b) the Interests of any holder who did not accept the Restructuring Agreement as of the confirmation date will be cancelled, but the rights and remedies of any holder under applicable non-bankruptcy law with respect to those Interests otherwise will not be impaired by, the Plan. Interests in all subsidiary Debtors will be reinstated under, and will not be impaired by, the Plan. A full-text copy of the Debtors' Disclosure Statement is available for free at http://ResearchArchives.com/t/s?4c6 Headquartered in Fort Valley, Georgia, Blue Bird Body Company -- http://www.blue-bird.com/-- designs, manufactures and sells school buses, commercial buses and recreational vehicles. Founded in 1927, the Debtors have nearly 3,000 employees and three facilities in two countries. The Debtors also have an extensive network of distributors and service parts facilities throughout North America. Blue Bird and five affiliates filed for chapter 11 protection on Jan. 26, 2006 (Bankr. D. Nev. Case No. 06-50026). Jay M. Goffman, Esq., Van C. Durrer II, Esq., and Mark A. McDermott, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP and Jennifer A. Smith, Esq., at Lionel Sawyer & Collins represent the Debtors in their restructuring efforts. The Debtors had $497,588,000 in total assets and $539,294,000 in total debts as stated in their SEC filing on Form 10-Q for the quarter ending July 31, 1999. In a Dec. 24, 2004, report, The Manufacturer.com says the Debtors' total assets as of 2004 were $700 million. BLUE BIRD: Exits Chapter 11 as Reorganized Company -------------------------------------------------- Blue Bird Corporation reported that its prepackaged restructuring plan filed last week with the United States Bankruptcy Court for the District of Nevada and confirmed by the court on Friday, became effective yesterday, Jan. 30, 2006. The completion of the in-court restructuring process allows Blue Bird's management team and employees to focus their full attention on strengthening business operations, improving financial performance, delivering best-in-class product performance and innovation and providing world-class customer service, the Company said. "We are going to take full advantage of the opportunities this restructuring plan provides Blue Bird," said Jeffry Bust, President and Chief Executive Officer of Blue Bird. "With the new financing this plan provides, the hard work of our employees and the ongoing commitment of our suppliers and distributors, Blue Bird will remain one of the world's leading school bus and motor home manufacturers for many decades to come." The approved restructuring plan, which was supported by 93% of the company's lenders, increased Blue Bird's borrowing availability by $52.5 million through a new and expanded loan agreement and included a debt-for-equity conversion plan that is said to dramatically strengthen the company's balance sheet. The plan also provides for a full recovery to all of the company's general unsecured creditors. Kroll Zolfo Cooper specializes in financial and operational restructurings. Three members of KZC have been appointed to serve on Blue Bird's Board of Directors: -- Stephen Cooper, who will serve as Chairman of the Board; -- Leonard LoBiondo; and -- Robert Bingham. Headquartered in Fort Valley, Georgia, Blue Bird Body Company -- http://www.blue-bird.com/-- designs, manufactures and sells school buses, commercial buses and recreational vehicles. Founded in 1927, the Debtors have nearly 3,000 employees and three facilities in two countries. The Debtors also have an extensive network of distributors and service parts facilities throughout North America. Blue Bird and five affiliates filed for chapter 11 protection on Jan. 26, 2006 (Bankr. D. Nev. Case No. 06-50026). Jay M. Goffman, Esq., Van C. Durrer II, Esq., and Mark A. McDermott, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP and Jennifer A. Smith, Esq., at Lionel Sawyer & Collins represent the Debtors in their restructuring efforts. The Debtors had $497,588,000 in total assets and $539,294,000 in total debts as stated in their SEC filing on Form 10-Q for the quarter ending July 31, 1999. In a Dec. 24, 2004, report, The Manufacturer.com says the Debtors' total assets as of 2004 were $700 million. BOWATER INCORPORATED: Incurs $120.6 Million Net Loss in 2005 ------------------------------------------------------------ Bowater Incorporated (NYSE: BOW) reported a net loss of $120.6 million for the year 2005. This compares with a net loss of $87.1 million in 2004. Sales in 2005 totaled $3.5 billion compared to $3.2 billion in 2004. Excluding impairment and other special items, the loss for 2005 was $39.6 million compared to a 2004 loss of $73.2 million. Bowater had a net loss of $101.9 million on sales of $876.4 million for the fourth quarter of 2005. These results compare with a net loss of $35.2 million on sales of $823.0 million in the fourth quarter of 2004. Before special items, the net loss for the fourth quarter of 2005 was $14.4 million compared with the 2004 fourth quarter net loss before special items of $23.6 million. Special items in the fourth quarter included a gain on asset sales of $21.7 million offset by charges of $109.2 million, principally related to a restructuring at the Thunder Bay, Ontario, mill. Specifically, the company will permanently close the Thunder Bay "A" kraft mill in the second quarter of 2006. This facility produces approximately 210,000 metric tons of market pulp per year. The closure will improve the financial performance of the site by reducing the use of high cost wood and energy. It will result in a 20% employment reduction at the site. "I regret the impact that our decision at Thunder Bay will have on our employees, their families and the community. However, this restructuring is essential for the viability of this site. Also critical is an improved operating environment in Ontario," said Arnold M. Nemirow, Chairman, President and Chief Executive Officer. "Although better than 2004, our 2005 financial results were very disappointing, as we continued to face a stronger Canadian dollar, and higher energy and wood costs. With this restructuring, as well as the $80 million cost reduction program announced last quarter and better markets, we expect to continue to improve our financial results in 2006." Fourth quarter special items consisted of a $21.7 million gain related to asset sales, an asset impairment charge of $69.3 million, primarily related to the permanent closure at Thunder Bay, tax charges of $27.3 million related to the elimination of deferred tax assets, primarily associated with the Thunder Bay operations, a severance charge of $12.8 million, a $0.7 million gain resulting from currency changes primarily related to the appreciation of the Canadian dollar and a $0.5 million charge related to the adoption of an accounting standard related to asset retirement obligations. Additional pension charges related to the closure of approximately $17.0 million are expected to occur in 2006. Operating costs for the company's pulp and paper products increased during the fourth quarter, primarily as a result of rising energy costs and the stronger Canadian dollar. In addition, repair spending was higher as a result of maintenance outages. Maintenance downtime at the Coosa Pines, Alabama pulp mill was longer than anticipated as a result of limited labor availability due to hurricane reconstruction projects in the region. Bowater's average transaction price for newsprint rose $13 per metric ton in the fourth quarter compared to the third quarter, while the company's average operating costs increased $19 per metric ton. Inventory decreased by 13,900 metric tons. The company curtailed 54,000 metric tons of newsprint production in the fourth quarter for market and maintenance reasons. In the first quarter, the company expects to curtail approximately 39,000 metric tons representing maintenance outages and the continued idling of a machine at Thunder Bay. The company has informed its North American customers of a $40 per metric ton price increase effective February 1. Bowater's average transaction price for coated and specialty papers increased $9 per short ton compared to the third quarter, while the company's average operating costs increased $14 per short ton. The company has informed its North American customers of a $60 per short ton price increase, effective February 1, for certain of its uncoated mechanical grades. Bowater's average transaction price for market pulp was essentially flat compared to the third quarter of 2005, while operating costs increased $23 per metric ton. The company curtailed 24,000 metric tons of market pulp due to maintenance outages in the quarter and expects to curtail approximately 6,000 tons in the first quarter. The company's average transaction price for lumber decreased $9 per thousand board feet compared to the third quarter of 2005. During the quarter, the company paid countervailing and antidumping duties of approximately $6.2 million. In December, these duties for the company were reduced from 20.15% to 10.81%. Headquartered in Greenville, South Carolina, Bowater Incorporated produces newsprint and coated mechanical papers. In addition, the company makes uncoated mechanical papers, bleached kraft pulp and lumber products. The company has 12 pulp and paper mills in the United States, Canada and South Korea and 12 North American sawmills that produce softwood lumber. Bowater also operates two facilities that convert a mechanical base sheet to coated products. Bowater's operations are supported by approximately 1.4 million acres of timberlands owned or leased in the United States and Canada and 30 million acres of timber cutting rights in Canada. Bowater is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange, the Pacific Exchange and the London Stock Exchange. A special class of stock exchangeable into Bowater common stock is listed on the Toronto Stock Exchange (TSX: BWX). * * * As reported in the Troubled Company Reporter on Dec. 5, 2005, 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. S&P said the outlook is stable. As reported in the Troubled Company Reporter on Apr. 22, 2005, Moody's Investors Service affirmed Bowater Incorporated's senior implied, senior unsecured and issuer ratings at Ba3, and concurrently, also affirmed the speculative grade liquidity rating as SGL-2 (indicating good liquidity). Moody's says the outlook remains negative. Ratings affirmed: -- Bowater Incorporated * Outlook: negative * Senior Implied: Ba3 * Senior Unsecured: Ba3 * Industrial and PC revenue bonds: Ba3 * Issuer: Ba3 * Speculative Grade Liquidity Rating: SGL-2 -- Bowater Canada Finance Corp. * Outlook: negative * Senior unsecured guaranteed notes: Ba3 As reported in the Troubled Company Reporter on Mar. 30, 2005, Fitch has rated Bowater's senior unsecured bonds and bank debt 'BB-'. Fitch says the Rating Outlook is Stable. Nearly $2.5 billion of debt is subject to the rating. CALPINE CORP: Wants Stay Modified to Apply ISO Cash Collateral -------------------------------------------------------------- Robert G. Burns, Esq., at Kirkland & Ellis LLP, in New York, relates that the California Independent System Operator Corporation is a non-profit public benefit corporation operating the electrical transmission system that delivers power throughout most of California. Participation in the markets administered by the ISO is limited to Scheduling Coordinators, the principals in the financial transactions administered by the ISO that act as intermediaries between the ISO, the retailers and the customers. The Scheduling Coordinator is obligated under the Scheduling Coordinator Agreement to perform all obligations under the ISO's Tariff, including financial obligations. Both the Scheduling Coordinator Agreement and the ISO Tariff are approved by the Federal Energy Regulatory Commission. Calpine Energy Services, LP, is a Scheduling Coordinator in the ISO. On December 27, 2005, the ISO issued the preliminary invoices for the October market activity. For that month, Calpine Corporation and its debtor-affiliates would be ISO Debtors with net charges of $2,908,460 as reflected in the preliminary invoices for October 2005. Payments were due to the market on January 4, 2006. The ISO holds $3,337,610 in cash from Calpine Corporation and its debtor-affiliates pursuant to the ISO Credit Policy and the ISO Tariff that provide that a Scheduling Coordinator that lacks an Approved Credit Rating must either post security or provide a prepayment to the ISO as a cash collateral. The Tariff allows the ISO to use the cash collateral provided by the Debtors to clear the market. Any decision not to use the cash collateral to clear the market may require FERC approval. Accordingly, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to modify the automatic stay to permit the ISO, effective January 4, 2006, to apply the cash collateral held in the ISO account to the final October invoices, in an amount not to exceed $2,925,000. Headquartered in San Jose, California, 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. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) CALPINE CORP: Wants Court to Okay Interim Compensation Procedures ----------------------------------------------------------------- Calpine Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of New York's permission to establish uniform procedures for the compensation and reimbursement of court-approved professionals on a monthly basis. Specifically, the Debtors propose that: (a) On or before the 30th day of each month after the month for which compensation is sought, each Professional seeking compensation will serve a monthly statement, by hand or overnight delivery, on: * the Debtors, * the Debtors' counsel, * the attorneys for any committees appointed by the U.S. Trustee; and * the U.S. Trustee. (b) Each Monthly Fee Statement must contain a list of the individuals and their titles, who provided services during the statement period, their billing rates, the aggregate hours spent by each individual, a reasonably detailed breakdown of the disbursements incurred and contemporaneously maintained time entries for each individual in increments of tenths of an hour; (c) Each person receiving a Fee Statement will have 15 days after receipt to review it. In the event a person has an objection to a Fee Statement, he will serve on the Professional whose statement is objected to, and the Notice Parties, a written notice of objection statement setting forth the nature of the objection and the amount of fees or expenses at issue, no later than 35 days after the end of the month for which compensation is sought,; (d) At the expiration of the 35-day period, the Debtors will promptly pay 80% of the undisputed fees and 100% of the undisputed expenses identified in each Monthly Statement to which no objection has been served; (e) If the Debtors receive an objection to a particular fee statement, they will withhold payment on that portion of the fee statement to which the objection is directed and promptly pay the remainder of the fees and disbursements in percentages set forth; (f) If the parties to an objection are able to resolve their dispute after the service of Notice of Objection to Fee Statement, and if the party whose statement was objected to serves on the Notice Parties a statement indicating that the objection is withdrawn and describing in detail the terms of the resolution, then the Debtors will promptly pay that portion of the fees statement which is no longer subject to an objection; (g) Every 120 days, but no more than every 150 days, each of the professionals will serve and file with the Court an application for interim or final Court approval and allowance, of the compensation and reimbursement of expenses requested; (h) Any Professional who fails to file an application seeking approval of compensation and expenses previously paid when due will be ineligible to receive further monthly payments of fees or expenses until further Court order, and may be required to disgorge any fees paid since retention or the last fee application, whichever is later; and (i) If a Committee is appointed, the attorneys for the Committee may, in accordance with the foregoing procedure for monthly compensation and reimbursement of Professionals, collect and submit statements of expenses, excluding individual committee members' counsel expenses, with supporting evidence of payment, from members of the Committee he represents. Richard M. Cieri, Esq., at Kirkland & Ellis LLP, in New York, tells that Court that the proposed procedures will enable the Debtors to: -- monitor closely costs of administration; -- maintain a level cash flow availability; and -- implement efficient cash management procedures. Moreover, the Debtors will allow the Court and key parties-in- interest to insure the reasonableness and necessity of the compensation and reimbursement sought pursuant to the procedures. Headquartered in San Jose, California, 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. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) CALPINE CORP: Gets Court OK to Reject Two Almaden Office Leases --------------------------------------------------------------- Calpine Corporation and its debtor-affiliates are parties to approximately 20 leases of non-residential real property for various office facilities located throughout the United States. substantially all of the Debtors' business operations, including the Debtors' corporate headquarters facility in San Jose, California. In the year immediately preceding the Debtors' bankruptcy petition date, the Leases cost the Debtors $21,081,410, in the aggregate, for rent and other non-rent expenses, according to Richard M. Cieri, Esq., at Kirkland and Ellis, LLP, in New York. The Debtors began reviewing and analyzing the Leases in December 2005 to determine the quality of the real estate, the market for comparable space and the current market rents, Mr. Cieri relates. The Debtors have identified one leased property and one related sublease that in their business judgment should be rejected as of the Petition Date. The Lease Property is comprised of 13,768 square feet of corporate office space located at Suite 500, 150 Almaden Blvd., in San Jose, California. The Lease is for $1,121,047 annually. The Sublease is for the same office space and is for $267,681 annually. Both Leases will expire on July 17, 2006. The counterparties for the Leases are: (1) DivcoWest Property Services, and (2) American Funding & Financial Corp. The Debtors do not use any of the Lease Property Space for their own purposes, Mr. Cieri discloses. The Debtors are paying more rent for the Property than they are receiving in rent under the Sublease and thus are paying approximately $853,366 annually in rent for Property that they are not using. Accordingly, the Debtors sought and obtained the U.S. Bankruptcy Court for the Southern District of New York's authority to reject the two Almaden Office Leases as of the Petition Date. Headquartered in San Jose, California, 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. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Foraker Balks at Portland's Disclosure Statement ----------------------------------------------------------------- David A. Foraker, the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case, argues that the Disclosure Statement accompanying the Plan of Reorganization filed by the Archdiocese should not be approved because the Plan is unconfirmable as a matter of law. Mr. Foraker points out that: (1) the Plan of Reorganization provides for categorical disallowance of all claims for punitive damages or for loss of consortium, which is impermissible under the Bankruptcy Code. (2) the "best interest of creditors" test of Section 1129(a)(7)(A)(ii) of the Bankruptcy Code cannot be satisfied with regard to the Plan. Mr. Foraker asserts that since the Plan is clearly unconfirmable on its face, no purpose would be served by approving a disclosure statement relating to the Plan or taking other steps in furtherance of confirmation of the proposed Plan. Doing so would be a time-consuming and expensive act of futility unless Portland first modifies the Plan to address the deficiencies. Mr. Foraker further notes that unless the Plan is promptly modified to correct the basic deficiencies, Portland's exclusive right to file and solicit acceptances of a plan should be terminated. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Claimants Balk at Portland Estimation Protocol --------------------------------------------------------------- As previously reported in the Troubled Company Reporter on November 28, 2005, the Archdiocese of Portland in Oregon asked the U.S. Bankruptcy Court for the District of Oregon to estimate and temporarily allow all unresolved present child sex abuse tort claims filed by April 29, 2005, for the limited purposes of voting on, and confirmation of, Portland's Plan of Reorganization. Thomas W. Stilley, Esq., at Sussman Shank LLP, in Portland, Oregon, informs Judge Elizabeth Perris that actual liquidation for purposes of distribution of the Unresolved Present Child Sex Abuse Tort Claims will unduly delay the administration of Portland's bankruptcy case. Estimation Procedures Portland's proposed estimation methodology is based primarily on 140 prepetition claims alleging sexual abuse of minors that were actually liquidated within 2000 to 2004. The Liquidation occurred within the adversary system of the Oregon state courts, pursuant to settlements between the Archdiocese and child sex abuse tort claimants. A total of 45 claims alleging misconduct by former priest Maurice Grammond were liquidated for $28,404,500, for an average of $631,211 per claim, and 14 claims alleging misconduct by former priest Thomas Laughlin were liquidated for $10,054,765, for an average of $773,443 per claim. The remaining 82 non-Grammond and non-Laughlin claims liquidated for $14,942,834, for an average of $182,230 per claim. According to Mr. Stilley, the average value of the Settled Claims is highly probative of the aggregate actual value of the Unresolved Present Child Sex Abuse Tort Claims for purposes of Plan confirmation. The Settled Claims and the Unresolved Present Child Sex Abuse Tort Claims have similar characteristics, including: -- proximity in time of liquidation; -- type and nature of alleged abuse; -- range of time period from the alleged occurrence until the assertion of the claim; -- range of alleged damages; -- identity of employer or principal of the accused wrongdoers; -- applicable law; -- representation by and identity of claimants' attorneys; and -- requests for jury trials. Based on the Settled Claims Data, the Unresolved Present Child Sex Abuse Tort Claims is expected to actually liquidate in amounts ranging from $0 to over $1,000,000. However, since most of the Unresolved Present Child Sex Abuse Tort Claims are in the earliest stages of discovery, Mr. Stilley submits that it is speculative at this time to predict whether any Unresolved Present Child Sex Abuse Tort Claim will liquidate for $0, $1,000,000, or, more likely, at some point in between. The only certainty, Mr. Stilley says, is that a claimant's allegations of the amount of damages he or she is entitled to receive has no correlation to the amount of damages the claimant will ultimately receive. Responses (A) FCR David A. Foraker, the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case, asks the U.S. Bankruptcy Court for the District of Oregon to reject Portland's proposed "forced settlement" estimation method with regard to the unresolved tort claims. "In the context of this case, such a method -- even if properly adjusted -- is appropriate only if the purposes of the estimation are limited to setting voting rights for a plan and determining whether a plan satisfies the 'best interest of creditors' test is feasible," Mr. Foraker explains. There simply is no good reason for the Court to do what the Archdiocese is asking it to do, Mr. Foraker continues. A plan can be confirmed in Portland's case without first determining the exact amount of the Archdiocese's total liability on account of Unresolved Tort Claims. Mr. Foraker tells the Court that the actual liquidation of the Claims would not result in "undue delay" in the administration of the case. The claims liquidation process must go forward under any plan structure. Mr. Foraker also notes that under 28 U.S.C. Section 157(b)(2)(B) estimation of unliquidated personal injury tort or wrongful death claims is not a core proceeding that may be heard and determined by bankruptcy judges, if the estimation is "for purposes of distribution" in a bankruptcy case. Under 28 U.S.C. Section 157(c)(1), a bankruptcy judge may hear a non-core proceeding but must submit proposed findings of fact and conclusions of law to the district court. Only the district court may enter a final order in a non-core proceeding, after de novo review of the bankruptcy judges' proposed findings and conclusions, absent the consent of all the parties to the proceeding to having the bankruptcy judge enter the final order. (B) 38 Tort Claimants Neil T. Jorgenson, Esq., in Portland, Oregon, informs the Court that 38 tort claimants support the entry of an order temporarily allowing each of the claimants' claims for voting purposes for $2,250,000, under the condition that the Court order: -- explicitly state that the claim is temporarily allowed only for voting purposes; -- is explicitly limited in nature and has no binding effect for any purpose other than the purpose of temporary allowance for voting; -- will have no effect with respect to the claims for any other purposes; and -- will not create any rights in any party to assert claims preclusion, issue preclusion, collateral estoppel or res judicata, or any other similar right including law of the case, in any other proceeding, whether in state or federal court. Additionally, Mr. Jorgenson points out that neither the order, nor any determinations must be admissible in any way with respect to any hearing or trial regarding the claims, whether in state or federal court. (C) 45 Tort Claimants On behalf of 45 tort claimants, Erin K. Olson, Esq., in Portland, Oregon, and Daniel J. Gatti, Esq., at Gatti, Gatti, Maier, Krueger, Sayer and Associates, in Salem, Oregon, argue that the Archdiocese of Portland in Oregon's use of "weighted averages" from past settlement figures is improper and unfair. The abuses of many clergy-perpetrators who were not accused in prior claims against the Archdiocese are now subject to claims pending against Portland for which there are no historical settlement figures, Mr. Gatti points out. Use of settlements from other priests' abuses is invalid, and Portland's use of postpetition settlements as a factor in its estimation model is improper, Ms. Olson adds. Many of the postpetition settlements included conditions, which Portland has breached by proposing an infeasible and unconfirmable plan of reorganization, so they are not settlements at all. If estimation is warranted at all for unresolved claims, Mr. Gatti insists that jury verdicts are the appropriate foundation, and not settlement figures. In addition, Mr. Gatti and Ms. Olson assert that there is no support for Portland's request that the Court simply disallow all punitive damages claims. (D) Tort Committee "Estimation will result in unnecessary delay and expense," Albert N. Kennedy, Esq., at Tonkon Torp, LLP, in Portland, Oregon, tells Judge Perris. Mr. Kennedy relates that for 18 months, Portland has delayed jury trials. Despite extensive efforts, Portland has had minimal success in settling claims. As a result, Portland has effectively delayed the liquidation of tort claims. Mr. Kennedy notes that Portland's assertion that the actual liquidation for tort claims will cause "undue delay" in the administration of the case is based on the unsupported and unsupportable assertion that no plan of reorganization can be confirmed until all claims have been liquidated. Furthermore, Portland's premise is wrong because the Archdiocese is solvent. A plan can be confirmed without liquidating tort claims. Accordingly, since Portland is solvent, the claim of each tort claimant must be paid in full or a plan will not be confirmable under Sections 1129(a)(7) and 1129(b)(2)(B) of the Bankruptcy Code. Mr. Kennedy clarifies that the Official Committee of Unsecured Creditors supports the temporary allowance of tort claims for the sole purpose of accepting or rejecting a plan pursuant to Rule 3018(a) of the Federal Rules of Bankruptcy Procedure. The Tort Committee also does not oppose Portland's proposed method for temporary allowance for voting purpose. The Tort Committee, hence, asks the Court to deny approval of Portland's request to estimate tort claims except as it relates solely to temporary allowance for voting on a plan. Claimants John Doe 104, John Doe 105, C.B., J.C.1, G.P., D.S., R.H., J.D., N.M., M.J.D., D.C., and holders of Claim Nos. 181, 182, 183, 184, 185, 187, 188, 189, 302, 303, 304, 305, 306, 448 and 835 support the Tort Committee's arguments. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) CELESTICA INC: Posts $28 Million Net Loss in Quarter Ended Dec. 31 ------------------------------------------------------------------ Celestica Inc. (NYSE: CLS, TSX: CLS/SV) reported financial results for the fourth quarter and fiscal year ended Dec. 31, 2005. Revenue was $2.075 billion, compared to $2.333 billion in the fourth quarter of 2004. Net loss for the fourth quarter was $28 million, compared to a net loss for the fourth quarter of 2004 of $810 million. Adjusted net earnings for the quarter were $29 million, compared to $43 million for the same period last year. Adjusted net earnings is defined as net earnings before amortization of intangible assets, gains or losses on the repurchase of shares and debt, integration costs related to acquisitions, option expense, option exchange costs and other charges, net of tax and significant deferred tax write-offs For 2005, revenue was $8.471 billion compared to $8.840 billion in 2004. Net loss was $47 million, compared to a net loss of $854 million last year. Adjusted net earnings for the year were $129 million, compared to adjusted net earnings of $96 million in 2004. "Demand in the quarter showed some modest seasonal strength, particularly in our server segment," said Steve Delaney, CEO, Celestica. "Profitability was adversely affected by the cost of supporting significant transfer activity combined with a late surge in demand in one of our Americas plants. Transition activity continues in the site in the first quarter, but we have deployed the necessary resources to restore efficiencies by the second quarter." Outlook For the first quarter ending March 31, 2006, the company anticipates revenue to be in the range of $1.8 billion to $2 billion, and adjusted earnings per share ranging from $0.04 to $0.12. Headquartered in Toronto, Ontario, Celestica, Inc. -- http://www.celestica.com/-- is a world leader in the delivery of innovative electronics manufacturing services. Celestica operates a highly sophisticated global manufacturing network with operations in Asia, Europe and the Americas, providing a broad range of integrated services and solutions to leading OEMs (original equipment manufacturers). Celestica's expertise in quality, technology and supply chain management, enables the company to provide competitive advantage to its customers by improving time-to-market, scalability and manufacturing efficiency. * * * As reported in the Troubled Company Reporter on Dec. 26, 2005, Fitch Ratings has initiated coverage of Celestica Inc. by assigning these ratings: -- Issuer default rating 'BB-'; -- Unsecured credit facility 'BB-'; -- Senior subordinated debt 'B+'. The Rating Outlook is Stable. Fitch's action affects approximately $750 million of debt. CENTURY THEATRES: S&P Rates Proposed Secured Credit Facility at B+ ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned a 'B+' corporate credit rating to San Rafael, California-based movie exhibitor Century Theatres Inc. Standard & Poor's also assigned a 'B+' rating and a recovery rating of '3' to the company's proposed secured credit facility, indicating a meaningful (50%-80%) recovery of principal in the event of a payment default. The outlook is negative. Following the new debt issuance, the company will have approximately $440 million in debt and $291 million in present value of operating leases. Proceeds for the $360 million term loan B portion of the secured credit facility will be used to retire existing debt and to fund a special dividend of $235 million to the company's shareholders. The $75 million revolving credit portion of the credit facility is expected to be undrawn at closing. "The rating reflects the company's geographic concentration in the western and midwestern states, high leverage, usage of debt to fund a large special dividend, relatively aggressive expansion plan, participation in a highly competitive industry, and reliance on the unpredictable popularity of Hollywood films," said Standard & Poor's credit analyst Tulip Lim. These risks are partially offset by the company's: * good operating metrics and margins relative to peers, * strong market position in the markets in which the company operates, and * modern theater circuit relative to other theater chains. The movie exhibition industry as a whole suffered in 2005 because of a weak summer and fall box office. The movie theaters' higher margin concession business was correspondingly hurt by lower traffic. Century's profitability was flat in 2005 after adjusting comparisons for an extra week in 2004, and margins remained good relative to peers. The company has a sizable new-theater construction plan for the next few years, which should provide a boost to EBITDA. However, it will be a cash drain in the near-to-intermediate term, raising the possibility of the company incurring negative discretionary cash flow and needing to draw on its revolving credit facility to fund the expansion plan. Also, the company's operating lease commitments will increase as the company grows. If the box office suffers a prolonged decline, the company maintains its ambitious growth plan, and incurs additional lease obligations, leverage may increase. CENVEO INC: Cost Cutting Measures Prompt S&P to Hold B+ Rating -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Cenveo, Inc., including the 'B+' corporate credit rating, and removed the ratings from CreditWatch, where they were placed with negative implications on Aug. 16, 2005. The CreditWatch listing followed the company's announcement it had reached an agreement with Burton Capital Management LLC and Goodwood Inc. to end the company's proxy contest, approved a new board of directors, and hired a new management team. The outlook is negative. "We expect that, even though lease-adjusted debt leverage at Cenveo is very high for the rating, the company will successfully accomplish significant and prudent additional cost-cutting actions in 2006, thereby meaningfully improving EBITDA, profit margins and leverage during the period," said Standard & Poor's credit analyst Emile Courtney. Also, Cenveo is expected over the next few months to sell its Canadian envelope subsidiary and to repay debt balances with most of the proceeds. Although this action may have only a moderate impact toward deleveraging the balance sheet over the near term -- given the relatively sizable cash flow stream at the Canadian subsidiary -- the proceeds would be used to meaningfully reduce debt balances by as much as $300 million. This would position Cenveo to benefit considerably from planned cost-cutting actions. Ratings reflect high debt leverage and the company's narrow business focus on the highly competitive envelope and commercial printing segments. Cenveo is the largest manufacturer in the North American envelope market and one of the largest regional commercial printers in the U.S. Commercial printing and envelope manufacturing segments are highly fragmented marketplaces characterized by low margins. Cenveo plans to rationalize printing facilities, lower headcount, and consolidate its supplier base toward a goal of achieving $75 million in annual cost cuts by the end of 2006. CHARTER COMMS: S&P Junks Rating on Proposed $400 Mil. Senior Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'CCC-' rating to the proposed aggregate $400 million senior notes of CCH II LLC (CCC+/Negative/--) and CCH II Capital Corp. (CCC+/Negative/--), which are indirect subsidiaries of cable TV system operator Charter Communications Inc. (Charter; CCC+/Negative/B-3). Proceeds will be used to reduce borrowings, but not commitments, under the Charter Communications Operating LLC (CCC+/Negative/--) revolving credit facility. The notes are being offered in two tranches, the first of which provides the option to pay interest in cash or in-kind, and will mature in 2013. The second tranche will be issued on terms substantially identical to those of CCH II's existing 10.25% senior notes due 2010. Both issues are being offered under Rule 144A with registration rights. The 'CCC+' corporate credit rating and all other ratings on Charter and its subsidiaries were affirmed. The outlook is negative. Charter had approximately $19.1 billion of debt as of Sept. 30, 2005. "The ratings on Charter continue to reflect high financial risk," said Standard & Poor's credit analyst Eric Geil. Charter's high financial risk results from: * aggressive debt-financed acquisitions and capital expenditures, * intense competitive pressure from satellite direct-to-home TV providers, * weak revenue and EBITDA trends, * uncertain prospects for discretionary cash flow generation in the foreseeable future, and * pressure from significant debt maturities beginning in 2007. These factors constrain the rating despite the company's position as the still-dominant provider of pay-TV services in its markets, a degree of EBITDA stability from largely subscription-based revenues, advanced services growth, and good system asset values. Charter boosted marketing efforts and related customer expenses in 2005 to improve subscriber retention, helping to moderate its rate of subscriber erosion. However, higher expenses are depressing profitability, and Charter's subscriber numbers remain weaker than most other major operators' generally flat trends. High-speed data customer growth was healthy, but net customer additions were down from last year; this key growth driver is losing capacity to temper weak video operating results. Phone companies are more aggressively promoting DSL with discounts, and Charter already faces initial competition in one of its Texas systems from local phone company Verizon Communications Inc. for video services. During the next two years, Charter could see new video competition in additional markets. Though higher spending on customer service, promotions, and digital video recorders is helping Charter stabilize the subscriber base, the company's weak financial condition could limit its ability to sustain elevated spending needed compete effectively against financially stronger rivals beyond the near term. Rising programming costs and customer service expenses could continue to pressure Charter's margins because intense competition limits its capacity to raise customer prices. Leverage is excessive, and could rise given stagnant weak revenue growth, further potential EBITDA declines, and significantly negative discretionary cash flow. COMPUTER SERVICES: Dutch Auction Cues S&P to Cut Ratings to BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on Dallas, Texas-based Affiliated Computer Services Inc. to 'BB+' from 'BBB+' and placed it on CreditWatch with negative implications. The rating actions follow ACS's announcement that its Board of Directors has authorized a modified "Dutch Auction" tender offer to purchase up to 55.5 million shares of its Class A common stock at a price per share not less than $56 and not greater than $63. The tender offer is expected to commence on or about Feb. 6, 2006, and to expire on or about March 6, 2006, unless extended. The number of shares proposed to be purchased in the tender offer represents approximately 45% of ACS's currently outstanding common stock. "The rating downgrades," said Standard & Poor's credit analyst Philip Schrank, "reflect Standard & Poor's assessment that ACS no longer possesses an investment-grade financial policy in light of the announced $3.5 billion debt-financed Dutch tender offer." Pro forma total debt to EBITDA will rise to about the 5x range from under 1x currently. If the tender offer is successfully completed as contemplated, the likely outcome for the company's corporate credit rating would be `BB' or `BB-', reflecting the company's highly leveraged capital structure. However, upon further discussions with ACS management, ratings may be lowered an additional notch based upon our review of management's future financial policy and growth strategies. "Additionally," said Mr. Schrank, "we expect that existing senior unsecured debt would either be refinanced and the ratings withdrawn, or else notched below the corporate credit rating due to the expected new secured debt in the capital structure." CONJUCHEM INC: Oct. 31 Balance Sheet Upside-Down by CDN$23 Million ------------------------------------------------------------------ ConjuChem Inc. (TSX:CJC) reported financial results for its fiscal year ended Oct. 31, 2005. Revenues for the fiscal year ending Oct. 31, 2005, were CDN$705,707, compared to CDN$820,449 of the prior year. "2005 was highlighted by the development of our new PC-DAC(TM) technology, which is a natural extension of our albumin bonding expertise and intellectual property," said Lennie Ryer, Chief Financial Officer. "We believe strongly in the power of PC-DAC(TM) to unlock the therapeutic potential of peptides. In 2006, we will endeavour to advance this technology in multiple programs." The Company's net loss for the year ended Oct. 31, 2005 was CDN$38.5 million, compared to CDN$47.7 million for the year ended Oct. 31, 2004. The decrease in the net loss is mainly attributable to a decrease in net research and development expenses of CDN$13.7 million. At Oct. 31, 2005, the Company had cash and cash equivalents of CDN$17.8 million and a working capital position of CDN$14.6 million. As of Oct. 31, 2005, ConjuChem Inc.'s balance sheet showed assets totaling CDN$20,410,052 and liabilities totaling CDN$43,502,313. The company's shareholders' deficit was CDN$23,092,261, compared to a CDN$10,252,756 deficit at Oct. 31, 2004. ConjuChem Inc. -- http://www.conjuchem.com/-- is biotechnology company, developing drugs to improve the treatment of human diseases. At the core of ConjuChem is a powerful, proprietary technology, which we are leveraging to create an attractive portfolio of commercial drugs. The Company's primary focus is the further development of a drug for Type 2 diabetes, which is currently in Phase II testing. CORNELL TRADING: Committee Hires Gadsby Hannah as Local Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Cornell Trading, Inc.'s chapter 11 case seeks the Court's authority to retain Charles A. Dale III and the law firm of Gadsby Hannah LLP as its local counsel. Gadsby Hannah is expected to: a) represent and communicate with the Committee in Court hearings; b) file all necessary motions, notices and other appropriate pleadings on the Committee's behalf; and c) assist the Committee generally in performing other services as may be desirable or necessary in connection with the discharge of the Committee's duties pursuant to Section 1103 of the Bankruptcy Code. Gadsby Hannah's current standard fees are: Professional Hourly Rates ------------ ------------ Partners $330 - $500 Associates $195 - $300 Paraprofessionals $100 - $150 Steven Sass, Esq., at Gadsby Hannah, assures the Court that his firm Hannah does not represent any interest adverse to the Debtors. Headquartered in Williston, Vermont, Cornell Trading, Inc. -- http://www.aprilcornell.com/-- sells women's and children's apparel including dresses, skirts, blouses, and sleepwear. Cornell also offers books and housewares like table linens, placemats and napkins, bedding, and dolls and stuffed animals. The Company filed for chapter 11 protection on January 4, 2006 (Bankr. D. Mass. Case No. 06-10017). Christopher J. Panos, Esq., at Craig & Macauley, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated debts and assets between $10 million to $50 million. COTT CORP: Posts $6.9 Million Net Loss in Quarter Ending Dec. 31 ---------------------------------------------------------------- Cott Corporation (NYSE:COT; TSX:BCB) reported results for the fourth quarter and full year ended Dec. 31, 2005. For the fourth quarter ending Dec. 31, 2005, Cott's sales grew to $397.2 million, compared to $369.3 million sales in the quarter ending Jan. 1, 2005. For the fourth quarter ending Dec. 31, 2005, Cott's incurred a net loss of $6.9 million, compared to a net income of $11.4 million in the quarter ending Jan. 1, 2005. As of Dec. 31, 2005, total assets were $1.71 billion and total liabilities were $1.229 billion, resulting in a stockholders' equity of $481 million. "2005 was a challenging year for Cott and our industry as we faced unprecedented commodity cost increases and a continuing consumer shift toward non-carbonated beverages," said John K. Sheppard, president and chief executive officer. "Despite these challenges, Cott remains a strong player in the beverage industry. Our U.S. retailer brand volume share remained steady for the past 52 weeks and grew in the most recent four and 12-week periods, despite category softness and aggressive national brand promotional activity. As we focus on the North American realignment in 2006, we are taking actions that we expect will drive sales growth and significantly improve our operating performance as we move beyond this transition year." For the full year ending Dec. 31, 2005, Cott's sales grew to $1.755 billion, compared to $1.646 billion sales for the year ending Jan. 1, 2005. Headquartered in Toronto, Ontario, Cott Corporation -- http://www.cott.com/-- is one of the world's largest retailer brand beverage suppliers whose principal markets are North America, the United Kingdom and Mexico. * * * As reported in today's Troubled Company Reporter, Standard & Poor's Ratings Services lowered its ratings on Toronto-based private label soft drink manufacturer Cott Corp. by one notch, including its corporate credit rating, to 'BB-' from 'BB'. At the same time, the ratings were removed from CreditWatch, where they were placed with negative implications Sept. 21, 2005, following the company's announcement of substantially weaker earnings expected for 2005. S&P said the outlook is negative. COTT CORP: Weak Earnings Prompt S&P to Downgrade Ratings to BB- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Toronto- based private label soft drink manufacturer Cott Corp. by one notch, including its corporate credit rating, to 'BB-' from 'BB'. At the same time, the ratings were removed from CreditWatch, where they were placed with negative implications Sept. 21, 2005, following the company's announcement of substantially weaker earnings expected for 2005. The outlook is negative. "The downgrade reflects Cott's weakened performance in 2005 and our belief that it will remain a challenge for some time for the company to turn operations around," said Standard & Poor's credit analyst Lori Harris. Cott's operations have been negatively affected by higher fixed and raw material costs, volume softness in the carbonated soft drink market, and a demand shift in product mix toward lower margin bottled water. As a result, the company's financial profile weakened in 2005, with the reported operating margin (before D&A and nonrecurring items) dropping to 10.3% from 12.5% in 2004, despite a 6.6% increase in revenues year over year. The ratings on Cott reflect its: * below-average business profile stemming from a narrow product portfolio, * customer concentration, and * small size in a sector dominated by companies with substantially greater financial resources and market presence. Furthermore, the company's weaker-than-expected operating performance resulted in a decline in operating margin. These factors are partially offset by Cott's good credit protection measures for the rating and solid market position as the leading private label manufacturer and marketer of take-home CSDs in the U.S., U.K., and Canada. Cott competes in the mature and highly competitive soft drink category alongside larger players by securing a strong private label share. Despite this defensive operating strategy, the company is vulnerable to pricing and market share actions by its primary competitors. Cott is the world's leading supplier of retailer-branded and the fourth-largest manufacturer of CSDs. The company provides an integrated solution for retailers' private label strategy including concept, concentrate formulation, production, packaging, inventory management, fulfillment, warehouse delivery, and promotion. Core geographic operations are in the U.S., the U.K., and Canada. Cott has benefited from the higher concentration of large food retailers in the U.S. and from an increased presence of private label products in the grocery channel, which has expanded at a faster rate than branded grocery sales. Nevertheless, the company is exposed to customer concentration risk as sales to its top customer account for more than 35% of total revenues. The negative outlook reflects our concerns regarding the challenges faced by the company given its weak operating performance. Downward pressure on the ratings could come from the ongoing deterioration in Cott's operations and/or weakness in credit protection measures or liquidity. In the medium term, there are limited prospects for the ratings to be raised. The outlook could be revised to stable if the company demonstrates improved operating performance and credit measures. COVALENCE SPECIALTY: S&P Rates Proposed $500 Mil. Sr. Loan at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Covalence Specialty Materials Corp., which will be formed as a stand-alone privately owned corporation following the equity sponsor-led acquisition of Tyco International Ltd.'s (BBB+/Watch Neg/A-2) plastics and adhesives businesses. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and a recovery rating of '1' to the company's proposed $500 million senior secured credit facilities, based on preliminary terms and conditions. The 'B+' rating is one notch above the corporate credit rating; this and the '1' recovery rating indicate that lenders can expect full recovery of principal in the event of a payment default. Standard & Poor's also assigned its 'B-' rating and a recovery rating of '3' to the company's $200 million second-priority senior secured floating rate notes due 2013. These ratings denote the likelihood that second-priority noteholders would experience meaningful recovery of principal (50%-80%) in a payment default. Standard & Poor's also assigned its 'CCC+' rating to the company's $295 million senior subordinated notes due 2016. Both the second-lien floating rate notes and subordinated notes will be issued under Rule 144A with registration rights. Transaction proceeds will be used to finance the acquisition and related fees and expenses. The outlook is positive. Pro forma for the transaction, Princeton, New Jersey-based Covalence had total debt outstanding of about $820 million at Dec. 31, 2005. In December 2005, Apollo Management L.P. entered into a definitive agreement to purchase the plastics and adhesives businesses of Tyco International Ltd. for $975 million. "The ratings reflect Covalence's vulnerable business risk profile incorporating its exposure to industrial and other end markets tied to general economic activity, potential vulnerability to volatile raw-material costs if business conditions weaken, challenges associated with operating as a stand-alone company, aggressive debt leverage, and low operating margins that reflect a moderate dependence on commodity-like products," said Standard & Poor's credit analyst Liley Mehta. These negative factors outweigh the benefits of leading market positions in various plastic films market segments, considerable scale and decent product and customer diversity. Ratings could be raised in the intermediate term, if the company: * establishes a track record of earnings improvement and free cash flow generation, * successfully establishes itself as a stand-alone entity, and * demonstrates its commitment to maintain debt at manageable levels. Given the company's heavy debt burden and limited operating profitability, preservation of sufficient liquidity under the proposed revolving credit facility is a key underpinning for the rating. If financial performance fails to improve in line with expectations, or if other unforeseen challenges develop to challenge credit quality, the outlook or ratings could be reevaluated. DIAMOND TRIUMPH: Lack of Info Prompts S&P to Withdraw B- Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'B-' corporate credit rating on Kingston, Pennsylvania-based Diamond Triumph Auto Glass Inc. At the same time, Standard & Poor's withdrew its 'B-' rating on Diamond Triumph's senior unsecured notes. Standard & Poor's no longer has sufficient information to maintain surveillance on these ratings, as Diamond Triumph received consent from debtholders to cease filing periodic financial reports with the SEC. DRS TECHNOLOGIES: S&P Rates Proposed $300 Mil. Senior Notes at B+ ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to DRS Technologies Inc.'s proposed $300 million convertible senior notes due 2026. The notes will be issued under SEC rule 144A without registration rights. The ratings on the proposed notes are not on CreditWatch. Certain other ratings on the defense electronics supplier, including the 'BB-' corporate credit rating, remain on CreditWatch, where they were placed with negative implications on Sept. 22, 2005. On Oct. 5, 2005, Standard & Poor's indicated that if the proposed acquisition of Engineered Support Systems Inc. is completed on terms similar to those presented, the ratings on DRS would be affirmed and removed from CreditWatch. The outlook would be negative. "The pending affirmation reflects expected improvements in program and customer diversity as a result of the $2 billion, largely debt-financed acquisition," said Standard & Poor's credit analyst Christopher DeNicolo. "However, the improved business risk profile is offset somewhat by the increase in leverage and deterioration in cash flow protection measures," the analyst continued. DRS has offered $43 for each share of ESSI stock to be paid 70% in cash and 30% in DRS stock. The cash portion, including fees and expenses and repaying bank debt at DRS and ESSI, will be financed with cash on hand and the proceeds from a new credit facility, and new public debt securities. As a result of the transaction, fiscal 2006 (ending March 31, 2006) pro forma debt to EBITDA is expected to increase above 5x, from previous expectations of 3.5x-4x for DRS stand-alone. Similarly, funds from operations to debt is likely to decline to the 10%-15% range from over 20%. The significant equity portion of the purchase consideration limits the impact on debt to capital, which will increase to 60% from around 50% currently. However, the acquisition will improve DRS' program diversity, increase its exposure to the U.S. Air Force, and provide a service offering (that should be less vulnerable to funding pressures) to complement its existing largely product portfolio. The transaction is expected to close by Jan. 31, 2006. DRYDEN III: Optional Redemption Prompts S&P to Withdraw Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on the class A-1, A-2, A-3, B, C, and D notes issued by Dryden III Leveraged Loan CDO 2002, a cash flow arbitrage high-yield CLO transaction. The rating withdrawals follow the optional redemption of the notes pursuant to article 9 of the indenture. The redemption took place on the Jan. 26, 2006 distribution date. Ratings Withdrawn Dryden III Leveraged Loan CDO 2002 Rating ------ Balance (in millions) Class To From Current Previous ----- -- ---- ------- -------- A-1 NR AAA 0.00 $188.00 A-2 NR AAA 0.00 $30.00 A-3 NR AA 0.00 $25.00 B NR A 0.00 $15.00 C NR BBB 0.00 $13.00 D NR BB 0.00 $10.00 ENDURANCE SPECIALTY: S&P Assigns BB+ Rating on Preferred Stock -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary 'BBB' senior debt, 'BBB-' subordinated debt, 'BB+' junior subordinated, and 'BB+' preferred stock ratings to Endurance Specialty Holdings Ltd.'s (NYSE:ENH; BBB/Positive/--) recently filed universal shelf. The new shelf has an undesignated notional amount in accordance with the new SEC rules effective Dec. 1, 2005. "The ratings reflect the company's strong competitive position, which is supported by a diversified business platform," explained Standard & Poor's credit analyst Damien Magarelli. In addition, ENH maintains strong capital adequacy and strong operating performance. "Offsetting these positive factors are concerns about exposure to catastrophes and ENH being a relatively new operation and management not having been tested through difficult market cycles while at the company," added Mr. Magarelli. Also, ENH has expanded its product offering via new transactions and it remains unclear if these new transactions will yield strong earnings. ENH has strong financial flexibility and debt leverage, and interest coverage levels are well above that required for the rating. Also, ENH's diversified platform and strong earnings support nonstandard notching. ENH is expected to maintain debt leverage of less than 20% and interest coverage of more than 10x in support of nonstandard notching. ENH had a debt-to-capital ratio of 17.7% in 2004 and interest coverage significantly more than the level required for the rating at 35x. The outlook is based on Standard & Poor's expectation that ENH will maintain strong earnings in 2006. Standard & Poor's also expects that the group's capital adequacy ratio will remain strong at more than 155%. In addition, the company is expected to exhibit the risk-management skills and underwriting discipline to control the volume and profitability of business. ENH is expected to maintain debt leverage at less than 20% and interest coverage of more than 10x in support of nonstandard notching. If ENH maintains strong earnings in 2006, the rating could be raised. In contrast, if hurricane loss estimates are revised significantly upward, if capital expectations are not met, or if strong earnings are not maintained, the outlook could be revised to stable. ENTERGY NEW ORLEANS: Wants Court to OK Bank of New York Settlement ------------------------------------------------------------------ As previously reported, Entergy New Orleans Inc., sought a summary judgment on Entergy Corporation's lien on insurance proceeds contending that The Bank of New York does not have an interest or valid lien in the insurance proceeds resulting from the destruction of the Debtor's property, plant and equipment caused by Hurricane Katrina. The Bank of New York is the indenture trustee pursuant to a Mortgage and Deed of Trust dated as of May 1, 1987. Even if The Bank of New York has an interest or valid lien on the insurance proceeds, the Debtor contended that it has the right to use those proceeds, as provided in the Indenture, to reimburse for the cost of restoration of its property, plant and equipment or to repay the DIP Loans. Bank of New York's Adversary Proceeding The Bank of New York has initiated an adversary proceeding against the Debtor, asking the U.S. Bankruptcy Court for the Eastern District of Louisiana to determine the: -- validity, priority and extent of the Trustee's liens on the Insurance Proceeds on account to damage sustained by the Indenture Collateral; and -- contractual rights under the Indenture regarding the reimbursement of the Debtor for the costs of rebuilding or renewing the Indenture Collateral. The Trustee asserted that it has a valid security interest in the Insurance Proceeds and that no designation as loss payee is required for it to have a valid, full perfected security interest on the Insurance Proceeds. DIP Agreement At the Final DIP Hearing, the Debtor, Entergy Corporation, Financial Guaranty Insurance Company and Deutsche Bank Securities, Inc., agreed to: -- allow the Debtor to use the Insurance Proceeds; -- grant to Entergy a priming lien; and -- provide the bondholders with adequate protection. The Trustee did not consent to the DIP Agreement. The Court upheld the DIP Agreement. The Trustee then filed an appeal. The Bank of New York Settlement To settle the issues raised, the Debtor and the Trustee agree that: (a) the Trustee will dismiss the Appeal and the adversary proceeding; (b) the Debtor will dismiss its Summary Judgment Motion; (c) the DIP Agreement will be for the benefit of and binding on all Bondholders, except that the provisions for the payment of reasonable fees and expenses will only apply to the fees and expenses of the Trustee, FGIC, Deutsche Bank and their professionals; and (d) the DIP Agreement will be binding on the Settling Parties and that all Bondholders, creditors and other parties-in -interest are prohibited from filing any litigation against the Settling Parties. The Debtor asks the Court to approve their Settlement with the Bank of New York. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENTERGY NEW ORLEANS: Wants Court to Set Apr. 19 as Claims Bar Date ------------------------------------------------------------------ To develop and confirm a plan of reorganization, Entergy New Orleans Inc. will need to possess complete and accurate information regarding the nature, amount and status of all claims that will be asserted in its bankruptcy case. Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure provides that the Court will fix the time within which proofs of claim must be filed in a Chapter 11 case. Bankruptcy Rule 3003(c)(2) provides that any creditor whose claim or interest is not scheduled or whose claim is scheduled as disputed, contingent, or unliquidated will file a proof of claim within the time period fixed by the Court. Accordingly, the Debtor asks the U.S. Bankruptcy Court for the Eastern District of Louisiana to fix April 19, 2006, as the deadline by which proofs of claim based must be filed against it. Each person or entity asserting prepetition claim against the Debtor is required to file a written proof of claim on or before the Bar Date with the Clerk of the Bankruptcy Court. A claimant need not file a proof of claim for these prepetition claims: (a) Any prepetition claim for which a proof of claim against the Debtor has already been properly filed with the Clerk of Court; (b) Any prepetition claim of a person or entity (i) whose claim is listed on the Debtor's Schedules of Liabilities and (ii) is not described in the schedules as "disputed," "contingent," or "unliquidated," and (iii) who does not dispute the amount, priority, status, or nature of the prepetition claim; (c) Any prepetition claim to the extent that the prepetition claim has been paid by the Debtor with the Court's authority; and (d) Any prepetition claim that has been fixed and allowed by a Court order entered on or before the Bar Date. Proofs of claim for any rejection damage claims arising during the Debtor's Chapter 11 Case must be filed by the later of: (i) 30 days after the effective rejection date; or (ii) the Bar Date. Proofs of claim for any other prepetition claims with respect to a lease or contract must be filed by the Bar Date. The Debtor will provide actual notice of the Bar Date by mailing a notice together with a proof of claim form to: (a) The Office of the United States Trustee; (b) Each member of any Committee appointed pursuant to the Bankruptcy Code, and any attorneys for that Committee; (c) All holders of prepetition claims listed on the Debtor's Schedules; (d) The district director of the Internal Revenue for the Eastern District of Louisiana, and all taxing authorities for the jurisdictions in which the Debtor conducts business; (e) The Securities and Exchange Commission; and (f) All persons and entities requesting notice, pursuant to Rule 2002 of the Federal Rules of Bankruptcy Procedure, as of the entry of the proposed Bar Date Order. The Bar Date Notice will notify the parties of the Bar Date and will inform them regarding: -- who must file a proof of claim; -- the procedure for filing of proofs of claim; and -- the consequences of failure to timely file a proof of claim. Out of an abundance of caution, the Debtor reserves the right to serve the Bar Date Notice to certain entities, with whom, before the Petition Date, it had done business with or who may have asserted a claim against it in the recent past. All potential claimants will have approximately 90 days' notice of the Bar Date, which is in excess of the minimum 20-day notice period, to provide the creditors ample time within which to prepare and file proofs of claim. After the initial mailing of the Bar Date Notice, the Debtor anticipates that it may be required to make supplemental mailings of the Bar Date Notice in a number of situations, including in the event that: (a) notices are returned by the post office with forwarding addresses, necessitating a re-mailing to the new addresses; (b) certain parties acting on behalf of parties-in-interest decline to pass along notices to the parties and instead, forward the Debtor the names and addresses for direct mailing; and (c) additional potential claimants become known to the Debtor. The Debtor seeks the Court's authority to make supplemental mailings of the Bar Date Notice up to 23 days in advance of the Bar Date, with any of the supplemental mailings being deemed timely. The Debtor will also publish a notice of the Bar Date to provide notice to: * those creditors to whom no other notice was sent and who are unknown or not reasonably ascertainable by the Debtor; * known creditors with addresses unknown to the Debtor; and * creditors with potential claims unknown to the Debtor. The Debtor believes that the Publication Notice will convey essential information in a succinct form that will minimize the publication costs to be incurred by the estate. The Debtor asks the Court to approve the Bar Date Notice and the Mailing and Publication Procedures. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) FUTURE BEACH: Files Notice of Intention Under BIA in Canada ----------------------------------------------------------- Future Beach has filed a "Notice to Intention" to make a proposal pursuant to the Bankruptcy and Insolvency Act of Canada. Future Beach has transferred its manufacturing facilities in favor of third party manufacturing facilities, which are currently operational. This is expected to achieve major savings in manufacturing and operating costs. Future Beach has received interim financing and is preparing a proposal to creditors. Contact: Mark Diamond Telephone (514) 693-9600 Headquartered in Pointe-Claire, Quebec, Future Beach Corp. designs and manufactures the world's finest collection of non-motorized watercraft and beach accessories at its 76,000 sq. ft. facility. The Future BeachT mission is to become the "World's Beach Company" by providing fun, safe and easy to use products for the whole family to enjoy. Founded in 1992 and selling in over 46 countries, Future Beach is a one-stop-shop for the consumer and institutional market. G+G RETAIL: Taps Pachulski Stang as Bankruptcy Counsel ------------------------------------------------------ G+G Retail, Inc., asks the U.S. Bankruptcy Court for the Southern District of New York for authority to employ Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. as its bankruptcy counsel. Pachulski Stang will: a) provide the Debtor legal advice with respect to its powers and duties as a debtor-in-possession in the continued operation of its business and management of its property; b) prepare and pursue confirmation of Debtor's plan and approval of a disclosure statement; c) prepare necessary applications, motions, answers, orders, reports and other legal papers on behalf of the Debtor; d) appear in Court to protect the interests of the Debtor; and e) perform all other legal services for the Debtor which may be necessary and proper in this proceeding. Laura Davis Jones, Esq., discloses Pachulski Stang's professionals' hourly billing rates: Professional Rate ------------ ---- Laura Davis Jones, Esq. $675 William P. Weintraub, Esq. $675 David M. Bertenthal, Esq. $495 Curtis A. Hehn, Esq. $350 Sandra G.M. Selzer $295 Kathe F. Finlayson $165 To the best of the Debtor's knowledge, Pachulski Stang does not hold any interest adverse to the Debtor's estate. Headquartered in New York, New York, G+G Retail Inc. retails ladies wear and operates 566 stores in the United States and Puerto Rico under the names Rave, Rave Girl and G+G. The Debtor filed for chapter 11 protection on Jan. 25, 2006 (Bankr. S.D.N.Y. Case No. 06-10152). When the Debtor filed for protection from its creditors, it estimated assets of more than $100 million and debts between $10 million to $50 million. GAINEY CORPORATION: S&P Rates $260 Million Credit Facility at BB- ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' long-term corporate credit rating to Gainey Corp., a provider of truckload transportation. At the same time, Standard & Poor's assigned its 'BB-' bank loan rating to Gainey's new $260 million credit facility, which consists of a $50 million five-year revolving facility and a $210 million six-year term loan. The bank facility is guaranteed by Gainey Corp. and is secured by all the company's assets and capital stock and its subsidiaries. A recovery rating of '3' was also assigned to the bank facility, indicating expectations of a meaningful (50%-80%) recovery of principal in the event of a payment default. Proceeds from the new bank facility will be used to refinance existing debt and to pay a small dividend to the owner, Harvey Gainey. The rating outlook is stable. The bank loan ratings are based on preliminary information and are subject to review upon final documentation. "Ratings on Gainey reflect its participation in a relatively low- margin, highly fragmented, seasonal, and cyclical industry, combined with a leveraged financial profile and an aggressive acquisition history," said Standard & Poor's credit analyst Eric Ballantine. The ratings also incorporate the company's record of fairly consistent profitability. The truckload industry is large, at over $300 billion, and highly fragmented, with over 300,000 participants. The top 10 companies represent less than 5% of total sales. Gainey, with over $400 million in sales, is a second-tier participant in truckload trucking, competing against both large companies such as J.B. Hunt Transport Services Inc. (with annual sales over $3 billion), and many smaller truckers. The company operates approximately 2,200 trucks and over 2,400 trailers from 15 locations throughout the U.S. In addition, the company's top 10 customers represent about 20% of the company's business, giving Gainey some diversification. Grand Rapids, Michigan-based Gainey operates in four business segments: * dry van freight (which is the majority of the company's business), * refrigerated goods, * pressurized gases, and * freight brokerage. This mix of businesses provides some diversity to help offset cyclical fluctuations in individual business segments. Gainey has a wide range of customers, which include home improvement, consumer goods, and major oil companies. A good mix of customers, solid freight rates, and a healthy demand for the company's services should continue to result in decent cash flow over the near term. The company's aggressive financial profile and acquisitive nature makes a positive outlook unlikely. If the company were to pursue a significant acquisition in the near term or further lever up beyond Standard & Poor's expectations, a negative outlook or ratings downgrade is possible. HURLEY MEDICAL: Fitch Cuts Ratings on $67.1 Million Bonds to BB+ ---------------------------------------------------------------- Fitch Ratings downgrades to 'BB+' from 'BBB-' the rating on approximately $67.1 million City of Flint Hospital Building Authority hospital revenue bonds listed at the end of the press release. The bonds are issued on behalf of Hurley Medical Center. The bonds are removed from Rating Watch Negative. The Rating Outlook is Negative. The rating downgrade reflects Hurley's continued operating losses in fiscal 2005 (June year-end) and six months of fiscal 2006. In fiscal 2005, Hurley posted a negative 1.5% operating margin ($5.0 million loss), falling short of its budgeted operating loss of 0.7%. Through six months of fiscal 2006, Hurley (hospital only) generated a negative 3.6% operating margin and did not cover maximum annual debt service (MADS) from EBITDA (negative 0.5 times). Recent losses from operations reflect rising expense pressures, including pension and malpractice, and declining utilization trends. In fiscal 2005, Hurley made a pension contribution of $9 million, compared with none in each of the previous four years. Additional credit concerns include Hurley's limited capital spending, unfavorable payor mix and high days in accounts receivable. Hurley's capital spending averaged only 71% of deprecation expense from fiscal years 2001-2005, resulting in a high average age of plant of 17.1 years in fiscal 2005. Deferred capital spending has contributed to improvement in Hurley's liquidity indicators in recent years. However, Hurley expects capital spending to approximate 175% of depreciation expense in fiscal 2006 and 125% beyond 2006. Hurley's poor demographic indicators are reflected in its Medicaid load, which accounts for approximately one-third of Hurley's gross revenues. As a safety net hospital, Hurley has relied on supplemental Medicaid payments, including intergovernmental transfers and disproportionate share payments, which have ranged from $3.5 million -$8.5 million over the last decade. Given the expected downsizing of General Motors and Delphi Corp., the service area's two largest employers, Fitch expects Hurley's Medicaid and self-pay load to increase further over the medium term. Days in accounts receivable at Sept. 30, 2005 was high at 76.4 days and has remained above 69.5 days at each fiscal year-end since 2001. With few exceptions, all of Hurley's financial indicators are below Fitch's investment-grade medians. Primary credit strengths are Hurley's moderately low debt burden relative to revenue and liquidity and its status a Level I trauma center providing high end tertiary services. In fiscal 2005, MADS as a percent of revenue was low at 2.3%, and debt-to- capitalization was somewhat low at 43.5%. In addition, cash-to- debt at Dec. 31, 2005 was solid at 93.7%. Hurley operates in a competitive market and had a 30.5% market share in 2004, compared to Genesys Medical Center (Genesys) at 33.2% and McLaren Health Care Corporation (McLaren; revenue bonds rated 'AA-' by Fitch) at 25.6%. However, the degree of competition is mitigated by strategic partnerships, including a cancer center with Genesys. In addition, Hurley refers cardiovascular surgery volume to McLaren while receiving most of Genesys' pediatric volume. Under the direction of a new Chief Executive Officer who was hired in mid-2005, Hurley has retained a turnaround consultant and recently implemented a restructuring plan that outlines $14 million - $26 million of operating improvement, including the reduction of FTEs, elimination of certain programs and a change in its nurse staffing mix. In addition, the plan identifies $6 million - $16 million of liquidity improvement from improved revenue cycle and supply chain management. Hurley expects to fully realize these benefits in fiscal 2007. Fitch believes the plan is aggressive, but expects it to result in modest improvement of Hurley's financial profile over the near to medium term. Fitch's Negative Outlook reflects an expectation that Hurley's operating margin will remain at or near 2005 levels over the short term based on insufficient reimbursement and possible weakening of service area demographics. For fiscal 2006, the budgeted operating loss (excluding the restructuring plan) was revised to negative $11.8 million from negative $8.0 million to reflect several items, including state budget cuts and declining volume, which are partially offset by special Medicaid payments. Given Hurley's continued operating losses, Fitch believes that future investment in property, plant and equipment will limit further growth of its liquid reserves. Inability to realize most or all of the initiatives outlined in the restructuring plan and improve operating performance over the next two years could place negative pressure on the rating. In 2004, Hurley entered into a fixed- to floating-rate swap (notional amount of $35 million) with Piper Jaffray as the counterparty in July 2004. The swap terminates in 2011. Hurley may terminate the swap at any time, and the counterparty may terminate the swap if Hurley is downgraded below 'BB+'. Given Hurley's limited financial flexibility, Fitch views the potential negative impact that could arise from a termination of the swap as a credit concern. As of Dec. 31, 2005, the mark-to-market value of the swap was negative $1.4 million. Hurley is a 461-bed acute care teaching hospital located in Flint, MI. Hurley had total operating revenues of $342 million in fiscal 2005. Hurley covenants to provide annual and quarterly disclosure to bondholders through the Nationally Recognized Municipal Securities Information Repositories . Quarterly disclosure includes financial statements (balance sheet, income, and cash flow statements) and utilization statistics; however, management discussion and analysis is not included. Outstanding bonds: -- $35,000,000 City of Flint Hospital Building Authority revenue and revenue refunding bonds (Hurley Medical Center), series 2003; -- $14,705,000 City of Flint Hospital Building Authority revenue refunding bonds (Hurley Medical Center), series 1998A; -- $18,510,000 City of Flint Hospital Building Authority revenue rental bonds (Hurley Medical Center), series 1998B; -- $2,200,000 City of Flint Hospital Building Authority revenue refunding bonds (Hurley Medical Center), series 1995A. J.P. MORGAN: Fitch Puts Low-B Ratings on Cert. Classes M-10 & M-11 ------------------------------------------------------------------ J.P. Morgan Mortgage Acquisition Corp., asset-backed pass-through certificates, series 2006-FRE1, are rated as follows by Fitch Ratings: -- $757,278,000 classes A-1 through A-4 (senior certificates) 'AAA'. -- $40,496,000 class M-1 'AA+'; -- $36,953,000 class M-2 'AA'; -- $22,273,000 class M-3 'AA-'; -- $20,248,000 class M-4 'A+'; -- $17,717,000 class M-5 'A'; -- $16,198,000 class M-6 'A-'; -- $15,692,000 class M-7 'BBB+'; -- $14,174,000 class M-8 'BBB'; -- $11,136,000 class M-9 'BBB-'; -- $12,149,000 privately offered class M-10 'BB+'; -- $10,630,000 privately offered class M-11 'BB'. The 'AAA' rating on the senior certificates reflects the 25.20% total credit enhancement provided by the 4.00% class M-1, the 3.65% class M-2, the 2.20% class M-3, the 2.00% class M-4, the 1.75% class M-5, the 1.60% class M-6, the 1.55% class M-7, the 1.40% class M-8, the 1.10% class M-9, the 1.20% privately offered class M-10, the 1.05% privately offered class M-11, and overcollateralization. The initial and target OC is 3.70%. 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 JPMorgan Chase Bank, National Association as servicer (rated 'RPS1' by Fitch) and U.S. Bank National Association as trustee. The collateral pool consists of 4,956 fixed- and adjustable-rate mortgage loans and totals $1.01 billion as of the cut-off date. Approximately 12.03% of the mortgage loans have fixed interest rates, and approximately 87.97% of the mortgage loans have adjustable interest rates. The weighted average original loan-to- value (OLTV) ratio is 81.80%. The average outstanding principal balance is $204,278, the weighted average coupon (WAC) is 7.636%, and the weighted average remaining term to maturity (WAM) is 356 months. The weighted average credit score is 627. The loans are geographically concentrated in California (24.71%), Florida (12.76%), and New York (11.26%). All of the mortgage loans were originated or acquired by Fremont Investment and Loan, a California state-chartered industrial bank headquartered in Brea, California. Fremont conducts business in 45 states and the District of Columbia. KMART CORP: Court Reinstates Manuel Lomas' $2-Million Claim ----------------------------------------------------------- Manuel Lomas III filed three claims in Kmart Corporation's Chapter 11 cases for damages on account of prepetition personal injury: -- Claim Nos. 45827 and 45875 for $200,000 each; and -- Claim No. 48330 for $2,000,000. Arturo R. Eureste, Esq., at Dovalina & Eureste, L.L.P., in Houston, Texas, asserts that Mr. Lomas' Claims were all filed within the time limits set by the U.S. Bankruptcy Court for the Northern District of Illinois for filing of personal injury claims. According to Mr. Eureste, the Claims were disallowed by the Court on July 15, 2003. In this regard, Mr. Lomas asks the Court to reconsider its order and allow the Claim. Mr. Lomas proposes that his Claims be consolidated to reflect one claim for $2,000,000. Mr. Eureste contends that Mr. Lomas was not aware that his claim was up for disallowance due to an "incomplete questionnaire." The medical condition of Mr. Lomas was not completely ascertained until mid-2005. Moreover, "no order closing the estate has been entered," Mr. Eureste adds. * * * Pursuant to an agreed order signed by Judge Sonderby: (a) Mr. Lomas' request for reconsideration is withdrawn; (b) the Court Order dated April 1, 2004, disallowing and expunging or otherwise reducing or reclassifying personal injury and other claims is vacated solely with respect to Mr. Lomas' Claim No. 48330; (c) Claim No. 48330 will be admitted into the Claims Resolution Procedures currently in place in Kmart's case; and (d) Kmart reserves all rights to challenge the validity, priority, and amount of the Claim in connection with the Claims Resolution Procedures, and to pursue any other claims, causes of actions, or potential offsets against the Claim. Judge Susan Pierson Sonderby clarifies that the Agreed Order will not be deemed Kmart's admission with respect to the Claim or any facts alleged by Mr. Lomas. 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. 106; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART CORP: Judi Davis Wants Injunction Lifted to Pursue Claims --------------------------------------------------------------- Judi A. Davis, as administrator of the Estate of Tina Bradley Cole, filed Claim Nos. 34978 and 34979 in Kmart Corporation and its debtor-affiliates' Chapter 11 cases for the wrongful death of Ms. Cole. According to Ms. Davis, Ms. Cole died of acute liver failure due to acetaminophen toxicity caused by the ingestion of controlled substances containing acetaminophen. Ms. Davis notes that the substances were provided by Christmann Joel Cole who was an agent, employee, and pharmacist of Kmart Corporation. Ms. Davis filed a lawsuit against Mr. Cole and Kmart in the Superior Court of Buncombe County, North Carolina, on Feb. 23, 2001, to seek recovery for Ms. Cole's wrongful death. Ms. Davis alleged, among other things, that Kmart: (a) negligently failed to supervise Mr. Cole; (b) negligently retained Mr. Cole; (c) failed to properly audit, manage, account for, control, monitor, and track controlled substances at its Kmart Store located at 1830 Hendersonville Road, City of Ashville, County of Buncombe, State of North Carolina (d) failed to have in place reasonable and proper standards, equipment, computer software, accounting methods, and personnel sufficient to prevent the unauthorized removal of controlled substances in that location; (e) failed to take adequate measure to prevent Mr. Cole from delivering controlled substances without proper prescriptions to third parties including the decedent; (f) acted without reasonable or ordinary care in the operation of the pharmacy; and (g) was negligent in other respects. Ms. Davis further alleged that Kmart's negligence constituted gross negligence and that its acts and behavior were reckless, entitling Ms. Cole's Estate to recover punitive damages. Derrick R. Bailey, Esq., Ms. Davis' attorney, relates that Ms. Davis filed a timely proof of claim, and completed and filed a questionnaire, as required by the U.S. Bankruptcy Court for the Northern District of Illinois for the resolution of personal injury claims. However, Kmart and Ms. Davis have not yet reached an agreement as to the value of the Claims. On March 6, 2004, Ms. Davis responded to Kmart's Omnibus Objection to claims and requested modification of the stay to allow the Estate of Ms. Cole's Claims to proceed in North Carolina. Against this backdrop, Ms. Davis asks the Court to lift the injunction provision under Kmart's Plan of Reorganization and allow the Claims to proceed in the North Carolina court. 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. 106; Bankruptcy Creditors' Service, Inc., 215/945-7000) METALFORMING TECH: Has Until March 13 to Remove Civil Actions ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended until March 13, 2006, the period within which Metalforming Technologies, Inc., and its debtor-affiliates can remove prepetition civil actions. The extension will give the Debtors more time to make fully informed decisions concerning removal of each pending action from a remote court to the District of Delaware for continued litigation. The extension will assure that the Debtors don't forfeit valuable rights. Headquartered in Chicago, Illinois, Metalforming Technologies, Inc., and its debtor-affiliates manufacture seating components, stamped and welded powertrain components, closure systems, airbag housings and charge air tubing assemblies for automobiles and light trucks. The Company and eight of its affiliates filed for chapter 11 protection on June 16, 2005 (Bankr. D. Del. Case Nos. 05-11697 through 05-11705). Joel A. Waite, Esq., Robert S. Brady, Esq., and Sean Matthew Beach, Esq., at Young Conaway Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of May 1, 2005, the Debtors reported $108 million in total assets and $111 million in total debts. MIRANT CORPORATION: Settles HSBC's $1.1 Billion Indenture Claims ---------------------------------------------------------------- Mirant Corporation, as issuer, and HSBC Bank USA, National Association, as successor indenture trustee, are parties to two Indentures dated May 31, 2001, and July 8, 2002. Under the 2001 Indenture, Mirant issued $750,000,000 of its 2.5% Convertible Senior Debentures due 2021. In March 2003, Mirant repurchased $83,050,000 of the 2.5% Debentures. Under the 2002 Indenture, Mirant issued $370,000,000 of its 5.75% Convertible Senior Notes due 2007. HSBC Bank filed two claims against Mirant arising from the 2.5% Debentures and the 5.75% Notes: (1) Claim No. 6831, which seeks to recover $750,000,000 in principal amount and $10,904,297 in interest; and (2) Claim No. 6832, which asserts $370,000,000 in principal amount and $10,578,403 in interest. Upon review of their books and records, the Debtors objected to Claim No. 6831 but agreed with the amount declared by Claim No. 6832. Claim No. 6831 failed to account prepetition interest payments totaling $9,375,000, the Debtors contended. To avoid unnecessary litigation and expense, the Debtors and HSBC agree that: (a) HSBC will be allowed a General Unsecured, Non-priority Claim for principal and interest due under the 2.5% Debentures against Mirant for $751,510,417; (b) HSBC will be allowed a General Unsecured, Non-priority Claim for principal and interest due under 5.75% Notes against Mirant for $380,578,403; (c) New Mirant will not receive any distributions of New Mirant Stock on account of the Repurchased Debentures; and (d) Other than the Allowed Claims, all of HSBC's proofs of claim will be expunged from the Debtors' claims registers. 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. 91 Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 8, 2005, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. The outlook is stable. The rating reflects the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005. MIRANT CORPORATION: Settles Citibank's Multi-Million Unsec. Claims ------------------------------------------------------------------ On December 15, 2003, Citibank, N.A., filed three proofs of claim against Mirant Corporation and its debtor-affiliates: Claim No. Claim Amount Asserted Debtor --------- ------------ --------------- 6470 $448,248,682 Mirant Corp. 6471 214,221,482 MADC 6473 214,221,482 Mirant Corp. The Debtors, Credit Suisse First Boston and Citibank have reviewed their books and records. Accordingly, the parties agree on these adjusted claim amounts: Claim No. Adjusted Amount --------- --------------- 6470 $446,862,117 6471 214,103,247 6473 214,103,247 The parties further agree that: (a) Claim No. 6470 will be allowed as an Unsecured Claim for $446,862,117; (b) Claim No. 6471 will be allowed as an Unsecured Claim for $214,103,247; (c) Citibank will not receive a recovery from Claim No. 6473 in accordance with the treatment of certain guaranty claims; and (d) Citibank will be entitled to postpetition interests aggregating $57,866,573 for Claim No. 6470 and $28,069,484 for Claim No. 6471, calculated at the non-default contract rate, anticipated as of December 31, 2005. 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. 91 Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 8, 2005, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. The outlook is stable. The rating reflects the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005. MIRANT CORPORATION: Settles Law Debenture's Multi-Million Claim --------------------------------------------------------------- Under a Subordinated Notes Indenture dated as of October 1, 2000, Mirant Corporation issued Junior Subordinated Notes aggregating $355,670,150. Deutsche Bank Trust Company Americas is the trustee under that 2000 Indenture. Law Debenture Trust Company of New York succeeded Deutsche Bank as trustee. Law Debenture subsequently asserted Claim No. 6694, seeking to recover $355,670,150 in principal amount and $6,437,431 in interest arising from the Subordinated Notes Indenture. Law Debenture reserved its rights with respect to its fees, expenses and indemnities. Upon reviewed of their books and records, the Debtors disputed the amount asserted in Claim No. 6694. The Debtors maintained that Claim No. 6694 failed to account prepetition interest payments totaling $5,557,347 and $15,609 in impermissible interest charges. To resolve the matter, the parties agree to allow Law Debenture a General Unsecured, Non-priority Claim for $356,534,626, plus any postpetition interest it may be entitled under the Debtor's Plan of Reorganization as a Mirant Debtor Class 3 - Unsecured Claim. The parties further agree that Law Debenture and Deutsche Bank may assert their rights to recover their Indenture Trustee Fees in accordance with the Plan. Law Debenture will be entitled to postpetition interest on the Allowed Claim calculated at the non-default contract rate anticipated to be $59,013,276 as of January 3, 2006. Other than the Allowed Claim, Law Debenture will be barred from asserting any other claims against any of the Debtors' estates. 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. 91 Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 8, 2005, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. The outlook is stable. The rating reflects the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005. MORTGAGE ASSET: Fitch Holds BB Ratings on Two Certificate Classes ----------------------------------------------------------------- Fitch Ratings has affirmed the following Mortgage Asset Securitization Transactions (MASTR) residential mortgage-backed certificates: Series 2004-4, Pool 1 -- Class I-A affirmed at 'AAA'. Series 2004-4, Total Pools 2 & 3 -- Classes II-A and III-A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'. Series 2004-6, Pool 1 -- Class I-A affirmed at 'AAA'; -- Class I-B-3 affirmed at 'BBB'. Series 2004-6, Total Pools 2-7 -- Classes II-A through VII-A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-3 affirmed at 'BBB'. Series 2004-9, Pool 3 -- Class III-A affirmed at 'AAA'. Series 2004-9, Total Pools 2 & 4 -- Classes II-A and IV-A affirmed at 'AAA'; -- Class 30-B-1 affirmed at 'AA'; -- Class 30-B-2 affirmed at 'A'; -- Class 30-B-3 affirmed at 'BBB'; -- Class 30-B-4 affirmed at 'BB'. Series 2004-9, Total Pools 1, 5, 6, & 7 -- Classes I-A, V-A, VI-A, and VII-A affirmed at 'AAA'. The affirmations, affecting approximately $1.4 billion of the outstanding certificates, are due to credit enhancement consistent with future loss expectations. None of the above deals have suffered losses since issuance. The pools are only seasoned between 17 (2004-9) and 22 months (2004-4). The collateral of the above deals consists of conventional, fully amortizing, jumbo prime 15-year and 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties and, in some cases, certificates from previous MASTR deals. MASTR 2004-4, pool 1, is backed by three certificates: MASTR 2003-10 class 3-A-1, which Fitch does not rate, and MASTR 2003-11 classes 1-A-1 and 2-A-1, both of which Fitch rates 'AAA'. MASTR 2004-6, pool 2, is backed by a pool of 30-year, fixed-rate mortgage loans and MASTR 2003-8 class 1-A-1, which Fitch rates 'AAA.' MASTR 2003-9, pool 3, is backed by MASTR 2004-6 class 7-A- 1, which Fitch rates 'AAA.' A majority of the collateral backing the affirmed deals was acquired by UBS from various mortgage originators. In addition, the deals are master serviced by Wells Fargo Bank Minnesota, N.A., which Fitch rates at 'RMS1.' As of the Jan. 25, 2006 distribution date, the pool factors (i.e., current mortgage loans outstanding as a percentage of the initial pool) for the above deals range from 64% (2004-4 total pools 2&3) to 85% (2004-6 pool 1). MUSICLAND HOLDING: Taps Retail Consulting as Real Estate Advisor ---------------------------------------------------------------- Musicland Holding Corp. and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of New York's permission to employ Retail Consulting Services, Inc., as their exclusive real estate consultant to provide an expedited analysis of their leasehold interests. It is essential for the Debtors to be able to confirm their internal analysis as to the value and liability for ongoing leaseholds. In addition, the Debtors need assistance with regard to lease renegotiations, marketing, and the disposition of certain real estate leases. The Debtors selected RCS because of its considerable expertise and experience as real estate consultants. The Debtors believe that the services to be provided by RCS is essential to their efforts as debtors-in-possession and to maximize the value of their assets for the benefit of their creditors. As real estate advisor, RCS will: (a) prepare a Lease Portfolio Book organized by landlord and by store, showing: * current lease terms, * sales, * profits, and * occupancy cost and store contribution percentages relative to sales; (b) assist in the analysis of rejection claims; (c) contact landlords to negotiate items like rent cutback, term modifications, lease extensions and other necessary modification for the Debtors' leasehold properties; (d) work with landlords, the Debtors and the Debtors' advisors to document accurately all lease modification proposals and provide timely status reports that will reflect current progress; (e) attend and participate in all Court hearings and meetings when requested by the Debtors; (f) perform desktop leasehold valuations for leases identified by the Debtors; (g) negotiate waivers, reductions or payout terms for prepetition cure amounts; (h) conduct negotiations with respect to mitigating landlords' rejection damage claims; (i) provide marketing and disposition functions, including: * reviewing all pertinent documents and consulting with Debtors' counsel; * creating a marketing program and budget which may include newspaper, magazine or journal advertising, letter or flyer solicitation, placement of signs, direct telemarketing, e-mail, fax blasts and other marketing methods; * utilizing all professional contacts, mailing lists and other resources available to market the Debtors' disposition properties; * creating an active market and auction process for the disposition properties and working on behalf of the Debtors to negotiate and get the best terms and prices for the disposition properties; * preparing and disseminating marketing materials; * communicating with parties who have expressed an interest in a disposition property, endeavoring to locate additional parties who may have an interest in the purchase of a disposition property and providing the Debtors an updated list of parties which have expressed interest; * responding to and providing information necessary to negotiate with and solicit offers from prospective purchasers or settlements from landlords and making recommendations to the Debtors as to the advisability of accepting particular offers or settlements; * meeting periodically with Debtors, its advisors and attorneys, in connection with the status of its efforts, and providing guidance to the Debtors in resolving issues and problems pertaining to the disposition of Disposition Properties; * coordinating and organizing the public bankruptcy hearing or auction and obtaining the attendance of all interested parties through direct communications; * working with the attorneys responsible for the implementation of the proposed transaction, reviewing documents, negotiating and assisting in resolving problems; * appearing in Bankruptcy Court to testify or consult with Debtors in connection with the marketing or disposition of a Disposition Property; and (j) provide advice regarding other real estate matters. The Debtors believe that RCS' services will not duplicate the services other professionals may provide. Prior to the Petition Date, the Debtors paid RCS a $125,000 non-refundable retainer fee as full payment for all analysis and consulting services. RCS will be paid $125,000 per month for lease renegotiations, rejection claim analysis, and waiver or reduction of prepetition cure amounts, starting January 1, 2006 until the termination of the agreement, or unless ordered by the Court. Upon closing of a transaction that disposes of any or all of the Disposition Properties, a Consultant will receive: * 4% of the total amount of money paid to the Debtors, if no broker is used; or * 5% of gross proceeds if a co-broker is used. Ivan L. Friedman, president of RCS, assures the Court that RCS is a disinterested person within the meaning of Section 101(14) of the Bankruptcy Code and as required by Section 327(a) of the Bankruptcy Code. Mr. Friedman asserts that RCS holds no adverse interest to the Debtors or their estates. Furthermore, RCS has no connection with the Debtors, their creditors or their related parties except as disclosed, Mr. Friedman says. Headquartered in New York, New York, Musicland Holding Corp., is a specialty retailer of music, movies and entertainment-related products. The Debtor and 14 of its affiliates filed for chapter 11 protection on Jan. 12, 2006 (Bankr. S.D.N.Y. Lead Case No. 06-10064). James H.M. Sprayregen, Esq., at Kirkland & Ellis, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Musicland Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) MUSICLAND HOLDING: Gets Court Nod to Pay Prepetition Taxes & Fees ----------------------------------------------------------------- In the ordinary course of business, Musicland Holding Corp. and its debtor-affiliates incur and collect various taxes, fees, and charges for payment to various taxing and licensing authorities. The taxes and fees are paid on a periodic basis. (a) Sales and Use Taxes Collectively, the Debtors estimate that they may owe $18,000,000 in sales taxes and the use taxes prior to the Petition Date. (b) Franchise Taxes The Debtors believe they are current in franchise taxes, but seek the U.S. Bankruptcy Court for the Southern District of New York's authority, out of caution, to pay amounts that may subsequently be determined to be owed prior to the Petition Date. (c) Business License Fees and Annual Report Taxes The Debtors estimate that the amounts owed with respect to business license fees and annual report or bi-annual report taxes prior to the Petition Date total $40,000. By this motion, the Debtors seek the Court's permission to pay the Sales and Use Taxes, Franchise Taxes and Business License Fees and Annual Report Taxes to the Taxing Authorities. According to James H.M. Sprayregen, Esq., at Kirkland & Ellis LLP, in New York, the failure to pay the Taxes and Fees could have an adverse impact on their ability to operate. If the Taxes and Fees are not paid, the Debtors believe that the Taxing Authorities will cause the Debtors to be audited and may attempt to curtail or suspend the Debtors' operations and pursue other remedies that will harm the estates. Furthermore, Mr. Sprayregen notes that the amounts to be paid were held in trust for third parties to whom payment is owed. Those funds do not constitute property of the Debtors' estates within the meaning of Section 541 of the Bankruptcy Code. Court Authorization Judge Stuart M. Bernstein authorizes the Debtors to pay and remit to the Taxing Authorities the Taxes, Fees, and other charges in an aggregate amount not to exceed $18,000,000. Judge Bernstein also allows the Debtors to reissue any check or electronic payment that was drawn in payment of any prepetition amount that is not cleared by a depository. Headquartered in New York, New York, Musicland Holding Corp., is a specialty retailer of music, movies and entertainment-related products. The Debtor and 14 of its affiliates filed for chapter 11 protection on Jan. 12, 2006 (Bankr. S.D.N.Y. Lead Case No. 06-10064). James H.M. Sprayregen, Esq., at Kirkland & Ellis, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Musicland Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL ENERGY: Asks Court to Approve Columbia Settlement Pact --------------------------------------------------------------- NEGT Energy Trading - Power, L.P. and NEGT Energy Trading - Gas Corporation ask the U.S. Bankruptcy Court for the District of Maryland to approve their Settlement Agreement with Columbia Gas Transmission Corporation and Columbia Gulf Transmission Company. Pursuant to a Transportation Agreement with Columbia Gas, ET Power established a $2,000,000 letter of credit with JP Morgan Chase Bank to support the obligations of ET Power and USGen to Columbia Gas and Columbia Gulf. On July 6, 2005, the Debtors filed a complaint against Columbia Gas and Columbia Gulf primarily alleging that: (i) Columbia Gas' draw on the Letter of Credit exceeded the obligations supported by the Letter of Credit by $1,481,896 -- the $2,000,000 draw less amounts applied to the obligation owed by ET Gas, and (ii) the Columbia Gulf Obligation and the Excess Draw constitute property of the Debtors' estates and should be returned. Columbia Gas and Columbia Gulf filed an answer to the Complaint. Dennis Shaffer, Esq., at Whiteford, Taylor & Preston LLP, in Baltimore, Maryland, discloses that after extensive negotiations, the Debtors and Columbia Gas and Columbia Gulf entered into a settlement agreement, which provides for the payment of all amounts owed by the Defendants to the Debtors without the expense and uncertainty of litigation. Pursuant to the Settlement Agreement, Columbia Gas will pay to ET Power $1,046,533 and Columbia Gulf will pay to ET Gas $4,158. Mr. Shaffer relates that the terms embodied in the Settlement Agreement represent an appropriate exercise of the Debtors' business judgment. Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) NELLSON NUTRACEUTICAL: Case Summary & 20 Largest Unsec. Creditors ----------------------------------------------------------------- Lead Debtor: Nellson Nutraceutical, Inc. 5801 Ayala Avenue Irwindale, California 91706 Bankruptcy Case No.: 06-10072 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Nellson Holdings, Inc. 06-10073 Nellson Intermediate Holdings, Inc. 06-10074 Nellson Northern Operating, Inc. 06-10075 Nellson Nutraceutical Eastern Division, Inc. 06-10076 Nellson Nutraceutical Powder Division, Inc. 06-10077 Vitex Foods, Inc. 06-10078 Type of Business: The Debtors formulate, make and sell bars and powders for the nutrition supplement industry. Chapter 11 Petition Date: January 28, 2006 Court: District of Delaware Debtors' Counsel: Laura Davis Jones, Esq. Rachel Lowy Werkheiser, Esq. Richard M. Pachulski, Esq. Brad R. Godshall, Esq. Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C. 919 North Market Street, 16th Floor Wilmington, Delaware 19899-8705 Tel: (302) 652-4100 Fax: (302) 652-4400 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtors' 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ The Solae Company Trade Debt $1,355,573 c/o Box Bank of America P.O. Box 169 Saint Louis, MO 63150-0169 Kerry Sweet Ingredients (DSCNT) Trade Debt $490,086 P.O. Box 98489 Baltimore, MD 21264-4420 Clasen Quality Coatings Trade Debt $325,256 2910 Laura Lane Middleton, WI 53562 Printpack Inc. Trade Debt $211,449 P.O. Box 102430 Atlanta, GA 30368-2430 ACH Food Companies Inc. Trade Debt $168,235 Orafti Trade Debt $166,054 Erie Foods International Trade Debt $165,190 Barry Callebaut USA Inc. Trade Debt $161,541 Alcan Packaging Inc. Trade Debt $159,883 Blommer Chocolate Co., Inc. Trade Debt $149,774 Vyse Gelatin Company Trade Debt $135,680 Farbest-Tallman Foods Corp. Trade Debt $121,847 Meelunie America Inc. Trade Debt $115,344 Malnove Incorporated Trade Debt $111,346 Roquette America, Inc. Trade Debt $110,750 Concord Foods, Inc. Trade Debt $110,530 Pride Transport Trade Debt $98,779 Crockett Container Trade Debt $97,259 Flavor Producers Inc. Trade Debt $81,522 CGU Capital Group, LLC Landlord Unknown O'SULLIVAN IND: Disclosure Statement Hearing Continues to Feb. 2 ---------------------------------------------------------------- O'Sullivan Industries Holdings, Inc., and its debtor-affiliates, the Official Committee of Unsecured Creditors, and the Ad Hoc Senior Secured Noteholders Committee -- GoldenTree Asset Management L.P., Mast Credit Opportunities I, (Master) Ltd., and Breakwater Fund Management, LLC -- agree to continue the hearing on the adequacy of the Amended Disclosure Statement explaining the Debtors' Plan of Reorganization to Feb. 2, 2006, at 9:30 a.m. As previously reported in the Troubled Company Reporter on Jan. 10, 2006, the Debtors delivered their First Amended Joint Plan of Reorganization and First Amended Disclosure Statement to the U.S. Bankruptcy Court for the Northern District of Georgia. The Court approved the stipulation. A hearing to consider confirmation of the Amended Plan is currently scheduled for February 16, 2006, at 9:30 a.m. (Eastern Standard Time). The Confirmation Hearing and Confirmation Objection Deadline are likely to be rescheduled to a later date. The Debtors will solicit votes on the Plan after approval of the Disclosure Statement. The Amended Plan provides that all votes to accept or reject the Plan must be cast by February __, 2006. The Voting Deadline is likely to be extended to a later date. Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings, Inc. -- http://www.osullivan.com/-- designs, manufactures, and distributes ready-to-assemble furniture and related products, including desks, computer work centers, bookcases, filing cabinets, home entertainment centers, commercial furniture, garage storage units, television, audio, and night stands, dressers, and bedroom pieces. O'Sullivan sells its products primarily to large retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and Office Depot. The Company and its subsidiaries filed for chapter 11 protection on Oct. 14, 2005 (Bankr. N.D. Ga. Case No. 05- 83049). On Sept. 30, 2005, the Debtor listed $161,335,000 in assets and $254,178,000 in debts. (O'Sullivan Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) O'SULLIVAN IND: Wants to Honor Potential Exit Lenders' Expenses --------------------------------------------------------------- O'Sullivan Industries Holdings, Inc., and its debtor-affiliates' amended plan of reorganization provides that they will obtain exit financing pursuant to an approximately $50,000,000 exit credit facility. The Debtors need the exit proceeds to provide cash to fund the Plan as well as their working capital needs. The Debtors anticipate emerging from bankruptcy in the next several months, once they obtain exit financing. Accordingly, the Debtors have solicited interest from numerous potential exit credit facility lenders. The Debtors are currently engaging in negotiations with those lenders regarding the terms of the exit credit facility. James C. Cifelli, Esq., at Lamberth, Cifelli, Stokes & Stout, P.A., in Atlanta, Georgia, tells Judge Mullins that as part of the next stage in the exit credit financing process, potential lenders will perform additional due diligence, including conducting field or collateral audits, which are necessary for them to make final, fully developed financial proposals. As a condition to performing due diligence, the potential lenders have required that the Debtors pay advance deposits or reimburse them for the reasonable and necessary expenses they incur. Specifically, Mr. Cifelli notes, potential lenders have indicated that they will only initiate field or collateral audits once they have received deposits. The Debtors believe that if they are not able to pay the expenses of the potential lenders, their schedule for securing exit financing commitments and negotiating an exit credit facility will be delayed, which could delay their emergence from bankruptcy. In this regard, the Debtors seek the U.S. Bankruptcy Court for the Northern District of Georgia's authority to reimburse, or to provide advance deposits to cover, the reasonable and necessary expenses of potential exit credit facility lenders, up to $180,000. Payment of the potential lenders' expenses is necessary to induce the potential lenders to continue to pursue an exit credit facility with the Debtors, Mr. Cifelli explains. The Debtors believe that the proposed expense payment is relatively small when compared to both: (i) the amount of the exit credit facility itself; and (ii) the amount that the Debtors hope to save in interest, costs, and fees by negotiating an exit credit facility on the most favorable terms. Allowing the Debtors to pay the potential lenders' expenses, and thus to have multiple proposals to choose from, will assist them and their professionals in negotiating the most favorable exit credit facility possible, Mr. Cifelli says. Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings, Inc. -- http://www.osullivan.com/-- designs, manufactures, and distributes ready-to-assemble furniture and related products, including desks, computer work centers, bookcases, filing cabinets, home entertainment centers, commercial furniture, garage storage units, television, audio, and night stands, dressers, and bedroom pieces. O'Sullivan sells its products primarily to large retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and Office Depot. The Company and its subsidiaries filed for chapter 11 protection on Oct. 14, 2005 (Bankr. N.D. Ga. Case No. 05- 83049). On Sept. 30, 2005, the Debtor listed $161,335,000 in assets and $254,178,000 in debts. (O'Sullivan Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: Slams Equity Panel's Insistence to Hold Meeting -------------------------------------------------------------- Owens Corning and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to: (a) deny the request of the Ad Hoc Committee of Preferred and Equity Security Holders to lift the automatic stay; and (b) declare that, under Section 362(a)(3) of the Bankruptcy Code, the Ad Hoc Committee and its members are barred from prosecuting an action in the Delaware Chancery Court to compel a shareholders' meeting. As reported in the Troubled Company Reporter on Jan. 2, 2006, the Ad Hoc Committee asked the Court to confirm that shareholders are entitled to prosecute an action in the Court of Chancery of the State of Delaware to compel the Debtors to immediately honor their obligation to convene an annual shareholders' meeting. In the alternative, the Ad Hoc Committee wants the stay lifted so it may prosecute an action. Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, relates that the Ad Hoc Committee's request appears to be an attempt to delay the Debtors' plan confirmation process and the successful completion of the cases. Changing the Board now would only result in further delay, uncertainty and disruption of the path toward confirmation, he says. Mr. Pernick notes that the equity interest holders are clearly out of the money. The Ad Hoc committee, he argues, improperly seeks to extract hold-up leverage on behalf of the equity interest holders. In Owens Corning's case, Mr. Pernick says, even outside of the federal bankruptcy process, the state-law right of shareholders to convene an annual meeting is conditional. When the federal rights and interests of all stakeholders in the enterprise of a debtor-in-possession are at stake in a collective chapter 11 proceeding, the rights of an equity interest holder under state law must often yield. In the case of Johns-Manville Corp., the court enumerated five reasons why shareholders should not be permitted to force a shareholders' meeting. The same reasons can be found in Owens Corning's case, Mr. Pernick says: (1) the Ad Hoc Committee's motion seeks to directly interfere with, if not derail, the currently pending plan confirmation process; (2) a shareholders' meeting would defeat the will of the real parties-in-interest -- the Debtors' creditors -- and ousting the current Board of Directors would undo months of plan negotiations; (3) the Committee's action seeks to threaten the Debtors' exclusive right to file and solicit any plan; (4) even if a new Board were elected, the underlying economics of the Debtors' cases, the reorganization value of the Debtors, and the prospects for asbestos legislation would not be affected, thus rendering the request futile; and (5) a meeting would only bring about additional costs, expenses, and uncertainty in the marketplace, which may potentially erode the Debtors' reorganization value. Mr. Pernick says the Court has jurisdiction to enforce the automatic stay of Section 362(a)(3) to prevent the Ad Hoc Committee from: * usurping the authority of Owens Corning's properly constituted board; and * interfering with the Debtors' pending plan confirmation process and exclusive right to seek solicitation of the Fifth Amended Plan. Mr. Pernick contends that a meeting is not warranted since the Debtors have complied with the Bankruptcy Code and applicable Delaware law with respect to their corporate governance. James J. McMonagle, the legal representative for future claimants, agrees with the Debtors and adopts their objection. Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. (Owens Corning Bankruptcy News, Issue No. 124; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: Ohio Asbestos Claimants Want to Litigate Claims -------------------------------------------------------------- About 2,122 asbestos personal injury claimants in Ohio ask the U.S. Bankruptcy Court for the District of Delaware to lift the automatic stay in Owens Corning and its debtor-affiliates' chapter 11 cases to allow them to proceed in the Ohio state courts to litigate their claims. Alan B. Rich, Esq., at Baron & Budd PC, in Dallas, Texas, tells the Court that during the five and a half years the Ohio state tort cases against the Debtors have been stayed, the Asbestos Claimants have suffered great harm in that some have either died or been diagnosed with mesothelioma and did not live long enough to have their claims heard by the state court. Others continue to suffer from the Debtors' actions, without remedy. There is no practical apparatus available to liquidate their claims before the Bankruptcy Court, thus they seek to liquidate their claims in the state courts. He notes that the Ohio lawsuits contain no issues of federal law. Mr. Rich points out that the Bankruptcy Court is prohibited from resolving the litigation between the Asbestos Claimants and the Debtors because it lacks jurisdiction. At the same time, due process of law requires that the claims of the Asbestos Claimants be tried and resolved in an appropriate forum. Lifting the stay and allowing the Asbestos Claimants to move forward with their claims against the Debtors in the state courts will not impose any prejudice on either the Debtors or their estates, Mr. Rich asserts. Moreover, he continues, granting relief from the stay would actually benefit the Debtors by saving them the cost of duplicating, in the federal district court, litigation already underway in the state courts. Mr. Rich emphasizes that time is of the essence to the Asbestos Claimants, many of whom are old or gravely ill. If the stay is not lifted and the reference to their cases is withdrawn, the Asbestos Claimants would be forced to shoulder the additional expense of duplicating their lawsuits. Mr. Rich also believes that the Asbestos Claimants will prevail on the merits of their claims against the Debtors because of the Debtors' history of being found liable in the tort system for asbestos injuries. Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. (Owens Corning Bankruptcy News, Issue No. 124; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: Resolving AT Plastics' Preference Action ------------------------------------------------------- On September 30, 2002, Owens Corning and its debtor-affiliates commenced an adversary proceeding against AT Plastics, seeking to avoid certain transfers and asking the U.S. Bankruptcy Court for the District of Delaware to enter a money judgment against AT Plastics for $219,134 pursuant to Section 550 of the Bankruptcy Code. The Debtors and AT Plastics have engaged in settlement negotiations with respect to the Preference Action. In the course of the negotiations, AT Plastics has provided to the Debtors certain information and documentation with respect to its asserted ordinary course defense and evidence of additional subsequent new value for $38,254. Accordingly, the Debtors and AT Plastics have agreed to resolve the Preference Action on the terms set forth in a Settlement Agreement dated January 12, 2006. Specifically, the parties agree that: (a) AT Plastics will pay, or cause to be paid, $50,000 to Owens Corning in full and final satisfaction of the Preference Action; (b) The parties will take all necessary actions to have the Preference Action dismissed, with prejudice; (c) The Settlement Agreement provides for mutual releases; provided, however, that the claim for a purported debt owing to AT Plastics for $211,527 filed by AT Plastics' transferee, Export Development Canada, which has been designated on the official claims registry maintained in the Debtors' cases as Claim No. 3943, to the extent allowed, is not released or otherwise affected by the Settlement Agreement; (d) The Debtors will retain and have the right to object to the EDC Claim, and all defenses to any objection will be fully preserved and maintained; and (e) Any claim for or arising from payment of the settlement amount, whether asserted by AT Plastics, Export Development Canada or any other party, will be disallowed; however, nothing in the Settlement Agreement will affect the Court's determination of the allowance or disallowance of the EDC Claim. J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington, Delaware, says the resolution of the Preference Action through continued litigation will cause added expense, inconvenience and delay. The Debtors also foresee that there could be some difficulty in collecting any judgment, which may be obtained, in that AT Plastics appears to conduct operations from Canada and have assets in Canada. Thus, the Debtors ask the Court to approve the settlement agreement. Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. (Owens Corning Bankruptcy News, Issue No. 124; Bankruptcy Creditors' Service, Inc., 215/945-7000) PLIANT CORP: Wants to Hire Sidley Austin as Bankruptcy Counsel -------------------------------------------------------------- Pursuant to Section 327(a) of the Bankruptcy Code, Pliant Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the District of Delaware's permission to employ Sidley Austin LLP as their general reorganization and bankruptcy counsel, nunc pro tunc to their bankruptcy petition date. Stephen T. Auburn, Pliant Corp.'s vice-president and general counsel, says that Sidley Austin is uniquely qualified to represent them. Sidley Austin is a full-service law firm with a national and international presence. Sidley Austin has more than 1,550 lawyers in 14 offices in major cities throughout the United States, Europe and Asia. Sidley Austin has experience and expertise in every major substantive area of legal practice, and its clients include leading public companies and privately held businesses in a variety of industries and major nonprofit organizations. In the months leading up to the Petition Date, Sidley Austin has been advising the Debtors on restructuring and insolvency issues, including factors pertinent to the commencement of these cases, as well as on general corporate, banking and litigation matters. In so doing, Sidley Austin has become intimately familiar with the Debtors and their affairs. Sidley Austin will: (a) provide legal advice with respect to the Debtors' powers and duties as debtors-in-possession in the continued operation of their businesses; (b) take all necessary action on behalf of the Debtors to protect and preserve the Debtors' estates, including prosecuting actions on behalf of the Debtors, negotiating any and all litigation in which the Debtors are involved, and objecting to claims filed against the Debtors' estates; (c) prepare on behalf of the Debtors all necessary motions, answers, orders, reports and other legal papers in connection with the administration of the Debtors' estates; (d) attend meetings and negotiate with representatives of creditors and other parties in interest, attend court hearings, and advise the Debtors on the conduct of their Chapter 11 cases; (e) perform any and all other legal services for the Debtors in connection with their Chapter 11 cases and with the formulation and implementation of the Debtors' plan of reorganization; (f) advise and assist the Debtors regarding all aspects of the plan confirmation process, including, but not limited to, securing the approval of a disclosure statement, soliciting votes in support of plan confirmation, and securing confirmation of the plan; (g) provide legal advice and representation with respect to various obligations of the Debtors and their directors and officers; (h) provide legal advice and perform legal services with respect to matters involving the negotiation of the terms and the issuance of corporate securities, matters relating to corporate governance and the interpretation, application or amendment of the Debtors' corporate documents, including their certificates or articles of incorporation, bylaws, material contracts, and matters involving the fiduciary duties of the Debtors and their officers and directors; (i) provide legal advice and legal services with respect to litigation, tax and other general non-bankruptcy legal issues for the Debtors; and (j) render other services as may be in the best interests of the Debtors in connection with any of the foregoing and all other necessary or appropriate legal services in connection with their Chapter 11 cases, as agreed upon by Sidley Austin and the Debtors. The Debtors will pay Sidley Austin for its legal services on an hourly basis. The Debtors will also reimburse the Firm for actual and necessary costs and expenses incurred in connection with its representation. Sidley Austin's customary billing rates are: Professional Hourly Rate ------------ ----------- Partners $415 to $850 Senior counsel $415 to $850 Associates $190 to $495 Para-professionals $25 to $240 Sidley Austin received a $250,000 retainer on September 28, 2005, and an additional $50,000 on October 25, 2005. Sidley Austin's unpaid fees and expenses through the Petition Date exceeded the Retainer by $60,613. The Firm is waiving the unpaid fees and expenses. In addition to the Retainer, Sidley Austin has received from the Debtors $1,935,449 for fees and $38,043 within one year preceding the Petition Date on account of legal services rendered in contemplation of or in connection with the restructuring efforts of the Debtors and the filing of their Chapter 11 cases. James F. Conlan, Esq., a partner at Sidley Austin, discloses that the Firm previously represented, and continues to represent, parties-in-interest in matters unrelated to the Debtors' Chapter 11 cases. Sidley Austin represents Meridian Automotive Systems, Inc., in its Chapter 11 proceedings. Pliant filed a $25,233 general unsecured claim in Meridian's Chapter 11 case. In 2001, Sidley Austin represented Clorox-California in a litigation matter adverse to Pliant Corp. In 2004, Sidley Austin represented Exopack LLC in a litigation matter adverse to Pliant. Sidley Austin also represented General Electric Corp. in a $90 million accounts receivable financing involving Pliant. Those matters are closed. In 2005, Sidley Austin represented Tredegar Film Products Corp. in a trade secret lawsuit. Sidley Austin no longer represents Tredegar, and has established an ethical wall between the Pliant matters and former Tredegar matters. Mr. Conlan assures the Court that Sidley Austin and its professionals are "disinterested persons" within the meaning of Section 101(14) of the Bankruptcy Code. Headquartered in Schaumburg, Illinois, Pliant Corporation -- http://www.pliantcorp.com/-- produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Debtor and 10 of its affiliates filed for chapter 11 protection on Jan. 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the company had $604,275,000 in total assets and $1,197,438,000 in total debts. (Pliant Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) PLIANT CORP: Wants to Tap Young Conaway as Local Bankr. Counsel --------------------------------------------------------------- Pliant Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the District of Delaware's consent to employ Young Conaway Stargatt & Taylor, LLP, as their Delaware counsel, effective on their bankruptcy petition date. According to Stephen T. Auburn, Pliant Corp.'s vice president and general counsel, the Debtors selected Young Conaway because of its extensive experience and knowledge in the field of business reorganizations under Chapter 11 of the Bankruptcy Code. Young Conaway will: (a) provide legal advice with respect to the Debtors' powers and duties as debtors-in-possession in the continued operation of their business and management of their properties; (b) assist in the preparation and pursuit of confirmation of a plan and approval of a disclosure statement; (c) prepare on behalf of the Debtors necessary applications, motions, answers, orders, reports and other legal papers; (d) appear in Court and to protect the interests of the Debtors before the Court; and (e) perform all other legal services for the Debtors which may be necessary and proper in these proceedings. Young Conaway has discussed with Sidley Austin LLP, the Debtors' co-counsel, a division of responsibility to avoid duplication of efforts. In accordance with Section 330(a) of the Bankruptcy Code, the Debtors will pay Young Conaway on an hourly basis and reimburse the Firm for actual, necessary expenses and other charges. The principal attorneys and paralegal presently designated to represent the Debtors are: Professional Hourly Fees ------------ ----------- Robert S. Brady $500 Edition L. Morton $365 Kenneth J. Enos $240 Lisa A. Armstrong $215 Stefanie B. Boyle $155 The Debtors employed Young Conaway on October 25, 2005, pursuant to an engagement agreement. On October 31, 2005, Young Conaway received a $100,000 retainer in connection with the planning and preparation of initial documents and its proposed postpetition representation of the Debtors. On December 13, 2005, the Firm applied $51,657 of the Retainer to outstanding balances resulting from fees and expenses for the period of October 25 through December 13. On December 16, 2005, the Debtors paid an additional $51,657 to Young Conaway to replenish the Retainer. On December 30, the Firm drew from the Retainer to cover fees and expenses incurred from December 14, 2005 through January 3, 2006. After reconciliation, $51,121 was allocated to satisfy all prepetition amounts owed and the remaining Retainer of $48,879 will be held by Young Conaway and used to satisfy its postpetition fees and expenses. Robert S. Brady, Esq., a partner at Young Conaway, assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Mr. Brady discloses that Young Conaway represents, or previously represented, these parties-in-interest in matters related to Pliant: -- Meridian Automotive Systems, Inc., -- Ameripol Synpol, Inc., -- Money Foods, and -- Official Committee of Unsecured Creditors of Uniflex, Inc. Young Conaway also represents, or previously represented, other parties-in-interest in matters unrelated to the Debtors. Headquartered in Schaumburg, Illinois, Pliant Corporation -- http://www.pliantcorp.com/-- produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Debtor and 10 of its affiliates filed for chapter 11 protection on Jan. 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the company had $604,275,000 in total assets and $1,197,438,000 in total debts. (Pliant Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) PLIANT CORP: Wants to Employ McMillan Binch as Canadian Counsel --------------------------------------------------------------- As previously reported, Uniplast Industries Co., Pliant Corporation of Canada Ltd., and Pliant Packaging of Canada, LLC, obtained an order from the Ontario Superior Court of Justice (Commercial List), in Canada, recognizing their Chapter 11 proceedings as "foreign proceedings" pursuant to Section 18.6 of the Companies' Creditors Arrangement Act. Due to the involvement of the Canadian Debtors in Pliant Corporation's overall debt structure, the successful restructuring of the Debtors under any Chapter 11 plan may be significantly affected by the application of Canadian procedural and substantive law, Stephen T. Auburn, Pliant Corp.'s vice president and general counsel, relates. Pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, the Debtors seek the U.S. Bankruptcy Court for the District of Delaware's consent to employ McMillan Binch Mendelsohn LLP, as their Canadian bankruptcy counsel. Since November 3, 2005, McMillan's professionals have worked closely with the Debtors' management team and the Debtors' other professionals, and they have become well acquainted with the Debtors' operations and businesses, especially with regard to the Canadian Debtors. Pursuant to an Engagement Letter, McMillan has agreed to: (a) prepare an application for relief pursuant to Section 18.6 of the CCAA for the Canadian Debtors; (b) prepare motions and other court papers, documents and agreements that may be called for under the Canadian proceedings in connection with these cases; (c) represent the Debtors at and preparing for all attendant court appearances and out-of-court planning and negotiations that relate to the Canadian Debtors; (d) negotiate, prepare and prosecute any relief with respect to the Canadian Debtors related to Chapter 11 plans and related solicitation and disclosure statements and other related documents; and (e) otherwise representing the Debtors, together with the Debtors' primary bankruptcy counsel, Sidley Austin LLP, in all aspects of the Debtors' Chapter 11 cases related to the Canadian Debtors. Mr. Auburn attests that McMillan is well suited to serve as the Debtors' Canadian bankruptcy counsel. Founded in 1903, McMillan provides a full range of business legal services and definitive advice to corporate and financial services clients in Canada, the US, and abroad. Corporate restructuring and insolvency is one of McMillan's core practice areas. McMillan's extensive cross- Canada and cross-border experience has earned it global recognition in several key areas of practice, including corporate restructuring and insolvency. McMillan intends to charge the Debtors at its regular hourly rates, and seek reimbursement of actual, necessary expenses and other charges. McMillan's current rates are: Professional Hourly Rate ------------ ----------- Attorneys CN$270 to CN$800 Paralegals CN$65 to CN$255 McMillan received $90,604 from the Debtors before to the Petition Date in payment for prepetition services and related expenses. In addition, McMillan received a $75,000 evergreen retainer from the Debtors. In addition to the payment of $90,604, the Firm has applied, after reconciliation, $51,774 from the retainer for additional fees and expenses related to prepetition services and expenses, which will be replenished by the Debtors. McMillan intends to hold the retainer as security for payment of postpetition fees and expenses. While the Debtors are in bankruptcy, the Bankruptcy Court will have exclusive jurisdiction over all matters relating, in any way, to disputes arising from the engagement until the Debtors emerge from bankruptcy. Jeffrey B. Gollob, Esq., a partner at McMillan, discloses that the Firm had relationships with, or is currently providing services to, parties-in-interest in unrelated matters: * Dow USA, * DuPont Company, * Arkema Inc., formerly known as Atofina Chemicals, * Sun Chemical Corp., * GE Capital, * BASF USA, * BASF Canada, * GE Canada Finance Holding Company, * General Electric Capital Corporation, * Zurich Insurance Company, * The Northwestern Mutual Life Insurance Company, and * Wachovia, formerly known as First Union Capital Partners. Headquartered in Schaumburg, Illinois, Pliant Corporation -- http://www.pliantcorp.com/-- produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Debtor and 10 of its affiliates filed for chapter 11 protection on Jan. 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the company had $604,275,000 in total assets and $1,197,438,000 in total debts. (Pliant Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) RESIDENTIAL ACCREDIT: Fitch Holds Low-B Ratings on 22 Class Certs. ------------------------------------------------------------------ Fitch Ratings has taken action on the following Residential Accredit Loan, Inc. mortgage-pass through certificates: Series 2001-QS13 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AAA'; -- Class M-2 upgraded to 'AAA' from 'AA'; -- Class M-3 affirmed at 'A'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2002-QS2 -- Class A affirmed at 'AAA'; -- Class M-1 upgraded to 'AAA' from 'AA+'; -- Class M-2 upgraded to 'AA' from 'A'; -- Class M-3 upgraded to 'A' from 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2002-QS5 -- Class A affirmed at 'AAA'; -- Class M-1 upgraded to 'AAA' from 'AA'; -- Class M-2 upgraded to 'AA' from 'A'; -- Class M-3 upgraded to 'A' from 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2003-QS5 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2004-QS3 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2004-QS4 -- Class A affirmed at 'AAA'. Series 2004-QS6 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2004-QS7 -- Class A affirmed at 'AAA'. Series 2004-QS8 -- Class A affirmed at 'AAA'. Series 2004-QS9 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2004-QS10 -- Class A affirmed at 'AAA'. Series 2004-QS11 -- Class A affirmed at 'AAA'. Series 2004-QS12 -- Class A affirmed at 'AAA'. Series 2004-QS13 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2004-QS15 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2004-QS16, Group I -- Class IA affirmed at 'AAA'; -- Class IM-1 affirmed at 'AA'; -- Class IM-2 affirmed at 'A'; -- Class IM-3 affirmed at 'BBB'; -- Class IB-1 affirmed at 'BB'; -- Class IB-2 affirmed at 'B'. Series 2004-QS16, Group II -- Class IIA affirmed at 'AAA'; -- Class IIM-1 affirmed at 'AA'; -- Class IIM-2 affirmed at 'A'; -- Class IIM-3 affirmed at 'BBB'; -- Class IIB-1 affirmed at 'BB'; -- Class IIB-2 affirmed at 'B'. The mortgage loans in the aforementioned transactions consist of both 30-year fixed-rate and 15-year fixed-rate mortgages extended to both Prime and Alt-A borrowers, which are secured by first and second liens, primarily on one- to four-family residential properties. The upgrades, affecting $27.56 million of outstanding certificates, are being taken as a result of low delinquencies and losses, as well as significantly increased credit support levels. As of the December 2005 distribution date, the credit enhancement (CE) levels for the upgraded classes have grown at least 8.0 times (x) original CE levels. The affirmations, affecting over $2.39 billion of certificates, indicate stable collateral performance and moderate growth in CE. The mortgage loan performance of the RALI transactions has generally been consistent with expectations. The percentage of loans over 90 days delinquent ranges from 0.0% to 5.76%. The cumulative loss as a percentage of the initial pool balance ranges from 0.0% to only 0.20%. As of the December 2005 distribution date, the transactions are seasoned from a range of 12 (2004-QS216) to 51 (2001-QS13) months. The pool factors (current mortgage loan principal outstanding as a percentage of the initial pool) range from approximately 9% (2001- QS13) to 81% (2004-QS16). The master servicer for all aforementioned RALI deals is GMAC Residential Funding Corporation, which is rated 'RMS1' by Fitch. SOLUTIA INC: Wants Until May 10 Make Lease-Related Decisions ------------------------------------------------------------ Jonathan S. Henes, Esq., at Kirkland & Ellis LLP, in New York, tells the U.S. Bankruptcy Court for the Southern District of New York that Solutia, Inc., and its debtor-affiliates have had insufficient time to fully appraise the value of their unexpired nonresidential real property leases in the context of a plan of reorganization. To accomplish this task, the Debtors must complete the plan negotiation process and propose a confirmable plan of reorganization. Against this backdrop, the Debtors ask the Court to further extend their deadline to assume or reject the Unexpired Leases to May 10, 2006. The Debtors reserve their right to seek further extensions. As of January 18, 2006, the Debtors are party to 30 Unexpired Leases, used in connection with their business operations around the world. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. (Solutia Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOLUTIA INCORPORATED: Wants More Time to Serve Complaints --------------------------------------------------------- Pursuant to Section 546 of the Bankruptcy Code, the period for the timely commencement of avoidance actions by filing adversary proceeding complaints expired on December 17, 2005. Solutia Inc. and its debtor-affiliates timely filed 86 complaints, commencing Avoidance Actions against various defendants. In addition, tolling agreements were reached with eight other potential defendants. To conserve judicial, legal, financial and other resources, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to extend the deadline to serve the complaints in the Avoidance Actions to 180 days after the filing of the Avoidance Complaints. In addition, the Debtors ask the Court to further extend the service deadline beyond the 180-day period for an additional 90 days, as necessary, without the need for further hearing. The Debtors suggest that they will simply file a notice of the Additional Extension with the Court and serve that notice on all interested parties. Any subsequent extension requests will be made by motion on notice to the necessary parties. Garry M. Graber, Esq., at Hodgson Russ LLP, in New York, relates that the Debtors are in the process of negotiating and drafting their plan of reorganization. The Plan, he says, may eliminate the necessity to further prosecute certain of the Avoidance Actions -- many of which involve defendants who continue to do business with the Debtors. Due to confidentiality concerns, the Debtors cannot provide further detail regarding plan negotiations or the factors that may impact a decision concerning the necessity of further prosecuting certain Avoidance Actions. However, the Debtors believe that negotiations are progressing, and that the provisions of a confirmable plan may eliminate the need to further pursue some of the Avoidance Actions. The Debtors want to avoid the costs and expenses associated with the service and prosecution of the Avoidance Actions until they determine that further prosecution is necessary and appropriate, Mr. Graber explains. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. (Solutia Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOLUTIA INC: Court Clerk Records 13 Claim Transfers in Nov. & Dec. ------------------------------------------------------------------ From November to December 2005, the Clerk of the U.S. Bankruptcy Court for the Southern District of New York recorded at least 13 claim transfers in Solutia Inc. and its debtor-affiliates' Chapter 11 cases. The Claim Transfers include: Transferor Transferee Claim Amount ---------- ---------- ------------ RU Connected Longacre Master Fund $20,300 Ampacet Corporation Argo Partners 8,614 George Edwards Co. Inc. Debt Acquisition Company 612 Ameren Services Co. 3V Capital Master Fund 137,934 Hardy Systems Corp. Argo Partners 5,578 Fluor Enterprises Inc. Longacre Master Fund 6,731,277 Stone Container Corp. Longacre Master Fund 183,791 URS Corporation Longacre Master Fund 600,587 Harberger Inc. Longacre Master Fund 18,867 Harberger Inc. Longacre Master Fund 143,479 Carlton Bates Company Fair Harbor Capital 2,933 Carlton Bates Company Fair Harbor Capital 5,488 Clean One Janitorial Fair Harbor Capital 3,593 Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. (Solutia Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) STRUCTURED ASSET: Fitch Holds Low-B Rating on Four Cert. Classes ---------------------------------------------------------------- Fitch Ratings has affirmed 15 classes of Structured Asset Securities Corp. (SASCO) residential mortgage-backed certificates, as follows: Series 2004-5H -- Class A at 'AAA'; -- Class B1 at 'AA'; -- Class B2 at 'A'; -- Class B3 at 'BBB'; -- Class B4 at 'BB'; -- Class B5 at 'B'. Series 2004-12H -- Class A at 'AAA'; -- Classes 1B1, 2B1 at 'AA'; -- Classes 1B2, 2B2 at 'A'; -- Class B3 at 'BBB'; -- Class B4 at 'BB'; -- Class B5 at 'B'. Series 2004-18H -- Class A at 'AAA'. The mortgage loans were originated by various originators or acquired by various originators or their correspondents in accordance with such originator's respective underwriting standards and guidelines. The mortgage loans generally are partially covered by primary mortgage insurance polices issued by either United Guaranty Corporation in connection with the Borrower Advantage Program, or Mortgage Guaranty Insurance Corporation in connection with the Pro Mortgage Program. The collateral consists primarily of fixed-rate, conventional, fully amortizing first lien residential mortgage loans. Additionally, all of the mortgage loans have a weighted average original loan to value ratio in excess of 101%. The mortgage loans are master serviced by Aurora Loan Services, Inc., which is rated 'RMS1-' by Fitch. These affirmations reflect adequate relationships of credit enhancement (CE) to future loss expectations and affect approximately $376.28 million of certificates. The above classes have experienced small to moderate growth in CE since closing and cumulative losses for series 2004-5H, 2004-12H, and 2004-18H have been $2,342, $13,312, and $2,433 respectively. The pools are seasoned from a range of only 15 to 23 months. The pool factors (current principal balance as a percentage of original) range from approximately 60% (series 2004-12H) to 73% (series 2004-18H) outstanding. UAL CORP: Inks Multi-Mil. Settlement with London Market Insurers ---------------------------------------------------------------- James J. Mazza, Jr., Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, tells Judge Wedoff that United Air Lines, Inc., has reached a settlement with certain underwriters at Lloyd's, London, and certain London Market Companies who severally subscribed to hull and liability policies in favor of United from October 1, 1956, to October 1, 1998. The settlement, Mr. Mazza explains, would resolve a dispute spanning seven years in which United has sought reimbursement from the London Market Insurers of amounts it incurred to remediate environmental damage at various airports sites, and for defense and indemnification for other known or projected environmental liabilities at airport sites and other locations. Under a Buy Back transaction, United wants to sell the London Policies to the issuing London Market Insurers free and clear of any pollution or asbestos claims or interests for a gross consideration of $27,000,000. Mr. Mazza notes that insolvency and non-participation of certain London Market Insurers and the inability to identify certain of the subscribing insurers will reduce the actual payment initially received immediately from the settlement by about $5,500,000, yielding a net payment of $21,500,000. London Policies' Structure Mr. Mazza explains that the value of the London Policies is constrained by their unique structure. One set of policies, incepting October 1, 1956, and ending October 1, 1969, consists of excess policies, providing coverage on a per occurrence basis, for hull and liability claims in amounts that exhaust primary limits of $500,000 per occurrence. Primary coverage was provided during this period by another insurer, United States Aviation Underwriters, with whom United previously reached settlement. The London Policies provided per occurrence limits during this period in amounts ranging from $15,000,000 in 1960 to $75,000,000 in 1969. The London Market Insurers contend that United has not exhausted the $500,000 primary limit as to each "occurrence" -- defined by the insurers as each instance of fuel leakage -- and therefore for most of United's claims, their excess policies during this period are not triggered. A second set of London Policies covered by the United settlement comprises policies incepting June 1, 1970, and ending October 1, 1998. In this period, the London Market Insurers wrote hull and liability coverage on a quota share basis, with each insurer subscribing severally to a discrete percentage of the first dollar of risk. Because these percentages varied from year to year, each of United's environmental claims may be entitled to different percentages of coverage from the London Market Insurers. United estimates that the London Market Insurers' aggregate share of hull and liability insurance coverage during this period is about 50%. United's Environmental Claims Over the past 15 years, United has incurred substantial expense to investigate and remediate soil and ground water and to provide engineering and monitoring reports by order of state environmental agencies or responsible airport authorities. Mr. Mazza relates that United has incurred in excess of $78,000,000 in environmental costs. United has reserved $45,000,000 for all future environmental expenses, including response costs associated with historic releases. As United was compelled to perform cleanup work, United tendered its claims to its insurers, including the London Market Insurers, for defense and indemnification. The London Market Insurers have reserved their rights or denied coverage on virtually all of the tendered claims. The insurers have interposed numerous defenses and exclusions, including the various forms of pollution exclusions found in the London Market Policies. Delay of Settlement May Negatively Affect United Many of the largest London Market Insurers subscribing to United's policies have filed schemes of arrangement in the United Kingdom, with bar dates for filing claims and a wide range of payment terms. Mr. Mazza says that these insolvent, and in some cases solvent, insurers may seek to avoid payment of amounts allocated to them under the proposed settlement. United anticipates that over time, additional London Market Insurers may seek protection under a scheme of arrangement or other insolvency proceedings, further reducing United's potential recoveries. United has preserved its rights of recovery against insolvent London Market Insurers, including the filing of the equivalent of proofs of claim with the scheme administrators. United has recently received distributions on claims filed with two insurers -- Aviation & General Insurance Co. and Andrew Weir -- totaling about $1,030,000. These funds are being held in escrow. The Lloyd's syndicates subscribing to the London Policies have been relieved of liability by order of English Courts who approved the appointment of an entity known as Equitas to assume and run off all environmental and asbestos liabilities for policies placed in the London Market prior to 1993. Equitas has limited funds and a mandate to close its books as soon as possible. Thus, United could not be guaranteed a recovery from Equitas should United fail to settle with the London Market Insurers promptly. "In light of the defenses and exclusions asserted by the London Market Insurers, the limited coverage attributable to the London Policies based upon United's claims, and the desire to avoid protracted litigation over which there is no guarantee of success, United determined that the Buy Back transaction at the proposed settlement amount was favorable to the estate at this time," Mr. Mazza says. By this motion, United ask the Court to approve: (i) its entry into the agreement to settle and release all pollution and asbestos claims against the London Market Insurers under the London Policies; (ii) the London Market Insurers Buy Back of the London Policies free and clear of any pollution or asbestos claims or interests in the policies for a gross consideration of $27,000,000; (iii) the entry of a permanent mandatory injunction prohibiting any person from prosecuting any pollution or asbestos insurance coverage claims against the London Market Insurers under the London Policies; and (iv) the $5,000,000 claims fund as adequate protection for parties who prove valid interests in the London Policies. In particular, the Agreement provides that: a. The London Market Insurers will pay to United and United will accept $27,000,000 in full satisfaction of all past and future pollution and asbestos claims. Of this amount, about $1,000,000 has been paid already, and is being held in escrow by United's outside counsel pending Court approval of the Debtors' Request. Of the remaining $26,500,000, United expects to receive $20,500,000 within the time periods specified within the Agreement. b. United will place $5,000,000 of the net proceeds in a separate account to provide adequate protection to parties who prove valid interests in the policies. To assert a "valid" pollution or asbestos claim for purposes of the Claim Fund, a potential claimant must demonstrate: -- a valid legal interest in the London Policies, either as an additional insured or as the holder of a final non- appealable judgment, or allowed claim, against United; -- it has adequately verified the amount of its pollution or asbestos claim using commercially accepted and reliable cost accounting and estimation procedures; and -- its claim is covered under specific London Policies. The Agreement also includes a full release between the parties with respect to claims concerning pollution or asbestos. Thus, upon Court approval and final payment, no other person, including but not limited to any other named insured, creditor or additional insured can bring a claim against the London Market Insurers under the London Policies with respect to pollution or asbestos claims. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. Judge Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006 (United Airlines Bankruptcy News, Issue No. 113; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Wants to Settle Tax Claims of 23 California Counties -------------------------------------------------------------- UAL Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the Northern District of Illinois' authority to settle certain tax disputes with 23 counties in California: (1) Alameda, (2) Fresno, (3) Kern, (4) Humboldt, (5) Los Angeles, (6) Monterey, (7) Orange, (8) Riverside, (9) Sacramento, (10) San Diego, (11) San Joaquin, (12) San Mateo, (13) Santa Barbara, (14) Santa Clara, (15) San Luis Obispo, (16) Shasta, (17) Solano, (18) Butte, (19) Del Norte, (20) Imperial, (21) Stanislaus, (22) Tulare, and (23) Ventura. Erik W. Chalut, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, tells Judge Wedoff that the Debtors and the Counties have been involved in an ongoing dispute regarding the assessed value of certain airline property for California property tax purposes. The controversy concerns whether an adjustment to the value of the property is required to reflect economic obsolescence in light of substantial changes in the airline industry in recent years. Many other airlines have also been involved in the dispute. The Counties have proposed a settlement agreement to the Debtors -- and to virtually all other major U.S. airlines -- whereby the assessed value of aircraft will be reduced and the airlines will receive a tax credit to be used to offset future tax liability to the Counties. Under the Settlement, the Debtors will receive future tax benefits in excess of $15,000,000, Mr. Chalut says. Pursuant to the Settlement, among other things, the parties agree that the taxable value of an aircraft of each Make, Model and Series of Main-line Jets and Regional Aircraft for the years 2002 to 2003 and 2003 to 2004 will be calculated in this manner: a. Tax year 2002-2003 Full Cash Value of each Make, Model and Series of Main-line Jets and Regional Aircraft will be the lesser of either: (1) the sum of 79.38% of the Trended Value of each Main- line Jet and Regional Aircraft within a Make, Model and Series: provided, however, that if this calculation produces a value for an individual Certificated Aircraft that is less than the APG Minimum, the APG Minimum value for Certificated Aircraft will be used instead; or (2) the Average APG Retail/Wholesale Value for the respective fleet. b. Tax year 2003-2004 Full Cash Value of each Make, Model and Series of Main-line Jets and Regional Aircraft will be the lesser of either: (1) the sum of 82.08% of the Trended Value of each Main- line Jet and Regional Aircraft within a Make, Model and Series; provided, however, that if the calculation produces a value for an individual Certificated Aircraft that is less than the APG minimum, the APG minimum value for the Certificated Aircraft will be used instead; or (2) the Average APG Retail/Wholesale Value for the fleet. For Tax Years 2004 to 2005 and 2005 to 2006, the parties agree that the Full Cash Value of each Make, Model and Series of Main- line Jets and Regional Aircraft for the tax year 2004-05 will be determined in accordance with the provisions of Section 401.17(a) of the California Revenue and Taxation Code. The Settlement also provides that any party to the Settlement who is operating under the authority of the federal bankruptcy laws cannot receive benefits under the Settlement unless it obtains court approval for the Settlement. A full copy of the Settlement Agreement is available for free at http://ResearchArchives.com/t/s?4c4 Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. Judge Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006 (United Airlines Bankruptcy News, Issue No. 113; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Kevakian Wants to Prosecute Whistle Blowers Act Lawsuit ----------------------------------------------------------------- Gregory S. Kevakian filed a civil action in the U.S. District Court for the District of Arizona seeking $5,925,440 from UAL Corporation and its debtor-affiliates for retaliatory discrimination, unlawful termination of employment and violation of the Whistle Blowers Act. The action has been stayed due to the Debtors' Chapter 11 cases. From January 2003 through September 2004, Mr. Kevakian became very vocal as to his objections with the Debtors. Mr. Kevakian assisted numerous whistle blowers that resulted in fines levied against the Debtors by various federal agencies. Mr. Kevakian was also featured numerous times at the Debtors' official Web site in which he was contacted by existing and former United Airlines employees seeking advice on who to turn for help. The Debtors filed a complaint against Mr. Kevakian and his wife in the North Valley Justice Court, in Maricopa County, Arizona. Mr. Kevakian filed a counterclaim for harassment, seeking $850,000 from the Debtors for damages and at the same time citing the Doctrine of Res Judicata to dismiss the Debtors' Complaint. Mr. Kevakian's Counterclaim was stayed. The Debtors' legal counsel contacted Mr. Kevakian on several different occasions asking him to drop his claim and they will do the same. However, Mr. Kevakian refused. Mr. Kevakian asks the U.S. Bankruptcy Court for the Northern District of Illinois to: (a) lift the automatic stay regarding his Civil Action and Counter Claim; and (b) allow him to his amend claim by increasing the claim amount to $6,766,210 to include unresolved union grievances filed prior to employment termination. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. Judge Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006 (United Airlines Bankruptcy News, Issue No. 114; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Court Fixes Compensation Procedures for Mediator ------------------------------------------------------------ W.R. Grace & Co. and its debtor-affiliates and the Official Committee of Asbestos Personal Injury Claimants have each proposed compensation procedures for Roger M. Whelan, the discovery mediator with respect to asbestos personal injury claims estimation, for his mediation services. The U.S. Bankruptcy Court for District of Delaware rules that: (1) Mr. Whelan will be paid for his reasonable fees and for the actual and necessary expenses he incurs in connection with his mediation. Mr. Whelan's fees will be based on the actual amount of time he spends on a mediation matter, and his hourly billing rate will not exceed $415. (2) If Mr. Whelan incurs time or out-of-pocket expenses in rendering mediation services in a given month, then on or before the last day of the immediately succeeding month, he will file with the Court and serve on the parties a written billing statement, including: -- a chronological itemization of services performed, including the date each service was performed, the amount of time spent in performing each service, and a narrative description of each service performed; -- an itemization of actual and necessary expenses incurred by the mediator; and -- a notation, indicating whether the service performed or expense incurred is related to a dispute between the Debtors and an individual claimant or claimants, or whether the service performed or expense incurred is related to a dispute between the Debtors and the PI Committee. (3) Each service or expense itemized will be accompanied by a description of the particular discovery objection or discovery-related motion that Mr. Whelan has mediated in connection with that service or expense. (4) If a discovery matter identified in Mr. Whelan's fee application is related to a dispute between the Debtors and the PI Committee, then the fees and expenses will be paid by the Debtors. If it is related to a dispute between the Debtors and an individual claimant, the fees and expenses will be paid in equal share by all parties to the mediation. If a discrete discovery issue is connected to a dispute among the Debtors, an individual claimant and the Committee, then the fees and expenses will be paid in equal share by all parties to the mediation, with the Debtors responsible for the PI Committee's share. Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Court Modifies Property Damage Estimation CMO --------------------------------------------------------- Pursuant to the Case Management Order for the estimation of asbestos property damage liabilities of W.R. Grace & Co. and its debtor-affiliates, the U.S. Bankruptcy Court for the District of Delaware rules that all discovery of experts and non-experts related to Phase I of the Estimation addressing the Methodology Issue will be abated until February 10, 2006. Depositions may commence on February 13, 2006, and will be concluded by April 7, 2006. Judge Fitzgerald directs the Debtors to file and serve on counsel for the Official Committee of Unsecured Creditors, rebuttal expert reports, if any, on the Phase I Methodology Issue, and identify: (i) rebuttal fact witnesses they intend to call to testify to address the Phase I Methodology Issue; and (ii) the general subject matter of any rebuttal fact witness testimony. Judge Fitzgerald directs any PD estimation participant to file and serve a final fact witness or expert list in respect of Phase I hearing addressing the Methodology Issue no later than April 12, 2006. Any pre-trial motions, including motions in limine, Daubert, and summary judgment motions addressing the Methodology Issue will be filed not later than April 21, 2006. Judge Fitzgerald will hold a preliminary pre-trial conference on Phase I of the Estimation addressing the Methodology Issue at the April 2006 omnibus hearing. The Phase I trial is scheduled for June 1, 2, and if necessary, June 12, 2006, at 9:00 a.m., in Pittsburgh, Pennsylvania. Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Anderson Memorial Wants Stay Lifted on S.C. Lawsuit --------------------------------------------------------------- Anderson Memorial Hospital asks the U.S. Bankruptcy Court for the District of Delaware to modify the automatic stay to allow it to file a petition addressed to Judge John C. Hayes, III, of the South Carolina Court of Common Pleas, to unseal records from the class certification proceedings conducted in Anderson Memorial Hospital v. W.R. Grace & Co., et al., 92-CP-25-279. Christopher D. Loizides, Esq., at Loizides & Associates, in Wilmington, Delaware, tells Judge Fitzgerald that Anderson wants to present substantial record on class certification, including testimony and affidavits that directly contradict the claims made by W.R. Grace &. Co. to the Bankruptcy Court regarding Speights & Runyan and the Anderson proceedings in South Carolina. Unsealing the record would provide the Bankruptcy Court with clear and incontrovertible evidence that the Anderson Class Certification issues were fully litigated before the South Carolina Court, and that Grace's claims about the South Carolina proceedings are false, Mr. Loizides asserts. Moreover, Mr. Loizides contends, disclosure will allow Anderson to present significant and uncontroversial evidence that the adequacy attack Grace previously raised in the South Carolina case is "utterly groundless and contradicted by a substantial body of evidence." Debtors Object There is no reason to inject the South Carolina Court's purported "substantial record on class certification, including testimony and affidavits" into the Debtors' bankruptcy case, Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, in Wilmington, Delaware, tells Judge Fitzgerald. The Debtors believe that Anderson is attempting to postpone resolution of its pending class certification request, on behalf of itself and all property owners everywhere whose buildings contain or used to contain the asbestos-containing surface materials for which the Debtors are allegedly responsible. Anderson does not identify which of Grace's "claims" it disagrees with, let alone explain how the disagreement impacts class certification, Ms. Jones notes. Anderson also ignores Grace's clear position that the South Carolina proceedings have no bearing on class certification in Grace's bankruptcy, "where notice has already been given to all potential claimants through means that were effective and approved by the Court." Accordingly, the Debtors ask the Court to deny Anderson's request. Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Wants to Hire Steptoe & Johnson as Tax Counsel ---------------------------------------------------------- W.R. Grace & Co. and its debtor-affiliates seek the U.S. Bankruptcy Court for the District of Delaware's authority to expand the services of Steptoe & Johnson LLP, to include advising and representing them on other tax law and tax litigation matters that may arise during the course of their Chapter 11 cases. Steptoe currently represents the Debtors as their special tax counsel in matters regarding certain corporate-owned life insurance policies. The Debtors assure Judge Fitzgerald that Steptoe's services will be complementary rather than duplicative of the services to be performed by the Debtors' other bankruptcy and reorganization counsel. The Debtors will pay Steptoe at its customary hourly billing rates: Attorneys $235 to $930 Paralegals and Analyst $15 to $235 The Debtors will also pay for all other expenses incurred by Steptoe in connection with their cases, including mail charges, delivery charges, document processing, photocopying charges, and travel expenses. Anne E. Moron, a partner at Steptoe, assures the Court that the firm does not represent any interest adverse to the Debtors or to their estates, and is a "disinterested person" as that term is defined under Section 101(14) of the Bankruptcy Code. Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) WINDOW ROCK: Taps Fulbright & Jaworski as Special Counsel --------------------------------------------------------- Window Rock Enterprises, Inc., seeks permission from the U.S. Bankruptcy Court for the Central District of California, to employ Fulbright & Jaworski, L.L.P., as its special litigation counsel. The Debtor expects Fulbright & Jaworski to represent them in: a) a lawsuit styled as Federal Trade Commission v. Window Rock Enterprises, et al., pending in United States District Court, Central District of California, Case No. CV04-8190DSF; and b) an arbitration proceeding pending before JAMS, entitled Greg S. Cynaumon and Infinity Advertising, Inc. v. Window Rock Enterprises, Inc., JAMS Ref. No. 1220033450. Specifically, the Debtor seeks to engage Anthony DiResta along with Robert E. Darby in the FTC Action; and Mr. Darby, Todd Sorrell and other counsel in the firm's Los Angeles office in the Cynaumon Arbitration. In the FTC Action and the Cynaumon Arbitration, Fulbright & Jaworski will: a) provide consultation to the Debtor; b) prepare pleadings; c) make court appearances; d) engage in settlement negotiations; e) provide other litigation services with respect to the proceedings; and f) take other actions and perform other services as the Debtor may require. According to Mr. Darby, Fulbright & Jaworski will be paid on a monthly basis. The firm received a $123,000 retainer from the Debtor. Mr. Darby assures the Court that Fulbright & Jaworski does not hold any interest adverse to the Debtor's estate. Headquartered in Brea, California, Window Rock Enterprises Inc. -- http://windowrock.net/-- manufactures and sells all-natural dietary and nutritional supplements. The Debtor is also producing its own TV, radio and print advertising campaigns for nutritional and dietary supplements and has distribution in over 40,000 Food Drug Mass Clubs as well as Health and Fitness Channels. The Company filed for chapter 11 protection on Nov. 23, 2005 (Bankr. C.D. Calif. Case No. 05-50048). Robert E. Opera, Esq., Winthrop Couchot, PC represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of more than $100 million. WINDOW ROCK: Committee Taps FTI Consulting as Financial Advisors ---------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Window Rock Enterprises, Inc.'s chapter 11 case asks the U.S. Bankruptcy Court for the Central District of California for permission to employ FTI Consulting, Inc., as its financial advisors. FTI Consulting will: 1) assist the Committee in the review and analysis of financial related disclosures required by the Court, including the Schedules of Assets and Liabilities, the Statement of Financial Affairs and the Monthly Operating Reports; 2) review and analyze financial information distributed by the Debtor to creditors and other parties-in-interest, including cash flow projections and budgets, cash receipts and disbursement analyses, analyses of various asset and liability accounts, business plans, claim analyses and analyses of transactions; 3) evaluate the Debtor's short-term cash management procedures, cash flow forecast and overall financial position and analyze its operations, marketing, product line and position in the market; 4) research and analyze potential sources of recovery, including insurance policies, prepetition transfers and claims against other parties; 5) assist and advise the Committee with respect to the Debtor's identification of core business assets and investigate the validity of potential disposition of any assets; 6) assist the Committee in the valuation of the Debtor's operations and in reviewing its cost and benefit evaluations in connection with the affirmation or rejection of various executory contracts and leases; 7) review and analyze the Debtor's management compensation, retention and any severance or bonus programs and assess the prospects for its reorganization or liquidation; 8) attend meetings and assist in discussions with the Debtor, potential investors, secured lenders, the U.S. Trustee and other parties-in-interest and assist in the review or preparation of information and analysis for any chapter 11 plan; and 9) render all other business consulting and financial advisory services to the Committee that are necessary in the Debtor's chapter 11 case. Cynthia Nelson, a senior managing director of FTI Consulting, reports her firm's professionals bill: Designation Hourly Rate ----------- ----------- Sr. Managing Directors $595 - $655 Directors and Managing Directors $435 - $590 Associates & Consultants $215 - $405 Administration Staff and Paraprofessionals $95 - $175 FTI Consulting assures the Court that it does not represent any interest materially adverse to the Debtor and the Committee and is eligible to represent the Committee under Section 1103(b) of the Bankruptcy Code. Headquartered in Brea, California, Window Rock Enterprises Inc. -- http://windowrock.net/-- manufactures and sells all-natural dietary and nutritional supplements. The Debtor is also producing its own TV, radio and print advertising campaigns for nutritional and dietary supplements and has distribution in over 40,000 Food Drug Mass Clubs as well as Health and Fitness Channels. The Company filed for chapter 11 protection on Nov. 23, 2005 (Bankr. C.D. Calif. Case No. 05-50048). Robert E. Opera, Esq., Winthrop Couchot, PC represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of more than $100 million. WINDOW ROCK: Wants Court OK to Hire Squar Milner as Accountants --------------------------------------------------------------- Window Rock Enterprises, Inc., asks the U.S. Bankruptcy Court for the Central District of California for permission to employ Squar, Milner, Reehl & Williamson, LLP, as its accountants. Squar Milner will: 1) consult with the Debtor regarding tax matters and assist in preparing its federal and state income tax returns and in preparing financial reports, including the reports required to be submitted to the Office of the U.S. Trustee; 2) assist the Debtor in preparing pleadings in connection with plan confirmation proceedings in its chapter 11 case and in expert testimony as needed by the Debtor; 3) provide accounting support in litigation affecting the Debtor and its reorganization and assist in settlement negotiations related to its chapter 11 case; and 4) perform all other accounting services to the Debtor that are necessary in its chapter 11 case. Stephen P. Milner, C.P.A., a managing partner at Squar Milner, discloses that his Firm received a $108,000 retainer. Mr. Milner reports that Squar Milner will also be paid on a monthly basis for its professionals' fees and expenses after the retainer is exhausted. Squar Milner assures the Court that it does not represent any interest materially adverse to the Debtor pursuant to Section 327(a) of the Bankruptcy Code. Headquartered in Brea, California, Window Rock Enterprises Inc. -- http://windowrock.net/-- manufactures and sells all-natural dietary and nutritional supplements. The Debtor is also producing its own TV, radio and print advertising campaigns for nutritional and dietary supplements and has distribution in over 40,000 Food Drug Mass Clubs as well as Health and Fitness Channels. The Company filed for chapter 11 protection on Nov. 23, 2005 (Bankr. C.D. Calif. Case No. 05-50048). Robert E. Opera, Esq., Winthrop Couchot, PC represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of more than $100 million. WINN-DIXIE: Backs U.S. Trustee Decree to Disband Equity Committee ----------------------------------------------------------------- In proceedings before the U.S. Bankruptcy Court for the Southern District of New York yesterday, Winn-Dixie Stores, Inc., and its debtor-affiliates supported the decision of the U.S. Trustee to disband the official committee of Winn-Dixie equity security holders. On Jan. 11, 2006, the U.S. Trustee disbanded this "Equity Committee," which subsequently petitioned the Court for reinstatement. The Equity Committee's motion for reinstatement remains pending before the Court. As reported in the Troubled Company Reporter on Aug. 22, 2005, Felicia S. Turner, the United States Trustee for Region 21, appointed five parties willing to serve on the Official Committee of Equity Security Holders in Winn-Dixie Stores, Inc., and its debtor-affiliates' chapter 11 cases: 1. Brandes Investment Partners, L.P.; 2. Houston N. Maddox; 3. Poul Madsen; 4. Michael Nakonechny; and 5. Kenneth M. Thomas Although the Company supported the creation of the Equity Committee at that time, Winn-Dixie has now concluded that the U.S. Trustee's disbandment of the Equity Committee is appropriate in light of current information. This information includes Winn- Dixie's recent financial statements and its recently completed confidential business plan, which contains forecasts regarding the profitability of the reorganized company. While the Company believes the business plan shows that Winn-Dixie will be able to reorganize successfully, it also makes it relatively clear that there is no substantial likelihood of a meaningful recovery for existing shareholders under a plan of reorganization. Ultimately, as the Company has stated in the past, the value of Winn-Dixie's common stock, if any, will be determined upon the confirmation of a plan of reorganization. The Company's objective is to negotiate a plan of reorganization that maximizes recoveries for all constituencies, including existing shareholders. "Winn-Dixie is making good progress in its reorganization, and we are seeing tangible improvements in our performance including an increase in identical store sales of more than 7% for the second quarter of fiscal 2006, excluding 11 stores in New Orleans that have been closed since Hurricane Katrina," Jay Skelton, Chairman of the Board of Directors of Winn-Dixie, commented. "However, as we have worked to prepare a plan of reorganization, it has become clear that existing holders of Winn-Dixie common stock will probably receive little or no value for their stock when the Company emerges from Chapter 11. While this is not an unusual outcome in most Chapter 11 cases, we deeply regret this news. Fortunately, we do not believe the outlook for the Company's existing stock is indicative of the outlook for our business and future financial performance. We are pleased with our progress and excited about our prospects for continued improvement." Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063, transferred Apr. 14, 2005, to Bankr. M.D. Fla. Case Nos. 05-03817 through 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. WORLDCOM INC: SAVVIS Insists It Can Recover Postpetition Charges ---------------------------------------------------------------- As reported in the Troubled Company Reporter on Dec. 16, 2004, SAVVIS Communications Corporation asked the U.S. Bankruptcy Court for the Southern District of New York to allow its administrative claim, aggregating $405,000. Savvis Communications is a tenant in a building located at 580 Winter Street, in Waltham, Massachusetts. Since WorldCom, Inc. and its debtor-affiliates' chapter 11 filing, the Debtors have also occupied and utilized a portion of the available space in the Massachusetts Facility, and have utilized and benefited from utility service provided to the Facility. Savvis asserts that C&W Internet expressly assigned to it not only the Exodus Lease but also any known or unknown rights, demands, claims, or causes of action "arising out of" or "relating to" the Exodus Lease or C&W Internet's overall business operations. In this regard, Savvis contends that it is clear that C&W Internet assigned its right to recover the Postpetition Electricity Charges to Savvis. Thus, Savvis is now entitled to recover the Charges from the Debtors. C&W Internet assigned the Exodus Lease to Savvis pursuant to an asset purchase agreement dated January 23, 2004. The Exodus Lease was expressly included in the definition of "Acquired Assets" in the Asset Purchase Agreement, David M. Banker, Esq., at Lowenstein Sandler, PC, in New York, relates. As defined in the Asset Purchase Agreement, the term "Acquired Assets" also included within its nearly all-encompassing scope all "property and assets of the Business, moveable and immoveable, real and personal, tangible or intangible, of every kind and description and wheresoever situated." The term "Business" was, in turn, defined in the Asset Purchase Agreement as the "business of providing network and hosting services as conducted by [C&W Internet] and [its] respective Subsidiaries on the date hereof . . ." and, thus, clearly, included C&W Internet's operations at the Waltham Property, Mr. Banker adds. The Asset Purchase Agreement also provided that C&W Internet was transferring and assigning to Savvis "any rights, demands, claims, credits, allowances, rebates, causes of action, known or unknown, or rights of set-off . . .arising out of or relating to any of the Acquired Assets." Thus, under their plain and unambiguous meaning, the terms "arising out of" and "relating to" are obviously intended to have an extremely far-reaching and expansive scopes, Mr. Banker explains. In identifying the types of claims and causes of action that would be assigned to Savvis, the Asset Purchase Agreement not only employed these two, extremely broad phrases -- that is, "arising out of" and "relating to" -- it also couched the two phrases in the disjunctive so that either one, or both, would be effective in pulling potential claims or causes of action into the pool of assets being transferred to Savvis. C&W Internet's claims for the Postpetition Electricity Charge must be regarded as having connection with the Exodus Lease and C&W Internet's operations at the Waltham Property, for if C&W Internet were not occupying and operating at the Waltham Property pursuant to the Exodus Lease, it would have never paid the Debtors' Postpetition Electricity Charges, Mr. Banker explains. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 112; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Parus Holdings Slams Move to Disallow Its Claims -------------------------------------------------------------- As previously reported in the Troubled Company Reporter on August 30, 2005, WorldCom, Inc. and its debtor-affiliates asked the U.S. Bankruptcy Court for the Southern District of New York to: (a) dismiss Parus Holding, Inc.'s statutory and tort based claims; and (b) limit Parus Holdings' recovery for breach of contract to $460,442. Robert L. Driscoll, Esq., at Stinson Morrison Hecker, LLP, in Kansas City, Missouri, relates that on November 20, 2000, EffectNet, Inc., and EffectNet, LLC, entered into a Unified Communications Services General Agreement with Intermedia Communications, Inc. Pursuant to the UC Contract, EffectNet agreed to supply Intermedia with unified messaging, wholesale communications and related services that Intermedia could resell to its end user customers. Parus Responds "The Debtors' Motion is a tactical maneuver born of desperation," Robert S. Friedman, Esq., at Kelley Drye & Warren, LLP, in New York, on behalf of Parus Holdings, Inc., avers. Realizing that they have an admitted breach of contract with significant exposure on the contract and torts claims, the Debtors have posited a last ditch effort to avoid their discovery obligations under the law, Mr. Friedman says. The Debtors attempt to offer an "easy" way out in a complex commercial case with sharp factual issues. However, the Debtors' attempts fail, as the Motion ignores established precedent, especially considering the pre-discovery status of the case. Mr. Friedman asserts that the Debtors ignore authority directly contrary to their arguments and exceptions to the general rules they cast as absolute barriers to Parus' claims. In addition, the Debtors' arguments ignore the fact that WorldCom and Intermedia Communications, Inc., were totally distinct entities during the time period most crucial to Parus' tort claims -- the months leading up to the merger of those companies. The Debtors' attempt to extricate themselves from an admitted and intentional contract breach fails on its face, Mr. Friedman points out. The Unified Communications Services General Agreement dated November 20, 2000, provides for direct damages: -- of more than $6,000,000 in minimums that Intermedia was obligated to meet; and -- well in excess of $6,000,000 for the benefit of Parus' bargain and the lost value of the UC Contract. Neither of the direct damages are limited by the so-called limitation of liability clause contained in the UC Contract. Even assuming the provision is enforceable, it does not preclude direct or benefit-of-the-bargain damages, which is what Parus seeks on its breach of contract claims, Mr. Friedman relates. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 112; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Abraxas Petro ABP (27) 120 (4) Accentia Biophar ABPI (8) 34 (20) AFC Enterprises AFCE (44) 216 53 Alaska Comm Sys ALSK (9) 589 49 Alliance Imaging AIQ (43) 643 42 AMR Corp. AMR (729) 29,436 (1,882) Atherogenics Inc. AGIX (98) 213 190 Bally Total Fitn BFT (1,463) 486 (442) Biomarin Pharmac BMRN (65) 209 (38) Blount International BLT (201) 427 110 CableVision System CVC (2,486) 10,204 (1,881) CCC Information CCCG (95) 112 34 Centennial Comm CYCL (488) 1,511 69 Cenveo Inc CVO (12) 1,146 127 Choice Hotels CHH (165) 289 (34) Cincinnati Bell CBB (672) 1,893 (10) Clorox Co. CLX (532) 3,570 (229) Columbia Laborat CBRX (13) 17 10 Compass Minerals CMP (83) 686 149 Crown Media HL CRWN (64) 1,250 (125) Deluxe Corp DLX (82) 1,426 (277) Denny's Corporation DENN (261) 498 (72) Domino's Pizza DPZ (553) 414 3 DOV Pharmaceutic DOVP (3) 116 94 Echostar Comm DISH (785) 7,533 321 Emeritus Corp. ESC (134) 713 (62) Empire Resorts NYNY (18) 65 (4) Foster Wheeler FWLT (375) 1,936 (186) Guilford Pharm GLFD (20) 136 60 Graftech International GTI (13) 1,026 283 Hollinger Int'l HLR (177) 1,001 (396) I2 Technologies ITWO (144) 352 112 ICOS Corp ICOS (67) 232 141 IMAX Corp IMAX (34) 245 30 Immersion Corp. IMMR (15) 46 29 Indevus Pharma IDEV (115) 113 79 Intermune Inc. ITMN (30) 194 109 Investools Inc. IED (20) 64 (46) Kulicke & Soffa KLIC (3) 440 216 Level 3 Comm. Inc. LVLT (632) 7,580 502 Ligand Pharm LGND (96) 306 (99) Lodgenet Entertainment LNET (69) 283 22 Maxxam Inc. MXM (677) 1,044 114 Maytag Corp. MYG (95) 2,989 371 McDermott Int'l MDR (53) 1,627 244 McMoran Exploration MMR (58) 408 67 NPS Pharm Inc. NPSP (55) 354 258 Omnova Solutions OMN (13) 355 46 Owens Corning OWENQ (8,443) 8,142 976 ON Semiconductor ONNN (317) 1,171 300 Quality Distribu QLTY (26) 377 20 Quest Res. Corp. QRES (27) 244 (29) Qwest Communication Q (2,716) 23,727 822 Revlon Inc. REV (1,169) 980 86 Riviera Holdings RIV (28) 221 6 Rural/Metro Corp. RURL (93) 315 56 Rural Cellular RCCC (460) 1,367 46 SBA Comm. Corp. SBAC (47) 886 25 Sepracor Inc. SEPR (213) 1,193 703 St. John Knits Inc. SJKI (52) 213 80 Tivo Inc. TIVO (9) 163 36 Unigene Labs Inc. UGNE (15) 14 (9) Unisys Corp UIS (33) 4,029 339 Vector Group Ltd. VGR (38) 536 168 Vertrue Inc. VTRU (30) 446 (82) Visteon Corp. VC (1,430) 8,823 404 Vocus Inc. VOCS (9) 21 (10) Worldspace Inc. WRSP (1,475) 765 249 WR Grace & Co. GRA (559) 3,517 876 ********* 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, Cherry Soriano-Baaclo, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Pinili, Jr., Tara Marie Martin, Terry Profetana and Peter A. Chapman, Editors. Copyright 2006. 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 $725 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***