/raid1/www/Hosts/bankrupt/TCR_Public/060202.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, February 2, 2006, Vol. 10, No. 28
Headlines
ACURA PHARMA: Obtains $750K Bridge Funding for Product Development
ADELPHIA COMMS: FTC Concludes Anti-Trust Inquiry on Asset Sale
ALIMENTATION COUCHE-TARD: Moody's Reviews Ratings & May Upgrade
ALTRA INDUSTRIAL: Moody's Rates New $55MM Sr. Unsec. Notes at Caa1
ALTRA INDUSTRIAL: S&P Rates Proposed $55 Million Sr. Notes at CCC+
ANGEL BERRIOS: Case Summary & 13 Largest Unsecured Creditors
ASTRATA GROUP: Posts $3.4 Mil. Net Loss in Quarter Ended Nov. 30
ATA AIRLINES: To Exit Bankruptcy Protection by February 28, 2006
ATA AIRLINES: Inks Stipulation Resolving Betaco's $2.3-Mil. Claims
BERRY-HILL: Gordian Group Approved as Debtor's Investment Bankers
CABOODLES LLC: Wants Until April 3 to File Chapter 11 Plan
CALPINE CORP: Gets Final Court Nod to Continue Insurance Programs
CALPINE CORP: Names Scott Davido as Chief Financial Officer
CAPE SYSTEMS: J.H. Cohn Raises Going Concern Doubt Over Losses
CATHOLIC CHURCH: Spokane Gets OK to Sell Cedar Assets for $318,000
CCH II: S&P Assigns CCC- Rating to $450 Million 10.25% Sr. Notes
CDEX INC: Aronson & Company Raises Going Concern Doubt
CHESAPEAKE ENERGY: S&P Rates Proposed $500 Million Notes at BB
CITIZENS COMMS: Moody's Affirms Corporate Family Rating at Ba3
CMS ENERGY: Focus on Core Operation Spurs S&P to Affirm BB Rating
COLLECTIBLE CONCEPTS: Posts $594K Net Loss in Fiscal Third Quarter
CONSUMERS TRUST: Fulbright & Jaworski Approved as Panel's Counsel
CONTINENTAL METAL: Case Summary & 20 Largest Unsecured Creditors
CURATIVE HEALTH: Has Until March 15 to File for Ch. 11 Protection
DIRECTED ELECTRONICS: Debt Repayment Cues Moody's Ratings Upgrade
DRS TECHS: Fitch Affirms B- Senior Subordinated Notes' Rating
DRUMMOND COMPANY: Moody's Puts Ba3 Ratings on $1.1 Billion Debts
DRUMMOND CO: S&P Assigns BB- Ratings to $1.1 Billion Senior Debts
DWIGHT BARNETTE: Case Summary & 19 Largest Unsecured Creditors
EASTMAN KODAK: Sales Decline Cues Moody's to Downgrade Ratings
EAGLEPICHER HOLDINGS: Wants Court Nod on Premium Financing Pact
EMERGE CAPITAL: Unit Buys 70% of Sagamore Holding's Common Stock
ENTERGY NEW ORLEANS: Panel Wants Taxes & Franchise Fee Returned
ENTERGY NEW ORLEANS: Wants Stay Lifted to Continue Lowenburg Case
ERA AVIATION: Taps Christianson & Spraker as Bankruptcy Counsel
GLASGOW INC: Case Summary & 20 Largest Unsecured Creditors
HUNTSMAN CORP: Proposed Company Sale Prompts S&P's Negative Watch
INEOS HOLDING: Moody's Rates EUR400 Million Facilities at (P)B1
INTEGRATED HEALTH: Wants Entry of Final Decree Delayed to Oct. 30
JACOBS INDUSTRIES: Files Combined Plan and Disclosure Statement
JEROME DUNCAN: Suburban Collection Buys Assets For $14.8 Million
KERR-MCGEE CORP: Moody's Reviews Ba3 Corporate Family Rating
KMART CORP: Settles Dispute Over State Street's $2.5 Million Claim
LA QUINTA: Blackstone Group Merger Cues Fitch to Withdraw Ratings
LAGNIAPPE HOSPITAL: Louisiana Seeks to Dismiss Chapter 11 Case
LEXTRON CORP: Miss. Tax Comm. Says Chapter 11 Plan Fatally Flawed
LIBERTY FIBERS: Bailey Roberts Approved as Ch. 7 Trustee's Counsel
LINENS 'N THINGS: Moody's Rates $650 Mil. Guaranteed Notes at B3
LINENS 'N THINGS: S&P Assigns B Corporate Credit & Debt Ratings
LOEWS CINEPLEX: AMC Ent. Merger Prompts S&P to Withdraw Ratings
MATRIA HEALTHCARE: S&P Lowers Planned $65 Mil. Loan's Rating to B-
MCI INC: Verizon Plans to Buy Back Sr. Notes at 101% of Amount
MERRILL LYNCH: S&P Cuts Rating on Class H Certs. from B- to CCC+
MUSICLAND HOLDING: Receives Court Approval to Close 341 Stores
NELLSON NUTRACEUTICAL: Court Okays AlixPartners as Claims Agent
NORTHWEST AIRLINES: Gets Court Nod for Pilot Pension Plan Freeze
O'SULLIVAN INDUSTRIES: Executes Severance Pact with Michael Franks
OFFSHORE LOGISTICS: Moody's Confirms Ba2 Corporate Family Rating
PACIFIC MAGTRON: Bankruptcy Court Approves Disclosure Statement
PARK PLACE: S&P Affirms Low-B Ratings on 15 Certificate Classes
PENN NATIONAL: Moody's Lifts $250MM Sr. Sub. Notes' Rating to B1
PHOENIX COLORADO: Case Summary & 4 Largest Unsecured Creditors
PPT VISION: Virchow Krause Raises Going Concern Doubt Over Losses
QUEEN'S SEAPORT: Judge Threatens to Convert or Dismiss Chapter 11
R.H. DONNELLEY: S&P Lowers Corporate Credit Rating to BB- from BB
RAPID LINK: Auditor Uncertain Over Going-Concern Ability
REMY INT'L: Additional Loan Cues Moody's to Lower Junk Ratings
RIM SEMICONDUCTOR: Marcum & Kliegman Raises Going Concern Doubt
ROTECH HEALTHCARE: Moody's Lowers $300MM Sub. Notes' Rating to B3
SANMINA-SCI CORP: Moody's Rates Proposed $600 Million Notes at B1
SEDGWICK CMS: Fitch Assigns B Rating to $340 Mil. Credit Facility
SPECTRUM BRANDS: Moody's Junks $1 Bil. Senior Subordinated Notes
STANDARD AERO: Moody's Affirms Sr. Subordinated Notes' Caa1 Rating
STRATOS GLOBAL: S&P Shaves Corporate Credit Rating to B+ from BB-
TEMBEC INC: Selling Oriented Strandboard Business for $98 Million
TEMBEC INDUSTRIES: Neg. Cash Flow Cues Moody's Ratings Downgrade
TENNECO INC: Financial Review Earns S&P's B+ Corp. Credit Rating
U.S. STEEL: Earns $109 Million of Net Income in 2005 Fourth Qtr.
UAL CORP: Emerges from Ch. 11 Protection with $3B Exit Financing
UAL CORP: Ch. 11 Emergence Cues S&P to Lift Credit Rating to B
UAL CORP: PBGC Expects $500 Mil. Proceeds from Sale of 10% Stake
USG CORP: Lobbyists Decry $3.05 Billion Contingent Asbestos Note
VARTEC TELECOM: Court Further Extends Plan-Filing Period to Apr. 4
WORLD WIDE: Wants Plan-Filing Period Extended to May 1, 2006
*********
ACURA PHARMA: Obtains $750K Bridge Funding for Product Development
------------------------------------------------------------------
Acura Pharmaceuticals, Inc. (OTCBB:ACUR) secured $750,000 of gross
term loan proceeds from:
* Essex Woodlands Health Ventures V, L.P.,
* Care Capital Investments II, L.P.,
* Care Capital Offshore Investments II, L.P.,
* Galen Partners III, L.P.,
* Galen Partners International III, L.P., and
* Galen Employee Fund III, L.P.
The Term Loan:
-- matures on June 1, 2006;
-- bears an annual interest rate of 10%;
-- is secured by a lien on all assets of the Company and its
subsidiary; and
-- is senior to all other Company debt.
The Company will use utilize the net proceeds from the Loan to
continue funding product development and licensing activities
relating to OxyADF tablets and other product candidates utilizing
its Aversion Technology. The Loan permits the funding of
additional cash amounts subject to agreement by the Company and
the Bridge Lenders. No assurance can be given, however, that any
additional funding will be advanced to the Company under the terms
of the Loan.
Cash Reserves Update
The Company estimates that its current cash reserves, including
the net proceeds from the Loan, will fund product development and
licensing activities through mid-to-late March 2006. To continue
operating thereafter, the Company must raise additional financing
or enter into appropriate collaboration agreements with third
parties providing for cash payments to the Company. No assurance
can be given that the Company will be successful in obtaining any
such financing or in securing collaborative agreements with third
parties on acceptable terms, if at all, or if secured, that such
financing or collaborative agreements will provide for payments to
the Company sufficient to continue funding operations. In the
absence of such financing or third-party collaborative agreements,
the Company will be required to scale back or terminate operations
and/or seek protection under applicable bankruptcy laws.
Acura Pharmaceuticals, Inc. -- http://www.acurapharm.com/--
together with its subsidiaries, is an emerging pharmaceutical
technology development company specializing in proprietary opioid
abuse deterrent formulation technology.
* * *
At Sept. 30, 2005, Acura Pharmaceuticals' balance sheet showed a
$4,889,000 stockholders' deficit, compared to a $1,085,000 deficit
at Dec. 31, 2004.
ADELPHIA COMMS: FTC Concludes Anti-Trust Inquiry on Asset Sale
--------------------------------------------------------------
Adelphia Communications Corporation (OTC: ADELQ) welcomed the
Federal Trade Commission decision to close its anti-trust
investigation into the proposed sale of Adelphia's assets to Time
Warner and Comcast.
"This important step forward satisfied a required condition to the
closing of our sale transaction with Time Warner and Comcast,"
Bill Schleyer, chairman and CEO of Adelphia, said. "The timely
closure of this sale is in the best interests of our creditors,
customers and employees. In addition to the remaining local
government approvals that have not yet been obtained, the focus of
our attention now turns to the FCC, where we hope for a prompt
ruling that this sale is in the public interest."
The FTC staff examined the proposed sale under provisions of the
so-called "Hart-Scott-Rodino" or "HSR Act" and chose to take no
additional action, satisfying a major condition to the closing of
the transactions.
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.
ALIMENTATION COUCHE-TARD: Moody's Reviews Ratings & May Upgrade
---------------------------------------------------------------
Moody's Investors Service placed all ratings of Alimentation
Couche-Tard, Inc. under review for possible upgrade. The review
is prompted by the operating and balance sheet progress that the
company has made since its December 2003 acquisition of Circle K.
As part of the review for upgrade, Moody's will consider factors
such as:
* changes over the longer term in average unit volume and store
level profitability;
* uses for expected future discretionary cash flow including
the company's acquisition appetite and likely levels of
shareholder distributions; and
* the company's position within the convenience store industry.
Ratings placed under review for possible upgrade are:
* Secured bank loan rating of Ba2;
* US$350 million 7.5% senior subordinated note (2013) rating of
Ba3; and
* Corporate family rating of Ba2.
During the review for upgrade, Moody's will consider likely long-
term levels of average unit volume and store level profitability,
both on the front-end and for motor fuel. Moody's expects that
gasoline profitability will eventually retreat to a normalized
level following unprecedented highs during 2005. Moody's review
also will consider possible uses for expected future discretionary
cash flow, between purposes such as:
* store count growth from acquisitions;
* store count growth from new store development;
* balance sheet improvement; and
* shareholder returns.
If ratings are upgraded at the conclusion of the review, at this
time ratings are unlikely to be raised by more than one notch.
The company has made improvements in operating performance (as
measured by average unit volume and store level profitability) and
debt protection measures since the December 2003 acquisition of
Circle K. Unprecedentedly high motor fuel prices during 2005 have
provided an added boost to recent operating performance, with
gasoline profitability increasing to 17 cents per gallon in the
Oct. 2005 quarter compared to historical norms of around 13 or
14 cents.
Leverage (using gross adjusted debt) for the twelve months ending
Oct. 9, 2005 was about 3 times, EBIT covered interest expense by
more than 3 times, and free cash flow to gross debt was around 19%
(all credit metrics calculated using Moody's standard analytical
adjustments). Merchandise margins have stayed strong at about 33%
over the several previous years, as improved merchandising and an
upgraded offering of fresh food has stimulated steady increases in
merchandise comparable store sales. The company has good
liquidity with cash of $409 million and complete availability
under the revolving credit facilities except for about $1 million
and US$15 million for letter of credit back-up.
Alimentation Couche-Tard, Inc., with headquarters in Laval,
Quebec, operates or licenses about 4,900 convenience stores in the
United States and Canada under the:
-- "Circle K",
-- "Couche-Tard",
-- "Mac's", and
-- other banners.
The company also licenses around 4,200 "Circle K" convenience
stores in Mexico and East Asia. Revenue for the twelve months
ending Oct. 2005 was about US$9 billion.
ALTRA INDUSTRIAL: Moody's Rates New $55MM Sr. Unsec. Notes at Caa1
------------------------------------------------------------------
Moody's Investors Service assigned a Caa1 rating to Altra
Industrial Motion, Inc.'s new senior unsecured notes and affirmed
all other existing ratings. The rating outlook remains stable.
Altra is issuing the senior unsecured notes to finance the
$50.5 million purchase price for its acquisition of Hay Hall
Holdings Limited, a manufacturer of couplings, industrial clutches
and brakes based in Birmingham, England. Hay Hall's product
offering is complementary to Altra's and should offer the company
increased customer leverage, improved geographic coverage as well
as the potential for synergy opportunities.
New rating assigned:
* $55 million senior unsecured notes, due 2013 at Caa1.
Ratings affirmed:
* Corporate Family Rating (formerly senior implied rating)
at B2;
* $165 million senior secured notes, due 2011 at B3; and
* Speculative Grade Liquidity rating at SGL-3.
The rating assignment and affirmation reflect:
* the company's high leverage;
* modest free cash flow generation; and
* potential risks associated with its acquisition strategy and
integration efforts.
The company's cash flow will be impacted by:
* higher interest expense;
* significant expected pension contributions;
* non-recurring cash integration costs; and
* expected payments on behalf of its parent company.
At the same time, the ratings recognize Altra's strong brand
names, established relationships with both OEMs and key players in
a consolidating distribution channel, as well as its potential to
achieve meaningful acquisition synergies.
The Caa1 rating on the senior unsecured notes reflects the lack of
collateral support and the junior-most position in the capital
structure, effectively subordinated to the first- and second-lien
secured debt. The notes will be guaranteed, on a senior unsecured
basis, by Altra's domestic restricted subsidiaries.
Because Altra is weakly positioned in its rating category, the
ratings and/or outlook could be pressured by any unexpected
integration issues with Hay Hall or an unexpected deterioration
in operating performance such that debt, using Moody's standard
rating adjustments, to adjusted EBITDA (adjusted to exclude
non-recurring restructuring expenses) would increase to over
6.0 times from the 4.6 times pro forma ratio projected by Moody's
for fiscal year end 2005 or if the company's ratio of free cash
flow to total debt becomes negative for an extended period of
time.
In addition, a material increase in the annual payment made on
behalf of the parent company (used to finance elective cash
interest payments on the CDPQ subordinated notes) could prompt a
rating downgrade. Factors that could cause Moody's to consider a
positive rating action include sustained operating improvements
resulting in a reduction of debt to adjusted EBITDA ratio to
4.5 times or less and an increase in free cash flow to total debt,
using Moody's standard adjustments, to over 8% on a sustainable
basis.
The stable outlook reflects Moody's expectation of continued
favorable conditions in the company's end markets over the near
term coupled with the expectation that a significant portion (at
least 45%) of Altra's revenues will continue to come from the sale
of replacement products.
Moody's expects Altra to have adequate liquidity over the next
twelve months, as indicated in its SGL-3 speculative grade
liquidity rating. The rating reflects Moody's expectation that
Altra's cash from operations, together with its cash on hand
(approximately $10 million as of Dec. 31, 2005), should be
adequate to cover its capital expenditures, working capital
requirements, and other financial needs over the next four
quarters. Liquidity is further supplemented by a $30 million
committed revolving credit facility due 2009 that will be undrawn
at closing. The revolver has a minimum fixed coverage ratio
(applicable only when revolver availability falls below $12.5
million) and a maximum annual capital expenditure covenant.
Moody's expects the company to remain in compliance with these
covenants.
Headquartered in Quincy, Massachusetts, Altra Industrial Motion,
Inc. is a manufacturer of mechanical power transmission products
with annualized revenues, pro forma for the Hay Hall acquisition,
over $425 million. The parent company is Altra Holdings, Inc., a
Genstar Capital, LLC portfolio company.
ALTRA INDUSTRIAL: S&P Rates Proposed $55 Million Sr. Notes at CCC+
------------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B' corporate
credit rating and other ratings on Altra Industrial Motion Inc.
At the same time, the rating agency assigned its 'CCC+' rating to
the company's proposed senior unsecured note issue of $55 million,
maturing in 2013. Proceeds from the transaction will be used to
fund the acquisition of U.K.-based Hay Hall Holdings Limited.
With the new debt issue, Standard & Poor's estimates that Altra
will have approximately $220 million of pro forma consolidated
total debt at the close of the transaction. The outlook is
stable.
Quincy, Massachusetts-based Altra manufactures power transmission
products for industrial customers and had sales of approximately
$420 million for the 12 months ended Sept. 30, 2005. The
company's principal owner is Genstar Capital LP, a private equity
firm.
"The speculative-grade ratings on Altra reflect the firm's weak
business risk profile and its highly leveraged financial profile,"
said Standard & Poor's credit analyst John R. Sico. "The ratings
are constrained by the company's high indebtedness and limited
financial flexibility, as well as by the fragmentation,
cyclicality, and highly competitive nature of the industry
and by the company's weak margins. The ratings also take into
account, however, the company's leading positions in niche
segments; its good customer, geographic, and end-market diversity;
and its strong brand names."
Altra's products are sold in 45 countries to 400 direct original
equipment manufacturer clients and through 3,000 distributor
outlets. The company's engineered products are often used in such
critical applications as failsafe brakes for:
* elevators,
* electric wheelchairs, and
* forklifts.
Its brand names include:
* Boston Gear,
* Warner Electric,
* Ameriflex,
* Amerigear,
* Kilian,
* Marland Clutch,
* Stieber, and
* Wichita Clutch.
Sales come from two divisions:
1. Standard products (which contributes two-thirds of revenues)
manufactures large-volume products such as clutches and
brakes, overrunning clutches, and enclosed gear drives.
2. Engineered products (contributing the other one-third of
revenues) manufactures products designed to customer
specifications, including couplings, open gearing, and
machined-race bearings.
Acquisitions are expected to augment organic growth. The
acquisition of U.K.-based Hay Hall for $50.5 million is expected
to complement Altra's existing product lines including couplings,
industrial clutches and brakes, and various power transmission
components. Hay Hall has well-established brands serving a
variety of applications in the power generation market, mining,
the primary metals market, factory automation, mobile equipment,
and other industrial markets, and it had revenues of more than
$60 million in 2004. Altra expects synergies and other growth
opportunities to improve its operational efficiencies.
ANGEL BERRIOS: Case Summary & 13 Largest Unsecured Creditors
------------------------------------------------------------
Debtors: Angel Manuel Santiago Berrios &
Carmen Ivette Melendez Padilla
dba Comerio Ambulance Service
dba Flamingo Gift Center
P.O. Box 4265
Bayamon Gardens Station
Bayamon, Puerto Rico 00956
Bankruptcy Case No.: 06-00234
Chapter 11 Petition Date: January 31, 2006
Court: District of Puerto Rico (Old San Juan)
Judge: Enrique S. Lamoutte
Debtors' Counsel: Luis A. Medina Torres, Esq.
Medina Torres Law Office
P.O. Box 191191
San Juan, Puerto Rico 00919-1191
Tel: (787) 765-3795
Fax: (787) 758-6000
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtors' 13 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
US Department of Health Ed. Claim of U.S. $2,817,753
c/o AUSA Jos, Pizarro Government
United States Attorney
Torre Chard¢n, Suite 1201
350 Carlos Chard¢n Street
San Juan, Puerto Rico 00918
Samuel Reyes de Jes£s Claim on tort $1,137,000
Virginia R”os Cruz KDP 02 02-0530
c/o Ra£l Aponte S nchez Superior Court
P.O. Box 8179 of Bayam¢n
Bayam¢n, PR 00960
Ford Motor Credit Liability from $240,000
c/o Jaime Ru”z Salda¤a returned vehicles
PMB 450, 400 Calaf Street
San Juan, PR 00918
Municipio de Bayam¢n Business Taxes $50,000
US Department of Health Ed. Student Loan $32,000
BBVA Visa $15,743
R-G Premier Bank Visa Credit Card $14,795
Banco Popular Personal Loan $13,000
Mercedes Benz Credit Residual Loan $13,000
PR Department of Labor Judgment on $6,300
Case No. KPE
2005-0737, Superior
Court of San Juan
Banco Santander Visa Credit Card $5,494
American Express Credit Card $4,193
Sucn. de Dora Padr¢ Siragusa Claim on tort $2,000
KDP 02 02-033
Superior Court
of Bayam¢n
ASTRATA GROUP: Posts $3.4 Mil. Net Loss in Quarter Ended Nov. 30
----------------------------------------------------------------
Astrata Group, Inc., delivered its financial results for the
quarter ended Nov. 30, 2005, to the Securities and Exchange
Commission on Jan. 23, 2005.
Astrata incurred a $3.4 million net loss for the three months
ended Nov. 30, 2005 compared to a $1.3 million net loss for the
three months ended Nov. 30, 2004.
Total revenues were approximately $3.9 million for the three
months ended Nov. 30, 2005; a decrease of approximately $200,000,
compared to $4.1 million of revenues for the three months ended
Nov. 30, 2004. This reflects a 4.9% decrease quarter to quarter.
The Company's balance sheet at Nov. 30, 2005, showed $12,814,860
in total assets and liabilities of $16,214,612, resulting in a
stockholders' deficit of $3,434,884. In addition, the Company
had a working capital deficit of approximately $7.4 million as of
Nov. 30, 2005.
New CEO
Effective Jan. 23, 2006, Martin Euler will serve as Astrata's
acting Chief Executive Officer while the Company seeks a permanent
CEO. Mr. Euler replaces Trevor Venter. Mr. Venter is now
president of the Company's geomatics operation and managing
director for its South Africa operations.
Going Concern Doubt
Squar, Milner, Reehl & Williamson, LLP, the Company's auditor,
expressed substantial doubt about the Company's ability to
continue as a going concern. The auditing firm pointed to the
Company's negative working capital of approximately $3.5 million
at Feb. 28, 2005, a net loss of $7.3 million for the year then
ended, and negative operating cash flow in fiscal 2005.
About Astrata Group
Astrata Group Inc. -- http://www.astratagroup.com/-- engaged in
the telematics and Global Positioning System industry, is focused
on advanced location-based IT products and services that combine
positioning, wireless communications, and information
technologies. The Company provides advanced positioning products,
as well as monitoring and airtime services to industrial,
commercial, governmental entities, academic/research institutions,
and professional customers in a number of markets including
surveying, utility, construction, homeland security, military,
intelligence, mining, agriculture, marine, public safety, and
transportation.
ATA AIRLINES: To Exit Bankruptcy Protection by February 28, 2006
----------------------------------------------------------------
ATA Holdings Corp and its subsidiary ATA Airlines will end their
Chapter 11 bankruptcy protection by Feb. 28, 2006.
The carrier has reportedly spent 14 months in bankruptcy, cutting
routes and staff to make enough savings. ATA will operate about
half the number of aircraft it had when it filed for bankruptcy in
2004. ATA will focus on flying to travel destinations while about
a half of its business will come from military charters.
The reorganisation plan was approved by US Bankruptcy Court Judge
Basil H. Lorch III and the final paperwork confirming the ruling
was filed on Jan. 31, 2006. Analysts have said that without its
code-sharing agreement with Southwest Airlines the airline may not
remain profitable.
A free copy of the Reorganizing Debtors' Chapter 11 Plan is
available at http://ResearchArchives.com/t/s?4d1
A free copy of the Reorganizing Debtors' Disclosure Statement is
available at http://ResearchArchives.com/t/s?4d2
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: Inks Stipulation Resolving Betaco's $2.3-Mil. Claims
------------------------------------------------------------------
American Trans Air Execujet, Inc., and Betaco, Inc., were parties
to these lease agreements:
(i) Lear Jet Lease Agreement, dated April 1, 2004, for the
lease by Execujet from Betaco of a Lear Jet Model 35
bearing FAA registration number N100AT;
(ii) Cessna Citation Lease Agreement, dated April 1, 2004, for
the lease by Execujet from Betaco of a Cessna Citation II
bearing FAA registration number N1AT; and
(iii) Helicopter Lease Agreement, dated April 1, 2004, for the
lease by Execujet from Betaco of a Bell 206L-3 LongRanger
helicopter bearing FAA registration number N116TV.
On October 31, 2005, the U.S. Bankruptcy Court for the Southern
District of Indiana approved the rejection of the Execujet Leases
for the Lear Jet and the Cessna Citation. On November 2, 2005,
the Court approved the rejection of the Execujet Lease for the
LongRanger. On November 29, 2005, Betaco filed duplicate claims,
each for $2,168,616, against the estates of Execujet and ATA
Holdings Corp., for alleged damages arising from the rejection of
the Execujet Leases.
Following arm's-length negotiations, ATA Airlines, Inc., its
debtor-affiliates and Betaco agree that:
(i) Betaco's total claim against the Reorganizing Debtors, or
any of the other Debtors, for all unsecured non-priority
claims, damages related to the Aircraft, arising from the
Betaco Leases, or the rejection or breach of the Betaco
Leases is $2,324,182;
(ii) Claim No. 1859 will be amended and allowed against the
estate of ATA Airlines as a general unsecured non-priority
claim for $170,000, reflecting all claims with respect to
the N13AT Lease; and
(iii) Claim No. 2156 will be amended and allowed against the
estate of Execujet as a general unsecured non-priority
claim for $2,154,182, reflecting all claims with respect
to the Execujet Leases.
The parties believe that the allowance of the Allowed Betaco
Claims would finally resolve all of the Aircraft Claims against
the Reorganizing Debtors. All claims, filed or scheduled, other
than the Allowed Betaco Claims, against the estates of the
Reorganizing Debtors, including, without limitation, Claim No.
2157, will be disallowed in their entirety and expunged.
Judge Basil H. Lorch approved the Stipulation in its entirety.
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)
BERRY-HILL: Gordian Group Approved as Debtor's Investment Bankers
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Berry-Hill Galleries, Inc., and its debtor-affiliate, Coram
Capital LLC, permission to employ Gordian Group, LLC, as their
investment banker.
Gordian Group will:
1) advise the Debtors' management on potential restructuring of
its indebtedness and assist them in presenting restructuring
proposals to creditors;
2) assist the Debtors in analyzing its business alternatives
and assist in raising new or replacement capital for them;
3) assist in formulating a plan of reorganization and analyze
from a financial point of view, any proposed chapter 11
plan, including assistance in the plan negotiation and
confirmation process; and
4) render all other investment banking services to the Debtors
that are necessary in their chapter 11 cases.
Peter S. Kaufman, a Managing Director of Gordian Group, discloses
that his Firm will be paid:
a) a $25,000 monthly fee;
b) a new capital fee equal to 2% in cash of the aggregate
principal amount of new capital or financing raised in a
financial transaction or committed by a lender;
c) a restructuring fee equal to 2% in cash of the principal
amount of any claims or obligations of the Debtor that are
compromised or restructured; and
d) a success fee equal to 2% in cash of all aggregate
consideration of a successful sale of the Debtors' assets,
or merging of the Debtor, or any other financial
transaction.
Gordian Group assures the Court that it does not represent any
interest materially adverse to the Debtors or their estates
pursuant to Section 327(a) of the Bankruptcy Code.
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 commission 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
$100 million and debts between $1 million and $50 million.
CABOODLES LLC: Wants Until April 3 to File Chapter 11 Plan
----------------------------------------------------------
Caboodles, LLC, asks the U.S. Bankruptcy Court for the Western
District of Tennessee to further extend until April 3, 2006, the
period within which the Debtor has the exclusive right to file a
chapter 11 plan. The Debtor also asks the Court to extend until
March 14, 2006, its exclusive right to solicit acceptances of that
plan.
The Debtor wants more time to explore financial strategies and
alternatives. The Debtor is in the early stages of formulating a
plan. If an extension is granted, the Debtor believes that a more
meaningful and acceptable plan will be filed.
Headquartered in Memphis, Tennessee, Caboodles, LLC, aka Caboodles
Cosmetics, manufactures cosmetics. The company filed for chapter
11 protection on Sept. 30, 2005 (Bankr. W.D. Tenn. Case No.
05-35710). Steven N. Douglass, Esq., at Harris Shelton Hanover
Walsh, PLLC, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it listed
$18,422,133 in assets and $15,874,247 in debts.
CALPINE CORP: Gets Final Court Nod to Continue Insurance Programs
-----------------------------------------------------------------
As previously reported, Calpine Corporation and its debtor-
affiliates maintain numerous insurance programs providing coverage
for general liability, worker's compensation, directors and
officers' liability, umbrella liability, automotive liability,
pollution and remediation, crime, fiduciary liability, legal
liability and property. Richard M. Cieri, Esq., at Kirkland &
Ellis LLP, in New York, tells the Honorable Burton R. Lifland of
the Bankruptcy Court for the Southern District of New York that
the Insurance Programs are essential to the preservation of the
Debtors' businesses, property and assets, and, in many cases, the
coverages are required by various regulations, laws and contracts
that govern the Debtors' business conduct.
The Debtors' Insurance Programs include coverage from two primary
sources: the Captive Insurance Company and policies purchased
from third party carriers.
The Debtors ask the Court for authority to:
(a) maintain and continue the existing arrangement regarding
the Captive Insurance Company and its related Fronting
Companies in the ordinary course of business;
(b) pay amounts due and owing to the Captive Insurance
Company pursuant to the Loanback Agreement up to
$35,000,000 on an interim basis pending a final
hearing;
(c) maintain and continue their current Insurance Policies
and obtain new insurance policies as needed in the
ordinary course of business;
(d) pay any outstanding prepetition amounts related to the
Insurance Policies, including, without limitation, all
premiums and amounts owed to the Insurance Brokers; and
(e) pay or otherwise satisfy retrospective adjustments under
the Insurance Policies relating to prepetition periods.
Final Order
Judge Lifland grants the Debtors' request, on a final basis,
except with respect to payments under the Loanback Agreement
between Calpine and the Captive Insurance Company.
The Court authorizes the Debtors, on an interim basis, to pay
amounts due and owing to the Captive Insurance Company up to
$18,000,000 in accordance with the terms and conditions of the
Loanback Agreement.
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: Names Scott Davido as Chief Financial Officer
-----------------------------------------------------------
Calpine Corporation (OTC Pink Sheets: CPNLQ) reported the
appointment of Scott Davido as Chief Financial Officer effective
Feb. 1, 2006. Mr. Davido most recently held the position of
Executive Vice President and President of the Northeast Region for
NRG Energy, Inc. Eric N. Pryor, who had been serving as Interim
Chief Financial Officer, will return to his position as Deputy
Chief Financial Officer and Chief Risk Officer.
"We are very pleased to have someone with Scott's expertise join
our management team," Robert P. May, Calpine's Chief Executive
Officer, said. "In addition to his broad industry knowledge,
Scott brings with him extensive restructuring experience. I am
confident that he will be a great asset as we work to complete our
reorganization."
"I am excited to be part of the new Calpine team, and look forward
to developing and implementing a plan for Calpine to emerge from
its restructuring with a strong balance sheet to complement its
highly competitive core asset base," said Mr. Davido. "My top
priorities will include completing Calpine's financial
restructuring and helping set the company's new strategic
direction."
"I would like to thank Eric for stepping in as Interim Chief
Financial Officer and for his invaluable support during a very
critical period of time of transition for Calpine," added Mr. May.
"Eric has done a terrific job and we look forward to his continued
support as Deputy CFO and his contributions as a key member of our
senior management team."
Mr. Davido has served as Executive Vice President and President
for the Northeast Region of NRG Energy since April 2004. He was
Chairman of the Board of NRG Energy from May to December 2003,
during its financial restructuring, and was Senior Vice President,
General Counsel and Secretary of NRG Energy from October 2002
through April 2004. Prior to joining NRG Energy, Mr. Davido was
with The Elder-Beerman Stores Corp. and served as Executive Vice
President and Chief Financial Officer from March 1999 to May 2002,
and as General Counsel from January 1998 through March 1999.
Mr. Davido currently is a member of the Board of Directors for
Stage Stores, Inc. and Special Metals Corporation.
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.
CAPE SYSTEMS: J.H. Cohn Raises Going Concern Doubt Over Losses
--------------------------------------------------------------
J.H. Cohn LLP expressed substantial doubt about Cape Systems
Group, Inc.'s ability to continue as a going concern after it
audited the Company's financial statements for the fiscal years
ended Sept. 30, 2005 and 2004. The auditing firm points to the
Company's recurring losses and working capital and stockholders'
deficiencies as of Sept. 30, 2005.
Fiscal Year 2005 Results
Cape Systems reported a $6,795,000 net loss for the fiscal year
ended Sept. 30, 2005, in contrast to a $2,185,000 net loss
incurred a year earlier. Operating revenues increased by
approximately 47.3% to $3,779,000 in 2005.
At Sept. 30, 2005, the Company's balance sheet showed $3,412,000
in total assets and liabilities of $27,722,000, resulting in a
stockholders' deficit of $24,310,000. The company had a
$26,246,000 working capital deficit at Sept. 30, 2005.
Renaissance Software Default
Notes payable classified as current liabilities consist of past
due notes payable to Renaissance Software, Inc., totaling
$1,227,000 as of Sept. 30, 2005.
Cape Systems issued approximately $1,500,000 in promissory notes
payable, bearing interest at 8%, in connection with the purchase
of Renaissance in fiscal 2000. The notes were originally due on
June 30, 2001. The Company has not paid the remaining past due
balance on the notes as of Jan. 13, 2006.
About Cape Systems
Cape Systems Group, Inc., provides supply chain management
technologies, including enterprise software systems and
applications, and software integration solutions, that enable its
customers to manage their order, inventory and warehouse
management needs, consultative services, and software and hardware
service and maintenance. The Company serves its clients through
two general product and service lines:
1) enterprise solutions; and
2) service and maintenance for its products and services,
including service and maintenance of software and
hardware it resells for third parties.
CATHOLIC CHURCH: Spokane Gets OK to Sell Cedar Assets for $318,000
------------------------------------------------------------------
Judge Patricia C. Williams of the U.S. Bankruptcy Court for the
Eastern District of Washington authorized the Diocese of Spokane
to sell the real property located at 707 N. Cedar Street, in
Spokane, Washington pursuant to an auction.
Judge Williams ruled that:
(a) The Diocese's real estate agent, Spokane County Title,
will provide notice to all parties that have previously
expressed an interest in purchasing the Property of the
date and location of the auction.
(b) Any party that intends to bid at the auction must -- prior
to the auction -- deliver to Spokane County Title a bid
deposit of $5,000 cash or cashiers check. Immediately
after the auction, Spokane County Title will return the
deposits or cashiers checks to those persons or entities
who made deposits except for the deposit or check
delivered by the highest bidder. The highest bidder's
deposit will be retained by Spokane County Title and
applied to the purchase price in accordance with the Real
Estate Purchase and Sale Agreement.
(c) The opening bid will be Messrs. Ronnie Rae and Frank
Cikutovich's $318,000 offer. The first overbid, if any,
will be at least 5% more than the opening bid. All
subsequent overbids will be in increments of $2,000 or
more until no further bids are submitted.
(d) At the conclusion of the auction, the winning bidder will
deliver an additional $5,000 cash or certified check to
Spokane County Title, which together with the $5,000 bid
deposit, will be held by Spokane County Title as earnest
money. The Earnest Money will become non-refundable five
business days following the date of the auction unless the
successful bidder advises counsel for the Diocese in
writing that it intends to withdraw its bid. In that
event, the Earnest Money will be returned to the
withdrawing bidder and the party who submitted the second
highest bid at the auction will become the successful
bidder.
(e) The sale of the Property will close no later than
February 28, 2006, at which time the entire purchase price
will be paid to the Diocese.
(f) The Property will be sold "where is, as is" without
warranty and in compliance with the Real Estate Purchase
and Sale Agreement.
(g) A 6% real estate commission will be split between
the Diocese's real estate agent and the real estate agent
representing Messrs. Rae and Cikutovich or the successful
bidder, if any.
As reported in the Troubled Company Reporter on Nov. 9, 2005, the
Property formerly housed the St. Anne's Children's Home. The
Property is legally described as the South 20' of Lot 4 and all of
Lots 5 and 6 of Chandler Second Addition.
According to Michael J. Paukert, Esq., at Paine, Hamblen, Coffin,
Brooke & Miller, LLP, in Spokane, Washington, the Property has
been professionally marketed since September 2003.
The Roman Catholic Church of the Diocese of Spokane filed for
chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on
Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen,
Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed $11,162,938 in total assets and
$81,364,055 in total debts. (Catholic Church Bankruptcy News,
Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CCH II: S&P Assigns CCC- Rating to $450 Million 10.25% Sr. Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'CCC-' rating to
the $450 million 10.25% senior notes due 2010 of CCH II LLC and
CCH II Capital Corp., which are indirect subsidiaries of cable TV
system operator Charter Communications Inc. Proceeds will be used
to reduce borrowings, but not commitments, under the Charter
Communications Operating LLC revolving credit facility.
The notes are being issued under Rule 144A with registration
rights. This offering represents an upsizing of the company's
proposed $400 million aggregate amount of two issues due in 2010
and 2013 originally rated on Jan. 26, 2006. The 2010 notes were
increased; the 2013 notes are not being issued and the rating on
this issue was withdrawn.
"The 'CCC+' corporate credit rating and all other ratings on
Charter and its subsidiaries were affirmed; the outlook is
negative," said Standard & Poor's credit analyst Eric Geil.
Charter had about $19.1 billion of debt as of Sept. 30, 2005.
The ratings on Charter continue to reflect:
* high financial risk 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.
CDEX INC: Aronson & Company Raises Going Concern Doubt
------------------------------------------------------
Aronson & Company expressed substantial doubt about CDEX Inc.'s
ability to continue as a going concern after it audited the
Company's financial statements for the fiscal years ended
Oct. 31, 2005 and 2004. The auditing firm pointed to the
Company's recurring net losses, insufficient working capital, lack
of committed borrowing arrangements and an accumulated deficit in
excess of $19 million as of Oct. 31, 2005.
The Company's auditors can be reached at:
Aronson & Company
700 King Farm Blvd., Suite 300
Rockville, Maryland 20850
Fax: 301.231.7630
Fiscal Year 2005 Results
CDEX incurred a $5,221,499 net loss during the fiscal year ended
Oct. 31,2005, compared to a $5,977,984 net loss in the prior year.
The Company generated $178,607 of revenue in fiscal year 2005,
in contrast to $4,069 of revenue for the fiscal year ended
Oct. 31, 2004. 2005 revenue came from the delivery and support of
ValiMed(TM) units to hospital pharmacy customers. ValiMed(TM) is
used by hospital pharmacies to improve patient safety and reduce
medication error rates by validating compounded doses of high-risk
medications.
At Oct. 31, 2005, the Company's balance sheet showed $1,783,510 in
total assets and liabilities of $1,015,531. The Company had
working capital of $730,647 as of Oct. 31, 2005, including
$1,472,242 of cash and cash equivalents.
About CDEX Inc.
CDEX Inc. -- http://www.cdex-inc.com/and http://www.valimed.com/
-- is a technology development company with a current focus on
developing and marketing products using chemical detection and
validation technologies. At present, CDEX is devoting its
resources to two distinct areas: (i) identification of substances
of concern (e.g., explosives and illegal drugs for homeland
security); and (ii) validation of substances for anti-
counterfeiting, brand protection and quality assurance (e.g.,
validation of prescription medication and detection of counterfeit
or sub-par products for brand protection). ValiMed is one line of
CDEX products for the healthcare market. CDEX is headquartered in
Rockville, Maryland with its research and development laboratory
in Tucson, Arizona.
CHESAPEAKE ENERGY: S&P Rates Proposed $500 Million Notes at BB
--------------------------------------------------------------
Standard & Poor's Rating Services assigned its 'BB' rating to oil
and gas exploration and production company Chesapeake Energy
Corp.'s proposed $500 million 6.5% senior note issue due 2017.
At the same time, Standard & Poor's affirmed its 'BB/B-1'
corporate credit rating on the company.
The outlook is stable. Pro forma for its recent debt raises,
Oklahoma City, Oklahoma-based Chesapeake will have $6.1 billion of
debt outstanding.
The company will use the cash proceeds from the note issuance to
repay revolver borrowings used to finance recent acquisitions.
Earlier this month the company announced that it would be
acquiring an estimated 660 billion cubic feet equivalent of proved
reserves for $796 million plus 13 drilling rigs for $150 million.
"We expect the company to continue benefiting from high commodity
prices and generate sufficient cash flow to internally fund its
aggressive drilling program," said Standard & Poor's credit
analyst David Lundberg.
Moreover, the company has hedged a relatively high percentage of
future expected production, which mitigates future cash flow
volatility to a degree.
Standard & Poor's also said that it expects the company to
continue to finance acquisitions in a balanced manner, targeting a
50% debt to capital ratio.
CITIZENS COMMS: Moody's Affirms Corporate Family Rating at Ba3
--------------------------------------------------------------
Moody's Investors Service affirms Citizens Communications' Ba3
corporate family rating, but has changed the rating outlook to
stable from negative to reflect:
* more resilient than expected free cash flow generation;
* a slower-than-expected roll-out of cable competition; and
* anticipated focus on improving leverage.
Moody's has taken these actions:
Outlook Actions:
Issuer: Citizens Communications Company
* Outlook changed to stable from negative.
Issuer: Citizens Utilities Trust
* Outlook changed to stable from negative.
Ratings actions:
Issuer: Citizens Communications Company
* Corporate family rating -- Affirmed Ba3
* Senior unsecured revolving credit facility -- Affirmed Ba3
* Senior unsecured notes, debentures, bonds -- Affirmed Ba3
* Multiple seniority shelf -- Affirmed (P)Ba3 / (P)B2
Issuer: Citizens Utility Trust:
* Preferred Stock (EPPICS) - Affirmed B2
The stable outlook reflects Moody's belief that, over the next
12 to 18 months, Citizens will continue to sustain its current
level of revenue and free cash flow, in the face of declining
access lines, through the growth of DSL services and enhanced
bundled offerings. Moody's also expects Citizens, having
completed a $250 million share repurchase program in January 2006,
to temper future share buybacks at least over the intermediate
term.
Moody's expects that in addition to the scheduled debt maturities
in 2006, Citizens will direct a greater portion of its modest free
cash flow to reducing debt. Moody's believes that the restored
focus on debt reduction, a slower-than-expected rollout of VoIP
competition, and anticipated stable cash flow generation should
provide Citizens sufficient cushion to maintain its ratings for
the next 12 to 18 months.
Citizens' Ba3 corporate family rating continues to reflect high
leverage coupled with an aggressive dividend policy, such that
free cash flow comprises only 5.3% of adjusted debt. The ratings
also incorporate:
* low fixed charge coverage [EBITDA/(debt service + capex +
dividends)];
* a modestly eroding customer base as measured by access lines;
and
* Moody's expectations that competition will increase in the
future.
Citizens' incumbent position in all its markets, stable revenue
and strong cash flow generation mitigate some of the risks.
While Citizens continues to lose access lines, it has stanched
revenue losses by offering higher margin products and selling more
DSL lines, resulting in stable revenue and EBITDA margins.
Citizens has been able to fortify its customer base with higher
valued customers as DSL growth exceeded access lines losses. For
the twelve months ending Sept. 30, 2005, the DSL additions
relative to access line losses (#of new DSL customers / # access
lines loss) were slightly over 100%. In addition, ARPU increased
3.0% over the same period. Moody's expects ARPU to continue to
grow by about 2.5% in 2006. Through improved ARPU, Moody's
expects Citizens' free cash flow to remain at about 5% of adjusted
debt, retained cash flow to remain at about 11% of adjusted debt,
and funds from operations interest coverage to modestly improve to
near 3.5x over the intermediate term.
Recent changes in corporate governance support the outlook.
Moody's views positively the executive bonus metrics, which
include certain creditor-friendly metrics such as revenue, EBITDA
and free cash flow. In addition, Moody's views favorably
increased board and management attention to succession planning
and management development, although it will take some time to
assess the effectiveness of these plans.
Although Moody's expects the competition to increase in future,
the telephone services provided by the cable companies and
wireless substitution in rural markets have not affected Citizens'
revenue as much as Moody's initially expected. The slower-than-
expected competitive cable rollout has allowed the RLECs, in
general, to protect their incumbent positions and customer
relationships predominantly through DSL and enhanced bundle
offerings. Although Moody's expects cable competition to
eventually pressure the RLECs' margins, the RLEC ratings will
benefit in the interim to the degree they continue to generate
stable cash flow while this competition is delayed.
Given its current financial strategy, Citizens would need to
significantly reduce its leverage such that adjusted debt is less
than three times EBITDA to create positive rating momentum.
Moody's believes Citizens is most likely to achieve this through
continued growth of data and enhanced services coupled with
meaningful margin improvement, and a commitment to funnel free
cash flow to debt reduction. Moody's believes this will be
increasingly challenging, however, should cable competition
significantly ramp up in Citizens' incumbent markets.
Moody's is concerned that several of Citizens' largest enterprise
customers, particularly in the Rochester market, are facing
operating challenges resulting from significant changes in secular
demand. Should Citizens' enterprise business experience
meaningful declines as a result of these customers' weaknesses,
the ratings could come under pressure.
The ratings are also likely to come under pressure should
competition increase significantly in Citizens' territories such
that access lines fall by more than 5% annually without offsetting
growth in complimentary product lines. Moody's notes that given
its current financial policy, Citizens has little flexibility to
develop new services or respond to increased competition.
Undertaking a competitive initiative that consumes most of the
company's free cash flow (i.e. require more than $200 million
annually capital commitment), will significantly weaken Citizens'
risk profile.
Citizens Communications is an ILEC providing wireline
telecommunications services to approximately 2.24 million access
lines in primarily rural areas and small- and medium-sized cities.
The company is headquartered in Stamford, Connecticut.
CMS ENERGY: Focus on Core Operation Spurs S&P to Affirm BB Rating
-----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB' long-term
corporate credit ratings on public utility holding company, CMS
Energy Corp., and its regulated utility subsidiary, Consumers
Energy Co., and removed the ratings from CreditWatch with negative
implications.
Standard & Poor's also affirmed its 'B-1' short-term corporate
credit rating on CMS and removed the rating from CreditWatch with
negative implications.
The outlook is stable. Jackson, Michigan-based CMS Energy had
about $7 billion of debt outstanding as of Sept. 30, 2005.
"The affirmation reflects CMS Energy's continued focus on its core
utility operations, satisfactory regulatory environment, and its
predictable regulated cash flow," said Standard & Poor's credit
analyst Brian Janiak.
Standard & Poor's said that other factors for the affirmation
were:
* CMS' sufficient liquidity,
* limited near-term debt maturities, and
* the expected continuation of parent level debt reduction.
The stable outlook on CMS is predicated on the firm's ability to
continue executing on its refocused business and deleveraging plan
while maintaining its currently adequate short-term liquidity,
strengthening its core regulated utility operations, and improving
its leverage and credit-protection measures over the near to
intermediate term.
COLLECTIBLE CONCEPTS: Posts $594K Net Loss in Fiscal Third Quarter
------------------------------------------------------------------
Collectible Concepts Group, Inc., delivered its quarterly report
on Form 10-QSB for the quarter ended Nov. 30, 2005, to the
Securities and Exchange Commission on Jan. 30, 2005.
The Company reported a $594,643 net loss on $138,003 of net sales
For the three months ended Nov. 30, 2005. At Nov. 30, 2005, the
Company's balance sheet showed $608,981 in total assets and
liabilities of $6,163,740, resulting in a $5,554,759 stockholders'
deficit.
Weinberg & Company, PA, expressed substantial doubt about
Collectible Concepts' ability to continue as a going concern after
it audited the Company's financial statements for the fiscal years
ended Feb. 28, 2005 and Feb. 29, 2004. The auditing firm pointed
to the Company's net loss as well as working capital and
shareholders' deficiencies.
A full-text copy of the regulatory filing is available at no
charge at http://researcharchives.com/t/s?4ce
Headquartered in Doylestown, Pa., Collectible Concepts Group, Inc.
-- http://www.collectibleconcepts.com/-- develops and markets
unique licensed entertainment, sports, and music collectible
merchandise for specialty, mass retail and online distribution.
Licenses include The Three Stooges(R), over 25 Colleges &
Universities, The National Football League, The NBA, Arena
Football and others.
CONSUMERS TRUST: Fulbright & Jaworski Approved as Panel's Counsel
-----------------------------------------------------------------
The United States Bankruptcy Court for the Southern District of
New York gave the Official Committee of Unsecured Creditors
appointed in The Consumers Trust's chapter 11 case, permission to
employ Fulbright & Jaworski L.L.P., as its counsel.
Fulbright & Jaworski will:
1) assist and advise the Committee in its consultation with the
Debtor in connection with the administration of its
bankruptcy case and attend meetings and negotiate with the
the Debtor's representatives;
2) assist and advise the Committee in its examination and
analysis of the acts, conduct, assets, liabilities, and
financial condition of the Debtor, its past business
operations and any other matters relevant to its chapter 11
case;
3) assist the Committee in the review, analysis and negotiation
of any chapter 11 plan or plans that may be filed and assist
the Committee in the review, analysis and negotiation of the
disclosure statement accompanying any chapter 11 plan or
plans;
4) take all necessary action to protect and preserve the
Committee's interests, including prosecute actions on its
behalf, assist in negotiations concerning all litigation in
which the Debtor is involved and review and analyze claims
filed against the Debtor's estate;
5) prepare on behalf of the Committee all necessary motions,
applications, answers, orders, reports and papers in support
of positions taken by the Committee;
6) appear as appropriate, before the Bankruptcy Court, the
Appellate Courts and the U. S. Trustee in order to protect
the interests of the Committee before those courts and
the U.S. Trustee; and
7) perform all other necessary legal services to the Committee
in relation to the Debtor's chapter 11 case.
David L. Barrack, Esq., a member at Fulbright & Jaworski, is one
of the lead attorneys of his Firm performing services to the
Committee.
Mr. Barrack reports Fulbright & Jaworski's professionals bill:
Designation Hourly Rate
----------- -----------
Partners & Counsel $350 - $680
Associates $165 - $465
Paralegals and $70 - $215
Legal Assistants
Fulbright & Jaworski assures the Court that it does not represent
any interest materially adverse to the Committee and the Debtor
pursuant to Section 327(a) of the Bankruptcy Code.
Headquartered in London, England, The Consumers Trust filed for
chapter 11 protection on Dec. 5, 2005 (Bankr. S.D.N.Y. Case No.
05-60155). Jeff J. Friedman, Esq., at Katten Muchin Rosenman LLP,
represents the Debtor in its restructuring efforts. When the
Debtor filed for protection from its creditors, it estimated
between $1 million to $10 million in total assets and more than
$100 million in total debts.
CONTINENTAL METAL: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Continental Metal Products, Inc.
8502 Brookville Road
Indianapolis, Indiana 46239
Bankruptcy Case No.: 06-00262
Type of Business: The Debtor manufactures stainless steel products
for hospitals and the medical equipment
industry. See http://www.continentalmetal.com/
Chapter 11 Petition Date: January 31, 2006
Court: Southern District of Indiana
Debtor's Counsel: Eric C. Redman
Bator Redman Bruner Shive & Ludwig
151 N Delaware Street Ste 1106
Indianapolis, Indiana 46204
Tel: (317) 685-2426
Fax: (317) 636-8686
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Amcomp Assurance Corp. Trade Debt $56,962
P.O. Box 17508
West Palm Beach, Florida 33416
Taubensee Steel and Wire Trade Debt $34,042
P.O. Box 97616
Chicago, Illinois 60678-7616
Pain Enterprises Trade Debt $26,295
101 Daniels Way
Bloomington, Indiana 47404
Allied Equipment Trade Debt $20,042
P.O. Box 2489
Indianapolis, Indiana 46206
T System 3, Inc. Trade Debt $16,117
Homer Donaldson Co. Trade Debt $12,515
Indianapolis Power And Light Trade Debt $12,070
Methodis Occupational Trade Debt $10,036
Health Centers, Inc.
John M. Glass Co. Trade Debt $9,497
Quality Finishing Trade Debt $7,868
Earle M. Jorgensen Trade Debt $7,491
East Side Gas Trade Debt $7,434
McMaster Carr Trade Debt $7,228
Hanger Bolt & Stud Co. Trade Debt $6,671
Progressive Plating Trade Debt $6,449
Union Planters Bank Trade Debt $5,741
Astro Courier Service Trade Debt $5,316
Cohen & Malad, LLP Trade Debt $4,650
Alcorn Industrial Trade Debt $4,007
Cintas First Aid & Safety Trade Debt $3,922
CURATIVE HEALTH: Has Until March 15 to File for Ch. 11 Protection
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Curative Health Services, Inc., together with its subsidiaries
entered into a Forbearance Agreement with General Electric Capital
Corporation on Dec. 1, 2005, with respect to the Company's Senior
Secured Credit Facility.
The GE Facility is governed by a Credit Agreement dated
Apr. 23, 2004.
Under the Forbearance Agreement, GE Capital, together with the
other lenders under the GE Facility will forbear from exercising
remedies on account of the cross-default arising from the
Company's failure to make a Nov. 1, 2005, interest payment on its
10.75% Senior Notes due 2011 before the lapse of a 30-day grace
period ending Nov. 30, 2005.
Subject to certain termination events, including additional
events of default, the Forbearance Agreement will expire on
April 28, 2006.
On Dec. 28, 2005, the Company and its subsidiaries and GE Capital
entered into an amendment to the Forbearance Agreement effective
as of Dec. 23, 2005, extending the date by which the Company must
distribute the Plan Support Agreement, a related disclosure
statement, and related solicitation materials to individuals
entitled to vote upon the Plan, into January 2006.
As amended, the Forbearance Agreement contemplates soliciting
votes in favor of a prepackaged chapter 11 plan in February 2006,
a prepackaged chapter 11 filing by March 15, 2006, and
confirmation of that prepackaged plan by June 1, 2006.
A full-text copy of the First Amendment Forbearance Agreement is
available for free at http://ResearchArchives.com/t/s?4cd
A full-text copy of the Plan Support Agreement, including a Term
Sheet for the proposed prepackaged plan, is available for free at
http://ResearchArchives.com/t/s?398
Status of Prepetition Solicitation
The Company entered into a Plan Support Agreement, dated
Dec. 2, 2005, with an ad hoc committee representing approximately
80% of the Senior Notes. By signing the Support Agreement, the
holders of Senior Notes agreed to support a consensual financial
restructuring of the Company pursuant to a prepackaged plan of
reorganization of the Company under Chapter 11 of Title 11 of the
United States Code, on the terms and conditions set forth in the
Support Agreement.
The Support Agreement was amended on Dec. 14, 2005, to extend the
date by which the final terms of the Plan must be agreed to, from
Dec. 14, 2005, to Dec. 21, 2005, and the date by which the
prepetition solicitation must commence, from Dec. 21, 2005, to
Dec. 23, 2005.
The Company is currently negotiating with the members of the Ad
Hoc Committee to amend the terms of the Support Agreement to
extend the date by which final terms of the Plan must be agreed to
and the date by which the prepetition solicitation must commence.
Pending the amendment, or if the amendment is not signed, a
majority in amount of Supporting Noteholders may terminate the
Support Agreement upon written notice to the Company. So far, the
Company hasn't received any of those notices.
Curative Health Services, Inc. -- http://www.curative.com/-- is a
leading provider of Specialty Infusion and Wound Care Management
services. The Specialty Infusion business, through its national
footprint of Critical Care Systems branch pharmacies, provides a
cost-effective alternative to hospitalization, delivering
pharmaceutical products and comprehensive infusion services to
pediatric and adult patients in the comfort of their own home or
alternate setting. Each JCAHO accredited branch pharmacy has a
local multidisciplinary team of experienced professionals who
clinically manage all aspects of a patient's infusion and support
needs. The Wound Care Management business is a leading provider
of wound care services specializing in chronic wound care
management. The Wound Care Management business manages, on behalf
of hospital clients, a nationwide network of more than 100 Wound
Care CenterA(R) programs that offer a comprehensive range of
services for treatment of chronic wounds, including outpatient,
inpatient, post-acute and hyperbaric oxygen therapy.
* * *
Going Concern Doubt
Management says that in the absence of a significantly improved
operating cash flow or the restructuring of the senior notes,
Curative currently does not expect to be able to service its debt
obligations coming due in fiscal 2006. For this reason,
management raised substantial doubt about the Company's ability to
continue as a going concern.
Ernst & Young LLP issued clean and unqualified opinions after
auditing Curative's financial statements for the year ended
Dec. 31, 2004, and 2003.
DIRECTED ELECTRONICS: Debt Repayment Cues Moody's Ratings Upgrade
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Moody's Investors Service upgraded Directed Electronics' debt
rating to B1 from B2, concluding a review for possible upgrade
initiated on Nov. 23, 2005. The rating action follows the
repayment of $74 million of unrated subordinated debt with IPO
proceeds. The rating outlook is stable.
In December 2005, Directed Electronics completed its IPO raising
approximately $84 million of net proceeds from newly issued common
shares. The proceeds were used to repay the company's two unrated
subordinated notes aggregating $74 million and to terminate
certain agreements.
The ratings upgrade reflects the significant decrease in adjusted
financial leverage* and improvement in interest coverage from the
repayment of subordinated notes with the IPO proceeds (for the LTM
ended Sept. 30, 2005, adjusted leverage measured as debt/EBITDA
decreased to 3.7x from pre IPO levels of over 5x and interest
coverage (EBITDA/interest) increased to almost 4x from just over
2x before the IPO). The ratings upgrade also recognizes the
growth and product diversification opportunities associated with
Directed's exclusive supply agreement with SIRIUS satellite radio
and its acquisition and integration of Definitive Technology;
Directed acquired Definitive Technology in September 2004.
Directed's ratings remain constrained by its limited financial
flexibility resulting from:
* high, albeit decreasing, debt levels, largely assumed to fund
a recapitalization in 2004; and
* uncertainty in consumer spending trends.
The company's financial flexibility could be further challenged
given the investment requirements to support the new Sirius
business. Moody's believes that working capital expenditures will
lead to a modest increase in leverage in the fourth quarter of
2005. The ratings also reflect the modest demand of certain of
Directed's historical product offerings the last couple of years,
which is expected to continue. The material weaknesses in
internal controls over financial reporting are also factored into
the ratings as is the company's increasing sales concentration
with Circuit City and Best Buy.
The company's outsourced production model results in relatively
strong operating margins (mid to high teens) and cash flow,
although margins have moderated the last couple of years and are
expected to further decrease in 2006 due to the increased product
mix towards the lower margin satellite radio business.
The company's:
* leading market share in the security and convenience segment
of the automotive aftermarket;
* strong brand names;
* strong distribution capabilities; and
* a history of product innovation
also support the company's ratings.
The company's liquidity is good with consistent operating cash
flow, expected availability under the $50 million revolver and a
proven ability to access the capital markets.
The stable ratings outlook reflects Moody's expectation that
Directed will build upon its growth initiatives with Definitive
Technology and Sirius satellite radio without a significant
impairment of its credit profile. Moody's expects management to
sustain its strategic direction, which is centered on growth in
its core categories and distribution channels with further
penetration of audio and video categories, and expansion into new
strategic relationships such as Sirius satellite radio. The
stable outlook assumes that the company's financial leverage,
measured by adjusted debt/EBITDA, will not increase significantly
in the medium term and that the company will sustain strong double
digit operating margins.
A positive outlook or another ratings upgrade could be considered
if the company demonstrates the sustainability of the Sirius and
Definitive Technology businesses without a significant
deterioration in its traditional product offerings.
Key credit metrics driving potential upward ratings pressure would
be warranted:
* if adjusted leverage were to fall below 3x and have the
momentum for further decline;
* if interest coverage continues to exceed 4x; and
* if operating margins are maintained at or about their current
mid teen levels.
Downward ratings pressure could arise with:
* leveraged acquisitions;
* a severe pull back in consumer spending;
* a significant erosion in market share or EBIT margins; or
* a material change in strategy.
A significant deterioration in Directed's core security and
entertainment businesses could also lead to downward ratings
pressure. Key credit metrics driving potential downward rating
pressure would be:
* debt/EBITDA greater than 5x;
* interest coverage falling below 3x; and
* low double digit EBIT margins.
Another large dividend or implementation of a share repurchase
program could also cause the ratings to be downgraded.
Ratings upgraded:
* Corporate family rating to B1 from B2
* Senior secured term loan to B1 from B2
* Senior secured revolving credit facility to B1 from B2
Directed Electronics, Inc., with corporate headquarters in Vista,
California, is a leading designer and manufacturer of consumer
branded vehicle security and convenience systems and audio
systems. The company's recognized brands, including Viper,
Clifford and Python, are sold and installed through a diverse
distribution network that includes over 3,400 retailers. Sales
for the LTM ended September 2005 were approximately $250 million.
DRS TECHS: Fitch Affirms B- Senior Subordinated Notes' Rating
-------------------------------------------------------------
Fitch Ratings has rated this debt issuance of DRS Technologies,
Inc.:
* Proposed convertible senior unsecured notes due 2026
'BB/Recovery Rating RR2'
These ratings for DRS have been affirmed:
* Issuer default rating 'B+'
* Proposed senior secured credit facility 'BB+/RR1'
* Proposed senior notes 'BB/RR2'
* Proposed and existing senior subordinated notes 'B-/RR6'
The Rating Outlook remains Stable.
These actions assume that the Engineered Support Systems, Inc.
(EASI) acquisition and associated debt issuances close under the
announced terms. Approximately $2 billion of existing and
proposed debt is covered by these actions.
The ratings reflect:
* continued high levels of defense spending;
* good pro forma free cash flow generation;
* DRS' proven ability to increase margins at acquired
companies;
* expected growth in homeland security spending; and
* healthy pro forma EBITDA margins.
The ratings also consider DRS' diversification within the defense
and homeland security arena, and the alignment between DRS'
products and services and expected Department of Defense and
Homeland Security needs, all of which will be aided by the EASI
acquisition.
Fitch's concerns center on:
* DRS' ability to integrate EASI;
* the company's future acquisition plans;
* limited financial flexibility due to high debt levels;
* potential changes within the DoD budget;
* the price being paid for EASI; and
* Securities and Exchange Commission investigations of EASI.
Fitch's ratings and Stable Outlook incorporate expectations for
deployment of free cash flow toward debt reduction in the next 12
months. In addition, the Outlook is based on the favorable effect
of DoD supplemental budgets offset by near-term concerns about
uncertainty in the DoD budget related to overall spending
pressures due to the federal budget deficit, the Quadrennial
Defense Review, and 'transformation.'
The Recovery Ratings and notching in the debt structure reflect
Fitch's recovery expectations under a scenario in which distressed
enterprise value is allocated to the various debt classes. The
recovery ratings for the senior secured credit facility ('RR1',
reflecting expected 100% recovery), the senior unsecured notes and
the convertible senior unsecured notes (both 'RR2', reflecting
expected recovery of 70%-90%) benefit from substantial cushions of
subordinated debt and equity as well as covenants that preclude
the issuance of significant amounts of debt without sizable
increases in EBITDA. The senior subordinated debt ratings ('RR6')
reflect the expectation of poor recovery prospects in a distressed
case.
DRUMMOND COMPANY: Moody's Puts Ba3 Ratings on $1.1 Billion Debts
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Moody's Investors Service assigned Ba3 ratings to each of Drummond
Company, Inc.'s proposed offerings of $400 million senior
unsecured notes due 2016, $500 million five-year senior secured
revolving credit facility and $200 million five-year senior
secured term loan A. Drummond's Ba3 ratings consider:
* the company's concentration of assets and cash flows at its
Mina Pribbenow and proposed El Descanso coal mines;
* the domicile of these assets in Colombia;
* its private ownership structure;
* the high level of capital investment required to develop the
El Descanso mine; and
* the inherently volatile and difficult nature of the coal
industry.
The ratings favorably reflect:
* the company's production and reserves of high quality;
* low sulfur coal;
* currently favorable prices for this coal;
* Drummond's strong financial metrics and profitable operating
history; and
* the relatively low level of OPEB, workers' compensation and
black lung obligations relative to many of its coal mining
peers.
This is the first time that Moody's has rated the debt of
Drummond. The rating outlook is stable.
Assignments:
Issuer: Drummond Company, Inc.
* Corporate Family Rating, Assigned Ba3
* Senior Secured Bank Credit Facility, Assigned Ba3
* Senior Unsecured Regular Bond/Debenture, Assigned Ba3
The Ba3 ratings reflect the concentration of revenue and cash flow
from one mine, Mina Pribbenow, which, during the LTM period ended
Sept. 30, 2005, contributed 86% of Drummond's total coal tonnage
and substantially all of total coal EBITDA. The concentration of
production and cash flow from one mining district will increase
over the next few years as the company develops the El Descanso
mine, which is twelve miles from Mina Pribbenow and will share the
same rail line and port facilities.
Additionally, coal production in Alabama will decline after 2007.
Concentration risk is compounded by the domicile of the principal
mining assets in Colombia (Ba2, negative outlook). The Ba3
ratings consider the political and economic risks of operating in
Colombia, but are not constrained by the rating of Colombia as all
of the company's revenues are denominated in U.S. dollars and are
received and held in offshore accounts. Moody's does note that
the company has successfully operated in Colombia since 1995.
The Ba3 ratings also reflect the private, family controlled nature
of Drummond, its complex corporate structure and the minority
interest of approximately 20% that is held by related parties in
most of the significant operating subsidiaries of the rated
entity. There are no upstream guarantees. Moody's concern about
potential leakage of cash to minority interest holders is partly
mitigated by the inclusion of all restricted subsidiaries in the
restricted payments tests for the senior notes and the credit
facilities, but notes that while the 50% of consolidated net
income that comprises the restricted payments basket is calculated
before minority interest, the company does not deduct cash taxes
in computing net income as all income taxes are payable by the
shareholders from cash distributed to them by Drummond.
The company is also able to distribute unrestricted dividends
sufficient to cover all cash taxes payable by shareholders, with
50% of this amount being used to reduce the calculation of
restricted payments. Therefore, the total potential dividend
distributions are at a higher level than would normally be
permitted by a restricted payments test.
The ratings also reflect:
* the risks and costs of the company's development of the
El Descanso mine;
* acquisition and expansion of the single rail line on which
the company ships all of its Colombian coal to port; and
* expansion of the company-owned port facilities.
Capex for these items is expected to total approximately $1
billion over the course of the next five years. In addition to
normal development and construction risks, Moody's is concerned
about the considerable inflationary impacts and equipment and
supply availability affecting both operating and development costs
for all mining companies. The Ba3 ratings favorably reflect the
company's positive operating history, as it was one of the few
coal mining companies to remain profitable throughout the coal
industry downturn in the first few years of this decade. This is
a reflection of its low-cost Colombian operations and high
quality, low sulfur coal, the majority of which is sold as steam
coal.
The ratings also reflect the company's solid financial position,
with LTM Sept. 30, 2005 debt to EBITDA and EBIT to interest, pro-
forma for the proposed capital structure, of 2.2x and 4.4x,
respectively. These levels are reflective of a higher than Ba3
rating under Moody's mining industry rating methodology. Under
this methodology, Drummond is penalized for its lack of diversity,
as discussed above, and negative FCF to debt, which is unlikely to
improve prior to completion of the El Descanso mine development.
The ratings also consider:
* the relatively low level of reclamation;
* workers' compensation; and
* OPEB liabilities, particularly in relation to some of
Drummond's similarly rated coal industry peers.
These liabilities total approximately $400 million, and the ratio
of other liabilities to equity is 44%, a level that Moody's would
consider to be of Baa quality under its mining rating methodology.
In addition to the coal mining operations, Drummond operates a
foundry coke plant in Alabama, is involved in real estate
development and management in the U.S., and manages various
royalty interests. These operations account for a relatively
small proportion of Drummond's business (LTM Sept. 30, 2005
revenue and EBITDA of 19% and 27%, respectively) but have
historically provided positive margins and an additional source of
cash flow.
However, these businesses, in Moody's view, do not provide
sufficient diversity to meaningfully impact the ratings.
Additionally, under the terms of the bond indenture, upon the sale
of the company or an IPO, Drummond has the ability to dispose of
the real estate business and distribute the proceeds to
shareholders without benefiting the holders of rated debt. The
stable outlook reflects Drummond's solid financial footing, low-
cost operations, and high quality Colombian reserves. These
reserves total 2.6 billion tons, approximately 75% of which are
compliance quality (less than 1.2lbs SO2/Btu), and represent a
mine life in excess of 60 years at anticipated mine production
rates.
Compliance coal is in high demand by both U.S. and European
customers, enabling Drummond to realize pricing premiums. While
the successful development of the El Descanso mine will improve
diversity somewhat, Drummond will remain highly concentrated
within one mining district, in Colombia. While this level of
concentration will continue to weigh on the ratings, an increase
to a Ba2 rating is possible if the company permanently reduces its
debt to below $500 million and significantly advances development
work at El Descanso to the point that Moody's is comfortable that
the project can be completed without impacting debt levels.
Given the company's strong financial condition, the rating is not
likely to be negatively impacted in the near term unless the
Colombian mining operations were unable to produce coal for a
period of two months or longer. The senior unsecured rating could
also be lowered if senior ranking debt was incurred at either the
holding company borrower, Drummond Company, Inc., or at the
operating subsidiaries, which do not provide upstream guarantees.
Moody's has not notched the senior unsecured debt down from the
corporate family rating as the debt owed by operating subsidiaries
is nominal and trade payables at the principal Colombian
subsidiary approximate only $85 million. Additionally, the
security provided to the credit facilities is comprised of shares
of certain subsidiaries and a political risk insurance policy,
neither of which, in Moody's opinion, gives the credit facility
lenders a meaningful advantage over the unsecured bond holders.
Drummond, based in Birmingham, Alabama is predominantly engaged in
the mining and marketing of coal and had revenues in the twelve
months ended Sept. 30, 2005 of $1.7 billion.
DRUMMOND CO: S&P Assigns BB- Ratings to $1.1 Billion Senior Debts
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Standard & Poor's Ratings Services assigned its 'BB-' corporate
credit rating to Birmingham, Alabama-based Drummond Co. Inc. At
the same time, Standard & Poor's assigned its 'BB-' rating to
Drummond's proposed $700 million senior secured bank credit
facility due 2011. Standard & Poor's also assigned its 'BB-'
rating to Drummond's proposed $400 million senior unsecured notes
due 2016.
The outlook is stable. Total debt pro forma for Drummond's
proposed refinancing is expected to be about $630 million as of
Sept. 30, 2005.
"We expect the company to continue to realize relatively strong
credit metrics in the intermediate term, as a result of a
favorable pricing environment and rising production levels," said
Standard & Poor's credit analyst Paul Vastola. "Ratings are
currently capped by the company's lack of operating diversity but
could be raised if Drummond successfully expands and diversifies
its operating base without a meaningful increase in its financial
leverage. The outlook could be revised to negative if the
company's aggressive growth spending or less-favorable mining
conditions result in much weaker performance."
The company has limited operating diversity, substantial exposure
in Colombia where the majority of its assets and cash flows are
derived from:
* aggressive growth spending plans; and
* a relatively small but growing production base.
Most of Drummond's revenues and EBITDA are derived from its
Colombian coal mining operations, which produced approximately
24 million tons of coal for the 12 months ended Sept. 30, 2005.
Upon closing of the refinancing, the company is expected to have
near full availability under its $500 million revolving credit
facility due 2011. The company's debt maturity schedule is
somewhat meaningful, starting near $30 million in 2007 and
steadily rising to $70 million in its fifth and final year. The
company is currently well in compliance of its proposed financial
covenants.
The proposed $700 million senior secured bank facility is secured
by a first-priority perfected security interest in 100% of the
capital stock of certain of the borrower's U.S. subsidiaries.
There is no pledge of the capital stock of the borrower's foreign
subsidiaries. The facility is comprised of a $500 million
revolving credit facility due 2011 and a $200 million term loan
facility due 2011.
DWIGHT BARNETTE: Case Summary & 19 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Dwight Wayne Barnette
f/d/b/a Blue Cactus
12923 Rocky Pointe Road
Hancock County
McCordsville, Indiana 46055
Bankruptcy Case No.: 06-00246
Type of Business: The Debtor operates the Blue Cactus Restaurant.
Chapter 11 Petition Date: January 30, 2006
Court: Southern District of Indiana
Judge: Frank J. Otte
Debtor's Counsel: Steven P. Taylor, Esq.
Law Office of Steven P. Taylor
6100 N. Keystone Avenue, Ste. 116
Indianapolis, Indiana 46220
Tel: (317) 475-1570
Fax: (317) 475-1697
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 19 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ ----------------- ------------
Nancy Samper, President Property Interest $550,300
FNS Inc.
10825 Players Drive
Indianapolis, Indiana 46229
Forum Credit Union Goods $81,323
P.O. Box 50738
Indianapolis, Indiana 46250
Chrysler Financial Goods $40,000
Dept 122701
Detroit, Michigan 48255
American General Property Interest $34,000
1976 Northwood Plaza
Franklin, Indiana 46131
Citizens Thermal Energy Services $32,791
366 Kentucky Avenue
Indianapolis, Indiana 46225
Rewards Network Loan Loans $32,113
(800) 422-5155
McFarling Foods Goods $32,044
P.O. Box 2207
Indianapolis, Indiana 46206
Advance Me, Inc. Line of Credit $26,651
600 Town Park Lane
Suite 500
Kennesaw, Georgia 30144
Merrell Brothers Excavating Services $21,705
8811 W 500 N
Kokomo, Indiana 46901
MBNA Consumer Credit $13,000
Internal Revenue Services Taxes $10,817
American Express Credit Card $10,740
Purchases
Bank of America Credit Card $9,060
Purchases
Sysco Food Service Services $5,691
IPL Services $5,452
Yellow Book USA Services $4,332
Lowes Consumer Credit $3,500
Coca-Cola Enterprises Services $3,354
Bright House Services $2,951
EASTMAN KODAK: Sales Decline Cues Moody's to Downgrade Ratings
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Moody's Investors Service downgraded the credit ratings of the
Eastman Kodak Company following weakened earnings performance and
accelerated film sales declines within the company's consumer and
health imaging businesses. The outlook is negative. The SGL-2
liquidity rating was affirmed.
In Moody's view, the earnings declines reflect execution
challenges the company faces to achieve digital profitability as
its business shifts into highly competitive digital imaging
markets. In the twelve months ended Dec. 31, 2005, the company's
earnings from operations within its Digital and Film Imaging
Systems and Health Group businesses declined year over year at
38% and 21%, respectively.
Moody's believes that an accelerating traditional consumer film
industry decline and vendor competition continue to contribute to
traditional sales declines. The company's film capture strategic
products group sales and retail photofinishing sales declined year
over year in the fourth quarter of 2005 by approximately 35%,
above the 30% decline experienced in the first nine months of the
year. In addition, traditional health imaging sales declined 11%
year over year in the fourth quarter, ahead of a low single digit
decline experienced in the first nine months of 2005.
The negative outlook reflects the company's ongoing challenges to
transition to a digital product and services business, including:
* requirements to fund investment and restructuring costs; and
* uncertain prospects for achieving solid digital business
profitability.
A scenario of increased restructuring cash charges or payments or
continued weak digital earnings, such that digital business
earnings from operations are likely to fall short of $300 million
for fiscal year 2006, would likely result in additional downward
rating pressure.
Moody's has affirmed the SGL-2 speculative grade liquidity rating
for the company. During the first half of fiscal 2006, Moody's
expects the company to adequately cover seasonal cash needs and
funding of a $500 million June 2006 unsecured note maturity
through:
* internal cash flows,
* cash balances, and
* external liquidity sources.
The company generates positive free cash flow (cash flow from
operating activities less capital expenditures and dividends) on
an annual basis. Over the past several years, free cash flow has
declined due to:
* the company's business exposure to the accelerating secular
decline of consumer film;
* its investments in new business initiatives such as consumer
ink jet; and
* the migration of its consumer and health businesses into
competitive digital markets.
For fiscal year ended 2005, free cash flow of $592 million
increased 5% year over year, benefiting from favorable impacts of
intellectual property monetization and about $340 million of
working capital improvements.
Ratings Downgraded:
* Corporate Family Rating to B1 from Ba3
* Senior Unsecured Rating to B2 from B1
* Senior Secured Credit Facilities to Ba3 from Ba2
Rating Affirmed:
* SGL-2 speculative grade liquidity rating
Headquartered in Rochester, New York, the Eastman Kodak Company is
a worldwide leader in imaging products and services.
EAGLEPICHER HOLDINGS: Wants Court Nod on Premium Financing Pact
---------------------------------------------------------------
EaglePicher Holdings, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Southern District of Ohio for authority
to enter into an insurance premium finance agreement with
Cananwill, Inc.
As previously reported in the Troubled Company Reporter, the Court
permitted the Debtor to enter into an insurance premium financing
agreement with Cananwill, Inc., with respect to property damage
insurance policies.
The Debtors tell the Court that they want to enter into a new
insurance premium finance agreement with respect to their general
liability insurance policies. The finance agreement will allow
the Debtors to keep the business operations and assets of their
estates insured for their benefit and their creditors'.
The Debtors say that their previous insurance policies expired
and were renewed for a one year period from Jan. 1, 2006, to
Jan. 1, 2007.
The agreement with Cananwill provides for a $652,617 down payment
and $1,212,004 to be financed over eight months in $154,894
installments, for a total payment of $1,239,157. The loan accrues
interest at 5.94% per annum.
To secure the loan, the Debtors grant Cananwill a security
interest in all unearned or returned premiums and other amounts
due to the Debtors under the policies that result from the
cancellation of the policies. The Debtors also allow Cananwill to
cancel the policies financed under the agreement in case of a
payment default.
Headquartered in Phoenix, Arizona, EaglePicher Incorporated
-- http://www.eaglepicher.com/-- is a diversified manufacturer
and marketer of innovative advanced technology and industrial
products for space, defense, automotive, filtration,
pharmaceutical, environmental and commercial applications
worldwide. The company along with its affiliates and parent
company, EaglePicher Holdings, Inc., filed for chapter 11
protection on April 11, 2005 (Bankr. S.D. Ohio Case No. 05-12601).
Stephen D. Lerner, Esq., at Squire, Sanders & Dempsey L.L.P,
represents the Debtors in their restructuring efforts. Houlihan
Lokey Howard & Zukin is the Debtors financial advisor. When the
Debtors filed for protection from their creditors, they listed
$535 million in consolidated assets and $730 in consolidated
debts.
EMERGE CAPITAL: Unit Buys 70% of Sagamore Holding's Common Stock
----------------------------------------------------------------
Emerge Capital Corp. (OTCBB:EMGC) reported that its wholly owned
operating subsidiary Corporate Strategies, Inc. has purchased
approximately 70% of the outstanding common stock of Sagamore
Holdings, Inc.
Sagamore Holdings' primary asset is its operating subsidiary,
Nexus Custom Electronics, Inc. Nexus is a 38-year-old custom
circuit board and prototype manufacturer located in Woburn,
Massachusetts and Brandon, Vermont.
"Nexus is a well-known brand in New England markets, and has a
capable, well-educated and experienced work force," Tim Connolly,
CEO of Emerge Capital Corp., commented. "Competitive pressure
from Chinese manufacturers has dramatically reduced gross sales
from $30,000,000 annually two years ago, and we believe that the
Nexus current negative operating condition can be turned around.
We are bringing restructuring expertise and turnaround management
to refine manufacturing techniques, improve delivery times to
customers, and identify new markets with the margins necessary to
support Nexus as a viable, continuing enterprise."
Through its wholly owned operating subsidiary, Corporate
Strategies, Inc. -- http://www.corporate-strategies.net/--
Emerge Capital Corp. provides Business Restructuring, Turnaround
Management, and Advisory Services for emerging and re-emerging
public and private companies.
Corporate Strategies, Inc. (CSI) helps micro-cap public companies
accelerate growth and provides working capital, management
restructuring and turnaround expertise, and in select cases, makes
direct investments in our client companies. CSI markets its
turnaround services to hedge funds, institutional investors, and
banks that have significant exposure in troubled micro-cap public
companies. Typically, these companies are in operational or
financial difficulty, may be in default of lending or equity
agreements, and may be facing bankruptcy or liquidation if their
operations are not turned around. CSI is compensated with cash
payments on a monthly or quarterly basis, and the most significant
part of our compensation is in outright grants of equity in the
form of common stock, and/or warrants for purchasing common stock.
CSI believes this compensation plan aligns our interests with the
client company and its shareholders because our ultimate
compensation is determined by successfully increasing shareholder
value. This performance-based arrangement clearly demonstrates
that our interests are consistent with the goals of our clients,
their shareholders, and the shareholders of Emerge Capital Corp.
Contact:
Emerge Capital Corp/Corporate Strategies, Inc.
Darla Blaha
Telephone (713) 621-2737
http://corporate-strategies.net/
At Sept. 30, 2005, Emerge Capital Corp.'s balance sheet showed a
stockholders' deficit of $3.4 million, compared to a $1.6 deficit
at Dec. 31, 2004.
ENTERGY NEW ORLEANS: Panel Wants Taxes & Franchise Fee Returned
---------------------------------------------------------------
As previously reported, Entergy New Orleans Inc., seeks the U.S.
Bankruptcy Court for the Eastern District of Louisiana's
permission to pay amounts owed to the City of New Orleans as of
the Debtors' bankruptcy petition date:
$1,096,711 attributable to consumer taxes they collected
for and on behalf of the City of New Orleans from
utility payments by their customers; and
$3,491,974 for the franchise fee pursuant to Section 3-123,
et seq., of the Home Rule of the City of New
Orleans.
Elizabeth J. Futrell, Esq., at Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, LLP, in Baton Rouge, Louisiana,
points out that a failure to pay the Prepetition Taxes may
adversely affect the Debtor's continued ability to conduct
business in the City of New Orleans.
Ms. Futrell explains that the Debtor's sales tax collection may
constitute "trust funds" that may be held in trust for payment to
the Taxing Authorities. Ms. Futrell points out that, to the
extent these "trust funds" were collected, these do not
constitute property of the Debtor's estate under Section 541(d)
of the Bankruptcy Code.
According to Ms. Futrell, the Home Rule Charter provides the City
Council with the power to grant franchises, privileges and permits
for the use of the streets and other public places, for the
furnishing of services to the City and its inhabitants. In
essence, the Debtor says, the Prepetition Franchise Fee is their
cost of doing business in the City of New Orleans.
Committee Objects
The Official Committee of Unsecured Creditors opposes the
Debtor's request to pay consumer taxes and franchise fees owed to
the City of New Orleans as of the Petition Date.
"It is clear that payments for [the] amounts were made by Entergy
Services, Inc., not by [Entergy New Orleans, Inc.] itself,"
Philip K. Jones, Jr., Esq., at Liskow & Lewis, APLC, in New
Orleans, Louisiana, contends.
According to Mr. Jones, the Debtor does not seek, in actuality,
approval of its postpetition payments to New Orleans, for the
simple reason that the Debtor itself never made the payments in
question. Rather, the Debtor's request is actually a disguised
request for reimbursement to ESI, inasmuch as the payments were
made by ESI.
To the extent that ESI has obtained reimbursement from the Debtor
for the payments it made to New Orleans on prepetition
obligations, then any postpetition reimbursement payments by the
Debtor to ESI were in violation of Section 559 of the Bankruptcy
Code, Mr. Jones argues. "There is no statutory or judicial
authority to justify those payments in reimbursement to an
affiliate of a debtor."
The "consumer taxes" collected by the Debtor as agent for New
Orleans were not held in trust or segregated for payment to New
Orleans. The Debtor's obligation to New Orleans was an unsecured
obligation of an agent to its principal, Mr. Jones notes.
Mr. Jones clarifies that the fees due to New Orleans under
Ordinances 17962 and 17963 were not "taxes" subject to the
priority of Section 507(a)(8) of the Bankruptcy Code. They were
fees owed by the Debtor for the right to use the streets of New
Orleans.
The reimbursement of ESI's claim is simply an unsecured claim of
an affiliate, which is no different from claims of other
unsecured creditors. Mr. Jones avers. "If the payments were made
by [the Debtor], then the City of New Orleans received
unauthorized [postpetition] payments on [prepetition] obligations
and any future payments due the City of New Orleans should be
reduced accordingly to effectuate a return of [the] payments to
the bankruptcy estate."
Accordingly, the Committee asks the Court to deny the Debtor's
request and direct ESI to return any funds received in
reimbursement from the Debtor for ESI's payments to New Orleans.
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 Stay Lifted to Continue Lowenburg Case
-----------------------------------------------------------------
In 2000, Thomas P. Lowenburg, Martin Adamo, Vern K. Baxter,
Philip D. Carter, Bernard Gordon, Leonard Levine, Ivory S.
Madison, Donetta Dunn Miller, and Maison St. Charles, LLC, doing
business as Quality Inn Maison St. Charles, filed a complaint
against Entergy New Orleans Inc.,before the Council for the City
of New Orleans.
On behalf of all the Debtor's current and former customers, the
Lowenburg Plaintiffs alleged that the Debtor unlawfully and
wrongfully overcharged for electric services since 1975 and that
the Debtor should be required to refund several hundred million
dollars to ratepayers.
At issue in the Lowenburg Suit is a 1922 City Council Ordinance
which provided that rates for the Debtor's predecessor, New
Orleans Public Service, Inc., should be set to produce a net
revenue equivalent to 7-1/2% per annum allowable rate of return
on the said Rate Base, R. Patrick R. Vance, Esq., at Jones,
Walker, Waechter, Poitevent, Carrere & Denegre, LLP, in New
Orleans, Louisiana, relates. The Lowenburg Plaintiffs argued
that the provision establishes a ceiling of 7-1/2% of the
Debtor's allowable and earned rates of return, and that the rate
of return could only be changed by an ordinance amending the 1922
Settlement Ordinance.
Mr. Vance clarifies that since 1975, the City Council has
approved allowable rates of return higher than 7-1/2%, but the
City Council has done so by resolution and not by ordinance.
Lowenburg Proceeding
To evaluate the allegations contained in the Lowenburg Complaint,
the City Council opened the Lowenburg Proceeding and appointed a
hearing officer to:
-- preside over the investigation and hearing; and
-- assemble and transmit a record of the proceedings to the
City Council at the close of the evidentiary hearing
without a report or recommended findings.
The Lowenburg Proceeding has been bifurcated into two phases:
(1) Phase I is focused upon the proper effect to be accorded
the 7-1/2% provision of the Settlement Ordinance.
(2) Phase II, which may not be necessary depending on the
outcome of Phase I, is focused on the appropriate
treatment of depreciation in calculating the rate base and
after application of that treatment, whether any refund is
owed to the Debtor's ratepayers.
The Debtor asks the U.S. Bankruptcy Court for the Eastern District
of Louisiana to modify the automatic stay to allow it to proceed
with the Lowenburg Proceeding to liquidate the amount of any
refunds due to ratepayers.
Mr. Vance emphasizes that the interests of judicial economy
support lifting the stay.
Moreover, the completion of the Lowenburg Proceeding will permit
the necessary liquidation of the Lowenburg Plaintiffs' claims
without negatively impacting the bankruptcy estate. "[F]orcing
the parties to start anew in [the Bankruptcy] Court may result in
greater harm to all of the interested parties," Mr. Vance warns.
Mr. Vance asserts that the City Council, as the governing
regulatory body of utility providers in Orleans Parish, has the
original jurisdiction, necessary experience and expertise to
determine the issues raised in the Lowenburg Proceeding.
Additionally, the Lowenburg Proceeding calls for review of the
City Council's actions as well as interpretation of its
ordinances and resolutions.
Mr. Vance assures the Court that the Lowenburg Proceeding will
not interfere with the Debtor's Chapter 11 case.
Lowenburg Responds
The Lowenburg Plaintiffs agree with the Debtor's request to
modify the stay. However, the Lowenburg Plaintiffs oppose the
Debtor's request to the extent that it does not seek relief with
regard to:
(a) both phases of the Lowenburg Administrative Proceeding;
(b) any and all appeals from the Lowenburg Administrative
Proceeding; and
(c) the Lowenburg Complaint.
Michael H. Piper, Esq., at Steffes, Vingiello & McKenzie, LLC, in
Baton Rouge, Louisiana, asserts that the automatic stay should be
lifted as to both phases of the Lowenburg Administrative
Proceeding, as well as to any appeals resulting from any decision
of the City Council in either phase of the proceeding.
Although the proceeding is bifurcated, the Lowenburg
Administrative Proceeding is a single adjudicatory administrative
suit. Hence, requiring the Lowenburg Plaintiffs to return to the
Court for relief from the automatic stay to prosecute any ensuing
appeal of the decision in Phase I or Phase II of the Lowenburg
Administrative Proceeding would be a waste of judicial resources
and would result in piecemeal litigation, Mr. Piper points out.
The automatic stay should also be lifted as to the re-initiation
of the Lowenburg Complaint to a final, non-appealable judgment,
Mr. Piper insists. Similarly, it would be a waste of judicial
resources and would needlessly increase the Lowenburg Plaintiffs'
litigation expenses to require them to return to the Bankruptcy
Court for leave to resume the Lowenburg Complaint.
In this regard, the Lowenburg Plaintiffs ask the Court to permit
them to prosecute:
(a) before the City Council, Phases I and II of the Lowenburg
Administrative Proceeding;
(b) in the Louisiana appellate courts, any appeal resulting
from any decision in either Phase I or Phase II of the
Lowenburg Administrative Proceeding, and any proceedings
on remand to a lower court or to the City Council, or on
subsequent appeal, or on writs; and
(c) their legal claims for damages and other relief in the
Lowenburg Complaint.
The Lowenburg Plaintiffs also ask the Court that for any judgment
obtained against the Debtor in connection with either the
Lowenburg Administrative Proceeding or the Lowenburg Complaint be
collected only as a claim in the Bankruptcy Court, unless
otherwise ordered or permitted by the Bankruptcy Court.
CCNO's Statement
The City Council is the governmental body with the sole power of
supervision, regulation and control over public utilities
providing service within the City of New Orleans, Basile Uddo,
Esq., at Sullivan & Worcester LLP, in Boston, Massachusetts,
informs Judge Brown.
The Lowenburg Proceeding is regulatory in nature. Thus, it falls
within the jurisdiction of the City Council, and the authority of
the City Council continues, Mr. Uddo explains.
In this regard, the City Council asks the Court not to make any
ruling as to the application of the automatic stay to the
Lowenburg Proceeding to the extent the City Council determines
the proper effect to accord the 7-1/2% provision of the 1922 City
Council Ordinance, or the regulatory matters that may be at
issue.
Debtor Talks Back
The Lowenburg Plaintiffs are requesting relief from the stay as
to a class action suit that has not yet been filed, cannot yet be
filed and that may never be filed, Elizabeth J. Futrell, Esq., at
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., in
New Orleans, Louisiana, argues in the Debtor's behalf.
According to Ms. Futrell, the Lowenburg Complaint has been
dismissed by the Fourth Circuit Court of Appeals on May 17, 2000,
for lack of subject matter jurisdiction and cannot be reinitiated
until the Lowenburg Proceeding has concluded.
Thus, the Debtor considers it appropriate to lift the stay for
the Lowenburg Complaint, only if necessary, and only when a
clearer picture of the reorganization plan exists and the relief
is before the Court through a proper motion.
Notwithstanding, the Debtor agrees with the City Council's
statement. The Debtor believes that as all parties are in
agreement that the Lowenburg Proceeding should move forward in
its entirety and as no party-in-interest has objected, it is not
necessary that the Court rule on the applicability of the stay to
the rate-making functions of the City Council.
Accordingly, the Debtor asks the Court to:
(a) authorize the parties to proceed with Phases I and II of
the Lowenburg Proceeding;
(b) keep the stay in effect with respect to all matters not
covered by the Debtor's request, including the Lowenburg
Complaint; and
(c) approve the City Council's request.
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)
ERA AVIATION: Taps Christianson & Spraker as Bankruptcy Counsel
---------------------------------------------------------------
Era Aviation, Inc., sought and obtained permission from the U.S.
Bankruptcy Court for the District of Alaska, to employ
Christianson & Spraker as its attorneys.
Christianson & Spraker is expected to:
(a) prepare necessary schedules of assets and liabilities and
related pleadings;
(b) attend creditors' meetings;
(c) resolve issues concerning the rights of secured, priority
and unsecured creditors;
(d) pursue causes of action where appropriate;
(e) prepare and obtain court approval of a disclosure
statement and plan of reorganization; and
(f) assist the Debtor on other matters relative to the
administration of the estate.
Cabot Christianson, Esq., member of Christianson & Spraker,
discloses that he will bill $250 per hour for his services. Mr.
Christianson further discloses that Gary Spraker, Esq., will bill
$200 per hour and paralegals bill $75 per hour.
Mr. Christianson assures the Court that the Firm does not hold or
represent any interest adverse to the Debtor or its estate.
Headquartered in Anchorage, Alaska, Era Aviation, Inc. --
http://www.flyera.com/-- provides air cargo and package express
services. The Debtor filed for chapter 11 protection on Dec. 28,
2005. Cabot C. Christianson, Esq., at Christianson & Spraker,
represents the Debtor in its restructuring efforts. When the
Debtor filed for protection from its creditors, it estimated
assets and debts between $10 million and $50 million.
GLASGOW INC: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------
Debtor: Glasgow, Inc.
t/a Sign of the Whale
1825 M Street, NW
Washington, D.C. 20036
Bankruptcy Case No.: 06-00033
Chapter 11 Petition Date: February 1, 2006
Court: District of Columbia
Debtor's Counsel: Richard H. Gins, Esq.
The Law Office of Richard H. Gins, LLC
3 Bethesda Metro Center, Suite 430
Bethesda, Maryland 20814
Tel: (301) 718-1078
Fax: (301) 718-8659
Estimated Assets: Unknown
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Washington Gas $2,501
101 Constitution Avenue, NW
Washington, DC 20018
Tel: (703) 750-1000
PEPCO $2,310
701 9th Street, NW
Washington, DC 20001
Tel: (202) 833-7500
Von Sonic, Inc. $2,025
P.O. Box 477
Pocomoke, Maryland 21851
Tel: (410) 677-5600
Margolius, Mallios & Rider, LLP $1,922
1828 L Street, NW, Suite 500
Washington, DC 20036
Tel: (202) 296-1000
WASA $1,256
810 First Street, NE
Washington, DC 20002
Tel: (202) 354-3600
Doering Accounting Service $1,200
37 West Street
Annapolis, Maryland 21401
Tel: (301) 266-6969
Metro Waste, Inc. $1,056
8215 Grey Eagle Drive
Upper Marlboro, Maryland 20722
Tel: (301) 669-1825
American Energy Restaurant, Inc. $694
Guardian Fire Protection Services $650
H & S. Bakery $437
Loyal Mat Services $382
Safeguard Business Systems $354
Verizon-Washington, DC $350
ASCAP $326
Intsy Prints $231
Safety First Filters Service $171
Comcast Cable $163
Home Depot $159
Verizon Wireless $152
Washington Wholesale $84
HUNTSMAN CORP: Proposed Company Sale Prompts S&P's Negative Watch
-----------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on Huntsman
Corp. and affiliate Huntsman International LLC on CreditWatch with
negative implications, including the 'BB-' corporate credit
ratings. The CreditWatch placement follows reports that the Salt
Lake City, Utah-based chemical company is in discussions to be
sold for more than $4.3 billion plus assumed debt. The reports
indicate that both private-equity firms and strategic buyers have
expressed interest in the company, but that buyout firm Apollo
Management L.P., a well-known investor with other interests in the
chemical industry, is considered the leading candidate.
"The CreditWatch listing indicates that the ratings would likely
be lowered if such a transaction were to proceed, given the strong
expectation that Apollo or other potential financial buyers would
use a significant amount of debt in any financing plans," said
Standard & Poor's credit analyst Kyle Loughlin.
Standard & Poor's also notes that the ratings could be affirmed if
the transaction is not completed or if a potential buyer completes
the transaction in a manner that does not add meaningfully to
Huntsman's already aggressive debt levels. Higher ratings are
considered a less likely outcome, but are possible, if one of a
few financially stronger strategic buyers were to pursue a
combination that preserved credit quality.
Following a financial restructuring process begun in 2001, the
company is majority owned by MatlinPatterson Asset Management L.P.
and the Huntsman family, with most of the balance sold through a
February 2005 IPO. The capital structure, while still aggressive,
improved meaningfully after the $1.5 billion (net proceeds) IPO of
common and preferred stock, the majority of which was used to
reduce debt. As of Sept. 30, 2005, Huntsman reported
approximately $4.5 billion of debt, excluding adjustments for
underfunded postretirement benefit obligations.
Huntsman Corp. is a holding company with diverse chemical
operations generating annual sales of approximately $13 billion.
Despite a strategic emphasis on growing the performance chemicals
business, nearly half of Huntsman's total revenue is still derived
from commodity product categories, consisting of:
* the domestic petrochemical and plastic assets and a large
basic petrochemical complex at Wilton, U.K.; and
* a No. 3 position in the global titanium dioxide business.
These markets are cyclical and sensitive to changes in the balance
between supply and demand, rapid movements in the price of raw
materials, and the level of economic growth; accordingly,
operating profit margins will exhibit significant variability
depending upon external business conditions.
Still, Huntsman's business mix in commodity chemicals is balanced
by:
* good positions in a number of intermediate products;
* participation in the more attractive niches within the
polymers segment; and
* significant contributions from differentiated product
categories.
INEOS HOLDING: Moody's Rates EUR400 Million Facilities at (P)B1
---------------------------------------------------------------
Moody's Investor service:
* assigned (P)B1 rating to EUR400 million of senior second lien
facilities of Ineos Holding Limited; and
* affirms its:
-- (P)Ba3 instrument rating assigned to senior secured debt
facilities of Ineos Holding Limited, and
-- (P) B2 rating assigned to the senior notes of Ineos Group
Holding Plc.
Outlook is stable.
Moody's issues provisional rating in advance of the final sale of
securities, and this rating only represents Moody's preliminary
opinion. Upon a conclusive review of the final documentation,
Moody's will endeavour to assign a definitive rating to the
securities. A definitive rating may differ from a provisional
rating.
On Oct. 7, 2005, Ineos announced its acquisition of Innovene, BP's
olefins and derivatives subsidiary, for approximately USD9 billion
cash consideration. The transaction closed and was funded on
Dec. 16, 2005. The original funding structure comprised of
EUR6,770 million in senior secured facilities and EUR3,105 million
subordinated bridge facility.
On Dec. 20, 2005, Moody's lowered corporate family rating of Ineos
Group Holdings Plc to Ba3 and assigned (P)Ba3 rating to the senior
secured debt facilities and Ineos Holding Limited, a subsidiary of
Ineos Group Holding Plc. Subsequently, Moody's assigned (P)B2
rating to the senior notes of Ineos Group Holding Plc.
Moody's notes a change to the original financial structure,
whereby the group will reduce the senior notes offering by
EUR750 million and will reallocate these funds by increasing the
amounts under the senior bank facilities by EUR 350 million and
offering a new EUR400 million second lien tranche. In
addition, senior revolving credit facility will be increased
by EUR100 million.
As a result, the amended funding structure will comprise
EUR7,220 million in senior secured facilities and EUR 400 million
in senior second lien facility at Ineos Holding Limited and
EUR2,355 million senior notes at Ineos Group Holdings Plc.
The (P)B1 rating assigned to EUR400 million second lien facility
recognises contractual and effective subordination of the facility
in relation to the senior secured bank facilities, as well as its
priority position in relation to the senior noteholders by virtue
of its effective, contractual and structural seniority. The
second lien facility will enjoy the same security and guarantees
package as senior secured facilities, but on a second priority
basis, while the senior notes will be guaranteed on senior
subordinated basis and rank behind the second lien facility.
Moody's notes that the revolving credit facility available to
Ineos has been increased to EUR800 million.
The stable outlook continues to reflect an expectation that the
current momentum in petrochemical pricing will continue to benefit
cash generation of the group over the next one to two years,
allowing for the deleveraging planned by the new shareholders, as
well as contributing to the group's adequate headroom position in
relation to the bank's covenants.
Ineos Group Holdings plc is a diversified and integrated chemicals
group headquartered in Southmapton, the United Kindom. In 2004,
Ineos reported sales of EUR 3.4 billion. Following the completion
of the Innovene acquisition, the group is estimated to have a
turnover of EUR22 billion and is likely to become the 3d largest
global petrochemicals company.
INTEGRATED HEALTH: Wants Entry of Final Decree Delayed to Oct. 30
-----------------------------------------------------------------
Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, in
Wilmington, Delaware, informs the U.S. Bankruptcy Court for the
District of Delaware that IHS Liquidating LLC has made substantial
progress in its efforts with regard Integrated Health Services,
Inc., and its debtor-affiliates' claims reconciliation process.
In particular, IHS Liquidating:
-- has prosecuted or otherwise resolved a large volume of
claim objections that were filed by the IHS Debtors;
-- has filed additional claim objections and made
distributions to the holders of allowed claims over the
past several months; and
-- is actively engaged in litigation with IHS' stock
purchaser, Abe Briarwood Corporation, and certain of IHS
former executives.
Due to the pending and active litigation before the Court, IHS
Liquidating asserts that case closure at this time is not
possible. Filing a final report and accounting would also be
inaccurate since the claims administration process has not come to
a conclusion.
Accordingly, IHS Liquidating asks the Court to:
(1) delay the entry of a final decree closing the Chapter 11
case of Integrated Health Services, Inc., Case No. 00-389
(MWF), until October 30, 2006; and
(2) extend the date for filing a final report and accounting
for all the IHS Debtors' cases until June 29, 2006.
"Delaying entry of a final decree for the IHS case will help
ensure that distributions are made under the Plan only to those
actual creditors, and in such amounts, as are appropriate," Mr.
Brady says.
The Court will hold a hearing to consider IHS Liquidating's
request on February 23, 2006, at 9:30 a.m. By application of
Del.Bankr.L.R. 9006-2, IHS Liquidating's Deadline to file a final
report and accounting for all the IHS Debtors' cases is
automatically extended until the Court rules on the request.
Integrated Health Services, Inc. -- http://www.ihs-inc.com/--
operated local and regional networks that provide post-acute care
from 1,500 locations in 47 states. The Company and its
437 debtor-affiliates filed for chapter 11 protection on
February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical
Corporation and its direct and indirect debtor-subsidiaries broke
away from IHS and emerged under their own plan of reorganization
on March 26, 2002. Abe Briarwood Corp. bought substantially all
of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan
on May 12, 2003, and that plan took effect September 9, 2003.
Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D.
Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP,
represent the IHS Debtors. On September 30, 1999, the Debtors
listed $3,595,614,000 in consolidated assets and $4,123,876,000 in
consolidated debts. (Integrated Health Bankruptcy News, Issue
No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000)
JACOBS INDUSTRIES: Files Combined Plan and Disclosure Statement
---------------------------------------------------------------
Jacobs Industries, Inc., and its debtor-affiliates delivered a
combined Plan and Disclosure Statement to the U.S. Bankruptcy
Court for the Eastern District of Michigan, Southern Division, on
December 20, 2005.
Pursuant to the Plan, the Debtors will be substantively
consolidated into a single entity on the effective date of the
Plan and will continue doing business as Jacobs Industries LLC.
The core of the Debtor's management, engineering and sales staff
will remain with the reorganized company after its emergence from
bankruptcy protection. Robert Potokar will continue serving as
Vice President of Operations with a $300,000 annual salary while
Chet Wisniewski will remain as President with a $120,000 annual
salary.
Treatment of Claims
Allowed priority tax claims, totaling $336,926, will be paid in
full, with interest, over a period not exceeding six years from
their assessment date. Payments to this class will begin three
months after the effective date of the Plan. Other priority
claims will be paid in full on or before the effective date.
Comerica Bank will receive $2 million on the effective date of
the Plan as partial payment of its allowed secured claim. The
$2 million payment will come from the proceeds of the recently
approved sale of certain of the Debtors' assets to Zohar Jacobs
Acquisition, LLC.
The balance of Comerica's claim will be allowed in the amount of
$500,000. It will be paid in equal monthly payments over a 5-year
period with 6% interest.
In addition, Comerica will continue to collect all of the Debtors'
prepetition receivables. The Debtor also agrees to transfer to
Comerica, via quit claim deed, all of its remaining real property.
Comerica will then lease the real estate back to the Debtors.
Comerica provided the Debtor with a prepetition term loan facility
and revolving credit. The loans are secured by a first priority
security interest in substantially all of the Debtors' assets.
When the Debtors filed for bankruptcy, the facility had a
$12.6 million balance.
GMAC Commercial Finance, LLC, which extended a $10 million
postpetition revolving line of credit to the Debtors, will receive
$7 million on the effective date of the Plan. The remaining
portion of GMAC's claim will be allowed in the amount of $750,000.
It will be paid in equal monthly payments over a 5-year period
with 6% interest.
Holders of general unsecured claims, estimated to total
$7.4 million, will receive payments equal to 10% of their allowed
claims. Claimholders will be paid in five equal payments
beginning one year after the effective date of the plan and every
year afterwards.
Equity interests in the Debtors will be cancelled on the effective
date. New equity interests on the Reorganized Debtor will be
issued to John Jacobs, Jr., the Debtors' sole shareholder, and
Messrs. Wisniewski and Potokar in exchange for their $1.5 million
capital contribution.
In consideration of his capital contribution, Mr. Jacobs will
receive monthly payments of $12,500 for a period of seven years
beginning thirty days after the effective date. Mr. Jacobs is
also entitled to receive annual payments of $8,750 every Feb. 1 of
each year from 2007 through 2012. Additionally, The Reorganized
Debtor will pay Mr. Jacobs $258,750 on Feb. 1, 2013.
Headquartered in Fraser, Michigan, Jacobs Industries, Inc.,
manufactures automotive interiors in roll forming and channel,
stampings and assembled product. The company along with its three
affiliates filed for chapter 11 protection on Sept. 26, 2005
(Bankr. E.D. Mich. Case No. 05-72613). Charles J. Taunt, Esq.,
and Erika D. Hart, Esq., at Charles J. Taunt & Associates,
P.L.L.C., represents the Debtors in their restructuring. When the
Debtor filed for protection from its creditors, it listed
$19,513,913 in total assets and $21,413,576 in total debts.
JEROME DUNCAN: Suburban Collection Buys Assets For $14.8 Million
----------------------------------------------------------------
The Honorable Marci B. McIvor of the U.S. Bankruptcy Court for the
Eastern District of Michigan approved the sale of substantially
all of the assets of Jerome-Duncan Inc. to Suburban Ford of
Sterling Heights L.L.C. for $14.8 million, free and clear of all
liens, claims and encumbrances.
Judge McIvor also authorized the Debtor to assume and assign its
leasehold interests located at 8000 Ford Country Lane, in Sterling
Heights, Michigan. The effective date of the assumption and
assignment of its headquarters will be the date of the closing of
the sale (expected to occur on Feb. 6, 2006).
As previously reported in the Troubled Company Reporter on
Jan. 9, 2006, Suburban Ford's bid offered $10 million for real
estate, $4 million for goodwill, and $800,000 for furniture.
An auction was held on Jan. 17, 2006, at Miller, Canfield, Paddock
and Stone plc in Detroit. No competing bidder emerged.
Jerome-Duncan's bankruptcy filing resulted from a shareholder
dispute between Gail Duncan, who operates the dealership, and her
father, Richard Duncan, who co-founded the dealership and still
holds a significant ownership stake.
Gail Duncan is the majority owner by a small percentage, and
Richard Duncan is the minority owner.
Headquartered in Sterling Heights, Michigan, Jerome Duncan Inc.,
is the largest dealer of automobiles manufactured by Ford Motor
Company in the state of Michigan. The Debtor is one of the most
well-known, modern automobile dealers in the area and has a
tradition of serving customers in southeastern Michigan for the
past 50 years. The Debtor employs over 200 individuals in its
operations and generates between $300 and $500 million in annual
sales. The company filed for chapter 11 protection on June 17,
2005 (Bankr. E.D. Case No. 05-59728). Arnold S. Schafer, Esq., at
Schafer and Weiner, PLLC, represents the Debtor in its
restructuring efforts.
KERR-MCGEE CORP: Moody's Reviews Ba3 Corporate Family Rating
------------------------------------------------------------
Moody's Investors Service placed Kerr-McGee Corporation's
(KMG, Ba3 Corporate Family Rating) long term debt ratings under
review for possible upgrade. This action reflects Kerr-McGee's
operating improvement, reflected in its re-investment risk, as it
transforms from a predominantly offshore, international,
exploration strategy to an onshore North American natural gas
exploitation focus.
The review also considers KMG's reduced financial risk, measured
by leverage and cash flow coverage, following its repayment of
$4.25 billion borrowed in 2005 to fund a $4 billion share
repurchase program. These improvements are tempered by KMG's
recently announced $1 billion stock buyback, which Moody's expects
to be funded from the sale of Gulf of Mexico shelf properties and
cash on hand. Moody's expects to complete the review after Kerr-
McGee files its final year-end 2005 results. If upgraded, Moody's
would not expect more than a one notch upgrade.
The ratings review will include Moody's evaluation of:
1) final year-end 2005 reserves disclosure;
2) the sustainability of KMG's growth strategy;
3) KMG's cash costs going forward as a standalone E&P company;
and
4) KMG's strategy regarding uses of excess cash including share
buybacks, acquisitions and debt repayment.
Kerr-McGee recently announced that it added 165 million barrels of
oil equivalent (boe) to its proved reserves in 2005, with no major
exploration additions, which corresponds to 150% reserves
replacement. The company made minimal acquisitions so this
approximates organic replacement as well. This is an improvement
from recent years, in which KMG replaced 25-35% of its production
through lower risk exploitation and development with the balance
coming from exploration, primarily in the deepwater Gulf of
Mexico.
Following its Westport acquisition in 2004 and the sale of non-
core properties in 2005, KMG should replace 75-100% of its
reserves organically, principally in the Wattenberg and the
Greater Natural Buttes fields, with exploration providing
additional upside. KMG expects 2005 all-sources finding and
development (F&D) costs to be under $11.85 per boe, also a
substantial improvement over the recent past.
Looking forward, KMG expects to spend $1.6 billion on capex
(including exploration costs) in 2006 and the company has stated
it expects a maximum of $15 F&D costs, with exploration success
reducing this to low double digits. Moody's review will assess
the execution risk associated with KMG achieving its reserves
replacement and F&D costs targets.
Kerr-McGee's leverage and cash flow coverage deteriorated
significantly when it borrowed $4.25 billion for its share
repurchase plan in 2005. As a result of asset sales and cash
flow, KMG repaid the term loans in the fourth quarter of 2005.
KMG also reduced balance sheet debt by an additional $1.1 billion
over the course of 2005 through conversions and normal maturities.
Year-end 2005 balance sheet debt, excluding Tronox debt, was
$2.6 billion compared to $3.7 billion at the end of 2004.
Debt to proved developed boe should be about $5 at the end of
2005, down from $5.61 at the end of 2004. Looking forward, KMG
has called its 7% debentures due in 2011 that had a balance sheet
value of $178 million at September 30 (par value $250 million).
KMG also has $307 million of debt that matures this September,
which it will repay out of cash flow. Combined, debt should drop
by about another $500 million by the end of 2006.
Kerr-McGee Corporation, headquartered in Oklahoma City, Oklahoma,
is an independent exploration and production company with primary
operations in the U.S.
KMART CORP: Settles Dispute Over State Street's $2.5 Million Claim
------------------------------------------------------------------
State Street Bank & Trust Co., as trustee under a Pooling and
Servicing Agreement among DR Structured Finance Corp., Shawmut
Bank, N.A., and First National Bank of Boston dated Oct. 15, 1993,
filed a lease rejection claim against Kmart Corporation.
Kmart objected to the Claim.
In an agreed order signed by Judge Susan Pierson Sonderby of the
U.S. Bankruptcy Court for the Northern District of Illinois, State
Street will have an Allowed Class 5 Lease Rejection Claim for
$2,525,787, which will be satisfied in accordance with the terms
of Kmart's confirmed Plan of Reorganization.
The first distribution to be made on account of the Allowed Class
5 Rejection Claim will be made at the next Distribution Date under
Kmart's Plan.
Upon the receipt of the distribution, State Street's Claim Nos.
40893 and 48543 will be satisfied in full.
State Street is forever barred from asserting, collecting, or
seeking to collect from Kmart any lease rejection amount other
than the allowed amount, with respect to the Lease relating to
Kmart Store No. 4901.
The Agreed Order will not affect State Street's rights against
Sardis Holdings, L.P., or any other parties liable to it. The
Agreed Order will not constitute an election of remedies by State
Street, or a waiver of any past, present or future defaults or
events of default under the Loan Documents.
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)
LA QUINTA: Blackstone Group Merger Cues Fitch to Withdraw Ratings
-----------------------------------------------------------------
Fitch Ratings affirmed and withdrawn these debt ratings of La
Quinta Corp.:
* Issuer default rating 'BB-'
* Senior secured credit facility 'BB'
* Senior unsecured rating 'BB-'
* Preferred stock rating 'B'
The ratings have been removed from Rating Watch Negative.
These actions are due to the recent announcement that La Quinta
Corp. and La Quinta Properties had completed their mergers with
affiliates of The Blackstone Group.
Additionally, La Quinta Properties received the requisite tenders
and consents from holders of more than a majority in aggregate
principal amount of each of its outstanding notes in connection
with its tender offers and consent solicitations for the notes.
LAGNIAPPE HOSPITAL: Louisiana Seeks to Dismiss Chapter 11 Case
--------------------------------------------------------------
The Louisiana Department of Revenue asks the U.S. Bankruptcy Court
for the Western District of Tennessee to dismiss Lagniappe
Hospital's chapter 11 case or convert the case to a chapter 7
liquidation proceeding.
The Department asserts that the Debtor failed to honor the terms
of a consent judgment and remit taxes. The Louisiana and the
Debtor are parties to a consent order dated June 30, 2003. The
consent order requires the Debtor to pay the Department $121,441
in partial payment of outstanding withholding taxes for the
Nov. 30, 2002 to May 31, 2003 withholding tax periods. The
payment was supposed to be made by Dec. 31, 2003. 2003 came and
went; so did 2004; 2005 too. The Department hasn't received any
payments from the Debtor under the consent order . . . only notice
of a bankruptcy filing in another state. All of this, the State
argues, adds up to cause to convert or dismiss the Debtor's bad
faith chapter 11 filing.
The Court will convene a hearing on March 13, 2006, at 9:00 a.m.,
to consider the Department's request.
Headquartered in Shreveport, Louisiana, Lagniappe Hospital --
http://www.lagniappehospital.com-- an affiliate of Camelot
Healthcare LLC, is a 146-bed, 94,680-square-foot long-term acute
care hospital and rehabilitation facility that served the greater
Shreveport community with 37,436 patient days in 2002. The
company filed for chapter 11 protection on Sept. 30, 2005 (Bankr.
W.D. Tenn. Case No. 05-35710). Curtis R. Shelton, Esq., in
Shreveport, Louisiana, represents the Debtor in its restructuring
efforts. When the Debtor filed for protection from its creditors,
it estimated $50 million in both assets and debts.
LEXTRON CORP: Miss. Tax Comm. Says Chapter 11 Plan Fatally Flawed
-----------------------------------------------------------------
The Mississippi State Tax Commission asks the U.S. Bankruptcy
Court for the Southern District of Mississippi to deny approval of
Lextron Corporation's Second Amended Disclosure Statement because
it describes a plan that can't be confirmed.
The State Tax Commission argues that the Debtor's plan violates
Section 1129(a)(9)(c) of the Bankruptcy Code, which requires
priority tax claims to be paid "over a period not to exceed six
years after the date of the assessment of such claim, of a value,
as of the effective date of the plan, equal to the allowed amount
of such claim."
The Commission says it's told the Debtor about the problem, but
the State's comments have fallen on deaf ears.
Objection to the Plan
James L. Powell, Esq., counsel for the Mississippi State Tax
Commission, also asks the Court to deny confirmation of the
Debtor's Second Amended Plan of Reorganization.
Mr. Powell relates that under the Debtor's plan, the State Tax
Commissions priority claims will be paid "with proceeds received
from the prosecution of the claims and causes of action the Debtor
has against Delphi, to the extent any such proceeds are remaining
after payment of the secured claims held by Wachovia and the IRS."
Paying delinquent taxes using recoveries on account of avoidance
actions against another chapter 11 debtor isn't what the Congress
had in mind when it codified the 13 standards for confirmation of
every chapter 11 plan in Sec. 1129 of the Bankruptcy Code, the
Commission suggests.
Mr. Powell argues that the Debtor's plan fails to pay the State
Tax Commission's allowed claim in full and fails to provide for
payment of interest on the claim. This, Mr. Powell says, violates
Section 1129(a)(9)(c) of the Bankruptcy Code.
Overview of the Plan
In its Disclosure Statement, the Debtor told the Court that
because of the Internal Revenue Service's objection to its First
Amended Plan, it was left with no recourse but to sell its assets.
In order to administer the Debtor's business post confirmation, a
Creditors Trust will be created.
Treatment of Claims
Under the plan, administrative expense claims will be paid in
full.
Priority claims consisting of:
(a) The Internal Revenue Service's tax Claims;
(b) The State of Mississippi's tax Claims;
(c) Hinds County Tax Collector's tax Claims;
(d) Mississippi Employment Security Commission tax Claims;
and
(e) Employee withholding claims,
will be paid using the remaining proceeds from the prosecution of
the claims and causes of action of the Debtor against Delphi,
after payment of the secured claims of Wachovia Bank and the
Internal Revenue Service.
Wachovia Bank will continue to have a lien in all of the Debtor's
property. Wachovia will also be entitled to all proceeds
resulting from the liquidation of Wachovia's collateral until
Wachovia's claim is satisfied in full. Pursuant to the plan,
Wachovia will be paid $5,000 per month plus 6% annual interest
until the Bank's claim is paid in full.
Once the adversary proceeding between the Internal Revenue Service
and Wachovia is resolved, the IRS' allowed secured claim will be
paid in full.
Trustmark National Bank's secured claim will be paid in full in
12 monthly installments.
BancorpSouth's secured claim was resolved by an Agreed Order dated
Apr. 20, 2004. Under the agreed order, the Debtor and Bancorp
agreed to lift the automatic stay on the real property securing
the Debtor's indebtedness to Bancorp, and abandon the property
from the Debtor's estate. Any deficiency after liquidation of the
real property is treated as a general unsecured claim.
Under the Plan, general unsecured claims will receive distribution
only after all priority claims are paid in full.
All interests in the Debtor will be cancelled upon confirmation.
Headquartered in Jackson, Mississippi, Lextron Corporation --
http://www.lextroncorporation.com/-- manufactures electrical
and electronic assemblies for the telecommunications and
automotive industries. The Debtor filed for chapter 11 protection
on Feb. 12, 2004 (Bankr. S.D. Miss. Case No. 04-00826). Craig M.
Geno, Esq., at Harris & Geno, PLLC, represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it didn't state its assets but estimated debts to
more than $10 million.
LIBERTY FIBERS: Bailey Roberts Approved as Ch. 7 Trustee's Counsel
------------------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Tennessee
gave Maurice K. Guinn, the chapter 7 trustee of Liberty Fibers
Corporation, fka Silva Acquisition Corporation, permission to
employ Robert M. Bailey and the law firm of Bailey Roberts &
Bailey, PLLC, as its counsel.
The Trustee wants Bailey Roberts' assistance to represent him for
the special purpose of pursuing a lawsuit pending in the Chancery
Court for Hamblen County, in Tennessee.
Mr. Bailey will charge the Debtor from $200 to $300 per hour.
To the best of the Trustee's knowledge, Bailey Roberts does not
hold or represents an interest adverse to the estate.
Headquartered in Lowland, Tennessee, Liberty Fibers Corporation,
fka Silva Acquisition Corporation, manufactures rayon staple
fibers. The Debtor filed for chapter 11 protection on
Sept. 29, 2005 (Bankr. E.D. Tenn. Case No. 05-53874). Robert M.
Bailey, Esq., at Bailey, Roberts & Bailey, PLLC, represents the
Debtor in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed $14,610,857 in assets and
$20,024,777 in debts.
LINENS 'N THINGS: Moody's Rates $650 Mil. Guaranteed Notes at B3
----------------------------------------------------------------
Moody's Investors Service assigned first time ratings to
Linens 'N Things, Inc. The ratings are being assigned in
connection with the proposed acquisition of Linens 'N Things by
a consortium of investors, led by Apollo Management, L.P.
These ratings are assigned:
* Corporate family rating of B3;
* $650 Million of senior secured guaranteed notes due 2014
of B3; and
* Speculative Grade Liquidity Rating of SGL-3.
The outlook is stable.
On Nov. 8, 2005 Apollo entered into a definitive agreement to
acquire Linens N Things for $28 per share or for a total purchase
price of about $1.3 billion. The transaction will be financed
with the proceeds of the offering of $650 million of senior
secured notes as well as an equity contribution of approximately
$649.2 million. Apollo Management, L.P. will be the controlling
investor with equity holdings of approximately 68%. Certain
members of the senior management team are expected to make equity
investments in the company post closing of the transaction.
The ratings are constrained by:
* the company's high leverage position post the transaction;
* the resulting weak coverage metrics;
* the limited free cash flow; and
* the company's weak operating performance over the last
several quarters.
Notably, for the LTM period ending Oct. 1, 2005 EBIT margins had
eroded to 2.3% from 5.1% for the period ending Jan. 3, 2004. In
addition, comparable store sales for the nine months ending
Oct. 1, 2005 were down 7.7%. The ratings also reflect Linens 'N
Things secondary competitive position in the home furnishings
market in which numerous larger and better capitalized companies
operate including;
* Bed, Bath, and Beyond;
* JCPenney;
* Target; and
* Wal-Mart.
The ratings, however, are supported by:
* the company's projected adequate liquidity position;
* the new senior management that will be put in place post the
transaction; and
* the sizable equity investment being made by the financial
sponsors.
In addition, the ratings are supported by:
* the company's recognizable established brand name;
* its solid geographically diversified nationwide store base;
and
* the overall stability of the home furnishings industry.
Moody's estimates that proforma for the transaction for the fiscal
year ended Dec. 31, 2005, Debt/EBITDA (as calculated using Moody's
standard adjustments) was approximately 7.1x, and EBIT/Interest
Expense (unadjusted as estimated by Moody's) was 0.9x. Moody's
expects for the fiscal year ended Dec. 31, 2006, Debt/EBITDA (as
calculated using Moody's standard analytical adjustments) of 7.0x
and EBIT/Interest Expense (unadjusted as estimated by Moody's) of
0.9x.
The stable outlook reflects the company's projected adequate
liquidity, largely provided by an asset based revolver (unrated),
and Moody's expectation that there will be no reduction in funded
debt over the next twelve to eighteen months. A positive outlook
could be assigned should operating performance improve causing
Debt/EBITDA (as calculated using Moody's standard analytical
adjustments) to be sustained below 6.75x and EBIT/IE (as reported)
to be sustained above 1.0x. Ratings could move downward should
the company's liquidity or operating performance deteriorate from
current levels.
The proposed senior secured notes will be rated at the corporate
family rating reflecting the enterprise value multiple that would
be required to fully cover the notes and the notes size and scale
relative to the total capital structure. In addition, the rating
on the senior notes reflects:
* the notes first lien on property plant, equipment, and
trademarks;
* equity interests of the subsidiaries, their second lien on
the inventory and accounts receivable; and
* the guarantees by all domestic subsidiaries.
The speculative grade liquidity rating of SGL-3 represents
adequate liquidity. The company's internally generated cash flow
combined with seasonal borrowings under the revolver will be
sufficient to fund its working capital and capital expenditures
requirements. The company has in place a $600 million secured
asset based revolving credit facility which is expected to be used
only for seasonal borrowings and letters of credit. The credit
agreement is subject to two financial covenants, a maximum
leverage ration and a minimum fixed charge coverage ratio, which
will only be in effect when availability falls below $75 million.
Linens 'N Things, Inc., headquartered in Clifton, New Jersey, is a
nationwide specialty retailer of:
* home textiles,
* housewares, and
* home accessories
that operates approximately 542 stores in 47 states and six
Canadian provinces.
Revenues for the LTM period ended Oct. 1, 2005 were approximately
$2.6 billion.
LINENS 'N THINGS: S&P Assigns B Corporate Credit & Debt Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its single 'B'
corporate credit rating to specialty home furnishings retailer
Linens 'n Things Inc. At the same time, Standard & Poor's
assigned its single 'B' secured debt rating and a recovery rating
of '2', indicating the expectation for substantial (80%-100%)
recovery of principal in the event of a payment default, to the
proposed $650 million senior secured floating-rate notes due 2014
to be co-issued by Linens and Linens 'n Things Center Inc.
The notes are to be issued under rule 144A with registration
rights. Proceeds of the notes, together with about $650 million
in equity contribution, will be used to fund the acquisition of
the company by an investor group, which is led by Apollo
Management L.P. In November 2005, Apollo Management L.P. and its
co-investors entered into a definitive agreement to acquire the
company for about $1.3 billion. The outlook is negative.
"The rating reflects Linens' recent weak operating performance and
its low profitability and productivity relative to its key
competitor," said Standard & Poor's credit analyst Ana Lai, "as
well as high pro forma debt leverage that will curtail cash flow
coverage of interest."
These risks are tempered by its good position in the growing
specialty home furnishings segment and adequate liquidity.
LOEWS CINEPLEX: AMC Ent. Merger Prompts S&P to Withdraw Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on Loews
Cineplex Entertainment Corp. following the completion of the
company's merger with AMC Entertainment Inc. and the repayment of
all of Loews' debt. At the same time, Standard & Poor's affirmed
its ratings, including its 'B' corporate credit rating, on both
AMC Entertainment Inc. and AMC's parent, Marquee Holdings Inc.
The outlooks for AMC and Marquee are negative. Following the
merger, AMC had approximately $2.5 billion in debt in addition to
$3 billion in present value of operating leases.
The ratings on AMC incorporate a consolidated view of Marquee, and
Consider:
* the company's high leverage;
* weak profit margins relative to peers;
* participation in a highly competitive industry; and
* reliance on the popularity of Hollywood films.
These risks are partially offset by:
* the company's modern theater circuit relative to other major
theater chains;
* its large and geographically diverse U.S. operations; and
* some international diversity.
According to Standard & Poor's credit analyst Tulip Lim, "The
merger should strengthen the already solid competitive profile of
the combined companies in large metropolitan U.S. markets, enhance
profitability through cost reductions and scale advantages, and
allow for better coordination of assets and capital spending."
MATRIA HEALTHCARE: S&P Lowers Planned $65 Mil. Loan's Rating to B-
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its bank loan rating on
Matria Healthcare Inc.'s proposed $65 million senior secured
second-lien term loan to 'B-' (two notches lower than the 'B+'
corporate credit rating on the company) from 'B'. The recovery
rating on the second-lien loan was revised to '4', indicating the
expectation for marginal (25%-50%) recovery of principal in the
event of a payment default, from '3'.
All other existing ratings on Matria, including the 'B+' corporate
credit rating, were affirmed. The rating outlook remains
negative. The outlook was revised to negative from stable on
Jan. 13, 2006 due to the increase in debt from the proposed
CorSolutions Medical Inc. acquisition.
"The rating downgrade of the second-lien loan follows Matria's
decision to reduce its proposed second-lien borrowings by $20
million, while increasing its proposed first-lien borrowings by
$20 million," said Standard & Poor's credit analyst Jesse Juliano.
"As such, we believe that in the event of a payment default, there
will be fewer assets remaining for second-lien lenders relative to
the outstanding second-lien principal."
Matria plans to use the proceeds from its bank debt to purchase
disease management provider CorSolutions Medical Inc. for $445
million, as well as to pay $12 million in related transaction
costs. The company expects to retire its first-lien term loan C
in 2006 with net proceeds from the anticipated sale of its Facet
Technologies and German diabetes supply businesses.
The ratings on disease-state management provider Matria reflect:
* the company's single business focus;
* relatively low barriers to entry;
* the threats of increased competition and integration risk;
and
* the company's significant debt burden.
These concerns are partially offset by:
* the growing demand for Matria's services;
* new contracts;
* the positive momentum in its disease management business;
* its well-developed IT platform; and
* the company's increased scale from its CorSolutions
acquisition.
However, Standard & Poor's remains concerned about the risks
associated with integrating pure-play disease management provider
CorSolutions, despite Matria's successful acquisition history.
MCI INC: Verizon Plans to Buy Back Sr. Notes at 101% of Amount
--------------------------------------------------------------
Verizon Communications Inc. (NYSE: VZ) is offering to repurchase
two series of MCI senior notes -- MCI, Inc. $1.983 billion
aggregate principal amount of 6.688% Senior Notes Due 2009 and
MCI, Inc. $1.699 billion aggregate principal amount of 7.735%
Senior Notes Due 2014 -- at 101% of their par value.
Due to the change in control of MCI that occurred on Jan. 6, 2006,
Verizon is required to make this offer to noteholders within 30
days of the closing of the merger of MCI and Verizon.
Separately, Verizon has notified noteholders that MCI is
exercising its right to redeem both series of Senior Notes prior
to maturity under the optional redemption procedures provided in
the indentures. The 6.688% Notes will be redeemed on March 1,
2006, and the 7.735% Notes will be redeemed on February 16, 2006.
The redemption agent is Citibank, N.A.
Later last month, Verizon expects to announce the actions that it
will take with respect to the remaining series of outstanding MCI
senior notes -- MCI, Inc. $1.983 billion aggregate principal
amount of 5.908% Senior Notes Due 2007.
Verizon intends to complete the refinancing of MCI's long-term
debt by the end of the first quarter using a combination of cash
and other capital sources.
About Verizon Communications
Verizon Communications Inc. (NYSE: VZ), a Dow 30 company, is a
leader in delivering broadband and other communication innovations
to wireline and wireless customers. Verizon operates
America's most reliable wireless network, serving 49.3 million
customers nationwide; one of the most expansive wholly owned
global IP networks; and one of the nation's premier wireline
networks, serving home, business and wholesale customers. Based
in New York, Verizon has a diverse workforce of approximately
250,000 and generates annual consolidated operating revenues of
approximately $90 billion. For more information, visit
http://www.verizon.com/
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)
* * *
As reported in the Troubled Company Reporter on Feb. 22, 2005,
Standard & Poor's Ratings Services placed its ratings of Ashburn,
Virginia-based MCI Corp., including the 'B+' corporate credit
rating, on CreditWatch with positive implications. The action
affects approximately $6 billion of MCI debt.
MERRILL LYNCH: S&P Cuts Rating on Class H Certs. from B- to CCC+
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on three
classes of commercial mortgage pass-through certificates from
Merrill Lynch Mortgage Investors Inc.'s series 1997-C2.
Concurrently, the rating on one class is lowered, while the
ratings on the three remaining classes are affirmed.
The raised and affirmed ratings reflect increased credit
enhancement levels that support the ratings through various stress
scenarios. The lowered rating reflects anticipated losses on the
specially serviced assets.
As of Jan. 11, 2006, the trust collateral consisted of 84 loans
with an aggregate outstanding principal balance of $339.9 million,
down from 147 loans amounting to $686.3 million at issuance. The
master servicer, Wachovia Bank N.A., provided interim and year-end
2004 as well as interim 2005 financial data for 94% of the loans.
Based on this information, Standard & Poor's calculated a weighted
average net cash flow debt service coverage ratio of 1.45x, up
from 1.37x at issuance. Seven loans in the pool are delinquent,
including five loans that are at least 90 days delinquent. There
are also three loans with appraisal reduction amounts in effect
for a total of $1.6 million. The trust has incurred 12 losses to
date, totaling $14.4 million.
The top 10 loans have an aggregate pooled balance of
$120.6 million and a weighted average DSCR of 1.34x, compared with
1.38x at issuance. Despite the overall stable DSC for the top
10 loans, the third-largest loan is with the special servicer,
CRIIMI MAE Services L.P., due to property damage from Hurricane
Katrina. Additionally, the second- and eighth-largest loans are
on Wachovia's watchlist. As part of its surveillance review,
Standard & Poor's reviewed recent property inspections provided by
Wachovia for the top 10 loans. All of the collateral was
characterized as "good" or "excellent."
There are six loans totaling $31.7 million with the special
servicer. The third-largest loan, Citrus Creek Apartments, has a
balance of $13.5 million and is secured by a 246-unit multifamily
property in Harahan, Louisiana. The loan is currently 90-plus
days delinquent. Hurricane Katrina damaged the property securing
this loan, but, according to the special servicer, the repairs at
the property have been completed and occupancy is back up to 100%.
The borrower has also brought the loan current, which will be
reflected in the next month's report, and this loan should be
transferred back to the master servicer after three consecutive
payments. The borrower reported a nine-month DSCR (at Sept. 30,
2005) of 1.18x.
The Metro Center II loan has a balance of $6.6 million. The
property is REO and consists of a 100,113-sq.-ft. office building
in Dublin, Ohio. The property was appraised at $5.8 million in
September 2005, and the special servicer is trying to sell the
property.
The Town and Country Business Park loan has a balance of
$4.8 million. The property is REO, and it consists of a
123,223-sq.-ft. industrial property in Colorado Springs, Colorado.
The property was appraised at $4.5 million in November 2005, and
the special servicer is trying to sell the property.
The Shoppes at Taylor Ranch loan has a balance of $2.8 million and
is secured by a 36,390-sq.-ft. retail center in Albuquerque, New
Mexico. The loan is currently in foreclosure, but a forbearance
agreement has been negotiated with the borrower. The agreement
will allow the borrower to pay all excess cash flow to the lender
and repay any remaining past-due amount at the loan's maturity in
November 2007. The special servicer will monitor the loan and
evaluate it for return to the master servicer at a later date. An
ARA for $82,697 is in effect on this loan.
The Westover Plaza Shopping Center loan has a balance of
$2.1 million and is secured by a 58,705-sq.-ft. retail center in
Hickory, North Carolina. A forbearance agreement was negotiated
with the borrower that will allow eight months to pay off the
advances made on this loan. The special servicer will monitor the
loan and evaluate it for return to the master servicer at a later
date. An ARA for $945,000 is in effect on the loan.
The Tiffanywood/Harmonyrick Apartments loan has a balance of
$1.9 million. The property is REO and consists of a 142-unit
multifamily property in Dumas, Texas. The year-end 2004 DSCR for
the loan was 0.10x, and the special servicer is trying to sell the
property. The property was appraised for $1.8 million in February
2005, and an ARA for $596,374 is in effect on the loan.
In addition to the six loans with the special servicer, there are
two loans that are between 30 and 60 days delinquent but which
have not been transferred to the special servicer. The Fountains
of Jupiter Apartments loan has a balance of $2.3 million and is
secured by 108-unit multifamily property in Dallas, Texas. The
reported nine-month DSCR (as of Sept. 30, 2005) was 0.82x, and the
property was 89% occupied as of December 2005. This loan was
recently transferred to the special servicer, and the transfer
will be reflected in the next month's report. The West Shore
Estates loan has a balance of $1 million and is secured by a
150-unit manufactured housing property in Bay City, Michigan. As
of Sept. 30, 2005, the reported nine-month DSCR was 1.32x, and
occupancy was 87%.
There are 16 loans with an outstanding balance of $68.8 million on
Wachovia's watchlist, including two of the top 10 exposures. The
second-largest loan in the trust, the Oaks at Centreport, has a
$13.9 million balance and is secured by a 726-unit multifamily
property in Fort Worth, Texas. The loan appears on the watchlist
due to a low nine-month DSCR of 0.70x (as of Sept. 30, 2005), as
well as occupancy of 84%.
The eighth-largest loan, the Dover Farms Apartments, has an
outstanding balance of $10.7 million and is secured by a 300-unit
multifamily property in North Royalton, Ohio. The borrower
reported a September 2005 DSCR of 0.73x, and occupancy was 94% as
of December 2005. The loan appears on the watchlist because of
the low DSCR.
Most of the remaining loans on the watchlist have occupancy or DSC
issues.
Standard & Poor's stressed loans in the pool with potential credit
issues as part of its analysis. The resultant credit enhancement
levels support the raised, affirmed, and lowered ratings.
Ratings Raised
Merrill Lynch Mortgage Investors Inc.
Commercial Mortgage Pass-Through Certificates Series 1997-C2
Rating
Class To From Credit enhancement
----- -- ---- ------------------
D AA+ A+ 22.02%
E AA- BBB+ 18.49%
F BB+ BB 7.38%
Rating Lowered
Merrill Lynch Mortgage Investors Inc.
Commercial Mortgage Pass-Through Certificates Series 1997-C2
Rating
Class To From Credit enhancement
----- -- ---- ------------------
H CCC+ B- 1.83%
Ratings Affirmed
Merrill Lynch Mortgage Investors Inc.
Commercial Mortgage Pass-Through Certificates Series 1997-C2
Class Rating Credit enhancement
----- ------ ------------------
A-2 AAA 52.31%
B AAA 44.23%
C AAA 32.12%
MUSICLAND HOLDING: Receives Court Approval to Close 341 Stores
--------------------------------------------------------------
Musicland Holding Corp. intends to close 341 of its
underperforming and unprofitable stores as part of its Chapter 11
financial review.
"Closing these stores was a difficult, but necessary decision to
protect the future of this company," said Musicland President &
CEO Michael J. Madden. "The store closing list is based on a
number of factors, including store profits and the terms of the
leases at each location. As we move forward in the restructuring
process, this action will allow us to focus our resources on those
four hundred stores that have stronger prospects for future
growth."
In many cases, Musicland customers who are affected by the store
closings will have the option of shopping at a nearby Sam Goody or
Suncoast store. In addition, customers can continue to shop
online at http://www.samgoody.com/http://www.suncoast.com/or
http://www.mediaplay.com/
A full-text copy of the list of the individual stores that have
been approved by the Court for closing is available at no charge
at http://ResearchArchives.com/t/s?4d0
Most listed stores will be closed through a liquidation process,
which begins Feb. 1. Following the liquidation process, Musicland
plans to operate 400 stores in 49 states -- 191 Sam Goody stores
and 209 Suncoast stores.
Musicland has selected a joint venture led by Hilco Merchant
Resources, LLC of Northbrook, Illinois, and including Gordon
Brothers Group, LLC of Boston, Massachusetts, to manage the store
closings. Michael Keefe, CEO of Hilco Merchant Resources, stated,
"Extremely compelling discounts of up to 40 percent are being
offered to the consumer on more than $140 million worth of music,
movies, video games and more. These stores have the merchandise
that customers want, at discounts rarely seen on current releases.
This is so much more than just a sale event and we anticipate a
tremendous response."
More information about Musicland's reorganization case is
available at http://www.musicland.com/or via the company's
restructuring information line at (888) 819-7914.
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.
NELLSON NUTRACEUTICAL: Court Okays AlixPartners as Claims Agent
---------------------------------------------------------------
The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the
District of Delaware gave Nellson Nutraceutical, Inc., and its
debtor-affiliates permission to employ AlixPartners, LLC, as
their noticing, claims and balloting agent, nunc pro tunc to
Jan. 28, 2006.
AlixPartners will:
(a) prepare and serve required notices in the Debtors'
bankruptcy cases, including:
(1) notice of the commencement of the Debtors' bankruptcy
cases and the initial meeting of creditors under
Section 341(a) of the Bankruptcy Code;
(2) notice of the claims bar date;
(3) notice of objection to claims;
(4) notice of any hearings on a disclosure statement and
confirmation of a plan of reorganization; and
(5) other miscellaneous notices to any entities, as the
Debtors or the Court may deem necessary or appropriate
for the orderly administration of the Debtors'
bankruptcy cases;
(b) file, within five business days after the mailing of a
particular notice, with the Clerk's Office a certificate or
affidavit of service that includes a copy of the notice
involved, a list of persons to whom the notice was mailed
and the date and manner of mailing;
(c) maintain copies of all proofs of claim and proofs of
interest filed;
(d) maintain official claims registers, including information
for each proof of claim or proof of interest;
(1) the name and address of the claimant and any agent, if
the proof of claim or proof of interest was filed by an
agent;
(2) the date received;
(3) the claim number assigned; and
(4) the asserted amount and classification of the claim;
(e) create and administer a claims database;
(f) implement necessary security measures to ensure the
completeness and integrity of the claims registers;
(g) transmit to the Clerk's Office a copy of the claims
registers on a monthly basis, unless requested by the
Clerk's Office on a more or less frequent basis, or in
the alternative, make available the proof of claim docket
on-line to the Clerk's Office via the Claims Manager claims
system;
(h) maintain an up-to-date mailing list for all entities that
have filed a proof of claim or proof of interest, which
list will be available upon request of a party-in-interest
or the Clerk's Office;
(i) provide access to the public for examination of copies of
the proofs of claim or interest without charge during
regular business hours;
(j) record all transfers of claims and provide notice of those
transfers as required by Rule 3001(e) of the Federal Rules
of Bankruptcy Procedures;
(k) comply with applicable federal, state, municipal, and local
statutes, ordinances, rules, regulations, orders and other
requirements;
(l) provide temporary employees to process claims, as
necessary;
(m) provide balloting services in connection with the
solicitation process for any chapter 11 plan to which a
disclosure statement has been approved by the Court;
(n) provide other claims processing, noticing and related
administrative services as may be requested from time to
time by the Debtors; and
(o) promptly comply with further conditions and requirements as
the Clerk's Office or the Court may at any time prescribe.
Meade Monger, managing director at AlixPartners, LLC, discloses
that the Firm will receive a $20,000 retainer. The Firm's
professionals bill:
Designation Hourly Rate
----------- -----------
Managing Directors $425
Directors $350
Vice Presidents $310
Associates $250
Analysts $180
Paraprofessionals $110
Mr. Monger did not state that AlixPartners is disinterested nor
did he say that his Firm has no interest adverse to the Debtors'
estates. Mr. Monger only stated that the Firm has not completed a
thorough check of the parties-in-interest. He also added that the
Firm does not know any fact or situation that represent a conflict
of interest with the Debtors.
AlixPartners, LLC -- http://www.alixpartners.com/-- is
internationally recognized for its hands-on, results-oriented
approach to solving operational and financial challenges for large
and middle market companies globally. The Firm will celebrate its
25th anniversary in 2006. The firm has over 450 employees in its
Chicago, Dallas, Detroit, Dusseldorf, London, Los Angeles, Milan,
Munich, New York, Paris, San Francisco, and Tokyo offices.
Headquartered in Irwindale, California, Nellson Nutraceutical,
Inc., formulate, make and sell bars and powders for the nutrition
supplement industry. The Debtors filed for chapter 11 protection
on Jan. 28, 2006 (Bankr. D. Del. Case No. 06-10072). Laura Davis
Jones, Esq., Rachel Lowy Werkheiser, Esq., Richard M. Pachulski,
Esq., Brad R. Godshall, Esq., and Maxim B. Litvak, Esq., at
Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C. represent
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.
NORTHWEST AIRLINES: Gets Court Nod for Pilot Pension Plan Freeze
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Northwest Airlines Corp permission to freeze its pilot
pension plan. The Court also approved a request to negotiate
lower lease and loan payments for some aircraft.
Northwest and the Air Line Pilots Association (ALPA) have both
agreed to the freeze of the defined benefit plan. In addition the
creditors committee also support the freeze.
The freeze is effective as of Feb. 1, 2006, and the pilots will
receive a defined contribution plan. The details for the plan are
still being negotiated by ALPA and the airline.
Freezing of the pension plan will stop the benefits under the plan
to accrue as they normally would with pay raises and years of
service. The pension plans require the airline to pay a defined
benefit, while the 401(k) program gives employees money to invest
for their retirements.
As reported in the Troubled Company Reporter on July 19, 2005, the
airline stated in a regulatory filing with the Securities and
Exchange Commission that it is up to date on payments to its three
traditional defined benefit pension plans for 2005 but will owe
$800 million in 2006 and $1.7 billion in 2007.
Northwest Airlines Corporation -- http://www.nwa.com/--
is the world's fourth largest airline with hubs at Detroit,
Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and
approximately 1,400 daily departures. Northwest is a member
of SkyTeam, an airline alliance that offers customers one of
the world's most extensive global networks. Northwest and its
travel partners serve more than 900 cities in excess of 160
countries on six continents. The Company and 12 affiliates
filed for chapter 11 protection on Sept. 14, 2005 (Bankr.
S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and
Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP
in New York, and Mark C. Ellenberg, Esq., at Cadwalader,
Wickersham & Taft LLP in Washington represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $14.4 billion in total assets and
$17.9 billion in total debts.
O'SULLIVAN INDUSTRIES: Executes Severance Pact with Michael Franks
------------------------------------------------------------------
In a regulatory filing with the Securities and Exchange
Commission on January 19, 2006, Rick A. Walters, Interim Chief
Executive Officer, Executive Vice President and Chief Financial
Officer of O'Sullivan Industries, Inc., disclosed that the
Company executed a severance agreement with Michael L. Franks on
December 13, 2005.
Mr. Franks is O'Sullivan's former Vice President for Marketing.
Mr. Franks' last day of employment with the Company was on
December 12, 2005.
Mr. Walters states that under the severance agreement, the
Company agreed to pay Mr. Franks salary through April 3, 2006, and
to continue his health insurance through January 31, 2006.
The agreement also contains certain releases and other covenants
by Mr. Franks, Mr. Walters says.
A full-text copy of the Severance Agreement is available for free
at http://ResearchArchives.com/t/s?4cf
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. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000)
OFFSHORE LOGISTICS: Moody's Confirms Ba2 Corporate Family Rating
----------------------------------------------------------------
Moody's confirmed the Ba2 ratings for Offshore Logistics, Inc.,
(OLG) and removed it from review for possible downgrade following
the company's filing of its FYE March 31, 2005 Form 10-K along
with the delayed 10Qs for the first two fiscal quarters for year
2006. However, the outlook remains negative pending resolution of
the ongoing SEC investigation related to Foreign Corrupt Practice
Act (FCPA) matters that resulted:
* of prior year financial restatements;
* a separate Dept. of Justice investigation related to
antitrust issues in the Gulf of Mexico (GOM); and
* the disclosure of company level material weaknesses in
internal controls.
The outlook would be changed to stable if a clear conclusion to
these investigations is reached with little impact on OLG's
financial profile and operations, and the internal control
weaknesses are remediated or substantial progress is made.
However, in the event that the investigations result in a material
impact to the credit or additional restatements occur that are
material to the credit, OLG's ratings could be downgraded. In
addition, Moody's will also assess the company's plans for
financing the remaining $400 million of a planned $600 million
aircraft expansion program to determine if OLG's leverage profile
would still remain in line with its current ratings.
The confirmation of the Ba2 ratings reflects:
* OLG's credit metrics which are currently solidly within the
range for its ratings;
* the favorable outlook for OLG's business given the continued
strength in the exploration and production sector;
* historically conservative financial policies;
* the geographic diversification of its operations;
* its leading position in its primary markets; and
* the company's solid liquidity position.
The ratings remain restrained by:
* the helicopter sector's contract structure which has
restrained upcycle earnings and cash flows relative to the
rest of the oilfield services sector which are at
historically high levels;
* the company's dependence on the volatile exploration and
production of oil and gas;
* the still mature and potentially cyclical nature of the GOM
and North Sea, which generate about half of the company's
earnings and cash flows;
* the ability of the major oil and gas companies to foster
greater competition for helicopter services; and
* the significant capital being spent on the company's fleet
renewal/expansion over the next couple of years.
Moody's has confirmed these OLG ratings with a negative outlook:
1) Ba2 -- Corporate Family Rating
2) Ba2 -- $230 million senior unsecured notes due 2013
The ratings review was prompted by OLG's delayed filing of its
financial statements due to the company's previously disclosed
internal and SEC investigations into improper activities in
certain foreign countries. The Audit Committee of the Board of
Directors retained outside counsel to fully investigate this
matter and expanded the investigation to other foreign countries
and other issues. The internal investigations are now complete.
Among the investigation's findings, the company determined that
improper payments were made over time to employees of the Nigerian
government and employers of certain Nigerian customers and
possible circumvention if currency controls in a certain South
American country. The company has taken several actions to
address the improprieties including the termination of the
employees involved as well commencing a restructuring of its
operations. The total financial impact of the restatements
appears to be in the range of $15MM over the last several
quarters, primarily in the form of accrued taxes. However, given
the uncertainty regarding the resolution of the still pending SEC
investigation, Offshore Logistics could have to pay additional
fees and penalties which may or may not have a material impact on
the company's financial and operating performance.
In its recently filed March 30, 2005 Form 10-K, OLG reported that
it had material weaknesses in its internal control over financial
reporting. Former senior management and other personnel failed to
establish or adhere to appropriate internal controls related to
the control environment of the company. Specifically, former
management failed to establish and act with appropriate integrity
and ethical values. These weaknesses are the root cause for the
improprieties and restatements discussed above. While the impact
of the restatements ultimately were small from our perspective,
Moody's has concerns about the nature and pervasiveness of the
internal control issues reported.
The company has made or is making significant changes in its
financial and accounting management and appears to be focused on
remediating these issues. However, until the material weaknesses
are fully resolved, some uncertainty remains regarding the
company's financial reporting and Moody's will continue to monitor
the company's progress in remediating its control issues.
Separately, OLG also announced on June 15, 2005 that it received a
subpoena from the Dept. of Justice regarding a grand jury
investigation into potential anti-trust violations among the
helicopter service providers in the Gulf of Mexico. However,
Moody's notes that certain of OLG's competitors also received the
same subpoena but that no other information is available at this
time. Moody's will continue to closely monitor the outcomes of
the investigations.
Despite the issues surrounding the above mentioned legal issues,
the underlying business has improved, and thus far, appears to be
largely unaffected by these events. OLG overall flight hours were
up almost 3.9% for the first half of this fiscal year versus the
first six months of FY 2005. Revenues were also up almost 13%
though operating income was down partially due to increased G&A
expenses as a result of the ongoing investigations. Adjusting for
these one time items, operating income would have been about $52
million compared to $47 million for the first six months for FY
2005. Operating margins in the company's two primary markets (GOM
and Europe) have been improving, going from 16.7% and 10.2% for
the first six months in 2004 versus 21.4% and 11.7% respectively
for 2005.
Moreover, the market outlook for OLG remains very favorable as
commodity prices remain supportive for a continued increase in
activity in all of the offshore oil and gas markets combined with
the recent trend of producer's willingness to contract offshore
rigs for record dayrates and for terms that in some case go
through the end of the decade. OLG noted the tightness in the
market as reflected by the need to contract out for additional
pilots and the constraints of equipment availability. While this
is indicative of the strength in the marketplace, Moody's will be
closely monitoring OLG's safety record given that many of the
pilots have not been trained by OLG since it is particularly
important for OLG to maintain a good safety record in order to
maintain and attract new contracts.
However, Moody's also notes that the helicopter market, though
improved, has not seen the same upside benefits as other segments
of the oilfield services market. While helicopter operators are
seeing fleet utilizations at increasing levels, which has been
translating into earnings and cash flow improvements, competition
and contract bidding and award practices in this segment tend to
hold back even greater earnings and cash flows. In Moody's view,
this segment will continue to lag the other oilfield services
markets given its contract paradigm. Some helicopter providers
continue to price contracts to win market share, which often
translates into lower margins. Also, the ease of entry into the
business with new capital tends to prevent existing providers from
raising prices too much, even when demand stretches capacity.
Until these factors evolve to favor the providers more, upside
potential may be limited.
OLG is responding to the increased demand with plans to complete
the remaining $400 million of its $600 million fleet expansion
program. The company intends to spend approximately $162 million
in its fiscal year 2007, $67 million in 2008, $23 million in 2009,
$25 million in 2010, $25 million in 2011 and $38 million
thereafter. For the calendar year 2006, OLG expects to spend
$163 million financed through a combination of cash flow and
proceeds from the sale leaseback transaction completed in December
2005 which generated approximately $69 million in proceeds. The
company has indicated that during 2006 it will consider enter into
other longer-term financings to finance the expansion on a longer-
term basis.
Moody's currently estimates that lease-adjusted Debt/EBITDA
leverage was about 3.8x for the twelve months ending
Sept. 30, 2005 pro-forma for the sale leaseback transaction and
adjusted for the one-time investigation related items. When
annualizing the run-rate EBITDA for Sept. 30, 2005, pro forma
adjusted debt/EBITDA was approximately 3.01x which is appropriate
for the ratings and would be even lower if a net debt figure is
used to adjust for the approximately $130 million of cash on hand.
Debt/capitalization was at 48% pro-forma for the sale leaseback
transaction, which is also within the range for the Ba2 ratings.
Moody's will closely monitor OLG's financing plans for its fleet
expansion program, a portion of which may be financed with term
debt, to determine whether leverage remains within the 3.5x to
4.0x for the current ratings.
The company continues to maintain a strong liquidity position.
As of Sept. 30, 2005, OLG had a GBP6 million facility for letters
of credit of which GBP3.6 million was outstanding. OLG also had
no drawings under its $30 million US revolving credit facility
with only $0.7 million of letters of credit outstanding at
Sept. 30, 2005. The company no longer requires waivers from its
banks to cover its failure to file financial statements which
ensure accessibility. OLG's liquidity is further enhanced by its
sizeable $130 million cash position pro-forma for the sale
leaseback transaction.
Offshore Logistics, Inc., headquartered in Houston, Texas, is a
provider of helicopter transportation services to the oil and gas
industry worldwide.
PACIFIC MAGTRON: Bankruptcy Court Approves Disclosure Statement
---------------------------------------------------------------
The U.S. Bankruptcy Court in the Southern District of Nevada
approved Pacific Magtron International Corporation's (PMIC)
Disclosure Statement and Plan of Reorganization in a bankruptcy
court hearing on Jan. 24, 2006.
At the same hearing, the court confirmed Pacific Magtron, Inc.'s
(PMI) and Pacific Magtron (GA), Inc.'s (PMIGA), wholly owned
subsidiaries of PMIC, Plans of Liquidation.
PMI and PMIGA Plans of Liquidation
The PMI and PMIGA Plans of Liquidation which were overwhelmingly
approved by a majority of each company's creditors, provides for:
* the complete liquidation of PMIC's former operating
entities,
* the sale of PMI's building in Milpitas, California, an
estimated payout of approximately 50% before preference
payment recoveries, if any, to each PMI creditor holding a
valid claim and the establishment of a Creditor Trust to
prosecute preference litigation against certain creditors
for the recovery of payments received from PMI within the
90-day period prior to the commencement of the bankruptcy
case.
It is estimated that creditors of PMIGA that hold allowed claims
will receive a dividend on their claims of approximately 20%-25%
before the collection of any preference recoveries. A separate
Creditor Trust will also be established for the PMIGA creditors to
prosecute preference litigation. Under the Plans of Liquidation,
Tim S. Cory has been appointed Trustee for both the PMI and PMIGA
Creditors Trust.
The PMI building sale was completed in November and netted
$1.6 million after payment of closing costs and the first and
second mortgages to Wells Fargo Bank and the SBA.
Under the PMI and PMIGA Plans of Liquidation, Advanced
Communications has been irrevocably appointed the estate
representative to prosecute any and all causes of action that may
be brought by the bankruptcy estates or PMIC against former
officers Ted Li and Cynthia Lee, the former board of directors and
any other party or parties acting in concert with them. In this
regard, Advanced Communications will, as estate representative,
prosecute claims and claim objections for the estates of PMI and
PMIGA or the PMI or PMIGA Creditor Trusts, and PMI and PMIGA will
retain the right to receive an allocated portion of the proceeds
of any such litigation to the extent that there is an affirmative
recovery.
The effective date of the PMI and PMIGA Plans of Liquidation will
be Feb. 10, 2006 at which time an initial cash distribution will
be made to creditors.
PMIC Plan of Reorganization
The court's approval of PMIC's Disclosure Statement paves the
way for PMIC to distribute the proposed Plan of Reorganization
and Disclosure Statement to all creditors and shareholders for
voting purposes. PMIC's proposed Plan of Reorganization provides
for an estimated payout of 50% to creditors holding valid claims
and the merger of Herborium, Inc. into PMIC. The Livewarehouse,
a wholly-owned subsidiary of PMIC, plan provides for up to a 100%
payment to those creditors of LW holding valid claims.
Herborium -- http://www.herborium.com/-- a privately held New
Jersey-based bio-herbaceutical company, distributes proprietary
natural and complimentary healthcare solutions to consumers and
healthcare professionals seeking alternative answers to disease
treatment, management and prevention. Its products address
healthcare problems that are not met satisfactorily by
conventional ethical pharmaceuticals. Herborium's reported
revenue for fiscal 2005 was in excess of $800,000. After the
merger, PMIC is expected to change its name to Herborium.
The proposed Plan of Reorganization also provides for the
cancellation of all the previously outstanding common and
preferred shares of PMIC and the distribution of unrestricted
newly issued PMIC/Herborium stock to former PMIC shareholders of
record other than Advanced Communications on a one for one basis.
Advanced Communications' 62% majority interest in PMIC will be
cancelled and newly issued unrestricted shares of Herborium will
be issued to all shareholders of Advanced Communications directly
as a special dividend. In connection with the merger, the former
shareholders of Herborium would receive newly issued shares of
PMIC/Herborium common stock representing 85% of the outstanding
common stock. The shares owned by PMIC's current common
shareholders, other than Advanced Communications, would represent
3.71% of the post merger shares, Advanced Communications'
shareholders would hold 10.55%, and common shares representing
less than 1% of the outstanding stock would be issued to former
PMIC preferred shareholders.
The Plan of Reorganization Disclosure Statement and voting ballots
was mailed to all creditors of PMIC and LW and all PMIC
shareholders on Jan. 30, 2006. The court has set March 3, 2006 as
the date for the plan confirmation hearing. All ballots need to
be submitted to PMIC's bankruptcy counsel on or before 5:00 p.m.
PST, Feb. 24, 2006.
The cash to fund the PMIC proposed Plan of Reorganization will be
from:
a) estimated proceeds from LW's allowed claim against PMI,
estimated to be in the amount of $180,000;
b) an IRS tax refund in the amount of approximately $74,000;
c) existing cash and allocable share of proceeds, if any,
from the Theodore Li and Cynthia Lee litigation and
d) a contribution of up to $50,000 of new value from Advanced
Communications.
The merger of Herborium into PMIC is subject to confirmation of
the Plan by PMIC's creditors and shareholders, execution of a
merger agreement and the closing of financing.
Martin Nielson, chairman and CEO of Pacific Magtron International
Corporation stated, "These reorganization plans provide
significant relief for creditors and an opportunity for PMIC and
Advanced Communications' shareholders to retain and gain
additional value. I am confident that we have taken a sensible
step towards securing the approval from creditors and
shareholders."
Advanced Communications will also be appointed the estate's
representative to prosecute any and all causes of action that may
be brought by PMIC against former officers Ted Li and Cynthia Lee,
the former board of directors and any other party or parties
acting in concert with them.
About Advanced Communications Technologies, Inc.
Based in New York City, Advanced Communications Technologies --
http://www.advancedcomtech.net-- is a public holding company
specializing in the technology after-market service and supply
chain, known as reverse logistics. Its wholly owned subsidiary
and principal operating unit, Encompass Group Affiliates, Inc.
acquires and operates businesses that provide computer and
electronics repair and end-of-lifecycle services. Encompass owns
Cyber-Test, Inc., an electronic equipment repair company based in
Florida that provides board-level repair of technical products to
third-party warranty companies, OEMs, national retailers and
national office equipment dealers. Service options include
advance exchange, depot repair, call center support, parts and
warranty management for office equipment, fax machines, printers,
scanners, laptop computers, monitors and multi-function units,
including high-end consumer electronics such as PDAs and digital
cameras.
About Pacific Magtron International Corp.
Headquartered in Milpitas, California, Pacific Magtron
International Corp. -- http://www.pacificmagtron.com/--
distributes some 1,800 computer hardware, software, peripheral,
and accessory items that it buys directly from 30 manufacturers
like Creative Labs, Logitech, and Yamaha. The Company, along with
its subsidiaries, filed for chapter 11 protection on May 11, 2005
(Bankr. D. Nev. Case No. 05-14326). As of Dec. 31, 2004, the
Company reported $11,740,700 in total assets and $11,105,200 in
total debts.
A subsidiary of Pacific Magtron International Corp., Pacific
Magtron (GA) Inc., together with another subsidiary Pacific
Magtron Inc., imports and distributes in wholesale electronics
products computer components, and computer peripheral equipment
across the US.
PARK PLACE: S&P Affirms Low-B Ratings on 15 Certificate Classes
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on
248 classes of certificates from 17 Park Place Securities Inc.
transactions.
The affirmations are based on credit support percentages that are
sufficient to maintain the current ratings. As of the December
2005 distribution date, total delinquencies for these transactions
ranged from 7.72% to 15.42% of the current pool balances.
Cumulative realized losses ranged from 0.00% to 0.27% of the
original pool balances. The average outstanding pool balance for
these transactions is approximately $1.6 billion. The current
pool factor is approximately 75%.
Credit support for these transactions is provided through a
combination of subordination, excess spread, and
overcollateralization. The underlying collateral consists of
conventional, fully amortizing, 30-year fixed- and adjustable-rate
mortgage loans, which are secured by first and second liens on
one- to four-family residential properties.
Ratings Affirmed
Park Place Securities Inc.
Series Class Rating
------ ----- ------
2004-MCW1 A-1, A-2, A-4, A-5 AAA
2004-MCW1 M-1 AA+
2004-MCW1 M-2 AA
2004-MCW1 M-3 AA-
2004-MCW1 M-4, M-5 A+
2004-MCW1 M-6 A
2004-MCW1 M-7 A-
2004-MCW1 M-8 BBB+
2004-MCW1 M-9 BBB
2004-MCW1 M-10 BBB-
2004-MHQ1 A-1, A-3, A-4 AAA
2004-MHQ1 M-1 AA+
2004-MHQ1 M-2 AA
2004-MHQ1 M-3 AA-
2004-MHQ1 M-4 A+
2004-MHQ1 M-5 A
2004-MHQ1 M-6 A-
2004-MHQ1 M-7 BBB+
2004-MHQ1 M-8 BBB
2004-MHQ1 M-9 BBB-
2004-MHQ1 M-10 BB+
2004-WCW1 A-1, A-2 AAA
2004-WCW1 M-1 AA
2004-WCW1 M-2 AA-
2004-WCW1 M-3 A
2004-WCW1 M-4 A-
2004-WCW1 M-5 BBB+
2004-WCW1 M-6 BBB
2004-WCW2 A-1, A-2, A-4, A-5, A-7 AAA
2004-WCW2 M-1 AA+
2004-WCW2 M-2 AA
2004-WCW2 M-3 AA-
2004-WCW2 M-4 A+
2004-WCW2 M-5 A
2004-WCW2 M-6 A-
2004-WCW2 M-7 BBB+
2004-WCW2 M-8 BBB
2004-WCW2 M-9 BBB-
2004-WCW2 M-10 BB+
2004-WHQ1 A-1, A-2, A-4, A-5 AAA
2004-WHQ1 M-1 AA+
2004-WHQ1 M-2 AA
2004-WHQ1 M-3 AA-
2004-WHQ1 M-4 A+
2004-WHQ1 M-5 A
2004-WHQ1 M-6 A-
2004-WHQ1 M-7 BBB+
2004-WHQ1 M-8 BBB
2004-WHQ1 M-9 BBB-
2004-WHQ1 M-10 BB+
2004-WHQ2 A-1A, A-1C, A-2A, A-3A AAA
2004-WHQ2 A-3C, A-3D AAA
2004-WHQ2 M-1 AA+
2004-WHQ2 M-2 AA
2004-WHQ2 M-3 AA-
2004-WHQ2 M-4 A+
2004-WHQ2 M-5 A
2004-WHQ2 M-6 A-
2004-WHQ2 M-7 BBB+
2004-WHQ2 M-8 BBB
2004-WHQ2 M-9 BBB-
2004-WHQ2 M-10 BB+
2004-WWF1 A-1A, A-1B, A-1C, A-2 AAA
2004-WWF1 A-4, A-IO-S AAA
2004-WWF1 M-1 AA+
2004-WWF1 M-2 AA
2004-WWF1 M-3 AA-
2004-WWF1 M-4 A+
2004-WWF1 M-5 A
2004-WWF1 M-6 A-
2004-WWF1 M-7 BBB+
2004-WWF1 M-8 BBB
2004-WWF1 M-9 BBB-
2004-WWF1 M-11 BB+
2004-MM1 A-MM-1, A-MM-2 AAA
2005-WCH1 A-1A, A-2A, A-3A, A-3B AAA
2005-WCH1 A-3C AAA
2005-WCH1 M-1 AA+
2005-WCH1 M-2 AA
2005-WCH1 M-3 AA-
2005-WCH1 M-4 A+
2005-WCH1 M-5 A
2005-WCH1 M-6 A-
2005-WCH1 M-7 BBB+
2005-WCH1 M-8 BBB
2005-WCH1 M-9 BBB-
2005-WCH1 M-10 BB+
2005-WCW1 A-1A, A-1B, A-2A, A-2B AAA
2005-WCW1 A-3A, A-3B, A-3C, A-3D AAA
2005-WCW1 M-1 AA+
2005-WCW1 M-2, M-3 AA
2005-WCW1 M-4 AA-
2005-WCW1 M-5 A+
2005-WCW1 M-6 A
2005-WCW1 M-7 A-
2005-WCW1 M-8 BBB+
2005-WCW1 M-9 BBB
2005-WCW1 M-10 BBB-
2005-WCW1 M-11, M-12 BB+
2005-WCW2 A-1A, A-1B, A-1C, A-1D AAA
2005-WCW2 A-2A, A-2B, A-2C, A-2D AAA
2005-WCW2 M-1, M-2 AA+
2005-WCW2 M-3 AA
2005-WCW2 M-4 AA-
2005-WCW2 M-5 A+
2005-WCW2 M-6 A
2005-WCW2 M-7 A-
2005-WCW2 M-8 BBB+
2005-WCW2 M-9 BBB
2005-WCW2 M-10 BBB-
2005-WCW2 M-11 BB+
2005-WCW3 A-1A, A-1B, A-2A, A-2B AAA
2005-WCW3 A-2C AAA
2005-WCW3 M-1 AA+
2005-WCW3 M-2, M-3 AA
2005-WCW3 M-4 AA-
2005-WCW3 M-5 A+
2005-WCW3 M-6 A
2005-WCW3 M-7 A-
2005-WCW3 M-8 BBB+
2005-WCW3 M-9 BBB
2005-WCW3 M-10 BBB-
2005-WCW3 M-11, M-12 BB+
2005-WHQ1 A-1A, A-2A, A-3A, A-3B AAA
2005-WHQ1 A-3C AAA
2005-WHQ1 M-1 AA+
2005-WHQ1 M-2 AA
2005-WHQ1 M-3 AA-
2005-WHQ1 M-4 A+
2005-WHQ1 M-5 A
2005-WHQ1 M-6 A-
2005-WHQ1 M-7 BBB+
2005-WHQ1 M-8 BBB
2005-WHQ1 M-9 BBB-
2005-WHQ1 M-10 BB+
2005-WHQ1 M-11 BB
2005-WHQ2 A-1A, A-1B, A-2A, A-2B AAA
2005-WHQ2 A-2C, A-2D, M1 AAA
2005-WHQ2 M-2, M-3 AA+
2005-WHQ2 M-4, M-5, M-6 AA
2005-WHQ2 M-7 AA-
2005-WHQ2 M-8, M-9 A+
2005-WHQ2 M-10 A
2005-WHQ2 M-11 A-
2005-WHQ2 M-12 BBB
2005-WHQ3 A-1A, A-1B, A-2A, A-2B AAA
2005-WHQ3 A-2C, A-2D, M-1 AAA
2005-WHQ3 M-2 AA+
2005-WHQ3 M-3, M-4 AA
2005-WHQ3 M-5 AA-
2005-WHQ3 M-6 A+
2005-WHQ3 M-7 A
2005-WHQ3 M-8 A-
2005-WHQ3 M-9 BBB+
2005-WHQ3 M-10 BBB
2005-WHQ3 M-11 BBB-
2005-WHQ3 M-12 BB+
2005-WHQ4 A-1A, A-2A, A-2B, A-2C AAA
2005-WHQ4 A-2D AAA
2005-WHQ4 M-1, M-2 AA+
2005-WHQ4 M-3, M-4 AA
2005-WHQ4 M-5 A+
2005-WHQ4 M-6, M-7 A
2005-WHQ4 M-8 A-
2005-WHQ4 M-9, M-10 BBB
2005-WHQ4 M-11 BB+
2005-WLL1 A-1A, A-1B AAA
2005-WLL1 M-1 AA+
2005-WLL1 M-2 AA
2005-WLL1 M-3 AA-
2005-WLL1 M-4 A+
2005-WLL1 M-5 A
2005-WLL1 M-6 A-
2005-WLL1 M-7 BBB+
2005-WLL1 M-8 BBB
2005-WLL1 M-9 BBB-
2005-WLL1 M-10 BB+
2005-WLL1 M-11 BB
PENN NATIONAL: Moody's Lifts $250MM Sr. Sub. Notes' Rating to B1
----------------------------------------------------------------
Moody's Investors Service raised the ratings of Penn National
Gaming, Inc. and assigned a stable ratings outlook. This rating
action ends the review process that began on Oct. 3, 2005 when
Moody's placed Penn's ratings on review for possible upgrade
following the company's announcement that it had completed its
acquisition of Argosy Gaming Company.
These ratings were affected:
* Corporate family rating, to Ba2 from Ba3;
* $750 million revolver due 2010, to Ba2 from Ba3;
* $325 million term loan due 2011, to Ba2 from Ba3;
* $1,650 million term loan B due 2012, to Ba2 from Ba3;
* $175 million 8.875% guaranteed sr. sub. notes due 2010,
to Ba3 from B2;
* $200 million 6.875% guaranteed sr. sub. notes due 2011,
to Ba3 from B2; and
* $250 million 6.750% not guaranteed sr. sub. notes due 2015,
to B1 from B3.
The Ba2 corporate family rating acknowledges Penn's increased size
and diversification following the Argosy acquisition. It also
considers:
* the continued overall positive performance of the company's
casino properties;
* the good risk reward profile of current expansion plans; and
* the expectation that Penn will receive full recovery from
insurance proceeds related to hurricane damages.
Other factors include the company's slot opportunities in Maine
and Pennsylvania, as well as the likelihood that the sale of two
of Penn's Illinois casinos will have a de-leveraging impact. The
Ba2 corporate family rating also incorporates the expectation that
the company will maintain a long-term financial and leverage
profile that is consistent with the current rating.
The similarity between the company's corporate family rating and
senior secured bank loan rating reflects the significant amount of
bank debt in the capital structure. On a fully drawn basis,
secured bank debt represents over 80% of total debt. This
percentage would be higher if you include Penn's option to
increase senior secured bank debt available by another $300
million. The two-notch upgrade of the company's guaranteed senior
subordinated debt to Ba3 from B1, and not guaranteed senior
subordinated debt to B1 from B3, anticipates that the company will
not layer material amounts of debt between the senior secured bank
debt and senior subordinated notes.
In addition to Penn's larger size and improved diversification,
the stable ratings outlook reflects the continued favorable
outlook for gaming in general, as well as the company's
considerable liquidity. Ratings improvement is limited at this
time by the company's relatively high leverage over the next
12-month period as a result of the Argosy acquisition and planned
capital spending. Ratings improvement is also limited by Penn's
aggressive acquisition history -- although the company does have
the capacity within its current rating to pursue further
acquisitions -- and the uncertainty related to the eventual
rebuilding of its Gulf Coast properties.
Penn National Gaming, Inc. is a diversified and multi-
jurisdictional owner and operator of gaming properties and horse
racetracks and associated off-track wagering facilities primarily
in the United States. Pro forma for the acquisition of Argosy,
net gaming revenues are about $2.2 billion.
PHOENIX COLORADO: Case Summary & 4 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Phoenix Colorado, Inc.
5332 Rochelle
Rockwall, Texas 75083
Bankruptcy Case No.: 06-10279
Chapter 11 Petition Date: January 31, 2006
Court: District of Colorado
Judge: Sidney B. Brooks
Debtor's Counsel: Lee M. Kutner, Esq.
Kutner Miller, P.C.
303 E. 17th Avenue, Ste. 500
Denver, Colorado 80203
Tel: (303) 832-2400
Fax: (303) 832-1510
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 4 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Gilpin County Treasurer Secured Tax $145,023
P.O. Box 368
Central City, Colorado 80427
Murdock, William Loan $40,000
5332 Rochelle
Rockwall, Texas
Woodall, John Loan $12,000
2020 Fairview Road
Raleigh, NC 27608
Tel: (919) 821-2772
Ashford, Jim Loan $2,000
707 North Rogers
Springfield, Missouri 65802
(417) 866-0400
PPT VISION: Virchow Krause Raises Going Concern Doubt Over Losses
-----------------------------------------------------------------
Virchow, Krause & Company, LLP, expressed substantial doubt about
PPT Vision, Inc.'s ability to continue as a going concern after it
audited the Company's financial statements for the fiscal years
ended Oct. 31, 2005 and 2004. The auditing firm pointed to the
Company's recurring losses and negative cash flows from operating
activities as well as its need for additional working capital to
support future operations.
Fiscal Year 2005 Results
PPT Vision incurred a $2,375,000 net loss for the fiscal year
ended Oct. 31, 2005, as compared to a $1,872,000 net loss for the
year ended Oct. 31, 2004.
Net Revenues decreased 34.9% to $5.6 million in fiscal 2005 from
$8.7 million in fiscal 2004. Net revenues decreased due to a
decline in sales of the Company's older Passport/Scout product
lines that have been phased out.
The Company's balance sheet at Oct. 31, 2005, showed $3,153,000 in
total assets and liabilities of $599,000. The Company has an
accumulated deficit of $33,827,000 at Oct. 31, 2005.
As of Oct. 31, 2005, PPT Vision had cash of $778,000 as compared
with $2.6 million at the end of the last fiscal year. Due to its
continuing losses, the Company has been using its existing cash
and cash equivalents to fund the shortfall in cash generated from
operating activities. In fiscal 2004, the Company raised cash by
selling its 3D business unit for $1 million and continued to focus
on controlling operating expenses in fiscal 2005.
Move to OTC Bulletin Board
PPT Vision announced on Jan. 17, 2005 that its common stock will
commence trading on the OTC Bulletin Board under the symbol
PPTV.OB. The Company anticipates that trading on the OTC Bulletin
Board will begin effective Jan. 23, 2006.
The Company is currently in compliance with the listing
requirements of the Nasdaq Capital Market because its
shareholders' equity is higher than the $2.5 million minimum
shareholders' equity required for continued inclusion on the
Nasdaq Capital Market.
However, the Company expects to incur a net loss, however, in the
first quarter of its 2006 fiscal year that would drop its
shareholders' equity below $2.5 million minimum required for
continued listing. Therefore, the Company's Board of Directors
decided to move trading in the Company's common stock from the
Nasdaq Capital Market to the OTC Bulletin Board, rather than
raising additional capital in the form of equity at this time for
the sole purpose of meeting the Nasdaq Capital Market minimum
shareholders' equity requirement.
"As we have stated before, PPT Vision will be required to raise
capital to meet it's liquidity requirements if sales do not
increase substantially in fiscal year 2006 compared to sales in
fiscal year 2005. However, we believe that it is in our
shareholders best interest that the Company raise capital in the
amount needed and at the point in time that it is needed, based on
the progress the Company demonstrates with it business plan over
the course of fiscal year 2006. In this way, the Company can
minimize shareholder dilution as rather than raising more capital
than is needed before it is needed, for the sole purpose of
meeting the Nasdaq requirement," stated Mr. Joe Christenson, PPT
Vision President.
PPT Vision, Inc. -- http://www.pptvision.com/-- designs,
manufactures, and markets camera-based intelligent systems for
automated inspection in manufacturing applications. The Company's
products, commercially known as machine vision systems, enable
manufacturers to realize significant economic paybacks by
increasing the quality of manufactured parts and improving the
productivity of manufacturing processes.
QUEEN'S SEAPORT: Judge Threatens to Convert or Dismiss Chapter 11
-----------------------------------------------------------
The Hon. Vincent P. Zurzolo of the U.S. Bankruptcy Court for the
Central District of California gave Queen's Seaport Development,
Inc., until Apr. 20, 2006, to show cause why its chapter 11 case
should not be converted to a chapter 7 liquidation proceeding or
dismissed.
Judge Zurzolo grumbled when the Debtor filed a disclosure
statement on Oct. 28, 2005, without an accompanying motion for
approval of that disclosure statement. In fact, Judge Zurzolo
directed the Debtor to file the Motion and schedule a hearing to
consider the adequacy of the disclosure document on Jan. 26, 2006.
The Debtor did neither. Rather, Judge Zurzolo observes, the
Debtor filed a Notice of Withdrawal of Disclosure Statement on
Dec. 29, 2005.
These facts, Judge Zurzolo tells the Debtor, suggest cause exists
to convert the chapter 11 proceeding to a chapter 7 liquidation or
dismiss the case pursuant to Section 1112(b) of the Bankruptcy
Code.
Judge Zurzolo directs the Debtor and any other party-in-interest
to show cause why that isn't the case by filing and serving any
responsive pleading or paper by Apr. 6, 2006. Judge Zurzolo will
hold a hearing on the matter on Apr. 20.
Headquartered in Long Beach, California, Queen's Seaport
Development, Inc. -- http://www.queenmary.com/-- operates the
Queen Mary ocean liner, various attractions and a hotel. The
Company filed for chapter 11 protection on March 15, 2005
(Bankr. C.D. Calif. Case No. 05-15175). Joseph A. Eisenberg,
Esq., at Jeffer Mangles Butler & Marmaro LLP represents the Debtor
in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed estimated assets and
debts of $10 million to $50 million.
R.H. DONNELLEY: S&P Lowers Corporate Credit Rating to BB- from BB
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on R.H.
Donnelley Corp. and its operating subsidiary Donnelley (R.H.),
Inc., including its corporate credit rating to 'BB-' from 'BB', as
expected, following the company's announcement that the company
has completed its acquisition of Dex Media Inc.
In addition, all ratings on RHD and RHD Inc. were removed from
CreditWatch with negative implications.
Furthermore, Standard & Poor's affirmed bank loan rating on RHD
Inc. and all ratings on the Dex family of companies, including the
corporate credit rating of 'BB-'. The outlook is stable.
RHD is a yellow page directory publisher based in
Cary, North Carolina with pro forma debt levels totaling about
$10.8 billion.
RAPID LINK: Auditor Uncertain Over Going-Concern Ability
--------------------------------------------------------
KBA Group LLP expressed substantial doubt about Rapid Link,
Incorporated's ability to continue as a going concern after it
audited the Company's financial statements for the fiscal years
ended Oct. 31. 2005 and 2004. The auditing firm pointed to the
Company's recurring losses from continuing operations during each
of the last two fiscal years as well as working capital and
shareholders' deficits at Oct. 31, 2005.
Fiscal Year 2005 Results
Rapid Link reported a $2.6 million net loss from continuing
operations for the fiscal year ended Oct. 31, 2005, in contrast to
a $800,000 net loss from continuing operations a year earlier. At
Oct. 31, 2005, the Company had an accumulated deficit of
approximately $49.2 million.
In fiscal year 2005, the Company generated $9.8 million of revenue
from continuing operations, versus $13.4 million of revenue in the
prior year.
The Company's balance sheet showed $3.2 million in total assets at
Oct. 31, 2005, and liabilities of $9.5 million, resulting in a
stockholders' deficit of $6.2 million. At Oct. 31, 2005, the
Company's current liabilities exceeded its current assets by $7.1
million.
In addition, Rapid Link reported that approximately 71% of its
trade accounts payable and accrued liabilities are past due. As
of the fiscal year ended Oct. 31, 2005, approximately $3.1
million of trade accounts payable and accrued liabilities were
past due.
Rapid Link and Sapotek Partnership
Rapid Link and Sapotek Inc. announced on Jan. 30, 2006 that they
have inked a partnership aligning their product strengths.
"Our goal is to become a seamless service provider, bridging
technology, communications and computing with the dynamic mobility
of today's users," stated David Hess, President and Chief
Operating Officer of Rapid Link. "Through this partnership, we
will enhance our position within the military personnel market
segment, through the packaging of related services to soldiers."
Rapid Link is a Voice Over Internet Protocol (VoIP) service
provider that focuses on the military personnel market segment.
Sapotek is a software and web services developer that has created
a web-based desktop for both individual and corporate users.
"In today's market it is important to differentiate yourself.
Rapid Link helps us achieve this goal by quickly extending our
product offering. This will help us attract and maintain the 18-
34 year old market that has been and will continue to be crucial
to our success," stated Joshua Rand, Chief Executive Officer of
Sapotek. "Sapotek is in the process of expanding geographically
across markets and into new customer segments, so Rapid Link, with
its global reach, is a perfect fit for us."
About Rapid Link
Rapid Link, Inc., fka Dial Thru International Corporation --
http://www.rapidlink.com/-- provides value-added Voice over
Internet Protocol (VoIP) communication services to customers, both
domestically and internationally. Rapid Link is a niche market
provider that has focused on the US military and other key niche
markets through its proven, high-quality Internet telephony
products, services and infrastructure for service providers,
businesses and individuals worldwide.
REMY INT'L: Additional Loan Cues Moody's to Lower Junk Ratings
--------------------------------------------------------------
Moody's Investors Service lowered the rating on Remy
International, Inc.'s second priority secured notes to Caa2 from
Caa1, and guaranteed senior unsecured notes to Ca from Caa3.
Remy's Caa1 Corporate Family rating, and the Ca ratings of its
guaranteed senior subordinated notes have been affirmed.
The actions follow Remy's completion of an additional $80 million
term loan financing as part an amendment to the company's senior
secured credit facility. The net proceeds of the additional term
loan were used to provide incremental liquidity to the company
through the pay down of the revolving credit facility. While
Remy's liquidity has improved as a result of the transaction, the
increase in the senior secured credit facility reduces collateral
coverage and recovery expectations for the second priority secured
notes, and the guaranteed senior unsecured notes. The outlook
remains negative.
The negative outlook continues to reflect Moody's concerns that
unless Remy can successfully implement planned cost reduction
initiatives and slow the pace of cash consumption, the company's
rating could be vulnerable to a further downgrade.
Ratings lowered:
* $125 million of guaranteed second-priority senior secured
floating rate notes due April 2009 to Caa2 from Caa1; and
* $145 million of 8.625% guaranteed senior unsecured notes due
December 2007 to Ca from Caa3.
Ratings affirmed:
* $150 million of 9.375% guaranteed senior subordinated notes
due April 2012, Ca;
* $165 million of 11% guaranteed senior subordinated notes due
May 2009, Ca; and
* Corporate Family, Caa1.
The last rating action was on Nov. 18, 2005 at which time the
ratings were downgraded.
The additional $80 million senior secured term loan and the senior
secured asset based revolving credit facility are not rated by
Moody's. The term loan was funded at 97% and matures at the same
time as the revolving credit facility, June 30, 2008. Consistent
with the prior agreement, the amended senior secured agreement
does not contain financial ratio covenants.
The total amount of senior secured debt in the company's capital
structure, assuming full utilization of the senior secured
revolving credit facility less reserve amounts, increases with the
additional term loan to $225 million and consequently reduces
coverage to the second priority senior secured notes and senior
unsecured notes. The additional $80 million term loan will
marginally increase Remy's interest expense due its higher
borrowing spread compared to the revolving credit facility.
Leverage will likely increase as working capital needs are drawn
under the revolving credit. However, the additional liquidity
will permit Remy to focus on its restructuring efforts over the
near term.
The revolving credit and additional term loan are secured by
substantially all of the assets of the Company and each of its
direct and indirect U.S. subsidiaries and are guaranteed by the
Company and, with certain exceptions, each of its direct and
indirect U.S. subsidiaries; provided that the pledge of capital
stock of any first-tier non-U.S. subsidiaries is limited to 66.5%
of such capital stock.
The rating on the senior subordinated notes were affirmed. While
the total amount of claims has increased ahead of these notes, the
impact on the determination of their ultimate value will also be
impacted by any success of the company's restructuring efforts.
Factors that could result in further pressure on the company's
rating include evidence that:
* declining automotive volume or market share loss will further
erode the company's revenue base;
* the restructuring cost savings are not being adequately
realized;
* working capital requirements or other needs are resulting in
persistent free cash flow deficits; or
* any indication that the company's liquidity profile is
deteriorating.
Factors that could contribute to a stabilization of the company's
outlook include evidence that Remy's restructuring and cost
reductions efforts, combined with cost savings and synergies
resulting from the UPC acquisition, translate into significantly
improved operating cash flow performance and credit metrics
including EBIT/interest expense consistently over 1.0x and
debt/EBITDA consistently below 6.0x.
Remy International, Inc., formerly known as Delco Remy
International, Inc., is headquartered in Anderson, Indiana. The
company is a leading global manufacturer and remanufacturer of
aftermarket and original equipment electrical components for:
* automobiles,
* light trucks,
* heavy duty trucks, and
* other heavy duty vehicles.
Remy International is privately owned in the following approximate
percentages by affiliates of:
* Citicorp Venture Capital (70%);
* Berkshire Hathaway (20%); and
* management/miscellaneous other investors (10%).
Annual revenues over the last twelve months approximated $1.05
billion, and are estimated at $1.2 billion pro forma for the
acquisition of UPC.
RIM SEMICONDUCTOR: Marcum & Kliegman Raises Going Concern Doubt
---------------------------------------------------------------
Marcum & Kliegman LLP expressed substantial doubt about Rim
Semiconductor Company's ability to continue as a going concern
after it audited the Company's financial statements for the fiscal
years ended Oct. 31, 2005 and 2004.
The auditing firm pointed to the Company's net losses of
$6,923,386 and $5,506,287 during the years ended Oct. 31, 2005 and
2004, respectively, and a $3,145,391 working capital deficiency as
of Oct. 31, 2005.
The Company generated $39,866 of revenue for fiscal year 2005, in
contrast to $287,570 of revenue in the prior year. $29,066 of
revenues in fiscal year 2005 came from guarantee and license
payments related to the distribution of "Step Into Liquid", a
feature-length film produced by the Company's NV Entertainment
subsidiary. No revenues were recorded in connection with the
Company's semiconductor business for the 2005 and 2004 periods.
At Oct. 31, 2005, the Company's balance sheet showed $6,504,965 in
total assets and liabilities of $4,778,329. The Company had a
$62,114,560 accumulated deficit. Cash balances totaled
approximately $543,000 at Jan. 25, 2006, $373,481 at Oct. 31,
2005, and $127,811 at Oct. 31, 2004.
Interim Financing
Rim Semiconductor completed a round of interim financing resulting
in gross proceeds to the Company of $750,000 on Jan. 24, 2006.
The note and warrant issued in this transaction, and the common
stock issuable upon exercise of the warrant, have not been
registered under the Securities Act of 1933, and the Company is
not under any obligation to register the warrant or such common
stock. The financing was a private offering effected pursuant to
Section 4(2) of the Securities Act of 1933.
The Company also announced that more than 85% of the convertible
debentures issued in May 2005 have been converted by their
holders. As a result, the security interest in its assets, which
the Company had granted to all of the investors in that
transaction, has been released.
"I am pleased that an institutional investor which has previously
invested in Rim Semiconductor continues to invest in our future,"
stated Brad Ketch, president and chief executive officer of Rim
Semiconductor. "This funding is part of our ongoing efforts to
raise additional capital to further the commercialization of our
broadband semiconductors and to satisfy our working capital
needs."
Headquartered in Portland, Oregon, Rim Semiconductor, fka
New Visual Corporation -- http://www.rimsemi.com/-- is an
emerging fabless communications semiconductor company. It has
made available an advanced technology that allows data to be
transmitted at greater speed and across extended distances over
existing copper wire.
ROTECH HEALTHCARE: Moody's Lowers $300MM Sub. Notes' Rating to B3
-----------------------------------------------------------------
Moody's Investors Service downgraded the credit ratings of Rotech
Healthcare, Inc. The rating action concludes a rating review for
possible downgrade initiated on Nov. 22, 2005. The corporate
family rating was lowered to B2 from Ba3, the ratings for the
senior secured credit facility were lowered to Ba3 from Ba2, and
the rating for the senior subordinated notes was lowered to B3
from B2. The ratings outlook is stable.
The downgrade of Rotech's ratings primarily reflect Moody's belief
that Rotech's operating cash flow for 2006 and beyond will be
dampened by the effects of unfavorable changes in Medicare
reimbursement for durable medical equipment and respiratory drugs
at at time when spending on capital equipment and acquisitions is
expected to rise. Moody's notes that the reimbursement for
Medicare Part B inhalation drugs, which currently account for
about 13% of the company's total revenues as of Sept. 30, 2005,
has been under severe pressure since the beginning of 2004.
In 2004, the rates paid for respiratory drugs were cut by over
15%, resulting in a loss of $24 million in revenue. The rates
were further cut by over 80% in 2005, although higher
administrative fees partially offset the impact of the lower
rates. A subsequent reduction in the level of administrative fees
should result in a $15 million decline in revenues in 2006.
In addition, Medicare reimbursement rates for durable medical and
oxygen equipment also declined in early 2005. Moody's expects
that Rotech's unadjusted operating cash flow will decline from
$134 million in 2004 to a range of between $75 million and $80
million in 2005, while capital spending is projected to increase
from $54 million in 2004 to a range of $75 to $80 million in 2005
and 2006. A slight moderation in capital spending, continued
growth in patient volumes, as well as the contribution of
additional revenues and cash flow from acquired companies, could
lead to an improvement in the company's ratio of adjusted free
cash flow to adjusted debt of approximately 3% to 5% in 2006 and
2007.
However, Moody's notes that lower Medicare reimbursement for
respiratory drugs, other potential reimbursement changes, the
implementation of competitive bidding in 2007, and other industry
risks will constrain the impact of any positive internal operating
changes and company-specific factors. Moody's projections assume
that the company will continue to spend approximately $25 to $30
million a year to acquire small sized home care companies.
These ratings were downgraded:
* $75 Million Revolving Credit Facility, due 2007 to Ba3
from Ba2;
* $42 million Senior Term Loan, due 2008 to Ba3 from Ba2;
* $300 million face amount Senior Subordinated Notes, due 2012
to B3 from B2; and
* Corporate Family Rating to B2 from Ba3.
Moody's notes that despite a slight decline in revenues, the level
of operating cash flow dropped from $110 million to $54 million
when comparing the nine months ended Sept. 30, 2005 and 2004,
respectively. The decline in operating cash flow reflects lower
Medicare reimbursement rates for durable medical equipment and
respiratory drugs, which is significant since Medicare accounts
for approximately 65% to 70% of the company's revenues. Further,
due to an increase in capital spending from $54 million to $60
million, Rotech recorded negative free cash flow during the nine
months ended 2005 compared to positive free cash flow of almost
$80 million in 2004.
Despite the decline in the core business, Rotech acquired seven
companies for over $21 million in cash (excluding deferred
purchase obligations). As such, cash dropped from $65 million at
the end of 2004 to $37 million as of Sept. 30, 2005. Rotech has
ceased repurchasing existing debt (compared to repaying over $110
million in 2003 and $39 million in 2004). The ratings also
reflect the risks of governmental investigations that Rotech has
and may encounter as a home healthcare provider. Moreover,
recently, the SEC requested information and documents relating
company's restatement of prior period results.
The stable outlook reflects continued volume growth, additional
revenue and cash flow from acquisitions and stabilization of the
company's operating cash flow, albeit at a much lower level than
Moody's previously estimated 12 months ago. The ratings outlook
could face downward pressure if there is a continued deterioration
in cash flow due to additional adverse reimbursement pressure or
other factors.
The Ba3 rating for the first lien senior secured credit facilities
is two notches above the corporate family rating of B2, reflecting
the security and guarantee of all of the assets of Rotech and its
subsidiaries.
Moody's notes that there are no outstanding borrowings under the
revolving credit facility and the remaining senior secured debt
consists of a $42 million term loan. As a result, the senior
secured credit facility benefits from the support of the $287
million senior subordinated notes and the fact that it consists of
only a small portion of the overall capital structure. The
revolving credit facility and term loan have more than adequate
protection under a distressed scenario.
As of Sept. 30, 2005, Rotech had total assets of $1.03 billion,
including:
* $143 million of Property, Plant and Equipment;
* $71 million of accounts receivable; and
* $9 million in inventory.
The B3 rating for the senior subordinated notes reflects:
* the guarantee of all of the assets of Rotech and its
subsidiaries;
* the absence of any security; and
* its structural subordination to the existing senior secured
credit facility.
The notes are only notched one level below the corporate family
rating as the outstanding amount of notes account for the
predominance of the existing outstanding debt. If the company
were to issue senior unsecured debt, these senior subordinated
notes would be notched lower relative to the corporate family
rating.
Rotech Healthcare, Inc., headquartered in Orlando, Florida,
provides home respiratory therapy, including service, medication
and equipment, as well as durable home medical equipment to over
100,000 patients nationally. Net revenue for the twelve months
ended Sept. 30, 2005 was $533 million.
SANMINA-SCI CORP: Moody's Rates Proposed $600 Million Notes at B1
-----------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to the proposed
$600 million ten-year senior subordinated notes issue of Sanmina-
SCI Corporation. At the same time Moody's affirmed the company's
existing ratings. The ratings outlook remains negative. Net
proceeds from the proposed offering along with existing cash on
hand are expected to finance a tender offer of the company's
existing $750 million senior secured second lien notes due 2010
rated Ba2.
The new B1 rating for the $600 million senior subordinated notes
reflects the contractual subordination of the notes to all senior
obligations. The notes are pari passu with the existing
subordinated notes.
The Ba2 corporate family rating continues to reflect Sanmina's
good market position and diversified product and end market
services within the EMS space. However, the rating also reflects
the highly competitive and volatile business environment as well
as its weak, albeit improving, profitability and return measures.
As noted previously Sanmina has a higher than average exposure to
the PC/desktop market which can be volatile and possibly
experience slower growth/secular decline vis-a-vis the notebook
computers. Sanmina's gross margins are expanding due to a
combination of the decline of the PC business, which has lower
margins and the benefits of vertical integration.
Moody's believes that Sanmina's revenue visibility may continue to
be poor going forward given the nature of the business driven in
large part by the structural imbalance in the EMS industry as well
as several trends that are impacting the EMS industry. These
include the consolidation of EMS suppliers by the OEMs and the
emerging competition from Asia, especially those from China. The
Chinese OEMs with their own manufacturing capacity have been
entering in to agreements with their global competitors and, in
the process, have impacted the total addressable market for the
North American EMS players (a Chinese OEM in one case acquired
both a PC brand and the related outsourcing business). Although
Sanmina has not been directly impacted to date, Sanmina's high
exposure to the PC business (35% of total revenue in fiscal 2005)
heightens the potential vulnerability of the company's PC
contracts in this changing outsourcing landscape.
The ratings could be downgraded if:
1) there is further loss of revenue either due to secular
decline of end products served or a trend towards
consolidation on the part of OEMs;
2) the company experiences reversal of margin and return
improvements and ROIC continues to lag cost of capital;
3) free cash flow (defined as cash flow net of CAPEX and
acquisitions) turns negative and drives up leverage; and
4) liquidity profile diminishes materially.
The ratings could be stabilized if:
1) there is evidence of sustained revenue growth;
2) improvement in operating margins;
3) meaningful improvement in return measures (eg. ROIC to match
its cost of capital); and
4) improved credit statistics consisting of total debt to
EBITDA at or below 2.0x and EBITDA less Capital Expenditures
to Interest at or above 4.0x.
The SGL-1 speculative grade liquidity rating continues to be
supported by the company's approximate $1.0 billion predominantly
cash & cash equivalents balances as of fiscal year ended
Oct. 1, 2005 and supplemental liquidity sources in the form of a
$500 million revolver and the $200 million foreign accounts
receivable securitization facility. The rating also takes into
account the amendments to the revolving credit facility and
Sanmina's proposed refinancing of the $750 million senior secured
notes on improved terms which will allow Sanmina to potentially
securitize domestic receivables and further bolster liquidity.
This new rating has been assigned;
* B1 rating on $600 million senior subordinated notes due 2016
These existing ratings have been affirmed:
* Ba2 Corporate Family rating;
* Ba2 rating on $750 million senior secured (second lien) notes
due 2010 (to be withdrawn when the entire issue is tendered);
* B1 rating on Sanmina's $400 million senior subordinated notes
due 2013;
* B1 rating on SCI Systems Inc.'s $521 million 3% convertible
subordinated notes due 2007 (guaranteed by Sanmina-SCI
Corporation); and
* SGL-1 speculative grade liquidity rating.
This rating has been withdrawn:
* Ba1 rating on $500 million guaranteed senior secured (first
lien) revolving credit facility due 2007 (amended revolver
not rated by Moody's)
Headquartered in San Jose, California, Sanmina-SCI Corporation is
one of the largest electronics contract manufacturing services
companies providing a full spectrum of integrated, value added
solutions. For the fiscal year ended September 2005, the company
generated approximately $11.7 billion in net sales and $430
million in Adjusted EBITDA (excludes non-recurring and unusual
charges).
SEDGWICK CMS: Fitch Assigns B Rating to $340 Mil. Credit Facility
-----------------------------------------------------------------
Fitch Ratings assigned an Issuer Default Rating of 'B' to Sedgwick
CMS Holdings, Inc. In addition, Fitch assigns Sedgwick's $340
million senior secured credit facility a 'B/RR4' new issue and
Recovery Rating. The Rating Outlook is Stable.
Fidelity National Financial (FNF) acquired Sedgwick, a third-party
administrator, for $635 million. The senior secured credit
facility will be the sole responsibility of Sedgwick and will not
be guaranteed by FNF or other FNF subsidiaries. The credit
facility is split between a $300 million term loan and a $40
million revolver.
Sedgwick is a leading provider of insurance claims management
services, specializing in workers' compensation, and liability and
disability insurance claims. The company is expected to produce
approximately $400 million in total revenue during 2005. The $340
million in senior secured debt places a heavy leverage burden on
Sedgwick as measured by a pro forma year-end 2005 debt-to-EBITDA
of 5.8x. Further, EBITDA coverage of interest expense is expected
to remain below 3x for 2006, which is considered relatively thin
coverage.
The Recovery Rating and notching in the debt structure reflect
Fitch's recovery expectations under a scenario in which distressed
enterprise value is allocated to the various debt classes.
Sedgwick's senior secured debt was expected to recover similar to
senior unsecured debt, which is in the range of 31%-50% and
translates to a recovery rating of 'RR4'. The large amount of
intangible assets as well as revenue estimates based on very high
persistency of existing business were key elements in determining
the expected recovery rating for Sedgwick's debt.
Sedgwick's ability to meet management forecasts for EBITDA, EBITDA
margin, and persistency of existing business will be closely
tracked and used to periodically calculate enterprise value and
Recovery Ratings. Either positive or negative changes in Recovery
Ratings would result in a change in Sedgwick's senior secured debt
rating.
No action has been taken on this rating:
Fidelity National Financial Inc.:
-- Long-term issuer 'BBB-'
Fitch assigns this rating, with a Stable Outlook:
Sedgwick CMS Holdings, Inc.:
-- Senior secured credit facility rated 'B'
SPECTRUM BRANDS: Moody's Junks $1 Bil. Senior Subordinated Notes
----------------------------------------------------------------
Moody's Investors Service lowered the corporate family rating and
senior subordinated notes rating of Spectrum Brands, Inc.,
reflecting the deterioration in Spectrum's credit protection
measures, and the expectation that earnings and liquidity will
remain under pressure over the near-to-medium term as the company
attempts to address demand and cost challenges across its various
business lines.
However, Moody's also confirmed its rating on Spectrum's senior
secured credit facilities, recognizing their superior position in
the capital structure and the expectation that internal cash flows
and asset sale proceeds will be used for senior secured debt
repayment during fiscal 2006. The rating action concludes the
review for possible downgrade, which was initiated on Spectrum's
ratings in November 2005 in light of disappointing operating
results and downwardly revised earnings forecasts from the
company. The rating outlook is stable.
These ratings were affected by this action:
* Corporate family rating, downgraded to B2 from B1;
* $300 million senior secured revolving credit facilities,
confirmed at B1;
* $1.2 billion senior secured term loan facilities, confirmed
at B1;
* $700 million 7 3/8% senior subordinated notes due 2015,
downgraded to Caa1 from B3; and
* $350 million 8.5% senior subordinated notes due 2013,
downgraded to Caa1 from B3.
The rating downgrades reflect the numerous challenges Spectrum
faces over the coming year, as it must contend with:
* long-term price degradation in its North American battery
business;
* a continual shift towards private label batteries in Europe;
and
* competitive and cost pressures across all its business lines.
Compounding these issues, Spectrum's high debt levels and limited
cushion relative to required bank covenants constrains its
flexibility to address existing concerns or to withstand
additional challenges, and necessitates the timely and efficient
realization of cost savings.
Following two large, debt-financed acquisitions in fiscal 2005
(ended September 2005), Spectrum significantly underperformed
expectations and continually lowered its forward earnings guidance
in light of lower-than-expected sales and cost pressures in most
of its businesses. While Moody's maintains a favorable view of
the company's strategy to diversify away from its legacy consumer
battery businesses, the high-price of the acquisitions and the
failure to achieve anticipated sales and profitability have
resulted in leverage levels that are inappropriate for the B1
corporate rating level. Moody's estimates pro forma fiscal 2005
debt-to-EBITDA of around 6.2x, excluding anticipated synergies),
and notes that the company may be challenged to rapidly delever
over the coming year.
Although price increases and integration-related cost savings are
expected during fiscal 2006, Moody's notes that higher
distribution and materials costs, promotion and brand support
needs, and incremental cost efficiency initiatives (particularly
in Europe) could negate their impact on profits. Moreover,
Spectrum continues to face strong competitors in nearly all of its
business lines, the above-mentioned challenges in the battery
category, and weather-related uncertainty in its seasonal lawn and
garden segment. As such, Moody's expects Spectrum to maintain
elevated leverage levels over the coming quarters and remains
concerned about its ability to meet covenant requirements through
fiscal year end.
Notwithstanding these concerns, the ratings outlook is stable as
the new rating levels recognize the potential for near-term
operating and liquidity pressures. Further, the stable outlook
reflects Moody's expectation:
* for minimal acquisition activity in fiscal 2006;
* for earnings to stabilize during the latter part of
fiscal 2006; and
* for meaningfully positive cash flow generation for the full
year.
This view is supported by:
* the recently completed sale of its Nu-Gro business
($83 million);
* planned new products introductions;
* cost and facility rationalization efforts;
* price increases; and
* long-term growth trends in its acquired lawn and pet
segments.
Similarly, Moody's confirmation of the B1 rating on Spectrum's
senior secured credit facilities recognizes their priority
position in the capital structure and the view that Spectrum's
enterprise value, although lower than expected following its 2005
acquisitions, is not anticipated to experience material further
erosion. Further, these facilities will benefit from ongoing
positive cash flow expectations and asset sales, as proceeds are
anticipated to be used for repayment at this debt class. As such,
asset coverage on the basis of enterprise value and, to a lesser
extent, tangible assets continues to support the B1 rating on
these facilities.
Ongoing support for all ratings stems from Spectrum's large and
diversified portfolio of leading brands, some of which are in
attractive long-term growth categories. As such, the ratings
could be raised if the company is able to overcome its current
operational challenges and restore its financial metrics. In
particular, the ability to sustain average debt-to-EBITDA well
under 6.0x and free cash flow in the mid-single digits as a
percentage of funded debt could result in upward rating pressures.
Conversely, downward rating actions would likely result if
Spectrum cannot halt its profit declines, engages in acquisitions
that prevent anticipated debt reduction, or fails to maintain the
support of its bank group. An increase in average debt-to-EBITDA
to over 7.0x or an erosion in annual free cash flow to near-
breakeven or negative levels would likely prompt consideration for
a downgrade.
With headquarters in Atlanta, Georgia, Spectrum Brands, Inc. is a
global consumer products company with a diverse product portfolio
including:
* consumer batteries,
* electric shavers, and
* lawn and pet supplies.
Reported sales for the fiscal year ended September 2005 were $2.4
billion, but fiscal 2005 acquisitions result in pro forma sales of
around $2.7 billion.
STANDARD AERO: Moody's Affirms Sr. Subordinated Notes' Caa1 Rating
------------------------------------------------------------------
Moody's Investors Service affirmed the ratings of Standard Aero
Holdings, Inc., Corporate Family Rating of B2, and has changed the
ratings outlook to negative from stable. The change in outlook
was prompted by the company's recent announcement that a key
customer, Kelly Aviation Center, L.P. ('KAC') will not exercise a
subcontract renewal past February 2007, contrary to the company's
expectations, affecting approximately one-third of the company's
revenue base. Standard Aero has a Speculative Grade Liquidity
Rating of SGL-3.
The rating action reflects the impact of the Jan. 25, 2006,
notification by KAC that it does not intend not to exercise
options to extend beyond February 2007 Standard Aero's Maintenance
Repair and Overhaul ('MRO') services subcontracts relating to
Rolls Royce T56 engines used by the U.S. Air Force. While the
ultimate repercussions to Standard Aero owing to the loss of the
revenue from this contract, estimated at about 31% of LTM
September 2005 sales, is not known, Moody's believes it likely
that Standard Aero's earnings and operating cash flows will be
subject to substantial deterioration absent satisfactory
resolution, after the February 2007 expiry, and anticipates that
it will take some time for the company to restore its operations
to a scale that supports current debt levels.
With balance sheet debt of approximately $481 million as of
September 2005, which has been reduced modestly (by about 10%)
since the August 2004 levered acquisition of the company by the
Carlyle Group, Moody's is concerned that the loss of this amount
of contract business will make coverage of debt service and
planned capital expenditures difficult over the medium term.
The ratings continue to reflect Standard Aero's:
* high degree of leverage,
* modest levels of liquidity, and
* revenue concentration risk associated with its MRO line of
business;
offset by the company's:
* historically stable, recurring revenue base, and
* its strong market position in the engine platforms in which
is competes.
However, the negative ratings outlook reflects Moody's concern
that Standard Aero may not be able to either retain the contract
extension or achieve other satisfactory resolution, or replace the
business lost to sufficiently restore its revenue base and cash
flows to levels that the company currently enjoys. Over the next
two quarters the rating agency expects that the company will be
able to provide a more detailed update as to progress made toward
a settlement with KAC, adjustments of expense levels more
appropriate to lower revenue levels, as well as guidance on
operating performance.
In addition, it is expected that it will be determined if
amendments to terms of the company's current credit facilities
will be necessary. Absent such guidance, ratings would likely be
lowered to reflect the fundamental material weakening in Standard
Aero's credit profile likely to ensue from loss of the KAC
contract. Specifically, ratings would be lowered if, taking the
reduced business levels into account, it were expected that
Standard Aero's leverage (Debt/EBITDA, as measured per Moody's
standard methodology) would exceed 6 times, if EBIT/interest
coverage would approach one time, or if free cash flow would
remain negative or neutral over the near term.
Ratings could be further affected negatively if it becomes
apparent that the company cannot amend its existing bank credit
facilities to provide ample room under its covenants to reduce the
likelihood of default. The ratings outlook would likely be
restored to stable if the company were to either demonstrate
replacement of revenue lost from the KAC contract from other
sources or if Standard Aero could be expected to reduce debt or
increase cash flow such that leverage would remain less than 5
times and interest coverage would remain over 1.5 times on a
sustainable basis.
Moody's assesses Standard Aero's liquidity as modest but adequate
at current business levels. The company has kept minimal cash on
its balance sheet ($6 million as of September 2005), and has about
$42 million available under its $50 million senior secured
revolving credit facility, with moderate cushion to covenant
ratios at current operating levels. Moody's expects free cash
flow, which had been negative in the first nine months of 2005
owing largely to a $33 million repayment to a payable relating to
the use of government-owned inventory at Kelly AFB, to be modest
through 2006, but adequate to meet unexpected near-term CAPEX or
working capital requirements. There are no scheduled debt
maturities before 2010.
However, the loss of operating earnings associated with the early
expiry of the KAC contract, absent satisfactory resolution, may
strain the company's ability to meet covenant levels starting in
2007, which would affect Standard Aero's access to its revolving
facility. This would imply that the company may need to seek
amendments to its existing credit facility terms to either waive
compliance or loosen covenant terms from 2007 onward.
These ratings have been affirmed:
Standard Aero Holdings, Inc.:
* Senior secured revolving credit facility due 2010, rated B2
* Senior secured term loan due 2012, rated B2
* Senior subordinated notes due 2014, rated Caa1
* Corporate Family Rating of B2
* Unsecured issuer rating of B3
Standard Aero Holdings, a Delaware corporation, is a leading
provider of MRO services to the military, regional and business
aircraft after-markets.
STRATOS GLOBAL: S&P Shaves Corporate Credit Rating to B+ from BB-
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term corporate
credit rating on Stratos Global Corp. to 'B+' from 'BB-' following
Stratos' announcement to issue up to $270 million in bank debt and
$150 million in senior unsecured notes, with proceeds used to
acquire Xantic B.V. and repay its existing credit facilities.
At the same time, the ratings were removed from CreditWatch, where
they were placed with negative implications Aug. 15, 2005, after
the company's announcement to acquire 100% of the shares of
Xantic. The outlook is stable.
Standard & Poor's also assigned its 'B+' rating with a recovery
rating of '3' to Stratos' proposed bank loan facilities, which
are composed of a $25 million revolving credit facility due 2011,
$20 million term loan A facility due 2011, and $225 million term
loan B facility due 2012. The '3'-recovery rating reflects
expectations for a meaningful recovery of principal in a default
scenario.
In addition, Standard & Poor's assigned its 'B-' rating to
Stratos' $150 million senior unsecured notes due 2013. The senior
unsecured notes are rated two notches below the corporate credit
rating, reflecting their junior position in the company's capital
structure and the expectation of minimal residual value in a
distress scenario following satisfaction of first priority claims.
The ratings revision largely reflects:
* the weakened financial risk profile of Stratos due to the
expected increase in debt and corresponding weakening of
credit ratios,
* the potential for continued weak operating performance due
to competitive pricing pressures as exhibited in the nine
months ended Sept. 30, 2005, and
* the integration risk associated with the acquisition.
These factors are partially offset by:
* the enhancement of Stratos' leading position as the
distributor of Inmarsat mobile satellite capacity,
* the potential for cost synergies, good diversification of
customers, and
* Stratos' proven capability to integrate large acquisitions.
"Stratos' results were below our expectations for the past three
quarters due to competitive pressures and decreased customer
volumes in its mobile satellite services (MSS) segment," said
Standard & Poor's credit analyst Joe Morin. "We believe that
pricing pressures will continue in 2006, but at a slower pace than
what was exhibited in 2005, due to the recent consolidation of
Inmarsat distributors," Mr. Morin added.
The stable outlook reflects Standard & Poor's expectation that
Stratos will be able to improve its core operating performance
from 2005 levels, and modestly improves credit metrics in the
medium term. The stable outlook also reflects expectations for
the successful integration of Xantic and that the company is able
to achieve the estimated synergies within the time frame outlined
by Stratos. The outlook could be revised to negative if the
company fails to meet expectations, due to continued pricing
pressures within the MSS segment or unexpected poor performance in
the broadband segment. The outlook could be revised to positive
if Stratos is able to substantially reduce debt and demonstrate
more sustained improvements in operating performance.
TEMBEC INC: Selling Oriented Strandboard Business for $98 Million
-----------------------------------------------------------------
Tembec Inc. agreed to sell its oriented strandboard (OSB) business
located at its facility in Saint-Georges-de-Champlain, Quebec
to Jolina Capital Inc. for total consideration of $98 million,
$88 million of which will be payable on closing and the balance
payable in the form of a $10 million interest-bearing note,
repayable in equal annual installments over a five-year period.
Jolina is a company controlled by Mr. Emanuele Saputo, a
significant shareholder of Tembec and a nominee for election as
a Director of the Company.
The transaction is subject to customary closing conditions,
including regulatory approval, and is expected to close before the
end of Tembec's current fiscal quarter ending March 25, 2006.
The transaction was reviewed by a Special Committee of the Board
comprised entirely of independent directors, which recommended
that the Board approve the transaction. The Board, after further
review, determined that the terms of the transaction are
reasonable in the circumstances and that the sale is in the best
interest of shareholders.
This sale is consistent with Tembec's earlier statements that
it was pursuing several initiatives aimed at generating between
$100 and $150 million in additional funds. "The Saint-Georges OSB
mill has been a good facility for Tembec. However, it is also a
business that for our Company is non-core," said Frank Dottori,
President and CEO. "It represents a small part of both the
Company's overall sales and those of our Forest Products Group.
It is a good transaction for both parties."
Incoming President and CEO James Lopez also commented positively
on the transaction. "It also comes at an opportune time for
Tembec. We had indicated earlier that we were reviewing our asset
base and that cash generation initiatives based on non-core assets
and other areas could be expected. The transaction announced
today is consistent with that plan," Mr. Lopez said. "The terms
of the transaction and the ability of Jolina to provide timely
closing are key for Tembec. We anticipate that there will be other
similarly positive initiatives as the year progresses."
The transaction constitutes a "related party transaction" under
applicable securities regulatory requirements and Tembec has
relied upon applicable exemptions from the valuation and minority
shareholder approval requirements that the Board of Directors and
the Special Committee have determined are available.
Tembec Inc. -- http://www.tembec.com/-- is a leading integrated
forest products company, with extensive operations in North
America and France. With sales of approximately $3.8 billion
and some 10,000 employees, it operates 50 market pulp, paper
and wood product manufacturing units, and produces silvichemicals
from by-products of its pulping process and specialty chemicals.
Tembec markets its products worldwide and has offices in Canada,
the United States, the United Kingdom, Switzerland, China, Korea
and Chile. The Company also manages 40 million acres of forest
land in accordance with sustainable development principles and has
committed to obtaining Forest Stewardship Council certification
for all forests under its care. Tembec's common shares are listed
on the Toronto Stock Exchange under the symbol TBC.
* * *
As reported in the Troubled Company Reporter on Feb. 01, 2006,
Standard & Poor's Ratings Services lowered its long-term corporate
credit and senior unsecured debt ratings on forest products
company Tembec Inc. and its subsidiary, Tembec Industries Inc., to
'CCC-' from 'CCC+'. The short-term rating on Tembec remains 'C'.
The outlook is negative.
The ratings on Montreal, Quebec-based Tembec reflect its weakening
liquidity position and the company's struggle to generate positive
EBITDA, or improve its weak cost position. The company's survival
is highly dependent on external factors such as pulp prices, the
depreciation of the Canadian dollar, or a resolution of the
U.S.-Canada softwood lumber dispute that results in a return of
the CDN$310 million of softwood lumber duties Tembec has deposited
with the U.S. government.
TEMBEC INDUSTRIES: Neg. Cash Flow Cues Moody's Ratings Downgrade
----------------------------------------------------------------
Moody's Investors Service downgraded the long term debt ratings of
Tembec Inc.'s key operating subsidiary, Tembec Industries, Inc. to
Ca, while also downgrading the company's speculative grade
liquidity rating to SGL-4 (indicating poor liquidity). The
outlook is stable.
The downgrades to both the long term debt and liquidity ratings
were prompted by the company's recent trend of significant
negative cash flow. The main cause of this is continued
deterioration in the business environment, particularly, a further
sustained strengthening in the exchange value of the Canadian
dollar. As well, Tembec has not made significant progress towards
a comprehensive restructuring to generate sustainable positive
free cash flow.
In the current environment as defined by exchange rates, input
costs and output prices, and with Moody's not expecting material
changes in these parameters over the near term, the negative cash
flow trend is likely to continue. In addition, Moody's does not
expect the company's ongoing operational restructuring to
materially improve near term cash generation. Given the ongoing
cash drain, in the absence of asset sales or additional funding,
there is the possibility of liquidity being depleted within twelve
months.
Ratings downgraded:
* Corporate family rating: to Caa3 from B3
* Senior unsecured notes and debentures: to Ca from B3
* Speculative grade liquidity rating: to SGL-4 from SGL-3
Tembec's Caa3 corporate family rating reflects elevated financial
leverage from a series of predominantly debt-financed acquisitions
combined with high operating leverage stemming from a high-cost
portfolio of assets. In the company's paper and pulp-making
segments, this cost disadvantage has been evidenced by negative
cash flow that adversely affects the consolidated figures.
Consequently, with the legacy debt load, leverage to cash flow is
very high. Further, with:
1) last September's surge in the US$ exchange value of the
Canadian dollar persisting;
2) with elevated energy prices also persisting; and
3) it appearing very unlikely that demand for any of the
company's products will suddenly increase so as to cause
pricing and revenue to improve dramatically,
a significant near term improvement in consolidated cash flow
appears unlikely.
In the current environment, it is estimated that Tembec consumes
in excess of CDN$60 million of cash per quarter. With only
CDN$226 million of liquidity (at Dec. 31, 2005; adjusted by CDN$88
million for the pending sale of the St-Georges OSB mill),
liquidity could be fully utilized within twelve months.
Given that the company's C$340 million in secured credit
facilities are expected to be fully utilized, and given their
preferential access to liquid assets, the ratings on the company's
notes are notched down from the Caa3 corporate family rating to
Ca.
Moody's had previously noted that Tembec had not put forward a
definitive plan to extensively restructure its asset portfolio and
operations so that sustainable improvements in profitability and
cash flow could be realized. Tembec has a seasoned management
team that has previous experience with financial stress. In the
current context, the company's aggregate scale and operational
diversity is the most significant tool at management's disposal,
providing an ability to supplement cash flow by selling assets,
and, as well, indicates an ability to restructure operations to
reduce costs and improve cash flow.
To date, however, the benefits of restructuring efforts have been
negated by the impact of input cost and exchange rate migration,
and asset divestitures have been limited. Similarly, no relief
has been provided from the possible return of some or all of the
C$317 million in softwood lumber duties Tembec has deposited with
the United States' Department of Commerce.
Headquartered in Montreal, Tembec is an integrated paper and
forest products company with operations in North America and
France.
TENNECO INC: Financial Review Earns S&P's B+ Corp. Credit Rating
----------------------------------------------------------------
Standard & Poor's Ratings Services placed various ratings,
including its 'B+' corporate credit rating on Lake Forest,
Illinois-based Tenneco Inc. on CreditWatch with positive
implications. The company's 'B-1' short-term and '3' recovery
ratings are affirmed and are not on CreditWatch.
"The CreditWatch reflects our view that a modest upgrade is
possible following our review of Tenneco's business and financial
prospects for 2006 and beyond," said Standard & Poor's credit
analyst Robert Schulz.
The company's credit measures improved during 2005, despite a very
difficult environment for the rated auto supplier universe,
reflecting Tenneco's good customer, platform, and geographic
diversity.
"Still," Mr. Schulz said, "given our view that challenging
automotive supplier industry conditions will continue, we would
need to conclude that Tenneco's improved operating and financial
performance is sustainable over the next couple of years in order
for an upgrade to occur."
Tenneco is a leading global supplier of emissions control and ride
control products to the automotive original equipment market and
aftermarket. Total lease-adjusted debt was about $1.5 billion at
Dec. 31, 2005.
U.S. STEEL: Earns $109 Million of Net Income in 2005 Fourth Qtr.
----------------------------------------------------------------
United States Steel Corporation (NYSE: X) reported fourth quarter
2005 net income of $109 million, compared to third quarter 2005
adjusted net income of $93 million and fourth quarter 2004
adjusted net income of $451 million.
For full-year 2005, U. S. Steel reported net income of
$910 million, compared to 2004 adjusted net income of
$1.135 billion. Prior period results have been adjusted
retrospectively for a change in the method of accounting for
inventories at U.S. Steel Kosice.
On Dec. 31, 2005, total assets was $9.8 billion and total
liabilities was $6.4 billion, resulting in $3.3 billion
stockholders' equity.
"A strong fourth quarter operating performance contributed to
making 2005 a very good year. Our annual earnings were the second
highest on record and we had another year of solid return on
capital employed," U. S. Steel President and CEO John P. Surma
said. "Importantly, our safety performance improved
substantially, thanks to the outstanding efforts of our employees.
Capital spending and repair and maintenance expenses were higher
than anticipated primarily because we expanded the scope of work
and experienced several delays related to the Gary No. 14 blast
furnace project. We are proceeding through the start-up process
and expect to be producing at full capacity of 9,200 tons of hot
metal per day in a relatively short time."
The company reported fourth quarter 2005 income from operations of
$222 million, compared with adjusted income from operations of
$148 million in the third quarter of 2005 and $543 million in the
fourth quarter of 2004. For the year 2005, income from operations
was $1.439 billion versus adjusted income from operations of
$1.625 billion for the year 2004.
Foreign currency gains in the fourth quarter of 2005 were
$1 million, compared to losses of $3 million in the third quarter
of 2005 and gains of $36 million in the fourth quarter of 2004.
The losses for the full-year 2005 primarily reflect accounting
remeasurement losses from the appreciation of the U.S. dollar
functional currency versus the euro and other local currencies.
Effective January 1, 2006, the functional currency for our
European operations was changed to the euro, which should reduce
future period remeasurement gains and losses.
Pensions and Benefits
During 2005, U. S. Steel made a first quarter voluntary cash
contribution of $130 million to its main defined benefit
pension plan and a fourth quarter voluntary cash contribution of
$50 million to a qualified trust for payment of future retiree
medical expenses.
At year-end 2005, U. S. Steel's main defined benefit pension plan
was measured and it was again determined that an additional
minimum liability is required for this plan. The reestablishment
of this liability net of associated tax effects resulted in a net
charge to equity of approximately $1.4 billion and had no effect
on income or cash flow.
Common Stock Repurchase Program
On July 26, 2005, U. S. Steel announced that its Board of
Directors had approved the repurchase of up to eight million
shares of its common stock. During 2005, 5.8 million shares were
repurchased under this program for a total cost of $254 million,
including 4.6 million shares repurchased in the fourth quarter for
a total cost of $202 million.
Headquartered in Pittsburgh, United States Steel Corporation --
http://www.ussteel.com/-- through its domestic operations, is
engaged in the production, sale and transportation of steel mill
products, coke, and iron- bearing taconite pellets; the management
of mineral resources; real estate development; and engineering and
consulting services and, through its European operations, which
include U. S. Steel Kosice, located in Slovakia, and U. S. Steel
Balkan located in Serbia, in the production and sale of steel mill
products. Certain business activities are conducted through joint
ventures and partially owned companies. United States Steel
Corporation is a Delaware corporation.
* * *
As reported by the Troubled Company Reporter on Nov. 04, 2005,
Fitch Ratings has affirmed the ratings of United States Steel
Corporation securities:
-- Senior unsecured debt 'BB';
-- $600 million senior secured revolving credit facility
'BB+'
-- Series B mandatory convertible preferred shares 'B+'.
-- Issuer default rating 'BB'.
Fitch also revises U.S. Steel's Rating Outlook to Positive from
Stable.
The ratings reflect permanent improvements to U. S. Steel's assets
and capital structure afforded by extraordinarily robust market
conditions. Earnings will continue to be affected by the cyclical
nature of the steel market as well as high natural gas prices.
UAL CORP: Emerges from Ch. 11 Protection with $3B Exit Financing
----------------------------------------------------------------
UAL Corporation (Nasdaq: UAUA) formally exited bankruptcy
yesterday, following confirmation of the company's Plan of
Reorganization by the U.S. Bankruptcy Court for the Northern
District of Illinois.
"We have the business platform we need to compete with the
strongest carriers and a clear strategy of offering the right
service to the right customer at the right price," said Glenn
Tilton, United's chairman, chief executive officer and president.
"As we move ahead, United is committed to continuous improvement
in costs, revenue and operations to optimize our resources and
sustain competitive margins. We have achieved a great deal in
our restructuring to reposition this company and build upon our
assets, an unrivaled global network and our dedicated employees.
We can be better. We are in a very competitive industry, and we
take nothing for granted."
"Our approach is clearly working, as the numbers show," said Jake
Brace, United's executive vice president and chief financial
officer. "We have substantially improved our financial
performance despite dramatic increases in fuel costs over the last
12 months. And United has one of the best operating records in
the industry -- in on-time departures, baggage handling, fewest
customer complaints and other areas helping us to outpace the
industry in unit revenue."
Over the past three years, United has, among other steps:
-- reduced its average annual costs by approximately
$7 billion;
-- substantially deleveraged its balance sheet;
-- strengthened its network while eliminating unprofitable
services;
-- reconfigured its fleet to optimize the use of its aircraft;
-- significantly increased the productivity of all its assets;
and
-- introduced new or expanded services targeted to specific
customer groups.
In particular, United increased its international capacity to
leverage competitive strengths, including profitable international
routes and its role in the Star Alliance, the largest and most
successful global airline alliance. To further enhance its strong
position with corporate and business travelers, United launched a
new premium transcontinental service -- p.s.(SM) -- and
significantly upgraded its regional jet service, United
Express(R), to offer both first-class and extra-comfort Economy
Plus(R) services at a premium price. At the same time, it
introduced a new low-fare service, Ted(SM), which is now competing
successfully in many markets, while also acting as a feeder to
United's mainline network.
UAL Corporation began to issue shares of common stock of the
reorganized company yesterday, Feb. 1, 2006, the effective date of
the Plan. Most shares will go to the company's former unsecured
creditors. Trading of these shares, which will be listed on
NASDAQ under the ticker symbol "UAUA," will begin today, Feb. 2.
The old shares of common stock that have been trading over the
counter under the symbol UALAQ.OB will be cancelled and will no
longer trade after Feb. 1, 2006.
To mark the commencement of trading in the new shares today,
Tilton will open trading on the NASDAQ remotely from O'Hare
International Airport in Chicago, United's largest hub, and Pete
McDonald, United's executive vice president and chief operating
officer, is scheduled to close trading from San Francisco
International Airport, United's gateway to the Pacific.
$3 Billion Exit Financing
United has obtained exit financing on favorable terms through a
syndication led by JPMorgan Chase and Citigroup Global Markets.
The company received offers of subscription for more than twice
the capital necessary to support the $3 billion in financing it
sought, enabling it to reduce the financing cost by 75 basis
points to 375 basis points over the London interbank offered rate
(LIBOR). The exit financing consists of a $2.8 billion term loan
and a $200 million revolving credit line.
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.
UAL CORP: Ch. 11 Emergence Cues S&P to Lift Credit Rating to B
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
ratings on UAL Corp. and subsidiary United Air Lines Inc. to 'B'
from 'D', following confirmation of the companies' plan of
reorganization. The new long-term rating outlook is stable. The
'B+' rating and '1' recovery rating on United's bank credit
facility are not affected, and are affirmed, as those ratings,
assigned January 9, 2006, were based on an assumption of UAL and
United exiting bankruptcy and on certain other conditions.
Standard & Poor's at that time indicated that it expected to
assign 'B' corporate credit ratings, with a stable outlook, to UAL
and United upon their bankruptcy emergence.
"The revised corporate credit ratings reflect United's
participation in the price-competitive, cyclical, and capital-
intensive airline industry, and difficult industry conditions,
characterized by high and volatile fuel prices and fierce
competition from low-cost carriers in the U.S. domestic market,"
said Standard & Poor's credit analyst Philip Baggaley. "The
ratings also reflect UAL's highly leveraged financial profile.
These weaknesses are mitigated to some extent by United's
extensive and well-positioned route system [which provides good
revenue potential, especially on international routes] and by
reductions in labor costs and financial obligations achieved in
bankruptcy," the credit analyst continued.
United is the second-largest U.S. airline, and like other
traditional, hub-and-spoke airlines, it has suffered heavy losses
since 2001, due to the effects of terrorism, high fuel prices, and
low-cost competition in the U.S. domestic market. United and UAL
entered Chapter 11 in December 2002, and, through a long and
difficult reorganization, used the bankruptcy process to reduce
United's exposure to the competitive U.S. domestic market from
almost two-thirds of flying to slightly more than half; secure
substantial labor cost reductions in negotiations with its unions;
terminate defined-benefit pension plans; and reduce total debt and
lease obligations.
UAL should report gradually improving earnings and credit
measures, but the extent of improvement will depend significantly
on general airline industry conditions, in particular on fuel
prices and the degree of price competition in the U.S. domestic
market. The outlook could be revised to positive if UAL can
execute on its planned revenue and operating cost initiatives,
which could, along with favorable industry conditions, permit the
financial improvements forecast beyond 2006. Adverse industry
conditions, which could include, in addition to those already
cited, the effects of an economic slowdown, terrorism, or a global
outbreak of epidemic disease, are the most likely potential causes
of a revision to a negative outlook.
UAL CORP: PBGC Expects $500 Mil. Proceeds from Sale of 10% Stake
----------------------------------------------------------------
The Pension Benefit Guaranty Corp expects to realize more than
$500 million from the sale of a 10% stake in UAL Corp., the parent
of United Airlines. Deutsche Bank will oversee the sale of the
UAL shares.
Jeff Bailey of the New York Times reports that the PBGC will sell
half of its 20% stake in UAL to take advantage of the brisk
trading in the shares on news of the airlines' emergence from
bankruptcy. According to Mr. Bailey, UAL's new stock is trading
at almost triple the price expected when the airline drafted its
reorganization plan last year.
Citing an unnamed source, Michael Schroeder at the Wall Street
Journal, reports the federal agency has no plans to immediately
sell its remaining 10% stake, in order to avoid a potential price
drop from an oversupply of UAL shares in the open market.
The PBGC took over the airlines' underfunded pension plan last
year and, in the process, became UAL's largest unsecured creditor
and the single largest shareholder in the reorganized carrier.
Mr. Schroeder reports that the airline transferred approximately
$10.2 billion of its pension liabilities, covering payments due to
about 120,000 workers and retirees, to the PBGC during its chapter
11 proceedings.
As reported it the Troubled Company Reporter, Reorganized UAL will
issue up to 125,000,000 shares of New UAL Common Stock, to be
divided in this manner:
(1) 115,000,000 shares as the Unsecured Distribution and the
Employee Distribution;
(2) up to 9,825,000 shares, or equivalent options, pursuant to
the Management Equity Incentive Plan; and
(3) up to 175,000 shares, or equivalent options, pursuant to
the Director Equity Incentive Plan.
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.
USG CORP: Lobbyists Decry $3.05 Billion Contingent Asbestos Note
----------------------------------------------------------------
The Coalition for Asbestos Reform (C.A.R.) commented on USG's
announcement of an agreement on asbestos personal injury claims,
as well as its quarterly earnings report. C.A.R. noted that the
terms of the agreement reveal plainly the enormous benefits S.852
offers to corporations supporting the legislation and its earnings
report showed that the company has prospered under bankruptcy.
"USG's announcement of an agreement to resolve asbestos personal
injury claims should show the U.S. Senate once and for all exactly
why S.852 is a boon to a handful of Fortune 50 companies and a
death knell to smaller and medium-sized companies," Tom O'Brien,
Chairman of the Coalition for Asbestos Reform, said. "It is rare
that the financial benefits inherent in a piece of legislation for
a single company are so clearly quantified -- no wonder companies
like USG are spending millions of dollars on advertising to get
this bill passed."
Under USG's agreement, which requires court approval, the company
will set up a trust for their claimants "funded with $900 million
in cash and a Contingent Note for another $3.05 billion."
However, if S.852 passes, with its trust fund, "the Contingent
Note will be cancelled" and "USG's payments for personal injury
claims . . . would be limited to $900 million, an amount USG . . .
would have been required to pay into the national trust fund."
The agreement would protect USG from all current and future
asbestos claims.
"The conclusion is inescapable that this legislation is worth
$3.05 billion to USG," Mr. O'Brien continued. "Unfortunately, the
bill will shift those billions of dollars in benefits that USG and
other major corporations stand to realize onto the backs of small
and medium-sized businesses and victims. While companies, like
USG will see their asbestos liability drop significantly, the cost
to companies like those in C.A.R. will increase dramatically
forcing many out of business. Yesterday's announcement makes it
perfectly clear who is driving the bus on this misguided
legislation, and why."
USG has been a leader of the movement to create this trust fund
for the past three years, and advised on the development of the
tiering system for S.852's allocations. Under that tiering
system, many Fortune 50 companies with annual revenues in excess
of $100 billion will find themselves paying a fraction of their
current asbestos liability into the trust fund. On the other
hand, many smaller and medium sized companies, like those in
C.A.R., have managed their asbestos liability appropriately. Yet,
they will be forced to pay millions of dollars, over and above
their current expenditures.
C.A.R. is a group of smaller and medium sized businesses and their
insurance companies committed to educating U.S. businesses and
policymakers about the serious flaws in S.852. The coalition
mobilized last June to launch a major national campaign to explain
the effect of the bill on hundreds of local businesses that face
potential asbestos liability, most of whom are unaware of the
devastating impact of $140 billion in new taxes S.852 authorizes
to finance the trust fund mandated by the bill.
Headquartered in Chicago, Illinois, USG Corporation --
http://www.usg.com/-- through its subsidiaries, is a leading
manufacturer and distributor of building materials producing a
wide range of products for use in new residential, new
nonresidential and repair and remodel construction, as well as
products used in certain industrial processes. The Company filed
for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No.
01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at
Jones Day represent the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $3,252,000,000 in assets and $2,739,000,000 in debts.
VARTEC TELECOM: Court Further Extends Plan-Filing Period to Apr. 4
------------------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Texas
further extended until Apr. 4, 2006, the period within which
Vartec Telecom Inc., and its debtor affiliates' have the exclusive
right to file a chapter 11 plan. The Court also extended until
June 5, 2006, the time within which the Debtors can solicit
acceptances of that plan.
The Debtors gave the Court seven reasons in support of the
extension:
1) their chapter 11 cases are large and complex, with
identified assets of more than $800,000,000, liabilities
of more than $590,000,000 and 14,000 creditors;
2) they have shown good faith progress towards their
reorganization efforts;
3) they have been working diligently with the Official
Committee of Unsecured Creditors, the Rural Telephone
Finance Cooperative, the Official Committee of Excel
Independent Representatives, their carriers, and other
parties-in-interest to maximize the value of the Debtor's
estates.
4) they have provided a draft of the plan to the Official
Committee;
5) they are paying obligations to their employees, carriers,
vendors, landlords, and utility providers in the ordinary
course of business as those obligations become due;
6) they have made efforts in maximizing the value of their
estates by reducing overhead costs, rejecting executory
contracts and unexpired leases, disposing of non-core
assets, and obtaining Court approval of the sale of the
Acquired Assets; and
7) the extension will not prejudice their creditors and other
parties-in-interest and it is not meant to pressure their
creditors into accepting an objectionable plan.
Headquartered in Dallas, Texas, Vartec Telecom Inc. --
http://www.vartec.com/-- provides local and long distance
service and is considered a pioneer in promoting 10-10 calling
plans. The Company and its affiliates filed for chapter 11
protection on November 1, 2004 (Bankr. N.D. Tex. Case No.
04-81694. Daniel C. Stewart, Esq., William L. Wallander, Esq.,
and Richard H. London, Esq., at Vinson & Elkins, represent the
Debtors in their restructuring efforts. When the Company
filed for protection from its creditors, it listed more than
$100 million in assets and debts.
WORLD WIDE: Wants Plan-Filing Period Extended to May 1, 2006
------------------------------------------------------------
World Wide Financial Services, Inc., asks the U.S. Bankruptcy
Court for the Eastern District of Michigan to extend until
May 1, 2006, the period within which it has the exclusive right to
file a chapter 11 plan.
The Debtor tells the Court that two extraordinary events adversely
impacted its ability to accurately propose a meaningful Plan of
Reorganization:
(1) The Debtor says it's been negotiating with the State of
Michigan Office of Financial and Insurance Services
regarding resolution of OFIS' attempts to revoke the
company's mortgage license. The Debtor relates that it
has not been able to reach an acceptable agreement with
the State to date; and
(2) GMAC/Residential Funding Corporation, the Debtor's largest
unsecured creditor, recently requested a large amount of
documentation and other information from the Debtor. The
Debtor says it will take significant time to compile
responsive documents and for GMAC/RFC to review and
analyze the information.
The Debtor believes that it will be able to file a more meaningful
plan after it has resolved these significant issues involving OFIS
and GMAC/RFC.
Headquartered in Southfield, Michigan, World Wide Financial
Services, Inc., is a mortgage company. The company filed for
chapter 11 protection on Oct. 4, 2005 (Bankr. E.D. Mich. Case No.
05-75180). Dennis W. Loughlin, Esq., and Lynn M. Brimer, Esq., at
Raymond & Prokor, P.C., represent the Debtor in its restructuring
efforts. When the Debtor filed for protection from its creditors,
it estimated assets between $1 million and $10 million and debts
between $10 million and $50 million.
*********
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.
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related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Each Friday's edition of the TCR includes a review about a book of
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Monthly Operating Reports are summarized in every Saturday edition
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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, Marie
Therese V. Profetana, Shimero Jainga, and Peter A. Chapman,
Editors.
Copyright 2006. All rights reserved. ISSN: 1520-9474.
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