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/raid1/www/Hosts/bankrupt/TCR_Public/060214.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, February 14, 2006, Vol. 10, No. 38 Headlines ACANDS INC: Insurer Balks at Dr. Peterson & LAS' Delayed Retention ADELPHIA COMMS: Non-Agent Secured Lenders Can Campaign vs. Plan ADELPHIA COMMS: John Griffin Construction Objects to Ch. 11 Plan AGILYSYS INC: Earns $15.2 Million of Net Income in Third Quarter ALASKA COMMS: Inks $115 Million Interest Rate Swap Agreement ALION SCIENCE: Moody's Cuts Family Rating to B2 on Low Revenue ALION SCIENCE: S&P Rates Proposed $50 Million Add-On Loan at B+ ALLIED HOLDINGS: Wants Cushman & Wakefield as Real Estate Broker ALLIED WASTE: Moody's Holds Junk Rating on Convertible Securities ALLSERVE SYSTEMS: Ch. 7 Trustee Taps McElroy Deutsch as Counsel AMARIN CORP: Posts $5.2 Million Net Loss in Fourth Quarter of 2005 AMCAST INDUSTRIAL: Court Okays Dann Pecar as Bankruptcy Counsel AMCAST INDUSTRIAL: Hires Bracewell & Guiliani as Bankr. Co-Counsel AMERICAN COMMERCIAL: S&P Raises Corporate Credit Rating to BB- AMERIGAS PARTNERS: Higher Propane Prices Lift Revenues AOL LATIN: Wants Court OK to Extend Cicerone Capital's Employment ARMSTRONG WORLD: Told to File 4th Amended Ch. 11 Plan by Feb. 21 ATRIUM COS: S&P Upgrades Corporate Credit Rating to B from CCC+ AUBURN ASSOCIATES: Case Summary & 18 Largest Unsecured Creditors AVAYA INC: Plans to Redeem 11-1/8% Senior Sec. Notes on April 3 AXS-ONE: December 31 Balance Sheet Upside Down by $2.11 Million BALL CORP: Fitch Affirms Senior Unsecured Notes' Ratings at BB BRANDYWINE REALTY: Sells Burnett Plaza for $172 Million BROWNING-FERRIS: Moody's Affirms Junk Rating on $284 Mil. Bonds CALPINE CORP: Wants Court to Approve Hiring of PwC as Auditors CAPITAL AUTO: S&P Places BB Preliminary Rating on Class D Notes CEEBRAID ACQUISITION: Case Summary & 13 Largest Unsec. Creditors CENTENNIAL COMMS: Offers to Swap Sr. Notes for Registered Bonds CENTRAL PARKING: Earns $17.9 Mil. in First Quarter Ended Dec. 31 CHAMPION ENTERPRISES: Releases Financials for Fourth Quarter 2005 COLLINS & AIKMAN: Wants to Modify JPMorgan DIP Loan Agreement COMPANHIA ENERGETICA: Moody's Rates $800 Million Term Notes at B3 CONEXANT SYSTEMS: Jury Returns $112 Mil. Verdict in Patent Dispute CUMMINS INC: Gets SEC Order on Financial Reporting Violations DIRECTED ELECTRONICS: S&P Upgrades Corporate Credit Rating to BB- DWJ ENTERPRISES: Case Summary & 20 Largest Unsecured Creditors EMMIS COMMS: Will Redeem Remaining $120M of Sr. Notes on Mar. 9 EQUINOX HOLDINGS: Moody's Rates $290 Mil. Sr. Debt Offering at B3 EQUINOX HOLDINGS: S&P Rates Proposed $290 Million Sr. Notes at B- ERHC ENERGY: Posts $1.2 Mil. Net Loss in Quarter Ended December 31 EXIDE TECH: Posts $27.6MM Net Loss in Quarter Ended December 31 EXTENSITY SARL: S&P Rates Proposed $410 Million Facilities at B FEDDERS CORP: Receives Non-Compliance Notice from NYSE FFCA SECURED: Fitch Downgrades Seven Loan Classes' Ratings to Cs FIRST FRANKLIN: Fitch Affirms Class B Certificates' BB+ Rating GENCORP INC: Posts $175 Mil. Net Loss in Fourth Qtr. Ended Nov. 30 GENCORP INC: S&P Lowers Corporate Credit Rating to B+ from BB- GRANDVIEW HEIGHTS: Case Summary & 20 Largest Unsecured Creditors GREAT NORTHERN: Ch. 7 Trustee Taps Silverman as Mass. Counsel GREENWICH CAPITAL: Moody's Downgrades $1 Mil. Certs. Rating to B1 GSMPS MORTGAGE: Moody's Puts Low-B Ratings on Three Subord. Certs. HEATING OIL: Committee Brings In Pepe & Hazard as Local Counsel INT'L RECTIFIER: Fitch Affirms B+ Sr. Subordinated Debt's Rating INZON CORP: Increased Costs Lead to Higher Losses in 1st Quarter J.L. FRENCH: Bankruptcy Court Approves First Day Motions KAISER ALUMINUM: KACC Balks at Gramercy's $5-Mil. Admin. Claim LEHMAN XS: Moody's Assigns Ba2 Rating on Class B Notes LEVEL 3 COMM: Posts $169 Million Net Loss in 4th Quarter of 2005 LODGENET ENTERTAINMENT: Posts $2.3 Mil. Net Loss in Fourth Quarter MAJESTIC STAR: Moody's Lifts Rating on $80 Mil. Sr. Loan to Ba3 NAVISTAR INT'L: Receives $1.5 Billion Loan Commitment from Lenders NAVISTAR INT'L: Fitch Downgrades Subordinated Debt's Rating to B NAVISTAR INT'L: S&P Maintains Watch on BB- Corporate Credit Rating NOVA COMMUNICATIONS: Changes Name to Encompass Holdings, Inc. NOVEMBER 2005: S&P Rates $80 Million Sr. Credit Facility at B+ O'SULLIVAN INDUSTRIES: Court Approves Disclosure Statement OAK CREEK: Wants Court to OK GMACC Agreement & Dismiss Bankr. Case ON SEMICONDUCTOR: Cuts Interest Rate on $639.1M of Term Loans OWENS CORNING: Court Sets April 5 Disclosure Statement Hearing PANOLAM INDUSTRIES: Nevamar Acquisition Cues S&P to Affirm Ratings PARMALAT USA: Preliminary Injunction Stretched to March 31 PATHMARK STORES: Awards Kenneth Martindale Restricted Common Stock PENNSYLVANIA REAL: Acquires Springhills Property for $21.5 Million PHASE III: Completes $1 Million Funding to Aid Purchase of NeoStem PEP BOYS: S&P Places B- Corporate Credit Rating on Watch PERFORMANCE TRANSPORTATION: U.S. Trustee Forms Creditors Committee PHLO CORP: Posts $904,494 Net Loss in Quarter Ended December 31 ROGERS COMMS: Posts $66.7 Million Net Loss in Fourth Quarter 2005 ROUGE INDUSTRIES: Has Interim Access to Lenders' Cash Collateral SAINT VINCENTS: Clarifies Coverage of Malpractice Claims Protocol SALOMON BROTHERS: Projected Losses Cue Moody's to Review Rating SAVVIS INC: Dec. 31 Balance Sheet Upside-Down by $132 Million SCHOONER TRUST: Moody's Rates CDN$2.4 Million Certs. at (P)B3 SECURUS TECHS: S&P Affirms B+ Corp. Credit & Sr. Sec. Debt Ratings SERENA SOFTWARE: Merger Cues Moody's to Junk $225MM Sr. Sub. Notes SERENA SOFTWARE: S&P Rates $225 Million Sr. Sub. Notes at CCC+ SILICON GRAPHICS: Studying Alternatives to Avoid Bankruptcy SUPERIOR LODGING: Case Summary & Known Creditors T.A.T. PROPERTY: Meeting of Creditors Scheduled for February 28 T.A.T. PROPERTY: Wants Until March 30 to File Chapter 11 Plan TECUMSEH PRODUCTS: Posts $55.8 Mil. Net Loss in Fourth Qtr. 2005 TOMMY HILFIGER: Earns $15.5 Million in Third Quarter Ended Dec. 31 TRIPATH TECH: Reports $3.4 Million First Quarter Net Revenue UNIVERSITY HEIGHTS: Case Summary & 12 Largest Unsecured Creditors USG: Dist. Ct. Revises Asbestos Estimation Discovery Schedule VALERO ENERGY: Fitch Raises Securities' Rating to BBB- from BB+ VERITAS DGC: Inks New $85 Million Credit Facility VIACAO ITAPEMIRIM: Fitch Affirms & Withdraws CCC Sr. Notes' Rating VIRAGEN INC: Posts $4.6 Million Net Loss in Quarter Ended Dec. 31 WINDSWEPT ENVIRONMENTAL: Earns $3MM of Net Income in 2nd Quarter XYBERNAUT CORP: Court Okays Chantilly Office Lease Agreement * Large Companies with Insolvent Balance Sheets ********* ACANDS INC: Insurer Balks at Dr. Peterson & LAS' Delayed Retention ------------------------------------------------------------------ Travelers Casualty and Surety Company, a creditor and insurer of ACandS, Inc., objects to the proposed retention of Legal Analysis Systems, Inc., as a consultant to the Debtor's Official Committee of Asbestos Personal Injury Claimants. LAS is Dr. Mark A. Peterson's California-based consulting firm; Dr. Peterson provides expert testimony in virtually every asbestos-related restructuring that the present value of pending and future asbestos claims renders the debtor hopelessly insolvent. Travelers says that the Asbestos Committee failed to provide competent evidence that LAS' services are necessary for the administration of the Debtor's bankruptcy case. The insurer questions the Committee's decision to retain LAS more than three years into the Debtor's bankruptcy case and after supporting a plan of reorganization that is currently on appeal. Accordingly, Travelers wants the U.S. Bankruptcy Court for the District of Delaware to compel LAS and the Committee to promptly respond to its outstanding discovery requests and justify LAS' retention. As reported in the Troubled Company reporter on Feb. 13, 2006, the Asbestos Committee sought permission to hire LAS as its asbestos- related bodily injury consultant, nunc pro tunc to Sept. 29, 2005. LAS will primarily assist the Asbestos Committee in estimating the number and value of present and future asbestos personal injury claims and developing procedures to be used in the development of financial models for the payment of claims. To support its objection to the LAS retention, Travelers commenced narrowly tailored discovery focusing on the necessity for and circumstances surrounding LAS' nunc pro tunc retention. The Asbestos Committee refused to comply with the discovery saying: -- the question of whether it requires an asbestos bodily injury expert is irrelevant to the LAS retention application; -- professionals are not subject to discovery in connection with their retention applications; -- its reasons for hiring LAS are protected by the attorney- client privilege; and -- LAS did not have reasonable time to provide the requested discovery. Headquartered in Lancaster, Pennsylvania, ACandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, the Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on September 16, 2002, (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., represents the Debtor in its restructuring efforts. Kathleen Campbell Davis, Esq., and Marla Rosoff Eskin, Esq., at Campbell & Levine, LLC, represent the Official Committee of Asbestos Personal Injury Claimants. When the Company filed for protection from its creditors, it estimated debts and assets of over $100 million. Chapter 11 Plan Update As previously reported, Judge Fitzgerald approved the adequacy of the Debtor's Amended Disclosure Statement explaining their proposed Plan of Reorganization on Oct. 3, 2003. On Jan. 26, 2004, Judge Fitzgerald entered Proposed Findings of Fact and Conclusions of Law Re Chapter 11 Plan Confirmation (Docket No. 979), recommending that the U.S. District Court deny confirmation of the Debtor's Plan. On Feb. 5, 2004, the Debtor and the Official Committee of Asbestos Personal Injury Claimants jointly filed with the District Court an objection to the Bankruptcy Court's Proposed Findings. In that filing, the Debtor and the Committee asked the District Court to reject the Bankruptcy Court's Findings and Conclusions and confirm the proposed chapter 11 plan. On Nov. 18, 2005, Judge Fitzgerald entered an order (Doc. 2081) extending, through and including the earlier of the effective date of its chapter 11 plan and Feb. 14, 2006, its exclusive period under 11 U.S.C. Sec. 1121 to file a further amended chapter 11 plan, and extending the Debtor's exclusive period to solicit acceptances of that plan from creditors, through the earlier of the effective date of that plan and May 22, 2006. ADELPHIA COMMS: Non-Agent Secured Lenders Can Campaign vs. Plan --------------------------------------------------------------- The Honorable Robert D. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approves the Ad Hoc Committee of Non-Agent Secured Lenders' revised form of Solicitation Letter and Adelphia Communications Corporation and its debtor-affiliates' letter to the secured lenders in response to the Non-Agent Committee's Solicitation Letter. As reported in the Troubled Company Reporter on Feb. 1, 2006, the Ad Hoc Committee of Non-Agent Secured Lenders wanted the Court to approve its solicitation letter and authorize its distribution. The Ad Hoc Committee of Non-Agent Secured Lenders is campaigning against the Debtors' Fourth Amended Joint Plan of Reorganization. The Debtors and the Ad Hoc Committee exchange barbs over the content of the solicitation letter, prompting the Ad Hoc Committee to revised it. A full-text copy of the revised Solicitation Letter is available for free at http://ResearchArchives.com/t/s?545 A full-text copy of the Debtors' Responsive Letter is available for free at http://ResearchArchives.com/t/s?510 Judge Gerber authorized the Non-Agent Secured Lenders' Committee to distribute to potentially interested parties, the revised Solicitation Letter and the Debtors' Letter, to be distributed together. The Non-Agent Committee's request to publish any shortened form of the Non-Agent Letter is denied. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: John Griffin Construction Objects to Ch. 11 Plan ---------------------------------------------------------------- John Griffin Construction, Inc., and Adelphia Cable Communications "and possibly other Adelphia entities" were parties to various written agreements to which John Griffin provided construction labor and materials to ACOM's voice, video and data telecommunications and cable television systems in Orange County and Los Angeles County, California. According to Mary E. Olden, Esq., at McDonough Holland & Allen PC, in Sacramento, California, at the time of the ACOM Debtors' Petition Date, ACOM was indebted to John Griffin for $2,972,865, secured by Griffin's mechanic's liens. John Griffin objects to the ACOM Debtors' plan of reorganization because it fails three tests necessary for confirmation, by: 1. improperly designating Class 3 claims as unimpaired and not entitled to vote; 2. improperly classifying together claims which are not substantially similar; and 3. failing the requirement of Section 1129(a)(a) -- the "best interest of creditors" test. Ms. Olden notes that the Plan defines Class 3 claims, to which John Griffin's claim belongs, as unimpaired. However, it impairs some of the Class 3 Claims by failing to provide for: -- interest at the proper rate, and -- payment of interest until the claim is paid. In addition, the Plan impairs only a specific group of Class 3 claims, Class 3 includes claims that are not substantially similar to one another. Section 1122 of the Bankruptcy Code states that dissimilar claims may not be classified together. John Griffin notes that the Plan had failed the "best interest of the creditors" test by treating some oversecured claims much more favorably than others. The Plan provision terminating interest accrual at the effective date also violates the best interest test. These defects render the Plan uncomfirmable, Ms. Olden says. She asserts that the ACOM Debtors must either amend the Plan to unimpair all Class 3 claims, or must amend the Plan to correct the improper classification and reopen balloting on plan acceptance to allow the holders of impaired claims currently in Class 3 to vote. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945-7000) AGILYSYS INC: Earns $15.2 Million of Net Income in Third Quarter ---------------------------------------------------------------- Agilysys, Inc. (Nasdaq: AGYS) reported unaudited fiscal 2006 third-quarter and nine-months results for the period ended Dec. 31, 2005. For the quarter, the company's sales increased 3% to $532.2 million compared with $515.7 million for the third quarter last year. Third-quarter sales of hardware products were $423.1 million, up 3% from $412.0 million last year. Software sales were $81.8 million, up 3% from $79.1 million a year ago, and services sales were $27.2 million, up 11% from $24.5 million last year. Gross margin for the quarter was 13.2% of sales, compared with 12.8% in the prior year. Selling, general and administrative expenses were $43.5 million, or 8.2% of sales for the quarter, compared with $39.7 million, or 7.7%, in the prior year. The year-over-year increase in selling, general and administrative expenses was mainly driven by higher compensation and benefits costs, as well as higher bad debt expense. Net income was $15.2 million for the quarter ended Dec. 31, 2005, compared with net income of $14.2 million, for the quarter ended Dec. 31, 2004. For the nine months ended Dec. 31, 2005, sales were $1.35 billion, a 6% increase over sales of $1.27 billion reported for the comparable period last year. Gross margin for the nine months was 12.9% of sales, consistent with 12.9% in the prior year. Selling, general and administrative expenses were $123.4 million, or 9.2% of sales for the nine months, compared with $117.9 million, or 9.3%, in the prior year. The company recorded net income for the nine months of 2005 of $22.1 million compared with net income of $21.8 million last year. Excluding $5.1 million in restructuring charges reported for the nine months and a non-recurring $4.8 million loss on redemption of the company's Convertible Trust Preferred Securities in the first quarter, the company would have reported a 27% increase in non- GAAP net income to $28.0 million compared with non-GAAP net income of $22.1 million in the prior year. Arthur Rhein, chairman, president and chief executive officer of Agilysys, said, "I am pleased with our third-quarter results, which exhibited a number of positive trends including an improvement in gross margin and an increase in net income. In addition, our year-to-date results were strong with a 6% increase in sales and a 27% increase in non-GAAP net income." Restructuring Charges During the first half of fiscal 2006, Agilysys consolidated a portion of its operations to reduce costs and increase operating efficiencies. As a result of this initiative, Agilysys recorded a total of $5.1 million in restructuring charges during the first nine months of fiscal 2006. As previously announced, the company expects to realize cost savings of approximately $6.0 million in the current fiscal year and approximately $7.0 million per year thereafter. Redemption of Convertible Trust Preferred Securities In the first quarter of fiscal 2006, as part of its strategy to increase both financial flexibility and shareholder value, the company redeemed its 6.75% Convertible Trust Preferred Securities. Agilysys shareholders benefited from the elimination of the annual distribution on the Trust Preferred Securities, which amounted to approximately $5.2 million annually, net of tax, and the removal of 6.7 million shares of dilution. Business Outlook Agilysys expects fiscal 2006 sales growth between 5% and 7% over fiscal 2005 sales of $1.62 billion; gross margin of approximately 12.9% of sales; selling, general and administrative expenses of approximately 9.6% of sales; and net income per diluted share of 80 to 88 cents, which includes the impact of the restructuring charges and the loss on the redemption of the convertible trust preferred securities. Excluding these one-time items, the company expects diluted earnings per share of 98 cents to $1.06 for the fiscal year. Based on year-to-date performance, Agilysys expects to achieve results near the high end of the ranges provided. Agilysys also expects to incur fiscal 2006 capital expenditures of $3 to $4 million, depreciation and amortization of approximately $11 million, and interest expense to be partially offset by interest and other income. Agilysys, Inc. -- http://www.agilysys.com/-- is one of the foremost distributors and premier resellers of enterprise computer technology solutions. It has a proven track record of delivering complex server and storage hardware, software and services to resellers, large and medium-sized corporate customers, as well as public-sector clients across a diverse set of industries. In addition, the company provides customer-centric software applications and services focused on the retail and hospitality markets. Headquartered in Mayfield Heights, Ohio, Agilysys has sales offices throughout the United States and Canada. * * * Agilysys, Inc.'s 9-1/2% Senior Notes due 2006 carry Standard & Poor's BB- rating. S&P assigned that rating on Oct. 14, 2004. Moody's has rated Agilysys' 9-1/2% Senior Notes at Ba3 since April 18, 2004. ALASKA COMMS: Inks $115 Million Interest Rate Swap Agreement ------------------------------------------------------------ Alaska Communications Systems Group, Inc. (NASDAQ:ALSK) reported the execution of a $115 million notional amount floating-to-fixed interest rate swap agreement related to its $375 million term loan under a senior secured bank credit facility the company entered into on Feb. 1, 2005. The swap effectively fixes the rate on $115 million principal amount of senior secured bank debt at 4.96% through December 2011. The company had previously entered into interest rate swaps for a notional amount of $260 million, and this transaction fixes the rates on its entire $375 million term loan. "Shareholders' interests are best served by reducing interest rate risk from our business through cost effective means," David Wilson, ACS senior vice president and chief financial officer, stated. "Taking advantage of current market conditions, we have fixed interest rates on the remaining portion of our term loan by executing a new rate swap at only 24 basis points over the current 3-month London Inter-Bank Offer Rate. As a result, we have reduced exposure to higher interest rates, and secured an attractive rate through December 31, 2011, on the remainder of our term loan." Based in Anchorage, Alaska, Alaska Communications Systems is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. * * * As reported in the Troubled Company Reporter on Dec. 16, 2005, Standard & Poor's Ratings Services revised its outlook on Anchorage, Alaska-based incumbent local exchange carrier Alaska Communications Systems, including Alaska Communications Systems Group Inc., to stable from negative, based on expectations for healthy growth in the wireless business, and improved operating trends in the wireline segment. These factors, coupled with declining capital expenditures as wireless upgrades wind down, are expected to lead to a turnaround to a positive discretionary cash flow position in mid-2006, somewhat earlier than anticipated," said Standard & Poor's credit analyst Allyn Arden. All ratings, including the company's 'B+' corporate credit rating, were affirmed. Total debt outstanding as of Sept. 30, 2005, was $457 million. ALION SCIENCE: Moody's Cuts Family Rating to B2 on Low Revenue -------------------------------------------------------------- Moody's Investors Service affirmed the B1 rating on Alion Science and Technology Corporation's $193 million term loan B, which is being upsized from the current level of $143 million, and affirmed the existing B1 rating on the $30 million revolver. Moody's concurrently lowered the corporate family rating to B2 from B1. The ratings outlook is stable. The lowering of the corporate family rating reflects the increased level of leverage pro forma for the increase in term loan B, an aggressive acquisition policy, revenue and operating cash generation for the fiscal year ended Sept. 30, 2005, that was modestly below expectations, and the potential loss of a contract that accounted for about 12% of fiscal year 2005 revenues. The B1 rating on the senior secured credit facilities was maintained as Moody's expects enterprise value coverage of the debt in a distressed scenario to more than cover the amount of the secured debt. The ratings continue to be supported by the company's level of free cash flow before acquisitions, $2.8 billion contract backlog, and historical track record of win rates on new business and re- competes, as well as the expected continued growth in defense spending and the outsourcing of work by government agencies. Moody's took these rating actions: * $30 million senior secured revolving credit facility due 2009, affirmed B1 * $193 million senior secured term loan B due 2009, affirmed B1 * Corporate family rating, lowered to B2 from B1 * Speculative grade liquidity rating, affirmed SGL-3. The ratings outlook is stable. The ratings are subject to review of final, executed documents. Moody's expects Alion to combine the $50 million of additional borrowings under the term loan B with $13 million in balance sheet cash to finance the acquisition of three separate companies with combined revenues of $59 million and to repurchase warrants valued at $14 million. The aggregate anticipated purchase price of $49 million represents approximately 7.8x the combined EBITDA of the three targets for the year ended Dec. 31, 2005. The acquisitions are expected to close during the first calendar quarter of 2006. Pro forma for the planned acquisitions, Alion's total debt to EBITDA as defined in the company's credit agreement. In addition to $192.8 million of borrowings under the senior secured term loan B, the company will have about $42.9 million in subordinated notes and $29.7 million in redeemable common stock warrants remaining as liabilities on the balance sheet. The subordinated notes pay interest at a rate of 6% per year through Dec. 2008 through the issuance of non-interest bearing notes. Beginning Dec. 2008, the subordinated notes will bear interest at 16% per year payable quarterly in cash. Principal on the subordinated notes will be payable in equal installments of $20 million in Dec. 2009 and Dec. 2010. The non-interest bearing notes will also be due in equal installments of $7.2 million on these same dates. The redeemable common stock warrants enable the holders to sell the warrants back to the company, at predetermined times, at the then current fair value of the common stock less the exercise price. The earliest date at which the warrants may be sold to the company is Dec. 2008. Pro forma for the transactions, Moody's expects Alion to exhibit a ratio of adjusted free cash flow to total debt of about 12%, before acquisitions and repurchases of stock from the employee stock ownership plan. At the close of the transactions, Moody's expects Alion to have about $26 million in availability under its $30 million revolving credit facility, after giving consideration to about $3 million in outstanding letters of credit and a $1 million draw on the revolver. Moody's expects Alion to rely on its revolver for quarterly working capital swings and to fund smaller prospective acquisitions. On August 5, 2005, Alion was notified that it had lost a US government contract that accounted for about 12% of Alion's revenue for the fiscal year ended Sept. 30, 2005. Alion lodged a protest alleging that the winning bidder had a conflict of interest. Although the government sustained Alion's protest on Jan. 6, 2006, whether Alion ultimately regains the contract as part of the government's corrective action is uncertain. In the meantime, Alion continues to perform under the terms of the prior contract and has shifted approximately 50% of the work to other long-term Alion contracts covering the same customers. Moody's views Alion's acquisition policy as aggressive and customer concentrations as significant. Moody's expects Alion to execute the near simultaneous acquisition of three companies with combined revenues of $59 million in the very near term, which will expand Alion's customer base. Nonetheless, Alion will continue to rely on the US government for over 90% of revenues, which exposes it to the risk of change in government contracting practices. A large portion of its government revenues is concentrated in a limited number of contracts. During fiscal 2005, Alion's top five government contracts accounted for approximately 48% of revenue. The termination of any of these contracts by the federal government or the inability to replace these contracts as they expire would materially affect cash generation and profitability. Competition for government contracts in defense services related to information technology is growing in intensity, which is driving up the prices of acquisition targets and making acquisition strategies more difficult to execute. Although competition to grow through acquisition raises the enterprise values of companies competing in the sector, an industry downturn or change in government contracting practices could reverse this trend. Many of the Alion's competitors are large in comparison and have greater financial and technical resources, larger client bases, and greater name recognition than Alion. The ratings benefit from the company's long term contracts, a large contract backlog relative to its size, historical win rate on re-competes of over 90%, projected continued growth in U.S. defense spending, and the continuing trend toward outsourcing of work by government agencies. Although the total backlog amounts are large relative to the company's revenue base, there is no guarantee that these revenues will materialize. The stable ratings outlook reflects Moody's expectation that Alion will be able to successfully integrate its recent and proposed acquisitions, will benefit from the expected growth in the federal defense budget, and will either regain or have time to ameliorate the recent loss of a significant contract. Moody's expects the company to continue to pursue strategic acquisitions similar in nature to those acquired in recent years. To the extent that leverage rises with the rising level of purchase price multiples in the industry, the outlook or ratings could come under pressure. The ratings or outlook could be raised if Alion reduces total debt to EBITDA, as defined in the credit agreement and adjusted for operating leases, to below 5.0x on a sustained basis while maintaining adjusted free cash flow to debt above 12%. The ratings or outlook could be lowered, however, if Alion's acquisition policy results in adjusted total debt to EBITDA rising above 6.5x or integration or other operational difficulties, such as the loss of a major contract, result in adjusted free cash flow to total debt falling below 10%. The affirmation of the SGL-3 speculative grade liquidity rating reflects Moody's expectations that the company will have adequate liquidity over the next twelve months, albeit with quarterly cash flow volatility, potential for significant utilization of the company's $30 million revolving credit facility, moderate cushion under financial covenants, and little recourse to alternate liquidity. At the close of the three acquisitions, Moody's expects Alion to have about $9 million in cash on hand and $26 million in availability under the revolver. The SGL rating will be sensitive to the ability of the company to generate stable quarterly free cash flows, the degree of expected utilization of the revolver, and the execution of the company's acquisition strategy. The B1 rating on the senior secured credit facility, one notch above the corporate family rating, reflects the first priority security in substantially all the tangible and intangible assets of the company and its subsidiaries including a pledge of 100% of the capital stock of domestic subsidiaries. The term loan B will continue to amortize at a rate of 0.25% a quarter through August 2008, with the balance payable in equal installments during the last four quarters of the facility. The credit facility has a 50% excess cash flow sweep. Alion Science and Technology Corporation, headquartered in McLean, Virginia, is an employee-owned technology solutions company delivering technical solutions and operational support to the Department of Defense, civilian government agencies, and commercial customers. The company designs, integrates, maintains, and upgrades technology solutions and products for national defense, intelligence, homeland security, emergency response, and other high priority government missions. Revenue for the fiscal year ended Sept. 30, 2005 was $369 million. ALION SCIENCE: S&P Rates Proposed $50 Million Add-On Loan at B+ --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating and '3' recovery rating to McLean, Virginia-based Alion Science and Technology Corp.'s proposed $50 million add-on senior secured term loan. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating, and its negative outlook, as well as its 'B+' debt rating, and '3' recovery rating, on the company's existing $173 million senior secured bank facility. The senior secured debt rating, which is the same as the corporate credit rating, along with the recovery rating, reflect Standard & Poor's expectation of meaningful (50%-80%) recovery of principal by creditors in the event of a payment default or bankruptcy. Proceeds from the incremental term facility, along with $13 million of cash from the balance sheet, will be used to fund three modest-sized acquisitions and to repurchase approximately $14 million of the company's redeemable common stock warrants, which would have been puttable in 2008. "The ratings reflect Alion's relatively modest position in the highly competitive and consolidating government IT services market, an acquisitive growth strategy, and high debt leverage," said Standard & Poor's credit analyst Ben Bubeck. A predictable revenue stream based upon a strong backlog and the expectation that the government IT services sector will continue to grow over the intermediate term are partial offsets to these factors. Alion is an R&D, engineering, and information technology company that provides services and communications solutions primarily to the federal government. Pro forma for the proposed transaction, Alion had approximately $340 million in operating lease-adjusted total debt, including redeemable common stock warrants, as of September 2005. ALLIED HOLDINGS: Wants Cushman & Wakefield as Real Estate Broker ---------------------------------------------------------------- Allied Holdings, Inc., and its debtor-affiliates seek authority form the U.S. Bankruptcy Court for the Northern District of Georgia to employ Cushman & Wakefield LePage, Inc., as their broker, nunc pro tunc to Nov. 29, 2005. Cushman is a privately held real estate services firm with offices in over 50 countries. The professionals at the firm have extensive experience in various aspects of real estate, including buying, selling, and financing real property. Pursuant to a brokerage agreement with the Debtors, Cushman will have exclusive authority to market and solicit bids for the Debtors' property in Windsor, Ontario, Canada. According to Alisa H. Aczel, Esq., at Troutman Sanders LLP, in Atlanta, Georgia, Cushman has marketed the Property before the Petition Date. Ms. Aczel discloses that the firm secured a bid for the Property with a per-acre purchase price in excess of its per-acre appraisal value on December 22, 2005. Ms. Aczel relates that Cushman will have a 5% commission upon the successful completion of a Property sale. Cushman reports that it has not received a retainer from the Debtors, nor did the Debtors make any prepetition payments to it. David Woodiwiss, a salesperson at Cushman & Wakefield, assures the Court that the people employed by the firm do not have any connection with the Debtors, their creditors, other parties-in- interest, the U.S. Trustee, or any person employed in the U.S. Trustee's office. Mr. Woodiwiss adds that Cushman does not hold any interest adverse to the Debtors or their estates. The firm is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code, Mr. Woodiwiss says. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. Anthony J. Smits, Esq., at Bingham McCutchen LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIED WASTE: Moody's Holds Junk Rating on Convertible Securities ----------------------------------------------------------------- Moody's Investors Service affirmed the long-term debt ratings of Allied Waste North America, Inc., along with its wholly owned subsidiary, Browning-Ferris Industries, Inc., and its parent company Allied Waste Industries, Inc., and raised the outlook to stable from negative. At the same time Moody's affirmed the Corporate Family Rating of B2. The improvement in outlook to stable from negative reflects a more favorable pricing environment for the industry as a whole which, combined with the company's own pricing initiatives is driving enhanced internal revenue growth. Combined with increased cost efficiencies, top line growth is expected to lead to improved cash from operations and EBITDA margins. The outlook change also reflects anticipated stabilization of free cash flow starting in 2006 to debt ratios, albeit at low single digit levels. The stable outlook also takes into account the 2005 refinancing exercise which provided Allied with flexibility in terms of time and liquidity to address operational and financial challenges. In particular, the 2005 Credit Facility provided Allied with more liquidity, reduced interest expense by about $20 million, and reduced refinancing risk by prepaying $785 million of debt maturing over the next five years and improved cushions under financial covenant tests. The change in outlook is also supported by the company's efforts to drive operational efficiencies with respect to landfill and equipment maintenance, an extension of the company's ROIC/EBITDA-based incentive compensation plan down to district managers and general managers, along with investments in sales and marketing and management development. The affirmation of Allied's long-term ratings reflects Allied's geographic diversification, continued prominence in the US waste market, the increased financial flexibility from the 2005 credit facility refinancing and the anticipated stabilization of capital expenditures as a percentage of revenues leading to modest cash flow improvements. The ratings continue to be constrained by the company's high leverage with estimated adjusted debt to EBITDA ratios of about five times as of Dec. 31, 2005, and slightly negative free cash flow generation in 2005. Free cash flow generation is expected to turn positive in 2006 but will remain weak and this continues to leave Allied vulnerable to pressure from potential price competition on the revenue side and labor and fuel costs on the expense side. Although the company has made progress with its best practices program over the last six to nine months, ongoing implementation costs, potential fuel cost fluctuations and labor market conditions as US unemployment drops further may put pressure on operating margins. Although Moody's expects ongoing improvements in free cash flow, such improvements are likely to continue to be constrained by interest payments, ongoing capital expenditure levels and cash dividend payments on the preferred stock. Sustainable improvements in free cash flow to debt ratios in the high single digits could lead to an upgrade. Negative free cash flows, debt-financed acquisitions or additional indebtedness could lead to downward pressure on the ratings. Availability under Allied's $1.575 million committed revolving credit facility as of December 31, 2005 was about $1.2 billion. The facility is used for funding working capital needs and for outstanding letters of credit. Cash at Dec. 31, was $56 million and Moody's expects cash from operations, unrestricted cash and revolver usage during 2006 to provide sufficient liquidity to fund any seasonal working capital needs. Capital expenditures were $696 million in 2005 and are expected to remain at these levels in 2006. Moody's expects cash flow over the near term to cover mandatory debt maturities. Allied's next significant debt maturity is in 2008 when about $1.5 billion of senior notes are due. These ratings were affected: Issuer: Allied Waste Industries, Inc. * Corporate Family Rating affirmed at B2; * $230 million issue of 4.25% senior subordinated convertible bonds due 2034, affirmed at Caa2; * $345 million issue of 6.25% senior mandatory convertible preferred stock -- conversion date of April 2006, affirmed at Caa3; * $600 million issue of 6.25% senior mandatory convertible preferred stock -- conversion date of March 2008, affirmed at Caa3; * Speculative Grade Liquidity Rating, affirmed at SGL-2; The outlook for the ratings was raised to stable from negative. Issuer: Allied Waste North America, Inc. * $1.575 billion guaranteed senior secured revolving credit facility due 2010, affirmed at B1; * $1.275 billion guaranteed senior secured term loan due 2012, affirmed at B1; * $495 million guaranteed senior secured Tranche A Letter of Credit Facility due 2012, affirmed at B1; * $750 million issue of 8.5% guaranteed senior secured notes due 2008, affirmed at B2; * $600 million issue of 8.875% guaranteed senior secured notes due 2008, affirmed at B2; * $350 million issue of 6.5% guaranteed senior secured notes due 2010, affirmed at B2; * $400 million issue of 5.75% guaranteed senior secured notes due 2011, affirmed at B2; * $275 million issue of 6.375% guaranteed senior secured notes due 2011, affirmed at B2; * $251 million issue of 9.25% guaranteed senior secured notes due 2012, affirmed at B2; * $450 million issue of 7.875% guaranteed senior secured notes due 2013, affirmed at B2; * $425 million issue of 6.125% guaranteed senior secured notes due 2014, affirmed at B2; * $600 million issue of 7.25% guaranteed senior secured notes due 2015, affirmed at B2; * $400 million issue of 7.375% guaranteed senior unsecured notes due 2014, affirmed at Caa1; Issuer: Browning-Ferris Industries, Inc., assumed by Allied Waste North America, Inc. * $155 million issue of 6.375% senior secured notes due 2008, affirmed at B2; * $96 million issue of 9.25% secured debentures due 2021, affirmed at B2; * $292 million issue of 7.4% secured debentures due 2035, affirmed at B2; * Approximately $284 million of industrial revenue bonds, affirmed at Caa1, unless backed by letters of credit. Allied Waste North America, Inc., a wholly owned operating subsidiary of Allied Waste Industries, Inc., is based in Scottsdale, Arizona. Allied is a vertically integrated, non -hazardous solid waste management company providing collection, transfer, and recycling and disposal services for residential, commercial and industrial customers. The company had 2005 revenues of approximately $5.735 billion. ALLSERVE SYSTEMS: Ch. 7 Trustee Taps McElroy Deutsch as Counsel --------------------------------------------------------------- Charles A. Stanziale, Jr., Esq., the Chapter 7 Trustee for Allserve Systems Corp., asks the U.S. Bankruptcy Court for the District of New Jersey for permission to retain McElroy, Deutsch, Mulvaney & Carpenter, LLP, as his counsel. McElroy Deutsch will: a) collect and reduce to fund the property of the estate for which any trustee serves, and close any estate as expeditiously as is compatible with the best interests of parties-in-interest; b) be accountable for all property received; c) ensure that the Debtor will perform his intention as specified in Section 521(2)(B) of the Bankruptcy Code; d) investigate the financial affairs of the Debtor; e) examine proofs of claims and object to the allowance of any claim that is improper if a purpose would be served; f) file with the Court, with the U.S. Trustee, and with any governmental unit charged with responsibility for collection or determination of any tax arising out of any operation, periodic reports and summaries of the operation of any business, including a statement of receipts and disbursements, and any other information as the U.S. Trustee or the Court requires if the business of the Debtor is authorized to be operated; g) make a final report and file a final account of the administration of the estate with the Court and with the U.S. Trustee; h) continue to perform the obligations required of the administrator if, at the time of the commencement of the case, the Debtor served as the administrator (as defined in section 3 of the Employee Retirement Income Security Act of 1974) of an employee benefit plan; i) appear in Court and represent the interests of the estate; j) provide litigation services to the Trustee; and k) provide any other legal services to the Trustee that are appropriate, necessary and proper in this Chapter 7 case. Jeffrey T. Testa, Esq., a McElroy Deutsch member, discloses his firm's professional's billing rates: Position Hourly Rate -------- ----------- Partners $375 - $475 Associates $250 - $350 Paraprofessionals $125 - $150 The professionals expected to have primary responsibility for providing services to the Debtors and their hourly rates are: Professional Hourly Rate ------------ ----------- Charles A. Stanziale, Jr. $475 Jeffrey Bernstein $375 Donald J. Crecca $375 Jeffrey T. Testa $300 As previously reported in the Troubled Company Reporter on Jan. 24, 2006, the Court converted the Debtor's chapter 11 case into a chapter 7 liquidation proceeding. Kelly Beaudin Stapleton, the U.S. Trustee for Region 3 named Charles A. Stanziale, Jr., Esq., at McElroy, Deutsch, Mulvaney & Carpenter, as the chapter 7 Trustee to oversee the liquidation of the Debtor's estate. To the best of the Trustee's knowledge, Mr. Testa assures the Court that McElroy Deutsch is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in North Brunswick, New Jersey, Allserve Systems Corp. is an outsourcing company for the IT industry. The Debtor filed for chapter 11 protection on November 18, 2005 (Bankr. D. N.J. Case No. 05-60401). Barry W. Frost, Esq., at Teich Groh represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between 10 million to $50 million and debts between $50 million to $100 million. AMARIN CORP: Posts $5.2 Million Net Loss in Fourth Quarter of 2005 ------------------------------------------------------------------ Amarin Corporation plc (NASDAQ: AMRN) reported financial results for the fourth quarter and full year ended Dec. 31, 2005. For the quarter ended Dec. 31, 2005 Amarin reported a net loss of $5.2 million compared with a net loss of $4.8 million or 13 cents per ADS in the quarter ended Dec. 31, 2004. The net loss for the quarter primarily reflects Amarin's substantial investment in research and development and intellectual property offset by license fee revenue and a reduction in selling, general and administrative costs. For the year ended Dec. 31, 2005, Amarin reported a net loss of $18.7 million compared with net income of $4.7 million for the year ended December 31, 2004. The operating loss from continuing activities for the year ended Dec. 31, 2005 was $18.9 million, compared with an operating loss from continuing activities for the year ended Dec. 31, 2004 of $9.9 million. The increase in this operating loss was primarily due to Amarin's substantial investment in research and development and intellectual property during 2005. Rick Stewart, chief executive officer of Amarin, commented, "2005 was a watershed year for Amarin marked by significant advances in all activities. We made substantial progress with all of our development programs, successfully out-licensed one of our pipeline programs, enhanced our management team with key hires in critically important positions, and considerably strengthened our balance sheet through a number of successful financings that raised gross proceeds of $46.3 million." "We continue to successfully implement our focused strategy of advancing our clinical programs in Huntington's disease and other neurodegenerative diseases while partnering our product candidates outside of this core area of focus. Our strengthened balance sheet allows us to actively pursue our course and we expect to build on our momentum throughout 2006." At Dec. 31, 2005, Amarin had cash of $33.9 million compared to $11.0 million at Dec. 31, 2004. The increase in cash balances is primarily due to the proceeds raised from financings in May and December, and a license fee received in December less operating cash outflows during the year. On May 24, 2005, Amarin raised gross proceeds of $17.8 million through the completion of a registered offering of 13.7 million ADS's with institutional and other accredited investors. Management Appointments Three senior management and board appointments made during the year, which further strengthened the Amarin management team; * Dr. Anthony Clarke as Vice President of Clinical Development; * Dr. Prem Lachman as non-executive director; and * Tom Maher as General Counsel and Company Secretary, effective February 2006. Discontinued activities For the year ended Dec. 31, 2005, there were no amounts relating to discontinued activities. For the comparative year ended Dec. 31, 2004, Amarin earned income before interest of $21.1 million on discontinued activities reflecting: (1) the results of Amarin's disposed U.S. business for the period from Jan. 1, 2004 to Feb. 25, 2004, being the date upon which the business was sold to Valeant; (2) an exceptional loss of $3.1 million on disposal of the majority of its U.S. operations and certain products to Valeant; (3) an exceptional gain of $0.75 million, representing receipt of the final installments of the sale proceeds on the disposal of Amarin's Swedish drug delivery to Watson in October 2003; (4) an exceptional gain of $24.6 million on the settlement of debt obligations to Elan; (5) the costs incurred by Amarin relating to the completion of safety studies on Zelapar (the rights to which are owned by Valeant). Following the sale of the majority of Amarin's U.S. operations to Valeant in the first quarter of 2004, Amarin remained responsible for the cost of undertaking safety studies on Zelapar and was liable up to $2.5 million of development costs; and (6) the settlement of an outstanding dispute with Valeant. Intangible Fixed Assets At Dec. 31, 2005, Miraxion had an intangible asset carrying value of $9.6 million, a decrease of $0.7 million from $10.3 million at Dec. 31, 2004. The decrease in the carrying value arises from amortisation in the year. Tax Relief Under UK tax legislation, Amarin Neuroscience is eligible for research and development tax relief. As the company is loss making, it can elect to surrender its eligible research and development tax losses and in return receive a payment from the Inland Revenue in respect of this research and development tax relief. In the quarter ended Dec. 31, 2005, Amarin recognized a tax credit of $200,000 in respect of such research and development tax relief. At December 31, 2005, included in the company is a total research and development tax relief receivable of $1.3 million. Transactions On Dec. 22, 2005, Amarin concluded a private placement of 26.1 million shares and 9.1 million warrants raising gross proceeds of $26.4 million. Investors in the private placement included Southpoint Capital Advisers LP, Biotechnology Value Fund LP, Fort Mason Capital LP, Domain Public Equity Partners LP and other new and existing institutional and accredited investors, including certain directors and executive officers of Amarin. On Jan. 23, 2006, Amarin entered into a definitive purchase agreement for 800,000 shares and 300,000 warrants raising $2.1 million. Together, these three transactions raised $46.3 million, including $7.7 million from directors and officers of the company. Amarin has no debt other than working capital liabilities. Amarin is forecast to have sufficient cash to fund operations into the second half of 2007 and, with possible revenue from partnering activities, potentially beyond. Amarin Corporation plc -- http://www.amarincorp.com/-- is a neuroscience company focused on the research, development and commercialization of novel drugs for the treatment of central nervous system disorders. Miraxion, Amarin's lead development compound, is in phase III development for Huntington's disease, phase II development for depressive disorders and preclinical development for Parkinson's disease. * * * Going Concern Doubt PricewaterhouseCoopers LLP expressed doubt about Amarin Corporation plc's (NASDAQSC: AMRN) ability to continue as a going concern opinion after it audited the company's financial statements for the fiscal year ended Dec. 31, 2004. PwC said that Amarin needs to secure further financing to allow the Company to fund its ongoing operational needs and meet its debt obligations, raising substantial doubt about its ability to continue as a going concern. AMCAST INDUSTRIAL: Court Okays Dann Pecar as Bankruptcy Counsel --------------------------------------------------------------- Amcast Industrial Corporation and its debtor-affiliate, Amcast Automotive of Indiana, Inc., sought and obtained authority from the U.S. Bankruptcy Court for the Southern District of Indiana to employ Dann, Pecar, Newman & Kleiman, P.C., as their general bankruptcy counsel. As previously reported in the Troubled Company Reporter, Dann Pecar is expected to: 1) assist and advise the Debtors with respect to their rights, duties and powers in their chapter 11 cases and in their consultations relative to the administration of their cases; 2) assist the Debtors in analyzing claims of their creditors and in negotiating with those creditors and in the analysis of and negotiations with any third party concerning matters related to the terms of a proposed plan of reorganization; 3) represent the Debtor at all Court hearing and proceedings; 4) analyze and review all applications, orders, statements of operations and schedules filed with the Court and advise the Debtors of the propriety of those filings; 5) assist the Debtors in preparing pleadings and applications as may be necessary in furthering their interests and objectives of their chapter 11 cases; and 6) perform all other necessary legal services to the Debtors in accordance with their powers and duties pursuant to the Bankruptcy Code. James P. Moloy, Esq., a member of Dann Pecar, is one of the lead attorneys for the Debtors. Mr. Moloy discloses that his Firm received a $25,000 retainer. Court records do not show how much Dann Pecar will charge the Debtors for its professional services. Dann Pecar assures the Court that it does not represent any interest materially adverse to the Debtors and is a disinterested person as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Fremont, Indiana, Amcast Industrial Corporation, manufactures and distributes technology-intensive metal products to end-users and suppliers in the automotive and plumbing industry. The Company and four debtor-affiliates previously filed for chapter 11 protection on Nov. 30, 2004. The U.S. Bankruptcy Court for the Southern District of Ohio confirmed the Debtors' Third Amended Joint Plan of Reorganization on July 29, 2005. The Debtors emerged from bankruptcy on Aug. 4, 2005. Amcast Industrial Corporation and Amcast Automotive of Indiana, Inc., filed for chapter 11 protection a second time on Dec. 1, 2005 (Bankr. S.D. Ind. Case No. 05-33323). David H. Kleiman, Esq., and James P. Moloy, Esq., at Dann Pecar Newman & Kleiman, P.C., represent the Debtors in their restructuring efforts. When the Debtor and its affiliate filed for protection from their creditors, they listed total assets of $97,780,231 and total liabilities of $100,620,855. Amcast Industrial's chapter 11 case is jointly administered with Amcast Automotive of Indiana, Inc.'s chapter 11 proceeding. AMCAST INDUSTRIAL: Hires Bracewell & Guiliani as Bankr. Co-Counsel ------------------------------------------------------------------ Amcast Industrial Corporation and its debtor-affiliate, Amcast Automotive of Indiana, Inc., sought and obtained authority from the U.S. Bankruptcy Court for the Southern District of Indiana to employ Bracewell & Giuliani LLP, as their bankruptcy co-counsel. Bracewell & Giuliani is expected to: a) advise the Debtors with respect to their rights, duties and powers in their chapter 11 cases; b) assist and advise the Debtors in their consultation relative to the administration of their chapter 11 cases; c) assist the Debtors in analyzing the claims of the creditors an in negotiating with such creditors; d) assist the Debtor in the analysis of and negotiations with any third party concerning matters relating to the terms of the plan of reorganization; e) represent the Debtors at all hearings and other proceedings; f) review and analyze all applications, orders, statements of operations and schedules filed with the Court and advise the Debtors as to the propriety; g) assist the Debtors in preparing pleadings and applications as may be necessary in the furtherance of the Debtors' interests and objectives; and h) perform such other legal services as may be required and deemed to in the interest of the Debtors. The Debtors discloses that Bracewell & Guiliani received a $50,000 retainer and will hold the amount pending final approval of the Court of the Firms' fees and expenses. William A. "Trey" Wood, Esq., attorney at Bracewell & Guiliani's Houston office, assures the Court that the Firm is a "disinterested person" as that term is defined in section 101(14) of the bankruptcy Code. The Firm's Houston Office can be reached through: Bracewell & Giuliani LLP 711 Louisiana Street, Suite 2300 Houston, Texas 77002-2781 Tel: (713) 223-2300 Fax: (713) 221-1212 http://www.bracewellgiuliani.com/ Headquartered in Fremont, Indiana, Amcast Industrial Corporation, manufactures and distributes technology-intensive metal products to end-users and suppliers in the automotive and plumbing industry. The Company and four debtor-affiliates previously filed for chapter 11 protection on Nov. 30, 2004. The U.S. Bankruptcy Court for the Southern District of Ohio confirmed the Debtors' Third Amended Joint Plan of Reorganization on July 29, 2005. The Debtors emerged from bankruptcy on Aug. 4, 2005. Amcast Industrial Corporation and Amcast Automotive of Indiana, Inc., filed for chapter 11 protection a second time on Dec. 1, 2005 (Bankr. S.D. Ind. Case No. 05-33323). David H. Kleiman, Esq., and James P. Moloy, Esq., at Dann Pecar Newman & Kleiman, P.C., represent the Debtors in their restructuring efforts. When the Debtor and its affiliate filed for protection from their creditors, they listed total assets of $97,780,231 and total liabilities of $100,620,855. Amcast Industrial's chapter 11 case is jointly administered with Amcast Automotive of Indiana, Inc.'s chapter 11 proceeding. AMERICAN COMMERCIAL: S&P Raises Corporate Credit Rating to BB- -------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on American Commercial Lines Inc. (ACL) to 'BB-' from 'B' and removed the rating from CreditWatch, where it was placed with positive implications on Sept. 27, 2005. The rating on subsidiary American Commercial Lines LLC's senior unsecured notes was raised to 'B+' from 'B-' and also removed from CreditWatch. The outlook is now positive. The Jeffersonville, Indiana-based barge company has about $330 million of lease-adjusted debt. The rating actions follow a review of the impact of ACL's October 2005 IPO and subsequent debt paydown on its capital structure and an assessment of the company's near- to intermediate-term operating prospects. "The upgrade reflects ACL's improved capital structure following its recent IPO of common stock," said Standard & Poor's credit analyst Lisa Jenkins. "Standard & Poor's believes that favorable market conditions and ACL's efficiency enhancements will allow it to sustain improved credit protection measures even as it invests to upgrade its fleet," the analyst continued. The ratings reflect ACL's: * strengthened capital structure; * improving profitability; and * prominent position in the fragmented barge industry. Offsetting these positives are: * the capital intensity of the business; * competitive end markets; * vulnerability to swings in demand; and * potential exposure to industry supply-and-demand imbalances. ACL generates about 80% of its barge revenues from dry bulk cargo (including grain, steel, and coal.) The remaining 20% comes from the transport of liquid cargo (including petroleum and chemical products). ACL also operates a barge manufacturing business, which accounts for about 15% of total company revenues. ACL emerged from Chapter 11 bankruptcy protection in January 2005. While in bankruptcy, ACL rejected and renegotiated certain leases and scrapped certain vessels, thereby improving its operating efficiency. Since its emergence, it has reduced overhead costs and implemented various other measures to improve operating performance. It also strengthened its capital structure by completing an IPO of common stock in October 2005. These actions have better positioned the company to deal with pricing and profitability pressures that periodically occur in this industry. Ratings assume that continuing favorable industry fundamentals over the near to intermediate term combined with ongoing initiatives to improve operating efficiency will enable the company to sustain its improved operating performance over the next two years. Ratings also incorporate some room for the company to make modest investments to upgrade and expand its fleet. If ACL: * generates improved earnings; * maintains a disciplined approach to acquisitions and investments; and * sustains its current balance sheet structure ratings could be raised. Conversely, if the company engages in greater-than-expected investment spending or if industry fundamentals weaken, the outlook is likely to be revised to stable. AMERIGAS PARTNERS: Higher Propane Prices Lift Revenues ------------------------------------------------------ AmeriGas Partners, LP, delivered its financial results for the quarter ended Dec. 31, 2005, to the Securities and Exchange Commission on Feb. 9, 2006. AmeriGas earned $55 million of net income during the 2005 three- month period, an increase of $10.7 million compared to the prior- year period. Retail propane revenues increased by $67.7 million reflecting a $75.6 million increase due to higher average selling prices partially offset by a $7.9 million decrease due to the lower retail volumes sold. Wholesale propane revenues increased by $3.2 million reflecting a $9.1 million increase resulting from higher average selling prices partially offset by a $5.9 million decrease due to lower volumes sold. The Partnership's retail gallons sold during the 2005 three-month period reflect the negative effects of customer conservation resulting from higher propane costs and selling prices and reduced volumes sold to agricultural customers reflecting a weak crop- drying season. The Partnership's results are largely seasonal and dependent upon weather conditions, particularly during the peak-heating season, which occurs in the first half of its fiscal year. As a result, net income is generally higher in the first and second fiscal quarters whereas lower net income or net losses occur in the third and fourth fiscal quarters. AmeriGas' balance sheet at Dec. 31, 2005, showed $1.7 billion in total assets, liabilities of $1.3 billion, minority interests of $8.4 million and partners' capital of 322.9 million. About AmeriGas AmeriGas Partners, L.P. (NYSE:APU) is the nation's largest retail propane marketer, serving nearly 1.3 million customers from over 650 locations in 46 states. UGI Corporation (NYSE:UGI) through subsidiaries, owns 44% of the Partnership and individual unitholders own the remaining 56%. * * * As reported in the Troubled Company Reporter on Jan. 12, 2006, AmeriGas Partners, L.P.'s $350 million senior notes due 2016, issued jointly and severally with its special purpose financing subsidiary AP Eagle Finance Corp., are rated 'BB+' by Fitch Ratings. Fitch also affirms APU's existing senior unsecured debt rating of 'BB+' and issuer default rating of 'BB+'. Fitch said the Rating Outlook is Stable. As reported in the Troubled Company Reporter on Jan. 12, 2006, Moody's Investors Service: * assigned a B1 rating to AmeriGas Partners, L.P.'s proposed $350 million senior unsecured notes due 2016; * upgraded its existing $415 million of senior unsecured notes due 2015 to B1 from B2; and * affirmed its Ba3 corporate family rating. Moody's said the rating outlook is stable. AOL LATIN: Wants Court OK to Extend Cicerone Capital's Employment ----------------------------------------------------------------- America Online Latin America Inc., asks the U.S. Bankruptcy Court for the District of Delaware for permission to further extend its employment and retention of Cicerone Capital LLC as its financial advisors, nunc pro tunc to Dec. 1, 2005. On Aug. 8, 2005, the Court authorized the Debtor's employment of Cicerone Capital as its financial advisors, nunc pro tunc to June 24, 2005. The Debtor wants to extend the employment of Cicerone Capital pursuant to the terms of a Second Extension Letter dated Dec. 1, 2005. As reported in the Troubled Company Reporter on Aug. 8, 2005, Cicerone Capital services include: a) assisting the Debtors in identifying the target, sectors, region and quantity of business entities and assets in Latin America with respect to a potential sale of the Debtors, the Non-Debtor Foreign Subsidiaries or their respective assets; b) advising and assisting the Debtors in analyzing and evaluating the business, operations, properties, financial condition, major liabilities, prospects and potential synergies of the Debtors and any potential purchaser; c) participating in discussions with the Company's directors, shareholders, suppliers and investment bankers and conduct management interviews, site visits, data analysis and due diligence of the Company and any potential purchaser; d) reviewing the documents related to any potential sale of the Debtors, the Non-Debtor Foreign Subsidiaries or their respective assets, and prepare a valuation analysis of the Debtors and any potential purchaser in connection with that potential asset sale; and e) providing all other financial advisory services to the Debtors in connection with their chapter 11 cases. Zain A. Manekia, a managing principal at Cicerone Capital, discloses that under the terms of the Second Letter Agreement, the Firm will be paid: 1) a $25,000 monthly advisory fee; and 2) a success fee in connection with a marketing operations coordination agreement into between Aol Brasil, Ltda., a wholly-owned subsidiary of the Debtor and Terra Networks Brasil S.A. Cicerone Capital assures the Court that it does not represent any interest materially adverse to the Debtor and is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The Court will convene a hearing at 3:00 p.m., on Feb. 23, 2006, to consider the Debtor's request. Headquartered in Fort Lauderdale, Florida, America Online Latin America, Inc. -- http://www.aola.com/-- offers AOL-branded Internet service in Argentina, Brazil, Mexico, and Puerto Rico, as well as localized content and online shopping over its proprietary network. Principal shareholders in AOLA are Cisneros Group, one of Latin America's largest media firms, Brazil's Banco Itau, and Time Warner, through America Online. The Company and its debtor-affiliates filed for Chapter 11 protection on June 24, 2005 (Bankr. D. Del. Case No. 05-11778). Pauline K. Morgan, Esq., and Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor, LLP and Douglas P. Bartner, Esq., at Shearman & Sterling LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $28,500,000 and total debts of $181,774,000. ARMSTRONG WORLD: Told to File 4th Amended Ch. 11 Plan by Feb. 21 ---------------------------------------------------------------- The Honorable Eduardo Robreno held a status conference on February 3, 2006, in Philadelphia, Pennsylvania. At the request of Armstrong World Industries, Inc., the Official Committee of Unsecured Creditors, the Official Committee of Asbestos Claimants, and Dean M. Trafelet, the Legal Representative for Future Asbestos Personal Injury Claimants, the District Court established a schedule to consider confirmation of AWI's Fourth Amended Plan of Reorganization. Judge Robreno directed AWI to file its modified fourth amended plan by February 21, 2006. As previously reported in the Troubled Company Reporter, the Modified Plan will: -- delete the provisions regarding the receipt of "New Warrants" by Equity Interests holders in Class 12; and -- make some technical modifications relating to the schedules of executory contracts. The District Court will preside over the Confirmation Hearing, which will commence on May 23, 2006. The Creditors Committee acknowledges that the sole objection that it will be pursuing at the Confirmation Hearing is that the Modified Plan discriminates unfairly with respect to Class 6 pursuant to Section 1129(b) of the Bankruptcy Code. However, the Creditors Committee reserves the right, whether at the Confirmation Hearing or otherwise, to seek an order from the District Court suspending the Confirmation Hearing or denying confirmation of the Modified Plan based on the prospect of the likely passage of the Fairness in Asbestos Personal Injury Resolution Act. Any party-in-interest will also have the right to object to any request. Discovery Relating to Confirmation Hearing The District Court will determine all discovery-related disputes for the Confirmation Hearing pursuant to the Federal Rules of Civil Procedure. Judge Robreno directs the parties to serve: (a) written document requests in connection with the Unfair Discrimination Objection on or before February 17, 2006; (b) written responses to those document requests within 10 days after receipt of any request; and (c) responsive documents not objected to within 21 days after receipt of those requests. Nothing will preclude AWI from providing the other parties with access to non-privileged documents comprising the "Baltimore Depository," the "Insurance ADR" documents, and the documents assembled by Kirkland & Ellis LLP before the production date. Absent further order from the District Court, the "Insurance ADR" materials will not include any materials that are protected by the confidentiality order entered in the insurance ADR proceeding. AWI will use its best efforts to furnish to the Patties a privilege log with respect to the K&E Documents as soon as practicable. Any party may serve discovery requests on third parties or non- parties in accordance with the Federal Rules of Civil Procedure, provided that the service will be made contemporaneously on all other parties, and that any party receiving discovery responses or documents will promptly notify and make available for inspection, within three days, any documents received from a third party or non-party. Furthermore, Judge Robreno fixed this discovery schedule: March 6, 2006 Parties may serve interrogatories limited solely to the identity of persons with knowledge of relevant information or the existence or location of relevant documents March 21, 2006 Filing of responses to interrogatories March 31, 2006 Filing of requests for admission relating to substantive topics April 10, 2006 Filing of interrogatories and admission Requests related to authenticity or admissibility of documents April 17, 2006 Deadline for responses to admission requests April 25, 2006 Deadline for responses to interrogatories On or before March 7, 2006, the Parties will exchange a preliminary disclosure of the identity of non-expert witnesses they anticipate calling on their case-in-chief at the Confirmation Hearing. The Parties will also exchange a preliminary list of the names of expert witnesses they anticipate calling at the Confirmation Hearing and a brief general description, per expert, of the nature of that expert's testimony no later than March 20, 2006. Depositions of non-expert witnesses may commence on March 8, 2006, and will be concluded by April 7, 2006. Any party that intends to offer a non-expert witness testimony at the Confirmation Hearing will serve and file with the District Court its non-expert witness list not later than April 10, 2006. Any person listed on a non- expert case-in-chief witness list not previously deposed may be deposed but in no event later than April 27, 2006. Expert Witnesses and Reports Judge Robreno directs any party wishing to call one or more experts to produce a report for each expert. Expert reports, copies of prior non-confidential reports and testimony for each expert will be served not later than March 27, 2006. Any party may designate a rebuttal expert, who may be the same as a previously designated expert, to opine on subject matters raised in the opposition's expert reports. All rebuttal expert reports will be served and may be filed with the Court not later than April 19, 2006. Depositions of experts may commence on April 21, 2006, and will be concluded by May 10, 2006. Discovery Of Expert-Related Materials Judge Robreno requires the Parties to produce all documents, data, and written information that the expert relied on or considered in forming opinions. Judge Robreno identified categories of data, information or documents that need not be disclosed by any party with respect to its expert witnesses, and are outside the scope of permissible discovery: (i) any notes of the expert's conversations with one or more attorneys for the Party offering the testimony of that expert; (ii) any notes or other writings prepared by an expert and not circulated by that expert; (iii) correspondence or memos, and notes of conversations, between the expert and other persons employed by or working for the same employer as the expert; and (iv) drafts of the expert's reports and preliminary or draft calculations or data runs prepared by the expert. The Parties will also consider and discuss potential further limitations on the scope of expert discovery. The Parties agree to a waiver to the extent that the specific agreements waive disclosure requirements under Rule 26(a)(2)(B) or (C) of the Federal Rules of Civil Procedure. Moreover, Judge Robreno directs the Parties to serve final trial witness and exhibit lists, as well as the Daubert motions, no later than May 12, 2006. Briefs related to the Confirmation Hearing will be filed with the District Court no later than May 15, 2006. All Parties will make designations of deposition testimony for use at the Confirmation Hearing by May 12, 2006, and counter- designations of deposition testimony by May 19, 2006. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 88; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATRIUM COS: S&P Upgrades Corporate Credit Rating to B from CCC+ --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Dallas, Texas-based Atrium Cos. Inc. and its parent, Atrium Corp. The corporate credit ratings were raised two notches to 'B' from 'CCC+'. All ratings were removed from CreditWatch where they were first placed with negative implications on June 2, 2005. The outlook is stable. "The rating actions follow Atrium's completion of a detailed accounting and financial review and, subsequently, its 2004 audited financial statements, alleviating our concerns that covenant violations could lead to a default," said Standard & Poor's credit analyst Lisa Wright. "The company also replaced its previous CEO, CFO, and controller; improved its accounting staff; established code of conduct and ethics policies; and is implementing new financial controls and an internal audit plan. In addition, Atrium has delivered its 2004 financial statements, thereby satisfying the covenants under its bank credit facility and senior discount notes." The company's accounts receivable securitization facility has an additional covenant requiring it to maintain a minimum corporate credit rating from Standard & Poor's and Moody's Investors Service, which has also now been satisfied. Atrium is a consolidator in the fragmented residential window industry, with about 60% of its sales going to new construction. "Relatively favorable end-market conditions and Atrium's business position support the ratings," Ms. Wright said, "but we could revise the outlook to negative if new construction markets or repair and remodeling demand weaken more than we expect or Atrium experiences significant raw-material cost increases that it cannot pass through to customers. We see a ratings upgrade as unlikely, given Atrium's very aggressive financial policy, which we expect will prevent the company from achieving meaningful debt reduction over the intermediate term." AUBURN ASSOCIATES: Case Summary & 18 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Auburn Associates, Ltd. dba Tamarack Apartments 6095 Lake Forrest Drive, N.W., Suite 270 Atlanta, Georgia 30328 Bankruptcy Case No.: 06-61491 Chapter 11 Petition Date: February 10, 2006 Court: Northern District of Georgia (Atlanta) Debtor's Counsel: Frank B. Wilensky, Esq. Macey, Wilensky, Cohen, Wittner & Kessler LLP 285 Peachtree Center Avenue, NE Suite 600, Marquis Two Tower Atlanta, Georgia 30303 Tel: (404) 584-1200 Fax: (404) 681-4355 Estimated Assets: $4,000,000 Estimated Debts: $5,660,000 Debtor's 18 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Twin City Security Systems Trade Debt $4,344 2200 Executive Park Drive Opelika, AL 36801 Dobbs Lawn Care Trade Debt $3,880 501 Webster Road, Lot 181 Auburn, AL 36832 Auburn Apartment Guide Trade Debt $3,360 15 Office Park Circle, Suite 211 Birmingham, AL 35223 Prosystems Trade Debt $2,830 278 Lee Road, Suite 400 Opelika, AL 36804 Charter Communications Trade Debt $1,865 Waste Management Trade Debt $1,002 Allen's Lawn Care Trade Debt $750 College Directory Publishing Trade Debt $650 Orkin Trade Debt $443 Rent.Com Trade Debt $188 AnswerTek, Inc. Trade Debt $157 Precision Glass Co. Trade Debt $155 Peaches 'N Clean Trade Debt $150 Great American Business Prod. Trade Debt $98 The Backyard Experience Trade Debt $77 Bryant Electric Service Trade Debt $68 Peachtree Business Products Trade Debt $27 Federal Express Trade Debt $13 AVAYA INC: Plans to Redeem 11-1/8% Senior Sec. Notes on April 3 --------------------------------------------------------------- Avaya Inc. (NYSE:AV), will redeem for cash all of its outstanding 11-1/8% senior secured notes due 2009 on April 3, 2006. As provided pursuant to the indenture governing the notes, the redemption price is $1,055.63 per $1,000 principal amount at maturity of notes. The current principal amount of notes outstanding as of February 7, 2006, is approximately $13.2 million. A notice of redemption is being mailed by The Bank of New York, the trustee for the notes, to all registered holders of notes. Copies of the notice of redemption and additional information relating to the procedures for redemption may be obtained from The Bank of New York by calling 1-800-254-2826. As reported in the Troubled Company Reporter on Jan. 27, 2006, the Company reported income from continuing operations of $71 million in the first fiscal quarter of 2006. Share Repurchase Program The Company repurchased 7.9 million shares of common stock during the first fiscal quarter at an average price of $11.32, or a total of $90 million. Since the inception of the company's share repurchase program during the second quarter of 2005, Avaya has repurchased a total of 19.5 million shares at an average price of $10.11, or a total of $197 million. Since the inception of the program the company has reduced its diluted common shares by three percent. Avaya, Inc. -- http://www.avaya.com/-- designs, builds and manages communications networks for more than one million businesses worldwide, including more than 90 percent of the FORTUNE 500(R). Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol telephony systems and communications software applications and services. * * * As reported in the Troubled Company Reporter on Jan. 31, 2005, Standard & Poor's Ratings Services raised its corporate credit rating on Basking Ridge, New Jersey-based Avaya, Inc., to 'BB' from 'B+'. "The rating upgrade reflects an improved business profile, characterized by a better market environment for enterprise telephony products, greater geographic and product coverage, and a leaner cost structure, along with a stronger financial profile, including improved profitability, sharp reductions in funded debt and an improved liquidity position," said Standard & Poor's credit analyst Joshua Davis. S&P says the outlook is revised to stable. As reported in the Troubled Company Reporter on Jan. 21, 2005, Moody's Investors Service upgraded the senior implied rating of Avaya, Inc., to Ba3 from B1. Moody's simultaneously withdrew the ratings of the 11-1/8% senior secured notes that have been substantially redeemed. The ratings outlook is positive. Ratings upgraded include: * Senior implied rating to Ba3 from B1 * Issuer rating to B1 from B2 * Shelf registration for senior unsecured debt and preferred stock to (P)B1 and (P)B3 from (P)B2 and (P)Caa1, respectively. Ratings withdrawn include: * Senior secured notes at B1. AXS-ONE: December 31 Balance Sheet Upside Down by $2.11 Million --------------------------------------------------------------- AXS-One Inc., reported its financial results for the fourth quarter and fiscal year ended December 31, 2005. For the three months ended Dec. 31, 2005, AXS-One incurred a net loss $1,647,000 compared to a net loss of $1,726,000 for the same period in 2004. For the 12 months ended Dec. 31, 2005, the Company incurred a net loss of $8,998,000 compared to a net loss of $5,212,000 for the 12-month period ended Dec. 31, 2005. For the 12 months ended Dec. 31, 2005, total revenues decreased to $32,808,000 from total revenues of $38,436,000 for the year ended Dec. 31, 2004. The Company had $3.6 million in cash and cash equivalents at Dec. 31, 2005, compared to the $4.8 million reported at Dec. 31, 2004. The Company currently has approximately $8.7 million in cash, which increased at the end of 2005 due to the prepayment of maintenance fees, specifically by one large customer, and a payment associated with a Records Compliance Management order from a major US health care provider for approximately $750,000. For the fiscal year ended Dec. 31, 2005, AXS-One reported total assets of $11,066,000 and total liabilities of $14,781,000. A full-text copy of AXS-One's Feb. 9 press release outlining 2005 financial results is available for free at: http://ResearchArchives.com/t/s?546 Headquartered in Rutherford, New Jersey, AXS-One Inc. -- http://www.axsone.com-- is a leading provider of high performance Records Compliance Management solutions. The AXS-One Compliance Platform enables organizations to implement secure, scalable and enforceable policies that address records management for corporate governance, legal discovery and industry regulations such as SEC17a-4, NASD 3010, Sarbanes-Oxley, HIPAA, The Patriot Act and Gramm-Leach Bliley. AXS-One's award-winning technology has been critically acclaimed as best of class and delivers digital archiving, business process management, electronic document delivery and integrated records disposition and discovery for e- mail, instant messaging, images, SAP and other corporate records. Founded in 1979, AXS-One has offices worldwide, including in the United States, Australia, Singapore, United Kingdom and South Africa. As of Dec. 31, 2005, AXS-One stockholders' deficit widened to $2,116,000 from a $1,024,000 deficit at Dec. 31, 2004. BALL CORP: Fitch Affirms Senior Unsecured Notes' Ratings at BB -------------------------------------------------------------- Fitch Ratings affirmed the ratings of Ball Corporation (BLL) as: -- Senior secured credit facilities at 'BB+' -- Issuer default rating (IDR) at 'BB' -- Senior unsecured notes at 'BB' At the same time, Fitch revised the Rating Outlook to Stable from Positive. The ratings affect approximately $1.6 billion of debt. The revised Outlook reflects BLL's increasing allocation of discretionary cash flow towards capital expenditures and share repurchases as well as lower margins. As a result, while BLL's credit profile remains comfortably within the current rating category, future reduction in debt and leverage are not likely to be substantial. The ratings are supported by BLL's: * leading market positions; * stability of end-markets and customers; and * solid free cash flow generation. Concerns include: * higher energy costs; * price pressures in certain business segments; * potential leverage hikes related to acquisition activities; and * higher share repurchases. During 2005, margins deteriorated due to higher energy and freight costs, as well as lower volumes in certain segments. While North American beverage can customers are under long-term contracts that allow BLL to pass through raw material costs, pricing has been competitive in the food can and international packaging businesses. In the North American beverage can business, the loss of some volume contributed to lower revenue and margins in 2005. Volumes in the North American beverage cans business in 2006 are expected to return to levels similar to 2004, as BLL regained the volume that was lost a year ago. Operating EBITDA during 2005 was $704 million (12.2% EBITDA margin), down from $742 million (13.6%) in 2004. Capital expenditures in 2005 were $292 million, up significantly from $196 million in 2004. As a part of its three-year expansion/improvement project, BLL: * expanded custom can capacity; * upgraded beverage can-end manufacturing capabilities; * converted a European beverage line to aluminum from steel; and * completed a new beverage can plant in Serbia. This project started in 2005, and capital expenditures are expected to remain high in 2006 and 2007. As a result of margin compression and higher capital expenditures, free cash flow (operating cash flow minus capital expenditures minus dividends) in 2005 fell to $225 million, compared to $301 million in 2004. The company spent over $350 million on share repurchases in 2005, which resulted in an increase in net debt. Fitch expects the company to continue to buy back shares in the absence of good acquisition candidates. In October 2005, the board authorized the repurchase of up to 12 million shares. In 2006, free cash flow is expected to be in the $210 million range, with expected share repurchases being about $150 million. While BLL did not make any acquisitions in 2005, the company continues to search for attractive opportunities. Total debt excluding A/R securitization was approximately $1.6 billion at Dec. 31, 2005, compared to $1.7 billion at Dec. 31, 2004. If the company does not make any acquisitions, net debt is expected to decline modestly in 2006. Ball Corporation manufactures metal and plastic packaging, primarily for beverages and foods, and is also a supplier of aerospace and other technologies and services to commercial and governmental customers. Major customers include: * Miller Brewing Company; * PepsiCo, Inc. and affiliates; * Coca-Cola Company and affiliates; * all bottlers of Pepsi-Cola and Coca-Cola branded beverages; and * various U.S. government agencies. BRANDYWINE REALTY: Sells Burnett Plaza for $172 Million ------------------------------------------------------- Brandywine Realty Trust (NYSE: BDN) entered into an agreement to sell Burnett Plaza, a 1,024,627-square-foot office property located in Fort Worth, Texas. The approximately $172 million transaction closes on Feb. 10, 2006. The purchaser, Harvard Property Trust, LLC, will assume the existing $114.2 million mortgage which has a maturity date of April 2015. In the short-term, the net proceeds to Brandywine of approximately $58 million will be used to reduce borrowings under the Company's revolving credit facility. The Company's strategy is to reinvest capital from Dallas asset sales into acquisition and development opportunities, primarily in its Northern Virginia submarkets. Burnett Plaza was constructed in 1983 and is approximately 97% occupied. After giving effect to the sale, the Company's Dallas portfolio represents approximately 11% of the Company's total square feet owned. "We are very pleased to have achieved our stated Dallas market capital recycling goal so swiftly after closing on our merger with Prentiss Properties," Gerard H. Sweeney, president and chief executive officer of Brandywine, stated. "With this first disposition in Dallas, we have reduced our investment in this market by almost one-third. We will continue to focus throughout the remainder of 2006 on re-deploying capital into our core markets." With headquarters in Plymouth Meeting, Pennsylvania and regional offices in Mt. Laurel, New Jersey and Richmond, Virginia, Brandywine Realty Trust -- http://www.brandywinerealty.com/-- is one of the Mid-Atlantic region's largest full service real estate companies. Brandywine owns, manages or has an ownership interest in 299 office and industrial properties, aggregating 24.2 million square feet. * * * As reported in the Troubled Company Reporter on Oct. 5, 2005, Moody's Investors Service affirmed the Baa3 senior unsecured debt rating of Brandywine Operating Partnership L.P. and Brandywine Realty Trust's preferred stock shelf at (P)Ba1. The rating outlook remains stable. These ratings were affirmed with a stable outlook: Brandywine Realty Operating Partnership, L.P.: * Senior debt at Baa3 * senior debt shelf at (P)Baa3 * subordinated debt shelf at (P)Ba1 Brandywine Realty Trust: * Preferred stock shelf at (P)Ba1 BROWNING-FERRIS: Moody's Affirms Junk Rating on $284 Mil. Bonds --------------------------------------------------------------- Moody's Investors Service affirmed the long-term debt ratings of Allied Waste North America, Inc., along with its wholly owned subsidiary, Browning-Ferris Industries, Inc., and its parent company Allied Waste Industries, Inc., and raised the outlook to stable from negative. At the same time Moody's affirmed the Corporate Family Rating of B2. The improvement in outlook to stable from negative reflects a more favorable pricing environment for the industry as a whole which, combined with the company's own pricing initiatives is driving enhanced internal revenue growth. Combined with increased cost efficiencies, top line growth is expected to lead to improved cash from operations and EBITDA margins. The outlook change also reflects anticipated stabilization of free cash flow starting in 2006 to debt ratios, albeit at low single digit levels. The stable outlook also takes into account the 2005 refinancing exercise which provided Allied with flexibility in terms of time and liquidity to address operational and financial challenges. In particular, the 2005 Credit Facility provided Allied with more liquidity, reduced interest expense by about $20 million, and reduced refinancing risk by prepaying $785 million of debt maturing over the next five years and improved cushions under financial covenant tests. The change in outlook is also supported by the company's efforts to drive operational efficiencies with respect to landfill and equipment maintenance, an extension of the company's ROIC/EBITDA-based incentive compensation plan down to district managers and general managers, along with investments in sales and marketing and management development. The affirmation of Allied's long-term ratings reflects Allied's geographic diversification, continued prominence in the US waste market, the increased financial flexibility from the 2005 credit facility refinancing and the anticipated stabilization of capital expenditures as a percentage of revenues leading to modest cash flow improvements. The ratings continue to be constrained by the company's high leverage with estimated adjusted debt to EBITDA ratios of about five times as of Dec. 31, 2005, and slightly negative free cash flow generation in 2005. Free cash flow generation is expected to turn positive in 2006 but will remain weak and this continues to leave Allied vulnerable to pressure from potential price competition on the revenue side and labor and fuel costs on the expense side. Although the company has made progress with its best practices program over the last six to nine months, ongoing implementation costs, potential fuel cost fluctuations and labor market conditions as US unemployment drops further may put pressure on operating margins. Although Moody's expects ongoing improvements in free cash flow, such improvements are likely to continue to be constrained by interest payments, ongoing capital expenditure levels and cash dividend payments on the preferred stock. Sustainable improvements in free cash flow to debt ratios in the high single digits could lead to an upgrade. Negative free cash flows, debt-financed acquisitions or additional indebtedness could lead to downward pressure on the ratings. Availability under Allied's $1.575 million committed revolving credit facility as of December 31, 2005 was about $1.2 billion. The facility is used for funding working capital needs and for outstanding letters of credit. Cash at Dec. 31, was $56 million and Moody's expects cash from operations, unrestricted cash and revolver usage during 2006 to provide sufficient liquidity to fund any seasonal working capital needs. Capital expenditures were $696 million in 2005 and are expected to remain at these levels in 2006. Moody's expects cash flow over the near term to cover mandatory debt maturities. Allied's next significant debt maturity is in 2008 when about $1.5 billion of senior notes are due. These ratings were affected: Issuer: Allied Waste Industries, Inc. * Corporate Family Rating affirmed at B2; * $230 million issue of 4.25% senior subordinated convertible bonds due 2034, affirmed at Caa2; * $345 million issue of 6.25% senior mandatory convertible preferred stock -- conversion date of April 2006, affirmed at Caa3; * $600 million issue of 6.25% senior mandatory convertible preferred stock -- conversion date of March 2008, affirmed at Caa3; * Speculative Grade Liquidity Rating, affirmed at SGL-2; The outlook for the ratings was raised to stable from negative. Issuer: Allied Waste North America, Inc. * $1.575 billion guaranteed senior secured revolving credit facility due 2010, affirmed at B1; * $1.275 billion guaranteed senior secured term loan due 2012, affirmed at B1; * $495 million guaranteed senior secured Tranche A Letter of Credit Facility due 2012, affirmed at B1; * $750 million issue of 8.5% guaranteed senior secured notes due 2008, affirmed at B2; * $600 million issue of 8.875% guaranteed senior secured notes due 2008, affirmed at B2; * $350 million issue of 6.5% guaranteed senior secured notes due 2010, affirmed at B2; * $400 million issue of 5.75% guaranteed senior secured notes due 2011, affirmed at B2; * $275 million issue of 6.375% guaranteed senior secured notes due 2011, affirmed at B2; * $251 million issue of 9.25% guaranteed senior secured notes due 2012, affirmed at B2; * $450 million issue of 7.875% guaranteed senior secured notes due 2013, affirmed at B2; * $425 million issue of 6.125% guaranteed senior secured notes due 2014, affirmed at B2; * $600 million issue of 7.25% guaranteed senior secured notes due 2015, affirmed at B2; * $400 million issue of 7.375% guaranteed senior unsecured notes due 2014, affirmed at Caa1; Issuer: Browning-Ferris Industries, Inc., assumed by Allied Waste North America, Inc. * $155 million issue of 6.375% senior secured notes due 2008, affirmed at B2; * $96 million issue of 9.25% secured debentures due 2021, affirmed at B2; * $292 million issue of 7.4% secured debentures due 2035, affirmed at B2; * Approximately $284 million of industrial revenue bonds, affirmed at Caa1, unless backed by letters of credit. Allied Waste North America, Inc., a wholly owned operating subsidiary of Allied Waste Industries, Inc., is based in Scottsdale, Arizona. Allied is a vertically integrated, non -hazardous solid waste management company providing collection, transfer, and recycling and disposal services for residential, commercial and industrial customers. The company had 2005 revenues of approximately $5.735 billion. CALPINE CORP: Wants Court to Approve Hiring of PwC as Auditors -------------------------------------------------------------- Calpine Corporation and its debtor-affiliates require the services of auditors. In this regard, the Debtors selected PricewaterhouseCoopers LLP because of the firm's extensive knowledge and experience in providing audit services in restructurings and reorganizations. The Firm enjoys an excellent reputation for services it has rendered in large and complex Chapter 11 cases on behalf of debtors and creditors throughout the United States. Matthew A. Cantor, Esq., at Kirkland & Ellis LLP, in New York City, relates that PricewaterhouseCoopers has extensive experience in delivering audit services in Chapter 11 cases, including, among others, Adelphia Communications Corporation, Anchor Glass Container Corporation, Century/ML Cable Venture, Crown Pacific Partners, KB Toys and TouchAmerica. Accordingly, the Debtors the U.S. Bankruptcy Court for the Southern District of New York's authority to employ PricewaterhouseCoopers, together with its wholly owned subsidiaries, agents and independent contractors, as their auditors, nunc pro tunc to the Petition Date. Under the engagement, PricewaterhouseCoopers will: (a) audit and review Calpine's consolidated financial statements at December 31, 2005, and for the year then ending; (b) obtain an understanding of Calpine's internal control over financial reporting, evaluate management's assessment of internal controls and test and evaluate the design and operating effectiveness of the internal controls; (c) analyze accounting issues and advise management regarding the proper accounting treatment of events; (d) assist in the preparation and filing of financial statements and disclosure documents of certain of the Debtors required by the Securities and Exchange Commission including Forms 10-K and 10-Q as required by applicable law or as requested by the Debtors; (e) assist in the preparation and filing of registration statements of certain of the Debtors required by the Securities and Exchange Commission in relation to debt and equity offerings; (f) audit certain standalone financial statements as required by various financing agreements; (g) perform a diagnostic of the control activities and control objectives planned to be included in a Type I SAS No. 70 Report for certain of the Debtors; (h) examine the assertions by certain of the Debtors relating to the processes for reporting natural gas and electricity transaction data as it relates to those standards set forth in Section V "Price Reporting Guidelines" of the FERC Policy Statement on Natural Gas and Electric Price Indices, Docket Number PL03-0-00 issued July 24, 2003; and (i) perform other auditing and accounting services for the Debtors as may be necessary or desirable. The parties' prepetition engagement letter provided for payment to PricewaterhouseCoopers according to a fixed fee arrangement between $11,602,000 and $12,492,000, composed of: * between $3,500,000 and $3,700,000 for the 2005 Group Audit; * between $910,000 and $1,050,000 for Quarterly Reviews; * between $4,200,000 and $4,750,000 for Sarbanes-Oxley work; * $2,892,000 for standalone audits of subsidiaries; and * $100,000 for audits of equity-method investments. The Debtors' Audit Committee, composed of the Debtors' Board of Directors, approved fees of $12,047,000, representing the mid- point of the high and low range for the fixed fee. This arrangement was converted into an hourly rate structure for the parties' postpetition Audit Engagement Letter dated December 20, 2005. The rate per hour for PricewaterhouseCoopers bankruptcy advisors by level of experience will be: Billing Category Hourly Rate ---------------- ----------- Partner $570 Director/Senior Manager $500 Manager $360 Senior Associate $260 Associate $205 According to Steve Kitson, a partner at PricewaterhouseCoopers, the Firm is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code and as required by Section 327(a). The Firm holds no interest adverse to the Debtors. 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. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. 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. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) CAPITAL AUTO: S&P Places BB Preliminary Rating on Class D Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Capital Auto Receivables Asset Trust 2006-1's $3.128 billion asset-backed notes series 2006-1. The preliminary ratings are based on information as of Feb. 10, 2006. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings assigned to the class A-1 through A-4, B, C, and D notes are based on credit enhancement in the form of: * subordinated certificates; * a nondeclining reserve account; * overcollateralization; and * excess spread. The amount of subordination, as a percentage of the initial aggregate discounted receivables balance, supporting the class A-1 through A-4, B, and C notes are: * 6.50%, * 2.50%, and * 1.00%, respectively. Additional credit support for the notes is provided by: * a nondeclining reserve account representing 0.50% of the initial aggregate discounted receivables balance; * overcollateralization representing 0.75% of the initial aggregate discounted receivables balance; and * excess spread. The trust will also issue class D notes with a principal balance of $31.513 million. The class D notes are subordinated to the class A, B, and C notes. Preliminary ratings assigned: Capital Auto Receivables Asset Trust 2006-1 Class Rating Amount (mil. $) ----- ------ --------------- A-1 A-1+ 510.000 A-2a AAA 450.000 A-2b AAA 1,060.000 A-3 AAA 650.000 A-4 AAA 252.835 B A 126.052 C BBB 47.270 D BB 31.513 CEEBRAID ACQUISITION: Case Summary & 13 Largest Unsec. Creditors ---------------------------------------------------------------- Debtor: Ceebraid Acquisition Corporation aka Ceebraid Signal Corporation 250 South Australian Avenue #1003 West Palm Beach, Florida 33401 Tel: (561) 835-4003 Bankruptcy Case No.: 06-10417 Type of Business: The Debtor specializes in recreating residential areas into boutique luxury communities. See http://ceebraidsignal.com/ Chapter 11 Petition Date: February 10, 2006 Court: Southern District of Florida (West Palm Beach) Judge: Paul G. Hyman, Jr. Debtor's Counsel: Luis Salazar, Esq. Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Tel: (305) 579-0500 Fax: (305) 579-0717 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 13 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Moriarity, Inc. Purchase Agreement $3,300,000 707 Southeast Third Avenue Suite 400 Fort Lauderdale, FL 33316-1155 New Valley Realty Loan $2,500,000 712 Fifth Avenue New York, New York 10019 Edward Cumisky and Purchase Agreement $2,400,000 Amanda Hunt 931 Sunrise Lane Fort Lauderdale, FL 33304 David Ewalt Purchase Agreement $2,350,000 1785 Riverside Drive Moore Haven, FL 33471 GZA GeoEnvironmental, Inc. Trade Debt $27,400 Appraisal First Trade Debt $25,000 Beilinson Architects Trade Debt $24,272 Jen-Mark Associates, Inc. Trade Debt $16,682 CB Richard Ellis Trade Debt $7,500 Siemon & Larson, P.A. Trade Debt $5,513 Consulting Engineers & Trade Debt $2,850 Science, Inc. Docu Solutions Trade Debt $81 West Side Reproductions Trade Debt $31 CENTENNIAL COMMS: Offers to Swap Sr. Notes for Registered Bonds --------------------------------------------------------------- Centennial Communications plans to exchange its Senior Floating Rate Notes and Senior Notes for registered bonds. The Company offers to exchange $350 million aggregate principal amount of Senior Floating Rate Notes due 2013 CUSIPS 15133VAD1 and U12968AC3 for registered bonds (CUSIP 15133VAE92) of the same aggregate principal amount and with the same terms of the old notes. The Company also offers to exchange $200 million aggregate principal amount of 10% Senior Notes due 2013 CUSIPS 15133VAF6 and U13968AD1 with registered bonds (CUSIP 15133VA41) of the same aggregate principal amount and with the same terms of the old notes. The terms of each series of Exchange Bonds are substantially identical to those of the applicable series of outstanding Restricted Bonds, except that the transfer restrictions, registration rights and additional interest provisions relating to the Restricted Bonds do not apply to the Exchange Bonds. The Company will not receive any proceeds from the exchange offers. There is no established trading market for the Exchange Bonds, although the Restricted Bonds currently trade on the Portal Market, Centennial says. Restricted Bonds tendered in the exchange offers must be in denominations of principal amount of $2,000 and any integral multiple of $1,000. The Notes are senior unsecured indebtedness of the Company ranking pari passu with all of the Company's other existing and future unsubordinated obligations. The Notes are effectively junior to the Company's secured obligations to the extent of the value of the Company's assets securing the obligations. After giving effect to the exchange offer as if each had occurred on November 30, 2005: -- there would have been $550.0 million outstanding under the senior credit facility and $60.6 million outstanding of capitalized leases and tower obligations, all of which was secured indebtedness; -- there would have been $500.0 million outstanding under the 2013 Senior Notes, $325.0 million outstanding under the 2014 Senior Notes and $550.0 million outstanding under the Restricted Bonds, all of which was senior unsecured indebtedness; -- there would have been $145.0 million outstanding under the 2008 Senior Subordinated Notes, all of which was subordinated indebtedness; and -- Centennial's Subsidiaries would have had total Indebtedness and other liabilities of approximately $2.4 billion, including Indebtedness on which Centennial is a co-obligor, all of which would be effectively senior to the Notes. A full-text copy of Centennial's Registration Statement is available for free at http://ResearchArchives.com/t/s?547 Based in Wall, N.J., Centennial Communications, (NASDAQ: CYCL) -- http://www.centennialwireless.com/-- is a leading provider of regional wireless and integrated communications services in the United States and the Caribbean with approximately 1.3 million wireless subscribers and 326,400 access lines and equivalents. The U.S. business owns and operates wireless networks in the Midwest and Southeast covering parts of six states. Centennial's Caribbean business owns and operates wireless networks in Puerto Rico, the Dominican Republic and the U.S. Virgin Islands and provides facilities-based integrated voice, data and Internet solutions. Welsh, Carson, Anderson & Stowe and an affiliate of the Blackstone Group are controlling shareholders of Centennial. At Nov. 30, 2005, Centennial Communications' balance sheet showed a $490,868,000 stockholders' deficit, compared to a $518,432,000 deficit at May 31, 2005. CENTRAL PARKING: Earns $17.9 Mil. in First Quarter Ended Dec. 31 ---------------------------------------------------------------- Central Parking Corporation (NYSE: CPC) reported earnings from continuing operations for the first quarter ended Dec. 31, 2005, of $17 million compared with $6.6 million earned in the first quarter of the previous fiscal year. Net earnings for the first quarter of fiscal 2006 were $18 million compared with $2.9 million in the year earlier period. "Earnings from continuing operations for the first quarter of fiscal 2006 exceeded our expectations," Emanuel Eads, President and Chief Executive Officer said. "Our program of opportunistic property sales again was accretive, generating approximately $41 million in proceeds and $23.0 million in pre-tax, property related gains during the quarter. Our efforts to reduce costs also produced positive results as cost of management contracts decreased by $4.4 million, resulting in a significant improvement in management contract margins. Excluding $2.8 million in costs relating to the recently completed United Kingdom investigation, general and administrative costs decreased from $18.9 million in the first quarter of last year to $18.1 million, or 11% of revenues. "As planned, revenues were lower than the first quarter of last year primarily due to closed locations, including a number of low margin and unprofitable locations that were closed as part of our initiative to improve profit margins. Revenues also were reduced by several other factors, including the reclassification of certain locations from leased to management and the effects of Hurricanes Katrina and Wilma ($2.2 million). The Dutch Auction tender offer was successfully completed during the quarter resulting in the purchase of approximately 13% of the Company's outstanding shares of common stock for an aggregate purchase price of $75.3 million. Proceeds from property sales were used to reduce debt incurred in connection with the tender offer resulting in a net increase in debt of $49.1 million in the quarter." "We are moving ahead with the execution of other components of the strategic plan we announced in August. Several marginal and low growth markets have been divested and we expect to divest additional domestic and international markets in the coming months. Our initiative to target non-traditional parking market segments with significant growth potential continues on track with the recent renewal of two major privatized toll road contracts, the Chicago Skyway and the Orange County toll road system. The extension of these two contracts is a strong endorsement of our ability to manage toll collection services for major toll road systems. Additionally, our USA Parking subsidiary, which targets the hospitality valet market, continues its expansion with the recent signing of contracts to manage parking operations at the LAX Sheraton, the Westin Ft. Lauderdale and the new Mandarin Hotel currently under construction in Chicago." "Overall, we are pleased with the results of the quarter. Operating earnings, excluding property gains, were on plan for the first quarter but we still have much work ahead as we continue the execution of our strategic plan. We expect to exceed our earlier guidance of $0.50 to $0.57 for earnings from continuing operations, including property-related gains or losses, for fiscal 2006 due primarily to the higher than expected property gains during the first quarter," Eads concluded. A full-text copy of Central Parking Corporation's quarterly financial reports for the first quarter ended Dec. 31, 2005, is available at no charge at http://ResearchArchives.com/t/s?54b Headquartered in Nashville, Tennessee, Central Parking Corporation is a leading global provider of parking and transportation management services. As of June 30, 2005, the Company operated more than 3,400 parking facilities containing more than 1.5 million spaces at locations in 37 states, the District of Columbia, Canada, Puerto Rico, the United Kingdom, the Republic of Ireland, Mexico, Chile, Peru, Colombia, Venezuela, Germany, Switzerland, Poland, Spain, Greece and Italy. * * * Moody's Investor Service rates Central Parking Corporation's LT Corporate Family Rating and Bank Loan Debt Rating at Ba3. Standard and Poor's rates Central Parking Corporation's LT Foreign Issuer Credit Rating and LT Local Issuer Credit Rating at B+. CHAMPION ENTERPRISES: Releases Financials for Fourth Quarter 2005 ----------------------------------------------------------------- Champion Enterprises, Inc. (NYSE: CHB) reported results for the fourth quarter and fiscal year ended Dec. 31, 2005. Revenues for the quarter increased 44% to $375.5 million, compared to $260.1 million for the fourth quarter of 2004. Income from continuing operations increased 67% to $6.2 million, compared to $3.7 million. Net income in the fourth quarter of 2005 was reduced $9.0 million, for the previously announced cost of debt retirement. Revenues for the full year 2005 increased 25% to $1.27 billion, compared to $1.01 billion reported for 2004. Income from continuing operations in 2005 increased 82% to $42.2 million compared to $23.1 million last year. Net income for 2005 increased 122% to $37.8 million, versus $17.0 million in 2004. Fourth Quarter 2005 Highlights -- Manufacturing net sales increased 38%, to $350.2 million, from $253.7 million in the fourth quarter of 2004. These results were favorably impacted by the shipment of 1,372 manufactured homes to the Federal Emergency Management Association in the fourth quarter, representing revenues totaling approximately $47 million. The remaining 628 homes have now been shipped, and represent revenues totaling approximately $22 million that will be recorded in the first quarter of 2006; -- Excluding shipments to FEMA, manufacturing net sales increased 19% for the fourth quarter; -- Manufacturing segment income for the fourth quarter climbed 75%, to $27.0 million, from $15.4 million in the fourth quarter of 2004; -- The Company reported manufacturing margins of 7.7%, compared to 6.1% in the fourth quarter of 2004, making this the company's eleventh consecutive quarter of year-over-year improving segment margins; -- Revenues from the sale of modular homes increased 78% to $83.2 million, or approximately 24% of manufacturing revenues, during the fourth quarter of 2005, compared to $46.8 million, or approximately 19% of manufacturing revenues, for the same period last year; -- Backlogs at the end of 2005 totaled approximately $147 million, compared to $90 million at the prior year-end and $170 million at the end of the third quarter of 2005 (excluding the FEMA order); -- Champion's average selling price per home increased 4% to $45,600, resulting both from continued increases in raw material costs and a greater mix of modular homes sold, despite the impact of the lower average selling price of the FEMA homes shipped during the quarter; -- The Company's California-based retail segment sales increased 24% to $34.6 million, compared to $28.0 million for the fourth quarter of 2004. Retail segment income was $2.1 million for the quarter, compared to $1.3 million in the prior year quarter; -- During the fourth quarter of 2005, Champion completed its tender offer and consent solicitation for its 11-1/4% Senior Notes due 2007. In connection with the tender, the Company entered into a new $200 million credit facility to finance the tender, provide working capital through a revolving credit facility and a back up credit facility to support the Company's letters of credit. -- Cash used for continuing operations was $1.3 million for the quarter driven by a significant increase in working capital. The company's contract with FEMA negatively impacted year- end investment in working capital by an estimated $17 million, all of which is expected to reverse during the first quarter of 2006. This was caused by higher year-end inventory and receivables as a result of FEMA's inability to take delivery of all 2,000 homes as scheduled; -- Cash and cash equivalents were approximately $127 million at quarter end; and -- Tax loss carryforwards total approximately $180 million as of the end of 2005. Champion elected in the fourth quarter to adopt SFAS 123(R), "Share-Based Payment". The adoption of SFAS 123(R) calls for the valuation of qualifying stock compensation at the grant date share price. The adoption was effective as of the beginning of 2005 and required the restatement of previously reported quarters in 2005. An aggregate reduction in stock compensation expense totaling $1.3 million was recorded, including $1.4 million in the third quarter of 2005, resulting in restated income from continuing operations for that quarter. "During the fourth quarter, we made significant strides in increasing our modular home sales, while continuing to focus on operational improvements and improving our balance sheet," William Griffiths, president and CEO of Champion Enterprises, Inc., said. "In response to the call from FEMA for manufactured homes, we quickly produced 2,000 homes in 13 different factories and, as a result, we were able to meet our customers' demand for our other products. We remain focused on our lean manufacturing program and driving continued margin improvement, despite the ongoing challenge of higher raw materials costs." "In 2005 we demonstrated tremendous progress on many fronts -- increasing revenues and earnings, further strengthening our balance sheet, and improving our manufacturing margins, which reached 7.6 percent for the year -- and we continue to be enthusiastic about our future," Griffiths said. "There is still much to accomplish and we expect our substantial momentum to continue into 2006 in our effort to build a better Champion." "Looking ahead, we are encouraged by the strength we continue to see in many of our regional operations. Our backlogs remain strong, and we believe that our modular homes are well positioned to play a prominent role later in 2006 as the Gulf Coast rebuilding begins in earnest. In the meantime, we remain focused on driving shareholder value through improved fundamentals and redeployment of our substantial cash resources," Griffiths concluded. Headquartered in Auburn Hills, Michigan, Champion Enterprises, Inc. -- http://www.championhomes.com/-- a manufacturer of factory-built housing, has produced more than 1.6 million homes through its family of homebuilders since 1953. Champion operates 32 manufacturing facilities in North America and partners with over 3,000 independent retailers, builders and developers. * * * As previously reported in the Troubled Company Reporter on Jan. 9, 2006, Standard & Poor's Ratings Services raised its rating on the 7.625% senior notes due 2009 from Champion Enterprises Inc. (Champion; B+/Positive/--) to 'B+' from 'B-'. At the same time, the rating is removed from CreditWatch with positive implications, where it was placed Oct. 7, 2005. COLLINS & AIKMAN: Wants to Modify JPMorgan DIP Loan Agreement ------------------------------------------------------------- Collins & Aikman Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Michigan to a approve a third amendment of their DIP Credit Agreement with JPMorgan Chase Bank, NA, and certain other lenders. According to the Debtors, the amendment will ensure that they are able to consummate certain IP transactions and remain in full compliance with the DIP Credit Agreement. The Debtors have interests in intellectual property, which: (i) will be licensed or assigned to IAC Acquisition Corporation Limited in exchange for various licensing agreements and other consideration, including $11,046,686 cash, pursuant to a Master Sale Agreement Relating to the Business of Collins & Aikman Group Companies (In Administration), dated as of November 28, 2005, with the English court-appointed administrators of Collins & Aikman Europe S.A. and its affiliated European debtors; and (ii) may be licensed or assigned to certain prospective buyers of assets subject to the U.K. Administration in exchange for various licensing agreements and other consideration, including $1,453,314 cash. The Debtors are also seeking to sell 100% of their equity interest in Collins & Aikman MOBIS, LLC -- a non-debtor joint venture between Collins & Aikman Products Co. and Hyundai MOBIS -- and receive repayment of related intercompany obligations aggregating $8,382,000. The Debtors also seek to monetize certain annuity contracts underlying Products' prepetition Supplemental Employee Retirement Program and utilize cash held in certain of Products' rabbi trust accounts for $6,600,000. However, in its current form, the Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, among the Debtors, JPMorgan Chase Bank, NA, and certain other lenders, restricts the Debtors' ability to sell certain assets. Consequently, the IP Transaction requires the approval of the DIP Lenders. In this regard, the Debtors and the DIP Lenders worked to structure and negotiate a reasonable amendment to the DIP Credit Agreement that accommodates the Debtors' ongoing operational requirements. The parties engaged in extensive arm's-length negotiations concerning the terms of the Amendment and the reasonable amount of an amendment fee. Marc J. Carmel, Esq., at Kirkland & Ellis LLP, in New York, tells the Court that the Amendment is also necessary to permit the Debtors to: -- engage in certain other transactions currently restricted; -- modify provisions governing the sharing of proceeds the Debtors receive from certain transactions; -- increase the Debtors' ability to sell, dispose of and transfer certain non-core assets; and -- continue the moratorium on the Borrowing Base, as defined in the DIP Credit Agreement. The material terms of the Amendment are: A. Consent to Certain Transactions The DIP Lenders consent to: (1) the IP Transaction and certain similar transactions with prospective buyers of assets of the Debtors' European subsidiaries; (2) the sale of 100% of the Debtors' equity interest in Collins & Aikman MOBIS; (3) the monetization and collection of assets held by the Debtors in connection with the prepetition supplemental employee retirement program, including the monetization of the rabbi trust accounts; (4) the dissolution of Waterstone Insurance, Inc., a non- Debtor subsidiary of Products; and (5) the sale of 100% of the Debtors' equity interest in a non-Debtor European subsidiary. B. Application of Proceeds (1) With respect to the consented transactions, the Amendment sets forth the allocation of the proceeds between the Debtors and the Lenders and the parameters regarding the Debtors' use of those proceeds. (2) With respect to amounts received by the Debtors from their claims and interests in their European subsidiaries, the proceeds will be escrowed pending agreement among the requisite Lenders, the Debtors and the Agent for the application of those amounts. C. Modifications to Negative Covenants (1) The Amendment modifies the negative covenant restricting the Indebtedness incurred by certain of the Debtors' foreign subsidiaries to allow the Debtors to incur additional Indebtedness. (2) The Amendment modifies the negative covenant restricting the Indebtedness incurred by the Debtors to allow the recharacterization as a capitalized lease of operating leases in Hermasillo, Mexico. (3) The Amendment modifies the negative covenant restricting the Debtors' ability to dispose of surplus or uneconomical assets by increasing the aggregate amount of those assets from $2,500,000 to $7,500,000. (4) The Amendment modifies the negative covenant restricting the Debtors' ability to dispose of assets and make investments in foreign subsidiaries by allowing the Debtors to dispose of or transfer equipment having a net book value up to $10,000,000 to certain foreign subsidiaries. D. Other Modifications (1) To accommodate the Debtors' expected operational needs, the Amendment suspends the Borrowing Base through September 30, 2006. (2) The Amendment includes certain conditions to effectiveness of the Amendment, including the approval of Required Lenders and payment of an amendment fee to each Lender that executes the Amendment by February 8, 2006, of an amount equal to 0.125% of the outstanding principal amount of the Lender's Tranche B Loans and Tranche A Commitment. In addition, the Debtors are required to pay JPMorgan an arrangement fee. Mr. Carmel relates that in addition to providing the Debtors with additional liquidity by allowing them to share in the proceeds from disposition of the Lenders' collateral, the Amendment permits the Debtors flexibility to make certain investments, transfers and dispositions of non-core assets to allow them to more productively use their assets. "The Amendment, including the Debtors' payment of the Amendment Fee . . . is an important component of the Debtors' ongoing restructuring efforts," Mr. Carmel says. A full-text copy of the Third Amendment is available for free at http://researcharchives.com/t/s?54c Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represents C&A in its restructuring. Lazard Freres & Co., LLC, provides the Debtor with investment banking services. Michael S. Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors Committee. When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 215/945-7000) COMPANHIA ENERGETICA: Moody's Rates $800 Million Term Notes at B3 ----------------------------------------------------------------- Moody's Investors Service assigned a B3 foreign currency rating to Companhia Energetica de Sao Paulo's $800 million Medium Term Notes Program, governed by UK law. Notes issued under the MTN Program will be issued as rule 144A securities or outside the United States under Regulation S and will constitute unsecured unsubordinated obligations of the issuer. Concurrently, Moody's affirmed CESP's B2 global local currency corporate family rating. The ratings' outlook is stable. The B3 FC rating assigned to the company's USD 800 million unsubordinated unsecured Medium-Term Notes Program reflects the B2 GLC corporate family rating of CESP and the structural subordination of the notes issued under the MTN Program to the existing secured debt of CESP, estimated at about 25% of the company's total adjusted debt as of Sept. 30, 2005. The B3 FC rating of the MTN Program is not constrained by Brazil's current Ba3 sovereign ceiling. Recently CESP was assigned a B2 GLC corporate family rating, which was based on Moody's rating methodology for Government -Related Issuers. CESP's GLC corporate family rating reflects its baseline rating and incorporates Moody's view of the medium default dependence between CESP and the State of Sao Paulo in addition to Moody's expectation of a medium level of support that would be provided by the State if the company were to require an extraordinary bailout. The baseline rating of CESP reflects Moody's view of the very high fundamental credit risk of CESP, and consequently, of a high likelihood that the company will require an extraordinary bailout in the foreseeable future. To a large extent, this is based on the high refinancing risk deriving from its excessive indebtedness when compared to cash flow generation. The baseline rating also incorporates the company's significant devaluation and interest rate risks, the hydrology risk, and the still existing uncertainties related to Brazil's regulatory framework. The baseline rating is, however, supported by the company's position as Brazil's second largest power generator and its strong operating margins. Headquartered in Sao Paulo -- Brazil, CESP is the country's second largest power generator, majority owned by the State of Sao Paulo. CESP operates 6 hydroelectric plants with total capacity of 7,456 MW and reported net revenues of BRL 1,914 million in the last 12 months through Sept. 30, 2005. CONEXANT SYSTEMS: Jury Returns $112 Mil. Verdict in Patent Dispute ------------------------------------------------------------------ Conexant Systems, Inc. (NASDAQ: CNXT), reported a jury in the U.S. District Court for the District of New Jersey reached a verdict on patent infringement counterclaims filed by Texas Instruments, Inc., Stanford University and its Board of Trustees, and Stanford University OTL, LLC (Texas Instruments) and found that GlobespanVirata, now a subsidiary of Conexant, willfully infringed three patents related to asymmetric digital subscriber line (ADSL) technology. In June 2003, GlobespanVirata, which merged with Conexant in February 2004, filed a complaint against Texas Instruments in the U.S. District Court for the District of New Jersey claiming that Texas Instruments violated U.S. antitrust law by creating an illegal patent pool, manipulating the patent process, and abusing the process for setting standards related to ADSL technology. In August 2003, Texas Instruments filed counterclaims alleging that GlobespanVirata infringed certain ADSL patents. In mid-2004, the case was split into two phases, patent and antitrust, with the patent phase going to trial first. Upon the merger of GlobespanVirata and Conexant in February 2004, Conexant inherited this legal dispute. The trial on the patent phase commenced on Jan. 4, 2006, in federal district court in Trenton, New Jersey. The jury announced its verdict and awarded $112 million in damages to Texas Instruments, which the judge in the case has the authority to enhance. In this two-phase case, no payment of damages, whether from Conexant to Texas Instruments, or from Texas Instruments to Conexant, will be required until the conclusion of the second phase. The jury trial for the second phase is currently scheduled for October of this year. "We are extremely disappointed with the jury's verdict in the first phase of the case and plan to file several post-trial motions and an appeal," said Dennis O'Reilly, Conexant senior vice president and chief legal officer. "The second phase of the case, which we believe involves a serious violation of U.S. antitrust law by Texas Instruments, is scheduled to begin in the fall. Should we prevail on all claims in the antitrust phase, the damages awarded today would be eliminated, and we would expect significant damages to be awarded to Conexant from Texas Instruments." Conexant Systems, Inc. -- http://www.conexant.com/-- is a fabless semiconductor company. The company has approximately 2,400 employees worldwide, and is headquartered in Newport Beach, California. * * * As reported in the Troubled Company Reporter on Dec. 20, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on Newport Beach, California-based Conexant Systems, Inc., to 'B-' from 'B' on projections of sharply reduced sales and profitability over the next few quarters. The outlook is negative. CUMMINS INC: Gets SEC Order on Financial Reporting Violations ------------------------------------------------------------- The United States Securities and Exchange Commission entered an administrative cease and desist order pursuant to which it found that Cummins Inc. had violated certain financial reporting, books and records and internal controls provisions of the federal securities laws and ordered the Company not to violate those provisions in the future. The February 7, 2006, cease and desist order was entered with the Company's consent, and it brought to a close an informal inquiry by the SEC staff that had commenced in January 2003 when the Company disclosed the existence of a potential understatement of its historical accounts payable accounts, which, after a re-audit of the Company's historical financial results, was corrected when the Company filed its 2002 Form 10-K, including restated results for 2000 and 2001, on August 4, 2003. The SEC did not find that the Company had violated the anti-fraud provisions of the federal securities laws, and the Company will not be required to pay any fine or penalty in connection with the settlement. The Company cooperated fully with the SEC staff throughout the course of its informal inquiry. Cummins Inc. -- http://www.cummins.com/-- a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in more than 160 countries through its network of 550 Company-owned and independent distributor facilities and more than 5,000 dealer locations. With more than 28,000 employees worldwide, Cummins reported sales of $8.4 billion in 2004. * * * As reported in the Troubled Company Reporter on Sept. 20, 2005, Moody's Investors Service raised its rating of Cummins Inc.'s debt securities (senior unsecured to Ba1 from Ba2), and also affirmed the company's Ba1 corporate family rating and SGL-1 speculative grade liquidity rating. The rating outlook is changed to positive from stable. As reported in the Troubled Company Reporter on Aug. 5, 2005, Standard & Poor's Ratings Services raised its rating on the $28,000,000 Structured Asset Trust Unit Repackagings Cummins Engine Co. Debenture-Backed Series 2001-4 certificates to 'BBB-' from 'BB+'. DIRECTED ELECTRONICS: S&P Upgrades Corporate Credit Rating to BB- ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Directed Electronics Inc. (DEI) to 'BB-' from 'B+' and removed the ratings from CreditWatch with positive implications, where they were placed on Nov. 29, 2005. At the same time, Standard & Poor's raised its rating on DEI's senior secured credit facility to 'BB-' from 'B+'. The '3' recovery rating assigned to the senior secured facility was affirmed. The rating outlook is stable. "The upgrades reflect DEI's more conservative financial policy, including a stronger balance sheet and greater financial flexibility following its December 2005 IPO of common shares, which was followed by debt reduction," said Standard & Poor's credit analyst Nancy C. Messer. "In addition, the company made a third amendment to its senior credit facility, effective Sept. 21, 2005, that enhanced its liquidity by increasing the revolving credit facility commitment and term-loan size." Vista, California-based DEI had pro forma total balance sheet debt, reflecting debt reduction following the IPO, of $200 million at Sept. 30, 2005. Proceeds of the stock offering were used to fully prepay both the company's unrated $37 million senior subordinated notes and its unrated $37 million junior subordinated notes. Additional funds from the offering were used to terminate a management agreement with unrated Trivest Partners LP. Trivest, which bought a controlling stake in DEI in 1999, will remain a shareholder. DEI's credit protection measures improved significantly following the IPO. However, DEI will still be characterized by an aggressively leveraged financial profile and vulnerable business profile. Standard & Poor's ratings incorporate the assumption that DEI's financial controls will be brought into compliance with requirements in the near term, since the company has identified certain material weaknesses in its internal control over financial reporting. Toward this end, the financial management team was recently augmented with a new CFO having relevant experience with a publicly traded company. DEI is the world's largest designer and marketer of consumer- branded, professionally installed electronic automotive vehicle security and convenience systems. The company also makes and markets premium home audio equipment and certain SIRIUS-branded satellite radio products marketed to consumers. Auto security and convenience products are the largest contributors to DEI's revenues, followed by: * SIRIUS-branded products, * mobile audio and video products, and * home audio products. DWJ ENTERPRISES: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: DWJ Enterprises, Inc. dba Buchanan Visual Communications 12400 Ford Dallas, Texas 75234 Bankruptcy Case No.: 06-30586 Type of Business: The Debtor is a Dallas-based printing company that specializes in commercial advertising and Web printing. See http://www.buchananvisual.com/ Chapter 11 Petition Date: February 13, 2006 Court: Northern District of Texas (Dallas) Judge: Barbara J. Houser Debtor's Counsel: Eric A. Liepins, Esq. Eric A. Liepins, P.C. 12770 Coit Road, Suite 1100 Dallas, Texas 75251 Tel: (972) 991-5591 Fax: (972) 991-5788 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Unisource $856,350 P.O. Box 849089 Dallas, TX 75284-9089 Clampitt Paper Company of Dallas $418,817 9207 Ambassador Row Dallas, Texas 75247 American Express (Corporate) $293,689 200002 North 19th Avenue Phoenix, Arizona 85027 RIS Paper/Paper USA $257,923 1705 Suckle Highway Pennsauken, NJ 08110 BRW Paper Co., Inc. $176,945 Printer's Service $127,160 Enovation Graphics Systems, Inc. $125,142 INX International Ink Co. $97,115 Carrollton-Farmers Branch ISD $86,478 American Express (Corporate Executive) $78,365 Dallas County Tax Assessor-Collector $53,400 Graphic Converting Ltd. $50,536 Suez Emergency Resources NA, Inc. $50,082 Goelzer Industries $46,641 AFCO Credit Corporation $38,126 People's Capital & Leasing Corp. $34,249 First Choice Power $31,786 Team Air Express, Inc. $33,294 Sterling Personnel Services $32,000 Xpedx $28,521 EMMIS COMMS: Will Redeem Remaining $120M of Sr. Notes on Mar. 9 --------------------------------------------------------------- Emmis Communications Corporation called for redemption the remaining $120 million aggregate outstanding principal amount of its Floating Rate Senior Notes due 2012, pursuant to the terms of the Indenture, dated June 21, 2005, between the Company and The Bank of Nova Scotia Trust Company of New York, as trustee. As reported in the Troubled Company Reporter on Dec. 29, 2005, the Company first called for redemption of $230 million aggregate outstanding principal amount of its Floating Rate Senior Notes. $110 million aggregate outstanding principal amount of the notes were redeemed on Jan. 23, 2006. The Notes will be redeemed on March 9, 2006. The redemption price for the Notes to be redeemed is $1,000.00 per $1,000 in aggregate principal amount of the Notes, plus accrued and unpaid interest on the Notes to be redeemed to the Redemption Date. Emmis Communications Corporation -- http://www.emmis.com/-- is an Indianapolis-based diversified media firm with radio broadcasting, television broadcasting and magazine publishing operations. Emmis owns 23 FM and 2 AM domestic radio stations serving the nation's largest markets of New York, Los Angeles and Chicago as well as Phoenix, St. Louis, Austin, Indianapolis and Terre Haute, Indiana. Emmis has recently announced its intent to seek strategic alternatives for its 16 television stations, which will result in the sale of all or a portion of its television assets. In addition, Emmis owns a radio network, international radio stations, regional and specialty magazines and ancillary businesses in broadcast sales and book publishing. * * * As reported in the Troubled Company Reporter on Oct. 5, 2005, Moody's Investors Service affirmed the long-term ratings of Emmis Communications Corporation and its wholly owned subsidiary, Emmis Operating Company, and changed the outlook to positive. Emmis Operating Company: * Ba2 rating on its senior secured credit facilities; and * B2 rating on its $375 million of senior subordinated notes due 2012. Emmis Communications Corporation: * B3 rating on the $350 million senior unsecured floating rate notes due 2012, * B3 rating on the 12.5% senior discount notes due 2011; * Caa1 rating on the $143.8 million of cumulative convertible preferred stock; * Ba3 corporate family rating; and * SGL-3 rating. EQUINOX HOLDINGS: Moody's Rates $290 Mil. Sr. Debt Offering at B3 ----------------------------------------------------------------- Moody's Investors Service assigned ratings to Equinox Holdings, Inc., in connection with its acquisition by The Related Companies, L.P. Related is a New York limited partnership engaged in the business of developing, managing and financing domestic and international real estate. Moody's assigned a B3 rating to the $290 million senior note offering, a B3 corporate family rating and a stable outlook. Proceeds from the $290 million of senior notes due 2012, $115 million of discount notes of Equinox's parent and a $115 million cash equity contribution were used to fund a tender offer for the company's $160 million of outstanding 9% senior notes due 2009, purchase outstanding equity securities and pay related fees and expenses. Moody's downgraded the rating on Equinox's senior notes due 2009 to Caa1 from B3, concluding the review for downgrade initiated on Dec. 20, 2005. Equinox announced on Feb. 10, 2006 that in response to its cash tender offer and consent solicitation, it had received and accepted for purchase valid tenders and consents from holders of approximately 98.9% of the outstanding $160 million senior notes due 2009. The Caa1 rating on the remaining senior notes due 2009 reflects the lack of ongoing protection for note holders, given that the notes were stripped of all credit support and covenant protection. Moody's has withdrawn all the other credit ratings of Equinox Holdings, Inc., and will withdraw the rating on the senior notes due 2009 in the very near term, given that over 98% of the notes have been tendered. The ratings assigned to Equinox reflect high levels of debt pro forma for the acquisition, near-term expectations of negative free cash flow from operations due to a planned aggressive growth strategy and the relatively small size and geographically concentrated nature of company's fitness club base. The ratings also consider improving financial performance, the expected maturation of the club base and growth opportunities in the fitness industry. Moody's assigned these ratings to Equinox Holdings, Inc.: * $290 million senior unsecured notes (guaranteed) due 2012, rated B3 * Corporate family rating, rated B3 The ratings outlook is stable Equinox has rapidly expanded its club base over the last few years and now operates 32 upscale clubs, with 19 clubs in the New York metropolitan region. The New York clubs are expected to account for about 80% of revenues and over 90% of operating profit in 2005. Equinox began expanding outside of the New York region in 2001 and now has 7 clubs in Southern California, 1 club in Northern California, 4 clubs in Chicago and 1 club in South Florida. Since these clubs are in the first few years of operation, in aggregate they are not currently making a meaningful contribution to profitability given the degree of their maturation. The ratings reflect significant exposure to economic and competitive conditions in the New York area as well as a dependence on just 13 mature New York clubs for most of company's profitability and cash flow. Moody's expects the company's revenue and operating profit to become more diversified geographically as recently opened clubs outside of New York mature. Equinox fitness clubs target an upscale demographic segment and offer a wide variety of ancillary programs including personal training, group fitness classes, spas and retail shops. Revenue from ancillary programs has grown rapidly in the last few years and account for about 34% of total revenue. These ancillary services tend to generate high operating margins and have a positive impact on member retention rates. The company's upscale focus and success in selling ancillary services is evident in the relatively high average annual revenue per member and EBITDA margins. Equinox should continue to benefit from its favorable brand recognition, positive long term industry trends and strong track record of growth. Fitness industry revenues and memberships have grown consistently during the last decade driven in part by the aging of the baby boomers and the growing awareness of the health implications of obesity. However, competition in the industry has increased rapidly as well reflecting low barriers to entry. A weakening economy or increased competition for Equinox's upscale target market could make it harder for the company to attract new members and result in increasing member attrition rates. The financial performance of the company's rapidly expanding club base has been solid over the last few years. Revenues grew from $116 million in 2003 to about $168 million in LTM period. The growth in revenues was primarily because of an increase in the member base, primarily due to fitness club openings, growth in personal training services and member price increases. Operating income increased from $18 million in 2003 to $24 million in the LTM period. Operating margin, however, decreased from about 15.6% in 2004 to about 14.4 % in the LTM period primarily reflecting an increase in general and administrative expenses as a percentage of revenues. Despite the growth in revenues, cash flow from operations has increased only marginally from $26 million in 2003 to $30 million in the LTM period. Cash flows have been constrained by the generally weak profitability levels of fitness clubs during the first two years of operation. Only 13 of Equinox's 32 clubs have been opened for more than 4 years with an aggregate of 13 clubs opened since 2004. Free cash flows have been consistently negative over the last few years due to the high level of capital expenditures needed to support the company's growth plans. Capital expenditures were $33 million in 2003, $37 million in 2004 and $51 million in the LTM period. Equinox opened 4 clubs in 2003, 5 clubs in 2004, and 7 clubs in 2005. Growth capital expenditures have averaged about $5-$6 million per new club over the last 3 years. Moody's expects Equinox to continue to open new clubs at a pace of about 6 a year for the next few years. Risks related to this aggressive growth strategy include higher than expected levels of required capital expenditures, lower profitability levels for newer clubs and greater than expected demands on management resources. Equinox has a limited track record outside the New York region and brand recognition may take longer to develop in new markets. However, Equinox should derive certain benefits from its relationship with Related such as greater access to new club locations, cross marketing opportunities and additional real estate expertise. The stable ratings outlook anticipates negative free cash flows in 2006 due to increased interest expense in the pro forma debt structure, high levels of capital expenditures and first year operating losses related to new club openings. Moody's doesn't expect free cash flow to approach breakeven levels until 2007 due to the continued maturation of the club base; however, Equinox should have adequate liquidity due to its $50 million revolver. Although borrowing base availability under the revolver is only about $15 million at closing after taking into account $4 million of letters of credit, Equinox expects availability to increase to about $45 million within the next few weeks upon completion of certain conditions. Equinox may need to rely significantly on the revolver over the next two years if recently opened clubs mature at a slower pace than expected. Although free cash flow from operations is expected to be negative in 2006, Moody's expects cash flow from operations less maintenance capital expenditures to total debt to be in the 3%-5% range. Moody's expects leverage, as measured by debt to EBITDA, to remain high at over 9 times during 2006. Given the high levels of leverage upon the closing of the transaction, an upgrade in the ratings or outlook in the near term is unlikely. Over the intermediate and longer term, the ratings could be upgraded if the company successfully executes its expansion strategy and improves profitability levels such that sustainable free cash flow from operations to debt exceeds 5% and adjusted debt to EBITDA falls below 6.5 times. The ratings could be pressured if expected improvements in profitability levels fail to materialize or capital expenditures requirements are higher than expected which results in heavier than expected reliance on the revolver and impairs liquidity. A failure to increase revolver availability to about $45 million in the near term could also pressure the rating or outlook. The B3 rating assigned to the senior notes, rated at the corporate family rating level, reflects the preponderance of senior unsecured notes in the capital structure. The notes will benefit from a guarantee on a senior basis by all the subsidiaries of Equinox. The notes and guarantees will be effectively subordinated to all secured obligations of Equinox and secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations. Headquartered in New York, Equinox operates full-service fitness clubs that offer an integrated selection of Equinox-branded programs, services and products. Revenue for the twelve month period ending Sept. 30, 2005 was $168 million. EQUINOX HOLDINGS: S&P Rates Proposed $290 Million Sr. Notes at B- ----------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'B-' rating to Equinox Holdings Inc.'s proposed $290 million senior unsecured notes due 2012. Proceeds from the offering, in conjunction with $115 million of pay-in-kind notes to be issued at Related Equinox Holdings Corp. and $125 million of new private equity, will be used to finance The Related Companies LP's acquisition of Equinox from North Castle Partners LLC and J.W. Childs Associates LP. At the same time, Standard & Poor's lowered its corporate credit rating on the fitness club operator to 'B-' from 'B'. The downgrade is due to increased financial risk from the pending debt-financed acquisition. In addition, the rating was removed from CreditWatch with negative implications. The outlook is stable. Pro forma for the transaction, New York, New York-based Equinox had total debt outstanding of about $294 million on Sept. 30, 2005. For analytical purposes, Standard & Poor's includes the $115 million PIK notes to be issued at Related Equinox, for total consolidated debt of about $410 million. ERHC ENERGY: Posts $1.2 Mil. Net Loss in Quarter Ended December 31 ------------------------------------------------------------------ ERHC Energy Inc. delivered its financial results for the quarter ended Dec. 31, 2005, to the Securities and Exchange Commission on Feb. 9, 2006. ERHC incurred a $1,228,984 net loss for the three months ended Dec. 31, 2005, compared to a $7,091,068 net loss for the three months ended Dec. 31, 2004. A significant portion of the decrease in net loss for the three months ended Dec. 31, 2005 was attributable to a $5,749,575 non-cash loss on extinguishment of debt during the three months ended Dec. 31, 2004. During the quarters ended Dec. 31, 2005 and 2004, the Company had no revenues from which cash flows could be generated to support operations and relied on borrowings funded from its line of credit with Chrome Energy as well as the sale of common stock. At Dec. 31, 2005, ERHC's current liabilities exceed its current assets by $2,482,419. The Company's balance sheet showed $6,060,052 in total assets and $2,845,119 of liabilities at Dec. 31, 2005. Going Concern Doubt Malone & Bailey, PC, expressed substantial doubt about ERHC Energy Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended Sept. 30, 2005. The auditing firm pointed to the Company's recurring losses from operations since inception and dependence on outside sources of financing for the continuation of its operations. About ERHC ERHC Energy -- http://www.erhc.com/-- is an independent oil and gas company. The Company was formed in 1986, as a Colorado corporation, and was engaged in a variety of businesses until 1996, when it began its current operations as an independent oil and gas company. EXIDE TECH: Posts $27.6MM Net Loss in Quarter Ended December 31 --------------------------------------------------------------- New Jersey-based Exide Technologies incurred a $27,658,000 net loss for the third quarter of fiscal 2006, ended Dec. 31, 2005, versus a $439,040,000 net loss in the third quarter of fiscal 2005. The Company generated $733,442,000 of net sales in the third quarter of fiscal 2006, versus $727,902,000 in the third quarter of fiscal 2005. Currency negatively impacted net sales in the third quarter of fiscal 2006 by approximately $35,877,000. Exide's results continued to be impacted in the third quarter of fiscal 2006 by increases in the price of lead and other commodity costs that are primary components in the manufacture of batteries and energy costs used in the manufacturing and distribution of the Company's products. In the North American market, the Company obtains the vast majority of its lead requirements from six Company-owned and operated secondary lead recycling plants. These facilities reclaim lead by recycling spent lead-acid batteries, which are obtained for recycling from the Company's customers and outside spent- battery collectors. Similar to the rise in lead prices, however, the cost of spent batteries has also increased. For the third quarter of fiscal 2006, the average cost of spent batteries has increased approximately 45% versus the third quarter of fiscal 2005. In Europe, the Company's lead requirements are mainly obtained from third-party suppliers. Because of the Company's exposure to lead market prices in Europe and based on historical price increases and apparent volatility in lead prices, the Company has implemented several measures to offset higher lead prices including selective pricing actions, lead price escalators, lead hedging and entering into long-term lead supply contracts. In addition to managing of the impact of higher lead and other commodity costs on the Company's results, the key elements of the Company's underlying business plans and continued strategies for fiscal 2006 include: a) the successful execution and completion of the Company's ongoing restructuring plans, and organizational realignment of divisional and corporate functions resulting in further headcount reductions, principally in selling, general and administrative functions globally; b) actions to improve the Company's liquidity and operating cash flow through aggressive working capital reduction plans, the sales of non-strategic assets and businesses, streamlining cash management processes, implementing plans to minimize the cash costs of the Company's restructuring initiatives and closely managing capital expenditures; and c) continuing measures to reduce costs, improve customer service and satisfaction through enhanced quality and reduced lead times. At Dec. 31, 2005, the Company's balance sheet showed $2.1 billion in total assets and $1.8 billion in total liabilities. As of Dec. 31, 2005, the Company had cash and cash equivalents of $36,872 and availability under the Revolving Loan Facility of $12,147 as compared to cash and cash equivalents of $76,696 and availability under the Revolving Loan Facility of $68,814 at March 31, 2005. On Feb. 3, 2006, total liquidity was approximately $71,200, consisting of availability under the revolving term loan facility of $27,500 and an estimated $43,700 in cash and cash equivalents. About Exide Technologies Headquartered in Princeton, New Jersey, Exide Technologies -- http://www.exide.com/-- is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represented the Debtors in their successful restructuring. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Feb. 6, 2006, Standard & Poor's Ratings Services lowered its corporate credit rating on Exide Technologies to 'CCC' from 'CCC+' because of Exide's continued poor operating performance and rising debt leverage. The senior secured rating on Exide's recently enlarged first-lien credit facility was lowered to 'CCC' from 'B-', and the recovery rating was lowered to '2' from '1', because of the lower corporate credit rating and the weaker asset protection for the enlarged facility. The senior secured rating and the recovery rating reflect Standard & Poor's expectation that lenders will realize a substantial recovery of principal (80%-100%) in the event of default or bankruptcy. The senior secured rating on Exide's second-lien notes was lowered to 'CC' from 'CCC', reflecting the lower corporate credit rating and an increase in priority debt. EXTENSITY SARL: S&P Rates Proposed $410 Million Facilities at B --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Atlanta, Georgia-based Extensity S.a.r.l. At the same time, Standard & Poor's also assigned its 'B' senior secured debt rating to the company's proposed $410 million in first lien credit facilities; the recovery rating is '3', indicating a meaningful (50%-80%) recovery of principal in the event of a payment default or bankruptcy. The facilities consist of: * a $50 million revolving credit; and * a $360 million first priority term loan. The outlook is positive. Proceeds of the facilities, together with $165 million in second priority debt, an equity contribution, and a partial sale of certain subsidiaries to Infor Global Solutions, AG, another Golden Gate portfolio company, will be used to fund the company's acquisition of GEAC Corp. "The ratings reflect Extensity's narrow business profile, high leverage and aggressive cost cutting objectives, partly offset by stable and recurring revenues from the company's legacy financial applications," said Standard & Poor's credit analyst Lucy Patricola. Extensity is a provider of software and services that focus on primarily financial applications, such as accounting, payroll and expense management. The company also offers solutions for strategic financial management and budgeting. Supplementing its core financial applications, Extensity provides a number of industry-specific vertical applications. The two segments generate about $325 million in revenues. Extensity operates in a competitive and fragmented segment of enterprise software, and further narrows its focus to a mid market client base. Its legacy solutions are characterized by transaction intensive applications run largely in a mainframe environment. While growth potential is limited, contract retention is high and revenue is largely recurring. There is no customer concentration, limiting contract termination risk. Extensity is striving to deepen its penetration into its installed base with applications that extend past transaction processing into financial management and budgeting with its business analytics solutions. FEDDERS CORP: Receives Non-Compliance Notice from NYSE ------------------------------------------------------ Fedders Corporation (NYSE: FJC) has been notified by the New York Stock Exchange that it is currently not in compliance with the NYSE's continued listing standards. The company is considered "below criteria" by the NYSE since, over a 30 trading-day period, its average global market capitalization was less than $75 million, as of Jan. 30, 2006 and its stockholders' equity was less than $75 million as of its Sept. 30, 2005 Form 10-Q. In accordance with the NYSE's rules, the company intends to submit a business plan to the NYSE within 45 days that will demonstrate compliance with the continued listing standards within 18 months. The company believes that, as a result of the previously reported identified cost savings in excess of $20 million, in part related to consolidations in its operating units, and its focus on growth and profitable business, the business plan it submits to the NYSE will demonstrate compliance with the listing standards within the required timeframe. Following receipt of the plan, the NYSE will make a determination to either accept the business plan, at which time the company will be subject to quarterly monitoring for compliance with the business plan, or it will not accept the business plan, at which time it will be subject to suspension by the NYSE and delisting by the SEC. Beginning on Feb. 13, 2006, the NYSE will make available on its consolidated tape an indicator, ".BC," to reflect that the company is below the NYSE's quantitative listing standards. The indicator will be removed at such time as the company is deemed compliant with the NYSE's continued listing standards. Headquartered in Liberty Corner, New Jersey, Fedders Corporation, -- http://www.fedders.com/-- is a leading global manufacturer and marketer of air treatment products, including air conditioners, air cleaners, dehumidifiers, and humidifiers. The company has production facilities in the United States in Illinois, North Carolina, New Mexico, and Texas and international production facilities in China, India and the Philippines. All products are manufactured to Fedders' one worldwide standard of quality. * * * Default on Senior Debts On June 24, 2005, the Company defaulted on the covenant in Senior Notes Indenture requiring the Company to file a Form 10-K for the year ended Dec. 31, 2004. This delay in filing the Form 10-K also resulted in a default under our agreement with Wachovia Bank, NA. On Sept. 13, 2005, the Company received the written consent from holders of a majority in aggregate principal amount of the outstanding Senior Notes under the Indenture waiving the default in performance of this covenant and consenting to the adoption of the First Supplemental Indenture and Waiver, dated Sept. 13, 2005. By the terms of the waiver, the Company must file its Form 10-K on or before Sept. 30, 2005 and Forms 10-Q for the first and second quarters of 2005 on or before Nov. 30, 2005. The Company currently expects to file these reports by such date. In order to obtain the consent of the holders of the Senior Notes, pursuant to the First Supplemental Indenture, the Company and FNA agreed that during the Waiver Period an additional 100 basis points of interest will accrue on the principal amount of the Senior Notes, which amount shall be payable with the interest payment due on March 1, 2006. FFCA SECURED: Fitch Downgrades Seven Loan Classes' Ratings to Cs ---------------------------------------------------------------- Fitch took rating actions on the outstanding classes of these FFCA Secured Franchise Loan Trust issues: Series 1999-2: -- Class A-1b affirmed at 'BBB' -- Class A-1c affirmed at 'AAA'* -- Class A-2 downgraded to 'BB' from 'A' -- Class B-1 downgraded to 'CC' from 'B-' -- Class B-2 downgraded to 'CC' from 'B-' -- Class C-1 downgraded to 'C' from 'CCC' -- Class C-2 downgraded to 'C' from 'CCC' -- Class D-1 downgraded to 'C' from 'CC' -- Class D-2 downgraded to 'C' from 'CC' -- Classes E-1 and E-2 remain at 'C' Series 2000-1: -- Class A-2 affirmed at 'AAA'* -- Class B affirmed at 'B' -- Class C remains at 'CCC' -- Class D downgraded to 'C' from 'CC' -- Class E remains at 'C' *Rating based on an MBIA guarantee. The negative rating actions reflect additional reductions in the credit enhancement (CE) Fitch expects will be available to support each class in these transactions. As many loans in default have remained unresolved, recovery expectations have decreased, while interest liabilities continually detract from collections. These lowered expectations in conjunction with incurred losses on existing defaults have reduced subordination and CE available to outstanding bonds. Anticipated CE is based on Fitch's expected recoveries on defaulted collateral. Fitch's recovery expectations are based on historical collateral-specific recoveries experienced in the franchise Asset-Backed Securities sector. FIRST FRANKLIN: Fitch Affirms Class B Certificates' BB+ Rating -------------------------------------------------------------- Fitch Ratings affirmed these First Franklin Financial Corporation residential mortgage-backed certificates: Series 2000-FF1: -- Class A 'AAA' -- Class M-1 'AA' Series 2001-FF1: -- Class A-1 'AAA' -- Class M-1 'AA' Series 2001-FF2: -- Classes A-1 and A-2 'AAA' -- Class M-1 'AA' -- Class M-2 'A' -- Class M-3 'BBB' Series 2002-FF1: -- Classes I-A-2 and II-A-1 'AAA' -- Class M-1 'AA' -- Class M-2 'A' -- Class M-3 'BBB' Series 2002-FF2: -- Classes A-1 and A-2 'AAA' -- Class M-1 'AA' -- Class M-2 'A' -- Class M-3 'BBB+' Series 2003-FF2: -- Class A-1 'AAA' -- Class M-1 'AA' -- Class M-2 'A' -- Classes M-3-A and M-3-F 'A-' -- Classes M-4-A and M-4-F 'BBB+' -- Classes M-5-A and M-5-F 'BBB' Series 2003-FF3: -- Classes I-A and II-A-2 'AAA' -- Class M-1 'AA' -- Class M-2 'A' -- Class M-3 'A-' -- Class M-4 'BBB+' -- Class B 'BBB' Series 2003-FF5: -- Classes A-1 through A-3 'AAA' -- Class M-1 'AA' -- Class M-2 'A' -- Class M-3 'A-' -- Class M-4 'BBB+' -- Class M-5 'BBB' -- Class M-6 'BBB-' -- Class B 'BB+' The affirmations, affecting approximately $730 million of the outstanding certificates, reflect a stable relationship between credit enhancement and expected loss. The losses suffered by the affirmed transactions are in line with expectations, ranging from 0.13% (2003-FF3) to 1.16% (2000-FF1) of the original collateral balance. In general, the overcollateralization has remained near or at its target over the last year for all affirmed transactions. The collateral of the above transactions consists of subprime, fixed-rate mortgage loans and adjustable-rate mortgage loans. Series 2001-FF2 and the 2002 through 2003 vintage certificates are supported by two collateral groups. The first consists of loans with principal balances that conform to Fannie Mae and Freddie Mac guidelines, while the second is made up of loans with principal balances that may or may not conform to Fannie Mae and Freddie Mac guidelines. All of the above transactions are serviced by either: * Option One Mortgage Corp. (rated 'RPS1' by Fitch); * Saxon Mortgage Inc. ( 'RPS2+'); * Chase Home Finance LLC ('RPS1'); or * Ocwen Loan Servicing LLC ('RPS2'). The pool factors for the affirmed deals range from 4% (2001-FF1) to 34% (2003-FF5). The seasoning for the affirmed deals ranges from 24 months (2003-FF5) to 62 months (2000-FF1). GENCORP INC: Posts $175 Mil. Net Loss in Fourth Qtr. Ended Nov. 30 ------------------------------------------------------------------ GenCorp Inc. (NYSE: GY) reported results for the fourth quarter and the fiscal year ended Nov. 30, 2005. 2005 Fourth Quarter Highlights and Events * The Company wrote down Atlas(R) V inventory of $169 million and completed sale of its Aerojet Fine Chemicals business for $114 million. * Fourth quarter 2005 sales from continuing operations increased 38% compared to fourth quarter 2004. Year-over- year annual sales increased 25%. * The Company is exploring entering into a transaction on its 2,700 acre Rio Del Oro project. * The Company continued discussions with the City of Folsom regarding the annexation and entitlement of 625 acres, bringing the total amount of Company-owned land currently in the entitlement and rezoning process to approximately 10 square miles. Sales from continuing operations for the fourth quarter 2005 totaled $205 million, 38% above $149 million in the fourth quarter 2004. Sales for 2005 were $624 million compared to $499 million for 2004, an increase of 25%. Excluding Atlas sales of $84 million in 2005 and $13 million in 2004, year-over-year growth was 11%. Sales in 2005 reflect growth in the Company's Aerospace and Defense business. The Company's net loss from continuing operations was $175 million for the fourth quarter 2005 and $206 million for the full year. The losses included a $169 million write-down of inventory on the Atlas V program and a $29 million charge for Olin litigation. Also included for the full year is a net charge for resolution of additional legacy litigation matters, recapitalization costs, other settlements, and a $29 million tax benefit for the carryback of current and prior year losses resulting in refunds of previously paid taxes. The Company's net loss from continuing operations was $14 million for the fourth quarter 2004 and $86 million for 2004. The loss for the full year included a net charge of $9 million related to the recapitalization costs and a $29 million tax provision. "In the fourth quarter and throughout the year, GenCorp steered its way through a number of legacy liability issues which predate our 1999 spin-off of the polymer products segment -- now OMNOVA Solutions, Inc.," Terry Hall, chairman, president and chief executive officer said. "We achieved acceptable settlements of retiree medical claims in the Wotus litigation and in our toxic tort cases in Southern California. While we were disappointed with having to write-down the Atlas V inventory and recognize the $29 million charge for the Olin litigation, these necessary actions, combined with the sale of our Fine Chemicals business, allow us to put many legacy uncertainties behind us with results going forward more reflective of our two core businesses." "Aerojet's revenue growth this year is a confirmation of our strategy to participate in the consolidation of the U.S. propulsion market and to grow Aerojet to assure effective funding of our environmental remediation programs. As a result of our discussions with the City of Folsom regarding annexation of 625 acres, we now have approximately 10 square miles of land in the rezoning and entitlement process in Northern California, and look forward to the approval of our first project, Rio Del Oro, later this year," continued Mr. Hall. Operations Review 1. Aerospace and Defense Segment Fourth quarter sales from continuing operations increased 47% to $203 million compared to $138 million in the fourth quarter 2004, including Atlas sales of $68 million in the fourth quarter 2005 and $12 million in the fourth quarter 2004. Excluding Atlas, fourth quarter sales increased 7% to $135 million compared to $126 million in the fourth quarter 2004. Sales for 2005 increased 25% to $617 million compared to $492 million last year. Included in these amounts were Atlas sales of $84 million in 2005 and $13 million in 2004. Excluding Atlas, 2005 sales increased 11% to $533 million compared to $479 million last year. Most of Aerojet's product areas contributed to the growth, with individual program increases of greater than $10 million related to Standard Missile, Terminal High-Altitude Area Defense and Tomahawk. Fourth quarter 2005 segment performance was a loss of $150 million compared to income of $7 million in the fourth quarter 2004. Excluding the impact of employee retirement benefit plan expense and unusual items, segment performance for the fourth quarter 2005 was a loss of $154 million, compared to income of $13 million in the fourth quarter of 2004. Segment performance, which is a non- GAAP financial measure, is defined in the Operating Segment Information table included in this release. Segment performance for the full year 2005 was a loss of $137 million compared to income of $30 million in 2004. Excluding the impact of employee retirement benefit plan expense and unusual items, 2005 segment performance was a loss of $113 million compared to income of $57 million in 2004. Significant factors impacting the change in segment performance compared to the prior year were: (a) $169 million and $16 million write-down of inventory associated with the Atlas V program in 2005 and 2004, respectively; (b) environmental reserve and recovery adjustments that resulted in $4 million expense in 2005 compared to a $16 million favorable impact to segment performance in 2004; and (c) changes in product mix that resulted in lower margins during 2005. With the recent completion of deliveries on the Titan program and restructure of the Atlas V contract, sales for these two programs in 2006 are expected to decline by approximately $70 million from 2005 sales. Titan sales are expected to rebound in 2007 and 2008 when final facilities conversion and other related close-out activities are funded by the U.S. Air Force. Aerojet, which Boeing Integrated Defense Systems selected as "Supplier of the Year," had a number of fourth quarter successes: -- awarded a $20 million contract to develop and demonstrate a new ICBM motor for the Air Force Applications Advanced Second Stage Booster Development program; -- demonstrated its rocket motor for the THAAD missile flight test; -- negotiated a production contract for the Guided Multiple- Launch Rocket System; and -- expanded its propulsion support of the TOW program with a new Bunker Buster contract. "Aerojet's engines performed flawlessly on seven launches during 2005 with 100% mission success, including the final Titan IV flight in October, marking the last milestone for Aerojet's 50 years of Titan program work," Mr. Hall commented. "Aerojet's launch and in-space technology also supported several other high profile deep space missions during the year, including the Mars Reconnaissance Orbiter and the Stardust project. In January 2006, five of Aerojet's solid rocket boosters launched the New Horizons spacecraft on its journey to Pluto." "Aerojet's accomplishments over the last year and the breadth of our technology and products position us to benefit from multiple new opportunities emerging from the Department of Defense and NASA," continued Mr. Hall. As of Nov. 30, 2005, contract backlog was $696 million compared to $879 million as of Nov. 30, 2004. The decrease in the contract backlog is primarily a result of the renegotiated Atlas V contract. Excluding Atlas, other program contract backlog grew by $69 million, a 13% increase. Funded backlog, which includes only the amount for which money has been directly authorized by the U.S. Congress, or for which a purchase order has been received from a commercial customer, was $498 million as of Nov. 30, 2005, compared to $538 million on Nov. 30, 2004. Excluding Atlas, funded backlog grew by $27 million, a 7% increase. 2. Real Estate Segment Real Estate sales and segment performance for 2005 were $7 million and $4 million, respectively, compared to $15 million and $12 million, respectively, for 2004. The 2004 results included revenue from a property usage agreement and an exclusive mining rights agreement. Results for 2005 consist of rental property revenue only, as there were no significant sales of real estate assets. In 2005, the Company continued its efforts to enhance shareholder value by repositioning excess Sacramento land holdings for higher and better uses. The City of Rancho Cordova is the planning and entitlement authority for the Company's 2,716-acre Rio Del Oro project application. The City, which is awaiting comments from the U.S. Army Corps of Engineers, expects to release its Environmental Impact Review in March 2006, with approval of the application anticipated in late 2006. Rancho Cordova also has jurisdiction over the Company's 1,654-acre Westborough project. The City expects to start the EIR for this project in the next few months, with project approval anticipated in 2008. The County of Sacramento is the planning and entitlement authority for the 1,385-acre Glenborough and Easton place project. The County began preparation of the EIR for this project in June 2005. A draft EIR generally takes at least a year to prepare; therefore, the Company expects this document to be released for comments in the second half of 2006, with project approval anticipated in 2007. The Company, along with several other property owners, is engaged in discussions with the City of Folsom regarding the annexation, rezoning and entitlement of 3,500 acres of County land, 625 of which are owned by the Company, in Folsom's sphere of influence. With this additional acreage, 6,400 acres, or approximately 10 square miles, of the Company's Sacramento land is in process for re-zoning and entitlement. "The key to creating shareholder value with our real estate holdings is obtaining the rezoning and entitlement approvals required to return this land to higher and better uses," Mr. Hall noted. "In California, this is a complex and lengthy process, the timing of which is difficult to predict. The Rio Del Oro application is currently dependent upon the response from the Corps of Engineers. We continue to work closely with the City of Rancho Cordova in its efforts to keep this project on track for approval in late 2006. "We will continue to explore real estate structures or transactions which add to shareholder value, such as our recent announcement regarding the exploration of a possible real estate transaction on our Rio Del Oro project," concluded Mr. Hall. Additional Information The loss from discontinued operations was $24 million in 2005 compared to $312 million in 2004. The loss in 2005 included a $29 million charge associated with the disposition of the Fine Chemicals business, primarily reflecting the seller note of $26 million for which income will be recorded as the note is realized. The loss in 2004 included a one-time charge of $279 million associated with the disposition of the GDX Automotive business. The Company recorded an inventory write-down of $169 million in the fourth quarter of 2005 on a contract to design, develop and produce a solid rocket motor for Lockheed Martin's Atlas V program. Recovery of the Atlas V inventory has been subject to several uncertainties. Until recently, the Company believed that a contract restructuring, projected to occur in late 2005, would permit recovery of inventoried development and production costs. This belief was based on prior statements by government officials regarding funding for the Evolved Expendable Launch Vehicle program, and ongoing discussions with the prime contractor over a long period of time, including requests for historical costs and past investment. Recently, the Company learned that government funding is not available to recover past costs, and as a result, the Company concluded renegotiation of the contract was in its best interest to prevent further unrecoverable investment in this historically unprofitable program. Accordingly, on Dec. 22, 2005, the Company reached an agreement with Lockheed Martin Corporation, which spells out the renegotiated terms. On Nov. 30, 2005, the Company sold its Fine Chemicals business to American Pacific Corporation for $114 million, subject to adjustment, consisting of $88 million of cash, unsecured subordinated seller note of $26 million. Additionally, AMPAC will pay us up to $5 million based on the Fine Chemical business achieving specified earning targets in the twelve month period ending Sept. 30, 2006. Interest expense decreased to $24 million in 2005 from $35 million in 2004. The decrease is the result of lower average debt and interest rates as a result of the sale of the GDX Automotive business in August 2004 and the recapitalization transactions initiated in November 2004 and completed in February 2005. Total debt decreased to $444 million at Nov. 30, 2005, from $577 million at Nov. 30, 2004. The cash balance at Nov. 30, 2005, was $91 million, all of which was unrestricted, whereas the cash balance at Nov. 30, 2004, totaled $269 million, of which $201 million was restricted. The restricted cash was used in the first quarter of 2005 to pay down debt. Total debt less cash increased from $308 million at Nov. 30, 2004, to $353 million as of Nov. 30, 2005. The $45 million increase resulted primarily from: (a) costs associated with the recapitalization transactions completed in the first quarter of 2005; (b) payment for the Olin judgment; (c) costs associated with legacy business matters, including costs related to postretirement plans; (d) interest payments on debt; (e) corporate expenses; and (f) capital expenditures offset by cash received from the sale of the Fine Chemicals business and cash generated by the Aerospace and Defense segment. As of Nov. 30, 2005, the Company's $80 million revolving credit facility was unused. Material Weakness The Company is required to assess the effectiveness of its internal control over financial reporting as of the end of its year ended Nov. 30, 2005. In the Company's 2005 Form 10-K, management expects to report a material weakness in internal control over financial reporting concerning insufficient processes and controls to communicate information in sufficient detail as it relates to accounting for complex, non-routine transactions. As a result, management is expected to conclude that its internal control over financial reporting was not effective at Nov. 30, 2005. GenCorp Inc. -- http://www.GenCorp.com/-- is a leading technology-based manufacturer of aerospace and defense products and systems with a real estate business segment that includes activities related to the development, sale and leasing of the Company's real estate assets. * * * As previously reported in the Troubled Company Reporter on Nov. 11, 2004, Moody's Investors Service assigned a Caa2 rating to GenCorp, Inc.'s proposed $50 million convertible subordinated notes, due 2024, and a B1 rating to the company's new $175 million senior secured credit facilities, consisting of a $75 million revolving credit due 2009 and a $100 million term loan due 2010. The proceeds from the new notes and facilities, along with about $100 million expected from a recently-announced 7.5 million public share offering as well as cash provided by the recent sale of the GDX automotive division in August 2004, will be used to repurchase part of the company's existing 5-3/4% note (due 2007) and certain other debt securities, as well as to re-finance its existing senior secured credit facilities. All other ratings of the company have been affirmed: * Senior implied rating of B2 * Unsecured issuer rating of B3 * $150 million 9.5% senior subordinated notes, due 2013, of Caa1 * $150 million 5.75% convertible subordinated notes, due 2007, of Caa2 * $125 million 4% convertible subordinated notes, due 2024, of Caa2 The ratings outlook is stable. As previously reported in the Troubled Company Reporter on Nov. 11, 2004, Fitch Ratings revised the Rating Outlook on GenCorp Inc. to Stable from Negative. Fitch has also assigned a 'BB-' rating to GY's proposed senior secured bank facility (which will replace the existing senior secured bank facility), and a 'B-' rating to a convertible subordinated notes offering due 2024. Additionally, Fitch affirms these ratings for GY: -- Senior subordinated notes due 2013 'B+'; -- Convertible subordinated notes due 2007 'B-'; -- Contingent convertible subordinated notes due 2024 'B-'. Approximately $705 million in debt securities is affected by these actions. As previously reported in the Troubled Company Reporter on Nov. 11, 2004, Standard & Poor's Ratings Services assigned its 'BB' bank loan rating and a recovery rating of '1' to GenCorp Inc.'s proposed $175 million senior secured credit facilities, indicating the high expectation of full recovery of principal in the event of default. Standard & Poor's also assigned its 'B' rating to the firm's proposed $50 million convertible subordinated notes due 2024 offered under Rule 144A with registration rights, which could be increased to $75 million via a greenshoe option. At the same time, Standard & Poor's revised its outlook on the propulsion supplier to negative from developing. The existing ratings, including the 'BB-' corporate credit rating, were affirmed. GENCORP INC: S&P Lowers Corporate Credit Rating to B+ from BB- -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on GenCorp Inc., including lowering the corporate credit rating to 'B+' from 'BB-'. The outlook is stable. The aerospace propulsion provider has about $445 million in debt. "The downgrade reflects continued poor, albeit improving, operating performance in the core Aerojet unit," said Standard & Poor's credit analyst Christopher DeNicolo. "Although a potential real estate transaction could result in significant cash inflows, the timing, amount, and use of proceeds is still uncertain," the analyst continued. The ratings on Sacramento, California-based GenCorp reflect a weak financial profile, driven by high leverage and poor profitability, and a modest scale compared with competitors. These factors are offset somewhat by solid niche positions in aerospace propulsion and significant real estate holdings. The company's Aerojet unit, which accounts for almost all sales, had 25% revenue growth in fiscal 2005 stemming from growth in a number of programs, especially related to missile defense and the Atlas V launch vehicle. Revenues from the Atlas V contract and the recent completion of the Titan launch vehicle program will decline $70 million in 2006. However, Titan revenues will rebound in 2007 and 2008 due to contract close out activities. Segment operating income, excluding pension expense and one-time items, was essentially flat (despite the sales increase) due to a shift in the product mix toward lower margin products. In the fourth quarter of fiscal 2005 (ended Nov. 30, 2005) the company took a $169 million, largely noncash charge, to write off inventory related to the Atlas V contract. Although book equity is now negative as a result of the charge, higher prices on the remaining 14 Atlas boosters in the contract should result in only modest additional cash outflows. Pension expense increased significantly in 2004, reflecting the amortization of prior years' losses, even though the company's defined-benefit pension plan is fully funded, and will continue at high levels for the intermediate term. The renegotiation of the Atlas V contract and a generally favorable environment for defense spending should result in improved profitably and cash generation at Aerojet. If operating performance at Aerojet does not improve as expected, the outlook could be revised to negative. Overall, credit protection measures will remain weak, but should strengthen modestly over the next two years. If a significant real estate transaction is arranged and the company uses the proceeds to reduce debt materially, the ratings could be placed on CreditWatch with positive implications. GRANDVIEW HEIGHTS: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Grandview Heights, L.P. dba Grandview Heights Apartments 6046 Delmar St. Louis, Missouri 63112 Bankruptcy Case No.: 06-40511 Type of Business: The Debtor operates an apartment building located in St. Louis, Missouri. Grandview Heights previously filed for chapter 11 protection on Nov. 2, 2005 (Bankr. E.D. Mo. Case No. 05-61837). Chapter 11 Petition Date: February 10, 2006 Court: Eastern District of Missouri (St. Louis) Judge: Barry S. Schermer Debtor's Counsel: Elbert A. Walton, Jr., Esq. Metro Law Firm, LLC 2320 Chambers Road St. Louis, Missouri 63136 Tel: (314) 388-3400 Fax: (314) 388-1325 Total Assets: $3,589,749 Total Debts: $2,965,402 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Office Depot Office supplies $6,000 600 Kellwood Parkway Chesterfield, MO 63017 J. Young Security deposit $500 3509 Bailey St. Louis, MO 63107 L. Nelson Security deposit $500 3022 Kossuth St. Louis, MO 63107 E. Merriman Security deposit $500 N. Penn Security deposit $456 D. Caldwell Security deposit $450 K. Lee Security deposit $450 V. Thomas Security deposit $450 P. Lucas Security deposit $436 S. Johnson Security deposit $427 R. Nance Security deposit $407 B. Kemp Security deposit $395 C. Dyer Security deposit $366 L. Mason Security deposit $366 A. Denson Security deposit $333 S. Harris Security deposit $322 B. Lewis Security deposit $294 L. Ford Security deposit $285 W. Joiners Security deposit $263 A. Green Security deposit $250 GREAT NORTHERN: Ch. 7 Trustee Taps Silverman as Mass. Counsel ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Maine gave Gary M. Growe, the chapter 7 Trustee overseeing the liquidation of Great Northern Paper, Inc., permission to employ Silverman & Kudisch P.C., as his local counsel in the Commonwealth of Massachusetts. Silverman & Kudisch will assist the Trustee in the administration of the Debtor's chapter 7 estate in matters involving the state of Massachusetts and on issues related to the collection of monies due to the estate. Richard L. Blumenthal, Esq., a member at Silverman & Kudisch, is one of the lead attorneys from the Firm performing services to the Trustee. Mr. Blumenthal charges $300 per hour for his services. Mr. Blumenthal reports Silverman & Kudisch's professionals bill: Professional Hourly Rate ------------ ----------- Sumner Darman $495 Peter L. Zimmerman $325 Lisa B. Darman $275 Designation Hourly Rate ----------- ----------- Paralegals $100 Silverman & Kudisch assures the Court that it does not represent any interest materially adverse to the Debtor or its estate. Headquartered in Millinocket, Maine, Great Northern Paper, Inc., one of the largest producers of groundwood specialty papers in North America, filed for chapter 11 protection on January 9, 2003 (Bankr. Maine Case No. 03-10048). Alex M. Rodolakis, Esq., and Harold B. Murphy, Esq., at Hanify & King, P.C., represent the Debtor. When the Company filed for chapter 11 protection, it listed debts and assets of more than $100 million each. In early 2003, Belgravia purchased substantially all of the Debtor's assets for approximately $75 million. The Bankruptcy Court converted the Debtor's case to a chapter 7 liquidation proceeding on May 22, 2003. Gary M. Growe is the chapter 7 Trustee for the Debtor's estate. Jeffrey T. Piampiano, Esq., at Drummond Woodsum & MacMahon represents the chapter 7 Trustee. GREENWICH CAPITAL: Moody's Downgrades $1 Mil. Certs. Rating to B1 ----------------------------------------------------------------- Moody's Investors Service downgraded Class N-LH of Greenwich Capital Commercial Funding Corp., Commercial Mortgage Pass -Through Certificates, Series 2004-FL2: * Class N-LH, $1,000,000, Floating, downgraded to B1 from Ba2 Class N-LH was downgraded to Ba2 from Baa3 and placed on review for further downgrade on Sept. 20, 2005 due to the deterioration of property performance of the Logan Airport Embassy Suites Hotel, which is located at Logan Airport in Boston, Massachusetts. The loan is secured by a leasehold interest in a 273-room full service hotel that was constructed in 2003. This floating rate loan matures in April 2007 and the borrower has two one-year extension options. The $32.0 million mortgage loan is comprised of an $18.0 million pooled senior interest, a $1.0 million trust junior component, a $13.0 million non-trust junior component and $15.0 million of mezzanine debt. Although property performance has improved since Moody's last full review in Sept. 2005, calendar year 2005 operating results provided to Moody's by the borrower indicate a 69.1% decrease in earnings before interest, taxes, depreciation and amortization from that at securitization due to reduced RevPAR and Food & Beverage revenue, along with significantly higher expenses. Moody's loan to value ratio for the total trust debt is in excess of 100.0%. Moody's is therefore downgrading Class N-LH to B1 from Ba2. GSMPS MORTGAGE: Moody's Puts Low-B Ratings on Three Subord. Certs. ------------------------------------------------------------------ Moody's Investors Service assigned an Aaa rating to the senior certificates issued by GSMPS Mortgage Loan Trust 2006-RP1 Mortgage Pass-Through Certificates, Series 2006-RP1, and ratings ranging from Aa2 to B2 to the subordinate certificates in the deal. The transaction consists of the securitization of FHA insured, and VA or RHS guaranteed reperforming loans virtually all of which were repurchased from GNMA pools. The credit quality of the mortgage loans underlying this securitization is comparable to that of mortgage loans underlying sub-prime securitizations. However after the FHA, VA and RHS insurance is applied to the loans, the credit enhancement levels are comparable to the credit enhancement levels for prime-quality residential mortgage loan securitizations. The insurance covers a large percent of any losses incurred as a result of borrower defaults. Moody's expects collateral losses to range from 0.40% to 0.50%. The Federal Housing Administration is a federal agency within the Department of Housing and Urban Development whose mission is to expand opportunities for affordable home ownership, rental housing, and healthcare facilities. The Department of Veterans Affairs, formerly known as the Veterans Administration, is a cabinet-level agency of the federal government. The Rural Housing Service is a part of the U.S. Department of Agriculture. The ratings are based on the credit quality of the underlying loans and the insurance provided by FHA and the guarantee provided by the VA and RHS. Specifically, in Pool 1 about 83% of the loans have insurance provided by FHA, 16% from the VA, and less than 1% from the RHS. In Pool 2, about 97% of the loans have insurance provided by FHA and 3% from the VA. The ratings are also based on the structural and legal integrity of the transaction. The Complete Rating Actions are: * Class 1AF1, Assigned Aaa * Class 1AF2, Assigned Aaa * Class 1AS, Assigned Aaa * Class 1A2, Assigned Aaa * Class 1A3, Assigned Aaa * Class 1A4, Assigned Aaa * Class AX, Assigned Aaa * Class 2A1, Assigned Aaa * Class B1, Assigned Aa2 * Class B2, Assigned A2 * Class B3, Assigned Baa2 * Class B4, Assigned Ba2 * Class B5, Assigned B2 The notes are being offered in privately negotiated transactions without registration under the 1933 Act. The issuance was designed to permit resale under Rule 144A. HEATING OIL: Committee Brings In Pepe & Hazard as Local Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Heating Oil Partners, L.P. and its debtor-affiliates' chapter 11 cases, sought and obtained authority from the U.S. Bankruptcy Court for the District of Connecticut to employ Pepe & Hazard LLP as its local counsel. Pepe & Hazard is expected to: a. participate in certain meetings of the Committee; b. meet with representatives of the Debtors and the Debtors' professionals; c. advise the Committee and Lowenstein Sandler PC, the Committee's lead counsel, regarding proceedings in the Court; d. prepare and file certain pleading and participate in hearings in the Court; e. monitor the Debtors' activities; f. assist the Committee and Lowenstein in maximizing the value to be realized for the unsecured creditors of the Debtors from the Debtors' sale of assets; g. assist the Committee and Lowenstein in formulating and negotiating a chapter 11 plan and advising creditors of the Committee's recommendation with respect to any such plan; and h. prosecute possible cause of action not prosecuted by Lowenstein. Mark I. Fishman, Esq., partner at Pepe & Hazard, will lead the engagement and bills $375 per hour. Mr. Fishman says that the other attorney will be Kristin B. Mayhew, Esq., and she bills $275 per hour. Mr. Fishman discloses that Joseph W. Martini, Esq., a partner at Pepe & Hazard, is the former husband of the U.S. Trustee. Nevertheless, Mr. Fishman assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The Firm's Connecticut Office is located at: Pepe & Hazard LLP Goodwin Square Hartford, Connecticut 06103-4302 Tel: (860) 522-5175 Fax: (860) 522-2796 http://www.pepehazard.com/ Headquartered in Darien, Connecticut, Heating Oil Partners, L.P. -- http://www.hopheat.com/-- is one of the largest residential heating oil distributors in the United States, serving approximately 150,000 customers in the Northeastern United States. The Company's primary business is the distribution of heating oil and other refined liquid petroleum products to residential and commercial customers. The Company and its subsidiaries filed for chapter 11 protection on Sept. 26, 2005 (Bankr. D. Conn. Case No. 05-51271) and filed for recognition of the chapter 11 proceedings under the Companies' Creditors Arrangement Act (Canada). Craig I. Lifland, Esq., and James Berman, Esq., at Zeisler and Zeisler, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $127,278,000 in total assets and $155,033,000 in total debts. INT'L RECTIFIER: Fitch Affirms B+ Sr. Subordinated Debt's Rating ---------------------------------------------------------------- Fitch Ratings revised International Rectifier Corp.'s (IR) Rating Outlook to Positive from Stable and affirmed the company's 'BB-' issuer default rating. The ratings on IR's 'B+' senior subordinated debt and 'BB' senior secured bank credit facility are also affirmed. Fitch's action affects approximately $550 million of public debt securities. The Positive Outlook reflects Fitch's expectations that: * IR's richer sales mix; * anticipated divestiture of its non-aligned products segment; and * positive longer term power management growth trends will result in IR achieving a stronger operating and financial profile, albeit still within the context of the semiconductor cycle. IR has steadily increased its mix of higher gross margin Focus products to 75% of revenues for the latest 12 months ended Dec. 31, 2005, from less than 60% for fiscal year 2003, driving corporate-wide gross margins to 42% from 33% over the same time frame. Fitch also believes the company's proprietary products provide greater visibility and, therefore, are less susceptible to gross margin erosion. Fitch notes that IR's contemplated divestiture of its Non-Aligned Products segment (approximately 9% of revenues for the LTM ended Dec. 31, 2005), if successful, will further strengthen the company's operating profile, as this segment historically has been characterized by lower and more volatile gross margins. This divestiture, which IR is targeting for completion by mid-2006, would follow IR's discontinuation of certain noncore product lines beginning in fiscal year 2004, which represented approximately $100 million of annual revenues. The ratings continue to reflect IR's: a) significant ongoing capital expenditures and investments in research and development, likely representing 20%-25% of revenues; b) likelihood that total debt will remain near current levels, given Fitch's expectations that IR will refinance the $550 million of convertible notes due in July 2007; c) small size relative to major competitors, several of which are large integrated semiconductor providers; and d) exposure to the cyclical demand patterns and volatile cash flows associated with the semiconductor industry. Ratings strengths center on IR's: * consistently positive (albeit modest) annual free cash flow; * leading positions in several power management markets; * strong and focused intellectual property portfolio; * diversified end market exposure; and * relatively conservative financial strategy, including a solid liquidity position. While IR has experienced recent negative quarterly revenue growth and some gross margin contraction over the past few quarters, longer-term operating trends continue to be positive. Revenue declines were due to a combination of capacity constraints in focus products, as well as pricing pressures, past discontinuations and other efforts to reduce exposure within commodity products. While recognizing that IR has benefited from a prolonged semiconductor market expansion, the power management market is expected to grow in the upper single digits for calendar year 2006 and over the intermediate-term, driven primarily by increased power management content, as well as continued (albeit less robust) end market growth. Over the near-term, Fitch believes IR's high utilization rates (in excess of 90%), positive book-to-bill ratio, backlog representing approximately 80% of revenues targeted for the March 2006 quarter, and historically lean inventory positions at components distributors (which represent approximately 20% of IR's revenues) should drive positive operating momentum for the first half of calendar year 2006. Also, IR's manufacturing capacity expansion, scheduled to be completed by October 2006, is expected to alleviate some of the company's capacity constraints that have caused lost revenues in recent quarters. Fitch notes that IR, as well as the overall semiconductor industry, have been more disciplined in adding capacity than historically, which should somewhat mitigate the supply and demand imbalances that have driven substantial cash flow volatility in previous cycles. As of Dec. 31, 2005, IR's liquidity was sufficient to meet near- term obligations, including potentially repurchasing up to $100 million of common stock, and consisted of approximately $920 million of cash and short- and long-term investments and a $150 million senior secured revolving credit facility expiring November 2006. Historically, free cash flow also has supported liquidity, averaging more than $50 million annually over the past four years, although Fitch believes this could be pressured in fiscal 2006 driven primarily by the temporarily elevated capital expenditures to add capacity in IR's most advanced manufacturing facility. Total debt consists of the aforementioned $550 million 4.25% convertible subordinated notes due in July 2007. INZON CORP: Increased Costs Lead to Higher Losses in 1st Quarter ---------------------------------------------------------------- InZon Corporation delivered its financial results for the quarter ended Dec. 31, 2005, to the Securities and Exchange Commission on Feb. 9, 2006. In the first quarter of fiscal year 2006, InZon reported a $581,019 net loss, as compared to a $38,925 net loss for the three months ended Dec. 31, 2004. Management attributes the increase primarily to higher costs of the Company's operations to support the sales levels reached for the current quarter, combined with the lag associated with the revenues represented by these sales. The Company generated $2,748,599 of revenue for the three months ended Dec. 31, 2005, compared to zero revenue for the comparable period in the prior year. The current period is the Company's first quarter of full operation of its business. The Company's balance sheet at Dec. 31, 2005, showed $2,156,049 in total assets and liabilities of $2,200,062, resulting in a stockholders' deficit of $44,013. As of Dec. 31, 2005, the Company had a $1,372,725 net working capital deficit, versus a $519,065 net working capital deficit at Dec. 31, 2004. Going Concern Doubt George Brenner, CPA, expressed substantial doubt about InZon's ability to continue as a going concern after he audited the Company's financial statements for the year ended Sept. 30, 2005, and the period May 14, 2004 (inception) through Sept. 30, 2004. Mr. Brenner pointed to the Company's losses from start-up operations, substantial need for working capital and accumulated deficit of $1,394,670 at Sept. 30, 2005. About InZon Based in Delray Beach, Florida, InZon Corporation provides telecommunication services in the United States. The company offers voice over Internet protocol (VoIP) services to tier 1 and tier 2 carriers. Its VoIP technology provides voice, fax, data, conference call, and Internet services over a private Internet protocol network to international carriers and other communication service providers. J.L. FRENCH: Bankruptcy Court Approves First Day Motions -------------------------------------------------------- J.L. French Automotive Castings, Inc., reported that the U.S. Bankruptcy Court for the District of Delaware approved its first motions, which included: * access to $25 million in interim debtor-in-possession financing; * payment of prepetition employee wages and benefits; * payment of prepetition critical trade vendor claims; and * continued use of the Debtor's cash management system and banking relationships. The Court will convene the Final DIP Financing Hearing on March 3, 2006. The Debtor seeks to obtain $50 million in fresh financing. Headquartered in Sheboygan, Wisconsin, J.L. French Automotive Castings, Inc. -- http://www.jlfrench.com/-- is one of the world's leading global suppliers of die cast aluminum components and assemblies. There are currently nine manufacturing locations around the world including plants in the United States, United Kingdom, Spain, and Mexico. The company has fourteen engineering/customer service offices to globally support our customers near their regional engineering and manufacturing locations. The Company and its debtor-affiliates filed for chapter 11 protection on Feb. 10, 2006 (Bankr. D. Del. Case No. 06-10119 to 06-06-10127). James E. O'Neill, Esq., Laura Davis Jones, Esq., and Sandra G.M. Selzer, Esq., at Pachulski Stang Ziehl Young & Jones, and Marc Kiesolstein, P.C., at Kirkland & Ellis LLP, represent the Debtors in their restructuring efforts. When the Debtor filed for chapter 11 protection, it estimated assets and debts of more than $100 million. KAISER ALUMINUM: KACC Balks at Gramercy's $5-Mil. Admin. Claim -------------------------------------------------------------- As previously reported in the Troubled Company Reporter on Jan. 9, 2006, Gramercy Alumina, LLC, and St. Ann Bauxite Limited asked the U.S. Bankruptcy Court for the District of Delaware to: (1) declare that Kaiser Aluminum Corporation breached the Purchase Agreement because they failed to list or otherwise disclose or describe the retirement plans and the accrued retirement benefits in the Purchase Agreement; (2) declare that the Debtors breached the Purchase Agreement because they failed to satisfy the accrued retirement benefits that stood at $7,200,000 on the closing date; (3) determine that the Debtors are obligated to pay them $5,000,000 in connection with liabilities unknowingly incurred and damages suffered for at least $7,200,000. The Debtors' indemnification obligations are limited to $5,000,000 under the Purchase Agreement; and (4) direct the Debtors to pay them $5,000,000 as an administrative expense payable under the Debtors' Chapter 11 case KACC and KBC Respond Kaiser Aluminum & Chemical Corporation and Kaiser Bauxite Company deny the allegations asserted by Gramercy and St. Ann. Kimberly Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, argues that there is no truth to Gramercy and SABL's allegations relating to: * the notification of accrued retirement benefits from Rambarran & Associates Limited Consulting Actuaries; and * "discovery" of the existence of the retirement plans or the accrued retirement benefits. KACC and KBC deny the allegations regarding the disclosure of the retirement plans or the accrued retirement benefits in the purchase agreement or its exhibits and schedules. They also deny the allegation that they continuously provided benefits under the retirement plans to retired employees since 1978. Ms. Newmarch points out that Gramercy and SABL's complaint fails to state a claim on which relief can be granted. Gramercy and SABL's claims are likewise barred under the doctrines of waiver, ratification, and release or accord and satisfaction. KACC and KBC contend that Gramercy and SABL are not entitled to the requests they seek including the award of $5,000,000 in damages. Hence, no request for administrative claim can be entertained. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 90; Bankruptcy Creditors' Service, Inc., 215/945-7000) LEHMAN XS: Moody's Assigns Ba2 Rating on Class B Notes ------------------------------------------------------ Moody's Investors Service assigned a rating of A3 to the Class A notes and a rating of Ba2 to the Class B notes of Lehman XS Net Interest Margin Notes, Series 2005-10. The notes are backed by the residual and prepayment penalty cash flows from the LXS 2005- 10 Alt-A mortgage securitization. Daniel Gringauz, a Moody's analyst, says that the ratings assigned to the notes are based primarily on the adequacy of cash flows from the underlying transaction's prepayment penalty and residual certificates. The risk faced by the LXS 2005-10 NIM noteholders depends on the size and timing of the excess spread and prepayment penalty cash flows. According to Daniel Gringauz, the cash flows available to repay the notes are most significantly impacted by the level of prepayments, as well as the timing and amount of losses on the underlying mortgage pool. The prepayment penalty and excess spread cash flows counter-balance each other, thus stabilizing cash flows in various prepayment environments. High prepayment speeds on the underlying loans reduce excess spread cash flows but increase prepayment penalty cash flows and vice versa. Moody's applied various combinations of loss and prepayment scenarios to evaluate the adequacy of cash flows to fully amortize the rated notes. The complete rating actions are: Issuer: Lehman XS NIM Company 2005-10 Co-Issuer: SASCO ARC Corporation Securities: Lehman XS Net Interest Margin Notes, Series 2005-10 * Class A Notes, rated A3 * Class B Notes, rated Ba2 The notes are being offered in privately negotiated transactions without registration under the 1933 Act. The issuance was designed to permit resale under Rule 144A. LEVEL 3 COMM: Posts $169 Million Net Loss in 4th Quarter of 2005 ---------------------------------------------------------------- Level 3 Communications, Inc., incurred a $169 million net loss for the quarter ended Dec. 31, 2005, compared to a $204 million net loss in the third quarter of 2005. Included in the net loss for the fourth quarter are: a) a net loss of $3 million as a result of the acquisition of WilTel Communications on Dec. 23, 2005; and b) income of approximately $49 million associated with the gain from the sale of Structure, LLC, the Company's wholly owned IT infrastructure management outsourcing subsidiary to Infocrossing, Inc., Nov. 30, 2005, and the results of its operations through the closing date of the sale. For the three months ended Dec. 31, 2005, the Company generated consolidated revenue of $944 million, versus $782 million of consolidated revenue for the third quarter of 2005. Consolidated Cash Flow and Liquidity In the fourth quarter of 2005, the Company reported unlevered cash flow of negative $12 million, versus positive $45 million during the third quarter. Consolidated free cash flow for the fourth quarter was negative $160 million, versus negative $50 million for the previous quarter. For the full year 2005, unlevered cash flow was negative $9 million compared to $58 million in 2004, and consolidated free cash flow decreased to negative $425 million in 2005 compared to negative $350 million last year. Management expects to file its financial results for the quarter and year ended Dec. 31, 2005, with the Securities and Exchange Commission next month. Mergers and Acquisitions The company closed its previously announced acquisition of WilTel Communications on Dec. 23, 2005, for consideration of 115 million shares of Level 3 common stock and $386 million in cash, subject to final purchase price or working capital adjustments. As a consequence of the completion of the acquisition of WilTel Communications, the company is in the process of completing its purchase accounting adjustments to the consolidated balance sheet. Level 3 Communications (Nasdaq: LVLT) -- http://www.Level3.com/ -- is an international communications and information services company. The company operates one of the largest Internet backbones in the world, is one of the largest providers of wholesale dial-up service to ISPs in North America and is the primary provider of Internet connectivity for millions of broadband subscribers, through its cable and DSL partners. The company offers a wide range of communications services over its 23,000-mile broadband fiber optic network including Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, and patented softswitch managed modem and voice services. * * * As reported in the Troubled Company Reporter on Jan. 12, 2006, Standard & Poor's Ratings Services assigned its 'CCC-' rating to the Company's proposed offering of up to $1.23 billion of 11.5% senior notes due 2010. The notes are being offered in exchange for an aggregate of up to $1.23 billion of the company's debt maturing in 2008, consisting of its 9.125% senior notes, 11% senior notes, and 10.5% senior discount notes. The Company's balance sheet at Sept. 30, 2005, showed $7.5 billion in total assets and liabilities of $8.2 billion, resulting in a stockholders' deficit of $632 million. LODGENET ENTERTAINMENT: Posts $2.3 Mil. Net Loss in Fourth Quarter ------------------------------------------------------------------ LodgeNet Entertainment Corporation (Nasdaq: LNET) reported revenue of $275.8 million, for the quarter ended Dec. 31, 2005, a 3.5% increase compared to 2004, and its 49th consecutive increase of comparative quarterly revenue. Revenue for the quarter increased 4.4% to $67.5 million as compared to $64.7 million for the fourth quarter of 2004 as total monthly Guest Pay and movie revenue per room increased 2.0% and 1.8%, respectively. For the full year 2005, operating income increased to $22.7 million compared to $13.0 million in 2004. Net loss for 2005 was $7 million versus net loss of $20.8 million in 2004. LodgeNet also reported $12.8 million in net free cash flow for the entire year of 2005 as compared to $6.3 million in 2004. "2005 was a year of significant accomplishments from both a financial and competitive standpoint as we continued to execute on our strategic plan of growing our business while simultaneously generating increasing levels of net free cash flow and improving profitability," Scott C. Petersen, LodgeNet President and CEO said. "We are especially pleased to report that total Guest Pay revenue and movie revenue per room per month for the quarter were both up over the same period last year. For the full year, we are also very encouraged by the progress we made in generating net free cash flow, which more than doubled, and in driving profitability, increasing operating income by 75% and reducing our net loss by two-thirds." "In the fourth quarter, seasonally our weakest, we were essentially net cash flow breakeven, driven by positive per-room revenue gains and a continued focus on managing our operating costs and capital investment program," Gary H. Ritondaro, LodgeNet Senior Vice President and CFO said. "For the full year, cash provided by operating activities was $64.3 million, a 6% increase over 2004, with net free cash flow of $12.8 million. We more than doubled net free cash flow from $6.3 million last year even as we grew our digital base by 120,000 rooms. Digital rooms now comprise 63% of our entire interactive room base." "During 2005, we also made significant progress in deleveraging our balance sheet," Ritondaro continued. "We ended the year with $292 million in long-term debt, a reduction of approximately $21 million over year-end 2004, which resulted in an 8% decrease in interest expense during 2005. In January, 2006 we reduced our long-term debt by an additional $10 million and presently have a long-term debt leverage ratio of 3.06 times." "While we have achieved substantial success with regard to our financial goals, we also had significant market-based success," Petersen said. "During the year, we signed contracts for an incremental 68,000 rooms; we extended our relationship with The Ritz-Carlton Hotel Company through 2011 based on our industry leading HDTV system offering; and in December, Starwood Hotels named LodgeNet its sole preferred provider for interactive television services for its Westin, W, Sheraton and Four Points brands due in large part to our ability to execute on their sophisticated requirements for content management." "We enter 2006 focused on growth, profitability and cash flow generation," Petersen continued. "We are working to drive more revenue through enhanced marketing, new programming content such as our daily subscription Hotel SportsNet(SM) service, and through our targeted advertising initiative. We also believe we are well positioned to grow our room base with our integrated sigNETure(SM) Solutions for high-definition television, hotel marketing applications and Internet connectivity, all supported by our world class service. In addition, we remain focused on diversifying our revenue streams by continuing to develop our Healthcare initiative, now with nine facilities under contract, and by exploring other adjacent markets." Results From Operations Total revenue for the fourth quarter of 2005 was $67.5 million, an increase of $2.8 million, or 4.4%, compared to the fourth quarter of 2004. Revenue from Guest Pay services increased $3.6 million, or 5.8%, resulting from both a 3.7% increase in the average number of rooms in operation and by a 2.0% increase in revenue realized per average Guest Pay room. Monthly Guest Pay revenue per room was $22.00 in the fourth quarter of 2005 as compared to $21.57 for the fourth quarter of 2004. The company generated this result despite having had approximately 9,000 rooms out of operation because of Hurricane Katrina. The company estimate the impact from having these rooms out of service reduced Guest Pay revenue by approximately $700,000 in the fourth quarter of 2005 or approximately $0.24 per room. Movie revenue per room increased 1.8% to $16.66 this quarter as compared to $16.37 in the year earlier quarter. Revenue per room from other interactive services increased 2.7%, from $5.20 per month in the fourth quarter of 2004 to $5.34 in the current year quarter. The increase was primarily due to price changes associated with basic cable services and increased revenue from the high-speed Internet access -- HSIA -- services. This was offset in part by our TV Internet profitability enhancement initiative that removed poorly performing rooms from service. The company estimate that the TV Internet initiative decreased revenue by approximately $325,000, or about $0.12 per room, while lowering direct operating costs by approximately $726,000. Total direct costs increased $1.3 million, or 4.5% to $30.5 million in the fourth quarter of 2005, compared to $29.2 million in the prior year's quarter. As a percentage of revenue, total direct costs remained flat at 45.2% in the fourth quarter of 2005 as compared to the fourth quarter of 2004. Guest Pay operations expenses were $8.8 million in the fourth quarter of 2005, a 1.7% increase, compared to $8.7 million in the fourth quarter of 2004. The increase was due to the 3.7% increase in the average number of rooms served, offset by decreases in general operating and insurance expenses and by greater efficiencies associated with our expanding digital room base. Guest Pay operations expenses as a percentage of revenue were 13.0% as compared to 13.4% in the fourth quarter of 2004. Per average installed room, Guest Pay operations expenses decreased 2.0% to $2.95 per month in the fourth quarter of 2005, compared to $3.01 per month in the prior year quarter. Operating income increased to $4.9 million in the fourth quarter of 2005 as compared to $2.3 million in the prior year quarter. The $4.9 million included a net insurance recovery of $758,000 related to Hurricane Katrina. Adjusted Operating Cash Flow increased 1.8% to $21.4 million for the fourth quarter of 2005 compared to $21.1 million in the fourth quarter of 2004. Net loss was $2.3 million for the fourth quarter of 2005, an improvement of $3.8 million as compared to a $6.1 million net loss in the year earlier quarter. For the quarter, cash provided by operating activities was $12.1 million while cash used for investing activities, including growth-related capital, was $12.2 million. During the fourth quarter of 2004, cash provided by operating activities was $6.7 million while cash used for investing activities, including growth-related capital, was $13.7 million, resulting in negative net cash flow of $7.0 million. During the quarter, 13,419 new digital rooms were installed compared to 27,475 new digital rooms installed during the fourth quarter of 2004, when the company installed a substantial number of newly contracted FelCor Lodging rooms. The average cost per newly installed digital room was $359 during the fourth quarter of 2005, compared to $341 for the fourth quarter of 2004. The increase in cost per room was primarily attributable to the mix of sites, which had a lower average number of rooms per site. The cost of converting a tape-based room to a digital room was $250 in the fourth quarter of 2005, compared to $263 in the same period last year. Results From Operations Total revenue for 2005 was $275.8 million, an increase of $9.3 million, or 3.5%, compared to 2004. Revenue from Guest Pay services increased $9.2 million, or 3.6%, resulting from a 5.1% increase in the average number of rooms in operation, and offset in part by a 1.4% decrease in revenue per average Guest Pay room. The decrease in revenue per average Guest Pay room was primarily attributable to lower movie purchases in the first three quarters, our TV Internet profitability enhancement initiative, and the impact from Hurricane Katrina. The company estimate the impact from having rooms out of service due to the Hurricane reduced Guest Pay revenue in 2005 by approximately $1.1 million. The TV Internet initiative, which removed poorly performing rooms from service, is estimated to have reduced revenue by approximately $1.4 million, while lowering direct operating costs by approximately $2.9 million. Movie revenue per room decreased 2.2% to $17.00 this year as compared to $17.39 in the prior year. Monthly Guest Pay revenue per room was $22.53 in 2005 as compared to $22.86 in 2004. Revenue per room from other interactive services increased 1.1%, from $5.47 per month in 2004 to $5.53 in the current year. The increase was primarily due to price changes associated with basic cable services and increased revenue from the high-speed Internet access services. Total direct costs increased $4.0 million, or 3.4% to $123.2 million in 2005, compared to $119.2 million in the prior year. As a percentage of revenue, total direct costs remained flat at 44.7% in 2005 as compared to 2004. Guest Pay direct costs as a percentage of Guest Pay revenue decreased to 44.5% for 2005 as compared to 44.7% last year while costs related to HSIA equipment sales increased over 2004. Guest Pay operations expenses were $35.1 million in 2005, a 4.4% increase, compared to $33.6 million last year. The increase was primarily due to the 5.1% increase in the average number of rooms served and other increased costs such as labor, property taxes, freight, fuel and other vehicle related costs. These increases were offset in part by greater efficiencies associated with an expanding digital room base. Guest Pay operations expenses as a percentage of revenue were 12.7% as compared to 12.6% in 2004. Per average installed room, Guest Pay operations expenses decreased to $2.96 per month in 2005, compared to $2.97 per month in the prior year. Other operating income of $508,000 in 2005 included insurance proceeds associated with the Hurricane Katrina recovery of $788,000 offset by a $280,000 charge for equipment impairment. Operating income increased 75.0% to $22.7 million in 2005 as compared to $13.0 million in the prior year. The $22.7 million included a net insurance recovery of $508,000 related to the Hurricane Katrina impact. Adjusted Operating Cash Flow increased 2.4% to $92.3 million for 2005 compared to $90.2 million in 2004. Net loss was $7.0 million for 2005, an improvement of $13.8 million as compared to a $20.8 million net loss in the previous year. Cash provided by operating activities for 2005 was $64.3 million while cash used for investing activities, including growth-related capital, was $51.5 million, resulting in net free cash flow of $12.8 million. During 2004, cash provided by operating activities was $60.6 million while cash used for investing activities, including growth-related capital, was $54.3 million, resulting in net free cash flow of $6.3 million. Cash on the balance sheet as of Dec. 31, 2005, was $20.7 million versus $25.0 million as of Dec. 31, 2004. In 2005, 71,731 new digital rooms were installed compared to 75,932 new digital rooms installed in 2004. The average cost per newly installed digital room decreased 6.6% to $340 during 2005, compared to $364 during 2004. The cost of converting a tape-based room to a digital room decreased 7.8% to $262 for 2005, compared to $284 in 2004. At Dec. 31, 2005, LodgeNet Entertainment Corporation's balance sheet showed a $70,233,000 stockholders' deficit, compared to a $72,118,000 deficit at Dec. 31, 2004. LodgeNet Entertainment Corporation (NASDAQ: LNET) -- http://www.lodgenet.com/-- is the world's largest provider of interactive television and broadband solutions to hotels throughout the United States and Canada as well as select international markets. These services include on-demand movies, music and music videos, on-demand videogames, Internet on television, and television on-demand programming, as well as high- speed Internet access, all designed to serve the needs of the lodging industry and the traveling public. LodgeNet provides service to more than one million interactive guest pay rooms and serves more than 6,000 hotel properties worldwide. LodgeNet estimates that during 2005, approximately 300 million travelers had access to LodgeNet's interactive television systems. In addition, LodgeNet is an innovator in the delivery of on-demand patient education, information and entertainment to medical care facilities. MAJESTIC STAR: Moody's Lifts Rating on $80 Mil. Sr. Loan to Ba3 --------------------------------------------------------------- Moody's Investors Service upgraded Majestic Star Casino, L.L.C.'s $80 million senior secured bank loan rating to Ba3 from B1. The upgrade followed the Dec. 2005 issuance of Majestic Holdco L.L.C.'s $55 million 12% senior discount notes, and the issuance of Majestic Star's $30 million 9-1/2% senior secured notes and $200 million 10% senior guaranteed unsecured notes. Following the upgrade, Moody's will withdraw the rating on Majestic Star's $80 million senior secured bank loan for business reasons. No other ratings were affected by this action. This rating action ends the review process that began on Dec. 9, 2005, when Moody's placed Majestic Star's bank loan rating on review for possible upgrade. Majestic Star's $80 million senior secured bank loan is now two notches higher than the company's B2 corporate family rating. This two-notch difference reflects the bank loan's prior lien status over the company's senior secured notes, as well as the benefits from the larger asset base and increased amount of debt subordinated to it. Prior to the upgrade, the bank loan was rated one notch higher than the senior secured notes. Majestic Star Casino, L.L.C., directly and indirectly owns and operates riverboat casinos in Gary, Indiana, Tunica, Mississippi, and Black Hawk, Colorado. Majestic Star Holdco, L.L.C. owns 100% of Majestic Star Casino, L.L.C. NAVISTAR INT'L: Receives $1.5 Billion Loan Commitment from Lenders ------------------------------------------------------------------ Navistar International Corporation (NYSE:NAV) has entered into a commitment letter dated February 9, 2006 with: * Credit Suisse; * Credit Suisse Securities (USA) LLC; * J.P. Morgan Chase Bank; * J.P. Morgan Securities Inc.; * Banc of America Securities LLC; * Banc of America Bridge LLC; * Citigroup Global Markets Inc.; and * Citigroup North America, Inc. under which the Four Lenders have committed to provide the Company with a 3-year senior unsecured term loan facility in the aggregate principal amount of $1,500,000,000. The Loan will be guaranteed by International Truck and Engine Corporation, the principal operating subsidiary of the Company. The commitment to fund the Loan Facility will expire August 7, 2006. If the commitment is terminated or expires, or if and to the extent the Loan Facility is funded, the Company will have to pay certain fees, the total of which the Company does not believe would be material to its financial position or results of operations. The Loan Facility will accrue interest at a rate equal to an adjusted LIBOR rate plus a spread. The spread, which will be based on the company's credit ratings in effect from time to time, may range from 450 basis points to 700 basis points and will increase by an additional 50 basis points at the end of the twelve-month period following the date of the first borrowing and by an additional 25 basis points at the end of each subsequent six-month period. Upon meeting the terms and conditions of the commitment, the proceeds from the loan facility could be used to refinance any or all of the company's outstanding notes that are allegedly in default as the result of a delay in filing its fiscal 2005 annual report. Navistar received notices from the trustee of its existing notes that it is in default on four series of the company's existing debt. The company disputes the notices of default contained in the notification letters. Daniel C. Ustian, Navistar chairman, president and chief executive officer, said failure to file the Form 10-K for the fiscal year ended Oct. 31, 2005, on time does not impact the financial strength and earnings power of the company and noted that the company's ability to secure a commitment is a positive sign of the company's continued strength. On Jan. 17, 2006, Navistar reported that it would not file its Form 10-K by the filing deadline because it is still in discussions with its outside auditors about a number of complex and technical accounting items. The company continues to work toward a resolution of these items and progress is being made on reaching a conclusion. "It is unfortunate that our delay in reporting fiscal 2005 financial results is overshadowing all the positive actions underway at our company," Mr. Ustian said. "This week's announcement that the U.S. Army has narrowed the field of contractors to build its next generation tactical military vehicle is a perfect example." Mr. Ustian said the selection of International and Lockheed Martin represents a shift in the way the Pentagon purchases military equipment since neither company is among the traditional suppliers of light and medium tactical vehicles, but rather are among the companies that have developed state-of-the-art technology applicable to the military's future needs when in combat. Bondholders in each of the following series of the company's outstanding long-term debt have tendered default notices: * 2-1/2% senior convertible notes totaling $190 million due 2007; * 9-3/8% senior notes totaling $400 million due 2006; * 6-1/4% senior notes totaling $250 million due 2012; and * 7-1/2% senior notes totaling $400 million due 2011. All of the bond issues contain provisions that allow the company a cure period from receipt of the notice to file its annual report. The 2-1/2% notes carry a 60-day cure period, while all other notes provide 30 days. The company believes that it has adequate resources available to continue to fund its operations and repay any notes, which are in default, and believes that notices of default will not have a material adverse effect on the company's liquidity position or financial condition. Full-text copies of the credit facility and default notices are available at no charge at http://ResearchArchives.com/t/s?541 Headquartered in Warrenville, Illinois, Navistar International Corporation -- http://www.nav-international.com/-- is the parent company of International Truck and Engine Corporation. The company produces International(R) brand commercial trucks, mid- range diesel engines and IC brand school buses, Workhorse brand chassis for motor homes and step vans, and is a private label designer and manufacturer of diesel engines for the pickup truck, van and SUV markets. The company is also a provider of truck and diesel engine parts and service sold under the International(R) brand. A wholly owned subsidiary offers financing services. * * * As reported in the Troubled Company Reporter on Feb. 07, 2006, Moody's Investors Service lowered the ratings of Navistar International Corporation (senior unsecured to B1 from Ba3 and subordinate to B3 from B2) and placed the ratings under review for further possible downgrade. Moody's rating actions followed Navistar's announcement that it has received notice from purported holders of more than 25% of the company's approximately $200 million senior subordinated exchangeable notes due 2009, claiming that the company is in default of reporting requirements relating to the filing of its financial statements for the fiscal year ending Oct. 31, 2005. The company disputes the allegation of default. Nevertheless, receipt of the notice of default represents a further negative development for the company stemming from its inability to file financial statements in a timely manner because of accounting issues. The downgrade and review reflect the heightened financial risk stemming from uncertainty as to Navistar's ability to file its financial statements in a timely manner given the number and complexity of various open items that the company continues to discuss with its auditors Deloitte and Touche. As a result of these open issues, Navistar cannot estimate the time frame for the filing of its October 2005 financial statements. NAVISTAR INT'L: Fitch Downgrades Subordinated Debt's Rating to B ---------------------------------------------------------------- Fitch downgraded the ratings of Navistar International Corp. and its subsidiary, Navistar Financial Corp. as: Navistar International Corp.: -- Issuer default rating (IDR) to 'BB-' from 'BB' -- Senior unsecured debt to 'BB-' from 'BB' -- Subordinated debt to 'B' from 'B+' Navistar Financial Corp. -- Senior unsecured bank lines to 'BB-' from 'BB' -- Senior unsecured debt to 'BB-' from 'BB' Fitch also assigned an indicative rating of 'BB-' to Navistar's prospective $1.5 billion credit facility. The ratings remain on Rating Watch Negative. Resolution of the Watch status will be contingent on the filing of audited financial statements and resolution of Navistar's debt structure. The downgrade reflects: * the protracted duration of Navistar's inability to file audited financial statements; * the scale and uncertainty of any adjustments that may be required; * uncertainties associated with the potential refinancing of Navistar International's debt; and * the potential for limited access to external capital following the refinancing. Following resolution of Navistar's debt structure, liquidity will be supplied by cash and securities, which totaled $877 million at Oct. 31, 2005, and cash from operations. Free cash flow is expected to be significant, as the end market for heavy duty trucks remains at cyclical peak levels in 2006. Despite solid volume growth in engines, segment margins have been pressured by competitive pricing and high commodity prices. Navistar is expected to enter a projected downturn in the heavy duty truck market with healthy cash balances. Navistar's underfunded pension position will make a meaningful claim on cash flows over the intermediate term, although required contributions in 2006 are minimal. Higher required contributions in later years could coincide with a cyclical decline in operating cash flows, potentially limiting Navistar's capacity to produce free cash flow. Pending pension legislation could result in tighter funding requirements and adversely affect Navistar's financial flexibility over the near term. The indicative rating on the new credit facility is based on the unsecured status and is subject to final documentation. The new unsecured credit facility alleviates concerns regarding creditor's ability to accelerate repayment and is available to refinance current outstanding debt (all of Navistar's debt-holders have now submitted notices of default). If the facility converts to a secured basis, any unsecured notes remaining outstanding would be downgraded. Drawdowns under the facility would result in higher interest expense, with potential further step-ups in pricing. The three-year term of the facility will require that Navistar gain access to the capital markets within that time frame. NAVISTAR INT'L: S&P Maintains Watch on BB- Corporate Credit Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services held its 'BB-' corporate credit ratings on North American heavy-duty and medium-duty truck producer Navistar International Corp., and Navistar's subsidiary, Navistar Financial Corp., on CreditWatch with negative implications. The company's senior unsecured and subordinated debt ratings also remain on CreditWatch. The ratings were originally placed on CreditWatch on Jan. 17, 2006. The CreditWatch update follows the company's most recent 8-K filing. The filing states that Navistar has received additional notices of default from purported holders of several additional outstanding debt instruments and that the company has received a loan commitment of $1.5 billion from several financial institutions and that the proceeds of the loan facility may be used to refinance the company's outstanding debt. Under the terms of the company's various bond indentures, Navistar has between 30 and 60 days from the time the notice was received to cure the default by either filing its financial statements or by receiving a waiver from its bondholders. Navistar had previously received a default notice, from holders of its 4 3/4 convertible bonds; however, the company disputes that it is in default on that instrument. If Navistar fails to cure the defaults, acceleration of required payment could occur. However, the company has indicated that the new loan commitment should be sufficient to cover an acceleration. Standard & Poor's currently believes that Navistar will resolve the potential defaults before the cure periods end, and that the company is exploring a range of possibilities, which could include repurchasing its outstanding debt obligations. "We will monitor Navistar's progress in reaching a prompt resolution, as well as its current and prospective sources of liquidity," said Standard & Poor's credit analyst Eric Ballantine. "If it appears that the company will be unable to resolve these potential defaults quickly, or if the company's liquidity were to become a concern, a multiple-notch downgrade is possible," the analyst continued. At Oct. 31, 2005, Navistar had approximately $875 million of cash. The company also has access to a $1.2 billion revolving credit facility at finance subsidiary Navistar Financial, subject to waivers related to filing financial statements that expire May 31, 2006, although Standard & Poor's believes that additional waivers could be granted if needed. In June 2006, Navistar faces nearly $400 million of maturing debt and the company has previously indicated that it plans to repay this obligation with cash from operations. Standard & Poor's anticipates that the ratings on Navistar will remain on CreditWatch until the company has filed its 10-K with the SEC and any defaults have been resolved. Once these events occur and if results are not materially different from previous expectations, Standard & Poor's expects to affirm the ratings with a stable outlook. NOVA COMMUNICATIONS: Changes Name to Encompass Holdings, Inc. ------------------------------------------------------------- Nova Communications Ltd. filed with the Securities and Exchange Commission an amendment to its Article of Incorporation to change its corporate name to Encompass Holdings, Inc. The company said the amendment was effective Jan. 27, 2006. Encompass Holdings' common stock started being quoted on the OTC Bulletin Board under its new symbol ECMH on Jan. 31, 2006. Encompass Holdings, Inc., fka Nova Communications Ltd. and First Colonial Ventures, is looking for companies that share a potential for growth and a need for capital. The company owns Aqua Xtremes, which makes a jet-powered surfboard. In May 2005 it acquired Nacio Systems, a provider of outsourced information technology services for corporate customers. * * * Going Concern Doubt Timothy L. Steers, CPA, LLC, expressed substantial doubt about Nova's ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended June 30, 2005 and 2004. The auditing firm points to the Company's significant operating losses and working capital deficit. NOVEMBER 2005: S&P Rates $80 Million Sr. Credit Facility at B+ -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' issuer credit rating to November 2005 Land Investors LLC. At the same time, a 'BB' bank loan rating with a '1' recovery rating is assigned to a $255 million senior secured first-lien term loan due 2011 and a $50 million senior secured first-lien revolving credit facility due 2009. Additionally, a 'B+' bank loan rating with a '3' recovery rating is assigned to an $80 million senior secured second-lien credit facility due 2012. The outlook is stable. "The issuer credit rating reflects the borrower's sizeable and concentrated investment in a large parcel of undeveloped land in Las Vegas, Nev., as well as the lower credit quality of several of the borrower's sponsors," explained Standard & Poor's credit analyst George Skoufis. "The ability and willingness of the borrower to make timely debt service payments could be adversely affected by construction delays and softening market conditions. Mitigating some of these concerns are the currently favorable housing supply and demand conditions in Las Vegas and the sponsors' contractual obligation to purchase a significant portion of the land and then amortize a material portion of the debt with those proceeds." While robust price appreciation in the market is considered unsustainable and there are signs of easing, the cost basis for the developed parcels in this master-planned community should remain competitive should the housing market weaken modestly. O'SULLIVAN INDUSTRIES: Court Approves Disclosure Statement ---------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia approved the adequacy of the Disclosure Statement explaining O'Sullivan Industries Holdings, Inc., and its debtor-affiliates First Amended Joint Plan of Reorganization. The Court determined that the Disclosure Statement contains adequate information -- the right amount of the right kind of information -- for creditors to make informed decisions when the Debtor asks them to vote to accept the Plan. The company also said that it reached an agreement with the Official Committee of Unsecured Creditors and the controlling holders of its 10.63% Senior Secured Notes due 2008. The company reported that both groups support confirmation of the plan. The Plan incorporates: * a cash payment for general unsecured creditors and a potential additional settlement for all vendors and utility providers electing to participate, * a warrant offering for the 13-3/8% senior subordinated notes due 2009, and * the conversion of the Secured Notes into substantially all of the equity of the reorganized company and $10 million of new secured notes. The company relates that a hearing to consider confirmation of the Plan is scheduled for March 16, 2006. "We are very pleased to have reached this consensual agreement on our Plan of Reorganization and the Court's approval of our amended Disclosure Statement," stated Rick Walters, interim CEO. "This is an important milestone in our Chapter 11 process and continues on our timeline to emerge from bankruptcy within the next few months." Distributions Under the Plan As reported in the Troubled Company Reporter on Jan. 10, 2006, The Debtors provide an estimate of the Allowed amount of claims on the Effective Date for these Classes: Claim Description Estimated Claim Amount ----------------- ---------------------- Administrative Claims $5,500,000 DIP Facility Claims $21,800,000 Tax Claims $1,068,771 Class 2A Unimpaired Claims The Debtors have paid all (Senior Credit outstanding Allowed Senior Facility Claims) Credit Facility Claims from the proceeds of the DIP Facility. The Debtors believe that there will not be any Allowed Senior Credit Facility Claims as of the Effective Date, although the Debtors do not know when any balance of the $500,000 deposited by them into the segregated account with GECC to fund indemnification obligations will be returned. Class 2C $89,400,000 Impaired Claims (Senior Secured Notes Secured Claims) Class 4 Claims To date, the Debtors estimate the total amount of Allowed Class 4 Claims to be approximately $99,800,000 under the BancBoston Note and the Tandy Agreements, plus approximately $18,600,000 in the Senior Secured Notes Deficiency Claims totaling approximately $118,400,000. Under the Amended Plan, holders of Impaired Class 3 General Unsecured Claims are entitled to a pro rata share of the Avoidance Recoveries, if any, which will be distributed only until the Allowed Senior Secured Notes Deficiency Claims, together with all Senior Secured Notes Postpetition Interest, have been paid in full. Furthermore, the holders of Impaired Class 3 General Unsecured Claims are entitled to vote on the Plan. To date, the Debtors estimate the total amount of Allowed Class 3 Claims to be $132,000,000 by the Effective Date of the Plan. The total claim amount consists of: (a) $102,400,000 in Senior Subordinated Notes Claims; (b) $11,000,000 for all other General Unsecured Claims; plus (c) $18,600,000 in Senior Secured Notes Deficiency Claims. A full-text copy of the Debtors' First Amended Plan of Reorganization is available for free at: http://bankrupt.com/misc/OSUL1stAmendedDisclosureStatement.pdf A full-text copy of the Debtors' First Amended Disclosure Statement is available for free at: http://bankrupt.com/misc/OSUL1stAmendedPlan.pdf 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. OAK CREEK: Wants Court to OK GMACC Agreement & Dismiss Bankr. Case ------------------------------------------------------------------ Oak Creek Park, LLC, asks the U.S. Bankruptcy Court for the Northern District of California to approve its settlement with GMAC Commercial Mortgage Corporation and dismiss its chapter 11 case. The Debtor reminds the Court that it filed for bankruptcy in order to restructure its loan with GMACC. The Debtor tells the Court that it intends to pay all undisputed claims in full and in cash. The Debtor contends that the goal of its bankruptcy has been accomplished and dismissal of the case is in the best interest of creditors and the estate. GMACC Loan The Debtor says that GMACC was the successor in interest in a loan agreement dated Dec. 6, 2000 in the original principal sum of $19.2 million as evidenced by a promissory note. The loan is secured by the property and related equipment, rents and leases, as evidenced by the Deed of Trust executed by the Debtor in favor of the original lender. The Debtor relates that it had remained current on the Note from December 2000 until September 2005, when it missed the September monthly payment of $178,830. GMACC Agreement The Debtor tells the Court that on Jan. 25, 2006, it entered into a Proposed Restructure Term Sheet with GMACC. The terms of the agreement includes: (a) the loan to continue being secured by the property and related collateral and the Debtor will not pledge any interest in the Collateral to any other entity; (b) the maturity date of the Note will be changed to Dec. 31, 2009; (c) GMACC will forgive $1.5 million of the principal amount when the loan is repaid in full provided no incident of monetary or material non-monetary defaults under the loan documents occur; (d) on the effective date of the Restructure Loan Documents, the Debtor will pay GMACC: -- reserve payments totaling $142,487, and -- $950,000 for all past due monthly installment to make the loan current, (e) all default interest and later charges will be waived by GMACC; (f) on the date in which GMACC and the Debtor execute the Restructure Loan Documents, the Debtor will pay GMACC all lenders expenses incurred by GMACC; (g) the Debtor will pay Avnet the remainder of the unpaid incentive payment; (h) GMACC will agree to a one-time waiver of the Yield Maintenance Payments and other prepayment penalties due under the Notes, provided that all obligations are paid in full by Jan. 1, 2007; and (i) the Debtor and GMACC will release each other from any and all liabilities or claims relates to the loan, loan documents or transactions contemplated by the term sheet. Headquartered in San Francisco, California, Oak Creek Park, LLC, filed for chapter 11 protection on Sept. 21, 2005 (Bankr. N.D. Calif. Case No. 05-56102). Desmond Cussen, Esq., Gibson, Dunn & Crutcher LLP represent 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. ON SEMICONDUCTOR: Cuts Interest Rate on $639.1M of Term Loans ------------------------------------------------------------- ON Semiconductor Corporation (NASDAQ: ONNN) has successfully refinanced approximately $639.1 million of term loans under its senior secured credit facilities to reduce the interest rate it pays from LIBOR plus 275 basis points to LIBOR plus 250 basis points. The amended and restated credit agreement also provides for a step down provision that would further reduce the interest rate to LIBOR plus 225 basis points if the Company has a credit rating of at least B2 (with stable outlook) from Moody's and meets a specified leverage ratio test that would first apply based on the 2005 fiscal year results. The Company currently anticipates it should meet this step down condition on or around the filing of its Form 10-K for the year ended December 31, 2005. "The reduction of the spread on our senior secured credit facilities is attributable to the improving financial performance of the Company," said Donald Colvin, ON Semiconductor senior vice president and CFO. "As part of our long-term financial strategy, we plan to use the cash generated from operations to reduce our overall debt levels." ON Semiconductor Corp. -- http://www.onsemi.com/-- supplies power solutions to engineers, purchasing professionals, distributors and contract manufacturers in the computer, cell phone, portable devices, automotive and industrial markets. As of December, 2005, the Company's equity deficit narrowed to $300.3 million from a $537 million deficit at December 31, 2004. OWENS CORNING: Court Sets April 5 Disclosure Statement Hearing -------------------------------------------------------------- The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware will hold a hearing on April 5, 2006, at 9:00 a.m., to consider approval of the Disclosure Statement explaining the Fifth Amended Joint Plan of Reorganization of Owens Corning and its debtor-affiliates. At the Disclosure Statement Hearing, the Court will find whether the Disclosure Statement contains adequate information pursuant to Section 1125 of the Bankruptcy Code that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the Debtors' Plan. The Disclosure Statement Hearing may be adjourned from time to time. The Debtors advise parties-in-interest to refer to the http://www.ocplan.comfor confirmation of the Disclosure Statement Hearing Date before attending the Hearing. Objections, if any, to the approval of the Disclosure Statement are due on March 15, 2006. Responses and objections, if any, must: -- be in writing; -- state the name and address of the objecting or responding party and the nature of the claim or interest of the party; -- state with particularity the nature of any objection or response and its legal basis, and include, where appropriate, proposed language to be inserted in the Disclosure Statement to resolve the objection or response; and -- be served on these parties: * co-counsel to the Debtors: Saul Ewing LLP 222 Delaware Avenue P.O. Box 1266 Wilmington, DE 19899 Attn: Norman L. Pernick, Esq.; Saul Ewing LLP Lockwood Place 500 E. Pratt Street Baltimore, MD 21202-3171 Attn: Jay A. Shulman, Esq.; and Sidley Austin LLP One South Dearborn Street Chicago, IL 60603 Attn: Larry J. Nyhan, Esq. James F. Conlan, Esq. and Jeffrey C. Steen, Esq.; * counsel to the Official Committee of Asbestos Creditors: Caplin & Drysdale, Chartered 375 Park Avenue, 35th Floor New York, NY 10152-3500 Attn: Elihu Inselbuch, Esq.; Campbell & Levine, LLC 800 King Street, Suite 300 Wilmington, DE 19801 Attn: Marla Eskin, Esq.; * counsel to James J. McMonagle, Legal Representative for Future Claimants: Kaye Scholer LLP 425 Park Avenue New York, NY 10022 Attn: Edmund M. Emrich, Esq.; and Young, Conaway, Stargatt & Taylor, LLP The Brandywine Building 1000 West Street, 17th Floor P.O. Box 391 Wilmington, DE 19899-0391 Attn: James L. Patton, Esq.; and * Office of the United States Trustee J. Caleb Boggs Federal Building 844 King Street, 2nd Floor Wilmington, DE 19801 Attn: David M. Klauder, Esq. The Debtors disclose that some provisions of the Disclosure Statement are subject to ongoing review or revision. The Debtors accordingly reserve the right to modify or supplement the Disclosure Statement at any time prior to the Hearing. Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. (Owens Corning Bankruptcy News, Issue No. 125; Bankruptcy Creditors' Service, Inc., 215/945-7000) PANOLAM INDUSTRIES: Nevamar Acquisition Cues S&P to Affirm Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B' corporate credit rating and other ratings on Shelton, Connecticut-based Panolam Industries International Inc. in connection with Panolam's pending acquisition of decorative laminate competitor, Nevamar Holdco LLC, for $80 million including assumed debt. The outlook is stable. At the same time, Standard & Poor's affirmed its 'B+' senior secured bank loan rating and '1' recovery rating on Panolam's bank facility, which will increase: * by $80 million to finance the acquisition; and * by $10 million to increase the revolving credit facility. The bank facility will comprise a $30 million revolving credit facility due 2010 and a $215 million first-lien term loan due 2012. The bank loan rating and recovery rating indicate the expectation of full recovery of principal in the event of a payment default. Standard & Poor's based its ratings on preliminary terms and conditions, and the ratings are subject to review once the rating agency receives final documentation. "The affirmation reflects our belief that the Nevamar acquisition solidifies Panolam's position as one of the largest producers of decorative overlay products, primarily thermally fused melamine panels and high-pressure laminates, and will expand Panolam's distribution network and customer base," said Standard & Poor's credit analyst Lisa Wright. "The acquisition will increase Panolam's debt leverage and decrease operating margins, although the combined company should benefit from opportunities for synergies through product and facility rationalization as well as reduced corporate overhead." Panolam's financial policy is very aggressive, and Standard & Poor's expects the company to remain highly leveraged. Total debt, including capitalized operating leases, will be approximately $370 million at closing. A leading market position and a competitive cost structure should sustain credit measures within a range appropriate for the current ratings, even during cyclical downturns and periods of rising raw- material costs. "We could revise the outlook to negative if Panolam experiences rising raw-material or energy costs that it can not offset with price increases or operating efficiencies, resulting in meaningfully constrained earnings and cash flow, or if expenses related to the plant-expansion program, higher-than-expected restructuring costs, or other integration issues constrain liquidity," Ms. Wright said. "We could revise the outlook to positive if leverage improves toward the 4x area and Panolam sustains free cash flow above $20 million." PARMALAT USA: Preliminary Injunction Stretched to March 31 ---------------------------------------------------------- Arab Banking Corporation (B.S.C.) asked the U.S. Bankruptcy Court for the Southern District of New York to either: a. make an inquiry and terminate the preliminary injunction; or b. extend the injunction on the condition that Parmalat cooperates in fact discovery in the U.S. so that ABC and other aggrieved creditors may develop evidence regarding the fairness of the Italian claims process. ABC is a holder of three promissory notes issued by Wishaw Trading S.A. and guaranteed by Parmalat SpA valued at $9,000,000 in principal and interest as of the Petition Date: 1. No. ECO-WU-2808, dated February 4, 2002 2. No. ECO-WU-2914, dated March 5, 2002 3. No. ECO-WU-3601, dated July 31, 2003 According to James W. Giddens, Esq., at Hughes Hubbard & Reed LLP, in New York, Parmalat on August 10, 2004, inexplicably excluded ABC's claim arising from the Notes and Guaranties from the Debtors' published list of creditors. Dr. Enrico Bondi, as extraordinary administrator of Parmalat and certain of its affiliates, also objected to the Claim, arguing that there were documentary deficiencies and a legal technicality rendered the Guaranties revocable under Italian law. In January 2005, ABC asked the Italian Court to admit the Claim over Dr. Bondi's objection. ABC argued that Dr. Bondi's objection is meritless because, among others: -- Italian case law holds that a lack of a certain date at law is not an obstacle for allowance of a claim in a bankruptcy proceeding; -- Parmalat CEO Calisto Tanzi executed the Guaranties, supported by later legal opinions, prior to the Petition Date; and -- the hypothetical revocability of the Guaranties does not apply to ABC, a bona fide third-party purchaser. Over the course of litigation, Mr. Giddens relates, Parmalat has never denied the Guaranties. In fact, Mr. Giddens says, the Guaranties were on Parmalat's books and records. Parmalat also did not question that ABC is a bona fide purchaser of the Notes and Guaranties. ABC expects that protracted litigation before the Italian Court could continue for many years. Mr. Giddens contends that Parmalat has proffered whimsical factual assertions supported by erroneous legal interpretations in denying admission to ABC's Claim in the Italian proceedings. However, Mr. Giddens points out, Parmalat is allowing nearly identical Notes and Guaranties held by other entities. While the other entities have received or soon will receive distributions of new Parmalat stock, Mr. Giddens notes that ABC is left to expend legal fees and time in a protracted litigation over a claim that Parmalat recognizes on its own books. In seeking an extension of the Preliminary Injunction Order, Parmalat must demonstrate that claimholders in the Italian proceedings are receiving "just treatment" and not experiencing "prejudice and inconvenience" in the claims administration process, Mr. Giddens insists. Parmalat has failed to meet this burden to ABC, he says. Parmalat, Mr. Giddens maintains, should not be granted relief in the United States while ABC faces delay and discrimination without foundation in the Italian Proceedings. Court Extends Preliminary Injunction Judge Drain enjoins and restrains, on an interim basis, all persons subject to the jurisdiction of the U.S. court from commencing or continuing any action to collect a prepetition debt against Parmalat SpA and its affiliates and subsidiaries, and the successor of the Foreign Debtors pursuant to the Composition with Creditors, without obtaining permission from the Bankruptcy Court. The Preliminary Injunction Order will remain in effect through and including March 31, 2006. Certain noteholders holding EUR632,559,971 in allowed claims have withdrawn, without prejudice, their objection to the further continuation of the Preliminary Injunction Order. The Foreign Debtors and the Noteholders have reached an agreement in principle regarding the resolution of litigation before the Parma Court in Italy relating to the Noteholders' claims arising under certain debt obligations of the Foreign Debtors. The Noteholders consented to a further extension of the Preliminary Injunction Order so that the Order will remain in full force and effect while the resolution of the claims litigation relating to the Noteholders' Notes is effectuated in the Foreign Debtors' Italian bankruptcy cases. Arab Banking Corporation also agreed to continue the hearing to consider its objection at a later date. Judge Drain will convene a hearing on March 29, 2006, at 10:00 a.m. to consider whether to continue the terms of the Preliminary Injunction. Any objection to the continuation of the Injunction must be filed and served on the counsel for the Foreign Debtors by March 22, 2006, at 4:00 p.m. A schedule of the Noteholders and their claims against the Foreign Debtors is available at no charge at http://ResearchArchives.com/t/s?544 Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. The U.S. Debtors emerged from bankruptcy on April 13, 2005. (Parmalat Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) PATHMARK STORES: Awards Kenneth Martindale Restricted Common Stock ------------------------------------------------------------------ As previously reported, Kenneth Martindale joined Pathmark Stores, Inc. (Nasdaq: PTMK) as a Co-President and Chief Merchandising and Marketing Officer, effective Jan. 1, 2006. On Jan. 1, 2006, pursuant to award agreements dated Dec. 14, 2005, Pathmark granted Mr. Martindale an option to purchase an aggregate of 500,000 shares of Pathmark common stock at an exercise price of $9.99 per share (the closing price of Pathmark common stock on the last business day before the Effective Date), and an award of restricted stock consisting of 200,000 restricted shares of Pathmark's common stock. The option will vest and become exercisable in three annual installments beginning on the first anniversary of the Effective Date, and the restricted stock will vest in twelve quarterly installments beginning on March 31, 2006 and each June 30th, September 30th, December 31st and March 31st thereafter, until the award shares are fully vested. Pathmark Stores, Inc. -- http://www/pathmark.com/-- is a regional supermarket currently operating 142 supermarkets primarily in the New York - New Jersey and Philadelphia metropolitan areas. The Company filed for chapter 11 protection on July 12, 2000 (Bankr. Case 00-02963). The Court confirmed its prepackaged Plan of Reorganization on Sept. 7, 2004. * * * As reported in the Troubled Company Reporter on Dec. 21, 2005, Standard & Poor's Ratings Services lowered its ratings on Pathmark Stores Inc. to 'B-' from 'B'. The rating outlook is negative. "The downgrade reflects Pathmark's weakening credit metrics, limited cash flow generation, and our view that it will be very challenging for the company to significantly improve its market share and profitability levels given the competitive supermarket environment in which it operates," said Standard & Poor's credit analyst Stella Kapur. PENNSYLVANIA REAL: Acquires Springhills Property for $21.5 Million ------------------------------------------------------------------ Pennsylvania Real Estate Investment Trust (NYSE:PEI) completed the acquisition of approximately 540 acres of land parcels known as Springhills in Gainesville, Florida for $21.5 million. PREIT funded the acquisition from its unsecured credit facility. The acquisition includes portions of all four quadrants of the interchange of Interstate 75 and 39th Avenue. It is located in the rapidly growing northwest area of Gainesville, Florida, the commercial center for North Central Florida's 12 counties. Located within an eight mile radius of Springhills are the major employers in Alachua County, such as The University of Florida (12,200 employees and 48,000 students), Shands Hospital (7,500 employees), and Alachua County School Board (4,200 employees). Springhills initially received approvals in 1998. Since 2001, when PREIT entered into a contract to purchase the property, the Company has worked with Alachua County officials to amend the approved development program to authorize a more comprehensive mixed-use development plan. In January, the Alachua County Commission voted to transmit program amendments to the Florida Department of Community Affairs as part of the Department's review of Developments of Regional Impact. During 2006, Alachua County and the Florida Department of Community Affairs are expected to prepare authorizations to allow for the development of up to: * 2,200 single and multi-family housing units; * 1,480,000 square feet of retail/commercial development; * 182,000 square feet of office/institutional facilities; * 300 hotel rooms; and * 440,000 square feet of industrial space. Permitting, designing, and leasing are expected to occur during 2006 and 2007, with initial occupancies expected in 2008 and 2009. "We are pleased to have reached this milestone with Alachua County and look forward to finalizing the development program and moving ahead with the creation of Springhillls in Gainesville," Doug Grayson, Executive Vice President, Development said. Headquartered in Philadelphia, Pennsylvania, Pennsylvania Real Estate Investment Trust -- http://www.preit.com/-- has a primary investment focus on retail shopping malls and power centers (approximately 34.5 million square feet) located in the eastern United States. Founded in 1960 and one of the first equity REITs in the U.S., PREIT's portfolio currently consists of 52 properties in 13 states, including 39 shopping malls, 12 strip and power centers and one office property. * * * As reported in the Troubled Company Reporter on Oct. 18, 2005, Fitch Ratings has affirmed the preferred stock rating of 'B+' on Pennsylvania Real Estate Investment Trust. Fitch has also established an issuer rating of 'BB' for P-REIT and revises its Outlook to Positive from Stable. PHASE III: Completes $1 Million Funding to Aid Purchase of NeoStem ------------------------------------------------------------------ Phase III Medical, Inc. (OTCBB:PHSM) completed two separate financings of $500,000 each. The money was raised to help complete Phase III's acquisition of NeoStem, an adult stem cell company, reported on Jan. 26, 2006, and to facilitate the new company's development of its adult stem cell collection, processing and storage business. On Nov. 28, 2005, Phase III sold to an accredited investor, Caribbean Stem Cell Group, Inc., 6,250,000 shares of common stock and short term warrants for a total of $500,000. On Jan. 31, 2006, the Company closed upon the final of three tranches of Units to accredited investors consisting of convertible promissory notes and detachable warrants. Gross proceeds raised were $500,000. Each Unit was composed of: (a) a nine-month note in the principal amount of $25,000 bearing 9% simple interest, payable semi-annually, with the second payment paid upon maturity, convertible into shares of the Company's common stock at a conversion price of $.06 per share; and (b) 416,666 detachable three-year warrants, each for the purchase of one share of common stock at an exercise price of $.12 per share. The Company also completed during November 2005 through January 2006, the exchange of $510,000 of outstanding promissory notes for 8,670,000 shares of common stock and repaid promissory notes aggregating $73,000 for a total debt reduction of $583,000. The Company paid to WestPark Capital, Inc., the placement agent for the Units: (a) cash equal to 10% of the aggregate principal amount of the promissory notes sold ($50,000); (b) 500,000 shares of common stock; and (c) a warrant to purchase 833,332 shares of the Company's common stock. WestPark was also reimbursed for certain expenses. "We are extremely pleased that investors share our enthusiasm about the growth potential of our new company, which is a pioneer in collecting, processing and storing adult stem cells that donors can access for their own medical treatment," Mark Weinreb, President and CEO of Phase III Medical, Inc., said. "These funds were timely so that we could effectively complete the NeoStem transaction and prepare the Company for activities after the acquisition." Currently, a marketing and operational plan is being developed to integrate both companies, and a corporate awareness campaign is being prepared," Mr. Weinreb added. "We are hopeful that this company will become the leading provider of adult stem cells for therapeutic use in the burgeoning field of regenerative medicine for heart disease, types of cancer and other critical health problems." None of the shares of common stock, short term warrants, Units and the convertible promissory notes and detachable warrant comprising the Units were registered under the Securities Act of 1933, as amended, and such securities were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated. The securities that were sold may not be offered or sold in the United States unless they are registered under the federal securities laws or subject to an applicable exemption from registration. The shares of common stock that were issued in exchange for outstanding promissory notes were not registered under the Securities Act of 1933, as amended and were exempt from registration. These shares of common stock may not be offered or sold in the United States unless they are subject to an applicable exemption from registration. About Phase III Medical. Inc. Phase III Medical, Inc. (OTCBB:PHSM), a Delaware corporation, is an innovative, publicly traded company that, through the acquisition of NeoStem, is positioned to become a leader in the adult stem cell field and to capitalize on the increasing importance the Company believes adult stem cells will play in the future of regenerative medicine. The management and board of directors and advisors of Phase III have collective experience in life science marketing, business management, and financial expertise, as well as significant technical, medical and scientific experience. At Sept. 30, 2005, Phase III Medical Inc.'s balance sheet showed a stockholders' deficit of $2.5 million, compared to $1.9 million deficit at Dec. 31, 2004. PEP BOYS: S&P Places B- Corporate Credit Rating on Watch -------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Pep Boys- Manny, Moe & Jack, including its 'B-' corporate credit rating, on CreditWatch with developing implications. This action follows the company's announcement that it has hired Goldman, Sachs & Co. to explore strategic and financial alternatives. Standard & Poor's will monitor developments associated with this process to assess the implications for the ratings. PERFORMANCE TRANSPORTATION: U.S. Trustee Forms Creditors Committee ------------------------------------------------------------------ Pursuant to Section 1102 of the Bankruptcy Code, Deirdre A. Martini, the United States Trustee for Region 2, appoints three parties to the Official Committee of Unsecured Creditors in Performance Transportation Services, Inc. and its 13 debtor- affiliates' Chapter 11 cases. The Creditors Committee consists of: (1) Robert Coco Central States Southeast & Southwest Areas Pension and Health and Welfare Funds Central States Law Department 9377 West Higgins Road Rosemont, IL 60018 (2) James McLearen McLearen's JJJ Interprise Inc. 19300 Middlebelt Road Romulus, MI 48174 (3) Eric J. Mikesell United Road Services Inc. 10701 Middlebelt Road Romulus, MI 48174 Headquartered in Wayne, Michigan, Performance Transportation Services, Inc. -- http://www.pts-inc.biz/-- is the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America. The Company provides transit stability, cargo damage elimination and proactive customer relations that are second to none in the finished vehicle market segment. The company's chapter 11 case is administered jointly under Leaseway Motorcar Transport Company. Headquartered in Niagara Falls, New York, Leaseway Motorcar Transport Company Debtor and 13 affiliates filed for chapter 11 protection on Jan. 25, 2006 (Bankr. W.D.N.Y. Case No. 06-00107). Garry M. Graber, Esq., at Hodgson Russ LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and more than $100 million in debts. (Performance Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) PHLO CORP: Posts $904,494 Net Loss in Quarter Ended December 31 --------------------------------------------------------------- Phlo Corporation delivered its quarterly report on Form 10-QSB for the quarter ended Dec. 31, 2005, to the Securities and Exchange Commission on Feb. 9, 2006. The Company reported a $904,494 net loss on $722 of net revenues for the quarter ended Dec. 31, 2005. At Dec. 31, 2005, the Company's balance sheet showed $187,447 in total assets and liabilities of $4,943,221, resulting in a $4,755,774 stockholders' deficit. The Company had an accumulated deficit of $19,738,480 at Dec. 31, 2005. Going Concern Doubt Russell Bedford Stefanou Mirchandani LLP expressed substantial doubt about Phlo Corporation's ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended March 31, 2005. The auditing firm pointed the Company's recurring losses from operations and inability to generate sufficient cash flow to sustain its operations. A full-text copy of the regulatory filing is available at no charge at http://researcharchives.com/t/s?543 About Phlo Corporation Based in Jacksonville, Florida, Phlo Corporation is a biotechnology company and a manufacturer and marketer of products containing patented and patents-pending biotechnologies which are sold on a commercial basis to governmental and institutional purchasers and to high volume chain stores, such as supermarkets and drug and convenience stores. Phlo is focusing its technology generation and acquisition efforts on those technologies related to enhancing cognition and personal performance, reducing the effects of aging, and preventing or ameliorating cancer. ROGERS COMMS: Posts $66.7 Million Net Loss in Fourth Quarter 2005 ----------------------------------------------------------------- Rogers Communications Inc. reported its financial results for fourth quarter and full year ended Dec. 31, 2005. Rogers Communications Inc. reports a $66,713,000 net loss on $2,120,162,000 of sales for the three months ended Dec. 31, 2005. The company also reports a full year net loss $44,658,000 on $7,482,154,000 of sales for the 12 months ended Dec. 31, 2005. Operations For three months ended Dec. 31, 2005, cash generated from operations before changes in non-cash operating items, increased to $379.8 million from $316.5 million in the corresponding period in 2004. The $63.3 million increase is primarily the result of the increase in operating profit of $63.0 million partially offset primarily by period over period changes in other income. Taking into account the changes in non-cash working capital items in the three months ended Dec. 31, 2005, cash generated from operations was $287.0 million, compared to $452.2 million in the corresponding period of 2004. The cash flow generated from operations of $287.0 million, together with the following items, resulted in total net funds of approximately $387.6 million raised in the three-month period ended Dec. 31, 2005: -- aggregate net draw downs of $82.0 million under bank credit facilities; -- receipt of $17.1 million from the issuance of Class B Non-Voting shares under the exercise of employee stock options; and -- receipt of $1.5 million mainly from the sale of miscellaneous investments. Net funds used during the three-month period ended Dec. 31, 2005, totaled approximately $593.8 million, which include: -- additions to PP&E of $436.9 million, including the $6.9 million of related changes in non-cash working capital; -- $140.9 million for the redemption of $113.7 million of Cable's 11% Senior Subordinated Guaranteed Debentures, including $7.3 million (5.50%) redemption premium; -- $12.9 million to fund the remainder owing for the exercise of call rights for warrants issued by Fido which was related to the acquisitions of Fido; -- $2.0 million related to other acquisitions; and -- $1.1 million repayment of mortgages and leases. Financing In October 2005, after the issuance to Microsoft Corporation of the company's intention to redeem the $600 million aggregate principal amount of 51/2% Convertible Preferred Securities due August 2009, the company received notice that Microsoft had elected to convert these securities. The company issued 17,142,857 Class B Non-Voting shares to Microsoft on Oct. 24, 2005, at the exercise price of $35 per share. In December 2005, Cable redeemed all of the outstanding $113.7 million aggregate principal amount of its 11% Senior Subordinated Guaranteed Debentures due 2015 at a redemption premium of 5.50% for a total of $140.9 million (US$119.9 million). Rogers Communications Inc. (TSX: RCI; NYSE: RG) -- http://www.rogers.com/-- is a diversified Canadian communications and media company engaged in three primary lines of business. Rogers Wireless Inc. is Canada's largest wireless voice and data communications services provider and the country's only carrier operating on the world standard GSM/GPRS technology platform; Rogers Cable Inc. is Canada's largest cable television provider offering cable television, high-speed Internet access, voice-over- cable telephony services and video retailing; and Rogers Media Inc. is Canada's premier collection of category leading media assets with businesses in radio and television broadcasting, televised shopping, publishing and sports entertainment. On July 1, 2005, Rogers completed the acquisition of Call-Net Enterprises Inc. (now Rogers Telecom Holdings Inc.), a national provider of voice and data communications services. * * * As previously reported in the Troubled Company Reporter on Oct. 31, 2005, Standard & Poor's Ratings Services revised its outlook to positive from stable on Rogers Communications Inc., Rogers Wireless Inc., and Rogers Cable Inc. At the same time, Standard & Poor's affirmed the 'BB' long-term corporate credit rating on each of RCI, RWI, and Rogers Cable. As previously reported in the Troubled Company Reporter on Nov. 2, 2005, Moody's Investors Service placed all long term ratings of Rogers Communications Inc., Rogers Cable Inc., and Rogers Wireless Inc. under review for possible upgrade. The corporate family rating of Rogers Telecom Holdings Inc. is withdrawn, as it is now part of the RCI family of companies, and the senior secured rating of Telecom remains under review for possible upgrade. Debt ratings affected by this action: Rogers Communications Inc. -------------------------- Corporate Family Rating, Ba3 Senior Unsecured, rated B3: * Notes 10.5% due February 2006 C$75 million Rogers Cable Inc. ----------------- Senior Secured, rated Ba3: Second Priority Notes * 7.60% due February 2007 C$450 million * 7.25% due December 2011 C$175 million * 7.875% due May 2012 $350 million * 6.25% due June 2013 $350 million * 5.50% due March 2014 $350 million * 6.75% due March 2015 $280 million Second Priority Debentures * 8.75% due May 2032 $200 million Senior Subordinated, rated B2: * Gteed Debentures 11% due December 2015 $114 million Rogers Wireless Inc. -------------------- Senior Secured Notes, rated Ba3 * 10.5% due June 2006 C$160 million Floating rate, due December 2010 $550 million * 9.625% due May 2011 $490 million * 7.625%, due December 2011 C$460 million * 7.25%, due November 2012 $470 million * 6.375%, due March 2014 $750 million * 7.50%, due March 2015 $550 million Senior Secured Debentures, rated Ba3 * 9.75% due June 2016 $155 million Senior Subordinated Notes, rated B2: * 8%, due December 2012 US$400 million Rogers Telecom Holdings Inc. (formerly Call-Net Enterprises Inc.) ------------------------------------ Corporate Family Rating: withdrawn Senior Secured rating: B3 * 10.625% Notes due December 31, 2008 (callable January 1, 2006) $22 million ROUGE INDUSTRIES: Has Interim Access to Lenders' Cash Collateral ---------------------------------------------------------------- The Hon. Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware gave Rouge Industries, Inc., and its debtor- affiliates interim access to cash collateral securing repayment of their prepetition debts to Philip Environmental Services Corporation and Duke/Fluor Daniel. The Bankruptcy Court has entered eleven prior orders allowing the Debtors to use their creditors' cash collateral. The Debtors are authorized to use PESC and Duke/Fluor's cash collateral until Feb. 28, 2006, in accordance with a monthly budget, a copy of which is available for free at http://researcharchives.com/t/s?548 Use of the cash collateral will enable the Debtors to continue the administration of their estates, wind down their remaining businesses and operations, and liquidate their remaining assets and properties. To provide the prepetition lenders with adequate protection, the Debtors will grant replacement liens and security interests to the extent of any diminution in value of their collateral. The Bankruptcy Court will convene a hearing to consider final approval of the Debtors' request to use cash collateral is scheduled at 2:00 p.m. on Feb. 23, 2006. Headquartered in Dearborn, Michigan, Rouge Industries, Inc., an integrated producer of flat-rolled steel, filed for chapter 11 protection on October 23, 2003 (Bankr. D. Del. Case No. 03-13272). Donna L. Harris, Esq., Robert J. Dehney, Esq., Eric D. Schwartz, Esq., Gregory W. Werkheiser, Esq., and Alicia B. Davis, Esq., at Morris, Nichols, Arsht & Tunnell represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $558,131,000 in total assets and $558,131,000 in total debts. On Dec. 19, 2003, the Court approved the sale of substantially all of the Debtors' assets to Severstal N.A. for $285.5 million. The Asset Sale closed on Jan. 30, 2005. SAINT VINCENTS: Clarifies Coverage of Malpractice Claims Protocol ----------------------------------------------------------------- Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that through discussions with interested parties, the form of Stipulation for each of Category One and Two, related to a protocol implemented to resolve malpractice claims, has been modified slightly to clarify Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates' intent that the Stipulations cover: (a) the Debtors' current or former employees who are not separately insured from the Debtors, where the Debtors maintain third party primary malpractice insurance; and (b) employees who are not separately insured and rely or have relied on indemnification or similar rights from the Debtors where the Debtors do not maintain third party primary insurance. Mr. Troop informs the U.S. Bankruptcy Court for the Southern District of New York that since the Debtors began to implement their "three category" approach to requests for relief from stay to pursue medical malpractice claims, they have been able to enter into Stipulations with a number of potential claimants, where commercial insurance is paying the Debtors' defense costs in connection with the asserted malpractice claim. To the extent Stipulations have not been entered, the Debtors are not aware definitively that the potential claimants are unwilling to do so. Those claimants have not contacted the Debtors, Mr. Troop states. Moreover, efforts to conclude Stipulations are still ongoing. Where commercial insurance to pay defense costs is not available, no claimant has pursued a relief from stay motion. Instead, those claimants seem to be awaiting the implementation of the compulsory mediation process, Mr. Troop tells the Court. Mr. Troop contends that it would be efficient for the Court, the Debtors, and other claimants asserting malpractice claims to establish a protocol that provides that: (i) parties filing motions for relief from stay to pursue a medical malpractice claim have the opportunity to evaluate the Stipulations, if they choose; (ii) parties filing stay relief motions have the opportunity to enter into the appropriate Stipulation with the Debtors without requiring the Debtors to respond to their stay relief motions; (iii) the Prospective Claimants schedule a hearing on their Prospective Motions; and (iv) the Court enter further orders for each Prospective Motion to permit Prospective Claimants and the Debtors to conclude a Stipulation. Hearings should be scheduled on Prospective Motions only where the Debtors and the Prospective Claimants are unable to agree on a Stipulation, Mr. Troop asserts. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) SALOMON BROTHERS: Projected Losses Cue Moody's to Review Rating --------------------------------------------------------------- Moody's Investors Service placed on review for possible downgrade one certificate from one transaction, issued by Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass-Through Certificates in 2001. The certificates are secured by seasoned reperforming loans. The M-5 subordinate certificate is placed under review for possible downgrade because existing credit enhancement levels may be low given the current projected losses on the underlying pool. The collateral has taken losses causing gradual erosion of the overcollateralization and the unrated M-6 class. As of the January payment date there was less than $100,000 of protection in the form of overcollateralization and an unrated tranche below the M-5 class. Moody's complete rating action: Issuer: Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass-Through Certificates Review for Possible Downgrade: * Series 2001-2; Class M-5, current rating B2, under review for possible downgrade SAVVIS INC: Dec. 31 Balance Sheet Upside-Down by $132 Million ------------------------------------------------------------- SAVVIS, Inc.'s (NASDAQ:SVVS) revenue for the fourth quarter of 2005 totaled $171.5 million, compared to $166.3 million in the fourth quarter of 2004 and $166.1 million in the third quarter of 2005. SAVVIS' consolidated net loss narrowed to $13.1 million, compared to a loss of $21.7 million in the fourth quarter of 2004 and a loss of $13.7 million in the third quarter of 2005. For the full year, revenue of $667.0 million was up 8% from $616.8 million in 2004. Consolidated net loss was $69.1 million, an improvement of $79.7 million compared to a consolidated net loss of $148.8 million in 2004. "The SAVVIS team delivered impressive results in 2005, with strong Adjusted EBITDA and cash generation as well as effective cost management and increased sales bookings," Acting Chief Executive Officer Jack Finlayson, said. "Fourth-quarter revenue of $171.5 million reflects the excellent sales results of 2005 -- strong market acceptance of SAVVIS' products, from our innovative virtualized utility services to traditional colocation hosting, resulted in record sales bookings. The fourth-quarter revenue was driven by strong growth in our core Managed IP VPN and Hosting services, up 22% and 19% from a year ago. For the full-year 2005, cash flow from operations was $62.8 million, an improvement of $89.6 million from cash used in operations of $26.8 million in 2004. For the full year 2005, cash capital expenditures totaled $56.4 million. At Dec. 31, 2005, the Company's total assets were $409.6 million and total liabilities were $541.6 million, resulting in a stockholders' deficit of $132 million. Headquartered in Town & Country, Missouri, SAVVIS, Inc. -- http://www.savvis.net/-- is a global provider of managed and outsourced IT services that focuses exclusively on IT solutions for businesses. With an IT services platform that extends to 47 countries, SAVVIS has over 5,000 enterprise customers and leads the industry in delivering secure, reliable, and scalable hosting, network, and application services. These solutions enable customers to focus on their core business while SAVVIS ensures the quality of their IT systems and operations. SAVVIS' strategic approach combines virtualization technology, a global network and 25 data centers, and automated management and provisioning systems. SCHOONER TRUST: Moody's Rates CDN$2.4 Million Certs. at (P)B3 ------------------------------------------------------------- Moody's Investors Service has assigned the following provisional ratings to certificates issued by Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2006-5: * (P) Aaa to the CDN$192.6 million Class A-1 Certificates due February 2021, * (P) Aaa to the CDN$241.0 million Class A-2 Certificates due February 2021, * (P) Aa2 to the CDN$9.2 million Class B Certificates due February 2021, * (P) A2 to the CDN$10.3 million Class C Certificates due February 2021, * (P) Baa2 to the CDN$13.4 million Class D Certificates due February 2021, * (P) Baa3 to the CDN$3.0 million Class E Certificates due February 2021, * (P) Ba1 to the CDN$3.6 million Class F Certificates due February 2021, * (P) Ba2 to the CDN$1.8 million Class G Certificates due February 2021, * (P) Ba3 to the CDN$1.2 million Class H Certificates due February 2021, * (P) B1 to the CDN$1.2 million Class J Certificates due February 2021, * (P) B2 to the CDN$1.2 million Class K Certificates due February 2021, * (P) B3 to the CDN$2.4 million Class L Certificates due February 2021, * (P) Aaa to the CDN$485.6* million Class XP Certificates due February 2021, and * (P) Aaa to the CDN$1.0 million Class XC Certificates due February 2021. The ratings on the Certificates are based on the quality of the underlying collateral -- a pool of multifamily and commercial loans located in Canada. The ratings on the Certificates are also based on the credit enhancement furnished by the subordinate tranches and on the structural and legal integrity of the transaction. The pool's strengths include its high percentage of less risky asset classes, recourse on 65.1% of the pool, and the creditor friendly legal environment in Canada. Moody's concerns include the geographic concentration of the pool, where 61.1% of the pool balance is secured by properties located in Ontario, and the ability of 23.3% of the pool balance to incure future subordinate debt. Moody's beginning loan-to-value ratio was 86.7% on a weighted average basis. SECURUS TECHS: S&P Affirms B+ Corp. Credit & Sr. Sec. Debt Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B+' corporate credit and senior secured debt ratings on Dallas, Texas-based Securus Technologies Inc. The ratings were removed from CreditWatch, where they were placed with negative implications on Feb. 1, 2006, following the company's announcement that it had received a notice from AT&T Operations Inc. (AT&T/SBC) indicating its intentions to terminate its billing and collections agreement and the associated services, prompted by concerns that a recent legal settlement by Securus may be viewed as admission of wrongdoing. "The ratings affirmation reflects Securus' announcement that AT&T/SBC has decided to withdraw its notice following extensive discussions with the company," said Standard & Poor's credit analyst Ben Bubeck. The ratings outlook is negative. The ratings reflect Securus' narrow focus within a competitive and evolving niche marketplace and its highly leveraged financial profile. These factors are partially offset by a largely recurring revenue base supported by long-term customer contracts. Securus is the largest independent provider of inmate telecommunications services in the U.S. The company provides services to correctional facilities operated by city, county, state, and federal authorities in the U.S. and Canada. Securus had approximately $220 million in operating lease-adjusted debt as of September 2005. SERENA SOFTWARE: Merger Cues Moody's to Junk $225MM Sr. Sub. Notes ------------------------------------------------------------------ Moody's Investors Service assigned first-time long-term ratings to Serena Software, Inc. Moody's also assigned a speculative grade liquidity rating of SGL-2. Spyglass Merger Corp., a newly formed entity, will acquire all of the outstanding shares of Serena, a publicly traded change management software provider that will continue as the surviving company. Net proceeds from the $375 million senior secured term loan and $225 million senior subordinated notes offering together with the $75 million senior secured revolver will be used to finance Serena's $1.3 billion buyout in a highly leveraged transaction. The buyout, which is subject to shareholder approval, also consists of a $349 million cash equity investment from private equity sponsor, Silver Lake Partners, and $154 million rollover equity from the company's founder and board chairman, Douglas Troxel. These first time ratings were assigned: * B2 Corporate Family Rating; * B1 rating for $75 million Senior Secured Revolving Credit Facility due 2012; * B1 rating for $375 million Senior Secured Term Loan B due 2013; * Caa1 rating for $225 million Senior Subordinated Notes due 2016; * SGL-2 for Speculative Grade Liquidity. The ratings outlook is stable. The B2 corporate family rating reflects Serena's substantial pro forma financial leverage and thin fixed charge coverage particularly given: (i) the company's small size; (ii) weak organic revenue growth relative to the industry; (iii) rapid growth from the debt-financed acquisition of Merant, which more than doubled the company's revenues; (iv) Merant's brief operating and financial reporting history under Serena and the lack of sustained synergies from the combination; (v) execution risk tied to the build-out of the sales force; and (vi) limited asset protection from a very small base of pro forma tangible assets. The ratings also consider Serena's unique cross-platform product offering, mission-critical nature of its software resulting in industry-leading gross margins, high revenue visibility, consistent positive free cash flow generation from an increasing proportion of recurring software maintenance revenue, large installed customer base of 15,000 companies broadly diversified across vertical markets and potential for margin expansion through up-sell opportunities of value-added offerings into its existing client base. The B1 rating assigned to the senior secured term loan and revolving credit facility is one notch higher than the corporate family rating to reflect the senior position of the bank facilities in the company's debt structure and the protection provided by the collateral package. The Caa1 rating on the senior subordinated notes is notched two levels below the corporate family rating to reflect the contractual subordination of the notes to senior and secured debt, extremely low level of tangible asset protection available and the possibility that this junior class of creditors would not likely recover all principal due to potential enterprise value deterioration in the event of distress. Moody's notes the company is being purchased at a relatively high multiple of 13x EBITDA. The stable outlook reflects the company's prospects for improving financial leverage and interest coverage metrics driven by strong pricing power, relatively stable operating cash flows even during recessionary episodes and attractive change management industry dynamics, offset by below average organic revenue growth, gradual gross margin erosion, rising sales/marketing costs as a percentage of revenues and potentially increasing competition. Serena's addressable markets within the software change management industry are expected to grow at a 9% CAGR through 2009 driven by several factors including: (i) greater software complexity; (ii) increasing importance of regulatory compliance programs; (iii) outsourcing/globalization of software design and development teams; and (iv) increasing pressures for in-house information technology managers to switch to more robust external solutions. To supplement its historic low single digit organic growth, Moody's expects Serena's long-term growth will be reliant on the build-out of its sales team and an aggressive branding campaign to cross-sell and up-sell higher margin products and services to the senior stakeholders of its installed customer base. While the company enjoys high software maintenance renewal rates of 90% due to the stickiness of its products, formidable rivals such as Computer Associates and IBM pose a long-term competitive threat to Serena's customer base. Serena is not expected to materially increase its investment in software research & development, currently at 14% of LTM October 31, 2005 revenue. The ratings could experience upward pressure to the extent that the company is able to materially de-lever through improved free cash flow generation resulting in debt to EBITDA under 4.5x, drive top-line revenue growth via better cross-selling into its installed customer base, enhance operating synergies with Merant, and demonstrate stability in gross margins evidenced by effective execution of up-selling more value-added capabilities. Conversely, the ratings could migrate downward if: (i) the company is unable to reduce leverage due to alternative uses of free cash flow such as sizeable acquisitions or non-productive uses such as equity investments or dividend payments; or (ii) Moody's witnesses changes in the company's competitive position or product functionality, resulting in diminished pricing power, customer retention or maintenance renewals. Additionally the ratings could be negatively influenced if the company suffers a sustained contraction in gross and operating margins, experiences rising financial leverage or materially increases capital expenditures leading to negative free cash flow generation. The Merant acquisition has helped to grow revenue from $105.6 million in fiscal 2004 to $253.7 million pro forma in fiscal 2005. For the LTM 10/31/05, the company recorded $251.4 million of revenue and $83.9 million of EBITDA compared to $40.8 million of EBITDA in fiscal 2004. Although Merant has been additive to cash flow, recent organic revenue growth has been estimated in the low- to-mid single digit range. Pro forma for the financing, debt to EBITDA will be very high at 6.6x, debt to total capitalization will be 54%, EBITDAR to fixed charges will be approximately 1.7x and free cash flow to debt will be 3%. Given the recurring nature of the maintenance contract revenue, historic renewal rates near 90% and low capital expenditure requirements, Moody's expects the company to generate positive free cash flow. Acquisition activity is expected to consist of small tuck-in technology asset purchases and working capital is projected to remain negligible due to the ongoing balance of deferred revenue. The senior secured credit facilities will be secured by substantially all tangible and intangible assets and stock of direct and indirect subsidiaries of the borrower and 65% of the voting interest in foreign subsidiaries, and will be guaranteed by the borrower's direct and indirect domestic subsidiaries. Although the senior subordinated notes have the same guarantors as the senior secured facilities, the guarantee is unsecured and junior to the guarantee on the credit facilities. Tangible asset coverage is very minimal, with roughly $6 million of net property, plant and equipment and $37 million of accounts receivable compared to approximately $1.3 billion of goodwill and intangible assets pro forma for the financing. Serena's speculative grade liquidity rating of SGL-2 recognizes the company's good liquidity position. The rating is largely based on the company's $75 million senior secured revolving credit facility and generation of free cash flow. Serena is expected to maintain reasonable levels of gross cash flow to cover working capital and capital expenditure requirements. Further supporting the company's overall liquidity is the expectation for covenant compliance over the next four quarters. Lastly, Serena has limited alternative/backdoor liquidity as all of the assets are encumbered. Headquartered in San Mateo, California, Serena Software, Inc., is a leading software provider focused solely on the design, development, marketing and support of software used to manage and control change in organizations. For the 12 months ended Oct. 31, 2005, revenues were $251.4 million. SERENA SOFTWARE: S&P Rates $225 Million Sr. Sub. Notes at CCC+ -------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'B' corporate credit rating to San Mateo, California-based Serena Software, Inc. At the same time, Standard & Poor's assigned its 'B' rating and its '2' recovery rating to the company's proposed $450 million senior secured facility. The senior secured facility consists of: * a $75 million, six-year revolving credit facility, undrawn at close; and * a seven-year, $375 million term loan. Standard & Poor's also assigned its 'CCC+' rating to $225 million in senior subordinated notes. "The bank loan rating, which is the same as the corporate credit rating, along with the recovery rating, reflect our expectation of substantial (80%-100%) recovery of principal by creditors in the event of a payment default or bankruptcy," said Standard & Poor's credit analyst Stephanie Crane. The outlook is stable. Debt proceeds amounting to $600 million, (not including the revolver which will be un-drawn at close) in conjunction with existing cash and equity from the sponsor and management, will be used to fund the acquisition of Serena, a public company, by Silver Lake, a private equity company, for a total of $1.24 billion. Serena Software provides enterprise software applications and related services aimed at managing change in the IT environment. The company's software products automate processes and control changes for teams within enterprises that are managing development, web content and IT infrastructure. The rating on Serena reflects the company's: * narrow business profile; * competitive market place; and * high leverage, around 6.9x adjusted debt to EBITDA. These factors are partially offset by: * a leading position in a growing niche software market; * strong EBITDA margins; and * a significant base of recurring business. SILICON GRAPHICS: Studying Alternatives to Avoid Bankruptcy ----------------------------------------------------------- Silicon Graphics, Inc., disclosed in its latest Form 10-Q filed with the Securities and Exchange Commission, that its Board of Directors is continuing to evaluate a range of strategic alternatives with the goal of preserving and creating value for the benefit of stockholders and creditors. Those alternatives include: * becoming an independent public company, * seeking a strategic partner or acquirer, * seeking a financial partner to make a substantial equity investment, and * divesting additional technologies or products The company says that if it fails to implement at least one of these plans and, at the same time, incurs a shortfall in its fiscal 2006 operating plan, then it could be forced to seek protection under chapter 11 of the U.S. Bankruptcy Code. As reported in the Troubled Company Reporter on Feb. 9, 2006, the company reported a second quarter fiscal year 2006 net loss of $30 million, compared with a net loss of $32 million for the second quarter of fiscal year 2005. The company also disclosed that Dennis McKenna was named as the new chairman, CEO and president, replacing Robert Bishop, who will remain as vice chairman. Restructuring Plan As previously reported in the Troubled Company Reporter, the company approved a restructuring plan on Aug. 30, 2005, in order to achieve an $80 to $100 million annualized savings. The first step of the restructuring included cutting its workforce in North America and certain other locations. In addition to the headcount reductions, the restructuring plan Also called for initiatives to reduce expenses in other areas including procurement costs for goods and services, consolidation and reorganization of operations in several locations, prioritization of marketing and benefits spending and other spending controls. Credit Facility At the end of fiscal 2005, the company reported that it did not have enough cash to support its on-going operations and actively sought to raise additional financing. As reported in the Troubled Company Reporter on Oct. 27, 2005, the company completed a new two-year asset-backed credit facility with Wells Fargo Foothill, part of Wells Fargo & Company, and Ableco Finance LLC. The new facility provides for increased credit of up to $100 million, consisting of: * a $50 million revolving line of credit, and * a $50 million term loan. The previous facility provided availability of up to $50 million, but was subject to a minimum cash collateral requirement of $20 million. On Feb. 3, 2006, borrowed the remaining $15 million against the term loan component of its asset-backed credit facility with Wells Fargo and Ableco. The company says that although it was in compliance with the covenants contained in the facility as of Dec. 30, 2005, the company is not certain that it will be able to maintain compliance with all of the covenants or if the additional financing will be adequate to meet its requirements or achieve our objectives. Retention of AlixPartners During the fourth quarter of fiscal 2005, the company retained the turnaround firm AlixPartners LLC to assist the company in developing and implementing a restructuring program aimed at further substantial expense reductions, revenue and margin improvement initiatives and improved cash flow and liquidity. Silicon Graphics, Inc. -- http://www.sgi.com/-- is a leader in high-performance computing, visualization and storage. SGI's vision is to provide technology that enables the most significant scientific and creative breakthroughs of the 21st century. Whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense or enabling the transition from analog to digital broadcasting, SGI is dedicated to addressing the next class of challenges for scientific, engineering and creative users. * * * Silicon Graphics, Inc.'s 6.5% Senior Secured Convertible Notes due 2009 carry Standard & Poor's CCC+ rating. SUPERIOR LODGING: Case Summary & Known Creditors ------------------------------------------------ Debtor: Superior Lodging, Inc. 617 South Broadway Little Rock, Arkansas 72201 Bankruptcy Case No.: 06-10461 Chapter 11 Petition Date: February 13, 2006 Court: Eastern District of Arkansas (Little Rock) Debtor's Counsel: Basil V. Hicks, Jr., Esq. Hankins & Hicks P.O. Box 5670 North Little Rock, Arkansas 72119-5670 Tel: (501) 301-7700 Fax: (501) 301-7999 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million A full-text copy of Superior Lodging's 9-page creditor matrix is available for free at http://ResearchArchives.com/t/s?54f T.A.T. PROPERTY: Meeting of Creditors Scheduled for February 28 --------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of T.A.T. Property's creditors at 3:00 p.m., on Feb. 28, 2006, at the Office of the United States Trustee, Second Floor, 80 Broad Street in New York City. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in New York, New York, T.A.T. Property filed for chapter 11 protection on Oct. 14, 2005 (Bankr. S.D.N.Y. Case No. 05-47223). Barton Nachamie, Esq., at Todtman, Nachamie, Spizz & Johns, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $13,531,595 in assets and $13,522,435 in debts. T.A.T. PROPERTY: Wants Until March 30 to File Chapter 11 Plan ------------------------------------------------------------- T.A.T. Property asks the U.S. Bankruptcy Court for the Southern District of New York to extend until March 30, 2006, the period within which it has the exclusive right to file a chapter 11 plan. The Debtor also wants its exclusive right to solicit plan acceptances extended through May 29, 2006. The Debtor tells the Court that it is in the final stages of obtaining funding to cure prepetition defaults under a mortgage note owed to LaSalle National Bank. The Debtor has tiny prepetition debts other than its debt to LaSalle and its subordinated debt to Michael Zenobio, the Debtor's principal beneficiary and grantor. Furthermore, the Debtor's estate has postpetition debt other than legal fees incurred by their bankruptcy counsel and the Reciever. Whether the Debtor seeks a structured dismissal or files a chapter 11 plan to be paid from cash flow, the Debtor intends to pay 100 cents on the dollar to creditors on undisputed claims over time. The Receiver has been collecting the Debtor's rents and paying some of the Debtor's bills. The Debtor believes that its assets will not be substantially depleted during the requested extension. Accordingly, the Debtor wants an extension of its exclusive periods to preserve its ability to formulate and negotiate a consensual plan. Headquartered in New York, New York, T.A.T. Property filed for chapter 11 protection on Oct. 14, 2005 (Bankr. S.D.N.Y. Case No. 05-47223). Barton Nachamie, Esq., at Todtman, Nachamie, Spizz & Johns, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $13,531,595 in assets and $13,522,435 in debts. TECUMSEH PRODUCTS: Posts $55.8 Mil. Net Loss in Fourth Qtr. 2005 ---------------------------------------------------------------- Tecumseh Products Company (Nasdaq: TECUA, TECUB) reported its consolidated fourth quarter and for the full year results ended Dec. 31, 2006. Consolidated results for the fourth quarter of 2005 amounted to a net loss of $55.8 million compared to a net loss of $13.2 million in the fourth quarter of 2004. Reported fourth quarter 2005 results included restructuring, impairment and other charges related to the Company's Engine and Power Train Group totaling $5.7 million. The charges include an impairment of goodwill of $2.7 million and a $3.0 million write-off of the Company's net investment in its Italian engine operations. In addition, $1.5 million in asset impairment charges across several segments were recognized as part of ongoing restructuring actions, a $2.5 million intangible asset impairment was recorded in a business not associated with any of the Company's four main segments, and a deferred tax valuation allowance of $0.4 million related to the Australian operations of the Electrical Components business was recognized. Reported fourth quarter 2004 results included a $14.6 million charge related to environmental costs involving the Company's New Holstein, Wisconsin facility, restructuring and impairment charges of $3.1 million resulting from the continuation of programs related to the North American Compressor, Indian Compressor and Electrical Components businesses, and a gain of $1.8 million from the final curtailment of medical benefits related to former hourly employees of the Sheboygan Falls, Wisconsin Plant. Also in the fourth quarter 2004, the Company recorded an allowance for an outstanding account receivable related to a significant customer of the Engine & Power Train business that filed for bankruptcy. This amount was $2.5 million and is included in selling and administrative expenses. Consolidated results for the full year 2005 amounted to a net loss of $223.5 million compared to net income of $10.1 million. Results for the full year 2005 included restructuring and impairment charges of $111.3 million, primarily goodwill impairment of $108.0 million recorded in the second quarter related to the Company's Electrical Components business and deferred tax valuation allowances related to operations in the United States ($18.2 million) and Brazil ($7.1 million). Increases in interest costs for the quarter and the year were primarily the result of a higher relative interest rate on the Company's Senior Guaranteed Notes from the August 8th amendment. Results for the full year 2004 included restructuring and impairment charges of $5.6 million resulting from the restructuring programs related to the North American Compressor, Indian Compressor and Electrical Components businesses. During the third quarter, the Company recognized valuation allowances against previously recorded deferred tax assets related to both its United States operations and the Brazilian Engine & Power Train business. As a result, the Company has a net tax provision despite sizeable losses before taxes. Under accounting rules, the Company will not be providing tax benefit for related losses in many of its taxing jurisdictions and future tax expense or benefit will relate to only those jurisdictions where such results are recognized. Exclusive of the respective restructuring, impairment and other items, fourth quarter and full year 2005 operating results were lower than prior year periods, primarily due to weaker results in the Company's Engine & Power Train and Compressor businesses. Consolidated sales for the fourth quarter of 2005 amounted to $442.2 million compared to sales of $471.9 million in the fourth quarter of 2004. Sales for the full year 2005 were $1,847.0 million compared to sales of $1,911.7 million in the full year 2004. The effect of currency translation increased 2005 sales by $13.4 million and $55.5 million in the fourth quarter and full year, respectively. Excluding the effects of currency translation, sales in the fourth quarter and full year decreased, primarily due to decreased sales in the Company's Engine & Power Train and Compressor businesses. Compressor Business Fourth quarter 2005 sales in the Company's Compressor business decreased by $11.7 million to $203.6 million from $215.3 million in the fourth quarter of 2004. The decrease over the comparable quarter from the prior year was attributable to a decline in the global market for compressor products sold into the original equipment markets of residential refrigerators and freezers and room air conditioners. Lower demand for small, high efficiency compressors used in refrigerators and freezers, particularly in Europe and South America, reduced volumes and intensified price competition. Sales of compressors utilized in room air conditioning also decreased from India as customers switched from reciprocating-style compressors to rotary-style compressors. The effect of foreign currency translation increased sales by $13.5 million. Compressor business sales increased from the effects of foreign currency translation with sales in the full year 2005 totaling $910.9 million compared to $880.2 million for full year 2004. After the $56.3 million change in sales due to fluctuating exchange rates is excluded, sales of compressors declined in refrigeration and room air conditioning due to the factors noted for the fourth quarter above. These comparative declines were partially offset by increases in aftermarket sales. Compressor business operating loss for the fourth quarter of 2005 amounted to $4.8 million compared to income of $6.8 million in the fourth quarter of 2004. The decrease in operating income in 2005 versus the comparable 2004 quarter resulted from the unfavorable exchange rate between the Brazilian Real and U.S. Dollar, which impacted profits by $9.3 million. Overall lower sales volumes in the quarter also served to reduce the business profitability. Operating income for the full year 2005 amounted to $18.8 million compared to $60.5 million for the full year 2004. Operating income decreased for 2005 versus 2004 due to the impact of commodity price increases, the unfavorable exchange rate in Brazil, and the effect of lower volumes. Cost saving activities helped to lessen the impact of these factors. Electrical Components Business Electrical Components sales were $104.2 million in the fourth quarter of 2005 compared to $108.3 million in the fourth quarter of 2004. Full year 2005 sales amounted to $410.1 million compared to $422.6 million in full year 2004. Fourth quarter 2005 segment operating profit was $3.5 million compared to $0.1 million in fourth quarter 2004. Segment operating profit for the full year was $7.5 million compared to $11.3 million for the same period in 2004. The improvement in operating income for the quarter versus last year was partly the result of lower amortization of intangible assets and also reflected the benefit of cost reduction and pricing increases serving to offset lower volumes. Full year results were also impacted by lower sales volumes, higher commodity costs in excess of pricing recoveries, and unanticipated operational inefficiencies related to the closure of the St. Clair facility, partially offset by lower amortization of intangible assets. Engine & Power Train Business Engine & Power Train business sales amounted to $106.3 million in the fourth quarter of 2005 compared to $124.0 million in the fourth quarter of 2004. Sales in the full year 2005 were $404.1 million compared to $480.9 million in the full year 2004. Sales trends in the fourth quarter were consistent with those of the full year. The net decrease in sales reflected lower sales volumes in the United States and Europe, primarily due to market share losses. Engine & Power Train business operating loss in the fourth quarter of 2005 amounted to $33.8 million compared to a loss of $10.0 million in the fourth quarter of 2004. In addition to the operating losses generated by the reduction in year over year volume, the Company incurred losses during the quarter related to product recalls of $4.1 million and fees of $6.3 million associated with the work of AlixPartners whom the Company engaged during the third quarter of 2005 to assist in the restructuring plans of the Engine & Power Train business with a focus on improved profitability and customer service. For the full year 2005, the business incurred an operating loss of $75.1 million compared to an operating loss of $21.2 million in 2004. The decline in full year results reflected losses in volume and increases in commodity, transportation and tooling costs. Additionally, during the first quarter, the Company experienced increased warranty response and expediting costs related to a quality issue at a transmission business customer. Continued reductions in profitability in Europe also contributed to the increase in the quarter and full year loss, and full year AlixPartners fees amounted to $7.8 million. Engine & Power Train losses were substantially due to the significant costs associated with excess capacities in the U.S. and Europe. The excess capacity situation was exacerbated by the shift of production to the Company's Brazilian manufacturing facility resulting in duplicate capacities. The substantial cost reductions and volume improvements necessary for sustained improvement have been initiated. During the fourth quarter, the Company announced the consolidation of engine assembly operations in Corinth, Mississippi into its facility in Dunlap, Tennessee and the closure of the Group's Italian operations. Pump Business Pump business sales in the fourth quarter of 2005 amounted to $27.7 million compared to $23.9 million in 2004. Full year sales amounted to $120.1 million in 2005 compared to $126.4 million the previous year. The increase in fourth quarter sales was primarily attributed to increased sales to industrial customers. The decline in the full year 2005 sales reflected a loss of a significant retail customer in mid-2004. Operating income in the fourth quarter of 2005 amounted to $2.9 million compared to $2.4 million in the same period of 2004. Operating income in the full year 2005 amounted to $13.0 million compared to $13.7 million in 2004. The decrease in operating income for the full year 2005 compared to 2004 was attributable to lower sales and higher raw material costs. Tecumseh Products Company -- http://www.tecumseh.com/-- is a full line, independent global manufacturer of hermetic compressors for air conditioning and refrigeration products, gasoline engines and power train components for lawn and garden applications, submersible pumps, and small electric motors. Tecumseh's products are sold in over 120 countries around the world. * * * As reported in the Troubled Company Reporter on July 19, 2005, Tecumseh Products Company asked the holders of $300,000,000 of 4.66% Senior Guaranteed Notes Due March 5, 2011, to relax a required 3:1 ratio of Consolidated Total Debt to Consolidated Operating Cash Flow (tested on a rolling four-quarter basis) with which the company failed to comply as of June 30, 2005. The Noteholders declined to modify the covenant. The Noteholders agreed to grant a temporary waiver of the default through Aug. 8, 2005. TOMMY HILFIGER: Earns $15.5 Million in Third Quarter Ended Dec. 31 ------------------------------------------------------------------ Tommy Hilfiger Corporation (NYSE: TOM) reported results for the third quarter of its fiscal year ending March 31, 2006. Net revenue for the third quarter of fiscal 2006 was $396.6 million compared to $430.7 million for the third quarter of fiscal 2005, a decrease of 7.9%. Operating income was $22.6 million for the third quarter of fiscal 2006 compared to $20.5 million in the prior year's third quarter, an increase of 10.2%. The Company earned net income of $15.5 million as compared to $20.2 million for the same period of fiscal 2005, a decrease of approximately 23%. Third quarter results for fiscal 2006 results included an income tax provision of $6.0 million or a 28% effective tax rate compared with a tax credit of $5.5 million in the comparable prior year's quarter. Retail revenue for the third quarter of fiscal 2006 was $185.8 million compared to $165.3 million a year earlier, an increase of 12.4%. Comparable sales at U.S. Company stores, the largest retail division, increased in the low single digit percentage range for the quarter. As of Dec. 31, 2005, the Company's worldwide store count was 223, including 169 Company stores and 54 specialty stores, compared to 198 stores a year earlier, consisting of 158 Company stores and 40 specialty stores. Included in the current year's total are eight stores that the Company opened in the third quarter of fiscal 2006, as well as two closures. U.S. wholesale revenue for the third quarter of fiscal 2006 was $107.5 million compared to $168.8 million for the third quarter of fiscal 2005, a decrease of 36.3%. Volume declined in each of the men's wear, women's wear and children's wear divisions primarily as a result of lower order levels from U.S. department stores. Approximately $13.5 million of this reduction is attributed to the Company's exit of the Young Men's Jeans wholesale business during fiscal 2005. International wholesale revenue, consisting of the Company's European and Canadian wholesale businesses, totaled $80.6 million for the third quarter of fiscal 2006 versus $77.4 million for the third quarter of fiscal 2005, an increase of 4.1%. The increase was driven primarily by continued momentum in Europe. A year over year decline in the Euro versus the U.S. Dollar partially offset this increase. Third party licensing revenue for the third quarter of fiscal 2006 was $20.6 million compared to $19.0 million for the third quarter of fiscal 2005, an increase of 8.4% that was driven by higher royalties and commissions from international licensees. Balance Sheet Highlights The Company had cash, cash equivalents, restricted cash and short- term investments totaling $687.0 million at Dec. 31, 2005, compared to $543.5 million at Dec. 31, 2004. Restricted cash is comprised of $150 million that is pledged as collateral under a letter of credit facility entered into by Tommy Hilfiger U.S.A., Inc., in April 2005. During fiscal 2006, the Company has received aggregate net proceeds of $96.6 million from the sale of two office buildings in New York City. Inventories totaled $229.7 million at Dec. 31, 2005, compared to $240.3 million at Dec. 31, 2004. Nine Months Results For the nine months ended Dec. 31, 2005, net revenue decreased 5.8% to $1,218.4 million from $1,293.7 million for the same period of fiscal 2005. For the comparable periods, segment revenues were as follows: -- retail revenue increased 13.8% to $453.4 million from $398.4 million; -- international wholesale revenue increased 12.6% to $360.2 million from $320.0 million; -- U.S. wholesale revenue decreased 34.3% to $342.7 million from $521.2 million; and -- third party licensing revenue increased 6.3% to $57.3 million from $53.9 million. Net income decreased by 5.6% to $67.7 million for the nine months ended Dec. 31, 2005, from $71.7 million for the nine months ended Dec. 31, 2004. Results for the nine months ended Dec. 31, 2005, included a tax provision of $26.4 million or a 28% effective tax rate versus a tax credit of $1.6 million for the comparable prior year period. Apax Partners Merger Agreement Update The Company filed with the Securities and Exchange Commission on Jan. 17, 2006, its preliminary proxy statement for the special shareholder meeting to consider the proposed acquisition by funds advised by Apax Partners. The Federal Trade Commission granted early termination of the Hart-Scott-Rodino waiting period. The Company currently expects to hold its shareholder meeting in April 2006 and to consummate the merger promptly thereafter, subject to the receipt of shareholder approval and the satisfaction of the other conditions to closing. The Apax transaction was the result of a thorough sales process undertaken over the preceding four months, including contacts with 24 potential strategic and financial bidders to solicit interest in a potential transaction with the Company. The Company's Board of Directors reviewed with its financial advisor, J.P. Morgan Securities Inc., the recent Schedule 13D filing by Sowood Capital Management LP. Following such review, the independent directors unanimously reaffirmed their determination that the Apax transaction is fair to and in the best interests of the Company and its shareholders. Since the announcement of the Apax transaction on Dec. 23, 2005, no third party has contacted the Company or J.P. Morgan Securities Inc. to express interest in a making a competing bid for the Company. Tommy Hilfiger Corporation, through its subsidiaries, designs, sources and markets men's and women's sportswear, jeans wear and children's wear. The Company's brands include Tommy Hilfiger and Karl Lagerfeld. Through a range of strategic licensing agreements, the Company also offers a broad array of related apparel, accessories, footwear, fragrance, and home furnishings. The Company's products can be found in leading department and specialty stores throughout the United States, Canada, Europe, Mexico, Central and South America, Japan, Hong Kong, Australia and other countries in the Far East, as well as the Company's own network of outlet and specialty stores in the United States, Canada and Europe. * * * As previously reported in the Troubled Company Reporter on Dec. 27, 2005, Standard & Poor's Ratings Services said that its ratings on Tommy Hilfiger USA Inc., including its 'BB-' corporate credit rating, remain on CreditWatch with negative implications, where they were placed on Nov. 3, 2004. TRIPATH TECH: Reports $3.4 Million First Quarter Net Revenue ------------------------------------------------------------ Tripath Technology Inc. reported estimated financial results for the first quarter of fiscal 2006 ended Dec. 31, 2005. Tripath Technology Inc. incurred a $4,727,000 net loss on $3,422,000 of revenue for the three-months ended Dec. 31, 2005, as compared to a $2,878,000 net loss on $1,673,000 of revenue for the same period in the prior year. The Company's balance sheet at Dec. 31, 2005, showed $10,914,000 in total assets and liabilities of $13,498,000. At Dec. 31, 2005, the Company had negative working capital of $3.4 million, including unrestricted cash of $1.7 million. "Demonstrating continued improvement over 2005, first quarter revenue exceeded our original guidance and results were consistent with our pre-announcement made on January 18." said Dr. Adya Tripathi, Tripath's Chairman, President and CEO. "Flat panel television sales delivered particularly strong revenue contribution and comprised over 71 percent of total dollar sales. Additionally, digital subscriber line (DSL) driver products and convergence products, such as the popular iPod(TM) docking stations, also drove sales growth." "We have been focused on continuing to drive fundamental improvements in our business and are committed to the goal of achieving profitability. Our strategy is to leverage our technology leadership and strong intellectual property position with timely and well-positioned product introductions into existing and new markets. We are building on the market opportunities in flat panel TVs, home theatre, automotive audio and personal computer (PC) convergence as our chips and technology are embedded into a growing number of high-volume end products. We are also gaining traction with new design wins and expanded use in key customers' product lines," added Dr. Tripathi. "We delivered first quarter revenue growth of over 100 percent compared to a year ago while continuing to manage operating expenses," said Jeffrey L. Garon, Vice President and CFO of the company. "Our loss from operations for the quarter was $2.5 million, which included approximately $460,000 in non-cash charges for the adoption of SFAS123R. In addition, we strengthened our balance sheet with a cash infusion and ended the quarter with improvements in our working capital position that are expected to help relieve some of the production constraints that impacted us in the fourth quarter of fiscal 2005." Financial Guidance Second fiscal quarter revenue is expected to range from approximately $3.5 million to $3.7 million, or approximately flat to an increase of 10 percent compared to the first fiscal quarter of 2006. Additionally, the company expects a small favorable impact to gross margin in the March quarter from the anticipated sale of inventory that has previously been written down to its estimated net realizable value in the range of 5 percent to 10 percent and, thus, would expect to report gross margin for the quarter in the range of 20 percent to 30 percent. "Total operating expenses for the second quarter of fiscal 2006 are expected to be approximately flat when compared to the first quarter of fiscal 2006. Primary risks to the accuracy of this number are due to uncertainty in our estimated legal expenses associated with pending litigation and entries required to remain in compliance with SFAS123R," added Garon. "Excluding the additional potential impact related to the accounting of the warrants and debentures, we expect the net loss for the second quarter of fiscal 2006 to be in the range of $0.05 to $0.06 per share." "As we continue to execute our strategy during the first half of fiscal 2006, we expect to continue building unit volumes, working to reduce product costs and expanding our product applications base. We expect that our overall performance will continue to drive us in the direction of profitability," Garon concluded. Going Concern Doubt Stonefield Josephson, Inc., expressed substantial doubt about Tripath Technology Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Sept. 30, 2005 and 2004. The auditing firm pointed to the Company's recurring operating losses and accumulated deficit. About Tripath Headquartered in San Jose, California, Tripath Technology Inc. -- http://www.tripath.com/-- is a fabless semiconductor company that focuses on providing highly efficient power amplification to the Flat Panel Television, Home Theater, Automotive Audio and Consumer and PC Convergence markets. Tripath owns the patented technology called Digital Power Processing (DPP(R)), which leverages modern advances in digital signal processing and power processing. Tripath markets audio amplifiers with DPP(R) under the brand name Class-T(R). Tripath's current customers include, but are not limited to, companies such as Alcatel, Alpine, Hitachi, JVC, Samsung, Sanyo, Sharp, Sony and Toshiba. UNIVERSITY HEIGHTS: Case Summary & 12 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: University Heights Association, Inc. 130 New Scotland Avenue Albany, New York 12208 Tel: (518) 434-9603 Fax: (518) 462-3207 Bankruptcy Case No.: 06-10226 Type of Business: The Debtor is composed of four educational institutions with the aim of enhancing the economic vitality and quality of life of its immediate community. See http://www.universityheights.org/ Chapter 11 Petition Date: February 13, 2006 Court: Northern District of New York (Albany) Debtor's Counsel: Peter A. Pastore, Esq. McNamee, Lochner, Titus & Williams, PC P.O. Box 459 677 Broadway Albany, New York 12201-0459 Tel: (518) 447-3246 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 12 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Marty and Dorothy Silverman Loan $22,000,000 Foundation 150 East 58th Street, 29th Floor New York, New York 10155 Albany Law School Loan $2,157,592 80 New Scotland Avenue Albany, New York 12208 Albany College of Pharmacy Loan $1,527,156 106 New Scotland Avenue Albany, New York 12208 The Sage Colleges Loan $65,025 Albany Medical Center Loan $43,300 Citicorp Vendor Finance Equipment Lease $19,266 Key Equipment Finance, Inc. Equipment Lease $10,000 Com Doc, Inc. Equipment Lease $6,820 Applied Theory Corporation Trade Debt $1,611 Pitney Bowes Credit Corp. Equipment Lease $1,200 American Express Credit Card $1,000 Exxon Mobil Credit Card $613 USG: Dist. Ct. Revises Asbestos Estimation Discovery Schedule ------------------------------------------------------------- Having fully considered the arguments presented by various parties in filings or during hearings regarding discovery issues, the United States District Court for the District of Delaware revised the discovery schedule for the estimation of the Debtors' asbestos personal injury liabilities. Specifically, Judge Joy Flowers Conti rules that: (1) The sampled 2000 PI claimants must complete and return their Questionnaires, including all requested documentation, to RUST Consulting, Inc., the Debtors' claims processing agent. (2) RUST will scan and electronically distribute the Questionnaires to counsel for the parties on or before February 23, 2006. Original radiographic evaluations will be retained by RUST and made available for inspection by the parties or their experts on reasonable terms. (3) RUST will organize the information contained in the Questionnaires into a searchable database, which will be provided to the parties no later than March 27, 2006. Judge Conti wants the fact discovery to close on July 31, 2006, subject to the District Court granting an extension of that date based on any party's request. The parties will exchange fully updated lists of the experts they intend to call as witnesses in their case-in-chief during the Estimation by July 7, 2006. Judge Conti will hold a hearing at 2:00 p.m. on July 18, 2006, to address the appropriate schedule for expert discovery. Parties Want Estimation Proceedings Stayed Immediately On January 26, 2006, the Debtors, the Official Committee of Asbestos Personal Injury Claimants, and Dean M. Trafelet, as the Legal Representative for Future Claimants executed a term sheet governing the basic terms on which the parties have agreed to settle certain disputes relating to the Debtors' alleged liability for asbestos-related personal injury claims and demands. The Term Sheet, when implemented by a confirmed plan of reorganization for the Debtors, will resolve all the disputes relating to: (1) the estimation of the Debtors' liability for PI claims; and (2) the Debtors' request for a declaration with respect to the voting rights of certain putative claimants. In addition, the Term Sheet also provides that a stay of the estimation litigation will be sought. In light of the pending settlement, the Debtors, the PI Committee, the Futures Representative, the Official Committee of Unsecured Creditors, and the Statutory Committee of Equity Security Holders jointly ask Judge Conti that those pending actions, including all discovery efforts, be stayed immediately. The Official Committee of Property Damage Claimants takes no position on the Motion. Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, tells Judge Conti that an automatic stay of those proceedings is necessary to allow the parties to focus their energies on the creation of a plan of reorganization to be submitted for confirmation in the United States Bankruptcy Court for the District of Delaware. Mr. DeFranceschi further asserts that the Stay will protect the Debtors' estate from needless additional expense. Should any material change in the status of the pending settlement occur, or should the parties, for any reason, determine that a resumption of those proceedings is necessary, the parties will inform the District Court promptly. 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. (USG Bankruptcy News, Issue No. 102; Bankruptcy Creditors' Service, Inc., 215/945-7000) VALERO ENERGY: Fitch Raises Securities' Rating to BBB- from BB+ --------------------------------------------------------------- Fitch Ratings raised the issuer default rating and senior unsecured debt rating of Valero Energy Corporation to 'BBB' from 'BBB-'. Fitch also raised the rating on the mandatory convertible preferred securities to 'BBB-' from 'BB+'. The Rating Outlook is Stable. The rating action recognizes the rapid reduction in debt following the acquisition of Premcor Inc. as balance sheet debt was under $5.4 billion at year-end 2005 from $6.4 billion at the end of the third quarter. The benefit of a full quarter of the Premcor refineries and the spike in margins following hurricanes Katrina and Rita pushed fourth quarter EBITDA to $2.26 billion and nearly $7.0 billion for the full year. As a result, credit protection metrics are very robust with year-end 2005 debt-to-EBITDA of 0.8x and interest coverage of 20.8x. The company also continues to benefit from the size and diversity of its asset base and its significant leverage to heavy and sour crudes. The company now operates 18 refineries with crude capacity of approximately 2.8 million barrels per day (mmbpd) and total capacity of 3.25 mmbpd including other feedstocks. Sixteen of the refineries are also at or above 100,000 barrels per day of capacity, the desired benchmark for achieving economies of scale. Although several of the company's refineries were impacted by the hurricanes, overall throughput remained strong due to the geographic diversification and the company's ability to quickly return its assets to production. The complexity of the company's asset base with significant downstream conversion capacity allows heavy and sour crudes to represent approximately 1.8 mmbpd of the company's throughput. The discount for heavy sour Maya crude to West Texas Intermediate averaged $15.30 per barrel in 2005 versus the 2000 to 2004 average of $8.00 per barrel. The Mars discount has shown a dramatic widening as well under the current crude price environment, averaging $6.37 per barrel versus a discount of $4.75 from 2000 to 2004. This flexibility and the continued investment the company is making in its downstream units should allow better management during downturns in the industry cycle. Offsetting factors continue to include the company's historical use of debt to finance sizable acquisitions. As seen with Premcor, the company has also reduced debt subsequent to the financings. While further sizable targets are limited, further acquisitions remain a possibility. Valero also continues to operate in a highly volatile margin industry as noted with the recent decline in industry margins. Capital expenditures will also remain high with 2006 guidance of $3.4 billion, although regulatory and Tier II fuel spending will decline in 2007 allowing for more strategic spending. Finally, stock repurchases to offset dilution will likely make up a greater piece of Valero's financial strategy given the lack of acquisition targets. Fitch would expect Valero to manage stock repurchases prudently and not risk the improved credit profile. VERITAS DGC: Inks New $85 Million Credit Facility ------------------------------------------------- Veritas DGC Inc. (TSX:VTS)(NYSE:VTS) entered into a new five-year $85 million revolving loan agreement with a syndicate of banks led by: * Wells Fargo Bank and National Association, as U.S. agent and lead arranger, * HSBC Bank Canada, as Canadian agent, * The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch, as Singapore agent, and * HSBC Bank plc, as U.K. agent. The new facility provides for revolving loans and the issuance of letters of credit to Veritas and certain of its subsidiaries of up to: * $45 million in the United States, * $15 million in Canada, * $15 million in Singapore and * $10 million in the United Kingdom. Certain closing conditions are yet to be met with regard to the Singapore portion of the facility, but are currently expected to be satisfied by mid-February. Until those conditions are met, the Singapore portion of the facility will not be available for borrowing or letters of credit. The new facility is secured by pledges of accounts receivable, certain intercompany notes, stock in certain Veritas subsidiaries, and the U.S. land data library. Veritas and certain of its U.S. and foreign subsidiaries have also issued loan guarantees. Interest rates on borrowings under the facility are selected by the borrower at the time of any advance and, prior to April 30, 2006, the rates so selected may be either at LIBOR plus 1.00% or the Base Rate. On and after April 30, 2006, these rates may be adjusted upward depending upon Veritas's leverage ratio to a maximum of LIBOR plus 1.50% or the base rate plus 0.50%. The loan agreement and related documents contain customary financial covenants and default provisions. This new credit facility replaces the previous credit facility with Deutsche Bank, which was entered into in February 2003 and has now been terminated. All letters of credit outstanding under the previous Deutsche Bank facility, totaling approximately $7 million as of the time of closing were rolled into the new credit facility. There were no borrowings outstanding under the previous facility at the time of closing. "This new facility has significantly more favorable terms than our previous facility and, when combined with our existing cash, provides us tremendous flexibility for continued growth" Mark Baldwin, Executive Vice President, Chief Financial Officer and Treasurer of Veritas, said. "We are very pleased to have this new facility and look forward to continuing our relationship with all of the banks in our lending group." Headquartered in Houston, Texas, Veritas DGC Inc. is a leading provider of integrated geophysical information and services to the petroleum industry worldwide. * * * As reported in the Troubled Company Reporter on Oct. 25, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on seismic services company Veritas DGC Inc. to 'BB' from 'BB+'. Standard & Poor's also assigned its 'BB' rating to the company's $155 million in convertible floating rate senior notes due in 2024. The outlook is stable. As of July 31, 2005, Houston, Texas-based Veritas had approximately $232 million in adjusted total debt. "The downgrade reflects our concerns regarding the volatility and cyclicality associated with the geophysical sector throughout the hydrocarbon pricing cycle," said Standard & Poor's credit analyst Jeffrey Morrison. VIACAO ITAPEMIRIM: Fitch Affirms & Withdraws CCC Sr. Notes' Rating ------------------------------------------------------------------ Fitch Ratings affirmed and simultaneously withdrew the 'CCC' rating assigned to Viacao Itapemirim S.A.'s (VISA) 12% senior secured notes and removed the rating from Rating Watch Negative. Fitch withdrew the rating consistent with its policies and will no longer provide ratings or analytical coverage of this issue. The notes totaling US$25.3 million (approximately BRL60 million) were issued in February and April 2004 and were paid on time and in full on Feb. 10, 2006. VISA is the leading provider of interstate passenger bus transportation services in Brazil. The company operates a fleet of about 1,265 buses in 21 of Brazil's 26 states and serves more than 2,000 cities. VISA benefits from its position as one of the leaders in interstate passenger bus transportation in Brazil. The industry enjoys: * high barriers to entry; * price competitive advantages in relation to alternative passenger transportation means; and * satisfactory regulated tariff revisions. VISA's revenues are a function of: * the number of buses operating; * passenger volume; * occupancy rates; and * ticket prices. The company's top 10 operating routes accounted for 31% of its gross revenues in 2004, while its top three operating routes (Sao Paulo to Rio de Janeiro; Sao Paulo to Curitiba; and Sao Paulo to Fortaleza) accounted for 14% of its gross revenues in 2004. VISA is part of the Itapemirim Group, which consists of 17 family- owned companies operating a broad spectrum of businesses (e.g. cargo, tourism, granite mining, and hotel and food services) with more than 14,000 employees. The group's primary activity is interstate passenger bus service. Three of the group's companies (VISA, Penha, and Viacao Kaiowa) form a consolidated fleet of 1,900 buses that transport approximately 5.0 million passengers annually. VIRAGEN INC: Posts $4.6 Million Net Loss in Quarter Ended Dec. 31 ----------------------------------------------------------------- Viragen, Inc. (Amex: VRA), delivered its financial results for the quarter ended Dec. 31, 2005, to the Securities and Exchange Commission on Feb. 9, 2006. For the three-months ended Dec. 31, 2005, Viragen incurred a $4.6 million net loss on $116,973 of revenue, versus a $3.5 million net loss on $52,548 of revenue for the comparable period in 2004. The Company's balance sheet at Dec. 31, 2005, showed $15.6 million in total assets and liabilities of $16 million, resulting in a stockholders' deficit of $581,789. Viragen had working capital of approximately $2.2 million at Dec. 31, 2005, compared to a working capital deficit of approximately $7.3 million as of June 30, 2005. The change in working capital is primarily attributed to the reclassification of the Company's convertible notes from current to long-term as a result of the amendments dated Sept. 15, 2005, which extended the due date of the notes from March 31, 2006 to Aug. 31, 2008. Going Concern Doubt Ernst & Young LLP expressed substantial doubt about Viragen's ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended June 30, 2005. The auditors point to the Company's operating losses, accumulated deficit and working capital deficiency. About Viragen With global operations in the U.S., Scotland and Sweden, Viragen - - http://www.Viragen.com/-- is a biotechnology company engaged in the research, development, manufacture and commercialization of pharmaceutical proteins for the treatment of viral diseases and cancers. WINDSWEPT ENVIRONMENTAL: Earns $3MM of Net Income in 2nd Quarter ---------------------------------------------------------------- Windswept Environmental Group, Inc., delivered its financial results for the quarter ended Dec. 27, 2005, to the Securities and Exchange Commission on Feb. 8, 2006. Windswept earned $3,196,162 of net income for the quarter ended Dec. 27, 2005, as compared to $1,388,310 of net income for the quarter ended Dec. 28, 2004. The Company generated $17,714,342 of total revenue for the quarter ended Dec. 27, 2005, a 140.7% increase from the $7,359,279 of revenue recorded for the quarter ended Dec. 28, 2004. Management attributes the substantial increase in revenue to $14,108,400 of revenues from work relating to Hurricane Katrina and $1,320,769 of revenues from work relating to Hurricane Wilma. At Dec. 27, 2005, the Company's balance sheet showed $22,613,603 in total assets and liabilities of $11,310,638. As of Dec. 27, 2005, the Company had a cash balance of $2,494,266, working capital of $6,079,337 and stockholders' equity of $10,002,965. In contrast, the Company had a cash balance of $512,711, a working capital deficit of $1,704,091, and a stockholders' deficit of $712,889 at June 28, 2005. The Company was recapitalized on June 30, 2005, after completing a financing transaction in which it issued a secured convertible term note which resulted in the repayment of its secured note payable-related party and a change of control of the Company. Going Concern Doubt Massella & Associates, CPA, PLLC, expressed substantial doubt about Windswept's ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended June 28, 2005. The auditing firm pointed to the Company's recurring losses from operations, difficulties in generating sufficient cash flow to sustain operations as well as working capital and stockholders' deficits. About Windswept Windswept Environmental Group, Inc., through its wholly owned subsidiary, Trade-Winds Environmental Restoration, Inc. -- http://www.tradewindsenvironmental.com/ -- provides a full array of emergency response, remediation, disaster restoration and commercial drying services to a broad range of clients. XYBERNAUT CORP: Court Okays Chantilly Office Lease Agreement ------------------------------------------------------------ The United States Bankruptcy Court for the Eastern District of Virginia authorized Xybernaut Corporation and Xybernaut Solutions, Inc., to enter into an Office Lease Agreement with Justice Federal Credit Union on Jan. 24, 2006. The Debtors leased approximately 9,656 square feet of office space at 5175 Parkstone Drive, located at Chantilly, Virginia. Pursuant to the lease, the Debtors will $224,502 rent for the first year of the lease. The rent is payable monthly and will increase 3% annually. The lease term started on Feb. 1, 2006, for 36 months. Under the lease, the Debtors also paid a $74,834 security deposit. Headquartered in Fairfax, Virginia, Xybernaut Corporation, develops and markets small, wearable, mobile computing and communications devices and a variety of other innovative products and services all over the world. The corporation never turned a profit in its 15-year history. The Company and its affiliate, Xybernaut Solutions, Inc., filed for chapter 11 protection on July 25, 2005 (Bankr. E.D. Va. Case Nos. 05-12801 and 05-12802). John H. Maddock III, Esq., at McGuireWoods LLP, represents the Debtors in their chapter 11 proceedings. Michael Z. Brownstein, Esq., at Blank Rome LLP, represents the Official Committee of Unsecured Creditors. The U.S. Trustee has appointed an Official Committee of Equity Security Holders; the equity panel has retained Kevin M. O'Donnell, Esq., at Henry, O'Donnell, Dahnke & Walther, P.C., as counsel. Alfred F. Fasola at Boardroom Specialist, LLC, serves as Xybernaut's restructuring advisor and consultant, at a rate of $2,500 per day. When the Debtors filed for protection from their creditors, they listed $40 million in total assets and $3.2 million in total debts. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Abraxas Petro ABP (27) 120 (4) Accentia Biophar ABPI (8) 34 (20) AFC Enterprises AFCE (44) 216 53 Alaska Comm Sys ALSK (9) 589 49 Alliance Imaging AIQ (43) 643 42 AMR Corp. AMR (729) 29,436 (1,882) Atherogenics Inc. AGIX (98) 213 190 Bally Total Fitn BFT (1,463) 486 (442) Biomarin Pharmac BMRN (65) 209 (38) Blount International BLT (201) 427 110 CableVision System CVC (2,486) 10,204 (1,881) CCC Information CCCG (95) 112 34 Centennial Comm CYCL (488) 1,511 69 Cenveo Inc CVO (12) 1,146 127 Choice Hotels CHH (165) 289 (34) Cincinnati Bell CBB (710) 1,863 16 Clorox Co. CLX (528) 3,567 (205) Columbia Laborat CBRX (13) 17 10 Compass Minerals CMP (83) 686 149 Crown Holdings I CCK (236) 6,545 (98) Crown Media HL CRWN (64) 1,250 (125) Deluxe Corp DLX (82) 1,426 (277) Denny's Corporation DENN (261) 498 (72) Domino's Pizza DPZ (553) 414 3 DOV Pharmaceutic DOVP (3) 116 94 Echostar Comm DISH (785) 7,533 321 Emeritus Corp. ESC (134) 713 (62) Foster Wheeler FWLT (375) 1,936 (186) Gencorp Inc. GY (73) 1,057 9 Graftech International GTI (13) 1,026 283 Guilford Pharm GLFD (20) 136 60 Hercules Inc. HPC (13) 2,548 330 Hollinger Int'l HLR (177) 1,001 (396) I2 Technologies ITWO (71) 202 (34) ICOS Corp ICOS (67) 232 141 IMAX Corp IMAX (34) 245 30 Immersion Corp. IMMR (15) 46 29 Indevus Pharma IDEV (115) 113 79 Intermune Inc. ITMN (30) 194 109 Investools Inc. IED (20) 64 (46) Koppers Holdings KOP (186) 570 120 Kulicke & Soffa KLIC (3) 440 216 Level 3 Comm. Inc. LVLT (632) 7,580 502 Ligand Pharm LGND (96) 306 (99) Lodgenet Entertainment LNET (69) 283 22 Maxxam Inc. MXM (677) 1,044 114 Maytag Corp. MYG (187) 2,954 150 McDermott Int'l MDR (53) 1,627 244 McMoran Exploration MMR (58) 408 67 NPS Pharm Inc. NPSP (55) 354 258 Omnova Solutions OMN (13) 355 46 Owens Corning OWENQ (8,443) 8,142 976 ON Semiconductor ONNN (276) 1,148 228 Quality Distribu QLTY (26) 377 20 Quest Res. Corp. QRES (27) 244 (29) Qwest Communication Q (2,716) 23,727 822 Revlon Inc. REV (1,169) 980 86 Riviera Holdings RIV (28) 221 6 Rural/Metro Corp. RURL (89) 310 54 Rural Cellular RCCC (460) 1,367 46 SBA Comm. Corp. SBAC (47) 886 25 Sepracor Inc. SEPR (165) 1,275 879 St. John Knits Inc. SJKI (52) 213 80 Tivo Inc. TIVO (9) 163 36 Unigene Labs Inc. UGNE (15) 14 (9) Unisys Corp UIS (33) 4,029 339 Vector Group Ltd. VGR (38) 536 168 Vertrue Inc. VTRU (30) 446 (82) Visteon Corp. VC (1,430) 8,823 404 Worldspace Inc. WRSP (1,475) 765 249 WR Grace & Co. GRA (559) 3,517 876 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. 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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, Jazel P. Laureno, Cherry A. Soriano-Baaclo, Marjorie C. Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M. Pinili, Tara Marie A. Martin and Peter A. Chapman, Editors. Copyright 2006. All rights reserved. ISSN: 1520-9474. 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