/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/060310.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, March 10, 2006, Vol. 10, No. 59 Headlines 7120 FRESH: Voluntary Chapter 11 Case Summary ADELPHIA COMMS: 30 Creditors Decry Ch. 11 Plan of Reorganization ADELPHIA COMMS: Resolving Devcon Dispute Over Asset Purchase Price AFFINITY GROUP: December 31 Balance Sheet Upside Down by $152 Mil. ALGOMA STEEL: CDN$200M Dividend Cues DBRS to Hold BB (low) Rating ALION SCIENCE: Moody's Affirms B1 Rating on Upsized $211MM Loan AOL LATIN: Ct. OKs Open-Ended Deadline to File Notices of Removal ARMSTRONG WORLD: Parent Posts $10MM Operating Loss in Fourth Qtr. BALL CORP: Senior Notes Priced to Yield 6.65% & Mature in 2018 BALL CORP: Fitch Assigns BB Rating to New Senior Unsecured Notes BENCHMARK HOMES: Case Summary & 20 Largest Unsecured Creditors BERRY-HILL GALLERIES: Resolves Dispute with Coram & Christie's BON-TON STORES: Completes Purchase of Saks' Northern Store Group BOOKER T. WASHINGTON: Placed Under Receivership in Alabama BOOKER T. WASHINGTON: Receivership Triggers A.M. Best's E Rating CALPINE CORP: Inks DIP Credit Facility Amendment with DIP Lenders CALPINE CORP: Canadian Affiliates' CCAA Stay Extended to April 20 CALPINE CORP: Court Okays Changes to Final Cash Collateral Order CATHOLIC CHURCH: Insurers Cry Spokane Disclosure Statement Flawed CATHOLIC CHURCH: Spokane FCR Taps Hamilton Rabinovitz as Advisor CERTEGY INC: S&P Downgrades $200 Million Notes' Ratings to BB+ CONSECO INC: Moody's Lifts Preferred Securities to B3 from Caa2 CORNELL TRADING: Retains Keen Realty to Auction 56 Retail Leases DANA CORP: Court Gives Interim Approval to Maintain Bank Accounts DANA CORP: Can Use Cash Management System on an Interim Basis DAVIS PETROLEUM: Evercore Buys Majority Stake for $150 Million DAVIS PETROLEUM: Case Summary & 45 Largest Unsecured Creditors DIGITAL LIGHTWAVE: Owes Optel Capital $48.7 Million at March 1 DIVERSIFIED ASSET: Fitch Affirms $37MM Class B-1 Notes' B Rating DJ ORTHOPEDICS: Moody's Puts Ba3 Rating on $410 Million Loans DJ ORTHOPEDICS: S&P Rates Proposed $410 Million Facility at BB- DOMINICK PEBURN: Case Summary & 19 Largest Unsecured Creditors DRAGWAY MANAGEMENT: Case Summary & 2 Largest Unsecured Creditors ENER1 INC: September 30 Equity Deficit Widens to $90.67 Million ENTERPRISE PRODUCTS: S&P Affirms Corporate Credit Rating at BB+ FEDERAL-MOGUL: Shuts Down Two Plants in Italy & United Kingdom FFMLT TRUST: Moody's Puts Low-B Ratings on Two Class Certificates FIDELITY NATIONAL: S&P Upgrades Corporate Credit Rating to BB+ FINANCIAL WORLD: Customers Have Until August 17 to File Claims FIRST FRANKLIN: S&P Affirms Class B-3 Certificates' BB+ Rating FLINTKOTE CO: Executive Retention & Incentive Program Approved FUTURE MEDIA: Wants Levene Neale as Bankruptcy Counsel GENERAL MOTORS: Japanese Bank Will Invest $1 Bil. For GMAC Stake GENERAL MOTORS: Fitch Affirms $4.1 Mil. Class N Certs.' D Rating GRUPO POSADAS: Fitch Affirms BB- Foreign & Local Currency Ratings GSAMP TRUST: Moody's Puts Low-B Ratings on Two Class Certificates HERCULES INC: Offers to Buy Back $118 Mil. of 11.125% Senior Notes HINES HORTICULTURE: Triad Buying Vacaville, Calif., Lot for $16.9M HINES HORTICULTURE: Incurs $10.4 Million Net Loss in 4th Quarter HONEY CREEK: Has Until March 27 to File Chapter 11 Plan INSIGHT COMMS: Discloses Fourth Quarter & Year-End Financials JEAN COUTU: Covenant Amendments Cue DBRS to Change Trends to Neg. JET HOLDINGS: Case Summary & 20 Largest Unsecured Creditors J.L. FRENCH: Wants Deloitte Tax as Tax Service Provider & Advisor J.L. FRENCH: Court Okays Abernathy MacGregor as PR Consultant JO-ANN STORES: Incurs $18 Million Net Loss in Fourth Quarter KAISER ALUMINUM: Inks Stipulation on Law Debenture's Stay Request KAISER ALUMINUM: Selling Surplus Pryor, Okla., Property for $700K KMART CORP: Settles Dispute Over Bankest's $3 Million Unsec. Claim KMART CORP: Asks Court to Reject Gramercy Dominicana's Claims LARGE SCALE: Court Grants Interim Access to Cash Collateral LARGE SCALE: Hires Felderstein Fitzgerald as Bankruptcy Counsel LEAR CORP: Disputes 2005 Financial Changes by Unnamed Customer LEVI STRAUSS: Fitch Affirms $1.8 Billion Unsecured Notes' B Rating LEVI STRAUSS: Moody's Lifts Caa2 Sr. Unsecured Debt Rating to B3 LEVI STRAUSS: S&P Puts B- Rating on Proposed $470 Million Notes LONGVIEW FIBRE: Rejects Purchase Proposal from Obsidian & Campbell LONGVIEW FIBRE: Postpones Common Stock and Senior Note Offerings METROMEDIA INT'L: Provides Update on Fuqua Shareholder Litigation MICRON TECH: Buying Lexar Media in Stock-for-Stock Merger MIRANT CORP: Court Defines Examiner's Post-Confirmation Duties MIRANT CORP: Examiner Taps Morris Nichols for Southern Co. Matters MIRANT CORP: Grants Stock Option to Eight Officers MKP CBO: Credit Quality Decline Cues Moody's to Watch Ratings NRG ENERGY: Earns $64 Million of Net Income in Fourth Quarter NRG ENERGY: Saves $39MM in 2005; Expects $59MM Savings This Year NUANCE COMM: Strong Market Position Prompts Moody's B1 Ratings NUANCE COMMS: S&P Rates Proposed $430 Million Bank Facility at B PENNSYLVANIA REAL: Lowers Interest Rate under Credit Facility PERFORMANCE TRANSPORTATION: Can Hire Hodgson Russ as Co-Counsel PERFORMANCE TRANSPORTATION: Panel Taps Damon & Morey as Co-Counsel PERFORMANCE TRANSPORTATION: Unions Want Creditors Committee Seats PERSISTENCE CAPITAL: Court Okays Appointment of Chapter 11 Trustee PLATINUM SEAFOOD: Case Summary & 9 Largest Unsecured Creditors PLUM POINT: Reduced Term Loan Prompts Moody's to Affirm B1 Rating PROCARE AUTOMOTIVE: Taps Thompson Hine as Bankruptcy Counsel PROFESSIONAL LIFE: Capital Decline Cues A.M. Best to Cut Ratings QUICKSILVER RESOURCES: Moody's Puts B2 Rating on $300M Sr. Notes RAMP TRUST: Moody's Assigns Ba1 Rating to Class B-1 Certificates RASC TRUST: Moody's Assigns Ba1 Rating to Class M-10 Certificates RCN CORP: Sells Mexican Units For $300 Million To Pay Debt RCN CORP: Debt Reduction Plan Cues Moody's to Review B3 Ratings REDCITY SEARCH: December 31 Balance Sheet Upside Down by CDN$623K RELIANCE NATIONAL: Court Adjourns Sec. 304 Injunction Hearing ROMACORP INC: Court Confirms Amended Joint Plan of Reorganization ROTECH HEALTHCARE: Wants Bell-Messier's Objection Overruled SAGE RANCH: Case Summary & 2 Largest Unsecured Creditors SCOTT RUBIN: Voluntary Chapter 11 Case Summary SHEFFIELD STEEL: Appears to Provoke a Labor Dispute with USW SHURGARD STORAGE: S&P Puts BB+ Pref. Stock Rating on Pos. Watch SOLAR INVESTMENT: Poor Credit Quality Cues Moody's to Cut Ratings ST. MATTHEWS: Case Summary & 3 Largest Unsecured Creditors SUB SURFACE: Accumulated Deficit Tops $12.24 Million at Dec. 31 SYNAGRO TECH: Amends Financial Ratio Under $305MM Credit Agreement TELOGY INC: Court Gives Nod to Dovebid Inc. as Auctioneer TIER TECHNOLOGIES: Amends Credit Facility to Address Default USG CORP: Court Okays Amended Berkshire Equity Commitment Accord USG CORP: Some Asbestos Estimation Proceedings Stayed Indefinitely VARIG S.A.: New York Court Clarifies Scope of Injunction VARIG S.A.: Creditors Approve Recovery Plan Details VESTA INSURANCE: Likely High Losses Cue A.M. Best to Cut Ratings WOLVERINE TUBE: Posts $38.6 Million Net Loss in Fiscal Year 2005 WORLD HEALTH: Taps Administar Services as Claims & Noticing Agent WORLD HEALTH: Wants to Continue Prepetition Insurance Programs W.R. GRACE: Releases Status Report on Progress of Chapter 11 Case W.R. GRACE: Wants Advanced Refining Credit Pact Extended to 2008 * BOOK REVIEW: Cyrus Hall McCormick: His Life and Work ********* 7120 FRESH: Voluntary Chapter 11 Case Summary --------------------------------------------- Debtor: 7120 Fresh Pond Corp. 7120 Fresh Pond Road Ridgewood, New York 11385 Bankruptcy Case No.: 06-40580 Type of Business: The Debtor's affiliate, 7002 FPR Corp., filed for chapter 11 protection on March 8, 2006 (Bankr. E.D.N.Y. Case No. 06-40573). Chapter 11 Petition Date: March 9, 2006 Court: Eastern District of New York (Brooklyn) Debtor's Counsel: Stuart P. Gelberg, Esq. 600 Old Country Road, Suite 410 Garden City, New York 11530-2009 Tel: (718) 343-2228 Fax: (516) 228-4278 Total Assets: $1,101,900 Total Debts: $2,300,000 The Debtor does not have any creditors who are not insiders. ADELPHIA COMMS: 30 Creditors Decry Ch. 11 Plan of Reorganization ---------------------------------------------------------------- At least 30 more groups of creditors, government entities, and other parties-in-interest delivered to the Court their objections to Adelphia Communications Corporation and its debtor-affiliates' Plan of Reorganization: 1. ML Media Partners, L.P.; 2. Verizon Media Ventures Inc.; 3. The putative class plaintiffs in a lawsuit pending before the United States District Court for the Southern District of New York captioned In re Adelphia Communications Corp. Securities & Deriv. Litigation, 03-MD-1529 (LMM); 4. The Ad Hoc Committee of Non-Agent Secured Lenders; 5. The City of Martinsville, Virginia; 6. The United States Trustee for the Southern District of New York; 7. The ad hoc committee of holders of certain of the 6.0% Convertible Subordinated Notes due 2006 and the 3.25% Convertible Subordinated Notes due 2021; 8. The Bank of New York in its capacity as Indenture Trustee with respect to the Ad Hoc Convertible Notes Committee; 9. Buccino & Associates, Inc., the liquidation trustee of Devon Mobile Communications Liquidating Trust et al; 10. Nationwide Life Insurance Company; 11. Olympus Parent Noteholders, namely, Silver Point Capital Fund, L.P. and Goldman Sachs & Co.; 12. Wilmington Trust Company, as indenture trustee to the Olympus notes; 13. The Bank of Nova Scotia, in its individual capacity and as administrative agent under the Parnassos Credit Agreement; 14. JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent under the Second Amended And Restated Credit Agreement dated December 19, 1997, among FrontierVision Operating Partners, L.P., as Borrower; J.P. Morgan Securities, Inc., as Syndication Agent; CIBC, Inc., as Documentation Agent; and the Lenders party thereto from time to time; 15. The Investment Banks, namely: a. ABN AMRO Inc. (successor to ABN AMRO Securities LLC); b. Banc of America Securities LLC; c. BNY Capital Markets, Inc.; d. Barclays Capital Inc.; e. Citigroup Financial Products, Inc.; f. Citigroup Global Markets Holdings, Inc.; g. CIBC World Markets Corp.; h. Deutsche Bank Alex Brown, Inc.; i. ADP Clearing & Outsourcing Services, Inc.; j. Morgan Stanley & Co. Incorporated; k. PNC Capital Markets, Inc.; l. Scotia Capital (USA) Inc.; m. SunTrust Securities, Inc.; and n. TD Securities (USA) Inc.; 16. Wachovia Bank, National Association, for itself and as administrative agent under that certain UCA Credit Agreement dated May 6, 1999; 17. Bank of America, N.A.; 18. The Ad Hoc Committee of Holders of the Senior Preferred Stock; 19. Bank of Montreal, in its capacity as the Olympus Administrative Agent; 20. Citibank, N.A., as administrative agent for the Century-TCI Lenders; 21. the Nominal Agents, namely: a. ABN Amro Bank N.V.; b. Barclays Bank PLC; c. Canadian Imperial Bank of Commerce; d. Credit Suisse, Cayman Branch; e. The Royal Bank Of Scotland PLC; f. Merrill Lynch Capital Corp.; g. PNC Bank, National Association; h. Societe Generale, S.A.; and i. Toronto Dominion (Texas), LLC; 22. The Official Committee of Equity Security Holders; 23. Calyon and Calyon Securities (USA) Inc.; 24. Edmund Rusin; 25. National Broadcasting Company; 26. Praxis Capital Ventures, L.P., Praxis Capital Partners, LLC, and Praxis Capital Management, LLC; 27. Steamtown Mall Partners, L.P.; 28. SES Americom, Inc.; 29. Circle Acquisitions, Inc., and Circle Security Systems, Inc.; and 30. Putnam Diversified Income Trust, Putnam High Yield Advantage Fund, Putnam High Yield Trust, Putnam Master Intermediate Income Trust, Putnam Premier Income Trust, Putnam VT Diversified Income Fund and Putnam VT High Yield Fund Generally, the parties complain that the Plan is unconfirmable under Section 1129 of the Bankruptcy Code. ML Media objects to the Plan on the grounds that: -- the rate of interest that the holders of Unsecured Claims are entitled is inappropriate; and -- it does not provide for payment in cash with respect to ML Media's secured claim, including interest at the contracted rate through the Payment Date. Michael C. Li, Esq., at Baker Botts L.L.P., in Dallas, Texas, counsel for Verizon, argues that: -- the Plan violates the absolute priority rule under Section 1129(b) of the Bankruptcy Code and best interest of creditors test of Section 1129(a)(7); -- the Plan's third-party releases and exculpation provisions are overly broad; and -- the Plan does not ensure that the residual value of the Reorganized Debtors is available for creditors. BNY objects to the definition of the X-Clause Sharing Percentage. BNY asserts that the X-Clause Sharing Percentage must be adjusted because holders of ACC Subordinated Notes are entitled to receive and retain their pro rata share of the TWC Class A Common Stock on a pari passu basis with the holders of ACC Senior Notes. In separate pleadings, the attorneys for the Bank of Nova Scotia and JPMorgan Chase Bank argue that the Plan cannot be confirmed because it: -- fails to provide an adequate means for payment of the Bank Lender Post-Effective Date Fee Claims that will arise as a result of the Bank Litigation; and -- eviscerates the Bank Lenders' indemnification rights in the event of liability under the Credit Agreement. The Nominal Agents assert that the Plan is not litigation-neutral as it improperly and inequitably prejudices the lenders' litigation rights. Representing the Praxis Entities, James N. Lawlor, Esq., at Wollmuth Maher & Deutsch LLP, in Newark, New Jersey, argues that the Plan proposes to treat similar claims differently and, therefore, violates the requirements of Section 1122 of the Bankruptcy Code. Representing SES Americom, Stephen V. Falanga, Esq., at Connell Foley LLP, in New York, asserts that ACOM has fallen woefully short of satisfying its burden of establishing the value of and necessity of substantive consolidation. Mr. Falanga points out that neither the Plan nor the Disclosure Statement addresses ACOM's justification for seeking the remedy. Circle raised various concerns regarding the sufficiency of the distribution reserves for Olympus other unsecured claims. Circle is concerned that there may not be adequate reserves for its claims. Circle timely filed proofs of claim for $25,000,000 against various Debtors in the "Olympus Group", including Star Point Limited Partnership and West Boca Acquisition Corp. The Circle Claims are presently being liquidated in an arbitration. Circle seeks to preserve its concerns, particularly to the extent those concerns stem from the Plan itself. The Putnam Funds object to the Plan because: a. it appears to exonerate agents under certain credit agreements from any liability for withheld, erroneous or otherwise invalid disbursements made by the Bank Agents, extinguishing their obligations to the Bank Lenders, including the Putnam Funds, under the credit agreements; and b. the release of the Bank Agents from any liability related to the administration of the Plan is not necessary to the ACOM Debtors' reorganization and has little, if any, bearing on the success of the reorganization. NBC asks the Court to prohibit the ACOM Debtors from assuming or assigning the retransmission consent contained in an NBC Programming Agreement separate and apart from all of the other rights and obligations of the parties under the NBC Programming Agreement. Other creditors point out that the Debtors' Plan: -- impermissibly provides for the payment of postpetition interest on general unsecured claims; -- impermissibly reduces existing securities law claims by payments from the restitution fund; -- violates Section 502(d) and (d) with its litigation indemnification fund; -- includes a revised third party release which is broad and ambiguous; -- fails to satisfy the "best interests of creditors" test; -- may not be crammed down on the UCA Lenders; and -- improperly interferes with state law rights. Headquartered in Coudersport, Pa., 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. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. (Adelphia Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: Resolving Devcon Dispute Over Asset Purchase Price ------------------------------------------------------------------ Adelphia Communications Corporation and its debtor-affiliates' seek the U.S. Bankruptcy Court for the Southern District of New York's permission to enter into a settlement agreement with Devcon Securities Services Corporation. The Agreement resolves a dispute between Devcon and the ACOM Debtors concerning calculation of the final purchase price to be paid by Devcon pursuant to an Asset Purchase Agreement dated January 21, 2005. Starpoint and its three subsidiaries, Cable, Coral and Westview, operated the residential and commercial security business of the ACOM Debtors in New York, Florida and Pennsylvania. The ACOM Debtors and Devcon entered into an Asset Purchase Agreement dated Jan. 21, 2005, in which the Debtors sold the Security Business to Devcon. In anticipation of a possible adjustment to the $40,229,045 estimated purchase price provided in the Asset Purchase Agreement, the ACOM Debtors and Devon agreed to set aside $4,022,904 of the estimated purchase price in an escrow account administered by JPMorgan Chase Bank, N.A., to be distributed in accordance with the Final Purchase Price calculation procedures set in the Asset Purchase Agreement. In June 2005, Devcon notified the Debtors that it had calculated the Final Purchase Price at $35,213,388. The ACOM Debtors disputed the calculations. The ACOM Debtors calculated the Final Purchase Price at $40,461,957, representing a $232,912 increase in the Final Purchase Price, which would necessitate a distribution to the ACOM Debtors of the entire Escrow Amount. During the course of negotiations, Devcon reduced the purchase price by $4,909,149 and out of this amount, the Parties agreed to submit disputed adjustments in the calculation of the Final Purchase Price of $2,761,514 to the Court and resolve the remaining disputed adjustments of $2,147,635 in an adversary proceeding. Devcon and the ACOM Debtors have determined to avoid the cost and risk of further litigation, and have agreed to resolve the dispute and all other outstanding issues between them. The Parties agreed that: a. they will take all steps required to effectuate the release and payment held under the Escrow Agreement, consisting of the escrow amount and the accumulated interest: * $2,349,578 to Devcon; * $1,673,326 to the Debtors; and * all interest accumulated on the Escrow Account to the Debtors; b. Devcon will pay the ACOM Debtors $49,173 on account of Devcon's usage of vehicles owned by ACOM for the months of April, May and June 2005; c. within ten days after the payment to each of the Parties of the Settlement Payment, they will execute and file a stipulation of dismissal; and d. they have executed mutual releases, subject to the ACOM Debtors' rights to indemnification as set in the Asset Purchase Agreement. Headquartered in Coudersport, Pa., 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. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. (Adelphia Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., 215/945-7000) AFFINITY GROUP: December 31 Balance Sheet Upside Down by $152 Mil. ------------------------------------------------------------------ Affinity Group Holding, Inc., delivered its annual report on Form 10-K for the year ended Dec. 31, 2005, to the Securities and Exchange Commission on March 3, 2006. For the 12 months ended Dec. 31, 2005, Affinity Group's net income decreased to $5,639,000 from a net income of $10,251,000 for 2004. For the 12-months ended Dec. 31, 2005, Affinity Group's total revenues increased to $485,600,000 from total revenues of $464,700,000 for the year ended Dec. 31, 2004. The Company generated net cash from operations of $17,100,000 for the year ended Dec. 31, 2005. At Dec. 31, 2005, Affinity Group's balance sheet showed $418,895,000 in total assets and $571,364,000 in total liabilities. Additionally, the Company has a working capital deficit of $6,400,000 at Dec. 31, 2005. A full-text copy of Affinity Group Form 10-K report is available for free at http://ResearchArchives.com/t/s?646 Affinity Group Holding, Inc., is a holding company and the direct parent of Affinity Group, Inc., and a wholly-owned subsidiary of AGI Holding Corp, a privately-owned corporation. The Company is a member-based direct marketing organization targeting North American recreational vehicle (RV) owners and outdoor enthusiasts. The Company's club members form a receptive audience to which Affinity Group Holding sells products, services, merchandise and publications targeted to their specific recreational interests. In addition, the Company is a specialty retailer of RV-related products. At Dec. 31, 2005, Affinity Group's total stockholder's deficit decreased to $152,469,000 from a deficit of $158,108,000 at Dec. 31, 2004. * * * As reported in the Troubled Company Reporter on March 16, 2005, Standard & Poor's Ratings Services assigned its 'B-' rating to Affinity Group Holding Inc.'s (B+/Negative/--) proposed $75 million senior unsecured notes due 2012. At the same time, Standard & Poor's affirmed its ratings on Ventura, California- based operating subsidiary Affinity Group Inc., including the 'B+' corporate credit rating, and revised the outlook on both companies to negative from stable. ALGOMA STEEL: CDN$200M Dividend Cues DBRS to Hold BB (low) Rating ----------------------------------------------------------------- Dominion Bond Rating Service notes that Algoma Steel Inc. announced a CDN$200 million distribution to shareholders, which is expected by the end of second quarter 2006. The distribution is part of the agreement reached with the Company's largest shareholder, Paulson & Co. Inc., which has withdrawn its request for a special shareholder meeting to vote on a capital reorganization plan. Algoma management had opposed the original plan put forth by Paulson. DBRS notes that the distribution will have a limited impact on Algoma's credit profile and the rating, BB (low), remains unchanged. The distribution is less than half the amount proposed by Paulson, and new debt will not be issued. On a pro forma basis, Algoma remains virtually debt-free and cash reserves continue to be favourable. The Company is expected to continue to generate free cash flow in 2006, which will add to liquidity and reduce financial risk. For more information on this credit or on this industry, please visit http://www.dbrs.com/ ALION SCIENCE: Moody's Affirms B1 Rating on Upsized $211MM Loan --------------------------------------------------------------- Moody's Investors Service affirmed the B1 rating on Alion Science and Technology Corporation's senior secured term loan B, which is being upsized to $211 million from $143 million. Moody's also affirmed the B1 rating on Alion's $30 million revolver and B2 corporate family rating. Alion has boosted the size of the planned incremental increase in term loan B to $68 million from the previously contemplated $50 million. Moody's expects the increased borrowings to be used to fund acquisitions and new business. The ratings outlook is stable. The ratings are subject to review of final, executed documents. These ratings were affirmed: * $30 million senior secured revolving credit facility due 2009, rated B1 * $211 million senior secured term loan B due 2009, rated B1 * Corporate family rating, B2 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. Revenue for the twelve months ended Dec. 31, 2005, was $401 million. AOL LATIN: Ct. OKs Open-Ended Deadline to File Notices of Removal ----------------------------------------------------------------- The Honorable Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware gave America Online Latin America Inc., and its debtor-affiliates more time to file notices of removal with respect to prepetition civil actions pursuant to Rules 9027(a)(2)(A), (B) and (C) of the Federal Rules of Bankruptcy Procedures. The Debtors have until the earlier of: -- the effective date of their Joint Plan of Reorganization and Liquidation, and -- July 31, 2006. The Debtors filed their Joint Plan and accompanying Disclosure Statement on Jan. 17, 2006, and Judge Walrath approved the Debtors' Disclosure Statement on Feb. 23, 2006. As reported in the Troubled Company Reporter on Feb. 24, 2006, the Debtors gave the Court three reasons supporting the extension: (1) it will give the Debtors more time and opportunity to make fully informed decisions concerning the removal of each pending prepetition civil action; (2) it will assure that the Debtors do not forfeit valuable rights under 28 U.S.C. Section 1452; and (3) the extension will not prejudice the rights of the Debtors' adversaries because any party to a prepetition civil action that is removed may seek to have it remanded to the appropriate state court pursuant to 28 U.S.C. Section 1452(b). Headquartered in Fort Lauderdale, Florida, America Online LatinAmerica, 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: Parent Posts $10MM Operating Loss in Fourth Qtr. ----------------------------------------------------------------- Armstrong Holdings, Inc., the parent company of Armstrong World Industries, Inc., reported net sales for the year ending Dec. 31, 2005 of $3,558.4 million, an increase of 1.7% from the $3,497.3 million reported for 2004. During 2005, Armstrong recorded non-cash charges related to changes to the U.S. pension plan of $16.9 million, and $17.6 million of fixed asset impairment. During 2004, Armstrong recorded non-cash goodwill impairment charges of $108.4 million and a fixed asset impairment charge of $44.8 million related to European resilient flooring business. For the fourth quarter 2005 net sales of $861.7 million were 0.7% higher than fourth quarter net sales of $855.3 million in 2004. An operating loss of $10.1 million was recorded for the fourth quarter of 2005 compared to an operating loss of $134.8 million in the fourth quarter of 2004. During the fourth quarter of 2005, Armstrong recorded non-cash charges related to changes to the U.S. pension plan of $16.9 million, and $17.6 million of fixed asset impairment. During the fourth quarter of 2004, Armstrong recorded a non-cash goodwill impairment charge of $48.4 million and a fixed asset impairment charge of $44.8 million related to the European resilient flooring business. During 2004, Armstrong implemented several manufacturing and organizational changes to improve its cost structure and enhance its competitive position. The Company did not initiate any additional manufacturing or organizational changes in 2005 but did incur costs in 2005 related to previously announced cost reduction initiatives. In 2005, charges for cost reduction initiatives totaled approximately $53 million, of which approximately $21 million was for accelerated depreciation and fixed asset impairments. The charges for these initiatives incurred in 2004 totaled approximately $50 million, of which approximately $32 million was for accelerated depreciation and fixed asset impairments. The remaining amounts were primarily for severances and other related costs. In addition to the above items, results for 2005 reflect increased selling prices that largely offset higher raw material and energy costs. Segment Highlights for the Full Year 2005 Resilient Flooring net sales of $1,185.4 million in 2005 decreased from net sales of $1,215.1 million in 2004. The decline was related to lower laminate sales volume related to a decision by a major customer to increase purchases of non-Armstrong laminate flooring products, and by a decline in residential vinyl sales as consumer preference in the market continued to shift away from vinyl products. An operating loss of $25.8 million was recorded in 2005 compared to an operating loss in 2004 of $150.2 million. 2005 operating results reflect the negative impact of sales volume declines and increased cost to acquire petroleum-based raw materials. Wood Flooring net sales of $833.9 million in 2005 were level with sales of $832.1 million in the prior year. Unit volume increased 2% while prices were lowered in response to declining lumber prices. Operating income grew to $60.9 million in 2005 compared to operating income of $51.4 million in 2004. Operating results benefited from increased volume, manufacturing efficiencies related to cost reduction initiatives and improvements in productivity at some plant locations. The improvement was made despite fixed asset impairment charges of $15.4 million in 2005. Textiles and Sports Flooring net sales of $279.0 million increased in 2005 compared to $265.4 million in 2004. An operating loss of $4.4 million was recorded in 2005 compared to an operating loss of $7.1 million recorded for 2004. The reduced 2005 operating loss was primarily due to increased sales volume, improved product mix, manufacturing efficiencies and reduced overhead expenses. Building Products net sales of $1,047.6 million in 2005 increased from $971.7 million in the prior year. Operating income increased to $148.5 million from operating income of $127.0 million in 2004. Volume growth and increased equity earnings in WAVE drove operating income improvement. Price realization essentially offset inflationary pressure from raw materials, energy and freight. Cabinets 2005 net sales of $212.5 million were level with 2004 sales of $213.0 million. Operating loss of $9.7 million was recorded in 2005 compared to an operating income of $1.4 million in the prior year. Operating losses in 2005 were primarily caused by manufacturing inefficiencies resulting from plant consolidation and higher SG&A expenses. 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. The Debtors tapped the Feinberg Group for analysis, evaluation, and treatment of personal injury asbestos claims. Mark Felger, Esq. and David Carickhoff, Esq., at Cozen and O'Connor, and Robert Drain, Esq., Andrew Rosenberg, Esq., and Alexander Rohan, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison, represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Houlihan Lokey for financial and investment advice. The Official Committee of Asbestos Personal Injury Claimant hired Ashby & Geddes as counsel. 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. BALL CORP: Senior Notes Priced to Yield 6.65% & Mature in 2018 -------------------------------------------------------------- Ball Corporation disclosed in a free writing prospectus filed with the Securities and Exchange Commission that its senior notes currently offered earns annual interest at 6-5/8%. The Company also changed the maturity date from March 15, 2016, to March 15, 2018. As reported in the Troubled Company Reporter on Mar. 7, 2006, the Company is offering $450 million in aggregate principal amount of its Senior Notes to partly fund its acquisition of: * the U.S. and Argentinean operations of U.S. Can Corporation; and * certain North American plastic bottle operations owned by Alcan Inc. The offering hinges on the closing of the U.S. Can buy-out but is not conditioned on the closing of the Alcan Inc. acquisition. The Company is offering the Notes at 99.799% of principal amount. It expects to get $443,481,806 from the notes after deducting the underwriting discount, which is 1.25% of principal amount. Terms of the Notes The Company will issue the notes under a base indenture with The Bank of New York, as trustee. Interest is payable on the notes on March 15 and September 15 of each year beginning on Sept. 15, 2006. The Notes' yield to maturity is 6.65%. The notes are senior unsecured obligations of the company and will rank: -- equally in right of payment to all of existing and future senior unsecured indebtedness; and -- senior in right of payment to all future indebtedness that expressly provides for its subordination to the notes. The notes are junior to all secured indebtedness of the Company and all liabilities, including trade payables, of the Company's subsidiaries that are not guarantors of the notes. The Company may redeem all or part of the notes on or after March 15, 2011. Prior to March 15, 2009, the Company may redeem up to 35% of the notes from the proceeds of certain equity offerings. Prior to March 15, 2011, the Company may redeem any or all of the notes upon payment of a "make-whole" premium. The offer's underwriters are: * Lehman Brothers Inc., * Banc of America Securities LLC, * J.P. Morgan Securities Inc., * Deutsche Bank Securities Inc., * BNP Paribas Securities Corp., * KeyBanc Capital Markets, a Division of McDonald Investments Inc. A full-text copy of the Free Writing Prospectus is available for free at http://ResearchArchives.com/t/s?63d Headquartered in Broomfield, Colorado, Ball Corporation -- http://www.ball.com/-- is a supplier of high-quality metal and plastic packaging products and owns Ball Aerospace & Technologies Corp., which develops sensors, spacecraft, systems and components for government and commercial customers. Ball reported 2005 sales of $5.7 billion and the company employs 13,100 people worldwide. * * * As reported in the Troubled Company Reporter on Mar. 6, 2006, Moody's Investors Service assigned ratings to Ball Corporation's proposed $500 million senior secured term loan D, rated Ba1, and proposed $450 million senior unsecured notes due 2016-2018, rated Ba2. Moody's also affirmed existing ratings, which include Ba1 ratings on $1.475 billion senior secured credit facilities and $550 million senior unsecured notes due Dec. 12, 2012. The ratings outlook is stable. The ratings are subject to review of final documentation. As reported in the Troubled Company Reporter on Mar. 2, 2006, Fitch Ball Corporation (NYSE: BLL) said Ball Corporation's recently announced acquisitions will not affect the company's credit ratings based on the currently available information. Fitch currently rates BLL as: -- Issuer default rating (IDR) 'BB' -- Senior secured credit facilities 'BB+' -- Senior unsecured notes 'BB' As reported in the Troubled Company Reporter on Feb. 20, 2006, Standard & Poor's Ratings Services revised its outlook on Broomfield, Colo.-based Ball Corp. to stable from positive. At the same time, Standard & Poor's affirmed its ratings, including its 'BB+' corporate credit rating, on the metal can and plastic packaging producer. These actions follow the recent announcement by Ball that it has entered into a definitive agreement to acquire U.S. Can Corp.'s (B/Watch Dev/--) U.S. and Argentinean operations for approximately 1.1 million shares of Ball common stock plus the assumption of $550 million of U.S. Can's debt. BALL CORP: Fitch Assigns BB Rating to New Senior Unsecured Notes ---------------------------------------------------------------- Fitch Ratings assigned a rating of 'BB' to Ball Corporation's (NYSE: BLL) new 12-year senior unsecured notes. The notes will be guaranteed by BLL's existing and future domestic subsidiaries. The new notes will rank equally in right of payment to all of BLL's existing and future senior unsecured debt. At the same time, BLL is raising a $500 million Term Loan D due October 2011 under the existing credit facilities ('BB+'). The company has: * a $715 million multicurrency revolver; * a $35 million Canadian revolver; * GBP85 million Term Loan A; * EUR350 million Term Loan B; * C$165 million Term Loan C; and * the new $500 million Term Loan D. At Dec. 31, 2005, $547 million was available under the multi- currency revolver. The company also had $267 million of short- term uncommitted credit facilities available, of which $106.8 million was outstanding. BLL will use the proceeds from the Term Loan D and the new notes to finance two recently announced acquisitions (U.S. Can and Alcan plastic bottle business acquisitions) and repay some amounts outstanding under BLL's existing multicurrency revolver. The ratings are supported by BLL's: * leading market positions in the beverage and food can market; * stability of end-markets and customers; * a strong asset base; and * solid free cash flow generation. Concerns include: * the potential for further leveraged acquisitions; * higher share repurchases; * higher energy costs; and * price pressures in certain business segments. The Rating Outlook was recently revised to Stable from Positive, reflecting BLL's increasing allocation of discretionary cash flow towards: * capital expenditures, * share repurchases, and * acquisitions. At Dec. 31, 2005, debt/operating EBITDA was 2.3x, and on a pro forma basis, the current ratio is expected to be in the 3.5x range (the company's debt typically increases during the first six months due to seasonality). Fitch expects the company to: * continue to produce healthy free cash flow; * adjust share repurchases in order to increase cash available for debt reduction; and * focus on improving leverage over the short to medium term. A review of the ratings and/or Rating Outlook may be considered if leverage further increases due to: * additional acquisitions, * share repurchases, or * margin deterioration. 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. BENCHMARK HOMES: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Benchmark Homes, Inc. 11011 "Q" Street Omaha, Nebraska 68137 Bankruptcy Case No.: 06-80243 Type of Business: The Debtor designs and builds houses. See http://www.benchmarkomaha.com/ Chapter 11 Petition Date: March 7, 2006 Court: District of Nebraska (Omaha Office) Judge: Timothy J. Mahoney Debtor's Counsel: Robert V. Ginn, Esq. Blackwell Sanders Peper Martin LLP 1620 Dodge Street, Suite 2100 Omaha, Nebraska 68102 Tel: (402) 964-5000 Fax: (402) 964-5050 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Pella Products Company $532,066 9845 South 142nd Street Omaha, NE 68138 Consolidated Supply Co., Inc. $453,669 10325 J Street Omaha, NE 68127 Builders Supply Co., Inc. $435,058 P.O. Box 27109 Omaha, NE 68127 McKeans Floor Coverings $412,352 10811 Harrison Street Omaha, NE 68128 Lumbermens Brick & Supply $336,617 P.O. Box 45506 Omaha, NE 68137 Kellys Carpet $284,742 90th & L Street P.O. Box 241336 Omaha, NE 68124 S.U.B.B. Contractors $277,077 9741 South 147th Street Omaha, NE 68138 Kathol Drywall Service, Inc. $272,135 7220 South 141 Street Omaha, NE 68138 PFI/Poured Foundations, Inc. $258,935 4502 Mark Street Omaha, NE 68133 Standard Heating and Air Conditioning $258,850 11746 Portal Road Omaha, NE 68128 Micro Plumbing Inc. $207,169 Lanoha Nurseries Inc. $168,088 Absolute Painting $160,767 Team Electric, Inc. $156,772 McNichols Brothers $153,638 Ayres Kahler $148,465 SID #438 $142,592 C.D. White Excavating $133,009 Arid Resources, Inc. $131,161 Great Western Bank $118,378 BERRY-HILL GALLERIES: Resolves Dispute with Coram & Christie's -------------------------------------------------------------- Berry-Hill Galleries, Inc., entered into a definitive agreement resolving all disputes between the Company and its affiliate, Coram Capital LLC, and Christie's. The settlement is subject to approval by the U.S. Bankruptcy Court for the Southern District of New York. With this agreement in place, Berry-Hill is a step closer to its emergence from bankruptcy. Several weeks ago, the Company resolved all disputes with its primary lender, ACG Credit Company, LLC, an affiliate of Art Capital Group. Berry-Hill sought chapter 11 protection in December 2005 as a strategic decision to protect its business and customers while dealing with short-term liquidity issues resulting from a lawsuit filed against the Company in August 2005 by ACG. In addition to mutual releases, the settlement provides for ownership by Christie's of the Edward Hopper painting "Chair Car" and permits Berry-Hill to show that painting to prospective buyers, earn a fee as the introducing broker, and participate with Christie's in the allocation of proceeds and any profits from its sale. The settlement also requires Christie's to deliver to Coram proceeds from consigned Coram artwork sold at a May 19, 2005 Christie's auction and return to Coram those pieces not sold. "We are very pleased to have reached this agreement with our friends and valued business partners at Christie's," Frederick D. Hill, a director of Berry-Hill Galleries, Inc., said. "Our business is strong and we continue to provide the highest level of service and expertise to our valued customers. This agreement puts us on an accelerated path toward emergence from chapter 11, and will allow us to continue the fruitful and productive business relationship we have had with Christie's for many years to come." The Company also noted that preparations continue for its highly anticipated exhibition 'Toward a New American Cubism,' which will run from May 23 through July 7, 2006. The exhibition will feature extensive new research on the subject. It will include important works of art on loan from major institutions as well as private collections, and will be accompanied by the publication of a substantial catalogue. Berry-Hill Galleries is represented by the law firm of Kramer Levin Naftalis & Frankel LLP, and has engaged Gordian Group, LLC as its investment bank. Alan M. Jacobs of AMJ Advisors, LLC, is the Chief Restructuring Officer. Headquartered in New York, New York, Berry-Hill Galleries, Inc. -- http://www.berry-hill.com/-- buys paintings and sculpture through outright purchase or on a commission basis and also exhibits artworks. The Debtor and its affiliate, Coram Capital LLC, filed for chapter 11 protection on Dec. 8, 2005 (Bankr. S.D.N.Y. Case Nos. 05-60169 & 05-60170). Robert T. Schmidt, Esq., at Kramer, Levin, Naftalis & Frankel, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $100 million and debts between $1 million and $50 million. BON-TON STORES: Completes Purchase of Saks' Northern Store Group ---------------------------------------------------------------- The Bon-Ton Stores, Inc. (NASDAQ:BONT) completed the acquisition of Saks Incorporated's Northern Department Store Group, which consists of 142 stores located in 12 states. Under terms of the purchase agreement, Bon-Ton paid approximately $1.05 billion in cash, reflecting certain purchase price adjustments, for NDSG, which generated net sales in fiscal 2005 of approximately $2.2 billion. With completion of the transaction, Bon-Ton will operate a total of 279 stores in 23 states with approximately $3.4 billion in net sales for fiscal 2005. On March 6, 2006, Bon-Ton issued 10.25% Senior Notes due 2014 in the aggregate principal amount of $510 million in order to finance the acquisition and the related refinancing of its existing indebtedness. Additionally, the Company entered into a $1 billion senior secured revolving credit facility led by Bank of America, N.A., as agent, and a $260 million loan facility with Bank of America, N.A., as lender. "With the close of this acquisition, Bon-Ton has become a major player in the retail industry and the second largest regional department store operator in the country," said Bud Bergren, President and Chief Executive Officer of Bon-Ton. "We look forward to realizing the potential of this business combination." "We welcome our new associates from NDSG to the Bon-Ton family and are excited about the opportunity to build on the tradition of excellence and customer service they have established." added Mr. Bergren. "Two great organizations have come together and with the talent, experience and insight of the combined teams, we see tremendous opportunity ahead. This merger will enhance shareholder value by providing an expanded and diversified geographic presence and economies of scale that we believe will drive greater profitability." Integration Plan Bon-Ton's corporate office will remain in York, Pennsylvania where the corporate administrative and back office support functions will reside. Merchandising and marketing functions for the combined operations will operate out of the existing NDSG headquarters in Milwaukee, Wisconsin. Integration activities will begin immediately and are expected to be completed within 18 to 24 months. During a transition period, Saks will provide Bon-Ton with specified support services including information technology and other back office support functions for NDSG. Mr. Bergren continued, "Initially we will focus on consolidating our merchandising, marketing and inventory management functions to enhance the shopping experience for our customers. Shortly thereafter we will address back office activities such as human resources, accounting, proprietary credit card operations and information technology. The management teams at Bon-Ton and NDSG have been working diligently over the past several months to position the Company for the integration process. We expect to realize cost savings beginning in 2006 from the consolidation of headquarters functions, achieving economies of scale and the adoption of best practices across the combined company. We fully expect this acquisition to be accretive to earnings in fiscal 2006." Lazard served as financial advisor to Bon-Ton in the transaction, Wolf, Block, Schorr and Solis-Cohen LLP acted as legal counsel. Headquartered in York, Pennsylvania, The Bon-Ton Stores, Inc. -- http://www.bonton.com/-- operates 279 department stores in 23 states in the Northeast, Midwest and Great Plains under the Bon-Ton, Elder-Beerman, Bergner's, Boston Store, Carson Pirie Scott, Herberger's and Younkers nameplates. The stores offer a broad assortment of brand-name fashion apparel and accessories for women, men and children, as well as cosmetics, home furnishings and other goods. * * * As reported in the Troubled Company Reporter on Mar. 02, 2006, Fitch Ratings assigned ratings to The Bon-Ton Stores, Inc., as: -- Issuer default rating 'B-' -- $1 billion senior secured credit facility 'B+/RR2' -- $260 million mortgage loan facility 'B+/RR2' -- $525 million of senior unsecured notes 'CCC/RR6' Fitch estimated that approximately $1.2 billion of debt would be outstanding following BONT's acquisition of Saks Incorporated's Northern Department Store Group, and said the Rating Outlook is Stable. BOOKER T. WASHINGTON: Placed Under Receivership in Alabama ---------------------------------------------------------- Booker T. Washington Insurance Co. agreed to be put into receivership after the Alabama Department of Insurance discovered that the company was insolvent by $4.3 million, according to various published reports. Denise B. Azar serves as the Receiver and was appointed to that post by the Jefferson County Circuit Court on Wed., Feb. 22, 2006, with the consent of Alabama Insurance Commissioner Walter A. Bell and the insurer's corporate officers. A copy of the Consent Order entered by the Circuit Court is available at no charge at http://aldoi.gov/PDF/Companies/BTWOrderofRehabilitation.pdf The department did not says how long the company will be under receivership but gave assurance that consumer's claims will continue to be paid and that policyholders should keep paying premiums to guarantee coverage. "I am pleased with the leadership of Booker T. Washington Insurance Company for working with us on this step," Commissioner Bell said. "We will all work together with the aim of rehabilitating this company." "I am hopeful that we can rehabilitate this company and am eager to work with company officials to do so," Ms. Azar said. "The cooperation that we have received from the management team has been outstanding in this very important time." Booker T. Washington Insurance Co. was founded by legendary African American businessman Arthur George Gaston in 1931 BOOKER T. WASHINGTON: Receivership Triggers A.M. Best's E Rating ---------------------------------------------------------------- A.M. Best Co. downgraded the financial strength rating to E (Under Regulatory Supervision) from C- (Weak) of Booker T Washington Insurance Company, Inc. (Birmingham, Alabama). The rating action follows the announcement by the Alabama Department of Insurance that BTWIC had voluntarily submitted to being placed into receivership. BTWIC recorded a significant decline in surplus in its first quarter 2005 statutory statement, following several years of capital erosion. A recent routine examination by the Alabama Department of Insurance indicated that BTWIC was insolvent by $4.3 million. Concurrent with this action, A.M. Best has downgraded the FSR to D (Poor) from C- (Weak) of BTWIC's life subsidiary, Universal Life Insurance Company (Universal Life) (Birmingham, Alabama). The rating outlook is negative. While A.M. Best notes that Universal Life has not been placed into receivership at this time, the rating action reflects the view that the entire insurance organization is stressed by this regulatory action and considers the historically weak operating performance of Universal Life. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. CALPINE CORP: Inks DIP Credit Facility Amendment with DIP Lenders ----------------------------------------------------------------- As reported in the Troubled Company Reporter on Jan. 23, 2006, the U.S. Bankruptcy Court for the Southern District of New York gave Calpine Corporation final approval to obtain $2 billion debtor-in- possession credit facility to fund operations during its chapter 11 restructuring and to retire certain obligations at The Geysers. The DIP facility will remain in place until the earlier of an effective Plan of Reorganization or Dec. 20, 2007. The DIP facility is secured by liens on all of Calpine's unencumbered assets and junior liens on all of its encumbered assets. DIP Facility Amended Calpine Corporation and certain of its subsidiaries have entered into an amendment of the Revolving Credit, Term Loan and Guarantee Agreement among the Company, as borrower, the other Loan Parties, as guarantors, Credit Suisse and Deutsche Bank Trust Company Americas, as joint administrative agents, joint syndication agents and joint documentation agents, and Deutsche Bank Securities Inc. and Credit Suisse, as joint lead arrangers and joint book runners. Calpine discloses in a Form 8-K filing with the Securities and Exchange Commission that the Amendment, among other things, permits the Company to withdraw funds necessary to complete Geysers Power Company, LLC, acquisition of 19 geothermal power plants in Sonoma and Lake Counties, California. The Amendment specifically permits Calpine to repay certain indebtedness associated with a leveraged lease and the reacquisition of title to the Geysers from the revolving commitment under the DIP Facility. The Credit Agreement had originally provided that amounts necessary for the completion of the Geysers Transaction could be drawn only from the second priority term loan commitment. The Geysers Transaction was consummated on February 3, 2006. Additionally, the Amendment finalized or clarified the provisions of the Credit Agreement, including certain covenants and definitions, including by adding a definition of EBITDA and providing the applicable interest coverage and leverage ratios required to be met with respect to the Geysers subsidiaries. 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. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) CALPINE CORP: Canadian Affiliates' CCAA Stay Extended to April 20 ----------------------------------------------------------------- At the request of Calpine Corporation's Canadian subsidiaries, Madam Justice B.E.C. Romaine of the Court of Queen's Bench of Alberta, Judicial District of Calgary, extends the stay under the Companies' Creditors Arrangement Act, R.S.C. 1985 c. C-36, to and including April 20, 2006. Toby Austin, director and Secretary of Calpine Canada Energy Limited, contends that an extension of the CCAA stay is necessary to enable the Applicants and the CCAA Parties to continue their restructuring efforts with a view to maximizing value for the benefit of all their stakeholders. Nine Calpine subsidiaries obtained protection from their creditors under the CCAA pursuant to an Initial CCAA Order dated Dec. 20, 2005. The Applicants are: -- Calpine Canada Energy Limited; -- Calpine Canada Power Ltd.; -- Calpine Energy Financial ULC; -- Calpine Energy Services Canada Ltd.; -- Calpine Resources Company; -- Calpine Canada Power Services Ltd.; -- Calpine Canada Energy Finance II ULC: -- Calpine Natural Gas Services Limited; and -- 3094479 Nova Scotia Company In addition to the Applicants, the Initial CCAA Order provided a stay of the proceedings against Calpine Energy Services Canada Partnership, Calpine Canada Natural Gas Partnership and Calpine Canadian Saltend Limited Partnership -- the CCAA Parties. Ernst & Young, Inc., was appointed monitor for the Applicants and the CCAA parties. Mr. Austin says the Applicants have implemented procedures to minimize cash outflows and have worked with the Monitor in preparing cash flow forecasts for the extension period. The cash flow forecasts demonstrate that the Applicants will have sufficient cash through the extension period to fund operations. Discussion with Stakeholders Neil Narfason, senior vice president of Ernst & Young, Inc., reports that the Applicants, CCAA Parties and their advisors have initiated dialogue with several of their major stakeholders and their advisors, including the Calpine Power Income Fund, counsel to the Trustee of ULC2 public bonds, certain bondholder counsel and Calpine Corporation. The parties discussed issues with respect to the Initial Order and the development of a framework to allow the Applicants and the CCAA Parties to move forward in their restructuring process. Discussion with the stakeholders is currently in the initial stages. Review of Contracts Mr. Narfason also relates that the Applicants and CCAA Parties, with the assistance of its advisors and the Monitor, are currently in the process of reviewing and valuating the various contracts pertaining to their operations. The majority of the relevant contracts are held by either CCNG or CESCA, as these two entities effectively manage Calpine Canada's energy trading. 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. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) CALPINE CORP: Court Okays Changes to Final Cash Collateral Order ---------------------------------------------------------------- As reported in the Troubled Company Reporter on Feb. 23, 2006, the U.S. Bankruptcy Court for the Southern District of New York authorizes, on a final basis, Calpine Corporation and its debtor- affiliates to: 1. use the Calpine Corp. Cash Collateral to: * pay the Debtors' ordinary and necessary business expenses; * pay expenses related to the administration of the Debtors' estates and the Chapter 11 cases; and * make adequate protection payments of principal and interest or other amounts; 2. use the Restricted Cash in accordance with any applicable Cash Waterfall Provisions; 3. distribute Unrestricted Cash to their parent entities that are Debtors through a Project Intercompany Loan notwithstanding the existence of an event of default or cross-default under the Project Loan Documents, or the insolvency of, the Project Debtors or any affiliates of the Project Debtors or resulting from the failure by any Debtor to make any payment during the prepetition period; and 4. incur indebtedness under a Project Intercompany Loan, provided, however, that Calpine Greenleaf, Inc. will also be authorized to use Restricted Cash to pay the prepetition portion of the invoices for maintenance and similar expenses. The Court previously approved interim amendments to the Final Cash Collateral Order. Under the amended order, these 13 companies comprise the Project Debtors: * Calpine Generating Company, LLC, * KIAC Partners; Nissequogue Cogen Partners, * Calpine Gilroy Cogen, L.P., * Geysers Power Company, LLC, * Silverado Geothermal Resources, Inc., * O.L.S. Energy-Agnews, Inc., * Calpine Hidalgo Power GP, LLC, * Calpine Hidalgo Energy Center, L.P., * Calpine Hidalgo Power, LP, * Calpine Hidalgo Inc., * Calpine Hidalgo Holdings, * MEP Pleasant Hill, LLC, and * CPN Pleasant Hill, LLC. The Project Lessees are comprised of these 10 companies: * Rumford Power Associates Limited Partnership, * Tiverton Power Associates Limited Partnership, * Calpine Monterey Cogeneration, Inc., * Calpine Greenleaf, Inc., * Calpine Northbrook Project Holdings, LLC, * Broad River Holdings, LLC, * Broad River Energy LLC, * RockGen Energy LLC, * South Point Holdings, LLC, and * South Point Energy Center, LLC. Under the Amended Cash Collateral Order, the Court finds it necessary to protect the Project Lessors' interest in the applicable leased facility and collateral pledged, if any, by the Project Lessees to secure the applicable Project Lessee's obligations. As adequate protection for any diminution in value of the Project Lender Collateral or the Project Lessor Collateral, including, from the use of the Restricted Cash in accordance with the applicable Cash Waterfall Provisions, the use of the Unrestricted Cash as well as Project Lender Collateral or the Project Lessor Collateral, the Court rules that each Project Lessor will receive reasonable fees and disbursements including, the fees of counsel and financial advisors to the Project Lessors, the indenture trustees and pass-through trustees, the Ad Hoc Committee, Quadrangle or agents under the Project Loan Documents and Project Lease Documents. However, a Project Lessee's obligation to pay professional fees and expenses will cease on the earlier to occur of: (i) a Termination Event with respect to the Project Lessee; and (ii) the date that falls 20 days after receipt by the Project Lessor of notice that the Project Lessee has determined to reject their lease. The Project Lessors are granted valid, binding and enforceable security interests in and replacement liens on all prepetition and postpetition property of the Project Lessees of whom each Project Lessor is a creditor or has a pledge of assets. The replacement liens and security interests will be equal to the extent of the aggregate diminution in value, if any, after the Petition Date, of a Project Lessor's particular Project Lessor Collateral. However, the Project Lessor Replacement Liens will be subordinate and junior to the DIP Liens and will be senior to the Calpine Corp. First Replacement Liens and Calpine Corp. Second Replacement Liens. The Replacement Liens will also be subject to the payment of the Carve Out. The Project Lessors agree to waive any right to appeal or file a motion to reconsider or stay the Cash Collateral Order. DZ Bank, Celanese Ltd., U.S. Bank, Quadrangle and the Ad Hoc Committee agree to withdraw any appeal of, or motion to reconsider or stay, the Final Cash Collateral Order. To the extent that Calpine Energy Services fails to make any payment -- other than any payment that CES is prohibited from making as a result of having filed for bankruptcy -- when due under tolling agreements, MEP Pleasant Hill, Calpine Northbrook, Broad River Holdings, Broad River Energy, RockGen Energy, South Point Holdings, and South Point Energy Center will automatically be added to the list of Designated Projects and a Termination Event will be deemed to have occurred as to the entity. Any funds advanced by the Project Lenders or the Project Lessors to the entity, with the entity's consent or as authorized by the Bankruptcy Court as adequate protection for the Project Lenders or Project Lessors, as applicable, after the entity has been deemed a Designated Project, will be repaid together with interest, fees and costs, if any, by the Debtors if the entity is not surrendered to the Project Lenders or Project Lessors, as applicable, within one year. * * * The Hon. Burton R. Lifland of the Bankruptcy Court for the Southern District of New York approves the amendments to the Final Cash Collateral Order, on a final basis. Baker Hughes Oilfield Operations, Inc., had objected to the Cash Collateral Order because it provided that various junior claims cannot be paid until obligations under the DIP Facility are paid. BHI argued that other creditors and parties should not be paid before BHI, as it has the most senior position in the financial structure of the Debtors. BHI seeks payment of a $331,913 unsecured claim, plus interest and legal fees. BHI said it is secured on assets of Geysers Power Company II, LLC. Judge Lifland rules that, to the extent that BHI's liens and interests are valid and perfected, the Debtors are authorized and directed to pay BHI immediately, pursuant to the order authorizing the Debtors to pay prepetition mechanics' lien claims. BHI will withdraw its objection with prejudice. Upon payment, BHI will be bound by the terms of the Mechanics' Lien Order and will be required to comply with every provision. BHI will also be bound by the terms of a letter Calpine Operating Services Company Inc. sent to BHI to cover the payment. BHI is to open credit terms as agreed to in a contract among BHI, Baker Petrolite Corporation, and Calpine Operating Services, Inc. A full-text copy of the amended Final Cash Collateral Order is available free of charge at http://ResearchArchives.com/t/s?64d 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Insurers Cry Spokane Disclosure Statement Flawed ----------------------------------------------------------------- As reported in the Troubled Company Reporter on Nov. 30, 2005, General Insurance Company of America and ACE Property & Casualty Insurance Company, as successor-in-interest with regard to policies issued by Aetna Insurance Company, issued insurance policies to the Diocese of Spokane. The Insurers informed the U.S. Bankruptcy Court for the Eastern District of Washington that the Diocese of Spokane's Disclosure Statement lacks adequate information required by Section 1125 of the Bankruptcy Code. The Disclosure Statement states that each Insurer will be given an opportunity to participate in the Plan of Reorganization and become a settling insurer. Settling Insurers, in exchange for their contributions, will receive an injunction against "prosecution of claims . . . by any Creditor or other party-in- interest, including a Tort Claimant." David E. Eash, Esq., at Huppin Ewing Anderson & Paul, P.S., in Spokane, Washington, notes that the Insurers are concerned that the Plan may alter their rights and obligations and improperly subject them to decisions of the so-called "Special Arbitrator" sought to be appointed in connection with Spokane's Plan. To what extent the Plan would affect Insurers' rights is unclear because the most critical Plan provisions are contained in documents, particularly the Settlement Trust Agreement and the Litigation Trust Agreement, that have not yet been provided. The failure to give parties-in-interest an opportunity to view the Trust Agreement should not be understated, Mr. Eash asserts. The Settlement Trust is the centerpiece of the Plan. It is the vehicle to which all sexual abuse claims will be channeled unless the claimant specifically opts out of the Settlement Trust in favor of litigating his or her claim in state court. * * * Eight insurers notify the Court that the Diocese of Spokane has given them an indefinite extension of time within which they may file their objections to the Disclosure Statement. The Insurers are: (1) ACE Property & Casualty Insurance Company, (2) American Casualty Company of Reading, Pennsylvania, (3) Columbia Casualty Company, (4) Continental Insurance Company, (5) General Insurance Company of America, (6) Oregon Auto Insurance Company, (7) Pacific Insurance Company, and (8) The Glens Falls Insurance Company Susan Brye Jahnke, Esq., at Lane Powell PC, in Chicago, Illinois, informs Judge Williams that Spokane has advised the Insurers that the Diocese will further amend its Disclosure Statement to reflect changes occasioned by the Diocese's tentative settlement with the Tort Litigants Committee. The Insurers preserve and do not waive any and all of their objections to the Disclosure Statement. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Spokane FCR Taps Hamilton Rabinovitz as Advisor ---------------------------------------------------------------- Gayle E. Bush, the Future Claims Representative appointed in the Diocese of Spokane's case, is required to file a proof of claim for the victims that he represents. According to Mr. Bush, he requires assistance from an expert in estimating the amount of child sexual abuse claims, which may reasonably be expected to be asserted in the future. In this regard, Mr. Bush believes that Hamilton Rabinovitz & Alschuler, Inc., is well qualified for the job. Mr. Bush seeks authority from the U.S. Bankruptcy Court for the Eastern District of Washington to retain Hamilton as his consultants. Hamilton is a full service financial and litigation support firm. It has extensive experience with mass tort litigation, including cases in the bankruptcy context. Hamilton has also assisted a number of companies estimate future tort claims. This includes the Archdiocese of Portland in Oregon, which Chapter 11 case is pending in the U.S. Bankruptcy Court for the District of Oregon. According to Mr. Bush, Hamilton will be provided data on known childhood sexual abuse in Spokane. From that data, the firm will: -- estimate patterns of abuse; -- forecast potential claims; -- allocate the claims based on severity; and -- estimate the number and severity of causal link claims and claims projected to be asserted against the Spokane Diocese in the future. A detailed summary of Hamilton's scope of work is available for free at http://ResearchArchives.com/t/s?64e Hamilton will be paid for its services on an hourly basis. Hamilton's discounted hourly rates range from $150 for research associates to $325 for senior partners: Discounted Professional Hourly Rates ------------ ------------ Senior Partners $325 Junior Partners $325 Principals $325 Directors $325 Managers $300 Senior Analysts $250 Analysts $175 Research Associates $150 Hamilton has drafted an estimated budget for the performance of its services. A full-text copy of the budget is available for free at http://ResearchArchives.com/t/s?64f Francine F. Rabinovitz, Hamilton's executive vice president, assures Judge Williams that the firm does not hold or represent an interest adverse to the Diocese's estate, and is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. The Roman Catholic Church of the Diocese of Spokane filed for chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen, Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $11,162,938 in total assets and $81,364,055 in total debts. (Catholic Church Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000) CERTEGY INC: S&P Downgrades $200 Million Notes' Ratings to BB+ -------------------------------------------------------------- Standard & Poor's Ratings Services raised the corporate credit and senior secured ratings of Jacksonville, Florida-based Fidelity National Information Services Inc. to 'BB+' from 'BB', and removed it from CreditWatch where it was placed on Sept. 15, 2005. At the same time, Standard & Poor's lowered its rating on Alpharetta, Georgia-based Certegy Inc.'s $200 million of senior unsecured notes to 'BB+' from 'BBB' and removed it from CreditWatch where it was placed on Sept. 15, 2005. The outlook is positive. "The rating actions follow the completed merger of FIS, a majority owned subsidiary of Fidelity National Financial Inc. (FNF, BBB- /Watch Pos/--), with Certegy, which has combined operations to form a single publicly traded entity," said Standard & Poor's credit analyst Philip Schrank. Under the terms of the merger agreement, FIS and Certegy combined in a tax-free, stock-for-stock merger. After the issuance of Certegy stock to FIS shareholders, current Certegy shareholders will own approximately 32.5% and FIS shareholders will own approximately 67.5% of the combined entity, with FNF directly owning approximately 50.3%. Additionally, Certegy has paid a $3.75 per share special cash dividend to its shareholders prior to the closing of the transaction. The name of the combined company will become Fidelity National Information Services Inc. The ratings reflect the new FIS' stable recurring revenue base, good cash-flow generation, and the opportunity to realize both product and cost synergies over time. The combination provides risk management solutions and outsourcing services to: * financial institutions, * retailers, * mortgage lenders, and * real estate professionals. While recent operating performance has been good, with operating margins in the 20% area, the company has grown rapidly through acquisitions, and has yet to demonstrate a sustained track record of performance. Growth opportunities include the cross-selling of an integrated suite of products and services, and international markets that are expected to grow more rapidly than the U.S. markets. Competition in niche markets is fragmented, and technology, process, and delivery are key differentiators. Barriers to entry include: * the investment in and development of risk and transaction management systems; * contractual relationships; and * the compilation of historical data. CONSECO INC: Moody's Lifts Preferred Securities to B3 from Caa2 --------------------------------------------------------------- Moody's Investors Service upgraded the debt and insurance financial strength ratings of Conseco, Inc., based on the company's progress in its financial performance since emerging from bankruptcy and the company's capital restructuring initiatives. The rating agency upgraded Conseco's: -- bank debt and revolving credit facility to Ba3 from B2, -- senior convertible debentures to B1 from B3, and -- mandatory convertible preferred securities to B3 from Caa2. In addition, the rating agency raised the IFSR of Conseco Inc.'s primary insurance subsidiaries to Baa3 from Ba1, and CSHIC's IFSR was affirmed at Caa1. All of the company's ratings now have a positive outlook. As the rationale for the rating actions, Moody's noted Conseco's most recent steps to further enhance holding company flexibility. The company raised approximately $330 million from the issuance of convertible debentures in August 2005 and used the proceeds to repay debt under its current credit facility. Moody's said that in addition to attaining more flexible financial covenants under the company's amended and restated $475 million credit facility, these latest refinancing activities reduced the company's financing costs. Separate and apart from the capital restructuring, Moody's notes that the rating action also reflects Conseco's ability to meet specific financial standards as previously articulated in prior Moody's publications. These financial metrics required for possible consideration of rating upgrade were primarily focused on statutory earnings, financial leverage, fixed charge coverage and NAIC risk-based capital ratios. Year-end 2005 adjusted financial leverage and consolidated RBC numbers of approximately 19% and 359%, respectively, were better than our expectations of below 30% and above 300%. Excluding the statutory reserve increase on long term care, the company's statutory operating earnings were approximately in line with our expectations. The actual cash fixed charge coverage was slightly below the 2.25x expectation. Moody's added that the recently completed recapitalization should provide Conseco additional time to execute its business strategy as well as greater financial flexibility. However, the current ratings continue to reflect the challenges that Moody's believes the company faces in attracting and retaining distribution; growing new business and conserving existing business without sacrificing profitability; and in servicing fixed charges at the holding company while maintaining current risk-adjusted capital levels at its insurance companies. Moody's commented that its decision to affirm CSHIC's Caa1 insurance financial strength rating with a positive outlook reflects the diminished uncertainty surrounding the company's future earnings, relatively low capitalization levels as well as the likelihood of financial support from Conseco, Inc. Following its most recent rating actions, Moody's stated that the new rating levels include these expectations: -- Adjusted financial leverage maintained at current levels or modestly above, with a corresponding improvement in capital structure; -- Projected fixed charge coverage at the holding company of at least 2.25x, calculated on a quarterly basis; -- RBC ratio on a consolidated basis of at least 320%, and RBC ratio of each statutory operating entity, excluding CSHIC, of at least 200%; RBC ratio of companies actively marketing insurance products of at least 250%; -- 2006 consolidated statutory net gain from operations before net realized capital gains and interest on surplus notes greater than $150 million; -- Parent company liquidity of at least 1 times the annual fixed charge amount of the holding company. The rating agency said that further upward rating movement could occur if Conseco meets the above metrics over a 12-18 month period. Additionally, consolidated statutory net gain from operations before net realized capital gains and interest on surplus notes greater than $180 million annually, or a material reduction of the outstanding bank debt would place upward pressure on the rating. To the contrary, any of these would place downward pressure on the rating: a fixed charge coverage less than 2.25x, consolidated statutory net gain from operations before net realized capital gains and interest on surplus notes of less than $150 million, an RBC ratio on a consolidated basis less than 300%, or a deterioration in the retention of distribution at Bankers Life. These ratings were upgraded with a positive outlook: * Conseco Insurance Company f.k.a. Conseco Annuity Assurance Company -- insurance financial strength rating to Baa3 from Ba1; * Bankers Life and Casualty Company -- insurance financial strength rating to Baa3 from Ba1; * Conseco Health Insurance Company -- insurance financial strength rating to Baa3 from Ba1; * Colonial Penn Life Insurance Company -- insurance financial strength rating to Baa3 from Ba1; * Conseco Life Insurance Company -- insurance financial strength rating to Baa3 from Ba1; * Washington National Insurance Company -- insurance financial strength rating to Baa3 from Ba1; * Conseco Inc.'s bank debt to Ba3 from B2; * Conseco, Inc.'s revolving credit facility to Ba3 from B2; * Conseco, Inc.'s senior convertible debentures to B1 from B3; * Conseco Inc.'s mandatorily convertible preferred securities to B3 from Caa2. This rating was affirmed with a positive outlook: * Conseco Senior Health Insurance Company -- Caa1 insurance financial strength rating. The last rating action took place on August 10, 2005, when Moody's assigned a B3 rating to Conseco Inc.'s $330 million of convertible debentures and a B2 rating to the company's $80 million revolving credit facility. Consistent with the rest of the ratings on Conseco, these new ratings were placed on review for possible upgrade. Conseco is a specialized financial services holding company that operates primarily in the life and health insurance sectors through its subsidiaries. As of Dec. 31, 2005, the company reported total GAAP assets of nearly $31.6 billion and shareholders' equity of $4.5 billion. CORNELL TRADING: Retains Keen Realty to Auction 56 Retail Leases ---------------------------------------------------------------- Cornell Trading, Inc., dba April Cornell, retained Keen Realty, LLC, to market and assist with the disposition of the company's retail leasehold interests located nationwide. April Cornell operates retail stores offering ladies and girls apparel with floral prints and signature palettes. The company filed for Chapter 11 protection on Jan. 4, 2006, in the United States Bankruptcy Court for the District of Massachusetts. Keen Realty, LLC is a real estate consulting firm specializing in maximizing the value of its clients' real estate assets nationwide. Keen intends to auction the leases in three phases, subject to bankruptcy court approval. The first auction will include 14 leases and is tentatively scheduled for March 17, 2006. The remaining leases are tentatively scheduled to be auctioned on April 7 or April 19. "We are excited to offer these leases for sale, as they are located in premier malls, centers and street locations throughout the country," said Craig Fox, Keen Realty's Vice President. "Given the short time frame, interested parties should contact us immediately as bids are now being accepted on these hard to come by locations. We anticipate that many of the leases may be sold prior to their respective auctions." The leases, which range in size from approximately 1,000 sq. ft. to 4,000 sq. ft., are located in Alabama, Arizona, California, Connnecticut, Colorado, District of Columbia, Florida, Georgia, Illinois, Indiana, Massachussets, Maryland, Michigan, Missouri, North Carolina, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Virginia, Vermont, and Washington. For over 23 years, Keen Consultants has had extensive experience solving complex problems and evaluating and selling real estate, leases and businesses. Keen Realty, a leader in identifying strategic investors and partners for businesses, has consulted with hundreds of clients nationwide, and evaluated and disposed of more than 18,400 properties consisting of approximately 1,723,300,000 sq. ft. across the country. Recent clients include: Eddie Bauer/Spiegel, The LoveSac Corp., The Penn Traffic Company, Cable & Wireless, Meadowcraft, Frank's Nursery and Crafts, Arthur Andersen, Service Merchandise, Tommy Hilfiger, Warnaco, and JP Morgan Chase. For more information regarding the disposition of these leaseholds for Cornell Trading Inc., please contact: Attn: Craig Fox Keen Realty, LLC, 60 Cutter Mill Road, Suite 214, Great Neck, NY 11021 Telephone (516) 482-2700 Fax (516) 482-5764 cfox@keenconsultants.com Headquartered in Williston, Vermont, Cornell Trading, Inc. -- http://www.aprilcornell.com/-- sells women's and children's apparel including dresses, skirts, blouses, and sleepwear. Cornell also offers books and housewares like table linens, placemats and napkins, bedding, and dolls and stuffed animals. The Company filed for chapter 11 protection on January 4, 2006 (Bankr. D. Mass. Case No. 06-10017). Christopher J. Panos, Esq., at Craig & Macauley, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated debts and assets between $10 million to $50 million. DANA CORP: Court Gives Interim Approval to Maintain Bank Accounts ----------------------------------------------------------------- The United States Trustee generally requires a debtor-in- possession to close all prepetition bank accounts and open new debtor-in-possession bank accounts. In addition, the United States Trustee may require a debtor-in-possession to maintain separate accounts for cash collateral and taxes. Dana Corporation and its debtor-affiliates have utilized approximately 100 Bank Accounts on a regular basis. The Debtors want to continue using their Bank Accounts. "Allowing these accounts to be maintained with the same account numbers will greatly assist the Debtors in accomplishing a smooth transition to operating in chapter 11," Corinne Ball, Esq., at Jones Day, in New York, says. To protect against the possible inadvertent payment of prepetition claims, the Debtors will immediately advise their Banks not to honor checks issued prior to the Petition Date, except as otherwise permitted by the U.S. Bankruptcy Court for the Southern District of New York and directed by the Debtors. According to Ms. Ball, the Debtors have the capacity to draw the necessary distinctions between prepetition and postpetition obligations and payments without closing the Bank Accounts and opening new ones. At the Debtors' request, the Court permits the Debtors, on an interim basis, to open and close bank accounts. Judge Burton R. Lifland also allows the Banks to charge, and the Debtors to pay or honor, prepetition and postpetition service and other fees, costs, charges and expenses to which the Banks may be entitled under the terms of their contractual arrangements with the Debtors. The Banks also are authorized to charge back returned items to the Bank Accounts in the normal course of business. Headquartered in Toledo, Ohio, Dana Corporation -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue No. 2, Issue No. 123; Bankruptcy Creditors' Service, Inc., 215/945-7000) DANA CORP: Can Use Cash Management System on an Interim Basis ------------------------------------------------------------- Dana Corporation and its debtor-affiliates have utilized a cash management system in the day-to-day operation of their business for the past nine years, and have used portions of the system for a significantly longer period. According to Michael J. Burns, the Company's chairman of the board, president, chief executive officer, and chief operating officer, the Cash Management System provides a well-established mechanism for the collection, concentration, management and disbursement of funds used in the Debtors' businesses. Before Dana filed for bankruptcy protection, the Debtors maintained approximately 87 domestic bank accounts and 10 foreign bank accounts, including a concentration account, collection accounts, disbursement accounts, petty cash and payroll accounts and other special purpose accounts, out of which they manage cash receipts and disbursements. All domestic Bank Accounts are maintained at financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation. The principal components of the Cash Management System are: (a) Cash Collection and Concentration The vast majority of the Debtors' cash receipts flow into a concentration account maintained by Dana with JPMorgan Chase Bank in New York City. Funds are swept to the Concentration Account from: 1. Dana Asset Funding LLC Accounts 2. DAF Funding Account 3. Clevite Division and DTF Trucking Inc. Collections 4. Plant Miscellaneous Receipt Account at KeyBank N.A. 5. Dividends/Royalty Account 6. Other Collections (b) Disbursements All of the Debtors' disbursement accounts are funded on an as needed basis, directly or indirectly, from the Concentration Account. 1. Benefits Accounts 2. Payroll Accounts Funded from Concentration Account 3. Payroll Accounts Funded from Global Payables Accounts 4. Payroll Accounts Funded from Dana Canada Account 5. Global Payables Accounts 6. The Canadian Payables Account 7. Flight Operations Account 8. Petty Cash Accounts 9. Foreign Accounts (c) Other Accounts 1. Investment Accounts 2. Security Accounts A chart summarizing the Debtors' Cash Management System, as it existed prior to the Petition Date is available for free at http://bankrupt.com/misc/dana_cashmanagementchart.pdf Mr. Burns tells the U.S. Bankruptcy Court for the Southern District of New York that the Cash Management System is similar to those commonly employed by corporate enterprises comparable to the Debtors in size and complexity. The Cash Management System provides the ability to: (a) control and monitor corporate funds; (b) invest idle cash; (c) ensure cash availability; and (d) reduce administrative expenses by facilitating the movement of funds and the development of timely and accurate account balance and presentment information. "These controls are especially important, given the significant volume of cash transactions -- aggregating approximately $25 billion annually -- managed through the Cash Management System," Mr. Burns. Accordingly, on an interim basis, the Honorable Judge Burton R. Lifland permits the Debtors to: (a) maintain the Cash Management System, as that system may be modified pursuant to the requirements of the DIP Facility; and (b) implement ordinary course changes to their Cash Management System. Headquartered in Toledo, Ohio, Dana Corporation -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) DAVIS PETROLEUM: Evercore Buys Majority Stake for $150 Million -------------------------------------------------------------- Davis Petroleum Corp. announced that it reached an agreement with a private equity group led by Evercore Capital Partners L.P. to re-capitalize the Company. The agreement will provide Davis with ample capital resources to continue its successful oil exploration and production business. Under the terms of the agreement, the private equity group led by ECP and management of the Company will purchase all of the equity of Davis Petroleum, Davis Offshore and Davis Pipeline, which comprise Davis Petroleum Corp., for approximately $150 million. The private equity group includes Red Mountain Capital Partners and Sankaty Advisors, an affiliate of Bain Capital. After the transaction is completed, the three Davis companies will continue to operate with the same corporate names and management teams. John T. Dillon, Evercore Vice Chairman and former Chief Executive Officer and Chairman of International Paper, will join Davis' Board. James R. Montague, former head of International Paper's oil and gas business, will become non-Executive Chairman of Davis. To facilitate the transaction, Davis has filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code, along with a prepackaged plan of reorganization providing for the company's emergence from Chapter 11. While a sale of the company outside of Chapter 11 requires 100% shareholder approval, only two-thirds shareholder approval is needed in a Chapter 11. The plan of reorganization has received the support of the required number of Davis shareholders. The Company has requested that a hearing to confirm the plan be set for March 9, 2006. "We are pleased to have Evercore, Red Mountain and Sankaty as our partners going forward. The new capital will allow our premier teams of oil and gas professionals to expand our reserves across areas of operation, and Evercore's involvement will enable us to strengthen our position as one of the most innovative oil and gas E&P companies in the U.S.," said Gregg Davis, President and C.E.O. of Davis. "Davis Petroleum has a storied history and a proven management team that, with the right capital structure in place, will enable the Company to continue its success in the exploration, discovery and development of its onshore properties as well as bring into production its recent offshore finds in the Gulf of Mexico," said Austin Beutner, Co-Chief Executive Officer of Evercore. "ECP has made a number of successful energy investments, particularly in the oil and gas E&P sector. We look forward to applying our expertise and insight to help Gregg and his team build on Davis Petroleum's success and capitalize on the exciting growth opportunities before it." "This transaction structure is the best alternative available to Davis Petroleum," Mr. Davis said. "Upon completion of the re- capitalization process in just a few weeks, all creditors will be paid in full, we will have a strong balance sheet, and ample liquidity to complete development of our Gulf of Mexico projects and continue growth in our onshore regions of operation." He noted that as a part of the agreement, ECP has committed to infuse additional capital into the Company going forward. Mr. Davis emphasized that Davis's employees, suppliers, drilling partners, and customers should not notice any difference in operation during the re-capitalization process, which is expected to be completed in just a few weeks. The Company filed its voluntary Chapter 11 petitions and plan of reorganization in the U.S. Bankruptcy Court for the Southern District of Texas, Corpus Christi Division. About Evercore Evercore Partners Inc. -- http://www.evercore.com/-- is a boutique financial advisory and investment firm. Evercore's advisory business provides its corporate clients with counsel on mergers, acquisitions, divestitures, restructurings and other strategic transactions. Evercore's investing business manages private equity and venture capital for institutional investors. Evercore's private equity investing arm, Evercore Capital Partners, has invested in a number of energy companies, including Michigan Electric Transmission Company, Continental Energy Services, and Energy Partners. Evercore recently extended its investing business to create Evercore Asset Management, an institutional asset management firm. Evercore serves a diverse set of clients around the world from its offices in New York, Los Angeles and San Francisco. About Red Mountain Headquartered in Los Angeles, Red Mountain Capital Partners is a private investment firm dedicated to investing in small capitalization public and private companies with a private equity approach. Red Mountain acquires strategic or control stakes in public companies and participates in negotiated private equity transactions on a selected basis About Sankaty Advisors Sankaty Advisors, LLC, the credit affiliate of Bain Capital, LLC, is one of the nation's leading private managers of high yield debt obligations. With approximately $12 billion in committed capital (as of December 30, 2005), Sankaty invests in a wide variety of securities, including leveraged loans, high-yield bonds, stressed debt, distressed debt, mezzanine debt, structured products and equity investments. Through a variety of funds, Sankaty Advisors has the ability to invest in a company's capital structure at every level from secured debt to equity, and can also provide capital to growing companies with unique financing needs. About Davis Petroleum Davis Petroleum Corp. -- http://www.davispetroleumcorp.com-- is an oil and gas E&P company operating in the onshore and intermediate-deep water Gulf of Mexico, Texas, Louisiana, Oklahoma and the Rocky Mountain region. Davis utilizes teams of geologists, geophysicists, landmen, and engineers to develop, drill and discover new oil and gas fields. Davis typically partners with other oil and gas companies, and retains a working interest. This business model allows Davis to focus on its core strength of prospect generation. The company is headquartered in Houston, with offices in Denver. Davis Petroleum Corp. and two affiliates filed for chapter 11 protection on Mar. 7, 2006 (Bankr. S.D. Tex. Case No. 06-20152). Rhett G. Campbell, Esq., Diana Merrill Woodman, Esq., Matthew Ray Reed, Esq., at Thompson & Knight LLP and Nathaniel Peter Holzer, Esq., at Jordan Hyden Womble Culbreth & Holzer PC represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million to $100 million. DAVIS PETROLEUM: Case Summary & 45 Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: Davis Petroleum Corp. 1360 Post Oak Boulevard, Suite 2400 Houston, Texas 77056 Bankruptcy Case No.: 06-20152 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Davis Offshore, L.P. 06-20153 Davis Petroleum Pipeline LLC 06-20154 Type of Business: The Debtors is an oil and gas exploration and production company. See http://www.davispetroleumcorp.com/ Chapter 11 Petition Date: March 7, 2006 Court: Southern District of Texas (Corpus Christi) Judge: Richard S. Schmidt Debtors' Counsel: Rhett G. Campbell, Esq. Diana Merrill Woodman, Esq. Matthew Ray Reed, Esq. Thompson & Knight LLP 333 Clay Street, Suite 3300 Houston, Texas 77002 Tel: (713) 654-8111 Fax: (713) 654-1871 - and - Nathaniel Peter Holzer, Esq. Jordan Hyden Womble Culbreth & Holzer PC 500 North Shoreline Drive, Suite 900 Corpus Christi, Texas 78471 Tel: (361) 884-5678 Fax: (361) 888-5555 Estimated Assets Estimated Debts ---------------- --------------- Davis Petroleum Corp. $50 Million to $50 Million to $100 Million $100 Million Davis Offshore, L.P. $50 Million to $50 Million to $100 Million $100 Million Davis Petroleum Pipeline LLC $1 Million to $50 Million to $10 Million $100 Million A. Davis Petroleum Corp.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Grey Wolf Drilling Co., LP Trade Debt $2,526,129 P.O. Box 4346 Deparment 504 Houston, TX 77210 The Offshore Drilling Co. Trade Debt $2,114,506 2000 West Sam Houston Parkway, Suite 800 Houston, TX 77042 Triad Pipe & Steel Co. Trade Debt $870,966 9225 Katy Freeway, Suite 400 Houston, TX 77024 Paterson UTI Drilling Co. Trade Debt $794,931 LP, LLP P.O. Box 1416 Snyder, TX 79550 Chesapeake Operating Inc. Trade Debt $722,078 P.O. Box 18496 Oklahoma City, OK 73154 Bourland & Leverich Supply Trade Debt $666,982 Co., Ltd. P.O. Box 778 Pampa, TX 79066 Baker Hughes - Hughes Trade Debt $561,557 Christensen Co. 800 North Shoreline Suite 700, North Tower Corpus Christi, TX 78401 The Offshore Drilling Co. $537,089 P.O. Box 650002 Department 8025 Dallas, TX 75265 Chesapeake Operating Inc. $445,269 P.O. Box 960165 Oklahoma City, OK 73196 National Onshore LP $433,478 P.O. Box 5391 Bryan, TX 778055391 Pipeco Services LP $417,333 P.O. Box 974644 Dallas, TX 753974644 BJ Services Company Trade Debt $405,308 5500 Northwest Central Drive Houston, TX 77092 Pathfinder Energy Services Trade Debt $384,545 Inc. P.O. Box 200641 Dallas, TX 753200641 Kiva Construction & Trade Debt $350,543 Engineering, Inc. P.O. Box 40 Anahuac, TX 77514 O'Melveny & Myers LLP $308,852 700 Louisiana Street Houston, TX 77002 Range Resources Corporation Trade Debt $307,651 P.O. Box 970463 Dallas, TX 75397 AICCO, Inc. Financing of $305,460 P.O. Box 200455 Insurance Premium Dallas, TX 753200455 J W Operating Company Trade Debt $251,615 P.O. Box 970500 Dallas, TX 753970500 Jeff Compton, Trustee Reliant Exploration, $250,000 Reliant Creditors Trust Opus 909 Fannin Street, Suite 3150 Houston, TX 77010 Opus Oil & Gas LP $250,000 16800 Imperial Valley Drive, Suite 380 Houston, TX 77060 B. Davis Offshore, L.P.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sankaty Advisors LLC $44,261,024 111 Huntington Avenue Boston, MA 02199 Bank of America $20,000,000 MA5-100-06-01 100 Federal Street Boston, MA 02110 Bank of America $9,300,206 MA-100-06-01 100 Federal Boston, MA 02110 Pioneer Natural Resources Trade Debt $7,955,858 USA P.O. Box 840836 Dallas, TX 75284 Noble Energy Inc. Trade Debt $3,485,420 PO Box 910083 Dallas, TX 753910083 LLOG Exploration Offshore Trade Debt $3,027,289 433 Metairie Road, Suite 600 Metairie, LA 70005 Plains Exploration Trade Debt $449,669 700 Milam, Suite 3100 Houston, TX 770022815 CGG Americas Trade Debt $65,000 TGS-Nopec Geophysical Co. Trade Debt $60,800 LP Generation IX Technologies $2,947 Star Office $451 IHS Energy Group $431 Brian C. Gillespie Employee Unknown Edward C. Stengel Employee Unknown John A Sansbury Jr. Employee Unknown John K. Bellis Employee Unknown Mark H. Gillespie Employee Unknown Michael H. Clark Employee Unknown Minerals Management Service Unknown Minerals Management Service Unknown C. Davis Petroleum Pipeline LLC's 5 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sankaty Advisors LLC $44,261,024 111 Huntington Avenue Boston, MA 02199 Bank of America $20,000,000 MA5-100-06-01 100 Federal Street Boston, MA 02110 Bank of America $9,300,206 MA5-100-06-01 100 Federal Street Boston, MA 02110 John P. Mathis Employee Unknown 2111 Rycroft Drive Spring, TX 77386 Port of Houston Authority Lease 1 acre out of Unknown P.O. Box 973884 corridor 60-Bayport Dallas, TX 753973884 DIGITAL LIGHTWAVE: Owes Optel Capital $48.7 Million at March 1 -------------------------------------------------------------- Digital Lightwave, Inc., borrowed another $200,000 from Optel Capital, LLC, on March 1, 2006, to fund its working capital requirements. Optel is controlled by Digital Lightwave's largest stockholder and current chairman of the board of directors, Dr. Bryan J. Zwan. The loan bears interest at 10.0% per annum, and is secured by a security interest in substantially all of the Company's assets. Optel can demand payment after March 31, 2006. As of March 1, 2006, the Company owed Optel around $48.7 million in principal plus approximately $6.9 million of accrued interest, all of which is secured by a first priority security interest in substantially all of the Company's assets and accrues 10% annual interest. The Company continues to have insufficient short-term resources for the payment of its current liabilities. As of March 1, 2006, the Company has been unable to secure any financing agreement or to restructure its financial obligations with Optel. The company has warned many times that if it is not able to obtain financing, it expects that it will not have sufficient cash to fund its working capital and capital expenditure requirements for the near term and will not have the resources required for the payment of its current liabilities when they become due. The Company's ability to meet cash requirements and maintain sufficient liquidity over the next 12 months is dependent on the Company's ability to obtain additional financing from funding sources, which may include, but may not be limited to Optel. Optel currently is, and continues to be, the principal source of financing for the Company. The Company has not identified any funding source other than Optel that would be prepared to provide current or future financing to the Company. The Company is continuing its discussions with Optel to restructure its debt by extending the maturity date, and to arrange for additional short-term working capital. If the Company does not reach an agreement to restructure the debt, and obtain additional financing from Optel, the Company will be unable to meet its obligations to Optel and other creditors, and in an attempt to collect payment, creditors including Optel, may seek legal remedies. Based in Clearwater, Florida, Digital Lightwave, Inc., provides the global communications networking industry with products, technology and services that enable the efficient development, deployment and management of high-performance networks. Digital Lightwave's customers -- companies that deploy networks, develop networking equipment, and manage networks -- rely on its offerings to optimize network performance and ensure service reliability. The Company designs, develops and markets a portfolio of portable and network-based products for installing, maintaining and monitoring fiber optic circuits and networks. Network operators and telecommunications service providers use fiber optics to provide increased network bandwidth to transmit voice and other non-voice traffic such as internet, data and multimedia video transmissions. The Company provides telecommunications service providers and equipment manufacturers with product capabilities to cost-effectively deploy and manage fiber optic networks. The Company's product lines include: Network Information Computers, Network Access Agents, Optical Test Systems, and Optical Wavelength Managers. The Company's wholly owned subsidiaries are Digital Lightwave (UK) Limited, Digital Lightwave Asia Pacific Pty, Ltd., and Digital Lightwave Latino Americana Ltda. At Sept. 30, 2005, Digital Lightwave's equity deficit widened to $44,696,000 from a $29,146,000 deficit at Dec. 31, 2004. DIVERSIFIED ASSET: Fitch Affirms $37MM Class B-1 Notes' B Rating ---------------------------------------------------------------- Fitch Ratings affirmed four classes of notes issued by Diversified Asset Securitization Holdings II, L.P. (DASH II). These rating actions are effective immediately: -- $47,257,081 class A-1 at 'AAA' -- $299,294,848 class A-1L at 'AAA' -- $50,000,000 class A-2L at 'BBB+' --$37,000,000 class B-1 at 'B' DASH II is a structured finance collateralized debt obligation managed by Western Asset Management Co. and originated by Asset Allocation & Management, LLC. Western became the substitute asset manager for AAMCO in November 2002. Fitch rates Western with a 'CAM2' ABS asset manager rating. DASH II was established on Sept. 13, 2000, to issue $496 million in notes and limited partnership interests. The transaction entered its amortization period on Sept. 15, 2005. The portfolio supporting the CDO comprises approximately: * 46% residential mortgage-backed securities; * 30% commercial mortgage-backed securities; * 19% commercial asset backed securities; * 1% consumer asset backed securities; * 2% collateralized debt obligations; and * 2% corporate securities. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the current ratings assigned to the class A-1, A- 1L, A-2L, and B-1 notes reflect the current risk to noteholders. Since the last rating action on Nov. 4, 2004, deal performance has improved overall. As of the Feb. 2, 2006 trustee report, the weighted average rating factor has decreased to 27 ('BBB-/BB+') from 28 ('BBB-/BB+'). The class A overcollateralization (OC) ratio increased to 114.9% from 111.7%, the class B OC ratio increased to 104.9% from 102.2%, and both tests are passing their required trigger levels. The amount of defaulted assets has remained unchanged at $25,079,000, or 5.73% of the portfolio. The rating of the classes A-1 and A-1L notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes A-2L and B-1 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. DJ ORTHOPEDICS: Moody's Puts Ba3 Rating on $410 Million Loans ------------------------------------------------------------- Moody's Investors Service assigned Ba3 corporate family rating to dj Orthopedics, LLC, and a Ba3 senior secured rating to the company's $410 million credit facility. The company will use the proceeds from the credit facility to: -- finance the company's recently announced acquisition of Aircast, Inc., from Tailwind Capital for $292 million, -- retire existing debt of $55 million, and -- for various fees and expenses associated with the said transaction. Moody's also assigned an SGL-2 Speculative Grade Liquidity Rating to dj orthopedics. The ratings reflect dj Orthopedics' relatively small size, revenue diversification, improving operating margins, stable revenues, strong financial metrics, long product lifecycles that require nominal R&D expenditures, and attractive demographic trends for the company's targeted end user. The ratings also represent Moody's expectation of relatively low integration risk and the potential for significant acquisition-related synergies and rapid debt reduction over the ratings horizon. The ratings also consider the company's relatively small size and integration risk associated with such a large acquisition. Ratings assigned: * Corporate Family Rating -- Ba3 * $50 million senior secured revolver due 2012, Ba3 * $360 million senior secured Term Loan B due 2013, Ba3 * Speculative grade liquidity rating -- SGL-2 The ratings outlook is stable. The ratings are subject to review of final documentation. Moody's will withdraw all ratings for Aircast subsequent to the closing of the acquisition and the repayment of Aircast's existing senior secured bank debt. Key ratings drivers, or factors, for medical device companies include: 1) size and scale of revenues; 2) profitability and diversity of product portfolio; 3) financial strength relative to debt burden; and 4) conservatism of financial policies. The Ba3 corporate family rating reflects the following characteristics in accordance with the aforementioned factors: Factor 1 -- dj Orthopedics' relatively small size for a medical device company constrains the rating. We believe its small size could make it difficult to weather adverse market conditions and unanticipated events. The diversification of the company's revenues by product mix and by geography after the Aircast acquisition partially offset its small size. Additionally, dj Orthopedics' size belies the company's strong position in many of its markets, which should improve with the Aircast acquisition. We recognize that dj Orthopedics' enjoys substantial brand recognition among its customer base and will have market leading positions in rigid bracing and soft goods and strong positions in the pain management and bone regeneration markets after the combination. Factor 2 -- Moody's expects that the Aircast acquisition will result in material operating margin improvement of at least 5% over the next two years. Improvements stem from the integration of the slightly higher margin Aircast business, and from the synergies that we expect the Aircast transaction to generate, both in terms of enhanced revenue opportunities and reduced manufacturing and overhead costs. Moody's anticipates that the combined company will generate significant merger synergies because of the similarities between the two businesses' product lines, the ability to consolidate overhead, and the opportunity to rationalize manufacturing by shifting production from Aircast's manufacturing facilities in New Jersey to dj Orthopedics' facilities in California and Mexico. Moody's expects that such synergies will materially improve operating margins without requiring a significant cash outlay to implement, most of which will consist of cash severance costs and cash expenses associated with the moving of production lines. Moody's believes that total synergies over the next two years could be in excess of $20 million. Moody's also expects that the company will generate solid free cash flow relative to its debt burden while concurrently maintaining adequate R&D spend and capital investment in excess of depreciation. The company's low R&D relative to its revenues reflects long product lifecycles and the innately lower risk associated with a business that requires less frequent product line updates in order to maintain its competitive position. Factor 3 -- Moody's expects that dj Orthopedics will maintain strong interest coverage in excess of 3.5 times over the next several years. We expect interest coverage to strengthen over time as the company uses excess cash to mandatorily pay down term debt. The rating also reflects Moody's belief that dj Orthopedics will actively manage down debt levels such that retained cash flow-to-debt and free cash flow-to-debt are roughly 20% and 15%, respectively, by the end of 2007. Factor 4 -- Moody's believes that, subsequent to the closing of the Aircast transaction, the company will maintain prudent financial policies. The ratings anticipate debt- to-EBITDA of roughly 2 times by the end of 2007 coupled with an increasingly conservative capital structure. Moody's also expects that the company will not return capital to shareholders, beyond that necessary to offset dilution from the exercise of options under the company's stock compensation plans. Other positive factors reflected in the ratings include the company's stable revenues, its strong position in its niche markets, which is amplified by the Aircast acquisition, favorable demographic trends. Constraining the ratings are Moody's concerns about the company's ability to sustain growth in light of the competitive environment, and integration risk associated with Aircast. Dj Orthopedics faces ongoing pressure from cost containment measures by Medicare, group-purchasing organizations, and other third party payers, which represents another constraint on the ratings. Moody's notes, however, that less than 5% of the company's pro forma sales depend on Medicare reimbursement. Dj Orthopedics competes against a number of firms, some of which are larger and better capitalized. In the soft goods market, which comprised over 40% of the company's pre-Aircast revenues, competitors include Aircast, Biomet, DeRoyal Industries, Ossur and Zimmer Holdings. The stable outlook reflects the inherent stability of the company's product portfolio, lack of dependency on any one customer, or several customers, for a significant percentage of its revenue stream, stable cash flow, low capital intensity -- with respect to both R&D spend as well as capital investments -- and Moody's expectation that material acquisition synergies are realizable. If competitive pressures lead to materially less revenue growth than expected or compress margins, the outlook could change to negative. Likewise, if improved top line growth and operating efficiencies improve cash flow beyond our expectations, such that it leads to accelerated debt reduction, the outlook could improve. Moody's notes that the company's size, as measured by net sales, impedes but does not preclude achieving significantly higher rating levels. Moody's assigned a first time Speculative Grade Liquidity rating of SGL-2 to dj Orthopedics. Refer to dj Orthopedics' speculative grade liquidity rating assessment on http://www.moodys.com/for further details. The Ba3 rating assigned to the proposed senior secured credit facility reflects its current position as the only debt class within dj Orthopedics' capital structure. Therefore, Moody's does not notch the credit facility rating relative to the Ba3 corporate family rating, even after adjusting total debt by capitalizing the company's operating leases. Moody's believes that dj Orthopedics' enterprise value would provide full coverage of existing debt under a distress scenario. All equity and assets of dj Orthopedics and its domestic subsidiaries secure the credit facilities. The facilities have upstream guarantees from the company's domestic subsidiaries and a downstream guarantee from dj Orthopedics, Inc., the company's parent. Borrowers under the $50 million revolver are the company, and foreign subsidiaries. The credit agreement will limit total revolver borrowings by foreign subsidiaries to $25 million in aggregate. Dj Orthopedics, based in Vista, California, specializes in the design, manufacture and marketing of products that rehabilitate soft tissue and bone injuries, protect against injury, and treat osteoarthritis of the knee. Revenues in 2005, pro forma for its acquisition of Aircast, were approximately $390 million. DJ ORTHOPEDICS: S&P Rates Proposed $410 Million Facility at BB- --------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'BB-' bank loan rating to dj Orthopedics Inc.'s proposed $410 million credit facility. (The 'BB-' rating is at the same level as the corporate credit rating on the company.) A recovery rating of '2' was also assigned to the loan, indicating the expectation for substantial (80%-100%) recovery of principal in the event of a payment default. The credit facility will be used to: * fund the acquisition of orthopedic product and vascular system manufacturer Aircast Inc.; and * to refinance existing debt. dj Orthopedics has the capacity to increase debt leverage at its current rating, and the acquisition expands its offering of premium braces and provides access to small, but high-growth, markets. The existing 'BB-' corporate credit rating on the company was affirmed. The rating outlook is stable. "The ratings on dj Orthopedics reflect the company's growing, but relatively narrow, position in orthopedic devices and competition from well-entrenched larger companies in its bone growth stimulation (BGS) business line," said Standard & Poor's credit analyst Jordan Grant. Vista, California-based dj's established position in the niche orthopedics device markets is based on longstanding customer relationships and a respectable record of new product development and enhancements in its DonJoy LLC franchise. In 2003, the company added Regentek, its BGS platform, which diversified its revenue stream. If acquired, Aircast will add the premium ankle brace brand to dj's existing premium brand of knee braces, and will also offer entry into the small, but high-growth potential, deep vein thrombosis prophylaxis market. DOMINICK PEBURN: Case Summary & 19 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Dominick T. Peburn 142 Stilson Hill Road New Milford, Connecticut 06776 Bankruptcy Case No.: 06-30265 Chapter 11 Petition Date: March 8, 2006 Court: District of Connecticut (New Haven) Judge: Lorraine Murphy Weil Debtor's Counsel: Peter L. Ressler, Esq. Groob Ressler & Mulqueen, P.C. 123 York Street, Suite 1B New Haven, Connecticut 06511-0001 Tel: (203) 777-5741 Fax: (203) 777-4206 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 19 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Peter Joseph $880,000 67 Mason Street Greenwich, CT 06831 William Granata $385,000 5 Heritage Drive New Milford, CT 06776 Anthony Fraulo $250,000 1234 Summer Street Stamford, CT 06901 Lyle Bross $157,000 Yongsuk Soe $130,000 Louise Bromberger $78,750 Eastern Equipment $75,000 Samuel Bromberger $63,000 Elmo Aiudi $43,000 Ambrose Healey $40,000 Susan Cosbett $33,000 David Hubband $26,000 Nunzeo Carrozza $23,000 Goldman, Gruder & Woods, LLC $16,000 Henry Bromberger $15,570 LRC Engineering & Survey $10,000 Lou Shepiro $5,000 HZH Asso. LLC $3,700 Lywood Gee $375 DRAGWAY MANAGEMENT: Case Summary & 2 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Dragway Management, Ltd. 702 Prince George Court Southlake, Texas 76092 Bankruptcy Case No.: 06-40302 Chapter 11 Petition Date: March 6, 2006 Court: Eastern District of Texas (Sherman) Judge: Brenda T. Rhoades Debtor's Counsel: Richard W. Ward, Esq. Law Offices of Richard W. Ward 2527 Fairmount Street Dallas, Texas 75201 Tel: (214) 220-2402 Fax: (214) 871-2682 Estimated Assets: $1 Million to $10 Million Estimated Debts: $100,000 to $1 Million Debtor's 2 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ APAC Texas, Inc. Services $37,129 c/o William P. Venegoni Law Office of James Stanton 3811 Turtle Creek Boulevard Suite 770 Dallas, TX 75219 Xelerate Group, LLC Services Unknown Michael S. Britton Shields Britton & Fraser, P.C. 5401 Village Creek Drive Plano, Texas 75093 ENER1 INC: September 30 Equity Deficit Widens to $90.67 Million --------------------------------------------------------------- Ener1, Inc., fka as Inprimis Inc., delivered an amended quarterly report on Form 10-QSB/A for the quarter ending Sept. 30, 2005, to the Securities and Exchange Commission on March 3, 2006. The Company filed the revised quarterly report to restate the financial statements included in the September 2005 10-QSB for the three and nine months ended Sept. 30, 2005, and 2004 in order to reflect additional gains and losses related to the classification of and accounting for (1) options to purchase Ener1's common stock issued to a business partner in July 2003 and (2) warrants to purchase Ener1's common stock issued to Ener1's majority stockholder in November 2003. For the three months ended Sept. 30, 2005, Ener1, Inc.'s net loss increased to $36,031,000 from a net loss of $2,163,000 for the same period in 2004. For the three months ended Sept. 30, 2005, Ener1, Inc. reported total revenues of $25,000 and $60,000 for the nine months ended Sept. 30, 2005 Ener1, Inc.'s balance sheet at Sept. 30, 2005, showed $13,957,000 in total assets and $104,634,000 in total liabilities. Additionally, the Company had a $166,501,000 accumulated deficit as of Sept. 30, 2005. Going Concern Doubt Ener1 has experienced net operating losses since 1997 and negative cash flows from operations since 1999 and had a $167 million accumulated deficit as of Sept. 30, 2005. "It is likely that Ener1's operations will continue to incur negative cash flows through Sept. 30, 2006, and additional financing will be required to fund its planned operations through that time," management said. "If additional financing is not obtained, that condition, among other things will give rise to substantial doubt about Ener1's ability to continue as a going concern for a reasonable period of time," management added. A full-text copy of Ener1, Inc.'s Form 10-QSB/A report is available for free at http://ResearchArchives.com/t/s?63f Ener1, Inc. (OTCBB: ENEI) -- http://www.ener1.com/-- is an alternative energy technology company. The Company's interests include: 80.5% of EnerDel -- http://www.enerdel.com/-- a lithium battery company in which Delphi Corp. owns 19.5%; 49% of Enerstruct, a Japanese lithium battery technology company in which Ener1's strategic investor ITOCHU owns 51%; wholly owned subsidiary EnerFuel, a fuel cell testing and component company -- http://www.enerfuel.com/-- and wholly owned subsidiary NanoEner -- http://www.nanoener.com/-- which develops nanotechnology- based materials and manufacturing processes for batteries and other applications. At Sept. 30, 2005, Ener1, Inc.'s stockholders' deficit widened to $90,677,000 from a $29,025,000 deficit at Sept. 30, 2004. ENTERPRISE PRODUCTS: S&P Affirms Corporate Credit Rating at BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit rating on midstream energy company Enterprise Products Partners L.P. following its annual review of the company. The outlook is stable. As of Dec. 31, 2005, the Houston, Texas- based company had $4.8 billion of debt outstanding. "We view many of Enterprise's new projects and current business fundamentals favorably," said Standard & Poor's credit analyst Aneesh Prabhu. "Still, uncertainty about the company's growth strategy, which currently appears insatiable, and a likely decline in distribution coverage as a result of significant capital tied in organic projects, mute upwards rating momentum," said Mr. Prabhu. In 2005, Enterprise used $615 million of equity proceeds to fund ongoing capital-expenditure programs. However, the company's debt to capital is expected to be higher at 46% because its nearly $1 billion of organic projects in 2005 were partly debt funded and will not generate EBITDA until around 2007. FEDERAL-MOGUL: Shuts Down Two Plants in Italy & United Kingdom -------------------------------------------------------------- Federal-Mogul Corporation closed two facilities in Alpignano, Italy, and Upton, United Kingdom, in December 2005 as part of its global restructuring plan, the company disclosed in a Form 10-K filing with the United States Securities and Exchange Commission. Federal-Mogul continues to undertake various restructuring activities to streamline its operations, consolidate and take advantage of available capacity and resources, and ultimately achieve cost reductions. These restructuring activities include efforts to integrate and rationalize the Company's businesses and to relocate manufacturing operations to best cost markets. The global restructuring plan will affect approximately 25 facilities and reduce the Company's workforce by approximately 10% by the end of 2008. The Company continues to identify and plan for the individual components of the restructuring plan, and will announce those components as plans are finalized. Federal-Mogul recorded $18,500,000 in restructuring charges associated with the restructuring plan. It expects to incur additional restructuring charges up to $130,000,000 through 2008. The Company expects to achieve annual cost savings of $120,000,000 subsequent to completion of the restructuring program. Federal-Mogul recorded approximately $4,000,000 in severance charges in 2005 relating to the closure and relocation of its piston operations in Alpignano, Italy, to other existing European facilities with available capacity. The charges recorded relating to this program remain outstanding as of December 31, 2005. Expected savings associated with the project are estimated to be approximately $6,000,000 per year. The ignition facility in Upton, United Kingdom, was also closed and relocated to other existing manufacturing facilities with available capacity or with lower manufacturing costs. Federal- Mogul recorded approximately $9,000,000 of severance charges that remain outstanding as of December 31, 2005. Expected savings associated with this activity are estimated to be approximately $9,000,000 annually. As of December 31, 2005, Federal-Mogul had approximately 41,700 full-time employees, of which approximately 15,900 were employed in the United States. Various unions represent approximately 43% of Federal-Mogul's domestic hourly employees and approximately 60% of the international hourly employees. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some US$6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed US$10.15 billion in assets and US$8.86 billion in liabilities. At Dec. 31, 2004, Federal-Mogul's balance sheet showed a US$1.925 billion stockholders' deficit. At Nov. 30, 2005, Federal-Mogul's balance sheet showed a US$1,450.4 billion stockholders' deficit, compared to a US$1.926 billion deficit at Dec. 31, 2004. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. (Federal-Mogul Bankruptcy News, Issue No. 104; Bankruptcy Creditors' Service, Inc., 215/945-7000) FFMLT TRUST: Moody's Puts Low-B Ratings on Two Class Certificates ----------------------------------------------------------------- Moody's Investors Service assigned Aaa rating to the senior certificates issued by FFMLT Trust 2006-FF3, and ratings ranging from Aa1 to Ba2 to the subordinate certificates in the deal. The securitization is backed by First Franklin Financial Corporation originated, adjustable-rate and fixed-rate, subprime mortgage loans acquired by Goldman Sachs Mortgage Company. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, excess spread, overcollateralization, and an interest rate swap agreement provided by Goldman Sachs Mitsui Marine Derivative Products LP. Moody's expects collateral losses to range from 4.10% to 4.60%. National City Home Loan Services Inc will service the loans. Moody's has assigned National City Home Loan Services Inc its servicer quality rating as a primary servicer of first-lien subprime loans. The complete rating actions are: FFMLT Trust, Mortgage Pass-Through Certificates, Series 2006-FF3 * Class A-1, Assigned Aaa * Class A-2A, Assigned Aaa * Class A-2B, Assigned Aaa * Class A-2C, Assigned Aaa * Class M-1, Assigned Aa1 * Class M-2, Assigned Aa2 * Class M-3, Assigned Aa3 * Class M-4, Assigned A1 * Class M-5, Assigned A2 * Class M-6, Assigned A3 * Class M-7, Assigned Baa1 * Class M-8, Assigned Baa2 * Class M-9, Assigned Baa3 * Class B-1, Assigned Ba1 * Class B-2, Assigned Ba2 FIDELITY NATIONAL: S&P Upgrades Corporate Credit Rating to BB+ -------------------------------------------------------------- Standard & Poor's Ratings Services raised the corporate credit and senior secured ratings of Jacksonville, Florida-based Fidelity National Information Services Inc. (FIS) to 'BB+' from 'BB', and removed it from CreditWatch where it was placed on Sept. 15, 2005. At the same time, Standard & Poor's lowered its rating on Alpharetta, Georgia-based Certegy Inc.'s $200 million of senior unsecured notes to 'BB+' from 'BBB' and removed it from CreditWatch where it was placed on Sept. 15, 2005. The outlook is positive. "The rating actions follow the completed merger of FIS, a majority owned subsidiary of Fidelity National Financial Inc. (FNF, BBB- /Watch Pos/--), with Certegy, which has combined operations to form a single publicly traded entity," said Standard & Poor's credit analyst Philip Schrank. Under the terms of the merger agreement, FIS and Certegy combined in a tax-free, stock-for-stock merger. After the issuance of Certegy stock to FIS shareholders, current Certegy shareholders will own approximately 32.5% and FIS shareholders will own approximately 67.5% of the combined entity, with FNF directly owning approximately 50.3%. Additionally, Certegy has paid a $3.75 per share special cash dividend to its shareholders prior to the closing of the transaction. The name of the combined company will become Fidelity National Information Services Inc. The ratings reflect the new FIS' stable recurring revenue base, good cash-flow generation, and the opportunity to realize both product and cost synergies over time. The combination provides risk management solutions and outsourcing services to: * financial institutions, * retailers, * mortgage lenders, and * real estate professionals. While recent operating performance has been good, with operating margins in the 20% area, the company has grown rapidly through acquisitions, and has yet to demonstrate a sustained track record of performance. Growth opportunities include the cross-selling of an integrated suite of products and services, and international markets that are expected to grow more rapidly than the U.S. markets. Competition in niche markets is fragmented, and technology, process, and delivery are key differentiators. Barriers to entry include: * the investment in and development of risk and transaction management systems; * contractual relationships; and * the compilation of historical data. FINANCIAL WORLD: Customers Have Until August 17 to File Claims -------------------------------------------------------------- On Jan. 17, 2006, the Honorable Carlos Murguia of the U.S. District Court for the District of Kansas granted the Securities Investor Protection Corporation's request for a Protective Decree setting deadlines for customers of Financial World Corporation to file their claims pursuant to the Securities Investor Protection Act of 1970. The SIPC was appointed as the Trustee for the liquidation of the business of the Debtor; the Trustee is represented by and obtains legal advice from: John Cruciani, Esq. Blackwell Sanders Peper Martin, LLP 4801 Main Street, Suite 1000 Kansas City, MO 64112 Customers of the Debtor who wish to avail of the protection afforded to them under SIPA must file their claims with the Trustee by Apr. 18, 2006. Claims filed by customers after Apr. 18 but before Aug. 17, 2006, "may result in less protection for the customer," a Court-approved notice of the claim filing deadline says, without providing additional information. Claims received after Aug. 17, 2006, won't be allowed. All claims must be filed with the Trustee at: Securities Investor Protection Corporation 805 15th Street, Northwest, Suite 800 Washington, DC 20005 The Court also ordered that as a result of the issuance of the Protective Decree, certain acts and proceedings against the Debtor and its property are stayed as provided in Section 362 of the Bankruptcy Code. Meeting of Creditors The first meeting of creditors will be held at 9:00 a.m., on March 23, 2006, at the U.S. Courthouse, 500 State Avenue, Room 173, in Kansas City, Kansas. At that meeting, customers and other creditors may attend, examine the Debtor, and transact such other business as may properly come before the meeting. Anyone intending to attend the meeting, must advise the Trustee at least two business days prior to the meeting by calling the Trustee's office at (202) 371-8300. This will ensure that you are registered with building security and will be able to access the building on the date of the meeting. The Securities Investor Protection Corporation initiated liquidation proceedings against Financial World Corporation on January 17, 2006, by filing an adversary proceeding (Bankr. D. Kan. Adv. Pro. No. 06-06030). The Honorable Carlos Murguia of the United States District Court for the District of Kansas, entered an Order granting the SIPC's request for a Protective Decree adjudicating the customers of Financial World Corporation to be in need of the protection afforded by the Securities Investor Protection Act of 1970 (15 U.S.C. Sec. 78aaa, et seq.). The SIPC was appointed Trustee for the liquidation of the business of the Debtor, and John Cruciani, Esq., at Blackwell Sanders Peper Martin, LLP, was appointed as counsel to the Trustee. FIRST FRANKLIN: S&P Affirms Class B-3 Certificates' BB+ Rating -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 11 classes of asset-backed certificates from First Franklin Mortgage Loan Trust 2004-FF3. The affirmed ratings are based on credit support percentages that are sufficient to maintain the current ratings. This transaction benefits from credit enhancement provided by: * overcollateralization, * excess spread, and * subordination. As of the January 2006 remittance date, total delinquencies were 7.21%. Additionally, cumulative losses, as a percentage of the original trust balance, were 0.13%. The outstanding pool balance, as a percentage of original size, was 53.65%. The collateral for this transaction consists primarily of fixed- and adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties. Ratings affirmed: First Franklin Mortgage Loan Trust Series Class Rating ------ ----- ------ 2004-FF3 A-1,A-2A,A-2B,A-2C AAA 2004-FF3 M-1 AA+ 2004-FF3 M-2 A+ 2004-FF3 M-3 A 2004-FF3 M-4 A- 2004-FF3 B-1 BBB+ 2004-FF3 B-2 BBB 2004-FF3 B-3 BB+ FLINTKOTE CO: Executive Retention & Incentive Program Approved -------------------------------------------------------------- The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware authorize Flintkote Company and Flintkote Mines Limited to implement: -- an Executive Retention and Incentive Program, and -- some amendments to the previously Court-approved Executive Employment Agreements. The three members of Senior Management are: -- David J. Gordon, Chairman, President and Chief Executive Officer, -- Eric A. Bower, Executive Vice President and Chief Financial Officer, and -- John H. Bay, Vice President and Insurance Counsel. Under the program, each executive will receive: -- $115,900 as a lump sum payment for the period May 1, 2005, through Oct. 31, 2005; -- $173,850 quarterly payments starting on Nov. 1, 2005, until plan confirmation; -- 1% of cumulative insurance value realized during the Insurance Recovery Period in excess of $50 million Insurance Recovery Period starts from Nov. 1, 2005, through the earlier of: -- plan confirmation, or -- Jan. 1, 2008. The Debtors agree to reimburse Mr. Gordon's temporary lodging up to $4,500 per month. Mr. Gordon resided in New Jersey but takes up residence right now in San Francisco, California, because that's where the Debtors are headquartered. The Debtors wanted to implement the program because: -- the three executives are not currently receiving any compensation other than their annual base salary, and this is contrary to the Debtors' prepetition practices; -- the program provides incentive to management to maximize the full value of the remaining insurance assets prior to plan confirmation; -- the program helps to ensure that Senior Management will remain with the Debtors through plan confirmation; and -- the total cost of the program is less than the total cost of the previously Court-approved Key Employee Retention Program. A full-text copy of the term sheet outlining the Debtors' revised retention and incentive program is available at no charge at http://bankrupt.com/misc/FlintkoteCoKERP_TermSheet.pdf Headquartered in San Francisco, California, The Flintkote Company is engaged in the business of manufacturing, processing and distributing building materials. The Company and its affiliate filed for chapter 11 protection on April 30, 2004 (Bankr. Del. Case No. 04-11300). James E. O'Neill, Esq., Laura Davis Jones, Esq., and Sandra G. McLamb, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., represent the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of more than $100 million. The Court appointed James J. McMonagle as the Representative for Future Asbestos Claimants. FUTURE MEDIA: Wants Levene Neale as Bankruptcy Counsel ------------------------------------------------------ Future Media Productions, Inc., asks the U.S. Bankruptcy Court for the Central District of California, San Fernando Valley Division, for permission to retain Levene, Neale, Bender, Rankin & Brill, LLP as its bankruptcy counsel. Levene Neale will: a) advise the Debtor with regard to the requirements of the Bankruptcy Court, Bankruptcy Code, Bankruptcy Rules, and the Office of the U.S. Trustee as they pertain to the Debtor; b) advise the Debtor with regard to certain rights and remedies of the Debtors bankruptcy estate and the rights, claims and interests of its creditors; d) represent the Debtor in any proceeding or hearing in the Bankruptcy Court involving the Debtors' estate unless the Debtor is represented in the proceeding by other special counsel; e) conduct examination of witnesses, claimants or adverse parties and represent the Debtor in any adversary proceeding except to the extent that the adversary proceeding is in an area outside of the firm's experience and capabilities; f) assist the Debtor in the preparation of reports, applications, pleadings and orders; g) assist the Debtor in the negotiation, formulation, preparation and confirmation of a plan or plans of reorganization and the preparation and approval of a disclosure statement; and h) perform other necessary and appropriate services as requested by the Debtor. The hourly rate for Levene Neale's professionals are: Professional Hourly Rate ------------ ----------- David W. Levene, Esq. $565 Martin J. Brill, Esq. $565 David L. Neale, Esq. $495 Ron Bender, Esq. $495 Craig M. Rankin, Esq. $495 Anne E. Wells, Esq. $465 Daniel H. Reiss, , Esq. $465 Monica Y. Kim, Esq. $465 David B. Golubchik, Esq. $465 Beth Ann R. Young, Esq. $465 Jacqueline L. Rodriguez, Esq. $375 Juliet Y. Oh, Esq. $350 Ovsanna Takvoryan, Esq. $310 Todd M. Arnold, Esq. $295 Paraprofessionals $180 David I. Neale, Esq., leads the engagement and assures the Bankruptcy Court that he, his partners and his Firm are disinterested. Mr. Neale discloses that, in June 2005, the Debtor paid a $10,000 retainer to Levene Neale for services rendered in connection with its efforts to restructure its financial affairs. He adds that his firm received a $140,000 prepetition retainer in contemplation of the Debtors bankruptcy filing. The firm has used $33,575 of the retainer to pay for prepetition services, leaving $116,427 retainer balance. Based in Los Angeles, Levene, Neale, Bender, Rankin & Brill, LLP -- http://www.lnbrb.com/-- is a law firm that specializes exclusively in matters of bankruptcy, insolvency and business reorganization. Headquartered in Valencia, California, Future Media Productions, Inc. -- http://www.fmpi.com/-- provides CD and DVD replication and packaging services on the West Coast. The Company filed for chapter 11 protection on Feb. 14, 2006 (Bankr. C. D. Calif. Case No. 06-10170). David I. Neale, Esq. at Levene, Neale, Bender, Rankin & Brill, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $12,370,783 in total assets and $30,650,669 in total debts. GENERAL MOTORS: Japanese Bank Will Invest $1 Bil. For GMAC Stake ---------------------------------------------------------------- Norinchukin Bank, one of Japan's leading financial institutions, is planning to invest $1 billion to acquire a portion of General Motors Acceptance Corp., Reuters reports. The Japan Times says that Norinchukin intends to team-up with a consortium of buyers, led by Cerberus Capital Management LP to purchase a majority stake in GMAC, General Motors Corp.'s finance unit. General Motors is talking about selling a portion of GMAC to raise it's credit rating and obtain access to cheaper financing. Fitch Ratings downgraded General Motor's Issuer Default Rating to 'B' from 'B+' on March 3, 2006. Rating Watch Negative status incorporates the risks that the sale of a controlling interest in GMAC is not completed on a timely basis. GMAC's 'BB' rating remains on Rating Watch Evolving pending further developments on the proposed sale. General Motors has been disposing of non-core assets as part of a larger restructuring program. As reported in the Troubled Company Reporter on March 8, 2006, the U.S. automaker expects to raise approximately $2 billion from the sale of its stake in Suzuki Motor Corp. About The Norinchukin Bank The Norinchukin Bank -- http://www.nochubank.or.jp/-- is the central bank for Japan agricultural, forestry and fishery cooperative systems. Based on constant funds procurement from member cooperatives, the Bank carries out efficient and flexible asset management by investing in various financial products. The Bank has branches in the world's major financial centers, including New York, London and Singapore. About General Motors Corp. General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM today employs about 317,000 people around the world. It has manufacturing operations in 32 countries and its vehicles are sold in 200 countries. * * * As reported in the Troubled Company Reporter on March 3, 2006, Fitch Ratings downgraded GM's Issuer Default Rating to 'B' from 'B+'. Fitch has also assigned an 'RR4' Recovery Rating to GM's senior unsecured debt, indicating average recovery prospects (30-50%) for this class of creditors in the event of a bankruptcy filing. GMAC's 'BB' rating remains on Rating Watch Evolving by Fitch pending further developments in GM's intent to sell a controlling interest in GMAC. As reported in the Troubled Company Reporter on Feb. 22, 2006, Moody's Investors Service lowered the Corporate Family Rating and senior unsecured rating of General Motors Corporation to B2/Negative Outlook from B1/Review for Downgrade. GM's ratings were placed under review for possible downgrade on January 26th. GENERAL MOTORS: Fitch Affirms $4.1 Mil. Class N Certs.' D Rating ---------------------------------------------------------------- Fitch Ratings upgraded GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through certificates, series 2000-C2 as: -- $31 million class B to 'AAA' from 'AA' -- $28 million class C to 'AAA' from 'A' -- $10.6 million class D to 'AA+' from 'A-' -- $19.3 million class E to 'A' from 'BBB' -- $9.7 million class F to 'BBB+' from 'BBB-' In addition, Fitch affirmed these classes: -- $83.2 million class A-1 at 'AAA' -- $485.5 million class A-2 at 'AAA' -- Interest only classes X at 'AAA' -- $4.8 million class M remains at 'C' -- $4.1 million class N remains at 'D' Fitch does not rate classes G, H, J, K, L, and O certificates. The rating upgrades reflect the increased credit enhancement levels from loan payoffs, amortization and the defeasance of an additional 10 loans (9.8%) since Fitch's last rating action. As of the February 2006 distribution date, the pool's aggregate certificate balance has been reduced 25.9% to $634.3 million from $773.7 million at issuance. There are 116 mortgage loans remaining in the transaction. Currently, three loans (2.4%) are in special servicing. The largest loan in special servicing (1.2%) is secured by a 188,981 square-foot (sf) retail property in Meriden, Connecticut. The loan transferred to the special servicer when Ames, the property's anchor tenant, rejected its lease after filing for bankruptcy, significantly reducing occupancy to 47%. The special servicer and the borrower are currently in negotiations for a possible workout. Recent appraisal valuation indicates losses are likely upon the liquidation of this asset. The second largest loan in special servicing (0.6%) is secured by a 38,768 sf office property in Duluth, Georgia. The loan transferred to the special servicer due to monetary default. The special servicer approved a loan modification that was finalized in the end of 2005. The loan is expected to return to the master servicer and no losses are currently expected. GRUPO POSADAS: Fitch Affirms BB- Foreign & Local Currency Ratings ----------------------------------------------------------------- Fitch Ratings removed the senior unsecured foreign currency and local currency ratings of Grupo Posadas, S.A. de C.V. as well as the national scale rating, from Rating Watch Negative. The 'BB-' senior unsecured foreign currency and local currency ratings and the 'A(mex)' national scale rating have been affirmed. The Rating Outlook is Stable. On Dec. 1, 2005, the ratings were placed on Rating Watch Negative following the announcement that Posadas intended to buy Mexico's largest airline carrier, Grupo Mexicana de Aviacion S.A. de C.V. (Mexicana). The removal from Rating Watch Negative and affirmation of the ratings reflect Fitch's assessment that the acquisition by the company of a minority stake in Mexicana will not significantly alter its credit profile. Last December 2005, an investor group comprised of the company and several other Mexican private investors paid US$165.5 million for 95% of Mexicana's equity and the assumption of its debt and aircraft leases. The company's stake in Mexicana is 49.7%, for which it paid approximately US$82 million funded with a mix of: * cash, * secured debt, * a non-recourse loan guaranteed by shares of Mexicana, and * a capital contribution from a shareholder. The new debt in connection with the acquisition comprises US$15 million of secured debt, which is included in Posadas' balance sheet at Dec. 31, 2005, and a US$35 million loan from Ixe Banco S.A. which is secured with shares of Mexicana and is non-recourse to Posadas. The company believes its investment in Mexicana: * brings strategic advantages and synergies in: -- information, -- technology, -- commercialization, and -- marketing; and * strengthens their leadership in tourism. The ratings reflect the company's: * solid business position, * strong brand name, and * multiple hotel formats. Posadas' presence in all major urban and resort locations in Mexico, consistent product offering and quality brand image have resulted in occupancy levels above the industry average in Mexico. The company's use of multiple hotel formats allows them to target domestic and international business travelers as well as tourists. Posadas' operations are primarily located in Mexico, which limits diversification. In recent years, the company's business strategy has evolved toward managing and leasing as opposed to owning new hotel properties. This strategy has allowed Posadas to lower capital investments and related borrowing while maintaining room growth. The company faces a comfortable debt maturity schedule and has a track record of positive free cash flow generation. During 2005, revenues grew by 11% driven by an increase in the number of rooms and in the average-revenue-per-available-room of owned and managed hotels. Occupancy levels had been growing during the first nine months of 2005 but during the fourth quarter the effect of Hurricane Wilma on Cancun and Cozumel coastal hotels partially off-set this growth. The company reported strong EBITDA for ther year, which reached US$116 million compared to US$98 million in 2004. Last September 2005, Hurricane Wilma damaged a total of five Posadas Hotels located in the Yucatan peninsula (three owned, one managed and one leased). These hotels accounted for approximately 12% of all rooms operated by Posadas, 12% of revenues and 9% of EBITDA for the first nine months of 2005. The properties were insured against property damages and business interruption and to date, insurance payments have covered the majority of damages. Damages were repaired within a few months and only one of the five hotels remains to open. It is not known with certainty when will the area's infrastructure fully recover from the devastation. This could potentially affect Posadas' occupancy levels in 2006. At Dec. 31, 2005, total on-balance sheet debt reached US$370 million, the majority of which (70%) was dollar-denominated and the remainder was in pesos. The debt was comprised of: * US$225 million unsecured 8.75% notes due 2011; * US$52 million of secured debt with properties (including US$15 million of new debt related to Posadas' investment in Mexicana); * US$75 million of Peso-denominated bonds (Certificados Bursatiles); and * US$18 million of other debt. In addition the company had US$158 million of off-balance sheet debt related to hotel leases. In November 2005, the company closed a dual-currency credit facility due 2011 for US$50 million (up to US$20 million equivalent can be drawn in pesos). Proceeds from this facility will refinance upcoming maturities on its peso notes maturing in February and July 2006 for Ps.300mm and Ps.250mm respectively. At Dec. 31, 2005 the company had comfortable liquidity with a balance of cash and marketable securities of US$35 million. The ratio of total adjusted debt to EBITDAR reached 3.9x, an improvement from 4.1x in 2004. Adjusted interest coverage measured by the ratio of EBITDAR to financial expense plus rent expense, was 2.4x. The acquisition of a minority stake in Mexicana did not have a material effect on leverage and credit ratios. According to Mexican GAAP, the US$35 million secured non-recourse loan incurred in connection with the acquisition is treated off- balance sheet. The non-recourse loan is to be repaid with proceeds from a future public or private offering of Mexicana shares and the creditor bank bears any price risk. Adjusting for the US$35 million off-balance sheet liability, total adjusted debt/EBITDAR at the end of 2006 should remain approximately flat from 2005 as incremental debt is off-set by an expected increase in EBITDAR. Capital expenditures during 2005 reached US$25 million, an increase from US$18 million during 2004. The investment was related to maintenance, conversion of hotels to the Vacation Club format and corporate purposes. Over the next three years, the company plans to open seven new Fiesta Inn Hotels and two new Cesar Park Hotels. It will also launch a new hotel format, One, targeted to economy business travelers, the first one of which will open during the second half of 2006. These investments, budgeted at approximately US$305 million for the next three years, will require a cash flow outlay by Posadas of 5% or approximately US$15 million, since the majority of the new openings will be under management and lease agreements. Grupo Posadas is the largest hotel operator in Mexico with more than 30 years in business. The company operates 92 hotels and 17,268 rooms across: * Mexico (83% of total rooms), * United States (5%), * Brazil (11%), and * Argentina (1%). Approximately 72% of rooms are in urban locations, with the remaining 28% in coastal destinations. The company manages different hotel formats under a combination of owned, leased, and managed properties including: * Fiesta Americana and Fiesta Inn in Mexico, and * Caesar Park and Caesar Business in Argentina and Brazil. GSAMP TRUST: Moody's Puts Low-B Ratings on Two Class Certificates ----------------------------------------------------------------- Moody's Investors Service assigned Aaa rating to the senior notes issued by GSAMP Trust 2006-NC1, and ratings ranging from Aa1 to Ba2 to the subordinate notes in the deal. The securitization is backed by New Century Mortgage Corporation originated, adjustable-rate and fixed-rate, subprime mortgage loans acquired by Credit-Based Asset Servicing and Securitization LLC. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, excess spread, overcollateralization, and an interest-rate swap agreement provided by Barclays Bank PLC. Moody's expects collateral losses to range from 3.7% to 4.20%. Litton Loan Servicing LP will service the loans. Moody's has assigned Litton Loan Servicing LP its top servicer quality rating SQ1 as a primary servicer of subprime first-lien loans. The complete rating actions are: GSAMP Trust, Mortgage Pass-Through Certificates, Series 2006-NC1 * Class A-1, Assigned Aaa * Class A-2, Assigned Aaa * Class A-3, Assigned Aaa * Class M-1, Assigned Aa1 * Class M-2, Assigned Aa2 * Class M-3, Assigned Aa3 * Class M-4, Assigned A1 * Class M-5, Assigned A2 * Class M-6, Assigned A3 * Class B-1, Assigned Baa1 * Class B-2, Assigned Baa2 * Class B-3, Assigned Baa3 * Class B-4, Assigned Ba1 * Class B-5, Assigned Ba2 HERCULES INC: Offers to Buy Back $118 Mil. of 11.125% Senior Notes ------------------------------------------------------------------ Hercules Incorporated (NYSE:HPC) is offering to purchase for cash any and all of its outstanding $118,968,000 in aggregate principal amount 11.125% Senior Notes due 2007 (CUSIP Nos. 427056AY2 and 427056AW6) on the terms and subject to the conditions set forth in its Offer to Purchase and Consent Solicitation Statement dated March 8, 2006. The Company also is soliciting consents to certain proposed amendments to the indenture governing the Notes. A portion of the funds required by the Company to finance the Offer is expected to be generated by the pending sale of the Company's 51% interest in FiberVisions Delaware Corporation to SPG/FV Investor LLC. The Asset Sale cannot be completed until certain customary conditions are satisfied. It is anticipated that the Asset Sale will be completed on or about March 31, 2006. The purpose of the Offer is to acquire all of the issued and outstanding Notes and to amend or eliminate the principal restrictive covenants, certain events of default and other provisions contained in the Indenture in order to enhance the business, operational and financial flexibility of the Company and its subsidiaries. If all conditions to the tender offer and consent solicitation are satisfied, holders of the Notes who validly tender their Notes pursuant to the offer and validly deliver their consents pursuant to the solicitation by 5:00 p.m., New York City time, March 21, 2006, (and do not validly withdraw their Notes or revoke their consents by such date), will be paid the total consideration for each $1,000 principal amount of the Notes, which is equal to the present value (minus accrued interest) of: (a) $1,000 per $1,000 principal amount of the Notes, the amount payable on Nov. 15, 2007, the stated maturity date and (b) an amount equal to the interest that would have been paid on the Notes from the date of payment up to and including the Maturity Date, in each case determined on the basis of a yield to the Maturity Date equal to the sum of: (i) the yield of a 3.00% U.S. Treasury Note due Nov. 15, 2007, plus (ii) a fixed spread of 50 basis points. In addition, holders who validly tender and do not validly withdraw their Notes in the tender offer will receive accrued and unpaid interest from the last interest payment date up to, but not including, the date of payment. In connection with the tender offer, the Company is soliciting consents to certain proposed amendments to eliminate substantially all of the restrictive covenants in the indenture governing the Notes and certain other provisions. The Company is offering to make a consent payment of $20 per $1,000 principal amount of the Notes to holders who validly tender their Notes prior to the Consent Date. Holders who tender their Notes after the Consent Date will not receive the consent payment. Holders may not tender their Notes without delivering consents and may not deliver consents without tendering their Notes. The tender offer is scheduled to expire at 5:00 p.m., New York City time, on April 5, 2006, unless otherwise extended or earlier terminated. Subject to the terms and conditions of the tender offer, payment for any Notes tendered will be made promptly after the Expiration Date. The Company will not be required to purchase any of the Notes tendered or pay any consent payments unless certain conditions have been satisfied, including: (a) the valid tender of a majority in aggregate principal amount of the Notes outstanding and the valid delivery of the accompanying consents, (b) the execution and delivery of a supplemental indenture, and (c) the receipt of net cash proceeds of at least $100 million from the Asset Sale. This announcement is not an offer to purchase, a solicitation of an offer to sell or a solicitation of consent with respect to any Notes. The full terms of the tender offer and the consent solicitation are set forth in the Statement, and in the related Consent and Letter of Transmittal. Credit Suisse Securities (USA) LLC and Wachovia Capital Markets LLC are the Dealer Managers and Solicitation Agents for the tender offer and consent solicitation. Questions regarding the tender offer and consent solicitation should be directed to: Credit Suisse Attn: Liability Management Group Telephone (212) 325-7596 Toll Free (800) 820-1653 or Wachovia Securities Attn: Liability Management Group Telephone (704) 715-8341 Toll Free (866) 309-6316 Requests for documents should be directed to the Information Agent for the tender offer and consent solicitation: Mellon Investor Services LLC 480 Washington Boulevard Jersey City, New Jersey 07310 Toll Free (877) 698-6867 Headquartered in Wilmington, Delaware, Hercules Incorporated -- http://www.herc.com/-- manufactures and markets chemical specialties globally for making a variety of products for home, office and industrial markets. At Dec. 31, 2005, Hercules Incorporated's balance sheet showed a $13.4 million stockholders' deficit compared to a $111.9 million positive equity at Dec. 31, 2004. HINES HORTICULTURE: Triad Buying Vacaville, Calif., Lot for $16.9M ------------------------------------------------------------------ Hines Nurseries, Inc., a subsidiary of Hines Horticulture, Inc., will have to sell its 168-acre property in Vacaville, California, to Triad Communities, L.P., as Triad is exercising its option to buy the lot under their April 30, 2003, Option Agreement. Hines Nurseries will get $16.9 million from the sale, which includes around $2.6 million in option payments already received. The balance of $14.3 million is due at the end of the month. Under the terms of the Option Agreement, the Company is able to transition off of the land in three phases from 2006 to 2008. The three phases of transition will be July 1, 2006, July 1, 2007 and July 1, 2008, and will consist of approximately 24 acres, 88 acres and 56 acres. The Company is continuing to develop replacement acreage and infrastructure at its 842-acreWinters South facility in Northern California. Hines Horticulture Inc. operates commercial nurseries in North America, producing one of the broadest assortments of container grown plants in the industry. Hines Horticulture sells nursery products primarily to the retail segment, which includes premium independent garden centers, as well as leading home centers and mass merchandisers, such as Home Depot, Lowe's and Wal-Mart. * * * As reported in the Troubled Company Reporter on April 6, 2005, Standard & Poor's Ratings Services revised its outlook on Irvine, California-based Hines Horticulture Inc. to negative from stable, and affirmed the company's 'B+' corporate credit rating. HINES HORTICULTURE: Incurs $10.4 Million Net Loss in 4th Quarter ---------------------------------------------------------------- Hines Horticulture, Inc. (NASDAQ: HORT), reported net sales for the fourth quarter of 2005 of $37.7 million, down $4.3 million, or 10.2%, from $41.9 million for the fourth quarter a year ago. Net sales for the twelve-month period ended December 31, 2005, of $327.9 million declined $7.3 million, or 2.2%, from net sales of $335.2 million for the comparable period in 2004. "Entering the second half of 2005 our sales were trending at 2004 levels," stated Rob Ferguson, chief executive officer. "However, as a result of hurricanes Katrina, Rita and Wilma we believe that our combined third and fourth quarter net sales declined by as much as $7 to $9 million. Hurricane Wilma alone resulted in a fourth quarter net sales decline of $5 to $6 million. Despite these hurricanes, we saw a modest improvement in net sales in our other non-hurricane impacted markets during 2005." "Looking forward to 2006, we anticipate a modest increase in net sales as a result of a slightly higher average selling price per unit. Based on our internal projections, we currently expect that our 2006 EBITDA will be flat compared to 2005 as we sell thru high cost inventory produced during fiscal 2005 and 2004 -- years severely impacted by higher commodity and labor costs. Despite expecting unchanged EBITDA in 2006, we do anticipate an improvement in cash generated from operations as we implement significant productivity initiatives. These improvement actions should benefit our EBITDA results beginning in 2007 and carrying into future periods." Fourth Quarter Results Gross profit for the fourth quarter of 2005 was $11.5 million, or 30.6% of net sales, compared to $18.0 million, or 42.9% of net sales, for the comparable period in 2004. The decline in gross profit was due to lower overall sales volume and increased scrap as a result of hurricane Wilma. Fourth quarter operating loss of $10.4 million increased $7.3 million from an operating loss of $3.1 million during the fourth quarter a year ago. The additional operating loss resulted from a decline in gross profit for the period of $6.5 million and an increase in distribution expenses primarily due to continuing increases in fuel costs and common carrier charges. In addition, the Company also incurred $0.9 million of consulting fees as we continue to implement new productivity initiatives aimed at offsetting rising commodity costs. The increase in the operating loss was offset by a decrease in selling expenses as a result of the strategic reorganization that we implemented during the second quarter of 2005. Other expenses for the fourth quarter were $6.9 million compared to $6.4 million for the comparable period in 2004. The increase was mainly due to deferred financing expenses written off in connection with the early termination of the company's term loan, as well as the decrease in interest rate swap agreement income, whichs expired in February 2005. This was offset by a decrease in interest expense due to lower debt. Net loss for the fourth quarter of 2005 increased to $10.4 million compared to a net loss of $5.6 million for the comparable period a year ago. "EBITDA" means income before interest expense, provision for income taxes and depreciation and amortization. "Adjusted EBITDA" is EBITDA plus severance charges. Adjusted EBITDA for the fourth quarter of 2005 was a loss of $7.1 million compared to a loss of $0.4 million for the same period last year. A reconciliation of net loss to EBITDA and Adjusted EBITDA for the fourth quarters of 2005 and 2004 is included in this earnings release. Twelve-Month Period Ended December 31, 2005 Gross profit for the twelve months ended December 31, 2005, was $153.3 million, or 46.8% of net sales, compared to $164.5 million, or 49.1% of net sales, for the comparable period in 2004. The decline in gross profit margin was mainly due to lower overall sales volume, increased scrap as a result of the hurricanes in the third and fourth quarters and higher raw material and commodity prices, driven primarily by the increase in the cost of petroleum. Operating income for the twelve months ended December 31, 2005 was $20.7 million, down $17.8 million, or 46.2%, from $38.5 million for the comparable period a year ago. The decline in operating income resulted from a decline in gross profit primarily due to the hurricanes in the third and fourth quarters and an increase in distribution expenses due to rising fuel costs and common carrier charges. In addition, other operating expenses included consulting fees relating to productivity improvements and severance costs incurred during our strategic reorganization. Other expenses for the twelve months ended December 31, 2005 were $24.8 million compared to $24.5 million in the comparable period in 2004. The increase was mainly due to the reduction of interest rate swap agreement income and deferred financing fees written off in connection with the early termination of the Company's term loan. This was offset by a reduction in interest expense due to lower overall debt. Net loss for the twelve months ended December 31, 2005, decreased to a net loss of $2.6 million compared to net income of $8.2 million for the comparable period a year ago. Adjusted EBITDA for the twelve-month period ended December 31, 2005, was $32.7 million compared to $49.1 million for the same period last year. Second Amendment To Credit Agreement At December 31, 2005, the Company was not in compliance with some of its debt covenants under its senior credit facility primarily due to lower sales caused by hurricanes Katrina, Rita and Wilma. On February 3, 2006, the Company obtained the Second Amendment to Credit Agreement from the financial institutions party to its senior credit facility to adjust the minimum fixed charge coverage ratio and eliminate the maximum leverage ratio covenants of the senior credit facility. Hines Horticulture Inc. operates commercial nurseries in North America, producing one of the broadest assortments of container grown plants in the industry. Hines Horticulture sells nursery products primarily to the retail segment, which includes premium independent garden centers, as well as leading home centers and mass merchandisers, such as Home Depot, Lowe's and Wal-Mart. * * * As reported in the Troubled Company Reporter on April 6, 2005, Standard & Poor's Ratings Services revised its outlook on Irvine, California-based Hines Horticulture Inc. to negative from stable, and affirmed the company's 'B+' corporate credit rating. HONEY CREEK: Has Until March 27 to File Chapter 11 Plan ------------------------------------------------------- MuniMae Portfolio Services, LLC, fka Municipal Mortgage Portfolio Services, LLC, submitted to the U.S. Bankruptcy Court for the Northern District of Texas a notice of termination of Honey Creek Kiwi, L.L.C.'s exclusive period. MuniMae Portfolio is the servicing agent for The Bank of New York Trust Company, N.A., as indenture trustee. As reported in the Troubled Company Reporter on Jan. 27, 2006, Court extended the Debtor's exclusive plan-filing period to the earlier of: a. the expiration of 30 days following the filing and service of a Notice of Termination of Exclusivity by MuniMae Portfolio or b. 30 days following the entry of an order terminating exclusivity entered: (i) after notice and hearing upon request of another party in interest or (ii) by the Court, sua sponte. MuniMae told the Court that it had granted the Debtor a 45-day extension instead of the previously agreed 30-day extension. MuniMae calculates that the Debtor's exclusive plan-filing period will end on Mar. 27, 2006. Headquartered in Mesquite, Texas, Honey Creek Kiwi LLC, filed for chapter 11 protection on August 24, 2005 (Bankr. N.D. Tex. Case No. 05-39524). Richard G. Grant, Esq., at Roberts & Grant, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. INSIGHT COMMS: Discloses Fourth Quarter & Year-End Financials ------------------------------------------------------------- Insight Communications Company disclosed its financial results for the quarter and year ended December 31, 2005. 2005 Highlights -- Revenue of $1.1 billion, an increase of 12% over 2004; -- Operating Income before Depreciation and Amortization of $406.0 million. After adjusting for going-private transaction-related costs of $62.0 million, Operating Income before Depreciation and Amortization was $468.0, an increase of 8% over 2004; -- Capital expenditures of $220.1 million; -- Total Customer Relationships of 1,347,500 at year-end, an increase of 24,800 compared to 1,322,700 at year-end 2004; Revenue for the year ended December 31, 2005 totaled $1.1 billion, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as basic and classic video rate increases. High-speed Internet service revenue increased 45% over the prior year, which is mainly attributable to an increased customer base. Insight added a net 139,900 high-speed Internet customers during the year to end the year at 470,400 customers. In addition, digital service revenue increased 13% over the prior year primarily due to an increased customer base. Insight added a net 67,500 digital customers during the year to end the year at 518,800 customers. Basic cable service revenue increased 4% due to basic and classic video rate increases, partially offset by promotional discounts. though the number of basic video customers was higher at December 31, 2005, than December 31, 2004, the average number of customers during the year declined slightly. Insight is increasing its customer retention efforts by emphasizing bundling, enhancing and differentiating its video services and providing video-on-demand, high definition television and digital video recorders. The company is also continuing to focus on improving customer satisfaction through higher service levels, increased education of product offerings and increased spending on sales and marketing efforts. Programming and other operating costs increased $37.6 million, or 11%. Total programming costs for Insight's video products decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004. The substantial increases in programming rates were offset by programming credits. The credits resulted from favorable resolution of pricing negotiations related to certain prior period programming costs that were accrued at a higher rate than the amount actually paid, as well as a settlement of disputed claims with a vendor. In addition, direct operating costs increased due to an increased volume of modems sold and cost of sales associated with telephone that were previously paid by Comcast. Other operating costs increased primarily as a result of increases in technical salaries for new and existing employees, in addition to decreased capitalized labor costs due to the continued transition from upgrade and new connect activities to maintenance and reconnect activities. Other operating costs also increased as a result of increases in repairs and maintenance costs due to increased repair costs for customer premise equipment, an increase in drop materials due to customer growth and increased property taxes due to a favorable reversal of accrued property taxes recorded in 2004. Selling, general and administrative expenses increased $41.7 million, or 18%, primarily due to increased payroll and payroll related costs, including an increase in the number of employees and salary increases for existing employees. Marketing support funds (recorded as a reduction to selling, general and administrative expenses) decreased over the prior year. Marketing expenses increased over the prior year to support the continued rollout of high-speed Internet, digital and telephone products, and to maintain the company's core video customer base. A decrease in expenses previously allocated to Comcast, under Insight's prior agreement to manage certain Comcast systems, also contributed to the increase in selling, general and administrative expenses. As this agreement was terminated effective July 31, 2004, the year ended December 31, 2005, does not include any of these expense allocations, and the year ended December 31, 2004, includes seven months of these expense allocations. Some cost savings have been realized upon termination of the management agreement, and the impact of certain of these savings is reflected in programming and other operating costs. Transaction-related costs of $62.0 million were recorded for the year ended December 31, 2005. These costs were comprised of sponsor and investment fees, legal and accounting fees, financial advisor fees, the cancellation of in-the-money stock options, printing and mailing and other miscellaneous expenses related to the going-private transaction. Stock-based compensation expense increased $12.9 million due to the expense associated with the accelerated vesting of certain restricted shares in connection with the going-private transaction and in connection with the granting of restricted and deferred shares during the year ended December 31, 2005. Depreciation and amortization expense increased $7.9 million, or 3%, primarily as a result of additional capital expenditures through December 31, 2005. These expenditures were primarily for telephone equipment, purchases of customer premise equipment and drop materials and network extensions, all of which Insight considers necessary in order to continue to maintain and grow its customer base and expand its service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since December 31, 2004. As a result of these factors, Operating Income before Depreciation and Amortization decreased $26.0 million. After adjusting for going-private transaction-related costs of $62.0 million, Operating Income before Depreciation and Amortization increased $36.0 million to $468.0 million, an increase of 8% over 2004. Interest expense increased $25.5 million, or 13%, due to higher interest rates, which averaged 8.2% for the year ended December 31, 2005, as compared to 7.1% for the year ended December 31, 2004, and an increase in the accreted value of the 12-1/4% Senior Discount Notes. Liquidity and Capital Resources Insight's business requires cash for operations, debt service and capital expenditures. The cable television business has substantial ongoing capital requirements for the construction, expansion and maintenance of its broadband networks and provision of new services. In the past, expenditures have been made for various purposes, including the upgrade of the existing cable network, and in the future will be made for network extensions, installation of new services, customer premise equipment (e.g., set-top boxes), deployment of new product and service offerings, and, to a lesser extent, network upgrades. Historically, Insight has been able to meet its cash requirements with cash flow from operations, borrowings under its credit facilities and issuances of private and public debt and equity. Cash provided by operations for the years ended December 31, 2005, and 2004 was $233.6 million and $289.9 million. The decrease was primarily attributable to an increase in net loss due to costs incurred in connection with the going-private transaction and partially offset by the effect of non-cash items. Cash used in investing activities for the years ended December 31, 2005, and 2004 was $218.7 million and $173.5 million. The increase primarily was due to capital expenditures to launch Insight's telephone product in additional markets and for customer premise equipment and drop materials. Cash used in financing activities for the years ended December 31, 2005 and 2004 was $85.2 million and $76.4 million. The increase was primarily due to increased amortization payments on the credit facility in 2005. For the years ended December 31, 2005, and 2004, Insight spent $220.1 million and $174.1 million in capital expenditures. These expenditures principally constituted purchases of customer premise equipment, telephone equipment, capitalized labor, drop materials, headend equipment and system upgrades and rebuilds, all of which are necessary to maintain Insight's existing network, grow its customer base and expand its service offerings. Free Cash Flow for the year ended December 31, 2005, totaled $13.5 million compared to $115.8 million for the year ended December 31, 2004. The decrease was primarily driven by: -- a $46.0 million increase in capital expenditures; -- a $26.0 million decrease in Operating Income before Depreciation and Amortization (including the impact of $62.0 million of going-private transaction-related costs); -- a $20.6 million increase in cash interest expense paid driven by an increase in interest rates; and -- a $16.0 million source of Free Cash Flow for the year ended December 31, 2005, compared to a $25.7 million source for the year ended December 31, 2004, from changes in working capital accounts. These changes resulted in an overall decrease in Free Cash Flow from 2004 to 2005 of $102.3 million. Insight Communications (NASDAQ: ICCI) is the 9th largest cable operator in the United States, serving approximately 1.3 million customers in the four contiguous states of Illinois, Indiana, Ohio, and Kentucky. Insight specializes in offering bundled, state-of-the-art services in mid-sized communities, delivering analog and digital video, high-speed Internet, and voice telephony in selected markets to its customers. * * * As reported in the Troubled Company Reporter on Oct. 5, 2005, Fitch Ratings affirmed the 'B+' Issuer Default Rating and the Stable Rating Outlook assigned to Insight Communications Company, Inc. Specifically, Fitch affirmed the 'BB+' senior secured rating and 'R1' Recovery Rating assigned to Insight Midwest Holdings, LLC's senior secured credit facility, and the 'B+' senior unsecured debt rating and 'R4' Recovery Rating assigned to the senior unsecured notes issued by Insight Midwest, LP. Also, Fitch affirmed the 'CCC+' senior unsecured rating and 'R6' Recovery Rating assigned to ICCI's senior discount notes. Approximately $2.8 billion of debt is affected by Fitch's action. JEAN COUTU: Covenant Amendments Cue DBRS to Change Trends to Neg. ----------------------------------------------------------------- Dominion Bond Rating Service changed the trends on the Bank Credit Facilities, Senior Unsecured Debt, and Senior Subordinated Debt of The Jean Coutu Group (PJC) Inc., to Negative from Stable. Complete rating action: * Bank Credit Facilities -- B (high) * Senior Unsecured Debt -- B * Senior Subordinated Debt -- B (low) The rating action follows Coutu's announcement that it is seeking amendment of the financial covenants in its Bank Credit Facilities. This initiative was precipitated by earnings weakness caused by slower-than-anticipated progress on sales and earnings in Coutu's U.S. operations following the acquisition and integration of Eckerd stores. In addition, inventory remains above optimum levels due to system-related problems in fall 2005, leading to higher-than-planned debt balances. Based on information provided by Coutu, DBRS had previously expected that Coutu would not breach its financial covenants in the near term. DBRS had noted that compliance over the longer term would be challenging without a marked improvement in U.S. earnings, given that the covenant requirements become tighter through the terms of the Bank Credit Facilities. JET HOLDINGS: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Jet Holdings, Ltd. dba MicroJet 3506 124th Street Northeast Marysville, Washington 98271 Bankruptcy Case No.: 06-10545 Type of Business: The Debtor is a contract manufacturer that specializes in laser cutting, welding, forming, and general fabrication. Chapter 11 Petition Date: March 2, 2006 Court: Western District of Washington (Seattle) Judge: Samuel J. Steiner Debtor's Counsel: Sarah Weaver, Esq. Sarah Weaver, PLLC 1325 4th Avenue, Suite 940 Seattle, Washington 98101 Tel: (206) 388-0138 Total Assets: $321,271 Total Debts: $10,655,996 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Wash. Water Jet Workers Lawsuit by Water $10,000,000 Assn. Jet Workers Assn. c/o Darrell L. Cochran Gordon Thomas Honeywell 1201 Pacific Avenue Suite 2100 Tacoma, WA 98402 Cutler & Nylander, P.S. Legal Fees $64,420 The College Club, Suite 220 505 Madison Street Seattle, WA 98104 AC Electric Service, Inc. Electrical $62,365 804 West Meeker Suite 102 Improvements Kent, WA 98032 Piel Enterprises Equipment lease $56,180 dated 12/2004 SEBCO, Inc. Rent $44,579 Sharon Piel Contract Wages $39,820 Benchmark Trade Debt $30,719 Kenneth L. Piel Unreimbursed Expenses $23,293 Gregory Miller Legal Fees $21,471 Barton Mines Corporation Trade Debt $20,790 American Steel, LLC Trade Debt $12,085 Central Welding Supply Trade Debt $8,019 Internal Revenue Service Federal Withholding & $7,289 Social Security & Medicare Taxes Accustream, Inc. Trade Debt $6,873 Snohomish County PUD Utilities $6,843 Oregon Metal Slitter Trade Debt $6,678 Snohomish County Treasurer Property Taxes $6,022 Powder Fab Trade Debt $5,625 JEMCO Components & Fab., Trade Debt $5,100 Inc. Washington Employers Trust Trade Debt $5,079 J.L. FRENCH: Wants Deloitte Tax as Tax Service Provider & Advisor ----------------------------------------------------------------- J.L. French Automotive Castings, Inc., and its debtor-affiliates ask the U.S. bankruptcy Court for the District of Delaware for permission to employ Deloitte Tax LLP as their tax service providers and tax consultants. Deloitte Tax will: 1) assist the Debtor with federal tax effects of bankruptcy filing and tax advisory services related to debt discharge issues: a. compute the Debtors' tax basis in order to assist the Debtors' management in evaluating the income from the cancellation or discharge of indebtedness and its effects under Section 108 and 1017 of the Internal Revenue Code; b. advise the Debtors in evaluating and modeling alternative tax methodologies in order to assist the Debtors management in understanding post-bankruptcy tax attributes available under applicable newly issued tax regulations and absorptions of such attributes based on the Debtors' operating projection; including a technical analysis of the effects of Treasury Regulation Section 1.1502-28 and the interplay with IRC Sections 108 and 1017; c. advise the Debtors in evaluating and modeling the potential effect of the alternative minimum tax in various post-emergence scenarios; d. assist the Debtors in analyzing the effects of tax rules under Sections 382(l)(5) and (l)(6) of the Internal Revenue Code; e. advise the Debtor in analyzing the Built-in Gain or Loss position at date of bankruptcy in order to assist the Debtor's management in understanding any limitations on use of tax losses generated from post- bankruptcy asset or stock sales; f. assist the Debtors by working with creditors' counsel, the Debtors' counsel, and the Debtors' financial advisors on cash tax effects of bankruptcy and in understanding the post-bankruptcy tax profile; g. advise the Debtors as to the proper tax treatment of post-petition interest; h. advise the Debtors as to the proper treatment of pre- petition and post-petition reorganization costs; i. assist the Debtors in determining the state tax consequences of the income from the discharge of indebtedness and any ownership changes, including their impact on the amount and use of state net operating losses; j. advise the Debtors on the state tax aspects of the post-bankruptcy environment with a focus on optimizing the post-bankruptcy tax structure for state tax purposes; k. assist the Debtors in evaluating and modeling the effects of liquidating, merging, or converting entities as part of the post-emergence plan, including, the effects on federal and state tax attributes, state incentives, apportionment, and other planning; l. assist the Debtors in consulting on the conceptual tax GAAP requirements of "fresh start" accounting as required for the emergence date of the US GAAP balance sheet to identify the appropriate tax treatment of adjustments to equity, and other adjustments to assets and liabilities recorded; and m. document, as appropriate, the tax analysis, opinions, recommendation, conclusion, and correspondences for any proposed restructuring alternative tax issue or other tax matter, and 2. provide general corporate tax advisory assistance: a. provide the Debtors general assistance with day-to-day federal and state tax questions as requested by the Debtors' internal tax department, and as may be agreed to by Deloitte tax, in an effort to assist the Debtors with ordinary tax needs not able to be satisfied with its existing internal resources. Scott Vickman, a partner at Deloitte Tax, tells the Court that the Firm's professionals bill: Professional Hourly Rate ------------ ----------- Partner $540 Senior Manager $430 Manager $335 Senior Associate $225 Mr. Vickman assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. 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. J.L. FRENCH: Court Okays Abernathy MacGregor as PR Consultant ------------------------------------------------------------- J.L. French Automotive Castings, Inc. and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to employ The Abernathy MacGregor Group, Inc. as their corporate communications consultant. Abernathy MacGregor will: a. prepare materials to be distributed to the Debtors' employees explaining the impact of the chapter 11 cases; b. draft correspondence to creditors, vendors, employees and other interested parties regarding the Debtors' chapter 11 cases; c. prepare written guidelines for head offices and location managers to assist them in addressing employee and customers; d. prepare news releases for dissemination to the media for distribution; e. interface and coordinate media reports to contain the correct facts and the Debtors' perspective as an ongoing business; f. assist the Debtors in maintaining their public image as a viable business and going concern during the chapter 11 reorganization process; g. assist the Debtors in handling inquiries and developing internal systems for handling such inquiries; h. coordinating public relations services with a third party making an investment in the Debtors; and i. perform other strategic communications consulting services as requested by the Debtors in their chapter 11 cases. Court documents don't indicate how much Abernathy MacGregor will be paid, but they do talk about how frequently and promptly the Debtor must pay its postpetition bills. Abernathy MacGregor expects payment from the Debtors within 30 days of the invoice date. If the Debtors are unable to pay Abernathy MacGregor within the 30-day period, then an interest charge of 1.5% per month will be assessed on any past-due balance. Jeffrey R. Maloney, chief financial officer of Abernathy MacGregor, assures the Court that the Firm does not represent or hold any interest adverse to the Debtors or their estates. 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. JO-ANN STORES: Incurs $18 Million Net Loss in Fourth Quarter ------------------------------------------------------------ Jo-Ann Stores, Inc. (NYSE: JAS), disclosed its financial results for its fiscal 2006 fourth quarter and full year ended January 28, 2006. Net loss for the fourth quarter of fiscal 2006 was $18.0 million compared with net income of $32.3 million in the prior year. Results for the fourth quarter include a charge of $27.1 million for goodwill impairment. Excluding the goodwill charge, pro forma net earnings for the fourth quarter of fiscal 2006 were $9.1 million versus $32.3 million in the prior year fourth quarter. Net sales for the fourth quarter increased 2.7% to $604.1 million from $588.2 million a year ago. Same-store net sales decreased 3.0% for the quarter, versus a same-store sales increase of 4.3% in the fourth quarter last year. Net loss for the year was $23.0 million compared with net income of $46.2 million, or $2.02 per diluted share in fiscal 2005. Results for fiscal 2006 include a charge of $27.1 million for goodwill impairment. Results for fiscal 2005 include debt repurchase costs, which reduced pre-tax income by $4.2 million. Excluding these items, pro forma net earnings were $4.1 million for fiscal 2006 versus $48.8 million in fiscal 2005. Net sales for fiscal 2006 increased 3.9% to $1.883 billion from $1.812 billion in fiscal 2005. Fiscal year 2006 same-store net sales decreased 0.8% versus a same-store sales increase of 3.2% in the prior year. Review of Operating Results Gross margins for the fourth quarter of fiscal 2006 decreased to 41.9% of net sales from 45.4% in the fourth quarter last year, due to higher promotional activity and markdowns compared to a year ago. As expected, the Company's efforts to sell through inventory during the fourth quarter significantly impacted the gross margin rate performance. Selling, general and administrative expenses, excluding other expenses separately identified in the statement of operations, increased to 35.8% of sales in the fourth quarter from 33.3% in the fourth quarter last year. The increase in percentage is due to the lack of leverage from same-store sales results, coupled with an increase in advertising, logistics costs, and increases in operating expenses, primarily driven by inflationary increases and increases in our stores fixed expenses, resulting from the larger number of superstores in our store base. Alan Rosskamm, chairman and chief executive officer said, "This year clearly has been a challenging and disappointing time for Jo-Ann Stores. We entered the year with high expectations and, in hindsight, with overly optimistic merchandising plans. The challenges of a slowing market and declining traffic were exacerbated by merchandising and marketing decisions that proved to be ineffective as we tried to counter negative industry trends during the year." Mr. Rosskamm continued, "Fiscal 2007 will be a year of transition as we implement our previously communicated repair plan. We expect the first half of the year to be difficult, due to ongoing industry softness, the costs associated with the execution of repair plan initiatives and a merchandise assortment project designed to reduce space designated for finished products and expand space allocated to craft components. However, in the second half of the year we expect to be positioned for substantial improvement in our operational and financial performance. We believe this strategy will enable us to end the year with lower debt balances and result in a stronger, more disciplined organization." Senior Bank Credit Facility On February 23, 2006, the Company completed an amendment of its $350 million senior bank credit facility, increasing the size of the facility to $425 million. The term of the senior bank credit facility remains unchanged, extending through April 2009. In general terms, the amendment to the senior bank credit facility, among other things, also improves advance rates on inventory during peak borrowing periods and modifies the consolidated net worth covenant. To date, Jo-Ann hasn't made a copy of the Amendment available to the public. Goodwill Impairment At the beginning of the fourth quarter, the Company conducted its annual impairment testing required by SFAS No. 142, "Goodwill and Other Intangible Assets," for fiscal 2006. As a result of the evaluation, the Company determined that the carrying amount of the goodwill exceeded its implied fair value, and that a total impairment of goodwill existed. This impairment conclusion considered the market capitalization of the Company, declining business trends, softness in our industry, deteriorating Company performance, and the Company's assessment of its anticipated near- term future performance. During the fourth quarter, the Company recorded a non-cash charge of $27.1 million to recognize the goodwill impairment. No tax benefit is recognized as a result of the impairment charge. Gift Card Breakage During the fourth quarter of fiscal 2006, the Company recognized $3.2 million of pre-tax income related to gift card breakage. While gift card breakage will continue to be recognized in future quarters, the amount is expected to be significantly less. Gift card breakage income is included in net sales in the consolidated statements of operations. Store Openings and Closings This past year, the Company opened 40 superstores and four traditional stores, and closed 57 traditional stores. The year-end store count was 684 traditional stores and 154 superstores, for a total of 838 stores. For the year, total store square footage increased 4.8% to 16.198 million square feet. For fiscal 2007, the Company anticipates opening 26 new stores and closing 55-60 existing stores. Fiscal 2007 Outlook Based upon management's operating assumptions, the initial repair plan initiatives, and ongoing softness in the crafts industry, the Company expects a challenging fiscal 2007, with year-over-year improvement in business performance in the second half of the year, after a difficult first half. The key considerations for understanding the Company's outlook for fiscal 2007 include: -- Same-store sales decline of 4 to 5% in the first half of the year, slightly improving in the back half of fiscal 2007; -- Gross margin rate improvement of 75 to 125 basis points during fiscal 2007, including gross margin rate deterioration of 150 to 200 basis points in the first half from the same period in fiscal 2006; -- Selling, general and administrative expenses increase of 95 to 125 basis points as a percentage of net sales from fiscal 2006, including a 260 to 280 basis point year-over-year increase in the first half of the year, primarily due to higher store expenses resulting from the same-store sales decline and impact of higher fixed costs of the superstore format, which is a more significant portion of our store base; -- Capital spending of $50 to $55 million related to the opening of the 26 new stores; and -- Strengthening of the balance sheet through inventory reduction of $45 to $50 million, and a resulting debt reduction by fiscal year end of $40 to $50 million. Jo-Ann Stores, Inc. -- http://www.joann.com/-- is the leading U.S. fabric and craft retailer with locations in 47 states, operates 688 Jo-Ann Fabrics and Crafts traditional stores and 154 Jo-Ann superstores. * * * As reported in the Troubled Company Reporter on Feb. 17, 2006, Moody's Investors Service lowered all ratings of Jo-Ann Stores, Inc., including the rating on a $100 million issue of 7.5% senior subordinated notes due 2012 to B3 from B2. The rating downgrade was prompted by the adverse impact that weak merchandising programs and a slowdown in several categories have had on sales, cash flow, and working capital. "Key credit metrics have fallen well below levels that are typical for the company's previous ratings," Moody's said, and the rating agency "does not expect that debt protection measures will soon regain prior levels." Moody's rating outlook was revised to negative too. Moody's does not rate Jo-Ann's secured bank credit facility. KAISER ALUMINUM: Inks Stipulation on Law Debenture's Stay Request ----------------------------------------------------------------- Law Debenture Trust Company of New York, asked the U.S. Bankruptcy Court for the District of Delaware to: * reconsider the Guaranty Decision issued on December 22, 2005, overruling its objection to the subordination of its fees and expenses under the joint plans of liquidation of the Liquidating Debtors; and * continue the stay imposed on the Guaranty Decision pending completion of its appeal seeking to stay the Court's order overruling its objections to the Liquidation Plans. Liverpool Limited Partnership supported Law Debenture's request. Consequently, Judge Fitzgerald grants Law Debenture's request for reconsideration. Judge Fitzgerald amends her Memorandum Opinion issued on Dec. 22, 2005, with respect to Law Debenture's Fees and Expenses, to state that: "[Law Debenture] also objected to the joint plans at issue because of the treatment provided therein for fees and expenses. For the reasons announced by the Court at hearings on May 2, 2005, and January 10, 2006, the Court finds that [Law Debenture's] 'Fee Objection' must be overruled." In all other respects, the Order overruling Plan Objections filed by Law Debenture and Liverpool will be unaffected by the Order, Judge Fitzgerald clarifies. Law Debenture's Stay Request With regards Law Debenture's request for continuation of stay, Judge Fitzgerald held a hearing on January 10, 2006. At the hearing, attorneys for Law Debenture, Liverpool, the Debtors, and the Official Committee of Unsecured Creditors reached an agreement. At the conclusion of the hearing, Judge Fitzgerald directed the parties to submit a proposed order, under certification of counsel, which will reflect the agreement. Pursuant to the Court's instructions, the parties submitted a proposed form of order regarding Law Debenture's Stay Request. The parties' Stipulated Order provides, among other things, that the Court's memorandum opinion and order overruling Plan Objections by Law Debenture and Liverpool are stayed, without bond. In addition, JPMorgan Trust Company, N.A., as the Distribution Trustee pursuant to the Subsidiary Plans will: (1) distribute all funds held by it as disputed funds subject to the claims in the Guaranty Dispute in accordance with the terms of the Subsidiary Plans and the Distribution Trust Agreement, which amounts to $213,015,912 as of December 22, 2005, plus applicable per diem interest, to these senior indenture trustees: * US Bank, as indenture trustee for the holders of the 10-7/8% Senior Notes -- $115,284,938; * Deutsche Bank, as indenture trustee for the holders of the 9-7/8% Senior Notes -- $89,230,974; * JP Morgan, as indenture trustee for the 7-3/4% SWD Revenue Bonds -- $8,000,000, plus $500,000; and (2) within three days that additional amounts or stock are allocated as funds or stock held by the Distribution Trustee as disputed funds or stock subject to the claims in the Guaranty Dispute, distribute those funds and stock to the Senior Indenture Trustees. A full-text copy of the Stipulated Order is available for free at http://ResearchArchives.com/t/s?651 Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, informs the Court that the Stipulated Order has been reviewed by, and is acceptable to, each of the counsel for Law Debenture, Liverpool and the Creditors' Committee. The Debtors did not receive a response from the U.S. Trustee, the Official Committee of Asbestos Claimants, the Legal Representative for Future Asbestos Claimants or the Legal Representative for Future Silica Claimants. 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. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Selling Surplus Pryor, Okla., Property for $700K ----------------------------------------------------------------- Following the U.S. Bankruptcy Court for the District of Delaware's approval of the request of Kaiser Aluminum & Chemical Corporation to enter into an agreement for the sale of its real property in Pryor, Oklahoma, KACC entered into a revised purchase and sale agreement and a related amendment. Among other things, the Revised Sale Agreement provides that: -- Amerex Acquisition Corp. replaces Tulsa Equipment, as buyer; -- the purchase price is increased from $100 to $700,000; and -- Amerex will deposit $400,000 into an escrow account to secure certain of its obligations. Except for these amendments, the Revised Sale Agreement contains no material changes from the previous purchase and sale agreement. Accordingly, Judge Fitzgerald authorizes KACC to: * enter into, and consummate the transaction contemplated by the Revised Sale Agreement; and * pay the prepetition taxes from the sale proceeds and its general operating funds as necessary to consummate the sale. The Court directs KACC to apply the net proceeds of the Sale in accordance with the order authorizing the Debtors to obtain postpetition financing and granting liens, security interests and superpriority claims, dated February 11, 2005. A full-text copy of the Revised Sale Agreement, is available for free at http://ResearchArchives.com/t/s?650 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. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART CORP: Settles Dispute Over Bankest's $3 Million Unsec. Claim ------------------------------------------------------------------ On July 10, 2002, Euler/American Credit Indemnity, as assignee of Bankest, LLC, filed Claim No. 27530 for $6,022,488, an unsecured non-priority prepetition claim, which allegedly represent amounts due to these vendors: * Team Products International, Inc., duns No. 70052, * Global Air also known as IMG International Merchandise Group, duns No. 13160, * IMG Kids, duns No. 61138, * IMG Global, duns No. 990239, * Joy Athletic, Inc., duns No. 56919178 and 63102, and * Joy Athletic, duns No. 22749. On April 30, 2002, Team Products filed an unsecured non-priority prepetition claim, No. 13241 for $618,776. The Team Claim was allowed for $597,720. The Team Claim was assigned to NewStart Factors, and Kmart Corporation made a distribution on the Team Claim to NewStart Factors as it believed it was making distribution on a claim validly held and asserted by Team Products. On Aug. 1, 2003, Bankest filed Administrative Expense Claim No. 56091 for $2,030,009. Kmart has objected to the Claims. Subsequently, Bankest and Euler contested Kmart's Objections. Kmart scheduled Claim No. 10590011 in the name of IMG Kids. Kmart issued, but not yet released, the initial distribution on the IMG Claim. As the IMG Claim is part of Euler's overall claim, Kmart will re-issue the IMG Distribution in the name of Euler and release and deliver it according to its Plan of Reorganization. To settle their dispute, the parties agree that: (a) Claim No. 27530 is allowed as a Class 5 Unsecured Non- priority Prepetition Claim for $3,000,000 and that any and all distributions made on its account will be issued and delivered to Euler. The amount will constitute full and final satisfaction of Claim No. 27530; (b) Bankest will be entitled to receive from Euler the distribution received on account of $75,000 of Claim No. 27530, which Euler will remit to Bankest net of liquidation costs and fees; (c) Claim No. 10590011 is allowed as a Class 5 Unsecured Non- Priority Claim for $609,240, and that any and all distributions made on its account will be issued and delivered to Euler. The amount will constitute full and final satisfaction of Claim No. 10590011; (d) The parties release each other from all claims and causes of action arising under or in connection with any and all claims of the Vendors against Kmart either on or before December 24, 2005, except: * Euler's right to receive the distributions on the Claims; * Bankest's right to receive any amounts to be refunded on account of co-insurance provisions under the applicable credit insurance policy in effect between Bankest and Euler and the Allocation Amount; and * Claim No. 56091, on account of which all parties reserve their rights; (e) Any other claims between Euler and Bankest, including claims relating to other vendors or issues arising under any credit insurance policies Euler issued in favor of Bankest are expressly reserved; (f) Any and all rights, claims, and causes of action that Euler, Bankest, and Kmart may have against Team Products and NewStart Factors relative to any and all distributions made or that will be made by Kmart relative to the Team Claim are assigned or otherwise transferred to Bankest and Euler, and Kmart will cooperate reasonably in the prosecution of any claim by Bankest as against either Team Products or NewStart Factors; (g) All amounts distributed to Euler pursuant to Claim No. 27530 and the IMG Claim will be divided among Euler and Bankest pursuant to the Policy. Bankest will be entitled to 18.0445% of Euler's recovery on the Claim, less reasonable fees due under the Policy and relating to a Kmart distribution to Euler or Bankest. To the extent Bankest and Euler cannot agree as to their entitlements to the amounts distributed pursuant to Claim No. 27530 and the IMG Claim, the parties agree that Euler will hold the amount in trust pending determination of those entitlements; and (h) The Stipulation will have no effect on Claim No. 56091. Judge Sonderby approves the Stipulation in its entirety. Headquartered in Troy, Michigan, Kmart Corporation nka KMART Holding Corporation -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART CORP: Asks Court to Reject Gramercy Dominicana's Claims ------------------------------------------------------------- Gramercy Dominicana, S.A., owned by Gramercy Industries, operating at 86 Heritage Court, Woodcliff Lake, New Jersey, supplied clothing products to Kmart Corporation for resale. Prior to the Debtor's bankruptcy filing, Gramercy Dominicana filed claims totaling $328,959, for clothing product shipped to Kmart: Claim No. Claim Amount --------- ------------ 29722 $129,240 29723 120,231 29724 79,488 Gramercy Dominicana assigned the Claims to BPD International Bank in August 2003. William J. Barrett, Esq., at Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP, in Chicago, Illinois, asserts that Kmart has paid the Claims in full. Kmart wire transferred $328,959 from its account at Bank One to the account of Gramercy Industries at BPD International Bank. Accordingly, Kmart asks the U.S. Bankruptcy Court for the Northern District of Illinois to grant summary judgment in its favor and disallow Claim Nos. 29722, 29723 and 29724. Headquartered in Troy, Michigan, Kmart Corporation nka KMART Holding Corporation -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., 215/945-7000) LARGE SCALE: Court Grants Interim Access to Cash Collateral ----------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of California in Sacramento granted Large Scale Biology Corporation and its debtor-affiliates interim access to cash collateral securing repayment of approximately $8.5 million of their prepetition debts. The Debtors will use the cash collateral in accordance with a weekly budget. A copy of this budget is available for free at http://researcharchives.com/t/s?634 To provide adequate protection for the use of their collateral, the Debtors grant their secured creditors replacement liens with the same scope, validity and priority as their prepetition security interests. Secured creditors holding liens on the Debtors' assets include: -- Agility Capital LLC, which holds a $1.1 million contested claim; -- Kentucky Technology, Inc., asserting a $2.9 million claim; -- Kevin Ryan, who is owed approximately $4.2 million; -- Robert Erwin, who is owed approximately $400,000; and -- Earl White, who is owed $50,000. Paul J. Pascuzzi, Esq., at Felderstein Fitzgerald Willoughby & Pascuzzi, LLP, tells the Bankruptcy Court that these secured creditors, except for Agility Capital, support the proposed use of cash collateral. Agility Capital and the Debtors are embroiled in a dispute over the value of the lender's claim. The Debtors say that they received only $500,000 from the $1.5 million prepetition bridge loan promised by Agility Capital. However, Agility Capital demands approximately $1.1 million from the Debtors on account of the loan, including a $450,000 exit and a $200,000 fee for expenses and miscellaneous charges. Agility Capital's move to foreclose on the Debtors' assets led to their bankruptcy filing in January 2006. The Debtors insist that Agility Capital acted in bad faith in implementing the terms of the loan agreement. The Debtors are currently assessing their reorganization prospects. While most of their workers have been laid off in December 2005, the Debtors anticipate conducting minimal operation to support certain valuable contracts to generate an income stream from the estates while they formulate a plan of reorganization. Headquartered in Vacaville, California, Large Scale Biology Corporation -- http://www.lsbc.com/-- develops, manufactures and sells plant-made pharmaceutical proteins and vaccines. LSBC and its debtor-affiliates filed for chapter 11 protection on Jan. 9, 2006. (Bankr. E.D. Calif. Case No. 06-20046). Paul J. Pascuzzi, Esq., at Felderstein Fitzgerald Willoughby & Pascuzzi, represent the Debtors in their restructuring efforts. As of Nov. 30, 2005, the LSBC had $9,760,000 in total assets and $7,836,000 in total debts. LARGE SCALE: Hires Felderstein Fitzgerald as Bankruptcy Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of California gave Large Scale Biology Corporation and its debtor-affiliates permission to employ Felderstein Fitzgerald Willoughby & Pascuzzi, LLP, as their bankruptcy counsel. Felderstein Fitzgerald will: a) advise and represent the Debtors as to all matters and proceedings in their chapter 11 cases, except for adversary proceedings, and excepting objections to the amount of unsecured claims; b) assist the Debtors in obtaining the use of cash collateral and DIP financing and assist with other bankruptcy issues which may arise in the operation of the Debtors' business, including negotiations with creditors, interest groups and the Official Committee of Unsecured Creditors; c) assist the Debtors in preparing and confirming a plan of reorganization; and d) assist the Debtors in selling some or all of their assets. The Firm disclosed that it received a $50,000 prepetition from the Debtor. In addition, the Firm applied a $35,000 prepetition retainer as a fixed fee to represent the Debtors prior to their chapter 11 case filing. The Debtors and Felderstein Fitzgerald agreed to the contingency fee arrangement in an amount equal to: i) 5% of the sums actually paid to the secured creditors, including but not limited to Agility Capital, Inc., Kentucky Technology, Inc., Kevin Ryan, Robert Erwin, and Earl White, up to the amount of their secured claims from the sale, liquidation, refinancing or other disposition of the secured creditors' collateral; ii) 10% of the sums paid to prepetition unsecured creditors (including priority claims) whose claims arose before the bankruptcy filing, which will be paid at the time of the payments to unsecured creditors; and iii) 20% of the sums paid to equity holders, which fee will be paid at the period of the payments to equity holders, but if the operating business, or any part of it, is reorganized instead of liquidated as part of a confirmed plan, the Debtors will pay on confirmation a $200,000 fixed fee in complete satisfaction of all sums due on account of the value of the reorganized business to the equity holders. Moreover, the Debtors and the Firm agreed to amend the contract for legal services and modify the contingent fee only if each of the following: * the Owensboro Sale closes on or before April 10, 2006; and * the purchase price paid to the Debtors is not less than $6 million. Upon satisfaction of these conditions, Felderstein Fitzgerald will cap the fees it will otherwise be entitle to under the contingent fee: i) 5% of the amounts paid to secured creditors from the Owensboro Sale; ii) 10% of the balance of the purchase available to the bankruptcy estate from the sale; iii) provided that the total of i) and ii), when added to the fixed fee, is note less than $380,000. Paul J. Pascuzzi, Esq., a Felderstein Fitzgerald member, assures the Court that the Firm does not hold or represent any interest materially adverse to the Debtors or their estate. Headquartered in Vacaville, California, Large Scale Biology Corporation -- http://www.lsbc.com/-- develops, manufactures and sells plant-made pharmaceutical proteins and vaccines. LSBC and its debtor-affiliates filed for chapter 11 protection on Jan. 9, 2006. (Bankr. E.D. Calif. Case No. 06-20046). Paul J. Pascuzzi, Esq., at Felderstein Fitzgerald Willoughby & Pascuzzi, represent the Debtors in their restructuring efforts. As of Nov. 30, 2005, the LSBC had $9,760,000 in total assets and $7,836,000 in total debts. LEAR CORP: Disputes 2005 Financial Changes by Unnamed Customer -------------------------------------------------------------- Subsequent to the company's original earnings announcement on Jan. 25, 2006, Lear was advised by a major customer of retroactive pricing adjustments associated with a particular vehicle program for shipments made prior to 2006. Certain payments due to Lear in 2006 were withheld as a result of these pricing adjustments. The vehicle program involved in this matter is no longer in production. Lear disagrees with the proposed pricing adjustments and intends to dispute and seek recovery of the amounts improperly withheld. Commercial discussions with the customer are ongoing and management has adjusted previously announced financial results to establish a reserve for this matter. The adjustment decreased both fourth quarter and full year 2005 net sales by $6 million and increased both fourth quarter and full year net loss by $6 million. The impact on basic and diluted net loss per share was $0.09 for both the fourth quarter and full year. A full-text copy of the revisions to Lear's 2005 financial results is available at no charge at http://ResearchArchives.com/t/s?642 Headquartered in Southfield, Michigan, Lear Corporation -- http://www.lear.com/-- is one of the world's largest suppliers of automotive interior systems and components. Lear provides complete seat systems, electronic products and electrical distribution systems and other interior products. With annual net sales of $17.1 billion, Lear ranks #127 among the Fortune 500. The company's world-class products are designed, engineered and manufactured by a diverse team of 115,000 employees at 282 locations in 34 countries. Lear's and Lear is traded on the New York Stock Exchange under the symbol [LEA]. * * * As reported in the Troubled Company Reporter on Jan. 16, 2006, Moody's Investors Service affirmed the long-term debt ratings of Lear Corporation, Corporate Family and Senior Unsecured at Ba2, and revised the company's rating outlook to negative from stable. The action flows from lowered expectations and limited visibility of North American production volumes from its two largest customers, GM and Ford, beyond what was contemplated in the existing rating as well as ongoing challenges to the company's profitability and cash flows. As reported in the Troubled Company Reporter on Jan. 10, 2006, Fitch Ratings has downgraded Lear Corp.'s issuer default rating, senior secured bank lines, and senior unsecured notes to 'BB+' from 'BBB-'. The Outlook remains Negative. LEVI STRAUSS: Fitch Affirms $1.8 Billion Unsecured Notes' B Rating ------------------------------------------------------------------ Fitch affirmed the ratings on Levi Strauss & Co.: -- Issuer Default Rating (IDR) 'B-' -- $650 million asset-based loan 'BB-/RR1' -- $1.8 billion unsecured notes 'B/RR3' Fitch also expects to rate Levi's new senior unsecured notes 'B/RR3'. In addition, Fitch withdrew its 'BB-/RR1' ratings on Levi's $500 million senior secured term loan. The Rating Outlook is Stable. The rating actions follow Levi's announcement that it is repaying its existing senior secured term loan with proceeds from: * a EUR100 million add-on to its existing 8.625% senior unsecured Euro notes due 2013; and * $350 million new senior unsecured notes due 2016 plus cash on hand. This transaction extends Levi's debt maturity profile by eliminating the 2009 maturity of the term loan and removes a substantial piece of secured debt from the company's capital structure. Proforma debt as of Nov.27, 2005 and corresponding adjusted leverage will remain unchanged. The ratings reflect the strengthened credit metrics that have resulted from Levi's initiatives to streamline and rationalize its operations and stabilize its core product areas. The ratings also consider: * Levi's well-known brand name, and * geographic diversity; offset by: * the company's heavy debt burden, * challenges in the US Dockers and European businesses, and * the highly competitive nature of the denim and casual bottoms market. Fitch derives recovery values and recovery ratings (RR) from an analysis and valuation of Levi's operations. The 'RR1' recovery rating assigned to Levi's secured asset-based loan reflects Fitch's view that in a distressed scenario, the secured bank facility would achieve full recovery. Under the same distressed scenario, Fitch determined that the recovery value for general senior unsecured creditors would be good at 51-70%, and has assigned a 'RR3' rating to this class of debt. In the event of a bankruptcy filing, Fitch estimates that the majority or 74% of claims would be on a senior unsecured basis. LEVI STRAUSS: Moody's Lifts Caa2 Sr. Unsecured Debt Rating to B3 ---------------------------------------------------------------- Moody's Investors Service upgraded Levi Strauss & Co.'s: -- corporate family rating to B2 from Caa1, -- senior secured debt rating to B1 from B3, and -- senior unsecured debt rating to B3 from Caa2. The outlook is stable. Moody's also assigned a rating of B3 to two proposed senior unsecured debt issues announced. Levi Strauss is planning to issue a EUR100 million note due in 2013, which will be an add-on to its existing Euro note, and a $350 million senior unsecured note due in 2016. The proceeds will be used to repay a $489 million senior secured term loan, prepayment premiums of approximately $17 million, and approximately $12 million in transaction costs. The new debt will rank equally with the company's other senior unsecured debt as a general obligation of Levi Strauss & Co., the parent company of Levi's numerous global operating subsidiaries. Following the repayment of the senior secured term loan, the senior secured debt rating will be withdrawn. The ratings upgrades recognize: -- the significant progress the company has made in stabilizing its business, improving profitability and liquidity; -- the resolution of its long standing tax issues; -- the company's extended maturity profile and reduced interest expense following the refinancing; and -- Levi's significant geographic diversification, with approximately 43% of operating income coming from outside of North America. The ratings continue to reflect the intense competitive environment that Levi Strauss faces; the potential for volatility in gross margin and working capital; the impact of currency fluctuations on results; and the underperformance of the Dockers brand. Levi Strauss faces significant competition from VF Corp, Calvin Klein, Polo Jeans, and Tommy Hilfiger, among others, in its core markets. The ratings also encompass Levi's challenge in translating improved operating performance into sustained improvements to its financial position. Levi's stronger operating performance has not fully translated into improved free cash flow thus far, as the Signature rollout, tax payments, fluctuations in working capital and various employment costs have added volatility to cash flows. The stable ratings outlook reflects Moody's expectation that the company should be able to generate meaningful operating cash flow, net of working capital changes, and that recent improvements in operating margins will be sustained at levels above 10%. The outlook also incorporates the possibility of a moderate amount of volatility in gross margin and working capital as the company proceeds with the rollout of its SAP system and the expectation that sales may fall in the first half of 2006 as Federated and Mervyn's shutter approximately 160 stores. Moody's does not expect any movement on the ratings for the medium term absent a transforming transaction, such as a major delevering event on the upside or unexpected liquidity event on the downside. In the longer term, upward momentum could result from additional improvements in profitability, increased consistency in free cash flow generation leading to de-leveraging, or signs of a turnaround in the Dockers brand. A ratings upgrade could occur if the company maintains its operating margin at levels above 13%, increases retained cash flow /debt to levels in excess of 14%, raises free cash flow/debt to at least 8.5%, and EBIT/interest reaches 2.75x, for a sustained period. Downward rating pressure could result from significant sales declines in any of the company's brands, a sustained decline in operating margin below 10%, retained cash flow/debt below 5.0%, or EBIT/interest expense falling to 2.0x or lower, for a sustained period. Levi Strauss & Co., headquartered in San Francisco, California, is one of the world's largest branded designers, manufacturers and marketers of apparel. The company designs and distributes jeans and jeans-related pants, casual and dress pants, shirts, jackets and related accessories for men, women and children under the Levi's(R), Dockers(R) and Levi Strauss Signature(TM) brands and markets its products in more than 110 countries worldwide. Revenues were approximately $4.1 billion for the fiscal year ended Nov. 28, 2005. LEVI STRAUSS: S&P Puts B- Rating on Proposed $470 Million Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to apparel marketer and distributor Levi Strauss & Co.'s proposed $470 million senior notes due 2016 and euro-denominated 8.625% senior notes due 2013. Proceeds from the notes will be used to repay the company's secured $500 million term loan. These ratings are subject to Standard & Poor's review of the final documentation. Upon completion of the above transaction, the ratings on the term loan will be withdrawn. At the same time, Standard & Poor's affirmed its ratings on the San Francisco-based company, including the 'B-' long-term corporate credit rating. The outlook is stable. Levi Strauss had about $2.3 billion in debt outstanding at Nov. 27, 2005. "The affirmation incorporates the company's improved operating performance and enhanced liquidity profile, and our expectation that these trends will continue," said Standard & Poor's credit analyst Susan H. Ding. Although Levi Strauss reported improvement in operating margins and cash flows for the fiscal year ended Nov. 27, 2005, the company announced it expected that revenues and operating earnings for the first quarter, ended February 2006, will be lower as a result of: * decreased demand in Europe; * the impact of foreign currency exchange rates; and * lower sales in the U.S. as retailers carry smaller inventories of Levi's apparel. The ratings on Levi Strauss reflect its highly leveraged financial profile and its participation in the intensely competitive denim and casual pants market. The ratings also incorporate the inherent fashion risk in the apparel industry and company-specific rating concerns, including management's ability to sustain the company's positive operating momentum and revitalize core Levi's and Dockers sales. The ratings also incorporate the company's improving operating performance and enhanced liquidity profile, and our expectation that these trends will continue. Although Levi Strauss is beginning to realize the benefits of its restructuring efforts, the European business continues to be problematic because of a persistent weak retail environment. The company's mass-channel Levi Strauss Signature line has provided much-needed diversification of revenue and distribution channels. Nevertheless, the Signature line requires significant working capital investments, particularly additional inventory investment to support the level of service and replenishment required to do business with Wal-Mart Stores Inc. Standard & Poor's has had long-standing concerns regarding the company's inventory management systems and practices. The company's ability to maintain optimal inventories and high service levels will continue to be a rating concern. Standard & Poor's expects that Levi Strauss will continue to invest in inventory and to increase marketing spending to support all of its brands. Levi Strauss' recent refinancing efforts have enhanced its liquidity profile by extending maturities. However, total debt and leverage remain high. They are not expected to improve materially in the near term because the company's free cash flow will be used to meet significant required cash outlays of about $450 million for fiscal 2006, primarily for interest and pension expense, and for income taxes. LONGVIEW FIBRE: Rejects Purchase Proposal from Obsidian & Campbell ------------------------------------------------------------------ Longview Fibre Company (NYSE:LFB) confirmed that Obsidian Finance Group, LLC and The Campbell Group LLC sought to engage the company in discussions regarding their unsolicited, conditional proposal to acquire the company. Since first approached in December, the Board of Directors carefully considered the proposal and concluded that it was in the best interests of Longview and its shareholders to complete the REIT conversion process rather than pursue discussions with Obsidian and The Campbell Group. The company's Board of Directors, with the assistance of the company's financial and legal advisors, carefully considered the proposal both on its merits and in light of the market, interest-rate and transaction-completion risks associated with delays in completing the company's refinancing and the other steps necessary for the company to complete its conversion to a real estate investment trust. The proposal is conditional, subject to a due diligence investigation and obtaining financing, as well as other conditions. The company and its Board of Directors have carefully studied the REIT conversion and other alternatives for the past year. The Board of Directors is committed to maximizing shareholder value and in that regard believes the REIT conversion and related financings are integral components of the company's value creation strategy. Headquartered in Longview, Washington, Longview Fibre Company -- http://www.longviewfibre.com/-- is a diversified timberlands owner and manager, and a specialty paper and container manufacturer. Using sustainable forestry methods, the company manages approximately 587,000 acres of softwood timberlands predominantly located in western Washington and Oregon, primarily for the sale of logs to the U.S. and Japanese markets. Longview Fibre's manufacturing facilities include a pulp-paper mill at Longview, Washington; a network of converting plants; and a sawmill in central Washington. The company's products include: logs; corrugated and solid-fiber containers; commodity and specialty kraft paper; paperboard; and dimension and specialty lumber. * * * As reported in the Troubled Company Reporter on Mar. 2, 2006, Moody's Investors Service affirmed Longview Fibre Company's corporate family rating at Ba3, senior secured debt at Ba2, and senior subordinate debt at B2. The rating agency also assigned a rating of B1 to the REIT's proposed senior unsecured notes. Longview Fibre's rating outlook is stable. According to Moody's, these ratings reflect Longview Fibre's progress towards completing its conversion to a REIT, which was first announced in July 2005, as well as the firm's intention to continue pursuing its established business strategy of operating in the timber, paper and paperboard, and converted products segments. The proceeds of the planned senior note issuance, as well as common equity, will be utilized to pay the cash portion of the earnings and profits distribution required for REIT conversion, which is anticipated to range between $70 and $75 million, as well as to tender for Longview Fibre's senior subordinated notes due 2009. LONGVIEW FIBRE: Postpones Common Stock and Senior Note Offerings ---------------------------------------------------------------- Longview Fibre Company (NYSE: LFB) postponed its proposed offerings, which would consist of 10,000,000 shares of the company's common stock and $150 million of senior unsecured notes maturing in 2016, and that the related tender offer and consent solicitation for its outstanding 10% senior subordinated notes due 2009 has been terminated. These offerings and the related tender offer and consent solicitation are part of the company's refinancing in connection with its conversion to a real estate investment trust. In December 2005, the company received an unsolicited proposal from Obsidian Finance Group, LLC and The Campbell Group, LLC. The proposal is conditional, subject to a due diligence investigation and obtaining financing, as well as other conditions. Following receipt of the proposal, the company's financial advisors, through discussions with Obsidian, The Campbell Group and their financial advisor, sought to obtain information regarding the viability of the transaction structure and the source of Obsidian's equity capital, which was not provided. With the assistance of the company's financial and legal advisors, the Board of Directors carefully considered the proposal and determined that it was in the best interests of the company and its shareholders to proceed with the REIT conversion process, and not to pursue further discussions with Obsidian and The Campbell Group. The company will continue to monitor the situation so that it can proceed with the offerings and the related tender offer and consent solicitation if and when, in its judgment, it is appropriate to do so. The Board remains committed to the best interests of the company's shareholders. Headquartered in Longview, Washington, Longview Fibre Company -- http://www.longviewfibre.com/-- is a diversified timberlands owner and manager, and a specialty paper and container manufacturer. Using sustainable forestry methods, the company manages approximately 587,000 acres of softwood timberlands predominantly located in western Washington and Oregon, primarily for the sale of logs to the U.S. and Japanese markets. Longview Fibre's manufacturing facilities include a pulp-paper mill at Longview, Washington; a network of converting plants; and a sawmill in central Washington. The company's products include: logs; corrugated and solid-fiber containers; commodity and specialty kraft paper; paperboard; and dimension and specialty lumber. * * * As reported in the Troubled Company Reporter on Mar. 02, 2006, Moody's Investors Service affirmed Longview Fibre Company's corporate family rating at Ba3, senior secured debt at Ba2, and senior subordinate debt at B2. The rating agency also assigned a rating of B1 to the REIT's proposed senior unsecured notes. Longview Fibre's rating outlook is stable. According to Moody's, these ratings reflect Longview Fibre's progress towards completing its conversion to a REIT, which was first announced in July 2005, as well as the firm's intention to continue pursuing its established business strategy of operating in the timber, paper and paperboard, and converted products segments. The proceeds of the planned senior note issuance, as well as common equity, will be utilized to pay the cash portion of the earnings and profits distribution required for REIT conversion, which is anticipated to range between $70 and $75 million, as well as to tender for Longview Fibre's senior subordinated notes due 2009. METROMEDIA INT'L: Provides Update on Fuqua Shareholder Litigation ----------------------------------------------------------------- Metromedia International Group, Inc. (currently traded as: (PINK SHEETS: MTRM) - Common Stock and (PINK SHEETS: MTRMP) - Preferred Stock) reported that a settlement hearing in the In Re Fuqua Industries action was held on March 6, 2006, in the Court of Chancery of the State of Delaware. At the Settlement Hearing, the Court approved the terms of the settlement memorialized in the Stipulation and Agreement of Compromise, Settlement and Release of Claims, dated Dec. 30, 2005, and entered the Order and Final Judgment effectively ending this legal action for the previously agreed upon $7 million settlement. Pursuant to the terms of the settlement, the Settlement Amount will be released from escrow upon expiration of a 30-day appeal period. Upon distribution from the escrow account, the Company will receive approximately $4.6 million of the Settlement Amount with the remaining $2.4 million distributed to the plaintiffs' attorneys for fees and expenses incurred. Since this action was brought on behalf of the Company, the funds received by the Company from the Settlement Amount will go directly to the Company and not to individual stockholders. Through its wholly owned subsidiaries, Metromedia International Group, Inc. -- http://www.metromedia-group.com/-- owns interests in communications businesses in the country of Georgia. Since the first quarter of 2003, the Company has focused its principal attentions on the continued development of its core telephony businesses, and has substantially completed a program of gradual divestiture of its non-core cable television and radio broadcast businesses. The Company's core businesses includes Magticom, Ltd., the leading mobile telephony operator in Tbilisi, Georgia, and Telecom Georgia, a well-positioned Georgian long distance telephony operator. * * * Moody's Investors Service has placed Metromedia's subordinated debt rating at B3 and junior subordinated debt rating at B2. MICRON TECH: Buying Lexar Media in Stock-for-Stock Merger --------------------------------------------------------- Micron Technology, Inc. (NYSE: MU) entered into a definitive agreement to acquire Lexar Media, Inc. (NASDAQ: LEXR) in a stock- for-stock merger. Under terms of the agreement, each outstanding common share of Lexar will receive 0.5625 shares of Micron stock. Micron anticipates issuing shares in exchange for 81.6 million Lexar shares outstanding. Additional Micron shares will be issued upon the exercise of assumed stock options. The acquisition will strengthen Micron's position in the NAND flash business and enable the company to deliver innovative NAND flash solutions from design, development and manufacturing to marketing and sales of products to worldwide consumers and device manufacturers. The merger is designed to combine Micron's technology and manufacturing leadership in NAND flash memory with Lexar's leadership in NAND controller and system design technology, brand recognition and retail channel strength to create a vertically integrated entity fully focused on the NAND business. "With this acquisition, Micron will have a complete package of NAND memory solutions for our customers," Steve Appleton, Micron chairman, CEO and president said. "Together with our NAND designs, technology, manufacturing capability and distribution channels, Micron is in a strong position to serve the flash storage requirements of consumer electronics and enterprise customers." "Through this acquisition, we expect to better align Lexar's cost structure with business conditions and increase our development and go-to-market scale in order to compete more effectively," Eric Stang, Lexar chairman, CEO and president said. "By merging with Micron, Lexar can achieve significant cost synergies and become better positioned to satisfy customer needs and establish faster growth, especially in new emerging mobile handset and solid-state computing businesses. We view this as an exciting opportunity for our company and its shareholders." The transaction is subject to regulatory review, Lexar stockholder approval and other customary closing conditions. Completion of the merger is expected by the end of the third calendar quarter. Upon closing, Lexar, as a continuing entity, will become a wholly owned subsidiary of Micron, and Lexar's stock will cease trading on the NASDAQ stock market. About Lexar Headquartered in Fremont, Calif., Lexar -- http://www.lexar.com/ -- is a leading marketer and manufacturer of NAND flash memory products including memory cards, USB flash drives, card readers and ATA controller technology for the digital photography, consumer electronics, industrial and communications markets. About Micron Technology Micron Technology, Inc. -- http://www.micron.com/-- is one of the world's leading providers of advanced semiconductor solutions. Through its worldwide operations, Micron manufactures and markets DRAMs, NAND flash memory, CMOS image sensors, other semiconductor components, and memory modules for use in leading-edge computing, consumer, networking, and mobile products. * * * On Dec. 8, 2005, Moody's Investors Service revised its ratings outlook on Micron Technology to stable (Corporate Family Rating at Ba3). As reported in the Troubled Company Reporter on Jan. 13, 2005, Moody's affirmed these ratings: * Senior Implied rating at Ba3 * Issuer rating at Ba3 * Senior unsecured shelf registration rated at (P) Ba3 * Subordinated shelf registration rated at (P) B2 * $632 million 2.5% convertible subordinated notes due February 2010 at B2 * $210 million 6.5%, junior subordinated notes due September 2005 at B2 reflecting Micron Technology's improved operating results over the last few quarters and expectations that, while perhaps less robust, Micron should demonstrate good results over the next year. The ratings outlook, Moody's said, remains negative, driven by continued concerns of its ability to sustain positive cash flow from operations after meeting investment requirements. MIRANT CORP: Court Defines Examiner's Post-Confirmation Duties -------------------------------------------------------------- In light of the confirmation of Mirant Corporation and its debtor-affiliates' Plan of Reorganization and the Debtors' emergence from bankruptcy, Judge Michael D. Lynn of the U.S. Bankruptcy Court for the Northern District of Texas modifies the scope of duties of William K. Snyder, the Court-appointed examiner in the Debtors' cases, to reflect that: (a) With respect to the Confirmed Debtors, the Examiner's role is restricted to the continuation and completion of the tasks and investigations outstanding as of the Effective Date of the Plan, including: * the mediation of all remaining claims, causes of action and other disputes among the Debtors, Potomac Electric Power Company and Southern Maryland Electric Cooperative; * the investigation of the claims trading activities of Debt Settlement Associates and Richard J. Feferman; * the prosecution of the pending adversary proceeding styled William K. Snyder and Mirant Corporation v. Richard J. Feferman and Debt Settlement Associates, LLC, Case No. 05-04236; * the evaluation of whether the $100,000 sanction imposed by the Court against a bonus pool available to certain of the Debtors' senior officers should be reallocated between the senior officers and the Debtors' outside professionals; * the Examiner's continued participation as a member of the Fee Review Committee; and * any other investigation or other task that the Court may direct the Examiner to undertake; (b) The Examiner will continue to perform his duties and exercise his powers and responsibilities with respect to the Excluded Debtors: (1) Mirant Bowline, LLC; (2) Mirant Lovett, LLC; (3) Mirant New York, Inc.; (4) Mirant NY-Gen, LLC; and (5) Hudson Valley Gas Corporation; (c) The Examiner will consult with the Debtors to determine whether any or all of the interim reports and other pleadings previously submitted by the Examiner under seal still contain confidential information. To the extent that any reports or pleadings are no longer required to be sealed, the Examiner is authorized to file pleadings to seek an order unsealing those reports and pleadings; and (d) The Examiner, personally or through his professionals, will take custody of all printed or other transferable work product generated by, or at the direction of, the Valuation Implementation Committee in connection with their work to implement the rulings contained in the Court's letter ruling dated June 30, 2005. The Court directs the Debtors and the VIC members to cooperate with the Examiner in collecting and turning over all work product. The Court reduces the Examiner's quarterly rolling average Budget to $250,000 per quarter for the period from and after January 3, 2006. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590), and emerged under the terms of a confirmed Second Amended Plan on January 3, 2006. Thomas E. Lauria, Esq., at White & Case LLP, represented the Debtors in their successful restructuring. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 93 Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 8, 2005, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. and said the outlook is stable. That rating reflected the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005, S&P said. MIRANT CORP: Examiner Taps Morris Nichols for Southern Co. Matters ------------------------------------------------------------------ Michael K. Snyder, the Chapter 11 Examiner appointed in Mirant Corporation and its debtor-affiliates' cases, relates that shortly after his appointment, he commenced an investigation into certain issues pertaining to potential causes of action against The Southern Company. Certain of the issues centered on the question of whether Delaware, Georgia or Texas law would apply, with the outcome varying significantly depending on which state's law proved applicable. In July and August 2004, Mr. Snyder and his professionals consulted briefly with Morris, Nichols, Arsht & Tunnell, a the Delaware firm, regarding the probable impact of the application of Delaware law on the causes of action. As a result, Morris Nichols incurred $13,752 in total fees and expenses. Mr. Snyder notes that the firm did not perform additional services for him after August 2004. Owing to other pressing matters, Mr. Snyder tells the Court that he failed to present the issue regarding Morris' engagement and fees. For this reason, Mr. Snyder asks Judge Lynn to designate Morris Nichols as a "non-core professional" as that term is used in the "Stipulation Regarding Payment of Expert Witnesses and Non-core Professionals in the Ordinary Course of Business" dated October 5, 2003. Pursuant to the Stipulation, certain professionals employed by the Debtors and the statutory committees were excused from the requirements of Sections 327, 330, 331 and 1103 of the Bankruptcy Code. The Professionals are employed and compensated "in the ordinary course of business, without further Court order." The Stipulation, according to Mr. Snyder, describes Non-core Professionals to include "engineers, environmental consultants, experts, including testifying and non-testifying expert witnesses, biological professionals, construction managers, and other technical consultants." Mr. Snyder believes that allowing Morris Nichols to be designated as a "Non-core Professional" would eliminate the need for the Debtors' estate to incur additional cost. In the event the Court denies his request, Mr. Snyder asks the Court to extend the deadline for the filing of final fee applications to permit Morris Nichols to file the necessary applications for employment and compensation. Judge Lynn designates Morris Nichols as a Non-core Professional. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590), and emerged under the terms of a confirmed Second Amended Plan on January 3, 2006. Thomas E. Lauria, Esq., at White & Case LLP, represented the Debtors in their successful restructuring. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 93 Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 8, 2005, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. and said the outlook is stable. That rating reflected the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005, S&P said. MIRANT CORP: Grants Stock Option to Eight Officers -------------------------------------------------- The Compensation Committee of the Board of Directors of Mirant Corporation approved grants of stock options and restricted stock unit awards to eight executive officers pursuant to the Company's 2005 Omnibus Incentive Plan: Number of No. of Restricted Name Stock Options Stock Units ---- ------------- ----------------- Edward R. Muller 405,844 81,169 James V. Iaco 121,753 24,351 Robert M. Edgell 128,517 25,703 S. Linn Williams 108,225 21,645 William P. von Blasingame 37,202 7,440 James R. Harris 20,292 4,058 Vance N. Booker 23,674 4,735 Thomas E. Legro 27,056 5,411 Award amounts for Messrs. Muller, Iaco, Edgell, Williams, von Blansingame and Legro are based on an economic value agreed to as part of their employment agreement. The Stock Options will be given in four equal installments on July 3, 2006, January 3, 2007, January 3, 2008 and January 3, 2009, subject to certain conditions specified in the award agreement. The Restricted Stock Units will be given in four equal installments during the same dates, subject to certain conditions specified in the award agreement. Messrs. Harris's and Booker's stock options and RSUs will be given in three equal installments every January 13 beginning 2007 through 2009. Mirant Corporation Senior Vice President and Controller Thomas Legro notes that the Options were granted at a purchase price of $24.64, the closing selling price per share of the Company's common stock on the New York Stock Exchange on the date preceding the grant. The Options will expire on January 13, 2016. A full-text copy of the Stock Option Award Agreement is available at the Securities and Exchange Commission: http://ResearchArchives.com/t/s?647 A full-text copy of the Restricted Stock Unit Agreement is available at the Securities and Exchange Commission: http://ResearchArchives.com/t/s?648 Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590), and emerged under the terms of a confirmed Second Amended Plan on January 3, 2006. Thomas E. Lauria, Esq., at White & Case LLP, represented the Debtors in their successful restructuring. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 93 Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Dec. 8, 2005, Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. and said the outlook is stable. That rating reflected the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005, S&P said. MKP CBO: Credit Quality Decline Cues Moody's to Watch Ratings ------------------------------------------------------------- Moody's Investors Service placed these notes issued by MKP CBO II, Ltd., a structured finance collateralized debt obligation issuer, on watch for possible downgrade: (1) The U.S. $61,250,000 Class A-2 Senior Secured Floating Rate Revolving Notes, Due 2036 Prior Rating: Aaa Current Rating: Aaa (on watch for possible downgrade) (2) The U.S. $18,000,000 Class B Second Priority Floating Rate Term Notes, Due 2036 Prior Rating: A3 Current Rating: A3 (on watch for possible downgrade) (3) The U.S. $12,500,000 Class C-1 Third Priority Floating Rate Term Notes, Due 2036 Prior Rating: Caa2 Current Rating: Caa2 (on watch for possible downgrade) (4) The U.S. $12,500,000 Class C-2 Third Priority Fixed Rate Term Notes, Due 2036 Prior Rating: Caa2 Current Rating: Caa2 (on watch for possible downgrade) According to Moody's, the rating actions are the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consisting primarily of structured finance securities, as well as the occurrence of asset defaults and par loss. NRG ENERGY: Earns $64 Million of Net Income in Fourth Quarter ------------------------------------------------------------- NRG Energy, Inc. (NYSE: NRG), reported net income of $64 million for the fourth quarter compared to $19 million for the same period in the prior year. Net income for 2005 totaled $84 million versus $186 million in 2004. The quarter-on-quarter increase was driven primarily by higher generation and more favorable market pricing in the Northeast region, coupled with lower G&A (approximately $25 million) and reduced interest and refinancing costs ($56 million). Full-year results for 2005 versus 2004 were favorably affected by higher energy prices, increased generation from our New York City assets, lower general and administrative costs, and reduced interest and refinancing expenses. Offsetting these improvements was $119 million of net domestic MtM losses related to the Company's open asset-backed hedges that are economically neutral to the Company. In addition, non-core asset divestitures and other changes within the portfolio also accounted for a portion of the decline. "This was an eventful year for NRG, and we are a stronger and better positioned company at all levels today-commercial, operations, regulatory and financial-than at any time in our past," said David Crane, NRG's President and Chief Executive Officer. "This year we built on the Company's strong foundation to extend NRG's strategic and competitive advantages within the industry. We have continued to focus on commercial and operational excellence-through such programs as FORNRG, strategic hedging and risk management policies, disciplined acquisitions and divestitures-while maintaining our commitment to prudent balance sheet management and return of capital to stakeholders." MtM Impacts of Hedging and Trading Activities In the fourth quarter of 2004 and over the course of 2005, the Company entered into contracts to lock in forward prices for a significant portion of its expected power generation, largely related to our Northeast assets, for the balance of 2005 and calendar year 2006. These hedging activities are intended to mitigate the risk of commodity price movements on revenues and cost of energy sold. While these transactions are predominately economic hedges of the portfolio, a majority of NRG's current forward sales portfolio are afforded hedge accounting treatment. The sharp rise in forward electricity prices, particularly during the third quarter, led the Company to record $206 million in year-to-date MtM losses through the third quarter associated with our open economic hedged positions. During the fourth quarter 2005, lower forward electricity prices led to a $87 million net reduction in the Company's MtM loss at year end. Additionally, during the fourth quarter of 2005 we had $27 million in MtM gains resulting from entering into various transactions not tied to specific assets, but to support our overall portfolio. Outlook The Company reaffirmed its adjusted EBITDA guidance outlook for 2006-adjusted EBITDA of $1.6 billion-and is increasing its cash flow from operations guidance by $140 million to nearly $1.4 billion. The improved outlook for cash flow from operations reflects lower interest rates and the timing of cash interest payments of our new debt facilities. With respect to the Company's adjusted EBITDA and cash flow from operations guidance, our outlook, as always, is based on normal weather patterns going forward. As such, if the unusually moderate weather experienced to date in 2006 should continue through the remainder of the winter or if we experience an unusually moderate summer, this would likely result in a declining 2006 outlook for adjusted EBITDA and cash flow from operations. Adjusted EBITDA and cash flow from operations guidance excludes the net impact of the pending West Coast Power and Rocky Road transactions. NRG Energy, Inc., currently owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and Western regions of the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. NRG also has ownership interests in generating facilities in Australia and Germany. * * * Moody's Investors Service has withdrawn certain of the ratings for NRG Energy, Inc., and all of the ratings for Texas Genco, LLC following the February 2, 2006, completion of the $8.7 billion acquisition of TGN by NRG. To finance the acquisition, NRG raised $1.5 billion of common stock and convertible securities, established $5.6 billion of new credit facilities and issued $3.6 billion of senior unsecured debt. Proceeds were used to acquire TGN, to repay secured term loans at NRG and TGN, to replace existing revolving credit facilities at NRG and TGN, and to tender for $1.371 billion of 8.0% second lien notes at NRG and $1.125 billion of 6.875% senior unsecured notes at TGN. Following the competion of the tenders, substantially all of NRG's 8.0% second lien notes were repaid and all of TGN's 6.875% senior unsecured notes were repaid. Ratings Withdrawn at NRG: -- $150 million Senior Secured Bank Credit Facility due 2007, rated Ba2 -- $800 million Senior Secured Bank Credit Facility due 2011, rated Ba2 -- $1.371 billion 8.0% Senior Secured Second Lien Notes due 2013, rated Ba3 Ratings Withdrawn at TGN: -- Corporate Family Rating, rated Ba3 -- Speculative Grade Liquidity Rating, rated SGL-2 -- $200 million Senior Secured Bank Credit Facility, rated Ba2 -- $325 million Senior Secured Bank Credit Facility, rated Ba2 -- $344.35 million Senior Secured Bank Credit Facility due 2009, rated Ba2 -- $475 million Senior Secured Bank Credit Facility, rated Ba2 -- $1.15 billion Senior Secured Bank Credit Facility due 2011, rated Ba2 -- $1.125 billion 6.875% Senior Unsecured Notes due 2014, rated B1 Outlook Action at TGN: -- Ratings Outlook, Withdrawn, from Stable As reported in the Troubled Company Reporter on Jan. 16, 2006, Fitch Ratings has initiated rating coverage of NRG Energy, Inc. by assigning a 'BB' rating to NRG's proposed $5.2 billion secured credit facility, consisting of: * a $3.2 billion secured term loan B and $2 billion of revolving credit/synthetic letter of credit facilities, * a 'B' rating to NRG's proposed $3.6 billion issuance of senior unsecured notes, and * a 'CCC+' rating to NRG's proposed issuance of $500 million mandatory convertible preferred stock. In addition, Fitch has assigned NRG a 'B' issuer default rating, as well as recovery ratings for the proposed debt instruments. The Rating Outlook is Stable. The ratings have been initiated by Fitch as a service to investors. Recovery ratings by Fitch are: NRG Energy, Inc. -- $3.2 billion secured term loan 'RR1'; -- $1 billion secured revolving credit line 'RR1'; -- $1 billion secured synthetic letter of credit 'RR1'; -- $3.2 billion senior unsecured notes 'RR4'; -- $500 million mandatory convertible preferred stock 'RR6' As reported in the Troubled Company Reporter on Jan. 9, 2006, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on power generation company NRG Energy Inc. Standard & Poor's also assigned its: * 'BB-' rating and '1' recovery rating to NRG's $3.2 billion first lien term loan B and $2 billion revolving credit and LOC facilities, * 'B-' rating to NRG's $3.6 billion unsecured notes, and * 'CCC+' rating to NRG's $500 million mandatory convertible securities. The 'BB-' rating and '1' recovery rating on the $3.2 billion term loan B and $2 billion revolving credit and LOC facilities indicate the expectation of full recovery of principal in the event of a payment default. Standard & Poor's affirmed its 'CCC+' ratings on NRG's preferred stock issues. The stable outlook reflects Standard & Poor's view that NRG's credit quality should not significantly deteriorate in the short term. NRG ENERGY: Saves $39MM in 2005; Expects $59MM Savings This Year ---------------------------------------------------------------- NRG Energy, Inc. (NYSE: NRG), disclosed updates on its FORNRG program, a comprehensive cost and margin improvement program, consisting of a large number of asset, portfolio and headquarters- specific targeted initiatives. In May 2005, NRG announced FORNRG. The ultimate objective of this program was to produce $100 million of recurring benefits by 2008. As of Dec. 31, 2005, FORNRG achieved $39 million of related savings, exceeding the Company's $30 million first year savings target. For 2006, NRG expects to achieve approximately $59 million of recurring cumulative savings, principally through improved performance at NRG's coal-fired plants. The $59 million target is up from the Company's prior estimate of $54 million, reflecting the recurring benefit of our first year's success with the cumulative goal being $105 million. NRG's hedging and trading activities require credit collateral support when prices change from the levels where trades were executed. Collateral supporting these activities at December 31, 2005, totaled $530 million, of which $438 million was in cash and $92 million was letters of credit. Any outstanding collateral is returned when the underlying trades settle. Cash collateral returned between year-end 2005 and March 3, 2006, was $271 million. NRG Energy, Inc., currently owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and Western regions of the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. NRG also has ownership interests in generating facilities in Australia and Germany. * * * Moody's Investors Service has withdrawn certain of the ratings for NRG Energy, Inc., and all of the ratings for Texas Genco, LLC following the February 2, 2006, completion of the $8.7 billion acquisition of TGN by NRG. To finance the acquisition, NRG raised $1.5 billion of common stock and convertible securities, established $5.6 billion of new credit facilities and issued $3.6 billion of senior unsecured debt. Proceeds were used to acquire TGN, to repay secured term loans at NRG and TGN, to replace existing revolving credit facilities at NRG and TGN, and to tender for $1.371 billion of 8.0% second lien notes at NRG and $1.125 billion of 6.875% senior unsecured notes at TGN. Following the competion of the tenders, substantially all of NRG's 8.0% second lien notes were repaid and all of TGN's 6.875% senior unsecured notes were repaid. Ratings Withdrawn at NRG: -- $150 million Senior Secured Bank Credit Facility due 2007, rated Ba2 -- $800 million Senior Secured Bank Credit Facility due 2011, rated Ba2 -- $1.371 billion 8.0% Senior Secured Second Lien Notes due 2013, rated Ba3 Ratings Withdrawn at TGN: -- Corporate Family Rating, rated Ba3 -- Speculative Grade Liquidity Rating, rated SGL-2 -- $200 million Senior Secured Bank Credit Facility, rated Ba2 -- $325 million Senior Secured Bank Credit Facility, rated Ba2 -- $344.35 million Senior Secured Bank Credit Facility due 2009, rated Ba2 -- $475 million Senior Secured Bank Credit Facility, rated Ba2 -- $1.15 billion Senior Secured Bank Credit Facility due 2011, rated Ba2 -- $1.125 billion 6.875% Senior Unsecured Notes due 2014, rated B1 Outlook Action at TGN: -- Ratings Outlook, Withdrawn, from Stable As reported in the Troubled Company Reporter on Jan. 16, 2006, Fitch Ratings has initiated rating coverage of NRG Energy, Inc. by assigning a 'BB' rating to NRG's proposed $5.2 billion secured credit facility, consisting of: * a $3.2 billion secured term loan B and $2 billion of revolving credit/synthetic letter of credit facilities, * a 'B' rating to NRG's proposed $3.6 billion issuance of senior unsecured notes, and * a 'CCC+' rating to NRG's proposed issuance of $500 million mandatory convertible preferred stock. In addition, Fitch has assigned NRG a 'B' issuer default rating, as well as recovery ratings for the proposed debt instruments. The Rating Outlook is Stable. The ratings have been initiated by Fitch as a service to investors. Recovery ratings by Fitch are: NRG Energy, Inc. -- $3.2 billion secured term loan 'RR1'; -- $1 billion secured revolving credit line 'RR1'; -- $1 billion secured synthetic letter of credit 'RR1'; -- $3.2 billion senior unsecured notes 'RR4'; -- $500 million mandatory convertible preferred stock 'RR6' As reported in the Troubled Company Reporter on Jan. 9, 2006, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on power generation company NRG Energy Inc. Standard & Poor's also assigned its: * 'BB-' rating and '1' recovery rating to NRG's $3.2 billion first lien term loan B and $2 billion revolving credit and LOC facilities, * 'B-' rating to NRG's $3.6 billion unsecured notes, and * 'CCC+' rating to NRG's $500 million mandatory convertible securities. The 'BB-' rating and '1' recovery rating on the $3.2 billion term loan B and $2 billion revolving credit and LOC facilities indicate the expectation of full recovery of principal in the event of a payment default. Standard & Poor's affirmed its 'CCC+' ratings on NRG's preferred stock issues. The stable outlook reflects Standard & Poor's view that NRG's credit quality should not significantly deteriorate in the short term. NUANCE COMM: Strong Market Position Prompts Moody's B1 Ratings -------------------------------------------------------------- Moody's Investors Service assigned first time corporate family rating of B1 to Nuance Communications, Inc., and B1 ratings to Nuance's proposed senior secured term loan facility and senior secured revolving credit facility. Proceeds of $355 million from the term loan along with cash on hand will be used to finance the acquisition of Dictaphone Corporation. The rating outlook is stable. These ratings were assigned: * Corporate family rating -- B1 * $75 million senior secured revolving credit facility due 2012 -- B1 * $355 million senior secured term loan facility due 2013 -- B1 The B1 corporate family rating reflects: (1) generally favorable macro environment for speech recognition software industry; (2) Nuance's strong market positions in respective product segments, in part due to its lead time in building up its speech technologies and number of languages supported -- both of which are key competitive advantages; (3) reasonable leverage and coverage statistics, assuming the realization of acquisitions synergies; (4) the expectation that Nuance will be free cash flow positive going forward. The rating also considers: (1) still modest scale of Nuance's business with pro forma revenue of $440 million post the Dictaphone acquisition; (2) Nuance's limited track record as a standalone company due to its rapid pace of acquisitions, possible risks related to integrations, and challenges associated with cost synergy realization; (3) the presence of competitors which are much bigger and better capitalized; (4) continued lack of reported GAAP profitability with negative net income for the past 3 years; (5) reliance on non-core imaging business for cash flow; and (6) limited asset protection from a small base of tangible assets. Originally a Xerox spin-off as a document imaging company, Nuance has transformed itself to its current focus of speech recognition software business through a number of acquisitions since 2001. It has a limited track record as a standalone entity and has made about 7 acquisitions over the past 2 years. Some of the companies acquired, including Dictaphone, had a checkered past. The two major recent acquisitions are legacy Nuance in September 2005 and the current Dictaphone acquisition, which combined will contribute almost 50% of Nuance's pro forma revenue of $440 million. The rapid pace of acquisitions naturally carries integration risks and demands management resources, as Nuance integrates various software engines from a technology standpoint, and in the case of Dictaphone, distribution channels as well. The general macro environment for speech recognition and dictation software appears to be strong. Nuance has apparently built up lead time in its capabilities controlling a wide range of speech technologies currently available and it also benefits from the depth of its statistical sampling tools and the number of languages its software supports. However, the competitive environment for the industry is complex where Nuance competes with companies, which are much larger with much more resources in select categories. Nuance's pricing power in key product categories also appears to be limited despite significant market shares. The pro forma EBITDA of $103 million assumes substantial acquisition synergy of about $60 million of cost savings from the current Dictaphone acquisition and legacy Nuance transaction that closed in late 2005. The realization of synergies will take time as management continues its integration execution. Debt to EBITDA would be reasonable at 3.4x and EBITDA to interest is relatively strong at 4x should the synergies be fully realized. Nuance should be able to generate free cash flow given its relatively low capex requirements and low cash tax rate due to legacy NOLs. The B1 ratings on the term loan and revolving facility reflect the fact that they comprise the entirety of Nuance's pro forma debt capital structure. The stable outlook reflects Moody's expectation that Nuance should be able to grow its speech recognition business given the positive macro environment for its products but the fact that it will take some time for Nuance to integrate its various acquisitions made recently. Moody's expects that Nuance will be able to continue to generate positive free cash flow. The ratings could be positive influenced upon a combination of: -- evidence of successful integrations of its various acquisitions in the form of revenue growth, minimum restructuring charges, and free cash flow generation; -- full realization of acquisition synergy without hampering top line growth; -- de-leveraging. Conversely, the ratings could be negatively influenced to the extent that: -- issues vis-a-vis integrations emerge; -- inability to realize acquisitions synergy; -- deteriorating credit stats in part due to continued debt financed acquisitions. Nuance Communications, Inc., formerly ScanSoft, Inc., is a leading provider of speech and imaging solutions for business and consumers around the world. Its technologies, applications and services seek to improve user experiences by changing the way people access, share, manage and use information. NUANCE COMMS: S&P Rates Proposed $430 Million Bank Facility at B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit and bank loan rating and '3' recovery rating to Burlington, Massachusetts-based Nuance Communications Inc.'s proposed $430 million first-lien senior secured bank facility, which will consist of: * a $75 million revolving credit facility (due 2012); and * a $355 million term loan B (due 2013). The outlook is stable. The first-lien senior secured bank loan is rated the same as the corporate credit rating. The recovery rating of '3' reflects Standard & Poor's expectation of meaningful (50%-80%) recovery of principal by lenders in the event of a payment default or bankruptcy. Proceeds from the proposed term loan will be used to finance the acquisition of Dictaphone Corp. for a total of $357 million, and to pay related fees and expenses. "The ratings reflect Nuance's acquisitive profile, the lack of a track record of managing at anticipated revenue levels, and high debt leverage," said Standard & Poor's credit analyst Martha Toll- Reed. These factors partly are offset by: * a leading presence in the market for speech recognition products; * a significant level of recurring revenues; and * a diverse customer base. Nuance is a global provider of speech recognition software and imaging solutions, and related services. The company is focused primarily on enterprise customers within: * the financial services, * telecommunications, * automotive, and * health care sectors. The company is the result of the September 2005 acquisition of Nuance Communications Inc. by ScanSoft, Inc. (and subsequent name change to Nuance Communications Inc.) Pro forma for the proposed Dictaphone acquisition, Nuance had revenues for the 12 months ended Dec. 31, 2005, of almost $450 million, compared with revenues for the 12 months ended Dec. 31, 2004, of almost $200 million. PENNSYLVANIA REAL: Lowers Interest Rate under Credit Facility ------------------------------------------------------------- Pennsylvania Real Estate Investment Trust (NYSE: PEI) amended its credit facility dated Nov. 20, 2003, effective March 1, 2006. The interest rate under the credit facility, as amended, ranges from 0.95% to 1.40% per annum over LIBOR, depending on the Company's leverage. The previous interest rate on the facility ranged from 1.05% to 1.55% over LIBOR. Pursuant to the amendment, the new capitalization rate applied in the calculation of Gross Asset Value is 7.50%. Previously the capitalization rate was 8.25%. The amendment also modified certain of the financial covenants of the Company in the credit facility agreement. The revised covenants reduce the minimum interest coverage and total debt ratios and allow for an increase in joint venture investments. The term of the amended credit facility will now run until Jan. 20, 2009, and the Company will have an option to extend the term for an additional 14 months, under prescribed conditions. Previously, the credit facility terminated on Nov. 20, 2007, with a 14 month extension option. The amount available under the facility remains at $500 million, of which $271 million is currently outstanding. PREIT has the option to increase the facility to $650 million under prescribed conditions. Based on the Company's current leverage ratio, the applicable interest rate is 0.95% over LIBOR. Previously, the interest rate was 1.05% over LIBOR for the same leverage ratio. The applicable interest rate is subject to change depending on the Company's leverage. Wells Fargo Bank, N.A. is the sole lead arranger and administrative agent under the facility. Headquartered in Philadelphia, Pa., 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. * * * On Feb. 26, 2004, Moody's Investors Service assigned a B1 rating to Pennsylvania Real Estate Investment Trust's Cumulative preferred stock. On Oct. 14, 2005, Fitch Ratings assigned these ratings to Pennsylvania Real Estate Investment Trust: * Senior Unsecured Debt -- BB * Preferred Stock -- B+ PERFORMANCE TRANSPORTATION: Can Hire Hodgson Russ as Co-Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of New York authorized Performance Transportation Services, Inc., and its debtor-affiliates to retain Hodgson Russ LLP as their co- counsel. As reported in the Troubled Company Reporter on Feb. 23, 2006, Hodgson, together with Kirkland& Ellis LLP, will provide the Debtors with general legal services as needed throughout the course of their Chapter 11 cases. Hodgson will: a. advise the Debtors of their rights, powers and duties as debtors and debtors-in-possession continuing to operate and manage their businesses and properties under Chapter 11; b. prepare, on the Debtors' behalf, necessary applications, motions, draft orders, other pleadings, notices, schedules and other documents, and review financial and other reports to be filed in the Debtors' Chapter 11 cases; c. advise the Debtors concerning, and prepare responses to, applications, motions, other pleadings, notices and other papers that may be filed and served in the Chapter 11 cases; d. advise the Debtors with respect to, and assist in the negotiation and documentation of, financing agreements, debt and cash collateral orders and related transactions; e. review the nature and validity of any liens asserted against the Debtors' property and advise them concerning the enforceability of the liens; f. advise the Debtors regarding their ability to initiate actions to collect and recover property for the benefit of their estates; g. counsel the Debtors in connection with formulation, negotiation and promulgation of a plan or plans of reorganization and related documents; h. advise and assist the Debtors in connection with any potential property dispositions; i. advise the Debtors concerning executory contract and unexpired lease assumptions, assignments and rejections and lease restructurings and recharacterizations; j. assist the Debtors in reviewing, estimating and resolving claims asserted against their estates; k. commence and conduct any litigation necessary or appropriate to assert rights held by the Debtors, protect assets of their Chapter 11 estates or otherwise further the goal of completing their successful reorganization; l. provide general corporate, litigation, regulatory and other non-bankruptcy services as requested by the Debtors; and m. appear in Court on behalf of the Debtors as needed; and n. perform any other necessary legal services in connection with the Debtors' Chapter 11 cases for or on behalf of the Debtors. The current hourly rates of the Hodgson personnel that will represent the Debtors are: Attorneys $130 to $595 Paralegals $75 to $195 Garry M. Graber, Esq. $325 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). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and 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. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) PERFORMANCE TRANSPORTATION: Panel Taps Damon & Morey as Co-Counsel ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of Performance Transportation Services, Inc., and its debtor-affiliates asks the U.S. Bankruptcy Court for the Western District of New York for permission to retain Damon & Morey LLP as its co-counsel. The Creditors Committee selected Damon & Morey to act as its co- counsel because of the firm's experience in representing debtors and creditors in Chapter 11 cases. The Committee also intends to retain Winston & Strawn LLP as its lead bankruptcy counsel. Legal work will be divided between Damon & Morey and Winston & Strawn regarding various bankruptcy issues. Damon & Morey will provide legal services as required as co- counsel to represent the interests of creditors in the Debtors' estate. Damon & Morey will regularly appear before the Court. Damon & Morey professionals that will primarily represent the Committee and their hourly rates are: Professional Position Hourly Rate ------------ -------- ----------- William F. Savino Partner $285 Daniel F. Brown Partner $285 Beth Ann Bivona Partner $245 Thomas L. Kennedy Associate $155 Melissa A. Brennan Para-professional $95 The firm may also assign additional attorneys or para- professionals whose current hourly rates are: Professional Hourly Rate ------------ ----------- Senior Partners $285 Junior Partners $245 Special Counsel $265 Senior Associates $195 Junior Associates $155 Para-professionals $95 Daniel F. Brown, Esq., a partner at Damon & Morey, asserts that the firm has no connection with the Debtors, with any creditor or with any other party-in-interest, and is a disinterested person, within the meaning of Section 101(14) of the Bankruptcy Code. As of the March 8, 20006, the firm held no retainer in the Debtors' Chapter 11 cases, Mr. Brown says. Damon & Morey is a full-service law firm currently maintaining three offices in New York -- Rochester, Batavia and Buffalo. 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). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and 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. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) PERFORMANCE TRANSPORTATION: Unions Want Creditors Committee Seats ----------------------------------------------------------------- The Teamsters National Automobile Transporters Industry Negotiating Committee, and Local Unions 25, 63, 104, 120, 215, 222, 294, 299, 312, 355, 377, 449, 490, 492, 560, 580, 651, 657, 710, 745, 957, 964, and 988, all affiliated with the International Brotherhood of Teamsters, want to participate in the Official Committee of Unsecured Creditors appointed in Performance Transportation Services, Inc., and its debtor-affiliates' bankruptcy case. The Teamsters note that Deirdre A. Martini, the United States Trustee for Region 2, appointed a competitor of the Debtors, a snow-removal contractor and a pension, health and welfare fund to the Creditors Committee. "The representation of the current committee is not adequate," Frederick Perillo, Esq., at Previant Goldberg Uelmen Gratz Miller & Brueggeman, s.c., in Milwaukee, Wisconsin, contends. The Teamsters believe that the vast majority of the creditors in the Debtors' Chapter 11 cases are union members and employees. However, Mr. Perillo points out, there is no union on the Creditors Committee and no representative of employees. The Teamsters are the exclusive representatives for collective bargaining purposes of approximately 2,100 of the employees of the Debtors in the United States and Canada. The number constitutes the vast majority of the Debtors' employees, Mr. Perillo says. The Debtors and the Teamsters are parties to a single master collective bargaining agreement setting forth the wages, hours and working conditions of those employees, known as the National Automobile Transporters Agreement. The accrued but unpaid benefits under the NMATA exceed $8,000,000. "The claims of the Teamsters are the largest, non-contingent, unsecured claims in [the Debtors' Chapter 11 cases]," Mr. Perillo asserts. "The sheer number of individual Teamster members is also a significant percentage of the total number of unsecured creditors in the case." Hence, the Teamsters ask Judge Kaplan to direct the U.S. Trustee to appoint them to the Creditors Committee. While the Teamsters have not received a formal explanation why they were not appointed, they believe that it has to do with their participation on the Creditors Committee in the chapter 11 cases of Allied Holdings, which is pending in the Bankruptcy Court of the Northern District of Georgia, Newnan Division. In the Allied Case, the Teamsters failed to provide the U.S. Trustee an affidavit stating that no one who had been exposed to information from the Allied Creditors Committee would speak to anyone appointed by the Teamsters to serve in connection with the Performance Creditors Committee. The Teamsters offered to have a separate person serve as committee representative, but for both practical and legal reasons, could not comply with the demand for a "wall" to be built between the union representatives in these cases. The U.S. Trustee insisted that the affidavit must be provided because of, among others, concerns that confidential information might be transmitted to Allied, which is the Debtors' competitor, for example, in the scenario that Allied might purchase Performance Transportation Services, Inc. The Teamsters however question why the U.S. Trustee appointed United Road Services, Inc., a direct competitor of the Debtors' operating companies, to the Committee, with no requirement that the competitor create a "wall" within itself to prevent disclosure of information. Mr. Perillo asserts that the U.S. Trustee's concerns over disclosure procedures are unfounded and inapplicable. In any event, the non-statutory criteria cannot be used to override the expressed congressional plan for representative committees, he adds. 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). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and 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. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) PERSISTENCE CAPITAL: Court Okays Appointment of Chapter 11 Trustee ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Central District of California granted Bruinbilt, LLC's request for a chapter 11 trustee in Persistence Capital, LLC's bankruptcy proceedings. As reported in Troubled Company Reporter on Feb. 7, 2006, Bruilbilt, through its counsel, Richard W. Brunette, Esq., at Sheppard, Mullin, Richter & Hampton LLP, filed its second request for the Court to appoint a chapter 11 trustee in the Debtor's bankruptcy proceedings. The Court had denied Bruinbilt's first request on Dec. 15, 2005. Bruilbilt said that its renewed request was based on newly discovered facts to bolster its request for the appointment of a chapter 11 trustee. Bruilbilt tells the Court that on Nov. 21, 2004, Mr. Coberly engaged in self-dealing by signing a release agreement in which he agreed to personally accept $1 million in exchange for a general release of all of the Debtor's claims against Curtis D. Somoza, a former managing director of the Debtor, and EZ/IIS, LLC. That release encompasses the Debtor's claim that Mr. Somoza diverted $5 million for his personal use in 2004. Bruibilt says Mr. Coberly's signing of a release of the Debtor's claims against Mr. Somoza and EZ/IIS is a clear indication of the need of a chapter 11 trustee to administer the Debtor's assets in order to protect the interest of creditors and other parties. Headquartered in Westlake Village, California, Persistence Capital LLC, filed a voluntary chapter 11 petition on Sept. 13, 2005 (Bankr. C.D. Calif. Case No. 05-16450). Lawrence R. Young, Esq., in Downey, California, represents the Debtor in its restructuring proceedings. When the Debtor filed for protection from its creditors, it listed $85,000,000 in total assets and $28,602,241 in total debts. PLATINUM SEAFOOD: Case Summary & 9 Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: Platinum Seafood Services, Inc. 4342 Pine Blossom Trail Houston, Texas 77056 Bankruptcy Case No.: 06-10081 Debtor affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Tuan Van Tran 06-10080 Type of Business: Platinum Seafood Services, Inc., sells shrimps. Tuan Van Tran owns the business. Chapter 11 Petition Date: March 6, 2006 Court: Eastern District of Texas (Beaumont) Judge: Bill Parker Debtors' Counsel: Frank J. Maida, Esq. Maida Law Firm 4320 Calder Avenue Beaumont, Texas 77706 Tel: (409) 898-8200 Fax: (409) 898-8400 Total Assets Total Debts ------------ ----------- Tuan Van Tran $1,143,995 $4,624,462 Platinum Seafood Services, Inc. $842,511 $3,524,932 A. Tuan Van Tran's 5 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Metro Bank Personal Guarantee $1,203,380 P.O. Box 4760 Value of security: Houston, TX 77210 $300,000 Metro Bank Personal Guarantee $1,017,057 P.O. Box 4760 Value of security: Houston, TX 77210 $300,000 Metro Bank Security Agreement $804,493 P.O. Box 4760 Value of security: Houston, TX 77210 $225,000 Business Loan Center, LLC Security Agreement $648,990 645 Madison Avenue Value of security: New York, NY 10022 $145,000 Business Loan Center, LLC Security Agreement $636,389 645 Madison Avenue Value of security: New York, NY 10022 $145,000 B. Platinum Seafood Services, Inc.'s 4 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Metro Bank Security Agreement $1,203,380 P.O. Box 4760 Value of security: Houston, TX 77210 $300,000 Metro Bank Security Agreement $1,017,057 P.O. Box 4760 Value of security: Houston, TX 77210 $300,000 Metro Bank Security Agreement $804,493 P.O. Box 4760 Value of security: Houston, TX 77210 $225,000 Tuan Tran Loan $500,000 4342 Pine Blossom Trail Houston, TX 77059 PLUM POINT: Reduced Term Loan Prompts Moody's to Affirm B1 Rating ----------------------------------------------------------------- Moody's Investors Service affirmed its B1 rating for the first lien senior secured credit facilities to be issued by Plum Point Energy Associates, LLC, following a change in its proposed capital structure. The B1 rating affirmation incorporates proposed changes in the capital structure of Plum Point whereby the first lien senior secured term loan will be reduced to approximately $450 million from $590 million and Plum Point will issue approximately $150 million to 250 million of a second lien term loan. To the extent the amount of second lien term loan issued is greater than $150 million, Moody's anticipates there would be a commensurate reduction of the first lien term loan facility. The first lien synthetic letter of credit facility will be reduced slightly to approximately $102 million and the first lien revolving credit facility will be reduced to $50 million from $65 million. The amount of equity funds contributed will increase by approximately $20 million. Interest on the second lien term loan will be paid in cash at a margin currently equivalent to the margin on the first lien term loan, but will also include a 200 basis point payment-in-kind option. Moody's notes that Plum Point is projected to incur interest expense at significantly higher levels than those assumed in the original base case projections reviewed by Moody's and that cash flow metrics on a total debt basis, are projected to be weaker. However, the affirmation also recognizes that there has been improvement in the prospects for recovery for the first lien lenders in a default scenario. Proceeds of the first and second lien term loans and the synthetic letter of credit facility along with approximately $225 million of equity funds will be used to fund the costs associated with Plum Point's approximate 63% ownership interest in a 665 MW coal-fired electric generating facility that will be constructed in Osceola, Arkansas. The rating outlook remains stable. Plum Point Energy Associates, LLC is a special purpose company formed to own approximately 50-60% of a 665 MW coal-fired merchant electric generating facility in Osceola, Arkansas. Headquartered in East Brunswick, New Jersey, Plum Point is a wholly owned subsidiary of LS Power Associates, L.P., a member of the LS Power group. PROCARE AUTOMOTIVE: Taps Thompson Hine as Bankruptcy Counsel ------------------------------------------------------------ ProCare Automotive Service Solutions, LLC, asks the U.S. Bankruptcy Court for the Northern District of Ohio Eastern Division for permission to employ Thompson Hine, LLP, as its bankruptcy counsel. The Debtor selected Thompson Hine as counsel because of the firm's extensive and diverse experience, knowledge and reputation in the field of debtors' and creditors' rights, business reorganizations under chapter 11 of the Bankruptcy Code, and in other areas of law related to the within chapter 11 case. Thompson Hine will: a) advise the Debtor of its rights, powers and duties as debtor-in-possession in the continued operation of its business; b) advise and assist the Debtor in the preparation of all necessary applications, motions, pleadings, reports and other legal papers required in connection with the administration of the chapter 11 estate; c) represent the Debtor in certain contested matters or adversary proceedings commenced by or against the Debtor; d) assist the Debtor in connection with the sale of substantially all of its assets; e) assist the Debtor in the preparation of a plan of reorganization, as appropriate; and f) perform other appropriate and necessary legal services for the Debtor. The hourly rate of Thompson Hine's professionals are: Professionals Hourly Rate ------------ ----------- Alan R. Lepene, Esq. $525 Thomas Aldrich, Esq. $495 Katherine Brandt, Esq. $480 Linn Harson, Esq. $275 Jeremy M. Campana, Esq. $220 Sean A. Gordon, Esq. $220 Jonathon Vinocur, Esq. $200 Renee L. Davis, Esq. $195 Curtis L. Tuggle, Esq. $185 Other partners, $300 to $525 Other associates $185 to $275 Paralegals $150 to $165 Alan R. Lepene, Esq., at Thompson Hine, tells the Bankruptcy Court that his firm received a total of $200,000 in retainer fees from the Debtor from Feb. 16, 2006, to March 3, 2006. The firm applied the retainers to a portion of the work performed, in preparation for the Debtor's bankruptcy filing. Mr. Lepene assures the Court that Thompson Hine does not hold or represent any interest materially adverse to the Debtor's estate and that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Established in 1911, Thompson Hine -- http://www.thompsonhine.com/news/-- is among the largest business law firms in the United States. For the last several years, the firm has been named one of the Best Corporate Law Firms in America (in an annual survey of 2,000 corporate directors conducted by Corporate Board Member magazine). With more than 370 lawyers, Thompson Hine serves premier businesses worldwide. The firm has offices in Atlanta, Brussels, Cincinnati, Cleveland, Columbus, Dayton, New York, and Washington, D.C. Mr. Lepene can be reached at: Alan R. Lepene, Esq. Thompson Hine LLP 3900 Key Center 127 Public Square Cleveland, Ohio 44114-1291 Telephone 216.566.5500 Fax 216.566.5800 Based in Independence, Ohio, ProCare Automotive Service Solutions, LLC -- http://www.procareauto.com/-- offers maintenance and repair services to all makes and models of foreign, domestic, light truck, and commercial-fleet vehicles. ProCare operates 82 retail locations in eight metropolitan areas throughout three states. The Debtor filed for chapter 11 protection on March 5, 2006 (Bankr. N.D. Ohio Case No. 06-10605). Alan R. Lepene, Esq., Jeremy M. Campana, Esq., and Sean A. Gordon, Esq., at Thompson Hine LLP, represent the Debtor. The Debtor estimated its assets and debts at $10 to $50 million when it filed for bankruptcy protection. PROFESSIONAL LIFE: Capital Decline Cues A.M. Best to Cut Ratings ---------------------------------------------------------------- A.M. Best Co. downgraded the financial strength rating to C+ (Marginal) from C++ (Marginal) of Professional Life & Casualty Company (Professional Life) (Chicago, Illinois). The rating outlook is negative. The rating action reflects Professional Life's: * significant decline in absolute capital and surplus levels, * the elevated level of risk in its investment portfolio, * its extremely low level of risk-adjusted capitalization, and * narrow market profile. Capital and surplus levels declined in 2005 due to a large increase in the level of non-admitted assets. Below investment grade bonds comprise over 30% of invested assets, while equities comprise over 20% of invested assets. Together, these high risk assets comprise nearly five times Professional Life's overall capital and surplus and have further deteriorated its risk- adjusted capital position. Professional Life's fixed annuity product offerings have no surrender charges, making them vulnerable to discretionary withdrawals. The company offers extremely high crediting rates, and this has facilitated historically strong retention levels on the annuity block. Professional Life's assets and liabilities are significantly mismatched and could present it with a severe liquidity crunch should a "run on the bank" scenario develop. While operating earnings have been consistently favorable due to strong investment income, net income levels have fluctuated due to realized losses the last several years. A.M. Best remains very concerned with Professional Life's high risk investment strategy, as a downturn in the economy could produce large credit losses in its bond portfolio, further eroding capital and surplus and risk-adjusted capitalization levels. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. QUICKSILVER RESOURCES: Moody's Puts B2 Rating on $300M Sr. Notes ---------------------------------------------------------------- Moody's assigned a B2 rating to Quicksilver Resources' $300 million 10-year senior subordinated notes, Ba3 corporate family rating, and SGL-3 liquidity rating. The outlook is stable. All subsidiaries, except for Canadian subsidiaries holding 27% of reserves and 29% of production, will guarantee the notes. Proceeds will repay roughly $72 million of second mortgage notes and roughly $193 million of bank debt. Moody's do not rate a $600 million borrowing base secured bank revolver, of which just over a pro-forma $200 million would be outstanding. Moody's Global Independent Exploration & Production Rating Methodology quantitatively and qualitatively assess E&P issuers the four core ratings driver factors of: -- oil and gas reserve and production scale, risk diversification, quality and mix, and reserve life; -- performance catalysts, including the relative capacity to reinvest capital for reserve and production replacement and growth at tolerable costs and repeatable sound cash returns on reinvested capital; -- reinvestment risk; and -- leverage on proven developed reserves, total reserves burdened by future development capital, and on cash flow. Moody's Methodology metrics mapped modestly sized KWK to a Ba2 corporate family rating. This was largely due to up-cycle price coverage of total costs and metrics arising from its ability to grow by organic efforts in longer-lived but extremely tight unconventional natural gas-bearing formations, rather than by acquisition or focusing on ever-less productive North American conventional reservoir rock. KWK is notable in that it has organically developed 3 core operating areas to commercial status and appears to have two of those three areas poised for sustained multi-year growth. However, the assigned Ba3 corporate family rating adjusts for moderating natural gas prices; the sharp expected rise in debt; the amount of leverage suitable for KWK's reserves, low production rate, high operating leverage, and modest scale of cash flow; and the still early phase of evaluation and production results at two of its three core property holdings. A significant amount of KWK's scale and diversification comes from its first year of material production from the complex and cost-, price-, and well productivity-sensitive Barnett Shale central to its aggressive 2006 growth plan. Record up-cycle prices drove much of the Methodology's indicated Ba2 profile but are moderating to Ba3 metrics. Moody's expect another sharp rise in debt in 2006 due to a likely more than $300 million shortfall in cash flow cover of heavy capital spending, widened by moderating prices and drilling and oilfield services cost inflation. A production shortfall below KWK's aggressive 20% or more growth plan for the Barnett Shale and Horseshoe Canyon properties would widen the cash flow shortfall. Challenges to attaining KWK's high growth goals include: -- sustaining a much expanded drilling pace in the face of a tight costly market for drilling rigs, hydraulic fracturing, and completion services; -- the short duration of KWK's more consistent drilling and hydraulic fracturing results in the Barnett and the potential for new well productivity in both its young Horseshoe Canyon and Barnett plays to under-perform; -- the one-year vintage of most of its Barnett production and very steep first year decline of that production; and -- the need for KWK's key new Cowtown gas processing plant to function consistently to specifications. Added factors include that wet weather slows drilling activity at KWK's Horseshoe Canyon coalbed methane play in Canada and that its stable but mature and hard-to-grow Antrim Shale core drives 50% of its production, requiring growth to come from plays where KEK and the sector remain fairly early in the learning curve. The SGL-3 liquidity rating reflects: -- strong cash flow coverage of sustaining capital spending but very weak coverage of the very large 2006 capital program; -- KWK's heavy reliance on its secured bank revolver to fund an expected $300 million or more cash flow shortfall after capital spending; satisfactory covenant coverage; and -- negligible alternative liquidity to cover note interest or principle from asset sales due to the banks' first secured position on virtually all KWK reserves. Ratings Factor One: Moody's E&P Methodology maps KWK's reserve scale to the Ba rating range but its production scale to the Caa range. KWK's modest scale recently grew rapidly with a three-year average annual reserve replacement rate of 346%, driven by commercial reserve bookings for the new Horseshoe Canyon and Barnett Shale plays. A sound 77% of reserves are in the PD reserves category, placing PD reserves in the Ba range and 71% of reserves are operated by KWK. KWK holds a durable production core in the Antrim shale and durable 15.4 year PD reserve life overall and good production replacement visibility. KWK is into its third year of commercial exploitation of Horseshoe Canyon and holds several years of qualified drilling inventory. KWK's Barnett Shale properties, while still early in evaluation, are beginning a second year of commercial scale and with a large drilling inventory. Ratings Factors Two and Three: These factors assess the catalysts driving forward performance, including unit operating costs, margins and discretionary cash flow relative to sustaining and growth capital spending, capital reinvestment efficiency, and cash-on-cash returns efficiency. KWK's comparatively high total unit full-cycle costs map to a single B rating but strong up-cycle prices have amply covered this cost structure to yield cash-on- cash returns mapping to a low Baa range. At lower prices, KWK's comparatively high combined unit production, G&A, and interest expense would more quickly reduce cash-on-cash returns. The ratings anticipate that historic high oil and gas prices will moderate in the next few years, beginning with the current sharp moderation in natural gas prices, and that upward momentum in operating and reserve replacement costs would continue to push costs higher and squeeze margins during the first year of falling prices. Total full-cycle costs of approximately $26/50/boe include unit production costs of somewhat over $10/boe, G&A expense of approximately $3.25/boe, including capitalized G&A, pro- forma unit interest expense of just under $4/boe, and 3- year average all-sources reserve replacement costs currently mapping to a low Baa3 rating. The 2005 element of three-year average reserve replacement costs fell to the Ba range. Moody's adds KWK's midstream and surface infrastructure costs to its reported FAS 69 outlays for reserve replacement in order to derive reserve replacement costs. Those outlays are essential for organic development and production of KWK's properties. Its three year average reserve replacement costs still totaled a fairly competitive $9.31/boe, rising on escalation of the one year figure to $10.78/boe in 2005. However, and characteristic to those reserves, production costs are high at over $10/boe. Ratings Factor Four: KWK mapped to a low Baa for leverage on PD and on total reserves. However, reflecting its lower margin production, lower rate of production, and therefore lower cash flow and net present value per BOE of reserves, KWK's suitable leverage per unit of reserves at a given rating is somewhat below average. Reflecting its inherent low production rate on reserves, KWK carries a fairly high $27,000 of pro-forma debt per unit of daily production, reflected also in the fact that cash flow, minus sustaining capital spending, divided by pro-forma debt maps to a lower Ba rating. Furthermore, KWK's relatively higher operating costs would amplify a reduction in debt coverage during softening prices. A potential lump sum source of debt reduction could become KWK's $150 million of convertible debt which is currently in the money. Year-end 2005 debt was $596 million, pro-forma total debt is approximately $680 million, and debt may be in the $900 million range by year-end 2006; current pro-forma leverage on PD reserves is approximately $4.50/PD boe; and pro-forma debt plus development capital spending is a fairly full $5.40/boe of total reserves. KWK's $566 million 2006 capital budget covers large front-end costs for Barnett production infrastructure, exploration and evaluation spending in the prospective Mannville Coal play in Alberta, Canada and Barnett/Woodford Shale play in the Delaware Basin of West Texas, and a major acceleration in 2006 drilling activity in the Barnett and Horseshoe Canyon plays. A doubling of Barnett drilling this year should continue accelerating Barnett production. KWK is running 6 rigs in the Barnett now, up from 3 as of last October, and plans to add 2 rigs by June and another 2 rigs by year-end 2006. Regarding tight rig availability, KWK states that it already has 8 of the expected 10 rigs under agreement. Under reasonably expected 2006 price scenarios, drilling activity and prospect economics are likely to be supported by prices. KWK commenced operations in the Antrim Shale of Michigan in 1991 while still a private firm. It was the first to move into the Horseshoe Canyon coalbed methane play in Alberta, Canada, and arrived in the non-core portion of the Barnett Shale play of East Texas in 2003. Moody's expects flat to modest 2006 production growth in the Antrim Shale, significant growth from Horseshoe Canyon and, assuming the Cowtown natural gas processing plant performs to specifications and the tight rig and oilfield services market does not hinder its activity, potentially substantial growth from the Barnett due to a near doubling of drilling activity. KWK's early stage potentially prospective activity focuses on the Mannville Coals and the Barnett/Woodford shale play in the Delaware Basin of West Texas. Quicksilver Resources Inc. is headquartered in Fort Worth, Texas. RAMP TRUST: Moody's Assigns Ba1 Rating to Class B-1 Certificates ---------------------------------------------------------------- Moody's Investors Service assigned Aaa rating to the senior notes issued by RAMP 2006-NC2 Trust, and ratings ranging from Aa1 to Ba1 to the subordinate notes in the deal. The securitization is backed by New Century Mortgage Corporation and Home123 Corporation originated, adjustable-rate and fixed- rate, subprime mortgage loans acquired by Residential Funding Corporation. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, excess spread, overcollateralization, and a yield maintenance agreement provided by Deutsche Bank AG New York Branch. Moody's expects collateral losses to range from 4.75% to 5.25%. HomeComings Financial Network Inc will subservice the loans, and Residential Funding Corporation will act as master servicer. Moody's has assigned HomeComings Financial Network Inc its servicer quality rating as a primary servicer of subprime first- lien loans and has assigned Residential Funding Corporation its top servicer quality rating as master servicer The complete rating actions are: Issuer: RAMP Series 2006-NC2 Trust Mortgage Asset-Backed Pass-Through Certificates Series 2006-NC2 * Class A-1, Assigned Aaa * Class A-2, Assigned Aaa * Class A-3, Assigned Aaa * Class M-1, Assigned Aa1 * Class M-2, Assigned Aa2 * Class M-3, Assigned Aa3 * Class M-4, Assigned A1 * Class M-5, Assigned A2 * Class M-6, Assigned A3 * Class M-7, Assigned Baa1 * Class M-8, Assigned Baa2 * Class M-9, Assigned Baa3 * Class B-1, Assigned Ba1 RASC TRUST: Moody's Assigns Ba1 Rating to Class M-10 Certificates ----------------------------------------------------------------- Moody's Investors Service assigned Aaa rating to the senior certificates issued by RASC Series 2006-KS2 Trust, Home Equity Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS2 and ratings ranging from Aa1 to Ba1 to the subordinate certificates in the deal. The securitization is backed by EFC Holdings Corporation, HomeComings Financial Network, Inc., and Decision One Mortgage Comp LLC originated adjustable-rate and fixed-rate subprime mortgage loans acquired by Residential Asset Securities Corporation. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, overcollateralization, excess spread and yield maintenance agreement. Moody's expects collateral losses to range from 5.10% to 5.60%. Primary servicing will be provided by HomeComings Financial Network, Inc., and Residential Funding Corporation will act as master servicer. Moody's has assigned HomeComings its servicer quality rating as primary servicer of subprime loans and RFC its top servicer quality rating as master servicer. The complete rating actions are: Issuer: RASC Series 2006-KS2 Trust Home Equity Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS2 * Class A-1, Assigned Aaa * Class A-2, Assigned Aaa * Class A-3, Assigned Aaa * Class A-4, Assigned Aaa * Class M-1, Assigned Aa1 * Class M-2, Assigned Aa2 * Class M-3, Assigned Aa3 * Class M-4, Assigned A1 * Class M-5, Assigned A2 * Class M-6, Assigned A3 * Class M-7, Assigned Baa1 * Class M-8, Assigned Baa2 * Class M-9, Assigned Baa3 * Class M-10, Assigned Ba1 RCN CORP: Sells Mexican Units For $300 Million To Pay Debt ---------------------------------------------------------- RCN Corporation (NASDAQ: RCNI) reached an agreement to sell its 48.93% interests in Megacable, S.A. de C.V. and Megacable Communicaciones de Mexico S.A. for net after-tax proceeds of $300 million in cash. Teleholding, S.A. de C.V., a Mexican entity comprised of the current shareholders of Megacable and MCM, will purchase the interests. The boards of directors of both companies have approved this transaction. RCN will apply the proceeds from the sale to repay debt, as required under its various debt agreements, resulting in nearly $30 million of annualized interest savings. On a pro forma basis (as of Sept. 30, 2005), after these repayments, and after adjusting for the previously announced acquisition of Consolidated Edison Communications Holding Company, Inc., RCN's total debt outstanding will be reduced to approximately $200 million, and net debt will be reduced to approximately $80 million. "The sale of our stake in Megacable and MCM represents an important milestone for RCN," stated James F. Mooney, Chairman of RCN's board of directors. "By unlocking the value of these assets, we can significantly reduce our debt and enhance our financial and strategic flexibility." Peter Aquino, President and Chief Executive Officer of RCN added, "This win-win deal represents a timely opportunity to realize strong asset value, and enables us to now focus all of our attention on RCN's core business in the U.S. We continue to execute well on all facets of our strategic plan, including the pursuit of selected acquisition and divestiture opportunities." Mike Sicoli, Chief Financial Officer of RCN, stated, "We worked closely with our Mexican partners to structure a transaction that was tax efficient for RCN. Taking into account the tax structure and related indemnities that we received in the transaction, we estimate the sale to be worth approximately $350 million to RCN on a pre-tax basis. This transaction serves as a catalyst for us to realize an immediate and dramatic improvement in our credit profile by significantly reducing our leverage and positioning us to generate positive free cash flow in 2006, well ahead of schedule." The transaction is expected to close in March 2006. The sale is conditioned upon certain regulatory filings to be made by Teleholding, but is not subject to the receipt of any regulatory approvals or consents. Deutsche Bank Securities, Inc. acted as financial advisors, and Milbank, Tweed, Hadley & McCloy LLP acted as legal advisors to RCN in connection with the transaction. RCN will report fourth quarter and full-year 2005 results on Wednesday, March 15, 2006 and will provide a 2006 financial outlook at that time. Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com-- is one of the largest facilities-based competitive providers of cable, high-speed internet and phone services delivered over its own fiber-optic local network to residential customers in the most densely populated markets in the U.S. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on May 27, 2004. The Debtors' confirmed chapter 11 Plan took effect on December 21, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. The Debtor consummated its plan of reorganization and formally emerged from Chapter 11 protection. The plan, confirmed on Dec. 8, 2004, by Judge Robert Drain of the Bankruptcy Court in New York, converted approximately $1.2 billion in unsecured obligations into 100% of RCN's new equity, and eliminated approximately $1.8 billion in preferred share obligations. RCN CORP: Debt Reduction Plan Cues Moody's to Review B3 Ratings --------------------------------------------------------------- Moody's Investors Service placed the B3 corporate family and B3 senior secured bank ratings of RCN Corporation on review for upgrade following the RCN's announcement that it will apply proceeds of approximately $300 million from the sale of its ownership in Megacable, S.A. de C.V. and MCM Holding, S.A. de C.V. to debt reduction. The review, which could result in a more than one notch upgrade, will focus on the improvement in credit metrics as well as an evaluation of management's strategic and fiscal plans. The complete rating actions are: Issuer: RCN Corporation * B3 Corporate Family Rating, placed on review for upgrade * B3 rating on Secured Bank Facility, placed on review for upgrade * Stable outlook, changed to rating under review Pro forma for the expected debt repayment, Moody's estimates RCN's leverage will decline from just under 6 times debt-to-EBITDA to the mid 2 times range. RCN will also benefit from annual cash interest savings of approximately $30 million. This substantial improvement in the company's financial strength could lead to a multiple notch upgrade from the current B3 corporate family rating. Moody's will also consider the likely timing and magnitude of a potential transition to positive free cash flow. RCN's approximately $490 million of debt consists of a $325 million first lien term loan, approximately two-thirds of RCN's total debt and currently rated B3 in line with the corporate family rating; Moody's does not rate RCN's $125 million second lien convertible notes or the approximately $40 million third lien evergreen facility. Following expected repayment of debt, Moody's estimates the first lien will comprise approximately 35% of RCN's total debt. Moody's will also assess expectations for RCN's strategic direction, including the integration of the previously announced Consolidated Edison Communications Holding Company, Inc. acquisition, the potential sale of underperforming assets, and other restructuring initiatives. Finally, Moody's will consider the likelihood and impact of any change in fiscal policy. RCN Corporation is a communications company marketing video, voice and data services to residential households located in high- density northeast, west coast and midwest markets, predominantly in competition with leading incumbent service providers. REDCITY SEARCH: December 31 Balance Sheet Upside Down by CDN$623K ----------------------------------------------------------------- redCity Search Company Inc. reported its financial results for the three months ended Dec. 31, 2005. For the three months ended Dec. 31, 2005, redCity Search's net loss decreased to CDN$689,616 from a CDN$705,047 net loss for the three months ended Dec. 31, 2004. For the three months ended Dec. 31, 2005, redCity Search's net revenues increased to CDN$1,359,292 from net revenues of CDN$257,668 for the same period in 2004. The Company posted a CDN$462,972 gross profit for the three months ended Dec. 31, 2005, from a CDN$136,056 gross profit for the same period in 2004. At Dec. 31, 2005, redCity Search's balance sheet showed CDN$5,734,080 in total assets and CDN$6,357,377 in total liabilities. Headquartered in Toronto, Ontario, Canada, redCity Search Company Inc. -- www.redcitysearch.com -- is a leader in local online search technology. The Company was established in 2003 and is Toronto's first publicly listed local search engine technology company (RDC-TSX Venture Exchange). redCity's search websites include www.redToronto.com and www.redMississauga.ca. The Company also publishes The Red Pages, a print directory of the websites of local Toronto businesses, which is distributed to approximately 400,000 households and businesses throughout Toronto. The websites and directory connect consumers to small- and medium-size businesses across the two cities. At Dec. 31, 2005, redCity Search's shareholders' equity deficit decreased to CDN$623,297 from a deficit of CDN$2,170,004 at Dec. 31, 2004. RELIANCE NATIONAL: Court Adjourns Sec. 304 Injunction Hearing ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York adjourned Reliance National Insurance Company (Europe) Limited's hearing on whether to grant a permanent injunction pursuant to Section 105 and 304(b) of the Bankruptcy Code. The hearing was previously scheduled last Feb. 27, 2006. The Court adjourned the hearing without setting a new date. Headquartered in London, England, National Insurance Company (Europe) Limited is a wholly owned subsidiary of Omni Whittington Investments (Guernsey) Limited. Whittington is an indirect, wholly owned subsidiary of Omni Whittington Group B.V. The Debtor underwrote insurance business primarily in Europe. The Debtor did not write business directly in the U.S., however, it has more than 700 U.S. policyholders. The Debtor provided insurance and reinsurance to corporate entities and insurance companies. Richard Paul Whatton, the Debtor's Foreign Representative, fileda Section 304 Petition on Oct. 13, 2005 (Bankr. S.D.N.Y. Case No. 05-46232). Kenneth P. Coleman, Esq., Stephen Doody, Esq., and Kelle Gagne, Esq., at Allen & Overy LLP, represent Mr. Whatton. As of Dec. 31, 2004, the Debtor reported assets totaling GBP184,015,000 and debts totaling GBP165,011,000. ROMACORP INC: Court Confirms Amended Joint Plan of Reorganization ----------------------------------------------------------------- The Honorable Barbara J. Houser of the U.S. Bankruptcy Court for the Northern District of Texas confirmed the Amended Joint Plan of Reorganization filed by Romacorp, Inc., and its debtor-affiliates. Judge Houser confirmed the Debtor's Plan on Mar. 8, 2005. The Court determined that the Plan satisfies the 13 standards for confirmation required under Section 1129(a) of the Bankruptcy Code. As reported in the Troubled Company Reporter on Jan. 23, 2006, the Court approved the adequacy of the Amended Disclosure Statement explaining that Plan on Jan. 17, 2006. Treatment of Claims and Interests Under the Amended Joint Plan 1) Priority non-tax claims will receive cash in an amount equal to the allowed amount of their claims on the Distribution Date. 2) The GECFFC secured claims and the GECFFC guaranty claims will receive, at the option of the Reorganized Debtors either the treatment required under Section 1124(c) of the Bankruptcy Code for those claims or full payment in cash. 3) Allowed other secured claims will receive on the Distribution Date and at the option of the Reorganized Debtor, either: a) the collateral securing the claim; b) cash in an amount equal to the lesser of the allowed amount of those claims with interest and other fees or the value of the collateral securing the claim; c) a cash payment to cure any pre-petition default, reinstatement of the underlying secured debt, reinstatement of all liens, and the Reorganized Debtors' promise to perform its obligations under the original credit agreement; d) the treatment required under Section 1124(2) of the Bankruptcy Code for those claims to be unimpaired or other treatment that the Reorganized Debtors and holder of the claim agree on. 4) Senior noteholder claims will receive their pro rata share of the Reorganized Restaurant Holdings Common Stock on the Distribution Date. 5) General unsecured claims, totaling approximately $3,166,201, will receive either: a) a pro rata share of the Reorganized Restaurant Holdings Common Stock along with the holders of the Senior Noteholder Claims, or b) cash equal to 20% of the claim and subject to a maximum payout of $1 million to all allowed general unsecured claims. 6) Intercompany claims will be reviewed by the Debtors and adjusted, continued or discharged as the Debtors deem appropriate. 7) Equity interests in Roma Restaurant Holdings, Inc. will be cancelled and voided in exchange for a payment of $200,000 to be shared pro rata among the holders of those interests. The legal, equitable and contractual rights of the holders of equity interests in the Subsidiary Debtors will remain unaltered. A full-text copy of the black-lined version of the Amended Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=060120015503 Headquartered in Dallas, Texas, Romacorp, Inc., owns and operates the Tony Roma chain of restaurants with 22 company-owned stores, 86 domestic franchise stores and 118 international franchise stores. The Debtor and seven of its affiliates filed for chapter 11 protection on November 6, 2005 (Bankr. N.D. Tex. Case No. 05-86818). Peter S. Goodman, Esq., Jason S. Brookner, Esq., Monica S. Blacker, Esq., and Matthew D. Wilcox, Esq., at Andrews Kurth LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,769,000 in total assets and $76,309,000 in total debts. ROTECH HEALTHCARE: Wants Bell-Messier's Objection Overruled ----------------------------------------------------------- The U.S. Government consents to the Reorganized Rotech Debtors' request to compel Sheila Bell-Messier to comply with the orders issued by the U.S. Bankruptcy Court for the District of Delaware: (a) confirming the Rotech Debtors' Plan of Reorganization; and (b) fixing the deadline for filing claims against the Rotech Debtors to Aug. 29, 2000. Matthew J. Troy, Esq., of the United States Department of Justice, in Washington, D.C., relates that the U.S. Government concurs with the Reorganized Rotech Debtors' position that the prepetition claims asserted by Ms. Bell-Messier on behalf of the U.S. Government were discharged by the Rotech Debtors' confirmed Plan. Bell-Messier Objects "The Court should decline the invitation to re-open a closed case solely in order to relitigate a discharge issue that has been fully briefed, argued, ruled on by a U.S. Magistrate, and submitted for ruling to the [the U.S. District Court for the Eastern District of Texas]," Laurie Selber Silverstein, Esq., at Potter Anderson Corroon, LLP, in Wilmington, Delaware, asserts. Ms. Silverstein argues that the Reorganized Rotech Debtors' attempt violates the "first-to-file" rule and principles of judicial estoppel, and constitutes the most blatant form of forum shopping. According to Ms. Silverstein, the first-to-file rule rests on principles of comity and sound judicial administration, with the goal of avoiding: * the waste of duplication; * rulings that may trench upon the authority of sister courts; and * piecemeal resolution of issues that call for a uniform result. Ms. Silverstein maintains that the Bankruptcy Court need not consider the Reorganized Rotech Debtors' discharge argument because under the first-to-file rule, Judge Folsom of the Texas District Court is entitled to maintain the Texas Action and rule on that defense. The Delaware Bankruptcy Court, as the second- filed court, should defer to the Texas District Court's prior jurisdiction. The Delaware Bankruptcy Court should also decline to re-open the case because it would open the door to duplicative litigation and the danger of conflicting rulings. Similarly, Ms. Silverstein submits that the Court should deny the Reorganized Rotech Debtors' request pursuant to the doctrine of judicial estoppel. Judicial estoppel is a common law doctrine that "bars a litigant from asserting a position that is inconsistent with one he or she previously took before a court or agency." Ms. Silverstein notes that in filing a request to dismiss Ms. Bell-Messier's complaint in Texas District Court, the Reorganized Rotech Debtors submitted themselves to the Texas District Court's jurisdiction. Implicit in the filing of the Request to Dismiss and the Reorganized Rotech Debtors' failure to immediately seek relief before the Delaware Bankruptcy Court is an agreement that the Texas District Court was the appropriate forum for interpretation of the Confirmation Order issued by the Delaware Bankruptcy Court, the Rotech Debtors' Plan, and the Settlement Agreement. Only after entry of the Magistrate's Report did the Reorganized Rotech Debtors change course, and suggest that the Texas District Court and Judge Folsom is incapable of interpreting the Bankruptcy Code and that the dischargeability should be decided instead by the Delaware Bankruptcy Court. Asking the Delaware Bankruptcy Court to employ injunctive relief to bar the Texas District Court from approving the Magistrate's Report merely because the Reorganized Rotech Debtors disagree with the Report satisfies judicial estoppel's bad faith requirement. For these reasons, Ms. Bell-Messier asks the Court to deny the Reorganized Rotech Debtors' request. Reorganized Rotech Debtors Respond Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, points out that Reorganized Rotech Debtors can reopen their bankruptcy cases and assert a violation of the discharge injunction despite the pendency of the Texas Action since there has been no final adjudication on the merits of the Texas Action by Texas District Court. The Delaware Bankruptcy Court has proper jurisdiction to decide on the discharge and injunction issue. Mr. Brady further reminds Judge Walrath that the "claims at issue" do not belong to Ms. Bell-Messier but are brought in the name of the U.S. Government -- which has steadfastly maintained that the Claims have been discharged pursuant to the Rotech Debtors' Plan and Confirmation Order. Mr. Brady notes that Ms. Bell-Messier's failure or refusal to file a proof of claim or otherwise assert the prepetition claims in the Rotech Debtors' bankruptcy cases was a violation of the injunction provisions of the Bar Date Order, and consequently meant that Ms. Bell-Messier's Claims were released independently of the Rotech Debtors' Plan. In addition, Mr. Brady notes that Ms. Bell-Messier does not have an objection to the technical reopening of a bankruptcy case in which she did not file a claim. Nor does she have an objection to the procedural step of holding a hearing. Ms. Bell-Messier's opposition is really directed to the substantive relief requested that the Delaware Bankruptcy Court interpret its own Orders relating to the discharge of Claims and the impact of the Bar Date Order on the prepetition conduct referred to in the Complaint. Ms. Bell-Messier also does not try to argue the merits of the Reorganized Rotech Debtors' position on the discharge, Mr. Brady says. Nor does she try to address the impact of the U.S. Government's position on the issue, which was also set forth before the Magistrate Judge in the Texas District Court. Rather, Mr. Brady notes, Ms. Bell-Messier focuses on the procedural aspects, arguing principles which are not applicable like the discretionary "first to file" rule or "judicial estoppel." "Courts are loathe to invoke these principles when the party asserting them has breached injunctions of the court (which it seeks to avoid), and has sought interpretations of that court's order from another court," Mr. Brady relates. Accordingly, the Reorganized Rotech Debtors ask Judge Walrath to overrule Ms. Bell-Messier's objection. Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- operated local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company and its 437 debtor-affiliates filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical Corporation and its direct and indirect debtor-subsidiaries broke away from IHS and emerged under their own plan of reorganization on March 26, 2002. Abe Briarwood Corp. bought substantially all of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan on May 12, 2003, and that plan took effect September 9, 2003. Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the IHS Debtors. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 102; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Feb. 2, 2006, Moody's Investors Service downgraded Rotech Healthcare, Inc.'S credit ratings: * $75 Million Revolving Credit Facility, due 2007 to Ba3 from Ba2; * $42 million Senior Term Loan, due 2008 to Ba3 from Ba2; * $300 million face amount Senior Subordinated Notes, due 2012 to B3 from B2; and * Corporate Family Rating to B2 from Ba3. Moody's said the ratings outlook is stable at that time. SAGE RANCH: Case Summary & 2 Largest Unsecured Creditors -------------------------------------------------------- Lead Debtor: Sage Ranch Estates, Inc. 1855 Highway 95A, Suite B P.O. Box 2040 Fernley, Nevada 89408 Bankruptcy Case No.: 06-50111 Debtor affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Sage Management Company, Inc. 06-50104 Truckee Resorts, Inc. 06-50105 JEC Development Co., LLC 06-50106 Skyline Realty, Inc. 06-50107 Erika Annette Cutler 06-50108 Sage View Estates, LLC 06-50112 Type of Business: Sage View Estates, L.L.C., owns and develops Sage Valley Estates. Sage Valley is a residential community that encompasses 50 one-acre lots and 87 one-half acre lots. Erika Annette Cutler, the president of these companies, also filed for bankruptcy. See http://www.sagevalley.net/ Chapter 11 Petition Date: March 9, 2006 Court: District of Nevada (Reno) Judge: Gregg W. Zive Debtor's Counsel: Sallie B. Armstrong, Esq. Downey Brand LLP 427 West Plumb Lane Reno, Nevada 89509 Tel: (775) 329-5900 Fax: (775) 785-5443 Entity Estimated Assets Estimated Debts ------ ---------------- --------------- Sage Ranch $10 Million to $10 Million to Estates, Inc. $50 Million $50 Million Sage Management $100,000 to $10 Million to Company, Inc. $500,000 $50 Million Truckee Resorts, Inc. $100,000 to $10 Million to $500,000 $50 Million JEC Development $1 Million to $10 Million to Co., LLC $10 Million $50 Million Skyline Realty, Inc. $500,000 to $10 Million to $1 Million $50 Million Erika Annette Cutler $1 Million to $10 Million to $10 Million $50 Million Sage View $1 Million to $10 Million to Estates, LLC $10 Million $50 Million Debtors' Consolidated list of 2 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Stanley J. Okula, Jr. Restitution Order $29,775,000 Assistant U.S. Attorney U.S. Department of Justice 300 Quarropas Street White Pines, NY 10601 Rich and Judy Cable Loan $50,000 P.O. Box 2524 Fernley, NV 89408 SCOTT RUBIN: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Scott Rubin Construction Company 16211 North Scottsdale Road, #498 Scottsdale, Arizona 85254 Bankruptcy Case No.: 06-00575 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Lynsco Properties LLC 06-00572 Rubin Properties Inc. 06-00573 S&H Construction LLC 06-00574 Sculie Properties LLC 06-00577 SOHO Construction LLC 06-00578 SOHO Financing LLC 06-00579 SOHO Fitness LLC 06-00580 SOHO Offices LLC 06-00581 SOHO Warehouse LLC 06-00582 The SAR Building Group Inc. 06-00584 Village Holding Company Ltd. 06-00585 Type of Business: The Debtors are home builders and developers. Scott Alan Rubin is the president of all the Debtors. Chapter 11 Petition Date: March 8, 2006 Court: District of Arizona (Phoenix) Judge: Sarah Sharer Curley Debtors' Counsel: D. Lamar Hawkins, Esq. Hebert Schenk P.C. 4742 North 24th Street, Suite 100 Phoenix, Arizona 85016 Tel: (602) 248-8203 Fax: (602) 248-8840 Entity Estimated Assets Estimated Debts ------ ---------------- --------------- Scott Rubin $1 Million to $1 Million to Construction Company $10 Million $10 Million Rubin Properties Inc. Less than Less than $50,000 $50,000 S&H Construction LLC Less than Less than $50,000 $50,000 Sculie Properties LLC $1 Million to $1 Million to $10 Million $10 Million SOHO Construction LLC $100,000 to $100,000 to $500,000 $500,000 SOHO Financing LLC $1 Million to $50,000 to $10 Million $100,000 SOHO Fitness LLC $500,000 to $100,000 to $1 Million $500,000 SOHO Offices LLC $500,000 to $500,000 to $1 Million $1 Million SOHO Warehouse LLC $500,000 to $500,000 to $1 Million $1 Million The SAR Building Less than $100,000 to Group Inc. $50,000 $500,000 Village Holding $1 Million to $500,000 to Company Ltd. $10 Million $1 Million The Debtors did not file a list of their 20 largest unsecured creditors. SHEFFIELD STEEL: Appears to Provoke a Labor Dispute with USW ------------------------------------------------------------ United Steelworkers at all three Sheffield Steel Corp locations have, to date, agreed to continue to work under the terms of expired agreements. However, this situation may not continue for long, as it appears that the company is determined to provoke a labor dispute. The Union has been willing to continue to work until a settlement can be reached but its patience is wearing thin. Kenny Parrick, Local 2741 president at the Sand Springs, Oklahoma location of Sheffield Steel stated, "The members of Local 2741 agreed to open their contract in 2002 and grant the company concessionary relief while the company was in bankruptcy. Now, four years later, the company is posting record profits and refuses to recognize our most basic needs." Levester Smith, Unit President of Local 9777-09 at Joliet, Illinois added, "We helped the company get through bankruptcy and worked for five years without a pay raise; now we expect the company to be fair to us in return." Although the Union would prefer to reach an agreement, Steelworker members have overwhelmingly voted to go on strike if necessary. The USW represents more than 850,000 workers in the U.S. and Canada. More than 100,000 are employed in the steel industry. Headquartered in Sand Springs, Okla., Sheffield Steel Corporation -- http://www.sheffieldsteel.com/-- is a regional mini-mill producer of hot rolled steel bar, concrete reinforcing bar, and fabricated products. Sheffield had sales of $297 million in the fiscal year ended April 30, 2005. Sheffield Steel Corporation's 11-3/8% Senior Secured Notes due 2011 carry Moody's Investors Service's B3 rating. SHURGARD STORAGE: S&P Puts BB+ Pref. Stock Rating on Pos. Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Shurgard Storage Centers Inc. (Shurgard; 'BBB-') on CreditWatch with positive implications. The CreditWatch placements follow the announcement of an agreement for the company to be acquired by Public Storage Inc. (A-/Watch Neg/--). The rating action affects approximately $450 million in rated debt. The roughly $5.0 billion acquisition will be structured as an all- stock transaction, in which each share of Shurgard common stock will be exchanged for 0.82 shares of Public Storage stock. Based on preannouncement closing stock prices, this implies a price of $65.16, or a 39% premium to Shurgard's closing stock price prior to Public Storage's initial unsolicited offer on Aug. 1, 2005. In addition, Public Storage will assume approximately $1.8 billion in Shurgard debt and expects to redeem $136 million of outstanding Shurgard preferred stock immediately upon closing. The transaction is subject to shareholder approval. Upon completion of the transaction (which is expected to occur during the second or third quarter of this year), Shurgard shareholders will own approximately 23% of the combined company and will appoint one board member. The combined company will be the based in Glendale, California, and increases the holdings of Public Storage, already the largest operator of self-storage facilities, by over 42% to roughly 2,100 locations. The extent to which Shurgard's issue ratings are raised will depend upon Public Storage's ultimate financing plan and the organizational structure of the combined entity. Standard & Poor's expects to meet with Public Storage in the near term to gain greater clarity on both these issues. Ratings placed on creditwatch positive: Shurgard Storage Centers Inc. Rating To From -- ---- Corporate credit BBB-/Watch Pos/-- BBB-/Developing/-- Unsecured debt BBB-/Watch Pos BBB- Preferred stock BB+/Watch Pos BB+ SOLAR INVESTMENT: Poor Credit Quality Cues Moody's to Cut Ratings ----------------------------------------------------------------- Moody's Investors Service downgraded its ratings of these classes of notes issued by Solar Investment Grade CBO II, Limited, a collateralized bond obligation issuance: * $7,000,000 Class III-A Mezzanine Secured Floating Rate Notes Due 2013 Prior Rating: Baa3, on watch for possible downgrade Current Rating: B1 * $20,000,000 Class III-B Mezzanine Secured Fixed Rate Notes due 2013 Prior Rating: Baa3, on watch for possible downgrade Current Rating: B1 The rating actions reflect the deterioration in the credit quality of the transaction's underlying collateral portfolio. ST. MATTHEWS: Case Summary & 3 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: St. Matthews Mortuary, L.L.C. fka St. Matthews Mortuary, LTD 5610 East Sam Houston Parkway North Houston, Texas 77015 Bankruptcy Case No.: 06-30924 Type of Business: The Debtor operates a mortuary located in Houston, Texas. Chapter 11 Petition Date: March 6, 2006 Court: Southern District of Texas (Houston) Judge: Jeff Bohm Debtor's Counsel: Jeffrey P. Norman, Esq. Gipson & Norman 17214 Mercury Drive Houston, Texas 77058 Tel: (281) 488-6656 Fax: (281) 488-8006 Total Assets: $1,114,000 Total Debts: $942,000 Debtor's 3 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Batesbille Casket Company Goods purchased $20,000 6750 West Loop South, Suite 120 Bellaire, TX 77401 Esser Manufacturing Company Goods purchased $20,000 2810 Capital Street Houston, TX 77003 Funeral Funding of Michigan Services $13,000 4615 Southwest Freeway, Suite 630 Houston, TX 77027 SUB SURFACE: Accumulated Deficit Tops $12.24 Million at Dec. 31 --------------------------------------------------------------- Sub Surface Waste Management of Delaware, Inc., disclosed its financial results for the quarter ended Dec. 31, 2005, to the Securities and Exchange Commission on Feb 21, 2006. For the three months ended Dec. 31, 2005, the company reported a $504,718 net loss on $62,306 of net revenues, compared to a $421,983 net loss on $64,081 of net revenues as of Sept. 30, 2005. During the three months ended Dec. 31, 2005, the Company raised $65,000, with no placement fees from issuance of 1,150,000 shares of restricted and unrestricted common stock, including the sale of 150,000 shares of unrestricted common stock to Fusion Capital Fund II, LLC. The Company had an accumulated deficit of $12,246,793 as of Dec. 31, 2005, compared to $11,742,075 deficit at Sept. 30, 2005. A full-text copy of Sub Surface's financial statements for the quarter ended Dec. 31, 2005, is available for free at http://researcharchives.com/t/s?64c Going Concern Doubt Russell Bedford Stefanou Mirchandani LLP expressed substantial doubt about Sub Surface's ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended Sept. 30, 2004 and 2003. The auditing firm pointed to the Company's recurring losses from operations and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations. Sub Surface Waste Management of Delaware, Inc. was formed under the laws of the State of Utah in January, 1986 and re-domiciled to the state of Delaware in February, 2001. The Company designs, installs and operates proprietary soil and groundwater remediation systems. At Dec. 31, 2005, U.S. Microbics, Inc., and subsidiaries control approximately 85% of the outstanding voting stock of the Company. SYNAGRO TECH: Amends Financial Ratio Under $305MM Credit Agreement ------------------------------------------------------------------ Synagro Technologies, Inc. (NASDAQ:SYGR)(ArcaEx:SYGR) entered into an agreement with its lenders to amend the financial ratio requirements included in the Company's $305 million Senior Secured Credit Agreement. The amendment, among other things, increases the maximum amount of debt permitted under the Company's leverage ratio from 4.5x earnings before interest, taxes, depreciation, and amortization, as defined, to 4.9x EBITDA at the end of fiscal 2006. The amendment also decreases the minimum amount of cash interest coverage from 3.5x EBITDA to 2.75x EBITDA at the end of fiscal 2006. These financial ratio requirements for fiscal 2007 and 2008 were also modified. "Over the past several years we have made substantial progress expanding our facilities business with the opening of the Pinellas County, Florida and the Sacramento, California municipal dryer facilities," Robert C. Boucher, Jr., Synagro's Chief Executive Officer, stated. "During 2005, we substantially completed construction on the Honolulu, Hawaii municipal dryer facility, the Central Valley, California compost facility, and the Providence Soil, Rhode Island municipal dewatering facilities. All three of these facilities are expected to commence operations in the first quarter of 2006 and expected to generate approximately $9 million of annual operating revenue." "We did experience delays in obtaining final approvals to commence construction activity on the Kern, California composting facility and the Woonsocket, Rhode Island municipal incinerator expansion during most of 2005. These facilities are now under construction and currently expected to be completed near the end of 2006, and are expected to generate approximately $14 million of annual operating revenue." "The covenant levels included in our credit agreement did not contemplate the delays in construction or the higher utilities costs that we have been experiencing in 2005 and 2006. We appreciate the support that our lenders have placed in our business by agreeing to new covenant levels that provide a reasonable amount of cushion for the delays that we have experienced with new facility construction activity as well as the higher utility costs. These new levels will also provide cushion for future dividend payments." Headquartered in Houston, Texas, Synagro Technologies, Inc. -- http://www.synagro.com/-- offers a broad range of water and wastewater residuals management services focusing on the beneficial reuse of organic, nonhazardous residuals resulting from the wastewater treatment process, including drying and pelletization, composting, product marketing, incineration, alkaline stabilization, land application, collection and transportation, regulatory compliance, dewatering, and facility cleanout services. The company's $180 million term loan due 2012, $30 million delayed draw term loan due 2012, and $95 million revolving credit facility due 2010, all carry Standard & Poor's BB- rating. Those ratings were assigned on Jan. 31, 2005. TELOGY INC: Court Gives Nod to Dovebid Inc. as Auctioneer --------------------------------------------------------- Telogy, Inc., and e-Cycle, L.L.C., sought and obtained authority from the U.S. Bankruptcy Court for the Northern District of California to employ Dovebid, Inc., as their auctioneer. The Debtors remind the Court that on Jan. 18, 2006, the Court approved for the future auction sales of their general-purpose test equipment assets. The Debtors say that DoveBid will be their auctioneer with respect to the sale of the test equipment assets. John Carroll, Senior Vice President of Global Sales of DoveBid, tells the Court that the Firm will collect a 13.5% buyer's premium from purchasers when assets are sold. Mr. Carroll 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 can be reached at: DoveBid, Inc. Attention: John Carroll 1241 East Hillsdale Boulevard Foster City, California 94404 Tel: (650) 377-2621 Fax: (650) 678-3299 Headquartered in Union City, California, Telogy, Inc. -- http://www.tecentral.com/-- rents, sells, leases electronic test equipment including oscilloscopes, spectrum, network, logic analyzers, power meters, OTDRs, and optical, from manufacturers like Tektronix, Rohde & Schwarz. Telogy, Inc., and its debtor-affiliate, e-Cycle, LLC, filed for chapter 11 protection on Nov. 29, 2005 (Bankr. N.D. Calif. Case No. 05-49371). Ramon M. Naguiat, Esq., at Pachulski, Stang, Ziehl, Young Jones & Weintraub P.C. represents the Debtor in its restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets and debts of more than $100 million. TIER TECHNOLOGIES: Amends Credit Facility to Address Default ------------------------------------------------------------ Tier Technologies, Inc. (Nasdaq:TIERE) executed an amendment to its existing bank credit facility effective March 6, 2006. The expected restatement, the delayed availability of Tier Technologies, Inc.'s financial statements for the fiscal year ended Sept. 30, 2005, and the anticipated loss for the quarter ended Sept. 30, 2005, constituted events of default under the revolving credit agreement between the Company and its lender, City National Bank. In addition, the Company incurred similar events of default for the quarter ended Dec. 31, 2005. To address these events of default, the Company and its wholly owned subsidiaries, Official Payments Corporation and EPOS Corporation, entered into an Amended and Restated Credit and Security Agreement with CNB on March 6, 2006. The Agreement, which amends and restates the original agreement signed by the Company and CNB on Jan. 29, 2003, made a number of significant changes including: * the termination a $15 million revolving credit facility, * the reduction of financial reporting covenants, and * the elimination of financial ratio covenants. The March 6, 2006 agreement provides that Tier may obtain up to $15 million of letters of credit and also grants CNB a perfected security interest in Cash Collateral in an amount equal to all issued and to be issued Letters of Credit. Currently, Tier is in compliance with all the terms and conditions of the amended Agreement. As of March 6, 2006, the Company has approximately $1.9 million outstanding letters of credit under the Agreement, which are fully collateralized by first priority liens and security interests in our assets. The Company primarily uses the credit to secure performance bonds and to meet leased facility requirements. Tier Technologies, Inc. -- http://www.tier.com/-- is a leading provider of transaction processing and packaged software and systems integration services for public sector clients. The company combines its understanding of enterprise-wide systems with domain knowledge enabling clients to rapidly channel emerging technologies into their operations. The company focuses on sectors that are driven by forces that make demand for its services less discretionary and are likely to provide the company with recurring long-term revenue streams. * * * Technical Default The restatements and the delayed availability of the company's financial statements for the fiscal year ended Sept. 30, 2005 may result in a technical default under the revolving credit agreement between the company and its lender. At Sept. 30, 2005, the company had outstanding letters of credit under this facility totaling $1.3 million. The company will communicate with the lender to seek a waiver of the defaults, but there can be no assurance that the lender will grant a waiver. USG CORP: Court Okays Amended Berkshire Equity Commitment Accord ---------------------------------------------------------------- USG Corporation and Berkshire Hathaway, Inc., entered into an amendment to the Equity Commitment Agreement on February 23, 2006, to decrease the commitment fee from $100,000,000 to $67,000,000, and the commitment extension fee from $20,000,000 to $6,700,000. As reported in the Troubled Company Reporter on Feb. 9, 2006, the Debtors entered into an equity commitment agreement, dated January 30, 2006, with Berkshire Hathaway, the company's largest stockholder, in connection with the anticipated rights offering. The Debtors expects to raise $1,800,000,000 through a rights offering in connection with a plan of reorganization to finance a portion of settlement payments to the asbestos personal injury trust, as well as avoid disputes as to the proper valuation of the shares. Under the Equity Commitment Agreement, Berkshire Hathaway will serve as "Standby Purchaser" for all or substantially all of the shares of USG stock not purchased in the rights offering by USG's then-existing shareholders. A full-text copy of the Debtors' Amended Equity Commitment Agreement is available at no charge at http://ResearchArchives.com/t/s?643 The U.S. Bankruptcy Court for the District of Delaware approves the transactions contemplated by the Amended Equity Commitment Agreement in all respects. The backstop agreement would assure that the Debtors would receive $1.8 billion in equity proceeds to fund a portion of their asbestos personal injury claim settlement underlying the reorganization plan. Berkshire Hathaway will receive a $67 million non-refundable fee for its backstop commitment. 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., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. 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. 105; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Some Asbestos Estimation Proceedings Stayed Indefinitely ------------------------------------------------------------------ The Honorable Joy Flowers Conti rules that USG Corporation and its debtor-affiliates' personal injury estimation proceedings are stayed indefinitely for all parties other than the Official Committee of Property Damage Claimants. Judge Conti also freezes all discovery efforts, including subpoenas or other discovery directed to third parties. If those proceedings must resume at a later date, the District Court will enter an appropriate order at that time. Discovery associated with the Debtors' Claimant Questionnaire is also stayed and no response is currently required of any claimant who received the Questionnaire. The PD Committee may take discovery relevant to the estimation of PI claims against the Debtors or their Voting Rights Motion, except that the PD Committee may not seek to compel responses to the Questionnaire. Should the PD Committee elect to serve discovery at this time, the parties may file objections and pleadings as permitted under the Federal Rules of Civil Procedure. 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., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. 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. 104; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARIG S.A.: New York Court Clarifies Scope of Injunction -------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York extended the Preliminary Injunction through and including March 21, 2006, and the Court will convene a hearing on March 17, 2006, at 10:00 a.m., to consider further continuation of the injunction. As reported in the Troubled Company Reporter on Nov. 29, 2005, Central Air Leasing Limited, Wells Fargo Bank Northeast, N.A., Ansett Worldwide Aviation, U.S.A and its affiliated or related corporations, and the Boeing Company asked for the removal of the preliminary injunction to give the Foreign Debtors time to close the sale of Varig Logistica S.A. Judge Drain clarifies that the scope of the injunction will: a. not exceed the scope of the order of the Brazilian Court approving the Foreign Debtors' Judicial Recovery Plan or any injunction or other order issued by or as applied by, the Brazilian Court or any subsequent order modifying, superseding or supplementing the orders; and b. be automatically reduced to the extent of any reduction or modification by the Brazilian Court of any order in the Foreign Proceeding. In the event that the Foreign Debtors are required to implement the contingency plan that was ratified by the Brazilian Court, Judge Drain rules that: a. to the extent that aircraft or engines are property of a lessor, the aircraft and engines will be repatriated to the lessor and the Foreign Debtors will cooperate with the repatriation by providing updated records of the location of aircraft parts and records and assisting with the delisting and recertification of the aircraft; and b. the Foreign Debtors will recognize that any claim arising from the lessors' right to the return of reassembled aircraft or engines and any other claim arising from the lessors' rights under the contingency plan will be treated in the Foreign Debtors' judicial restructuring plan as a postpetition claim under the New Bankruptcy and Restructuring Law of Brazil with priority of payment over prepetition claims. Parties-in-interest have until March 14, 2006, to file any objections to the continuation of the Preliminary Injunction. Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARIG S.A.: Creditors Approve Recovery Plan Details --------------------------------------------------- Creditors of Viacao Aerea Rio-Grandense approved by a majority vote detailed provisions for the implementation of the company's recovery plan. About 95.8% of the airline's creditors approved changes to the plan, Gazeta Mercantil (Brazil) reports. Changes in the plan include having one fund manager -- originally three -- for the Investments and Participation Fund that controls VARIG. The manager will be chosen at a March 13, 2006 assembly of creditors, Gazeta Mercantil relates. Mellon Bank is being considered a candidate. A consultant will also be brought in to help administer the company. Candidates named include Galeazzi, Integra and Alvares e Marsal, Gazeta Mercantil says. In addition, a management committee will be established to lead the company and define the new VARIG administrators when the FIP Controle funding reaches BRL$750 million, according to Gazeta Mercantil, citing Antonio Luis de Mello e Souza, partner-director of SM Asset Management, VARIG's restructuring advisor. The equity interest of Ruben Berta Foundation in VARIG will be reduced to 5% under the Plan. Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) VESTA INSURANCE: Likely High Losses Cue A.M. Best to Cut Ratings ---------------------------------------------------------------- A.M. Best Co. downgraded the financial strength rating to C++ (Marginal) from B (Fair) and has assigned issuer credit ratings of "b" to Vesta Insurance Group and its property/casualty affiliates. Concurrently, A.M. Best has downgraded the ICR to "cc" from "b" of Vesta's parent, Vesta Insurance Group, Inc. [Other OTC: VTA.PK]. Additionally, A.M. Best has downgraded the senior debt ratings to "cc" from "b" of the parent company's $100 million 8.75% senior unsecured debentures, due 2025 and to "c" from "ccc+" of Vesta Capital Trust I's $100 million 8.525% deferrable capital securities, due 2027. All ratings are under review with negative implications. All companies are located in Birmingham, Alabama. These rating actions reflect Vesta's continued deterioration in risk-adjusted capitalization through year-end 2005 due to higher than anticipated losses associated with hurricanes in 2005, combined with other reductions of statutory surplus, including changes in accounting estimates due to an adverse arbitration decision, changes in estimates of reinsurance recoverables and reserve strengthening in discontinued operations. Vesta has recently appointed a new chief executive officer and a new chief financial officer, and new management is actively working with third parties to structure a solution to the capital shortfalls. Although Vesta has previously executed capital enhancement plans, there is execution risk associated with new management's capital initiatives. Previous capital initiatives included the sale of its non-standard automobile operation through an initial public offering; its subsequent sale to private equity funds and the sale of its life operations to private equity funds. However, the hurricane losses experienced in 2005 largely offset the surplus enhancements realized through those transactions and Vesta's current capital position is inadequate relative to its current rating level. In addition, uncertainty exists with the holding company's financial position, pending the filing of its outstanding 2004 annual statement filing and various 2005 quarterly statement filings. The ratings were previously placed under review primarily due to a deterioration of Vesta's risk-adjusted capitalization due to losses associated with hurricanes in 2004 and uncertainty regarding the execution of management's capital enhancement plans. The ratings will remain under review pending filing of the 2004 and subsequent parent company financials as well as A.M. Best's meeting with management regarding ongoing strategic and capital- raising initiatives. The FSR has been downgraded to C++ (Marginal) from B (Fair) and ICRs of "b" have been assigned to Vesta Insurance Group and its following property/casualty affiliates: -- Vesta Fire Insurance Corporation -- Florida Select Insurance Company -- The Hawaiian Insurance & Guaranty Company, Limited -- Shelby Casualty Insurance Company -- The Shelby Insurance Company -- Texas Select Lloyds Insurance Company -- Vesta Insurance Corporation The ICR has been downgraded to "cc" from "b" for Vesta Insurance Group, Inc. The following debt ratings have been downgraded: Vesta Insurance Group -- to "cc" from "b" on $100 million 8.75% senior unsecured debentures, due 2025 Vesta Capital Trust I -- to "c" from "ccc+" on $100 million 8.525% deferrable capital securities, due 2027 A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. WOLVERINE TUBE: Posts $38.6 Million Net Loss in Fiscal Year 2005 ---------------------------------------------------------------- Wolverine Tube, Inc., reported its financial results for the fourth quarter and fiscal year ended Dec. 31, 2005. For the three months ended Dec. 31, 2005, Wolverine Tube's net loss increased to $19,300,000 from a $1,500,000 net loss for the same period in 2004. For the 12-months ended Dec. 31, 2005, the Company incurred a $38,600,000 net loss from a $644,000 net income for the 12-month period ended Dec. 31, 2004. For the fiscal 12 months ended Dec. 31, 2005, Wolverine Tube's net revenues increased to $873,500,000 from net revenues of $797,900,000 for the year ended Dec. 31, 2004. The Company's gross profit for the fiscal year ended Dec. 31, 2005, decreased to $21,600,000 from a $63,700,000 gross profit for the year ended Dec. 31, 2004. At Dec. 31, 2005, Wolverine Tube's balance sheet showed $567,352,000 in total assets and $404,050,000 in total liabilities. A full-text copy of Wolverine Tube's Feb. 23 press release outlining 2005 financial results is available for free at http://ResearchArchives.com/t/s?640 Headquartered in Huntsville, Alabama, Wolverine Tube, Inc. -- http://www.wlv.com/-- is a leading North American manufacturer and distributor of copper and copper alloy products, including copper and copper alloy tube, fabricated products, metal joining products as well as copper and copper alloy rods and bars. * * * As reported in the Troubled Company Reporter Sept. 29, 2005, Moody's Investors Service affirmed Wolverine Tube, Inc.'s B3 corporate family rating. Moody's also lowered Wolverine's guaranteed senior unsecured notes to Caa1 from B3 reflecting the company's increased usage of its recently expanded senior secured credit facilities (which augments risks associated with contractual subordination). As reported in the Troubled Company Reporter on Aug. 15, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Huntsville, Alaska-based Wolverine Tube Inc. to 'B-' from 'B'. The outlook is negative. In addition, Standard & Poor's lowered the ratings on the $236 million of senior unsecured notes to 'CCC+' from 'B'. WORLD HEALTH: Taps Administar Services as Claims & Noticing Agent ----------------------------------------------------------------- World Health Alternatives, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for authority to employ Administar Services Group as its claims, noticing, and balloting agent. Administar Services will: a) mail notices, pleadings and other documents to some of the Estates' creditors and other parties-in-interest; b) provide computerized claims objection, schedule preparation and balloting database services; and c) provide expertise and consultation and assistance in claim and ballot processing and with the dissemination of other administrative information related to the Debtors' Chapter 11 cases. The Debtors anticipate thousands of claimants and parties-in- interest whom they will be required to serve notices, pleadings, and other documents filed in their Chapter 11 cases, hence, they need ASG's services to assist the Office of the Clerk of the Bankruptcy Court. The Debtors believe that ASG's assistance will expedite the distribution of notices, streamline the claims administration process, and permit the Debtors to focus on their reorganization efforts. Jeffrey L. Pirrung, Vice President at Administar Services, states that the firm's professionals bill: Designation Hourly Rate ----------- ----------- Presidents, Principals & VP $245 Sr. Consultants & Programmers $175 Consultants and Programmers $135 Call Center Managers $91 Admin. & Clerical Personnel $56 Call Center Attendants $45 Mr. Pirrung discloses that Administar Services received a $10,000 prepetition retainer. Based in Jacksonville, Florida, Administar Services Group -- http://www.administar.net/-- provides bankruptcy claims management and class action settlement administration. Headquartered in Pittsburgh, Pennsylvania, World Health Alternatives, Inc. -- http://www.whstaff.com/-- is a premier human resource firm offering specialized healthcare personnel for staffing and consulting needs in the healthcare industry. The company and six of its affiliates filed for chapter 11 protection on Feb. 20, 2006 (Bankr. D. Del. Case Nos. 06-10162 to 06-10168). Stephen M. Miller, Esq., at Morris, James, Hitchens & Williams LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million and $100 million. WORLD HEALTH: Wants to Continue Prepetition Insurance Programs -------------------------------------------------------------- World Health Alternatives, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for authority to maintain and to continue paying these insurance programs: 1. Everest Insurance -- a medical professional liability insurance program which include self-insured retentions that require the Debtors to pay directly to the claimants all claim amounts up to the Debtors' retention amount of $100,000 for each claim. If the claim amount to be paid is in excess of the self-insured retention amount, the Debtors pay the self-insured amount of $100,000 plus 20% co-insurance of the claim in excess of the $100,000 self-insured amount; and 2. Third-Party Administrator for Medical Professional Liability claims -- the Debtors are required to employ a third-party administrator, Western Litigation Specialists, to administer professional liability claims brought against the independent contractor physicians placed by JC Nationwide Inc. The TPA performs general administration and claims adjustment services for the Debtors, including, but not limited to, administration, investigation, and settlement negotiations. The TPA administers claims for both current and prior policy periods. There are currently approximately 20 active professional liability suit files. The Debtors also ask the Court to authorize applicable banks and other financial institutions to receive, process and pay any and all checks and other transfers related to the claims. The TPA is paid $50,000 per year in installments for claims- handling services. In addition, pursuant to the current medical professional liability insurance policy with Everest and an escrow agreement with the TPA, the Debtors are required to deposit $1,060,000 into an escrow account. The TPA uses the funds in the Escrow Account to pay monthly expenses that the Debtors would otherwise be required to pay under the Medical Policy. Of the funds deposited in the Escrow Account, $560,000 is used to cover claims made under the Everest Medical Policy, while the remaining $500,000 is used to cover emergency medicine claims made pursuant to prior policies. The Escrow Account was fully funded by the payment due in February 2006. With respect to other insurance policies, the Debtors state that there are certain deductible amounts in the policy language for each claim. Claims for losses and expenses are paid by the Insurance Carriers directly to claimants, attorneys, investigators and health care providers, as incurred. Headquartered in Pittsburgh, Pennsylvania, World Health Alternatives, Inc. -- http://www.whstaff.com/-- is a premier human resource firm offering specialized healthcare personnel for staffing and consulting needs in the healthcare industry. The company and six of its affiliates filed for chapter 11 protection on Feb. 20, 2006 (Bankr. D. Del. Case Nos. 06-10162 to 06-10168). Stephen M. Miller, Esq., at Morris, James, Hitchens & Williams LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million and $100 million. W.R. GRACE: Releases Status Report on Progress of Chapter 11 Case ----------------------------------------------------------------- W.R. Grace & Co. delivered a status report on the progress of its Chapter 11 case to the U.S. Bankruptcy Court for the District of Delaware. Specifically, the Debtors' Status Report: (a) recounts in detail a chronology of the recent efforts to reach agreement on a plan, which efforts were not fully disclosed to the Bankruptcy Court in December 2005; (b) updates that account with a description of what has happened since December; (c) describes the steps that Grace has taken to specifically address concerns expressed by the Bankruptcy Court regarding the progress of negotiations and Grace's currently proposed plan of reorganization; and (d) reviews what can be done by the Court to assure further progress. Grace appreciates both the substantial efforts undertaken by the Bankruptcy Court to date and the fact that progress toward resolution of its case has sometimes been less than clear, James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., in Wilmington, Delaware, says. Overwhelmingly, that progress turns on addressing the difficult substantive issues that are central to determining the true scope of Grace's legal liability, Mr. O'Neill tells Judge Fitzgerald. Sometimes, describing case developments fully to the Bankruptcy Court has been a problem for all parties. The Debtors want to reiterate at the outset, however, that the most persistent obstacle is neither a lack of communication, nor any unwillingness of the Debtors to bring the case to conclusion. Rather, resolving substantive issues remains key. Excepting one, these issues are well known to the Bankruptcy Court: (1) The difficulty of distinguishing valid personal injury claims from the mass of "screening claims," which have been decried by all objective observers, ranging from the scientific community, to the Supreme Court, to legislators and, more recently, to certain federal courts. (2) The wholesale creation of a new round of property damage litigation comprising reams of "new" claims; a formidable undertaking made in the Debtors' case and elsewhere by Dan Speights. (3) The less mature effort to hypothesize the existence of Zonolite Attic Insulation claims that are speculative in dimension and lacking in scientific and legal merit. Mr. O'Neill relates that probably less well known to the Court are the additional issues posed by the United States government's decision to prosecute criminal environmental claims against Grace. These claims do not comprise a whole new area of civil liability, but the dimensions of the criminal case remain uncertain and its outcome unknown, adding to the uncertainty surrounding Grace's overall liability. Nonetheless, Mr. O'Neill says, uncertainty concerning Grace's liabilities does not spell insolvency, albeit the claimants would have the Court prejudge that to be so. Beyond the substantive issues posed in the Debtors' case, there are external factors as well that have produced delay. Negotiations Prior to December 2005 Hearing In connection with the extension of the Debtors' Exclusive Periods in December 2005, the Bankruptcy Court received briefs from the personal injury and property damage claimants and David Austern, the futures representative for asbestos claimants, all asserting that Grace had done nothing to advance settlement negotiations. Mr. O'Neill denies the allegation, explaining that while the ensuing briefing concerning the Debtors' plan of reorganization focused on legal issues, Grace devoted much thought and analysis to basic economic terms when it put the Plan together. Grace specifically intended to use the Plan as a vehicle for a real, dollar-oriented negotiation, so that it can build on principal- to-principal discussions that had occurred earlier in the Debtors' case. Mr. O'Neill says that the whole idea was to re- start "real negotiations." Judging that resolution of the whole case should be given priority over partial resolution, Grace decided to hold off on negotiating directly with the PI claimants, leaving the field clear for discussions between Martin W. Dies, III, Esq., at Dies & Hile L.L.P., and Russell Budd, Esq., at Baron & Budd, PC, among the key personal injury attorneys in the Debtors' case. As of the December 2005 hearing, Grace had heard promising reports on the dialogue between the two attorneys. Grace did not, however, know the terms of the deal currently under discussion. Relying on its relationship with Mr. Dies, Grace was content to await his report to the Court. As events unfolded, that report was very brief and did nothing to dispel the dark cloud cast over Grace's diligence by the previously submitted briefs. Post-December 2005 Hearing Following the December hearing, Grace has sought to move negotiations forward on two fronts. Specifically, Grace encouraged the continuation of discussions between Messrs. Dies and Budd, and asked to learn the terms being negotiated, so as to avoid misunderstandings in the event that an agreement is reached. Grace has learned that the dialogue between Messrs. Dies and Budd has not progressed, apparently because counsel for the personal injury claimants have been fully occupied with the USG Corp. negotiations. Grace takes those representations at face value and does not suggest that the resulting delay is unreasonable. Grace still has received no response to its request for information concerning the Dies and Budd negotiation. In addition, in line with the Courts' prior reminder to Grace that it was responsible for taking the initiative on plan negotiations, Grace has sought to reactivate direct discussions with the PI representatives. Mr. O'Neill notes that Grace is prepared to proceed with either of the settlement tracks. Grace's Work on Plan Amendment Mr. O'Neill informs Judge Fitzgerald that Grace has also been at work to address the Bankruptcy Court's concerns with the Plan on file and to draft a Plan to be used if agreement is reached with the PI claimants. At the December 2005 hearing, the Bankruptcy Court again raised the issue of impairment, focusing both on the proposed use of estimation to fix the value of PI claims and also on the hard cap. Grace clarified that the estimation was not for the purpose of liquidating individual claims but, instead, was designed solely to set the hard cap. Mr. O'Neill avers it is fundamentally different than the approach to property damage claims, since they can be estimated for distribution purposes and should be so estimated where, individual claim litigation with full discovery and a full trial would be too time consuming. Given the Court's concern with the hard cap, Mr. O'Neill states that Grace is ready to file, if necessary, an amended plan that removes the cap on PI claims and puts equity at risk. The actual plan revisions are in process and will be completed by scheduled March 2006 omnibus hearing. However, filing that kind of plan should await the outcome of the current negotiations, Mr. O'Neill notes. So as to minimize delay, Grace is also preparing amendments that could be used in the event that agreement is reached with the PI claimants. Mr. O'Neill maintains that Grace is doing the work necessary to pursue all options without delay. Grace Wants Exclusivity Extended "The path for keeping this case on track and the parties on a tight leash is clear," Mr. O'Neill tells Judge Fitzgerald. Given the distraction of the USG settlement, Grace proposes that the exclusivity should be extended for another 60 days so that the current negotiations can be given a fair chance. The deadline for PI claimants to submit questionnaires should also be extended accordingly. Grace also insists that the estimation process for traditional PD claims must continue. Mr. O'Neill relates that the large portion of the claims lodged by Speights & Runyan solely for strategic and obstructive purposes remains a major impediment to meaningful negotiations. Court Must Decide on ZAI Issues Furthermore, Grace believes that the time has come for the Bankruptcy Court to issue its opinion regarding the ZAI claims. Mr. O'Neill recounts that the Bankruptcy Court previously alerted the parties that an opinion would be forthcoming at the end of January 2006 and properly suggested that the parties should use the window of opportunity to resolve the matter consensually. That has not occurred, Mr. O'Neill points out, and ZAI remains a significant uncertainty that limits the prospects of negotiating a consensual plan. The speculative nature of even the number of claims affects the other parties' confidence in dedicating funds to resolve other types of claims. Moreover, Grace suggests that the Bankruptcy Court should take proposals for a mediator to be appointed in the event that the negotiations prove unsuccessful. Grace believes that an appointment is critical both to moving the parties toward resolution and to providing progress reports that are not biased by efforts to obtain leverage. Mr. O'Neill says that if the Bankruptcy Court adopts those suggestions, all bases are covered. "The active litigation will be focused, the questionnaire process will be available without delay if the negotiations fail, and the additional resources offered by a separate mediator likewise will be available without delay in that same eventuality," he says. A full-text copy of Grace's Status Report is available for free at http://ResearchArchives.com/t/s?644 Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Elihu Inselbuch, Esq., and Nathan D. Finch, Esq., at Caplin & Drysdalerepresent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Scott L. Baena, Esq., and Jay M. Sakalo, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. W.R. GRACE: Wants Advanced Refining Credit Pact Extended to 2008 ---------------------------------------------------------------- W.R. Grace & Co. and its debtor-affiliates ask the Honorable Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware to amend W.R. Grace & Co.-Connecticut's credit agreement inked with Advanced Refining Technologies with to extend its termination date to March 1, 2008. Effective March 1, 2001, Grace-Conn. and Chevron Products Company, a division of Chevron U.S.A. Inc., formed Advanced Refining, which is 55% owned by Grace-Conn. and 45% owned by Chevron USA. Governed by a Limited Liability Company Agreement, ART develops, manufactures and sells hydroprocessing catalysts used in the petroleum refining industry for the removal of impurities from petroleum feedstock. In connection with ART's formation, Grace-Conn. and Chevron Capital Corporation, an affiliate of Chevron USA, entered into separate credit agreements with ART, under which they provided ART an aggregate of $20,000,000 of revolving credit in proportion to their ownership of the joint venture -- $11,000,000 from Grace-Conn., and $9,000,000 from Chevron Capital. The parties subsequently amended the ART Credit Agreements to: (a) extend their terms to March 1, 2006; and (b) increase ART's lines of credit to $45,000,000, comprising $24,750,000 from Grace-Conn. and $20,250,000 from Chevron Capital. The Court approved the amendment to Grace Conn.'s ART Credit Agreement on January 22, 2004. James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., in Wilmington, Delaware, tells Judge Fitzgerald that other than the credit amounts, the two ART Credit Agreements are substantially identical. Pursuant to an Operating Agreement, loans under the ART Credit Agreements aggregating $2,000,000 or integral multiples will be lent 55% by Grace-Conn. and 45% by Chevron Capital. For administrative convenience, loans in lesser amounts will be made exclusively by Grace-Conn. until their balance reaches $2,000,000. Mr. O'Neill relates that the amendment of the ART Credit Agreements aimed to provide financing arrangements that would replace the then existing arrangements, which placed a disproportionate part of the financing burden on Grace-Conn. The increased credit line was required in 2004 to allow ART to pay W.R. Grace & Co. in 30 days for supplies and services and also to allow ART to purchase inventory that was made and held by Grace for ART. Mr. O'Neill notes that, based on ART's three-year forecasts in 2004, it was expected that the increased lines of credit established in 2004 would be paid back in full by the end of 2006. It was further projected that after 2006, ART would be self-financing, and Grace-Conn.'s investment in ART would be reduced to the amount of its outstanding receivables for finished goods inventory and services, which were expected to average $10,200,000 at month's end. Mr. O'Neill says that ART's Actual financial performance in 2004 and 2005 greatly exceeded forecasts provided at the time that the 2004 amendment was proposed. In fact, he adds, the lines of credit were paid off at the end of the third quarter of 2005. ART believes that, given the projected business developments, it is appropriate to keep lines of credit in place so that excess cash from operations can be used to pay dividends to Grace and Chevron Capital and to fund ART growth, and not be tied up to fund periodic "spikes" in working capital. Mr. O'Neill explains that the hydroprocessing business involves large orders that in some cases require several months of production time. Over the next few years, ART expects new refinery projects and other new transactions that will require initial orders of several million pounds of catalyst. The long production time on those orders will require temporary build up of inventory. Grace-Conn. believes that continuation of the lines of credit will provide the most cost-effective means of engaging its investment in the ART joint venture. Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Elihu Inselbuch, Esq., and Nathan D. Finch, Esq., at Caplin & Drysdalerepresent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Scott L. Baena, Esq., and Jay M. Sakalo, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. * BOOK REVIEW: Cyrus Hall McCormick: His Life and Work ------------------------------------------------------ Author: Herbert N. Casson Publisher: Beard Books Paperback: 348 pages List Price: $34.95 Order your personal copy at http://amazon.com/exec/obidos/ASIN/1587981076/internetbankrupt Carroll W. Pursell, in his book Invention in America, contends that "(the most deeply affecting invention during the antebellum era in terms both of people's lives and of the development of the American economy was surely Cyrus McCormick's reaper." Not a surprising observation given that, well into the 19th century, harvesting was done with scythes and sickles the world over. Harvesting had forever been the most labor-intensive, time- sensitive, and backbreaking of all farm operations. The first truly serviceable reaper appeared in 1826, and Cyrus McCormick introduced his superior version in 1831. Although McCormick's reaper was to revolutionize American agriculture, initially it met with derision. Farms in the Easter United States were generally too small and fields often too hilly to accommodate such a large machine. In 1844, McCormick had $300 and the good sense to go West, where he found the vast plains to which his reaper was eminently suited. In 1847, he opened a factory in Chicago using state-of-the-art mass-production principles and provided a critical impetus for large-scale agriculture, American style. Sales skyrocketed. McCormick was an innovative businessman. He pioneered the concepts of a "written guarantee," free trial, and clearly stated price. He led the way in the fledgling filed of advertising. One of his own favorite ads included a quote from a farmer who said his reaper had "more than paid for itself in one harvest." A committed Calvinist and Presbyterian, McCormick founded Chicago's McCormick Theological Seminary. He dabbled in politics and was actively involved in the great nationwide debate on whether the rich agricultural lands of the West, fueled by his invention and the railroads, would be designated slave states or free. Cyrus Hall McCormick: His Life and Work was first published in 1909. The book received positive reviews. The periodical Dial called the book the "life of the master builder of the modern business of manufacturing farm machinery. His life, coincident with the pioneer era of replacing muscle with machinery, has been devoted to inventions that have revolutionized farm labor, and it is one of those rare life-histories that blazon out the peculiar genius of the nation under the stress of a new experience." The American Monthly Review of Reviews said the author "diligently collected and very attractively presented much historical and statistical matter concerning the development of agricultural implements and ...the rapid increase in the world's wheat production." Herbert N. Casson provides a charming account of McCormick and the times in which he lived. He tells us of framers' insistence that iron implements poisoned the soil, as well as McCormick's motto, "One Step At a Time, The Hardest One First." He extols the courage and ingenuity of the country's founders as well as immigrants such as Eli Whitney, Andrew Carnegie, and Robert Fulton. He gives wonderful details about the London Exhibition of 1851 an the Great Chicago Fire. He tells us that McCormick, although a "big, red-blooded, great-hearted man," was "not always heroic" and had trouble keeping secretaries. He reports that McCormick's "energy was the wonder of his friends and the despair of his employees. His brain was not quick...but it was at work every waking moment, like a great engine that never tires." More than a biography of a great inventor by a fervent admirer, this book shines with the author's staunch pride in his country's accomplishments and certainty of its brilliance. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Marie Therese V. Profetana, Shimero Jainga, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Cherry A. Soriano-Baaclo, 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. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $725 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***