/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/060331.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 31, 2006, Vol. 10, No. 77 Headlines ADELPHIA COMMS: Court Approves $1.3-Bil. Extended DIP Facility AES CORP: S&P Lifts Corp. Credit Rating to BB- with Stable Outlook AMCAST INDUSTRIAL: Panel Wants Alvarez & Marsal as Advisor AMERICAN AIRLINES: S&P Rates $773 Million Amended Facility at B+ AMERICAN AIRLINES: Tom Horton Returns as AMR Corp. EVP & CFO AMERICAN FINANCIAL: S&P Assigns Preliminary BB+ Pref. Stock Rating AMERIQUEST TRUST: Moody's Puts Low-B Ratings on Two Cert. Classes ANCHOR GLASS: Court Allows Highwoods Lease Rejection ASPEON INC: Ninth Circuit Affirms Dismissal of Shareholders' Suit ATA AIRLINES: Inks Stipulation Allowing GATX's Claim for $7.9 Mil. BEST MANUFACTURING: SSG Arranges $97 Million Financing Package BIRCH TELECOM: Court Confirms Plan of Reorganization in Delaware BLUE BEAR: Hires Computer Forensic Lab as Computer Consultant BOMBARDIER INC: Earns $249 Million in Fiscal Year 2006 CALPINE CORP: Agrees to Sell 45% Interest in Mexico Power Plant CHASE FUNDING: S&P Downgrades Class IB Certificate's Rating to BB CHEVY CHASE: Moody's Rates Class B-5 Certificate at B2 CLEAN EARTH: Taps General Capital as Investment Banker CLEAN EARTH: U.S. Trustee Amends Official Committee Membership CONVERSENT COMMUNICATIONS: S&P Puts B Ratings on Developing Watch CREDIT SUISSE: Moody's Lifts 17 Securitization Tranche Ratings CREDIT SUISSE: Moody's Holds Ba1 Rating on $22.5MM Class L Certs. CYBERCARE INC: Has Until May 20 to File Chapter 11 Plan D&M FINANCIAL: Judge Stern Converts Case to Chapter 7 Liquidation DANA CORP: ITW Wants Debtors to Decide on Executory Contracts DANA CORP: U.S. Trustee Amends Creditors Committee Membership DELPHI CORP: Gets Court OK to Hire Dickinson Wright as IP Counsel DORAL FINANCIAL: Appoints Lidio Soriano as Chief Financial Officer DYNEGY HOLDINGS: S&P Rates $750 Million Sr. Unsecured Notes at B- EMISPHERE TECHNOLOGIES: PwC Expresses Going Concern Doubt EDDIE BAUER: Credit Metrics Decline Cues Moody's to Lower Ratings ENCORE ACQUISITION: Raising $131 Million in Common Stock Offering ENRON CORP: Inks Claim Settlement Pact with Toronto Dominion ENRON CORP: North American Unit Selling Emission Reduction Credits FEDERAL-MOGUL: CNA Parties Assert Rights Over Insurance Settlement FINOVA GROUP: Gets Adverse Ruling from Dist. Court in Thaxton Case FINOVA GROUP: No Class Certification for Thaxton Sub. Noteholders FONIX CORP: December 31 Balance Sheet Upside-Down by $15.2 Million FRGC DEVELOPMENT: Involuntary Chapter 11 Case Summary GENERAL MOTORS: Faulty Financials Prompt Moody's Ratings Review GENERAL MOTORS: S&P Puts B Corporate Credit Rating on Neg. Watch GENERAL MOTORS: Mulls Sale of Isuzu Shares GMAC COMMERCIAL: Fitch Lifts $6.6MM Class J Certs.' Rating to BB+ GMAC COMMERCIAL: Fitch Lifts $9.6MM Class L Certs.' Rating to BB GOODYEAR TIRE: SEC Closes Accounting-Related Probe HANDEX GROUP: GAIC Wants Handex-Harris County Contract Terminated HAWS & TINGLE: Picks Ford Nassen to Prosecute Construction Claims HEALTHSOUTH CORP: Net Loss Doubles Year-Over-Year in 2005 HOST MARRIOTT: S&P Rates Proposed $600 Million Sr. Notes at BB- INDYMAC TRUST: Moody's Places Class B Certificate Rating at Ba2 INTERNATIONAL PAPER: Selling Wisconsin Land For $83 Million INTERPUBLIC GROUP: Fitch Lowers Preferred Stocks' Ratings to CCC INTERSTATE BAKERIES: Selling Dorchester Lot to Tenean for $3.55M INTERSTATE BAKERIES: Settling Class Action After Court Lifts Stay IPIX CORP: Losses Prompt Auditors to Raise Going Concern Doubt J.G. WENTWORTH: S&P Puts B- Long-Term Counterparty Credit Rating KAISER ALUMINUM: PBGC & VEBA Agree to Stock Transfer Restrictions KAISER ALUMINUM: Asks Dist. Court to Consolidate Insurers' Appeals KB HOME: Moody's Puts Ba1 Rating on New $300MM 7.25% Senior Notes KING PHARMACEUTICALS: Prices $400-Mil. Conv. Senior Notes Offering LEAR CORP: S&P Downgrades Senior Unsecured Rating to B- from BB+ LEAR CORP: Secures $800 Mil. Loan Commitment & Suspends Dividends LEGACY ESTATE: Gets Court OK to Hire Deloitte as Restr. Advisor LEGACY ESTATE: Has Until May 20 to File Plan of Reorganization LIFE SCIENCES: Equity Deficit Widens to $14.5 Million at Dec. 31 LONDON FOG: Columbia Sportswear Acquires Pacific Trail Brands MANITOWOC: Expects Higher 1st Qtr. Earnings v. Wall Street Average MERIDIAN AUTOMOTIVE: Files Plan of Reorganization in Delaware METOKOTE CORP: S&P Affirms B+ Rating & Changes Outlook to Negative MIRANT CORP: Kern River Gets Stock for $81,765,967 Unsec. Claim MOUNT SINAI: Moody's Lifts Long-Term Debt Ratings to Ba1 from Ba2 MUSICLAND HOLDING: Balks at Marisa Uriarte's Lift Stay Motion MUSICLAND HOLDING: Can Hire Abacus as Advisors on Final Basis NATIONAL ENERGY: Asks Court to Approve Mirant Settlement Agreement NEIMAN MARCUS: Fitch Affirms $500 Mil. Sr. Sub. Notes' CCC Rating NELLSON NUTRACEUTICAL: Hires PricewaterhouseCoopers as Tax Advisor NET2000 COMMS: Chapter 7 Trustee Hires Recovery Services as Agent NEVADA POWER: Fitch Puts BB+ Rating on $250 Mil. Mortgage Notes NEVADA POWER: S&P Places BB Rating on Proposed $250 Million Bonds NEWBURGH DYEING: Case Summary & Largest Unsecured Creditor NEWFIELD EXPLORATION: Moody's Rates Pending $500MM Notes at Ba3 NEWFIELD EXPLORATION: S&P Rates $500 Million Sr. Sub. Notes at BB- NEXSTAR BROADCASTING: S&P Affirms Rating & Revises Outlook to Neg. NOBEX CORP: Gets Court Ok to Hire SSG Capital as Investment Banker NOBEX CORP: Panel Can Hire NachmanHaysBrownstein as Fin'l Advisor ON TOP COMMS: Wants to Sell Mississippi Station for $1.5 Million PANAVISION INC: S&P Rates $115 Million 2nd-Lien Term Loan at CCC PARAGON REAL: Losses & Equity Deficit Raise Going Concern Doubt PARMALAT USA: Tax Liability Battle with U.S. Govt. Continues PATH 1: Losses Cue Swenson Advisors to Raise Going Concern Doubt PINE PRAIRIE: S&P Puts Preliminary B+ Rating on $320 Million Debts PLIANT CORP: Liquidation Analysis Under Plan of Reorganization PRG-SCHULTZ INT'L: Losses & Deficit Prompt Going Concern Doubt RASC TRUST: Moody's Puts Low-B Ratings on Two Certificate Classes REAL ESTATE: Moody's Places Ba3 Rating on Class B7 Notes RESIX FINANCE: Moody's Rates Class B7 Series 2006-A Notes at Ba3 RIVERSTONE NETWORKS: Stockholder Withdraws Motion to Dismiss Case RIVERSTONE NETWORKS: Committee Hires Schulte Roth as Counsel SAINT VINCENTS: Proposes $25,000 Ordinary Course Professional Cap SEALY CORP: Expects to Raise $277 Million from Stock Offering SEMGROUP L.P.: Fitch Puts B Issuer Default Rating on Neg. Watch SFBC INT'L: Lenders Grant Waivers for $90 Million Credit Facility SOUNDVIEW HOME: S&P Affirms Ten Transaction Class' Low-B Ratings STARTECH ENVIRONMENTAL: Posts $439,462 Net Loss in January 2006 STARWOOD HOTELS: Host Marriott Merger Cut to $3.7B Sans CDN Hotels STATE STREET: U.S. Trustee Calls for Chapter 7 Conversion STATE STREET: Court Conditions Continued Use of MLC's Collateral STELCO INC: Monitor Files Fifty-Seventh Restructuring Report STEWART ENTERPRISES: Releases First Fiscal Quarter Ended Jan. 31 SUNNY DELIGHT: S&P Cuts Corp. Credit & Bank Loan Ratings to CCC+ SYNAGRO TECHNOLOGIES: Posts $549,000 Net Loss in Fourth Qtr. 2005 TOMMY HILFIGER: S&P Holds BB- Corp. Credit Rating on Neg. Watch THAXTON GROUP: 4th Cir. Denies Class Certification in Finova Suits THAXTON: Dist. Court Finds Finova Guilty of Fraud in Loan Deal U.S. ABS: S&P Puts Two B Certificate Class Ratings on Neg. Watch UNION PACIFIC: DBRS Holds BBB Issuer Rating on Stable Trend US AIRWAYS: America West Will Redeem $112MM of 7.5% Conv. Notes USG CORP: US Gypsum to Fund Otsego's $18M Purchase of Paper Mill VANTAGEMED CORP: Equity Deficit Narrows to $3.4 Mil. at Dec. 31 VENTURE HOLDINGS: Erman Teicher to Handle Small Preference Claims VICORP RESTAURANTS: Posts $2 Mil. Net Loss in Qtr. Ended Jan. 26 WCI STEEL: Bankruptcy Court Confirms Noteholders' Chapter 11 Plan WINN-DIXIE STORES: To Merge Distribution Biz in Southern Florida WORLDCOM INC: Wants Musicland's Decision on Service Pact Now WORLDCOM INC: Gets Okay to File Enforcement Request Under Seal XYBERNAUT CORP: Court Approves East River as Interim DIP Lender * Houlihan Lokey Relocating Washington Office Effective April 1 BOOK REVIEW: Dynamics of Institutional Change: The Hospital in Transition ********* ADELPHIA COMMS: Court Approves $1.3-Bil. Extended DIP Facility -------------------------------------------------------------- The Honorable Robert D. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approved the Extended DIP Facility of Adelphia Communication Corporation and its debtor-affiliates, despite objections from the Ad Hoc Committee of Arahova Noteholders, as holders of over $510,000,000 in Senior Notes issued by Arahova Communications, Inc. Among other things, the Extended DIP Facility: (a) provides for a $1,300,000,000 facility, comprised of an $800,000,000 revolving credit facility (including a $500,000,000 letter of credit sub facility) and a $500,000,000 term loan; (b) extends the maturity date from March 31, 2006, to August 7, 2006; (c) extends the date for delivery of: -- ACOM's consolidated audited financial statements for the fiscal year ended December 31, 2005, until no later than April 30, 2006, and -- the combining unaudited schedule for each borrower group under the Extended DIP Facility for the fiscal year ended December 31, 2005, until no later than May 31, 2006; (d) increases the aggregate amount of Intercompany Loans that may be made to ACOM and the Borrower in the Joint and Several Borrower Group from $100,000,000 to $130,000,000 that will: -- be used solely for Permitted Purposes; and -- not be subject to the monthly true-up required by the Cash Management Protocol, but will be repaid in full on the Effective Date; (e) permits Intercompany loans to be made by each of the Participating Borrowers to the Holding Company Guarantors in an aggregate maximum amount of $320,000,000 which will be used by the Holding Company Guarantors to make payments to certain Borrower Groups on the implementation of a new cost allocation methodology that the Debtors are in the process of finalizing; (f) increases the amount of Shared Capital Expenditures that the Joint and Several Borrower Group will be permitted to allocate to the other Borrower Groups from $200,000,000 to $230,000,000; (g) eliminates the SPV structure contained in the Existing DIP Facility and the provision that each existing SPV will be designated as a Holding Company Guarantor; (h) decreases the interest rate margin applicable to loans made under the Extended DIP Facility by 25 basis points; and (i) changes the Borrowing Limits and extension of the financial covenants levels of each Borrower Group through the new maturity date: Borrower Group Initial Final -------------- ------- ----- Century $690,000,000 $650,000,000 Century-TCI 230,000,000 250,000,000 UCA 100,000,000 75,000,000 Parnassos 10,000,000 10,000,000 FrontierVision 215,000,000 205,000,000 Olympus 25,000,000 25,000,000 Seven A 0 0 Seven B 20,000,000 75,000,000 Seven C 10,000,000 10,000,000 -------------- -------------- TOTAL $1,300,000,000 $1,300,000,000 Arahova Noteholders Committee's Response The Ad Hoc Committee of Arahova Noteholders noted that the ACOM Debtors' existing DIP Facility states that an "Event of Default" will occur if a Chapter 11 trustee is appointed to administer any of the ACOM Debtors' estates. In the ACOM Debtors' proposed Extended DIP Facility, that section remains unaltered and in full force and effect. The Arahova Noteholders Committee's appeal from Judge Gerber's denial of its request to: (i) terminate the Arahova Debtors' exclusive periods; and (ii) appoint a trustee for the Arahova Debtors and certain other Debtors, is currently pending before the United States District Court for the Southern District of New York. John K. Cunningham, Esq., at White & Case LLP, in New York, told the Court that in the event the Appeal is granted in favor of the Arahova Noteholders and the District Court finds that a Chapter 11 trustee should be appointed for one or more of the Debtors' estates, an Event of Default will be triggered. The Arahova Noteholders Committee asserts that prudence mandates that any order approving the ACOM Debtors' DIP extension request provide that the appointment of a Chapter 11 trustee granted by the District Court pursuant to the Appeal will not constitute an Event of Default. Debtors Talk Back The ACOM Debtors asked the Court to overrule the Arahova Noteholders Committee's response for three reasons: -- The DIP Lenders are unwilling to modify the affected provisions in the Extended DIP Facility; -- ACOM has a legitimate business need in extending and modifying the Existing DIP Facility; and -- ACOM cannot afford any delay in obtaining the DIP Financing extension and modification. Agents Support DIP Facility Extension JPMorgan Chase Bank, N.A., as Administrative Agent; Citigroup Global Markets Inc., as Syndication Agent; Citicorp North America, Inc., as Collateral Agent; and J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as Joint Bookrunners and Co-Lead Arrangers, on behalf of themselves and a syndicate of financial institutions, declared that they fully support the ACOM Debtors' efforts to extend their Existing DIP Facility. On behalf of JPMorgan Chase and Citicorp, Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, emphasized that the right to declare an event of default on the appointment of a Chapter 11 trustee is a necessary and totally standard protection for lenders in the Chapter 11 context. The DIP Lenders have agreed to lend the ACOM Debtors up to $1,300,000,000, based on their knowledge and understanding of the ACOM Debtors and their current management. The provision stating that the appointment of a trustee is an Event of Default is important to ensure that the DIP Lenders have rights, including the right to stop lending, if there is cause sufficient to warrant the appointment of a trustee under Section 1104(a) of the Bankruptcy Code, Mr. Huebner explains. "The provision at issue is completely standard and exists in virtually all, if not all, debtor-in-possession financing agreements." Accordingly, the Agents do not consent to the amendment of the Extended DIP Facility proposed by the Arahova Noteholders Committee. About Adelphia Communications 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. 125; Bankruptcy Creditors' Service, Inc., 215/945-7000) AES CORP: S&P Lifts Corp. Credit Rating to BB- with Stable Outlook ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on diversified energy company The AES Corp. to 'BB-' from 'B+'. The outlook is stable. As of Dec. 31, 2005, the Arlington, Virginia-based company had $4.892 billion of debt outstanding. The upgrade follows Standard & Poor's review of the company after its financial restatements completed in January. "The upgrade reflects the company's reduction of parent level leverage and resulting improved parent-level financial metrics," said Standard & Poor's credit analyst Scott Taylor. Although AES continues to have material weaknesses in its accounting controls that it needs to address, and future restatements are not out of the question, in Standard & Poor's view, the company has likely resolved its major problems. Standard & Poor's also said the stable outlook on AES reflects the expectation for consistent performance over the next 18 to 24 months. AMCAST INDUSTRIAL: Panel Wants Alvarez & Marsal as Advisor ---------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Amcast Industrial Corporation and its debtor-affiliates' bankruptcy cases, asks the U.S Bankruptcy Court for the Southern District of Indiana in Indianapolis for authority to retain Alvarez & Marsal, LLC, as its financial advisor, nunc pro tunc to Feb. 15, 2006. The Committee has selected A&M as its financial advisors because of the firm's diverse experience and extensive knowledge in the field of bankruptcy. A&M is expected to: a) provide analytical support to the Committee's counsel on certain litigation issues, including, but not limited to, the agreement between Amcast and General Motors; b) advise the Committee and its counsel on contract and commercial issues; c) perform an extensive analysis and review of the profitability of the Debtors' existing contracts and, if necessary, participate in the contract renegotiation process; d) assist the Committee and its counsel in any other Financial Advisor service, as requested by the Committee or its counsel, to maximize the recovery to the estate. These services include: -- analyzing and monitoring the Debtors' post-petition cash flow forecasts and assess the associated operational reasonableness, viability and risks; -- reviewing the Debtors' operational performance and business plans and analyzing the various operational risks and opportunities therein; -- analyzing the potential cost savings proposed by the Debtors' as well as potential cost savings incremental to those proposed by the Debtors; and e) Assist the Committee and its counsel in responding to various developments or motions during the course of the Debtors' Chapter 11 proceedings. The customary hourly rates for A&M's professionals are: Professional Hourly Rate ------------ ----------- Managing Director $500 to $650 Directors $400 to $500 Associates $300 to $400 Thomas E. Hill, a Managing Director at A&M, assures the Bankruptcy Court that his firm does not hold any interest adverse to the Debtors' estates and is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code. About Alvarez & Marsal Alvarez & Marsal -- http://www.alvarezandmarsal.com-- is a leading global professional services firm with expertise in guiding under performing companies and public sector entities through complex financial, operational and organizational challenges. About Amcast Industrial Headquartered in Fremont, Indiana, Amcast Industrial Corporation, manufactures and distributes technology-intensive metal products to end-users and suppliers in the automotive and plumbing industry. The Company and four debtor-affiliates filed for chapter 11 protection on Nov. 30, 2004. The U.S. Bankruptcy Court for the Southern District of Ohio confirmed the Debtors' Third Amended Joint Plan of Reorganization on July 29, 2005. The Debtors emerged from bankruptcy on Aug. 4, 2005. Amcast Industrial Corporation and Amcast Automotive of Indiana, Inc., filed for chapter 11 protection a second time on Dec. 1, 2005 (Bankr. S.D. Ind. Case No. 05-33322). David H. Kleiman, Esq., and James P. Moloy, Esq., at Dann Pecar Newman & Kleiman, P.C., represent the Debtors in their restructuring efforts. When the Debtor and its affiliate filed for protection from their creditors, they listed total assets of $97,780,231 and total liabilities of $100,620,855. AMERICAN AIRLINES: S&P Rates $773 Million Amended Facility at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' bank loan rating and its '1' recovery rating to a $773 million amended and restated senior secured credit facility dated as of March 27, 2006, available to AMR Corp. subsidiary American Airlines Inc. (B-/Stable/--). AMR (B-/Stable/B-3) guarantees the facility. The credit facility amends an existing bank facility (which has the same bank loan and recovery ratings) to revise: -- pricing; -- allocation of credit between the revolving credit facility ($325 million) and senior secured term loan ($448 million); and -- the cash flow coverage covenant. "American's credit facility is rated 'B+', two notches above the corporate credit rating, with a recovery rating of '1', indicating the expectation of full recovery of principal in the event of a payment default," said Standard & Poor's credit analyst Philip Baggaley. The 'B-' long-term corporate credit ratings on AMR Corp. and subsidiary American Airlines Inc. reflect a weak financial profile due to: -- several years of huge losses; -- a heavy debt and pension burden; and -- participation in the competitive, cyclical, and capital- intensive airline industry. Adequate liquidity, with $3.8 billion of unrestricted cash at Dec. 31, 2005, is a positive. American Airlines Inc. is the world's largest airline, measured by traffic, with solid market shares in the U.S. domestic, trans-Atlantic, and Latin American markets, but a minimal presence in the Pacific. American, like most other large U.S. airlines, has incurred heavy losses since late 2000 due to industrywide problems of: -- terrorism, -- war, -- high fuel prices, and -- increasing price competition in the domestic market as low- cost airlines expand. AMR's $861 million net loss in 2005, which included a $180 million negative impact from write-down of certain assets, was hurt by much higher fuel prices (fuel expense up by 42%). This was particularly true in the fourth quarter, when the company reported a $604 million net loss ($413 million loss before special items). However, strong international revenues and improved pricing in the U.S. domestic market boosted total 2005 revenues 11% and resulted in a narrowing of the full-year operating loss compared with 2004. American's credit measures, while improved from previous years, remain weak, with EBITDA interest coverage about 1x and funds flow to debt in the mid-single-digit percent area last year. Earnings and cash flow are expected to improve significantly in 2006, based on current revenue trends. A healthy cash balance and other potential sources of liquidity support credit quality, despite recent substantial losses. Improving revenue trends in the U.S. domestic market should allow greatly improved operating results in 2006. The outlook could be revised to positive if AMR appears likely to achieve approximately breakeven results or better this year, and if that improvement appears sustainable. A material deterioration in airline industry conditions, most likely due to higher fuel prices not offset by higher fares, could prompt a revision of the outlook to negative. AMERICAN AIRLINES: Tom Horton Returns as AMR Corp. EVP & CFO ------------------------------------------------------------ AMR Corporation, the parent company of American Airlines, reported the appointment of Thomas W. Horton as Executive Vice President - Finance and Planning and Chief Financial Officer. Mr. Horton returns to AMR and American from AT&T, where he most recently had been Vice Chairman and Chief Financial Officer after joining that company from AMR as CFO in June 2002. In his new role as AMR's Executive Vice President - Finance and Planning, Mr. Horton will also be CFO, responsible for all of the Company's finance functions, including financial planning, treasury, corporate development, accounting, tax, investor relations, a business unit that provides investment services, and purchasing. In addition, Mr. Horton will have overall responsibility for all planning functions led by Henry C. Joyner, American's Senior Vice President - Planning. These include capacity planning, revenue management, corporate real estate, international planning, activities related to American's membership in the global oneworld alliance, and fleet planning. "All of us at AMR are thrilled to welcome Tom Horton back to the leadership team," said Gerard Arpey, AMR's Chairman and CEO. "Tom is an executive of extraordinary insight and ability who served our Company with distinction in many roles, including Chief Financial Officer, before going on to do great things at AT&T. His broad knowledge of the challenging airline industry and keen understanding of the financial markets will be enormous assets to AMR as we continue the vital work of restoring the Company to sustained profitability in a global aviation marketplace." Executive Retirements With the expected retirement of two key executives in the next few years, American also disclosed several other major appointments to strengthen the management team and develop more refined lines of succession in several critical areas as the airline positions itself to become a stronger and more vibrant global competitor. Those planning retirement are Peter J. Dolara, American's Senior Vice President - Miami, the Caribbean and Latin America, who pioneered the airline's services in those regions and guided their growth into some of the most successful portions of American's network; and William F. Quinn, President of American Beacon Advisors, AMR's investment services unit, who founded that enterprise in 1986 and grew the business to a point where today it manages more than $45 billion in pension assets and short-term cash assets on behalf of American and outside clients. Mindful of these changes, American reported two senior international appointments made to address the changes that will result from Mr. Dolara's future retirement and to better position American globally for long-term competitive success. Craig S. Kreeger was named Senior Vice President - International, and C. David Cush was appointed Senior Vice President - Global Sales. At present, Mr. Kreeger is responsible for all sales and ground operations activities in Europe and Asia as Vice President - Europe and Pacific Division, based in London. Mr. Cush currently is Vice President and General Sales Manager, responsible for leading American's domestic sales team and for developing all sales policies worldwide, including those relating to key distribution systems. Under the transition that will take place when Mr. Dolara retires, Mr. Kreeger will become responsible for all ground operations in Latin America, Europe and Asia, and Cush will be responsible for all sales activities worldwide, including those in Latin America, Europe and Asia. Douglas G. Herring, currently American's Vice President and Controller, will become President of American Beacon Advisors, eventually succeeding Quinn, who will continue as the unit's chief executive officer and chairman, and remain on the American Beacon Mutual Fund Board. Isabella Goren was named Senior Vice President - Customer Relationship Marketing and Reservations. In this new role, Ms. Goren will continue to oversee the full range of on-line customer interactions, including expanding customer relationships through personalized service via the AA.com Web site, and the operation of American's reservations centers. In addition, Ms. Goren will be responsible for the airline's industry-leading AAdvantage travel awards program, led by Kurt Stache, President of AAdvantage. Brian McMenamy was appointed Vice President and Controller to succeed Herring. Mr. McMenamy is currently American's Managing Director - Airline Profitability and Financial Analysis. Mr. Dolara and Mr. Quinn, the two executives planning retirement, are remaining in their respective roles so they can work closely with their successors in the coming years to ensure a smooth and successful transition of leadership in their important areas of responsibility. About American Airlines American Airlines is the world's largest airline. American, American Eagle and the AmericanConnection regional airlines serve more than 250 cities in over 40 countries with more than 3,800 daily flights. The combined network fleet numbers more than 1,000 aircraft. American's Web site -- http://www.AA.com/-- provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld Alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members serve more than 600 destinations in over 135 countries and territories. American Airlines, Inc. and American Eagle are subsidiaries of AMR Corporation (NYSE: AMR). * * * As reported in the Troubled Company Reporter on Feb. 24, 2006, Moody's Investors Service affirmed all debt ratings of AMR Corp., and its primary subsidiary American Airlines, Inc. - corporate family rating at B3 -- as well as all tranches of the Enhanced Equipment Trust Certificates supported by payments from American and the SGL-2 Speculative Grade Liquidity Rating. The outlook has been changed to stable from negative. The stable outlook reflects Moody's expectation of steadily improving operating and financial performance during 2006 resulting primarily from yield-driven revenue growth while maintaining control of the growth of unit costs. As reported in the Troubled Company Reporter on Nov. 2, 2005, Standard & Poor's Ratings Services assigned its 'B-' rating to $800 million of New York City Industrial Development Agency special facility revenue bonds, series 2005 -- American Airlines Inc., John F. Kennedy International Airport Project, which mature at various dates. At the same time, the ratings on existing series 2002 bonds were raised to 'B-' from 'CCC', reflecting changes in the security arrangements that apply to those bonds. Both series of bonds will be serviced by payments made by AMR Corp. unit American Airlines Inc. under a lease between the airline and the agency. AMERICAN FINANCIAL: S&P Assigns Preliminary BB+ Pref. Stock Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary: -- 'BBB' senior debt, -- 'BBB-' subordinated debt, and -- 'BB+' preferred stock ratings to American Financial Group's (NYSE:AFG) recently filed universal shelf. Standard & Poor's also affirmed its 'BBB' counterparty credit rating on AFG. The outlook remains stable. The new shelf has an undesignated notional amount in accordance with the new SEC rules effective Dec. 1, 2005. "The ratings on AFG reflects a number of strengths, including its strong competitive position in the specialty property/casualty sector and -- through its indirect 82% ownership in Great American Financial Resources Inc. -- the 403(b) annuity market," said Standard & Poor's credit analyst Jason A. Jones. "In addition, AFG has strong operating results, especially in its property/casualty operations; strong financial flexibility because of its access to the capital markets; and strong capital adequacy in the operating subsidiaries." Partly offsetting weaknesses are the company's frequent special charges and loss reserve additions and asbestos and environmental exposure in the insurance business and in railroad properties. Standard & Poor's expects that AFG's operating results in 2006 will be strong. Capital adequacy in both the life and property/casualty groups is also expected to remain strong, supported by organic earnings. AMERIQUEST TRUST: Moody's Puts Low-B Ratings on Two Cert. Classes ----------------------------------------------------------------- Moody's Investors Service assigned Aaa rating to the senior certificates issued by Ameriquest Mortgage Securities Trust 2006- R2, Asset-Backed Pass-Through Certificates, Series 2006-R2, and ratings ranging from Aa1 to Ba2 to the subordinate certificates in the deal. The securitization is backed by Ameriquest Mortgage Company originated adjustable-rate and fixed-rate subprime mortgage loans. 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. Moody's expects collateral losses to range from 4.65% to 5.15%. Ameriquest Mortgage Company will act as Master Servicer and AMC Mortgage Services will act as sub-servicer for the mortgage collateral. Ameriquest had previously disclosed discussions with financial regulatory agencies or attorneys general offices of several states, regarding lending practices of AMC. ACC Capital Holdings Corporation, the parent company of Argent and AMC, had recorded a provision of $325 million in its financial statements with respect to this matter. ACC has recently announced that it had entered into a settlement agreement with forty-nine states and District of Columbia. Under the terms of the settlement agreement, ACC agreed to pay $295 million toward restitution to borrowers and $30 million to cover the States' legal costs and other expenses. In addition, ACC has agreed on behalf of itself, AMC and AMC's retail affiliates, to supplement several of its business practices and to submit itself to independent monitoring. The agreement is not expected to have any material credit implications on securitizations backed by collateral originated by AMC, Argent or their affiliates. The complete rating actions are: Ameriquest Mortgage Securities Trust 2006-R2 Asset-Backed Pass-Through Certificates, Series 2006-R2 * 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 M-10, Assigned Ba1 * Class M-11, Assigned Ba2 ANCHOR GLASS: Court Allows Highwoods Lease Rejection ---------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida authorized Anchor Glass Container Corporation to reject a lease with Highwoods Non-Orlando, LLC, for the premises at Anchor Plaza, effective Jan. 31, 2006. Highwoods has until April 15, 2006, to file a rejection damage claim against the Debtor. As reported in the Troubled Company Reporter on Feb. 1, 2006, Anchor Glass Container Corporation sought to reject the Highwoods lease after deciding to move its corporate offices to another location in Tampa, Florida. Headquartered in Tampa, Florida, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The Company filed for chapter 11 protection on Aug. 8, 2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano, Esq., at Carlton Fields PA, represents the Debtor in its restructuring efforts. Edward J. Peterson, III, Esq., at Bracewell & Guiliani, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts. (Anchor Glass Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASPEON INC: Ninth Circuit Affirms Dismissal of Shareholders' Suit ----------------------------------------------------------------- In a filing with the Securities and Exchange Commission, Aspeon, Inc., disclosed that on Feb. 23, 2006, the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal with prejudice of a consolidated, putative class action lawsuit alleging securities violations by the company, Richard M. Stack, the company's former CEO, and Horace M. Hertz, the company's former CFO. As previously reported in the Class Action Reporter, the shareholders filed another appeal after their "Third Amended Consolidated Complaint," was dismissed with prejudice on March 2004. The Ninth Circuit concluded that the company, Mr. Stack and Mr. Hertz had been sued in error and found that the allegations were insufficient under the Private Securities Litigation Reform Act of 1995. Fifth Dismissal The company said that this is the fifth time that the Courts have ruled in favor of Aspeon and against the shareholders who have brought this suit against Aspeon. The company related that on each of the previous occasions, the shareholders who have brought this suit against Aspeon have filed an appeal against the decision of the Courts. The company said that there is no assurance that the shareholders who have brought this suit against Aspeon will not file a further appeal against the Courts' latest ruling but will continue to vigorously defend against the claims. Shareholder Lawsuit The lawsuit was originally filed on Oct. 11, 2001 in the United States District Court for the Central District of California, alleging that Aspeon's Form 10-Q financial statements for quarters ended September 30, 1999, December 31, 1999, and March 31, 2000, were false and misleading. Since the inception of the lawsuit, the company has maintained that the lawsuit was without merit. Discontinued Operations The company said that on June 30, 2003, it discontinued all of its remaining operating business and focused on: * reaching satisfactory negotiated settlements with its outstanding creditors, * winning the outstanding law suit brought against it by certain of its shareholders, * bringing its financial records and SEC filings up to date, * seeking a listing on the over the counter bulletin board, * raising debt or equity to fund negotiated settlements with its creditors and to meet its ongoing operating expenses, and * attempting to merge with another entity with experienced management and opportunities for growth in return for shares of its common stock to create value for its shareholders. The company said that in order for them to merge with another entity, the lawsuit must be settled on a basis satisfactory to Aspeon. Bankruptcy Warning The company currently has no assets or ongoing source of income. The company says the proceeds from its Directors' and Officers' insurance policy will be sufficient to meet the legal cost incurred in defending any further appeal against the Court's decision. The company said that if these funds are exhausted, they would have no alternative but to file for bankruptcy. The company further said that if they lose an appeal against the Court's decision, the funds would be insufficient to cover any damages assessed and the company would also be forced into bankruptcy. As reported in the Troubled Company Reporter on Feb. 28, 2006, the company reported that as of Dec. 31, 2005, it had had only $7 in total assets, no operating business or other source of income, outstanding liabilities of approximately $8.1 million and an outstanding lawsuit filed by some of its shareholders. About Aspeon Aspeon Inc. used to design, manufacture and sell open systems touch screen point-of-sale computers for the food service and retail industries. The Company also provided customized, integrated business application software. ATA AIRLINES: Inks Stipulation Allowing GATX's Claim for $7.9 Mil. ------------------------------------------------------------------ As previously reported, ATA Airlines, Inc., and its debtor- affiliates sought and obtained authority from the U.S. Bankruptcy Court for the Southern District of Indiana to assume its amended lease with GATX Third Aircraft Corporation. GATX leased to ATA Airlines a Boeing B757-200 aircraft bearing U.S. Registration No. N514AT. In addition to the Lease, ATA Airlines, ATA Holdings and GATX are parties to these documents relating to the Aircraft: -- Tax Reimbursement Agreement dated September 1, 1995, between GATX and ATA Airlines; -- Aircraft Lease Framework Agreement dated June 30, 1995, between GATX and ATA Airlines; and -- Guaranty of the Obligations of American Trans Air, Inc., dated June 30, 1995, by ATA Holdings. On June 8, 2005, GATX filed Claim No. 2054 asserting an unsecured non-priority claim for damages related to the Lease, the Amended Lease or other Lease Documents. The Debtors objected to Claim No. 2054. Pursuant to an agreement between GATX, ATA and Holdings, GATX waived its right to require cure of any defaults existing under the Lease Documents at the time of their assumption. However, GATX reserved its right to assert general unsecured non-priority claims for damages arising from any defaults under the Lease Documents as well a claim for the difference in the amount of rent provided in the Lease and the Amended Lease. Having considered both the time and expense that will be required to litigate the allowed amount of GATX's general unsecured non- priority claims, and the anticipated distributions on account of those unsecured claims, GATX and the Reorganizing Debtors agree that GATX's total unsecured, non-priority claim against the Reorganizing Debtors, or any of the other Debtors, for the Aircraft Claims will be $7,878,476. The allowance of the Allowed GATX Claim fully resolves all of GATX's Aircraft Claims against the Reorganizing Debtors, or any of the other Debtors, and all claims, filed or scheduled, other than the Allowed GATX Claim, for the Aircraft Claims will be disallowed in their entirety. Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA Holdings Corp. -- http://www.ata.com/-- is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago- Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The Company and its debtor-affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). Terry E. Hall, Esq., at Baker & Daniels, represents the Debtors in their restructuring efforts. Daniel H. Golden, Esq., Lisa G. Beckerman, Esq., and John S. Strickland, Esq., at Akin Gump Strauss Hauer & Feld, LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $745,159,000 in total assets and $940,521,000 in total debts. (ATA Airlines Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) BEST MANUFACTURING: SSG Arranges $97 Million Financing Package -------------------------------------------------------------- SSG Capital Advisors reports that Best Manufacturing Group had difficulty absorbing an acquisition which temporarily suppressed cash flow and fatigued the Company's existing senior lender. SSG was retained as Best's exclusive investment banker to explore refinancing alternatives. SSG delivered a $97 million financing package comprised of an $80 million revolver and a $17 million term loan. The term loan was partially secured by machinery & equipment and real estate and had partial stretch or tranche B collateral characteristics. Best Manufacturing Group, LLC -- http://www.bestmfg.com/-- is the nation's premier supplier of washable textiles and garments for the textile rental, hospitality, healthcare, and image apparel industries. Headquartered in Jersey City, NJ, the Company maintains manufacturing facilities in Cambodia, Mexico and the United States. BMG's products include bed linen, table linen and uniforms. The professionals involved in the transaction included: Matthew P. Karlson Michael S. Goodman Luis A. Pillich Robert C. Smith SSG Capital Advisors, L.P. Five Tower Bridge 300 Barr Harbor Drive, Suite 420 West Conshohoken, PA 19428 Telephone (610) 940-1094 Mark Samson Getzler Henrich & Associates, LLC 295 Madison Avenue New York, NY 10017 Telephone (212) 697-2400 Christopher M. Graham, Esq. Levett Rockwood P.C. 33 Riverside Avenue Westport, CT 06880 Telephone (203) 222-0885 BIRCH TELECOM: Court Confirms Plan of Reorganization in Delaware ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware in Wilmington entered an order confirming the Plan of Reorganization of Birch Telecom. The Honorable Peter J. Walsh ruled that Birch had met all of the statutory requirements to confirm its Plan. With this action, Birch is set to complete its restructuring and emerge from Chapter 11 protection in early April. Terms of the Plan Upon consummation of the Plan and Birch's exit from Chapter 11, Birch will issue 100% of its post-emergence equity to its secured lenders. In addition, Birch's pre-petition secured debt of $108 million will be reduced to $35 million in reinstated debt held by the secured lenders. Birch's current equity will be canceled and equity holders will receive no distribution under the plan. Other creditors will receive distributions as provided under the plan. "We are extremely pleased with the Court's approval of our Plan of Reorganization," said Larry Adelman, principal of AEG Partners and Chief Restructuring Officer of Birch Telecom. "Emergence from Chapter 11 and the new business plan are positive developments for Birch's customers, employees, and partners as they bring financial stability and significantly reduce regulatory risks." Mr. Adelman added, "We accomplished what we set out to do at the start of this process, namely making the Company cash flow positive, de-leveraging our balance sheet and strengthening the Company's operations so that we can compete effectively in the current regulatory environment. We accomplished all of this in eight months, which is the time frame we anticipated at the beginning of the Chapter 11 process. "The fact that we were able to achieve a successful restructuring is the direct result of the hard work put forth by senior management, our employees, and our creditors. All of these groups contributed greatly to the successful restructuring of Birch and should be commended for their efforts. In addition, the management team did a great job caring for our customers and ensuring customer service continued to excel through this process," Mr. Adelman said. CEO & President Appointment Birch also reported that upon the Company's emergence from Chapter 11, Stephen Dube would take over as CEO and President, replacing Greg Lawhon who is leaving to become general counsel of News-Press & Gazette Company. "On behalf of the board and the entire company, I would like to take this opportunity to thank Greg for his years of service to Birch," said Mr. Adelman. "We are indebted to him for the guidance and leadership he demonstrated not only through the restructuring process but also during his entire tenure with the company. We will miss Greg and wish him great success in his new endeavor. "At the same time, we are very fortunate to have Mr. Dube join us at this important time. His industry knowledge, management skills, leadership and experience will be invaluable as we move forward," Mr. Adelman said. Mr. Dube has extensive experience in the telecommunications industry. Previously, he was elected a principal of CXO, L.L.C., a Dallas-based growth and management-consulting firm he has worked with since 2002. He provided on- site operations management and consulting services for many of CXO's clients, including competitive local exchange carriers. Prior to his work at CXO, Mr. Dube was president of a network management software company and before that was chief operating officer of OpTel, Inc., a national provider of telecommunications and broadband services. He holds a bachelor's degree in commerce from Carleton University, Ottawa, Canada, and an MBA from the York University Schulich School of Business, Toronto, Canada. "I am excited to be leading Birch at a time that presents great opportunities for the Company," said Mr. Dube. "I look forward to working with Birch's outstanding employees as we strive to exceed our customers' expectations and continue to offer and deliver exceptional service at the best price for small and mid-sized companies. While there are still challenges ahead of us, I believe that the Company is now well-positioned to meet those challenges and to realize the potential created by the successful restructuring." A new Board of Directors will also be appointed and Mr. Dube will serve as member of the new Board. Birch's new Board of Directors will be finalized upon consummation of the Plan or soon thereafter. DSL Service Agreement Key to the company's go-forward business plan is renewed relationships with carriers and vendors including AT&T, BellSouth, Qwest and Lucent. In addition, Birch recently signed a key agreement with Covad Communications, a leading national provider of integrated voice and data communications. Birch will utilize Covad's comprehensive DSL access network to supply the last mile to its DSL customers. The agreement represents a major cost savings for the Company and will ensure continued, affordable access for Birch's DSL customers. "We are proud that we were able to restructure successfully under Chapter 11 without any disruption in our ability to provide top- quality service to our customers," said Mr. Adelman. "We thank them for their loyalty during this process. Furthermore, as demonstrated by this most recent deal with Covad, we remain committed to continuing to offer our customers the best service at competitive rates for many years to come." About Birch Telecom Headquartered in Kansas City, Missouri, Birch Telecom, Inc., and its subsidiaries -- http://www.birch.com/-- own and operate an integrated voice and data network, and offer a broad portfolio of local, long distance and Internet services. The Debtors provide local telephone service, long-distance, DSL, T1, ISDN, dial-up Internet access, web hosting, VPN and phone system equipment for small- and mid-sized businesses. Birch Telecom and 28 affiliates filed for chapter 11 protection on Aug. 12, 2005 (Bankr. D. Del. Case Nos. 05-12237 through 05-12265). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents Birch and its debtor-affiliates in its second chapter 11 restructuring since 2002. Robert P. Simons, Esq., and Kurt F. Gwynne, Esq., at Reed Smith LLP, provide the Official Committee of Unsecured Creditors with legal advice and Chanin Capital Partners LLC provides the Committee with financial advisory services. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. BLUE BEAR: Hires Computer Forensic Lab as Computer Consultant ------------------------------------------------------------- Blue Bear Funding, LLC, fka 1st American Factoring, LLC, sought and obtained authority from the U.S. Bankruptcy Court for the District of Colorado to employ Computer Forensic Lab, Inc., as its forensic computer consultant. Computer Forensic is expected to inspect, evaluate and retrieve data from four pieces of equipment: * a Western Digital Enhanced IDE Hard Drive, S/N WMAAN2807338; * a Western Digital Enhanced IDE Hard Drive, S/N WMAD1A076740; * a Maxtor DimanodMax Plus 8 hard Drive; S/N E1HYKSJE; and * Dell Latitude D800 Laptop Computer, Model No. PP02X; BCM94306MP. The Debtor doesn't relate where the hard drives and laptop computer came from, who used them, or what it hopes to find. The Debtor tells the Court that Computer Forensic will bill: -- a $1,000 fee for forensic bit-stream images of the hard drives; -- $225 per hour for forensic examination of the hard drive image; -- $225 per hour for forensic analysis of recovered data; and -- $225 per hour for testimony under oath. David Penrod, a partner at Computer Forensics, assures the Court that the Firm is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Windsor, Colorado, Blue Bear Funding, LLC -- http://www.bluebearfunding.com/-- provides invoice factoring services. The Company filed for chapter 11 protection on Aug. 22, 2005 (Bankr. D. Colo. Case No. 05-31300). Alice A. White, Esq., and Douglas W. Jessop, Esq., at Jessop & Company, P.C., represent the Debtor in its restructuring efforts. Erin L. Connor, Esq., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million and $50 million. BOMBARDIER INC: Earns $249 Million in Fiscal Year 2006 ------------------------------------------------------ Bombardier's financial results for the fourth quarter and the year ended Jan. 31, 2006, show substantial improvement in the overall performance from the previous year. Net income for the fourth quarter of fiscal year 2006 was $86 million compared to $56 million for fiscal year 2005. Net income for fiscal year 2006 reached $249 million compared to a loss of $85 million for fiscal year 2005. Consolidated revenues totaled $4 billion for the three-month period ended Jan. 31, 2006, compared to $4.7 billion for the same period last fiscal year. The decrease is mainly due to lower mainline revenues in the United Kingdom and Germany, lower deliveries of regional aircraft and a lower volume of pre-owned business aircraft sales, partially offset by higher deliveries of business aircraft. For the year ended Jan. 31, 2006, consolidated revenues totaled $14.7 billion, compared to $15.5 billion the previous year. The decrease mainly reflects lower rolling stock revenues resulting from decreased mainline revenues in the U.K. and Germany due to a lower level of activities in these markets, lower deliveries of CRJ200 aircraft and a lower volume of pre-owned business aircraft sales, partially offset by increased deliveries and improved selling prices of business aircraft and increased deliveries of Q300 turboprops. "A year ago, we said we would improve our profitability through an unrelenting focus on costs, on product innovation and on customer needs," said Laurent Beaudoin, Chairman of the Board and Chief Executive Officer of Bombardier Inc. "The result is that we're back to profitability. We increased our cash position and our free cash flow generation. We also reduced our debt by some $2.5 billion, and in so doing, decreased risk and strengthened our balance sheet." "As number one in the business aircraft market, we take pride in the fact that more than half of this year's orders were for our newest models. Our Transportation customers also have shown their confidence in our innovative rail transportation solutions through an impressive 66% increase in new orders," Mr. Beaudoin continued. "We dealt with the changing business environment. In Aerospace, we adjusted our production rates to match the increased demand for our business jets and turboprop aircraft and lower demand for 50- seat regional jets. On the Transportation side, our restructuring initiative is near completion, and results are starting to show on the bottom line. Bombardier Capital's non-core portfolios are essentially wound down or sold." "This year's results indicate that we're doing the right things to restore Bombardier's earnings power and solidify our financial position," concluded Mr. Beaudoin. Bombardier Aerospace's results improved in fiscal year 2006, confirming the benefits of its diversification. The regional aircraft market presented significant challenges, but Aerospace nevertheless increased its earnings before interest and taxes by 31%, from $203 million last year to $266 million in 2006. The group also reached its delivery target with 337 aircraft. Bombardier Transportation also had a good year. EBIT before special items was $179 million, compared to $33 million last year, and the EBIT margin before special items reached 2.7%, as opposed to 0.4% in fiscal year 2005. About Bombardier A world-leading manufacturer of innovative transportation solutions, from regional aircraft and business jets to rail transportation equipment, Bombardier Inc. -- http://www.bombardier.com/-- is a global corporation headquartered in Canada. Its revenues for the fiscal year ended Jan. 31, 2005 were $15.8 billion US and its shares are traded on the Toronto Stock Exchange. * * * As reported in the Troubled Reporter on March 7, 2006, Fitch Ratings affirmed its BB ratings on Bombardier Inc. senior unsecured debt and credit facilities and its B+ rating on Bombardier Inc. preferred stock. Fitch rates Bombardier Capital Inc. senior unsecured debt at BB. Fitch also revised the Rating Outlook to Stable from Negative earlier this month. Due to the existence of a support agreement and demonstrated support by the parent, Bombardier Capital's ratings are linked to those of Bombardier Inc. These ratings cover approximately $4.7 billion of outstanding debt and preferred stock. As reported in the Troubled Company Reporter on Feb. 21, 2006, Standard & Poor's Ratings Services affirmed the ratings on Bombardier Inc. and its subsidiaries, including the 'BB' long-term corporate credit rating, following a review of the company's performance in 2005 and expected performance during the next few years. S&P says the outlook is negative. CALPINE CORP: Agrees to Sell 45% Interest in Mexico Power Plant --------------------------------------------------------------- Calpine Corporation's (OTC Pink Sheets: CPNLQ) foreign non-debtor affiliate agreed to sell its 45% interest in the 525-megawatt Valladolid III Power Plant, currently under construction on the Yucatan Peninsula in Mexico. Calpine is selling its equity interest to the two remaining partners in the project, Mitsui & Co., Ltd. and Chubu Electric Power Co., Inc., for a purchase price of approximately $43 million. Terms of Agreement Calpine will receive a cash payment of approximately $43 million, less a 10% holdback, at closing. The Buyers will return the 10% holdback after a period of one-year following closing of the transaction. At closing, Calpine will also eliminate its 45% share of the non-recourse unconsolidated project debt. In addition, at closing $9.1 million of Calpine funds held in escrow for credit support for the project will be released to Calpine. The company expects to record a non-cash impairment charge of approximately $41 million on its investment in the project and expects to complete the transaction in the next 30 days. "The sale of the Valladolid project will provide Calpine with additional liquidity and is consistent with our strategy of focusing on our core business, power generation in key power markets in the United States," said Robert P. May, Calpine's Chief Executive Officer. "As part of our restructuring program, Calpine will continue to assess opportunities to sell non-strategic assets, with the goal of emerging from Chapter 11 as a sustainable, competitive and profitable power company." Valladolid III is a natural gas-fired, combined-cycle power plant that will provide up to 525 megawatts of energy through a 25-year power purchase agreement with the Comision Federal de Electricidad. Calpine had supplied two General Electric F-class combustion gas turbines in exchange for its 45% interest in the project. Calpine also provided engineering, construction and commissioning services for the construction subcontractor. Construction of the project is scheduled for completion in June 2006. 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. CHASE FUNDING: S&P Downgrades Class IB Certificate's Rating to BB ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class IB from Chase Funding Loan Acquisition Trust Series 2001-C2 to 'BB' from 'BBB'. Concurrently, the rating on the IB certificate is placed on CreditWach with negative implications. At the same time, ratings are affirmed on 46 classes from six Chase Funding Loan Acquisition Trust transactions, including series 2001-C2. The lowered rating is the result of realized losses that have continuously depleted overcollateralization. As of the March 2006 distribution date, overcollateralization was below its target balance by approximately 25%. The CreditWatch placement is due to projected losses that have the potential to eliminate the credit enhancement supporting the IB certificate. If realized losses continue to outpace excess spread, it is likely that Standard & Poor's will lower the rating on the IB certificate to 'B'. Total delinquencies for this transaction are 22.92%. Cumulative realized losses represent 2.52% of the original pool balance. The affirmations are based on current and projected credit support percentages that are sufficient to maintain the current ratings. Total delinquencies ranged from 0.44% to 22.92% of the current pool balances, while cumulative realized losses ranged from 0.03% to 2.52% of the original pool balances. Credit support is provided by: * subordination, * overcollateralization, and * excess spread. The underlying collateral consists of 30-year fixed- or adjustable-rate subprime mortgage loans secured by first-liens on residential properties. Rating lowered; on creditwatch negative: Chase Funding Loan Acquisition Trust Mortgage loan asset-backed certificates Rating Series Class To From ------ ----- -- ---- 2001-C2 IB BB/Watch Neg BBB Ratings affirmed: Chase Funding Loan Acquisition Trust Mortgage loan asset-backed certificates Series Class Rating ------ ----- ------ 2001-C2 IA-4, IA-5 AAA 2001-C2 IM-1 AA 2001-C2 IM-2 A 2002-C1 IA-6 AAA 2002-C1 IM-1 AA 2002-C1 IM-2 A 2002-C1 IB BBB 2003-C1 IA-3, IA-4, IA-5, IIA-2 AAA 2003-C1 IM-1, IIM-1 AA 2003-C1 IM-2, IIM-2 A 2003-C1 IB, IIB BBB 2003-C2 IA, IIA, IA-X, IIA-X, IA-P, IIA-P AAA 2003-C2 B-1 AA+ 2003-C2 B-2 A+ 2003-C2 B-3 BBB+ 2003-C2 B-4 BB+ 2003-C2 B-5 B+ 2004-AQ1 A-2 AAA 2004-AQ1 M-1 AA 2004-AQ1 M-2 A 2004-AQ1 M-3 A- 2004-AQ1 B-1 BBB+ 2004-AQ1 B-2 BBB 2004-AQ1 B-3 BBB- 2004-AQ1 B-4 BB+ 2004-AQ1 B-5 BB 2004-OPT1 A-2 AAA 2004-OPT1 M-1 AA 2004-OPT1 M-2 A 2004-OPT1 M-3 A- 2004-OPT1 B-1 BBB+ 2004-OPT1 B-2 BBB 2004-OPT1 B-3 BBB- 2004-OPT1 B-4 BB+ CHEVY CHASE: Moody's Rates Class B-5 Certificate at B2 ------------------------------------------------------ Moody's Investors Service assigned ratings ranging from Aaa to B2 to certificates issued by Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2006-1. The securitization is backed by Chevy Chase Bank, F.S.B. originated or acquired 100% adjustable-rate mortgage loans with a negative amortization or an interest only payment option. The ratings are based primarily on the credit quality of the loans, the structure of the transaction, and on the protection from subordination and primary mortgage insurance. After taking into account the benefit from the mortgage insurance, Moody's expects collateral losses to range from 0.85% to 0.95%. Chevy Chase Bank, F.S.B. will service the loans. The complete rating actions are: Chevy Chase Funding LLC, Mortgage- Backed Certificates, Series 2006-1 * Class A-1, rated Aaa * Class A-1I, rated Aaa * Class A-2, rated Aaa * Class A-2I, rated Aaa * Class A-NA, rated Aaa * Class B-1, rated Aaa * Class B-1I, rated Aaa * Class B-1NA, rated Aaa * Class B-2, rated Aa2 * Class B-2I, rated Aa2 * Class B-2NA, rated Aa2 * Class B-3, rated A2 * Class B-4, rated Baa3 * Class B-5, rated B2 * Class IO, rated Aaa * Class NIO, rated Aaa The notes are being offered in a privately negotiated transaction without registration under the 1933 Act. The issuance was designed to permit resale under Rule 144A and, in the case of certain certificates, under Regulation S. CLEAN EARTH: Taps General Capital as Investment Banker ------------------------------------------------------ Clean Earth Kentucky, LLC, and its debtor-affiliate, Clean Earth Environmental Group, LLC, ask the U.S. Bankruptcy Court for the Eastern District of Kentucky for permission to employ General Capital Partners, LLC, as their investment banker and broker. General Capital will: (a) prepare a program which may include marketing the Debtors' assets through newspapers, magazines, journals, letters, fliers, signs, telephone solicitation, or such other methods as General Capital may deem appropriate; (b) prepare advertising letters, fliers and/or similar sales materials which would include information regarding the Debtors' assets; (c) locate parties who may have an interest in acquiring or refinancing the Debtors' assets. (d) circulate materials to interested parties regarding the Debtors assets, after completing confidentiality documents with those interested parties. The Debtors give General Capital the right to execute and modify confidentiality agreements on the Debtors' behalf; (e) respond, provide information to, communicate and negotiate with and obtain offers from interested parties and make recommendations to the Debtors as to whether or not a particular offer should be accepted; (f) communicate regularly with the Debtors in connection with the status of General Capital's efforts with respect to the disposition of the Debtors' assets; (g) recommend to the Debtors the proper method of handling any specific problems encountered with respect to the marketing or disposition of the Debtors' assets. (h) facilitate the auction sale for the Debtors' assets in conjunction with the Debtors' counsel. The Debtors tell the Court that General Capital will be paid a fixed fee of $20,000. Results-Based Transaction Fee On the sale of the Debtor's assets, if the initial bidder or its affiliates complete a transaction for $12.5 million, General Capital will receive nothing. If any party, including the Initial Bidder, completes a transaction for more than $12.5 million where the Initial Bidder is the Stalking Horse, then General Capital will receive: * 10% of the Gross Value if the transaction is between $12.5 million and $14.5 million; * 15% of the Gross Value if the transaction is between $14.5 million and $16.5 million; and * 20% of the Gross Value if the transaction is above $16.5 million. The Debtors clarify that the percentages apply to the incremental amounts above the $12.5 million mark. The Debtors further say that if any party other than the Initial Bidder completes a transaction and the Initial Bidder is not the Stalking Horse, then General Capital will receive a transaction fee of 4% of the total Gross Value. Michael J. Eddy, managing director of General Capital, assures the Court that the Firm is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code. A copy of the Debtors' agreement with General Capital is available for a fee at: http://www.researcharchives.com/bin/download?id=060330023109 About Clean Earth Kentucky LLC Headquartered in Cynthiana, Kentucky, Clean Earth Kentucky, LLC -- http://www.cleanearthllc.com/-- manufactures specialized sewer machines, street sweepers, and refuse trucks. The Company and its affiliate, Clean Earth Environmental Group, LLC, filed for chapter 11 protection on Jan. 24, 2006. (Bankr. E.D. Ky. Case No. 06-50052). Laura Day DelCotto, Esq., at Wise DelCotto PLLC, represents the Debtors in their restructuring efforts. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from its creditors, they estimated individual assets and debts between $10 million to $50 million. CLEAN EARTH: U.S. Trustee Amends Official Committee Membership -------------------------------------------------------------- The U.S. Trustee for Region 8 added Parker Hannifin Corporation to the Official Committee of Unsecured Creditors in Clean Earth Kentucky, LLC's chapter 11 case. The Trustee tells the Court that Parker Hannifin's claim places it within the top twenty unsecured creditors of the Debtor and has expressed interest in being part of the Committee. The Committee now consists of: 1. Tassco, LLC Attn: Larry Thomas 2700 5th Avenue, South, Irondale Industrial Park Birmingham, Alabama 35210 Tel: (205) 956-2567 Fax: (205_ 956-9703 2. AmCOMP Assurance Corp. Attn: Marjorie Barker P.O. Box 40819 Indianapolis, Indiana 46240-0819 Tel: (317) 616-0840 Fax: (317) 469-8800 3. Charlie Schroder Attn: Charlie Schroder 3229 U.S. 27 North Cynthiana, Kentucky 41031 Tel: (859) 234-9786 Fax: (859) 234-7017 4. Unisource Manufacturing, Inc. Attn: Doug Biddy 617 Country Club Drive Burlington, North Carlonia 27215 Tel: (336) 266-1221 Fax: (336) 227-2353 5. Parker Hannifin Corporation Attn: Bob Suszek 6035 Parkland Boulevard Cleveland, Ohio 44124 Tel: (216) 896-3000 Fax: (216) 896-4042 Headquartered in Cynthiana, Kentucky, Clean Earth Kentucky, LLC -- http://www.cleanearthllc.com/-- manufactures specialized sewer machines, street sweepers, and refuse trucks. The Company and its affiliate, Clean Earth Environmental Group, LLC, filed for chapter 11 protection on Jan. 24, 2006. (Bankr. E.D. Ky. Case No. 06-50052). Laura Day DelCotto, Esq., at Wise DelCotto PLLC, represents the Debtors in their restructuring efforts. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from its creditors, they estimated individual assets and debts between $10 million to $50 million. CONVERSENT COMMUNICATIONS: S&P Puts B Ratings on Developing Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed the long-term ratings on Marlborough, Massachusetts-based competitive local exchange carrier (CLEC) Conversent Communications Inc. on CreditWatch with developing implications, including the: -- 'B' corporate credit rating, and -- 'B' bank loan rating. "These actions follow the announcement that Conversent has signed a definitive agreement to be acquired by unrated CLECs CTC Communications and Choice One Communications, which had previously announced an agreement to merge on Feb. 10, 2006," said Standard & Poor's credit analyst Allyn Arden. Given the lack of information on merger terms and detailed financial disclosure by the acquiring companies and uncertainty about the financial profile and business strategy of the new entity, it is not clear whether the outcome of the transaction will be detrimental or beneficial to Conversent's overall credit profile. The acquisition will be partially funded with: * an equity investment from Columbia Ventures Corp. (the sole shareholder of CTC Communications); and * an equity investment from existing Choice One shareholders. As more detailed information on the acquisition is announced, the CreditWatch placement will be revised to reflect Standard & Poor's assessment of the potential effect on Conversent's credit ratings. CREDIT SUISSE: Moody's Lifts 17 Securitization Tranche Ratings -------------------------------------------------------------- Moody's Investors Service upgraded the ratings on seventeen tranches and placed three tranches under view for possible upgrades from four securitizations issued by Credit Suisse First Boston Mortgage Securities Corporation. These are jumbo deals that consist of conventional, adjustable rate, first lien mortgage loans originated by Chevy Chase Bank. The certificates are being upgraded or placed on watch for possible upgrade based on the high credit enhancement levels compared to the loss projections. These deals have experienced very low or no credit losses with a small amount of negative amortization. They are performing better than anticipated due to the high prepayment levels, low delinquencies, and the positive impact of the stepdown triggers. Complete rating actions are: Credit Suisse First Boston Mortgage Securities Corp., Series 2002-P1 * Class B-1, Upgraded from Aa2 to Aa1; * Class B-2, Upgraded from A2 to Aa3; * Class B-3, Upgraded from Baa2 to A3; * Class B-4, Upgraded from Ba2 to Baa3; * Class B-5, Currently: B2; under review for possible upgrade. Credit Suisse First Boston Mortgage Securities Corp., Series 2002-P2 * Class B-1, Upgraded from Aa2 to Aa1; * Class B-2, Upgraded from A2 to Aa3; * Class B-3, Upgraded from Baa2 to A3; * Class B-4, Upgraded from Ba2 to Baa3; * Class B-5, Currently: B2; under review for possible upgrade. Credit Suisse First Boston Mortgage Securities Corp., Series 2002-P3 * Class M-1, Upgraded from Aa1 to Aaa; * Class B-1, Upgraded from Aa2 to Aa1; * Class B-2, Upgraded from A2 to A1; * Class B-3, Upgraded from Baa2 to Baa1; * Class B-4, Upgraded from Ba2 to Ba1. Credit Suisse First Boston Mortgage Securities Corp., Series 2002-P4 * Class B-1, Upgraded from Aa2 to Aa1; * Class B-2, Upgraded from A2 to Aa3; * Class B-3, Upgraded from Baa2 to A3; * Class B-4 Upgraded from Ba2 to Baa3; * Class B-5, Currently: B2; under review for possible upgrade. CREDIT SUISSE: Moody's Holds Ba1 Rating on $22.5MM Class L Certs. ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of five classes and affirmed the ratings of eight classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2005-TFL1: * Class A-2, $127,915,743, Floating, affirmed at Aaa * Class A-X-1, Notional, affirmed at Aaa * Class A-X-2, Notional, affirmed at Aaa * Class B, $41,000,000, Floating, upgraded to Aaa from Aa1 * Class C, $27,500,000, Floating, upgraded to Aaa from Aa2 * Class D, $25,000,000, Floating, upgraded to Aaa from Aa3 * Class E, $22,500,000, Floating, upgraded to Aa1 from A1 * Class F, $22,500,000, Floating, upgraded to Aa3 from A2 * Class G, $22,500,000, Floating, affirmed at A3 * Class H, $22,500,000, Floating, affirmed at Baa1 * Class J, $15,000,000, Floating, affirmed at Baa2 * Class K, $15,000,000, Floating, affirmed at Baa3 * Class L, $22,500,000, Floating, affirmed at Ba1 The Certificates are collateralized by senior participation interests in five mortgage loans. The loans range in size from 12.4% to 27.5% of the pool based on current principal balances. As of the March 15, 2006 distribution date, the transaction's aggregate certificate balance has decreased by approximately 63.6% to $363.9 million from $1.0 billion at securitization due to the payoff of two loans and a partial property release associated with one loan. Moody's current weighted average loan to value ratio is 64.0%, compared to 66.4% at securitization. Moody's is upgrading Classes B, C, D, E and F due to increased credit support from the loan payoffs. The JW Marriott Las Vegas Resort & Spa Loan is secured by a 541- room full service resort hotel with 66,000 square feet of meeting and banquet space, 44,000 square feet of retail space, a spa and a 57,650 square foot casino located in Las Vegas, Nevada. RevPAR for the year-to-date period ending October 2005 was $131.36, compared to $122.42 at securitization. Moody's LTV is 61.3%, the same as at securitization. Moody's current shadow rating is Baa3, the same as at securitization. The Shidler Office Portfolio Loan is secured by ten Class B+ flex/office properties and two industrial properties located throughout Southern California. Portfolio occupancy as of November 2005 was 80.0%, compared to 83.2% at securitization. In- place rent has decreased and operating expenses have increased. Moody's LTV is 73.8%, compared to 67.3% at securitization. Moody's current shadow rating is Ba2, compared to Baa3 at securitization. The One & Only Palmilla Loan is secured by a 172-room luxury resort hotel located in the city of San Jose del Cabo in northwestern Mexico. The hotel offers a 27-hole Jack Nicklaus signature golf course. The hotel underwent a $102.5 million renovation during 2003 and 2004. RevPAR for the year-to-date period ending November 2005 was $510.00, compared to $437.50 at securitization. Moody's LTV is 62.4%, the same as at securitization. Moody's current shadow rating is Baa3, the same as at securitization. The Ritz-Carlton San Juan Loan is secured by a leasehold mortgage on a 416-room full service hotel, casino and spa located in Carolina, Puerto Rico. Average RevPAR in 2005 was $225.54, compared to $181.61 at securitization. Moody's LTV is 58.1%, compared to 61.6% at securitization. Moody's current shadow rating is Baa2, compared to Baa3 at securitization. The Galleria Office Towers Loan is secured by one office building and office portions of two other buildings located in the Galleria submarket of Houston, Texas. The property contains an overall net rentable area of 1,071,728 square feet. Occupancy as of October 2005 was 74.2%, compared to 78.9% at securitization. Moody's LTV is 63.2%, compared to 59.2% at securitization. Moody's current shadow rating is Baa3, compared to Baa2 at securitization. CYBERCARE INC: Has Until May 20 to File Chapter 11 Plan ------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida extended, until May 20, 2006, the period within which Cybercare, Inc., and CyberCare Technologies, Inc., have the exclusive right to file a chapter 11 plan of reorganization. The Court also ordered that if the Debtors file their disclosure statement and plan of reorganization on or before May 20, then their exclusive period to solicit acceptances of that plan will then be extended for 60 days from the day the plan is filed. The Debtors assured the Court that the extension won't prejudice any party. The Debtors say that to the best of their knowledge, no other party wants to file a plan. The Debtors' exclusive plan-filing period initially expired on Feb. 13, 2006. In previous requests to extend their exclusive periods, the Debtors said that Cast-Crete Corporation, their proposed exit-financing lender and post-confirmation merger partner, planned to circulate a revised term sheet. The Debtors contend that until it receives and reviews the revised term sheet, it will be unable to move forward and finalize a chapter 11 plan. The Debtors want to file a consensual plan rather than file the plan in its current form -- especially if the current drafts are inconsistent with changes Cast-Crete might request. Headquartered in Tampa, Florida, CyberCare, Inc., f/k/a Medical Industries of America, Inc., is a holding company that owns service businesses, including a physical therapy and rehabilitation business, a pharmacy business, and a healthcare technology solutions business. The Company and its debtor- affiliate, CyberCare Technologies, Inc., filed for chapter 11 protection on Oct. 14, 2005 (Bankr. M.D. Fla. Case No. 05-27268). Scott A. Stichter, Esq., at Stichter, Riedel, Blain & Prosser represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $5,058,955 in assets and $26,987,138 in debts. D&M FINANCIAL: Judge Stern Converts Case to Chapter 7 Liquidation ----------------------------------------------------------------- The Hon. Morris Stern of the United States Bankruptcy Court for the District of New Jersey converted D&M Financial Corp.'s chapter 11 case to a chapter 7 liquidation proceeding. Lack of Insurance Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, asked the Court to convert the case after the Debtor failed to comply with the U.S. Trustee Operating Guidelines by not producing proof of insurance. Ms. Stapleton told the Court that after discussing the insurance problem with Saul Berkman, Esq., the Debtor's counsel, she learned that the Debtor has only one employee, the company's president, and limited or no operations. Ms. Stapleton relates that the Debtor surrendered its premises to the landlord and any remaining operations will be conducted from the principal's home. Ms. Stapleton advised the Court that the debtor is pursuing a lawsuit which could result in a recovery for the estate. Ms. Stapleton argued that there appeared to be no chance of rehabilitation or even funding a plan and said that conversion of the case into a chapter 7 liquidation was in the best interest of creditors Chapter 7 Trustee As a consequence of the Court's conversion of the Debtor's case, Ms. Stapleton appointed Jonathan Kohn, Esq., to serve as the chapter 7 trustee. About D&M Financial Corp. Headquartered in Belleville, New Jersey, D&M Financial Corp. -- http://www.dnmfc.com/-- is a full-service mortgage company that offers home loan products. The company filed for chapter 11 protection on Feb. 14, 2006 (Bankr. D. N.J. Case No. 06-11040). Saul A. Berkman, Esq., represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets between $100,000 to $500,000 and debts between $10 million to $50 million. The Debtor's chapter 11 case was converted to a chapter 7 liquidation on Mar. 28, 2006. Jonathan Kohn, Esq., was appointed as the chapter 7 trustee. DANA CORP: ITW Wants Debtors to Decide on Executory Contracts ------------------------------------------------------------- International Trade Winds, LLC, asks the U.S. Bankruptcy Court for the Southern District of New York to compel Dana Corporation and its debtor-affiliates to promptly assume or reject their executory contracts. ITW is both a customer and supplier of the Debtors and their non- debtor foreign affiliates in Brazil. Before the Petition Date, the Debtors issued several purchase orders to ITW for component parts, which the Debtors cannot obtain from another source without a severe interruption of the Debtors' business. The component parts include: (a) differential castings used on axles supplied to General Motors for the GMC Savannah van; (b) universal joint components used in the assembly of drive shafts for the heavy truck industry; (c) constant velocity joints used in the drive shafts for the Ford Escape and the Mazda Tribute; (d) components used in heavy-duty drive shafts supplied to the heavy truck industry (Freight Liner, Volvo and Navistar); and (e) driveline components used to produce drive shafts for Caterpillar, Oshkosh, JLG Industries and John Deere. Currently, the Debtors pay ITW amounts due under the ITW Purchase Orders on a net 30-day basis. However, the Debtors have not paid ITW $1,094,128 for goods delivered prepetition. Richard M. Meth, Esq., at Pitney Hardin LLP, in Florham Park, New Jersey, relates that, of the unpaid amount, at least $618,241: (a) is entitled to an administrative expense priority under Section 503(b)(9) of the Bankruptcy Code, for goods delivered to the Debtors within 20 days of the Petition Date; and (b) should be entitled to an administrative expense status as a reclamation claim pursuant to Section 546(c) and applicable state law. According to Mr. Meth, it is critical for ITW to know whether the Debtors will assume or reject the ITW Purchase Orders for ITW to perform its contractual obligations to the Debtors and to mitigate any damages. Mr. Meth explains that ITW obtains, stores and then delivers goods to the Debtors on a just-in-time basis. Because the goods must first be shipped to ITW's warehouse from foreign countries, ITW must begin acquisition of the goods at least 60 days in advance of receiving a purchase order release or purchase order amendment from the Debtors. ITW must continually obtain goods from its suppliers to fill requests from the Debtors. However, since the Petition Date, ITW's suppliers in foreign countries have demanded payment in advance from ITW. Under the ITW Purchase Orders, the Debtors may cancel the contracts with ITW at any time, but must pay all outstanding invoices and all costs and expenses incurred by ITW under the ITW Purchase Orders. If the Debtors reject the ITW Purchase Orders, the amounts paid by ITW to fill postpetition release requests will constitute a prepetition unsecured claim. He also notes that ITW's business with the Debtors and their affiliates comprise majority of ITW's business and income. Without current payment from the Debtors and a commitment to assume the ITW Purchase Orders, ITW will suffer financial distress and may not be able to pay its suppliers. ITW also asks the Court to direct the Debtors to pay on a cash- on-delivery basis the amount owing for all goods shipped by ITW to the Debtors after the Petition Date until its contracts with Debtors are assumed. 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. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) DANA CORP: U.S. Trustee Amends Creditors Committee Membership ------------------------------------------------------------- Deirdre A. Martini, the United States Trustee for Region 2, appoints the Estate of Julio Gonzalez to the Official Committee of Unsecured Creditors replacing the Estate of Matthew Scott. The Creditors Committee currently consists of: (1) Wilmington Trust Company 520 Madison Avenue, 33rd Floor New York, New York 10022 Attn: James J. McGinley Tel. No. (212) 415-0522 (2) P. Schoenfeld Asset Management LLC 1330 Avenue of the Americas, 34th Floor New York, New York 10019 Attn: Peter Faulkner Tel. No. (212) 649-9542 (3) Sypris Technologies, Inc. 101 BullittLane, Suite 450 Louisville, Kentucky 40222 Attn: John R. McGeeney, General Counsel Tel. No. (502) 329-2000 (4) Metaldyne Company LLC 47603 Halvard Drive Plymouth, Michigan 48170 Attn: Thomas A. Amato Tel. No. (734) 207-6200 (5) Baton Corporation 1111 Superior Avenue Cleveland, Ohio 44114 Attn: William T. Reiff Tel. No. (216) 523-0566 (6) International Union, United Automobile, Aerospace and Agricultural Implement Workers of America 8000 East Jefferson Avenue Detroit, Michigan 48214 Attn: Niraj R. Ganatra, Associate General Counsel Tel. No. (313) 926-5216 (7) Julio Gonzalez, Jr., Special Administrator of the Estate of Julio Gonzalez, deceased 103 Chipola Road Cocoa Beach, Florida 32931 c/o John Cooney, Esq. Cooney and Conway 120 North LaSalle, 30th Floor Chicago, Illinois 60602 Tel. No. (312) 236-6166 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. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Gets Court OK to Hire Dickinson Wright as IP Counsel ----------------------------------------------------------------- Prior to the bankruptcy filing, Dickinson Wright PLLC represented the Delphi Corporation and its debtor-affiliates in certain litigation matters and provided legal services to their in-house counsel with respect to certain corporate and commercial transactional matters. After the Petition Date, Dickinson Wright continued to provide corporate and commercial transactional legal services to the Debtors, and was authorized by the Court to do so as an ordinary course professional. The Debtors sought and obtained the U.S. Bankruptcy Court for the Southern District of New York' authority to employ Dickinson Wright as intellectual property counsel and as litigation and corporate and commercial counsel pursuant to an ongoing professional relationship between them. Dickinson Wright will: (a) review invention disclosures, preparation of patentability opinions, and preparation and filing of patent applications with U.S. Patent and Trademark Office, focusing on, among others, these areas of technical expertise: climate control systems, heat exchange systems, compressors, evaporators, heating and air conditioning systems, steering systems, chassis, brakes, half shafts and ball joints, fuel injectors, hydraulic steering pumps, electrical systems, and plasma spray systems. (b) review correspondence from U.S. Patent and Trademark Office and prepare amendments to patent applications to secure the patent, focusing on the areas of technical expertise. (c) review potential products and inventions, conduct searches for relevant patents and publications, review and analyze uncovered patents and publications, and prepare opinions, focusing on the areas of technical expertise. (d) provide miscellaneous intellectual property advice and advice counsel related to copyrights, trademarks and know- how and contractual matters involving intellectual property, focusing on the areas of technical expertise. (e) if requested to do so by the Debtors, assist them with discrete ordinary course litigation and corporate and commercial transactional matters. Dickinson Wright attorneys who work or may work on Delphi matters and their hourly rates are: Attorneys Hourly Rate --------- ----------- Anderson, Edmund P. $325 Bergsman, Marc A. $330 Cho, Christine Y. $185 Honaker, William H. $375 Jones, Richard A. $350 Littlepage, Samuel D. $395 Maeso, Christopher C. $275 Marks, Lisa E. $300 Meyer, Nicole M. $255 Molinoff, Jeffrey S. $200 Naber, John M. $305 Phillips, Craig A. $240 Schaldenbrand, Michael A. $295 Shoemaker, Randall L. $275 Stearns, Robert L. $335 Thelen, Bruce C. $385 Legal Assistants Hourly Rate are: Campbell, Eggerton A. $160 Marasco, Jacqueline $90 Large, Dawn $90 William H. Honaker, Esq., a member of the firm, assures the Court that Dickinson Wright does not hold or represent any interest adverse to the Debtors and other party-in-interest with respect to the matters on which its is to be employed. Headquartered in Troy, Michigan, Delphi Corporation -- http://www.delphi.com/-- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Robert J. Rosenberg, Esq., Mitchell A. Seider, Esq., and Mark A. Broude, Esq., at Latham & Watkins LLP, represents the Official Committee of Unsecured Creditors. As of Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530 in total assets and $22,166,280,476 in total debts. (Delphi Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000 DORAL FINANCIAL: Appoints Lidio Soriano as Chief Financial Officer ------------------------------------------------------------------ Doral Financial Corporation (NYSE: DRL) reported the appointment of Lidio Soriano as its Chief Financial Officer. Mr. Soriano has served as interim Chief Financial Officer of the Company since August 2005. "We are very pleased with Mr. Soriano's outstanding contribution during the restatement process. His financial and accounting experience, and his familiarity with the residential mortgage market make him an ideal fit for Doral as we continue to rebuild our senior management team," said John A. Ward, III, the Company's Chairman and Chief Executive Officer. Prior to his appointment as interim Chief Financial Officer, Mr. Soriano served as Senior Vice President and Risk Management Director of the Company since January 2005. As Risk Management Director, Mr. Soriano was a member of the Company's Asset Liability Management Committee. From June 2004 until December 2004, Mr. Soriano served as President of Doral Money, a New York based subsidiary of Doral Bank, specializing in commercial and construction mortgage lending. Before joining the Company, Mr. Soriano was Vice President in charge of the Mortgage Division of Citibank Puerto Rico. The Company also reported that, effective Feb. 17, 2006, Arturo Tous had become Chief Accounting Officer. After joining the Company in 2005, Mr. Tous played an important role in the completion of the Company's restatement process. Prior to joining the Company, Mr. Tous was a Senior Associate at PricewaterhouseCoopers LLP. Mr. Tous is a Certified Public Accountant and holds a bachelor's degree from Marquette University and a Masters in Business Administration degree from the University of Wisconsin-Madison. The Company also announced that it has tentatively set Aug. 23, 2006 for its 2006 Annual Meeting of Stockholders. On Feb. 27, 2006, the Company completed the restatement of its previously issued consolidated financial statements for the years 2000 through 2004. Due to the work required to complete the restatement and to prepare and file the Company's quarterly reports on Form 10-Q for the first three quarters of 2005, the Company does not expect that it will be able to complete its audited financial statements for the year ended Dec. 31, 2005, in time for the regular date of the annual meeting, which is generally held in April. The Board has not set a record date for determining the shareholders entitled to vote at the annual meeting. The Board of Directors also adopted an amendment to the Company's Bylaws with respect to the annual meeting. Prior to the amendment, the Bylaws provided that the Company's annual meeting of shareholders would be held "at such time and date as the Board of Directors, by resolution, shall determine." In addition, the Bylaws provided that "in the event the Board of Directors fails so to determine the time, date and place of the meeting, the annual meeting of shareholders shall be held on the third Wednesday in April of each year." The amended Bylaws eliminate the reference to the third Wednesday in April as a default date for the annual meeting, and continue to provide that the annual meeting will be held at the time and date fixed by the Board. About Doral Financial Corporation Doral Financial Corporation -- http://www.doralfinancial.com/-- a financial holding company, is the largest residential mortgage lender in Puerto Rico, and the parent company of Doral Bank, a Puerto Rico based commercial bank, Doral Securities, a Puerto Rico based investment banking and institutional brokerage firm, Doral Insurance Agency, Inc. and Doral Bank FSB, a federal savings bank based in New York City. * * * As reported in the Troubled Company Reporter on March 27, 2006, Moody's Investors Service downgraded to B1 from Ba3 the senior debt ratings of Doral Financial Corporation, and reiterated the negative rating outlook. Moody's action follows cease and desist orders placed by banking regulators on Doral and some of its subsidiaries, including Doral Bank, San Juan, Puerto Rico. When Moody's last downgraded Doral's debt on Oct. 28, 2005, it issued a negative rating outlook, but noted that any credit deterioration including regulatory consequences or liquidity issues could result in a review for possible downgrade or an outright downgrade. DYNEGY HOLDINGS: S&P Rates $750 Million Sr. Unsecured Notes at B- ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on Dynegy Holdings Inc.'s senior unsecured debt to 'B-' from 'CCC+'. At the same time, Standard & Poor's assigned its 'B-' rating to Dynegy Holdings' $750 million senior unsecured notes due 2016. The outlook remains stable. As of Dec. 31, 2005, Houston, Texas- based parent company, Dynegy Inc., had $4.7 billion of debt outstanding. "The rating action reflects the reduction in the amount of secured financing that had placed the unsecured debtholders at a disadvantage and caused a greater separation between ratings," said Standard & Poor's credit analyst John Kennedy. Dynegy intends to use a combination of the net proceeds from the sale of senior unsecured notes and cash on hand to tender three series of its second priority senior notes totaling $1.75 billion. The stable outlook reflects the expectation that Dynegy will generate sufficient cash flow to service its obligations. EMISPHERE TECHNOLOGIES: PwC Expresses Going Concern Doubt --------------------------------------------------------- PricewaterhouseCoopers LLP raised substantial doubt about Emisphere Technologies, Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2005, 2004, and 2003, and of its internal control over financial reporting as of Dec. 31, 2005. PwC pointed to the company's sustained operating losses, limited capital resources and significant future commitments. Financials Emisphere Technologies, Inc. reported its financial results for the fourth quarter and year ended Dec. 31, 2005. The company reported a $18,051,000 net loss on $3,540,000 of revenues for the year ended Dec. 31, 2005. At Dec. 31, 2005, the company's balance sheet showed $18,988,000 in total assets and $33,883,000 in total liabilities, resulting in a $14,895,000 stockholders' equity deficit. The company's Dec. 31 balance sheet also showed strained liquidity with $10,240,000 in total current assets available to pay $10,762,000 in total current liabilities coming due within the next 12 months. The Company also reviewed highlights of the year, including progress in advancing its product portfolio and a successful result in a contract dispute lawsuit against Eli Lilly and Company. 2005 Product Development and Licensing Highlights A. Oral Heparin During the third quarter of 2005, Emisphere completed a multi-arm, cross-over, clinical trial with 16 normal subjects designed to compare heparin delivered by different injection routes to heparin delivered orally. Emisphere conducted this trial to support its contention that heparin, when given orally using the Company's eligen(R) technology, is unaltered when compared to heparin delivered by injection. The results from the trial should be available shortly. Once available, Emisphere expects to discuss the data with the U.S. Food and Drug Administration to determine if the results can accelerate the Company's product registration. In November 2005, Emisphere received written guidance from the FDA regarding the Company's planned Phase III trial with oral heparin. The planned trial is designed to determine the safety and efficacy of oral heparin measured against titrated Coumadin(R) (sodium warfarin) for the prevention of venous thromboembolism (VTE) following elective total hip replacement. The trial will be a randomized double blind, non-inferiority, multi-center study with the primary endpoint to prevent VTE, which consists of deep vein thrombosis, objectively confirmed by ultrasound, pulmonary embolism and death. The two-arm study will compare 30 days of dosing, three times per day, of two Emisphere oral heparin capsules, to 30 days of dosing, once per day, of oral titrated Coumadin(R). The expected enrollment for the trial is approximately 2,100 patients (including an allowance for non-evaluable patients), with 1,050 patients per arm. An independent Data and Safety Monitoring Committee will be charged with periodically reviewing the trial for safety. The Company plans to discuss modifications to the proposed protocol with the FDA based on the results of the cross-over trial that Emisphere completed during the third quarter of 2005 to determine if the results can accelerate the Company's product registration. B. Oral Insulin In November 2005, Emisphere commenced a Phase II trial in India for the Company's oral insulin product. The trial is a 90-day, multi-center, double-blind, randomized clinical trial. The four arm study will evaluate the safety and efficacy of low and high doses of oral insulin tablets measured against placebo in 120 subjects with Type 2 Diabetes Mellitus who have inadequate glycemic control with their existing oral antidiabetic monotherapy. The primary efficacy endpoint of the study is related to the change in hemoglobin A1c, the standard for evaluating glucose control in Type II diabetics. The Company also will focus on the safety of oral insulin, specifically incidents of hypoglycemia as well as the occurrence of insulin antibodies. C. Oral Salmon Calcitonin During the third quarter, Novartis Pharma AG and Nordic Bioscience A/S informed Emisphere that they had met with the FDA to discuss their Phase III development plan for the oral formulation of salmon calcitonin for the treatment of osteoporosis using Emisphere's eligen(R) technology. Based on the advice provided by the FDA, Nordic Bioscience and Novartis are planning to move forward with Phase III clinical studies. On Dec. 12, 2005, Emisphere announced positive clinical data generated by Drs. Daniel Manicourt and Jean-Pierre Devogelaer from the Department of Rheumatology at the University Hospital St-Luc, Universite Catholique de Louvain, Brussels, Belgium evaluating oral CT supplied by Novartis Pharma AG using Emisphere's eligen(R) technology in treating osteoarthritis. Results of this study strongly suggest that CT exhibits not only clinical efficacy but also markedly reduces the levels of several biochemical markers of joint metabolism, which all have been shown to have a negative prognostic value of the osteoarthritis process in longitudinal studies involving large groups of patients. D. Oral Recombinant Human Growth Hormone Novartis notified Emisphere that it initiated a multidose study in 2006 in growth hormone deficient adults with Novartis' improved oral formulation of rhGH. Emisphere will be entitled to a $5 million milestone payment upon completion of the study if Novartis elects to continue development under the Option and License Agreement with the Company. Results from the study are expected in April. In addition, Novartis is responsible for all costs related to the development of this product and Emisphere is entitled to receive royalties based on product sales. E. Roche Licensing Agreement Roche continued a clinical study utilizing Emisphere's eligen(R) technology in a number of different tablet dosage forms, under Roche's agreement with the Company to develop new oral formulations of a Roche small molecule compound for the treatment of bone-related diseases. Roche is using the Company's oral drug delivery technology to evaluate a number of new formulations that may be more convenient for patients than products currently on the market. Roche has completed the dosing portion of the study and is analyzing the relative performance of the various formulations tested in the study. On Feb. 15, 2006, the Company announced that Roche had initiated a clinical study utilizing Emisphere's eligen(R) delivery technology in a formulation for a second product. As a result, Emisphere received an additional milestone payment from Roche. F. Eli Lilly and Company Litigation On Jan. 9, 2006, U.S. Federal District Court Judge David F. Hamilton of the Southern District of Indiana, ruled that Eli Lilly & Co. had breached its contractual obligations with Emisphere and that the Lilly license and collaboration agreements with Emisphere for oral PTH were properly terminated by Emisphere as of Aug. 23, 2004. Judge Hamilton ruled in Emisphere's favor, finding that "Lilly did not act in good faith and did not deal fairly with Emisphere. The breach of trust went to the root of the parties' agreement, and it is serious enough to support termination of the contracts." The decision allows Emisphere to license the technology for oral PTH to Novartis. While the litigation with Lilly was pending, Emisphere had entered into a contingent license option agreement with Novartis in the event that the District Court permitted Emisphere to terminate the Lilly license, permitting Novartis to use Emisphere's eligen(R) technology with PTH as a treatment for osteoporosis. In addition, Emisphere will work with counsel to pursue all remedies against Lilly, including monetary damages, for Lilly's actions, which the Company believes have caused direct and consequential damages to Emisphere. $15 Million Financing With Largest Shareholder In September, Emisphere raised $15 million through a senior secured term loan financing with funds managed by MHR Fund Management LLC. The Loan Agreement required Emisphere to hold a special stockholder meeting for the purpose of obtaining stockholder approval of: (a) the exchange of the loan for an 11% senior secured convertible note with substantially the same terms as the Loan Agreement, and (b) the amendment and restatement of Emisphere's Restated Certificate of Incorporation. On Dec. 8, 2005, Emisphere filed a definitive proxy statement with the Securities and Exchange Commission relating to this special meeting of the Company's stockholders. On Jan. 17, 2006, the special meeting of stockholders was held and both proposals were approved by the Company's stockholders. The $6.9 million cash balance as of Feb. 28, 2006, includes the proceeds of the MHR financing. "We are excited to be entering 2006 with two products set to begin pivotal Phase III trials -- our oral salmon calcitonin product that is partnered with Novartis for two indications and our oral heparin product," Michael M. Goldberg, M.D., Chairman and Chief Executive Officer of Emisphere said. "We expect to receive the results from our heparin cross over study early in the second quarter and later this year, we will announce results from our Phase II oral insulin trial in India." "We continue to advance our licensing agreement with Roche to identify oral compounds for bone-related diseases. The strong clinical activity reflects the broad applicability of our eligen(R) technology platform." "We are very pleased with the findings of Judge Hamilton, backing our claim that Lilly breached its contract with Emisphere. We expect to ask the Federal Court in the Southern District of Indiana to order Lilly to pay substantial penalties related to this case." "Finally we are eager to work with our partner Novartis to advance development of oral PTH," Goldberg concluded. Full-text copies of Emisphere Technologies, Inc.'s financial statements for the year ended Dec. 31, 2005, are available at no charge at http://ResearchArchives.com/t/s?73b Headquartered in Tarrytown, New York, Emisphere Technologies, Inc. (Nasdaq: EMIS) -- http://www.emisphere.com/-- is a biopharmaceutical company pioneering the oral delivery of otherwise injectable drugs. Emisphere's business strategy is to develop oral forms of injectable drugs, either alone or with corporate partners, by applying its proprietary eligen(R) technology to those drugs or licensing its eligen(R) technology to partners who typically apply it directly to their marketed drugs. Emisphere's eligen(R) technology has enabled the oral delivery of proteins, peptides, macromolecules and charged organics. Emisphere and its partners have advanced oral formulations or prototypes of salmon calcitonin, heparin, insulin, parathyroid hormone, human growth hormone and cromolyn sodium into clinical trials. Emisphere has strategic alliances with world-leading pharmaceutical companies. At Dec. 31, 2005, the company's stockholders' equity deficit widened to $14,895,000 compared to a $11,274,000 deficit at Dec. 31, 2004. EDDIE BAUER: Credit Metrics Decline Cues Moody's to Lower Ratings ----------------------------------------------------------------- Moody's Investors Service downgraded the corporate family and senior secured term debt ratings of Eddie Bauer, Inc., from Ba3 to B2 with a stable outlook. The downgrade reflects Moody's expectation that the company's performance will continue to deteriorate during 2006 resulting in a significant weakening in credit metrics and free cash flow. These ratings are downgraded: * Corporate family rating to B2 from Ba3; * $300 million guaranteed secured term loan to B2 from Ba3. The rating outlook is stable. The B2 corporate family rating reflects the financial impact of the company's merchandise missteps during the Fall and Holiday 2005 seasons that resulted in operating performance materially below Moody's expectations. This negative trend will likely worsen during 2006 as the company clears excess inventory and focuses on readdressing its merchandise offering. Moody's expects 2006 performance levels will cause a notable weakening in free cash flow, operating margins, leverage and coverage metrics, as well as a probable covenant violation. Eddie Bauer will likely violate its financial covenants under the term loan for the first quarter of FY 2006 although Moody's expects the company will probably receive an amendment from the bank group. The ratings are supported by the company's adequate liquidity as provided by its unrated $150 million asset based revolver, its well recognized brand name, as well as, its stable licensing revenue stream. The ratings are also supported by the expected debt reduction that will occur during 2006 as a result of the mandatory excess cash flow sweep. The ratings continue to be constrained by the nature of the specialty apparel industry which is highly seasonal, subject to intense competition, and fashion risk. The rating outlook is stable reflecting Eddie Bauer's adequate liquidity as well as Moody's expectations for marginally positive free cash flow. A positive outlook could be assigned should the company's sales and operations stabilize as evidenced by Free Cash Flow/Debt above 5% and Debt/EBITDA solidly below 6.0x. Downward rating pressure could develop should; liquidity weaken, free cash flow turn negative for an extended period of time, or operating performance deteriorate materially below Moody's expectations. The $300 million term loan is secured by a first lien on the trademark and distribution center and has a second lien on the inventory and accounts receivable. In addition, it is guaranteed by the domestic subsidiaries. The senior secured term loan is rated at the same level as the corporate family rating given its dominance in the capital structure. The credit agreement has both a leverage and fixed charge coverage covenant as well as a 50% excess cash flow sweep. Headquartered in Redmond, Washington, Eddie Bauer, Inc. is a multi channel retailer that offers it products through its 381 retail and outlet stores in the U.S. and Canada along with its catalogs and e-commerce sites. Eddie Bauer, Inc., had revenues of approximately $1.0 billion for the year ended Jan. 1, 2006. ENCORE ACQUISITION: Raising $131 Million in Common Stock Offering ----------------------------------------------------------------- Encore Acquisition Company (NYSE:EAC) priced a public offering of 4,000,000 shares of its common stock for gross proceeds of approximately $131.1 million. Encore intends to use the net proceeds of the offering to repay indebtedness under its revolving credit facility and for general corporate purposes. Citigroup Global Markets Inc. will serve as sole underwriter for the offering. When available, copies of the prospectus supplement and accompanying prospectus may be obtained from: Citigroup Global Markets Inc. 388 Greenwich Street New York, NY 10013 Headquartered in Fort Worth, Texas, Encore Acquisition -- http://www.encoreacq.com/-- is a growing independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. Organized in 1998, Encore's oil and natural gas reserves are in four core areas: the Cedar Creek Anticline of Montana and North Dakota; the Permian Basin of West Texas and Southeastern New Mexico; the Mid Continent area, which includes the Arkoma and Anadarko Basins of Oklahoma, the North Louisiana Salt Basin, the East Texas Basin and the Barnett Shale; and the Rocky Mountains. * * * Encore Acquisition's $300-million senior subordinate notes due on July 15, 2015, carry Moody's Investors Service's B2 rating and Standard & Poor's B rating. ENRON CORP: Inks Claim Settlement Pact with Toronto Dominion ------------------------------------------------------------ Reorganized Enron Corporation and its debtor-affiliates ask Judge Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York to approve their Settlement Agreement dated January 25, 2006, with: -- The Toronto-Dominion Bank -- Toronto Dominion (Texas) LLC -- TD Securities (USA) LLC As previously reported, the Parties have agreed in August 2005 to enter into a settlement of claims under the MegaClaim Litigation. Under the Settlement, TD Bank or one of its affiliates will pay Enron Corp., by wire transfer of immediately available funds, $130,000,000 to resolve all of the pending disputes among the Parties. Pursuant to the MegaClaim Complaint, the Debtors have brought claims against the TD Entities for damages based on, asserted aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and civil conspiracy. The Debtors also assert against the TD Entities and some Defendants claims for: -- disallowance or equitable subordination of the Defendants' claims against the Debtors; -- avoidance or recovery of payments made to the Defendants allegedly constituting avoidable transfers; and -- accounting, punitive damages, interest and costs. TD Texas filed three proofs of claim against the Debtors for obligations allegedly owing to, or damages allegedly suffered by, TD Texas in connection with various credit facilities or financial transactions. In addition to the TD Claims, claims were filed in connection with some financing, loan or other transactions by parties with whom the Debtors allegedly had contractual arrangements and for which certain of the TD Entities allegedly maintain legal or beneficial interests in the proceeds of those claims. Aside from the MegaClaim Litigation, the Debtors and the TD Entities are also parties to various actions including: 1. The Guaranty Action An adversary proceeding seeking the avoidance of Enron's obligations under a Guaranty Agreement dated December 18, 2000, captioned Enron Corp. v. Toronto Dominion (Texas), Inc.. 2. The Trading Action An adversary proceeding, captioned Enron North America Corp. v. Toronto Dominion Bank, for the recovery of damages against TD Bank pursuant to a variety of theories relating to amounts allegedly due and owing to ENA from TD Bank. 3. The Assignee Adversaries The Debtors have commenced litigation in the Bankruptcy Court, styled Enron Corp. v. OCM Administrative Services II, LLC, and Enron Corp. v. Allied Irish Banks, et al., where the Debtors seek to disallow and subordinate the claims formerly held as of the Petition Date by certain of the TD Entities. These claims were sold, transferred or assigned by the TD Entities to third parties. The claims which the Debtors seek to disallow and subordinate in the Assignee Adversaries, and the holders of the assigned claims are: Claim No. Claimant Amount Class --------- -------- ------------ ----- 7541 UBS AG $55,238,868 4 11179 OCM Administrative Services II, LLC 118,475,587 185 11180 OCM Administrative Services II, LLC 118,475,587 5 12301 Allied Irish Banks, plc 1,000,000 4 141797 Citigroup, Inc. as agent for Redwood Master Fund Ltd. 4,999,999 4 14179 Citigroup, Inc. as agent for Rushmore Capital-II 22,083,333 4 Because of the substantial expense of litigating the issues associated with the Disputes, the length of time necessary to resolve the issues and the disruption to their efforts to further distributions contemplated by their Chapter 11 Plan, the Reorganized Debtors believe that the compromise and settlement provided in the TD Settlement Agreement is desirable and beneficial. The other salient terms of the TD Settlement Agreement includes the allowance of claims against the Debtors: A. Allowance of Assignee Claims On the Effective Date, the Assignee Claims will be deemed allowed as general unsecured claims against these Debtors: Claim No. Debtor Amount Class -------- ------- ------------ ----- 7541 Enron $55,238,868 4 11179 Enron 118,475,587 185 11180 ENA 118,475,587 5 12301 Enron 1,000,000 4 14179 Enron 4,999,999 4 14179 Enron 22,083,333 4 B. Allowance of TD Claims The TD Claims will be deemed allowed as general unsecured claims against these Debtors, in these amounts and classes: Claim No. Debtor Amount Class -------- ------- ------------ ----- 19053 Enron $15,538,576 185 19060 Enron 9,006,025 4 19061 ENA 31,077,153 5 The Reorganized Debtors have determined that the provisions in the Settlement Agreement could not be achieved unless the TD Entities were protected from the risk of post-settlement exposure, including exposure to Non-Settling Defendants. Accordingly, the TD Settlement Agreement contains release provisions, which are essential to the settlement with the TD Entities. A full-text copy of the TD Settlement Agreement is available for free at http://bankrupt.com/misc/TD_SettlementAgreement.pdf Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, represent the Official Committee of Unsecured Creditors. (Enron Bankruptcy News, Issue No. 168; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: North American Unit Selling Emission Reduction Credits ------------------------------------------------------------------ Emission Reduction Credits, which are issued by Air Quality Management Districts, Air Pollution Control Districts, and state and county governments, are transferable permits to emit certain types of chemical compounds in accordance with programs administered by various state and local environmental agencies within a particular geographic region. ERCs are required for new major emission sources, or sources undergoing major expansions, by various state air agencies in regions that do not meet the Environmental Protection Agency's national ambient air quality standards. Enron North America Corp., an Enron Corporation debtor-affiliate, holds numerous surplus ERCs, issued by regulatory agencies in California or Texas. ENA is not currently engaged in emission producing operations for which the Surplus ERCs would be required to offset current or future emissions, Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, tells the U.S. Bankruptcy Court for the Southern District of New York. Throughout the course of its Chapter 11 case, ENA has been trying to liquidate its Surplus ERCs. On February 7, 2003, ENA sought the Court's authorization to conduct a comprehensive auction for its Surplus ERCs. The Court granted the Debtor's request, and authorized ENA to sell, without a hearing, any Surplus ERCs, which remained unsold at the conclusion of the 2003 auction process, provided that adequate notice is provided to interested parties. Recent Sale Process In 2005, ENA was approached by Element Markets LLC, an environmental commodities broker. Element Markets indicated it represented a party interested in purchasing the ERC Assets. ENA was also notified by the Broker that it represented various parties interested in the ERC Assets. In January 2006, ENA conducted an auction by e-mail with Element Markets and Cantor Fitzgerald Brokerage L.P., each representing undisclosed buyers, as the only two participants. Element Markets submitted the highest offer -- $1,500,010 -- for the ERC Assets on behalf of its client, Green Market Investments LLC, a Texas limited liability company. Thereafter, ENA and Green Market entered into a purchase agreement dated as of January 12, 2006. Green Market tendered a $10,000 deposit to ENA. The Green Market Agreement waived all liability in the event the transaction did not close, subject only to the Reorganized Debtors' obligation to return the deposit. However, the Reorganized Debtors' Board of Directors later learned that Green Market was affiliated with a former ENE senior executive. Throughout these Chapter 11 cases, the Reorganized Debtors have maintained a policy of not selling estate assets to former employees or other insiders absent full disclosure of the buyer's affiliation prior to the sale. The Board's knowledge of the identity of Green Market, and its affiliation with a former executive of ENE -- which only came to light after the parties entered into the Green Market Agreement - - raised issues regarding potential conflicts of interests. As a result, ENA resumed discussions with Cantor -- on behalf of Grey K Holdings I, LLC, as buyer -- for the potential sale of the ERC Assets. Grey, through Cantor, was provided an opportunity to resubmit a higher and better offer. After continued negotiations Broker, ENA determined that Grey's final offer was superior to that of Green Market. Enron Corp. and ENA ask the Court to approve their purchase agreement with Grey. The Debtors will sell the Surplus ERCs to Grey free and clear of liens, claims, and encumbrances. The Purchase Agreement provides these terms: A. Purchase Price Grey will pay $1,525,010 for the Surplus ERCs: a. $25,000 will be deposited to an account with JP Morgan Chase Bank, 1 Chase Manhattan Plaza, New York, NY 10081; and b. Upon Closing, $1,500,010 plus all applicable district transfer fees will be deposited with Commerce Bank, National Association. B. Limitation of Liability In no event will any party be liable for consequential, incidental, punitive, exemplary, or indirect damages, in tort, contract or otherwise. Except as expressly represented in the Purchase Agreement, it is understood that Grey takes Surplus ERCs "as is" and "where is." C. Closing The transaction will occur not later than April 3, 2006, at 10:00 a.m., at the offices of Enron Corporation at 1221 Lamar Street, Houston, Texas, 77010, or at another time, place or by other means as ENA and Grey may agree. If the Closing has not occurred as of April 10, either party may cancel and terminate the Agreement by providing the other party with written notice of termination. D. Failure to Close In the event Grey fails to consummate the transactions, ENA will: a. retain the Deposit and ENA reserves the right to pursue all available remedies; and b. be free to sell any or all of the ERC Assets to another party. If ENA fails to consummate the transactions, Grey will have the Deposit returned in full, and will have the right to pursue all available remedies. However, if Grey terminates the Purchase Agreement due to failure to close on or before April 10, 2006, ENA will not be entitled to retain the deposit, but will be free to sell all of the ERC Assets to another party. A full-text copy of the Surplus ERCs Purchase Agreement is available for free at http://ResearchArchives.com/t/s?736 ENA also seeks the Court's authority to pay a commission to Cantor equal to $45,750, or 3% of the Purchase Price. If the Reorganized Debtors are barred from paying a commission to Cantor, brokers representing potential purchasers of the Debtors' other assets would have less incentive to approach the Debtors with potential buyers for the assets in the future, Mr. Rosen asserts. Green Market Wants Motion Denied After an open and competitive auction, the Reorganized Debtors selected Green Market LLC as the winning bidder for ENA's Surplus ERCs, David M. LeMay, Esq., at Chadbourne & Parke LLP, in New York, relates. Green Market believes it complied with all of the procedures and rules established by the Reorganized Debtors in conducting an auction for the sale of the Surplus ERCs. Mr. LeMay tells the Court that immediately after the Auction, ENA and Green Market entered into a sale and purchase agreement for the sale of the Surplus ERCs to Green Market. Green Market submitted its initial deposit as required by the Purchase Agreement and only awaited closing. However, Mr. LeMay continues, after several weeks of delay, the Reorganized Debtors inexplicably resumed discussions with the losing bidder in the Auction, entered into a purported second sale and purchase agreement for the same assets, and unilaterally repudiated the Green Market Agreement. "This abrupt reversal and repudiation not only violated the principles and procedures of the Auction Protocol, but plainly breached the Green Market Agreement," Mr. LeMay argues. Accordingly, Green Market asks Judge Gonzalez to deny the Reorganized Debtors' request. Mr. LeMay admits that Lou Pai, a former Enron executive, and certain trusts established by Mr. Pai, are the ultimate beneficial owners of Green Market. The Auction Protocol did not forbid or in any manner restrict any former Enron or ENA executives, employees or former insiders from participating in the Auction, nor did the Auction Protocol require the disclosure of the identities of any principals, executives or primary investors of any of the bidders, Mr. LeMay points out. Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, represent the Official Committee of Unsecured Creditors. (Enron Bankruptcy News, Issue No. 169; Bankruptcy Creditors' Service, Inc., 15/945-7000) FEDERAL-MOGUL: CNA Parties Assert Rights Over Insurance Settlement ------------------------------------------------------------------ Columbia Casualty Company, Continental Casualty Company, and The Continental Insurance Company, both in its individual capacity as well as successor to certain interests of Harbor Insurance Company, ask the U.S. Bankruptcy Court for the District of Delaware to find that: -- neither Federal-Mogul Corporation nor Federal-Mogul Products, Inc., has any rights to certain insurance policies or under a settlement agreement the CNA Plaintiffs entered into in 2003; and -- the Debtors have no property interest in those contracts under Section 541 of the Bankruptcy Code. CNA Policies The CNA Plaintiffs issued policies of liability insurance to IC Industries, Inc., the predecessor-in-interest by name change to PepsiAmericas, Inc. The Policies also covered IC Industries' subsidiaries. Abex Corporation, a predecessor of Pneumo Abex, LLC, was a subsidiary of IC Industries. Pneumo Abex has alleged that it is covered by the CNA Policies. For many years, predecessors of Pneumo Abex were engaged in the manufacture and distribution of asbestos-containing brake linings and clutch facings. Pneumo Abex and its corporate predecessors have been sued in several thousand personal injury lawsuits throughout the United States in relation to allegations that the plaintiffs suffered personal injuries resulting from exposure to asbestos-containing brake and clutch products Pneumo Abex and its predecessors manufactured and distributed. D.C. Primary Case In July 1982, Abex commenced coverage litigation against certain of its primary insurers before the United States District Court for the District of Columbia. The case was styled as Abex Corporation v. Maryland Casualty Co., et al., Civil Action No. 82-2098 (JGP) (D.D.C). CIC was not originally named as a defendant in the D.C. Primary Case, but was made a third-party defendant in 1987 by Abex's insurance carriers. Abex's claims against CIC in the D.C. Primary Case were voluntarily dismissed in 1999, after Abex and CIC agreed that CIC had paid its full limits of liability applicable to the Abex Asbestos Actions under the CIC Policies. Currently, CIC is a nominal party to the D.C. Primary Case in connection with certain claims of contribution asserted by another insurer in connection with defense expenses paid prior to CIC's exhaustion. CIC is indemnified for those claims by Abex, PepsiAmericas, and Cooper Industries, LLC. Cooper is CIC's indemnitor, and has been providing a defense to the contribution claims. Pneumo Abex and Cooper are also involved in a July 2002 suit before the Supreme Court of New York for New York County and a June 2005 suit before the U.S. District Court for the District of Columbia. Both actions seek declaratory judgment with regard to the rights and responsibilities of certain excess and umbrella insurers in connection with the Abex Asbestos Actions. The CNA Plaintiffs are not parties to the D.C. Excess Case. On July 29, 2005, the New York Supreme Court stayed proceedings in the New York Excess Case in deference to the D.C. federal litigation. The D.C. Excess Case is currently proceeding with discovery and motion practice. Settlement Agreements CIC and Columbia in 1999 entered into a confidential settlement agreement with Pneumo Abex and Whitman Corporation, a successor to IC Industries and a predecessor to PepsiAmericas, resolving all claims asserted by Abex against CIC in the Primary Coverage Litigation. Payments made by CIC and Columbia pursuant to the terms of the 1999 Settlement Agreement, along with prior payments made for unrelated claims, exhausted the limits of liability of primary and umbrella policies issued by CIC and Columbia. In 2003, the CNA Plaintiffs entered into a confidential settlement agreement with Pneumo Abex, PepsiAmericas, MAFCO Consolidated Group, Inc., and Cooper, in relation to certain umbrella and excess insurance policies issued to IC Industries. Pursuant to the 2003 Settlement Agreement, the CNA Plaintiffs made an initial payment to Pneumo Abex. The CNA Plaintiffs are required to make additional payments at specified dates for the benefit of "Abex." David C. Christian, II, Esq., at McDermott Will & Emery, LLP, in Chicago, Illinois, relates that the CNA Plaintiffs have made all payments due Pneumo Abex prior to February 15, 2006. Pneumo Abex has distributed the proceeds of those payments to the other entities within the definition of "Abex" under the 2003 Settlement Agreement pursuant to agreed procedures among those parties. According to Mr. Christian, the CNA Plaintiffs were ready to make a payment on February 15, 2006. However, they weren't able to do so because of competing claims to the payment asserted by the Debtors and certain of the contracting parties to the 2003 Settlement Agreement. Corporate Transactions In 1994, Pneumo Abex sold its Friction Products Division to Wagner Electric Corporation, which was a unit of Cooper at that time. As part of the deal, Wagner assumed legal responsibility for certain liabilities connected with the Friction Products Division. Cooper guaranteed Wagner's obligations. At the same, Pneumo Abex and Wagner entered into an insurance agreement. Pneumo Abex agreed to make benefits of its insurance, including insurance proceeds, available to Wagner to the extent that Pneumo Abex's insurance may respond to liabilities assumed by Wagner pursuant to the sale. Neither the Purchase Agreement nor the Insurance Agreement assigned to Wagner or Cooper any of the CNA Policies or the direct right to obtain proceeds from the CNA Policies from the CNA Plaintiffs. Wagner later merged with Moog Automotive Products, Inc., a unit of Cooper's Champion Spark Plug Company. In 1998, Cooper sold Champion to Federal-Mogul. The Champion Purchase Agreement provided that Cooper will make available to Federal-Mogul and the Champion Companies "the rights of the Seller and its Affiliates to any benefits, including insurance proceeds, of or arising out of any insurance policy that covers Asbestos Claims." However, Mr. Christian notes that the CNA Policies contain terms precluding the named insured's assignment of those policies or the rights and obligations associated with those policies to any other party without the express consent of the CNA Plaintiffs. The CNA Plaintiffs have not provided their consent to the assignment of the CNA Policies or of any of named insureds' rights and obligations to the CNA Policies to any party, Mr. Christian says. CNA Policies Don't Belong to Debtors In December 2005, Federal-Mogul, FM Products, the Official Committee of Asbestos Claimants, and Eric D. Green, the representative of future asbestos personal injury claimants, commenced an adversary action styled Federal-Mogul Corp., et al. v. Bobby Whitley, et al., Adversary No. 05-30785 (Bankr. D. Del.), to impose injunctive relief prohibiting the further prosecution of Abex Asbestos Actions for which Federal-Mogul Products has contractually agreed to indemnify Pneumo Abex. The Plaintiffs in the Whitley Action argued that the claims were subject to the bankruptcy stay because the asbestos claimants were seeking to "obtain possession of property of the estate." They asserted that the "shared insurance" of FM Products, Cooper, and Pneumo Abex applicable to the Abex Asbestos Actions was property of the Debtors' estate under Section 541 of the Bankruptcy Code. The CNA Plaintiffs dispute that Federal-Mogul and FM Products had legal rights to Pneumo Abex's insurance. Mr. Christian points out that neither Federal-Mogul nor FM Products had any relationship with IC Industries during the policy periods. Accordingly, neither Federal-Mogul nor FM Products was a "named insureds" or an "additional named insureds" under the CNA Policies. No other provision of the Policies affords Federal-Mogul or FM Products with coverage. To the extent that any named insured under the CNA Policies purported to assign rights to the Policies to Federal-Mogul or FM Products, the CNA Plaintiffs ask the Court to rule that the purported assignment violated the anti-assignment provisions of the Policies. Therefore, the assignment is without any legal effect. Competing Claims for Payment In connection with the Whitley Action, PepsiAmericas sent correspondence to the CNA Plaintiffs advising that it must be made a co-payee on any payment under the 2003 Settlement Agreement. However, Pneumo Abex disputes PepsiAmericas' allegation. Pneumo Abex indicated that any payment to PepsiAmericas would constitute a breach of the terms of the 2003 deal. According to Mr. Christian, both PepsiAmericas and Pneumo Abex indicated that whatever payment procedure the CNA Plaintiffs followed in response to the mutually conflicting claims would be made at the CNA Plaintiffs' own "peril." Cooper, on the other hand, asserted that the 2003 Settlement Agreement is no longer binding on it in the event that the CNA Plaintiffs do not make an immediate payment. Cooper said it intends not to honor its obligations to provide a defense and indemnity to the CNA Plaintiffs in the D.C. Primary Case in the event that the CNA Plaintiffs fail to make the immediate payment demanded by Cooper. "The CNA Plaintiffs are ready, willing, and able to perform their financial obligations under the 2003 Settlement Agreement, but have been precluded from doing so based on the mutually- conflicting claims made by the Whitley Action Plaintiffs, PepsiAmericas, and Pneumo Abex," Mr. Christian tells the Court. Mr. Christian says the CNA Plaintiffs are prepared to deposit $1,350,000, the amount they presently owe under the 2003 Agreement, into the Court's registry, pending resolution of the competing claims for payment. In this regard, the CNA Plaintiffs ask the Court to declare which party has the right to receive the payments. They also ask the Court to hold that Cooper, PepsiAmericas and Pneumo Abex have a joint and several continuing obligation to provide a defense and indemnity of claims asserted in the D.C. Primary Case. Pursuant to Rule 7008(a) of the Federal Rules of Bankruptcy Procedure, the CNA Plaintiffs assert that the case is a non-core proceeding. They do not consent to the entry of final orders or judgments by a bankruptcy judge making recommendations concerning findings of facts or conclusions of law on issues related to their action. Pursuant to 28 U.S.C. Section 157(e), the CNA Plaintiffs do not consent to a jury trial of the action in the bankruptcy court. About Federal-Mogul 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. 105; Bankruptcy Creditors' Service, Inc., 215/945-7000) FINOVA GROUP: Gets Adverse Ruling from Dist. Court in Thaxton Case ------------------------------------------------------------------ The United States District Court for the District of Delaware handed down a partial judgment on an action commenced by the Official Committee of Unsecured Creditors appointed in the chapter 11 cases of The Thaxton Group, Inc., and its debtor-affiliates against Finova Group, Inc. The Thaxton Entities owed Finova $108 million at Dec. 31, 2005, under a senior secured loan agreement. Through the Adversary Proceeding, the Thaxton Committee sought, among other things, to avoid or equitably subordinate Finova's liens and claims against the Thaxton Entities and recover $4 million of payments previously collected due to alleged securities fraud, violations of banking laws and regulations, preference payments and similar claims. In 2003, the Thaxton Entities were declared in default under their loan agreement with Finova after they advised Finova that they would have to restate earnings for the first two fiscal quarters of 2003, and after suspending payments on their subordinated notes. As a result of the default, Finova exercised its rights under the loan agreement, and accelerated the indebtedness. The Thaxton Entities then filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on Oct. 17, 2003, listing assets of approximately $206 million and debts of $242 million. The Thaxton Group had approximately 6,800 holders of its subordinated notes that were issued in several states, with total subordinated indebtedness of approximately $122 million. Delaware District Court Ruling The District Court found, among other things, that Finova engaged in fraudulent conduct by purposefully structuring its Loan Agreement in a way that allowed Thaxton to report to all of its creditors, and particularly prospective note purchasers, that an $8 million equity investment had been made, when in fact that $8 million continued to be debt, and that this enabled Thaxton to violate federal banking law. Fourth Circuit Appeal Finova is appealing an equitable subordination order entered in Gregory v. Finova, Case No. 04-CA-2612, in the U.S. District Court for the District of South Carolina, to the U.S. Court of Appeals for the Fourth Circuit (Case No. 05-2118). In a filing with the Securities and Exchange Commission, Richard A. Ross, Finova's Senior Vice President, Chief Financial Officer & Treasurer, laments that if the Fourth Circuit does not modify the District Court's equitable subordination ruling, Finova's ability to recover on its claims in the Thaxton Entities bankruptcy cases may be materially and negatively affected, depending on the results of other rulings in the Adversary Proceedings that may substantially limit the effect and importance of the equitable subordination ruling. Among the other rulings that could affect Finova's ability to recover its claims, either positively or negatively, are the Delaware bankruptcy court's ruling on a pending request seeking substantive consolidation of the Thaxton Entities and the ability of Thaxton Group to assert claims against the other Thaxton entities. The Delaware Bankruptcy Court held a hearing on the substantive consolidation issue in 2004, but has not yet ruled on the matter. No hearing has been held on the Thaxton intercreditor issue. Mr. Ross adds that a material and negative impact on Finova's ability to recover on its claims in the Thaxton Entities bankruptcy cases would have a material adverse impact on the Company's financial position, results of operations and cash flow. Mr. Ross points out if there is a significant adverse final determination against Finova in the various cases involving the Thaxton Entities, it is unlikely that Finova would be able to satisfy that liability due to its financial condition. As previously disclosed, due to FINOVA's financial condition, it does not expect that it can satisfy all of its secured debt obligations at maturity. Attempts to collect on any judgment could lead to future reorganization proceedings of either a voluntary or involuntary nature. About Thaxton Headquartered in Lancaster, South Carolina, The Thaxton Group, Inc., is a diversified consumer financial services company. The Company filed for Chapter 11 protection on October 17, 2003 (Bankr. Del. Case No. 03-13183). Daniel B. Butz, Esq., Michael G. Busenkell, Esq., and Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represent the Debtors in their restructuring efforts. Alan Kolod, Esq., at Moses & Singer LLP, represents the Offical Committee of Unsecured Creditors. As of Dec. 31, 2005, the Debtors reported assets totaling $98,889,297 and debts totaling $175,693,613. About Finova Headquartered in Scottsdale, Arizona, The Finova Group, Inc., provides commercial financing to small and mid-sized businesses; other services include factoring, accounts receivable management, and equipment leasing. The firm has three segments: Commercial Finance, Specialty Finance, and Capital Markets. FINOVA targets such markets as transportation, wholesaling, communication, health care, and manufacturing. Loan write-offs had put the firm on shaky ground. The Company and its debtor-affiliates and subsidiaries filed for Chapter 11 protection on March 7, 2001 (U.S. Bankr. Del. 01-00697). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., represents the Debtors. FINOVA has since emerged from Chapter 11 bankruptcy. Financial giants Berkshire Hathaway and Leucadia National Corporation (together doing business as Berkadia) own FINOVA through the almost $6 billion lent to the commercial finance company. At Dec. 31, 2005, The FINOVA Group Inc.'s equity deficit widened to $611,731,000 from a $534,677,000 stockholders' equity deficit at Dec. 31, 2004. FINOVA GROUP: No Class Certification for Thaxton Sub. Noteholders ----------------------------------------------------------------- United States Court of Appeals for the Fourth Circuit reversed the order of the U.S. District Court for the District of South Carolina certifying that five actions relating to The Finova Group, Inc.'s loan to The Thaxton Group, Inc., are a class. The South Carolina District Court entered the class certification order in June 2005. The Thaxton Entities were declared in default under their loan agreement with Finova after they advised Finova that they would have to restate earnings for the first two fiscal quarters of 2003, and suspended payments on their subordinated notes. As a result of the default, FINOVA exercised its rights under the loan agreement, and accelerated the indebtedness. The Thaxton Entities then filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on Oct. 17, 2003, listing assets of approximately $206 million and debts of $242 million. The Thaxton Group had approximately 6,800 holders of its subordinated notes that were issued in several states, with total subordinated indebtedness of approximately $122 million. The Thaxton Entities' senior secured loan from Finova totaled $108 million at December 31, 2005. At Finova's behest, these cases were transferred, on June 18, 2004, to the U.S. District Court for the District of South Carolina by order of the Judicial Panel on Multidistrict Litigation: Plaintiff Court Filed --------- ----- ----- Earle B. Gregory, et al. Court of Common Pleas Oct. 17, 2003 Lancaster County South Carolina Tom Moore, et al. U.S. District Court Nov. 25, 2003 South Carolina Sam Jones Wood, et al. Superior Court Dec. 9, 2003 Gwinnett County Georgia Grant Hall, et al. Superior Court Dec. 9, 2003 Mecklenberg County North Carolina Charles Shope, et al. U.S. District Court Jan. 13, 2004 Southern District Ohio Each of the five Thaxton-related lawsuits are styled as class actions, purportedly brought on behalf of certain defined classes of people who purchased subordinated notes from the Thaxton Entities. The complaints by the subordinated note holders allege claims against Finova for fraud, securities fraud, and various other civil conspiracy and business torts in the sale of the subordinated notes. Each complaint seeks an unspecified amount of damages, among other remedies. Fourth Circuit's Order The Fourth Circuit ruled that in light of an adversary proceeding brought by Thaxton's unsecured creditors committee against Finova in Thaxton's chapter 11 cases, class certification is not the superior method for the fair and efficient adjudication of the controversy. Unless the Fourth Circuit's ruling is modified or reversed on rehearing or appeal, the Litigations will not be permitted to proceed as a class action and could only be pursued as individual or arguably mass actions. Through the Adversary Proceeding, the Thaxton Committee sought, among other things, to avoid and/or equitably subordinate the liens and claims of Finova against the Thaxton Entities and to recover $4 million previously collected due to alleged securities fraud, violations of banking laws and regulations, preference payments and similar claims. The Delaware District Court, in a ruling handed down on March 20, 2006, found, among other things, that Finova engaged in fraudulent conduct by purposefully structuring its Loan Agreement in a way that allowed Thaxton to report to all of its creditors, and particularly prospective note purchasers, that an $8 million equity investment had been made, when in fact that $8 million continued to be debt, and that this enabled Thaxton to violate federal banking law. About Thaxton Headquartered in Lancaster, South Carolina, The Thaxton Group, Inc., is a diversified consumer financial services company. The Company filed for Chapter 11 protection on October 17, 2003 (Bankr. Del. Case No. 03-13183). Daniel B. Butz, Esq., Michael G. Busenkell, Esq., and Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represent the Debtors in their restructuring efforts. Alan Kolod, Esq., at Moses & Singer LLP, represents the Offical Committee of Unsecured Creditors. As of Dec. 31, 2005, the Debtors reported assets totaling $98,889,297 and debts totaling $175,693,613. About Finova Headquartered in Scottsdale, Arizona, The Finova Group, Inc., provides commercial financing to small and mid-sized businesses; other services include factoring, accounts receivable management, and equipment leasing. The firm has three segments: Commercial Finance, Specialty Finance, and Capital Markets. FINOVA targets such markets as transportation, wholesaling, communication, health care, and manufacturing. Loan write-offs had put the firm on shaky ground. The Company and its debtor-affiliates and subsidiaries filed for Chapter 11 protection on March 7, 2001 (U.S. Bankr. Del. 01-00697). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., represents the Debtors. FINOVA has since emerged from Chapter 11 bankruptcy. Financial giants Berkshire Hathaway and Leucadia National Corporation (together doing business as Berkadia) own FINOVA through the almost $6 billion lent to the commercial finance company. At Dec. 31, 2005, The FINOVA Group Inc.'s equity deficit widened to $611,731,000 from a $534,677,000 stockholders' equity deficit at Dec. 31, 2004. FONIX CORP: December 31 Balance Sheet Upside-Down by $15.2 Million ------------------------------------------------------------------ Hansen, Barnett & Maxwell expressed substantial doubt about Fonix Corporation's ability to continue as a going concern after auditing the Company's financial statements for the years ended December 31, 2005 and 2004. The auditing firm pointed to the Company's significant losses and negative cash flows from operating activities. Hansen Barnett also noted Fonix's current accrued liabilities and accrued settlement obligations, pending vendor accounts payable and current portion of notes payable. 2005 Financials For the 12 months ended Dec. 31, 2005, Fonix Corp. incurred a $22,631,000 net loss on $16,191,000 of total revenues. For the 12 months ended Dec. 31, 2004, the Company incurred a $15,148,000 net loss on $14,902,000 of total revenues. For the year ended Dec. 31, 2005, Fonix Corp. has approximately $10,214,000 of current accrued liabilities and accrued settlement obligations, vendor accounts payable of 6,770,000 and current portion of notes payable of $2,333,000. At Dec. 31, 2005, Fonix's balance sheet shows a $19,004,000 negative working capital balance. At Dec. 31, 2005, Fonix's balance sheet showed $9,293,000 in total assets and $24,519,000 in total liabilities. The Company's balance sheet shows a $250,521,000 accumulated deficit at Dec. 31, 2005. A full-text copy of Fonix Corp.'s latest annual report is available for free at http://ResearchArchives.com/t/s?738 Headquartered in Sandy, Utah, Fonix Corporation -- http://www.fonix.com/fonix/index.php-- is a communications and technology company that provides integrated telecommunications services and value-added speech technologies through its wholly owned subsidiaries and operation groups: Fonix Telecom Inc., LecStar Telecom Inc. and The Fonix Speech Group. The combination of interactive speech technology and integrated telecommunications services allows Fonix to provide customers with comprehensive, cost-effective solutions to enhance and expand their communications needs. As of Dec. 31, 2005, Fonix Corp.'s stockholders' equity deficit contracted to $15,226,000 from a $2,058,000 equity deficit reported at Dec. 31, 2004. FRGC DEVELOPMENT: Involuntary Chapter 11 Case Summary ----------------------------------------------------- Alleged Debtor: FRGC Development, LLC 3605 South Flagstaff Ranch Road Flagstaff, Arizona 86001 Involuntary Petition Date: March 30, 2006 Case Number: 06-00842 Chapter: 11 Court: District of Arizona (Phoenix) Petitioners' Counsel: Scott B. Cohen, Esq. Sacks Tieerney P.A. 4250 North Drinkwater Boulevard, 4th Floor Scottsdale, Arizona 85251-3693 Tel: (480) 425-2616 -- and -- Janessa E. Koenig, Esq. Jaburg & Wilk, P.C. 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 Tel: (602) 248-1000 -- and -- Philip R. Rupprecht, Esq. Hebert Schenk 4742 North 24th Street, Suite 100 Phoenix, Arizona 85016-4858 Tel: (602) 248-8203 Petitioner Nature of Claim Amount of Claim ---------- --------------- --------------- Robert Lutz as Secured, $13,815,333 Trustee of the Lutz Family Unsecured 71 Biltmore Estates Loans and Fees Phoenix, AZ 85016 Martz & Associates, Inc. Breach of Contract, $246,457 dba The Martz Agency Pending Lawsuit 7020 East Acoma Drive Scottsdale, AZ 85254 Vincent Goett Unpaid & Earned $290,000 6400 North 48th Street Fees Paradise Valley, AZ 85253 GENERAL MOTORS: Faulty Financials Prompt Moody's Ratings Review --------------------------------------------------------------- Moody's Investors Service maintained its review for possible downgrade on General Motors Acceptance Corporation's Ba1 long-term rating and Residential Capital Corporation's Baa3 long-term and Prime-3 short-term ratings. These actions follow the announcement by the two firms and their parent, General Motors, that certain prior period financial statements cannot be relied upon, as disclosed in securities filings made by the firms. Concurrently, Moody's said it downgraded GM's corporate family rating to B3 with a negative outlook. Moody's believes that the further weakening at GM puts additional negative pressure on GMAC's stand-alone credit profile. This is due to the substantial direct and indirect exposures GMAC currently has to GM. However, Moody's maintained GMAC's Ba1 long- term rating, on review for possible downgrade, because it believes that a successful conclusion of the GMAC sale process could have positive implications for GMAC's current stand-alone credit profile, corporate governance and control. This could lead to the confirmation of GMAC's ratings at their current level. In the absence of a sale transaction, Moody's said that it would re-link GMAC's ratings with GM's ratings. This would most likely result in the assignment of a Ba3 long-term rating to GMAC, absent the occurrence of additional deterioration to its credit profile resulting from internal issues or further GM stress. In addition, Moody's would monitor the structural subordination of GMAC's unsecured creditors, and their potential loss given default, given the likely increased reliance upon securitization financing in this scenario. Moody's also stated that even if the sale of GMAC does not take place it would most likely maintain the current Baa3 and Prime-3 ratings of ResCap. This rating action would reflect Moody's expectation that ResCap would likely be sold on its own if the GMAC sale efforts are abandoned. Moody's review of ResCap's ratings is focusing on any further accounting or control issues, the company's continued efforts to extinguish its intercompany debt with GMAC, and the progress made on GM's sale of GMAC. GMAC, a wholly owned subsidiary of GM, provides retail and wholesale financing in support of GM's automotive operations and is one of the world's largest non-bank financial institutions. ResCap is a holding company for the real estate financing businesses of GMAC, including GMAC-RFC Holding and GMAC Residential Holding Corp. GENERAL MOTORS: S&P Puts B Corporate Credit Rating on Neg. Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed all its ratings, including its 'B' long-term and 'B-3' short-term corporate credit ratings, on General Motors Corp. on CreditWatch with negative implications. This action stems from: * GM's disclosure in its 2005 10-K that the recent restatement of its previous financial statements raises potential issues regarding access to its $5.6 billion standby credit facility; and * the possibility that certain lease obligations of as much as $3 billion could be subject to possible claims of: -- acceleration, -- termination, or -- other remedies. At a minimum, GM could have seek waivers on financial reporting requirements from lenders, which could put pressure on its liquidity. Standard & Poor's understands that no similar issues exist under General Motors Acceptance Corp.'s (GMAC's) various bank facilities. GM's balance sheet debt stood at about $32 billion at Dec. 31, 2005. The need to attend to this issue adds to the various challenges that management continues to face on a number of non-operating issues beyond solidifying access to bank credit facilities, including: * the situation at Delphi Corp.; * the possible sale of GMAC; and * various accounting and other investigations. GMAC ('BB/B-1') and all GMAC-related entities, including Residential Capital Corp. (ResCap; 'BBB-/A-3'), are already on CreditWatch with developing implications, given GM's announced intention to sell a majority stake in GMAC. The ratings on ResCap are two notches above GMAC's, its direct parent, reflecting ResCap's ability to operate its mortgage businesses separately from GMAC's auto finance business, from which ResCap is partially insulated by financial covenants and governance provisions. However, Standard & Poor's continues to link the ratings on ResCap with those on GMAC because of the latter's full ownership of ResCap. "Although the primary reason for GM's CreditWatch listing is its uncertain access to existing or new bank facilities," said Standard & Poor's credit analyst Robert Schulz, "the resolution of the CreditWatch will also encompass other ongoing concerns, including the potential for work stoppages at Delphi and possible costly resolution for GM, as well as our primary concern -- GM's North American operations." Standard & Poor's will also consider progress on the sale of a controlling stake in GMAC. The rating agency expects to resolve this review once GM's access to existing or new bank facilities becomes more certain, or sooner if other developments such as the Delphi situation warrant. Previously, Standard & Poor's indicated that if these financial reporting issues had any near-term effect on GM's liquidity, the ratings could be placed on CreditWatch with negative implications. Standard & Poor's continues to view GM's unrestricted cash balances as likely to be adequate, given a total of $20.4 billion at Dec. 31, 2005, including available amounts in the short-term VEBA fund. Standard & Poor's believes current cash and VEBA balances remain close to year-end levels. Still, the rating agency is concerned that GM is facing an incremental decrease in liquidity because of an uncertain period of questionable access to its bank facility. This reduced liquidity is occurring at the same time as various potential calls on liquidity are looming -- for example, probable upcoming resolution of issues at Delphi that could be costly to GM. Standard & Poor's expects GM to act to remedy these uncertainties, possibly by establishing a new bank facility secured with certain assets as permitted under existing indentures. Were a secured bank facility to be established, Standard & Poor's would review the effect of contractual subordination on the unsecured debt, and depending on the level of security granted, the unsecured debt rating could be lowered. GENERAL MOTORS: Mulls Sale of Isuzu Shares ------------------------------------------ General Motors disclosed that it is exploring the possible sale of its interest in Isuzu Motors Ltd. The Company said that any sale of the Isuzu shares will not have any effect on existing strategic alliances with the Japanese carmaker. Isuzu is GM's core alliance partner and the two companies are involved in many long-term mutually beneficial projects. The Wall Street Journal reporter Kae Inoue says GM is in talks to sell its $340 million stake in Isuzu to Itochu Corp., Mitsubishi Corp. and Mizuho Financial Group Inc. Early this month, GM raised approximately $2 billion from the sale of most of its stake in Suzuki Motor Corp. As reported in the Troubled Company Reporter on March 8, 2006, that transaction reduced GM's equity interest in Suzuki from 20.4% to 3%. Last week, Kohlberg Kravis Roberts & Co., completed the acquisition of a majority interest in GMAC Commercial Holding Corp. from General Motors Acceptance Corporation. GMAC, GM's wholly owned financial services subsidiary, sold 78% of its equity in GMACCH, in exchange for more than $1.5 billion in cash. At the closing, GMACCH also repaid to GMAC approximately $7.3 billion of inter-company loans, bringing GMAC's total cash proceeds from the transaction to almost $9 billion. About General Motors General Motors Corp. -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader for 75 years. Founded in 1908, GM today employs about 327,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries. In 2005, 9.17 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM operates one of the world's leading finance companies, GMAC Financial Services, which offers automotive, residential and commercial financing and insurance. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on Mar. 21, 2006, Moody's Investors Service placed the B2 long-term rating of General Motors Corporation on review for possible downgrade and lowered the company's Speculative Grade Liquidity to SGL-2 from SGL-1. Moody's also changed the review status of General Motors Acceptance Corporation's Ba1 long-term rating to "review for possible downgrade" from "review with direction uncertain" and confirmed GMAC's Not Prime short-term rating. In addition, Moody's changed the review status of ResCap's senior unsecured Baa3 and short-term Prime-3 ratings to "review for possible downgrade" from "review with direction uncertain." These rating actions follow GM's announcement that it will delay filing its annual report on Form 10-K with the SEC due to an accounting issue regarding the classification of cash flows at ResCap, the residential mortgage subsidiary of GMAC. GMAC COMMERCIAL: Fitch Lifts $6.6MM Class J Certs.' Rating to BB+ ----------------------------------------------------------------- Fitch Ratings upgraded and removed from Rating Watch Positive GMAC Commercial Mortgage Securities Inc.'s mortgage pass-through certificates, series 2000-C1 as: -- $30.8 million class E to 'AAA' from 'A+' -- $15.4 million class F to 'AA' from 'A-' -- $22.0 million class G to 'A-' from 'BBB-' -- $15.4 million class H to 'BBB-' from 'BB' -- $6.6 million class J to 'BB+' from 'BB-' Fitch also affirms the following classes: -- $27.9 million class A-1 at 'AAA' -- $537.2 million class A-2 at 'AAA' -- Interest-only class X at 'AAA' -- $37.4 million class B at 'AAA' -- $41.8 million class C at 'AAA' -- $8.8 million class D at 'AAA' -- $8.8 million class K at 'B+' -- $11.0 million class L at 'B-' The $2.9 million class N and $6.6 million class M certificates maintain 'D' and 'C' ratings respectively. The rating upgrades are due to: * increased credit enhancement from scheduled amortization; and * an increase in defeasance since Fitch's last rating action. Thirty loans (29%) have defeased since issuance. As of the March 2006 distribution date, the transaction's aggregate principal balance has decreased 12.34% to $771.3 million from $879.9 million at issuance. There are currently three loans (3%) in special servicing, including two real estate owned assets. The largest specially serviced asset (1.62%) is an industrial facility in Dearborn, Michigan, and is expected to be listed for sale in the near future. Fitch expects a loss once the property is liquidated. The second largest specially serviced loan (1.22%) is an office property located in Schaumburg, Illinois. Fitch expects the property to be sold and the transaction to incur a loss shortly. Fitch reviewed Equity Inns Portfolio secured by 19 limited service and extended stay hotels located across 12 states and maintains a below investment grade credit assessment. The revenue per average room (RevPar) was $62.5 with 71% occupancy, based on year-to-date third quarter 2005 servicer provided operating statements. This was an improvement compared to year-end 2004 when RevPar and occupancy was $57 and 68.35%, respectively. Fitch will review the YE 2005 statements when they become available. GMAC COMMERCIAL: Fitch Lifts $9.6MM Class L Certs.' Rating to BB ---------------------------------------------------------------- Fitch Ratings upgraded and removed from Rating Watch Positive GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through certificates, series 2000-C3 as: -- $54.0 million class B to 'AAA' from 'AA+' -- $12.1 million class D to 'AAA' from 'A' -- $35.1 million class E to 'AA+' from 'BBB' -- $19.1 million class F to 'AA-' from 'BBB-' -- $8.0 million class G to 'A+' from 'BBB-' -- $9.9 million class H to 'A' from 'BB+' -- $4.5 million class K to 'BBB-' from 'BB-' In addition, Fitch upgrades these classes: -- $57.1 million class C to 'AAA' from 'A+' -- $25.5 million class J to 'BBB' from 'BB' -- $9.6 million class L to 'BB' from 'B+' Fitch also affirms these classes: -- $71.7 million class A-1 at 'AAA' -- $851.4 million class A-2 at 'AAA' -- Interest-only class X at 'AAA' -- $15.9 million class M at 'B' -- $3.2 million class N at 'B-' -- $3.2 million class O at 'CCC' -- $12.8 million class S-MAC-1 at 'A-' -- $9.0 million class S-MAC-2 at 'BBB' -- $5.4 million class S-MAC-3 at 'BB+' -- $14.3 million class S-MAC-4 at 'BB' Fitch does not rate classes P and S-AM. Classes S-MAC-1, S-MAC-2, S-MAC-3, and S-MAC-4 represent the interest in the trust fund corresponding to the junior portion of the MacArthur Center loan. The rating upgrades reflect increased credit enhancement due to a loan payoff, scheduled amortization and additional defeasance of eight loans (5.8%) since the last Fitch rating action. Twenty- eight loans (20.3%) have been defeased to date. As of the March 2006 distribution date, the pool's collateral balance has decreased 6.5% to $1.23 billion from $1.32 billion at issuance. Currently, there are five specially serviced loans (0.7%) in the transaction. The largest specially serviced loan (0.27%) consists of 11 apartment buildings located around the Quad Cities in Illinois and Iowa and remains 90+ days delinquent. The borrower filed bankruptcy in December 2004 on the date of a foreclosure sale. The special servicer approved a loan modification in October 2005, which required debt service payments to recommence in February 2006. The second largest specially serviced loan (0.18%) is a multifamily property located in Beaumont, Texas, which is current. The loan had transferred to special servicing in October 2004, due to imminent default. The borrower had disputed the required amounts of monthly replacement reserves. Progress on the loan workout was impeded by damage incurred from Hurricanes Katrina and Rita. The borrower has since brought the loan current and upon payment of certain outstanding expenses, the loan will be returned to the master servicer. Fitch reviewed the transaction's three credit assessed loans and their underlying collateral. Due to their stable performance, the senior portions of the loans retain their investment grade credit assessments. The Arizona Mills loan (11.3%) is secured by a 1.23 million square feet regional mall and is located in Tempe, Arizona. Occupancy as of June 2005, is 94.2% compared with 96.5% as of year-end 2004. The MacArthur Center loan (7.7%) is secured by 528,846 square feet in a 942,662 square feet regional mall in Norfolk, Virginia. Occupancy remains at 100% as of October 2005. The AmeriSuites loan (2.4%) is secured by eight limited service, cross-collateralized, cross-defaulted hotels located in eight states. As of September 2005, the occupancy is 71%, compared with 70% as of YE 2004. GOODYEAR TIRE: SEC Closes Accounting-Related Probe -------------------------------------------------- The Securities and Exchange Commission terminated its investigation into accounting matters included in a restatement of The Goodyear Tire & Rubber Company's financial results, first disclosed in October 2003. The SEC notified Goodyear that it will not recommend enforcement action against the company. SEC also terminated its investigation and will not recommend enforcement action against the company's former chief financial officer and former chief accounting officer. Headquartered in Akron, Ohio, The Goodyear Tire & Rubber Company (NYSE: GT) -- http://www.goodyear.com/-- is the world's largest tire company. The company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries. It has marketing operations in almost every country around the world. Goodyear employs more than 80,000 people worldwide. * * * Goodyear's 9% Senior Notes due 2015 carry Moody's Investor Service's B3 rating, Standard & Poor's B- rating, and Fitch Ratings' CCC+ rating. HANDEX GROUP: GAIC Wants Handex-Harris County Contract Terminated ----------------------------------------------------------------- Great American Insurance Company asks the U.S. Bankruptcy Court for the Middle District of Florida in Orlando to deem the contract for channel conveyance and basin improvements between Handex Construction Services, Inc., and Harris County, Texas rejected. In the alternative, GAIC asks the Court to lift the automatic stay to permit Harris County to terminate the Contract. As surety for the Debtor's performance and payment bond under Texas Law, GAIC provided the Debtor financial support in completing the Contract after it filed for bankruptcy protection. Currently, however, the Debtor is unable to complete the work under the Contract due to lack of financial assistance. To avoid any potential loss from the Debtor's delayed performance on the Contract, T. Scott Leo, Esq., at Leo & Weber, PC, in Chicago, Illinois, argues, the Contract must be terminated to allow GAIC's prompt takeover or tender of a new contractor for the completion of the Contract work. GAIC asserts an equitable interest in the Contract funds to the extent it incurs a loss completing the Contract and to the extent of any right to setoff it may possess. Harris County also claims liquidated damages due to loss incurred as a result of delays on the Contract. Hence, GAIC asks the Court's authority to make arrangements for the completion of the Contract work by replacing the Debtor as the contractor of record and to use and recover the Contract funds to reimburse its losses and to setoff remaining funds for other losses incurred. Headquartered in Mount Dora, Florida, Handex Group Inc. -- http://www.handex.com/-- and its affiliates help companies solve environmental issues. The Debtors offer management and consulting services, which include remediation, regulatory support, risk management, waste minimalization, health and safety training, data support, engineering and construction services. The Debtors filed for chapter 11 protection on Nov. 23, 2005 (Bankr. M.D. Fla. Case No. 05-17617). Mariane L. Dorris, Esq., and R. Scott Shuker, Esq., at Gronek & Latham LLP, represent the Debtor. The U.S. Trustee advised the Bankruptcy Court on Dec. 30, 2005, that there was insufficient interest among the Debtor's unsecured creditors in order to form an official committee. When the Debtors filed for protection from their creditors, they listed estimated assets and debts of $10 million to $50 million. HAWS & TINGLE: Picks Ford Nassen to Prosecute Construction Claims ----------------------------------------------------------------- Haws & Tingle, Ltd., seeks authority from the U.S. Bankruptcy Court for the Northern District of Texas in Dallas to employ Ford Nassen & Baldwin P.C., as its special counsel. The Debtor wants to hire Ford Nassen to sue Hensel Phelps Construction Company or the DFW International Airport Board for claims related to construction of the Maintenance & Storage Facility Building as part of DFW's Automated People Mover project. Jeffrey A. Ford, Esq., an attorney at Ford Nassen, states that the firm will charge for its legal services on a contingency basis. According to Mr. Ford, if the Complaint succeeds, the law firm will first recover the costs and expenses it disbursed in connection with the Complaint. If the case is settled prior to commencement of trial, the law firm will collect a 25% contingency fee. The contingency fee increases to 1/3 if a trial is necessary and 40% in the event it becomes necessary to defend a judgment on appeal. Mr. Ford assures the Court that Ford Nassen does not hold any interest adverse to the Debtor and is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Ford Nassen & Baldwin, P.C., is a construction law firm based in Dallas, Texas. About Haws & Tingle Headquartered in Fort Worth, Texas, Haws & Tingle, Ltd., is a building contractor. The Debtor filed for chapter 11 protection on October 6, 2005 (Bankr. N.D. Tex. Case No. 05-82478). Mark Edward Andrews, Esq., and Omar J. Alaniz, Esq., at Neligan Tarpley Andrews & Foley LLP represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. HEALTHSOUTH CORP: Net Loss Doubles Year-Over-Year in 2005 --------------------------------------------------------- HealthSouth Corporation filed its Annual Report on Form 10-K, including its audited financial statements, for the year ended Dec. 31, 2005, with the Securities and Exchange Commission on March 29, 2006. HealthSouth incurred a $446 million net loss for the year ended Dec. 31, 2005, compared with a $174.5 million net loss in 2004. The net loss in 2005 includes a previously disclosed $215 million non-cash charge relating to a global, preliminary agreement in principle to settle litigation and other restructuring costs, on net revenues of $3.2 billion. Consolidated Adjusted EBITDA was $629.1 million in 2005. "We're pleased that our consolidated adjusted EBITDA was consistent with our expectations, which underscores the fundamental strength of HealthSouth's business model and positioning in our core segments," said HealthSouth President and Chief Executive Officer Jay Grinney. "The company's underlying cash flow continues to be strong. While cash flow provided by operations declined from $391.6 million in 2004 to $1.6 million in 2005, the significant decline is related primarily to government settlement payments and cash used in discontinued operations." HealthSouth Chief Financial Officer John Workman said, "HealthSouth's multi-year process of reconstructing its historical accounting records is now complete. We have also made significant improvements in effectively remediating a number of previously reported internal control weaknesses. Filing our 2005 Form 10-K within the timeframe prescribed by the SEC is another significant step in HealthSouth's progress and we want to thank the many people who have tirelessly dedicated their time and efforts in the preparation and filing of this important document." Internal Controls HealthSouth notes that the 2005 Form 10-K includes an unqualified opinion from PricewaterhouseCoopers LLP, the company's independent auditor, as to the fair presentation of the financial statements included in the Form 10-K. The company further notes that the 2005 Form 10-K contains an unqualified opinion with respect to the company's assessment of its internal control over financial reporting but contains an adverse opinion with respect to the effectiveness of the company's internal control over financial reporting, which is consistent with the company's assessment. Since Dec. 31, 2004, the company has significantly reduced the number of material weaknesses. Improvements in internal controls include improved company-wide policies and procedures over the financial close and reporting process, implementation of an anti- fraud program, substantial improvements to the corporate governance process and updated and enhanced procedures with respect to the review, supervision, and monitoring of accounting operations at the facility level. The Company's balance sheet at Dec. 31, 2005, showed $3,592,213,000 in total assets, $4,859,192,000 in liabilities and $273,742,000 of minority interests, resulting in a $1,540,721,000 stockholders deficit. A full-text copy of the regulatory filing is available for free at http://researcharchives.com/t/s?73d About HealtSouth HealthSouth Corporation -- http://www.healthsouth.com/-- is one of the nation's largest providers of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide. HealthSouth Corporation's balance sheet showed a $1,540,721,000 stockholders' deficit at Dec. 31, 2005, a $1,109,420,000 stockholders' deficit at Dec. 31, 2004, and a $963,837,000 deficit at Dec. 31, 2003. HOST MARRIOTT: S&P Rates Proposed $600 Million Sr. Notes at BB- --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to Host Marriott Corp.'s proposed $600 million senior notes due 2016. Host is proposing to offer the notes in a private placement and use the proceeds to fund a portion of the cash consideration for the company's pending purchase of hotels from Starwood Hotels & Resorts Worldwide Inc. (BB+/Positive/--). All other ratings for Host were affirmed, including the 'BB-' corporate credit rating. The outlook is stable. "The ratings on Host reflect its highly leveraged financial profile and, as a REIT, its reliance on external sources of capital for growth," said Standard & Poor's credit analyst Emile Courtney. These factors are tempered by: * Host Marriott's high-quality and geographically diversified hotel portfolio; * high barriers to entry for new competitors because its hotels are primarily located in urban and resort markets or in close proximity to airports; * strong brand relationships; * experienced management team; and * the expectation that management remains intent on continuing to improve its balance sheet, despite a proposed sizable acquisition of 35 Starwood-branded hotels for $3.8 billion. Since the November 2005 announcement, three Canadian hotels have been removed from the deal because Starwood was unable to obtain a necessary tax ruling and the overall purchase price was reduced by $276 million. As of Dec. 30, 2005, Host Marriott owned 107 luxury and upscale full-service hotels, with more than 55,000 rooms, predominantly in: * urban, * airport, and * resort locations in the: * U.S., * Canada, and * Mexico. Host Marriott has signed a definitive merger agreement to acquire 35 luxury and upper upscale hotels for $3.8 billion from Starwood. The transaction is expected to close in early April 2006. Upon completion of this acquisition, about: * 64% of Host Marriott's revenues will be generated from Marriott brands; and * 23% from Starwood brands. Other brands in the portfolio include: * Hyatt, * Fairmont, * Swiss"tel, * Four Seasons, and * Hilton. The new portfolio will have good geographic diversification; its largest regional exposure is expected to be in California, with about 20% of total revenues. INDYMAC TRUST: Moody's Places Class B Certificate Rating at Ba2 --------------------------------------------------------------- Moody's Investors Service assigned Aaa ratings to the senior certificates issued by IndyMac Residential Mortgage-Backed Trust, Series 2006-L1 and ratings ranging from Baa3 to Ba2 to the subordinated certificates in the deal. The securitization is backed by IndyMac Bank F.S.B. originated adjustable-rate and fixed-rate mortgage lot loans. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, overcollateralization, excess spread and, in the case of the senior certificates, a financial guarantee policy issued by Ambac Assurance Corporation. Moody's expects collateral losses to range from 3.75 % to 4.25%. The Class B certificates are privately offered certificates to a limited number of "qualified institutional investors" within the meaning of Rule 144A of the Securities Act of 1933, as amended. IndyMac Bank F.S.B. will be the servicer of the lot loans. The complete rating actions are: IndyMac Residential Mortgage-Backed Trust 2006-L1 * Class A-1, Assigned Aaa * Class A-2, Assigned Aaa * Class A-3, Assigned Aaa * Class M, Assigned Baa3 * Class B, Assigned Ba2 INTERNATIONAL PAPER: Selling Wisconsin Land For $83 Million ----------------------------------------------------------- International Paper (NYSE: IP) is selling 69,000 acres of forestland in Wisconsin to The Nature Conservancy, as part of efforts to explore the sale of some or all of its U.S. forestland. Proceeds from the sale are expected to total approximately $83 million. The agreement also includes a fiber supply agreement. The "Wild Rivers Legacy Forest" project represents the largest land conservation effort in Wisconsin's history and one that will protect working forests, public access for recreation, wildlife habitat, and water quality. "International Paper is proud to be part of this important transaction in Wisconsin. It comes on the heels of our announcement yesterday to protect 218,000 acres of southern forestland, which was IP's largest conservation agreement ever. Today we continue our legacy of protecting forestlands here in Wisconsin. We applaud The Nature Conservancy and the state of Wisconsin's leaders for taking this important step to protect the state's forests," said David Liebetreu, International Paper vice president of forest resources. Yesterday, International Paper, The Nature Conservancy, and The Conservation Fund announced a 218,000-acre, 10-state conservation project, which represents the largest single private conservation transaction in the history of the South. The $300 million project protects key lands clustered around some of the South's most ecologically important rivers and estuaries. Private and non-profit conservation groups continue to express interest in additional International Paper land holdings, and the company will continue to explore those opportunities. About International Paper International Paper Inc. -- http://www.internationalpaper.com/-- is the world's largest paper and forest products company. Businesses include paper, packaging, and forest products. As one of the largest private forest landowners in the world, the company manages its forests under the principles of the Sustainable Forestry Initiative (R) (SFI) program, a system that ensures the continual planting, growing and harvesting of trees while protecting wildlife, plants, soil, air and water quality. * * * As reported in the Troubled Company Reporter on July 22, 2005, Moody's Investors Service placed International Paper Company's ratings on review for possible downgrade. International Paper Company: * Senior Unsecured Baa2 * Subordinate Shelf (P)Baa3 * Preferred Shelf (P)Ba1 * Commercial Paper P-2 International Paper Capital Trust II: * Bkd Preferred Stock Baa3 * International Paper Capital Trust III: * Bkd Preferred Shelf Baa3 International Paper Capital Trust IV: * Bkd Preferred Shelf (P) Ba1 * International Paper Capital Trust VI: * Bkd Preferred Shelf (P) Ba1 Champion International Corporation: * Senior Unsecured Baa2 * Federal Paper Board Co., Inc. * Senior Unsecured Baa2 Union Camp Corporation: * Senior Unsecured Baa2 INTERPUBLIC GROUP: Fitch Lowers Preferred Stocks' Ratings to CCC ---------------------------------------------------------------- Fitch Ratings downgraded Interpublic Group (IPG) as: -- Issuer default rating to 'B' from 'B+' -- Senior unsecured credit facility to 'B' from 'B+' (Recovery Rating 'RR4'); -- Senior unsecured notes to 'B' from 'B+' (Recovery Rating 'RR4') -- Cumulative convertible perpetual preferred stock to 'CCC' from 'CCC+' (Recovery Rating 'RR6') -- Mandatory convertible preferred stock to 'CCC' from 'CCC+' (Recovery Rating 'RR6') The Rating Outlook is Negative. The downgrade and Negative Outlook reflect heightened operational and financial risk given an extended time frame for its operational turn around and what Fitch believes is reduced liquidity associated with recent amendments made to IPG's $500 million credit facility. Fitch notes IPG has not used this facility in two years; however, the amendments make future borrowing unlikely. In order to borrow, IPG would be required to maintain $300 million in deposits at the bank syndicate in addition to the balance of any borrowings. This amendment effectively reduces $300 million in bank facility capacity that Fitch had expected IPG would have access to while it attempts its operational turn around. IPG and its bank group have also amended the covenants on the bank facility for year end 2005 and the first two quarters of 2006, removing the interest coverage and debt to EBITDA covenants and revising the minimum EBITDA thresholds to: * $233 million, * $175 million, and * $100 million, respectively. The ratings continue to reflect: * weak financial performance which has been driven by numerous accounting and operational challenges; * continued integration issues from IPG's restructuring initiatives, including major management changes, the ongoing material weaknesses and internal control issues, which have yet to be remedied; and * ongoing risk of client losses. These risks are balanced somewhat by IPG's position in the industry as a leading global advertising holding company and its diverse client base with long-term relationships with key accounts. Fitch had expected a very weak 2005 and had forecasted weakness in credit metrics through the first half of 2006. Fitch understood that negative effects of client losses on revenues, combined with an under utilized staff pitching new business and significant professional fees associated with the control issue remediation efforts would elevate cost levels significantly, and would result in significant deterioration in EBITDA levels through mid-2006. The timeframe for an operational turnaround has been extended as Fitch now believes the operating and financial profile may not improve until well into 2007 and that IPG faces significant challenges in reaching a normalized operating and financial profile by 2008. As such, Fitch's revenue expectations and Fitch's projected operating EBITDA are weaker than Fitch's prior expectations. Fitch expects IPG to make steady progress toward improved operating fundamentals, as measured by meaningful, consistent organic growth trends (above 2% initially) and healthier EBITDA margins (above 10%). Fitch recognizes that IPG has been proactive in bolstering its financial flexibility, issuing $500 million in preferred stock in October of 2005 and maintaining the cash on its balance sheet. Fitch expects IPG to continue to improve financial flexibility while demonstrating progress on addressing its operational issues as described previously. Its liquidity position is supported by approximately $2 billion in cash at year-end 2005. Fitch incorporates into its analysis the meaningful working capital deficit (in excess of $1.5 billion) resulting from short term payables which exceed receivables. Fitch expects that IPG will be free cashflow negative in 2006. Near-term flexibility is enhanced by the minimal debt maturities IPG faces in 2006 and 2007 and by Fitch's belief that capital expenditures are largely discretionary. IPG's next meaningful maturity is in 2008, when its $800 million 4.5% convertible senior notes due 2023 are putable by the note holders for cash. The Recovery Ratings and notching reflect Fitch's recovery expectations under a distress scenario. Fitch has used an enterprise value analysis for these recovery ratings, given the limited tangible asset base which exists in this company. The 'RR4' recovery rating for IPG's bank facility and senior unsecured notes reflects Fitch's belief that approximately 30%-50% recovery is realistic, and the 'RR6' recovery rating for the preferred stock reflects Fitch's estimate that negligible recovery would be achievable. INTERSTATE BAKERIES: Selling Dorchester Lot to Tenean for $3.55M ---------------------------------------------------------------- Interstate Bakeries Corporation and its debtor-affiliates seek the authority of the U.S. Bankruptcy Court for the Western District of Missouri to sell their property located at 60 Tenean Street, in Dorchester, Massachusetts, to Tenean Properties, LLC, for $3,550,000, subject to higher and better bids. The Dorchester Property is comprised of a 0.71-acre land with a 48,159-square foot building. The Debtors are no longer using the Property in connection with their business operations, Samuel S. Ory, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, tells the Court. Hilco Industrial, LLC, and Hilco Real Estate, LLC, assisted the Debtors in the sale and marketing of the Dorchester Property. The Sale Agreement provides for a $355,000 Escrow Deposit. The Debtors will deliver good and marketable fee simple title to the Land and Improvements, free and clear of liens, other than Permitted Exceptions. The Property is being sold as-is, where- is, with no representations or warranties, reasonable wear and tear, casualty and condemnation excepted. The Bid Deadline for the sale of the Dorchester Property is April 5, 2006, as may be extended by the Debtors in their sole discretion, Mr. Ory relates. An auction is set for April 10, 2006, as may be changed in the Debtors' sole discretion. Qualified Bidders will be permitted to participate in the Auction by teleconference. The Sale Agreement provides for a $3,700,000 Minimum Bid. The Debtors have agreed to provide Bid Protection to the Proposed Purchaser in the form of a termination fee equal to $71,000, which is 2% of the Purchase Price. The Debtors have also agreed to pay reasonable and documented expense reimbursement of up to $50,000, to the Proposed Purchaser. The Debtors reserve the right to elect not to hold an Auction, to change the time and location of the Auciton, and to impose other terms and conditions as they may determine to be in their best interests. In connection with the sale of the Dorchester Property, the Debtors propose to pay to the City of Boston, Massachusetts, tax collector: -- $33,124 in principal for real and personal property taxes that are due and owing for the 2004-2005 tax year and its interest at an accruing annual rate of 6% beginning on the date that statutory interest began to accrue on the past due balance; and -- $0 in penalties with respect to any and all delinquent taxes with respect to the Property. The payments will be in full satisfaction of all real property taxes for the Property for the tax year 2004-2005 and all prior tax years. The Debtors and the Successful Bidder will prorate 2005-2006 real and personal property taxes as of the Closing Date in accordance with the terms of the Successful Sale Agreement. The Debtors will publish notices and advertisements of the proposed sale in the Boston Globe before April 5, 2006. The Debtors ask the Court to deem the notice as proper notice to any other interested parties whose identities are unknown to them. About Interstate Bakeries Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Kenneth A. Rosen, Esq., at Lowenstein Sandler, PC, represents the Official Committee of Unsecured Creditors. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal, LLP, represents the Official Committee of Equity Security Holders. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Settling Class Action After Court Lifts Stay ----------------------------------------------------------------- Dennis Gianopolous, Mary K. Frost and Lisa Drucker are the proposed representatives of putative class in a class action lawsuit against Interstate Bakeries Corporation currently pending in the Circuit Court of Cook County, Illinois, County Department, Chancery Division. The Action arose out of the discovery of materials that allegedly contaminated certain products produced over a 17-day period in January 1998 at a bakery operated by the Debtors in Illinois. After the discovery, the Debtors conducted a product recall and offered to give a full refund to people returning the product. The refunds and credits represented approximately $5,000,000 or approximately 50% of the products purchased. On November 22, 2004, the parties entered into a stipulation under which, among other things, the Claims asserted in the Action were exempted from inclusion in the Debtors' procedures for liquidating and settling tort claims. A then pending request for relief from the automatic stay was denied without prejudice, and the Debtors' rights and defenses to any stay relief were reserved. The Class filed a motion for relief from the automatic stay to resume the Action in March 2005. Thereafter, the Debtors submitted a response opposing the Stay Relief Motion. On September 12, 2005, while discussions continued about a possible settlement, the Debtors filed an objection to Claim Nos. 6267 and 6268 seeking to have the Court determine the merits of the Claims asserted in the Action. After an arm's-length negotiation, the parties have agreed to compromise and settle their dispute. The salient terms of the Settlement Agreement, which is subject to approval of the Bankruptcy Court and Illinois Court, are: (a) The Debtors will cause to be issued by customary placement 27,000,000 coupons each with a redemption value of $0.35 for a total face value of $9,450,000. The coupons will be usable for purchases of any Multipack. The coupons may be combined without limit and will have an expiration date 60 days from the date of issuance. Within 120 days of Final Approval of the Settlement, the Debtors will arrange for the coupons to be circulated within a specified 23-state area. (b) The Debtors agree not to object to a request by Class Counsel to the Illinois Court for a total of $500,000 in attorneys' fees, costs and expenses and to pay the Court award to that amount. The award of attorneys' fees, costs and expenses will become an allowed general unsecured claim in the Debtors' cases. (c) The Debtors agree not to object to a request by Class Counsel to the Illinois Court for $1,500 for the benefit of Dennis Gianopolous and $1,200 ($600 each) for the benefit of Mary K. Frost and Lisa Drucker. The award will become an allowed general unsecured claim. Pursuant to Sections 362 and 363 of the Bankruptcy Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure and at the Debtors' behest, the Court: (1) modified the automatic stay to allow them to proceed with the Action for the purpose of conducting a fairness hearing seeking approval for and implementation of the Settlement Agreement, (2) approved the Settlement Agreement, and (3) conditionally approved the issuance of the coupons in the Settlement Agreement and these claims in favor of the Class counsel and representatives: (i) up to a $500,000 general prepetition unsecured claim for Class counsel, as determined by the Illinois Court; and (ii) $1,500 for Dennis Gianopolous, and $600 each for the benefit of Mary K. Frost and Lisa Drucker. About Interstate Bakeries Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Kenneth A. Rosen, Esq., at Lowenstein Sandler, PC, represents the Official Committee of Unsecured Creditors. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal, LLP, represents the Official Committee of Equity Security Holders. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue Nos. 36 & 37; Bankruptcy Creditors' Service, Inc., 215/945-7000) IPIX CORP: Losses Prompt Auditors to Raise Going Concern Doubt -------------------------------------------------------------- In compliance with Nasdaq Marketplace Rule 4350(b)(1)(B), IPIX Corporation's (Nasdaq:IPIX) independent auditors, Armanino McKenna LLP, included an explanatory paragraph in its Annual Report on Form 10-K for the year ended Dec. 31, 2005, stating concern on the Company's ability to continue as going concern. A similar explanatory paragraph was included in the Company's Annual Report on Form 10-K for the years ended Dec. 31, 2003 and 2004. The Company has suffered recurring losses and negative cash flow from operations that raises substantial doubt about its ability to continue as a going concern. In 2005, the Company took certain action to reduce its costs and raise additional funds. In June 2005, the Company completed a $10 million private placement of common stock to a group of existing and new institutional investors. In August 2005 the Company reduced its staff in both its Reston, Virginia and Oak Ridge, Tennessee offices. In November, further staff and costs were reduced in Oak Ridge, Tennessee. Although difficult, these cost-cutting measures enabled IPIX to streamline its processes and become more strategic in its focus on technology and vertical markets. Management monitors the Company's cash position carefully and evaluates its future operating cash requirements with respect to its strategy, business objectives and performance. While the Company has extensive experience in 360-degree technology, it has limited experience addressing the emerging IP 360-degree video market. As such, the Company has a limited operating history under its current business model, upon which an evaluation of its business and prospects in 2006 may be made. In addition, the Company is subject to generally prevailing economic conditions and, as such, the Company's operating results in 2006 will be dependent upon its ability to provide quality products and services, the success of its customers and the appropriations processes of various commercial and governmental entities. Management believes the Company will have to acquire additional working capital through financing to supplement working capital from operations to meet its funding needs for 2006. There can be no assurance that such additional financing will be available or if available, that such financing can be obtained on terms satisfactory to the Company. If the Company is not able to raise additional funds, it may be required to significantly curtail its operations, which would have an adverse effect on its financial position, results of operations and cash flow. About IPIX Corporation Headquartered in Reston, Virginia, IPIX Corporation -- http://www.ipix.com/-- is a premium provider of immersive imaging products for government and commercial applications. The company combines experience, patented technology and strategic partnerships to deliver visual intelligence solutions worldwide. The company's immersive, 360-degree imaging technology has been used to create high-resolution digital still photography and video products for surveillance, visual documentation and forensic analysis. J.G. WENTWORTH: S&P Puts B- Long-Term Counterparty Credit Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' long-term counterparty credit rating to J.G. Wentworth LLC. The outlook is stable. In addition, we also assigned a bank loan rating of 'B', and a recovery rating of '1'. The bank loan rating reflects Standard & Poor's belief that: * there is meaningful embedded value in the company's customer database (its main asset); and * the recovery rating of '1' indicates a high expectation for full recovery of principal in the event of a payment default. The five-year term loan will be secured by: * database customer lists, * trademarks, and * a pledge of capital stocks from related entities. Loan proceeds are being used to buy out existing shareholder interests. All book equity at the end of 2005, approximately $155 million, plus an additional $39 million, is being upstreamed to the company's owners, which are comprised of management and the private equity firm, JLL Partners (71% ownership interest). As a result, the company will go from having a positive tangible net worth of $28 million at Dec. 31, 2005, to negative tangible equity of $165 million. The rating takes into account Standard & Poor's conclusion that capital matters for this type of business. "While the credit quality of most counterparties is strong, and the company has recorded only minimal losses on the 12,315 court-ordered settlements purchased since June 2000, we do not believe that credit risk is nonexistent, and believe that some positive equity is required," said Standard & Poor's credit analyst Ernest D. Napier. Wentworth's business is the purchasing and servicing of structured settlements. A structured settlement is a contractual agreement whereby a claimant is compensated for damages through a series of payments over time, usually arising from an out-of-court negotiated settlement. Wentworth will pay the claimant a lump sum for these future cash streams at a significant discount and then securitize the associated receivable at a substantial cash premium (currently averaging 131% of purchase price.) The company has a customer database of unpurchased receivables- including amendments and new fundings from qualified leads-that, under various stress scenarios, should generate sufficient secondary market value to repay the $200 million secured bank loan. Standard & Poor's default scenario assumes: * a slowdown in new originations and conversions of existing customers; * the erosion in the high cash premiums that are realized at the time of securitizations; and * adverse change in the legal environment. This scenario would have a direct negative effect on the economics of the business and thus on the economic value of the customer database. Nevertheless, Standard & Poor's believes that the customer database should maintain sufficient value to repay the secured bank loan. The outlook is stable. The company is limited in its ability to pay additional dividends as part of the loan's covenants. Over time it is possible that the company could begin to rebuild equity and accumulate sufficient unencumbered residuals (and even unrestricted cash) that would elicit a more favorable rating outcome. Nevertheless, within the next two years, it is doubtful that the company could restore its capitalization to a positive surplus of a magnitude that could affect the rating. KAISER ALUMINUM: PBGC & VEBA Agree to Stock Transfer Restrictions ----------------------------------------------------------------- Section 172 of the Internal Revenue Code of 1986, as amended, permits a corporation to carry forward net operating losses to offset future income, thereby reducing federal income tax liability on the future income and significantly improving the corporation's cash position. Section 382 of the IRC limits the amount of taxable income that can be offset by a corporation's NOL carryforwards in any taxable year following an "ownership change". Under Section 382(l)(5), a corporation is generally not subject to the limitations imposed by Section 382 with respect to an ownership change resulting from consummation of a Chapter 11 plan, provided that, under that plan, qualified creditors or the debtor's shareholders, immediately before the relevant ownership change, emerge from the reorganization owning at least 50% of the total value and voting power of the debtor's stock immediately after the ownership change. Alternatively, if the Section 382(l)(5) safe harbor does not apply, either because the corporation elects out of that provision or because its requirements are not satisfied, then under Section 382(l)(6) of the IRC, the appropriate value of the debtors for purposes of calculating the Section 382 limitation reflects the increase in value of the debtors resulting from any surrender or cancellation of creditors' claims in the transaction as well as new investment pursuant to the plan. Kaiser Aluminum Corporation and its debtor-affiliates expect that they will: (a) qualify for the Section 382(l)(5) safe harbor; and (b) elect to have Section 382(l)(6) of the IRC apply. Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, relates that upon emergence, the Reorganizing Debtors expect to have NOLs in excess of $500,000,000 to offset future income. The Reorganizing Debtors estimated the projected cash savings from the use of the NOLs to have a present value of approximately $65,000,000 to $85,000,000. If the Reorganizing Debtors qualify for the Section 382(l)(5) safe harbor, their United States consolidated tax group may use the NOLs to offset the group's future income, thereby reducing the corresponding federal income tax liability and improving the group's cash position. Plan-related Agreements With PBGC & VEBA Trusts Under the Reorganizing Debtors' Plan of Reorganization: (1) the Pension Benefit Guaranty Corporation, (2) the voluntary employees' beneficiary association trusts benefiting certain hourly and salaried retirees, and (3) the Asbestos Personal Injury Trust, are the only known creditors entitled to receive 5% or more of the equity in Reorganized Kaiser Aluminum Corporation. Under the Plan, upon the Reorganizing Debtors' emergence, the PBGC and the VEBA Trusts will collectively hold more than 80% of the common stock in the Reorganized KAC: * the PBGC will be entitled to receive approximately 16%; * the Union VEBA Trust will be entitled to receive approximately 57%; and * the Retired Salaried Employee VEBA Trust will be entitled to receive approximately 9%. To avoid an ownership change following the effective date of the Plan and to preserve their ability to use the NOLs after emergence for the benefit of all creditors, the Reorganizing Debtors have included stock-transfer restrictions in certain Plan-related documents. In particular, the Certificate of Incorporation for Reorganized KAC prohibits, with certain exceptions, the transfer of equity securities, including common stock, in Reorganized KAC if either: (a) the transferor holds 5% or more of the total fair market value of all issued and outstanding securities; or (b) as a result of that transfer: (i) any person or group of persons would become a 5% Shareholder; or (ii) the percentage of stock ownership in Reorganized KAC of any 5% Shareholder would be increased. In addition, the Reorganized Debtors, the PBGC and the Union VEBA Trust will, on the Effective Date of the Plan, enter into the Stock Transfer Restriction Agreement and the Registration Rights Agreement. The Stock Transfer Restriction Agreement prevents the PBGC and the Union VEBA Trust from transferring or otherwise disposing of more than 15% of the total number of shares of the stock issued to each under the Plan in any 12-month period without prior written approval of Reorganized KAC's board of directors in accordance with Reorganized KAC's Certificate of Incorporation. In the Registration Rights Agreement, the PBGC and the Union VEBA Trust acknowledge that all resales of Registrable Securities are subject to the terms of the Stock Transfer Restriction Agreement and the restrictions on transfer contained in Reorganized KAC's Certificate of Incorporation. Ms. Newmarch relates that the Reorganizing Debtors have recently become aware that certain parties have expressed interest in acquiring all or a portion of the PBGC's or the VEBA Trusts' claims against the Reorganizing Debtors or rights to distributions under the Plan. In fact, some discussions among the parties have already occurred. The Reorganizing Debtors are concerned that any disposition by the PBGC or the VEBA Trusts could make them ineligible for the benefits of the Section 382(l)(5) safe harbor, which will constitute an attempt to "exercise control over property of the estate" in violation of Section 362(a)(3) of the Bankruptcy Code. Moreover, any disposition could require the Reorganizing Debtors to modify the Plan because certain dispositions will require changes to the Reorganized KAC's Certificate of Incorporation, the Stock Transfer Restriction Agreement or the Registration Rights Agreement, which could delay the confirmation process. To ensure the preservation of certain carryforwards of net operating losses and that any agreement will not delay the confirmation process, the Reorganizing Debtors ask Judge Fitzgerald to prohibit the PBGC and the VEBA trusts from entering into agreements regarding their claims or rights to distributions under the Plan without prior Court approval. About Kaiser Aluminum 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. 92; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Asks Dist. Court to Consolidate Insurers' Appeals ------------------------------------------------------------------ As reported in the Troubled Company Reporter on Mar. 9, 2006, Twenty-four insurers took an appeal from Judge Fitzgerald's order and findings of fact and conclusions of law confirming the Second Amended Plan of Reorganization filed by Kaiser Aluminum Corporation and its debtor-affiliates, to the U.S. District Court for the District of Delaware. The Insurers want the District Court to review the Bankruptcy Court's decision. The Insurers are: (1) ACE Property & Casualty Company (2) AIU Insurance Company (3) Central National Insurance Company of Omaha (4) Century Indemnity Company (5) Columbia Casualty Company (6) Continental Insurance Company (7) First State Insurance Company (8) Granite State Insurance Company (9) Harbor Insurance Company (10) Hartford Accident and Indemnity Company (11) Industrial Indemnity Company (12) Industrial Underwriters Insurance Company (13) Insurance Company of the State of Pennsylvania (14) Landmark Insurance Company (15) Lexington Insurance Company (16) National Union Fire Insurance Company of Pittsburgh, Pa. (17) New England Reinsurance Corporation (18) New Hampshire Insurance Company (19) Nutmeg Insurance Company (20) Pacific Employers Insurance Company (21) Republic Indemnity Company (22) TIG Insurance Company (23) Transcontinental Insurance Company (24) Transport Insurance Company Pursuant to Rule 9033 of the Federal Rules of Bankruptcy Procedure, the Insurers also filed separate requests asking the District Court to conduct a de novo review of Judge Fitzgerald's findings of fact and conclusions of law, to the extent that these are proposed findings of fact and conclusions of law to the District Court. The Plan Proponents initially filed their Joint Response to the insurers' request for de novo review of the Confirmation Findings with the Bankruptcy Court "because [as of February 24] there is not yet a pending case relating to confirmation in the District Court." The Plan Proponents are: -- the Reorganizing Debtors, -- the Official Committee of Unsecured Creditors, -- the Official Committee of Asbestos Claimants, -- the Official Committee of Retired Employees, -- Martin J. Murphy, as Legal Representative for Future Asbestos Claimants, and -- Anne M. Ferrazi, as Legal Representative for Future Silica and Coal Tar Pitch Volatiles Claimants. The Plan Proponents note repeatedly that they expect the District Court to address the issues raised in their Joint Response. Thus, Columbia Casualty Insurance Company, Transcontinental Insurance Company, Harbor Insurance Company, and Continental Insurance Company asks Judge Fitzgerald to: (a) disregard the Plan Proponents' Joint Response because they raise matters properly within the jurisdiction of, and addressed to, the District Court; and (b) give the Insurers a full opportunity to address the substance and procedure of their Appeals and Rule 9033 requests before the District Court. Plan Proponents Seek Consolidation of Appeals The Plan Proponents ask the District Court to: (a) consolidate all appeals filed by the 24 insurers and Duncan McNeill; (b) waive the mediation ordinarily required pursuant to the District Court's Standing Order dated July 23, 2004; (c) proceed without further briefing of the issues; and (d) schedule a hearing prior to April 10, 2006, to consider the Bankruptcy Court's Findings of Fact and Conclusions of Law regarding Confirmation of the Debtors' Plan of Reorganization. Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, explains that the Plan Proponents want the appeals consolidated because each Appeal seeks a review of the Confirmation Order and raises the same legal issues. The Plan Proponents also seek a waiver of mediation and an expedited hearing of their request because any further delay in obtaining the District Court's affirmation of the Confirmation Order may have an adverse effect and will create an unnecessary risk for the Reorganizing Debtors' businesses, Ms. Newmarch points out. Moreover, the Reorganizing Debtors' postpetition financing facility and commitment for exit financing expire on May 11, 2006. To ensure that the Bankruptcy Court approval of any extension can be timely obtained, the Reorganizing Debtors will be required to file a request with the Bankruptcy Court no later than April 10, 2006, seeking an extension of the maturity date of their postpetition financing and an extension of the commitment for their exit financing. The filing of that request for extension itself could have an adverse effect on the Reorganizing Debtors, Ms. Newmarch points out. Among other things, a further request for an extension beyond May 11, 2006: -- may cause the Reorganizing Debtors' customers and suppliers to develop mistaken impressions about when emergence will occur; -- may adversely affect the customers' and suppliers' confidence in the Reorganizing Debtors' business and reorganization prospects; -- will undermine the lenders' confidence in the Reorganizing Debtors, requiring them, as a result, to pay substantial fees associated with any resulting amendment to their postpetition facility; and -- may cause the lenders to modify the current terms of the financing facilities. The Plan Proponents believe that a hearing prior to April 10, 2006, will ensure that those adverse effects from the filing of an extension request are avoided or largely mitigated. Furthermore, Ms. Newmarch tells the District Court that delays in the Reorganizing Debtors' emergence will: * prevent the implementation of the Reorganizing Debtors' post-emergence strategic plans and programs for 2006; * adversely affect their ability to compete in the marketplace; * cause substantial operating costs and administrative expenses. The Reorganizing Debtors' restructuring costs now range between $2,000,000 and $3,000,000 per month; and * prevent them from making distributions to creditors, payments to tort claimants, and payments to hourly and salaried retirees. The Insurers will not be prejudiced at all by the District Court's expedited consideration of the Confirmation Order and Confirmation Findings, Ms. Newmarch says. Seven Groups of Insurers Respond Certain insurers agree with the Plan Proponents' requests to: -- consolidate the Appeals and for a de novo review of Judge Fitzgerald's findings of fact and conclusions of law pursuant to Rule 9033 of the Federal Rules of Bankruptcy Procedure; and -- waive mediation, as mediation is not likely to achieve resolution of the matter. The Insurers are: (1) Republic Indemnity Company (2) Transport Insurance Company formerly known as Transport Indemnity Company (3) Columbia Casualty Insurance Company, Transcontinental Insurance Company, Harbor Insurance Company, and Continental Insurance Company -- collectively called CNA (4) TIG Insurance Company (5) Republic Indemnity Company (6) Ace Property & Casualty Company, formerly known as Cigna Property & Casualty Company formerly known as Aetna Insurance Company, Central National Insurance Company Of Omaha, Century Indemnity Company, Industrial Indemnity Company, Industrial Underwriters Insurance Company, and Pacific Employers Insurance Company (7) AIU Insurance Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, Landmark Insurance Company, Lexington Insurance Company, National Union Fire Insurance Company and New Hampshire Insurance Company The Insurers do not agree with the Plan Proponents' request to do away with further briefing of the issues on appeal, Richard W. Riley, Esq., at Duane Morris LLP, in Wilmington, Delaware, tells the District Court. Mr. Riley represents Republic Indemnity. Mr. Riley notes that the Plan Proponents would have the District Court believe that the preemption issue has long since been decided in their favor in the Third Circuit in In re Combustion Eng'g, 391 F. 3rd 190 (3rd Cir. 2005) and that the District Court is bound by precedent. The Plan Proponents' reliance on the Combustion Engineering case is misplaced, Mr. Riley asserts. The Court of Appeals in Combustion Engineering affirmed the settled principle that an interest of the debtor in property -- a debtor's interest in the proceeds of its insurance policies -- is property of the debtor's estate within the meaning of Section 541(c)(1), regardless of any contractual anti-assignment provision. The Third Circuit did not, however, reach the question of whether Section 1123(a)(5) preempts otherwise enforceable contractual provisions precluding assignment of "insurance rights" to a trust, Mr. Riley points out. The only Circuit decision that directly addressed that issue, which is In re Pacific Gas & Electric Corp., 350 F.3d 932 (9th Cir. 2003), refutes the Plan Proponents' Section 1123(a)(5) express preemption argument. The Insurers maintain that briefing is necessary. Contrary to the Plan Proponents' arguments, the issues were not "fully briefed in the Bankruptcy Court," Mr. Riley indicates. The prior briefs in the Bankruptcy Court, Mr. Riley says, were written before: -- the confirmation hearing; -- the colloquy between the Bankruptcy Court and insurers' representatives, which illuminate Judge Fitzgerald's legally flawed reasoning supporting her Confirmation Findings; and -- Judge Fitzgerald issued the Confirmation Order and the Confirmation Findings. Carmella P. Keener, Esq., at Rosenthal, Monhait & Goddess, P.A., in Wilmington, Delaware, on behalf of CNA, disagrees with the Plan Proponents' proposal that the parties rely on the same briefs before the District Court as were filed with the Bankruptcy Court. The Insurers note that the affirmance or reversal of the Bankruptcy Court's preemption ruling on appeal will not impair the Plan Proponents' ability to consummate their Plan. The Plan itself contemplates a scenario where federal preemption is rejected by the federal courts, in which case the permissible scope of the proposed assignment will be decided among many other issues in an on-going California coverage litigation instituted by the Debtors prepetition. Although the Insurers agree with the Plan Proponents that the matter can be briefed and heard, based on the Court's availability, in a relatively short period of time, Mr. Riley contends that the proposed timeline is neither reasonable nor workable. Under normal procedures, briefing is usually done on a 40-day schedule, after which oral argument is ordinarily held. Assuming that the mandatory mediation requirement is waived by the District Court, the Insurers are willing to agree to a reasonable shortening of the schedule, Mr. Riley says. But the Plan Proponents seek extreme relief -- barring all briefs in the District Court and holding oral argument on or before April 10, 2006, barely 26 days after the record was transmitted to the District Court and a mere 14 days from the filing of the Response. Mr. Riley notes that the only reason offered by the Plan Proponents for their "extreme" request is that the Reorganizing Debtors' postpetition financing commitment is set to expire on May 11, 2006. If the Reorganizing Debtors wish to extend that commitment they must file a request with the Bankruptcy Court on or before April 10, 2006. Considering the known inherent uncertainties of the litigation process, the Reorganizing Debtors had no reasonable assurance and certainly no entitlement to locking in their exit financing by May 11, 2006, Mr. Riley points out. An extension of financing is not sufficient enough to justify depriving the Insurers of their fundamental due process rights in the Appeals, he says. The Insurers ask the District Court to: (a) consolidate the Appeals and Rule 9033 Requests in a single proceeding; (b) waive the mediation requirement; and (c) set a reasonable schedule for the consolidated proceeding, which will allow them a reasonable time to file and argue their briefs. About Kaiser Aluminum 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. 92; Bankruptcy Creditors' Service, Inc., 215/945-7000) KB HOME: Moody's Puts Ba1 Rating on New $300MM 7.25% Senior Notes ----------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to KB Home's new issue of $300 million of 7.25% senior notes due June 15, 2018, which will be used to fund out drawings under the company's revolver. At the same time, Moody's affirmed all of the company's existing ratings, including the ratings on the company's existing senior notes at Ba1 and on its senior subordinated debt at Ba2. The ratings outlook is positive. The positive ratings outlook reflects Moody's expectation that KB Home will fund its current share repurchase program through reduced land purchases and will continue to work towards bringing its reported debt leverage metric to below 45%. The ratings incorporate the company's leading share position in many of the markets that it serves, successful track record both in de novo expansions and in integrating numerous acquisitions, and its long and successful history through various housing cycles. However, the ratings also consider the financial and integration risks that accompany an aggressive expansion strategy, the still-sizable concentration of land inventory values and profits in California, the growing proportion of profits coming out of one market-Las Vegas, and the historically large share repurchase program. Going forward, consideration for further improvement in the company's ratings will depend largely on management's capital structure discipline. Moody's would view positively a permanent reduction in reported debt/capitalization to the 40% - 45% level and to adjusted debt/capitalization to between 45% - 50%. Factors that could stress the ratings and outlook going forward include a sizable increase in the size and pace of share repurchases, a large impairment charge, or a major acquisition involving large amounts of issued or assumed debt that had a significant effect on debt leverage. Founded in 1957 and headquartered in Los Angeles, California, KB Home is one of America's largest homebuilders, with domestic operating divisions in the following regions and states: West Coast -- California; Southwest -- Arizona, Nevada and New Mexico; Central -- Colorado, Illinois, Indiana and Texas; and Southeast -- Florida, Georgia, North Carolina and South Carolina. Kaufman & Broad S.A., the company's 49%-owned subsidiary, is one of the largest homebuilders in France. KB Home's fiscal 2005 revenues and net income were $9.4 billion and $842 million, respectively. KING PHARMACEUTICALS: Prices $400-Mil. Conv. Senior Notes Offering ------------------------------------------------------------------ King Pharmaceuticals, Inc. (NYSE:KG) disclosed the pricing of $400 million of convertible senior notes due 2026 in a private offering. In addition, the Company has granted the initial purchasers of the notes an option to purchase up to an additional $60 million aggregate principal amount of notes to cover over- allotments. The notes pay interest semiannually at a rate of 1.25% per year and will be convertible upon the occurrence of specified events, at an initial conversion rate of 48.0031 shares of common stock per $1,000 principal amount of notes (representing a conversion price of approximately $20.83 per share). The notes will also pay contingent interest commencing on April 1, 2013, if the trading price of the notes reaches a specified level. Upon conversion, the Company will pay cash equal to the lesser of the principal amount and the conversion value of such notes, based upon a specified observation period, and, if the conversion value exceeds the principal amount, cash or shares of its common stock as the Company may elect as payment for the premium. The notes are guaranteed by the Company's domestic subsidiaries. The Company intends to use the net proceeds from the offering to repurchase from time to time or redeem its 2-3/4% Convertible Debentures due November 15, 2021, and for general corporate purposes. Headquartered in Bristol, Tennessee, King Pharmaceuticals -- http://www.kingpharm.com/-- is a vertically integrated branded pharmaceutical company. King, an S&P 500 Index company, seeks to capitalize on opportunities in the pharmaceutical industry through the development, including through in-licensing arrangements and acquisitions, of novel branded prescription pharmaceutical products in attractive markets and the strategic acquisition of branded products that can benefit from focused promotion and marketing and product life-cycle management. * * * As reported in the Troubled Company Reporter on Mar. 27, 2006, Moody's Investors Service affirmed the ratings of King Pharmaceuticals, Inc., including the Ba3 Corporate Family Rating, Ba2 senior secured revolver due 2007, and Ba3 senior unsecured guaranteed convertible debentures due 2021. Following the rating action, the rating outlook remains negative. As reported in the Troubled Company Reporter on Oct. 4, 2005, Standard & Poor's Ratings Services affirmed its ratings on King Pharmaceuticals Inc., including the 'BB' corporate credit rating, and removed them from CreditWatch, where they were placed with negative implications on Feb. 28, 2005. The CreditWatch listing followed the cancellation of King Pharmaceuticals' potential acquisition by Mylan Laboratories Inc. S&P said the rating outlook is negative. LEAR CORP: S&P Downgrades Senior Unsecured Rating to B- from BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on automotive supplier Lear Corp. to 'B+' from 'BB+'. The downgrade reflects: * the sharp deterioration in Lear's operating performance during 2005; and * the expectation that earnings and cash flow generation will remain below previously expected levels for the next few years. The senior unsecured rating on the company was lowered to 'B-' from 'BB+', two notches below the corporate credit rating, because of structural subordination concerns and because there has been an increase in the amount of the company's higher ranking, secured liabilities. Both the corporate credit and senior unsecured ratings were removed from CreditWatch with negative implications, where they were placed Jan. 25, 2006. The ratings assume that the company will successfully raise at least $800 million in new secured debt to refinance upcoming debt maturities. At the same time, Standard & Poor's assigned a 'B-2' short-term corporate credit rating to Lear. Southfield, Michigan-based Lear has total debt of about $3 billion (including operating leases and securitized accounts receivable) and underfunded employee benefit liabilities of $580 million. The outlook is negative. Lear reported pretax income of $103 million for 2005 (excluding $1.1 billion of special charges). This is a sharp decline from its solid earnings in prior years. The weakened financial performance stemmed from: * reduced automotive production in North America; * volatile production schedules; * unfavorable shifts in product mix; * unusually high new-product launch costs; and * higher raw-material costs. Cash flow generation was negative $400 million. Also, Lear's credit protection measures have weakened dramatically. After it is adjusted for underfunded benefit liabilities, Lear's ratio of funds from operations to debt declined to 8% in 2005 from 25% in 2004, and debt to EBITDA increased to 4.8x from 2.9x. "Although Lear is expected to improve its financial results during 2006, we believe the improvement will be modest, and that Lear's earnings and cash flow will remain depressed in the near term," said Standard & Poor's credit analyst Martin King. Continued challenges will come from Lear's customer concentration: Its two largest clients: * Ford Motor Co. (BB-/Negative/B-2), and * General Motors Corp. (GM; B/Watch Neg/B-3), together represent about 50% of sales. Both companies are suffering from market share losses and intensified competitive pressures, and both are engaged in restructuring activities designed to reduce production capacity and lower their cost structures. Lear's own business profile has deteriorated significantly along with the declining fortunes of Ford and GM. Additional challenges facing Lear include persistently high raw material costs, which are well in excess of the amount recovered from customers. The company is also suffering from unfavorable product mix as consumers shy away from gas-guzzling SUVs. Furthermore the company must offer assistance to its own distressed suppliers, who have been unable to cope with the business challenges facing the industry. And Lear is confronting extensive restructuring plans, mainly focused on its distressed interior components segment. LEAR CORP: Secures $800 Mil. Loan Commitment & Suspends Dividends ----------------------------------------------------------------- The Board of Directors of Lear Corporation (NYSE: LEA) approved several significant actions to strengthen the company's financial flexibility and reposition the company's operational focus. These include the approval of bank commitments for $800 million in secured term loans, an agreement in principle to contribute substantially all of Lear's European Interior Products business to the joint venture with WL Ross & Co. LLC and the suspension of the company's dividend program. "The senior leadership of Lear understands that near-term challenges within the automotive sector are weighing heavily on investors' minds," said Bob Rossiter, Lear's chairman and chief executive officer. "By refinancing our 2007 debt maturities early, investors can be assured that the company is financially sound and focused on improving our longer-term operating performance." Lear has received commitments from four of its largest global lenders, JPMorgan Chase Bank, N.A., Bank of America, N.A., Citibank, N.A. and Deutsche Bank, to provide Lear with an aggregate $800 million of secured term loans. The term loans will mature no earlier than March 2012 and are expected to be made on market terms. A portion of the proceeds will be used to refinance the company's $400 million term loan scheduled to mature in February 2007. The remaining proceeds are expected to fund the retirement of Lear's outstanding convertible senior notes and for general corporate purposes. The financing commitments are subject to customary terms and conditions. In connection with the new term loan facilities, the company's primary credit facility would be amended and restated to, among other things, provide additional collateral for both the company's existing revolving credit facility and the new term loans, increase the interest rates applicable to the revolving credit facility and provide additional flexibility under the facility's existing financial covenants through 2007. The amendment and restatement of the company's primary credit facility will require the consent of lenders holding a majority of the outstanding commitments. The banks who provided the financing commitments for the term loans have agreed to support the proposed amendment . The amendment and restatement of the credit facility and the new term loan facility are expected to be completed in the second quarter. Additionally, Lear's Board of Directors approved an agreement in principle to contribute substantially all of the company's European Interior Products operations to International Automotive Components Group, Lear's joint venture with WL Ross & Co. LLC and Franklin Mutual Advisers LLC. The transaction is consistent with the framework agreement the parties entered into last fall to explore strategic opportunities in the automotive interior components sector. IAC was recently formed to acquire the principal businesses of Collins & Aikman Corporation in Europe. In exchange for its European Interiors business, Lear expects to receive a 34% equity stake in the joint venture. The transaction is subject to negotiation of definitive documentation as well as customary conditions, including the receipt of all required regulatory approvals, and is expected to close before June 30, 2006. Lear's European Interior operations that are being contributed to the joint venture include nine manufacturing locations generating about $750 million in annual sales, as well as certain management and operational support functions. The combined European Interior operations of Lear and Collins & Aikman would represent the largest enterprise of its kind in Europe, and provide a solid platform for improving ongoing operating performance. The Board also suspended Lear's quarterly cash dividend program to provide an additional measure of liquidity cushion given current industry conditions. "While we regret having to suspend the dividend program, management is focused on preserving the company's financial flexibility in a very challenging industry environment," Rossiter continued. "At the same time, the entire Lear team is working to improve our ongoing financial results, with an emphasis on improving cash flow and taking further aggressive actions to address our under-performing Interior Products business globally." Lear Corporation 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 March 22, 2006, Moody's Investors Service lowered Lear's Corporate Family and Senior Unsecured Debt ratings to B2 from Ba2. The actions reflected deterioration in Lear's operating performance and prospects below previous expectations. Leverage is anticipated to remain elevated over the intermediate term. As reported in the Troubled Company Reporter on March 20, 2006, Fitch downgraded Lear's Issuer Default Rating to 'B' from 'BB+', and the company's senior unsecured debt and secured bank agreement to 'B+' from 'BB+. Approximately 53% of Lear's 2005 revenues were to Ford and GM, which face capacity reductions and declining production over the next several years. A Recovery Rating of 'RR3' has been assigned, indicating that in the event of further deterioration in financial and operating results to the point where the company sought Chapter 11 protection, recovery values on secured bank facilities and senior unsecured debt are projected to be between 50%-70%. The Rating Outlook remains Negative. LEGACY ESTATE: Gets Court OK to Hire Deloitte as Restr. Advisor --------------------------------------------------------------- The Bankruptcy Court for the Northern District of California authorized The Legacy Estate Group LLC and its debtor-affiliates to employ Deloitte Financial Advisory Services, LLP, as their restructuring advisor, nunc pro tunc to Dec. 15, 2005. The Court entered its order on March 17, 2005. As reported in the Troubled Company Reporter on Jan. 27, 2006, Deloitte Financial will: a) advise the Debtors as they establish various reporting processes required in their bankruptcy cases; b) assist the Debtors with the production of relevant budgeting and forecasting, cash flow projections and operating and business plans; c) assist the Debtors in upgrading and streamlining their accounting and reporting functions and related practices and procedures; d) provide the Debtors with advice and recommendations designed to refine their cash management processes, including the monitoring of actual cash flow versus projections; e) assist the Debtors understand the business and financial impact of various operational, financial and strategic restructuring alternatives; f) assist the Debtors in gathering and evaluating information regarding leases, contracts and agreements in relation to their bankruptcy cases; g) assist the Debtors in the financial restructuring process, including the development of a plan of reorganization; h) assist the Debtors with respect to human resources issues; i) assist the Debtors in preparing internal and external communications related to restructuring and bankruptcy; j) assist the Debtors in negotiations and due diligence efforts with other parties-in-interest; k) assist the Debtors in evaluating and reconciling claims asserted, including PACA and reclamation claims; l) attend and participate as a technical advisor in hearings and meetings on matters within the scope of the services to be performed under its engagement, including providing expert testimony; and m) provide advice and recommendations with respect to issues regarding the integration of the Debtor's accounting systems that arise during the course of its engagement. The hourly rate for Deloitte Financial's professionals are: Designation Hourly Rate ----------- ------------ Partner/Principal/Director $475 to $525 Senior Manager $360 to $395 Manager $310 to $340 Senior Consultant $275 to $305 Consultant $210 to $230 To the best of the Debtors' knowledge, Deloitte Financial is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Saint Helena, California, The Legacy Estate Group LLC -- http://www.freemarkabbey.com/-- owns Freemark Abbey Winery, which produces a range of red, white, and dessert wines. Legacy Estate and Connaught Capital Partners, LLC, filed for chapter 11 protection on November 18, 2005 (Bankr. N.D. Calif. Case No. 05-14659). John Walshe Murray, Esq., Lovee Sarenas, Esq., and Robert A. Franklin, Esq., at the Law Offices of Murray and Murray represent the Debtors in their restructuring efforts. Lawyers at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts between $50 million and $100 million. LEGACY ESTATE: Has Until May 20 to File Plan of Reorganization -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of California approved the Stipulation between The Legacy Estate Group LLC and its debtor-affiliates, Laminar Direct Capital, Wilson Daniels, Ltd., and the Official Committee Of Unsecured Creditors, to extend until May 20, 2006, the Debtors' exclusive right to file a plan of reorganization. Laminar Direct and Wilson Daniels are two of the Debtors' creditors. Under that Stipulation, the Debtors also have until May 20, 2006, to solicit acceptances of that plan from their creditors. The Debtors and the three parties to the Stipulation told the Court that the extension of the exclusive periods is in the best interest of the Debtors' estates and will give them more opportunity to negotiate and formulate a consensual chapter 11 plan. The Court's order is without prejudice to the Debtors' right to seek a further extension of its exclusive periods, conditioned upon the written consent of the parties to the Stipulation and a Court order further extending the exclusive periods. Headquartered in Saint Helena, California, The Legacy Estate Group LLC -- http://www.freemarkabbey.com/-- owns Freemark Abbey Winery, which produces a range of red, white, and dessert wines. Legacy Estate and Connaught Capital Partners, LLC, filed for chapter 11 protection on November 18, 2005 (Bankr. N.D. Calif. Case No. 05-14659). John Walshe Murray, Esq., Lovee Sarenas, Esq., and Robert A. Franklin, Esq., at the Law Offices of Murray and Murray represent the Debtors in their restructuring efforts. Lawyers at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts between $50 million and $100 million. LIFE SCIENCES: Equity Deficit Widens to $14.5 Million at Dec. 31 ---------------------------------------------------------------- Life Sciences Research, Inc. (Other OTC: LSRI) reported its financial results for the year ended Dec. 31, 2005. The company reported $1,491,000 of net income on $172,013,000 of revenues for the year ended Dec. 31, 2005. At Dec. 31, 2005, the company's balance sheet showed $184,369,000 in total assets and $198,937,000 in total liabilities, resulting in a $14,568,000 stockholders' equity deficit. The company's Dec. 31 balance sheet also showed strained liquidity with $63,265,000 in total current assets available to pay $119,760,000 in total current liabilities coming due within the next 12 months. "2005 was another great year of progress in improving our financial performance with operating income up by one third on 2004, and now representing 12% of revenues," Brian Cass, LSR's President said. "Net orders for the year set a new record and we had a book to bill ratio of 1.06. This would have been even more but some customers faced difficulties in the development of their compounds so cancellations were unusually high this year. "However such variations which impact quarterly results are a feature of our business. We approach 2006 with confidence and optimism. Order levels on fourth quarter were solid with a book to bill of 1.13 and these will flow through to revenues later this year. "As always my thanks go to our employees and other stakeholders who have shown commitment and determination in supporting our company through another excellent year." Full-text copies of Life Sciences Research, Inc.'s financial statements for the year ended Dec. 31, 2005, are available at no charge at http://ResearchArchives.com/t/s?737 Life Sciences Research, Inc. -- http://www.lsrinc.net-- is a global contract research organization providing product development services to the pharmaceutical, agrochemical and biotechnology industries. LSR identifies risks to humans, animals or the environment resulting from the use or manufacture of a wide range of chemicals that are essential components of LSR's clients' products. The Company's services are designed to meet the regulatory requirements of governments around the world. LSR operates research facilities in the United States (the Princeton Research Center, New Jersey) and the United Kingdom (Huntingdon and Eye, England). At Dec. 31, 2005, the company's stockholders' equity deficit widened to $14,568,000 compared to a $2,064,000 deficit at Dec. 31, 2004. LONDON FOG: Columbia Sportswear Acquires Pacific Trail Brands ------------------------------------------------------------- Columbia Sportswear Company (Nasdaq: COLM) outbid Perry Ellis and will acquire the Pacific Trail group of brands. The transaction closed on Mar. 30, 2006. The acquisition is the result of the Mar. 29, 2006, auction in bankruptcy court of specified assets of Pacific Trail, Inc., and London Fog Group, Inc., where Columbia was the winning bidder for consideration of $20.4 million cash plus the assumption of certain liabilities. Established in 1945 in Seattle, Washington, Pacific Trail manufactures and sells products to retailers nationwide. The Pacific Trail business includes the Pacific Trail(R) outerwear and sportswear brand, the Towne(R) outerwear and rainwear brand, the Pac Tec(R) high-performance outerwear brand, the Black Dot(R) Clothing surfboard apparel brand, and the Moonstone(R) mountain equipment brand. "With the acquisition of Pacific Trail, we continue to strengthen our portfolio of authentic, outdoor brands," said Tim Boyle, President and CEO of Columbia Sportswear. "We are particularly enthusiastic about the opportunity to leverage our design and capital strengths to expand the growth opportunities for Pacific Trail products in distribution channels that Columbia has not yet developed." Grant D. Prentice, Vice President Global Outerwear Integration at Columbia, will be responsible for interim management of the Pacific Trail brands. About Columbia Sportswear Company Founded in 1938 in Portland, Oregon, Columbia Sportswear Company -- http://www.columbia.com/-- is a global leader in the design, sourcing, marketing and distribution of active outdoor apparel and footwear. As one of the largest outerwear brands in the world and a leading seller of skiwear in the United States, the Company has developed an international reputation for quality, performance, functionality and value. Columbia Sportswear Company manages a portfolio of outdoor brands including Mountain Hardwear(R), Sorel(R), Montrail(R), and Pacific Trail(R). About the London Fog Group The London Fog Group -- http://www.londonfoggroup.com/-- is comprised of three principal operations: * London Fog -- http://www.londonfog.com/-- is a great American apparel brand, ranked #32 of the top 100 brands by Women's Wear Daily. Created in the 1920s, London Fog became the ubiquitous symbol of American rainwear with the introduction of the classic trench. Today, London Fog is being made into a powerful must-have global lifestyle brand in the designer tier, showcased in the most prestigious retail venues and with the highest caliber product in fashion, accessories, outerwear and fragrance. * Pacific Trail http://www.pacifictrail.com/-- is a quietly powerful brand with an 60-year tradition of quality in the outerwear and sportswear world, and roots as an authentic Northwest lifestyle brand. The brand has a powerful emotional connection to the rugged outdoor life and leisure of the Pacific Northwest, and a prominent position at major national retailers. Pacific Trail is currently growing its consumer presence and retail footprint with additional licensing and new product development. * Homestead -- http://www.homesteadbrands.com-- is the premier designer and manufacturer of home fashions in the U.S. today. The company has extensive experience in a wide range of home textiles for major designers and private label brands. The Homestead portfolio includes brands such as Angela Adams, Collier Campbell, Nancy Koltes, Dreams by Peacock Alley, Preston Bailey, Jeffrey Bilhuber, The Art of Home Ann Gish, Cubanitas, MaryJane Butters, Pacific Trail Home and others. London Fog Group, Inc. and its debtor-affiliates filed for chapter 11 protection on March 20, 2006 (Bankr. D. Nev. Case No. 06-50146). Stephen R. Harris, Esq., at Belding, Harris & Petroni, Ltd., in Reno, Nevada, represents the Debtors. Avalon Group, Ltd., serves the Debtors' financial advisor. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million and $100 million. MANITOWOC: Expects Higher 1st Qtr. Earnings v. Wall Street Average ------------------------------------------------------------------ The Manitowoc Company expects first-quarter 2006 earnings per share to be at least $0.20 in excess of Wall Street average estimates. Because of this first-quarter performance and its outlook for the remainder of the year, the company is also increasing its annual GAAP earnings per share guidance range to $3.75 TO $4.00 from the $3.30-$3.60 per share range announced earlier this year. The GAAP earnings will include the change in accounting for stock option expense which is estimated to be $0.15, net of tax. Chairman and chief executive officer Terry Growcock commented that "the crane business has continued to outperform even our own high expectations. We are extremely pleased with our success in working through production challenges common in this high demand environment. The very strong cyclical upswing in our crane market appears to have offset much of the seasonal softness we would typically see in the first quarter of the year. Both the Foodservice and Marine segments are performing in-line with levels planned at the beginning of the year." The Manitowoc Company, Inc. -- http://www.manitowoc.com/-- is one of the world's largest providers of lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. As a leading manufacturer of ice-cube machines, ice/beverage dispensers, and commercial refrigeration equipment, the company offers the broadest line of cold-focused equipment in the foodservice industry. In addition, the company is a leading provider of shipbuilding, ship repair, and conversion services for government, military, and commercial customers throughout the maritime industry. * * * As reported in the Troubled Company Reporter on Mar. 27, 2006, Standard & Poor's Ratings Services raised its ratings on diversified equipment manufacturer The Manitowoc Co. Inc., including the corporate credit rating on the company, which rose to 'BB' from 'BB-'. S&P said the outlook is stable. MERIDIAN AUTOMOTIVE: Files Plan of Reorganization in Delaware ------------------------------------------------------------- Meridian Automotive Systems, Inc., filed its Plan of Reorganization with the United States Bankruptcy Court for the District of Delaware. Now that the Plan has been filed, Meridian will follow the process required by the Bankruptcy Court to obtain approval of its Plan and related documents at a confirmation hearing and ultimately exit Chapter 11. "Filing a Plan in less than eleven months since entering Chapter 11 is a major accomplishment and clearly reflects the strength of our company and our efficiency with respect to our restructuring efforts," Richard E. Newsted, Meridian's President and CEO, said. Our restructuring process is now entering into its critical final stage and we are committed to completing our exit from Chapter 11 as quickly and efficiently as possible." A copy of the Company's Proposed Plan is available for a fee at: http://www.researcharchives.com/bin/download?id=060330223815 About Meridian Automotive Systems Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. METOKOTE CORP: S&P Affirms B+ Rating & Changes Outlook to Negative ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on automotive and industrial coating supplier MetoKote Corp. to negative from stable. The ratings on the company, including the 'B+' corporate credit rating, were affirmed. MetoKote, which applies industrial coating designed to inhibit corrosion of metal products made by its automotive and industrial customers, had total balance sheet debt of $170 million at Jan. 31, 2006. "The outlook revision reflects our concerns about MetoKote's ability to maintain credit protection measures consistent with the rating, given the company's high leverage and current fundamental automotive industry challenges that have the potential to pressure EBITDA," said Standard & Poor's credit analyst Nancy C. Messer. The automotive OEM market, which accounts for 51% of MetoKote's revenues, has significantly deteriorated in the past year. Industry conditions are typified by: * pricing pressures, * weak volumes, and * high material costs. In addition, the financial performance of the auto supplier group is vulnerable to the increasingly fragile financial health of some of its major customers. MetoKote's relatively weak fiscal 2005 EBITDA left the company more highly leveraged than expected following a debt-financed share repurchase early in the year. The company's EBITDA, totaling $47 million for fiscal 2005, ended Oct. 31, was below expectations because of: * significant start-up problems in two new European InPlant facilities; and * high operating costs that were not recovered from customers. The European plant problems resulted from the difficulty of inaugurating a large number of facilities in a single year; MetoKote installed five InPlants: * one General Purpose operation, and * three Paint Shop operations. Because MetoKote's growth plan depends on the success of frequent facility startups, the company undertook a major organizational restructuring in 2005 to improve its practices. The ratings on Lima, Ohio-based MetoKote reflect: * the company's weak business risk profile as a participant in the highly competitive and cyclical: -- automotive, -- agricultural, and -- construction markets; and * its highly leveraged financial position. The negative outlook reflects Standard & Poor's concern that MetoKote's high leverage may not decline to a level appropriate for the rating in the year ahead. The rate of EBITDA expansion fell short of expectations in fiscal 2005, and the currently difficult auto market could constrain fiscal 2006 EBITDA growth. The ratings could be lowered if MetoKote is not able to generate free cash flow and reduce debt in the year ahead, or its financial performance is disrupted by customers' financial difficulties. The outlook could be revised to stable if market conditions improve and this recovery is sustained. This could strengthen MetoKote's earnings and cash flow generation prospects, enabling the company to reduce leverage following the recapitalization in 2005 that allowed a dividend payment to the equity sponsor. However, Standard & Poor's does not expect significant near-term market improvement for the auto sector. MIRANT CORP: Kern River Gets Stock for $81,765,967 Unsec. Claim --------------------------------------------------------------- In 2001, Mirant Americas Energy Marketing, L.P., entered into a long-term firm contract for transportation capacity with Kern River Gas Transmission Company. MAEM subsequently rejected the Contract. As a result, Kern River filed for rejection damages in the Debtors' cases. Pursuant to the Court's "Agreed Order Concerning Modification of Automatic Stay" dated May 27, 2004, Kern River applied certain cash security against the rejection damages, leaving an unsatisfied general unsecured claim outstanding for $138,889,498. The Debtors objected to Kern River's $138,889,498 Claim. The Objection became the subject of a court battle that ensued between the parties. On September 21, 2005, Judge Lynn ruled that Kern River is a holder of a $74,403,116 allowed unsecured claim against MAEM. According to David W. Elrod, Esq., at Elrod, PLLC, in Dallas, Texas, the effect of the Court's holding is that Kern River had a gross allowed claim of $89,154,705 as of the Petition Date. Under the Debtors' Plan of Reorganization, Kern River's Allowed Claim was classified in Mirant Debtor Class 3, and is entitled to receive distributions. Mr. Elrod notes that under the Plan, Allowed Unsecured Claims that have a contractual interest rate will be paid at the applicable non-default contractual rate with compounding to occur on the date of scheduled payments. For those claims that do not have a contractual rate of interest, the interest from the Petition Date through the Effective Date will be accrued at 4% without compounding. However, Kern River and the Debtors disagreed over the correct calculation of the interest with respect to Kern River's Claim. The Debtors argued that: (a) Kern River is not entitled to interest from the Petition Date through the Effective Date, but rather only from the date of rejection through the Effective Date; (b) Kern River is not entitled to interest in the full amount of the Kern River Gross Allowed Claim for the time period through May 27, 2004, when the Court permitted Kern River to apply the cash security; and (c) Kern River is not entitled to contractual interest with compounding but rather was only entitled to 4% simple interest. Using the 4% simple interest, Kern River believes that it is entitled to $82,288,203 in Plan distributions. Accordingly, Kern River asks the Court to direct the Debtors to make a timely distribution for $82,288,203, and award Kern River its reasonable attorneys' fees and costs. New Mirant Entities Object Craig H. Averch, Esq., at White & Case LLP, in Miami, Florida, argues that there are remaining material disputes as to the total distributions to be made to Kern River by the New Mirant Entities under the Plan. No final judgment has been entered on Kern River's contested claim and it, therefore, does not have a "Final Order" pursuant to the Plan. Mr. Averch points out that immediate distribution to Kern River would violate the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The HSR Act provides that a person may not acquire voting securities of another person in a transaction meeting the HSR Act's jurisdictional thresholds without filing an HSR filing with the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice, and observing a statutory waiting period. Mr. Averch believes that Kern River's proposed acquisition of Mirant voting securities meets the HSR Act's jurisdictional thresholds. Thus, unless Kern River is able to identify an applicable exemption, it may not acquire in excess of $53.1 million of voting securities of Mirant without filing a Notification and Report Form under the HSR Act, and waiting for the expiration or early termination of the statutory waiting period. Kern River was notified of the HSR Act's restrictions in September 2005. Kern River, therefore, cannot seek an order compelling distribution when the order would be in violation of federal law, Mr. Averch says. Moreover, the New Mirant Entities have recently become aware of new evidence that necessitates the filing of a request for a 2004 examination and reconsideration of Kern River's Claim. The New Mirant Entities were able to gather information alleging that Kern River sold some or all of the rejected capacity as firm capacity in 2005 representing tens of millions of dollars in income, Mr. Averch explains. The New Mirant Entities believe that this new evidence may prove that additional firm capacity agreements will provide mitigation to Kern River beyond 2008. Pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court to direct Kern River to appear for an examination and to produce any and all documents and any other physical evidence, records, correspondence or other property that relate to any, and all, sales of firm capacity from May 1, 2005, to the present. Kern River Talks Back David W. Elrod, Esq., at Elrod, PLLC, in Dallas, Texas, points out that the New Mirant Entities knew or could have known of all of the capacity sales months ago, including during the time prior to plan confirmation, but they did nothing. The capacity sales and rates are publicly available on the Kern River Web site and have been posted there beginning at the time or shortly after the bids were awarded. Mr. Elrod argues that the New Mirant Entities' so-called "newly discovered evidence" does not prevent distribution and does not justify reconsideration. The facts on which the "newly discovered evidence" was based arose after the close of evidence at the Kern River hearing on July 7, 2005, and do not justify reconsideration because they were not in existence at the time of trial. Furthermore, Mr. Elrod asserts that Kern River is exempt from the filing provisions of the HSR Act. Under Section 802.9 of the applicable FTC rules, a party is exempt from the requirements of the HSR Act if it would hold less than 10% of the stock of the issuing entity and does not participate in management of the entity. Kern River's distribution would be for slightly more than 1% of the common stock of New Mirant -- far short of the 10% threshold. Kern River has not participated in the management of New Mirant and has no intention of doing so, Mr. Elrod adds. Kern River, however, admits that it earned a relatively small amount of interest on funds it held that constituted a portion of the Kern River Gross Allowed Claim. To dismiss any notion of double recovery, Kern River informs Judge Lynn that it will reduce its request by the amount of interest it earned, which was $73,433. As a result, Kern River asks the Court to direct the Debtors to pay it $82,214,770, as Plan distribution, and award its attorney's fees and costs. Parties Agree to Resolve Dispute To resolve the dispute, the parties entered into a stipulated final judgment, signed by Judge Lynn, which provides that: (a) The Disbursing Agent will issue to Kern River shares of New Mirant Common Stock amounting to $81,765,967 in Mirant Debtors Class 3 - Unsecured Claims. The Disbursing Agent will notify Kern River of the issuance and provide an account number for the issued shares; (b) Kern River will also receive any and all subsequent distributions under the Plan in accordance with being a holder of an Allowed Claim in Mirant Debtor Class 3 - Unsecured Claims, including the corresponding pro rate share of the designated net litigation distributions; and (c) Kern River's allowed claim and distribution rights will not be subject to reconsideration under Section 502(j) of the Bankruptcy Code, or Rule 3008 of the Federal Rules of Bankruptcy Procedure or any other applicable law. The Debtors will not: -- seek any further discovery against Kern River related in any way to the Allowed Claim; and -- not initiate any contested matter, adversary proceeding or any other cause of action against Kern River. All of Kern River's other claims against the Debtors are expunged and disallowed in their entirety. The Disallowed Claims will not be asserted in any forum or subject to reconsideration under Section 502(j) or Rule 3008 or any other applicable law. 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. MOUNT SINAI: Moody's Lifts Long-Term Debt Ratings to Ba1 from Ba2 ----------------------------------------------------------------- Moody's Investors Service upgraded the long-term ratings to Ba1 from Ba2 on Mount Sinai Medical Center of Florida's outstanding debt. The rating action affects an aggregate $278.2 million of rated debt issued through the City of Miami Beach Health Facilities Authority. The upgrade to Ba1 reflects MSMC's ability to generate and sustain a multi year improvement in operating cashflow as well as sustain unrestricted liquidity at more adequate levels. Further credit improvement, and specifically an investment grade rating, is largely dependent on a sustained reversal of current volume trends that support enterprise growth. Legal Security: All outstanding bonds are secured by: a gross revenue pledge of the obligated group; a full and irrevocable guaranty of the Mount Sinai Medical Center Foundation for principal and interest payments; a mortgage on MSMC's south campus; MSMC's right, title and interest in the ground lease on the land that the north campus is situated on, and; a negative pledge from the Medical Center and the Foundation. Interest Rate Derivatives: None Strengths: * Sustained trend of positive cashflow with 8.6% operating cashflow margin that has transformed MSMC's financial profile, with more adequate debt measures such as nearly 2.0 times coverage of maximum annual debt service and reduced debt to cashflow to an improved but still high 10 times. We are also encouraged by inpatient volume growth of nearly 3.7% through the first two months of FYE 2006. * Maintenance of improved cash position held by MSMC and Foundation * Established management team with appropriate financial rigor * Clearly articulated operational imperatives to achieve much needed top line growth Challenges: * Debt levels remain very high relative to size of operations and balance sheet liquidity * Multi-year trend of sizable volume declines, across inpatient and outpatient service lines, which poses a fundamental challenge to MSMC's ability to achieve enterprise growth, as evidenced by revenue contraction in FY 2004, though volumes through the first two months of FY 2006 show an encouraging turn * Changing demographic of Miami Beach challenges MSMC to grow volumes * Multi faceted plans for enterprise growth may prove to be dilutive as debt or cash is used Recent Developments: The rating upgrade follows a review of MSMC's audited FY 2005 financial statements which shows a fourth consecutive year of operational improvement. In 2005, MSMC incurred a $4.4 million operating loss compared with a $7.4 million operating loss in FY 2004 and a budget that reflected expectations for break-even operating performance. MSMC's financial profile has strengthened through aggressive cost reductions and business cycle initiatives. Variances to budget are largely tied to continued volume declines that have resulted from the shifting demographic on Miami Beach and recently challenging Hurricane seasons that brought several high intensity storms to the greater market area. Operating cashflow of nearly $39 million in FY 2005 is slightly better then the FY 2004 level of just over $35.0 million, suggesting that the progress made since FYE 2001 is sustainable, though challenges to grow top line revenue remain. Sluggish revenue growth threatens to impede the organization's longer-term momentum including further credit improvement unless growth is sustained at levels that can generate sufficient cashflow. While key financial ratios remain weak, general and sustained improvement is noted supporting a stable outlook on the below investment grade rating, with 10.2 times debt to cashflow and 2.0 times maximum annual debt service coverage comparing favorably to levels that were negative at FYE 2001. Management prepared budget for FY 2006 shows continued growth in earnings and slightly better then break-even performance. Moody's continue to believe that volume is a critical issue for MSMC. It is noted that progress has been made in recruiting physicians for key clinical areas, as evidenced by 3.7% volume growth in the first two months of FY 2006. The ability to reverse negative volume trends and sustain growth will be a key driver of further credit improvement. Moody's are encouraged that the combined unrestricted liquidity balances held by MSMC and the Foundation have stabilized, after noted growth, although resources remain modest and highly leveraged for an organization of this size. The combined unrestricted cash balances totaled $111.3 million at FYE 2005, equates to an adequate 94.5 days but remains modest relative to leverage with cash to debt coverage of just 40%. While strategic capital projects are being considered, including the consideration of a new hospital to the north of the beach in Aventura, new money borrowings are not contemplated at this time. It is management's intention to fund strategic capital with resources that do not represent additional leverage. Historically strong, the MSMC Foundation has provided explicit and unconditional support to the clinical operations of MSMC. In FY 2005 the Foundation raised a record $16.9 million, suggesting the likelihood that a portion of MSMC's larger strategic capital needs could be financed with resources that do not leverage MSMC further. Outlook: The stable outlook recognizes our belief that financial performance should continue to produce acceptable and improving operating profile and debt coverage measures. Further improvement in liquidity and balance sheet measures, however, may be tempered by increasing capital investment. What could change the rating up: Consistent track record of operating cash flow at higher levels; reduction of debt outstanding or significant growth in liquidity; further credit improvement will not be contingent upon a move to a positive outlook as MSMC's ability to achieve and sustain enterprise growth as measured by revenue and volumes will likely complete the transformation of the credit risk to an investment grade profile. What could change the rating up: Deterioration of financial performance or liquidity levels; further enterprise contraction that results in continuous trend of market share loss; a material increase in debt without commensurate growth in cash flow or liquidity. Assumptions & Adjustments: -- Based on financial statements for Mount Sinai Medical Center of Florida, Inc. & Subsidiaries -- First number reflects audit year ended December 31, 2004 -- Second number reflects audit year ended December 31, 2005 -- Operating income in each FY 2004 and 2005 excludes a $10 million transfer from the Foundation -- Investment returns smoothed at 6% unless otherwise noted * Inpatient admissions: 25,564; 24,319 * Total operating revenues: $426.8 million; $450.9 million * Moody's-adjusted net revenue available for debt service: $42.1 million; $45.5 million * Total debt outstanding: $282.6 million; $278.2 million * Maximum annual debt service (MADS): $22.8 million; $22.8 million * MADS Coverage with reported investment income: 1.7 times; 1.8 times * Moody's-adjusted MADS Coverage with normalized investment income: 1.8 times; 2.0 times * Debt-to-cash flow: 12.0 times; 10.2 times * Days cash on hand: 101 days; 94.5 days * Cash-to-debt: 40.3%; 40% * Operating margin: -1.7%; -1.0% * Operating cash flow margin: 8.3%; 8.6% Rated Debt: Series 1998, Series 2001A and Series 2004 bonds MUSICLAND HOLDING: Balks at Marisa Uriarte's Lift Stay Motion ------------------------------------------------------------- As reported in the Troubled Company Reporter on Mar. 24, 2006, Marisa Uriarte asked the U.S. Bankruptcy Court for the Southern District of New York to lift the automatic stay so as to finalize Court approval of the Class Action Settlement and allow the Action to be brought to completion. Gene J. Stonebarger, Esq., at Lindsay & Stonebarger, in Sacramento, California, relates that on Feb. 2, 2005, Marisa Uriarte, individually, and on behalf of a class of California residents, initiated a state court litigation against Musicland Group, Inc., alleging violations of Section 432.8 of the California Labor Code. Section 432.8 protects the rights of an applicant for employment or an employee from disclosing information about a conviction related to the possession of marijuana where the conviction is more over two years old. Mr. Stonebarger asserts that allowing a matter to proceed in another forum can constitute a cause for lifting the automatic stay. It would be a waste of judicial and legal resources for the Action to be reinstituted in the Bankruptcy Court, he says. In addition, Mr. Stonebarger notes, the Action only involves issues of state law and California law must be applied in approving the Class Action Settlement. Debtors Object It is not certain that lifting the automatic stay will expeditiously resolve the state court litigation against the Debtors, David A. Agay, Esq., at Kirkland & Ellis LLP, in New York City asserts. If the parties meet the Superior Court's conditions for interim approval, and the Superior Court sustains an objection to the settlement at the final approval hearing, the Debtors will incur the costs and risks of continuing to litigate the Action potentially before both the Appellate Court and the Superior Court. Mr. Agay also points out that allowing the Action to proceed will prejudice the interests of other creditors. In addition, lifting the stay would impose unwarranted expenditures and could potentially diminish the value of the Debtors' estates. Thus, the Debtors ask the Court to deny Ms. Uriarte's request. The Informal Committee of Secured Trade Vendors joins in the Debtors' objection. The Trade Committee does not consent to the use of its collateral for the expenses related to settlement of the Action. About Musicland Holding Headquartered in New York, New York, Musicland Holding Corp., is a specialty retailer of music, movies and entertainment-related products. The Debtor and 14 of its affiliates filed for chapter 11 protection on Jan. 12, 2006 (Bankr. S.D.N.Y. Lead Case No. 06-10064). James H.M. Sprayregen, Esq., at Kirkland & Ellis, represents the Debtors in their restructuring efforts. Mark T. Power, Esq., at Hahn & Hessen LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Musicland Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) MUSICLAND HOLDING: Can Hire Abacus as Advisors on Final Basis ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Musicland Holding Corp. and its debtor-affiliates permission on a final basis, to employ Abacus Advisors Group LLC as their advisors and consultants in the sale of the Debtors' certain assets, nunc pro tunc to the chapter 11 filing. As reported in the Troubled Company Reporter on Feb. 10, 2006, Abacus will: -- assist in the preparation of an appropriate information package regarding closing stores for distribution to potential bidders; -- review bid proposals and assistance in negotiations with the various parties and, if appropriate, orchestration of an auction to ensure recoveries are maximized; -- provide observance, if necessary, of physical inventories that may be taken; and -- monitor the conduct and results of any third party selected to liquidate the inventory. For its services, Musicland will pay Abacus a $250,000 base fee. In addition, Abacus will be paid a value added fee to be determined in conjunction with the Company, its lenders and the creditors committee. Abacus will also be entitled reimbursement of its reasonable expenses including attorney's fees. Headquartered in New York, New York, Musicland Holding Corp., is a specialty retailer of music, movies and entertainment-related products. The Debtor and 14 of its affiliates filed for chapter 11 protection on Jan. 12, 2006 (Bankr. S.D.N.Y. Lead Case No. 06-10064). James H.M. Sprayregen, Esq., at Kirkland & Ellis, represents the Debtors in their restructuring efforts. Mark T. Power, Esq., at Hahn & Hessen LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Musicland Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL ENERGY: Asks Court to Approve Mirant Settlement Agreement ------------------------------------------------------------------ In June 2005, NEGT Energy Trading - Gas Corporation, National Energy & Gas Transmission, Inc., NEGT Energy Trading Holdings Corporation, NEGT Energy Trading - Power, L.P., Gas Transmission Northwest Corporation and Mirant Corporation agreed to stay certain pending litigation and resolve their claims against each other through mediation and, if necessary, binding arbitration. Mediation didn't work. The parties proceeded to arbitration and engaged in discovery. Several weeks prior to the scheduled arbitration hearing, the parties reached a settlement in principle. Among other things, the parties agreed that: (1) If the Court does not approve the Settlement on or before May 15, 2006, Mirant may terminate the Settlement Agreement. (2) ET Gas will pay $2,900,000 to Mirant. (3) Mirant will retain and own all of the $11,203,719 collateral as security for the parties' trading positions under the Master Firm Purchase/Sale Agreement dated as of February 1, 1998, between Southern Company Energy Marketing LP and PG&E Energy Trading - Gas Corporation. (4) Claim Nos. 145 and 146 filed by Mirant will be deemed withdrawn. (5) Mirant and NEGT will exchange mutual releases. (6) The Settlement Agreement will not result in the release of certain claims including: -- Claim Nos. 6511, 6512, 7965, 7957, 8082 and 8083 filed in Mirant's bankruptcy case by TransCanada PipeLines, Ltd., TransCanada Gas Services, Inc., and TransCanada Energy, Ltd.; and -- claims asserted by GTN and TransCanada Gas Services, Inc., in their request to enforce settlement agreements. The parties also have agreed to take the necessary steps to have their pending litigation dismissed with prejudice. A full-text copy of the Settlement Agreement is available for free at http://bankrupt.com/misc/neg_mirantsettlement.pdf The Debtors ask the U.S. Bankruptcy Court for the District of Maryland to approve the Settlement Agreement. Martin T. Fletcher, Esq., at Whiteford, Taylor & Preston L.L.P., in Baltimore, Maryland, relates that prior to entering into the Settlement Agreement, the Debtors reviewed all relevant documents, including their expert reports and the settlement calculations and data provided by Mirant. According to Mr. Fletcher, while the Debtors might well prevail in the self-administered binding arbitration if it went forward, the Settlement Agreement makes sense in light of the expense and uncertainty that would be involved. The Settlement Agreement is also beneficial to the Debtors because it will facilitate the release of funds that were placed in escrow to protect GTN, Mr. Fletcher says. Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) NEIMAN MARCUS: Fitch Affirms $500 Mil. Sr. Sub. Notes' CCC Rating ----------------------------------------------------------------- Fitch Ratings revised the Rating Outlook on The Neiman Marcus Group, Inc. (NMG) to Positive from Stable, while affirming the outstanding ratings as: -- Issuer Default Rating (IDR) 'B-' -- $600 million secured revolving credit facility 'BB-/RR1' -- $1.875 billion secured term loan facility 'B/RR3' -- $121 million secured debentures 'B/RR3' -- $700 million senior unsecured notes 'CCC+/RR5' -- $500 million senior subordinated notes 'CCC/RR6' The ratings reflect NMG's leadership position within the luxury retail segment and solid operating performance balanced against the company's high financial leverage and the cyclical nature of luxury apparel retailing. The Positive Rating Outlook reflects the expectation for solid operating performance over the near term and NMG's demonstrated commitment to reducing debt levels with free cash flow. The buy-out of NMG by Texas Pacific Group and Warburg Pincus was completed on Oct. 6, 2005. Since that time, NMG has continued to perform well, though comparable store sales growth has moderated from a high single digit pace to a mid-single digit pace over the past four months. Retail comparable store sales were up 7.3% in the six months ended Jan. 28, 2006, while EBITDA declined slightly to $289 million from $297 million in the prior year period due to merger-related costs. NMG used free cash flow in its fiscal second quarter (ended Jan. 28, 2006) to pay off the $150 million balance on its revolver and pay down its $1.975 billion term loan by $100 million. Adjusted debt/EBITDAR declined in the quarter from 6.8x to 6.4x. Fitch expects NMG to continue to dedicate free cash flow to debt reduction, which should enable adjusted leverage to decline to below 6x in the next year. The ratings of the various classes of debt listed above reflect their respective recovery prospects. Fitch's recovery analysis assumes an enterprise value of $2 billion in a distressed scenario. Applying this value across the capital structure results in outstanding recovery prospects (over 90%) for the $600 million revolving credit facility, which has a first lien on inventories and receivables. The $1.875 billion term loan and the $121 million of secured debentures are secured by a first lien on NMG's fixed and intangible assets, and have good recovery prospects (50%-70%). The $700 million of senior unsecured notes have below average recovery prospects (10-30%) and the senior subordinated notes have poor recovery prospects (less than 10%). NELLSON NUTRACEUTICAL: Hires PricewaterhouseCoopers as Tax Advisor ------------------------------------------------------------------ Nellson Nutraceutical, Inc., and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to employ PricewaterhouseCoopers LLP as their tax advisors, nunc pro tunc to Jan. 28, 2006. As reported in the Troubled Company Reporter on Mar. 16, 2006, PricewaterhouseCoopers is expected to: a. prepare the U.S. Corporation Income Tax Return, Form 1120, for the tax year Jan. 1, 2005 through Dec. 31, 2005 and any required state corporate tax returns; b. prepare the Schedule M-3 filing required by the Treasury and the Internal Revenue Service; c. provide tax consulting services, including advice, answers to questions or opinions on tax planning or reporting matters, including research, discussions, preparation of memoranda, and attendance at meetings related to such matters; d. advice or assist with respect to matters involving the IRS or other tax authorities on an as-needed basis; e. advice the Debtors regarding tax return disclosures, including but not limited to tax shelter compliance; and f. provide any other tax assistance as requested by the Debtors. Roderick L. Mayo, a partner at PricewaterhouseCoopers, told the Court that the Firm's professionals bill: Designation Hourly Rate ----------- ----------- Partner $570 Director/Senior Manager $500 Manger $360 Senior Associate $260 Associate $205 Mr. Mayo related that for this engagement, the Firm has agreed to a fixed fee of $69,000. Mr. Mayo assured the Court that the Firm is "disinterested" as that term is defined is Section 101(14) of the Bankruptcy Code. About Nellson Nutraceutical Headquartered in Irwindale, California, Nellson Nutraceutical, Inc., formulate, make and sell bars and powders for the nutrition supplement industry. The Debtors filed for chapter 11 protection on Jan. 28, 2006 (Bankr. D. Del. Case No. 06-10072). Laura Davis Jones, Esq., Rachel Lowy Werkheiser, Esq., Richard M. Pachulski, Esq., Brad R. Godshall, Esq., and Maxim B. Litvak, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C. represent the Debtors in their restructuring efforts. Lawyers at Young, Conaway, Stargatt & Taylor, LLP, represent an informal committee of which General Electric Capital Corporation and Barclays Bank PLC are members. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. NET2000 COMMS: Chapter 7 Trustee Hires Recovery Services as Agent ----------------------------------------------------------------- Michael B. Joseph, Esq., the trustee appointed in the Chapter 7 cases of Net2000 Communications, Inc., sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware, to employ Recovery Services Inc., as its collection agent, nunc pro tunc to Sept. 5, 2005. The Trustee needs RSI's assistance in recovering amounts for the Chapter 7 Estate with respect to default judgments and other judgments entered in adversary proceedings commenced in the Debtors' bankruptcy cases. RSI is a company in the collection industry since 1995. Larry Waslow, the firm's secretary and treasurer, will have primary involvement in the engagement. Mr. Waslow has worked in the collection industry for 36 years, and he and RSI has been employed as a collection agent for other trustees. RSI's standard compensation for work is a 30% contingency rate, net of costs. The Trustee will pay RSI's fee from the proceeds of any sums recovered from the Default Judgments without the need for a fee application and further Court order. To the best of the Trustee's knowledge, RSI does not represent any interest adverse to the Trustee or the Chapter 7 estate and is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Reston, Virginia, Net2000 Communications, Inc., a provider of state-of-the-art broadband telecommunications services to high-end customers, obtained Court approval to convert its chapter 11 cases to chapter 7 liquidation proceedings on May 13, 2002 (Bankr. Del. Case No. 01-11324). Michael G. Wilson, Esq. and Jason W. Harbour, Esq. at Morris, Nichols, Arsht & Tunnell represent the Debtors as they wind up their operations. Raymond H. Lemisch, Esq., at Adelman Lavine Gold and Levin serves as the Chapter 7 Trustee's counsel. When the Company filed for chapter 11 protection, it listed total assets of $256,786,000 and total debts of $170,588,000. NEVADA POWER: Fitch Puts BB+ Rating on $250 Mil. Mortgage Notes --------------------------------------------------------------- Fitch Ratings assigned a 'BB+' rating to Nevada Power Co.'s $250 million general and refunding mortgage notes, series N, due 2036. Net proceeds will be used to refinance maturing debt obligations. The notes are being offered in a private placement under Rule 144A of the Securities Act. The Rating Outlook is Stable. The ratings and Outlook of NPC reflect: * a more supportive regulatory environment in Nevada; * an improving financial profile; * adequate system liquidity; and * the absence of near-term maturities. Primary risks for NPC fixed-income investors include: * exposure to the wholesale energy markets; * high capital spending needs; and * relatively weak financial metrics. Positively, NPC finalized a settlement agreement in January 2006, resolving litigation with creditors of Enron Corp., which required only a modest incremental cash payment. Additionally, the recent decision approving construction of a new gas-fired plant by its affiliate, Sierra Pacific Power Co. (SPPC) in northern Nevada, which included a higher incentive return on equity and construction-work-in-progress in rate base, underscores the continuation of constructive regulatory orders by the Public Utilities Commission of Nevada (PUCN). The contentious regulatory environment in Nevada that contributed to NPC's financial distress in 2002-2003 has significantly improved over the last two years, in Fitch's view. Since early 2004, NPC has benefited from favorable deferred energy and general rate case rulings by the PUCN and greater coordination between company management and regulators on power and fuel supply procurement issues. Regulatory decisions will remain critical going forward as the utility, and affiliate SPPC, are expected to consistently file for recovery of capital investments and deferred energy costs. The Stable Outlook reflects the assumption that NPC will receive reasonable rate treatment in future rate filings. NEVADA POWER: S&P Places BB Rating on Proposed $250 Million Bonds ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating to the proposed $250 million general and refunding mortgage bond issue at Nevada Power Co. The outlook is positive. The proceeds will be used to refinance existing higher-cost debt. "The positive outlook reflects the substantial improvements in the regulatory environment and liquidity, NPC's much-reduced short position, a steady strengthening of financial ratios, and the potential for further improvement with debt refinancing," said Standard & Poor's credit analyst Swami Venkataraman. Given that financial ratios are expected to be weak for the 'BB' rating category, prospects for an upgrade would be enhanced if parent Sierra Pacific Resources were to issue equity, especially if the capital expenditure plans were not moderated. Downside risk is limited in the near term, but may arise if NPC and Sierra Pacific Co., SRP's other utility subsidiary, again build up significant deferred costs or become subject to regulatory disallowances. NEWBURGH DYEING: Case Summary & Largest Unsecured Creditor ---------------------------------------------------------- Debtor: Newburgh Dyeing Corp. 4 Thornbrook Lane Bedford, New York 10506 Bankruptcy Case No.: 06-35256 Type of Business: The Debtor prints and dyes textiles. Chapter 11 Petition Date: March 30, 2006 Court: Southern District of New York (Poughkeepsie) Judge: Cecelia G. Morris Debtor's Counsel: Thomas Genova, Esq. Genova & Malin Hampton Business Center, 1136 Route 9 Wappingers Falls, New York 12590 Tel: (845) 298-1600 Fax: (845) 298-1265 Total Assets: $3,900,000 Total Debts: $3,537,916 Debtor's Largest Unsecured Creditor: Entity Claim Amount ------ ------------ Central Hudson $268,445 284 South Avenue Poughkeepsie, NY 12601 NEWFIELD EXPLORATION: Moody's Rates Pending $500MM Notes at Ba3 --------------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating to Newfield Exploration's pending $500 million of 10-year senior subordinated notes and affirmed its existing Ba2 corporate family, Ba2 senior unsecured note, and Ba3 senior subordinated ratings. The rating outlook remains stable. Note proceeds would fund redemption of NFX's $250 million of 8.375% senior subordinated notes due 2012 and pre-fund a portion of its budgeted $1.9 billion 2006 capital spending well in excess of cash flow. NFX believes it may receive up to $180 million in insurance recoveries during 2006 for hurricane repairs included in the capital budget. NFX is a diversified modest sized independent exploration and production firm with 333.5 mmboe of proven reserves in the traditional shelf, deep shelf and deepwater Gulf of Mexico, Gulf Coast, Mid-Continent, Rocky Mountains; and its emerging Bohai Bay and shallow and deepwater offshore Malaysian operating areas. Production is 80% natural gas. Moody's Global Independent Exploration & Production Rating Methodology matrix maps NFX to a Ba2 corporate family rating if drilling rig operating leases are included as debt and Ba3 if the rig leases are included as debt. A number of factors involving (i) largely transitory deferred production due to 2005 hurricane damage and (ii) NFX's favorable but costly and rather leveraged repositioning of its property base impacted certain Methodology metrics but currently do not alter Moody's longer term Ba2 rating view. The Ba2 rating is also supported by seasoned management strength though its comparatively short 5.6 year proven developed reserve life is a ratings restraint. Singularly or in combination, the stable rating outlook could become vulnerable if NFX is unable to restore favorable sequential quarter production trends in 2006, net lease-adjusted leverage on PD reserves appears destined to rises materially above $6/PD boe, and/or its higher risk 2006 exploration and development program appears destined to be insufficiently productive for 2006. In that regard, a series of potentially high impact but commensurately high cost and higher risk wells in the 2006 drilling program sufficiently under-perform, material capital dissipation and difficulty in meeting 2007 production targets could result. In the high impact high risk category, Moody's includes NFX's deep GOM shelf Blackbeard West exploration program, Woodford Shale play, deepwater GOM, and deepwater Malaysia exploration programs. Additionally, NFX's portfolio repositioning exposes it to longer lead time, substantial front-end cost development programs before its production is back on a positive track. However, NFX's large inventory of lower risk development drilling and the likelihood of recovery of the majority of shut-in GOM production provide production support. NFX's senior subordinated and senior unsecured notes could be further notched within 12 months, to B1 and Ba3 respectively, if it does not add substantial and longer lived reserves to the direct issuer or if it borrows substantially under its senior unsecured bank revolver. NFX's operating subsidiaries do not guarantee the parent's senior subordinated or senior notes or the senior unsecured bank facility, both note classes are structurally subordinated to subsidiary liabilities though no debt currently resides at subsidiaries, and approximately only 30% of its reserve volumes are held at the issuer level, with the PD reserve life of the issuer's direct reserves comparatively short, being dominated by the short PD reserve life of GOM reserves. In combination with assessments of managements' strategies and track records, the Moody's E&P Methodology quantitatively and qualitatively assesses E&P's by the four core ratings driver factors of (i), oil and gas reserve and production scale, risk diversification, quality and mix, and PD reserve life; (ii) and (iii), reinvestment risk and forward performance catalysts, including relative capacity to reinvest capital for production growth at tolerable costs and repeatable sound cash returns on reinvested capital; and (iv), leverage on PD reserves, the financial burden on total reserves, and leverage on cash flow after sustaining capital spending. Factor 1: Reserves and Production Characteristics -- Moody's E&P Methodology maps NFX's proven reserve, PD reserve, and production scale, and its degree of diversification, to the Ba rating range. While it's still short 5.6 year PD reserve life is a ratings restraint and limits the pace at which NFX can transform its property profile. However, its comparatively smaller size, relative to its prospect opportunities and reinvestment patterns enhance its prospects for organic growth, though this is getting evermore capital intensive per sector trends. In the mature E&P sector, it is increasingly difficult to sustain organic growth at competitive costs through the cycle. Moody's believes that NFX has a widely diversified program though it is carrying an elevated high risk high cost element in that program. During 2005, NFX's production was flat to 2004 and reserves grew 12.2%, though a 43% increase in unfunded and comparatively higher risk PD reserves drove over 90% of its reserve growth. Restored production growth in 2006 could derive from NFX's expected first half 2006 restart of the 75% of its shut-in GOM production it expects to restore and from its accelerated lower risk drilling programs in the Uinta Basin and Western Oklahoma and Texas Panhandle. Factors 2 & 3: Re-investment Risk and Operating and Capital Efficiency -- These factors assess the catalysts driving forward performance, including reserve replacement costs, unit operating costs, leveraged operating margins, cash-on- cash returns, and scale of discretionary cash flow relative to both sustaining and growth capital spending. NFX's total unit full-cycle costs for the second half of 2005 map to a B rating. This includes unit production costs of in the range of $7/boe, G&A expense of approximately $4/boe, interest expense in the range of over $2/boe, and 3 year average all-sources reserve replacement costs of $13.80/boe that, itself, maps to a B rating. Fourth quarter full-cycle costs ran above the average for the year, partially due to shut-in GOM production having lower unit production costs. However, very strong accompanying up-cycle prices have amply covered NFX's cost structure, for cash-on-cash returns mapping to the Ba range. For 2005, Moody's estimates that NFX had a total leveraged full cycle ratio of approximately 210%, though this is running at 190% to 200% during fourth quarter 2005 and first quarter 2006. Price realizations have been dampened by NFX's long- standing hedging program. Factor 4: Leverage and Cash Flow Coverage -- NFX maps to the Ba rating category for net fully lease-adjusted leverage on PD reserves ($5.22/PD boe), to the Ba range for (Net Lease Adjusted Debt + Future FAS 69 Development Capex) divided by total proven reserves ($7.79/Boe total proven reserves) and, reflecting historic up-cycle prices, maps to the Baa range based on free cash flow less sustaining capex, divided by net lease adjusted debt. At approximately $13.30/Boe of proven undeveloped reserves, future FAS 69 development capex needed for PUD reserves is very high relative to its peers. NFX carries a moderate $13,930/Boe of adjusted debt divided by daily production, though this is aided by the firm's relatively flush production and commensurate relatively short reserve life. Pro-forma fully-lease adjusted debt will approximate $1.452 billion. Back-up liquidity is sound. After note offering close and pro-forma for the notes redemption, approximately $750 million of NFX's $1 billion senior unsecured bank facility would be available for borrowing. NFX's leverage and high total costs reflect the challenges and rising costs and capital intensity of building a North American exploration and production firm, increased by the high capital intensity of unconventional reserves, deepwater exploration and development, and deep horizon exploration and development. Generally, the ratings are supported by a history of sound funding and business strategies; larger reserve scale and diversification with the addition over time of the onshore Lariat, EEX, and Inland properties, adding or intensifying core areas onshore in the Uinta Basin of the Rocky Mountains and in the Texas Gulf Coast and South Texas properties; NFX's long established core position in the shallow water GOM with deeper horizon potential; and NFX's ability so far at strong prices and sound hedging to amply internally fund its relatively high reserve replacement costs. Newfield Exploration is headquartered in Houston, Texas. NEWFIELD EXPLORATION: S&P Rates $500 Million Sr. Sub. Notes at BB- ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit rating on Newfield Exploration Co. At the same time, Standard & Poor's assigned its 'BB-' subordinated rating to Newfield's $500 million senior subordinated notes due 2016. The outlook is stable. Proceeds from the note offering should be used to: * redeem Newfield's $250 million senior subordinated notes due 2012; and * help fund near-term capital expenditures. Houston, Texas-based Newfield will have around $1.1 billion of debt on a pro forma basis after this transaction. The ratings on Newfield, a midsize exploration and production company in the oil and natural gas industry, reflect: * the risks associated with its aggressive growth strategy, * moderate-lived reserve base, and * relatively high-cost operations; mitigated by: * strong leverage to natural gas, * continued strong, * expected production growth, and * moderate financial policies. Standard & Poor's believes that Newfield compensates for its operating risks through its somewhat moderate debt burden, around 25% at year-end 2005. However, this is expected to be around 30% to 35% in the near term, including operating-lease and asset- retirement obligations. "The stable outlook expects continuing moderate financial policies, while Newfield continues to grow and diversify its asset base," said Standard & Poor's credit analyst Paul B. Harvey. If future acquisitions are aggressively funded, ratings could be negatively affected. "However, continued diversification of reserves to provide a longer and more stable production profile, combined with the balanced financing of such growth, could lead to positive rating actions," he continued. NEXSTAR BROADCASTING: S&P Affirms Rating & Revises Outlook to Neg. ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Nexstar Broadcasting Group Inc. to negative from stable. The long-term ratings, including the 'B' corporate credit rating, were affirmed. Total debt outstanding, including debt obligations of Mission Broadcasting Inc. that are guaranteed by Irving, Texas-based Nexstar, was approximately $646 million at Dec. 31, 2005. "The negative outlook underscores our concern about Nexstar's narrow margin of financial covenant compliance at year-end 2005," said Standard & Poor's credit analyst Alyse Michaelson Kelly. Nexstar's EBITDA declined in 2005, resulting primarily from: * the absence of sizable political advertising; * lost revenues related to its retransmission negotiations; and * the impact of Hurricanes Katrina and Rita. Nexstar's leverage covenant tightens quarterly throughout 2006, which increases its dependence on EBITDA growth to remain in compliance. Meanwhile, political advertising, which is expected to fuel EBITDA growth in 2006, does not have as meaningful an impact until the second half of the year, and trends in the key auto advertising category are weak. The rating on Nexstar reflects: * its high leverage from aggressive debt-financed acquisitions; * relatively weak EBITDA margin and conversion of EBITDA into discretionary cash flow compared with peers; * advertising's vulnerability to economic downturns; and * TV broadcasting's mature revenue growth prospects. These factors are partially offset by: * Nexstar's cash flow diversity from major-network-affiliated TV stations in midsize markets; * broadcasting's good margin and discretionary cash flow potential; and * station asset values. NOBEX CORP: Gets Court Ok to Hire SSG Capital as Investment Banker ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware gave Nobex Corporation permission to employ SSG Capital Advisors, L.P., as its investment banker. As reported in the Troubled Company on Feb. 7, 2006, SSG Capital will: a) prepare an offering memorandum describing the Debtor, its historical performance and prospects; b) assist the Debtor in developing a list of suitable potential buyers who will be contacted on a discreet and confidential basis after approval by the Debtor; c) coordinate the execution of confidentiality agreements for potential buyers wishing to review the offering memorandum; d) assist the Debtor in coordinating site visits for interested buyers and work with the management team to develop appropriate presentations for such visits; e) solicit and analyze competitive offers from potential buyers as authorized by the Debtor in each instance; f) advise and assist the Debtor in structuring the transaction and negotiating the transaction agreements; and g) assist the Debtor, its attorneys and accountants, as necessary, through closing on a best efforts basis. Additionally, SSG Capital will assist the Debtor in negotiating with various stakeholders in the company regarding the possible reorganization of existing claims and equity by way of a recapitalization or other restructuring through a plan of reorganization. The Debtor will pay SSG Capital: i) an initial fee of $40,000 (100% of which will be credited against the Sale Fee); ii) a sale fee or reorganization fee of $200,000 plus 5.0% of the total consideration if the total consideration is between $3.5 million and $10 million, plus 10% of the total consideration in excess of $10 million if the Debtor closes on the sale of all or a significant portion of its assets or securities, or any other extraordinary corporate transaction, or if the Debtor effectuates a reorganization or other restructuring through a confirmed chapter 11 plan; and iii) all reasonable out-of-pocket expenses incurred by SSG Capital in connection with its duties. J. Scott Victor, a managing director at SSG Capital, assured the Court that SSG Capital does not represent any interest materially adverse to the Debtor or its estate pursuant to Section 327(a) of the Bankruptcy Code. Headquartered in Durham, North Carolina, Nobex Corporation -- http://www.nobexcorp.com/-- is a drug delivery company developing modified drug molecules to improve medications for chronic diseases. The Company filed for chapter 11 protection on Dec. 1, 2005 (Bankr. D. Del. 05-20050). Ben Hawfield, Esq., at Moore & Van Allen PLLC, represents Nobex. J. Scott Victor at SSG Capital Advisors, L.P., is providing Nobex with investment banking services. Michael B. Schaedle, Esq., and David W. Carickhoff, Esq., at Blank Rome LLP, represent the Official Committee of Unsecured Creditors in Nobex's chapter 11 case, and John Bambach, Jr., and Ted Gavin at NachmanHaysBrownstein, Inc., provide the Committee with financial advisory services. When the Debtor filed for protection from its creditors, it estimated between $1 million to $10 million in assets and $10 million to $50 million in liabilities. NOBEX CORP: Panel Can Hire NachmanHaysBrownstein as Fin'l Advisor ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware authorized the Official Committee of Unsecured Creditors in Nobex Corporation's chapter 11 case, to employ NachmanHaysBrownstein, Inc., as its financial advisor. As reported in the Troubled Company on Feb. 24, 2006, NHB will: 1) review and analyze the Debtor's business, management, operations, properties, financial condition and the assumptions underlying the business plans and cash flow projections for the assets involved in any potential transaction; 2) determine the reasonableness of the projected performance of the Debtor and review and analyze all its material contracts and agreements; 3) monitor, evaluate and report to the Committee with respect to the Debtor's near term liquidity needs, material operational changes and related financial and operations issues; 4) assist, procure and assemble any necessary validations of the Debtor's asset values and assist the Committee's legal counsel; 5) evaluate the Debtor's capital structure and make recommendations to the Committee with respect to the Debtor's efforts to reorganize its business operations and confirm a chapter 11 plan; 6) assist the Committee in preparing documentation required in connection with supporting or opposing a chapter 11 plan and participate in negotiations on behalf of the Committee with the Debtor or any groups affected by that plan; and 7) perform all other financial advisory services to the Committee that is required in the Debtor's chapter 11 case. John Bambach, Jr., and Ted Gavin were the lead professionals from NHB performing services to the Committee. Mr. Bambach charged $325 per hour, while Mr. Gavin charged $300 per hour. Mr. Bambach reported that NHB's compensation rates for principals, advisors and associates will range from $250 to $450 per hour. NachmanHaysBrownstein assured the Court that it does not represent any interest materially adverse to the Debtor's estate and is a disinterested person as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Durham, North Carolina, Nobex Corporation -- http://www.nobexcorp.com/-- is a drug delivery company developing modified drug molecules to improve medications for chronic diseases. The company filed for chapter 11 protection on Dec. 1, 2005 (Bankr. D. Del. 05-20050). Ben Hawfield, Esq., at Moore & Van Allen PLLC, represents Nobex. J. Scott Victor at SSG Capital Advisors, L.P., is providing Nobex with investment banking services. Michael B. Schaedle, Esq., and David W. Carickhoff, Esq., at Blank Rome LLP, represent the Official Committee of Unsecured Creditors in Nobex's chapter 11 case, and John Bambach, Jr., and Ted Gavin at NachmanHaysBrownstein, Inc., provides the Committee with financial advisory services. When the Debtor filed for protection from its creditors, it estimated between $1 million to $10 million in assets and $10 million to $50 million in liabilities. ON TOP COMMS: Wants to Sell Mississippi Station for $1.5 Million ---------------------------------------------------------------- On Top Communications, LLC, and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Maryland for permission to sell their real property located in Brandon, Mississippi (and some related assets) to Inner City Media Corporation for $1.5 million. The Debtors tell the Court that they have limited funds to continue operating their business. They believe selling their Mississippi station will minimize their need to incur additional debt and administrative expenses. Under the purchase agreement, the excluded assets are: a) the Debtors' corporate records; b) all of the Debtors' contracts and rights and interests which relate to the operation of the business; c) the Debtors' account receivable; d) all cash held by the Debtor as of the closing date; and e) other assets identified in the agreement. Inner City has deposited $100,000 with the Debtors' counsel and will be transferred to an interest-bearing escrow account upon approval of the sale. Inner City will not assume any of the Debtors' debts with respect to the Mississippi station and the Debtor will continually be responsible for any liabilities. The Debtors also ask the Court's approval to: (x) assume and assign the Station Contracts; and (y) reject all non-assumed Station Contracts. A full-text copy of the Debtors' station contracts is available for free at http://researcharchives.com/t/s?73c In addition, the Debtors want to enter into a Local Marketing Agreement with Inner City dated March 22, 2006. Under the LMA, the Debtor will license to Inner City all of the station's airtime and the right to program the Mississippi station pending approval of the transfer of the operating license by the Federal Communications Commission. The LMA requires the Debtor to support Inner City's operation of the station while nominally maintaining control of the station. Furthermore, Inner City will pay a commission to the Debtor. Headquartered in Lanham, Maryland, On Top Communications, LLC, and its affiliates acquire, own and operate FM radio stations located in the Southeastern United States. The Company and its debtor- affiliates filed for chapter 11 protection on July 29, 2005 (Bankr. D. Md. Case No. 05-27037). Thomas L. Lackey, Esq., of Bowie, Maryland, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets and debts of $10 million to $50 million. PANAVISION INC: S&P Rates $115 Million 2nd-Lien Term Loan at CCC ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its corporate credit rating on Woodland Hills, California-based Panavision Inc. on CreditWatch with developing implications, after the company's announcement that it will be refinancing its outstanding debt obligations and replacing them with:0 * a first-lien term loan B; * a second-lien term loan B; and * a revolving credit facility. Developing implications suggest that ratings could be raised or lowered. If the refinancing is successful, the corporate credit rating will be raised to 'B-' with a stable outlook. If the transaction is not completed, the 'CCC' corporate credit rating will be affirmed, removed from CreditWatch, and assigned a negative outlook, which could presage a downgrade if the company does not refinance its debt maturing in January 2007. At the same time, Standard & Poor's assigned a bank loan rating of 'B' and a recovery rating of '1' to Panavision's proposed $215 million first-lien credit facilities, indicating an expectation of full recovery of principal in a payment default scenario. The facilities consist of: * a $35 million revolving credit facility due 2011; and * a $195 million term loan B due 2011. Standard & Poor's also assigned a 'CCC' bank loan rating and a recovery rating of '5', indicating an expectation of negligible (0%-25%) recovery of principal in a payment default scenario, to Panavision's $115 million second-lien term loan B due 2012. Pro forma for the transaction, total debt outstanding as of Dec. 31, 2005, was $323.1 million, including $3 million that is expected to be drawn on the revolving credit facility and $10.1 million in capital leases. "Panavision's uncertain growth prospects, high leverage, and liquidity will remain rating concerns, irrespective of the refinancing," said Standard & Poor's credit analyst Tulip Lim. Panavision's revenue and EBITDA, linked to recent acquisitions and organic improvement in camera and lighting rental revenue, increased in 2005 from the preceding two years. Although the company has invested in new initiatives -- such as its film- quality, high-definition "Genesis" camera -- it is uncertain whether they will fuel earnings growth to the extent the company has planned. PARAGON REAL: Losses & Equity Deficit Raise Going Concern Doubt --------------------------------------------------------------- Boulay, Heutmaker, Zibell & Co. P.L.L.P., expressed substantial doubt about Paragon Real Estate Equity and Investment Trust's ability to continue as a going concern after auditing the Company's financial statements for the years ended December 31, 2005 and 2004. The auditing firm pointed to the Company's net losses, negative cash flow from operations and an accumulated deficit. 2005 Financials For the 12 months ended Dec. 31, 2005, Paragon Real incurred a $1,373,793 net loss on $646,442 of total revenues. For the 12 months ended Dec. 31, 2004, the Company incurred a $816,224 net loss on $660,028 of total revenues. For 12 months ended Dec. 31, 2005, Paragon Real has $529,000 of unrestricted cash resources. For the year ended Dec. 31, 2005, the Company's cash balance decreased to $529,000 compared to a $1,799,000 cash balance at Dec. 31, 2004. At Dec. 31, 2005, Paragon Real's balance sheet showed $4,699,066 in total assets, $2,171,352 in total liabilities and a $ 2,171,352 minority interest in a consolidated subsidiary. The Company's balance sheet shows a $25,935,287 accumulated deficit at Dec. 31, 2005. A full-text copy of Paragon Real's annual report is available for free at http://researcharchives.com/t/s?740 Headquartered in Cleveland, Ohio, Paragon Real Estate Equity and Investment Trust is a real estate company with a primary focus of acquiring, repositioning, owning, managing and operating multifamily apartment communities. During 2006, Paragon has also been searching for and reviewing other value-added real estate deals, including land development, retail, office, industrial, hotel, and joint venture investments. As of Dec. 31, 2005, the Company owns a 1% interest in Paragon Real Estate, LP, the operating partnership that owns Richton Trail Apartments, an apartment community containing 72 units. As of Dec. 31, 2005, Paragon Real's balance sheet shows a $513,917 stockholders' equity deficit, compared to $766,004 of positive equity reported at Dec. 31, 2004. PARMALAT USA: Tax Liability Battle with U.S. Govt. Continues ------------------------------------------------------------ The United States Government argued that the U.S. Bankruptcy Court for the Southern District of New York lacks subject matter jurisdiction over the U.S. Debtors' 2001 and 2002 claims relating to net operating losses because they conceded that any increase in their Net Operating Losses for tax years 2000, 2001, and 2002 would not be used in the future. As reported in the Troubled Company Reporter on Sept. 30, 2005, Parmalat USA Corporation and its U.S. debtor-affiliates, asked the Court to declare that they are entitled to a federal income tax refund and deductions to increase their NOLs for 2000, 2001, and 2002. The U.S. Debtors insisted that the Court has jurisdiction over their claims because their request for deductions for purposes of increasing their NOLs relates to pre-confirmation tax liability. At the hearing held in November 2005, the Court asked the parties to submit supplemental briefing on two issues: 1. Whether the Court has jurisdiction over the Net Operating Loss issues raised by the U.S. Debtors; and 2. Whether judicial estoppel precludes the U.S. Debtors from asserting that the $13,400,000 Reimbursement Credit should not be treated as income on their 2000 Amended Return because Farmland Dairies LLC filed a claim in the Italian Proceedings based on the Reimbursement Credit. Supplemental Briefings 1. U.S. Government Melanie R. Hallums, Assistant U.S. Attorney for the Southern District of New York, notes that at the November 2005 Hearing, the U.S. Debtors said that they "aren't interested in using the NOLs in order to offset federal tax liability." The U.S. Debtors said they only intended to "have the amended returns accepted, so that the reduced income reported in those returns are carried through to the state and local tax returns." Since the U.S. Debtors concede that the NOLs will not affect their federal tax liability, the U.S. Government asserts that the Internal Revenue Services should not be required to litigate these issues, nor is the Court constitutionally authorized to adjudicate them. In the absence of any federal tax consequences arising out of the NOL issues, there is no actual controversy between the IRS and the U.S. Debtors, Ms. Hallums maintains. Ms. Hallums notes that the U.S. Debtors took inconsistent positions in the U.S. Court and in the Italian proceedings. In the Italian bankruptcy proceedings, the U.S. Debtors, Ms. Hallums recalls, argued that their right to a refund and adjustment of the NOLs should not be affected by their claims. They asserted that the "filing of proofs of claim in the Italian proceedings was merely a protective action." The U.S. Debtors argued before the U.S. Court that Parmalat SpA forced them to record false "reimbursement credits" in their books. In the Italian proceedings, however, Farmland's $13,400,000 claim for the 2000 reimbursement credit was allowed. Based on their proofs of claim, the U.S. Debtors apparently failed to allege fraud during the Italian bankruptcy proceedings, which should estop the Debtors from making the allegations now, Ms. Hallums asserts. Citing AXA Marine and Aviation Ins. (UK) Ltd. v. Seajet Indus., Inc., 84 F.3d 622, 628 (2d Cir. 1996), Ms. Hallums contends that the doctrine of judicial estoppel forbids a party from advancing contradictory factual positions in separate proceedings. If its jurisdictional and abstention arguments will be rejected, the U.S. Government seeks Judge Drain's permission for limited discovery concerning the status of the U.S. Debtors' claims in the Italian proceedings to clarify whether the judicial estoppel doctrine applies. 2. U.S. Debtors The Bankruptcy Court has subject matter jurisdiction over the U.S. Debtors' NOL Claims for 2001 and 2002, James M. Sullivan, Esq., at McDermott Will & Emery LLP, in New York, insists. Mr. Sullivan further asserts that the controversy between the U.S. Debtors and the U.S. Government is neither speculative nor contingent and does constitute a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. Courts have held that whether a real and immediate controversy exists in a particular case is a matter of degree and must be determined on a case-by-case basis, Mr. Sullivan notes. The controversy between the parties about the determination of the U.S. Debtors' rights and obligations relating to their Amended Returns for 2001 and 2002 is not a "hypothetical, abstract, or academic" controversy, Mr. Sullivan asserts, citing Muller v. Olin Mathieson Chem. Corp., 404 F.2d 501, 504 (2d Cir. 1968). The controversy, Mr. Sullivan continues, is not based on mere contingencies that may or may not occur but is based on events that have already occurred, like the filing of the U.S. Debtors' Amended Returns and the refusal of the IRS to permit the amendments. It is a dispute about the U.S. Debtors' alleged tax liabilities, which liabilities have "already accrued," he continues, pointing to Dow Jones & Co., Inc. v. Harrods, Ltd., 237 F. Supp. 2d 394, 406-407 (S.D.N.Y. 2002). The U.S. Government's argument that it has no "federal interest" in litigating the NOL issues is of no avail because the pertinent issue that the Court will determine is whether there is a substantial controversy between the parties and not whether the resolution of the controversy will have positive or negative economic consequences for the U.S. Government. Furthermore, the U.S. Debtors believe that their Determination Motion will settle the controversy between the parties and will terminate and afford relief from the uncertainty, insecurity and controversy giving rise to the proceeding. As to the doctrine of judicial estoppel, the U.S. Debtors assert that it does not prevent them from arguing that the $13,400,000 Reimbursement Credit should not be treated as income. Whether a domestic court should recognize a judgment of a foreign court is governed by the principles of comity, Mr. Sullivan says, citing Rapture Shipping, Ltd. v. Allround Fuel Trading B.V., 350 F. Supp. 2d 369, 373 (S.D.N.Y. 2004). Comity requires that domestic courts should generally extend full faith and credit to a judgment of a foreign court provided "the foreign court had proper jurisdiction and recognition of its judgment or proceeding does not prejudice the rights of United States citizens or violate domestic public policy," he adds, pointing to Victrix S.S. Co. v. Salen Dry Cargo A.B., 825 F.2d 709, 713 (2d Cir. 1987). Mr. Sullivan points out that the full faith and credit clause of the U.S. Constitution does not require that a court provide a sister state judgment greater preclusive effect than the sister state would provide its own judgment. Accordingly, a domestic court should not give preclusive effect to a foreign judgment if the foreign court would not give that effect to its own judgment, Mr. Sullivan asserts. Mr. Sullivan also points out that the U.S. Government has failed to demonstrate that Italian law recognizes the theory of collateral estoppel. Even if U.S. law were to apply, however, the U.S. Government has not shown that: -- the Debtors took a position in the U.S. proceedings that is clearly inconsistent with the position taken in the Italian Proceedings; -- the Debtors have succeeded in persuading the Italian court of their prior position; and -- the Debtors would derive an unfair advantage or impose an unfair detriment on the U.S. Government if not estopped. Accordingly, the U.S. Debtors ask the Court to grant their request. Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. The U.S. Debtors emerged from bankruptcy on April 13, 2005. (Parmalat Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service, Inc., 215/945-7000) PATH 1: Losses Cue Swenson Advisors to Raise Going Concern Doubt ---------------------------------------------------------------- Path 1 Network Technologies Inc. (Amex: PNO), in compliance with AMEX rules, reported that the Company's independent registered public accounting firm, Swenson Advisors, LLP, included a going concern qualification as part of Path 1 Network Technologies Inc.'s 2005 financial statements Form 10-K. Swenson Advisors, LLP, included a going concern qualification in its audit opinion on the Company's consolidated financial statements for the fiscal year ended Dec. 31, 2005, as a result of its operating losses during fiscal 2005 and its potential inability to raise additional sources of capital to fund operations. AMEX's rules require AMEX-listed companies to publicly announce whenever a Form 10-K includes an audit opinion containing a going- concern qualification. About Path 1 Network Headquartered in San Diego, Calif., Path 1 Network Technologies Inc. -- http://www.path1.com/-- is the pioneer and leading provider of video transport products that enable the conversion and distribution of real-time, broadcast-quality video over Internet Protocol through public and private networks. From the delivery of live MPEG-2, MPEG-4, and VC-1 standard definition and high definition broadcasts to video on demand, Path 1's video infrastructure platforms allow broadcasters, cable, telco, satellite and mobile operators to transmit high-quality point-to- point, multipoint and multiplexed video across town or around the world. PINE PRAIRIE: S&P Puts Preliminary B+ Rating on $320 Million Debts ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary 'B+' rating and '3' recovery rating to Pine Prairie Energy Center LLC's: * $270 million term loan B due 2013; and * $50 million revolving credit facility due 2011. The outlook is stable. The '3' recovery rating indicates the expectation of meaningful recovery (50% to 80%) of principal in a payment default scenario. Proceeds of the debt will be used for the construction and development of a natural gas storage facility in Evangeline Parish, Louisiana, 50 miles north of Henry Hub. Pine Prairie is indirectly owned by a joint venture between: * Plains All American Pipeline L.P., and * Vulcan Gas Storage LLC. "We expect the rating to remain stable in the near term," said Standard & Poor's credit analyst Chinelo Chidozie. "We will monitor the project as it reaches key milestones to reduce construction risk and its ability to execute its strategy of entering into long-term storage agreements," said Ms. Chidozie. The project will have access to seven major pipelines with eight interconnections serving the: * Midwest, * Northeast, * Mid-Atlantic, and * Southeastern markets via a proposed header system. PLIANT CORP: Liquidation Analysis Under Plan of Reorganization -------------------------------------------------------------- The "best interests" test under Section 1129 of the Bankruptcy Code requires as a condition to confirmation of a plan of reorganization that each holder of impaired claims or impaired interests receive property with a value not less than the amount the holder would receive in a Chapter 7 liquidation. To demonstrate that their Plan of Reorganization satisfies the requirements of the "best interests" test, Pliant Corporation and its debtor-affiliates prepared a liquidation analysis with the assistance of their financial advisors, Jefferies & Company, Inc. The Debtors based the Liquidation Analysis on their balance sheets as of December 31, 2005. The Analysis assumes that the actual December 31, 2005 balance sheets are conservative proxies for the balance sheets that would exist at the time a Chapter 7 liquidation would commence. The Liquidation Analysis contains an estimate of the amount of Claims that will ultimately become Allowed Claims, according to Stephen T. Auburn, Pliant vice president and general counsel. Estimates for various classes of claims are based solely on the Debtors' continuing review of the claims filed in their Chapter 11 cases and on their books and records. In preparing the Liquidation Analysis, the Debtors projected claim amounts that are consistent with the estimated claims reflected in the Plan with certain modifications. For purposes of the Liquidation Analysis, the Debtors assumed that a liquidation would commence under the direction of a Court- appointed trustee and would continue for a period of nine months, during which time all of the Debtors' major assets would either be sold or conveyed to their lien holders. The cash proceeds of the sales, net of liquidation-related costs, would then be distributed to the Debtors' creditors. Although the liquidation of some assets might not require nine months to accomplish, the Debtors believe that other assets would be more difficult to collect or sell and hence would require a liquidation period substantially longer than nine months. The Debtors further assumed the orderly liquidation and wind down of all Debtor assets. The Debtors' management believes the remaining non-Debtor assets, specifically those located in Mexico, Germany and Australia, have greater value as a going concern than in an orderly wind-down. Thus, the Liquidation Analysis assumes an orderly liquidation on a going concern basis for the non-Debtor assets. There can be no assurances that the actual value realized in a sale of these operations would yield the results as assumed in the Liquidation Analysis. Based on the Liquidation Analysis, the Debtors conclude that the Plan meets the "best interest of creditors" test pursuant to Section 1129(a)(7). There are Impaired Classes with respect to each Debtor, certain of which are contemplated to receive recoveries under the Plan. The Debtors assert that the members of each Impaired Class will receive at least as much as they would if the Debtors were liquidated under Chapter 7. Pliant Corporation Unaudited Liquidation Analysis - Statement of Assets (In Millions) Estimated Book Value Hypothetical Liquidation 12/31/05 Recovery % Value --------- ------------- ----------- Low High Low High ------------- ----------- Debtor Assets: Cash & cash equivalents $6.9 100.0% 100.0% $6.9 $6.9 Trade & other receivables, net 120.0 65.5% 80.0% 78.6 96.0 Inventories, net 100.4 69.4% 79.6% 69.7 79.9 Other current assets 17.8 10.1% 20.2% 1.8 3.6 Property, plant & equipment, net 266.3 22.3% 38.5% 59.2 102.5 Intercompany receivables 66.4 12.5% 13.6% 8.3 9.0 Other non-current assets 49.4 15.0% 15.0% 7.4 7.4 Goodwill & other intangibles 197.0 0.0% 0.0% 0 0 Liquidation of non-debtor subsidiaries 40.8 70.6% 79.6% 28.8 32.5 ----- ----- ----- Gross estimated liquidation proceeds available for distribution $864.9 $260.7 $337.7 Cost Associated with Liquidation: Payroll / Overhead costs (25.2) (25.2) Chapter 7 Trustee Fees (7.8) (10.1) Chapter 7 Professional Fees (9 months) (4.5) (4.5) ----- ----- Net Estimated Liquidation Proceeds Available for Distribution $223.2 $297.9 ====== ====== Pliant Corporation Unaudited Distribution Analysis Summary (In Millions) Estimated Estimated Liquidation Value Allowable ----------------- Claims Low High --------- ----------------- Net Estimated Proceeds Available for Distribution $223.2 $297.9 Less Superpriority Administrative Claims: Carve Out for Professional Fees $5.0 DIP Facility 0.0 ------ ------- ------- Total Superpriority Administrative Claims $5.0 $5.0 Hypothetical Recovery to Superpriority Admin Claims 100% 100% Gross Proceeds Available after Superpriority Admin Claims $218.2 $292.9 Distribution of Proceeds from Unencumbered Debtor Subsidiaries (7.6) (10.5) Distribution of Proceeds from Unencumbered Non-Debtor Subsidiaries (10.1) (11.4) ------ ------ Net Proceeds Available after Superpriority Admin Claims $200.5 $271.1 Less Secured Claims: Prepetition Credit Facilities $138.0 Additional Drawn Letters 7.4 First Lien Notes 294.5 Second Lien Notes 273.7 ------ ------ ------ $713.2 $713.2 Hypothetical Recovery to Secured 28.1% 38% Proceeds Available after Secured $0.0 $0.0 Distribution of Proceeds from Unencumbered Debtor Subsidiaries $3.7 $6.6 Distribution of Proceeds from Unencumbered Non-Debtor Subsidiaries 10.1 11.4 ------ ------ Total Proceeds Available after Secured Claims $10.1 $11.4 Less Administrative and Priority Claims: Administrative and Priority Expense Claims $16.9 Chapter 11 Postpetition Accounts Payable & Accrued Liabilities 19.6 Priority Tax Claims 0.3 ------ ------ ------ $36.9 $36.9 Hypothetical Recovery to Administrative & Priority Claims 27.3% 30.8% Proceeds Available after Administrative & Priority Claims $0.0 $0.0 Less Total Unsecured Claims: Secured Debt - Deficiency Claim $512.6 $442.1 Senior Subordinated Notes 344.8 344.8 General Unsecured Claims 22.5 22.5 ------ ------ $880.0 $809.4 Hypothetical Recovery to Unsecured Claims 0% 0% Net Estimated Deficiency to Unsecured Claims ($880.0) ($809.0) ====== ====== Headquartered in Schaumburg, Illinois, Pliant Corporation -- http://www.pliantcorp.com/-- produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Debtor and 10 of its affiliates filed for chapter 11 protection on Jan. 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). James F. Conlan, Esq., at Sidley Austin LLP, and Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. The Debtors tapped McMillan Binch Mendelsohn LLP, as their Canadian bankruptcy counsel. The Ontario Superior Court of Justice named RSM Richter, Inc., as the Debtors' information officer in their restructuring proceeding under Companies Creditors Arrangement Act in Canada. As of Sept. 30, 2005, the company had $604,275,000 in total assets and $1,197,438,000 in total debts. (Pliant Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) PRG-SCHULTZ INT'L: Losses & Deficit Prompt Going Concern Doubt -------------------------------------------------------------- KPMG LLP expressed substantial doubt about PRG-Schultz International, Inc.'s (Nasdaq: PRGX) ability to continue as a going concern after auditing the company's financial statements for the years ended December 31, 2005. The auditing firm pointed to the Company's recurring losses from operations and shareholders' deficit. The paragraph in the audit opinion explaining the qualification noted that realization of assets and the satisfaction of liabilities in the ordinary course of business are dependent on the Company's ability: * to return to profitability, * to complete planned restructuring activities, * to generate positive cash flows from operations, and * to maintain credit facilities adequate to conduct its business. The disclosure was made in compliance with Nasdaq Marketplace Rule 4350(b)(1)(B), and does not represent any change from the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 23, 2006. Senior Credit Facility On March 17, 2006, the Company completed a substantial debt restructuring through the exchange of 99.6% of its outstanding 4.75% Convertible Subordinated Notes Due 2006 for: * new 11% Senior Notes Due 2011, * new 10% Senior Convertible Notes Due 2011 and * new 9% Senior Series A Convertible Participating Preferred Stock. Additionally, on March 17, 2006, the Company also entered into a new $45 million senior secured credit facility to provide ongoing liquidity for the Company's working capital needs. The Company believes that these actions constitute a substantial step in addressing the concerns expressed by the Company's independent auditors in the going concern qualification included in the independent auditors' report contained in the Form 10-K. About PRG-Schultz International Headquartered in Atlanta, Ga., PRG-Schultz International, Inc. -- http://www.prgx.com/-- is the world's leading recovery audit firm, providing clients throughout the world with insightful value to optimize and expertly manage their business transactions. Using proprietary software and expert audit methodologies, PRG- Schultz industry specialists review client purchases and payment information to identify and recover overpayments. At Dec. 31, 2005, PRG-Schultz International's balance sheet showed a stockholders' deficit of $102,365,000, compared to a positive equity of $103,584,000 at Dec. 31, 2004. RASC TRUST: Moody's Puts Low-B Ratings on Two Certificate Classes ----------------------------------------------------------------- Moody's Investors Service assigned Aaa rating to the senior certificates issued by RASC Series 2006-KS3 Trust, Home Equity Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS3 and ratings ranging from Aa1 to Ba2 to the subordinate certificates in the deal. The securitization is backed by EFC Holdings Corporation, People's Choice Home Loan, Inc., and HomeComings Financial Network, Inc., 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 a swap 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: RASC Series 2006-KS3 Trust Home Equity Mortgage Asset-Backed Pass-Through Certificates, Series 2006-KS3 * Class A-I-1, Assigned Aaa * Class A-I-2, Assigned Aaa * Class A-I-3, Assigned Aaa * Class A-I-4, Assigned Aaa * Class A-II, 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 * Class M-11, Assigned Ba2 REAL ESTATE: Moody's Places Ba3 Rating on Class B7 Notes -------------------------------------------------------- Moody's Investors Service assigned ratings to the Class A, Class B1, and Class B2 tranche exposures and to the Class B3, Class B4, Class B5, Class B6, and Class B7 certificates of Real Estate Synthetic Investment Securities, Series 2006-A. The Class A, Class B1, and Class B2 tranche exposures will not be issued and sold as securities on the closing date. The synthetic transaction provides the owner of a sizable pool of jumbo mortgages credit protection similar to the credit enhancement provided through subordination in conventional residential mortgage backed securities transactions. The reference portfolio includes approximately $7.2 billion of prime conforming and nonconforming balance fixed-rate mortgages purchased from various originators. The portfolio is generally static as in most RMBS deals. Through an agreement with the securities issuer, the Protected Party pays a fee for the transfer of a portion of the portfolio risk. Investors in the securities have an interest in the holdings of the issuer, which include highly rated investment instruments, a forward delivery agreement and fee collections on the agreement with the Protected Party. Investors are exposed to risk from the reference portfolio but benefit only indirectly from cash flows from these assets. Depending on the class of securities held, investors have credit protection from subordination. Moody's expected loss on the reference portfolio is approximately 0.23% to 0.33%. The complete rating actions are: Co-Issuer: RESI Finance Limited Partnership 2006-A Co-Issuer: RESI Finance DE Corporation 2006-A Issue: Real Estate Synthetic Investment Securities, Series 2006-A * Class A Tranche Exposure, Assigned Aaa * Class B1 Tranche Exposure, Assigned Aa2 * Class B2 Tranche Exposure, Assigned Aa3 * Class B3 Notes, Assigned A2 * Class B4 Notes, Assigned A3 * Class B5 Notes, Assigned Baa2 * Class B6 Notes, Assigned Baa3 * Class B7 Notes, Assigned Ba3 RESIX FINANCE: Moody's Rates Class B7 Series 2006-A Notes at Ba3 ---------------------------------------------------------------- Moody's Investors Service assigned Ba3 rating to the Class B7 Notes issued by RESIX Finance Limited Credit Linked Notes, Series 2006-A (RESIX 2006-A). The credit-linked note replicate the cash flow of synthetic RMBS securities issued with respect to Class B7 of the Real Estate Synthetic Investment Securities, Series 2006-A transaction. Complete rating action: * RESIX Finance Limited Credit-Linked Notes, Series 2006-A Class B7 Notes, Assigned Ba3 RIVERSTONE NETWORKS: Stockholder Withdraws Motion to Dismiss Case ----------------------------------------------------------------- Charles L. Grimes informed the U.S. Bankruptcy Court for the District of Delaware that he is withdrawing his request to dismiss the chapter 11 cases involving Riverstone Networks, Inc., and its debtor-affiliates. Mr. Grimes is one of the Debtor's largest stockholders. As reported in the Troubled Company Reporter on Feb. 28, 2006, Mr. Grimes told the Court that on the same day the Debtors inked an agreement with Lucent Technologies to sell its assets, they turned around and filed chapter 11 petitions, citing for the need to conduct the sale of their business under Section 363 of the Bankruptcy Code. Mr. Grimes argued that the case should be dismissed because it was filed in bad faith. Mr. Grimes reminded the Court that the Debtors pointed to three factors motivating their chapter 11 filing: 1. managerial distraction, 2. decline in market share and cash on hand, and 3. it is a condition of the agreement with Lucent. Mr. Grimes said that these reasons don't hold water. Mr. Grimes argued that: a. The Debtors allegations that the Securities and Exchange Commission investigation, earning restatement review and de-listing of the Riverstone's stock caused significant distraction can hardly be grounds for the filing of a chapter 11 petition since they occurred some time ago. b. The Debtors have not shown they were suffering financial distress at the time of the filing of the petition. Mr. Grimes says loss of money or experiencing a downward spiral is not sufficient to establish financial distress. Mr. Grimes relates that the Debtors have not identified any value that would be preserved in the bankruptcy, which would otherwise be lost. c. While selling assets under Section 363 of the Bankruptcy Code constitutes a valid reorganization purpose because it allows a purchaser to buy the assets free and clear of liens, Mr. Mr. Grimes contends that in these particular chapter 11 cases, not only is there virtually no secured debt, but there are no liens for the purchaser to be concerned about. At the same, all creditors will be paid in full. Headquartered in Santa Clara, California, Riverstone Networks, Inc. -- http://www.riverstonenet.com/-- provides carrier Ethernet infrastructure solutions for business and residential communications services. The company and four of its affiliates filed for chapter 11 protection on Feb. 7, 2006 (Bankr. D. Del. Case Nos. 06-10110 through 06-10114). Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. As of Dec. 24, 2005, the Debtors reported assets totaling $98,341,134 and debts totaling $130,071,947. RIVERSTONE NETWORKS: Committee Hires Schulte Roth as Counsel ------------------------------------------------------------ The Official Committee of Unsecured Creditors appointed in Riverstone Networks, Inc., and its debtor-affiliates' bankruptcy cases, sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to retain Schulte Roth & Zabel LLP as its lead bankruptcy counsel, nunc pro tunc to Feb. 17, 2006. As reported in the Troubled Company Reporter on Mar. 14, 2006, Schulte Roth is expected to: (a) assist and advise the Committee in its consultations with the Debtors, other committees, if any, and other parties- in-interest relative to the overall administration of the Debtors' estates; (b) represent the Committee at hearings to be held before the Court and communicate with the Committee regarding the matters heard and issues raised, as well as the decisions and considerations of the Court; (c) assist and advise the Committee in its examination and analysis of the Debtors' financial affairs; (d) review and analyze all applications, orders, operating reports, schedules and statements of financial affairs filed or to be filed with the Court by the Debtors or other interested parties in the Debtors' cases; advise the Committee as to the necessity and propriety of those documents and their impact on the rights of unsecured creditors, and upon the cases generally; and after consultation with, and approval from, the Committee or its designees' consent to appropriate orders on its behalf or otherwise object to them; (e) assist the Committee in preparing appropriate legal pleadings and proposed orders as may be required in support of positions taken by the Committee and preparing witnesses and reviewing documents relevant to them; (f) coordinate the receipt and dissemination of information prepared by and received from the Debtors' attorneys, accountants, financial advisors or other professionals retained in the Debtors' cases, as well as information as may be received from other professionals engaged by the Committee and other committees; (g) advise the Committee in connection with the Debtors' solicitation and filing with the Court of acceptances or rejections of any proposed plan or plans or reorganization or liquidation; and (h) perform all other necessary legal services and provide for, all other necessary legal advice to, the Committee in the Debtors' cases. Jeffrey S. Sabin, Esq., a member at Schulte Roth & Zabel LLP, disclosed that the hourly rates of the Firm's professionals are: Designation Hourly Rate ----------- ----------- Partners $580 to $800 Special Counsel $550 Associates $225 to $525 Legal Assistants $130 to $265 Mr. Sabin assured the Court that Schulte Roth & Zabel LLP does not have any connection with, or any adverse interest to the Debtors, its creditors, or any other party-in-interest. About Schulte Roth With more than 400 attorneys, Schulte Roth & Zabel LLP -- http://www.srz.com/-- is a full-service law firm, which provides legal advice and representation on these practice areas: business reorganization, business transactions, employment & employee benefits, environmental, finance, individual client services, intellectual property, investment management, litigation, real estate, structured products & derivatives, and tax. About Riverstone Networks Headquartered in Santa Clara, California, Riverstone Networks, Inc. -- http://www.riverstonenet.com/-- provides carrier Ethernet infrastructure solutions for business and residential communications services. The company and four of its affiliates filed for chapter 11 protection on Feb. 7, 2006 (Bankr. D. Del. Case Nos. 06-10110 through 06-10114). Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. As of Dec. 24, 2005, the Debtors reported assets totaling $98,341,134 and debts totaling $130,071,947. SAINT VINCENTS: Proposes $25,000 Ordinary Course Professional Cap ----------------------------------------------------------------- Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New York, tells the U.S. Bankruptcy Court for the Southern District of New York that Saint Vincents Catholic Medical Centers of New York's use of the Ordinary Course Professionals, among other things, has turned out to be more sporadic than anticipated. Mr. Troop relates that in some months, certain Ordinary Course Professionals seek compensation and reimbursement of expenses in amounts that exceed the Court-approved monthly maximum payment of $15,000. The Debtors propose to increase the Cap to $25,000 to: -- provide them and their Ordinary Course Professionals with added flexibility; and -- avoid the cost and expense of requiring that the Ordinary Course Professionals be retained under either Section 327(a) or 327(e) of the Bankruptcy Code. The Yearly Cap will remain $180,000. However, it may be exceeded by up to five Ordinary Course Professionals up to a total of $225,000 each unless, on a case-by-case basis, the Official Committee of Unsecured Creditors and the United States Trustee consent to allow additional exceptions or the Court orders otherwise. Mr. Troop notes that the U.S. Trustee and the Creditors' Committee have no objection to increasing the Cap to $25,000. As reported in the Troubled Company Reporter on Sept. 7, 2005, the Debtors sought the Court's permission to pay, without formal application to the Court by any Ordinary Course Professional, 100% of the fees and disbursements to each of the Professionals, provided that the total fees and disbursements do not exceed a $15,000 per month, and $180,000 per year per Professional. Additional Professionals Mr. Troop informs the Court that the Debtors will employ four more Ordinary Course Professionals: Professional Services Provided ------------ ----------------- Kelley Drye & Warren LLP Hospital Arbitrations Nixon Peabody Residency Review Work Ward Norris Heller & Reidy Litigation Defense Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) SEALY CORP: Expects to Raise $277 Million from Stock Offering ------------------------------------------------------------- Sealy Corporation expects to net $277 million from its stock offering underwritten by: * Citigroup; * Goldman, Sachs & Co.; * J.P. Morgan Securities Inc.; * Banc of America Securities LLC; * Lehman Brothers; * Wachovia Securities; * SunTrust Robinson Humphrey; and * Ferris, Baker Watts Of the approximately $277.0 million of net proceeds, the Company intends to use: -- approximately $86.7 million to redeem the outstanding principal amount of its Pay-In-King notes and pay a related redemption premium; -- approximately $37.7 million to redeem a portion of the outstanding principal amount of its 2014 notes and pay accrued interest and a related redemption premium; -- approximately $125.0 million to pay a special dividend to its existing stockholders; -- approximately $17.3 million to pay a transaction-related bonus to members of management and $11.0 million to Kohlberg Kravis Roberts & Co. to terminate the Company's future obligations under its management services agreement. J.P. Morgan Partners (BHCA), L.P., an affiliate of J.P. Morgan Securities Inc., an underwriter in this offering, and BancBoston Capital Inc., an affiliate of Banc of America Securities LLC, another underwriter, is also disposing their holdings in the Company. The Company will not receive any proceeds from the sale of shares of its common stock by these selling stockholders. Dividend Policy Immediately prior to the consummation of the offering, the Company will declare a one-time cash dividend of $125.0 million to its existing stockholders, to be paid from a portion of the net proceeds of this offering. In addition, on the completion of this offering, the Company currently intends to adopt a policy of declaring, subject to legally available funds, a quarterly cash dividend on each common share commencing in the third quarter of 2006, unless our board of directors, in its sole discretion, determines otherwise. Sealy Corporation is the largest bedding manufacturer in the world. The Company manufactures and markets a broad range of mattresses and foundations under the Sealy(R), Sealy Posturepedic(R), Sealy Crown Jewel(R), Sealy Correct Comfort(R), Stearns & Foster(R), and Bassett(R) brands. Sealy has the largest market share and highest consumer awareness of any bedding brand in North America. Sealy is also a leading supplier to the hospitality industry. In its last Form 10-Q filing for the period ending February 29, 2004, Sealy Corporation's balance sheet shows a stockholders' deficit of $61,850,000 compared to a deficit of $76,162,000 at November 30, 2003. As reported in the Troubled Company Reporter on Mar. 22, 2004, Standard & Poor's Ratings Services assigned its 'B-' rating to Sealy Mattress Co.'s $490 million senior subordinated notes due 2014, issued under Rule 144A with registration rights. Standard & Poor's also assigned its 'B+' senior secured bank loan rating and '3' recovery rating to Sealy's $685 million senior secured credit facility due 2012, and affirmed the company's 'B+' corporate credit and 'B-' subordinated debt ratings. S&P said the outlook is stable. SEMGROUP L.P.: Fitch Puts B Issuer Default Rating on Neg. Watch --------------------------------------------------------------- Fitch Ratings placed the outstanding credit ratings of SemGroup, L.P., and its wholly owned subsidiaries SemCrude, L.P., and SemCams Midstream Co. on Rating Watch Negative, meaning that the ratings could be lowered or affirmed in the near-term. These ratings have been placed on Rating Watch Negative: SemGroup, L.P.: -- Issuer Default Rating 'B' -- Senior unsecured notes due 2015 'B+/RR3' SemCrude, L.P.: -- IDR 'B'; -- Secured working capital facility due August 2008 'BB/RR1' -- Senior secured term loan B due March 2011: 'BB-/RR1' -- Secured revolving credit facility due August 2008: 'BB-/RR1' SemCams Midstream Co.: -- IDR 'B' -- Senior secured term loan due March 2011 'BB-/RR1' The rating action follows the announcement on March 27, 2006, that SemGroup has reached a definitive agreement to acquire the outstanding common stock of TransMontaigne, Inc. (TMG) in an all cash transaction valued at approximately $525 million. In addition, SemGroup will assume approximately $200 million of outstanding TMG debt. The Rating Watch Negative status reflects the potential leveraging impact of the acquisition which will ultimately be determined by SemGroup's permanent financing strategy. Based on a preliminary analysis of the combined SemGroup/TMG entity, pro forma leverage ratios could remain within parameters for SemGroup's existing 'B' IDR. However, the permanent financing structure ultimately executed by SemGroup could alter Fitch's asset recovery waterfall across the resultant capital structure. In particular, ratings on the partnership's outstanding $350 million senior unsecured notes, which are currently rated one notch higher than SemGroup's IDR at 'B+' are most vulnerable due to reduced recovery prospects. TMG is a Denver, Colorado-based provider of refined products distribution and supply services primarily in the: * Gulf Coast, * Midwest, and * East Coast regions. Operationally, the TMG assets appear to be a good strategic fit for SemGroup and should provided expanded market opportunities for the partnership's existing refined products logistics business. Specifically, TMG's 15 million barrels of refined product storage capacity will provide SemGroup with a larger physical platform to support its existing refined products marketing business. In addition, TransMontaigne Partners, L.P., TMG's publicly traded master limited partnership affiliate, could provide SemGroup with an alternative vehicle to monetize assets and/or pursue external growth opportunities on a cost competitive basis. The transaction remains subject to approval by both TMG shareholders and certain regulators. Fitch expects to meet with management in the near-term to further discuss SemGroup's acquisition financing structure and overall strategy for integrating and operating the TMG assets within the SemGroup partnership. SFBC INT'L: Lenders Grant Waivers for $90 Million Credit Facility ----------------------------------------------------------------- SFBC International, Inc. (NASDAQ:SFCC) entered into an agreement with its lenders, which waives all of the Company's defaults related to covenants and certain other terms under its existing Senior Secured Credit Facility. SFBC obtained waivers for these defaults to facilitate the timely filing of the Company's Form 10-K for the period ended Dec. 31, 2005. within the extended deadline of March 31, 2006. Following the filing of its Form 10-K, SFBC expects to continue discussions with its lenders to amend the terms of the Credit Facility to match the Company's current forecasts, growth strategy and capital requirements. Until the Credit Facility is amended, SFBC has agreed with its lenders not to draw down any additional funds from its Credit Facility. As of Dec. 31, 2005 and March 29, 2006, SFBC had $17 million drawn upon this $90 million Credit Facility. As of March 21, 2006, SFBC had approximately $44 million in cash, cash equivalents and marketable securities. "Based on our current business outlook, we anticipate that we will generate significant cash flow from operations in 2006 and that we have adequate liquidity to fund our working capital requirements while we amend the Credit Facility," Jeffrey P. McMullen, chief executive officer of SFBC International, stated. "With our cash position and outlook for positive cash flow from operations in 2006, we determined the best course of action was to obtain waivers from our lenders, allowing additional time to negotiate Credit Facility covenants and terms, which more appropriately match our current business objectives. We intend to continue taking appropriate actions to preserve and enhance long-term shareholder value and maintain flexibility." The covenant defaults and the waiver of the covenant defaults for the Credit Facility do not have an effect on the Company's agreement with holders of its 2.25% Convertible Senior Notes, due 2024. About SFBC International, Inc. Headquartered in Princeton, New Jersey, SFBC International, Inc. -- http://www.sfbci.com/-- is an international drug development services company offering a comprehensive range of clinical development, clinical and bioanalytical laboratory, and consulting services to the branded pharmaceutical, biotechnology and generic drug industries. SFBC has more than 35 offices, facilities and laboratories with approximately 2,500 employees strategically located throughout the world. * * * As reported in the Troubled Company Reporter on Jan. 27, 2006, Moody's Investors Service downgraded SFBC International's corporate family rating to B3 from B2, concluding a rating review for possible downgrade initiated on Jan. 5, 2006. Moody's also confirmed the B2 rating on the Company's Senior Secured Credit Facilities. In addition, Moody's assigned a speculative grade liquidity rating of SGL-4 to SFBC. The SGL-4 rating reflected the company's modest operating cash flow and its minimal liquidity availability. The ratings outlook is negative. SOUNDVIEW HOME: S&P Affirms Ten Transaction Class' Low-B Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on two classes from Soundview Home Loan Trust 2004-1. At the same time, ratings are affirmed on 101 classes from seven Soundview Home Loan Trust transactions. The raised ratings on series 2004-1 reflect a significant increase in credit support percentages due to the paydown of the senior classes, combined with the shifting interest feature of the transaction. Projected credit support is 2.41x the credit support level associated with the raised rating. As of the January 2006 remittance period, cumulative losses and total delinquencies were 0.23% and 8.88%, respectively. In addition, approximately 39.24% of the pool principal balance remains for this series. The affirmations are based on loss coverage percentages that are sufficient to maintain the current ratings. Credit support is provided by: * subordination, * overcollateralization, and * excess spread. The collateral for these transactions consists of fixed- and adjustable-rate, fully amortizing and balloon payment mortgage loans secured by first and second liens on one- to four-family residential properties. Ratings raised: Soundview Home Loan Trust Rating Series Class To From ------ ----- -- ---- 2004-1 M-1 AAA AA+ 2004-1 M-2 AA+ AA Ratings affirmed: Soundview Home Loan Trust Series Class Rating ------ ----- ------ 2003-2 A-2 AAA 2003-2 M-1 AA 2003-2 M-2 A 2003-2 M-3 A- 2003-2 M-4 BBB+ 2003-2 M-5 BBB 2003-2 M-6 BBB- 2003-2 B BB 2004-1 A-1,A-3,A-4 AAA 2004-1 M-3 AA- 2004-1 M-4 A+ 2004-1 M-5 A 2004-1 M-6 A- 2004-1 M-7 BBB+ 2004-1 M-8 BBB 2004-1 M-9 BBB- 2004-1 B-1 BB+ 2004-1 B-2 BB 2004-WMC1 1-A1,1-A2,II-A1,II-A2 AAA 2004-WMC1 II-A3, AAA 2004-WMC1 M-1 AA+ 2004-WMC1 M-2,M-3 AA 2004-WMC1 M-4 AA- 2004-WMC1 M-5 A+ 2004-WMC1 M-6 A 2004-WMC1 M-7 A- 2004-WMC1 M-8 BBB+ 2004-WMC1 M-9 BBB 2004-WMC1 M-10 BBB- 2005-1 1-A1,1-A2,II-A2,II-A3 AAA 2005-1 M-1 AA+ 2005-1 M-2 AA 2005-1 M-3 AA- 2005-1 M-4 A+ 2005-1 M-5 A 2005-1 M-6 A- 2005-1 M-7 BBB+ 2005-1 M-8 BBB 2005-1 M-9 BBB- 2005-1 B-1 BB+ 2005-1 B-2 BB 2005-1 B-3 BB- 2005-3 1-A1,1-A2,II-A1,II-A2 AAA 2005-3 II-A3 AAA 2005-3 M-1 AA+ 2005-3 M-2,M-3 AA 2005-3 M-4 AA- 2005-3 M-5 A+ 2005-3 M-6 A 2005-3 M-7 A- 2005-3 M-8 BBB+ 2005-3 M-9 BBB 2005-3 B-1 BBB- 2005-3 B-2 BB+ 2005-3 B-3 BB 2005-DO1 1-A1,II-A1,II-A2,II-A3 AAA 2005-DO1 II-A4 AAA 2005-DO1 M-1 AA+ 2005-DO1 M-2,M-3 AA 2005-DO1 M-4 AA- 2005-DO1 M-5 A+ 2005-DO1 M-6,M-7 A 2005-DO1 M-8 A- 2005-DO1 M-9 BBB+ 2005-DO1 M-10 BBB 2005-DO1 M-11 BBB- 2005-DO1 B-1 BB+ 2005-DO1 B-2 BB 2005-OPT1 1-A1,II-A1,II-A2,II-A3 AAA 2005-OPT1 II-A4,M-1 AAA 2005-OPT1 M-2 AA+ 2005-OPT1 M-3 AA 2005-OPT1 M-4 AA- 2005-OPT1 M-5 A+ 2005-OPT1 M-6 A 2005-OPT1 M-7 A- 2005-OPT1 M-8 BBB+ 2005-OPT1 M-9 BBB 2005-OPT1 M-10 BBB- STARTECH ENVIRONMENTAL: Posts $439,462 Net Loss in January 2006 --------------------------------------------------------------- StarTech Environmental Corporation reported its financial results for the quarter ended Jan. 31, 2006, to the Securities and Exchange Commission on March 21, 2006. For the three months ended Jan. 31, 2006, StarTech Environmental incurred a $439,462 net loss on $364,197 of total revenues. For the three months ended Jan. 31, 2005, the Company incurred a $988,586 net loss on of total revenues. For the three months ended Jan. 31, 2006, StarTech's has $2,353,472 of cash and cash equivalents and a $1,078,419 negative working capital balance. At Jan. 31, 2006, StarTech's balance sheet showed $5,580,248 in total assets and $3,920,216 in total liabilities. The Company's balance sheet shows a $24,681,694 accumulated deficit at Jan. 31, 2006. A full-text copy of StarTech's latest quarterly report is available for free at http://ResearchArchives.com/t/s?739 Going Concern Doubt In a Form 10-K report filed by StarTech Environmental with the SEC on Feb. 14, 2006, Marcum & Kliegman LLP expressed substantial doubt about StarTech's ability to continue as a going concern after auditing the Company's financial statements for the year ended Oct. 31, 2005. The auditing firm pointed to the Company's recurring losses since its inception. Headquartered in Wilton, Connecticut, StarTech Environmental Corporation is an environmental technology company commercializing its proprietary plasma processing technology known as the Plasma Converter(TM) that achieves closed-loop elemental recycling which irreversibly destroys hazardous and non-hazardous waste and industrial by-products while converting them into useful commercial products. These products include a rich synthesis gas called PCG (Plasma Converted Gas)(TM) surplus energy for power, hydrogen, metals and silicates for use and for sale. STARWOOD HOTELS: Host Marriott Merger Cut to $3.7B Sans CDN Hotels ------------------------------------------------------------------ Starwood Hotels and Resorts Worldwide, Inc., signed an amendment to its merger agreement with Host Marriott Corporation. Host Marriott has also formed a joint venture with two partners that will own the six hotels included in the proposed acquisition that are located in Europe. Changes to the merger agreement in the amendment include, but are not limited to: -- The three hotels located in Canada will not be included in the transaction because Starwood was unable to obtain a necessary tax ruling. As a result of the exclusion of the Canadian hotels, the overall purchase price for the transaction has been reduced by approximately $276 million to approximately $3.76 billion. The adjustment will be made to the cash portion of the transaction consideration. -- $600 million of senior notes issued by Sheraton Holding Corporation will not be assumed as part of the transaction (including $150 million of senior notes previously excluded from the transaction), which reduces the amount of debt the Company will be assuming in accordance with the transaction to approximately $104 million. -- The closing of five of the hotels included in the transaction located in Europe will be deferred as a result of certain notice requirements and will not be included in the initial closing of the transaction. The acquisition of four of the hotels is expected to occur by May 3, 2006, and the acquisition of the fifth hotel, The Westin Europa & Regina in Venice, Italy, is expected to occur no later than June 15, 2006. On March 24, 2006, Host Marriott entered into a joint venture in the Netherlands with Stichting Pensioenfonds ABP, the Dutch pension fund and Jasmine Hotels Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd., the real estate investment company of the Government of Singapore Investment Corporation Pte Ltd. The joint venture will acquire the five deferred-closing hotels directly from Starwood, and the Sheraton Warsaw Hotel & Towers will be contributed to the joint venture by the Company as a substantial portion of its equity investment in the joint venture. The total consideration for the six hotels will be approximately $621 million. The Company will be a limited partner in the joint venture and also will serve as the general partner of the venture, and potentially will earn a promote based on achieving certain return thresholds for the limited partners. An affiliate of the Company will serve as the asset manager of the joint venture's hotels and will earn fees for its services. The percentage interests of the parties in the joint venture will be 19.9% for ABP, 48% for GIC RE and 32.1% for the Company, including both its general and limited partner interests. About Host Marriott Host Marriott Corporation -- http://www.hostmarriott.com/-- is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 103 upper-upscale and luxury hotel properties primarily operated under premium brands, such as Marriott(R), Ritz-Carlton(R), Hyatt(R), Four Seasons(R), Fairmont(R), Hilton(R), and Westin(R). About Starwood Hotels Headquartered in White Plains, New York, Starwood Hotels & Resorts Worldwide, Inc. -- http://www.starwoodhotels.com/-- is one of the leading hotel and leisure companies in the world with approximately 750 properties in more than 80 countries and 120,000 employees at its owned and managed properties. With internationally renowned brands, Starwood(R) corporation is a fully integrated owner, operator and franchiser of hotels and resorts including: St. Regis(R), The Luxury Collection (R), Sheraton(R), Westin(R), Four Points(R) by Sheraton, and W(R), Hotels and Resorts as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. * * * As reported in the Troubled Company Reporter on Mar. 29, 2006, Standard & Poor's Ratings Services affirmed its 'BB+' ratings on Starwood Hotels & Resorts Worldwide Inc. subsidiary ITT Corp.'s: * $450 million senior unsecured notes, and * $150 million senior unsecured notes. All other existing ratings for Starwood were affirmed, including the 'BB+' corporate credit rating. S&P said the rating outlook is positive. STATE STREET: U.S. Trustee Calls for Chapter 7 Conversion --------------------------------------------------------- State Street Houses, Inc., and State Street Associates, LP, could face Chapter 7 liquidation if the U.S. Bankruptcy Court for the Northern District of New York favors the wind-down petition filed by Deirdre A. Martini, the U.S. Trustee for Region 2. Ms. Martini asks the Bankruptcy Court to convert the Debtors' jointly administered bankruptcy case to a liquidation proceeding under Chapter 7 of the Bankruptcy Code because of the Debtors' numerous breaches of their statutory and fiduciary duty as debtors-in-possession. Ms. Martini alleges that the Debtors reluctance to participate in the Chapter 11 process indicates that a confirmable plan is unlikely. Ms,. Martini charges that the Debtors' continued use of the protections afforded by Chapter 11 is abusive. The U.S. Trustee points out that the Debtors: a) have not hired new bankruptcy counsel following the resignation of Hancock and Estabrook, LLP, on Dec. 20, 2005 -- a situation that is prejudicial to creditors; b) failed to file Monthly Operating Reports since October 2005, depriving the U.S. Trustee, the Bankruptcy Court and creditors of fundamental information regarding the Debtor's financial condition; and c) have not paid approximately $4,000 in fees due to the U.S. Trustee. New York State Mortgage Loan Enforcement and Administration Corporation, as agent for the Debtors' secured mortgage lenders New York State Urban Development Corporation and New York State Project Finance Agency, supports the U.S. Trustees call for chapter 7 conversion. MLC agrees that the Debtors will not be able to formulate a consensual plan of reorganization soon. MLC alleges that the Debtors are only doing the minimum steps necessary to keep their bankruptcy case afloat in order to avoid the adverse tax consequences that will follow foreclosure of their assets. About State Street Headquartered in Utica, New York, State Street Houses, Inc., is a New York Corporation and legal titleholder of Kennedy Plaza Apartments in Utica, New York. Kennedy Plaza Apartments is a residential apartment complex consisting of one 17-story building and two five-story buildings with 303 total apartment units. The Company and its affiliate, State Street Associates, L.P., filed for chapter 11 protection on May 21, 2004 (Bankr. N.D.N.Y. Case No: 04-63673). When the Debtors filed for chapter 11 protection, they reported estimated assets and debts amounting between $10 million to $50 million. STATE STREET: Court Conditions Continued Use of MLC's Collateral ---------------------------------------------------------------- The Hon. Stephen D. Gerling of the U.S. Bankruptcy Court for the Northern District of New York granted State Street Houses, Inc., and its debtor-affiliates limited access to cash collateral securing repayment of their prepetition debts to New York State Mortgage Loan Enforcement and Administration Corporation, or MLC. MLC serves as agent for the Debtors' secured mortgage lenders, New York State Urban Development Corporation and New York State Project Finance Agency, which collectively hold approximately 89% of claims against the Debtors. MLC asserts that the Debtors have been in default under the mortgage debt since 2002 and have not made payments on that debt since 1998. The Bankruptcy Court gave the Debtors access to MLC's cash collateral since May 2004, pursuant to a final cash collateral order and several extensions. On Feb. 16, 2006, MLC objected to the continued use of its cash collateral because of the Debtors' continued failure to provide financial information regarding its operations. Gregory J. Mascitti, Esq., at Nixon Peabody LLP, told the Bankruptcy Court that because of the lack of information, MLC cannot determine if the Debtors have complied with the prior cash collateral orders and if its interest in the cash collateral continues to be adequately protected. The Debtors requested for continued use of MLC's cash collateral to maintain operations at its main asset, the Kennedy Plaza Apartments located in Utica, New York. MLC assured the Bankruptcy Court that it is willing and ready to take over operation at Kennedy Plaza once the Debtors are barred from using the cash collateral. Terms of Cash Collateral Use Judge Gerling allows MLC to establish and control a lock box account that will hold all cash collateral, including rents generated from the Kennedy Plaza operations. All Kennedy Plaza tenants are required to make payments directly to MLC's lock box account. Judge Gerling directs the Debtors to submit a budget for the period from Feb. 28, 2006, to May 5, 2006. To the extent the cash collateral will be used in accordance with the budget, the Debtors are required to make bi-weekly requests to obtain funds from the lock box account. The Debtors are also required to provide MLC with a written reconciliation of the actual cash collateral used and the amount approved in the bi-weekly cash request. Failure to submit the reconciliation or a Monthly Operating Report ten days after the due date will immediately cut the Debtors' access to cash collateral. Apart from the Budget, the Bankruptcy Court also directs the Debtors to file an accounting and reconciliation of actual cash collateral used versus budgeted items for the period from May 21, 2004 to Feb. 28, 2006. The report will include an accounting and reconciliation of all funds the Debtors transferred to Mathematical Bridge Corp., Mathematical Bridge LLC, and Lanny A Horowitz. About State Street Headquartered in Utica, New York, State Street Houses, Inc., is a New York Corporation and legal titleholder of Kennedy Plaza Apartments in Utica, New York. Kennedy Plaza Apartments is a residential apartment complex consisting of one 17-story building and two five-story buildings with 303 total apartment units. The Company and its affiliate, State Street Associates, L.P., filed for chapter 11 protection on May 21, 2004 (Bankr. N.D.N.Y. Case No: 04-63673). When the Debtors filed for chapter 11 protection, they reported estimated assets and debts amounting between $10 million to $50 million. STELCO INC: Monitor Files Fifty-Seventh Restructuring Report ------------------------------------------------------------ Stelco Inc. reported that the Monitor filed its Fifty-Seventh Report in the matter of the Company's Court-supervised restructuring. As preciously reported in the Troubled Company Reporter on March 27, 2006, the Company's restructuring plan and reorganization of its corporate structure will be implemented as planned on March 31, 2006. The Report also reviews the previously reported process of finalizing and posting certain principal documents in connection with the restructuring and reorganization. The Monitor indicates that it will seek an Order extending the protection afforded it under Stelco's CCAA process until it is discharged. While plan implementation is expected to occur on March 31, 2006, the Monitor's duties will extend beyond that date. It may be several months before the claims procedure and other matters for which the Monitor is responsible are completed. About Stelco Stelco is expected to emerge from its Court-supervised restructuring on March 31, 2006. At that time, new common shares will be issued under the approved restructuring plan and are expected to begin trading on the TSX on April 3, 2006, subject to certain conditions. Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. The company is currently in the final stages of a Court-supervised restructuring. This process is designed to establish the Company as a viable and competitive producer for the long term. The new Stelco will be focused on its Ontario-based integrated steel business located in Hamilton and in Nanticoke. These operations produce high quality value-added hot rolled, cold rolled, coated sheet and bar products. In early 2004, after a thorough financial and strategic review, Stelco concluded that it faced a serious viability issue. The Corporation incurred significant operating and cash losses in 2003 and believed that it would have exhausted available sources of liquidity before the end of 2004 if it did not obtain legal protection and other benefits provided by a Court-supervised restructuring process. Accordingly, on Jan. 29, 2004, Stelco and certain related entities filed for protection under the Companies' Creditors Arrangement Act. The Court extended the stay period under Stelco's Court-supervised restructuring from Dec. 12, 2005, until March 31, 2006. STEWART ENTERPRISES: Releases First Fiscal Quarter Ended Jan. 31 ---------------------------------------------------------------- Stewart Enterprises, Inc. (Nasdaq NMS: STEIE) reported its financial results for the first quarter of fiscal 2006, with increases in earnings and cash flow compared to the first quarter of fiscal 2005. For the quarter ended Jan. 31, 2006, the Company reported net earnings of $8.4 million compared to a net loss of $145.3 million for the first quarter of fiscal 2005. "We have achieved solid results during the first quarter of fiscal 2006, including increases in cash flow, gross profit and earnings," Kenneth C. Budde, Chief Executive Officer, stated. "We experienced increases in the number of same-store funeral calls, the average revenue per same-store funeral call, and preneed sales, each of which represents an integral part of our long-term business strategy for organic growth." "We also experienced a significant reduction in interest expense. Including the Louisiana properties affected by Hurricane Katrina, we achieved an increase in the number of services performed by our same-store funeral businesses of 2.4%, an increase in our cemetery property sales of 10%, and an increase in our preneed funeral sales of 9% during the first quarter of 2006 compared to the first quarter of 2005." "These results exceeded our 2006 goal to grow same-store funeral calls up to 2% and are at the high end of our 2006 goal to grow preneed property and funeral sales by 5% to 10%." "We believe that these strong results reflect the successful execution of our strategic plan, which focuses on putting people first -- customers and employees -- expanding our product and service offerings to the cremation consumer, and marketing additional products and services to our existing customer-base." "Additionally, we believe that our funeral home incentive compensation program, which was implemented during the first quarter of last year, continues to foster a sense of ownership in our funeral homes." "In our efforts to focus on customer service and in anticipation of growing our same-store funeral calls up to 2% in fiscal year 2006, we increased our staffing in funeral operations during the first quarter," Mr. Budde commented. "Additionally, as a result of the 9% increase in preneed funeral sales, the investment in preneed selling costs during the quarter placed some downward pressure on funeral gross profit, as these preneed selling costs are expensed as incurred." "The increased preneed funeral sales are deferred into our backlog until the products and services are delivered." "We are pleased to report these strong operating and financial results for the first quarter," Mr. Budde concluded. By continuing to execute our strategic plan and maintaining our focus on employees and customers, we are well positioned to deliver stable, sustainable results over the long-term." "We are proud of our accomplishments and appreciate the confidence and support of our employees, customers, and shareholders." Full-text copies of Stewart Enterprises, Inc.'s financial statements for the first quarter ended Jan. 31, 2006, are available for free at http://ResearchArchives.com/t/s?734 Headquartered in Jefferson, Louisiana, Stewart Enterprises Inc. -- http://www.stewartenterprises.com/-- is the third largest provider of products and services in the death care industry in the United States, currently owning and operating 231 funeral homes and 144 cemeteries. Through its subsidiaries, the company, founded in 1910, provides a complete range of funeral merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a preneed basis. Stewart Enterprises' 6.25% Senior Notes due 2013 carry Moody Investor's Service's B1 rating and Standard & Poor's BB rating. SUNNY DELIGHT: S&P Cuts Corp. Credit & Bank Loan Ratings to CCC+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and bank loan ratings on Cincinnati, Ohio-based Sunny Delight Beverages Co. to 'CCC+' from 'B'. The ratings have been removed from CreditWatch, where they were placed with negative implications on March 3, 2006, following the company's disclosure that liquidity was extremely limited, and because of Standard & Poor's concern that the company would be challenged to meet financial covenants at Dec. 31, 2005, and quarterly in 2006. The outlook is negative. Sunny Delight had about $117 million of total debt outstanding at Sept. 30, 2005. "The downgrade reflects Standard & Poor's concern that Sunny Delight will be in technical default of its credit facility because of a potential financial covenant violation for the December 2005 quarter, given the company's weaker-than-expected operating performance," said Standard & Poor's credit analyst Alison Sullivan. The deadline for covenant compliance is March 31, 2005, and the company has not secured a waiver or amendment on its covenants for this quarter to date. Furthermore, Standard & Poor's is concerned about Sunny Delight's ability to maintain compliance with its credit facilities' covenants in 2006 without a waiver and/or amendment. The company's liquidity is very limited. As of March 2, 2006, Sunny Delight was fully drawn on its $30 million revolver during its peak seasonal borrowing period and had about $10 million of cash. Revolver borrowing is expected to remain high until the second half of fiscal 2006. Standard & Poor's believes the company will have limited cushion to meet its debt amortization payments in 2006. Sunny Delight is a global manufacturer and distributor of juice drinks and sports beverages under the Sunny Delight brand name. The ratings on Sunny Delight reflect: * its narrow product portfolio and limited size within the highly competitive and somewhat fragmented global juice industry; and * higher-than-expected leverage. The company, owned by financial sponsor JW Childs Associates L.P., was formed by the combination of two juice drink businesses: * Sunny Delight; and * Punica (which was sold on June 1, 2005), previously owned by Procter & Gamble Co. SYNAGRO TECHNOLOGIES: Posts $549,000 Net Loss in Fourth Qtr. 2005 ----------------------------------------------------------------- Synagro Technologies, Inc. (Nasdaq:SYGR) (ArcaEx: SYGR) reported its financial results for the three months and full year ended Dec. 31, 2005. The company reported a $549,000 net loss on $90,020,000 of revenues for the three months ended Dec. 31, 2005. "For the quarter our top line revenue increased 5.8% over the prior year's quarter to $90.0 million, including a $5.7 million increase in our contract revenues, while our design build revenues decreased $1.2 million as we are nearing completion of the Honolulu dryer facility," commenting on the results of the quarter, the Company's Chief Executive Officer, Robert C. Boucher, Jr. stated. "Operating income for the quarter totaled $8.6 million compared to $10.4 million reported last year. Our earnings before interest, taxes, depreciation and amortization for the quarter totaled $14.3 million compared to $16.0 million reported in the same period last year." "The decreases in operating income and EBITDA are primarily due to a $800,000 decrease in revenue on a long-term cleanout contract that had higher than normal margins in 2004, a $1.2 million increase in facility utility costs, an increase in insurance claims, and Sarbanes Oxley implementation costs of $500,000." "During 2005, we made substantial progress with our new facilities development projects. Specifically, construction was substantially completed on the Honolulu dryer facility, the Central Valley compost facility, and the Providence Soil dewatering facility such that all three are expected to startup in the first quarter of 2006." "These projects are expected to generate approximately $9 million of annual operating revenue. We experienced delays in obtaining final approvals to commence construction activity on the Kern composting facility and the Woonsocket incinerator expansion, but these facilities are now under construction and currently expected to be completed near the end of 2006." "These two projects are expected to generate in excess of $14.0 million of annual operating revenue when they commence operations." "For 2006, we expect revenues of approximately $325 million to $340 million, net income of approximately $9 million to $11.5 million and EBITDA adjusted to exclude non-cash charges for restricted stock awards and option expense of approximately $60.0 million to $64.0 million." "We also expect 2006 capital expenditures, excluding new facilities capital expenditures, to total approximately $5 million." "We expect new facilities capital expenditures in 2006 of approximately $43 million related primarily to the Kern, Woonsocket, and Providence Soils projects." "Interest expense is expected to total approximately $20.0 million (excluding $2.5 million of interest that is expected to be capitalized on the Kern and Woonsocket projects)." "Our guidance for revenues and EBITDA is similar to our reported results for 2005 as growth associated with expected new business and the startup of new facilities is being offset by an increase in utility costs in the first quarter of 2006 compared to 2005, and reductions from non-recurring items in 2005, including margin from $25.5 million of construction revenue, and $2.7 million of gains on sales of real estate." "Finally, we operate four facilities that do not have natural gas pass-through provisions with our customers. Our results in 2005 were negatively impacted by commodity prices for natural gas and electricity which significantly increased during 2005." "Though costs remain high, we have locked in our unit costs on natural gas for substantially all of our requirements for 2006 which should significantly decrease our exposure to fluctuations in the price of natural gas in 2006." Recapitalization In June 2005, the Company: -- closed a new $305 million senior secured credit agreement, -- repaid $190 million of debt under its previously outstanding senior and subordinated debt agreements, -- converted all outstanding shares of preferred stock into 41,885,597 shares of common stock, and -- completed a $160 million offering of 9,302,326 primary and 27,847,674 secondary shares of common stock. Accordingly, the Company incurred certain costs and write-offs relating to the Recapitalization, including $1.5 million of transaction costs and expenses, $6.8 million of stock option redemptions and transaction bonuses, and $19.5 million of debt extinguishment costs. The Company also recognized as dividends $4.6 million of previously unrecognized accretion on preferred stock. These costs and write-offs are included in the year-to-date consolidated statement of operations. About Synagro Technologies, Inc. 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. TOMMY HILFIGER: S&P Holds BB- Corp. Credit Rating on Neg. Watch --------------------------------------------------------------- Standard & Poor's Ratings Services held the ratings of Tommy Hilfiger U.S.A. Inc., including the 'BB-' corporate credit rating, on CreditWatch with negative implications, where they were placed on Nov. 3, 2004. The company recently indicated it has received approval from the European Commission to be acquired by Apax Partners for about $1.6 billion. The Apax transaction is expected to close in April 2006. Men's and women's sportswear, jeanswear, and childrenswear company Tommy Hilfiger had about $345 million in long-term debt outstanding as of Dec. 31, 2005. "Although the financing plans for this transaction were not disclosed, Standard & Poor's expects a significant portion to be debt financed," said Standard & Poor's credit analyst Susan H. Ding. "The operating challenges in invigorating the Tommy Hilfiger brand and the ability to reverse the company's negative operating trends for recent periods are major rating concerns." Other concerns include open tax issues with the Hong Kong tax authorities, and shareholder lawsuits. Standard & Poor's will continue to closely monitor developments as they occur. Resolution of the CreditWatch will depend on the outcome of the above open issues and Standard & Poor's review of the company's business and financial strategies following the acquisition. THAXTON GROUP: 4th Cir. Denies Class Certification in Finova Suits ------------------------------------------------------------------ The United States Court of Appeals for the Fourth Circuit reversed the order of the U.S. District Court for the District of South Carolina certifying plaintiff classes in five actions relating to The Finova Group, Inc.'s loan to The Thaxton Group, Inc. The U.S. District Court of South Carolina entered the class certification order in June 2005. The Thaxton Entities were declared in default under their loan agreement with Finova after they advised Finova that they would have to restate earnings for the first two fiscal quarters of 2003, and had suspended payments on their subordinated notes. As a result of the default, FINOVA exercised its rights under the loan agreement, and accelerated the indebtedness. The Thaxton Entities then filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on Oct. 17, 2003, listing assets of approximately $206 million and debts of $242 million. The Thaxton Group had approximately 6,800 holders of its subordinated notes that were issued in several states, with a total subordinated indebtedness of approximately $122 million. The Thaxton Entities' senior secured loan from Finova totaled $108 million at December 31, 2005. These cases were transferred, on June 18, 2004, to the South Carolina District Court at Finova's behest to the United States Judicial Panel on Multidistrict Litigation: Plaintiff Court Filed --------- ----- ----- Earle B. Gregory, et al. Court of Common Pleas Oct. 17, 2003 Lancaster County South Carolina Tom Moore, et al. U.S. District Court Nov. 25, 2003 South Carolina Sam Jones Wood, et al. Superior Court Dec. 9, 2003 Gwinnett County Georgia Grant Hall, et al. Superior Court Dec. 9, 2003 Mecklenberg County North Carolina Charles Shope, et al. U.S. District Court Jan. 13, 2004 Southern District Ohio Each of the five Thaxton-related lawsuits are styled as class actions, purportedly brought on behalf of certain defined classes of people who had purchased subordinated notes from the Thaxton Entities. The complaints by the subordinated note holders allege claims against Finova for fraud, securities fraud, and various other civil conspiracy and business torts in the sale of the subordinated notes. Each of the complaints seeks an unspecified amount of damages, among other remedies. Fourth Circuit's Order The Fourth Circuit ruled that in light of an adversary proceeding brought by Thaxton's unsecured creditors committee against Finova in Thaxton's chapter 11 cases, class certification is not the superior method for the fair and efficient adjudication of the controversy. Unless the Fourth Circuit's ruling is modified or reversed on rehearing or appeal, the Litigations will not be permitted to proceed as a class action and could only be pursued as individual or arguably mass actions. Through the Adversary Proceeding, the Thaxton Committee sought, among other things, to avoid and/or equitably subordinate the liens and claims of Finova against the Thaxton Entities and to recover payments amounting to $4 million previously collected due to alleged securities fraud, violations of banking laws and regulations, preference payments and similar claims. The Delaware District Court, in a March 20, 2006, ruling, found, among other things, that Finova engaged in fraudulent conduct by purposefully structuring its Loan Agreement in a way that allowed Thaxton to report to all of its creditors, and particularly prospective note purchasers, that an $8 million equity investment had been made, when in fact that $8 million continued to be debt, and that this enabled Thaxton to violate federal banking law. About Finova Headquartered in Scottsdale, Arizona, The Finova Group, Inc., provides commercial financing to small and mid-sized businesses; other services include factoring, accounts receivable management, and equipment leasing. The firm has three segments: Commercial Finance, Specialty Finance, and Capital Markets. FINOVA targets such markets as transportation, wholesaling, communication, health care, and manufacturing. Loan write-offs had put the firm on shaky ground. The Company and its debtor-affiliates and subsidiaries filed for Chapter 11 protection on March 7, 2001 (U.S. Bankr. Del. 01-00697). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., represents the Debtors. FINOVA has since emerged from Chapter 11 bankruptcy. Financial giants Berkshire Hathaway and Leucadia National Corporation (together doing business as Berkadia) own FINOVA through the almost $6 billion lent to the commercial finance company. About Thaxton Headquartered in Lancaster, South Carolina, The Thaxton Group, Inc., is a diversified consumer financial services company. The Company filed for Chapter 11 protection on October 17, 2003 (Bankr. Del. Case No. 03-13183). Daniel B. Butz, Esq., Michael G. Busenkell, Esq., and Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represent the Debtors in their restructuring efforts. Alan Kolod, Esq., at Moses & Singer LLP, represents the Offical Committee of Unsecured Creditors. As of Dec. 31, 2005, the Debtors reported assets totaling $98,889,297 and debts totaling $175,693,613. THAXTON: Dist. Court Finds Finova Guilty of Fraud in Loan Deal -------------------------------------------------------------- The United States District Court for the District of Delaware handed down a partial judgment on an action commenced by the Official Committee of Unsecured Creditors appointed in the chapter 11 cases of The Thaxton Group, Inc., and its debtor-affiliates against Finova Group, Inc. The Thaxton Entities owe Finova $108 million at Dec. 31, 2005, under a senior secured loan. Through the Adversary Proceeding, the Thaxton Committee sought, among other things, to avoid or equitably subordinate the liens and claims of Finova against the Thaxton Entities and to recover payments amounting to $4 million previously collected due to alleged securities fraud, violations of banking laws and regulations, preference payments and similar claims. In 2003, the Thaxton Entities were declared in default under their loan agreement with Finova after they advised Finova that they would have to restate earnings for the first two fiscal quarters of 2003, and had suspended payments on their subordinated notes. As a result of the default, Finova exercised its rights under the loan agreement, and accelerated the indebtedness. The Thaxton Entities then filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on Oct. 17, 2003, listing assets of approximately $206 million and debts of $242 million. The Thaxton Group had approximately 6,800 holders of its subordinated notes that were issued in several states, with a total subordinated indebtedness of approximately $122 million. Delaware District Court Ruling The District Court found, among other things, that Finova engaged in fraudulent conduct by purposefully structuring its Loan Agreement in a way that allowed Thaxton to report to all of its creditors, and particularly prospective note purchasers, that an $8 million equity investment had been made, when in fact that $8 million continued to be debt, and that this enabled Thaxton to violate federal banking law. Fourth Circuit Appeal Finova is appealing an equitable subordination order entered in Gregory v. Finova, Case No. 04-CA-2612, in the U.S. District Court for the District of South Carolina, to the U.S. Court of Appeals for the Fourth Circuit (Case No. 05-2118). In a filing with the Securities and Exchange Commission, Richard A. Ross, Finova's Senior Vice President, Chief Financial Officer & Treasurer, laments that if the Fourth Circuit does not modify the District Court's equitable subordination ruling, Finova's ability to recover on its claims in the Thaxton Entities bankruptcy cases may be materially and negatively affected, depending on the results of other rulings in the Adversary Proceedings that may substantially limit the effect and importance of the equitable subordination ruling. Among the other rulings that could affect Finova's ability to recover its claims, either positively or negatively, are the Delaware bankruptcy court's ruling on a pending request seeking substantive consolidation of the Thaxton Entities and the ability of Thaxton Group to assert claims against the other Thaxton entities. The Delaware Bankruptcy Court held a hearing on the substantive consolidation issue in 2004, but has not yet ruled on the matter. No hearing has been held on the Thaxton intercreditor issue. Mr. Ross adds that a material and negative impact on Finova's ability to recover on its claims in the Thaxton Entities bankruptcy cases would have a material adverse impact on the Company's financial position, results of operations and cash flow. Mr. Ross points out if there is a significant adverse final determination against Finova in the various cases involving the Thaxton Entities, it is unlikely that Finova would be able to satisfy that liability due to its financial condition. As previously disclosed, due to FINOVA's financial condition, it does not expect that it can satisfy all of its secured debt obligations at maturity. Attempts to collect on any judgment could lead to future reorganization proceedings of either a voluntary or involuntary nature. About Finova Headquartered in Scottsdale, Arizona, The Finova Group, Inc., provides commercial financing to small and mid-sized businesses; other services include factoring, accounts receivable management, and equipment leasing. The firm has three segments: Commercial Finance, Specialty Finance, and Capital Markets. FINOVA targets such markets as transportation, wholesaling, communication, health care, and manufacturing. Loan write-offs had put the firm on shaky ground. The Company and its debtor-affiliates and subsidiaries filed for Chapter 11 protection on March 7, 2001 (U.S. Bankr. Del. 01-00697). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., represents the Debtors. FINOVA has since emerged from Chapter 11 bankruptcy. Financial giants Berkshire Hathaway and Leucadia National Corporation (together doing business as Berkadia) own FINOVA through the almost $6 billion lent to the commercial finance company. About Thaxton Headquartered in Lancaster, South Carolina, The Thaxton Group, Inc., is a diversified consumer financial services company. The Company filed for Chapter 11 protection on October 17, 2003 (Bankr. Del. Case No. 03-13183). Daniel B. Butz, Esq., Michael G. Busenkell, Esq., and Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represent the Debtors in their restructuring efforts. Alan Kolod, Esq., at Moses & Singer LLP, represents the Offical Committee of Unsecured Creditors. As of Dec. 31, 2005, the Debtors reported assets totaling $98,889,297 and debts totaling $175,693,613. U.S. ABS: S&P Puts Two B Certificate Class Ratings on Neg. Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on two classes from one U.S. ABS securitization related to General Motors Corp. on CreditWatch with negative implications. At the same time, the ratings on two classes from one U.S. ABS securitization related to General Motors Acceptance Corp. remain on CreditWatch with developing implications, where they were placed Oct. 11, 2005. The March 29, 2006, placement of the ratings on GM on CreditWatch negative does not have any immediate impact on the GMAC-related ABS transactions supported by collateral pools of consumer auto loans or auto wholesale loans. The 'BB' corporate credit rating on GMAC remains on CreditWatch with developing implications. The transaction with ratings placed on CreditWatch negative is weak-linked to the long-term corporate credit rating on GM. GM provides the underlying collateral for the securitization. The March 29, 2006, placement of the ratings on GM on CreditWatch negative reflects: * GM's disclosure in its 2005 10-K that the recent restatement of its previous financial statements raises potential issues regarding access to its $5.6 billion standby credit facility; and * the possibility that certain lease obligations of as much as $3 billion could be subject to possible claims of: -- acceleration, -- termination, or -- other remedies. Ratings placed on creditwatch negative: Corporate Backed Trust Certificates Series 2001-8 Trust Rating Class To From Role of GM ----- -- ---- ---------- A-1 B/Watch Neg B Underlying collateral A-2 B/Watch Neg B Underlying collateral Ratings remaining on creditwatch developing: Freedom Certificates US Autos Series 2004-1 Trust Class Rating Role of GMAC ----- ------ ------------ A BB/Watch Dev Underlying collateral X BB/Watch Dev Underlying collateral UNION PACIFIC: DBRS Holds BBB Issuer Rating on Stable Trend ----------------------------------------------------------- Dominion Bond Rating Service confirmed the rating of Union Pacific Corporation at BBB. The trend is Stable. UP's financial profile remains on track for the rating, following operating performance improvement over the past year that was in line with expectations. * Union Pacific Corp. -- Issuer Rating Confirmed at BBB UP's credit metrics are compatible with the rating. The Company has made progress in enhancing network efficiency and further gains are expected. However, an improvement to the flow of traffic on many main routes remains a key issue facing UP. Network-related expenses have moderated earnings and cash flow growth relative to the Company's peers. In addition, further capacity expansion initiatives will continue to require significant investment, which will limit UP's ability to generate significant free cash flow. DBRS expects the trend of earnings growth since year-end 2004 to continue over the near term, driven by robust demand across much of its highly diversified revenue base. Rising prices, fuel surcharges, and increasing volumes will remain the primary earnings drivers, and more than offset the impact of high/rising diesel prices. Continuing network capacity initiatives are expected to enhance efficiency, improve service, and support significant growth from global trade and truck market share gains over the longer term. DBRS notes that UP is expected to fund operations internally over the near term, driven by earnings growth. However, free cash flow is expected to be modest, largely due to continuing high capex required primarily for capacity investments and network upgrades. The Company's credit metrics are expected to strengthen over the near term. In the event of sharper-than-expected growth in earnings and cash flow, combined with flat or lower adjusted debt levels, DBRS would consider a positive rating adjustment. The rating is likely to be constrained until more tangible evidence of network efficiency improvement is demonstrated by UP. US AIRWAYS: America West Will Redeem $112MM of 7.5% Conv. Notes --------------------------------------------------------------- America West Holdings Corporation, a wholly owned subsidiary of US Airways Group, Inc., gave notice of full redemption to the holders of its 7.5% Convertible Senior Notes due 2009. The redemption date of the Notes has been set for April 13, 2006. The aggregate principal amount outstanding of the Notes is $112,299,302. Holders of the Notes will receive $1,053.42 in cash per $1,000 principal amount of Notes, which includes accrued and unpaid interest up to, but not including, the date of redemption. A notice of redemption has been sent to all registered note holders as of March 24, 2006. Copies of the notice may be obtained from the trustee and paying agent: Wilmington Trust Company Telephone (302) 636-6016 Holders of the Notes have the right, at any time at or prior to 5:00 p.m., New York City time, on April 11, 2006, the date that is two business days prior to the redemption date, to convert the Notes in integral multiples of $1,000 into shares of the common stock of US Airways Group at a price of $29.09 per share, or 34.376 shares per $1,000 principal amount. As indicated in the notice of redemption, to convert the Notes, a holder must deliver to the Depository Trust Company the appropriate instruction form for conversion pursuant to DTC's conversion program and must pay any transfer taxes or other applicable taxes or duties, if required. US Airways and America West's recent merger creates the fifth largest domestic airline employing nearly 35,000 aviation professionals. US Airways, US Airways Shuttle and US Airways Express operate approximately 3,700 flights per day and serve more than 230 communities in the U.S., Canada, Europe, the Caribbean and Latin America. About US Airways Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. USG CORP: US Gypsum to Fund Otsego's $18M Purchase of Paper Mill ---------------------------------------------------------------- Menasha Packaging Company, LLC, a Wisconsin limited liability company and a wholly owned subsidiary of Menasha Corp., owns a paper mill and related assets located in Otsego, Michigan. The original site of the mill was developed in 1887. Paper machine no. 1 located at the site was built in 1964, with a major upgrade completed in 1991 and a new process control system installed in 2001. The latest product produced at the Paper Mill was corrugating medium. The Paper Mill was shut down in the third quarter of 2005 because it no longer fits Menasha Packaging's operational needs. Subsequently, Menasha Corp., Menasha Packaging, United States Gypsum Company, and Otsego Paper, Inc., entered into an Acquisition Agreement, pursuant to which US Gypsum will be able to acquire the Paper Mill and upgrade its production capabilities to fit its paper production needs. Having been in the paper business since 1920, Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that US Gypsum's vertical integration of paper manufacturing remains an important strategy because it supports US Gypsum's goal to reduce the cost of its delivered wallboard so that it can produce and deliver high quality wallboard at a lower cost than its competitors. "This strategy accounts for a significant portion of US Gypsum's total cost reduction program," Mr. Heath says. In connection with the Acquisition Agreement, US Gypsum incorporated Otsego Paper as a wholly owned subsidiary to execute the Agreement and acquire the Paper Mill. US Gypsum will fund Otsego Paper all amounts necessary for it to purchase the Paper Mill. Key terms of the Acquisition Agreement are: (1) In consideration for the purchased assets, Otsego Paper will pay $18,000,000 to Menasha Packaging at the closing of the acquisition by wire transfer of immediately available funds. (2) At the closing date, Menasha Packaging will sell, convey and transfer to Otsego Paper all of its right, title, and interest in and to the Purchased Assets, including specified real and personal property related to the Paper Mill and its co-generation facility. (3) Otsego Paper will assume and agree to pay, perform and discharge certain liabilities and obligations in connection with its acquisition of the Purchased Assets. (4) US Gypsum will guarantee all of Otsego Paper's obligations, including payment of the Purchase Price and indemnity obligations. (5) Otsego Paper and Menasha Packaging will indemnify each other from certain losses actually incurred by each party. As part of their efforts to expand and strengthen their position in the building products manufacturing and distribution businesses, the Debtors, according to Mr. Heath, are receptive to, and actively search for, opportunities to acquire assets that can increase their cost and other advantages within those industries. "The building products manufacturing and distribution industries are highly competitive," Mr. Heath says. "The controlled expansion of the Debtors' businesses through strategic acquisitions is not merely beneficial to, but is in fact necessary for, the maximization of value for the Debtors' estates and creditors." Mr. Heath maintains that the failure to capitalize on those opportunities may result in the loss of the Debtors' pre-eminent position in the marketplace and a corresponding decline in their prospects. Accordingly, US Gypsum seeks Judge Fitzgerald's permission to consummate all of the transactions contemplated by the Acquisition Agreement, including providing funding to Otsego Paper to pay for the Paper Mill. About USG Corp 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. 106; Bankruptcy Creditors' Service, Inc., 215/945-7000) VANTAGEMED CORP: Equity Deficit Narrows to $3.4 Mil. at Dec. 31 --------------------------------------------------------------- VantageMed Corporation (OTCBB: VMDC.OB) reported its financial results for the fourth quarter and year ended Dec. 31, 2005. The company reported a $303,000 net loss on $3,464,000 of total revenues for the three months ended Dec. 31, 2005. For the full year ended Dec. 31, 2005, the company reported a $4,280,000 net loss on $15,295,000 of total revenues. At Dec. 31, 2005, the company's balance sheet showed $2,764,000 in total assets and $6,174,000 in total liabilities, resulting in a $3,410,000 stockholders' equity deficit. The company's Dec. 31 balance sheet also showed strained liquidity with $2,174,000 in total current assets available to pay $6,110,000 in total current liabilities coming due within the next 12 months. "In 2005 we invested significant capital in strengthening our core products and capabilities with our three practice management operations, and our lightweight computerized medical record solution," Steve Curd, VantageMed's CEO, commented. "During this process we were also able to make significant reductions to our operating costs and cash usage levels. Quarterly net losses have been reduced significantly from over $1 million in each of the first three quarters of 2005 to approximately $300,000 in the fourth quarter. The company is now better positioned to move toward profitability." VantageMed Corporation -- http://www.vantagemed.com/-- is a provider of healthcare software products and services to more than 18,000 physician, anesthesiologist and behavioral health providers nationwide. VantageMed's core products include ChartKeeper Computerized Medical Records software, RidgeMark, Northern Health Anesthesia, and Helper family of Practice Management products. All these products are supported by SecureConnect electronic transaction services. Its suite of software products and services automates administrative, financial, clinical and management functions for physicians and other healthcare providers as well as provider organizations. At Dec. 31, 2005, the company's stockholders' equity deficit narrowed to $3,410,000 from a $4,262,000 deficit at Dec. 31, 2004. VENTURE HOLDINGS: Erman Teicher to Handle Small Preference Claims ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Michigan approved the request of Stuart A. Gold, Chapter 7 Trustee overseeing the liquidation of Venture Holdings Company, LLC, and its debtor-affiliates, to employ Erman, Teicher, Miller, Zucker & Freedman, P.C., as his special purpose counsel. Erman Teicher will represent the Debtors in all preference actions which are under $15,000 per creditor regardless of whether an adversary proceeding is or was filed, effective Jan. 17, 2006. The Trustee will pay the Firm a contingency fee equal to 33-1/3% of the net recovery received from each preference action after deductions, if any, for costs advanced by the Firm or by the estate for any preference action. Headquartered in Fraser, Michigan, Venture Holdings Company, LLC, nka NM Holdings Company, LLC, and its debtor-affiliates filed for chapter 11 protection (Bankr. E.D. Mich. Case No. 03-48939) on March 28, 2003. Deluxe Pattern Corporation and its debtor- affiliates filed for chapter 11 protection on May 24, 2004 (Bankr. E.D. Mich. Case No. 04-54977). Venture's prepetition lenders acquired Venture's assets during the chapter 11 proceeding. John A. Simon, Esq., at Foley & Lardner LLP represents the Debtors. John A. Karaczynski, Esq., and Robert M. Aronson, Esq., at Akin Gump Strauss Hauer & Feld LLP, and Joel D. Applebaum, Esq., at Clark Hill PLC represent the Creditors' Committee. VICORP RESTAURANTS: Posts $2 Mil. Net Loss in Qtr. Ended Jan. 26 ---------------------------------------------------------------- VICORP Restaurants, Inc., reported its financial results for the fiscal 2006 first quarter ended Jan. 26, 2006. Financials The company reported a $2,120,000 net loss on $112,304,000 of revenues for the three months ended Jan. 26, 2006. At Jan. 26, 2006, the company's balance sheet showed $403,351,000 in total assets, $331,097,000 in total liabilities, and [$72,254,000] in total stockholders' equity. The company's Jan. 26 balance sheet also showed strained liquidity with $27,230,000 in total current assets available to pay $43,245,000 in total current liabilities coming due within the next 12 months. "While we are disappointed with the results of the quarter from a contribution perspective, we are nonetheless pleased with the comparable sales of the three business units," Debra Koenig, CEO, commented. "Comparable restaurant sales at Village Inn increased 0.2% in the first quarter of 2006 versus the same quarter of 2005, reversing the slight decline shown in the fourth quarter of 2005." "Same store sales at the Bakers Square business unit declined by 0.3%; however, this performance was significantly improved over the fourth quarter of 2005, and represents the third successive quarter of improving same store sales." "This quarter was again very significant to VICORP in terms of our development program. During the first quarter, we opened six new restaurants, acquired four restaurants from a franchisee and closed two under-performing locations whose leases had expired." "We plan to open or acquire a total of 33 to 37 new restaurants throughout fiscal 2006, predominantly under the Village Inn brand." The company's fiscal year is comprised of 52 or 53 weeks divided into four fiscal quarters. The company's 2006 first fiscal quarter is comprised of 12 weeks, or 84 days. The company's 2005 first fiscal quarter was comprised of 13 weeks, or 91 days. Full-text copies of VICORP Restaurants, Inc.'s financial statements for the quarter ended Jan. 26, 2006, are available for free at http://ResearchArchives.com/t/s?735 About VICORP Restaurants, Inc. Headquartered in Denver, Colorado, VICORP Restaurants, Inc. -- http://www.vicorpinc.com/-- operates family-dining restaurants under two proven and well-recognized brands, Village Inn and Bakers Square. VICORP, founded in 1958, has 379 restaurants in 25 states, consisting of 279 company-operated restaurants and 100 franchised restaurants. Village Inn is known for serving fresh breakfast items throughout the day, and we have also successfully leveraged its strong breakfast heritage to offer traditional American fare for lunch and dinner. Bakers Square offers delicious food for breakfast, lunch and dinner complimented by its signature pies, including dozens of varieties of multi-layer specialty pies made from premium ingredients. * * * As reported in the Troubled Company Reporter on Mar. 29, 2006, Standard & Poor's Ratings Services lowered its corporate credit rating on Denver-based restaurant operator VICORP Restaurants Inc. to 'B' from 'B+'. The senior unsecured debt rating was lowered to 'B-' from 'B'. S&P said the outlook is negative at that time. WCI STEEL: Bankruptcy Court Confirms Noteholders' Chapter 11 Plan ----------------------------------------------------------------- WCI Steel, Inc. completed another step towards its emergence from bankruptcy reorganization after a U.S. Bankruptcy Court judge signed orders confirming a Plan of Reorganization for WCI. U.S. Judge Marilyn Shea-Stonum, the bankruptcy judge in charge of WCI's Chapter 11 case, ruled in favor of the reorganization plan presented by a group of WCI's secured noteholders. Terms of the Competing Plans As reported in the Troubled Company Reporter on Oct. 28, 2005, the Second Competing Plans each incorporate provisions for the substantive consolidation of the Debtors' assets and liabilities. Substantive consolidation means that the assets and liabilities of the six Debtors will be pooled and all of Debtors' creditors will share in that common pool. Each of the plan proponents believes that substantive consolidation of the Debtors' assets and liabilities will assist the expeditious and successful conclusion of these Bankruptcy Cases. WCI's Second Plan The WCI Plan provides for: 1) a fully negotiated agreement with the United Steelworkers of America on the terms of a new collective bargaining agreement and related matters; 2) a capital structure that will allow New WCI to provide for the future needs of its business and 3) proven, capable management. The Debtors Plan is founded on a Revised CBA with their Union. The Revised CBA establishes the labor savings and costs necessary to reorganize WCI's business and to make the reorganized business a viable competitor in the future steel industry. Further, with a Revised Union CBA and the backing of the USW, the Reorganized Debtors avoid labor disputes and strikes and the other negative effects (including potential loss of valuable customers) associated with an unstable and uncertain workforce. The Debtors emphasize that their Plan is supported by their workers, and recommended by the Official Committee of Unsecured Creditors. Under WCI's Plan, these creditors are impaired: * Noteholders, * Unsecured Noteholders and * General Unsecured Creditors. Secured noteholders will receive on the Distribution Date, their pro rata portion of New Secured Notes in an aggregate principal amount equal to $93 million. The unsecured portion of the Noteholders' claim will get pro rata shares of the common interests of Equity Holdings LLC or a cash payment equivalent to 3% of their claims. General Unsecured Creditors will recover 22% of their claims, in cash. Secured lender claims, other secured claims and convenience claims are unimpaired. Equity interest holders won't receive distribution under the Plan. The Noteholders' Second Plan The Secured Noteholders: 1) are prepared to own Reorganized WCI subject to the terms and conditions of the existing labor contract; 2) believe that they will be able to negotiate an acceptable agreement with the United Steel Workers and 3) are committed to invest $50,000,000 in new cash on that basis. Under this Plan, WCI will reorganize on a stand-alone basis. The Debtors will continue to own and operate their businesses, without any sale of assets, any change in its pension or labor agreements, or any other business change. The Secured Noteholders and unsecured creditors will own all of the stock of the Reorganized WCI, the amount of debt on the company's balance sheet will be reduced, and the management of Reorganized WCI will change through the appointment of new officers and directors. The Noteholders financial advisor, CIBC World Markets valued Reorganized WCI at $325,000,000. All creditors, other than the Secured Noteholders and general unsecured creditors, will be paid either in full and in cash, or in accordance with the terms of their agreements. Secured Noteholders and general unsecured creditors will receive new notes, new common stock, cash and the right to purchase new preferred stock. The Plan also provides the assumption of the existing USW collective bargaining agreement without change to its terms. This differs from the plan of reorganization previously proposed by the Secured Noteholders, which provided for WCI to be sold to a separate entity without any collective bargaining agreement in place. Under the Noteholders' Plan, these claims are impaired: * Noteholders and * other allowed claims. The Noteholders will receive: a) $17 million in cash; b) $100 million of New Notes; and c) 1,730,129 of New Common Stock with a total value of $28,080,000. Unsecured creditors will receive and share pro rata 2,269,871 shares of New Common Stock plus any additional New Notes reallocated from the Noteholders. Unsecured creditors are expected to recover 22% of their claims. Wachovia's loan claims, other secured claims and small claims are unimpaired. Equity interest holders won't receive any distribution. CEO Comment Patrick G. Tatom, WCI's president and chief executive officer, said the timing of WCI's emergence from bankruptcy would depend upon a ratification vote by the United Steelworkers on a collective bargaining agreement negotiated in November with the noteholders. He added that the confirmed plan would enable WCI to emerge from bankruptcy with a strong balance sheet, a lower cost structure and a competitive labor agreement, all of which will position the company to better serve customers' needs now and in the future. "This plan gives the opportunity to build WCI Steel as a strong, independent custom flat-rolled producer," Mr. Tatom said. WCI filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code on Sept. 16, 2003. "All of us at WCI are greatly appreciative of the patience, support and loyalty shown by our customers, vendors and employees through the bankruptcy process," Mr. Tatom said. "We also are gratified by the strong commitment of our noteholder group, which is investing $50 million in the reorganized WCI." About WCI Steel Headquartered in Warren, Ohio, WCI Steel, Inc., is an integrated steelmaker producing more than 185 grades of custom and commodity flat-rolled steel at its Warren, Ohio facility. WCI products are used by steel service centers, convertors and the automotive and construction markets. WCI Steel filed for chapter 11 protection on Sept. 16, 2003 (Bankr. N.D. Ohio Case No. 03-44662). Christine M. Pierpont, Esq., and G. Christopher Meyer, Esq., at Squire, Sanders & Dempsey, L.L.P., represent the Company. When WCI Steel filed for chapter 11 protection it reported $356,286,000 in total assets and liabilities totaling $620,610,000. WINN-DIXIE STORES: To Merge Distribution Biz in Southern Florida ---------------------------------------------------------------- Winn-Dixie Stores, Inc., reported that as part of its ongoing focus on enhancing its financial performance and helping to position the company for profitability when it emerges from Chapter 11 later this year, it has decided to consolidate its distribution operations in Southern Florida. Winn-Dixie will sell its distribution center in Pompano Beach, Florida and move the work performed at that facility to its distribution center nearby in Miami. Associates at the Pompano Beach facility will be offered positions in Miami. The transfer of operations is expected to begin in late April and be completed by the end of June. "We have continued to examine our operations to ensure Winn-Dixie is best positioned to emerge from Chapter 11 financially healthier and better able to compete," Winn-Dixie President and Chief Executive Officer Peter Lynch said. "Using one facility rather than two in Southern Florida will allow us to leverage economies of scale and operate more efficiently. Proceeds received from the sale of the Pompano distribution center will provide us with additional capital to help fund our remodeling program and other improvements." Mr. Lynch added, "We are pleased that this consolidation can be achieved with a minimal amount of layoffs, as we expect to be able to offer employment opportunities at the Miami facility to every associate in the Pompano Beach distribution center." Winn-Dixie, together with its outside advisors, will conduct an active marketing effort to identify potential buyers for the Pompano Beach facility, which is approximately 787,500 square feet and handles grocery, meat, dairy and produce items. The Miami facility is approximately 961,690 square feet and handles the same items as well as frozen foods. There are currently approximately 280 full-time and part-time associates at the Pompano facility and 440 at the Miami facility. Winn-Dixie currently operates seven distribution centers in Florida, Alabama and Louisiana. Those interested in purchasing the Pompano Beach facility may contact: Emilio Amendola DJM Asset Management Telephone (631) 752-1100 Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063, transferred Apr. 14, 2005, to Bankr. M.D. Fla. Case Nos. 05-03817 through 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. Paul P. Huffard at The Blackstone Group, LP, gives financial advisory services to the Debtors. Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, and John B. Macdonald, Esq., at Akerman Senterfitt give legal advice to the Official Committee of Unsecured Creditors. Houlihan Lokey & Zukin Capital gives financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. WORLDCOM INC: Wants Musicland's Decision on Service Pact Now ------------------------------------------------------------ Pursuant to a Service Agreement dated August 2005, The Musicland Group, Inc., agreed to purchase a minimum of $1,500,000 worth of telecommunication services from MCI, Inc., each year, over a three-year term, with additional six-month ramp-up and ramp-down provisions. WorldCom, Inc., and its debtor-affiliates provide telecommunication services, including: * interstate and intrastate telecommunications services, * local service, * regional calling, * local metered TI service, and * voicemail service. William J. Hanlon, Esq., at Seyfarth Shaw LLP, in Boston, Massachusetts, relates that as a part of the Service Agreement, and as a reward for committing to the three-year term, the Debtors agreed to pay a $250,000 sign-up credit. The Sign-up Credit becomes due four months after the start of the Ramp-up Period, which started on October 15, 2005. The Service Agreement also provides that if Musicland terminates the Agreement before the end of the term, or if the Debtors terminates the Agreement for a cause, Musicland is required to pay a pro rata portion of any and all credits. Musicland and its 14 debtor-affiliates filed for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of New York. Judge Bernstein presides over Musicland's bankruptcy proceedings. The Debtors ask Judge Bernstein to fix a deadline for Musicland to assume or reject the Service Agreement. According to Mr. Hanlon, there is a potential substantial injury to the Debtors if the Service Agreement is not assumed. If the Debtors pay the Sign-up Credit without a prior assumption, Musicland will be able to reject the Service Agreement and treat both their obligations to refund the cash Signing bonus and the balance due for breach to the Debtors as an unsecured non- priority, prepetition claim. Musicland should not be allowed to pick and choose the advantageous portion of the Service Agreement, while retaining the option of avoiding its own obligation, Mr. Hanlon contends. The Debtors believe that the telecommunication services it provided under the Service Agreement are necessary to Musicland's operations. Thus, there is little prejudice to Musicland's estate in compelling it to assume the Service Agreement. The Debtors also seek Judge Bernstein's permission to file the Service Agreement under seal. Mr. Hanlon notes that the disclosure of certain information contained in the Service Agreement, including the pricing of telecommunications services, would put the Debtors at a competitive disadvantage. The Debtors ask Judge Bernstein to restrict access to the Service Agreement to: (a) the Court, (b) the United States Trustee, (c) professionals retained by an official committee in Musicland's Chapter 11 cases, and (d) those persons who: * are deemed acceptable by Musicland and the Debtors; * have executed a confidentiality agreement acceptable to Musicland and the Debtors; and * present the Clerk of the Court with a document evidencing satisfaction of the previous two Conditions, signed by the Debtors. The Debtors ask Judge Bernstein to rule that: -- access to the Service Agreement will only be for determining whether the relief requested in their Motion to Fix Deadline for Assumption or Rejection should be granted; -- any parties permitted access to the Service Agreement will not share any information contained in that document with any third party; and -- any party found to have violated those conditions will be subject to sanctions. About WorldCom Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 115; Bankruptcy Creditors' Service, Inc., 215/945-7000) WORLDCOM INC: Gets Okay to File Enforcement Request Under Seal -------------------------------------------------------------- To resolve certain outstanding business issues with Qwest Corporation and its affiliates, MCI, Inc., and Qwest signed a settlement agreement on August 14, 2003. Alfredo R. Perez, Esq., at Weil, Gotshal & Manges LLP, Esq., in New York City, relates that the Settlement Agreement contains substantial proprietary and confidential information, as well as provisions imposing confidentiality and non-disclosure obligations. Thus, the Agreement was not filed with the U.S. Bankruptcy Court for the Southern District of New York. Rather, WorldCom, Inc., and its debtor-affiliates filed a summary of the general terms of the Agreement. On January 9, 2006, Qwest filed a complaint against certain of the Reorganized Debtors in the U.S. District Court for the District of Colorado, asserting claims for breach of federal tariffs, breach of state tariffs, and in the alternative, unjust enrichment. The lawsuit is now pending in the Colorado Court. The parties have been unable to reach an agreement on the Qwest Action. The Qwest Action will necessarily implicate provisions of the parties' confidential Settlement Agreement, Mr. Perez says. According to Mr. Perez, the dissemination of certain commercial information pertaining to the Debtors' business relationship with Qwest would prejudice the Debtors by allowing other competitors and claimants to gain an unfair advantage in future settlements and business transactions. In addition, a disclosure would also violate the Settlement Agreement. Therefore, the Debtors ask the Court to: (a) allow them to file a motion to enforce the Plan and Confirmation Order against Qwest from prosecuting discharged claims and any related exhibits under seal; (b) require Qwest to file any response to the Enforcement Motion under seal; and (c) rule that the contents of the Motion to Enforce, any response filed by Qwest and any related pleadings and papers, and hearing transcripts recorded, will remain confidential and will not be made available to the general public. * * * Judge Arthur Gonzalez grants the Debtors' request. About WorldCom Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 115; Bankruptcy Creditors' Service, Inc., 215/945-7000) XYBERNAUT CORP: Court Approves East River as Interim DIP Lender --------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Virginia approved East River Capital LLC as Xybernaut Corporation's (Pink Sheets: XYBR.PK) interim replacement Debtor-in-Possession lender, subject to final approval on April 25. ERC has provided a $1.9 million initial loan to Xybernaut that will be increased to $2.6 million on final approval, and can be increased to $3.2 million by mutual agreement. Separately, the Court also approved the engagement of SSG Capital Advisors, L.P. and Technology Options Capital LLC, confirming their activities since February as the investment banking team spearheading the sale of some or all of the Company's extensive patent portfolio as part of its plan to emerge from Chapter 11. "Due to a dispute with the original DIP lender -- LC Capital Master Fund -- the Company did not receive funding from this lender in January or February," Perry L. Nolen, President of Xybernaut, declared. "With the interim approval of ERC, the Company's near-term budget has been funded in full and we have caught up on substantially all our obligations to vendors and employees. By reducing the size of the escrows in the new structure, we were able to reduce the loan amount from $5 million with the prior lender to $2.6 million with ERC. Assuming approval of the final order by the court, we believe this amount will be sufficient to see us successfully through the sale process of the patents." "With this new loan in place, we are back on our original plan to sell some or all of our patent portfolio to obtain the funding needed to emerge from Chapter 11 in the second half of the year as an ongoing provider of mobile computing solutions," Mr. Nolen said. "As part of that plan, we selected TOC to provide expertise in evaluating and positioning the patent portfolio and selected SSG to add expertise in sales of assets through the Chapter 11 process. In February, the Investment Banking team started the process of targeting and positioning components of this portfolio to key industry players. Although there can be no assurance as to the outcome of this sales process, we are pleased with the progress made by the investment banking team." East River Capital is a special situations investment fund based in Westport, Connecticut. Additional information about the fund can be obtained by contacting: Stevi Pasquella Telephone (203) 341-9964 About Xybernaut Corporation Headquartered in Fairfax, Virginia, Xybernaut Corporation, develops and markets small, wearable, mobile computing and communications devices and a variety of other innovative products and services all over the world. The corporation never turned a profit in its 15-year history. The Company and its affiliate, Xybernaut Solutions, Inc., filed for chapter 11 protection on July 25, 2005 (Bankr. E.D. Va. Case Nos. 05-12801 and 05-12802). John H. Maddock III, Esq., at McGuireWoods LLP, represents the Debtors in their chapter 11 proceedings. Paul M. Sweeney, Esq., at Linowes & Blocher LLP , represents the Official Committee of Unsecured Creditors. Craig Benson Young, Esq., at Connolly Bove Lodge & Hutz, represents the Official Committee of Equity Security Holders. When the Debtors filed for protection from their creditors, they listed $40 million in total assets and $3.2 million in total debts. * Houlihan Lokey Relocating Washington Office Effective April 1 --------------------------------------------------------------- Houlihan Lokey Howard & Zukin is relocating and expanding its Washington, D.C., office, effective April 1, 2006. The firm's new Washington address is: Houlihan Lokey Howard & Zukin 1800 Tysons Boulevard, Suite 300 McLean, VA 22102-4262 Phone: 703.847.5225 Fax: 703.848.9667 Phone numbers will remain the same. International investment bank Houlihan Lokey Howard & Zukin -- http://www.hlhz.com/-- provides a wide range of services, including mergers and acquisitions, financing, financial opinions and advisory services, and financial restructuring. Houlihan Lokey has ranked among the top 10 M&A advisors in the U.S. for the past five years, has been the No. 1 provider of M&A fairness opinions for five consecutive years, and has one of the largest worldwide financial restructuring practices of any investment bank. Established in 1970, the firm has over 700 employees in 11 offices in the United States and Europe. BOOK REVIEW: Dynamics of Institutional Change: The Hospital in Transition -------------------------------------------------------------- Authors: Milton Greenblatt, M.D., Myron R. Sharaf, Ph.D., and Evelyn M. Stone Publisher: Beard Books Hardcover: 292 pages List Price: $34.95 Order your personal copy today at: http://www.amazon.com/exec/obidos/ASIN/1587981815/internetbankrupt "Few social issues are more important today than the question of changing our public institutions so that they are more responsive to human want." This observation, made by the authors in 1971 when Dynamics of Institutional Change: The Hospital in Transition was first published, is even more relevant today. As the co- authors foresaw, the problem of sclerotic institutions threatening the social and moral commitments of government and other organizations was likely to become even more severe with the expanding population and with a more informed public having higher expectations and seeking accountability for shortcomings and failures. Hence, "[t]his book is concerned with the transitional period in the reorganization of a large public institution." As Superintendent of Boston State Hospital from 1963 to 1967, Milton Greenblatt, the book's principal author, ushered this large public institution through a transitional period. The hospital improved its services and better served not only its patients, but also its employees and the public, which funded the hospital through its taxes. While transition within complex, established organizations is the general topic, the focus is especially on "problems hampering change and the gains and losses of one or another strategy of change." These seemingly contradictory ends that must be considered in most transitions are: centralization versus decentralization; unified philosophy versus multiple ideologies; equal distribution versus special concentration of wealth; and professional domain versus use of volunteers. Evaluating and balancing these ends are discussed in the early chapters. The later chapters explore in greater depth the issues Greenblatt confronted when he led the transition at Boston State Hospital. While the work is based mainly on Greenblatt's assignment and experiences with the hospital, the majority of the content takes a broad enough look at the transition to make it an instructive and invaluable guide for any healthcare professional responsible for planning and effecting a transition in healthcare delivery. As the authors state at the start of this book, the Boston State Hospital case affords "parallels and similarities" with other large institutions. The book offers a blueprint for structuring, planning, implementing, leading, and monitoring a major, organization-wide transition. At the same time, readers will find encouragement and, at times, will sympathize with Greenblatt's experiences from his difficult, and ultimately satisfying, task in leading a large public healthcare institution through a wrenching transition. Like any determined leader, Greenblatt was the focal point for concerns, disagreements, resistance, and resentment among some members of the staff. How he overcame these personnel issues while keeping the transition moving along provides a "real world" perspective to the subject matter. The core of Dynamics of Institutional Change is how decentralization through unitization was implemented at Boston State Hospital. Sometimes known more simply as "unitization," the authors prefer the longer term "decentralization through unitization" because it connotes the purpose of unitization, which is decentralization. Decentralization is an especially desirable result for large public institutions that have become unresponsive to public needs because of entrenched bureaucratic practices and the vested interests of various factions. Furthermore, decentralization helps organizations better utilize today's more educated and productive workforce. "[I]n the context of the state mental hospital, decentralization, or unitization as it is commonly called, involves breaking up the hospital into semiautonomous units." With the hospital, this means that each semiautonomous unit has its own admission service, respective treatment programs, and transitional and aftercare programs -- in effect, serving a specific part of the community by virtually becoming a "small mental health center." As explained by the authors, decentralization through unitization advances the "delegation of responsibility and maximum participation in decision-making" among employees in key positions. Thus, this approach helps diminish the inevitable skepticism and resistance to a transition, clarifies its purposes and ends among employees, and insures that it takes root in the different sectors of the organization. Dynamics of Institutional Change advocates change in massive, tangled healthcare organizations. However, the authors offer more than just a tired discourse on the nature of transition. This book tells how the needed transformation can be achieved by making difficult decisions, addressing nettlesome problems, and attending to daily management details. Readers can judge for themselves whether decentralization through unitization is relevant for resolving chronic institutional problems. However, planners and leaders in charge of transitions in other institutions will find this book especially worthwhile reading. Milton Greenblatt is a former Commissioner of the Massachusetts Department of Health who is on the teaching staffs of the medical schools at Tufts, Harvard, and Boston University. Co-authors Myron Sharaf and Evelyn M. Stone have experience in the areas of medicine and public health in the Boston area. ********* 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 ***