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/raid1/www/Hosts/bankrupt/TCR_Public/060724.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, July 24, 2006, Vol. 10, No. 174 Headlines ACANDS INC: Wants Until Nov. 3 to Remove Prepetition Civil Actions ACANDS INC: Ct. OKs Stipulation Settling AWI & Travelers' Dispute ADELPHIA COMMS: Asks Court to Approve U.S. EPA Settlement Accord ADELPHIA COMMS: America Channel Will Appeal Permanent Injunction AFFILIATED COMPUTER: Files Suit Against DHHS in North Carolina AFFINITY TECHNOLOGY: Approves Salary Increases of CEO and COO AH-DH APARTMENTS: Gets Final Okay to Use Citigroup's Collateral AIRNET COMMS: Plan Confirmation Hearing Set for August 17 ALLIED HOLDINGS: Bridge Order Extends Plan-Filing Period to Aug. 4 ALLIED HOLDINGS: Inks Settlement Pact with Gateway and Hydraulic ALT COMM: Case Summary & 20 Largest Unsecured Creditors ALTEON INC: Posts $1.6 Million Net Loss in Quarter Ended March 31 AMERICAN CREDIT: Voluntary Chapter 11 Case Summary AMERICAN MEDICAL: Completes Tender Offer for Laserscope's Shares AMERICAN SAFETY: Moody's Junks Rating on $175 Mil. 2nd-Lien Loan AMERICAN SAFETY: S&P Junks Rating on $175 Million Second-Lien Loan ANCHOR GLASS: Reports on 33 Claim Transfers to Three Entities ASARCO LLC: Court Approves Mercer as Special Financial Advisor ASARCO LLC: Can Assume Bank of America Equipment Lease BERKLINE/BENCHCRAFT: High Leverage Cues S&P to Lower Rating to B BLACKWATER ENTERPRISES: Case Summary & Largest Unsecured Creditor BRADLEY PHARMA: Restates First Quarter 2006 Financial Results CATHOLIC CHURCH: Court Rules on Estimation Methodology in Portland CATHOLIC CHURCH: Claimants Object to Portland's Discovery Request CERADYNE INC: Acquires Facility and Equipment for $14.1 Million CHARLES EDWARDS: Creditors Lose Bid to Prosecute State Court Suit CHURCH & DWIGHT: To Acquire Orange Glo Int'l for $325 Million CITGO PETROLEUM: Averted Auction Won't Affect Ratings Says Fitch COLLINS & AIKMAN: Lessors Balk at Extended Lease Decision Deadline CREATIVE VENTURES: Case Summary & Eight Largest Unsec. Creditors CROWN CORK: Financial Leverage Prompts Moody's to Hold Ratings CROWN HOLDINGS: Good Liquidity Cues Fitch to Put Low-B Ratings DELPHI CORP: UAW President Says Strike Still Possible DELPHI CORP: Says Harbinger Stock Purchase is "Noncompliant" DELPHI CORP: Unit Sells Assets to Wireless Matrix for $11 Million DELTA AIR: Wants Court Approval on Panasonic Master Agreement DELTA AIR: Wants to Amend Merrill Lynch Letter of Credit Facility DELTA AIR: Flight Attendants To Negotiate for Consensual Agreement DIGITAL LIGHTWAVE: Borrows $200,000 from Optel for Working Capital DYNCORP INTERNATIONAL: Appoints Herb Lanese as President and CEO EAGLEPICHER CORP: S&P Rates $65 Million Sr. Credit Facility at B- ENRON CORP: WB Court Orders Argentina to Pay Azurix Unit $165 Mil. ENRON CORPORATION: Files Seventh Post-Confirmation Report ENTERGY NEW ORLEANS: S&P Holds Default Rating With Neg. Outlook EQUISTAR CHEMICALS: Fitch Puts Low-B Ratings on Evolving Watch ESTERLINE TECH: Moody's Lifts Rating on $175 Mil. Sr. Notes to Ba3 EVERGREEN INT'L: Launches Tender Offer for 12% Senior Sec. Notes EVERGREEN INT'L: Planned Refinancing Prompts S&P's Positive Watch FALCONBRIDGE LIMITED: Directors Review Xstrata's Revised Offer FALCONBRIDGE LTD: Must Decide on Offers by July 27 Says Inco FALCONBRIDGE LTD: Raised Phelps Bid Cues S&P to Watch Ratings FIRST SUMMIT: Case Summary & Largest Unsecured Creditor FOAMEX INTERNATIONAL: Gets Okay to Set Off Guilford Mills Debts FORD MOTOR: Moody's Lowers Senior Unsecured Ratings to B2 GE COMMERCIAL: Fitch Affirms Low-B Ratings on Three Class Certs. GENERAL MOTORS: Clears PBGC Hurdle to $14-B Sale of 51% GMAC Stake GREAT NORTHERN: Hires German Nason as New Brunswick Counsel GTSI CORP: New Loans Require Continuing Positive EBITDA H&E EQUIPMENT: Issues $250 Mil. Senior Notes in Private Offering H&E EQUIPMENT: S&P Rates Proposed $250 Million Senior Notes at B+ IDI CONSTRUCTION: Court Says $2.4 Mil. Settlement is the Estate's INCO LIMITED: Asserts that Offer is Superior to Xstrata's INCO LIMITED: Teck Cominco Extends Offer Expiry to August 16 ITC HOMES: Hires McNamara Goldsmith as Arizona Special Counsel KAISER ALUMINUM: Terminates 4-1/8% & 4-3/4% Convertible Stocks LEAR CORP: Agrees to Add European Interiors Biz to Joint Venture LG.PHILIPS DISPLAYS: Ch. 7 Trustee Hires Cooch & Taylor as Counsel LG.PHILIPS: Ch. 7 Trustee Taps Pepper Hamilton as Special Counsel LITTLE FARM: Case Summary & Eight Largest Unsecured Creditors LYONDELL CHEMICAL: Fitch Puts Low-B Ratings on Evolving Watch LYONDELL CHEMICAL: Discontinued Sale Cues Moody's Ratings Review LYONDELL CHEMICAL: Averted Sale Prompts S&P's Negative Watch MAXXAM INC: Pacific & Britt Completes $145 Million Financing MC GREENHOUSE: Case Summary & Eight Largest Unsecured Creditors MERIDIAN AUTOMOTIVE: Delaware Court Approves Disclosure Statement MERIDIAN AUTO: Files Revised 3rd Amended Plan & Disclosure Papers MERIDIAN AUTOMOTIVE: Addresses Clean-Air Violations Cited by EPA MILLENNIUM CHEMICALS: Fitch Affirms Issuer Default Rating at B+ MIRANT CORP: Rule 2019 Dispute on PEPCO Settlement Resolved MIRANT CORP: Court Approves New York Independent System Settlement MIRANT CORP: Wants Environmental Dept.'s 2006 Consent Order Okayed NATIONAL LAMPOON: Appoints Bruce Long as President NATIONSRENT COS: Ashtead Merger Prompts S&P's Positive Watch OCA INC: Court Denies BofA's Request to Disband Equity Committee OSA DEVELOPMENT: Case Summary & Largest Unsecured Creditor OWENS CORNING: Wants Court to Approve Blue Ridge Settlement OWENS CORNING: Court Approves Rights Offering Procedures PARKWAY HOSPITAL: Wants Plan-Filing Period Extended to Aug. 30 PARMALAT USA: Bondi Seeks Permanent Injunction on Ancillary Cases PERINI CORP: Moody's Withdraws Senior Notes' B2 Ratings PHIBRO ANIMAL: Receives Requisite Consents for Three Senior Notes PLATFORM LEARNING: U.S. Trustee Objects to Hiring of Argus Mgt. PLYMOUTH RUBBER: Court Approves Modified 2nd Amended Ch. 11 Plan PORTRAIT CORPORATION: Hires Thomas L. Garret, Jr. as EVP and CFO RUBEN DONADO: Case Summary & 13 Largest Unsecured Creditors RUSSELL-STANLEY: Has Until November 30 to Object to Claims SATCON TECH: Inks $12 Mil. Financing Transaction with Investors SEMGROUP LP: Moody's Holds B1 Rating on $350 Million Senior Notes SILICON GRAPHICS: Goodwin Procter Represents Ad Hoc Committee SILICON GRAPHICS: Wants to Issue Credit Memos to Customers SPECIALTYCHEM PRODUCTS: Wants Fort Dearborn as Financial Advisor SPECIALTYCHEM PRODUCTS: Panel Taps Greenberg Traurig as Co-Counsel SUPERIOR GALLERIES: Sells Assets to DGSE Cos. for $14 Million TEREX CORP: Inks New $900 Million Senior Lending Facility TRANSFIRST HOLDINGS: Moody's Junks Rating on $120 Mil. Sec. Loan TRANSFIRST HOLDINGS: S&P Rates $120 Million Second-Lien Loan at B- TRISTAR HOTELS: Ch. 7 Trustee Hires Wendel Rosen as Bankr. Counsel UNISYS CORP: Moody's Downgrades Senior Unsec. Debt Rating to B2 US SHIPPING: Expansion Program Prompts Moody's to Review Ratings UTILITY CRAFT: Case Summary & 20 Largest Unsecured Creditors VARIG S.A.: Sojitz Corp. Blocks Plea for Permanent Injunction XYBERNAUT CORP: Inks Further Amendment to Secured Promissory Note YANDOLI FOODS: Voluntary Chapter 11 Case Summary * Gilbert Heintz is "Hidden Gem" in BTI Power Rankings * BOND PRICING: For the week of July 17 - July 21, 2006 ********* ACANDS INC: Wants Until Nov. 3 to Remove Prepetition Civil Actions ------------------------------------------------------------------ ACandS, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to extend the period within which it can remove pending civil actions until Nov. 3, 2006, or the Effective Date of its plan. As reported in the Troubled Company Reporter on June 27, 2006, the Court had previously extended the Debtor's exclusive plan-filing period to July 6, 2006. Curtis A. Hehn, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, explained that the Debtor has been unable to complete the removal process because it has devoted most of its time to: -- various litigation matters; -- compiling information related to approximately 300,000 asbestos claims; and -- securing approval of a disclosure statement and Plan of Reorganization. The Debtor maintained that its Plan of Reorganization pending before the U.S. District Court for the District of Delaware should be confirmed. However, the Debtor said that it is also negotiating for an alternative plan structure with key creditor constituencies. Because of the ongoing negotiations, the District Court has indefinitely postponed hearings on confirmation of the Debtor's Plan. The extension will give the Debtor and its professionals more time to make fully informed decisions concerning removal of each prepetition action. Headquartered in Lancaster, Pennsylvania, ACandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, the Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on Sept. 16, 2002 (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., represents the Debtor in its restructuring efforts. Kathleen Campbell Davis, Esq., and Marla Rosoff Eskin, Esq., at Campbell & Levine, LLC, represent the Official Committee of Asbestos Personal Injury Claimants. When the Company filed for protection from its creditors, it estimated debts and assets of over $100 million. Chapter 11 Plan Update Judge Fitzgerald approved the adequacy of the Debtor's Amended Disclosure Statement explaining their proposed Plan of Reorganization on Oct. 3, 2003. On Jan. 26, 2004, Judge Fitzgerald entered Proposed Findings of Fact and Conclusions of Law Re Chapter 11 Plan Confirmation (Doc. 979), recommending that the U.S. District Court deny confirmation of the Debtor's Plan. On Feb. 5, 2004, the Debtor and the Official Committee of Asbestos Personal Injury Claimants jointly filed with the District Court an objection to the Bankruptcy Court's Proposed Findings. In that filing, the Debtor and the Committee asked the District Court to reject the Bankruptcy Court's Findings and Conclusions and confirm the proposed chapter 11 plan. ACANDS INC: Ct. OKs Stipulation Settling AWI & Travelers' Dispute ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved the stipulation of settlement among ACandS, Inc., Armstrong World Industries, Inc., and Travelers Casualty and Surety Company, The Travelers Indemnity Company and the Travelers Insurance Company. Interpleader Action and Other Dispute The Travelers Insurance companies filed a complaint against both the Debtor and AWI for interpleader in AWI's Chapter 11 case, in connection with several disputes among the parties concerning their rights and obligations with respect to the Shared Primary Travelers Policies and the related proceeds. Among others, the Debtor and AWI dispute: -- amounts previously billed to or paid by Travelers for Non- Products Claims under the Shared Primary Travelers Policies. -- their rights with respect to the remaining indemnity limits for Non-Products Claims under the Shared Primary Travelers Policies that have not yet been billed to or paid by Travelers. Terms of Stipulation The Stipulation resolves multiple complex insurance disputes among the Debtor, AWI and Travelers over the parties' rights and obligations on insurance policies shared by the Debtor and AWI. In addition, the Stipulation also resolves a complaint filed by Travelers in AWI's chapter 11 case, which will save the Debtor from attorney's fees and expenses. The Debtor however says that the Stipulation only covers the disputes among the parties with respect to the shared policies. The Stipulation does not resolve other disputes between the Debtor and Travelers. Pursuant to the Stipulation, the Debtor will receive $2,464,628 on account of unpaid indemnity payments, which amount equals half of the unbilled coverage on the shared insurance policies. Headquartered in Lancaster, Pennsylvania, ACandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, the Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on Sept. 16, 2002 (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., represents the Debtor in its restructuring efforts. Kathleen Campbell Davis, Esq., and Marla Rosoff Eskin, Esq., at Campbell & Levine, LLC, represent the Official Committee of Asbestos Personal Injury Claimants. When the Company filed for protection from its creditors, it estimated debts and assets of over $100 million. Chapter 11 Plan Update Judge Fitzgerald approved the adequacy of the Debtor's Amended Disclosure Statement explaining their proposed Plan of Reorganization on Oct. 3, 2003. On Jan. 26, 2004, Judge Fitzgerald entered Proposed Findings of Fact and Conclusions of Law Re Chapter 11 Plan Confirmation (Doc. 979), recommending that the U.S. District Court deny confirmation of the Debtor's Plan. On Feb. 5, 2004, the Debtor and the Official Committee of Asbestos Personal Injury Claimants jointly filed with the District Court an objection to the Bankruptcy Court's Proposed Findings. In that filing, the Debtor and the Committee asked the District Court to reject the Bankruptcy Court's Findings and Conclusions and confirm the proposed chapter 11 plan. ADELPHIA COMMS: Asks Court to Approve U.S. EPA Settlement Accord ---------------------------------------------------------------- To avoid civil and administrative claims, including potentially significant civil penalty claims, Adelphia Communications Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of New York's authority to enter into a Settlement Agreement with the United States of America, on behalf of the Environmental Protection Agency. Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher LLP, in New York, relates that the ACOM Debtors own and operate approximately 4,000 facilities located in 31 States and majority of these facilities consist of cable television operating plants and equipment, which may have stand-by electric power generating equipment, including diesel generators and sulfuric acid batteries. Many of the facilities are subject to federal and state environmental laws. To resolve potential violations of the relevant federal environmental statutes, rules and regulations at its facilities, the ACOM Debtors voluntarily initiated an environmental self- audit of their facilities. The ACOM Debtors and the EPA seek to ensure that the ACOM Debtors come into and remain in compliance with the Environmental Requirements. Based upon preliminary results of the Audit, the EPA believes that it has claims against the ACOM Debtors for violations of Environmental Requirements at some of their facilities. The ACOM Debtors have completed the Audit and have agreed to submit to the EPA a final and a supplemental report disclosing violations and certifying that all disclosed violations were corrected. Mr. Shalhoub informs the Court that the ACOM Debtors already have taken corrective actions to resolve the EPA Claims. The principal terms of the Settlement Agreement are: a. For violations of Environmental Requirements discovered pursuant to the Audit and corrected by the ACOM Debtors as provided for in the Settlement Agreement, the ACOM Debtors will pay civil penalties of: * $800 per facility in violation of the Clean Air Act Sections 110 and 113(a)(1); * $1,150 per facility in violation of Emergency Planning and Community Right-to-Know Sections 311 and 312; * $1,500 per facility in violation of Clean Water Act Section 311 for failure to have a Spill Prevention, Control and Countermeasures plan; and * $2,600 per facility in violation of CWA Section 311 for both failure to have a SPCC plan and failure to have adequate secondary containment. Additionally, the ACOM Debtors will pay $20,000 for South Coast Air Quality Management District violations for which compliance with best available control technology is necessary. b. The ACOM Debtors will be liable to pay penalties up to a maximum aggregate cap of $233,000, provided that any violation disclosed in the Final Audit Report in excess of category-specific totals are not included in the Settlement Agreement; c. The ACOM Debtors will submit a Final Audit Report in the two days after the Court approves the Settlement Agreement; d. The ACOM Debtors will submit a Supplemental Report upon completing all required corrective actions with respect to the SCAQMD Violations; e. Upon receipt of the Final Audit Report, the United States will determine the consistency of the disclosures in the Final Audit Report with the requirements of the Settlement Agreement. If the United States accepts the ACOM Debtors' disclosures, the United States will present them with a draft Final Settlement Agreement that specifies those violations for which they must pay civil penalties; f. Upon the United States' receipt of the ACOM Debtors' certified Final Audit Report and Supplemental Report and upon the ACOM Debtor's payment in full of civil penalties, the Settlement Agreement will resolve the United States' civil and administrative claims for the violations for which corrections are made and penalties paid; g. The Unites States' agreement to the terms of the Settlement Agreement is expressly conditioned on the completeness, truth and accuracy of all certifications made by the ACOM Debtors in its Audit Reports; h. The civil penalties will be treated as allowed administrative expenses. The United States will not required to file an application for administrative expenses in order to receive payment from the Debtors; and i. In the event that the Court has not approved the Settlement Agreement before the effective date of the Company Sale, Adelphia will not oppose any request by the United States for an extension of the deadline for filing its administrative expense claims against the ACOM Debtors up to 60 days after the date of the Court's approval or denial of the Settlement Agreement. Mr. Shalhoub asserts that approval of the Settlement Agreement will permit the ACOM Debtors to avoid the time, expense and uncertainty of litigation with respect to violations of the Environmental Requirements that they disclosed in the Final Report and corrected. About Adelphia Communications Based in Coudersport, Pa., Adelphia Communications Corporation (OTC: ADELQ) -- http://www.adelphia.com/-- 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. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. Adelphia Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas Manged Entities, are entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision, LLC. The RME Debtors filed for chapter 11 protection on March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06- 10642). Their cases are jointly adminsitered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue No. 141; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: America Channel Will Appeal Permanent Injunction ---------------------------------------------------------------- The America Channel, LLC; Gray, Plant, Mooty, Mooty & Bennett, P.A.; and Alioto Law Firm notify the U.S. Bankruptcy Court for the Southern District of New York that they will take an appeal from Judge Gerber's judgment and permanent injunction to the United States District Court for the Southern District of New York. Judge Gerber enjoined America Channel, et al., from violating the automatic stay by prosecuting any claim for injunctive relief under United States Antitrust Laws to prevent Comcast Corporation and Time Warner Cable, Inc., from purchasing assets of Adelphia Communications Corp. America Channel, et al., have a pending lawsuit against Time Warner and Comcast in the United States District Court for the District of Minnesota. America Channel, et al., present three issues for the District Court for the Southern District of New York to review: (1) Does the Bankruptcy Court have original and exclusive jurisdiction, to the exclusion of all United States District Courts, over any antitrust action brought against Comcast, Time Warner, and any affiliated company to enjoin them from purchasing the assets of Adelphia under Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act, and Section 16 of the Clayton Act? (2) Is the Bankruptcy Court's ruling that any effort to enjoin the buyers of the Adelphia assets in an antitrust action in any forum other than the Bankruptcy Court would constitute a violation of Section 362(a) of the Bankruptcy Code incorrect as a matter of law? (3) Is the Bankruptcy Court's injunction overly broad in permanently enjoining America Channel, et al., from pursuing any claim for injunctive relief, other than in the Bankruptcy Court, preventing the buyers of the Adelphia assets from dividing those and other assets, and allocating cable system markets in violation of United States antitrust laws? America Channel, et al., insist that the June 26 injunction by the Bankruptcy Court is an impermissible restraint on their right to bring a federal antitrust action in the court of their choice, and wrongfully interferes with the jurisdiction of the Minnesota District Court in which America Channel, et al., filed their action. The injunction is also overly and improperly broad in enjoining America Channel, et al., from seeking a preliminary injunction against a planned division of markets by Comcast and Time Warner once they have acquired the Adelphia cable systems. America Channel, et al., ask the District Court to reverse and vacate the Bankruptcy Court's injunction. The ACOM Debtors object to America Channel, et al.'s designation of contents of record on appeal. The ACOM Debtors point out that their Petition for Reorganization was not before the Bankruptcy Court in the adversary proceeding, and should not be added to the record on appeal. About Adelphia Communications Based in Coudersport, Pa., Adelphia Communications Corporation (OTC: ADELQ) -- http://www.adelphia.com/-- 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. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. Adelphia Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas Manged Entities, are entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision, LLC. The RME Debtors filed for chapter 11 protection on March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06- 10642). Their cases are jointly adminsitered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue No. 141; Bankruptcy Creditors' Service, Inc., 215/945-7000) AFFILIATED COMPUTER: Files Suit Against DHHS in North Carolina -------------------------------------------------------------- Affiliated Computer Services, Inc., filed with the General Court of Justice, Superior Court Division, in Wake County, North Carolina, a complaint and motion to preserve records related to the contract of its subsidiary, ACS State Healthcare, LLC, with the North Carolina Department of Health and Human Services. On July 14, 2006, the Company says that it received a letter from DHHS notifying the Company that DHHS was terminating the contract. The Company believes that DHHS did not have a valid basis for terminating the contract and thus pursued legal action against DHHS. In its complaint, the Company alleges, among other things, that: * DHHS' actions caused significant delays in the project, * DHHS through its employees have taken affirmative action to withhold information from the Company and the public, and * DHHS failed to properly respond to the Company's public records requests. DHHS Contract In April 2004, ACS State awarded a contract by DHHS to replace and operate the North Carolina Medicaid Management Information System. Although protests we filed by competing bidders, the Company commenced to perform services under the contracts at the request of DHHS. The Company discloses that on June 6, 2006, it received a notice from DHHS that DHHS planned to terminate the contract if the alleged breaches were not cured. On June 12, 2006, the Company disclosed that contracts issues arose and ACS State and DHHS alleged that the other party breached the contract. The parties then entered into a series of standstill agreement in order to permit discussion of their respective issues regarding the contract and whether the contract would be continued or terminated. Impact of Termination The Company reports that prior to the assessment of the contract termination notice and subject to appropriate adjustments after such assessment, in the fiscal year ended June 30, 2006, the Company preliminarily recognized $6.4 million of revenue under the contract resulting in operating losses during the fiscal year. As of June 30, 2006, the Company had recorded unbilled revenue related to the contract of approximately $11 million. The Company is currently reviewing the impact of the notice of termination on the amounts currently outstanding and other potential costs to terminate the contract. A full-text copy of the Termination Letter dated July 14, 2006 from DHHS to ACS State is available for free at: http://ResearchArchives.com/t/s?e32 A full-text copy of the Response letter dated July 12, 2006 from ACS State to DHHS regarding the contract is available for free at: http://ResearchArchives.com/t/s?e33 Headquartered in Dallas, Texas, Affiliated Computer Services, Inc., (NYSE: ACS) -- http://www.acs-inc.com/-- provides business process outsourcing and information technology solutions to commercial and government clients. * * * As reported in the Troubled Company Reporter on June 22, 2006, Standard & Poor's Ratings Services lowered its corporate credit and senior secured ratings to 'BB' from `BB+' for Affiliated Computer Services Inc. The ratings remain on CreditWatch with negative implications, where they were placed Jan. 27, 2006. AFFINITY TECHNOLOGY: Approves Salary Increases of CEO and COO ------------------------------------------------------------- The Compensation Committee and Board of Directors of Affinity Technology Group, Inc., approved the salary increases of its president and chief executive officer and chief operating officer and other compensation related matters on July 14, 2006. President and CEO, Joseph A. Boyle's base salary was increased to $250,000 per year while chief operating officer, S. Sean Douglas' was increased to $125,000 per year. Mr. Boyle also resumed full- time employment with the Company effective July 3, 2006. The Company also disclosed that it granted to Messrs. Boyle and Douglas these stock options: No. of Shares of Common Stock Exercise Officer Underlying Award Price Term ------- ---------------- -------- ---- Joseph A. Boyle 2,500,000 $0.50 10 years S. Sean Douglas 850,000 $0.50 10 years The Company says that one-third of the options are immediately exercisable, and the other two-thirds becoming exercisable in two equal annual installments on the first and second anniversaries of the date of grant. The Company also disclosed that it awarded stock options to two non-employee directors: No. of Shares of Common Stock Exercise Director Underlying Award Price Term ------- ---------------- -------- ---- Robert M. Price 250,000 $0.35 10 years 250,000 $0.50 10 years Peter R. Wilson 250,000 $0.35 10 years 250,000 $0.50 10 years The options to acquire 250,000 shares for $0.35 per share are immediately exercisable, and the options to acquire 250,000 shares for $0.50 per share are exercisable in two equal annual installments on the first and second anniversaries of the date of grant. About Affinity Technology Through its subsidiary, decisioning.com, Inc., Affinity Technology Group, Inc. -- http://www.affi.net/-- owns a portfolio of patents that covers the automated processing and establishment of loans, financial accounts and credit accounts through an applicant- directed remote interface, such as a personal computer or terminal touch screen. Affinity's patent portfolio includes U. S. Patent No. 5,870,721C1, No. 5,940,811, and No. 6,105,007. Going Concern Doubt As reported in the Troubled Company Reporter on April 19, 2006, Scott McElveen, L.L.P., expressed substantial doubt about Affinity Technology Group, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the company's recurring operating losses, accumulated deficit, and certain convertible notes in default. AH-DH APARTMENTS: Gets Final Okay to Use Citigroup's Collateral --------------------------------------------------------------- The Honorable Brenda T. Rhoades of the U.S. Bankruptcy Court for the Eastern District of Texas gave her final stamp of approval to AH-DH Apartments, Ltd., and its debtor-affiliates' request for permission to use Citigroup Global Market Realty Corporation, fka Salomon Brothers Realty Corporation's cash collateral. The Debtors owe Citigroup approximately $154,673,603, as of March 22, 2006, on account of four promissory notes issued between August 2001 and December 2003 and a Mezzanine Note, dated Dec. 22, 2003, in the original principal amount of $11,000,000. Certain Loan Agreements, Assignment of Rents and Leases, and Depository Acknowledgements secure the Notes. The Mezzanine Note is secured by, among other things, the Mezzanine Loan Agreement and Pledge Agreements. Citigroup consents to the use of its cash collateral to fund budgeted expenditures outline in an approved budget. A copy of this budget is available for free at: http://researcharchives.com/t/s?e1c As additional security for the repayment of the Debtors' obligations, the Court grants Citigroup a fully perfected first priority security interest in all of the Debtors' cash, received after the petition date, that constitute proceeds of its collateral. As adequate protection for any diminution in value of its collateral, Citigroup is also granted replacement liens on all assets of the Debtors. The Debtors agree to make monthly payments to Citigroup equal to the amount of income less necessary expenses as indicated in the approved budget. Citigroup is free to apply these adequate protection payments towards payment of the Debtors' obligations. The liens and adequate protections granted to Citigroup are subject to a carveout reserved for payment of allowed professional fees and fees due to the Clerk of the Bankruptcy Court. Headquartered in Plano, Texas, AH-DH Apartments, Ltd., owns 16 apartment complexes. The company and three of its affiliates filed for chapter 11 protection on Mar. 22, 2006 (Bank. E.D. Tex. Case No. 06-40355). J. Mark Chevallier, Esq., at McGuire Craddock & Strother, P.C., represents the Debtors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million and $100 million. DH Holdings Limited Partnership and DH Holdings GP, Inc., filed for chapter 11 protection on Apr. 8, 2006 (Bankr. E.D. Tex. Case Nos. 06-40479 and 06-40480). Another affiliate, DB Holdings, LLC, filed for chapter 11 protection on Apr. 10, 2006 (Bankr. E.D. Tex. Case No. 06-40484). The Debtors' chapter 11 cases are jointly administered under Case No. 06-40355. AIRNET COMMS: Plan Confirmation Hearing Set for August 17 --------------------------------------------------------- The Honorable Arthur B. Briskman of the U.S. Bankruptcy Court for the Middle District of Florida in Orlando has conditionally approved the Disclosure Statement explaining AirNet Communications Corporation's Chapter 11 Plan of Reorganization. Judge Briskman will consider approval of the Debtor's Plan at a combined Disclosure and Confirmation Hearing at 9:30 a.m., on Aug. 17, 2006, at Courtroom A, 5th Floor, 135 West Central Blvd. in Orlando, Florida. Plan Overview Pursuant to its Plan, AirNet will continue to operate it business after the effective date. All equity interest in the Debtor prior to its bankruptcy filing will be cancelled and new equity will be distributed to: a) TECORE, Inc., in exchange for the cancellation of $5.5 million of its Secured Claim; or b) other entities who will make a higher and better offer for the interests in the Reorganized Debtor, as determined by the Court. The Debtor's default of an Amended and Restated Security Agreement with Laurus Master Fund, Ltd., triggered a default in its Securities Purchase Agreement with TECORE and SCP Private Equity Partners, II, LP. The Securities Purchase Agreement governs the issuance and sale to SCP and TECORE of senior secured convertible notes in the principal amount of $16 million. TECORE has offered to purchase all of the Debtor's equity through a Chapter 11 plan of reorganization. The Letter of Intent details a proposed $500,000 exit financing by TECORE to the Reorganized Debtor and an offer to purchase an additional $500,000 of the Debtor's products during the first 12 months after the effective date of the Plan. Treatment of Claims Allowed Administrative Claims, estimated at approximately $200,000, will be paid in full on the effective date from the Debtor's cash-on-hand and, to the extent cash-on-hand is insufficient, the exit financing promised by TECORE. Allowed Priority Tax Claims will be paid based on a six-year amortization and maturity with interest at six percent. Priority Tax payments will be made quarterly, commencing on the effective date. Priority Wage, Vacation, and Benefit Claims, estimated at less than $700,000, will be paid in full over a period of one year without interest. The Reorganized Debtor will assume the liability for accrued vacations for existing employees, thus the Debtor believes the actual amount payable under this class to be de minimis. TECORE's claim, secured by a first priority lien on all intellectual property of the Debtor and a subordinated lien on all other assets, will be paid on a quarterly basis based on a 10-year amortization and maturity with interest at seven percent per annum. The Debtor estimates TECORE's allowed secured claim tot total $2 million. Based on this amount and the anticipated $500,000 DIP loan, the Debtor expects to make quarterly payments to TECORE in the amount of $84,146. TECORE will waive the remaining balance of its claim in exchange for a 100% equity interest in the Reorganized Debtor. The balance of its claim will be treated as a general unsecured claim if it fails to acquire the equity interest of the Reorganized Debtor. Laurus has agreed to reduce its $4.2 million secured claim to $3.3 million. The reduced claim will be divided into two Tranches. Tranche A, for $800,000, will accrue interest at 3% and will be repaid through 16 quarterly payments of $50,000 plus interest with the first payment due 30 days from the effective date. Tranche B, for $2.5 million, will not accrue any interest. It will be repaid upon each sale of any item of inventory which existed as of May 22, 2006. On the effective date, the Reorganized Debtor will pay $400,000 to SCP on account of its allowed secured claim. Additionally, AirNet will commence quarterly payments to SCP based on a note with a principal amount of $300,000, a three-year amortization and maturity and interest at seven percent per annum. The Debtor has the option to pay the SCP note for $210,000 within 90 days of the effective date. Holders of General Unsecured Claims will receive a pro rata interest in the AirNet Creditors Trust. The trust will be funded from the proceeds of causes of action and a note from the Reorganized Debtor for $350,000. The Note will be paid quarterly based on a 10-year amortization and maturity with interest at 7%. The quarterly payments shall be $12,030. Equity Interests in the Debtor will be terminated on the effective date. A copy of the Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=060723230700 About AirNet Communications Headquartered in Melbourne, Florida, AirNet Communications Corporation -- http://www.aircom.com/-- designs, manufactures, and markets wireless infrastructure products and offers infrastructure solutions for commercial GSM customers, and government, defense, homeland security based agencies. The Debtor filed for chapter 11 protection on May 22, 2006 (Bankr. M.D. Fla. Case No. 06-01171). R. Scott Shuker, Esq., at Gronek & Latham, LLP, represents the Debtor in its restructuring efforts. Hywel Leonard, Esq., at Carlton Fields, PA, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $15,701,881 and total debts of $21,615,346. ALLIED HOLDINGS: Bridge Order Extends Plan-Filing Period to Aug. 4 ------------------------------------------------------------------ The Honorable Coleman Ray Mullins of the U.S. Bankruptcy Court for the Northern District of Georgia issued a bridge order extending the exclusive period within which Allied Holdings, Inc., and its debtor-affiliates may file their plans of reorganization through and including Aug. 4, 2006. The Debtors are asking the Court to further extend the periods during which they have the exclusive right to: a. file a plan of reorganization, through and including November 1, 2006; and b. solicit acceptances of that plan, through and including January 2, 2007. The Court will convene a hearing on August 3, 2006, 9:30 a.m. to consider the Debtors' request. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor. Anthony J. Smits, Esq., at Bingham McCutchen LLP, provides the Official Committee of Unsecured Creditors with legal advice and Russell A. Belinsky at Chanin Capital Partners, LLC, provides financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIED HOLDINGS: Inks Settlement Pact with Gateway and Hydraulic ---------------------------------------------------------------- Pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure and Section 105 of the Bankruptcy Code, Allied Holdings, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Georgia to: * approve a settlement agreement with Gateway Development and Manufacturing, Inc., and Hydraulic Development and Manufacturing, Inc.; and * permit the execution of the Settlement Agreement. On August 20, 1997, Allied Holdings, Inc., entered into a purchase agreement with Ryder System, Inc., pursuant to which Allied was to purchase Ryder's automotive carrier division. The sale closed in September 1997. One of the Ryder System entities sold to Allied under the Purchase Agreement was Commercial Carriers, Inc. Excluded from the sale was Commercial Carriers Incorporated Manufacturing, a trailer manufacturing division of CCI. Ryder System held an open bidding process to sell CCIM's assets, wherein Gateway emerged as the highest bidder. On August 29, 1997, Gateway and CCI entered into an asset purchase agreement pursuant to which Gateway was to purchase CCIM's assets from CCI. The sale contemplated by the CCI/Gateway Agreement was scheduled to close on September 22, 1997. However, the sale never closed and Ryder System sold CCIM's assets to another entity. In October 1997, Gateway filed a civil lawsuit in the New York Supreme Court, Erie County captioned Gateway Development and Manufacturing, Inc. v. Commercial Carriers, Inc., Ryder Truck Rental, Inc., Ryder System, Inc. and Allied Holdings, Inc., Index No. 1997/8920. The complaint in the Gateway Action asserts a number of causes of action related to the failed closing of the CCI/Gateway Agreement against Allied, CCI, Ryder and a subsidiary of Ryder -- Ryder Truck Rental, Inc. While not currently named as actual defendants in the Gateway Action, Gateway claimed that it was considering adding Allied Automotive Group, Inc., and Axis Group, Inc., as defendants. Gateway has also filed proofs of claim in the Debtors' bankruptcy cases with respect to the matters in the Complaint against not only Allied and CCI, but AAGI and Axis as well: * Claim No. 2029 against Allied; * Claim No. 2030 against AAGI; * Claim No. 2031 against CCI; and * Claim No. 2032 against Axis. Each of the Claims asserts claims for compensatory damages totaling between $18,000,000 and $21,850,000, plus punitive damages, pre- and post-judgment interest, costs, legal expenses and attorney's fees. The Complaint asserts several claims, including: -- a claim for tortious interference with contract against Allied; -- claims against CCI for breach of contract, breach of duty of good faith and fair dealing, fraudulent inducement, negligent misrepresentation, and fraud; -- claims against Ryder System for fraudulent inducement, negligent misrepresentation, and fraud; and -- claims against Ryder Truck for fraudulent inducement, negligent misrepresentation, fraud, and breach of guaranty. Ryder System, Ryder Truck, and CCI filed counterclaims against Gateway and cross-claims against Allied in the Gateway Action, also based on the failed closing. The Ryder parties also filed a separate action against Gateway, Hydraulic, Allied, AH Acquisition Corp., AAGI, Canadian Acquisition Corp., Axis National Incorporated, and Axis, in the State of New York, Supreme Court: Erie County, at Index No. 2000/8184. Gateway filed cross-claims against Allied in the Ryder Action. Although all claims by the Ryder parties against the Allied parties in the Gateway Action and the Ryder Action have been dismissed, Gateway's direct and cross-claims against Allied in the Gateway Action and the Ryder Action still remain, as do Gateway's direct claims against the Ryder parties in the Gateway Action and the Ryder parties' counterclaims and direct claims against Gateway in the Gateway Action and the Ryder Action. According to Harris B. Winsberg, Esq., at Troutman Sanders LLP, in Atlanta, Georgia, neither Allied nor CCI has insurance coverage for the types of claims asserted against them in the Gateway Action and the Ryder Action. Accordingly, the financial liability for any recovery awarded to Gateway pursuant to the State Court Actions would fall directly on certain of the Debtors. Gateway and Ryder System have agreed to a settlement in the Gateway Action and the Ryder Action, which, if approved by the Court, would also apply to the Debtors. Mr. Winsberg relates that although the specific terms of the Settlement Agreement are confidential, the provisions relevant to the Debtors are: (1) in consideration of the final settlement of the Gateway Action and the Ryder Action, the Debtors, Gateway, Hydraulic, Ryder System and Ryder Truck will mutually release and discharge one another from all obligations; (2) the Debtors are to pay nothing; and (3) Gateway will withdraw with prejudice all of the Claims, and will waive any rights under Section 502(j) of the Bankruptcy Court to seek allowance or reconsideration of the Claims. The Debtors recognize that asking the Court to approve a confidential settlement agreement is rather unusual, but the fact that they are receiving full releases and the withdrawal of large claims while paying nothing demonstrates the reasonableness of the Settlement Agreement, Mr. Winsberg says. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor. Anthony J. Smits, Esq., at Bingham McCutchen LLP, provides the Official Committee of Unsecured Creditors with legal advice and Russell A. Belinsky at Chanin Capital Partners, LLC, provides financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALT COMM: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------- Debtor: ALT Communications, Inc. P.O. Box 229 Woodstock, Georgia 30188 Bankruptcy Case No.: 06-68497 Type of Business: The Debtor is a telecommunications company that provides planning, design, installation, and maintenance for data and voice systems. See http://www.altcommunications.com/ Chapter 11 Petition Date: July 20, 2006 Court: Northern District of Georgia (Atlanta) Judge: Robert Brizendine Debtor's Counsel: R.T. Gordon, Esq. Shriver & Gordon, P.C. 301 Creekstone Ridge Woodstock, Georgia 30188 Tel: (770) 926-7326 Fax: (770) 926-9661 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Essential Marketing Systems Pending Suit $1,000,000 c/o Baker Donelson Suite 1000 211 Commerce Street Nashville, TN 37201 Regions Bank Line of Credit $500,000 2653 Marietta Canton, GA 30114 Toshiba America, Inc. Trade Claim $488,449 9740 Irvine Boulevard Irvine, CA 92618 Bellsouth Advertising Contingent $260,000 c/o Benjamin Schwartz Suite 110, 8625 Crown Crescent Charlotte, NC 28227 Bells Ferry Properties Claim $155,348 5345 Bells Ferry Road Suite 100 Acworth, GA 30102 Larry Brown Stockholder Claim $153,000 North Carolina Dept. of Revenue Tax Claim $49,108 Clear Channel Trade Debt $40,815 ALT Technologies Claim $30,000 Tennessee Dept. of Revenue Tax Claim $25,263 Georgia Department of Revenue Tax Claim $25,031 Nextell Communications Trade Claim $21,743 Nuvox Trade Claim $17,685 Verizon/GTE Trade Claim $17,435 Hanover Insurance Insurance Premium $17,261 Florida Department of Revenue Tax Claim $16,709 Fleet Fueling Trade Debt $16,417 Internal Revenue Service Tax Claim $12,000 South Carolina Dept. of Revenue Tax Claim $9,401 Skybridge Resources Trade Claim $9,400 ALTEON INC: Posts $1.6 Million Net Loss in Quarter Ended March 31 ----------------------------------------------------------------- Alteon Inc. reported a net loss of $1,621,327 for the three months ended March 31, 2006. This compares to a net loss of $4,642,299 for the same period in 2005. The net loss applicable to common stockholders, which includes a non-cash preferred stock dividend, was $2,796,649 for the three months ended March 31, 2006, as compared to $5,713,877 for the same period in 2005. Research and development expenses were $449,840 for the three months ended March 31, 2006 as compared to $3,641,100 for the three months ended March 31, 2005. This is a decrease of $3,191,260 or 87.6%, which is attributed to significantly lower clinical trial costs and manufacturing expenses as a result of the discontinuation of our Systolic Pressure Efficacy and Safety Trial of Alagebrium (SPECTRA). General and administrative expenses were $1,231,851 for the three months ended March 31, 2006 as compared to $1,100,348 for the three months ended March 31, 2005. Although general and administrative expenses remained relatively flat, the 2006 results include increased severance costs and retention bonuses offset by decreased corporate expenses. Cash and cash equivalents at March 31, 2006, totaled $4.5 million. At March 31, 2006, the Company's balance sheet showed $5,156,704 in total assets and $786,371 in total liabilities. The Company's March 31 balance sheet also revealed an accumulated deficit of $225,610,094. Private Placement On April 21, 2006, the Company closed a private placement of Units, consisting of common stock and warrants, for gross proceeds of approximately $2.6 million. Each Unit consisted of one share of the Company's common stock and one warrant to purchase one share of the Company's common stock, comprising a total of 10,340,000 shares of common stock and warrants to purchase 10,340,000 shares of common stock. HaptoGuard Merger On April 19, 2006, the Company entered into a definitive merger agreement with HaptoGuard, Inc., Alteon Merger Sub, Inc., a wholly-owned subsidiary of Alteon, and Genentech, Inc. The merger agreement provides that upon the terms and subject to the conditions set forth in the merger agreement, Merger Sub will merge with and into HaptoGuard, with HaptoGuard becoming the surviving corporation and a wholly-owned subsidiary of Alteon. The merger agreement also provides for the granting of certain royalty and negotiation rights to Genentech, Inc. as part of the restructuring of Genentech's preferred stock position in Alteon in connection with the proposed merger. Key components of the proposed transactions between Alteon, HaptoGuard and stockholder Genentech include: * Alteon will acquire all outstanding equity of HaptoGuard. In exchange, HaptoGuard shareholders will receive from Alteon $5.3 million in Alteon common stock, or approximately 22.5 million shares. * Genentech will convert a portion of its existing preferred Alteon stock to Alteon common stock. A portion of Genentech's preferred stock, which when converted to common stock equals approximately $3.5 million in Alteon common stock, will be transferred to HaptoGuard shareholders. * The remaining Alteon preferred stock held by Genentech will be cancelled. * Genentech will receive milestone payments and royalties on net sales of alagebrium, as well as a right of first negotiation on BXT-51072. Going Concern Doubt J.H. Cohn LLP expressed substantial doubt about Alteon's ability to continue as a going concern after auditing the Company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's $13 million net loss and using approximately $14 million of cash in operating activities during the year ended Dec. 31, 2005. About HaptoGuard HaptoGuard, Inc. is a biopharmaceutical company developing and commercializing therapeutics for inflammatory diseases, particularly those that are present as a consequence of elevated oxidized lipids in the blood. The Company's portfolio includes orally bioavailable, organoselenium mimics of glutathione peroxidase that metabolize lipid peroxides. Its lead compound BXT-51072 is in Phase 2 clinical trials. The Company also controls rights to a diagnostic assay that identifies the large subset of diabetic patients at highest risk for cardiovascular complications, because of a defect in oxidized lipid metabolism that results in increased cardiovascular inflammation. About Alteon Inc. Headquartered in Parsippany, New Jersey, Alteon Inc. (AMEX: ALT) --- http://www.alteon.com/-- is a product-based biopharmaceutical company engaged in the development of small molecule drugs to treat and prevent cardiovascular diseases and other diseases associated with aging and diabetes. AMERICAN CREDIT: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: American Credit Company aka Resident Lenders of North Carolina, Inc. 905-B Conference Drive Greenville, North Carolina 27858 Tel: (252) 355-3974 Bankruptcy Case No.: 06-02189 Type of Business: The Debtor is a financial services company providing consumer loans and auto financing. See http://www.rlnc.org/ Chapter 11 Petition Date: July 21, 2006 Court: Eastern District of North Carolina (Wilson) Judge: J. Rich Leonard Debtor's Counsel: Gregory B. Crampton, Esq. Stephani W. Humrickhouse, Esq. Nicholls & Crampton, P.A. 4300 Six Forks Road, Suite 700 P.O. Box 18237 Raleigh, North Carolina 27619 Tel: (919) 781-1311 Fax: (919) 782-0465 Debtor's financial condition as of May 31, 2006: Total Assets: $21,263,884 Total Debts: $18,075,640 The Debtor did not file a list of its 20 largest unsecured creditors. AMERICAN MEDICAL: Completes Tender Offer for Laserscope's Shares ---------------------------------------------------------------- American Medical Systems Holdings, Inc. completed its cash tender offer for shares of Laserscope. The tender offer, which commenced on June 14, 2006, expired at 12 midnight, central time, on July 9, 2006. A total of 21,157,077 shares of Laserscope common stock were validly tendered and not withdrawn prior to the expiration of the offer (including 1,353,240 shares tendered pursuant to notices of guaranteed delivery), representing approximately 92.97% of the "fully diluted" shares of Laserscope, as defined in the parties' merger agreement. AMS has closed its senior secured credit facility led by CIT Healthcare LLC, which will be used to fund a portion of the purchase of the Laserscope shares. Payment for these shares will be made promptly. About Laserscope Headquartered in San Jose, California, Laserscope (NASDAQ:LSCP) -- http://www.laserscope.com/-- designs, manufactures, sells and services an advanced line of minimally invasive medical products worldwide including medical laser systems and related energy delivery devices for the office, outpatient surgical center and hospital markets. About American Medical Systems Based in Minnetonka, Minn., American Medical Systems Holdings, Inc. (NASDAQ: AMMD) -- http://www.americanmedicalsystems.com/-- supplies medical devices and procedures to cure erectile dysfunction, benign prostatic hyperplasia, incontinence, menorrhagia, prolapse and other pelvic disorders in men and women. The Company's products were used to provide 170,000 patient cures in 56 countries during 2005. * * * As reported in the Troubled Company Reporter on June 27, 2006, Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to American Medical Systems, Inc., the wholly owned operating subsidiary of American Medical Systems Holdings, Inc. The outlook is stable. At the same time, the rating agency assigned a debt rating of 'BB-' and a recovery rating of '2' to the company's $460 million senior secured credit facilities, indicating expectations of substantial recovery in the event of a payment default, based on an enterprise valuation. Standard & Poor's also assigned a 'B' rating to the Company's $325 million of convertible senior subordinated notes. Proceeds from the financings will be used to acquire Laserscope for $716.5 million. AMERICAN SAFETY: Moody's Junks Rating on $175 Mil. 2nd-Lien Loan ---------------------------------------------------------------- Moody's Investors Service affirmed the B2 corporate family rating and stable outlook of American Safety Razor Company, following the company's plans to recapitalize upon the completion of the sale of ASR to Lion's Capital for $625 million. The proposed $260 million first-lien facility due 2012 was assigned a B2 rating and the $175 million second-lien term loan facility due 2013 was assigned a Caa1 rating. Ratings on ASR's existing credit facilities were also affirmed, but will be withdrawn upon closing of the proposed transaction. Final ratings are subject to review of final documentation. These new ratings were assigned: * $35 million first-lien senior secured revolving credit facility, assigned at B2; * $225 million first-lien senior secured term loan credit facility, assigned at B2; and * $175 million second-lien senior secured term loan facility, assigned at Caa1; These ratings were affirmed: * Corporate family rating at B2; * $25 million first-lien senior secured revolving credit facility, affirmed at B2; * $200 million first-lien senior secured term loan facility, affirmed at B2; * $87.5 million second-lien senior secured term loan facility, affirmed at Caa1; ASR's B2 corporate family rating reflects ASR's high leverage, limited free cash flow and small size relative to its primary competitors in the non-cyclical but highly brand-sensitive and competitive wet shaving market. ASR's rating is supported by its niche position as a private label and value priced manufacturer, its long operating history, strong retailer relationships and its patents and production capability. Moody's notes that the company's credit metrics, including leverage and interest coverage will be substantially weakened with the expected increased debt burden while Free Cash Flow to Debt remains modest over the medium term given the company's need to increase spending behind anticipated new product launches and capacity expansion. Nevertheless, ASR's stable outlook reflects Moody's expectation that ASR's financial performance will steadily improve with little chance of any deterioration in the company's financial profile. The B2 ratings on ASR's senior secured revolving credit and first lien term loan facilities reflect their priority in the capital structure as supported by domestic subsidiary and parent company guarantees and by first lien collateral pledges comprising substantially all of the domestic assets of the borrower and guarantors and 65% of the capital stock of foreign subsidiaries. Despite these benefits, the ratings on the facilities are at the level of the corporate family rating due to limited tangible asset coverage and the significant portion of the debt structure comprised by this first lien debt class. However, the Caa1 rating on the second lien term loan facility, which also benefits from the same guarantees as the first lien debt, reflects the second priority lien and effective subordination on the same assets backing the material first lien debt. This debt class has been notched two levels below the corporate family rating despite the expected issuance of $35 million in additional junior PIK debt at the parent level given that in a distressed scenario tangible asset coverage will, most likely, not provide complete principal recovery for this debt class. While the additional HoldCo debt will not be a direct contractual obligation of ASR, Moody's recognizes the increased debt burden on the total enterprise and the parent's sole reliance on ASR to ultimately service this rapidly accreting holding company obligation; however, the ratings also recognize importance of provisions in the senior secured credit agreements and the effective subordination of this indebtedness given the lack of upstream guarantees that will substantially prohibit ASR's ability to prepay this obligation without achieving a meaningful reduction in the company's consolidated leverage. The final credit agreement governing all senior secured credit facilities is anticipated to contain customary limitations, a 50% excess cash flow sweep, and financial covenants governing maximum leverage, minimum interest and maximum capital expenditures. An upgrade to the company's ratings is unlikely in the near-term given the expectation of limited debt reduction. To upgrade the rating, ASR needs to sustain Debt measures in the high-single digits and reduce leverage through debt reduction or improved profitability comfortably below 5.5 times. Negative rating actions could be possible if ASR's financial performance and liquidity deteriorates from plan resulting in negative free cash flow for an extended period or leverage increasing above its already high levels to 7 times. Potential drivers under this scenario could be heightened competitive activity, shareholder initiatives or debt-financed acquisitions. Headquartered in Cedar Knolls, New Jersey, American Safety Razor Company is a major designer, manufacturer and marketer of brand name and private label consumer and industrial products. Its principal products include wet shaving blades and razors and medical blades. Revenues were approximately $303 million for the last twelve months ended April 2006. AMERICAN SAFETY: S&P Junks Rating on $175 Million Second-Lien Loan ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its loan and recovery ratings to American Safety Razor Co.'s proposed $435 million secured bank financing, which includes: * a $35 million first-lien revolving credit facility due 2012; * a $225 million first-lien term loan due 2013; and * a $175 million second-lien term loan due 2014. The first-lien facilities were rated 'B' (at the same level as the corporate credit rating on ASR), with a recovery rating of '2', indicating the expectation for substantial (80%-100%) recovery of principal in the event of a payment default. The second-lien facility was rated 'CCC+' (two notches below the corporate credit rating) with a recovery rating of '5', indicating the expectation for negligible (0%-25%) recovery of principal in the event of a payment default. Proceeds from the financing will be used to help fund the acquisition of ASR by Lion Capital LLP for $625 million. In addition, Standard & Poor's affirmed its 'B' corporate credit rating on Cedar Knolls, New Jersey-based ASR. The rating outlook is negative. Approximately $447 million of pro forma debt is affected by this action. The rating affirmation is based the company's stable operating performance despite significantly increased pro forma debt leverage resulting from the acquisition of the company by Lion Capital LLP for $625 million. As a result of the planned transaction, debt leverage is expected to increase to more than 6.0x, from 4.5x in fiscal 2005. A $35 million revolving credit facility under the planned transaction is expected to provide appropriate liquidity for the rating category. "The rating on ASR reflects the company's high debt leverage, narrow product focus, aggressive financial policy, and small size in a sector dominated by companies with substantially greater financial resources," said Standard & Poor's credit analyst Patrick Jeffrey. ASR maintains good market position as a private-label/value manufacturer and marketer of razors and blades. ANCHOR GLASS: Reports on 33 Claim Transfers to Three Entities ------------------------------------------------------------- From January 2006 to February 2006, the Clerk of the U.S. Bankruptcy Court for the Northern District of Georgia recorded 16 claims, aggregating $33,099, transferred to Debt Acquisition Company of America V, LLC: Transferor Claim Amount ---------- ------------ A-1 Electric Motor Service I $5,317 Alpha Associates, Inc. 261 ARAMARK 1,603 Army Navy Outdoors 1,942 Atlas Blue Print Remit 1,603 Bennett Material Handling 788 BFI 14,092 Brandt Trucking 149 Cantlon Association, Inc. 550 Consolidated Printing Services 404 Conveyer & Caster Co. 120 D&D Vending 1,311 Da Valco, Inc. 520 Dr. Michael Brian 1,899 Eagle Controls 3,479 EMD 360 From December 2005 to March 2006, the Clerk of the Bankruptcy Court recorded 14 claims transferred to New Jersey Claims: Transferor Claim No. ---------- --------- Bass Custom Landscapes 677 John McCormack Co., Inc. 355 JP Parker Personnel, Inc. 485 JTD Enterprises 88 Mid-west Railroad Construction 374 Overhead Door Co. of Covington 171 People Resources, Inc. 256 Redwood County Recycling Center 174 RM Welding Products 175 Scarlett Facilities Maintenance 544 Smith Transport, Inc. 844 Stigler Supply Co. 458 Yandell Truckaway, Inc. 72 Yandell Truckaway, Inc. 825 From February 2006 to March 2006, the Clerk of the Bankruptcy Court recorded three claims, aggregating $52,663, transferred to Contrarian Funds LLC: Transferor Claim No. Claim Amount ---------- --------- ------------ Maul Technology 1270 $29,413 Kluber Lubrication 639 29,413 AT&T Corp. 710 -- 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 Anchor Glass in its restructuring efforts. Edward J. Peterson, III, Esq., at Bracewell & Guiliani, represents the Official Committee of Unsecured Creditors. When Anchor Glass filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts. The Court confirmed Anchor Glass' second Amended Plan of Reorganization on April 18, 2006. Anchor Glass emerged from Chapter 11 protection on May 3, 2006. (Anchor Glass Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Court Approves Mercer as Special Financial Advisor -------------------------------------------------------------- The Hon. Richard S. Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi authorized ASARCO LLC to employ Mercer Management Consulting, Inc., as special purpose financial advisors to provide an independent valuation of the Copper Basin Railway, Inc. Since 1986, ASARCO LLC and Copper Basin Railway, Inc., are parties to: * a Stockholders' Agreement, * an ore car Lease Agreement, * a Rail Transportation Agreement, and * a Compensation Agreement for the management of CBRY. CBRY is a Class III short-line freight railroad in South Central Arizona: -- whose primary business is transporting minerals to and from ASARCO's Ray Mine and Hayden, Arizona smelter; -- which transports concentrate from outside sources to Hayden, and various by-products from Hayden for sale on the open market; and -- which transports copper anodes and cathodes to Magma, Arizona, where they are then transported to the Amarillo, Texas refinery. ASARCO owns 45% of CBRY's shares. Rail Partners LP owns the remaining 55% of CBRY's shares. In February 2004, pursuant to a "put" provision in the Stockholders' Agreement, Rail Partners notified ASARCO of its intent to sell its shares of CBRY stock to ASARCO. Rail Partners and ASARCO were unable to agree on the fair market value of the stock. Thus, they retained Ernst & Young to perform an appraisal. In January 2005, E&Y found that the value of Rail Partners' shares was $11,300,000. ASARCO objected to the evaluation. In March 2005, Rail Partners sued ASARCO in the Arizona state court for enforcement of the "put" provision based on E&Y's appraisal. The litigation was automatically stayed because of the Debtors' Chapter 11 bankruptcy filing. As a result of the ongoing disputes regarding the value of the CBRY stock, the relationship between ASARCO and CBRY has become contentious, James R. Prince, Esq., at Baker Botts LLP, in Dallas, Texas, tells the Court. "Among others, CBRY has unilaterally decreased the amount it pays to ASARCO under the Lease Agreement, while unilaterally charging ASARCO for repairs to the ore cars and to return them to ASARCO." The present disputes with Rail Management make the joint operation of the critical freight railroad problematic, Mr. Prince contends. Thus, ASARCO is addressing its options by employing a special financial advisor for the disputes. Pursuant to an Engagement Letter, Mercer will: (a) review CBRY's operations and history; (b) review the traffic flow and business plan on the mines and facilities that are part of that flow; (c) review similar regional rail operations; (d) review the underlying agreement, plans, forecasts and other relevant documents; (e) assist ASARCO to develop a transportation cost structure and its components; (f) review and compare against other regional carriers maintenance procedures, cost levels, agreements, traffic volumes and other relevant factors; (g) analyze general and administrative costs; (h) conduct physical inspection of the line and equipment; (i) prepare a value estimate and sensitivities; (j) provide negotiation and litigation support; (k) prepare reports, as required, and, if requested by designation by ASARCO at a later date, testify in connection with potential litigation involving CBRY; and (l) perform other services necessary to complete the required project or as requested by ASARCO. Mercer will also develop a set of operating options and recommendations for ASARCO to consider with the financial and operational arrangements regarding the future ownership and operation of the railroad. This service may be provided by Mercer, or be provided through agents or independent contractors. ASARCO will pay Mercer: -- a flat fee of $150,000 for the preparation of the valuation estimate and related operating options and recommendation for ASARCO; -- customary hourly rates for negotiation and litigation related services; and -- reimbursement of reasonable out-of-pocket expenses incurred while providing services to the Debtors. William J. Rennicke, director of Mercer Management Consulting, Inc., assures the Court that the firm does not hold any interests materially adverse to ASARCO and its estates. Mr. Rennicke adds that the firm is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. ASARCO will indemnify Mercer from and against all claims against Mercer in connection with its services to ASARCO. Rail Partners Object Rail Partners complains that Mercer's valuation services will be duplicative to the services provided by Ernst & Young. Patricia Reed Constant, Esq., in Corpus Christi, Texas, notes that after publication of E&Y's evaluation, ASARCO claimed a conflict on E&Y's part, and would not move forward with the put agreement. Rail Partners also complains that Mercer's employment would incur unnecessary expenditure of at least $150,000, an amount that is more than the $100,000 CBRY paid to E&Y. Ms. Constant tells the Court that the original Lease of Railroad Cars dated June 1, 1986, between CBRY and ASARCO expired in 1996. At present, there is no written lease agreement and no written agreement on the maintenance of the ore cars. CBRY has repeatedly encouraged ASARCO to address its aging and badly deteriorating ore car fleet, Ms. Constant says. The CBRY Board of Directors proposed plans ranging from sending the ore car fleet to Mexico for rebuilding to purchasing new cars. ASARCO never headed these plans. In July 2000, ASARCO's General Manager cancelled the ore car rebuild program and arbitrarily set ASARCO's payment at $15,000. Since that time, the cars have continued to deteriorate while the price of steel has more than doubled, prices for rail car components have escalated three-fold, and labor costs continue to escalate. ASARCO may choose from maintaining the cars itself, hire an outside contractor or continue with CBRY, Ms. Constant says. Regardless of which option ASARCO selects, Ms. Constant assures the Court that CBRY will never refuse to place a car in its train unless it has not maintained the standards set by the Association of American Railroads and Federal Railroad Administration. CBRY admits that it unilaterally charged ASARCO for the repairs of the ore cares and increased its rates for transporting ore by almost 200% because it was unable to reach an agreement with ASARCO. Ms. Constant, however, asserts that all of CBRY's ore rate increases are within the guidelines set by the Surface Transportation Board. Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services and investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 through 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle, Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-21346) also filed for chapter 11 protection, and ASARCO has asked that the three subsidiary cases be jointly administered with its chapter 11 case. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. (ASARCO Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Can Assume Bank of America Equipment Lease ------------------------------------------------------ The Hon. Richard S. Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi authorized ASARCO LLC to exercise its Purchase Option in the Equipment Lease with Bank of America Leasing & Capital LLC, formerly known as Fleet Capital Corporation. ASARCO will pay: (a) $527,292 as rent for the last quarter; (b) $248,702 as total cure amount; (c) $4,637,000 as purchase price for the Equipment; and (d) all sales and property taxes under the Lease. In addition, ASARCO will transfer $58,948 to Bank of America as security for ASARCO's obligation to pay property taxes for the Equipment. The amount will be returned to ASARCO after it has provided Bank of America a proof of payment of the taxes. As reported in the Troubled Company Reporter on July 4, 2006, ASARCO LLC and Bank of America Leasing & Capital LLC, formerly known as Fleet Capital Corporation, were parties to an equipment lease agreement relating to four haul trucks, a mechanical shove and other mining equipment utilized at ASARCO's Ray and Mission mines. The Lease Agreement expired on July 1, 2006, and BofA will not agree to renew the Lease for another term unless ASARCO is in the position to purchase the Equipment, James R. Prince, Esq., at Baker Botts LLP, in Dallas, Texas, noted. ASARCO must first cure all of its defaults under the Equipment Lease Agreement for it to exercise its purchase option. Mr. Prince asserted that the Equipment is indispensable to ASARCO's successful mines operation and contributes to increased production and revenue. Moreover, there is currently a limited availability of mining equipment in the market, Mr. Prince says. Significant lead-time is required to receive new replacement equipment from the manufacturer. Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services and investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 through 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle, Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-21346) also filed for chapter 11 protection, and ASARCO has asked that the three subsidiary cases be jointly administered with its chapter 11 case. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. (ASARCO Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) BERKLINE/BENCHCRAFT: High Leverage Cues S&P to Lower Rating to B ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Morristown, Tennessee-based residential furniture manufacturer Berkline/BenchCraft Holdings LLC, including the company's corporate credit rating, to 'B' from 'B+'. At the same time, the ratings were placed on CreditWatch with negative implications, indicating that the ratings may be affirmed or lowered following the completion of Standard & Poor's review. The company had about $158.6 million of total debt and $12.5 million of mandatorily redeemable preferred stock outstanding at March 31, 2006. "The downgrade and CreditWatch placement reflects our heightened concerns regarding Berkline's high leverage and continued weak operating performance through its first quarter ended March 31, 2006, and likely inability to meet the financial covenants required by its bank credit facilities for the second quarter of 2006," said Standard & Poor's credit analyst David Kang. Net sales and operating income declined by 10.4% and 54.9%, respectively, for the three months ended March 31, 2006, compared with the prior-year period. This followed a disappointing 9.5% drop in net sales and 30% drop in operating income for the fiscal year ended Dec. 31, 2005. The company's continued weak operating performance is attributable to the loss of two major customers that filed for bankruptcy, logistical problems at its largest distribution center, and rising raw material and fuel costs. As a result, credit protection measures are significantly weaker than expected. Lease-adjusted EBITDA coverage of interest and pay-in-kind dividends on its mandatorily redeemable preferred stock was 1.2x and lease-adjusted total debt and preferred stock to EBITDA was 7.3x for the 12 months ended March 31, 2006. While the company was in compliance with financial covenants at March 31, 2006, cushion was extremely tight. Standard & Poor's remains concerned about the company's ability to maintain covenant compliance next quarter, particularly because the covenant requirements will tighten up. The rating agency will meet with management and review the company's ability to secure a waiver and amendment to its credit agreement as well as its future operating plans before resolving the CreditWatch listing. Berkline is a narrowly focused company that is primarily engaged in manufacturing upholstered furniture, including recliners, sofas, and other residential furniture products. BLACKWATER ENTERPRISES: Case Summary & Largest Unsecured Creditor ----------------------------------------------------------------- Debtor: Blackwater Enterprises, Inc. 3475 Olympia Road Davidsonville, Maryland 21035 Bankruptcy Case No.: 06-14245 Chapter 11 Petition Date: July 20, 2006 Court: District of Maryland (Baltimore) Judge: Duncan W. Keir Debtor's Counsel: Marc Robert Kivitz, Esq. 201 North Charles Street, Suite 1330 Baltimore, Maryland 21201 Tel: (410) 625-2300 Fax: (410) 576-0140 Total Assets: $3,000,000 Total Debts: $814,000 Debtor's Largest Unsecured Creditor: Entity Claim Amount ------ ------------ Talbot County $3,000 Office of Finance Suite 9 11 North Washington Street Easton, MD 21601 BRADLEY PHARMA: Restates First Quarter 2006 Financial Results ------------------------------------------------------------- Bradley Pharmaceuticals, Inc., disclosed that during the financial closing process for the second quarter 2006, its management concluded that an error occurred in the preparation of its first quarter 2006 financial statements that requires a restatement. The restatement is a result of the Company mistakenly accruing, as of March 31, 2006, interest expense that was actually already recorded and paid during the quarter ended March 31, 2006. To rectify this error, the Company's consolidated statement of income for the quarter ended March 31, 2006 was restated to: * reduce interest expense by $962,975 to $2,114,016, * increase income tax expense by $405,000 to income tax expense of $149,000, and * increase net income by $557,975 to net income of $205,333. In addition, the Company's consolidated balance sheet as of March 31, 2006 was restated to: * reduce prepaid income taxes by $405,000 to $6,458,528, * reduce accrued expenses by $962,975 to $36,823,502 and * increase retained earnings by $557,975 to $41,514,934. The Company says that its previously issued financial statements for the period ended March 31, 2006 should no longer be relied upon. Lenders' Waiver In its Form 10-Q/A, the Company discloses that its failure to file its Annual Report on Form 10-K for the year ended December 31, 2005 by April 30, 2006, triggered a default under the New Facility. On May 15, 2006, the Company received a waiver of this default from its lenders under the New Facility. Pursuant to the waiver, the Company agreed with its lenders to file its Annual Report on Form 10-K for the year ended December 31, 2005 by May 31, 2006 and its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2006 by June 30, 2006. The waiver also allowed the Company to continue outstanding LIBOR Rate Loans under the New Facility Concurrently, the Company's lenders agreed to certain technical amendments to the New Facility clarifying Permitted Investments which can be utilized in determining the Company's restricted cash and investments, which until the Company filed its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2006 and demonstrates compliance with the financial covenants in the New Facility, must be at least $45 million, allowing the Company to: * deliver to the lenders under the New Facility the Company's 2006 annual budget by June 30, 2006 and * calculate, for financial covenant purposes, consolidated EBITDA without giving effect to that portion of the Company's initial $5 million payment to Medigene that the Company classified as an expense in accordance with GAAP. The Company's lenders acknowledged that provided the Company file its Annual Report on Form 10-K for the year ended December 31, 2005 with the SEC by May 31, 2006, the Company would not be required to pay default interest under the New Facility; otherwise, default interest would be payable on a retroactive basis beginning May 1, 2006. Filing Update The Company filed its Annual Report on Form 10-K for the year ended December 31, 2005 with the Securities and Exchange Commission on May 19, 2006. The Company also filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 with the SEC on June 23, 2006. A full-text copy of the Company's Amended Quarterly Report for the quarter ended March 31, 2006 is available for free at http://ResearchArchives.com/t/s?e13 About Bradley Pharmaceuticals Based in Fairfield, New Jersey, Bradley Pharmaceuticals, Inc. (NYSE: BDY) -- http://www.bradpharm.com/-- was founded in 1985 as a specialty pharmaceutical company marketing to niche physician specialties in the U.S. and 38 international markets. Bradley's success is based on the strategy of Acquire, Enhance and Grow. Bradley Acquires non-strategic brands, Enhances these brands with line extensions and improved formulations and Grows the products through promotion, advertising and selling activities to optimize life cycle management. Bradley Pharmaceuticals is comprised of Doak Dermatologics, specializing in topical therapies for dermatology and podiatry, and Kenwood Therapeutics, providing gastroenterology, respiratory and other internal medicine brands. CATHOLIC CHURCH: Court Rules on Estimation Methodology in Portland ------------------------------------------------------------------ At the estimation hearing, the Archdiocese of Portland in Oregon asked Judge Elizabeth L. Perris of the U.S. Bankruptcy Court for the District of Oregon not to accept Dr. Ronald Schmidt as a qualified expert because his experience is mostly on anti-trust and business matters. Because the Olson Claimants' proposed estimation methodology was untimely filed, Judge Perris grants the Archdiocese's request to strike the tort claimants' memorandum supporting their estimation proposal. As reported in the Troubled Company Reporter on June 26, 2006, the Archdiocese asked Judge Perris to strike the estimation methodology proposed by certain tort claimants represented by Erin K. Olson, Esq., in Portland, Oregon. The Olson Claimants wanted a methodology that involves individual estimation by the same estimator or panel of estimators using certain factors that distinguish the sex abuse claims from the mass tort claims. Judge Perris, however, overrules the Archdiocese's objections to Dr. Schmidt's qualifications. The Bankruptcy Court says Dr. Schmidt is a qualified expert. The Bankruptcy Court also rules that "maximum probable jury verdict" is not a recognized statistical concept and testimony about that concept will not be allowed. Through the "maximum probable jury verdicts," claims will be estimated based primarily on jury trial results at the maximum probable liability amount -- an amount that is unlikely to be exceeded in the real world. The Bankruptcy Court directs the Archdiocese and the Tort Committee to submit expert reports on or before December 15, 2006. In the interim, Judge Perris requires: (a) the Archdiocese to identify to the Tort Claimants Committee the individual claim attributes it intends to include in its data analysis; (b) the Tort Committee to identify to the Archdiocese those additional claim attributes, if any, it wants to include in the data analysis; and (c) the Archdiocese to provide data on the individual claims to the Tort Committee, by September 15, 2006. The Tort Committee's counsel can verify the data with counsel for the pertinent claimant. Judge Perris will schedule a two-day estimation trial in early February 2007. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Claimants Object to Portland's Discovery Request ----------------------------------------------------------------- Erin K. Olson, Esq., in Portland, Oregon, notes that the Archdiocese of Portland in Oregon has filed requests with the U.S. Bankruptcy Court for the District of Oregon seeking discovery from tort claimants, including all the known future claimants. The need for and scope of the discovery was discussed during hearings on the Archdiocese's estimation motions held on June 16 and June 30, 2006. Ms. Olson relates that another hearing has been set on July 27, 2006, at the request of the Archdiocese's counsel over Ms. Olson's express objection. According to Ms. Olson, the Archdiocese has not yet determined which claim attributes will become factors in its estimation methodology because it has not yet calculated the statistical significance of particular claim attributes to settlement values of the settled claims in its "Historical Claims Database." No information from the unresolved claimants is necessary until the Archdiocese has determined which claim attributes from settled claims have a statistically significant relationship to settlement values, Ms. Olson says. Ms. Olson, therefore, asserts that the Court should permit no discovery for estimation purposes until the Archdiocese has disclosed the statistically significant claim attributes, their confidence levels, their rates of error, and other information that would permit Judge Perris to determine whether the discovery sought will further the estimation process. Ms. Olson says it is likely that there will be very few claim attributes, which can be factored into a statistical analyses, and the need for any discovery for estimation purposes is an open question since the claim attributes likely to bear any statistical significance to settlement value are readily available without discovery, including the identity of the priest-perpetrator and identity of plaintiff's counsel. It would be a colossal waste of the Archdiocese's assets to undertake "mini-depositions" of 54 or 66 tort claimants to obtain information that is unnecessary to the estimation process, Ms. Olson asserts. It would also be a travesty to require victims of childhood sexual abuse for whom depositions are indescribably stressful, emotional, painful, and often harmful, to be subjected to the ordeal of a deposition twice. Should the Court consider allowing the Archdiocese's request for mini-depositions, the Olson Claimants ask the Court for an evidentiary hearing at which excerpts of the videotaped depositions of tort claimants can be played to illustrate the effect of a deposition on a typical tort claimant. Ms. Olson says the Tort Claimants are unprepared to present the videotape as evidence on the July 27 hearing. Ms. Olson relates that when she objected to the hearing date she was out of state and was unable to coordinate a collective response from the other claimants' counsel when presented with the Archdiocese's demand for an immediate hearing. Ms. Olson asked the Archdiocese's counsel to wait for one day before scheduling the hearing to permit her to coordinate with other claimants' counsel, but was refused. Ms. Olson argues that if the Archdiocese wants to take more than one deposition of a witness, it must obtain written stipulation of the other parties or leave of the court. Additionally, the Archdiocese has not demonstrated the relevance of the information it seeks in mini-depositions to the estimation proceeding because there is no evidence before the Court that the claim attributes in its estimation methodology are: (1) available for statistical testing for settled claims in the Archdiocese's "Historical Claims Database"; (2) suitable as variables in a statistical analysis, that is sufficiently "objective" to be plugged into a statistical calculation; (3) statistically significant to the settlement value of the claims within an acceptable confidence interval with an acceptable rate of error; and (4) unavailable through a less expensive and burdensome means. Ms. Olson notes that the Archdiocese's counsel, Susan S. Ford, Esq., at Sussman Shank LLP, in Portland, Oregon, addressed some of the issues at the June 30, 2006 hearing. But it is unclear from Ms. Ford's statements to the Court when the Archdiocese intends to produce a report containing the identified statistically significant claims attributes and their error rates. That Report should be required before the Archdiocese is permitted to obtain discovery from the present claimants, Ms. Olson asserts. Ms. Olson also relates that when addressing tort claimants' concerns about the subjective factors listed on the Archdiocese's list of attributes attached to its expert's report, Ms. Ford suggested that everyone "carefully read the list. There are very few subjective factors, but you don't have to take my word for it. We do have an expert here." Ms. Olson points out that the Archdiocese's expert at no time has indicated what attributes on the list are suitable for inclusion in a statistical analysis, until in its recent list sent to the tort claimants. A full-text copy of the Archdiocese's Present Child Sex Abuse Tort Claims Estimation Methodology Claims Attributes is available for free at http://researcharchives.com/t/s?e20 While it may be true that the Archdiocese has sought the listed information to factor into its determination of the amount it was willing to pay to settle a claim, Ms. Olson contends there is nothing on the list that suggests that the attributes have been found to be statistically significant to the settlement values of the settled claims within an acceptable margin of error. Until the Archdiocese has established the relevance of particular attributes to the estimation process, the Olson Claimants ask the Court to deny its requests for mini-depositions. The Olson Claimants also ask the Court to reject the Archdiocese's request to compel claimants to submit affidavits for estimation purposes, unless and until Portland agrees that the estimation of the claims of known future claimants should be included with present claimants, or at least estimated individually rather than as part of the estimation of unknown future claims. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) CERADYNE INC: Acquires Facility and Equipment for $14.1 Million --------------------------------------------------------------- Ceradyne, Inc. completed two transactions related to its plans to enter into the manufacture and marketing of structural neutron absorbing materials. The Company completed the acquisition of an 86,000 square foot, first-class industrial facility in Chicoutimi, Quebec, Canada. This facility is currently equipped with a state-of-the-art 2,750 ton short-stroke aluminum extruder. Additionally, Ceradyne acquired a boron carbide/aluminum cladding product line known as Boral(R), as well as associated manufacturing equipment and inventory, from AAR Manufacturing, Inc., a subsidiary of AAR Corp. Boral will be used as a neutron absorber in various nuclear waste containment structures. The Company paid a total of $14.1 million for the facility, equipment, product line, and inventory acquired in the two transactions. Joel Moskowitz, Ceradyne chief executive officer, commented: "Ceradyne's acquisition of this substantive manufacturing facility and technology is part of our diversification strategy, while maintaining our core competencies in advanced technical, primarily non-oxide, structural ceramics. "We intend to manufacture boron carbide/aluminum metal matrix composites in our newly-acquired Canadian facility under an exclusive agreement between Ceradyne and Alcan Inc. announced June 8, 2006. We project that we will be in production late this summer, with the first half of 2007 targeted for full production of these nuclear waste containment materials." Mr. Moskowitz went on to say, "Our new Canadian venture will be under the leadership of Ceradyne's President of North American Operations, David Reed." Mr. Reed stated, "We will use our boron carbide powder made in the Company's Kempten, Germany, plant and shipped to this new Canadian facility. I am very enthused regarding this new Ceradyne venture. I have appointed Eric Cantin, a long-term Sequenay, Canada, resident as the Director General of our recently established Ceradyne Canada operation. Eric has an extensive background of senior technology management of aluminum and metal matrix composite structure manufacturing." Ceradyne, Inc. (Nasdaq: CRDN) -- http://www.ceradyne.com/-- develops, manufactures and markets advanced technical ceramic products and components for defense, industrial, automotive/diesel and consumer applications. * * * Ceradyne's $50 million revolving credit facility due 2009 carries Standard & Poor's BB- rating. The Company's credit rating is also rated BB- by Standard & Poor's. Those ratings were assigned on July 13, 2004. CHARLES EDWARDS: Creditors Lose Bid to Prosecute State Court Suit ----------------------------------------------------------------- The Hon. Patrick M. Flatney of the U.S. Bankruptcy Court for the Northern District of West Virginia denied Connie Myers and Martinsburg Lumber Company's requests for relief from the automatic stay in Charles Edwards Enterprises, Inc.'s chapter 7 case to pursue state court litigation against the Debtor and non- debtor entities. Ms. Meyers and Martinsburg Lumber want to file a lawsuit in the Berkeley County West Virginia Circuit Court against the Debtor and non-debtor entities for, inter alia: -- false representations, -- actual fraud, and -- piercing the corporate veil. Robert W. Trumble, the Debtor's Chapter 7 trustee, objected to the creditors' arguments because: a) the Debtor is not an individual and is not eligible to receive a chapter 7 discharge under Section 727(a)(1) of the Bankruptcy Code; and b) any veil piercing and alter ego claims are property of the estate and cannot be pursued by any party other than the Chapter 7 Trustee. In addition, the Trustee noted that Ms. Meyers and Martinsburg Lumber have filed proofs of claim and he has not objected to those claims. Unless objected to, any proof of claim is prima facie evidence of its validity and amount. Thus, the creditors might be able to establish the amount of their claims without the necessity of further litigation in State Court. In a decision published at 2006 WL 1729678, Judge Flatney ruled that the creditors are not entitled to: a) relief from stay to pursue veil piercing causes of action that belong to the Chapter 7 estate; or b) litigate fraud claims that would have no affect on whether the corporate Debtor was entitled to a discharge in connection with their proofs of claim filed in the bankruptcy case. Headquartered in Martinsburg, West Virginia, Charles Edwards Enterprises, Inc., is a residential building contractor. The Company filed for chapter 7 protection on Oct. 14, 2005 (Bankr. N.D.W.V. Case No. 05-06024). Michael Santa Barbara, Esq., at Santa Barbara Law Offices, PLLC, represents the Debtor. CHURCH & DWIGHT: To Acquire Orange Glo Int'l for $325 Million ------------------------------------------------------------- Church & Dwight Co., Inc. reported a definitive agreement to acquire Orange Glo International in Greenwood Village, Colorado for $325 million in cash. The transaction, which is subject to regulatory and other customary approvals, is expected to close during the third quarter of 2006. Orange Glo International's sales in the fiscal year ended Jan. 1, 2006 were almost $200 million; two-thirds of those sales were from OxiClean(R), the premium-priced brand leader in the fast-growing laundry pre-wash additive category, with remaining sales from Kaboom(R) bathroom cleaner and Orange Glo(R) household cleaner products. Church & Dwight's 2005 sales of $1.7 billion included laundry and household cleaning products of $450 million. The Company's Arm & Hammer and Xtra(R) brands make it the number three participant in the $6 billion (at retail) laundry detergent market. The Company noted that OxiClean is the number two brand in the $1 billion (at retail) laundry additives market, as well as being the leader in the pre-wash segment of that market. "OxiClean is a great complement to our Arm & Hammer and Xtra brands and provides access to one of the fastest growing parts of the laundry category -- additives," James R. Craigie, Church & Dwight President and Chief Executive Officer, said. "OxiClean also brings to our company a franchise that has developed great consumer loyalty. This transaction is consistent with our growth strategy of strengthening our businesses by adding leading brands in areas of high growth potential." Growth in the pre-wash additives segment has been the result of consumers' desire for better stain removal and to enhance the cleaning attributes of liquid laundry products, the Company said. The transaction is structured as an asset purchase resulting in a cash benefit from tax depreciation with a net present value of over $60 million. Orange Glo International reported 2005 operating profit before charges of $17 million. Although Church & Dwight expects to continue managing it as a separate business unit, combining operations is anticipated to result in cost synergies of over $20 million a year by the middle of 2008. The Company will finance the acquisition with a $250 million addition to its bank credit facility combined with available cash. "Our Company was founded in 1987 on the premise that Orange Glo's products should delight consumers with innovative new ways to clean and be powerful without compromising the health of the home or the environment," Orange Glo International's Chairman, David Appel, said. "It was important to us that this legacy continues with a company that shares our beliefs. We are happy to become part of Church & Dwight, which has a 160-year history of marketing one of America's most trusted brands, Arm & Hammer." The acquisition is expected to have a slightly negative effect on 2006 earnings per share due primarily to integration costs. "We expect it to be moderately accretive in 2007 and contribute strongly to earnings in 2008. We are also still comfortable with our previously announced objective of achieving $1.93 in earnings per share for 2006, excluding any effect from the acquisition," Mr. Craigie concluded. About Orange Glo International Headquartered in Denver, Colorado, Orange Glo International -- http://www.greatcleaners.com/-- develops and manufactures cleaning products. The Company, known for its OxiClean(R) brand, employs over 180 people. About Church & Dwight Based in Princeton, New Jersey, Church & Dwight Co., Inc. (NYSE:CHD) -- http://www.churchdwight.com/-- manufactures and markets a wide range of personal care, household and specialty products, under the Arm & Hammer brand name and other well-known trademarks. CITGO PETROLEUM: Averted Auction Won't Affect Ratings Says Fitch ---------------------------------------------------------------- The ratings of CITGO Petroleum Corporation are not expected to change due to the announcement that Lyondell Chemical Company (Issuer Default Rating [IDR] of 'BB-' on Rating Watch Evolving) and CITGO have discontinued the auction process for the LYONDELL- CITGO Refining L.P. refinery in Houston, Texas. Although bids exceeded $5.0 billion, these offers did not meet the owners' views of the value of the facility. The announcement also indicated that the owners would seek other alternatives, including the possible acquisition of CITGO's 41.25% interest in the 268,000 barrel per day (bpd) refinery by Lyondell or continuation of the joint venture. Fitch rates the debt of CITGO as: -- IDR 'BB-'; -- $1.15 billion senior secured revolving credit facility maturing in 2010 'BB+'; -- $700 million secured term-loan B maturing in 2012 'BB+'; -- Senior secured notes 'BB+'. CITGO's variable-rate IRBs are supported by letters of credit under the company's credit facilities and are not rated by Fitch. The Rating Outlook for CITGO's debt is Stable. Although the ultimate outcome is uncertain, CITGO's ratings incorporate Fitch's expectation that net proceeds from the sale of its interest in LCR would be distributed to its ultimate parent, the Bolivarian Republic of Venezuela (Venezuela, long-term IDR of 'BB-' with a Stable Rating Outlook by Fitch). CITGO is also evaluating the sale of its two smaller asphalt refineries in Savannah, Georgia and Paulsboro, New Jersey. CITGO's credit facilities allow for the distribution of gross proceeds of up to $3 billion of asset sales by CITGO, including inventories associated with the asset sales, but excluding the Lake Charles, Louisiana, and Corpus Christi, Texas, refineries. The credit facilities are secured by the Lake Charles and Corpus Christi refineries as well as the company's current assets which include accounts receivable and inventories. CITGO's ratings continue to be supported by the significant improvements made to the company's balance sheet in recent quarters. CITGO's three core refineries (Lake Charles, Corpus Christi and Lemont, Illinois) have also been upgraded over the past several years to process a high percentage of heavy sour crude. Heavy crudes continue to sell at a 20% to 25% discount to lighter sweet crudes such as the benchmarks West Texas Intermediate and Brent. As the largest recipient of Venezuelan crude exports, CITGO remains a critical piece of Venezuela's integrated oil strategy. CITGO is one of the largest independent crude oil refiners in the U.S., with three modern, highly complex refineries and two asphalt refineries. Including the company's 41.25% interest in LCR, CITGO owns 970,000 bpd of crude refining capacity. CITGO branded fuels are marketed through more than 13,000 independently owned and operated retail sites. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., the state-owned oil company of Venezuela. COLLINS & AIKMAN: Lessors Balk at Extended Lease Decision Deadline ------------------------------------------------------------------ Becker Properties, LLC, and Anchor Court, LLC, point out that an open-ended extension of the lease decision deadline requested by Collins & Aikman Corporation and its debtor-affiliates is contrary to the timetable Congress provided in the Bankruptcy Code. The Debtors are asking the U.S. Bankruptcy Court for the Eastern District of Michigan to extend the period within which they must assume or reject unexpired leases with Becker and Anchor Court, until the date a plan of reorganization is confirmed in their Chapter 11 cases. The Debtors said they could not make reasoned decisions concerning assumption or rejection of leases until confirmation of a plan of reorganization. The Bankruptcy Code, however, provides a different timetable, Robert J. Diehl, Jr., Esq., at Bodman LLP, in Detroit, Michigan, argues. Section 365(d)(4) of the Bankruptcy Code provides that the trustee must decide to assume or reject a nonresidential lease of real property within 60 days, or longer if extensions are granted. The Debtors' justification for their open-ended request is that they are involved in ongoing negotiations regarding plan confirmation that might impact the decision to assume or reject the leases in question. Mr. Diehl contends that this justification is not cause for an extension of time, especially considering the prejudice to Becker and Anchor. "[The]Debtors' requested extension removes the Court's oversight of the reorganization process as established by the Bankruptcy Code and shifts the burden to Becker to request a deadline by which leases must be assumed or rejected," Mr. Diehl points out. If the extension is granted, Becker and Anchor will have no way to make an informed business decision about a proposed plan of reorganization before the final treatment of its leases is known, Mr. Gordon says. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represents C&A in its restructuring. Lazard Freres & Co., LLC, provides the Debtor with investment banking services. Michael S. Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors Committee. When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) CREATIVE VENTURES: Case Summary & Eight Largest Unsec. Creditors ---------------------------------------------------------------- Debtor: Creative Ventures Management, Inc. P.O. Box 570 Lower Lake, California 95457 Bankruptcy Case No.: 06-10434 Chapter 11 Petition Date: July 20, 2006 Court: Northern District of California (Santa Rosa) Debtor's Counsel: Michael C. Fallon, Esq. 100 East Street, Suite 219 Santa Rosa, California 95404 Tel: (707) 546-6770 Fax: (866) 305-7592 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million Debtor's Eight Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Marin Mortgage Bankers Real Estate $1,008,579 60 East Sir Francis Drake Boulevard Larkspur, CA 94939 Pacific Equity and Capital Real Estate $1,175,000 1299 Fourth Street San Rafael, CA 94901 American Secured Real Estate $460,000 14930 Ventura Boulevard Sherman Oaks, CA 91403 L.G. Engle Real Estate $343,008 P.O. Box 1261 Upland, CA 91785 Clifton Rakie Real Estate $240,000 P.O. Box 570 Lower Lake, CA 95457 Carson Williams $80,000 Bob Leal $20,000 Paul Katona $20,000 CROWN CORK: Financial Leverage Prompts Moody's to Hold Ratings -------------------------------------------------------------- Moody's Investors Service affirmed the Corporate Family Rating of Crown Cork and Seal Company, Inc., as well as ratings on the debt instruments of Crown and its operating subsidiaries, including Crown Americas LLC's $365 million senior secured term loan B. Moody's expects that the proposed $200 million increase in term loan B will be used to fund a share repurchase of about $100 million, fund a UK pension obligation of about GBP30 million, reduce borrowings under the existing revolver, and pay fees and expenses. Key ratings factors for packaging companies include: 1) financial leverage and interest coverage, 2) operating profile as reflected in operating profitability and asset efficiency, and 3) competitive position as reflected in revenue size, the value-added nature of the company's products, ability of customers to switch to other suppliers, and substrate diversity. Crown exhibits an overall credit profile that remains consistent with a corporate family rating of Ba3, with the financial leverage and interest coverage factor being weak for the rating category, operating profile in line with the rating category, and competitive profile relatively strong for the rating category. Moody's estimates that pro forma for the recently announced increase in term loan B at Crown Americas to $365 million from $165 million, Crown's total debt to EBITDA, adjusted for operating leases, pensions, and asbestos liabilities would rise to over 5 times, while free cash flow to debt would be in the high single digits and EBIT interest coverage would be below 2 times. Moody's expects Crown to maintain EBIT margins in the mid to high single digits and EBIT to gross property, plant, and equipment in the low teens. Strengths in Crown's competitive profile include annual revenue of over $7 billion and a concentrated industry structure that contributes to stability in the company's overall market share. Moody's affirmed these ratings: * $410 million US Revolving Credit Facility due 2011, Ba2 * $350 million European Revolving Credit Facility due 2011, Ba2 * $40 million Canadian Revolving Credit Facility due 2011, Ba2 * $365 million US Term Loan B due 2012, Ba2 * $348 million Euro Term Loan B due 2012, Ba2 * $500 million Crown Americas senior notes due 2013, B1 * $600 million Crown Americas senior notes due 2015, B1 * EUR460 million European Holdings 6.25% First Lien Notes due Sept. 1, 2011, Ba2 * $200 million Crown Cork & Seal Company, Inc. 8.00% Senior Unsecured Notes due April 15, 2023, B2 * $350 million Crown Cork & Seal 7.375% Senior Unsecured Notes due December 15, 2026, B2 * $150 million Crown Cork & Seal 7.50% Senior Unsecured Notes due December 15, 2096, B2 * $107 million Crown Cork & Seal Finance PLC Senior Unsecured Notes, due December 15, 2006, B2 * Speculative Grade Liquidity Rating, SGL-2 * Corporate Family Rating at Crown Cork & Seal Company, Inc., Ba3 The ratings outlook is stable. Large share repurchases beyond those currently expected, or significant debt-financed acquisitions, or evidence of inability to cope with raw materials price increases or other exogenous shocks, could put downward pressure on the ratings. The outlook or ratings likely would come under pressure if on a sustained basis adjusted total debt to EBITDA exceeds 5 times or free cash flow to debt deteriorates to below 5%. Conversely, if Crown exhibits sustained reduction in leverage and improvement in free cash flow such that total debt to EBITDA declines toward 4 times and expected free cash flow to debt improves to above 10%, the ratings could be raised. Crown Holdings, Inc., together with its principal subsidiary Crown Cork and Seal Company, Inc., headquartered in Philadelphia, Pennsylvania, is a leading global manufacturer of steel and aluminum containers for food, beverage, and consumer products. Revenues for the twelve months ended June 30, 2006 were approximately $7 billion. CROWN HOLDINGS: Good Liquidity Cues Fitch to Put Low-B Ratings -------------------------------------------------------------- Fitch rates Crown Holdings, Inc., Crown Cork & Seal Company, Inc., Crown Americas, LLC, and Crown European Holdings, SA: Crown: -- Issuer Default Rating 'B+' CCS: -- IDR 'B+' -- Senior unsecured notes 'B / Recovery Rating of 5' CA: -- IDR 'B+' -- Senior secured dollar term facility 'BB+/RR1' -- Senior secured dollar revolving facility 'BB+/RR1' -- Senior unsecured notes 'B+/RR4' CEH: -- IDR 'B+' -- Senior secured euro term facility 'BB+/RR1' -- Senior secured euro revolving facility 'BB+/RR1' -- Senior secured euro 1st priority notes 'BB+/RR1' Approximately $3.5 billion of debt is covered by the ratings. The Rating Outlook is Stable. The ratings reflect Crown's: * leading market share across its product categories; * balanced revenue mix; * geographic diversification; * good liquidity; * modest near-term debt maturities; * volume growth in emerging markets; and * focus on debt reduction. Rating concerns include: * high leverage; * escalating raw materials costs; * intense competition and low unit volume growth in mature markets; and * to a lesser extent, asbestos liability. Broader packaging conversion trends towards plastics are also a consideration, although not a primary rating factor. The Stable Outlook reflects the relatively steady demand in Crown's key end-markets, consistent operating performance and solid cash generation. The company's demonstrated ability to pass-through most raw materials price increases is also noted. The Recovery Ratings and notching in the debt structure reflect Fitch's recovery expectations under a scenario in which distressed enterprise value is allocated to the various debt classes. The recovery analysis also considers jurisdictional issues, with approximately 70% of the company's assets residing outside of the U.S. The RRs for Crown Americas, LLC., and Crown European Holdings, SA's senior secured credit facility, consisting of dollar-based and foreign currency term loans and revolving credit facilities ('RR1'; expected 91%-100% recovery) reflect significant expected recovery due to: * security from substantially all U.S. assets and certain foreign subsidiary assets; * 65% pledge of capital stock of non-U.S. subsidiaries of Crown Americas; and * substantial cushions of unsecured debt and equity. The $504 million of term loans mature in 2012 and are held at Crown Americas ($165 million) and Crown European Holdings (EUR287 million/$339 million). The revolving credit facilities mature in 2011 and consist of: * $410 million at Crown Americas, * $350 million at Crown European Holdings, and * $40 million at Crown Canada. The U.S. based credit facilities are guaranteed by Crown Holdings, Crown Cork & Seal, Crown Americas, and Crown International Holdings. The European based facilities are guaranteed by the same entities as well as certain foreign guarantor subsidiaries. The 6.25% senior secured first priority notes held at Crown European Holdings (EUR460 million/$587 million, due 2011) are rated 'RR1'; (expected 91%-100% recovery) which reflects outstanding recovery prospects in a distressed scenario deriving from a first priority lien on certain foreign subsidiary assets, 100% stock of Crown Cork & Seal, and significant debt with lower priority (about $1.9 billion). These notes are guaranteed by the same entities guaranteeing the European based credit facilities listed above. The Recovery Rating for the $1.1 billion of senior unsecured notes held at Crown Americas ($500 million of 7.625% notes, due 2013 and $600 million of 7.75% notes, due 2015) is 'RR4'; (expected 31%-50% recovery) and reflects the expectation of average recovery due to lack of security for the notes, and limited enterprise value remaining after allocation to senior secured debt in a distressed scenario. These notes are guaranteed by Crown and each of Crown's U.S. restricted guarantor subsidiaries. Upon a change of control the notes are puttable at 101% of par. The 7.625% notes become callable in November 2009, and the 7.75% notes become callable in November 2010. The Recovery Rating for the $807 million of senior unsecured notes held at Crown Cork & Seal ($107 million of 7.0% notes, due 2006; $350 million of 7.375% notes, due 2026; $150 million of 7.5% notes, due 2096; and $200 million of 8.0% notes, due 2023) is 'RR5'; (expected 11%-30% recovery) and reflects the below average recovery prospects for these notes, and also considers their structural subordination. These notes are guaranteed by Crown Holdings. It should be noted that while this class of debt carries a lower expected recovery under the assumptions of a distressed scenario, $107 million will mature in December 2006 and is covered by adequate liquidity. The company's liquidity at the end of the first quarter was about $563 million, and consisted of cash ($293 million) and available revolver ($270 million). Liquidity has declined somewhat over the past five quarters largely as a result of substantial cash payments in 2005 for debt restructuring fees and pension contributions. The company has $139 million of debt maturities due in 2006, which will be funded by cash from operations and available liquidity. Additionally, Crown has two receivables securitization facilities of $225 million and EUR120 million, and Fitch estimates availability under these facilities of about $110 million. Cash generation has been solid for the past several years (ranging from $225 million to $290 million on a free cash flow basis -- after deducting dividends to minority interests) with the notable exception of 2005 when the company reported negative $360 million of free cash flow and negative $122 million of operating cash flow. Fitch notes that the significant decline was primarily the result of $354 million of one-time cash pre-payment fees incurred in connection with the 2005 debt refinancing, as well as $401 million of pension contributions which included $266 million of accelerated payments. Excluding the pre-payment fees and the accelerated portion of the pension contribution, pro-forma free cash flow would have been about $260 million. Crown's credit metrics have been improving over the past few years as the company has been paying down debt with funds from divestitures and cash from operations. The debt refinancing in 2005 also reduced interest expense and extended major debt maturities for several years. However, leverage remains relatively high. As of Dec. 31, 2005, the company had leverage of 4.1x and EBITDA interest coverage of 2.3x. The company's 2005 refinancing lowered interest expense by roughly 30% based on a 2006 gross interest expense projection of about $250 million. Covenants under the senior secured credit facilities limit debt-to-EBITDA to 4.25x through Sept. 30, 2007, and EBITDA interest coverage to 2.75x through the same date. It should be noted that Fitch's calculation of these ratios is not equivalent to those allowed for covenant compliance. The company is benefiting from its focused strategy of organic growth in the metals packaging sector. Through divestitures over the past several years, the company has largely exited plastics- based packaging operations. Simultaneously, the company has aggressively pursued growth opportunities in emerging markets, where it is well-positioned to capture sizable new volume. The company has recently added sold-out new capacity that will increase volumes in beverage cans by 15%-20% outside North America. In mature markets, Crown intends to maintain market share and expand production of specialty and niche-market metal packaging, which typically garners higher margins. Challenges include escalating raw materials costs and maintaining unit volumes, particularly in mature markets. Crown's principal raw materials (steel and aluminum) comprise nearly 60% of cost of goods sold and each have shown price increases of 16% to 20% or more in the past year. The company has been successful for the most part in implementing price increases and maintaining profitability despite the higher prices. However, Fitch remains cautious about the company's continued ability to pass-through all price increases and maintain volumes, especially considering the intense price competition within the metal packaging industry. Management has noted a 6% loss of North America beverage can volume recently, which was due to price competition. The company believes this volume will be replaced with new business which will be fully realized sometime in 2007. Additionally, double-digit beverage can volume growth in certain emerging markets will likely bolster total volume growth, and 5% global volume growth across all products is expected in 2006. In addition, the company has asbestos liability exposure from a business acquired over 40 years ago. Crown has accrued a provision for asbestos liability claims of about $211 million as of March 31, 2006, and had about 80,000 claims outstanding as of the same date. Fitch is encouraged by the trend in annual new claims and cash payments for settlements, both of which have been declining each year for the past several years. However, the issue remains as an ongoing ratings consideration. The company expects to pay about $25 million in asbestos-related claims in 2006. Fitch used a $200 million asbestos-related liability estimate in the calculation of enterprise value for the recovery analysis. Significant divestitures seem unlikely going forward. Fitch believes the company is now positioned to generate healthy operating cash flows over the intermediate term and will likely reduce capital expenditures somewhat. As cash generation improves, Fitch expects that Crown will likely continue to focus on debt reduction and prudent asset management. Management has indicated that substantive acquisitions are not part of its strategic plan. Additionally, the company has about $145 million remaining in an authorized share repurchase program which was initiated to offset dilution. Crown repurchased approximately $38 million of common stock in 2005 and $9 million in the first quarter of 2006. Debt maturities are modest over the next several years, with the exception of $139 million in 2006 which includes $107 million of 7.0% senior unsecured notes at Crown Cork & Seal maturing in December 2006. DELPHI CORP: UAW President Says Strike Still Possible ----------------------------------------------------- There has been little progress in talks between United Auto Workers union and Delphi Corporation, Bloomberg News reports citing UAW President Ron Gettelfinger. According to Bloomberg, Mr. Gettelfinger said a strike at Delphi is still possible. "We have not ruled out any of our options," he said. Mr. Gettlefinger told reporters that he expected more concessions on wage and benefit issues from Delphi but the company seems to have stalled after approval of the attrition plan, Bloomberg relates. "I think the attrition package got them where they need to be, and they act like nothing has changed," Mr. Gettelfinger said. The next scheduled hearing on Delphi's request to reject the collective bargaining agreements will be on August 11, 2006. Based in Troy, Mich., 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. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Says Harbinger Stock Purchase is "Noncompliant" ------------------------------------------------------------ The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York directs Harbinger Capital Partners Master Fund I, Ltd., to show cause why an order should not be entered granting Delphi Corporation and its debtor-affiliates' request related to the trading of Delphi's stocks. The Court entered a trading order on January 6, 2006, which requires certain entities to file a notice of intent to purchase, acquire, or obtain tax ownership of Delphi Corporation's common stock before consummation of the acquisition. Entities who want to acquire Delphi Stock that would cause them to become substantial equityholders need to file the notice. A substantial equityholder owns Delphi Stock in excess of 26,499,999 shares. Harbinger Capital Partners Master Fund I, Ltd., represented to the Debtors that: (a) on June 1, 2006, it acquired Tax Ownership of Delphi Stock in excess of 26,499,999 shares; (b) on June 5, 2006, it acquired Tax Ownership of additional shares resulting in a total Tax Ownership of 32,025,000 shares; and (c) on June 12, 2006, Harbinger filed a Schedule 13D with the Securities and Exchange Commission disclosing its holdings of Delphi Stock. Harbinger made no acquisitions or dispositions of Delphi Stock after the Debtors contacted it regarding the Schedule 13D and the terms of the Final Trading Order. Under the Final Trading Order, Harbinger's acquisition of Delphi Stock in excess of 26,499,999 shares constituted "Noncompliant Purchases." Among other things, Harbinger did not serve on the Debtors a Notice of Intent to Purchase, Acquire, or Otherwise Obtain Tax Ownership of Stock prior to the Noncompliant Purchases. John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Chicago, Illinois, points out that the Noncompliant Purchases were void ab initio pursuant to the Final Trading Order. Thus, Harbinger never became a Substantial Equityholder. According to Harbinger, it did not receive actual notice of the Final Trading Order and that the Noncompliant Purchases were wholly inadvertent. Mr. Butler contends otherwise. The Debtors ask the Court to require Harbinger to: (a) sell on the open market a sufficient number of shares of Delphi Stock it acquired in the Noncompliant Purchases so that it will hold fewer than 26,500,000 shares. Harbinger must have no actual knowledge of the identity of the persons or entity that is to become the beneficial owner of the Stock. Harbinger would not be required to file: (1) A Notice of Status as a Substantial Equityholder as a result of any Stock Purchase; (2) A Notice of Intent to Purchase, Acquire, or Otherwise Obtain Tax Ownership of Stock as a result of any Stock Purchase; and (3) A Notice of Intent to Sell, Exchange, or Otherwise Dispose of Tax Ownership of Stock as a result of the Stock; (b) donate to one or more organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, any profit Harbinger realizes from the disposition of the Stock; and (c) promptly file a certificate with the Court confirming its compliance with these procedures and specifically describe the details of each Stock Disposition. Harbinger would be treated as never having owned the Stock acquired in the Noncompliant Purchases. Mr. Butler notes that Harbinger has advised the Debtors' counsel that it finds these procedures acceptable. Based in Troy, Mich., 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. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Unit Sells Assets to Wireless Matrix for $11 Million ----------------------------------------------------------------- Wireless Matrix Corporation bid and entered into an Amended and Restated Asset Sale and Purchase Agreement dated July 20, 2006, to acquire substantially all the assets of Mountain View, California- based MobileAria, Inc., a 71% owned subsidiary of Delphi Automotive Systems LLC. Wireless Matrix will pay cash consideration of $11,005,000 and assume certain liabilities to acquire the intellectual property and customer contracts of MobileAria. Consummation of the sale is subject to court approval and consent by parties in interest. If approved by the court, Wireless Matrix expects the sale to be consummated by the end of August 2006. The acquisition provides three significant benefits to Wireless Matrix. MobileAria brings to the Company a proven applications platform that enables Wireless Matrix to meet the needs of Enterprise-level customers with the solutions as well as a highly capable applications team who are designing new applications leveraging wireless broadband networks. It also provides a strategic relationship with Verizon Communications, MobileAria's primary customer, with over 10,000 subscribers. MobileAria's hardware technology accelerates the Company's entry into the wireless broadband market with its EVDO CDMA hardware capabilities. MobileAria's leading-edge high-speed wireless broadband device, certified and proven on the Sprint and Verizon networks, provides the field workforces of enterprise users' unfettered and secure access to all desktop and web applications. "The acquisition of MobileAria is another major step along our transformational strategy," said J. Richard Carlson, President and CEO of Wireless Matrix. "Not only does MobileAria fill out our hardware solution set, but this acquisition accelerates our entry into the hosted applications space, enabling Wireless Matrix to serve a much larger target market demanding new solutions that leverage wireless broadband networks." Wireless Matrix was selected and approved by the U.S. Bankruptcy Court for the Southern District of New York on July 19, 2006, as providing the best bid for substantially all the assets of MobileAria. About Wireless Matrix Headquartered in Reston, Virginia, Wireless Matrix Corporation (TSX: WRX) -- http://www.wrx-us.com/-- provides enterprise-class wireless data solutions for business-critical mobile and remote asset operations. The company delivers real-time data services across cellular, satellite and WiFi networks; a variety of modems and hardware platforms; and transportation applications that increase productivity and reduce operating expenses with service fleet operations. Wireless Matrix has offices in Burnaby, British Columbia. About Delphi Corp. Headquartered in Troy, Michigan, Delphi Corporation -- http://www.delphi.com/-- supplies 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. DELTA AIR: Wants Court Approval on Panasonic Master Agreement ------------------------------------------------------------- Delta Air Lines, Inc., and its debtor-affiliates ask the United States Bankruptcy Court for the Southern District of New York for authority to enter into, and perform under, the Letter Agreement and the Master Agreement with Panasonic Avionics Corporation. Pursuant to a Master Agreement for the Purchase of Equipment, Software Licenses and Services dated Feb. 28, 2003, Panasonic Avionics Corporation provides electronic equipment, including in- flight audio and video entertainment systems, for the Debtors' aircraft, and related maintenance and support services. The Debtors seek to continue purchasing equipment and availing services from Panasonic. The parties have reached regarding the terms and conditions upon which further purchases may be made. Pursuant to a Letter Agreement dated June 7, 2006, the parties agree to: (i) resolve the $5,694,298 owing to Panasonic for all goods and services provided prepetition; and (ii) enter into a Master Agreement dated July 7, 2006, that will supersede and replace the Original Agreement. While the Master Agreement does not obligate the Debtors to order any minimum amount of equipment, the Debtors have budgeted capital for the equipment and the maintenance fees for years 2006 and 2007: 2006 2007 ---- ---- Capital $35,000,000 $57,000,000 Maintenance Fees $4,000,000 $9,500,000 The term of the Master Agreement is five years, with various options to extend or terminate the Master Agreement on certain specified conditions. Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, relates that, pursuant to the Master Agreement, Panasonic will ship the equipment and invoice the Debtors for the value of each shipment. The Debtors will pay the amount of the invoice to Panasonic as it becomes due, the full amount of which will be credited against the invoice and will also be credited in like amount against the prepetition debt. In this way, Mr. Huebner explains, the prepetition debt will be reduced over time. When the Debtors have made $5,694,298 in total payments under the Master Agreement for postpetition goods and services, the prepetition debt will be completely exhausted. Mr. Huebner relates that the mechanism will encourage the Debtors to make purchases under the Master Agreement because each purchase will concomitantly reduce the prepetition debt. The pricing terms of the Master Agreement are reasonable, and eliminating the prepetition debt will obviate any potential prepetition claim by Panasonic, Mr. Huebner asserts. Panasonic is an important supplier of in-flight entertainment systems for the Debtors' aircraft, Mr. Huebner asserts. "Panasonic is an experienced provider of electronic equipment and already maintains and repairs many of the in-flight entertainment systems now used aboard the Debtors' aircraft." About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. (Delta Air Lines Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELTA AIR: Wants to Amend Merrill Lynch Letter of Credit Facility ----------------------------------------------------------------- Delta Air Lines, Inc., and its debtor-affiliates ask the United States Bankruptcy Court for the Southern District of New York to amend its L/C Facility without further Court order if they determine, based on the final pricing offered by Merrill Lynch Commercial Finance Corp., that it is in the best interests of the Debtors' estates. On January 26, 2006, Merrill Lynch, pursuant to a transaction with a syndicate of other financial institutions, issued a $300,000,000 letter of credit for the Debtors' account in favor of U.S. Bank National Association. Merrill Lynch has informed Delta Air, that it may be possible to modify the terms of the L/C Facility to obtain more favorable pricing terms from the syndicate, thus reducing Delta's cost of the L/C. The amendment would also extend the term of the more favorably priced L/C by approximately seven months. In return for those concessions, Delta, according to Merrill Lynch, would agree: -- not to terminate the L/C Facility for at least six months from the date of the amendment; and -- to pay Merrill Lynch a fee that will be substantially less than one year's savings from the repricing. The Debtors have not yet made a final decision to proceed with the amendment because Merrill Lynch has not yet completed the arrangement process to set the final pricing terms for the amended L/C Facility, Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, relates. However, according to Mr. Huebner, the Debtors need to be able to proceed quickly with consummating the amendment once the pricing terms are finalized in order to lock in the more favorable pricing as quickly as possible. About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines, Inc. -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. (Delta Air Lines Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELTA AIR: Flight Attendants To Negotiate for Consensual Agreement ------------------------------------------------------------------ Teamster flight attendants at Delta Comair are scheduled to negotiate with the company as previously scheduled before Federal Bankruptcy Judge Adlai Hardin's ruling on July 21, 2006. The judge reversed his previous decision that the company could not reject the flight attendants' contract on Delta Comair's earlier motion. Teamster legal counsel is reviewing the ruling to determine whether the Union should appeal. The flight attendants, who voted 93% in favor of authorizing job actions, will be free to respond with self-help actions should the company choose to implement their plan. "The decision does not significantly alter our position at the bargaining table," said Connie Slayback, Local 513 President in Florence, Kentucky. "We are disappointed by the judge's decision but the company will still have to compromise and they had already reduced their proposed cuts in order to get this ruling." The Cincinnati-based Comair filed for bankruptcy protection, along with Delta Air Lines Inc. last year, and had sought $8.9 million in cuts from the flight attendants. "Our commitment to the company helped keep this airline flying high during hard times," Ms. Slayback said. "The productivity of Comair's employees is shown by the fact that the company could hand $519 million in a cash loan to Delta over the past three years. If Comair moves to abrogate our agreement, travelers should be aware that strike activity is possible and would disrupt operations at both Comair and Delta." Founded in 1903, the Teamsters Union represents more than 1.4 million hardworking men and women in the United States and Canada. About Delta Air Lines Based in Atlanta, Ga., Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. DIGITAL LIGHTWAVE: Borrows $200,000 from Optel for Working Capital ------------------------------------------------------------------ Digital Lightwave, Inc. disclosed that on July 12, 2006, it borrowed $200,000 from Optel Capital, LLC, to fund its working capital requirements. Optel Capital is controlled by the Company's largest stockholder and current chairman of the board, Dr. Bryan J. Zwan. Secured Promissory Note The $200,000 loan is evidenced by a separate secured promissory note that bears 10% interest per annum and is secured by a security interest in substantially all of the Company's assets. Principal and any accrued but unpaid interest under the secured promissory note is due and payable upon demand by Optel at any time after August 31, 2006; provided, however, that the entire unpaid principal amount of each loan, together with accrued but unpaid interest, shall become immediately due and payable upon demand by Optel at any time on or following the occurrence of any of these events: (a) the sale of all or substantially all of the Company's assets or, subject to certain exceptions, any merger or consolidation of the Company with or into another corporation; (b) the inability of the Company to pay its debts as they become due; (c) the dissolution, termination of existence, or appointment of a receiver, trustee or custodian, for all or any material part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; (d) the execution by the Company of a general assignment for the benefit of creditors; (e) the commencement of any proceeding against the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 90 days after the date commenced; or (f) the appointment of a receiver or trustee to take possession of the property or assets of the Company. A full-text copy of the Secured Promissory Note issued by Digital Lightwave to Optel Capital on July 12, 2006, is available for free at http://ResearchArchives.com/t/s?e30 Optel Notes The Company discloses that as of July 12, 2006, it owed Optel approximately $53.5 million in principal plus approximately $8.8 million of accrued interest thereon, which debt is secured by a first priority security interest in substantially all of the Company's assets and such debt accrues interest at a rate of 10.0% per annum. The maturity dates and corresponding payment schedules related to these obligations are: (a) Secured Convertible Promissory Note. Pursuant to that certain secured convertible promissory note, dated as of September 16, 2004, the Company borrowed $27.0 million from Optel on these terms: * Accrued and unpaid interest as of September 16, 2004, plus interest that accrued on such accrued and unpaid interest and interest that accrued on the $27.0 million outstanding principal from September 16, 2004 became due and payable on September 16, 2005, is now currently due and payable on demand at any time, and as of July 12, 2006 was approximately $3.7 million; * Interest that accrues from September 17, 2005, is currently due and payable on demand at any time and as of July 12, 2006 was approximately $2.5 million; and * $27.0 million in principal is currently due and payable on demand at any time. (b) Short-Term Notes. Pursuant to several short-term secured promissory notes issued by the Company to Optel since September 30, 2004, the Company has borrowed approximately an additional \ $26.5 million on these terms: * Approximately $26.3 million in principal, plus accrued interest which as of July 12, 2006 was approximately $2.6 million, is currently due and payable on demand at any time; and * Approximately $200,000 in principal, plus accrued interest which as of July 12, 2006 was $0, is due and payable on demand at any time after August 31, 2006. Approximately $62.1 million of principal and accrued interest is currently due and payable on demand. Discussion With Optel The Company reports that is continuing its discussions with Optel to restructure the Short-Term Notes and the Secured Convertible Promissory Note by extending the maturity date of the debts, and to arrange for additional short-term working capital. The Company says that if it doesn't reach an agreement to restructure the Short-Term Notes and the Secured Convertible Promissory Note, and obtain additional financing from Optel, the Company will be unable to meet its obligations to Optel and other creditors, and in an attempt to collect payment, creditors including Optel, may seek legal remedies The Company says that all these transactions were approved by its board of directors, upon the recommendation of a special committee of the board, composed solely of independent directors. About Digital Lightwave Based in Clearwater, Florida, Digital Lightwave, Inc., provides the global communications networking industry with products, technology and services that enable the efficient development, deployment and management of high-performance networks. The Company designs, develops and markets a portfolio of portable and network-based products for installing, maintaining and monitoring fiber optic circuits and networks. The Company's product lines include: Network Information Computers, Network Access Agents, Optical Test Systems, and Optical Wavelength Managers. The Company's wholly owned subsidiaries are Digital Lightwave (UK) Limited, Digital Lightwave Asia Pacific Pty, Ltd., and Digital Lightwave Latino Americana Ltda. Going Concern Doubt As reported in the Troubled Company Reporter on May 11, 2006, Grant Thornton LLP raised substantial doubt about Digital Lightwave, Inc.'s ability to continue as a going concern following its review of the Company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's net losses in the years 2004 and 2005 and capital and stockholders' deficits as of Dec. 31, 2005. DYNCORP INTERNATIONAL: Appoints Herb Lanese as President and CEO ---------------------------------------------------------------- DynCorp International Inc. appointed Herb Lanese as president and chief executive officer, effective immediately. Mr. Lanese, a member of the board, replaces Stephen Cannon, who resigned after leading the company through its initial public offering. Mr. Lanese is a former president, executive vice president and chief financial officer of McDonnell Douglas Aircraft, where he played a critical role in the corporation's achievement of a "best in class" position in the 1990s. Prior to joining McDonnell Douglas, he served as corporate vice president of Tenneco, Inc., responsible for strategic planning, capital structure, accounting and information systems. Earlier, he served as vice president and chief financial officer of Tenneco's Newport News Shipbuilding business and vice president of Finance of Tenneco Chemicals. "Herb Lanese has an impressive track record in leadership roles in significant organizations," said Robert McKeon, chairman of DynCorp International. "The fundamentals of our business are robust and we are confident Herb will solidly position us to execute our strategic priorities. His experience and valuable insights made him an esteemed member of our Board and a strong choice to lead the company in building on the strong existing platform." Mr. McKeon continued, "We thank Steve for his significant contributions during a critical period for DynCorp International, and his skill in guiding the company through two landmark events: our acquisition of the company in 2005 and the recent initial public offering. We wish him well in whatever he chooses to take on in the future." "I know DynCorp International well, and know it to be a dynamic company with exciting opportunities," Mr. Lanese said. "It is a privilege to lead a company of such talented, dedicated employees and in conjunction with a board I value highly. Together we will develop strategies designed to deliver greater value to our customers." Headquartered in Irving, Texas, DynCorp International, LLC (NYSE: DCP) -- http://www.dyn-intl.com/-- the operating company of DynCorp International Inc., provides specialized mission- critical technical and professional services to civilian and military government agencies and commercial customers. DynCorp Inter'l employs more than 14,0000 people in 35 countries. * * * As reported in the Troubled Company Reporter on June 19, 2006, Standard & Poor's Ratings Services raised its ratings, including the corporate credit rating to 'BB-' from 'B+', on DynCorp International LLC. The ratings were removed from CreditWatch where they were placed with positive implications on Oct. 3, 2005. S&P said the outlook is stable. As reported in the Troubled Company Reporter on June 13, 2006, Moody's Investors Service upgraded the ratings of DynCorp International LLC based on DI's consistently improving performance over the past year plus the marginal added benefits to its credit metrics from the recently completed IPO. This concludes the review for possible upgrade that was initiated by Moody's on April 20th. Moody's upgraded the Company's $90 million senior secured revolver maturing February 11, 2010, to Ba3 from B2; $345 million senior secured term loan B due February 11, 2011, to Ba3 from B2; $320 million 9.5% senior subordinated notes due Feb. 15, 2013, to B3 from Caa1; Corporate Family Rating, to B1 from B2; and Speculative Grade Liquidity Rating, to SGL-2 from SGL-3. The ratings outlook is stable. EAGLEPICHER CORP: S&P Rates $65 Million Sr. Credit Facility at B- ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to New EaglePicher Corporation (formerly rated predecessor company Eagle Picher Inc. pending its emergence from bankruptcy). EaglePicher is a diversified manufacturer of automotive and other industrial products headquartered in Detroit. The company is scheduled to emerge from bankruptcy by July 31, 2006. Standard & Poor's also assigned its 'B+' rating and its '1' recovery rating to the company's $230 million first-lien senior secured credit facilities, indicating a high expectation of full recovery of principal in the event of a payment default. At the same time, the rating agency assigned its 'B-' rating and a '3' recovery rating to the company's $65 million second-lien senior secured credit facility, indicating marginal recovery of principal (50%-80%). The outlook is stable. Ratings on EaglePicher reflect: * the company's weak market position primarily serving the highly competitive automotive industry; * an aggressive financial profile characterized by a heavy debt burden; and * weak cash flow protection measures. Several positive factors include the diversity in the company's customer base and its participation in several niche end markets. The ratings also reflect that EaglePicher is currently in Chapter 11 bankruptcy, operating under a plan of reorganization that was filed in January 2006. The ratings are based on the company's reorganization and emergence from bankruptcy in July 2006. ENRON CORP: WB Court Orders Argentina to Pay Azurix Unit $165 Mil. ------------------------------------------------------------------ A World Bank court ordered Argentina to pay $165,000,000 to Azurix Corp., a unit of Enron Corp., in connection with the country's failure to abide by an investment protection treaty with the United States, according to a report by Bloomberg News, citing the Argentina-based daily Clarin. The dispute between the parties arose after Argentina revoked its water supply contract with the Azurix in 2001. Argentina cited Azurix's alleged failure to fulfill its contract commitments as reason for the revocation, which the company denied. The World Bank Court ruled that Argentina's revocation of the contract was a violation of the treaty. 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. 176; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORPORATION: Files Seventh Post-Confirmation Report --------------------------------------------------------- Reorganized Enron Corporation filed their Seventh Post- Confirmation Report on July 17, 2006. Since the filing of their Sixth Post-Confirmation Report, the Reorganized Debtors took additional actions to consummate their Chapter 11 Plan of Reorganization: A. Sale of Prisma Energy International Enron Corp. agreed to sell its wholly owned subsidiary, Prisma Energy International Inc., to Ashmore Energy International Limited in a two-stage transaction. Prisma is the last of three major platform entities to be distributed to creditors or sold pursuant to the Plan. The first stage of the transaction closed on May 25, 2006, with Ashmore acquiring an equity stake in Prisma, initially represented at less than 25% of the aggregate voting interest. Ashmore's purchase of the remaining equity interest in Prisma will be consummated after certain required consents and approvals have been obtained, which is expected to occur by late 2006. Prior to entering into the transaction, Prisma transferred to Enron Corp. majority of Prisma's interest in the Promigas business in Colombia, which is expected to be subject to a separate auction process after the closing of the second stage of the sale to Ashmore. B. Distributions In April 2006, holders of allowed secured, general unsecured and guaranty claims received cash distributions aggregating $4,110,000,000 and holders of allowed general unsecured claims received PGE Common Stock distributions aggregating $568,000,000. In June 2006, holders of allowed administrative, priority, secured, general unsecured, guaranty and convenience class claims received cash distributions in excess of $152,000,000, which includes approximately $151,000,000 distributed with respect to allowed general unsecured and guaranty claims. As of July 17, 2006, approximately $6,000,000,000 in cash and PGE common stock has been distributed to holders of allowed claims, while approximately $5,300,000,000 in cash and PGE common stock is held in the Disputed Claims Reserve. C. Claims Resolution Process As of July 17, 2006, over 25,000 proofs of claim were filed against the Reorganized Debtors. About 95 proofs of claim were disallowed, 250 proofs of claim were allowed, 20 proofs of claim were withdrawn and 16 proofs of claim were subordinated. D. Significant Litigation Settlements The Reorganized Debtors have reached settlements, subject to documentation and Bankruptcy Court approval, with two financial institution defendants in Adversary Proceeding Case No. 03-9266, known as the MegaClaim Litigation. The settlements with Credit Suisse First Boston, Inc., and Merrill Lynch & Co., Inc., resulted in approximately $120,000,000 in proceeds to Enron and a reduction in claims filed against various Debtors for $427,000,000 as a result of subordination, expungement or withdrawal. The remaining financial institution defendants in the MegaClaim Litigation include Citigroup, Inc., Barclays PLC and Deutsche Bank AG. E. Alleged Market Manipulation Proceedings On June 28, 2006, the U.S. Federal Energy Regulatory Commission approved the Reorganized Debtors' settlements with the Trial Staff of the FERC, the City of Santa Clara, California, and the Valley Electric Association, Inc., effectively resolving the parties' issues and disputes arising from events in the western electricity, natural gas and associated markets from January 16, 1997 through June 25, 2003. The FERC's approval of the settlements is conditioned on the modification of the Trial Staff settlement to remove the requirements that the Trial Staff withdraw evidence or withdraw from participation in proceeding and litigations related to the Western Energy Disputes. That modification was made. The Bankruptcy Court and the FERC have also approved Enron's settlement with the Metropolitan Water District of Southern California. On June 28, 2006, the FERC also granted in part, and denied in part, a petition filed by the Public Utility District No. 1 of Snohomish County, Washington. Snohomish requested that the FERC act pursuant to Section 1290 of the Energy Policy Act of 2005, also called the Cantwell Amendment, to deny approximately $120,000,000 of contract termination claim that Enron Power Marketing, Inc., had asserted against Snohomish in Adversary Proceeding No. 01-16034 filed in the Bankruptcy Court. After passage of the Cantwell Amendment, the FERC denied EPMI's contract termination claim under state law principles on the ground that Snohomish had been fraudulently induced to enter into the long-term power sales agreement that was the subject of EPMI's adversary complaint. Additionally, the FERC concluded that it did not have authority under the Cantwell Amendment to consider Snohomish's request that EPMI be ordered to disgorge certain amounts Snohomish paid for power delivered under the agreement from January 26, 2001, through November 28, 2001. EPMI intends to take steps to seek a review of the FERC's decision. Luzenac, Inc., also made similar allegations in a petition against EPMI in a companion FERC proceeding. EPMI has asserted before the United States District Court for the Southern District of New York that the Cantwell Amendment does not divest the Bankruptcy Court of jurisdiction over the termination payment issues, and in the Snohomish and Luzenac matters, if it did, the amendment would be unconstitutional. The FERC's June 28, 2006 decision indicated that Luzenac's petition might not be granted, although the FERC has not yet published a final decision regarding the petition. F. Trading Cases On March 4, 2003, the Bankruptcy Court ordered that current and future adversary proceedings between or among counterparties to wholesale trading and retail agreements be referred to mediation to be conducted by the Honorable Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York. As of July 17, 2006, 75 cases have been referred to mediation, and mediations have occurred in all the 75 cases. 66 of the 75 cases have been settled. Of the nine cases not yet settled: -- two are currently before the Honorable Loretta A. Preska of the United States District Court for the Southern District of New York; -- mediation has ended in four cases, including Adversary Proceeding No. 02-03468 against Dynegy, Inc., and certain of its affiliates; and -- three cases are still in mediation before Judge Gropper. 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. 176; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENTERGY NEW ORLEANS: S&P Holds Default Rating With Neg. Outlook --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BBB' corporate credit ratings of Entergy Corp. and all its subsidiaries except Entergy New Orleans Inc., which remains at 'D', and removed the ratings from CreditWatch with negative implications. The outlook is negative. As of March 31, 2006, the New Orleans, Louisiana-based company had about $8.9 billion of debt outstanding. "The ratings affirmation recognizes the increased probability that Entergy will recover a substantial portion of hurricane-related storm costs incurred in 2005," said Standard & Poor's credit analyst Dimitri Nikas. "Still, uncertainty exists regarding the ultimate level and timing of the recovery, which is reflected in the negative outlook," said Mr. Nikas. The negative outlook also reflects increasing pressure on the consolidated company's business profile from regulatory challenges in several jurisdictions combined and a larger portion of assets being involved in nonregulated ventures. Standard & Poor's said that Entergy has made significant progress in recovering storm costs with securitization bills being signed into law in Texas, Louisiana, and Mississippi. However, the funding level, mechanisms and timing in Texas and Louisiana are still uncertain. The negative outlook on Entergy reflects the regulatory uncertainty that still exits regarding the amount and timing of storm cost recovery. Moreover, the firm's business profile could be pressured by adverse regulatory rulings and increased operating risk at its nonregulated nuclear fleet. EQUISTAR CHEMICALS: Fitch Puts Low-B Ratings on Evolving Watch -------------------------------------------------------------- Fitch Ratings has placed the ratings of Lyondell Chemical Company and Equistar Chemicals L.P. on Rating Watch Evolving following Lyondell's announcement early July 21, 2006, that the auction process to sell Lyondell Citgo Refinery LP was discontinued. Fitch currently rates Lyondell's and Equistar's debt as: Lyondell -- Issuer default rating (IDR) at 'BB-'; -- Senior secured credit facility at 'BB+'; -- Senior secured notes and debentures at 'BB+'; -- Subordinated notes at 'B+'. Equistar -- IDR at 'B+'; -- Senior secured credit facility at 'BB+/RR1'; -- Senior unsecured notes at 'BB-/RR3'. In addition, Fitch affirms the following Millennium Chemicals Inc.'s ratings: -- Convertible senior unsecured debentures at 'BB/RR2'; -- IDR at 'B+'. Fitch also affirms Millennium America Inc.'s ratings: -- Senior secured credit facility and term loan rating at 'BB+/RR1'; -- Senior unsecured notes at 'BB/RR2'; -- IDR at 'B+'. Millennium's Rating Outlook remains Stable. For Lyondell, approximately $2.8 billion of debt is covered; for Equistar, approximately $2.2 billion of debt is covered; and for Millennium Chemicals, approximately $900 million of debt is covered by these actions. The Rating Watch Evolving status suggests that elements of a downgrade, upgrade, and affirmation are present in Lyondell's current situation. Given the uncertainty of the situation and multiple possible outcomes, a downgrade may potentially be required if Lyondell agrees to purchase the remaining 41.25% interest held by Citgo and funds such a purchase with additional debt. Fitch recognizes the downside scenario would be dependent on the total amount and composition of debt that would be incurred to finance such a purchase as well as evaluating the offsetting benefit from owning 100% of LCR, including full access to cash generation from the refinery operations. However, an upgrade could be warranted if any interested parties, or another buyer(s) emerge to acquire LCR for substantially greater than the $5 billion previously offered to the partners. Fitch expects that Lyondell would use proceeds from any refinery sale to repay debt as the company has publicly stated. Finally, an affirmation may be necessary if the partners continue with the LCR joint venture and no change in ownership occurs. Fitch expects any potential sale of LCR could also have a positive indirect effect on Equistar, since Lyondell's management has expressed its intent to use any proceeds from the refinery sale to fund debt repayment above Lyondell's initial $3.0 billion debt reduction target. With further deleveraging at the Lyondell parent, Equistar's ratings would indirectly benefit as its ratings are limited by Lyondell's ratings. The parent ratings limit Equistar's ratings due to Lyondell's strong access to its cash flow. Furthermore, Equistar is focused on North American markets and it has a narrower product portfolio compared to Lyondell. In the alternative situation, a purchase of Citgo's 41.25% share in LCR by Lyondell could potentially have negative effects on Equistar due to the relationship between Lyondell and Equistar ratings. The potential for additional debt at Lyondell could result in a greater demand for cash from Equistar. The affirmation of Millennium's ratings reflects Fitch's expectations that a potential sale of LCR or purchase of Citgo's 41.25% interest in LCR by Lyondell would not affect Millennium ratings. The ratings also consider the cyclical nature of Millenniun's commodity products, strong dividends through its 29.5% interest in Equistar, sizable debt reduction during the last 12-months and Lyondell's ownership of the company. Currently, Millennium cannot declare dividends to Lyondell due to certain restrictions in its existing bond indentures. Concerns include weaker than expected results for Millennium's core businesses and expectations for future cash outflows for distributions to Lyondell. Lyondell holds leading global positions in propylene oxide and derivatives, plus titanium dioxide, as well as leading North American positions in ethylene, propylene, polyethylene, aromatics, acetic acid, and vinyl acetate monomer. The company benefits from strong technology positions and barriers to entry in its major product lines. Lyondell owns 100% of Equistar; 70.5% directly and 29.5% indirectly through its wholly owned subsidiary Millennium. It also owns 58.75% of LCR, a highly complex petroleum refinery has a long-term, fixed-margin crude supply agreement with PDVSA. In 2005, Lyondell and subsidiaries generated $2.22 billion of EBITDA on $18.6 billion in sales. CITGO is one of the largest independent crude oil refiners in the U.S., with three modern, highly complex crude oil refineries and two asphalt refineries. With the expansion of the Lake Charles refinery to 425,000 bpd of capacity, CITGO now owns 970,000 bpd of crude refining capacity, including the company's 41.25% interest in LYONDELL-CITGO Refining L.P. LCR owns and operates a 265,000- bpd crude oil refinery in Houston, Texas. CITGO branded fuels are marketed through more than 13,000 independently owned and operated retail sites. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., the state-owned oil company of Venezuela. ESTERLINE TECH: Moody's Lifts Rating on $175 Mil. Sr. Notes to Ba3 ------------------------------------------------------------------ Moody's Investors Service raised the Corporate Family Rating of Esterline Technologies Corporation to Ba2 from Ba3. The rating on $175 million in senior subordinate notes has been upgraded to Ba3 from B1. The rating outlook is stable. This concludes the review commenced on Feb. 17, 2006. The rating upgrade reflects the company's strong operating performance that has resulted in substantially improved operating metrics, a demonstrated ability to successfully carry-out its acquisition strategy without use of substantial leverage, and favorable economic conditions in the company's prime customer sector as supplier to aircraft OEM's. Ratings are still constrained, however, by the company's modest revenue base and a degree of continued uncertainty in the size and scope of future acquisitions, and risks associated with integrating such purchases. The stable rating outlook anticipates that Esterline will continue to pursue modestly-sized acquisitions as part of its growth initiative, but that the company's existing businesses will demonstrate strong performance with stable or improving margins, and that the company will generate free cash flow that will facilitate a moderate amount of debt reduction over the near term. Ratings or their outlook could be subject to upward revision if the company were to repay a greater amount of debt through consistently strong cash flow generation, resulting in leverage of under 2 times and free cash flow in excess of 15% of total debt, while successfully growing its revenue base to over $2 billion without any erosion of margin levels. Conversely, ratings or their outlook could be lowered if operating results were to face unexpected deterioration, or if the company were to increase debt for any reason, particularly where a large amount of additional debt were involved in a transformational type of acquisition, such that EBITDA were to increase to over 3.5 times, if interest were to fall below 2.5 times, or if free cash flow were to fall below 5% of debt. Over the past three years, acquisitions and a steady level of organic growth helped Esterline to increase and diversify its revenue base, using only a modest amount of incremental debt to finance such growth. Since the assignment of its initial Corporate Family Rating of Ba3 in 2003, Esterline has nearly doubled its revenue, driven by both acquisitions and organic growth. Although organic growth has slowed somewhat in the first half of FY06, Moody's expects revenue growth to continue over the near term, driven by healthy demand in the commercial aerospace market. Esterline's revenues are divided between commercial aerospace, military, and industrial customers in both the U.S. and Europe. Recent robust ordering levels for the company's products are an important barometer of the company's underlying business strength. Esterline's backlog grew from $482 million in Oct. 2005 to $633 million at the end of Q2 2006. The company's expanded scale, strong order backlog, and diversification are viewed more favorably by Moody's and contribute to the rating upgrade. Through this rapid growth period, strong cash flow and disciplined financial policy has allowed Esterline to achieve and maintain leverage and interest coverage at levels consistent with a Ba2 corporate family rating. Moody's estimates April 2006 Debt at approximately 2.9 times, versus 3.5 times as of FY 2004. EBIT stood at 3.6 times for the LTM ended April 28, 2006, and was 4 times for Q2 06, illustrating coverage of additional interest related to the new term loan. Esterline continues to execute an acquisitive growth strategy, buying two aerospace contractors based in the United Kingdom over the past eight months. In December 2005, Esterline acquired Darchem Holdings Limited, a manufacturer of thermally engineered components for use in the manufacture of aerospace products for $122 million in cash. The acquisition was funded with cash on hand and $80 million drawn on its revolving credit facility. The company's cash flow generation has enabled it to pay down outstandings under that facility to $18 million drawn at the end of Q2 06, effectively reducing the financial leverage associated with the Darchem acquisition. In March 2006, Esterline acquired Wallop Defence Systems Limited, a U.K.-based manufacturer of military pyrotechnic devices, for $58 million in cash, partially financed with a $100 million term loan due 2010. While the market for WDSL's products should remain strong, Moody's believes that Esterline may be more challenged to achieve an adequate financial return on this acquisition. On June 26, 2006 an explosion at a WDSL plant resulted in one fatality and several minor injuries to workers. Britain's Health and Safety Executive has shut the plant down until it completes an investigation of the incident. While near- term losses associated with the incident are likely to be covered by available insurance, it is uncertain when and under what conditions production might be able to resume, and what the impact would be on the units profitability. The incident may have some residual negative impact on Esterline's financial results, yet Moody's believes that the size of the business unit affected relative to Esterline's overall revenue and earnings base mitigates the impact that this incident may have on the company's financial profile. Moody's assesses Esterline's liquidity position as good, as the company is estimated to have adequate cash balances and cash flows to cover all but large unexpected uses for capital expenditures or working capital purposes. As of April 2006, Esterline reported a cash balance of $118 million. In addition, the company has a $100 million revolving credit facility in place, with about $82 million available as of April 2006, providing additional liquidity cushion. Esterline's existing $100 million term loan facility stipulates only minimal required principal payments until 2010, while the senior subordinated notes do not mature until 2013. The Ba3 rating of the senior subordinated notes due 2013, one notch below the Corporate Family Rating, reflects the junior position in claim of this class of debt behind all existing and future senior debt of the company, including approximately $200 million of senior secured credit facilities. These notes are guaranteed by all of the company's subsidiaries. These ratings have been upgraded: Upgrades: Issuer: Esterline Technologies Corp. * Corporate Family Rating, Upgraded to Ba2 from Ba3 * Senior Subordinated Regular Bond/Debenture, Upgraded to Ba3 from B1 Outlook Actions: Issuer: Esterline Technologies Corp. * Outlook, Changed To Stable From Rating Under Review Esterline Technologies Corporation, headquartered in Bellevue Washington, serves aerospace and defense customers with products for avionics, propulsion and guidance systems. The company operates in three business segments: Avionics and Controls, Sensors and Systems and Advanced Materials. Esterline had LTM April 2006 revenue of $887 million. EVERGREEN INT'L: Launches Tender Offer for 12% Senior Sec. Notes ---------------------------------------------------------------- Evergreen International Aviation, Inc., commenced a cash tender offer for any and all of its outstanding $215,000,000 in aggregate principal amount 12% Senior Second Secured Notes Due 2010 (CUSIP No. 30024DAF7) on the terms and subject to the conditions set forth in its Offer to Purchase and Consent Solicitation Statement dated July 20, 2006. The Company also is soliciting consents to certain proposed amendments to the indenture governing the Notes. The purpose of the Offer is to acquire all of the issued and outstanding Notes and to amend or eliminate the principal restrictive covenants, certain events of default and other provisions contained in the Indenture. The Company plans to fund the Offer with the proceeds of a new Senior Secured Credit Facility, which is in the process of being arranged. If all conditions to the tender offer and consent solicitation are satisfied, holders of the Notes who validly tender their Notes pursuant to the offer and validly deliver their consents pursuant to the solicitation by 5:00 p.m., New York City time, Aug. 8, 2006 (and do not validly withdraw their Notes or revoke their consents by such date), will be paid the total consideration of $1,080 for each $1,000 principal amount of the Notes. In addition, holders who validly tender and do not validly withdraw their Notes in the tender offer will receive accrued and unpaid interest from the last interest payment date up to, but not including, the date of payment. In connection with the tender offer, the Company is soliciting consents to certain proposed amendments to eliminate substantially all of the restrictive covenants in the indenture governing the Notes and certain other provisions. The Company is offering to make a consent payment of $30 per $1,000 principal amount of the Notes (which is included in the total consideration described above) to holders who validly tender their Notes prior to the Consent Date. Payment in such case will be made promptly after Evergreen determines to accept the Notes tendered prior to 5:00 p.m., Eastern Time, on the Consent Date, which acceptance date is expected to be on or about Aug. 16, 2006 or such later date as the New Credit Facility is in place. Holders who tender their Notes after the Consent Date will not receive the consent payment. Prior to the Consent Date, holders may not tender their Notes without delivering consents and may not deliver consents without tendering their Notes. The tender offer is scheduled to expire at 5:00 p.m., New York City time, on Aug. 21, 2006, unless otherwise extended or earlier terminated. Questions regarding the terms of the tender offer or consent solicitation should be directed to the exclusive Dealer Manager and Solicitation Agent for the tender offer and consent solicitation: Credit Suisse Securities (USA) LLC Attn: Liability Management Group Telephone (212) 325-7596 or (800) 820-1653 The Tender Agent and Information Agent is D.F. King & Co., Inc. Any questions or requests for assistance or additional copies of documents may be directed to the Information Agent toll free at (800) 290-6426 (bankers and brokers call collect at (212) 269- 5550). About Evergreen Based in McMinnville, Oregon, Evergreen International Aviation, Inc. -- http://www.evergreenaviation.com/-- is a portfolio of five diverse aviation companies. With international operating authority and a network of global offices and affiliates, Evergreen consists of an international cargo airline that owns and operates a fleet of Boeing 747s, an unlimited aircraft maintenance, repair, and overhaul facility, a full-service helicopter company, an aircraft ground handling company, and an aircraft sales and leasing company. In addition to these endeavors, Evergreen owns and operates Evergreen Agricultural Enterprises and is headquartered near the not-for-profit Evergreen Aviation Museum, home of the Spruce Goose. EVERGREEN INT'L: Planned Refinancing Prompts S&P's Positive Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Evergreen International Aviation, Inc., including the 'B-' corporate credit rating, on CreditWatch with positive implications. The rating action follows Evergreen's announcement that it has commenced a tender offer for its 12% senior second secured notes due 2010. The company plans to fund the tender offer with the proceeds of a new senior secured credit facility. McMinnville, Oregon-based Evergreen has about $350 million of lease-adjusted debt. "The rating action reflects the potential for a modest upgrade if the planned refinancing improves the company's liquidity and operating flexibility," said Standard & Poor's credit analyst Lisa Jenkins. The existing ratings on Evergreen reflect its onerous debt service requirements, limited liquidity, and participation in the cyclical, competitive, and capital-intensive heavy airfreight business. Offsetting these challenges to some extent is the company's improved financial performance over the past year and prospects for further financial improvement over the near to intermediate term. Evergreen derives the majority of its revenues and operating profits from Evergreen International Airlines, its airfreight transportation subsidiary. The company also provides ground logistics services, aircraft maintenance and repair services, helicopter and small aircraft services, and aviation sales and leasing. Demand for most of Evergreen's services has been healthy over the past year and is expected to remain so for at least the next few years. In particular, the airfreight business should continue to benefit from strong military and healthy commercial demand, the latter driven by U.S. imports from China. Financial performance is also expected to benefit in coming years from Evergreen's recently signed agreement to provide air transportation services related to the manufacture of the new Boeing 787 aircraft. To resolve the CreditWatch, S&P will assess the impact of the planned debt refinancing on debt service requirements and operating flexibility, as well as the near to intermediate term operating outlook and cash-generating potential. FALCONBRIDGE LIMITED: Directors Review Xstrata's Revised Offer -------------------------------------------------------------- Falconbridge Limited is reviewing the details of Xstrata plc's intention to increase its offer for Falconbridge to CDN$62.50 per common share in cash and waive the minimum tender condition. Under the terms of the offer, the Falconbridge shareholders will also receive the special cash dividend of CDN$0.75 per common share declared by Falconbridge on July 16, 2006, representing total proceeds of CDN$63.25 per Falconbridge common share. The revised Xstrata offer will expire on Aug. 14, 2006 and is subject to approvals from Xstrata shareholders and Investment Canada. The Falconbridge Board of Directors will evaluate the terms of the revised Xstrata offer and provide Falconbridge shareholders with a formal recommendation as soon as it has completed its analysis. About Xstrata Xstrata plc (LSE: XTA) -- http://www.xstrata.com/-- is a major global diversified mining group, listed on the London and Swiss stock exchanges. The Group is and has approximately 24,000 employees worldwide, including contractors. Xstrata does business in six major international commodities markets: copper, coking coal, thermal coal, ferrochrome, vanadium and zinc, with additional exposures to gold, lead and silver. The Group's operations and projects span four continents and nine countries: Australia, South Africa, Spain, Germany, Argentina, Peru, Colombia, the U.K. and Canada. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited (TSX:FAL.LV)(NYSE: FAL) -- http://www.falconbridge.com/-- is a leading copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. FALCONBRIDGE LTD: Must Decide on Offers by July 27 Says Inco ------------------------------------------------------------ Inco Limited comments on the status of the decision facing Falconbridge shareholders: "The shareholders of Falconbridge have a clear decision to make by July 27 and it is in their interest to bear a few facts in mind. "First, Inco is making the superior offer. It has the highest value and provides the greatest potential to benefit from very strong nickel and copper markets. Both short and long-term shareholders will benefit from the strong profits and cash flow of the new company. Why turn that over to Xstrata? "Second, Falconbridge shareholders can be sure of what they are getting by tendering to Inco's offer on July 27. On July 28, Xstrata will not need to be nearly as 'shareholder friendly' as it appears today. There can be no assurance they will not start accumulating shares at lower prices, once the support of the Inco offer is gone. At that point, Xstrata will have the opportunity to gain effective control without paying full price. "Third, Inco's offer is unconditional and Xstrata's bid remains conditional. Xstrata requires Investment Canada approval and still do not have it. Xstrata also requires a shareholder vote. "On July 27 Falconbridge shareholders will have a choice between two distinct options. Their best interests are with the certainty of Inco's offer." About Xstrata Xstrata plc -- http://www.xstrata.com/-- is a major global diversified mining group, listed on the London and Swiss stock exchanges. The Group is and has approximately 24,000 employees worldwide, including contractors. Xstrata does business in six major international commodities markets: copper, coking coal, thermal coal, ferrochrome, vanadium and zinc, with additional exposures to gold, lead and silver. The Group's operations and projects span four continents and nine countries: Australia, South Africa, Spain, Germany, Argentina, Peru, Colombia, the U.K. and Canada. About Inco Headquartered in Sudbury, Ontario, Inco Limited (TSX, NYSE:N) -- http://www.inco.com/-- is the world's #2 producer of nickel, which is used primarily for manufacturing stainless steel and batteries. Inco also mines and processes copper, gold, cobalt, and platinum group metals. It makes nickel battery materials and nickel foams, flakes, and powders for use in catalysts, electronics, and paints. Sulphuric acid and liquid sulphur dioxide are produced as byproducts. The company's primary mining and processing operations are in Canada, Indonesia, and the U.K. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited (TSX:FAL.LV)(NYSE: FAL) -- http://www.falconbridge.com/-- is a leading copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited (TSX:FAL.LV)(NYSE: FAL) -- http://www.falconbridge.com/-- is a leading copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. FALCONBRIDGE LTD: Raised Phelps Bid Cues S&P to Watch Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services revised the CreditWatch implications on Inco Ltd. and Falconbridge Ltd. to developing from positive after Phelps Dodge Corp. (BBB/Watch Neg/A-2) announced an increase in the debt-financed cash consideration for the two companies. CreditWatch with developing implications means the ratings may be raised, lowered, or affirmed. "Because there are multiple competing bids outstanding -- both friendly and hostile -- for Inco and Falconbridge, the ratings on the companies are exposed to several potential outcomes," Standard & Poor's credit analyst Donald Marleau said. First, the ratings on both companies would be affirmed at 'BBB-' if the three-way transaction with Phelps Dodge is consummated. The three-way transaction faces some execution risk, with various regulatory approvals in Canada and Europe still outstanding. More important, however, is the uncertainty surrounding the required consent of Phelps Dodge shareholders, a majority of whom must approve the transaction. "It is possible that Inco acquires a majority of Falconbridge on July 27, yet the Phelps Dodge shareholders reject the subsequent acquisition of the combined nickel producers in September 2006," Mr. Marleau said. If Phelps Dodge shareholders reject the transaction, the 'BBB-' ratings on the combined Inco and Falconbridge entity face a small risk of being lowered because of increased debt leverage, notwithstanding very strong cash flow stemming from the expected strength of nickel and copper markets. Because Inco has lowered its minimum take-up condition to 50.01%, it may have only restricted access to the significant cash balances and cash flow at Falconbridge. Regardless, Inco's stand-alone cash flow is expected to be adequate to reduce the Falconbridge acquisition debt, and bring its financial profile back in line with the investment-grade rating. In addition, its limited control could slow the pace of operational changes necessary to achieve the US$550 million synergies between the companies, although this is a smaller risk and decidedly less likely because of the significant potential for value creation for all investors. The ratings on Inco could be raised in the two-way scenario, whereby Phelps Dodge acquires Inco without Falconbridge, depending on Phelps Dodge's response to the potential aggressiveness of competing bids. The ratings on Inco could also be raised if it is acquired by Teck Cominco Ltd. (BBB/Watch Neg/--), which currently has a hostile takeover bid outstanding for Inco for equity and CDN$6.4 billion of cash consideration. The ratings on Falconbridge may be raised if it is acquired by Xstrata PLC (BBB+/Watch Neg/--), although the ratings will be determined only after the company reveals its plans for raising equity to reduce the debt used to fund its all-cash offer of $16.2 billion. Falconbridge's CDN$119.7 Million Cumulative Preferred Shares Series 2 carries S&P's BB rating. That rating was assigned on Nov. 21, 2001. Falconbridge's CDN$150 Million Preferred Shares Series H also carries S&P's BB rating. That rating was assigned on Mar. 5, 2003. FIRST SUMMIT: Case Summary & Largest Unsecured Creditor ------------------------------------------------------- Debtor: First Summit Group, LLC 3869 Cayton Road Westlake, Louisiana 70669 Bankruptcy Case No.: 06-20237 Chapter 11 Petition Date: July 20, 2006 Court: Western District of Louisiana (Lake Charles) Debtor's Counsel: Wade N. Kelly, Esq. Robichaux, Mize & Wadsack, LLC 1333 Common Street Lake Charles, Louisiana 70601 Tel: (337) 433-0234 Fax: (337) 433-1274 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ GSK, LLC Potential Unsecured Unknown c/o James B. Doyle, Esq. Claim From Second 1304 Enterprise Boulevard Mortgage Note 2nd Floor Lake Charles, LA 70601 FOAMEX INTERNATIONAL: Gets Okay to Set Off Guilford Mills Debts --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved Foamex International Inc. and its debtor-affiliates' stipulation with Guilford Mills, Inc. As reported in the Troubled Company Reporter on July 7, 2006, the parties stipulate that: (a) the automatic stay under Section 362 of the Bankruptcy Code will be modified to permit the set-off of mutual prepetition debts and the payment of the Guilford Mills Obsolescence Claim; (b) pursuant to the set-off, Guilford Mills will pay Foamex $242,467 in cash within five business days after the Court approves the parties' stipulation; and (c) if the Debtors receive any payment from the original equipment manufacturers on account of the Guilford Mills Obsolescence Claim, they will transmit the funds within three business days after receipt. As of the Debtors' bankruptcy filing, Guilford Mills, Inc., owed Foamex L.P. $417,467 for prepetition services. Foamex also owed Guilford Mills $183,495 for fabric provided to Foamex prepetition and $175,000 for certain prepetition obligations pursuant to the parties' supply agreement. Headquartered in Linwood, Pa., Foamex International Inc. -- http://www.foamex.com/-- is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high- performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. The Company and eight affiliates filed for chapter 11 protection on Sept. 19, 2005 (Bankr. Del. Case Nos. 05-12685 through 05-12693). Attorneys at Paul, Weiss, Rifkind, Wharton & Garrison LLP, represent the Debtors in their restructuring efforts. Houlihan, Lokey, Howard and Zukin and O'Melveny & Myers LLP are advising the ad hoc committee of Senior Secured Noteholders. Kenneth A. Rosen, Esq., and Sharon L. Levine, Esq., at Lowenstein Sandler PC and Donald J. Detweiler, Esq., at Saul Ewings, LP, represent the Official Committee of Unsecured Creditors. As of July 3, 2005, the Debtors reported $620,826,000 in total assets and $744,757,000 in total debts. (Foamex International Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) FORD MOTOR: Moody's Lowers Senior Unsecured Ratings to B2 --------------------------------------------------------- Moody's Investors Service lowered the Corporate Family and senior unsecured ratings of Ford Motor Company to B2 from Ba3 and the senior unsecured rating of Ford Motor Credit Company to Ba3 from Ba2. The Speculative Grade Liquidity rating of Ford has been confirmed at SGL-1, indicating very good liquidity over the coming 12 month period. The outlook for the ratings is negative. The downgrade of the Ford ratings reflects Moody's expectation that the company's performance in North America will face considerable additional stress due to high fuel prices and the resulting shift in consumer preference away from the very profitable SUV segment. During the six months through June 2006 Ford's sales of mid-size SUVs fell by 24.7% and sales of large SUVs declined by 32.1%. Despite the fact that solid market acceptance of Ford's new mid-size and full-size cars has helped maintain US market share above 18%, the dramatic shift away from the SUV segment undermines prospects that Ford's Way Forward restructuring program will materially strengthen its weak credit metrics before 2008. Bruce Clark, a senior vice president with Moody's, said "The strong performance of Ford's new cars is certainly a positive. But the profitability of these vehicles doesn't come close to what the company had been earning on Explorers and Expeditions. This market shift is really hurting Ford and is pushing out the time frame during which the restructuring plan might contribute to any meaningful improvement in its credit ratios." In addition to the market shift from SUVs, Ford faces considerable challenges in other areas. These include implementing its extensive Way Forward restructuring initiative, reversing the chronically poor performance of Jaguar, contending with the ongoing erosion of its domestic supplier base, addressing the growing competitiveness and share gains of Asian manufacturers, and preparing for the renegotiation of its UAW contract in late 2007. As part of these contract negotiations it will be critical for Ford to achieve a material degree of relief in the areas of health care costs for active workers and the JOBs bank program. The decision by Ford's board of directors to cut both the company's dividend and director fees by half (with the annual dividend declining from about $700 million to $350 million) will have minimal impact on Ford's cash flow, but may contribute the constructive character of the dialogue with the UAW. Ford's negative outlook reflects the fact that the company is weakly positioned within the B2 rating category, and any shortfall in contending with the array of challenges that it faces could result in further pressure on the rating. Ford's liquidity position remains strong with $24 billion in cash and short-term VEBA balances, and the company's Speculative Grade Liquidity Rating has been confirmed at SGL-1. Nevertheless, the company's weak operating and competitive position limits its capacity to absorb additional stress. For the LTM through March 2006, Ford's automotive business had an operating margin of negative 2.8%, interest coverage well below 1x, and free cash flow of negative $2.8 billion. The downgrade of Ford Credit's long-term rating to Ba3, with a negative outlook, considers the firm's ownership by, and concentrated operating relationship with, Ford Motor. This connection results in a ratings linkage between the two firms. Ford Credit's rating already incorporated expectations that declining portfolio balances, higher borrowing costs, and a leveling of credit quality improvements are likely to constrain the company's profitability in coming periods. However, in Moody's view, Ford's deeper operating challenges and longer turnaround horizon could have further negative implications for Ford Credit's results and financial condition, including its origination volumes, asset quality, profits and liquidity, thus negatively affecting its stand-alone credit profile. The one notch downgrade of Ford Credit's long-term rating widens the differential from Ford's rating to two notches from one. This notching differential continues to reflect Moody's view that loss severity in the event of default for Ford Credit would be meaningfully lower than for Ford. At the lower extremity of Moody's rating scale, the same difference in expected loss results in a greater differential between the two firms' ratings. While Moody's also believes Ford Credit's probability of default is lower than its parent's, there remains uncertainty by virtue of Ford's ownership and control that limits the potential ratings differential between the two firms. "We believe Ford is economically motivated to maintain Ford Credit's operating strengths and enterprise value, but it could direct the company to take actions that, while seen by Ford's board to be beneficial for the consolidated Ford enterprise, are nevertheless adverse to Ford Credit's profile," said Mark Wasden, a Moody's Senior Credit Officer. Ford Motor Company, headquartered in Dearborn, Michigan, is the world's third largest automobile manufacturer. Ford Motor Credit Company, also headquartered in Dearborn, Michigan, is the world's largest auto finance company. GE COMMERCIAL: Fitch Affirms Low-B Ratings on Three Class Certs. ---------------------------------------------------------------- Fitch affirmed GE Commercial Mortgage Corporation commercial mortgage pass-through certificates, series 2005-C2: -- $46.7 million class A-1 at 'AAA' -- $334.9 million class A-2 at 'AAA' -- $132.4 million class A-3 at 'AAA' -- $72.4 million class A-AB at 'AAA' -- $445.4 million class A-4 at 'AAA' -- $451.2 million class A-1A at 'AAA' -- $149.1 million class A-J at 'AAA' -- Interest-only class X-P at 'AAA' -- Interest-only class X-C at 'AAA' -- $14.0 million class B at 'AA+' -- $30.3 million class C at 'AA' -- $16.3 million class D at 'AA-' -- $25.6 million class E at 'A' -- $16.3 million class F at 'A-' -- $21.0 million class G at 'BBB+' -- $16.3 million class H at 'BBB' -- $21.0 million class J at 'BBB-' -- $9.3 million class K at 'BB+' -- $7.0 million class L at 'BB' -- $9.3 million class M at 'BB-' Fitch does not rate classes N, O, P and Q certificates. The affirmations reflect stable performance and minimal paydown since issuance. As of the June 2006 distribution date, the transaction has paid down 0.6% to $1.85 billion from $1.86 billion at issuance. Fitch reviewed the four credit assessed loans in the pool: * General Motors Building (8.5%); * Loews Miami Beach (3.8%); * Campus Club Apartments (1.0%); and * Sterling University Trails (0.9%). All loans maintain an investment grade credit assessment. The General Motors Building loan is secured by a 1,905,103-square foot office building with a retail component located in midtown Manhattan, New York. The whole loan comprises six pari-passu A- notes, of which the A-2 and A-3 notes are included in this transaction. Although the year-end 2005 Fitch stressed DSCR has decreased to 1.25x from 1.52x at issuance new tenants have taken occupancy in the recently expanded retail space and YE 2006 DSCR is expected to be inline with issuance levels. YE 2005 occupancy declined to 96.3% from 93.6% at issuance. The Loews Miami Beach loan is secured by a 790-unit full service hotel property located in Miami Beach, Florida. The YE 2005 Fitch stressed DSCR has increased to 1.93x compared with 1.77x at issuance. YE 2005 Revenue per Average Room increased to $200.37 from $184.68 at issuance. The Campus Club Apartments loan is secured by a 276-unit multifamily/student-housing property located in Statesboro, Georgia. The YE 2005 Fitch stressed DSCR increased to 1.53x from 1.30x at issuance. Occupancy improved to 98.3% at YE 2005 compared to 97.4% at issuance. The Sterling University Trails loan is secured by a 240-unit multifamily/student-housing property located in Lubbock, Texas. The YE 2005 Fitch stressed DSCR increased to 1.54x from 1.43x at issuance. Occupancy decreased to 93.3% at YE 2005 compared to 96.1% at issuance. The Fitch stressed debt service coverage ratio is calculated using servicer provided net operating income less required reserves divided by debt service payments, using a Fitch stressed refinance constant. GENERAL MOTORS: Clears PBGC Hurdle to $14-B Sale of 51% GMAC Stake ------------------------------------------------------------------ Pension Benefit Guaranty Corp. assured General Motors Corp. that it would not pursue General Motors Acceptance Corp.'s assets even if GM won't pay pension benefits in the future. PBGC's statement is a step forward towards the closing of GM's sale of its 51% controlling interest in GMAC to a consortium of investors led by Cerberus Capital Management, LP. The U.S. Federal Trade Commission has cleared the proposed sale in April this year. The consortium is now comprised of: * Cerberus Capital Management, * Citigroup Inc., * Aozora Bank Limited, and * a subsidiary of The PNC Financial Services Group, Inc. The $14 billion in cash that GM is to receive as part of the transaction includes $7.4 billion from the Cerberus-led consortium at closing and an estimated $2.7 billion cash distribution from GMAC related to the conversion of most of GMAC and its U.S. subsidiaries to limited liability companies. In addition, GM will retain about $20 billion of GMAC automotive lease and retail assets and associated funding with an estimated net book value of $4 billion that will monetize over three years. GM also will receive dividends from GMAC equivalent to its earnings prior to closing, which largely will be used to fund the repayment of various intercompany loans from GMAC. As a result of these reductions, GMAC's unsecured exposure to GM is expected to be reduced to approximately $400 million and will be capped at $1.5 billion on an ongoing basis. GM and the consortium will invest $1.9 billion of cash in new GMAC preferred equity -- $1.4 billion to be issued to GM and $500 million to the Cerberus consortium. GM also will continue to receive its 49 percent share of common dividends and other value generated by GMAC. GM will take a non-cash pre-tax charge to earnings of approximately $1.1 billion to $1.3 billion in the second quarter of 2006 associated with the sale of 51 percent of GMAC. 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 including Mexico. 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 June 30, 2006, Standard & Poor's Ratings Services held all its ratings on General Motors Corp. -- including the 'B' corporate credit rating and the 'B+' bank loan rating, but excluding the '1' recovery rating -- on CreditWatch with negative implications, where they were placed March 29, 2006. As reported in the Troubled Company Reporter on June 22, 2006, Fitch assigned a rating of 'BB' and a Recovery Rating of 'RR1' to General Motor's new $4.48 billion senior secured bank facility. The 'RR1' is based on the collateral package and other protections that are expected to provide full recovery in the event of a bankruptcy filing. GREAT NORTHERN: Hires German Nason as New Brunswick Counsel ----------------------------------------------------------- The Honorable Louis H. Kornreich of the U.S. Bankruptcy Court for the District of Maine authorized Gary M. Growe, the chapter 7 Trustee overseeing the liquidation of Great Northern Paper, Inc., to employ Timothy M. Hopkins, Esq., and the firm of German Nason, as his counsel in the Province of New Brunswick, Canada. Mr. Hopkins will assist the Chapter 7 Trustee in the administration of the Chapter 7 Estate in New Brunswick, Canada. Mr. Hopkins' duties include the collection of monies due to the Estate. He will be paid $200 per hour for his services. Mr. Hopkins assures the Court that he and his firm do not hold or represent any interest adverse to the Debtor. Headquartered in Millinocket, Maine, Great Northern Paper, Inc., one of the largest producers of groundwood specialty papers in North America, filed for chapter 11 protection on January 9, 2003 (Bankr. Maine Case No. 03-10048). Alex M. Rodolakis, Esq., and Harold B. Murphy, Esq., at Hanify & King, P.C., represent the Debtor. When the Company filed for chapter 11 protection, it listed debts and assets of more than $100 million each. In early 2003, Belgravia purchased substantially all of the Debtor's assets for approximately $75 million. The Bankruptcy Court converted the Debtor's case to a chapter 7 liquidation proceeding on May 22, 2003. Gary M. Growe is the chapter 7 Trustee for the Debtor's estate. Jeffrey T. Piampiano, Esq., at Drummond Woodsum & MacMahon represents the chapter 7 Trustee. GTSI CORP: New Loans Require Continuing Positive EBITDA ------------------------------------------------------- GTSI Corp. and its wholly owned subsidiaries Technology Logistics, Inc., and GTSI Financial Services, Inc., as guarantors, executed two new credit agreements last month. One agreement, with SunTrust Bank and Bank of America, N.A., provides GTSI with up to $125 million of credit on a revolving basis. The second is a $10 million subordinated secured term loan agreement backed by Crystal Capital Fund, L.P. These new Credit Facilities replace the company's previous credit facility that slipped into default in January 2006. The Revolver provides GTSI with access to capital through 2010 with borrowings secured by substantially all of the assets of the Company and the Guarantors. Borrowing under the Credit Agreement at any time is limited to the lesser of $125 million or a collateral-based borrowing base less outstanding obligations. The Credit Agreement subjects GTSI and the Guarantors to certain covenants limiting their ability to, among other things to: a) freely incur debt; b) make certain guarantees or liens; c) make certain restricted payments, purchases or investments; d) enter into specified transactions with affiliates; e) dissolve, change names, merge or enter into any other material agreement regarding changes to the corporate entities; f) acquire real estate; and g) enter into sales and leaseback transactions. The Credit Agreement also contains negative covenants regarding the financial performance that the Company must satisfy, including, but not limited to: a) EBITDA amounts; b) fixed charge coverage ratio; and c) limits on capital expenditures. Furthermore, the Credit Agreement also contains information covenants which require the Company to provide the Lenders certain information including, but not limited to: a) monthly and quarterly financial statements and information; b) annual financial statements and information; and c) other periodic reports. The Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default. A full-text copy of the Revolving Credit Agreement is available at no charge at http://ResearchArchives.com/t/s?e1e The subordinated secured term loan agreement with Crystal Capital Fund, L.P., provides GTSI with an additional $10 million in new financing under similar terms as the Revolver. A full-text copy of the Second Lien Loan Agreeement is available at no charge at http://ResearchArchives.com/t/s?e1f The earnings covenant buried in both Credit Agreements requires that GTSI's EBITDA be greater than or equal to: For the 12-Month Period Ending Minimum EBITDA ------------------------------ -------------- June 30, 2006 ($12,200,000) July 31, 2006 ($9,250,000) August 31, 2006 ($7,070,000) September 30, 2006 ($9,680,000) October 31, 2006 ($7,580,000) November 30, 2006 ($3,596,000) December 31, 2006 ($789,000) January 31, 2007 ($59,000) February 28, 2007 $3,583,000 March 31, 2007 $3,813,000 April 30, 2007 $5,521,000 May 31, 2007 $5,922,000 June 30, 2007 $5,520,000 July 31, 2007 $6,721,000 August 31, 2007 $7,118,000 September 30, 2007 $7,929,000 GSTI received legal advice in this transaction from: Carter Strong, Esq. Arent Fox PLLC 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 FTI Consulting, inc., and FTI Capital Advisors, LLC, provided GTSI with financial advisory services. SunTrust Bank obtained counsel from: Chris D Molen, Esq. Paul, Hastings, Janofsky & Walker LLP 600 Peachtree Street, N.E., Suite 2400 Atlanta, Georgia 30308 Crystal Capital can be reached at: Michael L. Pizette Crystal Capital Fund, L.P. 1 Federal Street, Ninth Floor Boston, Massachusetts 02110 Crystal Capital was advised in this lending transaction by: Matthew Furlong, Esq. Bingham McCutchen LLP 150 Federal Street Boston, Massachusetts 02110 "These new credit facilities will give GTSI the financial flexibility and sufficient borrowing capacity to continue focusing on developing and selling technology solutions to our government customer," said Jim Leto, GTSI's President and Chief Executive Officer. "SunTrust, Bank of America, and Crystal Capital have shown confidence in our business and these agreements will allow GTSI to continue to capitalize on the strong government marketplace and provide outstanding service to those who support, service, and protect our fellow Americans. I am especially grateful to our many customers, partners, employees, and investors for their steadfast support and look forward to helping our government meet and solve their technology challenges in the years to come." Ernst & Young LLP, expressed substantial doubt about GTSI Corp.'s ability to continue as a going concern after auditing the company's 2004 and 2005 financials. The auditors pointed to the company's net losses and covenant defaults as of Jan. 31, 2006. GTSI Corp. -- http://www.GTSI.com/-- is a leading information technology product and solutions provider, combining best of breed products and services to produce solutions that meet government's evolving needs. For more than two decades, GTSI has focused exclusively on Federal, State, and Local government customers worldwide, offering a broad range of products and services, an extensive contract portfolio, flexible financing options, global integration and worldwide distribution. GTSI's Lines of Business incorporate certified experts and deliver exceptional solutions to support government's critical transformation efforts. Additionally, GTSI focuses on systems integrators on behalf of government programs. GTSI is headquartered in Northern Virginia, outside of Washington, D.C. H&E EQUIPMENT: Issues $250 Mil. Senior Notes in Private Offering ---------------------------------------------------------------- H&E Equipment Services, Inc., plans to offer $250 million aggregate principal amount of senior unsecured notes due 2016 in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933. The offering of the notes, which is subject to market and other conditions, will be made within the United States only to qualified institutional buyers, and outside the United States to non-U.S. investors. The notes will be fully and unconditionally guaranteed by all of the Company's existing and certain of its future subsidiaries. The Company intends to use the net proceeds of the offering, together with cash on hand and borrowings under its existing senior secured credit facility, to consummate its previously- announced cash tender offer and consent solicitation for its 11-1/8% Senior Secured Notes due 2012, and 12-1/2% Senior Subordinated Notes due 2013. About H&E Based in Baton Rouge, Louisiana, H&E Equipment Services, Inc., (NASDAQ:HEES) -- http://www.he-equipment.com/-- is an integrated equipment services company with 47 full-service facilities throughout the Intermountain, Southwest, Gulf Coast, West Coast and Southeast regions of the United States. The Company is focused on heavy construction and industrial equipment and rents, sells and provides parts and service support for four core categories of specialized equipment: hi-lift or aerial platform equipment; cranes; earthmoving equipment; and industrial lift trucks. H&E EQUIPMENT: S&P Rates Proposed $250 Million Senior Notes at B+ ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' unsecured debt rating to H&E Equipment Services Inc.'s proposed issue of $250 million senior unsecured notes due in 2016, 144A with registration rights. These notes will be used to retire H&E's approximately $250 million in existing debt which has been tendered for cash. The ratings on the existing senior secured notes will be withdrawn following the successful completion of the tender offer. The corporate credit rating on H&E is BB-/Stable/--. The ratings on the Baton Rouge, Louisiana-based company reflect Standard & Poor's assessment of H&E's business position as a regional provider of construction equipment rental services in the competitive and cyclical sector and an aggressive financial risk profile. However, H&E has seen an improvement in its operating performance and credit profile in line with the recovery in the equipment rental industry and because of its recent IPO, which helped reduce debt leverage. Prospects in 2006 continue to be favorable. Industry conditions have improved and nonresidential construction spending is expected to grow in 2006 and 2007, bolstering demand for rental equipment. Ratings List H&E Equipment Services Inc. Corporate credit rating BB-/Stable/-- Secured bank loan BB+ Recovery rating 1 Senior secured debt B+ Recovery rating 3 Ratings Assigned $250 mil. sr. unsecured notes B+ IDI CONSTRUCTION: Court Says $2.4 Mil. Settlement is the Estate's ----------------------------------------------------------------- The Honorable Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York discarded the contention that subcontractor creditors have superior interests among other creditors in the proceeds from settlement of claims against a debtor contractor. In December 2004, IDI Construction Company Inc.'s principals, Ted Kohl and James Stumpf, together with a Pre-Petition Unofficial Creditors Committee filed a pre-negotiated payout plan. Under the Plan, Messrs. Kohl and Stumpf -- who pleaded guilty of misappropriating substantial amounts of the Debtor's funds -- agreed to repay $2.4 million to the Debtor's estate. Seele LP, American Interiors Inc., and Matros Automated Electrical Construction Corp. argued that the Settlement Funds constitute trust funds under New York Lien Law, and should be paid to them in satisfaction of their claims before any payment is made to the Estate. Seele added that the Estate's claim to the Settlement Funds is barred by the doctrine of "in pari delicto." Seele, American Interiors, and Matros were subcontractors in some of the Debtor's projects who each filed claims for full payment under their subcontracts. Broadway Houston Mack Development LLC -- a ground lessee in one of the Debtor's construction projects -- contended that the pre- judgment temporary restraining order it obtained, enjoining the disposition of the proceeds from the sale of a real property, gives it a superior right to that portion of the Settlement Fund. Judge Bernstein disagreed. In a decision published at 2006 WL 1793655, Judge Bernstein finds and concludes that: (a) Seele, American Interiors Inc., and Matros Automated failed to show that the settlement funds are connected with the fraud or conversion they allege. The settlement funds, the Court says, are property of the estate, and the Trust Fund Claimants have no greater right to them than any other unsecured creditor. (b) Seele's reliance on the WagonerRule is misplaced. The Wagoner Rule does not bar claims by a corporation against its own fiduciaries. Accordingly, it would not bar the IDI Estate from suing Messrs. Stumpf and Kohl to recover the unpaid loans or to recover damages under any other theory. (c) Broadway Houston's position lacks merit. Under New York law, an attaching creditor must deliver the order of attachment to the sheriff in order to obtain priority in specific property or a debt. Broadway Houston did not deliver the attachment order to the sheriff, and there was no levy. Moreover, the IDI Estate received the $500,000 before the order of attachment even issued, and hence, could not have received the transfer with knowledge of that order. Accordingly, Broadway Houston never obtained a statutory priority. Schuyler G. Carroll, Esq., and Robert M. Hirsch, Esq., at Arent Fox PLLC, represented Broadway Houston Mack Development LLC; Gary L. Rubin, Esq., at Mazur Carp & Rubin, PC, represented American Interiors, Inc.; Thomas Califano, Esq., at DLA Piper Rudnick Gray Cary LLP, represented Seele, LP, and Tedd Blecher, Esq., in New York City, represented Matros Automated Electrical Construction Corp. in this proceeding. New York-based IDI Construction Company Inc. was a general contracting and construction management company. IDI filed for chapter 11 protection on December 15, 2004 (Bankr. S.D.N.Y. Case No. 04-17881). Marilyn Simon, Esq., at Marilyn Simon & Associates, represents the Debtor in its restructuring efforts. Sherri D. Lydell, Esq., and Scott K. Levine, Esq.,, at Platzer, Swergold, Karlin, Levine Goldberg & Jaslow, LLP serves as counsel to the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed $5,645,400 in total assets and $18,550,000 in total debts. INCO LIMITED: Asserts that Offer is Superior to Xstrata's --------------------------------------------------------- Inco Limited comments on the status of the decision facing Falconbridge shareholders: "The shareholders of Falconbridge have a clear decision to make by July 27 and it is in their interest to bear a few facts in mind. "First, Inco is making the superior offer. It has the highest value and provides the greatest potential to benefit from very strong nickel and copper markets. Both short and long-term shareholders will benefit from the strong profits and cash flow of the new company. Why turn that over to Xstrata? "Second, Falconbridge shareholders can be sure of what they are getting by tendering to Inco's offer on July 27. On July 28, Xstrata will not need to be nearly as 'shareholder friendly' as it appears today. There can be no assurance they will not start accumulating shares at lower prices, once the support of the Inco offer is gone. At that point, Xstrata will have the opportunity to gain effective control without paying full price. "Third, Inco's offer is unconditional and Xstrata's bid remains conditional. Xstrata requires Investment Canada approval and still do not have it. Xstrata also requires a shareholder vote. "On July 27 Falconbridge shareholders will have a choice between two distinct options. Their best interests are with the certainty of Inco's offer." About Xstrata Xstrata plc -- http://www.xstrata.com/-- is a major global diversified mining group, listed on the London and Swiss stock exchanges. The Group is and has approximately 24,000 employees worldwide, including contractors. Xstrata does business in six major international commodities markets: copper, coking coal, thermal coal, ferrochrome, vanadium and zinc, with additional exposures to gold, lead and silver. The Group's operations and projects span four continents and nine countries: Australia, South Africa, Spain, Germany, Argentina, Peru, Colombia, the U.K. and Canada. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited (TSX:FAL.LV)(NYSE: FAL) -- http://www.falconbridge.com/-- is a leading copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. About Inco Headquartered in Sudbury, Ontario, Inco Limited (TSX, NYSE:N) -- http://www.inco.com/-- is the world's #2 producer of nickel, which is used primarily for manufacturing stainless steel and batteries. Inco also mines and processes copper, gold, cobalt, and platinum group metals. It makes nickel battery materials and nickel foams, flakes, and powders for use in catalysts, electronics, and paints. Sulphuric acid and liquid sulphur dioxide are produced as byproducts. The company's primary mining and processing operations are in Canada, Indonesia, and the U.K. * * * Inco Limited's 3-1/2% Subordinated Convertible Debentures due 2052 carry Moody's Investors Service's Ba1 rating. INCO LIMITED: Teck Cominco Extends Offer Expiry to August 16 ------------------------------------------------------------ Teck Cominco Limited extended the expiry date of its offer to acquire all of the outstanding common shares of Inco Limited until 8:00 p.m. (Toronto time) on Aug. 16, 2006. The offer was announced on May 8, 2006, and was mailed to Inco shareholders on May 23, 2006. The new expiry date of the offer coincides with the date on which the Inco shareholder rights plan will be cease traded pursuant to an order issued on July 20, 2006, with the consent of Teck Cominco and Inco, by the Ontario Securities Commission. "We continue to monitor the progress of the bidding for Falconbridge," Teck Cominco President and CEO, Don Lindsay, said. "As market conditions evolve we will weigh any possible changes in our offer for Inco carefully against other potential transactions, and we remain committed to a disciplined approach to any transaction." Teck Cominco will also amend the terms of its offer to extend the time for deposit of Inco common shares for 10 business days after it first takes up and pays for Inco shares under the offer. U.S. federal securities laws applicable to the offer do not permit a tender offer offering cash and shares subject to proration to have more than one take-up date. Teck Cominco applied for, and received from the U.S. Securities and Exchange Commission, relief from this rule, permitting it to amend its offer in this manner. All other terms and conditions of the Teck Cominco offer will remain unchanged. Teck Cominco expects to mail a notice of variation reflecting the amendment on or about July 25, 2006. As at 5:00 p.m. (Toronto time) on July 21, 2006, approximately 1.35 million Inco common shares had been deposited to the Teck Cominco offer and not withdrawn. About Teck Cominco Based in Vancouver, British Columbia, Teck Cominco Limited (TSX:TCK.A; TCK.B; NYSE:TCK) mines, produces and refines gold, copper, zinc, lead, molybdenum, niobium, silver and metallurgical coal. The Company operates in Canada, the United States and Peru. About Inco Headquartered in Sudbury, Ontario, Inco Limited (TSX, NYSE:N) -- http://www.inco.com/-- is the world's #2 producer of nickel, which is used primarily for manufacturing stainless steel and batteries. Inco also mines and processes copper, gold, cobalt, and platinum group metals. It makes nickel battery materials and nickel foams, flakes, and powders for use in catalysts, electronics, and paints. Sulphuric acid and liquid sulphur dioxide are produced as byproducts. The company's primary mining and processing operations are in Canada, Indonesia, and the U.K. * * * Inco Limited's 3-1/2% Subordinated Convertible Debentures due 2052 carry Moody's Investors Service's Ba1 rating and Standard & Poor's BB+ rating. ITC HOMES: Hires McNamara Goldsmith as Arizona Special Counsel -------------------------------------------------------------- The Hon. Eileen W. Hollowell of the U.S. Bankruptcy Court for the District of Arizona allowed ITC Homes, Inc., to retain McNamara, Goldsmith, Jackson & Macdonald P.C., as its special counsel. McNamara Goldsmith represented the Debtor concerning local contract and real estate legal matters prior to Jan. 26, 2006. The Debtor wants to retain the firm for the limited purpose of continued representation in certain legal matters concerning contracts, employment in the state of Arizona. McNamara Goldsmith currently represents the Debtor in: -- ongoing litigation commenced in Pima County by Elyse Kaufman against M&S Unlimited. Kaufman placed a lis pendens on three lots owned by the Debtor. MGJM has been retained to obtain a release of the lis pendens. -- a dispute with Greiner Engineering regarding engineering services performed by Greiner. Litigation is likely to follow if settlement discussions do not result in an acceptable resolution to the Debtor's claims. -- an ongoing dispute with Dan and Lisa Bass regarding a balance claim to be due on a home purchase. No litigation is currently pending. The current hourly rates for McNamara Goldsmith's attorneys and paraprofessionals are: Designation Hourly Rate ----------- ----------- Shareholders $250 Associates $145 Paralegals $60 McNamara Goldsmith assures the Court that it does not hold or represent any material adverse interest to the Debtor is a "disinterested person" within the meaning of section 101(14) of the Bankruptcy Code. Headquartered in Vail, Arizona, ITC Homes, Inc. -- http://www.itchomesinc.net/-- develops residential real estates. The Company filed for chapter 11 protection on Jan. 26, 2006 (Bankr. D. Ariz. Case No. 06-00053). Scott D. Gibson, Esq., at Gibson, Nakamura & Decker, PLLC, represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. KAISER ALUMINUM: Terminates 4-1/8% & 4-3/4% Convertible Stocks -------------------------------------------------------------- According to a Form 15-12B regulatory filing with the U.S. Securities and Exchange Commission dated July 6, 2006, Kaiser Aluminum & Chemical Corp. has terminated these securities: (1) 4-1/8% Cumulative Convertible Preference Stock, par value $100.00 per share; and (2) 4-3/4% Cumulative Convertible Preference Stock, par value $100.00 per share. 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 Feb. 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. Lazard Freres & Co. serves as the Debtors' financial advisor. Lisa G. Beckerman, Esq., H. Rey Stroube, III, Esq., and Henry J. Kaim, Esq., at Akin, Gump, Strauss, Hauer & Feld, LLP, and William P. Bowden, Esq., at Ashby & Geddes represent the Debtors' Official Committee of Unsecured Creditors. The Debtors' Chapter 11 Plan became effective on July 6, 2006. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEAR CORP: Agrees to Add European Interiors Biz to Joint Venture ---------------------------------------------------------------- Lear Corporation entered into a definitive agreement with International Automotive Components Group, LLC, Lear's joint venture with WL Ross & Co. LLC and Franklin Mutual Advisers, LLC, to contribute substantially all of the Company's European Interiors Systems Division to IAC in exchange for a 34% equity interest in IAC, subject to adjustment. "The combined European Interior operations of Lear and Collins & Aikman represents a large and well capitalized enterprise in Europe, providing a solid platform for improving ongoing operating performance," said Bob Rossiter, Lear Chairman and Chief Executive Officer. "We have been focused on developing a solution to address operating challenges in this segment and we believe the European transaction is a positive development for our customers and our shareholders. We also are continuing to focus our attention on a solution for our North American Interiors business." ISD Europe operations included in the transaction consist of nine manufacturing facilities in five countries, generating about $750 million in annual sales, that supplies door panels, overhead systems, instrument panels, cockpits and interior trim to various original equipment manufacturers. IAC was formed to acquire the former European interiors operations of Collins & Aikman Corporation, which was completed on May 31, 2006. The transaction is consistent with the framework agreement entered into in October 2005 to explore strategic opportunities in the automotive interior components sector. In connection with the ISD Europe transaction, Lear expects to recognize a loss on sale of approximately $40 million when the transaction is completed, which is expected to occur in the third quarter. The closing of the transactions contemplated by the purchase agreement is subject to various conditions, including third-party consents and other closing conditions customary for transactions of this type. In connection with the ISD Europe transaction, Lear will enter into various ancillary agreements providing Lear with customary minority shareholder rights and registration rights with respect to its equity interest in IAC. Citigroup Corporate and Investment Banking and UBS Investment Bank acted as financial advisors to Lear in connection with this transaction. About Lear Corp Headquartered in Southfield, Michigan, Lear Corporation (NYSE: LEA) -- http://www.lear.com/-- supplies automotive interior systems and components. Lear provides complete seat systems, electronic products and electrical distribution systems and other interior products. * * * As reported in the Troubled Company Reporter on April 21, 2006, Standard & Poor's affirmed the 'B+' rating on the $1 billion first-lien term loan. Standard & Poor's corporate credit rating on Lear Corp. is B+/Negative/B-2. The speculative-grade rating reflects the company's depressed operating performance caused by severe industry pressures. LG.PHILIPS DISPLAYS: Ch. 7 Trustee Hires Cooch & Taylor as Counsel ------------------------------------------------------------------ Jeoffrey L. Burtch, Esq., the Chapter 7 trustee overseeing the liquidation of LG.Philips Displays USA Inc., obtained permission from the U.S. Bankruptcy Court for the District of Delaware to employ Cooch & Taylor as his general counsel, nunc pro tunc to May 26, 2006. The Trustee says that Cooch & Taylor will represent him in the Debtor's chapter 7 liquidation proceedings. Cooch & Taylor's professionals engaged by the Trustee and their fee rates are: Professional Position Hourly Rate ------------ -------- ------------ Adam Singer, Esq. Associate $345 Robert W. Pedigo, Esq. Associate $280 Shelley Kinsella, Esq. Associate $280 George Tsakataras, Esq. Associate $280 Robert Mallard, Esq. Associate $235 Sharyn Hallman Paralegal $155 Kelly Burk Paralegal $155 Kerry Bish Paralegal $140 Jacqueline Brown Paralegal $110 To the best of the Trustee's knowledge, Cooch & Taylor holds no interest adverse to the Debtor and is a "disinterested person" under Sec. 101(14) of the Bankruptcy Code. Headquartered in San Diego, California, LG.Philips Displays USA, Inc., is an indirect American affiliate of LG.Philips Displays Holding B.V. The company manufactures cathode ray tubes that are incorporated into television sets and computer monitors. The company filed for chapter 11 protection on Mar. 15, 2006 (Bankr. D. Del. Case No. 06-10245). Adam Hiller, Esq., at Pepper Hamilton LLP represents the Debtor in its restructuring efforts. Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., and Bonnie Glantz Fatell, Esq., at Blank Rome LLP represented the Official Committee of Unsecured Creditors. The Court converted the Debtor's case to a chapter 7 liquidation on May 25, 2006. Jeoffrey L. Burtch, Esq., serves as the Debtor's chapter 7 trustee, and is represented by Cooch & Taylor. When the Debtor sought protection from its creditors, it listed debts of more than $100 million and assets between $50 to $100 million. LG.PHILIPS: Ch. 7 Trustee Taps Pepper Hamilton as Special Counsel ----------------------------------------------------------------- Jeoffrey L. Burtch, Esq., the Chapter 7 trustee overseeing the liquidation of LG.Philips Displays USA Inc., asks the U.S. Bankruptcy Court for the District of Delaware for permission to employ Pepper Hamilton LLP as his special counsel, nunc pro tunc to May 26, 2006. The Trustee tells the Court that when the case was converted to chapter 7, a Motion for Rejection of Unexpired Leases and Executory Contracts that the Debtor had previously filed was still pending with respect to the proposed rejection of a group of executory contracts among the Debtor, Delafoil Ohio, Inc., and various third parties. The Trustee says that Pepper Hamilton will represent him on all matters relating to the Debtor's lease agreements with Delafoil Ohio, Inc. David B. Stratton, Esq., a partner at Pepper Hamilton, tells the Court that he and Adam Hiller, Esq., will primarily handle the Debtor's case. Mr. Stratton's billing rate is $540 per hour and Mr. Hiller's is $350 per hour. The Firm's other professionals likely to be engaged in the case and their hourly rates are: Professional Hourly Rate ------------ ----------- Partners $320 - $690 Associates $210 - $345 Paraprofessionals $80 - $190 Mr. Stratton discloses that Pepper Hamilton holds a $215,209 administrative claim against the Debtor's estate for services and expenses incurred before and after the Debtor's bankruptcy filing. Mr. Stratton says that the Firm intends to apply the $264,587 retainer it received from the Debtor to its administrative claim. In addition, the Firm was holding $450,287 to fund severance and consulting obligations to the Debtor's employees and affiliates in Mexico. To the best of the Trustee's knowledge, Pepper Hamilton holds no interest adverse to the Debtor or the Chapter 7 estate and is disinterested as defined in Section 101(14) of the Bankruptcy Code. Headquartered in San Diego, California, LG.Philips Displays USA, Inc., is an indirect American affiliate of LG.Philips Displays Holding B.V. The company manufactures cathode ray tubes that are incorporated into television sets and computer monitors. The company filed for chapter 11 protection on Mar. 15, 2006 (Bankr. D. Del. Case No. 06-10245). Adam Hiller, Esq., at Pepper Hamilton LLP represents the Debtor in its restructuring efforts. Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., and Bonnie Glantz Fatell, Esq., at Blank Rome LLP represented the Official Committee of Unsecured Creditors. The Court converted the Debtor's case to a chapter 7 liquidation on May 25, 2006. Jeoffrey L. Burtch, Esq., serves as the Debtor's chapter 7 trustee, and is represented by Cooch & Taylor. When the Debtor sought protection from its creditors, it listed debts of more than $100 million and assets between $50 to $100 million. LITTLE FARM: Case Summary & Eight Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Little Farm Properties, G.P. 8500 Biscayne Boulevard, Lot A-154 Miami, Florida Bankruptcy Case No.: 06-13329 Chapter 11 Petition Date: July 20, 2006 Court: Southern District of Florida (Miami) Debtor's Counsel: Jordi Guso, Esq. Berger Singerman 200 South Biscayne Boulevard, Suite 1000 Miami, Florida 33131 Tel: (305) 755-9500 Fax: (305) 714-4340 Total Assets: $7,648,494 Total Debts: $3,488,702 Debtor's Eight Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sarika Olah Personal Loan $112,000 941 Northeast 83 Street Miami, FL 33138 Rocio Montoya Personal Loan $30,000 6001 North Falls Circle Drive Suite 402 Fort Lauderdale, FL 33319 Alain Gandur Personal Loan $30,000 9039 Northeast 4th Avenue Road Miami Shores, FL 33138 Biscayne Electric, Inc. $26,000 8289 Northwest 56 Street Doral, FL 33166 The Home Depot $16,247 P.O. Box 9122 Des Moines, IA 50368 Lowe's $8,500 Office Depot $536 PGH-Holdings, Inc. Unknown LYONDELL CHEMICAL: Fitch Puts Low-B Ratings on Evolving Watch ------------------------------------------------------------- Fitch Ratings has placed the ratings of Lyondell Chemical Company and Equistar Chemicals L.P. on Rating Watch Evolving following Lyondell's announcement early July 21, 2006, that the auction process to sell Lyondell Citgo Refinery LP was discontinued. Fitch currently rates Lyondell's and Equistar's debt as: Lyondell -- Issuer default rating (IDR) at 'BB-'; -- Senior secured credit facility at 'BB+'; -- Senior secured notes and debentures at 'BB+'; -- Subordinated notes at 'B+'. Equistar -- IDR at 'B+'; -- Senior secured credit facility at 'BB+/RR1'; -- Senior unsecured notes at 'BB-/RR3'. In addition, Fitch affirms the following Millennium Chemicals Inc.'s ratings: -- Convertible senior unsecured debentures at 'BB/RR2'; -- IDR at 'B+'. Fitch also affirms Millennium America Inc.'s ratings: -- Senior secured credit facility and term loan rating at 'BB+/RR1'; -- Senior unsecured notes at 'BB/RR2'; -- IDR at 'B+'. Millennium's Rating Outlook remains Stable. For Lyondell, approximately $2.8 billion of debt is covered; for Equistar, approximately $2.2 billion of debt is covered; and for Millennium Chemicals, approximately $900 million of debt is covered by these actions. The Rating Watch Evolving status suggests that elements of a downgrade, upgrade, and affirmation are present in Lyondell's current situation. Given the uncertainty of the situation and multiple possible outcomes, a downgrade may potentially be required if Lyondell agrees to purchase the remaining 41.25% interest held by Citgo and funds such a purchase with additional debt. Fitch recognizes the downside scenario would be dependent on the total amount and composition of debt that would be incurred to finance such a purchase as well as evaluating the offsetting benefit from owning 100% of LCR, including full access to cash generation from the refinery operations. However, an upgrade could be warranted if any interested parties, or another buyer(s) emerge to acquire LCR for substantially greater than the $5 billion previously offered to the partners. Fitch expects that Lyondell would use proceeds from any refinery sale to repay debt as the company has publicly stated. Finally, an affirmation may be necessary if the partners continue with the LCR joint venture and no change in ownership occurs. Fitch expects any potential sale of LCR could also have a positive indirect effect on Equistar, since Lyondell's management has expressed its intent to use any proceeds from the refinery sale to fund debt repayment above Lyondell's initial $3.0 billion debt reduction target. With further deleveraging at the Lyondell parent, Equistar's ratings would indirectly benefit as its ratings are limited by Lyondell's ratings. The parent ratings limit Equistar's ratings due to Lyondell's strong access to its cash flow. Furthermore, Equistar is focused on North American markets and it has a narrower product portfolio compared to Lyondell. In the alternative situation, a purchase of Citgo's 41.25% share in LCR by Lyondell could potentially have negative effects on Equistar due to the relationship between Lyondell and Equistar ratings. The potential for additional debt at Lyondell could result in a greater demand for cash from Equistar. The affirmation of Millennium's ratings reflects Fitch's expectations that a potential sale of LCR or purchase of Citgo's 41.25% interest in LCR by Lyondell would not affect Millennium ratings. The ratings also consider the cyclical nature of Millenniun's commodity products, strong dividends through its 29.5% interest in Equistar, sizable debt reduction during the last 12-months and Lyondell's ownership of the company. Currently, Millennium cannot declare dividends to Lyondell due to certain restrictions in its existing bond indentures. Concerns include weaker than expected results for Millennium's core businesses and expectations for future cash outflows for distributions to Lyondell. Lyondell holds leading global positions in propylene oxide and derivatives, plus titanium dioxide, as well as leading North American positions in ethylene, propylene, polyethylene, aromatics, acetic acid, and vinyl acetate monomer. The company benefits from strong technology positions and barriers to entry in its major product lines. Lyondell owns 100% of Equistar; 70.5% directly and 29.5% indirectly through its wholly owned subsidiary Millennium. It also owns 58.75% of LCR, a highly complex petroleum refinery has a long-term, fixed-margin crude supply agreement with PDVSA. In 2005, Lyondell and subsidiaries generated $2.22 billion of EBITDA on $18.6 billion in sales. CITGO is one of the largest independent crude oil refiners in the U.S., with three modern, highly complex crude oil refineries and two asphalt refineries. With the expansion of the Lake Charles refinery to 425,000 bpd of capacity, CITGO now owns 970,000 bpd of crude refining capacity, including the company's 41.25% interest in LYONDELL-CITGO Refining L.P. LCR owns and operates a 265,000- bpd crude oil refinery in Houston, Texas. CITGO branded fuels are marketed through more than 13,000 independently owned and operated retail sites. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., the state-owned oil company of Venezuela. LYONDELL CHEMICAL: Discontinued Sale Cues Moody's Ratings Review ---------------------------------------------------------------- Moody's Investors Service placed the ratings of Lyondell Chemical Company, Equistar Chemical Company LP and Millennium Chemical Company's Corporate Family Ratings of Ba3 under review for possible downgrade following Lyondell's announcement that it and CITGO Petroleum Corporation have discontinued the exploration of sale of Lyondell-CITGO Refining LP joint venture to a third-party. Furthermore, Lyondell stated that the partners are continuing to evaluate options including Lyondell's purchase of CITGO's interest in the joint venture. Lyondell had previously stated that it intended to utilize the proceeds from the divestiture to further reduce debt. Moody's believes that if Lyondell purchases CITGO's interest in LCR, it would finance the transaction with debt, thereby reversing the vast majority of debt reduction that has occurred over the past two years at Lyondell and its subsidiaries. Moody's also affirmed Lyondell's speculative grade liquidity rating at SGL-2. However, the financing of this potential transaction, could result in a change to the SGL rating as well. Moody's review will focus on Lyondell's potential purchase price for the 41.25% of LCR that it does not own and extent to which the removal of existing purchase and supply agreements at LCR will positively impact LCR's profitability. Additionally, the review will focus on the ability of the company to reduce this additional debt over the next 12-15 months. If the acquisition price is close to $2 billion and the company will likely be able to reduce the additional debt by at least 45-50% within the next 12-15 months and refinery margins are expected to remain elevated, we could confirm Lyondell's Ba3 corporate family rating. Moody's review would also incorporate the impact of any new contracts between the refinery and CITGO or other affiliates of Petroleos de Venezuela, S.A. pertaining to the sourcing of the crude oil or supply of refined products. While Moody's expects to conclude this review quickly, it will depend on receipt of detailed information related to a definitive transaction between Lyondell and CITGO. Headquartered in Houston, Texas, Lyondell Chemical Company manufactures propylene oxide, MTBE and butanediol, as well as a major producer of co-product styrene. Both Equistar Chemicals LP and Millennium Chemicals Inc. are wholly owned subsidiaries of Lyondell. Equistar is a leading North American producer of commodity petrochemicals and plastics. Millennium Chemicals is among the largest global producers of titanium dioxide pigments and VAM. Lyondell also participates in a refinery joint venture with CITGO Petroleum Corporation - Lyondell-CITGO Refining Company Ltd. LCR is a refiner that has the unique ability to process 100% heavy sour crude oil from Venezuela. These combined entities reported revenues of nearly $24 billion for the LTM dated March 31, 2006. LYONDELL CHEMICAL: Averted Sale Prompts S&P's Negative Watch ------------------------------------------------------------ Standard & Poor's Ratings Services revised the CreditWatch implications on its ratings for Houston, Texas-based chemicals producer Lyondell Chemical Co. and affiliate Equistar Chemicals L.P. to negative from positive. The 'BB-' corporate credit rating and related ratings were originally placed on CreditWatch on April 10, 2006. The ratings on Lyondell's subsidiary, Millennium Chemicals Inc. (B+/Negative/--) and its affiliate, Millennium America Inc., are affirmed. "The CreditWatch implications have been revised to negative to reflect the decision by Lyondell and its partner, CITGO Petroleum Corp. [BB/Stable/--], to discontinue the exploration of a sale of its LYONDELL-CITGO Refining LP partnership to a third party," said Standard & Poor's credit analyst Kyle Loughlin. Such a transaction could have meaningfully improved Lyondell's balance sheet. In a departure from its previous plans, Lyondell has now indicated that it is evaluating the potential acquisition of the remaining 41.25% of LCR not already owned. Completion of such a transaction would add a meaningful amount of debt to an already highly leveraged capital structure. The key asset held by LCR is a strategically located oil refinery with the capacity to process 268,000 barrels of high sulfur crude oil per day. While the recent announcement represents an unexpected departure from previous efforts to deleverage the business, Lyondell's overall financial profile has improved in recent years to levels that are fully consistent with the ratings, with the key ratio of funds from operations to total debt near 25%, after adjustment for accounts-receivable sales, to capitalize operating lease obligations, and to adjust for unfunded postretirement benefit obligations. Financial performance in recent quarters demonstrates the strong operating leverage of Lyondell's businesses to the chemicals cycle, and its ability to reduce debt when business conditions are favorable. Still, completion of the LCR transaction would represent at least a temporary departure from expected financial policy and credit quality measures could be somewhat stretched relative to expected performance at the top of the business cycle. The CreditWatch placement will be resolved following a review of the LCR transaction, if it is completed, or upon further indication of management's plans for the business. Keys to the resolution of the CreditWatch will be: * the reassessment of Lyondell's ability to preserve an acceptable financial profile as the chemical cycle potentially weakens; * a review of LCR's operating prospects; * an assessment of the Lyondell's ability to efficiently manage through the continued phase-out of MTBE in the U.S.; and * a review with management to more fully understand its operational and financial strategies for the company over the next several years. MAXXAM INC: Pacific & Britt Completes $145 Million Financing ------------------------------------------------------------ Maxxam Inc.'s indirect wholly owned subsidiary, The Pacific Lumber Company and Pacific Lumber's subsidiary, Britt Lumber Co., Inc., as borrowers, closed, on July 18, 2006: * a revolving credit agreement relating to a five-year $60 million secured asset-based revolving credit facility, and * a loan agreement relating to a five-year $85 million secured term loan. Marathon Structured Finance Fund L.P., acted as Administrative Agent for the two transactions. The Term Loan was fully funded at closing. Pursuant to two substantially identical Guarantee and Collateral Agreements and substantially identical Deeds of Trust, the Revolving Credit Agreement and the Term Loan Agreement are each secured by a security interest in the stock of Pacific held by MAXXAM Group Inc, Pacific's immediate parent. The agreements are also secured by substantially all of the assets of Pacific and Britt, other than Pacific's equity interest in Scotia Pacific Company LLC. The Guarantee and Collateral Agreements and Deeds of Trust also contain customary covenants regarding insurance requirements and maintenance of the collateral, as well as customary remedies upon the occurrence of events of default. Pacific and Britt used approximately: -- $12 million of the Term Loan funds to pay off their existing revolving credit agreement with The CIT Group/Business Credit, Inc., and -- $34 million of the Term Loan funds to pay off their existing term loan agreement with Credit Suisse First Boston. Pacific and Britt also terminated the their credit agreement with CIT Group and loan agreement with Credit Suisse. A full-text copy of the New Revolving Credit Agreement is available for free at http://ResearchArchives.com/t/s?e34 A full-text copy of the New Term Loan Agreement is available for free at http://ResearchArchives.com/t/s?e35 Headquartered in Houston, Texas, MAXXAM Inc. (AMEX: MXM) operates businesses ranging from aluminum and timber products to real estate and horse racing. MAXXAM's top revenue source is Kaiser Aluminum, which has been in Chapter 11 bankruptcy since 2002. MAXXAM's timber subsidiary, Pacific Lumber, owns about 205,000 acres of old-growth redwood and Douglas fir timberlands in Humboldt County, California. MAXXAM's real estate interests include commercial and residential properties in Arizona, California, Texas, and Puerto Rico. The Company also owns the Sam Houston Race Park, a horseracing track near Houston. Its Chairman and CEO, Charles Hurwitz, controls 77% of MAXXAM. * * * Maxxam's balance sheet at March 31, 2006 showed a $671.3 million total stockholders' deficit resulting from $1,013.1 million in total assets and $1,684.4 million in total liabilities. MC GREENHOUSE: Case Summary & Eight Largest Unsecured Creditors --------------------------------------------------------------- Debtor: MC Greenhouse Inc. 9284 North Rush Creek Road Salem, Indiana 47167 Bankruptcy Case No.: 06-91011 Chapter 11 Petition Date: July 20, 2006 Court: Southern District of Indiana (New Albany) Debtor's Counsel: Neil C. Bordy, Esq. Seiller Waterman LLC 462 South 4th Street, Suite 2200 Louisville, Kentucky 40202-3459 Tel: (502) 584-7400 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's Eight Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Ball Seed $194,986 75 Remittance Drive, Suite 1114 Chicago, IL 60675-1114 Brehob $62,857 3821 Brehob Road Indianapolis, IN 46217-3300 Cisco $40,111 602 North Shortridge Road Indianapolis, IN 46219 Eason Horticulture Resource $12,988 939 Helen Ruth Drive Fort Mitchell, KY 41017 Fred C. Gloekner $73,852 600 Mamaroneck Avenue Harrison, NY 10528 Midwest Environmental $32,696 Wetsel Inc. $55,000 Yoder Brothers Inc. $52,717 MERIDIAN AUTOMOTIVE: Delaware Court Approves Disclosure Statement ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved the Disclosure Statement and proposed solicitation procedures of Meridian Automotive Systems, Inc., thereby allowing the company to move towards exiting Chapter 11. Meridian will begin distributing balloting materials to all creditors in order to solicit their votes in support of its Plan of Reorganization. The company anticipated a confirmation hearing on Sept. 13, 2006 and that the Plan will become effective on or about Sept. 29, 2006. "We are pleased to have received the Bankruptcy Court's approval of our Disclosure Statement today, which allows us to move closer to our ultimate emergence from Chapter 11," Richard E. Newsted, Meridian's President and CEO, said. "We are extremely pleased to have the support of our major creditor constituencies." About Meridian Automotive 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. MERIDIAN AUTO: Files Revised 3rd Amended Plan & Disclosure Papers ----------------------------------------------------------------- Meridian Automotive Systems, Inc., and its eight debtor-affiliates delivered to the Court a revised Third Amended Joint Plan of Reorganization and Disclosure Statement, on July 19, 2006. Meridian President and Chief Executive Officer Richard E. Newsted discloses that the revised Third Amended Plan modifies the treatment of Claims in Classes 3 and 4, expounds the Preferred Equity Rights Offering, and provides for the preservation of certain Causes of Action of the Debtors' Estates. Treatment of Class 3 Prepetition First Lien Claims Each Holder of an Allowed Prepetition First Lien Claim will, on the Effective Date, receive in full and complete settlement, release and discharge of the Claim: (a) the Lien Avoidance Release; (b) cash equal to 80% of its Allowed Prepetition First Lien Claim; (c) (i) Class A Convertible Preferred Stock having an aggregate Class A Stated Value equal to 20% of the Holder's Allowed Prepetition First Lien Claim; or (ii) if the Holder delivers to Reorganized Meridian a properly completed Cash Election Form prior to the Cash Election Deadline, then to the extent designated by the Holder in its Cash Election Form, in lieu of the Class A Convertible Preferred Stock, $75 for every $100 of Class A Stated Value of Class A Convertible Preferred Stock otherwise issuable to the Holder in respect of its Allowed Prepetition First Lien Claim, pursuant to clause (i); and (d) an inducement fee equal to $0.50 for each $100 of its Allowed Prepetition First Lien Claim. Under the Plan, Prepetition First Lien Claims will be deemed Allowed on the Effective Date in the aggregate amount of 300,642,146: (a) plus outstanding accrued interest from June 30, 2006, through the Effective Date pursuant to the DIP Order; (b) plus all reasonable fees, expenses and costs to the extent provided for, and allowable, under the Prepetition First Lien Credit Agreement or the Prepetition First Lien Hedge Agreement, or provided for pursuant to the DIP Order; and (c) minus amounts paid or repaid prior to the Effective Date, if any. Treatment of Class 4 Prepetition Second Lien Secured Claims The Committed Holder of an Allowed Prepetition Second Lien Secured Claim will, on the Effective Date, receive in full and complete settlement, release and discharge of the Claim, a share of a total commitment fee equal to $8,000,000, payable in Class A Convertible Preferred Stock, as provided for in the Preferred Equity Funding Agreement or the funding agreements in the forms attached to the Preferred Equity Funding Agreement. Under the Plan, Prepetition Second Lien Claims will be deemed Allowed on the Effective Date in the aggregate amount of $179,808,222 plus all reasonable fees, expenses and costs payable under the Prepetition Second Lien Credit Agreement pursuant to the DIP Order minus amounts paid or repaid prior to the Effective Date, if any, provided that: (a) Prepetition Second Lien Claims will be deemed Secured Claims, in part, and Unsecured Claims, in part; and (b) Claims in Classes 4 and 5 will be deemed Allowed, and the amount of the Claims will be determined by the Bankruptcy Court if necessary. Cash Election Deadline The Plan reschedules the Cash Election Deadline to 5:00 p.m., prevailing Eastern time, on the day that is 15 days after the Confirmation Date. If the Effective Date does not occur on or before the day that is 10 Business Days after the Cash Election Deadline, then the Debtors will establish a new cash election deadline for 5:00 p.m., prevailing Eastern time, on the day that is five days after the Debtors' provision of notice to Holders of Prepetition First Lien Claims of the new Cash Election Deadline. Preferred Equity Rights Offering The Plan further provides that to the extent that the Holders of Prepetition Second Lien Secured Claims are not already bound by the Preferred Equity Funding Agreement, the Debtors offer them the opportunity to enter into: (a) an Additional Funding Agreement in substantially the form attached to the Preferred Equity Funding Agreement, during the period from the entry of the Voting Procedures Order until 5:30 p.m., prevailing Eastern time, on the day that is five business days later; or (b) a Final Funding Agreement in substantially the form attached to the Preferred Equity Funding Agreement, during the period from the first day after the Confirmation Date until 5:30 p.m., prevailing Eastern time, on the date that is five business days later. Preservation of Certain Causes of Action The Plan provides for the preservation of all Causes of Action of the Estates pursuant to Section 1123(b)(3) of the Bankruptcy Code, except those expressly released or limited. Pursuant to the Plan, Retained Actions will vest in the Reorganized Debtors, and Avoidance Actions and Reserved Actions will vest in the Litigation Trust. A full-text blacklined copy of the revised Third Amended Plan of Reorganization is available for free at http://ResearchArchives.com/t/s?e38 A full-text blacklined copy of the revised Third Amended Disclosure Statement is available for free at http://ResearchArchives.com/t/s?e39 Plan Compendium The Debtors also delivered to the Court two revised Plan Compendium exhibits: 1. Preferred Equity Funding Agreement After the entry of the Voting Procedures Order, the Debtors, Camulos Master Fund LP, DK Acquisition Partners, L.P., and Stanfield Capital Partners LLC will execute and deliver the Preferred Equity Funding Agreement. The Agreement provides that on the Effective Date, the Debtors will issue to each of the Committed Holders a Commitment Fee comprised of shares of Class A Convertible Preferred Stock having an aggregate Class A Stated Value equal to the sum of: (a) the product of: (1) the First Lien Claim Commitment Fee Amount; and (2) a fraction: -- the numerator of which is the amount of its Committed First Lien Claims; and -- the denominator of which is the aggregate amount of All Committed First Lien Claims that are subject to the Agreement or an Additional Funding Agreement; and (b) the product of: (1) the Second Lien Claim Commitment Fee Amount; and (2) a fraction: -- the numerator of which is the amount of its Committed Second Lien Claims; and -- the denominator of which is the aggregate amount of All Committed Second Lien Claims that are subject to the Agreement or an Additional Funding Agreement. The First Lien Claim Commitment Fee Amount is an amount equal to the product of (i) 0.04 and (ii) the product of (x) 0.75 and (y) an amount equal to 20% of the aggregate amount of All Committed First Lien Claims. The Second Lien Claim Commitment Fee Amount is an amount equal to $8,000,000 less the First Lien Claim Commitment Fee Amount. A full-text copy of the Revised Preferred Equity Funding Agreement is available for free at http://ResearchArchives.com/t/s?e3a 2. Certificate of Designation of Series A Cumulative Convertible Preferred Stock If the Debtors determine that the funds available for redemption of Series A Cumulative Convertible Preferred Stock, on any Section 3(b) Redemption Date, are insufficient to redeem all of the shares, then none of the shares will be redeemed. Instead, holders of the shares of Series A Stock will have the right to convert all or any of the shares of Series A Stock into shares of Common Stock. The holders can also opt, before the Section 3(b) Redemption Date, to convert their shares into shares of Common Stock. The aggregate number of shares of Common Stock to be issued will equal 50% of the total number of shares of Common Stock that would be outstanding on the Effective Date after the issuance of all Common Stock and Series A Stock, if all of the Series A Stock were immediately converted into Common Stock. At the close of business on the last Business Day preceding the Redemption Date, the holders' rights to convert shares of Series A Stock into shares of Common Stock will expire. At the close of business on the date on which the Certificate and all other related documents are delivered to the principal office of any Common Stock conversion agent, the right of the holder of the converted shares of Series A Stock will cease and the holder will be treated, for all purposes, as the record holder of the corresponding shares of Common Stock. A full-text copy of the Revised Certificate of Designation for the Class A Convertible Preferred Stock is available for free at http://ResearchArchives.com/t/s?e3b 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. (Meridian Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Addresses Clean-Air Violations Cited by EPA ---------------------------------------------------------------- The U.S. Environmental Protection Agency for Region 5 has cited Meridian Automotive Systems for alleged clean-air violations at the company's composite plastic manufacturing plant located at 1020 East Main Street in Jackson, Ohio. EPA alleges that Meridian violated its state permits and state regulations by emitting excessive amounts of styrene, a hazardous air pollutant and a smog-producing volatile organic compound, from January 2001 through May 2006. "EPA's mission is to protect public health and the environment," Acting Regional Administrator Bharat Mathur said. "We will take whatever steps are needed to ensure compliance with the Clean Air Act." These are preliminary findings of violations. To resolve them, EPA may issue a compliance order, assess an administrative penalty or bring suit against the company. Meridian has 30 days from receipt of the notice to meet with EPA to discuss resolving the allegations. Styrene vapor irritates the eyes, nose and throat. It can also affect the human nervous system causing adverse eye effects. Health effects associated with breathing small amounts in the workplace over long periods of time include alterations in vision and hearing loss. Volatile organic compounds contribute to the formation of ground- level ozone, or smog. Smog is formed when a mixture of air pollutants is baked in the hot summer sun. Smog can cause a variety of respiratory problems, including coughing, wheezing, shortness of breath and chest pain. People with asthma, children and the elderly are especially at risk, but these health concerns are important to everyone. Meridian Addresses Emission Standards at Jackson Facility Meridian Automotive Systems has recently ended the production line in its Jackson, Ohio facility, which was responsible for the emissions of styrene, a chemical compound used to manufacture exterior automotive components. Meridian had extensive discussions with the U.S. Environmental Protection Agency for more than six months regarding the styrene- emission levels at the Jackson facility. Meridian presented the EPA with several alternatives that it was considering, to reduce or eliminate the emissions. "Meridian takes seriously its environmental compliance responsibilities, and we are proud of our track record in meeting federal and state environmental standards and regulations," Richard E. Newsted, president and chief executive officer of Meridian Automotive Systems, relates. "We have an active dialogue with the EPA and other regulatory bodies, cooperate fully with their inquiries and move quickly to resolve issues when they arise." All of Meridian's facilities have active Environmental Management Systems, and all qualifying facilities are certified under ISO 14001:2004 standards. The ISO 14001:2004 is an international standard for all industries and offers guidelines on principles, systems and supporting techniques to manage the environmental exposures created as part of the operation of a business. First published in 1996, ISO 14001 today is the most important environmental standard in the world. It is used by thousands of organizations, and is supported by environmentalists, private corporations and governments around the world. 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. (Meridian Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000) MILLENNIUM CHEMICALS: Fitch Affirms Issuer Default Rating at B+ --------------------------------------------------------------- Fitch Ratings has placed the ratings of Lyondell Chemical Company and Equistar Chemicals L.P. on Rating Watch Evolving following Lyondell's announcement early July 21, 2006, that the auction process to sell Lyondell Citgo Refinery LP was discontinued. Fitch currently rates Lyondell's and Equistar's debt as: Lyondell -- Issuer default rating at 'BB-'; -- Senior secured credit facility at 'BB+'; -- Senior secured notes and debentures at 'BB+'; -- Subordinated notes at 'B+'. Equistar -- IDR at 'B+'; -- Senior secured credit facility at 'BB+/RR1'; -- Senior unsecured notes at 'BB-/RR3'. In addition, Fitch affirms the following Millennium Chemicals Inc.'s ratings: -- Convertible senior unsecured debentures at 'BB/RR2'; -- Issuer default rating at 'B+'. Fitch also affirms Millennium America Inc.'s ratings: -- Senior secured credit facility and term loan rating at 'BB+/RR1'; -- Senior unsecured notes at 'BB/RR2'; -- Issuer default rating at 'B+'. Millennium's Rating Outlook remains Stable. For Lyondell, approximately $2.8 billion of debt is covered; for Equistar, approximately $2.2 billion of debt is covered; and for Millennium Chemicals, approximately $900 million of debt is covered by these actions. The Rating Watch Evolving status suggests that elements of a downgrade, upgrade, and affirmation are present in Lyondell's current situation. Given the uncertainty of the situation and multiple possible outcomes, a downgrade may potentially be required if Lyondell agrees to purchase the remaining 41.25% interest held by Citgo and funds such a purchase with additional debt. Fitch recognizes the downside scenario would be dependent on the total amount and composition of debt that would be incurred to finance such a purchase as well as evaluating the offsetting benefit from owning 100% of LCR, including full access to cash generation from the refinery operations. However, an upgrade could be warranted if any interested parties, or another buyer(s) emerge to acquire LCR for substantially greater than the $5 billion previously offered to the partners. Fitch expects that Lyondell would use proceeds from any refinery sale to repay debt as the company has publicly stated. Finally, an affirmation may be necessary if the partners continue with the LCR joint venture and no change in ownership occurs. Fitch expects any potential sale of LCR could also have a positive indirect effect on Equistar, since Lyondell's management has expressed its intent to use any proceeds from the refinery sale to fund debt repayment above Lyondell's initial $3.0 billion debt reduction target. With further deleveraging at the Lyondell parent, Equistar's ratings would indirectly benefit as its ratings are limited by Lyondell's ratings. The parent ratings limit Equistar's ratings due to Lyondell's strong access to its cash flow. Furthermore, Equistar is focused on North American markets and it has a narrower product portfolio compared to Lyondell. In the alternative situation, a purchase of Citgo's 41.25% share in LCR by Lyondell could potentially have negative effects on Equistar due to the relationship between Lyondell and Equistar ratings. The potential for additional debt at Lyondell could result in a greater demand for cash from Equistar. The affirmation of Millennium's ratings reflects Fitch's expectations that a potential sale of LCR or purchase of Citgo's 41.25% interest in LCR by Lyondell would not affect Millennium ratings. The ratings also consider the cyclical nature of Millenniun's commodity products, strong dividends through its 29.5% interest in Equistar, sizable debt reduction during the last 12-months and Lyondell's ownership of the company. Currently, Millennium cannot declare dividends to Lyondell due to certain restrictions in its existing bond indentures. Concerns include weaker than expected results for Millennium's core businesses and expectations for future cash outflows for distributions to Lyondell. Lyondell holds leading global positions in propylene oxide and derivatives, plus titanium dioxide, as well as leading North American positions in ethylene, propylene, polyethylene, aromatics, acetic acid, and vinyl acetate monomer. The company benefits from strong technology positions and barriers to entry in its major product lines. Lyondell owns 100% of Equistar; 70.5% directly and 29.5% indirectly through its wholly owned subsidiary Millennium. It also owns 58.75% of LCR, a highly complex petroleum refinery has a long-term, fixed-margin crude supply agreement with PDVSA. In 2005, Lyondell and subsidiaries generated $2.22 billion of EBITDA on $18.6 billion in sales. CITGO is one of the largest independent crude oil refiners in the U.S., with three modern, highly complex crude oil refineries and two asphalt refineries. With the expansion of the Lake Charles refinery to 425,000 bpd of capacity, CITGO now owns 970,000 bpd of crude refining capacity, including the company's 41.25% interest in LYONDELL-CITGO Refining L.P. LCR owns and operates a 265,000- bpd crude oil refinery in Houston, Texas. CITGO branded fuels are marketed through more than 13,000 independently owned and operated retail sites. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., the state-owned oil company of Venezuela. MIRANT CORP: Rule 2019 Dispute on PEPCO Settlement Resolved ----------------------------------------------------------- Holders of more than $1,200,000,000 of Class 3 claims under the Plan of Reorganization by Mirant Corporation and certain of its debtor-affiliates assert that the settlement agreement with Potomac Electric Power Company, among other things, constitutes an impermissible modification of the Plan. As reported in the Troubled Company Reporter on June 2, 2006, the Reorganized Debtors asked the U.S. Bankruptcy Court for the Northern District of Texas to approve the settlement agreement it entered into with Potomac Electric Power Cooperative and other settling parties: * Conectiv Energy Supply, Inc.; * PEPCO Energy Services, Inc.; * PEPCO Gas Services, Inc.; * PEPCO Holdings, Inc.; and * Potomac Capital Investment Corporation. The Debtor and PEPCO have been involved in significant litigation throughout the Debtors' bankruptcy proceedings. Thus, Class 3 Claim Holders ask Judge Lynn to deny the PEPCO Settlement Agreement as well as the related settlement agreement with Southern Maryland Electric Cooperative, Inc. Assumption of the SMECO Agreements creates a burden, rather than a benefit to New Mirant's estate, Richard M. Pachulski, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub LLP, in Los Angeles, California, contends. Without the approval of the SMECO Settlement Agreement, the PEPCO Settlement Agreement cannot become effective. According to Mr. Pachulski, the PEPCO Settlement Agreement purports to give PEPCO a guaranteed cash recovery, rather than simply a fixed allowed claim, resulting in a proportional allocation of stock and litigation recoveries. That treatment, Mr. Pachulski says, is both disparate and more beneficial than the treatment afforded to other Class 3 claimants under the Plan. Moreover, the New Mirant Entities have not provided any analysis in support of their decisions to enter into the settlement agreements and assume or reject various agreements, Mr. Pachulski points out. Of the $520,000,000 proposed distribution to PEPCO under the Settlement Agreement, Mr. Pachulski says $70,000,000 is nominally allocated to the "PEPCO Miscellaneous Claims." However, Mr. Pachulski continues, given New Mirant's total lack of analysis as to the value or merits of those claims, it is clearly possible that the distribution constitutes an artificial allocation designed to reduce the payment being made to PEPCO on account of the PEPCO Rejection Claim. Even an allocation of $450,000,000 to the PEPCO Rejection Claim appears to be significantly over-compensated, Mr. Pachulski adds. In a regulatory filing on May 31, 2006, New Mirant reported that rejection of the Back-to-Back Agreement creates an immediate "gain" to it totaling $360,000,000. Mr. Pachulski, however, asserts that New Mirant's failure to provide any analysis as to the true long-term cost of assuming the Back-to-Back Agreement makes it very difficult to determine whether, in fact, its management is improperly motivated by short-term gains rather than what is truly beneficial for the Company and its stakeholders. Although New Mirant provided no cost benefit analysis in its requests, Mr. Pachulski further contends that there is evidence demonstrating that it would be more advantageous for New Mirant to assume the Back-to-Back arrangement rather than rejecting it pursuant to the PEPCO Settlement Agreement. Edison Mission Energy, a Class 3 Claim Holder with a $7,000,000 Allowed Claim, joins in the objections and arguments raised by certain Class 3 Claim Holders. Rule 2019 Compliance Craig H. Averch, Esq., at White & Case LLP, in Miami, Florida, relates that at the hearing on the proposed settlement with Potomac Electric Power Company, the New Mirant Entities asked the Class 3 Claim Holders and their attorneys to file a verified statement pursuant Rule 2019 of the Federal Rules of Bankruptcy Procedure. Although Pachulski Stang Ziehl Young Jones & Weintraub LLP, as the Holders' attorney, filed a Verified Statement on June 26, 2006, Mr. Averch says that Statement did not comply with Rule 2019. The Verified Statement fails to provide any information other than the names of the alleged holders of Mirant common stock or their financial advisors, he says. As of June 30, 2006, the Holders or their lawyers have not filed a proper Rule 2019 statement, Mr. Averch says. Hence, New Mirant asks the Court to compel the Holders and their attorneys to provide all the information required by Rule 2019. If the Committee will not disclose the information required, New Mirant asks Judge Lynn to prohibit the Holders from participating further in the Chapter 11 cases and strike their Objection. The Class 3 Claim Holders are: (1) Resurgence Asset Management, L.L.C. (2) Luxor Capital Group (3) King Street Capital Management, L.L.C. (4) D.E. Shaw Laminar Portfolios, L.L.C. (5) Caspian Capital Advisors (6) Pirate Capital LLC (7) Quadrangle Master Funding LTD (8) Basso Capital Management, L.P. (9) Highland Capital Management, L.P. (10) Highland Floating Rate Fund (11) Highland Floating Rate Advantage (12) Cadence Master, Ltd. (13) Man Mac Gemstock 9B, Ltd. (14) Ivy MA Holdings Cayman 8, Ltd. Parties' Stipulation on Rule 2019 Issue New Mirant and the Class 3 Claim Holders entered into an Agreed Stipulation and Order regarding the submission of the Rule 2019 Exhibits under seal, and other matters. The parties agree that the Holders will file Rule 2019 exhibits as long as the Debtors will not: (a) distribute them or any of their portions to any third party other than the Debtors' representatives; and (b) communicate or disclose them to any third party other than the Debtors' representatives, except if the information: * is generally available to the public on a non- confidential basis; * is already acquired by the Debtors or their representatives; * has become available to the Debtors' counsel or representatives from a source other than the Holders; or * is independently developed by the Debtors' counsel or representatives. Judge Lynn approves the parties' Agreed Order and Stipulation. About Mirant Corp. 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 Nos. 100& 101; Bankruptcy Creditors' Service, Inc., 215/945- 7000) * * * As reported in the Troubled Company Reporter on July 17, 2006, Moody's Investors Service downgraded the ratings of Mirant Corporation and its subsidiaries Mirant North America, LLC and Mirant Americas Generation, LLC. The Ba2 rating for Mirant Mid- Atlantic, LLC's secured pass through trust certificates was affirmed. Additionally, Mirant's Speculative Grade Liquidity rating was revised to SGL-2 from SGL-1. The rating outlook is stable for Mirant, MNA, MAG, and MIRMA. Moody's downgraded Mirant Americas Generation, LLC's Senior Unsecured Regular Bond/Debenture, to B3 from B2. Moody's also downgraded Mirant Corporation's Corporate Family Rating, to B2 from B1, and Speculative Grade Liquidity Rating, to SGL-2 from SGL-1. Mirant North America, LLC's Senior Secured Bank Credit Facility, was also downgraded to B1 from Ba3 and its Senior Unsecured Regular Bond/Debenture, to B2 from B1. As reported in the Troubled Company Reporter on July 13, 2006, Fitch Ratings placed the ratings of Mirant Corp., including the Issuer Default Rating of 'B+', and its subsidiaries on Rating Watch Negative following its announced plans to buy back stock and sell its Philippine and Caribbean assets. Ratings affected are Mirant Corp.'s 'B+' Issuer Default Rating and Mirant Mid-Atlantic LLC's 'B+' Issuer Default Rating and the Pass- through certificates' 'BB+/Recovery Rating RR1'. Fitch also placed Mirant North America, Inc.'s Issuer Default Rating of 'B+', Senior secured bank debt's 'BB/RR1' rating, Senior secured term loan's 'BB/RR1' rating, and Senior unsecured notes' 'BB-/RR1' rating on Rating Watch Negative. Mirant Americas Generation, LLC's Issuer Default Rating of 'B+' and Senior unsecured notes' 'B/RR5' rating was included as well. Standard & Poor's Ratings Services also placed the 'B+' corporate credit ratings on Mirant Corp. and its subsidiaries, Mirant North American LLC, Mirant Americas Generating LLC, and Mirant Mid- Atlantic LLC, on CreditWatch with negative implications. MIRANT CORP: Court Approves New York Independent System Settlement ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Northern District of Texas approved the settlement agreement between Mirant Corporation and its debtor-affiliates and New York Independent System Operator, Inc. Jason D. Schauer, Esq., at White & Case LLP, in Miami, Florida, related that the NYISO and Mirant Americas Energy Marketing, LP, now known as Mirant Energy Trading LLC, entered into various agreements for the purchase of transmission service, and the purchase and sale of energy and ancillary services. The NYISO administers a wholesale market for electricity in the State of New York. It operates a bid-based commodity market in which power is purchased and sold on the basis of competitive bidding to balance supply and demand. MAEM is one of NYISO's market participants. The Contracts are governed by the NYISO's transmission tariffs. The NYISO settles transactions with Market Participants on a monthly basis, collecting net amounts owed and distributing those amounts to net creditors in the Market after deducting applicable fees and charges. Adjustment Holdback After the Debtors' bankruptcy filing, the NYISO asserted that MAEM owes it certain amounts for prepetition obligations under the Contracts. As a result, the NYISO held back $2,955,091, which amount represents an estimate of the net amounts that MAEM would owe the NYISO for the prepetition obligations. In September 2003, Mirant asked the Court to enforce the automatic stay to prohibit the NYISO and other parties from executing setoffs against amounts owed to MAEM for certain prepetition energy transactions. To resolve the issue on setoffs, MAEM and the NYISO entered into a Stipulated Order, which provides the NYISO with a lien on future amounts owed to MAEM as adequate protection for its unliquidated right of offset with respect to the adjustment claims. In exchange, the NYISO returned to MAEM the $2,955,091 Adjustment Holdback. The NYISO Claims On December 16, 2003, the NYISO filed Claim No. 7110 against MAEM and Claim No. 7111 against Mirant. The MAEM Claim included secured claims in an unliquidated amount allegedly arising from "true-ups" for prepetition transactions under the NYISO Tariffs and Contracts. The Mirant Claim, on the other hand, is duplicative of the MAEM Claim. The New Mirant Entities dispute the NYISO Claims. New Mirant believes that it has counterclaims against the NYISO. Lovett Metering Dispute The NYISO alleges it overpaid MAEM for energy generated at the generating facility in Lovett, New York, for the period prior to April 2001, Mr. Schauer related. The NYISO retained cash and certain collateral to secure the overpayment. Mr. Schauer contended that New Mirant possesses claims against the NYISO arising from that improper retention. Assumption and Assignment of Contracts Pursuant to Mirant's Plan of Reorganization, the Contracts were listed on a schedule of executory contracts to be assumed by MAEM and assigned to MET under Section 365 of the Bankruptcy Code. The NYISO objected to the scheduled cure amount, and to assumption and assignment of the Contracts, asserting disputes regarding: (i) the cure amount with respect to the Contracts; and (ii) adequate assurance of future performance of the Contracts upon assignment to MET. On February 23, 2006, the NYISO and MET entered into a Transfer Agreement. The NYISO consented to the transfer to MET of MAEM's rights and obligations under the Contracts effective as of February 1, 2006. MET agreed to pay the NYISO all unpaid amounts on account of MAEM's performance under the Contracts prior to February 1, 2006. Settlement Agreement To resolve the issues relating to the NYISO Claims, the Assignment Objection and the Lovett Metering Dispute, New Mirant asks the Court to: (i) authorize it and MET to enter into a settlement agreement with the NYISO pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure; and (ii) approve the assumption and assignment of the Contracts pursuant to Section 365 of the Bankruptcy Code. The principal terms of the Settlement Agreement are: (a) The NYISO will pay to New Mirant $999,000, without setoff, recoupment or reduction. The NYISO agrees not to charge New Mirant of any fees, rates or any other obligation, associated with the settlement amount; (b) Late payment of the settlement amount will bear interest at a rate set by the Federal Energy Regulatory Commission; (c) The NYISO will take all necessary steps to withdraw and dismiss, with prejudice, the NYISO Claims and the Assignment Objection; (d) As of the effective date of the Settlement Agreement, the Contracts will be deemed assumed and assigned to MET pursuant to Section 365, and there are no defaults which must be cured, or other amounts which must be paid to NYISO, as a condition to the assumption and assignment of the Contracts; (e) The NYISO waives all arguments and objections to the assumption and assignment of the Contracts; (f) The parties executed mutual releases on behalf of themselves and certain related entities in connection with the Settlement Issues; and (g) The NYISO acknowledges and reaffirms its agreement and obligations under a stipulation which tolls the limitations period of certain claims, including those pertaining to the NYISO Claims, the Assignment Objection and the Lovett Metering Dispute, through and including the date that the Bankruptcy Court approves or disapproves the Settlement Agreement. About Mirant Corp. 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. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on July 17, 2006, Moody's Investors Service downgraded the ratings of Mirant Corporation and its subsidiaries Mirant North America, LLC and Mirant Americas Generation, LLC. The Ba2 rating for Mirant Mid- Atlantic, LLC's secured pass through trust certificates was affirmed. Additionally, Mirant's Speculative Grade Liquidity rating was revised to SGL-2 from SGL-1. The rating outlook is stable for Mirant, MNA, MAG, and MIRMA. Moody's downgraded Mirant Americas Generation, LLC's Senior Unsecured Regular Bond/Debenture, to B3 from B2. Moody's also downgraded Mirant Corporation's Corporate Family Rating, to B2 from B1, and Speculative Grade Liquidity Rating, to SGL-2 from SGL-1. Mirant North America, LLC's Senior Secured Bank Credit Facility, was also downgraded to B1 from Ba3 and its Senior Unsecured Regular Bond/Debenture, to B2 from B1. As reported in the Troubled Company Reporter on July 13, 2006, Fitch Ratings placed the ratings of Mirant Corp., including the Issuer Default Rating of 'B+', and its subsidiaries on Rating Watch Negative following its announced plans to buy back stock and sell its Philippine and Caribbean assets. Ratings affected are Mirant Corp.'s 'B+' Issuer Default Rating and Mirant Mid-Atlantic LLC's 'B+' Issuer Default Rating and the Pass- through certificates' 'BB+/Recovery Rating RR1'. Fitch also placed Mirant North America, Inc.'s Issuer Default Rating of 'B+', Senior secured bank debt's 'BB/RR1' rating, Senior secured term loan's 'BB/RR1' rating, and Senior unsecured notes' 'BB-/RR1' rating on Rating Watch Negative. Mirant Americas Generation, LLC's Issuer Default Rating of 'B+' and Senior unsecured notes' 'B/RR5' rating was included as well. Standard & Poor's Ratings Services also placed the 'B+' corporate credit ratings on Mirant Corp. and its subsidiaries, Mirant North American LLC, Mirant Americas Generating LLC, and Mirant Mid- Atlantic LLC, on CreditWatch with negative implications. MIRANT CORP: Wants Environmental Dept.'s 2006 Consent Order Okayed ------------------------------------------------------------------ Mirant Lovett, LLC, and Mirant Bowline, LLC, Mirant Corporation's debtor affiliates, ask the U.S. Bankruptcy Court for the Northern District of Texas to approve the 2006 Consent Order entered into with the New York Department of Environmental Compliance. Mirant Lovett and Mirant Bowline each owns and operates an electric generation station in the state of New York. The Debtors' business is subject to extensive environmental regulations by federal, state and local authorities, which require continuous compliance with conditions established by their operating permits. Under New York law, the DEC has the authority to enforce the state's environmental laws. The DEC is also responsible for the abatement and control of air pollution in New York. Pursuant to the state's environmental regulation, the Debtors have installed and certified a Continuous Emissions Monitoring System to monitor emissions at their facilities. 2005 Consent Order In 2005, the Debtors stipulated, through a Court-approved Consent Order, to pay $44,100 as penalty for any emissions violations at their facilities. The Debtors also agreed to calculations for penalty provisions for exceedances incurred at the facilities on or after Jan. 1, 2005. The Consent Order provides that the compliance with the opacity standards is determined by the CEMS. Jeff P. Prostok, Esq., at Forshey & Prostok LLP, in Fort Worth, Texas, relates that the Debtors have provided to the DEC a statement of the alleged opacity exceedances at the facilities for the period Jan. 1, 2005, through and including the first quarter of 2006. 2006 Consent Order Mr. Prostok tells the Court that the Debtors and the DEC have agreed to a 2006 Consent Order, which will cover opacity exceedances at the facilities for the period after Jan. 1, 2005, through the first quarter of 2006. The 2006 Consent Order, Mr. Prostok adds, is conditioned on the Court's approval. The principal terms of the 2006 Consent Order are: (a) The Debtors and the DEC agree to the opacity exceedances for the Reporting Period based on the Emissions Report; (b) The penalty for the Reporting Period will be $76,200; (c) Penalties will not be assessed for certain unavoidable excess opacity emissions; (d) The 2006 Consent Order will not constitute an admission of any violation under applicable authority; and (e) The Debtors' compliance with the 2006 Consent Order releases and satisfies their obligations to the DEC for the violations alleged in the Order for the Reporting Period. The compliance does not satisfy the Debtors' future obligations for the DEC. About Mirant Corp. 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. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on July 17, 2006, Moody's Investors Service downgraded the ratings of Mirant Corporation and its subsidiaries Mirant North America, LLC and Mirant Americas Generation, LLC. The Ba2 rating for Mirant Mid- Atlantic, LLC's secured pass through trust certificates was affirmed. Additionally, Mirant's Speculative Grade Liquidity rating was revised to SGL-2 from SGL-1. The rating outlook is stable for Mirant, MNA, MAG, and MIRMA. Moody's downgraded Mirant Americas Generation, LLC's Senior Unsecured Regular Bond/Debenture, to B3 from B2. Moody's also downgraded Mirant Corporation's Corporate Family Rating, to B2 from B1, and Speculative Grade Liquidity Rating, to SGL-2 from SGL-1. Mirant North America, LLC's Senior Secured Bank Credit Facility, was also downgraded to B1 from Ba3 and its Senior Unsecured Regular Bond/Debenture, to B2 from B1. As reported in the Troubled Company Reporter on July 13, 2006, Fitch Ratings placed the ratings of Mirant Corp., including the Issuer Default Rating of 'B+', and its subsidiaries on Rating Watch Negative following its announced plans to buy back stock and sell its Philippine and Caribbean assets. Ratings affected are Mirant Corp.'s 'B+' Issuer Default Rating and Mirant Mid-Atlantic LLC's 'B+' Issuer Default Rating and the Pass- through certificates' 'BB+/Recovery Rating RR1'. Fitch also placed Mirant North America, Inc.'s Issuer Default Rating of 'B+', Senior secured bank debt's 'BB/RR1' rating, Senior secured term loan's 'BB/RR1' rating, and Senior unsecured notes' 'BB-/RR1' rating on Rating Watch Negative. Mirant Americas Generation, LLC's Issuer Default Rating of 'B+' and Senior unsecured notes' 'B/RR5' rating was included as well. Standard & Poor's Ratings Services also placed the 'B+' corporate credit ratings on Mirant Corp. and its subsidiaries, Mirant North American LLC, Mirant Americas Generating LLC, and Mirant Mid- Atlantic LLC, on CreditWatch with negative implications. NATIONAL LAMPOON: Appoints Bruce Long as President -------------------------------------------------- National Lampoon, Inc., appointed Bruce Long as its president. Mr. Long has served as the company's Chief Operating Officer in a consulting capacity since early 2006. In his new position he will continue to oversee all aspects of National Lampoon's production, distribution, and network operations. Together with the company's Chief Executive Officer, Daniel S. Laikin, Long will work to oversee operations and execution throughout all National Lampoon media and entertainment arms, including National Lampoon films, National Lampoon College, National Lampoon's TogaTV, and the National Lampoon Humor Network. They will also work to more aggressively implement additional strategic planning tactics to leverage and expand the brand's distribution across more media. Speaking on behalf of the company, Mr. Laikin said, "It's an honor to have Bruce join National Lampoon and help bring his experience and dedication to the company. Having worked closely with him since the start of the year, it's exciting to have another person on the team who truly gets the vision and is helping move the company towards our shared goals. His leadership and management background will be invaluable to our company's growth." Mr. Long stated, "This is an exciting time at National Lampoon and I look forward to helping execute and expand the initiatives the company has taken. Over the last couple years they have built distribution outlets and have re-energized and leveraged the brand into all areas of media and entertainment, we are now continuing to focus aggressively on increasing revenue generation across these platforms." "I look forward to continue working with a great team of people and helping build a future that will drive greater value for our shareowners, employees and consumers," Mr. Long added. Mr. Long joins National Lampoon from Technicolor Creative Services, where since 2001, he was Executive Vice President of Strategic Planning and Business Development. Mr. Long was responsible for the technical vision of the company, integration, new business, and acquisitions. During his tenure at Technicolor, Mr. Long also handled the development and integration of new services for asset management and digital distribution platforms including mobile, Internet, digital cinema and digital capture based feature post-production. Prior to Technicolor, Mr. Long served as Chief Executive Officer of Ionic Worldwide Studios, an interactive content start-up company launched with Mike Medavoy and Troy Bolotnick. He founded and launched Heroes Title Design and Encore Visual Effects Company, serving as president of Encore Video. The combined companies were eventually sold to Liberty Media. His early career highlights include a stint as a comedian, performing in Los Angeles with The Lunatics, L.A. based improvisational troupe. He worked as a theater director, actor, and producer for 10 years in Los Angeles. Mr. Long also spent the early part of his career in the music industry, working as Director of College Promotions for Columbia Records and was Chief Financial Officer of Headfirst Records. He worked in music management at Acme Moving and Management in LA. About National Lampoon National Lampoon, Inc. (AMEX:NLN), fka J2 Communications, Inc., is active in a broad array of entertainment segments, including feature films, television programming, interactive entertainment, home video, audio CDs and book publishing. The Company owns interests in all major National Lampoon properties, including National Lampoon's Animal House, the National Lampoon Vacation series and National Lampoon's van Wilder. The National Lampoon Network serves over 600 colleges and universities throughout the U.S. and reaches as many as 4.8 million 18-to-24-year-old college students. Its humor website is -- www.nationallampoon.com --. It has four operating divisions: National Lampoon Network, Entertainment Division, Publishing Division and Licensing Division. J2 Communications, Inc., was engaged in the acquisition, production and distribution of videocassette programs for retail sale. In 1991, J2 acquired all of the outstanding shares of National Lampoon, Inc., and subsequent to J2's acquisition of NLI, it de-emphasized its videocassette business and publishing operations and began to focus on exploitation of the National Lampoon(TM) trademark. J2 reincorporated in Delaware under the name National Lampoon, Inc., in November 2002. Going Concern Doubt In its Form 10-Q filing for the quarter ended April 30, 2006, National Lampoon's management disclosed that the Company's net losses of $8,669,170 and $5,127,107 in the prior two years, net loss of $4,321,539 during the first nine months of the 2006 fiscal year, and accumulated deficit of $36,215,567 at April 30, 2006, raise concerns about its ability to continue as a going concern. NATIONSRENT COS: Ashtead Merger Prompts S&P's Positive Watch ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on construction equipment rental company NationsRent Cos. Inc., including its 'B+' corporate credit rating on CreditWatch with positive implications. This action results from the announcement by U.K.-based equipment rental company Ashtead Group PLC (BB- /Stable/--) that it will acquire NationsRent for about $1 billion including the assumption of about $400 million of its debt, which is expected to be tendered for cash. Standard & Poor's will withdraw its ratings on NationsRent's outstanding notes when the transaction is completed, which is expected at the end of August 2006. The combination of NationsRent and Ashtead's U.S.-based Sunbelt Rentals unit will form the third-largest construction equipment rental firm in the U.S. The combined operations will have about 477 rental locations in 35 states and should provide some synergies including increased buying prowess and cost savings from clustering of locations and closing back-offices. While the industry remains highly fragmented and competitive, it has recovered from a cyclical slump in non-residential construction spending and is poised for modest growth in this stage of the cycle. OCA INC: Court Denies BofA's Request to Disband Equity Committee ---------------------------------------------------------------- The Honorable Jerry A. Brown of the U.S. Bankruptcy Court for the Eastern District of Louisiana denied the request of Bank of America, N.A., as agent for the secured lenders of OCA, Inc., and its debtor-affiliates, to disband the Official Committee of Equity Security Holders. The Securities and Exchange Committee, the U.S. Trustee, and some shareholders objected to the move. SEC Says Equity Panel Need to Investigate Improprieties E. Gordon Robinson, Esq., an SEC senior bankruptcy counsel at its Atlanta District Office, told the Court that there is a sufficient basis to justify the appointment and continuing existence of an equity committee. Financial information available at the time the appointment decision was made, including the exhibit to the Debtors' bankruptcy petition and the most recent monthly operating report filed with the Court under penalty of perjury, show positive book equity. OCA is delinquent in filing periodic public reports with the SEC, but its most recent Form 10-Q filing shows significant positive book equity. Shareholders have file multiple actions alleging that OCA's public filings with the SEC contain false and misleading information, and OCA acknowledges that restatements of its public financial statements are necessary, which creates uncertainty regarding OCA's financial condition. The valuation analysis in the Disclosure Statement shows that the Debtors have significant value as a going concern. Considerable efforts are underway to rehabilitate the Debtors' business. Mr. Robinson added that other significant parties in the case have entered into an agreement with the Debtors to support the Debtors' Plan, which minimizes the likelihood that the Debtors' estimation of value will be investigated or seriously challenged without the continued existence of the Equity Committee. The Debtors' Plan, moreover, as currently drafted, includes releases and injunctions, including releases of liability for certain officers and directors, which likely will impact pending shareholder litigation and seeks to preclude regulatory agencies, such as the SEC, from performing their statutory duties. Whatever the Debtors rationale for including those provisions in the Plan, if the Plan is confirmed with these provisions intact, any investigations into the Debtors' financial condition could be severely compromised. Under these circumstances, the issue of solvency is unresolved and is appropriate for exploration by the Equity Committee, and the need for the Equity Committee is apparent, Mr. Robinson contends. U.S. Trustee Insists on Continuing Equity Panel R. Michael Bolen, the U.S. Trustee for Region 5, reminded the Court that under Section 1102(a)(1) of the Bankruptcy Code, the U.S. Trustee is given authority to appoint and equity committee as it "deems appropriate." Furthermore, Section 1102 does not contain any authority for a court to disband a committee that has already been formed. Mary S. Langston, Esq., the Asst. U.S. Trustee, told the Court that the U.S. Trustee did not abuse its discretion in appointing the equity panel. Moreover, the Debtors' significant number of shareholders, the size and complexity of the chapter 11 cases, the cost of participation against the value, and BofA's lack of standing to request for disbandment favor continuing the existence of the Equity Committee. Based in Metairie, Louisiana, OCA, Inc. -- http://www.ocai.com/ -- provides a full range of operational, purchasing, financial, marketing, administrative and other business services, as well as capital and proprietary information systems to approximately 200 orthodontic and dental practices representing approximately almost 400 offices. The Debtor's client practices provide treatment to patients throughout the United States and in Japan, Mexico, Spain, Brazil and Puerto Rico. The Debtor and its debtor-affiliates filed for Chapter 11 protection on March 14, 2006 (Bankr. E.D. La. Case No. 06-10179). Three debtor-affiliates also filed for bankruptcy protection on June 1, 2006 (Bankr. E.D. La. Case No. 06-10503). William H. Patrick, III, Esq., at Heller Draper Hayden Patrick & Horn, LLC, represents the Debtors. Patrick S. Garrity, Esq., and William E. Steffes, Esq., at Steffes Vingiello & McKenzie LLC represent the Official Committee of Unsecured Creditors. Carmen H. Lonstein, Esq., at Bell Boyd & Lloyd LLC and Robin B. Cheatham, Esq., at Adams and Reese LLP represent the Official Committee of Equity Security Holders. When the Debtors filed for protection from their creditors, they listed $545,220,000 in total assets and $196,337,000 in total debts. OSA DEVELOPMENT: Case Summary & Largest Unsecured Creditor ---------------------------------------------------------- Debtor: OSA Development, Inc. P.O. Box 1401 Mount Vernon, Washington 98273 Bankruptcy Case No.: 06-12372 Type of Business: The Debtor's officers, Pete and Sandra Hansen, filed for chapter 11 protection on June 23, 2006 (Bankr. W.D. Wash. Case No. 06-12039). Chapter 11 Petition Date: July 20, 2006 Court: Western District of Washington (Seattle) Judge: Karen A. Overstreet Debtor's Counsel: Steven C. Hathaway, Esq. 115 West Magnolia Suite 211, P.O. Box 2147 Bellingham, Washington 98227-2147 Tel: (360) 676-0529 Fax: (360) 676-0067 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Mt. View Excavating Property $365,313 3492 Mt. Baker Highway Development Bellingham, WA 98226 Costs OWENS CORNING: Wants Court to Approve Blue Ridge Settlement ----------------------------------------------------------- Owens Corning and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve the Settlement Agreement with Blue Ridge Investments, LLC. Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, relates that on December 29, 1997, Owens Corning and Blue Ridge, entered into a Share Purchase Agreement pursuant to which Blue Ridge purchased from Owens Corning: -- 2,000 shares of preferred stock of Faloc, Inc., now known as Integrex, for $40,000,000; and -- 14 shares of common stock of Integrex for $100,000. Under the Share Purchase Agreement, Blue Ridge had the right, from December 31, 1999, through and including December 31, 2002, to require Owens Corning to repurchase or cause to be repurchased the Shares. If the Put Option was exercised for all of the Shares, Owens Corning would be obligated to pay an amount equal to the sum of the purchase price for the Shares, plus the dollar amount of accrued dividends that had not been paid with respect to the Shares. To exercise the Put Option, Blue Ridge was required to give Owens Corning seven days' notice specifying the put date, the Shares being put, the applicable put price and the account to which the put price was being paid. Blue Ridge says it provided that notice by written communications to Owens Corning dated September 18, 2000. Owens Corning disputes the contention. The Share Purchase Agreement also provided that the Put Option would be deemed exercised, without notice or other demand, upon the commencement of a voluntary bankruptcy case by Owens Corning, Integrex or any other significant subsidiary of Owens Corning as an Event of Put Acceleration. On April 15, 2002, Blue Ridge filed Claim No. 7964 for $40,100,000, plus interest, fees and other costs and expenses, for Owens Corning's alleged breach of the Put Option, as later supplemented and amended. Blue Ridge and Owens Corning engaged in various discussions with respect to the issues raised. Subsequently, Owens Corning and Blue Ridge reached a compromise and settlement. The terms of the parties' Settlement Agreement are: a. Blue Ridge will be deemed to hold an allowed OCD General Unsecured Claim for $25,000,000, which will be classified in Class A6-A, provided that Blue Ridge will receive a distribution under the Plan -- except with respect to the Subscription Documents and Rights Offering -- based on a reduced deemed allowed OCD General Unsecured Claim in Class A6-A for $20,000,000. Solely for the purpose of the distribution calculation, Blue Ridge will be deemed to have waived $5,000,000 of its agreed allowed OCD General Unsecured Claim in Class A6-A. b. In accordance with, and subject to the terms of the Debtors' Sixth Amended Plan of Reorganization and the Subscription Documents, Blue Ridge will be offered the right to subscribe to purchase up to its pro rata share of 72,900,000 shares of the New OCD Common Stock at a purchase price of $30 per share. c. Blue Ridge will disgorge the New OCD Common Stock purchased pursuant to the Rights Offering and Owens Corning will contemporaneously return to Blue Ridge an amount equal to the purchase price of the New OCD Common Stock so purchased and disgorged -- at the parties' request -- if the Court does not approve the Settlement Agreement. Until a final, binding and non-appealable order approving the Settlement Agreement is obtained, Blue Ridge may not dispose of the New OCD Common Stock without Owens Corning's prior consent. d. The Settlement is in full, final and complete satisfaction of all rights and claims of Blue Ridge against the Debtors existing as of the date of the entry of the order approving the Settlement Agreement. e. Blue Ridge will file an amended claim for $25,000,000 that will supercede and replace Claim No. 7964. f. Upon the Effective Date of the Sixth Amended Plan, the Debtors will file the requisite documents necessary to dismiss with prejudice two adversary proceedings against Bank of America Corporation currently pending before the Court -- Adversary Proceeding Nos. 02-05819 and 02-05820. g. Blue Ridge will support confirmation of the Sixth Amended Plan. The Debtors believe that the Settlement represents a fair and reasonable resolution of the issues between the parties. Due to the complexity of the issues involved, the probability of success in litigating the claims and disputes between the parties is uncertain and the resolution of these disputes through litigation will cause expense, inconvenience and delay, Mr. Pernick contends. Moreover, Mr. Pernick continues, as a result of the Settlement, Blue Ridge's claim against Owens Corning is greatly reduced -- a significant factor as the Debtors move toward confirmation of the Plan. Owens Corning (OTC: OWENQ.OB) -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on Oct. 5, 2000 (Bankr. Del. Case. No. 00-03837). Norman L. Pernick, Esq., at Saul Ewing LLP, represents the Debtors. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Asbestos Creditors. James J. McMonagle serves as the Legal Representative for Future Claimants and is represented by Edmund M. Emrich, Esq., at Kaye Scholer LLP. (Owens Corning Bankruptcy News, Issue No. 136; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: Court Approves Rights Offering Procedures -------------------------------------------------------- The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware approves the rights offering subscription procedures, distribution procedures and forms of certain subscription documents proposed by Owens Corning and its debtor-affiliates. One of the key components of the Debtors' Sixth Amended Plan of Reorganization is the rights offering where some holders in Classes A5, A6-A and A6-B will be offered the opportunity to subscribe for 72,900,00 shares of the New OCD Common Stock at $30 per share. As previously reported, the Debtors entered into an Equity Commitment Agreement with J.P. Morgan Securities Inc. to facilitate the Rights Offering. In connection with the implementation of the Rights Offering, Owens Corning has agreed to distribute a set of instructions outlining the process and terms and conditions of the Rights Offering and a related subscription acceptance form. The Court finds the Debtors' proposed procedures for determining the Rights Participation Amount as fair, equitable and appropriate under the circumstances. Hence, the Court orders that each Eligible Holder of a claim in Classes A6-A or A6-B will be bound by the Debtors' proposed Rights Participation Amount solely to determine the maximum number of Rights Offering Shares for which the holder may subscribe under the Rights Offering. Unresolved objections are overruled. The Court authorizes the Debtors to take all appropriate actions to implement the Rights Offering Procedures and Subscription Distribution Procedures. Rights Offering Procedures A. "Eligible Claim" and "Eligible Holder" In accordance with the Sixth Amended Plan, the Rights Offering will be made to "Eligible Holders" of "Eligible" claims in Classes A5, A6-A and A6-B, rather than simply to allowed claims in those classes. For purposes of the Rights Offering, the Debtors propose these criteria for determination of Eligible Claims and Eligible Holders entitled to participate in the Rights Offerings: a. An "Eligible" claim will mean: -- an allowed claim, as of the Rights Offering Record Date, in Classes A5, A6-A or A6-B; -- all Claims in Class A5, which will be deemed to be $1.389 billion in the aggregate for purposes of the Rights Offering; and -- any Claim for which a proof of claim has been filed as non-contingent, undisputed and liquidated and: * if an objection to the proof of claim has been filed, then the claim will only be "Eligible" to the extent of any undisputed portion; or * if an objection to the claim has not been filed and no amount is reflected in the Debtors' schedules of assets and liabilities but Owens Corning does not dispute all or a portion of the claim amount, then the claim will only be "Eligible" to the extent of its undisputed portion; or * if an objection to the claim has not been filed and the corresponding claim listed in the Debtors' Schedules is different than the amount asserted in claim and the Court has not entered an order to the contrary, then the claim will only be "Eligible" to the extent of the lesser of the amounts listed on the Schedules and the claim, unless Owens Corning does not dispute all or a portion of the claim amount, in which case the undisputed portion will be the amount of the "Eligible" Claim for purposes of participation in the Rights Offering. b. An "Eligible Holder" will mean the holder of an Eligible Claim, solely in its capacity as the holder of an Eligible Claim. B. Rights Participation Amount The Debtors further propose that the Eligible Holders in Classes A6-A and A6-B will be assigned a "Rights Participation Amount" which will be used to determine the maximum number of shares for which they may subscribe. To assist the Eligible Holders to determine their Rights Participation Amounts and to provide them with a reasonable opportunity to review and respond to the amounts, the Debtors prepared a list of the Rights Participation Amount for each Eligible Holder of a claim in Classes A6-A and A6-B. A full-text copy of the List of the Rights Participation Amount is available for free at http://ResearchArchives.com/t/s?b85 With respect to a small number of claims in Classes A6-A and A6-B, the Debtors dispute the amount of the claim submitted by the holder, but acknowledge that some amount may be owed. In those instances, the Debtors have listed the Rights Participation Amounts at zero to avoid making any admission as to liability and the value of the claim. The holders of those claims who wish to participate in the Rights Offering may file an objection. With respect to Class A5, all holders of OCD Bondholders Claims are treated as Eligible Holders. The Debtors estimate that the aggregate amount of claims in Class A5 is around $1.389 billion for purposes of the Rights Offering. However, there are various face amounts and accrued interest amounts for each issuance of bonds in Class A5. Therefore, the Debtors and their financial advisor Lazard Freres & Co. LLC developed a formula to determine each Class A5 Eligible Holder's "Rights Participation Amount" that is linked to the principal amount of the particular bond in question. The Right Participation Amount for each issuance will be divided by the aggregate Rights Participation Amounts of all Eligible Holders in Classes A5, A6-A and A6B to produce a "Pro Rata Multiplier." The maximum number of Rights Offering Shares allocated to each issuance will be determined by multiplying the Pro Rata Multiplier by the total number of available Rights Offering Shares for Classes A5, A6-A and A6-B. The holders of bonds within a particular issuance will then be entitled to subscribe for their Pro Rata share of the maximum number of Rights Offering Shares allocated to their issuance. The Rights Participation Amounts and Maximum Share Amounts for Eligible Holders of Claims in Class A5 will be calculated by the Debtors wherever possible and will be listed on the appropriate Subscription Acceptance Form. The formula to determine the Maximum Share Amount for Classes A6-A and A6-B is similar to that for Class A5. The holder's Rights Participation Amount will be divided by the aggregate number of all Rights Participation Amounts for Classes A5, A6-A and A6-B to produce a Pro Rata Multiplier. The Pro Rata Multiplier will then be multiplied by the total number of Rights Offering Shares, with the resulting number being rounded down to the next lowest whole number, which will be the Maximum Share Quantity. The Debtors currently estimate that the Maximum Share Amount will be approximately 42 Rights Offering Shares per $1,000 of Rights Participation Amount. Eligible Holders may subscribe for any number of Rights Offering Shares up to the Maximum Share Quantity at the price of $30 per share. The Debtors will provide each Eligible Holder with a set of the Instructions that includes a step-by-step formula to be used to determine the Subscribed Share Quantity and the Total Purchase Price. C. Subscription Acceptance Form To validly exercise its right to participate in the Rights Offering, once each Eligible Holder determines its Subscribed Share Quantity and Total Purchase Price, it must also complete and execute a "Subscription Acceptance Form." Each Subscription Acceptance Form: -- identifies the Eligible Holder; -- provides a table to assist the Eligible Holder in calculating its Total Purchase Price; -- contains a certification that the signatory is authorized to execute the form on behalf of the Eligible Holder, that the Eligible Holder is authorized to participate in the Rights Offering and agrees to be bound by the terms of the Subscription Acceptance Form and Instructions; and -- contains certain other standard acknowledgments relative to potential securities laws and related exculpation issues. To validly exercise its right to participate in the Rights Offering, each Eligible Holder of a Class A5 Claim must return a duly executed Subscription Acceptance Form to Financial Balloting Group LLC and tender the Total Purchase Price to Owens Corning before 2:00 p.m. Pacific Time on the same day as the Plan Voting Deadline -- Subscription Expiration Time. Each Eligible Holder of a Class A6-A and A6-B Claim must return a duly executed Subscription Acceptance Form to Omni Management Group LLC and tender the Total Purchase Price to Owens Corning before the Subscription Expiration Time. The Debtors intend to provide Each Eligible Holder with instructions outlining the general terms and conditions under which the Rights Offering is being made. Distribution Procedures The Debtors also propose procedures that govern the distribution of the Subscription Documents to each of the Eligible Holders in Classes A5, A6-A and A6-B. Because Class A5 is comprised of nine different issuances of Prepetition Bonds that are held in different manners, special Instructions and Subscription Acceptance Forms are required for each type of issuance. In addition to procedures relating to Classes A6-A and A6-B, the Debtors came up with three different distribution procedures for Class A5 to accommodate the different manner in which the Prepetition Bonds are held: A. Class A5 1. Registered Bondholder The Subscription Documents for Eligible Holders in Class A5 will be sent directly to the Prepetition Bonds' registered owners that are identified in the Debtors' books and records as of the Rights Offering Record Date. If those holders wish to participate in the Rights Offering, they must complete and return their Subscription Acceptance Forms directly to the Financial Balloting Group and make their subscription payments directly to Owens Corning. 2. Street Name Bond The Financial Balloting Group will also act as agent in connection with the Rights allocated with respect to any bonds held in street name through the Depository Trust Company. The Debtors expect that DTC will allocate the Rights through its Automated Subscription Offer Program in accordance with the Pro Rata Multiplier for each issuance of bonds. A sufficient number of Subscription Documents will be provided to the Nominees. The Nominees will then distribute the Subscription Documents to the beneficial holders of the Prepetition Bonds. If the beneficial holders wish to participate in the Rights Offering, they must return their properly completed Subscription Acceptance Form to their Nominees, in turn, will submit instructions through ASOP, and DTC will provide ASOP instructions to the Financial Balloting Group and will arrange for proper payment to Owens Corning. 3. Bearer Bond With respect to Eligible Holders in Class A5, the Debtors are unaware of the identities of most of the holders. Therefore, the Debtors plan to provide publication notice regarding the Rights Offering so that the holders will have notice of the Rights Offering and instructions on where to obtain the Subscription Documents. The holders of the bearer bonds must return the applicable Subscription Acceptance Document to Financial Balloting Group, deposit their bonds in an acceptable depositary and transfer the subscription payment directly to Owens Corning. B. Classes A6-A and A6-B With respect to the Eligible Holders in Classes A6-A and A6-B, the Subscription Documents will be sent directly to each Eligible Holder in this category. The holders must return the applicable Subscription Acceptance Form to Omni Management and transfer the subscription payment directly to Owens Corning. Form of Subscription Documents The Debtors will provide each Eligible Holder in Classes A5, A6-A and A6-B with (a) a set of Instructions and (b) a Subscription Acceptance Form. The Debtors believe that their proposed forms of Subscription Documents are: -- fair and reasonable; -- fairly designed to enable an Eligible Holder to determine whether or not to exercise its Rights to participate in the Rights Offering; -- consistent with other documents approved in other large chapter 11 cases. The Debtors seek the Court's permission to distribute the Subscription Documents to Eligible Holders together or concurrently with the Solicitation Packages, if necessary, or at a later time prior to the Effective Date as may be deemed appropriate by the Debtors, the other Plan Proponents and J.P. Morgan. Given the nature of the Subscription Documents, the Debtors further ask the Court to supplement the Solicitation Procedures Motion to: -- include the procedures for distributing the Subscription Documents to Eligible Holders concurrently with the Solicitation Packages in the solicitation procedures, if and as necessary; -- include the procedures for determining the extent to which the holders of claims in Classes A5, A6-A and A6-B that have not yet been determined to be Allowed Claims may participate in the Rights Offering; and -- permit the Debtors to distribute the forms of the Subscription Documents in accordance with those procedures. The Court exculpates the Debtors, J.P. Morgan Securities Inc. and the syndicate of investors who are ultimate purchasers under the Equity Commitment Agreement, from all obligations, suits, damages or causes of action now existing that any party may have based any act or omission associated with their participation contemplated by the Rights Offering, other than: a. the Debtors' obligations provided in the Instructions and Subscription Acceptance Form; b. the Debtors' obligations to repay or return any Total Purchase Price payments; c. J.P. Morgan's contractual liability to the Debtors pursuant to the Equity Commitment Agreement; d. J.P. Morgan's and the Ultimate Purchasers' contractual obligations to each other under the Syndication Agreement; and e. for bad faith, gross negligence or willful misconduct. Owens Corning (OTC: OWENQ.OB) -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on Oct. 5, 2000 (Bankr. Del. Case. No. 00-03837). Norman L. Pernick, Esq., at Saul Ewing LLP, represents the Debtors. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Asbestos Creditors. James J. McMonagle serves as the Legal Representative for Future Claimants and is represented by Edmund M. Emrich, Esq., at Kaye Scholer LLP. (Owens Corning Bankruptcy News, Issue No. 136; Bankruptcy Creditors' Service, Inc., 215/945-7000) PARKWAY HOSPITAL: Wants Plan-Filing Period Extended to Aug. 30 -------------------------------------------------------------- The Parkway Hospital, Inc., asks the U.S. Bankruptcy Court for the Southern District of New York in Manhattan for permission to extend its exclusive periods to: a) file a plan until Aug. 30, 2006; and b) solicit acceptance of that Plan until Oct. 30, 2006. The Debtor says it needs more time to negotiate settlements with significant creditors. The Debtor also says it has been distracted by several complex issues, including but not limited to: (a) addressing significant employee issues, including negotiations with the union and certain benefit issues; (b) negotiating and exchanging information with the Committee; (c) addressing executory contract and lease issues; (d) retaining professionals; (e) negotiating settlement with certain significant government litigation creditors; (f) negotiating with potential lenders concerning financing opportunities; (g) negotiating a resolution of the Debtor's obligations to its union and employee benefit funds; (h) negotiating a plan of reorganization term sheet with the Committee; and (i) responding to attempts by a certain creditor to foreclose on certain property the Debtor intends to use as a source of funding for its plan of reorganization. The Debtor says these issues place heavy demands on its management and personnel. The Debtor believes that the Committee is close to signing the term sheet proposed by the Debtor allowing it to propose a consensual plan of reorganization. The Debtor and the Committee are narrowing down the issues that remain outstanding and the Debtor expects that they will be resolved shortly. The Debtor is also negotiating with the 1199/SEIU United Healthcare Worker East to resolve certain open issues in connection with its Collective Bargaining Agreement. The Parkway Hospital, Inc., operates a 251-bed proprietary, acute care community hospital located in Forest Hills, New York. The Company filed for chapter 11 protection on July 1, 2005 (Bankr. S.D.N.Y. Case No. 05-14876). Timothy W. Walsh, Esq., at DLA Piper Rudnick Gray Cary US LLP, represents the Debtor in its restructuring efforts. The firm of Alston & Bird LLP serves as substitute bankruptcy counsel to the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed $28,859,000 in total assets and $47,566,000 in total debts. PARMALAT USA: Bondi Seeks Permanent Injunction on Ancillary Cases ----------------------------------------------------------------- Dr. Enrico Bondi, as authorized foreign representative of Parmalat Finanziaria S.p.A. and certain of its affiliates, asks the U.S. Bankruptcy Court for the Southern District of New York to enter a permanent injunction order in Parmalat's ancillary proceedings pursuant to Section 304 of the Bankruptcy Code. Dr. Bondi also submitted with the Court a memorandum of law supporting his permanent injunction request. Dr. Bondi believes that the grant of permanent injunctive relief to the Foreign Debtors is warranted under the Section 304(c) of the Bankruptcy Code. The Permanent Injunction Order gives full force and effect in the United States the terms of the proposed composition with creditors under Parmalat's Restructuring Plan and channels the assertion of claims against the Foreign Debtors to Italy. Granting comity to the Foreign Debtors' Italian insolvency proceeding is justified and deserved in light of, among other things, the significant procedural due process afforded to all creditors of the Foreign Debtors by applicable Italian law, as well as the Italian reorganization scheme which sufficiently comports with U.S. principles of bankruptcy law, Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges LLP, in New York, asserts. Section 304(c), Ms. Goldstein notes, lists factors that a U.S. Bankruptcy Court should consider when determining whether to grant a request for injunctive or other relief under Section 304(b): * just treatment of all holders of claims against or interests in the estate; * protection of claim holders in the United States against prejudice and inconvenience in the processing of claims in the foreign proceeding; * prevention of preferential or fraudulent dispositions of property of the estate; * distribution of proceeds of the estate substantially in accordance with the order prescribed by the Bankruptcy Code; * comity; and * if appropriate, the provision of an opportunity for a fresh start for the individual that the foreign proceeding concerns. Ms. Goldstein asserts that the Italian Proceeding is deserving of comity in that, among others, the Proceeding has progressed smoothly, efficiently and under the watchful oversight of the Civil and Criminal Court of Parma, in Italy. Moreover, she continues, Italian insolvency law: -- provides proper protections to all parties-in-interest; -- has many similarities with plenary cases under Chapter 11 of the Bankruptcy Code; and -- is not in any way repugnant to U.S. law or policy. According to Ms. Goldstein, similar to the automatic stay in the U.S. Bankruptcy Code, the Italian automatic stay ensures the orderly administration of the Foreign Debtors' estates by preventing the commencement or continuation of a wide range of actions against the Foreign Debtors on account of prepetition debts. The Italian Proceeding, Ms. Goldstein maintains, affords just treatment to creditors. The Italian Proceeding does not cause prejudice or inconvenience to U.S. Creditors. The Italian Proceeding has afforded sufficient notice of material events to creditors of the Foreign Debtors to ensure the adequacy of procedural safeguards for all creditors, Ms. Goldstein says. The U.S. creditors, she continues, have also not suffered any particularized harm or inconvenience by liquidating their claims in the Italian Proceeding. Italian insolvency law includes provisions that enable the Foreign Debtors to "claw-back" or set aside transactions that, among others, unfairly favor a creditor at the expense of other creditors. Hence, applicable Italian law also provides for the prevention of prepetition preferential or fraudulent dispositions. Additionally, Ms. Goldstein asserts, distribution of proceeds under the Composition is substantially in accordance with the priorities prescribed in the U.S. Bankruptcy Code. Pursuant to the Composition: -- creditors holding secured claims are satisfied in full, in cash; -- creditors holding fully admitted general unsecured claims receive pari passu distributions of share of Reorganized Parmalat stock based on the applicable recovery ratios; and -- holders of equity interests in the Foreign Debtors do not receive any distribution. Accordingly, Dr. Bondi asks Judge Drain for a permanent injunctive relief under Section 304 on the terms and conditions set forth in the proposed Permanent Injunction Order. "[E]ntry of a permanent injunction . . . signifies the conclusion of a critical component of the largest reorganization proceeding ever administered in Italy, Ms. Goldstein says. "This relief will serve as a significant step towards ensuring the success of Parmalat's reorganization under Italian insolvency law." A full-text copy of the proposed Permanent Injunction Order is available for free at http://researcharchives.com/t/s?e22 The U.S. Bankruptcy Court will convene a hearing on Sept. 12, 2006, at 10:00 a.m., to consider entry of the Permanent Injunction. Any objection to the entry of the proposed Permanent Injunction must be filed and served on counsel for the Foreign Debtors by August 14, 2006. Responses to the objections, if any, must be submitted by September 5. 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. 74; Bankruptcy Creditors' Service, Inc., 215/945-7000) PERINI CORP: Moody's Withdraws Senior Notes' B2 Ratings ------------------------------------------------------- Moody's Investors Service withdrawn the existing ratings of Perini Corporation, including the B1 Corporate Family Rating. This action follows Perini's announcement on May 31 that it had pulled the offering of its proposed $100 million of Senior Notes. These ratings have been withdrawn: * B1 Corporate family rating; * B2 Guaranteed senior notes due 2013; * SGL-3 Speculative grade liquidity rating. Headquartered in Framingham, Massachusetts, Perini is a general contractor and construction design company that operates three segments: Building, Civil, and Management Services. Total revenues for the year ended December 31, 2005 were approximately $1.7 billion. PHIBRO ANIMAL: Receives Requisite Consents for Three Senior Notes ----------------------------------------------------------------- Phibro Animal Health Corporation and PAHC Holdings Corporation, its parent, in connection with the tender offers by them for any and all 13% Senior Secured Notes due 2007 issued by PAHC and Philipp Brothers Netherlands III B.V., 9-7/8% Senior Subordinated Notes due 2008 issued by PAHC and 15% Senior Secured Notes due 2010 issued by Holdings, as well as related solicitations of consents to amend the indentures governing the Existing Notes, PAHC and Holdings have been advised that, as of 5:00 p.m. New York City time on July 14, 2006, holders of a majority in aggregate principal amount of each of the 13% Notes, 9-7/8% Notes and 15% Notes had validly tendered and not withdrawn their notes and had provided their consents to effect the proposed amendments to these indentures. Based upon receipt of the requisite consents and in order to effect the proposed amendments to the related indentures, PAHC, Philipp Brothers Netherlands III B.V. and Holdings will promptly execute and deliver supplemental indentures to the respective indentures which will eliminate substantially all of the restrictive covenants and certain events of default and amend certain other provisions contained in the indentures. The supplemental indentures reflecting the proposed amendments to the indentures will not, however, become operative unless and until each of PAHC and Holdings accept the Existing Notes for purchase pursuant to the respective tender offers. Notes may be tendered pursuant to the tender offers until 11:59 p.m., New York City time, on July 28, 2006. PAHC also reported the total consideration for 13% Notes validly tendered in the tender offer. The total consideration will be $1,034.75 for each $1,000.00 principal amount of 13% Notes purchased pursuant to the tender offer, plus accrued and unpaid interest up to, but not including, the date of payment. The total consideration includes a consent payment of $10 per $1,000 principal amount of 13% Notes. The total consideration for each $1,000 principal amount of 13% Notes validly tendered and accepted for purchase was determined, based upon an expected payment date of July 31, 2006, by reference to the bid-side yield of the 2.875% U.S. Treasury Note due Nov. 30, 2006. The detailed methodology for calculating the total consideration for the 13% Notes is outlined in the Offer to Purchase and Consent Solicitation Statement dated June 30, 2006. Holders of the 13% Notes who have validly tendered and not withdrawn their Notes pursuant to the tender offer at or prior to 5:00 p.m., New York City time, on July 14, 2006 will be eligible to receive the total consideration. Holders who validly tender their 13% Notes after such time will not be eligible to receive the consent payment. PAHC and Holdings have retained UBS Securities LLC to act as Dealer Manager in connection with the tender offers and consent solicitations. Questions about the tender offers and consent solicitations may be directed to the Liability Management Group of UBS Securities LLC at (888) 722-9555 x4210 (toll free). Requests for copies of the Offer to Purchase and Consent Solicitation Statement and related documents, and assistance relating to the procedures for delivering Existing Notes and consents may be obtained by contacting the Information Agent and Depositary: MacKenzie Partners, Inc. Telephone (212) 929-5500 (collect) Toll Free (800) 322-2885 Headquartered in Ridgefield Park, New Jersey, Phibro Animal Health Corporation -- http://www.philipp-brothers.com/-- manufactures and markets a broad range of animal health and nutrition products, specifically medicated feed additives and nutritional feed additives, which it sells throughout the world predominantly to the poultry, swine and cattle markets. MFAs are used preventively and therapeutically in animal feed to produce healthy animals. PAHC is also a specialty chemicals manufacturer and marketer. At March 31, 2006, Phibro Animal Health Corporation's balance sheet showed a $48,865,000 stockholders' deficit compared to a $44,924,000 deficit at June 30, 2005. * * * As reported in the Troubled Company Reporter on July 17, 2006, Moody's Investors Service assigned a B3 rating to the proposed new senior unsecured note offering of Phibro Animal Health Corporation. At the same time, Moody's affirmed the existing ratings of Phibro, including the B2 corporate family rating. The rating outlook is stable. PLATFORM LEARNING: U.S. Trustee Objects to Hiring of Argus Mgt. --------------------------------------------------------------- Diana G. Adams, the acting U.S. Trustee for Region 2, asks the U.S. Bankruptcy Court for the Southern District of New York to deny Platform Learning Inc.'s request to employ Argus Management Corporation as its financial advisor and interim chief financial officer. As reported in the Troubled Company Reporter on July 21, 2006, the Debtor asked the Court for permission to employ Argus Management as its financial advisor and chief financial officer, nunc pro tunc to June 21, 2006. The main thrust of the U.S. Trustee's objections concerns Argus' request for monthly interim compensation, at an 80% payment rate, with a concomitant 20% hold-back. The Trustee argues that neither the economics, the debt structure, the size, the brevity, nor the contemplated outcome of the Debtor's case justify any monthly payments to professionals. The Trustee reminds the Court that monthly compensation in reorganization cases is a privilege usually reserved for protracted, large and complex reorganization cases. She says that in light of the edicts of Section 331 of the Bankruptcy Code, however, neither the Firm nor any other professionals should assume they will receive or deserve monthly compensation in all chapter 11 cases. The Debtor's bankruptcy case is one where monthly professional compensation should not be granted since, in her estimation, secured creditors are proposed to receive only a 20% to 40% return, the Trustee asserts. Additionally, the Trustee has objected to the sale of the Debtor's assets, and an open-market sale process has not yet begun. A plan and a disclosure statement have not yet been filed, and the indications are that the Debtor's case should not last relatively long, the Trustee relates. She concludes that all professional compensation in this case should occur only after the results of this relatively new case have become more certain. About Platform Learning Based in Broad Street, New York, Platform Learning Inc. -- http://www.platformlearning.com/-- provides comprehensive supplemental educational services through their Learn-to-Succeed tutoring program to students attending public schools that are "in need of improvement." The Debtor works together with parents, schools, community organizations, and local educators to implement their research-based program, which ensures that all children can become successful students by providing appropriate support, motivation and curriculum tailored to their individual needs. The Company filed for chapter 11 protection on June 21, 2006 (Bankr. S.D.N.Y. Case No. 06-11391). Andrew C. Gold, Esq., Eric W. Sleeper, Esq., Paul Rubin, Esq., David M. Bass, Esq., and John M. August, Esq., at Herrick, Feinstein LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $21,026,148, and total debts of $36,933,490. PLYMOUTH RUBBER: Court Approves Modified 2nd Amended Ch. 11 Plan ---------------------------------------------------------------- The Honorable Joan N. Feeney of the U.S. Bankruptcy Court for the District of Massachusetts confirmed the Modified Second Amended Joint Plan of Reorganization filed by Plymouth Rubber Company, Inc., and Brite-Line Technologies, Inc., and their Official Committee of Unsecured Creditors. The confirmation sealed the agreement entered between the Debtors and LaSalle Bank, N.A., ending months of dispute over claims treatment. LaSalle filed its own competing Plan in June 6, 2006. Further negotiations ended the feud and prompted the Plan modifications. Victor Bass, Esq., at Burns & Levinson LLP in Boston, Massachusetts, recalled that on May 16, 2006, the Debtors and the Committee filed their Plan. It was circulated for solicitation of votes of various creditor classes, with a June 26, 2006, response deadline. The Plan was accepted by the requisite majorities of all impaired creditor classes, except for LaSalle Bank, which voted against and objected to the Plan. After a series of hearings on the Plan confirmation, on July 11, 2006, the Plan Proponents and LaSalle reached an agreement, resolving LaSalle's objection to the Plan, and paving the way for Plan confirmation of a consensual plan, provided that certain non- material modifications to the Plan were to be implemented. The proposed modifications to the Plan relate to: (a) a change in the equity investor who is to fund the investment capital for (and will receive the ownership interest in) the Debtors in the reorganization; (b) modification of LaSalle's claim; (c) further detail on the proposed disposition of the Debtors' real estate; (d) modification of the relative positions of the various secured creditors in light of the Court's approval of settlements of certain disputes as to priorities among those creditors; and (e) change of the conditions required for the triggering of the Plan Effective Date. The Plan Proponents believe that the consensual resolution fosters the reorganization of the Debtors' businesses and maximizes the recovery available to all creditors. Moreover, the Plan Proponents believe that the modifications are non-material in that they either do not adversely affect the rights of any creditors. Change of Equity Investor and Investment The Plan provided that Clarendon Capital Group, LLC, would receive 100% of the new equity interests in Reorganized PRC (the equity of B-L is held entirely by PRC, its parent company) in exchange for its $2 million investment. The modification to the Plan provides that a different investor, Long Dash PRC, LLC, will provide the required equity investment, in the increased mount of $3 million. Long Dash would receive all new equity interests in PRC and replace Clarendon as the sole shareholder of Reorganized PRC. Long Dash was created and will be substantially funded by Chrysalis Capital LLC, an organization based in Philadelphia. Chrysalis invests in distressed businesses and operates to help bring businesses to profitability. Rather than being a single-purpose entity, such as Clarendon, Chrysalis has invested in a number of distressed companies. Chrysalis also has significant funding resources including an "eight figure" line of credit with Citizens Bank. Chrysalis will own a substantial majority interest in Long Dash. Maurice Hamilburg, Debtors' current President, a Director and a shareholder of PRC, will receive a minority interest in Long Dash (he was also to be a minority investor in Clarendon) in exchange for his personal funding of that equity interest. After the Effective Date: (a) Messrs. Gregory Segall, Paul Halpern (both currently principals of Chrysalis) and Maurice Hamilburg will serve as the members of the Reorganized Debtors' Boards of Directors; and (b) the Debtors' existing officers will continue to serve as directors, other than Joseph Hamilburg, who will no longer serve as Chairman and Chief Executive Officer. Maurice Hamilburg will assume the position as Chief Executive Officer, as well as President. Modification of the Treatment of the LaSalle Claim The agreement contemplates that the PRC real estate, on which LaSalle holds a first mortgage, would become subject to a Section 363 sale (one of the alternate dispositions provided in the Plan) in accordance with certain procedures and timetables, and the $3.5 million secured creditor note that was to be issued to LaSalle would be sold by LaSalle to Long Dash (or a related entity). However, failing a timely and adequately priced real estate sale, LaSalle would retain all of its rights under the secured creditor note, and would further be entitled to relief from stay as against its collateral granted under its prepetition loan documents. The Debtors disclosed that a stalking horse buyer has offered to buy the PRC real estate for $4,312,500. LaSalle has agreed to proceed with that sale process, provided that a closing on the sale of this real estate occurs by Aug. 31, 2006, and LaSalle receives net sales proceeds of not less than $4 million. The current proposed sale is expected to yield an adequate payout for this purpose. If, however, the anticipated sale does not yield net proceeds of at least $4 million, LaSalle has agreed to a second round of bidding in a Section 363 sale, and will extend its deadline for the repayment until Oct. 17, 2006. While LaSalle has agreed to withhold its right to credit bid in the first proposed auction, it would retain the right to a credit bid if the property will go to a second auction. If a sale cannot commence under these conditions, LaSalle could then foreclose on the property. LaSalle would then also have the right to pursue confirmation of the plan of liquidation it proposed. The parties also have agreed to treat the LaSalle claim as allowed in the amount of $14,174,690. Around $11.3 million of which is deemed an allowed secured claim, and $2.9 million is deemed an allowed unsecured claim. LaSalle's allowed secured claim will bear interest at the rate of Prime + 3-3/4%, rather than at the rate of Prime + 1-3/4% as provided in the Plan. Finally, LaSalle will be deemed to hold an allowed 507(b) claim in the amount of $600,000 arising out of the use of its cash collateral, provided, however, that the claim will be deemed converted to an unsecured claim under the Plan, as modified, increasing LaSalle's allowed general unsecured claim to $3.5 million. The Debtors believe that the increased interest rate will not materially adversely affect the interests of any other creditor, insofar as the dollar amount of that increase is fairly limited (i.e. 2% of $3.5 million = $70,000 on an annual basis). In any event, to avoid any impact on the residual payments to be made to the unsecured creditors on their income note under the Plan, the parties have agreed that the calculation of "Available Cash Flow", which determines the amount to be paid to the unsecured creditors under that note, will not be affected by the increase in the interest rate under the senior secured creditor note. Thus, the Plan Proponents believe that this modification should be deemed to be non-material. Resolution of Priorities Among Secured Creditors As noted in the Disclosure Statement, the Debtors' secured creditors -- LaSalle, General Electric Capital Corporation, TD BankNorth, NA, and the Pension Benefit Guaranty Corporation -- have been engaged in two adversary proceedings which concern disputed priorities in the lien positions and security interests in the Debtors' assets. At the start of the confirmation hearings, the parties reached settled the dispute and agreed that PBGC would hold a first priority against the PRC assets in the amount of $5.2 million, LaSalle would be subordinate to PBGC on the PRC assets, and GECC and BankNorth would hold senior security interests in the PRC equipment, which for purposes of confirmation of the Plan, as modified, is stipulated to have a value of $4 million. This resolution will remove the need for the establishment of a secured creditor trust, which was created for the purpose of holding and disbursing funds to these secured creditors until the priority dispute was resolved. Further, pursuant to the agreement with LaSalle, its 1111(b) election is withdrawn and, therefore, this Trust is no longer needed to hold payments that would be made to LaSalle if it so elected under the Plan. Change of "Effective Date" of the Plan Finally, a change is made in the Plan which sets the Plan "Effective Date" at the day following a timely closing on the sale of the Debtor's real estate (as may be extended) and the funding of the Debtor from its debt and equity sources, and which no longer makes the Plan "Effective Date," as defined in Section 2.32, contingent upon there being no pending appeal or certiorari proceeding but, instead, avoids any delay in the Effective Date if no stay of confirmation has been obtained. About Plymouth Rubber Headquartered in Canton, Massachusetts, Plymouth Rubber Company, Inc., manufactures and distributes plastic and rubber products, including automotive tapes, insulating tapes, and other industrial tapes, mastics and films. Through its Brite-Line Technologies subsidiary, Plymouth manufactures and supplies highway marking products. The Company and its subsidiary filed for chapter 11 protection on July 5, 2005 (Bankr. D. Mass. Case Nos. 05-16088 through 05-16089). Victor Bass, Esq., at Burns & Levinson LLP, represents the Debtors in their restructuring efforts. John J. Monaghan, Esq., at Holland & Knight LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million to $50 million. PORTRAIT CORPORATION: Hires Thomas L. Garret, Jr. as EVP and CFO ---------------------------------------------------------------- Portrait Corporation of America, Inc., hired Thomas L. Garrett, Jr. as its new Executive Vice President and Chief Financial Officer, effective July 24, 2006. Mr. Garrett, 52 years old, has served as the Executive Vice President and Chief Operating Officer of Churchill Mortgage Corporation/Nations Home Funding, Incorporated, a residential mortgage company, since 2003. In 2001, Mr. Garrett served as Senior Vice President and Chief Financial Officer for LTV Steel. From 1996-2000 he worked for Service Merchandise Company, a jewelry and home products retailer, serving as its Senior Vice President and Chief Financial Officer from 1999-2000 and its Treasurer from 1996-1998. Prior to joining Service Merchandise, Mr. Garrett served as Treasurer for Magma Copper Company for four years and with The Goodyear Tire & Rubber Company for sixteen years in various treasury management positions. The Company disclosed that the employment agreement provides that Mr. Garrett will serve as Executive Vice President and Chief Financial Officer on an 'at will' basis. His annual base salary is $265,000 per year, subject to annual review and is eligible to receive a bonus of 50% of base salary based upon the achievement of his defined performance goals. The Company says that although Mr. Garret was not involved in developing the Company's budget for the fiscal year and will serve only a portion of the fiscal year, he is guaranteed a $50,000 first year bonus. Mr. Garrett is also granted options to purchase 50,000 shares, or approximately 1.2%, of the Company's common stock, subject to the terms of the Company's Stock Option Plan. Of these options, 40,000 will be granted at an exercise price of $8.00 per share, and the remaining 10,000 will be granted at an exercise price of $26.50 per share, for an eight year exercise term. The Company also disclosed that Mr. Garrett is entitled to participate in the Company's benefit plan for executive employees and he is also entitled to a minimum of 4 weeks of vacation per year. Mr. Garrett will also receive $60,000 as a moving allowance. Portrait Corporation of America, Inc., provides professional portrait photography products and services to children, adults and families in North America. The Company operates portrait studios within Wal-Mart stores and Supercenters in the United States, Canada, Mexico, Germany and the United Kingdom. The Company also operates a modular traveling business providing portrait photography services in additional retail locations and to church congregations and other institutions. Going Concern Doubt Eisner LLP raised substantial doubt about Portrait Corporation of America, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Jan. 29, 2006. The auditor pointed to the Company's substantial net loss, negative working capital, stockholders' deficiency, default of certain obligations, which were due on June 15, 2006 and insufficient liquidity to meet those obligations. RUBEN DONADO: Case Summary & 13 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Ruben Donado Eidy Silebi Donado 15340 Southwest 78 Place Miami, Florida 33157 Bankruptcy Case No.: 06-13290 Chapter 11 Petition Date: July 20, 2006 Court: Southern District of Florida (Miami) Judge: Laurel M. Isicoff Debtor's Counsel: Lynn H. Gelman, Esq. 1450 Madruga Avenue, Suite 302 Coral Gables, Florida 33146 Tel: (305) 668-6681 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 13 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ High Yield Plus, Inc. $1,500,000 c/o de la Pena & Associates, P.A. 601 Brickell Key Drive, Suite 705 Miami, FL 33131 Washington Mutual Mortgage $920,976 P.O. Box 1093 Northridge, CA 91328 BP-Auto $90,046 Carr 176 Km 1.3 Cu. Rio Piedras, PR 00926 BMW Financial Services $62,356 5515 Parkcenter Cir. Dublin, OH 43017 Amex $57,752 P.O. Box 297871 Fort Lauderdale, FL 33329 Ford Cred. Automobile $38,109 Sallie Mae 3rd Pty. Lsc. Educational $11,034 Chase $5,132 Citi $3,904 Gemb/Brandsmart Charge Account $3,986 HSBC/Saks Charge Account $726 Islandfin Charge Account $454 Wffnatbank Charge Account $225 RUSSELL-STANLEY: Has Until November 30 to Object to Claims ---------------------------------------------------------- The Hon. Brendan L. Shannon of the U.S Bankruptcy Court for the District of Delaware extended until Nov. 30, 2006, the period within which Ringo USA Holdings, Inc., fka Russell-Stanley Holdings, Inc., can file objections to claims. Kayalyn A. Marafioti, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, informs the Court that the Debtor is in the process of analyzing claims and believes that most of the claims have been paid or otherwise resolved in the ordinary course of business. Ms. Marafioti says the extension will allow the Debtor to facilitate continued consensual resolution of proofs of claim. Headquartered in Bridgewater, New Jersey, Russell-Stanley Holdings, Inc. -- http://www.russell-stanley.com/-- is North America's largest plastic drum manufacturer, second largest steel drum manufacturer, and a leading industrial container supply chain management company. The Company and its affiliates filed for chapter 11 protection on Aug. 19, 2005 (Bankr. D. Del. Case No. 05-12339). Mark S. Chehi, Esq., and Sarah E. Pierce, Esq., Kayalyn A. Marafioti, Esq., Frederick D. Morris, Esq., and Bennett S. Silverberg, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. SATCON TECH: Inks $12 Mil. Financing Transaction with Investors --------------------------------------------------------------- SatCon Technology Corporation(R) entered into a definitive agreement for a $12 million private placement with institutional investors. First Albany Capital served as the placement agent for the transaction. "We greatly appreciate the tremendous vote of confidence in SatCon that this financing represents from our new institutional investors," stated David Eisenhaure, Chairman and CEO. "The capital infusion fulfills part of SatCon's overall financing strategy and supports our plans for growth in our core businesses of developing and manufacturing alternative energy products, components for hybrid electric vehicles and advanced micro- electronics. Achieving this financing milestone will allow us to accelerate the expansion of our alternative energy stationary power business under the management of Clemens van Zeyl." The Senior Secured Convertible Notes to be issued in the financing will bear interest at the higher of 7% per annum or the six-month LIBOR plus 3.5% and will be convertible into SATC common stock at a conversion price of $1.65 per share, which represents a premium of approximately 6% over the average closing price of the Company's common stock for the last 5 trading days. Subject to certain conditions, the Company may elect to make payments of interest or principal in cash or stock. If interest is paid in stock, the price per share will be at a 10% discount to the 5-day volume-weighted average price of the Company's common stock prior to the payment date. If principal is paid in stock, the price per share will be the lesser of the conversion price or a 10% discount to the 5-day volume-weighted average price of the Company's common stock prior to the payment date. As part of this transaction, the Company will also issue warrants to purchase 3,636,368 shares of common stock that are fully exercisable at $1.815 per share six months from now and will expire in July 2013. Under certain circumstances, the Company can force the exercise of these warrants, depending on the performance of the Company's common stock. In addition, the Company also granted the investors the option to purchase up to an additional 3,636,368 shares of common stock of the Company at $1.68 per share for a period of 90 business days beginning the later of six months following the closing of this financing or the date the Securities and Exchange Commission declares effective the registration statement described below. If this option is exercised the Company will raise an additional $6.1 million, and the investors will also receive additional seven-year warrants to purchase a number of shares of common stock equal to 50% of the number of shares of common stock purchased upon exercise of the option; these additional warrants will have an exercise price of $1.815 per share. Under certain circumstances, the Company can force the exercise of the option, depending on the performance of the Company's common stock. Pursuant to the terms of the agreement, 75% of the face amount of the Notes is repayable in cash or stock as noted above, in 17 equal monthly installments beginning in the seventh month after the closing. Two years after the closing of the financing the investors can elect to require repayment of the balance outstanding or defer payment until the 60th month after the closing. The investors have the option to accelerate payments in certain circumstances. Under certain circumstances, the Company will have the right to force conversion of the Notes into shares of the Company's common stock, depending on the performance of the Company's common stock. Following one year from the effective date of the registration statement, the Company may, under certain circumstances, redeem the Notes at 120% of the outstanding principal amount plus any accrued and unpaid interest. Pursuant to the terms of the private placement, the Company is required to file a shelf registration statement with the Securities and Exchange Commission within 30 days after the closing, registering the resale of the common stock underlying the securities issued in the transaction. The securities to be issued in the private placement have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States in the absence of an effective registration statement or an exemption from such registration requirements. About SatCon Based in Boston, Massachusetts, SatCon Technology Corporation (Nasdaq NM: SATC) -- http://www.satcon.com/-- is a developer and manufacturer of electronics and motors for the Alternative Energy, Hybrid-Electric Vehicle, Grid Support, High Reliability Electronics and Advanced Power Technology markets. Going Concern Doubt As reported in the Troubled Company Reporter on Jan. 9, 2006, Grant Thornton LLP expressed substantial doubt about SatCon Technology Corporation's ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended Sept. 30, 2005 and 2004. Grant Thornton pointed to the Company's recurring losses from operations. In addition, the auditing firm noted the Company's need to comply with certain restrictive covenants related to a line of credit agreement. During the fiscal year ended Sept. 30, 2005, SatCon Technology incurred a $10.2 million net loss compared to an $11 million net loss in the prior fiscal year. For each of the past ten fiscal years, the Company has experienced losses from operating its businesses. As of Sept. 30, 2005, the Company had an accumulated deficit of approximately $137.9 million. SEMGROUP LP: Moody's Holds B1 Rating on $350 Million Senior Notes ----------------------------------------------------------------- Moody's Investors Service confirmed SemGroup, L.P.'s Ba3 corporate family rating and its B1 rated $350 million of 8.75% guaranteed senior unsecured notes due 2015; confirmed wholly-owned SemCrude, L.P.'s Ba2 rated secured working capital borrowing base facility, Ba3 rated and recently upsized revolving credit facility due 2010, and Ba3 rated secured Term Loan B due 2010; and confirmed wholly- owned SemCams Midstream Company's Ba3 rated Canadian Term Loan due 2010. SemGroup guarantees the SemCrude and SemCams facilities. The rating outlook is stable. Moody's does note that SemGroup's aborted acquisition of TransMontaigne would have resulted in a downgrade of SemGroup unless the final funding package contained a very substantial equity component. Moody's expects SemGroup to remain acquisitive. The outlook and ratings would be vulnerable to material acquisitions if SemGroup employed insufficient equity acquisition funding. Moody's also notes that the current ratings would not support materially higher levels of contango borrowings beyond current proportions. Generally, the ratings remain sensitive to SemGroup's ability to successfully market, trade, and hedge its activity through volatile spot and forward markets and execute profitable marketing business through backwardated, transition, and contango markets. The confirmations conclude Moody's review of SemGroup's ratings for possible downgrade, commenced March 31, 2006 when it announced its pending acquisition of TMG. That offer countered a standing offer from Morgan Stanley to acquire TMG. SemGroup's initial bid was $800 million, which it subsequently raised to approximately $900 million. MS subsequently re-countered SemGroup's bid for TMG. In late June, SemGroup announced that it would not counter the MS bid. TMG's board accepted MS's final $905 million offer and SemGroup received a $15 million break-up fee. SemGroup's ratings reflect its increasingly large scale; geographic and product diversification across multiple oil and natural gas producing basins and marketing regions; the advantages of its regional MidContinent operating intensity; a sound performance outlook over the next twelve months; management's execution of sound growth strategies; and moderate leverage relative to EBITDA. The ratings are also supported by: * strategically located pipeline, storage, and terminal assets; * a growing strategically important storage capacity at Cushing, Oklahoma, which should expose it to rising U.S. imported crude oil volumes; and * a sound record of hedging, adherence to hedging policy, and effective back office controls for its merchant marketing and hedged trading activity. The ratings are also supported by the company's ongoing access to private equity through sector-knowledgeable sponsors. However, the ratings also reflect SemGroup's: * comparatively high proportion of volatile earnings sources; * negligible free cash flow after working capital growth and high hedge cash margin deposits due to rising crude oil, natural gas liquids, and refined product prices; * ongoing acquisition and releveraging risks; and * very high balance sheet leverage. Moody's does note that substantial cash would be freed from working capital and from margin deposits during a period of sustained falling hydrocarbon prices. The ratings are restrained by: * a still high proportion of the company's earnings coming from the volatile, working capital intensive, and credit-sensitive hedged crude oil trading and marketing segment; * high balance sheet leverage; * comparatively high leverage on cash flow when cash flow is normalized for the current high proportion of volatile contango earnings; * heavy 2006 capital spending to increase storage capacity, pipeline construction, and environmental spending; and * high on-going acquisition and acquisition funding risks. Moody's notes that a significant portion of SemGroup's pipeline and storage throughput volumes are generated by itself in its pro- active middleman hydrocarbon sourcing and marketing activity, both as a principal and as an agent. SemGroup's scale, diversification, and underlying core earnings power have a profile in the Ba to possibly low Baa range, offset by the large proportion of earnings and cash flow coming from the volatile, high volume, thin margin, merchant marketing and hedged trading segment and very high working capital and margin deposit funding needs during periods of rising crude oil, natural gas liquids, and refined product prices. Moody's notes that SemGroup's working capital needs would have surged even more had natural gas prices not been on a downward trend year-to-date. SemGroup's leverage and event risk attendant to its active acquisition program tend towards a mid-to-high single B rating. Moody's also notes that the nature of SemGroup's business and assets and the interests of its private equity owners would appear to make it likely that the firm may go public in the form of a master limited partnership. Heretofore, the ratings have benefited by the fact that SemGroup has not been an MLP with the attendant very high distributions of cash flow to unit holders. An improving ratings outlook or an upgrade in the ratings would require the company to: (1) continue with substantial diversification of its activities towards higher proportions of durable fee-based businesses without increasing leverage above current levels; (2) maintain its favorable marketing and trading cash flow trends through backwardated, transition, and contango markets during times of major increases or declines in the absolute prices of crude oil; and (3) continue to run a tight hedging and trading program. SemGroup is headquartered in Tulsa, Oklahoma. SILICON GRAPHICS: Goodwin Procter Represents Ad Hoc Committee ------------------------------------------------------------- Allan S. Brilliant, a partner at Goodwin Procter LLP, informs the U.S. Bankruptcy Court for the Southern District of New York that his firm represents: -- the ad hoc committee of certain holders of 6.50% Senior Secured Convertible Notes, for themselves and on behalf of certain funds and managed accounts, under an Indenture dated December 24, 2003, by and between Silicon Graphics, Inc., and U.S. Bank National Association. The members of the Ad Hoc Committee are: (i) Castle Creek Partner 111 West Jackson Blvd, 20th Floor Chicago, IL 60614 (ii) Morgan Stanley & Co. Incorporated 750 Seventh Avenue New York, NY 10019 (iii) Quadrangle Group LLC 375 Park Avenue New York, NY 10152 (iv) Symphony Asset Management LLC 555 California Street, Suite 2975 San Francisco, CA 94104-1503 (v) Watershed Asset Management, LLC One Maritime Plaza, Suite 1525 San Francisco, CA 94111 -- the members of the Ad Hoc Committee in their capacity as DIP Lenders under the $70,000,000 Post-Petition Loan and Security Agreement, dated as of May 8, 2006, and the $130,000,000 Post-Petition Loan and Security Agreement. The lenders under the DIP Loan Agreement are: (i) Quadrangle Master Funding Ltd. c/o Quadrangle Group LLC 375 Park Avenue New York, NY 10152 (ii) Encore Fund, L.P. c/o Symphony Asset Management LLC 555 California Street, Suite 2975 San Francisco, CA 94104-1503 (iii) Watershed Technology Holdings, LLC c/o Watershed Asset Management, LLC One Maritime Plaza, Suite 1525 San Francisco, CA 94111 Mr. Brilliant relates that each member of the Ad Hoc Committee is a creditor in the Debtors' Chapter 11 cases and collectively hold, or manage or advise beneficial owners of, the notes issued under the 6.50% Senior Secured Note Indenture in the aggregate principal amount of at least $104,028,000. All members of the Ad Hoc Committee have purchased notes issued under the 6.50% Senior Secured Note Indenture in the secondary market. The Debtors have agreed to pay Goodwin's fees and disbursements during the cases. To date, the Debtors have not paid certain of Goodwin's outstanding fees and expenses, Mr. Brilliant says. About Silicon Graphics Headquartered in Mountain View, California, Silicon Graphics, Inc. (OTC: SGID) -- http://www.sgi.com/-- offers high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. The Debtor and 13 of its affiliates filed for chapter 11 protection on May 8, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10977 through 06-10990). Gary Holtzer, Esq., and Shai Y. Waisman, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $369,416,815 and total debts of $664,268,602. (Silicon Graphics Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) SILICON GRAPHICS: Wants to Issue Credit Memos to Customers ---------------------------------------------------------- Shai Y. Waisman, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that instead of receiving cash refunds, customers who have purchased products, warranties, or maintenance and support contracts from Silicon Graphics, Inc., and its debtor-affiliates have requested that credits be issued to their accounts with the Debtors. The Credit Memos may only be applied to the customers' future purchases of the Debtors' products or services. Historically, customers have requested Credit Memos for various reasons, including: 1. cancellation by the customer of a product order or a maintenance and service contract; and 2. overpayment by a customer. Generally, after a customer requests that a Credit Memo be issued, the Debtors work with the customer to gather information and analyze the validity of the customer's request. Once the Debtors validate the customer's Credit Memo request, the Debtors issue a Credit Memo in the appropriate amount to the customer's account. The customer may then apply the Credit Memo towards future purchases of the Debtors' products or services. According to Mr. Waisman, the Debtors want to continue their customer refund program and issue Credit Memos to customers to ensure customer satisfaction, effectively compete with their market, develop and sustain customer loyalty, improve profitability, and generate goodwill for the Debtors and their products. Mr. Waisman tells the U.S. Bankruptcy Court for the Southern District of New York that Credit Memos avoid the need to issue cash refunds to customers, which are less likely to yield future benefits to the Debtors, as customers are not obligated to use their cash refund to make additional purchases from the Debtors. On the other hand, Credit Memos incentivize customers to continue their business relationship with the Debtors as opposed to purchasing similar products and services from a competitor. At this time, the Debtors have reviewed and approved approximately $100,000 worth of Credit Memo requests submitted prepetition, which are currently outstanding. By this motion, the Debtors seek the Court's authority to: -- continue their Refund Program, including the ordinary course practice of issuing Credit Memos to customers; and -- perform and honor their prepetition obligations under the Refund Program, including the issuance of approximately $100,000 in Credit Memos relating to refund credit requests received prepetition. About Silicon Graphics Headquartered in Mountain View, California, Silicon Graphics, Inc. (OTC: SGID) -- http://www.sgi.com/-- offers high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. The Debtor and 13 of its affiliates filed for chapter 11 protection on May 8, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10977 through 06-10990). Gary Holtzer, Esq., and Shai Y. Waisman, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $369,416,815 and total debts of $664,268,602. (Silicon Graphics Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) SPECIALTYCHEM PRODUCTS: Wants Fort Dearborn as Financial Advisor ---------------------------------------------------------------- SpecialtyChem Products Corp. asks the U.S Bankruptcy Court for the District Court of Wisconsin to employ Fort Dearborn Partners, Inc, as its financial advisor and turnaround consultant, nunc pro tunc to June 12, 2006. Fort Dearborn is expected to: a) assist in the preparation of and timely filing of all reports, schedules and financial statements required by the bankruptcy code during the pendency of the case. b) assist in the preparation, monitoring and analysis of the Debtor's budgets and financial forecasts. c) assist in negotiations over the terms of a plan with an Official Committee of Unsecured Creditors which may be created. d) assist to Debtor's management in negotiations with vendors to obtain trade credit or other agreements. e) assist to Debtor's management in preparing materials describing the Debtor's business and prospects, and managing a sale process in the event such a course of action is adopted. f) provide testimony to the Court as required in support of Debtor's motions as they may be filed, including those related to the above described matters. g) assist to Debtor's management in negotiation with its current lender or other lenders regarding debtor- in-possession financing. The Debtor tells the Court that the Firm's professionals rates ranges from $200 to $ 450 per hour. The Debtor says it has paid the Firm a $50,000 retainer. The Firm estimates that its total fees for this engagement is between $150,000 to $300,000. To The best of the Debtor's knowledge, the Firm does not hold any interest adverse to the Debtor, its estate or creditors. Headquartered in Marinette, Wisconsin, SpecialtyChem Products, Corp., manufactures various organic chemicals for paper products, electronics, agricultural products and other materials. The company filed for chapter 11 protection on June 12, 2006 (Bankr. E.D. Wis. Case No. 06-23131). Christopher J. Stroebel, Esq., Timothy F. Nixon and Marie L. Nienhuis, Esq., at Godfrey & Kahn, S.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of 10 million to $50 million. SPECIALTYCHEM PRODUCTS: Panel Taps Greenberg Traurig as Co-Counsel ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of SpecialtyChem Products, Corp., asks the U.S. Bankruptcy Court for the Eastern District of Wisconsin for permission to employ Greenberg Traurig, L.L.P., as its bankruptcy counsel, nunc pro tunc to June 12, 2006 Greenberg Traurig is expected to: a) consult with the Debtor's professionals concerning the administration of this Case; b) prepare and review pleadings, motions and correspondence; c) appear and involve in proceedings before the Court; d) provide legal counsel to the Committed in its investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor, the operation of the Debtor's business, and any other matters relevant to this Case; e) analyze the Debtor's proposed use of cash collateral and debtor-in-possession financing; f) advise the Committee with respect to its rights, duties and powers in this Case; g) assist the Committee in analyzing the claims of the Debtor's creditors and in negotiating with creditors; h) assist with the Committee's investigation of the acts, conduct assets, liabilities and financial condition of the Debtor and of the operation of the Debtor's business and any other matters relevant to this Case; i) assist and advise the Committee in its analysis of and negotiations with the Debtor or any third party concerning matters related to, among other things, the terms of a sale, plan of reorganization of other conclusion of this Case; j) assist and advise the Committee as to its communications to the general creditor body regarding significant matters in this Case; k) assist the Committee in determining a course of action that best serves the interest of the unsecured creditors; and l) perform other legal services as may be required under the circumstances of this Case and are deemed to be in the interests of the Committee in accordance with the Committee's powers and duties as set forth in the Bankruptcy Code. Nancy A. Peterman, Esq., a shareholder of Greenberg Traurig, tells the Court that the firm has agreed to reduce its hourly rates by 15% and waive any fees incurred on account of non-working travel time for this engagement. Ms. Peterman discloses that the firm's professionals will bill: Professionals Designation Discounted Rate ------------- ----------- --------------- Matthew T. Gensburg, Esq. Shareholder $463 Nancy A. Peterman, Esq. Shareholder $463 Sherri Morissette, Esq. Associate $357 Yolanda Powell Paralegal $148 Professional Discounted Rate ------------ --------------- Shareholders $199 - $637 Associates $110 - $408 Legal Assistants/Paralegals $55 - $195 Ms. Peterman assures the Court that her firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Ms. Peterman can be reached at: Nancy A. Peterman, Shareholder Greenberg Traurig, L.L.P. H.I.G Capital 1001 Brickell Bay Drive 27th Floor Miami, Florida 33131 Tel: (312) 456-8410 http://www.gtlaw.com/ Headquartered in Marinette, Wisconsin, SpecialtyChem Products, Corp., manufactures various organic chemicals for paper products, electronics, agricultural products and other materials. The company filed for chapter 11 protection on June 12, 2006 (Bankr. E.D. Wis. Case No. 06-23131). Christopher J. Stroebel, Esq., Timothy F. Nixon and Marie L. Nienhuis, Esq., at Godfrey & Kahn, S.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of 10 million to $50 million. SUPERIOR GALLERIES: Sells Assets to DGSE Cos. for $14 Million ------------------------------------------------------------- Superior Galleries, Inc., executed a definitive agreement to be acquired by DGSE Companies, Inc. through the sale of all outstanding stock of Superior Galleries, Inc. in a transaction valued at $14 million. The acquisition is intended to diversify Superior's product lines, achieve cost efficiencies and bring together two established and diversified tangible asset dealers. Superior's current facility will provide the combined enterprise with a Beverly Hills, California location to expand DGSE's jewelry, diamond and fine watch businesses. Equally important will be the combined strength of DGSE and Superior in the live and internet auction sectors. The acquisition agreement provides for the merger of Superior into a wholly-owned subsidiary of DGSE Companies, Inc. in an all-stock transaction that will be priced at a weighted average closing price of DGSE's common stock for the 20 trading days prior to closing, subject to a maximum issuance of 7,368,421 shares and a minimum issuance of 4,307,692 shares of DGSE common stock. Upon successful completion of the acquisition, Superior shareholders will own between 47% and 60% of the outstanding shares of the combined entity. Stanford Financial Group Company or one of its affiliates will become the largest stockholder of DGSE. The acquisition is subject to a number of closing conditions, including Superior undergoing a major restructuring of its balance sheet which will reduce its total outstanding debt by approximately $5.5 million. It is also contemplated that Stanford Financial Group Company, Superior's primary lender and an affiliate of Superior's largest stockholder, will provide a new secured credit facility of $11.5 million with at least $6 million available to DGSE and all of its subsidiaries. Current DGSE management will be responsible for managing all operations of the combined companies. DGSE expects substantial continuity in the Superior staff. DGSE intends to expand the Superior numismatic auction business, leveraging the extensive experience and ongoing participation of its management team. Superior's current CEO, Silvano DiGenova, will remain with the new enterprise as the Managing Director-Numismatics, and Larry Abbott will remain as Executive Vice-President of Auctions and Sales at Superior. Through this acquisition Superior will become part of one of the nation's largest rare coin firms. Upon the completion of the acquisition, the inventory at the current showroom facility of Superior will be significantly expanded to include a full inventory of jewelry, diamonds and fine watches. Superior plans to expand its dynamic Internet website -- http://www.SGBH.com/-- significantly and to integrate the website with DGSE's websites -- http://www.DGSE.com/http://www.USBullionExchange.com/ http://www.FairchildWatches.com/(Fairchild International), and http://www.CGDEInc.com/(Charleston Gold & Diamond Exchange). "As one of the largest stockholders of DGSE after this transaction is completed, I am extremely pleased with this combination," Silvano DiGenova, current Chief Executive Officer of Superior said. "With enhanced capital and diversified operations supported by expertise in auctions, retail, wholesale and Internet, we should be able to make new advances in the coin, precious metals and jewelry sectors. Additionally, the combined entities will enjoy economies of scale and the elimination of redundancy in regulatory compliance expenses." "I am excited at the prospect of expanding into new collectibles auction categories, and continuing our successful growth in the numismatic auction market," COO Larry Abbott commented. "Our recent May 2006 elite sale, with over $10.8 million in prices realized, is a clear demonstration of the progress that Superior has made in this market and of the momentum that we have created going forward. With the resources available to us through this acquisition, and with the continued efforts of the first-rate staff that we have assembled in the past year, we believe that we can increase the size, number and types of auction that Superior conducts." "We view this transaction as a major opportunity for DGSE and its shareholders," noted William H. Oyster, President and Chief Operating Officer of DGSE Companies, Inc. "The fastest growing segment of our business has been the rare coin business and acquiring Superior will give us depth of operations, experienced personnel, and entry into the attractive auction sector. With revenues for the combined entities more than double our current level, substantial financing in place and a history that can be traced to 1930, we believe that the infrastructure is in place to have a major impact on our revenues and earnings." DGSE and Superior expect the acquisition to close late in October 2006, subject to the satisfaction or waiver of the various closing conditions in the acquisition agreement. About DGSE Companies Headquartered in Dallas, Texas, DGSE Companies, Inc. (Nasdaq:DGSE) -- http://www.dgse.com/-- wholesales and retails jewelry, diamonds, fine watches and precious metal bullion products and rare coins to domestic and international customers through its Dallas Gold and Silver Exchange and Charleston Gold and Diamond Exchange subsidiaries and well as through the Internet and World Wide Web. DGSE also owns vintage watch wholesaler Fairchild International, Inc. About Superior Galleries Superior Galleries, Inc. (OTCBB:SPGR) -- http://www.sgbh.com/-- is a publicly traded company, acting as a dealer and auctioneer in rare coins and other fine collectibles. The firm markets its products through its prestigious location in Beverly Hills, California. Going Concern Doubt In its Form 10-Q for the quarterly period ended March 31, 2005, filed with the Securities and Exchange Commission, Superior Galleries continues to report negative cash flows from operations and significant short-term debt which raise doubt about the Company's ability to continue as a going concern. Singer Lewak Greenbaum & Goldstein LLP, in Los Angeles, the Company's auditors, expressed "substantial doubt about the Company's ability to continue as a going concern" when they reviewed Superior Galleries' financial statements for the year ended June 30, 2004. Haskell & White LLP expressed similar doubts in 2003. TEREX CORP: Inks New $900 Million Senior Lending Facility --------------------------------------------------------- Terex Corporation entered into a new senior lending facility, which includes a revolving line of credit of $700 million and new senior term debt of $200 million. The co-lead arrangers for the new senior lending facility were Credit Suisse Securities (USA) LLC, UBS Securities LLC and Citigroup Global Markets Inc. Terex utilized the proceeds of its new senior term debt and cash on hand to pay in full its previously outstanding senior term debt of approximately $229 million. Senior Note Redemption In addition, Terex will redeem the remaining $200 million outstanding principal amount of its 10-3/8% Senior Subordinated Notes due 2011, effective Aug. 14, 2006. As set forth in the indenture for these Notes, Terex will pay holders 105.188% of the principal amount plus accrued and unpaid interest of approximately $38.33 per $1,000 principal amount at the redemption date. These Notes were originally issued on March 29, 2001. "Our new credit agreement is an important step forward in the evolution of Terex's capital structure," stated Phil Widman, Senior Vice President and Chief Financial Officer. "Most importantly, the new revolving credit facility provides the liquidity that we need to efficiently manage our working capital needs, and allows us to significantly reduce the large cash balances with which we have historically operated. In addition to increased liquidity and an extended term, the new facility has a lower cost compared to our previous senior lending arrangement. Completing the redemption of the 10-3/8% Notes was a major component of our 2006 strategic plan and is a significant accomplishment towards reaching our goal of eliminating high cost debt from our capital structure." Further, effective July 17, 2006, Terex's split of its common stock was completed, and Terex common stock will trade on the New York Stock Exchange reflecting the 2-for-1 stock split. About Terex Corp. Headquartered in Westport, Connecticut, Terex Corporation (NYSE:TEX) -- http://www.terex.com/-- is a diversified manufacturer of construction, infrastructure and surface mining equipment. * * * As reported in the Troubled Company Reporter on June 27, 2006, Standard & Poor's Ratings Services raised the ratings on construction equipment manufacturer Terex Corp. including the corporate credit rating to 'BB' from 'BB-'. In addition, ratings were removed from CreditWatch where they were placed with positive implications on June 7, 2006. At the same time Standard & Poor's assigned its 'BB' loan rating to Terex's proposed $900 million senior secured credit facilities due in 2013. The loan rating is the same as the corporate credit rating. The rating agency also assigned a recovery rating of '2' indicating its expectation of substantial recovery in the event of a default. The ratings on the existing credit facilities will be withdrawn when the new deal closes. The outlook is stable. TRANSFIRST HOLDINGS: Moody's Junks Rating on $120 Mil. Sec. Loan ---------------------------------------------------------------- Moody's Investors Service assigned a first-time corporate family rating of B2 to TransFirst Holdings, Inc. Moody's also assigned B2 ratings to TransFirst's proposed senior secured term loan B facility and senior secured revolving credit facility, and a Caa1 rating to its junior secured term loan facility. The rating outlook is stable. TransFirst's ratings reflects: (i) modest scale as a provider of transaction processing services and payment technologies, with approximately $131 million in revenues net of interchange, card association dues and assessments, and residual fees, (ii) its high debt leverage, (iii) the ongoing threat of competition from larger rivals, and (iv) moderate chargeback and client attrition levels following the Fifth Third portfolio acquisitions, although these have recently been trending favorably. Conversely, supporting the company's credit quality are: (i) the diversity of its merchant portfolio, (ii) the predictability of its revenue stream from clients under multiyear contracts, (iii) good levels of EBIT and EBITDA margins, and (iv) sustained positive free cash flow generation. The B2 senior bank rating reflects the senior debt's first priority lien on all personal and real property, including customer contracts, and pledged capital stock and other equity securities, as applicable, of each subsidiary. The Caa1 rating for junior secured term loan C reflects its second priority lien on all personal and real property, including customer contracts, pledged capital stock and other equity securities, as applicable, of each subsidiary. There could be upward pressure on the ratings should the company experience: (i) sustained improved organic revenue growth with lower merchant attrition rates and chargebacks, (ii) increased profitability and free cash flow generation, and (iii) a reduction in leverage with Debt to EBITDA less Capital Expenditures less pre-purchase of customer contracts declining to less than 5 times. Conversely, the ratings could face downward pressure if: (i) TransFirst experiences sustained weakness in operating performance due to significant decline in revenues and operating profit, (ii) levels of chargebacks and merchant attrition rise due to increased competition, (iii) TransFirst is unable to generate positive free cash flow, which subsequently reduces its liquidity and financial flexibility, and (iv) there is an increase in leverage, either due to further debt financed acquisitions or dividend recapitalization, without substantial improvement in operating performance. These first time ratings were assigned: * Corporate family rating -- B2 * $35 million senior secured revolving credit facility due 2012 -- B2 * $275 million senior secured term loan B credit facility due 2012 -- B2 * $120 million junior secured term loan C credit facility maturing 2013 -- Caa1 The rating outlook is stable. Headquartered in Dallas, Texas, TransFirst Holdings, Inc. is a merchant processor, providing a comprehensive platform of transaction processing services and payment solutions for merchants accepting credit cards, debit cards and other forms of electronic payment. TRANSFIRST HOLDINGS: S&P Rates $120 Million Second-Lien Loan at B- ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Dallas, Texas-based TransFirst Holdings Inc., a processor of credit card transactions for small to medium sized merchants. The outlook is negative. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and '2' recovery rating to the company's proposed $310 million of first-lien senior secured facilities, indicating that lenders can expect substantial (80%-100%) recovery of principal in the event of payment default. The rating agency assigned its 'B-' bank loan rating and '5' recovery rating to the proposed $120 million second-lien term loan, indicating that lenders can expect negligible (0-25%) recovery of principal in the event of payment default. All ratings are based on preliminary offering statements and are subject to review upon final documentation. Proceeds will be used to refinance existing debt and redeem preferred stock. "The rating reflects the company's narrow business profile, significant reliance on outsourced providers to generate new sales growth, and the company's high leverage," said Standard & Poor's credit analyst Lucy Patricola. These factors partly are offset by its smooth integration of a large acquisition and steady, predictable cash flow. TransFirst serves the small to medium sized merchant niche in the credit card processing industry. While processing for small to medium sized merchants remains one of the more profitable niches within the industry, it is subject to considerable competition from similarly sized and positioned companies. Additionally, other, larger and well-established competitors, such as First Data, may enter the market. TRISTAR HOTELS: Ch. 7 Trustee Hires Wendel Rosen as Bankr. Counsel ------------------------------------------------------------------ The Honorable Marilyn Morgan of the U.S. Bankruptcy Court for the Northern District of California in San Jose authorized Carol Wu, the appointed Chapter 7 Trustee of Tristar Hotels and Investments, LLC, to employ Wendel, Rosen, Black & Dean LLP as her bankruptcy counsel. Wendel Rosen will: (a) perform legal services required to investigate, collect and liquidate estate assets; (b) review and analyze liabilities, if it appears that there will be distribution; and (c) take further actions as necessary to protect the interests of the estate. A full-text copy of Wendel Rosen's hourly rates are available for free at http://ResearchArchives.com/t/s?e1a The Chapter 7 Trustee discloses that the Firm currently represents scheduled creditor Miller Starr & Regalia in unrelated matters. In the event Miller Starr files a claim and a dispute arises or the trustee files a complaint to avoid and recover alleged transfers, the Firm will represent neither party. The Chapter 7 Trustee says she will retain special counsel to investigate and pursue any dispute or complaint. Miller Starr has signed a waiver of any conflict that Wendel may have. The Chapter 7 Trustee assures the Court that Wendel, Rosen, Black & Dean LLP does not represent interest adverse to the estate in matters upon which the Firm is retained. Headquartered in Mountain View, California, Tristar Hotels and Investments, LLC, filed for chapter 11 protection on Sept. 13, 2005 (Bankr. N.D. Calif. Case No. 05-55789). Steven J. Sibley, Esq., at the Law Offices of DiNapoli and Sibley represented the Debtor. When the Debtor filed for protection from its creditors, it listed estimated assets and debts of $10 million to $50 million. On May 16, 2006, the Court converted the Debtor's case to a chapter 7 proceeding and appointed Carol Wu as the Debtor's Chapter 7 Trustee. The law firm of Wendel, Rosen, Black & Dean LLP represents the Chapter 7 Trustee. UNISYS CORP: Moody's Downgrades Senior Unsec. Debt Rating to B2 --------------------------------------------------------------- Moody's Investors Service downgraded the senior unsecured and corporate family debt ratings of Unisys Corporation to B2 from Ba3. The downgrade reflects a deterioration of credit metrics as indicated by declining new business orders, widening operating losses, and negative free cash flow through the company's Q2 2006 results reported July 19, 2006. The outlook is negative. Ratings downgraded: * Corporate Family Rating to B2 from Ba3 * Senior unsecured rating to B2 from Ba3 The B2 rating incorporates IT services sector rating factors of competitive position, cash flow, returns, financial leverage, and liquidity. While trailing twelve month services new business order growth supports the company's competitive position and suggests a slightly higher rating, the company's declining technology hardware new business order performance, variable services order growth, widening negative free cash flow, and operating losses drive the B2 rating. Orders for the technology business declined single digits while services orders declined double digits year over year in the June quarter. Excluding restructuring charges and pension expense, technology operating margins declined to about negative 8% in sixth months ended June 2006 from positive levels in 2005, while the services operating margin improved by a smaller increment to slightly above break even. The company's cash flow from operating activities weakened year over year for the six months ended June 2006 by about $257 million and capital expenditures were lower by $71 million, resulting in negative $285 million of free cash flow for TTM June 2006 compared to negative $93 million free cash flow for TTM June 2005. In Moody's view, the company's restructuring efforts are unlikely to materially improve its financial operating performance in the near to intermediate term. The negative outlook reflects a negative trend in operating metrics as indicated by pre restructuring charge and pension expense operating losses, negative returns on assets net of cash, negative free cash flow, and negative free cash flow to debt adjusted for a five times multiple of operating leases and underfunded pension liabilities. For further details, refer to Moody's Credit Opinion for Unisys Corporation. Based in Blue Bell, Pennsylvania, Unisys Corporation is a worldwide provider of IT services and technology hardware. US SHIPPING: Expansion Program Prompts Moody's to Review Ratings ---------------------------------------------------------------- Moody's Investors Service placed all debt ratings of U.S. Shipping Partners L.P. on review for possible downgrade -- Corporate Family Rating of Ba3. The review was prompted by USS' announcement of a major fleet expansion program, the financing of which contemplates: i) approximately $350 million of incremental debt to finance five new Articulated Tug Barge units, and ii) the creation of a joint venture to finance new product tankers. In its review, Moody's will consider the effect of the $350 million of incremental debt at USS, which will fund progress payments on the ATB's and contributions to the joint venture over the next 24 months. Moody's will also assess the ability of the company to manage multiple shipbuilding programs, as USS plans to separately enter into a contract for the construction of at least 9 and at most 14 new Jones Act product tankers at another shipyard for a total acquisition cost of between approximately $1.1 billion and $1.6 billion. Financing of these product tankers anticipates that USS will contribute equity for a large minority interest in a joint venture which will actually take delivery of the product tankers over several years beginning in 2009. As USS is likely to purchase or charter-in the product tankers upon delivery to the joint venture, Moody's will assess the impact of the USS support of the JV during the vessel construction period, as well as the potential for an increase in debt or lease obligations at USS once the product tankers are completed. Moody's review will also consider the potential for the new ATB's and product tankers to be employed at rates sufficient to service related debt or lease obligations. On Review for Possible Downgrade: U.S. Shipping Partners, L.P. * Corporate Family Rating, Ba3 * Senior Secured, Ba3 U.S. Shipping Partners L.P. is headquartered in Edison, New Jersey. The company owns and operates six integrated tug barge units and four US flagged chemical tankers qualified for U.S. Jones Act trading. UTILITY CRAFT: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Utility Craft, Inc. ta W.A. Home ta Utility Craft Furniture ta Furniture Clearing Center ta Wood Armfield Furniture 460 South Main Street High Point, North Carolina 27260 Bankruptcy Case No.: 06-10816 Type of Business: The Debtor specializes in manufacturing high quality furniture and accessories. Chapter 11 Petition Date: July 20, 2006 Court: Middle District of North Carolina (Greensboro) Debtor's Counsel: Christine L. Myatt, Esq. J. David Yarbrough, Jr., Esq. Nexsen Pruet Adams Kleemeier, PLLC Suite 100, 701 Green Valley Road P.O. Box 3463 Greensboro, North Carolina 27408 Tel: (336) 373-1600 Fax: (336) 273-5357 Estimated Assets: $1 Million to $10 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Stanley Furniture Company Trade Debt $392,470 1641 Fairystone Park Highway P.O. Box 30 Stanleytown, VA 24168 Century Furniture Trade Debt $281,243 P.O. Box 608 Hickory, NC 28603 BB&T Trade Debt $285,673 Bankcard and Merchant Services 2713 Forest Hills Road Wilson, NC 27894 Thomasville Furniture Trade Debt $237,985 P.O. Box 75120 Charlotte, NC 28275 American Express Trade Debt $145,376 P.O. Box 297812 Fort Lauderdale, FL 33327-7812 Lexington Furniture Ind. Trade Debt $136,528 Broyhill Furniture Trade Debt $131,064 Bernhardt Furniture Company Trade Debt $130,704 American Drew Trade Debt $88,391 Abdulrazzak Almahmoud Customer Deposit $74,471 Majda Alyatama on Furniture Lazy Boy, Inc. Trade Debt $72,356 Canadel Furniture Inc. Trade Debt $70,653 Rowe Furniture Corp. Trade Debt $70,140 Hickory Chair Trade Debt $69,538 Wesley Hall Inc. Trade Debt $66,282 Sherrill Furniture Trade Debt $64,298 Lane Furniture Industries, Inc. Trade Debt $60,401 La-Z-Boy Chair C. Trade Debt $56,679 Statton Furniture Mfg. Co. Trade Debt $53,820 Hekman Furniture - 6 Trade Debt $53,288 VARIG S.A.: Sojitz Corp. Blocks Plea for Permanent Injunction ------------------------------------------------------------- Sojitz Corporation of Japan asks the Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York deny the request of Eduardo Zerwes, the Foreign Representative of VARIG, S.A., and its affiliates, to convert the Preliminary Injunction into a Permanent Injunction and direct the airline to return its aircraft. Sojitz, successor to Nissho Iwai Corporation, leases to VARIG two Boeing model 767-300ER aircraft and two General Electric model CF6-80C2B6F spare aircraft engines under a Lease Agreement dated as of October 27, 1989, as amended. Sojitz delivered on June 30, 2006, a formal demand letter to VARIG in Brazil, its branch in Tokyo, Japan, and its U.S. counsel, Pillsbury Winthrop Shaw Pittman LLP. Sojitz demanded that in compliance with the Contingency Return Plan, the Aircraft Equipment be removed from commercial service and turned over within 10 days from the date of the Demand Letter. To date, the Foreign Debtors have failed to fully comply with the terms of the Contingency Plan and the U.S. Bankruptcy Court's July 5, 2006 Order requiring them to use their best efforts to promptly implement the Contingency Plan, Alyssa Englund, Esq., at Orrick, Herrington & Sutcliffe LLP, in New York, asserts. The Contingency Plan requires that the Foreign Debtors will within 10 days remove the aircraft from commercial service and make the aircraft available at one of their principal maintenance bases in Brazil. Ms. Englund says the Aircraft Equipment were not removed from service until July 12, 2006, two days past the time allowed in the Plan. To date, Sojitz has not been able to obtain control of the Aircraft Equipment. Despite requests, VARIG has not cooperated with Sojitz in timely executing a termination agreement, which has placed the Aircraft Equipment at risk of further loss, Ms. Englund tells the Court. Because VARIG Engineering and Maintenance will not provide Sojitz with access to the Aircraft Equipment or allow Sojitz to take control of the Aircraft Equipment, Sojitz is unable to protect the Aircraft Equipment from being raided for parts by VARIG or any other party. Sojitz has been advised that parts have been removed from certain of the Aircraft, Ms. Englund adds. Trustees Need Time to Implement Contingency Plan U.S. Bank National Association, Wells Fargo Bank Northwest, N.A., and Wells Fargo Bank Northwest, N.A., as aircraft trustees, ask the Court to continue for another 30 to 45 days the hearing on the Foreign Representative's request so they can continue to work to implement the terms of the Contingency Plan. The Aircraft Trustees have demanded return of three leased aircraft. Ann Acker, Esq., at Chapman and Cutler LLP, in Chicago, Illinois, relates that the Trustees' representatives have been working with VARIG and VEM towards a cooperative effort to initiate and complete the Contingency Plan with respect to the leased aircraft, including: -- the securing of the Aircraft; -- the grounding of the Aircraft where necessary; -- the assembly of Aircraft parts, engines, equipment and documents in an airworthy condition; and -- obtaining VARIG's cooperation in the deregistration and repatriation of the Aircraft. "VARIG has maintained that it is proceeding with diligence to the same objectives. However, at least with respect to these three Aircraft, the objectives of the Contingency Plan have not yet been accomplished," Ms. Acker says. About VARIG Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) XYBERNAUT CORP: Inks Further Amendment to Secured Promissory Note ----------------------------------------------------------------- Xybernaut Corporation, its debtor-affiliate Xybernaut Solutions, and East River Capital LLC entered, on July 11, 2006, into an Amendment No. 1 to the Amended and Restated Secured Promissory Note, dated May 2, 2006. The Amendment provides for a $100,000 loan to be used solely for payroll of the Debtors. The Debtors and East River had entered into a Secured Promissory Note dated as of March 23, 2006, on March 29, 2006. On May 8, 2006, the Debtors and East River entered into the Amended and Restated Secured Promissory Note, dated May 2, 2006. Pursuant to Amendment No. 1: * Section 7 of the Amended Note provides that the Debtors will not use any portion of the loans other than in the ordinary course of the trade or business of the Debtors; and * Section 23 (Issuance of Stock; Reconstitution of Board of Directors) and Section 24 (Warrants, Equity Rights) have been deleted from the Amended Note. The Amendment also contains standard representations and warranties, covenants and certain other matters. A full-text copy of Amendment No. 1 to the Amended and Restated Secured Promissory Note between Xybernaut Corporation, Xybernaut Solutions, Inc. and East River Capital LLC, dated as of July 7, 2006, is available for free at http://ResearchArchives.com/t/s?e31 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. YANDOLI FOODS: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Yandoli Foods, Inc. 219 Westchester Avenue, Suite 400 Port Chester, New York 10573 Bankruptcy Case No.: 06-42541 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Avenue V. Foods, Inc. 06-42544 Flatlands Ave. Foods, Inc. 06-42551 Neptune Ave. Foods, Inc. 06-42552 Nostrand-Hillel Foods, Inc. 06-42555 Rockaway Parkway Foods, Inc. 06-42556 Seaview Avenue Foods, Inc. 06-42558 Thurm-Lee Foods, Inc. 06-42559 Type of Business: Richard Yandoli, the president of the Debtors, is the owner and operator of nine McDonald's franchises. Chapter 11 Petition Date: July 21, 2006 Court: Eastern District of New York (Brooklyn) Debtor's Counsel: Gary M. Kushner, Esq. Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn LLP 330 Old Country Road, P.O. Box 31 Mineola, New York 11501 Tel: (516) 248-1700 Fax: (516) 248-1729 Estimated Assets: Unknown Estimated Debts: $1 Million to $10 Million The Debtors did not file a list of their 20 largest unsecured creditors. * Gilbert Heintz is "Hidden Gem" in BTI Power Rankings ------------------------------------------------------ Gilbert Heintz & Randolph LLP was named as a "hidden gem" in the BTI Power Rankings: The BTI Client Relationship Scorecard for Law Firms, 2006 (published by The BTI Consulting Group). The rankings were based on interviews with large and Fortune 1000 clients. In the rankings, GHR was listed as a firm whose excellence is underestimated by the marketplace and its peers. Clients who mentioned GHR believe they have found an excellent law firm that few others know about-or don't know enough about. Clients see the firm as special and a well-kept secret that brings added value to the law firm/client relationship. For this study, BTI interviewed 376 corporate counsel at three types of companies: Fortune 1000 organizations, large privately held companies and major financial services firms. They conducted the interviews over a 15-month time span ending in late 2005. Formed in 2001 and based in Washington, DC, Gilbert Heintz & Randolph LLP -- www.ghrdc.com/ -- specializes in four primary areas of law: Complex Dispute Resolution, Insurance Recovery, Strategic Risk Management, and Bankruptcy Representation. * BOND PRICING: For the week of July 17 - July 21, 2006 ------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia Comm. 3.250% 05/01/21 1 Adelphia Comm. 6.000% 02/15/06 0 Adelphia Comm. 7.500% 01/15/04 56 Adelphia Comm. 7.750% 01/15/09 56 Adelphia Comm. 7.875% 05/01/09 54 Adelphia Comm. 8.125% 07/15/03 44 Adelphia Comm. 8.375% 02/01/08 51 Adelphia Comm. 9.250% 10/01/02 53 Adelphia Comm. 9.375% 11/15/09 57 Adelphia Comm. 9.500% 02/15/04 54 Adelphia Comm. 9.875% 03/01/05 54 Adelphia Comm. 9.875% 03/01/07 56 Adelphia Comm. 10.250% 06/15/11 58 Adelphia Comm. 10.250% 11/01/06 55 Adelphia Comm. 10.500% 07/15/04 52 Adelphia Comm. 10.875% 10/01/10 54 AHI-DFLT07/05 8.625% 10/01/07 73 Allegiance Tel. 11.750% 02/15/08 47 Allegiance Tel. 12.875% 05/15/08 45 Amer & Forgn Pwr 5.000% 03/01/30 67 Amer Color Graph 10.000% 06/15/10 73 Amer Plumbing 11.625% 10/15/08 18 Ames Dept. Stores 10.000% 04/15/06 0 Antigenics 5.250% 02/01/25 56 Anvil Knitwear 10.875% 03/15/07 57 Armstrong World 6.350% 08/15/03 70 Armstrong World 6.500% 08/15/05 70 Armstrong World 7.450% 05/15/29 71 Armstrong World 9.000% 06/15/04 70 At Home Corp. 0.525% 12/28/18 2 At Home Corp. 4.750% 12/15/06 1 ATA Holdings 12.125% 06/15/10 2 Autocam Corp. 10.875% 06/15/14 61 Banctec Inc 7.500% 06/01/08 74 Bank New England 8.750% 04/01/99 6 Bank New England 9.500% 02/15/96 10 Big V Supermarkets 11.000% 02/15/04 0 Budget Group Inc 9.125% 04/01/06 0 Burlington North 3.200% 01/01/45 54 CCH II/CCH II CP 10.250% 01/15/10 70 Cell Therapeutic 5.750% 06/15/08 58 Charter Comm Hld 10.000% 05/15/11 62 Charter Comm Hld 11.125% 01/15/11 67 CIH 9.920% 04/01/14 60 CIH 10.000% 05/15/14 61 CIH 11.125% 01/15/14 64 Collins & Aikman 10.750% 12/31/11 21 Color Tile Inc 10.750% 12/15/01 0 Comcast Corp 2.000% 10/15/29 39 CPNL-Dflt12/05 4.000% 12/26/06 25 CPNL-Dflt12/05 4.750% 11/15/23 45 CPNL-Dflt12/05 4.750% 11/15/23 45 CPNL-Dflt12/05 6.000% 09/30/14 37 CPNL-Dflt12/05 7.625% 04/15/06 70 CPNL-Dflt12/05 7.750% 04/15/09 71 CPNL-Dflt12/05 7.750% 06/01/15 35 CPNL-Dflt12/05 7.875% 04/01/08 72 CPNL-Dflt12/05 8.500% 02/15/11 46 CPNL-Dflt12/05 8.625% 08/15/10 47 CPNL-Dflt12/05 8.750% 07/15/07 70 CPNL-Dflt12/05 10.500% 05/15/06 70 Cray Research 6.125% 02/01/11 16 Curagen Corp 4.000% 02/15/11 74 Dal-Dflt09/05 9.000% 05/15/16 25 Decode Genetics 3.500% 04/15/11 73 Delco Remy Intl 9.375% 04/15/12 56 Delco Remy Intl 11.000% 05/01/09 60 Delphi Trust II 6.197% 11/15/33 64 Delta Air Lines 2.875% 02/18/24 26 Delta Air Lines 7.541% 10/11/11 38 Delta Air Lines 7.700% 12/15/05 25 Delta Air Lines 7.900% 12/15/09 27 Delta Air Lines 8.000% 06/03/23 26 Delta Air Lines 8.270% 09/23/07 75 Delta Air Lines 8.300% 12/15/29 27 Delta Air Lines 8.540% 01/02/07 71 Delta Air Lines 8.950% 01/12/12 66 Delta Air Lines 9.200% 09/23/14 73 Delta Air Lines 9.250% 03/15/22 26 Delta Air Lines 9.375% 09/11/07 63 Delta Air Lines 9.750% 05/15/21 26 Delta Air Lines 9.875% 04/30/08 68 Delta Air Lines 10.000% 06/01/11 58 Delta Air Lines 10.000% 08/15/08 27 Delta Air Lines 10.060% 01/02/16 74 Delta Air Lines 10.125% 05/15/10 26 Delta Air Lines 10.375% 02/01/11 27 Delta Air Lines 10.375% 12/15/22 27 Delta Air Lines 10.500% 04/30/16 69 Deutsche Bank NY 8.500% 11/15/16 64 Dov Pharmaceutic 2.500% 01/15/25 49 Dura Operating 9.000% 05/01/09 51 Dura Operating 9.000% 05/01/09 53 Eagle-Picher Inc 9.750% 09/01/13 68 Epix Medical Inc. 3.000% 06/15/24 68 Federal-Mogul Co. 7.375% 01/15/06 61 Federal-Mogul Co. 7.500% 01/15/09 62 Federal-Mogul Co. 8.160% 03/06/03 54 Federal-Mogul Co. 8.370% 11/15/01 54 Federal-Mogul Co. 8.370% 11/15/01 58 Federal-Mogul Co. 8.800% 04/15/07 56 Finova Group 7.500% 11/15/09 29 Ford Motor Co 6.500% 08/01/18 69 Ford Motor Co 6.625% 02/15/28 69 Ford Motor Co 7.125% 11/15/25 68 Ford Motor Co 7.400% 11/01/46 67 Ford Motor Co 7.500% 08/01/26 70 Ford Motor Co 7.700% 05/15/97 67 Ford Motor Co 7.750% 06/15/43 68 Ford Motor Cred 5.750% 01/21/14 75 Ford Motor Cred 5.750% 02/20/14 73 Ford Motor Cred 5.750% 02/20/14 74 Ford Motor Cred 5.900% 02/20/14 74 Ford Motor Cred 6.000% 01/20/15 74 Ford Motor Cred 6.000% 01/21/14 75 Ford Motor Cred 6.000% 02/20/15 73 Ford Motor Cred 6.000% 11/20/14 73 Ford Motor Cred 6.000% 11/20/14 74 Ford Motor Cred 6.050% 02/20/15 73 Ford Motor Cred 6.050% 12/22/14 74 Ford Motor Cred 6.050% 12/22/14 74 Ford Motor Cred 6.100% 02/20/15 74 Ford Motor Cred 6.150% 01/20/15 71 Ford Motor Cred 6.200% 03/20/15 74 Ford Motor Cred 6.250% 01/20/15 74 Ford Motor Cred 6.250% 03/20/15 74 Ford Motor Cred 7.500% 08/20/32 74 Gateway Inc. 2.000% 12/31/11 73 GB Property Fndg 11.000% 09/29/05 62 General Motors 7.400% 09/01/25 74 GMAC 5.900% 01/15/19 74 GMAC 5.900% 01/15/19 74 Golden Books Pub 10.750% 12/31/04 0 Graftech Intl 1.625% 01/15/24 74 Gulf Mobile Ohio 5.000% 12/01/56 73 Gulf States Stl 13.500% 04/15/03 0 HNG Internorth 9.625% 03/15/06 33 Home Prod Intl 9.625% 05/15/08 64 Imperial Credit 9.875% 01/15/07 0 Inland Fiber 9.625% 11/15/07 60 Insight Health 9.875% 11/01/11 47 Iridium LLC/CAP 10.875% 07/15/05 26 Iridium LLC/CAP 11.250% 07/15/05 29 Iridium LLC/CAP 13.000% 07/15/05 28 Iridium LLC/CAP 14.000% 07/15/05 28 Isolagen Inc. 3.500% 11/01/24 73 Kellstrom Inds 5.500% 06/15/03 0 Kitty Hawk Inc 9.950% 11/15/04 2 Kmart Corp. 9.780% 01/05/20 10 Lehman Bros Hldg 11.000% 10/25/17 73 Liberty Media 3.750% 02/15/30 57 Liberty Media 4.000% 11/15/29 62 Lifecare Holding 9.250% 08/15/13 73 Macsaver Financl 7.600% 08/01/07 1 Merisant Co 9.500% 07/15/13 65 Merrill Lynch 10.000% 08/15/12 72 MSX Int'l Inc. 11.375% 01/15/08 69 Muzak LLC 9.875% 03/15/09 54 New Orl Grt N RR 5.000% 07/01/32 66 Northern Pacific RY 3.000% 01/01/47 54 Northern Pacific RY 3.000% 01/01/47 54 Northwest Airlines 6.625% 05/15/23 48 Northwest Airlines 7.248% 01/02/12 14 Northwest Airlines 7.625% 11/15/23 48 Northwest Airlines 7.875% 03/15/08 49 Northwest Airlines 8.700% 03/15/07 49 Northwest Airlines 8.875% 06/01/06 50 Northwest Airlines 9.179% 04/01/10 25 Northwest Airlines 9.875% 03/15/07 50 Northwest Airlines 10.000% 02/01/09 49 Northwest Airlines 10.500% 04/01/09 49 Northwest Stl&Wir 9.500% 06/15/01 0 NTK Holdings Inc 10.750% 03/01/14 71 Oscient Pharm 3.500% 04/15/11 65 Osu-Dflt10/05 13.375% 10/15/09 0 O'Sullivan Ind 10.630% 10/01/08 59 Outboard Marine 7.000% 07/01/02 0 Outboard Marine 10.750% 06/01/08 9 Overstock.com 3.750% 12/01/11 73 Owens-Corning 7.000% 03/15/19 72 Owens-Corning 7.500% 05/01/05 74 Owens-Corning 7.500% 08/01/18 74 Owens-Corning Fiber 9.375% 06/01/12 75 PCA LLC/PCA Fin 11.875% 08/01/09 21 Pegasus Satellite 9.625% 10/15/49 11 Pegasus Satellite 12.375% 08/01/06 9 Pegasus Satellite 12.500% 08/01/07 12 Pixelworks Inc. 1.750% 05/15/24 71 Pliant Corp 13.000% 06/01/10 43 Pliant Corp 13.000% 06/01/10 45 Polaroid Corp. 6.750% 01/15/02 0 Polaroid Corp. 7.250% 01/15/07 0 Polaroid Corp. 11.500% 02/15/06 0 Primus Telecom 3.750% 09/15/10 48 Primus Telecom 8.000% 01/15/14 65 PSINET Inc 10.500% 12/01/06 0 Radnor Holdings 11.000% 03/15/10 34 Railworks Corp 11.500% 04/15/09 1 Read-Rite Corp. 6.500% 09/01/04 18 Reliance Group Holdings 9.000% 11/15/00 20 RJ Tower Corp. 12.000% 06/01/13 60 Salton Inc 12.250% 04/15/08 72 Silicon Graphics 6.500% 06/01/09 71 Startec Global 12.000% 05/15/08 0 Tekni-Plex Inc. 12.750% 06/15/10 70 Tom's Foods Inc 10.500% 11/01/04 9 Toys R Us 7.375% 10/15/18 71 Tribune Co 2.000% 05/15/29 66 Triton Pcs Inc. 8.750% 11/15/11 72 Triton Pcs Inc. 9.375% 02/01/11 72 Twin Labs Inc. 10.250% 05/15/06 2 United Air Lines 7.270% 01/30/13 53 United Air Lines 7.870% 01/30/19 54 United Air Lines 9.020% 04/19/12 58 United Air Lines 9.350% 04/07/16 30 United Air Lines 9.560% 10/19/18 58 United Air Lines 10.020% 03/22/14 45 United Air Lines 10.125% 03/22/15 50 United Homes Inc 11.000% 03/15/05 0 US Air Inc. 10.250% 01/15/49 5 US Air Inc. 10.250% 01/15/49 11 US Air Inc. 10.300% 07/15/49 6 US Air Inc. 10.550% 01/15/49 45 US Air Inc. 10.680% 06/27/08 2 US Air Inc. 10.700% 01/15/49 44 US Air Inc. 10.700% 01/15/49 45 US Air Inc. 10.700% 01/15/49 45 US Air Inc. 10.700% 01/15/49 45 US Air Inc. 11.200% 03/19/05 0 US Leasing Intl 6.000% 09/06/11 75 Venture Holdings 9.500% 07/01/05 1 Vesta Insurance Group 8.750% 07/15/25 34 Werner Holdings 10.000% 11/15/07 29 Westpoint Steven 7.875% 06/15/05 0 Westpoint Steven 7.875% 06/15/08 0 Wheeling-Pitt St 6.000% 08/01/10 69 Winsloew Furniture 12.750% 08/15/07 26 World Access Inc. 13.250% 01/15/08 4 ********* 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/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. 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, Robert Max Victor M. Quiblat II, Shimero R. Jainga, Joel Anthony G. Lopez, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Cherry A. Soriano-Baaclo, Christian Q. Salta, Jason A. Nieva, Lucilo M. Pinili, Jr., 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 ***