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/raid1/www/Hosts/bankrupt/TCR_Public/060822.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, August 22, 2006, Vol. 10, No. 199 Headlines 2135 GODBY: Wants Legg Mason Appraisal Stricken Off the Records ADELPHIA COMMS: Details of Fifth Amended Chapter 11 Plan Draft ADELPHIA COMMS: iN DEMAND Holds $15,865,161 Allowed Unsec. Claim ADELPHIA COMMS: Senior Noteholders Want Plan Record Unsealed ACTUANT CORP: Buys Actown-Electrocoil Stock for $24 Mil. in Cash ADVOCAT INC: Completes $30.6-Mil. Refinancing with Capmark Finance AGRICORE UNITED: Acquires Hi Pro Feeds for $38.5 Million ALLIED HOLDINGS: Judge Mullins Allows Allens to File PI Suit AMERIVEST PROPERTIES: Completes Sale of Dallas Office Building ASARCO LLC: Bids for El Paso Property Must Be Received by Sept. 14 ASARCO LLC: Wants Brown McCarroll as Environmental Counsel ASARCO LLC: Wants Lease-Decision Period Extended Until January 16 ATLANTIC MUTUAL: Interest Non-Payment Cues S&P's Default Rating AUSTIN CO: Wants to Sell U.K. Unit to Austin (GB) Ltd. for $200K BOYD GAMING: Fitch Affirms Low-B Ratings With Stable Outlook CALPINE CORP: Court Okays Fishman, May and Doody Employment Pacts CALPINE CORP: Wants Interim Injunction of Nevada Power Litigation CELL THERAPEUTICS: June 30 Balance Sheet Upside-Down by $102 Mil. CERADYNE INC: 2006 Second Quarter Net Income Increases to $30 Mil. CIGNA CORP: S&P Assigns BB+ Pref. Stock Rating With Pos. Outlook CLEAR CHOICE: RJ Easton Takes Equity Stakes on Bay Capital Merger CLECO CORP: Prices Six Million Shares Offering at $23.75 per Share CNET NETWORKS: Form 10-Q Filing Delay Prompts Notice of Default CNET NETWORKS: Covenant Default Cues NASDAQ Delisting Notice CNET NETWORKS: Form 10-Q Filing Delay Cues S&P's Negative Watch COLLINS & AIKMAN: Contests Huron's First Lien on Molds COLLINS & AIKMAN: Gains Panel's Support Over GM Tooling Dispute COMMSCOPE INC: Moody's Confirms Low-B Corporate and Debt Ratings COMPLETE RETREATS: Gets Final Court Nod for $12 Million DIP Loan COMPLETE RETREATS: Robert McGrath Quits as CEO of Tanner & Haley CONCORD RE: S&P Assigns BB+ Rating to $375 Million Debt Facility CORNELL COMPANIES: Earns $3.9 Million in 2006 Second Quarter CONVERIUM AG: Obtains $250 Million Loan from Bank Group CREATIVE VISTAS: CEO Issues Letter to Shareholders on Biz Outlook DANA CORP: Wants Modified Burns, et al. Employment Pacts Approved DANA CORP: Wants Second Toledo Press Settlement Pact Approved DEL MONTE: $100 Mil. Loan Add-On Cues S&P to Affirm Low-B Ratings DELPHI CORP: DAS LLC Inks Settlement Pact with Flex-Tech Trustee DELPHI CORP: Posts $2.6 Billion Net Loss in First Half of 2006 ENRON CORP: Court Approves ONEOK Settlement Agreement ENTERPRISE PRODUCTS: Likely to Acquire $50 Million in Insurance FALCONBRIDGE LTD: Board Resigns After Xstrata Acquisition FEDERAL-MOGUL: 51 U.K. Debtors to File Voluntary Arrangements FEDERAL-MOGUL: Wants Court OK on Insurance-Related Changes to Plan FEDDERS CORP: Equity Deficit Widens to $17.04 Mil. in Six Months FEDDERS CORP: Hires Blackstone to Sell Indoor Air Quality Business FOOT LOCKER: Evercore Engagement Prompts S&P's Negative Watch FORD MOTOR: Lower Production Schedule Cues S&P's Negative Watch FORD MOTOR: Production Cutbacks Prompt Fitch to Downgrade Ratings FORD MOTOR: Reduced Vehicle Production Cues DBRS to Review Rating FRENCH LICK: S&P Affirms B- Rating & Revises Outlook to Negative GENERAL NUTRITION: Aborted IPO Plan Prompts S&P to Affirm B Rating IGI INC: Posts $368,000 Net Loss in Three Months Ended June 30 INTEGRATED ELECTRICAL: Earns $36.8 Million in Third Fiscal Quarter INTERMEC INC: S&P Upgrades Ratings to BB- With Stable Outlook INLAND FIBER: Unsecured Creditors to Receive 68.57% of Claims KINETIC CONCEPTS: Earns $46.6 Million in Second Quarter KMART CORP: Delivers Results for 13 Weeks Ended July 29 KMART CORP: Store in Stow, Ohio to Close in January 2007 LEVITZ HOME: Rejecting Nanuet Lease Effective August 2 LEVITZ HOME: Seeks to Assign Three More Leases to PLVTZ LLC LONE STAR: Buys 40% Stake in Valin Tube's Unit for $132 Mil. Cash LYONDELL CHEMICAL: Citgo Interest Buy Cues Fitch to Affirm Ratings MIRANT CORP: NY-Gen Unit Can Increase DIP Facility to $9.5 Mil. MIRANT CORP: Wants ConEd & O&R to Comply with Purchase Agreement NATIONAL COAL: Poor Performance Prompts S&P to Junk Ratings OPBIZ LLC: Form 10-Q Filing Delay Prompts S&P's Negative Watch OWENS CORNING: Schultze Wants List of Class A5 Creditors PEP BOYS: S&P Removes Developing Watch & Says Outlook is Negative PERFORMANCE TRANSPORTATION: Modified Incentive Program Draws Fire PERFORMANCE TRANSPORTATION: Taps @Road as MRM Solutions Provider PLIANT CORP: 1st Interest Payment on 13% Senior Notes on Jan. 2007 PREMIER ENTERTAINMENT: S&P Holds Junk Rating on Developing Watch QUANTUM CORP: S&P Ups Sr. Secured First-Lien Debt's Rating to B+ RADNOR HOLDINGS: Files for Chapter 11 Protection to Sell Assets RADNOR HOLDINGS: Case Summary & 30 Largest Unsecured Creditors SAFENET INC: Form 10-Q Filing Delay Prompts Notice of Default SAFENET INC: Late Form 10-Q Filing Prompts Nasdaq Delisting Notice SATELITES MEXICANOS: Court Gives Interim OK on Milbank as Counsel SATELITES MEXICANOS: Court Approves Employees Obligation Payment SATELITES MEXICANOS: Gets Interim Use of Cash Management System SCOTTISH RE: S&P Lowers Counterparty Credit Rating to B+ from BB+ SMARTIRE SYSTEMS: Employs BDO Dunwoody as Accountants SOLO CUP: Weak Performance Cues S&P to Lower Rating to B from B+ SUPERIOR ESSEX: Offers to Buy Optical Cable for $36 Mil. in Cash SYNAGRO TECHS: S&P Lowers Corp. Credit & Sr. Debt Ratings to B+ TOWER RECORDS: Files for Chapter 11 Protection to Sell All Assets TOWER RECORDS: Case Summary & 40 Largest Unsecured Creditors TRANS ENERGY: Buys Cobham Gas Industries' Assets for $600,001 TURNER-DUNN HOMES: Files for Bankr. to Stay Foreclosure Lawsuit UNICO INC: Inks Mining Deal with Polymet for Silver Bell Mine USG CORP: Asks Court to Close Chapter 11 Cases of 10 Affiliates VESTA INSURANCE: Organizational Meeting Scheduled for August 30 VESTA INSURANCE: Taps Parker Hudson as Bankruptcy Counsel W.R. GRACE: Objects to D. Slaughter's $1.375 Mil. Unsecured Claim WERNER LADDER: Wants to Walk Away from Greenville Property Lease WERNER LADDER: U.S. Trustee Wants Court to Deny Bonus Plans WINN-DIXIE: Completes Sale of 12 Stores in Bahamas to BSL Holdings WINN-DIXIE: Wants Florida Tax Claims Reduced and Allowed WINN-DIXIE: Wants 17 Scheduled Claims Disallowed WISE METALS: Crown Cork Business Loss Prompts S&P to Junk Ratings WORLDCOM INC: Court Expunges Dobie's Claim Nos. 17042 and 38241 WORLDCOM INC: Michael Jordan Wants $8 Mil. Claim Allowed in Full WORLDCOM INC: Wants Michael Jordan's Claim Reduced to $4 Million WORKFLOW MANAGEMENT: S&P Affirms BB- Rating With Negative Outlook WORNICK CO: Continued Losses Prompt S&P to Downgrade Rating to B * Large Companies with Insolvent Balance Sheets ********* 2135 GODBY: Wants Legg Mason Appraisal Stricken Off the Records --------------------------------------------------------------- 2135 Godby Property, LLC, asks the U.S. Bankruptcy Court for the Northern District of Georgia to strike out from the Court's records the appraisal filed by Legg Mason Real Estate Holdings, VI, Inc., and prohibit Legg Mason from using it as evidence on certain pending matters. The Court is currently considering the Debtor's request to use cash collateral securing the repayment of a $11.6 million debt to Legg Mason. Legg Mason opposed the request and further asked the Court to dismiss the Debtor's case. Legg Mason argued that the Debtor's bankruptcy proceeding should be dismissed because its chapter 11 filing was unauthorized and violated special stipulations under an Amended and Restated Operating Agreement. The Court is also considering a motion to dismissed filed by an entity asserting an ownership interest in the Debtor's LLC, the Hartunian Trust. The Court heard initial arguments on June 28, 2006, and had continued hearings on Aug. 4 and 9. As part of the scheduling of the matter, the Court directed that the parties exchange evidence and witness list by June 23, 2006. The parties did so. Legg Mason included only Chander Bains as its sole witness. No appraisals or other designations of purported experts were included by Legg Mason. On Aug. 3, 2006, Legg Mason filed a purported expert report and appraisal with the Court. As is disclosed in the report, the appraisers were retained on April 25, 2006, and the report was completed and transmitted to Legg Mason on May 17, 2006. Todd E. Hennings, Esq., at Macey, Wilensky, Kessler, Howick & Westfall, LLP, in Atlanta, Ga., points out that Legg Mason did not disclose any expert, or include any purported expert report in its documents submitted to be used as evidence. Legg Mason did not disclose the fact that it intended to use any expert and report despite the fact that the Debtor's counsel requested for those documents and disclosures as far back as May 30, 2006. Mr. Hennings laments that this apparent "sandbagging" is made even more egregious because it is clear from the face of the appraisal that it was, in its own words, "complete" as of the transmittal date of the appraisal, May 17, 2006. Legg Mason has not amended its witness list or otherwise provided any advance notice to the Debtor that it intended to call any experts or introduce new documents in evidence. Disclosure of an expert opinion, literally on the eve of a continued trial, where the witness has never been disclosed, the report has never been disclosed despite the requests of the Debtor's counsel, the evidence listing have not been amended, and the witness lists do not disclose the witness is inherent bad faith, Mr. Hennings argues. Headquartered in Calabasas, California, 2135 Godby Property, LLC, dba Quail Creek Apartments, owns and operates a 486-unit apartment in 2135 Godby Road, College Park, Georgia. The company filed for chapter 11 protection on May 1, 2006 (Bankr. N.D. Ga. Case No. 06-65007). Todd E. Hennings, Esq., at Macey, Wilensky, Kessler, Howick & Westfall, LLP, represents the Debtor in its restructuring efforts. No Committee of Unsecured Creditors has been appointed in the Debtor's case. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. ADELPHIA COMMS: Details of Fifth Amended Chapter 11 Plan Draft -------------------------------------------------------------- As reported in the Troubled Company Reporter yesterday, Adelphia Communications Corp. and its debtor-affiliates delivered to the U.S. Bankruptcy Court for the Southern District of New York a draft of their Fifth Amended Plan of Reorganization and Second Disclosure Statement Supplement relating to the Fifth Amended Plan. The ACOM Debtors and the Official Committee of Unsecured Creditors are co-proponents of the Plan. However, the ACOM Debtors are not proponents of the Plan in connection with: (a) the treatment of the Bank Claims; (b) any Class of Claims as and to the extent to which that proponency is restricted by Court; and (c) the Global Settlement under the Plan. The key terms of the Plan is based on the amended and restated agreement concerning the terms and conditions of a modified Chapter 11 plan among the ACOM Debtors and certain unsecured creditors on June 21, 2006. The Plan reflects the compromise among the major creditor groups pursuant to which approximately $1.08 billion in value will be transferred from certain unsecured creditors of various ACOM subsidiaries to certain unsecured senior and trade creditors of the Adelphia Communications parent corporation, subject, in some cases, to reimbursement from contingent sources of value, including the proceeds of a litigation trust to be established under the plan to pursue claims against third-parties that are alleged to have damaged ACOM. Summary of Plan Recoveries Generally, the Plan contemplates that its treatment of Claims and Equity Interests represents, among other things, the settlement and compromise of the Intercreditor Dispute pursuant to the Plan Agreement. The Plan groups the ACC Debtors together and the Subsidiary Debtors together, solely for purposes of describing treatment under the Plan, confirming the Plan, and making Plan Distributions with respect to the Claims and Equity Interests. The groupings do not: * effect any Debtor's status as a separate legal entity; * change the organizational structure of the ACOM Debtors' business enterprise; * constitute a change of control of any Debtor for any purpose; * cause a merger or consolidation of any legal entities; or * cause the transfer of any assets. Except otherwise provided or permitted in the Plan, all Debtors will continue to exist as separate legal entities. The ACOM Debtors and the Creditors Committee reserve the right to substantively consolidate any two or more Debtors, provided that the substantive consolidation does not materially and adversely impact the amount of the distributions to any Person under the Plan. A. Allowed Claims Against the Subsidiary Debtors Allowed Claims against the Subsidiary Debtors will be paid in full from the Commencement Date through the Effective Date, subject to: * the specified "give-ups" in varying amounts of Plan Consideration, which would be transferred to the creditors of the ACC Debtors; and * the deduction of fees payable to various ad hoc committees associated with each Class. The "give-ups" include: (a) $750,000,000 from amounts otherwise allocable to the Arahova Notes; (b) $85,000,000 from amounts otherwise allocable to the FrontierVision holding company notes; (c) $30,000,000 from amounts otherwise allocable to the Olympus notes and the FPL note; (d) $39,200,000 from amounts otherwise allocable to subsidiary trade claims; and (e) $6,800,000 from amounts otherwise allocable to other subsidiary unsecured creditors. Creditors of the Subsidiary Debtors, other than holders of the Olympus Notes and the FOL Notes, would have the ability to be repaid: * those "give-ups," plus interest at specified rates; * deducted fees from recoveries obtained by the Contingent Value Vehicle; and * in certain cases, releases from Identified Sources. A True-Up Reserve will also be created to protect creditors of the Subsidiary Debtors against an up to 15% decline in the value of the TWC Class A Common Stock during a 60-day test period. B. Allowed Claims for ACC Debtors' Senior Creditors Senior creditors of the ACC Debtors holding Allowed Claims would receive: * $1,080,000,000 of settlement consideration; * the residual sale consideration after funding all other distributions and reserves under the Plan; * proceeds from retaining assets not sold to Time Warner NY Cable, LLC, and Comcast Corporation; and * interests in the Contingent Value Vehicle. Holders of ACC Subordinated Note Claims, Preferred Stock Interest and Equity Interests in ACOM would not receive any distributions, unless the senior creditors in the ACC Debtors vote to accept the Plan and those holders also vote to accept the Plan, in which case, they would receive junior interests in the Contingent Value Vehicle. C. Bank Claims All Bank Claims are deemed disputed and are subject to disallowance in whole or in part. Unless and until otherwise allowed, no Bank will receive any distributions under the Plan, and the liens or security interest securing those Claims would be transferred to and attach to the proceeds of the Sale Transaction in an amount sufficient to pay in full the maximum amount of the Disputed Bank Claims as determined by the Court. Each Class of Bank Claims will have the right to elect, by accepting the Plan, to receive payment in full in cash on the Effective Date of all outstanding principal and accrued interest at the non-default interest rate in effect at the Petition Date, subject to disgorgement upon the entry of a final order directing the return of some or all of the distribution. True-Up Mechanism for TWC Class A Common Stock The Plan contemplates the creation of a true-up reserve on the Effective Date consisting of TWC Class A Common Stock, or cash to the extent there is no sufficient stock available. The True-Up Mechanism is intended, subject to certain limitations, to be sufficient to permit the adjustment of the total number of shares received by creditors of the Subsidiary Debtors based on a Market value of the TWC Class A Common Stock that is up to 15% higher or lower than the Deemed Value used for initial distributions under the Plan. The ultimate value of the recoveries to Claim holders will be impacted by, among others, the effect of the True-Up Mechanism and the value and timing of distributions from the Contingent Value Vehicle. To assist creditors in evaluating the Plan, the ACOM Debtors and the Creditors Committee provided, in the Disclosure Statement to the Plan, two sets of sensitivity tables to illustrate the potential impact that the True-Up Mechanism has on the estimated total recoveries. A full-text copy of Fifth Amended Joint Plan of Reorganization is available for free at http://ResearchArchives.com/t/s?ff8 A full-text copy of the Disclosure Statement is available for free at http://ResearchArchives.com/t/s?ff9 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 administered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue Nos. 146; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ADELPHIA COMMS: iN DEMAND Holds $15,865,161 Allowed Unsec. Claim ---------------------------------------------------------------- iN DEMAND filed multiple proofs of claim against Adelphia Communications Corp. and its debtor-affiliates in connection with prepetition amounts due to iN DEMAND. Each of the Claims was filed for $16,806,524, with the exception of Claim No. 17716, which was filed for $17,886,995. The Debtors dispute certain fees included in the Claims. Pursuant to a settlement between the ACOM Debtors and Viacom, Inc., and certain of its subsidiaries and affiliates, including Paramount Pictures Corporation: -- the ACOM Debtors assert that they have paid $836,611 to Viacom in satisfaction of a portion of the Disputed Claim Amount, and that the amount is no longer owed by the ACOM Debtors to iN DEMAND or to Paramount Pictures Corporation; and -- iN DEMAND asserts that it no longer owed $836,611 to Paramount. The ACOM Debtors asked the U.S. Bankruptcy Court for the Southern District of New York to disallow and expunge certain of the Claims as duplicative. The ACOM Debtors and iN DEMAND have executed a Settlement and Release Agreement dated as of July 26, 2006, which resolves all disputes related to the Claims. Pursuant to the Settlement Agreement, the ACOM Debtors and iN DEMAND mutually agree that: a. Claim No. 17716 will be allowed as an unsecured claim for $15,865,161 against the ACOM Debtors; b. the rest of the claims will be disallowed; c. iN DEMAND is authorized to file one master proof of claim -- the Additional Claim -- against the ACOM Debtors in the event Paramount seeks and obtains recovery of $836,611 from iN DEMAND; and d. they will mutually release each other from any and all claims provided that the release will not apply to the Additional Claim. The ACOM Debtors will provide notice of the Settlement Agreement to both Viacom and Paramount. 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 administered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue Nos. 145; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ADELPHIA COMMS: Senior Noteholders Want Plan Record Unsealed ------------------------------------------------------------ Aurelius Capital Management, LP, Catalyst Investment Management Co., LLC, Drawbridge Global Macro Advisors LLC, Drawbridge Special Opportunities Advisors, LLC, Elliot Associates, LP, Farallon Capital Management LLC, Noonday Asset Management LP, and Perry Capital LLC, as holders or investment advisors to holders of certain notes and debentures issued by Adelphia Communications Corporation, ask the U.S. Bankruptcy Court for the Southern District of New York to unseal and make publicly available: -- responses to Judge Cecelia's Monitor's Report filed under seal by: * JPMorgan Chase Bank, N.A., as administrative agent for FrontierVision Lenders; and * certain lenders, namely: Bank of America, N.A., in its individual capacity and in its capacity as administrative agent of the Century Cable Holdings Credit Facility; The Bank of Nova Scotia; Bank of Montreal, in its capacity as administrative agent of the Olympus Facility; Barclays Bank, PLC; the Ad Hoc Committee of Non-Agent Secured Lenders; Credit Suisse, Cayman Branch; The Royal Bank of Scotland PLC; Toronto Dominion (Texas), LLC; PNC Bank, National Association; Calyon New York Branch; The Bank of New York and The Bank of New York Company, Inc.; Societ, General, S.A.; and Wachovia Bank National Association, in its capacity as administrative agent for the UCA Lenders; -- the transcript for the status conference held on July 6, 2006, on global plan issues; -- all information relating to the Monitor process; and -- all pleadings filed and all proceedings held before the Court that relate to or implicate negotiations or proposals in respect of a reorganization or liquidation plan. The ACC Senior Noteholders also ask the Court to adjudicate all remaining intercreditor disputes. The Court has previously established a procedure -- the MIA Process -- to litigate the Intercreditor Disputes, including determination of the intercompany claims. In conjunction with the MIA Process, to preserve both fairness and the appearance of fairness and to ensure that the ACOM Debtors have fulfilled their fiduciary duties to all estates, the Court ordered the ACOM Debtors to remain neutral and designated certain participants to litigate the issues. Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges LLP, tells the Court that the ACOM Debtors have violated their Court-ordered neutrality by, among others, signing the amended and restated agreement, dated July 21, 2006, concerning terms and conditions of a modified Chapter 11 plan, purporting to settle the Intercreditor Disputes in an "extreme and lopsided manner." Mr. Bienenstock notes that in its regulatory filing with the Securities and Exchange Commission, the ACOM Debtors disclosed that they intend to propose a nonconsensual plan based on a term sheet as contemplated in the Plan Agreement. As the Term Sheet was being prepared, pleadings were filed under seal raising serious concerns about the "settlement" and the Court held a status conference on July 6, 2006, under seal, on the global plan issues related to it. Open Access to Court Records Is a Fundamental Right The bankruptcy process is heavily dependent on creditor participation and full financial disclosure, Mr. Bienenstock asserts. To foster that participation, subject to certain exceptions, the Bankruptcy Code mandates full and open access to court records. The directive for public access is most critical in the context of the plan process, determination of the ACOM Debtors' assets and liabilities, and the resolution of the Intercreditor Disputes. Transparency enhances informed creditor participation and maintains confidence in the system of justice, Mr. Bienenstock says. "[I]t is neither just nor functional to allow a partisan plan proposal to be endorsed and publicized by the [ACOM] Debtors, but criticized under seal; to discourage and threaten to punish open criticism of the [ACOM] Debtors' handling of these cases; or to employ threats behind closed doors to force a settlement that no rational person would otherwise accept," Mr. Bienenstock asserts. Mr. Bienenstock clarifies that the ACC Senior Noteholders do not seek full-blown disclosure to jeopardize the ACOM Debtors and their estates. Determination of the Intercompany Claim Is Mandatory Mr. Bienenstock asserts that the creditors have a right to the adjudication and determination of each estate's assets and liabilities. "Determining the assets and liabilities of each Debtor's estate is mandatory, not discretionary." Mr. Bienenstock contends that by ordering the ACOM Debtors to remain neutral and establishing the MIA Process, the Court established a construct to preserve a level-playing field. He relates that if the Ad Hoc Committee of ACC Senior Noteholders is silenced and stripped of its authorization to litigate or settle the Intercreditor Disputes or if the ACOM Debtors' patent lack of neutrality is tolerated, "then the field will no longer be level and the rules will change in the middle of the game." Mr. Bienenstock points out that the creditors have relied on the Court's insistence on due process and fundamental fairness through the MIA Process and neutralization of the ACOM Debtors. The purported settlement set forth in the Term Sheet is neither operative as a settlement nor entitled to the deference otherwise given a settlement proposed by a non-conflicted representative of the estate based on an evaluation of the merits of the underlying dispute, Mr. Bienenstock contends. Mr. Bienenstock asserts that any proposed plan that sidesteps the merits of the Intercreditor Disputes and ignores the ACOM Debtors' inherent conflicts cannot be confirmed. The only viable exit strategy, according to Mr. Bienenstock, is to adjudicate the Intercreditor Disputes and the Intercompany Claims, unless the authorized committees determine to settle them, which no one contends has occurred. 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 administered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue Nos. 145; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ACTUANT CORP: Buys Actown-Electrocoil Stock for $24 Mil. in Cash ---------------------------------------------------------------- Actuant Corporation completed the purchase of all of the outstanding stock of Actown-Electrocoil, Inc. for approximately $24 million in cash. Funding was provided from borrowings under Actuant's revolving credit facility. Actown will be a part of Actuant's Tools & Supplies Segment. "Actown is a great addition to our Professional Electric product line, which also includes Amveco and Acme Transformer," Mark Goldstein, Executive Vice President of Actuant and Tools & Supplies Leader, stated. "Actown's focus on the OEM customer base within the magnetics and sign markets is an excellent complement to our existing businesses. Its engineering expertise, long- standing customer relationships and global footprint allow us to offer the market a broader range of products and services. We are excited that Dave Weisberg, Steve Duffy and the rest of the current Actown management team will continue to play an important role in the Company's future." About Actuant Corp Headquartered in Glendale, Wisconsin, Actuant Corp. (NYSE:ATU) -- http://www.actuant.com/-- is a diversified industrial company with operations in more than 30 countries. The Actuant businesses are market leaders in highly engineered position and motion control systems and branded hydraulic and electrical tools and supplies. Since its creation through a spin-off in 2000, Actuant has grown its sales from $482 million to over $1 billion and its market capitalization from $113 million to over $1.5 billion. The company employs a workforce of approximately 6,000 worldwide. Actuant Corporation trades on the NYSE under the symbol ATU. Actuant Corp.'s 2% Convertible Senior Subordinated Debentures due 2023 carry Standard & Poor's B+ rating. ADVOCAT INC: Completes $30.6-Mil. Refinancing with Capmark Finance ------------------------------------------------------------------ Advocat Inc. completed its comprehensive refinancing transaction Capmark Finance, Inc. On Aug. 7, 2006, the Company entered into a $30.6 million refinancing with Capmark which retired existing mortgage and bank term debt and provided funds for a $1.1 million renovation of a nursing center. The new debt includes $22.5 million in mortgages with 25-year principal amortization and a five year term, and an $8.1 million term note with a four year term. In addition, the Company made a payment of approximately $2.5 million to reduce outstanding debt. The refinancing allows Advocat to classify $24.5 million in debt that was refinanced in the transaction as long-term at June 30, 2006. Advocat is now in compliance with all its debt covenants. Headquartered in Brentwood, Tennessee, Advocat Inc. (OTCBB: AVCA) -- http://www.irinfo.com/avc-- provides long-term care services to nursing home patients and residents of assisted living facilities in nine states, primarily in the Southeast. The Company has 43 centers containing 4,505 licensed nursing beds. * * * As reported in the Troubled Company Reporter on April 3, 2006, BDO Seidman LLP raised substantial doubt about Advocat 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 Company is not in compliance with certain debt covenants that allow the holders to demand immediate repayment. It has limited resources, including working capital, available to fund the reserve recorded for retained professional liability risk and to meet its debt service requirements during 2006. AGRICORE UNITED: Acquires Hi Pro Feeds for $38.5 Million -------------------------------------------------------- Agricore United reported the acquisition of Hi Pro Feeds, a Goldsmith Agio Helms client, for $38.5 million plus working capital. "We were delighted to be a part of this exceptional transaction outcome for Friona Industries as well as helping to form Agricore United's first U.S. acquisition" Barry D. Freeman, Managing Director and shareholder of Goldsmith Agio Helms disclosed. "Agricore United should benefit tremendously with the addition of Hi Pro's management team, quality products, excellent brand reputation, and strong growth trajectory in the dairy markets of west Texas and eastern New Mexico. The Hi Pro transaction was our fourth completed sale mandate in the animal nutrition sector for our firm's active agribusiness practice and representative of the strong outcomes we are securing for our clients." "The sale of Hi Pro, a business Friona established nearly 40 years ago, was highly opportunistic and based on the tremendous interest we had been receiving in the strong franchise that had been built in our area" James E. Herring, President and Chief Executive Officer of Friona Industries, L.P., commented. "We at Friona all would like to thank the good people at Hi Pro for their years of service with us and wish them only continued success with their new partners at Agricore United. We would also like to recognize the exceptional job executed by the team at Goldsmith Agio Helms who played a key role in orchestrating this entire transaction." About Agricore United Headquartered in Winnipeg, Manitoba, Agricore United Limited (TSX: AU.LV, TSE: AU) -- http://www.agricoreunited.com/-- is an agri- business with extensive operations and distribution capabilities across western Canada. The Company's operations are diversified into sales of crop inputs and services, grain merchandising, livestock production services and financial services. * * * As reported on the Troubled Company Reporter on Aug. 2, 2006, Moody's Investors Service assigned a Ba3 rating to new senior secured credit facilities for Agricore United and AU Holdings Inc., a Ba2 rating to Agricore United's $525 million senior secured revolving credit, and a Ba3 corporate family rating. Moody's also assigned an SGL-2 speculative grade liquidity rating to Agricore United. The outlook on all ratings is stable. These represent first-time ratings for this company. ALLIED HOLDINGS: Judge Mullins Allows Allens to File PI Suit ------------------------------------------------------------ The Honorable Coleman Ray Mullins of the U.S. Bankruptcy Court for the Northern District of Georgia signed a consent order modifying the automatic stay solely to permit Joseph and Zula Allen to: (i) resolve or to file and maintain an action against the Debtors, with respect their personal injury tort claims and property damage claims, so as to proceed to final judgment or settlement of the claims; and (ii) attempt to recover any liquidated final judgment, or settlement of, the Claims from the Debtors' available insurance policies. Recovery will be limited to the Debtors' applicable insurance policies. Any insurance policy proceeds received by the Allens will be in full satisfaction of their Claims. The Allens were seriously injured when a truck, driven by an employee of the Debtors, struck their vehicle. The Allens have not commenced a lawsuit when the Debtors filed for Bankruptcy. The Allens asked the Court to modify the automatic stay to allow them to pursue a settlement or to bring suit against Allied Holding, Inc., Allied Systems, LTD. (L.P), or Allied Automotive Group, Inc., in a non-bankruptcy court of their choosing, to pursue a claim for injuries and damages. On February 14, 2006, the Allens filed proofs of claim in the Debtors' bankruptcy cases. Mitchell S. Rosen, Esq., at Rosen Law Group, LLC, in Atlanta, Georgia, relates that the Allens will look solely to the Debtors' liability insurance coverage for the settlement or the satisfaction of any judgment obtained. Mr. Rosen asserted that relief is warranted because: -- the Debtors' insurer will bear the costs of litigation and the responsibility of satisfying any judgment so that neither the Debtors nor their estate will be prejudiced by permitting the Allens to bring suit against them; -- if the Debtors accept primary responsibility for the claims, their estate will not be diminished, given that the benefit conferred on them by the transfer of responsibility from the insurer will be essentially equal to the burden so assumed; -- if the stay is not lifted, the Allens will likely be unable to recover for the damages they suffered as a result of the Debtors' negligence; and -- the Allens will very likely succeed on the merits of their case against the Debtors. 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. 27; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) AMERIVEST PROPERTIES: Completes Sale of Dallas Office Building -------------------------------------------------------------- AmeriVest Properties, Inc., completed the sale of its Greenhill Park office building in Dallas, Texas. The estimated cash proceeds of $28.4 million, after closing costs and adjustments, will be available, subject to the expenses and other costs of the Company, for distribution to shareholders under the plan of liquidation approved by its shareholders. Greenhill Park is the first property to close under the purchase and sale agreement dated July 17, 2006, with Koll/PER. As reported in the Troubled Company Reporter on AmeriVest Properties Inc. entered into a definitive agreement to sell its entire portfolio of office properties to Koll/PER LLC, a limited liability company owned by The Koll Company of Newport Beach, California, and the Public Employee Retirement System of Idaho. The gross purchase price is $273 million, less a reserve for capital expenditures of approximately $850,000, and includes an assumption of existing property level debt of approximately $126 million. The sale is being made pursuant to the plan of liquidation previously adopted by AmeriVest and approved by its shareholders on May 24, 2006. AmeriVest Properties Inc.'s stockholders approved a Plan of Liquidation at its annual meeting, previously approved by the Company's Board of Directors on Feb. 9, 2006. Under the Plan, the Company's remaining 12 office properties will be sold on an orderly basis and proceeds distributed to stockholders. Additional closings are anticipated to be scheduled as loan assumption approvals are received from AmeriVest's mortgage lenders and other traditional closing activities are completed. The Board of Directors of AmeriVest has not established any dates for the payment of liquidating distributions. There can be no assurance with respect to the timing or amount of any distribution or distributions to be made by AmeriVest, or that any other closings will occur under the purchase and sale agreement or otherwise. A full-text copy of the Purchase and Sale Agreement is available for free at http://ResearchArchives.com/t/s?1010 About AmeriVest Properties Headquartered in Denver, Colorado, AmeriVest Properties Inc. (AMEX: AMV) -- http://www.amvproperties.com/-- provides Smart Space for Small Business(TM) in Denver, Phoenix, and Dallas through the acquisition, repositioning and operation of multi- tenant office buildings in those markets. ASARCO LLC: Bids for El Paso Property Must Be Received by Sept. 14 ------------------------------------------------------------------ ASARCO LLC seeks authority from the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to sell 125.957 acres of vacant real property located in the city of El Paso, Texas, to MEGACON, LLC, for $3,650,000. The proposed sale will include all of the Property's rights and interests, including oil, gas and other minerals, except the rights and interests retained by prior grantors. During the course of ASARCO's Chapter 11 case, RECON Real Estate Consultants, Inc., marketed the Property to more than 50 potential purchasers. RECON delivered offering materials and invited the potential purchasers to meet with ASARCO's management, and provided the potential purchasers the opportunity to conduct due diligence. Pursuant to a purchase agreement dated July 21, 2006, MEGACON will deliver a $67,500 deposit to Del Norte Title Company for the benefit of ASARCO. MEGACON will pay the remaining balance of the Purchase Price on or before the closing of the sale. ASARCO proposes to sell the Property, free and clear of all liens, claims, charges and encumbrances. ASARCO is not aware of any Claims on the Property. To enhance its ability to receive the best value for the Property, ASARCO will solicit higher and better offers for the Property through uniform bidding procedures. Any entity that wishes to participate in the bidding process must deliver a competing offer to Tom Aldrich, Jack Gracie, Ruth Kern, Baker Botts, L.L.P., and Reed Smith, LLP, not later than Sept. 14, 2006. Each Competing Offer must: (a) be accompanied by an executed copy of the Purchase Agreement, marked to show the modifications; (b) be accompanied by a $ 67,500 good faith deposit, which will be transferred by wire to Del Norte Title Company; (c) provide consideration to ASARCO's estate amounting to at least $150,000 greater than the purchase price; and (d) remain open and be irrevocable through the consummation of the Sale. For a bid to be considered a "Qualifying Bid," it must create value to the Property in an amount of at least $150,000 greater than the purchase price. If one or more Qualifying Bid is received, an Auction will be held on Sept. 18, 2006, at 10:00 a.m., at the offices of RECON Real Estate, at 700 N. Stanton St., Third Floor, in El Paso, Texas. The Auction will begin with the highest Qualifying Bid and will continue in minimum increments of at least $25,000 higher than the previous bid. If ASARCO chooses a bidder other than MEGACON, MEGACON will be awarded a $100,000 Break-up Fee. MEGACON indicated that it would not proceed with the purchase of the Property unless it had reasonable assurance that it would receive payment of the Break- up Fee, Tony M. Davis, Esq., at Baker Botts L.L.P., in Houston, Texas, relates. Mr. Davis adds that MEGACON's willingness to commit to a purchase of the Property, subject to higher and better offers, may encourage third parties to submit higher bids for the Property and will serve as a catalyst for subsequent bids. If there are no other competing offers, a hearing to consider the proposed sale will be held at 10:00 a.m., on Sept. 22, 2006. 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. 27; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ASARCO LLC: Wants Brown McCarroll as Environmental Counsel ---------------------------------------------------------- ASARCO LLC seeks authority from the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to employ Brown McCarroll, L.L.P., as its special litigation counsel, nunc pro tunc to June 1, 2006. Brown McCarroll will be assisting ASARCO with the environmental permitting litigation. ASARCO LLC's prior counsel handling the air permitting hearing at the El Paso, Texas, copper smelter withdrew his representation of ASARCO after a conflict arose when the counsel changed firms, James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, relates. Subsequently, ASARCO choose Brown McCarroll, L.L.P., to represent it in the El Paso air permitting hearing. Before the Debtor filed for bankruptcy, Brown McCarroll represented ASARCO as one of the company's environmental counsel, advising ASARCO on many issues, including environmental permitting of its El Paso smelter. Mr. Prince contends that Brown McCarroll is best suited for the job because of the firm's familiarity with ASARCO's business and environmental issues. ASARCO will pay Brown McCarroll according to the firm's customary hourly rates: Professional Hourly Rate ------------ ----------- Primary Attorney $200 to $500 Paraprofessionals $135 ASARCO will also reimburse Brown McCarroll for any necessary out- of-pocket expenses the firm incurred or will incur. Mr. Hopson informs the Court that his firm has a $121,575 general unsecured claim for prepetition services for which ASARCO has not yet paid. Keith Hopson, Esq., a partner at Brown McCarroll, L.L.P., in Austin, Texas, assures the Court that his firm does not represent any interest adverse to ASARCO and its estate, and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. 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. 27; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ASARCO LLC: Wants Lease-Decision Period Extended Until January 16 ----------------------------------------------------------------- ASARCO LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to further extend the time for them to decide whether to assume, assume and assign, or reject their non-residential real property leases until Jan. 16, 2007. The vast majority of the Debtors' Leases relate to the Mission Mine that ASARCO LLC operates on Native American Indian lands leased from the Tohono O'Odham Nation San Xavier District and certain individual members of the Nation. ASARCO operates the mine on those lands pursuant and subject to federal regulations imposed by the U.S. Department of the Interior Bureau of Land Management and Bureau of Indian Affairs. Judith W. Ross, Esq., at Baker Botts L.L.P., in Dallas, Texas, relates that the Indian Leases contain provisions imposing on ASARCO an obligation to conduct post-mining reclamation. The nature and scope of the reclamation obligation, however, is the subject to significant disagreement among the parties. Ms. Ross contends that until the precise nature and scope of the reclamation obligation is established, the Debtors cannot determine whether ASARCO should assume or reject the Indian Leases. As of Aug. 14, 2006, the Bureaus have given ASARCO access only to a small portion of the administrative records responsive to ASARCO's latest Freedom of Information Act request, Ms. Ross tells the Court. Also, the correspondence with the Bureaus has not yet resulted in an understanding concerning ASARCO's mine reclamation obligation. The Debtors, however, still seek a resolution of the reclamation questions and to that end, continue to participate in face-to-face meetings with representatives of the Nation, the Allottees and the Bureaus. With the current uncertainty regarding the nature and scope of ASARCO's reclamation obligations, Ms. Ross says ASARCO is not sure whether, in assuming the Indian Leases, it will be undertaking responsibility to perform millions of dollars in reclamation or more than a billion dollars in reclamation. Ms. Ross maintains that the uncertainty must be resolved before ASARCO can make a reasonable, informed business decision whether to assume or reject the Indian Leases. The Debtors have tried to bring certainty to ASARCO's obligations under the Indian Leases by establishing a bar date procedure that would require the Bureaus to file claims for all defaults existing under the Indian Leases. However, the Bureaus resisted ASARCO's request, and instead filed a proof of claim that failed to address ASARCO's reclamation obligation under the majority of the Indian Leases, Ms. Ross points out. 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. 27; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ATLANTIC MUTUAL: Interest Non-Payment Cues S&P's Default Rating --------------------------------------------------------------- Standard & Poor's Ratings Services revised its counterparty credit rating on Atlantic Mutual Insurance Co. to 'R' from 'B+' and its surplus note rating to 'D' from 'CCC' following the company's nonpayment of interest on its $100 million 8.15% surplus notes that was due on Aug. 15, 2006. Standard & Poor's has learned from more than one source that the New York State Insurance Department disallowed the interest payment. Atlantic Mutual's net loss of $4.6 million for the six months ended June 30, 2006, was greater than the net loss of $1.9 million for the three months ended March 30, 2006, demonstrating continued weakness in earnings. "Based on year-to-date results, we believe Atlantic Mutual is unlikely to meet our prior expectations of earnings of at least 1x interest coverage," said Standard & Poor's credit analyst Jason A. Jones. Another surplus notes issue in the amount of $15 million has interest due shortly, and Standard & Poor's believes it is likely that Atlantic Mutual will default on this payment as well. AUSTIN CO: Wants to Sell U.K. Unit to Austin (GB) Ltd. for $200K ---------------------------------------------------------------- The Austin Company and its debtor-affiliates ask the United States Bankruptcy Court for the Northern District of Ohio for permission to consummate a Share Purchase Agreement with Austin (GB) Limited for the sale of 100% of the capital shares of The Austin Company of U.K. Ltd for $200,000. The Debtors further ask the Court for authority to sell the shares free and clear of liens, claims, interests, and encumbrances and the assignment of certain intercompany receivables owed by Austin UK to the Debtors and for exemption of the sale from transfer taxes. Austin UK Business Austin UK is the Debtor's wholly owned subsidiary that has operated in the United Kingdom for more than 45 years. Based in London, Austin UK primarily provides design, engineering, and construction services to the pharmaceutical industry. Most of Austin UK's projects are repeat business from a handful of clients. Eleven employees maintain the Austin UK operations, which include two locations, the headquarters and one sales office. Austin UK's "backlog" has been significantly reduced in recent years. "Backlog" is a term used by Austin UK and the engineering and construction industry to refer to current work under contract remaining to be performed. As of Dec. 31, 2004, Austin UK's backlog was down 85% from the prior year, which resulted in operating losses in 2004 and 2005. No significant revenue is projected for 2006. The reduction in backlog and revenues for Austin UK has been primarily based on the Debtors' financial instability. In the UK, construction and engineering projects are generally not bonded as they are in the United States. In contrast, UK projects frequently require parent company guaranties. In recent years, the Debtors' financial statements were not strong enough to obtain the confidence of potential UK clients. Austin UK's Pension Liabilities and Deficit G. Christopher Meyer, Esq., at Squire, Sanders & Dempsey L.L.P., in Cleveland, Ohio, tells the Court that Austin UK's pension plan is significantly underfunded. As of December 2005, the value of the Pension Plan's assets were GBP5,086,000 and the value of the Pension Plan's liabilities were GBP7,819,000, for a total deficit of approximately GBP2.733 million, or $4 million. In February 2006, the Pension Plan's actuaries, SBJ Benefit Consultants Limited, projected that the Pension Plan's deficit would grow in 2006 to GBP2.742 million. As of December 2005, the Pension Plan's liabilities are allocated as follows: -- active members, GBP2,710,000; -- deferred members, GBP1,069,000; -- current pensioners, GBP3,487,000; and -- insured pensioners GBP553,000. SBJ estimates that the cost of winding up the Pension Plan is GBP10.7 million. If the Pension Plan is not wound up, it will be burdened with significant annual costs, Mr. Meyer asserts. SBJ estimates that future costs for removing the Pension Plan's funding deficit within 10 years will require annual funding payments of GBP350,000, which does not include the cost of maintaining the Pension Plan's necessary funding; this amount would merely work toward reducing the deficit. Austin UK's projected annual cost for maintaining the Pension Plan includes Austin UK's: (1) cost for funding individuals' benefits, GBP70,000; (2) ongoing expenses for running the Pension Plan, GBP50,000; (3) insurance premiums for insuring death benefits, GBP25,000; and (4) Pension Protection Fund levy payment, GBP20,000. Accordingly, the estimated total annual cost for maintaining the Pension Plan and overcoming the deficit is GBP515,000. According to Mr. Meyer if Austin UK is not sold, then it will probably be liquidated and the Pension Plan will be admitted to the PPF after a one to two year assessment period. If the Pension Plan is administered by the PPF, then pensioners and those members past the normal retirement age of the Pension Plan, age 65, will receive up to a maximum of GBP25,000 each year. Non-pensioners, and any pensioners that are below age 65 will receive 90% of their accrued entitlement, again limited to GBP25,000 each year. During the PPF's assessment period, the PPF will most likely assert its power to obtain assets of Austin UK and the Debtors to make up any deficit. Valuation A formal valuation of Austin UK has not been conducted. However, Austin UK's financial instability, lack of ability to obtain new projects due to the insolvency of its parent company (the Debtors), the lack of any offers to purchase any or all of the Austin UK assets, and the underfunded Pension Plan all suggest a going concern or liquidation value that is nominal or negative. About The Austin Company Headquartered in Cleveland, Ohio, The Austin Company is an international firm offering a comprehensive portfolio of in-house architectural, engineering, design-build, construction management and consulting services. The Company also offers value-added strategic planning services including site location, transportation and distribution consulting, and facility and process audits. The Company and two affiliates filed for chapter 11 protection on Oct. 14, 2005 (Bankr. N.D. Ohio Lead Case No. 05-93363). Christine M. Pierpont, Esq., at Squire, Sanders & Dempsey, LLP, represents the Debtors in their restructuring efforts. M. Colette Gibbons, Esq., and Victoria E. Powers, Esq., at Schottenstein Zox & Dunn Co., LPA, represent 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. BOYD GAMING: Fitch Affirms Low-B Ratings With Stable Outlook ------------------------------------------------------------ Fitch Ratings affirmed Boyd Gaming's credit ratings: -- Issuer Default Rating at 'BB-' -- Senior Secured Credit Facility at 'BB' -- Senior Subordinated Debt at 'B+' The ratings apply to roughly $2.6 billion of outstanding debt as of June 30. The Rating Outlook remains Stable. The ratings reflect Boyd's: * sizable and diversified portfolio of quality assets; * successful operating history; and * solid credit metrics. An improving near-term credit profile with improved leverage fueled by an asset sale and a modest level of capital expenditures over the next 12 months is mitigated by: * near-term softness in a core market; * the potential for a budget increase to a large-scale project; and * additional competition. South Coast Sale The company announced the sale of the South Coast, which just opened on December 22, 2005, to Michael Gaughan, the CEO of the Coast properties. Coast was acquired in 2004. Gaughan agreed to sell 15.8 million shares of BYD to finance the purchase and has agreed to provisions that protect BYD. Gaughan can not sell the property for a 5-year period (other than to Boyd) and Boyd also retains the right of first refusal on a future sale for an additional three years. Boyd is using roughly 75% of the proceeds to pay down its bank debt and the remaining 25% to repurchase stock. South Coast was off to a disappointing start, as it only generated $16 million of EBITDA in 1H'06, which is only a 5%-6% annualized return on the nearly $600 million investment. The property has been hampered by poor roadway access from I-15 that will not likely be resolved until mid-to-late-2007 at the earliest. And the property, which is located on Las Vegas Boulevard roughly 5 miles south of Mandalay Bay (the unofficial southern border of the LV Strip), may be too large for the current market. As a result, Fitch believes Boyd's spending for its North Las Vegas project, which is expected to open in 2009, will be lower than South Coast. Given the time and investment it may take to fix the property, Fitch views the sale of South Coast positively, particularly given the terms of the transaction. The net sale price is roughly $513 million, so BYD is recouping roughly 85%-90% of the project cost and receiving roughly 16x annualized EBITDA. And Boyd gets competitive protection since Gaughan agreed to a 5-year non-sale provision (except to Boyd) and an additional 3-year right of first refusal on a future sale. Fitch recognizes that as a result of the South Coast sale, investors will likely question the health of the Las Vegas locals market. There has been evidence of some weakness in the lower-end consumer and the LV locals market is currently showing some softness exacerbated by the increase in capacity from South Coast and Station Casino's Red Rock opening in April. Fitch believes the current softness will be temporary and the capacity increase will be absorbed, as the long-term fundamentals of the LV locals market remain intact. With a mega-project like Echelon Place in the works, investors will also likely question management's development ability following the disappointing results of South Coast. Fitch notes that the project's scale and scope was already set when it acquired Coast (other than an additional hotel tower that was added by BYD management). Also, Coast was run semi-autonomously within Boyd, which prevented maximizing synergies from the acquisition. Furthermore, Boyd developed the highly successful Borgata in Atlantic City as part of a joint venture with MGM MIRAGE and BYD is the current operator of that property. Therefore, Fitch views positively that the Borgata management team is now leading the Echelon development. Borgata Ratings also take into account Boyd's equity stake in the Borgata mega resort in Atlantic City. The property has performed beyond expectations and began upstream cash distributions to the parent companies (Boyd and MGM MIRAGE) last year. Boyd received $29 million from Borgata in 2005 and $43 million in 1H'06. Fitch expects the cash distributions to continue to accelerate, as Borgata benefits from its public space expansion that recently opened on June 30 and the Water Club expansion that is scheduled to open in Q4'07. Echelon Place Fitch is concerned about the level of a budget increase at Echelon Place, its $4 billion mixed-use development on the Stardust site ($2.9 billion of which will be wholly-owned by Boyd.) In its most recent quarterly filing, Boyd indicated that the budget is likely to increase as it continues to progress on development and refine the exact project costs. Furthermore, the large-scale development on the north end of the Las Vegas Strip is targeting a more upscale, destination-focused consumer, so it is somewhat of a departure from the company's core demographic. The Borgata is the company's only higher-end property and the Atlantic City market is still primarily a drive- in market. Therefore, a successful development will nicely diversify the company's cash flow. The project is scheduled to open in mid-2010 and Fitch expects BYD's direct investment to be funded with accumulated free cash flow, dividends from its Borgata investment and additional borrowings. Ratings will be monitored as there is more clarity with respect to the project's scale, scope, and ultimate cost. The non wholly-owned portion of the project ($1.1 billion) will be funded with land from Boyd, cash contributions from its partners, and project finance debt. Funding the project in this manner will likely result in peak leverage in the 5x-range. Competition Other concerns include the increased competition at key properties, including Suncoast in West Las Vegas and Blue Chip in Indiana. Station Casinos opened Red Rock Station in April 2006 and BYD's greatest competitive impact will be felt at Suncoast, which had a revenue and EBITDA decline of 11% and 23%, respectively in Q2. Fitch expects the property's results to continue to be negatively impacted by Red Rock over the next few quarters. Boyd's Blue Chip riverboat casino in Michigan City, Indiana will face significant competition from the Pokagon tribal casino (Four Winds Casino Resort in New Buffalo Township) that is just 15 miles away and scheduled to open in Q3'07. It will be a larger facility than Blue Chip, as Four Winds will have a 130,000 square foot casino with 3,000 slots, 90 table games and a 20-table poker room, and a 164-room hotel compared to Blue Chip, which has a 65,000 square foot casino, 2,170 slots, 53 table games and 184-room hotel. Earlier this year, the tribe had land taken into trust in January and completed financing in June. Harrah's is also undergoing a $485 million construction of a new boat facility for its Horseshoe property in Hammond, Indiana that is scheduled to open in mid- 2008. HET's Horseshoe primarily taps the southeastern Chicago market. BYD's Blue Chip taps the Chicago market for only a small percentage of its business (less than 5%), so the Pokagon tribal casino will have a greater impact to the property's results. Improving Near-term Credit Profile Boyd is likely to benefit from an improving credit profile over the next 12 months. Its last 12 months total debt-to-EBITDA ratio (excluding Borgata operating income, but including pre-opening expenses) was 4.7x as of the end of 2005 and improved to 4.5x at the end of Q2'06. Fitch expects leverage to decline to 3.7x by year-end 2006 driven by the sale of South Coast and modest capital expenditures. That assumes Boyd's $152.5 million purchase of the Dania Jai Alai facility in Florida closes in Q4'06. Free cash flow over the next 12-18 months will likely be used to fund that acquisition and begin construction of an expansion to the facility, which should open at the beginning of 2008. Boyd will also benefit from the acceleration of Borgata's cash distributions noted above, which will help the company's FFO Adjusted Leverage to be lower. Fitch estimates that leverage measure to be 3.4x by year end. (FFO Adjusted Leverage is cash from operations less working capital relative to total debt adjusted for capitalized leases.) Total debt levels as of June 30 were $2.61 billion with $1.46 billion (55%) secured, which consists mostly of its bank facility. Proforma for the South Coast transaction, debt levels reduce to roughly $2.2 billion with $1.1 billion secured (roughly 50%.) Given the limited capital expenditures over the next 12 months, liquidity is adequate with $170 million in cash and roughly $740 million-$755 million available on its bank facility after it pays it down with the South Coast proceeds. Boyd's next maturity does not occur until June 2010 when the revolver comes due. Fitch expects the company to negotiate expanding its credit facility, as it will likely need to have additional capital access, as it starts to pay for its North Las Vegas and Echelon Place projects. Capital expenditures should ramp up significantly in 2008 to mid-2010 when Echelon opens, with 2009 likely being the heaviest year for spending. Fitch's ratings incorporate only one notch differential on the subordinated debt relative to the IDR because Fitch believes there is significant asset value and over collateralization of debt. Fitch's ratings also incorporate a one notch differential on the bank debt relative to the IDR because of its secured status. If there are changes to asset values or security levels, Fitch will revisit its current notching. CALPINE CORP: Court Okays Fishman, May and Doody Employment Pacts ----------------------------------------------------------------- The Hon. Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York approved the Employment Agreements of Calpine Corp. and its debtor-affiliates with three executive vice presidents: 1. Robert E. Fishman, executive vice president for Power Operations; 2. Thomas N. May, executive vice president and president for Calpine Merchant Services Company, Inc.; and 3. Gregory L. Doody, executive vice president, general counsel and secretary. In connection with their restructuring process, the Debtors need talented and experienced executives who can manage their operations and compliment their current management team. Accordingly, the Debtors entered into employment agreements with the three executive vice presidents Fishman EVP Agreement Mr. Fishman will manage the Debtors' 27,000-megawatt portfolio of natural gas-fired and geothermal facilities. He will be responsible for the production and execution of business plans, strategies, and goals for Power Operations. He will also oversee all daily power plant operations, major maintenance and capital project planning, asset management and project development. The salient terms of the Fishman EVP Agreement are: (a) The EVP Agreement will end on June 13, 2007. After termination, Mr. Fishman's employment will be automatically renewed for an additional 12 months; (b) Mr. Fishman will receive: (i) $500,000 annual base salary, subject to the Chief Executive Officer and the Board of Directors' review; (ii) annual cash performance bonus of at least 90% of the base salary; and (iii) a guaranteed minimum success fee, and a one-time success fee on the effective date of a plan of reorganization; (c) Mr. Fishman is eligible to participate in the Debtors' benefit plans and programs available for senior executives; and (d) Mr. Fishman is restricted to be in any way connected to certain energy companies during his tenure and 12 months after his termination. A full-text copy of the Fishman EVP Agreement is available for free at http://ResearchArchives.com/t/s?d3e May EVP Agreement Mr. May will oversee Calpine Merchant, one of the energy commodity trading arms of the Calpine enterprise. The salient terms of the May EVP Agreement are: (a) The EVP Agreement will end on May 30, 2007. After termination, Mr. Fishman's employment will be automatically renewed for an additional 12 months; (b) Mr. May will receive: (i) $500,000 annual base salary, subject to the CEO and the Board's review; (ii) a $500,000 one-time payment, after approval of his Employment Agreement; (iii) $500,000 annual bonus in 2007; and (iv) a guaranteed minimum success fee and a one-time success fee on the effective date of a plan; (c) Mr. May is eligible to participate in the Debtors' benefit plans and programs for senior executives; (d) If Mr. May resigns without good reason, he will pay back to the Debtors a pro rata portion of his signing bonus; (e) Mr. May will be reimbursed of all reasonable commuting expenses from his residence in Princeton, New Jersey, and housing and living expenses for six months commencing on May 30, 2006; and (f) Mr. May is restricted to be in any way connected to certain energy companies during his tenure and 12 months after his termination. A full-text copy of the May EVP Agreement is available for free at http://ResearchArchives.com/t/s?d3f Doody EVP Agreement Mr. Doody will manage all of the Debtors' legal matters, especially the legal aspects of the Debtors' restructuring process. The salient terms of the Doody EVP Agreement are: (a) The EVP Agreement will end on July 17, 2007. After termination, Mr. Fishman's employment will be automatically renewed for an additional 12 months; (b) Mr. Doody will receive: (i) $500,000 annual base salary, subject to the CEO and Board's review; (ii) a $500,000 one-time payment after approval of his Employment Agreement; (iii) $450,000 annual bonus in 2007; and (iv) a guaranteed success fee and a one-time success fee payment on the effective date of the Debtors' plan; (c) Mr. May is eligible to participate in the Debtors' benefit plans and programs for senior executives; (d) If Mr. May resigns without good reason, he will pay back to the Debtors a pro rata portion of his signing bonus; (e) Mr. May will be reimbursed of all reasonable commuting expenses from his residence in Princeton, New Jersey and housing and living expenses for six months commencing July 17, 2006; and (f) Mr. May is restricted to be in any way connected to certain energy companies during his tenure and 12 months after his termination. A full-text copy of the Doody EVP Agreement is available for free at http://ResearchArchives.com/t/s?d34 Matthew A. Cantor, Esq., at Kirkland & Ellis LLP, in New York, asserts that Messrs. Fishman, May and Doody are well qualified for their appointed positions. The executives have had significant experience in the fields that they will be working on. The EVP Agreements are structured to reward value creation, Mr. Cantor says. The EVP Agreements provide that a portion of Messrs. Fishman, May and Doody's potential compensation will be received only after the Debtors' successful emergence from bankruptcy. About Calpine Corp. Headquartered in San Jose, California, Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) CALPINE CORP: Wants Interim Injunction of Nevada Power Litigation ----------------------------------------------------------------- Calpine Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to: (a) enter a declaratory judgment that the continued prosecution of the Nevada Power Action is stayed under Section 362 of the Bankruptcy Code; or (b) in the alternative, enjoin and prohibit the continued prosecution of the Nevada Power Action. Nevada Power Company and Debtors Calpine Corporation and Moapa Energy Center, LLC, are parties to two Transmission Service Agreements, involving the Centennial Project in Las Vegas, Nevada. The Centennial Project is intended to provide for the transmission of electric power to markets in Nevada and the Western United States. The Debtors originally planned to build one of the new power plants contemplated by the Centennial Project. From 2000 to 2001, a series of disputes arose between Nevada Power and various power generators, including the Debtors. Subsequently, the parties negotiated and entered into a global settlement agreement that, among others: -- terminated one of the Debtors' TSAs; and -- required the Debtors to post a $33,000,000 bond for the Centennial TSA. The bond became effective on July 16, 2001, and expired by its own terms on May 1, 2004. Fireman's Fund Insurance Company served as the guarantor of the Debtors' surety bond under the remaining TSA. Fireman's Fund agreed that it would pay for Nevada Power's damages up to the bond's value if the Debtors defaulted on their obligations. In September 2004, Nevada Power filed a lawsuit against the Debtors and Fireman's Fund in the Nevada state court, alleging breach of contract, breach of good faith and fair dealing, specific performance and sought a declaratory judgment against the Defendants. Nevada Power alleged that the Debtors breached the TSAs and that Fireman's failed to pay Nevada Power pursuant to the surety bond. Nevada Power asserted that Fireman's Fund's liability is derivative of the Debtors' alleged breach of their contractual obligation under the TSA. Nevada Power also sought recovery of the full value of the surety bond from Fireman's Fund based on the Debtors' alleged breach. Jeffrey S. Powell, Esq., at Kirkland & Ellis LLP, in New York, tells the Court that Nevada Power and Fireman's Fund have conducted only "minimal" discovery as of Aug. 4, 2006. Both Nevada Power's and Fireman's Funds' discovery plans confirm that there would be a considerable burden imposed on Calpine, Mr. Powell relates. Mr. Powell assert that the Court should extend the automatic stay to prohibit the continuation of the Nevada Power case because: -- a finding of liability against Fireman's Fund would amount to a finding of liability against its principal, Calpine; -- a finding of liability against Fireman's Funds would result in a claim by Fireman's Funds against the Debtors, further jeopardizing property of the Debtors' estate; and -- continuation of the case would impose a significant burden on the Debtors and constitute a major distraction of time and resources away from the Debtors' reorganization efforts. If the Nevada Power case is allowed to proceed, Mr. Powell contends that the Debtors face a significant risk of collateral estoppel, evidentiary prejudice, depletion of estate resources and distraction of key employees. These risks pose a danger to a successful reorganization. Mr. Powell clarifies that the Debtors do not seek a permanent injunction, only an injunction until the Debtors successfully emerges from their Chapter 11 proceedings. A delay in the Nevada Power case proceedings will not diminish the potential liability of Fireman's Funds or complicate the evidentiary burdens of Nevada Power, Mr. Powell points out. About Calpine Corp. Headquartered in San Jose, California, Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) CELL THERAPEUTICS: June 30 Balance Sheet Upside-Down by $102 Mil. ----------------------------------------------------------------- Cell Therapeutics, Inc., reported financial results for the quarter ended June 30, 2006. Net loss for the quarter totaled $21.0 million compared to a net loss of $36.2 million for the same quarter in 2005. For the six months ended June 30, 2006, CTI posted a net loss of $74.2 million compared to $75.3 million for the six months ended June 30, 2005. The net loss for the six months ended June 30, 2006, included $24.5 million in make-whole interest expense due to payments made upon conversions of the Company's 6.75% and 7.5% convertible senior notes. Operating expenses were reduced by 40% compared with the same period in 2005. The Company ended the quarter with approximately $48.1 million in cash and cash equivalents, securities available-for-sale, and interest receivable. "We have worked diligently over the past year to lower our burn rate to the current level," said James A. Bianco, M.D., President and CEO of CTI. "And we now have established regulatory pathways in the United States and in Europe for XYOTAX with the FDA and the EMEA. Bringing XYOTAX to patients can be a major break-through for patients suffering from a disease that is so deadly to so many and only now is just beginning to be recognized as a major cancer killer." As of June 30, 2006, the Company's equity deficit narrowed to $102.173 million from a $107.097 equity deficit at Dec. 31, 2005. Recent Events -- announced encouraging interim results of the EXTEND phase III clinical trial of pixantrone for relapsed non-Hodgkin's lymphoma; -- reached agreement with the U.S. Food and Drug Administration to review a new drug application (NDA) submission for XYOTAX(TM) (paclitaxel poliglumex) based on interim results of the PIONEER trial with the results of the STELLAR 3 and 4 trials to support the filing; -- announced that the Scientific Advice Working Party of the European Medicines Agency agreed in principle that a switch from the superiority endpoints in the STELLAR trials to non- inferiority endpoints could be justified as a pathway to approval using the existing data from the STELLAR clinical trials and that a shift in the non-inferiority margin may also be justified if the safety profile of XYOTAX is superior to comparators in terms of important (serious) side effects and quality of life or use of rescue medications; -- raised $33 million in a 7.5% convertible debt issuance (gross proceeds, prior to interest payments or fees); -- since November 2005, retired, exchanged, or converted approximately $161 million of debt from balance sheet as of June 21, 2006; -- reported the dismissal, with prejudice, of the shareholder class action lawsuit and the dismissal of the shareholder derivative lawsuit; -- reported on results of a phase I/II study of pixantrone combined with fludarabine, dexamethasone, and rituximab for treatment of patients with relapsed indolent non-Hodgkin's lymphoma (NHL); -- reported on results of XYOTAX non-small cell lung cancer clinical trials and a phase I trial of CT-2106 presented at the 2006 Annual Meeting of the American Society of Clinical Oncology; and -- commissioned and reported the results of a national poll showing that women are unaware of the rise and dangers of lung cancer, despite the fact that lung cancer is the number one cancer killer of women and is expected to kill more than 70,000 women this year -- more than breast and ovarian cancers combined. A full-text copy of the Quarterly Report in Form 10-Q filed with the Securities and Exchange Commission is available for free at http://ResearchArchives.com/t/s?ffe About Cell Therapeutics Based in Seattle, Washington, Cell Therapeutics, Inc. (NASDAQ and MTAX: CTIC) -- http://www.cticseattle.com/-- engages in the development, acquisition, and commercialization of treatments for cancer. The company was co-founded by James A. Bianco, Louis A. Bianco, and Jack W. Singer in 1991. CERADYNE INC: 2006 Second Quarter Net Income Increases to $30 Mil. ----------------------------------------------------------------- Ceradyne, Inc., reported increased sales for the second quarter 2006 of $162 million, up from $89.9 million in second quarter 2005. Net income increased to a record $30 million, compared to a net income of $11.4 million in second quarter 2005. Sales for the six months ended June 30, 2006 were $298.4 million, up from $159.7 million in the comparable period last year. Net income for the first six months of 2006 increased to $54.6 million from $17.4 million for the first six-month period in 2005. Total backlog as of June 30, 2006 rose to a record $256.6 million compared to total backlog at June 30, 2005 of $215.6 million. "We are very pleased with the significant increase in our second quarter 2006 financial performance," Joel P. Moskowitz, chief executive officer, commented. "The expansion of production capacity at our Lexington, Kentucky technical ceramic manufacturing facility this year allowed us to ramp up in order to meet the U.S. government's continuing requirements for lightweight ceramic body armor. The award to Ceradyne for ESBI (side plates) in early July of a $59.8 million, 2006 delivery order, as part of a new 5-year indefinite delivery/indefinite quantity contract with a maximum value of $611.7 million, indicates the continued demand for our lightweight ceramic body armor. "The exclusive agreement with Alcan, the establishing of a manufacturing facility in Chicoutimi, Quebec, Canada, and the acquisition of the nuclear radiation shielding business which were announced in July 2006 will put Ceradyne in the aluminum/boron carbide metal matrix composite business in order to produce structural elements for the fabrication of nuclear waste containment vessels. Ceradyne intends to develop ballistic grade aluminum compositions for armored vehicles and use its new Canadian facility as a base for working with the aluminum smelting industry regarding advanced technical ceramic applications. "Additionally, the Company intends to break ground this quarter on a technical ceramic manufacturing plant in Tianjin, China. This 117,000 square foot factory will be Ceradyne's first manufacturing facility in China. Although its initial ceramic product will be related to the Chinese manufacture of silicon solar energy cells, we anticipate it will expand our presence in China and complement our Beijing sales office. Mr. Moskowitz further stated: "We recently commenced a voluntary review of our historical stock option grants and related accounting treatment. This review was initiated by Ceradyne in response to concerns raised by several non-regulatory parties about our stock option granting policies and wide public media coverage of stock option grant issues involving other companies. This review is being conducted by a Special Committee of our Board of Directors, comprised solely of independent directors, with the assistance of independent legal counsel. The review is focusing on stock option grants made during the period of 1997 to the present. "Although the Special Committee's review has not been completed, management has concluded that the measurement dates for accounting purposes differ from recorded dates for certain stock option grants made during 1997 through 2003. As a result of these findings, in the 2006 second quarter, the Company recorded an estimated after-tax, non-cash charge of approximately $1.5 million pertaining to the years ended December 31, 1997 to 2005 and the first six months of 2006. However, because the review has not been completed, the charge we have recorded in the 2006 second quarter may be modified or significantly changed." Ceradyne, Inc. (Nasdaq: CRDN) -- http://www.ceradyne.com/-- develops, manufactures and markets advanced technical ceramic products and components for defense, industrial, automotive/dieseland consumer applications. * * * As reported in the Troubled Company Reporter on July 24, 2006, 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. CIGNA CORP: S&P Assigns BB+ Pref. Stock Rating With Pos. Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary 'BBB' senior debt, 'BBB-' subordinated debt, and 'BB+' preferred stock ratings to Cigna Corp.'s (NYSE:CI) recently filed universal shelf. At the same time, Standard & Poor's affirmed its 'BBB' counterparty credit rating on Cigna Corp. The outlook remains positive. The new shelf has an undesignated notional amount in accordance with the new SEC rules, effective Dec. 1, 2005. "The counterparty credit rating on CIGNA reflects its strong consolidated competitive position, national scope, diversified health and related businesses, and strong capitalization," explained Standard & Poor's credit analyst Shellie Stoddard. "Operating gains have been very strong in the past two years -- a turnaround from the two years before that." Membership has stabilized following prior-year declines because of service problems and corrective pricing actions. These positive factors are partially offset by: * operating expense challenges associated with lower membership (compared with historical levels); * the loss of retirement services business; and * lingering, though diminished exposure to run-off reinsurance operations. CIGNA's operating performance has been strong since 2004 because of significant improvement in its health care segment. Through the second quarter of 2006, CIGNA reported consolidated pretax earnings (excluding realized investment gains) of $786 million, which translates into a strong ROR of 9.8% The health care segment reported pretax earnings (excluding realized investment gains) of $484 million, which constituted the bulk, or 62% of consolidated pretax earnings. Health care segment earnings are expected to constitute an increasing portion of consolidated earnings as the company's medical membership stabilizes, operating expense management improves, and the retirement and reinsurance segments continue to run-off. Although health care earnings were reduced from the prior year because of lower overall revenue and lower guaranteed cost product earnings, the company continued to record favorable claim developments ($16 million in the second quarter), and expense reductions in the segment. Excluding favorable claim developments, CIGNA's medical loss ratio on its guaranteed cost products was 87.6% through the second quarter of 2006. CIGNA's financial flexibility is good. Debt to total capitalization (excluding unrealized capital gains from fixed- income investments but including the minimum pension liability, which is a negative factor in equity) was 22.1% as of June 30, 2006. Debt to tangible capital was 31.1%. EBITDA interest coverage is more than 20x. Connecticut General Life Insurance Co. remains CIGNA's primary operating subsidiary. Consolidated capitalization is currently very strong, estimated at 175% at year-end 2005, and is expected to decline but remain at a level supporting the rating. CIGNA's liquidity is good. As of June 30, 2006, the parent company held cash and short-term investments of approximately $550 million. Through July 2006, the company repurchased $1.5 billion in stock, compared with $1.6 billion for full-year 2005. The company still has $800 million of stock repurchase authority available. CIGNA is expected to return a large portion of the capital generated from the sale of the retirement business to shareholders through share repurchases as it has reduced its annual common stock dividend. As of June 30, 2006, CIGNA had $376 million in short-term debt and $950 million in long-term debt. During May 2006, CIGNA updated its committed lines of credit to $1.75 billion with a letter of credit sublimit facility of up to $1.25 billion. In 2006, CIGNA's membership is expected to grow 1%-2%, with the company's recent acquisition of Star HRG expected to add about 200,000 members in the third quarter of 2006. After-tax operating income for 2006 should be $960 million to $1.02 billion, up from previous expectations of $900 million-$960 million. The company will generate higher levels of cash from operations relative to prior years, and although Standard & Poor's does not expect CIGNA to retain all of these earnings, they do signal enhanced financial flexibility. Debt to capitalization is expected to remain at 25%-30%, even if the company finances a portion of its acquisitions in the near term. On a consolidated basis with its health affiliates, CIGNA's capital adequacy ratio is expected to decline in 2006 but remain at a level supporting the rating. Debt to total capital is expected to be 25%-30%. EBITDA interest coverage is projected at 16x-18x for 2006. On a consolidated basis, as of year-end 2005, CIGNA's current year contractual obligations (excluding insurance liabilities) of $1.20 billion, primarily in other long-term liabilities and purchase obligations, was considerably below its $1.7 billion in cash and equivalents. Dividends from operating companies totaled $1.3 billion in 2005 and are expected to remain the same, at $1.3 billion, in 2006 as CIGNA begins to take excess capital from its regulated subsidiaries. The company continues to fight a number of outstanding claims associated with workers' compensation and personal accident, but Standard & Poor's views the remaining liability to be largely reserved for. CIGNA took a $14 million fourth quarter 2005 charge on one such settlement. CLEAR CHOICE: RJ Easton Takes Equity Stakes on Bay Capital Merger ----------------------------------------------------------------- Clear Choice Financial, Inc., reported the acquisition of Bay Capital Corporation, a wholesale and retail provider of residential mortgages. RJ Easton acted as the exclusive financial advisor to Bay Capital in the sale as well as investor in the transaction. "Our investment in this transaction reflects our confidence in the Clear Choice Financial investment strategy and our dedication to our client Bay Capital," RJ Easton Chairman and CEO Richard Easton said. "We are selective with the clients we represent and invest in their continued success. I have been orchestrating the mergers and acquisitions of middle-market companies since 1978 and believe the Clear Choice/Bay Capital merger is an excellent opportunity for both firms." "The Bay Capital acquisition demonstrates our strategy to develop synergistic opportunities that will position us for growth as a full-service, client-focused, financial solutions provider," Darren Dierich, CFO of Clear Choice Financial Inc. said. "Bay Capital's committed management team, dedicated employees, and experience in the mortgage industry made Bay Capital an ideal acquisition for Clear Choice Financial." About Clear Choice Financial Headquartered in Tempe, Arizona, Clear Choice Financial, Inc. (OTCBB: CLRC) -- http://www.clearchoicecorp.com/-- is a publicly traded company that specializes in assisting consumers with the settlement of unsecured debt through its debt resolution business unit. The Company has acquired Bay Capital Corporation as part of the company's strategy to build a comprehensive financial solutions organization with a national presence. Going Concern Doubt As reported in the Troubled Company Reporter on July 6, 2006, Farber & Hass LLP expressed substantial doubt about Clear Choice's ability to continue as a going concern after it audited the Company's financial statements for the years ended June 30, 2005 and 2004. The auditing firm pointed to the Company's significant net losses and stockholders' deficit. CLECO CORP: Prices Six Million Shares Offering at $23.75 per Share ------------------------------------------------------------------ Cleco, Corp., priced an offering of 6 million shares of common stock at $23.75 per share. The Company granted the underwriters an option to purchase up to an additional 900,000 shares of common stock. Goldman, Sachs & Co. acted as the sole book running lead manager with KeyBanc Capital Markets serving as joint lead manager. A.G. Edwards and Howard Weil Inc. acted as co-managers. The underwriters have a 30-day option to purchase the additional shares at the initial public offering price less the underwriting discount to the extent they sell more than 6 million shares. Net proceeds from the sale will be used to fund a portion of the estimated $1 billion cost of constructing a new 600-megawatt solid-fuel unit at the Company's Rodemacher Power Station in Boyce. Headquartered in Pineville, Louisiana, Cleco Corp. (NYSE: CNL) -- http://www.cleco.com/-- is a regional energy provider, which operates a regulated electric utility company that serves about 267,000 customers across the state. Cleco also operates a wholesale energy business that has approximately 1,350 megawatts of generating capacity. * * * Moody's Investors Service assigned a Ba2 rating to Cleco Corp.'s Preferred Stock in March 2003. CNET NETWORKS: Form 10-Q Filing Delay Prompts Notice of Default --------------------------------------------------------------- CNET Networks, Inc., disclosed that it received a notice from the trustee under the indenture governing the Company's $125 million aggregate principal amount of 0.75% Convertible Senior Notes due 2024, stating that the company is in default of its covenant to file its Form 10-Q with the trustee within fifteen days after it is required to be filed with the SEC. If the default is not cured within 60 days, the bonds may be accelerated by the holders of 25% outstanding principal amount or the trustee. As of June 30, 2006, the Company had approximately $143.3 million of cash and investments. Filing Delay The Company previously disclosed that its board of directors established a special committee of independent directors to review the Company's stock option practices and related accounting. The Company intends to file its Form 10-Q once the special committee has completed its review and the company's independent registered public accountants have completed their procedures. CNET Networks, Inc. (Nasdaq: CNET) is a global media company. The company's brands -- CNET, GameSpot, TV.com, MP3.com, Webshots, BNET and ZDNet -- serve the technology, games and entertainment, business, and community categories. CNET Networks was founded in 1993 and has always been "a different kind of media company" creating engaging media experiences through a combination of world-class content and technology infrastructure. CNET NETWORKS: Covenant Default Cues NASDAQ Delisting Notice ------------------------------------------------------------ CNET Networks, Inc. intends to request a hearing before the Nasdaq Listing Qualifications Panel in response to the receipt of a Nasdaq Staff Determination notice stating that the company is not in compliance with Nasdaq Marketplace Rule 4310(c)(14). The letter, which was expected, was issued in accordance with Nasdaq procedures because the company has not timely filed its Quarterly Report on Form 10-Q for the period ended June 30, 2006. Pending a decision by the hearing panel, CNET's common stock will remain listed on The Nasdaq National Market. There can be no assurance that the hearing panel will grant the company's request for continued listing. The Company previously reported that a special committee of the Board of Directors is conducting a review of the company's stock option practices and related accounting. The Company intends to file its Form 10-Q once the special committee has completed its review and the company's independent registered public accountants have completed their procedures. About CNET Networks CNET Networks, Inc. (Nasdaq: CNET) is a global media company. The company's brands -- CNET, GameSpot, TV.com, MP3.com, Webshots, BNET and ZDNet -- serve the technology, games and entertainment, business, and community categories. CNET Networks was founded in 1993 and has always been "a different kind of media company" creating engaging media experiences through a combination of world-class content and technology infrastructure. CNET NETWORKS: Form 10-Q Filing Delay Cues S&P's Negative Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including the 'B' corporate credit rating, on San Francisco-based Internet publisher CNET Networks Inc. on CreditWatch with negative implications. "The action is due to the possible acceleration of $125 million of debt maturities," said Standard & Poor's credit analyst Andy Liu. The potential acceleration of debt stems from CNET's inability to file its quarterly 10-Q on time. If not cured in 60 days, the maturity on the 0.75% convertible senior notes due 2024 may be accelerated by holders of one-quarter of the $125 million outstanding principal amount. While the company has sufficient liquid assets with about $143 million in cash and investment to meet the potential acceleration, this would still represent a significant decrease in liquidity. CNET was identified as one of many companies with questionable stock option granting practices. This led the company to appoint a special committee of independent directors to investigate option grants and their timing. Subsequently, CNET announced that it expects to restate financial statements for 2003, 2004, and 2005 to correct errors related to accounting for stock-based compensation. CNET may also restate its financial statements for earlier years and its operating results for the first quarter of 2006. In addition, CNET has received a delisting notice from the Nasdaq as a result of a breach of exchange rules after it failed to file its quarterly 10-Q report on time. The resolution of the CreditWatch listing will depend on the company filing the delayed financial reports and Standard & Poor's evaluation of CNET's business performance and liquidity at that time. COLLINS & AIKMAN: Contests Huron's First Lien on Molds ------------------------------------------------------ Collins & Aikman Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Michigan to deny Huron Mold and Tools, Ltd., motion to obtain immediate possession of certain molds from the Debtors or receive adequate protection for its $1,496,126 secured claim. The Debtors contend that Huron has not established that it has a valid and enforceable first lien on the Molds. Jason C. Seewer, Esq., at Carson Fischer, PLC, in Bloomfield Hills, Michigan, points out that Huron failed to file any financing statement pursuant to the Uniform Commercial Code for several Molds and also failed to present any documentation regarding other Molds to prove that it satisfied the lien requirement of the Michigan Mold Lien Act. Huron contractually waived any Mold lien claims pursuant to the Debtors' standard terms as provided in their purchase orders. Furthermore, Mr. Seewer argues that Huron failed to provide any evidence that the Molds are diminishing in value or that certain programs are ending. In fact, Mr. Seewer adds, most of the Mold programs will continue for up to five more years. Mr. Seewer notes that the Molds cannot decline in value because they would have no value outside the Debtors' use of them. The Official Committee of Unsecured Creditors supports the Debtors' arguments. 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. 37; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) COLLINS & AIKMAN: Gains Panel's Support Over GM Tooling Dispute --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Collins & Aikman Corporation and its debtor-affiliates agrees with the Debtors' conclusion that, pursuant to Rule 7001 of the Federal Rules of Bankruptcy Procedure, General Motors Corporation's request to obtain possession of certain tooling must be coursed through an adversary proceeding. GM is seeking a "contingent" lift stay to take possession of all tooling related to a particular purchase order upon the happening of certain speculative future events. Under the tooling purchase orders, upon GM's payment of amounts properly invoiced by the Debtors and validly due, GM would own the Tooling. GM asserted it had paid all the amounts due to the Debtors and as a consequence, the Tooling is GM's property and the Debtors' obligation to turn the Tooling over to GM was absolute and unconditional. The Debtors sought to dismiss GM's request to obtain possession of the tooling. The Debtors argued that GM has failed to remit all amounts due for the Tooling and that the request is not properly the subject of a motion, but rather an adversary proceeding, which GM has failed to commence. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, points out that although GM attempts to disguise its request to recover property as a lift stay request, it seeks "immediate access to and possession of the Tooling." This is clearly an action to recover property, Mr. Stamer says. "GM plainly seeks not merely a cursory adjudication as to whether it has a colorable claim to the Tooling, but an order of this Court granting it the authority to access the Debtors' facilities to take immediate possession of Tooling," argues Mr. Stamer. Mr. Stamer explains that a determination of these issues requires the commencement of an adversary proceeding resulting in a trial on the merits, during which GM must submit evidence substantiating its claims. Accordingly, the Committee asks the Court to approve the Debtors' request to dismiss GM's Lift Stay Motion. GM Responds to Objections Scott A. Wolfson, Esq., at Honigman Miller Schwartz and Cohn LLP, in Detroit, Michigan, argues that the Debtors' dismissal request: -- misinterprets the fundamental purpose of a lift stay request; -- ignores express provisions of the Federal Rules of Bankruptcy Procedure; and -- fails to address GM's specific requests. Mr. Wolfson explains that GM never asserted that approval of its request would give it immediate possession of the Tooling. Instead, GM asked the Court to lift the automatic stay to take all "necessary actions" to recover the Tooling upon the occurrence of certain events. These "necessary actions" may include filing a complaint in state court for a final adjudication of GM's interest in the Tooling and ultimately recovery by GM, Mr. Wolfson says. Mr. Wolfson contends that GM does not request recovery of the Tooling; the determination of the validity, priority or extent of its interest in the Tooling; and a declaratory judgment. No adversary proceeding is required for disposition of the Tooling Request because the Court need only determine whether GM has presented a colorable claim to lift the automatic stay, Mr. Wolfson notes. If the Court wants to consider the Debtors' claims and defenses as they relate to GM's interest in the Tooling, the Court may do so without requiring an adversary proceeding, maintains Mr. Wolfson. 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. 37; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) COMMSCOPE INC: Moody's Confirms Low-B Corporate and Debt Ratings ---------------------------------------------------------------- Moody's Investors Service concluded its review of CommScope, Inc., and confirmed its Ba2 Corporate Family Rating and B1 subordinated debt rating. The ratings were confirmed after CommScope withdrew its debt financed $1.7 billion offer for Andrew Corporation. While Moody's believes the Company will continue to evaluate acquisitions within their markets, the Ba2 rating provides room for smaller debt financed acquisitions to fill gaps in its product offering. The Company's Ba2 rating is supported by its low leverage of 2.2x adjusted LTM EBITDA, , successful integration of the previously acquired Connectivity Solutions business from Avaya, leading global market positions supplying coaxial cable, fiber optics, complex wiring systems and environmental enclosures for the cable, telecom and enterprise markets, and continued growth in telecom and enterprise customer spending. Although the credit metrics and market position may support a higher rating, the firm's acquisition appetite, the cyclicality of the cable, telecommunications and enterprise connectivity businesses and competition from larger, well capitalized competitors constrain the rating. The outlook is stable. Ratings confirmed include: * Corporate Family Rating -- Ba2 * Convertible Senior Subordinated Debentures $250 million due 2024 - B1 The ratings could be positively impacted by continued growth in revenue, EBITDA and free cash flow along with increased market share within its business segments. CommScope's ratings may be negatively impacted by greater than expected increases in material costs, severe downturn in customer spending across segments, or a large debt financed acquisition, share repurchase or dividend. CommScope is a provider of cable and connectivity solutions for enterprise, cable, and telecom industries. The Company is headquartered in Hickory, North Carolina. COMPLETE RETREATS: Gets Final Court Nod for $12 Million DIP Loan ---------------------------------------------------------------- The Honorable Alan H.W. Shiff of the U.S. Bankruptcy Court for the District of Connecticut authorized Complete Retreats LLC and its debtor-affiliates, on a final basis, to borrow up to $12,223,000 from The Patriot Group, LLC, as lender and agent, and LLP Mortgage, Ltd. All objections to the Debtors' request for the entry of the Final DIP Order are deemed overruled to the extent not withdrawn. The Court approved the Debtors' DIP Credit Agreement, as modified: 1. The maximum amount of the DIP Facility Commitment is increased from $10,000,000 to $12,223,000, plus up to $1,900,000 in Carve-Out Expenses if Lenders elect to fund Carve-Out Expenses. 2. The 13-week Budget for postpetition operating expenses and other costs for the administration of the Debtors' cases is amended. A copy of the 13-week Budget is available at no charge at: http://researcharchives.com/t/s?1002 3. Events of default include the Debtors' failure to: * provide the DIP Lenders with an executed financing commitment for a New DIP facility which has been approved by the Official Committee of Unsecured Creditors, in form and substance acceptable to the Lenders, with a third- party lender, by Sept. 30, 2006; and * file with the Bankruptcy Court a motion to approve the New DIP Facility Commitment by Oct. 10, 2006. 4. The DIP loan will mature on the earliest of: (i) Oct. 15, 2006; (ii) Oct. 31, 2006, if the New DIP Conditions are met; (iii) the effective date of a plan of reorganization concerning any Debtor; or (iv) the date on which an Event of Default occurs. 5. All DIP Loan Advances under and after the entry of the Final Order after Sept. 30, 2006, will be conditioned on the New DIP Facility Commitment or an alternative New DIP Facility financing commitment in form and substance acceptable to the Lenders. The Lenders are granted valid and perfected security interests and liens, superior to all other liens, claims, security interests and encumbrances. The Lenders are also granted an allowed superpriority administrative claim for all of the Debtors' postpetition obligations. The Lenders' liens and security interests in the Collateral and the Superpriority Claim will be subject only to: * U.S. Trustee fees pursuant to 28 U.S.C. Sec. 1930(a)(6); * Clerk of Court fees; * professional fees, up to $1,500,000; and * unpaid business payroll expenses, up to $400,000. As further adequate protection, the Debtors will pay monthly to the Lenders: 1. the reasonable attorneys' fees and expenses incurred by each Lender in connection with the Debtors' cases and the Existing Loans; and 2. accrued interest on the Existing Loans. The rights granted to the Lenders relating to the Existing Loans and the Prepetition Obligations are without prejudice to the right of the Official Committee of Unsecured Creditors to: 1. object to or challenge the provisions of the Final Order and the Interim Order related to -- the validity, extent, perfection or priority of the mortgages, security interests and liens of the Lenders in connection with the Existing Loans and the Prepetition Obligations; or -- the validity, priority, status or amount of the Existing Loans or the Prepetition Obligations; or 2. assert any claim or cause of action at law or in equity against the Lenders related to the Existing Loans, Prepetition Obligations and the Lenders' relationship or conduct with respect to the Debtors. The Committee and any party-in-interest with requisite standing will have until Oct. 3, 2006, to object to the validity of the Prepetition Obligations or assert any Lender Claims. The Court may extend the Objection Period for up to two successive periods of not more than 30 days each for good cause shown. A full-text copy of the Final DIP Order is available for free at: http://researcharchives.com/t/s?1003 A full-text copy of the Modified DIP Credit Agreement is available for free at: http://researcharchives.com/t/s?1004 The Debtors relate that they will use their best efforts to deliver to the Lenders an executed New DIP Facility Commitment by Aug. 31, 2006, as approved by the Committee and to file a New DIP Facility Motion by Sept. 10, 2006. About Complete Retreats Headquartered in Westport, Connecticut, Complete Retreats LLC operates five-star hospitality and real estate management businesses. In addition to its mainline destination club business, the Debtor also operates an air travel program for destination club members, a villa business, luxury car rental services, wine sales services, fine art sales program, and other amenity programs for members. Complete Retreats and its debtor- affiliates filed for chapter 11 protection on July 23, 2006 (Bankr. D. Conn. Case No. 06-50245). Nicholas H. Mancuso, Esq. and Jeffrey K. Daman, Esq. at Dechert LLP represent the Debtors in their restructuring efforts. Michael J. Reilly, Esq., at Bingham McCutchen LP, in Hartford, Connecticut, serves as counsel to the Official Committee of Unsecured Creditors. No estimated assets have been listed in the Debtors' schedules, however, the Debtors disclosed $308,000,000 in total debts. (Complete Retreats Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). COMPLETE RETREATS: Robert McGrath Quits as CEO of Tanner & Haley ---------------------------------------------------------------- Robert McGrath has resigned as chief executive officer of Tanner & Haley Resorts. In a letter dated Aug. 15, 2006, Holly Felder Etlin, chief financing officer of Tanner & Haley, stated that in his resignation, Mr. McGrath concluded that he could best enable the company he founded to successfully complete its financial reorganization by stepping down. According to Ms. Etlin, Mr. McGrath is widely credited with inventing the destination club business, which currently numbers more than twenty major players and generates total revenues of more than a billion dollars. About Complete Retreats Headquartered in Westport, Connecticut, Complete Retreats LLC operates five-star hospitality and real estate management businesses. In addition to its mainline destination club business, the Debtor also operates an air travel program for destination club members, a villa business, luxury car rental services, wine sales services, fine art sales program, and other amenity programs for members. Complete Retreats and its debtor- affiliates filed for chapter 11 protection on July 23, 2006 (Bankr. D. Conn. Case No. 06-50245). Nicholas H. Mancuso, Esq. and Jeffrey K. Daman, Esq. at Dechert LLP represent the Debtors in their restructuring efforts. Michael J. Reilly, Esq., at Bingham McCutchen LP, in Hartford, Connecticut, serves as counsel to the Official Committee of Unsecured Creditors. No estimated assets have been listed in the Debtors' schedules, however, the Debtors disclosed $308,000,000 in total debts. (Complete Retreats Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). CONCORD RE: S&P Assigns BB+ Rating to $375 Million Debt Facility ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' senior secured debt rating to Concord Re Ltd.'s term loan debt facility of up to $375 million. Concord is a limited-life, special-purpose, Class 3 reinsurance company domiciled in Bermuda and set up specifically to offer quota share reinsurance to Lexington Insurance Co. (Lexington; AA+/Negative/--). "The rating reflects the application of our criteria for single- event risk," explained Standard & Poor's credit analyst James Brender. "Ratings for securities that expose investors to a loss of principal or interest from a single natural peril are capped at 'BB+'." Perils that could impair Concord's debt include a New Madrid earthquake or a very severe hurricane in either Florida or along the northern part of the East Coast. Output from modeling agencies indicates the probability of any of these events occurring is extremely remote. Concord has a very strong modeled cumulative probability of attachment of 25 basis points over at least three years and an investment-grade adjusted probability of attachment of 62 bps. The difference between the modeled and adjusted probabilities is mainly because of charges for modeling risk, operational risk, and the possibility of unfavorable attritional losses. It is important to the financial strength of any sidecar that it accepts business from a cedent capable of attracting quality submissions within appropriate risk tolerances. The quota share treaty between Concord and Lexington is a good example of such a relationship and one from which Concord will in fact benefit from Lexington's strong competitive position, thorough risk management, and strong alignment of interests with Concord. The alignment of interest encourages the cedent to attempt to maximize the sidecar's risk-adjusted profit. Standard & Poor's views the ratio of risk retained by the cedent to risk assumed by the sidecar as the best measure of the alignment of interest between the sidecar and its cedent. This ratio for Lexington and Concord's relationship will be at least 2, which is higher (better) than previously rated sidecars. Concord may borrow up to $375 million from a consortium of lenders for up to five and a half years. The entity's capital structure will include an equal amount of equity. The net proceeds from capital-raising transactions will be placed in a collateral account, which will provide Lexington with a source of indemnity cover for losses relating to its domestic commercial property lines of business. The duration of Concord's assets will be consistent with that of its obligations. Lexington will cede a pro rata portion of the premium from specified lines of its domestic commercial property business -- excluding exposures from program business, terrorism, personal lines, and boiler and machinery -- to Concord through a policy attaching quota share reinsurance treaty. The agreement covers policies incepting between July 15, 2006, and Jan. 15, 2008, but Concord will continue reinsuring Lexington until all covered policies cancel or expire. If Concord has suffered a cumulative net loss as of Oct. 15, 2007, Concord can elect to extend the quota share treaty for an additional 18 months. The sidecar will follow Lexington's fortunes for the first $10 million of coverage ($5 million for the line of construction services). The agreement provides for the periodic testing of the level of Concord's capital and adjustment of the quota share cession downward if capital is inadequate. The tests are based on both projected premium in force and probable maximum losses. CORNELL COMPANIES: Earns $3.9 Million in 2006 Second Quarter ------------------------------------------------------------ Cornell Companies, Inc., earned $3.9 million on $90.5 million of revenues for the second quarter ending June 30, 2006, the Company disclosed on a Form 10-Q filing delivered to the Securities and Exchange Commission on Aug. 9, 2006. Revenues increased around $12 million, or 15.3% for the three months ended June 30, 2006 from $78.5 million for the three months ended June 30, 2005. As of June 30, 2006, the Company's balance sheet disclosed assets amounting to $514.29 million, liabilities totaling $341.88 million and a $172.41 million equity. Liquidity and Capital Resources The Company's primary capital requirements are for (1) purchases, construction or renovation of new facilities; (2) expansions of existing facilities; (3) working capital; (4) pre-opening and start-up costs related to new operating contracts; (5) acquisitions; (6) information systems hardware and software; and (7) furniture, fixtures and equipment. Working capital requirements generally increase immediately prior to commencing management of a new facility as we incur start-up costs and purchase necessary equipment and supplies before facility management revenue is realized. Cash Flows From Operating Activities Cash provided by operations was approximately $10.8 million for the six months ended June 30, 2006 compared to $20.5 million for the six months ended June 30, 2005. The decrease in 2006 is due to an increase in accounts receivable (due to the activation of Moshannon Valley Correctional Center in April 2006) as well as the related timing of collections on accounts receivable in 2006 and 2005. Cash Flows From Investing Activities Cash used in investing activities was approximately $17.1 million for the six months ended June 30, 2006 due to net purchases of investment securities of $1.7 million, capital expenditures of approximately $9.1 million and net payments to the restricted debt payment account of approximately $6.3 million. Cash used in investing activities was approximately $17.1 million for the six months ended June 30, 2005 due to net sales of investment securities of $12.3 million offset by capital expenditures of $23.7 million comprised of approximately $14.6 million for the development of Moshannon Valley Correctional Center and approximately $9.1 million (net) for the acquisition of CSI. Additionally, there were net payments to the restricted debt payment account of approximately $5.8 million. Cash Flows From Financing Activities Cash provided by financing activities was $1.7 million due primarily to proceeds from the exercise of stock options. Cash used by financing activities was approximately $400,000 for the six months ended June 30, 2005, due primarily to repayments of approximately $1.9 million in debt acquired from CSI offset by stock option proceeds received of $1.7 million. A full-text copy of the regulatory filing is available for free at http://ResearchArchives.com/t/s?ffb Headquartered in Houston, Texas, Cornell Companies, Inc. (NYSE:CRN) -- http://www.cornellcompanies.com/-- provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. The Company has 83 facilities in 18 states and the District of Columbia, which includes one facility under construction. Cornell has a total service capacity of 19,506, including capacity for 1,300 individuals that will be available upon completion of the facility under construction. * * * Standard & Poor's Ratings Services lowered its ratings on corrections, treatment, and educational services provider Cornell Companies Inc., including its corporate credit rating to 'B-' from 'B' in May 2005. CONVERIUM AG: Obtains $250 Million Loan from Bank Group ------------------------------------------------------- Converium Holding A.G. has secured a $250 million letter of credit facility from a leading European banking group, at market conditions and available to Converium Ltd with immediate effect. The facility is uncollateralized. It will be used primarily to support third party claims related to the underwriting business. "Our ability to arrange this major uncollateralized facility testifies to the renewed strength of Converium's balance sheet," Paolo De Martin, Chief Financial Officer, said. "From a business perspective, the facility further enhances our competitive position as we prepare for the forthcoming year-end treaty renewals." Converium has made it a policy not to provide any quarterly or annual earnings guidance and it will not update any past outlooks for full-year earnings. It will, however, continue to provide investors with perspectives on its value drivers, certain financial guidance for the full year, its strategic initiatives and those factors critical to understanding its business and operating environment. About Converium Headquartered in Zug, Switzerland, Converium Holding AG -- http://www.converium.com/-- provides treaty and individual coverage for risks including accident and health, credit and surety, e-commerce, third party and professional liability, life, and special casualty. Converium employs about 600 people in 20 offices around the globe and is organized into four business segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on ongoing global lines of business, as well as the Run-Off segment, which primarily comprises the business from Converium Reinsurance (North America) Inc., excluding the U.S. originated aviation business portfolio. * * * Following its publication of its 2005 year-end results, restated financial information for the periods 1998 to 2004, and for each quarter from March 31, 2003, to June 2005, Fitch Ratings affirmed Converium AG's Insurer Financial Strength BBB- rating and removed it from Rating Watch Negative on which it had been placed since Nov. 4, 2005. Fitch also affirmed Converium Holding AG IDR at BB and Converium Finance S.A.'s $200 million subordinated debt due 2032 at BB+. Fitch also removed these ratings from Rating Watch Negative. CREATIVE VISTAS: CEO Issues Letter to Shareholders on Biz Outlook ----------------------------------------------------------------- Sayan Navaratnam, chairman and chief executive officer of Creative Vistas, Inc., issued a Special Letter to Shareholders in an effort to update existing Creative Vistas investors on the current status of the Company, and more importantly, management's perspective on the Company's future growth outlook. Mr. Navaratnam discloses CVAS' latest financial results for the first quarter ending March 31, 2006. Revenues are up 127% year- over-year. The increase is primarily due to the acquisition this January of Cancable, Inc. Business Outlook The letter also reports CVAS' anticipation of: -- robust organic growth, running at annual rates of 20% to 30%, on average, across all our divisions; -- revenues to reach at least $26 million in 2006, up significantly from $8.7 million for 2005. -- a widening of gross margins, to 35% in the current quarter from 32% in the first quarter of 2005 -- yet another sign that CVAS is growing not just in revenues but also, as a result only steps away from achieving profitability. Subsidiaries' Profit The letter also reveals profit at the division level of two subsidiaries. AC Technical Systems and Cancable have both already achieved positive EBIDTA excluding company-wide expenses. CVAS as a whole has seen much more bottom-line volatility, primarily because of financing activities, significant non-cash expenses and one-time costs associated with the acquisition of Cancable. Mr. Navaratnam declares that the wide swings do not reflect the much more steady operational performance of CVAS. The real question for its shareholders is whether finance-related factors will continue to have such a large impact on the Company's bottom line going forward. On that score, the Company believes it is reasonable to expect that CVAS' revenue growth and improving margins will enable it to continue to reduce its debt and other obligations to the point where it can achieve steady company-wide profitability. Financing costs, in other words, are a short-term component of a long-term strategy. The long-term strategy is one of consistent growth ahead in an extremely favorable market. Cancable Acquisition Benefit With the acquisition of Cancable, a provider of contract field technical support services and help-desk technical support for cable companies, CVAS now is poised to carry out its strategy of developing and deploying video and data processing technologies to two converging markets -- surveillance and IP/broadband. The letter asserts that the security surveillance industry is booming in a world forced to confront terrorism and other threats to property and physical safety. Video security systems are everywhere, delivering advanced digital technology for reasonable prices. One CVAS subsidiary, AC Technical Systems, has been planning, engineering, integrating and installing such systems since 1990. It is now one of the leading such providers in Canada and is gaining US based customers. Its clients include the Air Canada Centre in Toronto (home to the Maple Leafs and Raptors), BMW, PeopleSoft, various government ministries and the Canadian grocery giant Loblaws. Another CVAS unit, Iview Digital Video Solutions, provides surveillance technology to a wide range of customers in manufacturing, government, and health care. Its products include unique state of the art panoramic camera and digital systems for compressing, transmitting and analyzing images. Its new I-VMS (Intelligent Video Management Systems) line is capable of managing over 1,000 cameras. Iview DVSI's products are being used by a blue chip customer base that includes the Air Canada Centre, a large pharmaceutical company and a police department in Michigan. With the acquisition of Cancable, which is involved in computer networking as well as services to cable companies, CVAS now can develop surveillance systems and technology that take advantage of broadband and the Internet. Video surveillance has gone from analog to digital, enabling systems to manage, analyze and distribute images over the Internet. Video security and information technology are converging to create more powerful, complex and specialized systems, built around broadband connectivity. With the combined forces of Cancable, AC Technical Systems and Iview, the Company has a great platform for growth, not just in Canada but throughout North America and globally. The letter also states that in the coming months, shareholders will likely be hearing about a number of new CVAS contracts and installations, both in Canada and the U.S. The Company also plans to continue to seek acquisitions through a strong M&A program that fits within our strategy of providing a fully integrated suite of video surveillance products and services. Planned Investor Relations Program Finally, Mr. Navaratnam reports that CVAS has retained the investor relations services of Investor Relations International to help increase its exposure to the investment community. The Company urges shareholders to contact its representative, Haris Tajyar, of IRI to further discuss the Creative Vistas story and its outlook. In conclusion, the Company is looking forward to a new era of growth and expansion for Creative Vistas and is looking forward to keeping its shareholders updated through new and aggressive communications, according to Mr. Navaratnam. Creative Vistas, Inc. Based in Whitby, Ontario, Creative Vistas, Inc. (OTCBB: CVAS), provides advanced security and surveillance products and solutions. It also provisions the deployment and servicing of broadband technologies to the commercial and residential market. It primarily operates through its wholly owned subsidiaries AC Technical Systems Ltd and Iview Digital Video Solutions Inc, to provide integrated electronic security and surveillance systems and technologies. It provides its systems to various high profile clients including: Government, School Boards, Retail Outlets, Banks, and Hospitals. The Company operates through its subsidiary Cancable Inc. to provision the deployment of broadband technologies to the commercial and residential market. The Company has offices in Ontario, Canada. At June 30, 2006, Creative Vistas' balance sheet showed a stockholders' deficit of $9,886,638, compared to a deficit of $3,328,935 at Sept. 30, 2005. DANA CORP: Wants Modified Burns, et al. Employment Pacts Approved ----------------------------------------------------------------- Dana Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve the employment agreements of Michael J. Burns, president and chief executive officer, and five key executives of Mr. Burns' core management team, as modified. The Debtors previously asked the Court to approve the employment agreements of Mr. Burns and five key executives of Mr. Burns' core management team. Corinne Ball, Esq., at Jones Day, in New York, informs the Court that the Debtors have continuously engaged in extensive discussions with, among others, the Official Committee of Unsecured Creditors regarding concerns relating to certain terms of the Original Employment Agreements. Based on those discussions and the Debtors' continuing review of the Original Agreements, the Debtors have made these modifications: Item Modified Agreements ---- ------------------- Performance Metric Consummation of a plan of reorganization. Total Enterprise Value is six months after the Effective Date of a plan. Threshold Completion Bonus 66% of Target Completion Bonus if employed on pay-out date and TEV on the Valuation Date is equal to $2,000,000,000. Minimum Completion Bonus 50% of Target Completion Bonus if employed on pay-out date. Variable Pay-out Above Minimum Completion Bonus, pay-out varies depending on TEV, without a cap. Form of Payment Minimum Completion Bonus is payable in cash. Amounts in excess of Minimum Completion Bonus payable in common stock of reorganized Dana, provided that the common stock is (i) listed and readily tradable, or (ii) subject to repurchase by reorganized Dana if the Senior Executive is not employed by reorganized Dana after the Effective Date, otherwise payable in cash. Timing Pay-out Minimum Completion Bonus will be paid on Effective Date with the remainder payable six months after Effective Date. Impact of Death, Disability Prior to completion of or Involuntary Termination business plan: None. Without Cause or Voluntary Termination for Good Reason Prior to Effective Date: (with respect to Mr. Burns) Pro rata. on Completion Bonus After Effective Date: Full pay-out. Impact of Voluntary Prior to Effective Date: Termination Without No pay-out. Good Reason (with respect to Mr. Burns) After Effective Date: Full pay-out. The Original Agreements were further modified to reflect that: (a) The term of the Employment Agreements of Mr. Burns and the Executives is until the Effective Date of a plan of reorganization; (b) If Mr. Burns and the Executives are (i) involuntarily terminated without cause, (ii) are voluntarily terminated for good reason, or (iii) failed to complete a replacement employment agreement upon expiration of the Agreement prior to the Plan Effective Date, they are to enter into an 18-month non-compete agreement in exchange for compensation equal to 12 months salary, plus annual bonus; (c) Prior to the Plan Effective Date, if Mr. Burns and the Executives are involuntarily terminated for cause or are voluntarily terminated without good reason, they are to enter into an 18-month non-compete agreement; (d) Issues regarding termination after the Plan Effective Date and a change of control after the Plan Effective Date are deferred; and (e) The Senior Executive Retention Program will be assumed on earlier of termination without cause, with good reason with respect to Mr. Burns, confirmation of a plan, death or disability. Ms. Ball asserts that the Modified Employment Agreements will permit the Senior Executives to make the difficult choices that must be made in any restructuring while incentivizing them to maximize the enterprise value of the reorganized Debtors for the benefit of all stakeholders. Responses In separate letters to the Court, Gudrun Carr and an unidentified person argue that the Debtors' executive officers and members of the Board of Directors should not be awarded high salaries, bonuses and fringe benefits. Mr. Carr and the unidentified person are both retirees and stockholders of Dana Corp. The Retirees assert that if the Debtors' Executives are compensated because their stock holdings are at a very low dollar value, then the employees and retirees that are shareholders should also be compensated. The Retirees contend that the employees and retirees' health care benefits should not be rid of just to pay the Debtors' Executives. About Dana Corporation Toledo, OH-based Dana Corp. -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. The company and its affiliates filed for chapter 11 protection on Mar. 3, 2006 (Bankr. S.D.N.Y. Case No. 06-10354). Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). The Debtors' consolidated balance sheet at March 31, 2006, showed a $456,000,000 total shareholder' equity resulting from total assets of $7,788,000,000 and total liabilities of $7,332,000,000. DANA CORP: Wants Second Toledo Press Settlement Pact Approved ------------------------------------------------------------- Dana Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve their second Settlement Agreement with Toledo Press Company. The Debtors and Toledo Press are parties to several equipment purchase agreements pursuant to which the Debtors bought two 2,500-ton presses and two 1,000-ton presses and certain related equipment from Toledo Press. As reported in the Troubled Company Reporter on June 9, 2006, the Debtors entered into a Settlement Agreement with Toledo Press, resolving certain disputes between the parties relating to shipping charges incurred in connection with the delivery of certain equipment sold by Toledo Press to the Debtors. The purchase price of the Equipment amounts to more than $10,000,000, which will be paid through a series of quarterly payments until July 2006. The Equipment was used in the Debtors' Structures Division for the manufacture of frames for light trucks and automobiles. Toledo Press procured the Equipment from China and shipped it to the Debtors' facility in Hopkinsville, Kentucky. Toledo Press was responsible for installing the Equipment and providing other related services. The Purchase Agreements provided that the Debtors grant purchase money security interests to Toledo Press to secure payment of the Purchase Price. According to Toledo Press, the Equipment arrived at the Hopkinsville Facility from October 2005 through January 2006. After the delivery of the Equipment to the Debtors, Toledo Press then filed financing statements in the Commonwealth of Virginia, seeking to perfect the security interests granted pursuant to the Equipment Purchase Agreements. As of Mar. 3, 2006, the Debtors owed Toledo Press $3,825,100 under the Equipment Purchase Agreements, Corinne Ball, Esq., at Jones Day, in New York disclosed. Subsequently, the Debtors and Toledo Press disputed: (a) whether the Equipment Charges represented a prepetition or postpetition claim, and whether any portion of the amounts should be paid on a postpetition basis; (b) whether the Alleged Perfection properly perfected the Security Interests; and (c) even if the Security Interests were properly perfected, whether the perfection would be subject to avoidance under Chapter 5 of the Bankruptcy Code. On May 5, 2006, the Debtors and Toledo Press entered into a letter agreement resolving certain of their disputes on a provisional basis: * The Debtors agreed to pay $2,361,850 to Toledo Press; * The provisional payments would be disgorged to the extent that any Court order resolving the Secured/Administrative Claim Dispute provide that the perfection of the Security Interests should be avoided or that Toledo Press' claims are not secured or administrative claims; and * The Debtors would be entitled to hold the $700,000 balance owed under the Equipment Purchase Agreements pending the outcome of the Secured/Administrative Claim Dispute, but ultimately would pay that amount to Toledo Press if Toledo Press was successful in litigation. The Debtors were scheduled to make a second provisional payment of $763,250 to Toledo Press by the end of July 2006. However, because of the negotiation of a resolution of the issues, the parties agreed that the Second Payment would not be paid as scheduled, Ms. Ball says. Also, in May 2006, the Equipment designated by the parties as Press No. 27 malfunctioned and experienced certain mechanical problems. Toledo Press and the Debtors dispute whether the actions of Toledo Press employees or the Debtors' employees caused the mechanical problems with Press 27, Ms. Ball states. Toledo Press was required to provide various warranties with respect to the Equipment under the Purchase Agreements. The Debtors have advised Toledo Press that they are asserting a claim with respect to Press 27 based on Toledo Press' breach of the warranties. Ms. Ball says the Debtors have paid approximately $91,000 to third parties for the repair of Press 27. The Debtors expect to incur $5,000 in additional costs in connection with the Press 27 Warranty Claim. In June 2006, Toledo Press notified the Debtors that in addition to the Security Interests, its claims were secured by a statutory lien on the Equipment arising under Kentucky law. The Debtors have found that litigating the Secured/Administrative Claim Dispute and the Press 27 Warranty Claim in the Court could take substantial time and resources. Given the nature of the dispute, litigation with Toledo Press would be highly fact- intensive and require multiple witnesses, Ms. Ball notes. Thus, the Debtors and Toledo Press negotiated a resolution of the issues and ultimately agreed that: (a) Toledo Press will be permitted to retain the First Payment totaling $2,361,850; (b) the Debtors will not be required to make the Second Payment totaling $763,250, or pay the $700,000 Remaining Balance to Toledo Press; (c) Toledo Press will be have an allowed general unsecured non-priority claim for $1,433,250 against the Debtors; (d) Toledo Press will release the Debtors and other related parties from any claims it may have relating to the Equipment Purchase Agreements; (e) the Debtors will release Toledo Press from any claims they may have under Sections 544 through 550 relating to the potential avoidance of transfers under the Equipment Purchase Agreements and the Press 27 Warranty Claim; and (f) Toledo Press will continue to perform its warranty obligations under the Equipment Purchase Agreements and the Debtors will retain its warranty rights and claims, other than the Press 27 Warranty Claim. About Dana Corporation Toledo, OH-based Dana Corp. -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. The company and its affiliates filed for chapter 11 protection on Mar. 3, 2006 (Bankr. S.D.N.Y. Case No. 06-10354). Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). The Debtors' consolidated balance sheet at March 31, 2006, showed a $456,000,000 total shareholder' equity resulting from total assets of $7,788,000,000 and total liabilities of $7,332,000,000. DEL MONTE: $100 Mil. Loan Add-On Cues S&P to Affirm Low-B Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' bank loan and '1' recovery rating following Del Monte Corp.'s $100 million add- on to the company's term loan B that was used to reduce borrowings under the revolving credit facility and expand its liquidity. The terms and conditions of the incremental borrowing are the same as the existing term loan B loan. Following the $100 million add-on term loan, the company has $400 million remaining under its $500 million term loan accordion feature. Del Monte's bank facilities now consist of a: * $450 million revolving credit facility maturing Feb. 8, 2011; * $407 million term loan A maturing Feb. 8, 2011; and * approximately $893 million in term loan B debt maturing Feb. 8, 2012. Standard & Poor's notes that even with the incremental borrowing, the revised facility of approximately $1.75 billion is slightly less than the $1.88 billion anticipated at the time of its recovery report on Del Monte Corp. published on April 25, 2006. The reduction primarily reflects greater cash flow generation, and changes in tax timing and fees that were used to reduce the borrowing needed to fund Meow Mix and Milk Bone acquisitions. These changes do not materially affect Standard & Poor's simulated default and recovery analysis of Del Monte's bank loan that the rating agency published on April 25, 2006. As of April 30, 2006, the company had approximately $1.3 billion of total debt outstanding. The long-term corporate credit rating on Del Monte is 'BB-' and the rating outlook is negative. The short-term rating on the company is 'B-1'. The ratings reflect San Francisco, California- based Del Monte's aggressive debt levels and exposure to commodity pricing. Partially offsetting these risk factors is the company's diverse product portfolio with leading market shares and high brand recognition in the stable, domestic canned fruit and vegetable processing industry and pet food sector. Ratings Affirmed: Del Monte Corp. * Corporate credit rating: BB-/Negative/B-1 * $100 million add-on term loan: BB (Recovery Rating 1) DELPHI CORP: DAS LLC Inks Settlement Pact with Flex-Tech Trustee ---------------------------------------------------------------- Delphi Automotive Systems LLC and Ericka S. Parker, the Chapter 7 Trustee of Toledo Professional Temps, Inc., fka Flex-Tech Professional Services, Inc., have reached a settlement resolving their dispute. Ms. Parker had sought to lift the automatic stay to pursue a litigation pending in the U.S. Bankruptcy Court for the Northern District of Ohio. In April 2004, DAS LLC filed an adversary proceeding against Ms. Parker, seeking a declaratory judgment to receive a judicial determination of various issues under its 2003 settlement agreement with Flex-Tech, and Initial Transfer FT, Ltd. The Settlement Agreement relates to the payment of DAS LLC's third-party suppliers. Ms. Parker filed her an Answer, Counterclaim, and Third-Party Complaint in June 2004. A year later, DAS LLC amended the Complaint to include three third-party suppliers -- Northwest Controls, Inc., REM Electrics Supply Company, Inc., and Comptrol, Inc. -- as parties in the Litigation. In response, Ms. Parker also filed an Amended Answer, Counterclaim, and Third-Party Complaint. In a Court-approved stipulation, the parties agree, among other things, that: (a) the automatic stay will be lifted for the sole purpose of permitting Ms. Parker to liquidate her claim against the Debtors by continuing the Amended Answer and Counterclaim in the Litigation. Ms. Parker, however, will not further amend the Amended Answer and Counterclaim without further leave of the U.S. Bankruptcy Court for the Southern District Of New York; (b) In the event that the Ohio Bankruptcy Court finds DAS LLC liable to Toledo and Comptrol, Ms. Parker will return to the New York Bankruptcy Court for any further relief of the automatic stay. The parties clarify that the automatic stay will not be modified to allow the Ohio Bankruptcy Court, or any other court, to determine (i) whether the funds allegedly owed by DAS LLC under the Settlement Agreement are assets of the Debtors' estates or (ii) the priority of any claim related to the Litigation. 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. 37; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DELPHI CORP: Posts $2.6 Billion Net Loss in First Half of 2006 -------------------------------------------------------------- Delphi Corp. reported first half 2006 financial results with revenues of $14 billion, and a GAAP net loss of $2.6 billion, including charges of $1.9 billion associated with the company's special attrition program. The company generated $187 million in GAAP cash flow from operations in the first half of the year. Non-GM revenues grew 9% year-over-year to $7.7 billion, representing 55 percent of global revenues. "In the first half of the year, Delphi achieved an 85% acceptance rate of UAW employees signing up for its special attrition program," said Robert Dellinger, Delphi chief financial officer. "The attrition programs are a step in our transformation; however, we continue to experience losses reflecting an uncompetitive U.S. cost structure. Our leadership is addressing these issues with our stakeholders, including our unions and General Motors, as part of our reorganization proceedings through the bankruptcy court." First Quarter 2006 Financial Results: * Revenue of $7.0 billion, up approximately 2% from $6.9 billion in 2005. * Non-GM revenue for the quarter was $3.8 billion, up approximately 8% from $3.5 billion in 2005. Non-GM business represented 54% of revenues, compared to year- ago levels of 50%. * GAAP cash flow used in operating activities was $93 million, as compared to $529 million provided by operating activities for first quarter 2005. Cash used in operations was negatively impacted by the timing of cash collections on sales for first quarter 2006. * GAAP net loss of $363 million or a loss of $0.65 per share compared to net loss of $403 million or a loss of $0.73 per share. Second Quarter 2006 Financial Results: * Revenue of $7.0 billion, the same as in second quarter 2005. * Non-GM revenue for the quarter was $3.9 billion, up approximately 9% from $3.6 billion in second quarter 2005. Non-GM business reached 56% of second quarter revenues, compared to year-ago levels of 51%. * GAAP cash flow provided by operating activities was $280 million, as compared to cash flow used in operating activities of $305 million in second quarter 2005. * GAAP net loss of $2.3 billion compared to second quarter 2005 net loss of $338 million. Included in the second quarter 2006 GAAP net loss are charges related to the previously announced special attrition programs. These charges include a net pension and post-employment benefit curtailment charge of $1.5 billion, primarily due to reductions in anticipated future service as a result of the retirements, and $392 million of charges related to the pre-retirement and buyout portions of the special attrition programs. First Half 2006 Financial Results: * Revenue of $14.0 billion, up slightly from $13.9 billion in first half 2005. * Non-GM revenue for first half 2006 was $7.7 billion, up approximately 9% from $7.1 billion in first half 2005. Non-GM business reached 55% of first half 2006 revenues, compared to year-ago levels of 51%. * GAAP cash flow provided by operating activities was $187 million, as compared to $224 million provided by operating activities for first half 2005. * GAAP net loss of $2.6 billion compared to first half 2005 net loss of $741 million. Included in the first half 2006 GAAP net loss are charges related to the previously announced special attrition programs. These charges include a net pension and post-employment benefit curtailment charge of $1.5 billion, primarily due to reductions in anticipated future service as a result of the retirements, and $392 million of charges related to the pre-retirement and buyout portions of the special attrition programs. A full-text copy of Delphi's Form 10-Q report for the first quarter ended March 31, 2006, filed with the Securities and Exchange Commission is available for free at: http://researcharchives.com/t/s?1005 A full-text copy of Delphi's Form 10-Q report for the second quarter ended June 30, 2006, filed with the Securities and Exchange Commission is available for free at: http://researcharchives.com/t/s?1006 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. 36; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ENRON CORP: Court Approves ONEOK Settlement Agreement ----------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved the settlement agreement between Enron Corp. and Enron North America Corp., on one hand, and ONEOK Energy Services Company, L.P., formerly known as ONEOK Energy Marketing and Trading Company, L.P.; ONEOK, Inc.; and King Street Acquisition Company, L.L.C., on the other hand. Frederick W. H. Carter, Esq., at Venable LLP, in Baltimore, Maryland, related that, ENA and ONEOK entered into various financial and physical trading transactions related to the purchase and sale of natural gas, fuel oil, crude oil, other energy products and other products related thereto and those transactions were governed by various contracts. Enron Corp. guaranteed ENA's obligations to ONEOK under the contracts. After the Debtors filed for bankruptcy, ONEOK transferred its claims against Enron Corp. and ENA to Bear, Stearns & Co. Bear Stearns subsequently transferred its claims to Silver Oak Capital, LLC, as agent for and on behalf of AG Capital Recovery Partners III, LP. Silver Oak subsequently filed Claim Nos. 11322 and 11317 against the Reorganized Debtors. On Nov. 28, 2003, the Debtors filed Adversary Proceeding No. 03-93568 against Silver Oak and AG Capital, seeking to avoid the guarantee agreements. ONEOK later re-acquired from Silver Oak the portion of the Claims at issue in the Adversary Proceeding. Silver Oak later transferred its remaining interests in the Claims to Bear Stearns Investment Products, Inc., and BSIP in turn, transferred its interests in the Claims to King Street, Stark, Seneca Capital, L.P., and Quantum Partners LDC. To settle their disputes, the parties reached the settlement agreement, which provides that: (a) Claim No. 11322 will become an allowed Class 5 general unsecured claim against ENA in an agreed amount, with any interest previously held by Quantum or Seneca to be disallowed and expunged; (b) Claim No. 11317 will become an allowed Class 185 general unsecured claim against ENA in an agreed amount, with any interest previously held by ONEOK, Quantum or Seneca to be disallowed and expunged; (c) Claim Nos. 1132201, 1132203, 1131701, 1131702 and 1131704 will be withdrawn with prejudice and to the extent applicable, expunged; (d) the Adversary Proceeding will be dismissed with prejudice; and (e) the parties will mutually release each other from all claims arising from the contracts, guarantees and the Adversary Proceeding. 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. 177; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ENTERPRISE PRODUCTS: Likely to Acquire $50 Million in Insurance --------------------------------------------------------------- Enterprise Products Partners L.P. expects to receive approximately $50 million during the third quarter ending Sept. 30, 2006, from the partial recovery of business interruption insurance claims associated with Hurricanes Katrina, Rita and Ivan. The collection of these recoveries would increase net income by approximately $0.12 per unit. Currently during the third quarter, Enterprise has collected approximately $42 million of the estimated total. "We have made substantial progress in our efforts to document, submit and work with our insurance adjusters and underwriters on business interruption and property damage claims with respect to Hurricanes Katrina, Rita and Ivan," said Robert G. Phillips, Enterprise's President and Chief Executive Officer. "As a result of these efforts, we are receiving a significant amount of cash recoveries from business interruption insurance in advance of the definitive settlement of these claims. These recoveries will be used to partially fund our capital investment in organic growth projects and for general partnership purposes. We expect additional insurance recoveries during the remainder of 2006 and 2007 for business interruption claims, as well as reimbursement of costs already incurred to repair facilities damaged by the storms. We continue to work with our insurance providers regarding property damage claims." Enterprise also expects, based on current market conditions, that net income for the third quarter of 2006 will exceed the mean estimate of net income for the third quarter of $0.27 per common unit as monitored by First Call. Enterprise is scheduled to announce earnings for the third quarter on October 24, 2006. Headquartered in Houston, Texas, Enterprise Products Partners L.P. (NYSE:EPD) -- http://www.epplp.com/-- provides midstream energy services to producers and consumers of natural gas, NGLs and crude oil. Enterprise transports natural gas, NGLs and crude oil through 33,100 miles of onshore and offshore pipelines and is an industry leader in the development of midstream infrastructure in the United States and the Gulf of Mexico. Services include natural gas transportation, gathering, processing and storage; NGL fractionation (or separation), transportation, storage, and import and export terminaling; crude oil transportation and offshore production platform services. * * * As reported in the Troubled Company Reporter on June 19, 2006, Standard & Poor's Ratings Services affirmed the 'BB+' corporate credit rating on master limited partnership Enterprise Products Partners L.P. and subsidiary Enterprise Products Operating L.P., as well as the 'B+' corporate credit on EPCO Holdings Inc. FALCONBRIDGE LTD: Board Resigns After Xstrata Acquisition --------------------------------------------------------- Following the acquisition by Xstrata plc of 257,700,100 common shares of Falconbridge Limited, giving Xstrata ownership of 92.1% of the Common Shares on a fully diluted basis, each of the members of the board of directors has resigned at Xstrata's request, with the exception of James Wallace who has agreed to remain as a member of the interim Falconbridge Board. The board has been replaced by Xstrata nominees Benny Levene, Thras Moraitis, William Ainley, Douglas Knight and James Wallace. Mr William Ainley will serve as chair of the Board. The Company also reported the departure of Derek Pannell, former Chief Executive Officer of Falconbridge Limited and Steve Douglas, former Chief Financial Officer. The Company also disclosed that the New York Stock Exchange has notified the Company that the trading of Common Shares on the New York Stock Exchange will be suspended prior to the commencement of trading on Aug. 18, 2006. 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. * * * As reported in the Troubled Company Reporter on Aug. 4, 2006, Standard & Poor's Ratings Services revised the CreditWatch implications on Inco Ltd. and Falconbridge Ltd. to positive from developing, where they were placed July 18, 2006. This action stems from the lower probability under all current takeover scenarios that ratings will be lowered into the speculative-grade category. The ratings on Falconbridge will likely be raised or affirmed at 'BBB-', assuming that Xstrata PLC (parent of Xstrata Queensland Ltd. (BBB+/Watch Neg/--)) is successful in acquiring Falconbridge on Aug. 14, 2006, which now appears highly probable after Inco dropped its bid last week. Falconbridge Ltd.'s CDN$0.9 Million Cumulative Preffered Shares Series 1, CDN$119.7 Million Cumulative Preferred Shares Series 2, and CDN$150 Million Preferred Shares Series H, all carry Standar & Poor's BB rating. FEDERAL-MOGUL: 51 U.K. Debtors to File Voluntary Arrangements ------------------------------------------------------------- As previously reported, the U.K. Global Settlement approved by the U.S. Bankruptcy Court for the District of Delaware Agreement resolved issues between Federal-Mogul Corp. and its debtor- affiliates and the other co-plan proponents on the one hand, and the administrators of Federal-Mogul's affiliates in the United Kingdom, on the other hand, as to the reorganization of the U.K. Debtors The cornerstone of the U.K. Global Settlement Agreement is that the Administrators will propose company voluntary arrangements for certain of the U.K. Debtors. Initially, the Administrators intended to propose CVAs for the 20 principal U.K. Debtors. However, after negotiations over the past several months, the Administrators agreed to propose CVAs for 51 of the U.K. Debtors, which comprise virtually all of the U.K. Debtors that have material assets or third-party liabilities, Scotta E. McFarland, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub LLP, in Wilmington, Delaware, relates. The CVAs will principally be funded by cash held by the U.K. Debtors and cash that was transferred to the Administrators in exchange for certain intercompany loan notes held by T&N Limited, one of the U.K. Debtors. Pursuant to the CVAs, the holders of most claims against the U.K. Debtors will receive a payment under the CVAs in satisfaction of their claims. The Debtors believe that the CVAs becoming effective will be the most important step in facilitating the conclusion of the U.K. Debtors' administration proceedings. The Administrators have scheduled for September 7, 2006, meetings of creditors and shareholders to consider approval of the CVAs, in Manchester, England. If the CVAs are approved at those meetings, the CVAs could become effective as soon as mid-October 2006, after the expiration of a statutorily required 28-day waiting period. The U.K. Global Settlement Agreement provided that the CVAs would contain certain indemnities from Federal-Mogul, to fund the payment of dividends and various classes of claims under the CVAs. Specifically, the Global Settlement and the CVAs provided for an indemnity -- the FMC Revenue Indemnity -- on the part of Federal-Mogul to cover the payment of: -- claims for U.K. corporation tax against any CVA Company that rank as an expense of the administration of that CVA Company; and -- dividends on other claims for U.K. corporation tax against all of the CVA Companies, as well as the payment of U.K. corporation tax claims against those U.K. Debtors that did not propose CVAs. T&N Limited also agreed to grant a similar indemnity after the conclusion of its U.K. administration proceedings. The U.K. Global Settlement Agreement and the CVAs also provided for an indemnity on Federal-Mogul's part to fund the payment of any costs relating to asbestos property damage claims and the dividends payable on the claims that may be allowed under the CVAs, to the extent the costs and dividends are together in excess of GBP5.5 million (approximately $10 million) -- the APD Indemnity. Ms. McFarland asserts that the FMC Revenue Indemnity and the APD Indemnity benefit the Debtors in that they allow for indeterminate classes of claims against the CVA Companies to be addressed under and compromised by the CVAs, yet the Debtors are not required to fund large reserves for the claims that might, given the unknown scope of the claims, take some time to refund in the event claims to draw on the reserves never materialize. During the negotiation process of the terms of the CVAs, the Plan Proponents and the Administrators agreed to a number of compromises, beyond those contemplated under the U.K. Global Settlement Agreement, concerning the terms of the CVAs. Three of the compromises are: 1. the Ancillary CVA Indemnity; 2. the Long Tail Liability Claims Indemnity; and 3. the Tax Neutrality Undertaking. By this motion, the Debtors ask the Court to authorize Federal- Mogul to enter into and perform the three compromises. Ancillary CVA Indemnity The first of the relevant compromises concerns the granting by Federal-Mogul of an indemnity to cover unsecured claims, if any, that might be brought in the CVAs of two of the U.K. Debtors -- F-M UK Holding Limited and Federal-Mogul Global Growth Limited. The two companies are the senior-most U.K. holding companies within the Federal-Mogul corporate family and conduct no manufacturing or distribution operations of their own. Given the unique position of the two companies within the Federal-Mogul group corporate structure, both have different creditor profiles and classes of claims against them than the other U.K. Debtors covered by the CVAs. F-M UK Holding Limited has prepetition bank claims, surety claims, and noteholder claims asserted against it, while Federal- Mogul Global has in excess of $1.3 billion in intercompany claims against it. The Debtors have determined that F-M UK Holding Limited and Federal-Mogul Global's distinctiveness require an individualized structure for the CVAs, as opposed to integrating the terms of the CVAs for those companies into the principal CVA document. The Administrators also made it clear that they were only willing to accept the inclusion of the two companies into the joint CVA if Federal-Mogul were willing to establish substantial cash reserves for potential unsecured claims against those companies, which was an undesirable alternative from Federal-Mogul's perspective. To address these issues, the Plan Proponents and the Administrators agreed that the two companies would have separate CVAs proposed for them. According to Ms. McFarland, the CVAs for those two companies are structurally similar to and containing many of the same provisions as the CVAs jointly being proposed for the other 49 CVA Companies. The Plan Proponents and the Administrators further agreed that general unsecured claims against both companies, if any, would not require a reserve to be established out of which they may be paid, but could instead be funded by an indemnity to be given by Federal-Mogul. The Ancillary CVA Indemnity will cover the payment of an appropriate dividend on any general unsecured claims that may successfully be asserted against F-M UK Holding Limited or Federal-Mogul Global and certain fixed payments of GBP1.00 payable on account of certain other claims under the Ancillary CVAs. The Ancillary CVA Indemnity is capped at the realizable value of the assets of each of those companies. The Debtors believe that there are few or no general third-party unsecured claims against either F-M UK Holding Limited or Federal-Mogul Global Growth Limited. Hence the Debtors expect that the Ancillary CVA Indemnity is likely to be called very infrequently, and may ultimately be called only to pay the limited GBP1.00 amounts payable to certain claims under the CVAs. The Debtors anticipate that general unsecured claims against Federal-Mogul Global will be paid a 3% dividend, while general unsecured claims against F-M UK Holding at a 0.24%dividend. Long Tail Liability Claims Indemnity The second compromise concerns the establishment under the Principal CVAs of the Lone Tail Liability Claims Indemnity. The parties agree that certain claims that were contingent at the Petition Date, but which crystallized after the date of the U.K. Global Settlement Agreement -- the Lone Tail Liability Claims -- should be compromised under the CVAs and, hence, paid a dividend rather than in full. The Administrators believe that the claims are beyond the scope of those that they agreed would be paid out of the reserves to be established under the CVAs, and that as a result the Debtors should bear responsibility for funding the payment of any dividends to be paid out on account of the Long Tail Liability Claims. The Plan Proponents agreed that the Debtors should assume the responsibility. However, rather than provide a cash reserve for the potential claims, the Plan Proponents and the Administrators agreed that the Debtors could fund the claims through the grant of an indemnity covering the dividends to be payable on the claims. The Long Tail Liability Claims Indemnity provides that in the event that any Long Tail Liability Claims are allowed under the CVAs, the supervisors of the CVAs will be entitled to call on the Long Tail Liability Claims Indemnity to fund the payment of any Long Tail Liability Claims. The CVAs identify only a single claim, which relates to the proposed termination of the lease relating to the facility currently leased by Federal-Mogul Sealing Systems (Slough) Limited, as a Long Tail Liability Claim. That lease has not yet been terminated by FMSS-Slough, however, and as a result the ultimate amount of the claim is unknown, although the Debtors estimate that the cost of terminating the lease is in the range of GBP2 million to GBP2.5 million. The CVAs project a 27% dividend on general unsecured claims against FMSS-Slough. Assuming the breach-of-lease claim is ultimately treated as a Long Tail Liability Claim, the amount payable under the Long Tail Liability Claims indemnity would be around GBP540,000 to GBP675,000. If the claim is not treated as a Long Tail Liability Claim, however, it would be payable in full, Ms. McFarland points out. The Debtors admit that other potential Long Tail Liability Claims may emerge as the claims process under the CVAs unfolds. Federal-Mogul Tax Undertaking The third compromise relates to an undertaking to be given by Federal-Mogul in connection with certain "tax neutrality" provisions in the CVAs. The CVAs contain exceptionally detailed and intricate provisions intended to ensure that any commutation of the Hercules Policy -- a GBP500 million policy that covers Debtor T&N Limited and certain other Debtors for losses relating to asbestos personal injury claims -- or settlement of associated claims has no adverse tax consequences to the Debtors. In connection with the tax neutrality provisions of the CVAs, Federal-Mogul has provided an undertaking that commits it to perform some obligations, which relate to the commutation of the Hercules Policy or settlement of related claims. Pursuant to the undertaking, Federal-Mogul agrees to perform two principal obligations: 1. The determination of a reserve or other provision for U.K. taxes in the event that a request is made by the U.K. Asbestos Trustee and the U.S. Asbestos Trust to settle or commute the Hercules Policy; and 2. The preparation of a draft application under HM Revenue & Customs Code of Practice 10. T&N is not required under the CVAs to enter into any agreement settling or commuting the Hercules Policy unless the settlement or commutation is tax neutral in the United Kingdom to T&N and each of the other entities covered by the Hercules Policy. There may be uncertainty as to the amount of any future charge to U.K. tax in respect of asbestos-related receipts. To address that uncertainty, the CVAs require Federal-Mogul to calculate a reasonably prudent provision or reserve for U.K. tax in respect of the asbestos-related receipts, to the extent that Federal- Mogul reasonably considers that the provision or reserve can properly be quantified. In the event that the U.K. Asbestos Trustee and the U.S. Asbestos Trust disagree either with the amount that Federal-Mogul calculates, the disagreement will be referred to a firm of accountants to be agreed by the parties or, failing in that agreement, to be appointed by the President of the Institute of Chartered Accountants in England and Wales. That determination of the firm will be binding on each of Federal-Mogul, the U.K. Asbestos Trustee and the U.S. Asbestos Trust. The draft application, Ms. McFarland relates, will seek confirmation from the U.K. taxing authorities that the effect of any commutation of or settlement of claims under the Hercules Policy in accordance with the CVAs would be U.K. tax neutral for U.K. corporation tax purposes for all entities covered by the Hercules Policy, which are taxpayers in the United Kingdom. Debtors to Comply with Other CVA Obligations In addition, the Debtors seek the Court's authority to: a. comply with their obligations under the CVAs and associated documents; and b. enter into and perform any other transactions ancillary to the CVAs and associated documents that may be necessary to give effect to the CVAs. The Debtors and the other Plan Proponents have negotiated for the inclusion of these provisions into the CVAs to ensure that Federal-Mogul is properly informed regarding various matters relating to the CVAs and has the ability to consider and raise issues concerning the matters. According to Ms. McFarland, Federal-Mogul's consent is required on a number of issues throughout the CVAs. The Debtors seek authority to perform any other tasks incidental to the CVAs in anticipation of possible other limited tasks that will be needed to be performed so that the CVAs may become effective. About Federal-Mogul Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. (Federal-Mogul Bankruptcy News, Issue No. 112; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FEDERAL-MOGUL: Wants Court OK on Insurance-Related Changes to Plan ------------------------------------------------------------------ Federal-Mogul Global Inc., T&N Limited, et al., the Official Committee of Asbestos Claimants and Professor Eric D. Green, the duly appointed legal representative for future asbestos-related personal injury claimants, ask the U.S. Bankruptcy Court for the District of Delaware to approve a stipulation with certain insurers that defines the scope of permissible objections to confirmation of the Debtors' Third Amended Plan of Reorganization that may be prosecuted by the Stipulating Insurers. The Stipulating Insurers include: * Hartford Accident and Indemnity Co., First State Insurance Co. and New England Insurance Co.; * The Travelers Indemnity Co. and certain affiliates, and Travelers Casualty and Surety Company; * American International Underwriters Insurance Co., American Home Assurance Co., Birmingham Fire Insurance Co. of Pennsylvania, Granite State Insurance Co., Insurance Co. of the State of Pennsylvania, Lexington Insurance Co. and National Union Fire Insurance Co. of Pittsburgh, PA; * Century Indemnity Co., ACE Property & Casualty Insurance Co., Central National Insurance Co. of Omaha, Insurance Company of North America, Pacific Employers Insurance Co., St. Paul Mercury Insurance Co., U.S. Fire Insurance Co. and TIG Insurance Co.; * Globe Indemnity Co. and Royal Indemnity Co.; * Fireman's Fund Insurance Co. and National Surety Corp.; * Allstate Insurance; * Lumbermens Mutual Casualty Co.; * Columbia Casualty Co., Continental Casualty Company and The Continental Insurance Co.; * Allianz Versicherungs AG, Allianz Global Risks U.S. Insurance Co. and Allianz Underwriters Insurance Co.; * Federal Insurance Co.; * Liberty Mutual Insurance Co.; and * Evanston Insurance Co., Associated International Insurance Co. and Northwestern National Insurance Co. The Stipulation is conditioned on the Plan Proponents modifying the Plan to incorporate the negotiated resolution of various confirmation issues raised by the Stipulating Insurers and to include certain "insurance neutrality" provisions. According to James E. O'Neill, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub LLP, in Wilmington, Delaware, the Stipulation and the proposed Plan modifications together eliminate the bases for the majority of the insurers' objections to the Plan. As previously reported, several groups of insurers filed objections to confirmation of the Third Amended Plan. Each of those objections was extensive and presented numerous discrete factual and legal issues for determination by the Court. Prior to the parties' entry into the Stipulation, none of the objections had been resolved. The insurers, Mr. O'Neill relates, indicated their intention to prosecute those objections with respect to any Plan filed by the Plan Proponents. While the Plan Proponents believe that they would ultimately prevail over all of the insurers' objections if litigated, there is a significant prospect that the result would not be achieved until after substantial discovery or significant litigation before the Bankruptcy Court. The Plan Proponents believe that the Stipulation would shorten the likely timetable for the confirmation process. The Stipulation principally addresses issues relating to the insurance that the Plan Proponents believe covers asbestos personal injury claims arising from the so-called "Wagner" stream of asbestos personal injury claims, Mr. O'Neill notes. These claims relate to friction products manufactured, sold or distributed by predecessors of Federal-Mogul Products, Inc. Insurance policies relating to two other "streams" of asbestos personal injury claims against the Debtors -- the so-called Fel- Pro Claims and Vellumoid Claims -- are provided for a "pass- through" structure under the Plan. Under the structure, the claims would simply be tendered to the relevant insurers for handling and payment after the effective date of the Plan. The Stipulation contemplates that certain issues concerning the Fel-Pro and Vellumoid claims raised by the insurers will be the subject of a subsequent agreement between the Plan Proponents and the relevant insurers or, alternatively, decided by the Bankruptcy Court in connection with the agreed Plan objections that may be made by the insurers. Stipulation and Plan Modifications The Stipulation, in addition to providing Plan Modifications, sets out various limitations on Plan-related discovery and litigation by the Stipulating Parties. In particular, the Stipulating Insurers and the Plan Proponents agree that neither will issue written discovery to the other, and that neither the Stipulating Insurers nor the Plan Proponents will take any depositions of one another. The proposed Plan Modifications provide that Asbestos Insurer Coverage Defenses, which consist of all rights and defenses available to the Asbestos Insurance Companies under the Asbestos Insurance Policies or applicable nonbankruptcy law, will be assertable by the Asbestos Insurance Companies in any Coverage Litigation, subject to the terms of the Stipulation. However, in the Coverage Litigation, the Asbestos Insurance Companies will not be able to assert as a defense that the Plan or any of the Plan Documents do not comply with the Bankruptcy Code. In addition, if the Court determines that the Bankruptcy Code authorizes the assignment of the Asbestos Insurance Policies, their proceeds, or other Asbestos Insurance Assets to the asbestos trust under the Plan, the Asbestos Insurance Companies will be barred from asserting any defense that the assignment is prohibited by the Asbestos Insurance Policies or applicable non- bankruptcy law. The Plan Modifications also provides that none of the Plan, the Plan Documents, or the Confirmation Order will limit the ability of the Asbestos Insurance Companies to assert the Asbestos Insurer Coverage Defenses. In addition, approval by the Bankruptcy Court or the U.S. District Court for the District of Delaware of the Plan will not constitute a trial on the merits, adjudication, or judgment, or be used as evidence to prove: -- any liability of the Debtors, the Trust, or any Asbestos Insurance Company with respect to any individual Asbestos Personal Injury Claims or Demands; -- that the procedures specified in the Plan for evaluating and paying Asbestos Personal Injury Claims are reasonable, or that the procedures are consistent with the procedures that were used by the Debtors prior to the Petition Date to evaluate and settle Asbestos Personal Injury Claims; -- that the settlement or valuation of individual Asbestos Personal Injury Claims under the Plan and Asbestos Personal Injury Trust Distribution Procedures are reasonable or appropriate; -- that the Asbestos Insurance Companies have participated in or consented to the negotiation of the Plan and Plan Documents; -- that any of the Debtors or the Trust has suffered an insured loss with respect to any Asbestos Personal Injury Claim or Demand; or -- the liability, on an aggregate or individual basis, of the Debtors or the Trust for any Asbestos Personal Injury Claims and Demands, or their valuation. The insurance neutrality provision also provides that none of the Plan, the Plan Documents, or the Confirmation Order will be used to accelerate the obligations of any Asbestos Insurance Company under its Asbestos Insurance Policies. Furthermore, the proposed Plan Modifications include: a. a clarification that any entity that tenders a claim to an Asbestos Insurance Company is responsible for any applicable retrospective premiums, self-insured retentions, deductibles, or similar obligations, and that the Asbestos Insurance Companies have rights to set off any amounts owed to them against any amounts they may be obligated to pay or assert as a defense that the obligations have not been fulfilled; b. a provision that prepetition settlement agreements relating to Asbestos Insurance Policies will not be treated as executory contracts under the Plan; c. a provision that the Debtors and the Trust may ask the District Court to extend the Supplemental Injunction provided for in the Plan to include any additional Settling Insurance Companies, and that the District Court will have exclusive jurisdiction to extend the Supplemental Injunction; d. a provision that the Trust may request that the District Court terminate, reduce or limit the scope of the Asbestos Insurance Entity Injunction provided in the Plan with respect to any Asbestos Insurance Company on notice to any affected Asbestos Insurance Company; e. a clarification that the retention of jurisdiction by the Bankruptcy Court or the District Court under the Plan with respect to Plan-related matters will not constitute a finding or conclusion that the Bankruptcy Court has jurisdiction in fact over any Asbestos Insurance Action, or that any jurisdiction is exclusive with respect to any Asbestos Insurance Action, or that abstention respecting or dismissal of any Asbestos Insurance Action by the Bankruptcy Court or the District Court is or is not warranted; f. a provision that except as set forth in the Stipulation, nothing in the Plan operates as a waiver of any claim, right or cause of action that a Debtor, Reorganized Debtor, or the Trust has against any insurer under any insurance policy or insurance agreement, except to the extent the insurer is a Settling Insurance Company; and g. a clarification that nothing in the Plan, the Plan Documents or the Confirmation Order relieves any entity any duty to cooperate that may be required by any insurance policy or under applicable law with respect to the defense or settlement of any claim for which coverage is sought under the Asbestos Insurance Policy. The Stipulating Insurers additionally agree that their objections, if any, to the Plan will be limited to: a. whether, under the Bankruptcy Code and as a matter of law, the proposed assignment of insurance rights and proceeds to the Trust is valid and enforceable against the insurers despite the anti-assignment provisions of the Asbestos Insurance Policies and applicable non-bankruptcy laws; and b. whether the Plan complies with Sections 524(g)(2)(B)(i)(II) and (III) of the Bankruptcy Code. The Stipulating Insurers retain their rights under the Stipulation to conduct discovery and object to confirmation of the Plan as to any amendments to the Plan that would: -- add an additional party as a "Protected Party" or "Released Party" under the Plan that had not been covered by those definitions in the Third Amended Plan; and -- provide for claims that were not channeled to or assumed by the Trust under the Third Amended Plan to be channeled to or assumed by the Trust under the Plan as so amended. The Parties also agree to limit the submission of factual evidence to the Bankruptcy Court and stipulate to certain facts in connection with the Plan confirmation process. While the Plan will be revised, the fundamental structure of the Plan will remain unchanged from the prior version of the Plan, Mr. O'Neill asserts. The Parties believe that the Stipulation will significantly shorten the likely timetable for the confirmation process. Mr. O'Neill assures the Court that the Stipulation and the attendant Plan Modifications are the product of substantial arm's-length, good-faith negotiations among the Debtors, the ACC, the FCR and the bulk of the Asbestos Insurance Companies. A full-text copy of the Stipulation with the Plan Modifications is available for free at http://ResearchArchives.com/t/s?ffa Responses At least three parties filed objections, or joinders to objections, on the request for approval of the Stipulation: 1. MagneTek, Inc.; 2. Mt. McKinley Insurance Company and Everest Reinsurance Co.; and 3. Certain Underwriters at Lloyds London and certain London Market Companies. MagneTek holds more than $2,000,000 in asbestos personal injury claims arising from exposure to Wagner Industrial Brakes. MagneTek objects to the Stipulation to the extent it limits its rights to insurance proceeds or as against Federal-Mogul, or the taking of discovery to support its claims. The London Underwriters assert that the insurance neutrality language in the proposed Plan Modifications is not "adequate." The London Underwriters assert that the language should ensure that their prepetition rights under the "London Policies" are not affected and that nothing in the Debtors' Chapter 11 proceedings imposes new duties on them. The London Underwriters further complain that the Stipulation would appear to limit their rights with respect to the determination of coverage issues because it requires that issues of state law, which are normally tried in a coverage action, are to be tried in the confirmation hearing. The London Underwriters want the Court to clarify that notwithstanding any order approving the Stipulation, the Plan, or any of the Plan Documents, the Trust may not: (i) tender FM Products, Vellumoid or Fel-Pro Claims under the procedures set out in the Trust Distribution Procedures to the London Underwriters; (ii) allow judgment to be entered against the London Underwriters or the Debtors; and (iii) enter into settlements with any claimants by assigning to the claimants any rights it may have to pursue recovery against the London Underwriters unless and until a court of competent jurisdiction has entered a final order determining the rights and obligations of the parties to any insurance policies subscribed by the London Underwriters. Moreover, none of the Court's confirmation of the Plan, entry of the Confirmation Order, or any Plan provision will impose a duty on the London Underwriters to defend claims. Mt. McKinley and Everest clarify that they do not object to the Stipulation to the extent it affects "only the rights of the executing parties." About Federal-Mogul Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. (Federal-Mogul Bankruptcy News, Issue No. 112; Bankruptcy Creditors' Service, Inc. http://bankrupt.com/newsstand/or 215/945-7000) FEDDERS CORP: Equity Deficit Widens to $17.04 Mil. in Six Months ---------------------------------------------------------------- Fedders Corp. incurred a $10.04 million net loss on $95.57 million of net sales for the second quarter ending June 30, 2006, the Company disclosed on a Form 10-Q filing delivered to the Securities and Exchange Commission on Aug. 9, 2006. As of June 30, 2006, the Company's balance sheet showed $330.07 million in assets and $347.11 million in liabilities. The Company's equity deficit widened to $17.04 million at June 30, 2006, from a $62,000 deficit at Dec. 31, 2005. Liquidity and Capital Resources The Company's working capital requirements are seasonal, with cash balances peaking in the third quarter of each calendar year and the greatest utilization of its lines of credit occurring early in the calendar year. Cash on hand amounted to $11.8 million at June 30, 2006 compared with $17.8 million a year earlier. Short-term borrowings under the Company's working capital credit facilities amounted to $45.8 million at June 30, 2006, compared with $90.5 million a year earlier. Current portion of long-term debt amounted to $2.3 million at June 30, 2006, compared with $1.5 million a year earlier. Net cash provided by operating activities for the six-month period ended June 30, 2006, amounted to $9.2 million, compared with cash used of $17.7 million in the prior-year period. Cash was provided by operations primarily as a result of increased accounts receivable as the Company was in a more active selling season, partly offset by increased accounts payable. Accounts receivable increased $15.0 million versus an increase of $58.0 million in the prior year. Net inventories at June 30, 2006, were $61.7 million compared with $74.3 million at Dec. 31, 2005, and $103.7 million at June 30, 2005. The reduced inventory levels reflect the Company's decision to discontinue room air conditioner and dehumidifier sales to The Home Depot United States retail stores and management's focus on reducing inventory. Accounts payable at June 30, 2006, were $65.7 million compared with $44.0 million at Dec. 31, 2005, and $55.5 million at June 30, 2005, and reflect increased production compared with prior year. Net cash used in investing activities in the six-month period ended June 30, 2006, of $0.7 million compared with cash used of $12.6 million in the prior-year period. Investing activities included $1.6 million for additions to property, plant, and equipment, compared with $3.3 million for the prior-year period. This was partly offset by $0.9 million proceeds from asset sales in the first quarter. Net cash used by financing activities for the six-month period ended June 30, 2006, amounted to $11.5 million, primarily for repaying debt. Net cash provided by financing activities in the prior-year period was $26.3 million, comprised primarily of $31.2 million in short-term borrowings that were used to support operating needs, and $4.0 million of cash dividends. The Company did not declare quarterly dividends in the three months ended June 30, 2006. The First Supplemental Indenture limits, among other things, the Company from making any dividend payments without sufficient consolidated net income beginning January 1, 2006. The Company declared quarterly dividends of $0.03 on each share of outstanding common and Class B stock and $0.5375 on each share of outstanding preferred stock in the three months ended June 30, 2005 and $0.06 on each share of outstanding common and Class B stock and $1.076 on each share of outstanding preferred stock in the six months ended June 30, 2005. A full-text copy of the regulatory filing is available for free at http://ResearchArchives.com/t/s?fff Headquartered in Liberty Corner, New Jersey, Fedders Corporation (NYSE: FJC) -- http://www.fedders.com/-- manufactures air treatment products, including air conditioners, furnaces, air cleaners, dehumidifiers and humidifiers for residential, commercial and industrial markets. FEDDERS CORP: Hires Blackstone to Sell Indoor Air Quality Business ------------------------------------------------------------------ Fedders Corp. engaged The Blackstone Group to explore the possible sale of the company's global indoor air quality businesses. The IAQ businesses are not core to the company's principal global residential and commercial HVAC businesses. Included in a possible sale would be the company's North American IAQ production facility located in North Carolina, two factories in Suzhou, China and sales offices located in the U.S., the U.K., Germany, China, Malaysia and India. Headquartered in Liberty Corner, New Jersey, Fedders Corporation (NYSE: FJC) -- http://www.fedders.com/-- manufactures air treatment products, including air conditioners, furnaces, air cleaners, dehumidifiers and humidifiers for residential, commercial and industrial markets. FOOT LOCKER: Evercore Engagement Prompts S&P's Negative Watch ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including the 'BB+' corporate credit rating, on New York-based specialty footwear retailer Foot Locker Inc. on CreditWatch with negative implications. This rating action follows the announcement that the company has hired Evercore Partners to advise the company on a range of matters. "The rating action reflects Standard & Poor's concern that the range of matters could include shareholder friendly initiatives that could potentially weaken protection measures for bondholders if there are changes in the company's financial policy," said Standard & Poor's credit analyst Ana Lai. Standard & Poor's will monitor developments associated with this process in order to assess the implications for the ratings. FORD MOTOR: Lower Production Schedule Cues S&P's Negative Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' long-term and 'B-2' short-term ratings on Ford Motor Co., Ford Motor Credit Co., and related entities on CreditWatch with negative implications. The 'BB-' long-term rating and 'B-2' short-term ratings on FCE Bank PLC, Ford Motor Credit's European bank, were also placed on CreditWatch with negative implications, reflecting its linkage to the Ford rating. The Ford CreditWatch placement reflects Standard & Poor's decision to review the ratings in light of the sharply lower production schedule just announced for light trucks in the fourth quarter (down 155,000 units, or 28%, versus fourth-quarter production in 2005). These cuts, along with the very likely significant cost reductions to be announced in September, reveal the magnitude of turnaround efforts needed to deal with Ford's deteriorating product mix, lower market share, and excess production capacity in North America. "The lower production will have a significant negative effect on Ford's cash flow in the fourth quarter," said Standard & Poor's credit analyst Robert Schulz. Although Ford's North American automotive operations are cash-flow negative, Ford's liquidity should still be sufficient relative to near-term requirements, as the company has a large liquidity position. Standard & Poor's plans to resolve its review by the end of September. As part of the review, Standard & Poor's will meet with Ford's management to discuss the company's evolving plans to address the heightened challenges it faces in North America. FORD MOTOR: Production Cutbacks Prompt Fitch to Downgrade Ratings ----------------------------------------------------------------- Fitch Ratings downgraded the Issuer Default Rating of Ford Motor Company and Ford Motor Credit Company to 'B' from 'B+'. Fitch also lowered the Ford's senior unsecured rating to 'B+/RR3' from 'BB-/RR3' and Ford Credit's senior unsecured rating to 'BB- /RR2' from 'BB/RR2'. The Rating Outlook remains Negative. The downgrade is based on the significant production cutbacks in the third and fourth quarter that reflect persistent share losses across key product categories. Negative cash flows, including restructuring costs, could exceed $7 billion in 2006, including working capital and restructuring outflows. Cash outflows related to restructuring actions will continue in 2007, although operating losses could moderate as cost reduction efforts are realized. Sustained market share losses or a decline in economic conditions through 2007 would result in continued high levels of cash outflows and erosion of liquidity. Although liquidity remains adequate, progress in achieving structural cost reductions and maintaining the confidence of trade creditors will remain critical over the near term. Implicit in the production cutbacks are expectations of continued weak pickup sales that have resulted in extended inventories. Volume declines in Ford's pickup segment, along with continued declines in mid-size and large SUVs, are likely to accelerate revenue declines and negative cash flows in 2006. Although continued share losses and price erosion were anticipated as a result GM's upcoming refreshed pickup line and the start-up of Toyota's new pickup plant, vulnerability to this segment has increased as a result of high gas prices, a potential slowdown in economic conditions, and a contracting construction segment. Ford has demonstrated recent growth in certain car segments, where industry sales have been migrating, but volumes and profitability in these segments will be insufficient in the short-term to offset the decline in higher-margin mid-size and large SUVs and pickups. Ford's product pipeline is modest over the near term, although two crossover products to be introduced in 2006 (the Ford Edge and Lincoln MKX) are expected to partially offset continued share erosion. Ford's 'RR3' Recovery Rating reflects good recovery prospects of 50-70% in the event that the company is forced to seek protection under Chapter 11. Recovery values benefit from: * Ford's holdings in Mazda; * operations in Asia and South America; * very modest recoveries from Premier Automotive Group operations; and * 100% ownership in Ford Credit. Recovery for senior unsecured holders also benefits from being in a superior position to the Capital Trust II securities (which represents approximately 29% of consolidated debt). Recovery values associated with Ford Credit are likely to decline as Ford Credit's balance sheet shrinks and repatriated capital is used to finance operating losses. Fitch's recovery analysis also projects that due to declining market share and low current capacity utilization, at least one additional assembly plant will be shut down (in addition to those already announced). Fitch's recovery scenario incorporates a Chapter 11 filing of North American operations only, and would result in significant claims from working capital liabilities (trade creditors, dealers, fleet customers, etc.) in addition to unsecured debtholders. Fitch also factored in liabilities related to on and off-balance sheet liabilities that could augment claims. Fitch did not factor in claims related to potential termination or alteration of legacy OPEB and pension costs. In the event of a filing, Fitch anticipates that Ford would not attempt to terminate its pension plans. Changes to OPEB liabilities, are expected to be negotiated as part of a new labor agreement in the event of a Chapter 11 filing (as is taking place at Delphi), without resulting in claims against the estate. The restructured enterprise value includes reduced production volumes, and structural cost reductions to an extent that a 3% operating margin could be achieved in North America. Declining revenues are unlikely to reverse through 2007 due to market share losses and declining mix. Despite modest progress on the cost side, the pace of cost reductions is not expected to keep up with revenue losses (assuming continued high commodity costs), thereby continuing negative cash flows. Over the intermediate-term, reducing inventories and producing closer to demand will enhance even-flow production and production efficiencies, and reduce reliance on ruinous incentive programs. However, lower production levels, coupled with already weak capacity utilization will increase short-term cash outflows and heighten the urgency of achieving substantive structural cost reductions. Ford's production cutbacks will also heighten operating and financial stresses throughout the supply chain, increasing the risks of further bankruptcies or other supply disruptions. Supply chain stresses are expected to result in increased risks of financial support and will limit the potential for any cost savings to accrue to Ford over the near term from the restructuring of the supply base. Ford Credit's (FMCC) IDR remains linked to those of Ford due to the close business relationship between them. Fitch expects FMCC's earnings and dividends to decline noticeably in 2006 primarily due to lower receivables outstanding and margins. FMCC has benefited from lower provision expense, as the quality of its receivables pool has increased, but the pace of these improvements is expected to slow going forward. Fitch believes that FMCC maintains a good degree of liquidity relative to its rating. Supporting this is FMCC's ability to sell or securitize a broad spectrum of assets such as retail finance, lease, and wholesale loans. Moreover, FMCC continues to hold high cash balances and its assets mature faster than its debt. FMCC's 'RR2' Recovery Rating indicates superior recovery prospects on unsecured debt resulting from solid unencumbered asset protection, although discounted to account for stressed performance and/or disposition. Fitch downgraded these ratings with a Negative Rating Outlook: Ford Motor Co.: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'B+' from 'BB-' Ford Motor Credit Co.: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'BB-' from 'BB' FCE Bank Plc: -- Issuer Default Rating to 'B' from 'B+-' -- Senior debt to 'BB-' from 'BB' Ford Capital B.V.: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'BB-' from 'BB' Ford Credit Canada Ltd.: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'BB-' from 'BB' Ford Motor Capital Trust II: -- Preferred stock to 'CCC+/RR6' from 'B-/RR6' Ford Holdings, Inc.: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'B+' from 'BB-' Ford Motor Co. of Australia: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'B+' from 'BB-' Ford Credit Australia Ltd.: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'BB-' from 'BB' PRIMUS Financial Services (Japan): -- Issuer Default Rating to 'B' from 'B+' Ford Credit de Mexico, S.A. de C.V.: -- Issuer Default Rating to 'B' from 'B+' Ford Motor Credit Co. of New Zealand: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'BB-' from 'BB' Ford Credit Co S.A. de CV: -- Issuer Default Rating to 'B' from 'B+' -- Senior debt to 'BB-' from 'BB' Fitch also affirms these short-term ratings: Ford Motor Credit Co.: -- Commercial Paper 'B' FCE Bank Plc: -- Commercial Paper and short-term debt 'B' Ford Credit Canada Ltd.: -- Commercial Paper 'B' Ford Credit Australia Ltd.: -- Commercial Paper 'B' Ford Motor Credit Co. of New Zealand: -- Commercial Paper 'B' FORD MOTOR: Reduced Vehicle Production Cues DBRS to Review Rating ----------------------------------------------------------------- Dominion Bond Rating Service placed long-term debt rating of Ford Motor Company Under Review with Negative Implications following announcement that Ford will sharply reduce its North American vehicle production in 2006. DBRS notes that the planned production cuts, which are part of the Company's accelerated "Way Forward" plan, will be most significant in fourth quarter 2006 and are expected to have a substantially negative impact on 2006 operating results. DBRS expected Ford's near-term operating performance to deteriorate, but the extent of the planned production cuts was greater than anticipated. DBRS placed Ford Under Review -- Negative in order to assess the financial impact of today's announcement on the Company's credit profile and to gain additional information regarding further actions under the Way Forward plan, which will be revealed in September. FRENCH LICK: S&P Affirms B- Rating & Revises Outlook to Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its ratings outlook on French Lick Resorts & Casino LLC to negative from stable, and affirmed all ratings, including the 'B-' corporate credit rating. "The outlook revision reflects concerns that heightened disputes between the two primary owners over control of the project, which have led to various legal actions, could result in cost overruns in the next several months or operating disruptions after the project opens," said Standard & Poor's credit analyst Peggy Hwan Hebard. "Still, assuming an on-time opening, FLRC's liquidity position during the casino's first full year of operations is expected to be adequate, given an interest reserve for 2.5 payments, with the first project-funded payment of $7 million due on Oct. 15, 2007." The ratings on FLRC reflect: * its narrow business position as an operator of a single casino, once the facility opens in phases beginning in late 2006; * competitive market conditions in its southern Indiana gaming market; * expected challenges associated with developing a loyal gaming customer base; and * some construction risks associated with the development of the facility. Also, the company's high pro forma debt leverage and moderate-size cash flow base increase the risks that a slower-than-expected ramp-up period could strain the company's liquidity position. French Lick, Indiana-based FLRC was created to develop, own, and operate the French Lick Resorts & Casino, which is situated on about 750 acres, and located about 90 miles south of Indianapolis and 50 miles northwest of Louisville, Kentucky. The project, which includes the renovation of the historic French Lick Springs Hotel and West Baden Springs Hotel, broke ground in August 2005, with full completion currently scheduled for mid-2007. It is expected to open with 1,200 slot machines, about 42 table games (including 10 poker tables), the renovation of the approximately 680 rooms contained in the two existing hotels, 2,100 parking spaces, a few golf courses, and various nongaming amenities. The total project cost is about $380 million and is being funded mostly with debt. A contingency of about 15% of the remaining hard construction costs exists. In addition, the company has entered into guaranteed maximum price contracts that equal 100% of the "hard" construction costs, and the company entered into a $25 million FF&E revolver. Also, a phased development in which the casino becomes operational by the end of 2006 is planned. The combination of these factors helps to mitigate construction risk and provide comfort that the project will be completed on time. The negative outlook reflects the heightened risks related to the viability of the project, in the absence of a satisfactory resolution of the dispute between the owners. This uncertainty, in conjunction with the potential for a weaker-than-expected opening, could result in ratings being lowered if management fails to attract locals or drive-to destination visitors to the property. If the opening of the casino is successful and a satisfactory resolution of the dispute between the equity partners is reached, the outlook would be revised to stable. GENERAL NUTRITION: Aborted IPO Plan Prompts S&P to Affirm B Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings, including the 'B' corporate credit rating, on Pittsburgh, Pennsylvania-based General Nutrition Centers Inc. The ratings are removed from CreditWatch, where they were placed with positive implications on June 19, 2006. The outlook is stable. "The rating actions reflect the withdrawal of the company's planned IPO," said Standard & Poor's credit analyst Ana Lai. If completed, the IPO could have resulted in an upgrade. The stable outlook reflects GNC's improved operating performance for the past three quarters due to solid comparable-store sales growth and better margins. U.S.-based company-owned stores experienced 11.5% comparable-store growth for the quarter ended June 30, 2006; U.S. franchised stores posted 5.9% growth. For the six months ended June 30, 2006, EBITDA increased to about $79 million from $58 million a year ago. Profitability improved due to positive sales leverage as well as lower selling expenses, and operating margins increased to about 10% from 9% a year earlier. With better cash flow, total debt to EBITDA (adjusted for operating leases) declined to 5.6x, from 6.5x at Dec. 30, 2005. Despite GNC's position as a large player with a worldwide network of more than 5,800 locations, the company remains vulnerable. The nutritional supplements industry is very fragmented and GNC faces significant competition from other specialty retailers, drugstore chains, and mass merchants, as well as independents. Mass merchants and drugstores exert significant margin pressure on commodity products, such as vitamins and minerals, while specialty retailers like Vitamin Shoppe Industries Inc. target sophisticated vitamin, mineral, and supplement users. IGI INC: Posts $368,000 Net Loss in Three Months Ended June 30 -------------------------------------------------------------- IGI, INC. reported earnings for second quarter of 2006. Total revenues for the three months ended June 30, 2006, were $817,000, compared to $825,000 for the three months ended June 30, 2005. Total revenues for the six months ended June 30, 2006, were $1,398,000, compared to $1,600,000 for the six months ended June 30, 2005. "Our proprietary MIAJ(TM) anti-aging line of new products is being well received and our nano-particle Novasome(R) delivery technology is moving forward with new dermatologic and cosmeceutical products," stated Frank Gerardi, Chairman and CEO. Net loss for the three months ended June 30, 2006, was $368,000, compared to $191,000 for the three months ended June 30, 2005. Net loss for the six months ended June 30, 2006, was $820,000, compared to $374,000 for the six months ended June 30, 2005. The Company's operating activities used $594,000 of cash during the six months ended June 30, 2006, compared to $423,000 used in the comparable period of 2005. This use of cash is substantially related to the net loss for the Company. The Company investing activities used no cash in the six months ended June 30, 2006, compared to $68,000 used in investing activities in the first three months of 2005. The money used represents capital expenditures to purchase machinery and equipment related to the electroless nickel boride finishing operations in 2005. The Company's financing activities provided $253,000 of cash in the six months ended June 30, 2006 compared to $325,000 provided by financing activities in the six months ended June 30, 2005. The cash provided in 2005 and 2006 represents proceeds from the exercise of stock options. Currently, the Company's cash from operations are not sufficient to maintain operations or provide financing for the Company's future growth and business plan. In order to generate the working capital needed, the Company has signed an agreement of sale for a sale-leaseback of its corporate building for $1,600,000, to be accounted for as a financing transaction and a sale of a vacant parcel of land adjacent to its building for $225,000. The closing of the sale-leaseback transaction is subject to a contingency and is terminable by either party on or after Aug. 17, 2006, if the contingency is not met by such date. Upon the earlier of the closing of the sale- leaseback transaction or Sept. 30, 2006, the Company must repay the $1,000,000 loan provided to the Company by Univest Management EPSP an entity controlled by Frank Gerardi, its Chief Executive Officer, together with accrued interest, which accrued interest, as of June 30, 2006, was approximately $90,000. If the sale-leaseback transaction does not materialize, the Company will be forced to seek alternative funding, of which there can be no assurance. If consummated, this transaction if accompanied by an increase in product sales that the Company hopes to achieve during 2006 through new business arrangements may be sufficient to provide the capital needed to fund the Company through the end of August 2007. The Company received a $30,000 refundable deposit in the first quarter of 2006 relating to the sale-leaseback transaction. The Company's ability to continue as a going concern is ultimately dependent on its ability to increase sales to a level that will allow it to operate profitably and sustain positive operating cash flows. IGI's business operations have been partially funded over the past two years through the exercise of stock options by its directors and officers. If necessary, the Company may continue to seek additional capital through the sale of its equity. The Company may accomplish this via a strategic alliance with a third party. There may be additional acquisition and growth opportunities that may require external financing. There can be no assurance that this financing will be available or available on terms acceptable to the Company. Going Concern Doubt Amper, Politziner & Mattia, P.C. expressed substantial doubt on IGI, Inc.'s ability to continue as going concern after it audited the Company's financial statement for the year ending Dec. 31, 2005. The auditing firm pointed to the Company's recurring operating losses and a working capital deficiency of $501,000. About IGI, Inc. Headquartered in Buena, New Jersey, IGI Inc. (AMEX:IG) -- http://www.askigi.com/-- is a technology company focused on the development of custom products using the patented Novasome(R) delivery technology. The Company offers the patented Novasome(R) lipid vesicle encapsulation technology which contributes value- added qualities to cosmetics, skin care products, dermatological formulations and other consumer products, providing improved dermal absorption, low potential for irritations, controlled and sustained release as well as improved stability. IGI has licensed Novasome(R) lipid vesicle encapsulation technology to leading global dermatological and skin care companies including Johnson & Johnson Consumer Products, Inc., Estee Lauder Companies, Chattem Inc., Genesis Pharmaceutical, Inc. and Apollo Pharmaceutical, Inc. INTEGRATED ELECTRICAL: Earns $36.8 Million in Third Fiscal Quarter ------------------------------------------------------------------ Integrated Electrical Services, Inc., disclosed financial results for the period ended June 30, 2006, and implementation of fresh start accounting. Third Quarter Fiscal 2006 Results Results for the fiscal third quarter of 2006 are comprised of predecessor one-month results ended April 30, 2006 and successor two-month results ended June 30, 2006. Total revenues for the fiscal third quarter were $259.4 million. Gross profit for the period was $33.8 million, a gross profit margin of 13.0 percent. Selling, general and administrative expenses for the third quarter were $33.7 million, 13% of revenues. Income from operations for the third quarter was $100,000. The company reported total net income for the third quarter of $36.8 million. During the three months ended June 30, 2006, the company recorded reorganization items totaling a net gain of approximately $39.2 million. Backlog in the Go-Forward Operations remained steady at $336 million on June 30, 2006, compared to $341 million as of March 31, 2006. Backlog in the Wind-down Units as of June 30, 2006 dropped to $6 million from $21 million as of March 31, 2006, in line with the company's expectations. As a result, total backlog as of June 30, 2006 declined to $342 million, from $362 million as of March 31, 2006. Execution of Financial Restructuring On May 12, 2006, Integrated Electrical Services, Inc. and all of its domestic business units consummated a plan of reorganization and exited from Chapter 11. The Plan provided for, among other things, reducing IES' outstanding indebtedness by exchanging its $173 million of senior subordinated notes for 82% of the new IES common stock, refinancing the company's $50 million of outstanding senior convertible notes with the proceeds of a new term loan, converting IES' existing outstanding common stock into shares representing approximately 15% of the new IES common stock and issuing to management restricted shares representing approximately 3.0% of the new IES common stock. As part of the restructuring, the company decided to wind down operations at certain of its underperforming units. The remaining operations will be referred to as "Go-forward Operations." The Wind-down Units and the Go-forward Operations combined make up Continuing Operations. Debt and Liquidity In connection with its emergence from Chapter 11, the company entered into a two-year revolving credit facility with a syndicate of lenders led by Bank of America, in which the lenders will provide revolving borrowings in the aggregate amount of up to $80 million, with a $72 million sub-limit for letters of credit. In addition to the revolving credit facility, the company has entered into a seven-year, $53 million term facility with Eton Park Fund, L.P. and an affiliate, and Flagg Street Partners LP and affiliates. The term loan was used to refinance the company's outstanding senior convertible notes. As of June 30, 2006, unrestricted cash totaled approximately $10.9 million. In addition, the company has posted $20.0 million of cash collateral with its senior credit facility lenders, which is in other non-current assets, for total cash of $30.9 million. Fresh-Start Accounting On April 30, 2006, the company implemented fresh-start accounting and reporting in accordance with the American Institute of Certified Public Accountants Statement of Position No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." Fresh-start accounting required the company to re-value its assets and liabilities based upon their estimated fair values. Adopting fresh-start accounting has resulted in material adjustments to the carrying amount of the company's assets and liabilities. The company engaged an independent expert to compute the fair market value of its assets, to assist in the allocation of its reorganization value and in determining the fair market value of its property and equipment and intangible assets. The fair values of the assets as determined for fresh-start reporting were based on estimates of anticipated future cash flows as generated from each market and applying business valuation techniques. Liabilities existing on April 30, 2006, are stated at the present values of amounts to be paid discounted at appropriate rates. The determination of fair values of assets and liabilities is subject to significant estimation and assumptions. Under the provisions of fresh start accounting, a new entity is deemed created for financial reporting purposes. References to successor company refer to the company on and after May 1, 2006, and references to predecessor company relate to the company through April 30, 2006. As a result of implementing fresh start accounting, IES' financial statements for the successor company are not comparable to financial statements of the predecessor company. A full-text copy of the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission is available for free at http://ResearchArchives.com/t/s?1000 Headquartered in Houston, Texas, Integrated Electrical Services, Inc. (Nasdaq: IESC) -- http://www.ielectric.com/and http://www.ies-co.com/-- is an electrical and communications service provider with national roll-out capabilities across the U.S. Integrated Electrical Services offers seamless solutions and project delivery of electrical and low-voltage services, including communications, network, and security solutions. The Company provides system design, installation, and testing to long-term service and maintenance on a wide array of projects. The Debtor and 132 of its affiliates filed for chapter 11 protection on Feb. 14, 2006 (Bankr. N.D. Tex. Lead Case No. 06-30602). Daniel C. Stewart, Esq., and Michaela C. Crocker, Esq., at Vinson & Elkins, L.L.P., represent the Debtors in their restructuring efforts. Marcia L. Goldstein, Esq., and Alfredo R. Perez, Esq., at Weil, Gotshal & Manges LLP, represent the Official Committee of Unsecured Creditors. As of Dec. 31, 2005, Integrated Electrical reported assets totaling $400,827,000 and debts totaling $385,540,000. The Court confirmed the Debtors' Modified Second Amended Joint Plan of Reorganization on Apr. 26, 2006. That plan became effective on May 12, 2006. INTERMEC INC: S&P Upgrades Ratings to BB- With Stable Outlook ------------------------------------------------------------- Standard & Poor's Rating Services raised its ratings on Everett, Washington-based Intermec Inc. to 'BB-' from 'B+'. The upgrade reflects expectations that Intermec will sustain current levels of profitability and leverage. The outlook is stable. "The rating reflects a relatively narrow business profile, competitive market conditions, and ongoing product development requirements driven by evolving technology standards," said Standard & Poor's credit analyst Stephanie Crane. These factors are partly offset by a good market position with a strong patent portfolio and an improving financial profile with leverage at 3.5x. Intermec is a global provider of supply chain solutions, including the development, sales, and integration of wired and wireless automated data collection, radio frequency identification tags, mobile computing systems, bar code printers, and label media. These products are used primarily for the routing and distribution of goods, inventory management, transportation, and logistics. In the fourth quarter of 2005, Intermec completed the sale of its industrial automation systems businesses. Revenue growth and profitability are expected to benefit from greater management focus on the core business, which centers around automated data collection and radio frequency identification. Standard & Poor's expects revenue to grow in the high single digits in the near term as next-generation RFID technology is driven by market demand and the company focuses on building its emerging market exposure. EBITDA margins should also trend in the high single digits assuming cost efficiencies gleaned from restructuring. INLAND FIBER: Unsecured Creditors to Receive 68.57% of Claims ------------------------------------------------------------- Inland Fiber Group LLC and Fiber Finance Corp. delivered to the U.S. Bankruptcy Court for the District of Delaware a disclosure statement explaining their pre-packaged Joint Plan of Reorganization. Under the Plan, Priority Claims and Secured Claims will be paid in full. Holders of General Unsecured Claims will receive cash equal to 68.57% of the amount of their allowed claim while holders of Allowed Notes Claims are entitled to 68.57% of the principal amount of the Notes. All Intercompany Claims will be reviewed by the Debtors and adjusted, continued or discharged, as the Debtors determine is appropriate. Existing Interests in the Debtors will be unaffected by the Plan Settlement As reported in the Troubled Company Reporter on Aug. 21, 2006, the Debtors reached a final settlement on Aug. 18, 2006, resolving all of the outstanding claims in the litigation between them and certain other defendants, and the trustee under the indenture governing the $225 million principal amount of 9-5/8% senior notes due 2007 issued by the Debtors. Under the settlement agreement, the noteholders and the indenture trustee have also agreed to forbear from exercising any rights and remedies under the indenture, or from pursuing any claim pertaining to the notes or the subject matter of the litigation. In addition, as part of the Debtors' reorganization efforts, Inland Fiber has reached an agreement to sell certain of its assets, including its seed orchard, to a third party. The purchase price for the assets is $83 million. The Debtors have also entered into an agreement with their insurance carriers to contribute a total of $8.3 million towards payment under the plan of reorganization. Moreover, Inland Fiber's affiliates agreed to sell certain of their Oregon assets to the third party purchaser and certain of their assets in the State of Washington to a related party of the Debtors. The proceeds of those sales will fund the remaining amounts payable pursuant to the settlement agreement and plan of reorganization. Headquartered in Klamath Falls, Oregon, Inland Fiber Group LLC, aka U.S. Timberlands Klamath Falls LLC, and its affiliate Fiber Finance Corp., grow trees and sell logs, standing timber, and timberland. The Debtors filed a chapter 11 petition on Aug. 18, 2006 (Bankr. D. Del. Case Nos. 06-10884 & 06-10885). William P. Bowden, Esq. at Ashby & Geddes P. A. and Glenn E. Siegal, Esq. at Dechert LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, Inland Fiber reported $81,890,311 in total assets and $264,433,754 in total liabilities while its debtor-affiliate, Fiber Finance, disclosed $1,048 in total assets and $263,074,983 in total debts. KINETIC CONCEPTS: Earns $46.6 Million in Second Quarter ------------------------------------------------------- Kinetic Concepts, Inc., reported second quarter 2006 total revenue of $330 million, an increase of 12% from the second quarter of 2005. Total revenue for the first half of 2006 was $649.3 million, a 13% increase from the prior-year period. Foreign currency exchange movements favorably impacted total revenue for the second quarter of 2006 by 1% compared to the corresponding period of the prior year, but did not impact first half revenue results significantly. Net earnings for the second quarter of 2006 were $46.6 million, up 17%, compared to $39.8 million for the same period one year ago. For the first half of 2006, net earnings were $95.1 million, up 24% from the prior-year period. "The fundamentals of our business remain strong," said Dennert O. Ware, President and Chief Executive Officer of KCI. "In the second quarter, we faced challenges resulting from significant business litigation, lower homecare reimbursement and increased marketing of unproven competing therapies. Despite these challenges, we delivered revenue growth both sequentially and year-over-year. We believe that our innovative and effective products, supported by our clinically-focused sales and service team and backed by industry leading medical research, help caregivers and payers achieve improved patient outcomes at a lower overall cost of care." Revenue Recap Second Quarter and First Half of 2006 Domestic revenue was $238.6 million for the second quarter and $471.3 million for the first six months of 2006, representing an increase of 10% and 14%, from the prior year due primarily to increased rental and sales volumes for V.A.C. wound healing devices and related disposables. Domestic V.A.C. revenue of $193.4 million for the 2006 second quarter increased 12% from the prior-year period, due to higher V.A.C. rental units in use partly offset by lower realized pricing. The year-to-year unit growth was broad-based, with increased unit volume across all care settings. Lower realized V.A.C. pricing resulted from lower canister reimbursement rates under Medicare Part B combined with higher homecare receivable reserves related primarily to invoices/claims greater than one year old. International revenue of $91.4 million for the second quarter and $178.0 million for the first half of 2006 increased 18% and 11%, compared to the prior year due to increased V.A.C. revenue. International V.A.C. revenue of $62.7 million for the second quarter and $119.6 million for the first half of 2006 increased 28% and 26%, compared to the same periods of the prior year due primarily to higher unit volume. International surfaces revenue for the second quarter of 2006 was comparable to the prior year, while surfaces revenue for the first half of 2006 declined $6.8 million, or 10%. The year-to-date decline in international surfaces revenue was due in large part to a $5.1 million sale in the first quarter of 2005 to the Canadian Government. In addition, unfavorable foreign currency exchange movements negatively impacted first-half 2006 international surfaces revenue by $1.3 million compared to the prior-year period. In total, foreign currency exchange movements favorably impacted international revenue by 3% in the second quarter while negatively impacting first-half 2006 international revenue by 1%. Worldwide V.A.C. revenue was approximately $256.1 million for the second quarter of 2006 and $499.1 million for the first half of 2006, representing increases of 16% and 19%, due to increased rental and sales volumes for V.A.C. partly offset by lower price realization on unit placements. Foreign currency exchange movements favorably impacted worldwide V.A.C. revenue by 1% compared to the second quarter of the prior year, but did not have a significant impact on overall V.A.C. revenue for the first six months of 2006. The growth in V.A.C. revenue stemmed from volume increases driven by our continued focus on selling and marketing efforts, partly offset by lower U.S. homecare reimbursement for V.A.C. canisters and higher homecare receivable reserves. Worldwide surfaces revenue was $73.9 million for the second quarter of 2006, up 1% from the prior-year period. Worldwide surfaces revenue for the first six months of 2006 was $150.2 million, a $5.6 million, or 4% decline from the first half of 2005, of which $5.1 million was attributable to the prior-year sale to the Canadian government as noted previously. Foreign currency exchange movements favorably impacted worldwide surfaces revenue by 1% for the second quarter while unfavorably impacting first half surfaces revenue by 1%. Domestic surfaces revenue for the second quarter and first six months of 2006 each increased 1% from the same periods one year ago. Gross Profit Margin Gross profit for the second quarter and first six months of 2006 was $152.6 million and $302.8 million, representing increases of 12% and 15% from the same periods of the prior year. Gross profit margin for the current quarter was negatively impacted by lower homecare reimbursement for V.A.C. canisters and increased homecare receivable reserve levels, which had the effect of reducing revenue growth in the period. In addition, field sales and service costs increased as a percent of revenue during the period. In addition, KCI has historically presented licensing fees associated with our Rental Revenue in Rental Expenses and licensing fees associated with our Sales Revenue in Selling, General and Administrative Expenses. Legal Expenses As compared to the prior-year period, second quarter 2006 SG&A expenses include an additional $3.5 million related to our patent litigation case. Legal costs are expensed as incurred. Stock-Based Compensation During the second quarter and first six months of 2006, the Company recorded stock-based compensation expense totaling approximately $4.4 million and $7.4 million, before income taxes. Income Tax Rate The effective income tax rate for the second quarter of 2006 was 30.0% compared to 34.5% for the same period in 2005. The income tax rate reduction was primarily attributable to the favorable resolution of two foreign tax contingencies during the period. Going forward, we expect our effective tax rate to be in the 33% to 35% range. Outlook KCI is reaffirming its projections for 2006 total revenue of $1.34 billion to $1.39 billion based on continued demand for its V.A.C. negative pressure wound therapy devices and related supplies. A full-text copy of the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission is available for free at http://ResearchArchives.com/t/s?ffc About Kinetic Concepts Kinetic Concepts, Inc. (NYSE: KCI) -- http://www.kci1.com/-- designs, manufactures, markets and provides a wide range of proprietary products that can improve clinical outcomes while helping to reduce the overall cost of patient care. * * * As reported in the Troubled Company Reporter on Aug. 21, 2006, Moody's Investors Services upgraded its corporate family rating on Kinetic Concepts, Inc.'s from Ba3 to Ba2. The Company's ratings on its guaranteed senior secured revolving credit facility, due 2009, and guaranteed senior secured term loan B, due 2010, were upgraded to Ba2 from Ba3. Moody's rating on the Company's guaranteed unsecured subordinated notes, due 2013, was upgraded to B1 from B2. KMART CORP: Delivers Results for 13 Weeks Ended July 29 ------------------------------------------------------- In a Form 8-K filed with the Securities and Exchange Commission, Sears Holdings Corporation discloses Kmart Corporation's sales for 13 weeks ended July 29, 2006. Aylwin Lewis, chief executive officer and president of Sears Holdings Corporation, relates that the improvement in second quarter 2006 earnings reflects improved profitability at both Kmart and Sears Domestic, largely due to reduced expenses and an increase of 120 basis points in gross margin rate from 27.2% in 2005 to 28.4% in 2006. Kmart's Results and Key Statistics (In millions, except number of stores) 13 Weeks Ended ------------------- 07/29/06 07/29/05 -------- -------- Merchandise sales and services $4,472 $4,642 Cost of sales, buying and occupancy 3,389 3,529 Gross margin rate 24.2% 24.0% Selling and administrative 874 964 Selling and administrative expense as a percentage of total revenues 19.5% 20.8% Depreciation and amortization 18 10 Gain on sales of assets - (2) Restructuring charges - 42 ------- ------- Total costs and expenses 4,281 4,543 ------- ------- Operating income $191 $99 ======= ======== Number of Stores 1,398 1,445 According to Mr. Lewis, Kmart's comparable stores sales declined 0.6%. The sales declines in home goods were partially offset by increased sales within a number of merchandise categories, including apparel, general merchandise, pharmacy and food, and other consumable goods. Total revenues at Kmart declined $1,000,000 as compared to the prior year period, primarily reflecting a reduction in the total number of Kmart stores in operation, Mr. Lewis says. Furthermore, Kmart's operating income shows an increase of $92,000,000. About Kmart Corp. Headquartered in Troy, Michigan, Kmart Corporation nka KMART Holding Corporation -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 115; Bankruptcy Creditors' Service Inc. http://bankrupt.com/newsstand/or 215/945- 7000) KMART CORP: Store in Stow, Ohio to Close in January 2007 -------------------------------------------------------- Kimberly Freely, spokeswoman for Sears Holding, Corp., told Akron Beacon Journal that a Kmart store located in 4332 Kent Road, in Stow, Ohio, is permanently closing in January 2007. According to the Beacon Journal, officials at the Kmart store -- which opened in 1968, and employs about 60 workers -- informed employees that they may apply at other Kmart and Sears stores, but no positions were guaranteed. Clearance sales at the Stow Kmart store will begin in November, the paper says. About Kmart Corp. Headquartered in Troy, Michigan, Kmart Corporation nka KMART Holding Corporation -- http://www.bluelight.com/-- operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. Kmart bought Sears, Roebuck & Co., for $11 billion to create the third-largest U.S. retailer, behind Wal-Mart and Target, and generate $55 billion in annual revenues. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Jan. 27, without complaint by the Department of Justice. (Kmart Bankruptcy News, Issue No. 115; Bankruptcy Creditors' Service Inc. http://bankrupt.com/newsstand/or 215/945- 7000) LEVITZ HOME: Rejecting Nanuet Lease Effective August 2 ------------------------------------------------------ Nicholas M. Miller, Esq., at Jones Day, in New York, notifies the U.S. Bankruptcy Court for the Southern District of New York that Levitz Home Furnishings, Inc., and its debtor-affiliates will reject the lease for Store No. 20509 located in Nanuet, New York, effective as of Aug. 2, 2006. The Debtors will abandon their interest in any personal property located at the premises. Josephine Tritt and Dorothy Altman are the landlords for Store No. 20509. Headquartered in Woodbury, New York, Levitz Home Furnishings, Inc. -- http://www.levitz.com/-- is a leading specialty retailer of furniture in the United States with 121 locations in major metropolitan areas principally the Northeast and on the West Coast of the United States. The Company and its 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bank. S.D.N.Y. Lead Case No. 05-45189). David G. Heiman, Esq., and Richard Engman, Esq., at Jones Day, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they reported $245 million in assets and $456 million in debts. Jay R. Indyke, Esq., at Kronish Lieb Weiner & Hellman LLP represents the Official Committee of Unsecured Creditors. Levitz sold substantially all of its assets to Prentice Capital on Dec. 19, 2005. (Levitz Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) LEVITZ HOME: Seeks to Assign Three More Leases to PLVTZ LLC ----------------------------------------------------------- PLVTZ, LLC, and the Pride Capital Group, as purchasers of substantially all of Levitz Home Furnishings, Inc., and its debtor-affiliates' assets, provided the Debtors with Lease Assumption Notices for three store leases. The Debtors, hence, seek the Court's authority to assume and assign these leases to PLVTZ, and pay the cure amounts: Store# Address Landlord Cure Amount ------ ------- -------- ----------- 10205 Soundview, BR Bruckner Corporation; $55,649 New York First New York Partners 10401 Middletown, Topper Associates, LLC 44,688 New York 10504 Kenilworth, Grand Pop Realty Co., 16,500 New Jersey Inc. Nicholas M. Miller, Esq., at Jones Day, in Cleveland, Ohio, tells the Court that the proposed assumption and assignment provide the Landlords with adequate assurance of future performance. Headquartered in Woodbury, New York, Levitz Home Furnishings, Inc. -- http://www.levitz.com/-- is a leading specialty retailer of furniture in the United States with 121 locations in major metropolitan areas principally the Northeast and on the West Coast of the United States. The Company and its 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bank. S.D.N.Y. Lead Case No. 05-45189). David G. Heiman, Esq., and Richard Engman, Esq., at Jones Day, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they reported $245 million in assets and $456 million in debts. Jay R. Indyke, Esq., at Kronish Lieb Weiner & Hellman LLP represents the Official Committee of Unsecured Creditors. Levitz sold substantially all of its assets to Prentice Capital on Dec. 19, 2005. (Levitz Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) LONE STAR: Buys 40% Stake in Valin Tube's Unit for $132 Mil. Cash ----------------------------------------------------------------- Lone Star Technologies, Inc. entered into a definitive agreement to form a joint venture with Hunan Valin Steel Tube & Wire Co., Ltd., one of China's largest steelmakers. Under the agreement, Lone Star would acquire a 40% stake in one of Valin Tube and Wire's subsidiaries, Hengyang Valin MPM Steel Tube Co. Ltd., for a consideration of $132 million (approximately CNY1.059 billion) in cash. Lone Star will also provide significant technical and related operational support for the Joint Venture. Lone Star contemplates a series of future transactions related to the steel tube assets of Valin Tube and Wire in Hengyang, Hunan Province with the expectation that Lone Star would eventually contribute up to an aggregate of $238 million (approximately CNY1.909 billion) for 47% of the Joint Venture. All transactions being contemplated are subject to relevant regulatory approvals and consents. Upon injection of the $132 million into the Joint Venture, Lone Star and Valin Tube and Wire will also jointly establish a sales company with an initial equity investment of $15 million each to manage the North American sales and marketing of tubular products produced by the Joint Venture. Lone Star will have exclusive marketing and sales rights in North America to a minimum of 200,000 tons annually of oilfield tubular products produced by the Joint Venture. Valin Tube and Wire steel tube and related assets in Hengyang have an estimated annual manufacturing capacity of approximately one million pipe tons. The Joint Venture will also have small- and large-diameter billet casting capabilities, including two electric arc furnace melt shops, and oilfield tubular finishing capabilities. The new pipe mill and related melt shop became fully operational early this year. Lone Star expects to achieve a number of important strategic, operational and financial benefits from this transaction, including: -- An expanded product offering that will encompass a full range of seamless and welded oilfield tubular products, significantly enhancing Lone Star's ability to provide oilfield products and service solutions to its customers worldwide; -- Access through the joint venture to a stable supply of high- quality, globally competitive seamless tubular products and services; -- A substantial equity stake in seamless pipe mills (melt shops through product finishing), including a newly built, state-of-the-art seamless pipe manufacturing and OCTG finishing plant; -- Participation in the Chinese oilfield tubular markets; -- Opportunities for growth in the specialty tubing (mechanical) sector; and -- Enhanced, sustainable long-term revenue generation and value creation potential, including expected EPS accretion in 2007. "Establishing both a manufacturing base and stable supply source in China represents a major milestone for Lone Star, our distributors and our customers. Through our participation in this Joint Venture, Lone Star will add a broad range of high-quality seamless tubular products and oilfield services to our extensive line of premium welded OCTG offerings," Rhys J. Best, Lone Star's Chairman and Chief Executive Officer, said. "As a result, our customers can look forward to having access to an even larger array of products and services from a single source, when and where they need them. This transaction also gives us a highly attractive point of entry into the most rapidly growing steel market in the world, further strengthening our competitive capabilities and positioning us for accelerated international growth and profitability. "We are particularly pleased to be forging this relationship with Valin Tube and Wire, whose well-established presence in the Chinese market and modern, efficient operating facilities, make them an excellent partner for us. This is an exciting transaction that reflects the culmination of a great deal of hard work, mutual respect and good faith collaboration on both sides. I am confident that our highly complementary fit and shared objectives will enable us to deliver tangible and sustainable value to the customers and shareholders of both of our companies," added Mr. Best. "Our strategic alliance with Lone Star marks Valin Tube and Wire's entrance into the oilfield service industry and is an important step in our company's overall development strategy," Xiao Wei Li, Chairman of Valin Tube and Wire, said. "This Joint Venture is a true collaboration that will enable us to leverage our complementary strengths and expertise in different industry sectors to achieve synergies from our expanded market coverage and enhance our overall competitiveness. "We are committed to working closely with Lone Star to smoothly integrate our operations so that we can begin to realize the many benefits we expect this Joint Venture to create for both of us. From Valin Tube and Wire's perspective, we believe this alliance will rapidly improve our capability to produce high-grade, high- quality seamless steel pipe and tubes. This will allow us to adjust the mix of our product portfolio to address the huge increase in demand we are seeing in the oilfield industry, both domestically and globally. As a result, we will be well positioned to generate enhanced value for our shareholders," concluded Mr. Li. Transaction Terms Lone Star and Valin Tube and Wire will share the profits generated by the Sales Company from the sale of oilfield tubular products based upon a predetermined schedule that provides Lone Star with a preferential return until the earlier date of: (i) the recovery of the full value of its investment in the Joint Venture and the Sales Company; or (ii) 10 years after the Sales Company is established, after which time the profits will be shared equally between the two parties. Profits of the Joint Venture will be shared based upon the joint venture partners' ownership stakes. Under the terms of the agreement, currency fluctuations of less than 10% that occur between the date of signing and the closing will be borne equally by both Valin Tube and Wire and Lone Star. Should a fluctuation of greater than 10% occur, both parties have the option to terminate or renegotiate the agreement as appropriate. In addition to the satisfaction of customary conditions, the transaction is subject to the approval of the relevant regulatory authorities in the Peoples Republic of China, including the State- owned Assets Supervision and Administration Commission in Hunan, the National Development and Reform Commission, and the Ministry of Commerce. Upon completion of the transaction, which is anticipated to be by early 2007, both companies will participate in management appointments and board member nominations for the Joint Venture Company. The Board of Directors of the Joint Venture will be composed of 10 directors: four designated by Lone Star and six designated by Valin Tube and Wire and affiliates. The Chairman of the Board of Directors is appointed by Valin Tube and Wire. An extensive number of matters require the affirmative vote of not less than two-thirds of the members of the Board of Directors, of which at least two votes must be cast by directors designated by Lone Star. These matters are intended to include all of the important decisions that would come before the Board of Directors. Management of the Joint Venture will be headed by a General Manager who is nominated by Valin Tube and Wire. Lone Star will nominate the Chief Financial Officer, Chief Operating Officer, Director of Quality Assurance and Director of International Marketing. The Sales Company will be overseen by a Board of Directors composed of six directors: three designated by Lone Star and three designated by Valin Tube and Wire. The Chairman of the Sales Company's Board of Directors is appointed by Lone Star. Lone Star will fund its investment in the Joint Venture from its general corporate resources which, at the end of the second quarter of 2006, included $236.8 million in cash and short-term investments and an available $125 million revolving credit facility. Weil, Gotshal & Manges LLP is acting as legal counsel to Lone Star and Goldman Sachs & Co. is acting as financial advisor. About Lone Star Technologies Headquartered in Dallas, Texas, Lone Star Technologies, Inc. (NYSE: LSS) -- http://www.lonestartech.com/-- is a holding company whose principal operating subsidiaries manufacture and market oilfield casing, tubing, and line pipe, specialty tubing products, including finned tubes used in a variety of heat recovery applications, and flat rolled steel and other tubular products and services. Lone Star Technologies Inc.'s principal operating subsidiaries manufacture, market and provide custom services related to oilfield casing, tubing, couplings, and line pipe, specialty tubing products used in a variety of applications, and flat rolled steel and other tubular products. * * * In October 2005, Moody's Investors Service assigned Lone Star Technologies' senior subordinate debt and long-term corporate family ratings at B2 and Ba3 respectively. The ratings were placed with a stable outlook. In the same year, Standard & Poor's placed the Company's long-term foreign and local issuer credit ratings at BB- with a stable outlook. LYONDELL CHEMICAL: Citgo Interest Buy Cues Fitch to Affirm Ratings ------------------------------------------------------------------ Fitch Ratings affirmed and removed from Rating Watch Evolving the ratings for Lyondell Chemical Company and Equistar Chemicals L.P. following Lyondell's announcement to acquire the remaining 41.25% interest held by Citgo Petroleum Corporation in Lyondell-Citgo Refinery LP for $2.1 billion. The affirmed ratings are: Lyondell: -- Issuer default rating 'BB-' -- Senior secured credit facility 'BB+' -- Senior secured notes and debentures 'BB+' Equistar: -- Issuer default rating 'B+' -- Senior secured credit facility 'BB+/RR1' -- Senior unsecured notes 'BB-/RR3' At the same time, Fitch downgraded Lyondell's senior subordinated notes rating to 'B' from 'B+' and prospectively assigns a 'BB+' rating to Lyondell's new $800 million senior secured revolving credit facility and $2.65 billion senior secured term loan. Fitch also affirmed these: Millennium Chemicals Inc.'s: -- Issuer Default Rating 'B+' -- Convertible senior unsecured debentures 'BB/RR2' Millennium America Inc.: --Issuer Default Rating 'B+' --Senior secured credit facility and term loan 'BB+/RR1' --Senior unsecured notes 'BB/RR2' The Rating Outlook for Lyondell, Equistar and Millennium is Stable. For Lyondell, approximately $5.4 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 actions resolve the Rating Watch Evolving status put in place on July 21, 2006, following Lyondell's and its partner, CITGO, announcement to discontinue the auction of LCR. The rating affirmations for Lyondell's IDR, senior secured credit facility, and senior secured notes and debentures are supported by the increased access to cash flow from LCR as a result of its acquisition of CITGO's remaining 41.25% in the refinery. Given the fact that the refinery will be operating under a new crude supply agreement between LCR and PDVSA (which is expected to be based fully on market prices) and Fitch's outlook for continued strength in refining margins, Fitch expects Lyondell's benefit as the sole owner of LCR will offset the initial increase in indebtedness to fund the purchase of CITGO's minority share. Additionally Lyondell is expected to benefit from LCR's unique operating capabilities, its advantaged location and recent capital investments made to the refinery. Lyondell's consolidated total debt decreased, by $457 million, to $5.84 billion at June 30, 2006, from Dec. 31, 2005. On a proforma basis, Fitch expects total consolidated debt subsequent to the acquisition to be $8.49 billion and Lyondell's parent debt level to reach $5.42 billion. Fitch also expects Lyondell credit metrics will rebound within less than 18 months due to higher EBITDA levels and moderate debt reduction. By 2007 year-end Fitch anticipates Lyondell's consolidated as well as Lyondell parent level credit metrics to improve and surpass 2005 levels. Total balance sheet debt is expected to return to near current levels by the end of 2008. The affirmation also considers debt reduction at Lyondell parent will be heavily dependent on cash flow received from LCR and Equistar. Even though Fitch perceives integration and operating risks to be low, event risk associated with potential hurricane activity in the US Gulf and future political actions taken by the Venezuelan government could have a material negative affect on the refinery operations. Fitch views political risk as it relates to refinery operations higher than before due to the exit of CITGO as a partner and the potential for Venezuelan heavy sour crude supplies to be diverted away from the U.S. to other geographies. The one notch downgrade of Lyondell's senior subordinated notes to 'B' reflects deep subordination with the increased amount of senior secured debt post acquisition. Lyondell's exposure to potential weakness in methyl tertiary butyl ether markets and the loss of profitability if alternative products are produced remains a rating concern, as does continued volatility of raw material prices and its impact on demand, dividends and debt levels. Operating results in 2006 and 2007 are likely to be unstable quarter to quarter, but overall tight supply demand fundamentals coupled with low inventories should prove favorable for Lyondell and its businesses in the short term. The Stable Outlook reflects favorable business conditions for the markets Lyondell participates in and the expectation that Lyondell and its subsidiaries will continue to use excess cash for debt repayment. Fitch also expects that energy and raw material prices will continue to be volatile and remain a headwind for the company. Potential weaknesses related to MTBE as well as Millennium's business are likely to be offset by strong operations from petrochemical and refining operations. The rating affirmations for Equistar are supported by Fitch's view that the credit profile at Equistar will not materially change as a result of the purchase of CITGO's remaining share of LCR. Lyondell's management has been consistent that the target debt level at Equistar is $1.8 billion (approximately $500 million lower than $2.3 billion total debt level during the last cyclical trough). Fitch expects Lyondell will continue to be committed to previously stated debt reduction targets. Furthermore the rating affirmations incorporate Fitch's outlook for favorable market conditions for the chemical sector in the near-term; however in any one quarter margins may be under pressure from volatile raw materials (crude oil and natural gas). Margins are expected to remain well above a mid-cycle level for 2006 and 2007. Lastly, the ratings also include Equistar's product offerings of ethylene, ethylene derivatives and co-products, its significant earnings leverage, as well as strong cash generation. However, Equistar's ratings are limited by Lyondell's strong access to its cash flow, its focus on North American markets, and a narrower product portfolio compared to Lyondell. The rating affirmations for Millennium reflect Fitch's view that the credit profile at Millennium will also not materially change as a result of the purchase of CITGO's remaining share of LCR. The ratings consider the cyclical nature of Millenniun's commodity products, strong dividends through its 29.5% interest in Equistar, sizable debt reduction during the last 15-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. Furthermore, Fitch continues to monitor any new developments regarding Millennium's ongoing lead paint litigation. Lyondell holds leading global positions in propylene oxide and derivatives, plus TiO2, as well as leading North American positions in ethylene, propylene, polyethylene, aromatics, acetic acid, and vinyl acetate monomer. With the recent acquisition of LCR, Lyondell also expands it refining operations. 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. Post- acquisition, LCR is a wholly owned subsidiary of Lyondell as well. In 2005, Lyondell and subsidiaries generated $2.22 billion of EBITDA on $18.6 billion in sales. MIRANT CORP: NY-Gen Unit Can Increase DIP Facility to $9.5 Mil. --------------------------------------------------------------- The Honorable Michael D. Lynn of the U.S. Bankruptcy Court for the Northern District of Texas allowed Mirant NY-Gen, LLC, a Mirant Corporation debtor affiliate, to amend and increase its existing lending facility with Mirant Americas, Inc., to $9,500,000 pursuant to a First Amendment to the Debtor-in-Possession Credit Agreement. The Court authorizes Mirant NY-Gen to execute and deliver the First Amendment and the Amended DIP Facility Documents to Mirant Americas. As reported in the Troubled Company Reporter on July 7, 2006, Mirant NY-Gen discovered that its $4,500,000 existing DIP Facility is not enough to finance the final remediation plan approved by the Federal Energy Regulatory Commission. The Final Remediation Plan provides for the remediation of Mirant NY-Gen's Swinging Bridge hydroelectric facility. Headquartered in Atlanta, Georgia, Mirant Corporation (NYSE: MIR) -- http://www.mirant.com/-- is an 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 Jan. 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. The Debtors emerged from bankruptcy on Jan. 3, 2006. (Mirant Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 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 ConEd & O&R to Comply with Purchase Agreement ---------------------------------------------------------------- In 1998, Mirant Corp.'s debtor-affiliates in New York, entered into four agreements to purchase certain generation facilities of Consolidated Edison Company of New York, Inc., and Orange and Rockland Utilities, Inc. Old Mirant or MC 2005, LLC, guaranteed the New York Debtors' obligations under the Purchases Agreements and transferred as purchase price (i) $349,272,262 to O&R and (ii) $136,920,555 to ConEd. In December 2000, O&R, the New York Debtors and Mirant Americas Energy Marketing, LP, reconciled the amounts then owed to or from the Sellers: (a) O&R cancelled its $3,987,435 claim against Mirant NY-Gen, LLC, Mirant Lovett, LLC, and Mirant Bowline, LLC; (b) O&R transferred $2,362,812 to Mirant Bowline by wire transfer; (c) MAEM cancelled its $6,350,248 claim against O&R; (d) Mirant NY-Gen cancelled $1,071,843 of indebtedness due to it from MAEM; (e) Mirant Lovett agreed to pay $2,819,754 to MAEM at a future but unspecified date; and (f) Mirant Bowline agreed to pay $2,458,651 to MAEM at a future but unspecified date. Liability Obligations Pursuant to the Purchase Agreements, the New York Debtors assumed certain liabilities with respect to the Purchased Assets, except those identified as excluded liabilities. Craig H. Averch, Esq., at White & Case LLP, in Miami, Florida, notes that O&R and ConEd represented in the Purchase Agreements that: * they possessed no non-disclosed liabilities relating to the business or operations of the Purchased Assets; * there had not been any damage, destruction or casualty loss which had a material adverse effect on the Purchased Assets; and * they were in compliance with all applicable environmental laws. O&R and ConEd agreed to indemnify Mirant NY-Gen, Mirant Bowline, and Mirant Lovett from all claims asserted against the Debtors, and arising out of the Excluded Liabilities or from any breach of the covenants. The Purchase Agreements also provide that O&R and ConEd would be responsible for its prorated portion of taxes accrued by the Purchased Assets through the Closing Date. Plan of Reorganization In accordance with the Debtors' Plan, Old Mirant and MAEM were transferred to Mirant Corporation on the Effective Date. All assets of MAEM and other "Trading Debtors" were transferred to Mirant Energy Trading, LLC. Deficiencies and Problems Indemnification and Tax Payments Mr. Averch relates that during the past two years, the New York Debtors have discovered various deficiencies and problems with the Purchased Assets resulting in continuing liabilities, damages and costs. Based on the New York Debtors' investigation, many of the liabilities, damages and costs are "Excluded Liabilities" under the Purchase Agreements and further result from breaches of O&R and ConEd's covenants. The New York Debtors have identified these deficiencies and problems at the facilities that are Excluded Liabilities: (1) Improper closure at the Lovett coal ash management facility; (2) Leaking from the underground pipeline at the Hillburn generating facility; (3) Inadequate secondary containment storage capacity for oil tanks at the Lovett facility and at the Bowline facility; and (4) Existence of a sinkhole at the Swinging Bridge Dam near the Swinging Bridge Hydroelectric Station. The New York Debtors have asserted indemnification from the O&R and ConEd, but the Sellers failed to abide by their contractual obligations. In addition, since the Closing Date, the New York Debtors and Old Mirant paid the property taxes on behalf of O&R and ConEd that should have been prorated under the Purchase Agreements, Mr. Averch says. The New York Debtors and Old Mirant have asserted reimbursement for those tax payments, but O&R and ConEd failed to do so. Claim Objections O&R filed Claim No. 8411 for $962,037, while ConEd filed Claim No. 8036 for $85,843 on account of certain unpaid services. The New York Debtors seek to disallow the Claims pursuant to Section 502(d) of the Bankruptcy Code. Section 502(d) provides that a court will disallow any otherwise allowable claim of an entity that is the recipient of a transfer avoidable under Chapter 5 of the Bankruptcy Code, unless the recipient surrenders the transfer. ConEd has not surrendered the Transfers made to it by Old Mirant, hence, the Claim should be disallowed under Section 502(d), Mr. Averch argues. In addition, an invoice for $1,880, which was attached to ConEd's Claim No. 8036 should be disallowed for untimely filing, Mr. Averch says. Moreover, Mr. Averch asserts that the Old Mirant Transfers constitute as fraudulent transfers to ConEd that is avoidable pursuant to Section 544 and under applicable state law. Section 544(b)(1) provides that any debtor may avoid any transfer of an interest in property or any obligation incurred that is avoidable under applicable law by a creditor holding an unsecured claim that is allowable or not allowable under Section 502. The phrase "under applicable law" has been interpreted to mean the state's fraudulent transfer law that would govern the potentially fraudulent transaction. The New York Debtors also dispute the validity and timing of O&R's Claim No. 5517, Mr. Averch notes. Pursuant to Section 550(a), to the extent that a transfer is avoided under Section 544, 545, 547, 548, 549, 553(b), or 724(a), the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of the property, from: (1) the initial transferee of the transfer or the entity for whose benefit the transfer was made; or (2) any immediate or mediate transferee of the initial transferee. For these reasons, the Mirant Entities ask Judge Lynn to: (a) disallow the O&R Claim and the ConEd Claim; (b) avoid Old Mirant's guaranty obligations pursuant Section 544; (c) avoid the Transfers pursuant to Section 544; (d) rule that Mirant and MET may recover the value of the property transferred, with interest, attorney's fees, and costs of suit and collection allowable by law; (e) disallow in accordance with Section 502(d), any claim held by O&R and ConEd until they satisfy the judgment; (f) rule that: (1) the deficiencies and problems at the facilities included in the Purchased Assets are Excluded Liabilities under certain of the Purchase Agreements; (2) O&R and ConEd are obligated to indemnify the New York Debtors for the liabilities, damages and costs arising out of the Excluded Liabilities; and (3) O&R and ConEd are required to defend the New York Debtors against those liabilities; and (g) award the Mirant Entities damages for breach of contract according to proof, interest, attorney's fees, and other costs. ConEd and O&R Seek Dismissal of Complaint and Withdrawal of the Reference Martin A. Sosland, Esq., at Weil, Gotshal & Manges LLP, in Dallas, Texas, asserts that the time for the Debtors to assert claims for fraudulent transfers has expired. Pursuant to Section 24.010(a)(2) of the Texas Business & Commerce Code Annotated, claims for constructive fraudulent transfer are time-barred when they are brought more than four years after the transfer, Mr. Sosland points out. The transfers occurred on November 24, 1998, when the agreements were entered into, Mr. Sosland says. Moreover, even if the closing date of June 30, 1999, were considered as the transfer date, still, more than four years passed between the transfers and the Debtors' July 14, 2003, Petition Date. Hence, O&R and ConEd ask Judge Lynn to dismiss the fraudulent transfer claims for failure to state a claim on which relief can be granted. With respect to the breach of contract claims, O&R and ConEd ask the U.S. District Court for the Northern District of Texas to withdraw the reference pursuant to Section 157(d) of the Judiciary and Judicial Procedures Code. Mr. Sosland contends that the claims for breach of contract are non-core proceedings. Absent the Debtors' bankruptcy, the claims for beach of contract would have been brought in a state or federal court in New York, Mr. Sosland points out. The pendency of the New York Debtors' bankruptcy cases and the fact that Mirant was once in bankruptcy does not alter the substance of the causes of action, nor does the fact that the claims for breach of contract are couched as counterclaims to proofs of claim, Mr. Sosland asserts. The Breach of Contract Counterclaims are state law contract claims relating to environmental and tax issues, which do not constitute core proceedings, Mr. Sosland says. They do not implicate any federally created or bankruptcy-related rights. Additionally, O&R and ConEd seek the transfer of the adversary proceedings with respect to the Breach of Contract Counterclaims to the New York District Court in the interest of justice and for the convenience of the witnesses and the parties. Judge Lynn will conduct a status conference on the motion to withdraw the reference on August 30, 2006, at 10:30 a.m. About Mirant Headquartered in Atlanta, Georgia, Mirant Corporation (NYSE: MIR) -- http://www.mirant.com/-- is an 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 Jan. 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. The Debtors emerged from bankruptcy on Jan. 3, 2006. (Mirant Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 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 COAL: Poor Performance Prompts S&P to Junk Ratings ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Nashville, Tennessee-based National Coal Corp., to 'CCC' from 'CCC+', in response to continued weak financial performance and concerns about the company's very limited liquidity. At the same time, Standard & Poor's lowered its senior secured debt rating on the company to 'CCC-' from 'CCC'. The outlook is negative. At June 30, 2006, the company had only $1.5 million in cash and had generated only $500,000 in cash from operations during the first half of 2006. "We could lower the ratings further if the company's liquidity position continues to erode because of any combination of significant operating disruptions, a deterioration of market conditions, markedly higher capital expenditures, or unexpectedly high costs," said Standard & Poor's credit analyst Marie Shmaruk. "We could raise the ratings should the company execute its expansion programs in a way that materially enhances its cash flow, diversity, and cost profile, while reducing its debt leverage." National Coal is a very small producer of thermal coal in the difficult mining region of central Appalachia. OPBIZ LLC: Form 10-Q Filing Delay Prompts S&P's Negative Watch -------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B-' corporate credit and senior secured ratings for Las Vegas, Nevada-based OpBiz LLC on CreditWatch with negative implications following the announcement by BH/RE, L.L.C. (the parent company of OpBiz) that OpBiz will delay filing its 10-Q for the three months ended June 30, 2006. "The delay is the result of ongoing negotiations between OpBiz and its contractors relative to the company's intention to enter into gross maximum price contracts for a substantial portion of the planned renovation work to the Aladdin Resort and Casino, which is ongoing," said Standard & Poor's credit analyst Michael Scerbo. Under the terms of these proposed contracts, OpBiz expects to make advanced payments to the contractors in exchange for a discount on the total cost of the renovations. These payments are expected to exceed the minimum spend requirements defined in the company's bank agreement, particularly the requirement that at least $72 million be spent by Aug. 31, 2006. As a result, the company does not anticipate that it will be required to make a mandatory prepayment of amounts outstanding under the bank facility for a renovation spend shortfall, which is a condition in the bank agreement. However, in the event that a prepayment of the bank facility is required, the company's liquidity situation could be pressured and the viability of the renovation project in question. In resolving our CreditWatch listing, Standard & Poor's will monitor the negotiations between OpBiz and its bank group for a resolution to the minimum renovation spend issue. The outcome of Standard & Poor's ratings review ranges from an affirmation to a multiple notch downgrade if the company's liquidity position becomes constrained. OWENS CORNING: Schultze Wants List of Class A5 Creditors -------------------------------------------------------- Schultze Asset Management LLC asks the U.S. Bankruptcy Court for the District of Delaware to direct Owens Corning and its debtor- affiliates to produce names and mailing addresses of creditors in Class A5. As previously reported, Schultze objected to the Disclosure Statement attached to the Debtors' Sixth Amended Plan of Reorganization, asserting that some parties to the Plan Support Agreement that are members of Class A5 may have conflicting interests in Classes A11, A12 or A4. Schultze, holder of approximately $60,000,000 in face amount of notes in Class A5, believes that those parties' commitments to support the Plan may be motivated by the conflicting interests rather than by actual belief in the fairness of treatment of Class A5 creditors under the Plan. The Court overruled Schultze's Disclosure Statement Objection but directed the Debtors to insert certain language reflecting its concern in the Plan, Thomas J. Francella, Jr., at Reed Smith LLP, in Wilmington, Delaware, says. The Court noted that Schultze could independently express its concerns in a letter to other creditors. Schultze has already prepared the letter, which it asserts is accurate and complies with the provisions of the Bankruptcy Code, Mr. Francella tells Judge Fitzgerald. Schultze therefore wants the list of names and addresses so it could distribute the letter. Schultze believes that Court approval of the content of the letter is not required. Mr. Francella points out that the U.S. Court of Appeals for the Third Circuit ruled in Century Glove, Inc., v. First Am Bank of N.Y. 860 F.2d 94 (3rd Cir. 1998), that once adequate information has been provided a creditor, Section 1125(b) of the Bankruptcy Code does not limit communication between creditors. Debtors Say Letter Has Misstatements and Omissions The Debtors relate that they have informed Schultze that they would provide the requested mailing information before Schultze filed its request. The Debtors, however, conditioned furnishing the information upon Schultze's removal of what they believe are legal and factual inaccuracies in the letter and the correction of some material omissions. The Debtors provided proposed revisions to Schultze, Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, informs Judge Fitzgerald. However, Schultze would not agree to the proposed modifications. Still, the Debtors are willing to mail the letter provided that: -- the misstatements and omissions are corrected prior to the letter's dissemination; or -- the Debtors, the Official Representatives, the Ad Hoc Committee of Bondholders and the Class A5 bondholders are provided an opportunity to provide their own letters in the same mailing to Class A5 creditors with Schultze's letter so that Class A5 creditors receive a broader, more balanced perspective on the Plan. "Permitting Schultze's proposed letter to be circulated without . . . opposing views would do the voting process . . . and Class A5 creditors, a disservice," Mr. Pernick maintains. Schultze Talks Back Schultze merely requested a mailing list; It did not ask the Debtors to include the letter in the Plan's solicitation package nor did it ask them to provide any imprimatur whatsoever to the letter, Mr. Francella points out. Instead of giving the mailing list, the Debtors demanded reviewing and editing the letter, holding the mailing list hostage until Schultze acceded to their demands, Mr. Francella complains. According to Mr. Francella, Schulze made certain of the changes that the Debtors requested. Schulze just does not want to give the Debtors complete control over its communications with other creditors, Mr. Francella contends. But from their objection, that is exactly what the Debtors want from the Court. Schultze ask the Court to overrule the Debtors' Objection in its entirety. Court Grants Schultze's Request The Court granted Schulze request over the Debtors' objection. The Court compels the Debtors to provide Schultze with the names and addresses of Class A5 Claimants. Since no request for approval of the letter was filed with the Court, Judge Fitzgerald rules that the letter will not be included in the Plan's solicitation package. "[I]f Schultze . . . desires to sent the letter it shall do so itself at its own expense and risk," Judge Fitzgerald adds. The Order is without prejudice to any party-in-interest to include in the solicitation package a response to Schultze's letter. A full-text copy of Owens Corning's Sixth Amended Plan is available for free at http://ResearchArchives.com/t/s?b1c A full-text copy of Owens Corning's Sixth Amended Disclosure Statement is available for free at: http://ResearchArchives.com/t/s?b1d 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. 138; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PEP BOYS: S&P Removes Developing Watch & Says Outlook is Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook for Philadelphia-based Pep Boys- Manny Moe & Jack to negative and removed its ratings, including the 'B-' corporate credit rating, from CreditWatch, where they were placed with developing implications on Feb. 10, 2006. "This action follows the company's conclusion of its strategic review process and its decision not to pursue a sale," said Standard & Poor's credit analyst Stella Kapur. Progress in turning around the company's operating performance continues to be limited. Same-store sales at the auto parts retailer for the first half of 2006 decreased 0.3%, following a 1.3% decline for all of 2005. However, EBITDA improved marginally, growing 10% to $57 million in the first half of 2006, and operating cash flow generation increased significantly to $86 million from $19 million in the first half of 2005. The higher operating cash flow primarily reflected better working capital management. This, combined with much lower capital spending, enabled the company to reduce its outstanding debt to $526 million at July 29, 2006, from $587 million at the end of 2005. While credit metrics have improved since the end of 2005, they still remain very weak. At July 29, 2006, lease-adjusted debt to EBITDA was 8.3x, compared with more than 9x at 2005, and last-12- month EBITDA coverage of interest remained flat at 1.3x due to higher interest expenses following its refinancing activity earlier this year. Standard & Poor's anticipates that it will be difficult for Pep Boys to experience significant improvements in operating performance from its remerchandising and remodeling programs, particularly given the more challenging environment for consumers and the company's reduced capital spending activity. As a result, Standard & Poor's does not anticipate significant improvement in EBITDA generation and operating performance in the near term. Near-term credit metrics improvement is also not expected to be meaningful. The ratings on Pep Boys-Manny, Joe & Jack reflect: * weak operating trends; * the risks of operating in the highly competitive and consolidating auto parts retail sector; * highly leveraged capital structure; and * somewhat limited financial flexibility. The company faces considerable challenges and needs to turn around its service segment and reinvest capital in its store base. PERFORMANCE TRANSPORTATION: Modified Incentive Program Draws Fire ----------------------------------------------------------------- The Teamsters National Automobile Transporters Industry Negotiating Committee and the Official Committee of Unsecured Creditors of Performance Transportation Services, Inc., and its debtor-affiliates object to the Debtors' motion to a modified performance incentive program. As reported in the Troubled Company Reporter on July 31, 2006, The Debtors came up with a modified performance-based program consisting of two components: 1. the EBITDAR Realization Bonus; and 2. the Value Added Bonus. Under the terms of the Modified Program, the Debtors increased the number of their management personnel eligible to achieve a bonus payment, to include all 54 participants that were eligible for a bonus payment under the Debtors' prepetition bonus plan. The Modified Program does not include any type of severance payments. Objections (A) Teamsters The Teamsters and its local unions threaten a strike if the Debtors' proposed incentive plan is approved. Frederick Perillo, Esq., at Previant, Goldberg, Uelmen, Gratz, Miller and Brueggeman, S.C., in Milwaukee, Wisconsin, tells the Court that the Incentive Plan will de facto be funded by significant benefit and wage reductions to rank and file employees, who will bear unfairly the whole burden of cost- savings of "reorganizing" the estate. However, Mr. Perillo continues, rank-and-file Teamsters will not pay a penny of tribute to upper management. Teamsters will not sacrifice alone to prop up an estate weighed down by the fatness of management greed, he says. Mr. Perillo notes that the Debtors have sought $10,000,000 to $13,000,000 in concessions from Teamster-represented employees. On the other hand, since February, the Debtors have modified the bonus program by removing the upward limit on the size of "value added" bonuses to the top executives, and by adding 50 more executives and managers. If the Debtors achieve the "maximum" EBITDAR goal of the Plan, and effectuate an early sale of the company, Mr. Perillo says the apparent bonuses called for by the Plan would be in excess of $4,000,000, weighted heavily to their two top executives. The Incentive Program rewards select executives and managers with a windfall for doing no more than their regular job duties, Mr. Perillo points out. Despite the re-casting of the incentive program in a "goal- oriented" fashion, Mr. Perillo cites two indications that the Plan is a sham: (1) The Debtors specifically discussed designing a bonus program with their financial experts from FTI Consulting prior to the bankruptcy. In particular, they discussed the new proscriptions in Section 503(c) of the Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Creditor Protection Act of 2005. There is therefore a very strong reason to believe that the Debtors were attempting to evade the prohibitions in the Act through artful program design; and (2) The employment contracts of the managers and executives already require these employees to devote their "best" efforts to performance of their duties. Because no one from the Debtors can identify specifically how the executives or managers will achieve the goals, or what particular steps need to be taken, other than to "work harder" at their current assignments, the bonus program is nothing more than an increase in pay for people who already have contracts requiring them to perform their duties. "A plan which increases [employees'] compensation on the theory that they will give 'better' than their 'best' effort is a mere caricature of high school coach's exhortation to a team of adolescents to 'give 110%,'" Mr. Perillo adds. Teamsters believes that the incentive program is part of a sub rosa plan of reorganization by management, to be achieved entirely on the backs of current employees. "The sub rosa plan is simple: Step One is the Court's approval of this bonus program. Step Two is the Section 1113 hearing. The executives get rich -- very rich -- very quickly," according to Mr. Perillo. Step Three, Mr. Perillo adds, is the strike the Teamsters will call, which will prevent the reorganization of the Debtors. That strike cannot be enjoined by the Court, as the bankruptcy court lacks federal subject matter jurisdiction to do so. The TNATINC and Local Unions 25, 63, 104, 120, 215, 222, 294, 299, 312, 355, 377, 449, 490, 492, 560, 580, 651, 657, 710, 745, 957, 964, and 988 are affiliated with the International Brotherhood of Teamsters. Teamsters is the exclusive representatives for collective bargaining purposes of approximately 2,100 of the employees of the Debtors and their affiliates in the United States and Canada. The Debtors and Teamsters are parties to a single master collective bargaining agreement, known as the National Master Automobile Transporters Agreement. Teamsters estimates accrued but unpaid benefits under the NMATA to exceed $8,000,000 as of February 3, 2006. (B) Creditors Committee The Official Committee of Unsecured Creditors tells Judge Kaplan that the Modified Incentive Program merely expands the eligible participates in an attempt to justify the top-heavy bonuses to insiders and increases the cost of the Original Program while still providing a windfall to the Debtors' two top insiders. The Modified Program, like the Original Program, is nothing more than a stealth key employee retention plan intended to reward insiders. Beth Ann Bivona, Esq., at Damon & Morey LLP, in Buffalo, New York, notes that bonuses under the Modified Program may be payable irrespective of the executives' performance. Given that the two major causes of the Debtors' woes -- production cutbacks by original equipment manufacturers and high fuel prices -- are beyond the executives' control, they can hardly be said to be essential or even necessary to a turnaround. Positive movements in these areas, Ms. Bivona says, will directly impact EBITDAR, which is the benchmark for payments under the Modified Plan. This means the executives will receive substantial payments if these metrics move in a favorable direction even if they do nothing. In addition, Ms. Bivona notes that the chief restructuring officer retained by the Debtors has many duties and responsibilities that overlap those of the executives. If the Modified Program is approved, the estates will be paying significant and duplicative bonuses to the executives for actions taken by the CRO. It is also doubtful that the Modified Program is necessary to retain talented managers as the auto-haul transportation sector is facing significant problems, according to Ms. Bivona. The Debtors' number one competitor -- Allied Automotive Group -- is also in bankruptcy. Thus, she says, attractive employment alternatives in this industry would appear to be limited. In sharp contrast, Ms. Bivona relates, the Debtors seem much less concerned about the approximately 2,100 rank and file employees that drive the machine. The Debtors seek approval to pay its upper management significant bonuses, while attempting to renegotiate downwards what hourly employees will earn. "This is clearly the wrong message to send to the thousands of employees supporting the company, particularly when there is a national shortage of long-distance truckers," Ms. Bivona says. The Debtors have survived for many months in bankruptcy without paying bonuses, Ms. Bivona reminds the Court. She contends that bonuses to insiders have proven to be unnecessary as the Debtors have been in bankruptcy for nearly eight months with only limited and normal attrition rates. However, bonuses to executive insiders could eviscerate recoveries to unsecured creditors. Bonuses to executive insiders could irreparably damage the Debtors' reorganization efforts if, as a result of these bonuses, the Debtors' employees strike. Debtors Respond The Debtors assert that their Modified Incentive Performance Program satisfies all applicable requirements of the Bankruptcy Code. The Debtors assure Judge Kaplan that the Modified Incentive Program was designed to ensure that any potential bonuses are commensurate with the value that eligible employees create for the estate. "No employee will be entitled to incentive compensation simply for remaining with the Debtors through the bankruptcy period. Nor will any employee be entitled to incentive compensation simply for being terminated," Garry M. Graber, Esq., at Hodgson Russ, LLP, in Buffalo, New York, says. Mr. Graber admits that the Debtors sought input from major constituents in developing the Modified Incentive Program. The Debtors, Mr. Graber relates, negotiated terms of the Program with their first lien lenders, second lien lenders and DIP lenders. After the Creditors Committee and the Teamsters voiced objections to the Original Plan, the Debtors hired Watson Wyatt & Company as compensation experts to review and modify the program to address those concerns. The Teamsters and the Committee never expressed a willingness to negotiate, let alone agree to, any of the terms of the Modified Incentive Program, Mr. Graber notes. Mr. Graber also relates that the Modified Incentive Program is substantially similar to the incentive programs approved by the courts in In re Nobex Corp., No. 05-20050 (Bankr. D. Del. Jan. 12, 2006), and In re Calpine Corp., No. 05-60200 (Bankr. S.D.N.Y. Apr. 26, 2006). In Nobex, the debtor sought approval of an incentive program that would pay certain senior executives, who were hired prior to the Petition Date, a percentage of the price achieved upon the sale of the debtors' assets. Under the Nobex incentive program, the executives received no compensation unless they created additional value above the stalking horse bid that was already proposed by the date the incentive program was to be approved. In Calpine, the New York court approved performance incentive programs under which bonus payments to management personnel were based on the achievement of a certain enterprise value, a specific annual cash flow target and certain cost savings. Mr. Graber also contends that the Debtors' Modified Incentive Program is not subject to Sections 503(c)(1) and 503(c)(2) of the Bankruptcy Code. Those sections describe certain conditions that must be satisfied before an insider can receive retention or severance bonus, not an incentive bonus. The Modified Incentive Program, Mr. Graber insists, falls within the purview of Section 503(c)(3), which provides the standards that govern all management bonus programs other than "stay" bonus programs or severance programs. In approving the Nobex incentive program, Mr. Graber notes, the Delaware court concluded that the program's structure was not similar to a retention or severance plan. The court also recognized that if the proposed sale did not provide sufficient funds, the senior executives could remain employed with the debtor indefinitely and they would receive no bonus. In Calpine, the New York court held that even if the incentive programs had the incidental effect of making employees "excited enough to stay at the company," Calpine's programs were not retention plans to be assessed under Section 503(c)(1) because the programs focus on maximizing the value of the estate and not to retain employees. Mr. Graber also points Judge Kaplan to the approval by the U.S. Bankruptcy Court for the Northern District of Georgia of Allied Holdings, Inc.'s key employee retention plan and severance plan. The Allied plan amounts to more than $10,000,000 in payments for 80 employees. Mr. Graber notes that the $10,000,000 in potential payments, which represent 1.13% of Allied's revenues -- was not in any way tied to the performance of eligible employees. As compared to the Allied bonus plan, the Modified Incentive Plan offers a smaller total payout and requires greater effort to achieve it, Mr. Graber tells Judge Kaplan. Moreover, unlike participants in the Allied plan, the Debtors' employees will only be eligible for incentive pay under the Modified Program if they achieve meaningful financial goals. Additionally, Mr. Graber contends that the Teamsters' objection highlights the fallacy that it will be too easy for eligible participants to achieve financial goals necessary to trigger bonus payments under the Modified Programs. The Teamsters' representation that there will be a strike if the Program is approved makes clear that the financial milestones will be anything but easy. About Performance Headquartered in Wayne, Michigan, Performance Transportation Services, Inc. -- http://www.pts-inc.biz/-- is the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America. The Company provides transit stability, cargo damage elimination and proactive customer relations that are second to none in the finished vehicle market segment. The company's chapter 11 case is administered jointly under Leaseway Motorcar Transport Company. Headquartered in Niagara Falls, New York, Leaseway Motorcar Transport Company Debtor and 13 affiliates filed for chapter 11 protection on Jan. 25, 2006 (Bankr. W.D.N.Y. Case No. 06-00107). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and Garry M. Graber, Esq., at Hodgson Russ LLP represent the Debtors in their restructuring efforts. David Neier, Esq., at Winston & Strawn LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and more than $100 million in debts. (Performance Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PERFORMANCE TRANSPORTATION: Taps @Road as MRM Solutions Provider ---------------------------------------------------------------- @Road, Inc., disclosed that Performance Transportation Services, Inc., has selected @Road as its MRM solutions provider. Under the terms of the agreement, PTS intends to deploy the flagship @Road(R) GeoManager(SM) MRM solution designed to give PTS greater location intelligence, manageability and real-time visibility into the work of up to 1,544 commercial carrier drivers and trucks. "After a competitive MRM vendor evaluation and solution pilot program, we are pleased to announce that PTS has chosen @Road," said Krish Panu, @Road CEO. "The PTS customer win reaffirms @Road as the MRM solutions provider of choice. We look forward to working with PTS and helping it to achieve a sizable reduction in fuel and other operating costs as well as increased productivity for delivering new cars and trucks to dealers throughout North America." PTS operates under three key transportation business lines including: E. and L. Transport, Hadley Auto Transport and Leaseway Motorcar Transport, and employs more than 2,000 employees who deliver approximately 3.8 million new cars and light trucks annually. PTS Operates from thirty-one strategically located facilities throughout the U.S. and Canada and has responsibility for seventy-two different customer vehicle delivery centers. "Of the five vendors we evaluated, @Road demonstrated strength in all areas including user interface, North American deployment capability and technical interfaces," said Jeff Cornish, PTS president and chief executive officer. "Moreover, with more than 150,000 vehicles and mobile workers managed using @Road MRM solutions, we like the fact that it maintains redundant data systems and has the infrastructure and staff to support this project. @Road also provided us with the most flexible and competitive pricing." PTS plans to also deploy an @Road on-board vehicle diagnostics and reporting solution based on J1708 industry standards. @Road Vehicle Diagnostics is designed to retrieve vehicle-operating information from the vehicle's electronic on-board control module. Information generated from the J1708 appliance is designed to be transmitted via the @Road iLM(R) in-vehicle wireless communication device to PTS managers in the form of daily or real-time online reports detailing such vehicle data as fuel usage and Power Take- Off, as well as engine fault codes related to oil pressure, coolant temperature, excessive engine speed and more. This information can be used to remotely monitor important engine parameters for proactive preventative maintenance, which can also help reduce vehicle down time, fuel and other operating costs. As part of @Road's relationship with PTS, @Road is also working with PTS's wholly-owned subsidiary, Logistics Computer Services ("LCS"), a custom software solutions provider for the automotive transportation sector, to develop a joint marketing relationship designed to bring a combination of @Road and LCS technology and solutions to the commercial carrier transportation market. As part of the joint arrangement, @Road and LCS plan to market a solution that includes a streamlined process for vehicle delivery, with electronic signature capture, exception data collection at the point of dealership contact, trip related messaging services, fuel tax reporting, pre and post trip equipment reporting, integrated geofence event triggers and other proprietary automated processes. "We are asking LCS and @Road to develop a joint solution for commercial carrier transporters that would be designed to significantly reduce paper intensive daily processes and which would also reduce 'out of route' miles as well as provide electronic Department of Transportation Logs and JBus interface to their equipment," said Cornish. "A primary goal is that this solution would have a complete extension of a customer's existing system to the driver and have enhanced capabilities to dramatically improve the overall vehicle delivery process." About @Road @Road, Inc. is a global provider of solutions designed to automate the management of mobile resources and to optimize the service delivery process for customers across a variety of industries. @Road delivers Mobile Resource Management solutions in three key areas: Field Force Management, Field Service Management and Field Asset Management. About Performance Transportation Headquartered in Wayne, Michigan, Performance Transportation Services, Inc. -- http://www.pts-inc.biz/-- is the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America. The Company provides transit stability, cargo damage elimination and proactive customer relations that are second to none in the finished vehicle market segment. The company's chapter 11 case is administered jointly under Leaseway Motorcar Transport Company. Headquartered in Niagara Falls, New York, Leaseway Motorcar Transport Company Debtor and 13 affiliates filed for chapter 11 protection on Jan. 25, 2006 (Bankr. W.D.N.Y. Case No. 06-00107). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and Garry M. Graber, Esq., at Hodgson Russ LLP represent the Debtors in their restructuring efforts. David Neier, Esq., at Winston & Strawn LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and more than $100 million in debts. (Performance Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PLIANT CORP: 1st Interest Payment on 13% Senior Notes on Jan. 2007 ------------------------------------------------------------------ As previously reported, Pliant Corporation and certain of its subsidiaries entered into an Indenture with The Bank of New York Trust Company, N.A., regarding the issuance of the company's 13% Senior Subordinated Notes due 2010. On a Form 8-K filing with the Securities and Exchange Commission, Pliant Corporation Senior Vice President and Chief Financial Officer Joseph Kwederis discloses that pursuant to the Indenture, interest that accrues on the New Subordinated Notes will be payable semi-annually on each January 15 and July 15, commencing Jan. 15, 2007, to holders of record on the immediately preceding January 1 or July 1. The New Subordinated Notes will accrue payment-in-kind interest with respect to the first two interest payment dates and then will accrue semi-annual cash pay interest with respect to the interest payment dates afterwards. Among other things, the Indenture contains: -- covenants limiting the incurrence of indebtedness and restricting certain payments; -- covenants limiting restrictions on the ability of subsidiaries to make distributions to the company; -- covenants limiting sales of assets and subsidiary stock and the entry into affiliate transactions; and -- provisions governing merger and change of control transactions. Mr. Kwederis relates that the company may be required under certain circumstances to offer to repurchase New Subordinated Notes with the proceeds of certain asset sales. The New Subordinated Notes will automatically become due and payable without notice upon the occurrence of an event of default involving insolvency or bankruptcy of the company or certain of its subsidiaries. In addition, upon the occurrence and during the continuation of any other event of default under the Indenture, by notice given to the company, the Trustee or holders of at least 25% in principal amount of the New Subordinated Notes may declare the principal of and accrued and unpaid interest on all the New Subordinated Notes to be immediately due and payable. Headquartered in Schaumburg, Illinois, Pliant Corporation -- http://www.pliantcorp.com/-- produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Debtor and 10 of its affiliates filed for chapter 11 protection on Jan. 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). James F. Conlan, Esq., at Sidley Austin LLP, and Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. The Debtors tapped McMillan Binch Mendelsohn LLP, as their Canadian bankruptcy counsel. The Ontario Superior Court of Justice named RSM Richter, Inc., as the Debtors' information officer in their restructuring proceeding under Companies Creditors Arrangement Act in Canada. Kenneth A. Rosen, Esq., at Lowenstein Sandler, P.C., serves as counsel to the Official Committee of Unsecured Creditors. Don A. Beskrone, Esq., at Ashby & Geddes, P.A., is local counsel to the Creditors' Committee. As of Sept. 30, 2005, the company had $604,275,000 in total assets and $1,197,438,000 in total debts. The Debtors emerged from chapter 11 protection on July 19, 2006 (Pliant Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PREMIER ENTERTAINMENT: S&P Holds Junk Rating on Developing Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services held its ratings on Premier Entertainment Biloxi LLC, including the 'CCC' corporate credit rating, on CreditWatch with developing implications where they were placed on April 19, 2006, reflecting: * Upside ratings potential in the event the company's $160 million first mortgage notes due 2012 are successfully tendered at par or better, or if it appears that equity holders will financially support the rebuilding effort; and * Downside ratings potential in the event there is no successful tender of the notes, and if equity holders do not appear likely to continue to support the project. "Premier announced in its June 2006 10-Q that BHR Holdings Inc. has agreed to make its third tender offer for the notes at 101% plus accrued interest upon the receipt of additional insurance proceeds by the company, expected by Aug. 31, 2006, per terms of settlement agreements with carriers; however, BHR's agreement to make another tender offer is subject to conditions, one of which is a concurrent tender offer by Premier to partially redeem the notes at 100%," said Standard & Poor's credit analyst Emile Courtney. BHR, an affiliate of Leucadia National Corp., acquired a controlling interest in Premier through a subsidiary in April 2006. BHR's first two tender offers expired with no notes tendered. Insurance receivables under settlement agreements with carriers total $160 million; however, collections as of August 15, 2006, were $122 million, with $38 million in collections expected by Aug. 31, 2006. Premier has estimated the costs of opening the Hard Rock Hotel & Casino Biloxi, including construction, interest and expenses through the reconstruction period, and existing overdue obligations, would be approximately $195 million. Premier was formed to construct and operate the Hard Rock Biloxi, which was destroyed by Hurricane Katrina on August 29, 2005. QUANTUM CORP: S&P Ups Sr. Secured First-Lien Debt's Rating to B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its rating and recovery rating on Quantum Corp.'s proposed first-lien bank facility to 'B+' and '1' from 'B' and '3', respectively, following a recent amendment to the terms of the proposed financing of Quantum's acquisition of Advanced Digital Information Corporation. The bank loan rating, along with the '1' recovery rating, reflect Standard & Poor's expectation of full recovery of principal by first-lien creditors in the event of a payment default. The newly proposed first-lien senior secured bank facility will consist of: * a $150 million revolving credit facility (due 2009); and * a $225 million term loan (due 2012). Additionally, Quantum will now issue a $125 million second-lien senior secured term loan (due 2013), which will not be rated. Furthermore, an accelerated maturity clause has been added to the terms of the credit facilities, such that the failure to either refinance or convert existing 4.375% convertible subordinated notes prior to January 1, 2010, would accelerate maturities of the first- and second-lien facilities to April 2, 2010 and May 2, 2010, respectively. Scheduled amortization also was amended such that Quantum will be required to repay $50 million of the first-lien term loan by September 2008 in equal quarterly installments beginning in December 2006. Thereafter, annual amortization will be $2.25 million, paid quarterly, until maturity, at which point the remaining balance is due. Quantum's corporate credit rating is 'B' with a stable outlook. The corporate credit rating reflects increased financial leverage and debt servicing burdens resulting from the ADIC acquisition financing and relatively weak operating profitability stemming from mixed industry fundamentals and competition. These factors are partially offset by the potential for an improved business position, and incremental improvements in profitability and cash flow generation, resulting from cost cuts and synergies from the acquisition of ADIC. Ratings List: Quantum Corp. * Sr. secured first-lien debt's rating revised to B+ (Recovery Rating 1) from B (Recovery Rating 3) RADNOR HOLDINGS: Files for Chapter 11 Protection to Sell Assets --------------------------------------------------------------- Radnor Holdings Corp. and 21 of its affiliates filed for chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware on Aug. 21, 2006. Paul D. Ridder, the Company's Vice-President, Chief Financial Officer and Assistant Secretary tells the Court that the Debtors have a highly leveraged capital structure, as a result of both operational decisions and circumstances beyond their control. Specifically, during 2005 and 2006, the Debtors launched certain new products in response to customer requirements and an effort to improve profitability. Although the new product launches were successful and the Debtors obtained valuable customer contracts as a result, the Debtors made significant expenditures related to the new products, including investments in equipment and research. To make such expenditures and meet operating expenses, the Company incurred substantial debt. A significant percentage of that debt is at variable interest rates that have steadily risen. When the Debtors filed for bankruptcy, the principal amount of their secured indebtedness was in excess of $201 million, consisting of: * a prepetition term loan under which approximately $118.5 million is outstanding, * a prepetition revolving facility under which approximately $63.4 million is outstanding, and * additional secured debt of approximately $19.2 million outstanding under miscellaneous secured credit documents. The Debtors also have unsecured bond indebtedness in the principal amount of $135 million, an unsecured note in the principal amount of $7 million in connection with the acquisition of the Debtors' plastics manufacturing operations in 2003, and approximately $47.2 million in unpaid ordinary course trade debt, including certain accrued expenses. Operational and Financial Difficulties Mr. Ridder adds that over the past 12 months, the Debtors have experienced an unprecedented increase in raw material prices and escalating energy costs. Specifically, the Company's products require a variety of raw materials, including styrene monomer and pentane in the production of expandable polystyrene (EPS), and plastic resins such as polystyrene and polypropylene for the manufacture of plastic packaging products. Each of these raw materials is petrochemical based. Thus, escalating petrochemical and petrochemical derivatives product prices have significantly increased the cost of the raw materials the Company uses to produce its products, which increased costs the Debtors have not been able to fully pass through to their customers. Moreover, even when the Debtors were able to pass costs through to customers, they experienced a lag between the increase in cost and the benefit of the increased prices. The rising cost of energy (both crude oil and natural gas) also increased the Debtors' operating expenses, including shipping costs and the cost of running their manufacturing facilities. As a result, the Debtors' operating margins have suffered, notwithstanding the fact that the Debtors have been able to increase the average selling prices of certain of their products, Mr. Ridder says. Mr. Ridder contends that the Debtors' highly leveraged capital structure has limited not only their ability to respond to thoseconditions, but also their ability to exploit business opportunities and respond to unpredictable business challenges, such as the 2005 Gulf Coast hurricanes. Prepetition Restructuring Efforts Earlier this year, the Company undertook more aggressive measures to improve operating performance and address its liquidity concerns. In particular, the Debtors began to implement a company-wide cost reduction program. These efforts included consolidating the Debtors' Jacksonville, Florida manufacturing operation into other plants, and reducing the Debtors' workforce by approximately 10%. The Debtors have also made strides in improving manufacturing efficiencies and reducing nonoperating costs. Although the Debtors benefited from these initiatives, their liquidity problems continued, according to Mr. Ridder. By June of this year, the Debtors had been advanced approximately $20 million in excess of permitted advances under the Prepetition Revolving Facility. Accordingly, on June 15, 2006, the Debtors publicly announced that they had reached an agreement with National City Business Credit, Inc. -- the Prepetition Revolving Agent -- and Bank of America, N.A. as syndication agent and KeyBank, National Association, pursuant to which the Debtors agreed to undertake efforts to reduce the Over Advance in exchange for such lenders' agreement to forbear from exercising rights and remedies on account of the Over Advance. NCBC, BofA and Keybank are the Original Prepetition Revolving Lenders. Sale Process At the same time, the Debtors began evaluating strategic alternatives, and engaged Lehman Brothers as their financial advisor to advise and assist with the evaluation of such alternatives. Lehman immediately commenced due diligence and worked with the Company to develop a preliminary business plan for 2006 and 2007. Based on that plan, the Debtors and their financial advisers pursued a variety of transactions, including an equity or capital infusion as well as a sale of all or a portion of the Company's business. In addition, Lehman began to search for debtor-in-possession financing, in the event that the Company determined to commence Chapter 11 cases. Although the Company and Lehman contacted numerous potentially interested parties regarding financing and sales, it became apparent that the Prepetition Term Loan Agent was the most likely potential purchaser of the Debtors' assets and that the Original Prepetition Revolving Lenders were the most likely providers of debtor in possession financing. Accordingly, the Debtors and their advisors approached Tennenbaum Capital Partners, LLC, regarding its interest in serving as a "stalking horse" bidder in a bankruptcy court-supervised sale of the Debtors' business. At the same time, the Debtors began to negotiate the terms and conditions of a debtor in possession financing facility with the Original Prepetition Revolving Lenders. Negotiations with Lenders While negotiating the terms of a stalking horse bid, the Debtors entered into the First Amendment to the Agreement Regarding Loans, dated as of July 18, 2006, pursuant to which the Prepetition Revolving Agent and the Prepetition Revolving Lenders agreed to continue to fund the Debtors, and forbear from exercising rights and remedies, through July 27, 2006. The primary purposes of the First Amendment were to afford the Debtors an opportunity to negotiate the stalking horse agreement and to arrange debtor in possession financing by proving the Company with additional liquidity of $3.2 million. In connection with the First Amendment, the Prepetition Term Loan Agent and the Prepetition Term Loan Lenders entered into an intercreditor agreement, dated July 18, 2006, with the Prepetition Revolving Agent and the Original Prepetition Revolving Lenders, pursuant to which the Prepetition Term Loan Lenders contractually agreed to subordinate to the Increased Overadvance. Subsequently, the Debtors and the Prepetition Revolving Agent and the Original Prepetition Revolving Lenders extended the forbearance period through July 31, 2006. On August 1, 2006, the Current Prepetition Revolving Lender purchased the interests of the Original Prepetition Revolving Lenders with respect to the Prepetition Revolving Facility, and concurrently therewith provided the Debtors with additional liquidity of $5 million and a forbearance through August 21, 2006. The Debtors used the additional time and liquidity provided by the Current Prepetition Revolving Lenders to further explore their restructuring alternatives, and negotiate the terms of a stalking horse agreement with the Prepetition Term Loan Agent and the terms of debtor in possession financing with the Current Prepetition Revolving Lenders. The Debtors' efforts culminated in the Debtors entering into two agreements. The first is a stalking horse asset purchase agreement, pursuant to which the Debtors would sell substantially all of their assets, subject to higher and better offers, to TR Acquisition Company, Inc., an affiliate of the Prepetition Term Loan Agent. The second agreement is a debtor in possession financing credit agreement that provides the Debtors with sufficient liquidity to commence a bankruptcy court supervised sale process that will enable the Debtors to maximize value for creditors and other interested parties through a sale of substantially all of its assets or some other restructuring alternative. Accordingly, the Debtors filed for bankruptcy to use the section 363 sale process as a means to maximize value and provide themselves with a vehicle to explore any and all of their restructuring alternatives, Mr. Ridder explains. Headquartered in Radnor, Pennsylvania, Radnor Holdings Corporation -- http://www.radnorholdings.com/-- is a private holding company. The Company's domestic operations are conducted through Radnor's wholly owned subsidiaries, WinCup Holdings, Inc., WinCup Texas, Ltd., and StyroChem U.S., Ltd. The Company's subsidiaries manufacture and distribute a broad line of disposable foodservice products in the United States, and specialty chemical products worldwide. RADNOR HOLDINGS: Case Summary & 30 Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: Radnor Holdings Corporation 150 Radnor Chester Road, Suite A300 Radnor, Pennsylvania 19087 Bankruptcy Case No.: 06-10894 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Benchmark Holdings, Inc. 06-10895 Radnor Asset Management, Inc. 06-10896 Radnor Chemical Corporation 06-10897 Radnor Delaware II, Inc. 06-10898 Radnor Investments II, Inc. 06-10899 Radnor Investments III, Inc. 06-10900 Radnor Investments, Inc. 06-10901 Radnor Investments, L.L.C. 06-10902 Radnor Management Delaware, Inc. 06-10904 Radnor Management, Inc. 06-10905 StyroChem Delaware, Inc. 06-10906 StyroChem Europe Delaware, Inc. 06-10907 StyroChem GP, L.L.C. 06-10908 StyroChem LP, L.L.C. 06-10909 StyroChem U.S., Ltd. 06-10910 WinCup Europe Delaware, Inc. 06-10911 WinCup GP, L.L.C. 06-10912 WinCup Holdings, Inc. 06-10913 WinCup LP, L.L.C. 06-10914 WinCup RE, L.L.C. 06-10915 WinCup Texas, Ltd. 06-10916 Type of Business: The Debtor manufactures and distributes a broad line of disposable food service products in the United States, and specialty chemicals worldwide. See http://www.radnorholdings.com/ Chapter 11 Petition Date: August 21, 2006 Court: District of Delaware Judge: Peter J. Walsh Debtors' Counsel: Gregg M. Galardi, Esq. Mark L. Desgrosseilliers, Esq. Skadden, Arps, Slate, Meagher One Rodney Square Wilmington, DE 19899 Tel: (302) 651-3000 Fax: (302) 651-3001 Total Assets: $361,454,000 Total Debts: $325,300,000 Debtors' Consolidated List of 30 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Unsecured Bondholders $135,000,000 U.S. Trust Attn: Constantine Hromych 123 South Broad Street Philadelphia, PA 19109 Tel: (215) 772-1500 Fax: (215) 772-7620 Polar Plastics $9,035,257 P.O. Box 428 Mount Mourne, NC 28123 Tel: (336) 784-8880 Fax: (336) 785-1815 Lyondell Chemical Company $8,349,001 Attn: Dominic Ching 2640 Collections Drive Center Chicago, IL 60693 Tel: (713) 309-4726 Fax: (713) 309-7595 Nova Chemicals Inc. $6,709,672 Nova c/o Citibank N.A. P.O. Box 2399 Carol Stream, IL 60132-2 Tel: (412) 490-4000 Fax: (412) 490-4155 Total Petrochemicals USA, Inc. $2,329,605 P.O. Box 932437 Atlanta, GA 31193 Tel: (713) 483-5451 Fax: (713) 483-5466 Formosa Plastics Corp. $1,994,735 P.O. Box 7062 Los Angeles, CA 90074 Tel: (973) 992-2090 Fax: (973) 992-9627 WeyerHaeuser $1,440,090 Attn: Steven R. Rogel Box 75146 Charlotte, NC 28275 Tel: (704) 334-5222 Fax: (253) 924-3380 Swift Transportation $1,354,562 Attn: Brian Alexander P.O. Box 643116 Cincinnati, OH 45264 Tel: (800) 446-4051 Fax: (614) 308-2385 WS Packaging Group $1,354,562 1102 Jefferson St. Algoma, WI 54201 Tel: (800) 236-3424 Fax: (920) 487-5644 South Hampton Resources, Inc. $698,152 FM 418 West Silsbee, TX 77656 Tel: (409) 385-14000 Fax: (409) 385-2453 Temple Inland $666,450 1000 Erwin Thompson Dr. Minden, LA 71055 Tel: (512) 434-3739 Fax: (512) 434-3750 KHS $639,429 880 Bahcall Court Waukesha, WI 83186 Tel: (262) 786-2188 Fax: (262) 786-2155 Exelon Energy Inc. $546,317 21425 Network Place Chicago, IL 60673 Tel: (877) 617-8593 Fax: (877) 212-2630 Service Transport $510,298 P.O. Box 751418 Houston, TX 77275 Tel: (713) 209-2500 Fax: (713) 209-2656 Richlen Construction $453,745 115 Aspen Drive Pacheco, CA 94553 Tel: (415) 904-0900 Fax: (415) 904-0905 Waller Logistics $446,136 Attn: Robert Waller P.O. Box 872835 Kansas City, MO 64187 Tel: (816) 629-3400 Fax: (816) 629-3460 Brady Services $445,346 Attn: Jim Brady 1915 Church Street Greensboro, NC 27405 Tel: (336) 510-6404 Fax: (336) 378-0677 M&N Plastics Inc. $416,170 Attn: Robert Waller 2706 S. Turkey Creek Rd. Plant City, FL 33566 Tel: (503) 252-8811 Fax: (503) 252-6796 Bright Transportation $406,609 Attn: Paul Miller P.O. Box 348 South Holland, IL 60473 Eagle Express $386,786 Attn: Danny Fulmah P.O. Box 348 South Holland, IL 60473 Tel: (708) 333-8401 Fax: (708) 333-4747 Heartland Express $360,310 Attn: Larry Byrd 2777 Heartland Dr. Coralville, IA 52241 Tel: (319) 545-2728 Fax: (319) 545-1349 Enbridge Gathering $318,135 Attn: Kurt Knight 2358 Payshare Circle Chicago, IL 60674 Tel: (972) 367-2640 Fax: (214) 750-7120 Temple Inland $312,357 1000 Erwin Thompson Dr. Minden, LA 71055 Tel: (512) 434-7339 Fax: (512) 434-3750 Tango Transport $296,815 Attn: Laurence Vaugn P.O. Box 11407 Birmingham, AL 35246 Tel: (800) 368-0599 Fax: (318) 683-4454 Dolphin Cartage $294,961 Attn: Andy Gegtmeyer 2832 Eagle Way Chicago, IL 60678 Tel: (773) 767-1234 Fax: (773) 767-7610 National Freight $292,223 Attn: Leon Cobb P.O. Box 12852 Philadelphia, PA 19101 Tel: (856) 691-7000 Fax: (856) 794-4653 Integrated Packaging $263,304 P.O. Box 23680 Newark, NJ 07189 Tel: (732) 247-5200 Fax: (732) 247-9559 Plastic Packaging Inc. $249,414 P.O. Box 245 Aberdeen, NC 28315 Tel: (828) 328-2466 Fax: (828) 322-1830 Transco Lines $235,642 Attn: Danny Fulmah P.O. Box 1400 Russelville, AR 72811 Tel: (479) 967-5700 Fax: (479) 968-3373 Suez Energy Resources $228,837 P.O. Box 25237 Lehigh Valley, PA 18002-5237 Tel: (713) 636-0000 Fax: (713) 636-1364 SAFENET INC: Form 10-Q Filing Delay Prompts Notice of Default ------------------------------------------------------------- SafeNet, Inc., disclosed that on Aug. 14, 2006, it received a purported Notice of Default from Citibank, N.A., Trustee, under the Indenture relating to the issuance of its $250 million 2-1/2% Convertible Subordinated Notes Due 2010, as a result of the failure to file the Form 10-Q. This purported notice of default demands that the Company cure the purported default within 60 days from the receipt of the notice of default. The Indenture provides that the trustee or holders of at least 25% of the aggregate principal amount of the Notes may accelerate repayment of the Notes if a default under the Indenture is not cured within 60 days after the Company receives notice of the default. The Company contemplates that the required SEC filings would be made within such 60-day period. However, SafeNet cannot assure such filings will be made within this period. Headquartered in Belcamp, Maryland, SafeNet, Inc. (NASDAQ:SFNT) -- http://www.safenet-inc.com/-- provides complete security utilizing its encryption technologies to protect communications, intellectual property and digital identities, and offers a full spectrum of products including hardware, software, and chips. is a global leader in information security. SAFENET INC: Late Form 10-Q Filing Prompts Nasdaq Delisting Notice ------------------------------------------------------------------ SafeNet, Inc., which has delayed filing its Form 10-Q for the quarter ended June 30, 2006, reported that it has in place a plan that, if achieved, would allow for this Form 10-Q to be filed by early October. The Company received a letter from the NASDAQ Listing Qualifications Staff indicating that the failure to timely file the Form 10-Q, as required by NASDAQ Marketplace Rule 4310(c)(14), could serve as a basis for the delisting of the Company's stock from The NASDAQ Global Select Market. The Company plans to request a hearing before a NASDAQ Listings Qualifications Panel to address the filing delay. At the hearing, the Company will present its plan to regain compliance with NASDAQ's filing requirements. The Company's common stock will remain listed on The NASDAQ Global Select Market pending the issuance of a formal decision by the NASDAQ Panel. SafeNet hopes to remedy its filing delay before NASDAQ effects the de-listing of SafeNet's common shares, but SafeNet cannot assure that the Panel will grant a request for continued listing. The plan would also allow the filing of a previously delayed amendment to Form 8-K containing certain financial information regarding the Company's acquisition of Eracom Technologies AG. Headquartered in Belcamp, Maryland, SafeNet, Inc. (NASDAQ:SFNT) -- http://www.safenet-inc.com/-- provides complete security utilizing its encryption technologies to protect communications, intellectual property and digital identities, and offers a full spectrum of products including hardware, software, and chips. is a global leader in information security. SATELITES MEXICANOS: Court Gives Interim OK on Milbank as Counsel ----------------------------------------------------------------- The Honorable Robert D. Drain, of the U.S. Bankruptcy Court for the Southern District of New York, granted Satelites Mexicanos, S.A. de C.V., application to employ Milbank, Tweed, Hadley & McCloy LLP, on an interim basis. The Court will convene a hearing on Sept. 6, 2006, to consider the Application on a permanent basis. Objections, if any, are due Aug. 31, 2006. The Debtor needs bankruptcy lawyers to prosecute its Chapter 11 Plan of Reorganization to confirmation. In this regard, the Debtor has chosen Milbank because of the firm's substantial expertise and familiarity in the Debtor's business operations and capital structure. The Debtor retained Milbank on March 6, 2001, to advise it on various corporate and restructuring matters, including, with respect to the Debtor's procurement of financing and insurance for its satellites as well as with various general U.S. corporate and securities legal issues. Milbank has also represented the Debtor in connection with its restructuring efforts prior to its filing for chapter 11 protection, including the Section 304 Proceeding, the U.S. issues relating to its Concurso Proceeding in Mexico, and the negotiation and execution of its Restructuring Agreement with major parties-in-interest. As legal counsel, Milbank is expected to: (a) advise the Debtor of its rights, powers, and duties as Debtor and debtor-in-possession in the continued management And operation of its business and properties; (b) advise and assist the Debtor in connection with the solicitation and confirmation of the plan of reorganization and related documents; (c) advise the Debtor concerning actions that it might take to collect and recover property for the benefit of its estate; (d) prepare on behalf of the Debtor all necessary and Appropriate applications, motions, draft orders, other pleadings, notices, schedules, and other documents, and review all financial and other reports to be filed in the Debtor's Chapter 11 case; (d) advise the Debtor concerning, and prepare responses to, applications, motions, other pleadings, notices, and other papers that may be filed and served in the Debtor's Chapter 11 case; (e) review the nature and validity of any liens asserted against the Debtor's property and advise the Debtor concerning the enforceability of those liens; (f) advise and assist the Debtor in connection with any potential asset dispositions; (g) advise the Debtor concerning executory contract and unexpired lease assumptions, assignments and rejections; (h) assist the Debtor in reviewing, estimating, and resolving claims asserted against its estate; (j) commence and conduct any and all litigation necessary or appropriate to assert rights held by the Debtor, protect assets of its estate, or otherwise further the goal of completing a successful reorganization; (k) advise and assist the Debtor with the preparation and filing of various documents required for the Debtor's compliance with U.S. securities laws; and (l) perform all other necessary legal services in connection with the Debtor's Chapter 11 case and other general corporate matters concerning the Debtor's business. The Debtor will pay Milbank for its services in accordance with the firm's standard hourly rates: Position Hourly Rate -------- ----------- Partners $600 - $850 Of Counsel $590 - $715 Associates & Senior Attorneys $225 - $565 Legal Assistants $155 - $295 Matthew S. Barr, Esq., a member of Milbank, Tweed, Hadley & McCloy LLP, discloses that on June 26, 2003, the Debtor provided his firm with a $200,000 retainer. Over time, the Debtor provided Milbank with additional payments to increase the Retainer and, as of the Debtor's filing for chapter 11 protection, Milbank held $454,250. The Retainer remains unapplied. In addition, Mr. Barr notes that according to Milbank's books and records for the year prior to the Debtor's filing for chapter 11 protection, Milbank was paid $3,608,660 by the Debtor for legal services performed and expenses incurred in contemplation of or in connection with the Debtor's restructuring efforts, including, among other things, representing the Debtor in connection with the involuntary Chapter 11 case filed against it, the Section 304 Proceeding, the U.S. issues relating to the Concurso Proceeding, the negotiation and execution of the Restructuring Agreement, and the preparation of various "first day" motions, the Chapter 11 Plan and related Disclosure Statement. Mr. Barr assures the Court that Milbank does not represent and will not represent any entity, other than the Debtor, in matters related to its Chapter 11 case. Mr. Barr, however, discloses that Milbank currently represents The Bank of New York Company, Inc., the indenture trustee for the Debtor's 10-1/8% Unsecured Senior Notes due November 1, 2004, and Citibank, N.A., the indenture trustee for the Senior Secured Floating Rate Notes due June 30, 2004, on matters unrelated to the bankruptcy case. Fees derived from Citibank matters represented over 1% of Milbank's 2005 revenues. According to Mr. Barr, Milbank has obtained a waiver from Bank of New York and Citibank to allow it to represent the Debtor. In the event the Debtor seeks advice with respect to an adversary proceeding in which either Bank is named as an adverse party or with respect to a challenge of the claims of the unsecured creditors for which the Banks act as trustee, Mr. Barr says the Debtor will retain conflicts counsel. About Satelites Mexicanos Satelites Mexicanos, S.A. de C.V., provides fixed satellite services in Mexico. Satmex provides transponder capacity via its satellites to customers for distribution of network and cable television programming, direct-to-home television service, on-site transmission of live news reports, sporting events and other video feeds. Satmex also provides satellite transmission capacity to telecommunications service providers for public telephone networks in Mexico and elsewhere and to corporate customers for their private business networks with data, voice and video applications. Satmex also provides the government of the United Mexican States with approximately 7% of its satellite capacity for national security and public purposes without charge, under the terms of the Orbital Concessions. The Debtor filed for chapter 11 petition on August 11, 2006 (Bankr. S.D.N.Y. Case No. 06-11868). Luc A. Despins, Esq., at Milbank, Tweed Hadley & McCloy LLP represents the Debtor in the U.S. Bankruptcy proceedings. Attorneys from Galicia y Robles, S.C., and Quijano Cortina Lopez y de la Torre give legal advice in the Debtor's Mexican Bankrutpcy proceedings. UBS Securities LLC and Valor Consultores, S.A. de C.V., give financial advice to the Debtor. Steven Scheinman, Esq., Michael S. Stamer, Esq., and Shuba Satyaprasad, Esq., at Akin Gump Strauss Hauer & Feld LLP give legal advice to the Ad Hoc Existing Bondholders' Committee. Dennis Jenkins, Esq., and George W. Shuster, Jr., Esq., at Wilmer Cutler Pickering Hale and Dorr LLP give legal advice to Ad Hoc Senior Secured Noteholders' Committee. As of July 24, 2006, the Debtor has $905,953,928 in total assets and $743,473,721 in total liabilities. On May 25, 2005, certain holders of Satmex's Existing Bonds and Senior Secured Notes filed an involuntary chapter 11 petition against the Company (Bankr. S.D.N.Y. Case No. 05-13862). On June 29, 2005, Satmex filed a voluntary petition for a Mexican reorganization, known as a Concurso Mercantil, which was assigned to the Second Federal District Court for Civil Matters for the Federal District in Mexico City. On August 4, 2005, Satmex filed a petition, pursuant to Section 304 of the Bankruptcy Code to commence a case ancillary to the Concurso Proceeding and a motion for injunctive relief seeking, among other things, to enjoin actions against Satmex or its assets (Bankr. S.D.N.Y. Case No. 05-16103). (Satmex Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SATELITES MEXICANOS: Court Approves Employees Obligation Payment ---------------------------------------------------------------- The Honorable Robert D. Drain, of the U.S. Bankruptcy Court for the Southern District of New York, granted the request of Satelites Mexicanos, S.A. de C.V., to: (a) pay certain obligations to the Employees, through the Employee Affiliates, where applicable, and to continue its employee benefit plans and practices postpetition; and (b) authorize and direct applicable banks and other financial institutions to receive, honor and pay all checks and electronic payment requests drawn on the Debtor's disbursement accounts and automatic payroll transfers related to the Employee Obligations, provided that: -- the Debtor has not requested and is not authorized at this time to make payments to its executive Employees: (a) under the Performance Bonus Plan; and (b) in excess of the $10,000 statutory cap provided for under Sections 507(a)(4) and 507(a)(5) of the Bankruptcy Code; and -- if, as of December 31, 2006, no order has been entered confirming a plan of reorganization under Chapter 11 with respect to the Debtor, nothing in the Order will prejudice the rights of the Ad Hoc Senior Secured Noteholders Committee and the Ad Hoc Bondholders Committee to seek the Court's reconsideration of amounts paid to individual Employees in excess of the $10,000 statutory cap. The Debtor says that it employs about 187 full-time and 19 part- time employees. Other than the chief executive officer, who is directly employed by the Debtor, all of the Debtor's Employees are employed through three non-debtor affiliates -- Satmex Servicios Tecnicos, S. de R.L. de C.V.; Satmex Administracion, S. de R.L. de C.V.; and Satmex Corporativo, S. de R.L. de C.V. Tecnicos employs 53 technical Employees all of whom are members of the Mexican Television and Radio Labor Union. Administracion and Corporativo employ 111 administrative and 23 executive Employees, none of which are unionized. The Employee Affiliates have no material assets and their only liabilities are the payment of the Employees' wages, compensation and benefits. They exist solely for the purpose of employing the Debtor's Employees. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, relates that the Debtor realizes substantial savings by employing and paying the Employees through the Employee Affiliates. However, while most of the Debtor's Employees are employed directly by one of the Employee Affiliates, under Mexican law, the Debtor and its Employee Affiliates are jointly liable for payment of each Employee's wages and benefits. Pursuant to contracts between the Debtor and each Employee Affiliate, each Employee is paid directly by the Employee Affiliate by which it is employed, and the Debtor prepays the Employee Affiliates for estimated amounts to be paid plus a fee of up to 10% of gross payroll. The Debtor, according to Mr. Despins, has incurred costs and obligations in respect of its Employees that remain unpaid as of the filing for chapter 11 protection. Although these obligations arose prepetition, they will only become due and payable in the ordinary course of the Debtor's business on or after the filing for chapter 11 protection. In the ordinary course of business, the Debtor also provides various Employee Benefits for the benefit of its Employees, Mr. Despins added. The Debtor estimates that it owes $1,600,000 in prepetition Employee Obligations. A) Compensation -- Salaries The Debtor pays its Employees approximately $314,000 in salaries on a bi-weekly basis. As of the Petition Date, no prepetition Salary obligations are due to Employees. Out of an abundance of caution, the Debtor seeks the Court's authority to pay any prepetition Salary obligations that may be outstanding. -- Commissions Certain directors and managers in the Debtor's sales force, who are trained to cultivate new business, are paid commissions, aggregating $300,000 annually, under the Debtor's sales bonus program. As of the filing for chapter 11 protection, $75,000 in Commissions were accrued but unpaid. -- Bonuses Certain Employees are entitled to bonus payments under several prepetition bonus programs maintained by the Debtor, either to motivate the Debtor's Employees or as required by Tecnicos' collective bargaining agreement. -- Performance Bonuses The Debtor spends $1,560,000 annually for employees who are eligible to receive bonus payments under its performance bonus plans. The Debtor does not seek to pay prepetition amounts owing to its executives under the Performance Bonus Plan at this time. -- Statutory Annual Bonus Pursuant to Mexican law, the Debtor pays an annual bonus to each employee in an amount equal to one month's salary. The Debtor pays an aggregate annual amount of $630,000 to Employees on account of the Statutory 13th Month Bonus Plan. -- Holiday Bonus The Debtor also pays an aggregate of $21,500 for annual Christmas bonus to approximately 100 Employees who are union personnel, support personnel and analysts. -- Vacation Premium The Debtor provides a statutory benefit to each Employee that has been employed by Satmex for at least one year. The Debtor's average yearly Vacation Premium obligations do not exceed $331,000. As of the filing for chapter 11 protection, approximately $182,000 in Vacation Premium obligations were accrued but unpaid. -- Medical Aid Plan The Debtor makes monthly payments to its non-union Employees to cover medical expenses not included in the Medical Insurance at an annual aggregate cost to the Debtor of approximately $170,000. As of the filing for chapter 11 protection, approximately $51,000 in Medical Aid Plan obligations were accrued but unpaid. -- Education Plan The Debtor makes an aggregate of $24,500 in annual payments (through Tecnicos) to all of its unionized Employees to assist with education costs for their children. As of the filing for chapter 11 protection, the Debtor has no accrued but unpaid obligations relating to the Education Plan. -- Severance In accordance Mexican labor laws, the Debtor spends $352,400 annually for severance to Employees whose employment relationship are terminated. As of the filing for chapter 11 protection, the Debtor has no accrued but unpaid Severance Pay obligations. -- Reimbursement of Expenses The Debtor pays for certain approved business-related Expenses of its Employees, including airplane tickets, taxis, gasoline, accommodations, phone calls and Internet access. Based on historic practices, as of the filing for chapter 11 protection, the accrued but unreimbursed Employee Expenses that remain outstanding totaled approximately $80,000. B) Employee Benefits -- Vacation Time The Debtor provides vacation time to each Employee as a paid time off benefit. Based on historical practices, the amount outstanding for unpaid Vacation Time that accrued prepetition for all Employees does not exceed $100,000. -- Social Security At the time of hiring by the Debtor, Mexican law requires that each Employee become affiliated to the Instituto Mexicano del Seguro Social (Mexican Social Security Institute), Mexico's social security program. The Debtor's average yearly Social Security obligations aggregate approximately $1,100,000. As of the filing for chapter 11 protection, approximately $74,000 in Social Security obligations were accrued but unpaid. -- Social Security Quota Support Each Employee is required to pay a quota to IMSS, aggregating $176,000 annually. As of the filing for chapter 11 protection, approximately $15,000 remained outstanding for the Debtor's Social Security Quota Support obligations. -- Spending Vouchers The Debtor provides spending vouchers to its employees as a tax-free benefit in an amount equivalent to 10% of each Employee's monthly base wage, at an aggregate annual cost of $280,000. As of the filing for chapter 11 protection, no Spending Vouchers obligations were accrued but unpaid. -- Automobile Allowance The Debtor provides certain of its Employees with Automobiles owned by the Debtor for personal and business use and, in connection therewith, provides the Employees with debit cards, which the Employees can use for gasoline and maintenance expenses. The Automobile Allowance has an annual cost of approximately $73,000. The Debtor believes that no Automobile Allowance obligations were accrued but unpaid as of the filing for chapter 11 protection. -- Medical Insurance The Debtor provides each Employee with medical insurance from Allianz Mexico S.A. Compana de Seguros. The Debtor's aggregate annual cost for the Medical Insurance is approximately $175,000. As of the filing for chapter 11 protection, approximately $55,000 of its Medical Insurance obligations were accrued but unpaid. -- Life Insurance The Debtor spends $15,000 annually for Allianz-provided life insurance for each Employee. As of the filing for chapter 11 protection, approximately $3,600 of the Debtor's Life Insurance obligations were accrued but unpaid. -- Savings Fund Program The Debtor pays $340,000 annually for matching contributions to a savings fund for the benefit of each Employee in an amount equivalent to 10% of the respective Employee's monthly base wage up to a statutory limit. As of the filing for chapter 11 protection, the Debtor has no accrued but unpaid obligations under the Savings Fund Program. About Satelites Mexicanos Satelites Mexicanos, S.A. de C.V., provides fixed satellite services in Mexico. Satmex provides transponder capacity via its satellites to customers for distribution of network and cable television programming, direct-to-home television service, on-site transmission of live news reports, sporting events and other video feeds. Satmex also provides satellite transmission capacity to telecommunications service providers for public telephone networks in Mexico and elsewhere and to corporate customers for their private business networks with data, voice and video applications. Satmex also provides the government of the United Mexican States with approximately 7% of its satellite capacity for national security and public purposes without charge, under the terms of the Orbital Concessions. The Debtor filed for chapter 11 petition on August 11, 2006 (Bankr. S.D.N.Y. Case No. 06-11868). Luc A. Despins, Esq., at Milbank, Tweed Hadley & McCloy LLP represents the Debtor in the U.S. Bankruptcy proceedings. Attorneys from Galicia y Robles, S.C., and Quijano Cortina Lopez y de la Torre give legal advice in the Debtor's Mexican Bankrutpcy proceedings. UBS Securities LLC and Valor Consultores, S.A. de C.V., give financial advice to the Debtor. Steven Scheinman, Esq., Michael S. Stamer, Esq., and Shuba Satyaprasad, Esq., at Akin Gump Strauss Hauer & Feld LLP give legal advice to the Ad Hoc Existing Bondholders' Committee. Dennis Jenkins, Esq., and George W. Shuster, Jr., Esq., at Wilmer Cutler Pickering Hale and Dorr LLP give legal advice to Ad Hoc Senior Secured Noteholders' Committee. As of July 24, 2006, the Debtor has $905,953,928 in total assets and $743,473,721 in total liabilities. On May 25, 2005, certain holders of Satmex's Existing Bonds and Senior Secured Notes filed an involuntary chapter 11 petition against the Company (Bankr. S.D.N.Y. Case No. 05-13862). On June 29, 2005, Satmex filed a voluntary petition for a Mexican reorganization, known as a Concurso Mercantil, which was assigned to the Second Federal District Court for Civil Matters for the Federal District in Mexico City. On August 4, 2005, Satmex filed a petition, pursuant to Section 304 of the Bankruptcy Code to commence a case ancillary to the Concurso Proceeding and a motion for injunctive relief seeking, among other things, to enjoin actions against Satmex or its assets (Bankr. S.D.N.Y. Case No. 05-16103). (Satmex Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SATELITES MEXICANOS: Gets Interim Use of Cash Management System --------------------------------------------------------------- The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York, authorized Satelites Mexicanos, S.A. de C.V., to continue, on an interim basis, to manage its cash pursuant to its existing Cash Management System. Judge Drain also directed the Debtor to maintain records of all transfers within the cash management system so that all transfers and transactions will be adequately and promptly documented in, and readily ascertainable from, its books and records, to the same extent maintained by the Debtor prepetition. The Debtor's cash management system consists of 18 bank accounts at various banks located in Mexico, Luxemburg and the United States. The Debtor maintains investment accounts at IXE Casa de Bolsa, S.A., (in Mexican Pesos), JPMorgan Chase (in U.S. Dollars), and BBVA Bancomer, S.A. (in U.S. Dollars). The Debtor also maintains: (i) four operating accounts; (ii) six collection accounts; (iii) two operating and collection accounts; and (iv) one savings fund at Banco INVEX, S.A. To comply with the United States Trustee's operating guidelines for debtors-in-possession, the Debtor modified its Cash Management System to ensure that its Bank Accounts with HSBC Mexico, S.A. Institucion de Banca Multiple, Grupo Financiero HSBC, serve as its primary Bank Accounts during the pendency of its Chapter 11 case, with its other Bank Accounts utilized only to the extent necessary to facilitate the collection of funds from its customers. Additionally, the Debtor opened two investment accounts, in Mexican Pesos and U.S. Dollars, at HSBC Mexico to serve as its primary investment accounts. Satmex transferred all of the funds maintained at IXE into the HSBC Investment Account maintained in Mexican Pesos and all of the funds maintained in its investment accounts at Chase and BBVA into the HSBC Investment Account maintained in U.S. Dollars. The other investment accounts will remain dormant during the pendency of its Chapter 11 case. Revenues generated by the Debtor are deposited in the Collection Accounts as received and then swept primarily into the Operating Accounts maintained with HSBC Mexico. At the close of each business day, all of the Debtor's accounts are reviewed and cash gains are swept into the corresponding HSBC Investment Account. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, relates that the Cash Management System provides significant benefits to the Debtor, including its ability to: (a) control corporate funds; (b) ensure the maximum availability of funds when necessary; (c) fund its operations efficiently and seamlessly; and (d) reduce administrative expenses by facilitating the movement of funds and the development of timely and accurate account balance information. Continuation of the current Cash Management System, including the network of Collection Accounts, is essential to a smooth and orderly transition into and operation in Chapter 11, thereby causing minimum disruption to the Debtor's operations, Mr. Despins contends. About Satelites Mexicanos Satelites Mexicanos, S.A. de C.V., provides fixed satellite services in Mexico. Satmex provides transponder capacity via its satellites to customers for distribution of network and cable television programming, direct-to-home television service, on-site transmission of live news reports, sporting events and other video feeds. Satmex also provides satellite transmission capacity to telecommunications service providers for public telephone networks in Mexico and elsewhere and to corporate customers for their private business networks with data, voice and video applications. Satmex also provides the government of the United Mexican States with approximately 7% of its satellite capacity for national security and public purposes without charge, under the terms of the Orbital Concessions. The Debtor filed for chapter 11 petition on August 11, 2006 (Bankr. S.D.N.Y. Case No. 06-11868). Luc A. Despins, Esq., at Milbank, Tweed Hadley & McCloy LLP represents the Debtor in the U.S. Bankruptcy proceedings. Attorneys from Galicia y Robles, S.C., and Quijano Cortina Lopez y de la Torre give legal advice in the Debtor's Mexican Bankrutpcy proceedings. UBS Securities LLC and Valor Consultores, S.A. de C.V., give financial advice to the Debtor. Steven Scheinman, Esq., Michael S. Stamer, Esq., and Shuba Satyaprasad, Esq., at Akin Gump Strauss Hauer & Feld LLP give legal advice to the Ad Hoc Existing Bondholders' Committee. Dennis Jenkins, Esq., and George W. Shuster, Jr., Esq., at Wilmer Cutler Pickering Hale and Dorr LLP give legal advice to Ad Hoc Senior Secured Noteholders' Committee. As of July 24, 2006, the Debtor has $905,953,928 in total assets and $743,473,721 in total liabilities. On May 25, 2005, certain holders of Satmex's Existing Bonds and Senior Secured Notes filed an involuntary chapter 11 petition against the Company (Bankr. S.D.N.Y. Case No. 05-13862). On June 29, 2005, Satmex filed a voluntary petition for a Mexican reorganization, known as a Concurso Mercantil, which was assigned to the Second Federal District Court for Civil Matters for the Federal District in Mexico City. On August 4, 2005, Satmex filed a petition, pursuant to Section 304 of the Bankruptcy Code to commence a case ancillary to the Concurso Proceeding and a motion for injunctive relief seeking, among other things, to enjoin actions against Satmex or its assets (Bankr. S.D.N.Y. Case No. 05-16103). (Satmex Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SCOTTISH RE: S&P Lowers Counterparty Credit Rating to B+ from BB+ ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its counterparty credit rating on Scottish Re Group Ltd. to 'B+' from 'BB+'. In addition, Standard & Poor's lowered its counterparty credit and financial strength ratings on Scottish Re's operating subsidiaries to 'BBB-' from 'BBB+'. All of these ratings remain on CreditWatch with negative implications, where they were placed on July 31, 2006. In addition, the ratings on several securitization transactions related to Scottish Re have been lowered and remain on CreditWatch with negative implications. "The ratings were lowered reflecting our concerns that the group's access to credit facilities is more limited than we had previously believed," explained Standard & Poor's credit analyst Neil Strauss. This conclusion was acknowledged by the company in its recent representations in its recently filed second-quarter 2006 10-Q. Liquidity sources have decreased such that the holding company's liquidity situation has been impaired. "It is our belief that without additional capital, the company is likely to be unable to satisfy future needs, including potential debt redemption in December 2006," added Mr. Strauss. The company disclosed in their just filed 10-Q that while as of June 30, 2006, there was significant unused commitment under a $200 million bank credit facility, in light of second-quarter results and recent downgrades, there was uncertainty whether the lenders under this facility, and other facilities, would honor commitments to fund any borrowing requests and if so whether they would insist upon collateral for funding. The holding company's liquidity is further strained by the existing credit facility, which contains restrictions on the ability of Scottish Annuity & Life Insurance Co. (Cayman) Ltd. and certain of its operating subsidiaries to pay dividends or make loans to the holding company. This means that although the operating coverage may be generating strong cash flows, and have strong current liquid assets, dividends to the holding company are severely restricted, given current conditions. The operating companies' liquidity position is better than that of the holding company. In fact, the inability to dividend from the operating companies to the holding company makes the operating company's financial position somewhat more protected. However, financial stress at the group level will indirectly adversely impact the operating company's ability to write new business until Scottish Re's longer term financial security situation is more certain. Thus, Standard & Poor's downgrade at the operating companies was two notches versus three for the holding company ratings. Standard & Poor's continues to believe that there is substantial value in the underlying businesses in the operating companies, however, the franchise has been impaired by the continuing recurring disclosures of the operational issues at Scottish Re and the company will need to find funding sources to fund ongoing business. The ratings will remain on CreditWatch until: * capital has been raised; * the tight liquidity situation has been mitigated; and * the company's strategic alternatives have been clarified. As a result, the ultimate ratings will depend on the resulting capital, liquidity, and competitive position of the company. SMARTIRE SYSTEMS: Employs BDO Dunwoody as Accountants ----------------------------------------------------- SmarTire Systems, Inc., has accepted the resignation of KPMG LLP, as the Company's independent registered public accounting firm and engaged BDO Dunwoody LLP, as its new independent registered public accounting firm for the fiscal year ending July 31, 2006. The Company's Audit Committee made the decision to change independent accountants and that decision was approved, ratified and adopted by the Company's Board of Directors. The Company disclosed that, the audit report of KPMG on the consolidated financial statements as of and for the year ended July 31, 2004, did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles but was modified as to uncertainty due to substantial doubt regarding the Company's ability to continue as a going concern. The audit report of KPMG on the consolidated financial statements as of and for the year ended July 31, 2005 did not contain an adverse opinion or disclaimer of opinion and was not qualified, but was modified as to uncertainty due to substantial doubt regarding the Company's ability to continue as a going concern. The Company also disclosed that BDO will perform procedures related to the financial statements included in the Company's quarterly reports on Form 10-QSB, beginning with, and including, the quarter ended Oct. 31, 2006. The Company's Audit Committee considered BDO's experience and expertise related to public companies traded on the Over-the-Counter Bulletin Board as well as reviewed auditor independence issues and existing commercial relationships with BDO. The Audit Committee concluded that BDO has no commercial relationship that would impair its independence and had the appropriate expertise that the Company required regarding its current operations. About BDO International BDO International is a worldwide network of public accounting firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country. At Sept. 30, 2005, the 93 BDO member firms in 105 countries employed 27,828 professionals in 601 offices throughout Europe, North and Southern Africa, North America and the Caribbean, Latin America, the Middle East and the Asia Pacific region. About Smartire Systems Inc. Based in British Columbia, Canada, SmarTire Systems Inc. (OTC Bulletin Board: SMTR) -- http://www.smartire.com-- develops and markets technically advanced tire pressure monitoring systems for the transportation and automotive industries that monitor tire pressure and tire temperature. Its TPMSs are designed for improved vehicle safety, performance, reliability and fuel efficiency. The Company has three wholly owned subsidiaries: SmarTire Technologies Inc., SmarTire USA Inc. and SmarTire Europe Limited. Going Concern In an addendum to its audit report, KPMG pointed to the Company's uncertainty in meeting its current operating and capital expense requirements after auditing the Company 's financial statements for the fiscal years ended July 31, 2005 and 2004. SOLO CUP: Weak Performance Cues S&P to Lower Rating to B from B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Solo Cup Co. and placed them on CreditWatch with negative implications. The corporate credit rating was lowered to 'B' from 'B+'. These rating actions follow several quarters of weak performance, with funds from operations to total adjusted debt of 7.4% and total adjusted debt to EBITDA of 6.6x as of April 2, 2006. Standard & Poor's adjusted debt to include about $200 million of capitalized operating leases and tax-effected, unfunded postretirement obligations. Standard & Poor's rating actions also factor in significant recent management changes, and the company's announcement that it will delay filing its second-quarter 2006 financial statements pending an internal review of certain accounting practices and procedures related to the current and/or prior periods. The primary issues identified so far relate to the timely recognition of certain customer credits, accounts payable, and accrued expenses, and the valuation of certain tangible and intangible assets. "We will monitor events and expect to resolve the CreditWatch once the outcome of the accounting review is known and the company has reported its second-quarter results," said Standard & Poor's credit analyst Cynthia Werneth. "However, we could lower the ratings again before then if there are significant negative developments such as rapid raw material cost escalation or weaker-than-expected general business conditions." Standard & Poor's ratings incorporate expectations that the company will obtain waivers from its banks for the reporting delay, and that the delay will not precipitate a default under its bonds. Although the rating agency believes that the company has made meaningful changes to improve its ability to pass on raw material cost increases to customers and should maintain sufficient liquidity to meet near-term obligations, these remain key concerns. In addition, Standard & Poor's now expects the financial profile to remain weak in the near term as the company continues to face issues related to the integration of the 2004 acquisition of Sweetheart Holdings Inc. These include the planned launch of a new information technology platform later this year. With annual revenues of $2.4 billion, Solo, based in Highland Park, Illinois, is a leading provider of disposable paper and plastic cups, plates, and cutlery to foodservice distributors, quick-service restaurants, and retailers. SUPERIOR ESSEX: Offers to Buy Optical Cable for $36 Mil. in Cash ---------------------------------------------------------------- Superior Essex, Inc., offered to acquire all of the outstanding shares of Optical Cable Corporation (Nasdaq: OCCF), a leading manufacturer of fiber optic cables primarily sold into the enterprise market, for $6.00 per share in cash. Superior Essex's proposal represents a premium of almost 70% over Optical Cable's closing share price on Aug. 14, 2006. The proposal, which was approved by Superior Essex's Board of Directors, is valued at approximately $36 million. Superior Essex expects the combined company to be one of the industry's leading fiber optic and copper cable manufacturing companies. Superior Essex's strong commercial and telephone company relationships complement Optical Cable's strong international, military and government relationships, and the combination would result in greater diversification and substantial cross selling opportunities. "Under our proposal, Optical Cable shareholders will receive a substantial cash premium for their shares over recent trading prices and immediate liquidity," said Stephen Carter, chief executive officer of Superior Essex. "We believe this represents a generous offer based on Optical Cable's profitability and cash flow. For Superior Essex shareholders, we believe this transaction represents an opportunity to create value and earnings accretion through diversification, growth, enhanced operating capabilities and reduced costs. We look forward to working with Optical Cable's Board and management team in a cooperative fashion to move quickly towards a definitive merger agreement." "We expect Optical Cable's Roanoke manufacturing facility to become a valuable component of our overall fiber optic and premise cable production base," said Justin Deedy, executive vice president of Superior Essex and president of its Communications Group. "We are excited by the cross-selling opportunities among customers of Superior Essex and Optical Cable and the extension of our complementary product lines. We believe that the combined businesses would have annualized fiber and premise revenues in excess of $250 million and enhance our presence in the market." Superior Essex would finance the transaction through cash and its existing credit facility. The Company also confirmed that it does not expect the combination to have significant contingencies other than completion of due diligence and customary conditions that would be included in a definitive merger agreement. Superior Essex believes that with cooperation from Optical Cable's Board and management, a transaction could be completed during the fourth quarter of 2006. Superior Essex is advised in connection with the proposed transaction by SunTrust Robinson Humphrey, as financial advisors, and Troutman Sanders LLP, as outside counsel. About Superior Essex Headquartered in Atlanta, Georgia, Superior Essex Inc. (Nasdaq:SPSX) -- http://www.superioressex.com/-- manufactures a broad portfolio of wire and cable products with primary applications in the communications, magnet wire and related distribution markets. It is a manufacturer and supplier of copper and fiber optic communications wire and cable products to telephone companies, distributors and system integrators; a leading manufacturer and supplier of magnet wire and fabricated insulation products to major original equipment manufacturers for use in motors, transformers, generators and electrical controls; and a distributor of magnet wire, insulation, and related products to smaller OEMs and motor repair facilities. * * * As reported in the Troubled Company Reporter on March 27, 2006, Standard & Poor's Rating Services revised its outlook on Atlanta, Georgia-based Superior Essex Inc. to positive from stable, and affirmed its 'B+' corporate credit rating; 'BB' secured bank loan rating; and 'B' senior unsecured debt rating. SYNAGRO TECHS: S&P Lowers Corp. Credit & Sr. Debt Ratings to B+ --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating and senior secured debt ratings on Synagro Technologies Inc. by one notch to 'B+' from 'BB-'. The outlook is stable. "The downgrade reflects our concerns that recent delays in the startup of new facilities, higher utility and fuel costs, and sizable dividend payments are likely to limit discretionary cash flow, preventing credit measures from returning to levels appropriate for the former ratings. Therefore, the company will remain more highly leveraged for longer than previously expected," said Standard & Poor's credit analyst Robyn Shapiro. Incorporated into the former and current ratings is the company's reduced financial flexibility as a result of the quarterly dividend payment implemented in 2005. Operating performance and cash flow generation remain under pressure due to the material delays in commencing operations at the composting facility in Kern, California, and at the expanded municipal incinerator in Woonsocket, Rhode Island. They are currently expected to start operating during the first quarter of 2007. The ratings on Houston, Texas-based Synagro reflect its aggressive financial policies, narrow scope of operations, and highly leveraged financial risk profile that heightens vulnerability to adverse weather conditions or other business disruptions. These factors are partially offset by its position as the largest full- service provider in the fragmented wastewater residuals management industry and its efficient operations. With annual revenues of about $340 million, Synagro manages the organic, non-hazardous residuals generated by public and privately owned water and wastewater treatment facilities. (Materials that meet federal and state regulations for beneficial reuse by land application or other methods are referred to as biosolids.) The company provides processing, land application, transportation, site monitoring, and environmental regulatory compliance services to more than 600 municipal and industrial accounts, with operations in 37 states and the District of Columbia. Stability is enhanced by long-term contracts, mostly with municipalities, which generate about 80% of revenues and have a high 85%-90% renewal rate; and a backlog that equals several times annual revenues. However, considerable seasonality of some aspects of the business can disrupt operations during winter months or periods of heavy rainfall. TOWER RECORDS: Files for Chapter 11 Protection to Sell All Assets ----------------------------------------------------------------- MTS Incorporated, dba Tower Records, and its subsidiaries disclosed its intent to sell the Company through a Section 363 process under Chapter 11 of the Bankruptcy Code. This process, which is subject to court approval, sets in motion a timeline of events that will ultimately insure a sale of the Company within approximately 60 days of the filing date. According to Joseph D'Amico, Tower's recently named CEO, the filing is a necessary vehicle to execute his commitment to sell the Company. "Tower Records has conducted an extensive sale process and this step will allow buyers to complete a sale in time for the holiday season while maximizing the value for stakeholders." In March of 2006, the Company retained Houlihan Lokey Howard & Zukin as its marketing and sales agent. The Company is evaluating Letters of Intent from parties interested in acquiring the Company. Mr. D'Amico stated, "Potential parties seeking to acquire Tower Records recognize the strength of the brand and its unique position within the marketplace, making it a very attractive opportunity." DIP Financing The Company also entered into an $85 million Debtor-in-Possession Financing with its current bank group led by CIT as agent. This financing will fund its operations and purchases of new product while the Company completes the sale. Tower has also been able to renegotiate delivery terms for product with the trade. D'Amico commented, "The trade has always supported Tower through difficult times and we recognize that their support is imperative to the consummation of a transaction." About Tower Records Founded in Sacramento, California, Tower Records owns and operates 89 stores in the U.S. with 144 additional stores run by licensees in nine different countries. The Company opened one of the first Internet music stores on America Online in June 1995 and followed a year later with the launch of Tower.com. Tower Records has filed for Chapter 11 bankruptcy protection from its creditors, its second such filing in less than three years. TOWER RECORDS: Case Summary & 40 Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: M T S, Incorporated dba Tower Records 2500 Del Monte Street West Sacramento, California 95691 Bankruptcy Case No.: 06-10891 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Three A's Holdings, L.L.C. 06-10886 Jeremy's Holdings, L.L.C. 06-10887 Tower Direct, LLC 06-10888 33rd Street Records, Incorporated 06-10889 Pipernick Corp. 06-10890 Columbus & Bay, Inc. 06-10892 R.T. Records, Incorporated 06-10893 Type of Business: The Debtor is a retailer of music in the U.S., with nearly 100 company-owned music, book, and video stores. See http://www.towerrecords.com/ The Company and its affiliates previously filed for chapter 11 protection on Feb. 9, 2004 (Bankr. D. Del. Lead Case No. 04-10394). Chapter 11 Petition Date: August 20, 2006 Court: District of Delaware Judge: Brendan Linehan Shannon Debtor's Counsel: Mark D. Collins, Esq. Richards Layton & Finger One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Tel: (302) 651-7531 Fax: (302) 651-7701 Estimated Assets Estimated Debts ---------------- --------------- M T S, Incorporated More than $100 More than $100 Million Million Three A's Holdings, L.L.C. $10 Million to $50 Million to $50 Million $100 Million Jeremy's Holdings, L.L.C. $500,000 to $500,000 to $1 Million $1 Million Tower Direct, LLC $1 Million to $1 Million to $10 Million $10 Million 33rd Street Records, $100,000 to $100,000 to Incorporated $500,000 $500,000 Pipernick Corp. $0 to $50,000 $0 to $50,000 Columbus & Bay, Inc. $0 to $50,000 $0 to $50,000 R.T. Records, Incorporated $0 to $50,000 $0 to $50,000 Debtors' Consolidated List of 40 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Six Degrees Records Trade Debt $1,898,564 540 Hampshire St. San Francisco, CA 94110 International Periodical Trade Debt $1,282,247 Beth Oja 350 N. Orleans St. Suite 6458 Chicago, IL 60654 Super D/Phantom Imp. Trade Debt $846,823 James Navales 17822 Gillette Ave. #A Irvine, CA 92614 Harmonia Mundi U.S. Trade Debt $791,218 Christine Rodriguez 1117 Chestnut Street Burbank, CA 91506 Ingram Entertainment Trade Debt $760,084 Karen Carter Two Ingram Blvd. La Vergne, TX 37086 Entertainment UK Ltd. Trade Debt $758,584 Gary Woods Auriol Drive Greenford Park Greenford, Middlesex UK UB6 0DS Image Entertainment Trade Debt $750,593 Kristi Katilavas 20525 Nordhoff St., Ste. 200 Chatsworth, CA 91311 City Hall Records Trade Debt $595,441 David Evans 101 Glacier Point Rd. Suite C San Rafael, CA 94901 Allegrio Corp. Trade Debt $548,458 Linda Richardson 14134 N.E. Airport Way Portland, OR 97230 Select-O-Hits, Inc. Trade Debt $524,514 Denise Johnson 1981 Fletcher Creek Dr. Memphis, TN 38133 Baker & Taylor Book Sherry Trade Debt $437,452 1205 Payshpere Circle Chicago, IL 60674 Ventura Home Entertainment Trade Debt $427,712 Cheryl Hernandez 2590 Conejo Spectrum St. Thousand Oaks, CA 91320 MSI Music Corp. Trade Debt $407,115 Roger Pena 14620 NW 60th Ave. Miami Lakes, FL 33014 Gotham Distributing Corp. Trade Debt $389,492 60 Portland Rd. Conshohocken, PA 19428 Music Video Distib. Trade Debt $333,831 David Bruno H-840 422 Business Center Oaks, PA 19456 C.E.D. Entertainment Dist. Trade Debt $323,948 1035 S. Semoran Blvd. Bldg #2, Ste. 1049 Winter Park, FL 32792 Model Distributors Trade Debt $300,475 Howard Schisler 318 West 39th St., 9th Fl. New York, NY 10018 BCI Eclipse Co. LLC Trade Debt $287,104 NW5186 P.O. Box 1450 Minneapolis, MN 55485 Telarc International Trade Debt $274,888 Karen Burns 23307 Commerce Park Rd. Cleveland, OH 44122 HEP CAT Dist. Trade Debt $233,058 Lincoln West Partners Trade Debt $231,357 Maxell Corp. of America Trade Debt $227,852 Brown Bear Music Marketing Trade Debt $225,673 Sedgwick Rd. Inc. Trade Debt $213,919 Emmis Communications - KPWR Trade Debt $208,505 Musicrama, Inc. Trade Debt $207,571 New York Times Trade Debt $206,415 Mountain Apple Co. Trade Debt $201,560 Baker & Taylor Video Trade Debt $197,970 Wab Management Ltd. Trade Debt $192,938 Innovative Distribution Trade Debt $190,224 Network Big Daddy Music Dist. Trade Debt $188,304 Albany Music Dist. Trade Debt $182,408 RetailVision Trade Debt $181,208 Hal Leonard Publ. C Trade Debt $178,493 Speedimpex USA, Inc. Trade Debt $171,093 Redeye Distribution Trade Debt $170,125 TDK Electronics Cor. Trade Debt $167,189 Ingram Book Co. Trade Debt $160,905 Import Images Trade Debt $153,199 TRANS ENERGY: Buys Cobham Gas Industries' Assets for $600,001 ------------------------------------------------------------- Trans Energy, Inc., entered into an Assignment and Bill of Sale with George Hillyer, Trustee of Texas Energy Trust Company, BOK Operating Company, and Prima Oil Company, Inc., wholly-owned by the Company. TETCO, BOK and Prima agreed to sell, assign and convey to the Company all of their rights, title and interest in the assets of Cobham Gas Industries, Inc., including certain oil and gas wells, both producing and non-producing, leases, pipelines, equipment and rolling stock. Also, assigned and conveyed to the Company are certain rights-of-way and roads that may be needed to maintain, produce and abandon the conveyed Wells. In consideration for the acquisition of assets, the Company will pay Mr. Hillyer and BOK, the sole owner of Cobham, $600,001 and 1 million shares of Trans Energy common stock. The shares of common stock are subject to certain restrictions regarding the future sale of the shares. The Agreement and assignment of Assets is made without warranty of title to the wells, either express or implied, and the Company becomes responsible for the plugging and abandoning of the Wells, in accordance with the applicable rules and regulations of the State of West Virginia, and for any reclamation of the lands after plugging and abandoning operations are completed. All production, revenue, costs, expenses and other liabilities attributable to the assigned Wells occurring before Aug. 14, 2006, will belong to the sellers, and those occurring after Aug. 14, 2006, shall belong to the Company. The Assets being acquired include: -- Certain interests in oil and gas wells, located in Marion County, West Virginia assigned to BOK by TETCO in May 2006; -- Certain interests in oil and gas wells located in Marion County, West Virginia assigned to TETCO by Prima in August 2005; and -- Certain rights-of-way, related facilities and miscellaneous vehicles and equipment. A text-copy of the Assignment and Bill of Sale may be viewed at no charge at http://ResearchArchives.com/t/s?1001 Trans Energy, Inc., -- http://www.transenergy.com-- has been in the business of production, transportation, transmission, sales and marketing of oil and natural gas in the Appalachian and Powder River basins since 1993. With interests in West Virginia, Ohio, Pennsylvania, Virginia, Kentucky, New York, and Wyoming; Trans Energy and its subsidiaries own and operate oil and gas wells, gas transmission lines, transportation systems and well construction equipment and services. Going Concern Doubt HJ & Associates, LLC, in Salt Lake City, Utah, raised substantial doubt about Trans Energy Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's losses from operations, accumulated deficit and working capital deficit. TURNER-DUNN HOMES: Files for Bankr. to Stay Foreclosure Lawsuit --------------------------------------------------------------- Turner-Dunn Homes, Inc., and two affiliates, filed for chapter 11 petition on Aug. 14, 2006, the U.S. Bankruptcy Court for the District of Arizona to stay the $23-million foreclosure suit filed by Ohio Savings Bank. The foreclosure proceedings were commenced in the Superior Court of Arizona in Pinal County on Aug. 8, 2006, against the Debtors' 450 housing lots in Casa Grande and Maricopa. Those lots were used as collateral for millions of dollars in loans and credit lines. The loans were supposed to be used in the development of houses on those lots. Around 200 unfinished homes are still unfinished, though many home buyers have already paid earnest money. Ohio Savings would ask the Bankruptcy Court to lift the stay so it can proceed with the foreclosure and auction of the lots, The Arizona Republic reports. The Arizona Department of Real Estate and the Registrar of Contractors are also investigating the Debtors. Several subcontractors were also not paid amounting to millions. Those subcontractors are claiming liens on the housing units, some of which have already been habited. According to the Debtors' counsel, Alan A. Meda, Esq., at Stinson Morrison Hecker LLP, in Phoenix, Ariz., the Debtors ran out of cash, disclosing that the liquidity problems were just recently uncovered after the Debtors' former partner and president, Louis Turner, left the Company. Headquartered in Phoenix, Arizona, Turner-Dunn Homes, Inc., develops housing units. Its developments include: (1) Fiesta Series at Maricopa Meadows, in Maricopa City, Pinal; (2) Celebration Series at Maricopa Meadows, in Maricopa City, Pinal; (3) Fiesta Series at McCartney Center, in Casa Grande City, Pinal; and (4) Celebration Series at McCartney Center in Casa Grande City, Pinal. UNICO INC: Inks Mining Deal with Polymet for Silver Bell Mine ------------------------------------------------------------- Unico, Inc., reached an initial agreement for a joint venture with the Polymet Company, LLC, for mining at the Silver Bell Mine, held by Unico's wholly owned subsidiary, Silver Bell Mining Company, Inc. A subsequent definitive agreement, which will finalize the details of the joint venture, is expected to be signed by Aug. 31, 2006. Under terms of the letter of intent, Polymet will be responsible for all mining activity and bear all mining expenses. Polymet will also conduct certain resource definition and exploration work designed to identify other ore bodies and further develop the value of the property. Polymet will also pay lease payments to the Silver Bell Mining Company, as agreed upon by the parties. The agreement covers all 17 mining claims owned by Silver Bell Mining Company and which comprise the property commonly known as the Silver Bell Mine. Unico subsidiary, Deer Trail Mining Company, LLC, which is completing reconstruction of an on-site mill and processing facility, will be responsible to mill the ore into concentrates. All of the ore mined pursuant to the joint venture arrangement and milled into concentrates shall be sold to Polymet subsidiary, PGM, LLC, which previously entered into an agreement to purchase concentrates from the Deer Trail Mine. "We are pleased to extend our relationship with the Polymet Company and its subsidiary, PGM, LLC to include a joint venture for the Silver Bell Mine," said Unico chief executive officer Mark A. Lopez. "As we have repeatedly stated when discussing the long- term plan to build value for Unico stockholders, there are a number of initiatives that the company expects to undertake to develop and grow revenues streams, and a mining program at the Silver Bell is one of these." "A joint venture was judged to be an excellent method to initiate mining activity at the Silver Bell, while Unico concurrently supports the development of processing capabilities at the Deer Trail mill facility and continues to oversee the geological and analytic process from the Phase II exploratory drilling program conducted at the Deer Trail Mine in 2005," said Mr. Lopez. "All of this activity was made possible through the ongoing support of our shareholders, who approved the restructuring plan, allowing Unico to undertake many of these activities. We look forward to the continued progress at the Deer Trail Mine, as well as the initiation of mining at the Silver Bell, and we will keep shareholders updated on these operations as they develop," added Mr. Lopez. The Silver Bell Mine was discovered in 1871 and in 1880 there was recorded production of 120 tons of 100 ounce per ton silver from the mine. Production at the Silver Bell has been was sporadic, including long periods of inactivity. In 1978, the mine was re- opened and was expanded with three inclines on the main vein. The mine changed hands again in 1980 and was developed further. Pre- feasibility and confirmation work conducted under different ownership in the mid-1990s led to plans for a three-phase drilling program at the Silver Bell mine. About Unico Headquartered in San Diego, California, Unico, Inc. (OTCBB: UCOI) -- http://www.uncn.com/-- is a publicly traded natural resource company in the precious metals mining sector focused on the exploration, development and production of gold, silver, lead, zinc, and copper concentrates at its three mine properties: the Deer Trail Mine, the Bromide Basin Mine and the Silver Bell Mine. At March 31, 2006, the Company's balance sheet showed a stockholders' deficit of $5,100,381, compared to a deficit of $2,863,214 at Nov. 30, 2005. Going Concern Doubt As reported in the Troubled Company Reporter on July 25, 2006, HJ Associates & Consultants, LLP, expressed substantial doubt about Unico, Incorporated's ability to continue as a going concern after auditing the Company's financial statements for the years ended Feb. 28, 2006 and 2005. The auditing firm pointed to the Company's recurring losses from operations and stockholders' deficit. USG CORP: Asks Court to Close Chapter 11 Cases of 10 Affiliates --------------------------------------------------------------- As previously reported, the U.S. Bankruptcy and District Courts for the District of Delaware confirmed on June 16, 2006, the First Amended Joint Plan of Reorganization of USG Corp. and its debtor- affiliates. On June 20, the Plan became effective in accordance with its terms, and the Debtors emerged from bankruptcy as reorganized entities. In addition, the four official committees appointed in the Debtors' Chapter 11 cases were dissolved and the representative for future asbestos claimants was discharged on the Effective Date. Section 350(a) of the Bankruptcy Code and Rule 3022 of the Federal Rules of Bankruptcy Procedure provide that a court will close a bankruptcy case "[a]fter an estate is fully administered." The term "fully administered" is not defined in the Bankruptcy Code or in the Bankruptcy Rules, however, courts have utilized these factors identified in an Advisory Committee Note to Bankruptcy Rule 3022 in determining whether an estate has been fully administered: (a) Whether an order confirming a plan has become final; (b) Whether deposits required by a plan have been distributed; (c) Whether a property proposed by a plan to be transferred has been transferred; (d) Whether the debtor or the debtors' successor under a plan has assumed business or management of the property dealt with by the plan; (e) Whether payments under the plan have commenced; and (f) Whether all motions, contested matters and adversary proceedings have been finally resolved. Applying those factors and in light of Rule 5009-1 of the Local Rules of Bankruptcy Practice and Procedure for the Delaware Bankruptcy Court, the Debtors ask Judge Fitzgerald to issue a final decree order closing 10 bankruptcy cases. The Closing Debtors are: * United States Gypsum Company, * USG Interiors, Inc., * USG Interiors International, Inc., * L&W Supply Corporation, * Beadex Manufacturing, LLC, * B-R Pipeline Company, * La Mirada Products Co., Inc., * USG Industries, Inc., * USG Pipeline Company, and * Stocking Specialists, Inc. The Debtors are not seeking to close the lead case of Debtor USG Corporation because certain issues in connection with claims settlement and Plan consummation are still yet to be determined by the Bankruptcy Court. Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that any deposits and property transfers provided for by the Plan have been completed following the Effective Date. Moreover, Mr. Heath notes that the Debtors have assumed the business and management of their assets as reorganized entities. The distributions provided for under the Plan, to the extent proper tax documentation has been received from the relevant creditors, have been or will be substantially completed by end of September 2006. With the exception of the contingent $3,050,000,000 payment to the Asbestos Personal Injury Trust, all distributions on account of Allowed Claims were made within 60 days of the Effective Date, Mr. Heath states. A hearing on various professionals' final fee applications will also occur on December 18, 2006, and all allowed professional fees or expenses will be paid in accordance with the Bankruptcy Court's order. In addition, all other claims either have been paid or will be paid once pending and to be filed claim objections have been resolved or, if reinstated under the Plan or the Confirmation Order, in the ordinary course of business. Furthermore, Mr. Heath relates that any adversary proceedings in the closing cases either have been or likely will be resolved or dismissed by end of September. Considering that USG's lead case will remain open, Mr. Heath contends that the Closing Debtors and the Closing Cases are unnecessary to the Court's retention of jurisdiction over these matters. However, it is possible that the Court may be asked to address issues relating to the Closing Debtors, which cannot be addressed in USG's lead case. Nevertheless, Mr. Heath maintains, the Closing Debtors' estates have been fully administered, and their estates should be closed. As the Advisory Committee Note states, "[t]he court should not keep the case open only because of the possibility that the court's jurisdiction may be invoked in the future." The Advisory Committee Note also states that the Court may continue to exercise its jurisdiction after closure of the Debtors' cases to enforce or interpret its own orders, and the Court may also reopen the Debtors' cases on a sufficient showing of cause pursuant to Section 350(b). Mr. Heath insists that leaving USG's case open at this time will provide an additional avenue for resolving any issues that may arise that relate to the Closing Cases, without the need to reopen those cases. The Court will convene a hearing to consider the Debtors' request on September 25, 2006, at 9:00 a.m. About USG Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. The Debtors emerged from bankruptcy protection on June 20, 2006. VESTA INSURANCE: Organizational Meeting Scheduled for August 30 --------------------------------------------------------------- J. Thomas Corbett, the Chief Deputy Bankruptcy Administrator for the Northern District of Alabama, advises that he has contacted Vesta Insurance Group, Inc.'s largest unsecured creditors and solicited their indications of interest in serving on an Official Committee of Unsecured Creditors in the Debtors' cases. If a sufficient number of creditors indicate their interest and willingness to serve on a Committee, the Bankruptcy Administrator will convene an Organizational Meeting at 1:30 p.m. on Wednesday, Aug. 30, 2006, in Birmingham, Alabama. Mr. Corbett can be reached by telephone at (205) 714-3838. About Vesta Insurance Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc. (Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offer property insurance in targeted states. Wyatt R. Haskell, Luther S. Pate, UV, and Costa Brava Partnership III, L.P., filed an involuntary chapter 7 petition against the Company on July 18, 2006 (Bankr. N.D. Ala. Case No. 06-02517). The case was converted to a voluntary chapter 11 case on Aug. 8, 2006 (Bankr. N.D. Ala. Case No. 06-02517). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represents the Debtor. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the petitioning creditors. At Dec. 31, 2004, Vesta Insurance's balance sheet showed $1,764,247,000 in total assets and $1,810,022,000 in total liabilities resulting in a $45,775,000 stockholders' deficit. On Aug. 1, 2006, the District Court of Travis County, Texas entered the Order appointing the Texas Commissioner of Insurance as Liquidator of Vesta Insurance's Texas-domiciled subsidiaries: Vesta Fire Insurance Corporation; The Shelby Insurance Company; Shelby Casualty Insurance Corporation; Texas Select Lloyds Insurance Company; and Select Insurance Services, Inc. (Vesta Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). VESTA INSURANCE: Taps Parker Hudson as Bankruptcy Counsel --------------------------------------------------------- Vesta Insurance Group Inc. and J. Gordon Gaines Inc. seek permission from the U.S. Bankruptcy Court for the Northern District of Alabama to employ Parker, Hudson, Rainer & Dobbs, LLP, as their bankruptcy attorneys. Donald Thornton, Esq., VIG senior vice president, tells the Court that the Debtors' cases are likely to be complex and will require counsel with extensive experience in bankruptcy, insolvency, restructuring, and reorganization cases. Parker Hudson has approximately 60 lawyers and has extensive experience and expertise in bankruptcy and restructuring cases and in analyzing bankruptcy issues. According to Mr. Thornton, Parker Hudson has had a significant practice in the area of bankruptcy restructuring and workouts. The firm's bankruptcy practice includes representing debtors, creditor and noteholder committees, secured creditors, trustees, and examiners. The firm's attorneys regularly appear in bankruptcy courts in Alabama, Delaware, Georgia, Florida, New York, North Carolina, South Carolina, Tennessee, Texas, and Virginia. Mr. Thornton relates that the partners, counsel and associates of Parker Hudson who will advise the Debtors have considerable knowledge and experience in the field of bankruptcy law, and debtors' and creditors' rights, including insolvencies, restructurings and business organizations, and liquidations under Chapter 11 of the Bankruptcy Code, as well as in other areas of law related to the Debtors' Chapter 11 case. As the Debtors' bankruptcy counsel, Parker Hudson is expected to: (a) advise the Debtors with respect to their powers and duties as debtors and debtors-in-possession in the continued management and operation of their business and properties; (b) attend meetings and negotiate with representatives of creditors and other parties-in-interest, and advise and consult with the Debtors on the conduct of the case, including all of the legal and administrative requirements of operating in Chapter 11; (c) take all necessary actions to protect and preserve the Debtors' estate, including the prosecution of actions commenced under the Bankruptcy Code on the Debtors' behalf, and object to claims filed against the estate; (d) prepare on the Debtors' behalf all motions, applications, answers, orders, reports, and papers necessary to the administration of the estate; (e) negotiate and prepare on the Debtors' behalf sales or other disposition of assets, plans of reorganization, disclosure statements, and all related agreements and documents, and take any necessary action to obtain confirmation of a plan; (f) appear before the Court, any appellate courts, and the Bankruptcy Administrator, and protect the interests of the Debtors' estate before those courts and the Bankruptcy Administrator; and (g) perform all other necessary services in connection with the Debtors' Chapter 11 cases. The firm's current hourly rates range: Position Hourly Rate -------- ----------- Partners $290 to $495 Of counsel $340 Associates $170 to $275 Paralegals $70 to $160 The attorneys and paralegals that will likely provide services to the Debtors are: Professional Hourly Rate ------------ ----------- C. Edward Dobbs, Esq. $495 Rufus T. Dorsey, IV, Esq. $450 Eric W. Anderson, Esq. $420 Jack C. Basham, Jr., Esq. $340 James S. Rankin, Jr., Esq. $290 Tyronia Morrison, Esq. $180 Stephanie Phillips (bar admission pending) $170 Paralegals $55 to $130 In addition, the firm customarily charges its clients for all costs and expenses incurred. Edward Dobbs, Esq., a partner at Parker, Hudson, Rainer & Dobbs LLP, relates that on July 21, 2006, his firm received from VIG a $30,000 retainer to secure payment for future service rendered and expenses incurred. On July 27, the firm received from Gaines a $75,000 retainer. Parker Hudson received an additional $75,000 from VIG on August 4, 2006. Prior to the entry of the Conversion Order, on August 7, 2006, the firm applied $39,222 of the VIG retainer and $55,113 of the Gaines retainer to payment of prepetition fees and expenses and the payment of filing fees. The remainder of the VIG retainer -- $65,777 -- and the Gaines retainer -- $19,886 -- will be held by Parker Hudson as a general retainer for postpetition services and expenses. "Based upon a review of [Parker Hudson's] records and using the available information, I believe that [Parker Hudson] is a disinterested person within the meaning of [Section 327 of the Bankruptcy Code]," Mr. Dobbs tells Judge Bennett. Mr. Thornton informs the Court that the Debtors intend to employ the law firm of Balch & Bingham as special counsel. Balch also has extensive knowledge regarding the corporate history of the Debtors and is in a position to provide valuable information and advice on an array of corporate issues. "Retention of Balch as special counsel will prove to be cost effective and beneficial to [the Debtors]. [Parker Hudson] and Balch have agreed to make every effort to avoid duplication of services in [the Debtors'] Chapter 11 case[s]," Mr. Thornton says. According to Mr. Dobbs, his firm is unaware of any undisclosed connection with the Debtors, their creditors, any other parties- in-interest, their attorneys and accountants, or the Bankruptcy Administrator. About Vesta Insurance Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc. (Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offer property insurance in targeted states. Wyatt R. Haskell, Luther S. Pate, UV, and Costa Brava Partnership III, L.P., filed an involuntary chapter 7 petition against the Company on July 18, 2006 (Bankr. N.D. Ala. Case No. 06-02517). The case was converted to a voluntary chapter 11 case on Aug. 8, 2006 (Bankr. N.D. Ala. Case No. 06-02517). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represents the Debtor. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the petitioning creditors. At Dec. 31, 2004, Vesta Insurance's balance sheet showed $1,764,247,000 in total assets and $1,810,022,000 in total liabilities resulting in a $45,775,000 stockholders' deficit. On Aug. 1, 2006, the District Court of Travis County, Texas entered the Order appointing the Texas Commissioner of Insurance as Liquidator of Vesta Insurance's Texas-domiciled subsidiaries: Vesta Fire Insurance Corporation; The Shelby Insurance Company; Shelby Casualty Insurance Corporation; Texas Select Lloyds Insurance Company; and Select Insurance Services, Inc. (Vesta Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). W.R. GRACE: Objects to D. Slaughter's $1.375 Mil. Unsecured Claim ----------------------------------------------------------------- David Slaughter filed in September 2001 a petition for damages in the 14th Judicial District Court, Calcasieu Parish, in the state of Louisiana, seeking recovery from Turner Industries, Ltd., and W. R. Grace & Company for a personal injury that he suffered when asphalt crumbled beneath his feet while making a delivery to Grace's Lake Charles Louisiana facility in December 2000. Mr. Slaughter subsequently filed Claim No. 5703, asserting a $1,375,000 unsecured non-priority claim. In August 2004, Mr. Slaughter asked the Bankruptcy Court to modify the automatic stay imposed under Section 362(a) of the Bankruptcy Code to pursue the state court action. The Debtors argued that: (i) Mr. Slaughter sought favorable treatment from other claimants, without providing any meaningful substantive support or justification for his request; and (ii) the Complaint was filed after the Petition Date, in violation of the Automatic Stay. The Bankruptcy Court denied the Lift Stay Motion in November 2004 and directed the Debtors to file an objection to Claim No. 5073. By this objection, the Debtors ask Judge Fitzgerald to disallow and expunge Claim No. 5703 because Grace is not liable for Mr. Slaughter's alleged injuries and, in any event, Mr. Slaughter cannot support the amount of damages requested in the Claim. According to James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, in Wilmington, Delaware, Mr. Slaughter fails to provide any evidence that he is injured, let alone an evidence enough to satisfy a "preponderance of the evidence" standard as is required in these circumstances. To the extent Mr. Slaughter was injured, his alleged injury was due to his own negligence when he fell while exiting his truck, Mr. O'Neill asserts. Grace inspected the asphalt after the incident, and there was no evidence that the asphalt crumbled or was otherwise defective. In addition, Mr. O'Neill contends that Mr. Slaughter failed to name all necessary parties, including "I.M.C.," the contractor that built the asphalt containment barrier. To the extent that the barrier was defective, I.M.C. would also be liable for Mr. Slaughter's alleged injuries. Mr. O'Neill argues that Mr. Slaughter failed to establish any basis for the $1,375,000 claim amount sought in the Complaint or the Claim. He explains that Mr. Slaughter bears the burden of establishing all elements of his Claim, hence, it must fail unless and until Mr. Slaughter provides evidence to support that amount. Moreover, Mr. O'Neill notes that Mr. Slaughter has neither pled that he is nor was an employee of Grace. Mr. O'Neill points out that Mr. Slaughter is an employee of Turner Industries or one of its affiliated entities. Therefore, Mr. Slaughter's alleged injuries would be covered by workers' compensation through Turner, which serves as Mr. Slaughter's sole avenue for recourse. In addition, any amount owed to Mr. Slaughter by Grace would necessarily be reduced to reflect all amounts that he has received for workers' compensation or otherwise. Mr. O'Neill further avers that Mr. Slaughter failed to support that his Claim is non-dischargeable, as alleged in the Lift Stay Motion. Based on Mr. Slaughter's description of his Claim, it is subject to discharge under Section 1141. About W.R. Grace Headquartered in Columbia, Maryland, W.R. Grace & Co. (NYSE:GRA) -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor-affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. D. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Elihu Inselbuch, Esq., and Nathan D. Finch, Esq., at Caplin & Drysdale represent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Scott L. Baena, Esq., and Jay M. Sakalo, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. WERNER LADDER: Wants to Walk Away from Greenville Property Lease ---------------------------------------------------------------- Werner Holding Co. (DE), Inc., aka Werner Ladder Company, and its debtor-affiliates ask authority from the U.S. Bankruptcy Court for the District of Delaware to reject a non-residential real property lease in Greenville, Pennsylvania. On Aug. 7, 1992, Olympus Properties, Inc., and BLS Limited Partnership entered into a non-residential real property lease for the premises located at 109 Woodfield Drive, Greenville, Pennsylvania, for a term of 15 years. The Lease commenced on Dec. 1, 1992 and expires on Nov. 30, 2007. The minimum annual rent through the lease term is $86,900, payable in monthly installments of $7,242. Olympus merged with Werner Co., one of the Debtors, on Dec. 31, 1998. The Debtors vacated the leased premises on June 30, 2006 and determined that they have no more need for the space, relates Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, LLP in Wilmington, Delaware. Section 365(a) of the Bankruptcy Code provides that a debtor-in- possession, subject to the court's approval, may assume or reject an executory contract or unexpired lease of the debtor. Section 554(a) provides that after notice and a hearing, the trustee may abandon any property. The Lease, according to Mr. Brady, holds no material economic value to the Debtors or their estates because assignment of the lease is unlikely and delaying the rejection of the Lease will cause them to continue to accrue additional and potentially administrative obligations under the lease. To the extent that the Debtors leave any property that they own or lease at the leased premises on or after June 30, the Debtors request that the property be deemed abandoned. Mr. Brady asserts that any personal property remaining at the leased premises will be of inconsequential value, burdensome for the Debtors to remove and provides no benefit to their estates. About Werner Ladder Headquartered in Greenville, Pennsylvania, Werner Co. -- http://www.wernerladder.com/-- manufactures and distributes ladders, climbing equipment and ladder accessories. The company and three of its affiliates filed for chapter 11 protection on June 12, 2006 (Bankr. D. Del. Case No. 06-10578). The firm of Willkie Farr & Gallagher LLP serves as the Debtors' counsel. Kara Hammond Coyle, Esq., Matthew Barry Lunn, Esq., and Robert S. Brady, Esq., Young, Conaway, Stargatt & Taylor, LLP, represents the Debtors as its co-counsel. The Debtors have retained Rothschild Inc. as their financial advisor. At March 31, 2006, the Debtors reported total assets of $201,042,000 and total debts of $473,447,000. (Werner Ladder Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WERNER LADDER: U.S. Trustee Wants Court to Deny Bonus Plans ----------------------------------------------------------- Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, asks the U.S. Bankruptcy Court for the District of Delaware to deny the request of Werner Holding Co. (DE), Inc., aka Werner Ladder Company, and its debtor-affiliates, to approve the Bonus Plans and authorize them to fund the Bonus Plans. The U.S. Trustee says that the Debtors have not demonstrated that the proposed payments under the Bonus Plans are appropriate under Section 503(c) of the Bankruptcy Code. Based on the scant information contained in the Debtors' request, the Bonus Plans are nothing more than key employee retention plans in disguise, Mark S. Kennedy, Esq., trial attorney of the U.S. Trustee, avers. Mr. Kennedy notes that the Motion is devoid of facts to support authorization of the proposed bonus plan payments. Among other things, it does not: (1) provide copies of the Business Optimization Bonus Plan and Chicago Transition Plan and identify the employees eligible to receive the proposed bonus payments and the bonus amounts for which each employee is eligible; (2) disclose the performance objectives that each employee must meet to be eligible for bonus payments and disclose whether individual performance objectives require each participating employee to perform at an objectively measurable higher level than in the past in order to receive a bonus; (3) disclose how the performance objectives for each participating employee were established and whether each participating employee bears any true performance risk; (4) disclose whether partial or reduced bonus payments will be made to any eligible employees if the employees or the Debtors fail to meet their established objectives; (5) disclose other compensation paid to each eligible employee; (6) disclose the recipients of previous payments made under the bonus plans described in the motion and the amounts of the payments; (7) disclose the existence of any other bonus, incentive or severance payment plans and amounts paid for those plans, both prepetition and postpetition; and (8) disclose whether any of the employees eligible for bonus payments are officers, directors, persons in control, other insiders, or management of the Debtors because the motion only indicates that all eligible employees work at the supervisory and professional level or above. The U.S. Trustee notes that retention bonus payments to insiders are prohibited under Section 503(c)(1) of the Bankruptcy Code. Mr. Kennedy also notes that the Debtors are asking the Court to employ Section 105(a) to approve a bonus program under the business judgment rule, a test that puts a judicial imprimatur on gross management blunders as long as management is minimally informed, is disinterested and acts in good faith. The Debtors' citing of Section 105(a) is contrary to Section 503(c)(3), which disallows and bars payment of transfers or obligations outside of the ordinary course of business unless justified by the facts and circumstances of the case, Mr. Kennedy says. Because the Debtors have not met the burden of demonstrating that the proposed bonus payments are justified, the U.S. Trustee wants the Court to deny the Debtors' request. Debtors React The Debtors maintain that neither the BOB Plan nor the Chicago Transition Plan is a key employee retention plan governed by Section 503(c)(1). Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, LLP in Wilmington, Delaware, explains that, although the BOB Plan and the Chicago Plan would cover four insiders, the plans were crafted with care to motivate select employees to meet individual specific performance objectives that would have a direct impact on the Debtors' ability to meet their organizational performance targets. Moreover, according to Mr. Brady, an indirect benefit of the Bonus Plans is reducing the Debtors' attrition rate among the covered employees. Every incentive-based plan that is crafted correctly will motivate eligible employees to remain with a debtor because the performance objectives in the plans are reasonable. Because of the reduced attrition rate as a benefit of the Bonus Plans, the Debtors have neither converted the Plans to retention plans nor reduced their performance-based characterization of the Plans to window dressing a key employee retention plan, Mr. Brady relates. To the extent Section 503(c)(3) governs the approval of the Bonus Plans, the Debtors note that the standard for approval of non- ordinary course transactions under the section is essentially the same as the standard for similar transactions under Section 363(b)(1). Section 503(c)(3) precludes payment as an administrative expense "other transfers or obligations that are outside the ordinary course of business and not justified by the facts and circumstances of the case. . ." Mr. Brady notes that the court in Committee of Equity Security Holders v. Lionel Corp. (In re Lionel), 722 F.2d 1063 (2d Cir. 1983), held, "Whether or note there are sufficient business reasons to justify a transaction depends upon the facts and circumstances of each case." The facts supporting approval of the Debtors' request under Section 363(b)(1) are sufficient to justify the approval of the Bonus Plans under Section 503(c)(3), Mr. Brady asserts. About Werner Ladder Headquartered in Greenville, Pennsylvania, Werner Co. -- http://www.wernerladder.com/-- manufactures and distributes ladders, climbing equipment and ladder accessories. The company and three of its affiliates filed for chapter 11 protection on June 12, 2006 (Bankr. D. Del. Case No. 06-10578). The firm of Willkie Farr & Gallagher LLP serves as the Debtors' counsel. Kara Hammond Coyle, Esq., Matthew Barry Lunn, Esq., and Robert S. Brady, Esq., Young, Conaway, Stargatt & Taylor, LLP, represents the Debtors as its co-counsel. The Debtors have retained Rothschild Inc. as their financial advisor. At March 31, 2006, the Debtors reported total assets of $201,042,000 and total debts of $473,447,000. (Werner Ladder Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WINN-DIXIE: Completes Sale of 12 Stores in Bahamas to BSL Holdings ------------------------------------------------------------------ Winn-Dixie Stores, Inc., has completed the sale of its 12 supermarkets in the Bahamas -- nine operated by Winn-Dixie under the City Markets banner and three under the Winn-Dixie banner. The stores were sold to BSL Holdings Limited, a Bahamian investor group represented by Fidelity Merchant Bank & Trust Limited, for nearly $54 million. All 12 stores are remaining open under their new owners. Pursuant to a definitive agreement with BSL Holdings Limited, W-D (Bahamas) Ltd., a Bahamas Company and a wholly owned subsidiary of Winn-Dixie, has sold all of its shares of Bahamas Supermarkets Limited to BSL Holdings Limited. W-D (Bahamas) owned about 78% of the common shares of BSL. The remainder of BSL's common shares will remain publicly traded in the Bahamas. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates 527 stores in Florida, Alabama, Louisiana, Georgia, and Mississippi. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063, transferred Apr. 14, 2005, to Bankr. M.D. Fla. Case Nos. 05-03817 through 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. Paul P. Huffard at The Blackstone Group, LP, gives financial advisory services to the Debtors. Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, and John B. Macdonald, Esq., at Akerman Senterfitt give legal advice to the Official Committee of Unsecured Creditors. Houlihan Lokey & Zukin Capital gives financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WINN-DIXIE: Wants Florida Tax Claims Reduced and Allowed -------------------------------------------------------- Winn-Dixie Stores, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Middle District of Florida to reduce and allow these tax claims in the amounts based on Assessment Technologies, Ltd.'s revised tax amounts. The Debtors object to the tax claims filed on behalf of a group of tax collectors, treasurers and officers for 65 different jurisdictions within the State of Florida. Based on the analysis of Assessment Technologies, Ltd., their property tax consultants, the Debtors conclude that the imposed 2004 and 2005 tax amounts are excessive. The Tax Liabilities include: Base Tax Revised Location Asserted Tax Amount --------- ----------- ----------- Brevard County $1,740,299 $1,582,956 Broward County 12,764,906 11,474,206 Collier County 1,099,822 961,080 Duval County 6,448,549 5,206,101 Hillsborough County 3,394,102 2,865,307 Lee County 1,174,577 962,213 Miami-Dade County 14,365,657 12,908,358 Orange County 3,981,494 3,350,574 Osceola County 1,294,639 1,041,373 Palm Beach County 6,862,625 6,302,537 Pinellas County 3,308,899 2,797,364 Polk County 1,335,242 937,021 Seminole County 1,464,607 1,146,033 Volusia County 1,995,874 1,700,040 The Debtors further ask the Court to determine that the adjusted market values of their properties are the correct values the Florida Tax Collectors should use in computing the tax liabilities for 2006. A list of the 2006 market values of the properties is available for free at http://ResearchArchives.com/t/s?1007 http://bankrupt.com/misc/Wdix_2006MarketValues.pdf To the extent that their claims are secured by liens against the Debtors' property and the value of the property exceeds the amount of the tax claim, the Florida Tax Collectors impose interest for their claims of 18% per annum. Cynthia C. Jackson, Esq., at Smith Hulsey & Busey, in Jacksonville, Florida, notes that the court in In re Davison, 106 B.R. 1021, 1022 (Bankr. Neb. 1989), held that a debtor is obligated to pay interest at the statutory rate "unless the court determines that the statutory interest rate constitutes a penalty." Based upon the average 3.61% one-year London Interbank Offered Rate and 5.68% prime lending rate, the Debtors submit that the rates asserted by the Florida Tax Collectors contain a penalty and should be reduced. Accordingly, the Debtors ask the Court to determine that the adjusted rate of 6% per annum is the appropriate interest rate to be used to calculate accrued interest on any Allowed Tax Claim. The proposed Adjusted Rate represents Prime plus one-half percent for the period the taxes remain unpaid, and adequately accounts for the appropriate credit risk of the Debtors and the Florida Tax Collectors' secured status, Ms. Jackson relates. Moreover, the Debtors ask the Court to: (a) authorize them to set off any excess amount paid against their liability on other accounts within the same jurisdiction and for the same or other tax years; and (b) extinguish any liens relating to their secured tax liabilities addressed in the objection upon payment of the allowed Florida Tax Claims and revised tax amounts. Objections to the Debtors' request are due on Aug. 28, 2006. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063, transferred Apr. 14, 2005, to Bankr. M.D. Fla. Case Nos. 05-03817 through 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. Paul P. Huffard at The Blackstone Group, LP, gives financial advisory services to the Debtors. Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, and John B. Macdonald, Esq., at Akerman Senterfitt give legal advice to the Official Committee of Unsecured Creditors. Houlihan Lokey & Zukin Capital gives financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WINN-DIXIE: Wants 17 Scheduled Claims Disallowed ------------------------------------------------ Winn-Dixie Stores, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Middle District of Florida to deem their schedules of assets and liabilities and schedules of executory contracts and unexpired leases amended to disallow, reduce or reclassify 23 scheduled claims. A. No Liability Claims The Debtors have identified 17 scheduled claims, aggregating $476,038, that their books and records reflect as zero balance claims, as a result of: (a) prepetition payments that were not reflected in their books and records at the time the Schedules were filed; (b) accounts payable credits or accounts payable balances due to the Debtors; or (c) the correction of erroneous entries in the books and records that were scheduled as claims. The Debtors ask the Court to disallow these No Liability Scheduled Claims: Claimant Claim No. -------- --------- AAF International 30038 Bran Luebbe Inc. 30248 City of Montgomery 33422 The Dispatch 36859 Ferrania USA Inc. 34823 GE Capital 30828 Hauer Custom Manufacturing 40054 Levlad Inc. 35043 Mountaineer 36578 Murzan 31242 Napa Auto Parts 31251 Pearlstine Dist. Inc. 32180 Safeline Metal Detection 31506 Southern Eagle Dist. 32209 Town Talk 34265 Triangle Package Machinery 31768 Triangle Package Machinery 32294 B. Overstated Claims Upon review of their books and records, the Debtors have also identified five overstated scheduled claims aggregating $967,941. The Overstated Scheduled Claims are: Reduced Claimant Claim Amount Claim Amount -------- ------------ ------------ Premium Beverage $209,270 $1,072 RH Barringer Dist. 383,216 873 Savannah Dist. Company 1,304 958 Silver Eagle Dist. Key West 370,800 2,789 Velt Sherman Residuary Trust 3,351 505 The Debtors seek to reduce the Overstated Scheduled Claims to account for postpetition amounts that were inadvertently included in the scheduled claims that have been paid and the correction of erroneous entries in the books and records that were scheduled as claims. C. Garnier Claim Claim No. 34865 was filed by Garnier for $71,065, asserting an unsecured non-priority class status. The Debtors have determined that the Garnier Claim is overstated and partially misclassified. According to the Debtors, the Garnier Claim partially duplicates its reclamation demand. The Debtors and Garnier have previously agreed to Garnier's allowed reclamation claim. The Debtors seek to reduce the claim amount to $69,768 to reflect accounts receivable balance of $1,298, and to reclassify $22,349 as administrative priority and the $47,419 remains as unsecured non-priority claim. The Debtors reserve their rights with respect to potential preference and avoidance actions under Chaoter 5 of the Bankruptcy Code against any of the claimants. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063, transferred Apr. 14, 2005, to Bankr. M.D. Fla. Case Nos. 05-03817 through 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. Paul P. Huffard at The Blackstone Group, LP, gives financial advisory services to the Debtors. Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, and John B. Macdonald, Esq., at Akerman Senterfitt give legal advice to the Official Committee of Unsecured Creditors. Houlihan Lokey & Zukin Capital gives financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WISE METALS: Crown Cork Business Loss Prompts S&P to Junk Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Linthicum, Maryland-based Wise Metals Group LLC to 'CCC-' from 'CCC+'. At the same time, the rating agency lowered its senior secured note rating on the company to 'C' from 'CCC-'. The outlook is negative. The downgrade follows disclosures in the company's Form 10-Q filing on Aug. 15, 2006, that it will lose the beverage-can sheet business from Crown Cork & Seal Inc. for the fourth quarter of 2006 and for all of 2007. Wise Metals did not inform Standard & Poor's of the loss of the Crown business when the rating agency was lowering the corporate credit rating to 'CCC+/Negative--' from 'B-/Negative/--' on Aug. 15. Sales to Crown during 2005 accounted for 20% of Wise Metal's 2005 total revenue, the vast majority of which was from beverage-can sheet business. "We expect the company to experience financial distress because of the loss of this business and think there is a strong likelihood the company will seek bankruptcy protection," said Standard & Poor's credit analyst Dominick D'Ascoli. "Wise has been experiencing negative cash flows and has thin liquidity, and debt has been increasing. We had already been expecting liquidity to decline in the third quarter and now, with the loss of a significant customer, we expect negative free cash flow in the fourth quarter of 2006 and full year 2007. We are also doubtful that the company will be able to secure additional financing to bolster its thin liquidity level." Mr. D'Ascoli added, "We will lower the rating further if the company fails to service its debt obligation. We could upgrade the rating if the company can successfully replace its lost business, liquidity improves, and the company reduces its onerous debt level." WORLDCOM INC: Court Expunges Dobie's Claim Nos. 17042 and 38241 --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New York expunged Dobie Properties LLC's Claim Nos. 17042 and 38241 against WorldCom Inc. and its debtor-affiliates. The Court directed Gaylord Merlin Ludovici Diaz & Bain to disburse the principal sum of $1,600,000 held in the Escrow Account and 100% of its accrued interest, to date, to Dobie. Upon compliance with the terms of the Order, the Court will relieve Gaylord Merlin from any further obligation with respect to the Escrow Account. As reported in the Troubled Company Reporter on July 13, 2006, the Honorable Arthur Gonzalez granted Dobie's request for the enforcement of the amended settlement agreement it entered into with the Debtors. The Court required the Debtors to disburse to Dobie the $1,600,000 in Proceeds held in escrow by Gaylord Merlin Ludovici Diaz & Bain. About WorldCom WorldCom, Inc., a Clinton, MS-based global communications company, filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, WorldCom listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on Oct. 31, 2003, and on Apr. 20, 2004, the Company formally emerged from U.S. Chapter 11 protection as MCI, Inc. On Jan. 6, 2006, MCI merged with Verizon Communications, Inc. MCI is now known as Verizon Business, a unit of Verizon Communications. (WorldCom Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WORLDCOM INC: Michael Jordan Wants $8 Mil. Claim Allowed in Full ---------------------------------------------------------------- Michael Jordan asks the U.S. Bankruptcy Court for the District of New York to allow his $8,000,000 claim against WorldCom Inc. and its debtor-affiliates in full. The Debtors pointed to Mr. Jordan's Claim No. 36077, seeking payment of: (1) $2,000,000 for an annual compensation payment due on June 30, 2002; and (2) three $2,000,000 annual payments due on June 30 of 2003, 2004 and 2005. Jason M. Torf, Esq., at Schiff Hardin LLP, in Chicago, Illinois, argues that Michael Jordan's Endorsement Agreement is not an "employment contract" and that Mr. Jordan was not an "employee" for the Debtors because under the Agreement: -- the term "employment" was never utilized and Mr. Jordan was never referred to as an "employee"; -- Mr. Jordan was an "independent contractor"; -- employment taxes were not withheld from Mr. Jordan's payments; and -- Mr. Jordan never agreed to provide any consulting services to the Debtors. Mr. Torf relates that as testified by David Falk, Mr. Jordan's agent, an "independent contractor" provision was standard in all of Mr. Jordan's endorsement agreements. In addition, Curtis Polk, Mr. Jordan's financial and business advisor, testified that it was important to the parties to include the "independent contractor" provision so that they could structure Mr. Jordan's stock options in the manner they desired and avoid reporting obligations that otherwise would apply to the options. According to Mr. Torf, the Debtors overlooked the fact that: -- the primary purpose of the Agreement was not to obtain the benefit of any "services" from Mr. Jordan but to provide the Debtors with an exclusive worldwide license to use Mr. Jordan's name and likeness to promote their products and services; -- Mr. Jordan's commitment was limited to a maximum of four hours per day for each of the four days per year that he was required to make himself available to produce advertisements or for promotional appearances; and -- Mr. Jordan exercised a high degree of control concerning when and where he would make any appearances. The legislative history of Section 502(b)(7) of the Bankruptcy Code is not applicable to Mr. Jordan's Claim, Mr. Torf argues. Under the 1973 Commission on the Bankruptcy Laws of the United States, Section 502(b)(7) was intended principally to apply to long-term contracts providing substantial compensation to management executives of corporate debtors, Mr. Torf relates. Mr. Jordan, however, was never the Debtors' "management executive," and had nothing to do with the circumstances that resulted in the Debtors' bankruptcy. In addition, the Debtors' breach of the Agreement did not provide Mr. Jordan with time that he otherwise would not have had to enter into additional endorsement agreements, Mr. Torf contends. Even if Mr. Jordan had entered into an additional endorsement contract, that contract would not constitute mitigation because he already had the opportunity to enter into the contract prior to the Debtors' rejection. The Debtors have not satisfied their burden of establishing that Mr. Jordan could have entered into a substantially similar endorsement contract, Mr. Torf maintains. Mr. Torf argues that the Debtors' attempt to rely on a 2000 Chicago Sun-Times newspaper article as evidence that Mr. Jordan withdrew from the endorsement market in 2003 is improper for three reasons: -- The statements purportedly made by Mr. Jordan in the article are inadmissible hearsay and cannot not be considered for purposes of summary judgment; -- Any statements allegedly made by Mr. Jordan to the author of the Article are not evidence of Mr. Jordan's state of mind at the time when the Debtors breached the Agreement three years later; and -- Both of Mr. Jordan's advisors testified that the article was not accurate. Mr. Torf asserts that Mr. Jordan made a reasonable decision not to pursue another telecommunications endorsement after WorldCom, Inc.'s collapse because doing so would harm his reputation and dilute his impact as an endorser. It would also be inconsistent with Mr. Jordan's overall business strategy. About WorldCom WorldCom, Inc., a Clinton, MS-based global communications company, filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, WorldCom listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on Oct. 31, 2003, and on Apr. 20, 2004, the Company formally emerged from U.S. Chapter 11 protection as MCI, Inc. On Jan. 6, 2006, MCI merged with Verizon Communications, Inc. MCI is now known as Verizon Business, a unit of Verizon Communications. (WorldCom Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WORLDCOM INC: Wants Michael Jordan's Claim Reduced to $4 Million ---------------------------------------------------------------- WorldCom Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of New York to limit Michael Jordan's claim to $4,000,000, the amount the Debtors owed to Mr. Jordan when they filed for bankruptcy, plus one year's compensation under the Agreement. The Debtors maintain that Claim No. 36077 is capped by Section 507(b)(2) and that Mr. Jordan did not make reasonable efforts to mitigate his damages from their rejection of the Endorsement Agreement. Mark A. Shaiken, Esq., at Stinson Morrison Hecker LLP, in Kansas City, Missouri, contends that the Agreement is an employment contract for these reasons: (1) It is written; (2) It provides for Mr. Jordan to produce television commercials and print advertisements and to make personal appearances; (3) It provides for a substantial cash compensation and for stock options; (4) It precludes Mr. Jordan from providing endorsement services for other telecommunications companies; (5) It is not assignable by Mr. Jordan; (6) It ceases, at the Debtors' option, upon Mr. Jordan's death; (7) It has provisions for termination by both parties; (8) Mr. Jordan, through his agents, played an active role in creating and negotiating its terms, including insisting that the compensation should be more that six figures and that the term should be at least 10 years; and (9) It is the basis for Mr. Jordan's claim and defines the terms of his employment. Consequently, if the Agreement is an employment contract under Section 502(b)(7), then Mr. Jordan is an "employee" as he is the person hired to provide services for the Debtors, Mr. Shaiken avers. The plain language of the Agreement designates Mr. Jordan as an independent contractor for tax purposes only, Mr. Shaiken clarifies. In fact, after the Debtors rejected the Agreement, Mr. Jordan was obligated to make reasonable efforts to find substitute employment, Mr. Shaiken states. Mr. Shaiken points out that David Falk, Mr. Jordan's agent, Curtis Polk, Mr. Jordan's financial and business advisor, and expert Willian A. Cartner, whose business is to help corporate sponsors identify and secure professional athletes for the purpose of product endorsement, testified that Mr. Jordan could have obtained an endorsement agreement to replace the Agreement. However, Mr. Jordan's agents admit that no efforts were made to find alternate endorsement opportunities because Mr. Jordan did not want new endorsements. Because Mr. Jordan made no effort to mitigate his damages, the reasonableness of his refusal to entertain other endorsement opportunities is irrelevant, Mr. Shaiken contends. "[Mr.] Jordan had the right to decide to focus his time and talents on other endeavors, but the reasonableness of that decision from his perspective has no bearing on his right to be paid by the bankruptcy estate." About WorldCom WorldCom, Inc., a Clinton, MS-based global communications company, filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, WorldCom listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on Oct. 31, 2003, and on Apr. 20, 2004, the Company formally emerged from U.S. Chapter 11 protection as MCI, Inc. On Jan. 6, 2006, MCI merged with Verizon Communications, Inc. MCI is now known as Verizon Business, a unit of Verizon Communications. (WorldCom Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WORKFLOW MANAGEMENT: S&P Affirms BB- Rating With Negative Outlook ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its recovery rating on Workflow Management Inc.'s first-lien credit facilities to '2' from '3', indicating expectations for a substantial recovery (80%- 100%) of principal in the event of a payment default. At the same time, the rating agency affirmed the other ratings on the company, including the 'BB-' corporate credit rating. The outlook is negative. "The higher first-lien recovery rating reflects lower pro forma first-lien debt levels because of the planned sale of Workflow's Relizon Canada unit. The reduced first-lien borrowings result in improved recovery prospects for this debt under our simulated payment default scenario," said Standard & Poor's credit analyst Donald Wong. The ratings on Greenwich, Connecticut-headquartered Workflow reflect the company's: * heavy debt levels; * moderate-size cash flow base; and * competitive operating climate. These factors are tempered by Workflow's solid market position in the niche print management segment and its adequate liquidity. The company is a provider of document and business process outsourcing services. Operations were substantially expanded with the November 2005 acquisition of Relizon Co. Workflow benefits from: * a sizable and diversified customer base; * long-standing customer relationships; * significant recurring revenues; and * high retention rates. The Relizon acquisition provides the company with cost savings due to its increased scale and from facilities consolidation, and prospects for incremental revenues from cross-selling opportunities. Workflow is expected to continue to focus on integrating Relizon's operations in coming periods. The print management segment is highly fragmented, resulting in competitive market conditions. On Aug. 10, 2006, Workflow agreed to sell its Relizon Canada unit to DATA Group Income Fund for about CDN$141 million, consisting of CDN$112 million in cash and about 3 million units of the fund. The transaction is expected to close during this 2006 third quarter. Net cash proceeds will be used to repay borrowings under the first-lien credit facilities. Workflow will be subject to a 90-day standstill agreement for the shares of DATA Group Income Fund received. Standard & Poor's assumes in its ratings that Workflow will sell these shares, proceeds of which are required to be used to repay the first-lien facilities. WORNICK CO: Continued Losses Prompt S&P to Downgrade Rating to B ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Wornick Co. (The) and its parent, TWC Holdings LLC, and placed the ratings on CreditWatch with negative implications. The corporate credit rating on both entities were lowered to 'B' from 'B+' "The downgrade and CreditWatch placement reflect concerns about the company's near-term liquidity and continued losses despite good demand in key end markets," said Standard & Poor's credit analyst Christopher DeNicolo. In the first six months of 2006, Wornick reported an $8 million operating loss despite a 15% increase in revenue. The loss was due to: * costs related to consolidation efforts; * inefficiencies in the comanufacturing business; and * lower margins on certain military ration sales. Free cash flow was negative in the first half of 2006 due to the losses and higher working capital. Subsequent to the end of the quarter, the company made its scheduled semiannual coupon payment on the $125 million secured notes and had further working capital investments, resulting in zero cash balances and borrowings of $12 million on the $15 million revolver. In addition, the company stated in its 10-Q that, although it expects to repay the revolver drawings by the end of the year, it could violate the financial covenants in its credit agreement. Overall Wornick's financial profile is likely to remain weak due to high debt leverage and poor profitability. Standard & Poor's will meet with management to discuss plans to restore profitability and cash flow generation and a further downgrade is possible. Cincinnati, Ohio-based Wornick specializes in the production, packaging, and distribution of shelf-life, shelf-stable, and frozen foods in flexible pouches and semirigid products. The firm's two main lines of business are military rations (approximately 70% of revenues) and comanufacturing for leading food brands (30%). The company produces both individual (including Meals Ready to Eat or MRE) and group rations (including Unitized Group Rations-A or UGR-A) for the U.S. military. MREs comprise about 65% of military revenues. In the most recent MRE contract award Wornick received the lowest share of the three approved suppliers. The high number and increasing tenor of overseas troop deployment and the replenishment of war reserves is likely to sustain demand for MREs in the intermediate term, although sales in the near term are likely to decline from unusually high levels in late 2005 and early 2006. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Abraxas Petro ABP (21) 132 (6) AFC Enterprises AFCE (46) 172 5 Alaska Comm Sys ALSK (17) 565 24 Alliance Imaging AIQ (23) 682 26 AMR Corp. AMR (508) 30,752 (1,392) Atherogenics Inc. AGIX (124) 211 165 Biomarin Pharmac BMRN 49 469 307 Blount International BLT (123) 465 126 CableVision System CVC (2,468) 12,832 2,643 Centennial Comm CYCL (1,062) 1,436 23 Cenveo Inc CVO 24 941 128 Choice Hotels CHH (118) 280 (58) Cincinnati Bell CBB (705) 1,893 18 Clorox Co. CLX (156) 3,616 (123) Columbia Laborat CBRX 10 29 23 Compass Minerals CMP (63) 664 161 Crown Holdings I CCK 144 7,287 174 Crown Media HL CRWN (393) 1,018 133 Deluxe Corp DLX (90) 1,330 (235) Domino's Pizza DPZ (609) 395 (4) Echostar Comm DISH (512) 9,105 1,589 Emeritus Corp. ESC (111) 721 (29) Emisphere Tech EMIS 2 43 19 Empire Resorts I NYNY (26) 62 (3) Encysive Pharm ENCY (64) 93 56 Foster Wheeler FWLT (38) 2,224 (93) Gencorp Inc. GY (88) 990 (28) Graftech International GTI (166) 900 250 H&E Equipment HEES 226 707 22 I2 Technologies ITWO (55) 211 (9) ICOS Corp ICOS (36) 266 116 IMAX Corp IMAX (21) 244 33 Incyte Corp. INCY (55) 375 155 Indevus Pharma IDEV (147) 79 35 J Crew Group Inc. JCG (489) 353 97 Koppers Holdings KOP (95) 625 140 Kulicke & Soffa KLIC 65 398 230 Labopharm Inc. DDS (92) 143 105 Level 3 Comm. Inc. LVLT (33) 9,751 1,333 Ligand Pharm LGND (238) 286 (155) Lodgenet Entertainment LNET (66) 262 15 Maytag Corp. MYG (187) 2,954 150 McDermott Int'l MDR 125 3,181 64 McMoran Exploration MMR (21) 434 (38) NPS Pharm Inc. NPSP (164) 248 168 New River Pharma NRPH 0 93 68 Omnova Solutions OMN (6) 366 67 ON Semiconductor ONNN (75) 1,423 279 Qwest Communication Q (2,826) 21,292 (2,542) Riviera Holdings RIV (29) 214 7 Rural/Metro Corp. RURL (93) 302 50 Sepracor Inc. SEPR (109) 1,277 363 St. John Knits Inc. SJKI (52) 213 80 Sulphco Inc. SUF 25 34 12 Sun Healthcare SUNH 10 523 (34) Sun-Times Media SVN (261) 965 (324) Tivo Inc. TIVO (33) 143 19 USG Corp. USG (313) 5,657 (1,763) Vertrue Inc. VTRU (16) 443 (72) Weight Watchers WTW (110) 857 (72) WR Grace & Co. GRA (515) 3,612 929 ********* 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. 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