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/raid1/www/Hosts/bankrupt/TCR_Public/060825.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, August 25, 2006, Vol. 10, No. 202 Headlines ACCEPTANCE INSURANCE: Plan-Filing Period Stretched to February 9 ACXIOM CORP: Moody's Rates $800 Million Senior Loan at Ba2 ADELPHIA COMMS: CanPartners Holds Allowed $22,126,440 Claim ADELPHIA COMMS: Senior Noteholders Want Exclusivity Terminated ADVANTA CORP: Improving Performance Cues S&P to Upgrade Ratings AIR CANADA: Arbitrator Issues Wage Review Award for IAMAW Groups AIRNET COMMS: Plans to Pay Unsecured Creditors Over Three Years ALLEGHENY ENERGY: Subsidiary Issues $145 Mil. First Mortgage Bonds ALLIED PROPERTIES: Section 341(a) Meeting Scheduled on Sept. 14 ARMSTRONG WORLD: Parent Loses Ownership Under Chapter 11 Plan ASARCO LLC: East Helena Equipment Auction Today ASARCO LLC: Court Okays Pate Auction to Sell East Helena Equipment ASARCO LLC: Wants to Pay Willis for Brokerage Services ATLANTIC GULF: Trustee Michael Joseph Distributes $875,866 CATALYST PAPER: TSX Defers Acceptance of Shareholder Rights Plan CATHOLIC CHURCH: Court Appoints Additional Mediators for Portland CATHOLIC CHURCH: Portland Tort Committee Files Opening Brief CERADYNE INC: Requests Nasdaq Listing Qualifications Panel Hearing CHARTERMAC: Completes $455 Million Fixed-Rate Bond Securitization CHASE MORTGAGE: Fitch Puts Low-B Ratings on Class B-3 & B-4 Certs. COMVERSE TECHNOLOGY: Granted Continued Listing By NASDAQ Panel CREATIVE BUILDING: Notices of Appearance Must Be Filed by Sept. 1 DANA CORP: Creditors Committee Selects ARPC as Consultants DANA CORP: Equity Committee Selects Fried Frank as Counsel DAYTON SUPERIOR: Moody's Holds Junk Ratings with Stable Outlook DELPHI CORP: 7 Trade Creditors Retain Kasowitz as Legal Counsel DELTA AIR: Wants Pilots Retirement Plan Terminated DELTA AIR: Panel Supports Termination of Pilots' Retirement Plan DOMTAR INC: Weyerhaeuser Merger Prompts DBRS to Review Ratings FALCONBRIDGE LTD: Fails to Register Sale to Dominican Tax Dept. FEDERAL-MOGUL: Abex Claimants' Move for Futures Rep. Draws Fire FEDERAL-MOGUL: Underwriters Want to Conduct Discovery on Travelers FLYI INC: Wants Court Approval on Committee Investigation Protocol FLYI INC: Wants Solicitation and Tabulation Procedures Set GOLD KIST: Pilgrim's Buy Offer Prompts Moody's to Hold Ratings HARPER STREET: Case Summary & 5 Largest Unsecured Creditors HARVEST OPERATIONS: Moody's Reviews Ratings and May Downgrade INN OF THE MOUNTAIN: S&P Downgrades Issuer Credit Rating to B- INTEGRATED HEALTH: U.S. Trustee Wants Reports Filed INTEGRATED HEALTH: Court Extends Removal Period to November 3 INTERNATIONAL MANAGEMENT: Ct. Okays Auction Management's Retention INTERSTATE BAKERIES: JPMorgan Supports DIP Financing Amendment INTERSTATE BAKERIES: Sells Matteson Property to Realty America JEAN COUTU: Inks $3.4 Billion Merger Transaction with Rite Aid JEAN COUTU: Stores Sale Cues S&P to Put Ratings on Positive Watch KMART CORP: Court Approves Pact Allowing Roldan to Pursue PI Suit KMART CORP: Court Okays Pact Allowing Holmes, et al.'s PI Suit LARRY'S MARKETS: Selling Three Grocery Stores for $6.2 Million LIN TV: High Leverage Prompts S&P to Revise Outlook to Negative MARSH & MCLENNAN: S&P Puts BB+ Preferred Stock Rating on New Shelf MASTERCRAFT INTERIORS: Has Access to $1.5 Million BofA DIP Loan MESABA AVIATION: Bankruptcy Contributes to MAIR's $2.5 Mil. Loss MESABA AVIATION: Reports July 2006 Traffic Results MIRANT: Asset Recovery Wants Foster Wheeler's $2M Claim Disallowed MIRANT CORP: Files Adversary Case vs. Three Environmental NGOs MUSICLAND HOLDING: Committee Has Until November 3 to File Claim NATIONAL ENERGY: Littleton Electric Wants Claims Allowed NATIONAL ENERGY: Wants Settlement Pact with ET Power & DTE Okayed NORTEL NETWORKS: Unit Inks New $1.6 Mil. Court Records System Pact NORTHWEST AIRLINES: Amadeus Wants Decision on Carrier Agreement NORTHWEST AIRLINES: Wants Court Nod on Term Sheets for 5 Aircraft NTL INC: In Talks With Four Buyout Firms Over Possible Takeover O'SULLIVAN IND: Inks Stipulation with Mirisola to Pursue Action PAN AM CORP: Admin. Claim Holders Can Confirm Claims Until Nov. 30 PERFORMANCE TRANSPORTATION: Donald Crumlich Wins Lift-Stay Plea PIERRE FOODS: S&P Affirms Low-B Ratings With Negative Outlook PILGRIM'S PRIDE: Gold Kist Buy Offer Cues Moody's to Hold Ratings PREMIUM PAPERS: Court Okays Smart Papers Asset Sale to Plainfield PREMIUM PAPERS: Has Until November 16 to File Chapter 11 Plan PROFESSIONAL INVESTORS: Section 341(a) Meeting on September 8 QUANTUM CORP: Completes Acquisition of ADIC for $770 Million QUIGLEY CO: Wants DIP Facility Extended Until March 2007 RADIOSHACK CORPORATION: 2006 Results Cue Fitch's Ratings Downgrade REAL ESTATE: Section 341(a) Meeting Scheduled on September 15 REDCITY SEARCH: Gets TSX Nod to Complete Private Placement REFCO INC: Official Committees Create Joint Subcommittee REFCO INC: U.S. Trustee Reconstitutes Official Creditors Committee RITE AID: Inks $3.4 Billion Merger Agreement with Jean Coutu RITE AID: Jean Stores' Acquisition Prompts Fitch's Negative Watch RITE AID: $3.4 Billion Jean Stores' Buy Cues S&P's Negative Watch SAINT VINCENTS: Inks Resolution Agreement with NY Attorney General SAINT VINCENTS: Moves to Renew Pacts with Six Bargaining Units SANMINA-SCI: Fitch Lowers Issuer Default Rating to B+ from BB- SATELITES MEXICANOS: Judge Drain Enters Order Enforcing Stay SATELITES MEXICANOS: Valor Okayed as Interim Financial Advisors SEARS HOLDINGS: Second Quarter Net Income Soars to $294 Million SENECA GAMING: Low Leverage Cues Moody's to Upgrade Rating SMART ONLINE: Sells $250,000 Common Shares to Investors SOLUTIA INC: Sells European Unit to Dishman Pharma for $74.5 Mil. SOLUTIA INC: Wants to Expand Colliers Turley's Scope of Duties SOS REALTY: Court Okays Lacourse Construction as Gen. Contractor SVP HOLDINGS: S&P Assigns B+ Rating to $280 Million Facilities TOWER AUTOMOTIVE: Fuji Supplements Response to Objections TOWER AUTOMOTIVE: Hires Heidrick & Struggles as Consultants TRIPLE A POULTRY: Volvo Financial Wants Truck Leases Decided USA COMMERCIAL: Equity Panel Hires Beckley Singleton as Counsel USA COMMERCIAL: Equity Panel Hires Orrick Herrington as Counsel USA COMMERCIAL: Court Okays Hilco as Real Estate Appraiser USG CORP: Signs $2.8 Bil. Exit Financing with JPMorgan, et al. VALHI INC: S&P Downgrades Corporate Credit Rating to BB- from BB VARIG S.A.: Volo May Face Lawsuit Over Unpaid Wages WADSWORTH HOUSING: S&P Downgrades $3.4 Million Bonds' Rating to B WARD PRODUCTS: Section 341(a) Meeting Scheduled on September 14 WESTERN APARTMENT: Taps Matranga & Wiley as Accountants WESTON NURSERIES: Disclosure Statement Hearing Set for Sept. 27 WESTON NURSERIES: Has Until October 31 to Decide on Leases WESTON NURSERIES: No Takers for 655-Acre Property WINN-DIXIE: Sets Sept. 12 as Special Bar Date for 287 Claimants WINN-DIXIE: Wants Exclusive Solicitation Period Carried to Oct. 31 YUKOS OIL: Moscow Court Rejects Debtor's Bankruptcy Appeal * BOOK REVIEW: The Big Board: A History of the New York Stock Market ********* ACCEPTANCE INSURANCE: Plan-Filing Period Stretched to February 9 ---------------------------------------------------------------- The Honorable Timothy J. Mahoney of the U.S. Bankruptcy Court for the District of Nebraska in Omaha extended until Feb. 9, 2007, Acceptance Insurance Companies Inc.'s period to exclusively file a chapter 11 plan. The Debtor also has until April 9, 2007, to exclusively solicit acceptances of that plan from its creditors. As reported in the Troubled Company Reporter on June 12, 2006, two of the Debtor's principal assets are its interest in Acceptance Insurance Company and a takings claim from the United States of America. An extension, the Debtor contended, would allow it to complete the liquidation of these assets. Interest in AIC The Debtor said it continues to diligently manage claims within AIC in an effort to maximize the value of AIC for the benefit of its creditors. The Debtor discloses that the claims resolutions process within AIC has not yet entered the stage where it will permit the Debtor to structure an optimal plan of reorganization. The Debtor told the Court that insurance consultants have advised it that the run-off of AIC's business is not yet at the point where claims can be determined with sufficient precision to allow AIC's assets to be sold. Takings Claim The Debtor told the Court that the takings claims started from the initial stages of litigation. The Debtor said that the United States filed a motion to dismiss its complaint but was denied. The Debtor and the United States have filed cross motions for summary judgments and the briefing on motions will close in June 2006. The Debtor expected a ruling on the cross motion in August or September of 2006. The Debtor said that if trial becomes necessary, it would take place either in December 2006 or the first quarter of 2007. Granite Reinsurance Litigation The Debtor also disclosed that along with AIC, it is currently engaged in litigation with Granite Reinsurance Ltd. regarding a: * $10 million claims filed against the Debtor in its bankruptcy proceedings, and * $10 million lawsuit filed against AIC. The bankruptcy claim and lawsuit have been procedurally consolidated and are pending in the bankruptcy court. The Debtor said that Granite's claim represents approximately 10% of the total claims filed against the Debtor. The Debtor told the Court that the Official Committee of Unsecured Creditors appointed in its case has intervened in both matters. The Debtor expected resolution of the Granite litigation some time in December 2006 or the first quarter of 2007. The Debtor told the Court that once the takings claim and Granite litigations are resolved, the run-off from AIC's business has progressed to a point that AIC's assets can be sold and a buyer for the assets is identified, then it will be in a position to propose a plan of liquidation. The Debtor revealed that the Committee has consented to the extension. Headquartered in Council Bluffs, Iowa, Acceptance Insurance Companies Inc. -- http://www.aicins.com/- owns, either directly or indirectly, several companies, one of which is an insurance company that accounts for substantially all of the business operations and assets of the corporate groups. The Company filed for chapter 11 protection on Jan. 7, 2005 (Bankr. D. Nebr. Case No. 05-80059). The Debtor's affiliates -- Acceptance Insurance Services, Inc., and American Agrisurance, Inc. -- filed separate chapter 7 petitions (Bankr. D. Nebr. Case Nos. 05-80056 & 05- 80058) on Jan. 7, 2005. John J. Jolley, Esq., at Kutak Rock LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $33,069,446 in total assets and $137,120,541 in total debts. ACXIOM CORP: Moody's Rates $800 Million Senior Loan at Ba2 ---------------------------------------------------------- Moody's Investors Service assigned a Ba2 rating to Acxiom Corporation's $800 million senior secured credit facilities, while affirming its corporate family rating of Ba2. The outlook is stable. The company expects to use proceeds from the proposed offering for a recently authorized share repurchase program as well as to repay amounts drawn on its revolving credit facility and for general corporate purposes. Acxiom's Ba2 corporate family rating is constrained by its relatively high client concentration, modest size relative to larger information technology services peers, and challenges to address an increasing public sentiment for consumer privacy. In addition, the rating reflects the company's ample free cash flow and modest financial leverage, which in isolation suggest a rating within the Baa category. Information technology outsourcing services sector rating factors include competitive position, cash flow, financial leverage, returns, and liquidity. For further information, refer to Moody's credit opinion for Acxiom Corporation. Acxiom's Ba2 credit rating could experience upward pressure if free cash flow to debt exceeds 15%, organic revenues and operating profits continue to grow, if the company is able to grow its asset and revenue levels to that of similarly rated companies, and the company is able to reduce the level of secured debt and obtain an unsecured bank facility. Downward rating pressure could come from increased share repurchase or acquisition activity such that there is a leveraging event that results in free cash flow to debt less than 5%, if operating margins vary significantly from forecasted results, or if the company is unable to grow its asset and revenue levels to that of similarly rated companies. Headquartered in Little Rock, Arkansas, Acxiom Corporation is a customer data integration and content software and information technology outsourcing services provider. ADELPHIA COMMS: CanPartners Holds Allowed $22,126,440 Claim ----------------------------------------------------------- Adelphia Communications Corporation is a party to a Standard Industrial Commercial Single-Tenant Lease-Net dated May 28, 1997, as amended, governing the lease of certain premises located at 1260 S. Dupont Street in Ontario, California owned by Meredith Enterprises, Inc., formerly known as West Coast Realty Investors, Inc. W. C. Communications, Inc., doing business as West Coast Communications, filed proofs of claim against the ACOM Debtors for amounts allegedly owing for certain construction services performed for the ACOM Debtors, including services performed on the Premises. W. C. Communications subsequently assigned the Claims to CanPartners Investments IV LLC. By a Court order dated April 7, 2006, CanPartners was allowed a secured claim for $81,200,000 plus interest from the date of the Debtors' bankruptcy filing through the date of payment, $22,126,440 of which was allowed on behalf of the Claims. It is currently contemplated that the Allowed Claim will be paid in full under the terms of a plan or plans of reorganization for the ACOM Debtors' estates. The ACOM Debtors proposed to assume and assign the Lease to Comcast Corporation but Meredith objected to it, asserting certain defaults under the Lease. Given the resolution of the Claims and the proposed assumption and assignment of the Lease, W. C. Communications, Meredith and the ACOM Debtors stipulate that: 1. Upon confirmation of a plan or plans of reorganization for ACOM, ACOM will pay CanPartners the $22,126,440 Allowed Claim in full; 2. W. C. Communications will take all actions necessary to release the Lien from the Property, and all other parcels of real property covered by the Lien; 3. Upon payment in full of the Allowed Claim, W. C. Communications and CanPartners releases and forever discharges the Premises and Meredith from all liens and actions in connection with the Claims; 4. In the event the Allowed Claim is not paid in full or in the event the Claims are not fully paid and satisfied, W. C. Communications and CanPartners each agrees that the Lien and any future lien filed to enforce the Claims attaches not to the fee interest of Meredith and its successors and assigns in the Premises, but rather, solely to the leasehold interest of the ACOM Debtors and its successors-in-interest under the Lease or to any sale proceeds received by the ACOM Debtors from Comcast; and 5. The Stipulation will constitute adequate assurance of prompt cure of Meredith's asserted defaults under the Lease relating to the Lien, as required under Section 365 of the Bankruptcy Code. Judge Gerber approves the Stipulation. 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 Exclusivity Terminated -------------------------------------------------------------- These holders or investment advisors to certain holders of notes and debentures issued by Adelphia Communications Corporation, ask the Court to terminate the ACOM Debtors' exclusive periods to allow them to file a competing chapter 11 plan of reorganization: * Aurelius Capital Management, LP; * Catalyst Investment Management Co., LLC; * Drawbridge Global Macro Advisors, LLC; * Drawbridge Special Opportunities Advisors, LLC; * Elliott Associates, LP; * Farallon Capital Management, LLC; * Noonday Asset Management, LP; and * Perry Capital, LLC, Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, notes that throughout the ACOM Debtors' Chapter 11 cases, the Court has insisted on: (i) neutrality on the part of the ACOM Debtors, who are conflicted on intercompany issues; and (ii) the resolution of the intercreditor disputes through the Motion in Aid Process. Mr. Rosen relates that the MIA Process, approved by the Court, was designed to promote an open and valid assessment of the ACOM Debtors' assets and liabilities, ensure that the merits of intercreditor issues were considered and determined, and treat all parties in the ACOM Debtors' Chapter 11 cases fairly and equitably. Thus, the Court has rebuked multiple attempts to undermine a fair and open determinative proceeding. Mr. Rosen informs the Court that the ACC Senior Noteholders have relied on the repeated assurances that due process, fairness, and the ACOM Debtor's neutrality were unyielding principles that the Court would not compromise. On April 6, 2006, the Court issued a Plan Procedures Order, which provides that if the ACOM Debtors propose amendments to a chapter 11 plan of reorganization that include a proposed settlement of the Intercreditor Disputes, the amended plan must be structured to permit creditors to separately accept or reject a "Settlement Plan" and a "Reserve Plan." Mr. Rosen asserts that the ACOM Debtors have violated the Court's Plan Procedures Order by: (i) publicly committing to filing a chapter 11 plan that mandates the "settlement" negotiated by certain constituencies and does not include the holdback plan alternative; and (ii) signing the amended and restated agreement concerning the terms and conditions of a modified chapter 11 plan dated July 21, 2006, that prohibits them from complying with the Plan Procedures Order. To ensure that no one else can pursue the "Reserve Plan," the ACOM Debtors have retained exclusivity and relinquished it only in favor of the Official Committee of Unsecured Creditors, Mr. Rosen relates. It is extremely inappropriate for the ACOM Debtors to join in an effort to coerce creditors into accepting the "settlement" negotiated by certain parties and to deny creditors the holdback plan alternative that the Court previously has ordered the Debtors to provide, Mr. Rosen argues. Mr. Rosen contends that since the ACOM Debtors will not adhere to the Plan Procedures Order and propose the required alternative, other parties should be given the opportunity to do so. He notes that the ACOM Debtors' alternative would provide for immediate distributions to be made to the Bank Group and general unsecured creditors except for holders of the ACC unsecured debt, the Arahova Notes and the FrontierVision HoldCo Notes, for whom distributions would be delayed, to the extent necessary, pending a merits-based resolution of the intercreditor issues. Need for an Alternative Plan The ACC Senior Noteholders maintain that a two-pronged approach consistent with the Plan Procedures Order is appropriate and should be employed to rectify the current imbalance. The two- pronged approach will: -- eliminate the accrual of interest on the secured debt and unsecured subsidiary debt other than the Arahova Notes and FrontierVision Holdco Notes; -- allow for prompt distributions to all creditor classes other than to holders of the ACC unsecured debt, the Arahova Notes and the FrontierVision HoldCo Notes; and -- allow the MIA Process to reach its rightful conclusion expeditiously. "The Debtors should not object to this balanced approach and, if the Arahova Noteholders and FrontierVision Holdco Noteholders are interested in knowing the truth of the MIA Process, they should not be concerned about presenting the merits of the Intercreditor Disputes," Mr. Rosen contends. The ACC Senior Noteholders delivered to the Court their proposed Term Sheet that provides for the same treatment as the ACOM Debtors' Amended Term Sheet for all constituencies other than the Bank Group and holders of the ACC unsecured debt, the Arahova Notes and the FrontierVision HoldCo Notes. Mr. Rosen explains that the Amended Term Sheet provides that litigation over approval of the purported settlement of the Intercreditor Disputes will delay distributions to all creditors, while under ACC Noteholders' Term Sheet, all constituencies other than the Bank Group and holders of the ACC unsecured debt, the Arahova Notes and the FrontierVision HoldCo Notes will receive their distributions regardless of whether the Intercreditor Disputes are litigated now, later or consensually resolved. A full-text copy of the ACC Noteholders' Term Sheet is available for free at http://ResearchArchives.com/t/s?1050 Mr. Rosen asserts that the ACC Senior Noteholders should be authorized to file and pursue confirmation of a competing plan because the ACOM Debtors have waived exclusivity, which cannot be done exclusively for the benefit of selective creditors and constituencies to the detriment of others. 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) ADVANTA CORP: Improving Performance Cues S&P to Upgrade Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Advanta Corp., including its counterparty credit rating, which was raised to 'BB-/B' from 'B+/B'. At the same time, the rating agency affirmed the 'BB/B' counterparty credit rating on Advanta Bank Corp. The outlook on both entities is stable. "The rating changes were driven by the strong performance of Advanta's core business credit card unit, solid leverage metrics, and steadily improving earnings and credit quality," said Standard & Poor's credit analyst Rian M. Pressman, CFA. Offsetting factors include: * the monoline nature of the company; * its lack of scale in the increasingly competitive card industry; and * reliance on securitization funding. With the distractions caused by divested and closed business units behind it, Advanta's focus on its niche card business has resulted in improved financial and operational performance. The company has improved its performance by strengthening marketing practices, improving underwriting, and lowering operational costs. Managed receivables and transaction volume have been growing at a rapid pace, with both increasing 25% year-over-year as of June 30, 2006. Since 2003, FICO scores of new customers have been of high- prime quality (about 730), resulting in steadily improving credit quality. With charge-offs approaching 3%, Standard & Poor's believes asset quality is most likely near a cyclical high point. Nevertheless, the company should perform better than it did during the last industry downturn, reflecting tighter underwriting standards. Advanta's financial leverage is solid and compares favorably with that of higher-rated peers. At June 30, 2006, the company's ratio of tangible equity to tangible managed assets (adjusted upward to include reserves and downward for I/O securities) was 12.4%. Advanta has announced plans to increase account originations significantly from 2005 levels. Standard & Poor's expects risk adjusted revenues, managed net interest margin, asset quality, and operating expenses may be pressured to accommodate this growth. Despite the risks attendant to this rapid growth, the rating agency expects future financial performance to remain strong. The company's size relative to its credit card (and bank) competitors is a limiting rating factor. As the competitive environment puts pressure on the profitability of consumer and corporate credit cards, larger competitors are likely to work more aggressively to penetrate other segments of the credit-card market. This, and the likelihood that credit card industry-wide receivable growth will slow as the market becomes saturated, all add the potential for volatility in Advanta's results. Additionally, the high percentage of funding derived from ABS markets constrains the rating. At June 30, 2006, 71% of total funding liabilities were derived from securitized receivables. Although we consider the use of deposit funding (25% of funding liabilities) to be a net positive, it no longer provides Advanta with a competitive advantage vis-.-vis its competitors. The recent wave of consolidation between independent credit card companies and banks has given the company's competitors greater access to retail deposits. The stable outlook is driven by Advanta's improved performance, partially offset by rapid growth. Downside movement may result if profitability, asset quality, or leverage experience significant deterioration due to the company's inability to support this growth. Upward movement in the rating may result if Advanta continues to successfully execute its monoline business model. Such upside is limited, however, by: * the monoline nature of the company's business; * its lack of scale in the increasingly competitive card industry; and * reliance on securitization funding. AIR CANADA: Arbitrator Issues Wage Review Award for IAMAW Groups ---------------------------------------------------------------- Air Canada Inc. reported that Arbitrator Donald Munroe has issued his wage review award for two employee groups represented by the International Association of Machinists and Aerospace Workers on Aug. 24, 2006. The award covers approximately 10,500 Technical, Maintenance and Operational Support employees and approximately 300 employees in the Company's Finance Branch. The arbitration, dealing exclusively with adjustment to the hourly wage rate, was conducted pursuant to a provision in collective agreements reached between the Company and its unions in 2003. Mr. Munroe's award granted IAMAW-represented employees a 1% wage increase effective July 2006, 0.5 % effective January 2007, 1.75 % effective July 2007 and 1.75% effective July 2008. In July, Arbitrator Michel Picher awarded the 5,540 employees represented by the CAW a 1% wage increase effective July 2006, 1.75% effective July 2007 And a 1.75 % increase effective July 2008. Negotiations with all other major labour groups except CUPE have moved to mediation/arbitration. Negotiations with CUPE, which represents the airline's approximate 6,000 flight attendants, are scheduled to commence mid-September. About Air Canada Air Canada -- http://www.aircanada.com/-- together with Air Canada Jazz and other business units of parent company ACE Aviation Holdings Inc., provides scheduled and charter air transportation for passengers and cargo to more than 150 destinations, vacation packages to over 90 destinations, as well as maintenance, ground handling and training services to other airlines. Canada's flag carrier is recognized as a leader in the global air transportation market by pursuing a strategy based on value-added customer service, technical excellence and passenger safety. * * * As reported in the Troubled Company Reporter on April 24, 2006, Standard & Poor's Ratings Services raised the long-term corporate credit rating on ACE Aviation Holdings Inc. to 'B+' from 'B', while affirming the 'B' long-term corporate credit rating on its wholly owned subsidiary, Air Canada. The outlook on both entities remains stable. AIRNET COMMS: Plans to Pay Unsecured Creditors Over Three Years --------------------------------------------------------------- AirNet Communications Corp. filed a Modified Amended Plan of Reorganization with the U.S. Bankruptcy Court for the Middle District of Florida on Aug. 17, 2006. The Plan contemplates that Reorganized AirNet will continue to operate its business. In addition, Tecore, Inc., will provide exit financing, in the form of a credit line amounting to $500,000. Cash flow from the continued operation of business and the Exit Financing will be used toward all required Plan payments. Classification and Treatment of Claims Allowed priority tax claims will be paid quarterly over five years, with a 6% per annum interest. Priority wage, vacation, and benefit claims will be paid in full over 12 months without interest. Tecore's $2 million claim will be paid quarterly over ten years with a 7% per annum interest. Tecore's $5,448,190 remaining claim will be waived in exchange for 100% of the new equity interests in Reorganized AirNet. Laurus Master Fund, Ltd.'s $4,249,000 claim will be reduced to $3,300,000 and divided into two tranches. Tranche A will be in the amount of $800,000 and accrue 3% interest. Reorganized AirNet will repay Tranche A through 16 quarterly payments of $50,000 plus interest. Tranche B will be in the amount of $2,500,000 and won't accrue interest. Tranche B will be repaid upon each sale of any item of inventory, which existed as of the Debtor's bankruptcy filing. The amount due upon each sale of Petition Date Inventory will be 25% of that inventory's book value. If sale of Petition Date Inventory does not produce at least $1,700,000 in payments to LMF as of four years from the Effective Date, the Reorganized AirNet will pay Laurus an amount equal to the difference between $1,700,000 and the amount previously paid on Tranche B. Secured creditor SCP Private Equity Partners II will retain its Lien against all of the Debtor's intellectual property to the same extent, validity and priority as existed prepetition lien and subject to a term sheet entered into between the Debtor and SCP Private. A full-text copy of the Term Sheet is available for free at http://ResearchArchives.com/t/s?104d Holders of general unsecured claims will receive a combination of an initial payment on the Effective Date and deferred payments over a three year period after the Effective Date with 10% annual interest. The deficiency claim of SCP Private Equity Partners II, amounting to $2.1 million will be paid quarterly over 40 quarters plus 7% annual interest. Sacco and Associates, which asserts a retaining lien on certain legal files, may retain those files as the indubitable equivalent of its claim. Holders of equity interest will get nothing. A full-text copy of the Plan is available for a fee at: http://www.researcharchives.com/bin/download?id=060823061028 Headquartered in Melbourne, Florida, AirNet Communications Corporation -- http://www.aircom.com/-- designs, manufactures, and markets wireless infrastructure products and offers infrastructure solutions for commercial GSM customers, and government, defense, homeland security based agencies. The Debtor filed for chapter 11 protection on May 22, 2006 (Bankr. M.D. Fla. Case No. 06-01171). R. Scott Shuker, Esq., at Gronek & Latham, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $15,701,881 and total debts of $21,615,346. ALLEGHENY ENERGY: Subsidiary Issues $145 Mil. First Mortgage Bonds ------------------------------------------------------------------ Allegheny Energy, Inc.'s wholly-owned subsidiary, West Penn Power Company issued $145 million aggregate principal amount of 5.875% First Mortgage Bonds due 2016. The Bonds bear interest at the rate of 5.875% per annum, payable semi-annually on each Feb. 15 and Aug. 15, beginning Feb. 15, 2007, and will mature on Aug. 15, 2016. The Bonds are secured by the First Supplemental Indenture, with Union Bank of California, N.A. as the indenture trustee, which establishes a lien on all of West Penn's fixtures and equipment, real property and tangible personal property located in the Commonwealth of Pennsylvania that it now owns or may own in the future. The Bonds are West Penn's senior secured indebtedness and rank pari passu in right of payment with all securities issued under the Indenture. At any time and from time to time on or after Aug. 16, 2006, the Bonds may be redeemed in whole or in part at a redemption price equal to the greater of: (i) 100% of the principal amount of the Bonds to be redeemed, plus accrued and unpaid interest to the redemption date; or (ii') the sum of the present values of the remaining scheduled payments of principal and interest on the Bonds to be redeemed, exclusive of interest accrued as of the redemption date, discounted to the redemption date on a semi-annual basis at the applicable Adjusted Treasury Rate plus 15 basis points, plus accrued interest to the redemption date. The Bonds have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. Headquartered in Greensburg, Pennsylvania, Allegheny Energy, Inc., (NYSE:AYE) -- http://www.alleghenyenergy.com/-- is an investor- owned utility consisting of two major businesses. Allegheny Energy Supply owns and operates electric generating facilities, and Allegheny Power delivers low-cost, reliable electric service to customers in Pennsylvania, West Virginia, Maryland and Virginia. * * * As reported in the Troubled Company Reporter on June 28, 2006 Fitch upgraded the Issuer Default Rating and senior unsecured debt ratings of Allegheny Energy, Inc., to 'BB+' from 'BB-'. The ratings of Allegheny Energy Supply Company, LLC, and Allegheny Generating Company (AYE's non-regulated subsidiaries) were also upgraded by Fitch. The Rating Outlook for AYE, AE Supply and AGC is Stable. ALLIED PROPERTIES: Section 341(a) Meeting Scheduled on Sept. 14 --------------------------------------------------------------- The U.S. Trustee for Region 7 will convene a meeting of Allied Properties, LLC's creditor at 11:00 a.m., on Sept. 14, 2006, in Suite 3401, 515 Avenue in Houston, Texas. This will be the first meeting of creditors as required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Houston, Texas, Allied Properties, LLC, is a real estate developer. The company filed for chapter 11 protection on August 1, 2006 (Bankr. S.D. Tex. Case No. 06-33754). Leonard H. Simon, Esq., at Pendergaft & Simon, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. ARMSTRONG WORLD: Parent Loses Ownership Under Chapter 11 Plan ------------------------------------------------------------- Armstrong Holdings, Inc., the parent company of Armstrong World Industries, Inc., provided additional information regarding the anticipated effect on Armstrong Holdings of the expected consummation of the Chapter 11 reorganization of AWI. As reported in the Troubled Company Reporter on Aug. 16, 2006, AWI's "Fourth Amended Plan of Reorganization, as Modified" was confirmed by the U.S. District Court and AWI currently expects to emerge from Chapter 11 in the fourth quarter of 2006. Pursuant to AWI's Chapter 11 Plan, Armstrong Holdings' ownership of AWI will end. All current AWI stock will be cancelled and no payment or other distribution will be made to Armstrong Holdings on account of its ownership interest. AWI will distribute to certain of its creditors under the Chapter 11 Plan cash and new common stock of reorganized AWI, and in certain circumstances may also distribute notes of reorganized AWI. These creditors include a trust that will be established to satisfy current and future asbestos personal injury claimants, and allowed unsecured creditors. Although AWI's Chapter 11 Plan has been confirmed, Armstrong Holdings has filed a claim against AWI in an unspecified amount in respect of intercompany accounts and, to the extent such claims are allowed by the Bankruptcy Court, Armstrong Holdings will participate on a pro rata basis in the distributions that are to be made under the Chapter 11 Plan to unsecured creditors. The cash and stock in AWI that Armstrong Holdings may receive as a result of such claims is not expected to have a value in excess of a few million dollars and there is no assurance that any claim will be allowed. Upon AWI's cancellation of Armstrong Holdings' ownership of AWI pursuant to the Chapter 11 Plan, Armstrong Holdings also will have a substantial ordinary income loss. This loss will be in addition to the substantial net operating loss, which AWI will incur in connection with consummation of its Chapter 11 Plan. As a result, the Armstrong consolidated group may be entitled to receive a tax refund based upon a carry back of a portion of the group's tax loss to prior years, in an amount estimated to be approximately $37 million. It is not possible for Armstrong Holdings to estimate at this time the amount, if any, of such tax refund to which it may be entitled. Armstrong Holdings may also be entitled to additional benefits from carrying forward the balance of its tax loss. Following AWI's emergence from Chapter 11, Armstrong Holdings and AWI will cease reporting together as members of a consolidated group for U.S. federal income tax reporting purposes. A final federal income tax return for the companies on a consolidated basis is expected to be filed by September 2007. After considering the result of its intercompany account claims and the tax consequences to Armstrong Holdings of AWI's emergence from Chapter 11, Armstrong Holdings is expected to decide whether or not to dissolve. A full-text copy of the Fourth Amended Plan of Reorganization is available for free at http://ResearchArchives.com/t/s?fb4 About Armstrong World Based in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. The Debtors tapped the Feinberg Group for analysis, evaluation, and treatment of personal injury asbestos claims. Mark Felger, Esq. and David Carickhoff, Esq., at Cozen and O'Connor, and Robert Drain, Esq., Andrew Rosenberg, Esq., and Alexander Rohan, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison, represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Houlihan Lokey for financial and investment advice. The Official Committee of Asbestos Personal Injury Claimant hired Ashby & Geddes as counsel. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. ASARCO LLC: East Helena Equipment Auction Today ----------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi authorized ASARCO LLC to sell the East Helena Facility Equipment, free and clear of liens, claims, encumbrances or interests, subject to an auction to be held today, Aug. 25, 2006. As reported in the Troubled Company Reporter on July 21, 2006, before ASARCO LLC filed for bankruptcy, it entered into a Consent Decree with the Environmental Protection Agency and the Montana Department of Environmental Quality requiring ASARCO to clean up its lead smelter plant in East Helena, Montana. ASARCO owns various pieces of heavy equipment at the East Helena Facility used for its clean-up efforts. A 3-page list of the East Helena Equipment is available for free at http://ResearchArchives.com/t/s?dec ASARCO has determined that it is more cost-effective to hire contractors to perform the clean-up work. As a result, ASARCO no longer has any use for the Equipment. Tony M. Davis, Esq., at Baker Botts L.L.P., in Houston, Texas, said that the Auction will be an unreserved auction. The Property offered will be sold at the highest bidder on the date of the Auction. Headquartered 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: Court Okays Pate Auction to Sell East Helena Equipment ------------------------------------------------------------------ In connection with its intent to sell its East Helena Property, the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi authorized ASARCO LLC to employ Pate Auction, Inc., as auctioneer. As reported Troubled Company Reporter on July 21, 2006, as auctioneer for the East Helena Property, Pate Auction will: (a) advertise the Auction; (b) prepare brochures; (c) make minor repairs and improvements as necessary to maximize the Property's value; and (d) conduct the Auction. ASARCO will pay Pate Auction a 12% commission from the Property's gross sales price. The commission is expected not to exceed $3,500. ASARCO will also pay Pate Auction for any additional advertising costs and repair expenses for the Property. Pate Auction will collect the full proceeds from the Auction. All expenses incurred for the promotion, advertisement and conduct of the Auction will be first paid from the sales proceeds. Within 14 days after the conclusion of the Auction, Pate Auction will deliver to ASARCO the sales proceeds, less Pate Auction's commission and the Approved Expenses, together with an accounting of the successful bids, the monies received, and the expenses incurred. The accounting should also reflect the gross sales proceeds, the amount of the commission, the amount of the approved expenses, and the net sales proceeds being turned over to ASARCO. Doug Dandro, secretary and treasurer of Pate Auction, Inc., assured the Court that his firm does not represent any interest adverse to ASARCO or its estates, and is disinterested as defined in Section 101(14) of the Bankruptcy Code. Headquartered 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 to Pay Willis for Brokerage Services ------------------------------------------------------ ASARCO LLC seeks permission from the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to pay Willis of Arizona, Inc., its fees as the company's insurance broker. ASARCO LLC maintains insurance policies covering all aspects of its business, including workers' compensation, business auto coverage, umbrella liability, directors' and officers' liability, employment practices liability, fiduciary liability, crime, property coverage, cargo program, environmental liability coverage and storage tank liability. ASARCO is currently addressing its options in connection with its insurance needs, James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, tells the Court. Next year, ASARCO will need to make important business decisions in connection with the insurance policies, including: (a) evaluating their renewal, change and replacement; (b) the undertaking of risk, limit and retention analyses; (c) the completion of loss control analysis; and (d) the review of claims management issues, as needed. ASARCO submitted proposal requests to four different brokers to solicit interest for assistance in managing its insurance portfolio of policies. A consensus recommendation was presented to, and approved by, ASARCO's Board of Directors. Willis of Arizona, Inc., was the recommended broker. Accordingly, the Debtors and Willis entered into an engagement letter, which provides for Willis' service and compensation arrangement for the period Aug. 1, 2006, to Aug. 1, 2007. As insurance broker, Willis will: (a) assess the adequacy of ASARCO's coverages under its current policies and advise of modifications based on the company's risk profile; (b) update ASARCO's insurance underwriting data; (c) assist ASARCO in the preparation of insurance underwriting submission for its review and approval before submission to insurance underwriters; (d) develop, before any policy renewal, a negotiation strategy for meetings with insurance underwriters; (e) in the context of selecting specific coverage, prepare a written summary of all quotes and other disclosures affecting the selected coverage and prepare insurance binders, review and transmit policies to ASARCO; (f) assess the financial soundness of the insurers recommended to provide coverage and, on ASARCO's request, provide a factual analysis of the insurers; (g) review all policies and endorsements delivered by insurers or intermediaries for the purpose of confirming their accuracy and conformity to negotiated specifications and ASARCO's instructions, and advise the company of any changes in the policies; (h) meet with ASARCO's representatives to explain coverage and policies and promptly respond to ASARCO's requests for coverage information and analysis of changing market conditions; (i) assist ASARCO in developing procedures for handling loss exposures and reporting subsequent changes in underwriting information to insurance companies; and (j) inform ASARCO of the reporting requirements for claims, if applicable. ASARCO will pay Willis a $175,000 fee and a performance incentive fee up to $20,000. Willis will be also awarded by the Debtors commissions and fees earned on international placements. The Fees are in addition to the net premium paid for the Coverages. The Base Fee will be paid in equal quarterly installments of $43,750, starting August 1, 2006. The Incentive Fee will be paid by August 1, 2007. Any commission earned on the domestic placements will be offset against the Fees and will be disclosed quarterly. The Willis Engagement Letter provides that either party can terminate their agreement on a 60-day notice. If Willis terminates the Engagement Letter before the expiration of the term, it will be deemed to have fully earned and entitled to a pro rata portion of the Base Fee. If ASARCO terminates the Engagement Letter, Willis will be deemed to have fully earned and be entitled to a portion of the Base Fee: -- 50% if terminated during the first six months; and -- 100% of the Base Fee if terminated after six months. Headquartered 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 GULF: Trustee Michael Joseph Distributes $875,866 ---------------------------------------------------------- The Honorable Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware authorized Michael B. Joseph, the Chapter 7 Trustee appointed in Atlantic Gulf Communities Corporation and its debtor-affiliates cases, to make a partial distribution to AGC Anglo Services LLC for $875,866. AGC Anglo serves as collateral agent for the Debtors' term loan lenders. The Trustee is disposing the assets pursuant to the request of the term loan lenders. The lenders hold liens and security interests on substantially all of the Debtor's assets. As consideration for the Trustee's administration of their assets, the lenders have agreed to make available from their collateral certain funds for distribution to other creditors and the payment of chapter 7 administrative expenses. The partial distribution came from: Sale Amount ---- -------- Syndicated Capital Sale of 11 Lots $227,662 Malinosky, sale of 3 parcels 112,313 Moallem, sale of 13 lots 133,446 HT Land Trust, sale of 3 tracts 402,445 -------- TOTAL $875,866 Headquartered in Fort Lauderdale, Florida, Atlantic Gulf Communities Corporation was a developer and operator of luxury residential real estate communities. The Company and its affiliates filed for chapter 11 protection on May 1, 2001 (Bankr. D. Del. Case Nos. 01-01594 through 01-01597). Michael R. Lastowski, Esq., at Duane Morris LLP represents the Debtor. The Bankruptcy Court converted the Debtors' chapter 11 cases to a chapter 7 liquidation proceeding on June 18, 2002. Michael B. Joseph is the chapter 7 Trustee for the Debtors' estates. John D. McLaughlin, Jr., Esq., at Young Conaway Stargatt & Taylor, LLP represents the chapter 11 Trustee. When the Debtors filed for chapter 11 protection, they listed $148,546,000 in assets and $170,251,000 in liabilities. CATALYST PAPER: TSX Defers Acceptance of Shareholder Rights Plan ---------------------------------------------------------------- Catalyst Paper Corporation disclosed that the Toronto Stock Exchange has deferred its consideration of acceptance for filing of the Company's adopted shareholder rights plan. The deferment will be until such time as the TSX is satisfied that the Ontario Securities Commission will not intervene pursuant to National Policy 62-202 of the Canadian Securities Administrators in any take-over bid for Catalyst. A condition of acceptance of notice of the rights plan by the TSX would be that the requisite shareholder approval be obtained. The rights plan remains effective in accordance with its terms. Based in Vancouver, British Columbia, Catalyst Paper (TSX: CTL) -- http://www.catalystpaper.com/-- produces mechanical printing papers in North America. The Company also produces market kraft pulp and owns Western Canada's largest paper recycling facility. With five mills employing 3,800 people at sites within a 160- kilometer radius on the south coast of British Columbia, Catalyst has a combined annual capacity of 2.4 million tons of product. * * * As reported in the Troubled Company Reporter on Aug. 23, 2006 Moody's Investors Service revised the rating outlook for Catalyst Paper Corporation from negative to stable. Moody's also affirmed Catalyst's senior unsecured notes and corporate family rating at B1. CATHOLIC CHURCH: Court Appoints Additional Mediators for Portland ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Oregon appoints these mediators in the Chapter 11 case of the Archdiocese of Portland in Oregon and in all contested matters and adversary proceedings pending in the bankruptcy case: (1) The Honorable Michael R. Hogan of the U.S. District Court for the District of Oregon; and (2) The Honorable Lyle C. Velure, Circuit Court Judge of the State of Oregon for Lane County. Judge Elizabeth L. Perris says her Order does not supersede the order appointing the Honorable Dennis Montali as settlement judge entered on July 15, 2005, in Adversary Proceeding No. 04-3292. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) CATHOLIC CHURCH: Portland Tort Committee Files Opening Brief ------------------------------------------------------------ The Official Committee of Tort Claimants appointed in the Chapter 11 case of the Archdiocese of Portland in Oregon asks the U.S. District Court for the District of Oregon to affirm Judge Perris' ruling that: * certain parcels of real property to which the Archdiocese holds title -- the "Test Properties" -- are part of the Archdiocese's bankruptcy estate and must be included in determining the value of the bankruptcy estate; and * the unincorporated parishes and schools are part of the Archdiocese's corporation and do not have the capacity to sue or be sued, and therefore, denied the parishes' proofs of claim against the bankruptcy estate. The Tort Committee also asks the District Court not to consider the issue on whether or not the Test Properties are held in trust, because the U.S. Bankruptcy Court for the District of Oregon did not decide on it. In ruling on the Test Properties, Robyn E. Ridler, Esq., at Tonkon Torp LLP, in Washington Crossing, Pennsylvania, says the Bankruptcy Court assumed, by prior agreement of the parties, that the Test Properties are held in trust. Hence, the District Court must also assume, as what the Bankruptcy Court did. Working on that assumption, the undisputed facts establish that the Test Properties are held free and clear by the Archdiocese for purposes of determining its bankruptcy estate, Ms. Ridler tells the District Court. Ms. Ridler notes that Section 544(a)(3) of the Bankruptcy Code maximizes the estates of bankrupt debtors by giving the bankruptcy trustee or debtor-in-possession the same priority over other real property interests that a bona fide purchaser would have under state law. In effect, Ms. Ridler explains, Section 544(a)(3) causes a hypothetical sale of all of the debtor's real property to a BFP at the moment the bankruptcy petition is filed, and includes in the bankruptcy estate any interests the BFP would have acquired in that transaction. Oregon is a race-notice jurisdiction so subsequent purchasers who record first take priority over prior interests, Ms. Ridler points out. However, Oregon law requires a subsequent purchaser to be "without notice" to assert the rights of a bona fide purchaser. Notice may be actual or constructive, Ms. Ridler says. The purchaser created by Section 544(a)(3), by definition, lacks actual notice. Therefore, the only question is whether the Section 544(a)(3) purchaser would have had constructive notice of the alleged interests at the moment the bankruptcy petition was filed. In this regard, Ms. Ridler argues that undisputed facts establish that on the Petition Date, a purchaser would not have had constructive notice of any of the parishes and schools' interests in the Test Properties, other than the Archdiocese's. The Parishes and Schools' interests are not recorded, which is currently the only form of constructive notice under Oregon law, Ms. Ridler points out. Moreover, even if common law "inquiry notice" still existed as a form of constructive notice, the Bankruptcy Court correctly concluded that a purchaser would not have had inquiry notice of the Parishes' alleged interests. The Bankruptcy Court's ruling that unincorporated parishes are part of the Archdiocesan corporation without the capacity to sue and be sued are supported by the facts, which show that the parishes may have significant day-to-day autonomy in operations but are ultimately divisions of the Archdiocese, Ms. Ridler asserts. The Archdiocese itself has asserted repeatedly to Oregon courts that its parishes and schools are part of its corporation, not separate legal entities, Ms. Ridler reminds the District Court. As divisions of the corporation, the parishes do not have standing to sue or be sued or to file claims against the corporation. Unhappy with the present consequences of those choices, Ms. Ridler says the Archdiocese, and the Parishes and Schools have: * attempted to invoke the First Amendment and the Religious Freedom Restoration Act as a bar to the Bankruptcy Court's jurisdiction or as a limitation on its ability to apply neutral civil laws; and * sought to avoid the consequences of those choices by arguing that the Bankruptcy Court must interpret and apply the Roman Catholic Church's internal doctrine and rules. Ms. Ridler contends that the Appellants' view of the First Amendment is completely at odds with well established First Amendment principles and Supreme Court jurisprudence. The Bankruptcy Court correctly recognized that the summary judgment motions are not disputes over religious doctrine or ecclesiastical questions. Hence, the Bankruptcy Court was required to apply ordinary principles of civil law, which is precisely what it did. The Bankruptcy Court could not interpret Roman Catholic canon law as part of its analysis, nor could it let the Archdiocese unilaterally decide the extent of its own bankruptcy estate, Ms. Ridler says. The Supreme Court has made abundantly clear that the only laws that civil courts are competent or constitutionally permitted to apply are civil laws. "Interpreting a religious organization's internal doctrine and rules not only goes beyond the 'free exercise' guarantees of the First Amendment, it violates the prohibition against the government 'establishing' religion," Ms. Ridler notes. "Religious organizations, like everyone else, must utilize the civil law to effectuate their intentions and preferences." Even the Appellants' own canon law expert recognizes that necessity, Ms. Ridler adds. Hence, the Bankruptcy Court correctly rejected the Appellants' invocation of the First Amendment. With respect to RFRA, Ms. Ridler contends that the Bankruptcy Court properly ruled that including the Test Properties in the Archdiocese's bankruptcy estate does not substantially burden the exercise of religion so as to implicate RFRA, particularly given the limited number of Test Properties. While some Appellants may be inconvenienced if any of the Test Properties are ultimately sold to pay the Archdiocese's creditors, they will not be compelled to abandon their religious principles, Ms. Ridler asserts. Having to use alternative facilities because the Archdiocese declared bankruptcy is not a "significantly great restriction or onus" upon the exercise of Roman Catholicism, Ms. Ridler adds. Moreover, Ms. Ridler argues that the Bankruptcy Court should have denied the Appellants' RFRA defenses outright because RFRA is inapplicable to the proceeding. RFRA only applies to federal government action, and there is no governmental actor in the Chapter 11 case. A full-text copy of the Tort Committee's 94-page Opening Brief is available for free at http://researcharchives.com/t/s?1053 The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) CERADYNE INC: Requests Nasdaq Listing Qualifications Panel Hearing ------------------------------------------------------------------ Ceradyne, Inc., requested a hearing before the Nasdaq Listing Qualifications Panel in response to its receipt of a Nadaq Staff Determination letter on Aug. 17, 2006, indicating that the Company is not in compliance with the filing requirements for continued listing as set forth in Marketplace Rule 4310(c)(14). The letter was issued in accordance with Nasdaq procedures due to the delayed filing of the Company's Form 10-Q for the quarter ended June 30, 2006. Pending a decision by the Panel, the Company's common stock will remain listed on The Nasdaq Stock Market. The Company disclosed that a special committee of independent directors was formed, on Aug. 4, 2006, to conduct an internal investigation of the Company's historical stock option grants and related accounting treatment. The special committee is being assisted by independent legal counsel and forensic accountants. The special committee's investigation is ongoing and, accordingly, the Company was unable to file its Form 10-Q for the quarter ended June 30, 2006 by the required filing deadline. The Company is focused on resolving the issues as quickly as possible and plans to file its Form 10-Q following completion of the independent investigation by the special committee. Based in Costa Mesa, California, 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. CHARTERMAC: Completes $455 Million Fixed-Rate Bond Securitization ----------------------------------------------------------------- One of CharterMac's subsidiaries completed a $455 million, fixed- rate bond securitization transaction with a weighted average term of 8 years. The transaction was completed through the sale of Class A Medium Term Tax-Exempt Multifamily Housing Trust Certificates, Series 2006A to third-party investors. The purpose of the securitization was to reduce the Company's floating interest rate exposure with the proceeds being used to retire existing bond securitizations that have floating-rates and shorter terms. As a result, more than 70% of the Company's capital structure is fixed-rate, based on amounts outstanding at June 30, 2006, as adjusted to include this transaction, the incremental financing to acquire ARCap and hedges associated with the new debt facility put in place at that time. The Class A Certificates consist of $300 million Series A-1 and $155 million Series A-2 Certificates. The Company contributed 56 fixed-rate, tax-exempt multifamily housing and senior housing revenue bonds totaling approximately $572.5 million in aggregate principal into a trust, out of which was sold $455 million in Class A Certificates to various institutional investors. The Series A-1 and Series A-2 Certificates bear interest at the fixed rate of 4.54% and 4.72% per annum for 7 and 10 years, respectively. A wholly-owned indirect subsidiary of CharterMac retained the subordinated Class B Certificates totaling approximately $117.5 million. Headquartered in New York City, CharterMac (NYSE: CHC) -- http://www.chartermac.com/-- through its subsidiaries, CharterMac is a full-service real estate finance company, with focus on the multifamily industry. CharterMac offers capital solutions to developers and owners of multifamily and commercial real estate throughout the country and quality investment products to institutional and retail investors. * * * As reported in the Troubled Company Reporter on July 18, 2006, Moody's Investors Service assigned a rating of Ba3 to the $500 million CharterMac guaranteed senior credit facility which the company is issuing to acquire ARCap Investors, LLC, a private real estate finance company specializing in high yield CMBS. In addition, Moody's assigned CharterMac a corporate family rating of Ba3. The outlook is stable. The credit facility consists of a three-year $150 million revolver and a six-year $350 million term loan. CHASE MORTGAGE: Fitch Puts Low-B Ratings on Class B-3 & B-4 Certs. ------------------------------------------------------------------ Chase Mortgage Finance Trust's $1.1 billion mortgage pass-through certificates, series 2006-A1, were rated by Fitch Ratings: -- $1.1 billion classes 1-A1 - 1A-4, 1-AX, 2-A1 - A4, 2-AX, 3-A1, 3-A2, 4-A1, 4-A2 and A-R senior certificates 'AAA' -- $16.9 million class M certificates 'AA' -- $8.2 million class B-1 certificates 'A' -- $4.9 million class B-2 certificates 'BBB' -- $3.3 million privately offered class B-3 'BB' -- $2.7 million privately offered class B-4 'B' Fitch does not rate the $2.7 million privately offered class B-5 certificates. The 'AAA' rating on the senior certificates reflects: * the 3.55% subordination provided by the 1.55% class M; * 0.75% class B-1; * 0.45% class B-2; * 0.30% privately offered class B-3; * 0.25% privately offered class B-4; and * 0.25% privately offered class B-5 certificate. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the primary servicing capabilities of JPMorgan Chase Bank, N.A. (rated 'RPS1' by Fitch). The trust consists of 1,588 first-lien residential mortgage loans with stated maturity of not more than 30 years and an aggregate principal balance of $1,087,946,521 as of the cut-off date (Aug. 1, 2006). The mortgage pool has a weighted average original loan- to-value ratio of 69.62% with a weighted average mortgage rate of 6.362%. The weighted-average FICO score of the loans is 745. The average loan balance is $685,105 and the loans are primarily concentrated in California (37.4%), New York (20.7%) and Florida (8.4%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. U.S. Bank, N.A. will serve as trustee. Chase Mortgage Finance Corporation, a special purpose corporation, deposited the loans in the trust which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. COMVERSE TECHNOLOGY: Granted Continued Listing By NASDAQ Panel -------------------------------------------------------------- The NASDAQ Listing Qualifications Panel has granted Comverse Technology, Inc.'s request for continued listing on the NASDAQ National Market. The Panel granted the company's request for continued listing subject to the requirement that the company file its Annual Report on Form 10-K for the fiscal year ended Jan. 31, 2006 and its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2006 by no later than Sept. 25, 2006. The Panel has advised the company that should it be unable to meet the deadline, it will issue a final determination to delist the company's shares from The NASDAQ Stock Market. Headquartered in Woodbury, New York, Comverse Technology, Inc. (NASDAQ: CMVT) -- http://www.comverse.com/-- provides software and systems that enable network-based multimedia enhanced communication and billing services. Over 450 communication and content service providers in more than 120 countries use Comverse products to generate revenues, strengthen customer loyalty and improve operational efficiency. * * * As reported in the Troubled Company Reporter on May 4, 2006, Standard & Poor's Ratings Services held its ratings on Comverse Technology Inc. on CreditWatch with negative implications, where they were placed on March 15, 2006, on the disclosure that the board of directors at Comverse had created a special committee to review matters relating to the company's stock option grants and the likely need to restate prior-period financial results. As reported in the Troubled Company Reporter on March 17, 2006, Standard & Poor's placed its corporate credit and senior unsecured debt ratings on Comverse Technology on CreditWatch with negative implications. The company has S&P's 'BB-' corporate credit and senior unsecured debt ratings. CREATIVE BUILDING: Notices of Appearance Must Be Filed by Sept. 1 ----------------------------------------------------------------- The Ontario Superior Court of Justice approved a claims bar procedure for claims against Creative Building Maintenance Inc., an Ontario corporation, Creative Building Maintenance Inc., a Delaware corporation, and Third Parties. Creditors who want to appear at the claims bar motion must file a notice of appearance and received no later than 5:00 p.m. on Sept. 1, 2006, to Doyle Salewski Inc. DSI is the Monitor and Interim Receiver appointed by the Ontario Superior Court of Justice for CBM Canada and CBM U.S. A copy of the claim bar procedure order can be obtained at: Creative Building Maintenance Inc. c/o Doyle Salewski Inc. 404 Bank Street Ottawa, Ontario K2P 1Y5 Canada Tel: 613-569-4444 Ext. 212 Toll Free: 1-888-489-5555 Fax: 613-569-1116 http://www.doylegroup.ca/ If a creditor fails to deliver a notice of appearance and attend the claims bar motion, the creditor will be deemed to have accepted that his claim against CBM Canada and CBM U.S. will be extinguished and barred. The Third Party Releasees are: -- Michal Cerny, -- Anca Periet aka Perieteanu, -- Phoenix Equity Inc., -- 2072789 Ontario Ltd., -- 1354828 Ontario Limited c.o.b. as ACSYS Group, -- Angela Cerny, -- Phoenix Equity Limited II, -- Antonia Alfonsi, -- Domenico Alfonsi, -- Alexandru Perieteanu (husband of Anca Periet) -- Perieteanu (son of Anca Periet), and -- Paul Hams. The Ontario Court will convene a hearing on the claims bar motion at 10:00 a.m. on Sept. 13, 2006, at 393 University Avenue at Toronto, Ontario. Creative Building Maintenance Inc., an Ontario corporation, and Creative Building Maintenance Inc., a Delaware corporation, have cases (06-CL-006425 and 06-CL-006426) in the Ontario Superior Court of Justice commenced by HSBC Bank Canada, KeyBank National Association, Key Equipment Finance Inc., and RoyNat Inc. DANA CORP: Creditors Committee Selects ARPC as Consultants ---------------------------------------------------------- The Official Committee of Unsecured Creditors in Dana Corporation and its debtor-affiliates' chapter 11 cases asks the Unite States Bankruptcy Court for the Southern District of New York for permission to retain Analysis, Research, and Planning Corporation as its asbestos claims evaluation consultants, nunc pro tunc to July 28, 2006. Since 2001, the Debtors have employed Peterson Asbestos Consulting Enterprise to administer claims, bill insurance carriers and assist them in claims negotiation and resolution related to their asbestos liabilities. There are approximately 77,000 "active" asbestos cases against the Debtors. The Debtors estimate their asbestos liabilities for the next 15 years to be within the range of $70,000,000 to $120,000,000, and that they will have only "de minimis" liability thereafter. Since its appointment, the Creditors Committee has reviewed countless documents regarding the Debtors' asbestos liabilities and has had at least three in-person meetings devoted solely to asbestos and related issues, Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel, LLP, in New York, tells the Court. Also, there is a substantial likelihood that a plan of reorganization in the Debtors' Chapter 11 cases may permit asbestos creditors to "pass-through" the case, Mr. Thomas adds. However, Mr. Thomas relates, before the Committee can make a determination as to how the asbestos liabilities should be treated, it must, among other things: -- test the assumptions and calculations utilized by the Debtors in connection with the estimate of their present and future asbestos liabilities; -- examine the applicable insurance covering the liabilities and claims; and -- examine the costs and benefits of "resolving" the asbestos liabilities as part of the Chapter 11 cases as compared to "passing-through" the liabilities to the reorganized company. To accomplish the task, the Committee has determined that it requires the assistance of an industry expert as asbestos claims evaluation consultants. As the Committee's asbestos claim consultant, ARPC will: (a) determine whether a plan that "passes through" the Debtors' asbestos liabilities is feasible and appropriate; (b) compare a "pass-through" plan to the costs, benefits and feasibility of resolving the present and future asbestos claims as part of the Chapter 11 case; and (c) understand and use the estimates provided by the Debtors and test the assumptions and calculations on which the estimates are based. ARPC will be paid according to its customary hourly rates: Professional Hourly Rates ------------ ------------ Partners and Principals $350 to $550 Managing Directors $275 to $350 Directors $225 to $275 Consultants $185 to $225 ARPC will also be reimbursed for its necessary expenses incurred while providing services to the Committee. B. Thomas Florence, president of ARPC, in Washington, D.C., assures the Court that his firm does not represent any interest adverse to the Debtors and their estates. Mr. Florence maintains that ARPC is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. 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. 19; 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: Equity Committee Selects Fried Frank as Counsel ---------------------------------------------------------- The Official Committee of Equity Security Holders in Dana Corporation and its debtor-affiliates' chapter 11 cases asks the U.S. Bankruptcy Court for the Southern District of New York for permission to employ Fried, Frank, Harris, Shriver & Jacobson, LLP, as its counsel, nunc pro tunc to June 30, 2006. As the Equity Committee's counsel, Fried Frank will: (a) provide legal advice with respect to the Equity Committee's rights, powers and duties in the Chapter 11 cases; (b) assist the Equity Committee in its analysis and negotiation of any plan of reorganization and related corporate documents; (c) assist and advise the Equity Committee with respect to its communications with the general equity body regarding significant matters in the Chapter 11 cases; (d) review, analyze, and advise the Equity Committee with respect to documents filed with the Court and respond on behalf of the Equity Committee to all applications, motions, answers, orders, reports, and other pleadings in connection with the administration of the Debtors' estates in the Chapter 11 cases; and (e) perform any other legal services requested by the Equity Committee in connection with the Chapter 11 Cases and the confirmation and implementation of a plan in the Chapter 11 cases. Fried Frank will be paid based on its customary hourly rates: Professional Hourly Rate ------------ ----------- Partners $650 to $995 Counsel $550 to $850 Special Counsel $595 to $620 Associates $315 to $540 Legal Assistants $170 to $235 These professionals will have primary responsibility of providing services to the Debtors: Professional Hourly Rate ------------ ----------- Brad Eric Scheler, Esq. $995 Gregg Weiner, Esq. $750 Gary Kaplan $650 Brian Pfeiffer $525 Julia Smolyanskiy $470 Joanna Palacios $370 Fried Frank will also be reimbursed for all necessary expenses it will incurr in providing services to the Equity Committee. Brad Eric Scheler, Esq., member of Fried, Frank, Harris, Shriver & Jacobson, LLP, in New York, assures the Court that his firm does not represent any interest adverse to the Equity Committee or the Debtors. Fried Frank is also a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. 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. 19; 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. DAYTON SUPERIOR: Moody's Holds Junk Ratings with Stable Outlook --------------------------------------------------------------- Moody's Investor Service affirmed Dayton Superior's ratings and changed the ratings outlook to stable from negative to reflect the improvement in the company's financial performance over the last two quarters and an improved outlook for the company's businesses. These ratings were affirmed: * Corporate family rating, affirmed at Caa1; * $165 million 10.75% senior secured second priority notes due 2008, affirmed at Caa1; * $155 million 13% sr. subordinated notes due 2009, affirmed at Caa3. The ratings outlook has been changed to stable from negative. The change in outlook for the ratings reflects improved financial performance over the last two quarters. For the six months ended on June 30, the company's net sales increased to $231.5 million from $203.5 million for the same period a year earlier. Operating income increased to $17.4 million for the six months ended in June 30 against $3.9 million for the first six months of fiscal year 2005. The improvement is a result of both stronger sales and a strong ability to pass on raw material prices. The company's product gross profit increased to $46 million for the first half of fiscal 2006 against $40.1 million for the same period in 2005. For the same period, its rental gross profit increased to $11.4 million from $4.3 million thereby proving to be a meaningful contributor to the company's improved operating performance. The company continues to benefit from strength in commercial construction. The ratings and outlook may improve if the company shows consistent improvement over the next couple of quarters. The ratings would particularly benefit if the company proved able to generate positive free cash flow on a consistent basis. The rating and outlook could decline if the company's margins contract, if the company is unable to pass on its raw material pricing, or if anticipated positive free cash flow generation remains elusive. Headquartered in Dayton, Ohio, Dayton Superior Corporation is the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction, and metal accessories used in masonry construction. DELPHI CORP: 7 Trade Creditors Retain Kasowitz as Legal Counsel --------------------------------------------------------------- Certain Delphi Corp. trade creditors have retained Kasowitz, Benson, Torres & Friedman LLP, as legal counsel, to prosecute their interests in Delphi and its debtor-affiliates' Chapter 11 cases. The Trade Creditors are: (1) Argo Partners, Inc. 12 West 37th Street, 9th Floor New York, NY 10018; (2) Avenue Capital Management, LLC 535 Madison Avenue, 15th Floor New York, NY 10022; (3) Contrarian Capital Management, L.L.C. 411 W. Putnam Avenue, Suite 225 Greenwich, CT 06830; (4) Hain Capital Group Meadows Office Complex 301 Route 17, 6th Floor Rutherford, NJ 07070; (5) King Street Capital Management, L.L.C. 65 East 55th Street, 30th Floor New York, NY 10022; and (7) Longacre Fund Management, LLC 810 Seventh Avenue, 22nd Floor New York, NY 10019 King Street Capital Management is the investment manager to King Street Capital, Ltd.; King Street Capital, L.P.; and King Street Institutional, Ltd. The Trade Creditors collectively hold about $100,000,000 of trade claims acquired after the Petition Date. David S. Rosner, Esq., a partner at Kasowitz, Benson, Torres & Friedman LLP, in New York, relates the Trade Creditors approached his firm to discuss the treatment of holders of trade claims during the Debtors' cases, and ultimately, in any proposed plan of reorganization. Kasowitz does not own any claims against or equity interests in the Debtors, Mr. Rosner says in a Verified Statement filed with the Court pursuant to Rule 2019(a) of the Federal Rules of Bankruptcy Procedure. 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. 38; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DELTA AIR: Wants Pilots Retirement Plan Terminated -------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York will convene a hearing on Sept. 1, 2006, to consider Delta Air Lines, Inc., and its debtor-affiliates' request for the voluntary distress termination of the Delta Pilots Retirement Plan Delta Air Lines, Inc., has maintained the Pilot Plan pursuant to its collective bargaining agreement with the Air Line Pilots Association, International, since 1972. The Pilot Plan is a defined benefit plan subject to the funding requirements of the Employee Retirement Income Security Act and the Internal Revenue Code, and is qualified under Section 401(a) of the IRC of 1986, as amended. A defined benefit plan guarantees participants a specified level of income at retirement. Employers contribute to their defined benefit plans, and these payments are invested in income producing assets in a segregated trust fund. Qualified defined benefit plans are partially insured by the Pension Benefit Guaranty Corporation, the federal governmental agency that administers the pension plan termination insurance program established by Title IV of ERISA. When a pension plan covered by Title IV terminates without sufficient assets to pay all of its accrued liabilities, the PBGC typically becomes trustee of the plan and pays plan participants their pension benefits, subject to certain statutory limits. Pilots Plan's Liquidity Shortfall Margaret M. McDaniel, principal in the Atlanta office of Towers Perrin, says that as recently as 2002, the Pilot Plan's assets exceeded its liabilities determined on an ERISA current liability-funding basis. Since that time, the funded status of the Pilot Plan has deteriorated dramatically. In 2004, in the face of Delta's pressing financial troubles, ALPA and Delta agreed to freeze further accrual of benefits for future service under the Pilot Plan. In conjunction with the soft freeze of the Pilot Plan, Delta agreed to establish the Delta Pilots Defined Contribution Plan, a new defined contribution pension plan for pilots covering future pilot service at Delta, under which the Debtor contributed an average of 9% of each pilot's earnings to an account in the individual pilot's name. Pursuant to Letter of Agreement No. 51 to their CBA, Delta and ALPA subsequently agreed to a hard freeze of the Pilot Plan and fixed the defined contribution of the DC Plan at 9% of each pilot's earnings. Before the Petition Date, Delta made all required contributions to the Pilot Plan. Delta has continued to make all required contributions attributable to postpetition labor, which, according to Ms. McDaniel, have been small, totaling only $4,702,861 through July 15, 2006, because of the soft freeze of the Pilot Plan. Delta also continued to make all payments to the DC Plan, which are postpetition obligations. After its bankruptcy filing, Delta ceased making contributions to the Pilot Plan that were allocable to past service liabilities, because these were considered to be prepetition costs. The Pilot Plan contains a "lump sum" feature whereby pilots, when they retire, can take 50% of the present value of their accrued retirement benefits in the form of an immediate, up-front payment. Under ERISA's "anti-cutback" rules, that lump sum option cannot be modified or eliminated, even if all affected parties unanimously consented. Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, relates that since October 2005, the Pilot Plan has been in a "liquidity shortfall", and has therefore been precluded as a matter of law from making lump sum payments. The Pilot Plan emerged from liquidity shortfall by a small margin on July 1, 2006. If it did not, it is virtually certain to emerge by Oct. 1, 2006. Upon that emergence, the lump sum option will again become available to retiring pilots unless Court grants the Debtors' request to terminate the Plan, Mr. Huebner notes. The payment of those lump sums has been suspended by the filing of a Notice of Intent to Terminate on June 19, 2006. However, according to Mr. Huebner, if the Debtors' request is denied and the Pilot Plan is not terminated, the lump sum option will become available. Legal Standard for Distress Termination The Debtors ask the Court to find that they satisfy the financial requirements for a distress termination of the Pilot Plan. Title IV of the ERISA permits a debtor to terminate its defined benefit pension plans if it meets the standard for a voluntary distress termination, which requires that the bankruptcy court, or other appropriate court, determines that, unless the plan is terminated, the debtor will be unable to pay all its debts pursuant to a plan of reorganization and will be unable to continue in business outside the Chapter 11 reorganization process, and approves the termination. According to David Watson, director of Pilot Resources and Scheduling of the Flight Operations division of Delta, if the Pilot Plan is not terminated and the lump sum option again becomes available, Delta will face an operational crisis that could challenge Delta's survival, and in any event Delta will remain unable to emerge from Chapter 11 due to billions of dollars in additional financing needs that will not be obtainable. Similarly, the enormous obligations to the Pilot Plan would prevent Delta, if it survived in the short term, from being able to submit a feasible plan of reorganization that would satisfy the standards of Section 1129 of the Bankruptcy Code, says Timothy R. Coleman, senior managing director of The Blackstone Group L.P. Delta Will Face Operational and Financial Crisis Absent Pilot Plan Termination "If the Pilot Plan is not terminated and the lump sum door reopens, Delta will immediately face a huge wave of pilot early retirements by its most senior pilots", Ms. McDaniel states. Ms. McDaniel explains that when the lump sum door opens, pilots eligible for early retirement will understandably view this as their only remaining chance to obtain a lump sum payment, which for many pilots exceeds $500,000, and for some exceeds $1,000,000. The value of these up-front payments for pilots over 50 years old, relative to the value of continuing to work at Delta until the mandatory retirement age of 60, is even greater than it had been in the past because of the pay cuts under Letter of Agreements No. 46 and 51 -- 32.5% followed by 14% cuts to hourly wages -- not to mention other substantial concessions that have had an economic and emotional impact on pilots. According to Ms. McDaniel, approximately 1,820 Delta pilots will be eligible to retire early on October 1, 2006. In addition, there are 126 pilots, mostly on disability, who are above age 60 and retirement eligible. Of these 1,946 pilots, 857 would be entitled to lump sum payments of $500,000 or more, and another 712 would be entitled to lump sum payments of between $250,000 and $500,000. Delta believes that a reasonable estimate is that 800 to 1,000 pilots would immediately retire early if the lump sum door opens. In addition, the 126 other retirement eligible pilots over age 60 would also retire to secure their lump sums. Mr. Watson contends that the simultaneous early retirement of hundreds of senior pilots would have an immediate and devastating impact on Delta's operations because it will result in the cancellation of thousands of flights, and the grounding of a significant percentage of Delta's entire fleet for a substantial period. The retirements would immediately cause a 29% to 41% reduction in Delta's overall mainline capacity, and would immediately slash Delta's international capacity almost in half, by an estimated 43% to 50%, he explains. The lost operating cash flow that would be associated with the partial shutdown of its operations is estimated to be approximately between $1,300,000,000 and $2,100,000,000, Edward E. Bastian, Delta's executive vice president & chief financial officer, says. Moreover, according to Mr. Coleman, the enormous liquidity drain would cause Delta to breach the financial covenants in its DIP loans in short order, which would likely cause the DIP lenders to exercise their rights and remedies under the loans, including their rights with respect to their collateral, and potentially lead Delta on a quick path toward liquidation. To emerge from bankruptcy, Delta will require approximately $2,000,000,000 to repay the then outstanding amount on its DIP loans. Debtors Can't Emerge Even If They Survive Short Term Crisis Even if Delta somehow weathered the immediate crisis, it could not obtain the exit financing needed to emerge from Chapter 11 without termination of the Pilot Plan, Mr. Coleman avers. According to Mr. Coleman, as a result of the financial and operational crisis, Delta would suffer an enormous liquidity drain of an estimated $1,300,000,000 to $2,100,000,000, which would need to be replenished for Delta to have the liquidity necessary to run its business and provide a minimum cash cushion to protect against future shocks and the seasonality that exists within the airline industry. Ms. McDaniel adds that Delta will be required to contribute approximately $1,400,000,000 to $1,700,000,000 to the Pilot Plan from the day it exits Chapter 11 to 12 months after, if: -- the Pilot Plan is not terminated; -- assuming U.S. President George W. Bush signed the proposed pension legislation; and -- an estimated 800 to 1,000 pilots retire early, in addition to the 126 other eligible pilots most of which would be due immediately upon exit. To repay the DIP loans, maintain minimum liquidity, and satisfy its financial obligations to the Pilot Plan and otherwise in the first 12 months following its emergence from bankruptcy, Delta would require between $5,200,000,000 and $6,600,000,000 of exit financing, Mr. Coleman states. If a slightly higher number of 1,200 pilots retired, the amount of exit financing required would be $7,700,000,000. Delta has virtually no unencumbered collateral against which to secure an additional $3,000,000,000 to $4,400,000,000 in financing above the level of its DIP financing, Mr. Coleman notes. "It is inconceivable that the exit lenders would provide billions of dollars of incremental financing on the same collateral pool." Mr. Coleman asserts that, even if the financial impact of the wave of early retirements was lower than anticipated, so that an amount less than $5,200,000,000 in exit financing were needed, lenders would be unwilling to provide billions of dollars in incremental exit financing, especially where well over a billion will not be invested in the Debtors to improve Delta's ongoing prospects, but will immediately leave the Debtors already dramatically weakened by the operational crisis in the form of pension funding. According to Mr. Bastian, additional factors would make the risk to exit lenders even worse: (i) dramatic industry-wide changes in recent years have substantially increased competition and decreased profits in the airline industry; (ii) the problem of early retirements and significant operational disruptions would not disappear after the initial wave of early retirements; (iii) absent termination of the Pilot Plan, no Delta plan of reorganization could meet the feasibility standard of Section 1129 of the Bankruptcy Code; and (iv) Delta would not be able to secure the $3,000,000,000 to $4,400,000,000 in additional financing, above and beyond the amount of its then outstanding DIP financing, by making additional cost cuts or seeking additional revenue improvements. Moreover, if the Pilot Plan is not timely terminated, the much larger Delta Requirement Plan, which covers over 90,000 non-pilot Delta employees and retirees, would need to be terminated as well, Mr. Huebner asserts. Beneficiaries Do Not Oppose Termination Mr. Huebner informs the Court that the representatives of the majority of beneficiaries of the Pilot Plan do not oppose its termination: -- ALPA, which represents over 6,800 Delta pilots, has acknowledged that termination of the Pilot Plan is necessary if Delta is to emerge from Chapter 11; -- DP3, Inc., representing 2,700 retired Delta pilots, has indicated that it will not oppose the Pilot Plan termination; and -- the Official Committee of Unsecured Creditors supports termination of the Pilot Plan, although it expressly reserves all of its rights with respect to any claims that may arise as the result of termination. About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. (Delta Air Lines Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DELTA AIR: Panel Supports Termination of Pilots' Retirement Plan ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Delta Air Lines, Inc., and its debtor-affiliates, believes that if the Delta Pilots Retirement Plan is not terminated and the lump sum option again becomes available, hundreds of senior pilots will immediately retire. The Committee finds the Debtors' estimate -- 800 to 1,000 pilots may retire -- very plausible, based upon the Debtors' experiences in 2004 and 2005. Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, explains that if the Pilot Plan is not terminated, Delta Air Lines, Inc., will suffer a severe disruption to its business, resulting to a significant financial loss. In addition, according to Ms. Beckerman, even if Delta could survive the damage caused by the large number of early retirements by senior Delta pilots, it would be unable to successfully emerge from Chapter 11 without termination of the Pilot Plan. Ms. Beckerman says that it is not realistic to believe that an equity sponsor would be willing to invest funds in the Debtors if the Debtors were: (i) weakened by the financial effects of the early pilot retirements; and (ii) facing large future pension payments and future waves of additional pilot retirements. Without sufficient exit financing, the Debtors will be unable to propose a feasible plan to emerge from Chapter 11 and successfully reorganize, Ms. Beckerman asserts. Thus, the Creditors Committee maintains that the termination of the Pilot Plan is critical for both the Debtors' short-term viability and their prospects for a successful reorganization. Objections to Plan Termination Several retired pilots and parties-in-interest delivered to the Court their objections to the termination of the Pilot Plan: -- the Pension Benefit Guaranty Corporation; -- Christopher N. Waggener; -- Roger Lee Edson; -- Delta Pilots Pension Termination Opposition, a recently organized group of retired Delta pilots; -- DP3, Inc., doing business as Delta Pilots' Pension Preservation Organization, and retired pilots James H. Gray, Reuben Black, Richard Colby, Don Mairose, Ron Stowe, William Wirth, John Mills, and Roger Ross; and -- Robert D. Berger; the Estate of Mac Braun, by Ann Braun Goldfein, Personal Representative; William G. MacAulay; and Samuel O. Gamble, on behalf of themselves and a certified class of participants; and -- William C. Buergey DP3 and Mr. Gray, et al., ask the Court to adjourn the hearing on the determination of the Debtors' financial distress, on the basis that this determination may be premature, given that the law which created the very problem of which the Debtors complain is in flux. The delay of the hearing on the Debtors' request will allow for a full examination of the recently passed Pension Protection Act of 2006 and the exploration of a legislative solution to the problems caused by an accelerated benefits option or the lump sum option, Shelley D. Rucker, Esq., at Miller & Martin PLLC, in Atlanta, Georgia, contends. In the alternative, DP3 and Mr. Gray, et al., ask the Court to direct the Debtors to prove that the Pilot Plan must still be terminated even if the Lump Sum Option can be removed. Jeffrey B. Cohen, Esq., chief counsel of the PBGC, in Washington, D.C., argues that the Debtors must prove to the Court that: (a) if the lump sum option opens, 800 to 1,000 Delta pilots will in fact immediately retire and elect to receive a lump sum; (b) no other options exist to prevent their argument that they will face an "imminent operational and financial crisis that will threaten Delta's near term survival" if those 800 to 1,000 Delta pilots will in fact immediately retire; (c) they have exhausted all realistic measures to retain the Pilots Plan; and (d) they cannot rehire retired pilots on an interim basis, as it has done before, or even if it could, that measure would not avoid an operational and financial crisis. In determining whether the Debtors could not secure the exit financing necessary to emerge from bankruptcy absent the termination of the Pilot Plan, Mr. Cohen proposes that the Court must not only analyze the Debtors' proposed business plan but should also look at all available financial information to assess whether any business plan could be implemented that would allow Delta to retain the Pilot Plan and emerge from bankruptcy. Only if the Court is satisfied, after reviewing all available financial and operational information, that the Debtors will not be able to pay their debts when due and will not be able to continue business, should it make the factual determination required by the Employment Retirement Income Security Act of 1974, as amended, and grant the Debtors' request, Mr. Cohen contends. Representing DPPTO, Daniel A. Lowenthal, Esq., at Thelen Reid & Priest LLP, in New York, asserts that Delta both failed to exhaust all avenues available to restrict lump sums and provide any substantiation for its assumption that 800 to 1200 pilots will retire on Oct. 1, 2006. According to Mr. Lowenthal, Delta conducted no analysis based on fewer than 800 early retirements of its ability to continue operations or its funding needs for the Plan. Delta's failure to demonstrate that no reasonable scenario exists equates to a failure to meet its burden of demonstrating the necessity of the requested plan termination, Mr. Lowenthal contends. Mr. Lowenthal notes that Delta offers no explanation for its assumed retirement rate other than several unproven assumptions, which include: -- the 45% rate of retirements in the year preceding Delta's bankruptcy filing; -- the unsupported assertion that there is a pent up demand for lump sums; -- the unsupported assertion that the expected decrease in the calculation of lump sums slated for 2008 will encourage retirements now; -- the assertion that with recent pay cuts, the lump sum is more valuable; and -- the seemingly irrelevant assertion that Air Line Pilots Association, International, favors the termination of the Pilot Plan. Mr. Lowenthal maintains that the circumstances have changed in a number of ways since the 12-month period preceding Delta's bankruptcy. The reopening of the lump sum door will not result in the number of early retirements that Delta assumes because: a. the lump sum a pilot would have received in September 2005, would have been larger than what he would receive in October 2006, due to changes in the GATT rate, which forms the basis for the calculation of lump sums; b. the Money Purchase Pension Plan, which provided a supplementary lump sum upon retirement, was terminated effective June 30, 2006, and the subsequent automatic distribution of the lump sums to all pilot participants, the incentive to retire to get the additional lump sum disappeared; c. an individual contemplating early retirement in 2005 relied on the presence of a nonqualified benefit, which Delta has ceased paying since the Petition Date. d. in planning for retirement in 2005, a potential retiree could rely on health insurance coverage through Delta until reaching age 65 at a cost of 22% to 28% of the premium. Based on changes in Letter of Agreement No. 51 dated April 14, 2006, between Delta and ALPA, the retiree contribution has grown to 51%; and e. pilots have additional financial incentives to remain employed, including a very generous defined contribution plan, more profit sharing and increased seniority due to the 2004-2005 retirements. Mr. Lowenthal further argues that: (i) Delta's quantitative analysis does not support its predicted number of early retirees; (ii) Delta can take steps to avoid an operational crisis; (iii) Delta fails to acknowledge the true financial picture; and (iv) Delta fails to consider alternatives to maintain the funding of the Plan. Mr. Berger, et al., and the Objecting Class, ask the Court to: * ensure that the Qualified Settlement Fund within the Retirement Plan Trust is fully protected; and * direct the Debtors to comply with the Settlement Agreement dated May 19, 2005, and related court orders that control the appropriate disposition of the assets in the Qualified Settlement Fund. "[The] Debtors should not be allowed to use a distress termination of the Pilot Plan to wash their hands of obligations that they knowingly, willingly, and voluntarily undertook in entering into the class action Settlement Agreement that forms the basis for the Qualified Settlement Fund," Mr. Berger, et al., and the Objecting Class's counsel, Diogenes P. Kekatos, Esq., at Seeger Weiss LLP, in New York, says. Mr. Waggener, a retired pilot at Delta, relates that the Delta management used "coercive tactics" to force him and other pilots into early retirement. The retired pilots detrimentally relied on Delta's assurances as to guaranteed retirement benefits. "Delta has discriminated against its former pilots by singling them out regarding the diminution of retirement benefits," Mr. Waggener adds. Mr. Waggener notes that Delta has recently announced that it is now in a financial position to once again offer lump sum retirement packages to retiring pilots but is simultaneously representing that it cannot meet its obligations with respect to its contractual annuities payments. Mr. Waggener argues that Delta management has voluntarily chosen to incur expenses other than the pension benefits to which he is "lawfully and morally" entitled. Among Delta's expenses that he points out are: -- the new uniforms created by a professional design team; -- the renovation and refurbishment of terminals in at least two airports; -- the fee and reduced fare trips for vacationers stranded overseas; and -- corporate sponsorships. About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. (Delta Air Lines Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DOMTAR INC: Weyerhaeuser Merger Prompts DBRS to Review Ratings -------------------------------------------------------------- Dominion Bond Rating Service placed the ratings of Domtar Inc. Under Review with Developing Implications following the announcement that the Company will be combined with Weyerhaeuser Company's fine paper and related assets to form a new U.S. company that will continue to be called Domtar. The Unsecured Notes and Debentures are rated at BB (low) and the Preferred Shares at Pfd-5 (high). The rating status reflects the uncertainty regarding Domtar's capital structure following closing of the transaction, which is expected in Q1 2007. Under the terms of the transaction, WY will contribute its fine papers business and related assets, which include ten primary pulp and paper mills facilities and two sawmills, along with $1.35 billion of new debt, to the new Domtar. WY will receive $1.35 billion in cash for the fine paper and related assets from the new Domtar. In addition, WY's shareholders, after a share spinoff or split-off by WY, will end up with a 55% equity interest in the new company, while former Domtar shareholders will hold 45%. On a pro forma basis, the transaction appears modestly positive to Domtar's credit metrics, but additional information is required. The new Domtar is expected to have roughly $3.2 billion in debt. However, the debt structure has not been finalized, and could include the new Domtar secured credit facility or a combination of a secured credit facility and new unsecured debt. In addition, debt-to-capital of the new company cannot be determined, as accounting equity is yet to be established. Debt-to-EBITDA and coverage ratios modestly improve, based on annualized Q2 2006 EBITDA of the combined businesses. DBRS notes that the positive implications of the creation of new Domtar include the significant increase in scale of its uncoated free sheet operations, the addition of lower-cost assets, and expected synergies of $200 million per year in two years. However, despite recent UFS pricing strength, demand remains generally soft and margins are expected to remain under pressure. DBRS will continue to monitor developments with respect to the transaction and make a rating determination prior to its closing. FALCONBRIDGE LTD: Fails to Register Sale to Dominican Tax Dept. --------------------------------------------------------------- Falconbridge Limited has not registered its sale to Xstrata plc with the Dominican Republic's Tax Department, the DR1 Newsletter reports. DR1 relates that the Tax Department asked Falconbridge Limited on July 19, 2006, to register the sale. Falconbridge Limited sold most of its outstanding stock to Xstrata for $20 billion, through the Toronto Exchange, DR1 notes. The sale includes 85% of Falconbridge Dominicana. The Tax Department may fine Falconbridge for not registering the sale, DR1 states. About Xstrata Xstrata plc -- http://www.xstrata.com/-- is a major global diversified mining group, listed on the London and Swiss stock exchanges. The Group is and has approximately 24,000 employees worldwide, including contractors. Xstrata does business in six major international commodities markets: copper, coking coal, thermal coal, ferrochrome, vanadium and zinc, with additional exposures to gold, lead and silver. The Group's operations and projects span four continents and nine countries: Australia, South Africa, Spain, Germany, Argentina, Peru, Colombia, the United Kingdom and Canada. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited (TSX:FAL) (NYSE:FAL) -- http://www.falconbridge.com/-- is a copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. Falconbridge has sales offices in Beijing, China, and Tokyo, Japan, as well as a recycling plant in Penang, Malaysia. * * * Falconbridge's CDNUS$150 million 5% convertible and callable bonds due April 30, 2007, carries Standard & Poor's BB+ rating. FEDERAL-MOGUL: Abex Claimants' Move for Futures Rep. Draws Fire --------------------------------------------------------------- Several parties-in-interest objected to the request by individual personal injury claimants that assert claims for exposure to asbestos-containing products produced by Pneumo Abex LLC to appoint a separate Future Claimants' Representative in the chapter 11 cases of Federal-Mogul Corporation and its debtor-affiliates. Futures Rep. Say Another Rep. Is Unwarranted "Appointing an additional future claimants' representative for the Future Abex Claimants is unwarranted and unnecessary," Eric D. Green, the Court-appointed legal representative for future claimants in the Debtors' Chapter 11 cases, contends. Counsel for the FCR, Edwin L. Patton, Jr., at Young Conaway Stargatt & Taylor LLP, asserts that the FCR has faithfully represented the Future Abex Claimants interests. The FCR will continue to do so throughout the Debtors' cases, he assures the Court. The application for Section 524(g) of the Bankruptcy Code does not require the appointment of an additional futures representative, even in instances where Section 524(g) channeling injunction is proposed to be expected to third parties, Mr. Patton argues. The FCR believes that the Current Abex Claimants' ultimate objective in its request is not to protect the interests of Future Abex Claimants with regards to a Section 524(g) trust, but rather to prevent Pneumo Abex LLC's claims from being channeled to a Section 524(g) trust in the first place. The FCR, however, asserts that the Current Abex Claimants' ability to reach their objective is not contingent on the appointment of another futures representative. They can vote against the Debtors' Plan of Reorganization, object to its confirmation, and challenge the proposal for channeling Pneumo Abex Claims to the Pneumo Abex Subfund meets the substantive requirement of Section 524(g), Mr. Patton suggests. Pneumo Abex supports the FCR's contentions and asks the Court to deny the Current Abex Claimants' request. Mt. McKinley Wary About Factual Rulings Mt. McKinley Insurance Company takes no position regarding the Appointment Request. However, because some pending litigations can affect insurance coverage for Pneumo Abex Claims and the impact of certain transactions related to Pneumo Abex, Mt. McKinley asks the Court to refrain from making any factual legal determinations, rulings or findings concerning: -- the scope of coverage for Pneumo Abex asbestos claims; -- the impact any purported transfer or assignment of insurance coverage or insurance proceeds has on any party; and -- the impact the corporate transactions have on insurance coverage for Pneumo Abex asbestos liabilities. "In determining whether to appoint an additional FCR, the Court does not need to make any factual or legal findings regarding the impact the corporate transactions have on insurance coverage," Sean J. Bellew, Esq., at Cozen O'Connor, in Wilmington, Delaware, says. "Moreover, any such findings made in connection with the Abex Claimants' Motion may unfairly and unnecessarily prejudice the rights of Mt. McKinley and other insurers in the pending insurance coverage actions." Ace Property & Casualty Insurance Company and certain other insurers, including Central National Insurance Company of Omaha; OneBeacon America Insurance Company; TIG Insurance Company; and Allianz Global Risks U.S. Insurance Company, also ask the Court to refrain from making any factual or legal findings regarding any purported transfer of insurance coverage to Pneumo Abex, Wagner, Cooper, PepsiAmericas, or Federal-Mogul or the existence or nonexistence, or scope, of insurance coverage available for the Abex-related asbestos personal injury claims. "Any factual or legal finding could unfairly and unnecessarily prejudice the ability of [the] Insurance Companies and others to litigate those cases," Brian L. Kasprzak, Esq., at Marks O'Neill O'Brien & Courtney P.C., in Wilmington, Delaware, explains on the ACE parties' behalf. Debtors Says Abex Claimants Have No Standing The Debtors ask the Court to deny the Appointment Request. The Current Abex Claimants are not "Future Abex Claimants" and are thus without standing to raise the legal rights of the third parties, Scotta E. McFarland, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub LLP, in Wilmington, Delaware, argues. Furthermore, Ms. McFarland continues, the Current Abex Claimants fail to meet the exception set forth by the U.S. Court of Appeals for the Third Circuit in Storino v. Borough of Point Pleasant Beach, 322 F.3d 293 (3d Cir. 2003). In Storino, the Third Circuit recognized a limited right of litigants to bring actions on behalf of third parties when three criteria are met: 1. The litigant has suffered an injury in fact giving him a sufficiently concrete interest in the outcome of the issue; 2. The litigant has a close relation to the third party; and 3. There exists some hindrance to the third party's ability to protect his own interests. The Debtors also contend that the Appointment Request is wholly unsupported by the Bankruptcy Code, is lacking any legal or factual basis, and would result in an unnecessary drain of a potentially large amount of estate resources. The Official Committee Of Asbestos Claimants and Cooper Industries, LLC, agree with the Debtors' and the FCR's arguments. 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: Underwriters Want to Conduct Discovery on Travelers ------------------------------------------------------------------ Since at least November 2004, the Plan Proponents -- Federal-Mogul Corporation and its debtor-affiliates, the Official Committee of Asbestos Claimants and the Legal Representative for Future Asbestos Claimants -- and the Debtors' various insurers, Certain Underwriters at Lloyd's, London and Certain London Market Companies have been negotiating insurance neutrality language to limit the areas of dispute between and among the insurers and the Plan Proponents, Christopher M. Winter, Esq., at Duane Morris LLP, in Wilmington, Delaware, relates. According to Mr. Winter, substantial progress has been made with respect to policies of insurance that may be implicated in asbestos personal injury claims asserted against Debtor Federal- Mogul Products, Inc. However, the London Underwriters and the Plan Proponents have reached an impasse with respect to two other lines of insurance coverage -- the Fel-Pro Line of Coverage and the Vellumoid Line of Coverage -- that would be affected by confirmation of the Plan. The London Underwriters want to continue negotiating the neutrality language for the Fel-Pro and Vellumoid Lines of Coverage. However, their lack of any data on the Fel-Pro and Vellumoid Claims make the negotiations exceeding difficult. Among others, Mr. Winter notes that the Disclosure Statement describing the Debtors' Third Amended Plan of Reorganization states only that, as of the Petition Date, 33,625 asbestos personal injury claims had been asserted against Fel-Pro, and 61,528 asbestos personal injury claims had been asserted against Vellumoid. Nothing more is known about them. Moreover, the Ballot Summary filed in connection with voting on the Third Amended Plan of Reorganization re-sent to the Court on July 14, 2006, shows that there were 87,184 claims outstanding against Fel-Pro and 149,948 claims outstanding against Federal- Mogul, presumably due to the activities of its Vellumoid division. Pursuant to the proposed Trust Distribution Procedures to be adopted at confirmation, Fel-Pro and Vellumoid Claims are to be tendered directly to the insurers for defense or settlement, and are not subject to the TDP claims handling procedures and payment schedules established for the FMP Claims. The London Underwriters, however, as excess insurers, have no duty to defend claims, or to pay defense costs with respect to claims that are not covered under their policies. The London Underwriters need to know: -- the nature and extent of the Fel-Pro and Vellumoid Claims; and -- the extent to which the primary insurers on the Fel-Pro and Vellumoid Lines of Coverage have defended and paid the claims and eroded their policy limits. Pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, the London Underwriters seek Judge Fitzgerald's permission to examine and obtain documents from The Travelers Indemnity Company, Travelers Casualty and Surety Company, and certain affiliates, with respect to the Fel-Pro Claims and the Vellumoid Claims. Travelers is a primary insurer of Debtors Felt Products Manufacturing Company and Federal-Mogul Corporation. Without the discovery, the London Underwriters cannot evaluate how the Trust Distribution Procedures would change the London Underwriters' risk or negotiate insurance neutrality language with respect to the Fel-Pro and Vellumoid Lines of Coverage, Mr. Winter maintains. 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) FLYI INC: Wants Court Approval on Committee Investigation Protocol ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of FLYi, Inc., and debtor-affiliates has sought a full investigation of potential claims of the Debtors against the Debtors' current and former officers, directors, employees, agents and professionals, as well as certain other third parties, regarding the bankruptcy cases, Margaret Whiteman, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, informs the U.S. Bankruptcy Court for the District of Delaware. The Debtors relate that they were not aware of the Committee's actions. The Debtors were not aware of any insider dealings with respect to their prepetition activities, and neither the Debtors nor their officers were subject to any securities or breach of fiduciary duties lawsuits, Ms. Whiteman avers. According to Ms. Whiteman, the Committee has indicated that there are allegations that, for instance, the Debtors and their officers may not have exercised due care in making key decisions that led up to their Chapter 11 filing. The Debtors disagree with the Committee's allegations. However, the Debtors understand that the Committee has the right and a fiduciary obligation to conduct an investigation of any Potential Claims. "What the Debtors have requested, however, is that the Committee conduct any investigation with promptness," Ms. Whiteman says. The Debtors wish to clear their officers and employees of any alleged wrongdoing and believe it is appropriate to give these parties some certainty sooner, rather than later, Ms. Whiteman states. As part of the Plan discussions, the Debtors and the Committee have reached a settlement as to how the investigation and all other issues will be handled. The salient terms of the Investigation Protocol are: (a) The investigation of Causes of Action will be commenced promptly and the Debtors' Joint Plan of Liquidation will provide that Causes of Action must be filed by no later than Feb. 28, 2007 or they will be released under the Plan. The Committee or a liquidating trust may seek extension of the bar date for filing Causes of Action. However, the Causes of Action Bar D could not be extended beyond May 31, 2007; (b) If any Causes of Action are filed, they will be limited to: (1) those Causes of Action which the investigation recommends be brought; and (2) any other Causes of Action that: -- after the filing of a Cause of Action are identified for the first time in discovery; and -- could not reasonably have been discovered and asserted during the investigation. Otherwise, the Plan will provide that the Debtors and their officers will be released and no third party will be entitled to seek to assert any Causes of Action on behalf of the Debtors' estates; (c) The Plan will provide the standard Delaware "Bruno's" exculpation for postpetition acts of the Debtors, their officers and the Committee members in the form described in the Plan, which excludes exculpation for gross negligence or willful misconduct; (d) The Debtors will reimburse reasonable attorneys' fees and expenses, up to $500,000, of: (1) the Debtors' current and former officers, directors, and employees incurred in connection with the investigation contemplated by the Protocol; (2) the Debtors' current directors already incurred during the Chapter 11 cases leading up to the Committee's investigatory process; and (3) current or former professionals of the Debtors to whom the Debtors and the Committee or liquidating trustee agree; (e) The parties will discuss among themselves and with the Office of the U.S. Trustee the continuing need for the existing members of the Debtors' board of directors after Nov. 1, 2006. The Committee will support the extension, renewal, or replacement of the D&O policies, and payment of the required premiums, as is necessary through the Effective Date of the Plan; and (f) Anthony Schnelling of Bridge Associates will be the liquidating trustee. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court's permission to implement the Investigation Protocol. Ms. Whiteman argues that the Protocol should be approved for four reasons: 1. It will provide a clear path for the Debtors and the Committee to complete certain key remaining aspects of the Debtors' bankruptcy cases; 2. It is necessary to the administration of the Debtors' cases; 3. It represents a settlement of certain key disputes between the Debtors and the Committee; and 4. It involves the use of property of the Debtors' estates. The Debtors have consented to the Committee's standing to bring and prosecute any of the Causes of Action through the Effective Date, Mr. Whiteman emphasizes. About FLYi Inc. Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. Brett H. Miller, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represents the Official Committee of Unsecured Creditors. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. (FLYi Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). FLYI INC: Wants Solicitation and Tabulation Procedures Set ---------------------------------------------------------- FLYi, Inc., and debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to establish uniform procedures for the solicitation and tabulation of votes to accept or reject the Joint Plan of Liquidation filed by FLYi, Inc., and its debtor affiliates on Aug. 15, 2006. The hearing to approve the Disclosure Statement is scheduled for Oct. 3, 2006. Accordingly, the Debtors propose to mail a Disclosure Statement Notice to: * all persons or entities that have filed proofs of claim on or before the Record Date; * all persons or entities listed in the Schedules of Assets and Liabilities as holding liquidated, non-contingent and undisputed claims as of the Record Date; * all other known holders of claims or potential claims against the Debtors; * the indenture trustee of the Convertible Notes as of the Record Date and each holder of record of the Convertible Notes as the Record Date; * the indenture trustees, loan trustees, collateral trustees and owner trustees with respect to the aircraft owned or leased by the Debtors as of the Petition Date; * all holders of record of the common stock of FLYi; and * all other parties-in-interest that have filed requests for notice pursuant to Rule 2002 of the Federal Rules of Bankruptcy Procedure in the Debtors' Chapter 11 cases. The Disclosure Statement Notice identifies the date, time and place of hearing to consider the approval of the Disclosure Statement and the deadline and procedures for asserting objections to the approval of the Disclosure Statement. Solicitation Package After the Court approves the Disclosure Statement, the Debtors propose to mail Solicitation Packages containing copies of: a. the Confirmation Hearing Notice; b. the Disclosure Statement and the Disclosure Statement Order, together with the Plan and other exhibits; c. one or more letters recommending acceptance of the Plan; d. for Solicitation Packages sent to holders of claims in classes entitled to vote to accept or reject the Plan, an appropriate form of Ballot and a Ballot return envelope; e. for Solicitation Packages sent to former customers with credit balance on the Debtors' books and records, the Notice to Holders of Customer Flight Credit regarding Availability of Priority Treatment and related certification. The Solicitation Packages will be mailed, not less than 35 days prior to the Voting Deadline, to the Securities and Exchange Commission, the U.S. Trustee and the same parties who were sent a Disclosure Statement Notice. With respect to (a) holders of claims and interests who are not entitled to vote to accept or reject the Plan other than holders of Class 7 Intercompany Claims and (b) parties to executory contracts or unexpired leases to be rejected pursuant to the Plan: (i) the Confirmation Hearing Notice and the applicable Ballot or Non-Voting Status sent to those entities will be a paper copy; and (ii) any other materials in the Solicitation Packages sent to those holders of claims and interests will be sent on CD-ROM. For Credit Balance Customers for which the Debtors have a known mailing address, the Solicitation Package will include only the Confirmation Hearing Notice, applicable Ballot and the Customer Certification. For Credit Balance Customers for which the Debtors do not have a known mailing address but do have an e-mail address, the Confirmation Hearing Notice and the Customer Certification will be sent to those entities solely through e-mail. The e-mail will contain a Internet link to any other materials to be included in the Solicitation Packages for those Credit Balance Customers. In lieu of the Solicitation Packages, entities who are listed in the Schedules in the amount of $0, or who are scheduled as contingent, unliquidated, or disputed and who did not file a proof of claim will only receive the Confirmation Hearing Notice. All Plan documents, including the Disclosure Statement and forms of the Ballots will be available by paper copy upon written request to the Debtors' Voting Agent and via the Internet on the Web site of the Debtors' Voting Agent at http://www.kccllc.net/ia Ballot Forms The Debtors will distribute to creditors entitled to vote on the Plan ballots based on Official Form No. 14, but have been modified to address the particular terms of the Plan. Solicitation Packages for holders of claim against any Debtor in a class under the Plan that is deemed to accept or reject the Plan under Section 1126f) or 1126(g) of the Bankruptcy Code will not include a Ballot but will include the appropriate notice with respect to holders of claims and interests who are not entitled to vote to accept or reject the Plan -- the Notice of Non-Voting Status. No Ballots have been proposed for creditors and interest holders in Classes 1, 2, 7, 8 and 9 because solicitation of acceptances from creditors and interest holders in those Classes is not required. The Record Date Pursuant to Rule 3017(d) of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court to establish October 3, 2006, as the record date for purposes of determining which creditors are entitled to receive Solicitation Packages and, where applicable, vote on the Plan. With respect to a transferred claim, the transferred claim will be entitled to receive a Solicitation Package and cast a Ballot on account of the transferred claim only if by the Record Date: (i) all actions necessary to effect the transfer of the claim pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure have been completed; or (ii) the transferee files the documentation required by Rule 3001(e) to evidence the transfer and a sworn statement of the transferor supporting the validity of the transfer. Voting Deadline To be counted as votes to accept or reject the Plan, the Debtors propose that all Ballots must be properly executed, completed, and delivered to the Debtors' Voting Agent either by regular mail, overnight mail or by personal delivery so that, in each case, the Ballots are received by the Voting Agent no later than 5 p.m., Pacific Time, on a date established by the Debtors that is at least 35 days after they substantially complete the mailing of all of the Solicitation Packages in accordance with the procedures set forth. The Debtors further propose that the Convertible Note Master Ballots, if necessary, may be submitted by facsimile so that they are received by the Voting Agent prior to the Voting Deadline. Procedures for Vote Tabulation Solely for purposes of voting to accept or reject the Plan, the Debtors propose that each claim within a class of claims entitled to vote to accept or reject the Plan will be temporarily allowed. Any claimant that seeks to challenge the allowance of its claim for voting purposes will be required to file a motion pursuant to Rule 3018 of the Federal Rules of Bankruptcy Procedure and serve that Motion on the Debtors and the Official Committee of Unsecured Creditors so that it is received on or before the date that is 15 days prior to the Voting Deadline. A full-text copy of FLYi's Solicitation and Tabulation Procedures is available for free at http://ResearchArchives.com/t/s?1058 Confirmation Hearing Date The Debtors ask the Court to schedule a hearing on the confirmation of the Plan, which may be continued from time to time by the Court without further notice other than the announcement of the adjourned date. Objections to the confirmation of the Plan, if any, must: (i) be in writing; (ii) state the name and address of the objecting party and the nature of the claim or interest of that party; (iii) state with particularity the basis and nature of any objection to the confirmation of the Plan; and (iv) be filed with the Court. The Confirmation Objections must be served on the counsel to the Debtors, the counsel to the Creditors Committee and the U.S. Trustee so that they are received at a date at least 35 days after the Debtors substantially complete the mailing of the Solicitation Packages. The Debtors propose to publish an abbreviated form of the Confirmation Hearing Notice not less than 25 days before the Confirmation Hearing in the national edition of The Wall Street Journal and The Washington Post. About FLYi Inc. Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. Brett H. Miller, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represents the Official Committee of Unsecured Creditors. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. (FLYi Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). GOLD KIST: Pilgrim's Buy Offer Prompts Moody's to Hold Ratings -------------------------------------------------------------- Moody's Investors Service affirmed the B2 $130 million 10.25% senior unsecured notes and B1 corporate family ratings and SGL-2 speculative grade liquidity rating for Gold Kist, Inc., but changed the outlook to developing from stable. This rating action follows the announcement that Pilgrim's Pride Corporation has made an offer to acquire Gold Kist for approximately $1 billion in cash plus the assumption of $144 million in Gold Kist Debt. The change in outlook to developing from stable reflects the uncertainty surrounding Gold Kists' future ownership and financial strategy following the Pilgrim's Pride acquisition bid. While it remains highly uncertain whether or not an acquisition by Pilgrim's Pride will be consummated, the highly-publicized bid could initiate increased shareholder pressure on Gold Kist's management to take actions to improve shareholder returns. Such actions could include either Gold Kist continuing as a stand- along company, an acquisition by a financially stronger company, or a more financially aggressive policy toward share repurchases and dividends. Since the company's 2004 conversion from an agricultural cooperative to a publicly held corporation, Gold Kist has maintained a conservative capital structure with modest debt and plentiful cash -- largely reflective of an investment grade credit. However the company's modest size for a protein processor, its narrow product mix, geographically concentrated raw material supply, and highly volatile earnings stream constrain the rating. Using financial data including the lagging 12-months ended July 2006, the factors underlying Moody's Rating Methodology for Global Natural Product Processors indicate a rating of Ba2, two notches higher than the company's actual B1 rating. In Moody's view, Gold Kist's high degree of earnings volatility, the recent severe earnings pressure in the overall poultry industry, the possibility that financial metrics could weaken further in the near term, the risk that the company's financial policy could become more aggressive, and Gold Kist's relatively short history as a public company justify a rating lower than the rating methodology might otherwise indicate. The affirmation of the company's SGL-2 speculative grade liquidity rating reflects the company's good liquidity and the expectation that internal cash flow, cash balances, and committed bank credit availability are sufficient to cover all of the company's cash needs over the coming year. Headquartered in Atlanta, Georgia, Gold Kist is a major US chicken processor and producer of value-added chicken products. HARPER STREET: Case Summary & 5 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: Harper Street Realty Corp. 151-21 Sixth Road Whitestone, New York 11357 Bankruptcy Case No.: 06-42966 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- 30-01 Harper Street LLC 06-42964 Chapter 11 Petition Date: August 18, 2006 Court: Eastern District of New York (Brooklyn) Judge: Carla E. Craig Debtor's Counsel: Matthew G. Roseman, Esq. Cullen and Dykman Bleakley Platt LLP 100 Quentin Roosevelt Boulevard Garden City, NY 11530 Tel: (516) 296-9106 Total Assets Total Debts ------------ ----------- Harper Street Realty Corp. $9,609,000 $15,222,916 30-01 Harper Street LLC $3,500,000 $18,196,673 A. Harper Street Realty Corp.'s 2 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Stephan Kalaijian $500,000 140 East 72nd Street New York, NY Grace Asphalt, Inc. $116,558 151-21 Sixth Road Whitestone, NY 11357 B. 30-01 Harper Street LLC's 3 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Stephan Kalaijian $3,500,000 140 East 72nd Street New York, NY Grace Asphalt, Inc. $92,356 151-21 Sixth Road Whitestone, NY 11357 Grace Industries, Inc. $3,635 151-21 Sixth Road Whitestone, NY 11357 HARVEST OPERATIONS: Moody's Reviews Ratings and May Downgrade ------------------------------------------------------------- Moody's Investor's Service placed Harvest Operations Corp.'s B2 corporate family rating and B3 rated $250 million 7.875% senior unsecured notes due 2011 under review for a possible downgrade. Harvest Energy Trust, the parent company of Operations announced today that it has agreed to a CDN$1.6 billion purchase of the "Come by Chance" refinery from North Atlantic Refining, Ltd. a member of the Vitol Group. Moody's ratings review for possible downgrade will include a discussion with management regarding its strategy, integration plans, and operation of the inherently volatile, cyclical, and highly capital intensive refining assets which has not been a core competency of the company and is being acquired at a record multiple. Conclusion of our ratings review will include the impact of Moody's pending Loss Given Default Methodology which will incorporate the pro forma liability structure to determine the notching of the rated notes from the Corporate Family Rating. Moody's notes that pending the company's final financing package, the trust is incurring very high initial leverage on complexity barrels and daily throughput capacity, and at close would rank as the highest leveraged refinery rated by Moody's. In addition, leverage in the company's E&P business on a Proved Developed reserve base prior to this acquisition was full for the B2 ratings. Pro forma for the Burchill acquisition which added US$220 million of debt to the company, pro forma leverage on the proven developed reserves rises to over CDN$8.00 per boe. Moreover, the company's capital draining unit trust structure which makes regular distributions to the unit holders is already challenging for an E&P company and is viewed by Moody's not to be that compatible with the inherently volatile and capital intensive refining business. Moody's will also review the refinery's crude sourcing contracts and evaluate the capabilities and operating history of the assets as well as the size, scope, and timing of any planned capital programs to be completed at the refinery which could carry significant funding needs. Moody's estimates that Harvest is paying a considerably high multiple of over almost CDN$2,046 per complexity barrel for the Newfoundland refinery, based on a nelson complexity rating of 6.8 and the company's stated throughput capacity of 115,000 bpd. The refinery's hydrocracking configuration and location offers the Trust a high degree of flexibility to source and process a wide range of crude oils and feedstocks from Western Europe, Eastern United States, Middle East, Russia, and Venezuela. The refinery's recently upgraded diesel unit has been producing ultra-low sulfur diesel fuel and jet fuel marketed primarily in Boston, New York city, and Newfoundland. Harvest Operations Corp. is a wholly-owned subsidiary of Harvest Energy Trust which is headquartered in Calgary, Alberta, Canada. INN OF THE MOUNTAIN: S&P Downgrades Issuer Credit Rating to B- -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Inn of the Mountain Gods Resort and Casino, including its issuer credit rating to 'B-' from 'B'. The outlook is negative. As of April 30, 2006, total debt outstanding was approximately $215 million. Mescalero, New Mexico-based IMG is an entity formed to own and operate the casino and resort operations for the Mescalero Apache Tribe. The downgrade reflects: * disappointing earnings for the fourth quarter ended April 30, 2006; * a tight liquidity position; and * Standard & Poor's concerns regarding the one-time charges and reported internal control weaknesses. While preliminary results indicate that first quarter financial performance will be higher than the same prior-year period's, it is unclear whether this is sustainable given a history of inconsistent earnings performance. Revenues for IMG grew 22% for the fiscal 2006, resulting from the opening of the new resort in the fourth quarter of the prior fiscal year. Despite double-digit revenue increases during fiscal 2006, EBITDA, adjusted for non-recurring charges declined about 5% on higher general and administrative costs and some start-up inefficiencies. The EBITDA margin for the fiscal year was about 24%, down from 31% for fiscal 2005. INTEGRATED HEALTH: U.S. Trustee Wants Reports Filed --------------------------------------------------- Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, asks the U.S. Bankruptcy Court for the District of Delaware to: (i) compel Integrated Health Services, Inc., and its debtor- affiliates to file post-confirmation reports and pay quarterly fees; or in the alternative (ii) convert their Chapter 11 cases, pursuant to Section 1112(b) of the Bankruptcy Code. Ms. Stapleton says that the Reorganized Debtors failed to comply with the United States Trustee Operating Guidelines and Reporting Requirements for Chapter 11 cases. The Reorganized Debtors have not filed any post-effective date operating or disbursement reports. The failure to file the reports, inter alia, hinders the U.S. Trustee's ability to monitor post-effective date operations and whether the cases can be final decreed and properly closed, Richard L. Schepacarter, Esq., trial attorney of the U.S. Department of Justice, asserts. In the absence of the reports, according to Mr. Schepacarter, it is impossible to determine whether the Reorganized Debtors are current with post-effective date obligations, paid the correct amount of fees pursuant to 28 U.S.C. Section 1930(a)(6), or has the present ability to "properly administer and final decree the cases." The U.S. Trustee adds that the Reorganized Debtors have not properly paid quarterly fees and are in arrears through the second quarter 2006 of about $874,500, based upon estimated disbursements. The U.S. Trustee was required to estimate the disbursements and fees due to the Reorganized Debtors' failure to file timely post- confirmation reports, Mr. Schepacarter explains. The actual quarterly fees may be greater based on the Reorganized Debtors' actual disbursements. The failure to file post-confirmation operating reports, comply with Rule 2015(a) of the Federal Rules of Bankruptcy Procedure, and pay quarterly fees is cause for the conversion of the case pursuant to Section 1112(b), Mr. Schepacarter notes. The U.S. Trustee reserves any and all rights, remedies and obligations to, inter alia, complement, supplement, augment, alter, substitute or modify its request and to conduct any and all discovery as may be deemed necessary or as may be required, and to assert other grounds as may become apparent. Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- operated local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company and its 437 debtor-affiliates filed for chapter 11 protection on Feb. 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical Corporation and its direct and indirect debtor-subsidiaries broke away from IHS and emerged under their own plan of reorganization on March 26, 2002. Abe Briarwood Corp. bought substantially all of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan on May 12, 2003, and that plan took effect Sept. 9, 2003. Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the IHS Debtors. On Sept. 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) INTEGRATED HEALTH: Court Extends Removal Period to November 3 ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended the period within which IHS Liquidating LLC may file notices of removal with respect to civil actions pending on its chapter 11 filing, through and including Nov. 3, 2006. As reported in the Troubled Company Reporter on July 11, 2006, Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that IHS Liquidating is still investigating disputed claims that are the subject of pending prepetition actions. The extension will provide IHS Liquidating an opportunity to make more fully informed decisions concerning the removal of each prepetition action and will assure that it does not forfeit its valuable rights under Section 1452 of the Judicial Procedures Code, Mr. Brady asserts. Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- operated local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company and its 437 debtor-affiliates filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical Corporation and its direct and indirect debtor-subsidiaries broke away from IHS and emerged under their own plan of reorganization on March 26, 2002. Abe Briarwood Corp. bought substantially all of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan on May 12, 2003, and that plan took effect September 9, 2003. Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the IHS Debtors. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) INTERNATIONAL MANAGEMENT: Ct. Okays Auction Management's Retention ------------------------------------------------------------------ The Honorable Paul W. Bonapfel of the U.S. Bankruptcy Court for the Northern District of Georgia in Atlanta authorized William F. Perkins, the chapter 11 trustee appointed in the bankruptcy cases of International Management Associates LLC and its debtor- affiliates to employ Auction Management Corp. as his auctioneer. Auction Management will assist the Trustee in auctioning certain of the Debtors' personal property in the Greater Atlanta area. The Troubled Company Reporter reported on July 25, 2006, that Auction Management's engagement will: -- not require an initial financial outlay from the Debtors' estates; -- be compensated solely out of sales proceeds the Trustee believes will be augmented as a result of the Firm's efforts; and -- allow the Trustee to market the Atlanta Assets without having to make initial provisions for a marketing budget. Under Auction Management's employment terms, the Firm will be compensated in this manner: a) With respect to sales of Atlanta Assets, the Firm will be paid a commission of 5% of the aggregate bid amount, plus the Firm will collect and retain the 10% buyer's premium added to all winning bids on the Atlanta Assets. b) In addition, the Firm has agreed to advance a $26,173 marketing budget to be used to market the Atlanta Assets, with the marketing budget to be reimbursed to the Firm out of sales proceeds realized through the sale of Atlanta Assets. Headquartered in Atlanta, Georgia, International Management Associates, LLC -- http://www.imafinance.com/-- managed hedge funds for investors. The company and nine of its affiliates filed for chapter 11 protection on Mar. 16, 2006 (Bankr. N.D. Ga. Case No. 06-62966). David A. Geiger, Esq., and Dennis S. Meir, Esq., at Kilpatrick Stockton LLP, represent the Debtors in their restructuring efforts. James R. Sacca, Esq., at Greenberg Traurig, LLP, and Mark S. Kaufman, Esq., at McKenna Long & Aldridge, LLP, represent the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they did not state their total assets but estimated total debts to be more than $100 million. On April 28, 2006, the Court appointed William F. Perkins as the Debtors' chapter 11 trustee. Kilpatrick Stockton LLP represents Mr. Perkins. INTERSTATE BAKERIES: JPMorgan Supports DIP Financing Amendment -------------------------------------------------------------- JPMorgan Chase Bank, N.A., asks the U.S. Bankruptcy Court for the Western District of Missouri to grant Interstate Bakeries Corporation and its debtor-affiliates' request to amend their DIP Agreement to, among other things: (a) extend the maturity date until June 2, 2007; (b) increase the sublimit to $150,000,000 for letters of credit to be issued; and (c) augment the Debtors' cash resources by allowing them to use 50% or approximately $44,000,000 of the restricted cash for general corporate purposes. The remaining 50% will be used to repay the prepetition Secured Lenders as further adequate protection. JPMorgan Chase Bank, N.A., the administrative agent under the Amended and Restated Credit Agreement dated April 25, 2002, tells the Court that, together with the senior lenders, they have consistently supported the Debtors' restructuring efforts. In the latest fiscal year ended June 3, 2006, Interstate Bakeries Corporation generated negative EBITDA of approximately $2,000,000, Lisa A. Epps, Esq., in Spencer Fane Britt & Browne, LLP, in Kansas City, Missouri, relates. As of Aug. 18, 2006, the Debtors have spent more than $100,000,000 attempting to restructure their operations, yet they have been unable to improve performance, Ms. Epps notes. The Debtors' efforts have come at the expense of sales, with a decline of more than 11% in sales since fiscal year 2004, Ms. Epps adds. JPMorgan is concerned that the deterioration will continue for the foreseeable future. In light of these results, the Debtors have advised of the importance for near-term emergence from Chapter 11 to address their declining performance. To that end, JPMorgan supports the Debtors' request for an extension of the exclusive period as appropriate to allow them, among others, to attempt to obtain exit financing to support a plan of reorganization that will provide for the repayment in full, in cash, of the Prepetition Credit Agreement obligations. If the Debtors cannot achieve financing transactions to provide capital for the repayment of the Prepetition Credit Agreement, JPMorgan expects the Debtors to consider other strategic alternatives, including asset sales, to raise enough cash to pay out the Prepetition Credit Agreement obligations. If subsequent events later reveal that those transactions are not feasible, JPMorgan intends to seek appropriate relief from the Court. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on Sept. 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due Aug. 15, 2014 on Aug. 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) INTERSTATE BAKERIES: Sells Matteson Property to Realty America -------------------------------------------------------------- Judge Venters of the U.S. Bankruptcy Court for the Western District of Missouri authorizes Interstate Bakeries Corporation and its debtor-affiliates to sell their interest in a property located at 21403 Cicero Avenue, in Matteson, Illinois, to Realty America Group, LP, free and clear of all liens, claims, and encumbrances. The Debtors are directed to pay: -- $39,782 and $77,639 in principal for real property taxes that are due and owing for 2003 and 2004 tax years; and -- interest of the real property taxes at a 6% annual rate from the date the statutory interest began to accrue on the past due balance. The Court clarifies that the Sale Order does not modify the Debtors' obligations under the Successful Sale Agreement to pro-rate taxes for the 2005 and 2006 tax years. As reported in the Troubled Company Reporter on Aug. 2, 2006, the Property is comprised of several parcels of commercial real estate currently used as a depot and thrift store, and includes about 2.82 acres of land with an approximately 13,435 square feet building. The Property is adjacent to the Lincoln Mall, which is redeveloped by Realty America with assistance provided by the Village of Matteson in the form of tax increment financing initiatives and other entitlements. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014 on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) JEAN COUTU: Inks $3.4 Billion Merger Transaction with Rite Aid -------------------------------------------------------------- The Jean Coutu Group (PJC) Inc. and Rite Aid Corporation entered into a definitive agreement, on Aug. 24, 2006, on a transaction in which its US subsidiary, The Jean Coutu Group (PJC) USA Inc., will be merged into Rite Aid, strengthening Rite Aid's position as the third largest national drugstore chain in the United States and creating the largest drugstore chain on the East Coast. The Jean Coutu Group (PJC) USA includes 1,858 drugstores (337 Brooks stores and 1,521 Eckerd stores) and six distribution centers, all located primarily on the East Coast and in the Mid-Atlantic states. All of the stores will be re-branded Rite Aid and Rite Aid headquarters will remain in Camp Hill, Pennsylvania. Under the transaction, The Jean Coutu Group will receive $1.45 billion in cash, subject to customary working capital adjustments, and 250 million shares of Rite Aid common stock giving it a 32.0% common equity interest and 30.2% of the voting power in the expanded Rite Aid. Rite Aid also intends to assume $850 million of The Jean Coutu Group's long-term debt. Based on Rite Aid's prior one-month average closing share price, the transaction would be valued at approximately $3.4 billion. The Jean Coutu Group will continue to independently act as franchisor and distributor for its Canadian network currently consisting of 327 franchised drugstores located in three provinces. Upon completion of the transaction, which has been approved by the Boards of Directors of both companies, there will be approximately 5,000 Rite Aid stores in 31 states and the District of Columbia, with coverage on both the East and West coasts. The stores Rite Aid will acquire are located in 18 states, with Rite Aid currently operating in 14 of the states and adding Massachusetts, Rhode Island, South Carolina and North Carolina to its national footprint. The combined fiscal 2006 revenues of Rite Aid and The Jean Coutu Group (PJC) USA were approximately $26.8 billion. Executive Team Mary Sammons will continue to lead Rite Aid as President and CEO while also becoming Chairman of the Rite Aid Board of Directors. Michel Coutu, currently President of The Jean Coutu Group's U.S. operations, will become Co-Chairman of Rite Aid's Board and a member of the Board's Executive Committee. The Jean Coutu Group will name three other independent members to a 14-person Rite Aid Board, including Francois J. Coutu, Vice Chairman of The Jean Coutu Group, Andre Belzile, Senior Vice President of Finance and Corporate Affairs of The Jean Coutu Group, and Dennis Wood, one of the independent members of The Jean Coutu Group's Board of Directors. Robert G. Miller, the current Rite Aid Chairman, will continue to serve as a Director. Also, Pierre Legault, The Jean Coutu Group's Executive Vice President who was recently appointed to run its U.S. operations, will become Rite Aid Senior Executive Vice President, Chief Administrative Officer, while Rite Aid's current senior management team remains in place. As CAO, Mr. Legault will be responsible for finance, information technology and real estate and will be a member of the integration leadership team along with Ms. Sammons, Jim Mastrian, Rite Aid Chief Operating Officer, and Chris Hall, Rite Aid Senior Vice President of Strategic Business Development. Synergies Rite Aid expects the transaction will enable it to achieve significant cost efficiencies in the areas of merchandising, purchasing, advertising and distribution as well as administrative expense. Net synergies are estimated to be $150 million after the first twelve months following the close, with some net synergies experienced during the first twelve months. The company said it expects the transaction to be accretive 12 months after the close by $.09 to $.15 per diluted share. The company said it expects the transaction to be dilutive by $.03 to $.07 per diluted share for the first twelve months because of integration and non-recurring expenses associated with the transaction. The estimate of dilution for the first twelve months does not include a gain or loss on any regulatory-required store dispositions. Rite Aid Growth Strategy "We're very excited about this unique opportunity that dramatically accelerates our growth strategy, particularly in areas where we've been focusing our new store development," Ms. Sammons said. "The Brooks and Eckerd stores are in good locations with dedicated associates committed to serving their customers and their communities. Adding these stores to our company gives Rite Aid scale comparable to our major drugstore competitors, and we believe this enables us to compete more effectively in a highly competitive business. We also look forward to bringing the Rite Aid shopping experience to four new states while at the same time, we continue our organic growth program with our very successful "Customer World" store design. "Successfully integrating these stores requires a strong infrastructure like the one we have built at Rite Aid, with information systems and a supply chain already capable of supporting a significant increase in the number of stores. We believe the stores will also benefit from our proven front-end merchandising programs, innovative advertising and promotion programs, successful pharmacy marketing initiatives, solid supplier relationships, state-of-the-art technology and strong field structure. With 70% of the acquired stores located in states where we already operate, we expect to leverage our systems, programs, best practices and executive management talent to improve profitability by achieving substantial cost savings and growing sales. We'll also capitalize on our leadership team's expertise in retail mergers and turnarounds and plan to make a significant financial investment to improve the acquired stores. We look forward to working with Brooks and Eckerd associates to effect a smooth transition and create a distinctive health and wellness focused shopping experience second to none." The Jean Coutu's U.S. Investment Jean Coutu, Chairman, President and CEO of The Jean Coutu Group, said, "We see this transaction as a unique strategic opportunity to optimize our U.S. presence by transforming our investment in a regional drugstore chain into the leading ownership position in a major national chain with the scale to better compete in the growing U.S. drugstore industry. The Jean Coutu Group and its four designated Directors, who will be members of Rite Aid's various Board committees, are proud to be associated with Rite Aid's management. We are confident that the team has the skills and experience to leverage its capabilities across a larger network. At the same time, this transformational event allows us to deleverage our balance sheet, maintain focus on our leading Canadian franchise and should generate significant value for our shareholders." Rite Aid recently increased its sales guidance for fiscal 2007, citing positive pharmacy same store sales trends and continuing solid front end same-store sales gains. The company also remains on target with its organic new store development program with plans to open 800 to 1,000 new stores over the next five years. Transaction Funding Rite Aid expects to finance the transaction with a combination of existing excess cash on hand and through a combination of bank borrowings, the issuance of debt securities, the expected assumption of previously issued Jean Coutu Group 8.5% Senior Subordinated Notes in the amount of $850 million, subject to satisfaction of certain conditions, and the issuance of 250 million shares of common stock. In the event the $850 million Senior Subordinated Notes are not assumed by Rite Aid, the cash paid would increase to $2.3 billion and Rite Aid would issue additional debt securities to fund the increased cash consideration. A financing commitment has been obtained from Citigroup North America, Inc. and Citigroup Global Markets Inc. Pro Forma Financial Impact The investment by The Jean Coutu Group in Rite Aid will be accounted for using the equity method in future periods. US operations will not be presented as discontinued operations considering the continuing involvement by the company in the business. The estimated proceeds on disposal of $3.4 billion are subject to fluctuation due to changes in the US dollar per Canadian dollar exchange rate and the Rite Aid share price until the transaction closes. Based on Rite Aid's prior one-month average closing share price of $4.41 and an average exchange rate of 0.8885 US dollars per Canadian dollar, The Jean Coutu Group would have recorded an after-tax loss of $140 million from the transaction. Closing of the transaction is subject to review under the Hart- Scott-Rodino Act, Rite Aid stockholder approval and other customary closing conditions. The closing date is dependent on these activities but could be as early as Rite Aid's fiscal 2007 fourth quarter, which begins Dec. 3, 2006 and ends March 3, 2007, and The Jean Coutu Group's fiscal 2007 third quarter, which begins on Nov. 26, 2006 and ends Feb. 24, 2007. The Brooks stores Rite Aid will acquire are located in Maine, Vermont, New Hampshire, Massachusetts, Rhode Island and Connecticut. The Eckerd stores Rite Aid will acquire are located in New York, Pennsylvania, New Jersey, Maryland, Delaware, Virginia, West Virginia, Tennessee, North Carolina, South Carolina, Georgia and Ohio. The distribution centers Rite Aid will acquire are located in Atlanta, Georgia; Charlotte, North Carolina; Philadelphia, Pennsylvania; Dayville, Connecticut; Syracuse, New York and Bohemia, New York. The transaction also includes The Jean Coutu Group (PJC) USA's corporate headquarters in Warwick, Rhode Island. Financial advisors for Rite Aid are Citigroup Corporate and Investment Banking and Rothschild; exclusive financial advisor for The Jean Coutu Group is J.P. Morgan Securities, Inc. About Rite Aid Headquartered in Camp Hill, Pennsylvania, Rite Aid Corporation (NYSE, PCX: RAD) -- http://www.riteaid.com/-- runs a drugstore chain with 2005 annual revenues of $17.3 billion and 3,320 stores in 27 states and the District of Columbia. About Jean Coutu Headquartered in Longueuil, Quebec, The Jean Coutu Group Inc. (TSX: PJC.A) -- http://www.jeancoutu.com/-- is the fourth largest drugstore chain in North America and the second largest in both the eastern United States and Canada. The Company and its combined network of 2,175 corporate and franchised drugstores (under the banners of Brooks and Eckerd Pharmacy, PJC Jean Coutu, PJC Clinique and PJC Sante Beaute) employ more than 60,000 people. The Jean Coutu Group's United States operations employ 46,000 people and comprise 1,853 corporate owned stores located in 18 states of the Northeastern, mid-Atlantic and Southeastern United States. The Jean Coutu Group's Canadian operations and franchised drugstores in its network employ over 14,000 people and comprise 322 PJC Jean Coutu franchised stores in Quebec, New Brunswick and Ontario. JEAN COUTU: Stores Sale Cues S&P to Put Ratings on Positive Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including the 'B+' long-term corporate credit rating, on Montreal, Quebec- based Jean Coutu Group (PJC) Inc. on CreditWatch with positive implications, meaning that the ratings could be raised or affirmed following the completion of its review. At the same time, the ratings on PJC's $850 8.5% million senior subordinated notes were placed on CreditWatch with developing implications. "The CreditWatch placement follows Rite Aid Corp.'s announcement that it will purchase PJC's Brooks and Eckerd 1,858-store pharmacy chains in the U.S. for about $3.4 billion in cash and stock," said Standard & Poor's credit analyst Don Povilaitis. The purchase is also expected to result in Rite Aid assuming PJC's $850 million 8.5% senior subordinated notes, in which case the rating on the notes could be lowered. Conversely, if the notes remain with PJC, the rating on the notes could be raised. Rite Aid will also assume substantial operating leases associated with the Brooks Eckerd chain. As of the end of the fourth quarter (ended May 27, 2006), PJC had about $2.4 billion in total reported debt. Although the credit impact to PJC is positive, given that the sale proceeds will allow for the company's net debt position to be close to zero following the repayment of its revolving credit facilities and senior unsecured notes, PJC will become a much smaller regional Canadian operator with a 32% equity interest in Rite-Aid (B+/Watch Neg/B-2). PJC's Canadian franchising revenues were CDN$1.6 billion (about $1.44 billion) in fiscal 2006. The transaction is expected to close within PJC's fiscal 2007 year, contingent upon regulatory and shareholder approval. Standard & Poor's will review PJC's financial plans with management before resolving the CreditWatch. KMART CORP: Court Approves Pact Allowing Roldan to Pursue PI Suit ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois approved a stipulation between Kmart Corporation and Carmen Dominguez Roldan and her husband Francisco Martinez Arias lifting the automatic stay and injunction provision under Kmart's Plan of Reorganization to permit the litigation captioned Carmen Dominguez v. Kmart, Case No. DKDP01-0313, to proceed and continue to a final judgment or settlement. Carmen Roldan and Francisco Arias filed Claim No. 30383 against the Kmart and its debtor-affiliates for personal injury. The Debtors objected to the Claim. Ms. Roldan and Mr. Arias then asked the Court to either allow their Claim or lift the automatic stay to allow them to pursue their Claim. 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: Court Okays Pact Allowing Holmes, et al.'s PI Suit -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois signed an agreed order between Kmart Corporation and its debtor- affiliates and Eric and Natasha Holmes partially lifting the automatic stay and injunction provision under the Debtors' Plan of Reorganization to permit the litigation captioned Holmes, et al. v Kmart, et al., Case No. 2866, to proceed to final judgment or settlement. Eric and Natosha Holmes, as parents and natural guardians of Tyron Rice, filed Claim No. 27068 against Kmart for severe and permanent injuries Tyron Rice suffered when he was shot in the eye by an airgun sold by Kmart on Oct. 30, 2001. They then asked the Court to allow them to pursue their Claim in a separate litigation. 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) LARRY'S MARKETS: Selling Three Grocery Stores for $6.2 Million -------------------------------------------------------------- Larry's Markets, Inc., will sell three of its grocery stores for $6.2 million, Puget Sound Business Journal reports. The Company's original plan was to sell its five grocery stores to LM Acquisition Partners LLC for $5.5 million but after this week's negotiations, the Company accepted the offer of: -- Metropolitan Market to buy the Company's store in Seattle's Queen Anne area and Larry's Catering; -- TRF Northwest Inc. to buy the Larry's in Bellevue; and -- TRF Pacific LLC to buy the Larry's in Totem Lake/Redmond. According to the news, the future remains uncertain for the Larry's stores located at the Oak Tree Plaza in North Seattle, Tukwila and Kirkland. LM Acquisition was reported that it didn't participate in this week's bidding. The latest deal must be approved by the U.S. Bankruptcy Court for the Western District of Washington. Headquartered in Kirkland, Washington, Larry's Markets, Inc. -- http://www.larrysmarkets.com/-- operates several supermarkets and department stores in the U.S. Northwest. The company filed for chapter 11 protection on May 7, 2006 (Bankr. W.D. Wash. Case No. 06-11378). Armand J. Kornfeld, Esq., at Bush Strout & Kornfeld, represents the Debtor. The Official Committee of Unsecured Creditors is represented by Marc L. Barreca, Esq., and Michael J. Gearin, Esq., at Preston Gates & Ellis LLP. When the Debtor filed for protection from its creditors, it listed total assets of $12,574,695 and total debts of $21,489,800. LIN TV: High Leverage Prompts S&P to Revise Outlook to Negative --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on LIN TV Corp. (B+/Negative/--) to negative from stable. The Providence, Rhode Island-based TV operator had approximately $989 million in total debt outstanding as of June 30, 2006. "The outlook revision reflects our concern about LIN's continued high leverage resulting from debt-financed acquisitions and declining profits," said Standard & Poor's credit analyst Heather M. Goodchild. The rating on LIN reflects: * financial risk from debt-financed TV station expansion; * ongoing acquisitions; * increasing competition for advertisers and audiences; and * advertising cyclicality. These factors are only partially offset by the company's: * competitive positions in midsize TV markets; * broadcasting's good margin and free cash flow potential; and * relatively resilient station asset values. MARSH & MCLENNAN: S&P Puts BB+ Preferred Stock Rating on New Shelf ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary 'BBB' senior debt, 'BBB-' subordinated debt, and 'BB+' preferred stock ratings to Marsh & McLennan Cos.'s (NYSE:MMC) recently filed unlimited universal shelf. Standard & Poor's also affirmed its 'BBB' counterparty credit rating on MMC. The outlook remains negative. The counterparty credit rating on MMC is based on the company's Strong -- though markedly diminished -- competitive position. Offsetting these strengths are the material competitive and operational uncertainties resulting from the allegations of bid rigging and other anticompetitive actions referred to in the settlement with the New York Attorney General and Superintendent of Insurance. Although management has been proactive in addressing these uncertainties, the ratings and outlook, in addition to reflecting the potential for developments from ongoing regulatory investigations to hamper MMC's competitive position and prospective profitability, reflect the execution risks of implementing management's new business model, which addresses the elimination of contingent commissions. Although MMC's financial flexibility has materially improved in 2005, it remains a weakness to the rating. In summary, MMC is faced with the challenge of rebalancing its financial leverage with a diminished competitive and operating profile. The negative outlook reflects continued uncertainties, heightened by a disadvantageous medium-term debt structure ($1 billion of debt due in 2007). These uncertainties include: * significant concerns surrounding employee and client retention; * material execution risk because of the adoption of Marsh's new business model incorporating the elimination of contingent commissions; and * the potential for ongoing regulatory investigations to hamper MMC's competitive position. Standard & Poor's expects that Marsh's new business model will address the elimination of contingent commissions and concerns surrounding employee and client retention by implementing cost and revenue initiatives. Operating performance in 2006, particularly in the latter half, is expected to materially improve compared with 2005. This continual improvement will be driven by the immediate realization of cost- control initiatives supplemented by organic growth steadily improving to the level of MMC's peer group by late-2006. "If MMC is successful in improving operating performance and organic growth as outlined in our expectations, we will consider revising the outlook to stable," said Standard & Poor's credit analyst Steven Ader. "Conversely, if MMC is unsuccessful in meeting our expectations or if ongoing regulatory investigations materially affect MMC's competitive or financial position, we will consider lowering the rating." MASTERCRAFT INTERIORS: Has Access to $1.5 Million BofA DIP Loan ---------------------------------------------------------------- The Honorable Paul Mannes of the U.S. Bankruptcy Court for the District of Maryland authorized, on a final basis, Mastercraft Interiors Ltd. and its affiliate, Kimels of Rockville, Inc., to obtain up to $1.5 million of debtor-in-possession loans from Bank of America N.A. To secure repayment of the DIP loans, the Debtors grant BofA a security interest in and lien on all of their prepetition and postpetition assets, except for their lease at Fair Oaks Mall in Fairfax, Virginia. BofA is also granted a superpriority claim over all other administrative expenses subject to a $150,000 carve out. The Debtors also owe BofA approximately $10.4 million on account of prepetition revolving and term loans. The Court allows the Debtors to use cash collateral securing repayment of the Debtors' prepetition and postpetition debts to BofA pursuant to a budget. A copy of the budget is available for free at: http://researcharchives.com/t/s?104b As adequate protection for any diminution in value of its collateral, BofA is granted replacement liens on its prepetition collateral. Headquartered in Beltsville, Maryland, Mastercraft Interiors Ltd. -- http://www.mastercraftinteriors.com/-- manufactures furniture and other home furnishings. The Company and its subsidiary, Kimels of Rockville, Inc., filed for bankruptcy on May 15, 2006, (Bankr. D. Md. Case No. 06-12769). Morton A. Faller, Esq., Michael J. Lichtenstein, Esq., and Stephen A. Metz, Esq., at Shulman, Rogers, Gandal, Pordy & Ecker, P.A., represent the Debtors in their restructuring efforts. Bradford F. Englander, Esq., at Linowes and Blocher LLP, represents the Official Committee Unsecured Creditors. When Mastercraft Interiors filed for bankruptcy, it reported assets amounting to $10,600,288 and debts amounting to $25,485,847. Kimels of Rockville reported assets totaling $704,227 and debts amounting to $10,341,704 when it filed for bankruptcy. MESABA AVIATION: Bankruptcy Contributes to MAIR's $2.5 Mil. Loss ---------------------------------------------------------------- MAIR Holdings, Inc.'s financial results for the first quarter of fiscal 2007 reflect the ongoing expenses associated with Mesaba Aviation, Inc.'s bankruptcy, according to MAIR President and Chief Executive Officer Paul F. Foley. MAIR reported a net loss of $2,500,000, or $0.12 per diluted share, for the quarter ended June 30, 2006, compared to net income of $1,200,000, or $0.06 per share, during the same quarter last year. Because Mesaba is projecting significant losses in fiscal 2007, MAIR did not record Mesaba's equity income at June 30, 2006, Mr. Foley says. Due to the reduction of its fleet by 19 Avros and 13 Saabs year- over-year, Mesaba reported an operating loss of $1,600,000 for the first quarter of fiscal 2007 compared to an operating loss of $100,000 for the first quarter of fiscal 2006. Mesaba also reported net income of $100,000 in the first quarter of fiscal 2007 and 2006. Mesaba's net income in fiscal 2007 was primarily the result of a $1,800,000 credit to reorganization items due to the reversal of $5,200,000 for maintenance associated with returned Avro aircraft, Mr. Foley explains. About Mesaba Aviation Headquartered in Eagan, Minnesota, Mesaba Aviation, Inc., dba Mesaba Airlines -- http://www.mesaba.com/-- operates as a Northwest Airlink affiliate under code-sharing agreements with Northwest Airlines. The Company filed for chapter 11 protection on Oct. 13, 2005 (Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in its restructuring efforts. Craig D. Hansen, Esq., at Squire Sanders & Dempsey, L.L.P., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $108,540,000 and total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). MESABA AVIATION: Reports July 2006 Traffic Results -------------------------------------------------- Mesaba Aviation, Inc., a subsidiary company of MAIR Holdings, Inc. (NASDAQ:MAIR), reported capacity and traffic for July 2006. Mesaba Aviation flew 147.0 million available seat miles (ASMs) in July, which was down 42.1% year over year. Mesaba Aviation carried 346,342 passengers in the month, which was down 35.4% year over year generating 100.5 million revenue passenger miles (RPMs). Passenger load factor, representing capacity filled, decreased 2.2 points year over year to 68.3%. Separately, Mesaba Aviation also disclosed its operating performance for the month of July: Mesaba Airlines July Operating Performance 2006 2005 Change ---- ---- ------ Completion Factor 98.1% 98.0% 0.1 pts. Arrivals within 14 minutes 82.1% 79.5% 2.6 pts. Mesaba Airlines July Traffic Results FY 2007 FY 2006 Change ------- ------- ------ ASMs (000) 147,048 253,930 (42.1%) RPMs (000) 100,464 179,056 (43.9%) Load Factor 68.3% 70.5% (2.2 pts.) Passengers 346,342 535,746 (35.4%) Fiscal Year to Date (4 Months) ------------------------------ FY 2007 FY 2006 Change ------- ------- ------ ASMs (000) 653,184 1,019,949 (36.0%) RPMs (000) 466,391 693,866 (32.8%) Load Factor 71.4% 68.0% 3.4 pts. Passengers 1,483,751 2,036,791 (27.2%) Calendar Year to Date (7 Months) ------------------------------- CY 2006 CY 2005 Change ------- ------- ------ ASMs (000) 1,212,073 1,776,629 (31.8%) RPMs (000) 837,521 1,169,287 (28.4%) Load Factor 69.1% 65.8% 3.3 pts. Passengers 2,565,377 3,370,301 (23.9%) About Mesaba Aviation Headquartered in Eagan, Minnesota, Mesaba Aviation, Inc., dba Mesaba Airlines -- http://www.mesaba.com/-- operates as a Northwest Airlink affiliate under code-sharing agreements with Northwest Airlines. The Company filed for chapter 11 protection on Oct. 13, 2005 (Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in its restructuring efforts. Craig D. Hansen, Esq., at Squire Sanders & Dempsey, L.L.P., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $108,540,000 and total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). MIRANT: Asset Recovery Wants Foster Wheeler's $2M Claim Disallowed ------------------------------------------------------------------ Foster Wheeler Energy Corporation entered into agreements for purchase and sale of equipment with: (1) Mirant Kendall, LLC, on February 26, 2001; and (2) Mint Farm Generation, LLC, on June 3, 2002. Foster Wheeler was contracted to design and provide equipment and related services in connection with Mirant Kendall's and Mint Farm's construction projects at the Debtors' power plants. Foster Wheeler was to receive $12,132,000 as compensation under the Kendall Agreement. As of the Petition Date, Mirant Kendall had paid Foster Wheeler $11,716,821 as compensation. On the other hand, Foster Wheeler was to receive $14,060,000 as compensation under the Mint Farm Agreement. Incomplete Projects Michelle C. Campbell, Esq., at White & Case LLP, in Miami, Florida, relates that Mirant Kendall incurred approximately $1,900,000 in damages as a result of Foster Wheeler's delay. Foster Wheeler did not complete the project at the Mint Farm facility. Ms. Campbell notes that Mint Farm has prepaid Foster Wheeler's goods and services. Foster Wheeler, therefore, owes Mint Farm more than $800,000. On May 23, 2003, Foster Wheeler filed a complaint seeking a mechanic's lien in the Superior Court for the Commonwealth of Massachusetts. The State Proceeding was automatically stayed when Mirant Kendall filed for bankruptcy. Foster Wheeler filed a notice in the Bankruptcy Court reserving its rights with respect to the mechanic's lien. Foster Wheeler's Claims Foster Wheeler filed Claim No. 5225 against Mirant Kendall alleging a secured claim for $1,373,115 representing the remaining amounts owing under the 2001 Agreement. Foster Wheeler filed Claim No. 5359 against Mint Farm seeking payment for $804,883 owing under the 2002 Agreement. Michelle C. Campbell, Esq., at White & Case LLP, in Miami, Florida, asserts that after application of the credits Mint Farm has accrued and the damages that Mirant Kendall suffered due to Foster Wheeler's delays, no further amounts remain owing to Foster Wheeler under both Agreements. As the credits owed to Mint Farm and Mirant Kendall exceed the amounts of the Claims, to require the Debtors to pay for the Claims would result in a windfall to Foster Wheeler, Ms. Campbell points out. Therefore, MC Asset Recovery, LLC, the Debtors' successor-in- interest, asks the U.S. Bankruptcy Court for the Northern District of Texas to disallow or reduce Foster Wheeler's Claims as appropriate pursuant to the doctrines of setoff and recoupment. 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. MIRANT CORP: Files Adversary Case vs. Three Environmental NGOs -------------------------------------------------------------- Mirant Corporation, Mirant Mid-Atlantic, LLC, and Mirant Chalk Point, LLC, received on June 15, 2006, a notice from Environmental Integrity Project, a non-government organization, "threatening" to sue the Reorganized Debtors in federal court due to certain discharged violations. EIP asserts, on its behalf and on behalf of other private, non- government and nonprofit organizations, that the Reorganized Debtors violated the Clear Air Act due to emissions at Mirant Chalk Point's power units, which "repeatedly violated opacity limits under federal and state law." The emissions occurred between January 2002 and March 2006, The other NGOs are: (1) Chesapeake Climate Action Network (2) Patuxent Riverkeeper (3) Environment Maryland Research and Policy Center Ian T. Peck, Esq., at Haynes and Boone, LLP, in Dallas, Texas, relates that EIP and CCAN participated directly in the Debtors' cases, including by objecting to the Plan. Patuxent and EM also participated in the bankruptcy cases to some degree, Mr. Peck adds. To prevent unnecessary litigation, the Reorganized Debtors responded to each of the NGOs indicating that: * the Notice constituted a violation of the Plan, the Confirmation Order and Sections 524 and 1141 of the Bankruptcy Code; and * the failure to withdraw the Notice and the commencement of the litigation threatened in the Notice would also constitute violations. But EPI, et al., refused to withdraw the Notice. The period of the impending action under the Clean Air Act runs until August 14, 2006. Mr. Peck notes that a large bulk of the "Alleged Violations" occurred prior to the Effective Date. Hence, those violations have been discharged under the Plan, Mr. Peck asserts. Mr. Peck points out that the Confirmation Order includes a general discharge, which states that on the Effective Date of the Plan "all Claims against and Equity Interests in the Debtors and the Debtors-in-Possession [will] be satisfied, discharged and released in full." Additionally, the Confirmation Order includes a discharge provision specifically negotiated for by the EIP and the CCAN, Mr. Peck says. The Chesapeake Discharge Provision provides that the rights of the Chesapeake Bay Foundation, the EIP and the CCAN, if any, to commence an action as a private attorney general under any federal, state, or local environmental law or regulation regarding the Debtors' postpetition acts or omissions are not affected or impaired by the Plan or the Confirmation Order except to the extent that any action gives rise to a Claim or debt subject to discharge under Section 1141 of the Bankruptcy Code. Mr. Peck points out that the deadline to file an administrative claim against the Debtors expired on January 24, 2006. At no time did the NGOs file a proof of claim or an administrative claim, Mr. Peck notes. Mr. Peck adds that the Confirmation Order included provisions enjoining holders of claims against and equity interests in the Debtors from pursuing any actions in existence at the Effective Date and pursuing actions based on Claims in existence prior to the Effective Date. The Confirmation Order, Mr. Peck further notes, includes language that tracks the General Injunction Provision and provides that all persons and entities who have been, are, or may be holders of Claims are permanently enjoined from, among other things: * commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind; or * enforcing, levying, attaching, collecting or otherwise recovering by any manner or means, whether directly or indirectly, any judgment, award, decree or order. For these reasons, Mirant, MIRMA, and Mirant Chalk Point ask Judge Lynn to: (a) rule that: (1) the discharged violations and any liability of the Reorganized Debtors and the other New Mirant Entities were discharged by the Plan, the Confirmation Order and the Bankruptcy Code; (2) the NGOs violated the Plan, the Confirmation Order and the Bankruptcy Code by sending the Notice, and will violate the Plan, the Confirmation Order and the Bankruptcy Code if they commence any action in federal district court or otherwise to assert the "discharged violations"; (3) the NGOs are in civil contempt for having violated the Confirmation Order by sending the Notice. As a result, the Reorganized Debtors are entitled to money damages; (4) the Notice is deemed invalid as to all alleged violations; and (5) the NGOs may not bring a cause of action under the Clean Air Act with respect to post-Effective Date violations until a new notice is issued in accordance with Section 7604(a)(1) of the Clean Air Act; (b) issue a temporary restraining order, and preliminary and permanent injunction, enjoining the NGOs from commencing or continuing, or encouraging any person or entity to initiate or continue, any action based on the discharged violations and requiring the NGOs to immediately withdraw the Notice; and (c) award amounts owed to the Reorganized Debtors based on the NGOs' breach of the Plan, including, all attorney's fees incurred. 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. MUSICLAND HOLDING: Committee Has Until November 3 to File Claim --------------------------------------------------------------- In a Court-approved stipulation, Musicland Holding Corp. and its debtor-affiliates, the Official Committee of Unsecured Creditors and the Secured Trade Creditors stipulate that the Creditors Committee's time to file any claim against the Secured Trade Creditors under the DIP Order is further extended until Nov. 3, 2006. The Creditors Committee reserves the right to seek the U.S. Bankruptcy Court for the Southern District of New York's permission for examination of the Secured Trade Creditors, provided that the Informal Committee of Secured Trade Vendors' rights to object to the examination of its members are reserved. Headquartered in New York, New York, Musicland Holding Corp., is a specialty retailer of music, movies and entertainment-related products. The Debtor and 14 of its affiliates filed for chapter 11 protection on Jan. 12, 2006 (Bankr. S.D.N.Y. Lead Case No. 06-10064). James H.M. Sprayregen, Esq., at Kirkland & Ellis, represents the Debtors in their restructuring efforts. Mark T. Power, Esq., at Hahn & Hessen LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Musicland Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) NATIONAL ENERGY: Littleton Electric Wants Claims Allowed -------------------------------------------------------- Littleton Electric Light Department asks the U.S. Bankruptcy Court for the Middle District of Maryland to: (1) grant summary judgment in its favor on the issue of whether its claims against NEGT Energy Trading Holdings Corporation and NEGT Energy Trading - Power, L.P. were timely filed and allow the Claims for purposes of distribution; and (2) overrule the Debtors' objection to its Claims. Littleton Electric asserts claims against the Debtors in connection with the rejection of their prepetition contracts: -- a Power Supply Agreement for Firm Energy dated March 14, 2002, between Littleton and ET Power, -- a Power Supply Agreement for Installed Capacity dated May 29, 2002, between Littleton and ET Power, and -- a Guarantee dated March 14, 2002, between Littleton and ET Holdings. The ET Debtors previously objected to four proofs of claim filed by Littleton because the claims were filed nearly 17 months after the bar date for filing proofs of claim in their Chapter 11 cases: Claim No. Claim Amount --------- ------------ 738 $11,024,377 739 11,024,377 740 1,701,315 741 1,701,315 Nathan F. Coco, Esq., at McDermott, Will & Emery LLP in Chicago, Illinois, asserts that the Littleton Claims were timely filed and the Contracts were executory as a matter of law on numerous legal grounds. Mr. Coco explains that the Littleton Contracts were executory as of the Debtors' bankruptcy filing as each party owed at least one continuing material duty to the other party under each of the Contracts. For example, Mr. Coco notes that under the Firm Energy Contract, ET Power's obligation to deliver power and Littleton's obligation to receive and pay for the power commenced on Jan. 1, 2004, after the Debtors' bankruptcy filing and will continue through Dec. 31, 2011, which proves the Firm Energy Contract's executory status as of the Debtors' bankruptcy filing. Moreover, the Debtors did not move to reject, and the Court did not approve the rejection of the Littleton Contracts at any point prior to confirmation of the ET Debtors' Amended Liquidation Plan, which means the Contracts remained executory contracts throughout the course of the ET Debtors' Chapter 11 cases until they were ultimately deemed rejected pursuant to the Court's Confirmation Order and Section 6.1 of the confirmed Plan, Mr. Coco adds. Mr. Coco asserts that applicable bar date for claims arising from the rejection of an executory contract pursuant to the Plan and Confirmation Order is June 1, 2005, not Jan. 9, 2004, as asserted by the Debtors. The ET Debtors cite in its Objection the provision of the Confirmation Order, which provides that "Except as expressly authorized herein, a Claim may not be filed after the Confirmation Date without the prior authorization of the Bankruptcy Court, and may be amended after the Confirmation Date solely to decrease the amount of the Claims." However, Mr. Coco points out, the Debtors ignore the opening clause, "except as expressly authorized herein" and fail to mention either provisions in the Confirmation Order or the Plan, each of which expressly establishes a separate deadline for rejection damage claims arising from a contract that is deemed rejected pursuant to the Confirmation Order and the Liquidating Plan. Moreover, according to Mr. Coco, the Court's order establishing the General Claims Bar Date provides that the Confirmation Order is an Order authorizing the rejection of an executory contract providing for a different bar date in which case a date will govern in all respects. Hence, Mr. Coco asserts, the specific bar date for rejection damage claims under the Confirmation Order and the Plan should be 30 days after the effective date of the Plan. The Plan became effective on May 2, 2005, while Littleton filed its Claims on May 27, 2005, well before the June 1, 2005 bar date. Additionally, Mr. Coco argues, the Debtors are barred from raising any new objections to the Littleton Claims other than on the grounds of timeliness, which the Debtors did by questioning the executory nature of the Contracts from which the Claims are based. Pursuant to the Confirmation Order, the last date by which the Debtors could file any objections to the allowance of the Littleton Claims was September 24, 2005. Mr. Coco notes that the Debtors either declined or failed to seek an extension of the objection deadline. Any new or additional objections that the Debtors could have raised to the Claims after September 24 are barred under the Confirmation Order, he asserts. About National Energy Bethesda, MD-based PG&E National Energy Group Inc. nka National Energy & Gas Transmission Inc. -- http://www.pge.com/-- develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company and six of its affiliates filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004. NEGT's affiliates -- NEGT Energy Trading Holdings Corp., NEGT Energy Trading - Gas Corporation, NEGT ET Investments Corp., NEGT Energy Trading - Power, L.P., Energy Services Ventures, Inc., and Quantum Ventures -- filed their First Amended Plan and Disclosure Statement on March 3, 2005, which was confirmed on Apr. 19, 2005. Steven Wilamowsky, Esq., and Jessica S. Etra, Esq., at Willkie Farr & Gallagher LLP represent the ET Debtors. (PG&E National Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) NATIONAL ENERGY: Wants Settlement Pact with ET Power & DTE Okayed ----------------------------------------------------------------- National Energy & Gas Transmission Inc. and NEGT Energy Trading - Power L.P. ask the U.S. Bankruptcy Court for the Middle District of Maryland to approve the settlement agreement they entered into with DTE Georgetown L.P. On July 6, 2005, ET Power filed a complaint to avoid preferential and fraudulent transfers and to recover property, amounting to $31,191,382, against DTE Georgetown pursuant to Sections 547, 548 and 550 of the Bankruptcy Court. Representing ET Power, Dennis J. Shaffer, Esq., Willkie Farr & Gallagher LLP, in New York, recounts that ET Power and DTE Georgetown were parties to a Tolling Agreement dated May 23, 2000. On May 24, 2000, PG&E Corporation entered into a Guarantee Agreement in favor of DTE pursuant to which, among other things, PG&E, as the assignor, guaranteed to DTE the payment when due of all amounts payable under the Tolling Agreement, subject to certain limitations. On Jan. 19, 2001, PG&E Corporation entered into an Assignment and Assumption Agreement with NEGT, as successor-in-interest to PG&E Gas Transmission, Northwest Corporation. Pursuant to the agreement, NEGT, among others, assumed the due and punctual performance, discharge and observation of all of PG&E Corp.'s obligations in, related to, or arising under the Guarantee. ET Power, DTE and NEGT entered into a Termination Agreement dated as of June 24, 2003, to terminate and extinguish all of their respective obligations and liabilities under and in respect of the Tolling Contract. In consideration of the Termination Agreement, ET Power agreed to pay $30,716,800 to DTE as Termination Payments. During the 90-day period prior to its bankruptcy filing, ET Power paid to DTE the Termination Payments and other payments pursuant to the Tolling Contract, which all totaled $31,191,382. DTE has asserted that it has defenses to the claims raised by ET Power's avoidance action, including its defense that the Guarantee covers its liability, if any, of up to $24,000,000. ET Power; Charles R. Goldstein, the Plan Administrator for ET Power's bankruptcy estate; NEGT; and DTE reached a settlement agreement to resolve the Avoidance Action. The parties agree that: (1) NEGT will pay $10,916,984 to ET Power's estate as initial settlement payment; (2) in addition to the initial settlement payment, there will be a settlement payment adjustment based upon the actual distribution to unsecured creditors; (3) ET will dismiss with prejudice the Avoidance Action; (4) the parties will release and waive each other from all claims relating to the Guarantee Contract and the Avoidance Action; and (5) the waivers by DTE and NEGT of any claims to which they would be entitled under Section 502(h) that have value to the ET Power's estate is expected to be $5,500,000. ET Power and NEGT each believes that the terms of the settlement are fair and equitable and in the best interests of their respective estates. The settlement provides a negotiated resolution of the issues between the Parties while avoiding costs, uncertainties and delays of litigation and collection. About National Energy Bethesda, MD-based PG&E National Energy Group Inc. nka National Energy & Gas Transmission Inc. -- http://www.pge.com/-- develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company and six of its affiliates filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004. NEGT's affiliates -- NEGT Energy Trading Holdings Corp., NEGT Energy Trading - Gas Corporation, NEGT ET Investments Corp., NEGT Energy Trading - Power, L.P., Energy Services Ventures, Inc., and Quantum Ventures -- filed their First Amended Plan and Disclosure Statement on March 3, 2005, which was confirmed on Apr. 19, 2005. Steven Wilamowsky, Esq., and Jessica S. Etra, Esq., at Willkie Farr & Gallagher LLP represent the ET Debtors. (PG&E National Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) NORTEL NETWORKS: Unit Inks New $1.6 Mil. Court Records System Pact ------------------------------------------------------------------ Nortel Government Solutions will continue development and operational support of a sophisticated records system for the Fairfax County, Virginia Circuit Court under a five-year agreement valued at $1.6 million. First implemented in 1996, the Fairfax County Courts Automated Recording System provides more than 1,400 users each day with automated access to more than 31 million recorded images and corresponding indexes dating back to 1742. CARS was initially designed for the Land Records department, but later enhanced with the help of Nortel Government Solutions to include the Judgments, Public Services and Probate Departments. The system is now used by banks, title examiners, law offices, mortgage companies and county agencies. Nortel Government Solutions developed and implemented the integrated scanning, point-of-sale, verification, storage and retrieval capabilities that enable CARS to capture images and index data. The system has been maintained and enhanced by Nortel Government Solutions for the past 10 years. "CARS has been a big success for Fairfax County," Chuck Saffell, chief executive officer, Nortel Government Solutions, said. "This new agreement is a testament to our performance in maintaining and enhancing the system for the past 10 years, and a vote of confidence in our ability to evolve and improve it with new technology over the next five years." About Nortel Government Solutions Headquartered in Fairfax, Virginia, Nortel Government Solutions -- http://www.nortelgov.com-- is a U.S. company wholly-owned by Nortel(x). It offers a one-stop shop for solutions designed to improve workforce productivity, reduce operating costs, and streamline inter-agency communications. Nortel Government Solutions is a network-centric integrator. About Nortel Networks Headquartered in Ontario, Canada, Nortel Networks Corporation (NYSE/TSX: NT) -- http://www.nortel.com/-- delivers technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world's greatest challenges. Nortel does business in more than 150 countries. * * * As reported in the Troubled Company Reporter on July 10, 2006, Dominion Bond Rating Service confirmed the long-term ratings of Nortel Networks Capital Corporation, Nortel Networks Corporation, and Nortel Networks Limited at B (low) along with the preferred share ratings of Nortel Networks Limited at Pfd-5 (low). All trends are Stable. DBRS confirmed B (low) Stb Senior Unsecured Notes; B (low) Stb Convertible Notes; B (low) Stb Notes & Long-Term Senior Debt; Pfd-5 (low) Stb Class A, Redeemable Preferred Shares; and Pfd-5 (low) Stb Class A, Non-Cumulative Redeemable Preferred Shares. As reported in the Troubled Company Reporter on June 20, 2006, Moody's Investors Service affirmed the B3 corporate family rating of Nortel; assigned a B3 rating to the proposed US$2 billion senior note issue; downgraded the US$200 million 6.875% Senior Notes due 2023 and revised the outlook to stable from negative. Standard & Poor's also affirmed its 'B-' long-term and 'B-2' short-term corporate credit ratings on the company, and assigned its 'B-' senior unsecured debt rating to the company's proposed $2 billion notes. The outlook is stable. NORTHWEST AIRLINES: Amadeus Wants Decision on Carrier Agreement --------------------------------------------------------------- Amadeus IT Group, S.A., asks the U.S. Bankruptcy Court for the Southern District of New York to compel Northwest Airlines, Inc., and its debtor-affiliates to assume or reject a Participating Carrier Agreement dated Feb. 16, 1990, between Northwest Airlines, Inc., and Amadeus Marketing S.A.R.L. Pursuant to the Agreement, Northwest supplies fares, schedules and other essential information, as well as a variety of reservations services, to Amadeus IT's global distribution system on terms that are non-discriminatory relative to information and services provided to subscribers of other GDSs. Subscribers to the Amadeus GDS are able to access the information from computers that are linked to the Amadeus GDS, make bookings on the participating airline, and take advantage of other travel services for the benefit of their business and their customers on the same terms as subscribers of other GDSs in which that airline participates. The Agreement requires that Northwest provide information and reservations services, at it own cost, on a basis that does not discriminate against Amadeus Subscribers. Amadeus relates that since the Debtors filed for bankruptcy: -- the Debtors have continued to use its services; and -- it has continued to render services to the Debtors and to permit travel agents and others to schedule and ticket flights on the Debtors' airline. Greg R. Yates, Esq., at Steptoe & Johnson LLP, in New York, notes that, like other major airlines, Northwest Airlines has relationships with multiple GDS providers. Northwest's management has had ample time to evaluate the services provided by those companies. Amadeus says that Northwest Airlines has not yet indicated whether it intends to assume the Agreement. Negotiations concerning the renewal of a related agreement have stalled. However, according to Mr. Yates, on July 21, 2006, Northwest Airlines announced that, effective Sept. 1, 2006, it would impose a surcharge against travel agents making reservations through the Amadeus reservation system. Northwest Airlines also stated that it might withhold content from Amadeus subscribing agencies. Northwest indicated that it would not impose the surcharge on reservations made through certain preferred distribution options, including "Sabre's Efficient Access Solution Product, Galileo's Content Continuity Product, Worldspan's Super Access Product, all G2 Switchworks Products, Farelogix's Direct Connect Product, Northwest's agency portal WorldAgentDirect.com, CorpNet Direct, nwa.com and WorldVacations Tour Source." Mr. Yates argues that any failure by Northwest Airlines to provide travel agencies subscribing to the Amadeus GDS with information and reservation services as advantageous as those provided to subscribers of other GDSs would make Amadeus's GDS services less comprehensive, or otherwise less attractive, to present and prospective travel agency subscribers. Thus, that discriminatory treatment of Amadeus' subscribers will impair Amadeus' ability to compete with other GDSs for new subscribers and cause irreparable disruptions to Amadeus' established relationships with its existing subscribers, he asserts. Mr. Yates also argues that any surcharges on Amadeus agencies, or withholding of content from them, would be in clear violation of the non-discrimination obligations undertaken by Northwest relative to Amadeus subscribers under the Agreement. Amadeus informs the Court that due to the drastic and immediate impact that the surcharge would have on its business, it has, pursuant to the Agreement, (1) instituted an arbitration in Paris, France, seeking a determination that Northwest's surcharge is in violation of the Agreement; and (2) sought an injunction from the Southern District of New York barring Northwest from imposing the surcharge on Amadeus subscribers or withholding content from them. Mr. Yates contends that absent the automatic stay and as a result of Northwest's postpetition breach, Amadeus would have the right to terminate the Agreement upon 15 days notice to Northwest, pursuant to the Agreement. About Northwest Airlines Northwest Airlines Corp. (OTC: NWACQ) -- http://www.nwa.com/ -- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). NORTHWEST AIRLINES: Wants Court Nod on Term Sheets for 5 Aircraft ----------------------------------------------------------------- Northwest Airlines, Inc., asks the U.S. Bankruptcy Court for the Southern District of New York to enter into, implement and perform the restructured financings and other agreements relating to five aircraft: -- aircraft with Tail Nos. N552NW and N555NW, pursuant to a restructuring term sheet dated August 15, 2006, among Northwest, U.S. Bank National Association as security trustee, and DVB Bank AG, HSH Nordbank, AG, and ING Bank N.V.; -- aircraft with Tail No. N357NB, under a restructuring term sheet dated Aug. 15, 2006, among Northwest, U.S. Bank N.A. as security trustee, and DVB Bank; -- aircraft bearing Tail No. N556NW, under a restructuring term sheet dated August 15, 2006, among Northwest, U.S. Bank N.A. as security trustee, and ING Capital LLC; and -- aircraft with Tail No. N557NW, pursuant to a restructuring term sheet dated Aug. 16, 2006, among Northwest, U.S. Bank NA as security trustee, Bayerische Landesbank, and DVB Bank. Northwest Airlines also seeks the Court's permission to file redacted versions of the Term Sheets. Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, asserts that the negotiated restructurings of the financing arrangements for the Aircraft will provide Northwest Airlines substantial savings over the existing financings. Moreover, the agreements, Mr. Ellenberg adds, will settle other disputes relating to each of the Aircraft, including certain administrative expense claims, and claims for modification of the existing financings. Northwest Airlines currently owns the Aircraft, in each case subject to a mortgage loan facility. The Lenders and U.S. Bank have a first priority lien and security interest in each Aircraft and related collateral that secures all amounts payable by Northwest under the respective indenture and related agreements. The parties in each Term Sheet have agreed to modify the financings for each Aircraft, including modifications favorable for Northwest and: (a) in connection with Aircraft with Tail Nos. N357NB, N552NW and N555NW, a reduction in the interest rate margins under the loan facilities effective Sept. 1, 2006, an option for Northwest Airlines to convert the applicable rate to a fixed rate on the effective date of the amendment; and (b) a reduction of the interest rate under each of the loan facility with regards to: Aircraft Tail No. Effective Date ----------------- -------------- N556NW August 20, 2006 N557NW January 16, 2007 Each of the Aircraft will serve as collateral under each of the Amended Indentures. Amended Indentures with regards to N552NW and N555NW will be cross-defaulted to each other provided that the benefits of the cross-collateralization and cross-default will only apply with respect to Aircraft on which DVB Bank, HSH Nordbank and ING Bank collectively hold 50% or more of the outstanding debt. To the extent that DVB holds 50% or more of the outstanding debt with respect to N357NB and continues to hold the same outstanding principal amount of debt on N552NW, N555NW and N557NW as of Aug. 15, 2006: * N357NB will also serve as collateral under the indentures for N552NW, N555NW and N557NW; and * an event of default with respect to N552NW, N555NW and N557NW will also constitute an event of default under the Amended Indenture for N357NB. Upon its effectiveness, each of the Amended Indentures will constitute Northwest's compliance with Section 1110(a)(2) of the Bankruptcy Code with respect to the related Aircraft. Any plan of reorganization filed by the Debtor will provide for reinstatement of the Amended Indentures. U.S. Bank, as security trustee, will be entitled to allowed general unsecured claims against Northwest as damages for reduction of the interest rates under the existing financings in these amounts: Claim Amount Aircraft Tail No. ------------ ----------------- $712,007 N552NW 723,832 N555NW 748,203 N357NB 1,049,652 N556NW 287,672 N557NW After Court approval of each of the Term Sheets, Northwest will pay these catch-up payments, with respect to: (i) N555NW, equal to all amounts of principal and interest due and owing through the date of payment at the non-default rate; (ii) N552NW, equal to all amounts of principal and interest that was due and owing on July 31, 2006, together with prorated interest for the period from July 31, 2006, to the date of payment at the non-default rate; and (iii) N556NW, equal to all amounts of principal and interest due and owing with respect to U.S. Bank's notices of default under the existing agreements relating to a payment due May 20, 2006, at the non-default interest rate. Other than with respect to the allowed unsecured claim, the Catch-up Payments and the Debtor's other obligations under the Term Sheet, the Lenders and U.S. Bank will waive any and all claims under the current indentures and other operative documents arising from the modification of those agreements pursuant to the Term Sheet, as well as all claims for amounts calculated under the original interest rates under the current indentures from the effective date of the amendment. The Lenders and U.S. Bank do not waive any of their secured claims with respect to all other claims under the current indentures, the Amended Indentures or other operative documents and reserve all rights with respect to those. Conditions precedent to effectiveness of the Amended Indentures include, among other things, preparation of definitive documentation, Bankruptcy Court approval, internal approvals of the Debtor and the Lenders, and payment any amounts required under the Term Sheet or the Section 1110(a) agreement. About Northwest Airlines Northwest Airlines Corp. (OTC: NWACQ) -- http://www.nwa.com/ -- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). NTL INC: In Talks With Four Buyout Firms Over Possible Takeover --------------------------------------------------------------- NTL Inc. is in talks with a group of four buyout firms including: -- Providence Equity Partners Inc. -- Blackstone Group LP -- Kohlberg Kravis Roberts & Co., and -- Cinven Ltd. about a potential offer for Britain's biggest cable-television company, Bloomberg News reports citing two unnamed sources. According to the sources, the firms are contemplating a takeover bid as NTL faces growing competition from British Sky Broadcasting Group Plc and BT Group Plc. "The company is an attractive target for private equity" because of its cash flow and assets, Aryeh Bourkoff, an analyst at UBS AG in New York, told Bloomberg. In March 2005, NTL received and rejected several unofficial takeover bids from private equity firms. The Times reports that at least two investors are planning to write NTL CEO Steve Burch to complain about the board's decision to reject a US$32-a-share offer in 2005. As previously reported in TCR-Europe, NTL opened itself to a GBP8 billion private equity offer on Aug. 8 after sustaining a significant drop in customers. In the company's financial report for the second quarter ending June 30, 2006, net customer disconnections are 18,900 compared with 25,800 net customer additions in the first quarter and 62,500 net customer additions for the second quarter in 2005. According to the report, the group declined an unofficial GBP8 billion takeover offer from a consortium including Apax Partners, Cinven and Permira last year, claiming that it was below the company's worth. Since then, NTL's share price dropped from US$27.25 to US$22.76. About Providence Equity Providence Equity Partners Inc. is a private investment firm specializing in equity investments in communications and media companies around the world. The principals of Providence Equity manage funds with over US$9 billion in equity commitments, including Providence Equity Partners V, a US$4.25 billion private equity fund, and have invested in more than 80 companies operating in over 20 countries. Providence Equity currently has offices in Providence, Rhode Island, London, England, and New York, New York. About Blackstone Group The Blackstone Group -- http://www.blackstone.com/-- a global private investment and advisory firm, was founded in 1985. The firm has raised a total of more then US$63 billion for alternative asset investing since its formation. The Blackstone Group's core businesses are Private Equity Investing, Private Real Estate Investing, Corporate Debt Investing, Hedge Funds, Mutual Fund Management, Private Placement, Marketable Alternative Asset Management, and Investment Banking Advisory Services. About KKR Kohlberg Kravis Roberts & Co., one of the world's largest and most successful private equity firms, has completed buyout transactions that are among the most complex in history. The firm's investment approach, however, is fundamentally simple: KKR acquires industry- leading companies and works with management to improve them and create shareholder value. About Cinven Established in 1977, Cinven Ltd. is one of the most prominent and successful investors in the European buyout market. About NTL Inc. Headquartered in London, England, NTL Inc. (NASDAQ: NTLI) -- http://www.ntl.com/-- is a Delaware corporation and is publicly- traded is the US on the Nasdaq Global Select Market under the symbol "NTLI." The Company provides broadband, digital television, telephony, content and communications services, reaching over 50% of UK homes and 85% of UK businesses. * * * In July 2006, Fitch Ratings assigned NTL Cable PLC's $550 million 10-year senior notes a rating of B and a Recovery Rating of RR5. NTL Cable's existing senior notes were removed from Rating Watch Negative, and downgraded to B. At the same time, Fitch affirmed NTL Inc.'s Issuer Default rating at B+ with Stable Outlook and its Short-term rating at B. NTL Investment Holdings Limited's GBP5.275 billion senior secured credit facilities were affirmed at BB+ and Recovery Rating RR1. O'SULLIVAN IND: Inks Stipulation with Mirisola to Pursue Action --------------------------------------------------------------- On Dec. 19, 2005, Marie Mirisola commenced an action in state court against the Debtors, alleging negligence and seeking recovery for a personal injury she allegedly suffered in December 2002 on a property controlled by the Debtors. On July 27, 2006, Ms. Mirisola filed a Motion to suspend the stay of the State Court Proceedings. Ms. Mirisola now wishes to proceed, in name only, against the Debtors in the State Court Action in order to seek judgment against the proceeds of any available insurance of the Debtors. To permit Ms. Mirisola to proceed in the State Court Action and to ensure that the proceedings will not affect the Debtors' bankruptcy estates, To resolve their dispute, the Debtors and Ms. Mirisola stipulate that: (a) The automatic stay will be modified for the limited purposes of allowing Ms. Mirisola to: -- discover the name or names of the insurers, if any, which have provided coverage to the Debtors for her claims; -- discover the policy or policies issued to the Debtors, which provide the coverage; -- discover the terms and limits of the insurance coverage; and -- pursue to final judgment her rights in the State Court Action against the Debtors in name only and solely Against any insurance proceeds that may be available to satisfy her claim; (b) Ms. Mirisola waives, and will be barred from asserting, any claims against the Debtors and their estates; and (c) Ms. Mirisola will withdraw her Stay Relief Motion. Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings, Inc. -- http://www.osullivan.com/-- designs, manufactures, and distributes ready-to-assemble furniture and related products, including desks, computer work centers, bookcases, filing cabinets, home entertainment centers, commercial furniture, garage storage units, television, audio, and night stands, dressers, and bedroom pieces. O'Sullivan sells its products primarily to large retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and Office Depot. The Company and its subsidiaries filed for chapter 11 protection on Oct. 14, 2005 (Bankr. N.D. Ga. Case No. 05-83049). Joel H. Levitin, Esq., at Dechert LLP, represents the Debtors. Michael H. Goldstein, Esq., Eric D. Winston, Esq., and Christine M. Pajak, Esq., at Stutman, Treister & Glatt, P.C., represent the Official Committee of Unsecured Creditors. On Sept. 30, 2005, the Debtor listed $161,335,000 in assets and 254,178,000 in debts. (O'Sullivan Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PAN AM CORP: Admin. Claim Holders Can Confirm Claims Until Nov. 30 ------------------------------------------------------------------ On July 6, 2006, Pan Am Corporation and its debtor-affiliates obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to make final distribution to administrative creditors. Holders of administrative claim will receive pro rata share of the final distribution minus any tax or other withholdings, reasonably determined by the Debtors to be legally required. Claimants who did not receive mailed notices or who received forwarded mailed notices must provide Wells Fargo Bank N.A. -- the Debtors' distribution agent -- an updated contact information until Nov. 30, 2006. The Distribution Agent can be reached by: -- toll-free service and information line 1-877-813-3539 between 9 a.m. and 5 p.m. EST, Monday to Friday -- mail to: Pan Am Liquidation Trust c/o Wells Fargo Bank N.A. P.O. Box 2370 Minneapolis, MN 55402-0370 Additional information regarding the final distribution can be accessed at http://www.panamliquidationtrust.com/ Headquartered in New York City, New York, Pan Am Corporation is a holding company for Pan American World Airways, Pan Am Express and the Pan Am Shuttle. The Company's air transportation included flights to Latin America, Europe, Middle East, Africa, the Bahamas and domestic locations. Pan Am and certain of its affiliates filed for chapter 11 protection on Jan. 8, 1991 (Bankr. S.D.N.Y. Case No. 91-10080). On Feb. 15, 1996, Pan Am Liquidation Trust was formed to handle distribution to claim holders. Paul A. Rendich, Esq. serves as responsible officer and trustee. The distribution fund is from settlement proceeds with Libya regarding loss of Flight 103 over Lockerbie, Scotland. PERFORMANCE TRANSPORTATION: Donald Crumlich Wins Lift-Stay Plea --------------------------------------------------------------- The Honorable Michael J. Kaplan of the U.S. Bankruptcy Court for the Western District of New York modifies the automatic stay to permit Donald W. Crumlich, Jr., to pursue his bodily injury action against Debtor Leaseway Motorcar Transport Company before the Connecticut State Court. Mr. Crumlich asserts a personal injury claim against Leaseway believing that it maintains a liability insurance with a pre- accident deductible of $1,000,000. Mr. Crumlich was a passenger in one of the three vehicles involved in a June 2004 accident, one of which was owned by Leaseway. Janet G. Burhyte, Esq., at Gross Shuman Brizdle & Gilfillan, P.C., in Buffalo, New York, estimated Mr. Crumlich's personal injury claim not to exceed $1,000,000. Performance Transportation Services, Inc., and its debtor- Affiliates had asked the Court to deny Mr. Crumlich's request. The Debtors had argued that if the Court grants Mr. Crumlich's request, he would receive preferential treatment of his claim in direct violation of the principle that similarly situated creditors are to be treated similarly. The Debtors had claimed that they will obligated to pay the first $1,000,000 of any defense costs incurred or damages awarded in connection with Mr. Crumlich's personal injury action. 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) PIERRE FOODS: S&P Affirms Low-B Ratings With Negative Outlook ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B+' bank loan rating and raised its recovery rating on Pierre Foods Inc.'s senior secured credit facility to '2' from '3', indicating that investors could expect substantial recovery of principal in the event of a payment default. Pierre Foods has added $24 million to its original $150 million term loan B. Prior to the add-on, the company had repaid about $43 million of the $150 million term loan. The existing ratings on the company, including its 'B+' corporate credit rating, have also been affirmed. The outlook is negative. Pro forma for the transaction, the company is expected to have about $256.8 million in total debt outstanding, excluding operating lease obligations. The rating actions follow the company's recent announcement that it has signed a non-binding letter of intent to acquire Clovervale Farms Inc., a producer and distributor of prepackaged food products, for $22.8 million. Clovervale serves the military and school distribution channels. In addition to expanding the company's presence in these channels, the acquisition adds some diversity to Pierre's existing product pipeline, including boxed and compartmentalized meals and other ready-to-eat sandwiches. "The ratings on Pierre Foods reflect its modest scale of operations, high customer concentration, and leveraged financial profile," said Standard & Poor's credit analyst Mark Salierno. "These factors are partially mitigated by the company's leading position in the niche markets for formed, precooked beef and microwavable sandwiches and by the company's ability to manage raw material costs through market-related pricing." With sales of $431.6 million in fiscal 2006 (ended March), Pierre Foods manufactures and markets processed food items with a niche focus on formed, pre-cooked protein products and hand-held convenience sandwiches. PILGRIM'S PRIDE: Gold Kist Buy Offer Cues Moody's to Hold Ratings ----------------------------------------------------------------- Moody's Investors Service affirmed the Ba2 senior unsecured, Ba3 senior subordinated, and Ba2 corporate family ratings for Pilgrim's Pride Corporation, but changed the outlook to negative from stable. This rating action follows the company's announcement that it has made an offer to acquire Gold Kist, Inc. for approximately $1 billion in cash plus the assumption of $144 million in Gold Kist Debt. The change in the outlook to negative reflects the possibility that Pilgrim's Pride's capital structure and financial profile could change materially should it succeed in its bid to acquire Gold Kist. While it remains highly uncertain whether any transaction will be consummated, and if it were what the ultimate post-transaction capital structure would be, the transaction could result in a significant increase in Pilgrim's Pride's debt and leverage. PPC has maintained a conservative capital structure with modest debt and plentiful cash -- largely reflective of an investment grade credit. However the company's narrow product mix, highly volatile earnings stream, and history of periodic debt-financed acquisitions constrain the rating. Using financial data including the lagging 12-months ended July 2006, the factors underlying Moody's Rating Methodology for Global Natural Product Processors indicate a rating of Baa3, two notches higher than the company's actual Ba2 rating. In Moody's view, PPC's high degree of earnings volatility, the recent severe earnings pressure in the overall poultry industry, the likelihood that financial metrics from its existing business could weaken further in the near term, the risk of leveraged acquisitions -- such as the recent offer to acquire Gold Kist -- justify a rating lower than the rating methodology might otherwise indicate. Headquartered in Pittsburgh, Texas, Pilgrim's Pride is a major US chicken processor and producer of value-added chicken products. PREMIUM PAPERS: Court Okays Smart Papers Asset Sale to Plainfield ----------------------------------------------------------------- The Hon. Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware approved an offer from Plainfield Asset Management to buy Smart Papers LLC's assets and assume $40 million of its debt, the Journal-News reports. As reported in the Troubled Company Reporter on Aug. 18, 2006, other terms of the takeover include $5 million in interim financing for Smart Papers to be followed by $5 million for the reorganized company, including a $2 million payment plan now owed to International Paper. According to the news, Hamilton Mayor Don Ryan said he was told that Plainfield plans to get the company the cash it needs to stay in business and come out of bankruptcy. "That will ensure the company will have the necessary resources to continue operations, including normalizing vendor relationships, purchasing raw materials and providing employees Plainfield's commitment to stabilize operations and create the foundation for the future," Mr. Ryan commented. "They were very upbeat and very positive. From what I gather, they have the wherewithal both in funds and management personnel to be able to step back and look at the whole picture and come in and revitalize." Journal-News staff writer Lisa A. Bernard states that Plainfield Representatives are scheduled to meet with city officials in September. Al Williamson, president of United Steelworkers 1967 which represents more than 300 Smart Papers workers, said his group also will meet with Plainfield reps, but a date has yet to be set, Ms. Bernard adds. Headquartered in Hamilton, Ohio, Premium Papers Holdco, LLC, -- http://www.smartpapers.com/-- is an independent manufacturer and marketer of a wide variety of premium coated and uncoated printing papers, such as Kromekote, Knightkote, and Carnival. The Company and its debtor-affiliates, SMART Papers LLC and PF Papers LLC, filed for chapter 11 protection on March 21, 2006 (Bankr. D. Del. Case No. 06-10269). Ian S. Fredericks, Esq., at Young, Conaway, Stargatt & Taylor, LLP, represents the Debtors. Mary E. Seymour, Esq., at Lowenstein Sandler PC, represents the Official Committee of Unsecured Creditors. Traxi LLC serves as the Debtors' financial advisor. When the Debtors filed for protection from their creditors, they listed unknown estimated assets and $10 million to $50 million estimated debts. PREMIUM PAPERS: Has Until November 16 to File Chapter 11 Plan ------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Washington extends the period within which Premium Papers Holdco, LLC, and its debtor-affiliates have the exclusive right to file a chapter 11 plan through Nov. 16, 2006. The Court also extends the Debtors' period to solicit acceptance of that plan until Jan. 15, 2007. The Debtors tell the Court that it has devoted its time to the selling of all of their assets, including responding to inquiries from and facilitating due diligence efforts by parties expressing an interest in the Debtors' assets. The extension, the Debtors believe, will give them opportunity to propose a plan of reorganization without the deterioration and disruption of the Debtors' business that caused by the filing of competing plans by non-Debtor parties. The Debtors add that the extension is necessary to enable them to: i) complete the auction and sale process; ii) formulate the terms of a chapter 11 plan; and iii) seek input from their various creditor constituencies. Headquartered in Hamilton, Ohio, Premium Papers Holdco, LLC, -- http://www.smartpapers.com/-- is an independent manufacturer and marketer of a wide variety of premium coated and uncoated printing papers, such as Kromekote, Knightkote, and Carnival. The Company and its debtor-affiliates, SMART Papers LLC and PF Papers LLC, filed for chapter 11 protection on March 21, 2006 (Bankr. D. Del. Case No. 06-10269). Ian S. Fredericks, Esq., at Young, Conaway, Stargatt & Taylor, LLP, represents the Debtors. Mary E. Seymour, Esq., at Lowenstein Sandler PC, represents the Official Committee of Unsecured Creditors. Traxi LLC serves as the Debtors' financial advisor. When the Debtors filed for protection from their creditors, they listed unknown estimated assets and $10 million to $50 million estimated debts. PROFESSIONAL INVESTORS: Section 341(a) Meeting on September 8 ------------------------------------------------------------- The U.S. Trustee for Region 6 will convene a meeting of Professional Investors Insurance Group, Inc.'s creditors at 10:00 a.m., on Sept. 8, 2006, in Room 976, U.S. Trustee's Office at 1100 Commerce Street in Dallas, Texas. This will be the first meeting of creditors as required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Plano, Texas, Professional Investors Insurance Group, Inc., filed for chapter 11 protection on Aug. 9, 2006 (Bankr. N.D. Tex. Case No. 06-33278). John P. Lewis, Jr., Esq., represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets between $10 million and $50 million and debts between $1 million and $10 million. QUANTUM CORP: Completes Acquisition of ADIC for $770 Million ------------------------------------------------------------ Quantum Corp., completed its acquisition of Advanced Digital Information Corp. Under the terms of the definitive agreement the Company acquired all of ADIC and its outstanding shares for $770 million, primarily in cash. The Company is funding the transaction through a combination of cash on hand and approximately $500 million in financing from a group of banks and other lending institutions. The annual interest expense resulting from the financing is expected to be approximately $50 million. As a result of intensive integration planning over the last few months, the Company has identified annualized cost synergies of approximately $75 million to $80 million, compared to the $45 million it had initially estimated. The Company expects to begin realizing the benefit of a significant portion of the synergies by the end of the calendar year, the majority of the synergy savings by the end of its fiscal year, and the remaining synergy benefits in the following two quarters. The synergies will reduce both cost of goods sold and operating expenses and primarily be generated by eliminating redundancies in internal programs, processes and employee positions, rationalizing facilities, leveraging higher manufacturing volumes to reduce supply chain costs, and streamlining procurement processes. With the acquisition of ADIC, the Company offers a comprehensive portfolio of platform-independent systems, software, devices and media. In addition, with combined revenues exceeding $1.2 billion over the last four quarters and a significantly larger sales and service infrastructure, the Company now has the scale to engage with customers at a more strategic level. The Company further disclosed that, it will continue to sell and support all current Quantum and ADIC products; sell all products through the companies' respective partners and distribution channels; and maintain existing service contracts and product warranties. The Company will have nearly a thousand Sales, Marketing and Service employees providing informed expertise, advice and support to customers around the world. Based in San Jose, California, Quantum Corp., (NYSE: DSS) -- http://www.quantum.com-- formerly a maker of hard disk drive for desktop computers, now produces digital linear tape technology, such as DLT devices, automated tape library systems, and the tape cartridges used in these systems. * * * As reported in the Troubled Company Reporter on Aug. 22, 2006 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. QUIGLEY CO: Wants DIP Facility Extended Until March 2007 -------------------------------------------------------- Quigley Co., Inc., asks the U.S. Bankruptcy Court for the Southern District of New York to extend until March 5, 2007, the maturity date under its $20-million postpetition financing agreement with Pfizer Inc. The DIP facility matures on Sept. 7, 2006. The Debtor is also asking the Court for permission to access its parent company's cash collateral until the March 5 deadline. The original credit pact was signed on March 6, 2003. Under that agreement, Pfizer provides secured loans and advances on a revolving basis to Quigley. The loans are secured by liens approved by the Court under Sec. 364 of the Bankr. Code. Lawrence V. Gelber, Esq., at Schulte Roth & Zabel LLP, in New York City that the proposed extension, is not a "material amendment" to the DIP Facility. Although the DIP Facility remains undrawn at the present time, Quigley nevertheless seeks to extend the DIP Facility so that the financing continues to be available in the event that it is needed in the future, as Quigley proceeds toward confirmation and consummation of its Plan. A copy of the proposed budget on the use of the cash collateral and the DIP Facility is available for free at: http://ResearchArchives.com/t/s?1059 Headquartered in Manhattan, Quigley Company, Inc., is a subsidiary of Pfizer, Inc., which used to produce and market a broad range of refractories and related products to customers in the iron, steel, glass and other industries. The Company filed for chapter 11 protection on Sept. 3, 2004 (Bankr. S.D.N.Y. Case No. 04-15739) to resolve legacy asbestos-related liability. Michael L. Cook, Esq., Lawrence V. Gelber, Esq., and Jessica L. Fainman, Esq., at Schulte Roth & Zabel LLP, represent the Company in its restructuring efforts. Albert Togut, Esq., at Togut Segal & Segal serves as the Futures Representative. Elihu Inselbuchm Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed $155,187,000 in total assets and $141,933,000 in total debts. RADIOSHACK CORPORATION: 2006 Results Cue Fitch's Ratings Downgrade ------------------------------------------------------------------ Fitch Ratings downgraded these ratings for RadioShack Corporation: -- Issuer Default Rating to 'BB+' from 'BBB' -- Bank credit facility to 'BB+' from 'BBB' -- Senior unsecured notes to 'BB+' from 'BBB' -- Commercial paper to 'B' from 'F2' The Rating Outlook is Stable. Approximately $500 million of debt is affected by these actions. The downgrades reflect RadioShack's weaker than expected operating results year-to-date in 2006 and the challenges associated with executing a turnaround in the face of increasing competition in the company's core product segments. The ratings also reflect Fitch's expectation for modest improvement in the company's performance in 2007 as a result of the cost cutting and other turnaround initiatives implemented this year. RadioShack continues to experience weakness in its core wireless business, which represents about one-third of its total revenues, through June 30, 2006. Wireless sales were down 3% in the first half of 2006 reflecting poor execution of the transition to Cingular from Verizon at the end of 2005, Verizon's continued stronghold in key markets in the northeast and northwest regions, and increased competition from other retailers, as well as direct- to-consumer distribution by the wireless carriers themselves. Although sales in the first half of 2006 increased in some of the company's product categories like accessories (up 4%) and personal electronics (up 22%), they were inadequate in offsetting sales declines in wireless and modern home products such as home audio and video end-products, computers, etc. (down 6%). In addition, the areas that expanded, such as kiosk operations, personal electronics, and services, generated lower operating margins than the other businesses, contributing to a decline in the company's EBITDA margin to 6.6% in the 12 months ended June 30, 2006 from 12.6% a year earlier. To gain greater customer acceptance, RadioShack is carrying out targeted marketing campaigns in local markets where Cingular is weak in hopes of increasing its wireless sales. In addition, the company has remodeled over 1,000 stores in the past several years and is in the process of re-merchandising all of its stores to include more popular products like the flat-panel televisions and MP3 players and accessories. Fitch anticipates these initiatives will take time to gain traction. Given the company's weak sales and lower operating margins, its credit metrics have come under pressure and are expected to remain below their historical levels over the near to medium term. In the 12 months ending June 30, 2006, FFO fixed charge coverage dropped to 1.8x from 2.6x while total adjusted debt/EBITDAR increased to 4.7x from 3.0x in 2005. At the same time, RadioShack's liquidity remains adequate with cash of approximately $170 million and availability of around $575 million under its credit facilities as of June 30, 2006. Fitch recognizes that a new top management team headed by CEO Julian Day will provide additional energy to the company's turnaround efforts. In addition, the recent closure of 480 stores and the cost savings from the consolidation of distribution centers and the headquarters staffing reduction (400-450 employees) will lead to some margin improvement in late 2006 and 2007. However, generating additional top-line momentum and restoring margins to historical levels through changes to the merchandise mix and improved service levels within the stores will take additional time. REAL ESTATE: Section 341(a) Meeting Scheduled on September 15 ------------------------------------------------------------- The U.S. Trustee for Region 10 will convene a meeting of Real Estate Investors of Decatur, LLC's creditors at 11:30 p.m., on Sept. 15, 2006, in Courtroom 5C, Macon County Courthouse, at E. Wood Street in Decatur, Illinois. This is the first meeting of creditors as required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Decatur, Illinois, Real Estate Investors of Decatur, LLC, own four hotel in Illinois. The Company filed for chapter 11 protection on Aug. 9, 2006 (Bankr. C.D. Ill. Case No. 06-71033). John Barr, Esq., at Barr & Barr represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. REDCITY SEARCH: Gets TSX Nod to Complete Private Placement ---------------------------------------------------------- redCity Search Company Inc. received conditional approval of the TSX Venture Exchange to complete: (i) its private placement; (ii) its acquisition of all of the issued and outstanding securities of Zip411 Enterprises Inc.; (iii) its acquisition of all of the issued and outstanding securities of Offsite Corporation; (iv) the settlement of a total of $4,927,249.33 in outstanding liabilities of the Company in exchange for the issuance of 23,708,997 common shares; and (v) the redemption of its 944,444 issued and outstanding preferences shares, series A, subject to satisfaction of certain conditions imposed by the TSX-V. Private Placement redCity confirms that it is proceeding with its "best efforts" private placement at $0.05 per common share of the Company for minimum gross proceeds of $8,000,000. A syndicate led by GMP Securities L.P. and including Orion Securities Inc. is acting as the Company's agents of the Offering. redCity agreed to grant to the Agents an option to sell additional common shares, at the Offering Price, equal to up to 15% of the number of common shares sold on the closing date of the Offering. The Over-Allotment Option will be exercisable for a period of 30 days from the closing date of the Offering. The Offering is subject to TSX-V and shareholder approvals as well as the satisfaction by the Company of certain conditions precedent, including obtaining the approval of the TSX-V for the acquisitions of Zip411 and Offsite. The proceeds raised from the Offering will be used by the Company to fund payment of the cash portion of the purchase price for Zip411 Enterprises Inc., the cash portion of the purchase price of Offsite, to repay certain outstanding indebtedness, to pay the expenses of the Offering and related transactions and for general working capital purposes. All common shares issued pursuant to the Offering will be subject to the four-month hold period prescribed under applicable securities laws and the policies of the TSX Venture Exchange. Shareholder Approval The Offering will result in, or will be considered part of a transaction that will result in, the creation of a new control person of redCity. The TSX-V advised redCity that it requires consent from disinterested shareholders, holding more than 50% of the issued and outstanding common shares of redCity, to all Transactions. TSX-V policies provide that shareholder approval may be obtained by ordinary resolution at a general meeting of Shareholders or by the written consent of shareholders holding more than 50% of the issued common shares. Shareholders of redCity who do not have an interest in any of the Transactions, excluding existing shareholders who intend to participate in the Offering, are eligible to be included in calculating disinterested shareholder approval to the creation of a new control person, the change of control and the change of management of redCity. Accordingly, redCity is seeking written consent of its disinterested shareholders. Acquisition of Zip411 On April 21, 2006, redCity entered into an agreement in principle to acquire Zip411 for a total purchase price of $5.4 million. Zip411 (formerly Tamec Inc.) is a national database publisher and internet service provider based in Montreal, Quebec. Pursuant to the Zip411 Acquisition, it is anticipated that redCity will acquire all of the issued and outstanding shares of the parent holding companies of Zip411 (9029-6534 Quebec Inc., which is controlled by Michel Lafontaine and hold 50% of the shares of Zip411, and 9060-8951 Quebec Inc., which is controlled by Yves St- Sauveur and holds 45.91% of the shares of Zip411) and the 4.09% interest in Zip411 held directly by Michel Lafontaine. Initially, the purchase price consisted of a cash payment of $3 million, 9,600,000 common shares of redCity (with an ascribed value of $0.25 per share) and settlement of shareholder loans in the principal amount of $236,267. In addition, redCity intended to grant to the sellers of Zip411 up to 2,600,000 warrants to purchase common shares of redCity, which warrants would be exercisable, at prices ranging from $0.25 to $0.60 per share, for a period two years from the closing date. In accordance with the JLA Term Sheet and the GMP Engagement Letter, the terms of payment were subsequently amended to reduce the cash payment portion of the purchase price to $2,000,000 from $3,000,000 and to increase the aggregate number of securities to be issued by redCity to 13,600,000 common shares (up from 9,600,000) and 3,600,000 warrants (up from 2,600,000). The parties have agreed to further amendments to the purchase price to provide for the assignment to redCity by the vendors of their outstanding shareholder loans to Zip411 in the total amount of $200,000 and to further amendments to the number and terms of the warrants. redCity proposes to acquire the outstanding Zip411 shareholder loans for the face value thereof by issuing to the vendors a total of 4,000,000 common shares at a deemed value of $0.05 per share. redCity further proposes to increase the total number of warrants issuable to the vendors to 8,600,000 and to reduce the exercise price to $0.25 per share. It is proposed that the warrants will be exercisable until the later of (i) the second anniversary of the closing date, and (ii) subject to redCity's graduation to Tier 1 of the TSX-V Exchange and receipt of all necessary approvals, the fifth anniversary of the closing date. The vendors will provide customary representations and warranties regarding their holdings in Zip411 and in respect of Zip411 and its business. These representations and warranties are supported by indemnities from the vendors. In further support for the vendors' indemnities, redCity will deposit into escrow 2,500,000 of the common shares issued at closing. The escrowed shares will be subject to release to redCity should it make an uncontested or otherwise successful claim for indemnification against the vendors. If redCity does not make a claim for indemnification by Aug. 31, 2008, such shares will be released to the vendors. redCity intends to enter into employment agreements with each of Michel Lafontaine, currently a director and President and Chief Executive Officer of Zip411, and Yves St-Sauveur, currently a director and Vice-President, Sales of Zip411, pursuant to which Messrs. Lafontaine and St-Sauveur will become officers of redCity, namely Vice-President Operations and Vice-President Sales, respectively. In addition, Mr. Lafontaine will be appointed to redCity's board of directors. Closing of the Zip411 Acquisition is subject to and conditional upon the completion by redCity of a private placement offering of its common shares with gross proceeds of at least $7,000,000. Acquisition of Offsite Corporation redCity and Blair H. Calder entered into an agreement in principle pursuant to which redCity will acquire all of the outstanding shares of Offsite Corporation for a total purchase price of $375,000. Offsite is a custom software development company located in Toronto, Ontario. It is currently a service provider to redCity under a services agreement dated June 14, 2004, and Mr. Calder serves as redCity's Chief Information Officer. redCity intends to satisfy payment of the purchase price by $100,000 cash and the issuance of 1,750,000 common shares of redCity, with an ascribed value of $0.10 per share, at closing. An additional $100,000, and 750,000 of the common shares issued to Mr. Calder at closing, will be held in escrow and released to Mr. Calder upon completion of a technology transition period agreed to by the parties. redCity has agreed to enter into consulting agreements with certain former employees of Offsite. In addition, Mr. Calder will receive an aggregate of 250,000 warrants to purchase common shares of redCity, each such warrant exercisable at a price of $0.45 for a period of not more than two years from closing. Closing of the Offsite Acquisition is subject to certain conditions, including the concurrent closing of the Offering. Upon closing of the Offsite Acquisition, Mr. Calder will resign from his positions with redCity. Debt Settlement As at Aug. 17, 2006, redCity had outstanding indebtedness owing to trade and other creditors in the aggregate amount of $6,427,249.33. redCity anticipates settling $4,927,249.33 by the issuance of its common shares at prices ranging from $0.05 to $0.854 per share. Series A Share Redemption redCity has 944,444 issued and outstanding Series A Shares, 611,111 of which are held by ABM Investments Limited and 333,333 of which are held by Gould Leasing Ltd. Holders of Series A Shares are entitled to receive a cumulative annual dividend of 13.9%. The terms of the Series A Shares provide that redCity may at any time call the Series A Shares for redemption upon payment of the redemption price of $0.90 per share and all accrued and unpaid dividends. To satisfy the Offering closing condition, redCity called the Series A Shares for redemption and paid to the holders thereof $0.90 per share and the further sum of $0.06245 per share representing a dividend for the period from Feb. 1, 2006 (being the last dividend payment date) to July 31, 2006. As the Series A Shares were not redeemed on the Deemed Redemption Date, an additional amount of approximately $0.00034 per share per day, representing a dividend for the period from the Deemed Redemption Date to the actual date of redemption, is to be paid on the Series A Shares. Consequently, the total amount of approximately $0.96245 per share (plus $0.00034 per share per day after the Deemed Redemption Date to and including the actual date of redemption) is to be paid. The aggregate Redemption Amount payable by redCity is anticipated to be $914,445.84, based on calculations as of Aug. 17, 2006. About redCity Based in Toronto, Ontario, Canada, redCity Search Company Inc. (TSX VENTURE:RDC) -- www.redcitysearch.com -- operates local search engines that allow users to find local businesses quickly and easily. redCity's search websites include www.redToronto.com and www.redMississauga.ca. The Company also publishes The Red Pages, a print directory of the websites of local Toronto businesses, which is distributed to 400,000 households and businesses throughout Toronto. At March 31, 2006, the Company's balance sheet showed a stockholders' deficit of CDN$1,786,227, compared to a deficit of CDN$483,520 at March 31, 2005. REFCO INC: Official Committees Create Joint Subcommittee -------------------------------------------------------- In a stipulation approved by the U.S. Bankruptcy Court for the Southern District of New York, members of the Official Committee of Unsecured Creditors of Refco Inc., and its debtor-affiliates, and the Additional Official Committee, along with Marc S. Kirschner, the Chapter 11 trustee for Refco Capital Markets, Ltd., agree that: (1) The Official Committees will create a joint subcommittee composed of the appointed and then serving members of the Official Committee and the Additional Official Committee. The Joint Subcommittee will represent the interests of all unsecured creditors in the Debtors' Chapter 11 cases with respect to all issues other than with respect to asset allocation, intercompany claim, and Chapter 11 plan issues between RCM and the other Debtors. (2) The Joint Subcommittee and its members will be subject to bylaws of the original nine-member committee, as agreed to and accepted by the Original Committee on November 14, 2005, including the obligation to maintain information confidentiality and deliberations of the Joint Subcommittee. However, those may be disclosed to certain professionals retained by each of the Official Committees and the Joint Subcommittee. (3) Each of the Official Committees and the Joint Subcommittee will be deemed to have retained and will be permitted to use the services of all professionals previously retained by the Original Committee, including Milbank, Tweed, Hadley & McCloy LLP, Houlihan, Lokey, Howard & Zukin LLC, and Kasowitz Benson Torres & Friedman LLP. However, Milbank will not be retained as counsel by the Additional Official Committee without prior written consent of both the Official Committees. None of the professionals retained by any of the Official Committees will act as attorneys or financial advisors for any individual member of the Official Committee or the Additional Official Committee, or any other creditor in any matter relating to the Debtors' cases. The Stipulation will not limit the right of each of the Official Committees to seek to retain additional professionals pursuant to Section 1103(a) of the Bankruptcy Code. (4) The Official Committees and the Joint Subcommittee will be permitted to use the Original Committee Professionals to assist the parties with respect to fact finding and analysis on matters in respect of which the Original Committee Professionals have performed. The RCM Trustee will be permitted access to all financial information and analysis prepared by the Original Committee Professionals. The RCM Trustee may, although not on the basis of an advisor-client relationship, consult with the Original Committee Professionals concerning information and analysis and may also request that those professionals prepare reports and financial models to assist him with respect to fact finding and analysis on certain matters. None of the Official Committees, the Joint Subcommittee or the RCM Trustee may use any of the Original Committee Professionals as expert witnesses in litigation adverse to any of the other Parties. However, if both of the Official Committees expressly consent, any of the Official Committees or the Joint Subcommittee may use the Original Committee Professionals as expert witnesses in litigation adverse to the RCM Trustee. The Parties further clarify that that the Stipulation is not intended to create an advisor-client relationship between the Original Committee Professionals and the RCM Trustee with respect to the Original Committee Professionals' factfinding and analysis. The Official Committees, the Joint Subcommittee, the Debtors and the U.S. Trustee will not object to the retention of or seek disqualification of any of the professionals engaged by any or all of the Official Committees or the Joint Subcommittee based on access given by any of the professionals to the RCM Trustee, or services rendered by any professional to the Official Committees or the Joint Subcommittee. The RCM Trustee will not seek to disqualify any professionals based on his access to those professionals. Nothing in the Stipulation will be deemed to limit the right of any of the Parties, the Debtors, or the U.S. Trustee to oppose the retention of or to seek disqualification of a professional for an actual conflict of interest. The Parties and the Official Committee members consent to Kasowitz's retention as general counsel to the Additional Committee, provided that a proper application for that retention will be made to the Bankruptcy Court. About Refco Inc. Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). (Refco Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). REFCO INC: U.S. Trustee Reconstitutes Official Creditors Committee ------------------------------------------------------------------ Diana G. Adams, the acting United States Trustee for Region 2, further reconstitutes the Official Committee of Unsecured Creditors as of August 3, 2006, to enable its members to meet their fiduciary obligations to their constituents. The U.S. Trustee appoints additional members to the Creditors Committee to represent the interests of Refco Capital Markets, Ltd. account holders asserting claims against the "Other Refco Debtors" for, among others: * wrongful interference with contract and prospective economic advantage; * common law conversion and law fraud; * aiding and abetting fraud and breach of fiduciary duty * constructive trust; * unjust enrichment; * violations of federal and state securities laws and the "RICO" Act and other causes and similarly situated claimants. The Additional Committee is composed of: 1. VR Global Partners, L.P. Avora Business Park 77 Sadovnicheskaya Nab. Building 1 Moscow, Russia 115035 Attention: Richard Deitz Phone: (011) 709-578-78181 2. Premier Bank International N.V. Abraham Veerstraatt 7-A Willemstad, Curazao, Netherlands Antilles Attention: Richard Levinson, U.S. Representative Phone: (59-99) 461-3967 or 465-7708 3. Everest Asset Management, Inc. 1100 North 4th Street, Suite 143 Fairfield, Iowa 52556 Attention: Peter Lamoureux, President Phone: (641) 472-5500 4. Fimex International Ltd. 375 Park Avenue New York, New York 10152 Attention: David Martinez Phone: (212) 593-4500 5. Markwood Investments, Ltd. Via Lovanio 19 Rome, Italy 00198 Attention: Salvador Frieri Phone: (212) 408-5100 About Refco Inc. Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). (Refco Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). RITE AID: Inks $3.4 Billion Merger Agreement with Jean Coutu ------------------------------------------------------------ Rite Aid Corporation and The Jean Coutu Group (PJC) Inc. entered into a definitive agreement, on Aug. 24, 2006, on a transaction in which its US subsidiary, The Jean Coutu Group (PJC) USA Inc., will be merged into Rite Aid, strengthening Rite Aid's position as the third largest national drugstore chain in the United States and creating the largest drugstore chain on the East Coast. The Jean Coutu Group (PJC) USA includes 1,858 drugstores (337 Brooks stores and 1,521 Eckerd stores) and six distribution centers, all located primarily on the East Coast and in the Mid-Atlantic states. All of the stores will be re-branded Rite Aid and Rite Aid headquarters will remain in Camp Hill, Pennsylvania. Under the transaction, The Jean Coutu Group will receive $1.45 billion in cash, subject to customary working capital adjustments, and 250 million shares of Rite Aid common stock giving it a 32.0% common equity interest and 30.2% of the voting power in the expanded Rite Aid. Rite Aid also intends to assume $850 million of The Jean Coutu Group's long-term debt. Based on Rite Aid's prior one-month average closing share price, the transaction would be valued at approximately $3.4 billion. The Jean Coutu Group will continue to independently act as franchisor and distributor for its Canadian network currently consisting of 327 franchised drugstores located in three provinces. Upon completion of the transaction, which has been approved by the Boards of Directors of both companies, there will be approximately 5,000 Rite Aid stores in 31 states and the District of Columbia, with coverage on both the East and West coasts. The stores Rite Aid will acquire are located in 18 states, with Rite Aid currently operating in 14 of the states and adding Massachusetts, Rhode Island, South Carolina and North Carolina to its national footprint. The combined fiscal 2006 revenues of Rite Aid and The Jean Coutu Group (PJC) USA were approximately $26.8 billion. Executive Team Mary Sammons will continue to lead Rite Aid as President and CEO while also becoming Chairman of the Rite Aid Board of Directors. Michel Coutu, currently President of The Jean Coutu Group's U.S. operations, will become Co-Chairman of Rite Aid's Board and a member of the Board's Executive Committee. The Jean Coutu Group will name three other independent members to a 14-person Rite Aid Board, including Francois J. Coutu, Vice Chairman of The Jean Coutu Group, Andre Belzile, Senior Vice President of Finance and Corporate Affairs of The Jean Coutu Group, and Dennis Wood, one of the independent members of The Jean Coutu Group's Board of Directors. Robert G. Miller, the current Rite Aid Chairman, will continue to serve as a Director. Also, Pierre Legault, The Jean Coutu Group's Executive Vice President who was recently appointed to run its U.S. operations, will become Rite Aid Senior Executive Vice President, Chief Administrative Officer, while Rite Aid's current senior management team remains in place. As CAO, Mr. Legault will be responsible for finance, information technology and real estate and will be a member of the integration leadership team along with Ms. Sammons, Jim Mastrian, Rite Aid Chief Operating Officer, and Chris Hall, Rite Aid Senior Vice President of Strategic Business Development. Synergies Rite Aid expects the transaction will enable it to achieve significant cost efficiencies in the areas of merchandising, purchasing, advertising and distribution as well as administrative expense. Net synergies are estimated to be $150 million after the first twelve months following the close, with some net synergies experienced during the first twelve months. The company said it expects the transaction to be accretive 12 months after the close by $.09 to $.15 per diluted share. The company said it expects the transaction to be dilutive by $.03 to $.07 per diluted share for the first twelve months because of integration and non-recurring expenses associated with the transaction. The estimate of dilution for the first twelve months does not include a gain or loss on any regulatory-required store dispositions. Rite Aid Growth Strategy "We're very excited about this unique opportunity that dramatically accelerates our growth strategy, particularly in areas where we've been focusing our new store development," Ms. Sammons said. "The Brooks and Eckerd stores are in good locations with dedicated associates committed to serving their customers and their communities. Adding these stores to our company gives Rite Aid scale comparable to our major drugstore competitors, and we believe this enables us to compete more effectively in a highly competitive business. We also look forward to bringing the Rite Aid shopping experience to four new states while at the same time, we continue our organic growth program with our very successful "Customer World" store design. "Successfully integrating these stores requires a strong infrastructure like the one we have built at Rite Aid, with information systems and a supply chain already capable of supporting a significant increase in the number of stores. We believe the stores will also benefit from our proven front-end merchandising programs, innovative advertising and promotion programs, successful pharmacy marketing initiatives, solid supplier relationships, state-of-the-art technology and strong field structure. With 70% of the acquired stores located in states where we already operate, we expect to leverage our systems, programs, best practices and executive management talent to improve profitability by achieving substantial cost savings and growing sales. We'll also capitalize on our leadership team's expertise in retail mergers and turnarounds and plan to make a significant financial investment to improve the acquired stores. We look forward to working with Brooks and Eckerd associates to effect a smooth transition and create a distinctive health and wellness focused shopping experience second to none." The Jean Coutu's U.S. Investment Jean Coutu, Chairman, President and CEO of The Jean Coutu Group, said, "We see this transaction as a unique strategic opportunity to optimize our U.S. presence by transforming our investment in a regional drugstore chain into the leading ownership position in a major national chain with the scale to better compete in the growing U.S. drugstore industry. The Jean Coutu Group and its four designated Directors, who will be members of Rite Aid's various Board committees, are proud to be associated with Rite Aid's management. We are confident that the team has the skills and experience to leverage its capabilities across a larger network. At the same time, this transformational event allows us to deleverage our balance sheet, maintain focus on our leading Canadian franchise and should generate significant value for our shareholders." Rite Aid recently increased its sales guidance for fiscal 2007, citing positive pharmacy same store sales trends and continuing solid front end same-store sales gains. The company also remains on target with its organic new store development program with plans to open 800 to 1,000 new stores over the next five years. Transaction Funding Rite Aid expects to finance the transaction with a combination of existing excess cash on hand and through a combination of bank borrowings, the issuance of debt securities, the expected assumption of previously issued Jean Coutu Group 8.5% Senior Subordinated Notes in the amount of $850 million, subject to satisfaction of certain conditions, and the issuance of 250 million shares of common stock. In the event the $850 million Senior Subordinated Notes are not assumed by Rite Aid, the cash paid would increase to $2.3 billion and Rite Aid would issue additional debt securities to fund the increased cash consideration. A financing commitment has been obtained from Citigroup North America, Inc. and Citigroup Global Markets Inc. Pro Forma Financial Impact The investment by The Jean Coutu Group in Rite Aid will be accounted for using the equity method in future periods. US operations will not be presented as discontinued operations considering the continuing involvement by the company in the business. The estimated proceeds on disposal of $3.4 billion are subject to fluctuation due to changes in the US dollar per Canadian dollar exchange rate and the Rite Aid share price until the transaction closes. Based on Rite Aid's prior one-month average closing share price of $4.41 and an average exchange rate of 0.8885 US dollars per Canadian dollar, The Jean Coutu Group would have recorded an after-tax loss of $140 million from the transaction. Closing of the transaction is subject to review under the Hart- Scott-Rodino Act, Rite Aid stockholder approval and other customary closing conditions. The closing date is dependent on these activities but could be as early as Rite Aid's fiscal 2007 fourth quarter, which begins Dec. 3, 2006 and ends March 3, 2007, and The Jean Coutu Group's fiscal 2007 third quarter, which begins on Nov. 26, 2006 and ends Feb. 24, 2007. The Brooks stores Rite Aid will acquire are located in Maine, Vermont, New Hampshire, Massachusetts, Rhode Island and Connecticut. The Eckerd stores Rite Aid will acquire are located in New York, Pennsylvania, New Jersey, Maryland, Delaware, Virginia, West Virginia, Tennessee, North Carolina, South Carolina, Georgia and Ohio. The distribution centers Rite Aid will acquire are located in Atlanta, Georgia; Charlotte, North Carolina; Philadelphia, Pennsylvania; Dayville, Connecticut; Syracuse, New York and Bohemia, New York. The transaction also includes The Jean Coutu Group (PJC) USA's corporate headquarters in Warwick, Rhode Island. Financial advisors for Rite Aid are Citigroup Corporate and Investment Banking and Rothschild; exclusive financial advisor for The Jean Coutu Group is J.P. Morgan Securities, Inc. About Jean Coutu Headquartered in Longueuil, Quebec, The Jean Coutu Group Inc. (TSX: PJC.A) -- http://www.jeancoutu.com/-- is the fourth largest drugstore chain in North America and the second largest in both the eastern United States and Canada. The Company and its combined network of 2,175 corporate and franchised drugstores (under the banners of Brooks and Eckerd Pharmacy, PJC Jean Coutu, PJC Clinique and PJC Sante Beaute) employ more than 60,000 people. The Jean Coutu Group's United States operations employ 46,000 people and comprise 1,853 corporate owned stores located in 18 states of the Northeastern, mid-Atlantic and Southeastern United States. The Jean Coutu Group's Canadian operations and franchised drugstores in its network employ over 14,000 people and comprise 322 PJC Jean Coutu franchised stores in Quebec, New Brunswick and Ontario. About Rite Aid Headquartered in Camp Hill, Pennsylvania, Rite Aid Corporation (NYSE, PCX: RAD) -- http://www.riteaid.com/-- runs a drugstore chain with 2005 annual revenues of $17.3 billion and 3,320 stores in 27 states and the District of Columbia. RITE AID: Jean Stores' Acquisition Prompts Fitch's Negative Watch ----------------------------------------------------------------- Fitch Ratings placed its ratings on Rite Aid Corp. on Rating Watch Negative: -- Issuer Default Rating 'B-' -- Bank credit facility 'BB-'/'RR1' -- Senior secured notes 'BB-'/'RR1' -- Senior unsecured notes 'CCC+'/'RR5' Fitch's rating action follows the announcement that Rite Aid has agreed to acquire 1,858 drug stores from The Jean Coutu Group for approximately $3.4 billion. Rite Aid's consideration for the transaction includes: * $1.45 billion in cash; * 250 million of newly-issued Rite Aid common shares; and * the assumption of Jean Coutu's $850 million 8.5% senior subordinated notes. Fitch expects that the cash portion of the transaction price will be primarily financed with new debt. The transaction is subject to approval by Rite Aid shareholders as well as regulatory approvals. It is expected to close as early as the fourth quarter of fiscal 2007. Rite Aid will acquire Jean Coutu's drug stores currently operating under the Brooks and Eckerd banners in 14 states, primarily in the Northeast and mid-Atlantic regions of the US. Rite Aid will also acquire six distribution centers. This transaction will significantly increase Rite Aid's current drug operations, to approximately 5,000 stores, thus closing the gap with its largest competitors. Rite Aid will remain the third largest drug operator in the US, and will have pro forma revenues of approximately $28.0 billion, up from $17.4 billion for the latest 12 months ended June 3, 2006. In addition, following the completion of the acquisition, Rite Aid is expected to have approximately $5.5 billion of total debt. As a result, credit metrics are anticipated to remain weak as the company's ability to delever will be constrained going forward. For the LTM period ended June 3, 2006 Rite Aid's adjusted leverage was 6.8x and EBITDAR coverage of interest and rents was 1.3x. In resolving the Rating Watch Negative status, Fitch will consider Rite Aid's ability to: * successfully integrate the acquired stores; * manage higher debt balances with limited financial flexibility; and * improve the current condition of its consolidated stores base through increased capital investments. Fitch expects that the company will face significant challenges in integrating its new stores while also positioning its store base to better compete with other market players. Also considered will be Rite Aid's larger store base, and its ability to better leverage its distribution and purchasing network. RITE AID: $3.4 Billion Jean Stores' Buy Cues S&P's Negative Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including the 'B+' corporate credit rating, on Harrisburg, Pennsylvania- based Rite Aid Corp. on CreditWatch with negative implications. This action follows the company's announcement that it will acquire all of the U.S.-based Eckerd and Brooks drugstores from Que., Canada-based Jean Coutu Group (PJC) Inc. in a transaction valued at approximately $3.4 billion. Although the purchase price includes 250 million of Rite Aid common stock (about $1.1 billion), Rite Aid will also finance another $1.45 billion and will assume $850 million of Jean Coutu's long-term debt. "After including our estimate of the present value of the acquired operating leases and EBITDA, Rite Aid's leverage is expected to increase to perhaps 7.5x on a pro forma basis, from 7.0x at the end of 2005," said Standard & Poor's credit analyst Gerald Hirschberg. "The increased financial risk and challenges of integrating the acquired stores could result in a lower credit rating." Standard & Poor's review of the rating will also factor in several positives. The acquisition should greatly strengthen Rite Aid's position in the U.S. drug store industry (currently about 3,300 stores) and make the company a more formidable competitor with CVS and Walgreen. The acquired stores total 1,858 drugstores, including 337 Brooks stores and 1,521 Eckerd stores, all located primarily on the East Coast and in the Mid-Atlantic states. Standard & Poor's expects that all of the stores will be rebranded into the Rite Aid nameplate. Combined revenues are approximately $26.8 billion. Rite Aid expects the transaction will enable it to achieve significant cost efficiencies in the areas of merchandising, purchasing, advertising, and distribution, as well as administrative expense. Integration and nonrecurring expenses associated with the transaction are expected to be dilutive during the first 12 months, but savings of about $150 million are anticipated in the next 12 months. SAINT VINCENTS: Inks Resolution Agreement with NY Attorney General ------------------------------------------------------------------ Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve their Resolution Agreement with the Office of the Attorney General of the State of New York. The OAG received complaints concerning the provision of language interpretation and translation services at St. Vincent's Hospital, Staten Island. Subsequently, the OAG began an investigation into SVHSI's policies, procedures, and practices regarding language assistance services. To avoid the expense and inconvenience of further investigation or litigation, and while denying any wrongdoing or liability in the matter, Saint Vincent Catholic Medical Centers, doing business as SVHSI, entered into a resolution agreement with the OAG. The Resolution Agreement revises SVHSI's policies in a number of ways, specifically, in the areas of: * Assessment of Interpreters and Language Banks; * Providing and Securing Language Assistance Services; * Monitoring; * Training; and * Appointment of a Language Assistance Coordinator. Among other things, the Resolution Agreement provides that: (a) SVHSI will establish a written Language Bank identifying Hospital Employees who may interpret or translate Medical Information to LEP Patients -- patients whose primary language is not English and who cannot speak, read, write or understand English at a level sufficient to permit the patient to interact effectively with health care providers. (b) SVHSI will ensure that each shift includes a sufficient number of Qualified Interpreters. (c) SVHSI will continue to maintain a contract with a company qualified to provide telephonic interpretation services. (d) Hospital Employees will seek to provide face-to-face interpretation services where possible. (e) SVHSI will collect and report data over three Reporting Periods. (f) SVHSI will prepare Language Assistance Monitoring Reports. (g) The Language Assistance Monitoring Reports will be used to address service deficiencies and to help prepare a separate report summarizing internal needs and plans for future changes. Both the Language Assistance Monitoring Report and the Internal Needs Assessment Report will be provided to the OAG. (h) SVHSI will take additional steps to measure the adequacy of its language assistance services, including: (1) patient satisfaction surveys; (2) provider satisfaction surveys; (3) spot checks of various departments to determine the extent to which Hospital Employees are complying with language assistance policies and procedures; and (4) telephone tests to assess the adequacy of staff responses to telephone inquiries from LEP persons. (i) SVHSI will develop a concise summary of procedures to follow when employees come into contact with LEP Patients, which will be subject to the approval of the OAG. Once approved, the LEP Policy Summary will be distributed to all employees who come into contact with patients, and will be posted in specific locations. (j) SVHSI will appoint a specific individual or individuals responsible for implementing language assistance services and for ensuring compliance with the Agreement. A full-text copy of the Resolution Agreement is available for free at http://ResearchArchives.com/t/s?1066 Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, New York, notes that the Resolution Agreement will help the Debtors avoid the significant time, expense and uncertainty of further investigation and litigation on the matter, thus, allowing them to focus on their reorganization. The Resolution Agreement is also the product of arm's-length bargaining over several months, and was entered into without fraud or collusion, Mr. Troop asserts. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 32 Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SAINT VINCENTS: Moves to Renew Pacts with Six Bargaining Units -------------------------------------------------------------- Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates have determined to renew or extend their relationship with six separate collective bargaining units. Specifically, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to enter into six agreements that will govern their relationship with those collective bargaining units for varied periods, generally between one and two years, to ensure compliance, to the extent required, with Section 363(b) of the Bankruptcy Code: 1. The Master Clerical Agreement with the Teamsters Local 803 covers the full-time and regular part-time office clerical and professional employees who are regularly scheduled to work 14 hours or more per week at St. John's Hospital, Queens, and Mary Immaculate Hospital, Queens. The term of the agreement runs from February 15, 2006, through June 30, 2007. The Local 803 Master Clerical Agreement supercedes all previously dated written agreements while maintaining the status quo with respect to the existing terms and conditions of employment for the Local 803 Employees. 2. The Transportation Personnel Agreement with the Teamsters Local 803 covers the full-time and regular part-time office paramedics, emergency medical technicians, chauffeurs, and vehicle maintenance employees who are regularly scheduled to work 16 hours or more per week at MIH. The term of the agreement runs from February 15, 2006, through June 30, 2007. The Local 803 Transportation Personnel Agreement supercedes all previously dated written agreements while maintaining the status quo with respect to the existing terms and conditions of employment for the Local 803 Transportation Personnel Employees. 3. The Memorandum of Agreement with the Special and Superior Officers Benevolent Association covers the security officers working at St. John's, MIH, St. Anthony's and St. Matthew's. The Agreement extends the parties' relationship through September 30, 2006. The SSOBA Memorandum of Agreement makes changes to the vacation donation, meal break and training policies. Except for those changes, it maintains the status quo with respect to the existing terms and conditions of employment for the SSOBA Employees. 4. The Memorandum of Agreement with Building and Construction Trades Council covers the MIH engineering and maintenance employees. It runs through October 15, 2007. The BCTC Memorandum of Agreement maintains the status quo with respect to the existing terms and conditions provided by the CBA. 5. The MIH Agreement and Monsignor Fitzpatrick Agreement with the New York State Nurses Association covers nurses working at MIH and Monsignor Fitzpatrick. The NYSNA Agreements provide for an extension retroactive to Feb. 1, 2006, and effective through Jan. 31, 2007. The NYSNA Agreements maintain the status quo except for these changes: (a) an increase in employer pension plan contributions for eligible employees retroactive to February 1, 2006, and applicable through Dec. 31, 2006, at the rate of $7,278; (b) effective Jan. 1, 2007, through Jan. 31, 2007, an increase in employer pension plan contribution for eligible employees at the rate of $7,866; and (c) for permanent full-time employees, retroactive to Feb. 1, 2006, and effective during the term of the NYSNA Agreements, the Debtors will make a prorated monthly premium contribution on behalf of each full- time employee to the NYSNA benefits fund. The premium that went into effect on Feb. 1, 2006, is $11,123 annually. Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that entry into the Labor Agreements will facilitate the assignment of the Labor Agreements pursuant to the terms of the asset purchase agreement applicable to the buyer of St. John's, MIH and Monsignor Fitzpatrick. Mr. Troop clarifies that the assumption of any predecessor agreements will not constitute an assumption of any unpaid contributions owed to any of the Unions that were not paid prepetition, which will remain prepetition claims in the Debtors' bankruptcy cases. Moreover, Mr. Troop notes that the Labor Agreements are not and will not be considered a postpetition agreement by the Debtors to pay the Prepetition Obligations other than as may be provided in a confirmed plan of reorganization subsequently confirmed in the Debtors' Chapter 11 cases. The Debtors owe Prepetition Obligations to Local 803, SSOBA and NYSNA, Mr. Troop says. Mr. Troop explains that absent approval, the Labor Agreements will have expired and the Debtors will be at risk of work stoppages by the employees that may severely disrupt the Debtors': (i) ability to provide patient care at MIH and Monsignor Fitzpatrick; (ii) provision of services necessary for the efficient function of the Debtors' other facilities, St. John's, St. Anthony's and St. Matthew's; and (iii) ability to assign the Labor Agreements to the buyer pursuant to the terms of the applicable asset purchase agreement. According to Mr. Troop, the Labor Agreements will preserve and protect the value of the Debtors' estates and enable them to maximize return to creditors by ensuring the effective administration of certain critical aspects of the Debtors' business, and continue the Debtors' mission of providing high quality patient care at MIH and Monsignor Fitzpatrick. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005,the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 32 Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SANMINA-SCI: Fitch Lowers Issuer Default Rating to B+ from BB- -------------------------------------------------------------- Fitch Ratings downgraded Sanmina-SCI Corporation: -- Issuer Default Rating to 'B+' from 'BB-' Fitch also placed Sanmina's IDR, as well as these ratings, on Rating Watch Negative: -- Senior subordinated debt 'B+' -- First lien senior secured credit facility 'BB+' Additionally, Fitch initiated a 'RR1' recovery rating for Sanmina's senior secured credit facility, and a 'RR4' for the senior subordinated debt. Fitch's action affects approximately $1.5 billion of outstanding debt securities. The downgrade reflects: * Sanmina's weaker financial profile and lower financial flexibility relative to peers; * Fitch's expectations for further delays in improving operating performance combined with weaker than anticipated sales growth trends; and * limited prospects for meaningful strengthening of credit protection measures. Fitch anticipates total debt adjusted for rent expense and limited recourse on sales of accounts receivables will remain at approximately $2 billion through the intermediate term, among the highest of its peer group, as Fitch expects Sanmina to refinance its primary near-term maturities with long-term debt. While refinancing will improve Sanmina's liquidity position, it also will extend catalysts for debt reduction through 2009, when the company's $400 million 6.75% senior subordinated notes become callable. Fitch revised Sanmina's Rating Outlook to Negative from Stable in December 2005 due to pressured operating metrics and the company's lack of debt reduction. The ratings are supported by: * Fitch's expectation for longer term industry growth trends driven in part by increased penetration of the manufacturing and design outsourcing model; * Sanmina's strong historical relationships with tier-one customers; and * the significant scale and scope of the company's operations. The Negative Rating Watch primarily reflects: * Sanmina's delayed filing of its 10Q and compliance certificates for the quarter ended July 1, 2006; * the resultant technical default under the terms of the subordinated and convertible indentures (the banks provided a compliance waiver through the cure period for both the credit facility and receivables sales agreement) and non-compliance with NASDAQ's filing requirements (the company continues to be listed on the exchange pending a decision by NASDAQ's Listing Qualifications Panel); and * the company's ongoing internal investigation by a special committee comprised of board members, independent outside legal counsel, and accounting consultants into the company's stock option administration practices dating back to Jan. 1, 1997. The Negative Rating Watch also considers the heightened refinancing risk related to the aforementioned $525 million convertible subordinated notes due March 2007. Fitch believes that a resolution of the stock option investigation, a satisfactory filing of Sanmina's 10Q and compliance certificates, and further insight into the company's refinancing plans, would resolve the Negative Rating Watch status. Fitch anticipates further delays in meaningful operating EBIT margin expansion due to ongoing industry-wide excess capacity, continued program specific demand volatility, and sustained pricing pressures related to Sanmina's personal computing business. In addition, Sanmina's components businesses and the company's efforts to increase vertical integration have demonstrated improvement but Fitch expects this effort to remain a relatively small portion of total sales through the intermediate term. Fitch expects Sanmina's operating EBIT margins to increase to nearly 2.5% over the intermediate-term from 2.3% for the latest 12 months ended April 1, 2006, and 2.1% in both fiscal years 2005 and 2004. The lack of a significant improvement in profitability has been compounded by declining sales trends which are expected to stabilize in FY 2007 ending Oct. 1, 2007. Fitch expects sales for FY 2006 to be down 6.5%, well below beginning of the year forecasts of 5%-10% growth despite relatively stable industry demand. Sanmina has been negatively affected by the company's meaningfully higher exposure to the lower growth rates and more uneven demand patterns of communications equipment and computing end markets, which continue to represent approximately 80% of current revenues (among the least diversified in the industry). Revenue from faster growing non-traditional end markets has not offset the decline in Sanmina's core markets. Fitch estimates Sanmina's sales will grow approximately 5% for FY 2007 despite potential further sales declines from Lenovo, a top customer for Sanmina, based on the assumption that the company will gain further traction in non-traditional markets with some stabilization expected in the communications and computing segments. As a result, Fitch expects credit protection measures to remain near current levels through FY 2007. Total adjusted leverage is expected to be 4.5x for FY 2006 and 4.3x for FY 2007, down from 4.8x for FY 2005. Interest coverage is estimated to be near 3x over the same period with the potential for higher interest costs related to Sanmina's expected refinancing offsetting modest profitability expansion. The Recovery Ratings and notching reflect Fitch's recovery expectations under a distressed scenario, as well as Fitch's expectation that the enterprise value of Sanmina, and hence, recovery rates for its creditors, will be maximized in a restructuring scenario (going concern) rather than a liquidation scenario. An estimate of Sanmina's enterprise value as a going concern under a distressed scenario requires an estimation of: 1) a percentage discount to apply to the LTM EBITDA that would likely trigger a distressed scenario and 2) an appropriate EBITDA multiple to apply to this stressed EBITDA to derive an estimate of enterprise value. Fitch applies 15% discount to LTM EBITDA based on an estimate of Sanmina's current fixed charge coverage ratio of 2.6x versus the minimum 1.75x required under its bank credit facility. Fitch then applies a 4x distressed EBITDA multiple to reflect Fitch's expectations that Sanmina's current multiple of 6.3x would contract under a stressed scenario. That leads to a distressed enterprise value estimate of approximately $1 billion, providing the basis for a waterfall analysis to determine recovery ratings. The 'RR1' recovery rating for Sanmina's secured bank facility reflects Fitch's belief that 100% recovery is realistic. The 'RR4' recovery rating for the subordinated debt reflects Fitch's estimate that a recovery of 31%-50% would be achievable. Fitch believes liquidity was pressured as of July 1, 2006, and supported by approximately $563 million of cash and equivalents and an undrawn $500 million senior secured revolving credit facility due 2008, which is not available for refinancing purposes. Sanmina's $200 million receivables sales facility due 2007 also supports liquidity. Total debt was approximately $1.5 billion at July 1, 2006, and consisted primarily of: 1) $525 million 3% convertible subordinated notes due March 2007; 2) $400 million of 6.75% senior subordinated notes due March 2013 (callable in 2009); and 3) $600 million of 8.125% senior subordinated notes due March 2016. SATELITES MEXICANOS: Judge Drain Enters Order Enforcing Stay ------------------------------------------------------------ The Honorable Robert D. Drain, of the U.S. Bankruptcy Court for the Southern District of New York, upon the request of Satelites Mexicanos, S.A. de C.V., entered an order enforcing and restating the automatic stay and ipso facto provisions of the Bankruptcy Code. The Debtor is organized and operates in Mexico and has many creditors and counterparties to contracts that may not be well- versed in the restrictions of the United States Bankruptcy Code, Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, relates. According to Mr. Despins, various interested parties may attempt to seize assets located outside of the United States to the detriment of the Debtor, its estate and creditors, or take other actions in contravention of the automatic stay under Section 362 of the Bankruptcy Code. Upon learning of the Debtor's bankruptcy, counterparties to the Debtor's leases and executory contracts may attempt to terminate those leases or contracts pursuant to ipso facto provisions contained therein in contravention of Section 365 of the Bankruptcy Code, Mr. Despins adds. Mr. Despins explains that, notwithstanding the fundamental nature of the automatic stay and ipso facto protections, and the fact that they arise as a matter of law upon the commencement of a Chapter 11 case, not all parties are aware of those Bankruptcy Code provisions. Nor are all parties cognizant of their significance and impact. Furthermore, as the Chapter 11 Plan provides for payment in full of the claims of all of the Debtor's creditors, other than holders of Senior Secured Notes and Existing Bonds, the granting of the Debtor's request will prevent unfair and obstructionist practices by creditors who are going to receive full payment of their claims under the Chapter 11 Plan, Mr. Despins maintains. 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: Valor Okayed as Interim Financial Advisors --------------------------------------------------------------- Satelites Mexicanos, S.A. de C.V., obtained authority, from the U.S. Bankruptcy Court for the Southern District of New York, to employ Valor Consultores S.A. de C.V., as interim financial advisors. Carmen Ochoa Avendano, Esq., general counsel of the Debtor, tells the Court that the restructuring of the Debtor's liabilities will require intensive participation of various advisors. In this regard, the Debtor has tapped Valor, as its financial advisors, to work in tandem with UBS Securities LLC and any other financial advisor it will retain. Valor provides advisory services to companies in Mexico in the areas of corporate finance, mergers and acquisitions and financial restructurings. Ms. Avendano relates that Valor is intimately familiar with the Debtor's business and financial affairs and thus is well qualified to provide financial advisory services. Valor, she continues, has been assisting the Debtor in its restructuring efforts since September 2005, and has gained valuable knowledge of the Debtor, its business operations, capital structure, strategic and financial needs, and the negotiations with various creditor constituencies leading to the filing of the Chapter 11 case. Ms. Avendano also notes that Valor's Managing Partner, J. Sandor Valner, who will be primarily responsible for the services provided to the Debtor, ran Credit Suisse's Mexican operations before joining Valor. Mr. Valner has provided financial advisory services in Mexico for more than 15 years and has led initial public offerings, debt offerings, acquisitions, divestitures, and restructurings with an aggregate value of more than $15 billion. Pursuant to the parties' engagement letter, Valor will: (a) advise and assist the Debtor in analyzing, structuring, negotiating and implementing the financial aspects of any restructuring of the Debtor and its affiliates' liabilities, including any exchange, conversion, repurchase or repayment of any liabilities, or any modification, amendment, deferral, restructuring, recapitalization, rescheduling, moratorium, or adjustment of the terms or conditions of those liabilities; (b) advise and assist the Debtor with respect to a sale, merger, consolidation or liquidation of the Debtor's assets, including assisting the Debtor in analyzing, structuring, negotiating, and implementing the financial aspects of a Sale Transaction; and (c) provide other assistance and services. All services to be provided by Valor will not be duplicative of the services provided by UBS, Ms. Avendano assures the Court. Valor will bill the Debtor: -- a $60,000 monthly financial advisory fee; -- a $500,000 Restructuring Transaction Fee, which will become due when a Restructuring Transaction becomes binding on the creditors affected thereby and payable on the date of the closing of the Restructuring Transaction; and -- a Sales Transaction Fee equal to 0.40% of the Transaction Value, payable at the closing of a Sale Transaction. The Debtor will also reimburse Valor for all of its reasonable and documented expenses, provided that Valor obtains the Debtor's prior written consent before incurring any single expense in excess of $10,000. Ms. Avendano discloses that as of the date of filing for chapter 11 protection, the Debtor had paid 11 Monthly Advisory Fees totaling $660,000 to Valor. Of this amount, $330,000, as well as 50% of any Monthly Advisory Fees paid after the Petition Date, will be credited against the first to occur of the Restructuring Transaction Fee or the Sale Transaction Fee. The Debtor will indemnify Valor and its related parties from any liabilities and expenses in connection with the engagement, except to the extent that it will be determined by a court of competent jurisdiction in a final non-appealable judgment that those liabilities resulted from the gross negligence or willful misconduct of the indemnified parties. Mr. Valner reports that, according to his firm's books and records, for the year prior to the Petition Date, Valor received $660,000 from the Debtor for services performed and expenses incurred, plus $99,000 for applicable value-added taxes. Mr. Valner assures the Court that Valor does not hold or represent any other entity having an adverse interest in connection with the Debtor's case. Valor, he attests, is a "disinterested person," as defined in Section 101(14) of the Bankruptcy Code as modified by Section 1107(b). 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). SEARS HOLDINGS: Second Quarter Net Income Soars to $294 Million --------------------------------------------------------------- Sears Holdings Corporation reported net income of $294 million for the second quarter ended July 29, 2006, compared with net income of $161 million for the second quarter ended July 30, 2005. The second quarter 2006 results include a $36 million pre-tax gain, or $22 million net of taxes representing the Company's portion of proceeds received during the second quarter of 2006 related to the settlement of Visa/MasterCard antitrust litigation. Excluding the impact of this gain, second quarter 2006 net income was $272 million. In addition, the prior year second quarter results included $42 million in merger-related restructuring charges at Kmart, or $26 million net of taxes. Excluding the impact of these charges, prior year second quarter net income was $187 million. 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. "Sears Holdings' resolve to improve the profitability of this business remains strong and is borne out in the company's second quarter results," Aylwin Lewis, Sears Holdings' chief executive officer and president, said. He added, "While we are making progress, we must continue to focus on our customers, improve the shopability of our stores and continue to give our customers reasons to shop our stores more frequently." Second Quarter Revenues & Comparable Store Sales For the quarter, domestic comparable stores sales declined 3.8% in the aggregate, with Sears Domestic comparable store sales declining 6.3% and Kmart comparable store sales declining 0.6%. The comparable store sales declines at both Kmart and Sears Domestic reflect the impact of increased competition and lower transaction volumes. At Kmart, comparable store 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. At Sears Domestic, comparable store sales declined across most categories and formats, with more pronounced sales declines within both the home fashion and lawn and garden categories. Total revenues declined $400 million to $12.8 billion for the 13 weeks ended July 29, 2006, as compared with total revenues of $13.2 billion for the 13 weeks ended July 30, 2005. Sears revenues were $8.3 billion for the 13 weeks ended July 29, 2006, as compared with $8.6 billion for the 13 weeks ended July 30, 2005, primarily reflecting the impact of comparable store sales declines, partially offset by an increase in the total number of Sears Full-line stores in operation, resulting mainly due to conversions from the Kmart format. Total revenues at Kmart declined $1 million as compared with the prior year period, primarily reflecting a reduction in the total number of Kmart stores in operation. Operating Income Operating income was $517 million for the 13 weeks ended July 29, 2006, as compared with $324 million for the 13 weeks ended July 30, 2005. The increase in operating income was due to an increase of $92 million of Kmart operating income, as well as a $77 million increase in Sears Domestic operating income mainly due to lower expenses as a result of realizing merger synergies and a reduction of selling and administrative costs which decreased from $3.0 billion (22.8% of revenues) last year to $2.8 billion (22.1% of revenues) this year. The second quarter 2006 results include a $36 million one-time gain, recorded as a reduction of selling and administrative expenses, representing the Company's portion of proceeds received during the second quarter of 2006 related to the settlement of Visa/MasterCard antitrust litigation. Excluding the impact of this gain, second quarter operating income was $481 million. In addition, the prior year results included $42 million in merger-related restructuring charges at Kmart. Excluding the impact of these charges, the prior year second quarter operating income was $366 million. Revenues declined from $13.2 billion last year to $12.8 billion this year, however, the impact of this decline was largely offset by an improvement in gross margin rate to 28.4% this year, an increase of 120 basis points from the prior year rate. Financial Position The Company had cash and cash equivalents of $3.7 billion at July 29, 2006 (of which $3.2 billion is domestic and $0.5 billion is at Sears Canada) as compared with $2.1 billion at July 30, 2005, and $4.4 billion at January 28, 2006. The decline in cash from fiscal 2005 year end is attributable to share repurchases, cash used in the acquisition of additional interests in Sears Canada, capital expenditures and debt repayments, partially offset by cash generated from operations. Merchandise inventories at July 29, 2006, were approximately $9.5 billion, as compared with $9.0 billion as of July 30, 2005. The increase reflects planned increases due to earlier receipt of product this year and increases in categories where the Company believes business trends support higher inventory levels. Merchandise payables were $3.3 billion at July 29, 2006, as compared with $3.5 billion as of July 30, 2005. Share Repurchase During the second quarter of 2006, the company repurchased 700,000 common shares at a total cost of $91 million, or an average price of $137.67 per share. As of July 29, 2006, the Company had remaining authorization to repurchase $406 million of common shares under its existing share repurchase program approved by the board of directors. The remaining shares may be purchased in the open market, through self-tender offers or through privately negotiated transactions. Timing will depend on prevailing market conditions, alternative uses of capital and other factors. Investment of Available Capital The Company had total domestic cash and cash equivalents of $3.2 billion at July 29, 2006. Since the merger between Kmart and Sears, the Company's cash flows have exceeded its working capital, financing and capital investment needs, and management expects that the Company's cash flows will continue to exceed its operating cash needs for the foreseeable future. The Company regularly evaluates how best to use available capital to increase shareholder value. The Company has and will continue to invest in its businesses to improve the customer experience and provide the opportunity for attractive returns. The Company has also repurchased $1.1 billion of its common shares since the merger and expects to continue to repurchase shares subject to market conditions and board authorization. In addition, the Company may pursue investments in the form of acquisitions, joint ventures and partnerships where the Company believes attractive returns can be obtained. Further, the Company may determine under certain market conditions that available capital is best utilized to fund investments that it believes offer the Company attractive return opportunities, whether or not related to its ongoing business activities. The Company's Board of Directors has delegated authority to direct investment of the Company's surplus cash to its Chairman, Edward S. Lampert, subject to various limitations that have been or may be from time to time adopted by the Board of Directors and Finance Committee of the Board of Directors. As of July 29, 2006, the Company's surplus cash was primarily invested in short-term, highly liquid investments. The Company is currently using, and may in the future use, a portion of its available capital to invest in marketable securities and other financial instruments, including derivatives. These investments may include significant and highly concentrated direct investments and related derivative positions with respect to the equity securities of public companies. Derivative contracts would be recorded on the Company's balance sheet at fair value and, for non-hedge contracts, changes in fair value would be recognized currently in earnings as unrealized gains or losses. "Our strong financial position and cash flow generation provide us with the flexibility to capitalize on a wide range of market opportunities as they arise. "In addition to investing in our business and acquiring our shares, we are prepared to invest substantial amounts of capital if we identify other attractive investment opportunities which have the potential for returns we believe appropriately compensate the Company for the associated risks." Edward S. Lampert, chairman of Holdings, said. Any such investments will involve risks, and shareholders should recognize that Holdings' balance sheet may change depending on the extent of excess funds and the timing, magnitude and performance of investments which the Company may make. Furthermore, such investments would be subject to volatility that may affect both the recorded value of the investments as well as the Company's periodic earnings. The Company plans to file with the SEC its Quarterly Report on Form 10-Q for the second quarter 2006 on or before Sept. 7, 2006. About Sears Holdings Corp. Hoffman Estates, Illinois-based Sears Holdings Corporation (NASDAQ: SHLD) -- http://www.searsholdings.com/-- is the nation's third largest broadline retailer, with approximately $55 billion in annual revenues, and with approximately 3,800 full-line and specialty retail stores in the United States and Canada. Sears Holdings is a home appliance retailer as well as a retailer of tools, lawn and garden, home electronics, and automotive repair and maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard, and a broad apparel offering, including well-known labels as Lands' End, Jaclyn Smith, and Joe Boxer, as well as the Apostrophe and Covington brands. It also has Martha Stewart Everyday products, which are offered exclusively in the U.S. by Kmart and in Canada by Sears Canada. * * * As reported in the Troubled Company Reporter on June 23, 2006, Standard & Poor's Ratings Services revised its outlook on Sears Holdings Corp. to stable from negative. All ratings, including the 'BB+' corporate credit rating, and the 'B-1' short-term rating for Sears Roebuck Acceptance Corp., are affirmed. As reported in the Troubled Company Reporter on Jun 22, 2006, Fitch affirms its ratings of Sears Holdings Corporation including its Issuer Default Rating (IDR) at 'BB'; Senior notes at 'BB'; and Secured bank facility at 'BBB-'. SENECA GAMING: Low Leverage Cues Moody's to Upgrade Rating ---------------------------------------------------------- Moody's Investors Service raised Seneca Gaming Corporation's corporate family rating to Ba2 from Ba3, and senior note rating to Ba3 from B1. At the same time, Seneca's SGL-2 speculative grade liquidity rating was affirmed. The ratings outlook is stable. The upgrade considers that since the initial rating in April 2004, Seneca's financial profile has improved despite significant development activity, and that the Seneca Niagara casino facility continues to have a strong hold on its local market. The Ba2 rating and stable outlook also considers Seneca's low leverage, relatively small size, dependence on a single market area, and Moody's expectation that Seneca will continue to distribute most of its surplus operating cash flow to the Seneca Nation of Indians of New York. Seneca's SGL-2 speculative grade liquidity rating acknowledges the company's good liquidity and the expectation that the company will be able to meet its obligations over the next twelve months through a combination of internal sources of cash flow and balance sheet cash. Moody's previous rating action on Seneca occurred on May 16, 2005 with the confirmation of its corporate family rating and an upgrade of its $300 million 7-1/4% senior note due 2012. A new rating was also assigned at that time to Seneca's $200 million 7-1/4% senior note add-on. Seneca Gaming Corporation is an incorporated instrumentality of the Seneca Nation of Indians of New York. The Seneca Nation of Indians of New York is federally recognized and has a compact with the State of New York that provides the Nation with the right to establish and operate three Class III gaming facilities in western New York. Net revenue reported for the 12-month period ended June 30, 2006 was $493 million. Total debt outstanding reported was $500 million. SMART ONLINE: Sells $250,000 Common Shares to Investors ------------------------------------------------------- Smart Online, Inc., disclosed that in transactions that closed on Aug. 17, 2006, and Aug. 21, 2006, it sold 50,000 shares of its common stock to The Blueline Fund, a current investor, and 50,000 shares to an individual new investor. The private placement shares were sold at $2.50 per share. The aggregate amount raised in the private placement was $250,000. The Company, Blueline and the individual have entered into Subscriber Rights Agreements whereby the Company has an obligation to register the shares sold for resale by the purchaser by filing a registration statement on or before Sept. 30, 2006. If a registration statement is not filed by that date, the Company is obligated to pay a penalty obtained by multiplying the total purchase price for the shares by 0.5% by the number of prorated 30 day periods after the target registration date. At the Company's sole discretion, the penalty can be paid in the number of shares obtained by dividing the total penalty amount by the per share purchase price. The Company further disclosed that the investors have also entered into Dribble Out Agreements with the Company, pursuant to which, they may sell up to 25% of the shares during any rolling 30 day period, following the effective date of the registration statement. The shares in the transactions were sold in reliance upon the exception afforded by Rule 506 of Regulation D of the Securities and Exchange Commission and Section 4(2) of the Securities Act of 1933, as amended. The Company also disclosed that the proceeds from the transaction are to be used primarily to pay for ongoing operations, current liabilities, and legal and professional expenses related to matters regarding the internal investigation and the SEC matters, audit and professional fees related to SEC filings, and installment payments due the sellers for the acquisition of iMart Incorporated. Smart Online Inc. -- http://www.SmartOnline.com/-- develops and markets Internet-delivered Software-as-Service software applications and data resources to start, run, protect and grow small businesses. Going Concern Doubt Sherb & Co., LLP, expressed substantial doubt about Smart Online, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the years ended Dec. 31, 2005 and 2004. The auditing firm pointed to the Company's recurring losses from operations and working capital deficit. SOLUTIA INC: Sells European Unit to Dishman Pharma for $74.5 Mil. ----------------------------------------------------------------- Solutia Europe SA/NV, a subsidiary of Solutia Inc., completed the sale of its Pharmaceutical Services business, comprised principally of SESA's subsidiary CarboGen Amcis AG -- http://www.carbogen-amcis.com/ Dishman Pharmaceuticals and Chemicals Limited and its subsidiaries have purchased 100% of the stock of CarboGen Amcis AG, as well as certain other assets used in the Pharmaceutical Services business, for approximately $74.5 million, subject to a working capital adjustment. The Pharmaceutical Services business provides seamless drug development and commercialization services for leading pharmaceutical and biotechnology companies. During the year 2005, the business had sales of approximately CHF80 million. The Pharmaceutical Services business has world-class research and development facilities at three sites in Switzerland: Aarau, Bubendorf, and Neuland. All intellectual property, patents and trademarks, customer contracts, as well as employees of the Pharmaceutical Services business are included in the transaction. About Dishman Pharmaceuticals Headquartered in Ahmedabad, India, Dishman Pharmaceuticals and Chemicals Limited -- http://www.dishmangroup.com/-- is a globally focused company involved in the manufacture of APIs (active pharmaceutical ingredients), API intermediates, quaternary compounds and fine chemicals. Dishman has exports spanning all continents. About Solutia Inc. Headquartered in St. Louis, Missouri, Solutia, Inc. (OTCBB:SOLUQ) -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. (Solutia Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SOLUTIA INC: Wants to Expand Colliers Turley's Scope of Duties -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York authorized Solutia Inc. and its debtor-affiliates to employ Colliers Turley Martin Tucker as their exclusive real estate brokers on July 19, 2004. The Debtors now want the Court order supplemented so that Colliers can: (1) assist them in selling or renting of certain parcels of real estate that they own, including about 135 acres of property located in Houston, Texas; and (2) locate and negotiate a lease for about 18,000 square feet of office property in Kennesaw, Georgia, or assist them in the renegotiation of the existing lease of their Kennesaw office. For these additional assignments, the Debtors signed a Master Exclusive Listing Agreement and an Exclusive Tenant Representation Agreement with Colliers on May 3, 2006. The Listing Agreement runs from May 3, 2006, through the date it is terminated by either party for cause at any time or without cause by giving the other party 30 days advance written notice of intention to terminate. Colliers will be paid for its services under the Listing Agreement with a monthly retainer plus commission, which will depend on whether the Property is sold, leased or re-leased to the current tenant. The retainer payments will be deducted from the net commission to be paid to Colliers. The term of the Tenant Agreement is from May 3, 2006 through Dec. 31, 2006, or any earlier date determined by the Debtors in their sole discretion. Colliers will be paid for its services under the Tenant Agreement on a commission basis. Colliers' commission will depend on whether the Debtors relocate their Kennesaw office to a new facility or renegotiate their existing lease and remain in the current facility. The Debtors believe that Colliers is both well qualified and uniquely able to serve them in an efficient, cost-effective and timely manner. David Thiemann, vice president of Colliers, assures the Court that Colliers is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code, and holds no interest adverse to the Debtors and their estate. About Solutia Inc. Based in St. Louis, Mo., Solutia, Inc. -- http://www.solutia.com/ -- with its subsidiaries, make and sell a variety of high- performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. (Solutia Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/and 215/945-7000) SOS REALTY: Court Okays Lacourse Construction as Gen. Contractor ---------------------------------------------------------------- The Honorable Joan N. Feeney of the U.S. Bankruptcy Court for the District of Massachusetts in Boston authorized SOS Realty LLC to employ Lacourse Construction Corporation to act as the Debtor's general contractor for $2,854,370. Lacourse Construction will complete the construction of the Debtor's real property and condominium project known as Washington Grove Condominums. Lacourse Construction has agreed to complete the entire construction project within three months. The Washington Grove Condominums consist of two buildings with a total of 48 residential condominiums as well as 54 underground parking spaces. Lacourse Construction is expected to: a. perform and execute all of the work described in the Site Plans, Drawings, Construction Draw Schedules, Master Electrical Plan, and the Revised Drainage Plan; b. use its best efforts to substantially complete all of the work at the Project within 12 weeks from the date of approval of this motion; and c. provide all labor and approved materials, appliances, and services of every kind necessary for proper execution of work at the Project and consistent with the Contract Documents. Lacourse Construction will execute, at its own cost, any work that fails to conform to the requirements of the Agreement. Lacourse Construction will remove all of its construction debris from the site and leave the premises in broom-clean condition. All work will be completed in a workmanship like manner and in compliance with all code and other applicable laws. To the extent required by law, all work will be performed by individuals duly licensed and authorized by law to perform said work. Lacourse Construction will adequately protect the work, adjacent property, and the public, and will be responsible for any damage or injury due to its act or neglect. Lacourse Construction will be given progress payments based on the Construction Draw Schedules. Final payment will be given upon the work completion and the agreement fully performed. Based in West Roxbury, Massachusetts, SOS Realty LLC, owns a condominium development known as the "Washington Grove Condominiums." The company filed for chapter 11 protection on May 11, 2006 (Bankr. D. Mass. Case No. 06-11381). Jennifer L. Hertz, Esq., at Duane Morris LLP, represents the Debtor in its restructuring efforts. No Official Committee of Unsecured Creditors has been filed in the Debtor's case. In its schedules of assets and liabilities, it listed $12,009,000 in total assets and $6,734,279 in total liabilities. SVP HOLDINGS: S&P Assigns B+ Rating to $280 Million Facilities -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its loan and recovery ratings to SVP Holdings Ltd.'s $280 million bank financing. The first-lien senior secured credit facilities consist of: * a $50 million revolving credit facility; * a $160 million term loan A facility; and * a $70 million term loan B facility. The facilities are rated 'B+' (at the same level as the 'B+' corporate credit rating on SVP) with a recovery rating of '3', indicating the expectation for meaningful recovery of principal (50%-80%) in the event of a payment default. These ratings are based on preliminary offering statements and are subject to review upon final documentation. SVP revised the terms of its previously announced bank financing, related to its planned refinancing. The previously announced offering of $315 million of senior secured credit facilities has been terminated, and Standard & Poor's has withdrawn its loan and recovery ratings on the terminated deal. The corporate credit rating on Bermuda-based SVP is B+/Stable/--. This rating reflects: * the company's narrow business focus; * participation in the mature and highly competitive consumer sewing machine industry; * customer concentration; and * highly leveraged financial profile. These factors are somewhat mitigated by the company's leading market position and portfolio of well-recognized brands. Ratings List: SVP Holdings Inc.: * Corporate credit rating at B+/Stable/-- Ratings Assigned: * $280 Million secured first-lien financing at B+ (Recovery rating: 3) TOWER AUTOMOTIVE: Fuji Supplements Response to Objections --------------------------------------------------------- As reported in the Troubled Company Reporter on May 30, 2006, Fuji Dietec Corporation asks the U.S. Bankruptcy Court for the Southern District of New York to lift the automatic stay in Tower Automotive, Inc., and its debtor-affiliates' chapter 11 cases to allow it to repossess the Fuji Tooling. Fuji Entities Supplements Response Elaine A. Parson, Esq., at Strobl & Sharp, P.C., in Bloomfield Hills, Michigan, tells the Court that the Debtors' objection to Fuji Dietec Corporation and Fuji Technica, Inc.'s request ignored the Debtors' own standard form, pre-printed Purchase Order form -- specifically those Purchase Orders issued by the Debtors to the Fuji Entities in Michigan which incorporated "Terms and Conditions." Ms. Parson relates that the Debtors' incorporated Terms and Conditions clearly state that the laws of the state of Michigan, including the Uniform Commercial Code and Michigan Tooling Lien Act apply to the contracts between the Fuji Entities and the Debtors. It is well settled law in Michigan that parties to a contract can agree to the law of a particular jurisdiction, Ms. Parson says. Ms. Parson further argues, among others, that: * The Debtor entered into several so-called "partnering agreements" with both Fuji Entities in Michigan, including an organizational chart delineating relationships for building the Step by Step Relationship 'A Partnership for the Future'." The chart demonstrates the Fuji Entities' intentional presence in and availability to the Debtors in Michigan to achieve "partnering" goals; * It is an undisputed fact that as defined in the Tooling Act, the Fuji Entities are Special Tool Builders and the tools and dies at issue are Special Tools; and * The Fuji Entities substantially complied with the Tooling Act by permanently affixing multiple metal tags at different locations to the different parts of the Special Tools that they fabricated for the Debtors. For these reasons, the Fuji Entities ask the Court to rule that: (a) the Choice of Law provision in the Debtors' Purchase Order Terms and Conditions for Michigan law is to be given full legal effect; (b) the Fuji Entities have substantially complied with the Tooling Act and, therefore, are secured creditors; and (c) the Fuji Entities will be awarded possession of the Tools at issue. Alternatively, the Fuji Entities seek the Court's permission to send a notice as provided in the Tooling Act to the Debtors and necessary third parties, together with a ruling for an expedited scheduling order for discovery. The Fuji Entities ask the Court to set an evidentiary hearing to determine the amount owing by the Debtors to the Fuji Entities following which the Court should enter an appropriate ruling for adequate protection payments to the Fuji Entities. About Tower Automotive Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. Ira S. Dizengoff, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). TOWER AUTOMOTIVE: Hires Heidrick & Struggles as Consultants ----------------------------------------------------------- The Official Committee of Unsecured Creditors of Tower Automotive Inc., and its debtor-affiliates, obtained authority to enter into an agreement with Heidrick & Struggles, Inc., as its consultants for the purpose of identifying and selecting candidates for the board of directors of reorganized Tower Automotive, Inc. The Committee selected Heidrick & Struggles after interviewing several firms that specialize in executive searches. The Debtors are familiar with Heidrick & Struggles. Chris Reddy of Camulos Capital, chair of the Creditors' Committee, tells the Court that Heidrick & Struggles is widely recognized as an industry leader in the development of best-in- class Boards of Directors, and is expert in recruiting board members who fulfill the highest priorities of today's best- managed companies, including directors with financial expertise, operating experience, and strategic acumen. The Committee and the Debtors will consult on the process conducted by Heidrick & Struggles, including, discussing the criteria for candidates, sharing information with potential candidates, providing access for the current Board and management to candidates and input regarding candidates for the Board of Reorganized Tower. The firm will assist the Creditors' Committee in making an informed decision about the best-qualified candidates available for the Board. Heidrick & Struggles will assist the Debtors in their evaluation and deliberation of the Board candidates. The firm says it will make every effort to complete the search in three months. Heidrick & Struggles will charge for its services on a retainer basis, which fees will be structured this way: 1st Director (Chair of Audit Committee) $100,000 2nd Director $100,000 3rd and 4th Director $75,000 each Any additional Directors $55,000 each The firm will seek reimbursement for expenses incurred. Invoices will be submitted to the Debtors. Bo Herbst, a principal at Heidrick & Struggles, will be leading the project with close support from his fellow partner John Gardner, and associates Cheryl Doty and Amanda Henkel. Kenneth J. Ashley, treasurer of Heidrick & Struggles, assures the Court that his firm neither holds nor represents any interest adverse to the Committee, the Debtors, their creditors or other parties-in-interest in the Debtors' cases. Mr. Ashley believes Heidrick & Struggles is a "disinterested person" within the meaning of the Bankruptcy Code. The Committee and the Debtors submit that Heidrick & Struggles' personnel providing the services are not "professional persons" as contemplated by Section 327 of the Bankruptcy Code and, thus, no retention or payment authorization is necessary. Mr. Reddy contends that Heidrick & Struggles' personnel should not be considered professionals within the meaning of Section 327 because: -- they do not and will not control, manage, administer, invest, purchase, or sell assets that are significant to the Debtors' reorganization; -- they are not involved in negotiating the terms of the Debtors' Plan; -- they will provide only a temporary service in more of an administrative capacity rather than providing advice to improve the operations of the Debtors' affairs; -- they have only limited discretion, and have no autonomy in performing their tasks; and -- they will not have involvement in the administration of the Debtors' estate, but rather will perform a specific, limited service to assist in locating director candidates. "[A]lthough Heidrick & Struggles is providing services that require some degree of special knowledge or skill, they are not of a type that is considered 'professional' within the ordinary meaning of the term," Mr. Reddy says. If the Court finds that Heidrick & Struggles is a professional within the meaning of Section 327, the Committee and the Debtors seek Judge Gropper's permission to retain Heidrick & Struggles pursuant to Sections 327(a) and 1103(a) of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure. About Tower Automotive Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. Ira S. Dizengoff, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). TRIPLE A POULTRY: Volvo Financial Wants Truck Leases Decided ------------------------------------------------------------ Volvo Financial Services, a VFS US LLC division successor-in- interest to Volvo Commercial Finance LLC asks permission from the U.S. Bankruptcy Court for the Southern District of Texas to compel Triple A Poultry Inc. to assume or reject leases related to two Master Lease Agreements. VFS is the Debtor's secured creditor by virtue of a series of financial transactions with the Debtor and a related entity, Cyclone Enterprises, Inc. On Sept. 18, 2000, the Debtor entered into a Master Lease Agreement with VFS in which the Debtor leased specific vehicles. The lease includes: -- a 2001 Volvo Truck for a 60-month period at the rate of $1,618.12 per month; and -- a 2002 Volvo Truck for a 60-month period at the rate if $1,363.99 per month. The amounts financed pursuant to the terms of the leased trucks were $99,129.42 and $191,207.27, respectively. The Parties entered into a loan transaction on Sept. 18, 2005, evidenced by the End of Term Promissory Note in the principal amount of $191,207.27 relating to 2002 Volvo Truck lease. The Promissory Note 1 provided for monthly payments of $8,560.84. It also financed the purchase of 5 Volvo trucks that served as collateral for the loan transaction. On the same date as the Debtor's agreement with VFS, Cyclone and VFS entered into a Master Lease Agreement. The agreement provided for the lease of a 2001 Volvo Truck for a 54-month period at the rate of $1,463 per month. The amount financed pursuant to the terms of that lease was $78,869.61. VFS believes that the vehicles subjected to the Cyclone financing transactions in which the Debtor guaranteed are being used by the Debtor. VFS wants the Debtor to determine its interest in connection with the leased equipments. Moreover, VFS says that the Debtor needs to decide on leases by a date certain to be set as soon as practicable by this Court but before confirmation of its Plan. Should the Debtor decide to assume the leases, VFS asserts that the Debtor should cure the defaults, if any, and provide adequate assurance of future performance. Headquartered in Houston, Texas, Triple A Poultry, Inc., sells meat and poultry products. The company filed for chapter 11 protection on May 19, 2006 (Bankr. S.D. Tex. Case No. 06-32119). John Matthew Vaughn, Esq., at Porter & Hedges, LLP, represents the Debtor in its restructuring efforts. No Official Committee of Unsecured Creditors has been appointed in the Debtor's case. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million and $50 million. USA COMMERCIAL: Equity Panel Hires Beckley Singleton as Counsel --------------------------------------------------------------- The Honorable Linda B. Riegle of the U.S. Bankruptcy Court for the District of Nevada in Las Vegas authorized the Official Committee of Equity Security Holders appointed in USA Capital Diversified Trust Deed Fund, LLC, to retain Beckley Singleton, Chartered, as special Nevada counsel, nunc pro tunc to June 9, 2006. Beckley Singleton will: a. protect and preserve the collective interests of the equity security holders of USA Diversified as a classes; b. advise the Committee on the requirements of the Bankruptcy Code and the Bankruptcy Rules as they pertain to the interests of the Committee and its constituents; c. develop, through discussion with the Committee, its financial advisor, Orrick, and other parties-in-interest, the Committee's legal positions and strategies with respect to all facets of the Debtors' cases generally, and USA Diversified in particular, including analyzing the Committee's position on administrative and operational issues; d. prepare and respond to motions, applications, answers, orders, memoranda, reports, and papers in connection with representing the interests of the Committee; e. participate in the negotiations and resolution of issues related to financing and any plan of reorganization or plan of liquidation; and f. render other necessary advice and services that the Committee may require in connection with the Debtors' cases. Beckley Singleton will assist Orrick, Herrington & Sutcliffe LLP, USA Diversified's lead bankruptcy counsel. The two firms will coordinate responsibility to minimize duplication. Bob L. Olson, Esq., a shareholder at Beckley Singleton, Chartered, disclosed that professionals bill: Designation Hourly Rate ----------- ----------- Partners/Of Counsel $300 - $550 Associates $165 - $300 Law Clerks $120 - $165 Paralegals $110 - $145 Mr. Olson assured the Court that the Firm does not hold nor represent any interest adverse to USA Diversified's estate. Based in Las Vegas, Nevada, USA Commercial Mortgage Company, dba USA Capital (USACM) -- http://www.usacapitalcorp.com/-- provides more than $1 billion in short-term and permanent financing to homebuilders, commercial developers, apartment owners and institutions nationwide. The Company and its debtor-affiliates filed for chapter 11 protection on April 13, 2006 (Bankr. D. Nev. Case Nos. 06-10725 to 06-10729). Lenard E. Schwartzer, Esq., at Schwartzer & Mcpherson Law Firm, represents the Debtors. Candace C. Carlyon, Esq., and Shawn w. Miller, Esq., at Shea & Carlyon, Ltd., and Jeffrey H. Davidson, Esq., Frank A. Merola, Esq., and Eve H. Karasik, Esq., at Stutman, Treister & Glatt, PC, represent the Debtors' Investor Committees. Susan M. Freeman, Esq., and Rob Charles, Esq., at Lewis and Roca LLP represent the Official Committee of Unsecured Creditors. Marc A. Levinson, Esq., and Jeffery D. Hermann, Esq., at Orrick, Herrington & Sutcliffe LLP, and Bob L. Olson, Esq., and Anne M. Loraditch, Esq., at Beckley Singleton, Chartered, give legal advice to the Official Committee of Equity Security Holders appointed in USA Capital Diversified Trust Deed Fund, LLC. When the Debtors filed for protection from their creditors, they estimated assets of more than $100 million and debts between $10 million and $50 million. USA COMMERCIAL: Equity Panel Hires Orrick Herrington as Counsel --------------------------------------------------------------- The Honorable Linda B. Riegle of the U.S. Bankruptcy Court for the District of Nevada in Las Vegas authorized the Official Committee of Equity Security Holders appointed in USA Capital Diversified Trust Deed Fund, LLC, to retain Orrick, Herrington & Sutcliffe LLP, as its lead bankruptcy counsel, nunc pro tunc to June 1, 2006. Orrick Herrington will: a. protect and preserve the collective interests of the equity security holders of USA Diversified as a classes; b. advise the Committee on the requirements of the Bankruptcy Code and the Bankruptcy Rules as they pertain to the interests of the Committee and its constituents; c. develop, through discussion with the Committee, its financial advisor, Beckley, and other parties-in-interest, the Committee's legal positions and strategies with respect to all facets of the Debtors' cases generally, and USA Diversified in particular, including analyzing the Committee's position on administrative and operational issues; d. prepare and respond to motions, applications, answers, orders, memoranda, reports, and papers in connection with representing the interests of the Committee; e. participate in the negotiations and resolution of issues related to financing and any plan of reorganization or plan of liquidation; and f. render other necessary advice and services that the Committee may require in connection with the Debtors' cases. Beckley Singleton Chartered will serve as the USA Diversified's local counsel, and will assist Orrick Herrington. The two firms will coordinate responsibility to minimize duplication. Marc A. Levinson, Esq., a partner at Orrick, Herrington & Sutcliffe LLP, discloses that professionals bill: Designation Hourly Rate ----------- ----------- Partners/Of Counsel $495 - $755 Associates $235 - $490 Law Clerks $225 Paralegals $50 - $290 Mr. Levenson assures the Court that the Firm does not hold nor represent any interest adverse to the estate of USA Diversified. Based in Las Vegas, Nevada, USA Commercial Mortgage Company, dba USA Capital (USACM) -- http://www.usacapitalcorp.com/-- provides more than $1 billion in short-term and permanent financing to homebuilders, commercial developers, apartment owners and institutions nationwide. The Company and its debtor-affiliates filed for chapter 11 protection on April 13, 2006 (Bankr. D. Nev. Case Nos. 06-10725 to 06-10729). Lenard E. Schwartzer, Esq., at Schwartzer & Mcpherson Law Firm, represents the Debtors. Candace C. Carlyon, Esq., and Shawn w. Miller, Esq., at Shea & Carlyon, Ltd., and Jeffrey H. Davidson, Esq., Frank A. Merola, Esq., and Eve H. Karasik, Esq., at Stutman, Treister & Glatt, PC, represent the Debtors' Investor Committees. Susan M. Freeman, Esq., and Rob Charles, Esq., at Lewis and Roca LLP represent the Official Committee of Unsecured Creditors. Marc A. Levinson, Esq., and Jeffery D. Hermann, Esq., at Orrick, Herrington & Sutcliffe LLP, give legal advice to the Official Committee of Equity Security Holders appointed in USA Capital Diversified Trust Deed Fund, LLC. When the Debtors filed for protection from their creditors, they estimated assets of more than $100 million and debts between $10 million and $50 million. USA COMMERCIAL: Court Okays Hilco as Real Estate Appraiser ---------------------------------------------------------- The Honorable Linda B. Riegle of the U.S. Bankruptcy Court for the District of Nevada in Las Vegas authorized USA Commercial Mortgage Company and its debtor-affiliates to employ Hilco Real Estate, LLC, and Hilco Real Estate Appraisal, LLC, as their real estate appraisers. As reported in the Troubled Company Reporter on July 4, 2006, the Debtors want Hilco to provide appraisal and related services because of its broad national reach in the real estate marketplace, its vast experience in conducting valuations of the various types of properties securing the loans. Hilco will: a) provide a range of valuation reports, determined by, among other things, the presence or absence of a current appraisal for a given property, the reliability of any existing appraisal and the payment history or status of the loan; b) provide expert witness services, including court testimony and deposition testimony, as necessary, on related matters; consulting services concerning the status of various properties and real issues relating to delinquent or defaulted loans; and advisory services relating to funding new loans, if any, or funding loans which currently are unfunded or under-funded; and c) provide services relating to the disposition of properties which the Debtors acquire through foreclosure, settlement or otherwise. Jeffrey W. Linstrom, a member at Hilco, disclosed that Hilco and the Debtors entered into an agreement on the firm's compensation. Under the agreement, Hilco will be paid a $300,000 base fee for its valuation services in three monthly installments of $100,000 each, beginning on May 31, 2006, through July 31, 2006. For its expert witness, consulting and advisory services, the firm's professionals bill: Designation Hourly Rate ----------- ----------- Senior Professionals $450 Midlevel Professionals $350 - $400 Junior Level Professionals $250 - $300 Administrative Staff $100 Hilco will receive a disposition fee based on a sliding percentage scale of the gross proceeds from the disposition of a property, which fee will be paid out of the gross proceeds at the time of closing of the disposition. Those percentages are: Amount Percentage Scale ------ ---------------- up to $5,000,000 5% $5,000,001 to $10,000,000 4% $10,000,001 to $20,000,000 3% over $20,000,000 1.5% Mr. Linstrom assured the Court that the Firm is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Based in Las Vegas, Nevada, USA Commercial Mortgage Company, dba USA Capital (USACM) -- http://www.usacapitalcorp.com/-- provides more than $1 billion in short-term and permanent financing to homebuilders, commercial developers, apartment owners and institutions nationwide. The Company and its debtor-affiliates filed for chapter 11 protection on April 13, 2006 (Bankr. D. Nev. Case Nos. 06-10725 to 06-10729). Lenard E. Schwartzer, Esq., at Schwartzer & Mcpherson Law Firm, represents the Debtors. Candace C. Carlyon, Esq., and Shawn w. Miller, Esq., at Shea & Carlyon, Ltd., and Jeffrey H. Davidson, Esq., Frank A. Merola, Esq., and Eve H. Karasik, Esq., at Stutman, Treister & Glatt, PC, represent the Debtors' Investor Committees. Susan M. Freeman, Esq., and Rob Charles, Esq., at Lewis and Roca LLP represent the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets of more than $100 million and debts between $10 million and $50 million. USG CORP: Signs $2.8 Bil. Exit Financing with JPMorgan, et al. -------------------------------------------------------------- USG Corp. discloses in a regulatory filing with the United States Securities and Exchange Commission that it entered into a $2.8 billion credit agreement with a syndicate of banks led by JPMorgan Chase Bank, N.A., as administrative agent. In addition, USG Corp. says the outstanding letters of credit under its DIP credit agreement with LaSalle Bank National Association were incorporated into the Exit Facility, and the DIP agreement with LaSalle was terminated. As of June 30, 2006, $86 million of letters of credit were outstanding under the LaSalle facility. As previously reported, the Exit Facility consists of: (i) a $650 million revolving credit facility with a $250 million sublimit for letters of credit; (ii) a $1 billion term loan facility; and (iii) a $1.15 billion tax bridge term loan facility. The revolving credit facility matures on August 2, 2011, unless terminated earlier in accordance with its terms. The revolving credit facility has not been drawn upon as of August 3, 2003, except for approximately $90,000,000 of outstanding letters of credit. The term loan facility matures on August 2, 2011, and the tax bridge facility matures on February 2, 2009. The term loan is to be made available to USG from the lenders in a single drawing of up to $1 billion and the tax bridge facility is to be made available to USG in a single drawing of up to $1.15 billion -- in each case to be made on or before January 31, 2007. If the Fair Act of 2005, or substantially similar legislation, is enacted but remains subject to constitutional challenge, USG would be able to request that the availability of the term loan and tax bridge facilities be extended. However, the availability of the term loan facility is not permitted to be extended beyond August 1, 2008, and the availability of the tax bridge facility is not permitted to be extended beyond February 1, 2008. 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. (USG Bankruptcy News, Issue No. 120; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). VALHI INC: S&P Downgrades Corporate Credit Rating to BB- from BB ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Valhi Inc. and its indirect subsidiary Kronos International Inc. to 'BB-' from 'BB'. At the same time, Standard & Poor's lowered its rating on Kronos' EUR400 million senior secured notes issue due 2013 to 'B' from 'B+'. All ratings remain on CreditWatch with negative implications, where they were placed earlier this year in connection with an adverse verdict in a Rhode Island lead pigment lawsuit. "The downgrade reflects deterioration in operating trends versus our previous expectations, a modest weakening of the financial profile due to increased share repurchases, and continued concern regarding the potential negative implications stemming from the lead litigation," said Standard & Poor's credit analyst Wesley E. Chinn. During the second quarter of 2006, the company experienced higher raw-material and energy costs and weakening titanium dioxide product pricing and mix. When coupled with lingering economic uncertainties for the second half of 2006, this could continue to compress margins in Valhi's chemicals segment and limit the free cash flow necessary to maintain its financial profile. The chemicals segment accounts for approximately 86% of the company's total sales. The ratings on Valhi reflect the company's: * limited business diversity; * exposure to cyclical commodity product cycles; and * an aggressive financial profile. These factors are mitigated by the company's well-established position among the leading global TiO2 producers and a niche component products business through its CompX International Inc. subsidiary (ergonomic computer support systems, precision ball- bearing slides for furniture, and security products). In the TiO2 segment, Valhi benefits from: * good geographic diversity; * environmentally compliant proprietary chloride process technology; and * competitive cost positions. With about $1.4 billion in sales, Valhi is a holding company that derives the majority of its revenue and operating profits from its ownership in Kronos Worldwide Inc., the world's fifth-largest producer of TiO2. On Feb. 22, 2006, a jury in Rhode Island found NL Industries Inc. (a subsidiary of Valhi), along with Sherwin-Williams Co. and Millennium Chemicals Inc., liable for creating a public nuisance by making lead-based paints decades ago. Possible damages could be substantial, although the extent to which an adverse ruling would affect Valhi or the credit quality of its other subsidiaries is uncertain. The verdict found the defendants responsible for the abatement of lead-based paint, which has been banned in the U.S. since 1978 because of serious health issues caused by lead poisoning. Some estimates have placed the number of affected homes in Rhode Island in the range of 200,000 to 300,000 and cleanup costs of $2 billion to $3 billion. The cost of abatement in Rhode Island is still highly uncertain at this time as the judge presiding over the trial will determine the specifics of that program. Product liability insurance related to lead poisoning would be a mitigating factor when assessing potential outlays for claims and defense costs, but the extent of effective coverage, relative to the potential obligations, is unknown. Standard & Poor's expects to resolve the CreditWatch when additional details of the abatement program are known. These include the possible dollar magnitude for the removal of lead paint, lead paint removal procedures, and bonding requirements of the appeals process. The CreditWatch resolution would also take into consideration the risk of additional lawsuits or other pending legal actions against Valhi or its subsidiaries. In the interim, Standard & Poor's could lower the ratings if there are prospects for extended adverse market conditions, further deterioration of operating profitability and the financial profile, or continued aggressive shareholder initiatives. VARIG S.A.: Volo May Face Lawsuit Over Unpaid Wages --------------------------------------------------- Volo do Brasil, the purchaser of VARIG S.A.'s operating assets, is facing a potential lawsuit by the Brazilian Labor Prosecutor's Office, according to Investnews (Brazil). The Prosecutor's Office said it will sue Volo and VARIG for payment of late salaries and the rescission rights of VARIG's workers, Investnews relates. Rodrigo Carelli, Esq., of the Prosecutor's Office, said the lawsuit will be aimed at Volo. Volo acquired VARIG's operating assets at an auction in July 2006. Volo has pledged to infuse more than $500,000,000 to allow the airline to pay debts and return to profitability. The sale is still subject to regulatory approval by the National Civil Aviation Authority in Brazil. Volo also acquired VarigLog, VARIG's former cargo unit, in a transaction early this year. About VARIG Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WADSWORTH HOUSING: S&P Downgrades $3.4 Million Bonds' Rating to B ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Wadsworth Housing Development Corp., Ohio's $3.4 million mortgage revenue bonds series 1993 to 'B' from 'BB-'. The outlook is stable. The bonds are secured by a first mortgage lien on the property. The downgrade reflects: * declining debt service coverage, which is currently below the 1x level; * a steep rise in expenses at the project; and * contract rent above fair market rents. The latest audited financial results for the fiscal year ended June 30, 2005, indicate that debt service coverage declined to 0.87x from 1.01x in 2004 and 1.23x in 2001. As per the year-to- date financial statements for the eight months ended Feb. 28, 2006, annualized debt service coverage improved to 0.93x. The average net rent is $594 per unit per month for June 2005. Expenses per unit per year have increased to $4,295 in June 2005, up from $3,769 in June 2004. This increase was mainly due to: * a 10% increase in administrative expenses; * a 27% increase in maintenance expenses; and * a 10% increase in utilities expenses. This sharp 14% increase in expenses partially led to a higher expense ratio of 58.85% from 52.08% in June 2004. As per the year-to-date financial statements for the eight months ended Feb. 28, 2006, annualized expenses per unit increased to $4,397 and the expense ratio deteriorated marginally to 57.92%. The occupancy at the project was 100% as of December 2005, as per the project manager report. Debt per unit was $32,800 as of March 2006. WARD PRODUCTS: Section 341(a) Meeting Scheduled on September 14 ------------------------------------------------------------- The U.S. Trustee for Region 9 will convene a meeting of Ward Products, L.L.C.'s creditors at 10:00 a.m., on Sept. 14, 2006, in Room 743 at 211 West Fort Street Building in Detroit, Michigan. This will be the first meeting of creditors as required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquarted in Royal Oak, Michigan, Ward Products, L.L.C. manufactures receiving antennas. The Company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. E.D. Mich. Case No. 06-50527). Jay L. Welford, Esq., Judith Greenstone Miller, Esq., Paige E. Barr, Esq., and Richard E. Kruger, Esq., at Jaffe Franklin Heuer & Weis, P.C. represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. WESTERN APARTMENT: Taps Matranga & Wiley as Accountants ------------------------------------------------------- Western Apartment Supply & Maintenance Company asks the United States Bankruptcy Court for the District of Hawaii for permission to employ Matranga & Riley as accountants. The Debtor needs Matranga & Riley for an accounting and review of all documents related to loans the Debtor received from La Jolla Loans Inc. The Debtor wants to determine the full amount of the La Jolla Loan in order to determine how La Jolla will be paid and how other creditors will receive distributions, if any. La Jolla demanded payment of more than $12,300,000. The Debtor believes the amount is well beyond what La Jolla is entitled to and intends to prepare its own history and accounting of the La Jolla transaction. Joseph E. Matranga, a certified public accountant at Matranga & Riley says his Firm will charge $10,000 for this engagement. Mr. Matranga assures the Court that Matranga & Riley does not hold any interest adverse to the Debtor. About Western Apartment Based in San Diego, California, Western Apartment Supply & Maintenance previously filed for chapter 11 protection on Jan. 12, 2004 (Bankr. D. Hawaii Case NO. 04-00072). The case was dismissed on May 16, 2006. The Debtor filed its second chapter 11 petition on Apr. 18, 2006 (Bankr. S.D. Calif. Case No. 06-00821). John L. Smaha, Esq., at Smaha and Daley, represents the Debtor. When the Debtor filed for chapter 22, it listed total assets of $18,045,054 and total debts of $18,131,069. On June 30, 2006, at the request La Jolla Loans Inc., a secured creditor, the U.S. Bankruptcy Court for the Southern District of California transferred the Debtor's case to the U.S. Bankruptcy Court for the District of Hawaii on July 1, 2006 (Bankr. D. Hawaii Case No. 06-00459). WESTON NURSERIES: Disclosure Statement Hearing Set for Sept. 27 --------------------------------------------------------------- The Honorable Joel B. Rosenthal of the U.S. Bankruptcy Court for the District of Massachusetts, Western Division, will consider the adequacy of the Disclosure Statement explaining Weston Nurseries, Inc.'s Joint Chapter 11 Plan of Reorganization at a hearing on Sept. 27, 2006, 10:00 a.m., at Courtroom 3, Harold Donohue, Federal Building & Courthouse, 595 Main Street in Worcester, Massachusetts. Plan Overview After emerging from bankruptcy protection, the Debtor intends to continue to grow and market its agricultural nursery-related products from its Hopkinton operations and maintain its landscaping contractual services throughout New England. The Joint Plan provides the Debtor with three options for reorganization: 1) a substantive consolidation of the Debtor and non-debtor Mezitt Agricultural Corporation; 2) a merger of the Debtor and MezAG into the Reorganized Company; or 3) the sale of certain real property that the Debtor determines to be no longer necessary for its future operations. Distribution due to creditors will be funded from any combination of: 1) the funds the Reorganized Company receives on the effective date from post-confirmation financing with the Debtor's current DIP lender, Business Alliance Capital Corporation; 2) net proceeds from the sale of certain real estate in which the Reorganized Company has an interest; 3) a portion of the revenues generated by the Reorganized Company's business operations; and 4) recoveries of proceeds from the prosecution or settlement of any causes of action. The Debtor has also received a formal written proposal from an unnamed developer that would fully fund the Plan, provide financing for the Debtor (leaving in place the BACC exit revolver), permit the Debtor to operate pursuant to its business plan and generate substantial proceeds for shareholders. Wayne Mezitt, has conditionally accepted this proposal. Roger Mezitt is currently considering the offer. Brothers Wayne and Roger Mezitt, currently own 13% of the Debtor's stock and are the present beneficial holders of a trust that owns the remaining 74% of stock. Their long-standing dispute over control of Weston Nurseries led to the Debtor's bankruptcy filing. Treatment of Claims BACC's secured claim on account of the DIP credit facility will be paid in full on the effective date from the proceeds of the exit facility. BACC's claim is unimpaired. First Pioneer Farm Credit ACA holds security interests in the Debtor and MezAG. In full satisfaction of its claim, First Pioneer can elect either to: -- foreclose on real property its holds a security interest in and pay itself from the proceeds of the sale of the property; -- receive payment from the planned sale of a portion of the Debtor's real property; or -- allow the Debtor to cure all monetary defaults, reinstate maturity and continue to make payment at the prevailing non-default interest rate until it is fully paid. Claims arising from secured equipment liens will be paid, at the option of the Debtor, through cash, surrender of collateral, reinstatement of debt in accordance with Section 1124(2) of the Bankruptcy Code or a modification and compromise of the debt terms. The allowed claim of the Town of Hopkinton will be paid from the proceeds of the sale of the Debtor's properties. Holders of general unsecured claims will receive payment for 100% of their allowed claims through a Creditors' Trust established pursuant to the Plan. The Trust will receive funds or property from the Reorganized Company to cover full payment of all allowed general unsecured claims over a period of no more 10 years. Distribution to the Creditors' Trust includes 6% of the Reorganized Company's stock. The Debtor estimates general unsecured claims at $950,000. The estimate does not include the $2 million alleged unsecured claim of Roger Mezitt which the Debtor disputes or argues should be subordinated. Wayne and Roger Mezitt will divide equally the 94% equity interest in the Reorganized Debtor due to them under the Plan. A full-text copy of the Disclosure Statement explaining the Debtor's Plan is available for a fee at: http://www.researcharchives.com/bin/download?id=060824054933 Objections to the Disclosure Statement or Plan must be filed by 4:30 p.m., on Sept. 18, 2006, with: a) The Clerk of the Bankruptcy Court District of Massachusetts, Western Division Harold Donahue Federal Building and Courthouse 595 Main Street Worcester, MA 01608 b) Counsel for the Debtor Alan L. Braunstein, Esq. Riemer & Braunstein LLP Three Center Plaza Boston, Massachusetts 02108 c) the Office of the United States Trustee 446 Main Street, Worcester, Massachusetts 01608. The Debtor has filed a motion with the Court seeking to extend their exclusive period to solicit acceptances of their Plan until Nov. 30, 2006. The Debtor says the solicitation period extension will promote a focused and continued effort to confirm the Plan in an agreeable and consensual matter. Headquartered in Hopkinton, Massachusetts, Weston Nurseries, Inc., -- http://www.westonnurseries.com/-- is central New England's premier resource in designing, creating, and enjoying outdoor living areas. Weston Nurseries grows and sells plants, trees, shrubs, and perennials. The Company filed for chapter 11 protection on Oct. 14, 2005 (Bankr. D. Mass. Case No. 05-49884). Alan L. Braunstein, Esq., at Riemer & Braunstein, LLP, represents the Debtor in its restructuring efforts. Michael J. Fencer, Esq., and Steven C. Reingold, Esq., at Jager Smith, PC, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. WESTON NURSERIES: Has Until October 31 to Decide on Leases ---------------------------------------------------------- The Honorable Joel B. Rosenthal of the U.S. Bankruptcy Court for the District of Massachusetts extends, until Oct. 31, 2006, Weston Nurseries, Inc.'s period to assume, assume and assign or reject its unexpired leases on non-residential real property. Christopher M. Condon, Esq., at Riemer & Braunstein LLP asserts that it is in the best interest of the Debtor's business and its creditors for certain alleged lease agreements to be preserved as estate assets until the Court can make a determination on the validity, amount and necessity of these leases. The Debtor will request disposition of the alleged lease agreements during confirmation proceedings for their recently submitted Plan of Reorganization. The Debtor assures the Court that the proposed extension will not prejudice the lessors of any unexpired leases because: -- each of the lessors is an insider of the Debtor; and -- the Debtor has sufficient assets to pay any court-a approved damages that might arise due to the prolongation of the time to assume or reject. Headquartered in Hopkinton, Massachusetts, Weston Nurseries, Inc., -- http://www.westonnurseries.com/-- is central New England's premier resource in designing, creating, and enjoying outdoor living areas. Weston Nurseries grows and sells plants, trees, shrubs, and perennials. The Company filed for chapter 11 protection on Oct. 14, 2005 (Bankr. D. Mass. Case No. 05-49884). Alan L. Braunstein, Esq., at Riemer & Braunstein, LLP, represents the Debtor in its restructuring efforts. Michael J. Fencer, Esq., and Steven C. Reingold, Esq., at Jager Smith, PC, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. WESTON NURSERIES: No Takers for 655-Acre Property ------------------------------------------------- Weston Nurseries, Inc., failed to attract any qualified bids for its 655-acre real estate property in Hopkinton, Massachusetts. The U.S. Bankruptcy Court for the District of Massachusetts subsequently cancelled the July 31, 2006 auction for the property. The Official Committee of Unsecured Creditors, the Town of Hopkinton and Mezag Agricultural Corp. all agreed to the cancellation. The Troubled Company Reporter disclosed on June 19 that the Debtor was looking for a $29.5 million minimum offer for the property if a prospective buyer acquires stock in the company or $37 million, if the purchaser buys the entire land. The Debtor informs the Court that it is presently pursuing alternative sale options for the land. Headquartered in Hopkinton, Massachusetts, Weston Nurseries, Inc., -- http://www.westonnurseries.com/-- is central New England's premier resource in designing, creating, and enjoying outdoor living areas. Weston Nurseries grows and sells plants, trees, shrubs, and perennials. The Company filed for chapter 11 protection on Oct. 14, 2005 (Bankr. D. Mass. Case No. 05-49884). Alan L. Braunstein, Esq., at Riemer & Braunstein, LLP, represents the Debtor in its restructuring efforts. Michael J. Fencer, Esq., and Steven C. Reingold, Esq., at Jager Smith, PC, represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. WINN-DIXIE: Sets Sept. 12 as Special Bar Date for 287 Claimants --------------------------------------------------------------- Winn-Dixie Stores, Inc., and its debtor-affiliates inform the U.S. Bankruptcy Court for the Middle District of Florida that they have established Sept. 12, 2006, at 5:00 p.m. (Eastern Standard Time) as a special bar date for 287 subsequently identified potential claimants who were not identified in time to receive notice of the original bar date established in the Debtors' Chapter 11 cases, including potential claimants whose claims may arise from the provisions of the Debtors' proposed plan of reorganization. On August 18, 2006, copies of notices establishing the special bar date were mailed to: -- 76 subsequently identified potential claimants; See http://ResearchArchives.com/t/s?1054 -- 82 potential claimants under Section 7.9(d) of the Plan; See http://ResearchArchives.com/t/s?1055 -- 129 potential claimants under Section 7.10 of the Plan. See http://ResearchArchives.com/t/s?1056 Copies of the notices were also sent to the Office of the U.S. Trustee, counsel of the Official Committee of Unsecured Creditors, and counsel to the Debtors' postpetition secured lender. 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. 50; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WINN-DIXIE: Wants Exclusive Solicitation Period Carried to Oct. 31 ------------------------------------------------------------------ Pursuant to Sections 105(a) and 1121(d) of the Bankruptcy Code, Winn-Dixie Stores, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Middle District of Florida to extend their exclusive period to solicit acceptance of their plan of reorganization, dated June 29, 2006, as amended, and subsequently refiled, for about 60 days, to the earlier of: (a) the entry of an order confirming the Plan; or (b) October 31, 2006. The Debtors seek an extension of their exclusive solicitation period, which currently expires on August 29, 2006, to ensure that they are able to complete the solicitation process without the risk of distractions resulting from any party's efforts to take advantage of the termination of the exclusive solicitation period. The Debtors ask the Court to approve the extension, without prejudice to: -- their right to seek further extensions of the exclusive solicitation period; or -- any party-in-interest's right to seek to reduce the exclusive solicitation period for cause. 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. 50; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). YUKOS OIL: Moscow Court Rejects Debtor's Bankruptcy Appeal ---------------------------------------------------------- The Moscow Arbitration Court rejected Wednesday OAO Yukos Oil Co.'s appeal against an Aug. 1 bankruptcy ruling, upholding the decision by creditors to liquidate the company, according to published reports. As previously reported in TCR-Europe, creditors voted on July 25 to liquidate what was once Russia's biggest oil firm rejecting a management rescue plan that valued the company's assets at about $30 billion. The vote came after bankruptcy manager Eduard Rebgun said Yukos couldn't pay its debts in the time allotted by law. Subsequently, the court declared the oil firm bankrupt on Aug. 1 after three years of litigation over back taxes. The company is facing up to $16.6 billion in claims filed by more than 20 creditors including, among others: Yuganskneftegas $4.07 billion Federal Tax Service $11.6 billion OAO Rosneft Oil Co. $482 million The Prosecutor General's Office launched a probe on Aug. 8 into alleged fraud during the oil group's bankruptcy procedure. Russian prosecutors have accused former Yukos officials of embezzling money by securing a $4.5 billion loan from Yukos Capital SARL, a Luxembourg-based unit and major creditor for Yukos, through legal entities affiliated with the company. Investigators alleged that the ex-Yukos officials masterminded a plan to sell crude oil through trading companies Fargoil and Ratibor under their control, acting both as fictitious owners and buyers, RIA Novosti relates. According to the Russian news agency, Mr. Rebgun agreed with investigators that Yukos Capital had offered Yukos its own assets. While Yukos was in external administration, Yukos Capital filed a motion to participate in the first creditors' meeting and filed claims against Yukos, which the court subsequently rejected. About Yukos Headquartered in Moscow, Yukos Oil -- http://yukos.com/-- is an open joint stock company existing under the laws of the Russian Federation. Yukos is involved in energy industry substantially through its ownership of its various subsidiaries, which own or are otherwise entitled to enjoy certain rights to oil and gas production, refining and marketing assets. The Company filed for Chapter 11 protection Dec. 14, 2004 (Bankr. S.D. Tex. Case No. 04-47742), but the case was dismissed on Feb. 24, 2005, by the Hon. Letitia Z. Clark. A few days later, the Government sold its main production unit Yugansk, to a little-known firm Baikalfinansgroup for $9.35 billion, as payment for $27.5 billion in tax arrears for 2000- 2003. Yugansk eventually was bought by state-owned Rosneft, which is now claiming more than $12 billion from Yukos. On March 10, a 14-bank consortium led by Societe Generale filed a bankruptcy suit in the Moscow Arbitration Court in an attempt to recover the remainder of a $1 billion debt under outstanding loan agreements. The banks, however, sold the claim to Rosneft, prompting the Court to replace them with the state-owned oil company as plaintiff. On April 13, court-appointed external manager Eduard Rebgun filed a chapter 15 petition in the U.S. Bankruptcy Court for the Southern District of New York (Bankr. S.D.N.Y. Case No. 06- 0775), in an attempt to halt the sale of Yukos' 53.7% ownership interest in Lithuanian AB Mazeikiu Nafta. On May 26, Yukos signed a $1.49 billion Share Sale and Purchase Agreement with PKN Orlen S.A., Poland's largest oil refiner, for its Mazeikiu ownership stake. The move was made a day after the Manhattan Court lifted an order barring Yukos from selling its controlling stake in the Lithuanian oil refinery. * BOOK REVIEW: The Big Board: A History of the New York Stock Market ------------------------------------------------------------- Author: Robert Sobel Publisher: Beard Books Paperback: 412 pages List Price: $34.95 Order your personal copy at http://amazon.com/exec/obidos/ASIN/1893122662/internetbankrupt First published in 1965, The Big Board was the first history of the New York stock market. It's a story of people: their foibles and strengths, earnestness and avarice, triumphs and crash-and- burns. It's full of entertaining anecdotes, cocktail-party trivia, and tales of love and hate between companies and investors. Early investments in North America consisted almost exclusively of land. The few securities holders lived in cities, where informal markets grew, with most trading carried out in the street and in coffeehouses. Banking, insurance, and manufacturing activity increased only after the Revolution. In 1792, 24 prominent New York businessmen, for who stock- and bond-trading was only a side business, met under a buttonwood tree on Wall Street and agreed to trade securities on a common commission basis. Five securities were traded: three government bonds and two bank stocks. Trading was carried out at the Tontine Coffee-House in a call market, with the president reading out a list of stocks as brokers traded each in turn. The first half of the 19th century was heady for security trading in New York. In 1817, the Tontine gave way to the New York Stock and Exchange Board, with a more organized and regulated system. Canal mania, which peaked in the late 1820s, attracted European funds to New York and volume soared to 100 shares a day. Soon, the railroads competed with canals for funding. In the frenzy, reckless investors bought shares in "sheer fabrications of imaginative and dishonest men," leading an economist of the day to lament that "every monied corporation is 'prima facia' injurious to the national wealth, and ought to be looked upon by those who have no money with jealousy and suspicion." Colorful figures of Wall Street included Jay Gould and Jim Fisk, who in 1869 precipitated one of the worst panics in American financial history by trying to corner the gold market. Almost lynched, the two were hauled into court, where Fisk whined, "A fellow can't have a little innocent fun without everybody raising a halloo and going wild." Then, there was Jay Cooke, who invented the national bond drive and, practically unaided, financed the Union effort in the Civil War. In 1873, however, faulty judgment on railroad investments led to the failure of Cooke & Co. and a panic on Wall Street. The NYSE closed for ten days. A journalist wrote: "An hour before its doors were closed, the Bank of England was not more trusted." Despite J. P. Morgan's virtual single-handed role in stemming the Knickerbocker Trust panic of 1907, on his death in 1913, someone wrote "We verily believe that J. Pierpont Morgan has done more harm in the world than any man who ever lived in it." In the 1950s, Charles Merrill was instrumental in changing this attitude toward Wall Streeters. His firm, Merrill Lynch, derisively known in some quarters as "We, the People" and "The Thundering Herd," brought Wall Street to small investors, traditionally not worth the effort for brokers. The Big Board closes with this story. Asked by a much younger man what he thought stocks would do next, J.P. Morgan "never hesitated for a moment. He transfixed the neophyte with his sharp glance and replied 'They will fluctuate, young man, they will fluctuate.' And so they will." Robert Sobel died in 1999 at the age of 68. A professor at Hofstra University for 43 years, he was a prolific historian of American business, writing or editing more than 50 books. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Marie Therese V. Profetana, Robert Max Victor M. Quiblat II, Shimero R. Jainga, Joel Anthony G. Lopez, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Cherry A. Soriano-Baaclo, Christian Q. Salta, Jason A. Nieva, Lucilo M. Pinili, Jr., Tara Marie A. Martin and Peter A. Chapman, Editors. Copyright 2006. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $725 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***