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/raid1/www/Hosts/bankrupt/TCR_Public/060922.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, September 22, 2006, Vol. 10, No. 226 Headlines AMERICAN ENTERTAINMENT: S&P Rates Proposed $250 Mil. Notes at B- AMERICAN ENTERTAINMENT: Moody's Junks Proposed $250MM Senior Notes AMERICAN TOWER: Restating Annual and Quarterly Financial Reports ACORN PARTNERS: Case Summary & 20 Largest Unsecured Creditors ARAMARK CORP: Moody's Lowers $250MM Senior Notes to B2 from Baa3 ASARCO LLC: CBRY Stockholders Pact Effective as of August 29 ASARCO LLC: Wants Srackangast as Special Environmental Auditor ASHLAND INC: CFO Provides Quarter Ended September 30 Outlook ATLANTIS PLASTICS: Moody's Affirms Caa1 Rating on $75MM Jr. Loan AVIALL INC: S&P Withdraws BB Corp. Credit Rating & Removes Watch AXCESS INT'L: Incurs $965,812 Net Loss in Quarter Ended June 30 BAINBRIDGE REALTY: Voluntary Chapter 11 Case Summary BATTERSON PARK: Moody's Pares $16.5MM Cl. B Notes to Caa3 from B3 BLEECKER STRUCTURED: Moody's Puts Junked $40 Mil. Notes on Watch BOOKHAM INC: Sells UK Assembly and Test Facility for $9.5 Million BIOFORCE NANOSCIENCES: Losses Continue in 2006 Second Quarter CALPINE CORP: Can Sell 35% Russell Stake to GE Energy for $44MM CAPRIUS INC: Incurs $687,424 Net Loss in Quarter Ended June 30 CEP HOLDINGS: Case Summary & 20 Largest Unsecured Creditors CG MULTIFAMILY: Wants Court to Dismiss Chapter 11 Proceeding COMPLETE RETREATS: Administaff Wants Debtors Decision on Two Pacts COMPLETE RETREATS: Bingham & Kramer Files Creditors Update Report CONDO 53: Case Summary & Largest Unsecured Creditor CONTINENTAL AIRLINES: Defends DOT China Route Application DATALOGIC INT'L: Subsidiary Determines Source of $550,000 Deposits DELPHI CORP: Computer Patent Seeks Decision on Services Contract DORAL FINANCIAL: Agrees to Pay $25 Mil. Civil Penalty to the SEC DURA AUTOMOTIVE: Moody's Pares Junked Ratings on $856MM Sr. Notes DYNEGY INC: LS Power Merger Cues Moody's to Affirm Low-B Ratings E.DIGITAL CORP: June 30 Balance Sheet Upside Down by $3.5 Million EXIDE TECHNOLOGIES: Seeks Summary Judgment on EPA Response Claims EXIDE TECHNOLOGIES: U.S. Seeks Summary Judgment on Response Costs FORD MOTOR: Buying Rover Brand Name From BMW FOSS MANUFACTURING: Disclosure Statement Hearing Set for Oct. 10 FRIENDLYWAY C0RP: Posts $3.5M Net Loss in 3rd Qtr. Ended July 31 FTS GROUP: Earns $1.6 Million for the Period Ended June 30 G+G RETAIL: Assigns More than 400 Leases to Max Rave GENERAL MOTORS: Talks with Nissan and Renault Enter Final Phase GEORGIA GULF: Fitch Assigns B Rating to Proposed Sr. Sub. Notes GLOBAL EMPIRE: Chapter 11 Trustee Hires Hughes Watters as Counsel GMAC COMMERCIAL: S&P Upgrades Three Cert. Classes' Low-B Ratings GRAFTON PROPERTIES: Case Summary & Two Largest Unsecured Creditors INFORMATION ARCHITECTS: IFGT-SI Submits Replacement Asset INFORMATION ARCHITECTS: Inks Merger Agreement with Global Triad INSIGHT MIDWEST: S&P Rates New $2.57 Bil. Debt Facilities at BB- INVESTOOLS INC: Inks $340 Million Merger Deal with thinkorswim IRIDIUM SATELLITE: Names Matthew J. Desch as New CEO ISLE OF CAPRI: Earns $9 Million for the Quarter Ended July 30 IVOW INC: Net Loss Increases to $589,248 in Quarter Ended June 30 J.P. MORGAN: S&P Puts Class B-5 Loan's B Rating on Negative Watch JAMES VANN: Case Summary & Six Largest Unsecured Creditors LASELL COLLEGE: Moody's Affirms Ba1 Rating on $9.6 Million Bonds LONDON FOG: DJM & Hilco Joint Venture to Facilitate Sale of Leases LONDON FOG: Panel Taps McDonald Carano as Substitute Nev. Counsel MCCOMBS REALTY: Posts $112,000 Net Loss in Quarter Ended June 30 MICHAEL EZZO: Case Summary & 15 Largest Unsecured Creditors MIRANT CORP: Mirant Delta & Vogt-NEM Want Claims Dispute Resolved MIZAC PROPERTIES: Voluntary Chapter 11 Case Summary MORTGAGE ASSISTANCE: June 30 Equity Deficit Increased to $1.6 Mil. NANOBAC PHARMACEUTICALS: Posts $835,460 Net Loss in Second Quarter NATIONAL ENERGY: Court Allows Lehman's Claim No. 699 for $7.2 Mil. NATIONAL ENERGY: ET Debtors Say Littleton's Claim Was Filed Late NELNET INC: Moody's Rates $200 Mil. Sub. Debt Securities at Ba1 NETWORK INSTALLATION: June 30 Balance Sheet Upside Down by $47,839 NORTH AMERICAN: Restructures $25.5 Million of Debts NORTHWEST AIRLINES: Flight Attendants Declare Talks at Impasse NOTIFY TECHNOLOGY: Inks Amendments to Terms of Issued Warrants NUNET INC: Debtor Did Not Assume Liability for Claimant's Loans PARMALAT: Hermes et al., Balk at Credit Suisse's Motion to Dismiss PARMALAT USA: Court Okays Pact on George's Suit Against Farmland PEP BOYS: $120 Mil. Facility Increase Cues S&P to Affirm B+ Rating PITTSFIELD WEAVING: Case Summary & 20 Largest Unsecured Creditors PORTRAIT CORP: Hires BSI as Claims and Balloting Agent PREMIER ENTERTAINMENT: Chapter 11 Filing Cues S&P's Default Rating PROTECTION ONE: Has $71.4 Million Stockholders' Deficit at June 30 RADNOR HOLDINGS: Committee Taps Greenberg Traurig as Counsel RALPH STRUCHTEMEYER: Voluntary Chapter 11 Case Summary REAL ESTATE: Reports $217,000 Net Loss in Quarter Ended June 30 ROCKPORT HEALTHCARE: June 30 Balance Sheet Upside-Down by $1.9MM RONALD STAHL: Case Summary & 4 Largest Unsecured Creditors ROWE COS: Receives Court Approval of First-Day Motions SECUNDA INTERNATIONAL: S&P Holds B- Corp. Credit & Debt Ratings SIERRA PACIFIC: Fitch Lifts Issuer Default Rating to BB- from B+ SILICON GRAPHICS: Delays Filing of 2006 Annual Report SILICON GRAPHICS: Enters Into $115 Mil. Commitment Letter SINGING MACHINE: Incurs $1.1 Mil. Net Loss in 2006 Second Quarter STANFIELD ARBITRAGE: Moody's Reviews Low-B Ratings on $32MM Notes STERLING FINANCIAL: Fitch Affirms C Individual Rating SUPERB SOUND: Court Dismisses Case, Okays Kimco Lease Assumption TERWIN MORTGAGE: Moody's Rates Cl. I-B-5 & I-B-6 Certs. at Low-B TOWER RECORDS: Committee Taps McGuireWoods as Bankruptcy Counsel TRANS ENERGY: Has $2.1 Million Working Capital Deficit at June 30 TRANSAX INT'L: June 30 Balance Sheet Upside-Down by $3.7 Million TRIBUNE CO: Forms Special Panel to Enhance Shareholders' Value TRIBUNE CO: Shareholder Files Suit Against Eight Directors TRM CORPORATION: S&P Holds CCC Ratings on Developing Watch UNION STAMPING: Involuntary Chapter 11 Case Summary URANIUM RESOURCES: 2nd Quarter 2006 Net Loss Decreases to $2.1MM USGEN NEW ENGLAND: Braskan Claim Hearing Scheduled on Sept. 26 USGEN NEW ENGLAND: Wants Tennessee Gas' Claim Reduced to $1.2 Mil. UTILITY CRAFT: Wants Hale Resources as Bankruptcy Consultant VERIDIEN CORP: June 30 Balance Sheet Upside-Down by $6.3 Million VESCOR DEVELOPMENT: Taps Lionel Sawyer as Bankruptcy Counsel VESTA INSURANCE: Court Grants Injunction Against Utility Companies VESTA INSURANCE: Court Lets Gaines Reject Four Property Leases VIASYSTEMS INC: Earns $202.5 Mil. in Quarter Ended June 30, 2006 VIOQUEST PHARMACEUTICALS: Posts $1.8MM Loss in 2006 2nd Quarter WELLINGTON APARTMENT: Bankr. Ct. Awards Debtor $2.5 Mil. Judgment WEST VIRGINIA: Hires Joseph Caldwell as Legal Counsel WILLOWBEND NURSERY: Case Summary & 16 Largest Unsecured Creditors WINN-DIXIE: Four Parties Want Leesburg & Edgewood Taxes Attached WINN-DIXIE: Panel Hires Spencer Stuart to Search for Directors YOUTHSTREAM MEDIA: Earns $459,180 in Quarter Ended June 30 * BOOK REVIEW: Grounded: Frank Lorenzo and the Destruction of Eastern Airlines ********* AMERICAN ENTERTAINMENT: S&P Rates Proposed $250 Mil. Notes at B- ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B-' rating to the proposed $250 million senior floating rate notes due 2014 to be issued by American Entertainment Properties Corp. and its subsidiary, American Entertainment Properties Finance Corp. Proceeds from the proposed notes, in addition to AEPC's excess cash, will be used to fund a dividend to the company's parent. In addition, a 'B+' corporate credit rating and stable outlook were assigned to AEPC. Pro forma for the proposed notes issue, consolidated debt outstanding at AEPC approximated $525 million at June 30, 2006. Concurrently, Standard & Poor's revised its outlook on AEPC's subsidiary, American Casino & Entertainment Properties LLC, to stable from positive. At the same time, ACEP's existing ratings, including its 'B+' corporate credit rating, were affirmed. ACEP owns and operates four casinos in Nevada. AEPC and ACEP are subsidiaries of American Real Estate Partners L.P., an entity engaged in acquiring and managing real estate and other activities, which is controlled by Carl Icahn. The outlook revision on ACEP reflects the additional leverage in the consolidated capital structure and reduced financial flexibility as a result of the proposed debt-financed dividend. The proposed dividend significantly alters AEPC's consolidated financial profile, but to a level that we consider to be in line with the ratings. However, ratings upside potential has been eliminated given the more aggressive financial policy. The ratings on AEPC and ACEP are based on the consolidated credit quality of AEPC. With no operations, AEPC is dependent upon cash flow from ACEP to fund its debt service obligations, including the proposed senior notes. Ratings reflect: * a relatively small portfolio of second-tier assets; * the disadvantaged location on the Las Vegas Strip of its largest cash flow-generating property; * a moderately sized cash flow base; and * pro forma credit measures that are in line for the rating. These factors are somewhat tempered by steadily improved operating results during the past few years. AMERICAN ENTERTAINMENT: Moody's Junks Proposed $250MM Senior Notes ------------------------------------------------------------------ Moody's Investors Service took a number of rating actions in relation to American Entertainment Properties Corp. and its subsidiary, American Casino & Entertainment Properties LLC: * assigned a B2 corporate family rating to AEP, * assigned a Caa1 rating to its proposed $250 million senior unsecured floating rate notes, * withdrew ACEP's B2 corporate family rating, and * applied Moody's new Probability of Default and Loss Given Default rating methodology to the long term ratings of both AEP and ACEP. The rating outlook on all ratings is stable. The proceeds from the new notes will be used to pay a dividend to AEP's parent, a newly formed corporation. AEP is the holding company of American Casino & Entertainment Properties LLC. AEP and ACEP are indirect wholly owned subsidiaries of American Real Estate Partners, L.P. American Entertainment Properties Finance Corp. will be the co-issuer of AEP's new notes. Ratings assigned: * American Entertainment Properties Corp. -- Corporate Family Rating at B2 -- Probability-of-default rating at B2 -- $250 million senior unsecured floating rate notes due 2014 at Caa1 (LGD 5, 80%) Ratings upgraded: * American Casino & Entertainment Properties LLC -- $215 million 7.85% senior secured second lien notes due 2012 to Ba3 (LGD 2, 29%) from B2 Ratings withdrawn: * American Casino & Entertainment Properties LLC -- Corporate Family Rating of B2. Moody's has applied its new Probability-of-Default and Loss-Given-Default rating methodology to AEP and ACEP. Moody's current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology disaggregates these two key assessments in long-term ratings. The LGD rating methodology also enhances the consistency in Moody's notching practices across industries and improves the transparency and accuracy of our ratings as our research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha-numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0%-9%) to LGD6 (loss anticipated to be 90%-100%). AEP's B2 corporate family rating reflects higher pro-forma debt to EBITDA (5.2x) and lower EBITDA/interest (2.1x) resulting from the issuance of the new notes. The assignment of Caa1 ratings to AEP's senior unsecured notes, as well as the rating actions taken in relation to ACEP existing second lien notes reflects Moody's new methodology for assigning ratings to individual securities rather than a change in the characteristics of any debt security or in the company's fundamental credit profile. The lower rating on AEP's senior unsecured notes reflects its structural and effective subordination to the senior secured second lien notes issued by ACEP that also benefit from upstream guarantees from its operating subsidiaries. The stable rating outlook is based on the favorable demand outlook for gaming in Nevada, the absence of near term maturities and adequate liquidity. Headquartered in Las Vegas, Nevada, AEP and ACEP are wholly owned, indirect, unrestricted subsidiaries of American Real Estate Partners, L.P., a publicly traded firm engaged in both real estate and non-real estate activities. Carl Icahn currently owns approximately 86% of AREP through non-AREP subsidiaries. AEP's principal asset is its ownership of ACEP, which in turn owns and operates three gaming properties in the Las Vegas metropolitan area and one in Laughlin, Nevada. AMERICAN TOWER: Restating Annual and Quarterly Financial Reports ---------------------------------------------------------------- Based on facts ascertained by the special committee of Board of Directors of American Tower Corporation investigating its stock option grants, the Company has determined that it will need to restate its financial statements. The restatement of the previously issued financial statements is to record charges for stock-based compensation expense related to certain option grants and to account for the tax-related consequences. The special committee's investigation is ongoing and it is continuing its review of the matters. The Company expects to file an amended Annual Report on Form 10-K/A for the year ended Dec. 31, 2005 to reflect the restatement of its consolidated financial statements as of Dec. 31, 2005 and 2004 and for each of the years ended Dec. 31, 2005, 2004 and 2003. The amended Annual Report will also reflect the restatement of selected financial data as of and for the years ended Dec. 31, 2005, 2004, 2003, 2002 and 2001. The Company also expects to file an amended Quarterly Report for the quarter ended March 31, 2006 to reflect the restatement of its condensed consolidated financial statements as of March 31, 2006 and for the three month periods ended March 31, 2006 and 2005. In addition, the Company expects to file its Quarterly Report for the quarter ended June 30, 2006. The Company currently expects to file with the Securities and Exchange Commission its restated annual and quarterly reports in the next three to five weeks. Headquartered in Boston, Massachusetts, American Tower Corporation (NYSE: AMT) -- http://www.americantower.com/-- is an independent owner, operator and developer of broadcast and wireless communications sites in North America. American Tower owns and operates over 22,000 sites in the United States, Mexico, and Brazil. Additionally, American Tower manages approximately 2,000 revenue producing rooftop and tower sites. * * * As reported in the Troubled Company Reporter on Sept. 21, 2006 Standard & Poor's Ratings Services' ratings for Boston-based wireless tower operator American Tower Corp. and its related entities remained on CreditWatch with negative implications, including the 'BB+' corporate credit rating. The '1' recovery ratings for the company's bank loans are not on CreditWatch. As reported in the Troubled Company Reporter on Sept. 4, 2006 Moody's Investor Service lowered American Tower Corporation's Speculative Grade Liquidity Rating to SGL-3 from SGL-1 and affirmed all long term ratings of AMT, American Tower Inc. and Spectrasite Communications Inc., including AMT's Ba2 Corporate Family Rating. At the same time, Moody's changed the outlook to developing from stable. ACORN PARTNERS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Acorn Partners, Ltd. dba Schulz Nursery dba Texas Plant Ranch P.O. Box 128 Marion, TX 78124 Bankruptcy Case No.: 06-51825 Type of Business: The Debtor operates a floral and plant nursery. See http://www.schulznursery.com/ Chapter 11 Petition Date: September 19, 2006 Court: Western District of Texas (San Antonio) Judge: Leif M. Clark Debtor's Counsel: William B. Kingman, Esq. William B. Kingman, P.C. 4040 Broadway, Suite 430 San Antonio, TX 78209 Tel: (210) 829-1199 Fax: (210) 821-1114 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Joe Tocquigny Judgment $140,436 c/o Robin Dwyer, Esq. Pape & Dwyer, LLP 109 West Court Street Sequin, TX 78155 McHutchison $122,712 P.O. Box 92170 Elk Grove Village, IL 60009-0794 Texas Comptroller of Sales Tax $101,795 Public Accounts P.O. Box 13528 Austin, TX 78711-3528 Capital Lease Administration $79,000 Stephen Lalinski 1818 Market Street, 9th Floor Philadelphia, PA 19103 Internal Revenue Service Employment Taxes $76,395 Special Procedures Staff STOP 5022 AUS 300 East 8th Street Austin, TX 78701 Guadalupe County Tax A/C Ad Valorem Taxes $69,525 Gryphon Group $64,556 ITML $64,222 BWI Judgment $50,000 Marion State Bank Line of Credit $47,000 Wells Fargo WF Processing Center $45,627 Fischer's $37,204 GroLink $26,941 San Antonio Express News $25,081 Ball Seed Judgment $22,000 Ran Pro Farm Judgment $21,000 Sequin Electric Judgment $17,041 Willtex Stores Judgment $16,490 Peerless Farms $15,129 Innovative Financial Solutions $13,129 ARAMARK CORP: Moody's Lowers $250MM Senior Notes to B2 from Baa3 ---------------------------------------------------------------- Moody's Investors Service downgraded the 5% senior notes due 2012 of ARAMARK Services, Inc. to B2 from Baa3, confirmed the Baa3 ratings on the senior notes due 2007 and 2008, and assigned a corporate family rating of Ba3 to ARAMARK Corporation, ARAMARK Services' holding company parent. The B2 rating on the 5% senior notes due 2012 and the Ba3 corporate family rating are under review for possible downgrade. Moody's placed all the credit ratings of ARAMARK on review for possible downgrade on May 1, 2006 following the announcement that it received a proposal from the company's CEO and a group of investors to acquire all of the outstanding shares of common stock. In August 2006, ARAMARK signed a definitive merger agreement under which the company's Chairman and Chief Executive Officer and a group of investment funds will acquire the company in a transaction valued at approximately $8.3 billion, including the assumption or repayment of approximately $2 billion of debt. The merger agreement was approved by the board of directors based on the unanimous recommendation of a special committee consisting of independent directors. In August, Moody's confirmed the Baa3 rating on the 7.1% senior notes due 2006 of ARAMARK Services and left all other senior note issues on review for possible downgrade. This rating action reflected the uncertainty as to whether the senior notes maturing in 2007-2012 would be refinanced in connection with the acquisition. ARAMARK recently disclosed the expected financing package for the acquisition in its proxy statement filed with the U.S. Securities and Exchange Commission. The assignment of a Ba3 corporate family rating to ARAMARK reflects the substantial increase in debt levels and weakening of credit metrics expected in the post-acquisition capital structure. Based on information included in ARAMARK's proxy statement, Moody's believes that pro forma Debt to EBITDA will likely exceed 6 times and that a corporate family rating in the single B rating category is possible upon conclusion of the review. The rating review will focus on ARAMARK'S post- acquisition capital structure, liquidity position and operating strategies. The confirmation of the Baa3 rating on the senior notes due 2007-2008 reflects the company's intention to refinance these notes in connection with the acquisition. Based on disclosure in ARAMARK's proxy statement, Moody's understands that the company does not intend to refinance its 5% senior notes due 2012, which lack guarantees from ARAMARK's major operating subsidiaries. The downgrade of the 5% senior notes due 2012 to B2, two notches below the corporate family rating, reflects the expected structural subordination of those notes to high levels of secured and guaranteed debt in the post-acquisition capital structure. The acquisition is expected to be completed by late 2006 or early 2007, subject to receipt of stockholder approval. The investor group has obtained equity and debt financing commitments for the transactions contemplated by the merger agreement. There is no financing condition to the proposed transaction. Moody's took these rating actions: * Affirmed $125 million senior unsecured notes due 2006, rated Baa3 * Confirmed $300 million senior unsecured notes due 2007, rated Baa3 * Confirmed $31 million senior unsecured notes due 2007, rated Baa3 * Confirmed $300 million senior unsecured notes due 2008, rated Baa3 * Downgraded $250 million senior unsecured notes due 2012, to B2 from Baa3 * Downgraded senior unsecured shelf registration, to (P) B2 from (P)Baa3 * Downgraded senior subordinated shelf registration, to (P) B2 from (P)Ba1 * Assigned corporate family rating, rated Ba3 These ratings remain on review for possible downgrade: * $250 million senior unsecured notes due 2012, rated B2 * Senior unsecured shelf registration, rated (P) B2 * Senior subordinated shelf registration, rated (P) B2 * Corporate family rating, rated Ba3 ARAMARK Corporation, a managed services company headquartered in Philadelphia, Pennsylvania, provides or manages a variety of services, including food and support services, and uniform rental and sales. The company's revenues were approximately $11.5 billion for the twelve-month period ending June 30, 2006. ASARCO LLC: CBRY Stockholders Pact Effective as of August 29 ------------------------------------------------------------ The Honorable Richard S. Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi rules that the Stockholders Agreement for the sale of Rail Partners II, LLC's shares in Copper Basin Railway, Inc., is deemed effective as of Aug. 29, 2006. Judge Schmidt directs ASARCO to pay $11,455,000 for the purchase of Rail Partners' interest in CBRY. From Sept. 12, 2006, until the Closing of the sale, Rail Partners will not cause CBRY to operate and transfer other than in the ordinary course of business. Upon payment of the Purchase Price, ASARCO, Rail Partners and Mr. Durden will deliver full and complete releases of all claims made against each other. Judge Schmidt also directs Rail Partners and Mr. Durden to promptly furnish the initial draft of all Closing documents and to reasonably cooperate with ASARCO in closing the sales and in transitioning control of CBRY. Objections 1. Committees The Official Committees of Unsecured Creditors for ASARCO LLC and the Asbestos Subsidiary Debtors were concerned that Mr. Durden of Rail Partners II, LLC, may be threatening ASARCO LLC with unjust rate hikes to coerce the company into paying the overstated $11,300,000 purchase price for Rail Partners' 2,200 shares. Jacob L. Newton, Esq., at Stutzman, Bromberg, Esserman & Plifka, in Dallas, Texas, counsel to the Asbestos Committee, noted that Mr. Durden had recently notified ASARCO that he is selling his ownership interest in Rail Partners to an affiliate of Washington Transportation Group -- a company that is aggressively seeking to buy ASARCO and is likely looking to exert whatever pressure it can on the Debtors. While the Committees did not object to ASARCO's exercise of its business judgment in deciding to assume the Copper Basin Railway, Inc., Stockholders Agreement, and purchase the remaining 2,200 shares from Rail Partners, the Committees did not agree to ASARCO's paying for the shares an amount that could be overstated by 30% or more. The Committees contended that the $11,300,000 cure amount does not take into consideration ASARCO's payment of a $2,600,000 account receivable after the Ernst & Young valuation was made, and for which it should get a dollar-for-dollar credit. Hence, the Committees asked the Court to deny ASARCO's assumption of the CBRY Stockholders Agreement absent modifications in the Agreement and the Assumption Motion. 2. Rail Partners Rail Partners complained that the $11,300,000 purchase price failed to include payments of interest. According to Patricia Reed Constant, Esq., at Corpus Christi, Texas, the $11,300,000 valuation was due from ASARCO on Feb. 13, 2005, and under Arizona law, all liquidated debt is to bear interest at a 10% annual rate until paid in full. Ms. Constant calculated that the interest of $11,300,000 at 10% from Feb. 13, 2005, to Sept. 12, 2006, is $1,783,296, plus $3,096 in per diem interest thereafter. Ms. Constant argued that to assume the Stockholders Agreement, ASARCO is required to promptly cure all defaults and compensate Rail Partners for any actual pecuniary losses. Rail Partners also complained that ASARCO failed to include payment of attorneys' fees it incurred in pursuit of redress for ASARCO's breach. Rail Partners' attorneys' fees for seeking redress for ASARCO's breach total $47,500, as of Sept. 8, 2006, Ms. Constant said. Accordingly, Rail Partners asked the Court to deny ASARCO's assumption of the Stockholders Agreement. ASARCO Amended Request Ernst & Young was retained in connection with the valuation dispute and in January 2006, it completed an appraisal of Rail Partners' 2,200 shares at $11,300,000. Mercer Management Consulting had prepared an independent evaluation materially lower than the E&Y report, James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, informed the Court. However, common to both reports was the acknowledgment of the dollar-for-dollar addition to the valuation of a $2,600,000 account receivable due to Railway Partners by ASARCO. The Mercer evaluation opined that ASARCO should be entitled to a credit for the post-appraisal payment of the account receivable. The E&Y evaluation did not give credit for the payment only because it was not treated as paid when the report was published, Mr. Prince pointed out. ASARCO addressed changes to the evaluation after the value was set and established by E&Y related to the payment of the account receivable, without waiver of any claims, rights or offset or recoupment remedies in the event that relief through its Assumption request is not granted. Mr. Prince asserted that ASARCO had paid the account receivable. If ASARCO is bound by E&Y's evaluation, its post-appraisal payment of the account receivable should reduce the cure amount by 55% of the payment, Mr. Prince contended. Rail Partners' position is that it may keep the payment, and demand the full- appraised value of E&Y. "Such windfall is not supported by law or fact," Mr. Prince said. The valuation dispute including the potential for an E&Y conflict prevented the closing of the stock sale arising from Rail Partners' exercise of its put rights under the Stockholders Agreement, Mr. Prince stated. The demand for a credit of the 55% had further prevented the closing of the stock sale by agreement. Accordingly, ASARCO sought the Court's authority to assume the CBRY Stockholders Agreement and purchase Rail Partners' equity interest for $11,300,000. Mercer's Valuation is Invalid, Rail Partners Argued ASARCO's Amended Motion is no longer a motion to assume, but a motion to unilaterally alter and assume or perhaps alternatively, a motion to value and assume, Rail Partners complained. Ms. Constant contended that ASARCO has waived any of its right to complain about the E&Y's appraisal by failing to raise the matter in the lawsuit filed against it in the Superior Court of the state of Arizona, and the assertions cannot now be raised due to laches. The alleged account receivable due CBRY from ASARCO did not form the basis for E&Y's appraisal because the appraisal, as most all railroad appraisals, was based on discounted cash flow, not assets, Ms. Constant emphasizes. Furthermore, Ms. Constant argues, Mercer's valuation is not independent because it was prepared with no input from Rail Partners or by Arthur Anderson as provided by the Stockholders Agreement. Ms. Constant recalls that Mercer was retained to advise the ASARCO's new Board of Directors so it can make responsible decisions, including whether to assume the Stockholders Agreement. Rail Partners disputes ASARCO's assertions that there has been demand for credit against the stock sale and no issue has delayed any closing. Accordingly, Rail Partners asked the Court to deny ASARCO's assumption of the Stockholders Agreement, unless it provides that the total cure amount to be paid is $13,130,796. About ASARCO LLC 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 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 Boudloche as Encycle/Texas, Inc.'s d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products 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 liquidation proceeding. The Court appointed Michael News, Issue No. 29; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ASARCO LLC: Wants Srackangast as Special Environmental Auditor -------------------------------------------------------------- ASARCO LLC seeks permission from the Honorable Richard S. Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to employ Arnold Srackangast as its special purpose environmental professional. Mr. Srackangast will conduct the air quality modeling audit for the El Paso smelter. ASARCO LLC has submitted an application to the Texas Commission on Environmental Quality for renewal of certain air quality permit necessary for the operation of its El Paso smelter, Tony M. Davis, Esq., at Baker Botts L.L.P., in Houston, Texas, relates. As required by TCEQ, ASARCO submitted an air dispersion modeling protocol to support its permit renewal application. However, the TCEQ has advised ASARCO that it will not consider its review completed until a third-party contractor audits the air modeling results. The TCEQ believes that an independent audit will ensure "a thorough and impartial review of the emissions from and related to the El Paso Plant and their impacts on surrounding areas . . ." Pursuant to an Engagement Letter, Mr. Srackangast will: (a) review ASARCO's air dispersion modeling to determine whether it complies with TCEQ protocols; and (b) prepare for the TCEQ Executive Director a final report, which will be in a form substantially conforming with the TCEQ's standard modeling report and will include the information and conclusions as required by the standard modeling report. ASARCO understands that the TCEQ staff will consider and rely on the final report in preparing its own independent review of the modeling. Thus, the parties have agreed that, in performing the air quality modeling audit, Mr. Srackangast will not act as an advocate for ASARCO, but as an independent third-party consultant paid for by ASARCO. ASARCO will pay not more than $30,000 to Mr. Srackangast on a time and material basis. To reduce administrative expenses, ASARCO also seeks permission to pay Mr. Srackangast's invoices in the ordinary course of business. Mr. Srackangast assures the Court that he does not represent any entity having adverse interest to ASARCO or its estate, and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. About ASARCO LLC 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. 29; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ASHLAND INC: CFO Provides Quarter Ended September 30 Outlook ------------------------------------------------------------ Ashland, Inc.'s Senior Vice President and Chief Financial Officer, J. Marvin Quin, provided participants in the Credit Suisse 19th Annual Chemical Conference in New York City with an update on the Company's outlook for its fiscal fourth quarter, ending Sept. 30, 2006. Commenting on Valvoline, Mr. Quin estimated that it would incur an operating loss due to weak operating margins, especially early in the current quarter. "The previously disclosed price increase of roughly 50 cents per gallon does appear to be holding," Mr. Quin said, "so we are more optimistic about the next quarter, beginning Oct. 1, which should be profitable." Mr. Quin also noted that the establishment of a $3 million reserve related to the sale of 33 Valvoline Instant Oil Change stores will contribute to the operating loss. Commenting on the Company's other divisions, Mr. Quin said, "Performance Materials and Distribution have performed well thus far this quarter. Performance Materials should produce operating results well above the prior year, and Distribution should report solid profit growth." Mr. Quin noted that the Company's Water Technologies division is also performing better, due in large part to the operating income produced by the Environmental and Process Solutions flocculants business acquired from Degussa AG in May 2006. Concluding, Mr. Quin said, "I do want to caution that we may record restructuring and severance charges in the quarter that are not reflected in my outlook. Also, we are now conducting our regular quarterly review of various assets and contingent liabilities, including insurance receivables and environmental remediation, and the associated reserves could increase or decrease. In total, we do not expect reserve adjustments to be material to Ashland as a whole. Of course, these items may impact some divisions more than others. However, we cannot accurately project the impact of these items until our accounting close processes are complete." Ashland, Inc., (NYSE: ASH) -- http://www.ashland.com/-- a diversified, global chemical company, provides quality products, services and solutions to customers in more than 100 countries. Ashland operates through four wholly owned divisions: Ashland Performance Materials, Ashland Distribution, Valvoline and Ashland Water Technologies. * * * As reported in the Troubled Company Reporter on Aug. 24, 2006 Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on Ashland to 'BB+' from 'BBB-', and its short-term corporate credit and commercial paper ratings to 'B' from 'A-3'. The outlook is stable for this Ashland, Kentucky-based company. ATLANTIS PLASTICS: Moody's Affirms Caa1 Rating on $75MM Jr. Loan ---------------------------------------------------------------- Moody's changed the outlook for the ratings of Atlantis Plastics, Inc. to negative from stable, and affirmed the existing ratings: * B2 Corporate Family Rating; * Caa1 rating for the $75 million junior term loan; * B2 rating for the $25 million sr. secured revolver, and, * B2 rating for the $120 million senior term loan. The change of the ratings outlook to negative from stable reflects some deterioration in Atlantis' operating and financial performance during the past few quarters, which has resulted in margin compression, inability to generate positive free cash flow, and increased receivables days outstanding and average inventory days. Key factors that explain the negative trend include increased resin costs accompanied by the inability to pass through a significant part of these costs, a slowing housing market affecting its injection molding business, and an inventory correction in the company's plastic films' business. The negative ratings outlook expresses some tolerance at existing ratings for limited further slippage in credit statistics. However, the cumulative effects of reduced profitability have resulted in an impaired financial profile, which if not remedied in the near term, could result in a downgrade of the CFR. The company's ability to maintain adequate liquidity is essential to the ratings, and should the current pressure on liquidity not abate in the very near term, the ratings could be downgraded. The affirmation of Atlantis' B2 CFR reflects the company's moderate, although deteriorated, credit statistics as evidenced by EBIT coverage of interest coverage at roughly 1.8 times and adjusted debt to EBITDA at approximately 4.6 times. In Moody's opinion, the company's business fundamentals remain sound, despite the likely continuation of operating challenges. New business opportunities are expected to ramp up in the near term which should help to alleviate some of the current margin pressure. In the event of default, the likely recovery on first lien debt should be solid, thus, upward movement on the first lien ratings is possible in the near term. Moody's affirms these ratings: * B2 rating for the $25 million senior secured revolver * B2 rating for the $120 million senior term loan * Caa1 rating for the $75 million junior term loan * B2 Corporate Family Rating The ratings outlook changed to negative from stable. Atlantis Plastics, Inc. is a leading manufacturer of specialty polyethylene films and molded and extruded plastic components used in a variety of industrial and consumer applications. Headquartered in Atlanta, Georgia, Atlantis Plastics had revenues of approximately $443 million for the twelve months ended June 30, 2006. AVIALL INC: S&P Withdraws BB Corp. Credit Rating & Removes Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings, including the 'BB' corporate credit rating, on Aviall Inc. and removed the ratings from CreditWatch, where they were placed with positive implications on May 1, 2006. The aircraft parts distributor was acquired by Boeing Co. (A/Positive/A-1) for $2 billion and its rated debt has been repaid. AXCESS INT'L: Incurs $965,812 Net Loss in Quarter Ended June 30 --------------------------------------------------------------- AXCESS International Inc. posted a $965,812 net loss for the three months ended June 30, 2006, compared to a loss of $939,408 for the three months ended June 30, 2005. The increase is mainly related to the expensing of stock based compensation that began in 2006, by an increase in research and development relating to the Company's next generation product development, the paying of directors' fees to the Company's independent directors that began in 2006 and increased investor relations activities. Sales for the quarter ended June 30, 2006 were $354,475, compared to $206,818 of sales generates for the three months ended June 30, 2005. Cost of sales for the three months ended June 30, 2006 were $189,215 and for the three months ended June 30, 2005 were $123,545. The Company's balance sheet at June 30, 2006, showed total assets of $1,973,477 and total liabilities of $5,009,103, resulting in a stockholders' deficit of $3,035,626. A full-text copy of the Company's quarterly report is available for free at http://researcharchives.com/t/s?1203 Going Concern Doubt Hein & Associates LLP expressed substantial doubt about Axcess International'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 resulting continued dependence upon access to additional external financing. Headquartered in Dallas, Texas, AXCESS International Inc. -- http://www.axcessinc.com-- through its proprietary technology, is a manufacturer of advanced physical security and enterprise asset management systems that can automatically locate, identify, track, monitor, count, and protect people, property and vehicles. The purpose of the systems is: to reduce loss and liability; to increase the efficiency of a client's employees; and to improve the management of personal property, logistics, and facilities. Axcess utilizes two patented and integrated technologies: battery- powered wireless tagging called Active-Radio Frequency Identification and network based streaming digital video. BAINBRIDGE REALTY: Voluntary Chapter 11 Case Summary ---------------------------------------------------- Debtor: Bainbridge Realty Corp. 514 Broadway Providence, RI 02909 Bankruptcy Case No.: 06-11003 Chapter 11 Petition Date: September 19, 2006 Court: District of Rhode Island (Providence) Debtor's Counsel: Robert Pierce, Esq. 43 Hewitt Circle Needham Heights, MA 02494 Tel: (781) 449-7399 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million The Debtor did not file a list of its 20 largest unsecured creditors. BATTERSON PARK: Moody's Pares $16.5MM Cl. B Notes to Caa3 from B3 ----------------------------------------------------------------- Moody's Investors Service has taken these rating actions on four classes of notes issued by Batterson Park CBO I, Ltd. Moody's has withdrawn the ratings on $172,400,000 Class A-3 Notes due 2011 and $32,000,000 Class A-4 Notes due 2011, upgraded the rating on $49,500,000 Class A-5 Notes due 2011 and downgraded the rating on $16,500,000 Class B Notes due 2011. Withdrawal Action: * Tranche description: $172,400,000 Class A-3 Notes due 2011; and $32,000,000 Class A-4 Notes due 2011 -- Previous Rating: Aa1 on review for possible upgrade -- Current Rating: WR Upgrade Action: * Tranche description: $49,500,000 Class A-5 Notes due 2011 -- Previous Rating: Ba1 on watch for possible upgrade -- Current Rating: A2 Downgrade Action: * Tranche description: $16,500,000 Class B Notes due 2011 -- Previous Rating: B3 on watch for possible downgrade -- Current Rating: Caa3 Moody's noted that the deal, which closed in November of 1998, is currently failing the Moody's Average Debt Rating Test, the Overcollateralization Ratio Test and the Moody's Diversity Test, each as reported in the Trustee Report dated Aug. 25, 2006. Since the last rating action in Nov. 22, 2002, the portfolio has incurred further loss of par. This has resulted in the Overcollateralization Ratio to remain below 100%. The concentration of assets rated Caa1 or below by Moody's is approximately 20%. Moody's stated that upgrade and downgrade actions are a result of the amortization of the senior liabilities and the deterioration in the aggregate par of the collateral pool. BLEECKER STRUCTURED: Moody's Puts Junked $40 Mil. Notes on Watch ---------------------------------------------------------------- Moody's Investors Service puts on watch for possible downgrade the ratings on these notes issued in 2000 by Bleecker Structured Asset Funding, Ltd., a managed structured finance collateralized debt obligation issuer: * The $45,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes Due April 1, 2035 -- Prior Rating: Baa3 -- Current Rating: Baa3, on watch for possible downgrade * The $315,000,000 Class A-2 First Priority Senior Secured Floating Rate Notes Due April 1, 2035 -- Prior Rating: Baa3 -- Current Rating: Baa3, on watch for possible downgrade * The $40,000,000 Class B Second Priority Senior Secured Floating Rate Notes Due April 1, 2035 -- Prior Rating: Ca -- Current Rating: Ca, on watch for possible downgrade The rating actions reflect the deterioration in the credit quality of the transaction's underlying collateral portfolio, consisting primarily of asset-backed securities and related synthetic securities, as well as the occurrence of asset defaults and par losses, and the continued failure of certain collateral and structural tests, according to Moody's. Since the time of the transaction's last rating action, the overcollateralization ratio for the Class A notes decreased by more than 20%, as reported in the July 2006 trustee report, Moody's noted. BOOKHAM INC: Sells UK Assembly and Test Facility for $9.5 Million ----------------------------------------------------------------- Bookham, Inc., signed an agreement for the sale of its Paignton, UK, assembly and test facility on Sept. 20, 2006. On closing, which is expected to occur in the middle of November, the Company expects to receive proceeds of approximately $9.5 million. "With this latest transaction we will have raised approximately $41 million from the recent private placement of common stock and the sale of our Paignton facility," said Dr. Giorgio Anania, president and CEO of Bookham Inc. "We now have a much stronger balance sheet, which we plan to leverage to better address our growing markets." About Bookham Inc. Bookham, Inc. -- http://www.bookham.com/-- designs, manufactures and markets optical components, modules and subsystems that generate, detect, amplify, combine and separate light signals principally for use in high-performance fiber optics communications networks. The Company has manufacturing facilities in the UK, US, Canada, China and Switzerland; and offices in the US, UK, Canada, France and Italy and employs approximately 2000 people worldwide. * * * As reported in the Troubled Company Reporter on Sept. 21, 2006, Ernst & Young LLP expressed substantial doubt about Bookham's ability to continue as a going concern after auditing the Company's financial statements for the fiscal year ended July 1, 2006. The auditing firm pointed to the Company's recurring operating losses. BIOFORCE NANOSCIENCES: Losses Continue in 2006 Second Quarter ------------------------------------------------------------- BioForce Nanosciences, Inc., incurred a $626,603 net loss for the three months ended June 30, 2006, compared to a $631,263 loss for the three months ended June 30, 2005. During the three months ended June 30, 2006, revenue decreased 34% from the same period of 2005. Revenue for 2006 was $28,822, which is a $14,909 decrease from fiscal 2005 sales of $43,731. The decrease in revenue was realized in all of the Company's products and services but is most directly attributable to decreased AFM solution revenues. AFM Solutions are a line of products sold to the Atomic Force Microscopy community. These products include modified AFM probes and a device for cleaning AFM probes called the TipCleaner. At June 30, 2006, The Company had total assets of $5,936,043 and total stockholders' equity of $5,332,801, compared to total assets of $1,422,182 and a stockholders' deficit of $789,595 at Dec. 31, 2005. The Company's working capital as of June 30, 2006 was $4,693,423 compared to $166,730 at Dec. 31, 2005. This increase in working capital is directly attributed to completion of the Company's private placement stock offering in March 2006. A full-text copy of the Company's quarterly report is available for free at http://researcharchives.com/t/s?1200 Going Concern Doubt Moore & Associates, Chartered, expressed substantial doubt about BioForce Nanosciences' ability to continue as a going concern after auditing the Company's financials statements for the years ended Dec. 31, 2005 and 2004. The auditing firm pointed to the Company's recurring losses and lack of operations. About BioForce Nanosciences BioForce Nanosciences, Inc. -- http://www.bioforcenano.com/-- is a nanotechnology tools and applications company, providing products that support the growth of the nanotechnology industry. BioForce is a wholly owned subsidiary of BioForce Nanosciences Holdings, Inc. CALPINE CORP: Can Sell 35% Russell Stake to GE Energy for $44MM --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved the sale of a 35% equity interest in Calpine Corp's Russell City Energy Center to GE Energy Financial Services for approximately $44 million. Calpine will own the remaining 65- percent interest. GE Energy Financial Services' equity will be applied toward completion of development and construction of the power plant, and it also will provide related credit support for the project. The Russell City Energy Center is a proposed 600- megawatt, natural gas-fired power plant to be built in Hayward, Calif. that will help power the San Francisco Bay Area. "With the growing demand for power in California, especially the Bay Area, the Russell City Energy Center is well positioned to help meet demand in a manner that is environmentally friendly and cost-effective," stated Calpine Chief Executive Officer Robert P. May. "Calpine looks forward to building upon our long-term relationship with GE. With a strong record of achievement in the power industry, GE Energy Financial Services will be a valued strategic partner to Calpine." "Russell City represents a unique opportunity to invest in a critical new-build generation facility in the highly sought-after California market," said Leanne Bell, Managing Director for Power at GE Energy Financial Services. "This investment will help California meet its power needs and is consistent with our growth strategy. GE Energy Financial Services also values the opportunity to partner with Calpine, an experienced developer familiar with the California market." Construction of the fuel-efficient, combined-cycle power plant is scheduled to begin by the spring of 2008 and to be completed in mid-2010, in time to help meet peak electricity summer demand. In March 2006, a Calpine affiliate agreed in a letter of intent to sell the Russell City Energy Center's full output to Pacific Gas and Electric Company. Calpine and PG&E expect to replace the letter of intent in October 2006 with a ten-year tolling agreement. About GE Energy Financial Services Based in Stamford, Connecticut, GE Energy Financial Services -- http://www.geenergyfinancialservices.com/-- invest with a long- term view, across the capital spectrum and the energy and water industries, to help their customers and GE grow. With $13 billion in assets, including investments in power projects with a capacity to produce 22 gigawatts, GE Energy Financial Services, invests more than $3 billion annually in two of the world's most capital- intensive industries, energy and water. About Calpine Corp. Headquartered in San Jose, California, Calpine Corporation (OTC Pink Sheets: CPNLQ) -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. CAPRIUS INC: Incurs $687,424 Net Loss in Quarter Ended June 30 -------------------------------------------------------------- Caprius, Inc., posted a $687,424 net loss for the three-month period ended June 30, 2006, compared to a $739,163 net loss for the three-month period ended June 30, 2005. Revenues generated from MCM Environmental Technologies Ltd.'s product sales totaled $266,431 for the three months ended June 30, 2006 as compared to $185,878 for the three months ended June 30, 2005. Revenues generated from MCM rentals totaled $0 as compared to $2,677 for the comparable period. The Company owns a majority interest in MCM, which develops, markets and sells the SteriMed and SteriMed Junior compact systems that simultaneously shred and disinfect Regulated Medical Waste. The SteriMed Systems are sold and leased in both the domestic and international markets. Consulting and royalty income from the TDM Business, which was sold in 2002, totaled $54,145 for the three months ended June 30, 2006 as compared to $15,157 for the three months ended June 30, 2005. The Company's balance sheet at June 30, 2006, showed total assets of $3,958,823, total current liabilities of $547,997 and stockholders' equity of $3,410,826. At June 30, 2006, the Company's cash and cash equivalents position approximated $1,721,000. A full-text copy of the Company's quarterly reports is available for free at http://researcharchives.com/t/s?1205 Going Concern Doubt Marcum & Kleigman LLP expressed substantial doubt about Caprius, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the fiscal years ended Sept. 30, 2005 and 2004. The auditing firm pointed to the Company's recurring losses from operations. About Caprius Caprius, Inc. -- http://www.caprius.com/-- is a manufacturer of proprietary equipment for the on-site disinfection and disposal of infectious medical waste through its subsidiary, M.C.M. Environmental Technologies, Inc. CEP HOLDINGS: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: CEP Holdings, LLC 3650 West Market Street Akron, OH 44333 Bankruptcy Case No.: 06-61796 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Creative Engineered Polymer Products, LLC 06-61794 Thermoplastics Acquisition, LLC 06-61797 Type of Business: The Debtors manufacture hard, molded rubber products and extruded plastic materials for companies in the automotive, construction, and the medical industries. Chapter 11 Petition Date: September 20, 2006 Court: Northern District of Ohio (Canton) Judge: Russ Kendig Debtors' Counsel: Joseph F. Hutchinson, Jr. Baker & Hostetler, LLP 3200 National City Center 1900 East Ninth Street Cleveland, OH 44114 Tel: (216) 621-0200 Fax: (216) 696-0740 Debtors' Financial Advisors: Glass & Associates 4571 Stephen Circle Northwest, Suite 130 Canton, OH 44718 Tel: (330) 494-3252 Fax: (330) 494-2420 http://www.glass-consulting.com/ Debtors' Claims, Noticing, and Balloting Agent: The BMC Group, Inc. 3343 Peachtree Road Northeast, Suite 200 Atlanta, GA 30326 Tel: (404) 442-2485 Fax: (404) 442-2473 http://www.bmcgroup.com/ Debtors' Investment Bankers: Giuliani Capital Advisors LLC 5 Concourse Parkway, Suite 2750 Atlanta, GA 30328 Tel: (404) 815-3420 Fax: (404) 815-3430 http://www.giulianicapitaladvisors.com/ Estimated Assets Estimated Debts ---------------- --------------- CEP Holdings, LLC Less than $50,000 $10 Million to $50 Million Creative Engineered $10 Million to $10 Million to Polymer Products, LLC $50 Million $50 Million Thermoplastics $10 Million to $1 Million to Acquisition, LLC $50 Million $10 Million A. CEP Holdings, LLC has no unsecured creditors who are not insiders. B. Creative Engineered Polymer Products, LLC's 20 largest unsecured creditors: Entity Claim Amount ------ ------------ Washington Penn Plastic Co. $2,801,913 2080 North Main Street 222 Merchandise Mart Washington, PA 15301 Du Pont Denemours & Co. $1,896,005 PLZ Suite 10-111 Chicago, IL 60654 Du Pont Mexico SA de CV $870,792 Homero 206 15 Chapultepec Morales Mexico DF 11570 Lanxess Corp. $668,459 2112 South Hamilton Street Dalton, GA 30720 Chisso America, Inc. $651,695 1920 Thoreau Drive North Schaumberg, IL 60173 PME Companies $632,739 13870 East 11 Mile Road Warren, MI 48089 Rhodia $511,120 AV. Insurgentes Sur No. 1971 Torres III Piso 6 Colonia Guadalupe Inn Deleg. Alvarao Obregon, CP 01020 Valeo Electrical Systems $501,381 3000 University Drive Auburn Hills, MI 48326 Innovene USA LLC $446,725 13536 Collections Center Drive Chicago, IL 60693 Prudential $414,050 200 Wood Avenue, South Iselin, NJ 08830 Entropex $413,090 1271 Logar Street Sarnia, ON N75 5N5 Brown Corp. of Greenville $400,656 Department 77188 P.O. Box 77000 Detroit, MI 48277-0188 Gold Key Processing, Ltd. $375,063 14910 Madison Road Middlefield, OH 44062 Dow-Corning STI $374,383 First of Chicago National Bank P.O. Box 905191 Charlotte, NC 28290-5191 Modern Metal Products Co. $337,401 35053 Eagle Way Chicago, IL 60678-1350 Lavergne Group Inc. $322,617 Montcap Financial Corp. 3500 deMaisonneuve Boulevard West Suite 1510 Montreal, QC H3Z 3C1 Excel Polymers, LLC $322,537 MSC-41069351 P.O. Box 415000 Nashville, TN 37241-5000 ARJ Manufacturing LLC $317,013 3300 Richrest Road Extended Jackson, TN 38305 Concours Mold Inc. $312,365 3400 St. Etienne Boulevard Windsor, ON N8W 5E1 E.I. Du Pont de Nemours Co. $257,856 6324 Fairview Road Charlotte, NC 28210 C. Thermoplastics Acquisition, LLC did not file a list of its 20 largest unsecured creditors. CG MULTIFAMILY: Wants Court to Dismiss Chapter 11 Proceeding ------------------------------------------------------------ CG Multifamily-New Orleans, L.P., asks the U.S. Bankruptcy Court for the Eastern District of Louisiana to dismiss its chapter 11 case. The Debtor tells the Court that it has reached an agreement in principle with Fannie Mae, its secured lender, for modifications and reinstatement of their loan agreement. Fannie Mae Indebtedness The Debtor relates that Fannie Mae is the holder of an Amended and Restated Discount MBS Multifamily Note dated June 14, 2004, in the amount of $65 million executed by the Debtor in favor of GMAC Commercial Mortgage Corporation and subsequently assigned to Fannie. The Note was amended on Oct. 1, 2005. The Note is secured by, among other things: * an Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement dated June 10, 2004, executed by the Debtor and the Industrial Development Board of the City of New Orleans, Louisiana, Inc., and subsequently assigned by GMAC to Fannie Mae; and * an Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement dated June 10, 2004, executed by the Debtor in favor of GMAC and subsequently assigned to Fannie Mae. These two agreements encumber the Debtor's real property known as the Saulet Apartments. The Debtor says it filed for bankruptcy when it failed to reach an agreement with Fannie Mae concerning the use of certain insurance proceeds belonging to the Debtor but held by Fannie Mae. Agreement Under the new Agreement: a. one or more of the Debtor's partners will make an additional equity capital contribution of $2 million to the Debtor to be utilized in part to satisfy all of the Debtor's prepetition and postpetition obligations; and b. Fannie Mae will permit the Debtor to use the insurance proceeds it holds and make other financial concessions, so that the Debtor can perform necessary repairs to the Saulet and allow it to be reopened to the public. With this development, the Debtor contends that it now has the ability and intent to satisfy all of its debts and no longer needs reorganization under Chapter 11 of the Bankruptcy Code. The Debtor also argues that dismissal of its case is in the best interest of its creditors. About CG Multifamily-New Orleans Headquartered in Charleston, South Carolina, CG Multifamily-New Orleans, L.P. owns the Saulet Apartments in New Orleans, Louisiana. The company filed for chapter 11 protection on June 12, 2006 (Bankr. E.D. La. Case No. 06-10533). John M. Landis, Esq. and Michael Q. Walshe, Jr., Esq., at Stone Pigman Walther Wittman, LLC, represents the Debtors in its restructuring efforts. No Official Committee of Unsecured Creditors has been appointed in the Debtor's bankruptcy proceedings. When the Debtor filed for protection from its creditors, it estimated assets and debts between $50 million and $100 million. COMPLETE RETREATS: Administaff Wants Debtors Decision on Two Pacts ------------------------------------------------------------------ Administaff Companies II, L.P., asks the U.S. Bankruptcy Court for the District of Connecticut to compel Complete Retreats LLC and its debtor-affiliates to assume or reject two client service agreements the Debtors entered into with Administaff. Administaff serves as a full-service human resources department for small and medium-sized businesses throughout the United States. Administaff delivers personnel management services by entering into a co-employment relationship with a client company and its existing employees. Before the Debtors' bankruptcy filing, Administaff entered into two client service agreements with Debtors Preferred Retreats Design Group, LLC, and Preferred Retreats, LLC. The Client Service Agreements were effective as of Jan. 24, 2004, and Dec. 27, 2003. The terms of the Agreements are continuous until either Administaff or the Debtors terminate them in accordance with their terms. Pursuant to the Agreements, Administaff: -- acts as co-employer of the Debtors' employees; -- pays the salaries and wages of the Debtors' employees; and -- provides other personnel management services to the Debtors. If the Debtors decided to assume the Service Agreements, Administaff asks the Court to require the Debtors to provide adequate assurance of future performance by prepaying all salaries, wages, and charges in advance of the first pay day of each payroll period. Daniel E. Bruso, Esq., at Cantor Colburn LLP, in Bloomfield, Connecticut, relates that Administaff pays the salaries and wages of the Debtors' employees in arrears on a bi-weekly basis. All payroll checks are drawn on Administaff's account and Administaff collects its fee to cover wages and other costs for each pay period by drafting on the Debtors' account when the payroll is run. As a result, Administaff incurs financial obligations of approximately $480,000 per pay period before it is paid by the Debtors. Mr. Bruso asserts that Administaff continues to incur liability to the Debtors' employees but have no adequate assurance that the Debtors will continue to pay their obligations to Administaff. Motion Filing Violates Court Procedures The Clerk of the Bankruptcy Court notes that Administaff's Motion was not submitted through the Court's Electronic Filing System and thus, was filed in violation of the Court's Administrative Procedures. Accordingly, the Clerk asserts that the Motion should be stricken from the Court record. About Complete Retreats Headquartered in Westport, Connecticut, Complete Retreats LLC operates five-star hospitality and real estate management businesses. In addition to its mainline destination club business, the Debtor also operates an air travel program for destination club members, a villa business, luxury car rental services, wine sales services, fine art sales program, and other amenity programs for members. Complete Retreats and its debtor- affiliates filed for chapter 11 protection on July 23, 2006 (Bankr. D. Conn. Case No. 06-50245). Nicholas H. Mancuso, Esq. and Jeffrey K. Daman, Esq. at Dechert LLP represent the Debtors in their restructuring efforts. Michael J. Reilly, Esq., at Bingham McCutchen LP, in Hartford, Connecticut, serves as counsel to the Official Committee of Unsecured Creditors. No estimated assets have been listed in the Debtors' schedules, however, the Debtors disclosed $308,000,000 in total debts. (Complete Retreats Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). COMPLETE RETREATS: Bingham & Kramer Files Creditors Update Report ----------------------------------------------------------------- Bingham McCutchen LLP and Kramer Capital Partners LLC, legal and financial advisors to the Official Committee of Unsecured Creditors in Complete Retreats LLC and its debtor-affiliates' Chapter 11 cases, delivered a report to update unsecured creditors about the Committee's recent efforts as well as certain emerging events. Bingham and Kramer have been working on the Committee reports since Aug. 29, 2006. In the report, the Committee discloses that it has made significant progress on a number of fronts in the first few weeks of the Debtors' Chapter 11 cases. Among other things, the Committee has dealt with several critical deadlines that were established before it was formed, including, among other things: * hiring advisors, * responding to first day motions, * evaluating DIP proposals, and * responding to the Debtors' cost reduction initiatives and interim revenue enhancement proposals. The Committee asserts that it is committed to working with the Debtors to provide an appropriate level of accurate information to unsecured creditors balanced by the necessity to maintain the confidentiality of certain information to maximize the value of the Debtors' estates. The Committee informs creditors that it is now focusing its attention on determining the appropriate strategy for maximizing the value of the Debtors' estates. The Committee has concluded that a leadership change was required in order to position the Debtors to move forward in their restructuring process. Evaluation of Strategic Alternatives The strategic alternatives available to the Debtors include a stand-alone reorganization, a merger or sale of the Debtors' assets, and a liquidation of the Debtors' assets. The Committee's advisors believe that the recoveries to unsecured creditors could be severely impaired in a liquidation of the Debtors' assets and thus, the Debtors should pursue, on a parallel path basis, a stand alone restructuring and a merger or sale of their assets. The Debtors have launched a data room and have begun to engage in due diligence discussions with certain parties interested in evaluating an acquisition of, or merger with, the Debtors' businesses pursuant to acceptable confidentiality arrangements. The Committee advises prospective purchasers to contact Holly Felder Etlin, the Debtors' chief restructuring officer. If merger scenarios develop that the Debtors intend to pursue, the Committee believes that the terms of that transaction will be substantially finalized by the end of 2006. If a transaction were to be completed pursuant to a plan of reorganization, the Committee expects it to close by early 2007. DIP Facility Timeline The Debtors anticipate to replace, extend and refinance its existing secured debt and post-bankruptcy loans so that they will have credit available through early 2007, the Committee reports. The Debtors and the Committee are currently considering various proposals from lenders. The Committee expects the Debtors to give a public announcement on those proposals and file a court motion with detailed terms by the end of September. Forensic Investigation Program The Committee and the Debtors have begun a forensic investigation effort concerning prepetition conduct and transactions by the Debtors, their former officers and directors, and certain other parties, to determine the extent of their liability to the estates. The Committee is committed to pursuing any wrongdoers to the fullest extent possible through the filing or facilitation of lawsuits on the Debtors' behalf, according to Michael J. Riley, Esq., at Bingham McCutchen. The forensic investigation program will be a coordinated effort with Xroads Solutions Group LLC and Dechert LLP on behalf of the Debtors. The Committee's advisory team for forensic matters will be led by: * Dan McGillycuddy of Bingham McCutchen LLP, a former prosecutor in the Frauds Bureau of the New York District Attorneys' office; and * Michael Hershman, the president and founder of The Fairfax Group and a former investigator for the Senate Watergate Committee. Section 341 Meeting The Committee reports that the next "341 Meeting" will be held on Sept. 28, 2006, at the U.S. Trustee's office, in New Haven, Connecticut. In general, a 341 Meeting is a gathering of company representatives and creditors that wish to attend, whereby the company representatives are placed under oath and questioned by the U.S. Trustee about operations, business going forward and other matters. The upcoming 341 Meeting is time to coincide with the filing of the Debtors' Schedules of Assets and Liabilities and the Statements of Financial Affairs. Thus, the Committee expects the U.S. Trustee to focus on financial and claims-related matters at the upcoming meeting. A full-text copy of the Committee's Report dated August 2006 is available for free at: http://researcharchives.com/t/s?1219 A full-text copy of the Committee's Report dated September 2006 is available for free at: http://researcharchives.com/t/s?121b About Complete Retreats Headquartered in Westport, Connecticut, Complete Retreats LLC operates five-star hospitality and real estate management businesses. In addition to its mainline destination club business, the Debtor also operates an air travel program for destination club members, a villa business, luxury car rental services, wine sales services, fine art sales program, and other amenity programs for members. Complete Retreats and its debtor- affiliates filed for chapter 11 protection on July 23, 2006 (Bankr. D. Conn. Case No. 06-50245). Nicholas H. Mancuso, Esq. and Jeffrey K. Daman, Esq. at Dechert LLP represent the Debtors in their restructuring efforts. Michael J. Reilly, Esq., at Bingham McCutchen LP, in Hartford, Connecticut, serves as counsel to the Official Committee of Unsecured Creditors. No estimated assets have been listed in the Debtors' schedules, however, the Debtors disclosed $308,000,000 in total debts. (Complete Retreats Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). CONDO 53: Case Summary & Largest Unsecured Creditor --------------------------------------------------- Debtor: Condo 53, LLC 44 Grafton Street A-1 Hartford, CT 06106 Bankruptcy Case No.: 06-20869 Chapter 11 Petition Date: September 19, 2006 Court: District of Connecticut (Hartford) Debtor's Counsel: Kevin L. Mason, Esq. Neistat & Mason 47 East Cedar Street Newington, CT 06111 Tel: (860) 666-6022 Fax: (860) 666-6710 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Northern Source, LLC Mortgage $1,300,000 132 West 31st Street 14th Floor Value: $2,000,000 New York, NY 10001 Unsecured: $333,299 CONTINENTAL AIRLINES: Defends DOT China Route Application --------------------------------------------------------- Continental Airlines, Inc., says its application to serve the largest U.S.-China market currently without nonstop service - New York/Newark-Shanghai - should be approved by the U.S. Department of Transportation because the airline has made the best case for the route award. The Company further says that its proposed flight from Newark Liberty International Airport would conveniently link metropolitan New York City with China's center for finance and trade. Third Quarter Outlook For the third quarter, The Company expects the mainline load factor to be up about 1 point year-over-year on a mainline capacity increase of 8.4%. It expects Mainline Domestic load factor to be up about 1 point year-over-year on 6% more capacity, with modest year-over-year yield improvements. The Company expects the Mainline Transatlantic load factor to be down about 2 points year-over-year on a capacity increase of 14.5%, and Mainline Latin load factor to be up 3 to 4 points year- over-year on a capacity increase of 12.5%, with strong year-over- year yield improvements. The Company expects Pacific load factor to be up about 3 points year-over-year with capacity up slightly year-over-year and strong yield improvements. For Regional Operations, the Company expects the load factor to be up 1 to 2 points year-over-year on a capacity increase of 12.4%, with modest year-over-year yield improvements. The Company disclosed that it has contributed $176 million to the pension plans to date and estimates that its 2006 pension plan contributions will total approximately $210 million. The Company estimates its non-cash pension expense will be approximately $185 million for the year, which includes year-to- date settlement charges of $29 million related to lump-sum distributions from the pilot's frozen defined benefit plan. Additional settlement charges are expected for the remainder of 2006. The Company also estimates its 2007 pension plan contributions will total approximately $200 million. The Company also disclosed that it expects to record stock option expense of $6 million for the third quarter and $26 million for the full year 2006. Cargo, mail and other revenue are estimated to be approximately $280 million for the third quarter 2006. Scheduled debt and capital lease principal payments for the third quarter 2006 are estimated to be approximately $92 million. Using petroleum swap contracts, the Company also disclosed that it has hedged approximately 33% of its projected fuel requirements for the third quarter with a weighted average swap price of $73.18 per barrel, and 28% of its projected fuel requirements for the fourth quarter, with a weighted average swap price of $75.20 per barrel. The Company is minimally hedged for the first quarter 2007. The Company expects to record income of approximately $26 million for the full year 2006 related to the tax sharing agreement with ExpressJet. The Company further disclosed that it anticipates ending the third quarter 2006 with an unrestricted cash and short-term investments balance of between $2.4 billion and $2.5 billion and that due to accumulated losses, it has stopped recording income tax benefit on current and future book losses and does not expect to record a tax expense or pay cash taxes this year. Continental Airlines (NYSE: CAL) -- http://continental.com/-- is the world's fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 3,200 daily departures throughout the Americas, Europe and Asia, serving 154 domestic and 138 international destinations. More than 400 additional points are served via SkyTeam alliance airlines. With more than 43,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 61 million passengers per year. Continental consistently earns awards and critical acclaim for both its operation and its corporate culture. * * * As reported in the Troubled Company Reporter on May 29, 2006, Standard & Poor's Ratings Services assigned its 'AAA' preliminary rating to Continental Airlines Inc.'s (B/Negative/B-3) $190 million Class G pass-through certificates, and its 'B+' preliminary rating to the $130 million Class B pass-through certificates. As reported in the Troubled Company Reporter on May 26, 2006, Moody's Investors Service assigned Aaa rating to the Class G Certificates and B1 rating to the Class B Certificates of Continental Airlines, Inc.'s 2006-1 Pass Through Trusts Pass Through Certificates, Series 2006-1. DATALOGIC INT'L: Subsidiary Determines Source of $550,000 Deposits ------------------------------------------------------------------ DataLogic International, Inc., has determined that deposits, totaling $550,000, were advanced on behalf of Derek K. Nguyen, chief information officer and a member of the board of directors, and Keith D. Nguyen, chief financial officer and a member of the board of directors. As reported in the Troubled Company Reporter on Sept. 5, 2005, the Company through its wholly owned subsidiary, DataLogic Consulting, Inc., during the period from Aug. 8, 2006 through Aug. 21, 2006, received deposits totaling $550,000 into its bank account on terms and conditions that was not fully determined due to its failure to maintain an effective system of internal controls. The funds were used to meet the Company's August 2006 payroll obligations and Aug. 2006 principal and interest payment to Laurus Master Fund, Ltd. DCI required the funding due to unanticipated delays in its collection of accounts receivable. DCI is working to improve the collection of its accounts receivable. The Company has entered into a promissory note with each of Derek K. Nguyen and Keith D. Nguyen, in the amount of $250,000 and $300,000 respectively, to evidence the deposits. The officer loans are unsecured, are subordinated to the Company's senior secured indebtedness, are non-transferable and bear interest at 6% per annum. All amounts advanced under the officer loans are due and payable in monthly installments from Oct. 8, 2006 through Aug. 17, 2007. Grant of "most favored nations" Rights The Company also disclosed that it granted the investors in its May 2006 private placement of common stock certain "most favored nations" rights. Specifically, during the 12-month period after the closing of the private placement, if the Company or a subsidiary consummates another financing of common stock, common stock equivalents or debt securities, the investors have the right to exchange any remaining shares purchased in the private placement for the securities offered in the new financing. The "most favored nations" rights were not extended to the Officer Loans. If the Company's entry into the Officer Loans is determined to have triggered the investors' "most favored nations" rights, the Company would be obligated to exchange up to 8,125,000 shares of common stock issued in the private placement for up to $1.625 million in promissory notes with the same terms and conditions as the Officer Loans. Laurus Hold Access to "lockbox" Account Laurus Master Fund, Ltd., on Sept. 5, 2006, placed a hold on the access to funds held in the "lockbox" account, through which the Company receives payment of its accounts receivable. Approximately $454,000 has been redirected from the "lockbox" to Laurus and applied as prepayments to the outstanding note. The Laurus action was based on the default notice served to the Company. Without access to funds in the "lockbox" account, the Company does not have sufficient funds to meet its payroll obligations to employees or otherwise support its operations. The Company and its subsidiaries, on Sept. 15, 2006, began notifying employees that they would not be able to meet their payroll obligations. As of Sept. 15, 2006, the Company and its subsidiaries owed approximately $480,000 in outstanding payroll obligations. The inability to pay the amounts may result in the employees terminating their relationship with the Company and its subsidiaries and/or pursuing legal remedies. A material loss of its employee base may result in the inability of the Company and its subsidiaries to meet their obligations to customers, the loss of key customer relationships and revenue, and claims for breach of contractual obligations. Based in Irvine, Calif., DataLogic International, Inc., (OTCBB: DLGI) -- http://www.dlgi.com/-- is a technology and professional services company providing a wide range of consulting services and communication solutions like GPS based mobile asset tracking, secured mobile communications and VoIP. The Company also provides Information Technology outsourcing and private label communication solutions. DataLogic's customers include U.S. and international governmental agencies as well as a variety of international commercial organizations. Going Concern Doubt As reported in the Troubled Company Reporter on May 17, 2006, Corbin & Company, LLP, raised substantial doubt about DataLogic International, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's recurring losses and need to establish profitable operations. As reported in the Troubled Company Reporter on Sept. 14, 2006 DataLogic International, Inc., received a Default Notice from Laurus Master Fund, Ltd., relating to the $3,250,000 Secured Term Note, as amended, between the Company and Laurus dated Jan. 20, 2006. Under the terms of the Note, Laurus may accelerate the entire Note upon an event of default. The Company discloses that it is currently reviewing its alternatives. DELPHI CORP: Computer Patent Seeks Decision on Services Contract ---------------------------------------------------------------- Computer Patent Annuities Limited asks the Honorable Robert D. Drain of the U.S. Bankruptcy Court for Southern District of New York to compel Delphi Corporation and its debtor-affiliates to either assume or reject their Quarterly Patent and Design Patent Renewal Services contract. Pursuant to the Contract, Computer Patent arranges for the renewal of the Debtors' patents through numerous local contractors. The Debtors are invoiced quarterly for the patent renewal fees. Computer Patent, however, is required to pay the local contractors regardless of when or if the Debtors meet their obligations under the Contract. Dorothy H. Marinis-Riggio, Esq., at Clinoff & Katz, LLP, in New York, points out that absent assumption of the Contract, there is no protection available to Computer Patent that guarantees it will be paid for the patents renewed on the Debtors' behalf. In January 2006, the parties reached agreement whereby Computer Patent will invoice the Debtors more than 60 days in advance of each succeeding quarter so that they would have sufficient time to process the invoice and pay Computer Patent before the renewal deadline for the quarter. The agreement was intended to provide the Debtors with additional time to process the quarterly invoices while at the same time reduce the financial risk posed to Computer Patent under the Contract. Despite the agreement, the Debtors continued to pay the invoices late. Ms. Marinis-Riggio states that the Debtors' pattern of untimely payments forced Computer Patent to advance substantial renewal payments on the Debtors' behalf. Ms. Marinis-Riggio asserts that if the Debtors continue to require its services, they should be required to ensure payment by assuming the contract. Computer Patent's continued performance under the Contract in the absence of assumption imposes an unreasonable burden. If the Debtors decide to reject the Contract, Computer Patent asks the Court to grant administrative expense status for the unpaid patent renewal fees advanced on the Debtors' behalf. In the alternative, Computer Patent asks the Court to compel the Debtors to provide adequate protection payments before the start of each quarter. About Delphi Corp. 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. 41; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DORAL FINANCIAL: Agrees to Pay $25 Mil. Civil Penalty to the SEC ---------------------------------------------------------------- Doral Financial Corporation has reached an agreement with the Securities and Exchange Commission to resolve the Commission's investigation of the Company in connection with the restatement of the Company's financial statements for the years 2000 to 2004. "This agreement is a major step forward in resolving the legal and regulatory issues facing Doral" Glen Wakeman, Chief Executive Officer, said. "We have implemented and will continue implementing improvements in our accounting, financial reporting and corporate governance. We are working vigorously to build the new Doral." Under the agreement approved by the Commission, the Company agreed, without admitting or denying any wrongdoing, to be enjoined from future violations of certain provisions of the securities laws. The Company also agreed to pay a $25 million civil penalty to the Commission. The staff of the Commission may request that the civil penalty be distributed to investors under a plan of distribution to be established by the Commission, as authorized under the Sarbanes-Oxley Act of 2002. About Doral Financial Corp. Doral Financial Corporation (NYSE: DRL) -- http://www.doralfinancial.com/-- a financial holding company, is the largest residential mortgage lender in Puerto Rico, and the parent company of Doral Bank, a Puerto Rico based commercial bank, Doral Securities, a Puerto Rico based investment banking and institutional brokerage firm, Doral Insurance Agency, Inc. and Doral Bank FSB, a federal savings bank based in New York City. * * * As reported in the Troubled Company Reporter on June 13, 2006, Standard & Poor's Ratings Services lowered its long-term ratings on Doral Financial Corp., including the company's long-term counterparty rating, to 'B+' from 'BB-'. At the same time, Doral's outlook remains on CreditWatch with negative implications. DURA AUTOMOTIVE: Moody's Pares Junked Ratings on $856MM Sr. Notes ----------------------------------------------------------------- Moody's Investors Service has lowered the ratings of Dura Operating Corporation, and its direct parent, Dura Automotive Systems, Inc. Dura Automotive's Corporate Family Rating has been lowered to Ca from Caa1. Moody's also assigned a probability of default rating of Caa3 to Dura Automotive. Dura Operating Corp.'s senior secured second lien ratings were lowered to Caa2 (LGD 3, 35%) from Caa1, the senior unsecured notes were lowered to Ca (LGD 4, 61%) from Caa3; and the senior subordinated notes were lowered to C (LGD 6, 92%) from Ca. Dura Automotive Systems Capital Trust's preferred securities also were lowered to C (LGD 6, 98%) from Ca. The lowered ratings reflect the company's ongoing operating pressures in the automotive supplier sector, which have recently been exacerbated by the announcement of additional production declines in the second half of 2006. Sales to Ford and GM approximate 23% and 20% of revenue, respectively, with roughly half of Ford exposure, and 75% of GM exposure derived in the US. Combined with the company's announced restructuring program and interest payments on its senior unsecured and senior subordinated notes in the fourth quarter, the lower expected production in the second half of 2006 will increase the cash flow pressure on the company. The company's Atwood division is expected to be impacted by non-recurring FEMA sales resulting from hurricane Katrina and higher fuel cost. The outlook remains negative reflecting the continuing industry pressures of lower Big 3 production in North America, raw material pricing pressures, and published reports indicating the company has hired restructuring advisors. These are the ratings: * Probability-of-Default rating of Caa3 Ratings lowered: *Dura Automotive Systems, Inc.: -- Corporate Family Rating to Ca from Caa1; * Dura Operating Corp.: -- $150 million guaranteed senior secured second-lien term loan due May 2011, to Caa2 (LGD 3, 35%) from Caa1; -- $75 million guaranteed senior secured second-lien add-on term loan due May 2011, to Caa2 (LGD 3, 35%) from Caa1; -- $400 million of 8.625% guaranteed senior unsecured notes due April 2012 (consisting of $350 million and $50 million tranches), to Ca (LGD 4, 61%) from Caa3; -- $456 million of 9% guaranteed senior subordinated notes due May 2009, to C (LGD 6, 92%) from Ca; -- EUR100 million of 9% guaranteed senior subordinated notes due May 2009, to C (LGD 6, 92%) from Ca; * Dura Automotive Systems Capital Trust: -- $55.25 million of 7.5% convertible trust preferred securities due 2028, to C (LGD 6, 98%) from Ca Ratings affirmed: * SGL-4 Speculative Grade Liquidity Rating Dura Automotive's $175 million guaranteed senior secured first- lien asset-based revolving credit is not rated by Moody's. The last rating action was July 28, 2006 when the ratings were lowered. Dura Automotive, headquartered in Rochester Hills, Michigan, designs and manufactures components and systems primarily for the global automotive industry including driver control systems, structural door modules, glass systems, seating control systems, exterior trim systems, and mobile products. Annual revenues approximate $2.3 billion. DYNEGY INC: LS Power Merger Cues Moody's to Affirm Low-B Ratings ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of Dynegy Holdings Inc., including the B1 Corporate Family Rating and the B2 rating for its senior unsecured debt. Moody's also affirmed the ratings of DHI's parent, Dynegy Inc., including the (P)Caa1 rating for its shelf registration for issuance of senior unsecured debt. The rating outlook for DYN and DHI remains stable. This affirmation follows the announcement that DYN has agreed to merge with various affiliated companies jointly referred to as LS Power, a privately owned independent power project developer and operator. DYN will exchange 340 million shares of Class B stock (equal to about 40% of total equity), valued at approximately $2 billion; $275 million in junior subordinated notes; and $100 million in cash for 100% of LS Power's equity interest in its power generation portfolio and a 50% interest in a generation development joint-venture. LS Power's $2.4 billion in funded project debt will remain in place, but will be non-recourse to Dynegy. DHI's credit facilities will not be available to the projects. As such, the transaction is being accomplished with a minimal increase in recourse debt. The merger will increase the size of Dynegy's portfolio of generating assets by roughly two-thirds, to approximately 20,000 MW, while improving Dynegy's geographic, fuel and dispatch diversity. In addition, Dynegy will have the opportunity to participate in LS Power's development pipeline, which includes another 10,000 MWs of greenfield and repowering projects. The transaction is expected to increase Dynegy's operating cash flow, and LS Power's hedges and power sales agreements should provide a greater degree of stability to the company's revenues, which are currently largely unhedged and vulnerable to commodity price volatility. However, the projects are highly leveraged and Moody's does not anticipate a substantial improvement in Dynegy's consolidated financial ratios as a direct result of the merger. Moody's notes that much of the free cash flow generated by the LS Power projects will be trapped by cash sweep mechanisms requiring the prepayment of the project debt. While the near-term impact of the merger may be limited, management has disclosed that based solely on the projected net financial impact of the recent wholesale power auction in Illinois, where Dynegy's largest coal-fired baseload assets are located, the company could realize a potential increase of $90-$100 million in operating margin for 2007 as compared to 2006. The auction will replace a portion of a below-market contract with Ameren that expires at the end of this year with a multi-year commitment to provide up to 1,400 MWs of capacity on a load- following basis at the around the clock price of $65/MWh. Moody's expects that the combined impact of the merger, the auction, and other on-going improvements will result in adjusted funds from operation to debt and FFO to interest ratios in excess of 10% and 2x respectively by the end of 2007, which would be consistent with the existing B1 Corporate Family Rating. Dynegy is an independent power producer headquartered in Houston, TX, with a 12,820 MW portfolio of assets. E.DIGITAL CORP: June 30 Balance Sheet Upside Down by $3.5 Million ----------------------------------------------------------------- e.Digital Corporation's balance sheet at June 30, 2006 showed total assets of $621,817 and total liabilities of $4,176,523 resulting to a total stockholders' deficit of $3,554,706. The Company's total stockholders' deficit as of March 31, 2006 stood at $2,453,859. The Company's balance sheet at June 30, 2006 also showed negative working capital with $571,757 in total current assets and $4,176,523 in total current liabilities. For the three months ended June 30, 2006, the Company reported a $683,685 operating loss from total revenues of $21,105, compared to a $529,873 operating loss from total revenues of $998,209 in the three months ended June 30, 2005. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?120c With principal executive offices at San Diego, California, E.Digital Corporation -- http://www.edigital.com/-- designs and markets digital technology product platforms employing portable storage media, with the major categories being digital video recorder/players, digital music recorder/players and related mobile devices. It also has experience developing digital automotive technology platforms and a wireless technology platforms. EXIDE TECHNOLOGIES: Seeks Summary Judgment on EPA Response Claims ----------------------------------------------------------------- Exide Technologies and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to enter a summary judgment in its favor regarding the U.S. Environmental Protection Agency's claims. The U.S. Government, on behalf of the EPA, previously sought payment for response costs from Exide due to releases of hazardous substances at, and from, Exide's Price Battery Superfund and Broomworks Superfund Site in Hamburg, Pennsylvania. James O'Neill, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub LLP, in Wilmington, Delaware, points out that Exide and the EPA agreed in a consent order dated June 11, 2003, that the lead-contaminated sites would be remediated by capping. Despite the EPA's approval of the method, however, it decided to conduct a full-scale removal of the soil. Mr. O'Neill tells the Court that as a result, the EPA caused Exide to incur greater expenses than it otherwise would have incurred to effect the remediation. Mr. O' Neill argues that the EPA should not be awarded response costs because the EPA: * acted arbitrarily and capriciously, and inconsistently with the Superfund National Contingency Plan, when it failed to take reasonable steps to determine Exide's ownership of the site; and * further violated the NCP when it based a warrant application for the site on incorrect and misleading statements. The NCP establishes the procedures and requirements for responding to hazardous substance sites. According to Mr. O' Neill, even if some of the costs must be paid, which Exide contests, the costs cannot be given administrative priority because the EPA's remediation was unnecessary and did not benefit the estate. Rather, the costs should be treated as a general, unsecured prepetition claim based on the prepetition deposition of the contamination the EPA sought to remedy. About Exide Headquartered in Princeton, New Jersey, Exide Technologies (NASDAQ: XIDE) -- http://www.exide.com/-- manufactures and distributes lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represented the Debtors in their successful restructuring. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000, http://bankrupt.com/newsstand/) EXIDE TECHNOLOGIES: U.S. Seeks Summary Judgment on Response Costs ----------------------------------------------------------------- The U.S. Government asks the U.S. Bankruptcy Court for the District of Delaware for a summary judgment on Exide Technologies' liability under the Comprehensive Environmental Response, Compensation, and Liability Act for costs incurred by the U.S. Government in responding to the release and threat of release of lead from Exide's Price Battery Superfund and the Broomworks Superfund sites in Pennsylvania. Specifically, the U.S. Government asks the Court to: * hold the Debtors liable for the response costs; and * grant administrative expense status to the costs. Donna D. Duer, Esq., at the Environmental Enforcement Section of the U.S. Department of Justice, in Washington, D.C., discloses that Exide assumed responsibility for cleaning up the sites pursuant to the June 11, 2003 consent order. For response costs between the Petition Date and the confirmation date of the Debtors' Plan of Reorganization, the EPA incurred: (1) $177,446 for the Broomworks Site; and (2) $240,769 for the Price Battery Site. Ms. Duer notes that the undisputed facts show that: (a) Exide is the owner of the Price Battery Site and the Broomworks Site, each of which is a "facility" from which there has been a release of lead under the CERCLA; (b) the Debtor's affirmative defense is wholly without merit and fails as a matter of law because Exide's claim that the EPA did not notify its counsel of the EPA's proposed removal action is irrelevant to the issue of liability; and (c) the EPA made significant efforts to determine who owned the property, including questioning Exide about its ownership of the property and obtaining a valid access warrant before entering the property. Ms. Duer explains that because the undisputed facts show that the Debtor is liable under Section 107(a) of CERCLA, the U.S. Government is entitled to summary judgment on the issue of the Debtor's liability. The U.S. Government further asks the Court to enter summary judgment declaring that the $418,216 response costs it is entitled to recover from Exide are administrative expenses of the estate. Ms. Duer tells the Court that no genuine issue of material fact exists because there is no dispute that: (i) the U.S. Government incurred response costs at the sites; or (ii) the costs are within the categories of recoverable costs under the CERCLA. Furthermore, Ms. Duer asserts that the declarations the U.S. Government submitted to the Court fully establish the amounts of the response costs it incurred at, or in connection with, the Sites between April 15, 2002, and April 21, 2004. Ms. Duer asserts that Exide cannot demonstrate that the EPA's choice of response action was inconsistent with the National Contingency Plan. About Exide Headquartered in Princeton, New Jersey, Exide Technologies (NASDAQ: XIDE) -- http://www.exide.com/-- manufactures and distributes lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represented the Debtors in their successful restructuring. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service, Inc., 215/945-7000, http://bankrupt.com/newsstand/) FORD MOTOR: Buying Rover Brand Name From BMW -------------------------------------------- Ford Motor Co. will exercise its right to purchase the "Rover" brand name from BMW AG, in order to prevent confusion regarding the brand among customers, Newratings.com reports. Ford purchased the Land Rover brand from BMW in 2000 and holds the option to acquire the Rover brand as part of that deal. Land Rover is a unit of Ford's Premier Automotive Group, which includes other brands like Volvo, Jaguar and Aston Martin. The segment incurred a $180 million net loss in Ford's second quarter results. According to Newratings.com, BMW has agreed to sell the Rover brand to Shanghai Automotive Industry Corp for GBP11 million if Ford won't exercise its right. SAIC had previously acquired the right to the designs for the Rover cars from BMW. James Doran, writing for The Times, reports that while Ford does not intend to roll out the Rover in its original form, the company is planning to introduce Rover vehicles under the Land Rover series. About Ford Motor Headquartered in Dearborn, Michigan, Ford Motor Company -- http://www.ford.com/-- manufactures and distributes automobiles in 200 markets across six continents. With more than 324,000 employees worldwide, the company's core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive- related services include Ford Motor Credit Company and The Hertz Corporation. * * * As reported in the Troubled Company Reporter on Aug. 22, 2006, Dominion Bond Rating Service placed long-term debt rating of Ford Motor Company Under Review with Negative Implications following announcement that Ford will sharply reduce its North American vehicle production in 2006. DBRS lowered on July 21, 2006, Ford Motor Company's long-term debt rating to B from BB, and lowered its short-term debt rating to R-3 middle from R-3 high. DBRS also lowered Ford Motor Credit Company's long-term debt rating to BB(low) from BB, and confirmed Ford Credit's short-term debt rating at R-3(high). Fitch Ratings also downgraded the Issuer Default Rating of Ford Motor Company and Ford Motor Credit Company to 'B' from 'B+'. Fitch also lowered the Ford's senior unsecured rating to 'B+/RR3' from 'BB-/RR3' and Ford Credit's senior unsecured rating to 'BB- /RR2' from 'BB/RR2'. The Rating Outlook remains Negative. Standard & Poor's Ratings Services also placed its 'B+' long- term and 'B-2' short-term ratings on Ford Motor Co., Ford Motor Credit Co., and related entities on CreditWatch with negative implications. As reported in the Troubled Company Reporter on July 24, 2006, Moody's Investors Service lowered the Corporate Family and senior unsecured ratings of Ford Motor Company to B2 from Ba3 and the senior unsecured rating of Ford Motor Credit Company to Ba3 from Ba2. The Speculative Grade Liquidity rating of Ford has been confirmed at SGL-1, indicating very good liquidity over the coming 12 month period. The outlook for the ratings is negative. FOSS MANUFACTURING: Disclosure Statement Hearing Set for Oct. 10 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Hampshire will convene a hearing at 1:30 p.m., on Oct. 10, 2006, to consider the adequacy of the Disclosure Statement explaining the Plan Of Liquidation proposed by the Official Committee of Unsecured Creditors appointed in Foss Manufacturing Company, Inc.'s bankruptcy case. The Committee's Plan is intended to provide a vehicle to realize upon the remaining assets of the Debtor following the sale of substantially all of its operating assets on May 5, 2006, to Foss Manufacturing Company LLC, for approximately $39 million. The Debtor's remaining assets consist primarily of Causes of Action, including claims against Company insiders for breach of fiduciary duty, illegal dividends and corporate waste, and avoidance claims under sections 544(b), 547 and 548 of the Bankruptcy Code. On the effective date of the Plan, the Debtor's remaining assets will vest into the Liquidating Debtor. Under the direction and control of the Plan Administrator and the Oversight Committee, the Liquidating Debtor will be responsible for the liquidation (through prosecution, settlement or other disposition) of the Causes of Action, as well as any miscellaneous assets of the Debtor, and the distribution of the proceeds to creditors. The Committee has selected Lawrence E. Rifken, Esq., at McGuireWoods LLP, as Plan Administrator. Treatment of Claims The Plan designates three Classes of Claims and two Classes of Interests, which include all Claims against, and Interests in, the Debtor. Because creditor recoveries will depend primarily upon recoveries from the Causes of Action, no estimate can be provided as to how much can be recovered by creditors in each Class. The Committee is currently not aware of any remaining secured claim against the estate except for the purported claim asserted by the Pension Benefit Guaranty Corporation. The Committee maintains that the PBGC's collateral was sold to the Buyer and that, as a result, the PBGC is no longer a secured creditor. Any allowed secured claim will receive either the collateral securing its claim or the net proceeds from the sale of the collateral, up to the allowed amount of the claim. On the effective date, Holders of Priority Claims other than Priority Tax Claims, estimated to total $3 million, will get a pro rata portion of available cash after the payment of allowed Administrative claims and the establishment of appropriate Plan Reserve Accounts. The Plan Administrator will make additional periodic cash distributions from available cash on a pro rata basis until the earlier of the date that the claims are paid in full or all estate assets have been exhausted. General Unsecured Claimholders , estimated at between $23 million to $35 million, will receive a pro rata portion of available cash on the effective date after the payment of Allowed Administrative Expense Claims, Allowed Priority Tax Claims and Allowed Other Priority Claims and the establishment of appropriate Plan Reserve Accounts. General unsecured creditors are also entitled to periodic cash distributions from available cash on a pro rata basis until the earlier of the date that their claims are fully paid or estate assets are exhausted. Holders of the Debtors' Preferred and Common Stock will get nothing under the Plan and their interests will be cancelled on the effective date. A copy of the Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=060921213543 A copy of the Disclosure Statement and Plan of Liquidation may also be obtained by sending a written request to the local counsel for the Committee at: McLane, Graf, Raulerson & Middleton PA Attn: Joseph A. Foster, Esq. P.O. Box 326, 900 Elm Street Manchester, NH 03105-0326 Objections to the Disclosure Statement must be filed with the Court on or before 4:30 p.m., on Oct. 3, 2006. About Foss Manufacturing Headquartered in Hampton, New Hampshire, Foss Manufacturing Company, Inc. -- http://www.fossmfg.com/-- is a producer of engineered, non-woven fabrics and specialty synthetic fibers, for a variety of applications and markets. The Company filed for chapter 11 protection on Sept. 16, 2005 (Bankr. D. N.H. Case No. 05-13724). Andrew Z. Schwartz, Esq., at Foley Hoag LLP represented the Debtor. Beth E. Levine, Esq., at Pachlski, Stang, Zieh, Young, Jones & Weintraub represents the Official Committee of Unsecured Creditors. The Court appointed Patrick J. O'Malley as the Debtor's Chapter 11 Trustee and lawyers from Hanify & King, Perkins, Smith & Cohen, LLP, and Mintz, Levin, Cohn, Ferris represent the Chapter 11 Trustee. When the Debtor filed for protection from its creditors, it listed $49,846,456 in assets and $53,419,673 in debts. FRIENDLYWAY C0RP: Posts $3.5M Net Loss in 3rd Qtr. Ended July 31 ---------------------------------------------------------------- friendlyway Corporation, now known as PSI Corp, filed its financial statements for the third fiscal quarter ended July 31, 2006, with the Securities and Exchange Commission on Sept. 15, 2006. The Company reported a $3,538,187 net loss on $164,740 of total revenues for the three months ended July 31, 2006, compared with an $807,921 net loss on $548,126 of total revenues for the same period in 2005. At July 31, 2006, the Company's balance sheet showed $1,270,779 in total assets and $3,739,471 in total liabilities, resulting in a $2,468,692 stockholders' deficit. The Company's balance sheet also showed strained liquidity with $936,788 in total current assets available to pay $1,434,471 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's third fiscal quarter are available for free at http://ResearchArchives.com/t/s?121f Recent Acquisitions On May 2, 2006, friendlyway Corp. acquired Pantel Systems Inc. and Pantel Financial Centers in exchange for 20,000,000 shares of its common stock for all the outstanding shares of Pantel. In August 2006, the Company purchased the assets of Ignition Media Group for a $2.5 million purchase price consisting of $1 million in cash and 1.5 million in stock. The Company believes this acquisition will enable it to successfully access the digital advertising forum as well as the national media network. In August 2006, the Company purchased the assets of Big Fish Marketing Inc. for a $1.5 million purchase price, of which $150,000 in cash is payable over six months and the balance in stock. The Company believes this acquisition will give them entrance to media advertising and content development fields. Going Concern Doubt Lopez, Blevins, Bork & Associates, LLP, in Houston, Tex., raised substantial doubt about friendlyway Corp.'s ability to continue as a going concern after auditing their consolidated financial statements for the year ended Oct. 31, 2005. The auditor pointed to the Company's operating losses, accumulated deficiencies, and need for additional working capital to develop its business or additional financing necessary to support its working capital requirements. About friendlyway Headquartered in Colorado Springs, Colo., friendlyway Corporation nka PSI Corp. (OTCBB: FDWY) -- http://www.friendlywayinc.com/-- is a self-service provider of customer-facing public access self- service systems primarily in the United States of America. PSI Corp. has developed an e-Banking kiosk, which is a stand alone, full function financial center for customers who desire ATM cash transactions, check cashing, money order purchasing, money transfers, prepaid debit card transactions, bill payment, and bilingual text and audio response. FTS GROUP: Earns $1.6 Million for the Period Ended June 30 ---------------------------------------------------------- FTS Group, Inc., reported a net loss of $56,867 on revenues of $1,633,392 for the three months ended June 30, 2006. At June 30, 2006, the Company's balance sheet showed $7,196,971 in total assets, $5,352,419 in total liabilities and $1,844,552 in stockholders' equity. The Company's June 30 balance sheet also showed strained liquidity with $1,239,377 in total current assets available to pay $3,850,749 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended June 30, 2006, are available for free at: http://ResearchArchives.com/t/s?120d Going Concern Doubt Withum Smith & Brown, P.C., in Princeton, New Jersey, raised substantial doubt about FTS Group, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses and working capital deficits. About FTS Group FTS Group, Inc., develops and acquires businesses primarily in the wireless industry. Through FTS Wireless, Inc., a wholly-owned subsidiary, acquires and develops a chain of retail wireless locations in the Gulf Coast market of Florida. As of March 1, 2006, the Company operates nine retail wireless locations in Florida. G+G RETAIL: Assigns More than 400 Leases to Max Rave ---------------------------------------------------- The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York authorized G+G Retail Inc. to assume over 400 leases of non-residential real property and assign these leases to Max Rave, LLC. Early this year, Max Rave, and Guggenheim Corporate Funding LLC, won the auction of substantially all of the Debtor's assets. GCF provided equity and loan commitments for Max Rave to: * fund the purchase of the company, * provide fresh inventory for stores, and * provide operating working capital for operations. Max Rave paid the Debtor $35 million in cash plus the assumption of certain leases, payment of gift certificate liability and inventory purchased postpetition. Max Rave also agreed to pay the cure amounts for the assigned leases. A list of the assumed and assigned leases is available for free at http://researcharchives.com/t/s?1218 Headquartered in New York, New York, G+G Retail Inc. retails ladies wear and operates 566 stores in the United States and Puerto Rico under the names Rave, Rave Girl and G+G. The Debtor filed for Chapter 11 protection on Jan. 25, 2006 (Bankr. S.D.N.Y. Case No. 06-10152). William P. Weintraub, Esq., Laura Davis Jones, Esq., David M. Bertenthal, Esq., and Curtis A. Hehn, Esq., at Pachulski, Stang, Ziehl, Young & Jones P.C. represent the Debtor in its restructuring efforts. Scott L. Hazan, Esq.. at Otterbourg, Steindler, Houston & Rosen, P.C., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it estimated assets of more than $100 million and debts between $10 million to $50 million. GENERAL MOTORS: Talks with Nissan and Renault Enter Final Phase --------------------------------------------------------------- Talks on the planned collaboration between General Motors Corporation and the Nissan Motor Company-Renault SA alliance have entered the final stage as the Oct. 15, 2006 preliminary deadline for the parties to complete a review on the potential benefits of the tie-up approaches, The Yomiuri Shimbun reveals. According to the Yomiuri, General Motors' interest in the deal has waned, especially over the idea of forming a capital alliance. Consequently, the nature of the tie-up may turn out to be much less comprehensive than the Nissan-Renault bloc had initially planned. In July, the three carmakers agreed to conduct a 90-day study of the potential benefits of an alliance that could create an automobile giant with a combined annual production of 15 million vehicles, The Associated Press reports. The study came after GM shareholder Kirk Kerkorian, who owns a 9.9% stake in the company through his investment firm Tracinda Corp., called for the carmakers to pursue an alliance. Carlos Ghosn, the chief executive of Renault and Nissan, has said the benefits from an alliance would be similar to the gains from the Renault-Nissan alliance, which have included cost savings from joint purchases of auto parts, AP relates. Renault SA has named BNP Paribas to advise on a possible three-way alliance with General Motors Corp. and Nissan Motor Co. According to AFX, the French carmaker has also drawn up a shortlist of around eight British and US banks from which it will choose a second adviser. If the firms reach a comprehensive tie-up deal with capital involvement, the alliance would create a giant that produces 25% of all automobiles in the world, the Yomiuri says. General Motors, however, has been cautious since the talks began, whereas the Nissan-Renault side has been consistently positive over the prospective deal. The opposition of the United Auto Workers' Union may be a factor behind General Motors' reluctance, according to the Yomiuri. Alarmed by Mr. Ghosn's past record on aggressive corporate restructuring, union head Ron Gettelfinger has publicly said he wants talks on the three-way alliance to be put away forever. With the rise of such resistance in the United States, Mr. Ghosn now seems to have backed down from his initial goal of acquiring a capital stake in General Motors to maximize the synergy effect of the alliance, and has said a capital tie-up is not a precondition to the deal. About General Motors General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM employs about 317,000 people around the world. It has manufacturing operations in 32 countries and its vehicles are sold in 200 countries. * * * As reported in the Troubled Company Reporter on July 28, 2006, Standard & Poor's Ratings Services held all of its ratings on General Motors Corp. -- including the 'B' corporate credit rating, but excluding the '1' recovery rating -- on CreditWatch with negative implications, where they were placed March 29, 2006. The CreditWatch update followed GM's announcement of second quarter results and other recent developments involving its bank facility and progress on the GMAC sale. As reported in the Troubled Company Reporter on July 27, 2006, Dominion Bond Rating Service downgraded the long-term debt ratings of General Motors Corporation and General Motors of Canada Limited to B. The commercial paper ratings of both companies are also downgraded to R-3 (low) from R-3. As reported in the Troubled Company Reporter on June 22, 2006, Fitch assigned a rating of 'BB' and a Recovery Rating of 'RR1' to General Motor's new $4.48 billion senior secured bank facility. The 'RR1' is based on the collateral package and other protections that are expected to provide full recovery in the event of a bankruptcy filing. As reported in the Troubled Company Reporter on June 21, 2006, Moody's Investors Service assigned a B2 rating to the secured tranches of the amended and extended secured credit facility of up to $4.5 billion being proposed by General Motors Corporation, affirmed the company's B3 corporate family and SGL-3 speculative grade liquidity ratings, and lowered its senior unsecured rating to Caa1 from B3. The rating outlook is negative. GEORGIA GULF: Fitch Assigns B Rating to Proposed Sr. Sub. Notes --------------------------------------------------------------- Fitch Ratings assigned a 'BB-' rating to Georgia Gulf Corporation's proposed senior unsecured notes due 2014 and a 'B' rating to the company's proposed senior subordinated notes due 2016. These ratings affect approximately $750 million of new notes. The Issuer Default Rating would be downgraded to 'BB-' from 'BB' upon the closing of Georgia Gulf's acquisition of Royal Group Technologies and the Rating Outlook would be Negative. Fitch previously assigned a 'BB+' rating to the proposed senior secured credit facility in August. Georgia Gulf's current credit ratings remain on Rating Watch Negative pending the closing of the acquisition. An IDR of 'BB-' incorporates: * the benefit of greater integration in the vinyls chain; * the potential for greater earnings and cash flow with less volatility; and * some success in realizing cost synergies. However, the rating is tempered by concerns regarding high leverage, particularly as the PVC resin market is expected to loosen and residential construction activity may be slowing. Moreover, target integration risk may be higher due to ongoing legal and regulatory investigations at Royal Group, and Georgia Gulf's lack of direct experience integrating a sizeable downstream target. The proposed 'BB-' rating on the senior notes, both new and existing, reflects their unsecured position relative to a significant amount of secured debt. Upon closing of the acquisition-related financing, Fitch estimates that secured debt of $1.175 billion with perfected liens and the $165 million accounts receivable securitization program could have priority interest in the assets of the company before the senior unsecured and senior subordinated notes. Assuming the senior unsecured notes are contractually senior in right of payment to the subordinated notes, the subordinated notes will be rated 'B', two notches lower than the IDR and senior unsecured notes, to reflect their junior position and expected lower principal recovery in bankruptcy. Fitch previously assigned a 'BB+' rating to the proposed senior secured credit facility in August 2006. The rating reflects the superior collateral position of the term loan and revolver based on preliminary terms and conditions. The rating also considers the high likelihood of principal recovery in a liquidation scenario. The ratings could change if the final terms of the new credit agreement, senior notes, and senior subordinated notes differ materially from the preliminary terms and conditions considered for the ratings. Based in Atlanta, Georgia Gulf is a commodity chemicals producer. Its product portfolio includes VCM, PVC resin, vinyl compounds, cumene, acetone, and phenol. Georgia Gulf earned approximately $279 million of EBITDA on sales of $2.2 billion for the latest 12- month period ended June 30, 2006. GLOBAL EMPIRE: Chapter 11 Trustee Hires Hughes Watters as Counsel ----------------------------------------------------------------- The Honorable Marvin Isgur of the U.S. Bankruptcy Court for the Southern District of Texas in Houston authorized David Askanase, the Chapter 11 Trustee for the estate of Global Empire Investments and Holdings, LLC, to retain Hughes, Watters & Askanase LLP as his counsel. Hughes Watters will: a) file pleadings with the court in which representation of the Chapter 11 Trustee would be appropriate, particularly related to any Disclosure Statement and Plan of Reorganization, and to represent the estate's interest with regard to any adversaries or contested matters pending before the Court, particularly with the estate's interest in property; b) analyze, institute and prosecute actions regarding determination and recovery of property of the estate, including the investigation and prosecution of avoidance litigation, as well as collection of assets of the estate wherever they may be found, to the extent these activities would be economically beneficial to the estate; c) prepare for, institute and prosecute any examination under Bankruptcy Rule 2004 and, if necessary, institute and prosecute motions to compel attendance and removal of persons for examination under Bankruptcy Rule 2005; d) institute and prosecute proceedings for extraordinary relief, analyze, institute and prosecute actions regarding insider transactions and third party dealings, including instituting or joining other parties-in-interest or creditors in related adversary litigation ; e) represent the Chapter 11 trustee where necessary to negotiate and consummate non-routine sales of estate assets and institute any necessary related proceedings; f) analyze institute and prosecute or defend actions regarding liens and set-offs asserted against the property of the estate, including any liens and set-offs previously asserted by any of the Debtor's affiliated business entities against each other; g) institute non-routine objection to claims asserted against the estate and prosecute all contested objections to proofs of claim asserted against the estate; h) aid in the representation of the Trustee in any litigation by or against the Trustee and coordinate with any special litigation counsel subsequently employed by the Trustee to represent him in any bankruptcy or non-bankruptcy litigation or other legal matter which may be found to be an asset of the estate; i) coordinate with the Chapter 11 Trustee's accountants and tax advisors and take actions appropriate in representing the estate with regard to tax matters; and j) take action regarding information in the hands of the Debtors' business financial and legal advisors as is allowed under the Bankruptcy Code and other applicable law. The current hourly rates for Hughes Watters' professionals are: Designation Hourly Rate ----------- ----------- Partners/Senior Associates $235 to $380 Junior Associates $150 to $215 Legal Assistants $60 to $110 Wayne Kitchens, Esq., at Hughes Watters, will act as the Chapter 11 Trustee's lead counsel. To the best of the Trustee's knowledge, Hughes Watters does not hold or represent any interest adverse to the Debtor or its estate. The Court named Mr. Askanase as the Debtor's Chapter 11 Trustee in July 2006 upon the recommendation of Richard W. Simmons, the former U.S. Trustee for Region 7. Headquartered in Houston, Texas, Global Empire Investments & Holdings, LLC, filed for chapter 11 protection on Dec. 6, 2005 (Bankr. S.D. Tex. Case No. 05-95389). Richard L. Fuqua, II, Esq., at Fuqua & Keim, represents the Debtor in its restructuring efforts. David J. Askanase serves as Chapter 11 Trustee for the Debtor's estate. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. GMAC COMMERCIAL: S&P Upgrades Three Cert. Classes' Low-B Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on eight classes of commercial mortgage pass-through certificates from GMAC Commercial Mortgage Securities Inc.'s series 2000-C2. Concurrently, the ratings on the remaining classes were affirmed. The raised and affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios, as well as the defeasance of 31% of the collateral in the trust. As of the Aug. 16, 2006, remittance report, the trust balance was $617 million, down from $773.7 million at issuance. As of the August remittance, the collateral consisted of 114 loans and a Freddie Mac Multifamily Gold Participation Certificate. The Freddie Mac PC represents an undivided beneficial ownership interest in a pool of two loans that were secured by five multifamily properties until they were defeased in 2005. Despite the defeasance, the Freddie Mac guaranty remained in place. Excluding the Freddie Mac PC, the pool of 114 loans has an aggregate outstanding balance of $530.8 million, $134 million of which has been defeased. The master servicer, Capmark Finance Inc., reported primarily year-end 2005 financial information for 100% of the pool, excluding the defeased loans. Based on this information, Standard & Poor's calculated a weighted average debt service coverage of 1.31x for the pool, compared with 1.35x at issuance. All of the loans in the pool are current except for one that is 90-plus-days delinquent and with the special servicer, also Capmark. One appraisal reduction amount totaling $4.1 million is in effect related to the aforementioned delinquent loan. To date, the trust has experienced eight losses totaling $10.3 million. The top 10 exposures in the pool secured by real estate had an aggregate outstanding balance of $140.8 million (23%) and a weighted average DSC of 1.15x for year-end 2005, down from 1.29x at issuance. The decrease in the DSC resulted primarily from a 25% or more decline in net cash flow since issuance for four of the top 10 loans. Seven of the top 10 loans are on the master servicer's watchlist. Standard & Poor's reviewed property inspections provided by Capmark for all of the assets underlying the top 10 exposures, and all were characterized as "good" or "excellent," with the exception of one property that was characterized as "poor." Capmark reported a watchlist of 37 loans with an aggregate outstanding balance of $176 million (29%), with seven of the top 10 loans representing approximately 51% ($89.6 million) of the loans on the watchlist. Details concerning seven of the top 10 loans on the watchlist are: -- The largest loan on the watchlist is the Rialto Building ($25.9 million, 4%), which is also the largest loan in the pool. This loan is secured by a 140,206-sq.-ft. office building in San Francisco, California, that was built in 1901 and renovated in 2000. The DSC for this loan has declined 34% since issuance because of a decrease in occupancy caused when one of the largest tenants vacated due to bankruptcy. The year-end 2005 DSC was 0.84x and occupancy was 85%. -- Rochester Village Apartments ($15.4 million, 2.5%), the fourth-largest loan in the pool, is secured by a 412-unit class B apartment complex in Rochester, Minnesota. The property was built between 1972 and 1975 and renovated in 1997. The loan was placed on the watchlist due to a 57% decline in DSC since issuance. Despite a reported 92% occupancy at year-end 2005, the DSC was 0.62x. -- The Roanoke portfolio secures the fifth-largest loan ($11.0 million, 2%) and consists of three flex office buildings in Roanoke, Virginia, totaling 149,247 sq. ft. The buildings were built between 1993 and 1999. The loan was placed on the watchlist due to a decline in occupancy. The year-end 2005 occupancy was 73% and the DSC was 1.17x. -- The Sheraton Four Points Hotel is the sixth-largest loan with an unpaid principal balance of $10.6 million (2%). A 153-room full-service hotel in Emeryville, California, secures the loan. The loan was placed on the watchlist due to a decline in DSC. The year-end 2005 DSCR was 1.11x and occupancy was 79%. For the six months ending June 30, 2005, the DSC had improved to 1.29x. -- The seventh-largest loan, the O'Herron portfolio, is secured by five supermarket-anchored retail properties comprising 239,324 sq. ft. Four of the properties are located in North Carolina and one is in Virginia. The combined year-end 2005 DSC was 0.97x and occupancy was 88%. The decline in the loan's DSC and occupancy are attributable to reduced occupancy at the property in Virginia, which no longer has Winn Dixie as a tenant. After Winn Dixie vacated, the property's occupancy dropped to 34%, and leasing efforts to date have not been successful. -- Partridge Run Apartments is the ninth-largest loan with an unpaid principal balance of $8.5 million (1.4%) and is secured by a 247-unit apartment complex in Parsippany, New Jersey. The apartment complex was built in 1965 and renovated in 1999. A May 2, 2006, property inspection characterized the underlying asset as "poor" due to substantial deferred maintenance. The year-end 2005 DSC was 0.80x and occupancy was 83%. The borrower and property manager are currently addressing the deferred maintenance. -- Eastlake Commons is the 10th-largest loan with an unpaid principal balance of $8.5 million (1%) and is secured by a 99,205-sq.-ft. retail center in Sterling Heights, Michigan, built in 1988 and renovated in 1998. The supermarket anchor, Farmer Jacks, has vacated the property but continues to pay rent under its lease obligations, which remain in effect until January 2009. The year-end 2005 DSCR was 1.02x and physical occupancy was 60%. The Meriden Parkade Shopping Center, which is secured by a 188,981-sq.-ft. retail center in Meriden, Connecticut, has an unpaid principal balance of $7.5 million and is the only asset with the special servicer. Including advances, the total loan exposure is $9.3 million. An ARA of $4.1 million is effect. The property was built in 1961 and renovated in 1987. The asset was transferred to the special servicer due to delinquent payments after the anchor tenant vacated the property. Capmark has commenced foreclosure and is also proceeding with a discounted payoff. The highest offer was $7.05 million received from the borrower, and the sale is expected to occur in mid-September. Standard & Poor's stressed various loans in the transaction, paying closer attention to the asset with the special servicer and those on the watchlist. The resultant credit enhancement levels support the raised and affirmed ratings. Ratings Raised: GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2000-C2 Class To From Credit enhancement ----- -- ---- ------------------ B AAA AA+ 19.85% C AA+ A 15.31% D AA A- 13.58% E A- BBB 10.45% F BBB+ BBB- 8.88% G BB+ BB 4.80% H BB BB- 3.86% J B+ B 2.92% Ratings Affirmed: GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2000-C2 Class Rating Credit enhancement ----- ------ ------------------ A-2 AAA 24.87% K CCC 1.51% L CCC- 0.88% X AAA N/A N/A -- Not applicable. GRAFTON PROPERTIES: Case Summary & Two Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Grafton Properties, LLC Suite A-1 44 Grafton Street Hartford, CT 06106 Bankruptcy Case No.: 06-20868 Chapter 11 Petition Date: September 19, 2006 Court: District of Connecticut (Hartford) Debtor's Counsel: Kevin L. Mason, Esq. Neistat & Mason 47 East Cedar Street Newington, CT 06111 Tel: (860) 666-6022 Fax: (860) 666-6710 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Two Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Cl&P Utility Bills $6,852 Credit & Collection P.O. Box 2919 Hartford, CT 06104 MDC Utility Bills $1,500 555 Main Street, P.O. Box 800 Hartford, CT 06142 INFORMATION ARCHITECTS: IFGT-SI Submits Replacement Asset --------------------------------------------------------- Information Architects disclosed that as a result of the cancellation of the agreement with Petroleum Communication Holdings, Inc., International Funding Group Trust - Synergistic Investments has submitted a replacement asset, which may serve as a substitute value, to complete its original deal with IFGT-SI. On Aug. 1, 2006, Earnest Phillips, president of PTLC, sent a letter to the Company canceling the agreement between PTLC and the Company, as a result of extenuating circumstances between the Company and IFGT-SI. The initial agreement dated Oct. 14, 2005, between PTLC and the Company involved property that was the subject of the agreement between the Company and IFGT-SI. For the benefit of their shareholders the Company's board of directors have taken actions beginning Sept. 15, 2006, until verification can be completed as to the actual dollar value of the potential asset offered by IFGT-SI. The Company disclosed that its Board of Directors anticipates working through the information provided by IFGT-SI regarding the replacement asset. Its Board needs to ensure that the asset has real immediate value, which can be utilized by the Company. As suggested by legal Council, its Board of Directors has placed a soft deadline date of Oct. 15, 2006, to decide on the resolution. Its Board however, based on legal advice, is prepared to promptly act as soon as the investigation is complete, and until the decision is made, the transfer agent is instructed to place a Total NON-TRANSFER NO LEGEND RELEASE on all shares listed within the contract between PTLC, IFGT-SI and the Company. The Company's Board is also compelled to investigate a reset of the clock on all shares relevant to the agreement. The Company also disclosed that additional concerns have been raised regarding the legal issues that constituted the cancellation by PTLC and the Company's Board feels obligated to investigate all the relevant issues regarding the business event to ensure a positive outcome for its shareholders. The Company's proper officers were authorized to execute all instruments, documents, forms and certificates and to take all further actions necessary in connection with the resolutions. A text copy of the Acquisition Agreement between the Company and PTLC may be viewed at no charge at: http://ResearchArchives.com/t/s?1216 Headquartered in Ft. Lauderdale, Florida, Information Architects Corporation (OTCBB: IACH) -- http://www.ia.com/-- provides employment screening and background investigations software application. The Company's balance sheet at June 30, 2006 showed total assets of $1.87 million and total liabilities of $4.24 million resulting in a total shareholders' deficit of $2.37 million. INFORMATION ARCHITECTS: Inks Merger Agreement with Global Triad --------------------------------------------------------------- Information Architects has signed a merger agreement with Global Triad, Inc., including Global TV, Inc., Global Wifi Plus, Inc. and Global Marine System, Inc. The Company disclosed that new board members and officers will be appointed to Global Triad, Inc. About Global Triad Headquartered in Ft. Lauderdale, Florida, Global Triad Incorporated owns and operates three subsidiaries, Global WiFi Plus, Inc., Global TV, Inc. and Global WiFi Marine, Inc., all Florida Corporations. About Global Wifi Plus Global Wifi Plus is the aggregation and delivery of a wholesale, end-to-end wireless digital communications system utilizing both Internet Protocols and proprietary digital devices. The company will offer, over wireless high-speed networks, a "Triple Play" consisting of Voice over Internet telephony, high-speed Internet data delivery and true Video-On-Demand. Both the Internet and VOD will be accessible through the consumer's television. About Global TV Inc. Global TV, Inc. offers a full production facility, which produces ABA Basketball events while the main focus of activity for Global WiFi Marine, Inc., is the installation of high speed broadband to the marine industry. About Information Architects Headquartered in Ft. Lauderdale, Florida, Information Architects Corporation (OTCBB: IACH) -- http://www.ia.com/-- provides employment screening and background investigations software application. The Company's balance sheet at June 30, 2006 showed total assets of $1.87 million and total liabilities of $4.24 million resulting in a total shareholders' deficit of $2.37 million. INSIGHT MIDWEST: S&P Rates New $2.57 Bil. Debt Facilities at BB- ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'BB-' rating to Insight Midwest Holdings LLC's proposed $2.575 billion of bank credit facilities. Standard & Poor's also assigned a '2' recovery rating, indicating expectations for substantial (80%-100%) recovery of principal in a default or bankruptcy. At the same time, the rating agency affirmed the ratings on New York City-based cable TV operator Insight Midwest L.P., and its intermediate holding company Insight Midwest Holdings LLC, including the 'BB-' corporate credit ratings. Proceeds from this new bank financing will be used to refinance borrowings under the current bank facility, as well as fully repay the $630 million of 10.5% notes due 2010, and a portion of the 9.75% notes due 2009. "The ratings on Insight Midwest reflect the company's high leverage and the challenges it faces from direct-to-home competitors, as well as from AT&T Inc. in the longer term as that company rolls out video services," said Standard & Poor's credit analyst Catherine Cosentino. The company is the dominant provider of cable TV service in its Midwestern markets, with about 1.3 million basic subscribers. Despite its dominant position, it has experienced competitive losses over the past few years from DTH competitors, and over the next few years it faces potential threats from AT&T Inc. with its expected introduction of Internet-protocol TV services in selected markets, as well as some overbuild threat in certain markets, primarily by WideOpen West. INVESTOOLS INC: Inks $340 Million Merger Deal with thinkorswim -------------------------------------------------------------- INVESTools Inc. (NASDAQ:IEDU) and thinkorswim Group Inc. have signed a definitive agreement to merge in a transaction valued at approximately $340 million. Merger -- The combination of INVESTools' education capabilities with thinkorswim's best-in-class trading platform creates a unique business model with the ability to offer differentiated product offerings for the retail investor; -- INVESTools' continuing education offerings, which represent more than 80% of its sales, are principally based on options, complementing thinkorswim's award-winning options- oriented execution platform; -- The combination of two leading technology-based companies will create operating leverage in product innovation resulting in increased lifetime value and recurring revenue from each student. "INVESTools has been committed to educating investors since 1983" said Lee K. Barba, Chairman and CEO of INVESTools. "With over 80% of our sales transaction volume originating from the purchase of our continuing education products, our students have become among the most confident, active and knowledgeable individual investors in the market. With the majority of our continuing education programs based on options strategies, our students have been demanding a seamless education to the execution learning experience in both stock and options securities. This merger creates that student experience for the first time." Terms of the Transaction -- thinkorswim shareholders will receive 50% of merger consideration in cash, and 50% in stock, representing approximately $170 million in cash and 19.1 million IEDU common shares; -- JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. will provide INVESTools a senior secured term loan of $125 million to fund a portion of the cash transaction and will also provide an unfunded committed senior secured revolving credit facility of $25 million; -- Following the transaction, thinkorswim shareholders will have a 30% ownership stake in INVESTools; -- thinkorswim will receive two seats on an expanded eight- member INVESTools' Board of Directors; -- thinkorswim employees will be eligible to receive a $20 million retention pool that will be paid over 3 years and 2.2 million INVESTools options vesting over 4 years, of which 50% will be at the market price at transaction closing, and 50% will be at 150% of the market price at closing. About INVESTools INVESTools Inc. -- http://www.investools.com -- offers and provides educational products and services. * * * At June 30, 2006, the Company's balance sheet showed $54,242,000 in stockholders' deficit compared to a $23,739,000 stockholders' deficit at December 31, 2005. IRIDIUM SATELLITE: Names Matthew J. Desch as New CEO ---------------------------------------------------- Iridium Satellite LLC has named Matthew J. Desch as Chairman and Chief Executive Officer of the company. "We are delighted to have Matt join as our new CEO," said Dan Colussy, Chairman of Iridium Holdings LLC. "He brings more than 26 years of directly relevant wireless and telecom experience to our company, providing the ideal background to oversee our continued double-digit growth, multiple new product and service introductions, and the development of our next-generation constellation." Mr. Colussy said that Desch will replace him as CEO of Iridium Satellite. Additionally, Mr. Desch will become CEO of Iridium Holdings, the parent of Iridium Satellite, while Mr. Colussy will remain Chairman of Iridium Holdings. "I am excited to lead the Iridium team as it unleashes the full potential of this unique global network," Mr. Desch said. "Iridium's evolution from a handheld voice service to a full suite of voice and data solutions has impressed upon me the potential to become the world's most robust, pervasive and fully-integrated global communications network. I look forward to leading Iridium to that level." Mr. Desch was most recently CEO of New Jersey-based Telcordia Technologies, Inc., a supplier of software and services to the telecommunications industry. He was instrumental in moving Telcordia into new wireless and international markets, and spinning off the company to private equity from SAIC, Inc. Prior to Telcordia, Mr. Desch spent 13 years at Nortel Networks, leaving in 2000 as President, Global Service Providers and responsible for Nortel's business in Europe and Asia. Active in the wireless industry with Nortel since 1990, he was President of Nortel's fast growing Wireless Networks division from 1995 to 1999, leading its growth from $2 billion to more than $4.5 billion in annual revenue. Mr. Desch has served on the boards of several industry associations including the International Association For The Wireless Telecommunications Industry and the Personal Communications Industry Association. He served as Chairman of the Wireless Foundation and was a member of the executive board of The Alliance for Telecommunications Industry Solutions. An active industry executive, Mr. Desch is Chairman of the Board of Airspan Networks and is a board member of Starent Networks. He previously served on the boards of Flarion Technologies and SAIC, as well as numerous other private and public companies. Mr. Desch began his career in software development with Bell Laboratories, which became Lucent Technologies. He has a BS in Computer Science from The Ohio State University and an MBA from University of Chicago. About Iridium Iridium Satellite LLC -- http://www.iridium.com/-- is the only provider of truly global satellite voice and data solutions with complete coverage of the earth (including oceans, airways and Polar Regions). Iridium delivers essential communications services to and from remote areas where no other form of communication is available. The Iridium constellation consists of 66 low-earth orbiting, cross-linked satellites and has multiple in-orbit spares. The constellation operates as a fully meshed network and is the largest commercial satellite constellation in the world. The company also designs, builds and sells its services, products and solutions through a worldwide network of more than 100 partners. * * * As reported in the Troubled Company Reporter on July 31, 2006, Standard & Poor's Ratings Services assigned its bank loan and recovery ratings to the $210 million secured bank financing of Iridium (B-/Negative/--). The Company's $170 million first-lien loan is rated 'B-', the same as the corporate credit rating on Iridium, with a recovery rating of '3', indicating an expectation for meaningful (50%-80%) recovery of principal following a payment default. The $40 million second-lien term loan is rated 'CCC', with a recovery rating of '5', indicating the expectation for negligible (0%-25%) recovery of principal following a payment default. As reported in the Troubled Company Reporter on June 22, 2006, Moody's Investors Service assigned a B3 Corporate Family Rating and SGL-2 speculative grade liquidity to Iridium Satellite. As well, Moody's assigned a B3 first priority senior secured and a Caa1 second priority senior secured rating to the company's prospective bank facility, subject to review of final documentation. This is the first time ratings have been assigned to Iridium. The outlook is stable. ISLE OF CAPRI: Earns $9 Million for the Quarter Ended July 30 ------------------------------------------------------------- Isle of Capri Casinos, Inc., has filed its financial report, reflecting the consolidated operations of all its subsidiaries, for the quarter ended July 30, 2006 on Form 10-Q with the Securities and Exchange Commission. Results for the Isle-Vicksburg and the Isle-Bossier City have been classified as discontinued operations. Gross revenues for the fiscal quarter ended July 30, 2006 were $332 million, compared to gross revenues for the fiscal quarter ended July 24, 2005 of $292.3 million. The Company's net income for the quarter ended July 30, 2006 was $9 million, versus net income of $4 million for the comparable quarter in 2005. Casino revenue increased by $33.3 million, or 13.6 %, compared to the fiscal quarter ended July 24, 2005, with a large increase in revenues from Isle-Biloxi due to the limited competition in the market. Isle-Natchez showed an increase in revenues due to population shifts from eastern Louisiana. Room revenue increased $4.4 million, or 42.8%, compared to the fiscal quarter ended July 24, 2005, primarily resulting from the increased capacity at Isle-Biloxi, Colorado Central Station and Isle-Boonville. Pari-mutuel commissions earned at Pompano Park in Florida for the fiscal quarter were down a total of $200,000, or 4.1%. Food, beverage and other revenues increased by $2.2 million, or 6.7%, primarily attributable to an increase at Isle-Biloxi. Total current assets at July 30, 2006 stood at $471 million, with total current liabilities of $228 million, of which current maturities of long term debt was $8 million and accounts payable was $45 million. Cash and cash equivalents and marketable securities, at July 30, 2006 was $116 million compared to $138.9 million at April 30, 2006, the end of its last fiscal year. In addition, as of July 30, 2006, the Company had $317.8 million of capacity under lines of credit and available term debt which consisted of $292.2 million in unused credit capacity under the revolving loan commitment on its senior secured credit facility, $21.6 million of unused credit capacity under the Isle-Black Hawk's senior secured credit facility and $4 million under other lines of credit and available term debt. During the three months ended July 30, 2006, net borrowings on the Company's senior secured credit facility was $41.6 million and the Isle-Black Hawk made net borrowings $3.3 million under the Isle-Black Hawk's senior secured credit facility. Investing Activities The Company made $80.7 million in cash expenditures for property and equipment during the three months ended July 30, 2006, including $27.7 million in construction costs related to the Isle- Biloxi casino reconstruction following Hurricane Katrina. The Company signed a development agreement with the City of Bettendorf pursuant to which it will construct a new 250-room Isle hotel, additional parking, a Kitt's Kitchen restaurant, and an expansion of the existing buffet. The City of Bettendorf agreed to construct a 50,000 square foot convention center adjacent to the Company's facility, which will be managed by Isle-Bettendorf. The cost of the project is approximately $45 million and the new hotel is scheduled to open in the late spring of 2007. The Company agreed, in June 2005, to a $43 million project with the City of Davenport to build a 180-room hotel and rooftop restaurant, and the City of Davenport will be constructing a 500 plus space parking ramp and provide funding to realign the Company's casino with the new hotel facility. The project is scheduled to open 18-20 months after all permits and approvals are received. The Company is also constructing a slot machine and entertainment area at Pompano Park adjacent to the existing grandstand at a cost of $155.5 million with slot machine gaming anticipated to commence in early 2007. The statute authorizes Pompano Park to install and operate up to 1,500 slot machines at its facility 365 days per year, 16 hours per day. The Company also disclosed construction of a 35,000 square foot single level casino with 1,300 gaming positions, three restaurants, a 200-room hotel and 1,000 parking spaces in Waterloo, Iowa, which it expects to open in late spring of 2007 at a total cost of approximately $139.5 million. The Company further disclosed plans for an $85 million expansion project at our Kansas City, Missouri property. As of July 30, 2006, $1.4 million was spent on the project. The Company entered into an agreement to develop and operate an Isle of Capri-themed casino in a commercial leisure complex currently under development in Coventry, England. Total project costs are estimated to be $55 million. As of fiscal quarter end of July 30, 2006, $32.7 million was spent on the Coventry project. Completion of the casino at the RICOHTM Arena Coventry is estimated to be in early 2007. The Company signed a casino management and related development and option agreements with resort developer Eighth Wonder to manage the casino included in Eighth Wonder's proposal for a new integrated resort complex in Singapore. Subsequent to the end of the first quarter of fiscal year 2007, it expensed $2 million related to the agreements. Based in Biloxi, Miss., Isle of Capri Casinos, Inc. (Nasdaq: ISLE) -- http://www.islecorp.com/-- a developer and owner of gaming and entertainment facilities, operates 16 casinos in 14 locations. The Company owns and operates riverboat and dockside casinos in Biloxi, Vicksburg, Lula and Natchez, Miss.; Bossier City and Lake Charles (two riverboats), La.; Bettendorf, Davenport and Marquette, Iowa; and Kansas City and Boonville, Mo. The Company also owns a 57% interest in and operates land-based casinos in Black Hawk (two casinos) and Cripple Creek, Colorado. Isle of Capri's international gaming interests include a casino that it operates in Freeport, Grand Bahama, and a 2/3 ownership interest in casinos in Dudley, Walsal and Wolverhampton, England. The company also owns and operates Pompano Park Harness Racing Track in Pompano Beach, Fla. * * * Moody's Investors Service confirmed, effective Feb. 14, 2006, Isle of Capri, Inc.'s Corporate family rating at Ba3; $400 million senior secured revolver due 2010 at Ba2; $300 million senior secured term loan due 2011 at Ba2; $500 million 7% senior subordinated debt due 2014 at B2; and $200 million 9% senior subordinated debt due 2012 at B2. Moody's assigned a negative ratings outlook. Standard & Poor's Ratings Services, effective Dec. 22, 2005, affirmed its ratings on Isle of Capri Casinos Inc., including its 'BB-' corporate credit rating. At the same time, all ratings were removed from CreditWatch with negative implications where they were placed on Sept. 1, 2005. S&P said the outlook is negative. IVOW INC: Net Loss Increases to $589,248 in Quarter Ended June 30 ----------------------------------------------------------------- iVOW, Inc.'s net loss for the three months ended June 30, 2006 increased to $589,248 from net loss of $484,947 in the same quarter last year. Revenues for the current quarter increased to $746,110 compared to revenues of $252,916 in the three months ended June 30, 2005. The Company's balance sheet at June 30, 2006 showed total assets of $4,284,191, total liabilities of $1,173,351, and total stockholders' equity of $3,110,840. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?120e Going Concern Doubt As reported in the Troubled Company Reporter on April 12, 2006, J.H. Cohn LLP in San Diego, California, expressed substantial doubt about iVOW, Inc.'s ability to continue as a going concern after auditing its financial statements for the fiscal year ended Dec. 31, 2005. The auditing firm pointed the Company's recurring net losses and negative net cash flows from operating activities since inception. Based in San Diego, California, iVow, Inc. (NASDAQ: IVOW) -- http://www.ivow.com/-- provides program management, healthcare services, operational consulting and clinical training services to employers, payors, physicians and hospitals involved in the medical and surgical treatment of the chronic and morbidly obese. The Company also provides specialized vitamins to patients who have undergone obesity surgery. J.P. MORGAN: S&P Puts Class B-5 Loan's B Rating on Negative Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' rating on class B-5 from J.P. Morgan Mortgage Trust 2005-S1 on CreditWatch with negative implications. At the same time, the remaining ratings from this series, and from three other J.P. Morgan Mortgage Trust transactions, were affirmed. The CreditWatch placement of the rating on class B-5 from J.P. Morgan Mortgage Trust 2005-S1 reflects Standard & Poor's expectations that additional losses may result from the delinquent mortgage loans. As of the August 2006 distribution, total delinquencies for series 2005-S1 were 4.93%, with 2.10% categorized as severely delinquent (90-plus days, foreclosure, and REO). The affirmations were based on credit support percentages that are sufficient to maintain the current ratings. Credit support for these transactions is provided by subordination. Standard & Poor's will continue to closely monitor the performance of class B-5 from J.P. Morgan Mortgage Trust 2005-S1. If delinquent loans translate into realized losses, the rating agency will downgrade the class. In contrast, if delinquencies decrease without causing significant additional losses, the rating agency will affirm the rating and remove it from CreditWatch negative. As of the August 2006 remittance date, total delinquencies ranged from 0.30% (series 2004-A5) to 4.93% (series 2005-S1). None of the pools have experienced any losses. The outstanding pool balances ranged from 63.34% (series 2005-S1) to 78.88% (series 2005-A1) of their original sizes. The collateral for these transactions consists of prime adjustable-rate and conventional mortgage loans secured by first liens on primarily one- to four-family residential properties. Rating Placed on Creditwatch Negative: J.P. Morgan Mortgage Trust Series Class To From ------ ----- -- ---- 2005-S1 B-5 B/Watch Neg. B Ratings Affirmed: J.P. Morgan Mortgage Trust Series Class Rating ------ ----- ------ 2004-A5 1A1,1A2,1A3,2A1,2A2,2A3,2A4,3A1,4A1,4A2 AAA 2004-A5 4A3,4A4,4A5,4A6,5A1 AAA 2004-A5 B1 AA 2004-A5 B2 A 2004-A5 B3 BBB 2004-A5 B4 BB 2004-A5 B5 B 2005-A1 1A1,2A1,2A2,2A3,2A4,3A1,3A2,3A3 AAA 2005-A1 3A4,3A5,3A6 AAA 2005-A1 4A1,4A2,5A1,5A2,5A3,6T1 AAA 2005-A1 1B1,TB1 AA 2005-A1 1B2,TB2 A 2005-A1 1B3,TB3 BBB 2005-A1 1B4,TB4 BB 2005-A1 1B5,TB5 B 2005-A2 1A1,1A2,2A1,2A2,3A1,3A2,3A3,3A4,4A1 AAA 2005-A2 5A1,5A2,5A3,6A1,6A2,7CB1,7CB2,8A1,9A1 AAA 2005-A2 1B1 AA 2005-A2 1B2 A 2005-A2 1B3 BBB 2005-A2 1B4 BB 2005-A2 1B5 B 2005-S1 1A1,1A2,1AX,2A1,2A2,2A3,2A4 AAA 2005-S1 2A5,2A6,2A7,2A8,AP AAA 2005-S1 B1 AA 2005-S1 B2 A 2005-S1 B3 BBB 2005-S1 B4 BB 2005-S1 B5 B JAMES VANN: Case Summary & Six Largest Unsecured Creditors ---------------------------------------------------------- Debtor: James H. Vann 18 Laguna Madre Drive Laguna Vista, TX 78578 Bankruptcy Case No.: 06-10606 Chapter 11 Petition Date: September 19, 2006 Court: Southern District of Texas (Brownsville) Judge: Richard S. Schmidt Debtor's Counsel: Christopher Lee Phillippe, Esq. Phillippe Law Firm, P.C. 806 Morgan Boulevard, Suite J Harlingen, TX 78550 Tel: (956) 440-0061 Fax: (956) 440-0884 Total Assets: $550,000 Total Debts: $2,074,144 Debtor's Six Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Randall Crane Potential Lawsuit $640,000 201 South Sam Houston San Benito, TX 78586 Michael J. Rogers, Lawsuit $412,000 Richard A. Oats, et. al. c/o Daniel G. Rios 2724 West Canton Edinburg, TX 78539 Robert Sheline Lawsuit $240,000 Martinez, Barrera and #2006-06-2877-D Martinez, LP 1201 East Van Buren Street Brownsville, TX 78520 Harveys Tahoe Management Loss $150,000 Harrah's Casino Hotel Lake Tahoe Lake Tahoe, NV BMW Financial Services Purchase Money $80,000 P.O. Box 3608 Dublin, OH 43016 Frost Bank Personal Line of Credit $51,000 Line of Credit 100 West Houston Street San Antonio, TX 78205 LASELL COLLEGE: Moody's Affirms Ba1 Rating on $9.6 Million Bonds ---------------------------------------------------------------- Moody's Investors Service affirms Lasell College's Ba1 long-term rating. The outlook for the rating remains stable. The rating applies to $9.6 million of Series A bonds issued through the Massachusetts Health and Educational Facilities Authority. Moody's review is in conjunction with the planned issuance of the Series 2006 bonds, which will be supported by a letter of credit and will not carry a rating based on Lasell's underlying credit quality. The Series 2006 bonds will refund all or portions of the Series 2001 and 2004 bonds, as well as a small mortgage note. The Series 2006 bonds will provide approximately $8.3 million in new money funds for the construction of a residence hall. Interest Rate Derivatives During 2004 Lasell entered into an interest rate swap agreement in the amount of $4 million related to the Series 2004 bonds and expiring in 2007. The College is a fixed rate payor under the agreement and receives a variable rate. The College also expects to enter into an additional swap agreement in relation to the Series 2006 bonds to be issued within the next several weeks under which it will pay a fixed rate in exchange for variable rate payments based on a percentage of LIBOR, except for a small portion of the 2001 refunding which will be based on BMA. Strengths: * Continued growth in enrollment (1,230 FTE in fall 2006) and student demand (63.5% selectivity), demonstrating further progress in solidifying the College's role in an attractive suburban Boston environment; enrollment is expected to grow more modestly in the future as capacity for residential students is limited * Strong improvements in operating performance (average operating margin FY03-05 of 5.7%), stemming from healthy growth in net tuition per student ($10,386 based on draft FY2006 financial statements), and prudent budgeting practices *Although still limited, liquidity is expected to show substantial improvement with the recent announcement of a $5 million bequest ($4.7 million in expendable financial resources in FY2005). Challenges: * Limited financial resources relative to debt obligations (expendable financial resources to debt of 0.38 based on draft FY2006 and with pro-forma debt after 2006 issue) * Strong relationship with Lasell Village, a continuing care retirement community, including shared corporate parent and a management agreement under which Lasell College operates Lasell Village; Lasell Village, despite strong occupancy, represents a much higher risk enterprise than the College, somewhat limiting the credit rating of the College, especially given the approximately $21 million of debt of the Village, which Moody's treats as an indirect debt of the College; the College has no legal obligation to pay the debt of Lasell Village Lasell announced earlier this year the receipt of a $5 million bequest. The funds will be used for capital improvements, but will likely relieve other funds from being spent in this area, allowing for substantial improvement in the limited liquidity of the College. Despite the relatively high occupancy of Lasell Village, Moody's treats the Village and its debt as indirectly associated with the College. Moody's treatment of the debt as indirect debt of the College is based upon: -- the ongoing management agreement whereby the College operates the Village, -- the shared corporate parent of both organizations, -- the shared, although limited, overlap of trustee members, and, -- the high degree of integration between the mission and niche of both organizations, including the strong presence of elder and geriatric programs at the College and the educational requirement for residency at the Village. Outlook Moody's stable outlook reflects the continued strengthening of the College's market position, operating performance and liquidity, restrained by a competitive market environment and the relationship with a much higher risk organization (Lasell Village). If the College is able to sustain liquidity growth and strong operating performance, there is potential for an improving outlook over the next several years. What could change the rating - up * substantial growth in financial resources; * sustained strong cash flow margins; and * limited additional debt. What could change the rating - down * rapid decline in liquidity; and * need or decision to directly support Lasell Village. Key data and ratios (Fiscal year 2005 financial data, fall 2006 enrollment data) -- Total Enrollment: 1,230 full-time equivalent students -- Selectivity: 63.5% -- Matriculation: 23.3% -- Total Financial Resources: $9.5 million -- Total Pro-Forma Direct Debt: $27.9 million -- Total Comprehensive Debt: $49.6 million -- Expendable Resources to Direct Debt: 0.17x -- Expendable Resources to Operations: 0.21x -- Three-Year Average Operating Margin: 5.7% -- Operating Cash Flow Margin: 20.9% LONDON FOG: DJM & Hilco Joint Venture to Facilitate Sale of Leases ------------------------------------------------------------------ The Honorable Gregg W. Zive of the U.S. Bankruptcy Court for the District of Nevada in Reno authorized the London Fog Group, Inc., nka PTI Holding Corp., and its debtor-affiliates to employ a joint venture comprising of DJM Asset Management, LLC, and Hilco Real Esate, LLC, to facilitate the sale and assignment of certain leases. The Debtors have sold a substantial portion of their assets including the inventory that is currently located in their factory outlet stores. Although the Debtors want to utilize certain leases, many of the factory outlet store leases will serve no useful purpose to the Debtors once assets are sold and related operations wind down. The joint venture will: a. develop and design a marketing program for the sale, assignment, or termination of the leases including soliciting offers from prospective purchasers and advising the Debtors whether to accept certain offers or settlements; b. coordinate and organize the bidding procedures and sale process and provide any other services necessary in connection with any transactions; and c. negotiate, for the benefit of the Debtors, waivers or reductions of prepetition cure amounts, postpetition claims, and claims under Section 502(b)(6) of the Bankruptcy Code with respect to the leases. The Debtors' Real Estate Consulting Agreement with the joint venture will not constitute an assumption or assignment of any lease. In the event, however, that a landlord consents to the transaction, that transaction may be accomplished by stipulation of the landlord, the Debtors, the Committee, and the secured creditors without further notice to any other party. Should a party object to the transaction, the Debtors will move the Court for the transaction after notice and hearing. Under the Real Estate Consulting Agreement, DJM, Hilco, and the Debtors agree that: a. the joint venture will post a $50,000 letter of credit for the benefit of the Debtors; b. the LC may be drawn upon by the Debtors if the aggregate net proceeds from the sale, assignment, or termination, negotiated rejection, or other disposition of the leases, including the sale of designation rights does not equal or exceed $50,000 after the disposition of all leases; c. any drawing from the LC will be equal to the amount by which the aggregate net proceeds after the final disposition of all the leases is less than $50,000 up to the full amount of the LC. The Debtors recognize that the joint venture has not guaranteed any recovery on the disposition of the leases other than as provided by the ability of the Debtors to draw upon the LC; and d. at a time when the aggregate net proceeds exceed $50,000, the Debtors will release the LC, and it will be terminated. The joint venture and the Debtors will be entitled to payment of the excess amount. The Debtors have agreed to pay the joint venture on: a. sale of leaseholds 1. The Debtors will retain the first $50,000 of aggregate net proceeds; 2. The joint venture will get 10% of the aggregate net proceeds between $50,000 and $500,000; 3. The joint venture will get 20% of the aggregate net proceeds between $500,000 and $1,000,000; and 4. The joint venture will get 30% of the aggregate net proceeds over $1,000,000; b. reduction in bankruptcy claims 1. The joint venture will earn 4% of the reduced or waived cure amount for any lease assumed by the Debtors; and 2. The joint venture will earn 4% of the savings that would have been payable to the landlord for any lease rejected by the Debtors; c. additional consulting services The joint venture will bill $300 per hour for additional consulting services performed at the Debtors' specific written requests that are not provided in the Real Estate Consulting Agreement; d. expenses and disbursements 1. The joint venture will not be responsible for any costs and legal expenses incurred by the Debtors in connection with their retention of the joint venture; and 2. The joint venture will bear all marketing and out-of-pocket expenses incurred in connection with its services; e. exclusivity The joint venture will have the sole and exclusive authority to perform all services outlined and deal with the disposition of all the leases. All inquiries regarding the leases will be directed to the joint venture. To the best of the Debtors' knowledge, DJM and Hilco do not have any connection with the Debtors, creditors, and any other parties- in-interest. About London Fog Headquartered in Seattle, Washington, London Fog Group, Inc. -- http://londonfog.com/-- nka PTI Holding Corp. designs and retails the latest styles in jackets and other professional apparel. The company and six of its affiliates filed for chapter 11 protection on March 20, 2006 (Bankr. D. Nev. Case No. 06- 50146). Stephen R. Harris, Esq., at Belding, Harris & Petroni, Ltd., represents the Debtors in their restructuring efforts. Avalon Group, Ltd., serves as the Debtors' financial advisor. Aron M. Oliner, Esq., at Buchalter Nemer, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million to $100 million. In a filing with the U.S. Securities and Exchange Commission, Iconix Brand Group, Inc., disclosed that on Aug. 28, 2006, it completed the acquisition of the London Fog trademarks and certain related intellectual property assets from London Fog Group Inc. for $30.5 million in cash and 482,423 shares of the Registrant's common stock. LONDON FOG: Panel Taps McDonald Carano as Substitute Nev. Counsel ----------------------------------------------------------------- The Honorable Gregg W. Zive of the U.S. Bankruptcy Court for the District of Nevada in Reno authorized the Official Committee of Unsecured Creditors in London Fog Group, Inc., nka PTI Holding Corp.'s bankruptcy case to retain McDonald Carano Wilson LLP as its Nevada and conflicts counsel, nunc pro tunc to Sept. 6, 2006. The Court approved the Committee's request to retain Beckley Singleton, Chartered, as its Nevada and conflicts counsel on March 28, 2006. Kaaran Thomas, Esq., the lead counsel for Beckley Singleton transferred to McDonald Carano on April 14, 2006. McDonald Carano will divide responsibilities with Buchalter Nemer, PC, the Committee's lead bankruptcy counsel to avoid duplication of services. McDonald Carano will: a. advise the Committee with respect to its powers and duties with special emphasis on local rules and procedures; b. attend meetings and negotiate with representatives of the Debtor, creditors, and other parties-in-interest and advise and consult on the conduct of the case, including all of the legal and administrative requirements of operating in chapter 11; c. take all necessary action to protect and preserve the interests of the creditors of the Debtor's estate, including the prosecution of actions on their behalf, the defense of any actions commenced against those estates, negotiations concerning all litigation in which the Debtor may be involved, and objections to claims filed against the estate; d. prepare, on behalf of the Committee, all motions, applications, answers, orders, reports, and papers necessary to the administration of the estates; e. appear before the Bankruptcy Court and any appellate courts and protect the interest of the Committee and its constituents before such courts; and f. perform all other necessary legal services and provide all other necessary legal advise to the Committee in connection with the Debtor's bankruptcy case. Ms. Thomas, a partner at McDonald Carano, disclosed that she has agreed to reduce her hourly rate to $400 for this engagement. The other professionals who will work on this case are: Professional Designation Hourly Rate ------------ ----------- ----------- Sylvia Harrison, Esq. Partner $350 Michael A.T. Pagni, Esq. Partner $325 Ryan Bellows, Esq. Associate $185 Ericka Maiss Paralegal $130 Ms. Thomas assured the Court that McDonald Carano does not hold nor represent any interest materially adverse to the Debtors and is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. About London Fog Headquartered in Seattle, Washington, London Fog Group, Inc. -- http://londonfog.com/-- nka PTI Holding Corp. designs and retails the latest styles in jackets and other professional apparel. The company and six of its affiliates filed for chapter 11 protection on March 20, 2006 (Bankr. D. Nev. Case No. 06- 50146). Stephen R. Harris, Esq., at Belding, Harris & Petroni, Ltd., represents the Debtors in their restructuring efforts. Avalon Group, Ltd., serves as the Debtors' financial advisor. Aron M. Oliner, Esq., at Buchalter Nemer, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million to $100 million. In a filing with the U.S. Securities and Exchange Commission, Iconix Brand Group, Inc., disclosed that on Aug. 28, 2006, it completed the acquisition of the London Fog trademarks and certain related intellectual property assets from London Fog Group Inc. for $30.5 million in cash and 482,423 shares of the Registrant's common stock. MCCOMBS REALTY: Posts $112,000 Net Loss in Quarter Ended June 30 ---------------------------------------------------------------- McCombs Realty Partners incurred a $112,000 net loss for the three months ended June 30, 2006, as compared to net loss of $162,000 for the same period in the prior year. For the six months ended June 30, 2006, the Partnership incurred a net loss of $245,000, as compared to a $268,000 loss for the six months ended June 30, 2005. The decrease in net loss for both periods is due to an increase in total revenues partially offset by an increase in total expenses. The Partnership generated $379,000 of total revenues for the quarter ended June 30, 2006, compared to $298,000 generated for the same period in the prior year. Total revenues increased in the three months ended June 30, 2006 due to increases in rental and other income. The Partnership's balance sheet at June 30 showed $2,139,000 in total assets and $6,616,000 in total liabilities, resulting in a $4,477,000 partners' deficit. At June 30, 2006, the Partnership had cash and cash equivalents of approximately $44,000 as compared to approximately $152,000 at June 30, 2005. The increase in cash and cash equivalents of approximately $28,000, from Dec. 31, 2005, is due to approximately $64,000 and $54,000 of cash provided by financing and operating activities, respectively, partially offset by approximately $90,000 of cash used in investing activities. A full-text copy of the Partnership's quarterly report is available for free at http://researcharchives.com/t/s?1210 Going Concern Doubt Ernst & Young, LLP, expressed substantial doubt about McCombs' ability to continue as a going concern after auditing the Partnership's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's inadequate liquidity and recurring operating losses. McCombs Realty Partners' investment property consists of one apartment complex located at Lakewood at Pelham, in Greenville, South Carolina. MICHAEL EZZO: Case Summary & 15 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Michael Ezzo 36 Cheyenne Crescent Whitesboro, NY 13492 Bankruptcy Case No.: 06-62288 Chapter 11 Petition Date: September 20, 2006 Court: Northern District of New York (Utica) Debtor's Counsel: Richard L. Weisz, Esq. Hodgson Russ LLP 677 Broadway Albany, NY 12207 Tel: (518) 465-2333 Total Assets: $2,137,653 Total Debts: $1,759,380 Debtor's 15 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ NYS Department Taxation & $450,000 Finance ($200,000 Sales Tax Compliance Div. Secured) P.O. Box 22021 Albany, NY 12201 Internal Revenue Service Personal Income Tax; $180,000 Department of the Treasury Withholding Tax Andover, MA 05501 Bridge Street Enterprises, $67,491 Inc. c/o R. John Clark, Esq. Hancock & Estabrook, LLP 1500 Mony Tower I P.O. Box 4976 Syracuse, NY 13221 Internal Revenue Service $57,000 Department of the Treasury (1,000,000 Andover, MA 05501 secured) Great Lakes Borrower Student Loan $22,000 Services P.O. Box 3059 Milwaukee, WI 53201 Sears Gold Master Card $13,540 P.O. Box 183082 Columbus, OH 43218 Discover Card $12,297 P.O. Box 15192 Wilmington, DE 19850 MBNA $10,820 P.O. Box 15137 Wilmington, DE 19850 American Express $6,736 P.O. Box 360001 Ft. Lauderdale, FL 33336 J.C. Penney $6,265 P.O. Box 961425 El Paso, TX 79998 Chase $5,472 P.O. Box 100044 Kennesaw, GA 30156 Wells Fargo Card Services, $1,785 Inc. Payment Remittance Center P.O. Box 6426 Carol Stream, IL 60197 Kaufmans/Macy's $832 P.O. Box 689195 Des Moines, IA 50368 Dept. of MED SVC GRP $748 c/o Medbest MGMT. P.O. Box 4848 Syracuse, NY 13221 Onondaga Healthcare $318 Recoveries 447 E. Washington St. Syracuse, NY 13202 MIRANT CORP: Mirant Delta & Vogt-NEM Want Claims Dispute Resolved ----------------------------------------------------------------- New Mirant asks The Honorable D. Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas to approve a Settlement Agreement and Release between Mirant Delta and Vogt-NEM. The salient terms of the Settlement Agreement and Release are: (a) Vogt-NEM will have an allowed administrative claim for $1,063,060 pursuant to Section 503 of the Bankruptcy Code, which is comprised of: (1) $844,000 for the purchase of the SCR Catalyst; (2) $60,000 for storage of the SCR Catalyst through July 31, 2006; (3) $137,060 for the purchase of the CO Catalyst; and (4) $21,500 for storage of the CO Catalyst through July 31, 2006; (b) All of Vogt-Nem's claims against any of the Debtors, except for the Allowed Administrative Claim and the Allowed Prepetition Claim, are disallowed in their entirety; (c) Vogt-NEM acknowledges that the Purchase & Sale Agreement has been assumed pursuant to Section 365 of the Bankruptcy Code, and there were no defaults, which must be cured as a condition to the assumption of the Purchase & Sale Agreement. Vogt-NEM waives all arguments and objections to the assumption of the Purchase & Sale Agreement; (d) Vogt-NEM agrees to the assignment of the Purchase & Sale Agreement to PG&E in connection with the sale of the Contra Costa Plant; and (e) Vogt-NEM will continue to store the Equipment for the benefit of PG&E at a rate of $3,000 per month for storage of the SCR Catalyst and $1,150 monthly for the CO Catalyst. Vogt-NEM agrees that PG&E will be solely liable for all storage fees arising subsequent to the assignment of the Purchase & Sale Agreement. Mirant Delta, LLC, as successor-in-interest to Mirant Bay Area Procurement, LLC, formerly known as Bay Area Power Services, LLC, and Vogt-NEM, Inc., want to resolve their disputes over certain prepetition claims and an administrative claim arising from an Agreement for the Purchase and Sale of Equipment dated Oct. 1, 2000. Craig H. Averch, Esq., at White & Case LLP, in Miami, Florida, relates that under the Purchase and Sale Agreement, Vogt-NEM agreed to deliver between January and May 2002 certain equipment -- SCR Catalyst and CO Catalyst -- to Mirant Delta for the construction of the Debtor's Contra Costa power facility in Antioch, California. The delivery of the equipment was stalled when Mirant Delta issued Change Order No. 12 to the Purchase & Sale Agreement, which delayed the delivery until November 2004 and extended the warranty period, Mr. Averch says. Pursuant to the Debtors' Plan of Reorganization, the New Mirant Entities assumed the Purchase & Sale Agreement with a $0 cure amount. Vogt-NEM did not object to the assumption or to the cure amount, Mr. Averch notes. On Jan. 24, 2006, Vogt-NEM filed an administrative expense claim for $997,961 arising from the Purchase & Sale Agreement. New Mirant objected to Vogt-NEM's administrative claim on the grounds that the Claimant failed to provide supporting evidence for its claim. In February 2006, Vogt-NEM provided the Debtors with additional information to support the administrative claim. Mr. Averch informs Judge Lynn that Mirant Delta is currently negotiating the sale of the Contra Costa Plant to a third party purchaser, Pacific Gas & Electric Company. Mirant Delta anticipates that the sale will be finalized in September or October 2006. According to Mr. Averch, PG&E has asked Vogt-NEM to: * assign the Purchase & Sale Agreement to it in connection with the sale of the Contra Costa Plant; and * continue to store the Equipment until the Purchaser requests its delivery. PG&E has agreed to reimburse Mirant Delta for the remaining cost of the Equipment. Mr. Averch adds that prior to the filing of the administrative expense claim, Vogt-NEM asserted Claim Nos. 7313, 7314, 7315, 7316, 8042 and 8043 against various of the Debtors, but none of which related to the Purchase & Sale Agreement. On February 6, 2006, New Mirant and Vogt-Nem stipulated to resolve the Prepetition Claims, which granted the Claimant an allowed Mirant Debtor Class 3 Unsecured claim against: (i) Mirant Sugar Creek, LLC, for $277,000; and (ii) Mirant Las Vegas, LLC, for $306,000. A full-text copy of the Settlement Agreement and Release is available for free at: http://ResearchArchives.com/t/s?11f1 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. 104; 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. 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. MIZAC PROPERTIES: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: MiZac Properties, LP 7532 Courtney Circle Sachse, TX 75048 Bankruptcy Case No.: 06-41537 Debtor-affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Jeffrey Hambrice DDS PA 06-41536 Chapter 11 Petition Date: September 20, 2006 Court: Eastern District of Texas (Sherman) Judge: Brenda T. Rhoades Debtor's Counsel: Eric A. Liepins, Esq. Eric A. Liepins, P.C. 12770 Coit Road, Suite 1100 Dallas, TX 75251 Tel: (972) 991-5591 Fax: (972) 991-5788 Estimated Assets Estimated Debts ---------------- --------------- MiZac Properties, LP $1 Million to $1 Million to $10 Million $10 Million Jeffrey Hambrice DDS PA Less than $50,000 $100,000 to $500,000 The Debtors did not file a list of their 20 largest unsecured creditors. MORTGAGE ASSISTANCE: June 30 Equity Deficit Increased to $1.6 Mil. ------------------------------------------------------------------ Mortgage Assistance Center Corporation's balance sheet at June 30, 2006 showed $2,701,962 in total assets and $4,317,420 in total liabilities, resulting to a total stockholders' deficit of $1,615,458. The Company's stockholders' deficit at Dec. 31, 2005 stood at $1,219,524. The Company's balance sheet at June 30, 2006 also showed negative working capital with total current assets of $2,566,558 and total current liabilities of $3,676,669. For the three months ended June 30, 2006, the Company incurred an $87,445 net loss on $279,822 in net operating revenues, compared to the $234,219 net loss on net operating revenues of $189,919 in the three months ended June 30, 2005. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?11fc Going Concern Doubt As reported in the Troubled Company Reporter on May 25, 2006, Sutton Robinson Freeman & Co. P.C. in Tulsa, Oklahoma, raised substantial doubt about Mortgage Assistance Center Corporation's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations, and working capital and stockholders' deficiencies. Mortgage Assistance Center Corporation fka Safe Alternatives Corporation of America Inc. buys, sells and manages distressed real estate and non-performing mortgages secured by real estate in the secondary market in the United States through its subsidiary, Mortgage Assistance Corporation. MAC purchases non-performing, charged-off, sub-prime first and second lien mortgages. Those mortgages are secured by real estate, and are typically 90 days to two years past due at the time MAC buys them. Those mortgages are purchased in pools or portfolios of assets from lending institutions and usually at discounts to the outstanding principal balance. NANOBAC PHARMACEUTICALS: Posts $835,460 Net Loss in Second Quarter ------------------------------------------------------------------ Nanobac Pharmaceuticals, Inc., incurred a $835,460 net loss on $37,565 of net revenues for the three months ended June 30, 2006, compared to a $643,769 net loss on $167,988 of revenues in 2005, the Company disclosed in its second quarter financial statements on Form-10QSB filed with the Securities and Exchange Commission. As of June 30, 2006, the Company's accumulated deficit widened to $19.7 million from a $17.3 million deficit at Dec. 31, 2005. At June 30, 2006, the Company's balance sheet showed $338,054 in total current assets and $5.1 million in total current debts, resulting in a working capital deficit of $4.8 million, as compared to a working capital deficit of $3.4 million at Dec. 31, 2005. The $4 million of the $4.8 million working capital deficit is attributable to related party loans from the Company's affiliated entities. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?1215 Going Concern Doubt As reported in the Troubled Company Reporter on April 21, 2006, Aidman, Piser & Company, P.A., expressed substantial doubt about Nanobac Pharmaceuticals Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the company's recurring losses from operations, working capital and net capital deficiencies and its dependent upon continued financing from stockholders and outside investors. Headquartered in Tampa, Florida, Nanobac Pharmaceuticals, Inc., fka American Enterprise.Com, Corporation and its subsidiaries -- http://www.nanobaclabs.com/-- is a research-based lifescience company. The Company's primary business is the study and development of therapeutic and diagnostic technologies related to calcifying nano-particles. NATIONAL ENERGY: Court Allows Lehman's Claim No. 699 for $7.2 Mil. ------------------------------------------------------------------ The Honorable Paul Mannes of the U.S. Bankruptcy Court for the Middle District of Maryland denied National Energy & Gas Transmission, Inc.'s objection and allows Lehman Brothers, Inc.'s Claim No. 699 for $7,217,000. NEGT argues that the Letter Agreement dated Nov. 25, 2002 is subject to rescission as one made under a mutual mistake, and cites the ruling of Gould v. Board of Ed. of the Sewanhaka Central High School Dist., 616 N.E. 2d 142, 146-147 (NY 1993), to support its argument. "But that case has no application here and the court cannot find that the contract is subject to rescission in part because of a mutual mistake of law," Judge Mannes says. He notes that it was only after Lehman substantially performed its work under the Agreement that NEGT looked elsewhere and hired another investment banker, which means that there was an anticipatory breach of contract by NEGT. Although Lehman failed to provide NEGT with a list of entities contacted with respect to any transaction contemplated by the Agreement, the Court finds that NEGT had actual knowledge of the five bids received as a result of Lehman's efforts and that the ultimate purchaser, TransCanada Corp., was among the high bidders. The Court concludes that Lehman's failure to deliver a list did not amount to a forfeiture of its rights to compensation as the delivery of the list was not a condition precedent, but the purpose of the list's delivery was to protect Lehman. The Court also notes that under the Agreement, NEGT agreed that Lehman would be paid for its work on the Gas Transmission Northwest Corporation equity stock sale process if NEGT terminated the engagement with Lehman and then announced the sale of GTN within 12 months of the termination to a purchaser which had initially been brought to NEGT's attention by Lehman. Lehman filed Claim No. 14 on September 3, 2003, as a contingent and unliquidated claim based upon services performed and for damages arising out of Agreement's rejection. On February 24, 2004, Lehman filed Claim No. 699 for $7,217,000 as an amended claim and a liquidated damages claim under the "tail" provision of the Agreement, but NEGT had raised objections to the Claims. NEGT argues that the "tail provision" does not apply because the Agreement to perform services after filing of the bankruptcy case could never be approved by the Court. But the Court notes that the issue for decision is whether Lehman belongs in the pool of creditors paid pro rata for services rendered prior to the filing of a bankruptcy case. The Court says that the effect of rejection of an executory contract under Section 365(g) of the Bankruptcy Code is that of a breach of a contract and a claim arising from the breach is allowed or disallowed as if the claim had arisen immediately before the Petition Date. The fact that the Agreement was no longer in effect is of no significance to the allowance of Claim No. 14, the contingent claim originally filed by Lehman, Judge Mannes says. Claim No. 14 was contingent, because no money was due Lehman unless within 12 months of a termination, an applicable transaction was announced. NEGT also argues that the "tail provision" never became operative because Lehman failed to show that NEGT elected to terminate the Agreement, a condition precedent to its efficacy. NEGT cites In re Alongi, 272 BR 148 (B.C. MD 2001). But the Court notes that, while the Alongi ruling states "rejection of an executory contract, because it constitutes a breach, does not terminate the contract," the ruling also states "the rights and obligations of the parties remain intact because rejection does not change the substantive rights of the parties, while personal service contracts may not be assumed by the trustee under Section 365(c)(1), the party rejecting the agreement remains burdened with the contract obligations." Accordingly, the Court finds that NEGT has not established a valid defense to Lehman's proof of claim as amended. Lehman's Claim relates to an investment banking agreement it entered into with NEGT before NEGT's bankruptcy filing. Under the Investment Banking Agreement, Lehman provided advisory services concerning the potential sale of some of NEGT's assets. As a result of Lehman's statutory conflict and its legal inability to perform under the Agreement, the Debtors had to replace Lehman. On NEGT's bankruptcy filing, the Debtors filed, and subsequently obtained Court approval of, an application under Sections 327(a) and 328(a) of the Bankruptcy Code to employ Lazard Freres and Co., LLC, as their financial advisor and investment banker. In November 2003, Lazard initiated a competitive sale process for the sale of NEGT's equity stock in Gas Transmission Northwest Corporation, formerly known as PG&E Gas Transmission Northwest Corporation. On Feb. 24, 2004, NEGT and TransCanada Corporation entered into a purchase and sale agreement, pursuant to which TransCanada agreed to purchase all of the issued and outstanding shares of capital stock of GTNC for $1,203,000,000 in cash and the assumption of $500,000,000 in debt. On March 2, 2005, the Court granted Lazard's application for allowance of $10,830,593 in fees, including a $9,787,375 success fee for its efforts in the GTNC sale. After the announcement of the sale of GTNC, Lehman pursued claims against the Debtors. Lehman filed Claim No. 14 asserting an unliquidated claim for services performed and for damages arising out of the Debtors' rejection of the Agreement. Lehman also timely filed Claim No. 699 for $7,217,000 as a rejection damages claim under the "tail" provision of the Agreement. This sum allegedly represents the success fee owed to Lehman for the sale of GTNC to TransCanada. Lehman claims that it had contacted TransCanada and introduced it to NEGT for the purpose of facilitating discussions about the purchase of GTNC. 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. 65; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) NATIONAL ENERGY: ET Debtors Say Littleton's Claim Was Filed Late ---------------------------------------------------------------- NEGT Energy Trading - Power, L.P., and NEGT Energy Trading Holdings Corporation assert that Littleton Electric Light Department's Claims should be barred because they were filed on May 27, 2005, more than 14 months after the Jan. 9, 2004 claims bar date. Dennis J. Shaffer, Esq., at Whiteford Taylor & Preston, LLP, in Baltimore, Maryland, says that Littleton attempts to justify its untimely filing by characterizing its Claims as claims for rejection damages, which may arise only from executory contracts. Littleton's claims, however, cannot relate to rejection damages because the relevant contracts were not executory, in that they automatically terminated by their own terms immediately before the ET Debtors' bankruptcy filing, Mr. Shaffer contends. Mr. Shaffer explains that, as safe-harbor contracts, the prepetition Electricity Contracts terminated by their own terms upon the ET Debtors' bankruptcy filing, and the parties did not have executory obligations under the contracts as of the Petition Date. Mr. Shaffer argues that the terminated contracts were not rejected by the ET Debtors' Plan, and Littleton's claims for termination damages do not relate to rejection. The termination damages are prepetition claims for which Littleton should have filed proofs of claim on or before the Bar Date. Moreover, Littleton has significantly inflated its damages claims as compared to what is reflected on the ET Debtors' books and records. 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, the "ET Debtors" -- 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. 65; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) NELNET INC: Moody's Rates $200 Mil. Sub. Debt Securities at Ba1 --------------------------------------------------------------- Moody's Investors Service has assigned a Ba1 rating to the $200 million launch amount of subordinated debt securities being issued by Nelnet, Inc. The rating outlook is stable. The rating considers Nelnet's underlying Baa2 senior unsecured rating, the relative priority of claim of the Securities within the company's capital structure, and certain structural features of the Securities such as optional only interest deferral and the non-cash cumulative nature of interest deferral. The Securities will, in Moody's view, have sufficient equity-like features to allow it to receive basket "D" treatment, i.e. 75% equity and 25% debt, for financial leverage purposes. This basket designation will shift from "D" to "C" in 5 years, will be basket "C" for the next 20 years, then will shift to basket "B" for the next 10 years, and then Basket A for the remaining 20 years. The basket allocation is based on these rankings for the three dimensions of equity: * No maturity: Strong The Securities will have a Scheduled Maturity of 30 years and a Final Repayment Date of 55 years, and will be callable by the issuer at their option at par in year 5. The Securities will also have a legally enforceable Capital Replacement Covenant (Covenant), which obligates Nelnet not to redeem or repurchase the Securities unless it has previously issued qualifying securities, consisting of common stock, rights to acquire common stock, "mandatorily convertible preferred stock", "debt exchangeable into equity", and "qualifying capital securities". This Covenant initially runs in favor of a specified series of Nelnet's indebtedness, other than the Securities. The Covenant includes provisions requiring Nelnet to redesignate a new series of indebtedness if the Initial Covered Debt approaches maturity, becomes subject to a redemption notice or is reduced to less than $100 million in outstanding principal amount, subject to additional procedures. In addition, the replacement security is clearly defined to have equal or greater equity-like characteristics as the Securities at the time of redemption. Given the relatively short maturity of the Initial Covered Debt, Moody's notes that the Capital Replacement Covenant could go away much sooner than expected unless Nelnet issues longer-dated securities. Moody's notes further that Nelnet has stated its intention to replace the Initial Covered Debt with a longer dated instrument prior to the maturity of the 5.125% Senior Notes. Nelnet will receive an acceptable opinion from outside counsel regarding the enforceability of this Covenant in accordance with the laws of New York. * No ongoing payments: Moderate The Securities contain an optional deferral feature for up to 10 years. As an ongoing concern: If deferred, distributions must be settled with cash generated from the sale of common equity or qualifying preferred stock, which is defined as non-cumulative perpetual preferred stock, callable subject to a Covenant. Any deferred distributions must be settled the earlier of: 1) when cash payments are resumed or 2) 5 years from the beginning of the deferral period. There is a lifetime cap on the common equity of 2% of shares outstanding and a 25% cap on the issuance of the non- cumulative perpetual preferred stock. Any distributions in relation to the limited deferral period in excess of these caps will be permanently cancelled at the 10-year anniversary of the commencement of the limited deferral period. In bankruptcy: Any distributions that have not been settled through the sale of warrants for common equity or qualifying preferred stock will be limited to 2 years. * Loss absorption: Moderate The Securities are subordinated to all existing and future debt with limited rights and limited ability to cause acceleration. Nelnet is headquartered in Lincoln, Nebraska, and reported net student loan assets of $22.4 billion as of June 30, 2006. NETWORK INSTALLATION: June 30 Balance Sheet Upside Down by $47,839 ------------------------------------------------------------------ At June 30, 2006, Network Installation Corp.'s balance sheet showed a $47,839 stockholders' deficit from total assets of $12,709,271 and total liabilities of $12,757,110. For the three months ended June 30, 2006, the Company incurred a $607,111 net loss on sales of $4,939,067. In the comparable period last year, the Company reported a $975,459 net loss on zero sales. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?11fd Headquartered in Irvine, California, Network Installation Corp. -- http://www.networkinstallationcorp.net/-- through its wholly owned subsidiaries, Com Services and Kelley Technologies, provides communications infrastructure services, specializing in the design, installation, deployment and integration of specialty systems and computer networks. NORTH AMERICAN: Restructures $25.5 Million of Debts --------------------------------------------------- North American Technologies Group, Inc., has restructured $25.5 million of its debt and debentures. Under the terms of the new agreement, the amortization of principal for the $14 million of senior debt was deferred until July 1, 2008. Additionally, the maturity date of $11.5 million in convertible debentures was extended from Dec. 31, 2006 to July 1, 2008. All of the debts will be reclassified as long-term liabilities in the company's financial statements. "NATK debt and debenture holders recognized the current market opportunity and renewed financial discipline of the company," Neal Kaufman, chief executive officer, said. "This restructuring gives NATK additional time to focus on growth and driving to profitability, and will maximize value for our customers and shareholders." North American Technologies Group, Inc., (OTCBB: NATK) -- http://www.natk.com/-- through its TieTek subsidiary manufactures and sells composite railroad crosstie known as TieTek(TM) made from recycled composite materials that is a direct substitute for wood crossties, but with a longer life and with several environmental advantages. Going Concern Doubt As reported in the Troubled Company Reporter on June 5, 2006, Ham, Langston & Brezina, LLP, in Houston, Texas, raised substantial doubt about North American Technologies Group, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations and debt service and working capital requirements that reach beyond its current available cash. NORTHWEST AIRLINES: Flight Attendants Declare Talks at Impasse -------------------------------------------------------------- Northwest Airlines' flight attendants, represented by the Association of Flight Attendants-CWA ask the National Mediation Board to release them from further talks with the airlines' management. Northwest attendants union says contract talks with the airline are at an impasse, according to the AFA's website. "The NMB was created to protect employees, not strip away their rights as the courts have done," said Mollie Reiley, Interim Master Executive Council President. "Management has no motivation to negotiate. They have already taken over $200 million a year from us and the district court has prevented us from striking. If Northwest is allowed to get away with destroying our careers, you can be sure that this practice will soon spread and other companies will use this as a method to destroy the lives and the professions of thousands of employees. The right to strike is the only tool working women and men have to counter the greed of management that is eroding corporations across America. It's the one thing that forces management to negotiate fairly." The NMB is a federal agency that enforces the Railway Labor Act, which protects workers' rights to organize unions and engage in free and fair collective bargaining in the US aviation and railroad industries. Under the collective bargaining process, when a company and a union reach an impasse in negotiations, the NMB can determine that further mediation will not help the parties reach a consensual agreement. The NMB then offers to submit the dispute to arbitration. If either side rejects arbitration a 30- day cooling-off period commences. If no agreement is reached by the end of the cooling-off period, the workers may choose to exercise their right to strike. A status conference between AFA- CWA and company management has been requested by the NMB for Tuesday, Sept. 26, 2006. "When management unilaterally cut flight attendant pay, benefits and work rules, they mocked the integrity of the NMB's role in promoting consensual resolution of labor disputes," said Patricia Friend, AFA-CWA International President. "Northwest management has made every attempt to stall negotiations and hang on to the concessions that they forcibly took in bankruptcy court. For the future of Northwest flight attendants, as well as the countless employees who will follow in their footsteps unless this culture of greed is reversed, we urge the NMB to declare an impasse and allow the Northwest flight attendants to exercise their own self help in the wake of management's imposed working conditions." About AFA For over 60 years, the Association of Flight Attendants -- http://www.afanet.org/-- has been serving as the voice for flight attendants in the workplace, in the aviation industry, in the media and on Capitol Hill. More than 55,000 flight attendants at 20 airlines come together to form AFA-CWA, the world's largest flight attendant union. AFA is part of the 700,000-member strong Communications Workers of America, AFL-CIO. 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. NOTIFY TECHNOLOGY: Inks Amendments to Terms of Issued Warrants -------------------------------------------------------------- Notify Technology Corporation entered into amendments to: (1) its Series A Warrants issued in connection with its July 2001 Preferred Stock Offering with Commonwealth Associates, L.P., and other holders of Warrants holding in the aggregate 54% of the outstanding Series A Warrants; (2) the Commitment Warrant to Purchase 118,151 Shares of Common Stock dated as of May 16, 2001 with ComVest Venture Partners, L.P.; and (3) the Unit Purchase Option issued to Commonwealth in connection with the July 2001 Preferred Stock Offering. Each of the amendments amend the terms to limit the maximum number of additional common shares subject to issuance as a result of penalties provided for in Section 10 of each Agreement for certain defaults by the Company described in Section 10 of the Agreements to the number of additional common shares determined if the Company remained in default for five consecutive thirty day periods. The provision subjected the Company to adverse accounting treatment with respect to the Amendments under Emerging Issues Task Force guidance EITF 00-19 "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, A Company's Own Stock". Each of the amendments is intended to amend the terms that made the Agreements subject to EITF 00-19 and allow them to be reclassified as equity at a value calculated using the Black- Scholes option-pricing model as of Sept. 12, 2006. Because approximately 63% of its outstanding Unit Purchase Options have not been amended, however, the Company could be required to recognize additional non-cash charges if the conditions of EITF 00-19 are met with respect to the Unit Purchase Options and the underlying shares. "Due to the mechanics of EITF 00-19, Notify has recorded non cash losses of $457,919 identified as Loss on the Valuation of Warrants in fiscal 2006 as the value of our common stock increased," Paul DePond, president, said. "We believe these amendments should avoid any further material near-term non cash negative impact on our income statement as a result of EITF 00-19. " Headquartered in San Jose, California, Notify Technology Corporation (OTC: NTFY) -- http://www.notifycorp.com/ -- is a software company that develops mobility products for organizations of all sizes. Notify's wireless solutions provide secure synchronized email and PIM access and management to any size organization on a variety of wireless 2-way devices and networks. Notify sells its wireless products directly and through authorized resellers internationally. Notify Technology Corp.'s balance sheet showed shareholders' deficit of $1.08 million at June 30, 2006, compared to a deficit of $778,888 at Sept. 30, 2005 * * * As reported in the Troubled Company Reporter on Sept. 15, 2006 Standard & Poor's Rating Services assigned its 'BB' rating to Peabody Energy Corp.'s proposed $2.75 billion of senior unsecured credit facilities, consisting of a $1.8 billion revolving credit facility and $950 million Term Loan A. The rating outlook is stable. As reported in the Troubled Company Reporter on Sept. 14, 2006 Moody's Investors Service assigned a Ba1 senior unsecured rating to Peabody Energy Corporation's $1.8 billion Revolving Credit Facility and $950 million Term Loan A. At the same time, Moody's raised the senior unsecured rating on the company's existing senior unsecured notes to Ba1 from Ba2. Moody's also affirmed Peabody's Ba1 corporate family rating and its SGL-1 Speculative Grade Liquidity rating. The rating outlook remains negative. NUNET INC: Debtor Did Not Assume Liability for Claimant's Loans --------------------------------------------------------------- Rudolph Geist, Edward Geist, Edward J. Geist, Jr., Stacey Geist and Josephine Geist filed five separate proofs of claim against NuNET, INC., dba NuNet Fiber Technologies, in its chapter 11 case. All five claims relate back to a purchase agreement signed in March 1999, whereby NuNet purchased all of the existing shares of U.S. Netway, Inc., in exchange for, inter alia, the assumption of certain liabilities of U.S. Netway. The Geist Claims have four components: $100,000 -- amount paid to D & L Realty (the Assignee of a Small Business Administration Loan) in settlement of confession of judgement proceedings in the Court of Common Pleas, Luzerne County, Pennsylvania (No. 2542-C-2003) $27,000 -- Payment of Federal Tax liabilities by Edward J. Geist, Jr. $81,456 -- Outstanding principal and interest owed, as of March 1, 2006, on loans by Rudolph J. Geist $95,869 -- Attorneys' fees incurred in pursuit of legal claims against NuNet and in defense of the D & L judgment proceedings -------- $304,325 ======== On Sept. 14, 2005, NuNET filed its Amended Plan of Reorganization. By Order dated Dec. 1, 2005, the Court confirmed the Debtor's Amended Plan of Reorganization. On Oct. 18, 2005, the Debtor objected to the Geist Claims. A hearing was held on Nov. 17, 2005. Neither the Geist Claimants nor their attorney attended the hearing. An Order was entered sustaining the objections and awarding the Geist Claimants a collective general unsecured claim in the amount of $100,000. On Dec. 5, 2005, the Geist Claimants filed a Motion to Reconsider the Nov. 17, 2005 Order. The Debtor filed a response on Dec. 21, 2005. A hearing was held on the Motion to Reconsider on Dec. 22, 2005. On Jan. 27, 2006, the court entered an order granting the Geist Claimants's Motion to Reconsider, which stated that a hearing would be held "on the merits of the Debtor's Objections to the various Geist Claims." On March 15, 2006, the Honorable Eric L. Frank held a hearing on the Debtor's claim objections. Examining the underlying purchase agreement under Pennsylvania law, Judge Frank concludes in a decision published at 2006 WL 2501436 that the Debtor is responsible for payment of the $100,000 loan and the Geist's legal fees. NuNET has no liability for the prepetition loans made by Rudolph J. Geist. Although there was no doubt that the claimant gave the company money as part of an effort to salvage the company, the transaction lacked formality, and the loans were not in active repayment status at the time of the agreement's execution, nor were they listed as an existing indebtedness of the company, Judge Frank explains. Further, Judge Frank rules, NuNET has no liability for the Geist's tax bills. Based in Allentown, Pa., NuNet, Inc., dba NuNet Fiber Technologies -- <http://www.nunetfiber.com/>http://www.nunetfiber.com/-- provides Internet dial-up access, web hosting, full e-mail service, bandwidth connections and customer service. NuNet filed for chapter 11 protection (Bankr. E.D. Pa. Case No. 05-21633) on March 24, 2005, reporting less than $1 million in assets and $1 million to $10 million in liabilities. Aris J. Karalis, Esq., and Robert W. Seitzer, Esq., at Ciardi, Maschmeyer & Karalis, P.C., represented the Debtor in its successful chapter 11 restructuring. PARMALAT: Hermes et al., Balk at Credit Suisse's Motion to Dismiss ------------------------------------------------------------------ Hermes Focus Asset Management Europe Limited; Cattolica Partecipazioni S.p.A.; Solotrat; Societe Moderne des Terrassements Parisiens; and Capital & Finance Asset Management, S.A., ask the Honorable Lewis A. Kaplan of the U.S. District Court for the Southern District of New York to deny separate motions filed by Grant Thornton LLP and Credit Suisse to dismiss their Third Amended Consolidated Class Action Complaint. Representing the Lead Plaintiffs, Diane Zilka, Esq., at Grant & Eisenhofer, P.A., in New York, contends that GT-US's Motion to Dismiss is a waste of time and resources, as all of the arguments that the firm presents have already been rejected by the District Court. The Third Amended Complaint asserts a claim against GT-US under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78j(b), and Rule 10b-5 promulgated thereunder on the theory that Grant Thornton-Italy was the agent for Grant Thornton International and that GTI was the agent for GT-US. The Third Amended Complaint also alleges a control person claim against GT-US under Section 20(a) of the Exchange Act, 15 U.S.C. Section 78t(a), on the theory that GT-US controlled GTI and is, therefore, liable for GTI's violations of Sections 10(b) and 20(a). GT-US has argued that a principal cannot be held liable for the Rule 10b-5(b) violations of its agents unless the agent's statements are specifically attributed to the principal. GT-US also asserted that an agency theory cannot be invoked to hold it liable for the liabilities of GTI unless the corporate veil is pierced and the Court finds that GTI is the alter ego of GT-US. GT-US also pointed out that the Third Amended Complaint adds only a handful of new allegations regarding the relationship between GT-US and GTI. According to Ms. Zilka, the District Court's prior rulings provide everything needed to demonstrate that the claims in the Third Amended Complaint against GT-US are sufficient. Ms. Zilka notes that the District Court has already held that: (a) the allegations in Dr. Bondi's amended complaint against, among others, the Grant Thornton entities -- which in all respects relevant to GT-US are now contained in the Lead Plaintiffs' Third Amended Complaint -- are sufficient to allege that GTI acted in connection with the Parmalat audits as the agent for GT-US; (b) the Lead Plaintiffs have stated a Section 10(b) claim against GTI on the basis that GT-Italy was the agent for GTI; (c) the Lead Plaintiffs have stated a Section 20(a) claim against GTI on the basis that GTI controlled GT-Italy; (d) allegations that a firm that is a member of an international auditing complex acted as an agent for another are also sufficient to allege a control person claim under Section 20(a); and (e) the U.S. member firm of a worldwide auditing complex can be held liable for audit work performed by a "sister" member firm in Italy on the theory that the U.S. firm controlled the worldwide umbrella firm, which in turn controlled the member firm in Italy. The Third Amended Complaint names Credit Suisse as successor-in- interest to the previously named defendant, Credit Suisse First Boston. CSFB served as the investment banking and asset management arm of Credit Suisse Group until it merged in May 2005 with CSG's private banking division -- formerly named Credit Suisse -- to become the new Credit Suisse. Credit Suisse has argued that the Third Amended Complaint fails to state a claim under Section 10(b) because the Lead Plaintiffs have not adequately alleged a fraudulent act or scienter, and that the Lead Plaintiffs' allegations are too vague under Rule 9(b) of the Federal Rules of Civil Procedure. Credit Suisse also pointed out that the Third Amended Complaint fails to adequately allege a claim under Section 20(a) because the claim is predicated solely on its status as the parent corporation of two affiliate defendants, (i) Credit Suisse First Boston International, now known as Credit Suisse International, and (ii) Credit Suisse First Boston Europe Limited, now known as Credit Suisse Securities (Europe) Limited. Ms. Zilka tells Judge Kaplan that to the contrary, the Third Amended Complaint alleges with particularity the specific fraudulent acts and conduct of Credit Suisse in connection with the issuance of convertible bonds by Parmalat's Brazilian subsidiary and the underwriting of notes issued by another Parmalat subsidiary to artificially inflate Parmalat's assets on its financial statements. "These allegations are more detailed than those alleged with respect to CSFB," Ms. Zilka says. Ms. Zilka also asserts that the Third Amended Complaint alleges that CSFB controlled CSFBi and Credit Suisse Europe through (i) CSFB's ownership of these subsidiaries, and (ii) their common directors, employees and places of business. According to Ms. Zilka, Credit Suisse cannot dispute that it is CSFB's successor-in-interest nor can it credibly argue that it had no notice of a claim it has been litigating since 2004. The Troubled Company Reporter on Sept. 6, 2006 relates that in its request -- which Grant Thornton supported -- Credit Suisse argued that since filing their first amended consolidated complaint, the investors have taken 20 months to specify which Credit Suisse entities they seek to sue despite this deficiency having been brought to their attention. In Credit Suisse's behalf, Michael S. Feldberg, Esq., at Allen & Overly LLP, in New York, told the Court that in the Third Amended Complaint, the investors alleged, among others, that Credit Suisse, Credit Suisse International, and Credit Suisse Securities (Europe), Limited, structured and participated in a transaction to provide financing to the Brazilian subsidiary of Parmalat, knowing that Parmalat would use it to conceal debt on its financial statements. According to Mr. Feldberg, Credit Suisse stands on a different footing with Credit Suisse International and Credit Suisse Securities. Mr. Feldberg contended that the Third Amended Complaint is devoid of any facts that detail with specificity Credit Suisse's role in the challenged transaction. Credit Suisse believes that the Complaint fails adequately to plead a primary violation of the securities laws under the particularity requirements of Rule 9(b) of the Federal Rules of Civil Procedure. There is no allegation in the Third Amended Complaint that Credit Suisse committed a deceptive or manipulative act, Mr. Feldberg pointed out. Instead, he continues, investors meld Credit Suisse into the umbrella term "Credit Suisse Entities" without detailing the nature of its participation in the alleged fraudulent scheme. Credit Suisse also believes that the investors' references to it as the corporate parent of Credit Suisse International and Credit Suisse Securities do not advance their position. Mere allegation of a status as a corporate parent of alleged wrongdoers does not suffice, Mr. Feldberg said. Mr. Feldberg also noted that the investors did not allege that Credit Suisse acted scienter with particularity, as required by the Reform Act and Second Circuit decisional law. To plead scienter, the plaintiff must allege a purpose to harm by intentionally deceiving, manipulating or defrauding, Mr. Feldberg explained, citing Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S. Ct. 1375, 1381 (1976). The Third Amended Complaint adds a new claim for controlling person liability against Credit Suisse. However, Credit Suisse says the claim is deficient. Mr. Feldberg argued that the Third Amended Complaint's allegations of control "do not show that Credit Suisse had actual control over the transaction at issue." "No amendment could cure the deficiencies identified in the third amended complaint," Mr. Feldberg maintained. "Credit Suisse simply had no involvement in the Parmalat matters at issue . . . and there are no facts that could support the legal conclusion of [it's participation] in the alleged fraudulent scheme or actively controlled the . . . entities which are alleged to have participated." About Parmalat Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. The U.S. Debtors emerged from bankruptcy on April 13, 2005. (Parmalat Bankruptcy News, Issue No. 78; Bankruptcy Creditors' Service, Inc., 215/945-7000, http://bankrupt.com/newsstand/) PARMALAT USA: Court Okays Pact on George's Suit Against Farmland ---------------------------------------------------------------- The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York approved a stipulation between Arthur George, Farmland Dairies LLC, and the Farmland Dairies LLC Unsecured Creditors' Trust modifying the plan injunction. In the settlement agreement published in the Troubled Company Reporter on Sept. 5, 2006, Farmland and Mr. George agreed to the modification of the Plan injunction to allow the parties to prosecute and defend against Mr. George's personal injury suit pending before the Supreme Court of the State of New York, County of Bronx. However, Mr. George will not be entitled to recover any property of or from the Debtors or their estates, Reorganized Farmland, or the Trust. He will have recourse solely against any available insurance proceeds. Mr. George's suit relates to the injuries he sustained while unloading milk crates inside a truck owned and maintained by Sunnydale Farms, Inc., a business unit of Farmland. Mr. George seeks $900,000 in damages in the Action. At the time of the accident, Farmland maintained a general liability insurance policy with Royal & SunAlliance. Mr. George agrees that payment of any judgment awarded against the U.S. Debtors' insurers, if any, will be reduced by the lesser of the payment or the amount of the Policy's deductible that the U.S. Debtors, Reorganized Farmland or the Trust might otherwise be liable for. Mr. George's Lift Stay Motion is withdrawn, with prejudice. Mr. George releases the U.S. Debtors, Reorganized Farmland and the Trust from all claims and causes of action. About Parmalat Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, represent the Debtors. When the U.S. Debtors filed for bankruptcy protection, they reported more than $200 million in assets and debts. The U.S. Debtors emerged from bankruptcy on April 13, 2005. (Parmalat Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000, http://bankrupt.com/newsstand/) PEP BOYS: $120 Mil. Facility Increase Cues S&P to Affirm B+ Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B+' rating on Philadelphia-based Pep Boys-Manny, Moe & Jack's term loan after the company announced plans to increase the size of the facility by $120 million to $320 million. Proceeds from the additional $120 million term loan will be used to refinance its convertible notes which mature in June 2007. The recovery rating was revised to '1' from '1+'. At the same time, the rating on the $357.5 million asset-based revolver was raised to 'B+' from 'B' to properly realign its ratings with the term loan and to reflect Standard & Poor's increased comfort with the collateral and terms securing this facility. The 'B-' corporate credit and other ratings were affirmed; the outlook remains negative. "The ratings on Pep Boys-Manny, Joe & Jack reflect weak operating trends, the risks of operating in the highly competitive and consolidating auto parts retail sector, a highly leveraged capital structure, and somewhat limited financial flexibility," said Standard & Poor's credit analyst Stella Kapur. The company faces considerable challenges and needs to turn around its service segment and reinvest capital in its store base. Progress in turning around the company's operating performance continues to be limited. Same-store sales at the auto parts retailer for the first half of 2006 decreased 0.3%, following a 1.3% decline for all of 2005. However, EBITDA improved marginally, growing 10% to $57 million in the first half of 2006, and operating cash flow generation increased significantly to $86 million from $19 million in the first half of 2005. The higher operating cash flow primarily reflected better working capital management. This, combined with much lower capital spending, enabled the company to reduce its outstanding debt to $526 million at July 29, 2006, from $587 million at the end of 2005. PITTSFIELD WEAVING: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Pittsfield Weaving Company 55 Barnstead Road Pittsfield, NH 03263 Bankruptcy Case No.: 06-11214 Type of Business: The Debtor is a full service, global provider of brand identification to the apparel and soft goods industries, and manufactures woven and printed labels and RFID/EAS solutions. See http://www.pwcolabel.com/ Chapter 11 Petition Date: September 20, 2006 Court: District of New Hampshire (Manchester) Judge: Mark W. Vaughn Debtor's Counsel: William S. Gannon, Esq. William S. Gannon PLLC 889 Elm Street, 4th Floor Manchester, NH 03101 Tel: (603) 621-0833 Fax: (603) 621-0830 Estimated Assets: $10 Million to $50 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ CES Designs Services $241,615 2613 Cambridge Road Burlington, NC 27215 Public Service of NH Utility $221,306 P.O. Box 330 Manchester, NH 03105-0330 Nixon Peabody Legal Fees $105,246 900 Elm Street Manchester, NH 03101 The Israeli Processing Co., Ltd. Services $87,855 P.O. Box 33 Yavne, Israel Checkpoint Systems Services $42,692 P.O. Box 8538-0379 Philadelphia, PA 19171-0379 Town of Pittsfield Taxes $33,970 American Express Delta Credit Card $33,414 Cigna Healthcare Insurance $29,962 Global Fiber & Yarns Supplies $29,291 Ogilvy Renault Services $20,467 Rosenthal & Rosenthal, Inc. Services $18,008 American Express Credit Card $16,452 Vaupal Americas, Inc. Services $13,101 United Parcel Service Trade Debt $12,907 Bornstein & Sweatt P.C. Services $12,519 Spang Management Co., Inc. Services $10,950 First Bankcard Credit Card $10,414 Memic Indemnity Co. Insurance $9,418 Amerigas Propane LP Vendor $8,433 JB Yarn Supplies $6,997 PORTRAIT CORP: Hires BSI as Claims and Balloting Agent ------------------------------------------------------ The Honorable Adlai S. Hardin, Jr., of the U.S. Bankruptcy Court for the Southern District of New York authorized Portrait Corporation of America, Inc., and its debtor-affiliates, on an interim basis, to retain Bankruptcy Services LLC as their noticing, claims and balloting agent. In this engagement, BSI will: a) prepare and serve required notices in these chapter 11 cases, including: * a notice of the commencement of the chapter 11 cases and the initial meeting of creditors under section 341(a) of the Bankruptcy Code; * a notice of the claims bar date; * notices of objections to claims; * notices of any hearings on a disclosure statement and confirmation of a plan or plans of reorganization; and * other miscellaneous notices as the Debtors or Court may deem necessary or appropriate for an orderly administration of the chapter 11 cases; b) within three business days after the service of a particular notice, prepare for filing with the Clerk of the Court a certificate or affidavit of service that includes: * an alphabetical list of persons on whom the notice was served, along with their addresses, and * the date and manner of service; c) maintain copies of all proofs of claim and proofs of interest filed in these chapter 11 cases; d) maintain official claims registers in these chapter 11 cases by docketing all proofs of claim and proofs of interest in a claims database that includes these information for each claim or interest asserted: * the name and address of the claimant or interest holder and any agent, if the proof of claim or proof of interest was filed by an agent; * the date the proof of claim or proof of interest was received by BSI and/or the Court; * the claim number assigned to the proof of claim or proof of interest; and * the asserted amount and classification of the claim; e) implement necessary security measures to ensure the completeness and integrity of the claims registers; f) transmit to the Clerk of the Court a copy of the claims registers on a weekly basis unless requested more or less frequently by the Clerk's Office; g) maintain an up-to-date mailing list for all entities that have filed proofs of claim or proofs of interest and make this list available upon request to the Clerk of the Court or any party in interest; h) provide access to the public for examination of copies of the proofs of claim or proofs of interest filed in the Debtors' chapter 11 cases without charge during regular business hours; i) record all transfers of claims pursuant to Bankruptcy Rule 3001(e) and, if directed to do so by the Court, provide notice of these transfers as required by Bankruptcy Rule 3001(e); j) comply with applicable federal, state, municipal, and local statutes, ordinances, rules, regulations, orders, and other requirements; k) provide temporary employees to process claims as necessary; l) promptly comply with further conditions and requirements as the Clerk of the Court or the Court may at any time prescribe; m) provide other claims processing, noticing, balloting, and related administrative services as may be requested from time to time by the Debtors; n) act as balloting agent o) at the close of the case, box and transport all original documents in proper format, as provided by the Clerk's office, to the Federal and Record Administration; The current hourly rates for BSI's professionals are: Designation Hourly Rate ----------- ----------- Senior Bankruptcy Counsel $225 - $295 Bankruptcy Consultant 185 - 225 IT Programming Consultant 140 - 190 Case Managers 125 - 175 Clerical 40 - 60 James Katchadurian, a vice-president at BSI, assures the Court that his firm does not hold any interest adverse to the Debtors' estate and is a disinterested person as that term is defined in Section 101(14) of the Bankruptcy Code. A copy of the bankruptcy services agreement between BSI and the Debtors is available for free at: http://researcharchives.com/t/s?1217 About Portrait Corporation Portrait Corporation of America, Inc. -- http://pcaintl.com/-- provides professional portrait photography products and services in North America. The Company operates portrait studios within Wal-Mart stores and Supercenters in the United States, Canada, Mexico, Germany and the United Kingdom. The Company also operates a modular traveling business providing portrait photography services in additional retail locations and to church congregations and other institutions. Portrait Corporation and its debtor-affiliates filed for Chapter 11 protection on Aug. 31, 2006 (Bankr S.D. N.Y. Case No. 06-22541). John H. Bae, Esq., at Cadwalader Wickersham & Taft LLP, represents the Debtors in their restructuring efforts. Berenson & Company LLC serves as the Debtors' Financial Advisor and Investment Banker. At June 30, 2006, the Debtor had total assets of $153,205,000 and liabilities of $372,124,000. PREMIER ENTERTAINMENT: Chapter 11 Filing Cues S&P's Default Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit and first mortgage note debt ratings on Premier Entertainment Biloxi LLC to 'D' from 'CCC'. The downgrade follows the announcement by Biloxi-based Premier Entertainment that it has filed for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court. PROTECTION ONE: Has $71.4 Million Stockholders' Deficit at June 30 ------------------------------------------------------------------ Protection One Inc.'s balance sheet at June 30, 2006, showed $437,828,000 in total assets and $509,239,000 in total liabilities, resulting in a stockholders' deficit of $71,411,000. The Company's balance sheet at June 30, 2006 also showed strained liquidity with total current assets of $59,476,000 and total current liabilities of $66,346,000. For the three months ended June 30, 2006, the Company incurred a $6,663,000 net loss on total revenues of $67,150,000, compared to a $7,891,000 net loss on total revenue of $65,441,000 for the same period last year. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?11ff Headquartered in Wichita, Kansas, Protection One -- http://www.protectionone.com/-- provides installation, maintenance and monitoring of fire and burglar alarm systems. Network Multifamily, the Company's wholly owned subsidiary, is a security provider to the multifamily housing market. Protection One's 2,300 professionals serve its customers from more than 64 branch offices and three monitoring facilities. RADNOR HOLDINGS: Committee Taps Greenberg Traurig as Counsel ------------------------------------------------------------ The Official Committee of Unsecured Creditors of Radnor Holdings Corporation and its debtor-affiliates asks the U.S. Bankruptcy Court for the District of Delaware for permission to retain Greenberg Traurig, LLP, as its bankruptcy counsel, nunc pro tunc as of Aug. 30, 2006. Greenberg Traurig will: (a) provide legal advice with respect to the Committee's rights, powers and duties in the Debtors' chapter 11 cases; (b) prepare all necessary applications, answers, responses, objections, orders, reports and other legal papers; (c) represent the Committee in any and all matters arising in the Debtors' bankruptcy proceedings including any dispute or issue with the Debtors, any alleged secured creditors or any other creditors or third parties; (d) assist the Committee in its investigation and analysis of the Debtors, including but not limited to, the review and analysis of all pleadings, claims or plans of reorganization that may be filed in the Debtors' chapter 11 cases and any negotiations or litigation that may arise out of or in connection with such matters, operations and financial affairs; (e) represent the Committee in all aspects of confirmation proceedings; and (f) perform all other legal services for the Committee that may be necessary or desirable in these proceedings. Victoria Watson Counihan, Esq., a shareholder at Greenberg Traurig, tells the Court that she will bill $440 per hour for this engagement. Ms. Counihan tells the Court that other professionals who will render services bill: Professional Hourly Rate ------------ ----------- Nancy A. Mitchell, Esq. $615 Nancy A. Peterman, Esq. $545 Donald J. Detweiler, Esq. $490 Monica L. Loftin, Esq. $470 Dennis A. Meloro, Esq. $300 Elizabeth C. Thomas $170 Designation Hourly Rate ----------- ----------- Shareholders $235 - $750 Associates $130 - $480 Legal Assistants/Paralegals $65 - $230 Ms. Counihan assures the Court that her firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Ms. Counihan can be reached at: Victoria Watson Counihan, Esq. Greenberg Traurig, LLP The Nemours Building, 1007 North Orange Street Suite 1200 Wilmington, DE 19801 Tel: (302) 661-7000 Fax: (302) 661-7360 Headquartered in Radnor, Pennsylvania, Radnor Holdings Corporation -- http://www.radnorholdings.com/-- manufactures and distributes a broad line of disposable food service products in the United States, and specialty chemicals worldwide. The Debtor and its affiliates filed for chapter 11 protection on Aug. 21, 2006 (Bankr. D. Del. Case No. 06-10894). Gregg M. Galardi, Esq., and Mark L. Desgrosseilliers, Esq., at Skadden, Arps, Slate, Meagher, represent the Debtors. When the Debtors filed for protection from their creditors, they listed total assets of $361,454,000 and total debts of $325,300,000. RALPH STRUCHTEMEYER: Voluntary Chapter 11 Case Summary ------------------------------------------------------ Debtor: Ralph Earl Struchtemeyer Marilyn Sue Struchtemeyer dba J2M Farm 7325 Southshore Drive Hartsburg, MO 65039 Bankruptcy Case No.: 06-20989 Chapter 11 Petition Date: September 19, 2006 Court: Western District of Missouri (Jefferson City) Debtors' Counsel: Gwendolyn Froeschner Hart, Esq. Shurtleff, Froeschner & Bunn LLC 25 North 9th Street Columbia, MO 65201 Tel: (573) 449-3874 Fax: (573) 875-5055 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million The Debtors did not file a list of their 20 largest unsecured creditors. REAL ESTATE: Reports $217,000 Net Loss in Quarter Ended June 30 --------------------------------------------------------------- Real Estate Associates Limited VII incurred a $217,000 net loss on revenues of $28,000 for the quarter ended June 30, 2006, compared to a $238,000 net loss on $17,000 of revenues for the same period in the prior year. The Partnership's balance sheet at June 30, 2006, showed total assets of $2,125,000 and total liabilities of $20,567,000, resulting in a $18,442,000 stockholders' deficit. A full-text copy of the Partnership's quarterly report is available for fee at http://researcharchives.com/t/s?1206 Going Concern Doubt Ernst & Young LLP expressed substantial doubt about Real Estate Associates' ability to continue as a going concern after auditing the Partnership's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Partnership's recurring operating losses and default on approximately $20,231,000 of notes payable and related accrued interest. Ten of the Partnership's twenty-three investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. The Partnership is obligated for non-recourse notes payable of approximately $6,840,000 to the sellers of the partnership interests, bearing interest at 9.5 to 10 percent. Accrued interest is approximately $13,708,000 as of June 30, 2006. These obligations and the related interest are collaterized by the Partnership's investment in the local limited partnerships and are payable only out of cash distributions from the Local Limited Partnerships, as defined in the notes. Unpaid interest was due at maturity of the notes. All notes payable have matured and remain unpaid at June 30, 2006. Real Estate Associates Limited VII is a limited partnership formed under the laws of the State of California on May 24, 1983. The general partners of the Partnership are National Partnership Investments Corp., a California Corporation, and National Partnership Investments Associates II. ROCKPORT HEALTHCARE: June 30 Balance Sheet Upside-Down by $1.9MM ---------------------------------------------------------------- Rockport Healthcare Group, Inc., incurred a $87,319 net loss on $704,907 of net revenues for the three months ended June 30, 2006, compared to a $143,128 net loss on $848,584 of revenues for the same period in 2005. At June 30, 2006, the Company's balance sheet showed $1,055,121 in total assets and $3,015,754 in total liabilities, resulting in a $1,960,633 stockholders' deficit. The Company's June 30 balance sheet also showed strained liquidity with $675,581 in total current assets available to pay $2.5 million in total current liabilities coming due within the next 12 months. New Independent Accountants On Aug. 13, 2006, the Company's board of directors approved a change in the Company's independent accountants. The Company engaged Thomas Leger & Co., L.L.P., as the Company's independent accountants to audit the Company's consolidated financial statements for the year ending March 31, 2007. Thomas Leger will also perform a review of the unaudited condensed quarterly financial statements to be included in the Company's quarterly reports on form 10-QSB beginning with the June 30, 2006 form 10-QSB. During the two-year period ended March 31, 2006, and the subsequent interim period preceding such dismissal, the Company said it did not have any disagreements with its previous independent auditor, Hein & Associates LLP, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?1211 Going Concern Doubt Hein & Associates raised substantial doubt about Rockport Healthcare's ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations and its stockholders' equity deficit. About Rockport Healthcare Headquartered in Houston, Texas, Rockport Healthcare Group, Inc. - - http://www.pennoctane.com/-- develops, operates, and manages networks consisting of healthcare providers and medical suppliers that serve employees with work-related injuries and illnesses in the United States. It offers access to a healthcare network at a local, state, or national level for its clients and their customers. The company contracts with physicians, hospitals, and ancillary healthcare providers and offers healthcare services to its clients. Its clients include property and casualty insurance companies, employers, bill review/medical cost containment companies, managed care organizations, software/bill review companies, and third-party administrators. RONALD STAHL: Case Summary & 4 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Ronald W. Stahl 7579 Firebird Lane Manlius, NY 13104 Bankruptcy Case No.: 06-62276 Chapter 11 Petition Date: September 20, 2006 Court: Northern District of New York (Utica) Judge: Stephen D. Gerling Debtor's Counsel: Lee E. Woodard, Esq. Harris Beach LLP One Park Place 300 S. State Street Syracuse, NY 13202 Tel: (315) 423-7100 Fax: (315) 214-2101 Total Assets: $446,570 Total Debts: $2,023,763 Debtor's 4 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ 407 University Realty Associates Inc. $1,331,416 c/o Pyramid Brokerage Co. Inc. P.O. Box 3 Dewitt, NY 13214 HPSC, Inc. $20,000 Attn: Michael Powell One Beacon St., 2nd Fl. Boston, MA 02108 Washington Mutual Visa Card $10,000 P.O. Box 660487 Dallas, TX 75266 American Express $2,900 P.O. Box 1270 Newark, NJ 07101 ROWE COS: Receives Court Approval of First-Day Motions ------------------------------------------------------ The Rowe Companies received approval of first-day motions presented to the U.S. Bankruptcy Court in the Eastern District of Virginia. During hearings held yesterday before the Honorable Stephen S. Mitchell, Rowe received interim approval of a $50 million Secured Super Priority Debtor-in-Possession Facility provided by General Electric Capital Corporation. The DIP Facility includes the payment or "roll up" of GECC's pre-petition secured loans to Rowe. The facility, among other things, requires Rowe to conform to a budget and for the sale or liquidation of the Storehouse chain. A hearing to approve the DIP Facility on a final basis will be held on Oct. 13, 2006. In addition, Rowe obtained approval to pay pre-petition and ongoing employee wages and to continue various employee benefit programs. The Court also authorized Rowe to honor certain pre- petition customer deposits and continue many of its customer service programs. In addition, Rowe obtained approval to continue the use of its pre-petition bank accounts and current cash management system. The first-day orders will enable Rowe to continue normal business operations without interruption as it completes its ongoing restructuring plans and initiatives. "We are very pleased with the Court's approval of the DIP financing and the rest of the first day motions presented by Rowe," said Gerald Birnbach, President and CEO of Rowe. "Having secured DIP financing, we will be able to move forward with business operations and continue providing our customers with quality products. In addition, we are optimistic that the DIP financing will offer assurance to our vendors and suppliers that they will be timely paid for post-petition services as we complete our restructuring process. The Court's approval of the first day motions will also enable Rowe to honor critical employee and customer obligations, while continuing normal business operations without interruption." On Sept. 18, 2006, The Rowe Companies, along with its two operating subsidiaries, Rowe Furniture, Inc. and Storehouse, Inc., filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code in the Eastern District of Virginia. Business and operations will continue as usual while Rowe pursues various restructuring options. Consumer customers and Storehouse vendors may call 1-866-907-6499. Rowe Furniture vendors may call 1-877-684-3578. Headquartered in McLean, Virginia, The Rowe Companies -- http://www.therowecompanies.com/-- manufactures upholstered retail home and office furniture, interior decorations, tableware, lighting fixtures, and other interior design accessories. The Company owns 100% of stock of manufacturing and retail subsidiaries, Rowe Furniture -- http://www.rowefurniture.com/-- and Storehouse, Inc. -- http://www.storehousefurniture.com/ The Company and its two of its debtor-affiliates filed for chapter 11 protection on Sept. 18, 2006 (Bank. E.D. Va. Case Nos. 06-11142 to 06-11144). Dylan G. Trache, Esq., H. Jason Gold, Esq., and Valerie P. Morrison, Esq., at Wiley Rein & Fielding LLP, represent the Debtors. When the Debtors filed for protection from their creditors, The Rowe Companies listed total assets of $130,779,655 and total debts of $93,262,974; Rowe Furniture estimated assets between $50 million and $100 million and debts between $10 million and $50 million; and Storehouse, Inc. estimated assets and debts between $10 million and $50 million. SECUNDA INTERNATIONAL: S&P Holds B- Corp. Credit & Debt Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services' 'B-' long-term corporate credit and senior secured debt ratings on offshore support vessel provider Secunda International Ltd. remained on CreditWatch with positive implications, where they were placed Sept. 29, 2005. The continued CreditWatch listing was the result of the company's ongoing efforts to complete its IPO, in which it plans to sell common stock. In conjunction with the IPO, Secunda also extended its tender offer for its senior secured notes. In June 2006, Nova Scotia-based Secunda concurrently discontinued its IPO registration process with the U.S. SEC and opted to file in Canada. Net proceeds will be used to: * fund the acquisition of an additional vessel; * repay existing indebtedness; and * for general corporate purposes. The funds from the offering should provide the company with additional liquidity, as well as added flexibility from the company's access to the equity market. Furthermore, the equity offering should afford Secunda the ability to expand and improve its fleet, without any incremental negative effects on its financial profile. The preliminary prospectus filed in June 2006 included Secunda's financial results for the quarter ended March 31, 2006, with the company reporting an improvement in both revenues and internal cash flow generation, compared with the previous year. "We expect that Secunda will complete the IPO before the end of 2006, which should allow the company to reduce its leverage, as well as gain added flexibility and liquidity," said Standard & Poor's credit analyst Jamie Koutsoukis. "This, combined with the continued improvement in its financial profile as a result higher-than-historical utilization and day rates, should result in Secunda's overall credit profile strengthening," Ms. Koutsoukis added. The extent of any positive rating action will depend on Standard & Poor's analysis of Secunda's prospective business and financial plans, including its planned uses of the proceeds and amount of debt reduction following the offering. Based on Standard & Poor's preliminary assessment, an upgrade higher than one notch is unlikely. Standard & Poor's will resolve the CreditWatch action after further consultation with Secunda's management and the successful completion of the IPO. SIERRA PACIFIC: Fitch Lifts Issuer Default Rating to BB- from B+ ---------------------------------------------------------------- Fitch upgraded the ratings of Sierra Pacific Resources and its utility subsidiaries, Nevada Power Co. and Sierra Pacific Power Co. The Rating Outlook is Stable. The rating upgrade reflects: * continuing evidence of a more supportive regulatory environment in Nevada; * reduced litigation exposure; * improved financial flexibility; * adequate liquidity; and * ongoing efforts to diminish reliance on the wholesale energy markets. The upgrade also reflects recent positive developments, including a Nevada Supreme Court decision that reversed a $180 million 2002 deferred energy disallowance by the Public Utilities Commission of Nevada, as well as SRP's recent $280 million equity issuance. The Stable Rating Outlook assumes the continuation of constructive regulatory orders in Nevada and the issuance of adequate amounts of equity to support the company's large capital spending plans. If the PUCN approves the company's pending integrated resource plan filing, Fitch expects the credit ratios of SRP and its subsidiaries to weaken over the next several years as the company makes significant capital investments in the $3.7 billion Ely Energy Center and the expansion of its fast growing transmission and distribution system. Substantial external financing will be required beginning in 2008 for the Center's construction, and the first unit would not be operational until 2011, with the second coming on line in 2014. The anticipated lag in regulatory recovery of these investments and other projects is expected to result in the deterioration of the company's financial profile over the intermediate term. However, Fitch recognizes that these expenditures are in line with the company's strategy to diversify its generation portfolio and reduce exposure to the wholesale energy markets. SRP is expected to finance these expenditures with a balanced mix of debt and equity to support credit quality. Approximately $200 million from SRP's August 2006 equity offering was contributed to NPC to reduce outstanding debt. Moreover, if the sale of its 50% interest in the Tuscarora Gas Transmission Co. is completed, proceeds may be used to reduce system debt or fund capital expenditures. Regulatory support for the recovery of deferred energy costs and capital investments at the utilities will remain critical going forward. A change to the pattern of constructive regulatory orders demonstrated by the PUCN over the last several years would have negative rating implications for the company. During 2006, SRP's utility subsidiaries have continued to demonstrate access to capital markets. Several debt financings have pushed out maturities and lowered interest expense. In response to elevated commodity prices, both NPC and SPPC increased the capacity of each of their revolving credit facilities by $100 million to $600 million and $350 million, respectively. As of July 28, 2006, NPC had $217 million in facility availability while SPPC had $340 million of facility capacity. Current liquidity is believed to be stronger, since these figures were prior to SRP's $280 million equity issuance and the historically robust late summer cash flow at the utilities. SRP's ratings reflect its consolidated financial profile and structural subordination. Although the holding company's liquidity has improved, the parent relies on dividends from its subsidiaries to meet its obligations and certain limitations have been put in place. Currently, the most restrictive dividend limitation is from a February 2006 PUCN financing order that restricts the combined dividends from NPC and SPPC to the amount of SRP's debt service. Fitch believes that permitted dividends will be sufficient to meet parent needs over the next several years, but any further deterioration of the subsidiaries' financial results would affect parent cash flow. SRP also intends to hold $30 million in cash at the parent level. Fitch upgraded these ratings: Sierra Pacific Resources: -- Issuer Default Rating to 'BB-' from 'B+' -- Senior unsecured debt to 'BB-' from 'B+/RR4' -- Rating Outlook Stable Nevada Power Co.: -- IDR to 'BB' from 'BB-' -- General and refunding mortgage bonds to 'BBB-' from 'BB+' -- Secured revolving bank facility rated to 'BBB-' from 'BB+' -- Senior unsecured debt to 'BB' from 'BB-' -- Rating Outlook Stable Sierra Pacific Power Co.: -- IDR to 'BB' from 'BB-' -- First mortgage bonds to 'BBB-' from 'BB+' -- General and refunding mortgage bonds to 'BBB-' from 'BB+' -- Secured revolving bank facility to 'BBB-' from 'BB+' -- Rating Outlook Stable SILICON GRAPHICS: Delays Filing of 2006 Annual Report ----------------------------------------------------- Barry Weinert, vice president and general counsel of Silicon Graphics, Inc., informs the Securities and Exchange Commission that due to the company's Chapter 11 filing; the ongoing assessment of the company's long-lived assets for potential impairment; and the dismissal of Ernst & Young as the company's independent registered public accounting firm, Silicon's annual report on Form 10-K has not been completed by the due date. Silicon needs more time to finalize its audited financial statements and related internal control assessment for the year ended June 30, 2006, Mr. Weinert explains. Mr. Weinert says the company expects to file its Form 10-K as soon as practicable. Financial statements to be included in the filing will reflect any potential adjustments that may be required as the result of an asset impairment evaluation as well as any other necessary adjustments and disclosures that must be included in order for those financial statements to be stated in accordance with U.S. generally accepted accounting principles. Headquartered in Mountain View, California, Silicon Graphics, Inc. (OTC: SGID) -- http://www.sgi.com/-- offers high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. The Debtor and 13 of its affiliates filed for chapter 11 protection on May 8, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10977 through 06-10990). Gary Holtzer, Esq., and Shai Y. Waisman, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. Judge Lifland confirms the Debtors' Plan of Reorganization on Sept. 19, 2006. When the Debtors filed for protection from their creditors, they listed total assets of $369,416,815 and total debts of $664,268,602. (Silicon Graphics Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SILICON GRAPHICS: Enters Into $115 Mil. Commitment Letter --------------------------------------------------------- The Honorable Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York authorized Silicon Graphics, Inc., and its debtor-affiliates to: -- enter into a commitment letter with Morgan Stanley Senior Funding, Inc., and one or more of its affiliates, and General Electric Capital Corporation, and one or more of its affiliates, in connection with a proposed several, not joint, commitment for a senior secured facility of up to $115,000,000; and -- pay the fees related to the Senior Secured Facility Letter. As reported in the Troubled Company Reporter on Sept. 7, 2006, the Debtors need an exit financing facility to: (a) repay their existing indebtedness under their DIP Financing Facility; (b) fund payments required to be made under the Plan on the effective date; and (c) meet the working capital and other corporate needs of the Reorganized Debtors. Under the Court-approved Plan, the Debtors' exit financing facility will consist of two facilities -- a revolving line of credit and a term loan facility. A full-text copy of the Commitment Letter is available for free at http://researcharchives.com/t/s?112f Headquartered in Mountain View, California, Silicon Graphics, Inc. (OTC: SGID) -- http://www.sgi.com/-- offers high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. The Debtor and 13 of its affiliates filed for chapter 11 protection on May 8, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10977 through 06-10990). Gary Holtzer, Esq., and Shai Y. Waisman, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. Judge Lifland confirms the Debtors' Plan of Reorganization on Sept. 19, 2006. When the Debtors filed for protection from their creditors, they listed total assets of $369,416,815 and total debts of $664,268,602. (Silicon Graphics Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SINGING MACHINE: Incurs $1.1 Mil. Net Loss in 2006 Second Quarter ----------------------------------------------------------------- The Singing Machine Company, Inc., incurred a $1.1 million net loss on $1 million of net revenues for the three months ended June 30, 2006, compared to a $1.9 million net loss on $2.7 million of revenues in 2005. At June 30, 2006, the Company's balance sheet showed $4,039,723 in total assets and $5,799,917 in total liabilities, resulting in a $1,760,194 stockholders' deficit. The Company's June 30 balance sheet also showed strained liquidity with $3.4 million in total current assets available to pay $5.7 million in total current liabilities coming due within the next 12 months. As of June 30, 2006, the Company had cash on hand of $168,635, as compared to cash on hand of $233,345 and restricted cash of $872,645 as of June 30, 2005. The Company has a factoring agreement with Crestmark Bank, pursuant to which the Company may borrow 70% of eligible accounts receivable up to approximately $2.5 million. The agreement stipulates that the Company is only allowed to factor sales originating from its warehouses in the United States. The factoring company determines the eligible receivables based on their own credit standard, and the accounts' aging. As of June 30, 2006, the credit availability under this agreement is $118,119. As of June 30, 2006, the Company's unrestricted cash on hand was $168,635. The Company had an average monthly general and administrative expenses are approximately $350,000. The Company expects that it will require approximately $1.05 million for working capital during the next three-month period. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?1213 Going Concern Doubt As reported in the Troubled Company Reporter on July 12, 2006, Berkovits, Lago & Company, LLP, expressed substantial doubt about The Singing Machine Company, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended March 31, 2005. The auditor points to the Company's inability to obtain outside long term financing, increasing stockholders' deficit and recurring losses from operations. About The Singing Machine Company Based in Coconut Creek, Florida, The Singing Machine Company (AMEX: SMD) -- http://www.singingmachine.com/-- develops and distributes a full line of consumer-oriented karaoke machines and music as well as other products under The Singing Machine(TM), Motown(TM), MTV(TM), Nickelodeon(TM), Hi-5(TM) and other brand names. The first to provide karaoke systems for home entertainment in the United States, The Singing Machine sells its products in North America, Europe and Asia. STANFIELD ARBITRAGE: Moody's Reviews Low-B Ratings on $32MM Notes ----------------------------------------------------------------- Moody's Investors Service placed on watch for possible upgrade the ratings on these notes issued in 2001 by Stanfield Arbitrage CDO, Ltd, a managed high yield structured finance collateralized loan obligation issuer: * The $53,000,000 Class B-1 Floating Rate Notes Due 2016 -- Prior Rating: A3 -- Current Rating: A3, on watch for possible upgrade * The $23,000,000 Class B-2 Fixed Rate Notes Due 2016 -- Prior Rating: A3 -- Current Rating: A3, on watch for possible upgrade Moody's also placed on watch for possible downgrade the ratings on the notes issued by Stanfield Arbitrage CDO, Ltd: * The $9,000,000 Class D-1 Floating Rate Notes Due 2016 -- Prior Rating: Ba2 -- Current Rating: Ba2, on watch for possible downgrade * The $20,000,000 Class D-2 Fixed Rate Notes Due 2016 -- Prior Rating: Ba2 -- Current Rating: Ba2, on watch for possible downgrade * The $3,000,000 Class D-3 Floating Rate Notes Due 2016 -- Prior Rating: Ba2 -- Current Rating: Ba2, on watch for possible downgrade According to Moody's, the rating actions with respect to the Class B notes reflect the delevering of the transaction which more than offset the deterioration of the transaction's performance. As reported in the August 2006 trustee report, the Class B Par Value Test was 112%, versus trigger level of 107%. Moody's also noted that the rating actions with respect to the Class D notes reflect the occurrence of previous asset defaults and par losses in the bond bucket of the CDO. STERLING FINANCIAL: Fitch Affirms C Individual Rating ----------------------------------------------------- Fitch affirmed Sterling Financial Corporation (Nasdaq: STSA): -- Issuer Default Rating 'BBB-' -- Short-term 'F3' -- Individual 'C' The Rating outlook remains Stable. STSA recently announced it has entered into a definitive agreement to purchase Northern Empire Bancshares , a $1.3 billion asset bank headquartered in Santa Rosa, California, in a deal valued at $355 million. Northern has strong asset quality, good profitability metrics and accelerates STSA's entry into the Northern California market by adding 12 branches. Importantly, the deal is structured to modestly strengthen capital metrics. Upon completion STSA will have pro-forma assets of approximately $11.2 billion and deposits of $7.3 billion. With the Northern acquisition representing the third purchase announced by STSA during 2006, Fitch will monitor the management of integration and operational risk. Fitch affirmed these ratings with a Stable Rating Outlook: -- Long-term Issuer Default Rating 'BBB-' -- Short-term 'F3' -- Individual 'C' -- Support '5' Sterling Savings Bank: -- Long-term IDR 'BBB-' -- Long-term deposits 'BBB' -- Short-term 'F3' -- Short-term deposits 'F3' -- Individual 'C' -- Support '5' SUPERB SOUND: Court Dismisses Case, Okays Kimco Lease Assumption ---------------------------------------------------------------- At Superb Sound Inc.' request, the U.S. Bankruptcy Court for the Southern District of Indiana in Indianapolis dismissed the Debtor's chapter 11 case. The Court dismisses the Debtor's case in conjunction with its order permitting the Debtor to assume the "Net Ground Lease" dated Aug. 15, 1989, between Kimco North Trust II, as successor in interest, and Passive Investors of Indiana Inc., as landlord, relating to real estate located at 8802 South U.S. 31 in Indianapolis, Indiana. In its request, the Debtor told the Honorable Frank J. Otte that it has no remaining unencumbered assets and recoverable preferences from fraudulent conveyance or other actions. The Debtor has sold its retail stores including inventory, fixtures and equipment, and general intangibles and has assumed and assigned executory contracts and leases. Accordingly, the Debtor's active retail sales operation has ceased. The Debtor's remaining assets include deferred consideration and royalty payments due from purchases of the Debtor's assets relating to the Store Sales and equity in a lease and sub-lease arrangement related to one of the Debtor's former retail store locations. Net Ground Lease The Debtor is a tenant under the "Net Ground Lease". The Debtor incurred the cost of constructing a retail store on the Greenwood Real Estate. With Kimco's consent, the Debtor made additional improvements to the Greenwood Real Estate for the purpose of entering into a sublease. The Debtor is a sublessor with respect to the Greenwood Real Estate under a "Sublease" with AT & T Wireless PCS LLC dba AT & T Wireless as subtenant. The monthly payments due the Debtor from AT & T under the Sublease exceed the monthly payments due Kimco under the Lease. Pursuant to the Court's Final DIP Order, the "equity" in the Sublease relating to the Greenwood Real Estate is collateral for the DIP Loan. The Debtor wanted to assume the Lease and Sublease to preserve the "equity" in the Sublease, with the payments collaterally assigned to the Bank. Headquartered in Indianapolis, Indiana, Superb Sound Inc. dba Ovation, Ovation Audio/Video and Ovation Home -- http://www.ovation-av.com/-- is an audio, video and mobile electronics specialist. The Company filed for chapter 11 protection on Oct. 14, 2005 (Bankr. S.D. Ind. Case No. 05-29137). William J. Tucker, Esq., and Jeffrey M. Hester, Esq., at William J. Tucker & Associates LLC represent the Debtor in its restructuring efforts. Ben T. Caughey, Esq., and Jeffrey A. Hokanson, Esq., at Ice Miller LLP represent the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed $9,416,642 in assets and $14,546,796 in debts. TERWIN MORTGAGE: Moody's Rates Cl. I-B-5 & I-B-6 Certs. at Low-B ---------------------------------------------------------------- Moody's Investors Service assigned an Aaa rating to the senior notes and a (P)Aaa rating to the class I-G certificates issued by Terwin Mortgage Trust 2006-8 and ratings ranging from Aa2 to Ba2 to the subordinate notes in the deal. The securitization is backed by fixed-rate, closed-end second lien mortgages (92.27%) and adjustable rate home equity lines-of-credit (7.73%) originated by various mortgage lenders and acquired by Terwin Securitization LLC. The rating on the senior notes is based primarily on the note insurance policy provided by Financial Guaranty Insurance Company, whose insurance financial strength is rated Aaa. The ratings on the subordinate notes and the class I-G certificates are based primarily on the credit quality of the loans and the protection against credit losses provided by subordination, excess spread, and overcollateralization. Moody's expects collateral losses to range from 7.05% to 7.55%. Specialized Loan Servicing LLC and GreenPoint Mortgage Funding, Inc. will service the loans. Moody's has assigned SLS its servicer quality rating of SQ3 as a servicer of second lien mortgage loans. These are the ratings: Terwin Mortgage Trust 2006-8 Asset-Backed Securities, Series 2006-8 Class I-A-1, Assigned Aaa Class I-A-2, Assigned Aaa Class I-M-1, Assigned Aa2 Class I-M-2, Assigned Aa3 Class I-M-3, Assigned A2 Class I-B-1, Assigned A3 Class I-B-2, Assigned Baa1 Class I-B-3, Assigned Baa2 Class I-B-4, Assigned Baa3 Class I-B-5, Assigned Ba1 Class I-B-6, Assigned Ba2 Class I-G, Assigned (P)Aaa The notes were sold in privately negotiated transactions without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. TOWER RECORDS: Committee Taps McGuireWoods as Bankruptcy Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of MTS Incorporated, dba Tower Records, and its debtor-affiliates, asks the U.S. Bankruptcy Court for the District of Delaware for permission to retain McGuirewoods LLP as its lead bankruptcy counsel. McGuirewoods will: a. advise the Committee with respect to its powers and duties under Section 1103 of the Bankruptcy Code; b. advise the Committee with respect to its efforts to interview, select, and retain a financial advisor to provide the Committee with financial advisory, forensic accounting, investment banking, and other related services in connection with the Debtors' bankruptcy cases, in general, and the Debtors' proposed sale of their businesses; c. advise and represent the Committee with respect to the Debtors' efforts to obtain postpetition secured financing; d. advise and represent the Committee with respect to its review and analysis of the relief requested in the Debtors' various bankruptcy pleading and its negotiation of, or formal objection tom requested relief as when necessary to preserve the rights of the Debtors' unsecured creditors and to maintain the value of the Debtors' assets; e. advise and represent the Committee in connection with its performance of the necessary due diligence and analysis to ensure that the Debtors conduct a fully vetted and meaningful investment banking and sale process in the Debtors' bankruptcy cases in order to maximize the value of the sale proceeds; f. advise and represent the Committee in its role to evaluate and negotiate the terms and conditions of any offer to purchase the Debtors' businesses or assets so as to maximize the sale proceeds that will be allocated and preserved for subsequent distribution to the Debtors' unsecured creditors; g. advise and represent the Committee with respect to its investigation into the Debtors' businesses and prior transactions in order to determine the viability of any theories of recovery against any parties; h. take all necessary action to preserve, protect, and maximize the value of the Debtors' estates for the benefit of the Debtors' unsecured creditors, including but not limited to, investigating the acts, conduct, assets, liabilities, and financial condition of the Debtors, the operation of the Debtors' businesses and the desirability of the continuance of such businesses, and any other matters relevant to these chapter 11 cases or to the formulation of a plan; i. advise and represent the Committee in connection with the formulation of a plan that is in the best interests of the Committee and the unsecured creditors of the Debtors' estates; j. appear before the Court, any appellate courts, and the U.S. Trustee to protect the interests of the Committee and the value of the Debtors' estates before the courts and the U.S. Trustee; k. consult with the Debtors' professional on behalf of the Committee regarding various tax, intellectual property, labor and employment, real estate, corporate, and litigation matters involving the Debtors or their estates, as well as the Debtors' general business or operational issues; l. prepare and prosecute any and all motions, applications, objections, replies, orders, complaints, answers, reports, and other papers on behalf of the Committee that may be necessary to assert or preserve the Committee's interest in the Debtors; chapter 11 cases; and m. perform all other necessary legal services and provide all other necessary legal advice to the Committee in connection with the Debtors' chapter 11 cases. Lawrence E. Rifken, Esq., a partner at McGuireWoods, tells the Court that the firm's professionals bill: Professional Hourly Rate ------------ ----------- Partners $275 - $700 Associates $200 - $405 Paralegals $80 - $235 Mr. Rifken assures the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Mr. Rifken can be reached at: Lawrence E. Rifken, Esq. McGuirewoods LLP 1750 Tysons Boulevard, Suite 1800 McLean, VA 22102-4215 Tel: (703) 712-5000 Fax: (703) 712-5050 http://www.mcguirewoods.com/ Headquartered in West Sacramento, California, MTS, Inc., dba Tower Records -- http://www.towerrecords.com/-- is a retailer of music in the U.S., with nearly 100 company-owned music, book, and video stores. The Company and seven of its affiliates filed for chapter 11 protection on Aug. 20, 2006 (Bankr. D. Del. Case Nos. 06-10886 through 06-10893). Richards, Layton & Finger, P.A. and O'Melveny & Myers LLP represent the Debtors. When the Debtors filed for protection from their creditors, they estimated assets and debts of more than $100 million. The Debtors' exclusive period to file a chapter 11 plan expires on Dec. 18, 2006. The Company and its affiliates previously filed for chapter 11 protection on Feb. 9, 2004 (Bankr. D. Del. Lead Case No. 04-10394). The Court confirmed the plan on March 15, 2004. TRANS ENERGY: Has $2.1 Million Working Capital Deficit at June 30 ----------------------------------------------------------------- Trans Energy, Inc., earned $821,239 of net income on $812,107 of net revenues for the three months ended June 30, 2006, in contrast to a $525,857 net loss on $861,468 of revenues in 2005, the Company disclosed in its second quarter financial statements on Form-10QSB to the Securities and Exchange Commission. At June 30, 2006, the Company's balance sheet showed $4,402,813 in total assets and $5,290,877 in total liabilities, resulting in a $888,064 stockholders' deficit. The Company's June 30 balance sheet also showed strained liquidity with $1.5 million in total current assets available to pay $3.7 million in total current liabilities coming due within the next 12 months. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?1212 Going Concern Doubt HJ & Associates, LLC, in Salt Lake City, Utah, raised substantial doubt about Trans Energy Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's losses from operations, accumulated deficit and working capital deficit. Trans Energy, Inc., -- http://www.transenergy.com-- has been in the business of production, transportation, transmission, sales and marketing of oil and natural gas in the Appalachian and Powder River basins since 1993. With interests in West Virginia, Ohio, Pennsylvania, Virginia, Kentucky, New York, and Wyoming; Trans Energy and its subsidiaries own and operate oil and gas wells, gas transmission lines, transportation systems and well construction equipment and services. TRANSAX INT'L: June 30 Balance Sheet Upside-Down by $3.7 Million ---------------------------------------------------------------- Transax International Limited's balance sheet at June 30, 2006 showed a $3,717,316 total stockholders' deficit from total assets of $2,196,551 and total liabilities of $5,913,867. The Company's balance sheet at June 30, 2006 also showed negative working capital with $1,085,530 in total current assets and $4,943,668 in total current liabilities. Net loss for the three months ended June 30, 2006, rose to $1,302,259, from net loss of $167,041 in the three months ended June 30, 2005. Revenues also increased to $1,034,844 in the current quarter compared to revenues of $861,023 in the same period last year. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?1201 Based in Miami, Florida, Transax International Limited (OTCBB: TNSX) -- http://www.transax.com/-- provides health information management systems to hospitals, physicians and health insurance companies. The Company's subsidiaries, TDS Telecommunication Data Systems LTDA provides services in Brazil; Transax Australia Pty Ltd. operates in Australia; and Medlink Technologies Inc. initiates research and development. TRIBUNE CO: Forms Special Panel to Enhance Shareholders' Value -------------------------------------------------------------- Tribune Company's board of directors has established an independent special committee to oversee management's exploration of alternatives for creating additional value for shareholders. This process is expected to conclude by the end of 2006. "In pursuing the leveraged recapitalization that was launched in June, we emphasized that it would not preclude us from pursuing other value-creating initiatives in the future," Dennis FitzSimons, Tribune chairman and chief executive officer said. "[This]day's actions, along with our performance improvement plan, are consistent with our overall objective to generate the most value for all Tribune shareholders." Named to the special committee of the board were Enrique Hernandez, Jr., Betsy D. Holden, Robert S. Morrison, William A. Osborn, J. Christopher Reyes, Dudley S. Taft, and Miles D. White. "Management and the board have been working together to determine the best course of action for creating shareholder value. The board unanimously agrees with this approach, and we will work expeditiously to complete the process," Mr. Osborn, Tribune's lead independent director, said. Restructuring of Two Partnerships The company also announced the restructuring of two partnerships known as TMCT, LLC (TMCT I) and TMCT II, LLC (TMCT II), which it inherited six years ago in its acquisition of Times Mirror. In a unanimous vote, with Chandler family representatives abstaining due to their interests in the partnerships, Tribune's board approved the terms of the transaction. The two partnerships currently own all of Tribune's preferred stock, 51.3 million shares of Tribune common stock, real estate used by the Los Angeles Times, Newsday, Baltimore Sun and Hartford Courant, and various other investments. Under the terms of the restructuring, Tribune will receive distributions of all of the Tribune preferred stock and approximately 39.5 million shares of the Tribune common stock held by the partnerships. Tribune also will receive the right to acquire the real estate owned by the partnerships in January 2008 for $175 million. Additionally, Tribune will retain a 5% interest in the partnerships. The Chandler Trusts will retain a 95% interest in the partnerships. The two partnerships will distribute within 30 days the 11.8 million shares of Tribune common stock remaining in the partnerships to the Chandler Trusts. As a result, the Chandler Trusts will increase their holdings of Tribune common stock to approximately 48.7 million shares from approximately 36.9 million. The Chandler Trusts have agreed to vote these additional 11.8 million shares in the same proportion as all other shares are voted on any matter requiring a shareholder vote for a period of 12 months from the date of this distribution. As a result of the distributions, the number of shares of Tribune common stock outstanding will increase by 1.6 million. The reason for this increase is that the 39.5 million shares of common stock Tribune is receiving is less than the 80% of the common stock in the partnerships that Tribune currently treats as treasury stock for financial reporting purposes. Tribune's earnings per share will not be affected by the restructuring because the impact of the increase in shares outstanding will be offset by the elimination of the preferred stock dividends. The company expects to record a one-time gain of approximately $45 million as a result of the transaction. "The Chandler Trusts are pleased that we reached an agreement that serves the interests of all Tribune shareholders. We will now work collaboratively with management and the board to build value for all shareholders," Warren B. Williamson, chairman of the Chandler Trusts, said. "The restructuring of these partnerships frees the Company to move quickly to pursue strategic alternatives to further enhance shareholder value," Mr. FitzSimons said. "Under these terms, all shareholders benefit." In other business, the Tribune board of directors approved the sale of WLVI-TV (channel 56), Boston, to Sunbeam Television Corp. for $113.7 million. The sale was announced on Sept. 14, 2006, contingent upon board approval. The transaction will close upon regulatory approval. The sale of WLVI is part of Tribune's performance improvement plan announced May 30. The plan includes at least $500 million in asset sales and approximately $420 million have been identified so far. On Aug. 7, Tribune completed the sale of WATL-TV in Atlanta for $180 million in cash. In July, Tribune sold 2.8 million shares of Time Warner common stock for net proceeds of approximately $46 million. In June, the company announced the sale of WCWN-TV in Albany for $17 million. About Tribune Headquartered in Chicago, Illinois, Tribune Company (NYSE: TRB) -- http://www.tribune.com/-- is a media company, operating businesses in publishing and broadcasting. In publishing, Tribune operates 11 leading daily newspapers including the Los Angeles Times, Chicago Tribune and Newsday, plus a wide range of targeted publications. The company's broadcasting group operates 26 television stations, Superstation WGN on national cable, Chicago's WGN-AM and the Chicago Cubs baseball team. * * * As reported in the Troubled Company Reporter on June 19, 2006, Moody's Investors Service downgraded Tribune Company's senior unsecured debt rating to Ba1 from Baa3 and downgraded its short- term commercial paper rating to Not Prime from Prime-3 concluding the review for downgrade initiated on May 30, 2006. Moody's assigned a Ba1 Corporate Family Rating to The Tribune Company. Moody's said the outlook is stable. TRIBUNE CO: Shareholder Files Suit Against Eight Directors ---------------------------------------------------------- Frank Garamella, commenced a lawsuit against eight directors of Tribune Company on Sept. 19 at the U.S. District Court in Chicago. Mr. Garamella, a shareholder of the company, named Dennis Fitzsimons, Tribune chairman and chief executive officer, as one of the defendants. The suit alleges that the Tribune directors breached their fiduciary duty to the company when they snubbed offers to buy The Los Angeles Times. About Tribune Headquartered in Chicago, Illinois, Tribune Company (NYSE: TRB) -- http://www.tribune.com/-- is a media company, operating businesses in publishing and broadcasting. In publishing, Tribune operates 11 leading daily newspapers including the Los Angeles Times, Chicago Tribune and Newsday, plus a wide range of targeted publications. The company's broadcasting group operates 26 television stations, Superstation WGN on national cable, Chicago's WGN-AM and the Chicago Cubs baseball team. * * * As reported in the Troubled Company Reporter on June 19, 2006, Moody's Investors Service downgraded Tribune Company's senior unsecured debt rating to Ba1 from Baa3 and downgraded its short- term commercial paper rating to Not Prime from Prime-3 concluding the review for downgrade initiated on May 30, 2006. Moody's assigned a Ba1 Corporate Family Rating to The Tribune Company. Moody's said the outlook is stable. TRM CORPORATION: S&P Holds CCC Ratings on Developing Watch ---------------------------------------------------------- Standard & Poor's Ratings Services' 'CCC' ratings on Portland, Oregon-based TRM Corporation remained on CreditWatch with developing implications, where they were placed on March 21, 2006, reflecting continued operating uncertainties since the CreditWatch placement. "While the company was successful in refinancing its defaulted credit agreement, operational trends continue to be negative, the company is highly leveraged, and cash flow remains weak," said Standard & Poor's credit analyst Martha Toll-Reed. ATM revenues declined 10% in the first six months of 2006, mostly because of ATM attrition. TRM expects continued erosion of its ATM portfolio through 2006, although at a decelerating pace. Profitability has declined sharply, with EBITDA margins at 14% for the first half of 2006, down from about 31% in the year earlier period. Vault cash expense, unfavorable foreign exchange and higher processing expenses contributed to the decline in profitability. Cash flow remains under pressure because of declining profit levels combined with required upgrades of about 60% of TRM's ATM portfolio to comply with industry encryption standards. Standard & Poor's will monitor the company's progress in reversing current operating trends and evaluate its new credit agreements to determine the final impact on the rating. Upside rating potential is predicated on confirmation of acceptable profitability and cash flow trends. If the company is unable to reverse negative operating trends, the rating could be lowered. UNION STAMPING: Involuntary Chapter 11 Case Summary --------------------------------------------------- Alleged Debtor: Union Stamping & Assembly, Inc. 3201 Enterprise Parkway, Suite 490 Cleveland, OH 44122 Case Number: 06-20586 Involuntary Petition Date: September 20, 2006 Chapter: 11 Court: Southern District of West Virginia (Charleston) Petitioners' Counsel: Scott Edward Barnette, Esq. Jackson Kelly PLLC 1600 Laidley Tower P.O. Box 553 Charleston, WV 25322 Tel: (304) 340-1020 Fax: (304) 340-1080 Petitioners Nature of Claim Claim Amount ----------- --------------- ------------ Park Corporation Lease Obligations $150,000 6200 Riverside Drive Cleveland, OH 44135 Dynamic Graphics Trade Debt $2,100 306 MacCorkle Avenue, Southwest South Charleston, WV 25303 URANIUM RESOURCES: 2nd Quarter 2006 Net Loss Decreases to $2.1MM ---------------------------------------------------------------- For the three months ended June 30, 2006, Uranium Resources Inc.'s net loss decreased to $2,116,097 from a net loss of $10,081,642 in the three months ended June 30, 2005. The Company's total revenues increased to $1,844,770 for the current quarter from total revenues of $1,060,451 in the same quarter last year. At June 30, 2006, the Company's balance sheet showed total assets of $51,920,507, total liabilities of $8,317,339 and shareholders' equity of $43,603,168 -- a 21% recovery from a stockholders' deficit of $35,990,370 in Dec. 31, 2005. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?1204 As reported in the Troubled Company Reporter on May 9, 2006, Hein & Associates LLP expressed substantial doubt about Uranium Resources Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's recurring losses from operations and its stockholders' deficit at Dec. 31, 2005. Headquartered in Dallas, Texas, Uranium Resources Inc. -- http://www.uraniumresources.com/-- specializes in in-situ mining solution and holds mineralized uranium materials in South Texas and New Mexico. Since 1988, the Company has produced about 6.1 million pounds of uranium from two South Texas properties, 3.5 million pounds from Kingsville Dome and 2.6 million pounds from Rosita. Additional mineralized uranium materials exist at the Kingsville Dome and Rosita properties. In 1999, the Company shut down its production due to depressed uranium prices, and from the first quarter of 2000 until December 2004, it had no source of revenue and had to rely on equity infusions to remain in business. USGEN NEW ENGLAND: Braskan Claim Hearing Scheduled on Sept. 26 -------------------------------------------------------------- The Honorable Paul Mannes of the U.S. Bankruptcy Court for the Middle District of Maryland will conduct a hearing on Sept. 26, 2006 to consider USGen New England Inc.'s objection to Brascan Energy Marketing Inc.'s claim. The Court will address these issues at the trial: (a) whether Brascan is entitled to go forward with evidence in connection with establishing the validity and amount of Claim No. 418; (b) whether Claim No. 418 was timely filed and relates back to Claim No. 327; (c) whether the rejection damages should be determined and calculated as of immediately prior to the Petition Date or some later date; (d) whether Brascan's calculation of damages appropriately takes into account mitigation; and (e) the appropriate discount rate to apply to future damages. The Court, on Nov. 20, 2003, authorized USGen to reject its 30- year power purchase agreement dated July 26, 1985, with Pontook Operating Limited Partnership. On Jan. 28, 2004, Brascan Energy, now known as Brookfield Energy Marketing Inc., as agent of Pontook, filed Claim No. 327 asserting $240,947 owed under the Pontook Agreement and $10,162,400 for damages arising from the rejection of the Agreement. On May 6, 2005, Brascan filed Claim No. 418, amending its prior claim, to assert rejection damages of $24,934,700. USGen does not dispute the $240,947 prepetition claim. However, USGen wants the rejection claims disallowed or reduced. Parties' Pre-Trial Briefs (1) Brascan Holly E. Loiseau, Esq., at Weil, Gotshal & Manges LLP, in Washington, D.C., notes that Rule 3001(f) of the Federal Rules of Bankruptcy provides that a proof of claim constitutes prima facie evidence of the validity and amount of the claim. If the objecting party comes forward with evidence sufficient to rebut that presumption, the burden of proof remains with the claimant to establish the validity and amount of its claim. Hence, Ms. Loiseau asserts, Brookfield is entitled to go forward and present its evidence at the trial to establish its claim. On the other hand, according to Ms. Loiseau, USGen bears the burden of proof with regard to mitigation, which is an affirmative defense that must be pleaded and proved by the breaching party. Ms. Loiseau maintains that Claim No. 418 is an amendment to Claim No. 327. The rejection damages in the amended claim are of the same nature as that asserted in the original claim and were calculated using the same methodology. The damages calculated in Claim No. 418 more accurately reflect the market conditions as of the date immediately prior to the Petition Date, she explains. Brascan denounces USGen's argument that its shareholder, NEGT, will be prejudiced by Brascan's ability to amend Claim No. 327 by a dollar-for-dollar reduction on its equity return. Ms. Loiseau notes that NEGT, as a shareholder, is not entitled to recover anything until creditors are paid in full. In addition, since the USGen Plan is essentially an absolute priority plan, Claim No. 418 is covered under Section 726(a)(3), which provides that tardily filed claims are entitled to distributions prior to any distribution to equity holders. The rejection damages should be measured as of the date immediately prior to USGen's Petition Date and are to be measured using data known available as of that date, Ms. Loiseau asserts, citing rulings in In re American HomePatient, Inc., 414 F.3d 614 (6th Cir. 2005), cert. denied, 126 S. Ct. 1571 (2006) and In re Enron Corp., 330 B.R. 387 (Bankr. S.D.N.Y. 2005), aff'd, In re Enron Corp., 05 Civ. 10164, slip op. (S.D.N.Y. Aug. 23, 2006). Ms. Loiseau also notes that under Section 365(g)(1) of the Bankruptcy Code, a debtor's rejection of an executory contract constitutes a breach of the contract as of immediately prior to its commencement of its bankruptcy case. Even though the contract rejection occurs postpetition, Section 502(g) makes clear that a rejection claim will be determined and allowed just as if the claim had arisen immediately preceding the commencement of the case. Both Claim No. 418 and the expert report of Kurt G. Strunk valued Brascan's rejection damages using information known and available as of July 7, 2003, the date immediately prior to the Petition Date, Ms. Loiseau notes. Brascan's calculation of rejection damages appropriately takes into account mitigation, Ms. Loiseau relates. Brascan measured its damages by evaluating the difference between: (i) the revenues that Brascan would have received under the Pontook Agreement but for USGen's breach; and (ii) the revenues that Brascan could have obtained, as of the date of the breach, by selling the entire net electric output of Pontook's hydroelectric power facility located in Dummer, New Hampshire, to another buyer under a comparable long-term, fixed-price contract. Brascan disputes USGen's contentions that mitigation must be measured by determining revenues that may be earned by hourly sales into the volatile spot market for power from 2003 through 2017. Brascan maintains that it is entitled to the value of USGen's promise to pay a fixed price for power over the 14 years since the rejection of the Pontook Agreement. The appropriate discount rate for the rejection claims unmatured as of the Petition Date is the rate that most accurately determines the present value of a future amount, Ms. Loiseau states. Accordingly, the risk-free rate as of July 7, 2003 is the discount rate that should be applied to Brascan's future damages, she asserts citing, Kucin v. Devan, 251 B.R. 269 (D. Md. 2000) In re Highland Superstores, Inc., 154 F.3d 573, 579 (6th Cir. 1998). If the Court chooses not to apply the risk-free rate, another reasonable, conservative discount rate to be applied to future damages would be Pontook's cost of equity capital as of July 7, 2003, Ms. Loiseau says. (2) USGen Thomas P. Preston, Esq., at Blank Rome LLP, in Wilmington, Delaware, asserts that it is state, not federal law, which determines the amount and validity of Brascan's rejection claims. Once calculated under applicable state law, the claims are then subject to the allowance and disallowance provisions of Section 502 of the Bankruptcy Code. Under the Commonwealth of Massachusetts' common law, the fundamental goal in measuring damages for breach of contract is to place the injured party in as good a position as it would have been in, had the contract been performed. A plaintiff in a breach of contract action must prove "actual" loss, and speculative and hypothetical losses are not compensable under Massachusetts law. Brascan can prove no damages under Massachusetts common law because it has sold and likely will continue to sell the Pontook Facility's output at average spot-market rates in excess of the rate provided in the Pontook Agreement, Mr. Preston asserts. The Court, Mr. Preston adds, should also disallow and expunge the Claims for Rejection Damages in the exercise of its equitable powers or under Section 105(a). Equitable considerations include: -- Brascan has no actual damages and, in fact, has benefited and will continue to benefit handsomely from the rejection of the Pontook Agreement; -- The rejection of the Pontook Agreement was an express condition to the purchase of Pontook; -- Brascan purported to increase the amount of its rejection damages by 145%, on the eve of confirmation of the USGen Plan, when it was clear that general unsecured creditors would receive full distributions plus interest; and -- The allowance of any claim for rejection damages would: (i) treat Brascan much more favorably than other general unsecured creditors and (ii) be decidedly unfair to the creditors in the bankruptcy case of NEGT, which creditors are now the ultimate beneficiaries of the USGen estate. Mr. Preston also notes that Claim No. 418, which was filed after the Jan. 9, 2004 claims bar date, can only be considered timely filed only if it is fairly characterized as an amendment of a timely filed proof of claim. Mr. Preston argues that Claim No. 418 is no mere "amendment" of Claim No. 327. Claim No. 481 was calculated using completely different methodologies and increased the amount of Claim No. 327 by almost $15,000,000. Consequently, USGen asks the Court to disallow Brascan's claims for rejection damages. (3) NEGT National Energy & Gas Transmission, Inc., as USGen's indirect parent and ultimate equity holder, supports USGen's objections to Brascan's rejection claims. Matthew A. Feldman, Esq., at Willkie Farr & Gallagher LLP, in New York, argues that Brascan cannot use American HomePatient and Enron, which served to reduce creditors' claims in those cases, to increase its claims against USGen's estate. He notes that Brascan's claim under state law is already lower than what the Enron court would otherwise consider the maximum allowable amount of Brascan's claims under the Bankruptcy Code. Regardless of when measured, Pontook suffered no damages by USGen's rejection of the Pontook Agreement, Mr. Feldman asserts. He notes that Pontook was obligated to secure rejection of the Pontook Agreement as a condition of closing to its sale agreement with Brascan. If the Debtor had not rejected the Pontook Agreement when it did, Pontook would have had to move to compel rejection shortly thereafter to enable it to close its deal with Brookfield. Thus, Pontook was not put in a worse position by virtue of USGen's rejection of the Pontook Agreement, Mr. Feldman argues. "Without any harm, there can be no claim," he says, citing In re Fleishman, 138 B.R. 641, 648 (Bankr. D. Mass. 1992). NEGT further asserts that Claim No. 481 cannot be viewed as an amendment to Claim No. 327. Mr. Feldman notes, among others, that bankruptcy courts in the District of Maryland have ruled that "for a subsequent claim to be considered an amendment of a timely filed claim, rather than a new claim, the second claim should not only be of the same nature as the first but also within the amount to which the first claim provided notice." Claim No. 481, asserting $24,934,700 in rejection damages, is not "reasonably within the amount" of Claim No. 327, which sought $10,162,400, he points out. Mr. Feldman adds that the 14-month delay in filing the "amended" claim is unreasonable, especially given the fact that Pontook, which assigned any claims related to the rejection of the Pontook Agreement to Brascan, had notice of the Bar Date. Expert Reports Brascan will present Kurt G. Strunk, a Senior Consultant at National Economic Research Associates, Inc., as its expert, at the trial. Mr. Strunk will provide testimony related to, among others, the present value of rejection damages incurred by Pontook as a result of the rejection of the Pontook Agreement. On the other hand, USGen retained the services of Robert B. Stoddard, vice president of CRA International, to provide expert opinion as to the amount of damages, if any, caused by the rejection of the Pontook Agreement. In his initial report, Mr. Strunk calculated the rejection damages to be in the range of $15,290,000 to $19,650,000, depending on the choice of valuation date and discount rate. Mr. Strunk used discount rates ranging from 4.37% to 7.23%. Mr. Strunk's calculations do not corroborate with any amounts asserted in Brascan's rejection claims, USGen's counsel, Mr. Preston, points out. He notes, "Brascan has attempted to characterize Mr. Strunk's analysis as a "conservative estimate" and maintains that it is entitled to the full amount of the Second Rejection Damages Claim, notwithstanding that [the] amount is not supported by its own expert." Mr. Preston also notes that Mr. Strunk, like Brascan, gave no consideration to actual sales of the Pontook Facility's output since the Rejection Date and ignored the best evidence of anticipated future sales. On the other hand, Mr. Stoddard says, there are no aggregate damages associated with the rejection of the Pontook Agreement, and instead, as a result of increased energy prices, the rejection of the Agreement will result in a net benefit of $2,300,000. Mr. Stoddard calculated damages by comparing the annual revenues that would have been received under the Pontook Agreement to the annual revenues that have been and will in the future be generated through spot-market sales. Mr. Stoddard's findings provide that revenues generated from sales of Pontook Operating Limited Partnership Facility's output in the ISO New England, Inc., spot markets since the November 18, 2003 rejection date of the Agreement have, in the aggregate exceeded the revenues that would have been earned during that same period under the Pontook Agreement. In addition, future sales of the Pontook Facility's output in the ISO-NE spot markets likely will continue to generate more aggregate revenues than would have been earned under the Pontook Agreement. Mr. Stoddard applied a 10% annual discount rate to determine the net present value of the past-period and future-period damages and benefits. In Mr. Stoddard's opinion, a 10% discount rate is appropriate because Brascan itself used a range of discount rates of 9.5% to 11% to assess the cash flows associated with the Pontook Facility during due diligence for the sale of the Facility. Mr. Strunk, in his rebuttal report provided an analysis similar to Mr. Stoddard's analysis. Specifically, Mr. Strunk concluded that rejection damages, when based on actual spot-market sales and up-to-date projections, are $1,340,000 to $1,820,000, depending on the discount rate. However, according to Mr. Preston, Mr. Strunk overstated these amounts by, among other things, using a hypothetical $5.29/MWh Product Discount and discount rates of 4.65% and 7.06%. Motions to Exclude Evidence (i) Brascan Pursuant to Rule 26(a)(2)(C) of the Federal Rule of Civil Procedure, Brascan asks the Court to exclude from the trial the proposed supplemental report by Mr. Stoddard, as well as any testimony of his that is outside the scope of his written reports produced during the course of the pre-trial discovery period. Ms. Loiseau says that Mr. Stoddard had conveyed his intention to submit a new opinion of damages shortly before the start of the trial. However, as of August 31, 2006, Brascan has not seen the supplemental report, and it does not have a clear understanding of what his opinions will be under oath at the trial. Brascan will be highly prejudiced if the Court allows USGen to submit late-filed supplemental expert reports and testimonies, Ms. Loiseau says. (ii) USGen USGen tells Judge Mannes that Brascan has proposed to present at the trial e-mails related to purported quotes of UBS AG and Constellation Global Commodities for a hypothetical "product" that purportedly would be similar to the Pontook Agreement. Mr. Preston notes that UBS and Constellation are not parties to the dispute between USGen and Brascan, nor have their employees been identified by Brascan as witnesses. Mr. Preston argues, among others, that any reference to the Hypothetical Quotes is inadmissible hearsay under Rules 801 and 802 of the Federal Rules Of Evidence, which states "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter stated, is inadmissible evidence." About USGen New England Headquartered in Bethesda, Maryland, USGen New England Inc., an affiliate of PG&E Generating Energy Group LLC, owns and operates several electric generating facilities in New England and purchases and sells electricity and other energy-related products at wholesale. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30465). Marc Richards, Esq., at Blank Rome LLP represents USGen New England in its restructuring efforts. When it sought chapter 11 protection, the Debtor reported assets amounting to $2,337,446,332 and debts amounting to $1,249,960,731. The Debtor filed its Second Amended Plan of Liquidation and Disclosure Statement on March 24, 2005. The Plan was confirmed on May 13, 2005. (PG&E National Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) USGEN NEW ENGLAND: Wants Tennessee Gas' Claim Reduced to $1.2 Mil. ------------------------------------------------------------------ On Oct. 15, 2003, Tennessee Gas Pipeline Company filed Claim No. 410 for $45,705,529 asserting damages arising from USGen New England, Inc.'s rejection of two Gas Transportation Agreements. On Sept. 22, 2004, TGP filed an amended claim for $41,349,873 to account for mitigation of its damages to that date. Following discovery, the Honorable Paul Mannes of the U.S. Bankruptcy Court for the Middle District of Maryland held a six- day trial starting July 18, 2006 regarding four issues: (1) whether USGen should receive mitigation credit for five disputed contracts; (2) whether USGen should receive mitigation credit based on speculative future sales; (3) whether USGen should receive mitigation credit against its Throughput Commitment based on volumes transported for mitigating shippers; and (4) the net present value of TGP's damages. The parties have submitted their post-trial briefs in connection with the issues heard at the trial. Post-Trial Briefs A. TGP Kenneth W. Irvin, Esq., at McDermott Will & Emery LLP, in Washington, D.C., notes that USGen presented no fact witnesses and a lone expert witness, Thomas Norris. On the other hand, TGP presented three fact witnesses -- Susan Argue, James Eckert, and Jay Dickerson -- and two experts -- Andrea Wolfman and William Gwozd. Mr. Irvin says that TGP is entitled to just compensation for damages sustained by USGen's rejection of the Agreements, which constituted breach of contract. As of July 31, 2006, TGP's gross damages resulting from rejection of the Agreements total $33,912,713, net of $11,792,812 in mitigation credit. Applying a 6.376% discount rate as of July 31, 2006, TGP's damages total $28,767,857: Net Present Value Historical Losses Net of Mitigation Rejection to 7/31/06 8/1/06 to 10/31/13 -------------------- ------------------ Contract Demand Revenues $3,300,507 $15,697,455 Throughput Guarantee $5,420,253 - Surcharges $3,335,256 $1,014,386 ----------- ----------- Amount Owed to TGP $12,056,016 $16,711,841 The record proves that the nearly $12,000,000 credit given USGen reasonably and appropriately satisfies TGP's duty of mitigation, and that USGen has no right to any additional mitigation credit, Mr. Irvin states. Based on testimonies by Mr. Norris and Mr. Dickerson, there is no basis to award USGen more mitigation credit or to deny TGP recovery of damages for the unsold portions of the capacity formerly reserved under the Agreements, Mr. Irvin asserts. TGP's experts affirmed that TGP made reasonable but unsuccessful efforts to mitigate its losses with respect to the remaining capacity, Mr. Irvin notes. Mr. Dickerson testified that TGP has not, despite reasonable efforts, mitigated all of its damages to date, and that TGP has not sold any of the turned-back USGen capacity beyond 2009. Moreover, because USGen elected not to avail itself of a unique and potentially better opportunity to mitigate damages by releasing its capacity to other shippers instead of rejecting the Agreements, USGen has no right to complain about TGP's efforts or to receive any benefit of doubt, Mr. Irvin states. USGen's expert and its cross-examination of TGP's witnesses adduced no credible basis for awarding USGen any further mitigation credit, Mr. Irvin maintains. He notes that the witness testimony and exhibits demonstrate: -- USGen's rejection of the Agreements did not cause any incremental revenues from the five disputed contracts; -- No credible basis exists for reducing USGen's liability based on assumed future sales -- USGen's claims about the future rest upon speculation and abstractions that strain credulity, and establish no basis for believing any future sale is reasonably ascertainable; and -- USGen has no right under the plain terms of the parties' contract to offset its Throughput Commitment based on the volumes transported for mitigating shippers; -- The proper and equitable means for determining the net present value of TGP's claim uses TGP's cost of funds as the discount factor (6.376%) and calculates future damages as of trial. TGP satisfied the Federal Energy Regulatory Commission and Texas requirements for mitigation and acted prudently and in good faith to mitigate the damages resulting from rejection of the Agreements, Mr. Irvin adds. He notes that every fact witness testified that TGP dealt with the USGen capacity in the ordinary course and that no action was taken or not taken to increase TGP's claim against the USGen estate. Through its reasonable efforts, TGP has resold portions of the capacity rejected by USGen and has credited those amounts to USGen as mitigation, Mr. Irvin points out. However, USGen wants TGP's claim reduced by $5,000,000 for mitigation credits for five contracts entered into by TGP. According to Mr. Irvin, evidence adduced at trial establishes that no cause exists for awarding USGen mitigation credit for the Hess Stagecoach to Mendon, Hess Dracut to White Plains and Select contracts because the USGen capacity was not the key in any of those contracts to unlocking access from Zone 5 to Zone 6. In each case, the shippers used the USGen capacity merely to transport gas within Zone 6, and TGP did not earn incremental revenue from that intra-zonal transportation. The undisputed record evidence establishes that TGP could have earned the same revenues associated with these contracts, even if USGen had not turned back its capacity, Mr. Irvin avers. In addition, Mr. Irvin says, no cause exists for mitigation credit for the last five months of TGP's contracts with Connecticut Natural Gas and Southern Connecticut Natural Gas. Pursuant to the contracts, TGP agreed to deliver gas from Dracut, Massachusetts to Bloomfield, Connecticut, from November 1, 2004 to March 31, 2006. Under the Gas Transportation Agreements, USGen owed TGP $295,800 per month for the reservation charge. For the last five months of the Connecticut Contracts, TGP's damages were fully mitigated, and TGP recognized the full $295,800 per month as mitigation credit. For the last five months of the Connecticut Contracts, there are no damages for which to apply mitigation because the USGen capacity was fully resold, Mr. Irvin contends. He says that USGen's claim to mitigation credit for the last five months of these contracts seeks to gain a benefit in breach that USGen did not enjoy outside of bankruptcy -- an offset to its liability from sales of capacity other than the USGen capacity. Moreover, no cause exists for granting USGen any mitigation credit based on assumed future sales, Mr. Irvin maintains. The fact that TGP was successful in reselling the capacity in 2006 does not mean TGP will be successful in selling the capacity every month through October 2013. The record shows TGP has not entered into any contracts to utilize the USGen capacity through the entire term of the Agreements, which expire Oct. 31, 2013, and no shipper stands ready, willing, and able to contract for the USGen capacity beyond 2009. USGen's claim for mitigation credit against its Throughput Commitment for the volumes transported for mitigating shippers lacks any valid basis because the requirement of the Agreements for allowing the offset do not exist here, Mr. Irvin contends. The Throughput Commitment was a special promise given by USGen in consideration for TGP's agreement to convert from the NET rate schedule to the less expense FT-A rate schedule. USGen personally promised to transport 90% of its 60,000 Dth/day reservation volume, measured over three 12-month periods and one six-month period. TGP would not have agreed to allow USGen to convert from the NET rate schedule to the FT-A rate schedule without this consideration, and TGP has not received a similar promise from any of the shippers utilizing the USGen capacity. As such, this special promise is not mitigatable, Mr. Irvin says. Throughput Commitment would be satisfied based only on volumes transported for USGen or a "Replacement Shipper." However, according to Mr. Irvin, the shippers who contracted for the USGen turned-back capacity do not meet the requirements of the "Replacement Shipper" definition. USGen was required to take certain steps to find replacement shippers, and it did not. None of those shippers succeeded to 100% of USGen's obligations, and USGen does not stand as guarantor. Accordingly, TGP asks the Court to enter judgment allowing TGP's claim for $28,767,857, and directing USGen to pay that claim forthwith in cash and release of the $902,292, plus interest, deposit held by TGP. In addition, under Section 38.001 of the Texas Civil Practice & Remedies Code, USGen is liable to TGP for attorneys' fees, Mr. Irvin relates. Accordingly, the Court should further allow TGP to establish the amount necessary to cover its attorneys' fees after decision on the merits, he asserts. B. USGen "This is a case of a claimant attempting to use the bankruptcy process to recover damages beyond what it would receive outside of bankruptcy," Gordon A. Coffee, Esq., at Winston & Strawn LLP, Washington, D.C., asserts. Mr. Coffee maintains that evidence at the trial demonstrated that TGP has been tremendously successful in reselling the gas pipeline capacity formerly reserved by USGen under the Gas Transportation Agreements. Since USGen's rejection of the Agreements in September 2003, TGP has been able to resell most, and in many months all, of the 60,000 dekatherms of capacity that USGen had reserved from Wright, New York, to Mendon, Massachusetts, Mr. Coffee relates. Moreover, by selling the USGen capacity in segments, TGP has realized revenues in recent months well in excess of what USGen would have paid under the Contracts, Mr. Coffee says. Invoking principles never adopted by any Texas or bankruptcy court, TGP has refused to credit all of the revenues derived from resale of the USGen capacity against its claim, Mr. Coffee points out. TGP reiterated it would not give mitigation credit for three contracts because it could have provided a different delivery point for those shippers using other capacity and realized the same revenues. However, according to Mr. Coffee, under this theory, giving the customer a delivery point that required use of the USGen capacity did not generate incremental revenue; thus, TGP was not required to credit any revenues from the contract as mitigation. At no time either before or after trial, however, did TGP cite any legal authority for its novel "incremental revenue" theory, he notes. The theory adopted by TGP to justify its refusal to give full credit for the two other contracts was equally unsupported by any law, Mr. Coffee argues. While agreeing that the contracts did generate revenues it must recognize even under its incremental revenue theory, TGP refuses to give credit for the last five months of the contracts, on the grounds that it already reached full mitigation in those months. TGP's unilateral capping of mitigation credit in those months, and its attendant refusal to credit the gains in those months against losses in earlier months, flies in the face of well-established contract damages principles, Mr. Coffee says. TGP further has no legal leg on which to stand regarding its claim to recover as damages the full amount of the guarantee USGen made regarding commodity charges, Mr. Coffee contends. Mr. Coffee notes that USGen guaranteed that gas either would flow at a 90% rate through Jan. 31, 2006 or that it would compensate TGP for the commodity charges associated with any shortfall. As shown at trial, shippers who purchased the USGen turnback capacity have flowed a substantial amount of gas. TGP has refused, however, to credit any of the gas flowed by those shippers against USGen's guarantee. By refusing to credit the revenues it received in the wake of USGen's rejection of the Agreements, TGP essentially is seeking to transform a contractual guarantee into a liquidated damages provision, in violation of Texas law and the Bankruptcy Code, Mr. Coffee avers. TGP's effort to reap a windfall from USGen's bankruptcy is even more blatant with respect to future years, Mr. Coffee says. He notes that, although TGP has sold all of the USGen turnback capacity from late 2005 through early 2007 and lesser amounts through early 2009, TGP has refused to assume any further sales between April 1, 2007 and Oct. 31, 2013, on the grounds that making projections of future sales would be speculative. Mr. Coffee asserts that TGP bears the burden of proving future damages. He notes that under prevailing Texas and bankruptcy law, a plaintiff seeking damages for the unexpired term of a contract is required to account for, and subtract from its damage claim, the present market value of the property during that term. While TGP relied throughout trial on the presumed validity of its proof of claim, the claim was facially deficient because it was inflated, contained factual inaccuracies, and was not accompanied by any supporting documentation, Mr. Coffee points out. Rather than meet its burden of showing future damages by demonstrating the value of the remaining USGen capacity, TGP relied on a legal fiction -- that if the future is uncertain, TGP is entitled to collect the full contract amount without subtracting for any future predicted sales, Mr. Coffee notes. Courts uniformly have recognized, however, that the reasonableness of the projection, not the mathematical certainty with which it can be made, is the relevant standard for assessing the future, Mr. Coffee notes. He adds that Texas courts have declined to award damages to plaintiffs who demand the remaining face amount due under a long-term contract without attempting to determine the present value of expected future resales. Accordingly, USGen maintains that TGP is legally entitled only to minimal damages, depending on which of Mr. Norris's scenarios the Court adopts for future years and the discount rate used. The discount rate that the Court should use in this case is 18%, as set by Texas statute. In addition, TGP's 11th-hour effort to collect legal fees is equally unwarranted, Mr. Coffee argues. TGP never requested legal fees in its initial or amended claim. In addition, TGP has no entitlement under the Texas statute it invokes because it failed to follow the procedural requirements set forth in the statute. USGen asks the Court to award TGP damages of $1,280,873 and disallow the remainder of its claims. About USGen New England Headquartered in Bethesda, Maryland, USGen New England Inc., an affiliate of PG&E Generating Energy Group LLC, owns and operates several electric generating facilities in New England and purchases and sells electricity and other energy-related products at wholesale. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30465). Marc Richards, Esq., at Blank Rome LLP represents USGen New England in its restructuring efforts. When it sought chapter 11 protection, the Debtor reported assets amounting to $2,337,446,332 and debts amounting to $1,249,960,731. The Debtor filed its Second Amended Plan of Liquidation and Disclosure Statement on March 24, 2005. The Plan was confirmed on May 13, 2005. (PG&E National Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) UTILITY CRAFT: Wants Hale Resources as Bankruptcy Consultant ------------------------------------------------------------ Utility Craft, Inc., dba Wood Armfield Furniture, asks the U.S. Bankruptcy Court for the Middle District of North Carolina to employ Hale Resources, Inc., as its bankruptcy consultant, nunc pro tunc o July 20, 2006. Hale is expected to: a) prepare the Debtor's schedules of assets and liabilities; b) prepare the Debtor's statement of financial affairs; c) prepare the Debtor's cash collateral budget; d) prepare the Debtor's monthly reports; and e) other matters related to the financial condition and financial reporting requirements of the Debtor during this bankruptcy proceeding. The firm will bill $1,730.99 per week on a bi-weekly basis for this engagement. In addition, the firm will receive a 5% bonus in the event the holding company holds an income of zero or more for the period April 1, 2006 to March 31, 2007 and a 15% bonus if the North Carolina and the Virginia companies hold an income of zero or more for the period April 1, 2006 to March 31, 2007. Robert A. Hale assures the Court that the firm does not hold any interest adverse to the Debtor's estate. Mr. Hale can be reached at: Robert A. Hale 3504 Willow Grove Court Greensboro, NC 27410 Headquartered in High Point, North Carolina, Utility Craft, Inc., dba Wood Armfield Furniture, specializes in manufacturing high quality furniture and accessories. The Company filed for chapter 11 protection on July 20, 2006 (Bankr. M.D. N.C. Case No. 06- 10816). 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. VERIDIEN CORP: June 30 Balance Sheet Upside-Down by $6.3 Million ---------------------------------------------------------------- At June 30, 2006, Veridien Corporation's balance sheet showed $1,661,796 in total assets and $7,907,781 in total liabilities, resulting in a shareholders' deficit of $6,315,432. The Company's balance sheet at June 30, 2006 also showed negative working capital with total current assets of $875,639 and total current liabilities of $6,010,749. Net loss for the three months ended June 30, 2006 decreased to $422,828 from net loss of $490,872 in the three months ended June 30, 2006. Revenues for the current quarter increased to $265,054 from revenues of $153,339 in the same period last year. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?1207 Headquartered in Pinellas Park, Florida, Veridien Corporation -- http://www.vrde.com/-- is a life sciences company, engaged in the development, manufacture, distribution, and sale of disinfectants, antiseptics, and sterilants in the United States and Canada. VESCOR DEVELOPMENT: Taps Lionel Sawyer as Bankruptcy Counsel ------------------------------------------------------------ Vescor Development 3 LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Nevada for permission to employ Lionel Sawyer & Collins as its bankruptcy counsel. Lionel Sawyer will: (1) advise the Debtors of their rights and obligations and performance of their duties during administration of their bankruptcy cases; (2) represent the Debtors in all proceedings before this Court or before other courts with jurisdiction over these cases; (3) assist the Debtors in the performance of its duties as set forth in Section 1107 of Title 11 of the U.S. Code; (4) assist the Debtors in developing legal positions and strategies with respect to all facets of these proceedings; and (5) provide other counsel and advice as the debtors may require in connection with their chapter 11 cases. The Debtor tells the Court that the firm's professionals bill: Professional Hourly Rate ------------ ----------- Shareholders $275 - $550 Associates $160 - $235 Paralegals $150 - $170 Laurel E. Davis, Esq., a shareholder at Lionel Sawyer, assures the Court that her firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Ms. Davis can be reached at: Laurel E. Davis, Esq. Lionel Sawyer & Collins 300 South 4th Street #1700 Las Vegas, NV 89101 Tel: (702) 383-8866 Fax: (702) 383-8845 http://www.lionelsawyer.com/ Headquartered in Henderson, Nevada, Vescor Development 3 LLC is a real estate developer. The Company and two of its affiliates filed for chapter 11 protection on Aug. 16, 2006 (Bankr. D. Nev. Case No. 06-12094. When Vescor filed for protection from its creditors, it listed total assets of $109,570,385 and total debts of $63,290,195. VESTA INSURANCE: Court Grants Injunction Against Utility Companies ------------------------------------------------------------------ The Hon. Thomas B. Bennett of the U.S. Bankruptcy Court for the Northern District of Alabama granted J. Gordon Gaines Inc.'s request for injunction against several utility companies. Judge Bennett ruled that upon timely receipt of an Adequate Assurance Request, J. Gordon Gaines Inc. will have 20 days -- not 60 days as initially requested -- to file a Motion for Determination of Adequate Assurance of Payment. According to Judge Bennett, the Utility Order will not apply to Alabama Power. The Debtor and Alabama Power are engaged in discussions regarding a different form of adequate assurance of payment for Utility Services to be provided by Alabama Power. Alabama Power has represented, through counsel, that it will not terminate Utility Services to the Debtor pending negotiations on the terms of adequate assurance of payment, unless those negotiations do not result in an agreement mutually acceptable to the parties on or before September 5, 2006. In that event, the Court will convene a hearing on September 6, 2006, at 10:00 a.m., regarding the Utility Motion as it relates to Alabama Power. Pending the Court's ruling on the Motion, Alabama Power will be prohibited from terminating any Utility Services. As reported in the Troubled Company Reporter on Sept. 6, 2006, the Debtor, an affiliate of Vesta Insurance Group, Inc., asked the U.S. Bankruptcy Court for the Northern District of Alabama to: (a) deem utilities adequately assured of payment for postpetition services; (b) prohibit utilities from altering, refusing or discontinuing services to the Debtor on account of the commencement of its Chapter 11 case or the nonpayment of prepetition invoices; (c) authorize it to pay prepetition utility invoices in its discretion; and (d) establish uniform procedures for resolving disputes regarding the adequate assurance of payment it provides. J. Gordon uses various utilities essential to the continued operation of its business, including: Vendor Type of Service ------ --------------- Alabama Power Power Alabama Gas Corp. Gas and gas generator Bell South Long distance, Internet, and club service The Debtor is highly computerized and extremely reliant on electrical services for its continued operation. In addition to back office operations including record keeping and accounting, the Debtor uses computers to provide critical services and processing for delivering services to various insurance subsidiaries and VIG. Moreover, the Debtor conducts most of its day-to-day communications and financial reporting via electronic mail. Thus, the Debtor is also dependent on Internet and telephone service to maintain its ability to send and receive electronic communications and records. "Any disruption in either telephone or electric service could seriously hamper the Debtor's ability to conduct its business and communicate with vendors and other critical third parties, and could cause the loss of important computerized records and information," C. Edward Dobbs, Esq., at Parker, Hudson, Rainer & Dobbs, LLP, in Atlanta, Georgia, told the Court. Section 366 of the Bankruptcy Code protects a debtor against termination of its utility service upon the commencement of its Chapter 11 case, and simultaneously requires the debtor to furnish utility companies with adequate assurance of payment for postpetition utility service within 20 days from the Petition Date. According to Mr. Dobbs, prior to the Petition Date, the Debtor generally was current and timely with respect to its invoices for Utility Services. Any amounts the Debtor owes each Utility Company for prepetition services are reflected in the schedules of liabilities to be filed by the Debtor. J. Gordon Gaines asserted that the Utility Companies are adequately assured of future payment because: (a) the Debtor should have sufficient liquidity to pay postpetition utility invoices from the proceeds of its business operations; and (b) of the Debtor's provision of additional deposits with each Utility Company in an amount equal to the average invoice amount for the six months immediately preceding the Petition Date, adjusted to account for the decrease in the Debtor's demand for Utility Services as a result of the scaling back of its operations since its bankruptcy filing. In the event a Utility Company asks for additional assurance, the Debtor proposed to implement these procedures: (a) Any Utility Company seeking adequate assurance from the Debtor in the form of a deposit or other security must make a request in writing, setting forth the location for which utility services were provided. The Request must be received by the Debtor's counsel no later than 20 days after the Court approves the Utility Motion: Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachtree Center Avenue, N.E. Atlanta, GA 30303 Attention: Rufus T. Dorsey, IV, Esq. (b) Upon timely receipt of the Request, the Debtor will have 60 days to file a Motion for Determination of Adequate Assurance of Payment, and will seek a hearing on that motion within 20 days after the filing of the Determination Motion, unless another hearing date is agreed to by the parties or ordered by the Court. (c) Any Request received by the Debtor after the Request Deadline, or that is otherwise defective, will be deemed as untimely and invalid, and that Utility Company will be deemed adequately assured of payment by the terms of the Order granting the Utility Motion. (d) If a Determination Hearing is scheduled, the utility provider will be deemed adequately assured of payment until an Order is entered in connection with that Determination Hearing. About Vesta Insurance Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc. (Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offer property insurance in targeted states. Wyatt R. Haskell, Luther S. Pate, UV, and Costa Brava Partnership III, L.P., filed an involuntary chapter 7 petition against the Company on July 18, 2006 (Bankr. N.D. Ala. Case No. 06-02517). The case was converted to a voluntary chapter 11 case on Aug. 8, 2006 (Bankr. N.D. Ala. Case No. 06-02517). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represents the Debtor. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the petitioning creditors. In its schedules of assets and liabilities, Vesta listed $14,919,938 in total assets and $214,278,847 in total liabilities. J. Gordon Gaines, Inc., is a Vesta Insurance-owned unit that manages the company's numerous insurance subsidiaries and employs the headquarters workers. The Company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. N.D. Ala. Case No. 06-02808). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represent the Debtor in its restructuring efforts. In its schedules of assets and liabilities, Gaines listed $19,818,094 in total assets and $16,046,237 in total liabilities. On Aug. 1, 2006, the District Court of Travis County, Texas entered the Order appointing the Texas Commissioner of Insurance as Liquidator of Vesta Insurance's Texas-domiciled subsidiaries: Vesta Fire Insurance Corporation; The Shelby Insurance Company; Shelby Casualty Insurance Corporation; Texas Select Lloyds Insurance Company; and Select Insurance Services, Inc. (Vesta Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). VESTA INSURANCE: Court Lets Gaines Reject Four Property Leases -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Alabama permitted J. Gordon Gaines Inc. to reject four unexpired non-residential real property leases effective Aug. 31, 2006 -- not August 17 as initially requested. Any party to a Lease who seeks to recover rejection damages is required to file a Proof of Claim with the Clerk of Court on or before December 11, 2006. As reported in the Troubled Company Reporter on Aug. 28, 2006, the Debtor asked the Court for authority to reject the leases, effective Aug. 17, 2006. The Leases relate to locations at which the Debtor ceased operations prior to its bankruptcy filing and has vacated or intends to vacate as soon as possible: Premises Lease Description Counterparty -------- ----------------- ------------ Pacific Plaza Office Building A-P Knight, LP 14100 San Pedro Lease dated May 2, (landlord) Avenue, Suite 510 2005 San Antonio, TX MSB Pacific Plaza LP (assignee of landlord) 5788 Widewaters Office Lease 5788 Widewaters Parkway dated April 28, Company (landlord) DeWitt, NY 13214 2005 Hub Properties Trust (assignee of landlord) One South Wacker Office Lease Metropolitan Life Drive, Suite 2710 dated February 1, Insurance Company Chicago, IL 60606 2002 (landlord) Sublease Discover Re Agreement dated Managers, Inc. December 22, 2003 (tenant) By rejecting the Leases, Gaines expects to reduce postpetition administrative costs. According to Gaines, the Leases are costly to maintain and unnecessary to its operations and business. Gaines tells the Court that it has reviewed each of the Leases and has determined that those Leases do not have any net value to its estate. About Vesta Insurance Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc. (Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offer property insurance in targeted states. Wyatt R. Haskell, Luther S. Pate, UV, and Costa Brava Partnership III, L.P., filed an involuntary chapter 7 petition against the Company on July 18, 2006 (Bankr. N.D. Ala. Case No. 06-02517). The case was converted to a voluntary chapter 11 case on Aug. 8, 2006 (Bankr. N.D. Ala. Case No. 06-02517). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represents the Debtor. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the petitioning creditors. In its schedules of assets and liabilities, Vesta listed $14,919,938 in total assets and $214,278,847 in total liabilities. J. Gordon Gaines, Inc., is a Vesta Insurance-owned unit that manages the company's numerous insurance subsidiaries and employs the headquarters workers. The Company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. N.D. Ala. Case No. 06-02808). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represent the Debtor in its restructuring efforts. In its schedules of assets and liabilities, Gaines listed $19,818,094 in total assets and $16,046,237 in total liabilities. On Aug. 1, 2006, the District Court of Travis County, Texas entered the Order appointing the Texas Commissioner of Insurance as Liquidator of Vesta Insurance's Texas-domiciled subsidiaries: Vesta Fire Insurance Corporation; The Shelby Insurance Company; Shelby Casualty Insurance Corporation; Texas Select Lloyds Insurance Company; and Select Insurance Services, Inc. (Vesta Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). VIASYSTEMS INC: Earns $202.5 Mil. in Quarter Ended June 30, 2006 ---------------------------------------------------------------- For the three months ended June 30, 2006, Viasystems Inc. earned $202,546,000 of net income, in contrast to net loss of $27,344,000 in the same quarter last year. Net sales for the current quarter rose to $187,799,000 from net sales of $171,932,000 in the three months ended June 30, 2005. The Company's balance sheet at June 30, 2006 showed total assets of $640,571,000, total liabilities of $438,006,000, and total stockholder's equity of $202,565,000. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?1209 Headquartered in St. Louis, Missouri, Viasystems Inc. -- http://www.viasystems.com/-- a subsidiary of Viasystems Group Inc., provides electronics manufacturing services to original equipment manufacturers, primarily in the telecommunications, networking, automotive, consumer, industrial and computer industries. * * * Viasystems Inc.'s senior subordinate debt, bank loan, and long- term corporate family rating carry Moody's Caa2, B2, and B3 ratings with a stable outlook. The Company's long-term local and foreign issuer credits also carry Standard & Poor's B ratings with a positive outlook. VIOQUEST PHARMACEUTICALS: Posts $1.8MM Loss in 2006 2nd Quarter --------------------------------------------------------------- VioQuest Pharmaceuticals, Inc., reported a net loss of $1.8 million for the second quarter ended June 30, 2006, compared to a net loss of $1.1 million for the same quarter in 2005. For the six months ended June 30, 2006, the net loss was $3.7 million, compared to $2.5 million for the same period in 2005. The net loss was primarily attributed to higher research and development expenses as the Company advanced its clinical development programs, in addition to increased selling, general and administrative expenses. VioQuest expects to continue to incur losses associated to increased expenses from further advancing its clinical programs and expansions of its corporate infrastructure. "VioQuest made excellent progress during the second quarter. As our drug candidates move into the clinic, we continue to establish ourselves as a leader in targeted cancer therapeutics. We believe targeted therapeutics are essential to the advancement of cancer treatments and improved patient outcomes. We look forward to bringing our drug candidates through the clinical process," said Daniel Greenleaf, VioQuest's President and CEO. The Company's balance sheet at June 30, 2006, showed $5,158,582 in total assets, $1,948,187 in total liabilities, and total stockholders' equity of $3,210,395. A full-text copy of the Company's quarterly report is available for free at http://researcharchives.com/t/s?120f Going Concern Doubt J.H. Cohn LLP, in Roseland, New Jersey, raised substantial doubt about VioQuest Pharmaceuticals' ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's net loss, cash burn and accumulated deficit. VioQuest Pharmaceuticals, Inc., has two distinct business units -- Drug Development and Chiral Products and Services. The Company's drug development business focuses on acquiring, developing and eventually commercializing human therapeutics in the areas of oncology, and antiviral diseases and disorders for which there are current unmet medical needs. The Company currently has the exclusive rights to develop and commercialize two oncology drug candidates. Its chiral business, which it operates through its wholly owned subsidiary, Chiral Quest, Inc., provides innovative chiral products, technology and custom synthesis development services to pharmaceutical and fine chemical companies in all stages of a products' lifecycle. WELLINGTON APARTMENT: Bankr. Ct. Awards Debtor $2.5 Mil. Judgment ----------------------------------------------------------------- On June 1, 2005, Wellington Apartment, LLC, sued Charles Clotworthy, Richard Merel, Esq., Steven Byers, the law firm of Garfield & Merel, Ltd., WP New Orleans, L.L.C., and WPN, L.L.C. (Bankr. E.D. Va. Adv. Pro. No. 05-5029) to force a ruling on one ultimate question: did the defendants deprive the debtor of assets by fraudulently eliminating the debtor's interest in real property located in New Orleans, Louisiana? Wellington's lawsuit contends that former business associates of its principal, the attorney and law firm that represented the principal in connection with certain loan transactions, and two limited liability companies crafted and executed a scheme to appropriate its assets. The lawsuit asserts claims for, inter alia, business conspiracy, fraudulent transfer, unauthorized postpetition transfers of debtor's property, automatic stay violation, unjust enrichment, and professional negligence. In a decision published at 2006 WL 2422758, the Honorable David H. Adams (observing that the dispute is very fact specific and commenting that the facts underpinning Wellington's 11-count complaint are quite convoluted) answers Wellington's question in the affirmative. Judge Adams finds that Wellington has met its burden of proof that (i) an actual fraudulent transfer of the debtor's assets occurred at the hands of the defendants, (ii) a constructive fraudulent transfer of the debtor's assets has occurred at the hands of the defendants and (iii) the defendants effectuated a post-petition transfer of the debtor's assets. Therefore, Judge Adams rules, "the defendants are jointly and severally liable to the debtor and are ordered to pay to the debtor a total amount of $2,546,174.59." Judge Adams also finds that Mr. Merel and/or his law firm "engaged in inappropriate activities outside of an attorney-client relationship, which may be sanctionable under Illinois law." Wellington Apartments, LLC (with an s in its name) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the District of Connecticut, Bridgeport Division, on November 13, 2002. The case was converted to one under Chapter 7 of the Code on January 23, 2003, and was transferred to the Eastern District of Virginia, Newport News Division, on December 10, 2004, at the request of First Bank & Trust Company of Illinois, an alleged creditor in that case. On January 5, 2004, Wellington Apartment, LLC (without an s in its name) filed for relief under Chapter 11 of the Code in the District of Connecticut, Bridgeport Division, and its case was transferred to the Eastern District of Virginia, Newport News Division, on February 3, 2004 (Bankr. E.D. Va. Case No. 04-50301). Wellington Apartment, LLC, owned a 152-unit apartment complex located in Newport News, Virginia, which was sold pursuant to an order of the bankruptcy court. WEST VIRGINIA: Hires Joseph Caldwell as Legal Counsel ----------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of West Virginia allowed West Virginia Consumers for Justice to employ Joseph W. Caldwell, Esq., Jennifer P. Taylor, Esq., Marshall C. Spradling, Esq., and Henry E. Wood, III, Esq. As its legal counsel, nunc pro tunc to Aug. 10, 2006. The attorneys are expected to: a) give the Debtors legal advice with respect to its powers and duties as debtor-in-possession. b) prepare on behalf of the Debtor necessary applications, answers, orders, reports and other legal papers. c) review pending litigation and to file an application to remove an action pending in the Circuit Court of Fairfax County, Virginia, through the U.S. Bankruptcy Court for the Southern District of West Virginia. d) prepare a disclosure statement and plan of reorganization. e) perform all other legal services for the Debtor which may become necessary. The Debtor tells the Court that it has paid the firm $2,500 as retainer. The firm's attorneys standard billing rates are: Designation Hourly Rates ----------- ------------ Joseph W. Caldwell, Esq. $240 Marshall C. Spradling, Esq. $240 Jennifer P. Taylor, Esq. $200 Henry E. Wood, III, Esq. $200 Joseph W. Caldwell, Esq., assures the Court that his firm does not hold any interest adverse to the Debtor and is a "disinterested person" as that term defined in Section 101(14) of the Bankruptcy Code. Mr. Caldwell can be reached at: Joseph W. Caldwell, Esq. Marshall C. Spradling, Esq. Jennifer P. Taylor, Esq. Henry E. Wood, III, Esq. W.V. Bar No. 586 P.O. Box 4427 Charleston, WV 25364 Tel: (304) 925-2100 Headquartered in Charleston, West Virginia, West Virginia Consumers for Justice filed for chapter 11 protection on Aug. 10, 2006 (Bankr. S.D. W. Va. Case No 06-20478). Joseph W. Caldwell, Esq., at Caldwell & Riffee represents the Debtor in its restructuring efforts. West Virginia estimated its assets at $1,534 debts at $300,062,129 when it filed for protection from its creditors. WORLDGATE COMMS: Second Quarter 2006 Net Loss Increases to $5 Mil. ------------------------------------------------------------------ For the three months ended June 30, 2006, Worldgate Communications Inc.'s net loss increased to $5,091,000, compared to net loss of $366,000 in the same quarter last year. Revenues for the current quarter decreased to $186,000 from revenues of $1,399,000 in the three months ended June 30, 2005. The Company's balance sheet at June 30, 2006 showed total assets of $12,063,000, total liabilities of $5,179,000, and total stockholders' equity of $6,884,000. Full-text copies of the Company's financial statements for the quarter ended June 30, 2006 are available for free at: http://researcharchives.com/t/s?120b Going Concern Doubt As reported in the Troubled Company Reporter on May 16, 2006, Marcum & Kliegman LLP expressed substantial doubt about WorldGate Communications, Inc.'s ability to continue as a going concern. The accounting firm pointed to the Company's recurring losses from operations and accumulated deficit of $229 million after auditing its financial statements for the year ended Dec. 31, 2005. Headquartered in Trevose, Pennsylvania, WorldGate Communications Inc. -- http://www.wgate.com/-- designs, manufactures, and distributes personal video phones. WorldGate's products is marketed to consumers through cable, DSL, VoIP and satellite service providers as well as through retail stores worldwide under the Ojo brand name. WorldGate is traded on NASDAQ under the symbol WGAT. WILLOWBEND NURSERY: Case Summary & 16 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Willowbend Nursery, Inc. 4654 Davis Road Perry, OH 44081-9867 Bankruptcy Case No.: 06-14353 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Pilgrim Holdings, LLC 06-14355 Hydrangea Farms LP 06-14356 Nursery Lands LP 06-14357 Type of Business: The Debtors own and operate a nursery and grow quality bareroot plants & shrubs. See http://www.willowbendnursery.com/ Chapter 11 Petition Date: September 20, 2006 Court: Northern District of Ohio (Cleveland) Judge: Arthur I. Harris Debtor's Counsel: Kenneth J. Freeman, Esq. Kenneth J. Freeman Co., LPA 515 Leader Building 526 Superior Avenue Cleveland, OH 44114-1903 Tel: (216) 771-9980 Fax: (216) 771-9978 Estimated Assets: $1 Million to $10 Million Estimated Debts: $10 Million to $50 Million A. Willowbend Nursery, Inc.'s 13 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Fifth Third Bank Checking Account, $20,472,190 Fifth Third Center Acct. Receivables, 600 Superior Avenue East Office Equipment, Secured: Cleveland, OH 44114 Machinery, Trucks, $8,300,480 Inventory, Employee Loan, Embezzled Funds Kohrman Jackson & Krantz, PLL Attorney Fees $129,176 1375 East Ninth Street Suite 2000 Cleveland, OH 44114-1793 Management Advisory Services Consulting Services $107,881 8 North State Street, Suite 200 Painesville, OH 44077 Stark & Stark Professional Services $43,219 8 North State Street, Suite 200 Painesville, OH 44077 Spring Meadow Nursery Supplier $30,503 12601 120th Avenue Grand Haven, MI 49179 Meilland Star Roses Supplier $28,571 W.S. Yoe Nurseries Supplier $21,855 The Parkland Group, Inc. Consulting Services $21,710 Perry Coal & Feed Co. Supplier $14,509 Krauth NSY Supplier $11,927 Stropkey Nursery Supplier $10,885 Ohio Cat Supplier $9,311 Mackenzie Nursery Supply Supplier $5,815 B. Pilgrim Holdings, LLC's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Fifth Third Bank 100% Ownership of $17,774,022 Fifth Third Center Willowbend Nursery, 600 Superior Avenue East Ridge Manor Nursery Cleveland, OH 44114 LLC, and Ridge Manor Nursery Lands, LLC Guarantor $2,432,951 C. Hydrangea Farms LP's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Fifth Third Bank Debtor's Real $20,472,190 Fifth Third Center Estate 600 Superior Avenue East Secured: Cleveland, OH 44114 $5,500,000 D. Nursery Lands LP's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Fifth Third Bank Debtor's Real $20,472,190 Fifth Third Center Estate 600 Superior Avenue East Secured: Cleveland, OH 44114 $2,500,000 WINN-DIXIE: Four Parties Want Leesburg & Edgewood Taxes Attached ---------------------------------------------------------------- Winn-Dixie Stores, Inc., and its debtor-affiliates want to sell their Leesburg Outparcel to the State of Florida Department of Transportation and the Edgewood Outparcel to AJDC LLC or to a party submitting a higher or better offer. The Duval County Tax Collector and the Lake County Tax Collector assert that their liens for ad valorem real estate taxes for fiscal 2006 and subsequent years are included as permitted encumbrances attached to the sale of the Leesburg and Edgewood Outparcels. Brian T. FitzGerald, Esq., at the Hillsborough County Attorney's Office, in Tampa, Florida, relates that the 2004 and 2005 ad valorem real estate taxes for the Edgewood Outparcel are due and have not been paid. Winn-Dixie Stores, Inc., and its debtor- affiliates' total amount of outstanding, delinquent 2004 and 2005 ad valorem real estate taxes if paid in September 2006 is $23,221. The full amount of the outstanding real estate taxes, with statutory interest, should be paid at the closing of the Edgewood Outparcel sale in accordance with state law and customary business practice or, alternatively, Duval County's statutory liens will be attached to the proceeds of the sale, Mr. FitzGerald states. Lake County says that the Debtors' real estate taxes are paid through 2005 on the Leesburg Outparcel. The lien for the 2006 real estate taxes, however, arose on Jan. 1, 2006, and the liquidated amount of the taxes will not be known until Nov. 1, 2006. In addition, the Florida Administrative Code requires that taxes be paid when property is acquired by any government unit and requires current taxes to be prorated and placed in escrow with the Lake County Tax Collector at closing, according to Mr. FitzGerald. Since the proposed purchaser of the Leesburg Outparcel is the Florida Department of Transportation, the Debtors should be ordered to pay the taxes at closing or the Tax Collector's lien will be attached to the sale proceeds, Mr. FitzGerald says. 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. 52; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WINN-DIXIE: Panel Hires Spencer Stuart to Search for Directors -------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida authorized the Official Committee of Unsecured Creditors in Winn- Dixie Stores, Inc., and its debtor-affiliates' bankruptcy cases to retain Spencer Stuart as director retention consultant effective as of July 10, 2006. As reported in the Troubled Company Reporter on Aug. 18, 2006, under the Debtors' Joint Plan of Reorganization, the Creditors Committee will select seven individuals to serve on the board of directors of reorganized Winn-Dixie Stores. The Creditors Committee is seeking the assistance of Spencer Stuart in conducting an efficient and expedient search for new directors. Spencer Stuart has nearly 50 years of experience in the executive search field and is one of the leading executive search firms in the United States. Spencer Stuart also has extensive experience in assisting companies in selecting board candidates. Spencer Stuart will: (1) meet with the Creditors Committee to develop background information on the significant issues and creditor expectations before approaching and meeting with candidates; (2) work with the Creditors Committee to develop detailed position specifications; (3) construct a search strategy for the positions to define and prioritize potential candidate locations, position levels and other elements of the search focus to ensure a comprehensive search assignment; (4) conduct an intensive search utilizing its retail networks and knowledge of the marketplace to yield qualified individuals for the Creditors Committee to compare and evaluate; (5) thoroughly interview qualified candidates to obtain a realistic understanding of their experience, accomplishments, capabilities, and potential, as well as prepare and present a comprehensive resume for review of each candidate recommended for interview; (6) present the best qualified and interested individuals for selection interviews; (7) assist as necessary in developing and negotiating the final compensation package and other terms of employment for the directors; (8) conduct reference checks of successful candidates; (9) conduct periodic progress reviews with the Creditors Committee to discuss individuals contacted, candidate interest, recruiting issues, and any other matters related to the search; and (10) perform other search-related services as may be required by the Creditors Committee. Spencer Stuart will be retained until the completion of the assignment unless terminated beforehand in accordance with the provisions of the engagement letter dated July 10, 2006. The Debtors have agreed that they will be solely responsible for the payment of all fees and expenses incurred by Spencer Stuart. Spencer Stuart's retainer fee will be up to $525,000, which will be billed in three equal installments for up to seven board member placements at $75,000 per each placement. Installments are to be paid by the Debtors on Aug. 15, 2006; Sept. 15, 2006; and Oct. 16, 2006. In addition to its retainer fee, Spencer Stuart also charges monthly for search-related expenses at 10% of each installment. Spencer Stuart will also be reimbursed for direct, out-of-pocket expenses. Thomas J. Snyder, a consultant at Spencer Stuart, assured the Court that his firm is disinterested as defined by Section 101(14) of the Bankruptcy Code. Mr. Snyder said his firm holds no adverse interest to the Debtors. 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. 52; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). YOUTHSTREAM MEDIA: Earns $459,180 in Quarter Ended June 30 ---------------------------------------------------------- YouthStream Media Networks, Inc., filed its financial statements for the third fiscal quarter ended June 30, 2006, with the Securities and Exchange Commission on Sept. 15, 2006. The Company's net sales figure for the three months ended June 30, 2006, was $34,284,157 compared with $29,127,566 for the three months ended June 30, 2005. The increase in net sales for the current period as compared with 2005 reflects a general improvement in the steel industry as well as the Company's decision to focus on selling higher margin products. The Company reported $459,180 of net income for the three months ended June 30, 2006, as compared with a net loss of $1,837,129 for the three months ended June 30, 2005. At June 30, 2006, the Company's balance sheet showed $39,038,960 and $117,533,730 in total liabilities, resulting in a $78,494,770 stockholders' deficit. The Company had a $79,600,350 deficit at Sept. 30, 2005. The Company's June 30 balance sheet also showed strained liquidity with $33,556,710 in total current assets available to pay $39,005,853 in total current liabilities coming due within the next 12 months. Investment in Planet Hollywood (Alabama), LLC In August 2006, YouthStream invested $75,000 to acquire an 8.82% membership interest in Planet Hollywood (Alabama), LLC, to pursue a licensing and merchandising arrangement with Planet Hollywood International, Inc., or one or more of its subsidiaries. Planet Hollywood (Alabama) was assigned certain rights held by PHI in connection with PHI's role in the development of a charitable bingo facility, restaurant, and entertainment venue in Shorter, Alabama, with Lucky Palace, LLC, a subsidiary of Lucky Palace, Inc. Libra Securities Holdings, LLC, is also involved in this business enterprise. Renegotiated Debt Agreements On Aug. 29, 2006, the loan and security agreement with General Electric Capital Corp. was amended and restated to extend its maturity date to March 24, 2010. The extension allows the payment of principal on the Company's subordinated secured promissory notes, subject to compliance with various agreements and covenants, with all other terms and conditions remaining substantially the same. On Aug. 29, 2006, the subordinated secured promissory notes were amended and restated to extend their maturity date to March 31, 2010, with all other terms and conditions remaining substantially the same. Full-text copies of the Company's third fiscal quarter financials are available for free at http://ResearchArchives.com/t/s?121c Going Concern Doubt As reported in the Troubled Company Reporter on July 5, 2006 Weinberg & Company, P.A., in Los Angeles, Calif., raised substantial doubt about YouthStream Media Networks, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the years ended Sept. 30, 2005, and 2004. The auditor pointed to the Company's losses; negative cash flow from operations; negative working capital; and accumulated and stockholders' deficiencies. About YouthStream Media Networks YouthStream Media Networks, Inc., (OTC: YSTM) owns and operates Kentucky Electric Steel. It is a steel mini-mill located in Ashland, Kentucky. * BOOK REVIEW: Grounded: Frank Lorenzo and the Destruction of Eastern Airlines ------------------------------------------------------------- Author: Aaron Bernstein Publisher: Beard Books Paperback: 272 Pages List Price: $34.95 Order your personal copy at http://www.amazon.com/exec/obidos/ASIN/1893122131/internetbankrupt Barbara Walters once referred to Frank Lorenzo as "the most hated man in America." Since 1990, when this work was first published and Eastern Airlines' troubles were front-page news, there had been many worthy contenders for the title. Nonetheless, readers sensitive to labor-management concerns, particularly in the context of corporate restructuring, will find in this book much to support Barbara Walters' characterization. To recap: For a few brief and discordant years, Frank Lorenzo was boss of the biggest airline conglomerate in the free world (Aeroloft was larger), combining Eastern Continental, Frontier, and People Express into Texas Air Corporation, financing his empire with junk bonds. TAC ultimately comprised a fleet of 452 planes and 50,000 employees, with revenues of $7 billion. But Lorenzo was lousy on people issues, famously saying, "I'm not paid to be a candy ass." The mid-1980's were a bad time to take that approach. Those were the years when the so-called Japanese model of management, which emphasized cooperation between management and labor, was creating a stir. The Lorenzo model was old school: If the unions give you any trouble, break 'em. That strategy had worked for him at Continental, where he'd filed Chapter 11 despite the airline's $60 million in cash reserves, in order to exploit a provision in the Bankruptcy Code allowing him to abrogate his contracts with the unions. But Congress plugged that Loophole by the time Lorenzo went to the mat with Charles Bryan, IAM chapter president. Lorenzo might have succeeded in breaking the machinists alone, but when flight attendants and pilots honored the picket line, he should have known it was time to deal. He didn't. Instead he tried again for a strategic advantage through the bankruptcy courts, by filing Chapter 11 in the Southern District of New York where bankruptcy judges were believed to be more favorably disposed toward management than in Miami where Eastern is headquartered, Eastern had to hide behind the skirts of its subsidiary, Ionosphere clubs, Inc., a New York Corporation, in order to get into SDNY. Six minutes later, Eastern itself filed in the same court as a related proceeding. The case was assigned to Judge Burton Lifland, whom Eastern's bankruptcy lawyer, Harvey Miller, knew well, but Lorenzo was mistaken if he believed that serendipitous lottery assignment would be his salvation. Judge Lifland a year later declared Lorenzo unfit to run the airline and appointed Martin Shugrue as trustee. Most hated man or not, one wonders whether the debacle was all Lorenzo's fault. Eastern unions, in particular the notoriously militant machinist, were perpetual malcontents, and Charlie Bryan was an anti-management zealot, to the point of exasperating even other IAM officers. The book provides a detailed account of the three-and-a-half period between Lorenzo's acquisition of Eastern in the autumn of 1986 and Judge Lifland's appointment of the trustee in April 1990. It includes the history of Eastern's pre-Lorenzo management, from World War I flying ace Eddie Rickenbacker to astronaut Frank Borman. ********* 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, Melvin C. Tabao, 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 ***