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/raid1/www/Hosts/bankrupt/TCR_Public/061103.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, November 3, 2006, Vol. 10, No. 262 Headlines ACTIS GLOBAL: Posts $1 Million Net Loss in Second Quarter 2006 ADSOUTH PARTNERS: Posts $3.5 Million Net Loss in 2006 2nd Quarter ADVENTURE PARKS: Taps Langdale & Valloton as Special Counsel ALLIED HOLDINGS: Explores Potential Merger Deal with Performance ALLIED HOLDINGS: Excl. Plan-Filing Period Intact Until November 9 ASARCO LLC: Judge Schmidt Approves Intercompany Bar Date Accord ASARCO LLC: Wants Winters Dorsey as Special Purpose Advisor ATLANTIC WINE: Posts $16,937 Net Loss in 2006 First Fiscal Quarter BANTA CORP: RR Donnelley Extends $1.3 Bil. Cash Purchase Offer BANTA CORP: RR Donnelley Purchase Deal Cues S&P to Revise Outlook BANTA CORPORATION: Moody's Affirms Ba2 Corporate Family Rating BENCHMARK ELECTRONICS: S&P Places BB- Rating on CreditWatch BLOCKBUSTER INC: Outlines New Deal for Online Renters CAVALIER TELEPHONE: Moody's Rates Proposed $415MM Sr. Loan at B2 COLLINS & AIKMAN: Can Pay Severance Fees to Laid-Off Workers COLLINS & AIKMAN: Court Okays Rejection of 4 GECC Lease Schedules COLUMBUS HOSPITAL: Moody's Affirms Rating on $27MM Bonds at B3 COMPLETE RETREATS: Gets Court OK to Employ XRoads as Claims Agent COMPLETE RETREATS: Court Approves First Insurance Premium Pact CREDIT SUISSE: S&P Puts Initial 'BB' Ratings to $3.4 Bil. Certs CWMBS INC: Fitch Affirms Rating on 78 & Upgrades 12 RMBS Classes DELPHI CORP: Court Approves EDS and HP Outsourcing Agreements DELPHI CORP: Former Employees Want Funds for Legal Expenses DORAL FINANCIAL: Aims to Boost Returns & Refinance $625 Mil. Debt DORAL FINANCIAL: Names Marangal Domingo as Chief Financial Officer DURA AUTOMOTIVE: Ontario Court Recognizes Chapter 11 Case EASTON-BELL: Moody's Assigns Loss-Given-Default Ratings ENTERGY NEW: Parent Company Releases Preliminary 3rd Qtr. Results ENTERGY NEW ORLEANS: Can Open Investment Account at Federated FEDERAL-MOGUL: Gets Stay on Discovery Propounded by Mt. McKinley FEDERAL-MOGUL: Stipulation of Permissible Objections Gets Court OK FELLOWS ENERGY: Posts $1,392,257 Net Loss in 2006 Second Quarter FOAMEX INTERNATIONAL: Noteholders Panel Balks at DIP Loan Deal FOAMEX INT'L: Financial Projections Under First Amended Plan FORD MOTOR: Reducing Health Care Benefits of Salaried Employees FORD MOTOR: Shows Improvement in October Sales Figures FORMAL INC: Case Summary & Largest Unsecured Creditor GERDAU AMERISTEEL: Completes $104 Mil. West Coast Joint Venture GULF ATLANTIC: Voluntary Chapter 11 Case Summary HERBST GAMING: MGM Deal Cues Moody's to Hold Rating at B1 HOME PRODUCTS: Moody's Assigns Loss-Given-Default Rating ITIS HOLDINGS: Cootes Drive Sues Hunter M.A. Carr & Joanne Hoover IVI COMMS: Posts $110,702 Net Loss in Quarter Ended June 30 K2 INC: Moody's Assigns Loss-Given-Default Rating KAISER ALUMINUM: Reports 3rd Qtr. Claim Settlement Fund & Escrow KAISER ALUMINUM: Settles OCP Status of Fleishman and Hewitt KARA HOMES: Gets Court Approval to Sell Nine Homes KOPPERS HOLDINGS: Dr. Whittle to Retire as Europe General Manager LE-NATURE'S INC: Creditors File Bankruptcy Case in Pennsylvania LE-NATURE'S INC: Involuntary Chapter 7 Case Summary LE-NATURE'S: Moody's Sees Ratings Withdrawal After Bankr. Filing LOGANS ROADHOUSE: Moody's Assigns B2 Corporate Family Rating LOOMIS SAYLES: Moody's Rates $15MM Class E Notes Due 2020 at Ba2 MERIDIAN AUTOMOTIVE: Court Extends Foreign Unit Financing Period MERIDIAN AUTOMOTIVE: Sells Mich. Property to Roskam for $2.45 Mil MESABA AVIATION: Opts to Reject Six Engine Leases with GS Leasing MESABA AVIATION: Can Enter Into Master Lease Pact with Northwest NCO GROUP: Earns $11.4 Million in 2006 Third Quarter NE ENERGY: Fitch Assigns B Issuer Default Rating NEW YORK RACING: Files for Bankruptcy Protection in Manhattan NEW YORK RACING: Case Summary & 20 Largest Unsecured Creditors NOMURA HOME: Fitch Places BB+ Rating on $12.2 Mil. Class B-2 Certs NORTH AMERICAN: Moody's Lowers Corp. Family Rating One Notch to B3 NORTHEAST GENERATION: S&P Lifts Rating on $320 Mil. Bonds to BB- NORTEL NETWORKS: Secures $7.7 Million NRC Maintenance Contract NUTECH DIGITAL: Posts $399,002 Net Loss in 2006 Second Quarter OWENS CORNING: Reorganization Cues S&P to Lift Default Rating PERFORMANCE TRANSPORTATION: Files Stipulation on $7MM Yucaipa Loan PERFORMANCE TRANSPORTATION: Withdraws Bonus Program Modifications PEMBRIDGE SQUARE: Fitch Rates EUR16 Million Class H Notes at BB+ PREMIER ENTERTAINMENT: Taps Byrd & Wiser as Bankruptcy Counsel PURE FISHING: Moody's Assigns Loss-Given-Default Ratings PURE MORTGAGES: Moody's Affirms Ba2 Rating on $23-Mil. Notes REEDS INC.: Posts $587,238 Net Loss in 2006 Second Quarter REFCO INC: Court Gives Final Okay on Amended Disclosure Statement REFCO INC: Court Sets December 15 Joint Plan Confirmation Hearing REFCO INC: Court Provides Clarification on Nov. 15 Claims Bar Date SALOMON BROTHERS: Moody's Ratings on 3 Cert. Classes Slides to C SMALL WORLD: Posts $4.9 Million Net Loss in 2006 Second Quarter STRUCTURED ASSET: Fitch Downgrades Ratings on Five Cert. Classes TIME WARNER: Buys Xspedius Communications for $216 Million in Cash UNITEDHEALTH GROUP: CalPERS Wants to Block CEO's Retirement Pay UNITEDHEALTH GROUP: Earns $1.101 Billion in Third Quarter of 2006 UNITED KAISER: Case Summary & Eight Largest Unsecured Creditors USA COMMERCIAL: Judge Riegle Disapproves Chapter 7 Conversion VARIG S.A.: Foreign Rep Objects to Port Authority's Payment Motion WAVE WIRELESS: Case Summary & 20 Largest Unsecured Creditors WELD WHEEL: Court Okays Spencer Fane as Committee's Lead Counsel WELD WHEEL: Ct. OKs Mesirow Financial as Panel's Financial Advisor WELLMAN INC: Poor Performance Cues Moody's to Lower Rating to B3 WESLEY TENNYSON: Case Summary & 20 Largest Unsecured Creditors WINN-DIXIE: Court Approves Five Alabama Power Agreements WINN-DIXIE: Wants TRP-Held SRP Plan Assets Transferred WOLVERINE TUBE: Mulls Chapter 11 Filing WOLVERINE TUBE: S&P Cuts Corp. Credit Rating to CC from CCC+ WOLVERINE TUBE: Bankruptcy Plan Prompts Junks Ratings by Moody's * BOOK REVIEW: The Managerial Mystique: Restoring Leadership in Business ********* ACTIS GLOBAL: Posts $1 Million Net Loss in Second Quarter 2006 -------------------------------------------------------------- Actis Global Ventures, Inc., reported a $1,046,142 net loss on $3,045,700 of revenues for the second quarter ended June 30, 2006, compared with a $48,081 net loss on $1,796,627 of revenues for the same period in 2005. The increase in net sales of $1,249,073 or 70% over 2005 is primarily due to a net increase in revenue from Direct Sales from the BIOPRO Technology division of $2,725,219, or 69% over 2005, while the increase in net loss from 2005 is due primarily to the increase in non-cash expense recorded in the 2006 period. At June 30, 2006, the company's balance sheet showed $2,045,800 in total assets, $5,346,638 in total liabilities and $44,843 in minority interest in subsidiaries, resulting in a $3,345,681 stockholders' deficit. The company's balance sheet at June 30, 2006, also showed strained liquidity with $1,289,849 in total current assets available to pay $5,346,638 in total current liabilities. Full-text copies of the company's second quarter financial statements are available for free at: http://researcharchives.com/t/s?1458 Going Concern Peterson & Co., LLP, expressed substantial doubt about Actis Global Ventures, Inc.'s ability to continue as a going concern after auditing the company's financial statements for the years ended Dec. 31, 2005 and 2004. The auditing firm pointed to the company's recurring losses from operations and working capital deficiency at Dec. 31, 2005 and 2004. About Actus Global Actis Global Ventures, Inc., -- http://www.actisglobalventures.com/-- is an early stage company that markets, sells and distributes a variety of products designed to provide consumers with a new generation of wellness solutions. The company sells their products primarily though Direct Sales through two divisions, BIOPRO and FemOne, and the company also sells their Channoine cosmetic products through the Direct Response Television Shopping Network. ADSOUTH PARTNERS: Posts $3.5 Million Net Loss in 2006 2nd Quarter ----------------------------------------------------------------- Adsouth Partners, Inc. reported a $3,502,000 net loss on $795,000 of revenues for the quarter ended June 30, 2006, compared with a $1,322,000 net loss on $277,000 of revenues for the comparable period in 2005. All $795,000 of the company's revenues for the second quarter of 2006 were from generator sales and all $277,000 of the company's revenues for the second quarter of 2005 were from the advertising services segment. As of June 30, 2006, the company's balance sheet showed $5,310,000 in total assets and $7,881,000 in total liabilities, resulting in a $2,571,000 stockholders' deficit. The company's balance sheet at June 30, 2006, also showed strained liquidity with $3,937,000 in total current assets available to pay $7,835,000 in total current liabilities. Outlook On Aug. 1, 2006. the company and its subsidiaries sold to MFC Development Corp. substantially all of the assets of its product sector. Only the generator sales and advertising services segments remain. During the three months ended June 30, 2006, two advertising customers who are no longer customers, represented 41% and 20% of total revenues. In addition, the company is a defendant in a recently-commenced litigation by one of their advertising customers seeking damages in excess of $2,000,000. Although the company believes it has meritorious defenses against such lawsuit, an unfavorable outcome of such action would have a materially adverse impact on its business and its ability to continue operating. About Adsouth Partners Adsouth Partners, Inc. -- http://www.adsouthpartners.com/-- is a vertically integrated direct response marketing company that generates revenues from the placement of advertising, the production of advertisements, creative advertising and public relations consulting services. Since December 2005, through a majority-owned subsidiary, Genco Power Solutions, Inc. -- http://www.gencopowersolutions.com-- the company has been marketing integrated power generator systems to residential homeowners and commercial businesses throughout Florida. ADVENTURE PARKS: Taps Langdale & Valloton as Special Counsel ------------------------------------------------------------ Adventure Parks Group LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Middle District of Georgia for permission to employ Langdale & Vallotton LLP, as their special counsel. Specifically, the firm will: a) serve as general non-bankruptcy corporate counsel; b) represent the Debtors in pending civil actions; and c) perform other duties as may be requested. The hourly rates for the firm's professionals are: Designation Hourly Rate ----------- ----------- Senior Partners $300 New Associates $150 Legal Assistants $150-$300 The Debtors' application further shows that: -- the firm served as general counsel for the Debtors, for which services it has been fully compensated; -- William Langdale, Jr., is the holder of an equity interest in the Debtors; and -- Palmetto Holdings LLP, a partner of William P. Langdale, Jr. and William P. Langdale, III, holds an equity interest in the Debtors. William P. Langdale, III, Esq., member of the firm, assures the Court that his firm does not hold any interest adverse to the Debtors, its estate or creditors. Mr. Langdale can be reached at: William P. Langdale, III, Esq. Langdale & Vallotton, LLP 1007 North Patterson Street Valdosta, Georgia 31601 Tel: (229) 244-5400 Fax: (229) 244-0453 (229) 244-5475 http://www.langdalevallotton.com/ Headquartered in Valdosta, Georgia, Adventure Parks Group, LLC, is the holding company of Wild Adventures and Cypress Gardens. Wild Adventures operates an amusement park in Valdosta, Georgia while Cypress operates an amusement park in Winter Haven, Florida. The Company, along with Wild Adventures and Cypress Gardens, filed for chapter 11 protection on Sept. 11, 2006 (Bankr. M.D. Ga. Case Nos. 06-70659 through 06-70661). George H. McCallum, Esq., James P. Smith, Esq., and Ward Stone, Jr., Esq., at Stone & Baxter, LLP, represent the Debtors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $50 million and $100 million. ALLIED HOLDINGS: Explores Potential Merger Deal with Performance ---------------------------------------------------------------- Alvarez & Marsal, LLC, chief restructuring officer of Performance Transportation Services, Inc., discloses in its first interim fee application that it "conducted limited due diligence on Allied [Holdings, Inc.,] and coordinated discussions with Allied regarding [a] potential business combination." Timothy Skillman, managing director at Alvarez & Marsal, reports that on July 24, 2006, he met and discussed merger related issues with Allied and Yucaipa American Alliance Fund I, LP, and Yucaipa American Alliance (Parallel) Fund I, LP. Yucaipa is a premier private equity investment firm that has established a record of fostering economic value through the growth and responsible development of companies. As an investor, Yucaipa works with management to strategically reposition businesses and implement operational improvements, resulting in value creation for shareholders, customers and employees. Since its founding in 1986, Yucaipa has completed mergers and acquisitions valued at more than $30,000,000,000. Among other investments, Yucaipa holds approximately $100,000,000 of senior unsecured claims against Allied. Performance, the second largest vehicle-hauler in North America, is the Debtors' primary competitor in the vehicle-delivery business on a nation-wide basis. Allied and Performance specifically compete for assembly plant contracts with original equipment manufacturers. Performance and certain of its affiliates filed for Chapter 11 in the U.S. Bankruptcy Court for the Western District of New York, Buffalo Division. The Performance Debtors disclosed a $2,932,900 operating net loss on August 31, 2006. Bankruptcy Creditors' Service, Inc., also publishes Performance Bankruptcy News, providing detailed coverage of its chapter 11 restructuring. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor. Anthony J. Smits, Esq., at Bingham McCutchen LLP, provides the Official Committee of Unsecured Creditors with legal advice and Russell A. Belinsky at Chanin Capital Partners, LLC, provides financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc. http://bankrupt.com/newsstand/ or 215/945-7000) ALLIED HOLDINGS: Excl. Plan-Filing Period Intact Until November 9 ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia issued a bridge order extending the exclusive period within which Allied Holdings, Inc., and its debtor-affiliates may file a plan of reorganization through and including Nov. 9, 2006. As reported in the Troubled Company Reporter on Oct. 26, 2006, the Debtors are seeking a twelve-week extension of the periods during which they have the exclusive right to: * propose and file a plan of reorganization through and including Jan. 17, 2007; and * solicit acceptances of that plan through and including March 21, 2007. The Court will convene a hearing on Nov. 8, 2006, to consider the Debtors' request. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor. Anthony J. Smits, Esq., at Bingham McCutchen LLP, provides the Official Committee of Unsecured Creditors with legal advice and Russell A. Belinsky at Chanin Capital Partners, LLC, provides financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc. http://bankrupt.com/newsstand/ or 215/945-7000) ASARCO LLC: Judge Schmidt Approves Intercompany Bar Date Accord --------------------------------------------------------------- The Honorable Richard Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi approves the stipulation among ASARCO LLC and its debtor-affiliates, the Official Committee of Unsecured Creditors for ASARCO LLC and the Asbestos Subsidiary Debtors, and Robert C. Pate, as future claims representative. Pending further Court order, the Bar Dates established in the Bar Date Order are extended solely with respect to the Intercompany Claims of the non-filing subsidiaries of ASARCO LLC. The Asbestos Subsidiary Debtors are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. As reported in the Troubled Company Reporter on Oct. 17, 2006, the parties agreed that: (a) Pending further Court order, the Bar Dates are extended solely with respect to Intercompany Claims; (b) The Bar Dates applicable to claims asserted by any party other than one of the Debtors are not modified and remains in full force; (c) Upon completion of the Intercompany Claims' investigation, the Debtors and the ASARCO Committee may file a supplemental bar date notice with the Court establishing a new bar date with respect to the Intercompany Claims, provided that the notice must be filed at least 30 days before that Intercompany Claims Bar Date; (d) The complaints filed by the Asbestos Committee and the FCR in the Derivative Asbestos Claims Adversary Proceeding constitute a proof of claim by the Asbestos Debtors against ASARCO. The amounts asserted in the Asbestos Debtors' Proofs of Claim will be determined by the Court pursuant to the Asbestos Claims Estimation Motion, which amount will be incorporated by ASARCO in its plan of reorganization; and (e) Any other Intercompany Claims asserted by the Asbestos Debtors will be filed by the Asbestos Committee by Jan. 31, 2007. 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. 31; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ASARCO LLC: Wants Winters Dorsey as Special Purpose Advisor ----------------------------------------------------------- ASARCO LLC seeks authority from the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to employ Winters, Dorsey & Company, LLC, as special purpose consulting experts to Baker Botts LLP, nunc pro tunc to Sept. 1, 2006. ASARCO has previously commenced a complaint against Mineral Park Inc. in connection with the sale of the South Mill Assets a month before it filed for bankruptcy. ASARCO asserted that it failed to receive reasonably equivalent value in exchange for the transfer of the South Mill Assets. James R. Prince, Esq., at Baker Botts, in Dallas, Texas, relates that ASARCO needs to employ professionals who can provide valuation services in connection with the Adversary Proceeding. Mr. Prince tells the Court that WDC has already prepared a preliminary valuation report in connection with the Adversary Proceeding. Aside from the preliminary report, WDC will prepare a final report for trial and more reports as needed. WDC will also provide other expert consulting services to Baker Botts. Mr. Prince says WDC has accrued approximately $100,000 in fees and expenses for the preparation of the preliminary expert report. For additional work, ASARCO will pay WDC in its customary hourly rates. Harry Winters, Jr., president of WDC, will be paid $350 per hour. Other professionals from WDC who may provide services to ASARCO will be paid from $150 to $250 per hour. ASARCO estimates that professional fees for WDC will range from $95,000 to $116,000. ASARCO will also reimburse WDC for its reasonable out-of-pocket expenses. Mr. Winters assures the Court that WDC is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code, and does not represent any other entity having adverse interests to ASARCO and its estate. 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. 31; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). ATLANTIC WINE: Posts $16,937 Net Loss in 2006 First Fiscal Quarter ------------------------------------------------------------------ Atlantic Wine Agencies Inc. reported a $16,937 net loss on $55,959 of sales for the first fiscal quarter ended June 30, 2006, compared with a $454,507 net loss on $94,302 of sales for the same period in 2005. At June 30, 2006, the company's balance sheet showed $3,704,411 in total assets, $1,756,928 in total liabilities, and $1,947,483 in total stockholders' equity. The company's balance sheet at June 30, 2006, also showed strained liquidity with $975,180 in total current assets available to pay $1,756,928 in total current liabilities. Full-text copies of the company's first fiscal quarter financial statements are available for free at: http://researcharchives.com/t/s?144a Going Concern As reported on the Troubled Company Reporter on July 20, 2006, Meyler & Company, LLC, in Middletown, New Jersey, raised substantial doubt about Atlantic Wine Agencies, Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended March 31, 2006, and 2005. The auditor pointed to the company's losses since inception and uncertainties over its ability to obtain additional capital and operate successfully. About Atlantic Wine Headquartered in London, Atlantic Wine Agencies, Inc. -- http://www.atlanticwineagencies.com/-- is a public listed company supported by a small group of key investors who are passionate wine enthusiasts. The company purchased Mount Rozier Estatem, a world-class vineyard estate in Stellenbosch, South Africa, in February 2004. The group has two key business areas: a brand building wine business and a leisure/lifestyle development business. Each is operated separately with management and organizations within the group under the control of the main board. BANTA CORP: RR Donnelley Extends $1.3 Bil. Cash Purchase Offer -------------------------------------------------------------- RR Donnelley & Sons Company disclosed that it has signed a definitive agreement with Banta Corporation, pursuant to which RR Donnelley will acquire Banta Corporation, in an all-cash deal, for approximately $1.3 billion, or $36.50 per share, after the special dividend of $16 per share declared by Banta Corp. The agreement has been unanimously approved by the Boards of Directors of both companies and is expected to close in the first quarter of 2007. The acquisition is expected to be accretive to RR Donnelley's earnings in the first full year after the closing of the transaction and is subject to customary closing conditions, including regulatory approval and approval of Banta shareholders. The combination will enable RR Donnelley to expand the range of products and services it offers customers, while at the same time enhancing its services to the magazine, catalog, book and direct marketing segments. "Banta is an exceptional fit with RR Donnelley," Mark A. Angelson, RR Donnelley's chief executive officer, said. "This combination will create immediate cross-selling opportunities with our blue- chip customers as well as offer substantial synergies in our procurement, manufacturing and services operations. We are delighted to have the opportunity to better serve our customers by expanding the flexibility of our combined global manufacturing and service platforms. The addition of Banta furthers our goal of increasing long-term shareholder value and we look forward to maximizing the benefits for our customers, employees and investors." "RR Donnelley's innovative, customer-centered approach, broad product and service mix and emphasis on developing value-added solutions mirrors Banta's," Stephanie A. Streeter, Banta's chairman and chief executive officer, said. "Joining these two highly successful, complementary companies will result in a combined organization that creates new and exciting opportunities for our customers and employees moving forward. Together, the companies will offer enhanced capabilities and an increased array of options to our customers and I look forward to working closely with RR Donnelley's management to ensure a smooth transition." Goldman, Sachs & Co. served as financial advisor to R.R. Donnelley and Sullivan & Cromwell LLP provided legal counsel. UBS Securities LLC served as financial advisor to Banta Corp. and Foley & Lardner LLP provided legal counsel. About RR Donnelley RR Donnelley (NYSE: RRD) -- http://www.rrdonnelley.com-- provides solutions in commercial printing, direct mail, financial printing, print fulfillment, labels, forms, logistics, call centers, transactional print-and-mail, print management, online services, digital photography, color services, and content and database management to customers in the publishing, healthcare, advertising, retail, technology, financial services and many other industries. About Banta Corp. Headquartered in Menasha, Wisconsin, Banta Corporation provides a combination of printing and digital imaging solutions to publishers and direct marketers through its printing services segment, and a range of outsourcing capabilities through its supply-chain management services. BANTA CORP: RR Donnelley Purchase Deal Cues S&P to Revise Outlook ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its CreditWatch listing on Banta Corp. 'BB' ratings to positive from negative implications following the company's announcement that it has signed a definitive agreement to be acquired by R.R. Donnelley & Sons Co. for cash. In addition, on Oct. 31, 2006, Cenveo Inc. withdrew its proposal to acquire Banta. The positive CreditWatch listing reflects the proposed purchase of Banta by a higher-rated company. Donnelley will pay $1.3 billion for Banta or $36.5 per common share after the special dividend of $16.00 per share already declared by Banta. At the same time, Standard & Poor's placed its ratings on Donnelley on CreditWatch with negative implications. The acquisition has been approved by the boards of directors of both companies and is expected to close in the first quarter of 2007. Following the close of the acquisition, if debt at Banta were refinanced, Standard & Poor's would expect to withdraw its ratings on the company. BANTA CORPORATION: Moody's Affirms Ba2 Corporate Family Rating -------------------------------------------------------------- Moody's Investors Service affirmed the Baa2 Senior Unsecured and P-2 short-term ratings of RR Donnelley and Sons Company, while placing the Ba2 Corporate Family Rating, Ba2 Senior Secured rating, Ba3 Probability of Default and LGD3 (39%) Loss-Given- Default rating of Banta Corporation under review for possible upgrade. The SGL-1 liquidity rating of Banta remains unchanged. This action reflects the announcement that RRD has made a $900 million all-cash acquisition offer for Banta ($36.50/share), which has been approved by Banta's Board. Banta will also pay an extraordinary dividend of approximately $400 million to its shareholders ($16/share). The outlook for RRD's ratings remains negative. The affirmation of RRD's long term rating reflects Moody's belief that the acquisition, if consummated, will not negatively affect RRD's credit metrics by 2008, assuming, importantly, that the company dedicates all of its expected cash flow towards debt reduction. Moody's expects an immediate deterioration of credit metrics, but the rating has been maintained because Moody's believes the company is likely to focus on debt reduction following the Banta acquisition. The Debt/EBITDA is expected to increase approximately _ of a turn towards 3X, pro-forma for 2006, before reducing back towards 2x by 2008. Moody's also assumes that there will be some synergy benefits to come from this acquisition by 2008, after usual interim integration and restructuring costs are incurred in 2007. The outlook for RRD's ratings remains negative because of Moody's concerns over the continuing difficult conditions in the printing industry, as well as both acquisition risk and the potential for share buybacks. RRD has been acquisitive over the past several years and although Moody's has concluded that the proposed acquisition of Banta can be accommodated within the existing Baa2 rating, the risk remains that RRD will undertake one or more future acquisitions that will collectively cause a deterioration of expected 2008 credit metrics. As well, even though Moody's is currently assuming that RRD will dedicate all cash flow to debt reduction following the proposed acquisition, the company has nevertheless recently authorized a $350 million share buyback program. The review of Banta's ratings will focus on the likelihood of the acquisition closing, the potential for RRD to refinance Banta's debt, and the impact on its standalone operating performance and credit metrics caused by its pending ownership by RRD. On Review for Possible Upgrade: * Issuer: Banta Corporation -- Corporate Family Rating, Placed on Review for Possible Upgrade, currently Ba2 Outlook Actions: -- Issuer: Banta Corporation -- Outlook, Changed To Rating Under Review From Stable RR Donnelley and Sons Company, the world's largest commercial printer with revenue of over $9 billion, is headquartered in Chicago, Illinois. Banta Corporation, a commercial printer with revenue of approximately $1.5 billion, is headquartered in Menasha, Wisconsin. BENCHMARK ELECTRONICS: S&P Places BB- Rating on CreditWatch ----------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB-' corporate credit rating on Angleton, Texas-based Benchmark Electronics Inc. on CreditWatch with positive implications after the company announced it will acquire Pemstar Inc. in a stock transaction valued at about $300 million. Pemstar is an electronics manufacturing service company that has good penetration in adjacent markets to Benchmark. Pemstar reported revenues of $871 million for the fiscal year ended March 31, 2006, approximately 46% of which is derived from industrial equipment programs, nearly double Benchmark's revenue contribution from that segment. Profitability has been suppressed by restructuring actions and an unprofitable contract that is being evaluated to determine strategic alternatives. "The acquisition will broaden Benchmark's market reach in higher margin, stable programs in industrial equipment as well as augmenting low cost manufacturing capacity," said Standard & Poor's credit analyst Lucy Patricola. The acquisition will increase Benchmark's revenue by over 30% and enhance its business position, which has been a limiting factor for its ratings. While Benchmark retains sufficient liquidity to extinguish Pemstar debt of about $100 million, leverage would remain low, under 1x, if the debt remains outstanding. S&P will meet with management to discuss and evaluate the enhanced business prospects of the combined companies, as well as any restructuring costs and their impact, to determine the final impact on the rating. BLOCKBUSTER INC: Outlines New Deal for Online Renters ----------------------------------------------------- Blockbuster Inc. is giving online renters expanded access to movies through the introduction of BLOCKBUSTER Total Access(TM), a movie rental program that gives online customers the option of returning their DVDs through the mail or exchanging them at more than 5,000 participating BLOCKBUSTER(R) stores for free in-store movie rentals. The new program, available only from Blockbuster, means Total Access subscribers don't need to wait to get DVDs through the mail, essentially allowing them to double the number of movies they can access each month. Beginning Nov. 1, Blockbuster will automatically upgrade all current and new online rental subscribers to the Blockbuster Total Access program at no extra cost, immediately giving them the option of mailing back their online movies, exchanging them at any participating Blockbuster store, or a combination of the two. For each online rental exchanged in the store, customers can receive a free in-store movie rental. Subscribers to Blockbuster's lower- priced $5.99 and $7.99 plans will also be included in the Total Access program and will be able to exchange their online DVDs for free in-store movie rentals. Another feature Blockbuster Total Access offers subscribers is a faster shipping cycle. When subscribers return their online rentals to a participating Blockbuster store, the store check-in process automatically initiates the shipment of the next available movies in the subscriber's rental queue, whether they take advantage of the in-store exchange option or not. That means Total Access customers generally will get their online movies a day faster than if they had dropped the return movies in the mail. In addition to being able to exchange online rentals at participating Blockbuster stores for free movie rentals, Blockbuster Total Access customers will also receive a free in- store rental coupon each month. Subscribers can use the monthly rental coupon in the same visit with their in-store exchanges for another free movie, or by itself if they have already returned their DVDs through the mail or just aren't ready to return their online rentals yet. Movies received through the in-store exchange option or with the rental coupon do not count against the total number of DVDs an online customer can have out at any one time per their subscription plan. In-store movies are still subject to store rental terms, including due dates, and must be returned to the store from which they were rented. Another added convenience is that customers can now sign up for Blockbuster's online rental service right in the stores. With the launch of the Blockbuster Total Access program, almost all participating Blockbuster stores will have online wireless access, so store personnel can sign up new subscribers on the spot. As of the end of September, Blockbuster had approximately 1.5 million online subscribers, a year-over-year increase in its subscriber base of 50 percent, which included some 100,000 trial subscribers at quarter-end who subsequently converted to paying members. During the third quarter, the company added approximately 150,000 net subscribers. With more than 60,000 titles to choose from online, Blockbuster delivers DVDs right to subscribers' mailboxes in return-pre-paid postage envelopes. There are no due dates or late fees with movies rented from Blockbuster's online rental service, and subscription plans start as low as $5.99 a month, with the $17.99 three-out unlimited movie plan being the most popular. A two- week free trial membership to Blockbuster Total Access is available for a limited time, including to those customers who have previously tried Blockbuster's online rental service but are not currently subscribing to the service. About Blockbuster Blockbuster Inc. -- http://www.blockbuster.com/-- provides in-home movie and game entertainment, with more than 9,000 stores throughout the Americas, Europe, Asia and Australia.. * * * As reported in the Troubled Company Reporter on Oct. 11, 2006, Moody's Investors Service affirmed its B3 Corporate Family Rating for Blockbuster Inc. in connection with its implementation of the new Probability-of-Default and Loss-Given-Default rating methodology for the US and Canadian Retail sector. Standard & Poor's Ratings Services lowered, in November 2005, its corporate credit and bank loan ratings on Blockbuster Inc. to 'B-' from 'B' and the subordinated note rating to 'CCC' from 'CCC+'. S&P said the outlook is negative. Fitch downgraded, in August 2005, Blockbuster Inc.'s Issuer default rating to 'CCC' from 'B+'; Senior secured credit facility to 'CCC' from 'B+' with an 'R4' recovery rating; and Senior subordinated notes to 'CC' from 'B-' with an 'R6' recovery rating. CAVALIER TELEPHONE: Moody's Rates Proposed $415MM Sr. Loan at B2 ---------------------------------------------------------------- Moody's Investors Service assigned a B2 rating for the proposed $415 million senior secured term loan and the $20 million revolving credit facility at CavTel Holdings, LLC. The ratings reflect both the overall probability of default of the company, to which Moody's assigns a PDR of B3, and a loss given default of LGD3. In addition, Moody's affirmed Cavalier's B2 corporate family rating, and the B2 rating on the existing credit facilities. The outlook remains stable. The new credit facility will be used to fund the acquisition of TalkAmerica Holdings and to refinance existing debt. At the closing of the transaction, the ratings on the existing facilities will be withdrawn. * Issuer: CavTel Holdings, LLC -- Corporate Family Rating -- Affirmed B2 -- Probability of Default Rating -- Affirmed B3 -- Senior 1st lien secured Revolving Credit Facility Due 2011 -- Assigned B2, LGD3-31% -- Senior 1st lien secured Term Loan Due 2012 -- Assigned B2, LGD3-31% -- Existing 1st lien $20 million Revolving Credit Facility Due 2011 -- Affirmed B2, LGD3-31% -- Existing 1st lien $185 million Term Loan Due 2012 -- Affirmed B2, LGD3-31% -- Outlook - Stable The B2 corporate family rating reflects Cavalier's financial risk, challenging competitive position as a CLEC, increased capital spending on the IPTV initiative and the complexity of turning around and integrating TalkAmerica within its operations. The ratings also incorporate the inherent risk of Cavalier's greater reliance on the residential telephony market relative to its CLEC peers, as the residential customers typically have higher churn rates. The ratings benefit from the company's larger operating scale and the expected EBITDA growth driven by merger synergies. The company's leverage (which includes 75% of preferred stock accounted as debt, in accordance with Moody's methodology, and adjusted for operating leases) is expected to be about 3.8x TTM 2Q 2006, proforma for the acquisition. The stable rating outlook considers the company's growth plans and the reasonable likelihood of achieving merger synergies to resume generating free cash flow to drive deleveraging over the rating horizon. Given the challenges management will face in integrating TalkAmerica's operations and achieving cost synergies, the ratings are somewhat prospective in nature. Should the company fail to quickly realize on the expected merger benefits or if residential churn were to stay close to the 5% threshold, the outlook and the rating could come under downward pressure. The B2 rating of the term loan and the revolver reflects an LGD3 loss given default assessment, as these senior secured credit facilities represent largely the entire debt capital of the company, and the assumed 65% family recovery rate given its current all bank debt capital structure. Cavalier is a CLEC servicing approximately 400,000 access lines in 5 mid-Atlantic United States. The company maintains its headquarters in Richmond, Virginia. TalkAmerica is a CLEC servicing approximately 450,000 access lines, in the Midwest and Southeast, and is headquartered in Reston, Virginia. COLLINS & AIKMAN: Can Pay Severance Fees to Laid-Off Workers ------------------------------------------------------------ The U.S Bankruptcy Court for the Eastern District of Michigan authorized Collins & Aikman Corporation and its debtor-affiliates to pay severance benefits in connection with their planned reduction-in-force. As part of their ongoing efforts to cut costs and increase operational efficiency, the Debtors determined, in consultation with JPMorgan Chase Bank, N.A., the administrative agent for their senior, secured prepetition lenders, and the Official Committee of Unsecured Creditors, to implement the RIF. In particular, the Debtors plan to reduce the number of salaried employees by approximately 125, representing approximately $7,600,000 in annual base salaries. As reported in the Troubled Company Reporter on Oct. 17, 2006, the Debtors want to provide severance benefits to employees affected by the RIF. For these employees, the Debtors intend to give, upon execution of a release acceptable to the Debtors: (a) a severance package equivalent to (i) up to four weeks of base salary and (ii) any accrued and unused vacation; and (b) continued employee benefits for up to four weeks. The base salary component of the Severance Benefits would be subject to an aggregate limit of $650,000. The cap does not include any payments to employees of non-debtors that may be affected by the RIF. Should additional reductions-in-force become necessary to complete their restructuring process, the Debtors intend to return to the Court for approval of severance-related benefits. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represents C&A in its restructuring. Lazard Freres & Co., LLC, provides the Debtor with investment banking services. Michael S. Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors Committee. When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) COLLINS & AIKMAN: Court Okays Rejection of 4 GECC Lease Schedules ----------------------------------------------------------------- The Honorable Steven W. Rhodes of the U.S. Bankruptcy Court for the Eastern District of Michigan authorizes Collins & Aikman Corporation and its debtor-affiliates to reject, as of Sept. 22, 2006, four lease schedules under their May 7, 1993 Master Lease Agreement with General Electric Capital Corporation. As reported in the Troubled Company Reporter on Oct. 4, 2006, the Debtors sought to reject these lease schedules: (1) Schedule No. 5, Serial Nos. 96386 to 96390; (2) Schedule No. 16, Serial No. 299; (3) Schedule No. 7, Serial Nos. 96407, 96354, and 96353; and (4) Schedule No. 19, Serial No. 96381. The U.S. District Court for the Eastern District of Michigan, Southern Division, recently denied GECC's appeal with regard to the Bankruptcy Court's ruling concerning the Master Lease Agreement. GECC had informed the Bankruptcy Court that it will take an appeal to the District Court from the order denying its request to compel payments under its master lease agreements with the Debtors. GECC wanted the District Court to determine whether: a. the Bankruptcy Court erred in denying GECC's request to compel payments first due at least 60 days after the Petition Date under certain master lease agreements; and b. the Bankruptcy Court erred by, over GECC's objection, instituting a procedure to rule on the relief requested in the Request when: (1) the procedure resulted in the denial of the Motion and the continued use by the Debtors of the equipment leased under the Products Leases without any evidence or suggestion that the Debtors will have the financial wherewithal to pay the accrued and accruing obligations under the Products Leases by which the Debtors remain bound; (2) the procedure is not contemplated by the Bankruptcy Code or the Federal Rules of Bankruptcy Procedure; and (3) the procedure denied GECC due process of law in violation of Article V of the Constitution in that it did not (a) afford GECC the opportunity to submit a brief, (b) allow GECC to conduct discovery, (c) allow GECC to depose the Debtors' witnesses, or (d) allow GECC to cross examine the Debtors' witnesses at the hearing. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represents C&A in its restructuring. Lazard Freres & Co., LLC, provides the Debtor with investment banking services. Michael S. Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors Committee. When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) COLUMBUS HOSPITAL: Moody's Affirms Rating on $27MM Bonds at B3 -------------------------------------------------------------- Moody's Investors Service has affirmed the B3 underlying rating to Columbus Hospital's $27 million of Series A (1991) bonds issued by New Jersey Healthcare Facilities Financing Authority. The outlook remains negative. However, management is considering a $10 million borrowing from a healthcare lender which requires approval by two-thirds of the bondholders. Request for such approval has not yet been sought. Maintenance of the B3 rating will be challenged in the event of another $10 million obligation. Legal security Gross revenue pledge and mortgage. Debt service coverage ratio of 1.1 times which the hospital did not meet in FY 2005. Debt service reserve fund remains intact and untapped. Strengths Proven commitment to monthly funding of debt service obligations from cash flow and without using the debt service reserve fund despite a depleted cash position and stressed operations. Challenges * Minimal cash position of $3 million, or 12 days cash on hand, as of June 30, 2006 although management reports that cash has declined to $2.6 million as of August 30, 2006, which provides no liquidity cushion to manage operational volatility * Consideration of a $10 million borrowing to pay vendors, enhance certain revenue-producing clinical programs and fund needed capital will stress an already overly leveraged organization and placing further stress on the hospital's ability to make bond payments * Material 4.5% decline in volumes in FY 2005 over the prior year due to increased physician referrals to Columbus' sizable competitor, Clara Maas Medical Center; volumes continued to decline 3.4% through the first half of 2006 over the prior comparable period Recent Developments Columbus Hospital continues to face significant performance and liquidity challenges. FY 2005 results were abysmal with an $8.4 million operating loss or -9.8% operating margin. Operating cash flow and total cash flow were negative and for the second consecutive year Columbus failed to meet its 1.1 times rate covenant. Debt-to-capitalization is extremely unfavorable at 271% due to the negative adjustment to net assets of $11 million for prior period adjustments. Likewise, $6 million in accounts receivable were written off (through increased contractual allowances) after consultation with Columbus' new auditors. Comparison to prior years' performance is meaningless given the adjustments taken in FY 2005. Prior audited financial statements indicated overstated performance by about $5 million in both FY 2004 and FY 2003. Performance through the first half of FY 2006 shows a loss of $1.1 million which management reports has increased to $2.8 million through August 2006 as volumes continue to decline. Management is trying to hold FY 2006's loss to $3 million through cost reductions and volume strategies. Per the bond documents, a consultant was hired after Columbus failed to meet its rate covenant in FY 2004. The consultant's plan began in June 2005 and is only one-year into its two-year turnaround plan. Hence, Columbus will not have to hire another consultant for the FY 2005 rate covenant violation. If Columbus reports at least 1.1 times coverage in FY 2006 it will not need a consultant. More pertinent to the rating is Columbus's cash position. Liquidity at FYE 2005 declined to a dangerously low one thousand dollars (0 days cash on hand) although this was due to a delay in CMS' PIP (periodic interim payments) funding which came a few days after the first of the year. As of June 30, 2006, cash has increased to $3.1 million (12 days cash) although management reports that cash has since declined to $2.3 million as of August 30, 2006. Columbus has no line of credit and is not on C.O.D. with its vendors. Notwithstanding Columbus' dire liquidity, the organization remains current on its monthly bond payments. Cash flow is used to make bond payments and payroll. Columbus has a demonstrated track record of making all debt payments in full and on time since cash precipitously declined in FY 2003 to less than $1 million. After the Series A bonds, the largest liability is a $17 million payable to Cathedral Health System, the parent of Columbus Hospital following the 1999 affiliation. Payments to the parent are not currently required but management anticipates making some type of payment by year end. No additional cash funding is expected from Cathedral following the $10 million grant made in 1999. Cathedral does not guarantee Columbus' debt and did not make its own rate covenant in FY 2005. Management is considering a $10 million borrowing from CIT healthcare lending but needs two-thirds bondholder approval. The loan would be secured by accounts receivable. Proceeds will be used to pay vendors, enhance revenue-producing clinical services and fund capital. Another $10 million obligation will further stress demand on already stressed cashflow. Outlook The negative outlook continues to reflect the highly tenuous situation caused by the very low level of unrestricted cash available to Columbus. Given the depleted asset base, Columbus' inability to absorb any additional financial challenges severely compromises bondholders' security. The negative outlook also reflects our belief that cash will remain low in the coming years as the modest cash flow generated will be required to pay debt service, vendors, and routine capital and operations. What could change the rating-- up Unlikely, given current financial position. What could change the rating-- down Payment default on debt service, payment or timing concessions from current bondholders, bankruptcy filing Key indicators -- Based on audited financial statements for Columbus Hospital ending December 31, 2005 -- Investment return normalized at 6% -- Total hospital admissions: 8,520 -- Total operating revenue: $ 81.0 million -- Net revenues available for debt service: ($3.3) million -- Days-cash-on-hand: None -- Debt-to-cash flow: (5.92x) -- Maximum annual debt service: $3.5 million Moody's adjusted maximum annual debt service coverage based on 6% investment return: -0.94 times Maximum annual debt service coverage based on reported investment return: -0.94 times Total debt outstanding: $32.8 million Operating cash flow margin: -3.8% Rated debt: Series A (1991): B3 COMPLETE RETREATS: Gets Court OK to Employ XRoads as Claims Agent ----------------------------------------------------------------- Pursuant to Sec. 363 of the Bankruptcy Code, the U.S. Bankruptcy Court for the District of Connecticut gave Complete Retreats LLC and its debtor-affiliates authority to employ XRoads Claims Management Services LLC as their claims and noticing agent until Sept. 30, 2006. In August 2006, the Debtors filed an application pursuant to Section 327 of the Bankruptcy Code to employ XCM as their claims and noticing agent. The United States Trustee has objected twice to the XCM Retention Application. The Debtors voluntarily withdrew the XCM Application after discussions with their counsel and the U.S. Trustee. As reported in the Troubled Company Reporter on Oct. 6, 2006, XCM was expected to: (a) assist in the preparation of the Debtors' Schedules of Assets and Liabilities, Statements of Financial Affairs, the initial reporting package for the United States Trustee, and monthly operating reports; (b) design, maintain, and administer the Debtors' claims database; (c) provide designated users with access to the claims database to track claims activity, view claims-related documents in PDF format, and create reports; (d) send acknowledgement cards to creditors confirming receipt of their proofs of claim; and (e) provide copy and notice service consistent with the applicable local rules and as requested by the Debtors and the Court, including acting as the official claims agent in lieu of the Court in: * serving notice to parties-in-interest, * maintaining all proofs of claim and proofs of interest filed and received in the Debtors' bankruptcy cases; * docketing the claims; * maintaining and transmitting to the Bankruptcy Clerk the official claims registers; * maintaining current mailing lists of all claimants and notices of appearance received; * providing free public access for claims examination at its premises during regular business hours; and * recording claims assignments to third parties and recording all transfers received pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure. The Debtors proposed to pay XCM's service at these hourly rates: Professional Hourly Rate ------------ ----------- Director or Managing Director $225 to $325 Consultant or Sr. Consultant $125 to $225 Type of Service Hourly Rate --------------- ----------- Accounting and Document Management $125 to $195 Programming and Technical Support $125 to $195 Clerical - data entry $40 to $65 The Debtors also proposed to reimburse XCM for its out-of-pocket expenses. XCM has not received a retainer from the Debtors, Jeffrey K. Daman, Esq., at Dechert LLP, in Hartford, Connecticut, told the Court. The Debtors have more than 5,000 creditors and other potential parties-in-interest. Mr. Daman avered that the Bankruptcy Clerk's Office is not equipped to (i) distribute notices, (ii) process all proofs of claim filed in these cases, and (iii) assist in the balloting process for the Debtors' Chapter 11 cases. XCM is not to be retained under Section 327, Mr. Daman noted. Accordingly, the Debtors asked the Court to treat XCM's fees and expenses as an administrative expense under the Debtors' estates. The Debtors also asked the Court for permission to pay XCM's fees and expenses without the need for XCM to file any fee applications. John Vander Hooven, a managing director at XRoads Case Management Services, LLC, assured the Court that XCM does not hold or represents any interest adverse to the Debtors' estates and is a "disinterested person," as referenced in Section 327(a) and as defined in Sections 101(14) and 1107(b) of the Bankruptcy Code. 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. 12; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). COMPLETE RETREATS: Court Approves First Insurance Premium Pact -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Connecticut gave Complete Retreats LLC and its debtor-affiliates authority to enter into a premium financing agreement and disclosure statement with First Insurance Funding Corp. The Debtors wanted to execute the Premium Finance Agreement and Disclosure Statement with First Insurance for the financing of coverage essential for the operation of their business operations, including umbrella, general liability, and property insurance policies. In the ordinary course of business, the Debtors maintain insurance coverage for themselves and their properties. To reduce the burden of funding the premiums of their insurance policies, the Debtors have in the past routinely entered into various financing agreements. Pursuant to the FIFC Premium Finance Agreement, FIFC will provide financing to the Debtors for the purchase of three Policies: Policy Effective Policy Number Insurance Company Date Premium ------ ----------------- --------- ------- NHA036341 RSUI Indemnity Company 8/29/2008 $36,000 FIN TXS/FEES 0 ERN TXS/FEES 0 GL000302-02 Aspen Specialty Insurance 8/29/2008 56,330 FIN TXS/FEES 2,906 ERN TXS/FEES 1,800 7522791 Lexington Insurance Co. 8/29/2006 293,149 FIN TXS/FEES 15,032 ERN TXS/FEES 7,500 The premium to be financed pursuant to the Premium Finance Agreement is $302,563, which is in addition to the $110,154 cash down payment delivered upon purchase of the Policies. By virtue of the Premium Finance Agreement, the Debtors will be obligated to pay FIFC $313,059, which includes a financing charge of $10,495 in nine monthly installments of $34,784 each. The Premium Finance Agreement provides FIFC with various rights to act against the Policies. To secure the repayment of the indebtedness due under the Premium Finance Agreement, the Debtors would grant FIFC a security interest in, among other things, the unearned premiums of the Policies. The Debtors would appoint FIFC as their attorney-in- fact with the irrevocable power to cancel the Policies and to collect the unearned premium in the event that they are in default of their obligations under the Premium Finance Agreement. To grant adequate protection to FIFC, the parties also agree that the Debtors would be authorized and directed to timely make all payments due under the Premium Finance Agreement and FIFC would be authorized to receive and apply those payments to the indebtedness owed by the Debtors to FIFC as provided in the Premium Finance Agreement. The parties further agree that if the Debtors do not make any of the payments due under the Premium Finance Agreement as they become due, the automatic stay would automatically lift and be vacated to enable FIFC and any insurance companies providing the coverage under the Policies to take all steps necessary and appropriate to: -- cancel the Policies, -- collect the collateral, and -- apply that collateral to the indebtedness owed to FIFC by the Debtor; provided that in exercising those rights, FIFC and insurance companies would be required to comply with the notice and other relevant provisions of the Premium Finance Agreement. The Debtors believe that the terms of the Finance Agreement are commercially fair and reasonable. Without the Policies, the Debtors assert they would be forced to cease operations and would be in default under their postpetition credit agreements. 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. 12; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). CREDIT SUISSE: S&P Puts Initial 'BB' Ratings to $3.4 Bil. Certs --------------------------------------------------------------- Standard & Poor's Ratings Services assigned preliminary ratings to Credit Suisse First Boston Mortgage Securities Corp.'s $3.4 billion commercial mortgage pass-through certificates series 2006-TFL2 . The preliminary ratings are based on information as of Nov. 1, 2006. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying mortgage loans, and the geographic and property type diversity of the loans. Standard & Poor's analysis determined that, on a weighted average basis, the trust pool has a debt service coverage of 1.6x based on a weighted average stressed constant of 10.40%, and a beginning and ending LTV of 64.9%. Preliminary Ratings Assigned Credit Suisse First Boston Mortgage Securities Corp. Class Rating Preliminary Recommended credit amount ($) support (%) A-1 AAA 1,862,000,000 24.860 A-2 AAA 621,000,000 24.860 A-X-1* AAA 3,304,500,000 N/A A-X-2* AAA - N/A A-X-3* AAA 78,000,000 N/A B AA+ 152,000,000 20.260 C AA 99,000,000 17.264 D AA- 79,000,000 14.874 E A+ 72,000,000 12.695 F A 72,000,000 10.516 G A- 71,000,000 8.367 H BBB+ 52,000,000 6.974 J BBB 67,000,000 4.766 K BBB- 75,000,000 2.497 L BBB- 82,500,000 0.000 M-SHD** BB+ 21,000,000 N/A M-QUN** BB+ 15,000,000 N/A M-ARG** BB 7,000,000 N/A M-BEV** BB+ 11,000,000 N/A M-NHK** BB 4,000,000 N/A N-SHD** BB 17,000,000 N/A N-ARG** BB 5,500,000 N/A O-SHD** BB- 16,500,000 N/A *Residual class. **Loan-specific class. N/A--Not applicable. CWMBS INC: Fitch Affirms Rating on 78 & Upgrades 12 RMBS Classes ---------------------------------------------------------------- Fitch has taken rating actions on these CWMBS (Countrywide Home Loans), Inc. residential mortgage-backed certificates: Series 2002-22 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AAA'; -- Class B1 upgraded to 'AAA' from 'AA'; -- Class B2 upgraded to 'AA' from 'A'; -- Class B3 upgraded to 'A' from 'BBB'; -- Class B4 upgraded to 'BB' from 'B'. Series 2003-3 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA+'; -- Class B1 affirmed at 'A+'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-4 -- Class A affirmed at 'AAA'; -- Class M upgraded to 'AA+' from 'AA'; -- Class B1 upgraded to 'A+' from 'A'; -- Class B2 upgraded to 'BBB+' from 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-7 -- Class A affirmed at 'AAA'; -- Class M upgraded to 'AA+' from 'AA'; -- Class B1 upgraded to 'A+' from 'A'; -- Class B2 upgraded to 'BBB+' from 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-14 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-18 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-24 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-26 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-28 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-29 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-34 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-39 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-44 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-50 -- Class A affirmed at 'AAA'; -- Class M affirmed at 'AA'; -- Class B1 affirmed at 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. Series 2003-57 -- Class A affirmed at 'AAA'; -- Class M upgraded to 'AA+' from 'AA'; -- Class B1 upgraded to 'A+' from 'A'; -- Class B2 affirmed at 'BBB'; -- Class B3 affirmed at 'BB'; -- Class B4 affirmed at 'B'. The underlying collateral for all the transactions consists of conventional, fully amortizing 15- to 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. The mortgage loans are master serviced by Countrywide Home Loans, Inc. (rated 'RMS2+' by Fitch). The affirmations on the above classes reflect adequate relationships of credit enhancement to future loss expectations and affect approximately $3.37 billion of the outstanding certificates. The upgrades reflect an improvement in the relationship of CE to future loss expectations and affect $38.19 million of certificates. The CE levels for all the upgrade classes have more than doubled the original enhancement levels since the closing date. As of the October 2006 distribution date, the pools are seasoned from a range of 35 (series 2003-57) to 50 (series 2002-22) months. The pool factors (current principal balance as a percentage of original) range from approximately 10% (series 2002-22) to 64% (series 2003-39). The transactions have experienced some or no loss to date. DELPHI CORP: Court Approves EDS and HP Outsourcing Agreements ------------------------------------------------------------- The U.S Bankruptcy Court for the Southern District of New York has authorized Delphi Corporation and its debtor-affiliates to enter into and perform under: (a) an agreement with Electronic Data Systems Corporation and EDS Information Services, LLC, which provides for the outsourcing of global desktops, service desk, and mainframe systems hosting; and (b) an agreement with Hewlett Packard Company, which provides for the outsourcing of server systems hosting. The Debtors' decision to enter into the IT Infrastructure Outsourcing Agreements is one step in the implementation of their transformation plan. The Debtors intend to transform their salaried workforce to ensure a competitive structure aligned with their product portfolio and manufacturing footprint, which would in turn, lower the Debtors' selling, general, and administrative expenses. To achieve this goal, the Debtors are designing and implementing a shared service delivery model that will contribute to the reduction of their global SG&A expense by $450 million annually. One aspect of this effort is Delphi's accelerated consolidation and outsourcing of IT functions and the transition to common processes and systems. Benchmarking analysis conducted with independent consultants concluded that Delphi's 2005 IT operating budget of $588 million could be reduced by $256 million through three transformation actions: (1) outsourcing IT services; (2) reducing the number and type of unique, non-common systems, moving to common operating platforms; and (3) running a streamlined IT shared service organization. The Debtors' shared service model calls for the outsourcing of these IT services: (a) global infrastructure services, including desktops, service desk, and mainframe and server systems hosting; (b) system development, maintenance, and support; and (c) network services such as data networks and voice services. Currently, the Debtors purchase IT services from more than 100 regional-based suppliers. Completion of all three outsourcing phases would enable rationalization of the supplier-provider base to fewer than 10 direct suppliers, which will enable the Debtors to significantly reduce the number of internal employees providing those services. After one-time transition costs of $80 million, net operating savings of $155 million are expected over the seven- year term of the IT Infrastructure Outsourcing Agreements. By moving to a model that provides for the outsourcing of IT infrastructure services to two vendors, the Debtors believe that they will: (a) achieve and sustain a competitive environment in which their service providers will provide service at competitive prices throughout the term of the agreement; (b) be able to develop stronger relationships with their fewer service providers; (c) reduce their costs through common process, common systems, and economies of scale; and (d) find providers with innovation and progressive technology. Delphi will contract for global infrastructure services for a seven-year term, with costs between $700 million and $800 million. Monthly operating expenses and one-time transition costs will be charged directly or allocated to the Delphi affiliates which use the services, with 35% of operating and transition costs being borne by the Debtors and the remaining costs by non-Debtor affiliates. The scope of services to be provided under the IT Infrastructure Outsourcing Agreements includes transition services both at inception and at termination to ensure a smooth transition from existing service providers to EDS and HP and also to ensure that there is no disruption to Delphi's business at the end of the term. Each service provider would be required to submit a detailed transformation plan which identifies principal changes in technology and deliverables to allow Delphi to work toward implementing common systems and a more efficient IT services delivery model and achieve year-over-year price reductions over the life of the contracts. Troy, Mich.-based 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. 45; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DELPHI CORP: Former Employees Want Funds for Legal Expenses ----------------------------------------------------------- John Blahnik, Paul Free, Milan Belans, Laura Marion, Peter Janak, and Cathy Rozanski, former officers and employees of Delphi Corporation, ask the U.S. Bankruptcy Court for the Southern District of New York to modify the Human Capital Obligations Order to require Delphi to comply with the provisions of its Amended and Restated Bylaws with respect to indemnification and advancement. The Former Employees have incurred, and continue to incur legal fees and expenses in response to subpoenas issued by the Securities and Exchange Commission related to its investigation of Delphi's accounting practices and adequacy of financial disclosures. John Blahnik, Alan Dawes and Paul Free have also incurred legal expenses in relation to a multi-district litigation alleging securities fraud, captioned In re Delphi Corp. Securities, Derivative & ERISA Litigation, MDL No. 1725 (E.D. Mich.). The legal fees and expenses were incurred by reason of the Former Employees' work at Delphi. Before its bankruptcy filing, Delphi had advanced fees and expenses for the Former Employees' legal representation in accordance with Section 145(e) of the Delaware General Corporation Law and its Amended and Restated Bylaws. Last year, shortly after the Petition Date, the Court authorized the Debtors to pay Prepetition Wages and Salaries to employees and independent contractors. The Court also allowed the Debtors to pay Prepetition Benefits and continue Maintenance of Human Capital Benefit Programs in the ordinary course of their businesses. The Former Employees complain that the Human Capital Obligations Order allows Delphi to exercise discretion that is arbitrary, contrary to the provisions of Delphi's bylaws, contrary to public policy, and prejudicial to them. "The Human Capital Obligations Order improperly interferes with the advancement of attorneys' fees in violation of [our] constitutional rights," the Former Employees add. The Former Employees relate that they were not given notice of the Human Capital Obligations Motion. Thus, they assert, the Human Capital Obligations Order cannot be accorded finality with respect to them, and they are entitled to be heard with respect to their objections to the Human Capital Obligations Motion and the related Order. Richard A. Rossman, Esq., and Matthew J. Lund, Esq., at Pepper Hamilton LLP, in Detroit, Michigan, represent Paul Free. Thomas W. Cranmer, Esq., at Miller Canfield Paddock & Stone PLC, in Troy, Michigan, represent John Blahnik and Peter Janak. William A. Sankbeil, Esq., at Kerr, Russell & Weber PLC, in Detroit, Michigan, also represent John Blahnik. Martin E. Crandall, Esq., at Clark Hill PLC, in Detroit, Michigan, represent Milan Belans. Christopher A. Andreoff, Esq., at Jaffe, Raitt, Heuer & Weiss PC, in Southfield, Michigan, represent Laura Marion. David Dumouchel, Esq., and Laurie J. Michelson, Esq., at Butzel Long PC, in Detroit, Michigan, represent Cathy Rozanski. Troy, Mich.-based 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. 45; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DORAL FINANCIAL: Aims to Boost Returns & Refinance $625 Mil. Debt ----------------------------------------------------------------- Glen Wakeman, the chief executive officer of Doral Financial Corp., said in a conference call that the firm will concentrate on increasing returns and refinancing a $625 million debt, which matures in July 2007, to recover from a difficult situation. Mr. Wakeman told Business News Americas, "Our focus will shift from market share-driven to returns-driven. We have not and will not abandon the mortgage or construction lending space. Refinancing this debt is my top priority. We will need outside financing or other sources of capital to repay this debt at maturity... such as issuing junk debt, the sale of assets and the issuance of additional equity securities." According to BNamericas, Mr. Wakeman praised Doral Financial's substantial progress in correcting legacy issues and acknowledged that the firm will continue to experience margin compression for the foreseeable future due to its balance sheet structure. Mr. Wakeman told BNamericas, "Our loan volumes are down and our margins have fallen over 130 basis points since 2004." Doral Financial's loan production dropped 50% to $1.4 billion in the first half of 2006. Its market share decreased to around 10%, BNamericas states. Doral Financial Corporation (NYSE: DRL) -- http://www.doralfinancial.com/-- a financial holding company, is a 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 Oct. 31, 2006, Standard & Poor's Ratings Services removed from CreditWatch and affirmed its ratings on Doral Financial Corp., including its 'B+' counterparty rating. The ratings were placed on CreditWatch with negative implications on April 19, 2005. The outlook is negative. DORAL FINANCIAL: Names Marangal Domingo as Chief Financial Officer ------------------------------------------------------------------ Doral Financial Corporation disclosed that Marangal Domingo, who recently joined Doral bringing more than 20 years of experience in finance in the financial services industry, has been named chief financial officer of the Company, replacing Lidio Soriano, who has resigned. In becoming chief financial officer, Mr. Domingo also will continue as Doral Financial Corporation's treasurer and chief investment officer, positions which he assumed upon joining Doral. In addition, Doral Financial Corporation announced that Cesar Ortiz, who has served as Doral's Director of Internal Audit, has been named the Corporation's comptroller and chief accounting officer. In light of this appointment, the Company is undertaking a search for a new Director of Internal Audit. Arturo Tous, who previously served as the chief accounting officer, will remain with the Company as a senior vice president reporting to the CFO. Glen Wakeman, chief executive officer, stated, "I am satisfied that these management appointments will help Doral manage its financial position, address its balance sheet priorities, including the refinancing of Doral's $625 million of debt due July 2007, and continue moving Doral forward with its SEC regulatory filings." Mr. Domingo has more than 20 years of knowledge, skills and experience in retail and commercial banking, most recently as executive Vice President, Finance & Strategy at Countrywide Bank, N.A. Prior to his tenure at Countrywide, he served as President and Chief Executive Officer of Downey Financial Corporation in 2004, where he was responsible for strategic direction and managing day-to-day operations. Before Downey, Mr. Domingo was with Washington Mutual, Inc. as Executive Vice President -- Capital Markets, Home Loans & Insurance Services Group from 2001 to 2004 and as Executive Vice President and Chief Financial Officer -- Home Loans & Insurance Services Group from 1999 to 2001. Prior to his tenure at the Company, Mr. Ortiz worked with Banco Santander Puerto Rico as Senior Vice President -- Comptroller from February to July 2006 and for PricewaterhouseCoopers LLP as an Audit Senior Manager from November 1997 to February 2006. Doral Financial Corporation (NYSE: DRL) -- http://www.doralfinancial.com/-- a financial holding company, is a 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 Oct. 31, 2006, Standard & Poor's Ratings Services removed from CreditWatch and affirmed its ratings on Doral Financial Corp., including its 'B+' counterparty rating. The ratings were placed on CreditWatch with negative implications on April 19, 2005. The outlook is negative. DURA AUTOMOTIVE: Ontario Court Recognizes Chapter 11 Case --------------------------------------------------------- The Ontario Superior Court of Justice, entered a "Foreign Recognition Order," which recognized under Canadian law the Chapter 11 bankruptcy proceedings commenced by DURA Automotive Systems Inc. and its U.S. and Canadian subsidiaries filed in the United States Bankruptcy Court for the District of Delaware on Oct. 30, 2006. DURA's European and other operations outside of the U.S. and Canada, accounting for approximately 51% of DURA's revenue, are not part of the Chapter 11 proceedings nor are they part of the Canadian Court proceedings. DURA's European and other non-U.S. and non-Canadian operations therefore remain unaffected by either orders entered by the U.S. Bankruptcy Court or the Canadian Court's Foreign Recognition Order. In the Foreign Recognition Order, the Canadian Court also: -- Granted a stay of all proceedings in Canada against DURA and its U.S. and Canadian subsidiaries; -- Recognized the U.S. Bankruptcy Court's interim order authorizing DURA to access up to $50 million of the approximately $300 million in Debtor in Possession (DIP) financing from Goldman Sachs, GE Capital and Barclays; -- Appointed RSM Richter Inc. as Information Officer for Canadian stakeholders in respect of DURA's Canadian recognition proceedings; and -- Recognized all other "first day orders" of the U.S. Bankruptcy Court that DURA submitted to the Ontario Court for recognition. These other first day orders authorize DURA and its U.S. and Canadian subsidiaries to: * Pay employee salaries, wages and benefits that accrued prior to the petition filing date; * Pay certain critical pre petition filing date vendor claims and certain claims of vendors whose goods were received within the 20 day period prior to the petition filing date; * Provide "adequate assurance" to utilities in the form of a deposit equal to an average of 2 weeks' worth of utilities' bills; * Pay all "trust fund" and similar taxes accruing prior to the petition filing date; and * Continue using the pre petition cash management system. DURA and its U.S. and Canadian subsidiaries previously said that they will be paying, in the ordinary course of business, all post petition employee, wages, salaries and benefits accruing on and after the petition filing date. They will also be paying on a going forward basis, and in the ordinary course of business, all vendors and service providers who provide goods and services to them after the petition filing date. The Honorable Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware is presiding over the Chapter 11 proceedings of Dura and its U.S. and Canadian subsidiaries. The Application Record filed in respect of the hearing and the Foreign Recognition Order will be posted at http://www.rsmrichter.com/ About DURA Automotive Systems Rochester Hills, Michigan-based DURA Automotive Systems, Inc. (Nasdaq: DRRA) -- http://www.DURAauto.com/-- designs and manufactures driver control systems, seating control systems, glass systems, engineered assemblies, structural door modules and exterior trim systems for the global automotive industry. The company also supplies similar products to the recreation vehicle and specialty vehicle industries. The Debtors filed for chapter 11 protection on October 30, 2006 (U.S. Bankr. Del. Case No: 06-11202). Daniel J. DeFranceschi, Esq.., and Jason M. Madron, Esq., at Richards, Layton & Finger, P.A. represent the Debtors. No Official Committee of Unsecured Creditors has been appointed in this case to date. As of July 2, 2006, the Debtors reported $1,993,178,000 in total assets and $1,730,758,000 total debts. EASTON-BELL: Moody's Assigns Loss-Given-Default Ratings ------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. consumer products sector, the rating agency confirmed its B1 Corporate Family Rating for Easton-Bell Sports, Inc. Additionally, Moody's revised or held its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $140M senior sub. notes due 2012 B3 B3 LGD5 88% $70M senior secured revolving credit facility due 2012 B1 Ba3 LGD3 37% $335M senior secured term loan due 2012 B1 Ba3 LGD3 37% Moody's explains that 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 will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's 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% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Easton-Bell Sports, Inc., formerly known as Riddell Bell Holdings, Inc., with executive offices at Irving, Texas, designs, developes and markets performance enhancing sports equipment as well as protective equipment and related accessories for athletic and recreational activities. ENTERGY NEW: Parent Company Releases Preliminary 3rd Qtr. Results ----------------------------------------------------------------- Entergy Corporation has indicated that it expects third quarter 2006 as-reported earnings of approximately $1.86 per share and third quarter operational earnings of approximately $1.83 per share. As-reported results, which were $1.65 per share in third quarter 2005 and included the impact of Hurricanes Katrina and Rita, are prepared in accordance with generally accepted accounting principles and are comprised of operational earnings (described below) and special items. Third quarter as-reported 2006 earnings will include special items to reflect the quarterly results of Entergy New Orleans, Inc., and quarterly results of Entergy's competitive retail business for remaining transition work associated with the second quarter sale of this business. ENOI's results are being reported as a special item given the uncertainty that remains for this business as it works toward emerging from bankruptcy. Competitive retail results are being reported as a special item given Entergy's 2005 decision to sell this business. Third quarter 2006 operational earnings are expected to be higher compared to third quarter 2005, when Entergy reported operational earnings of $1.68 per share, due to higher results at Entergy Nuclear that were partially offset by slightly lower results at Utility, Parent and Other. The quarter on quarter decrease in earnings at Utility, Parent and Other is attributed primarily to: * higher operation and maintenance expense * higher interest expense * lower interest income Partially offsetting these items were higher revenues due to sales growth and pricing from previous rate actions and lower income taxes. Weather was warmer than normal in third quarter 2006 but comparable to the same period last year. Entergy Nuclear's higher results are due primarily to: * higher energy pricing compared to one year ago * a power uprate completed since third quarter 2005 and fewer outage days * a reduction in the decommissioning liability to reflect changes in assumptions on probability of life extension Partially offsetting these factors was higher operation and maintenance expense at Entergy Nuclear in third quarter 2006. Operational results at Entergy's non-nuclear wholesale assets business are expected to be slightly higher in the current period compared to third quarter 2005. Entergy affirmed previously issued as-reported earnings guidance for 2006 to be in the range of $4.78 to $5.08 per share, and operational earnings guidance in the range of $4.50 to $4.80 per share. Entergy plans to issue 2007 earnings guidance as part of its third quarter 2006 earnings release. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. Carey L. Menasco, Esq., Philip Kirkpatrick Jones, Jr., Esq., and Joseph P. Hebert, Esq., at Liskow & Lewis, APLC, represent the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ENTERGY NEW ORLEANS: Can Open Investment Account at Federated ------------------------------------------------------------- The Hon. Jerry A. Brown of the U.S. Bankruptcy Court for the Eastern District of Louisiana grants Entergy New Orleans Inc.'s motion to open an account at Federated Investors Inc. Judge Brown waives the requirements of Section 345(b) of the Bankruptcy Code and the U.S. Trustee Guidelines to permit the opening of the account at Federated Investors. As reported in the Troubled Company Reporter on Sept. 21, 2006, the Court authorized ENOI to maintain its existing Cash Management System. Entergy Services, Inc., provides, among other things, accounting and cash management services to ENOI and other Entergy Corporation affiliates as part of ENOI's cash management system. Nan Roberts Eitel, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., said that one of the ESI account is maintained at Federated Investors, which is covered by the Court's Cash Management Order. ESI used its Federated Investors account to invest excess cash that it manages as agent for the Entergy operating companies from the sale of excess power. ENOI intended to invest with Federated Investors from $4,000,000 to $30,000,000 on any given day. The maximum amount that ENOI would ever have invested at Federated will not exceed $50,000,000, but ENOI does not reasonably expect to exceed $30,000,000 any time. The range of expected return at Federated substantially exceeds the earnings credit rate for the ENOI general fund account, which is used principally to set off ENOI's bank fees, Ms. Eitel averred. She cited June 2006, when the proposed fund at Federated earned an average of 4.96%. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. Carey L. Menasco, Esq., Philip Kirkpatrick Jones, Jr., Esq., and Joseph P. Hebert, Esq., at Liskow & Lewis, APLC, represent the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FEDERAL-MOGUL: Gets Stay on Discovery Propounded by Mt. McKinley ---------------------------------------------------------------- The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware rules that all discovery propounded by Mt. McKinley Insurance Company and Everest Reinsurance Co. in the Chapter 11 cases of Federal-Mogul Corporation -- save for discovery propounded in connection with ongoing proceedings concerning Mt. McKinley's request to disqualify Gilbert, Heintz & Randolph as special insurance counsel to the Debtors -- will be stayed subject to further Court order, until a date to be set after the filing of an amended plan of reorganization for the Debtors. Mt. McKinley's brief in support of discovery and the Plan Proponents' reply to that brief, together with all related pleadings, are adjourned from the Court's consideration at present, without prejudice to the parties' ability to raise certain issues addressed by those briefs in connection with the Plan confirmation. As reported in the Troubled Company Reporter on May 11, 2006, the Company and its debtor-affiliates, the Official Committee of Asbestos Claimants and the Legal Representative for Future Asbestos Claimants ask the U.S. Bankruptcy Court to issue a protective order: -- extending the time for all parties and third-party witnesses to respond or object to all discovery requests, deposition notices and subpoenas propounded by Mt. McKinley Insurance Company and Everest Reinsurance Company until a date to be determined by the Court; and -- staying the issuance of further discovery until after the Response Date. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is an automotive parts company with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. (Federal-Mogul Bankruptcy News, Issue No. 114; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). FEDERAL-MOGUL: Stipulation of Permissible Objections Gets Court OK ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware approved a stipulation among Federal-Mogul Global Inc., T&N Limited, et al., the Official Committee of Asbestos Claimants, Professor Eric D. Green, the duly appointed legal representative for future asbestos-related personal injury claimants, and certain insurers, which defines the scope of permissible objections to confirmation of the Debtors' Third Amended Plan of Reorganization that may be prosecuted by the Stipulating Insurers. The Company disclosed that all rights of all non-parties to the Stipulation are unaffected and preserved for determination as part of the Plan confirmation process. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is an automotive parts company with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01- 10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. (Federal-Mogul Bankruptcy News, Issue No. 114; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). FELLOWS ENERGY: Posts $1,392,257 Net Loss in 2006 Second Quarter ---------------------------------------------------------------- Fellows Energy Ltd. reported a $1,392,257 net loss on $282,926 of revenues for the second quarter ended June 30, 2006, compared with a $241,395 net loss on zero revenues for the same period in 2005. At June 30, 2006, the company's balance sheet showed $13,393,945 in total assets, $6,003,554 in total liabilities, and $7,390,391 in total stockholders equity. At June 30, 2006, the company's accumulated deficit has ballooned to $9,508,473. Full-text copies of the company's second quarter financial statements are available for free at: http://researcharchives.com/t/s?1450 Going Concern Mendoza Berger & Company, Irvine, Calif., expressed substantial doubt about Fellows Energy Ltd.'s ability to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the company's significant operating losses since inception. About Fellows Energy Incorporated in Nevada on April 9, 2001, Fellows Energy Ltd. was originally formed to offer business consulting services in the retail automobile fueling industry. In November, 2003 the company ceased all activity in the automotive fueling industry and entered the oil and gas business, focusing on exploration for oil and gas in the Rocky Mountain Region. On January 5, 2004, the company acquired certain interests in certain oil and gas leases and other interests owned by Diamond Oil & Gas Corporation, a Nevada corporation. Diamond is wholly owned by George S. Young, Fellows Energy Ltd.'s CEO. FOAMEX INTERNATIONAL: Noteholders Panel Balks at DIP Loan Deal -------------------------------------------------------------- The Ad Hoc Committee of Senior Secured Noteholders previously complained that rather than undertaking the effort to identify equity financing on terms most favorable to Foamex International Inc. and its debtor-affiliates, their creditors and equity security holders, the Debtors have negotiated exclusively with the Significant Equityholders since June 8, 2006. In a separate document, John H. Knight, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, points out that the Significant Equityholders are already highly motivated to provide the equity financing and subscribe to a Rights Offering in order to avoid the dilution to their interest that would necessarily result from a third-party investment or conversion of existing debt to equity under a plan of reorganization. However, according to Mr. Knight, there is no evidence that equity financing was not available to the Debtors on more favorable terms. The Senior Noteholders Committee had previously noted that the structure and terms of the Equity Commitment evidence a substantial risk that a termination event will occur and that the Debtors' estates and creditors will be left with the burden of all of the fees and expenses under the Commitment Letters and arising from related actions. Mr. Knight notes that the Equity Commitment requires the Debtors to file a reorganization consistent with the Term Sheet for Proposed Chapter 11 Plan of Reorganization annexed to the Equity Commitment, and prohibits the Debtors from modifying that plan at any point in the future in a manner that is adverse to the Significant Equityholders. If the Debtors do file a modification -- even one mandated by order of the Court -- in order to afford a particular creditor group the treatment to which it is entitled under the Bankruptcy Code or other applicable law, the Significant Holders can declare a Termination Event and pocket the up to $9,500,000 Put Option Premium. Mr. Knight argues that the Put Option Premium and other fees to be paid to the Significant Equityholders pursuant to the Equity Commitment are unreasonable and should not be approved. There is no need to pay the Significant Equityholders up to $9,500,000 to provide the Equity Commitment, he contends. "Were this a [Section] 363 [of the Bankruptcy Code] sale and a hearing on approval of a 'break-up' fee, under the rationale of the Third Circuit Court of Appeals in In re O'Brien Environmental Energy, Inc., 181 F.3d 527, 535 (3d Cir. 1999), the Court would not approve a break-up fee for the Significant Equityholders because they have not proven that the Put Option Premium and fees are actually necessary to preserve the value of the estate," Mr. Knight maintains. In addition, the Debtors had several alternatives available as paths to emerge from Chapter 11, Mr. Knight points out. "Here, the Debtors chose to ignore any alternative other than negotiations with the Significant Equityholders." Creditors Committee Supports Hearing Adjournment The Official Committee of Unsecured Creditors supports the Senior Noteholders' Committee's request to adjourn the hearing on the Debtors' motion to enter into and perform under the Commitment Letters. Headquartered in Linwood, Pa., Foamex International Inc. -- http://www.foamex.com/-- is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high- performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. The Company and eight affiliates filed for chapter 11 protection on Sept. 19, 2005 (Bankr. Del. Case Nos. 05-12685 through 05-12693). Attorneys at Paul, Weiss, Rifkind, Wharton & Garrison LLP, represent the Debtors in their restructuring efforts. Houlihan, Lokey, Howard and Zukin and O'Melveny & Myers LLP are advising the ad hoc committee of Senior Secured Noteholders. Kenneth A. Rosen, Esq., and Sharon L. Levine, Esq., at Lowenstein Sandler PC and Donald J. Detweiler, Esq., at Saul Ewings, LP, represent the Official Committee of Unsecured Creditors. As of July 3, 2005, the Debtors reported $620,826,000 in total assets and $744,757,000 in total debts. (Foamex International Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FOAMEX INT'L: Financial Projections Under First Amended Plan ------------------------------------------------------------ Foamex International Inc. and its debtor-affiliates' First Amended Plan of Reorganization includes their financial projections for the Reorganized Debtors' fiscal years ending December 30, 2007, December 28, 2008, and January 3, 2010. The Debtors expect that the Plan's Effective Date is likely to occur in the first quarter, thus, the Financial Projections assume an Effective Date of February 25, 2007. Pursuant to the Equity Commitment Agreement and the First Amended Plan, to the extent that the Rights Offering generates proceeds of less than the $150,000,000 Rights Offering Amount, the Significant Equityholders may exercise their Call Option to purchase all shares of Additional Common Stock not subscribed and paid for in full by the holders of the existing common stock as part of the Rights Offering. Alternatively, if the Significant Equityholders do not exercise their Call Option, Foamex International may exercise its Put Option to sell the new preferred stock to them in an amount equal to the difference of the Rights Offering Amount less the amount that Foamex International will receive as a result of the Equityholders' exercise of rights under the Rights Offering. The Debtors provide two sets of Financial Projections: (a) assuming that either all of the holders of Existing Common Stock exercise their Rights or that the Significant Equityholders exercise their Call Option to make up any shortfall in the amount of proceeds received from the Rights Offering; and (b) assuming that none of the Existing Common Stockholders exercise their Rights and that Foamex International exercise the Put Option and sells the New Preferred Stock to the Significant Equityholders. Among others, the Financial Projections assume that total revenue will increase to: Increase Year -------- ---- 8.2% 2007 2.4% 2008 3.5% 2009 The Debtors expect gross margins will remain relatively constant at: Gross Margin Year ------------ ---- 13.8% 2007 14.0% 2008 14.5% 2009 Headquartered in Linwood, Pa., Foamex International Inc. -- http://www.foamex.com/-- is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high- performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. The Company and eight affiliates filed for chapter 11 protection on Sept. 19, 2005 (Bankr. Del. Case Nos. 05-12685 through 05-12693). Attorneys at Paul, Weiss, Rifkind, Wharton & Garrison LLP, represent the Debtors in their restructuring efforts. Houlihan, Lokey, Howard and Zukin and O'Melveny & Myers LLP are advising the ad hoc committee of Senior Secured Noteholders. Kenneth A. Rosen, Esq., and Sharon L. Levine, Esq., at Lowenstein Sandler PC and Donald J. Detweiler, Esq., at Saul Ewings, LP, represent the Official Committee of Unsecured Creditors. As of July 3, 2005, the Debtors reported $620,826,000 in total assets and $744,757,000 in total debts. (Foamex International Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FORD MOTOR: Reducing Health Care Benefits of Salaried Employees --------------------------------------------------------------- Ford Motor Co. plans to reduce expenses for U.S. salaried workers by abolishing merit-pay raises, requiring bigger payments for health benefits and reducing health-care payouts for retirees, Bill Koenig and John Lippert at Bloomberg News report. The changes will take effect June 1, company spokeswoman Marcey Evans said in the report. Ford will require active salaried workers to increase monthly health-care contributions and pay higher deductibles, Ms. Evans told Bloomberg. Specifics will vary because the company offers those employees five health-care plans, she explained. Ford also will now provide salaried retirees and their spouses 65 and older $1,800 each for health-care expenses. The automaker currently provides the employees company-paid supplemental health insurance beyond U.S. Medicare benefits. The affected retirees can use the $1,800 payments to purchase supplemental insurance, the source said, citing Ms. Evans. In addition, Ms. Evans noted that Ford will no longer provide supplemental health insurance for dependent children of retirees older than 65. Ms. Evans also noted that Ford will cut merit-pay increases to active salaried employees and will reinstate matching contri- butions for the salaried employee 401(k) retirement plans. Ford had suspended such matching payments in July 2005. The company will pay 60 cents for each dollar employees contribute for the first 5 percent of a worker's base pay, Bloomberg relates. 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 Oct. 24, 2006, Standard & Poor's Ratings Services placed its 'B' senior unsecured debt issue ratings on Ford Motor Co. on CreditWatch with negative implications. At the same time, S&P affirmed all other ratings on Ford, Ford Motor Credit Co., and related entities, except the rating on Ford Motor Co. Capital Trust II 6.5% cumulative convertible trust preferred securities, which was lowered to 'CCC- ' from 'CCC.' At the same time, Fitch Ratings placed Ford Motor's 'B+/RR3' senior unsecured debt on Rating Watch Negative reflecting Ford's intent to raise secured financing that would impair the position of unsecured debt holders. Under Fitch's recovery rating scenario it was estimated that unsecured holders would recover approximately 68% in a bankruptcy scenario, equating to a Recovery Rating of 'RR3' (50-70% recovery). Moody's Investors Service has disclosed that Ford's very weak third quarter performance, with automotive operations generating a pre-tax loss of $1.8 billion and a negative operating cash flow of $3 billion, was consistent with the expectations which led to the September 19 downgrade of the company's long-term rating to B3. FORD MOTOR: Shows Improvement in October Sales Figures ------------------------------------------------------ Ford Motor Company's dealers delivered 215,985 vehicles to U.S. customers in October, up 8 percent compared with a year ago. It is the second monthly sales increase for the company, which posted a 5-percent increase in September. October car sales were up 22 percent as sales for the company's new mid- size cars (Ford Fusion, Mercury Milan and Lincoln MKZ) were more than double a year ago. The Ford Focus and the outgoing Ford Taurus also posted sharply higher sales. Truck sales were up 1 percent, led by gains for the new 2007-model Expedition and Navigator, which now are on sale in dealerships. Expedition sales were 8,553 (up 41 percent), and Navigator sales were 2,066 (up 44 percent). Ford's F-Series pickup also was up 3 percent, and the Ford Econoline full- size van was up 31 percent. October sales for the Ford Escape (9,603) lifted the vehicle's lifetime sales to more than 1 million. The Escape has been the best-selling small utility vehicle in the United States since it was introduced in late 2000. Cumulative sales now total 1,001,186. U.S. Inventories Lower At the end of October, Ford, Lincoln and Mercury inventories were estimated at 622,000 units. This level is 107,000 units lower than a year ago and 30,000 units lower than at the end of September. The company estimates three- quarters of the present inventory is new 2007 models. "We are very serious about aligning inventories with demand," said Al Giombetti, president, Ford and Lincoln Mercury sales and marketing. "Our dealers did an outstanding job with the 2006 model sell-down program, and we took a painful but necessary action to reduce fourth-quarter production." 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 Oct. 24, 2006, Standard & Poor's Ratings Services placed its 'B' senior unsecured debt issue ratings on Ford Motor Co. on CreditWatch with negative implications. At the same time, S&P affirmed all other ratings on Ford, Ford Motor Credit Co., and related entities, except the rating on Ford Motor Co. Capital Trust II 6.5% cumulative convertible trust preferred securities, which was lowered to 'CCC-'from 'CCC.' At the same time, Fitch Ratings placed Ford Motor's 'B+/RR3' senior unsecured debt on Rating Watch Negative reflecting Ford's intent to raise secured financing that would impair the position of unsecured debt holders. Under Fitch's recovery rating scenario it was estimated that unsecured holders would recover approximately 68% in a bankruptcy scenario, equating to a Recovery Rating of 'RR3' (50-70% recovery). Moody's Investors Service has disclosed that Ford's very weak third quarter performance, with automotive operations generating a pre-tax loss of $1.8 billion and a negative operating cash flow of $3 billion, was consistent with the expectations which led to the September 19 downgrade of the company's long-term rating to B3. FORMAL INC: Case Summary & Largest Unsecured Creditor ----------------------------------------------------- Debtor: Formal, Inc. 1000 Route 213 Kingston, NY 12401 Bankruptcy Case No.: 06-12934 Type of Business: The Debtor leases real property for marinas. Chapter 11 Petition Date: November 1, 2006 Court: Northern District of New York (Albany) Judge: Robert E. Littlefield Jr. Debtor's Counsel: Richard L. Weisz, Esq. Hodgson Russ LLP 677 Broadway Albany, NY 12207 Tel: (518) 465-2333 Fax: (518) 465-1567 Total Assets: $1,051,300 Total Debts: $372,662 Debtor's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ NYS Department of Taxation & Corporate Franchise $250 Finance Taxes Tax Compliance Division W.A. Harriman State Campus Albany, NY 12227 GERDAU AMERISTEEL: Completes $104 Mil. West Coast Joint Venture --------------------------------------------------------------- Gerdau Ameristeel has completed the acquisition of a controlling interest in a newly formed joint venture with Pacific Coast Steel, Inc. and Bay Area Reinforcing. The venture, to be called Pacific Coast Steel, comprises one of the country's largest reinforcing steel contractors, specializing in the fabrication and installation of reinforcing steel products across a variety of construction projects throughout California and Nevada. It has in excess of 1,000 employees, including over 800 field ironworkers. Additionally, the venture operates four rebar fabrication facilities in California, including San Diego, San Bernardino, Fairfield, and Napa, with a combined capacity in excess of 200,000 tons per year. The purchase price for the interest in Pacific Coast Steel was approximately $104 million in cash. Gerdau Ameristeel funded the transaction with available cash on hand. About Gerdau Ameristeel Gerdau Ameristeel -- http://www.gerdauameristeel.com/-- is the second largest minimill steel producer in North America with annual manufacturing capacity of over 9 million tons of mill finished steel products. Through its vertically integrated network of 17 minimills (including one 50%-owned minimill), 17 scrap recycling facilities and 46 downstream operations, Gerdau Ameristeel primarily serves customers in the eastern two-thirds of North America. * * * As reported in the Troubled Company Reporter on Oct. 18, 2006, Moody's Investors Service's confirmed its Ba2 Corporate Family Rating for Gerdau Ameristeel Corporation and its Ba3 rating on the Company's $450 million issue of 10.375% guaranteed senior unsecured global notes due 2011. Moody's also assigned an LGD5 rating to those loans, suggesting noteholders will experience a 83% loss in the event of a default. GULF ATLANTIC: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Gulf Atlantic Operations, LLC 921 North Chaparral Street, Suite 111 Corpus Christi, TX 78401 Bankruptcy Case No.: 06-20676 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Gulf Atlantic Terminalling, LLC 06-20677 Gulf Atlantic Marine, LLC 06-20678 Patriot Asphalt, LLC 06-20679 Chapter 11 Petition Date: November 1, 2006 Court: Southern District of Texas (Corpus Christi) Debtors' Counsel: Nathaniel Peter Holzer, Esq. Jordan Hyden Womble Culbreth & Holzer P.C. 500 North Shoreline Drive, Suite 900 Corpus Christi, TX 78471 Tel: (361) 884-5678 Fax: (361) 888-5555 Debtors' Chief Restructuring Officer: K. Scott Van Meter Debtors' Financial Advisor: Aon Consulting, Inc. 200 East Randolph Street Chicago, IL 60601 http://www.aon.com/ Estimated Assets Estimated Debts ---------------- --------------- Gulf Atlantic $1 Million to $1 Million to Operations, LLC $100 Million $100 Million Gulf Atlantic Less than $10,000 $100,000 to Terminalling, LLC $1 Million Gulf Atlantic Less than $10,000 Less than $10,000 Marine, LLC Patriot Less than $10,000 Less than $10,000 Asphalt, LLC The Debtors did not file a list of their 20 largest unsecured creditors. HERBST GAMING: MGM Deal Cues Moody's to Hold Rating at B1 --------------------------------------------------------- Moody's Investors Service confirmed the ratings of Herbst Gaming, Inc. after the announcement that the company entered into an agreement with MGM MIRAGE whereby MGM MIRAGE will sell its Buffalo Bill's, Primm Valley and Whiskey Pete's hotel-casinos located in Primm, Nevada, to Herbst for $400 million. Ratings confirmed include Herbst's B1 corporate family rating and B1 PDR, along with its Ba1/LGD2 senior secured credit facilities and B3/LGD5 senior subordinated debt. A stable ratings outlook was assigned. Prior to this confirmation, Herbst's ratings were on review for possible upgrade since May 19, 2006 in consideration of the fact that the company has been mapping to a higher rating category according to the risk factors and metrics outlined in Moody's Global Gaming Methodology. However, this recent acquisition announcement combined with the pending acquisition of The Sands Regent, and assumption that both acquisitions will be entirely debt financed, will result in leverage, coverage and profitability measures that will likely remain consistent with the company's current rating. Pro forma debt/EBITDA is about 6 (over 7x on a lease adjusted basis), and not expected to improve materially over the next 18-24 month period. Longer-term, however, ratings improvement is possible given the company's increased asset size and continued low regulatory risk profile. Debt/EBITDA improvement to approximately 5x could result in an upgrade. Although Moody's expects that both acquisitions will be funded with debt, no specific financing plan has been announced. It is important to note that while Herbst's B1 corporate family rating will not be impacted by the ultimate financing plan, its secured bank loan rating could be negatively impacted by up to 2 notches depending on how much of additional first lien debt is used to fund the acquisitions. The Primm transaction which is expected to close by the end of the first quarter 2007, is subject to customary closing conditions contained in the purchase agreement, including receipt of necessary regulatory and governmental approvals. The $150 million Sands Regent acquisition is expected to close by the end of 2006. Moody's most recent action on Herbst occurred on September 28, 2006 when Probability of Default ratings and LGD assessments were assigned to the company as part of the general roll-out of the LGD product. Herbst Gaming, Inc. is an established slot route operator in Nevada with over 8,400 slot machines and currently owns and operates eight casinos in Nevada, Missouri and Iowa. Net revenues for the latest 12-month period ended June 30, 2006 were $587 million. HOME PRODUCTS: Moody's Assigns Loss-Given-Default Rating -------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. consumer products sector, the rating agency confirmed its Caa1 Corporate Family Rating for Home Products International, Inc. and upgraded its Caa3 rating to Caa2 on the company's $116 million senior subordinated notes due 2008. Additionally, Moody's assigned an LGD5 rating to those bonds, suggesting noteholders will experience a 73% loss in the event of a default. Moody's explains that 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 will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's 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% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Home Products International, Inc. -- http://www.hpii.com/and http://www.homz.biz/-- is an international consumer products company which designs and manufactures houseware products. The Company sells its products through national and regional discounters including Kmart, Wal-Mart and Target, hardware/home centers, food/drug stores, juvenile stores and specialty stores. ITIS HOLDINGS: Cootes Drive Sues Hunter M.A. Carr & Joanne Hoover ----------------------------------------------------------------- Cootes Drive, LLC, a fund advised by Southridge Capital Management LLC, has filed suit against Hunter M.A. Carr and Joanne Hoover, officers of ITIS Holdings, Inc., in the state district court in Texas. The Company alleged that Mr. Carr and Ms. Hoover breached fiduciary duties they owed to the Company and other creditors of ITIS Holdings by causing ITIS Holdings to liquidate its remaining assets and to distribute the proceeds to its officers and directors, including Mr. Carr, in an attempt to shield the assets from creditors. In addition, the Company alleges that numerous payments received by Mr. Carr during the past several years were fraudulent conveyances made with the intent to hinder the Company and other creditors. The Company seeks damages from Mr. Carr and Ms. Hoover in excess of $2 million. The Company also disclosed that its claim against ITIS Holdings arose from its status as a creditor, as confirmed by an order entered by the United States District Court for the Southern District of New York finding ITIS Holdings liable for breach of a Convertible Preferred Stock Purchase Agreement between ITIS Holdings and the Company and for non-payment of a promissory note in favor of the Company. The Company anticipates the court to enter a final judgment in favor of the Company in an amount in excess of $3 million. About Southridge Southridge Capital Management LLC's advised funds have provided over $1 billion in growth capital to emerging companies globally. Southridge is committed to funding mid to micro-cap companies with robust business models across diverse industries. About ITIS Holdings Inc. ITIS Inc. was originally incorporated in Idaho in 1967 was reincorporated in Delaware and the corporate name was changed to Planet Resources, Inc. On September 18, 2002, ITIS Inc., merged into its wholly owned subsidiary, ITIS Holdings Inc., with ITIS Holdings Inc. as the surviving corporation. The Company provides management and marketing services to third party companies. Going Concern Doubt Malone & Bailey, PC expressed substantial doubt about ITIS Holdings Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the years ended December 31, 2005 and 2004. The auditing firm pointed to the Company's equity deficit of $6.3 million at December 31, 2005 and net losses incurred of $137,692 and $1,077,422 during 2005 and 2004, respectively. IVI COMMS: Posts $110,702 Net Loss in Quarter Ended June 30 ----------------------------------------------------------- IVI Communications Inc. reported a $110,702 net loss on $662,123 of revenues for the first fiscal quarter ended June 30, 2006, compared with a $1,008,221 net loss on $777,836 of revenues for the same period in 2005. At June 30, 2006, the company's balance sheet showed $4,851,650 in total assets and $6,086,749 in total liabilities, resulting in a $1,235,099 stockholders' deficit. The company's balance sheet at June 30, 2006, also showed strained liquidity with $654,338 in total current assets available to pay $5,700,845 in total current liabilities. Full-text copies of the company's first fiscal quarter financial statements are available for free at: http://researcharchives.com/t/s?1448 Going Concern Bagel, Josephs, Levine & Company, LLC, in Gibbsboro, New Jersey, raised substantial doubt about IVI Communications Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Mar. 31, 2006. The auditor pointed to the company's operating losses and capital deficits. About IVI Communications IVI Communications, Inc. -- http://www.ivn.net/-- acquires, consolidates and profitably operates locally branded ISPs to offer state of the art dialup and fixed wireless broadband Internet access and other services such as VoIP Internet Telephony to residential and business customers. IVI has three wholly owned subsidiaries, Internet Business Consulting, Inc., Futura, Inc., and AppState.Net. IBC is a VoIP services provider and a source of turnkey wireless networks that has the expertise required to engineer, install, and support wireless applications and solutions. Futura, founded in September 1995, is a regional Internet Service Provider serving dialup, DSL and VoIP in communities surrounding Little Rock, Arkansas. AppState.net is an Internet Service Provider founded in July 1999 providing wireless and dialup Internet access to the Appalachian State University town of Boone, NC. K2 INC: Moody's Assigns Loss-Given-Default Rating ------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. consumer products sector, the rating agency confirmed its Ba3 Corporate Family Rating for K2 Inc., and its B1 rating on the company's $200M senior unsecured notes due 2014. Additionally, Moody's assigned an LGD4 rating to those bonds, suggesting noteholders will experience a 61% loss in the event of a default. Moody's explains that 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 will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's 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% to 9%) to LGD6 (loss anticipated to be 90% to 100%). K2 Inc. (NYSE: KTO) is a premier, branded consumer products company with a portfolio of brands including Shakespeare(R), Pflueger(R) and Stearns(R) in the Marine and Outdoor segment; Rawlings(R), Worth(R), K2 Licensed Products and Brass Eagle(R) in the Team Sports segment; K2(R), Volkl (R), Marker(R) and Ride(R) in the Action Sports segment; and Adio(R), Marmot(R) and Ex Officio(R) in the Apparel and Footwear segment. K2's diversified mix of products is used primarily in team and individual sports activities such as fishing, watersports activities, baseball, softball, alpine skiing, snowboarding and in-line skating. Among K2's other branded products are Hodgman(R) waders, Miken(R) softball bats, Tubbs(R) and Atlas(R) snowshoes, JT(R) and Worr Games(R) paintball products, Planet Earth(R) apparel and Sospenders(R) personal floatation devices. Adio(R), Atlas(R), Brass Eagle(R), Ex Officio(R), Hodgman(R), JT(R), K2(R), Marker(R), Marmot(R), Pflueger(R), Planet Earth(R), Rawlings(R), Ride(R), Shakespeare(R), Sospenders(R), Stearns(R), Tubbs(R), Volkl(R), Worth(R) and Worr Games(R) are trademarks or registered trademarks of K2 Inc. or its subsidiaries in the United States or other countries. KAISER ALUMINUM: Reports 3rd Qtr. Claim Settlement Fund & Escrow ---------------------------------------------------------------- Kaiser Aluminum & Chemical Corporation's Tort Claims Settlement Fund reports $9,520 in total investments for the quarter ended Sept. 30, 2006. For the period July 1 through Sept. 30, 2006, the Tort Claims Settlement Fund made cash disbursements totaling $15,372,704. It held $124,398 in principal cash as of September 30. Kaiser's Asbestos Claim Settlement Escrow reports $10,638 in total investments for the quarter ending Sept. 30, 2006. The Asbestos Claim Settlement Escrow made cash disbursements totaling $17,086,665 in the third quarter, and held $751,366 in principal cash as of Sept. 30, 2006. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on Feb. 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. Lazard Freres & Co. serves as the Debtors' financial advisor. Lisa G. Beckerman, Esq., H. Rey Stroube, III, Esq., and Henry J. Kaim, Esq., at Akin, Gump, Strauss, Hauer & Feld, LLP, and William P. Bowden, Esq., at Ashby & Geddes represent the Debtors' Official Committee of Unsecured Creditors. The Debtors' Chapter 11 Plan became effective on July 6, 2006. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 609/392-0900) KAISER ALUMINUM: Settles OCP Status of Fleishman and Hewitt ----------------------------------------------------------- Kaiser Aluminum Corporation employed the two firms as ordinary course professionals during its Chapter 11 cases: (a) Fleishman-Hillard, Inc., assisted Kaiser with public relations matters; and (b) Hewitt Associates LLC acted as the enrolled actuary for Kaiser's defined benefit pension plans and was also employed to provide other services, including assisting in the development of a post-emergence management equity incentive plan. During the six-month period February 1, 2006 through July 5, 2006, Fleishman and Hewitt were paid fees that exceeded the $210,000 limit imposed by the U.S. Bankruptcy Court for the District of Delaware on ordinary course professionals. Specifically, Kaiser paid Fleishman fees of $315,911 and Hewitt fees of $363,507. Kaiser, and Kelly Beaudin Stapleton, the U.S. Trustee for the District of Delaware, have agreed that despite the terms of the Court order governing the employment of ordinary course professionals: (1) Kaiser should not have to seek a Court order approving the employments of Fleishman and Hewitt under Section 327 of the Bankruptcy Code; and (2) Kaiser is permitted to pay Fleishman and Hewitt as ordinary course professionals. Judge Fitzgerald approved the stipulation on October 13, 2006. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on Feb. 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. Lazard Freres & Co. serves as the Debtors' financial advisor. Lisa G. Beckerman, Esq., H. Rey Stroube, III, Esq., and Henry J. Kaim, Esq., at Akin, Gump, Strauss, Hauer & Feld, LLP, and William P. Bowden, Esq., at Ashby & Geddes represent the Debtors' Official Committee of Unsecured Creditors. The Debtors' Chapter 11 Plan became effective on July 6, 2006. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 609/392-0900) KARA HOMES: Gets Court Approval to Sell Nine Homes -------------------------------------------------- The Hon. Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey gave Kara Homes Inc. permission to proceed with the sale and closing of nine homes, the Asbury Park Press reports. David P. Willis, writing for Asbury Park, says the Company had hoped to restart construction of up to 300 homes, but its lawyer, David L. Bruck, Esq., said the short-term financing to get the Company started had not materialized. Reports say negotiations for new financing are ongoing, and Kara officials are hopeful that a new deal would be in place. Prior to its chapter 11 filing, Kara said it had lined up a $5 million financing to start rebuilding and meeting its payroll for about 70 employees still working for the Company. It also wanted to reimburse customers who had canceled their new home contracts before it filed for bankruptcy. About Kara Homes Headquartered in East Brunswick, New Jersey, Kara Homes, Inc., aka Kara Homes Development LLC, builds single-family homes, condominiums, town homes, and active-adult communities. The Company filed for chapter 11 protection on Oct. 5, 2006 (Bankr. D. N.J. Case No. 06-19626). David L. Bruck, Esq., at Greenbaum, Rowe, Smith, et al., represents the Debtor. When the Debtor filed for protection from its creditors, it listed total assets of $350,179,841 and total debts of $296,840,591. On Oct. 9, 2006, nine affiliates filed separate chapter 11 petitions in the same Bankruptcy Court. On Oct. 10, 2006, 12 more affiliates filed chapter 11 petitions. Kara Homes' exclusive period to file a chapter 11 plan expires on Feb. 2, 2007. KOPPERS HOLDINGS: Dr. Whittle to Retire as Europe General Manager ----------------------------------------------------------------- Koppers Holdings Inc., disclosed that Dr. David Whittle, vice president and general manager, European Operations, will be retiring effective March 31, 2007. The Company said that Dr. Whittle has been responsible for European operations since the Company acquired 100% ownership of Tarconord A/S, now known as Koppers Europe, in May 2000. The Company concurrently disclosed the appointment of James T. Dietz to replace Dr. Whittle effective March 31, 2007. Mr. Dietz has more than 21 years of experience in the coal tar distillation business, with a background in engineering and operations. Mr. Dietz is currently operations manager for Koppers' North American Carbon Materials & Chemicals business. In his new capacity, Mr. Dietz will report to Kevin J. Fitzgerald, who was named senior vice president, Global Carbon Materials & Chemicals. Koppers Holdings Inc., (NYSE: KOP) -- http://www.koppers.com/-- with corporate headquarters and a research center in Pittsburgh, Pennsylvania, is an integrated producer of carbon compounds and treated wood products. Including its joint ventures, Koppers operates facilities in the United States, United Kingdom, Denmark, Australia, China, the Pacific Rim and South Africa. * * * Koppers Holdings Inc.'s balance sheet at June 30, 2006 showed total assets of $625 million and total liabilities of $733 million resulting in a total stockholders' deficit of $108 million. Total stockholders' deficit at Dec. 31, 2005 stood at $206 million. LE-NATURE'S INC: Creditors File Bankruptcy Case in Pennsylvania --------------------------------------------------------------- General Press Corp., Lyons Contracting Inc., M.I. Friday Inc., and Jackel Development Inc. have filed a chapter 7 petition with the United States Bankruptcy Court in Pennsylvania for Le-Nature's Inc., fka Global Beverage Systems Inc., saying the company owes them more than $1.4 million, the Associated Press reports. The move follows the appointment of Kroll Zolfo Cooper LLC, as custodian of Le Nature's after a Delaware judge concluded the Company had engaged in potentially criminal activity, the source said, citing court documents. The turnaround firm, according to the report, has submitted an emergency motion in Delaware to borrow up to $10 million and seek Chapter 11 protection. An attorney for the creditors, David K. Rudov, told the Associated Press that he wanted to ensure the anticipated bankruptcy proceedings take place in western Pennsylvania, where many creditors are located, rather than in Delaware. "The doors are going to remain open," Mr. Rudov said in the report, adding that the company may operate under new ownership in the future. "The company's going to continue to make beverages. This is just an issue of how everyone's going to get paid." Steven G. Panagos, a Kroll Zolfo Cooper managing director, has arrived in Latrobe to take control of the company while four Le- Nature executives were relieved of their duties and ordered by the Court of Chancery in Delaware to turn over all company property within 48 hours, AP relates. The court had also issued a temporary restraining order on Oct. 20 prohibiting company directors from accessing, tampering with or destroying company property, books or records, AP notes. Headquartered in Latrobe, Pennsylvania, Le-Nature's Inc. makes bottled waters, teas, juices and nutritional drinks. Its brands include Kettle Brewed Ice Teas, Dazzler fruit juice drinks and lemonade, and AquaAde vitamin-enriched water. LE-NATURE'S INC: Involuntary Chapter 7 Case Summary --------------------------------------------------- Alleged Debtor: Le-Nature's fka Global Beverage Systems, Inc. 11 Lloyd Avenue Latrobe, PA 15650 Involuntary Petition Date: November 1, 2006 Case Number: 06-25454 Chapter: 7 Court: Western District of Pennsylvania (Pittsburgh) Judge: M. Bruce McCullough Petitioners' Counsel: David K. Rudov, Esq. Rudov & Stein, P.C. First and Market Building 100 First Avenue, Suite 500 Pittsburgh, PA 15222 Tel: (412) 281-7300 Fax: (412) 281-7305 Petitioners Nature of Claim Claim Amount ----------- --------------- ------------ General Press Corp. Trade Claim $1,067,456 110 Allegheny Drive Natrona Heights, PA 15065 M.I. Friday, Inc. Trade Claim $180,000 150 Perrysville Avenue Pittsburgh, PA 15229 Lyons Contracting, Inc. Trade Claim $97,971 4101 Route 993 North Huntingdon, PA 15642 Jackel Development, Inc. Trade Claim $96,027 13030 Veronica Lane North Huntingdon, PA 15642 LE-NATURE'S: Moody's Sees Ratings Withdrawal After Bankr. Filing ---------------------------------------------------------------- Moody's Investors Service lowered the ratings which were on review for downgrade on Le-Nature's Inc. and will withdraw all ratings because an involuntary petition for bankruptcy was filed under Chapter 7 of the bankruptcy code. Ratings lowered and to be withdrawn: -- Corporate Family Rating -- to C from Caa1 -- Bank Facility Ratings -- to Ca (LGD 5, 77% LGD Rate) from B2 (LGD 2, 27% LGD rate) -- $150 million senior subordinated notes -- to C (LGD 6, 100%) from Caa2 (LGD 5, 81% LGD rate) -- Probability of Default rating to D from Caa1 Le-Nature's, Inc. with headquarters in Latrobe, Pennsylvania makes water, juices, teas and other-non-carbonated beverages. LOGANS ROADHOUSE: Moody's Assigns B2 Corporate Family Rating ------------------------------------------------------------ Moody's Investors Service assigned a first-time B2 corporate family rating to Logan's Roadhouse, Inc. along with Ba3 ratings for the proposed senior secured credit facilities. Proceeds from the newly rated debt together with senior subordinated notes not rated by Moody's and contributed equity will fund the acquisition of Logan's by two private equity sponsors, Bruckmann, Rosser, Sherrill & Co. and Canyon Capital Advisors LLC and affiliates from CBRL Group, Inc. CBRL, the operator of Cracker Barrel Restaurants, elected to monetize its investment in Logan's after concluding a strategic review that was initiated in the fall of 2005. These assigned ratings are subject to review of final documentation. The rating outlook is stable. The B2 corporate family rating reflects high financial leverage and modest free cash flow generation, limited scale and scope, operating within the highly competitive casual dining segment of the restaurant industry and the challenges associated with operating independently of CBRL. The rating acknowledges Logan's track record for performance, potential for unit and operating margin growth and loyal customer base that results in more frequent visits, consistent average unit volumes and allows the company to spend considerably less than its peers on marketing initiatives. Ratings assigned with a stable outlook: -- B2 corporate family rating, -- B2 probability of default rating, LGD4-50% loss given default assessment, -- Ba3 (LGD2, 29%) for the $30 million revolver maturing in 2011, -- Ba3 (LGD2, 29%) for the $138 million term loan B maturing in 2012, Moody's has applied its new Probability-of-Default and Loss-Given- Default rating methodology to Logan's and its subsidiaries. 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 on an individual security is 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%). The assignment of ratings to Logan's new capital structure reflects Moody's new methodology for assigning ratings to individual securities rather than a change in the characteristics of any debt security in the company's fundamental credit profile. Logan's Roadhouse, Inc., headquartered in Nashville, Tennessee, operates 143 and franchises 26 traditional American roadhouse- style steakhouses in twenty states across the country. LOOMIS SAYLES: Moody's Rates $15MM Class E Notes Due 2020 at Ba2 ---------------------------------------------------------------- Moody's Investors Service assigned these ratings to notes issued by Loomis Sayles CLO I, Ltd., a collateral loan obligation: -- Aaa to $296,000,000 Class A Floating Rate Notes, Due 2020 -- Aa2 to $20,000,000 Class B Floating Rate Notes, Due 2020 -- A2 to $20,000,000 Class C Deferrable Floating Rate Notes, Due 2020 -- Baa2 to $21,000,000 Class D Deferrable Floating Rate Notes, Due 2020 -- Ba2 to $15,000,000 Class E Deferrable Floating Rate Notes, Due 2020 Moody's ratings of the notes address the ultimate cash receipt of all required interest and principal payments, as provided by the notes' governing documents, and are based on the expected loss posed to noteholders, relative to the promise of receiving the present value of such payments. MERIDIAN AUTOMOTIVE: Court Extends Foreign Unit Financing Period ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware authorized Meridian Automotive Systems Inc. and its debtor-affiliates to modify the terms of the Foreign Funding Order to: (a) extend the time in which they may advance funds to their Foreign Subsidiaries to the earlier of: (i) the effective date of a plan of reorganization, or (ii) June 26, 2007; and (b) allow them to reallocate $750,000 of the $8,500,000 that was previously allocated to Meridian Mexico to Meridian Brazil. The Debtors previously obtained permission from the Court to advance up to $9,700,000 to their non-debtor Foreign Subsidiaries over a 14-month period ending on June 26, 2006. As reported in the Troubled Company Reporter on Oct. 17, 2006, under the terms of the Foreign Funding Order, the Debtors were authorized to advance: -- up to $8,500,000 to Meridian Automotive System, S. de MR. de C.V., -- up to $200,000 to Voplex of Canada; and -- up to $1,000,000 to Meridian Automotive Systems-DO Brazil LTDA. As of Oct. 5, 2006, the Debtors had advanced approximately $3,500,000 to the Foreign Subsidiaries pursuant to the Foreign Funding Order. The Foreign Subsidiaries generally had been able to generate positive cash flow from their operations and as a result, the Debtors had only advanced approximately $3,500,000 to the Foreign Subsidiaries. The Debtors, however, required the continued ability to advance additional funds to the Foreign Subsidiaries up to the $9,700,000 cap to ensure that the Foreign Subsidiaries can operate their business without interruption. It is necessary for the Debtors to continue advancing funds to their Foreign Subsidiaries to: (i) safeguard the Debtors' investment in the Foreign Subsidiaries; and (ii) ensure that the Foreign Subsidiaries continue to manufacture parts that the Debtors use to make end-product component parts to sell to OEMs. The advances are necessary to permit the Foreign Subsidiaries to, among other things, continue their production and manufacturing operations. If the Foreign Subsidiaries ceased operations: (i) the value of the Debtors' interest in the Foreign Subsidiaries would be significantly reduced; (ii) any incremental revenue produced by the Foreign Subsidiaries would be eliminated; (iii) the Debtors' market share in the automotive parts industry would be reduced; and (iv) the Debtors' relationship with numerous OEM customers would be materially and adversely affected. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). MERIDIAN AUTOMOTIVE: Sells Mich. Property to Roskam for $2.45 Mil ----------------------------------------------------------------- The Honorable Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware authorizes Meridian Automotive Systems Inc. and its debtor-affiliates to sell a parcel of real property located at 3225 32nd Street Southeast, in Kentwood, Michigan, referred to as the GR1 Plant to Roskam Baking Company for $2,450,000, free and clear of all liens, claims and encumbrances, and pursuant to the terms of the Sale Agreement, as amended on Oct. 19, 2006. The Sale Agreement has been amended to include these provisions: 1. The Due Diligence Period for Roskam to complete the Phase 1 Review, Title Review and Survey Review is extended for two additional weeks. The new deadline for Roskam to complete due diligence is on November 2, 2006. 2. The Debtors agree to work with Consumers Energy regarding the release of the easements that the existing building encroaches on the Premises. In the event the matter cannot be resolved by Nov. 2, 2006, the parties agree to enter into an Escrow Agreement, whereby $50,000 will be withheld from the proceeds of closing to assume Roskam's continued work towards the release of the encroached easements. The closing deadline, however, will not be delayed as a result of it. 3. Subject to the satisfaction or waiver of Roskam's remaining contingencies, the closing of the sale of the Premises will take place on a date mutually agreeable to the parties within 10 days of Nov. 2, 2006. The Court also authorizes the Debtors to pay the commission earned by real estate broker NAI West Michigan. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). MESABA AVIATION: Opts to Reject Six Engine Leases with GS Leasing ----------------------------------------------------------------- Mesaba Aviation, Inc. asks the U.S. Bankruptcy for the District of Minnesota for authority to reject their spare engine leases effective as of Sept. 27, 2006. The date coincides with the expiration of a stipulation providing for extension regarding aircraft agreements between the parties. In connection with operating AVRO aircraft, the Debtor leases a number of spare Avro engines, including six Avro engines with these engine serial numbers: * LF07586, * LF07587, * LF07636, * LF07637, * LF07645, and * P07726. In light of the removal AVRO aircraft from the Debtor's fleet, the spare engines are no longer necessary and beneficial to the Debtor's operations, according to Will R. Tansey, Esq., at Ravich Meyer Kirkman McGrath & Nauman, in Minneapolis, Minnesota. Mr. Tansey relates that the Spare Engines are each leased from GS Leasing Engines I, LLC, pursuant to leases and related agreements assigned to GS Leasing I by Banc of America Leasing & Capitol, LLC. In the Extended Use Stipulation, Mr. Tansey says, GS Leasing I agreed to take possession of the Spare Engines from the Debtor's Minneapolis, Minnesota maintenance facility on October 2, 2006. The Debtor had obtained authority from the Court to reject leases related to the seven spare engines leased from GS Leasing. The Debtor said that these seven spare engines are the least desirable Avro engines in the Debtor's possession primarily since GS Leasing has refused to reduce the rent, among other reasons. GS Leasing II Objects The week before the end of the Extended Use Stipulation period on September 27, 2006, GS Leasing Engine II, LLC's consultants inspected maintenance records relating to the six Avro engines, and discovered that none of the Spare Engines met the requirements set forth in the Extended Use Stipulation. Monica L. Clark, Esq., at Dorsey & Whitney LLP, in Minneapolis, Minnesota, clarifies that GS Leasing II does not object to the Debtor's rejection of the Spare Engines, but only to the retroactive, nunc pro tunc September 27, 2006, rejection date. Ms. Clark asserts that the effective date of the rejection of each of the Spare Engine Leases should be effective only after the Debtor has complied with the requirements for return of the engines set forth in the Extended Use Stipulation. Thus, GS Leasing II asks the Court to (a) deny the Debtor's nunc pro tunc request for a retroactive rejection date, and (b) set the rejection date on a date when all of the required conditions for return of each Spare Engines are satisfied by the Debtor. Debtor Answers Back Mr. Tansey argues that GS Leasing II can provide no legal precedent or support for the theory that the Debtor may not reject a lease until it meets return obligations, whether disputed or acknowledged. Mr. Tansey asserts that to the extent that GS Leasing II believes the Debtor has failed to meet contractual obligations, GS Leasing must make a claim against the Debtor's estate. However, the resolution of a claim dispute is unrelated to rejection and should not bar or delay a rejection ruling from being entered by the Court. Mr. Tansey notes that the Debtor has sought and received retroactive approval of the rejection of leases throughout its Chapter 11 case without objection. Denying retroactive approval now could unduly harm the estate by potentially creating additional and unnecessary administrative expense claims. Moreover, Mr. Tansey continues, GS Leasing does not object to retroactive approval but merely attempts to rely on the law related to nunc pro tunc approval in an attempt to confuse the issues and force the Debtor to perform certain return requests. Accordingly, the Debtor asks the Court to overrule the objection, and approve its rejection request. About Mesaba Aviation Headquartered in Eagan, Minnesota, Mesaba Aviation, Inc., dba Mesaba Airlines -- http://www.mesaba.com/-- operates as a Northwest Airlink affiliate under code-sharing agreements with Northwest Airlines. The Company filed for chapter 11 protection on Oct. 13, 2005 (Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in its restructuring efforts. Craig D. Hansen, Esq., at Squire Sanders & Dempsey, L.L.P., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $108,540,000 and total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) MESABA AVIATION: Can Enter Into Master Lease Pact with Northwest ---------------------------------------------------------------- Mesaba Aviation, Inc. obtained authority from the U.S. Bankruptcy Court for the District of Minnesota to enter into a Master Lease Agreement with Northwest Airlines, Inc., which provides for the lease of certain baggage handling equipment by Northwest. Specifically, the Debtor asked the Court to: (a) approve a Master Lease Agreement providing for the lease of certain pieces of the Debtor's baggage handling equipment by Northwest; (b) approve a Master Sublease Agreement pursuant to which Northwest will lease back the Equipment to the Debtor; and (c) grant an option to purchase the Debtor's property outside the ordinary course of business. In the ordinary course of its operations, the Debtor provides ground-handling services to Northwest, pursuant to an unwritten agreement. The baggage handling equipment is owned by the Debtor, is essential to the ground-handling services provided by the Debtor, and is integral to Northwest's flight service operations. Will R. Tansey, Esq., at Ravich Meyer Kirkman Mcgrath & Nauman, P.A., in Minneapolis, Minnesota, relates that Northwest has expressed concern that the Debtor's reorganization puts Northwest's operations at risk. Accordingly, the parties entered into the Master Lease and Sublease to assure Northwest that if the Debtor is forced to cease ground operations, Northwest will be able to maintain uninterrupted ground-handling services to its passengers. Mr. Tansey notes that the Debtor and Northwest were in substantial agreement on the terms of the Lease and Sublease, and have executed both agreements effective October 12, 2006, and will remain in effect until April 1, 2007, unless earlier terminated, in whole or in part, in accordance with each agreement. The Debtor is attempting to obtain approval of the agreements at the earliest opportunity, and has filed the Lease and Sublease with their schedules, which contain the detailed Equipment lists and the Option and rent prices, Mr. Tansey says. Among other things, the Master Lease: * provides that the Debtor will lease the Equipment to Northwest for a monthly base rent of $90,000; * grants Northwest an option to purchase the Equipment for $4,672,350 in the event, among others, the Debtor (a) files a Chapter 11 of the Bankruptcy Code liquidating plan, (b) converts its Chapter 11 case to a liquidation under Chapter 7 of the Bankruptcy Code, or (c) is unable to continue ground handling services; and * is terminable at will upon the Debtor's confirmation of a plan, other than a liquidating plan. A full-text copy of the Master Lease is available for free at: http://researcharchives.com/t/s?13b6 Among other things, the Sublease: * provides that Northwest will sublease the Equipment to the Debtor for a monthly base rent of $90,000; * is terminable at will upon the Debtor's confirmation of a plan, other than a liquidating plan. A full-text copy of the Sublease is available for free at: http://researcharchives.com/t/s?13b7 Mr. Tansey asserts that the Lease and Sublease help ensure that the Debtor continues generating revenue from ground handling services, which revenue is crucial to its organization and its estate under the current circumstances. Moreover, if the Debtor is forced to cease operations, the Option ensures that the Debtor's estate will quickly receive fair market value for the Equipment while ensuring that Northwest and its passengers are not unduly burdened. The Debtor believes that the Option is necessary to maximize the likelihood of continued ground operations and to minimize risk to Northwest and its passengers, and the Option price is the current fair market value of the Equipment. About Mesaba Aviation Headquartered in Eagan, Minnesota, Mesaba Aviation, Inc., dba Mesaba Airlines -- http://www.mesaba.com/-- operates as a Northwest Airlink affiliate under code-sharing agreements with Northwest Airlines. The Company filed for chapter 11 protection on Oct. 13, 2005 (Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in its restructuring efforts. Craig D. Hansen, Esq., at Squire Sanders & Dempsey, L.L.P., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed total assets of $108,540,000 and total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) NCO GROUP: Earns $11.4 Million in 2006 Third Quarter ---------------------------------------------------- NCO Group, Inc., reported net income of $11.4 million, including special charges of $3.6 million, net of taxes for the third quarter of 2006. This compares to net income of $7.6 million in the third quarter of 2005; including special charges of $2.2 million, net of taxes. The special charges are associated with the restructuring of the Company's legacy operations to streamline the Company's cost structure, the integration of recent acquisitions, and costs associated with the Company's proposed merger. The special charges for 2005 also included the impact from Hurricane Katrina. The restructuring charges are included as a separate line item under operating costs and expenses, and the integration, merger, and Hurricane Katrina charges are included in payroll and related expenses, and selling, general and administrative expenses. NCO is organized into four divisions that include Accounts Receivable Management North America, Customer Relationship Management, Portfolio Management, and Accounts Receivable Management International. Overall revenue in the third quarter of 2006 was $301.6 million, an increase of 21.0%, or $52.4 million, from revenue of $249.2 million in the third quarter of 2005. For the third quarter of 2006, ARM North America's revenue was $205.7 million as compared to $186.8 million in the third quarter of 2005. The increase was primarily attributable to the acquisition of Risk Management Alternatives, Inc., which was completed on Sept. 12, 2005, and an $8.7 million increase in inter-company revenue from Portfolio Management, which is eliminated in consolidation. During the quarter, this division recorded approximately $3.4 million, net of taxes, of restructuring charges, costs associated with integration of the Company's recent acquisitions, and merger costs. For the third quarter of 2006, CRM's revenue was $62.8 million as compared to $44.9 million in the third quarter of 2005. The increase was primarily attributable to new clients ramping up business during the end of 2005 and during 2006. While these new contracts have allowed this division to expand its revenue base in 2006, the deployment of large numbers of seats on an expedited schedule adversely impacts near-term profitability because the operating expenses are incurred in advance of the revenue growth. Partially offsetting the revenue from new clients in the third quarter of 2006 was the reduction in revenue from a major client where NCO ceased providing certain services when the client exited the consumer long-distance business due to changes in telecommunications laws. During the quarter this division recorded approximately $133,000, net of taxes, of restructuring and integration charges. For the third quarter of 2006, Portfolio Management's revenue was $55.3 million compared to $35.1 million in the third quarter of 2005. The increase included additional revenue from portfolio assets acquired as part of two business combinations at the end of the third quarter of 2005. Portfolio Management recorded $13.1 million of revenue during the third quarter of 2006 from the sale of portions of several older portfolios with little or no remaining carrying value, as compared to $2.8 million during the third quarter of 2005. For the third quarter of 2006, ARM International's revenue was approximately $8.4 million compared to $3.5 million in the third quarter of 2005. The increase in revenue was primarily attributable to the acquisition of the international operations of RMA. During the quarter this division recorded approximately $80,000, net of taxes, of restructuring and integration charges. NCO Group, Inc. -- http://www.ncogroup.com/news/-- provides business process outsourcing services including accounts receivable management, customer relationship management and other services. NCO provides services through 90 offices in the United States, Canada, the United Kingdom, Australia, India, the Philippines, the Caribbean and Panama. * * * As reported in the Troubled Company Reporter on Nov. 2, 2006, Moody's Investors Service assigned a B3 rating to NCO Group, Inc.'s proposed $165 million senior unsecured notes and a Caa1 rating to its proposed $200 million of senior subordinated notes, which are intended to replace a proposed $365 million senior subordinated notes offering that was cancelled. Concurrently, Moody's withdrew the Caa1 rating assigned to the discussed $365 million of senior subordinated notes. Pro-forma for the aforementioned capital mix changes, Moody's affirmed the B2 corporate family rating and the Ba3 rating on the $565 million senior secured credit facility. NE ENERGY: Fitch Assigns B Issuer Default Rating ------------------------------------------------ Fitch Ratings has assigned an Issuer Default Rating of 'B' to NE Energy, Inc. In addition, Fitch has assigned issue ratings of 'BB-/RR2' to NE Energy's first lien credit facilities and 'B-/RR5' to NE Energy's second lien credit facilities. The first lien facilities consist of a $550 million term loan due November 2013, a $65 million cash collateralized synthetic letter of credit facility due November 2013, and a $70 million revolving credit facility maturing November 2011. The second lien facility consists of a $170 million term loan due May 2014. The Rating Outlook is Stable. NE Energy is a newly formed subsidiary of Energy Capital Partners I, LP. The term loans, in addition to approximately $400 million of equity, will be used to finance the Sponsor's acquisition of Northeast Utilities' non-regulated generation assets, fund required liquidity accounts, and pay transaction costs. The acquired assets consist of Mt Tom, a 146 MW coal fired facility, and Northeast Generation Company, a portfolio of primarily hydroelectric facilities totaling 1296 MW. NGC is currently encumbered with $320 million of senior secured bonds due 2026 (rated BBB- by Fitch). The Mt Tom facility is not encumbered with project-level debt. NEW YORK RACING: Files for Bankruptcy Protection in Manhattan ------------------------------------------------------------- The New York Racing Association has filed a voluntary petition under Chapter 11 of United States Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York. NYRA, owner and operator of Aqueduct Racetrack, Belmont Park, and Saratoga Race Course, is a private, non-profit racing association established in 1955. "We always viewed filing for Chapter 11 bankruptcy protection as a last option, and regrettably, NYRA's Board of Trustees felt that we were required to take this action to protect New York's Thoroughbred racing industry," Charles Hayward, President and CEO of NYRA said. "The goal of the filing is to maintain the current schedule of racing dates, purse structure, stakes program and all other racing operations. "Chapter 11 bankruptcy does not mean going out of business," added Mr. Hayward. "In fact, it is a constructive process that allows NYRA the opportunity to achieve financial reorganization while continuing to conduct world-class Thoroughbred racing without interruption." Over the last three years, NYRA brought in new management, reformed its internal security systems, incorporated state of the art drug testing programs through the use of race day monitoring barns, reduced its net loss, increased revenues and decreased expenses. Late last year, as a result of these improvements as verified by a Federal monitor, the State Legislature worked out a $30 million dollar loan to allow NYRA to meet its obligations until a new revenue stream could be put into place-the introduction of 4,500 Video Lottery Terminals at Aqueduct Race Track. Despite state legislation authorizing gaming at selected racetracks and NYRA's dire financial situation, the VLTs have never been approved at Aqueduct, and the State failed to fund $19 million of the loan that was appropriated for NYRA's use. Aqueduct is the only NYRA track included in the VLT legislation. On Monday, the Non-Profit Racing Association Oversight Board approved a new resolution that applied further restrictions and conditions on NYRA's ability to receive the $19 million balance of the previously approved loan. "It is unfortunate, and frankly, inexplicable, why the State Lottery Division could not work out the details necessary to get the VLT construction underway at Aqueduct;" said C. Steven Duncker, Chairman of the NYRA Board of Trustees. "It is all the more mystifying given the fact that VLTs have been put in operation at eight non-NYRA tracks around the state," he added. "VLTs at Aqueduct represent cash flow to our industry, the continuation of New York Racing-the premier brand in North America-and over $400 million per year for the State's budget for education, $60 million for the Lottery, and $50 million for purses and breeders awards." NYRA is the cornerstone of New York's Thoroughbred racing industry, which provides 17,000 jobs and $1.4 billion in annual impact on the State's economy, according to a 2005 Deloitte Consulting study. NYRA employs 1,170 workers and there are approximately 1,800 backstretch workers living in 900 NYRA dormitory rooms. More than 2,000 horses are currently stabled at Aqueduct Racetrack and Belmont Park. Last year, NYRA's Belmont Park and Saratoga Race Course were ranked first and second, respectively, among all North American racetracks in average daily purse distribution. The recently- concluded Belmont Park fall meeting finished up 6.7% in wagering, while Saratoga Race Course posted a 4.9% wagering increase and retained its position as the most popular and successful race meeting in the nation. NEW YORK RACING: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: The New York Racing Association Inc. aka NYRA Aqueduct Race Track 110-00 Rockaway Boulevard Jamaica, NY 11417 Bankruptcy Case No.: 06-12618 Type of Business: The Company operates racing tracks in Aqueduct, Belmont Park and Saratoga. See http://www.nyra.com/ Chapter 11 Petition Date: November 2, 2006 Court: Southern District of New York (Manhattan) Judge: James M. Peck Debtor's Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: (212) 310-8602 Fax: (212) 310-8007 Total Assets: More than $100 Million Total Debts: More than $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Pension Benefit Guaranty Corporation $12,400,000 1200 K Street, N.W. Washington, DC 20005 New York State Lottery $6,000,000 Attn: Susan E. Miller Executive Deputy Director One Broadway Center P.O. Box 750 Schenectady, NY 12301 MGM Grand New York LLC $5,692,035 Attn: General Counsel 3600 Las Vegas Blvd. South Las Vegas, NV 89109 Empire State Development Corp. $5,000,000 633 3rd Ave, 36th Floor New York, NY 10017 TVG Network $4,333,328 19545 N.W. Von Neumann Dr. Suite 210 Beaverton, OR 97006 Lien Gaming $1,386,695 2901 Frontage Rd. WE HWY 10 Morrhead, MN 56560 The Port Authority of NY & NJ $1,000,000 225 Park Avenue South New York, NY 10003 Commissioner of Taxation and Finance $625,000 New York State Dept. of Taxation and Finance Bankruptcy Section P.O. Box 5300 Albany, NY 12205 Forum Services Group, Inc. $495,377 260 Madison Avenue Suite 200 New York, NY 10016 GC Consulting $367,253 867 Westfield Road Scotch Plains, NJ 07076 Sports Publication Prod. (NY) LLC $360,736 100 Broadway, 7th Floor New York, NY 10005 Aon Risk Services $275,995 P.O. Box 7247-7376 Philadelphia, PA 19170 United Tote Company $224,158 11505 Susquehanna Trail Glen Rock, PA 17327 Long Island Power Authority $216,466 P.O. Box 888 Hicksville, NY 11815 Associated Premium Corp. $176,400 124 MacArthur Court Nicholasville, KY 40356 NYS Racing and Wagering Board $150,000 One Broadway Center Suite 600 Schenectady, NY 12305 Comprehensive Health Services $144,459 8229 Boone Blvd. Suite 700 Vienna, VA 22182 Finger Lakes Race Track $128,452 Attn: David Bridger P.O. Box 25250 Farmington, NY 14425 NYS Thoroughbred Breeding and $108,015 Development Find Corp. 19 Roosevelt Drive, Suite 250 Saratoga Springs, NY 12866 Niagara Mohawk (National Grid) $101,588 P.O. Box 4798 Syracuse, NY 13321 NOMURA HOME: Fitch Places BB+ Rating on $12.2 Mil. Class B-2 Certs ------------------------------------------------------------------ Fitch assigns these ratings to Nomura Home Equity Loan Trust, Series 2006-FM2: -- $952,346,000 classes I-A-1, II-A-1, II-A-2, II-A-3, II-A-4 'AAA'; -- $46,051,000 class M-1 'AA+'; -- $41,753,000 class M-2 'AA+'; -- $25,788,000 class M-3 'AA'; -- $22,104,000 class M-4 'AA-'; -- $20,876,000 class M-5 'A+'; -- $19,034,000 class M-6 'A'; -- $18,420,000 class M-7 'A-'; -- $15,964,000 class M-8 'BBB+'; -- $12,894,000 class M-9 'BBB'; -- $12,894,000 privately offered class B-1 'BBB-'; and -- $12,280,000 privately offered class B-2 'BB+'. The 'AAA' rating on the senior certificates reflects the 22.45% total credit enhancement provided by the 3.75% class M-1, 3.40% class M-2, 2.10% class M-3, 1.80% class M-4, 1.70% class M-5, 1.55% class M-6, 1.50% class M-7, 1.30% class M-8, 1.05% class M- 9, 1.05% privately offered class B-1, 1.00% privately offered class B-2 and fully funded initial and target overcollateralization of 2.25%. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings on the certificates reflect the quality of the underlying collateral, and Fitch's level of confidence in the integrity of the legal and financial structure of the transaction. The mortgage pool consists of first and second lien, fixed and adjustable-rate mortgage loans with an aggregate principal balance of approximately $1,228,042,345 as of the cut-off date, Oct. 1, 2006. The weighted average FICO score is 628. The weighted average loan rate is approximately 8.452%. The weighted average remaining term to maturity is 355 months. The average principal balance of the loans is approximately $214,918. The weighted average original loan-to-value ratio is 81.25%. The properties are primarily located in California (25.00%), Florida (16.14%), and New York (12.15%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Nomura Home Equity Loan, Inc. deposited the loans into the trust, which issued the certificates, representing beneficial ownership in the trust. HSBC Bank USA, National Association, will act as Trustee. Equity One, Inc. will act as servicer, and Popular Mortgage Servicing, Inc. (rated 'RPS2-' by Fitch) will act as subservicer for this transaction. Wells Fargo Bank, N.A. (rated 'RMS1' by Fitch) will act as master servicer. For federal income tax purposes, the trust fund will comprise multiple real estate mortgage investment conduits, organized in a tiered REMIC structure. NORTH AMERICAN: Moody's Lowers Corp. Family Rating One Notch to B3 ------------------------------------------------------------------ Moody's Investors Service downgraded the corporate family rating of North American Membership Group Inc. to B3 from B2 and the second lien term loan rating to Caa2 from Caa1. The B1 rating on the first lien term loan was affirmed. The rating outlook remains negative. The ratings downgrade reflects negative free cash flow from operations, weaker than expected profitability levels and tight liquidity. Moody's anticipates that NAMG may violate financial covenants over the next few quarters and may need to seek a waiver from its bank group. Despite a long track record in the industry and a large membership base of about 4 million members, increases in operating costs and working capital requirements may prevent the company from generating positive cash flow from operations in the next 12-24 months. Leverage and interest coverage metrics that remain solid for the rating category precluded a further downgrade in the ratings. Moody's took these rating actions: -- Downgraded $20 million senior secured second lien term loan facility due 2011 to Caa2 from Caa1 (LGD 5 -- 80%) -- Downgraded corporate family rating to B3 from B2 -- Downgraded probability of default rating to B3 from B2 -- Affirmed $16.5 million senior secured first lien revolving credit facility due 2010, rated B1 (LGD 3- 32%) -- Affirmed $75 million senior secured first lien term loan facility due 2011, rated B1 (LGD 3- 32%) -- Affirmed $2.5 million senior secured first lien delayed draw term loan facility, rated B1 (LGD 3- 32%) The negative outlook anticipates weak profitability, continued high levels of accounts receivable and inventory and limited, if any, free cash flow from operations over the next year. The fourth calendar quarter is typically the strongest quarter for the company and absent good response rates to its marketing programs, Moody's expects that NAMG may breach financial covenants under its credit facility. The ratings could be downgraded if (i) profitability is below expectations in the seasonally strong fourth quarter of 2006; or , (ii) the company breaches its financial covenants and fails to get a timely waiver from the bank group. Sustained negative free cash flow generation due to increasing working capital requirements or increasing bad debt expense could also result in a downgrade. The outlook could be changed to stable if profitability and cash flow generation improve which result in adequate headroom under financial covenants. Free cash flow to debt that can be sustained in the 2%-5% range could support a stable outlook in the B3 rating category. Based in Minnetonka, Minnesota, NAMG is a club-based affinity marketing company. Reported revenues for the 12 month period ending Sept. 30, 2006 were about $224 million. NORTHEAST GENERATION: S&P Lifts Rating on $320 Mil. Bonds to BB- ---------------------------------------------------------------- Standard & Poor's Ratings Services raised the rating on Northeast Generation Co.'s $320 million first mortgage bonds to 'BB-' from 'B+' and removed the rating from CreditWatch with positive implications, where it had been placed on Sept. 20, 2006. The outlook is stable. At the same time, Standard & Poor's assigned its '1' recovery rating to the first mortgage bonds, indicating expectations of full recovery of principal in a payment default scenario. "The rating action reflects NE Energy's purchase of Northeast Utilities' (BBB/Stable/--) competitive generation assets, which includes NGC's assets, for $1.34 billion including the assumption of the first mortgage bonds," said Standard & Poor's credit analyst Kenneth L. Farer. NE Energy is a wholly owned subsidiary of NE Energy Holdings Inc., which, in turn, is indirectly owned by Energy Capital Partners I L.P. Regarding the recovery rating, NGC's balance sheet includes net utility plant of about $800 million (2.5x the amount of first mortgage bonds outstanding), and substantially all of NGC's assets secure its $320 million first mortgage bonds. The outlook is stable. Because NGC does not meet Standard & Poor's special-purpose entity, bankruptcy-remote criteria, NGC's outlook depends on NE Energy and NGC's purchase-power agreement with NE Energy Management. As such, Standard & Poor's could revise the outlook to negative if capacity pricing in New England or performance at Northfield Mountain or Mt. Tom is less than forecast or if NGC's DSCR falls below 1.5x. "However, we are unlikely to revise the outlook to positive, due to NE Energy's sizable refinancing risk, potential for NE Energy's debt service coverage to fall below 1x, and high reliance on Northfield Mountain for cash flow," said Mr. Farer. NORTEL NETWORKS: Secures $7.7 Million NRC Maintenance Contract -------------------------------------------------------------- Nortel Government Solutions(x), a company wholly owned by Nortel(x), has been selected by the U.S. Nuclear Regulatory Commission to operate and maintain its digital courtroom systems in Rockville, Maryland and Las Vegas, Nevada. Nortel Government Solutions will provide the services under an agreement estimated at $7.7 million over four years. The agreement also includes support for NRC hearings, as well as application development and testing. The systems were developed by Nortel Government Solutions and delivered to the NRC earlier this year. They provide electronic evidence presentation, digital audio and video transcripts, and electronic capture and display of evidence. This enables immediate electronic access to documents, and live video and audio feeds to ensure the widest possible public access to NRC proceedings. The digital courtroom systems are designed to help the NRC's Atomic Safety and Licensing Board Panel simplify proceedings ranging from routine cases to more complicated hearings involving nuclear reactor licenses. The Company says that one of the proceedings is the potential adjudication regarding a U.S. Department of Energy license application for a commercial nuclear reactor waste storage facility at Nevada's Yucca Mountain, located 100 miles northwest of Las Vegas, which is expected to last three to four years as mandated by Congress and could become one of the largest and most complex administrative hearings in U.S. history. The digital database available to the two courtrooms is capable of storing and providing electronic access to the millions of pages of evidence and thousands of hours of testimony that may accumulate. "These showcase systems integrate everything into one multimedia system with real-time access to information for all participants," Chuck Saffell, chief executive officer, Nortel Government Solutions, said. "Our operations and maintenance services will help the NRC to achieve and sustain the highest performance, efficiency, security and reliability from its electronic courtrooms." About Nortel Government Solutions Based in Fairfax, Virginia, Nortel Government Solutions -- http://www.nortelgov.com/-- is a network-centric integrator, providing the services expertise, mission-critical systems and secure communications that empower government to ensure the security, livelihood, and well being of its citizens. The company is a provider for solutions designed to improve workforce productivity, reduce operating costs, and streamline inter-agency communications. About Nortel Networks Headquartered in Ontario, Canada, Nortel Networks Limited (NYSE/TSX: NT) -- http://www.nortel.com/-- delivers technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband. Nortel does business in more than 150 countries. * * * As reported in the Troubled Company Reporter on July 10, 2006, Dominion Bond Rating Service confirmed the long-term ratings of Nortel Networks Capital Corporation, Nortel Networks Corporation, and Nortel Networks Limited at B (low) along with the preferred share ratings of Nortel Networks Limited at Pfd-5 (low). All trends are Stable. DBRS confirmed B (low) Stb Senior Unsecured Notes; B (low) Stb Convertible Notes; B (low) Stb Notes & Long-Term Senior Debt; Pfd- 5 (low) Stb Class A, Redeemable Preferred Shares; and Pfd-5 (low) Stb Class A, Non-Cumulative Redeemable Preferred Shares. As reported in the Troubled Company Reporter on June 20, 2006, Moody's Investors Service affirmed the B3 corporate family rating of Nortel; assigned a B3 rating to the proposed US$2 billion senior note issue; downgraded the US$200 million 6.875% Senior Notes due 2023 and revised the outlook to stable from negative. Standard & Poor's also affirmed its 'B-' long-term and 'B-2' short-term corporate credit ratings on the company, and assigned its 'B-' senior unsecured debt rating to the company's proposed $2 billion notes. The outlook is stable. NUTECH DIGITAL: Posts $399,002 Net Loss in 2006 Second Quarter -------------------------------------------------------------- NuTech Digital, Inc. reported a $399,002 net loss on $188,020 of sales for the second quarter ended June 30, 2006, compared with a $596,248 net loss on $299,252 of sales for the same period in 2005. At June 30, 2006, the company's balance sheet showed $2,496,373 in total assets and $3,334,558 in total liabilities, resulting in a $838,185 stockholders' deficit. The company's balance sheet at June 30, 2006, also showed strained liquidity with $659,730 in total current assets available to pay $2,549,398 in total current liabilities. Full-text copies of the company's second quarter financial statements are available for free at: http://researcharchives.com/t/s?144b Going Concern Weaver & Martin, LLC, of Kansas City, Mo., expressed substantial doubt about Nutech Digital, Inc.'s ability to continue as a going concern after auditing the company's Dec. 31, 2005 financial statements. The auditing firm pointed to the company's recurring losses from operations and the company's dependence upon the continued sale of its securities or obtaining debt financing for funds to meet its cash requirements. About Nutech Digital NuTech Digital, Inc. -- http://www.nutechdvd.com/-- is engaged in the business of producing popular music concerts and licensing and distributing general enertainment products, most of which are made available through digital versatile discs. The company's products include Japanese anime, late night programming, and general entertainment action adventure films. The company's products are principally sold through retail stores, the Internet and distributors. OWENS CORNING: Reorganization Cues S&P to Lift Default Rating ------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Owens Corning to 'BBB-' from 'D', after the building products company's emergence from bankruptcy on Oct. 31, 2006. All other ratings are affirmed. The outlook is stable. "Owens Corning's moderate financial policies and ability to generate meaningful free cash flow should permit it to perform in line with our expectations throughout the cycle," said Standard & Poor's credit analyst Pamela Rice. "We could revise the outlook to negative if the downturn in residential construction is worse than we currently expect or if insulation prices drop precipitously and the company is unable to offset weaker results with productivity or cost-saving measures. "A positive outlook would require an appreciable improvement in the company's business profile or a more conservative capital structure that would permit it to withstand severe downturns with stronger-than-currently expected credit metrics." Toledo, Ohio-based Owens manufactures building products and composite materials focused mainly in North America. Its primary businesses are insulation, roofing and asphalt, glass fiber reinforcement products, vinyl siding, and manufactured stone veneer. The company plans to form a reinforcements and composites joint venture with Compagnie de Saint-Gobain S.A. (BBB+/Negative/A-2), although Owens Corning will retain certain of its value-added fabricated products. The rating agency does not expect this transaction to affect ratings on Owens Corning. Owens Corning will own a majority (60%) stake in a larger business that has more geographic and end-market diversity than Owens' building products businesses. In addition, the benefits from potential rationalization and synergies at the combined venture should be a positive for the industry and for Owens Corning's profitability over the intermediate term. PERFORMANCE TRANSPORTATION: Files Stipulation on $7MM Yucaipa Loan ------------------------------------------------------------------ On October 27, 2006, Performance Transportation Services, Inc., and its debtor-affiliates filed with the U.S. Bankruptcy Court for the Western District of New York a stipulation governing their $7,000,000 postpetition financing agreement with Yucaipa American Alliance Fund I, LP, and Yucaipa American Alliance (Parallel) Fund I, LP. The Debtors note that the form of the stipulation has yet to be approved by Yucaipa. According to the Debtors, approval of the Stipulation will facilitate the negotiation and confirmation of a plan of reorganization and will maintain the value of their estates during the pendency of their cases. Among others, the Stipulation provides that on the Plan effective date, the Junior DIP Obligations will -- at the option of the Junior DIP Lenders in their sole absolute discretion -- be automatically exchanged into Voting Shares equal to a percentage of the total Voting Shares issued pursuant to the Plan. The option must be exercised within 10 days after the Court confirms the Plan. If the Junior DIP Lenders exercise the option, the Voting Shares will be allocated among the Junior DIP Lenders on a pro-rata basis based on the amount of Junior DIP Obligations outstanding at the time of conversion or on other basis as may be agreed to by the Junior DIP Lenders. The Debtors covenant not to: (a) incur, create, assume, suffer to exist or permit any other superpriority claim that is pari passu with or senior to the Junior DIP Superpriority Claims; (b) permit the aggregate amount of Capital Expenditures made at any time after the Initial Closing Date to exceed $9,050,000 on a cumulative basis; (c) permit the cumulative Consolidated EBITDA beginning on November 1, 2006, and ending in each case on the last day of each fiscal month to be less than: Period EBITDA ------ ------ November 2006 $7,596,000 December 2006 $8,933,000 (d) as of the last day of each calendar month from and after the Initial Closing Date, permit the cumulative monthly Revenue to be less than 90% of the Forecasted Revenue. Prior to the 26th day of each month, the Borrower will provide an updated calculation of its monthly cumulative Revenue through the prior month-end. The Junior DIP Commitment will terminate on the earliest of: * January 27, 2007; * the effective date of the Debtors' confirmed Plan of reorganization; * November 1, 2006, if the Court has not entered a final order approving the Junior DIP Facility by that date; * reversal or modification -- if not consented to by the Junior DIP Lenders -- of the order approving the Junior DIP Facility; or * at the Lenders' option, the occurrence of any event of default. In the event of default, the Junior DIP Agent may terminate the Junior DIP Commitments and declare the Junior DIP Loans, then outstanding, to be due and payable, together with accrued interest and any unpaid accrued fees and all other liabilities. Events of default include: (a) one or more judgments will be rendered against the Debtors as to any obligation arising after the Petition Date, which will not be effectively stayed, and: (i) is for an amount in excess of $500,000 in the aggregate not covered by insurance; or (ii) is for injunctive relief and could reasonably be expected to result in a Material Adverse Effect; (b) any security interest in Collateral that, individually or in the aggregate, is valued in excess of $100,000 purported to be created by any Junior DIP Security Document will cease to be valid; (c) any of the cases will be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code, a trustee under Chapter 7 or Chapter 11 will be appointed in any of the cases, and the appointment will not be reversed or vacated within 30 days; (d) claims for the return of goods shipped to the Parties prior to the Petition Date will be made under Section 546(h) for goods having an aggregate fair market value in excess of $50,000; (e) the Bankruptcy Court lifts the automatic stay to the holders of any security interest to permit foreclosure; (f) a plan of reorganization or liquidation other than the current Plan will be filed by any Party that does not provide for the indefeasible payment in full of the Obligations in cash or otherwise provide acceptable treatment to the Junior DIP Secured Parties, in the sole and absolute discretion of the Junior DIP Lenders; (g) any disruption or cessation of production at any of the Debtors' customers that contributes more than 5% to the annualized consolidated revenues of the Debtors, which will continue for 14 days or more; (h) any strike or work stoppage at any of the Debtors' customers that contributes more than 5% to the annualized consolidated revenues of the Debtors, which will continue for 14 days or more; (i) any announcement by any of the Debtors' customers relating to a future event that could be reasonably expected -- on a pro forma basis after giving effect to the event as if it occurred on the date of the announcement -- to result in the reduction by 5% or more of the annual consolidated revenues of the Debtors, and in each case, the Debtors fail to obtain replacement contracts or commitments of an equal or greater value within 60 days of the announcement; and (j) any of the Debtors seeks to sell assets with a value in excess of $500,000, which sale is not on terms and conditions acceptable to the Junior DIP Lenders, in their sole and absolute discretion. Yucaipa is represented in the Debtors' cases by Robert A. Klyman, Esq., and Gregory O. Lunt, Esq., at Latham & Watkins LLP, in Los Angeles, California. A full-text copy of the Junior DIP Facility Stipulation is available at no charge at http://researcharchives.com/t/s?1456 Committee Objects Representing the Official Committee of Unsecured Creditors, David Neier, Esq., at Winston & Strawn LLP, in New York, contends that the Junior DIP Facility locks the Debtors into a single path with Yucaipa as the acquirer of the Debtors, which may or may not maximize the value of the Debtors' businesses. If the loan is fully drawn, Yucaipa will receive an option to convert its postpetition debt into a 22% equity stake in the reorganized entity by the terms of the Junior DIP Facility. In addition, it is not expected that the Debtors will have to repay their principal and interest obligations under the Junior DIP Facility because the Loan terms provides that Yucaipa may convert obligations owing to it by the Debtors into equity of the reorganized entity. Mr. Neier also points out that the Stipulation limits the Debtors' reorganization options by hindering investors or bidders other than Yucaipa from offering a higher or better price for the Debtors' assets. The Stipulation provides that the terms of any sale of the Debtors' assets must be acceptable to Yucaipa. The provision has the chilling effect on competition, preventing any other investor from acquiring the Debtors' entire business. It represents a very effective blocking position for Yucaipa with respect to competitors for the Debtors' businesses. The Committee believes that it is premature for the Debtors to dedicate themselves to a single path towards reorganization to the exclusion of all others. Mr. Neier also notes that the Junior DIP Facility may be in conflict with certain of the terms of the Final Order approving the Senior DIP Facility with Credit Suisse, like the agreement among Credit Suisse, the Debtors and Committee to set aside 50% of the proceeds of avoidance actions for the benefit of general unsecured creditors. The proceeds of avoidance actions may represent the only source of recovery for general unsecured creditors, Mr. Neier adds. Moreover, under no circumstances should Yucaipa be granted liens in avoidance actions such that it could decide those avoidance actions that may or may not be pursued. Mr. Neier informs the Court that there are substantial potential avoidance actions -- presently estimated by the Committee to be more than $48,000,000 -- that are available against insiders of the Debtors. Having control of the insider avoidance actions effectively gives Yucaipa a sword of Damocles over the Debtors' board of directors, and an effective method in ensuring that the Board approves a plan of reorganization to Yucaipa's liking, Mr. Neier says. Based on information available to the Committee, it is unclear whether the Debtors will in fact be required to access the Junior DIP Facility to cash collateralize letters of credit or to meet general working capital needs. Mr. Neier says the Debtors' financial advisors have indicated to the Committee that the Debtors may be able to cover their financing needs based on their current cash flows and availability under the Senior DIP Facility, which remains undrawn. The concessions granted to Yucaipa as part of the Junior DIP Facility are simply too rich in comparison to the benefits that are being conferred upon the Debtors, Mr. Neier adds. Notwithstanding, the Committee is mindful that Yucaipa may provide an attractive opportunity for the Debtors. It is wise for the Debtors to obtain Yucaipa's commitment as a backstop in case liquidity under the Senior DIP Facility is insufficient for their purposes, Mr. Neier says. Should it ultimately turn out that the Junior DIP Facility was not absolutely necessary, but was drawn down nonetheless, then it will have been a very expensive proposition to grant Yucaipa the Conversion Option. The Committee also notes that certain provisions in the Stipulation require clarification or are unreasonable, inappropriate or otherwise objectionable, including: (a) The Stipulation provides that if one of the Yucaipa lending parties defaults upon its funding commitment, the other Yucaipa lending party is not required to advance funds in respect of the defaulting party's commitment. Mr. Neier notes that the Yucaipa parties are under common control and are closely related affiliates. They should not be permitted to build in such an "out." (b) The Stipulation accords Yucaipa a right of consultation with respect to negotiations between the Debtors and their labor unions. This is over-reaching. (c) Events of Default: -- The $50,000 threshold for Section 546 claims is too low, and the mere assertion of a claim should not trigger a default; -- It should only be an event of default if relief from stay is granted with respect to material assets of the Debtors. The provision does not contain an appropriate materiality qualifier; -- It should only be an event of default if a material claim under Section 506(c) is granted. The provision does not contain an appropriate materiality qualifier; and -- Circumstances involving the Debtors' customers are entirely out of the Debtors' control. (d) The Stipulation contains a blank with respect to the drop- dead date upon which the facility will expire. This information must be provided. (e) Yucaipa is permitted to assign the obligations and commitments under the Stipulation to one or more assignees of its choice. Given the inclusion of the Conversion Option and the concomitant right to acquire equity in the reorganized entity, the Debtors could find themselves stuck with a potential acquirer that may be unattractive for any number of reasons. At bottom, if Yucaipa is going to commit the Debtors to a future path, it should give its commitment to stay the course as well. Mr. Neier tells Judge Kaplan that the Debtors' request is perhaps the first step in a plan by the Debtors to hand over the company to Yucaipa in a debt for equity swap. However, no auction process is contemplated, and it appears that there is no process for developing an alternative plan or for dealing with other unsolicited offers. Moreover, he contends that there is no valuation available to creditors to determine if the plan is warranted. The Committee asks the Court not to tolerate a takeover by a secured junior creditor with no auction and valuation available to determine if the Debtors have maximized the value of their estates. Headquartered in Wayne, Michigan, Performance Transportation Services, Inc. -- http://www.pts-inc.biz/-- is the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America. The Company provides transit stability, cargo damage elimination and proactive customer relations that are second to none in the finished vehicle market segment. The company's chapter 11 case is administered jointly under Leaseway Motorcar Transport Company. Headquartered in Niagara Falls, New York, Leaseway Motorcar Transport Company Debtor and 13 affiliates filed for chapter 11 protection on Jan. 25, 2006 (Bankr. W.D.N.Y. Case No. 06-00107). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and Garry M. Graber, Esq., at Hodgson Russ LLP represent the Debtors in their restructuring efforts. David Neier, Esq., at Winston & Strawn LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and more than $100 million in debts. (Performance Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PERFORMANCE TRANSPORTATION: Withdraws Bonus Program Modifications ----------------------------------------------------------------- In the Disclosure Statement accompanying the Plan of Reorganization of Performance Transportation Services, Inc., and its debtor-affiliates, the Debtors disclose that at the Oct. 12, 2006 hearing, they withdrew their request to modify the performance incentive bonus program. The Debtors explain that the holders of the Second Lien Claims agreed to carve out of their recoveries incentive payments to Jeffrey Cornish, the Debtors' chief executive officer; Jack Stalker, the Debtors' chief financial officer; and John Richter, the Debtors' chief operating officer. Pursuant to a Management Incentive Program Term Sheet, the Eligible Participants will receive $1,754,000 in the aggregate. Actual allocation will be determined by the Debtors' board of directors prior to execution of definitive documentation. The MIP Payment will be paid in Cash to the extent the holders of Second Lien Claims vote as a class in favor of the Plan. In the event the Second Lien Claimants vote as a class to reject the Plan, the Eligible Participants will receive payment in kind, aggregating $1,754,000, based on the Second Lien Claimants' recoveries under the Plan. The MIP Payment is conditioned, among others, on the entry of a confirmation order by December 26, 2006. The amount will be paid on the Plan effective date. A full-text copy of the Debtors' Management Incentive Program Term Sheet is available at no charge at: http://researcharchives.com/t/s?1455 Headquartered in Wayne, Michigan, Performance Transportation Services, Inc. -- http://www.pts-inc.biz/-- is the second largest transporter of new automobiles, sport-utility vehicles and light trucks in North America. The Company provides transit stability, cargo damage elimination and proactive customer relations that are second to none in the finished vehicle market segment. The company's chapter 11 case is administered jointly under Leaseway Motorcar Transport Company. Headquartered in Niagara Falls, New York, Leaseway Motorcar Transport Company Debtor and 13 affiliates filed for chapter 11 protection on Jan. 25, 2006 (Bankr. W.D.N.Y. Case No. 06-00107). James A. Stempel, Esq., James W. Kapp, III, Esq., and Jocelyn A. Hirsch, Esq., at Kirkland & Ellis, LLP, and Garry M. Graber, Esq., at Hodgson Russ LLP represent the Debtors in their restructuring efforts. David Neier, Esq., at Winston & Strawn LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and more than $100 million in debts. (Performance Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) PEMBRIDGE SQUARE: Fitch Rates EUR16 Million Class H Notes at BB+ ---------------------------------------------------------------- Fitch has assigned ratings to Pembridge Square Finance Limited floating-rate credit-linked notes, which were issued on Oct. 19, 2006: -- EUR17,000,000 class A1 due 2041 'AAA'; -- EUR80,000,000 class A2 due 2041 'AAA'; -- EUR70,000,000 class B due 2041 'AA+'; -- EUR60,000,000 class C due 2041 'AA'; -- EUR50,000,000 class D due 2041 'AA-'; -- EUR40,000,000 class E due 2041 'A'; -- EUR25,000,000 class F due 2041 'A-'; -- EUR22,000,000 class G due 2041 'BBB'; -- EUR16,000,000 class H due 2041 'BB+'; Pembridge Square Finance Limited is a fully managed synthetic CDO that references a EUR2.0 billion diversified portfolio. The portfolio consists of primarily investment grade corporate obligations referenced via direct investments (50% of the total referenced amount) and through 10 inner tranche credit default swaps (35% of the total referenced amount) as well as of various investment grade ABS (15% of the total referenced amount). The transaction is designed to provide credit protection for realized losses on the reference portfolio through a master credit default swap between the issuer and the swap counterparty, KBC Investments Cayman Islands V, Ltd. The legal maturity date of the CDS is January 2041, but this trade is scheduled to amortize on or after January 2017. The rating of the notes addresses the likelihood that investors will receive full and timely payments of interest and ultimate receipt of principal by the scheduled maturity date. Pembridge Square provides protection to the swap counterparty via a CDS that is collateralized with the issuance proceeds of the notes. The issuer will enter into a guaranteed investment contract agreement with KBC Investments Hong Kong Limited (guaranteed by KBC Bank NV), which will allow it to redeem collateral at the purchase price of the principal amounts on the maturity date. Under the GIC agreement, the issuer will pay to the GIC counterparty an amount equal to the net proceeds of issuance of the notes to be used for the purchase of the collateral. Pembridge Square pays the swap counterparty for any losses due to credit events experienced in the portfolio above the first loss amount for each class up to the balance on the notes by liquidating collateral. Any reference obligations in the portfolio can be traded at the discretion of the portfolio swap counterparty, KBC, subject to trading guidelines and portfolio criteria restrictions. While KBC bears no fiduciary responsibility to noteholders, the capital structure of the transaction aligns interests of the portfolio manager with those of the investors through an exclusively subordinate management fee and equity holdings, among other features. The ratings are based upon the structure of the issuer, the financial strength and abilities of KBC as the portfolio swap counterparty, and KBC Bank NV as GIC guarantor. PREMIER ENTERTAINMENT: Taps Byrd & Wiser as Bankruptcy Counsel -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Mississippi, gave Premier Entertainment Biloxi, LLC, dba Hard Rock Hotel & Casino Biloxi and its debtor-affiliates, authority to employ Byrd & Wiser, as their bankruptcy counsel. Byrd & Wiser is expected to assist the Debtors in all aspects concerning their chapter 11 proceedings. The Debtors' application did not disclose the firm's compensation rates. Robert Alan Byrd, Esq., at Byrd & Wiser, assures the Court that his firm does not hold any interest adverse to the Debtors' estate. Headquartered in Biloxi, Mississippi, Premier Entertainment Biloxi LLC, dba Hard Rock Hotel & Casino Biloxi -- http://www.hardrockbiloxi.com/-- owns and operates hotels. The Company filed for chapter 11 protection on Sept. 19, 2006 (Bankr. S.D. Ms. Case No. 06-50975). 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 $252,862,215 and debts of $226,069,921. PURE FISHING: Moody's Assigns Loss-Given-Default Ratings -------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. consumer products sector, the rating agency confirmed its B1 Corporate Family Rating for Pure Fishing, Inc. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $160M first lien senior secured term loan due 2010 B1 Ba3 LGD3 39% $45M first lien sr. sec. revolving credit facility due 2009 B1 Ba3 LGD3 39% $35M second lien sr. sec. term loan due 2011 B2 B3 LGD5 87% Moody's explains that 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 will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's 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% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Sprit Lake, Iowa, Pure Fishing, Inc. offers a comprehensive line of products for the global fishing tackle market, including fishing line, rods, baitcast and spinning reels, and artificial bait. Products are sold to mass merchandisers, sporting good retailers, catalogs, and wholesalers. PURE MORTGAGES: Moody's Affirms Ba2 Rating on $23-Mil. Notes ------------------------------------------------------------ Moody's Investors Service upgraded the ratings of two classes and affirmed the ratings of five classes of Pure Mortgages 2004: -- Class A+, $45,547, Floating Rate, affirmed at Aaa -- Class A, $52,100,000, Floating Rate, affirmed at Aaa -- Class B, $26,050,000, Floating Rate, affirmed at Aaa -- Class C, $28,650,000, Floating Rate upgraded to Aa1 from Aa3 -- Class D, $13,050,000, Floating Rate upgraded to A1 from A2 -- Class E, $29,950,000, Floating Rate affirmed at Baa2 -- Class F, $23,500,000, Floating Rate affirmed at Ba2 As of the August 15, 2006 distribution date, the transaction's aggregate bond balance has decreased by approximately 65.8% to $355.9 million from $1 billion at securitization. The Certificates are credit-linked to a reference pool of commercial mortgage loans originated by various divisions of HSH Nordbank AG. Since securitization, 27 of the loans in the reference pool have paid off, leaving 14 loans remaining in the pool. The loans range from less than 1% to 12.1% of the pool, with the top five loans representing 56.4% of the outstanding pool balance. Moody's was provided with year-end 2005 operating results for 100% of the pool. Moody's weighted average loan to value ratio for the reference pool is 69.2%, compared to 71.3% at Moody's last full review in May 2006 and compared to 76.2% at securitization. Moody's is upgrading Classes C and D due to increased credit support from loan payoffs and amortization and the improved overall quality of the reference pool. The three largest loans represent 35.4% of the reference pool. I The largest loan is the 1325 Avenue of the Americas Loan ($43.2 million - 12.1%), which represents a 24.4% share in a syndicated loan secured by a 798,000 square foot Class A office building located in midtown Manhattan, New York. The property is 100.0% occupied, compared to 96.6% at securitization. The loan has amortized by approximately 3.8% and matures in February 2014. Moody's LTV is 55.9%, compared to 71% at last review. II The second largest loan is the 410 Park Avenue Loan ($42.8 million - 12%), which represents a 64.3% share in a syndicated loan secured by a 228,700 square foot office building located in midtown Manhattan, New York. The property is 98.5% occupied, compared to 99.4% at securitization. The property's financial performance has been impacted by an increase in expenses. The loan has amortized by approximately 2.6% and matures in June 2008. Moody's LTV is 85.5%, compared to 76.2% at last review. III The third largest loan is the 712 Fifth Avenue Loan ($40 million -- 11.2%), which represents a 27.3% share in a syndicated loan secured by a 543,200 square foot office building located in midtown Manhattan, New York. The property is 97% occupied, compared to 95.8% at securitization. The loan has amortized by approximately 1.5% and matures in June 2013. Moody's LTV is 64.4%, compared to 63.4% at last review. Moody's current shadow rating is Baa2, the same as at last review. The pool's collateral is a mix of office, multifamily and retail. The collateral properties are located in seven states and Washington, D.C. with a concentration in New York (52.2%) and California. REEDS INC.: Posts $587,238 Net Loss in 2006 Second Quarter ---------------------------------------------------------- Reeds, Inc., reported a $587,238 net loss on $3,157,818 of sales for the second quarter ended June 30, 2006, compared with a $58,048 net loss on $2,582,273 of sales for the same period in 2005. At June 30, 2006, the company's balance sheet showed $5,124,380 in total assets and $5,502,966 in total liabilities, resulting in a $378,586 stockholders' deficit. The company's balance sheet as of June 30, 2006, also showed strained liquidity with $2,425,649 in total current assets available to pay $4,266,040 in total current liabilities. Full-text copies of the company's second quarter financial statements are available for free at: http://researcharchives.com/t/s?1447 Going Concern Doubt Weinberg & Company, P.A., expressed substantial doubt about Reeds, Inc.'s ability to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the company's loss of $825,955, negative cash flow from operating activities of $42,610 during the year ended Dec. 31, 2005, and working capital deficiency of $1,594,758 as of Dec. 31, 2005. About Reeds Reeds, Inc. -- http://www.reedsgingerbrew.com/-- develops, manufactures, markets, and sells natural non-alcoholic and "New Age" beverages, candies and ice creams. "New Age Beverages" is a category that includes natural soda, fruit juices and fruit drinks, ready-to-drink teas, sports drinks and water. REFCO INC: Court Gives Final Okay on Amended Disclosure Statement ----------------------------------------------------------------- The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York has issued a final written order approving Refco Inc. and its debtor-affiliates' Disclosure Statement, as modified, with respect to its First Amended Plan of Reorganization. Judge Drain found that the Disclosure Statement contains "adequate information" as that term is defined in Section 1125 of the Bankruptcy Code. Judge Drain ruled that the Disclosure Statement may be amended and modified from time to time to incorporate immaterial modifications, fill in blanks, and reflect any modifications that the Debtors determine to be appropriate, which do not materially change the Disclosure Statement or affect any rights of a party- in-interest All objections, to the extent not withdrawn or resolved, are overruled. The Debtors are authorized and empowered to take all steps and perform acts as may be necessary to implement and effectuate the Disclosure Statement Order. Amended Disclosure Statement As reported in the Troubled Company Reporter on Oct. 11, 2006, the Debtors filed with the Court their Amended Plan of Reorganization and accompanying Disclosure Statement, with Marc Kirschner, the Chapter 11 trustee for Refco Capital Markets, Ltd.; the Official Committee of Unsecured Creditors; and the Additional Committee of Unsecured Creditors as co-proponents. The Amended Plan contemplates that on or prior to the effective date of the plan, the RCM Chapter 11 Case will be converted to a case under subchapter III of Chapter 7 of the Bankruptcy Code, unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate to be administered under Chapter 11. In the event of a conversion to Chapter 7, the Plan will constitute a settlement and compromise between the RCM Estate and the Debtors' Estates, on one hand, and among the Estates of the various Debtors and certain creditors, on the other hand, for which approval is sought simultaneously with the confirmation of the Plan. Creditor Recovery Under Amended Plan The Amended Plan separately classifies Claims against and Interests in: * Refco and its 24 affiliates -- Contributing Debtors, * Refco Capital, Markets, Ltd., and * Refco F/X Associates, LLC. Administrative and Priority Tax Claims against the Contributing Debtors, RCM, and FXA are not classified under the Plan. Administrative and Priority Tax Claims will be paid in full in cash. The Amended Plan groups Claims against and Interest in the Contributing Debtors into eight classes: Estimated Estimated Class Description Claim Amount % Recovery ----- ----------- ------------ ---------- 1 Non-Tax Priority Claims $3,000,000 100.0% 2 Other Secured Claims $700,000 100.0% 3 Secured Lender Claims $704,000,000 100.0% 4 Sr Subordinated Note Claims $397,400,000 83.4% 5(a) Contributing Debtors Gen. Unsecured Claims $522,700,000 23.0% 5(b) Related Claims - 0.0% 6 RCM Intercompany Claims - N/A 7 Subordinated Claims - 0.0% 8 Old Equity Interests - 0.0% The Class 3 Secured Lender Claims against the Contributing Debtors will be allowed and paid to the extent provided in the Early Payment Order. RCM will be entitled to an additional Claim if, at the conclusion of the claims reconciliation process: (x) the total Allowed Contributing Debtors General Unsecured Claims are less than $394,000,000; and (y) the Distributions to be made to Holders of Allowed Contributing Debtors General Unsecured Claims would result in a recovery for the Holders in excess of 35% from the sum of the Contributing Debtors Distributive Assets and the Contributing Debtors' portion of the RGL FXCM Distribution. Specifically, RCM will be entitled to an additional Claim equal to the positive difference between $394,000,000 minus the amount of the Allowed Contributing Debtors General Unsecured Claims. The Additional RCM Claim will participate pro rata in all Distributions from Contributing Debtors Distributive Assets and the Contributing Debtors' portion of the RGL FXCM Distribution to Holders of Allowed Contributing Debtors General Unsecured Claims that exceed the 35% recovery threshold. The Additional RCM Claim, however, will not be subject to the 40% limit on Distributions set forth in the Contributing Debtors General Unsecured Claim Distribution. The Amended Plan groups Claims against FXA into seven classes: Estimated Estimated Class Description Claim Amount % Recovery ----- ----------- ------------ ---------- 1 FXA Non-Tax Priority Claims $165,000 100.0% 2 FXA Other Secured Claims $120,000 100.0% 3 FXA Secured Lender Claims $704,000,000 N/A 4 FXA Sr Sub. Note Claims $397,400,000 N/A 5(a) FXA Gen. Unsecured Claims $140,700,000 to $180,700,000 35.0% 5(b) Related Claims - 0.0% 6 FXA Convenience Claims $12,500,000 40.0% 7 FXA Subordinated Claims - 0.0% The Amended Plan provides that Class 5(a) FXA General Unsecured Claims less than or equal to $10,000, or greater than $10,000 but, with respect to which, Holder voluntarily reduces the Claim to $10,000, will be treated as Class 6 FXA Convenience Claims. The aggregate amount of Distributions to Class 6 FXA Convenience Claims is limited to $5,000,000. To the extent that the amount of Class 5(a) FXA General Unsecured Claims electing to receive a Class 6 FXA Convenience Claim causes the aggregate amount to exceed the cap, the Holders of Claims permitted to elect the treatment will be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest claim being selected thereafter until the cap is reached. The ranges of claims and recoveries for Holders of FXA General Unsecured Claims are subject to material deviations and may be significantly lower due to: (i) alleged administrative expenses incurred in trading activity post-bankruptcy; and (ii) a dispute with a related entity in Japan concerning ownership of a significant portion of FXA cash. FXA has commenced a turnover action against Japan KK to require it to turn certain cash assets over to FXA. The Amended Plan groups RCM Claims into seven classes: Estimated Estimated Class Description Claim Amount % Recovery ----- ----------- ------------ ---------- 1 RCM Non-Tax Priority Claims $90,000 100.0% 2 RCM Other Secured Claims $110,400,000 100.0% 3 RCM FX/Unsecured Claims $985,600,000 37.6% 4 RCM Securities Customer Claims $2,793,800,000 85.4% 5 RCM Leuthold Metals Claims $15,600,000 100.0% 6 Related Claims - 0.0% 7 RCM Subordinated Claims - 0.0% Holders of Allowed Related Claims will be subordinated and will receive no Distribution unless all Holders of Allowed RCM FX/Unsecured Claims, Allowed RCM Securities Customer Claims and Allowed RCM Leuthold Metals Claims have been paid in full. To the extent that a Non-Debtor Affiliate has an Intercompany Claim against RCM, the Claim will be resolved by: (a) the netting of the Claim against any Claim held by the Contributing Debtors or RCM against the Non-Debtor Affiliate; or (b) to the extent that a distribution is made by RCM on account of the Claim, the Contributing Debtors will reimburse RCM for payments from any amounts the Contributing Debtors receive directly or indirectly from any Non-Debtor Affiliate. Holders of Claims under these classes are impaired and entitled to vote on the Amended Plan: -- Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims, Class 5(b) Related Claims and Class 6 RCM Intercompany Claims, against one or more of the Contributing Debtors; -- Class 4 FXA Senior Subordinated Note Claims, Class 5(a) FXA General Unsecured Claims, Class 5(b) Related Claims, and Class 6 FXA Convenience Claims, against FXA; and -- Class 3 RCM FX/Unsecured Claims, Class 4 RCM Securities Customer Claims, Class 5 Leuthold Metals Claims and Class 6 Related Claims, against RCM. BAWAG Proceeds Allocation On October 5, 2006, the Court approved a partial allocation of the proceeds of a settlement agreement among the Debtors, the Creditors Committee and BAWAG P.S.K. Bank fur Arbeit und Wirtschaft und Osterreichische Postsparkasse Aktiengesellschaft. The BAWAG Allocation Order provides that $100,000,000 of the BAWAG Guaranteed Proceeds was indefeasibly allocated to Refco Group Ltd., LLC, for payment to the Senior Secured Lenders. The consideration given by BAWAG, aside from the $100,000,000 already earmarked for RGL, will be allocated this way: * $150,000,000 will be allocated to the Contributing Debtors for payment to the Holders of Senior Subordinated Note Claims; * $56,250,000 -- plus 100% of up to $150,000,000 in the form of the BAWAG Contingent Payment -- will be allocated to the Contributing Debtors for payment to the Holders of Allowed Contributing Debtors General Unsecured Claims; * $200,000,000 will be allocated to RCM for payment to the Holders of RCM Securities Customer Claims and RCM FX/Unsecured Claims; and * the value of each release granted by BAWAG in favor of each of the Debtors and RCM would be allocated to each of the Debtors and RCM, as applicable, without any resulting transfer of Cash or other Distribution. On September 21, 2006, BAWAG wired $337,500,000 to the Debtors and $337,500,000 to the U.S. government. The Debtors expect to receive $168,700,000 of the amount transferred by BAWAG to the U.S. government prior to confirmation of the Plan. The BAWAG Settlement Agreement provides that: -- any creditor who voluntarily elects to receive any portion of the BAWAG Proceeds must release BAWAG from all claims or actions arising from or related to the Debtors; and -- any portion of the BAWAG Proceeds that would have been allocated to any creditor that elects not to provide the required release must be returned to BAWAG. The Amended Plan provides that Holders of Allowed Claims against the Contributing Debtors and RCM can, if they affirmatively elect, opt out of the BAWAG settlement and thereby return their share of BAWAG Proceeds to BAWAG in lieu of agreeing to release BAWAG from liability. Opting out, however, will significantly reduce the aggregate recoveries to be received by the Creditors under the Plan: Estimated Plan Estimated Plan Recovery With Recovery Minus Creditor Class BAWAG Proceeds BAWAG Proceeds -------------- -------------- -------------- Senior Subordinated Note Claims 83.4% 45.7% Contributing Debtors General Unsecured Claims 23.0% 12.2% RCM Securities Customer Claims 85.4% 80.6% RCM FX/Unsecured Claims 37.6% 30.9% $140,000,000,000 Claim Pile As of September 29, 2006, the Debtors' claims agent, Omni Management Group, LLC, had received approximately 14,000 timely filed proofs of claim in the Debtors' Chapter 11 cases asserting more than $140,000,000,000 in the aggregate, not including claims asserted in unliquidated amounts. The Debtors and their professionals have been engaged in the process of evaluating the proofs of claim to determine whether objections seeking disallowance, reclassification or reduction of certain asserted claims should be filed. The Debtors expect to seek disallowance of approximately $130,000,000,000 of the claims. Administration of Refco Estates The Joint Sub-Committee of the Official Creditors Committees will designate an entity to serve as Plan Administrator for both Reorganized Refco and Reorganized FXA. The Joint Sub-Committee will also select a trustee for the Litigation Trust to be established under the Plan. The Litigation Trust will be structured in a manner that provides for a senior Tranche A and a junior Tranche B. No Distributions of Litigation Trust Interests will be made in respect of Tranche B until Tranche A has been fully and indefeasibly paid. However, Holders of Allowed Old Equity Interests may receive recoveries directly from 10% of the IPO Underwriter Claims Recovery in Tranche A. The Litigation Trust will have an initial five-year term, which may be extended for one or more one-year terms. The Trust may be terminated earlier than its scheduled termination if: -- the Bankruptcy Court has entered a final order closing all of or the last of the Chapter 11 cases and the RCM Chapter 11 case to the extent the RCM Chapter 11 case was converted to Chapter 7; and -- the Litigation Trustee has administered all the Trust assets and performed all other duties required under the Plan. The RCM Trustee will retain his rights, powers and duties necessary to carry out his responsibilities with respect to the RCM Estate. The Court will convene a hearing on October 16, 2006, at 10 a.m., to consider whether the Amended Disclosure Statement contains adequate information within the meaning of Section 1125 of the Bankruptcy Code. Objections, if any, are due by October 9. A blacklined copy of the Debtors' Amended Disclosure Statement is available for free at http://ResearchArchives.com/t/s?132f About Refco Inc. Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). Refco Commodity Management, Inc., formerly known as CIS Investments, Inc., a debtor-affiliate of Refco Inc., filed for chapter 11 protection on Oct. 16, 2006 (Bankr. S.D.N.Y. Case No. 06-12436). (Refco Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). REFCO INC: Court Sets December 15 Joint Plan Confirmation Hearing ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York set Dec. 15, 2006, at 10:00 a.m., as the hearing to consider confirmation of the First Amended Joint Plan of Reorganization filed by Refco Inc. and its debtor-affiliates; the Official Committee of Unsecured Creditors of Refco and the Additional Committee; and Marc Kirschner, the Chapter 11 Trustee for Refco Capital Markets, Ltd. The Confirmation Hearing may be continued from time to time by announcing it in open court, without further notice to parties- in-interest. The Court also set: * December 1, 2006, at 4:00 p.m., as the deadline for filing and serving objections to Plan confirmation; * November 20, 2006, at 4:00 p.m., as the deadline for filing and serving objections to claims solely for purposes of voting on the Plan, which deadline will not apply to Claims Objections that may be asserted for purposes other than voting on the Plan; * December 5, 2006, at 4:00 p.m., as the deadline for filing and serving motions pursuant to Rule 3018(a) of the Federal Rules of Bankruptcy Procedure seeking temporary allowance of claims for voting purposes; and * December 8, 2006, at 5:00 p.m., as the deadline for submitting ballots to Financial Balloting Group LLC, the Debtors' special voting agent. Claimholders whose claims are subject to an objection that was served after the Claims Objection Deadline will not be subject to the Rule 3018(a) Motion Deadline. Pursuant to Sections 105(a) and 502(a) of the Bankruptcy Code, any claim as to which an objection has been filed before the Claims Objection Deadline will be ineligible to vote on the Plan, and that claim will not be counted in determining whether the Section 1126(c) requirements have been met with respect to the Plan: (i) unless the claim has been temporarily allowed for voting purposes pursuant to Rule 3018(a); or (ii) except to the extent that the objection to that claim has been resolved in favor of the creditor asserting the claim. Holders of claims in Contributing Debtors Classes 4, 5(a), 5(b) and 6; FXA Classes 4, 5(a), 5(b) and 6; and RCM Classes 3, 4, 5, 6, 7 and 8 are impaired and entitled to vote on the Plan. Failure of a claimholder to timely deliver a properly executed Ballot will be deemed to constitute an abstention by that holder with respect to voting on the Plan, and that abstention will not be counted as a vote for or against the Plan. The Honorable Robert D. Drain fixed Oct. 16, 2006, as the record date for purposes of determining creditors and equity holders entitled to receive Solicitation Packages and related materials, if any; and creditors entitled to vote to accept or reject the Plan and elect certain treatment. Judge Drain directed the Debtors to mail to all of their known creditors, the Senior Subordinated Note Indenture Trustee and equity security holders as of the Record Date, and all other entities required to be served under Rules 2002 and 3017, notice of, inter alia, the Confirmation Hearing, within Oct. 25, 2006. Furthermore, Judge Drain ruled that each Senior Subordinated Note Claimholder will receive BAWAG Proceeds as a component of its pro rata share of the Senior Subordinated Note Holder Distribution, unless that Noteholder opts out of the BAWAG Settlement. Only the Senior Subordinated Note Claimholders who vote to reject the Plan will be eligible to elect not to receive Senior Subordinated Note Holder BAWAG Proceeds. Election by any Senior Subordinated Note Claimholder who votes to accept the Plan will be disregarded. Holders of Class 3 RCM FX/Unsecured Claims and Class 4 RCM Securities Customer Claims under the Plan will be deemed to have agreed to: (i) assign their RCM Related Claims against the Debtors to the Litigation Trust; (ii) affirm their understandings that their RCM Related Claims against any Contributing Non-Debtor Affiliate will be subordinated pursuant to the Plan, as of each applicable Contributing Non-Debtor Affiliate Trigger Date, to all other existing claims against and equity interests in the applicable Contributing Non-Debtor Affiliate; and (iii) release the Secured Lenders from the Secured Lender Released Claims, if any, unless the holders elect not to accept that treatment. The Ballots for Class 6 FXA Convenience Claims, Class 6 RCM FX/Unsecured Convenience Claims and Class 7 RCM Securities Customer Convenience Claims will contain the same Ballot elections as the Ballots for Class 5(a) FXA General Unsecured Claims, Class 3 RCM FX/Unsecured Claims, and Class 4 RCM Securities Customer Claims. However, the Ballot elections made on a particular Convenience Class Ballot will be effective only if Convenience Class treatment is denied to the claimant making the Ballot elections due to oversubscription of the applicable Convenience Class. Parties-in-interest are entitled to request that the Debtors demonstrate cause for any instance in which: (a) a Ballot was withdrawn; (b) a vote was changed by the filing of a superseding Ballot; or (c) the Voting Deadline was extended. The deadline for filing and serving a Request for Cause will be December 14, 2006, at 12:00 noon. Notwithstanding Local Rule 3018-1(b), the Debtors' voting agents will serve by December 12, 2006, notice to any claimholder who is permitted to make an election with respect to a claim treatment, but whose election is deemed ineffective or otherwise is not counted. About Refco Inc. Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). Refco Commodity Management, Inc., formerly known as CIS Investments, Inc., a debtor-affiliate of Refco Inc., filed for chapter 11 protection on Oct. 16, 2006 (Bankr. S.D.N.Y. Case No. 06-12436). (Refco Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). REFCO INC: Court Provides Clarification on Nov. 15 Claims Bar Date ------------------------------------------------------------------ The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York clarified that in the case of Refco Capital Markets Ltd., the bar date for administrative claims will apply whether RCM is being administered in Chapter 11 or Chapter 7 of the Bankruptcy Code. The Bankruptcy Court previously set November 15, 2006, as the deadline for filing administrative expense payment requests in Refco Inc. and its debtor-affiliates' chapter 11 cases. The Court also set a subsequent Administrative Bar Date for claims that accrue from November 1, 2006, through the effective date of the Debtors' Chapter 11 Plan of Reorganization. That deadline will be on the 30th calendar day following the Plan Effective Date. Judge Drain ruled that these claims do not require filing of Administrative Expense Payment Requests on or before the Administrative Bar Dates: -- postpetition claims of professionals retained in the Debtors' cases for compensation for postpetition fees and Expenses; -- postpetition claims based on goods or services provided in the ordinary course of business, which are paid or remain payable according to typical and customary business terms. Failure to file requests for payment of Ordinary Course of Business Claims by the Administrative Bar Dates will not bar payment of claims in the ordinary course of business. Judge Drain further ruled that the Ad Hoc Committee of Equity Security Holders, Bank of America, N.A., and the Debtors' prepetition secured lenders under the August 2004 credit agreement are exempted from the Initial Administrative Bar Date. Man Financial Inc. will have until November 27, 2006, to file all of its Administrative Expense Payment Requests. Any Administrative Expense Claimholder against the Debtors who is required, but fails to file an Administrative Expense Payment Request on or before the Administrative Bar Dates or the date, as to Man, will: (i) be forever barred, estopped, and permanently enjoined from asserting Administrative Expense Claim against the Debtors, their successors, or their property; and (ii) not be entitled to receive further notices regarding the Administrative Expense Claims. About Refco Inc. Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). Refco Commodity Management, Inc., formerly known as CIS Investments, Inc., a debtor-affiliate of Refco Inc., filed for chapter 11 protection on Oct. 16, 2006 (Bankr. S.D.N.Y. Case No. 06-12436). (Refco Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SALOMON BROTHERS: Moody's Ratings on 3 Cert. Classes Slides to C ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of three classes, affirmed the ratings of six classes and downgraded the ratings of four classes of Salomon Brothers Mortgage Securities VII, Inc., Commercial Mortgage Pass-Through Certificates, Series 2000-C2: Class A-2, $452,975,589, Fixed, affirmed at Aaa Class X, Notional, affirmed at Aaa Class B, $33,214,000, Fixed, upgraded to Aaa from Aa1 Class C, $33,215,000, Fixed, upgraded to A1 from A2 Class D, $7,815,000, Fixed, upgraded to A2 from A3 Class E, $11,723,000, Fixed, affirmed at Baa1 Class F, $13,677,000, Fixed, affirmed at Baa2 Class G, $9,769,000, WAC, affirmed at Baa3 Class J, $13,677,000, Fixed, affirmed at B3 Class K, $5,861,000, Fixed, downgraded to Caa2 from Caa1 Class L, $5,861,000, Fixed, downgraded to C from Caa2 Class M, $8,792,000, Fixed, downgraded to C from Caa3 Class N, $2,833,398, Fixed, downgraded to C from Ca As of the October 18, 2006 distribution date, the transaction's aggregate certificate balance has decreased by approximately 20.6% to $620.9 million from $781.5 million at securitization. The Certificates are collateralized by 164 mortgage loans ranging in size from less than 1% to 4.8% of the pool, with the top 10 loans representing 28.8% of the pool. Thirty loans, representing 22.4% of the pool, have defeased and have been replaced with U.S. Government securities. Six loans have been liquidated from the pool resulting in aggregate realized losses of approximately $9 million. Six loans, representing 6.6% of the pool, are currently in special servicing. The largest specially serviced loan is Diamond Point Plaza, which is discussed below. Moody's has estimated aggregate losses of approximately $13.3 million for all of the specially serviced loans. Thirty seven loans, representing 19.7% of the pool, are on the master servicer's watchlist. Moody's was provided with year-end 2005 operating results for 98.7% of the performing loans. Moody's loan to value ratio is 92.6%, compared to 95.5% at Moody's last full review in February 2005 and compared to 84.2% at securitization. Moody's is upgrading Classes B, C and D due to increased credit support, defeasance and stable overall pool performance. Class B was upgraded on Aug. 2, 2006 and placed on review for further possible upgrade based on a Q tool based portfolio review. Moody's is downgrading Classes K, L, M, and N due to realized and expected losses from the specially serviced loans. Class P has been eliminated in its entirety due to losses and Class N has sustained approximately $4.1 million in losses. The top four non-defeased loans represent 12.4% of the pool. I The largest loan is the 1615 Poydras Street Loan ($27.7 million - 4.5%), which is secured by a 502,000 square foot office building located in the Warehouse District of New Orleans, Louisiana. Damage from Hurricane Katrina has been repaired and the property is fully operational. The largest tenant is FM Services Company, which occupies 61% of the premises under a lease that expires in April 2011. The property is 89% leased, compared to 90.4% at last review. Moody's LTV is 91.2%, compared to 76.4% at last review. II The second largest loan is the Western Plaza II Loan ($17.9 million - 2.7%), which is secured by a 343,000 square foot strip shopping center located in Mayaguez, Puerto Rico. The center is anchored by Sam's Club, Caribbean Cinemas and Pep Boys. The center is also shadow anchored by a Super Kmart. The property has maintained a stable occupancy since securitization and is currently 98.6% leased. Moody's LTV is 80.2%, compared to 83.1% at last review. III The third largest loan is the Red Lion Shopping Center Loan ($16.1 million - 2.6%), which is secured by a 218,000 retail center located 10 miles northeast of downtown Philadelphia, Pennsylvania. The property is anchored by Best Buy, Staples and Pep Boys. The property is currently 67.0% occupied, compared to 100.0% at last review. The decline in occupancy is due to the 2005 lease expiration of two tenants. The loan is on the master servicer's watchlist due to declines in occupancy and a low debt service coverage ratio. Moody's LTV is in excess of 100%, compared to 88.6% at last review. IV The fourth largest loan is the Diamond Point Plaza Loan ($14.6 million - 2.4%), which is secured by a 251,000 retail center located in suburban Baltimore, Maryland. The loan was transferred to special servicing in June 2002 and became REO in March 2006. The loan was transferred due to the unexpected vacancy of Sam's Club which went dark in 2002 although it continues to pay rent (56% GLA; lease expiration January 2009). Ames, formerly the second largest tenant, also vacated its space prior to its lease expiration. The property is currently 67% leased but only 5.5% occupied. The Trust was awarded a $22.8 million judgment against the borrower and its affiliates in December 2005 and successfully won the appeal in Sept. 2006, defeating the debtors' attempts to have the judgment overturned. Moody's anticipates a significant loss upon the resolution of this loan, although the loss could be partially or substantially mitigated if the special servicer is successful in its efforts to collect on the judgment. The pool collateral is a mix of office, U.S. Government securities, retail, industrial and self storage, multifamily, lodging, and healthcare. The collateral properties are located in 39 states and Puerto Rico. SMALL WORLD: Posts $4.9 Million Net Loss in 2006 Second Quarter --------------------------------------------------------------- Small World Kids, Inc. reported a $4,946,290 net loss on $5,461,958 of sales for the quarter ended June 30, 2006, compared to a $1,804,979 net loss on $6,164,399 of sales for the same period in 2005. At June 30, 2006, the company's balance sheet showed $21,949,207 in total assets, $20,492,009 in total liabilities, and $1,457,198 in total stockholders' equity. Additionally, the company's accumulated deficit worsened to $19,485,784 as of June 30, 2006. Going Concern Stonefield Josephson, Inc. of Los Angeles, Calif., expressed substantial doubt about Small World Kids, Inc.'s ability to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the company's principal debt obligations of $4.7 million due in 2006, significant net losses since inception, as well as the company's accumulated deficit of $10 million and cash used for operating activities during the year ended Dec. 31, 2005, amounting to $2.7 million. About Small World Headquartered in Nevada, Small World Kids, Inc., -- http://www.smallworldkids.net/-- formerly known as SavOn Team Sports, Inc., acquired Fine Ventures, LLC, a Nevada limited liability company, and Small World Toys, a California corporation in May 2004. The company is now a holding company and has no significant business operations or assets other than their interest in Small World Toys. Fine Ventures LLC is a wholly owned subsidiary with no business operations or assets. Since the acquisition of Small World Toys, the company has been engaged in the development, manufacturing, marketing and distribution of educational and developmental toys. In September 2004, Small World Toys acquired certain assets of Neurosmith LLC including electronic learning and related intellectual property, prototypes, models, chips and miscellaneous assets. On June 24, 2005, the company acquired certain assets of Imagiix LP including intellectual property and miscellaneous assets. STRUCTURED ASSET: Fitch Downgrades Ratings on Five Cert. Classes ---------------------------------------------------------------- Fitch downgrades five and affirms 15 classes of Structured Asset Securities Corp. residential mortgage-backed certificates: Series 2001-8A Pools 1-3 -- Classes 1A, 2A, 3A affirmed at 'AAA'; -- Classes B1-I, B1-IX affirmed at 'AAA'; -- Class B2-I affirmed at 'AAA'; -- Class B3-I affirmed at 'A+'; -- Class B4-I downgraded to 'B' from 'BB-'; -- Class B5-I remains at 'C/Distressed Recovery (DR)5'. Series 2002-22H Group 1 -- Class 1A affirmed at 'AAA'; -- Class B1-I affirmed at 'AA'; -- Class B2-I affirmed at 'A'; -- Class B3-I affirmed at 'BBB'; -- Class B4-I downgraded to 'B' from 'BB'; -- Class B5-I downgraded to 'C/DR6' from 'CCC/DR2'. Series 2002-22H Group 2 -- Class 2A affirmed at 'AAA'; -- Class B1-II affirmed at 'AA'; -- Class B2-II affirmed at 'A'; -- Class B3-II affirmed at 'BBB'; -- Class B4-II downgraded to 'B' from 'BB'; -- Class B5-II downgraded to 'C/DR6' from 'CCC/DR2'. The negative rating action affects $508,375 of outstanding certificates and is the result of cumulative pool losses and high delinquency levels. The affirmations reflect credit enhancement consistent with future loss expectations and affect approx. $34.27 million of outstanding certificates. The transactions are seasoned from 48 (series 2002-22H) to 65 months (series 2001-8A). The pool factors (current principal balance as a percentage of original) range from less than 2% for series 2001-8A pools 1-3 to 13% for series 2002-22H group 1. Series 2002-22H consists of two mortgage groups. Associated with each of these two mortgage groups are component certificate classes B3 through B6. Each group of components is backed by a separate mortgage group (e.g., B3-I group 1, B3-II group 2). Therefore, each component performs differently, based on the performance of its underlying pool. However, since the components are not severable, each rated class (e.g. B3, B4, B5) reflects the performance of the weakest of all of its components. In this transaction, mortgage group 1 is the poorest performer and as such, mortgage group 1's components (i.e., B3-I group 1, B4-I group 1, B5-I group 1) determine the ratings of each entire class. Oct. 25, 2006 remittance information for mortgage group 1 indicates that 2.1% of the pool is currently over 90 days delinquent and cumulative losses are 0.09% of the original pool balance. Realized losses have averaged $6,699 a month over the past three months. Class B4-I currently has 0.24% ($74,548) of credit support remaining (originally 0.20% or $502,615). Class B5-I currently has no support remaining (originally 0.10% or $252,615). Oct. 25, 2006 remittance information for Series 2001-8A pools 1-3 indicates that 5.74% of the pool is currently over 90 days delinquent and cumulative losses are 0.14% of the original pool balance. Realized losses have averaged $4,427 a month over the past three months. Class B4-I currently has 1.49% ($49,583) of credit support remaining (originally 0.25% or $555,608). Class B5-I currently has no support remaining (originally 0.15% or $337,608). The collateral consists of adjustable or fixed rate, conventional, fully amortizing first lien residential mortgage loans. additionally, all of the mortgage loans have a weighted average original loan to value ratio in excess of 100%. The mortgage loans generally are covered by primary mortgage insurance polices issued by either United Guaranty Corporation in connection with the Borrower Advantage Program, or Mortgage Guaranty Insurance Corporation in connection with the Pro Mortgage Program. The mortgage loans are master serviced by Aurora Loan Services, Inc., which is rated 'RMS1-' by Fitch. TIME WARNER: Buys Xspedius Communications for $216 Million in Cash ------------------------------------------------------------------ Time Warner Telecom Inc., has completed its acquisition of Xspedius Communications, LLC. Pursuant to the terms of the merger agreement, the Company issued 18,249,428 shares of Class A Common Stock and paid $216 million in cash, including an adjustment for working capital. The Company assumed no debt in the transaction. "We continue to believe in the value of the last mile connectivity to enterprise customers, and this acquisition further expands our network reach and market density, enhancing our ability to further fuel enterprise growth," Larissa Herda, chairman, chief executive officer and president, said. "We have been preparing for the integration of the two companies, and look forward to achieving the synergistic capabilities of the powerful combined fiber footprint and advanced network solutions created by the merger of both operations." Concurrent with the closing of the Xspedius acquisition, the Company's wholly owned subsidiary, Time Warner Telecom Holdings Inc., drew down the balance of its secured Term Loan B credit facility. The draw down was used to fund the $250 million redemption, including the redemption fees and accrued interest, of its $240 million principal amount Second Priority Senior Secured Floating Rate Notes due 2011 to be paid on Nov. 6, 2006, and $150 million was used to fund a portion of the acquisition. Headquartered in Littleton, Colorado, Time Warner Telecom Inc. (Nasdaq: TWTC) -- http://www.twtelecom.com/-- provides data, dedicated Internet access, and local and long distance voice services to business customers in 44 metropolitan markets in the United States. Xspedius, a privately held telecommunications company, is headquartered in O'Fallon, Montana. * * * As reported in the Troubled Company Reporter on Sept. 13, 2006 Moody's Investors Service took these rating actions on Time Warner Telecom, Inc.: Speculative grade liquidity rating upgraded to SGL-1 from SGL-2; corporate family rating affirmed at B2; Convertible senior notes due 2026 affirmed at Caa1 and assigned LGD5 rating, indicating noteholders could experience an 89% loss in the event of a default. UNITEDHEALTH GROUP: CalPERS Wants to Block CEO's Retirement Pay --------------------------------------------------------------- The California Public Employees' Retirement System asks the U.S. District Court in Minnesota a preliminary injunction to block UnitedHealth Group Inc.'s outgoing chief executive, William McGuire from collecting his retirement package. Mr. McGuire will step down on Dec. 1, 2006, and will get as much as $1.1 billion in stock options, retirement pay, and other benefits, according to the Wall Street Journal, based on an examination of securities filings. David Brodsky, Esq., Mr. McGuire's attorney, is preparing a response to CalPERS, Reuters reports. About UnitedHealth Group Minneapolis, Minn.-based UnitedHealth Group Inc. (NYSE: UNH) -- http://www.unitedhealthgroup.com/-- offers a broad spectrum of products and services through six operating businesses: UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix. Through its family of businesses, UnitedHealth Group serves approximately 70 million individuals nationwide. * * * As reported in the Troubled Company Reporter on Aug. 31, 2006, UnitedHealth received a purported notice of default on Aug. 28, 2006, from persons claiming to hold certain of its debt securities alleging a violation of the Company's indenture governing its debt securities. The notice came following the Company's failure to file its quarterly report on Form 10-Q for the quarter ended June 30, 2006, with the U.S. Securities and Exchange Commission. The Company asserted it is not in default. The Company's indenture requires it to provide to the trustee copies of the reports the Company is required to file with the SEC, such as its quarterly reports, within 15 days of filing those reports with the SEC. The Company has delayed the filing of its financial results in light of an independent review of the company's stock option programs from 1994 to present. UNITEDHEALTH GROUP: Earns $1.101 Billion in Third Quarter of 2006 ----------------------------------------------------------------- UnitedHealth Group Inc. achieved record results in the third quarter ended Sept. 30, 2006. Diversified business growth was well-matched with effective cost management, advances in the integration of acquisitions and accelerating gains in profitability from seasonally strong product offerings in the third quarter, leading to a further advance in the Company's full- year earnings outlook. UnitedHealth Group Highlights -- Third quarter consolidated net earnings increased to $1.101 billion, up $301 million or 38% year-over-year and $127 million or 13% from the second quarter of 2006. -- Consolidated revenues of $18.0 billion increased $6.4 billion or 55% year-over-year, and $91 million or 1% from the second quarter of 2006. Excluding acquisitions, third quarter revenues increased 20% on a year-over-year basis. -- The Company expanded its reach to more than 4 million entirely new individuals through the first nine months of 2006, with strong growth achieved across employer health benefits programs, senior and government services offerings, and specialty product lines. -- Consolidated earnings from operations increased to $1.9 billion in the third quarter, up $551 million or 42% over the prior year and up $225 million or 14% sequentially. -- Consolidated third quarter operating margin improved to 10.3% from 9.1% in the second quarter of 2006, reflecting diversified growth coupled with effective continuing cost management and improved underlying business performance in multiple businesses. The year-over-year operating margin decrease of 100 basis points was due to business mix changes driven by the commencement of the Company's Medicare Part D offerings and the acquisition of PacifiCare Health Systems (PacifiCare). -- Third quarter operating costs of $2.6 billion decreased by $60 million from their level in the second quarter of 2006. Operating costs declined to 14.3% of revenues in the third quarter, an improvement of 110 basis points from the third quarter of 2005 and 40 basis points from the second quarter of 2006. -- Third quarter operating costs included an insurance recovery of approximately $40 million received by the Company's PacifiCare entity and a contribution to the United Health Foundation of more than $20 million. -- The consolidated medical care ratio (medical costs as a percentage of premium revenues), which includes all businesses and products, declined 50 basis points on a sequential quarter basis to 81.1%. As expected, on a year-over-year basis the consolidated medical care ratio increased due to the impact of the acquisition of PacifiCare and the commencement of Medicare Part D. -- Consolidated medical costs payable, excluding the AARP division of Ovations, increased to $7.3 billion at Sept. 30, 2006. Medical costs days payable was 54 days at Sept. 30, 2006, as compared to 53 days payable at June 30, 2006. -- During the third quarter, the Company realized net favorable development of $10 million in its previous estimates of medical costs incurred in 2005. The Company also realized $70 million in net favorable development related to estimates of medical costs incurred in the first two quarters of 2006. -- Accounts receivable, excluding the AARP division of Ovations, were $788 million at Sept. 30, 2006, and represented 4 days sales outstanding. -- Reported cash flows from operations were $315 million for the third quarter, bringing year-to-date operating cash flows to $4.92 billion. Adjusted to align CMS payment timing to the proper periods, third quarter cash flows from operations were $1.83 billion, up 121% year-over-year. -- Third quarter 2006 annualized return on equity was 23%, up 1% from the second quarter of 2006. -- The Company is likely to delay the filing of its quarterly reports on Form 10-Q for the second and third quarters of 2006, in order to complete its analysis of its previously filed financial statements in light of the Independent Committee of the Board's report on stock option practices. Stephen J. Hemsley, president and chief operating officer, stated, "The broad and evolving health care markets are increasingly engaging the capabilities which we have cultivated, even as our business execution steadily continues to improve. "We anticipate continued strong growth into 2007, with total revenues in the area of $79 billion and 2007 earnings per share growth of 15% above the range of $2.95 to $2.97 per share we now project for 2006." Comment on Board Actions Richard Burke, chairman of the Board of Directors of UnitedHealth Group, said, "The actions we announced last week establish a blueprint for the Company's governance and internal controls. "We deeply regret the deficiencies relative to our historical stock option programs cited in the Independent Committee's report and apologize to all our stakeholders for them. "The actions we adopted are designed to help ensure that UnitedHealth Group meets the highest possible standards of corporate governance, in compensation matters and other areas. "The Board unanimously appointed Steve Hemsley as CEO after fully considering his strong performance at the Company and all facts pertaining to the Independent Committee's review. "Each of the directors believes that our decision and Steve's leadership are in the best interests of UnitedHealth Group, our employees, customers, and shareholders. Steve will be a strong and capable leader for UnitedHealth Group's future." About UnitedHealth Group Minneapolis, Minn.-based UnitedHealth Group Inc. (NYSE: UNH) -- http://www.unitedhealthgroup.com/-- offers a broad spectrum of products and services through six operating businesses: UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix. Through its family of businesses, UnitedHealth Group serves approximately 70 million individuals nationwide. * * * As reported in the Troubled Company Reporter on Aug. 31, 2006, UnitedHealth received a purported notice of default on Aug. 28, 2006, from persons claiming to hold certain of its debt securities alleging a violation of the Company's indenture governing its debt securities. The notice came following the Company's failure to file its quarterly report on Form 10-Q for the quarter ended June 30, 2006, with the U.S. Securities and Exchange Commission. The Company asserted it is not in default. The Company's indenture requires it to provide to the trustee copies of the reports the Company is required to file with the SEC, such as its quarterly reports, within 15 days of filing those reports with the SEC. The Company has delayed the filing of its financial results in light of an independent review of the company's stock option programs from 1994 to present. UNITED KAISER: Case Summary & Eight Largest Unsecured Creditors --------------------------------------------------------------- Debtor: United Kaiser Services, LLC 1001 Stephenson Norway, MI 49870 Bankruptcy Case No.: 06-26217 Chapter 11 Petition Date: November 1, 2006 Court: Eastern District of Wisconsin (Milwaukee) Debtor's Counsel: Paul G. Swanson, Esq. Steinhilber, Swanson, Mares, Marone & McDermott 107 Church Avenue, P.O. Box 617 Oshkosh, WI 54903-0617 Tel: (920) 426-0456 Fax: (920) 426-5530 Total Assets: $1,079,004 Total Debts: $2,081,153 Debtor's Eight Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ North American Hydro Unsecured Loan and $604,226 Holdings, Inc. and Trade Debt 116 State Street P.O. Box 167 Neshkoro, WI 54960-0167 United Construction Trade Debt $459,060 4830 Brookside Road Abrams, WI 54101 North American Hydro Unsecured Loan and $440,526 Operations, LLC and Trade Debt 116 State Street P.O. Box 167 Neshkoro, WI 54960-0167 Kiser Johnson Company Unsecured Debt $100,000 N15847 Gustafson Road Vulcan, MI 49892 Kiser Enterprises, LLC Business Real $427,871 N15847 Gustafson Road Estate (appraisal Secured: Vulcan, MI 49892 pending) $350,000 Jeff Kiser Unsecured Debt $38,611 J.R. Enterprises Trade Debt $9,758 William D. Harris Unsecured Loan $1,100 USA COMMERCIAL: Judge Riegle Disapproves Chapter 7 Conversion ------------------------------------------------------------- The Honorable Linda B. Riegle of the U.S. Bankruptcy Court for the District of Nevada rejected USA Commercial Mortgage Company, fka USA Capital's, and its debtor-affiliates' motion to convert their chapter 11 cases to chapter 7 liquidation proceedings, the Las Vegas Review-Journal reports. Judge Riegle, in an interview with Las Vegas Review, said that the chapter 7 conversion of the Debtors' estate would be devastating. Judge Riegle said a conversion could discourage potential buyers from taking over USA Capital. According to the report, lawyers and creditor committees objected to the conversion proposed by August Landis, an assistant U.S. Trustee assigned in the Debtors' cases. Mr. Landis stated that federal law gave him no option but to seek for a conversion. USA Capital had little chance of being rehabilitated into an ongoing business, he argued. Reports indicated that the Nevada Mortgage Lending Division has suspended the Company's right to originate new loans and the USA Commercial Mortgage, which services the trust deeds, disclosed an operating loss of $36 million in July and $1.4 million in August. Mr. Landis asserted the losses were shrinking remaining assets available for creditors. Annette Jarvis, Esq., at Ray Quinney & Nebeker P.C., counsel for the Debtors, countered Mr. Landis' claims, saying the operating losses did not reflect assets that interim managers have marshaled since April. Ms. Jarvis contended that an interim management team led by restructuring chief Thomas Allison has collected $145 million in principal payments and $38 million in interest. She added that, USA Commercial has received $2.7 million in servicing fees, $1.2 million in other fees and $14.5 million in prepaid interest. Furthermore, Ms. Jarvis counted outstanding loans totaling $791 million as of Sept. 30, 2006, and said that Mr. Allison expects to cut to 55 number of outstanding loans totaling $469 million by Jan. 1, when a buyer takes over the assets of USA Capital First Trust Deeds, one of two mortgage pools operated by the Company, and starts servicing loans. Las Vegas Review disclosed that USA Capital solicited money from several thousand individual investors around the country and used the money to make short-term mortgage loans to commercial developers, including Tom Hantges and Joe Milanowski, USA Capital owners. About USA Commercial Based in Las Vegas, Nevada, USA Commercial Mortgage Company, dba USA Capital -- http://www.usacapitalcorp.com/-- provides more than $1 billion in short-term and permanent financing to homebuilders, commercial developers, apartment owners and institutions nationwide. The Company and its debtor-affiliates filed for chapter 11 protection on April 13, 2006 (Bankr. D. Nev. Case Nos. 06-10725 to 06-10729). Lenard E. Schwartzer, Esq., at Schwartzer & Mcpherson Law Firm, and Annette W. Jarvis, Esq., at Ray Quinney & Nebeker, P.C., represent the Debtors in their restructuring efforts. Thomas J. Allison, a senior managing director at Mesirow Financial Interim Management LLC, has been employed as Chief Restructuring Officer for the Debtors. Susan M. Freeman, Esq., and Rob Charles, Esq., at Lewis and Roca LLP represent the Official Committee of Unsecured Creditors of USA Commercial Mortgage Company. Edward M. Burr at Sierra Consulting Group, LLC, gives financial advice to the Creditors Committee of USA Mortgage. Marc A. Levinson, Esq., and Jeffery D. Hermann, Esq., at Orrick, Herrington & Sutcliffe LLP, and Bob L. Olson, Esq., and Anne M. Loraditch, Esq., at Beckley Singleton, Chartered, represent the Official Committee of Equity Security Holders of USA Capital Diversified Trust Deed Fund, LLC. FTI Consulting, Inc., gives financial advice to the Equity Committee of USA Diversified. Candace C. Carlyon, Esq., and Shawn w. Miller, Esq., at Shea & Carlyon, Ltd., and Jeffrey H. Davidson, Esq., Frank A. Merola, Esq., and Eve H. Karasik, Esq., at Stutman, Treister & Glatt, PC, represent the Official Committee of Equity Security Holders of USA Capital First Trust Deed Fund, LLC. Matthew A. Kvarda, at Alvarez & Marsal, LLC, gives financial advise to the Equity Committee of USA First. When the Debtors filed for protection from their creditors, they estimated assets of more than $100 million and debts between $10 million and $50 million. VARIG S.A.: Foreign Rep Objects to Port Authority's Payment Motion ------------------------------------------------------------------ Eduardo Zerwes, the Foreign Representative of VARIG S.A. and its debtor-affiliates, objects to The Port Authority of New York and New Jersey's request to compel the Foreign Debtors to pay postpetition flight fees and other fees totaling $207,500 as an administrative expense pursuant to Sections 105, 503 and 507 of the Bankruptcy Code. While VARIG, S.A., acknowledges the debts mentioned by the Port Authority of New York and New Jersey -- except that it does not have a record of an invoice for a $250 Supplemental Flight Fee -- Mr. Zerwes asserts that Sections 503 and 507 of the Bankruptcy Code do not apply in the ancillary case and allowance or disallowance of the claims must be determined in the Foreign Proceeding in Brazil. Representing Mr. Zerwes, Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP, in New York, argues that: * the Port Authority's request improperly applies the Bankruptcy Code and lacks the necessary basis to support an order granting the relief it seeks; and * any order from the U.S. Court compelling payment of any claim is premature because claims should first be administered in accordance with VARIG's approved In-Court Reorganization Plan. Specifically, Mr. Antonoff says, nothing in Sections 503 and 507 authorizes a U.S. court to direct payment of a claim in a case that was commenced as an ancillary case under Section 304. Section 304(b) sets forth the relief that the Court may grant in an ancillary case, and yet Section 304 is not mentioned in the Port Authority's request other than in the caption and a background recital. Moreover, while Section 304 ancillary cases permit a court to condition the continuation of a preliminary injunction to grant certain relief, the court lacks jurisdiction to compel production of assets administered in a foreign bankruptcy proceeding, Mr. Antonoff explains. Mr. Antonoff maintains that continuation of the Preliminary Injunction should not be conditioned upon payment of a claim to Port Authority. Payment of any claim outside of the procedures approved in VARIG's In-Court Recovery Plan would unfairly and unduly prejudice other "bankruptcy creditors" that arose during the Foreign Proceeding. Mr. Antonoff further notes that the Reorganization Plan, which was approved by creditors and the Brazilian Court on July 17, 2006, expressly sets forth the procedure for addressing all "bankruptcy creditors" including Port Authority. The Reorganization Plan provides that the Foreign Debtors will make available, within 90 days after approval of the Plan, a "list of bankruptcy creditors and their credits". Within 30 days after the list is made available, "bankruptcy creditors wishing to adhere to the Reorganization Plan shall do so pursuant to the proper adhesion instrument." Bankruptcy creditors who do not state their adhesion to the Reorganization Plan remain creditors of the Foreign Debtors and are entitled to receive payments derived from the Foreign Debtors' remaining operating cash flow. Since the Foreign Proceeding addresses treatment of the Port Authority claim in a Reorganization Plan approved by creditors and the Brazilian Court, the U.S. Court should not grant the Port Authority's request, Mr. Antonoff says. Port Authority Talks Back Representing the Port Authority of New York and New Jersey, Milton H. Pachter, Esq., points out that: * VARIG concedes that it owes the Port Authority $207,250; * since June 17, 2005, VARIG has benefited from the U.S. Court's protection with respect to its creditors' prepetition claims; and * VARIG continued to use John F. Kennedy International Airport as part of its operations in the United States in May, June and July 2006, and thus earned revenues from the flights. Mr. Pachter further notes that 90 days have passed yet no "list of bankruptcy creditors and their credits" has been issued. No specific date for the issuance of the list has been stated too. "It seems to be questionable whether the Port Authority will have any opportunity to pursue its post-petition claim in the Brazilian Court," Mr. Pachter says. The Port Authority believes that it should not be required to litigate the matter in Brazil since VARIG expressly sought and received the benefits of the U.S. Court with regard to the issuance of a preliminary injunction. Mr. Pachter contends that VARIG's argument that nothing in Sections 503 and 507 authorize a U.S. court to direct payment of a claim in a case commenced under Section 304, is disingenuous, since Section 304 specifically provides that court determination as to the relief it should grant should be guided, among other things, "with the distribution of proceeds of such estate substantially in accordance with the order prescribed by [the Bankruptcy Code]." For these reasons, the Port Authority asks the U.S. Court to compel VARIG to immediately pay the $207,500 postpetition flight fees, parking fees and charges that are presently owed. Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WAVE WIRELESS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Wave Wireless Corporation fka PCom Inc. 1996 Lundy Avenue San Jose, CA 95131 Bankruptcy Case No.: 06-11267 Type of Business: The Debtor is a wireless broadband developer. Chapter 11 Petition Date: October 31, 2006 Court: District of Delaware Judge: Peter J. Walsh Debtor's Counsel: Anthony M. Saccullo, Esq. Neal J. Levitsky, Esq. Fox Rothschild LLP 919 N. Market Street, Suite 1300 P.O. Box 2323 Wilmington, DE 19899 Tel: (302) 622-4212 Fax: (302) 656-8920 Total Assets: $1,000,000 Total Debts: $5,000,000 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Vodafone Prepayment for $686,423 Dept. FMT support services AM Seestern 1 Dusseldorf, Germany 40547 MynTahl Corporation Suite for breach of $626,865 c/o James Cai contract Schein & Cai LLP 100 Century Center Group, Suite 315 San Jose, CA 95122 Siemens AG Promissory Note $350,000 ICN CN 1 BA B D81730 Munich, Germany Able Electronics Promissory Note $300,000 31033 Huntwood Avenue Hayward, CA 94544 Tax Collector Property taxes $101,798 Santa Clara County 70 W. Hedding Street, East Wing San Jose, CA 95110 Inland Revenue VAT $89,592 P.O. Box 3900 Glasgow, UK G70 6AA United Manufacturing Trade debt $89,592 Assembly 44169 Fremont Blvd. Fremont, CA 94538 Property Tax Assistance Co. Trade debt $44,252 16600 Woodruff Ave., Suite 200 Bellflower, CA 90706 Hytegrity Trade debt $36,142 Yerevan, Armenia Bryan Family Partnership Rent $25,349 c/o Toeniskoeeter & Breeding The Alameda, Suite 20 San Jose, CA 95126 Thomson Financial/Carson Trade debt $22,500 P.O. Box 5137 Carol Stream, IL 60197 Pluris Partners, Inc. Settlement agreement $16,500 33 E. Robinson Street Orlando, FL 32801 Alburger Basso de Grosz Trade debt $16,407 550 Montgomery Street, 3rd Floor San Francisco, CA 94111 VSoft, Inc. Trade debt $14,741 12930 Saratoga Avenue Suite B1 Saratoga, CA 95070 J.D. Myers II Former employee $14,092 8204 Meadowfield Way expenses Laurel, MD 20708 Avaya, Inc. Trade debt $13,632 PO Box 5125 Carol Stream, IL 60197 Purolator Courier Shipping $13,342 P.O. Box 1100 Postal Station A Etobicoke, Ontario, Canada M9C 5K2 Smart Networks Trade debt $12,962 Zaragoza #25 Col Santa Cruz Atoyac, C.P. 03310 Deleg. Benito Jaurez, Mexico, D.F. Endwave Corporation Trade debt $10,000 File 56297 Los Angeles, CA 9007 Amphenol Antel, Inc. Trade $8,280 1300 Capital Drive Rockford, IL 61109 WELD WHEEL: Court Okays Spencer Fane as Committee's Lead Counsel ---------------------------------------------------------------- The Honorable Jerry W. Venters of the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City authorized the Official Committee of Unsecured Creditors appointed in Weld Wheel Industries Inc., and its debtor-affiliates' bankruptcy cases to retain Spencer Fane Britt & Browne LLP as its counsel. As reported in the Troubled Company Reporter on Sept. 13, 2006, Spencer Fane will: a. advise the Committee with respect to its rights, duties and powers as an official unsecured creditors' committee; b. advise the Committee with respect to terms, conditions and documentation of financing agreements, cash collateral orders and related transactions; c. advise the Committee in connection with any potential sale of assets or businesses; d. investigate the nature and validity of liens asserted against Debtors' assets and to advise the Committee concerning the enforceability of these liens; e. investigate and advise the Committee with respect to the taking of actions necessary to collect and, in accordance with applicable law, recover property for the benefit of the estates; f. prepare and submit on behalf of the Committee, among other things, applications, motions, pleadings, orders, notices, schedules and other legal papers to be prepared and submitted in the Debtors' case, and review financial and other reports; g. advise the Committee concerning and to prepare responses to applications, motions, pleadings, notices and other documents; h. counsel the Committee in connection with the formulation, negotiation and promulgation of a plan or plans of reorganization and related documents; i. appear on behalf of the Committee at all hearings scheduled before the Court; j. review pending litigation and evaluating and advising the Committee concerning appropriate actions to be taken under the circumstances; and k. represent the Committee, and perform all other legal services for the Committee that may be necessary, in connection with this case. The current hourly billing rates for Spencer Fane's professionals are: Designation Hourly Rate ----------- ----------- Partners $260 - $410 Associates $195 - $250 Paralegals $110 - $140 Lisa A. Epps, Esq., at Spencer Fane, assured the Court that the firm does not hold any interest adverse to the Debtors' estates and is disinterested pursuant to Section 101(14) of the Bankruptcy Code. Kansas City, Missouri- based Weld Wheel Industries, Inc., nka XWW Inc. -- http://www.weldracing.com/-- manufactures forged alloy wheels to enhance the performance and appearance of racecars, off- road trucks, luxury pickups, SUV's, premium motorcars, customs, hot rods, and motorcycles. Weld Wheel and its two debtor- affiliates filed for Chapter 11 protection on Aug. 17, 2006 (Bankr W.D. Mo. Case No. 06-42105). Cynthia Dillard Parres, Esq., and Laurence M. Frazen, Esq., at Bryan Cave LLP, represent the Debtors. Lisa A. Epps, Esq., at Spencer Fane Britt & Browne LLP and Kim Martin Lewis, Esq., at Dinsmore & Shohl LLP represent the Official Committee of Unsecured Creditors. Mesirow Financial Consulting LLC gives financial advice to the Committee. When the Debtors sought protection from their creditors, they estimated assets and debts at $10 million to $50 million. WELD WHEEL: Ct. OKs Mesirow Financial as Panel's Financial Advisor ------------------------------------------------------------------ The Honorable Jerry W. Venters of the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City authorized the Official Committee of Unsecured Creditors appointed in Weld Wheel Industries Inc., and its debtor-affiliates' bankruptcy cases to retain Mesirow Financial Consulting LLC as its financial advisors, nunc pro tunc to Aug. 29, 2006. As reported in the Troubled Company Reporter on Sept. 19, 2006, Mesirow Financial will: a) analyze the Debtors' procedures and status regarding the proposed Section 363 sale to American Racing Equipment, Inc.; b) review due diligence procedures currently in place and make any additional recommendations to the Committee; c) assist with the analysis and evaluation of potential competing bids in regards to the Section 363 sale; d) assist in the review of reports or filings as required by the Bankruptcy Court or the Office of the United States Trustee, including, but not limited to, schedules of Assets and liabilities, statements of financial affairs and monthly operating reports; e) review of the Debtors' financial information, including, but not limited to, analyses of cash receipts and disbursements, financial statement items and proposed transactions for which Bankruptcy Court approval is sought; f) review and analyze the Debtors' reporting regarding cash collateral and any debtor-in-possession financing arrangements and budgets; and g) perform other functions as requested by the Committee or its counsel to assist the Committee. Mesirow Financial will be compensated a fixed fee of $75,000 for its evaluation of the 363 Sale process for the period ending Sept. 30, 2006. Thomas D. Bibby, at Mesirow Financial, assured the Court that the firm is disinterested pursuant to Section 101(14) of the Bankruptcy Code. Kansas City, Missouri- based Weld Wheel Industries, Inc., nka XWW Inc. -- http://www.weldracing.com/-- manufactures forged alloy wheels to enhance the performance and appearance of racecars, off- road trucks, luxury pickups, SUV's, premium motorcars, customs, hot rods, and motorcycles. Weld Wheel and its two debtor- affiliates filed for Chapter 11 protection on Aug. 17, 2006 (Bankr W.D. Mo. Case No. 06-42105). Cynthia Dillard Parres, Esq., and Laurence M. Frazen, Esq., at Bryan Cave LLP, represent the Debtors. Lisa A. Epps, Esq., at Spencer Fane Britt & Browne LLP and Kim Martin Lewis, Esq., at Dinsmore & Shohl LLP represent the Official Committee of Unsecured Creditors. Mesirow Financial Consulting LLC gives financial advice to the Committee. When the Debtors sought protection from their creditors, they estimated assets and debts at $10 million to $50 million. WELLMAN INC: Poor Performance Cues Moody's to Lower Rating to B3 ---------------------------------------------------------------- Moody's Investors Service downgraded Wellman, Inc.'s corporate family rating to B3 from B2. The ratings on Wellman's first lien term loan due 2009 and second lien term loan due 2010 were downgraded to B1 and Caa1 from Ba3 and B3, respectively. The company's ratings were also placed under review for further possible downgrade. These are the rating actions: -- Corporate family rating --B3 from B2 -- $185 million First lien term loan due 2009 -- B1 from Ba3, LGD2, 29% -- $265 million Second lien term loan due 2010 -- Caa1 from B3, LGD5, 77% The downgrade of the corporate family rating reflects Wellman's low raw material margins, operating losses in each quarter of 2006, lack of free cash flow in 2006 and elevated leverage. The company has been subject to rising and volatile feedstock prices and has not been able to raise prices to maintain sufficient margins. Additionally, volumes in its fiber business continue to decline. The PET resin industry has suffered from Asian import competition and capacity additions that have limited producers ability to maintain adequate margins, conditions that are likely to worsen in 2007. Funds from operations during 2006 have not been sufficient to meet the company's elevated capital expenditures associated with the PET resin capacity expansion at its Pearl River, MS plant, sizeable working capital growth as a result of higher raw material costs and the startup of new capacity, and hurricane Katrina costs, resulting in an increase in debt of over $100 million. The continuing review will consider the impact of deteriorating market conditions on the company's cash flows and its ability to maintain compliance with its financial covenant in its revolver over the next 12 months. Furthermore, it will examine the timing of several one-time cash in-flows that are expected to occur over the next 12 months that may improve the company's liquidity. The company expects to reduce costs and raise cash through the restructuring of its US fibers operations and working capital reductions. It is also exploring strategic alternatives for its European operations. Additionally, insurance proceeds covering hurricane Katrina costs could benefit liquidity. WESLEY TENNYSON: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Wesley J. Tennyson aka Wesley Tennyson aka Wes Tennyson aka Tennyson's Garage aka R/T Properties 655 North Marion Avenue Jefferson, WI 53549 Tel: (920) 674-2017 Bankruptcy Case No.: 06-12814 Chapter 11 Petition Date: November 1, 2006 Court: Western District of Wisconsin Debtor's Counsel: Guy K. Fish, Esq. Fish Law Offices 533 Vernal Avenue Milton, WI 53563 Tel: (608) 868-3200 Fax: (608) 868-3208 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ First National Bank $25,366 P.O. Box 3331 Omaha, NE 68103-0331 Robert J. Elliott, Esq. $18,645 117 West Milwaukee Street Janesville, WI 53548-2913 Rock County Treasurer $16,794 P.O. Box 1975 Janesville, WI 53545 Chase Cardmember Services $15,250 P.O. Box 15548 Wilmington, DE 19886-5548 National City $14,425 Cardholder Services P.O. Box 500 Portage, MI 49081-0500 Chase Sony Card $13,348 AT&T Universal Card $11,906 Sears Gold MasterCard $8,940 Fort Community Credit Union Mastercard $7,997 Washington Mutual Card Services $6,146 American Express - California $5,396 American Express - Florida $5,296 GC Services L.P. $4,999 Discover Financial Services $4,890 Bank of America - Texas $4,655 Bank of America - Washington $3,821 Jefferson County Treasurer $2,951 E Trade Financial $1,943 State Collection Services $1,530 Neuberger, Wakeman, Lorenz, $1,515 Griggs, Sweet & Fischer WINN-DIXIE: Court Approves Five Alabama Power Agreements -------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida approved the agreements between Winn-Dixie Stores Inc. and its debtor-affiliates and Alabama Power Company and directs the Debtors to pay APCO $861,747 as cure relating to the assumption of four contracts. The Court rules that the Debtors cannot assume the Contracts if their Joint Plan of Reorganization is not confirmed or does not become effective. As reported in the Troubled Company Reporter on Oct. 27, 2006, the five contracts under which APCO provides electricity to nearly 63 of the Debtors' operating locations in Alabama are: (a) Master Contract for Electric Service between APCO and Winn-Dixie Stores, Inc., dated May 16, 2002; (b) Master Contract for Electric Power Service between APCO and Winn-Dixie Montgomery, Inc., dated Feb. 23, 1996; (c) Master Contract for Electric Power Service between APCO and WD Montgomery dated Aug. 8, 1997, and associated Electric System Lease Agreement and Standby Generator Program Agreement each dated Sept. 3, 1997; (d) Contract for Electric Power between APCO and WD Montgomery dated April 15, 1997; and (e) Contract for Electric Power between APCO and WD Montgomery dated Nov. 5, 1996. The parties have resolved their dispute with respect to the May 2002 Contract, and have also negotiated the terms pursuant to which all of the Contracts will be assumed, except for the November 1996 Contract. The negotiations had resulted in these agreements: (1) The Debtors will assume the February 1996, April 1997, September 1997, and May 2002 Contracts, as amended; (2) APCO will facilitate the assumption of the four Contracts by agreeing to (i) amend the May 2002 and February 1996 Contracts by virtue of two separate contracts dated October 12, 2006, and (ii) accept $861,747 as cure for the four Contracts; (3) The Debtors' cure obligations will be limited to the payment of the $861,747 cure with APCO waiving any additional requirements under Section 365(b)(1) of the Bankruptcy Code as they relate to any prepetition defaults under the Contracts; (4) APCO's Agreements will not negate the impact of assumption on any claims held by the Debtors against APCO or otherwise expose APCO to potential preference actions with respect to payments made on account of the Contracts; (5) APCO will be entitled to an administrative claim for cure if any amounts become owing to it pursuant to Section 502(h) of the Bankruptcy Code upon assumption of the Contracts; (6) The Omnibus Motion as it pertains to the May 2002 Contract and APCO's Objection will be deemed withdrawn; and (7) The Debtors will reject the November 1996 Contract as of Oct. 25, 2006, and APCO will have a prepetition non- priority unsecured rejection damages claim for $51,876. The Debtors will also save an estimated $1,000,000 annually by avoiding service price increases that they would otherwise have to incur if they pursued a rejection and entered into new service contracts with APCO. The November 1996 Contract related to the provision of electricity to one of the Debtors' closed stores in Montgomery, Alabama. The Debtors say that the contract's rejection is still in their best interest although it will result in a $51,876 rejection of damages in favor of APCO, since that amount reflects minimum charges that they are required to pay under the contract. By rejecting the November 1996 Contract, the Debtors will ensure that the charges are treated as a prepetition non-priority unsecured claim rather than as an administrative claim to be paid in cash. 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. 57; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WINN-DIXIE: Wants TRP-Held SRP Plan Assets Transferred ------------------------------------------------------ Conditioned on the occurrence of the effective date of their Joint Plan of Reorganization, Winn-Dixie Stores, Inc., and its debtor affiliates ask the U.S. Bankruptcy Court for the Middle District of Delaware to direct the liquidation and transfer to Winn-Dixie Stores, Inc., of the Winn-Dixie Supplemental Retirement Plan's assets held in trust by T. Rowe Price Trust Company under an agreement effective as of July 1, 1994. Specifically, the Debtors ask the Court to direct the transfer to Winn-Dixie of SRP assets held in trust by TRP within five business days following the later of (a) the receipt by TRP of notice from the Debtors of the occurrence of the Effective Date, and (b) the receipt by TRP of a copy of the Transfer Order. Before their bankruptcy filing, the Debtors maintained the SRP to provide supplemental retirement benefits to participating employees. The SRP was intended to constitute an unfunded, unsecured, deferred compensation plan, with benefits to be paid from the Debtors' general assets. To support their obligations under the SRP, the Debtors elected to enter into the Trust Agreement with TRP. Although the Trust Agreement establishes a trust fund to hold SRP plan assets, both the Trust Agreement and the SRP indicate that the Debtors remain the owner of all Trust Assets and that Trust Assets are subject to the claims of creditors in the event of the Debtors' bankruptcy, Cynthia C. Jackson, Esq., at Smith Hulsey & Busey, in Jacksonville, Florida, relates. As of Oct. 18, 2006, the Trust Assets had an approximate value of $16,200,000. Under the Chapter 11 Plan, the SRP and related trust and individual agreements, including the Trust Agreement, will be terminated for all purposes as of the Effective Date, and all claims of participants under the SRP will be discharged. The Debtors wish to have the Trust Assets available as a source of funds as soon as possible following the Effective Date. However, Section 9.2 of the Trust Agreement provides, in relevant part, that when TRP determines that Winn-Dixie has filed for bankruptcy, TRP will hold for the benefit of Winn-Dixie's creditors all Trust Assets and will deliver them to satisfy the claims of the Winn-Dixie creditors as directed by a court of competent jurisdiction. Hence, the Debtors are seeking a Transfer Order from the Court to satisfy the requirement contained in Section 9.2, Ms. Jackson explains. 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. 57; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WOLVERINE TUBE: Mulls Chapter 11 Filing --------------------------------------- Wolverine Tube, Inc., provided an update on Wednesday regarding its restructuring and rationalization program, which is designed to strengthen the Company's balance sheet, reduce debt and enhance its overall capital structure while continuing to serve and support customers globally. The Company and its advisors have been evaluating refinancing and restructuring alternatives in anticipation of the upcoming maturities of the Company's Secured Revolving Credit Facility and Receivables Sale Facility in 2008 and its outstanding 7.375% Senior Notes and 10.5% Senior Notes (collectively, the "Senior Notes") in 2008 and 2009, as well as its future projected short- term liquidity needs. As part of that process, Wolverine continues to be engaged in discussions with representatives of its bondholders and other groups as to the most appropriate transaction, if any, to reduce debt and maintain value for its shareholders. Wolverine has filed a Registration Statement on Form S-4 with the Securities and Exchange Commission for an exchange offer and consent solicitation to exchange newly issued equity and a new issue of secured notes for the Company's Senior Notes, subject to certain conditions, including a minimum tender condition and the SEC's declaring the Registration Statement effective. If the Company does proceed with the exchange offer but conditions to the exchange offer and consent solicitation are not satisfied, the Company intends to pursue other alternatives, including, if certain conditions are met, a prepackaged plan of reorganization of Wolverine and certain of its subsidiaries. The Registration Statement filed Wednesday therefore includes solicitation for a Prepackaged Plan under chapter 11 of the Bankruptcy Code. If pursued, the Prepackaged Plan would generally provide substantially the same consideration to the holders of the Senior Notes as would the consummation of the exchange offer and consent solicitation. Further, under the contemplated Prepackaged Plan, all administrative claims, priority claims, secured claims and general unsecured claims (other than with respect to the Senior Notes), including trade claims, would be paid in full, and holders of existing common stock would receive a pro rata share of a percentage of the new common stock in certain circumstances. Chip Manning, Wolverine's President and Chief Executive Officer stated, "Today's filing is another step in the Company's efforts to improve its overall financial health. It is important to note that we are still continuing to explore a range of alternatives, and no decision has been made on which course of action the Company will ultimately take." Manning added, "We continue to believe that liquidity is sufficient to sustain our operations in the near- to mid-term. The Company's restructuring process should have no impact on our day-to-day operations and our customers and vendors can continue to rely on the same high quality service and relationships with Wolverine that they have come to expect." A full-text copy of the registration statement filed with the SEC is available for free at http://researcharchives.com/t/s?145f Wolverine Tube, Inc. -- http://www.wlv.com/-- supplies copper and copper alloy tube, fabricated products and metal joining products. WOLVERINE TUBE: S&P Cuts Corp. Credit Rating to CC from CCC+ ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Huntsville, Alabama-based Wolverine Tube Inc., to 'CC' from 'CCC+', after Wolverine's exchange offer and solicitation of consent filed with the SEC. The rating on the company's senior unsecured notes was also lowered to 'C' from 'CCC'. "The lower ratings on the notes reflect the distressed nature of the proposed exchange and our belief that the value of the exchange offer, if completed, is not equivalent to the value of the original contracted amounts," said Standard & Poor's credit analyst Lisa Tilis. At the same time, S&P placed all of the ratings on CreditWatch with negative implications pending the outcome of the proposed restructuring, which could involve a Chapter 11 bankruptcy filing. Wolverine proposes to offer a combination of newly issued common stock and convertible preferred stock and new secured notes to current holders of its $135 million 7.375% senior notes due August 2008 and $99 million 10.5% senior notes due April 2009. The exchange offer and consent solicitation is subject to certain conditions, including a minimum tender condition. The exchange offer and consent solicitation is intended to reduce debt and position Wolverine to continue its operational restructuring efforts. Also, if the requirements of the exchange offer are not met, the company is soliciting acceptances of a prepackaged plan of reorganization under Chapter 11. The proposed terms for noteholders under the prepackaged plan are substantially the same as under the exchange offer and consent solicitation. Wolverine is also continuing to explore other alternative refinancing and restructuring options. Standard & Poor's believes that it is unlikely that the company will be able to secure such financing in the absence of waivers for its current indentures because of its very high debt leverage and weak operating results. If the distressed exchange is completed, the corporate credit rating will be lowered to 'SD', or selective default, and the ratings on the exchanged notes will be lowered to 'D'. Also, if any interest payments are missed while the company is preparing to effect the exchange or considering its financing options, the relevant issue rating would be lowered to 'D', with no likely impact on the corporate credit rating. Alternatively, if the prepackaged plan of bankruptcy is filed, all ratings will be lowered to 'D'. WOLVERINE TUBE: Bankruptcy Plan Prompts Junks Ratings by Moody's ---------------------------------------------------------------- Moody's downgraded the ratings of Wolverine Tube, Inc.'s senior unsecured notes to Caa3 from Caa2 and its corporate family rating to Caa2 from Caa1. The outlook for the company remains negative. This action was prompted by Wolverine's announcement of a restructuring and reorganization program that will involve a debt for equity exchange to the company's current noteholders. If the company does not receive enough support for this offer, Wolverine intends to pursue a prepackaged bankruptcy plan. The downgrade reflects Moody's opinion concerning the impact of the restructuring program on noteholders' ultimate recovery as well as the overall financial strength of Wolverine. Industry competitive dynamics, volatility of raw material prices, and Wolverine's liquidity were also considered in the assessment of the company's ratings and rating outlook. These ratings were downgraded: -- Corporate Family Rating, to Caa2 from Caa1 -- Gtd. Sr. Unsec. 7.375% notes, $135 million due 2008, to Caa3 from Caa2 (LGD4 -- 62%) -- Gtd. Sr. Unsec. 10.5% notes, $99 million due 2009, to Caa3 from Caa2 (LGD4 -- 62%) Moody's previous rating action on Wolverine was the April 27, 2006 downgrade of its long-term debt ratings to Caa2 from Caa1 and its corporate family rating to Caa1 from B3. Wolverine is a North American manufacturer and distributor of copper and copper alloy tube, fabricated products and metal joining products, headquartered in Huntsville, Alabama. Wolverine generated $1.1 billion in revenues and a net loss of $45.3 million, for the nine months ended October 1, 2006 as compared to revenues of $636 million and a net loss of $19.4 million realized in the same period earlier. * BOOK REVIEW: The Managerial Mystique: Restoring Leadership in Business --------------------------------------------------------------- Author: Abraham Zaleznik Publisher: Beard Books Paperback: 320 pages List Price: $34.95 Order your personal copy at http://amazon.com/exec/obidos/ASIN/1587982811/internetbankrupt "Business in America has lost its way ... desperately needing leadership to face worldwide economic competition." Zaleznik wrote these words in 1989 when The Managerial Mystique was first published. But his observation remains as true today as it was then. In 1989, the problems included high debt and the decline of major industries such as steel and automobiles. To these problems can now be added outsourcing and the growing economic power of China and India. Zaleznik primarily attributes the weakened condition of American business to errors in business management. "The causes of this decline in competitiveness are complex, but at the forefront is the attitude of American management," he says. Mainly, management strayed from its critically important role of encouraging, nurturing, and recognizing initiative and creativity of individuals. Instead, management concentrated myopically on restructuring, lateral organization, communication, charismatic leadership, and mergers and acquisitions. While each of these strategies has a place in the corporate world, they are not the basis for a strong business that can compete effectively. Zaleznik contends that it is the relationship between management and employees that count the most in generating the ideas, goals, cooperation, and endurance that make a corporation competitive. Zaleznik puts to good use his background in social psychology and psychoanalysis to explore this essential, yet neglected, area of business management. Social psychology and psychoanalysis are not normally associated with business management. However, the author applies these so-called "soft sciences" to business organizational structures and processes. He critiques business organizations and their activities and management at all levels by looking at what has been excluded that really accounts for the quality of a business. Zaleznik points to some high-profile examples to illustrate what is wrong with American management. One is Harold Geneen, the former chief executive officer of ITT, who, the author says, epitomized a managerial approach that stifled company energy and potential. According to Zaleznik, Geneen is one of the many business managers who "have put their faith in numbers, managed by process, and formed elaborate structures to get people to do the predictable thing." Geneen's perspective fails to acknowledge that there are differences between one business and another. That such a belief -- easily disproved by experience -- has come to be the core principle of American business evidences, to Zaleznik's mind, just how far off course American business has strayed. Zaleznik offers a business approach that concentrates on nurturing creativity and moral connections among employees. He recognizes employees as individuals and as a corrective to business practices gone awry. The values advocated by Zaleznik should not be regarded as an alternative technique or peripheral considerations. They are the basis of a strategy that all businesses need to compete effectively. A professor emeritus of Harvard Business School and a certified psychoanalyst, Abraham Zaleznik has an international reputation for his studies and teaching on social psychology in the business setting and the characteristics of managers and leaders. ********* 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, Ronald C. Sy, 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 ***