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/raid1/www/Hosts/bankrupt/TCR_Public/070727.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, July 27, 2007, Vol. 11, No. 176 Headlines ABENGOA BIOENERGY: Successful Start-Up Cues S&P's Positive Watch ABLE ENERGY: Posts $1.6 Million Net Loss in Qtr. Ended Sept. 30 AK STEEL: Intends to Redeem $150 Million of 7-7/8% Senior Notes ALPHA MEDIA: S&P Assigns Corporate Credit Rating at B ALTERNATIVE LOAN: S&P Junks Ratings on Two Certificate Classes AMERICAN COLOR: Vertis Merger Cues Moody's to Review Ratings AMERICAN STEAMSHIP: Improved Capital Cues S&P's Positive Watch ARVINMERITOR INC: To Close Ontario Assembly Operations BANCO BGN: Moody's Puts Ratings Under Review and May Upgrade BAUSCH & LOMB: Asks Advanced Medical to Revise Buyout Bid BEST BRANDS: Moody's Junks Corporate Family Rating CALIFORNIA HEALTH: Operating Losses Cues S&P to Cut Ratings to BB CATHOLIC CHURCH: Davenport Taps R. Hughes as Insurance Consultants CATHOLIC CHURCH: San Diego Can Appoint Unknown Claimants Rep. CENTURY ALUMINUM: Incurs $60.7 Million Net Loss in Second Quarter COBALT CMBS: S&P Rates $5.042 Million Class O Certificates at B- COUDERT BROS: Disclosure Statement Hearing Moved to August 21 COVANTA HOLDING: Earns $37.7 Million in Quarter Ended June 30 CPM HOLDINGS: High Leveraged Financial Risk Cues S&P's B+ Rating DADE BEHRING: Earns $50.3 Million in Second Quarter 2007 DADE BEHRING: Declares Quarterly Dividend of 5 Cents Per Share DADE BEHRING: Inks Definitive Merger Agreement with Siemens AG DAIMLERCHRYSLER: Banks to Pool Money to Raise Buyout Financing DANA CORP: Court Approves USW & UAW Settlement Agreements DEATH ROW: Tupac's Mom Wants Unreleased Songs Excluded from Sale DELPHI CORPORATION: IUE-CWA Intends to Terminate Contracts DELTA AIR: Earns $1.8 Billion in Second Quarter 2007 DEVELOPERS DIVERSIFIED: Earns $127.4 Million in Second Qtr. 2007 E*TRADE FIN'L: Earns $159 Million in Quarter Ended June 30 ELEC COMMUNICATIONS: May 31 Balance Sheet Upside-down by $6.7 Mil. FHC HEALTH: S&P Retains Negative Watch on B Credit Rating FORD MOTOR: Seeks Concessions as Labor Talks With UAW Start FORSTER DRILLING: Posts $960,342 Net Loss in Qtr. Ended May 31 FRENCH LICK: Moody's Lowers Corporate Family Rating to Caa3 FRENCH LICK: S&P Lowers Corporate Credit Rating to CCC from CCC+ GENERAL MOTORS: Deal Hits Snag as Firms Shelve $3.1 Bil. Debt Sale GENERAL MOTORS: Reports Global Second Quarter Sales GENERAL MOTORS: Seeks Concessions as Labor Talks with UAW Start GP INVESTMENTS: Fitch Revises Outlook to Positive from Stable GRANDE COMM: Moody's Affirms Caa1 Corporate Family Rating GREGG APPLIANCES: Completes Tender Offer for 9% Senior Notes GSAMP TRUST: S&P Junks Rating on 2002-HE Class B-2 Certificates GSI GROUP: Earns $3.3 Million in Quarter Ended June 29 HUNT REFINING: S&P's Rates $760 Million Term Loan at B+ IMAX CORP: S&P Affirms Ratings and Removes Negative CreditWatch INTERNATIONAL COAL: Prices $180 Mil. of 9% Convertible Sr. Notes INTERNATIONAL COAL: S&P Revises Outlook to Negative from Stable KINDER MORGAN: S&P Rates $100MM Series A Preferred Stock at BB+ KNOLL INC: Moody's Withdraws Ba3 Rating on $500 Million Facility LANDRY'S RESTAURANTS: Obtains Covenant Waiver from Lenders LANDRY'S RESTAURANT: S&P Lowers Corporate Credit Rating to CCC LANDRY'S RESTAURANT: Moody's Lowers Corporate Family Rating to B2 LAUREATE EDUCATION: Weak Cash Flow Cues S&P's B Credit Rating MERRILL LYNCH: Fitch Affirms B- Rating on $1.3MM Class P Certs. METHANEX CORP: Earns $35.7 Million in Quarter Ended June 30 NEWCASTLE CDO: S&P Rates $14 Million Class F Notes at BB NEWFIELD EXPLORATION: Earns $150 Million in Second Quarter 2007 NOE FULINARA: Case Summary & 19 Largest Unsecured Creditors OGLEBAY NORTON: S&P Places Ratings Under Developing CreditWatch ORECK CORP: S&P Withdraws All Ratings at Company's Request PILGRIM'S PRIDE: Declares 2-1/4 Cents Per Share Quarterly Dividend PSS WORLD: Net Income Downs to $8.7 Mil. in Quarter Ended June 29 RESIDENTIAL ACCREDIT: Fitch Lowers Ratings on Four Cert. Classes REYNOLDS AMERICAN: Earns $325 Million in Quarter Ended June 30 SAINT VINCENT'S: Creditors Vote to Accept Amended Plan SAINT VINCENT'S: Inks Stipulation Resolving DASNY's Plan Objection SOUNDVIEW HOME: Moody's Rates Class M-10 Certificates at Ba1 SPECIALTY UNDERWRITING: Losses Prompt S&P to Lower Ratings SPECTRUM BRANDS: Global Operations President K. Biller to Retire SYNCHRONOUS AEROSPACE: Moody's Rates Proposed $95 Mil. Loan at B2 SYNCHRONOUS AEROSPACE: S&P Rates Proposed $95MM Facility at B TEXAS SOUTHERN: Moody's Cuts Bond's Rating to Ba3 & Retains Watch VERTIS INC: American Color Merger Cues Moody's to Review Ratings WR GRACE: Judge Fitzgerald Okays Sale of Washcoat Business WR GRACE: Responds to Exclusive Periods Extension Plea Objections WELLMAN INC: Posts $11.4 Million Net Loss in Qtr. Ended June 30 WELLS FARGO: Fitch Rates $2.5 Million Class B-7 Certs. at B XEROX CORP: Earns $266 Million in Quarter Ended June 30 * BOOK REVIEW: Bankruptcy: A Feast for Lawyers ********* ABENGOA BIOENERGY: Successful Start-Up Cues S&P's Positive Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services revised the CreditWatch listing on Abengoa Bioenergy of Nebraska LLC's 'B-' rating to positive from developing following the successful start-up of the project's 88 million gallon per year ethanol plant. The rating is on the company's $90 million senior secured term bank loan. In May 2007, the rating was lowered to 'B-' from 'B' and placed on CreditWatch with developing implications due to significant delays in construction and the increasing concern that the project would not be able to service debt before construction was complete. Through change orders in the engineering, procurement, and construction contract, incentive payments retained when construction milestones were not met, liquidated damages, and support from the project sponsor, Abengoa S.A., the project was able to make all interest payments during construction. The project expects to service all debt through cash flow from plant operations. However, the construction delay forced the project to enter the market in a low crush spread environment. Also, the plant will not reach final completion until after the summer driving season. "The revenue lost due to the six-month construction delay could have been used to pay down debt and will likely cause higher refinancing risk at the bonds' maturity," said Standard & Poor's credit analyst Justin Martin. The CreditWatch will be resolved when the plant begins full operations and can provide cash flow to the project. The rating would be raised if the project can prove it can service debt with cash flow from operations. The rating would be affirmed if the project remains in distress due to low crush spreads in the market relative to other rated ethanol plants. ABLE ENERGY: Posts $1.6 Million Net Loss in Qtr. Ended Sept. 30 --------------------------------------------------------------- Able Energy Inc. reported a net loss of $1.6 million on net sales of $12.8 million on net sales of $12.8 million for the first quarter ended Sept. 30, 2006, compared with a net loss of $1.5 million on net sales of $13.1 million for the same period ended Sept. 30, 2005. The decrease in net sales can be attributed primarily to the reduction in on road diesel fuel sales. The increase in net loss is directly related to an increase in selling, general and administrative expenses, offset by a decrease in amortization expense and decrease in other expenses. At Sept. 30, 2006, the company's consolidated balance sheet showed $16.2 million in total assets, $15.0 million in total liabilities, and $1.2 million in total stockholders' equity. The company's consolidated balance sheet at Sept. 30, 2006, also showed strained liquidity with $10.0 million in total current assets available to pay $11.3 million in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended Sept. 30, 2006, are available for free at http://researcharchives.com/t/s?21d1 Going Concern Doubt Marcum & Kliegman LLP expressed substantial doubt about Able Energy Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended June 30, 2006. The auditing firm reported that the company has incurred losses from continuing operations of approximately $6.2 million, $2.2 million and $1.7 million during the years ended June 30, 2006, 2005 and 2004, and in additionn the company has used cash from operations of approximately $1.7 million for the year ended June 30, 2006, and has a working cpital deficiency of approximately $432,000 at June 30, 2006. About Able Energy Headquartered in Rockaway, New Jersey, Able Energy Inc., (Other OTC: ABLE.PK) -- http://www.ableenergy.com/-- through its subsidiaries, distributes and provides services relating to home heating oil, propane gas, kerosene, and diesel fuels. The company also offers complete heating, ventilation and air conditioning installation and repair and other services and also markets other petroleum products to commercial customers, including on-road and off-road diesel fuel, gasoline, and lubricants. Its current subsidiaries are Able Oil Company Inc., Able Energy New York Inc., Able Oil Melbourne Inc., Able Energy Terminal LLC, and PriceEnergy.com Inc. AK STEEL: Intends to Redeem $150 Million of 7-7/8% Senior Notes --------------------------------------------------------------- AK Steel Corp. will redeem the remaining $150 million of its outstanding 7-7/8% Senior Notes Due Feb. 15, 2009. AK Steel redeemed $225 million of the original $450 million of notes on March 2, 2007 and another $75 million on May 31, 2007. AK Steel would consider redeeming the remaining notes during or before the first quarter of 2008. The company said the redemption of the remaining $150 million of the notes will be funded from the company's existing cash reserves, and is expected to be completed in August 2007. AK Steel said it expects to incur a non-cash, pre-tax charge of approximately $0.6 million in the third quarter of 2007 related to this action. However, the company expects to realize a net, pre-tax interest- related benefit of $1.5 million in 2007, and approximately $4.3 million in 2008, as a result of the completion of the redemption of the notes. "Enhancing shareholder value by reducing our debt to strengthen our balance sheet continues to be a high priority for AK Steel," James L. Wainscott, chairman, president and CEO, said. About AK Steel Corp. Headquartered in Middletown, Ohio, AK Steel Corp. (NYSE: AKS) -- http://www.aksteel.com/-- produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. * * * Moody's Investor Services assigned B1 rating on AK Steel Corp.'s long term corporate family rating and probability of default on Sept. 2006. The outlook is stable. Standard and Poor's rated the company's long term foreign and local issuer credit B+ on July 2003. The outlook is stable. ALPHA MEDIA: S&P Assigns Corporate Credit Rating at B ----------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating and stable outlook to Alpha Media Group Inc., a holding company formed by private-equity concern Quadrangle Capital Partners to acquire Dennis Publishing Inc. At the same time, Standard & Poor's assigned its 'B+' bank loan rating, one notch higher than the corporate credit rating on Alpha Media, and '2' recovery rating to the company's $135 million first-lien bank facility, indicating that lenders can expect substantial (70%-90%) recovery in the event of a payment default. The facility consists of a $15 million revolving credit facility maturing in 2012 and a $120 million term loan B maturing in 2014. S&P also assigned a 'CCC+' bank loan rating, two notches lower than the corporate credit rating, and recovery rating of '6' to the company's $40 million second-lien term loan due 2015, indicating our expectation of negligible (0%-10%) recovery in the event of a payment default. Proceeds will be used to fund Quadrangle's acquisition of Dennis Publishing for $244 million, representing a 7.6x multiple of trailing 12-month adjusted EBITDA at March 31, 2007. The New York-based magazine publisher will have pro forma total debt of $160 million as of March 31, 2007. "The rating reflects the company's earnings concentration, with Maxim, the largest of its three magazines, accounting for nearly all of its profits," said Standard & Poor's credit analyst Hal F. Diamond. Further key issues are strong competition in the men's-lifestyle magazine niche from the Internet and other entertainment sources. These factors are only partially offset by the competitive position of Maxim. ALTERNATIVE LOAN: S&P Junks Ratings on Two Certificate Classes -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class B-3 mortgage pass-through certificates from Alternative Loan Trust's series 2004-J1 and 2004-J8. Concurrently, S&P removed the two lowered ratings from CreditWatch with negative implications. Furthermore, S&P affirmed its ratings on the other classes from these two transactions. The lowered ratings reflect a reduction in both current and projected credit support. Projected credit support reflects actual credit support reduced by projected losses on current delinquencies. As of the June 2007 distribution date, the accumulation of realized losses had caused credit support in each series to fall to less than 30% of its original amount. Cumulative losses range from 0.10% (series 2004-J1) to 0.29% (series 2004-J8) of the original pool balances. In addition, 90-plus-day delinquencies range from 1.85% (series 2004-J1) to 3.79% (series 2004-J8) of the current pool balances. The rating affirmations are based on credit support percentages that are sufficient to maintain the current ratings on these securities. The collateral backing these transactions consists of Alt-A mortgage loans. Credit support is provided by subordination. Ratings Lowered and Removed from Creditwatch Negative Alternative Loan Trust Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2004-J1 B-3 CCC B/Watch Neg 2004-J8 B-3 CCC BB/Watch Neg Ratings Affirmed Alternative Loan Trust Mortgage pass-through certificates Series Class Rating ------ ----- ------ 2004-J1 1-A1, 1-X, 2-A-1 AAA 2004-J1 2-X, PO AAA 2004-J1 M AA 2004-J1 B-1 A 2004-J1 B-2 BBB 2004-J8 1-A1, 1-X, 2-A-1 AAA 2004-J8 2-X, 3-A-1, 3-X AAA 2004-J8 4-A-1, 4-X, PO-A AAA 2004-J8 PO-B, IO AAA 2004-J8 M AA 2004-J8 B-1 A 2004-J8 B-2 BBB AMERICAN COLOR: Vertis Merger Cues Moody's to Review Ratings ------------------------------------------------------------ Moody's Investors Service placed the ratings of American Color Graphics Inc. under review for possible downgrade following the announcement that the company plans to merge with Veris Inc. Details of the rating action are: American Color Graphics, Inc. -- $280 million senior secured second priority notes due 2010 - Caa2 -- Corporate Family rating - Caa2 -- Probability of Default rating - Caa2 The review for possible downgrade reflects Moody's expectation of a recapitalization as well as heightened concern regarding the companies' weak financial metrics, strained liquidity and the pressure of approaching debt maturities. The rating review will consider: i. the probability that the companies will successfully conclude the proposed merger; ii. the likelihood that debt holders will face losses if the expected recapitalization involves an exchange of notes at less than full value, or if debtholders interests are otherwise compromised; and iii. the ability of ACG to fund its near- term interest expense obligations and the ability of both companies to fund scheduled maturities of principal, absent a restructuring. Vertis and ACG recently announced that both have signed a non- binding letter of intent to merge their businesses. Management of both companies expect to conclude a definitive merger agreement by Aug. 13, 2007, which will be subject to the amendment, refinancing or payment in full of the companies' senior secured credit facilities and the successful exchange of the companies' outstanding notes. Management expects that the merger will result in significant synergies. American Color Graphics, Inc., a leading provider of print and pre-media services, recorded sales of $445 million for the FYE period ended March 31, 2007. The company is based in Brentwood, Tennessee. AMERICAN STEAMSHIP: Improved Capital Cues S&P's Positive Watch -------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' counterparty credit and financial strength ratings on American Steamship Owners Mutual Protection & Indemnity Assoc. on CreditWatch with positive implications. "The rating action primarily reflects American Steamship's significantly improved statutory capital of $31.3 million as of year-end 2006, compared with $8.4 million in 2005," said Standard & Poor's credit analyst Siddhartha Ghosh. "In addition, the ratings action reflects management's commitment to maintaining the company's capital prospectively, both on a risk adjusted and absolute basis." Standard & Poor's is currently in the process of conducting a detailed rating review of the company, which is expected to be completed within the next few weeks. Upon such review, the company's financial strength rating could be raised by a notch to 'BB-'. ARVINMERITOR INC: To Close Ontario Assembly Operations ------------------------------------------------------ ArvinMeritor Inc. would close its Commercial Vehicle Systems assembly operation in St. Thomas, Ontario, Canada by Nov. 23, 2007. The closure is part of restructuring actions in North America and Europe which the company expects to affect 13 plants and 2,800 employees, resulting in an estimated annual run rate savings of $130-$140 million by 2012. The facility in St. Thomas employs 17 people, and serves as an assembly site of the company's drivelines. Operations based in St. Thomas will be transferred to ArvinMeritor's facility in Laurinburg, North Carolina. Employees were advised of the closure today during a meeting at the facility. ArvinMeritor will offer outplacement support and severance and benefits packages to affected employees. "Actions like these are never easy, but are necessary because of the highly competitive nature of the motor vehicle industry," Wayne Watson, general manager, Operations, North America, said. "The company must have a global manufacturing footprint that optimizes capacity, reduces costs, and creates the greatest level of customer service." "The closure of St. Thomas is in no way a reflection of our fine workforce," Brad Ducharme, site manager at the St. Thomas facility said. Our employees are talented and highly skilled individuals who have worked hard to support our customers." About ArvinMeritor Inc. Based in Troy, Michigan, ArvinMeritor Inc. (NYSE: ARM) -- http://www.arvinmeritor.com/-- supplies integrated systems, modules and components serving light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarket. * * * As reported in the Troubled Company Reporter on Feb. 28, 2007, Moody's Investors Service has upgraded ArvinMeritor's senior secured bank debt rating to Baa3, LGD2, 13% from Ba1, LGD2, 20% and affirmed the company's Corporate Family Rating of Ba3, Speculative Grade Liquidity rating of SGL-2, and stable outlook. BANCO BGN: Moody's Puts Ratings Under Review and May Upgrade ------------------------------------------------------------ Moody's Investors Service placed the Ba3 global local and foreign currency long term deposit ratings of Banco BGN S.A. under review for possible upgrade. Moody's also placed the bank's A2.br national scale deposit rating on review for possible upgrade. The rating action follows the announcement that BGN has signed an agreement with BNP Paribas Group, through its consumer finance arm Cetelem in Brazil, to sell 100% of its outstanding shares. The transaction remains subject to due diligence by BNP Paribas as well as to approval by the regulatory authorities. The action reflects Moody's view of the potential support of the bank's liabilities from its new ultimate parent, BNP Paribas and its direct owner, Cetelem. The rating review will focus on the assessment of the level of support. Moody's maintained the stable outlook on BGN's D- bank financial strength rating. The agency said that BGN's well-established position in payroll lending -- where it ranks as the nation's 13th largest originator of such loans -- should add diversity to Cetelem's operations in Brazil. Cetelem has been active in the local consumer finance segment since 1999. As of March 2007, BGN had total assets of about R$1.57 billion ($763 billion) and equity of R$130million ($64 million). These ratings were placed on review for possible upgrade: -- Long-term local currency deposit rating: Ba3 -- Long-term foreign currency deposit rating: Ba3 -- Long-term national scale rating: A2.br This rating outlook remains unchanged: -- Bank Financial Strength Rating: D- (D minus), with stable outlook BAUSCH & LOMB: Asks Advanced Medical to Revise Buyout Bid --------------------------------------------------------- William H. Waltrip, the chairman of a special committee of the Board of Directors of Bausch & Lomb Incorporated, sent a letter Tuesday asking Advanced Medical Optics to revise its offer to buy Bausch & Lomb. In July 2007, Advanced Medical proposed to acquire 100% of the outstanding shares of Bausch & Lomb in a merger in which Bausch & Lomb's shareholders would receive, per share of Bausch & Lomb stock, $45.00 in cash and $30.00 in AMO stock. In his letter, Mr. Waltrip noted that "without further assurances as to value and certainty of consummation and, in particular, without concrete, credible evidence that holders of a significant percentage of the outstanding AMO shares would affirmatively support the proposed acquisition of Bausch & Lomb by AMO, the Special Committee and the Board intend to revoke AMO's designation as an excluded party under [a merger agreement with] Warburg Pincus." Mr. Waltrip also emphasized that any proposed increase in the fee that would be payable by AMO in the event the transaction did not close due to failure to obtain AMO shareholder approval should be accompanied by an opinion of counsel that such fee is legally payable in light of the known opposition of at least one significant shareholder to the proposed transaction. Bausch & Lomb is expecting additional information from AMO no later than 12:00 p.m., Eastern time, today, July 27, 2007. Warburg Pincus Deal In May 2007, Bausch & Lomb entered into a definitive merger agreement with Warburg Pincus, pursuant to which Warburg Pincus agreed to acquire 100% of the outstanding shares of Bausch & Lomb for $65.00 per share in cash. Pursuant to the Warburg Pincus merger agreement, AMO has been designated as an "excluded party," thus permitting Bausch & Lomb, subject to certain conditions, to continue negotiating with AMO with respect to the AMO proposal despite the end of the "go shop" period, so long as AMO remains an "excluded party." FTC Approval Reuters said in a July 10, 2007 report that affiliates of Warburg Pincus have received U.S. antitrust approval to acquire Bausch & Lomb. Citing the U.S. Federal Trade Commission, Reuters said antitrust authorities completed their review of the deal without taking any action to block it. About Bausch & Lomb Headquartered in Rochester, New York, Bausch & Lomb Inc. (NYSE: BOL) -- http://www.bausch.com/-- develops, manufactures, and markets eye health products, including contact lenses, contact lens care solutions, and ophthalmic surgical and pharmaceutical products. The company is organized into three geographic segments: the Americas; Europe, Middle East, and Africa; and Asia (including operations in India, Australia, China, Hong Kong, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand). In Latin America, the company has operations in Brazil and Mexico. "In Europe, the company maintains operations in Austria, Germany, the Netherlands, Spain, and the United Kingdom. * * * As reported in the Troubled Company Reporter on July 12, 2007, Standard & Poor's Ratings Services said its 'BB+' corporate credit and senior secured ratings on Bausch & Lomb Inc. remain on CreditWatch with negative implications in light of the July 5, 2007 acquisition bid by Advanced Medical Optics Inc. As reported in the Troubled Company Reporter on May 18, 2007, Moody's Investors Service stated that it will continue its review of Bausch & Lomb Incorporated's ratings for possible downgrade following the announcement that the company has entered into a definitive merger agreement with affiliates of Warburg Pincus. Ratings subject to review for possible downgrade include the company's Ba1 Corporate Family rating and Ba1 Probability of Default rating. In addition, the Warburg Pincus deal prompted Fitch to maintain its Negative Rating Watch on the company. Fitch also warned that the transaction would significantly increase leverage and likely result in a multiple-notch downgrade, including an Issuer Default Rating of no higher than 'BB-'. BEST BRANDS: Moody's Junks Corporate Family Rating -------------------------------------------------- Moody's Investors Service downgraded Best Brands Corporation's corporate family rating to Caa1 from B3, and lowered the ratings on the company's first and second lien senior secured credit facilities. The ratings remain under review for possible downgrade. The company's LGD assessments are also subject to change. The downgrade reflects Moody's continued concern that an agreement has not been reached between the company and its lenders regarding the request for a second waiver and amendment to its credit facilities, which would cure the violation for late delivery of its 2006 financial statements and the likely violation of financial covenants for the second quarter ending June 30, 2006. The company is required to report compliance within 30 days of each reporting period. Moody's also remains concerned about the ongoing lack of visibility regarding the motivation of the company's lender group. Moody's review will focus on i. the company's ability to obtain amendments to its credit facilities in order to avoid covenant defaults; ii. its ability to comply with the revised covenants and maintain certain access to liquidity over the near-term once an agreement is reached; iii. the likely behavior of the company's various constituencies, including vendors, lenders and shareholders; and iv. the outlook for improving financial performance and debt reduction. Ratings downgraded: Best Brands Corporation: -- Corporate family rating to Caa1 from B3 -- Probability of default rating to Caa1 from B3 -- $30 million first-lien revolving credit facility due 2011 to B3 from B2 -- $170 million first-lien Term Loan B due 2012 to B3 from B2 -- $75 million second-lien Term Loan due 2013 to Caa3 from Caa2 Headquartered in Minnetonka, Minnesota, Best Brands Corporation, parent company is Value Creation Partners, Inc., is a leading manufacturer and distributor of specialty bakery products in the US, with pro forma revenues for 2006 approaching $500 million. CALIFORNIA HEALTH: Operating Losses Cues S&P to Cut Ratings to BB ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating to 'BB' from 'BB+' on the California Health Facilities Financing Authority's outstanding revenue debt, issued for Good Samaritan Hospital. Operating losses have continued, and despite improved reimbursement and increased state support, management projects that operating losses will continue. As a result, coverage of maximum annual debt service remains low. The outlook is stable. "In addition to our concerns about persistent operating losses and low coverage, the rating also reflects Good Samaritan's economically challenging service area," said Standard & Poor's credit analyst Geraldine Poon. "While there is evidence of increased commercial and residential development, the high uninsured population remains challenging and the hospital remains reliant on state support." Management has preliminary capital plans for a medical office building and additional surgical capacity; an associated financing would also restructure Good Samaritan's debt, resulting in slight reduction of MADS, but would increase leverage. Good Samaritan is fortunate in that it does not have significant capital spending needs to meet California seismic regulations, and annual capital expenditures are expected to be $10 million-$12 million, or approximately 100% of depreciation. Good Samaritan closed on the sale of more than four acres of land for $45 million. These proceeds will support the construction costs of a medical office building. Management is in the preliminary stages of developing a fundraising campaign and expects that there is significant potential on this front. Debt-to-capitalization remains high at 75%. However, at this lower rating level, it is likely that Good Samaritan could issue additional debt to fund the medical office building and surgery projects without a further rating impact. Good Samaritan is a 408-bed tertiary hospital located in downtown Los Angeles. The hospital's major service line is cardiology, including cardiothoracic surgery. Other specialties include orthopedics, neurosciences, ophthalmology, and women's services -- which have increased since the county stopped providing obstetrics services. Good Samaritan derives 42% and 16% of annual net patient service revenue from Medicare and MediCal, respectively. Good Samaritan receives approximately $19 million in annual Medicare disproportionate share hospital funds, and has secured, along with a coalition of other providers, additional DSH payments from the state. Management expects this state support to continue. CATHOLIC CHURCH: Davenport Taps R. Hughes as Insurance Consultants ------------------------------------------------------------------ The Diocese of Davenport seeks authority from the U.S. Bankruptcy Court for the Southern District of Iowa to employ Robert Hughes Associates, Inc., as its insurance consultants. Robert Hughes specializes in providing assistance to entities that are researching and analyzing historical liability insurance coverage. Richard A. Davidson, Esq., at Lane & Waterman LLP, in Davenport, Iowa, relates that the Diocese is doing its best to obtain information about historical insurance policies and coverage, which includes issuing subpoenas to known insurers and searching available records. However, the process is very specialized and complex, and the Diocese believes it requires assistance from experienced insurance consultants to ensure that a thorough review of the Diocese's insurance assets has been conducted. Mr. Davidson informs the Court that Robert Hughes was previously employed by the Archdiocese of Portland in Oregon in its bankruptcy proceedings. Through the collaborative efforts of the Archdiocese and its insurance counsel and consultants, very substantial amounts were obtained from insurance carriers after a complete and thorough review and analysis of Portland's historical liability insurance coverage. In Davenport's case, the Diocese needs Robert Hughes to provide consulting services to locate and reconstruct liability insurance coverage from secondary evidence, which the Diocese has located for the periods from the 1950s through 1968, Mr. Davidson relates. He adds that the Diocese will collaborate with the Official Committee of Unsecured Creditors and the U.S. Trustee's Office to develop secondary evidence and to establish the existence of liability coverage under policies, which have been previously lost or misplaced. A $5,000 retainer will be paid to Robert Hughes, Mr. Davidson informs the Court. For its services, the firm's professionals will paid based on these hourly rates: Robert N. Hughes $500 Olie Jolstad $300 Michele Martin $250 Robert Hughes will also be reimbursed for reasonable, out-of- pocket expenses. Mr. Hughes assures the Court that the firm holds no adverse interest against the Diocese and is a "disinterested person" within the meaning of Section 101 of the Bankruptcy Code. About Diocese of Davenport The Diocese of Davenport in Iowa filed for chapter 11 protection (Bankr. S.D. Ia. Case No. 06-02229) on October 10, 2006. Richard A. Davidson, Esq., at Lane & Waterman LLP, represents the Davenport Diocese in its restructuring efforts. Hamid R. Rafatjoo, Esq., and Gillian M. Brown, Esq., of Pachulski Stang Zhiel Young Jones & Weintraub LLP represent the Official Committee of Unsecured Creditors. In its schedules of assets and liabilities, the Davenport Diocese reported $4,492,809 in assets and $1,650,439 in liabilities. Davenport's exclusive period to file a plan will expire on Aug. 15, 2007. Its exclusive period to solicit acceptances of its plan will expire on Oct. 14, 2007. (Catholic Church Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CATHOLIC CHURCH: San Diego Can Appoint Unknown Claimants Rep. ------------------------------------------------------------- The Hon. Louise DeCarl Adler of the U.S. Bankruptcy Court for the Southern District of California authorizes The Roman Catholic Bishop of San Diego to appoint a legal representative for unknown or future tort claimants who will represent all claimants (i) who are minors, (ii) who have repressed memory of sexual abuse, and (c) who know they were abused as minors but who have not discovered, or who reasonably should not have discovered, the causal connection between their injury and the sexual abuse. Judge Adler clarifies that the Unknown Claims Representative will not represent those claimants who know they were abused and have discovered the causal connection between their injury and the abuse, but who decline to assert their claims by the Bar Date because of shame or desire not to come forward. Judge Adler notes that these victims know they have claims, and the Bar Date is meaningless if it tells these victims that they need not come forward by the Bar Date's expiration. In addition, the Unknown Claims Representative will not represent victims whose claims have already lapsed under California law as of the Petition Date, Judge Adler says. The Court does not have the power to revive claims that are time-barred under state law as of the Debtor's bankruptcy filing. About the San Diego Diocese The Roman Catholic Diocese of San Diego in California -- http://www.diocese-sdiego.org/-- employs approximately 3,000 people in various areas of work. The Diocese filed for Chapter 11 protection just before commencement of the first of court proceedings for 140 sexual abuse lawsuits filed against the Diocese. Authorities of the San Diego Diocese said they were not in favor of litigating their cases. The San Diego Diocese filed for chapter 11 protection on Feb. 27, 2007 (Bankr. S.D. Calif. Case No. 07-00939). Gerald P. Kennedy, Esq., at Procopio, Cory, Hargreaves and Savitch LLP, represents the Diocese. In its schedules of assets and liabilities, the Diocese listed total assets of $152,510,888 and total liabilities of $72,754,092. On March 27, 2007, the Debtor filed its plan and disclosure statement. The Diocese's exclusive period to file a chapter 11 plan of reorganization expired June 27, 2007. The Diocese however has asked the Court to extend its exclusive plan- filing period. (Catholic Church Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CENTURY ALUMINUM: Incurs $60.7 Million Net Loss in Second Quarter ----------------------------------------------------------------- Century Aluminum Company reported a net loss of $60.7 million for the second quarter of 2007. Reported second quarter results were negatively impacted by an after-tax charge of $125.1 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting and by a non-cash after-tax charge of $2 million for the early extinguishment of debt. Quarterly results were positively impacted by a tax benefit of $4.3 million related to the increase in the carrying amount of deferred tax assets as a result of a state tax law change. The dilutive effect of the convertible notes, options and service- based awards would reduce basic EPS by $0.13. In the second quarter of 2006, the company reported net income of $45.8 million, which included an after-tax charge of $19.5 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting. Second Quarter 2007 Highlights -- Strong operating earnings were generated on revenues of $464 million, which increased 3.7% from record levels set in the first quarter of 2007. -- All primary aluminum facilities operated at or above capacity. -- The first cells of the 40,000 tonne expansion of the Grundartangi, Iceland smelter were energized on July 2. The project remains on schedule and budget for a fourth quarter, 2007 completion. -- Century signed a definitive agreement with Icelandic electric power suppliers Hitaveita Sudurnesja and Orkuveita Reykjavikur for the supply of electrical power to the new aluminum smelter project to be built near Helguvik, Iceland. These contracts provide for the supply of power for approximately 250,000 tonnes of aluminum production. -- A memorandum of understanding was signed with the Guangxi Investment Group Company to explore the feasibility of developing a project including a high purity aluminum reduction plant and related bauxite and alumina facilities in the Guangxi Zhuang Autonomous Region in China. Sales in the second quarter of 2007 were $464 million, compared with $406 million in the second quarter of 2006. Shipments of primary aluminum for the quarter totaled 188,650 tonnes compared with 171,715 tonnes in the year-ago quarter, reflecting the impact of the Grundartangi expansion to 220,000 tonnes, which was completed in the fourth quarter of 2006. For the first half of 2007, the company reported net income of $3.6 million, which includes an after-tax charge of $125.1 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting. Sales in the first six months of 2007 were $911.7 million compared with $752.9 million in the same period of 2006. Shipments of primary aluminum for the first six months of 2007 were 373,272 tonnes compared with 328,666 tonnes for the comparable 2006 period. At June 30, 2007, the company's balance sheet showed total assets of $2.5 billion, total liabilities of $1.9 billion, and total stockholders' equity of $601.2 million. The company held unrestricted cash of $187.7 million and restricted cash of $2 million at June 30, 2007. "We made important progress on our long-term initiatives during the quarter," said president and chief executive officer Logan W. Kruger. "The continuing expansion of Grundartangi remains on schedule and budget. At our Helguvik greenfield project, we signed contracts with each of our two power supply partners and advanced the various permitting processes. In addition, we raised equity capital for the plant's construction and became the first U.S. company to list its shares on the stock exchange in Iceland." About Century Aluminum Company Headquartered in Monterey, California, Century Aluminum Company (NASDAQ:CENX) -- http://www.centuryca.com/-- owns and operates a 244,000 mtpy plant at Hawesville, Kentucky; a 170,000 mtpy plant at Ravenswood, West Virginia; and a 90,000 mtpy plant at Grundartangi, Iceland. The company also owns a 49.67% interest in a 222,000 mtpy reduction plant at Mt. Holly, South Carolina. ALCOA Inc. owns the remainder of the plant and is the operating partner. Century also holds a 50% share of the 1.25 million mtpy Gramercy Alumina refinery in Gramercy, Louisiana and related bauxite assets in Jamaica. * * * Century Aluminum Company carries Moody's Investors Service Ba3 corporate family and probability-of-default ratings, and B1 senior unsecured debt rating. The ratings outlook remains stable. The company also carries Standard & Poor's BB- long-term foreign and local issuer credit ratings. The ratings outlook remains stable. COBALT CMBS: S&P Rates $5.042 Million Class O Certificates at B- ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Cobalt CMBS Commercial Mortgage Trust 2007-C3's $2.01 billion commercial mortgage pass-through certificates series 2007-C3. The preliminary ratings are based on information as of July 25, 2007. 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 fiscal agent, the economics of the underlying loans, and the geographic and property type diversity of the loans. Classes A-1, A-1A, A-2, A-3, A-4, A-J, A-M, A-PB, B, C, and D are currently being offered publicly. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.17x, a beginning LTV of 124.3%, and an ending LTV of 120.1%. Preliminary Ratings Assigned Cobalt CMBS Commercial Mortgage Trust 2007-C3 Recommended Class Rating Amount credit support ----- ------ ------ -------------- A-1 AAA $13,910,000 30.000% A-2 AAA $107,675,000 30.000% A-3 AAA $93,863,000 30.000% A-PB AAA $45,466,000 30.000% A-4 AAA $783,039,000 30.000% A-1A AAA $367,811,000 30.000% IO* AAA $2,016,804,393 -- A-M AAA $201,680,000 20.000% A-J AAA $153,781,000 12.375% B AA $40,336,000 10.375% C AA- $20,168,000 9.375% D A $25,211,000 8.125% A-4FL AAA TBD 30.000% A-MFL AAA TBD 20.000% A-JFL AAA TBD 12.375% E A- $20,168,000 7.125% F BBB+ $25,210,000 5.875% G BBB $22,689,000 4.750% H BBB- $25,210,000 3.500% J BB+ $7,563,000 3.125% K BB $5,042,000 2.875% L BB- $10,084,000 2.375% M B+ $5,042,000 2.125% N B $2,521,000 2.000% O B- $5,042,000 1.750% P NR $35,293,393 0.000% * Interest-only class with a notional amount. TBD -- To be determined. NR -- Not rated COUDERT BROS: Disclosure Statement Hearing Moved to August 21 ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York moved the hearing to approve the disclosure statement describing Coudert Brothers LLP's Chapter 11 Plan of Liquidation from June 15, 2007, to Aug. 21, 2007, Bill Rochelle of Bloomberg News reports. In March 2007, Coudert filed with the Court a Chapter 11 Plan of Liquidation stating that on the effective date of that Plan, the liquidation trust agreement will be executed by the Debtor and the liquidation trustee. Also on that date, all the estate's assets will vest in the liquidation trust free and clear of all liens, claim and encumbrances. The Debtor and the Creditors Committee will jointly pick the liquidation trustee 15 days before the confirmation hearing. If a dispute arises, the Court will select from the candidates submitted by the Debtor and the Committee. Treatment of Claims Under the Plan, each holder of Secured Claims and Priority Non-Tax Claims will be paid in full. At the Liquidation Trustee's option, these holders will receive: i. cash; ii. non-recourse conveyance of the Debtor's interest and the collateral securing the their claims; or iii. less favorable treatment as agreed to by the holders and the liquidation trustee. Holders of General Unsecured Claims and Partner Non-Profit Claims will receive a pro rata share of the unsecured creditor fund. In the event there exists any disputed Secured, Priority Non-Tax, General Unsecured, and Partner Non-Profit claims, the liquidation trustee must maintain cash in an amount equal to the portion of the disputed claims reserve. On the effective date, Convenience Claim holders will receive cash in an aggregate amount equal to a percentage of the allowed amount determined by the Debtor before the solicitation of the Plan. In addition, holders of Convenience, General Unsecured, and Partner Profit Claims will be paid from the Unsecured Creditors fund. Holders of Insured Malpractice Claims will be paid solely from the proceeds of any applicable policy with respect to the insured portion of the claim. This holder will not receive any distribution from the Unsecured Creditor fund. Each holder of Partner Profit Claims, if any, will receive the Debtor's surplus. Holders of Interests will get nothing under the Plan. The Unsecured Creditor Fund is the cash derived from Participating Party Settlement Proceeds, liquidation of assets, and causes of action recoveries, less any distributions or reserves on account of Secured Claims, Administrative Claims, Priority Tax Claims, Priority Non-Tax Claim, and Estate Expenses. Participating Party Settlement Proceeds refers to cash that the Liquidation Trustee received from a participating party under a participating party agreement. About Coudert Brothers Coudert Brothers LLP was an international law firm specializing in complex cross border transactions and dispute resolution. The firm had operations in Australia and China. The Debtor filed for Chapter 11 protection on Sept. 22, 2006 (Bankr. S.D.N.Y. Case No. 06-12226). John E. Jureller, Jr., Esq., and Tracy L. Klestadt, Esq., at Klestadt & Winters, LLP, represent the Debtor in its restructuring efforts. Brian F. Moore, Esq., and David J. Adler, Esq., at McCarter & English, LLP, represent the Official Committee Of Unsecured Creditors. In its schedules of assets and debts, Coudert listed total assets of $29,968,033 and total debts of $18,261,380. COVANTA HOLDING: Earns $37.7 Million in Quarter Ended June 30 ------------------------------------------------------------- Covanta Holding Corporation had net income of $37.7 million for the second quarter ended June 30, 2007, as compared with $51.2 million for the second quarter ended June 30, 2006. Total operating revenues that grew 6% to $355 million for the three months ended June 30, 2007, up from $334 million in the prior year comparative period. The company's domestic waste and energy operating revenues grew 5% to $301 million, driven primarily by contractual service fee escalations, construction revenues related to the Hillsborough County facility expansion and two facilities added to the company's portfolio this year; the Harrisburg Energy-from-Waste facility and the Holliston transfer station. International revenues of $52 million grew by 17% primarily due to higher electricity sales at both Indian facilities. Six Months Results For the six months ended June 30, 2007, total company operating revenues rose 7% to $685 million. Covanta Energy's net income for the six months ended June 30, 2007, was $19.8 million. At June 30, 2007, the company listed $4.3 billion total assets, $3.4 billion total liabilities, $43.6 million minority interest, and $895.3 million stockholders' equity. A full-text copy of the company's second quarter report is available for free at http://ResearchArchives.com/t/s?21d6 "The second quarter was marked by solid operating performance and tangible progress on our growth initiatives that position us to take advantage of promising opportunities around the world," said Anthony Orlando, president and chief executive officer of Covanta. "Notably, we signed a 10 year agreement to operate the Harrisburg Energy-from-Waste facility, completed our joint venture to enter the Energy-from-Waste market in China, announced the acquisition of two biomass renewable energy facilities in California, and received a Letter of Intent to design, build and operate a 1,700 ton per day Energy-from-Waste facility in Dublin, Ireland." About Covanta Headquartered in Fairfield, New Jersey, Covanta Holding Corp. -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. Covanta has operations in the Philippines, China, Costa Rica, India, and Bangladesh. * * * The company carries Standard & Poor's Ratings Services' BB- corporate credit rating with a stable outlook. It also carries Moody's Investors Service's Ba2 Corporate Family Rating. CPM HOLDINGS: High Leveraged Financial Risk Cues S&P's B+ Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Waterloo, Iowa-based agricultural equipment supplier CPM Holdings Inc. The outlook is stable. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and a '3' recovery rating to subsidiary CPM Acquisition Corp.'s proposed $210 million first-lien term loan and $25 million first-lien revolving credit facility, indicating an expectation of meaningful (50%-70%) recovery in event of a payment default. The term loan is used to acquire substantially all assets of Crown Holdings, Inc. and to refinance CPM's existing debt. "The ratings reflect CPM's highly leveraged financial risk profile characterized by somewhat high debt levels and its exposure to cyclical agricultural equipment markets and to volatile commodity prices. This is partially offset by CPM's leading position in niche markets and by its fair geographic diversification," said Standard & Poor's credit analyst Robert Wilson. DADE BEHRING: Earns $50.3 Million in Second Quarter 2007 -------------------------------------------------------- Dade Behring Holdings, Inc. reported second quarter earnings of $50.3 million, an increase of 42% over the same quarter in 2006, and also reported revenue of $480.8 million, an increase of 8.2%. Earnings for the six months ended June 2007 was $90.4 million, an increase of 33% over the similar period in 2006, and six-month revenue increased 9.3% to $940 million, representing 6.1% growth on a constant currency basis. "Our strong financial performance is directly related to our people and their ability to consistently execute our customer excellence business strategy," said Jim Reid-Anderson, Chairman, President and CEO, Dade Behring said. "We are highly focused on providing world-class products and service to our 25,000 clinical laboratory customers around the globe." Cash flow from operations, after investing activities and excess tax benefits from stock-based compensation, was $56 million and $106 million for the quarter and six months ended June 30, 2007, respectively. Stock Repurchase Program During the quarter, the company repurchased $122 million of its common stock, and during the first six months of the year it repurchased $179 million of its shares. Since the inception of its share repurchase plan in the third quarter of 2005, the company has repurchased $583 million or 15% of the outstanding shares. As of June 30, 2007, 600,000 shares remain authorized for repurchase under the current program. In the second quarter, the company recorded a $3.1 million tax benefit related to a reduction in the company's reserve for uncertain tax positions, which favorably impacted earnings per share by $0.04. Operational Highlights U.S. revenue grew 5.8% and 6.9% over the second quarter and first six months of 2006, respectively. Revenue outside of the United States grew 4.8% and 5.6% for the similar periods on a constant currency basis. Global core-product reagent, service and operating lease revenue grew 3.8% in the second quarter and 5.4% for the first six months of the year, on a constant currency basis. Operating income, as a percent of sales, was 16.8% and 16.3% for the quarter and six months ended June 30, 2007. Headquartered in Deerfield, Illinois, Dade Behring Holdings Inc. -- http://www.dadebehring.com/-- engages in the manufacture and distribution of diagnostics products and services to clinical laboratories worldwide. * * * The company carries Moody's Investors Service Ba1 Corporate Family Rating with a Stable Outlook. DADE BEHRING: Declares Quarterly Dividend of 5 Cents Per Share -------------------------------------------------------------- Dade Behring Holdings, Inc.'s board of directors has declared its tenth consecutive cash dividend. Shareholders of record as of Aug. 31, 2007 will receive five cents per common share of stock, payable on Sept. 17, 2007. Headquartered in Deerfield, Illinois, Dade Behring Holdings Inc. -- http://www.dadebehring.com/-- engages in the manufacture and distribution of diagnostics products and services to clinical laboratories worldwide. * * * The company carries Moody's Investors Service Ba1 Corporate Family Rating with a Stable Outlook. DADE BEHRING: Inks Definitive Merger Agreement with Siemens AG -------------------------------------------------------------- Dade Behring Holdings, Inc. and Siemens AG have entered into a definitive merger agreement under which Siemens will acquire all of the outstanding shares of Dade Behring for $77 per share in cash. Pursuant to the agreement, Siemens is expected to commence a tender offer for any and all outstanding shares of Dade Behring common stock by Aug. 8, 2007. The board of directors of Dade Behring has voted unanimously to recommend to holders of Dade Behring common stock that they tender their shares in the tender offer. The tender offer is subject to various conditions, including the tender of a majority of the shares of Dade Behring common stock in the tender offer and the receipt of regulatory approvals. Following the completion of the tender offer, the parties will cause a subsidiary of Siemens to merge with Dade Behring As a result of the merger, Dade Behring will become a wholly-owned subsidiary of Siemens and all outstanding shares of Dade Behring common stock will be converted into the right to receive the same consideration paid in the tender offer. The agreement contains customary terms and conditions. The transaction is expected to close within three to six months. "Combined, Dade Behring and Siemens will have the potential to become uniquely positioned as the largest provider of clinical diagnostic products and services in the world," Jim Reid-Anderson, Chairman, President and CEO, Dade Behring, said. "We will continue to serve our clinical laboratory customers with the same care and commitment that we always have, by providing innovative products and outstanding service that meets their needs. Dade Behring's customer excellence business strategy has been the foundation of our success, and as part of Siemens Medical Solutions Diagnostics, the combined businesses will continue to follow that same strategy into the future." "The planned acquisition of Dade Behring complements our current capabilities and offers us the unique opportunity to assemble an unparalleled portfolio of products and services, and together become the world market leader in comprehensive clinical laboratory diagnostics," Erich R. Reinhardt, member of the Managing Board of Siemens AG and President & CEO of Siemens Medical Solutions, explained. Headquartered in Deerfield, Illinois, Dade Behring Holdings Inc. -- http://www.dadebehring.com/-- engages in the manufacture and distribution of diagnostics products and services to clinical laboratories worldwide. * * * The company carries Moody's Investors Service Ba1 Corporate Family Rating with a Stable Outlook. DAIMLERCHRYSLER: Banks to Pool Money to Raise Buyout Financing -------------------------------------------------------------- Bankers for DaimlerChrysler AG's Chrysler Group deferred a $12 billion sale of debt to investors as part of a buyout severing Chrysler from its German parent, The Wall Street Journal reports. According to WSJ, rather than fund the operations of the newly independent auto maker with money raised from loans, as planned, the underwriters of the deal -- five banks led by J.P. Morgan Chase & Co. -- will have to provide much of the money themselves, at least until the market settles down. The New York Times relates that executives at the automaker's parent company said the financing problem will not affect the purchase of the Chrysler Group by the private equity firm Cerberus Capital Management, which signed to buy an 80% stake in the U.S. Arm. Based in Stuttgart, Germany, DaimlerChrysler AG (NYSE:DCX) (FRA:DCX) -- http://www.daimlerchrysler.com/-- develops, manufactures, distributes, and sells various automotive products, primarily passenger cars, light trucks, and commercial vehicles worldwide. It primarily operates in four segments: Mercedes Car Group, Chrysler Group, Commercial Vehicles, and Financial Services. The company's worldwide operations are located in Canada, Mexico, United States, Argentina, Brazil, Venezuela, China, India, Indonesia, Japan, Thailand, Vietnam, and Australia. The Chrysler Group segment offers cars and minivans, pick-up trucks, sport utility vehicles, and vans under the Chrysler, Jeep, and Dodge brand names. It also sells parts and accessories under the MOPAR brand. The Chrysler Group is facing a difficult market environment in the United States with excess inventory, non-competitive legacy costs for employees and retirees, continuing high fuel prices and a stronger shift in demand toward smaller vehicles. At the same time, key competitors have further increased margin and volume pressures -- particularly on light trucks -- by making significant price concessions. In addition, increased interest rates caused higher sales & marketing expenses. In order to improve the earnings situation of the Chrysler Group as quickly and comprehensively, measures to increase sales and cut costs in the short term are being examined at all stages of the value chain, in addition to structural changes being reviewed as well. DANA CORP: Court Approves USW & UAW Settlement Agreements --------------------------------------------------------- The Honorable Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York granted approval of the settlement agreements between Dana Corporation and each of the United Steel Workers and the United Auto Workers, as well as an investment agreement with Centerbridge Capital Partners, L.P., for a major investment in the company. As reported in the Troubled Company Reporter on July 9, 2007, the agreements consist of: -- A settlement agreement with each of the United Steel Workers and the United Auto Workers, which will lower Dana's labor costs and replace the company's health care and long-term disability obligations for retirees and employees represented by these unions with Voluntary Employees' Beneficiary Association trusts to which Dana will contribute in aggregate approximately $700 million in cash, less certain benefit payments made prior to the effective date of the company's plan of reorganization, and approximately $80 million in common stock of the reorganized Dana; -- An agreement with Centerbridge Capital Partners, L.P., and its affiliates on the terms under which the firm will invest up to $500 million in cash for convertible preferred stock in the reorganized Dana and facilitate an additional investment by other investors of up to $250 million in convertible preferred stock; and -- A plan support agreement with the USW, the UAW, and Centerbridge, under which these parties will support a plan of reorganization filed by Dana that includes both the labor settlements and the Centerbridge investment agreement. The judge also approved a plan support agreement with the USW, the UAW, and Centerbridge, under which these parties will support a plan of reorganization filed by Dana that includes both the labor settlements and the Centerbridge investment agreement. Under terms of the investment agreement, Centerbridge will purchase up to $500 million of convertible preferred stock of the reorganized Dana and facilitate an additional investment of up to $250 million in convertible preferred stock. "We are pleased with the Court's approval of these agreements, which we believe preserves significant value for all of our constituents," Dana Chairman and CEO Mike Burns said. "The developments support Dana's long-term success and keep our company on the path to file our reorganization plan by the beginning of September and to emerge from bankruptcy by year end as a competitive and sustainable business." Toledo, Ohio-based Dana Corp. -- http://www.dana.com/-- (OTC Bulletin Board: DCNAQ) designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off- highway vehicle customers, which collectively produce more than 60 million vehicles annually. The company and its affiliates filed for chapter 11 protection on Mar. 3, 2006 (Bankr. S.D.N.Y. Case No. 06-10354). As of Sept. 30, 2005, the Debtors listed $7,900,000,000 in total assets and $6,800,000,000 in total debts. Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, represents the Official Committee of Unsecured Creditors. Fried, Frank, Harris, Shriver & Jacobson, LLP serves as counsel to the Official Committee of Equity Security Holders. Stahl Cowen Crowley, LLC serves as counsel to the Official Committee of Non-Union Retirees. The Debtors' exclusive period to file a plan expires on Sept. 3, 2007. They have until Nov. 2, 2007, to solicit acceptances of that plan. DEATH ROW: Tupac's Mom Wants Unreleased Songs Excluded from Sale ---------------------------------------------------------------- Afeni Shakur, mother of the late rapper Tupac Shakur, filed an adversary complaint with the U.S. Bankruptcy Court for the Central District of California against Death Row Records Inc., according to various news reports. Ms. Shakur hopes to stop the Debtor from including unreleased songs of Tupac in a bankruptcy sale. According to the reports, Donald N. David, Esq., General Counsel for Amaru Entertainment and co-administrator of the Tupac Shakur Estate, contends that the Debtor violated a 1997 Death Row Agreement, stating that all unreleased songs physically housed in the data vaults at Death Row Records, would become the rightful property of the Tupac Shakur Estate. Mr. David disclosed that the Estate's administrators were surprised that a bankruptcy court assessment of Death Row's assets revealed an album's worth of unreleased songs of Tupac being herald to potential buyers, various papers said. Headquartered in Compton, California, Death Row Records Inc. -- http://www.deathrowrecords.net/-- is an independent record producer. The company and its owner, Marion Knight, Jr., filed for chapter 11 protection on April 4, 2006 (Bankr. C.D. Calif. Case No. 06-11205 and 06-11187). Daniel J. McCarthy, Esq., at Hill, Farrer & Burrill, LLP, and Robert S. Altagen, Esq., represent the Debtors in their restructuring efforts. R. Todd Neilson serves as Chapter 11 Trustee for the Debtors' estate. When the Debtors filed for protection from their creditors, they listed total assets of $1,500,000 and total debts of $119,794,000. DELPHI CORPORATION: IUE-CWA Intends to Terminate Contracts ---------------------------------------------------------- The International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers Division of the Communications Workers of America notified Delphi Corp. of its intent to terminate its local and national contracts with the auto parts maker in a July 18, 2007 letter. The action comes as talks over a new national agreement have dragged on concerning key issues, including job security, wages, and benefits. "Delphi has not delivered proposals that meet our members' needs," said IUE-CWA President Jim Clark. "From the start we have stated that IUE-CWA members want both their jobs and dignity intact at the end of the process. We are tired of spinning our wheels in negotiations while Delphi falls short of these basic demands." The termination notice is the first step toward a national strike by the IUE-CWA at Delphi. Under the terms of the national agreement, the notice allows the locals to strike effective 12:01 a.m. on October 13, 2007. "There is still much time to change our course," said IUE-CWA Automotive Conference Board Chairman Willie Thorpe. "But we cannot sit back and be unprepared. In our estimation, given the current state of talks, a strike is a real possibility and we need to act accordingly." As part of the termination notice, IUE-CWA also revoked its permission for Delphi to continue to use temporary employees in IUE-CWA represented facilities. "The union had allowed temporary workers as a goodwill gesture as long as talks toward an acceptable contract were progressing. Hopefully with this action progress may improve," explained Mr. Clark. According to the IUE-CWA, Delphi has the option of reducing production output or hiring the workers as permanent. In most cases, the cut-off takes place in two weeks. The IUE-CWA represents more than 2,000 Delphi workers. About Delphi Corp. Headquartered in Troy, Mich., Delphi Corporation (OTC: DPHIQ) -- 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. Delphi has regional headquarters in Japan, Brazil and France. 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 Mar. 31, 2007, the Debtors' balance sheet showed $11,446,000,000 in total assets and $23,851,000,000 in total debts. The Debtors' exclusive plan-filing period expires on Dec. 31, 2007. (Delphi Corporation Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). DELTA AIR: Earns $1.8 Billion in Second Quarter 2007 ---------------------------------------------------- Delta Air Lines reported combined results for the quarter ended June 30, 2007. Key points include: * Delta's second quarter pre-tax income was $1.9 billion. Excluding reorganization and related items, pre-tax income was $373 million, a nearly $200 million improvement compared to the prior year period. * Delta's operating income for the June 2007 quarter was $490 million, the company's fifth consecutive quarterly operating profit, reflecting an operating margin of 9.8 percent. Excluding reorganization and related items, operating income was $499 million, and operating margin was 10.0 percent. * In the June 2007 quarter Delta generated $1.1 billion in free cash flow. As of June 30, 2007, Delta had $3.7 billion in cash, cash equivalents and short-term investments, of which $3.4 billion was unrestricted. The company's undrawn revolving credit facility provides an additional $1 billion in unrestricted liquidity. * Delta accrued $79 million in profit sharing for the June 2007 quarter, in recognition of the achievements of all Delta employees toward meeting the company's financial targets. Delta reported pre-tax income of $1.9 billion in the second quarter of 2007, compared to a pre-tax loss of $2.2 billion in the second quarter of 2006. Given its significant net operating loss carry forwards (NOLs) which will be used to offset substantially all cash income tax obligations in the foreseeable future, Delta believes pre-tax earnings is a more meaningful measure of financial performance. Net income for the June 2007 quarter was $1.8 billion. Excluding the reorganization and related items, net income was $274 million. "Delta's emergence from bankruptcy was a significant milestone in the history of the company and the airline industry," said Gerald Grinstein, Delta's chief executive officer. "In delivering the kind of outstanding financial, operational and customer service results we saw this quarter, it is clear Delta people at every level are producing a strong airline with a bright future." Fresh Start Reporting Upon emergence from bankruptcy on April 30, 2007, the company adopted fresh start reporting. Under fresh start reporting, Delta revalued its assets and liabilities to preliminarily estimated current market values and changed the accounting for its SkyMiles frequent flyer program. These non-cash adjustments significantly impacted Delta's balance sheet, statement of operations and statement of cash flows. As a result, Delta's financial statements on and after May 1, 2007 are not comparable to its previously issued financial statements. Financial Performance Strong passenger demand, together with Delta's network restructuring and revenue management initiatives, drove operating revenue of $5.0 billion for the June 2007 quarter, representing an increase of $262 million or 5.5 percent compared to the prior year period. The increase includes a $42 million benefit, primarily impacting passenger revenue, from fresh start adjustments related to a change in accounting for Delta's frequent flyer program. Delta's consolidated passenger unit revenue (PRASM) was 11.78 cents, an increase of 5.6% in the June 2007 quarter compared to the same period in 2006. Excluding the impact of the fresh start adjustments related to a change in accounting for the frequent flyer program, consolidated PRASM increased 4.6%. Delta's international PRASM grew 9.7% year over year, with trans- Atlantic markets producing an 11.1% PRASM improvement on an 11.8% increase in capacity, and Latin American markets producing a 6.7% increase in PRASM on a 23.8% increase in capacity. Domestic markets also showed solid PRASM performance, with domestic PRASM up 5.7% on 4.8% lower capacity. Delta's mix of domestic versus international capacity was 65% and 35%, respectively in June 2007, as compared to 77 percent and 23 percent, respectively in June 2005. Based on the most recent available ATA data for the year-to-date period ended May 31, 2007, Delta's consolidated length of haul adjusted PRASM was 96% of the industry average PRASM (excluding Delta), up from 86% in 2005 and on track with Delta's target of closing the gap to the industry by the end of 2008. For the June 2007 quarter, Delta's operating expenses increased 3%, or $141 million, versus the prior year period. The increase was due to $79 million in profit sharing expense, $36 million in non-cash expense from fresh start adjustments, $26 million in non- cash compensation expense related to emergence awards, and higher expenses related to a 1% increase in capacity. These increases were partially offset by lower fuel price and benefits from restructuring initiatives. For the same period, non-operating expenses declined 27%, or $52 million, due primarily to improved cash flows and lower effective interest rates. Delta's reported mainline unit cost (CASM) in the second quarter of 2007 was 10.41 cents, an increase of 1.8% compared to the second quarter of 20065. Excluding expenses from profit sharing and bankruptcy-related professional fees, mainline non-fuel CASM was 6.93 cents, a decline of 0.6%. Liquidity At June 30, 2007, Delta had $3.7 billion in cash, cash equivalents and short-term investments, of which $3.4 billion was unrestricted. Delta also has an additional $1 billion in unrestricted liquidity available under its undrawn revolving credit facility. During the June 2007 quarter, Delta generated $1.1 billion in free cash flow, which included more than $170 million in capital expenditures reinvested in its business. June 2007 Quarter Highlights The June 2007 quarter included several significant events for Delta. In addition to emerging from bankruptcy on April 30, Delta continued the positive momentum from its restructuring, demonstrating its continued commitment to providing the best products and services to its customers while creating value for investors by: * Completing its $2.5 billion exit financing facility, which includes an industry leading $1 billion revolving credit facility, and repaying its $2.1 billion debtor-in- possession financing loans; * Beginning trading of its common stock on May 3rd on the New York Stock Exchange under the ticker symbol DAL; * Increasing its unrestricted cash reserves by approximately $800 million by amending its Visa/Mastercard credit card processing agreement to provide for return of the previously required holdback; * Earning, for the second consecutive year, a ranking in the top two among network carriers in the JD Power Customer Satisfaction Survey; * Completing the conversion of eight B767-400 aircraft from domestic to international service, to continue its international expansion strategy. International routes launched during the June 2007 quarter include new service from Atlanta to Dubai, Prague, Seoul, and Vienna and from New York-JFK to Bucharest and Pisa; * Confirming an additional order for a B777-LR aircraft, and announcing the planned installation of winglets on more than 60 Boeing 737-NG, 757-200 and 767-300ER aircraft over the next 2 years; * Completing its redesigned, state-of-the-art lobby at Hartsfield-Jackson Atlanta International Airport to provide its customers with a faster, more convenient check-in process; * Opening a dedicated check-in facility at Terminal 2 at New York-JFK, offering the only exclusively premium check-in facility at that airport; and * Unveiling its new corporate brand and livery, which features the new all-red Delta "widget" to recognize Delta's rich heritage and highlight the company's bold, new identity. "The June quarter results announced today include $1.1 billion in free cash flow showing solid evidence that our plan is working. As a result of our strong operating performance, we're pleased to report that we accrued $79 million in profit sharing for the quarter that we expect will be paid to employees early next year to reward them for all their hard work," said Edward H. Bastian, Delta's executive vice president and chief financial officer. "Our turnaround continues to take hold, but is not complete - we must remain vigilant in driving revenue and cost improvements, especially in light of increasing fuel prices." Operational Performance Based on the most recent available DOT data for the year-to-date period ended May 31, 2007, Delta ranks first of the network carriers in on-time performance. In addition, exchange carrier data for the month of June 2007 indicates similar rankings through the end of the second quarter. Delta's June 2007 quarter completion factor was 99.1 percent. "Delta people continue to step up to day-to-day operational challenges and have again achieved top tier operational performance, which is even more impressive when considered against the severe weather and record load factors during the quarter," said Jim Whitehurst, Delta's chief operating officer. "This drive to deliver excellent customer service was recognized in Delta's second place ranking of the network carriers - for the second year in a row - in the JD Power Customer Satisfaction Survey." Reorganization and Related Items In the second quarter of 2007, Delta recorded income of $1.5 billion from reorganization and related items, primarily due to the discharge of claims and liabilities in connection with its bankruptcy proceedings and the adoption of fresh start reporting. In the second quarter of 2006, Delta recorded a $2.4 billion charge for reorganization items primarily related to the allowed general, unsecured pre-petition claim in conjunction with changes to the Delta pilot collective bargaining agreement. Fuel Hedging During the June 2007 quarter, Delta hedged 48% of its fuel consumption resulting in an average fuel price per gallon of $2.05. Due to fresh start accounting eliminating much of the hedge benefits toward fuel costs, the average reported fuel price per gallon was $2.09 for the June 2007 quarter. Delta realized approximately $40 million in cash gains on fuel hedge contracts settled during the quarter. As of July 18, 2007, Delta has hedged 21% of its projected fuel consumption for the September 2007 quarter utilizing heating oil collars with an average cap of $1.80. DELTA AIR LINES, INC. Unaudited Consolidated Statement of Operations (Unaudited) (in millions) (Predecessor) (Successor) One Month Two Months Ended Ended April 30, June 30, 2007 2007 ------- ------- OPERATING REVENUE: Passenger: Mainline $1,046 $2,338 Regional affiliates 349 760 Cargo 36 82 Other, net 124 268 ------- ------- Total operating revenue 1,555 3,448 OPERATING EXPENSES: Salaries and related costs 345 694 Aircraft fuel 322 790 Contract carrier arrangements 239 530 Depreciation and amortization 95 193 Contracted services 83 160 Landing fees and other rents 60 122 Passenger commissions and other selling expenses 78 175 Aircraft maintenance materials and outside repairs 82 165 Aircraft rent 20 36 Passenger service 24 61 Other 62 98 Profit sharing - 79 ------- ------- Total operating expenses 1,410 3,103 ------- ------- OPERATING INCOME 145 345 OTHER (EXPENSE) INCOME: Interest expense (62) (120) Interest income 4 33 Miscellaneous, net (2) 9 Total other expense, net (60) (78) ------- ------- INCOME BEFORE REORGANIZATION ITEMS, NET 85 267 REORGANIZATION ITEMS, NET 1,515 - ------- ------- INCOME (LOSS) BEFORE INCOME TAXES 1,600 267 INCOME TAX (PROVISION) BENEFIT 4 (103) ------- ------- NET INCOME (LOSS) $1,604 $164 ======= ======= About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. (Delta Air Lines Bankruptcy News, Issue No. 74; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25 2007, the Court confirmed the Debtors' plan. * * * As reported in the Troubled Company Reporter on July 16, 2007, Fitch Ratings has initiated coverage of Delta Air Lines, Inc. (NYSE: DAL) with the assignment of these debt ratings: Issuer Default Rating 'B'; First-lien senior secured credit facilities 'BB/RR1'; and Second-lien secured credit facility (Term Loan B) 'B/RR4' As reported in the Troubled Company Reporter on May 2, 2007, Standard & Poor's Ratings Services raised its ratings on Delta Air Lines Inc. (B/Stable/--), including raising the corporate credit rating to 'B', with a stable outlook, from 'D', following the airline's emergence from Chapter 11 bankruptcy proceedings. DEVELOPERS DIVERSIFIED: Earns $127.4 Million in Second Qtr. 2007 ---------------------------------------------------------------- Developers Diversified Realty Corporation reported total revenues of $255.4 million for the second quarter ended June 30, 2007, as compared with $189 million for the second quarter ended June 30, 2006. The company had net income of $127.4 million for the second quarter, up from net income of $78.7 million for the second quarter ended June 30, 2006. For the first six months of fiscal year 2007, the company had total revenues of $476.3 million, as compared with $380 million for the comparable period a year ago. The company had net income of $190 million, as compared with $128.5 million for the comparable period a year ago. At June 30, 2007, the company had total assets of a $8.9 billion, total liabilities of $5.5 billion, minority interest of $116.1 million, and total stockholders' equity of $3.4 billion. Scott Wolstein, DDR's chairman and chief executive officer, stated, "We're pleased to announce this quarter's results, which reflect the consistent performance of our core portfolio and the successful execution of several strategic transactions. Now, five months after closing the IRRETI acquisition, we have completed all of the major objectives we previously announced to the market, which, in turn, have accomplished our primary goal: to complete a large, accretive transaction in a manner that improves portfolio quality and overall leverage ratios." Financial Results For the three-months ended June 30, 2007, FFO, a widely accepted measure of a Real Estate Investment Trust performance, available to common shareholders was $159.3 million, as compared to $109.8 million for the three-months ended June 30, 2007, and 2006, respectively, an increase of 45.1%. Net income available to common shareholders was $111.4 million for the three-months ended June 30, 2007, as compared to $64.9 million for the prior-year comparable period. For the six-months ended June 30, 2007, FFO available to common shareholders was $265.4 million, as compared to $196.0 million for the six-months ended June 30, 2007 and 2006, respectively, an increase of 35.4%. Net income available to common shareholders was $160.2 million for the six-months ended June 30, 2007, as compared to $100.9 million, for the prior-year comparable period. Leasing The results from the second quarter ended June 30, 2007, highlight continued strong leasing activity throughout the portfolio were: -- Executed 140 new leases aggregating 713,318 square feet and 264 renewals aggregating 1,172,733 square feet. -- On a cash basis, rental rates on new leases increased 30.3% and rental rates on renewals increased 7.4%. Overall, rental rates for new leases and renewals increased 11.3%. -- Total portfolio average annualized base rent per occupied square foot as of June 30, 2007, was $12.46, as compared to $11.62 at June 30, 2006. -- Portfolio leased rate was 96.0% as of June 30, 2007, as compared to 96.2% at June 30, 2006. The company currently estimates its total annual recurring capital expenditures, including tenant improvements and tenant allowances, to be approximately $24 million in 2007. This figure includes aggregate expenditures anticipated at properties held in joint ventures. Strategic Real Estate Transactions In the second quarter of 2007, the company formed DDR Domestic Retail Fund I, a sponsored, fully-seeded commingled fund. The Fund acquired 63 shopping center assets aggregating 8.3 million square feet from the company and a joint venture for approximately $1.5 billion. The Portfolio is comprised of 54 assets recently acquired by the company through its acquisition of IRRETI, seven assets formerly held in a joint venture with Kuwait Financial Centre, and two assets from the company's wholly-owned portfolio. Due to the sale of the assets from the KFC I joint venture, the Company recognized a promote of approximately $13.6 million, which is included in the company's second quarter 2007 net income and FFO. Dividend Capital Joint Venture In the second quarter of 2007, the company formed a $161.5 million joint venture with Dividend Capital Total Realty Trust. The Company contributed three recently developed assets aggregating 700,000 of company-owned square feet to the joint venture. The company recorded an after-tax merchant build gain, net of its 10% retained interest, of approximately $45.6 million, which is included in the company's second quarter FFO. The company retained an effective 10% ownership and receives asset management and property management fees, plus fees on leasing and ancillary income. In addition, the company will receive a promoted interest above a 9.5% leveraged threshold return. Dispositions In addition to the sale of assets to the two joint ventures discussed above, the company sold 52 shopping center properties, aggregating 5.4 million square feet for about $448.7 million and recognized a non-FFO gain of about $10.8 million in the second quarter of 2007. An additional 11 assets associated with this transaction are expected to sell in the third quarter of 2007 for about $154.3 million. Common Share Repurchase During the second quarter of 2007, the Company's Board of Directors authorized a common share repurchase program. Under the terms of the program, the Company may purchase up to a maximum value of $500 million of its common shares during the next two years. At June 30, 2007, $525.5 million of costs were incurred in relation to the Company's eleven development projects under construction and the six that will commence construction in 2007. In addition to these developments, the company has identified several additional development opportunities reflecting an aggregate estimated cost of over $1 billion. Development (Joint Ventures) The company's joint ventures have the following shopping center projects under construction. At June 30, 2007, $159.5 million of costs had been incurred in relation to these development projects. The company's joint venture with Sonae Sierra anticipates commencing construction on a 350,000 square foot enclosed mall in Uberlandia, Brazil, with an estimated gross cost of $69.9 million. Redevelopments and Expansions The company is currently expanding/redeveloping the following shopping centers at a projected aggregate gross cost of approximately $93.9 million. At June 30, 2007, about $20.1 million of costs had been incurred in relation to these projects. The company's joint ventures are currently expanding/redeveloping the following shopping centers at a projected gross cost of $567.6 million, which includes the initial acquisition costs for the Coventry II redevelopment projects. At June 30, 2007, approximately $448.5 million of costs had been incurred in relation to these projects. Financings In April 2007, the company redeemed all outstanding shares of its 8.6% Class F Cumulative Redeemable Preferred Shares, aggregating $150 million, at a redemption price of $25.10750 per Class F Preferred Share. The company recorded a non-cash charge to net income available to common shareholders of about $5.4 million in the second quarter of 2007 relating to original issuance costs. During the second quarter of 2007, the company received net cash proceeds of about $1.6 billion relating to the sale of assets to joint ventures and third parties. These proceeds were used to repay the balance outstanding on the Inland bridge financing of $550 million, redemption of $484 million, net, of preferred operating partnership units and the balance of $600 million was used to repay revolving credit facility borrowings. Developers Diversified currently owns and manages over 735 retail operating and development properties in 45 states, plus Puerto Rico and Brazil, totaling 155.5 million square feet. Developers Diversified Realty is a self-administered and self-managed real estate investment trust operating as a fully integrated real estate company which acquires, develops, leases and manages shopping centers. About Developers Diversified Based in Beachwood, Ohio, Developers Diversified Realty Corp. (NYSE: DDR) -- http://www.ddr.com/-- owns or manages approximately 800 operating and development retail properties in 45 states, plus Puerto Rico and Brazil, comprising approximately 162 million square feet. Developers Diversified is a self-administered and self-managed real estate investment trust operating as a fully integrated real estate company which develops, leases and manages shopping centers. The company elected to be treated as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended Dec. 31, 1993. As a real estate investment trust, the company must meet a number of organizational and operational requirements, including a requirement that the company distribute at least 90% of its taxable income to its stockholders. As a real estate investment trust the company generally will not be subject to corporate level federal income tax on taxable income it distributes to its stockholders. * * * Developers Diversified Realty Corporation continues to carry Fitch BB+ preferred stock rating. E*TRADE FIN'L: Earns $159 Million in Quarter Ended June 30 ---------------------------------------------------------- E*TRADE FINANCIAL Corporation reported net income of $159 million for the quarter ended June 30, 2007 compared to $156 million for the quarter ended June 30, 2006. The results in the second quarter of 2007 produced a 39% operating margin including approximately $35 million of pre-tax expense for certain legal and previously disclosed regulatory matters related to the company's institutional equity business. Total net revenue for the second quarter increased 9% year over year to a record $664 million. Net operating interest income after provision for loan losses increased 15 percent year over year to a record $384 million - representing 58% of total net revenue. The company's retail client assets increased to a record $213 billion including growth in total customer cash and deposits of $1.9 billion - a more than six-fold increase versus the year ago period. The company's balance sheet as of June 30, 2007, showed total assets of $62,975,066,000, total liabilities of $58,640,904,000, and total shareholders' equity of $4,334,162,000. "Our second quarter results demonstrate the strategic and economic success we have achieved through investments in product, service and marketing over the past several years," said Mitchell H. Caplan, Chief Executive Officer, E*TRADE FINANCIAL Corporation. "We delivered record performance in the quarter while improving the overall quality of revenue and earnings through continued growth and engagement led by our high-value, target segment accounts." Other selected recent and second quarter highlights: * Launched Global Trading Platform, providing U.S. retail investors online access to foreign stocks and currencies in the major international markets and the ability to buy, hold and sell in the respective local currencies; * Recognized by SmartMoney magazine as the #1 premium broker (August 2007 issue); * Produced record levels of options trades at 15.4 percent of U.S. Daily Average Revenue Trade ("DART") volumes, up 3 percentage points versus the year ago period; * Generated record quarterly Quick Transfer volume averaging over 400,000 cash transactions per month; * Expanded international business with the launch of operations in Norway and the Netherlands; * Extended branch network with three new locations: Minneapolis, Minnesota; Charlotte, North Carolina; and Houston, Texas - increasing total branches to 27 nationwide; and * Repurchased over 3.1 million shares of common stock at a weighted average price of $23.30 per share. About E*TRADE FINANCIAL Headquartered in New York City, E*TRADE FINANCIAL Corp. -- https://us.etrade.com/ -- provides financial services including trading, investing, banking and lending for retail and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member NASD/SIPC). Bank and lending products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries. * * * E*TRADE FINANCIAL Corp. carries to date Moody's "Ba2" Issuer and Senior Unsecured Debt ratings, which were placed on June 6, 2006, with a positive outlook. In addition, the company carries Standard & Poor's "BB-" long-term local and foreign issuer credit ratings, which were placed on Oct. 23, 2006, with a stable outlook. ELEC COMMUNICATIONS: May 31 Balance Sheet Upside-down by $6.7 Mil. ------------------------------------------------------------------ eLEC Communications Corp.'s consolidated balance sheet at May 31, 2007, showed $2.9 million in total assets and $9.6 million in total liabilities, resulting in a $6.7 million total stockholders' deficit. The company's consolidated balance sheet at May 31, 2007, also showed strained liquidity with $2.0 million in total current assets available to pay $9.4 million in total current liabilities. The company reported a net loss of $729,466 on revenues of $213,389 for the second quarter ended May 31, 2007, compared with a net loss of $647,941 on revenues of $58,245 for the same period ended May 31, 2006. The increase in revenues was directly related to the increase in the number of wholesale customers that began reselling the company's Internet telephone service. The increase in net loss is mainly attributable to the increase in total costs and expenses, the increase in interest expense, partly offset by the increase in warrant income due to the decrease in the market price of the company's common stock at May 31, 2007, as compared to Feb. 28, 2007, and the increase in revenues. In addition, loss from discontinued operations, attributable to the company's former CLEC operations, which were sold in June 2007, totalled $147,020, compared to a loss from discontinued operations of $11,125 for the same period ended May 31, 2006. Full-text copies of the company's consolidated financial statements for the quarter ended May 31, 2007, are available for free at http://researcharchives.com/t/s?21cf Going Concern Doubt Nussbaum Yates & Wolpow P.C., in Melville, New York, expressed substantial doubt about eLEC Communications Corp.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Nov. 30, 2006, 2005, and 2004. The auditing firm reported that the company has suffered recurring losses from operations and is in default of its financing agreements with its principal lender. On April 16, 2007, the company received a waiver and deferral of principal payments on its February 2005 financing and November 25 financing, so that monthly principal payments were not required until June 1, 2007 and Aug. 1, 2007, respectively, in consideration of the issuance by the company of a seven=year warrant to purchase 1,200,000 of common stock at a price of $0.25 per share. The company is in default with its lender for not making all of its June and July 2007 principal and interest payments. The company is working with its lender to adjust its payment schedule. About eLEC Communications eLEC Communications Corp. (OTCBB: ELEC) -- http://www.elec.net/-- through its wholly owned subsidiary, VoX Communications Corp., provides an integrated suite of IP-based communications services and offers wholesale broadband voice, origination and termination services for cable operators, carriers, ISPs, CLECs, resellers and other wireless and wireline operators, as well as enhanced VoIP telephone service to the small business and residential marketplace. FHC HEALTH: S&P Retains Negative Watch on B Credit Rating --------------------------------------------------------- Standard & Poor's Ratings Services said that it would keep its 'B' counterparty credit rating on FHC Health Systems Inc. on CreditWatch with negative implications. On June 14, 2007, Standard & Poor's placed the rating on CreditWatch following the announcement that, effective Sept. 1, 2007, FHC will no longer manage behavioral health care for Medicaid recipients and other beneficiaries of the Maricopa County Regional Behavioral Health Authority. In 2006, the account had constituted about 38% of the company's revenues and 31% of the company's EBITDA. The loss of the account results in a diminished competitive profile for FHC. "We have met with FHC's management subsequent to the announcement," said Standard & Poor's credit analyst Neal Freedman, "and now expect improved operating performance to offset the lost income from the Maricopa County Regional Behavioral Health Authority contract nonrenewal." The increased operating performance is driven by a combination of improved client contracting and enhanced expense management. "Although the loss of the contract was unexpected, it had a low profit margin, and FHC is responding to the negative effects," said Mr. Freedman. On July 19, 2007, FHC announced that it has entered into a definitive agreement with Crestview Partners L.P., a private equity firm under which Crestview will take a significant equity stake in the company accompanied by a new governance structure. FHC remains on CreditWatch with negative implications pending discussions with management regarding the effects of the proposed new equity owner on capitalization, leverage, coverage, and financial policy. The transaction is expected to close by year- end 2007. Standard & Poor's expects the financing of the deal will result in increased debt and a refinancing of the company's current debt with more favorable terms. Standard & Poor's expects to review the transaction financing. If the terms result in debt leverage or interest coverage inconsistent with the current rating, Standard & Poor's would likely lower the rating by one notch. FORD MOTOR: Seeks Concessions as Labor Talks With UAW Start ----------------------------------------------------------- General Motors Corp. and Ford Motor Company officially opened contract negotiations with the United Auto Workers Monday, seeking to win concessions that would reduce labor costs as they grapple with rising health care expenses and stiff competition, particularly from Japanese carmakers, Reuters reports. DaimlerChrysler AG unit Chrysler Group started labor talks with the UAW on Friday. The automakers are trying to deal with health care costs that GM CEO Rick Wagoner says cost them a combined $12 billion in 2006. Providing health care to 2 million employees, retirees and dependents contributed to losses at each of the U.S. automakers last year, while Japanese rivals posted record profits. The difference is made even more significant by higher pensions and retiree health care costs. Many analysts expect the UAW to consider establishing a union- aligned trust fund for retiree health care, if it can reach an agreement with the automakers on how fully to fund it. GM and Ford hourly labor costs -- $73.26 and $70.51, respectively -- are about $30 an hour higher than those paid by Japanese competitors operating U.S. plants, Reuters states, referring to data compiled by the automakers. The UAW's current four-year contract with the "Big Three" automakers expires Sept. 14, 2007, Reuters relates. UAW President Ron Gettelfinger said a strike was still possible if the parties could not reach an agreement. About Ford Motor Co. Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. * * * To date, Ford Motor Company still carries Standard & Poor's Ratings Services 'B' long-term foreign and local issuer credit ratings and negative ratings outlook. At the same time, the company carries Moody's Caa1 issuer and senior unsecured debt ratings and negative ratings outlook. FORSTER DRILLING: Posts $960,342 Net Loss in Qtr. Ended May 31 -------------------------------------------------------------- Forster Drilling Corp. reported a net loss of $960,342 on total revenues of $2.0 million for the second quarter ended May 31, 2007, compared with a net loss of $729,454 on zero revenues for the same period ended May 31, 2006. Total operating expenses increased from $690,739 to $1.0 million for the three months ended May 31, 2007, reflecting increased business operations in the field and in the corporate office. The increase net loss is mainly due to the increase in total operating expenses and the increase in interest expenses, offsetting the increase in gross profit as a result of the increase in revenues. At May 31, 2007, the company's consolidated balance sheet showed $12.0 million in total assets, $8.6 million in total liabilities, and $3.4 million in total stockholders' equity. The company's consolidated balance sheet at May 31, 2007, also showed strained liquidity with $896,494 in total current assets available to pay $7.0 million in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended May 31, 2007, are available for free at http://researcharchives.com/t/s?21ce Going Concern Doubt John M. James CPA, in Houston, expressed substantial doubt about Forster Drilling Corporation's ability to continue as a going concern after auditing the company's consolidted financial statements for the year ended Nov. 30, 2006. Mr. James pointed to the company's recurring losses from operations. About Forster Drilling Headquartered in Houston, Forster Drilling Corporation (OTC BB: FODL.OB) -- http://www.forsterdrilling.com/-- is engaged in in the refurbishing land drilling rigs and deploying them for use by oil and natural gas producers. Currently, the company provides contract land drilling services in New Mexico to two different oil and gas company customers. FRENCH LICK: Moody's Lowers Corporate Family Rating to Caa3 ----------------------------------------------------------- Moody's lowered French Lick Resort and Casino's Corporate Family Rating and Probability of Default ratings to Caa3 from Caa1, respectively, and all ratings remain on review for further possible downgrade. The rating action reflects reported revenue and earnings through March 31, 2007 that are well below originally projected levels, the likelihood FLRC's intermediate earnings potential will be materially below previously anticipated levels, FLRC's inability to request draws under its line of credit, as well as the strong probability the company will not generate sufficient cash flow to supplement the interest reserve to pay its next scheduled interest payment in October 2007. As a result, the probability of default is high unless FRLC can obtain new sources of capital to support operations through a prolonged ramp-up period. In addition, Indiana passed a law permitting the two Indiana horse racing facilities that are more conveniently located to Indianapolis to operate slot machines which will increase competition for FLRC in 2008. The Southern Indiana market is not likely to support the level of investment made in the resort due to its remote location and insufficient marketing efforts to date. The ratings remain on review for further possible downgrade. Moody's review will focus on FLRC's plan to address its intermediate liquidity needs, as well as the pace of improvement in operating results. If FLRC does not make progress toward resolving its near term liquidity needs, further downgrades are likely. Ratings downgraded/assessment assigned and placed on review for further downgrade: -- Corporate Family Rating to Caa3 from Caa1 -- Probability of Default to Caa3 from Caa1 -- $270 million first mortgage notes due 2014 to Caa3 (LGD-4, 53%) from Caa1 (LGD-4, 55% ) Moody's last rating action on FLRC occurred on June 1, 2007 when Moody's downgraded the CFR to Caa1. French Lick Resorts & Casino, LLC is privately owned company that owns a luxury resort casino comprised of two historic hotels, about 1,202 slots and 32 tables games, 12 poker tables, and 45 holes of golf in French Lick, Indiana. FRENCH LICK: S&P Lowers Corporate Credit Rating to CCC from CCC+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on French Lick Resorts & Casino LLC. The corporate credit rating was lowered to 'CCC' from 'CCC+'. The ratings remain on CreditWatch with negative implications, where they were placed April 10, 2007. "The downgrade and continuing CreditWatch listing reflect our concerns about FLRC's tight liquidity position, which could result in a covenant violation under the company's revolving credit facility," explained Standard & Poor's credit analyst Ariel Silverberg. While previous covenant violations regarding filing requirements have been resolved, FLRC currently does not have availability to draw on this facility. As a result of this and an expectation for continued weak performance, FLRC's liquidity position to meet its near-term operating requirements, fund unpaid construction costs, and meet an upcoming interest payment in October is tight. Furthermore, S&P do not incorporate the potential for liquidity support from FLRC's parent. In resolving S&P's CreditWatch listing, S&P will continue to monitor FLRC's liquidity position and its progress in negotiating access to funds under its revolving credit facility. If FLRC is successful in obtaining availability under the revolver, the rating would be removed from CreditWatch and would likely carry a negative outlook. If, however, the company does not obtain access to the facility, the rating would likely be lowered to 'D'. GENERAL MOTORS: Deal Hits Snag as Firms Shelve $3.1 Bil. Debt Sale ------------------------------------------------------------------ General Motors Corp.'s plan to sell Allison Transmission is facing a major hurdle after Wall Street firms postponed a sale of $3.1 billion in loans that would pay for the leveraged buyout of the unit by private-equity firms, the Wall Street Journal relates. As reported in the Troubled Company Reporter on June 29, 2007, the automaker reached a definitive agreement to sell its Allison Transmission commercial and military business to The Carlyle Group and Onex Corporation for approximately $5.6 billion. Allison is expected to have debt that represents about seven times its annual cash flow, according to Standard & Poor's Leveraged Commentary & Data, WSJ notes. Underwriters that include Citigroup, Lehman Brothers and Merrill Lynch were planning to sell, or syndicate, $3.1 billion of the loans to investors, the report says. The firms will now try to distribute the loan among a small group of banks, WSJ quotes a person familiar with the matter as saying. Investors have been avoiding sales of junk bonds and similarly rated corporate loans for several weeks. Debt investors have become more cautious after seeing the losses that have struck bonds backed by risky subprime mortgage debt, WSJ states. The snag reflects difficult conditions in the market for risky corporate loans and bonds and raises questions about the prospects of other buyout-related debt financings that need to be completed this summer, Serena Ng and Gina Chon of WSJ observe. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908, GM employs about 280,000 people around the world. With global manufactures its cars and trucks in 33 countries, including Brazil and India. In 2006, nearly 9.1 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on May 28, 2007, Standard & Poor's Ratings Services placed General Motors Corp.'s corporate credit rating at B/Negative/B-3. At the same time, Moody's Investors Service affirmed GM's B3 Corporate Family Rating and B3 Probability of Default Rating, and maintained its SGL-3 Speculative Grade Liquidity Rating. The rating outlook remains negative, according to Moody's. GENERAL MOTORS: Reports Global Second Quarter Sales --------------------------------------------------- General Motors Corp. sold 2.405 million cars and trucks around the world in the second quarter of 2007, reporting record sales outside the United States, according to preliminary sales figures. GM sold 2.395 million vehicles in the second quarter last year. "GM's second quarter sales were driven by exceptionally strong demand in emerging markets," John Middlebrook, GM vice president, Global Sales, Service and Marketing Operations, said. "GM global sales of 4.67 million vehicles for the first half of the year reflects solid results, in fact we're on track to have our second- best annual sales performance in our almost 100-year history. In the second quarter we experienced record sales growth around the globe including 20% growth in Latin America, Africa and the Middle East -- an all-time quarterly record for that region, and 8% growth in the Asia/Pacific region. We're also pleased to see almost 5% growth in Europe where we sold more than 574,000 vehicles." Chevrolet global sales of 1.13 million vehicles in the second quarter of 2007 were up more than 4,000 vehicles compared with a year ago. The brand grew by 34% in Europe, 24% in Latin America, Africa and the Middle East and 3% in Asia-Pacific. Saturn sales in the United States and Canada were up 27%, based largely on the popularity of three new vehicles, the Sky roadster, Aura mid-car and Outlook mid-utility crossover vehicle. Saturn is launching the all-new Vue small utility crossover and soon will introduce the Astra small car. Saturn has two hybrid offerings in its lineup, the Aura Green Line and Vue Green Line. Second quarter sales outside the United States has set a record. At 1.39 million vehicles, Q2 2007 sales outside of the United States accounted for about 58% of GM's total global sales, growing at close to 8% compared with Q2 2006, outpacing the industry average growth rate of 6%. In the Latin America, Africa and Middle East region, GM sales surged to 293,300 vehicles, up 20% in volume compared with 2006, which set the industry and GM record for the second quarter. Sales in Brazil were up 23% for the quarter. In the Asia/Pacific region, GM sales of 338,000 vehicles were 8% higher than the previous year's second quarter, and were a record for the quarter. GM China sales of 234,000 vehicles posted a more than 6% sales increase compared with 2006. GM remained the top- selling automaker in China. With these results, GM is on track to become the first manufacturer in China to exceed one million vehicles sold annually. GM's sales in China include sales by SAIC-GM-Wuling, in which GM owns the maximum permissible interest for a foreign company, 34%. In Europe, GM also set a quarterly sales record with deliveries of 574,000 vehicles, up 5%. Growth in Russia, up 106%, led the increase. Chevrolet achieved record European sales of 114,900 vehicles, up 34%, and is fueling GM's growth in Russia. Vauxhall sales strength in the UK helped offset significant reductions in the German market, keeping Opel/Vauxhall share in Europe at 7.4% for the first half of the year. In North America, planned reductions in daily rental sales and softness in the U.S. market due to increasing fuel prices and concerns about housing, resulted in sales of 1.2 million vehicles, a decline of 7% compared with a strong quarter the previous year. Despite a competitive market for full-size pickups, GM continues to show pickup truck segment leadership with share gains in the quarter thanks to the North America Truck of the Year Chevrolet Silverado and all-new GMC Sierra. GM's mid-car and mid-utility crossover segments also saw retail sales gains on the strength of mid-cars Saturn Aura, Pontiac G6 and Chevrolet Impala, and mid- utility crossovers GMC Acadia, Saturn Outlook and Buick Enclave. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908, GM employs about 280,000 people around the world. With global manufactures its cars and trucks in 33 countries. In 2006, nearly 9.1 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on May 28, 2007, Standard & Poor's Ratings Services placed General Motors Corp.'s corporate credit rating at B/Negative/B-3. At the same time, Moody's Investors Service affirmed GM's B3 Corporate Family Rating and B3 Probability of Default Rating, and maintained its SGL-3 Speculative Grade Liquidity Rating. The rating outlook remains negative. GENERAL MOTORS: Seeks Concessions as Labor Talks with UAW Start --------------------------------------------------------------- General Motors Corp. and Ford Motor Company officially opened contract negotiations with the United Auto Workers Monday, seeking to win concessions that would reduce labor costs as they grapple with rising health care expenses and stiff competition, particularly from Japanese carmakers, Reuters reports. DaimlerChrysler AG unit Chrysler Group started labor talks with the UAW on Friday. The automakers are trying to deal with health care costs that GM CEO Rick Wagoner says cost them a combined $12 billion in 2006. Providing health care to 2 million employees, retirees and dependents contributed to losses at each of the U.S. automakers last year, while Japanese rivals posted record profits. The difference is made even more significant by higher pensions and retiree health care costs. Many analysts expect the UAW to consider establishing a union- aligned trust fund for retiree health care, if it can reach an agreement with the automakers on how fully to fund it. GM and Ford hourly labor costs -- $73.26 and $70.51, respectively -- are about $30 an hour higher than those paid by Japanese competitors operating U.S. plants, Reuters states, referring to data compiled by the automakers. The UAW's current four-year contract with the "Big Three" automakers expires Sept. 14, 2007, Reuters relates. UAW President Ron Gettelfinger said a strike was still possible if the parties could not reach an agreement. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908, GM employs about 280,000 people around the world. With global manufactures its cars and trucks in 33 countries, including Brazil and India. In 2006, nearly 9.1 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on May 28, 2007, Standard & Poor's Ratings Services placed General Motors Corp.'s corporate credit rating at B/Negative/B-3. At the same time, Moody's Investors Service affirmed GM's B3 Corporate Family Rating and B3 Probability of Default Rating, and maintained its SGL-3 Speculative Grade Liquidity Rating. The rating outlook remains negative, according to Moody's. GP INVESTMENTS: Fitch Revises Outlook to Positive from Stable ------------------------------------------------------------- Fitch Ratings revised the Rating Outlook of the Long-term Foreign Currency Issuer Default Rating of GP Investments and the rating of GP's $150 million senior secured perpetual notes to Positive from Stable. Fitch also affirmed these GP ratings: -- Foreign currency Issuer Default Rating at 'B'; -- Senior secured at 'B/RR4'. The change in the Rating Outlook recognizes the significant expected increase in assets under management and its positive effects over GP's recurrent income. The resolution of this Positive Outlook will depend on the ability of the company to sustain the expected increase in recurring income and keep an adequate control of its expenses, while a successful deployment of new investments will also be monitored. The need for a significantly more diversified investment portfolio, a further increase of recurrent income to cover operating expenses, and a more developed valuation methodology, are key to sustaining an improvement of GP's rating going forward. The recent closing of a new private equity fund managed by GP ($1.025 billion of committed capital -including limited partners), will increase the size of its funds under management almost 4 times. This event would lead to a significant increase in GP's recurrent income going forward, benefiting the recurrent cash flow of the company and reducing its dependence on the income generated by the appreciation of its investment portfolio, or the possible gains generated by contingent exits. Going forward, an adequate control of its expense base would enhance the aforementioned increase of revenues in terms of operating profits. GP Investments Ltd. ratings are supported by adequate leverage levels, the franchise of the company and the experience of the management team which bodes well for positive prospects going forward. Also, the significant increase in the size of its portfolio of managed investments results in a positive trend on its recurrent income. The ratings are constrained, however, by the concentrated nature of the current and intended investment portfolio, the uncertainty related to the maturation period of the investment portfolio, and GP's timing and ability to realize investment gains. Given that the investment policy of the company calls for large tickets deals, the current and expected concentration of the portfolio will remain largely in Brazilian assets. No major changes are expected with regard to the size of the investments to be included in the portfolio. At end-March 2007, the investment portfolio concentration increased from a moderate 3% of total equity to a high 16%. Despite the increase in leverage, resulting from the issuance of US$150 million in perpetual notes, which was completed in early 2007, current capital ratios are considered strong (equity to assets ratio as of March 2007 was 55%), and Fitch does not expect further leverage. Liquidity ratios will maintain a downward trend as the deployment of new investments takes place. Nevertheless, GP's adequate liability maturity profile mitigates this trend. The continued maintenance of the liquidity reserve equal to 18 months debt service provides additional comfort to debt holders. Profitability ratios have remained high given the appreciation of the fair value of the investment portfolio and the realization of some gains in a partial exit of one its oldest investments. GP's ROAA reached 9% in year 2006, and increased to 24% at end-March 2007. Fitch expects that given the volatility and contingent nature of exit strategies and the appreciation of the fair value of GP's investment portfolio, profitability ratios could post significant swings in absence of such gains. However, the experience built up by the company and the positive outlook for the Brazilian capital markets could reduce the aforementioned volatility over the short and medium term. GP is a Bermuda exempted company that consolidates the activities of a private equity business and an asset management business in Brazil. The origins of the company date from 1993. A major corporate reorganization was completed in 2005 in preparation for an IPO of the company during year 2006. The company is listed on the Luxembourg Stock Exchange and also has a BDS program on the Brazilian Stock Market. GRANDE COMM: Moody's Affirms Caa1 Corporate Family Rating --------------------------------------------------------- Moody's Investors Service affirmed Grande Communications Holdings, Inc.'s ratings, including its Caa1 corporate family rating and SGL-3 speculative grade liquidity rating. Moody's characterizes Grande's liquidity through the twelve months ending March 31, 2008, as adequate following the company's agreement to issue an additional $25 million of 14% senior secured notes due 2011. In addition, Moody's changed Grande's probability of default rating to Caa1, reflecting the marginally higher default risk associated with the high-coupon security add-on and the ongoing requirement to maintain minimal cash balances per the bond indenture. LGD rates for the company's senior secured bonds, however, improved to 47% (LGD3) from 63% (LGD4) in accordance with the expectation of potentially higher recovery for secured lenders in an event of default scenario, partially attributable to their constituting a more significant share of the company's consolidated liability structure. The rating outlook is stable. Grande's ratings continue to reflect its lack of scale, high financial risk, and the prospect of increased competition, offset by an upgraded network, high penetration of multiple services, and the positive demographic trends in its markets. Following the note offering, leverage is likely to remain in the mid-6 times range and fixed charge coverage is likely to stay negative through 2008. While Grande continues to improve its liquidity position, the company does not have a revolving credit facility and its operating plan may require capital investment in excess of currently available funds. Grande Communications Holdings, Inc. Affirmed -- Corporate Family Rating, Caa1 -- Senior Secured Bonds, Caa1, LGD3, 47% Lowered -- Probability of Default Rating to Caa1 Outlook: Stable Grande Communications Holdings, Inc. is a retail provider of video, Internet and telephony services primarily serving communities in six Texas markets. The company also serves enterprise customers and has a wholesale Internet and telephony business. Grande maintains its headquarters in San Marcos, Texas. GREGG APPLIANCES: Completes Tender Offer for 9% Senior Notes ------------------------------------------------------------ Gregg Appliances Inc. has closed its tender offer and consent solicitation for its outstanding 9% Senior Notes due 2013. hhgregg Inc., the company's parent company has also closed its initial public offering of 9,375,000 shares of common stock and completed its debt refinancing. hhgregg will use the net proceeds from the initial public offering together with cash on hand to fund a portion of the tender offer and redeem Gregg Appliances' junior notes. As of midnight, New York City time on July 24, 2007, $107,847,000 aggregate principal amount of the 9% Senior Notes, representing approximately 96.98% of the total principal amount outstanding, had been validly tendered and accepted for purchase in the tender offer. In addition, after the receipt of the requisite consents, Gregg Appliances, HHG Distributing, LLC and Wells Fargo Bank, National Association, the trustee under the indenture governing the 9% Senior Notes, entered into a supplemental indenture amending the 9% Senior Notes. The amendments to the indenture will become operative upon Gregg Appliances' payment for the accepted 9% Senior Notes. Gregg Appliances has obtained a $100 million Term Loan facility agented by Wachovia Bank, National Association to fund the remaining portion of the purchase of the 9% Senior Notes. In addition, Gregg Appliances has increased its revolving credit facility, agented by Wachovia Capital Finance Corporation (Central), to $100 million. Gregg Appliances has paid for the accepted 9% Senior Notes. About hhgregg Inc. hhgregg Inc. (NYSE:HGG) is the company of Gregg Appliances Inc. and a specialty retailer of premium video products, brand name appliances, audio products and accessories. hhgregg currently operates 79 stores in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee. About Gregg Appliances Headquartered in Burbank, California, Gregg Appliances Inc. -- http://www.hhgregg.com/-- is a specialty retailer of consumer electronics, home appliances, mattresses and related services. It operates under the hhgregg(R) and Fine Lines(R) brands in 79 stores in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee. * * * As reported in the Troubled Company Reporter on June 12, 2007, Standard & Poor's Rating Services raised its corporate credit rating on Gregg Appliances Inc. to 'B+' from 'B'. GSAMP TRUST: S&P Junks Rating on 2002-HE Class B-2 Certificates --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on three classes from GSAMP Trust's series 2002-HE and 2002-WF. Two of the ratings remain on CreditWatch with negative implications, and one was removed from CreditWatch negative. Concurrently, S&P placed the rating on class M-2 from GSAMP Trust 2002-WF on CreditWatch with negative implications. At the same time, S&P affirmed the ratings on the remaining classes from these two transactions. The lowered ratings and CreditWatch placements affecting series 2002-WF and 2002-HE reflect the continuing deterioration of performance of these collateral pools. Realized losses have outpaced excess spread and eroded overcollateralization to the extent that credit support is no longer sufficient at the prior rating levels. For series 2002-HE, as of the June 2007 remittance period, O/C had been reduced to $1.16 million, or 0.26% of the original pool balance. Cumulative realized losses reached $6.28 million, or 1.45% of the original pool balance. Total delinquencies and severe delinquencies (90-plus-days, foreclosures, and REOs) constituted 37.33% and 22.36% of the current pool balance, respectively. For series 2002-WF, as of the June 2007 remittance period, O/C had been reduced to $1.72 million, or 0.36% of the original pool balance. Cumulative realized losses were $6.51 million, or 1.37% of the original pool balance. Total delinquencies and severe delinquencies constituted 22.72% and 13.18% of the current pool balance, respectively. Standard & Poor's will continue to closely monitor the performance of the classes with ratings on CreditWatch. If the delinquent loans cure to a point at which monthly excess interest begins to outpace monthly net losses, thereby allowing O/C to build and provide sufficient credit enhancement, S&P will affirm the ratings and remove them from CreditWatch. Conversely, if delinquencies cause substantial realized losses in the coming months and continue to erode credit enhancement, S&P will take further negative rating actions on these classes. S&P removed the rating on class B-2 from series 2002-HE from CreditWatch because it was lowered to 'CCC'. According to Standard & Poor's surveillance practices, ratings lower than 'B-' on classes of certificates or notes from RMBS transactions are not eligible to be on CreditWatch negative. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings. A combination of subordination, excess spread, and O/C provides credit support for these transactions. The underlying collateral consists of conventional, fully amortizing, 30-year, fixed- and adjustable-rate mortgage loans secured by first and second liens on one- to four-family residential properties. Ratings Lowered and Remaining on Creditwatch Negative GSAMP Trust Rating ------ Series Class To From ------ ----- -- ---- 2002-WF B-1 B-/Watch Neg BB/Watch Neg 2002-HE B-1 B/Watch Neg BBB+/Watch Neg Rating Lowered and Removed from Creditwatch Negative GSAMP Trust Rating ------ Series Class To From ------ ----- -- ---- 2002-HE B-2 CCC BB/Watch Neg Rating Placed on Creditwatch Negative GSAMP Trust Rating ------ Series Class To From ------ ----- -- ---- 2002-WF M-2 A/Watch Neg A Ratings Affirmed GSAMP Trust Series Class Rating ------ ----- ------ 2002-WF A-1, A-2B AAA 2002-WF M-1 AA+ 2002-HE M-1 AA+ 2002-HE M-2 A GSI GROUP: Earns $3.3 Million in Quarter Ended June 29 ------------------------------------------------------ GSI Group Inc. had revenue of $73.1 million for the second quarter ended June 29, 2007, compared to first quarter revenue of $74.2 million and $76.4 million for the second quarter of 2006. Excluding restructuring charges, operating profit was $5.3 million in the second quarter versus $6 million in the first quarter and $8 million in the second quarter of 2006. Net income for the quarter was $3.3 million, compared to the first quarter results of $3.2 million, and $6.2 million in the second quarter of 2006. First half 2007 revenue was $147.3 million, compared to $152.5 million in 2006. Excluding restructuring charges, operating profit totaled $11.3 million in the first half of 2007 compared to $15.2 million in the first half of 2006. Year to date net income was $6.5 million, compared to year to date net income of $11.3 million in the prior year. Second quarter bookings were $89.5 million, up 16% compared with $76.9 million in the first quarter. The book to bill ratio was 1.2, the third consecutive quarter with a book to bill ratio of 1 or above. Deferred revenue at June 29, 2007, totaled $15.3 million. The backlog at June 29, 2007 was $98.1 million, up from $79.3 million in the prior quarter. Precision Technology segment bookings grew 12% from the first quarter due to strength in encoders and printed circuit board spindles. Semiconductor Systems segment bookings grew 21% from the first quarter due to record Wafer Mark orders and strong Wafer Repair bookings. Second quarter order activity in this segment was the second highest level in the last twelve quarters. Gross margin of 41% in the second quarter increased from 40% in the first quarter largely due to favorable margins and higher revenue in the encoder, printed circuit board spindle and wafer mark product lines. Operating expenses, excluding a one time benefit of a legal settlement in the first quarter and restructuring charges, declined $1 million sequentially, from $25.3 million in the first quarter to $24.3 million in the second quarter. Income tax expense for the second quarter was $2.1 million, an effective tax rate of 39%. The increase in the effective tax rate was primarily due to losses, including restructuring charges, in the U.K., which were not tax affected due to the company's current tax loss carryforward position in the U.K. Cash and short term investments were $152.3 million, up $4.9 million from the first quarter, including $3 million used for the purchase of the Thales Beryllium Optronics Business. At June 30, 2007, the company had $436.3 million in total assets, $77.8 million in total liabilities, and $358.5 million in total stockholders' equity. Dr. Sergio Edelstein, president and chief executive officer commented, "We are pleased with both orders and results this quarter. Company-wide bookings grew significantly and we are entering the third quarter with a healthy backlog. We completed an accretive acquisition. Our Precision Technology bookings strengthened, particularly in the encoder business, and Semiconductor Systems made steady progress in new customer wins and orders." About The GSI Group Illinois-based GSI Group Inc. -- http://www.grainsystems.com/-- manufactures agricultural equipment. The company's grain, swine and poultry products are used by producers and purchasers of grain, and by producers of swine and poultry. The company is comprised of several manufacturing divisions. Grain Systems (GSI), and GSI International are the grain storage, drying and material handling divisions of The GSI Group. GSI manufactures galvanized steel storage bins and many types of grain drying systems including portable, stacked, tower and process dryers. In addition, GSI carries a full line of material handling equipment including augers, bin sweeps, bucket elevators, conveyors, distributors, chain loop systems, and grain spreaders. The GSI Group markets its products to over 75 countries worldwide through a network of independent dealers to grain/protein producers and large commercial businesses. * * * As reported in the Troubled Company Reporter on July 18, 2007, Standard & Poor's Ratings Services affirmed its 'B' corporate credit rating on Assumption, GSI Group Inc. and revised its outlook to stable from negative. HUNT REFINING: S&P's Rates $760 Million Term Loan at B+ ------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to petroleum refiner and marketer Hunt Refining Co. At the same time, S&P assigned its bank loan and recovery ratings to Hunt's $760 million secured credit facilities, consisting of a $400 million delayed-draw term loan, a $130 million delayed-draw construction loan, a $100 million synthetic LOC facility, and a $130 million revolving credit facility. The term loan is rated 'B+' with a recovery rating of '2', indicating expectations for substantial (70%-90%) recovery in the event of a payment default. Tuscaloosa, Alabama-based Hunt is a wholly owned subsidiary of Hunt Consolidated Inc. The rating reflects a vulnerable business risk profile that incorporates the company's status as a small, independent, low- complexity company. "Its highly leveraged financial risk profile takes into account the significant amount of debt to fund the company's proposed expansion," said Standard & Poor's credit analyst Ben Tsocanos. IMAX CORP: S&P Affirms Ratings and Removes Negative CreditWatch --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings, including the 'CCC+' corporate credit rating, on IMAX Corp. and removed them from CreditWatch. The ratings were originally placed on CreditWatch with negative implications on April 2, 2007, with a revision to developing implications occurring on July 5, 2007. The rating action follows the company's filing of its SEC Form 10-Q for the first quarter of 2007 and its 2006 Form 10-K, which should put the company in compliance with its filing requirement under its bond indenture and alleviate the risk of a near-term acceleration. "The positive outlook reflects solid system signings in the first quarter and good box office performance of IMAX films this year, which could lead to new system signings," said Standard & Poor's credit analyst Tulip Lim. As of March 31, 2007, the company had $160 million of debt. The rating reflects the modest size and uncertain long-term earnings potential of the company's niche market relative to its debt burden, weak discretionary cash flow, and limited liquidity. These concerns overshadow IMAX's position as a specialized provider of giant-screen projection, camera, and sound systems; the recurring revenue provided by the installed base of 283 IMAX theater systems; and a measure of near-term revenue visibility provided by the company's backlog of pending system installations. INTERNATIONAL COAL: Prices $180 Mil. of 9% Convertible Sr. Notes ---------------------------------------------------------------- International Coal Group Inc. has priced $180 million aggregate principal amount of 9% Convertible Senior Notes due 2012 in an offering exempt from the registration requirements of the Securities Act of 1933. The company has also granted the initial purchaser of the notes a 30-day option to purchase additional notes in an amount up to $27 million. Subject to customary closing conditions, ICG expects the offering to close on July 31, 2007. The notes will be ICG's senior unsecured obligations, ranking equal in right of payment with all of ICG's existing and future unsecured senior indebtedness. The notes will be guaranteed on a senior unsecured basis by all of the company's existing subsidiaries. The notes and the guarantees will be subordinated to the company's and the guarantors' secured indebtedness to the extent of the value of the related collateral. Interest on the notes will be paid semi-annually on August 1 and February 1 at a rate of 9% per year. The notes will be convertible upon satisfaction of certain conditions. The principal amount of the notes will be convertible into cash, and amounts above the principal amount will be convertible into shares of ICG common stock or, at ICG's option, cash. The initial conversion rate will be 163.8136 shares per $1,000 principal amount of notes, subject to adjustment. This is equivalent to an initial conversion price of approximately $6.10 per share, representing a premium of 45% relative to the last reported sale price on July 25, 2007, of ICG's common stock of $4.21 per share. If the average of the volume-weighted average price per share of ICG common stock for the 20 consecutive trading days ending on Aug. 1, 2008 is less than $4.21, then the conversion rate will automatically be adjusted so that the conversion price is equal to the greater of (1) 145% of such average volume-weighted average price and (2) $4.21. Upon the occurrence of certain events, holders may require ICG to repurchase all or some of their notes for cash equal to 100% of the principal amount to be repurchased plus accrued and unpaid interest. The notes will mature on Aug. 1, 2012. ICG estimates that the net proceeds from the offering will be approximately $174 million, or approximately $200 million if the initial purchaser exercises its over-allotment option in full, after deducting discounts, commissions and estimated offering expenses. ICG intends to use the net proceeds to repay all amounts outstanding under its $25 million bridge loan facility, repay $65 million outstanding under its senior credit facility and for general corporate purposes. About International Coal International Coal Group, headquartered in Scott Depot, West Virginia, is engaged in the mining and marketing of coal. The company has 11 active mining complexes, of which 10 are located in Northern and Central Appalachia and one in Central Illinois. ICG's mining operations and reserves are strategically located to serve utility, metallurgical and industrial customers throughout the Eastern United States. INTERNATIONAL COAL: S&P Revises Outlook to Negative from Stable --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on International Coal Group LLC to negative from stable. At the same time S&P affirmed all ratings for the coal producer, including its 'B-' corporate credit rating. Total consolidated debt outstanding at June 30, 2007, was about $250 million. S&P also assigned its 'B-' rating to the proposed $180 million senior unsecured convertible notes due 2012 of parent company International Coal Group Inc. ICG guarantees the notes. The company expects to sell these securities pursuant to Rule 144A of the Securities Act of 1933. Concurrently, S&P placed its 'CCC+' rating on ICG's existing senior unsecured notes due 2014 on CreditWatch with positive implications. "This action reflects the expectation that once the proposed note issue is funded, with proceeds used to permanently reduce bank borrowings outstanding, the amount of priority debt will decline materially and existing noteholders will be in a less disadvantaged position," said Standard & Poor's credit analyst Marie Shmaruk. "Once the proposed notes are funded, we will raise the rating on the existing note issue to 'B-'." Scott Depot, West Virginia-based ICG is relatively small and has a high cost profile and meaningful exposure to the difficult operating environment of Central Appalachia, with pressured operating results, and minimal liquidity cushion. The company's weak results thus far in 2007 has substantially eroded its liquidity cushion and resulted in the pursuit of more permanent capital. "We could lower the ratings if the company's weak operating performance continues and weak markets persist or if the company significantly increases in its debt levels from expected levels," Ms. Shmaruk said. "Although we are less likely to revise the outlook back to stable in the near term, we would consider such a move in the intermediate term if the company improves, diversifies, and expands its operations while not materially constraining its liquidity. Over the longer term, favorable coal industry conditions should benefit ICG." KINDER MORGAN: S&P Rates $100MM Series A Preferred Stock at BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' credit rating to Kinder Morgan G.P. Inc.'s $100 million series A fixed- to floating-rate term cumulative preferred stock due 2057. The outlook is stable. KMGP is the general partner of Kinder Morgan Energy Partners L.P. (KMP; BBB/Stable/A-2), a Houston, Texas-based master limited partnership that owns and operates natural gas, refined products, crude and carbon dioxide pipelines, and liquids and bulk terminal facilities. The company is 100% owned by Knight Inc. (formerly known as Kinder Morgan Inc.), which recently completed a leveraged management buyout led by CEO Richard Kinder and affiliates of Goldman Sachs, American International Group, the Carlyle Group, and Riverstone Holdings. Knight financed the management buyout with $4.76 billion in term loans and a $1 billion revolving credit facility that was undrawn at closing. This debt was incremental to the existing $4.5 billion of debt that was already outstanding at Knight. When the management buyout closed on May 30, 2007, about $9.2 billion in debt was outstanding at Knight. The stable outlook on KMGP is based on the outlook of KMP, which contemplates sufficient equity support for an aggressive capital plan to complete several large growth projects and no significant delays in those projects that would postpone the onset of cash generation. "Any slippage in construction progress could lead to an outlook change or ratings downgrade, either of which would lead to a lower short-term rating," said Standard & Poor's credit analyst Michael Messer. A ratings upgrade or positive outlook revision are unlikely because the entities must perform almost flawlessly just to maintain ratings stability. KNOLL INC: Moody's Withdraws Ba3 Rating on $500 Million Facility ---------------------------------------------------------------- Moody's Investors Service withdrew the Ba3 ratings on Knoll's $500 million senior secured credit facility, which is comprised of a revolver and a term loan term loan, following the refinancing of the facility with an unrated $500 million revolving credit facility. At the same time, Moody's affirmed the company's Ba3 corporate family rating, but withdrew the B1 probability of default rating and LGD assessments as these ratings/assessments are only applicable for speculative grade companies that have rated debt. The rating outlook is stable. Knoll's Ba3 rating reflects its strong brand name, diversified customer, industry leading margins, and distributor base, and a good market position in its core office systems business with more than a 15% market share. The rating further reflects Knoll's long-standing reputation for product quality and design/innovation. The rating also reflects Moody's expectation of the continuation of favorable demand trends, although the growth rate is expected to be slower than the last few years. The ratings are constrained by its modest top line, which is about two-thirds of the median for similarly rated companies, by the cyclical and competitive nature of the industry and by high raw material prices. This rating was affirmed: -- Corporate family rating at Ba3; These ratings/assessments were withdrawn: -- Senior secured revolver at Ba2 (LGD 2, 27%); -- Senior secured term loan at Ba2 (LGD 2, 27%); -- Probability of default rating at B1. Knoll is a leading designer, manufacturer and distributor of a comprehensive portfolio of branded office furniture products, textiles and accessories. Revenue for the LTM ended March 2007 approximated $1 billion. LANDRY'S RESTAURANTS: Obtains Covenant Waiver from Lenders ---------------------------------------------------------- Landry's Restaurants Inc. has obtained a waiver of the covenant requiring the company to timely deliver its audited financial statements and related certificates and schedules, as of and for the year ended Dec. 31, 2006, within 90 days after the end such fiscal year pursuant to the company's $450 million Credit Agreement by and among the company, Wachovia Bank, National Association and the other financial institutions party thereto. However, the waiver does not apply in the event of an acceleration of the maturity of the Notes. Therefore, the company is not in compliance with the Credit Agreement. Notwithstanding the foregoing, Wachovia has not accelerated the indebtedness under the Credit Agreement, nor does the company expect Wachovia to take such action, and the company believes that it will be able to obtain a waiver of the covenant. The total amount outstanding under the Credit Agreement is approximately $97 million. "The company will refinance the amount outstanding under the Notes and under the company's existing Credit Agreement, Rick Liem, the company's chief financial officer, said. Due to the recent downturn in the credit markets and the increase in interest rate spreads, our 7.50% below market Notes did not provide enough of an economic return to our bondholders and prompted their decision to accelerate the Notes." "The recent $545 million credit facility secured for the Golden Nugget properties is not impacted, nor are our other unrestricted subsidiaries," Mr. Liem further advised. The company will obtain new financing to replace its current Credit Agreement and outstanding 7.50% Senior Unsecured Notes. While the company's voluntary internal review of its historical stock option granting practices is expected to be completed within the next few weeks, the company will not be able to file its annual report on Form 10-K for the year ended Dec. 31, 2006 until completion of the review. As a result of not filing its Form 10-K on a timely basis, the company has been notified by U.S. Bank, National Association, the Trustee under the Indenture covering the company's $400 million 7.50% Senior Unsecured Notes, that upon direction of a majority of the Note holders, it declared the unpaid principal of, premium if any, and accrued and unpaid interest on all of the Notes outstanding to be due and payable immediately pursuant to the Indenture. Nevertheless, the company believes that it will be able to refinance this indebtedness, however, due to the recent tightening of the credit markets, the terms of the refinancing may be on terms less favorable then could have been obtained a few weeks earlier. About Landry's Restaurants Inc. Headquartered in Houston, Texas, Landry's Restaurants Inc. (NYSE: LNY) - http://www.landrysrestaurants.com/-- owns and operates more than 300 restaurants, including Landry's Seafood House, Joe's Crab Shack, The Crab House, Rainforest Cafe, Charley's Crab, Willie G's Seafood & Steak House, The Chart House, and Saltgrass Steak House. Landry's also owns several icon developments, including Downtown Aquariums in Houston and Denver. The company employs approximately 36,000 workers in 36 states. LANDRY'S RESTAURANT: S&P Lowers Corporate Credit Rating to CCC -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Houston, Texas-based Landry's Restaurant Inc., including the corporate credit rating, to 'CCC' from 'B+'. The company's ratings remain on CreditWatch with negative implications, where they had been placed with negative implications on March 16, 2007, because of its failure to file its 10K for fiscal 2006 and its 10Q for the first-quarter 2007. However, the CreditWatch listing has been changed to Developing. "The downgrade reflects the company's need to seek new financing to fund the accelerated redemption of the unpaid principal and accrued interest on its $400 million 7.50% senior unsecured notes due 2014," explained Standard & Poor's credit analyst Charles Pinson-Rose. The downgrade also follows the recent announcement that holders of notes at Golden Nugget Inc., Landry's subsidiary, are accelerating payment as a result of Landry's financial reporting delay. Standard & Poor's will review the rating once the company's financing plans are announced. "We could lower ratings if the company is unable to obtain new financing to fund the redemption," added Mr. Pinson-Rose. LANDRY'S RESTAURANT: Moody's Lowers Corporate Family Rating to B2 ----------------------------------------------------------------- Moody's Investors Service lowered the corporate family, senior secured, and speculative grade liquidity ratings of Landry's Restaurant Inc.'s, in addition to affirming the company's senior unsecured note rating and placing all long term ratings on review for possible downgrade as: Ratings lowered are: -- Corporate family rating lowered to B2 from B1 -- Probability of default rating lowered to B2 from B1 -- $150 million senior secured term loan B, due Dec. 28, 2010, lowered to Ba2/14%/ LGD2 from Ba1/14%/LGD2 -- $300 million senior secured revolving credit facility due Dec. 28, 2009, lowered to Ba2/14%/LGD2 from Ba1/14%/LGD2 -- Speculative grade liquidity rating lowered to SGL-4 from SGL-2 Ratings affirmed are: -- $400 million, 7.75% guaranteed senior global notes, due Dec. 15, 2014, rated B3/76%/ LGD5 All long term ratings were placed on review for possible downgrade. The downgrade of the corporate family rating to B2 from B1 was prompted by the company's recent announcement that due to the company's inability to file its financial statements in a timely manor, a majority of bondholders have requested the trustee under the indenture covering the company's $400 million of senior unsecured notes to declare the unpaid principle and accrued and unpaid interest on all of the notes outstanding to be due and payable immediately pursuant to the indenture. The downgrade of the speculative grade liquidity rating to SGL-4 indicates weak liquidity, the company's reliance on external sources of financing and the availability of that financing in Moody's opinion is uncertain. The review for possible downgrade reflects the uncertainty regarding the company's ability to successfully address the noteholders request for full payment of principle and accrued interest as requested by the trustee, its success in seeking a waiver from its current bank group regarding the current default under the bank agreement due to the acceleration of the notes, and its inability to provide audited and reviewed financial statements to the SEC, its bank group, and bondholders in a timely manner. Landry's Restaurants, Inc., headquartered in Houston, Texas, owns and operates full service casual dining restaurants concepts including Landry's Seafood House, Rainforest Cafe, The Crab House, Charley's Crab, The Chart House, and Saltgrass Steak House. In addition, Landry's owns and operates the Golden Nugget Hotel and Casino through a wholly-owned unrestricted subsidiary. For the year end Dec. 31, 2006, the company generated revenue of about $869 million. LAUREATE EDUCATION: Weak Cash Flow Cues S&P's B Credit Rating ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating and negative outlook to Laureate Education Inc. At the same time, Standard & Poor's assigned its 'B' bank loan rating, at the same level as the corporate credit rating, and '3' recovery rating to the company's $1.20 billion first-lien bank facilities. The recovery rating indicates that lenders can expect meaningful (50%-70%) recovery in the event of a payment default. The facilities consist of a $400 million revolving credit facility maturing in 2014, a $695 million term loan B maturing in 2014, and a $100 delayed-draw term loan due 2014. S&P also assigned a 'B-' rating to the company's $685 million senior unsecured notes due 2015 and a 'CCC+' rating to the company's $310 million senior subordinated notes due 2017. Baltimore, Maryland-based Laureate Education operates a network of 61 for-profit college campuses located in 16 countries in Latin America, Europe, and Asia. Pro forma total debt at June 30, 2007, was $1.84 billion. "The rating reflects heightened debt leverage and weakened cash flow protection resulting from the impending leveraged acquisition of Laureate Education by a group of private-equity concerns," said Standard & Poor's credit analyst Hal F. Diamond. The ratings also consider the challenges to the company inherent in managing its fast growth, and its debt-financed expansion plans. These risks are only partially offset by the company's position in the highly fragmented and competitive international postsecondary education market. MERRILL LYNCH: Fitch Affirms B- Rating on $1.3MM Class P Certs. --------------------------------------------------------------- Fitch Ratings affirms Merrill Lynch Mortgage Trust's commercial mortgage pass-through certificates, series 2003-KEY1, as: -- $1.9 million class A-1 at 'AAA'; -- $172.3 million class A-1A at 'AAA'; -- $75 million class A-2 at 'AAA'; -- $130 million class A-3 at 'AAA'; -- $482.9 million class A-4 at 'AAA'; -- Interest-only class XC at 'AAA'; -- Interest-only class XP at 'AAA'; -- $34.3 million class B at 'AA'; -- $15.8 million class C at 'AA-'; -- $25.1 million class D at 'A'; -- $10.6 million class E at 'A-'; -- $11.9 million class F at 'BBB+'; -- $7.9 million class G at 'BBB'; -- $10.6 million class H at 'BBB-'; -- $5.3 million class J at 'BB+'; -- $5.3 million class K at 'BB'; -- $4.0 million class L at 'BB-'; -- $6.6 million class M at 'B+'; -- $2.6 million class N at 'B'; -- $1.3 million class P at 'B-'. Fitch does not rate the $11.9 million class Q, classes WW-1 through WW-3, or the interest-only class WW-X. The rating affirmations reflect the stable pool performance and minimal paydown and defeasance since issuance. As of the July 2007 distribution date, the pool has paid down 3.8% to $1.02 billion from $1.06 billion at issuance. One loan (0.4%) backed by a multifamily property in Euless, TX is currently in special servicing and is in foreclosure. Fitch reviewed the credit assessments of the following four loans: 77 West Wacker Drive (14%); Solomon Pond Mall (11.1%); Miami International Mall (9.5%); and Mall at Fairfield Commons (2.7%). All four loans maintain investment grade credit assessments due to stable debt service coverage ratios and occupancy as of year-end 2006. METHANEX CORP: Earns $35.7 Million in Quarter Ended June 30 ----------------------------------------------------------- For the second quarter of 2007, Methanex Corp. realized revenue of $466.4 million and net income of $35.7 million. The company had revenue of $461 million and net income of $83 million for the second quarter of 2006. Total sales volumes for the three months ended June 30, 2007, were 1.7 billion, down from 1.8 billion for the three months ended June 30, 2006. At June 30, 2007, the company had total assets of $2.4 billion, total liabilities of $1.2 billion, and total stockholders' equity of $1.2 billion. Liquidity and Capital Resources Cash flows from operating activities before changes in non-cash working capital in the second quarter of 2007 were $67 million compared with $129 million for the same period in 2006. During the second quarter of 2007, the company repurchased for cancellation a total of 3.2 million common shares at an average price of $24.79 per share, totaling $79 million. This includes 1.9 million common shares repurchased under a normal course issuer bid that expired May 16, 2007, and 1.3 million common shares repurchased under a new normal course issuer bid that commenced May 17, 2007. On closing of the normal course issuer bid that expired at May 16, 2007, the company had repurchased a total of 7.5 million common shares at an average price of $23.85 per share, totaling $179 million. On May 7, 2007, the new normal course issuer bid was approved. This bid commenced May 17, 2007, and expires May 16, 2008, and allows the company to repurchase for cancellation up to 8.7 million common shares. Also during the second quarter of 2007, the company's Board of Directors approved a 12% increase in our regular quarterly dividend to shareholders, from $0.125 per share to $0.14 per share. During the second quarter of 2007, the company paid quarterly dividends of about $14 million. In May 2007, the company reached financial close for the company's project to construct a 1.3 million tonne per year methanol facility at Damietta on the Mediterranean Sea in Egypt. The company is developing the project through a joint venture in which it has a 60% interest. The joint venture has secured limited recourse debt of $530 million. The company expects commercial operations from the methanol facility to begin in early 2010 and it will purchase and sell 100% of the methanol from the facility. The total estimated future costs to complete the project over the next three years, excluding financing costs and working capital, are expected to be about $800 million. The company's 60% share of future equity contributions, excluding financing costs and working capital, over the next three years is estimated to be about $215 million and it expects to fund these expenditures from cash generated from operations and cash on hand. Cash balance at June 30, 2007 was $484 million and the company has a strong balance sheet with an undrawn $250 million credit facility. Its planned capital maintenance expenditure program directed towards major maintenance, turnarounds and catalyst changes is currently estimated to total about $90 million for the period to the end of 2009. Bruce Aitken, president and chief executive officer of Methanex, commented, "Our average realized price in the second quarter was $286 per tonne, similar to our Q2-2006 average realized price of $279 per tonne. We commented at the end of the first quarter that our pre-tax earnings would be lower in the second quarter by $35 million as a result of selling higher cost opening inventory. This fact, together with the disappointing level of production from our assets in Chile, reduced earnings below what we would regard as normal in the current positive operating environment in the methanol industry." Mr. Aitken added, "While our operational performance in Chile during the second quarter was disappointing, our production outlook for the second half of the year looks much better. As recent technical issues impacting gas supply are currently being resolved, we expect to restart our plants in Chile on a staged basis and have all four production plants operating by the fourth quarter." Mr. Aitken continued, "Industry fundamentals continue to be positive, with markets expected to remain balanced under a normal industry operating environment. As expected, under the current price environment, China reverted back to being a net importer of methanol during the second quarter. Industry pricing remains healthy, with July posted contract prices averaging approximately $300 per tonne in all of the major regions. Overall, the global demand outlook for traditional chemical derivatives remains strong, as does the longer-term outlook for significant new methanol demand growth from emerging energy related uses including biodiesel, DME, and fuel blending." Mr. Aitken concluded, "With $124 million in cash flow from operations generated during the second quarter, we continue to be in a very strong financial position with liquidity to meet the financial requirements related to our methanol project in Egypt, pursue opportunities to accelerate gas development in southern Chile, pursue other strategic growth initiatives, and continue to deliver on our commitment to return excess cash to shareholders." About Methanex Corp. Based in Vancouver, Canada, Methanex Corp. (TSX: MX)(NASDAQ: MEOH) -- http://www.methanex.com/-- is a publicly traded company engaged in the worldwide production and marketing of methanol. * * * Methanex Corp. carries Moody's Investors Service's Ba1 long-term corporate family, senior unsecured debt, and probability-of- default ratings. The ratings outlook remains stable. NEWCASTLE CDO: S&P Rates $14 Million Class F Notes at BB -------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Newcastle CDO X Ltd./Newcastle CDO X LLC's $1,361,741,692 notes. Newcastle CDO X Ltd./Newcastle CDO X LLC is a cashflow CDO backed primarily by CMBS, RMBS, REIT debt securities, other ABS, and loans. The ratings reflect: -- The adequate credit support provided in the form of overcollateralization, subordination, and excess spread; -- The characteristics of the underlying collateral pool, consisting primarily of CMBS, REIT debt securities, other ABS, and loans; -- The hedge agreements entered into with an appropriately rated counterparty to mitigate the interest rate risk created by having certain fixed-rate assets and floating- rate liabilities; -- Scenario default rates of 19.25% for class S, A-1, A-2, and A-3; 16.24% for class B; 13.96% for class C; 10.06% for class D; 7.86% for class E; and 6.01% for class F; and break-even default rates of 80.00% for class S, 36.46% for class A-1, 28.71% for class A-2, 22.11% for class A-3, 21.39% for class B, 18.10% for class C, 12.75% for class D, 10.71% for class E, and 9.23%% for class F; -- Weighted average rating of 'BBB+'; -- Weighted average maturity for the portfolio of seven years; -- S&P default measure of 0.43%; -- S&P variability measure of 1.21%; and -- S&P correlation measure of 1.84. Interest on the class C, D, E, and F notes may be deferred up until the legal final maturity of July 2052 without causing a default under these obligations. The ratings on the class C, D, E, and F notes, therefore, address the ultimate payment of interest and principal. Ratings Assigned Newcastle CDO X Ltd./Newcastle CDO X LLC Class Rating Amount ----- ------ ------ S AAA $24,241,692 A-1 AAA $80,000,000 A-2 AAA $140,000,000 A-3 AAA $99,750,000 B AA $28,000,000 C A $40,250,000 D BBB $22,000,000 E BBB- $13,500,000 F BB $14,000,000 Preference shares NR $62,500,000 NR-Not rated. NEWFIELD EXPLORATION: Earns $150 Million in Second Quarter 2007 --------------------------------------------------------------- Newfield Exploration Company reported net income of $150 million for the second quarter of 2007. The results reflect the impact of commodity derivative income of $55 million associated with unrealized changes in the fair market value of open derivative contracts that are not designated for hedge accounting. Without the effect of unrealized commodity derivative income, net income for the quarter would have been $114 million. Revenues in the second quarter of 2007 were $528 million. Net cash provided by operating activities before changes in operating assets and liabilities was $380 million. Newfield's production in the second quarter of 2007 was 71 Bcfe, an increase of 10% over first quarter 2007 production and 22% above the second quarter of 2006. Operational Highlights -- Seven Seas Prospect Successful -- In early July, Newfield drilled a successful appraisal well on its Seven Seas prospect on License Area 48-7C in the U.K. North Sea. The well, located approximately 14 kilometers east of the West Sole Fields, was drilled to appraise a 1990s discovery. The Seven Seas well was drilled horizontally within the reservoir for 3,500 feet and tested at an equipment- limited rate of 47 MMcfe/d. Newfield operates with an 80% interest in this undeveloped field. -- Grove Field Commences Production -- On April 25, the Grove Field in the U.K. North Sea commenced production. The G-1 and G-2 wells have produced as high as 37 MMcfe/d and 38 MMcfe/d, respectively. The field is currently producing 36 MMcfe/d (gross). Newfield operates the field with an 85% interest. Newfield plans to sell all its subsidiaries which do business in the U.K. -- Wrigley Field On-Line -- In early July, first production commenced from Newfield's Wrigley development in the deepwater Gulf of Mexico. Gross production is currently 40 MMcfe/d and continues to ramp up to an expected rate of about 60 MMcfe/d. The field is operated by Newfield with the Company holding a 50% working interest. -- Abu Field Commences Production -- In May, the Abu Field offshore Malaysia commenced production. The field is currently producing 10,000 BOPD and is ramping to an expected run rate of 15,000 BOPD. Due to the timing of oil liftings, reported second quarter 2007 production includes no Abu volumes. Newfield has a 50% interest in Abu. -- Stiles/Britt Ranch Reaches Record Production -- In the second quarter, production from the Stiles/Britt Ranch Field in the Texas Panhandle reached a record production rate of 74 MMcfe/d. There are five operated rigs running in the field today. Newfield operates this growing development with a 95-100% working interest across the field. -- Val Verde Production Surpasses 100 MMcfe/d -- In the second quarter, production from the Val Verde Basin of West Texas reached a new high rate of more than 100 MMcfe/d (gross). Newfield's working interest across the Val Verde Basin averages about 70%. -- South Texas JV Production Reaches 82 MMcfe/d -- In the second quarter, production from Newfield's joint venture with Exxon-Mobil in South Texas reached a new high of 82 MMcfe/d (gross). Newfield's interest in this joint venture is about 50%. Newfield has an inventory of 20 ready-to-drill prospects under this venture and is currently operating two drilling rigs. -- Fastball Tests at 60 MMcfe/d -- During the second quarter, Newfield tested its recent Fastball Prospect, located at Viosca Knoll 1003 in the deepwater Gulf of Mexico, at 43 MMcf/d and 3,000 BCPD (gross). The field will be developed as a tie back to existing infrastructure with first production expected in the first half of 2009. Newfield operates Fastball with a 66% working interest. -- Woodford Shale Production at 115 MMcfe/d -- Newfield is currently completing its first 40-acre pilot with four wells expected to commence production in August. Newfield has now spud 110 operated horizontal wells and has an interest in 175 horizontal wells, or 60% of the industry's 291 horizontal wells drilled in the play to date. At June 30, 2007, the company $7.7 billion in total assets, $4.6 billion in total liabilities, and $3.1 billion in total stockholders' equity. Capital Expenditures During the second quarter, Newfield invested $522 million, excluding the $577 million acquisition of the Rocky Mountain assets. Year-to-date, Newfield has invested $1.6 billion, including the acquisition and expects its full-year capital budget to be approximately $2.1 billion. "Our production in the second quarter was strong and provides great momentum as we move into the remainder of 2007 and into 2008," said David A. Trice, Newfield chairman, president and chief executive officer. "The sources of our production growth are diverse -- we hit new production highs in our Woodford Shale Play, in the Val Verde Basin and in our South Texas JV. Although not reflected in our second quarter results, we recently commenced production from significant new developments offshore Malaysia and in the deepwater Gulf of Mexico. These fields will add significant volumes in the second half of 2007 and in 2008. Management's Comments "Our production guidance for the full year 2007 is well ahead of our previously provided forecast," continued Trice. "In fact, if you consider that we expect to divest of approximately 45 Bcfe of production in 2007, our full-year volumes would have been above our previous full year 2007 guidance of 265 - 279 Bcfe. This is great news and indicates that our development drilling programs are contributing to growth as expected. We are in the process of divesting of our assets on the shelf, all of our assets in the U.K. North Sea, our producing fields in Bohai Bay and select properties in the Mid-Continent and South Texas. For 2008, we expect to have at least 10% pro-forma production growth -- or a range of 215 - 230 Bcfe." About Newfield Exploration Newfield Exploration Company (NYSE: NFX) -- http://www.newfld.com/ -- engages in the exploration, development, and acquisition of crude oil and natural gas properties primarily in the United States. As of Dec. 31, 2006, the company had proved reserves of 2.3 trillion cubic feet equivalent. The company was founded in 1988 and is based in Houston, Texas. * * * As of June 25, 2007, Newfield Exploration Company continues to carry Fitch's BB+ long term issuer default rating. Fitch rates the company's bank loan debt and senior unsecured debt at BB+ while its senior subordinate rating is at BB-. The outlook remains stable. At the same time, the company also bears Moody's Investor Services' Ba2 long term corporate family rating and probability of default rating, Ba1 senior unsecured debt, Ba3 senior subordinate rating, and B1 preferred stock rating. The outlook is stable. The company also continues to carry Standard & Poor's BB+ long term foreign and local issuer debt ratings. The outlook remains stable. NOE FULINARA: Case Summary & 19 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Noe Fulinara Merilyn Fulinara 2819 McAndrew Court San Jose, CA 95121 Bankruptcy Case No.: 07-52218 Chapter 11 Petition Date: July 24, 2007 Court: Northern District of California (San Jose) Judge: Marilyn Morgan Debtor's Counsel: Lars T. Fuller, Esq. 60 North Keeble Avenue San Jose, CA 95126 Tel: (408) 295-5595 Total Assets: $4,735,068 Total Debts: $4,478,106 Debtor's 19 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Regional Medical Center $163,961 of San Jose P.O. Box 538620 Atlanta, GA 30353-8620 Wells Fargo Bank value of collateral: $115,652 P.O. Box 54180 $50,472 Los Angeles, CA 90054-0180 American Express $78,585 P.O. Box 0001 Los Angeles, CA 90096-0001 I.R.S. Centralized $57,658 Insolvency Operation Navy Federal Credit $21,748 Bank of America $18,104 Franchised Tax Board $11,306 Special Procedures San Jose Medical Group $10,309 Marshal Rosario, M.D. $4,680 Gentiva Health Services $4,074 South Bay Patholog $3,533 Medical Association Regional Medical Center J.C. Penney $3,121 Bright Now Dental, Inc. $3,038 G.E. Money Bank value of collateral: $3,038 $500 Dell Preferred Account value of collateral: $2,329 Payment Processing Center $500 Central Valley Imaging $2,515 Sears Credit Cards $1,988 Galen Inpt. Phys., Inc. $1,557 BrightNow Dental, Inc. $1,500 OGLEBAY NORTON: S&P Places Ratings Under Developing CreditWatch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Oglebay Norton Co., including its 'B' corporate credit rating, on CreditWatch with developing implications following the company's announcement that it had engaged J.P. Morgan Securities Inc. to assist the company's management and board of directors in exploring options to enhance shareholder value. In resolving the CreditWatch listing, we will monitor developments associated with the company's pursuit of strategic alternatives. The CreditWatch developing placement indicates that the ratings might be affirmed, raised, or lowered, depending on Oglebay's credit profile following a potential transaction. "An acquisition by a strategic buyer with a stronger credit profile may result in an upgrade," said Standard & Poor's credit analyst Marie Shmaruk. "Alternatively, an acquisition by a financial buyer, resulting in a material increase in leverage, could result in a downgrade. As the company may not provide ongoing guidance relative to its progress, we may decide to resolve the CreditWatch listing at a later date if it appears a transaction is not likely to occur." ORECK CORP: S&P Withdraws All Ratings at Company's Request ---------------------------------------------------------- Standard & Poor's Ratings Services withdrew all ratings on New Orleans, Louisiana-based Oreck Corp, including its 'CCC-' corporate credit ratings. S&P made the ratings withdrawal at the company's request. Ratings List Not Rated Action; CreditWatch/Outlook Action To From Oreck Corp. Corporate Credit Rating NR/-- CCC-/Negative/-- Not Rated Action Senior Secured Local Currency NR CCC- PILGRIM'S PRIDE: Declares 2-1/4 Cents Per Share Quarterly Dividend ------------------------------------------------------------------ The Board of Directors of Pilgrim's Pride Corporation has declared a quarterly dividend of 2-1/4 cents per share. The quarterly dividend is payable on Sept. 28, 2007, to shareholders of record at the close of business on Sept. 14, 2007. Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. Pilgrim's Pride employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. * * * Pilgrim's Pride Corp. carries Moody's Investors Service's B1 senior unsecured credit rating, B2 senior subordinated notes, and Ba3 corporate family ratings. PPC's planned new $250 million senior unsecured notes also bears Moody's B1 rating and its new $200 million senior subordinated notes bears Moody's B2 rating. The outlook on all ratings is stable. Standard & Poor's Ratings Services gave Pilgrim's Pride Corp. a 'BB-' corporate credit rating. PSS WORLD: Net Income Downs to $8.7 Mil. in Quarter Ended June 29 ----------------------------------------------------------------- PSS World Medical Inc. had net sales for fiscal 2008 first quarter ended June 29, 2007, of $438.9 million, an increase of 6.2%, compared with net sales of $413.1 million for the three months ended June 30, 2006. Net sales for the three months ended June 29, 2007, for the Physician Business increased by 7.7%, while net sales for the Elder Care Business increased by 3.1%. Income from operations for the three months ended June 29, 2007, was $14.5 million compared with income from operations for the three months ended June 30, 2006, of $18.7 million. Net income for the three months ended June 29, 2007, was $8.7 million, compared with net income for the three months ended June 30, 2006, of $11 million. The company noted that the first quarter operating income was negatively impacted by: -- costs associated with new state pedigree laws, particularly within the state of Florida, for the sale and distribution of pharmaceutical products ($2.7 million); -- costs associated with integration of a recently acquired company ($0.7 million); -- sales training and marketing program costs to launch a new product category in its Physician Business ($1.2 million); -- lower than expected equipment sales in its Physician Business, primarily resulting from lost selling time used for program launch and training ($0.5 million). At June 30, 2007, the company's balance sheet showed total assets of $806.4 million, total liabilities of $416 million, and total stockholders' equity of $390.4 million. David A. Smith, chairman and chief executive officer, commented, "This first quarter set back has challenged and energized the determination of our officer team to execute our plans for the next three quarters of the year. Our field teams are very pleased and excited by the new programs and products we have invested in for their future growth. We have good momentum in the business, a solid plan, and are attractively positioned for future strategic growth." David M. Bronson, executive vice president and chief financial officer, commented, "The costs we recognized in this first quarter tended to mask some otherwise very good performance. Other than the shortfall in equipment revenue, traction in our key marketing strategies was very strong with good revenue growth in Select(TM), pharmaceuticals, and home care. Continued focus on working capital generated operating cash flow that exceeded our expectations. Our operating and shared service teams are focused on building on that momentum to meet our earnings targets for the remainder of the fiscal year." About PSS World Based in Jacksonville, Florida, PSS World Medical Inc. (NASDAQ: PSSI) -- http://www.pssworldmedical.com/-- is a national distributor of medical products to physicians and elder care providers through its two business units. Since its inception in 1983, PSS operated in two market segments focused on customer services, a consultative sales force, strategic acquisitions, strong arrangements with product manufacturers and a unique culture of performance. * * * To date, PSS World Medical Inc. carries Standard & Poor's Ratings Services' BB long-term foreign and local issuer credit ratings. The rating outlook remains stable. RESIDENTIAL ACCREDIT: Fitch Lowers Ratings on Four Cert. Classes ---------------------------------------------------------------- Fitch Ratings has taken action on these Residential Accredit Loan, Inc. mortgage-pass through certificates: Series 2003-QS16 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 affirmed at 'B'. Series 2005-QS5 -- Class A affirmed at 'AAA' -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 downgraded to 'B+' from 'BB'; -- Class B-2 downgraded to 'C' from 'B' and assigned a DR rating of 'DR4'. Series 2005-QS17 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 downgraded to 'B+' from 'BB'; -- Class B-2 downgraded to 'C' from 'B' and assigned a DR rating of 'DR4'. Series 2006-QS10 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'. -- Class B-1 affirmed at 'BB'; -- Class B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS12 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 rated 'BB', placed on Rating Watch Negative. -- Class B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS13 Group I -- Class I-A affirmed at 'AAA'; -- Class I-M-1 affirmed at 'AA'; -- Class I-M-2 affirmed at 'A'; -- Class I-M-3 affirmed at 'BBB'; -- Class I-B-1 affirmed at 'BB'; -- Class I-B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS13 Group II -- Class II-A affirmed at 'AAA' -- Class II-M-1 affirmed at 'AA'; -- Class II-M-2 affirmed at 'A'; -- Class II-M-3 affirmed at 'BBB'; -- Class II-B-1 affirmed at 'BB'; -- Class II-B-2 affirmed at 'B'. Series 2006-QS14 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS16 -- Class A affirmed at 'AAA' -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS17 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class M-3 affirmed at 'BBB'; -- Class B-1 affirmed at 'BB'; -- Class B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS18 Group I -- Class I-A affirmed at 'AAA'; -- Class I-M-1 affirmed at 'AA'; -- Class I-M-2 affirmed at 'A'; -- Class I-M-3 affirmed at 'BBB'; -- Class I-B-1 rated 'BB', placed on Rating Watch Negative; -- Class I-B-2 rated 'B', placed on Rating Watch Negative. Series 2006-QS18 Group II -- Class II-A affirmed at 'AAA' -- Class II-M-1 affirmed at 'AA'; -- Class II-M-2 affirmed at 'A'; -- Class II-M-3 affirmed at 'BBB'; -- Class II-B-1 affirmed at 'BB'; -- Class II-B-2 affirmed at 'B'. Series 2006-QO7 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA+'; -- Class M-2 affirmed at 'AA+'; -- Class M-3 affirmed at 'AA'; -- Class M-4 affirmed at 'A+'; -- Class M-5 affirmed at 'BBB+'; -- Class M-6 affirmed at 'BBB'; -- Class M-7 affirmed at 'BBB-'. The affirmations, affecting approximately $6.3 billion of the outstanding certificates, reflect a stable relationship between credit enhancement and expected loss. The downgrades, affecting approximately $6.5 million, reflect a deteriorating relationship between CE and expected losses. Classes B-1 and B-2 from the 2005 transactions are downgraded due to high delinquencies and expected losses. For series 2005-QS5, the amount of loans in Foreclosure and REO, as a percentage of the current collateral balance, is 1.27%. The CE for classes B-1 and B-2 is 1.00% and 0.53%, respectively. To date, the transaction has experienced losses of approximately $297,000 or 0.14% of the original collateral balance. For series 2005-QS17, the amount of loans in Foreclosure and REO, as a percentage of the current collateral balance, is 1.36%. The CE for classes B-1 and B-2 is 1.01% and 0.49%, respectively. To date, the transaction has experienced losses of approximately $184,000 or 0.03% of the original collateral balance. Several classes from the 2006 vintage RALI transactions are placed on Rating Watch due to current trends in the relationship between serious delinquency and credit enhancement. For the affected transactions, the 90+ DQ ranges from 1.63% to 2.67% of the current collateral balance. The affected B-2 bonds have CE ranging from 0.41% to 0.55%, while the affected B-1 bonds have CE of 0.92% (QS12) and 1.05% (QS18). As of the June 2007 distribution date, the pool factors of the above transactions range from 46% (series 2003-QS16) to 92% (series 2006-QS17 & 2006-QS18, Group 1). The seasoning ranges from 6 months (series 2006-QS17 and 2006-QS18) to 46 months (series 2003-QS16). The collateral of the above transactions primarily consists of 30- year and 15-year fixed-rate mortgage loans extended to Alt-A borrowers. The loans are primarily secured by first liens on one- to four-family residential properties. All of the above transactions are master serviced by GMAC-RFC, (rated 'RMS1' by Fitch). REYNOLDS AMERICAN: Earns $325 Million in Quarter Ended June 30 -------------------------------------------------------------- Reynolds American Inc. reported a $325 million net income on net sales of $2,348 million for the three months ended June 30, 2007, compared to net income of $376 million on net sales of $2,291 million for the three months ended June 30, 2006. As of June 30, 2007, the company's balance sheet showed total assets of $17,630 million, total liabilities of $10,413 million and total shareholders' equity of $7,217 million. The company states that reported EPS for both periods was down due to unusually high, undiscounted, volume at wholesale and extraordinary tax gains in the prior-year periods. Adjusted EPS was down for the quarter, but up 1.8 percent for the first half. Second-quarter reported and adjusted 2007 EPS included a charge of approximately $20 million, or about 4 cents per share, related to debt refinancing that smooths out maturities and reduces the company's cost of debt. Reynolds American expects to see substantial improvements in second-half earnings comparisons due to the significant quarterly fluctuations throughout 2006. Reynolds American has raised the low end of its prior full-year 2007 guidance by 5 cents and now expects reported EPS of $4.45 to $4.60. The company said it remains on track to deliver year-over-year reported EPS growth of 9 percent to 12 percent. Commenting on the results, Susan M. Ivey, the company's chairman, president and chief executive officer, said, "Reynolds American's first-half results position us well to deliver strong earnings growth for the full year." Ms. Ivey relates that the first half of 2007 was highlighted by: * R.J. Reynolds' margin improvements and total growth-brand gains; * Conwood's continued share and volume gains, and double- digit profit growth; * Continuing benefits from productivity initiatives; * Debt refinancing to smooth out maturities and reduce cost; and * Credit rating upgrades based on RAI's performance and improved risk profile. She noted that the company's financial strength in the first half of 2007 is clouded by comparisons to a particularly strong prior- year period that benefited from an unusual wholesale inventory build and $74 million of extraordinary tax gains. "Our guidance and dividend increases clearly demonstrate our confidence in RAI's 2007 performance," Ms. Ivey said. "We're solidly on track to deliver strong full-year results." Revised Full-Year Forecast "Our first-half results fully met our expectations and reflect a difficult prior-year comparison," said Dianne M. Neal, the company's chief financial officer. "All of our businesses are producing solid results, we're continuing see growth on key brands, and we're on track to generate full-year productivity gains of $75-to-$100 million. "Based on our first-half accomplishments and our full-year expectations, we've raised the low end of our prior guidance by 5 cents," Neal said. "We now expect to deliver full-year reported EPS of $4.45 to $4.60. That represents an increase of 9 percent to 12 percent, compared with RAI's prior-year earnings." Ms. Neal said that the company's first-half 2007 highlights also include: -- The repayment of $300 million in debt; -- Rating-agency upgrades of RAI's revolving credit facility and its senior secured notes; -- The successful refinancing of a $1.55 billion term loan over a longer, staggered term and at lower rates; and -- The return of the $100 million appeal bond in the Engle case. Ms. Neal noted that the dividend increase keeps the company in line with its policy of returning about 75 percent of current-year net income to shareholders in the form of dividends. "We continue to face external challenges in terms of FDA regulation, and state and federal excise tax proposals," she said. "However, we continue to address these challenges, and we're confident that we will deliver strong financial results and continue to build value for our shareholders." About Reynolds American Inc. Headquartered in Winston-Salem, North Carolina, Reynolds American Inc. (NYSE: RAI) is the ultimate parent company of wholly owned subsidiaries, R.J. Reynolds Tobacco Company (manufactured cigarettes), Santa Fe Natural Tobacco Company (additive free tobacco cigarettes), Lane Limited (roll your own tobacco brands) and Conwood Holdings, Inc. (smokeless tobacco products). * * * As reported in the Troubled Company Reporter on June 22, 2007, Moody's Investors Service affirmed Reynolds American Inc.'s Ba1 corporate family rating and its' speculative grade liquidity rating of SGL-2. The rating outlook is positive. In addition, Standard & Poor's Ratings Services assigned Reynolds American Inc.'s corporate credit rating at 'BB+', which reflects the company's participation in the contracting domestic cigarette industry, its declining shipment volumes and market share, and significant litigation risk partly offset by relatively moderate financial policies. The outlook is positive. SAINT VINCENT'S: Creditors Vote to Accept Amended Plan ------------------------------------------------------ The First Amended Plan of Saint Vincent's Catholic Medical Centers of New York and its debtor-affiliates, Andrew M. Troop, Esq., at Cadwalader, Wickersham & Taft LLP, in New York informs the United States Bankruptcy Court for the Southern District of New York, has been expressly supported by the Official Committee of Unsecured Committee and the Official Committee of Tort Claimants, and has been overwhelmingly accepted by all Classes that actually voted on it. As reported in the Troubled Company Reporter on June 8, 2007, the Debtors filed an Amended Chapter 11 Plan that was in act, six separate plans-- a plan of reorganization for Saint Vincents Catholic Medical Centers of New York and separate plans of liquidation for each of the five Other Debtors. The Debtors' Amended Plan is designed to permit them to emerge from Chapter 11 as a financially healthy enterprise capable not only of satisfying Allowed Claims, but also capable of remaining an important, integrated and substantial provider of health care and employment in New York City and Westchester County. "The First Amended Plan represents a highly successful and, importantly, consensual conclusion for the Debtors' Chapter 11 cases," Mr. Troop asserts. James Katchadurian, vice president of Epiq Bankruptcy Solutions, LLC, presents a tabulation of properly completed and executed and timely filed Ballots: Accept Reject --------------------- ------------------ Class Amount Number Amount Number ----- ----------- -------- -------- --------- Class 2-2 $25,000,000 1 $0 0 Aptium Secured Claims (100%) (100%) (0%) (0%) Class 3 $137,811,958 715 $17,495 4 Gen. Unsecured Claims (99.99%) (99.44%) (0.01%) (0.56%) Class 4 $111 111 $6 6 MedMal-BQ Claims (94.87%) (94.87%) (5.13%) (5.13%) Class 5 $60 60 $3 3 MedMal-MW Claims (95.24%) (95.24%) (4.76%) (4.76%) Class 6 $58 58 $4 4 MedMal-SI Claims (93.55%) (93.55%) (6.45%) (6.45%) Class 8 $37,975,772 4 $0 0 Intercompany Claims (100%) (100%) (0%) (0%) Class 9 $6,765,721 1 $0 0 DASNY Subordinated (100%) (100%) (0%) (0%) Class A3 $12,136 1 $0 0 Gen. Unsecured Claims (100%) (100%) (0%) (0%) against MS-SVH Class A4 $1 1 $0 0 Equity Interest in MS-SVH (100%) (100%) (0%) (0%) Class B3 $0 0 $0 0 Gen. Unsecured Claims (0%) (0%) (0%) (0%) against SSSV Class B4 $0 0 $0 0 Equity Interest in SSSV (0%) (0%) (0%) (0%) Class C3 $0 0 $0 0 Gen. Unsecured Claims (0%) (0%) (0%) (0%) Against CMC-CS Class C4 $0 0 $0 0 Equity Interest in CMC-CS (0%) (0%) (0%) (0%) Class D3 $0 0 $0 0 Gen. Unsecured Claim (0%) (0%) (0%) (0%) Against CMC-PS Class D4 $0 0 $0 0 Equity Interest in CMC-PS (0%) (0%) (0%) (0%) Class E3 $45,229 1 $0 0 Gen. Unsecured Claims (100%) (100%) (0%) (0%) against CMC-RS Class E4 $0 0 $0 0 Equity Interest in CMC-RS (0%) (0%) (0%) (0%) Not a single Class voted to reject the First Amended Plan, Mr. Troop points out. "The fundamental fairness of the First Amended Plan and the appropriate, honest and with good intention way it balances competing interests in these cases is demonstrated by the consensus it reflects and the support it has received from the Creditors' Committee, the Tort Committee, various parties-in- interest who have reached agreement with the Debtors over the treatment of their claims and the overwhelming number and amount of interested parties who have voted in favor of the Plan," Mr. Troop says. In fact, the Debtors note, the only remaining substantive objection to confirmation of the Plan is the one filed by the U.S. Trustee. Mr. Troop argues that the First Amended Plan complies in all respects with applicable law and need not be modified to address the U.S. Trustee's concerns for these reasons: * Limited exculpation provisions as those contained in the First Amended Plan are routinely approved by courts, in light of the recognition that absent these provisions, negotiated Chapter 11 plans would not be possible. * The provisions of the First Amended Plan which enjoin the assertion of certain claims against certain non-Debtor parties are narrowly tailored and justified under applicable authority. They are not blanket releases purporting to enjoin the assertion of a broad spectrum of direct claims against non-Debtor parties, Mr. Troop maintains. Rather, the First Amended Plan only enjoins actions against certain specified non-Debtor parties to the extent those actions seek to recover on account of Claims and Equity Interests subject to the First Amended Plan. Although the Debtors are not at present aware of the right of any third party to bring any such action against any of the Released Parties, if and to the extent that right exists and is later asserted, the applicable Released Party likely would be entitled to assert a corresponding indemnification claim against the applicable Debtor. Under these circumstances, the limited non-Debtor release provisions contained in the First Amended Plan are entirely appropriate under governing case law in this jurisdiction and should be approved. * The Litigation Trustee and the MedMal Trustee were selected based upon the Debtors' due diligence and after consultation with the Creditors Committee and the Tort Committee, as applicable. The Debtors and the Committees believe the parties selected to serve as Litigation Trustee and MedMal Trustee are reliable and, accordingly, that there is no need for either the MedMal Trustee or the Litigation Trustee to be bonded. * The Debtors have demonstrated in supporting declarations, and will further demonstrate at the Confirmation Hearing as necessary, that they are fully capable of satisfying all of their payment obligations under the First Amended Plan and that these Chapter 11 Cases are not likely to be followed by the need for further bankruptcy proceedings. Moreover, the First Amended Plan satisfies all applicable requirements of the Bankruptcy Code, including Sections 1122, 1123, 1125, 1126 and 1129, Mr. Troop avers. Moreover, the First Amended Plan provides that SVCMC will enter into a $320,000,000 Exit Facility on the Effective Date. SVCMC anticipate that the substantial liquidity available to it under the Exit Facility, together with its existing assets of as of the Effective Date, will be sufficient to enable it to satisfy their cash obligations under the Plan as well as its working capital needs upon and subsequent to the Effective Date. The Debtors contend that the First Amended Plan should be confirmed to enable them to concentrate their efforts on emerging from Chapter 11 and continuing to provide quality health care services to the greater New York community. The Court is set to consider confirmation of the Debtors' Amended Plan, today, July 27. About Saint Vincent's Based in New York City, Saint Vincent's Catholic Medical Centers of New York -- http://www.svcmc.org/-- the healthcare provider in New York State, operates hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. The Debtors filed their Chapter 11 Plan of Reorganization accompanying a disclosure statement explaining that Plan on Feb. 9, 2007. On June 1, 2007, the Debtors filed an Amended Plan & Disclosure Statement. (Saint Vincent Bankruptcy News, Issue No. 59 Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) SAINT VINCENT'S: Inks Stipulation Resolving DASNY's Plan Objection ------------------------------------------------------------------ The Dormitory Authority of the State of New York is the holder of certain claims pursuant to that certain stipulation between DASNY, Saint Vincent's Catholic Medical Centers of New York and its debtor-affiliates, and the Official Committee of Unsecured Creditors approved by the U.S. Bankruptcy Court or the Southern District of New York on December 29, 2005. DASNY has opposed the approval of the Disclosure Statement, but certain of the objections raised were deferred until the hearing on the confirmation of the Debtors' First Amended Plan. Specifically, DASNY has contended that the Plan does not provide for the treatment of the DASNY Subordinated Claims in a manner that is consistent with the provisions of the December 29 Stipulation and thus cannot be confirmed. Accordingly, to resolve their dispute, the parties stipulate that in full payment and satisfaction of the DASNY Subordinated Claims: -- the Debtors will shall pay DASNY $2,865,721, together with accretions accruing from the Effective Date until the 2nd Effective Date Anniversary on the amount of the $2,865,721 outstanding at DASNY's cost of funds, beginning on the 2nd Effective Date Anniversary, in 16 equal installments to be made on a quarterly basis over a four-year period; and -- DASNY will receive a subordinated beneficial interest in the Litigation Trust totaling $3,900,000, plus DASNY's reasonable legal fees and expenses incurred in the Debtors' Chapter 11 cases in an amount to be agreed upon by the Debtors and DASNY or in the absence of agreement as determined by the Bankruptcy Court. The DASNY Litigation Trust Claim will be entitled payment under the Litigation Distribution Schedule, which will be modified from the Litigation Distribution Schedule in the Plan. The Litigation Distribution Schedule means the distribution of Litigation Claims Proceeds and other Litigation Trust Assets by the Litigation Trust in this manner: * First, to pay Litigation Claims Costs; * Second, to Reorganized SVCMC to pay back the Litigation Trust Loan; * Third, to pay down the remaining principal portion of the GUC Litigation Trust Interest; * Fourth, to pay down the accreted portion of the GUC Litigation Trust Interest; * Fifth, after the GUC Litigation Trust Interest is satisfied in full and until the Secured Obligation is paid in full, 50% to pay down the Secured Obligation and 50% to the MedMal Trusts, allocated among the MedMal Trusts in accordance with their respective Pro Rata Shares, and applied to obligations under the MedMal Trust Funding Schedule in inverse order of maturity; * Sixth, after the Secured Obligation is paid in full and until the Unsecured Obligation is paid in full, 50% to pay down the Unsecured Obligation and 50% to the MedMal Trusts, allocated among the MedMal Trusts in accordance with their respective Pro Rata Shares, and applied to obligations under the MedMal Trust Funding Schedule in inverse order of maturity; * Seventh, to the MedMal Trusts until Reorganized SVCMC's payments under the MedMal Trust Funding Schedule will have been fully paid or the obligation to make those payments will have ceased and all required Shortfall Payments due, outstanding, and unpaid at the time of distribution will have been paid in full; * Eight, to the Pension Plan until the Pension Plan is fully funded under applicable ERISA requirements and all minimum funding requirements up until the date of payment under this eighth payment level have been paid in full; * Ninth, to DASNY until the DASNY Litigation Trust Claim is paid in full; * Tenth, to the Pension Plan. DASNY also consents to the release of all security interests in and mortgages on the Debtors' property and assets securing the DASNY Subordinated Claims. On the Effective Date of the Plan, those security interests and mortgages will be deemed released, discharged and satisfied. DASNY will be granted a mortgage on O'Toole Real Estate to secure payment of only the DASNY Secured Claim, which mortgage will be subordinate in priority and payment only to SVCMC's exit financing and any replacement financing. The parties' Stipulation will be effective only upon approval of the Court. DASNY notes that if the Court does not approve the Stipulation, the current treatment of the DASNY DIP Loan Claim under the First Amended Plan violates its rights and renders the First Amended Plan unconfirmable. Accordingly, DASNY reserves its rights to prosecute its objection to confirm the First Amended Plan if the Stipulation is not approved. About Saint Vincent's Based in New York City, Saint Vincent's Catholic Medical Centers of New York -- http://www.svcmc.org/-- the healthcare provider in New York State, operates hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. The Debtors filed their Chapter 11 Plan of Reorganization accompanying a disclosure statement explaining that Plan on Feb. 9, 2007. On June 1, 2007, the Debtors filed an Amended Plan & Disclosure Statement. (Saint Vincent Bankruptcy News, Issue No. 59 Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) SOUNDVIEW HOME: Moody's Rates Class M-10 Certificates at Ba1 ------------------------------------------------------------ Moody's Investors Service assigned a Aaa rating to the senior certificates issued by Soundview Home Loan Trust 2007-OPT2 and ratings ranging from Aa1 to Ba1 to the subordinate certificates in the deal. The securitization is backed by adjustable-rate and fixed-rate, first lien, subprime residential mortgage loans originated by Option One Mortgage Corporation. The ratings are based primarily on the credit quality of the loans and on the protection against credit losses by subordination, overcollateralization, and excess spread. The ratings also benefit from an interest rate swap agreement and an interest rate cap agreement both provided by The Bank of New York. Moody's expects collateral losses to range from 5.70% to 6.20%. Option One Mortgage Corporation will service the mortgage loans in the transaction. Moody's assigned Option One its servicer quality rating of SQ2+ as a primary servicer of subprime residential mortgage loans. The complete rating actions are: Soundview Home Loan Trust 2007-OPT2 Asset-Backed Certificates, Series 2007-OPT2 -- Cl. I-A-1, Assigned Aaa -- Cl. II-A-1, Assigned Aaa -- Cl. II-A-2, Assigned Aaa -- Cl. II-A-3, Assigned Aaa -- Cl. II-A-4, Assigned Aaa -- Cl. M-1, Assigned Aa1 -- Cl. M-2, Assigned Aa2 -- Cl. M-3, Assigned Aa3 -- Cl. M-4, Assigned A1 -- Cl. M-5, Assigned A2 -- Cl. M-6, Assigned A3 -- Cl. M-7, Assigned Baa1 -- Cl. M-8, Assigned Baa2 -- Cl. M-9, Assigned Baa3 -- Cl. M-10, Assigned Ba1 SPECIALTY UNDERWRITING: Losses Prompt S&P to Lower Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five classes issued by Specialty Underwriting and Residential Finance Trust Series 2003-BC2 and 2003-BC3. Of the five lowered ratings, S&P placed one on CreditWatch with negative implications, and S&P removed the ratings on three from CreditWatch negative. Furthermore, S&P affirmed its ratings on the remaining classes from these two transactions. The lowered ratings reflect a continuous increase in realized losses, which has depleted overcollateralization and caused monthly losses to significantly outpace monthly excess interest. As of the June 25, 2007, distribution date, the failure of excess interest to cover monthly losses has caused O/C to fall approximately 58% below its target balance. Cumulative losses range from 1.41% (series 2003-BC3) to 2.09% (series 2003-BC2) of the original pool balances. In addition, 90-plus-day delinquencies range from 12.26% (series 2003-BC3) to 19.59% (series 2003-BC2) of the current pool balances. Standard & Poor's will continue to closely monitor the performance of the class M-2 certificates from series 2003-BC2. If losses continue to outpace excess spread, S&P will take further negative rating action on this class within the next several months. Conversely, if this trend reverses, S&P will affirm the rating and remove it from CreditWatch. S&P removed the ratings on classes B-1 and B-2 from series 2003- BC2 and the rating on class B-3 from series 2003-BC3 from CreditWatch negative because they were lowered to 'CCC'. According to Standard & Poor's surveillance practices, ratings lower than 'B-' on classes of certificates or notes from RMBS transactions are not eligible to be on CreditWatch negative. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings on these securities. Credit support for these transactions is derived from a combination of subordination, excess interest, and O/C. The collateral supporting these transactions consists of subprime mortgage loans. Rating Lowered Specialty Underwriting and Residential Finance Trust Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ----- 2003-BC3 B-2 B BBB Rating Lowered and Placed on Creditwatch Negative Specialty Underwriting and Residential Finance Trust Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2003-BC2 M-2 BBB/Watch Neg AA Ratings Lowered and Removed from Creditwatch Negative Specialty Underwriting and Residential Finance Trust Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ----- 2003-BC2 B-1 CCC BBB/Watch Neg 2003-BC2 B-2 CCC B/Watch Neg 2003-BC3 B-3 CCC BB-/Watch Neg Ratings Affirmed Specialty Underwriting and Residential Finance Trust Mortgage pass-through certificates Series Class Rating ------ ----- ------ 2003-BC2 S AAA 2003-BC2 M-1 AAA 2003-BC3 A AAA 2003-BC3 S AAA 2003-BC3 M-1 AAA 2003-BC3 M-2 AA 2003-BC3 M-3 A 2003-BC3 B-1 BBB+ SPECTRUM BRANDS: Global Operations President K. Biller to Retire ---------------------------------------------------------------- Kenneth V. Biller, President of Global Operations of Spectrum Brands, Inc., disclosed his retirement from the company effective Sept. 30, 2007. Mr. Biller's responsibilities will be assumed by other members of Spectrum's senior management team. "Ken is completing a distinguished 35 year career with Spectrum Brands during which he was integral to the company's growth from a locally owned Midwestern battery manufacturer to a global, multi- brand consumer products company," Kent Hussey, Chief Executive Officer, said. "His expertise and leadership were instrumental to the successful integration of our acquisitions, and he most recently spearheaded the consolidation of Spectrum Brands' Global Operations division into our Global Batteries & Personal Care, Home & Garden and Global Pet Supplies business units. Throughout his years at the company, Ken has been a relentless advocate of quality, efficiency and superior technology, and a mentor to many of our senior managers. We wish Ken all the best in his well- earned retirement." Mr. Biller, 59, joined Rayovac Corporation in 1972 and held a series of management positions in technology and manufacturing operations. He was appointed Senior Vice President of Operations in 1998 and a year later was named Executive Vice President of Operations. In 2005 he became President of Global Operations, with responsibility for nearly 6000 employees around the globe. His many accomplishments include the integration and consolidation of technology, manufacturing and supply chain operations acquired along with VARTA AG in Germany in 2002, Remington Products LLC in 2003, Brazilian battery manufacturer Microlite S.A. and Ningbo Baowang China Battery Company in 2004, and United Industries and Tetra GmbH in 2005. Mr. Biller currently serves on the Dean's Advisory Board for the University of Wisconsin's School of Business and in recent years has served as a member of the Advisory Board for the University of Wisconsin Operations and Technology Management program. He holds a Bachelor of Science in chemical engineering and a Masters of Business Administration from the University of Wisconsin. About Spectrum Brands Headquartered in Atlanta, Georgia, Spectrum Brands (NYSE: SPC) -- http://www.spectrumbrands.com/-- is a consumer products company and a supplier of batteries and portable lighting, lawn and garden care products, specialty pet supplies, shaving and grooming and personal care products, and household insecticides. Spectrum Brands' products are sold by the world's top 25 retailers and are available in more than one million stores in 120 countries around the world. The company has manufacturing and distribution facilities in China, Australia and New Zealand, and sales offices in Melbourne, Shanghai, and Singapore. * * * As reported in the Troubled Company Reporter on April 30, 2007, Fitch Ratings affirmed the ratings of Spectrum Brands Inc., including its CCC issuer default rating, its CCC- rating of the company's $700 million 7-3/8% senior subordinated note due 2015 and its CCC- rating of the company's $350 million 11.25% Variable Rate Toggle Interest pay-in-kind Senior Subordinated Note due 2013. The Outlook remains Negative. SYNCHRONOUS AEROSPACE: Moody's Rates Proposed $95 Mil. Loan at B2 ----------------------------------------------------------------- Moody's Investors Service assigned a B2 first time rating to Synchronous Aerospace Group's proposed $95 million senior secured credit facility consisting of a $75 million term loan due 2014 and a $20 million revolver due 2013. Also, Moody's assigned to Synchronous a B2 Corporate Family Rating. The rating outlook is stable. The purpose of the proposed credit facilities is to partially fund the acquisition of the company by LJ Synch Holdings, Inc., an affiliate of private equity group Littlejohn & Co., LLC. On June 29, 2007, LJ Synch Holdings entered into a definitive agreement to acquire all of the outstanding stock of Synchronous. This acquisition will be partially funded by an equity investment from Littlejohn and management. The balance will be funded through use of a $75 million senor secured term loan facility. The senior secured credit facility also includes a $20 million revolving credit facility, which is expected to be un-drawn upon close of the acquisition financing. Synchronous' ratings reflect the company's relatively high debt levels resulting from LBO financing, its small and concentrated sales base, and integration risk associated with operating transformations that the company has undertaken in its relatively short history. The ratings also take into account Moody's concerns over the company's thin projected free cash flow levels, and risk to the stability of these cash flows in the event of unexpected market developments. Despite these risks, the company's high level of revenue predictability based on its role as a supplier of key components to leading aircraft OEM's in along with a trend of improving operating margins suggests that cash flow and credit metrics will improve in the near-term to levels more consistent with a B2 rating. The stable rating outlook reflects Moody's expectations that Synchronous will maintain operating margins at least at current levels through FY 2008, resulting in modestly positive free cash flow over the near term. Such cash generation would likely result in a small amount of debt repayment in FY 2008, with improvements in credit metrics to levels more strongly supportive of a B2 rating. Ratings or their outlook could be subject to downward revision if sales levels drop due to unexpected reduction in OEM delivery levels, or the loss of a significant contract, or if margins were to deteriorate as a result of poor prolonged industry conditions or increased competitive pressures. Ratings could also be lowered if debt is increased for any reason, for large levered acquisitions or equity distributions in particular. These credit metric levels may result in a downgrade: Leverage: Debt/EBITDA in excess of 7.5 times; Interest Coverage: EBIT/Interest below 1 time; Cash Flow: Retained cash flow/Debt below 5%; or Margins: Operating Margin below 10%. Ratings or their outlook could be raised if the company could expand its sales and customer base while maintaining margins without substantial impairment of cash flow generation by unduly large increases in working capital or CAPEX spending. An upgrade or positive outlook would be most likely if improvements in operating performance result in substantial reduction in debt. These credit metric levels may positively affect ratings: Leverage: Debt/EBITDA below 5 times; Interest Coverage: EBIT/Interest of greater than 1.7 times; and Cash Flow: Retained cash flow/Debt in excess of 10%. These ratings have been assigned: Synchronous Aerospace Group: -- Senior secured credit facilities at B2 (LGD3, 33%) -- Corporate Family Rating of B2 -- Probability of Default Rating of B3 The B3 Probability of Default rating was assigned one notch below the Corporate Family Rating due to an assumed family loss given default rate of 35% considered in Moody's loss given default methodologies. The lower loss/higher recovery rate assumption was used since the entirety of the company's debt structure comprises first lien secured bank debt. Synchronous Aerospace Group headquartered in Santa Ana, CA, is a manufacturer of structural components for the commercial and military aerospace and space industries. SYNCHRONOUS AEROSPACE: S&P Rates Proposed $95MM Facility at B ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Synchronous Aerospace Group. The outlook is stable. At the same time, Standard & Poor's assigned its 'B' rating and '3' recovery rating to the company's proposed $95 million senior secured credit facility, indicating expectations of a meaningful (50%-70%) recovery in the event of payment default. "The ratings on Synchronous Aerospace reflect a highly leveraged financial profile, a small revenue base with limited customer and program diversity, and the cyclical and competitive nature of the commercial aerospace market," said Standard & Poor's credit analyst Christopher DeNicolo. "These factors are offset somewhat by currently strong demand for commercial aircraft and long term agreements with customers," the analyst continued. The proceeds from the new credit facility will be used to partially finance the acquisition of the company by an affiliate of Littlejohn & Co. LLC, a private equity firm. Leverage will be high at close, with debt to EBITDA of almost 5x. Other credit protection measures will also be weak, with funds from operations to debt in the 10%-15% range and EBITDA interest coverage about 2x. Some improvement is expected as earnings grow and debt is repaid with excess cash flows. Santa Ana, California-based Synchronous Aerospace is a Tier II supplier of highly complex machined parts, assemblies, kits, and replacement spare parts mostly for commercial aircraft, but also military fixed wing aircraft, military rotorcraft, and space. Production of commercial aircraft has been increasing steadily since bottoming out in 2003 and should continue to rise in the near term. However, the industry is cyclical and there is a fair amount of competition at this level of the supply chain. Military aircraft and rotorcraft production has been supported by high levels of defense spending and the start of new programs. Customer and program diversity is somewhat limited, but the company participates on several popular, mostly Boeing Co., commercial aircraft programs and most business is under long term agreements with leading OEMs. The company has grown through a series of acquisitions, mostly of entities that were having financial or operational difficulties. Profitability has been increasing steadily as operations improve at the acquired facilities and unprofitable contracts are renegotiated or exited. Operating margins are expected to be good, although the absolute amount of earnings is small. Increasing production of commercial aircraft is expected to support revenue growth in the intermediate term. Improving profitability and debt reduction using excess cash flows should enable the company to maintain a financial profile consistent with current ratings. S&P does not expect to revise the outlook to positive or negative in the near term. TEXAS SOUTHERN: Moody's Cuts Bond's Rating to Ba3 & Retains Watch ----------------------------------------------------------------- Moody's downgraded Texas Southern University's underlying Revenue Financing System bond rating to Ba3 from Baa3 and the rating remains on watchlist for further downgrade. The continued watchlist is based on Moody's continued concern regarding the enrollment, financial, managerial, and governance stability of the University as well as the continued level of state oversight and support. The underlying Ba3 rating action applies to $111 million of Revenue Financing System bonds, detailed at the end of this report. Moody's rates the University's constitutional appropriation bonds at the Aa2 level, based on an appropriation in the Texas State constitution. Legal Security A pledge of Revenue Funds, which includes the revenues, incomes, receipts, rentals, rates, charges, fees, grants, and tuition levied or collected from any public or private source by the University. Debt service reserve fund. Strengths As a public university long dedicated to serving African-American students and an urban education mission in Houston, TSU has received strong support from the Aa1-rated State of Texas during periods of financial difficulties. In the recent biennial session, the University received a supplemental appropriation for the current fiscal year of 2007 of over $13.6 million. Full receipt of this funding, however, is contingent upon a reorganization plan to be approved by the Legislative Budget Board and the Governor, or the placing of the University under conservatorship. The legislature also approved $25 million of supplemental appropriations for fiscal years 2008 and 2009 ($12.5 million each year) with the same contingency in place. Further, the University received authority for additional tuition revenue bonds. About 90% of the University's outstanding revenue financing system bonds are "tuition revenue bonds" for which TSU receives debt service reimbursement from the State. The State, however, is not legally obligated to provide this funding and the actual payment obligation is TSU's alone. Challenges The University's ongoing viability is contingent upon continued strong state support. Moody's believes there is significant uncertainty regarding political decisions surrounding the future of the University. Management, governance, and oversight of the University remain in flux. The University's nine-member board was forced to resign and was replaced by a new five member board in May. The President and Chief Financial Officer positions remain filled on an interim basis, and there has been a change in the interim financial officer since Moody's last report. It is not clear when a reorganization plan will be complete to facilitate the release of the supplemental appropriations, nor is it clear what level of oversight of the University's financial operations will be provided by the state. The University's financial condition is such that it required a supplemental appropriation to conclude fiscal year 2007. It now has essentially no financial reserves. An external auditor, Deloitte and Touche, was hired to conclude an audit for fiscal years 2006 and 2005 but was unable to do so due to the poor condition of the University's records and internal controls. Moody's believes the accuracy of any reported data is uncertain and unreliable, and prior year audited financial statements might also be not fully reliable. Failure to make timely debt service payments on two separate occasions within the past two years despite having sufficient funds on hand to do so, in part due to inadequate staffing and procedures. It is unclear that appropriate administrative systems have been put in place to prevent a reoccurrence of these problems. The University's payment ability on related and contingent obligations is questionable. In 2004, the University financed parking improvements through the use of a limited liability corporation, with payment ultimately secured by a mandatory student fee that the University agreed to levy and transfer to the bond trustee. The student fee was never levied and management reports that the bonds are in default. Similarly, 2003 bonds also issued under an LLC structure for student housing are in danger of default due to construction problems and inadequate project performance. Under an occupancy agreement related to this financing, the University agreed to lease vacant rental units in order to achieve break-even occupancy of 95%. The nature of the University's obligations under both these transactions has led Moody's to classify and view them as direct debt obligations of TSU, with default on these transactions having significant negative impact on Moody's view of the University's ability and willingness to pay on all obligations. Finally, payments under a disputed energy conservation contract entered into the 1990s remain in litigation. Expected enrollment declines, with management projecting a 15% drop for Fall 2007, following on a 5% decline over the past two years. Fall 2006 enrollment stood at over 9,800 full-time equivalent students. Management reports that a federal audit of the University's financial aid program is expected this fall. The University's mismanagement of its financial aid programs led to its last fiscal crisis in the mid-1990s, which also resulted in a state bail-out at that time. Moody's remains concerned about TSU's future accreditation by the Southern Association of Colleges and Schools. At this point, no public action has been taken regarding accreditation for the University. However, accrediting actions are frequently taken in cases where financial viability and unstable management and governance are present; should the University lose its full accreditation, the enrollment and financial impact could be severe. Outlook The rating remains on watchlist for potential further downgrade. Moody's will be monitoring the continued evolution of state support and oversight for the University, enrollment trends, the federal audit of the university's financial aid programs, and any potential accreditation issues that arise from the university's governance, administrative, and financial turmoil. What could change the rating - Up Strong action at the state level to provide fiscal support and oversight for the University and an ability to demonstrate stabilized enrollment and revenues in support of debt service. What could change the rating - Down Failure by the state to provide the necessary level of financial support and oversight to enable the University to recover from its latest crisis, change of federal financial aid status, loss of accreditation, larger than expected enrollment declines. Ten year rating history: July 2007: Rating downgraded to Ba3 and remains on watchlist for downgrade April 2007: Rating downgraded to Baa3, from A3, remains on watchlist for downgrade February 2007: Constitutional Appropriation Bonds downgraded to Aa2 from Aa1 January 2007: Rating placed on watchlist for downgrade June 2006: Negative outlook placed on rating at A3 level March 2004: Rating upgraded to A3 from Baa1 May 2003: Rating outlook changed to positive at the Baa1 level March 2002: Rating upgraded to Baa1 from Baa3 March 1998: Baa3 rating assigned to Series 1998 Bonds Key data and ratios Total FTE Enrollment: 9,807 Total Direct Debt: $111 million of Revenue Financing System, $38 million Constitutional Appropriation Bonds, $25 million of Houston Student Housing II LLC bonds, and $35 million of Crawford Educational Facilities Corporation Bonds Reliance on State Funding: 45.5% State of Texas Rating: Aa1, Stable Rated Debt Revenue Financing System Bonds: -- Series 1998 A-1, Series 2002: Ba3, Aaa insured (MBIA) -- Series 1998 A-2 and B, Series 2004: Ba3, Aaa insured (Ambac) -- Series 2003: Ba3, Aaa insured (FGIC) Constitutional Appropriation Bonds: -- Series 2004 and 2005: Aa2 Crawford Education Facilities Corporation, University Parking System Project: -- Aa2/VMIG1 based on credit facility from BNP Paribas VERTIS INC: American Color Merger Cues Moody's to Review Ratings ---------------------------------------------------------------- Moody's Investors Service placed the ratings of Vertis, Inc. under review for possible downgrade following the announcement that the company plans to merge with American Color Graphics, Inc. Ratings placed under review for possible downgrade: Vertis, Inc. -- $350 million 10.875% senior notes due 2009 - Caa1 -- $293 million 13 1/2% senior subordinated notes due 2009 - Caa3 -- $350 million 9 3/4% senior secured second lien notes due 2009 - B1 -- Corporate Family rating - Caa1 -- Probability of Default rating - Caa1 The review for possible downgrade reflects Moody's expectation of a recapitalization as well as heightened concern regarding the companies' weak financial metrics, strained liquidity and the pressure of approaching debt maturities. The rating review will consider: i. the probability that the companies will successfully conclude the proposed merger; ii. the likelihood that debt holders will face losses if the expected recapitalization involves an exchange of notes at less than full value, or if debtholders interests are otherwise compromised; and iii. the ability of ACG to fund its near- term interest expense obligations and the ability of both companies to fund scheduled maturities of principal, absent a restructuring. Vertis and ACG recently announced that both have signed a non- binding letter of intent to merge their businesses. Management of both companies expect to conclude a definitive merger agreement by Aug. 13, 2007, which will be subject to the amendment, refinancing or payment in full of the companies' senior secured credit facilities and the successful exchange of the companies' outstanding notes. Management expects that the merger will result in significant synergies. Vertis Inc., a leading provider of integrated advertising products and marketing services, recorded revenues of $1.4 billion for the LTM period ended March 31, 2007. The company is headquartered in Baltimore, Maryland. WR GRACE: Judge Fitzgerald Okays Sale of Washcoat Business ---------------------------------------------------------- The Hon. Judith Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware authorized W.R. Grace & Co. and its debtor- affiliates to sell their Washcoat Business to Rhodia, Inc., for $21.9 million. Judge Fitzgerald rules that the proposed Break-Up Fee will not be paid to Rhodia pending further determination by the Court that the amount of that fee bears a reasonable relationship to Rhodia's costs and expenses. The insurance policies issued by the Fireman's Fund Insurance Company and its rights under certain agreements it entered with the Debtors will not be assumed and assigned or otherwise transferred to Rhodia, the Court rules. The Debtors are directed to execute termination statements, instruments of satisfaction, releases of all Liens of the Acquired Assets on behalf of any person or entity, including the treasurer of Hamilton County, that has filed financing statements, mortgages and mechanic's liens. About W.R. Grace Headquartered in Columbia, Md., W.R. Grace & Co. (NYSE:GRA) -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor-affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. D. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Anderson Kill & Olick, P.C., represent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Martin W. Dies, III, Esq., at Dies & Hile L.L.P., and C. Alan Runyan, Esq., at Speights & Runyan,to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. The Debtors' filed their Chapter 11 Plan and Disclosure Statement on Nov. 13, 2004. On Jan. 13, 2005, they filed an Amended Plan and Disclosure Statement. The hearing to consider the adequacy of the Debtors' Disclosure Statement began on Jan. 21, 2005. The Debtors' exclusive period to file a chapter 11 plan expires on July 23, 2007. At Dec. 31, 2006, the W.R. Grace's balance sheet showed total assets of $3,620,400,000 and total debts of $4,189,100,000. (W.R. Grace Bankruptcy News, Issue No. 133; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WR GRACE: Responds to Exclusive Periods Extension Plea Objections ----------------------------------------------------------------- W.R. Grace & Co. and its debtor-affiliates obtained permission from the U.S. Bankruptcy Court for the District of Delaware to file a reply to address the objections of the Asbestos Personal Injury Committee, the Asbestos Property Damage Committee, and the Future Claims Representative to the Debtors' tenth request to extend their exclusive periods to file a plan of reorganization and solicit acceptances of that plan. The Debtors assert that global negotiations of the asbestos claims have failed whereas individual negotiations with key constituents have proven to be effective. James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, LLP, in Wilmington, Delaware, relates that in the past months, settlement of asbestos claims has been pursued on two paths: * One involving global settlement of both property damage and personal injury claims, and * The other involving settlement of PD claims before the settlement of PI Claims. Both settlement processes have been active, Mr. O'Neill tells the Court. In effect, agreements have been executed or settlements- in-principle have been reached with all but two firms, Speights & Runyan and Motley Rice. The Debtors are also engaged in individualized negotiations with the counsel for the Zonolite Attic Insulation claimants regarding how to address potential ZAI claims. The Debtors believe that success with respect to the resolution of the treatment of PI Claims under a plan of reorganization will only occur if the discussions involve the key attorneys representing PI claimants, not merely Committee counsel. The Debtors also assert that the Asbestos Constituents "new" argument in favor of a briefing schedule was earlier rejected by the Court and promises only distraction that will not result in a quicker exit from Chapter 11. Accordingly, the Debtors ask the Court to overrule the Asbestos Constituents' objections and extend their exclusive periods. Cal. Gen. Services Dept. Responds The California Department of General Services argues that the Debtors presented an incomplete and misleading picture of the extent of their efforts and progress in resolving the asbestos claims. The Debtors stated that they have reached settlements with all law firms except Speights & Runyan and Motley Rice. However, the Debtors have not even initiated or engaged in any settlement discussions with the Gen. Services Department nor its counsel regarding the Debtors' "product identification" objections to which the Court overruled in June 2007, Leslie Heilman, Esq., at Ballard Spahr Andrews & Ingersoll, LLP, in Wilmington, Delaware, reports. The Debtors sweeping representation about its settlement efforts and disregard of the Department's PD Claims are particularly curious, Ms. Heilman notes, given the Debtors' indication in open Court that they were not interested in pursuing mediation while its summary judgment motion on statute of limitations ground were still pending. Debtors Talk Back The Debtors acknowledge that, in addition to the claims represented by Speights & Runyan and Motley Rice, PD claims asserted by the Gen. Services Department and by the owners of the Macerich Fresno shopping mall and a claim relating to the Solow case in New York remain and have not been subject to settlement discussions. In the case of the Department and Macerich, the claims are the subject of dispositive motions argued to the Court that are currently under advisement, Mr. O'Neill says. The Solow claim relates to a matter for which judgment was entered against the Debtors before the Petition Date, the judgment is on appeal, and the Court previously denied an effort to lift the automatic stay to complete the appeal. The Debtors are not ignoring these claims, Mr. O'Neill asserts. These claims were simply not addressed in the discussion of settled claims due to their procedural posture. Anderson Supports Asbestos Constituents and U.S. Trustee's Objections Anderson Memorial Hospital, individually and on behalf of several claimants, supports the objections of the Asbestos Constituents and the U.S. Trustee. About W.R. Grace Headquartered in Columbia, Md., W.R. Grace & Co. (NYSE:GRA) -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor-affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. D. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Anderson Kill & Olick, P.C., represent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Martin W. Dies, III, Esq., at Dies & Hile L.L.P., and C. Alan Runyan, Esq., at Speights & Runyan,to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. The Debtors' filed their Chapter 11 Plan and Disclosure Statement on Nov. 13, 2004. On Jan. 13, 2005, they filed an Amended Plan and Disclosure Statement. The hearing to consider the adequacy of the Debtors' Disclosure Statement began on Jan. 21, 2005. The Debtors' exclusive period to file a chapter 11 plan expires on July 23, 2007. At Dec. 31, 2006, the W.R. Grace's balance sheet showed total assets of $3,620,400,000 and total debts of $4,189,100,000. (W.R. Grace Bankruptcy News, Issue No. 134; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). WELLMAN INC: Posts $11.4 Million Net Loss in Qtr. Ended June 30 --------------------------------------------------------------- Wellman Inc. reported a net loss of $11.4 million for the quarter ended June 30, 2007. This compares to a net loss of $11.7 million for the same period in 2006. For the first six months of 2007, Wellman reported a net loss of $38.7 million, compared to a net loss from continuing operations attributable to common stockholders of $33.4 million for the same period in 2006. For the quarter ended June 30, 2007, the company generated net sales of $333.7 million, compared with $345.2 million for the quarter ended June 30, 2006. At June 30, 2007, the company had accounts receivable of $186 million, inventories of $146 million, and net debt of $600 million. Tom Duff, Wellman's chairman and chief executive officer, stated, "Demand for PET resins remained strong in the second quarter. Force majeures on PTA and PIA kept the NAFTA PET resin market tight by limiting the introduction of net capacity additions into the market. In addition, as part of our strategy to focus on our U.S. chemical-based business, we have agreed to sell our European recycled-based polyester staple fiber business to an affiliate of AURELIUS AG, a publicly traded group focused on investing in medium-sized industrial companies. The sale is expected to be completed this week." Keith Phillips, Wellman's Chief Financial Officer, stated, "Our second quarter 2007 EBITDA, as defined, improved substantially, compared to first quarter 2007, as a result of continued strong PET resin demand and improved PET resin margins." About Wellman Wellman Inc. manufactures and markets PET (polyethylene terephthalate) packaging resins under the PermaClear brand name and polyester staple fibers under the Fortrel brand name. * * * Moody's Investors Service confirmed the B3 corporate family rating for Wellman, Inc., and the existing ratings on the company's debt and revised the outlook to negative. Moody's also rates $265 Million Second Lien Term Loan due 2010 at Caa1. WELLS FARGO: Fitch Rates $2.5 Million Class B-7 Certs. at B ----------------------------------------------------------- Fitch rates Wells Fargo mortgage asset-backed pass-through certificates, series 2007-PA4, as: -- $538,704,100 classes I-A-1, I-A-2, I-A-IO, I-A-R, II-A-1, II-A-2, II-A-IO, III-A-1, III-A-2, III-A-IO, IV-A-1, IV-A-2, IV-A-IO, V-A-1 and V-A-IO (senior certificates) 'AAA'; -- $13,431,000 class B-1 'AA'; -- $4,573,000 class B-2 'A+'; -- $2,000,000 class B-3 'A'; -- $1,429,000 class B-4 'A-'; -- $2,286,000 class B-5 'BBB'; -- $4,572,000 class B-6 'BB'; -- $2,573,000 class B-7 'B'. The 'AAA' ratings on the senior certificates reflect the 5.75% subordination provided by the 2.35% class B-1, the 0.8% class B-2, the 0.35% class B-3, the 0.25% class B-4, the 0.4% class B-5, the 0.8% privately offered class B-6, the 0.45% privately offered class B-7, and the 0.35% privately offered class B-8. The ratings on the class B-1, B-2, B-3, B-4, B-5, B-6 and B-7 certificates are based on their respective subordination. Class B-8 is not rated by Fitch. Fitch believes the amount of credit enhancement available will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral, the integrity of the legal and financial structures, and the primary servicing capabilities of Wells Fargo Bank, N.A. rated 'RPS1' by Fitch. The certificates represent ownership interests in a trust fund that consists of five pools of mortgage loans. The senior certificates whose class designation begins with I, II, III, IV and V, correspond to pools I, II, III, IV and V, respectively. In certain limited circumstances, principal and interest collected from loan group I, II, III, IV or V may be used to pay principal or interest, or both, to the senior certificates related to the other of those five loan groups. The transaction consists of 1,445 fully amortizing, one- to four- family, adjustable-rate mortgage loans that provide for a fixed interest rate during an initial period of approximately 77 months, with remaining weighted average term to maturity of approximately 358 months. Thereafter, the interest rate will adjust on an annual basis. The interest rate of each mortgage loan will adjust to equal the sum of the index and a gross margin. Approximately 80.65% of the mortgage loans are interest-only loans, which require only payments of interest generally until the month following the first adjustment date. The aggregate unpaid principal balance of the pool is $571,572,575 as of July 1, 2007, and the average principal balance is $395,552. The weighted average original loan-to-value ratio of the loan pool is approximately 74.53%; 11.42% of the loans have an OLTV greater than 80%. The weighted average coupon of the mortgage loans is 6.655%, and the weighted average FICO score is 731. The states that represent the largest geographic concentration are California (47.38%), Florida (9.12%), and New York (5.54%). All other states represent less than 5% of the outstanding balance of the pool. XEROX CORP: Earns $266 Million in Quarter Ended June 30 ------------------------------------------------------- Xerox Corporation's net income increased 2% to $266 million for the three months ended June 30, 2007 from net income of $260 million for the three months ended June 30, 2006. Total revenues also increased 6% to $4,208 million for the three months ended June 30, 2007 from total revenues of $3,977 million for the three months ended June 30, 2006. Post-sale and financing revenue increased 7 percent. Both total revenue and post-sale revenue included a currency benefit of 2 percentage points as well as the benefit from Xerox's acquisition of Global Imaging Systems, which was completed in early May. The company's balance sheet at June 30, 2007 showed total assets of $23,006 million, total liabilities of $15,457 million, and total common shareholders' equity of $7,549 million. "Our results in the second quarter reflect the strategic importance of annuity and acquisitions flowing through to boost revenue and strengthen our position in the marketplace," said Anne M. Mulcahy, Xerox chairman and chief executive officer. "With the Global Imaging team now on board, we've increased our reach to U.S. small and mid-size businesses by 50 percent. At the same time, our investment in delivering the industry's broadest portfolio of color technology is paying off with the annuity from our color business increasing 16 percent. And, Xerox's global relationships with large customers are contributing to annuity growth from our consulting and managed services business." During the second quarter, the company's install activity increased 54% for its color multifunction devices that print, copy, fax and scan. In addition, activity grew for color production systems as more commercial printers and graphic arts customers installed Xerox digital presses to meet their clients' demand for personalization, book publishing and promotional marketing materials. Price declines and the mix of products sold continued to put pressure on equipment sales revenue. Xerox reported a 3% increase in equipment sales revenue, which includes a 2-point benefit from currency. Since the beginning of the year, Xerox has introduced 28 new products, 10 of which are color devices, doubling the 14 total product launches in 2006. More than two-thirds of Xerox's equipment sales revenue comes from products launched in the past two years. Revenue from color grew 12 percent in the second quarter and now represents 38 percent of Xerox's total revenue, up 4 points from the second quarter of 2006. Xerox color presses produce the highest volume of pages in the industry and last year more than 30 billion color pages were printed on Xerox technology. In the second quarter, the number of color pages grew 30 percent, and now represent 12 percent of total pages, up 3 points from the prior year. Color performance excludes Global Imaging Systems. Through multiyear, multimillion dollar contracts, the company's document management services generated more than $1.6 billion in annuity revenue in the first half of the year, an 8 percent increase in post-sale revenue from services. Xerox recently signed its largest services contract to date, finalizing a seven-year deal with the United Kingdom's Department for Work and Pensions for a Xerox-led group to serve as the department's primary supplier of print and related services, supporting more than 2,000 DWP offices across the U.K. Gross margins were 40.3 percent, a less than one point decline from second quarter of 2006. Selling, administrative and general expenses were 25.7 percent of revenue, about the same as the prior year. Xerox generated operating cash flow of $388 million in the second quarter and closed the quarter with $870 million in cash and short-term investments. Since launching its stock buyback program in October 2005, the company to date has repurchased about 117 million shares, totaling $1.8 billion of its $2.5 billion program. Xerox expects third-quarter 2007 earnings in the range of 24-26 cents per share. The company increased its range of earnings expectations for full-year 2007 to $1.16-$1.18. About Xerox Corp. Headquartered in Stamford, Connecticut, Xerox Corp. (NYSE: XRX) -- http://www.xerox.com/-- develops, manufactures, markets, services and finances a range of document equipment, software, solutions and services. Xerox operates in over 160 countries worldwide and distributes products in the Western Hemisphere through divisions, wholly owned subsidiaries and third-party distributors. The company maintains operations in France, Japan, Italy, Nicaragua, and the United Kingdom, among others. * * * As reported in the Troubled Company Reporter on May 16, 2007, Fitch Ratings placed Xerox Corp.'s trust preferred securities rating at 'BB' with a stable outlook. The rating still applies to date. * BOOK REVIEW: Bankruptcy: A Feast for Lawyers ---------------------------------------------- Author: Sol Stein Publisher: Beard Books Paperback: 341 pages List Price: $34.95 Order your personal copy at http://amazon.com/exec/obidos/ASIN/1893122123/internetbankrupt Described by the Chicago Tribune as a "latter-day version of Dicken's Bleak House," this book is a shattering indictment of bankruptcy law by a CEO who lived through the experience of a Chapter 11. The author exposes a system that is supposed to provide an opportunity for troubled companies to reorganize, but kills more than 70 percent of the businesses that take refuge in it while enriching legions of lawyers. In the nightmare world of Chapter 11, the gainers are seldom the creditors or the debtor company, but rather the bankruptcy bar, impeached in this book by its own conduct and the condemnation of its ethical brethren. Besides his own experience, the author draws examples from diverse industries including trucking, food, real estate, oil and publishing. Sol Stein, the author of this book, was the former CEO of now- defunct Stein and Day, one of the last independent American publishing houses operating in the 1980s. ********* 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, Shimero R. Jainga, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Jason A. Nieva, Melanie C. Pador, Ludivino Q. Climaco, Jr., Loyda I. Nartatez, Tara Marie A. Martin, John Paul C. Canonigo, Sheena Jusay, and Peter A. Chapman, Editors. Copyright 2007. 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 $775 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 ***