T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, March 26, 2008, Vol. 12, No. 72 Headlines 1031 TAX: Ex-CEO Edward Okun Indicted of Fraud & Cash Smuggling ALION SCIENCE: Weak Metrics Cues Moody's to Junk Ratings From 'B3' ALTIUS III: Eroding Credit Quality Prompts Moody's Rating Reviews AMERICAN AXLE: Strike Cues S&P to Put Ratings on Negative Watch AMERICAN HOME: Committee Wants Loan Sale Proceeds Escrowed AMERICAN HOME: Committee, BofA Agree on Sale Proceeds Allocation AMERICAN LAFRANCE: Files 2nd Amended Reorganization Plan AMERICAN LAFRANCE: Seeks to Remove Freightliner from Committee AMERICAN LAFRANCE: Committee Asks Court to Name Chapter 11 Trustee AMERICAN LAFRANCE: Appoints A. Matthew Karmel President and CEO AMERICAN TOWER: Moody's Puts 'Ba1' Rating on $325 Mil. 2012 Loan AMERICAN TOWER: S&P Puts 'BB+' Rating on $325 Mil. Loan Facility AMERICAN TOWER: Fitch Puts 'BB+' Rating on Proposed $325MM Loan ANDERSON MEZZANINE: Poor Credit Quality Cues Moody's Rating Cuts APOSTOLIC BIBLE: Case Summary & Five Largest Unsecured Creditors AREMISSOFT CORP: Appeals Court OK with Lawsuit Against Swiss Banks ARTISTDIRECT INC: Inks Forbearance with Senior Financing Investors BANC OF AMERICA: Moody's Puts Low-B Final Ratings on Six Classes BEAR STEARNS: JPMorgan Offers Bonuses to Top Brokers BEAR STEARNS: Investors Seek Injunction Blocking Sale to JPMorgan BEAR STEARNS: Merger Deal Revisions Prompt Moody's Rating Reviews BEAR STEARNS: Fitch Sees High Chance Merger Deal Will Close BEAR STEARNS: NY Fed Puts $30BB in Portfolio Managed by BlackRock BLUFF DALE: Moody's Raises Rating From Ba1 on Taxable Value Growth BMO FINANCIAL: Reaches Restructuring Deals with Counterparties BRAINTECH INC: Sept. 30 Balance Sheet Upside-Down by $1,421,083 CAIRN MEZZ: Declining Credit Quality Spurs Moody's Rating Reviews CETUS ABS: Moody's Junks Rating on $50 Mil. 2046 Notes From 'Ba1' CHRISTENSEN REALTY: Sterling Savings Wants to Pursue Foreclosure CIENA CORP: Revenue Growth Prompts S&P to Upgrade Rating to 'B+' CITADEL BROADCASTING: Inks Amendment to June 12 Credit Agreement CLEAR CHANNEL: Financing Talk Glitch Threatens to Derail Merger COMPASSIONATE HANDS: Case Summary & 19 Largest Unsecured Creditors COUDERT BROTHERS: Dechert Asserts Right to Draw from Escrowed Fund COUNTRYWIDE FINANCIAL: Former Officers Start Up Mortgage Business CTI FOODS: Stop to Bean Product Roll Out Spurs S&P's Rating Cuts CYPRESS WALK: Case Summary & 20 Largest Unsecured Creditors DAYSTAR OIL: Case Summary & 19 Largest Unsecured Creditors DELPHI CORP: Court Extends Exclusive Plan-Filing Date to May 31 DELPHI CORP: Seeks Add'l IRS Waivers Due to Delay of Emergence DELTA AIR: PBGC Seeks Leave to Respond to NQ Claims Objection DUNMORE HOMES: Files Liquidation Plan & Disclosure Statement DUNMORE HOMES: Classification and Treatment of Claims DUNMORE HOMES: Trust Set up; Leon Szlezinger Proposed as Trustee DUNMORE HOMES: Estimates 10.20% Recovery to Unsecured Creditors ENLIVEN MARKETING: Has Financial Issues Over $3.5 Mil. Sub Notes ESSENTIAL INNOVATIONS: Jan. 31 Balance Sheet Upside-Down by $2.6MM ETHANEX ENERGY: Mulls Bankruptcy Filing Amid Terminated Sale Deal ETHANEX ENERGY: Cuts Three Principal Positions, Ends Operations FAB US 2006-1: Weak Credit Quality Cues Moody's Note Rating Cuts FINANCIAL GUARANTY: 313 Classes Put on Neg. Watch with Neg Outlook FINANCIAL GUARANTY: S&P Puts 60 ABS on Negative CreditWatch FRIEDMAN'S INC: Unnamed Buyer Offers $72.5 Mil. for Store Leases FUSION TELECOM: Inks $500,000 Common Share Subscription Agreement GENERAL MOTORS: Extended Strike Spurs S&P's Negative CreditWatch GRANDE COMMUNICATIONS: S&P Withdraws Ratings At Company's Request GREENBRIER COMPANIES: Unit's Chair Resigns After Bankruptcy Filing HARBORVIEW MORTGAGE: High Delinquencies Cue S&P's Four Rating Cuts HAVEN HEALTHCARE: Wants Court to Approve Asset Sale Procedure HOLLEY PERFORMANCE: Court Confirms Prepackaged Chapter 11 Plan HOMELAND SECURITY: Inks Securities Purchase Pact with YA Global INNOVATIVE DESIGNS: Jan. 31 Balance Sheet Upside-Down by $3.8 Mil. INPHONIC INC: U.S. Trustee Wants Chapter 11 Case Dismissed INSURANCE CORP: A.M. Best Affirms B-(Fair) Fin'l Strength Rating INTEGRATED MEDIA: Engages Malone & Bailey as Principal Accountant ISABELLA FIORE: Case Summary & 20 Largest Unsecured Creditors KIK CUSTOM: Moody's Reviews 'B2' Rating on High Market Competition LEAR CORP: Extended Work Stoppage Cues S&P's CreditWatch Negative LEINER HEALTH: Seeks Approval of Bidding Procedure for Asset Sale LEVITZ FURNITURE: Revised Pact on GECC Cash Collateral Approved LOEHMANN'S HOLDINGS: S&P Junks Rating From B- on Poor Performance MASTR TRUST 2005-2: S&P Retains 'CCC' Rating on Class B-5 Certs. MBIA INC: Fitch Maintains Insurer Fin'l Strength and Debt Ratings MICHAELS STORES: S&P Changes Outlook to Stable; Holds 'B-' Rating MOSHE ZEMACH: Case Summary & Two Largest Unsecured Creditors NATIONAL SECURITY: A.M. Best Affirms bb Issuer Credit Rating NETBANK INC: Exclusive Plan Filing Period Extended to April 3 NEUMANN HOMES: Selling Assets in Six Developments to RFC OCCULOGIX INC: To Appeal Nasdaq Delisting Letter PACIFIC LUMBER: Seeks to Make $250,000 in Pension Payments PACIFIC LUMBER: Diamond McCarthy Submits Revised Billing Rates PACIFIC LUMBER: Scopac Wants to Hire RRM Design as Consultants PALM INC: Moody's Cuts Ratings to 'B2' on Weak Fin'l Performance PHELIX BYRD: Case Summary & Four Largest Unsecured Creditors PIKE NURSERY: Court Grants Panel's Request for Chapter 11 Trustee PLASTECH ENGINEERED: Sec. 341 Meeting Continued to April 18 PLASTECH ENGINEERED: Fifth Third Bank Demands Contract Decision PLASTECH ENGINEERED: Schedule-Filing Deadline Extended to May 19 POWERMATE HOLDINGS: Gets Initial OK to Access $15 Million Facility PREMAIR INC: Case Summary & 20 Largest Unsecured Creditors PRINCETON COMMUNITY: Moody's Lifts Rating on $40.9MM Bonds to 'B1' PROIA & GOULETTE: Voluntary Chapter 11 Case Summary QUEBECOR WORLD: Has $350 Million in Available Funds QUEBECOR WORLD: Noteholders Question Panel Advisors' Engagement QUEBECOR WORLD: Lays Off One-Third of Memphis Employees RADNOR HOLDINGS: Files Disclosure Statement in Delaware RADNOR HOLDINGS: Disclosure Statement Hearing Set for April 22 RELIANT ENERGY: Set to Auction Channelview Power Plant on April 7 RESIDENTIAL CAPITAL: Michael Rossi Resigns as Board Chairman RETAIL PRO: Posts $2.1 Million Net Loss in Quarter Ended June 30 RICHARD ANDERSON: Case Summary & 12 Largest Unsecured Creditors SAFEGUARD HOLDINGS: Involuntary Chapter 11 Case Summary SIRVA INC: Allowed to Sell U.K. & Ireland Operations to TEAM SIRVA INC: Committee Wants Class 5 Claims Bar Date Set to May 29 SIX FLAGS: Refinancing Risk Cues Moody's to Give Negative Outlook SMG LAND: Case Summary & Three Largest Unsecured Creditors SOLUTIA INC: Files Amended Financial Report for Year 2007 SOLUTIA INC: To Begin Financial Reporting on Five Segments SOLUTIA INC: Appoints Nine Members to Board Committees SOLUTIA INC: To Rely on Asian Growth Amid Slowing U.S. Economy STANDARD PACIFIC: Waiver Extended to May 14 on $900 Mil. Facility STIVALA INVESTMENTS: Voluntary Chapter 11 Case Summary TENNECO INC: Prolonged Strike Prompts S&P's Negative Watch Listing THORNBURG MORTGAGE: Commences $1.35 Bil. Offering of Secured Notes TIMOTHY OLSON: Case Summary & 20 Largest Unsecured Creditors TOUSA INC: Bank of Florida Moves to Lift Stay to Commence Action TOUSA INC: Bankruptcy Court Sets May 19 as Claims Bar Date TOUSA INC: Panel to Hire Stearns Weaver as Local Counsel TOUSA INC: Amends Senior Secured Super-Priority DIP Facility TRENTONWORKS LTD: Regan Resigns as Chair After Bankruptcy Filing TRIBUNE CO: Fitch Says Poor EBITDA Exhausted Much Room for Ratings TROPICANA ENTERTAINMENT: Says WTC Disrupts Move to Cure Default TROPICANA ENTERTAINMENT: WTC Clears Role in Suit vs. Bondholders TWIN LAKES: Case Summary & 12 Largest Unsecured Creditors TZA INVESTMENTS: Involuntary Chapter 11 Case Summary UAL CORPORATION: Labor, Political Leaders Balk at Outsourcing Plan UAL CORPORATION: Teamsters Wants Compensation Practices Overhauled UAL CORPORATION: U.S. Workers Get $110 Million in Profit Sharing UAL CORPORATION: Capt. Wallach Joins Two Board Committees UNISYS CORP: Engages KPMG LLP as New Independent Auditors US AIRWAYS: Weak Profile on Fuel Prices Cues S&P's Stable Outlook VERNON VERNON: Case Summary & 14 Largest Unsecured Creditors VERTICAL VIRGO: Moody's Reviews Note Ratings For Possible Cuts VESTA INSURANCE: Court Confirms FSIA's Plan of Liquidation WATERLOO SERVICE: Surge in Fuel Prices Prompts Chapter 7 Filing WILFRED SARONI: Case Summary & 11 Largest Unsecured Creditors WORNICK CO: Judge Approves Bid Procedures and Overrules Objections ZIFF DAVIS: Asks Court to Establish Claims Bar Date ZIFF DAVIS: Asks Court to Set Disclosure & Confirmation Hearings * Fitch Says US Cable Operators Need to Move Into a Broader Market * Fitch Says Florida Homeowners Insurance Market Remains Unstable * Moody's Evaluates Proposed Changes to Ratings System * S&P Reports Rate Freeze Is Likely To Modestly Affect Alt-A Loans * S&P Assigns Ratings on 129 CDO Tranches on Negative CreditWatch * S&P Downgrades Ratings on 86 Classes From 26 RMBS Transactions * S&P Says Utilities' Regulatory Risk Continues On Slowing Economy * Wall Street Banks See $460BB in Credit Losses, Goldman Says * 24 Attorneys From Winstead PC Recognized as Texas Rising Stars * Steven F. Agran Joins New York Office of MorrisAnderson * Sheppard Mullin Adds Two Bankruptcy Partners in New York Office * Upcoming Meetings, Conferences and Seminars ********* 1031 TAX: Ex-CEO Edward Okun Indicted of Fraud & Cash Smuggling --------------------------------------------------------------- A federal grand jury in Richmond, Virginia, indicted former 1031 Tax Group LLC chief executive officer Edward Okun on charges of mail fraud, bulk cash smuggling and making false statements, according to South Florida Business Journal. According to the paper, the former CEO deceived customers of real estate sale proceeds valued at $132 million between August 2005 and April 2007, to support his extravagant habits, pay operating costs for companies he controlled, invest in commercial real estate and buy additional qualified intermediary companies to obtain access to additional client funds. To avoid federal currency disclosure requirements, Mr. Okun, also, made workers withdraw $15,000 cash from Okun-controlled Investment Properties of America's bank account and transfer the cash in his personal yatch in the Bahamas, the report says. According to various sources, the Debtor was a "qualified intermediary" aiding customers to ditch capital gains taxes by holding proceeds from the sale of property until a replacement property was bought. Headquartered in Richmond, Virginia, The 1031 Tax Group LLC -- http://www.ixg1031.com/-- is a privately held consolidated group of qualified intermediaries created to service real property exchanges under Section 1031 of the Internal Revenue Code. The company and 15 of its affiliates filed for Chapter 11 protection on May 14, 2007 (Bankr. S.D.N.Y. Case No. 07-11447 through 07-11462). Paul Traub, Esq., Norman N. Kinel, Esq., and Steven E. Fox, Esq., at Dreier LLP, represent the Debtors in their restructuring efforts. Thomas J. Weber, Esq., Melanie L. Cyganowski, Esq., and Allen G. Kadish, Esq., at Greenberg Traurig, LLP, represent the Official Committee of Unsecured Creditors. The Debtors' operating report for the month ended Sept. 30, 2007, showed net loss of $67,903 on $0 revenues. As of Sept. 30, 2007, the Debtors had total assets of $164,231,012 and total liabilities of $168,126,294, resulting in a total stockholders' deficit of $3,895,282. ALION SCIENCE: Weak Metrics Cues Moody's to Junk Ratings From 'B3' ------------------------------------------------------------------ Moody's Investors Service lowered Alion Science and Technology Corporation's Corporate Family Rating and Probability of Default Rating to Caa1 from B3. A change in the PDR impacts the outcome of individual instrument ratings under Moody's Loss Given Default methodology. Ultimate recovery expectations are subject to a number of uncertainties and were modeled at 50%. As a result, ratings on Alion's secured bank debt and unsecured notes fell with modest revisions to LGD percentages. The rating on the company's first lien bank debt was lowered to B1, (LGD-2, 18%) from Ba3, (LGD-2, 16%), and the rating on the company's unsecured notes was lowered to Caa2, (LGD-5, 71%) from Caa1, (LGD-4, 68%). The actions concluded a review for possible downgrade that was announced on Feb. 29, 2008. The review was triggered by liquidity concerns and potential complications from Alion's disclosure of an inability to timely file its financial statements. The outlook is negative. Alion had sizable disbursements under ESOP stock redemptions in the fourth quarter of fiscal 2007. Working capital needs increased in the same period as well as the first quarter of fiscal 2008. The company had maximized use of its revolving credit facility in February at which time it also held $15 million in cash. In February, Alion became delinquent in its SEC financial statement filing requirements. In March, Alion filed its 10-Q financial statements for the quarter ending Dec. 31, 2007 and restated its 10-K report for fiscal 2007. The 10-K(a) and 10-Q resulted in certain corrections and format changes, but did not restate the company's income statement for fiscal 2007. Alion is in now in compliance with its reporting obligations under its unsecured note indenture and has made some progress in restoring its liquidity profile. However, unless the company is successful in refinancing its subordinated notes later this year, interest on its subordinated notes will convert to cash pay at 16% pa in late December (currently 6.7% pa on a PIK basis) and add to its fixed charges. In turn, this could impact cushion under the minimum interest coverage covenant applicable under its bank credit agreement. That agreement also stipulates that the defined maximum senior secured leverage ratio will step down to 3.25 times on Oct. 1, 2008 from 3.75 times currently. Furthermore, Alion has certain obligations to redeem exercisable stock appreciation rights held by employees and phantom stock awards granted to management and directors. The company has quantified the latter total as roughly $12 million in fiscal 2008. Other cash requirements arise from remaining acquisition obligations (earn-outs and hold backs), which amounted to some $7 million at the end of December and $1.8 million of term loan amortization over the remainder of fiscal 2008. In aggregate, these payments emphasize the importance of Alion achieving its earnings guidance for the year, continuing to receive proceeds from employee share purchases, and accelerating collection of its accounts receivable in order to avoid further stress on remaining available commitments under the company's revolving credit facility. In total, these liquidity concerns elevate near term default risks and lead to a PDR of Caa1. The Caa1 CFR recognizes substantial leverage deployed in Alion's capital structure, weak interest coverage metrics and low free cash flow generation in comparison to the magnitude of its repayment obligations. The rating also considers the company's relative size, substantial backlog of lower risk government contract awards, certain concentrations within that book of business, and uncertainties inherent to a growth strategy which has included frequent acquisitions. The ESOP structure, while offering equity participation to a critical employee base in a knowledge-based service industry, introduces certain funding requirements on the organization to provide liquidity under defined circumstances to shareholders. Those attributes increase potential liquidity requirements and produce an element of tenuity to its capital base. Nonetheless, the company's underlying business profile and areas of expertise remain competitively positioned to benefit from favorable longer term trends supporting government demand for scientific, engineering, and technology based solutions to national defense, homeland security and energy and environmental analysis. The negative outlook considers the multiplicity of financial challenges the company faces over the intermediate period. These arise from scheduled payment obligations, prospects for higher cash interest expense on the subordinated notes and tightening financial covenants to which a more challenging credit market may be less receptive or price risk differently than Alion's current credit arrangements. However, successful execution of working capital initiatives could ease strain on the company's liquidity, and, possibly, facilitate some de-leveraging. Should that scenario develop in combination with a successful refinancing of the subordinated notes, pressure on the firm's liquidity, outlook and default risk could ease. The SGL-4 liquidity rating designates weak liquidity over the coming twelve months and flows from modest cash balances and internal cash flows relative to the company's potential cash needs as well as covenant constraints under the company's $50 million revolving credit facility. That facility matures in August 2009. Alion was in compliance with its bank financial covenants at Dec. 31, 2007, but the margin was thin and covenant thresholds tighten on Oct. 1, 2008. To successfully navigate this period, the company will need to execute under initiatives to reduce days' sales outstanding in its accounts receivable balances, reduce measured indebtedness under its covenants, and deliver on its earnings guidance. Alion reports progress in reducing its account receivable DSOs and lower usage of the revolving credit facility. That has somewhat alleviated current liquidity pressure. But, prospective headroom under applicable financial covenants could tighten, cash interest expense could increase under the terms of its subordinated debt, and ongoing principal amortization, acquisition related payments and redemptions of ESOP stock and phantom stock awards require settlement in the year ahead. Flexibility to develop alternative liquidity from existing assets is constricted by the extent of existing bank liens. Ratings lowered and LGD assessments revised: -- Corporate Family Rating, Caa1 from B3 -- Probability of Default, Caa1 from B3 -- $50 million secured revolving credit facility, B1, (LGD-2, 18%) from Ba3, (LGD-2, 16%) -- $246 million secured term loan, B1, (LGD-2, 18%) from Ba3, (LGD-2, 16%) -- $250 million unsecured notes, Caa2, (LGD-5, 71%) from Caa1, (LGD-4, 68%) Ratings confirmed: -- Speculative Grade Liquidity rating, SGL-4 Alion Science and Technology Corporation, based in McLean, Virginia, is an employee-owned company that provides scientific research, development, and engineering services related to national defense, homeland security, and energy and environmental analysis. Particular areas of expertise include communications, wireless technology, netcentric warfare, modeling and simulation, chemical and biological warfare, program management, and naval architecture and engineering. Revenues for the twelve months ended Sept. 30, 2007 were $738 million. ALTIUS III: Eroding Credit Quality Prompts Moody's Rating Reviews ----------------------------------------------------------------- Moody's Investors Service placed these notes issued by Altius III Funding, Ltd. on review for possible downgrade: Class Description: $220,000,000 Class A-1a Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Class Description: $499,950,000 Class A-1b-1F Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Class Description: $499,950,000 Class A-1b-1B Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Class Description: $300,000,000 Class A-1b-2 Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Class Description: $250,000,000 Class A-1b-3 Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Class Description: $100,000 Class A-1b-V Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Class Description: $90,000,000 Class A-2 Floating Rate Notes Due 2041 -- Prior Rating: Aaa -- Current Rating: Aaa, on review for possible downgrade Moody's has downgraded and left on review for possible further downgrade the ratings on these notes: Class Description: $88,000,000 Class B Floating Rate Notes Due 2041 -- Prior Rating: Aa2, on review for possible downgrade -- Current Rating: A3, on review for possible downgrade Class Description: $23,000,000 Class C Floating Rate Deferrable Notes Due 2041 -- Prior Rating: A2, on review for possible downgrade -- Current Rating: B1, on review for possible downgrade Class Description: $19,000,000 Class D Floating Rate Deferrable Notes Due 2041 -- Prior Rating: Baa2, on review for possible downgrade -- Current Rating: Caa1, on review for possible downgrade Additionally, Moody's has downgraded the ratings on these notes: Class Description: Up to $6,000,000 Class E Floating Rate Deferrable Notes Due 2041 -- Prior Rating: Ba1, on review for possible downgrade -- Current Rating: Ca According to Moody's, the rating actions reflect increased deterioration in the credit quality of the underlying portfolio. AMERICAN AXLE: Strike Cues S&P to Put Ratings on Negative Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed the ratings on General Motors Corp., American Axle & Manufacturing Holdings Inc., Lear Corp., and Tenneco Inc. on CreditWatch with negative implications. The CreditWatch placement reflects S&P's decision to review the ratings in light of the extended American Axle (BB/Watch Neg/--) strike. The work stoppage that began Feb. 25 at American Axle's U.S. United Auto Workers plants has forced closure of many GM (B/Watch Neg/B-3) plants, as well as plants of certain GM suppliers. The strike began after the expiration of the four-year master labor agreement with American Axle. Although S&P still expects American Axle and the UAW to reach an agreement that will reflect more competitive labor costs, the timing is unknown. The two sides resumed negotiations last week. "We believe the strike has gone on long enough to possibly begin to affect the financial resources of GM and those suppliers most exposed to the automaker," said Standard & Poor's credit analyst Robert Schulz. To resolve the CreditWatch listings, Standard & Poor's will assess the strike's impact on the companies' credit profiles, particularly liquidity, once production resumes. S&P could lower the ratings any time prior to a resolution of the Axle strike if the liquidity of the companies becomes compromised, although downgrades are not likely for another several weeks. AMERICAN HOME: Committee Wants Loan Sale Proceeds Escrowed ---------------------------------------------------------- The Official Committee of Unsecured Creditors supports the proposal of American Home Mortgage Investment Corp. and its debtor-affiliates to sell non-performing loans. However, the Creditors Committee objects to the distribution of the sale proceeds to JPMorgan Chase Bank, N.A., and Bank of America, N.A. The Creditors Committee has been informed by the Debtors that, as of February 28, 2008: -- of the 327 loans allegedly subject to the security interest of JPMorgan, 34 loans having an unpaid principal balance of $10,991,135 have been foreclosed; and -- of the 208 loans allegedly subject to the security interest of BofA, three loans having an unpaid principal balance of $1,196,545 have been foreclosed. Joseph J. Bodnar, Esq., at Law Offices of Joseph J. Bodnar, in Wilmington, Delaware, tells the U.S. Bankruptcy Court for the District of Delaware that following the foreclosures, neither JPMorgan nor BofA took any steps to perfect their security interest in the real estate assets subject to certain Non- Performing Loans. Because the security interests of JPMorgan and BofA in the mortgage loans were perfected only under Article 9 of the Uniform Commercial Code and neither institution obtained a perfected security interest in real property, the security interest, if any, of the banks became unperfected when the Debtors acquired real property pursuant to foreclosure or deed in lieu of foreclosure, Mr. Bodnar states, citing In re Seaway Express Corp., 912 F.2d 1125 (9th Cir. 1990). Like the secured creditor in the Seaway Express case, either (i) JPMorgan and BofA hold no security interest in the REO Assets or (ii) the security interest in the REO Assets can be avoided by the Debtors pursuant to Section 544(a)(3) of the Bankruptcy Code, Mr. Bodnar continues. Section 363(f)(4) of the Bankruptcy Code permits the sale of the REO Assets free and clear of any interest that is in bona fide dispute, as in the interests claimed by JPMorgan and BofA, Mr. Bodnar notes. The Debtors may proceed to sell the REO Assets, but rather than distribute the proceeds, the Debtors should establish an escrow to which the disputed liens of JPMorgan and BofA will attach pending resolution of the dispute, Mr. Bodnar states. The creation of an escrow will provide adequate protection for the interests of JPMorgan and BofA pending resolution of the dispute, he adds. Committee Withdraws Objection on BofA Claims The Creditors Committee learned that all three of the REO Assets in which BofA claimed an interest became REO Assets following the filing of the Debtors' Chapter 11 cases. The September 4, 2007 "Final Order (I) Authorizing Debtors' Limited Use Of Cash Collateral And (II) Granting Replacement Liens And Adequate Protection To Certain Pre-Petition Secured Parties" deemed BofA to be perfected in proceeds of its collateral arising after the Petition Date without compliance with otherwise applicable law. The Creditors Committee, therefore, withdraws its objection solely as it pertains to the REO Assets in which BofA claims an interest. Debtors' Motion to File Purchase Prices Under Seal On February 1, 2008, the Court entered an order granting the Debtors' Non-Performing Loan Sale Motion. The Sale Hearing with respect to the BofA and JPMorgan Non-Performing Loans has been adjourned until March 27, 2008. Pursuant to the Sale Procedures Order, the Debtors received qualified bids with respect to the BofA Non-Performing Loans and JPMorgan Non-Performing Loans. On March 12, 2008, the Debtors filed the Notice of the Successful Bids identifying the Successful Bidders of the banks' Non-Performing Loans. The Notice, however, does not identify the purchase prices due to the sensitivity and commercial nature of the Purchase Prices, Robert F. Poppiti, Jr., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, says. The Notice indicates that Beltway Capital, LLC, is the successful bidder for the BofA Non-Performing Loans, and Lehman Capital is the successful bidder of the JPMorgan Non-Performing Loans. The Debtors sought and obtained the Court's authority to file an unredacted version of the Notice exhibit under seal and directing that the unredacted Exhibit A will remain under seal, confidential and not be made available to anyone except certain parties until the earlier of the date the Court approves the Sale of Unencumbered Non-Performing Loans or April 14, 2008, or further Court order. The allowed parties are the Court, the United States Trustee, counsel to the Official Committee of Unsecured Creditors, and counsel of BofA and JPMorgan, as applicable. According to Mr. Poppiti, although the Debtors have received Qualified Bids and determined Successful Bidders for the BofA and JPMorgan Non-Performing Loans, the Debtors have yet to determine a Successful Bidder for a third pool of Unencumbered Non- Performing Loans. Filing the Purchase Prices for the BofA and JPMorgan Non- Performing Loans under seal is necessary to ensure that the Debtors maximize the value of the Unencumbered Non-Performing Loans, as publicly filing these at this time may have a negative impact on the bidding on the remaining Unencumbered Non- Performing Loans, Mr. Poppiti asserts. * * * The Court granted the Debtors' request to sell the BofA and JPMorgan Non-Performing Loans to the successful bidders, Beltway Capital and Lehman Capital. The Court also approved the Sale Agreement with respect to the BofA and JPMorgan Non-Performing Loans and REO Assets. Moreover, Judge Christopher S. Sontchi directed American Home Mortgage Corp. to pay certain expense reimbursement from the Sales proceeds to the extent any expense reimbursement is due and payable under the Sale Procedures. Upon closing of the Sales, the Purchasers will have the right to designate a new servicer, provided that the Debtors will provide interim servicing for the Non-Performing Loans until they are transferred to a replacement servicer. Judge Sontchi ruled that all Sale Proceeds with respect to the BofA Non-Performing Loans will be paid to BofA, as administrative agent for certain secured parties, after deducting (i) all expense reimbursements, and (ii) the amount of $24,003, as necessary direct costs of selling the loans in accordance with the Cash Collateral Order. The Court also ruled that all Sale Proceeds with respect to the JPMorgan Non-Performing Loans will be paid to AHM Corp., on behalf of itself and American Home Mortgage Acceptance, Inc., and distributed or retained in escrow in a segregated and interest- bearing account in these amounts: (1) $2,787,878 for certain servicing advances paid as of the cut-off date, and subject to the rights of JPMorgan to, among other things, challenge or object to the validity or reasonableness of the Servicing Advances; (2) $740,000 for unpaid accrued Servicing Advances; (3) the amount of the REO Proceeds; (4) the Purchase Price for each withdrawn loan, which will be held in a withdrawn loan escrow by the Debtors, pending delivery of required documents or an executed bailee letter agreement to the Purchaser; and (5) $800,000 to satisfy delinquent taxes. Judge Sontchi directed AHM Corp. to distribute all JPMorgan Sale Proceeds, other than those held in escrow, to JPMorgan within two business days after the Sale is closed. He maintained that the distribution is subject to the Debtors' rights to seek disgorgement of the Sale Proceeds, or to surcharge JPMorgan's collateral in connection with the Sale About American Home Based in Melville, New York, American Home Mortgage Investment Corp. (NYSE: AHM) -- http://www.americanhm.com/-- is a mortgage real estate investment trust engaged in the business of investing in mortgage-backed securities and mortgage loans resulting from the securitization of residential mortgage loans originated and serviced by its subsidiaries. American Home Mortgage and seven affiliates filed for chapter 11 protection on Aug. 6, 2007 (Bankr. D. Del. Case Nos. 07-11047 through 07-11054). James L. Patton, Jr., Esq., Joel A. Waite, Esq., and Pauline K. Morgan, Esq. at Young, Conaway, Stargatt & Taylor LLP represent the Debtors. Epiq Bankruptcy Solutions LLC acts as the Debtors' claims and noticing agent. The Official Committee of Unsecured Creditors selected Hahn & Hessen LLP as its counsel. As of March 31, 2007, American Home Mortgage's balance sheet showed total assets of $20,553,935,000, total liabilities of $19,330,191,000. American Home is currently seeking an extension of its exclusive period to file a plan of reorganization through June 2, 2008; and its exclusive period to solicit and obtain acceptances for that plan through July 31, 2008. (American Home Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN HOME: Committee, BofA Agree on Sale Proceeds Allocation ---------------------------------------------------------------- After months of extensive negotiations, the Official Committee of Unsecured Creditors of American Home Mortgage Investment Corp., its debtor-affiliates, and Bank of America, N.A., agent for certain prepetition secured parties under the Second Amended and Restated Credit Agreement dated August 10, 2006, jointly ask the U.S. Bankruptcy Court for the District of Delaware to approve a stipulation that resolves all remaining issues with respect to BofA's collateral. Pursuant to the terms of the Final Cash Collateral Order, BofA agreed to allow the Debtors to use up to $3,000,000 of cash collateral from postpetition collections of construction-to-perm mortgage loans on single-family residences to fund additional advances under the loans. As of December 4, 2007, the Debtors used $2,493,288 of Cash Collateral since the Petition Date to fund additional advances under the Construction-to-Perm Loans. The parties have agreed to settle issues relating to Prepetition Secured Parties' interests in the Debtors' REO property, certain prepetition collateral, and certain fees and costs for the reduction of the Debtors' indebtedness to BofA, which as of the Petition aggregated more than $1,000,000,000. Pursuant to the Court's order approving the Debtors' use of the cash collateral, BofA has received proceeds from the Debtors' sale of certain collateral, which proceeds BofA applied in permanent reduction of the Indebtedness. The principal remaining Collateral to be sold consists of 3,400 residential mortgage loans with outstanding amounts aggregating $584,000,000. The salient terms of the Stipulation are: -- The parties established a "benchmark" level of Indebtedness of $1,082,867,194, as of the Petition Date. After cash receipts from the Collateral, Court-appointed liquidating trustee, or any Debtor, have been paid to the Prepetition Secured Parties and irrevocably applied to the permanent reduction of the Indebtedness by an amount of $1,017,895,163, the remaining proceeds of the Cash Receipts will be shared between the Prepetition Secured Parties and the Debtors' bankruptcy estates; -- The Creditors Committee waives the right to file any adversary proceeding or contested matter against the Prepetition Secured Parties and release all claims relating to the Remaining Issues; -- The Prepetition Secured Parties: * waive their claims against and liens on certain designated REO Properties; * will have no responsibility for the Designated REO Properties; and * all expenses incurred or advances made in connection with the Designated REO Properties will be paid by the estates, and not from Collateral proceeds; -- The Creditors Committee will support BofA's request for relief from stay to sell the 3,400 mortgage loans, which act as collateral for the Debtors' prepetition obligations. to BofA. With respect to all other requests, contested matters or adversary proceedings concerning the Collateral or the Prepetition Secured Parties' claims, the Creditors Committee will either remain neutral, or support BofA and the Prepetition Secured Parties, but will not oppose them; -- BofA's fees and expenses incurred with respect to the Stipulation will be paid from the Secured Parties' Share; and -- To the extent that the Prepetition Secured Parties' prepetition claims asserted in BofA's Claim No. 8165 are unsatisfied after all Cash Receipts have been applied, the Prepetition Secured Parties will have a deficiency claim with all other allowed unsecured claims against the estates, but not entitled to any distributions from the Estate Share or the Designated REO Properties. The Parties tell Judge Christopher S. Sontchi that the Stipulation will allow the estates to realize the full value of the Designated REO Properties, while entirely avoiding litigation risks and substantial expenses. They note that BofA's agreement to share with the estates a portion of the Cash Receipts, which is otherwise payable to the Prepetition Secured Parties, gives unsecured creditors an opportunity to realize significant additional value. The sharing arrangement also aligns the interests of all creditors in maximizing the value of the Collateral. As an added benefit to unsecured creditors, the provision on the Prepetition Secured Parties' Deficiency Claim, further increases the pro rata distributions payable to other holders of allowed unsecured claims. Hence, the Creditors Committee and BofA submit that the Stipulation fairly and reasonably resolves the Remaining Issues, serves the best interests of unsecured creditors, and should be approved by the Court. Expedited Hearing Request Denied Judge Sontchi denied BofA' and the Creditors Committee's request for an expedited hearing on the Stipulation. Pursuant to Rule 9006-1(e) of the Local Rules of Bankruptcy Practice and Procedure of the U.S. Bankruptcy Court for the District of Delaware, the Creditors Committee and BofA sought the Court's approval to shorten the notice period on the Stipulation, and requested for a March 27 hearing, and a deadline to file objections three days before that. The Parties contend that, among other things, their Stipulation needs to be heard prior to BofA's Lift Stay Request, which is scheduled for hearing on April 16. The Creditors Committee has agreed to support the Lift Stay Request if the Stipulation is approved. The Debtors, however, objected to an expedited hearing to the Stipulation. The Debtors aver that the Creditors Committee "veritable raison d'etre" in the Chapter 11 cases has finally arrived -- under the guise of delivering value to its constituency consummate with its bargaining power. James L. Patton, Jr., Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, contends the Creditors Committee delivered its constituency to BofA on a silver platter, by submitting to BofA's control in all remaining disputes in the Chapter 11 cases. He points out that BofA seeks to fast-track the Court's consideration of the Stipulation, but the motives for doing so are transparent, and have little to do with the exigencies cited in the request to shorten, which are either illusory or manufactured. ". . . Having openly declared war against the Debtors by filing its motion for relief . . . [BofA] wants approval of the Settlement Stipulation as soon as possible so it can begin using the Committee as its public face in the stay relief litigation and, more importantly, so it can begin using the fee-shifting provisions of the Settlement Stipulation to exert financial leverage against the Debtors," Mr. Patton argues. Mr. Patton points out that if the Stipulation truly is the result of bona fide, arm's-length negotiations and represents an exchange of reasonably equivalent value between the Creditors Committee and the Prepetition Secured Lenders, then they should have no problem with the Stipulation seeing the light of day, and on full notice to all creditors. About American Home Based in Melville, New York, American Home Mortgage Investment Corp. (NYSE: AHM) -- http://www.americanhm.com/-- is a mortgage real estate investment trust engaged in the business of investing in mortgage-backed securities and mortgage loans resulting from the securitization of residential mortgage loans originated and serviced by its subsidiaries. American Home Mortgage and seven affiliates filed for chapter 11 protection on Aug. 6, 2007 (Bankr. D. Del. Case Nos. 07-11047 through 07-11054). James L. Patton, Jr., Esq., Joel A. Waite, Esq., and Pauline K. Morgan, Esq. at Young, Conaway, Stargatt & Taylor LLP represent the Debtors. Epiq Bankruptcy Solutions LLC acts as the Debtors' claims and noticing agent. The Official Committee of Unsecured Creditors selected Hahn & Hessen LLP as its counsel. As of March 31, 2007, American Home Mortgage's balance sheet showed total assets of $20,553,935,000, total liabilities of $19,330,191,000. American Home is currently seeking an extension of its exclusive period to file a plan of reorganization through June 2, 2008; and its exclusive period to solicit and obtain acceptances for that plan through July 31, 2008. (American Home Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN LAFRANCE: Files 2nd Amended Reorganization Plan -------------------------------------------------------- American LaFrance, LLC, delivered to the Court on March 24, 2008, a Second Amended Plan of Reorganization and Disclosure Statement, to: (i) apprise parties-interest of the developments in its Chapter 11 case since its filing of a revised plan on March 11; (ii) provide a revised schedule regarding the solicitation of votes and the confirmation of the Plan; and (iii) provide for the retention of interests of certain interest holders upon ALF's emergence from bankruptcy, in exchange for certain releases of claims and funding of new cash. The Second Amended Plan provides that should the Court approve the Official Committee of Unsecured Creditors' motion for the appointment of Chapter 11 trustee, ALF will default on its $50,000,000 DIP loan from Zohar CDO 2003-1 Limited, Zohar II 2005-1 Limited, Zohar III, and Patriarch Partners Agency Services, LLC. The Debtor informs the Court that in the event of a default and absent additional postpetition financing, a cessation of its operations and liquidation of its assets is likely to occur. The Debtor, in a separate request, seeks the removal of Daimler Trucks North America LLC, formerly known as Freightliner LLC, from the Creditors Committee. ALF believes Freightliner has an "impermissible" conflict of interest in serving on the Committee. The Court is scheduled to convene a hearing on April 9, 2008, to consider the request for appointment of a trustee. The Debtor will lose control of its Chapter 11 case and its exclusive rights to file and solicit acceptances of a reorganization plan in the event the Court orders a trustee appointment. Changes in management took place during the past week. Beginning March 17, 2008, A. Matthew Karmel assumed the role as ALF's chief executive officer. ALF expects former CEO William J. Hinz to be named chairman of the company's board of managers. The Second Amended Plan contemplates this schedule with respect to voting deadline and Plan confirmation: Deadline for Submission of Ballots April 18, 2008 Deadline for Objections to Plan Confirmation April 18, 2008 Pre-Trial Confirmation Hearing April 21, 2008 Plan Confirmation Hearing April 28, 2008 The Second Amended Plan maintains the treatment of claims and interests set forth in the March 11 Plan. The latest version of the Plan, however, provides that in exchange for retention of their interests in ALF, certain parties that are also holders of Class 1 Secured Claims will release $4,225,767 of their Class 1 Claims. The released amount represents the total of accrued, unpaid interest owed to the Prepetition Lenders -- a group of lenders which loaned the Debtor $150,000,000 and assert liens in substantially all of ALF's assets as collateral for the loan. In addition, those interest holders will contribute $500,000 in cash to the Reorganized Debtor. Funds managed by Patriarch Partners Agency Services own 100% of the membership interests in ALF. Patriarch Agency Services is the administrative agent for the Prepetition Lenders, which consist of Zohar CDO 2003-1, Limited, Zohar II 2005-1, Limited, and Zohar III, Limited. In addition, the Second Amended Plan provides for certain changes in treatment of holders of unsecured claims who may be subject to potential preference claims from the Debtor. Those claimants may each settle its liability for a preference claim to provide the Reorganized Debtor, for a period of 12 months after the effective date of the Plan, with pricing for goods and services equal to or more favorable than the best pricing offered to ALF during 2007. The provision in the First Amended Plan -- any distribution be reduced by 10% of the preference amount, provided that the reductions will not be more than 10% of the allowed amount -- has been excluded in the latest version of the Plan. Pursuant to Second Amended Plan, the trust to be established to distribute proceeds and administer assets left for general unsecured creditors will receive: -- $5,000,000 in cash; -- proceeds of avoidance actions not settled pursuant to the provisions of the Plan; -- Litigation Assets, i.e. ALF's claims against International Business Machines Corp.; -- 25% of the recovery, after costs, of the proceeds of the Reorganized Debtor's prosecution of claims for recovery of (a) preferential payments of transfers to Freightliner made within one year prior to the Petition Date, and (b) fraudulent transfers to Freightliner; -- title of real property, land and buildings, located at 1800 Lehman Street, in Lebanon, Pennsylvania 17046; and -- a certificate evidencing a contingent right to receive the sum of up to $20,000,000 on these terms: in the event that within three years after the Plan's effective date the Reorganized Debtor consummates a transaction that provides for the recovery in cash by the Prepetition Lenders and Interest Holders and any post-Effective Date lenders or investors of all of their invested capital, the Trust will receive 15% of any excess cash proceeds, after the invested capital has been recovered, up to a maximum of $20,000,000 has been paid to the Trust. A full-text copy of the Second Amended Plan is available for free at http://bankrupt.com/misc/ALF_2nd_Revised_Plan.pdf A full-text copy of the Second Amended Disclosure Statement is available for free at: http://bankrupt.com/misc/ALF_2nd_Revised_DS.pdf About American LaFrance Headquartered in Summerville, South Carolina, American LaFrance LLC -- http://www.americanlafrance.com/-- is one of the oldest fire apparatus manufacturers and one of the top six suppliers of emergency vehicles in North America. The company filed for Chapter 11 protection on Jan. 28, 2008 (Bankr. D. Del. Case No. 08-10178). Ian T. Peck, Esq., and Abigail W. Ottmers, Esq., at Haynes and Boone LLP, are the Debtor's proposed Lead Counsel. Christopher A. Ward, Esq., at Klehr, Harrison, Harvey, Branzburg & Ellers LLP, are the Debtor's proposed local counsel. In its schedules of assets and debts filed Feb. 4, 2008, the Debtor disclosed $188,990,680 in total assets and $89,065,038 in total debts. The Debtor's exclusive period to file a plan expires on May 27, 2008. The Debtor filed its plan of reorganization on Feb. 3. (American LaFrance Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN LAFRANCE: Seeks to Remove Freightliner from Committee -------------------------------------------------------------- American LaFrance, LLC, asks the U.S. Bankruptcy Court for the District of Delaware to remove Daimler Trucks, North America, LLC, formerly known as Freightliner, LLC, from the Official Committee of Unsecured Creditors, pursuant to SectionS 105(a) and 1102(a)(4) of the Bankruptcy Code. Christopher A. Ward, Esq., at Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, in Wilmington, Delaware, contends that Freightliner has, in many instances, breached its fiduciary duties to the Debtor's unsecured creditors. As a direct competitor to the Debtor, Freightliner recently "poached" the executive assistant for the Debtor's current chief executive officer and several previous senior executives, Mr. Ward relates. The executive assistant's tenure spanned over a decade, within which time she has gained direct access to and knowledge of all high-level decisions made and considered by the Debtor, and to all key data and proprietary information. Mr. Ward asserts that a Committee member, let alone the chairman of the Committee, cannot steal key employees from a reorganizing debtor without breaching its fiduciary duty to unsecured creditors. This direct competitive attack, he states, on the viability and success of the Debtor's business and reorganization effort, by itself, is hostile to the interests of unsecured creditors. The Debtor also notes that Freightliner breached its fiduciary duties by refusing to recuse itself from settlement discussions between the Debtor and the Committee so that its interests and claims against the Debtors could be openly discussed. Mr. Ward cites that Freightliner, as chairman of the Committee, joined in the objection to any communication between the Debtor and other members of the Committee, which could substantially fund a plan of reorganization and provide a meaningful distribution to unsecured creditors. Mr. Ward argues that given Freightliner's bias and desire to put the Debtor out of business and given that its motives are distinct from those of all other creditors of the Debtor, Freightliner should be removed from the Committee. He cites In re Venturelink Holdings, Inc., 299 B.R. 420, 423 , which held that, "removal is not only mandated for actual breaches of fiduciary duties but also whenever there is an appearance of a fiduciary breach," and, In re SPM Mfg. Corp., 984 F.2d 1305, 1317 which states that "[i]f the Unsecured Creditors' Committee fails to be properly representatives of the unsecured creditors, any party in interest can move to have the Committee reconstituted". Mr. Ward also asserts that Freightliner should also be removed from the Committee because it has incurable and substantial conflicts of interest with its fiduciary duties to the unsecured creditors: (i) For the 12-year period ending December 2005, Freightliner was the sole owner of the Debtor. Until April 2007, Freightliner owned preferred equity in the Debtor. Until mid-2007, Freightliner operated the Debtor under the Transition Services Agreement using Freightliner's computer systems. Freightliner is responsible, in no small part, for the Debtor's bankruptcy. (ii) Freightliner owes the Debtor millions of dollars, including substantial warranty obligations that have been unpaid for months, and has received over $40,000,000 in alleged avoidable transfers from the Debtor. Given the amount of money involved, the claims against Freightliner, both avoidance actions and otherwise, are substantial assets of the estate. (iii) Freightliner is also direct competitor of the Debtor for the sale of the Condor-line of trucks. (iv) Freightliner commenced state-court litigation against the Debtor, having sued it in December 2007 asserting claims in excess of $10,000,000. However, Freightliner's alleged claims against the Debtor, the basis for Freightliner's service on the Committee, will be significantly reduced or eliminated by amounts owed by Freightliner to the Debtor. "In sum, these impermissible conflicts make it impossible for Freightliner to act as a fiduciary to the very creditors that would be harmed if Freightliner had its way and the Debtor were put out of business," Mr. Ward tells the Court. About American LaFrance Headquartered in Summerville, South Carolina, American LaFrance LLC -- http://www.americanlafrance.com/-- is one of the oldest fire apparatus manufacturers and one of the top six suppliers of emergency vehicles in North America. The company filed for Chapter 11 protection on Jan. 28, 2008 (Bankr. D. Del. Case No. 08-10178). Ian T. Peck, Esq., and Abigail W. Ottmers, Esq., at Haynes and Boone LLP, are the Debtor's proposed Lead Counsel. Christopher A. Ward, Esq., at Klehr, Harrison, Harvey, Branzburg & Ellers LLP, are the Debtor's proposed local counsel. In its schedules of assets and debts filed Feb. 4, 2008, the Debtor disclosed $188,990,680 in total assets and $89,065,038 in total debts. The Debtor's exclusive period to file a plan expires on May 27, 2008. The Debtor filed its plan of reorganization on Feb. 3. (American LaFrance Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN LAFRANCE: Committee Asks Court to Name Chapter 11 Trustee ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of American LaFrance, LLC, asks the U.S. Bankruptcy Court for the District of Delaware to appoint a Chapter 11 trustee in the bankruptcy case of American LaFrance, LLC, pursuant to Section 1104(a) of the Bankruptcy Code. On behalf of the Committee, David M. Fournier, Esq., at Pepper Hamilton LLP, in Wilmington, Delaware, tells the Court that Patriarch Partners Agency Services, LLC's and Lynn Tilton's multiple and conflicting insider roles in the Debtor preclude the Debtor's management and professionals from discharging their fiduciary duties owed to the estate and non-insider creditors in the Chapter 11 case. Accordingly, he asserts, "cause" exists for mandating the appointment of a Chapter 11 Trustee. Pursuant to Section 1104, a trustee may be appointed, for among other things, for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the petition date. The trustee, pursuant to Section 1106, will investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business and the desirability of the continuance of the business, and any other matter relevant to the case or to the formulation of the plan. The Creditors Committee believes the Debtor is laboring under a "fundamental and incurable" conflict of interest, which precludes its board and management from discharging the fiduciary duties they owe to the bankruptcy estate. The Debtor, its allegedly secured lenders, and its equity holders all are under the common control of one person -- Lynn Tilton, Mr. Fournier asserts. He points out that: -- Ms. Tilton is the sole member of the Debtor's Board of Managers; -- Patriarch Partners Agency Services, which is managed by Ms. Tilton, is the agent for the Debtor's lenders; -- The alleged secured lenders of the Debtor are investment funds that are controlled by limited liability companies for which Ms. Tilton is the manager; and -- The lenders hold all or substantially all of the Debtor's equity. Mr. Fournier adds that even though Patriarch, in its role as lender, has interests in diametric opposition to the Debtor and its estate, it and Ms. Tilton control each and every aspect of the Debtor as insiders, as evidenced by these facts: 1. Managed funds affiliated with Patriarch own all or substantially all equity in the Debtor; 2. Ms. Tilton is the sole manager on the Debtor's board of managers; 3. Ms. Tilton is the manager of Patriarch Partners Management Group, LLC, which employs the Debtor's Chief Executive Officer and many other senior executives pursuant to the terms of a staffing agreement; and 4. Ms. Tilton appointed all acting management and executives of the Debtor. The insider roles held by Ms. Tilton and Patriarch have enabled her to dictate the course, strategy and decisions with respect to the Debtor in this case, as well as the terms of each significant event in the Debtor's bankruptcy proceedings, notwithstanding the material and pervasive conflicts of interest existing between Patriarch and the Debtor's creditors, Mr. Fournier contends. "Unfortunately, Patriarch and Tilton have utilized their control over the Debtor and management to further the interests of Patriarch as alleged secured lender rather than to encourage the Debtor to meet its Chapter 11 responsibilities to the estate and its impaired creditors." The Committee maintains that Ms. Tilton: a. made the decision on behalf of the Debtor to enter Chapter 11; b. dictated the hiring of the Debtor's executives, management and professionals; c. dictated the terms of the DIP financing; d. controlled the terms of the proposed Plan, including the proposed treatment of equity, insider creditors and recoveries of non-insider creditors; e. dictated the terms of the proposed sale of all of the Debtor's assets; f. and her dictates control all operations and management of the Debtor; g. can hire and fire executives at will; h. makes all decisions on behalf of the board of managers; and i. dictated the timing of the proposed plan solicitation process and sale process. Mr. Fournier notes the Debtor has proposed to move forward with one of two scenarios: (i) a proposed plan of reorganization under which Patriarch is the plan sponsor, or (ii) a proposed sale under which Patriarch is the stalking horse bidder. Under either scenario, the Debtor is unable to negotiate a good-faith, arm's- length bargain with Patriarch, as the ultimate decision maker for both the Debtor and Patriarch is Ms. Tilton. "In essence, the Debtor is nothing but a proxy for its primary alleged secured creditor. It is therefore imperative that an independent Chapter 11 Trustee be appointed to protect the Debtor's estate and its creditors." Mr. Fournier argues ALF's preferred avenue of reorganization -- confirmation of the "one-sided" proposed Plan -- is a brazen dispensation to Patriarch of important rights and claims of the Debtor's estate at the expense of unsecured creditors. The Plan, he notes, proposes that Patriarch retains all equity interests in the Debtor, even through the claims of unsecured creditors are drastically impaired. Unsecured creditors, he adds, are to receive a pro rata distribution of possibly less than 10 cents on the dollar and the threat of preference litigation. "If unsecured creditors wish to negotiate more favorable Plan treatment, there is no independent Debtor to consider any proposal for a Plan structure or strategy that varies from the parochial interests of Patriarch," Mr. Fournier says. The inequities of Patriarch's domination over the Debtor's bankruptcy process, Mr. Fournier argues, are only amplified when one examines the procedures pursuant to which the Debtor seeks to push through an accelerated Plan or sale to Patriarch, which appear calculated to minimize the possibility of creditor input into Patriarch's carefully laid plans. The Court will convene a hearing to consider the Committee's request on April 9, 2008. About American LaFrance Headquartered in Summerville, South Carolina, American LaFrance LLC -- http://www.americanlafrance.com/-- is one of the oldest fire apparatus manufacturers and one of the top six suppliers of emergency vehicles in North America. The company filed for Chapter 11 protection on Jan. 28, 2008 (Bankr. D. Del. Case No. 08-10178). Ian T. Peck, Esq., and Abigail W. Ottmers, Esq., at Haynes and Boone LLP, are the Debtor's proposed Lead Counsel. Christopher A. Ward, Esq., at Klehr, Harrison, Harvey, Branzburg & Ellers LLP, are the Debtor's proposed local counsel. In its schedules of assets and debts filed Feb. 4, 2008, the Debtor disclosed $188,990,680 in total assets and $89,065,038 in total debts. The Debtor's exclusive period to file a plan expires on May 27, 2008. The Debtor filed its plan of reorganization on Feb. 3. (American LaFrance Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN LAFRANCE: Appoints A. Matthew Karmel President and CEO --------------------------------------------------------------- American LaFrance, LLC, announced the appointment of A. Matthew Karmel as President and CEO. With Mr. Karmel's arrival Bill Hinz was named Chairman of American LaFrance. Mr. Karmel will report to Mr. Hinz in his new role. Mr. Karmel joins the American LaFrance team as the company transitions to a permanent leadership team. Mr. Karmel will be making additions to his staff to complete his team over the next few months. Mr. Karmel brings over 25 years of manufacturing experience in a variety of industries including heavy engines at Detroit Diesel Corp. His body of work includes several successful turnaround companies, both domestic and international. His most recent position was that of President Asia-Pacific, MAG Industrial Automation Systems. Mr. Karmel is a degreed Mechanical engineer earning his PhD in 1981 from Princeton University. He is also a licensed Professional Engineer and holds several patents. Mr. Karmel will be relocating to the area permanently in the very near future. Bill Hinz said of Mr. Karmel's appointment "Matthew brings a wealth of experience to American LaFrance at a time when the Company is poised to emerge from its legal proceedings. By having Matthew in place there will be a seamless transition of leadership. I will remain actively engaged with American LaFrance focusing on the strategic elements of the business while Matthew will immediately engage the tactical." About American LaFrance Headquartered in Summerville, South Carolina, American LaFrance LLC -- http://www.americanlafrance.com/-- is one of the oldest fire apparatus manufacturers and one of the top six suppliers of emergency vehicles in North America. The company filed for Chapter 11 protection on Jan. 28, 2008 (Bankr. D. Del. Case No. 08-10178). Ian T. Peck, Esq., and Abigail W. Ottmers, Esq., at Haynes and Boone LLP, are the Debtor's proposed Lead Counsel. Christopher A. Ward, Esq., at Klehr, Harrison, Harvey, Branzburg & Ellers LLP, are the Debtor's proposed local counsel. In its schedules of assets and debts filed Feb. 4, 2008, the Debtor disclosed $188,990,680 in total assets and $89,065,038 in total debts. The Debtor's exclusive period to file a plan expires on May 27, 2008. American LaFrance LLC will pursue a sale of its business operations in the event that the company's plan of reorganization is not confirmed. The Debtor filed its plan of reorganization on Feb. 3. (American LaFrance Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN TOWER: Moody's Puts 'Ba1' Rating on $325 Mil. 2012 Loan ---------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to American Tower Corporation's new $325 million senior unsecured term loan maturing in 2012, the proceeds of which will be used to repay outstandings under the revolving credit facility. The transaction will modestly strengthen the company's liquidity position, as the company also announced a $1.5 billion stock buyback program. The Company's fundamental key credit considerations remain unchanged. Accordingly, Moody's affirmed AMT's Ba1 corporate family, Ba1 senior unsecured and SGL-1 liquidity ratings. Moody's also affirmed AMT's Ba1 probability of default rating. The outlook remains stable. Moody's has taken these ratings actions: Issuer: American Tower Corporation -- Corporate Family Rating: Affirmed Ba1 -- Probability-of-Default Rating: Affirmed Ba1 -- $325 million new term loan facility: Assigned Ba1, LGD4 -- 56% -- $1.25 billion revolving credit facility: Affirmed Ba1, LGD4 -- 56% (Changed from LGD4 -- 55%) -- 7% Senior Notes due 2017: Affirmed Ba1, LGD4 -- 56% (Changed from LGD4 -- 55%) -- 7.125% Senior Notes due 2012: Affirmed Ba1, LGD4 -- 56% (Changed from LGD4 -- 55%) -- 7.5% Senior Notes due 2012: Affirmed Ba1, LGD4 -- 56% (Changed from LGD4 -- 55%) -- 5% Senior Convertible Notes due 2010: Affirmed Ba1, LGD4 -- 56% (Changed from LGD4 -- 55%) -- Outlook: Stable -- Speculative Grade Liquidity: Affirmed SGL-1 AMT's Ba1 corporate family rating reflects Moody's expectation that the fundamentals of the wireless tower sector are likely to remain favorable through the next several years and AMT's good market position will enable its strong earnings and cash flow momentum to continue. The rating also considers the company's single industry focus and relatively small scale, although much of AMT's revenues are contractually derived from its relationships with the largest and well-capitalized national wireless operators across the U.S. Finally, the rating reflects Moody's view that AMT is likely to continue directing its growing free cash flow to shareholders via share buy backs over the next few years, targeting adjusted leverage below 6.0x. Based in Boston, Massachusetts, American Tower Corporation is a wireless tower operator with annual revenues of $1.5 billion. AMERICAN TOWER: S&P Puts 'BB+' Rating on $325 Mil. Loan Facility ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its issue and recovery ratings to Boston, Massachusetts-based communications tower operator American Tower Corp.'s $325 million unsecured term loan facility. The assigned issue rating is 'BB+', the same as the corporate credit rating, with a recovery rating of '3', indicating expectations for meaningful (50%-70%) recovery in the event of a payment default. The existing ratings on the company's outstanding unsecured debt issues remain unchanged. Although numerically S&P's analysis indicates recovery in the 90%-100% range, the recovery rating has been capped at '3' due to the company's ability to incur additional debt. Should the company's credit profile worsen, S&P expect it may add further debt, material enough to reduce its recovery estimate. The term loan is an incremental facility that is allowed under, and governed by, the existing loan agreement. It will have substantially similar terms and conditions as the existing loan agreement. The proceeds from this new facility will be used to repay borrowings under the company's $1.25 billion revolving credit facility. The corporate credit rating is BB+ and the outlook is stable. The corporate credit rating reflects the promising prospects of its wireless tower leasing business, which is expected to generate increasingly stronger levels of net free cash flow after capital expenditures. Ratings List American Tower Corp. Corporate credit rating BB+/Stable/-- New Issue Assigned American Tower Corp. $325 million unsecured term loan facility BB+ Recovery rating 3 AMERICAN TOWER: Fitch Puts 'BB+' Rating on Proposed $325MM Loan --------------------------------------------------------------- Fitch Ratings has assigned a 'BB+' rating to American Tower Corporation's proposed $325 million incremental senior term loan maturing in 2012. Proceeds from the term loan will be used to refinance existing indebtedness under the revolving facility. The Rating Outlook is Stable. AMT's ratings reflect the scale in its operations, which has translated into strong operating performance and increased free cash flow. AMT's operating characteristics remain favorable and are reflective of the lower business risk that results in a predictable and growing cash flow stream generated largely from investment grade national wireless operators. Fitch believes these characteristics more than offset AMT's sizable share repurchase program and the higher financial leverage for its rating category. AMT should continue to meaningfully improve its operating metrics due to scale benefits and the expectations for continued wireless industry demand. Over the longer-term, Fitch expects that AMT, as well as the rest of the tower industry, will benefit from the build-out requirements associated with the 700 MHz auction. AMT's liquidity position is solid owing to its free cash flow, cash on hand and undrawn revolver capacity. FCF for the last twelve months was in excess of $500 million. For 2008, with higher capital spending expected for land purchases, new tower construction and augmentation of existing sites, Fitch believes FCF levels will be comparable to 2007. Cash and cash equivalents, including restricted cash, was $87 million as of Dec. 31, 2007. Proforma for the new incremental term loan, which will provide AMT with additional liquidity, the company had drawn approximately $650 million of the $1.25 billion on its senior unsecured revolving credit facility that matures in 2012. The financial covenants for the new term loan are the same as the existing revolver, which includes these: total senior secured leverage ratio of 3.0 times, total borrower leverage ratio of 6.0x and interest coverage ratio of 2.5x. The senior secured leverage covenant of 3.0x provides AMT with additional capacity for future tower securitizations. Fitch expects the majority of excess cash flow, borrowings under its revolving credit facility and cash on hand will be used to repurchase shares. Under the previous stock repurchase program that expired in February 2008, AMT purchased 35 million shares of common stock for $1.5 billion. AMT's Board of Directors approved a new stock repurchase program to purchase up to an additional $1.5 billion of its class A common stock. As a result, debt will increase moderately over the next couple of years. For 2007, debt increased by $700 million to $4.3 billion. Based on current capital allocation plans, Fitch expects debt to increase by at least $400 million in 2008 with leverage likely staying in the mid-4x range. AMT's near-term debt maturities are relatively modest over the next three years with only $78 million of convertible debt from two issuances due in 2010. ANDERSON MEZZANINE: Poor Credit Quality Cues Moody's Rating Cuts ---------------------------------------------------------------- Moody's Investors Service downgraded and left on review for possible further downgrade the ratings on these notes issued by Anderson Mezzanine Funding 2007-1, Ltd.: Class Description: $130,000,000 Class A-1a Floating Rate Notes due July 2042 -- Prior Rating: Aa3, on review for possible downgrade -- Current Rating: Ba3, on review for possible downgrade Class Description: $53,000,000 Class A-1b Floating Rate Notes due July 2042 -- Prior Rating: Aa3, on review for possible downgrade -- Current Rating: Ba3, on review for possible downgrade Additionally, Moody's downgraded these notes: Class Description: $30,500,000 Class A-2 Floating Rate Notes due July 2042 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: Ca Class Description: $42,700,000 Class B Floating Rate Notes due July 2042 -- Prior Rating: Ba3, on review for possible downgrade -- Current Rating: Ca Class Description: $16,775,000 Class C Deferrable Floating Rate Notes due July 2042 -- Prior Rating: Caa2, on review for possible downgrade -- Current Rating: Ca Class Description: $11,090,000 Class D Deferrable Floating Rate Notes due July 2042 -- Prior Rating: Caa3, on review for possible downgrade -- Current Rating: Ca According to Moody's, the rating actions reflect increased deterioration in the credit quality of the underlying portfolio. APOSTOLIC BIBLE: Case Summary & Five Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Apostolic Bible Students Association, Inc. 3306 Carey Glen Court Westfield, IN 46074 Bankruptcy Case No.: 08-03077 Type of Business: The Debtor owns and lead a religious organization. Chapter 11 Petition Date: March 24, 2008 Court: Southern District of Indiana (Indianapolis) Judge: Basil H. Lorch III Debtor's Counsel: Eric C. Redman, Esq. (ksmith@batorredman.com) Bator Redman Bruner Shive & Ludwig 151 North Delaware Street, Suite 1106 Indianapolis, IN 46204 Tel: (317) 685-2426 http://www.batorredman.com/ Total Assets: $2,242,500 Total Debts: $1,132,000 Debtor's Five Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Christ Church Apostolic loans 2005-2006 $50,000 Church 6601 North Grandview Church Indianapolis, IN 46260 Breno Enterprise loans and services $15,000 8888 Keystone Crossing Services Indianapolis, IN 46240 Greater One Way Apostolic loans 2005-2006 $10,000 Church 5840 East 16th Street Indianapolis, IN 46218 Salem Insurance insurance $4,000 Zion Temple Apostolic Church loans 2005-2006 $3,000 AREMISSOFT CORP: Appeals Court OK with Lawsuit Against Swiss Banks ------------------------------------------------------------------ The U.S. Court of Appeals for the Third Circuit vacated an order by the Honorable Joel A. Pisano of the U.S. District Court for the District of New Jersey that dismissed an action by the AremisSoft Liquidating Trust against certain Swiss banks. Litigation History Between 1998 and 2001, two of AremisSoft's directors and officers, Lycourgos Kyprianou and Roys Poyiadjis, allegedly artificially inflated AremisSoft's stock price by fraudulent representation of the company's financial condition, and then sold off these inflated shares to investors. According to the complaint, the directors hid these transactions in sham entities and bank accounts, with the assistance and knowledge of Bordier et Cie and Dominick Company A.G., both banking institutions organized under the laws of Switzerland. After discovery of the scheme, NASDAQ halted ArtemisSoft's trading of its common stock in 2001. The situation continued to worsen and, in March 2002, the company filed for Chapter 11 protection with the U.S. Bankruptcy Court for the District of New Jersey. At the time of filing, a federal class-action securities suit, in which a group of purchasers of AremisSoft stock requested rescission of their stock-purchase contracts, was pending against AremisSoft. To settle the Purchasers' suit, the parties to the bankruptcy proceeding agreed that the plan of reorganization would assign to the Purchasers all causes of action owned by AremisSoft. Rather than trying to assign to each of the Purchasers some portion of the estate's claims, the plan of reorganization provided for the creation of a state-law trust to take title to and prosecute the assigned claims for the Purchasers' benefit. The Purchasers also assigned to the Trust any causes of action that they owned individually for activities related to the purchase of the AremisSoft securities. Assigning both sets of claims -- the Debtor's claims and individual Purchasers' claims -- to the Trust made logistical sense, as it rendered one entity responsible for prosecuting and distributing to the Purchasers the proceeds of all of the claims. AremisSoft Corp. emerged from bankruptcy protection in 2002. Trustees Cannot Hound Banks Due to SLUSA, District Court Says In bringing the lawsuit in the District Court of New Jersey, plaintiffs Joseph LaSala and Fred Ziedman, trustees of the AmerisSoft Trust, asserted four causes of action: a) two counts of aiding and abetting a breach of fiduciary duty, one against Bordier et Cie, and one against Dominick Company; b) and two counts of violating Swiss money-laundering laws, one against Bordier, and one againt Dominick. All causes of action were allegedly assigned to the Trust by the AremisSoft bankruptcy estate or by the Purchasers in their individual capacities. Judge Pisano previously granted the banks' request to dismiss the the Trustees' action, arguing that the Trust's lawsuit was preempted by the Securities Litigation Uniform Standards Act, 15 U.S.C. Section 78bb. Nature of the SLUSA Congress enacted SLUSA in 1998 as a supplement to the Private Securities Litigation Reform Act of 1995, 15 U.S.C. Section 77z-1 & 78u-4. In order to understand SLUSA, the Appeals Court said, one must first understand the PSLRA. Congress enacted the PSLRA because it determined that securities plaintiffs and their attorneys were bringing abusive securities class actions that had no legitimate chance of success, but, because of the expense of discovery, were enough of a nuisance to force defendants to settle non-meritorious claims. Moreover, class members typically recovered very little from those settlements, while class counsel were paid exorbitant fees. SLUSA undertook to close this perceived loophole by preventing securities plaintiffs from using the class-action vehicle to prosecute state-law securities claims. To be preempted by SLUSA, an action must: -- make use of a procedural vehicle akin to a class action; and -- allege a misrepresentation or deceptive device in connection with a securities trade. Appeals Court Says Federal Law "No Hindrance" In the case at bar, the District Court ruled that all four claims were preempted by SLUSA, and thus dismissed the action. The District Court determined that all of the counts involved substantive allegations of misrepresentations in connection with securities trades. It further concluded that the lawsuit operated like a class action, inasmuch as the Trust was asserting claims for the benefit of some 6000 former shareholders of AremisSoft. The Appeals Court contended that the SLUSA is not an impediment for the Trustees to adjudicate, in a federal court, state-law aiding-and-abetting-breach-of-fiduciary duty claims, which have passed from a corporation to its bankruptcy estate, then to a trust. The Appeals Court further argued that the SLUSA does not hinder the Trustees from asserting, against foreign entities, claims characterized as arising under foreign law for aiding and abetting money laundering. SLUSA Does Not Bar Covered Class Actions SLUSA prevents would-be plaintiffs from bringing certain claims in the form of a "covered class action." The Appeals Court concluded that a corporation's claims do not take this form, irrespective of whether the claims are asserted by the corporation directly, its shareholders derivatively, its bankruptcy estate, its bankruptcy estate's assignee, or its successor. The conclusion, said the Appeals Court, accords with the text of � 78(f) and with Congress's intent, as reflected in the legislative history, not to preempt corporate claims, and to leave the bankruptcy process undisturbed. SLUSA Preempts Class Actions Based Upon State Law The Trust alleged that the Banks violated Swiss banking regulations by failing properly to investigate and interdict the Directors' alleged money-laundering transactions. The Trust further alleged that it, as assignee of the Purchasers, is entitled, under Swiss law, to recover damages for the Banks' violations. It is important to recognize that claims of money-laundering are not alleged to have been owned by AremisSoft or its bankruptcy estate, said the Appeals Court. The Swiss-law claims are, rather, claims owned by the Purchasers as individual purchasers of AremisSoft stock. They were assigned by the Purchasers to the Trust so that they could be prosecuted. Thus the counts for money-laundering likely are brought to recover damages "on behalf of more than 50 persons," 15 U.S.C. Section 78bb(f)(5)(B)(i)(I), so they would seem to take the form of a covered class action. SLUSA however, said the Appeals Court, only preempts covered class actions "based upon the statutory or common law of any State,", where "State" is defined as "any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or any other possession of the United States,". Despite this seemingly clear language, the Banks contend that SLUSA preempts the Trust's Swiss-law claims because: 1) Congress intended to preempt foreign-law claims; 2) the Swiss-law claims are "based upon" state law because the Banks' violation of Swiss law is dependent on the Directors' breach of their state-law fiduciary dutiesthat is, only if the Directors breached their state-law fiduciary duties can the Banks be liable under Swiss law; 3) the Swiss-law claims are "based upon" state law because New Jerseys choice-of-law rules are "state laws" that trigger application of Swiss law to the present dispute; 4) the Swiss-law claims incorporate the allegations of the state-law claims; and 5) the Swiss-law claims are too closely tied to the state-law claims. The Appeals Court said the contentions of the District Court are either extraneous, without merit, and even "overblown", with regards to Congress' alleged preemption of foreign-law claims. Circumventing SLUSA Permeating the Banks' briefs is the general argument that allowing these claims to go forward will re-create a loophole for abusive securities litigation that Congress intended, through SLUSA, to close. The Appeals Court found this argument unpersuasive. Conclusion The Appeals Court finally held that SLUSA does not prevent the Trust from bringing AremisSoft's Delaware-law aiding-and-abetting- breach-of-fiduciary-duty claims against the Banks. These are direct corporate claims assigned to the Trust from AremisSoft's bankruptcy estate. SLUSA's text and legislative history yield the conclusion that Congress did not intend to preempt direct corporate claims such as these, the Appeals Court said. The Appeals Court further held that SLUSA does not prevent the Trust from asserting Swiss-law claims against the Banks for violating Swiss money-laundering regulations. This conclusion flows directly from the text of SLUSA, which by its terms only affects claims based upon the laws of a state or territory of the United States, the Appeals Court said. About AremisSoft Corp. Based in Minneapolis, Minnesota, AremisSoft Corporation -- http://www.aremissoft.com/-- developed enterprise resource planning (ERP) software for midsized companies in the manufacturing (35% of sales), health care, hospitality, and construction industries. Its ERP applications automate and manage such processes as accounting, customer service, and sales and marketing for BAE SYSTEMS, Regal Hotel International, Ericsson, and other customers. The company filed for chapter 11 protection on March 15, 2002 (Bankr. D. N.J. Case No. 02-32621). Paul R. DeFilippo, Esq., at Gibbons, DelDeo, Dolan, Griffinger et al., represented the Debtor in its restructuring efforts. The Court confirmed the Debtor's Chapter 11 plan in June 2002, and took effect in August 2002. Among others, the plan mainly called for a creation of a litigation and liquidating trust. ARTISTDIRECT INC: Inks Forbearance with Senior Financing Investors ------------------------------------------------------------------ ARTISTdirect Inc. said in a regulatory filing with the Securities and Exchange Commission that on March 17, 2008, it entered into a Forbearance and Consent Agreement with U.S. Bank National Association, as Collateral Agent, and JMB Capital Partners L.P., JMG Capital Partners, L.P., JMG Triton Offshore Fund Ltd., and CCM Master Qualified Fund Ltd. Under the terms of the Agreement, the Initial Purchasers agreed to forbear from exercising any of their rights and remedies under the Senior Financing Documents with respect to existing senior defaults for a period commencing Feb. 20, 2008, and ending on Dec. 31, 2008. Pursuant to the Agreement, the interest rate on the unpaid balance of the notes issued pursuant to the Senior Financing Documents will be 15% per annum from Feb. 20, 2008, until Sept. 30, 2008. If the notes have not been paid in full by Sept. 30, 2008, the interest rate will be increased to 16% per annum retroactive to Feb. 20, 2008, with additional interest for the period from Feb. 20, 2008, until Sept. 30, 2008, to be paid on Sept. 30, 2008. Senior Financing and Sub-Debt Notes As of Sept. 30, 2007, and Dec. 31, 2006, approximately $13,307,000 principal amount was outstanding with respect to the Senior Financing, and approximately $27,658,000 principal amount was outstanding with respect to the Sub-Debt Financing. On Oct. 16, 2007, the company received an Event of Default Redemption Notice from the holders of approximately $2,693,000 principal amount of Sub-Debt Notes demanding that the company redeem their Sub-Debt Notes. The company believes and has advised these Sub-Debt Note holders that redemption (including the demand for redemption) is not permitted under the terms of the Subordination Agreement. About ARTISTdirect Inc. Headquartered in Santa Monica, California, ARTISTdirect Inc. (OTC.BB: ARTD) -- http://artistdirect.com/-- is a digital media entertainment company that is home to an online music network and, through its MediaDefender subsidiary, is a provider of anti-piracy solutions in the Internet-piracy-protection industry. Going Concern Doubt As reported in the Troubled Company Reporter on May 7, 2007, Gumbiner Savett Inc. in Santa Monica, Calif., expressed substantial doubt about Artistdirect Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's default under its senior and subordinated debt agreements and suggested that the default could cause a request for accelerated payment or redemption of the debt. BANC OF AMERICA: Moody's Puts Low-B Final Ratings on Six Classes ---------------------------------------------------------------- Moody's Investors Service assigned definitive ratings to securities issued by Banc of America Commercial Mortgage Loan Trust 2008-LS1. The provisional ratings issued on March 4, 2008 have been replaced with these definitive ratings: -- Class A-1, $28,873,000, rated Aaa -- Class A-2, $76,020,000, rated Aaa -- Class A-3, $75,846,000, rated Aaa -- Class A-4A, $134,000,000, rated Aaa -- Class A-4B, $806,996,000, rated Aaa -- Class A-1A, $429,430,000, rated Aaa -- Class A-SM, $70,350,000, rated Aaa -- Class A-M, $234,502,000, rated Aaa -- Class A-J, $99,663,000, rated Aaa -- Class XW, $2,345,024,732*, rated Aaa -- Class B, $32,244,000, rated Aa1 -- Class C, $29,312,000, rated Aa2 -- Class D, $23,450,000, rated Aa3 -- Class E, $23,450,000, rated A1 -- Class F, $26,381,000, rated A2 -- Class G, $23,450,000, rated A3 -- Class H, $29,312,000, rated Baa1 -- Class J, $29,312,000, rated Baa2 -- Class K, $29,312,000, rated Baa3 -- Class L, $8,793,000, rated Ba1 -- Class M, $8,793,000, rated Ba2 -- Class N, $8,793,000, rated Ba3 -- Class O, $5,862,000, rated B1 -- Class P, $8,793,000, rated B2 -- Class Q, $11,725,000, rated B3 * Approximate notional amount Moody's assigned definitive ratings to these additional class of certificates: -- Class A-4BF, $20,000,000 rated Aaa BEAR STEARNS: JPMorgan Offers Bonuses to Top Brokers ---------------------------------------------------- JPMorgan Chase & Co. has proposed an retention incentive scheme, which will become effective following the buyout closing, to keep top brokers of Bear Stearns Cos. Inc. from leaving the company, The Associated Press reports. According to AP's unnamed source, the cash-and-stock bonuses for top earners, who make $500,000 in commissions and fees, will receive 100% of their yearly production, while those who make $250,000, will get half. Brokers earning below $250,000 get no bonuses. Advisers get an additional bonus according to the average yearly increase in production for three years, AP relates. As reported in yesterday's Troubled Company Reporter, JPMorgan and Bear Stearns disclosed an amended merger agreement regarding JPMorgan Chase's acquisition of Bear Stearns, increasing its bid from $2.32 per share to $10 per share. Under the revised terms, each share of Bear Stearns common stock would be exchanged for 0.21753 shares of JPMorgan Chase common stock -- up from 0.05473 shares -- reflecting an implied value of approximately $10 per share of Bear Stearns common stock based on the closing price of JPMorgan Chase common stock on the New York Stock Exchange on March 20, 2008. In addition, JPMorgan Chase and Bear Stearns entered into a share purchase agreement under which JPMorgan Chase will purchase 95 million newly issued shares of Bear Stearns common stock, or 39.5% of the outstanding Bear Stearns common stock after giving effect to the issuance, at the same price as provided in the amended merger agreement. The purchase of the 95 million shares is expected to be completed on or about April 8, 2008. About JPMorgan JPMorgan Chase & Co. (NYSE: JPM) -- http://www.jpmorganchase.com/ -- is a global financial services firm with operations in more than 60 countries. The firm does investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase serves millions of consumers in the United States and many of the world's most prominent corporate, institutional and government clients under its JPMorgan and Chase brands. About Bear Stearns New York City-based The Bear Stearns Companies Inc. (NYSE: BSC) -- http://www.bearstearns.com/-- is a leading financial services firm serving governments, corporations, institutions and individuals worldwide. The company's core business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private client services. The company has approximately 14,000 employees worldwide. * * * As reported in the Troubled Company Reporter on Dec. 28, 2007, Fitch Ratings' affirmed its Negative Outlook for The Bear Stearns Companies Inc. following the announcement of the company's fiscal year earnings for 2007. On Nov. 14, 2007, Fitch affirmed Bear Stearns' long-term credit ratings, along with its subsidiaries. Fitch also downgraded the short-term rating to 'F1' from 'F1+', and Individual rating to 'B/C' from 'B'. BEAR STEARNS: Investors Seek Injunction Blocking Sale to JPMorgan ----------------------------------------------------------------- Investors Wayne County Employees' Retirement System of Michigan and the Police and Fire Retirement System of the City of Detroit have asked the Delaware Chancery Court in Wilmington to issue a restraining order to prevent the purchase of 95 million new Bear Stearn Cos. Inc. shares by JPMorgan Chase & Co., Phil Milford of Bloomberg News reports. As reported in yesterday's Troubled Company Reporter, JPMorgan and Bear Stearns disclosed an amended merger agreement regarding JPMorgan Chase's acquisition of Bear Stearns, increasing its bid from $2.32 per share to $10 per share. Under the revised terms, each share of Bear Stearns common stock would be exchanged for 0.21753 shares of JPMorgan Chase common stock -- up from 0.05473 shares -- reflecting an implied value of approximately $10 per share of Bear Stearns common stock based on the closing price of JPMorgan Chase common stock on the New York Stock Exchange on March 20, 2008. In addition, JPMorgan Chase and Bear Stearns entered into a share purchase agreement under which JPMorgan Chase will purchase 95 million newly issued shares of Bear Stearns common stock, or 39.5% of the outstanding Bear Stearns common stock after giving effect to the issuance, at the same price as provided in the amended merger agreement. The purchase of the 95 million shares is expected to be completed on or about April 8, 2008. According to Mr. Milford, citing papers filed with the Court, the new shares will make JPMorgan a major shareholder and will enable it to vote in favor of the merger. The investors want the stock transaction to be deferred to enable them to file for a permanent injunction halting the merger deal. The Wayne County fund complained that the Bear Stearn directors shouldn't have agreed to an unsubstantial deal with JPMorgan, instead, should have mulled over the sale of the company to the highest bidder, Mr. Milford relates. As previously reported in the TCR, Joseph Lewis, Bear Stearn Companies Inc.'s major shareholder, plans to evaluate the proposed acquisition of the investment banker by J.P. Morgan Chase & Co. for $2.32 a share, or $339 million. About JPMorgan JPMorgan Chase & Co. (NYSE: JPM) -- http://www.jpmorganchase.com/ -- is a global financial services firm with operations in more than 60 countries. The firm does investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase serves millions of consumers in the United States and many of the world's most prominent corporate, institutional and government clients under its JPMorgan and Chase brands. About Bear Stearns New York City-based The Bear Stearns Companies Inc. (NYSE: BSC) -- http://www.bearstearns.com/-- is a leading financial services firm serving governments, corporations, institutions and individuals worldwide. The company's core business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private client services. The company has approximately 14,000 employees worldwide. * * * As reported in the Troubled Company Reporter on Dec. 28, 2007, Fitch Ratings' affirmed its Negative Outlook for The Bear Stearns Companies Inc. following the announcement of the company's fiscal year earnings for 2007. On Nov. 14, 2007, Fitch affirmed Bear Stearns' long-term credit ratings, along with its subsidiaries. Fitch also downgraded the short-term rating to 'F1' from 'F1+', and Individual rating to 'B/C' from 'B'. BEAR STEARNS: Merger Deal Revisions Prompt Moody's Rating Reviews ----------------------------------------------------------------- Moody's Investors Service continues to review for possible upgrade the Baa1 long-term ratings and Prime-2 short-term ratings of The Bear Stearns Companies Inc. and those of its rated subsidiaries. At the same time, Moody's assigned a Aa2 Backed Long-term and Prime-1 Backed Short-term Issuer ratings to Bear and certain rated subsidiaries that explicitly benefit from the Amended and Restated Guaranty Agreement from JPMorgan Chase & Co. (Aa2/Prime-1). This rating action follows recent revisions to the original March 16, 2008 merger agreement and operating guaranty from JPMorgan. JPMorgan has issued a broad guaranty that covers all of Bear's existing and subsequent trading activities, and is applicable to defined "covered entities" and "covered liabilities" as long as the liabilities are incurred while the guaranty is in force. Moody's said that the changes to the guaranty and merger agreement have clarified protections for Bear's trading counterparties. The Backed Issuer Ratings recognize the effective credit substitution provided by the JPMorgan operating guaranty for the defined covered liabilities and covered Bear entities specified within the guaranty. For the guaranty to be voided, Bear's board would have to change its recommendation to shareholders, choosing not to support the JPM transaction. The rating agency said that the likelihood of a qualified third-party bid arising, and thus Bear's board choosing not to recommend the JPMorgan bid, is low given the recent changes to the merger agreement. The amended agreement sharply narrows the scope of qualified bidders that could legitimately propose and consummate an alternative transaction. "Qualified Parties" must have the capital, liquidity and financial strength to replace on an equivalent basis the guaranties from both JPMorgan and the Federal Reserve as necessary to enable Bear Stearns to continue to conduct its business. The list of potential bidders that meet these qualifications, and are likely to receive approval from the Fed, is limited. Under the new merger agreement, JPMorgan has increased its consideration to Bear shareholders to 0.21753 JP Morgan shares (up from 0.05473) for every Bear Stearns common share, a price equivalent of about $10 per share. Bear Stearns has also agreed to issue to JPMorgan 95 million shares of Bear common stock, which will represent approximately 39.5% of outstanding shares upon issuance. The share issuance is expected to occur on or about April 8, 2008. In addition to these shares, all members of Bear's board have agreed to vote their shares in favor of the merger. The transaction has received expedited approval from the Federal Reserve, but requires shareholder approval. Although there is some risk that shareholders will not approve the transaction, Moody's believes that, given the conditions of the merger agreement, including JPMorgan's expected ownership of 39.5% of Bear's pro-forma outstanding common shares, it is likely that this transaction will be completed Though Bear's debt obligations are not explicitly guaranteed, JP Morgan has agreed to assume all of Bear's debt obligations upon deal closing, at which time Bear's debt ratings would be upgraded to JPMorgan's levels, subject to Moody's review of the structure of the acquisition and merger with JPMorgan. The Bear Stearns Companies Inc. is an international investment bank and financial services firm headquartered in New York, New York, that had 14,153 employees and reported $80.3 billion in total long-term capital at Nov. 30, 2007. Bear generated net revenues of $5.9 billion for 2007. Moody's has assigned these backed ratings, based on the guarantee from JPMorgan Chase & Co., to the below entities: Bear Stearns Companies Inc.: -- Backed Long-term issuer rating, Aa2 -- Backed Short-term Issuer rating, P-1 Bear, Stearns Securities Corporation: -- Backed Long-term issuer rating, Aa2 -- Backed Short-term Issuer rating, P-1 Bear Stearns Bank plc: -- Backed Long-term issuer rating, Aa2 -- Backed Short-term Issuer rating, P-1 BEAR STEARNS: Fitch Sees High Chance Merger Deal Will Close ----------------------------------------------------------- Fitch Ratings believes that the probability that JPMorgan Chase & Co. will complete its acquisition of The Bear Stearns Companies, Inc. has increased under the amended terms. That said, Fitch has not modified its ratings of BSC, as significant risk to BSC debtholders remains if the transaction is not completed. Earlier, JPMC announced amended terms and conditions of its agreement to acquire BSC and, in the interim, its guaranty of BSC's obligations. Fitch believes that the motivation to amend the terms of this transaction on the part of all parties involved was primarily to reduce the uncertainty that JPMC will complete the acquisition of BSC. The amended terms call for JPMC to pay significantly more for BSC, albeit still substantially less than the last reported book value, and to assume somewhat more risk with respect to certain of BSC's assets. Offsetting this, the transaction is considerably more likely to be completed. Of note, JPMC is expected to have 39.5% of BSC's shares to vote. In addition the merger agreement limits qualifying alternative bids to those from other institutions that have, at minimum, the equivalent level of financial wherewithal as JPMC to provide the same comprehensive guarantees, and, at the same time, enter financing and support arrangements with the Federal Reserve sufficient to enable BSC 'to conduct business in the ordinary course.' The amended agreement calls for JPMC to exchange 0.21753 share of JPMC common stock for each share of BSC, valuing the offer at approximately $10 per BSC share. This is increased from approximately $2 per BSC share in the original agreement. JPMC has also entered a purchase share agreement to acquire 95 million BSC shares at the same price in a transaction expected to close on or about April 8, 2008. Importantly, because the sale of these shares constitutes more than 20% interest in BSC, BSC's Audit Committee and Board of Directors agreed to the use of an exception to the NYSE Shareholder Approval Policy that is permitted when the financial viability of the listed entity is in jeopardy. Other terms of the transaction were also amended. JPMC will now absorb the first $1 billion of loss on a segregated portfolio of $30 billion of BSC assets, primarily mortgage related; the Federal Reserve will fund the remainder of the portfolio on a non-recourse basis to JPMC. In addition, terms of the Guaranty Agreement under which JPMC will guarantee all trading and counterparty obligations of BSC have been expanded and clarified. Among the expanded provisions, JPMC will guarantee all BSC's obligations to the Federal Reserve Bank of New York. Regulatory and board approvals for this transaction have already been received, although the transaction remains subject to shareholder approval. As part of the amended agreement, the shareholder vote will remain open for the lesser of 120 days or until the transaction is approved. This is in contrast to the original agreement which called for the shareholder vote to remain open for up to 12 months. BEAR STEARNS: NY Fed Puts $30BB in Portfolio Managed by BlackRock ---------------------------------------------------------------- At the closing of the merger, the Federal Reserve Bank of New York will provide term financing to facilitate JPMorgan Chase & Co.'s acquisition of The Bear Stearns Companies Inc. This action is being taken by the Federal Reserve, with the support of the Treasury Department, to bolster market liquidity and promote orderly market functioning. The New York Fed will take, through a limited liability company formed for this purpose, control of a portfolio of assets valued at $30 billion as of March 14, 2008. The assets will be pledged as security for $29 billion in term financing from the New York Fed at its primary credit rate. JPMorgan Chase will bear the first $1 billion of any losses associated with the portfolio and any realized gains will accrue to the New York Fed. BlackRock Financial Management, Inc. will manage the portfolio under guidelines established by the New York Fed designed to minimize disruption to financial markets