/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/080506.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, May 6, 2008, Vol. 12, No. 107 Headlines ADVANTAGE ONE: Case Summary & 19 Largest Unsecured Creditors ALLIED HOLDINGS: Release Post-Confirmation Quarterly Report ALOHA AIRLINES: Ch. 7 Trustee Sells Air Cargo Assets for $10.5MM AMERICHIP INT'L: Posts $969,582 Net Loss in 1st Qtr. Ended Feb. 29 AQUATIC CELLULOSE: Feb. 29 Balance Sheet Upside-Down by $4,576,529 ASSET BACKED: Fitch Affirms 'B' Ratings on Four Cert. Classes ATA AIRLINES: Final Hearing on Use of Cash Collateral on May 7 ATARI INC: To Merge with Infogrames Entertainment in $11MM Deal AVENTINE RENEWABLE: Liquidity Issues Cue S&P to Affirm 'B+' Rating BENAZZI CDO: Fitch Junks Ratings on Three Note Classes BERNOULLI HIGH: Fitch Lowers Ratings on Six Note Classes BI-LO LLC: Weak Performance Cues S&P to Revise Outlook to Neg. BLOUNT INTL: Acquires Carlton Holdings for $63,000,000 BRODERICK CDO: Poor Collateral Cues Fitch to Downgrade Ratings BSML INC: Andrew Rudnick Resigns as CEO and Board Chairman BSML INC: Appoints Jeffrey Nourse as New Chief Executive BUCHANAN ENTITIES: Voluntary Chapter 11 Case Summary C-BASS CBO: Fitch Slashes AA Rating to CCC on $29 Million Notes CALAMOS INVESTMENTS: To Refinance $300MM of Preferred Stocks CATHOLIC CHURCH: Fairbanks' Creditors Wants Pachulski as Counsel CATHOLIC CHURCH: Fairbanks' Creditors Wants Bundy as Co-Counsel CHALLENGER POWERBOATS: Auditor Raises Going Concern Doubt CHALLENGER POWERBOATS: Files Chapter 7 Petition in Missouri CHASEFLEX: Moody's Junks Ratings on Four Loan Classes CLAIRE'S STORES: Poor Performance Cues S&P to Junk Note Ratings CHECKSMART FIN'L: Bill 545 Cues S&P to Put Rtngs. Under Neg. Watch COBLESKILL BUSINESS: Case Summary & 12 Largest Unsecured Creditors COLUMBIA RIVER: Case Summary & 20 Largest Unsecured Creditors COUNTRYWIDE FINANCIAL: BofA Undecided on How to Treat $38MM Debt COUNTRYWIDE MORTGAGE: Fitch Lowers Ratings on Five Cert. Classes COUNTRYWIDE FIN'L: BOA's S-4/A Filing Cues S&P to Cut Rating DALTON CDO: Poor Collateral Prompts Fitch to Chip Ratings DANKA BUSINESS: To Undergo Voluntary Liquidation After Sale DAVID MORGAN: Case Summary & 19 Largest Unsecured Creditors DELTA AIR: Posts First Quarter 2008 Net Loss of $6,390,000,000 DELTA AIR: Merger with Northwest Will Result in 1,000 Cut Jobs DELTA AIR: Internal Revenue Service Withdraws $11.8 Bil. Claims DELTA AIR: JPMorgan Chase Holds 15% of Outstanding Common Stock DELUXE ENTERTAINMENT: S&P Holds B Rating; Revises Outlook to Neg. DEUTSCHE BANK: U.S. Affiliate Faces Insolvency Claims DUKE FUNDING: Fitch Junks Ratings on Six Note Classes DUKE FUNDING: Fitch Cuts 'BB-' Ratings to 'C' on Two Note Classes ELECTRICAL COMPONENTS: Poor Liquidity Cues S&P to Junk Credit Rtng EMPIRE LAND: Wants Court Approval of $20 Million Palmdale Loan ENRON CORP: Releases 14th Post-Confirmation Report ENRON CORP: Wants to Merge Certain Debtor-Affiliates to Save Costs ENRON CORP: Court OKs $1.66 Bil. Citigroup Settlement Agreement ENTEGRA TC: S&P Affirms 'B+' Rating on 2007 Recapitalization EOS AIRLINES: Organizational Meeting to Form Committees on May 8 EXPRESS SCRIPTS: Moody's Withdraws Ba1 Corp. Family Rating FAIRCHILD SEMICONDUCTOR: Moody's Holds Ba3 Corp. Family Rating FORT SHERIDAN: Collateral Deterioration Cues Fitch to Cut Ratings FULL COLOR SERVICES: Case Summary & 20 Largest Unsecured Creditors GMAC LLC: ResCap Unit Launches Exchange Offer for $12.8 Bil. Notes GMAC LLC: Fitch Cuts ID Rating to BB- After ResCap's Poor Fin'l GMAC LLC: S&P 'B' Rating Unaffected by ResCap's Downgrades GENERAL MOTORS: ResCap's Offer Does Not Affect S&P's Neg. Watch GUARDIAN TECH: Secures $7 Million Financing from Nine Investors INTERNATIONAL PAPER: Net Income Drops to $133MM in '08 1st Quarter INTERPUBLIC GROUP: Net Loss Lowers to $62MM in 2008 First Quarter ION MEDIA: S&P Puts '3' Recovery Rating on CCC+ Rated $400MM Notes IPCS INC: S&P Affirms 'B-' Rating and Changes Outlook to Stable IPSWICH STREET: Fitch Cuts Six Note Ratings and Removes Neg. Watch ISLE OF CAPRI: S&P Lowers BB- Rating to B+ and Removes Neg. Watch KLEROS PREFERRED: Fitch Junks Ratings on Four Note Classes LEXINGTON PRECISION: Gets Final Approval to Use $4 Mil. Facility LEXINGTON PRECISION: Gets Final Approval to Use $4 Mil. Facility LEVITZ FURNITURE: WFNNB Demands Allowance of $1,892,587 Claim LINENS N THINGS: Gets Interim OK to Tap $700-Mil. GECC DIP Loan LINENS 'N THINGS: Bankruptcy Filing Cues Fitch's Default Rating LINENS 'N THINGS: Bankruptcy Filing Cues Moody's Default Rating LINENS 'N THINGS: S&P Withdraws Default Rating MAGELLAN HEALTH: S&P Holds Ratings; Revises Outlook to Positive MARATHON STRUCTURED: Fitch Chips Rating to BB on Class A-1 Notes MERCK & CO: To Reduce U.S. Sales Force by 1,200 Positions MERRILL LYNCH: Fitch Chips Ratings on $121.3MM Certificates MERRILL LYNCH: Fitch Takes Rating Actions on Various Cert. Classes MERRILL LYNCH: Fitch Affirm 'BB' Rating on Class B-2 Certificates NAE OF KENDALL: Case Summary & Six Largest Unsecured Creditors NIELSEN CO: S&P Revises Outlook on 'B' Rating to Stable from Neg. NEXTEL CORP: S&P Lowers Ratings to 'BB' on Five Transactions NORTH SHORE: Case Summary & Nine Largest Unsecured Creditors NORTHWEST AIRLINES: Posts $4.1 Billion First Qtr. 2008 Net Loss NORTHWEST AIRLINES: Merger with Delta to Result in 1,000 Cut Jobs OFFICEMAX INC: Net Income Rises to $63MM in Quarter Ended March 29 ORIENT POINT: Fitch Junks Ratings on Five Note Classes PAMPELONNE CDO: S&P Puts Default Ratings on 12 Classes of Notes PLASTECH ENGINEERED: Seeks Permission to Wind Down Canadian Unit PLASTECH ENGINEERED: Can Remove Pending Actions Until August 29 PLASTECH ENGINEERED: Agrees to Return Hyundai Tooling to JCI PRB ENERGY: Wants To Use $2 Million Facility of Republic et al. PRIME MORTGAGE: Moody's Cut Ba1 Rating to B3; Puts Under Review QUALITY HOME: Weak Performance Prompts S&P to Cut Rating to B- RADWAN & AFFES: Voluntary Chapter 11 Case Summary RECYCLED PAPER: Payment Failure Prompts S&P's Default Ratings RELIANT CHANNELVIEW: Plan Filing Period Extended to June 20 RESIDENTIAL CAPITAL: Commences Exchange Offer for $12.8 Bil. Notes RESIDENTIAL CAPITAL: S&P Cuts Corp. Credit to CC on Debt Offer RESIDENTIAL CAPITAL: Debt Exchange Offer Cues Fitch to Cut Rating RESIDENTIAL CAPITAL: Moody's Cut Rating to Ca on Exchange Offer ROYAL UTILITIES: S&P Cuts Rating to BB+ After Sherritt Acquisition REYNOLDS AMERICAN: Debt Reduction Cues S&P to Lift Rating from BB+ SALISBURY INT'L: Fitch Slashes $33MM Note Rating to CC from A+ SEALY CORPORATION: March 2 Balance Sheet Upside-Down by $130MM SHAPES/ARCH HOLDINGS: Files Modified Disclosure Statement SHARPS CDO: Fitch Cuts Rating to C from BB on $6.9 Million Notes SPECIALTY UNDERWRITING: Fitch Downgrades Ratings on $97.5MM Certs. SOLO CUP: Fitch Affirms Ratings and Revises Outlook to Positive SOUTH FINANCIAL: Fitch Puts 'BB' Rating on $250MM Preferred Stock STEVEN MOLASKY: Case Summary & 14 Largest Unsecured Creditors STRUCTURED ASSET: Moody's Lowers Ratings on 57 Certificate Classes ST. JOSEPH'S: Moody's Assigns Ba1 Rating on $236.6 Million Bonds THOMAS WEISEL: To Slash 13% of Workforce First Half This Month TOMARCON INC: Case Summary & 20 Largest Unsecured Creditors TORO ABS: Fitch Slashes Rating to CCC from A- on $876.9MM Notes TORO ABS: Fitch Chips BBB Rating to C and Removes Negative Watch TOWERS OF CHANNELSIDE: Court Approves Disclosure Statement TOWERS OF CHANNELSIDE: Plan Confirmation Hearing Set for May 28 TRIAD GUARANTY: Planned Mortgage Unit Cues Fitch to Lower Ratings TRIAD GUARANTY: S&P Retains 'BB' Rating Under Negative Watch TROPICANA ENTERTAINMENT: Files Chapter 11 Bankruptcy in Delaware TROPICANA ENTERTAINMENT: Case Summary & 30 Largest Creditors UAL CORPORATION: ReGen Insists Cure Amount Worth $4,272,555 UAL CORPORATION: Union Workers Denounce New Incentive Plan US AIRWAYS: Incurs $236 Million Net Loss in First Quarter 2008 U.S. ENERGY: Wants Court to Set July 1 as Claims Bar Date VERTIS INC: Inks Forbearance Agreement with Senior Noteholders VICORP RESTAURANTS: U.S. Trustee Forms Seven-Member Committee VILLAGE HOTEL: Gets Interim OK to Use Lender's Cash Collateral VILLAGE HOTEL: Hires Lewis and Roca as Bankruptcy Counsel WELLCARE HEALTH: S&P Retains 'B+' Credit Rating Under Neg. Watch WESTAR ENERGY: Fitch Retains 'BB+' Rating Under Positive Watch WIREFREE PARTNERS: S&P Cuts Lease-Backed Notes Rating to BB WOLVERINE TUBE: Appoints William Evans to Board & Audit Committee * Fitch Says Delinquencies on US Timeshare ABS Receded in 1Q'08 * Fitch Says Recessionary Pressures Are Among Concerns for Banks * S&P Downgrades Ratings on Eight Tranches from Three Hybrid CDOs * S&P Says Consumer Products Remains Susceptible to Economic Stir * S&P Reports High-Yield Market Rebounded in Late March to April * Large Companies with Insolvent Balance Sheets ********* ADVANTAGE ONE: Case Summary & 19 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Advantage One Mortgage Corp. 8151 Peters Rd., Ste. 2000 Plantation, FL 33324 Bankruptcy Case No.: 08-15308 Type of Business: The Debtor is a correspondent lender serving the lending needs of real estate professionals, builders and individual home buyers throughout the US. See http://www.advantage1mtg.com/ Chapter 11 Petition Date: April 28, 2008 Court: Southern District of Florida (Fort Lauderdale) Judge: John K. Olson Debtor's Counsel: David W. Langley, Esq. Email: dave@flalawyer.com 8181 W. Broward Blvd., Ste. 204 Plantation, FL 33324 Tel: (954) 356-0450 Fax: (954) 356-0451 Total Assets: $250 Total Debts: $1,816,519 Debtor's 19 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Internal Revenue Service $550,000 Atlanta, GA 39901 SCP-Capri MG Owner $241,971 Attn: David W. Black, Esq. 7805 S.W. 6 Ct. Plantation, FL 33324 FIS Empower $239,381 50 S. Water Ave. Sharon, PA 16146 California Franchise Tax Board $200,000 Dell Financial Services $127,801 Colonial Bank $100,000 Kroll Factual Data $68,552 Equifax Credit Marketing $64,547 FIS Empower $61,760 Telepacific Communications $46,798 Who's Calling $38,551 CIT Technology $21,165 The Turning Point $12,365 Zurich North America $8,509 Bricar Enterprises $7,659 Wolters Kluwer $6,457 PAETEC/US LEC $5,794 CIT Technology $4,740 NCO Credit Services $4,154 ALLIED HOLDINGS: Release Post-Confirmation Quarterly Report ----------------------------------------------------------- Allied Holdings, Inc., and its 21 affiliates filed separate post- confirmation quarterly operating reports for the period Jan. 1, 2008, to March 31, 2008. Allied Holdings reports total cash disbursements of $59,921,965 for the period. Bank account balances reflect: Bank Account No. Balance ---- ----------- ------- Bank of America 9429019178 $138,203 Fidelity National Bank 59328 9,143 LaSalle Bank 5800299454 76,115 LaSalle Bank 5590056569 0 LaSalle Bank 5590056577 0 LaSalle Bank 5590056551 0 LaSalle Bank 5590056544 0 LaSalle Bank 5590056536 0 JPMorgan Chase 904123677 0 First Community Bank of Tifton 1900109 0 LaSalle Bank 5801012450 415,277 Regions Bank 6596012078 14,782 Counsel for the Reorganized Debtors, Kelly E. Culpin, Esq., at Troutman Sanders LLP, in Atlanta, Georgia, delivered the post- confirmation reports to the Court on April 30, 2008. About Allied Holdings Based in Decatur, Georgia, Allied Holdings Inc. (AMEX: AHI, other OTC: AHIZQ.PK) -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represented the Debtors in their restructuring efforts. Henry S. Miller at Miller Buckfire & Co., LLC, served as the Debtors' financial advisor. Anthony J. Smits, Esq., at Bingham McCutchen LLP, provided the Official Committee of Unsecured Creditors with legal advice and Russell A. Belinsky at Chanin Capital Partners, LLC, provided financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. On May 11, 2007, the Court confirmed Allied's Second Amended Chapter 11 Plan of Reorganization. Allied emerged from bankruptcy on May 29, 2007. (Allied Holdings Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc. http://bankrupt.com/newsstand/or 215/945-7000) * * * As of April 30, 2007, Allied Holdings Inc.'s consolidated balance sheet showed $217,379,000 in total stockholders' deficit resulting from total assets of $309,931,000 and total liabilities of $527,310,000. ALOHA AIRLINES: Ch. 7 Trustee Sells Air Cargo Assets for $10.5MM ---------------------------------------------------------------- Dane S. Field, interim Chapter 7 Trustee for Aloha Airlines Inc. and its debtor-affiliates, asks the Hon. Lloyd King of the United States Bankruptcy Court for the District of Hawaii for authority to sell the Debtors' "Air Cargo Assets" to Saltchuk Resources Inc. for $10.5 million free and clear of all liens and encumbrances. On May 1, 2008, Saltchuk and GMAC Commercial Finance LLC, the Debtors' senior secured lender, entered into a letter of intent for Saltchuk's purchase of the "Air Cargo Assets" from the Debtors' bankruptcy estates. The Air Cargo Assets handles 85% of the cargo traffic in the state of Hawaii, including a contract with the U.S. Postal Services. Under the salient terms of the letter of intent include, among other things: i) a $10.5 million purchase price; ii) a $1,000,000 earnest money deposit, including $500,000 previously deposited; iii) the assumption of aircraft and facility leases and other executory contracts, as selected by Saltchuk; and iv) a closing on or before May 14, 2008. Furthermore, the letter of intent requires GMAC Financial to finance the operation of the "Air Cargo Assets" pending the sale, Which GMAC Financial is only willing to fund until May 14, 2008. GMAC Financial agrees to carve-out a portion of the proceeds of the sale for the benefit of the Debtors' estates, wherein 5% of the proceeds, net of fees and expenses incurred in the sale, will be paid to th Chapter 7 Trustee to pay expenses and fees. A hearing is set for May 12, 2008, at 2:00 p.m., to consider approval of the Debtors' request. A full-text copy of the Letter of Intent is available for free at http://ResearchArchives.com/t/s?2b70 As reported in the Troubled Company Reporter on April 25, 2008, Saltchuk Resources lost the bid for Aloha Airlines Inc.'s contract services operations to Pacific Air Cargo, which offered $2 million for those assets. As reported in the Troubled Company Reporter on April 30, 2008, Judge King converted the Debtors' jointly administered Chapter 11 cases to liquidation proceedings under Chapter 7. On May 1, 2008, Judge King authorized the Chapter 7 Trustee to operate the Debtors' "Air Cargo Assets" under Section 721 of the Bankruptcy Code until the closing date. About Aloha Airlines Based in Honolulu, Hawaii, Aloha Airgroup Inc., Aloha Airlines Inc. -- http://www.alohaairlines.com/-- and its affiliates are carriers that fly passengers and freight to Hawaii's five major airports, as well as to half a dozen destinations in the western U.S. They operate a fleet of about 20 aircraft, all Boeing 737s, including three configured as freighters. This is the airline's second bankruptcy filing. Aloha filed for Chapter 11 protection on Dec. 30, 2004 (Bankr. D. Hawaii Case No. 04-03063), and emerged from Chapter 11 bankruptcy protection in February 2006. The company and its affiliates filed again for Chapter 11 protection on March 18, 2008 (Bankr. D. Hawaii Lead Case No. 08- 00337). Brian G. Rich, Esq., Jordi Guso, Esq., and Paul Steven Singerman, Esq., at Berger Singerman P.A., and David C. Farmer, Esq., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed estimated assets and debts of $100 million to $500 million. AMERICHIP INT'L: Posts $969,582 Net Loss in 1st Qtr. Ended Feb. 29 ------------------------------------------------------------------ Americhip International Inc. reported a net loss of $969,582 for the first quarter ended Feb. 29, 2008, compared with a net loss of $8,133,780 in the same period in 2007. Revenues for the three months ended Feb. 29, 2008, increased from $180,435 for the three months ended Feb. 28, 2007, to $921,472. This increase in revenues is primarily due to the acquisition of KSI Machine and Engineering Inc. during the year ending Nov. 30, 2007. Operating expenses, which include administrative expenses, legal and accounting expenses, consulting expenses and license expense decreased from $8,206,896 for the three months ended Feb. 28, 2007, to $1,351,283 for the three months ended Feb. 29, 2008, a decrease of $6,855,613. This decrease is due to a significant decrease in Director Fees and consulting expenses during the three months ended Feb. 29, 2008. Director Fees in 2007 were the result of the issuance of restricted common stock to each of the company's directors in the amount of $5,850,000. The company said it anticipates that the operations of KSI Machine and Engineering will bring to the consolidated balance sheet of AmeriChip annual revenues of approximately $3,600,000 based on revenues generated during the three months ended Feb. 29, 2008. Going Concern Disclaimer As reported in the Troubled Company Reporter on March 13, 2008, Jewett, Schwartz, Wolfe & Associates, in Hollywood, Fla., expressed substantial doubt about Americhip International Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Nov. 30, 2007. The auditing firm pointed to the company's recurring losses from operations. At Feb. 29, 2008, the company had an accumulated deficit of $33,129,549. This compares with an accumulated deficit of $32,159,967 at Nov. 30, 2007. Balance Sheet At Feb. 29, 2008, the company's consolidated balance sheet showed $7,329,077 in total assets, $6,987,585 in total liabilities, and $341,492 in total stockholders' equity. The company's consolidated balance sheet at Feb. 29, 2008, also showed strained liquidity with $1,245,544 in total current assets available to pay $4,306,792 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended Feb. 29, 2008, are available for free at http://researcharchives.com/t/s?2b74 About AmeriChip International Headquartered in Clinton Township, Mich., AmeriChip International Inc. (OTC BB: ACHI.OB) -- http://www.americhiplacc.com/-- holds a patented technology known as Laser Assisted Chip Control, which can be used to re-engineer the manufacturing process for industrial metal machining applications. According to AmeriChip International, this technology, when implemented by the customer, will eliminate dangerous ribbon-like steel chips that tangle around moving tool parts, automation devices and other components essential to the machine processing of low to medium grade carbon steels and non-ferrous metal parts. AQUATIC CELLULOSE: Feb. 29 Balance Sheet Upside-Down by $4,576,529 ------------------------------------------------------------------ Aquatic Cellulose International Corp.'s consolidated balance sheet at Feb. 29, 2008, showed $1,095,311 in total assets and $5,671,840 in total liabilities, resulting in a $4,576,529 total stockholders' deficit. At Feb. 29, 2008, the company's consolidated balance sheet also showed strained liquidity with $255,388 in total current assets available to pay $5,671,840 in total current liabilities. The company reported net income of $5,597,919 for the third quarter ended Feb. 29, 2008, compared with net income of $1,387,799 in the same period ended Feb. 28, 2007. For the three month period ended Feb. 29, 2008, and Feb. 28, 2007, the company recorded other income of $5,672,083 and $1,538,103 respectively, associated with the company's 2003 and 2004 convertible debt. At Feb. 29, 2008, the estimated fair value of the company's derivative liability was $1,709,352, as well as a warrant liability of $2,447. This compares with the estimated fair value of the company's derivative liability of $7,138,823, as well as a warrant liability of $17,991 at Nov. 30, 2007. The company recognized its equity interest in Sargent South lease in the amount of $147,506 for the three month period ended Feb. 29, 2008, compared with $45,714 for the same period ended Feb. 28, 2007. The increase in equity interest is primarily due to increased production and the overall increases in the selling price of the company's natural gas. Liquidity At Feb. 29, 2008, the company had cash of $1,327 and total current assets of $255,388. In comparison, the company had cash of $231,637 and total current assets of $233,071 at Nov. 30, 2007. As of Feb. 29, 2008, the company had a working capital deficiency of $5,416,452 and an accumulated deficit of $10,555,980, compared with a working capital deficiency of $10,965,167 and an accumulated deficit of $16,153,898 at Nov. 30, 2007. Over the next twelve months, management said it is confident that sufficient working capital will be obtained from a combination of revenue and external financing to meet the company's cash commitments as they become payable. The company has in the past successfully relied on private placements of common stock, loans from private investors, sale of assets and the exercise of common stock warrants, in order to sustain operations. Full-text copies of the company's consolidated financial statements for the quarter ended Feb. 29, 2008, are available for free at http://researcharchives.com/t/s?2b78 Going Concern Disclaimer As reported in the Troubled Company Reporter on March 13, 2008, Peterson Sullivan PLLC expressed substantial doubt about Aquatic Cellulose International Corp.'s ability to continue as a going concern after auditing the company's financial statements for the years ended May 31, 2007, and 2006. The auditing firm pointed to the company's negative cash flow from operations during the year ended May 31, 2007, and accumulated deficit at May 31, 2007. The company continues to experience recurring losses. In addition, the company is receiving minimal cash flow from its oil and natural gas investments. About Aquatic Cellulose Headquartered in B.C., Canada, Aquatic Cellulose International Corp. (OTC: AQCI) is an independent oil and gas investment, development and production company, engaged in the acquisition and development of crude oil and natural gas reserves and production initially in the state of Texas of the United States. The company owns a 20 percent working interest and a 16 percent net revenue interest in the Sargent South Field, Hamill & Hamill lease, a 3,645-acre natural gas producing property located in Matagorda County, Texas. The company's interest applies to all depths from surface to 7000 feet, with the exception of three currently non-producing wells, number 19, 14 and 1-R, of which the company has no interest in. All of the company's South Sargent interests, both onshore and offshore, are subject to the company's Joint Operating Agreement with New Century Energy Corp. The company also is a fifty percent working interest participant in oil and gas leases comprised by the twenty five acre Isaac Holliday tract in the William Cooper Survey in Waller County, Texas (Brookshire Dome Field Area). ASSET BACKED: Fitch Affirms 'B' Ratings on Four Cert. Classes ------------------------------------------------------------- Fitch Ratings has taken rating actions on 10 Asset Backed Funding Corporation mortgage pass-through certificates. Unless stated otherwise, any bonds that were previously placed on Rating Watch Negative are now removed. Affirmations total $683.2 million and downgrades total $106.3 million. ABFC 2003-AHL1 Total -- $11.5 million class AI affirmed at 'AAA'; -- $19.9 million class M-1 affirmed at 'AAA'; -- $4.3 million class M-2 affirmed at 'AA'; -- $2.3 million class M-3 affirmed at 'A+'; -- $0.8 million class M-4 affirmed at 'A'; -- $1.2 million class M-5 affirmed at 'BBB+'. Deal Summary -- Originators: Accredited Home Lenders, Inc. 100% -- 60+ day Delinquency: 15.34% -- Realized Losses to date (% of Original Balance): 1.34% ABFC 2003-OPT1 Total -- $15.1 million class A-1 affirmed at 'AAA'; -- $0.8 million class A-1A affirmed at 'AAA'; -- $14.2 million class A-3 affirmed at 'AAA'; -- $32.1 million class M-1 affirmed at 'AA+'; -- $5.7 million class M-2 downgraded to 'A-' from 'A+'; -- $1.5 million class M-3 downgraded to 'BBB+' from 'A'; -- $1.5 million class M-4 downgraded to 'BBB-' from 'A-'; -- $1.4 million class M-5 downgraded to 'BB' from 'BB+'; -- $0.8 million class M-6 affirmed at 'B'. Deal Summary -- Originators: Option One Mortgage Corporation 100% -- 60+ day Delinquency: 16.98% -- Realized Losses to date (% of Original Balance): 0.98% ABFC 2003-WF1 -- $19.9 million class A-2 affirmed at 'AAA'; -- $4.7 million class M-1 affirmed at 'AA'; -- $2.4 million class M-2 affirmed at 'A+'; -- $2.1 million class M-3 affirmed at 'BB'; -- $0.1 million class M-4 affirmed at 'BB-'. Deal Summary -- Originators: Wells Fargo Home Mortgage, Inc 100% -- 60+ day Delinquency: 12.71% -- Realized Losses to date (% of Original Balance): 1.20% ABFC 2003-WMC1 -- $23.0 million class M-1 affirmed at 'AAA'; -- $8.0 million class M-2 affirmed at 'A+'; -- $1.8 million class M-3 affirmed at 'A'; -- $1.2 million class M-4 affirmed at 'BBB+'; -- $1.1 million class M-5 affirmed at 'BBB'; -- $0.6 million class M-6 affirmed at 'B'. Deal Summary -- Originators: WMC Mortgage Corp. 100% -- 60+ day Delinquency: 10.80% -- Realized Losses to date (% of Original Balance): 0.75% ABFC 2004-FF1 -- $42.9 million class M-1 affirmed at 'AA-'; -- $21.7 million class M-2 affirmed at 'BBB+'; -- $7.2 million class M-3 downgraded to 'BB+' from 'BBB-'; -- $1.9 million class M-4 affirmed at 'B'; -- $1.9 million class M-5 affirmed at 'CC/DR4'; -- $0.8 million class M-6 affirmed at 'C/DR6'. Deal Summary -- Originators: First Franklin Financial Corporation 100% -- 60+ day Delinquency: 28.93% -- Realized Losses to date (% of Original Balance): 1.08% ABFC 2004-OPT1 -- $30.2 million class M-1 affirmed at 'AA+'; -- $16.5 million class M-2 affirmed at 'A+'; -- $2.0 million class M-3 affirmed at 'A'; -- $1.9 million class M-4 downgraded to 'BBB+' from 'A-'; -- $1.2 million class M-5 downgraded to 'BBB' from 'BBB+'; -- $1.6 million class M-6 affirmed at 'B'. Deal Summary -- Originators: Option One Mortgage Corporation 100% -- 60+ day Delinquency: 18.44% -- Realized Losses to date (% of Original Balance): 1.12% ABFC 2004-OPT2 -- $4.2 million class A-1 affirmed at 'AAA'; -- $0.5 million class A-1A affirmed at 'AAA'; -- $0.4 million class A-2 affirmed at 'AAA'; -- $27.0 million class M-1 affirmed at 'AA+'; -- $21.6 million class M-2 affirmed at 'AA-'; -- $3.8 million class M-3 affirmed at 'A+'; -- $1.6 million class M-4 affirmed at 'A'; -- $1.1 million class M-5 affirmed at 'BBB+'; -- $1.5 million class M-6 affirmed at 'BBB'; -- $0.3 million class B affirmed at 'BB+'. Deal Summary -- Originators: Option One Mortgage Corporation 100% -- 60+ day Delinquency: 11.91% -- Realized Losses to date (% of Original Balance): 0.64% ABFC 2004-OPT3 -- $13.8 million class A-1 affirmed at 'AAA'; -- $9.2 million class A-4 affirmed at 'AAA'; -- $34.3 million class M-1 affirmed at 'AA'; -- $22.5 million class M-2 affirmed at 'A'; -- $2.4 million class M-3 affirmed at 'A'; -- $2.0 million class M-4 affirmed at 'A-'; -- $1.2 million class M-5 affirmed at 'BBB' -- Zero balance class M-6 affirmed at 'BBB-'. Deal Summary -- Originators: Option One Mortgage Corporation 100% -- 60+ day Delinquency: 16.09% -- Realized Losses to date (% of Original Balance): 0.44% ABFC 2004-OPT4 -- $29.8 million class A1 affirmed at 'AAA'; -- $6.1 million class A2 affirmed at 'AAA'; -- $42.9 million class M1 affirmed at 'AA'; -- $30.3 million class M2 downgraded to 'BBB+' from 'A-'; -- $1.7 million class M3 downgraded to 'BBB' from 'BBB+'; -- $2.6 million class M4 downgraded to 'BB+' from 'BBB-'; -- $1.7 million class M5 downgraded to 'BB-' from 'BB+'; -- $1.9 million class M6 downgraded to 'B' from 'BB-'. Deal Summary -- Originators: Option One Mortgage Corporation 100% -- 60+ day Delinquency: 18.58% -- Realized Losses to date (% of Original Balance): 0.63% ABFC 2004-OPT5 -- $86.0 million class A-1 affirmed at 'AAA'; -- $29.7 million class A-4 affirmed at 'AAA'; -- $53.9 million class M-1 affirmed at 'AA'; -- $37.0 million class M-2 downgraded to 'BBB+' from 'A'; -- $7.2 million class M-3 downgraded to 'BBB-' from 'A-'; -- $3.4 million class M-4 downgraded to 'BB+' from 'BBB+'. Deal Summary -- Originators: Option One Mortgage Corporation 100% -- 60+ day Delinquency: 18.57% -- Realized Losses to date (% of Original Balance): 0.50% ATA AIRLINES: Final Hearing on Use of Cash Collateral on May 7 -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Indiana will convene a hearing May 7, 2008, to consider final approval of ATA Airlines, Inc.'s request to use its lenders' cash collateral. As reported by the Troubled Company Reporter on April 14, 2008, ATA Airlines obtained permission, on an interim basis, to use the cash collateral of its secured lenders to pay costs and expenses associated with the wind-down of its business, the orderly liquidation of its assets and the conduct of the Chapter 11 case. ATA Airlines is a borrower under a $360,000,000 term loan with JPMorgan Chase Bank, N.A., as administrative agent for certain lenders. ATA Airlines granted to the Administrative Agent and the Secured Lenders liens and security interests on its assets and property to secure its loan obligations. ATA Airlines has proposed to provide their lenders and JPMorgan replacement security interests in, and liens on, all of its assets in return for using their cash collateral. Terry Hall, Esq., at Bakers & Daniels, LLP, in Indianapolis, Indiana, has informed Judge Basil H. Lorch III that ATA Airlines projects to use $23,585,000 of the cash collateral as set forth in its 26-Week Forecast. A full-text copy of the budget forecast is available at no charge at: http://bankrupt.com/misc/ATA26WeekCashForecast While it is not able to accurately assess the value of all its assets at this time, ATA Airlines has said the estimated liquidation value of the collateral it owns that secures its obligations to the Secured Lenders is approximately $50,000,000. The Port of Oakland is expected to show up at Thursday's hearing to block the approval of ATA Airlines's request. Port of Oakland objects to the request to the extent the passenger facility charges are included within the replacement liens. Mark A. Salzberg, Esq., at Foley & Lardner LLP, in Washington, D.C., says that passenger facility charges ATA Airlines' collects are not property of the bankruptcy estate since ATA Airlines does not have equitable or legal interest in those facility charges. According to Mr. Salzberg, ATA Airlines was required to collect and remit to the Port certain passenger facility charges for using the Port's facilities in the operation of its business. Under the Port's regulatory scheme, those facility charges are trust funds collected by ATA Airlines and its agents, and held for the benefit of the Port. Mr. Salzberg says that ATA Airlines is not entitled to commingle the facility charges and is required to segregate in a separate account an amount of money equal to the average monthly liability for the facility charges. About ATA Airlines Headquartered in Indianapolis, Indiana, ATA Airlines, Inc., is a diversified passenger airline operating in two principal business lines -- a low cost carrier providing scheduled passenger service that leverages a code share agreement with Southwest Airlines; and a charter operator that focused primarily on providing charter service to the U.S. government and military. ATA is a wholly owned subsidiary of New ATA Acquisition, Inc. -- a wholly owned subsidiary of New ATA Investment, Inc., which in turn, is a wholly owned subsidiary of Global Aero Logistics Inc. ATA Acquisition also owns another holding company subsidiary, World Air Holdings, Inc., which it acquired through merger on August 14, 2007. World Air Holdings owns and operates two other airlines, North American Airlines and World Airways. ATA Airlines and its affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). The Honorable Basil H. Lorch III confirmed the Debtors' plan of reorganization on Jan. 31, 2006. The Debtors' emerged from bankruptcy on Feb. 28, 2006. Global Aero Logistics acquired certain of ATA's operations after its first bankruptcy. The remaining ATA affiliates that were not substantively consolidated in the company's first bankruptcy case were sold or otherwise liquidated. ATA Airlines filed for Chapter 22 on April 2 (Bankr. S.D. Ind. Case No. 08-03675), citing the unexpected cancellation of a key contract for ATA's military charter business, which made it impossible for ATA to obtain additional capital to sustain its operations or restructure the business. ATA discontinued all operations subsequent to the bankruptcy filing. ATA's Chapter 22 bankruptcy petition lists assets and liabilities each in the range of $100 million to $500 million. (ATA Airlines Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000). ATARI INC: To Merge with Infogrames Entertainment in $11MM Deal --------------------------------------------------------------- Atari, Inc., and Infogrames Entertainment S.A. reached a definitive agreement to merge, which: * brings to a close a period of financial underperformance for Atari; * strengthens Atari under Infogrames' new management team; * delivers a platform for future growth in the US; and * offers Atari shareholders an all cash exit. Under the terms of the merger agreement, Infogrames will acquire the remaining outstanding equity interests of Atari (other than shares of common stock held by Infogrames or its affiliates, which would be cancelled) for $1.68 per share, equivalent to a cash payment of approximately $11 million. Infogrames is currently the majority shareholder in Atari holding approximately 51.4%. Following the merger, Atari will be a wholly owned subsidiary of Infogrames. The merger will be funded by Infogrames from existing cash resources. The transaction is not subject to any financing conditions and is expected to close in the third calendar quarter of 2008. This agreement is an essential and positive development for Infogrames and its shareholders. It brings Atari fully under the control of Infogrames, delivering a platform for future growth in the U.S. This step closely follows a series of recent major restructuring actions implemented in an effort to reposition Atari, streamline its corporate structure and reduce its annualized costs, including costs related to being a US public company. The Board of Infogrames believes that full ownership of a restructured Atari is an important step for the Group, leading to a simplified operating structure that will deliver greater efficiency, provide the Group with greater opportunities to expand its US distribution capabilities and strengthen its platform for its global online initiatives. "Bringing Atari US and Infogrames businesses together will enable us to create a simplified global structure for our business as we seek to re-build a well-managed, cohesive and financially disciplined company," David Gardner, CEO, Infogrames, said. "This is a key strategic event for Infogrames that will benefit all of our shareholders. I believe that this transaction will generate significant benefits for the Group." The management of Atari, Inc., led by recently appointed President and CEO, Jim Wilson, will join the Group upon the closing of the transaction and remain focused on growing the key North American gaming market. "By joining Infogrames, we will have the opportunity to further transform Atari," Mr. Wilson said. "As part of this newly integrated company, we will be better able to streamline operations and have a stronger platform for growth in North America." The transaction was negotiated and approved by the Special Committee of the Board of Directors of Atari, consisting entirely of directors who are independent of Infogrames. In approving and recommending the merger transaction, the Special Committee considered, among other things, the terms of the merger agreement, which permits the Special Committee to terminate the agreement under certain circumstances, Atari's financial position and results of operations, general market and industry conditions, the risks of implementing Atari's business plan, Atari's limited liquidity and the limited range of options available to Atari. The Special Committee also considered the effects of Infogrames' controlling interest, the risk that the transaction will not be completed, the premium to Atari's share price 30 days prior to the date of Infogrames' offer, and the willingness of Infogrames to extend a loan of up to $20 million to Atari to cover expected capital requirements. The transaction is subject to a number of customary conditions, including the approval of the holders of a majority of outstanding shares. Atari expects to call a special meeting of shareholders to consider the merger in the third quarter of calendar 2008. Since Infogrames controls a majority of Atari's outstanding shares, Infogrames has the power to approve the transaction without the approval of Atari's other shareholders. In connection with the transaction, Infogrames has committed to lend Atari $20 million, subject to the terms and conditions of the credit agreement between Atari and Infogrames. This loan will be used to fund Atari's operational cash requirements during the period between the date of the merger agreement and its closing. About Atari Inc. Headquartered in New York, Atari Incorporated, (NASDAQ: ATAR) -- http://www.atari.com/-- publishes and distributes interactive entertainment software in the U.S. The company's 1,000+ published titles distributed by the company include hard-core, genre- defining franchises such as Test Drive(R); and mass-market and children's franchises such Dragon Ball Z(R). Atari Inc. is a majority-owned subsidiary of France- based Infogrames Entertainment SA, an interactive games publisher in Europe. As reported in the Troubled Company Reporter on Feb. 20, 2008, Atari Inc.'s consolidated balance sheet at Dec. 31, 2007, showed $43.5 million in total assets and $60.3 million in total liabilities, resulting in a $16.8 million total stockholders' deficit. Going Concern Doubt New York-based Deloitte & Touche LLP expressed substantial doubt about Atari's ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended March 31, 2007. The auditing firm pointed to the company's significant operating losses. As reported in the Troubled Company Reporter on March 28, 2008, Atari Inc. received a Staff Determination Letter from the Nasdaq Listing Qualifications Department stating that Atari Inc. has not gained compliance with the requirements of Nasdaq Marketplace Rule 4450(b)(3), and that its securities are therefore subject to delisting from The Nasdaq Global Market. On Dec. 21, 2007, the Nasdaq Listing Qualifications Department notified Atari Inc. that, pursuant to Nasdaq Marketplace Rule 4450(e)(1), unless the market value of Atari Inc.'s publicly held shares, which is calculated by reference to Atari Inc.'s total shares outstanding, less any shares held by officers, directors or beneficial owners of 10% or more, maintains an aggregate market value of $15 million or more for a minimum of 10 consecutive business days prior to March 20, 2008, Atari Inc.'s securities would be subject to delisting. As disclosed on March 21, 2008, the forbearance period granted by BlueBay High Yield Investments (Luxembourg) S.A.R.L., the lender under Atari's senior secured credit facility, has expired and Atari is currently in discussions with BlueBay with respect to, among other things, an extension of the forbearance period. AVENTINE RENEWABLE: Liquidity Issues Cue S&P to Affirm 'B+' Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on ethanol producer Aventine Renewable Energy Holdings Inc. At the same time, S&P placed the rating on CreditWatch with negative implications. The company currently has 207 million gallons of annual production capacity, with an additional 226 million gallons per year of capacity in construction. Marketing alliances, along with purchase and re- sale activities, supplement the core revenues from equity production. The rating action is a result of the continued illiquidity of the auction rate securities markets in which Aventine has about $127.1 million invested. The write-down has not affected the company's cash position, and gross revenues have improved over the last quarter. However, the repeated failures of the monthly auctions for various student loan asset-backed securities have prevented the company from closing its position in these securities, resulting in a liquidity shortfall in the midst of continued construction of two new facilities in Aurora, Nebraska and Mt. Vernon, Indiana Aventine is currently exploring options to access additional capital. "We believe that the majority of these options--along with those we think Aventine is most likely to pursue--could have negative implications for credit quality," said Standard & Poor's credit analyst Justin Martin. Aventine is still pursuing its expansion plans as construction continues on the Aurora and Mt. Vernon dry-mill plants, each with annual capacity of 113 mmgpy. The company's liquidity position remains tight during this build-out as the auction rate securities market in which it has invested continues to experience failed auctions. The maximum rate paid on the SLABS reduces the negative carry on the unsecured notes. However, Aventine needs access to the principal to pay for continued construction costs. It is exploring several financing options. First-quarter results saw Aventine's realized ethanol price increase by about 27 cents per gallon over the previous quarter, outpacing the corn price increase (11 cents per gallon) for improved EBITDA of $21.6 million for the quarter (versus $49 million for all of 2007). Aventine was able to use roughly $24 million in cash from operations for this period and $26 million from cash reserves for $50 million of construction costs. This leaves $250 million left to complete construction, with roughly $200 million of liquidity available ($74 million cash plus $130 million revolver availability), resulting in a $50 million shortfall barring additional cash from operations. Given the volatility of historical earnings, no credit is given for cash from operations in future quarters for the purpose of this analysis. To address the shortfall, Aventine is exploring several options, the majority of which Standard & Poor's views as likely to detract from credit quality. However, precise details of the options are not yet available, and the possibility of a credit-neutral solution still exists. S&P will resolve the CreditWatch when Aventine has determined a strategy for addressing its projected liquidity shortfall. If the solution results in additional leverage or increased obligations that significantly affect the break-even crush spreads, S&P could lower the rating. If Aventine can access capital on favorable credit terms or reduce liquidity needs without hurting long-term earnings potential, the outlook could be stabilized. BENAZZI CDO: Fitch Junks Ratings on Three Note Classes ------------------------------------------------------ Fitch has downgraded 3 classes of notes issued by Benazzi CDO 2005-1, Ltd., and removed them from Rating Watch Negative. These rating actions are effective immediately: -- $20,000,000 class A notes to 'CC' from 'AAA'; -- $50,000,000 class B notes to 'CC' from 'AA'; -- $30,000,000 class C notes to 'CC' from 'A'. Benazzi is a static synthetic collateralized debt obligation that closed on Dec. 14, 2005 and is managed by Barclays Bank, PLC. Benazzi has a portfolio comprised primarily of subprime residential mortgage-backed securities bonds (73%), Alternative-A (Alt-A) (9%), structured finance (SF) CDOs (7%)other structured finance assets. Subprime RMBS bonds of the 2005 and 2006 vintages account for approximately 72% and 1% of the portfolio, respectively. Likewise, the SF CDO exposure includes SF CDO originated in 2005 (7%). Alt-A RMBS bonds issued in 2005 represent approximately 9% of the portfolio. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since the beginning of 2007, approximately 78% of the portfolio has been downgraded, with 7% of the portfolio currently on Rating Watch Negative. The negative credit migration started in the second half of 2007 and has continued through the present. The ratings address the timely receipt of interest and ultimate receipt of principal. The ratings are based upon the credit quality of the reference portfolio, the financial strength of Barclays as the swap counterparty, the credit quality of the collateral assets and the legal structure of the transaction. Fitch will continue to monitor and review this transaction for future rating adjustments. BERNOULLI HIGH: Fitch Lowers Ratings on Six Note Classes -------------------------------------------------------- Fitch downgraded six classes of notes issued by Bernoulli High Grade CDO I, Ltd./Inc. These rating actions are effective immediately: -- $880,448,158 class A-1A notes downgraded to 'B' from 'AAA' and remain on Rating Watch Negative; -- $358,463,312 class A-1B notes downgraded to 'A' from 'AAA' and placed on Rating Watch Negative; -- $86,536,865 class A-2 notes downgraded to 'CCC' from 'AAA' and removed from Rating Watch Negative; -- $57,691,244 class B notes downgraded to 'CC' from 'AA' and removed from Rating Watch Negative; -- $14,648,712 class C notes downgraded to 'C' from 'A' and removed from Rating Watch Negative; -- $14,719,804 class D notes downgraded to 'C' from 'BBB' and removed from Rating Watch Negative. Bernoulli is a static hybrid cash and synthetic collateralized debt obligation that closed on March 30, 2006 and is monitored by Babcock & Brown Securities Pty, Ltd. Bernoulli has a portfolio comprised of subprime residential mortgage-backed securities bonds (36.5%), structured finance CDOs (32.1%), Alternative-A RMBS (27.1%), and prime RMBS (4.3%). Subprime RMBS bonds of the 2005 and 2006 vintages account for approximately 32.6%, and 3.9% of the portfolio, respectively. SF CDO exposure includes SF CDOs originated in 2004 (18%), 2005 (11.7%) and 2006 (2.4%) and Alt-A RMBS of the 2005 and 2006 vintages represent approximately 13.3% and 13.8% of the portfolio, respectively. Approximately 75% of the assets are owned as cash bonds, with the remaining 25% referencing SF CDOs via credit default swaps. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS and SF CDOs with underlying exposure to subprime RMBS. Since the last review on May 18, 2007, approximately 56.5% of the portfolio has been downgraded, with 34.7% of the portfolio currently on Rating Watch Negative. Approximately 28.4% of the portfolio is now rated below investment grade. According to the March 28, 2008 trustee report, the weighted average rating factor is 5.1 ('BBB/BBB-'), failing its covenant of 1.4 ('AA-/A+'), and approximately $12 million of the portfolio is considered defaulted. The class A/B coverage test is failing at 99.7% compared to a trigger of 101.69%, causing the class C and D notes to pay-in- kind. Considering that the class B notes are undercollateralized, it is unlikely the A/B coverage test will cure in the future, and therefore unlikely that the class C and D notes will receive any payments going forward. Fitch believes that the portion of the portfolio rated 'AAA' and 'AA', 20.5% and 28% respectively, provides enough credit enhancement to the class A-1B notes to maintain an investment grade rating. The class A-1B notes are viewed as the most senior class in the capital structure. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A-1A, A-1B, A-2 and B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. BI-LO LLC: Weak Performance Cues S&P to Revise Outlook to Neg. -------------------------------------------------------------- Standard & Poor's Ratings Services revised the outlook on Greenville, South Carolina-based BI-LO LLC to negative from stable. The 'B' corporate credit rating remains unchanged. "The outlook revision reflects operating performance that weakened in the second half of fiscal year 2007," said Standard & Poor's credit analyst Jackie E. Oberoi, "leading to credit metrics that are now weak for the rating." Leverage, for example, is now in the mid-5x range. BLOUNT INTL: Acquires Carlton Holdings for $63,000,000 ------------------------------------------------------ Blount International Inc. acquired all the capital stock of Carlton Holdings Inc. from its private shareholders. Blount paid approximately $63 million in net consideration for the stock, funded through the company's revolving credit facility. "The acquisition of Carlton is consistent with our intention to invest in and grow our core business, the Outdoor Products segment," James Osterman, Blount's chairman and CEO, said. "The added capacity and potential operating synergies of the combined entities make Carlton an attractive asset to own. "Carlton's strengths in international markets where over 80% of their sales take place, fits well with our expansion plans and the additional capacity will accelerate the opportunities to take advantage of the weakened U.S. dollar in trading," Mr. Osterman added. About Carlton Holdings Inc. Located in Milwaukie, Oregon, Carlton Holdings Inc. is a manufacturer of saw chain. Carlton employs approximately 400 employees, most at its Oregon manufacturing facility, and distributes the majority of its products to international markets. The company was founded in 1963. About Blount International Blount International Inc. (NYSE: BLT) -- http://www.blount.com/-- is a diversified international company operating in two principal business segments: Outdoor Products and Industrial and Power Equipment. The company's Outdoor Products segment provides chain, bars and sprockets to the chainsaw industry, accessories to the lawn care industry and concrete cutting saws. As reported in the Troubled Company Reporter on April 29, 2008, Blount International Inc.'s balance sheet at Dec. 31, 2007, showed total assets of $411.9 million and total liabilities of $466.0 million, resulting in a total shareholders' deficit of $54.1 million. BRODERICK CDO: Poor Collateral Cues Fitch to Downgrade Ratings -------------------------------------------------------------- Fitch downgrades six classes of notes issued by Broderick CDO 1 Ltd. These rating actions are effective immediately: -- $238,526 class A-1V notes downgraded to 'B' from 'AAA' and remain on Rating Watch Negative; -- $338,468,979 class A-1NVA notes downgraded to 'B' from 'AAA' and remain on Rating Watch Negative; -- $462,741,239 class A-1NVB notes downgraded to 'B' from 'AAA' and remain on Rating Watch Negative; -- $81,650,000 class A-2 notes downgraded to 'CC' from 'AAA' and removed from Rating Watch Negative; -- $41,304,634 class B notes downgraded to 'CC' from 'AA' and removed from Rating Watch Negative; -- $21,642,610 class C notes downgraded to 'C' from 'BBB' and removed from Rating Watch Negative. Broderick is a cash collateralized debt obligation that closed on Dec. 13, 2005, and is managed by SCM Advisors LLC. Broderick's substitution period ended on April 3, 2008. The portfolio is comprised primarily of subprime residential mortgage-backed securities bonds (44.3%), Alternative-A RMBS (30.4%), and structured finance CDOs (15.5%). Subprime RMBS, Alt-A RMBS and SF CDO bonds originated in 2005 account for approximately 42.4%, 30.2%, and 10.8% of the portfolio, respectively. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically in subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since the beginning of 2007, approximately 40.6% of the portfolio has been downgraded, and 19.2% of the portfolio is currently on Rating Watch Negative. Approximately 25.1% of the portfolio is now rated below investment grade. The negative credit migration is primarily attributable to credit deterioration in subprime RMBS and SF CDO bonds from the 2005 vintage. While the most recent trustee report from March 25, 2008 shows that the class A/B overcollateralization test is passing at 102.7% compared to a trigger of 102.01%, Fitch expects the test to be failing now due to additional downgrades in the portfolio. Based on this expectation, the class C notes are unlikely to receive any interest or principal payments going forward. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A-1N, A-1NVA, A-1NVB, A-2 and B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class C notes addresses the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. BSML INC: Andrew Rudnick Resigns as CEO and Board Chairman ---------------------------------------------------------- Andrew Rudnick resigned as the Chief Executive Officer and Chairman of BSML, Inc., effective April 25, 2008. In connection with Mr. Rudnick's resignation, the company and Mr. Rudnick entered into a Separation and Release of Claims Agreement, effective as of April 25, 2008. The company and Sleek Inc., an entity controlled by Mr. Rudnick, also entered into an Amended and Restated Support Services Agreement, which amended and restated a prior agreement dated Dec. 6, 2007. Pursuant to the Separation Agreement, the company agreed to pay Mr. Rudnick a total of $495,000 in severance pay as follows: (1) $72,500 on the effective date of the Agreement; (2) $72,500 on the first to occur of: (i) thirty (30) days after the Effective Date or (ii) that date that BSML receives $1 million in equity financing from its new CEO or his affiliates; and (3) $350,000 paid by the company to Rudnick over a 12 month period in accordance with the company's payroll practices in effect as of the effective date of the Separation Agreement, the first payment to commence on that date which is sixty days after the effective date and continue each month thereafter until paid in full. Additionally, the company agreed to pay to Sleek $50,105 upon execution of the Separation Agreement by Mr. Rudnick, which sum constituted advance payment for the support services Sleek agreed to provide to the company under the Amended Services Agreement during his term. The company and Rudnick agreed that in the event that Sleek determines, in Sleek's reasonable opinion, that the cost of the support services Sleek provides to the Company under the Amended Support Services Agreement for the applicable period exceeds $50,105, the company will promptly pay Sleek such additional amounts once invoiced by Sleek. Mr. Rudnick and Sleek acknowledged and agreed that Sleek had already received payment from the company for the support services Sleek provided BSML through April 18, 2008. In consideration of the company's entering into the Separation Agreement, Mr. Rudnick and Sleek, as applicable, agreed that Mr. Rudnick's Employment Agreement is terminated and of no further force or effect provided, however, that Section 7(o) of the Employment Agreement will survive and remain in full force and effect. Mr. Rudnick also agreed, on behalf of Sleek, to provide consulting services to the Company after the execution of the Separation Agreement pursuant to the Amended Services Agreement. Amended Services Agreement The Amended Services Agreement modified and restated a prior Support Services Agreement between the company and Sleek dated Dec. 6, 2007. Pursuant to the Amended Services Agreement, Sleek agreed to provide these services: (i) marketing advice, consulting and strategy for all products and services offered by the customer; (ii) fulfillment of all product requirements; (iii) training of the Customer's personnel; (iv) timely billing to and collecting from all customers, and accounts receivable; (v) cash management; (vi) personnel management; (vii) timely preparation and filing of the customer's tax and regulatory returns and other necessary governmental filings; (viii) providing information technology services; (ix) providing data processing services; (x) maintenance of records in accordance with procedures mutually agreed upon by the parties; (xi) providing technical services for the Customer and its business; and (xii) call center management and operations. As consideration for providing the services, the company agreed to pay Sleek a monthly administrative fee equal to the aggregate of Sleek's actual costs, fees, expenses incurred by or on behalf of Sleek in connection with, or related to the provision of the Services under the Amended Services Agreement, including, without limitation, salaries, wages, and other compensation paid to employees -- excluding salary or other compensation paid to Andrew Rudnick -- and approved by Sleek to perform the Services, the cost of employee benefits attributable to such approved employees, communications, and any other operating expenses of Sleek. However, in no event will compensation paid to, and the costs of benefits attributable to, Sleek employees not approved by the Company be included in Base Costs. The Administrative Fee is to be paid on the first of every month following the month in which Sleek bills the company for Services during the term of the Amended Services Agreement. However, upon Execution of the Amended Services Agreement, the company paid the Administrative Fee through May 31, 2008, in the amount of $50,105. About BSML Inc. Based in Walnut Creek, California, BSML Inc. (NasdaqCM: BSML) -- http://www.britesmile.com/-- markets teeth whitening technology and manages BriteSmile Professional Teeth Whitening Centers. Going Concern Doubt Stonefield Josephson, Inc., raised substantial doubt about the ability of BSML, Inc., to continue as a going concern after it audited the company's financial statements for the year ended Dec. 29, 2007. BSML INC: Appoints Jeffrey Nourse as New Chief Executive -------------------------------------------------------- The Board of Directors of BSML, Inc., appointed Jeffrey Nourse as its chief executive officer effective as of April 25, 2008, to replace Andrew Rudnick. The company's Board of Directors also appointed Anthony M. Pilaro as the company's Chairman of the Board of Directors. The Board also appointed Mr. Nourse as a Director of the company. Jeffrey Nourse, 41, is a successful entrepreneur with a long career with retail growth companies. From 1985 to 2001, Mr. Nourse was the founder and CEO of Canada's largest wholesale auto body supply centers. From 2002 to the present, he was the founder and CEO of the second largest med spa company in North America. The company will provide information regarding Mr. Nourse's compensation once it has been finalized. Mr. Pilaro had previously served as the Chairman of the company's Board of Directors since 1997 through February 2008. Presently, he serves as Chairman of CAP Advisers Limited, with offices in Dublin, Ireland, and which serves as a family office for the business affairs of the Pilaro family. He is also founder and Chairman of Excimer Vision Leasing L.P., a partnership primarily engaged in the business of leasing Excimer laser systems. Mr. Pilaro was Chairman of both CAP and Excimer Vision Leasing for the last 5 years except for the period from August 2004 to February 2005. Mr. Pilaro has been involved in private international investment banking. He was a Founding Director and former Chief Executive Officer of Duty Free Shoppers Group Limited, the world's leading specialty retailer catering to international travelers, and a founder of the predecessor of VISX, Inc. A graduate of the University of Virginia and the University of Virginia Law School, Mr. Pilaro practiced law in New York City through 1964. About BSML Inc. Based in Walnut Creek, California, BSML Inc. (NasdaqCM: BSML) -- http://www.britesmile.com/-- markets teeth whitening technology and manages BriteSmile Professional Teeth Whitening Centers. Going Concern Doubt Stonefield Josephson, Inc., raised substantial doubt about the ability of BSML, Inc., to continue as a going concern after it audited the company's financial statements for the year ended Dec. 29, 2007. BUCHANAN ENTITIES: Voluntary Chapter 11 Case Summary ---------------------------------------------------- Debtor: Buchanan Entities, LLC 20 Beech Lane Tarrytown, NY 10591 Bankruptcy Case No.: 08-22596 Chapter 11 Petition Date: April 28, 2008 Court: Southern District of New York (White Plains) Debtor's Counsel: Jonathan S. Pasternak, Esq. Email: jsp@rattetlaw.com Rattet, Pasternak & Gordon Oliver, LLP 550 Mamaroneck Ave., Ste. 510 Harrison, NY 10528 Tel: (914) 381-7400 Fax: (914) 381-7406 http://www.rattetlaw.com Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million The Debtor did not file a list of its largest unsecured creditors. C-BASS CBO: Fitch Slashes AA Rating to CCC on $29 Million Notes --------------------------------------------------------------- Fitch Ratings has downgraded four classes of notes issued by C-BASS CBO XIV Ltd. and one class of notes remains on Rating Watch Negative. These rating actions are effective immediately: -- $336,999,562 class A notes downgraded to 'B' from 'AAA' and remains on Rating Watch Negative; -- $29,000,000 class B notes downgraded to 'CCC' from 'AA' and removed from Rating Watch Negative; -- $30,000,000 class C notes downgraded to 'CC' from 'A' and removed from Rating Watch Negative; -- $17,060,000 class D notes downgraded to 'C' from 'BBB' and removed from Rating Watch Negative. C-BASS XIV is a collateralized debt obligation that closed on Sept. 22, 2005 and has a static portfolio that was selected by C-BASS Investment Management, LLC. C-BASS XIV has a portfolio comprised primarily of subprime residential mortgage-backed securities bonds (65.6%), Alternative-A (Alt-A) RMBS (17.5%), and other diversified structured finance assets. Subprime RMBS bonds of the 2005 vintage account for approximately 60.5% of the portfolio. Alt-A RMBS bonds of the 2005 vintage represent approximately 13.2% of the portfolio. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS. Since the beginning of 2007 approximately 53.1% of the portfolio has been downgraded, and 4.7% of the portfolio is currently on Rating Watch Negative. The negative credit migration is primarily attributable to credit deterioration in subprime RMBS bonds from the 2005 vintage. As of the March 31, 2008 trustee report approximately $26.1 million (5.9%) of the portfolio, consisting of subprime RMBS assets, was considered to be defaulted. As a result of the collateral deterioration, C-BASS XIV is currently failing its class C and class D overcollateralization tests. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A and class B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C and class D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CALAMOS INVESTMENTS: To Refinance $300MM of Preferred Stocks ------------------------------------------------------------ Calamos Investments intends to refinance $300 million of the outstanding auction rate preferred securities issued by the Calamos Global Dynamic Income Fund. The company relates that this transaction comes a week after Calamos disclosed the refinancing of an aggregate of $939 million of outstanding ARPs of the Calamos Global Total Return Fund and the Calamos Strategic Total Return Fund. "We have stressed all along that we would work rapidly to secure solutions to the recent liquidity crisis in the ARPs market," said John P. Calamos, Sr., the chairman, chief executive officer and co-chief investment officer of Calamos Investments. "We are committed to seeing this issue through to a successful resolution across our entire fund complex, and we want our fund shareholders to know that we have been and will continue to focus on finding solutions for all of our closed-end fund shareholders." Calamos has secured an alternative form of borrowing that will enable, based on current market conditions, CHW to redeem approximately 85.7% or $300 million of its outstanding ARPs at their par value. The refinancing comes in the form of the first money market eligible extendible note to be issued by a closed-end fund. This refinancing, together with the previous refinancings of CGO and CSQ, represents $ 1.239 billion or approximately 53.8% of the total auction rate preferred outstanding in the five Calamos closed-end funds. Upon completion of the refinancing, which has been approved by the board of trustees of CHW, the leverage ratio for the fund is not expected to change materially and the funds will continue to meet the asset coverage requirements of the Investment Company Act of 1940. Since the amount of refinancing for CHW is less than the total amount outstanding, this refinancing will take place pro rata by auction series. It is important to note that the Depository Trust Company, the securities' holder of record, will determine how to allocate this partial redemption of shares among each participant broker-dealer account. Each participant broker-dealer, as nominee for underlying beneficial owners, in turn will determine how redeemed shares are allocated among its beneficial owners. The date will show the shares outstanding per series and the number that the fund will redeem via this refinancing: a) CHW Auction Series: Monday CUSIP: 12811L206 Shares to be redeemed/outstanding: 2,400/2,800 Redemption Percent: 85.7 % Redemption Amount: $60,000,000 b) CHW Auction Series: Tuesday CUSIP: 12811L305 Shares to be redeemed/outstanding: 2,400/2,800 Redemption Percent: 85.7 % Redemption Amount: $60,000,000 c) CHW Auction Series: Wednesday CUSIP: 12811L404 Shares to be redeemed/outstanding: 2,400/2,800 Redemption Percent: 85.7 % Redemption Amount: $60,000,000 d) CHW Auction Series: Thursday CUSIP:12811L503 Shares to be redeemed/outstanding: 2,400/2,800 Redemption Percent: 85.7 % Redemption Amount: $60,000,000 e) CHW Auction Series: Friday CUSIP: 12811L602 Shares to be redeemed/outstanding: 2,400/2,800 Redemption Percent: 85.7 % Redemption Amount: $60,000,000 The fund expects to begin issuing redemption notices in the next several days and redemptions will coincide with the completion of the refinancing transaction. About Calamos Investments Headquartered in Naperville, Illinois, Calamos Investments -- http://www.calamos.com-- is a diversified investment firm offering equity, fixed-income, convertible and alternative investment strategies, among others. The firm serves institutions and individuals via separately managed accounts and a family of open-end and closed-end funds, providing a risk-managed approach to capital appreciation and income-producing strategies. CATHOLIC CHURCH: Fairbanks' Creditors Wants Pachulski as Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of the Catholic Bishop of Northern Alaska, aka The Roman Catholic Diocese of Fairbanks in Alaska, sought authority from the U.S. Bankruptcy Court for the District of Alaska to retain Pachulski Stang Ziehl & Jones LLP as its counsel. As counsel to the Creditors Committee, Pachulski will: a. assist, advise and represent the Creditors Committee in its consultations with the Diocese regarding the administration of the Diocese's Chapter 11 case; b. assist, advise and represent the Creditors Committee in analyzing the Diocese's assets and liabilities, investigate the extent and validity of liens and participate in and review any proposed asset sales, any asset dispositions, financing arrangements and cash collateral stipulations or proceedings; c. assist, advise and represent the Creditors Committee in any manner relevant to reviewing and determining the Diocese's rights and obligations under leases and other executory contracts; d. assist, advise and represent the Creditors Committee in investigating the acts, conduct, assets, liabilities and financial condition of the Diocese, the Diocese's operations and the desirability of the continuance of any portion of those operations, and any other matters relevant to the Chapter 11 case or to the formulation of a plan; e. assist, advise and represent the Creditors Committee in its participation in the negotiation, formulation and drafting of a plan of liquidation or reorganization; f. advise the Creditors Committee on the issues concerning the appointment of a trustee or examiner under Section 1104 of the Bankruptcy Code; g. assist, advise and represent the Creditors Committee in understanding its powers and its duties under the Bankruptcy Code and the Bankruptcy Rules and in performing other services as are in the interests of those represented by the Creditors Committee; h. assist, advise and represent the Creditors Committee in the evaluation of claims and on any litigation matters, including avoidance actions; and i. provide other services to the Creditors Committee as may be necessary in the Chapter 11 case. Pachulski and the Creditors Committee agreed that: (a) no retainer will be paid to the Firm; (b) neither the Creditors Committee nor any of its member will be liable for any fees or costs incurred by the Firm; (c) the Firm will charge a blended hourly rate of: -- $480 for partners and counsel attorneys, -- $350 for associates, and -- $180 for paralegal services; and (d) the Firm will seek reimbursement of expenses at its cost or as otherwise allowed by the Court. The Firm received $35,000 from the Diocese before the commencement of the bankruptcy case for fees and expenses related to the representation of a prepetition unofficial committee. Of the $35,000, $10,000 was forwarded to David Bundy, local counsel for the prepetition unofficial committee. James I. Stang, Esq., a partner at Pachulski Stang Ziehl & Jones LLP, assured the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). About Diocese of Fairbanks The Roman Catholic Diocese of Fairbanks in Alaska, aka Catholic Bishop of Northern Alaska, aka Catholic Diocese of Fairbanks, aka The Diocese of Fairbanks, aka CBNA filed for chapter 11 bankruptcy on March 1, 2008 (Bankr. D. Alaska Case No. 08-00110). Susan G. Boswell, Esq., at Quarles & Brady LLP represents the Debtor in its restructuring efforts. Michael R. Mills, Esq., of Dorsey & Whitney LLP serves as the Debtor's local counsel and Cook, Schuhmann & Groseclose Inc. as its special counsel. Judge Donald MacDonald, IV, of the United States Bankruptcy Court for the District of Alaska presides over Fairbanks' Chapter 11 case. The Debtor's schedules show total assets of $13,316,864 and total liabilities of $1,838,719. The church's exclusive plan filing period expires on June 29, 2008. (Catholic Church Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CATHOLIC CHURCH: Fairbanks' Creditors Wants Bundy as Co-Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors of the Catholic Bishop of Northern Alaska, aka The Roman Catholic Diocese of Fairbanks in Alaska, sought authority from the U.S. Bankruptcy Court for the District of Alaska to retain David H. Bundy as assistant counsel to Pachulski Stang Ziehl & Jones LLP. The Creditors Committee has decided to retain David Bundy since he has extensive experience in bankruptcy representation. Mr. Bundy is expected to assist the Creditors Committee and Pachulski in the Diocese's Chapter 11 case. Mr. Bundy will charge $300 per hour and will seek reimbursement of expenses as allowed by the Court. Mr. Bundy received $10,000 from the Diocese before the commencement of the case for fees and expenses related to the representation of a prepetition unofficial committee. Mr. Bundy assured the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). About Diocese of Fairbanks The Roman Catholic Diocese of Fairbanks in Alaska, aka Catholic Bishop of Northern Alaska, aka Catholic Diocese of Fairbanks, aka The Diocese of Fairbanks, aka CBNA filed for chapter 11 bankruptcy on March 1, 2008 (Bankr. D. Alaska Case No. 08-00110). Susan G. Boswell, Esq., at Quarles & Brady LLP represents the Debtor in its restructuring efforts. Michael R. Mills, Esq., of Dorsey & Whitney LLP serves as the Debtor's local counsel and Cook, Schuhmann & Groseclose Inc. as its special counsel. Judge Donald MacDonald, IV, of the United States Bankruptcy Court for the District of Alaska presides over Fairbanks' Chapter 11 case. The Debtor's schedules show total assets of $13,316,864 and total liabilities of $1,838,719. The church's exclusive plan filing period expires on June 29, 2008. (Catholic Church Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CHALLENGER POWERBOATS: Auditor Raises Going Concern Doubt --------------------------------------------------------- Jaspers + Hall PC raised substantial doubt on the ability of Challenger Powerboats Inc. to continue as a going concern after auditing the company's annual report for 2007. The auditor pointed to the company's current liabilities that exceed current assets by $1,722,562 as of Dec. 31, 2007. The auditor said that the company had operating losses of $7,046,691 and $5,211,514 in 2007 and 2006, respectively and has ceased operations. The auditor continued that the company's recurring losses from operations and its difficulties in generating sufficient cash flow to meet its obligation and sustain its operations. For the year ended Dec. 31, 2007, the company generated net revenues of $7,399,703, as compared to net revenues of $238,171 for the year ended Dec. 31, 2006. During 2007, the major change in its business which impacted revenues was primarily due to the addition of IMAR, which we acquired in January 2007. The company had a net loss of $4,656,940 for the 12 months ended Dec. 31, 2007, as compared to $9,133,144 for the 12 months ended Dec. 31, 2006. The year-over-year net loss decreased primarily due to the sale of the Sugar Sand product line to Execute Sports, Inc for $5,000,000 in August 2007. Liquidity and Capital Resources As of Dec. 31, 2007, the company had total current assets of $2,769,550, compared to $1,991,808 as of Dec. 31, 2006. This was due primarily to an increase in accounts receivable and inventory as a result of the acquisition of IMAR Group, LLC. As of Dec. 31, 2007, the company had total current liabilities of $4,492,112, compared to $5,983,083, as of Dec. 31, 2006. This was due primarily to a $1,872,216 increase in accounts payable and accrued payables, a $510,877 increase in warranty reserve which were offset with a $722,125 decrease in accrued interest as a result of the Sept. 30, 2007 debt conversion, as well as a $2,976,054 reduction of related party debt to Dutchess. During 2007, the company did not issue any promissory notes to related parties. As of Dec. 31, 2007, a total of $0 was owed to related parties for promissory notes. The outstanding balances of $3,083,454 on related party promissory notes were included in the Sept. 30, 2007 Series A Convertible Preferred Stock Purchase Agreement with Dutchess. As of Dec. 31, 2007, the company had debt of $11,301,142, including convertible debentures which total $3,725,041. The company accrue monthly interest expense on the debt under its convertible debentures, which are due in 2009, 2010, 2011 and 2012. As of Dec. 31, 2007, the company's balance sheet showed total assets of $6,408,050, total liabilities of $11,301,142, and total stockholders' deficit of $4,893,092. Management's Analysis and Financial Warning According to the company's management, Challenger Powerboats did not generate positive cash flows and is required to make large debt service payments. Consequently, the company continues to require additional funding at this time. It may be able to secure funding from current investors, but there is no assurance it will be able to do so. If the company is unable to generate sufficient cash flow or obtain funds for required payments, or if it fails to comply with the covenants in its debt, the company will be in default. Accordingly, it may not be able to able to meet its debt service obligations and may be forced to consider alternative strategies, including ceasing its operations. Further, on March 17, 2008, the company was required to layoff 58 of its 84 employees due to a slowdown in its operations. A full-text copy of the company's annual 2007 report is available for free at http://ResearchArchives.com/t/s?2b73 About Challenger Powerboats Washington, Missouri-based Challenger Powerboats Inc. (OTC: CPBI) -- http://www.challengerpowerboats.com/-- designs and manufactures boats, family sport cruisers, jet boats and water ski tow boats under the brands Challenger Powerboats, Sugar Sand and Gekko. The company is a design-to-manufacturing organization, creating or licensing designs, and creating tooling, molds, and parts necessary to assemble its products in-house. The company markets its products through a dealer network comprising more than 100 dealers throughout the United States, Canada, Mexico, Europe, Australia, the Middle East and Japan. On Jan. 1, 2007, the company acquired International Marine and Recreation, and Gekko Sports Corporation. CHALLENGER POWERBOATS: Files Chapter 7 Petition in Missouri ----------------------------------------------------------- On April 25, 2008, Challenger Powerboats, Inc., and its wholly owned subsidiaries, IMAR Group, LLC and Marine Holdings, Inc., each filed voluntary petitions for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri, case numbers 08-42946- 705, 08-42948-705 and 08-42950-705, respectively. Judge Albert L. Rendlen has been assigned to the cases. E. Rebecca Case was appointed bankruptcy trustee for all three entities on the Petition Date. In connection with the filings, the company has ceased all business activity and operations. The company believes that its assets will be insufficient to satisfy the claims of all creditors and it is unlikely that the company's shareholders will be eligible to participate in any distributions of the company's assets as a result of the Bankruptcy. Upon liquidation, the company will cease operations and wind up its business. Resignation and Layoffs On April 24, 2008, Mr. Michael Novielli resigned effective immediately as a Director of Challenger Powerboats. Mr. Novielli's resignation letter did not reference a disagreement with the company on any matter relating to the company's operations, policies and practices. On April 24, 2008, Mr. Douglas Leighton resigned effective immediately as a Director of the company. Mr. Leighton's resignation letter did not reference a disagreement with the company on any matter relating to the company's operations, policies and practices. On April 18, 2008, Challenger Powerboats laid off all but three employees and one contract laborer at its manufacturing facilities in Washington, Missouri, which manufactured the company's decks and hulls for the Challenger and Gekko boats. In addition to the layoffs at its Missouri facility, the company also laid off all but two employees at its manufacturing facilities in Fargo, North Dakota, which manufactured the company's decks and hulls for the Sugar Sand boats. From March 17, 2008 through April 18, 2008, the company has laid off approximately 79 of its 84 employees due to a slowdown in the company's operations. About Challenger Powerboats Washington, Missouri-based Challenger Powerboats Inc. (OTC: CPBI) -- http://www.challengerpowerboats.com/-- designs and manufactures boats, family sport cruisers, jet boats and water ski tow boats under the brands Challenger Powerboats, Sugar Sand and Gekko. The company is a design-to-manufacturing organization, creating or licensing designs, and creating tooling, molds, and parts necessary to assemble its products in-house. The company markets its products through a dealer network comprising more than 100 dealers throughout the United States, Canada, Mexico, Europe, Australia, the Middle East and Japan. On Jan. 1, 2007, the company acquired International Marine and Recreation, and Gekko Sports Corporation. CHASEFLEX: Moody's Junks Ratings on Four Loan Classes ----------------------------------------------------- Moody's Investors Service has downgraded the ratings of 24 tranches from 3 Alt-A transactions issued by ChaseFlex. Twelve tranches remain on review for possible further downgrade. Additionally, 2 tranches were placed on review for possible downgrade, and the rating on one tranche was confirmed. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, Alt-A mortgage loans. The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels. The actions are a result of Moody's on-going review process. Complete rating actions are: Issuer: ChaseFlex Trust Series 2007-2 -- Cl. M-5, Downgraded to A3 from A2 -- Cl. M-6, Downgraded to Baa2 from A3 -- Cl. B-1, Downgraded to Ba3 from Baa1 -- Cl. B-2, Downgraded to B1 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. B-3, Downgraded to B2 from Baa3; Placed Under Review for further Possible Downgrade Issuer: ChaseFlex Trust Series 2007-3 -- Cl. II-A-2, Placed on Review for Possible Downgrade, currently Aaa -- Cl. II-M1, Downgraded to A2 from Aa1 -- Cl. II-M2, Downgraded to Baa2 from Aa2 -- Cl. II-M3, Downgraded to Ba3 from Aa3 -- Cl. II-M4, Downgraded to B1 from A2; Placed Under Review for further Possible Downgrade -- Cl. II-M5, Downgraded to B1 from A3; Placed Under Review for further Possible Downgrade -- Cl. II-M6, Downgraded to B2 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. II-B1, Downgraded to B2 from Baa3; Placed Under Review for further Possible Downgrade -- Cl. II-B2, Downgraded to Ca from Ba1 Issuer: ChaseFlex Trust Series 2007-M1 -- Cl. 1-A4, Placed on Review for Possible Downgrade, currently Aaa -- Cl. 1-M1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. 1-M2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. 1-M3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. 1-M4, Downgraded to B3 from A1; Placed Under Review for further Possible Downgrade -- Cl. 1-M5, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. 1-M6, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. 1-B1, Downgraded to Ca from Ba1 -- Cl. 1-B2, Downgraded to Ca from Ba2 -- Cl. 2-M3, Confirmed at Aa3 -- Cl. 2-M6, Downgraded to Ba1 from Baa3 -- Cl. 2-B1, Downgraded to B1 from Ba2 -- Cl. 2-B2, Downgraded to Ca from Ba3 CLAIRE'S STORES: Poor Performance Cues S&P to Junk Note Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Pembroke Pines, Florida-based Claire's Stores Inc. to 'B-' from 'B'. At the same time, S&P lowered the ratings on the company's $1.65 billion senior secured credit facilities to 'B' from 'B+', its $600 million senior unsecured notes to 'CCC+' from 'B-', and its $335 million senior subordinated notes to 'CCC' from 'CCC+'. The outlook is negative. "The downgrade reflects the poor performance over the past year, which was well below our expectations," said Standard & Poor's credit analyst David Kuntz. Claire's credit protection profile weakened modestly concurrently with the deterioration of operations. CHECKSMART FIN'L: Bill 545 Cues S&P to Put Rtngs. Under Neg. Watch ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'B' long-term counterparty credit rating on CheckSmart Financial Co. on CreditWatch with negative implications. The 'BB-' rating on CheckSmart's first-lien bank facility and the 'CCC+' rating on its second-lien bank facility are also on CreditWatch Negative. The CreditWatch listing follows the Ohio House of Representatives' passage of Bill 545 on April 30, 2008. In S&P's view, if this bill is passed by the State Senate and signed by the governor, it would severely restrict payday lending in Ohio. CheckSmart generates approximately 80% of its revenues from payday lending, and more than 50% of outstanding payday loans were to Ohio consumers at year-end 2007. "The CreditWatch listing reflects our view that that House Bill 545, if enacted into law, would render CheckSmart's almost 100 Ohio stores unprofitable, possibly necessitating their closure," said Standard & Poor's credit analyst Rian M. Pressman, CFA. (As of year-end 2007, CheckSmart had approximately 256 stores in 11 states.) As a consequence, CheckSmart's ability to service its bank facilities may be severely constrained. Ohio House Bill 545 would cap the allowable rate of interest on payday loans at 28% (quoted on an APR equivalent basis). This translates to less than $2.50 per $100 borrowed, significantly below the $12-$14 that S&P believe industry participants would have to charge to break even. In Ohio, payday lenders currently charge $15 per $100 borrowed. In addition, a consumer could not borrow more than $500, or 25% of the his monthly income; loan terms would be extended to 31 days from the customary two weeks; and consumers would be limited to four payday loans per year. If Ohio House Bill 545 or a similar bill passes the Ohio Senate and is signed by the governor, the ratings on CheckSmart and its bank facilities may be lowered by one notch or more. If this legislation does not become law and the economics of payday lending in Ohio remain essentially unchanged, the outlook will be changed back to stable. COBLESKILL BUSINESS: Case Summary & 12 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Cobleskill Business Park, LLC Mineral Springs Road Cobleskill, NY 12043 Bankruptcy Case No.: 08-11304 Type of Business: The Debtor owns and manages industrial real estate. Chapter 11 Petition Date: April 28, 2008 Court: Northern District of New York (Albany) Judge: Robert E. Littlefield Jr. Debtor's Counsel: Richard L. Weisz, Esq. Hodgson Russ LLP 677 Broadway Albany, NY 12207 Tel: (518) 465-2333 Email: Rweisz@hodgsonruss.com http://www.hodgsonruss.com/ Total Assets: $5,950,209 Total Debts: $1,978,823 Debtor's 12 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Marion Jones $84,000 P.O. Box 1524 Destin, FL 32540 Tel: (978) 697-6028 United Rentals $35,258 1401 Vischer Ferry Road Clifton Park, NY 12065 Tel: (518) 459-6174 BTS Staffing $33,294 49 S. Main St. Gloversville, NY 12078 Tel: (518) 725-7884 Waste Management of Eastern $32,391 NY National Grid $30,990 NYSEG $17,515 Sunbelt Rentals $13,132 Guernsey's Nurseries $9,681 Blue Cross Blue Shield of MA $8,754 Robert H. Finke & Sons, Inc. $8,010 Home Depot Credit Services $5,958 Law Offices of James $1,210 Stedronsky COLUMBIA RIVER: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Columbia River Fish Farms, LLC P.O. Box 262 Coulee Dam, WA 99116 Bankruptcy Case No.: 08-01669 Chapter 11 Petition Date: April 28, 2008 Court: Eastern District of Washington (Spokane/Yakima) Judge: Frank L. Kurtz Debtor's Counsel: Kevin O'Rourke, Esq. Email: korourke@southwellorourke.com Southwell & O'Rourke 421 W. Riverside Ave., Ste. 960 Spokane, WA 99201 Tel: (509) 624-0159 Fax: (509) 624-9231 http://www.southwellorourke.com/ Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Fortune Bay Aquaculture $905,149 Conne River, NL AOH 1JO Land America Transnation $143,636 P.O. Box 2118 Omak, WA 98841 Trout Lodge, Inc. $98,228 P.O. Box 1290 Summer, WA 98390 Northern Fish Products, Inc. $49,396 C.O. Shull $29,979 Norcan Electrical Systems, $25,980 Inc. Glen Whitton Trucking $17,600 LeMaster & Daniels, PLLC $12,096 RPM Transport $12,000 Coulee House Inn & Suites $11,662 Commodity Forwarders, Inc. $9,317 ABD Insurance Services $9,300 Landau Associates $7,958 Brown Line, LLC $7,882 Don Kruse Electric, Inc. $7,652 Net Systems $7,503 K&D Freight $6,300 Unicel (Rural Cell) $4,004 Baker Commodities $4,000 North Cascades National Bank $3,715 COUNTRYWIDE FINANCIAL: BofA Undecided on How to Treat $38MM Debt ---------------------------------------------------------------- In a form S-4 filed with the U.S. Securities and Exchange Commission on April 30, 2008, Bank of America N.A. said that it has not made any decision with regards to guaranteeing or assuming $38 million of Countrywide Financial Corp.'s outstanding debt. The bank related in its filing that, as of Dec. 31, 2007, Countrywide had outstanding indebtedness of approximately $97.23 billion. This amount includes revolving credit facilities with an aggregate principal balance of approximately $11.48 billion, which Bank of America expects will be repaid upon closing of the merger. The amount also includes Federal Home Loan Bank advances to Countrywide Bank FSB of approximately $47.68 billion, which Bank of America expects will remain outstanding until repaid by Countrywide Bank. As part of its integration planning in connection with its merger with Countrywide, Bank of America is currently evaluating alternatives for the disposition of the remaining Countrywide indebtedness, including the possibility of redeeming, assuming or guaranteeing some or all of this debt, or allowing it to remain outstanding as obligations of Countrywide. The bank made clear in its filing that it has made no determination in this regard, and there is no assurance that any of such debt would be redeemed, assumed or guaranteed. The portion of Countrywide's debt that does not comprise debt under its revolving credit facilities or FHLB advances would represent approximately 2.4% of Bank of America's total liabilities as of Dec. 31, 2007, disclosed the bank. Bloomberg News relates that, since the announcement of the bank's indecision, financial instruments that are used as investor insurance in case Countrywide defaults on its loan have been trading at higher prices. This suggests that investors are fretting about a possible default, Bloomberg notes. About Bank of America Based in Charlotte, North Carolina, Bank of America Corp. (NYSE:BAC) -- http://www.bankofamerica.com-- is a bank holding company. Bank of America provides banking and non-banking financial services and products through three business segments: global consumer and small business banking, global corporate and investment banking, and global wealth and investment management. In December 2006, the company sold its retail and commercial business in Hong Kong and Macau to China Construction Bank. In October 2006, BentleyForbes, a commercial real estate investment and operations company, acquired Bank of America plaza in Atlanta from CSC Associates, a partnership of Cousins Properties Incorporated and the company. In June 2007, the company acquired the reverse mortgage business of Seattle Mortgage Company, an indirect subsidiary of Seattle Financial Group Inc. In October 2007, ABN AMRO Holding N.V. completed the sale of its United States subsidiary, LaSalle Bank Corporation, to Bank of America. About Countrywide Financial Based in Calabasas, California, Countrywide Financial Corporation (NYSE: CFC) -- http://www.countrywide.com/-- is a diversified financial services provider and a member of the S&P 500, Forbes 2000 and Fortune 500. Through its family of companies, Countrywide originates, purchases, securitizes, sells, and services residential and commercial loans; provides loan closing services such as credit reports, appraisals and flood determinations; offers banking services which include depository and home loan products; conducts fixed income securities underwriting and trading activities; provides property, life and casualty insurance; and manages a captive mortgage reinsurance company. * * * As reported in the Troubled Company Reporter on Jan. 15, 2008, Moody's placed the ratings of Countrywide Financial Corporation and its subsidiaries under review for upgrade. CFC and Countrywide Home Loans senior debt is rated Baa3 and short-term debt is rated Prime-3. Countrywide Bank FSB's bank financial strength rating is C-, deposits are rated Baa1 and short-term debt Prime-2. All long and short-term ratings are placed under review for possible upgrade. COUNTRYWIDE MORTGAGE: Fitch Lowers Ratings on Five Cert. Classes ---------------------------------------------------------------- Fitch Ratings has taken rating actions on Countrywide mortgage pass-through certificates. Unless stated otherwise, any bonds that were previously placed on Rating Watch Negative are removed. Affirmations total $182.1 million and downgrades total $23.2 million. CWABS 2003-SD2 -- $4.6 million class A-1 affirmed at 'AAA'; -- $2.0 million class A-2 affirmed at 'AAA'; -- $11.3 million class M-1 affirmed at 'AA'; -- $2.6 million class M-2 downgraded to 'BBB' from 'A'; -- $2.5 million class B-1 downgraded to 'B' from 'BBB'. CWABS 2004-SD3 -- $32.2 million class A-1 affirmed at 'AAA'; -- $8.1 million class A-2 affirmed at 'AAA'; -- $15.0 million class M-1 affirmed at 'AA'; -- $7.3 million class M-2 affirmed at 'A'; -- $6.8 million class M-3 affirmed at 'BBB'; -- $0.7 million class B-1 affirmed at 'BBB-'. CWABS 2004-SD4 -- $13.9 million class A-1 affirmed at 'AAA'; -- $3.5 million class A-2 affirmed at 'AAA'; -- $17.7 million class M-1 affirmed at 'AA'; -- $10.1 million class M-2 downgraded to 'A-' from 'A'; -- $6.5 million class M-3 downgraded to 'BB+' from 'BBB'; -- $1.5 million class B-1 downgraded to 'B' from 'BBB-'. CWABS 2005-SD1 -- $21.0 million class A-1-C affirmed at 'AAA'; -- $2.3 million class A-2 affirmed at 'AAA'; -- $17.8 million class M-1 affirmed at 'AA'; -- $9.5 million class M-2 affirmed at 'A'; -- $6.9 million class M-3 affirmed at 'BBB'; -- $1.4 million class B-1 affirmed at 'BBB-'. COUNTRYWIDE FIN'L: BOA's S-4/A Filing Cues S&P to Cut Rating ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on Countrywide Financial Corp. and Countrywide Home Loans Inc. to 'BB+/B' from 'BBB+/A-2'. S&P also lowered its rating on Countrywide Bank fsb to 'BBB/A-2' from 'A-/A-2'. The rating actions were due to the disclosure in Bank of America Corp.'s May 1 Form S-4/A filing relating to the terms of the merger between BAC and Countrywide and a new reference regarding the treatment of Countrywide's indebtedness. All of S&P's ratings on Countrywide are now on CreditWatch Developing, a revision from CreditWatch Positive (where they were placed Jan. 11, 2008) due to the new level of uncertainty as to the ultimate legal status of Countrywide's creditors after the merger. As recently as April 30, 2008, S&P issued a CreditWatch update on Countrywide indicating that its sensing a change in the status of this merger agreement would result its downgrading Countrywide several notches. Specifically, S&P's rating actions follow BAC's May 1 filing of a Form S-4/A that states that "As part of its integration planning in connection with the merger, Bank of America is currently evaluating alternatives for the disposition of the remaining Countrywide indebtedness, including the possibility of redeeming, assuming, or guaranteeing some or all of this debt, or allowing it to remain outstanding as obligations of Countrywide (and not Bank of America). Bank of America has made no determination in this regard, and there is no assurance that any of such debt would be redeemed, assumed, or guaranteed." The filing indicates that it is now possible that BAC would not support some of Countrywide's debt, including the approximately $17 billion of medium-term notes, $4 billion of convertible debt, $2.2 billion junior subordinated debt, and $1 billion of subordinated debt currently outstanding. There is also language in the filing indicating that Countrywide will be merged with and into a merger subsidiary that will remain wholly owned by BAC, and assurances from BAC to Countrywide's common shareholders that they will receive common dividends. Until this filing, it was S&P's understanding that BAC would acquire all of Countrywide as stated in the January 2008 merger agreement. This new filing raises the possibility that this assumption is no longer true. "The CreditWatch Developing indicates that after the merger, the ratings on Countrywide could either be raised, lowered, or affirmed depending on the ultimate legal status of and support for Countrywide creditors and final clarification by BAC regarding the merger terms. If Countrywide is to be a wholly owned, core subsidiary of BAC after the acquisition, then we expect to equalize our ratings on Countrywide with those on BAC. If selective debt of Countrywide is not fully supported under the merger terms or its legal status as a wholly owned subsidiary post acquisition is not considered to be core under our criteria, then ratings could either be affirmed or lowered," said Standard & Poor's credit analyst Victoria Wagner. DALTON CDO: Poor Collateral Prompts Fitch to Chip Ratings --------------------------------------------------------- Fitch has downgraded eight classes of notes issued by Dalton CDO, Ltd. These rating actions are effective immediately: -- $114,000,000 class A-1a1 (undrawn TRS) notes downgraded to 'BBB' from 'AAA' and remain on Rating Watch Negative; -- $50,000,000 class A-1a2 notes downgraded to 'BBB-' from 'AAA' and remain on Rating Watch Negative; -- $36,000,000 class A-1b1 notes downgraded to 'BB' from 'AAA' and remain on Rating Watch Negative; -- $40,000,000 class A-1b2 notes downgraded to 'BB-' from 'AAA' and remain on Rating Watch Negative; -- $40,000,000 class A-2 notes downgraded to 'B' from 'AAA', and remain on Rating Watch Negative; -- $57,400,000 class B notes downgraded to 'CCC' from 'AA', and removed from Rating Watch Negative; -- $20,077,202 class C notes downgraded to 'C' from 'A', and removed from Rating Watch Negative; -- $18,387,714 class D notes downgraded to 'C' from 'BBB', and removed from Rating Watch Negative; Dalton is a hybrid structured finance collateralized debt obligation that combines the use of synthetic and cash assets, as well as unfunded and funded liabilities. Dalton's portfolio originally included long and short positions. Dalton closed on June 28, 2007 and is managed by Dynamic Credit Partners, LLC. Dalton has a $114 million unfunded senior swap (class A-1a1 swap) and has issued approximately $286 million of funded notes and funded preferred securities. Dalton's reinvestment period will end in July 2011. Dalton has a portfolio comprised primarily of subprime residential mortgage-backed securities bonds (19%), structured finance CDOs (65%) and other structured finance assets. Subprime RMBS bonds of the 2005, 2006, and 2007 vintages account for approximately 8%, 7%, and 4% of the portfolio, respectively. Likewise, the SF CDO exposure includes SF CDO originated in 2005 (19%), 2006 (27%) and 2007 (4%) and 15% originated before 2005. The short positions, with an initial notional balance of $130 million, were entered at close and consisted of primarily 'AA' rated tranches of 2006 high grade and mezzanine SF CDO bonds. Since going effective Dalton has unwound all their short positions. Proceeds from the unwound short positions have been used to purchase CRE CDOs, CLOs and RMBS from earlier vintages and of higher credit quality relative to the existing portfolio collateral, as well as vintage CMBS and CBOS. As of the most recent trustee report dated, April 15, 2008, the long collateral balance is approximately $501 million as opposed to a liability balance of approximately $402 million. The ability to monetize the short positions has been of benefit to the notes as additional credit enhancement, especially to the most senior notes by providing more credit enhancement against losses. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since close, approximately 78% of the portfolio has been downgraded, with 36% of the portfolio currently on Rating Watch Negative. As of the most recent trustee report dated April 15, 2008, the weighted average rating factor is 20.71('BB-/B+') versus a trigger of 5.21('BBB/BBB-'). All principal coverage tests are failing with the class A/B principal coverage at approximately 89.3% versus a trigger or 108.55%. Currently approximately 37% of the portfolio is classified as defaulted or PIKing. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. Classes rated CCC and below will not have a rating watch assessment as such a rating reflects Fitch's view on the credit worthiness going forward. The ratings of the class A and B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. DANKA BUSINESS: To Undergo Voluntary Liquidation After Sale ----------------------------------------------------------- Danka Business Systems PLC disclosed in a regulatory filing that the company will undergo a voluntary liquidation under the laws of the United Kingdom. As reported in the Troubled Company Reporter on April, 10, 2008, the company signed a definitive agreement with Konica Minolta Business Solutions U.S.A., Inc., enabling Konica Minolta to acquire the company's wholly owned U.S. subsidiary, Danka Office Imaging Company, at a transaction valued at $240 million. Danka Office is the company's remaining operating business. The company's board of directors said that liquidation is the "most cost effective manner" to distribute the net cash obtained from the sale to shareholders. The company plans to distribute around $6.5 million to ordinary shareholders. The company will hold an extraordinary general meeting wherein shareholders will be asked to vote on: (i) the sale of the company's U.S. operations on the terms of and subject to the conditions of the stock purchase agreement, dated as of April 8, 2008, by and among Danka Business Systems PLC, Danka Holding Company, and Konica Minolta, pursuant to which the Danka Holding will sell DOIC to Konica Minolta in a sale of all the outstanding capital stock of DOIC; (ii) entry into a "members voluntary liquidation," pursuant to which the company will be voluntarily wound up; (iii) the approval of a $5 million termination fee to be paid to Konica Minolta in the event the stock purchase agreement is terminated under certain circumstances; and (iv) other resolutions necessary to effect both the sale of the U.S. operations and the Liquidation, including a resolution authorizing the directors of the company to take any and all actions required to be taken by the company or which the directors of the company (or a duly authorized committee thereof) deem necessary or desirable to consummate the sale of DOIC to Konica Minolta. Distribution Plan for Holders of Participating Shares and Ordinary Shares In a filing with the U.S. Securities and Exchange Commission late April 2008, the company disclosed that under the terms of its Articles of Association, the holders of the Participating Shares are currently entitled to receive the sum of about $372 million upon liquidation. The Board believes that the relevant provisions of the Articles require the entirety of the amount which would ultimately be available for distribution to be paid to the holders of the Participating Shares, leaving no amount available for distribution to the holders of Danka's ordinary shares or ADSs. In order to ensure that there is some return to the holders of the Danka's ordinary shares and ADSs in the Liquidation, the Board of Danka has, pursuant to the Deed of Undertaking, procured the agreement of the holders of the Participating Shares to direct the company's liquidators to pay the persons who hold ordinary shares and ADSs as at the time at which the Liquidation commences, an aggregate amount in cash equal to approximately $6.5 million. The distribution for holders of ordinary shares and ADSs will be taken out of the proceeds of the Liquidation prior to any distribution to the holders of Participating Shares, on the basis of a payment in cash of $0.025 per ordinary share and a payment in cash of $0.10 per ADS. Following this payment, additional proceeds of the Liquidation are to be paid to the holders of Participating Shares in accordance with the Articles and holders of ordinary shares and ADSs would not receive further distributions from the proceeds of the Liquidation. Danka shareholders should note that the disposal to Konica Minolta and the Liquidation remain conditional on shareholder approval of resolutions to be proposed at the extraordinary general meeting of the company, to be convened in due course. The obligations of the Participating Shareholders under the Deed of Undertaking are conditional on these resolutions being duly approved by the requisite majorities and completion of the disposal taking place. Further details of the Deed of Undertaking and the other proposals to be considered by Danka's shareholders at the EGM will be set out in the shareholder circular convening the EGM and the proxy statement, each of which will be posted to Danka shareholders as soon as possible. For inquiries: Edward Quibell Chief Financial Officer, Danka Tel: (727) 622-2760 Weber Shandwick Financial (London) James White/Laura Vaughn Tel: 020 7067 0700 Evolution Securities Limited (London) (Sponsor to Danka Business Systems PLC) Stuart Andrews / Bobbie Hilliam Tel: 020 7071 4300 Evolution Securities Limited, which is authorized in the United Kingdom by the Financial Services Authority, is acting as Sponsor to Danka Business Systems PLC and no one else in connection with the transaction will be responsible to anyone other than the company for providing the protections afforded to customers of Evolution Securities, or for advising any other person in connection with the transaction. About Danka Business Danka Business Systems PLC (LON: DNK) -- http://www.danka.com/ -- offers document solutions, including office imaging equipment, software, support, and related services and supplies in the United States. It offers office imaging products, services, supplies and solutions, including digital and color copiers, digital and color multifunction peripherals printers, facsimile machines and software. It also provides a range of contract services, including professional and consulting services, maintenance, supplies, leasing arrangements, technical support and training, collectively referred to as Danka Document Services. The company's revenue is generated from two primary sources: new retail equipment, supplies and related sales, and service contracts. Danka sells Canon products, as well as Kodak, Toshiba and Hewlett-Packard. On Aug. 31, 2006, the company sold its subsidiary, Danka Australasia, PTY Limited, to Onesource Group Limited. In January 2007, the company disposed of its European businesses to Ricoh Europe B.V. The company's Dec. 31, 2007 balance sheet showed total assets of $233.5 million, total liabilities of $225.0 million, 6.5% senior convertible participating shares of $362.6 million, and total stockholders' deficit of $354.1 million. DAVID MORGAN: Case Summary & 19 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: David Morgan Fine Arts, Inc. aka David Morgan Fine Arts International, LLC aka David Morgan Fine Arts International, Inc. dba The Art Marketplace 14539-C S. Military Trail Delray Beach, FL 33484 Bankruptcy Case No.: 08-15311 Type of Business: The Debtor sells nondurable goods in wholesale. It also sells the following in retail: miscellaneous merchandise cork craft supplies and accessories, multicultural project materials and accessories, cross curricular projects, clay and modeling compounds and ceramics equipment and accessories. Chapter 11 Petition Date: April 28, 2008 Court: Southern District of Florida (West Palm Beach) Judge: Paul G. Hyman, Jr. Debtor's Counsel: Robert C. Furr, Esq. Furr & Cohen 2255 Glades Rd., Ste. 337W Boca Raton, FL 33431 Tel: (561) 395-0500 Fax: (561) 338-7532 Email: bnasralla@furrcohen.com http://www.furrcohen.com/ Total Assets: $1,933,183 Total Debts: $1,890,547 Debtor's 19 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ RLV Marketplace of Delray LP rent, Delray $142,534 Attn: Ramco Gershenson 31500 Northwestern Hwy. Ste. 300 OH 43884 Tel: (248) 350-9900 Tri County Plaza Assoc. rent $105,361 Attn: Turnberry Associates Fort Lauderdale, FL 33324 Art Marketplace of $38,787 Davie - past due balances for arreaarages incurred prior to November 27, 2007 pursuant to agreement Del Jou Art Group art $109,453 1616 Huber St. Atlanta, GA 30318-7530 Tel: (404) 350-7195 Sun Sentinel advertising $39,589 Ana Oberlander investment in $30,000 Universal Framing Products frame moulding $29,292 Akerman Senterfitt attorney fees $28,491 Dennis Trainor reimbursement of $25,000 investor funds Top Art art $18,891 Ruben Bore & Son Fine Arts art $16,275 Margaret & Albert Welch investment in $15,000 JES Publising Corp. art $14,310 GAL Ltd Publishers art $12,490 WTVJ NBC advertising $11,735 Morris Vistor Publications LLC advertising $11,680 WPTV-Channel 5 advertising $11,530 Gallery 25 Ltd art $10,450 Jack art $10,170 Ethel Daub investment in $10,000 company DELTA AIR: Posts First Quarter 2008 Net Loss of $6,390,000,000 -------------------------------------------------------------- Delta Air Lines Inc. reported results for the quarter ended March 31, 2008. Key points include: * On April 14, 2008, Delta announced an agreement to merge with Northwest; the transaction will create America's premier global airline, which is expected to generate in excess of $1,000,000,000 in annual revenue and cost synergies; * Delta's net loss for the first quarter excluding special items was $274,000,000, or $0.69 per diluted share, driven by a $585,000,000 year over year increase in the cost of fuel; * Delta's reported net loss for the March 2008 quarter was $6,400,000,000, or $16.15 per diluted share; * special items include a $6,100,000,000 non-cash goodwill impairment charge from the decline in Delta's market capitalization due to sustained record fuel prices; * as of March 31, 2008, Delta had $3,600,000,000 in unrestricted liquidity, including $1,000,000 available under its revolving credit facility. Response to Record Fuel Prices On March 18, Delta announced that it had aggressively recalibrated its 2008 business plan with a focus on preserving liquidity in light of the significant increase in crude oil prices. The airline reevaluated its capacity, targeting reductions in or cancellations of unprofitable routes, and has already implemented schedule changes to bring down domestic flying. Delta now expects system capacity for the second half of 2008 to be down 0-2% compared to 2007, with domestic capacity down 9-11%. As a result of the capacity reduction, the company is removing 15- 20 mainline and 60-70 regional jet aircraft from its operations by the end of 2008. Delta is continuing to evaluate the fuel and demand environment and will make proactive changes quickly if economic conditions warrant. Delta is also accelerating revenue and productivity initiatives to help address high fuel costs, as well as reducing capital spending. These measures will provide revenue and cost benefits of $150,000,000in 2008, equivalent to $350,000,000 on an annual basis, in addition to the $400,000,000 in productivity initiatives previously announced. Financial Performance Delta reported a net loss of $274,000,000 in the first quarter of 2008 compared to a net loss of $6,000,000 in the first quarter of 2007, excluding special and reorganization items. The $268,000,000 year over year increase in net loss was driven by a $585,000,000 increase in costs due to higher fuel price. Delta did not record an income tax benefit in the March 2008 quarter. Revenue Momentum Passenger revenue increased 10% in the first quarter of 2008 on a 2% increase in capacity compared to the prior year period, demonstrating Delta's momentum from its network transformation and revenue management initiatives. The increase in passenger revenue was driven by 6% higher yield and 4% higher traffic. Delta's international expansion has contributed significantly to passenger revenue growth, as the airline has launched nearly 90 new international routes since the summer of 2005, including Tel Aviv, Prague, Dubai, London-Heathrow and Shanghai. Delta has grown the percentage of its capacity operating in international markets from 25% in the March 2006 quarter to 33% in the March 2008 quarter. Delta expects more than 40% of capacity to be deployed in international markets by summer 2008. Based on the most recently available ATA data, Delta's consolidated length of haul adjusted passenger unit revenue (PRASM) was 101% of industry average PRASM, excluding Delta, up from 86% in 2005 when the company began its network restructuring. This represents the first quarter in eight years that Delta has exceeded industry average. Delta's selection of unique and distinct markets has allowed the company to grow international unit revenues and capacity at double digit rates. Delta's international PRASM grew 13% year over year in the March 2008 quarter, with strong yield gains in the trans- Atlantic and Latin markets. Domestic PRASM increased 6% on a capacity decline of 2%. Consolidated system PRASM improved more than 7% to 11.36 cents. Non-passenger revenue was also strong in the first quarter. Revenue from Cargo operations increased 20% compared to the March 2007 quarter. Other net revenues grew $133 million, or 33%, primarily due to an increase in passenger fees and charges, revenue from SkyMiles, and maintenance services provided to third parties. Cost Discipline Excluding special items described below, Delta's operating expenses increased 20%, or $825,000,000 compared to the first quarter of 2007, largely due to the $585,000,000 increase in costs due to higher fuel prices. The remainder of the increase in operating expense was due primarily to fresh start accounting, salary and benefit enhancements for Delta's employees, and the cost of increased capacity versus the prior year quarter. For the March 2008 quarter, non-operating expenses declined 20%, or $32,000,000, due primarily to lower effective interest rates (including the impact of fresh start reporting) and interest earned on higher average cash balances, which were partially offset by FAS 133 mark-to-market on hedges. Delta's mainline unit cost (CASM5) increased 16% to 11.64 cents compared to the prior year period, reflecting the significant increase in fuel costs. Excluding fuel expense, mainline CASM increased 4% to 7.31 cents compared to the March quarter of 2007. "We have moved quickly to mitigate the short-term impact of higher fuel prices by further reducing domestic capacity and taking a disciplined approach to costs and cash flow. These actions have offset more than 50% of the fuel price impact," said Edward Bastian, Delta's president and chief financial officer. "However, we clearly need to do more. Merging with Northwest will generate over $1,000,000,000 in annual synergies, providing a more durable financial foundation for the future and giving Delta a stronger platform for profitable, long-term growth," he said. Special and Reorganization Items Delta recorded special items of $6,100,000,000 in the March 2008 quarter, including (i) a $6,100,000,000 non-cash goodwill impairment charge due to a decline in Delta's market capitalization caused by sustained record fuel prices, and (ii) a $16,000,000 charge for severance for the previously announced voluntary workforce reduction programs. Upon emergence from bankruptcy, Delta recorded a $12,000,000,000 goodwill balance under fresh start accounting. The valuation of goodwill was predicated on the company's market value at that point of $9,400,000,000 billion. A key assumption in that valuation was the price of fuel of $70 per barrel. Crude oil recently traded over $117 per barrel, with refining spreads in the $20-$30 range, significantly impacting Delta's single largest operating expense and future projected discounted cash flows. Based on the difference between Delta's book equity and an updated stand-alone valuation reflecting current fuel and economic assumptions, prepared in connection with Delta's recently announced merger with Northwest, Delta recorded a non-cash goodwill impairment charge of $6,100,000,000. In the March 2007 quarter, Delta recorded reorganization expenses totaling $124,000,000. Liquidity Position During the quarter, Delta issued $733,000,000 in debt, a portion of which was used to refinance Delta's 2003-1 EETC maturity. Delta had approximately $550,000,000 in net capital expenditures during the March 2008 quarter, with approximately $500,000,000 for investments in aircraft, parts and modifications to improve Delta's international product and position the airline for continued international growth. At the end of the March 2008 quarter, Delta had $2,800,000,000 in cash, cash equivalents and short-term investments, of which $2,600,000,000 was unrestricted. Delta has an additional $1,000,000,000 available under its revolving credit facility, resulting in a total of $3,600,000,000 in unrestricted liquidity at quarter end. As of March 31, 2008, Delta had $103,000,000 in auction-rate securities classified as short-term investments on its balance sheet. The company's March 31, 2008 balance sheet showed total assets of $26,755,000,000, total liabilities of $22,804,000,000, and total stockholders' equity of $3,951,000,000. March 2008 Quarter Highlights During the first quarter, Delta continued its international expansion and made targeted investments in its products, services, and employees to deliver an industry-leading customer experience. Highlights include, Delta: -- made strong improvements to its operational performance reducing involuntary denied boardings by nearly 50%, improving baggage performance by 3.6%, and ranking first among the network carriers in on-time performance, including a first place ranking in on-time performance at its hubs in Atlanta, New York-JFK, and Cincinnati for the month of February; -- launched the joint venture with Air France, including three new trans-Atlantic routes connecting London- Heathrow to Los Angeles, Atlanta and New York-JFK, filling a key position in Delta's portfolio by connecting our international gateways in Atlanta and New York to one of the world's premier business airports; -- continued its commitment to Delta employees -- awarded $158,000,000 in profit sharing in recognition of 2007 financial results, instituted benefits enhancements on January 1, contributed $25,000,000 to employee pensions, and paid $6,000,000 in Shared Rewards for achieving operational goals; -- enhanced Atlanta's position as a powerful Asian gateway by beginning the first-ever nonstop flight between Atlanta and Shanghai, complementing existing service to Tokyo and Seoul; -- celebrated being the first U.S. carrier to add the world's longest range commercial jetliner to its fleet by taking delivery of two of the eight Boeing 777-200LR aircraft expected to be delivered through 2009. With the new aircraft, Delta strengthens its ability to connect customers and cargo between virtually any two cities around the globe, nonstop; -- ranked as the top U.S. carrier to Latin America by readers of Latin Trade magazine and second overall on the magazine's "best of" list. Latin Trade readers also gave Delta the highest ranking in ticketing and boarding experience, and second highest ranking in frequent flier program among traditional network carriers in the U.S. and Latin America; -- provided SkyMiles members with more ways to redeem their miles by initiating a "Pay with Miles" program in partnership with American Express, expanding access to Medallion(R) Marketplace, growing the SkyMiles online auction program, and enhancing the Award Travel search calendar on delta.com; and -- enhanced customers' onboard experience by expanding the popular food for sale program, EATS, beginning April 1 to all flights within the U.S. of 750 miles or more and select flights between the U. S. and destinations in the Caribbean and Latin America. Delta's first quarter results on Form 10-Q may be accessed at no charge at: http://ResearchArchives.com/t/s?2b7a About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Jan. 17, 2008, Standard and Poor's said that media reports that Delta Air Lines Inc. (B/Positive/--) entered into merger talks with UAL Corp. (B/Stable/--) and Northwest Airlines Corp. (B+/Stable/--) will have no effect on the ratings or outlook on Delta, but that confirmed merger negotiations would result in S&P's placing ratings of Delta and other airlines involved on CreditWatch, most likely with developing or negative implications. DELTA AIR: Merger with Northwest Will Result in 1,000 Cut Jobs -------------------------------------------------------------- In a testimony before Congress, Delta Air Lines, Inc. Chief Executive Officer Richard Anderson disclosed that a merger with Northwest Airlines, Inc., will mean the loss of a "guess-timate" of 1,000 additional jobs, the Atlanta-Journal Constitution reports. According to Mr. Anderson, the job losses would come after the deal closes, and would be concentrated on "the management jobs, not the front-line jobs" that would involve "finance, accounting -- the functions that are important in the headquarters." The layoff is part of an effort to save on costs to offset skyrocketing fuel prices, Mr. Anderson told the Committees in the House and the Senate. Mr. Anderson will be chief executive officer of the merged airline. Delta and Northwest have recently launched their campaign in Washington, D.C., by testifying before Senate and Congress hearings. Majority of the lawmakers "appeared friendly" of the proposed consolidation, finding, among other things, that there is "very little overlap" in the carriers' routes, and agreeing that "fuel costs really are a game-changer." Prior to the hearings, Mr. Anderson told The Associated Press that regardless of the merger, Delta and Northwest will continue to adjust capacity to demand as fuel prices continue at current levels. "That's the rational thing to do, and we'll continue to do that," he maintained. After the hearing, Delta spokeswoman Chris Kelly told AJC that because the consolidated company would be based in Atlanta, more of the job cuts may be from Northwest because they may not want to make the move to Georgia. In the coming months, the two airlines will face additional hearings. Regulators and shareholders will reveal whether they approve the combination, the AP says. NWA's CEO Stands to Get $22.1MM After Merger Northwest CEO Doug Steenland, according to Business Week of Minnesota, will get about $22.1 million when he resigns after the Delta merger. Business Week adds that in 2007, Mr. Steenland pooled $27 million, including $6 million in stock options following Northwest's bankruptcy exit. The report comments that the stock option is "currently worthless" since the exercise price of $22 per share is twice the company's current share price. Minnesota's Star Tribune reports that Northwest intends to retain Mr. Steenland after the merger and wooes the executive with $3.6 million in stock options. Based on Star Tribune, Mr. Steenland waived his option to resign last June and get $3.2 million in severance pay. The executive in turn opted a 375,000 "restricted retention units" as a stock-based compensation, Star Tribune says. Delta Pilots Open to Arbiter, Union Chairman Says Lee Moak, the head of executive committee of Delta's pilots union, suggested that he is open to arbitration with Northwest pilots over how to merge their seniority lists, the AP says. In a letter addressed to fellow pilots, Mr. Moak said that union leaders believe that seniority integration should be accomplished after negotiation of a single joint contract and, if necessary, "expedited arbitration [should] be completed before closing of a corporate transaction." Mr. Moak related that while Delta and Northwest pilots failed to reach an overall agreement on pilot seniority integration, the Delta pilots union determined "an alternative that would provide for a superior outcome not only for the pre-merger Delta pilots, but eventually for all pilots of the merged corporation." As a result, a tentative agreement between Delta management and the Delta pilots union was formed, which will provide certain modifications to the current Pilot Working Agreement, that include, among others, a three and one-half percent equity stake in the merged Company, annual pay raises, "furlough protection," and an increase in 737-700 pay rates, the letter said. Rank-and-file Delta pilots will soon be asked to vote on the proposed Agreement. The Agreement does not cover Northwest pilots, whose union has stated it supports arbitration. The statement, however, was said before Delta's pilots cut a deal with management days before the merger announcement, says the AP. Mr. Moak disclosed that Delta's pilots union welcomes the idea of partnering with the Northwest pilots "to bring about the rapid completion of a new joint contract and a fair and equitable integrated seniority list upon the effective date of the . . . Agreement." A full-text copy of Mr. Moak's letter is available for free at: http://crewroom.alpa.org/dal/DesktopDefault.aspx?tabid=2421 About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007 the Debtors filed with the Court their Chapter 11 Plan. On Feb. 15, 2007, they Debtors filed an Amended Plan & Disclosure Statement. The Court approved the adequacy of the Debtors' Disclosure Statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' Plan. The Plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on April 17, 2008, Moody's Investors Service placed the debt ratings of Delta Air Lines, Inc. ("Delta", corporate family at B2) and Northwest Airlines Corporation ("Northwest", corporate family rating at B1) on review for possible downgrade. The review was prompted by the announcement that the two airlines have agreed to combine in an all-stock transaction with a combined enterprise value of approximately $18 billion. Fitch Ratings has affirmed the debt ratings of Delta Air Lines, Inc. following the announcement that Delta has agreed to merge with Northwest Airlines Corp., subject to approval by the two airlines' shareholders and the U.S. Department of Justice. Delta's ratings were affirmed as: Issuer Default Rating at 'B'; First-lien senior secured credit facilities at 'BB/RR1'; Second- lien secured credit facility (Term Loan B) at 'B/RR4'. The issue ratings apply to $2.5 billion of committed credit facilities. The Rating Outlook for Delta has been revised to Negative from Stable. Standard & Poor's Ratings Services placed its ratings, including the 'B+' long-term corporate credit rating, on Northwest Airlines Corp. on CreditWatch with negative implications, following announcement of a merger agreement with Delta Air Lines Inc. (B/Watch Pos/--). The CreditWatch listing affects enhanced equipment trust certificates with various ratings, excepting those that are insured by a bond insurer. S&P's listing of Northwest ratings on CreditWatch with negative implications and those of Delta on CreditWatch with positive implications implies that S&P foresee a corporate credit rating of either 'B' or 'B+' for the combined entity. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Jan. 17, 2008, Standard and Poor's said that media reports that Delta Air Lines Inc. (B/Positive/--) entered into merger talks with UAL Corp. (B/Stable/--) and Northwest Airlines Corp. (B+/Stable/--) will have no effect on the ratings or outlook on Delta, but that confirmed merger negotiations would result in S&P's placing ratings of Delta and other airlines involved on CreditWatch, most likely with developing or negative implications. DELTA AIR: Internal Revenue Service Withdraws $11.8 Bil. Claims --------------------------------------------------------------- The Internal Revenue Service, on behalf of the United States of America, notifies the U.S. Bankruptcy Court for the Southern District of New York that it is withdrawing six proofs of claim, filed on Aug. 16, 2006, against certain of Delta Air Lines, Inc.'s affiliates. The IRS asserted unsecured claims for $792,106,703 each against Comair Holdings, LLC and Comair Services, Inc. Claims for $1,891,444,502 were filed as unsecured each against Song, LLC DAL Aircraft Trading, Inc., Delta Ventures III, Inc., Delta Loyalty Management Services, LLC, and Comair Services, Inc. In addition, the IRS filed secured claims for $2,883,912 against each of the Debtor-affiliates. The IRS did not disclose its reason for the Claim withdrawals. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Jan. 17, 2008, Standard and Poor's said that media reports that Delta Air Lines Inc. (B/Positive/--) entered into merger talks with UAL Corp. (B/Stable/--) and Northwest Airlines Corp. (B+/Stable/--) will have no effect on the ratings or outlook on Delta, but that confirmed merger negotiations would result in S&P's placing ratings of Delta and other airlines involved on CreditWatch, most likely with developing or negative implications. DELTA AIR: JPMorgan Chase Holds 15% of Outstanding Common Stock --------------------------------------------------------------- In a Form 13G filed with the Securities and Exchange Commission, JPMorgan Chase & Co., disclosed that in its capacity as a parent holding company, it is deemed to beneficially own an aggregate of 43,838,137 shares of Delta Air Lines, Inc., common stock, representing 15% of Delta's outstanding stock. JPMorgan has sole power to vote on 250,932 shares, the sole power to dispose of 13,838,661 shares, and shared voting and dispositive power each of 496 shares. JPMorgan reports that on May 3, 2007, the Pension Benefit Guaranty Corporation received 49,484,950 shares of the common stock of Delta Air Lines. PBGC has assigned investment discretion and voting authority over this position to J.P. Morgan Investment Management Inc., a wholly owned subsidiary of JPMorgan Chase & Co. "As of Feb. 29[], 2008, the number of shares held by the PBGC is now 43,567,017 and this filing is being made to reflect that decrease," the bank disclosed with the SEC. Roughly 292,217,061 shares of Delta common stock are outstanding as of Jan. 31, 2008. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Jan. 17, 2008, Standard and Poor's said that media reports that Delta Air Lines Inc. (B/Positive/--) entered into merger talks with UAL Corp. (B/Stable/--) and Northwest Airlines Corp. (B+/Stable/--) will have no effect on the ratings or outlook on Delta, but that confirmed merger negotiations would result in S&P's placing ratings of Delta and other airlines involved on CreditWatch, most likely with developing or negative implications. DELUXE ENTERTAINMENT: S&P Holds B Rating; Revises Outlook to Neg. ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Deluxe Entertainment Services Group Inc. to negative from stable. "The rating action is based on our concerns regarding the company's narrowing headroom under its progressively tightening financial covenants," explained Standard & Poor's credit analyst Tulip Lim. At the same time, S&P affirmed the 'B' corporate credit rating on the company. The ratings on Deluxe reflect the risk of widespread adoption of digital projection; the company's dependence on several large movie studios; the likelihood of advance payments by Deluxe to movie studios to secure contracts; and an aggressive financial policy (evidenced by the company's debt-financed dividend last year). Deluxe's leading market share in motion picture film processing and duplication; good near-term growth prospects in its creative services and European film laboratory businesses; and its long-term contracts with movie studios only minimally offset these factors. DEUTSCHE BANK: U.S. Affiliate Faces Insolvency Claims ----------------------------------------------------- Lindsay Jenkins has notified a Florida law firm representing Deutsche Bank AG that she is preparing to file insolvency papers against a Deutsche Bank affiliate in the United States. Ms. Jenkins is a purported creditor of Deutsche Bank's U.S. affiliate. In her March letter to Deutsche Bank's attorneys, Akerman Senterfitt, Ms. Jenkins stated: "Given the highly publicized failure of Bear Stearns, I am of the opinion that the Deutsche Bank affiliate that is serving as a trustee may be insolvent and may be subjected to an involuntary bankruptcy petition. I am exploring whether such a petition can be filed in the Southern District of New York. I will not, however, take any action until I receive a response to this letter, or before April 14, 2008." "We have not heard from Deutsche Bank's attorneys denying that the U.S. affiliate is insolvent, and they have not denied they filed a frivolous and malicious lawsuit against me. Therefore, we are proceeding to prepare a filing for the U.S. Bankruptcy Court," Ms. Jenkins stated. She added, "Under U.S. law, I stand in a creditor's class that may initiate a voluntary petition for receivership or, in the alternative, if a federal court is not available a state court proceeding seeking appointment of a receiver." Headquartered in Frankfurt am Main, Germany, Deutsche Bank AG performs banking services in Germany and operates as a financial institute in Europe and the rest of the world. As of Dec. 31, 2007, the company employed 78,291 people on a full- time equivalent basis and operated in 76 countries out of 1,889 facilities worldwide, of which 52% were in Germany. The company offers investment, financial and related products and services to private individuals, corporate entities and institutional clients. DUKE FUNDING: Fitch Junks Ratings on Six Note Classes ----------------------------------------------------- Fitch downgraded ten classes of notes issued by Duke Funding High Grade III Ltd. These rating actions are effective immediately: -- $439,207,761 class A-1A notes downgraded to 'BB' from 'AAA' and remain on Rating Watch Negative; -- $1,293,855,556 class A-1B1 notes downgraded to 'BB' from 'AAA' and remain on Rating Watch Negative; -- $1,293,855,556 class A-1B2 notes downgraded to 'BB' from 'AAA' and remain on Rating Watch Negative; -- $102,000,000 class A-2 notes downgraded to 'B' from 'AAA' and remain on Rating Watch Negative; -- $8,000,000 class B-1 notes downgraded to 'CCC' from 'AA+' and removed from Rating Watch Negative; -- $8,000,000 class B-2 notes downgraded to 'CCC' from 'AA-' and removed from Rating Watch Negative; -- $44,000,000 class C-1 notes downgraded to 'C' from 'A+' and removed from Rating Watch Negative; -- $44,000,000 class C-2 notes downgraded to 'C' from 'A-' and removed from Rating Watch Negative; -- $12,247,320 class D notes downgraded to 'C' from 'BBB' and removed from Rating Watch Negative; -- $19,151,849 subordinated notes downgraded to 'C' from 'BB+' and removed from Rating Watch Negative. Duke III is a collateralized debt obligation that closed on Aug. 3, 2005 and is managed by Duke Funding Management, LLC. Duke III will exit its reinvestment period in August 2009. Duke III has a portfolio comprised primarily of RMBS bonds; approximately 44.4% are subprime RMBS, 49.6% are Alt-A RMBS, and 5.1% are prime RMBS. Subprime RMBS bonds of the 2005, 2006, and 2007 vintages account for approximately 30.5%, 1.6%, and 12% of the portfolio, respectively. Alt-A RMBS of the 2005, 2006 and 2007 vintages represent approximately 46.1% of the portfolio. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, and Alternative-A mortgage loans. Since the last review on May 11, 2007, approximately 26.7% of the portfolio has been downgraded net of upgrades, with 10.1% of the portfolio currently on Rating Watch Negative. Approximately 16.3% of the portfolio is now rated below investment grade and, according to the March 28, 2008 trustee report, $29.9 million, or 1.5%, of the portfolio is considered defaulted. The negative credit migration is primarily attributable to credit deterioration in subprime and Alt-A RMBS bonds from the 2005, 2006 and 2007 vintages. The weighted average rating factor test has been failing its covenant of 1.6 ('AA-/A+') since the November 2007 trustee report, and is reported as 5 ('BBB/BBB-') in the March 28, 2008 trustee report. The class A/B, C, and D overcollateralization tests are failing at 103.6%, 99.7% and 99.1% respectively. The class C-1 and C-2 notes received interest payments on the last quarterly distribution date in February, but will begin to pay-in-kind starting on the May 2008 quarterly distribution date. The class D and subordinated notes did not receive any interest proceeds on the last quarterly distribution date in February. It is unlikely that the class C-1, C-2, D and subordinated notes will receive any additional payments going forward due to the failing OC tests. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS, as well as growing concerns with the performance of Alt-A mortgage loans. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A-1A, A-1B1, A-2, B-1 and B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C-1, C-2 and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class A-1B2 notes addresses the likelihood that investors will receive only full and timely payments of interest as per the transaction's governing documents. The rating of the subordinated notes addresses the likelihood that investors will receive only the ultimate payment of principal by the stated maturity date. The balance reflects the remaining rated balance. DUKE FUNDING: Fitch Cuts 'BB-' Ratings to 'C' on Two Note Classes ----------------------------------------------------------------- Fitch downgrades five classes of notes issued by Duke Funding X CDO, Ltd./Corp. These rating actions are effective immediately: -- $72,000,000 class A1 notes downgraded to 'CCC' from 'BBB+', and removed from Rating Watch Negative; -- $105,000,000 class A2 notes downgraded to 'CC' from 'BBB-', and removed from Rating Watch Negative; -- $79,221,079 class A3 notes downgraded to 'C' from 'BB+', and removed from Rating Watch Negative; -- $18,502,444 class B1 notes downgraded to 'C' from 'BB-', and removed from Rating Watch Negative; -- $19,452,116 class B2 notes downgraded to 'C' from 'BB-', and removed from RRating Watch Negative;. Duke X is a collateralized debt obligation that closed on April 12, 2006 and is managed by Duke Funding Management, LLC. Duke X's reinvestment period will end in April 2010. Duke X has a portfolio comprised entirely of RMBS bonds; approximately 80% are subprime RMBS, 18% Alt-A RMBS, and 2% prime RMBS. Subprime RMBS bonds of the 2005, 2006, and 2007 vintages account for approximately 52%, 10%, and 4% of the portfolio, respectively. Alt-A RMBS of the 2005 and 2006 vintages represent approximately 7% each of the portfolio. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, and Alternative-A RMBS. Since the last review in November 2007, approximately 68% of the portfolio has been downgraded net of upgrades, and 14.3% of the portfolio is currently on Rating Watch Negative. Actual credit deterioration exceeds the level of downgrades that Fitch assumed in its November 2007 review. Overall, 63.3% of the assets in the portfolio now carry a rating below the rating assumed in November 2007. According to the March 9, 2008 trustee report, the weighted average rating factor has increased to 11.9 ('BB+/BB') from 5.3 ('BBB/BBB-'). Approximately $71 million, or 6%, of the portfolio is now considered defaulted. The negative credit migration has caused the class A2 overcollateralization test to fail, diverting interest and principal proceeds to the reserve account before paying class A3 interest, causing the class A3, B1 and B2 notes to pay-in-kind. Fitch projects that the class A3, B1 and B2 notes will not receive any future interest or principal payments. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A1 and A2 notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class A3, B1 and B2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. ELECTRICAL COMPONENTS: Poor Liquidity Cues S&P to Junk Credit Rtng ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on St. Louis, Missouri-based Electrical Components International Inc. to 'CCC+' from 'B'. Standard & Poor's also downgraded the company's first-lien bank loan to 'B-' from 'B+' and the company's second-lien bank loan to 'CCC-' from 'CCC+', and placed all ratings on CreditWatch with negative implications. The company had approximately $317 million of debt as of Sept. 30, 2007. "The downgrade and CreditWatch placement reflect a rapid deterioration in liquidity, as ECI most likely will not be able to comply with certain financial covenants in the first quarter of 2008 and future periods; this has resulted in the failure of the company to file its 2007 financial statements in a timely fashion, which is considered an event of default under the credit agreement," said Standard & Poor's credit analyst James Siahaan. ECI, a manufacturer of wire harnesses for white goods appliances and other products, has experienced a significant reduction in profitability as a result of weak consumer spending along with a severe drop-off in residential construction. This has constricted headroom under its financial covenants, to the point that its auditors could not issue an unqualified audit opinion. S&P could lower the ratings if ECI does not receive necessary relief from its lenders prior to the 30-day cure end date of May 29, 2008. EMPIRE LAND: Wants Court Approval of $20 Million Palmdale Loan -------------------------------------------------------------- Empire Land LLC seeks authority from the United States Bankruptcy Court for the Central District of California to obtain up to $20 million in postpetition revolving credit from Palmdale Land Investors. The Debtor and Palmdale are parties to a second amended and restated limited liability company agreement dated May 31, 2008, among the parties and Anaverde LLC, which develops residential community in Palmdale, California. The Debtor owns 50.1% membership interest in Anaverde, while the remaining 49.9% member interest own by Palmdale. The proceeds of the loan will be used to make additional capital contributions to Anaverde, and to pay certain fees and expenses. The DIP facility will incur interest at 25% per annum, compounded monthly. If any portion of the principal of the loan is not paid when due, the principal loan and any overdue interest will bear interest at 27%. The DIP agreement contains customary and appropriate events of default. It is also subject to a carve-out for payment to professional advisors to the Debtor's, any statutory committee appointed in this case and the U.S. Trustee of Court fees. The Debtor's DIP obligation is secured by its membership interest in Anaverde LLC, but junior to the first priority perfected security interest granted to Cadim Note, Inc. Cadim is presently the lender and real property in interest with respect to the loan and security agreement dated Aug. 21, 2007, between Anaverde and CWCapital LLC, as lender. Under the agreement, CWCapital agreed provide $125 million in loan, which will mature on Sept. 30, 2009, to Anaverde. On Oct. 4, 2007, CWCapital transfered all of its interest to Cadim. Cadim Note has stopped funding as Anaverde is out of compliance due to some mechanics' liens filed against it. Anaverde owed at least $92.3 million to Cadim Note. A hearing is set for May 27, 2008, at 1:30 p.m., at 3420 Twelfth Street, Courtroom 302, in Riverside, California., to consider approval of the Debtor's request. A full-text copy of the Debtor-In-Possession Agreement is available for free at: http://ResearchArchives.com/t/s?2b76 A full-text copy of the Second Amended And Restated Limited Liability Company Agreement is available for free at: http://ResearchArchives.com/t/s?2b77 Headquartered in Ontario, California, Empire Land, LLC, dba Empire Land Development, LLC -- http://www.epinc.com/-- develops communities and other land construction projects located in California and Arizona. As of March 31, 2008, the company owned at least 11,800 lost in 14 separate land projects. The company and seven of its affiliates filed for Chapter 11 protection on April 25, 2008 (Bankr. C.D. Calif. Lead Case No.08- 14592). James Stang, Esq., at Pachulski Stang Ziehl & Jones, LLP, represents the Debtors in their restructuring efforts. The U.S. Trustee for Region 16 has not appointed creditors to serve on an Official Committee of Unsecured Creditors in this cases. When the Debtors filed for protection against their creditors, they listed assets and debts between $100 million to $500 million. ENRON CORP: Releases 14th Post-Confirmation Report -------------------------------------------------- Enron Creditors Recovery Corp., formerly known as Enron Corp., and its affiliated reorganized debtor entities delivered to the Court their 14th Post-Confirmation Status Report. A. Distributions Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, informs the Court that, between January 1 and April 1, 2008, the Reorganized Debtors made cash distributions of approximately $1,067,000,000, to holders of Allowed Claims, with a substantial portion allocated for holders of Allowed General Unsecured and Guaranty Claims. The distributions included approximately: -- $1,012,000,000 of Cash distributions, -- $45,000,000 of PGE Common Stock equivalents, and -- $10,000,000 in interest, dividends and gains from the sale of Portland General Electric Company Common Stock. The Reorganized Debtors have distributed an aggregate of $14,600,000,000 in cash and PGE Common Stock equivalents to holders of Allowed Claims, including $82,200,000 of interest, capital gains and dividends. About $4,769,500,000 in cash and cash equivalents of PGE Common Stock are held in the Disputed Claims Reserve, including $329,300,000 of accrued interest, capital gains and dividends. B. Claims Resolution Process In the first quarter of 2008, nine claims have been disallowed, 24 have been ordered allowed, and five were withdrawn. Of the 25,000 claims filed against the Debtors, 4,309 have been allowed, 2,264 have been allowed as filed, and 100 remain unresolved. The remaining filed claims have been expunged, withdrawn, subordinated, or otherwise resolved. The remaining unresolved claims have a reserve base of approximately $9,700,000,000, comprised of: -- $88,000,000 for four pending Administrative Claims; and -- $9,600,000,000 for 96 pending General Unsecured, Guaranty and Convenience Class Claims. Of the pending General Unsecured, Guaranty and Convenience Class Claims, $9,200,000,000 relate to 75 Citibank claims in the MegaClaims Litigation. The remaining $400,000,000 relate to 21 unresolved unsecured claims, consisting of: (a) four claims totaling $340,000,000, in connection with unresolved aspects of certain structured financing transactions; (b) six claims totaling $5,100,000, which claims are expected to be resolved in the second quarter of 2008; (c) ten Schedule S claims aggregating $24,000,000, which claims are pending presentment of ownership certificate; and (d) one claim of $43,200,000. C. Citigroup Settlement The Reorganized Debtors entered into a Global Settlement Agreement, dated April 4, 2008, with Citigroup and several of its affiliates, Delta Energy Corporation, the Indenture Trustee for the Yosemnite/CLN Transaction, the CLN Trust Agent, and certain other entities resolving the MegaClaim Litigation. The Global Settlement Agreement, among other things, provides that Citigroup will pay $1,660,000,000, to Enron. The settlement also provides for the expungement or subordination of approximately $249,400,000, in claims, as well as indemnity claims with a $4,000,000,000 reserve. Mr. Rosen says the Global Settlement Agreement will result in the release of an additional $1,700,000,000 of cash held by the Reorganized Debtors in the DCR. The Reorganized Debtors will disburse the amounts to creditors in through special distribution. D. Schedule S The Reorganized Debtors filed an amended list of Schedule S claims, which listed the types of claims entitled to benefits of subordinated afforded by their Plan of Reorganization, to reflect the decision of the U.S. District Court for the Southern District of New York affirming the Bankruptcy Court's order with respect to the relative rights of the EFP Claims under the 1987 Indenture and reversed the Schedule S Order with respect to the relative rights of the Cherokee and EFP Claims under the TOPRS Indenture. The Reorganized Debtors said they have distributed the amounts reserved for distributions previously withheld that related to Schedule S. A copy of the Amended Schedule S is available for free at: http://researcharchives.com/t/s?2b75 G. Other Activities Mr. Rosen states that the Reorganized Debtors continue to proceed toward final wind-up of Enron activities. In accordance with Court-approved procedures, approximately 93,000 boxes of documents have been approved for disposal, with 148,000 boxes remaining. There are 199 remaining entities, of which 69 are Debtors, 26 are non-debtors, and four are DCR trusts. Tax returns are being prepared and filed for all remaining entities, and plans are being made for preparation of final returns upon completion of operations. According to Mr. Rosen, after the pending Citibank Settlement Motion is ordered, 47 other cases remain pending. The Reorganized Debtors are disposing of remaining assets, settling insurance claims, resolving Enron's captive insurance subsidiary, and auditing and winding up terminated benefit plans. Moreover, the Reorganized Debtors continue to perform the necessary accounting, control and reporting work required to maximize timely distributions to creditors and accounting and reporting associated with the amount remaining in the DCR, approximately $4,796,500,000. About Enron Corp. Based in Houston, Texas, Enron Corporation filed for chapter 11 protection on Dec. 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. Albert Togut, Esq., at Togut Segal & Segal LLP, Brian S. Rosen, Esq., Martin Soslan, Esq., Melanie Gray, Esq., Michael P. Kessler, Esq., Sylvia Ann Mayer, Esq., at Weil, Gotshal & Manges LLP, Frederick W.H. Carter, Esq., Michael Schatzow, Esq., Robert L. Wilkins, Esq., at Venable, Baetjer and Howard, LLP, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft, LLP, represent the Debtors. Jeffrey K. Milton, Esq., Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy LLP represent the Official Committee of Unsecured Creditors. The Debtors filed their Chapter Plan and Disclosure Statement on July 11, 2003. On Jan. 9, 2004, they filed their fifth Amended Plan and on the same day the Court approved the adequacy of the Disclosure Statement. On July 15, 2004, the Court confirmed the Debtors' Modified Fifth Amended Plan and that plan was declared effective on Nov. 17, 2004. ENRON CORP: Wants to Merge Certain Debtor-Affiliates to Save Costs ------------------------------------------------------------------ Enron Creditors Recovery Corp. and its reorganized debtor affiliates, and BDHLR LLC, as Reorganized Debtor Plan Administrator, seek permission from the U.S. Bankruptcy Court for the Southern District of New York to merge certain Reorganized Debtors and related entities. The Plan of Reorganization contemplates actions as may be necessary to consummate the Plan and facilitate the ongoing administration and liquidation of the Reorganized Debtors, including, without limitation, the merger or consolidation of the Reorganized Debtors, Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, relates. According to Mr. Rosen, merger of the Reorganized Debtors, and other Enron-related entities, with Enron or other Reorganized Debtor as appropriate should result in substantial cost savings for the Reorganized Debtors' estates. He says the separate estates are responsible for various state filing and administrative fees, as well as related internal costs to monitor and ensure that these numerous entities are in compliance with laws. He adds that the separate estates are responsible for payment of taxes, certain statutory fees and other costs, including tax preparation costs, for each of the remaining Reorganized Debtor entities. These fees and costs, including taxes must continue to be paid for each Reorganized Debtor until the time as a chapter 11 case for a particular Reorganized Debtor is closed in accordance with the Plan. Absent a merger, each of the Chapter 11 estates will continue to be burdened by expenses and significant estate resources will be expended to pay these mandatory costs, Mr. Rosen says. "This process of dissolving each of the Reorganized Debtor entities will be extremely costly and time-consuming, up to two years, and each estate will bear its own costs," he says. "Merger, however, will eliminate these separate costs and will provide a considerable economic benefit for the Reorganized Debtors, their estates and creditors." As Reorganized Debtors and other Enron-related entities will merge in name only, merger will not prejudice the rights or interests of creditors pursuant to the Plan, Mr. Rosen says. As per the current practice, each of the Reorganized Debtors' estates will continue to maintain separate accounting and bookkeeping processes. Distributions to creditors will continue to be made in accordance with the Distribution Model of the Plan and be predicated on the assets and liabilities of an individual Debtor's Chapter 11 estate. Essentially, there will be no effect of the merger on Creditors or their entitled distributions. Rather, their distributions may even be enhanced and accelerated due to the anticipated savings and speed with which the Chapter 11 cases will have been fully administered, Mr. Rosen says. About Enron Corp. Based in Houston, Texas, Enron Corporation filed for chapter 11 protection on Dec. 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. Albert Togut, Esq., at Togut Segal & Segal LLP, Brian S. Rosen, Esq., Martin Soslan, Esq., Melanie Gray, Esq., Michael P. Kessler, Esq., Sylvia Ann Mayer, Esq., at Weil, Gotshal & Manges LLP, Frederick W.H. Carter, Esq., Michael Schatzow, Esq., Robert L. Wilkins, Esq., at Venable, Baetjer and Howard, LLP, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft, LLP, represent the Debtors. Jeffrey K. Milton, Esq., Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy LLP represent the Official Committee of Unsecured Creditors. The Debtors filed their Chapter Plan and Disclosure Statement on July 11, 2003. On Jan. 9, 2004, they filed their fifth Amended Plan and on the same day the Court approved the adequacy of the Disclosure Statement. On July 15, 2004, the Court confirmed the Debtors' Modified Fifth Amended Plan and that plan was declared effective on Nov. 17, 2004. ENRON CORP: Court OKs $1.66 Bil. Citigroup Settlement Agreement --------------------------------------------------------------- The Honorable Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York formally approved the settlement agreement between Enron Creditors Recovery Corp. and its reorganized debtor affiliates, and Citigroup, Inc., and certain of its affiliates on April 24, 2008. The Debtors sought formal approval of the settlement on April 7, 2008. The global settlement, according to according to Enron's counsel, David M. Stern, Esq., at Klee, Tuchin, Bogdanoff & Stern LLP, in Los Angeles, California, is the eleventh and final settlement of the MegaClaim Litigation. He says, like the previous settlements with other MegaClaim Defendants, the Citigroup Settlement represents a significant benefit to the Enron Entities, as it resolves several adversary proceedings pending before the Court, settles multiple claims, brings $1.660 billion in immediate cash into the estates of the Enron Entities for distribution to creditors, and will allow the Enron Entities to release money being held in reserve for billions of dollars in claims. The global settlement provides that: (a) Citigroup will pay to $1.66 billion to Enron; (b) Citigroup agrees to the expungement or subordination of approximately $249.4 million in claims, as well as indemnity claims as to which the Court established a $4 billion reserve; (c) the CLN Trust Claims, which total more than $4.8 billion, and approximately $55 million of claims transferred to Springfield Associates, L.L.C., and Westpac Banking Corporation, are allowed; and (d) the parties agree to mutual releases, subject to carve outs as to certain claims created or preserved by the Global Settlement Agreement. The Citigroup Settlement also provides for a comprehensive settlement of these litigations: -- Adversary Proceeding No. 03-92701, -- Adversary Proceeding No. 03-93611, -- Adversary Proceeding No. 05-01025, -- portions of Adversary Proceeding No. 03-92677, and -- Yosemite Securities Trust I et al. v. Citibank N.A. et al., (MDL-1446; Civ. No. H-05-1191), currently pending in the U.S. District Court of the Southern District of Texas. Enron said the approval will permit $5 billion special distribution to creditors, bringing total distributions to almost $20 billion since the consummation of Enron's Plan in November 2004, Bloomberg News reported. Enron also said the Citigroup settlement would bring unsecured creditors' total recovery to 37.4%, Bloomberg added. Enron said the distributions were already 225% greater than the estimate Enron made when it was confirming its Plan. In its Plan filed July 11, 2003, Enron estimated that unsecured creditors will recover about 14.4% of their claims. "The settlement with Citigroup marks an important milestone in winding up the Enron Estate, and we are pleased that today the court approved the settlement," said John Ray III, Enron Creditors Recovery Corp.'s President and Chairman of the Board. "Upon implementation of the settlement, the Enron estate expects to return approximately $5 billion to creditors, which brings us to nearly $20 billion in total returned to creditors." The MegaClaims suit was filed in 2003 by Enron Creditors Recovery Corp. against eleven global banks and today's approval of the Citigroup settlement brings this effort to a successful close. About Enron Corp. Based in Houston, Texas, Enron Corporation filed for chapter 11 protection on Dec. 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 Plan took effect on Nov. 17, 2004. Albert Togut, Esq., at Togut Segal & Segal LLP, Brian S. Rosen, Esq., Martin Soslan, Esq., Melanie Gray, Esq., Michael P. Kessler, Esq., Sylvia Ann Mayer, Esq., at Weil, Gotshal & Manges LLP, Frederick W.H. Carter, Esq., Michael Schatzow, Esq., Robert L. Wilkins, Esq., at Venable, Baetjer and Howard, LLP, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft, LLP, represent the Debtors. Jeffrey K. Milton, Esq., Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy LLP represent the Official Committee of Unsecured Creditors. The Debtors filed their Chapter Plan and Disclosure Statement on July 11, 2003. On Jan. 9, 2004, they filed their fifth Amended Plan and on the same day the Court approved the adequacy of the Disclosure Statement. On July 15, 2004, the Court confirmed the Debtors' Modified Fifth Amended Plan and that plan was declared effective on Nov. 17, 2004. ENTEGRA TC: S&P Affirms 'B+' Rating on 2007 Recapitalization ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B+' rating and '1' recovery rating on debt issued in conjunction with electric power generation company Entegra TC LLC's recapitalization in 2007. The outlook is stable. The 2007 recapitalization consisted of the formation of a holding company (Entegra Holdings LLC), which is subordinated to intermediate holding company Entegra TC. Entegra TC's rated credit facilities consist of a $450 million second-lien senior term loan due 2014 and a $30 million synthetic revolving credit facility due 2012. The loans sit behind an existing $350 million first-lien letter of credit facility due 2012, used predominantly for hedging purposes, and ahead of an $850 million third-lien payment-in-kind senior term facility due 2015 (both unrated). Entegra TC used the $1.33 billion of proceeds to refinance $675 million of tranche A debt plus accrued interest, paid related transaction expenses, and made a one-time distribution of $545 million to members. The '1' recovery rating of the second- lien debt obligations indicates expectations of very high (90% to 100%) recovery of principal in a default scenario. Entegra TC owns two primary subsidiaries (Gila River Power L.P. and Union Power Partners L.P.), which own generation assets and guarantee the loans. Gila River is a 2,146 MW combined-cycle gas turbine plant at Gila Bend in Maricopa County, Arizona, that dispatches in the Arizona-New Mexico-South Nevada subregion of the Western Electricity Coordinating Council. Union Power is a 2,152 MW CCGT plant near El Dorado, in south-central Arkansas, that dispatches in the Entergy subregion of the Southeastern Electric Reliability Council. Entegra TC was created in June 2005, when original asset owner Teco Energy Corp. transferred ownership to a lender group via a Chapter 11 restructuring. The plants were built at a cost of $2.8 billion. An affiliate of Entegra TC manages and operates the plants. "The stable outlook reflects our view that current expectations of net revenues and the liquidity available to the company will be sufficient to reduce the size of the second lien over the next three years," said Standard & Poor's credit analyst Matthew Hobby. However, under a low-gas-price scenario, the project would suffer without the benefit of contracted revenues, and Standard & Poor's could revise the outlook to negative or lower the ratings if spark spreads deteriorate substantially or if loan paydown lags expectations. On the other hand, S&P could revise the outlook to positive if market conditions improve further and allow Entegra TC to enter more long-term contracts, and if continuing good operating performance allows the company to repay sufficient debt to ensure that it will substantially reduce the second-lien term loan before maturity. EOS AIRLINES: Organizational Meeting to Form Committees on May 8 ---------------------------------------------------------------- Diana G. Adams, the United States Trustee for Region 2, will convene an organizational meeting in Eos Airlines, Inc.'s chapter 11 case Thursday, May 8, 2008, at 11:00 a.m. The meeting will be held at the Office of the United States Trustee, located at 80 Broad Street, 4th Floor, in Manhattan. The sole purpose of the meeting will be to form a committee or committees of unsecured creditors in the Debtors' bankruptcy cases. This is not the meeting of creditors pursuant to Section 341 of the Bankruptcy Code. However, a Debtor's representative may attend and provide background information regarding the cases. Headquartered in Purchase, New York, EOS Airlines, Inc. -- http://www.eosairlines.com/-- is a transatlantic airline. The company filed for Chapter 11 protection April 26, 2008 (Bankr. S.D.N.Y. Case No.08-22581). Stephen D. Lerner, Esq., at Squire Sanders & Dempsey, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection against it creditors, it listed total assets of $70,233,455 and total debts of $34,858,485. EXPRESS SCRIPTS: Moody's Withdraws Ba1 Corp. Family Rating ---------------------------------------------------------- Moody's Investors Service withdrew the rating of Express Scripts, Inc. Moody's has withdrawn this rating for Moody's business reasons. Moody's added that the rating was withdrawn because this issuer has no rated debt outstanding. These rating of ExpressScripts has been withdrawn: -- Ba1 Corporate Family Rating Express Scripts, Inc. is one of the nation's leading full service pharmacy benefit managers, serving a variety of clients, including managed care organizations, third-party administrators, government and union-sponsored benefit plans and employers. FAIRCHILD SEMICONDUCTOR: Moody's Holds Ba3 Corp. Family Rating -------------------------------------------------------------- Moody's Investors Service affirmed Fairchild Semiconductor Corporation's Ba3 corporate family rating and SGL-1 speculative grade liquidity rating. The rating continues to reflect the company's moderate pro forma leverage, its favorable business profile as the largest global supplier of power semiconductors, and significant historical improvements in operating margins, but also considers the highly competitive nature of the company's markets, ongoing acquisition risk, and its exposure to softening consumer end-markets. Fairchild Semiconductor Corporation is a wholly owned subsidiary of Fairchild Semiconductor International, Inc. As such, Moody's will continue to monitor the company's business strategy, the pricing environment, and its cost control efforts. In Moody's opinion, Fairchild's pro forma liquidity position is very good due to its large cash and investments balance, favorable debt maturity profile, and expectations for modest positive cash flow, though offset by its lack of alternative liquidity as it plans to fully draw the revolving credit facility. The ratings outlook remains positive. Moody's affirmed the Ba2 rating on Fairchild's senior secured credit facilities, under which the company plans to issue a $100 million incremental term loan as permitted by the existing credit agreement. This prospective issuance would upsize the term loan to $469 million from the current $369 million outstanding. Fairchild intends to use proceeds from the incremental term loan, revolving credit facility borrowings, and cash to redeem the $200 million convertible subordinated notes due November 2008 (not rated). The incremental term loan has the same maturity date as the existing term loan. Given the proposed change to an all bank debt capital structure, Moody's revised the probability-of- default rating to B1 from Ba3, consistent with Moody's published Loss Given Default Methodology. The positive outlook reflects improvements in Fairchild's credit metrics and operating margins, largely reflecting the benefit of its initiatives to focus on higher margin products and reduce earnings volatility. The outlook also reflects Moody's expectation that the company will reverse recent earnings declines, sustain business volume, and continue to execute on its strategy to increase the penetration of higher margin proprietary products. Despite the positive momentum in Fairchild's credit profile, an uncertain economic environment precludes a ratings upgrade at this time, particularly given the company's exposure to consumer- oriented markets. Additionally, Moody's is cognizant of potential acquisition risk given modest organic growth rates and a weak economic environment (implying potentially lower valuations). These ratings were affirmed: -- Corporate family rating at Ba3; -- $100 million senior secured revolving credit facility due 2012 at Ba2 (LGD2, 27%). Point estimate revised from (LGD2, 29%); -- $469 million (upsized from $369 million) senior secured term loan due 2013 at Ba2 (LGD2, 27%). Point estimate revised from (LGD2, 29%). These rating was revised: -- Probability-of-default rating, to B1 from Ba3. Fairchild Semiconductor Corporation, based in South Portland, Maine, is the world's largest global supplier of power semiconductors. The company reported sales of approximately $1.7 billion through the twelve months ended March 30, 2008. FORT SHERIDAN: Collateral Deterioration Cues Fitch to Cut Ratings ----------------------------------------------------------------- Fitch has downgraded six classes of notes issued by Fort Sheridan ABS CDO, Ltd. These rating actions are effective immediately: -- $760,979,919 Class A-1 downgrade to 'BB' from 'AAA', and remain on Rating Watch Negative; -- $34,589,996 Class A-2 downgrade to 'B' from 'AAA'; and remain on Rating Watch Negative; -- $44,966,995 Class B downgrade to 'CCC' from 'AA'; and removed from Rating Watch Negative; -- $11,076,885 Class C-1 downgrade to 'C' from 'BBB'; and removed from Rating Watch Negative; -- $1,704,136 Class C-2 downgrade to 'C' from at 'BBB'; and removed from Rating Watch Negative; -- $4,000,000 Class C-3 downgrade to 'C' from 'BBB', and removed from Rating Watch Negative. Fort Sheridan is a collateralized debt obligation that closed March 30, 2005 and is managed by Vanderbilt Capital Advisors LLC. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, Alternative-A mortgage loans, and structured finance CDOs with underlying exposure to subprime RMBS. Presently 25.4% of the portfolio is exposed to 2005, 2006 and 2007 U.S. subprime RMBS vintages, 24.7% is exposed to 2005, 2006 and 2007 U.S. SF CDOs vintages and 16.1% of the portfolio is exposed to 2005, 2006 and 2007 U.S Alt-A RMBS vintages. The portfolio has experienced negative rating migration of 39.2% since Jan. 1, 2007 with 25.5% of the portfolio currently on rating watch negative. The negative credit migration is primarily attributable to credit deterioration in subprime RMBS bonds from the 2005, 2006 and 2007 vintages, coupled with significant downgrades in SF CDOs originated between 2005 and 2007. Since the last review on June 7, 2006, the deal has experienced negative credit migration resulting in the Weighted Average Rating Factor deteriorating to 3.67 which breaches its convent of 1.15, as of the March 31, 2008 trustee report. The class A/B and C overcollateralization ratios are currently 101.77% and 99.79% respectively which breach their covenants of 101.78% and 100.31% respectively. The classes A/B and C interest coverage test are currently 117.10% and 112.79% respectively which have covenants of 102% and 100% respectively. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS, as well as growing concerns with the performance of Alt-A mortgage loans. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A-1, A-2 and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C-1, C-2 and C-3 notes address the likelihood that investors will receive ultimate interest and deferred interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. FULL COLOR SERVICES: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Full Color Services, Inc. dba Full Color Printing dba FCP dba FCPLV 3347 S. Highland Dr. Ste. 310 Las Vegas, NV 89109 Bankruptcy Case No.: 08-14190 Chapter 11 Petition Date: April 28, 2008 Court: District of Nevada (Las Vegas) Debtor's Counsel: Robert E. Atkinson, Esq. Email: r.atkinson@kupperlin.com Kupperlin Law 10120 S. Eastern Ave., Ste. 226 Henderson, NV 89052 Tel: (702) 448 7010 Fax: (702) 947 6119 http://www.kupperlin.com/ Total Assets: $4,104,671 Total Debts: $4,914,040 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sharon Kerr Loan to company $298,467 6301 Tara Ave. Las Vegas, NV 89146 Daniel Kerr Loan to company $115,000 6301 Tara Ave. Las Vegas, NV 89146 Charles Kerr Loan to company $114,603 6301 Tara Ave. Las Vegas, NV 89146 Kelly Paper Vendor $108,000 Highland Associates Lessor $85,000 Harold M. Pittman Co. Vendor $54,000 Valley View Business Center Vendor $48,000 Rare Group Enterprises, Inc. Vendor $38,000 Coatings & Adhesives Corp. Vendor $35,000 Gulf Pacific Vendor $24,000 Unisource Distribution Vendor $23,846 Division Actega Kelstar Vendor $23,183 Arc Paper Vendor $22,004 Tanaguchi Ink Vendor $20,891 Rotadyne Vendor $13,554 United Health Insurance Vendor $11,000 Hartford Insurance Vendor $10,000 Screen Vendor $9,875 OCE Vendor $9,672 Federal Express Vendor $7,893 GMAC LLC: ResCap Unit Launches Exchange Offer for $12.8 Bil. Notes ------------------------------------------------------------------ Residential Capital LLC commenced offers to exchange any and all of the U.S. dollar equivalent $12.8 billion outstanding notes of ResCap for newly issued notes, upon the terms and subject to the conditions set forth in its Offering Memorandum and Consent Solicitation Statement dated May 5, 2008, and the related letter of transmittal and consent. The new notes will be issued by ResCap, will be guaranteed by subsidiaries of ResCap and will be secured by a security interest in substantially all of ResCap's existing and after acquired unencumbered assets remaining available to be pledged as collateral. a) For 2008-2009 Notes: CUSIP/ISIN: 76113BAL3 / US76113BAK52 Outstanding Principal Amount: $398,848,000 Title of Old Notes to be Tendered: Floating Rate Notes due 2008(1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $1,000 Tender After Early Delivery Time: $970 CUSIP/ISIN: 76113BAK5 / US76113BAK52 Outstanding Principal Amount: $684,014,000 Title of Old Notes to be Tendered: 8.125% Notes due 2008 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $1,000 Tender After Early Delivery Time: $970 CUSIP/ISIN: 76113BAQ2 / US76113BAQ23 Outstanding Principal Amount: $714,000,000 Title of Old Notes to be Tendered: Floating Rate Notes due April 2009 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $900 Tender After Early Delivery Time: $870 CUSIP/ISIN: 76114EAB8 / US76114EAB83 Outstanding Principal Amount: $949,000,000 Title of Old Notes to be Tendered: Floating Rate Notes due May 2009 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $900 Tender After Early Delivery Time: $870 CUSIP/ISIN: 76113BAN9 / US76113BAN91, U76134AD4 / USU76134AD49 Outstanding Principal Amount: $576,961,000 Title of Old Notes to be Tendered: Floating Rate Subordinated Notes due 2009 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 b) For 2010-2015 Notes: CUSIP/ISIN: 76113BAF6 / $2,154,500,000, 76113BAC3 / US76113BAC37, U76134AC6 / USU76134AC65 Outstanding Principal Amount: $2,154,500,000 Title of Old Notes to be Tendered: 8.375% Notes due 2010 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0307840735 Outstanding Principal Amount: EUR 542,800,000 Title of Old Notes to be Tendered: Floating Rate Notes due 2010 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76113BAM1 / US76113BAM19 Outstanding Principal Amount: $1,243,500,000 Title of Old Notes to be Tendered: 8.000% Notes due 2011 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0254758872 Outstanding Principal Amount: EUR 550,000,000 Title of Old Notes to be Tendered: 7.125% Notes due 2012 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76114EAC6 / US76114EAC66 Outstanding Principal Amount: $928,500,000 Title of Old Notes to be Tendered: 8.500% Notes due 2012 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76113BAR0 / US76113BAR06 Outstanding Principal Amount: $1,604,500,000 Title of Old Notes to be Tendered: 8.500% Notes due 2013 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0254759920 Outstanding Principal Amount: GBP 348,920,000 Title of Old Notes to be Tendered: 8.375% Notes due 2013 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0307841469 Outstanding Principal Amount: GBP 363,000,000 Title of Old Notes to be Tendered: 9.875% Notes due 2014 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76113BAE9 / US76113BAE92, U76134AB8 / USU76134AB82 Outstanding Principal Amount: $486,500,000 Title of Old Notes to be Tendered: 8.875% Notes due 2015 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 (1) Listed on the Luxembourg Stock Exchange. In the exchange offers, ResCap is offering to issue new 8.500% senior secured guaranteed notes due May 15, 2010 in exchange for any and all old notes that mature in 2008 and 2009. In addition, ResCap is offering to issue new 9.625% junior secured guaranteed notes due May 15, 2015 in exchange for any and all old notes that mature in 2010 through 2015. ResCap will mandatorily redeem one-third of the original principal amount of each junior secured guaranteed note on May 15, 2013 and May 15, 2014 with the remaining principal amount paid at maturity. All new notes will be denominated in U.S. dollars. The offer to exchange old notes for new notes is not subject to proration. The senior secured guaranteed notes will be secured on a second lien basis by the collateral for the proposed new $3.5 billion credit facility. The junior secured guaranteed notes will be secured on a third lien basis by the collateral for that facility. In addition, holders participating in the exchange offers may elect to receive cash in lieu of the new notes that they would otherwise receive, pursuant to a "modified Dutch auction" process described in the offer documents. Each participating holder electing to receive cash pursuant to the auction process, must submit a price denominated in U.S. dollars that specifies the minimum amount of cash such participating holder wishes to receive in lieu of each $1,000 principal amount of new notes it would otherwise receive for tendered old notes. The indicative offer price specified by a participating holder of old 2008-2009 notes can be no less than $850 per $1,000 principal amount of new notes, the indicative offer price specified by a participating holder of old 2010-2015 notes can be no less than $650 per $1,000 principal amount of new notes, and in both cases the indicative offer price specified by a participating holder can be no greater than $1,000 per $1,000 principal amount of new notes. The amounts of cash that ResCap expects to have available to pay participating holders in lieu of new notes that they would otherwise receive in the exchange offers will be $700 million with respect to the old 2008-2009 notes and $500 million with respect to the old 2010-2015 notes. Holders will receive new notes in exchange for old notes submitted but not accepted in the auction process. Only old notes that are tendered in the exchange offers may participate in the auction process. However, old notes may be tendered in the exchange offers without participating in the auction process. ResCap also commenced a cash tender offer for any and all of its outstanding $1,198,710,000 in aggregate principal amount of floating rate notes due June 9, 2008 at a purchase price of $1,000 per $1,000 principal amount upon the terms and subject to the conditions set forth in the offering memorandum and the related letter of transmittal and consent. The total purchase price for each $1,000 principal amount of June 2008 notes includes an early delivery payment of $30.00 per $1,000 principal amount. The CUSIP and ISIN for the June 2008 notes are 76114EAA0 and US76114EAA01. In conjunction with the offers, ResCap is soliciting consents to certain proposed amendments to the indentures under which the old notes were issued. The proposed amendments to the old notes would release the subsidiary guarantees of ResCap's obligations under the old notes and would eliminate certain of the restrictive covenants and events of default currently in the indentures. However, the proposed amendments are not necessary for the issuance of the new notes and the new subsidiary guarantees or for the pledge of collateral for the new notes and subsidiary guarantees. Accordingly, the offers are not conditioned on receipt of the requisite consents to adopt the proposed amendments. Claims with respect to new notes will be effectively senior to claims with respect to unexchanged old notes. In addition, claims with respect to new notes will be effectively senior to claims with respect to unexchanged old notes to the extent of the value of all of the assets of the subsidiary guarantors if the requisite consents from holders of the senior old notes are received. Claims with respect to new notes will be contractually senior to the subordinated old notes. In the offers, ResCap is offering an early delivery payment, which in the case of the June 2008 notes and old notes that are accepted in the auction process, will be paid in cash, and, in the case of all other old notes, will be paid in principal of new notes. The early delivery payment will be paid only to holders who validly tender their old notes, which tender will be deemed to include their consents to the proposed amendments, prior to 5:00 p.m., New York City time, on May 16, 2008, unless extended by ResCap with respect to any or all series of old notes, and do not validly withdraw their tenders. The offers will expire at 11:59 p.m., New York City time, on June 3, 2008, unless extended by ResCap with respect to any or all series of old notes. Tendered old notes may be validly withdrawn at any time prior to 5:00 p.m., New York City time, on May 16, 2008, unless extended by ResCap with respect to any or all series of old notes, but not thereafter. Holders of old notes accepted in the offers will receive a cash payment equal to the accrued and unpaid interest in respect of such old notes from the most recent interest payment date to, but not including, the settlement date. The offers are conditioned on the satisfaction or waiver of certain conditions. In particular, the offers are conditioned on ResCap entering into a new first lien senior secured credit facility, providing for at least $3.5 billion of commitments on terms acceptable to ResCap. As a result of these conditions, ResCap may not be required to exchange or purchase any of the old notes tendered. The offers are not conditioned on receipt of the requisite consents with respect to the old notes. ResCap is currently in negotiations with GMAC LLC, who would act as the lender under this new first lien senior secured credit facility which, if entered into, will be on terms acceptable to ResCap and GMAC. The new facility would: 1. fund the cash required for the offers, 2. repay ResCap's term loan maturing in July 2008, and 3. replace ResCap's existing $875.0 million 364-day and $875.0 million 3-year revolving bank credit facilities. Documents relating to the offers will only be distributed to noteholders who complete and return a letter of eligibility confirming that they are within the category of eligible investors for this private offer. Noteholders who desire a copy of the eligibility letter should contact Global Bondholder Service Corporation, the information agent for the offers, at (866) 470- 3800 (U.S. Toll-free) or (212) 925-1630 (Collect). As reported in the Troubled Company Reporter on April 25, 2008, Residential Funding Company and GMAC Mortgage LLC, both subsidiaries of Residential Capital, LLC, borrowed $468 million collectively under a Loan and Security Agreement with ResCap's parent, GMAC LLC, as lender, to provide ResCap's subsidiaries with a revolving credit facility with a principal amount of up to $750 million, providing incremental liquidity for ResCap's operations until longer-term financing is arranged. ResCap and GMAC are investigating various strategic alternatives related to all aspects of ResCap's business, including extensions and replacements of existing secured borrowing facilities, and establishing additional sources of secured funding for ResCap's operations. One potential source of new secured funding is credit secured by certain of ResCap's mortgage servicing rights. The Troubled Company Reporter also reported on April 9, 2008 that GMAC LLC purchased $1.2 billion of ResCap's notes in open market. The notes have a fair value of approximately $607,192,000 to ResCap in exchange for 607,192 ResCap Preferred units with a liquidation preference of $1,000 per unit. ResCap canceled the $1.2 billion face amount of notes. GMAC may, in its sole discretion, on or before May 31, 2008, contribute up to an additional approximately $340 million of ResCap notes, having a fair value of approximately $265,779,000, for additional ResCap Preferred units. The ResCap Preferred ranks senior in right of payment to ResCap's common membership interests with respect to distributions and payments on liquidation, winding-up or dissolution of ResCap. About Residential Capital Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. Cerberus Capital Management LP bought 51% GMAC LLC stake from General Motors Corp. on December 2006. As reported in the Troubled Company Reporter on April 25, 2008, Residential Funding Company and GMAC Mortgage LLC, both subsidiaries of Residential Capital, LLC, borrowed $468 million collectively under a Loan and Security Agreement with ResCap's parent, GMAC LLC, as lender, to provide ResCap's subsidiaries with a revolving credit facility with a principal amount of up to $750 million, providing incremental liquidity for ResCap's operations until longer-term financing is arranged. Similarly, the Troubled Company Reporter also reported on April 25, 2008 that Moody's Investors Service downgraded GMAC LLC's senior rating to B2 from B1; the rating remains on review for further possible downgrade. The GMAC downgrade is based upon Moody's opinion that further operating weakness at ResCap poses risks to GMAC's capital position and liquidity that exceed previous estimates. In particular, Moody's believes that for ResCap to have continued access to debt capital, GMAC may be required to provide additional indications of support to the unit and that it is likely to do so. GMAC LLC: Fitch Cuts ID Rating to BB- After ResCap's Poor Fin'l --------------------------------------------------------------- Fitch Ratings has downgraded the long-term Issuer Default Rating of GMAC LLC and related subsidiaries to 'BB-' from 'BB'. Fitch has also downgraded GMAC's unsecured long-term ratings to 'B+' from 'BB-', reflecting the potential for reduced recovery in a default scenario should the company encumber assets. Additionally, Fitch has affirmed the 'B' short-term ratings. The Rating Outlook remains Negative. Approximately $85 billion of unsecured debt is affected by this action. The downgrade of GMAC's L-T IDR reflects in part continued financial deterioration at ResCap, which has necessitated further financial support from GMAC as part of a debt exchange at ResCap. In addition, given the current capital markets environment, Fitch believes that GMAC may need to encumber assets to enhance its liquidity. To the extent this occurs, it would subordinate current debtholders and reduce recovery prospects in a default scenario. Fitch's Negative Outlook on GMAC continues to reflect the more challenging economic environment that will continue to pressure core operating performance. Given reduced industry sales, GMAC's financing volumes will likely decline unless offset by higher penetration rates. In addition, Fitch expects automotive credit quality to remain pressured throughout 2008 due to rising consumer defaults and higher loss severity upon default. Ratings could be lowered if core profitability (excluding ResCap) weakens coupled with credit quality deterioration beyond historical averages. Fitch has downgraded these ratings with a Negative Outlook: GMAC LLC GMAC International Finance B.V. GMAC Bank GmbH GMAC Canada Ltd. General Motors Acceptance Corp. of Canada Ltd. General Motors Acceptance Corp. of Australia -- Long-term IDR to 'BB-' from 'BB'; -- Senior debt to 'B+' from 'BB'. General Motors Acceptance Corp. (NZ) Ltd. -- Long-term IDR to 'BB-' from 'BB'. Fitch has also affirmed these ratings: GMAC LLC GMAC International Finance B.V. GMAC Bank GmbH General Motors Acceptance of Canada Ltd. General Motors Acceptance Corp. of Australia GMAC Australia (Finance) Ltd. General Motors Acceptance Corp. (U.K.) Plc General Motors Acceptance Corp. (N.Z.) Ltd. GMAC Canada Ltd. -- Short-term IDR 'B'; -- Short-term debt 'B'. GMAC Canada Ltd. -- Short-term IDR 'B'. GMAC LLC: S&P 'B' Rating Unaffected by ResCap's Downgrades ---------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings and negative outlook on GMAC LLC (B/Negative/C) will not be affected by the downgrade of its 100%-owned subsidiary, Residential Capital LLC to 'CC' from 'CCC+'. The ratings actions on Residential Capital LLC follow the company's launch of an exchange offer for unsecured bonds that would pay less than face value to certain Residential Capital LLC bondholders. The exchange illustrates the gravity of the Residential Capital LLC's financial position. Furthermore, the exchange indicates that GMAC LLC's ultimate parents, General Motors Corp. (49% owner of GMAC LLC) and Cerberus (51% owner of GMAC LLC), are pursuing these actions rather than directly provide GMAC LLC with additional capital to downstream to Residential Capital LLC. However, a successful exchange would extend debt maturities, providing needed relief to both Residential Capital LLC in terms of its maturing debt, and GMAC LLC in terms of future support pressures. GENERAL MOTORS: ResCap's Offer Does Not Affect S&P's Neg. Watch --------------------------------------------------------------- Standard & Poor's Ratings Services said its 'B' long-term and 'B- 3' short-term corporate credit ratings on General Motors Corp. remain on CreditWatch with negative implications, where they were placed March 17, 2008. The update follows the announcement by Residential Capital LLC (CC/Watch Neg/C) that it is launching an exchange offer for unsecured bonds, which S&P interpret to be a distressed debt exchange. (Residential Capital is a unit of 49%- owned unit GMAC LLC [B/Negative/C]. S&P do not expect GM to provide any significant capital to GMAC or indirectly to Residential Capital, nor is GM required to do so in the future. GM's ratings were placed on CreditWatch because of the strike at major supplier American Axle & Manufacturing Holdings Inc., which began Feb. 26. The strike caused GM to lose 100,000 units of production in the first quarter of 2008, mostly full-size pickups. "Negotiations are continuing, and media reports indicate that the strike is closer to being resolved," said Standard & Poor's credit analyst Gregg Lemos Stein. "But until American Axle's production resumes, we won't know the full extent of the strike's effect on GM's liquidity." GM's second-quarter results will be affected as well, and in light of weak sales and deteriorating demand for pickups and SUVs, GM recently announced production cuts beyond those caused by the strike. GM should benefit from working capital increases once American Axle resumes production, even if future production levels do not fully replace that lost during the strike. S&P expect GM to be able to maintain adequate available liquidity in 2008; at March 31, 2008, the company had $23.9 billion, including cash, marketable securities, $700 million in short-term VEBA funds, and a $4.5 billion secured revolving credit facility. Another uncertainty for GM, although less of a pressing issue in the near term, is former supplier Delphi Corp.'s difficulties in emerging from bankruptcy. S&P still believe the comprehensive costs to GM of Delphi's reorganization will remain within the scope of GM's liquidity. Still, the current capital market turmoil may keep Delphi in Chapter 11 for several more months, if not the rest of 2008. GM recently said it will make advance payments of up to $650 million to Delphi over the course of 2008, an amount that is within our range of expectations, even if Delphi had emerged from bankruptcy. However, S&P's ratings do not leave any room for GM to make substantial cash payments to support a revised Delphi capital structure beyond the labor and transitional subsidies GM has already agreed to provide. S&P will likely not resolve the GM CreditWatch until after the American Axle strike has been resolved and S&P have assessed its effect on GM's liquidity in light of the deteriorating U.S. auto industry environment. S&P's analysis will also incorporate those concerns. GUARDIAN TECH: Secures $7 Million Financing from Nine Investors --------------------------------------------------------------- Guardian Technologies International Inc. entered into definitive agreements with five existing and four new accredited investors with respect to the private placement of approximately 10.0 million shares of its common stock at a purchase price of $0.70 per share for expected gross proceeds of approximately $7.0 million. There were no discounts or brokerage fees associated with the offering. Guardian expects to utilize the proceeds to advance its international business development activities, healthcare research and development activities, and fund general corporate operations. Two closings are scheduled to occur with $5.15 million having closed on April 4, 2008, and the second closing expected to occur on or about May 30, 2008, subject to customary closing conditions. "Completing this financing transaction increases our financial strength and stability, and positions us to advance our strategic initiatives," Bill Donovan, president and chief operating officer of Guardian, said. "We deeply appreciate the continuing confidence of our existing investors and we welcome our new investors. With the current state of the liquidity markets, this financing, structured at a premium to our stock's market price, would be an unambiguous indication to the market that our international business development initiatives and partnerships are well-positioned to generate near-term revenues." About Guardian Technologies Based in Herndon, Virginia, Guardian Technologies International Inc. (OTC BB: GDTI.OB) -- http://www.guardiantechintl.com/-- is a technology company that designs and develops imaging informatics solutions for delivery to its target markets: aviation/homeland security and healthcare. As reported in the Troubled Company Reporter on Dec. 14, 2007, the company's consolidated balance sheet at Sept. 30, 2007, showed $2.4 million in total assets, $11.0 million in total liabilities, and $246,911 in common shares subject to repurchase, resulting in an $8.8 million total stockholders' deficit. As reported in the Troubled Company Reporter on April 14, 2008, Guardian Technologies disclosed in a SEC filing that the company did not make timely payment of the interest due under its Series A 10% Senior Convertible Debentures on Jan. 1, 2008. However, the company said it has paid all of the interest and late fees due to debenture holders as of April 8, 2008. The company further disclosed that while the debenture holders have not elected to require the company to make immediate repayment of the mandatory default amount, in accordance with the debenture terms, there can be no assurance they will not do so. Going Concern Doubt Goodman & Company L.L.P., in Norfolk, Virginia, expressed substantial doubt about Guardiain Technologies International 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 reported that the company has incurred significant operating losses since inception and is dependent upon its ability to raise additional funding through debt or equity financing to continue operations. The company reported a net loss of $3.4 million on net revenues of $43,778 for the third quarter ended Sept. 30, 2007, compared with a net loss of $3.3 million on net revenues of $51,197 for the same period in 2006. INTERNATIONAL PAPER: Net Income Drops to $133MM in '08 1st Quarter ------------------------------------------------------------------ International Paper reported preliminary first-quarter 2008 net earnings of $133 million compared with net earnings of $327 million in the 2007 fourth quarter and $434 million in the first quarter of 2007. Earnings from continuing operations and before special items in the first quarter of 2008 were $175 million, compared with $294 million in the 2007 fourth quarter and $203 million in the first quarter of 2007. Quarterly net sales were $5.7 billion, down from $5.8 billion in the fourth quarter and up from $5.2 billion in the first quarter of 2007. Industry segment operating profits were $332 million for the 2008 first quarter versus $566 million in the 2007 fourth quarter and $403 million in the first quarter of 2007. The quarter-to-quarter decrease reflects higher input costs, lower earnings from land sales and operating performance below expectations early in the quarter. Additionally, the company reported equity earnings, net of taxes, of $17 million from its 50% investment in Ilim Holding S.A., a separate reportable industry segment in Russia. "We continued to realize price improvement in the first quarter," John Faraci, chairman and CEO, said. "However, those gains were more than offset by sharply increasing input costs, well as the expected quarter-to-quarter decline in earnings from land sales." "We are prepared to work through the weakness of the U.S. economy. Our business outside of North America continues to demonstrate healthy growth and solid pricing," Mr.Faraci said. At March 31, 2008, the company's balance sheet showed total assets of $24.3 billion, total liabilities of $15.3 billion and total shareholders' equity of about $9.0 billion. About International Paper Headquartered in Stamford, Connecticut, International Paper Co. (NYSE: IP) -- http://www.internationalpaper.com/-- is an uncoated paper and packaging company with primary markets and manufacturing operations in North America, Europe, Russia, Latin America, Asia and North Africa. International Paper employs approximately 54,000 people in more than 20 countries, and serves customers worldwide. * * * Moody's Investors Service placed International Paper Co.'s senior subordinate rating at 'Ba1' in December 2005. The rating still holds to date with a stable outlook. INTERPUBLIC GROUP: Net Loss Lowers to $62MM in 2008 First Quarter ----------------------------------------------------------------- Interpublic Group of Cos. reported net loss of $62.8 million compared with a year-earlier net loss of $125.9 million, Kathy Shwiff and Kevin Kingsbury of The Wall Street Journal reports. According to WSJ, citing a poll by Thomson Reuters, revenue increased 9.3% to $1.49 billion while organic revenue -- excluding divestitures, acquisitions and foreign-currency translation -- rose 5.1%. Analysts' mean estimates were for a loss of 16 cents a share on revenue of $1.44 billion, WSJ adds. WSJ notes that Interpublic is in the middle of a turnaround after correcting accounting problems that had dogged it for several years. New York-based, Interpublic Group of Companies Inc. (NYSE: IPG) -- http://www.interpublic.com/-- is one of the world's leading organizations of advertising agencies and marketing services companies. Major global brands include Draftfcb, FutureBrand, GolinHarris International, Initiative, Jack Morton Worldwide, Lowe Worldwide, MAGNA Global, McCann Erickson, Momentum, MRM Worldwide, Octagon, Universal McCann and Weber Shandwick. Leading domestic brands include Campbell-Ewald, Carmichael Lynch, Deutsch, Hill Holliday, Mullen, The Martin Agency and R/GA. * * * As reported in the Troubled Company Reporter on April 9, 2008, Fitch Ratings has upgraded Interpublic Group of Companies' issuer default rating to 'BB+' from 'BB-'. Approximately $2.1 billion in total debt and $525 million in preferred stock as of Dec. 31, 2007 is affected. The rating outlook is positive. ION MEDIA: S&P Puts '3' Recovery Rating on CCC+ Rated $400MM Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned recovery ratings to ION Media Networks Inc.'s (CCC+/Negative/--) $400 million floating rate first priority secured notes due 2012 and $405 million floating rate second priority secured notes due 2013. The issue-level rating on ION Media's $400 million floating rate first priority secured notes due 2012 remains 'CCC+', and a recovery rating of '3' was assigned, indicating S&P's expectation for meaningful (50%-70%) recovery in the event of a payment default. The issue-level rating on ION Media's $405 million floating rate second priority secured notes due 2013 remains 'CCC-', and a recovery rating of '6' was assigned, indicating our expectation for negligible (0%-10%) recovery in the event of a payment default. Additionally, the company has a $325 million term loan and convertible senior subordinated notes that S&P do not rate. Ratings List Ratings Assigned ION Media Networks Inc. Recovery Rating ($400M First Priority Notes) 3 Recovery Rating ($405M Second Priority Notes) 6 Ratings Affirmed ION Media Networks Inc. $400M Floating Rate First Priority CCC+ $405M Floating Rate Second Priority CCC- IPCS INC: S&P Affirms 'B-' Rating and Changes Outlook to Stable --------------------------------------------------------------- Standard & Poor's Rating Services revised its outlook on Schaumburg, Illinois-based iPCS Inc. to stable from negative. All existing ratings, including the 'B-' corporate credit rating, were affirmed. "The stable outlook revision reflects the resolution of a number of operational and financial issues between Sprint Nextel Corp. and iPCS, which dampened iPCS' 2007 operating performance," said Standard & Poor's credit analyst Susan Madison. iPCS is a Sprint PCS affiliate serving approximately 640,600 subscribers, with the exclusive right to provide Sprint PCS digital wireless services to 80 markets located in Illinois, Michigan Pennsylvania, Indiana, Iowa, Ohio and Tennessee covering 15.1 million population equivalents. Debt outstanding for the consolidated company as of Dec. 31, 2007, totaled about $475 million. The ratings on iPCS reflect an aggressive financial policy, its reliance on Sprint Nextel, which owns the wireless spectrum licenses used by the company to provide service; its highly leveraged financial profile and below average profitability. Tempering factors include opportunity for growth given the company's relatively low 5.3% penetration rate of covered population equivalents and adequate liquidity. IPSWICH STREET: Fitch Cuts Six Note Ratings and Removes Neg. Watch ------------------------------------------------------------------ Fitch downgrades and removed from Rating Watch Negative six classes of notes issued by Ipswich Street CDO, Ltd./LLC. These rating actions are effective immediately: -- $1,528,551,908 Class A-1 Notes downgraded to 'CCC' from 'BBB-' and removed from Rating Watch Negative; -- $60,000,000 Class A-2 Notes downgraded to 'CC' from 'BB' and removed from Rating Watch Negative; -- $62,000,000 Class B Notes downgraded to 'CC' from 'BB-' and removed from Rating Watch Negative; -- $25,393,543 Class C Notes downgraded to 'C' from 'B-' and removed from Rating Watch Negative; -- $9,650,486 Class D Notes downgraded to 'C' from 'CCC' and removed from Rating Watch Negative; -- $8,302,774 Class E Notes downgraded to 'C' from 'CC' and removed from Rating Watch Negative. Ipswich Street is a collateralized debt obligation that closed on June 27, 2006 and is managed by Massachusetts Financial Services Company. Presently 53.2% of the portfolio is comprised of 2005, 2006 and 2007 vintage U.S. subprime residential mortgage-backed securities, 6.5% consists of 2005, 2006 and 2007 vintage U.S. structured finance CDOs and 3.4% is comprised of 2005, 2006 and 2007 vintage U.S. Alt-A RMBS. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since Nov. 21, 2007, approximately 52.7% of the portfolio has been downgraded with 11.9% of the portfolio currently on Rating Watch Negative. 38.3% of the portfolio is now rated below investment grade. Fitch notes that, overall, 27.3% of the assets in the portfolio now carry a rating below the rating it assumed in November 2007. The negative credit migration experienced since the last review on November 21, 2007 has resulted in the Weighted Average Rating Factor deteriorating to 11.38 from 2.55, breaching its covenant of 1.45, as of the March 31, 2008 trustee report. The collateral deterioration has caused each of the class A/B, class C and class D overcollateralization tests, class A Sequential Pay test and class E interest diversion tests to fall below 100% and fail their respective triggers. The failures of these tests are diverting interest proceeds to attempt to cure the tests and therefore exhausting remaining interest proceeds before the class C, class D, and class E interest payments are made. Fitch expects these classes to receive only capitalized interest payments in the future with no ultimate principal recovery. The ratings of the classes A-1, A-2, and B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C, D, and E notes address the likelihood that investors will receive ultimate and compensating interest payments, as well as the aggregate outstanding amount of principal by the stated maturity date, pursuant to the transaction's governing documents. The ratings are based upon the capital structure of the transaction, the quality of the collateral, and the protections incorporated within the structure. ISLE OF CAPRI: S&P Lowers BB- Rating to B+ and Removes Neg. Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on St. Louis, Missouri-based Isle of Capri Casinos Inc.; the corporate credit rating was lowered to 'B+' from 'BB-'. The ratings were removed from CreditWatch, where they were placed with negative implications March 6, 2008. The rating outlook is negative. In addition, S&P assigned a recovery rating to Isle's 7% senior subordinated notes due March 1, 2014, while lowering the issue- level rating on these securities to 'B-' from 'B', in conjunction with the corporate credit rating change. A recovery rating of '6' was assigned to this debt, indicating that lenders can expect negligible (0% to 10%) recovery in the event of a payment default. "The downgrade and negative outlook reflect credit measures that have been weak for the rating for an extended period, resulting from a shortfall in EBITDA generation relative to our previous expectations," explained Standard & Poor's credit analyst Ariel Silverberg. Isle's inability to improve credit measures at the pace that S&P expected has been due to a slower ramp-up at the company's Pompano Park, Waterloo, and Coventry properties, as well as weakness in operating performance at several of Isle's other properties, including its Mississippi properties, which contribute, on average, 30% to the company's EBITDA base. New management has been installed in the last several months to improve operations, and S&P expect its efforts to be reasonably successful, somewhat tempered by the negative impact that S&P anticipate from economic conditions during 2008. The new rating incorporates the expectation for EBITDA in the fiscal year ended April 30, 2009 to be at least flat with fiscal 2008 EBITDA. The 'B+' rating reflects Isle's highly leveraged capital structure, vulnerability to competitive pressures due to the second-tier market position of many of its properties, and a historically aggressive growth strategy. These factors are somewhat tempered by the geographically diverse portfolio of the company's gaming assets and the company's experienced management team. Isle wholly owns and operates 14 casino gaming facilities in the U.S. located in Black Hawk, Colorado; Lake Charles, Louisiana; Lula, Biloxi, and Natchez, Mississippi; Kansas City, Caruthersville, and Booneville, Missouri; Bettendorf, Davenport, Waterloo, and Marquette, Iowa; and Pompano Beach, Florida. The company also owns casinos in Freeport, Grand Bahamas and Coventry, England, and has a two-thirds ownership interest in casinos in Dudley and Wolverhampton, England. KLEROS PREFERRED: Fitch Junks Ratings on Four Note Classes ---------------------------------------------------------- Fitch has downgraded seven classes of notes issued by Kleros Preferred Funding II, Ltd. These rating actions are effective immediately: -- $819,559,570 class A-1NV downgraded to 'BB' from 'AAA' and placed on Rating Watch Negative; -- $235,573 class A-1V downgraded to 'BB' from 'AAA' and placed on Rating Watch Negative; -- $58,429,928 class A-2 downgraded to 'B' from 'AAA' and remains on Rating Watch Negative; -- $33,110,292 class B downgraded to 'CCC' from 'AA' and removed on Rating Watch Negative; -- $7,790,657 class C downgraded to 'CC' from 'AA-' and removed on Rating Watch Negative; -- $9,555,226 class D downgraded to 'C' from 'A' and removed from Rating Watch Negative; -- $10,762,374 class E downgraded to 'C' from 'BBB' and removed from Rating Watch Negative. Kleros II is a collateralized debt obligation that closed Jan. 10, 2006 and is managed by Strategos Capital Management, LLC. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, Alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Since the last rating action on January 18, 2008 approximately 34.2% of the portfolio has been downgraded with 14.9% of the portfolio currently on Rating Watch Negative. The negative credit migration is primarily attributable to credit deterioration in subprime RMBS bonds from the 2005, 2006 and 2007 vintages, coupled with significant downgrades in SF CDOs originated between 2005 and 2007. Kleros II has a static portfolio comprised primarily of subprime RMBS bonds (61.4%), Alt-A RMBS (13.73%), prime RMBS (12.28%), SF CDOs (11.27%) and other structured finance assets. Subprime RMBS bonds of the 2005 and 2006 vintages account for approximately 55.24% and 0.32% of the portfolio, respectively. The portfolio does not contain any subprime RMBS bonds of 2007 vintage. Likewise, the SF CDO exposure includes 3.38% SF CDOs originated in 2005. Alt-A RMBS of 2005 vintage represent approximately 12.28% of the portfolio. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A, B and C notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class D and E notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. LEXINGTON PRECISION: Gets Final Approval to Use $4 Mil. Facility ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware authorized Lexington Precision Corp. and Lexington Rubber Group Inc. to obtain, on a final basis, up to $4,000,000 in postpetition financing from Lubin Partners LLC, William B. Conner, and ORA Associates LLC, as lenders, Bloomberg News reports. As reported in the Troubled Company Reporter on April 9, 2008, the Court gave the Debtors permission to access, on an interim basis, $2,000,000 of a possible $4,000,000 in financing. The lenders' facility will terminate on the earliest of: -- the one year anniversary of the Debtors' bankruptcy filing; -- the effective date of a confirmed Chapter 11 plan of reorganization in these Chapter 11 cases; -- the conversion of any of these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy Code; -- the appointment of a Chapter 11 trustee in any of these Chapter 11 cases or the appointment of an examiner with expanded powers to operate or manage the financial affairs, the business or the reorganization of any Debtor; and -- the date of acceleration by the DIP Lenders. According to papers filed with the Court, the proceeds of the DIP loan will be used to finance working capital requirements and general corporate purposes in regard to the Debtors' postpetition operations. The lenders' facility will incur interest at LIBOR plus 7% per annum with a LIBOR floor of 3% per annum. The Debtors will pay $80,000 fee in the aggregate to the DIP lenders. The DIP lien is subject to a $500,000 carve-out for payment of U.S. Trustee fees, Clerk of Court fees, and fees payable to professionals retained in the Debtors' cases. Pursuant to Section 364(c)(1) of the Bankruptcy Code, all obligations under the DIP loans will be entitled to super-priority administrative expense status. DIP Lenders Michael A. Lubin, the co-chief executive officer of the Debtors, owns $7,011,000 of the principal amount with respect to the Debtors' senior subordinated notes. Mr. Lubin also owns 13% junior subordinated notes. In regard to the equity of the Debtors: -- Mr. Lubin and his affiliates hold 1,523,279 common shares and owns 78077 warrants to purchase the common stock of the Debtors at $3.50 per share; -- Mr. Lubin owns an additional 89,062 shares held by Lubin Delano & Co. Profit Sharing Trust; and -- Lubin Delano owns an additional 3,110 warrants. Mr. Lubin is a managing member of lender Lubin Partners. Mr. Conner is a director of the Debtors and owns 364,894 commons shares with respect to the equity. ORA Associates is not neither an affiliate of the Debtors nor of the other DIP lenders. About Lexington Precision Headquartered in New York, Lexington Precision Corp. -- http://www.lexingtonprecision.com/-- manufacture tight-tolerance rubber and metal components for use in medical, automotive, and industrial applications. As of Feb. 29, 2008, the companies employed about 651 regular and 22 temporary personel. The company and its affiliate, Lexington Rubber Group Inc., filed for Chapter 11 protection on April 1, 2008 (Bankr. S.D.N.Y. Lead Case No.08-11153). Richard P. Krasnow, Esq., at Weil, Gotshal & Manges, represents the Debtors in their restructuring efforts. The U.S. Trustee for Region 2 has not appointed creditors to serve on an Official Committee of Unsecured Creditors in these cases. When the Debtors filed for protection against their creditors, they listed total assets of $52,730,000 and total debts of $88,705,000. LEXINGTON PRECISION: Gets Final Approval to Use $4 Mil. Facility ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware authorized Lexington Precision Corp. and Lexington Rubber Group Inc. to obtain, on a final basis, up to $4,000,000 in postpetition financing from Lubin Partners LLC, William B. Conner, and ORA Associates LLC, as lenders, Bloomberg News reports. As reported in the Troubled Company Reporter on April 9, 2008, the Court gave the Debtors permission to access, on an interim basis, $2,000,000 of a possible $4,000,000 in financing. The lenders' facility will terminate on the earliest of: -- the one year anniversary of the Debtors' bankruptcy filing; -- the effective date of a confirmed Chapter 11 plan of reorganization in these Chapter 11 cases; -- the conversion of any of these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy Code; -- the appointment of a Chapter 11 trustee in any of these Chapter 11 cases or the appointment of an examiner with expanded powers to operate or manage the financial affairs, the business or the reorganization of any Debtor; and -- the date of acceleration by the DIP Lenders. According to papers filed with the Court, the proceeds of the DIP loan will be used to finance working capital requirements and general corporate purposes in regard to the Debtors' postpetition operations. The lenders' facility will incur interest at LIBOR plus 7% per annum with a LIBOR floor of 3% per annum. The Debtors will pay $80,000 fee in the aggregate to the DIP lenders. The DIP lien is subject to a $500,000 carve-out for payment of U.S. Trustee fees, Clerk of Court fees, and fees payable to professionals retained in the Debtors' cases. Pursuant to Section 364(c)(1) of the Bankruptcy Code, all obligations under the DIP loans will be entitled to super-priority administrative expense status. DIP Lenders Michael A. Lubin, the co-chief executive officer of the Debtors, owns $7,011,000 of the principal amount with respect to the Debtors' senior subordinated notes. Mr. Lubin also owns 13% junior subordinated notes. In regard to the equity of the Debtors: -- Mr. Lubin and his affiliates hold 1,523,279 common shares and owns 78077 warrants to purchase the common stock of the Debtors at $3.50 per share; -- Mr. Lubin owns an additional 89,062 shares held by Lubin Delano & Co. Profit Sharing Trust; and -- Lubin Delano owns an additional 3,110 warrants. Mr. Lubin is a managing member of lender Lubin Partners. Mr. Conner is a director of the Debtors and owns 364,894 commons shares with respect to the equity. ORA Associates is not neither an affiliate of the Debtors nor of the other DIP lenders. About Lexington Precision Headquartered in New York, Lexington Precision Corp. -- http://www.lexingtonprecision.com/-- manufacture tight-tolerance rubber and metal components for use in medical, automotive, and industrial applications. As of Feb. 29, 2008, the companies employed about 651 regular and 22 temporary personel. The company and its affiliate, Lexington Rubber Group Inc., filed for Chapter 11 protection on April 1, 2008 (Bankr. S.D.N.Y. Lead Case No.08-11153). Richard P. Krasnow, Esq., at Weil, Gotshal & Manges, represents the Debtors in their restructuring efforts. The U.S. Trustee for Region 2 has not appointed creditors to serve on an Official Committee of Unsecured Creditors in these cases. When the Debtors filed for protection against their creditors, they listed total assets of $52,730,000 and total debts of $88,705,000. LEVITZ FURNITURE: WFNNB Demands Allowance of $1,892,587 Claim ------------------------------------------------------------- World Financial Network National Bank and Levitz Furniture Inc., nka PVLTZ Inc., are parties to a BankCard agreement dated Nov. 8, 2002, under which WFNNB agreed to process the Visa and MasterCard credit card transactions between the Debtor and its customers. The types of transactions WFNNB processes for the Debtor include credit card purchases and deposits and refunds, which facilitates the transfer of funds between the customer's credit card bank and the Debtor. WFNNB also processes chargebacks for the Debtor, and has the right to charge back any amounts if the Debtor fails to comply with the BankCard Agreement or the rules set by the credit card companies. Thus, when the Debtor takes prepayments or deposits on merchandise and fails to deliver the product, the customer is entitled to a chargeback, and the Debtor is ultimately responsible for paying the chargeback. WFNNB is entitled to collect a fee for processing each chargeback. On behalf of WFNNB, Philip C. Dublin, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, related that WFNNB is required to respond to a chargeback within 30 days under the rules of the credit card companies. "In order to conduct the necessary investigation, the Debtor is required under the BankCard Agreement to provide certain documentation evidencing transactions to WFNNB," Mr. Dublin says. If the Debtor fails to produce the evidence to refute the customer's chargeback claim, WFNNB must charge back the transaction or return the funds to the customer's issuing bank, he added. WFNNB invoiced the Debtor more than $15,140, for the services it rendered after the Petition Date. The Bank also identified: (i) about $1,590,447 worth of chargebacks that it processed for the Debtor postpetition; and (ii) about $287,000 in additional chargebacks that the Debtor considers invalid due to lack of supporting evidence and alleged customer fraud, among other things. According to Mr. Dublin, the amount of chargeback requests increased substantially as the Debtor's Chapter 11 case progressed. "For each of the chargebacks, WFNNB requested the appropriate evidence of the underlying transaction. The Debtor largely failed to respond to these requests as well as to general inquiries by WFNNB, except in a few rare instances where the consumer provided evidence on behalf of the Debtor," Mr. Dublin related. He contended that the Debtor's failure to produce evidence of transactions is a breach of the BankCard Agreement and makes the Debtor ultimately liable for those additional chargebacks. Accordingly, WFNNB asks the U.S. Bankruptcy Court for the Southern District of New York to allow its administrative claim for $1,892,587. About Levitz Furniture/PVLTZ Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. -- http://www.levitz.com/-- is a specialty retailer of furniture, bedding and home furnishings in the United States. It has 76 locations in major metropolitan areas, principally in the Northeast and on the West Coast of the United States. Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on Sept. 5, 1997. In December 2000, the Court confirmed the Debtors' Plan and Levitz emerged from chapter 11 on February 2001. Levitz Home Furnishings Inc. was created as the new holding company as a result of the emergence. Levitz Home Furnishings and 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 45189). In their second filing, the Debtors disclosed about $245 million in total assets and $456 million in total debts. Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R. Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish LLP served as counsel to the Official Committee of Unsecured Creditors. During this period, the Debtors closed around 35 stores in the Northeast, California, Minnesota and Arizona. PLVTZ Inc., a company created by Prentice Capital Management LP, and Great American Group purchased substantially all the assets of Levitz Home Furnishings in December 2005. Initially, Prentice owned all of the equity interests in PLVTZ. On July 6, 2007, PLVTZ was converted into a Delaware corporation, and Harbinger Capital Partners Special Situations Fund, LP, Harbinger Capital Partners Master Fund I, Ltd., and their affiliates became minority shareholders. Great American's stake in the acquisition was in running the going-out-of-business sales for some 27 Levitz units. PLVTZ, dba Levitz Furniture, continued to face decline in financial performance since December 2005. Liquidity issues and the inability to obtain additional capital prompted PLVTZ to seek protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq., at Jones Day represents the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC serves as the Debtors' claims and noticing agent. The Debtor's schedules show total assets of $123,842,190 and total liabilities of $76,421,661. The Debtors' exclusive period to file a chapter 11 plan expired on March 7, 2008. (Levitz Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). LINENS N THINGS: Gets Interim OK to Tap $700-Mil. GECC DIP Loan --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware allowed Linens Holding Co., its operating subsidiary Linens 'N Things Inc., and their debtor-affiliates, in the interim, to request extensions of credit up to an aggregate outstanding principal of $700,000,000 at any one time outstanding, including a sub-limit for letter of credit up to $400,000,000 under a DIP credit facility with General Electric Capital Corporation and other lenders. The DIP Credit Facility consists of a senior revolving credit facility in a committed amount of up to $700,000,000. The Revolver will have a $400,000,000 sublimit for letters of credit and a sublimit for swingline loans, and a Canadian subfacility of up to $50,000,000. The Court will convene a hearing to consider final approval of the DIP Credit Facility on May 27, 2008, at 2:00 p.m. Deadline for objections on the Debtors' proposed Final Order is on May 19. Proposed counsel for the Debtors, Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates the Debtors and their non-debtor subsidiaries entered into a prepetition credit agreement with GECC and GE Canada Finance Holding Company. The Prepetition Lenders provided loans to the Linens Companies of up to $700,000,000, which consists of a $625,000,000 revolving credit facility, and a $75,000,000 Tranche B commitment. As of the Petition Date, an aggregate amount of $430,000,000 was outstanding under the Prepetition Credit Facility. Francis M. Rowan, the Debtors' chief financial officer, told the Court that the Debtors' reorganization depends in large part on restoring vendor, customer and employee confidence, and maintaining the operation of their business as they restructure. He says that the Debtors need to have an immediate need to access to the DIP Credit Facility, and to use certain prepetition collateral to, among other things, permit the orderly operation of their business by securing goods and paying employees, preserve the going concern value of the bankruptcy estates, fund their reorganization, and maximizing recoveries for stakeholders. Mr. Rowan said that given that the Debtors' vendors have been shipping only on a cash on delivery basis for several weeks prepetition, access to the DIP Credit Facility and use of cash collateral on an interim basis is necessary to enable the Debtors to obtain sufficient merchandise for the upcoming "back-to- school" sales. Thus, avoiding immediate and irreparable harm to the Debtors pending the final hearing on the request, he related. By their motion, the Debtors also proposed to grant super priority claim status to the claims of the DIP Lenders under the DIP Credit Agreement, and grant to GECC, as administrative and collateral agent for the DIP Lenders, security interests in, and liens upon certain collateral, subject to carve-out and other priority liens, as security for the repayment and other obligations arising under the DIP Credit Agreement. The Debtors will use the DIP proceeds to refinance obligations under their Prepetition Credit Facility, working capital and general corporate purposes, payment of costs of administration of the cases, and payment of certain prepetition expenses. The salient terms of the Credit DIP Agreement are: Borrowers: Linens Inc., Linens Center and Linens 'n Things Canada Corp. Guarantors: Linens Holding Co., and certain of its wholly-owned domestic subsidiaries. In addition, the Canadian Subfacility will be guaranteed by the Canadian Subsidiaries other than the Canadian Borrower. Interest Rates: At either the Alternate Base Rate/Canadian Prime Rate, or the Adjusted LIBOR Rate plus the Applicable Margins. Applicable Margins: Revolver ABR Rate/ Canadian Prime Margin 1.75% Revolver Eurodollar Rate 3.25% Standby L/C Margin 3.25% Commercial L/C Margin 2.75% Unused Facility Fee Margin 0.375% Carve-Out: Carve-out refers to allowed and unpaid professional fees and disbursements incurred by the credit parties and any statutory committee, and all fees required to be paid to the Clerk of the Bankruptcy Court and to the office of the U.S. Trustee, in an aggregate not exceeding $5,000,000. Canadian Liens: The Canadian Subfacility will be secured by all assets of the Canadian Subsidiaries only. DIP Credit Facility Claims and Liens: The DIP Credit Facility and all of the Debtors' obligations under the Facility will be entitled to super priority administrative claim status, and will be secured by properly perfected postpetition security interests and liens on all of the Debtors' assets and estates. Events of Default: In addition to the usual and customary events of default, the DIP Credit Agreement provides that these will constitute Events of Default: -- the filing of a plan of reorganization or disclosure statement, which GECC, GE Canada and the Required Lenders do not consent. The Required Lenders are the DIP Lenders having more than 66.67% of the sum of all outstanding loans; -- the termination of the Debtors' exclusive periods; -- the failure of the Debtors to meet any of these deadlines: * 09/14/2008 -- Deadline for filing a Chapter 11 Plan * 10/14/2008 -- Deadline for Disclosure Statement approval * 11/18/2008 -- Deadline for soliciting votes on Plan * 11/28/2008 -- Deadline for entry of a confirmation order Remedies on Event of Default: In addition to customary remedies, and after giving five business days' notice to the Debtors, official committees and the U.S. Trustee, GECC will have relief from the automatic stay, and may foreclose on the DIP Priority Collateral, collect accounts receivable and apply proceeds to the obligations, occupy the Debtors' premises to complete inventories, fulfill orders and sell inventories, execute going out-of-business sales, or exercise remedies against the DIP Priority Collateral permitted by applicable nonbankruptcy law. A full-text copy of the DIP Credit Agreement is available for free at http://bankrupt.com/misc/LNT_DIP_Credit_Agreement.pdf Clifton, New Jersey-based Linens Holding Co., which does business through its operating subsidiary Linens 'N Things Inc. -- http://www.lnt.com/-- is the second largest specialty retailer of home textiles, housewares and home accessories in North America operating 589 stores in 47 U.S. states and seven Canadian provinces as of December 29, 2007. The company is a destination retailer, offering one of the broadest and deepest selections of high quality brand-name well as private label home furnishings merchandise in the industry. Linens 'N Things and 11 affiliates filed separate voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware on May 2, 2008 (Lead Case No. 08-10832). The Canadian operations are not included in the filings. Linens 'N Things is represented by Richards, Layton & Finger, P.A., and Morgan, Lewis & Bockius LLP. Conway, Del Genio, Gries & Co., LLC will serve as the retailer's restructuring advisor until substantial consummation of a chapter 11 plan. Conway Del Genio's Michael F. Gries acts as the Debtors' chief restructuring officer and interim CEO. Kurtzman Carson Consultants LLC acts as the Debtors' claims agent. A Noteholder Committee has been formed and is represented by Kasowitz, Benson, Torres & Friedman LLP, and Pachulski Stang Ziehl & Jones. LINENS 'N THINGS: Bankruptcy Filing Cues Fitch's Default Rating --------------------------------------------------------------- Fitch Ratings has downgraded its Issuer Default Rating on Linens 'n Things, Inc. to 'D' from 'C' and reaffirmed the ratings on Linens existing asset-backed revolver at 'CC/RR3' and the senior secured notes at 'C/RR5'. The Negative Rating Watch has been removed. Fitch expects to withdraw its ratings on Linens within thirty days. Fitch's action follows Linens' Chapter 11 filing for the company and its U.S. subsidiaries and excludes its Canadian operations. Linens has secured $700 million in debtor-in-possession financing from General Electric Capital Corp. Linens has also announced plans to close 120 of its 589 stores. LINENS 'N THINGS: Bankruptcy Filing Cues Moody's Default Rating --------------------------------------------------------------- Moody's Investors Service downgraded Linens 'N Things, Inc.'s ratings, probability of default rating to D and confirmed all other existing long term ratings. The downgrade of Linens' PDR is prompted by Linens' N Things voluntary filing of Chapter 11 on May 2, 2008. This rating is downgraded: -- Probability of default rating to D from Ca. These ratings are confirmed: -- Corporate family rating at Ca; -- $650 Million of senior secured guaranteed notes due 2014 at Ca (LGD4, 61%). -- The Speculative Grade Liquidity Rating remains a SGL-4. As a result of the bankruptcy filing, Moody's will withdraw all the ratings on Linens 'N Things in the near future. Linens N Things Inc., headquartered in Clifton, New Jersey, is a nationwide specialty retailer of home textiles, housewares, and home accessories that operates approximately 589 stores in 47 states and seven Canadian provinces. Revenues for the lagging twelve month period ended Dec. 29, 2007 were approximately $2.8 billion. LINENS 'N THINGS: S&P Withdraws Default Rating ---------------------------------------------- Standard & Poor's Ratings Services withdrew its 'D' ratings on Clifton, New Jersey-based Linens 'n Things Inc. and its '6' recovery rating on the company's senior secured floating-rate notes. Subsequent to the company's Chapter 11 filing, S&P determined that they would not have access to sufficient information to continue surveillance on the company's recovery ratings. MAGELLAN HEALTH: S&P Holds Ratings; Revises Outlook to Positive --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Magellan Health Services Inc. to positive from stable. At the same time, Standard & Poor's said it has affirmed its 'BB' counterparty credit rating on Magellan and withdrawn its 'BBB-' debt rating assigned to Magellan's $150 million credit facility due August 2008. "The revised outlook reflects Magellan's strengthening balance sheet fundamentals and improving business profile diversity," said Standard & Poor's credit analyst Joseph Marinucci. Over the past few years, Magellan has materially reduced debt outstanding, strengthened its liquidity position, and significantly enhanced its tangible net equity position. In addition, the company's acquired lines are beginning to contribute more meaningfully to cash flow generation. The rating affirmation reflects the company's established competitive position, improving cash flow diversity, and good liquidity and financial flexibility. The rating is constrained by qualitative business profile considerations related to changing competitive and product dynamics and uncertainties about Magellan's prospects for sustained growth into new and compatible markets through acquisition. In addition, the company remains exposed to client concentration risk. "Standard & Poor's might raise the rating by one notch if Magellan continues to perform in accordance with our expectations for 2008 and adequately manages growth from a risk perspective," said Mr. Marinucci. "Conversely, we might revise the outlook back to stable or negative if cash flow and earnings erode or if the company were to make an acquisition that significantly altered its capital structure. "The timeliness and effectiveness of the process related to the hiring of a new CFO could also affect our position on the outlook and the potential for an upgrade," Mr. Marinucci added. MARATHON STRUCTURED: Fitch Chips Rating to BB on Class A-1 Notes ---------------------------------------------------------------- Fitch downgraded one class of notes issued by Marathon Structured Funding I, LLC, and withdraws the class A-2 notes. These rating action is effective immediately: -- $131,288,059 class A-1 notes downgraded to 'BB' from 'AAA' and remain on Rating Watch Negative; Marathon Structured Funding is a collateralized debt obligation that closed on March 22, 2005 and is managed by Marathon Asset Management, LLC. Marathon Structured Funding ended its reinvestment period in January 2008. Marathon Structured funding has a portfolio comprised primarily of subprime residential mortgage-backed securities bonds (67.5%), structured finance (6.7%), and non-SF CDOs (18.2%) and other structured finance assets. Subprime RMBS bonds of the 2005, 2006, and 2007 vintages account for approximately 16.0%, 18.2%, and 23.5% of the portfolio, respectively. Likewise, the SF CDO exposure includes SF CDO originated in 2005 (5.2%) and 2006 (1.5%). Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS and SF CDOs with underlying exposure to subprime RMBS. Since the beginning of 2007, approximately 57.1% of the portfolio has been downgraded with 10.6% of the portfolio currently on Rating Watch Negative. The negative credit migration is primarily attributable to credit deterioration in subprime RMBS bonds from the 2005, 2006 and 2007 vintages, coupled with significant downgrades in SF CDOs originated between 2005 and 2007. Approximately 48.4% of the portfolio is below investment grade of which 39.4% is rated CCC and below. The class A-2 notes were issued a credit rating with a $0 balance in expectation of future issuance, no class A-2 notes were ever issued and the ability to issue class A-2 in the future no longer exists. Because the class A-2 notes will not be issued, Fitch has withdrawn the rating. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class A-1 notes addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. MERCK & CO: To Reduce U.S. Sales Force by 1,200 Positions --------------------------------------------------------- Merck & Co., Inc. plans to reduce the size of its U.S. sales force by 1,200 positions. In February 2008, the company disclosed that as part of implementing the new commercial model, the company is re-engineering its core business to be more efficient with the goal of reducing aspects of its cost base and realizing gross margin improvement. The reengineering includes the implementation of manufacturing and marketing cost savings initiatives. The initial phase of the global restructuring program announced in 2005 was designed to reduce the company’s cost structure, increase efficiency and enhance competitiveness. The scope of this initial phase included the implementation of a new supply strategy by the Merck Manufacturing Division over a three-year period, focusing on establishing lean supply chains, leveraging low-cost external manufacturing and consolidating the company's manufacturing plant network. As part of this program, through January 2008, Merck had closed, sold or ceased operations at five manufacturing sites and two preclinical sites and eliminated approximately 7,200 positions company-wide (comprised of actual headcount reductions and the elimination of contractors and vacant positions). The company, however, continues to hire new employees as the business requires. As of March 2008, the company has 59,800 employees worldwide. "Merck is taking this step as part of our previously disclosed, continuing efforts to optimize our cost base and improve Merck's effectiveness and efficiency across all aspects of our business as part of our Plan to Win strategy," Kenneth Frazier, president, Global Human Health, said. "With eight successful launches of Merck products approved in the U.S. since 2006 now behind us, and with an unexpected delay in a new product approval, we decided to accelerate the achievement of efficiencies we anticipate gaining as we transition to our new commercial model in the U.S." The company does not anticipate any disruption in its service to customers as these changes occur. Affected employees, who are located throughout the U.S., will be notified by the end of May; separations will be completed by the end of July. As Merck takes this difficult but necessary action, the Company is committed to treating employees with fairness and respect. Eligible employees will receive benefits and other services to assist them. The pretax costs of this restructuring program since inception through the end of 2007 were $2.1 billion, of which approximately 70% are non-cash, relating primarily to accelerated depreciation for those facilities scheduled for closure and approximately 30% represent separation and other restructuring related costs. These costs were $810.1 million in 2007 and are expected to be approximately $100 million to $300 million in 2008, at which time the initial phase of the restructuring program relating to the manufacturing strategy is expected to be substantially complete. Merck continues to expect the initial phase of its cost reduction program, combined with cost savings the company expects to achieve in its marketing and administrative and research and development expenses, will yield cumulative pretax savings of $4.5 to $5.0 billion from 2006 through 2010. VIOXX Litigation Individual and putative class actions have been filed against the company in federal and state courts alleging personal injury and economic loss with respect to the purchase or use of VIOXX. A number of these actions are coordinated in a multidistrict litigation in the U.S. District Court for the Eastern District of Louisiana, and in separate coordinated proceedings in state courts in the states of New Jersey, California and Texas and in the counties of Philadelphia, Pennsylvania; Washoe County, Nevada; and Clark County, Nevada. As of March 31, 2008, the company had been served or was aware that it had been named as a defendant in approximately 14,450 lawsuits, which include approximately 32,925 plaintiff groups alleging personal injuries resulting from the use of VIOXX, and in approximately 260 putative class actions alleging personal injuries or economic loss. Of these lawsuits, approximately 9,200 lawsuits representing approximately 24,325 plaintiff groups are or are slated to be in the federal MDL, and approximately 3,350 lawsuits representing approximately 3,350 plaintiff groups are included in a coordinated proceeding in New Jersey Superior Court. In addition, as of March 31, 2008, approximately 12,760 claimants had entered into Tolling Agreements with the company, which halt the running of applicable statutes of limitations for those claimants who seek to toll claims alleging injuries resulting from a thrombotic cardiovascular event that results in a myocardial infarction or ischemic stroke. Information regarding scheduled product liability trials in 2008 can be found at http://www.merck.com/newsroom/vioxx/ About Merck & Co. Based in Whitehouse Station, New Jersey, Merck & Co., Inc. -- http://www.merck.com/-- is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs. The company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them. Merck also publishes unbiased health information as a not-for- profit service. MERRILL LYNCH: Fitch Chips Ratings on $121.3MM Certificates ----------------------------------------------------------- Fitch Ratings has taken rating actions on eight Merrill Lynch Mortgage Investors mortgage pass-through certificate transactions. Unless stated otherwise, any bonds that were previously placed on Rating Watch Negative are removed. Affirmations total $390 million and downgrades total $121.3 million. Additionally, $2.6 million was placed on Rating Watch Negative. Series 2003-HE1 -- $6.0 million class A-1 affirmed at 'AAA'; -- $8.5 million class A2-B affirmed at 'AAA'; -- $13.1 million class M-1 affirmed at 'AA'; -- $3.4 million class M-2 affirmed at 'A+'; -- $1.2 million class M-3 downgraded to 'BBB+' from 'A'; -- $0.8 million class B-1 downgraded to 'BBB' from 'A-'; -- $0.8 million class B-2 downgraded to 'B' from 'BB+'; -- $0.8 million class B-3 downgraded to 'CC/DR3' from 'B'. Deal Summary -- Originators: 86% Provident & 14% Novelle; -- 60+ day Delinquency: 17.78%; -- Realized Losses to date (% of Original Balance): 1.77%. Series 2003-OPT1 -- $48.9 million class A-1 affirmed at 'AAA'; -- $7.6 million class A-2 affirmed at 'AAA'; -- $6.5 million class A-3 affirmed at 'AAA'; -- $52.6 million class M-1 affirmed at 'AAA'; -- $12.8 million class M-2 affirmed at 'A+'; -- $2.9 million class M-3 downgraded to 'A-' from 'A'; -- $3.0 million class B-1 downgraded to 'BBB' from 'A-'; -- $3.3 million class B-2 downgraded to 'BB' from 'BB+'; -- $2.2 million class B-3 affirmed at 'B'. Deal Summary -- Originators: 100% Option One Mortgage Corp.; -- 60+ day Delinquency: 16.46%; -- Realized Losses to date (% of Original Balance): 0.84%. Series 2003-WMC1 -- $12.0 million class M-2 affirmed at 'AA-'; -- $16.8 million class B-1 revised to 'CCC/DR2' from 'CCC/DR1'; -- $0.7 million class B-2 revised to 'C/DR6' from 'C/DR5'. Deal Summary -- Originators: 100% WMC Mortgage Corp.; -- 60+ day Delinquency: 26.67%; -- Realized Losses to date (% of Original Balance): 1.84%. Series 2003-WMC2 -- $20.1 million class M-2 affirmed at 'AA-'; -- $16.8 million class B-1 downgraded to 'B' from 'BBB+'; -- $1.8 million class B-2 downgraded to 'C/DR5' from 'BB+'. Deal Summary -- Originators: 100% WMC Mortgage Corp.; -- 60+ day Delinquency: 20.68%; -- Realized Losses to date (% of Original Balance): 1.30%. Series 2003-WMC3 -- $25.2 million class M-3 affirmed at 'A+'; -- $15.7 million class M-4 downgraded to 'A-' from 'A'; -- $5.1 million class B-1 downgraded to 'BB' from 'BBB+'; -- $0.5 million class B-2 downgraded to 'B+' from 'BB'; -- $0.8 million class B-3 downgraded to 'B' from 'BB-'. Deal Summary -- Originators: 100% WMC Mortgage Corp.; -- 60+ day Delinquency: 20.01%; -- Realized Losses to date (% of Original Balance): 1.39%. Series 2004-HE1 -- $3.9 million class M-1 affirmed at 'AA'; -- $10.7 million class M-2 downgraded to 'BBB+' from 'A'; -- $3.8 million class B-1 downgraded to 'BB+' from 'BBB+'; -- $3.5 million class B-2 downgraded to 'CCC/DR1' from 'BBB'; -- $0.6 million class B-3 downgraded to 'C/DR5' from 'B'. Deal Summary -- Originators: Various; -- 60+ day Delinquency: 21.53%; -- Realized Losses to date (% of Original Balance): 1.27%. Series 2004-HE2 -- $7.7 million class A-1A affirmed at 'AAA'; -- $0.5 million class A-1B affirmed at 'AAA'; -- $8.2 million class A-2C affirmed at 'AAA'; -- $0.0 million class R affirmed at 'AAA'; -- $35.8 million class M-1 affirmed at 'AA'; -- $21.7 million class M-2 affirmed at 'A'; -- $7.7 million class M-3 affirmed at 'A-'; -- $7.7 million class B-1 affirmed at 'BBB+'; -- $6.2 million class B-2 affirmed at 'BBB'; -- $2.6 million class B-3 rated 'BBB-', placed on Rating Watch Negative. Deal Summary -- Originators: Various; -- 60+ day Delinquency: 14.42%; -- Realized Losses to date (% of Original Balance): 1.79%. Series 2004-OPT1 -- $48.8 million class A-1A affirmed at 'AAA'; -- $2.6 million class A-1B affirmed at 'AAA'; -- $19.3 million class A-2A affirmed at 'AAA'; -- $1.3 million class A-2B affirmed at 'AAA'; -- $0.0 million class R affirmed at 'AAA'; -- $31.0 million class M-1 downgraded to 'A' from 'AA'; -- $15.1 million class M-2 downgraded to 'BBB' from 'A'; -- $1.2 million class M-3 downgraded to 'BBB-' from 'A-'; -- $1.2 million class B-1 downgraded to 'BB+' from 'BBB+'; -- $0.7 million class B-2 downgraded to 'BB' from 'BBB'. Deal Summary -- Originators: 100% Option One Mortgage Corp.; -- 60+ day Delinquency: 18.14%; -- Realized Losses to date (% of Original Balance): 0.51%. MERRILL LYNCH: Fitch Takes Rating Actions on Various Cert. Classes ------------------------------------------------------------------ Fitch Ratings has taken rating actions on these Merrill Lynch Mortgage Investors Merrill Lynch Credit Corp. mortgage pass- through certificates: Series 2003-C -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AA+'; -- Class B-3 affirmed at 'A+'; -- Class B-4 downgraded to 'BB' from 'BBB+'; -- Class B-5 downgraded to 'CC/DR3' from 'BB+'. Series 2004-G -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A+'; -- Class B-3 downgraded to 'B' from 'BBB'; -- Class B-4 downgraded to 'CC/DR4' from 'BB+'; -- Class B-5 downgraded to 'C/DR6' from 'B+'. The affirmations, affecting approximately $194.9 million of the outstanding certificates, reflect a stable relationship between credit enhancement and expected loss. The downgrades, affecting approximately $4.1 million of the outstanding certificates, are taken as a result of a deteriorating relationship between credit enhancement and expected loss. The negative rating actions on the transactions are because of current trends in the relationship between serious delinquency and credit enhancement. The 90+ DQ for series 2003-C is 2.30% and series 2004-G is 8.50% of the current collateral balance. The collateral of the transactions consists of conventional, adjustable-rate, fully amortizing mortgage loans extended to prime borrowers and secured by first liens on one- to four-family residential properties. The loans were originated or acquired by Merrill Lynch Credit Corp. and are serviced by PHH Mortgage Corp., which is rated 'RPS1-' by Fitch. As of the March 2008 remittance date, the pool factor of series 2003-C is 13% and series 2004-G is 15%. Series 2003-C is seasoned 57 months and series 2004-G is seasoned 39 months. MERRILL LYNCH: Fitch Affirm 'BB' Rating on Class B-2 Certificates ----------------------------------------------------------------- Fitch Ratings affirmed Merrill Lynch Bank USA mortgage pass- through certificates as: Series 2001-A -- Class A at 'AAA'; -- Class M-1 at 'AA+'; -- Class M-2 at 'AA-'; -- Class B-1 at 'BBB'; -- Class B-2 at 'BB'. The affirmations, affecting approximately $87.8 million of the outstanding certificates, reflect a stable relationship between credit enhancement and expected loss. The collateral of the transaction consists of high balance, adjustable rate mortgage loans extended to prime borrowers and secured by first liens on one- to four-family residential properties. The loans were originated or acquired by Merrill Lynch Credit Corp. and are serviced by PHH Mortgage Corp., which is rated 'RPS1-' by Fitch. As of the March 2008 remittance date, series 2001-A has a pool factor of 14% and is seasoned 84 months. NAE OF KENDALL: Case Summary & Six Largest Unsecured Creditors -------------------------------------------------------------- Debtor: NAE of Kendall, LLC 14040 S.W. 139 Ct. Miami, FL 33186 Bankruptcy Case No.: 08-15354 Chapter 11 Petition Date: April 29, 2008 Court: Southern District of Florida (Miami) Judge: 08-15354 Debtor's Counsel: Mariaelena Guitian, Esq. Email: mguitian@gjb-law.com Genovese Joblove & Battista 200 E. Broward Blvd., Ste. 1110 Ft. Lauderdale, FL 33301 Tel: (954) 453-8000 Fax: (954) 453-8010 http://www.gjb-law.com/ Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million Debtor's Six Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Bayview Loan Servicing LLC 14040 S.W. 139 Ct. $1,714,021 4425 Ponce de Leon, 5th Flr. Miami, FL 33186 Coral Gables, FL 33146 Tamiami Pointe, Ltd. 14040 S.W. 139 Ct. $210,000 1637 N.W. 27 Ave. 200 Miami, FL 33186; Miami, FL 33125 value of senior lien: $3,558,042 Jose M. De La O, Esq. attorney's fees $5,000 75 Valencia Ave. Flr. 4 Miami, FL 33134 Carlos Ziegenhirt, Esq. attorney's fees $2,500 CitiCard Visa-CitiBusiness credit card $2,072 Waste Management garbage pick-up $2,026 NIELSEN CO: S&P Revises Outlook on 'B' Rating to Stable from Neg. ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on the 'B' corporate credit rating of The Nielsen Co. B.V. to stable from negative. "The outlook change reflects the company's good operating performance and progress in its cost-cutting initiatives," said Standard & Poor's credit analyst Tulip Lim. "However, Nielsen's discretionary cash flow remains weak, prolonging its highly leveraged status." The ratings on the New York City-based Nielsen reflect the company's highly leveraged capital structure, track record of frequent acquisitions that have deferred deleveraging, the continuing investment required to remain competitive in the evolving marketing information industry, and ongoing customer pressure on prices and service levels that underpin the need for an efficient cost base. Nielsen's satisfactory business risk profile, which reflects its strong market positions in media measurement and retail marketing information, and significant recurring revenues partially offset these factors. Operating in more than 100 countries, Nielsen is one of the world's leading providers of marketing, media, and business information. Marketing information and media measurement have a high proportion of sales contracted in advance and strong renewal rates, which mean that cash flows are relatively predictable. Nielsen aims to deleverage its balance sheet largely through EBITDA growth resulting from cost savings. Management's progress depends on several factors, some of which are not within its control. In particular, S&P expect that most of the cost savings will originate in the marketing information division, which is more exposed to competition. Nielsen's acquisition of IAG Research Inc. last month, its August 2007 acquisition of U.S. telecom research provider Telephia Inc., and the June 2007 buyout of minority investors in Nielsen/NetRatings Inc. were marginally negative to Nielsen's near-term liquidity and at price tags that reinforce high leverage. Also, funding of the cost-cutting program and pension-plan contributions will consume cash for the next few years. As a result, S&P expect debt reduction will be very limited, with any improvement in credit measures coming from EBITDA growth. NEXTEL CORP: S&P Lowers Ratings to 'BB' on Five Transactions ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on five Sprint Nextel Corp. - related transactions and removed them from CreditWatch with negative implications. The rating actions reflect the May 1, 2008, lowering of the ratings on the underlying securities, the 6.875% notes due Nov. 15, 2028, and the 8.75% notes due March 15, 2032, issued by Sprint Capital Corp. (a subsidiary of Sprint Nextel Corp.) and their removal from CreditWatch with negative implications. STRATS Trust for Sprint Capital Corp. Securities Series 2004-2, Corporate Backed Trust Certificates Sprint Capital Note-Backed Series 2003-17, COBALTS Trust for Sprint Capital Notes' series 2002-1, and PPLUS Trust Series SPR-1 are pass-through transactions. The ratings on the certificates issued by the trusts for those transactions are based solely on the rating assigned to the underlying securities, the 6.875% notes due Nov. 15, 2028, issued by Sprint Capital Corp. SATURNS Sprint Capital Corp. Debenture Backed Series 2003-2 is a pass-through transaction, and the rating on the callable units issued by the trust is based solely on the rating assigned to the underlying securities, the 8.75% notes due March 15, 2032, issued by Sprint Capital Corp. Ratings Lowered and Removed from Creditwatch Negative COBALTS Trust for Sprint Capital Notes $25 million corporate-backed listed trust securities trust series Sprint Capital certificates, series 2002-1 Rating ------ Class To From ----- -- ---- Certs BB BBB-/Watch Neg Corporate Backed Trust Certificates Sprint Capital Note-Backed Series 2003-17 $25 million Sprint Capital note-backed series 2003-17 Rating ------ Class To From ----- -- ---- A-1 BB BBB-/Watch Neg PPLUS Trust Series SPR-1 $42 million trust certificates series SPR-1 Rating ------ Class To From ----- -- ---- Cert BB BBB-/Watch Neg SATURNS Trust No. 2003-2 $30 million callable units series 2003-2 Rating ------ Class To From ----- -- ---- A BB BBB-/Watch Neg B BB BBB-/Watch Neg Structured Repackaged Asset Backed Trust Securities (STRATS) Certificates Series 2004-2 $38 million certificates series 2004-2 Rating ------ Class To From ----- -- ---- A-1 BB BBB-/Watch Neg NORTH SHORE: Case Summary & Nine Largest Unsecured Creditors ------------------------------------------------------------ Debtor: North Shore LLP dba Highland Lakes Country Club 20552 Lake Highlands Blvd. Lago Vista, Tx 78645 Bankruptcy Case No.: 08-10770 Type of Business: The Debtor owns and manages a golf course. Chapter 11 Petition Date: April 28, 2008 Court: Western District of Texas (Austin) Judge: Frank R. Monroe Debtor's Counsel: Eric A. Liepins, Esq. 12770 Coit Rd., Ste. 1100 Dallas, TX 75251 Tel: (972) 991-5591 Fax: (972) 991-5788 Email: eric@ealpc.com Total Assets: $1,753,000 Total Debts: $736,028 Debtor's Nine Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Montegra Capital Resources first lien holder on $500,000 730 17th St. Ste. 690 property Denver, CO 80202 C&M Air Cooled Engine, Inc. $39,675 6612 W. Highway 84 Woodway, TX 76712 Professional Turf Products $16,638 1010 N. Industrial Blvd., Euless, TX 76039 Comptroller $13,106 Floor King, Inc. $6,348 Perdanales Electric $4,186 Thomas Petroleum LLC $850 Logix Communications $725 IESI $500 NORTHWEST AIRLINES: Posts $4.1 Billion First Qtr. 2008 Net Loss --------------------------------------------------------------- Northwest Airlines Corporation reported a first quarter 2008 net loss of $4.1 billion, or $15.78 per share. Reported results include a non-cash goodwill impairment charge of $3.9 billion. This compares to the first quarter 2007 when Northwest reported a net loss of $292 million. Excluding non-recurring, non-cash impairment charges and losses associated with marking-to-market out-of-period fuel hedges, Northwest reported a first quarter 2008 net loss of $191 million versus the first quarter 2007 when the airline reported net income of $73 million before the impact of reorganization items and out- of-period fuel hedge gains. Excluding taxes and out-of-period mark-to-market adjustments on fuel hedges, Northwest paid $2.77 per gallon for jet fuel in the first quarter compared to $1.85 a gallon in the first quarter of 2007, an increase of 49.7 percent. On April 14, Northwest announced an agreement to merge with Delta. Commenting on the transaction, Doug Steenland, Northwest Airlines' president and chief executive officer, said, "The agreement to merge with Delta creates America's premier global airline. Because it combines end-to-end networks with little overlap, there will be no reduction in competition. The transaction will create America's leading airline -- an airline that is more financially secure, better able to invest in our employees and our customers and be sustainable in an increasingly competitive marketplace. The new carrier will offer superior route diversity across the U.S., Latin America, Europe and Asia and will be better able to overcome the industry's boom-and-bust cycles. The airline will also be better able to match the right planes with the right routes, making transportation more efficient across our entire network." In commenting on first quarter results, Mr. Steenland added, "Northwest's first quarter performance was negatively impacted by the dramatic increases in the price of oil. Year-over-year our first quarter total fuel expense increased by $445 million, or 57.3 percent. The sustained high fuel prices represent an extraordinary challenge to Northwest and the entire airline industry. In response to fuel, we have taken a series of actions and will continue to monitor the impacts of fuel prices on our operation and are prepared to take additional actions as necessary." $3.9 Billion Non-cash, Non-recurring Accounting Charge Taken to Reduce Goodwill The company is required for accounting purposes to measure the value of goodwill annually or whenever significant events that could be indicators of a change in value have occurred. In completing the company's first quarter evaluation, NWA considered the impact of current high fuel prices, Northwest's recent stock price, other industry trends and the equity value of Northwest implied by the recent merger announcement and have determined that an impairment to goodwill is required. To make this etermination, the company compared the carrying value of its equity to its fair value. For purposes of this evaluation, fair value has been determined based on the implied market value of Northwest's equity in the announced transaction. As a result of this evaluation, the company recorded a non-cash goodwill impairment charge of $3.9 billion. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007 the Debtors filed with the Court their Chapter 11 Plan. On Feb. 15, 2007, they Debtors filed an Amended Plan & Disclosure Statement. The Court approved the adequacy of the Debtors' Disclosure Statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' Plan. The Plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 92; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on April 17, 2008, Moody's Investors Service placed the debt ratings of Delta Air Lines, Inc. ("Delta", corporate family at B2) and Northwest Airlines Corporation ("Northwest", corporate family rating at B1) on review for possible downgrade. The review was prompted by the announcement that the two airlines have agreed to combine in an all-stock transaction with a combined enterprise value of approximately $18 billion. Fitch Ratings has affirmed the debt ratings of Delta Air Lines, Inc. following the announcement that Delta has agreed to merge with Northwest Airlines Corp., subject to approval by the two airlines' shareholders and the U.S. Department of Justice. Delta's ratings were affirmed as: Issuer Default Rating at 'B'; First-lien senior secured credit facilities at 'BB/RR1'; Second- lien secured credit facility (Term Loan B) at 'B/RR4'. The issue ratings apply to $2.5 billion of committed credit facilities. The Rating Outlook for Delta has been revised to Negative from Stable. Standard & Poor's Ratings Services placed its ratings, including the 'B+' long-term corporate credit rating, on Northwest Airlines Corp. on CreditWatch with negative implications, following announcement of a merger agreement with Delta Air Lines Inc. (B/Watch Pos/--). The CreditWatch listing affects enhanced equipment trust certificates with various ratings, excepting those that are insured by a bond insurer. S&P's listing of Northwest ratings on CreditWatch with negative implications and those of Delta on CreditWatch with positive implications implies that S&P foresee a corporate credit rating of either 'B' or 'B+' for the combined entity. NORTHWEST AIRLINES: Merger with Delta to Result in 1,000 Cut Jobs ----------------------------------------------------------------- In a testimony before Congress, Delta Air Lines, Inc. Chief Executive Officer Richard Anderson disclosed that a merger with Northwest Airlines, Inc., will mean the loss of a "guess-timate" of 1,000 additional jobs, the Atlanta-Journal Constitution reports. According to Mr. Anderson, the job losses would come after the deal closes, and would be concentrated on "the management jobs, not the front-line jobs" that would involve "finance, accounting -- the functions that are important in the headquarters." The layoff is part of an effort to save on costs to offset skyrocketing fuel prices, Mr. Anderson told the Committees in the House and the Senate. Mr. Anderson will be chief executive officer of the merged airline. Delta and Northwest have recently launched their campaign in Washington, D.C., by testifying before Senate and Congress hearings. Majority of the lawmakers "appeared friendly" of the proposed consolidation, finding, among other things, that there is "very little overlap" in the carriers' routes, and agreeing that "fuel costs really are a game-changer." Prior to the hearings, Mr. Anderson told The Associated Press that regardless of the merger, Delta and Northwest will continue to adjust capacity to demand as fuel prices continue at current levels. "That's the rational thing to do, and we'll continue to do that," he maintained. After the hearing, Delta spokeswoman Chris Kelly told AJC that because the consolidated company would be based in Atlanta, more of the job cuts may be from Northwest because they may not want to make the move to Georgia. In the coming months, the two airlines will face additional hearings. Regulators and shareholders will reveal whether they approve the combination, the AP says. NWA's CEO Stands to Get $22.1MM After Merger Northwest CEO Doug Steenland, according to Business Week of Minnesota, will get about $22.1 million when he resigns after the Delta merger. Business Week adds that in 2007, Mr. Steenland pooled $27 million, including $6 million in stock options following Northwest's bankruptcy exit. The report comments that the stock option is "currently worthless" since the exercise price of $22 per share is twice the company's current share price. Minnesota's Star Tribune reports that Northwest intends to retain Mr. Steenland after the merger and wooes the executive with $3.6 million in stock options. Based on Star Tribune, Mr. Steenland waived his option to resign last June and get $3.2 million in severance pay. The executive in turn opted a 375,000 "restricted retention units" as a stock-based compensation, Star Tribune says. Delta Pilots Open to Arbiter, Union Chairman Says Lee Moak, the head of executive committee of Delta's pilots union, suggested that he is open to arbitration with Northwest pilots over how to merge their seniority lists, the AP says. In a letter addressed to fellow pilots, Mr. Moak said that union leaders believe that seniority integration should be accomplished after negotiation of a single joint contract and, if necessary, "expedited arbitration [should] be completed before closing of a corporate transaction." Mr. Moak related that while Delta and Northwest pilots failed to reach an overall agreement on pilot seniority integration, the Delta pilots union determined "an alternative that would provide for a superior outcome not only for the pre-merger Delta pilots, but eventually for all pilots of the merged corporation." As a result, a tentative agreement between Delta management and the Delta pilots union was formed, which will provide certain modifications to the current Pilot Working Agreement, that include, among others, a three and one-half percent equity stake in the merged Company, annual pay raises, "furlough protection," and an increase in 737-700 pay rates, the letter said. Rank-and-file Delta pilots will soon be asked to vote on the proposed Agreement. The Agreement does not cover Northwest pilots, whose union has stated it supports arbitration. The statement, however, was said before Delta's pilots cut a deal with management days before the merger announcement, says the AP. Mr. Moak disclosed that Delta's pilots union welcomes the idea of partnering with the Northwest pilots "to bring about the rapid completion of a new joint contract and a fair and equitable integrated seniority list upon the effective date of the . . . Agreement." A full-text copy of Mr. Moak's letter is available for free at: http://crewroom.alpa.org/dal/DesktopDefault.aspx?tabid=2421 About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News, Issue No. 96; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Jan. 17, 2008, Standard and Poor's said that media reports that Delta Air Lines Inc. (B/Positive/--) entered into merger talks with UAL Corp. (B/Stable/--) and Northwest Airlines Corp. (B+/Stable/--) will have no effect on the ratings or outlook on Delta, but that confirmed merger negotiations would result in S&P's placing ratings of Delta and other airlines involved on CreditWatch, most likely with developing or negative implications. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007 the Debtors filed with the Court their Chapter 11 Plan. On Feb. 15, 2007, they Debtors filed an Amended Plan & Disclosure Statement. The Court approved the adequacy of the Debtors' Disclosure Statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' Plan. The Plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 91; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on April 17, 2008, Moody's Investors Service placed the debt ratings of Delta Air Lines, Inc. ("Delta", corporate family at B2) and Northwest Airlines Corporation ("Northwest", corporate family rating at B1) on review for possible downgrade. The review was prompted by the announcement that the two airlines have agreed to combine in an all-stock transaction with a combined enterprise value of approximately $18 billion. Fitch Ratings has affirmed the debt ratings of Delta Air Lines, Inc. following the announcement that Delta has agreed to merge with Northwest Airlines Corp., subject to approval by the two airlines' shareholders and the U.S. Department of Justice. Delta's ratings were affirmed as: Issuer Default Rating at 'B'; First-lien senior secured credit facilities at 'BB/RR1'; Second- lien secured credit facility (Term Loan B) at 'B/RR4'. The issue ratings apply to $2.5 billion of committed credit facilities. The Rating Outlook for Delta has been revised to Negative from Stable. Standard & Poor's Ratings Services placed its ratings, including the 'B+' long-term corporate credit rating, on Northwest Airlines Corp. on CreditWatch with negative implications, following announcement of a merger agreement with Delta Air Lines Inc. (B/Watch Pos/--). The CreditWatch listing affects enhanced equipment trust certificates with various ratings, excepting those that are insured by a bond insurer. S&P's listing of Northwest ratings on CreditWatch with negative implications and those of Delta on CreditWatch with positive implications implies that S&P foresee a corporate credit rating of either 'B' or 'B+' for the combined entity. OFFICEMAX INC: Net Income Rises to $63MM in Quarter Ended March 29 ------------------------------------------------------------------ OfficeMax(R) Incorporated reported net income of $63.3 million in the first quarter ended March 29, 2008, an increase from $58.5 million in the first quarter of 2007. Results for the first quarter of 2008 and 2007 included items that are not considered indicative of core operating activities or unusual items. Results for the first quarter of 2008 included three unusual items which, if excluded, would reduce income before taxes by $16.3 million and included a benefit of $20.5 million recorded as other income related to the company's investment in Boise Cascade L.L.C. The result was partly offset by an expense of $2.4 million recorded in the Contract segment related to the consolidation of manufacturing facilities in New Zealand, and an expense of $1.8 million recorded in the Retail segment related to employee severance for restructuring the Retail field and ImPress print and document services management organization. The cumulative effect of these three items, if excluded, would reduce first quarter 2008 net income by $9.8 million. Results for the first quarter of 2007 included one unusual item which, if excluded, would increase net income for the first quarter of 2007 by $1.1 million. At March 29, 2008, the company's balance sheet showed total assets of $6.1 billion, total liabilities of $3.8 billion and total shareholders' equity of $2.3 billion. "In the first quarter, we continued to experience lower sales levels in both our Contract and Retail segments reflecting the weaker U.S. economy and our more disciplined, analysis-driven approach to sales generation and retention, Sam Duncan, chairman and CEO of OfficeMax, said. "However, we were successful in streamlining operations and pursuing cost controls across our company." "In our Contract segment, we offset lower sales with improved gross margin rates to drive operating income margin improvement," Mr. Duncan added. "In our Retail segment, deleveraging of fixed cost of sales and operating expenses contributed to lower operating income margin. Despite challenges in certain parts of our business as we navigate the weaker U.S. economy, we continue to advance the strategies of our turnaround plan." As of March 29, 2008, OfficeMax had total debt of $368.3 million, excluding $1.470 billion of timber securitization notes which have recourse limited to $1.635 billion of timber installment notes receivable. During the first quarter of 2008, OfficeMax generated $142.4 million of cash from operations, an increase of $223.3 million from the first quarter of 2007. OfficeMax invested $33.3 million for capital expenditures in the first quarter of 2008 compared to $28.1 million in the first quarter of 2007. "While we are impacted by the weaker U.S. economy, we remain steadfast in implementing our turnaround plan and operating initiatives," Mr. Duncan related. "The sales declines we experienced during the past two quarters have continued in April." "However, we remain committed to pursuing initiatives in both Contract and Retail that will protect our gross margin and streamline our cost structure," Mr. Duncan concluded. "We are focused on further leveraging complementary aspects of our Contract and Retail businesses well as driving differentiation in our merchandising and marketing. Overall, we continue to aim our strategies at managing through the current macroeconomic environment while also building the foundation for OfficeMax to generate long-term shareholder value." About OfficeMax Incorporated Headquartered in Naperville, Illinois, OfficeMax Incorporated (NYSE: OMX) -- visit http://www.officemax.com/-- is into both business-to-business office products solutions and retail office products. The company provides office supplies and paper, in- store print and document services through OfficeMax ImPress(TM), technology products and solutions, and furniture to consumers and to large, medium and small businesses. OfficeMax customers are served by over 36,000 associates through direct sales, catalogs, e-commerce. OfficeMax customers are served by approximately 35,000 associates through direct sales, catalogs, e-commerce and more than 900 stores. * * * Moody's Investor Service placed OfficeMax Inc.'s probability of default rating at 'Ba2' in September 2006. The rating still holds to date. ORIENT POINT: Fitch Junks Ratings on Five Note Classes ------------------------------------------------------ Fitch downgraded eight classes of notes issued by Orient Point CDO, Ltd. and Orient Point CDO, Inc. The rating actions are effective immediately: -- $249,317 class A-1V downgraded to 'B' from 'AAA' and remains on Rating Watch Negative; -- $645,481,653 class A-1NVA downgraded to 'B' from 'AAA' and remains on Rating Watch Negative; -- $648,224,140 class A-1NVB downgraded to 'B' from 'AAA' and remains on Rating Watch Negative; -- $99,250,000 class A-2 Notes downgraded to 'CCC' from 'AAA' and removed on Rating Watch Negative; -- $47,000,000 class B Notes downgraded to 'CC' from 'AA' and removed from Rating Watch Negative; -- $12,183,593 class C Notes downgraded to 'C' from 'A' and removed from Rating Watch Negative; -- $19,305,096 class D Notes downgraded to 'C' from 'A-' and removed from Rating Watch Negative; -- $14,771,322 class E Notes downgraded to 'C' from 'BBB' and removed from Rating Watch Negative. Orient Point is a collateralized debt obligation that closed Oct. 25, 2005 and is managed by Fortis Investments U.S.A. Presently, 65.5% of the portfolio is comprised of 2005, 2006 and 2007 vintage U.S. subprime residential mortgage-backed securities, 25.9% consists of 2005, 2006 and 2007 vintage U.S. structured finance CDOs and 7.2% is comprised of 2005, 2006 and 2007 vintage U.S. Alternative-A RMBS. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since the beginning of 2007, approximately 60.6% of the portfolio has been downgraded with 20.4% of the portfolio currently on Rating Watch Negative. Currently 34.9% of the portfolio is rated below investment grade. As of the March 28, 2008 trustee report, the class A/B, class C/D, and class E overcollateralization ratios are 101.4%, 99.3%, and 98.3% respectively and all are failing their tests with respective triggers of 102.4%, 100.7% and 100.2%. The failing OC tests are causing interest proceeds to be diverted before the class C, class D, and class E notes receive their interest payments. Fitch expects these classes to receive only capitalized interest payments in the future with no ultimate principal recovery. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A-1V, class A-1NVA, class A-1NVB, class A-2 and class B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C, class D, and class E notes address the likelihood that investors will receive ultimate interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. PAMPELONNE CDO: S&P Puts Default Ratings on 12 Classes of Notes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 19 classes of notes from three collateralized debt obligation transactions to 'D'. S&P removed seven of the lowered ratings from CreditWatch with negative implications. Two of the transactions, Pampelonne CDO I Ltd. and Pampelonne CDO II Ltd., are high-grade structured finance CDOs of asset-backed securities backed substantially by U.S. residential mortgage- backed securities. The third deal, Durant CDO 2007-1 Ltd., is a CDO backed substantially by tranches from CDOs of ABS with exposure U.S. RMBS. The downgrades follow notices from the trustees stating that the transactions have liquidated their portfolio collateral and have distributed, or are in the final stages of distributing, the proceeds to the noteholders. The trustees for the three CDO transactions have indicated that they do not expect the proceeds from the sale of the collateral and in the principal collection account, along with proceeds in the super-senior reserve account, credit default swap reserve account, and other sources, to be adequate to cover the required termination payments to the CDS counterparty, and that it is likely that proceeds will not be available for distribution to the notes junior to super-senior swaps in the capital structure of the CDO transactions. Rating and Creditwatch Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Durant CDO 2007-1 Ltd. A-1 D CCC- Durant CDO 2007-1 Ltd. A-2 D CC Durant CDO 2007-1 Ltd. B D CC Durant CDO 2007-1 Ltd. C D CC Pampelonne CDO II Ltd. S D B-/Watch Neg Pampelonne CDO II Ltd. A-1 D CCC-/Watch Neg Pampelonne CDO II Ltd. A-2 D CCC-/Watch Neg Pampelonne CDO II Ltd. A-3 D CCC-/Watch Neg Pampelonne CDO II Ltd. B D CC Pampelonne CDO II Ltd. C D CC Pampelonne CDO II Ltd. D D CC Pampelonne CDO II Ltd. E D CC Pampelonne CDO I Ltd. S D BB/Watch Neg Pampelonne CDO I Ltd. A-1 D CCC-/Watch Neg Pampelonne CDO I Ltd. A-2 D CCC-/Watch Neg Pampelonne CDO I Ltd. B D CC Pampelonne CDO I Ltd. C D CC Pampelonne CDO I Ltd. D D CC Pampelonne CDO I Ltd. E D CC PLASTECH ENGINEERED: Seeks Permission to Wind Down Canadian Unit ---------------------------------------------------------------- Plastech Engineered Products Inc. and its debtor-affiliates seek authority from the U.S. Bankruptcy Court of the Eastern District of Michigan to: (1) enter into certain transactions in connection with the wind-down of their foreign non-Debtor affiliate, LDM Technologies Company, a New Brunswick company; (2) enter into a related accommodation agreement with LDM and their customers General Motors Corporation, Ford Motor Company, Chrysler LLC, on behalf of itself and Chrysler Motors LLC, and Chrysler Canada, Inc.; (3) enter into a letter agreement by and between LDM and Plastech regarding the provision of management services; (4) approve payment of $1,000,000 by LDM to Plastech upon satisfaction of certain terms and conditions as more fully set forth in the Accommodation Agreement; and (5) authorize the sale of certain assets on the terms set forth in the Accommodation Agreement. Plastech is the ultimate parent of LDM, and prior to the date of bankruptcy, LDM's sole source of funding was through intercompany transfers from Plastech. During the year 2007, the Debtors provided funding to LDM aggregating $22,510,893. In exchange, LDM historically had directed that 85% of its receivables be paid directly to the Debtors' bank accounts. The Debtors collected about $16,527,533 in receivables directly from LDM's creditors. In the ordinary course of business, Plastech paid the purchase price for capital the as equipment, tooling, parts and other goods, and the capital would be shipped to and received by LDM's Leamington, Ontario plant. The purchase price for those assets was charged by Plastech to LDM as intercompany payable and LDM listed the capital on its books and records as LDM-owned assets. Plastech in turn maintained an unsecured intercompany claim against LDM to the extent that LDM had not paid the intercompany payable associated with the capital assets. Similarly, Plastech issued purchase orders to the Customers for all tooling used by LDM in connection with its manufacture of component parts for each Customer at LDM's Leamington, Ontario facility. The Customers remitted payment to Plastech for the Tooling purchase orders and Plastech would thereafter transfer the receivable to LDM pursuant to an intercompany transfer. The tooling was delivered directly to LDM at the Leamington facility. Since Plastech obtained the Court's approval to make a one-time intercompany payable to LDM of up to $1,900,000 in order for LDM to satisfy obligations relating to payroll, insurance, taxes, energy, and supplier obligations, Plastech, LDM and the Customers worked to direct LDM receivables directly to LDM accounts rather than channeling the receivables through the Debtors. The Customers also agreed to pre-fund and prepay certain obligations and receivables owed to LDM. LDM's Wind-Down LDM is experiencing financial difficulties and has determined that an orderly wind-down of its operations is necessary. LDM may effectuate the wind-down by initiating a Companies' Creditors Arrangement Act proceeding in the Ontario Superior Court of Justice (Commercial List). Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware, tells Judge Shefferly that in connection with the wind-down and financing, the resources of Plastech's management team are necessarily required as the majority of LDM's corporate activity occurs through its parent Plastech. As the parent of LDM, Plastech's approval of the sale or release of certain Tooling and Equipment may be required. As all or substantially all of the purchase orders associated with LDM are issued by and payable to Plastech, both Plastech's and the Court's approval may be necessary to consummate any sales, releases or transfers of assets from LDM to the Customers. Accommodation Agreement LDM may effectuate the wind-down by initiating a Companies' Creditors Arrangement Act proceeding in the Ontario Superior Court of Justice (Commercial List). The parties agreed that should LDM seek a CCAA Proceeding, it should request an order that, among other things: -- allows LDM to continue operating its business through at least May 16, 2008; -- approves the Accommodation Agreement, including Customers' funding of the wind-down; -- appoints BDO Dunwoody Ltd. as monitor in the CCAA Proceeding; -- grant liens and security interest to Customers, subject only to charges securing obligations to pay reasonable fees of its counsel, the Monitor and the Monitor's counsel in an amount not to exceed $350,000; and -- approves the sale of LDM's assets. The Customers have requested that during the wind-down, LDM, among other things, use its commercially reasonable best efforts to build a bank of component parts for each Customer and assist the Customers in resourcing to other suppliers. In order to meet these requests, LDM requires that the Customers provide financial and other accommodations. The Customers will provide financial accommodations on these terms: (1) The Customers will make certain secured loans to LDM, which will be used pursuant to a Budget. (2) On or before April 25, 2008, $3,560,000 (on account of severance pay and accrued vacation pay as reflected in the Budget) will be paid to a third-party escrow agent by the Customers. Following the completion of the Production Period, the Escrow Agent will release funds on an as needed basis. (3) The loans will be allocated among the Customers: * For all cash needs of LDM, other than Wind-down Costs: Chrysler: 72.4% GM: 23.1% Ford: 4.5% * For all Wind-down Costs including stay bonuses: Chrysler: 69.125% GM: 16.125% Ford: 11.75% LDM has agreed to continue to manufacture of component parts to the Customers in accordance with the terms of their purchase orders. LDM, together with Plastech, will build an inventory bank of component parts for each Customer in accordance with an agreed schedule. LDM and Plastech will cooperate with each Customer's preparation for resourcing or resourcing of production of Component Parts. Plastech's Responsibilities The Debtors ask the Bankruptcy Court to approve their responsibilities arising under the Accommodation Agreement: (a) Payment to Plastech of the Management Fee, to be paid by LDM to Plastech (a) $500,000 within the earlier of (i) five days of entry of the initial order entered in a CCCA Proceeding initiated by LDM or (ii) five days of the effective date of the Accommodation Agreement; and (b) $500,000 on May 16, 2008, if LDM satisfies all of its obligations to use commercially reasonable best efforts under the Accommodation Agreement and if Plastech fully cooperates in each Customer's resourcing efforts relating to LDM; (b) Provide to each Customer reasonable access to LDM's operations, books and records at any time during regular business hours, or outside of regular business hours upon reasonable request and prior notice; (c) Cooperate with each Customers' preparation for resourcing or resourcing of production of Component Parts; (d) Acknowledgment that the Customer Owned Tooling used by LDM in connection with its manufacture of Component Parts for each Customer at its facility in Leamington, Ontario for which a Customer has paid the applicable purchase order price for the Tooling are owned by the respective Customers; (e) Acknowledgment that upon payment in full of LDM's or Plastech's actual cost for any item of Unpaid Tooling the item will thereafter be included in the definition of Customer Owned Tooling under the Accommodation Agreement; (f) Participate in negotiations with the Canadian Auto Workers Union regarding the wind-down of LDM; and (g) Grant the Customers an option to purchase LDM's or Plastech's entire right, title and interest in and to (i) all machinery and equipment that is owned by LDM or Plastech and is used by LDM exclusively to manufacture Component Parts for the respective Customer in Canada, and (ii) a royalty-free, irrevocable and fully transferable license to use any and all intellectually property associate with the Equipment, which option will be exercisable at any time on or before June 16, 2008 upon written notice to Plastech and LDM and the purchase price for the option shall be net book value of the Equipment for which the option is exercised. Mr. Galardi tells the Bankruptcy Court that an orderly, court- supervised wind-down and liquidation of LDM is in the best interests of Plastech as the holder of a large unsecured intercompany claim against LDM, as the process may afford Plastech an opportunity to recover on the claim from the proceeds of the sale of any remaining assets of LDM. Moreover, in exchange for cooperating with the Customers' resourcing of production from LDM and provision of services to LDM pursuant to the Management Agreement, Plastech will receive a $1,000,000 fee, he narrates. Accordingly, the Debtors believe that approval of their commitments under the Accommodation Agreement are appropriate, in the best interests of their estates, creditors and other parties- in-interest. A full-text copy of the Accommodation Agreement is available for free at http://researcharchives.com/t/s?2b79 * * * The Canadian Driver reports that the closing of the Leamington Facility will eliminate 300 jobs. About Plastech Engineered Based in Dearborn, Michigan, Plastech Engineered Products, Inc. -- http://www.plastecheng.com/-- is full-service automotive supplier of interior, exterior and underhood components. It designs and manufactures blow-molded and injection-molded plastic products primarily for the automotive industry. Plastech's products include automotive interior trim, underhood components, bumper and other exterior components, and cockpit modules. Plastech's major customers are General Motors, Ford Motor Company, and Toyota, as well as Johnson Controls, Inc. Plastech is a privately held company and is the largest family- owned company in the state of Michigan. The company is certified as a Minority Business Enterprise by the state of Michigan. Plastech maintains more than 35 manufacturing facilities in the midwestern and southern United States. The company's products are sold through an in-house sales force. The company and eight of its affiliates filed for Chapter 11 protection on Feb. 1, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 42417). Gregg M. Galardi, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Deborah L. Fish, Esq., at Allard & Fish, P.C., represent the Debtors in their restructuring efforts. The Debtors chose Jones Day as their special corporate and litigation counsel. Lazard Freres & Co. LLC serves as the Debtors' investment bankers, while Conway, MacKenzie & Dunleavy provide financial advisory services. The Debtors also employed Donlin, Recano & Company as their claims and noticing agent. An Official Committee of Unsecured Creditors has been appointed in the Debtors' cases. As of Dec. 31, 2006, the company's books and records reflected assets totaling $729,000,000 and total liabilities of $695,000,000. (Plastech Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000) PLASTECH ENGINEERED: Can Remove Pending Actions Until August 29 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Michigan has extended the time for Plastech Engineered Products, Inc. to remove pending actions as of the date of bankruptcy through the later of Aug. 29, 2008, or 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. As reported in the Troubled Company Reporter on April 18, 2008, the Debtors said that they are parties to numerous judicial and administrative proceedings currently pending in various courts and administrative agencies. These actions involve a variety of claims, some of which are complex. Specifically, the Actions include, among others, contract disputes, personal injury, discrimination, and workers' compensation, the Debtors said. Because of the number of Actions involved and the variety of claims, the Debtors require additional time to determine which, if any, of the Actions should be removed and, if appropriate, transferred to the Court. Furthermore, the Debtors related that, because they have been focused primarily on negotiating their DIP financing, addressing numerous administrative and substantive matters affecting customers, vendors, employees, and secured lenders, and addressing the myriad of other issues inherently faced by debtors in newly-filed cases, including preparing the Debtors' schedules of assets and liabilities and statements of financial affairs, the Debtors have not completed their review of the Actions to determine whether any Actions should be removed. About Plastech Engineered Based in Dearborn, Michigan, Plastech Engineered Products, Inc. -- http://www.plastecheng.com/-- is full-service automotive supplier of interior, exterior and underhood components. It designs and manufactures blow-molded and injection-molded plastic products primarily for the automotive industry. Plastech's products include automotive interior trim, underhood components, bumper and other exterior components, and cockpit modules. Plastech's major customers are General Motors, Ford Motor Company, and Toyota, as well as Johnson Controls, Inc. Plastech is a privately held company and is the largest family- owned company in the state of Michigan. The company is certified as a Minority Business Enterprise by the state of Michigan. Plastech maintains more than 35 manufacturing facilities in the midwestern and southern United States. The company's products are sold through an in-house sales force. The company and eight of its affiliates filed for Chapter 11 protection on Feb. 1, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 42417). Gregg M. Galardi, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Deborah L. Fish, Esq., at Allard & Fish, P.C., represent the Debtors in their restructuring efforts. The Debtors chose Jones Day as their special corporate and litigation counsel. Lazard Freres & Co. LLC serves as the Debtors' investment bankers, while Conway, MacKenzie & Dunleavy provide financial advisory services. The Debtors also employed Donlin, Recano & Company as their claims and noticing agent. An Official Committee of Unsecured Creditors has been appointed in the Debtors' cases. As of Dec. 31, 2006, the company's books and records reflected assets totaling $729,000,000 and total liabilities of $695,000,000. (Plastech Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000) PLASTECH ENGINEERED: Agrees to Return Hyundai Tooling to JCI ------------------------------------------------------------ Plastech Engineered Products Inc. and its debtor-affiliates entered into a stipulation with Johnson Controls Inc. that allows JCI to repossess its Hyundai tooling equipment. Hyundai Motor America contracted with Johnson Controls, Inc., to produce certain component parts for its NF/CM programs. As part of the contract, Hyundai placed in the possession of JCI the tooling necessary to produce the Hyundai Component Parts for the CM program and required JCI to fabricate the tooling necessary for the NF program. The contract provides that the ownership on the Toolings remains with Hyundai. JCI subcontracted with the Debtors to produce some of Hyundai Component Parts that JCI was required to supply to Hyundai. JCI delivered to and placed in the possession of the Debtors certain of the necessary Hyundai Tooling for the production of the JCI Component Parts. Disputes have arisen between the Debtors and JCI involving alleged claims that the Debtors have asserted against JCI in relation to the Hyundai NF/CM programs. The Debtors claim that JCI is indebted to the Debtors for claims relating to these disputes: * NF/CM Component Inventory This relates to a debit taken by JCI in July, 2007 following payment to the Debtors for the transfer of inventory from the Debtors' plant in McCalla, Alabama to Montgomery, Alabama. The Debtors claim that JCI owes $713,403 for the inventory transfer. JCI asserts that the Debtors transferred less inventory than was originally paid for by JCI and JCI debited the difference between the amount paid and the value of the inventory actually transferred. * NF Mold Assembly Retro -- McCalla This relates to the Debtors' request for a retroactive payment due to pricing in 2006. The Debtors claim that JCI owes $156,361. JCI disputes that the retroactive payment is owed because the Debtors released JCI of any obligation to make the retroactive under the Financial Accommodation Agreement executed on February 12, 2007. * NF Painted Console Assembly This relates to the Debtors' request for a retroactive payment due to component target pricing. The Debtors claim that JCI owes $472,174. JCI disputes that payment is owed because the Debtors released JCI of any obligation to make the retroactive payment under the Financial Accommodation Agreement executed on February 12, 2007. * NF/CM Phase I Obsolescence -- McCalla, and NF Phase I Obsolescence -- Franklin This relates to the Debtors' claim that they are entitled to payment for unused materials resulting from JCI's re- sourcing. The Debtors claim that JCI owes $169,026. JCI disputes that the unused materials were rendered obsolete due to re-sourcing, but rather, that the Debtors purchased excess materials not at the direction of JCI for which JCI is not obligated to pay the Debtors. * CM Tool Repairs This relates to the Debtors' claim that it made certain repairs to CM Tooling that cost $54,214. JCI disputes the claim because prior to the Debtors making the repairs, JCI informed the Debtors that the repairs should not be made due to Hyundai's de-sourcing of the CM program. * NF/CM Scrap Variance -- above 2% This relates to the Debtors' request for payment relating to scrap rates going forward from April 1, 2007. The Debtors claim that JCI owes $189,694, which JCI disputes. In order to resolve these disputes, the parties stipulate that: (a) JCI will pay to the Debtors $111,620. (b) The Debtors release JCI from all actions, causes of action, and obligations relating to the NF/CM Program Related Claims provided that the Debtors do not release the JCI Released Parties from any and all claims of any of the Debtors for increased resin prices in connection with the Hyundai NF/CM programs, which claims, notwithstanding the release, are expressly preserved. (c) JCI is granted relief from the automatic stay provisions of Section 362 of the Bankruptcy Code so that JCI may take possession of the Hyundai Tooling. About Plastech Engineered Based in Dearborn, Michigan, Plastech Engineered Products, Inc. -- http://www.plastecheng.com/-- is full-service automotive supplier of interior, exterior and underhood components. It designs and manufactures blow-molded and injection-molded plastic products primarily for the automotive industry. Plastech's products include automotive interior trim, underhood components, bumper and other exterior components, and cockpit modules. Plastech's major customers are General Motors, Ford Motor Company, and Toyota, as well as Johnson Controls, Inc. Plastech is a privately held company and is the largest family- owned company in the state of Michigan. The company is certified as a Minority Business Enterprise by the state of Michigan. Plastech maintains more than 35 manufacturing facilities in the midwestern and southern United States. The company's products are sold through an in-house sales force. The company and eight of its affiliates filed for Chapter 11 protection on Feb. 1, 2008 (Bankr. E.D. Mich. Lead Case No. 08- 42417). Gregg M. Galardi, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Deborah L. Fish, Esq., at Allard & Fish, P.C., represent the Debtors in their restructuring efforts. The Debtors chose Jones Day as their special corporate and litigation counsel. Lazard Freres & Co. LLC serves as the Debtors' investment bankers, while Conway, MacKenzie & Dunleavy provide financial advisory services. The Debtors also employed Donlin, Recano & Company as their claims and noticing agent. An Official Committee of Unsecured Creditors has been appointed in the Debtors' cases. As of Dec. 31, 2006, the company's books and records reflected assets totaling $729,000,000 and total liabilities of $695,000,000. (Plastech Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000) PRB ENERGY: Wants To Use $2 Million Facility of Republic et al. --------------------------------------------------------------- PRB Energy Inc. and PRB Oil and Gass Inc. seek authority from the Bankruptcy Court to enter into a $2 million Debtor-In-Possession Loan and Security Agreement with PRB Acquisition LLC, an entity formed by Republic Financial Corporation and Nex Gen Resources Corp. If the DIP Agreement is approved by the Bankruptcy Court, PRB may borrow up to $2 million, $1 million of which may be advanced only at the sole discretion of the Exit Lender. PRB also seeks approval from the Bankruptcy Court to pay the Exit Lender a 4% commitment fee and a $300,000 due diligence fee as part of the DIP Agreement. The loan under the DIP Agreement will mature 270 days from the effective date of the DIP Agreement and the interest rate will be 18% per annum. PRB intends to use the cash advance from the DIP Agreement to continue daily operations, preserve and maintain assets, fund general overhead and administrative expenses, and cover certain shortfalls between revenue and expenses. The Exit Lender will be secured by all of PRB's assets. The DIP Agreement further provides that PRB and the Exit Lender will agree to exclusive negotiations in good faith to reach an agreement as to the definitive terms for the plan of reorganization and exit financing. PRB has agreed to use its best efforts to have a plan of reorganization, including the exit financing, effective no later than August 31, 2008, subject to certain extensions. Under the plan proposed in the DIP Agreement, the exit financing would provide for an amount sufficient to satisfy the allowed claims of PRB's Senior Secured Debentures, any allowed secured claims, and a commitment to fund the reorganized successor to PRB Oil & Gas, Inc. with up to $10 million for operations and drilling, which would be disbursed pursuant to agreed-upon operating budgets and drilling plans. Certain oil and gas assets in the State of Wyoming would be sold and the proceeds placed into a trust for the benefit of allowed unsecured claims against PRB Energy, Inc., which may include PRB's 10% Senior Subordinated Convertible Notes. Allowed unsecured trade claims of PRB Oil and Gas, Inc. would be paid over three years. PRB does not expect that holders of PRB common stock would receive any payments or equity in the reorganized company. The Exit Lender is entitled to determine the amount of exit financing that would be invested as equity capital and the amount intended to constitute debt capital under the capital structure of the reorganized successor to PRB Oil & Gas, Inc. The DIP Agreement further provides for a $300,000 commitment fee for the exit financing. PRB will have to pay $500,000 in liquidated damages if it fails to consummate the exit financing. The DIP Agreement also provides that the Exit Lender will receive 87.5% of the equity in the reorganized company and the remaining 12.5% of the equity is reserved for creditors which may include PRB's 10% Senior Subordinated Convertible Notes, and other parties in interest. The Exit Lender has up to 45 days from the approval of the DIP Agreement by the Bankruptcy Court to conduct due diligence and evaluate PRB's business in order to decide whether to enter into a definitive agreement with respect to the exit financing. The due diligence period may be extended for an additional 30 days by the mutual written consent of PRB and the Exit Lender. A full-text copy of the Debtor-In-Possession And Security Agreement is available for free at: http://ResearchArchives.com/t/s?2b6f Monthly Operating Reports PRB Energy reported an opening cash balance of $1,228,103 and a closing cash balance of $1,112,826 under its monthly operating report for the period from March 6, 2008, to March 31, 2008. PRB Oil & Gass Inc. reported an opening cash balance of $248,867 and a closing cash balance of $4,352 under its monthly operating report for the period from March 6, 2008, to March 31, 2008. About PRB Energy Headquartered in Denver, PRB Energy Inc. fka PRB Gas Transportation Inc. -- http://www.prbenergy.com/-- operates as independent energy companies engaged in the acquisition, exploitation, development and production of natural gas and oil. In addition, the company and its affiliates provide gas gathering, processing and compression services for properties it operates and for third-party producers. They conduct business activities in Wyoming, Colorado and Nebraska. The Debtor filed for chapter 11 protection on March 5, 2008 (Bankr. D. Co. Case No. 08-12658) together with two affiliates, PRB Oil & Gas Inc. (Case No. 08-12661) and PRB Gathering Inc. (08- 12663). James T. Markus, Esq., at Block, Markus & Williams LLC represents the Debtors in their restructuring efforts. The Debtors listed assets between $50 million and $100 million and liabilities between $10 million and $50 million. They owe at least $1 million each to four unsecured creditors. PRIME MORTGAGE: Moody's Cut Ba1 Rating to B3; Puts Under Review --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 3 tranches from one Alt-A transaction issued by Prime Mortgage Trust. One tranche remains on review for possible further downgrade. The collateral backing this transaction consists primarily of first-lien, fixed -rate, Alt-A mortgage loans. The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels. The actions are a result of Moody's on-going review process. Complete rating actions are: Issuer: Prime Mortgage Trust 2006-CL1 -- Cl. M-4, Downgraded to Baa3 from Baa1 -- Cl. M-5, Downgraded to Ba3 from Baa2 -- Cl. M-6, Downgraded to B3 from Ba1; Placed Under Review for further Possible Downgrade QUALITY HOME: Weak Performance Prompts S&P to Cut Rating to B- -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Cary, North Carolina-based Quality Home Brands Holdings LLC, including its corporate credit rating to 'B-' from 'B'. All ratings remain on CreditWatch, where they had been placed with negative implications on April 8, 2008, following weaker-than-expected operating performance for the fiscal year ended Dec. 28, 2007, and concern that the company would not be able to meet its financial covenants in 2008. About $450 million of reported debt was outstanding at Dec. 28, 2007 (including a $42.8 million holding company payment-in-kind note). The downgrade reflects Quality Home Brands' weak operating performance which resulted in lease- and pension-adjusted leverage of almost 7x (including holdco payment-in-kind notes), and uncertainty related to its exposure to the weak housing market which may continue to affect operating results. "Given the current weak housing market and challenging economic conditions, we believe the company will not be able to meaningfully improve its operating performance and meet its maximum total leverage covenant during the first and second quarter of fiscal 2008 and possibly the rest of the year unless a cure provision is exercised under the credit agreement," said Standard & Poor's credit analyst Bea Chiem. Alternatively, Quality Home Brands could seek to amend the terms of its credit facility. The ongoing CreditWatch listing reflects Standard & Poor's expectation that the company will be challenged to remain in compliance with its financial covenants with adequate cushion in the absence of an amendment, which could result in loss of access to its revolving credit facility and near-term liquidity concerns. Standard & Poor's will resolve the CreditWatch listing once it ascertains covenant compliance for the first quarter. Standard & Poor's will also review Quality Home Brands' ability to restore adequate covenant cushion for the rest of 2008 either through improved operating performance or an amendment to the terms of its credit facility. RADWAN & AFFES: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Radwan & Affes Real Estate Investment, Inc. 14730 Harper Detroit, MI 48224 Bankruptcy Case No.: 08-50353 Chapter 11 Petition Date: April 29, 2008 Court: Eastern District of Michigan (Detroit) Judge: Phillip J. Shefferly Debtor's Counsel: Robert N. Bassel, Esq. Email: robert.bassel@kkue.com 201 W. Big Beaver, 6th Flr. Troy, MI 48099 Tel: (248) 528-1111 Estimated Assets: $500,000 to $1 million Estimated Debts: $1 million to $10 million The Debtor did not file a list of its largest unsecured creditors. RECYCLED PAPER: Payment Failure Prompts S&P's Default Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Chicago, Illinois-based Recycled Paper Greetings to 'D' from 'CCC'. At the same time, Standard & Poor's lowered the rating on RPG's $77 million second-lien term loan to 'D' from 'CC', while the '6' recovery rating on the facility remains unchanged. The rating on the company's first-lien $20 million revolver and $120 million first-lien term loan was lowered to 'CC' from 'CCC+' and the recovery rating remains unchanged at '2'. "The downgrade is based on the company's failure to make its April 30, 2008, interest payment of $1.6 million on its $77 million second-lien debt due 2010," said Standard & Poor's credit analyst Bea Chiem. The company did not make its second-lien interest payment because it intends to address this as part of an overall capital structure solution during its current discussions with its lenders. The financial sponsor has made an offer to the second-lien holders whereby the sponsor would invest additional capital in the business subject to certain conditions. The second-lien lenders have not yet responded to the offer. RPG was operating with a waiver since it violated its financial covenants for the quarter ended Jan. 31, 2008. Under the waiver, the company had limited access to its $20 million revolver up to April 28, 2008, and has since drawn on $3 million, for a total amount of $15.5 million. The company has not yet requested another waiver and currently does not have access to the remainder of its revolving credit facility. RPG has a 45-day grace period in which to receive a cure or waiver to avoid a cross-default under the first-lien credit facilities. Second-lien holders have a 180-day standstill period. RPG is a niche company that develops and markets alternative greeting cards. Standard & Poor's will monitor RPG's ability to cure its default and evaluate any changes as additional information becomes available. RELIANT CHANNELVIEW: Plan Filing Period Extended to June 20 ----------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware extended Reliant Energy Channelview LP and its debtor-affiliates' exclusive period to file a Chapter 11 plan until June 20, 2008. The Court also extended the Debtors' exclusive period to solicit acceptances of that plan until August 19, 2008. The Debtors sought the extension to consummate the sale of their assets to GIM Cogeneration Channelview LLC. Based in Houston, Reliant Energy Channelview L.P.-- http://www.reliant.com/--owns a power plant located near Houston, and is an indirect wholly owned subsidiary of Reliant Energy Inc. The company and its three affiliates, Reliant Energy Channelview (Texas) LLC, Reliant Energy Channelview (Delaware) LLC, and Reliant Energy Services Channelview LLC filed for chapter 11 protection on Aug. 20, 2007 (Bankr. D. Del. Lead Case No. 07-11160). Jason M. Madron, Esq., Lee E. Kaufman, Esq., Mark D. Collins, Esq., Paul Noble Heath, Esq., Richards, Robert J. Stearn Jr., Esq., at Layton & Finger P.A., and Timothy P. Cairns, Pachulski Stang Ziehl & Jones represent the Debtors. The U.S. Trustee for Region 3 appointed an Official Committee of Unsecured Creditors in the Debtors' cases. David B. Stratton, Esq., and Evelyn J. Meltzer, Esq., at Pepper Hamiltion LLP, represent the Committee. When the Debtors filed for protection from their creditors, they listed total assets of $362,000,000 and total debts of $342,000,000. RESIDENTIAL CAPITAL: Commences Exchange Offer for $12.8 Bil. Notes ------------------------------------------------------------------ Residential Capital LLC commenced offers to exchange any and all of the U.S. dollar equivalent $12.8 billion outstanding notes of ResCap for newly issued notes, upon the terms and subject to the conditions set forth in its Offering Memorandum and Consent Solicitation Statement dated May 5, 2008, and the related letter of transmittal and consent. The new notes will be issued by ResCap, will be guaranteed by subsidiaries of ResCap and will be secured by a security interest in substantially all of ResCap's existing and after acquired unencumbered assets remaining available to be pledged as collateral. a) For 2008-2009 Notes: CUSIP/ISIN: 76113BAL3 / US76113BAK52 Outstanding Principal Amount: $398,848,000 Title of Old Notes to be Tendered: Floating Rate Notes due 2008(1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $1,000 Tender After Early Delivery Time: $970 CUSIP/ISIN: 76113BAK5 / US76113BAK52 Outstanding Principal Amount: $684,014,000 Title of Old Notes to be Tendered: 8.125% Notes due 2008 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $1,000 Tender After Early Delivery Time: $970 CUSIP/ISIN: 76113BAQ2 / US76113BAQ23 Outstanding Principal Amount: $714,000,000 Title of Old Notes to be Tendered: Floating Rate Notes due April 2009 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $900 Tender After Early Delivery Time: $870 CUSIP/ISIN: 76114EAB8 / US76114EAB83 Outstanding Principal Amount: $949,000,000 Title of Old Notes to be Tendered: Floating Rate Notes due May 2009 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $900 Tender After Early Delivery Time: $870 CUSIP/ISIN: 76113BAN9 / US76113BAN91, U76134AD4 / USU76134AD49 Outstanding Principal Amount: $576,961,000 Title of Old Notes to be Tendered: Floating Rate Subordinated Notes due 2009 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 b) For 2010-2015 Notes: CUSIP/ISIN: 76113BAF6 / $2,154,500,000, 76113BAC3 / US76113BAC37, U76134AC6 / USU76134AC65 Outstanding Principal Amount: $2,154,500,000 Title of Old Notes to be Tendered: 8.375% Notes due 2010 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0307840735 Outstanding Principal Amount: EUR 542,800,000 Title of Old Notes to be Tendered: Floating Rate Notes due 2010 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76113BAM1 / US76113BAM19 Outstanding Principal Amount: $1,243,500,000 Title of Old Notes to be Tendered: 8.000% Notes due 2011 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0254758872 Outstanding Principal Amount: EUR 550,000,000 Title of Old Notes to be Tendered: 7.125% Notes due 2012 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76114EAC6 / US76114EAC66 Outstanding Principal Amount: $928,500,000 Title of Old Notes to be Tendered: 8.500% Notes due 2012 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76113BAR0 / US76113BAR06 Outstanding Principal Amount: $1,604,500,000 Title of Old Notes to be Tendered: 8.500% Notes due 2013 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0254759920 Outstanding Principal Amount: GBP 348,920,000 Title of Old Notes to be Tendered: 8.375% Notes due 2013 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: XS0307841469 Outstanding Principal Amount: GBP 363,000,000 Title of Old Notes to be Tendered: 9.875% Notes due 2014 Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 CUSIP/ISIN: 76113BAE9 / US76113BAE92, U76134AB8 / USU76134AB82 Outstanding Principal Amount: $486,500,000 Title of Old Notes to be Tendered: 8.875% Notes due 2015 (1) Principal Amount of New Notes to be Issued Tender Prior to Early Delivery Time: $800 Tender After Early Delivery Time: $770 (1) Listed on the Luxembourg Stock Exchange. In the exchange offers, ResCap is offering to issue new 8.500% senior secured guaranteed notes due May 15, 2010 in exchange for any and all old notes that mature in 2008 and 2009. In addition, ResCap is offering to issue new 9.625% junior secured guaranteed notes due May 15, 2015 in exchange for any and all old notes that mature in 2010 through 2015. ResCap will mandatorily redeem one-third of the original principal amount of each junior secured guaranteed note on May 15, 2013 and May 15, 2014 with the remaining principal amount paid at maturity. All new notes will be denominated in U.S. dollars. The offer to exchange old notes for new notes is not subject to proration. The senior secured guaranteed notes will be secured on a second lien basis by the collateral for the proposed new $3.5 billion credit facility. The junior secured guaranteed notes will be secured on a third lien basis by the collateral for that facility. In addition, holders participating in the exchange offers may elect to receive cash in lieu of the new notes that they would otherwise receive, pursuant to a "modified Dutch auction" process described in the offer documents. Each participating holder electing to receive cash pursuant to the auction process, must submit a price denominated in U.S. dollars that specifies the minimum amount of cash such participating holder wishes to receive in lieu of each $1,000 principal amount of new notes it would otherwise receive for tendered old notes. The indicative offer price specified by a participating holder of old 2008-2009 notes can be no less than $850 per $1,000 principal amount of new notes, the indicative offer price specified by a participating holder of old 2010-2015 notes can be no less than $650 per $1,000 principal amount of new notes, and in both cases the indicative offer price specified by a participating holder can be no greater than $1,000 per $1,000 principal amount of new notes. The amounts of cash that ResCap expects to have available to pay participating holders in lieu of new notes that they would otherwise receive in the exchange offers will be $700 million with respect to the old 2008-2009 notes and $500 million with respect to the old 2010-2015 notes. Holders will receive new notes in exchange for old notes submitted but not accepted in the auction process. Only old notes that are tendered in the exchange offers may participate in the auction process. However, old notes may be tendered in the exchange offers without participating in the auction process. ResCap also commenced a cash tender offer for any and all of its outstanding $1,198,710,000 in aggregate principal amount of floating rate notes due June 9, 2008 at a purchase price of $1,000 per $1,000 principal amount upon the terms and subject to the conditions set forth in the offering memorandum and the related letter of transmittal and consent. The total purchase price for each $1,000 principal amount of June 2008 notes includes an early delivery payment of $30.00 per $1,000 principal amount. The CUSIP and ISIN for the June 2008 notes are 76114EAA0 and US76114EAA01. In conjunction with the offers, ResCap is soliciting consents to certain proposed amendments to the indentures under which the old notes were issued. The proposed amendments to the old notes would release the subsidiary guarantees of ResCap's obligations under the old notes and would eliminate certain of the restrictive covenants and events of default currently in the indentures. However, the proposed amendments are not necessary for the issuance of the new notes and the new subsidiary guarantees or for the pledge of collateral for the new notes and subsidiary guarantees. Accordingly, the offers are not conditioned on receipt of the requisite consents to adopt the proposed amendments. Claims with respect to new notes will be effectively senior to claims with respect to unexchanged old notes. In addition, claims with respect to new notes will be effectively senior to claims with respect to unexchanged old notes to the extent of the value of all of the assets of the subsidiary guarantors if the requisite consents from holders of the senior old notes are received. Claims with respect to new notes will be contractually senior to the subordinated old notes. In the offers, ResCap is offering an early delivery payment, which in the case of the June 2008 notes and old notes that are accepted in the auction process, will be paid in cash, and, in the case of all other old notes, will be paid in principal of new notes. The early delivery payment will be paid only to holders who validly tender their old notes, which tender will be deemed to include their consents to the proposed amendments, prior to 5:00 p.m., New York City time, on May 16, 2008, unless extended by ResCap with respect to any or all series of old notes, and do not validly withdraw their tenders. The offers will expire at 11:59 p.m., New York City time, on June 3, 2008, unless extended by ResCap with respect to any or all series of old notes. Tendered old notes may be validly withdrawn at any time prior to 5:00 p.m., New York City time, on May 16, 2008, unless extended by ResCap with respect to any or all series of old notes, but not thereafter. Holders of old notes accepted in the offers will receive a cash payment equal to the accrued and unpaid interest in respect of such old notes from the most recent interest payment date to, but not including, the settlement date. The offers are conditioned on the satisfaction or waiver of certain conditions. In particular, the offers are conditioned on ResCap entering into a new first lien senior secured credit facility, providing for at least $3.5 billion of commitments on terms acceptable to ResCap. As a result of these conditions, ResCap may not be required to exchange or purchase any of the old notes tendered. The offers are not conditioned on receipt of the requisite consents with respect to the old notes. ResCap is currently in negotiations with GMAC LLC, who would act as the lender under this new first lien senior secured credit facility which, if entered into, will be on terms acceptable to ResCap and GMAC. The new facility would: 1. fund the cash required for the offers, 2. repay ResCap's term loan maturing in July 2008, and 3. replace ResCap's existing $875.0 million 364-day and $875.0 million 3-year revolving bank credit facilities. Documents relating to the offers will only be distributed to noteholders who complete and return a letter of eligibility confirming that they are within the category of eligible investors for this private offer. Noteholders who desire a copy of the eligibility letter should contact Global Bondholder Service Corporation, the information agent for the offers, at (866) 470- 3800 (U.S. Toll-free) or (212) 925-1630 (Collect). As reported in the Troubled Company Reporter on April 25, 2008, Residential Funding Company and GMAC Mortgage LLC, both subsidiaries of Residential Capital, LLC, borrowed $468 million collectively under a Loan and Security Agreement with ResCap's parent, GMAC LLC, as lender, to provide ResCap's subsidiaries with a revolving credit facility with a principal amount of up to $750 million, providing incremental liquidity for ResCap's operations until longer-term financing is arranged. ResCap and GMAC are investigating various strategic alternatives related to all aspects of ResCap's business, including extensions and replacements of existing secured borrowing facilities, and establishing additional sources of secured funding for ResCap's operations. One potential source of new secured funding is credit secured by certain of ResCap's mortgage servicing rights. The Troubled Company Reporter also reported on April 9, 2008 that GMAC LLC purchased $1.2 billion of ResCap's notes in open market. The notes have a fair value of approximately $607,192,000 to ResCap in exchange for 607,192 ResCap Preferred units with a liquidation preference of $1,000 per unit. ResCap canceled the $1.2 billion face amount of notes. GMAC may, in its sole discretion, on or before May 31, 2008, contribute up to an additional approximately $340 million of ResCap notes, having a fair value of approximately $265,779,000, for additional ResCap Preferred units. The ResCap Preferred ranks senior in right of payment to ResCap's common membership interests with respect to distributions and payments on liquidation, winding-up or dissolution of ResCap. About Residential Capital Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. Cerberus Capital Management LP bought 51% GMAC LLC stake from General Motors Corp. on December 2006. As reported in the Troubled Company Reporter on April 25, 2008, Residential Funding Company and GMAC Mortgage LLC, both subsidiaries of Residential Capital, LLC, borrowed $468 million collectively under a Loan and Security Agreement with ResCap's parent, GMAC LLC, as lender, to provide ResCap's subsidiaries with a revolving credit facility with a principal amount of up to $750 million, providing incremental liquidity for ResCap's operations until longer-term financing is arranged. Similarly, the Troubled Company Reporter also reported on April 25, 2008 that Moody's Investors Service downgraded GMAC LLC's senior rating to B2 from B1; the rating remains on review for further possible downgrade. The GMAC downgrade is based upon Moody's opinion that further operating weakness at ResCap poses risks to GMAC's capital position and liquidity that exceed previous estimates. In particular, Moody's believes that for ResCap to have continued access to debt capital, GMAC may be required to provide additional indications of support to the unit and that it is likely to do so. RESIDENTIAL CAPITAL: S&P Cuts Corp. Credit to CC on Debt Offer -------------------------------------------------------------- Standard & Poor's Ratings Services lowered selected ratings on Residential Capital LLC, including lowering the long-term corporate credit rating to 'CC' from 'CCC+', following the company's launch of an exchange offer for unsecured bonds that S&P interpret as a distressed debt exchange. The ratings remain on CreditWatch with negative implications, where they were placed April 24, 2008. There are no ratings or outlook changes on GMAC LLC, Residential Capital LLC's parent. "The downgrade reflects the probability that, with the successful execution of the exchange offer, which will pay less than face value to certain Residential Capital LLC bondholders, Standard & Poor's, in accordance with our criteria, will lower our corporate credit rating on the company to 'SD' (selective default)," said Standard & Poor's credit analyst John K. Bartko, C.P.A. In addition, ratings on the affected debt issues would be lowered to 'D', although the exchange would not constitute a legal default. A successful exchange would extend debt maturities, providing needed relief, but the action illustrates the gravity of the company's financial position. Furthermore, the exchange indicates that ultimate parents General Motors Corp. (49% owner of GMAC LLC) and Cerberus Capital Management L.P. (51% owner of GMAC LLC) are pursuing these actions rather than directly providing GMAC LLC with additional capital to downstream to Residential Capital LLC. S&P believe that if the exchange fails, Residential Capital LLC might file for bankruptcy protection. In this case, Residential Capital LLC would have to replace at least one of the two departed independent directors, as the company's operating agreement requires support from at least one independent director to initiate such a filing. Accordingly, our ratings on securities that are not part of the exchange offer are also on CreditWatch with negative implications. Residential Capital LLC is proposing to offer new secured notes in exchange for any and all of the $12.9 billion of unsecured bonds. The new secured notes would consist of two classes: 8.5% second- lien notes due May 15, 2010, which would be exchanged for certain existing debt maturing in 2008 and 2009; and 9.625% junior lien notes due in 2015 that would be exchanged for existing debt maturing between 2010 and 2015. Residential Capital LLC would offer the new notes to existing bondholders, grouped by the maturity of the securities that they hold currently, at various exchange ratios. The exchange offer is intended to advance Residential Capital LLC's overall restructuring plan, which includes a focus on the production of prime, conforming products; the reduction of credit risk through the sale or elimination of noncore businesses and products; the increased production at GMAC Bank in an effort to leverage the banks lower-cost funding; structural cost reductions; and delevering the balance sheet. The exchange offer would lighten near-term debt maturities, although interest cost will increase. Upon completion of the exchange and review of Residential Capital LLC's financial position, a new corporate credit rating would be assigned. RESIDENTIAL CAPITAL: Debt Exchange Offer Cues Fitch to Cut Rating ----------------------------------------------------------------- Fitch Ratings has downgraded Residential Capital LLC's Issuer Default Rating to 'C' from 'BB-' following the company's announced debt exchange offer. ResCap remains on Rating Watch Negative pending execution of the debt exchange offer. Upon completion of the exchange, Fitch will downgrade ResCap's IDR to 'D' indicating a default has occurred in accordance with Fitch's criteria on distressed debt exchanges. In addition, Fitch has downgraded GMAC LLC's IDR to 'BB-'. Approximately $12.9 billion of outstanding debt is affected by this action. ResCap is undertaking this exchange offer in order to extend debt maturities and increase its financial flexibility. ResCap's announced debt exchange offer is part of a plan to address the company's capital structure in light of current and expected future market conditions, by lengthening debt maturities and providing security to first lien creditors. Under the plan, a new first lien credit facility will have a security interest in ResCap's unencumbered assets, effectively subordinating existing noteholders. Under the exchange offer, existing debt holders will get new notes in ResCap with extended maturities at less than current par value for maturities after 2008. ResCap will also provide a cash tender option for outstanding debt with up to $1.2 billion in cash. Importantly, noteholders who do not exchange could be further disadvantaged by loss of subsidiary guarantees and become effectively subordinated below the exchange debt. . At completion of the exchange, Fitch would assign a post-default IDR and new issue level ratings solely reflecting a prospective view of ResCap and its new capital structure. Fitch envisions that ResCap's IDR would be in the single 'B' category, with issue level and Recovery Ratings reflecting relative seniority and recovery within the capital structure. Fitch has downgraded these ratings and kept them on Rating Watch Negative: Residential Capital LLC -- Long-term IDR to 'C' from 'BB-'; -- Senior debt to 'C' from 'B+'; -- Subordinated debt to 'C' from 'B-'; -- Short-term IDR to 'C' from 'B'. RESIDENTIAL CAPITAL: Moody's Cut Rating to Ca on Exchange Offer --------------------------------------------------------------- Moody's Investors Service downgraded to Ca, from Caa1, its ratings on the senior debt of Residential Capital, LLC subject to the bond exchange announced by ResCap on May 2, 2008. The rating of ResCap's approximately $1.2 billion of bonds maturing on June 9, 2008 was affirmed at Caa1. These bonds are not part of the exchange and the company has announced they intend to commence a cash tender for these bonds at par. All ratings remain under review for downgrade. The senior unsecured rating of GMAC LLC was left unchanged at B2, under review for downgrade. The downgrade follows the company's announcement of an exchange offer for certain of its unsecured bonds. Moody's considers this exchange to be a distressed exchange because the bonds being offered in exchange for ResCap's existing debt is being offered at a discount to par value and will have longer maturities. Distressed exchanges are included in Moody's definition of defaults. The exchange debt being offered will have second or third lien claims on ResCap's unencumbered assets behind a proposed $3.5 billion credit facility that ResCap is negotiating with GMAC. These claims on ResCap's unencumbered assets will substantially subordinate any existing debt that does not participate in the exchange. "This exchange was undertaken to assist ResCap in avoiding a payment default on its existing unsecured bond obligations," said Moody's Vice President and Senior Credit Officer Craig Emrick. If all bonds subject to the exchange participate at the early delivery price, ResCap's outstanding bonds will be reduced by approximately $2.2 billion to approximately $11 billion (excluding the company's June 9, 2008 maturities and $1.75 billion bank line maturing in July 2008). This does not include any possible reduction in outstanding debt through the company's proposed $1.2 billion modified Dutch auction that is being offered for those bonds which participate in the exchange. Of this amount approximately $3 billion will mature in May 2010 and $2.6 billion in May 2013, 2014 and 2015 under the terms of the exchange. Despite the benefits this exchange could have on ResCap's ability to service its debt, the ratings remain under review for downgrade. This is because ResCap has not proven it has a business model that can produce the required operating cash flow to service and ultimately repay these reduced obligations. "Even after this exchange, we believe ResCap's debt levels will remain inconsistent with its long term earnings." said Mr. Emrick. Additionally, the ultimate resolution of the company's $1.75 billion bank loan which matures in July 2008 and two $875 million (total of $1.75 billion) committed, undrawn, unsecured revolvers which mature in June 2008 and June 2010 remains unclear. Moody's considers this line availability to be an important source of contingent liquidity. The rating of ResCap's $1.2 billion of June 9, 2008 bonds was affirmed at Caa1 as these bonds are not part of the exchange and the company has announced they intend to commence a cash tender for these bonds at par. Additionally, even if the cash tender for these bonds is not untaken, their maturity in advance of the bank facilities maturing increases the likelihood they will be repaid. Downgrades: Issuer: Residential Capital, LLC -- Multiple Seniority Shelf, Downgraded to (P)Ca from (P)Caa1 -- Subordinate Regular Bond/Debenture, Downgraded to C from Caa2 -- Senior Unsecured Regular Bond/Debenture, Downgraded to Ca from Caa1 Issuer: Residential Funding of Canada Finance ULC -- Senior Unsecured Regular Bond/Debenture, Downgraded to Ca from Caa1 On Review for Possible Downgrade: Issuer: Residential Capital, LLC -- Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Ca Issuer: Residential Funding of Canada Finance ULC -- Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently Ca ResCap is a subsidiary of GMAC LLC and is headquartered in Minneapolis, Minnesota. Rescap reported equity of $6.0 billion at Dec. 31, 2007. ROYAL UTILITIES: S&P Cuts Rating to BB+ After Sherritt Acquisition ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its long-term corporate credit rating on thermal coal miner Royal Utilities Income Fund to 'BB+' from 'BBB+' after Sherritt International Corp. (not rated) successfully acquired the remaining 59% of Royal Utilities it did not already own. At the same time, S&P removed the ratings from CreditWatch, where they were placed March 19. The lowered rating reflects Standard & Poor's assessment, based on public information only, that Sherritt's consolidated credit profile including Royal Utilities would be speculative grade. Subsequently, S&P withdrew the ratings at the issuer's request. Neither Royal Utilities nor Sherritt has rated debt. REYNOLDS AMERICAN: Debt Reduction Cues S&P to Lift Rating from BB+ ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on Winston-Salem, North Carolina-based Reynolds American Inc. to 'BBB-' from 'BB+'. Standard & Poor's also raised the issue-level ratings on RAI subsidiary RJ Reynolds Tobacco Holdings' senior unsecured debt to 'BBB-' from 'BB+', and affirmed its issue-level ratings on RAI's senior secured bank facilities and senior secured notes at 'BBB'. At the same time, Standard & Poor's withdrew its '3' recovery rating on the senior unsecured debt, as well as its recovery rating of '1' on the senior secured debt. "The upgrade reflects the continued reduction in debt leverage since the acquisition of Conwood Companies in May 2006, improved operating performance, and a more favorable litigation environment within the domestic tobacco industry," said Standard & Poor's credit analyst Kenneth Shea. The withdrawal of all recovery ratings relates to RAI's corporate credit rating crossing into investment grade, as Standard & Poor's typically does not assign recovery ratings to investment-grade companies. The affirmation of the senior secured debt ratings one notch above the revised corporate credit rating reflects the fact that, at least for the time being, lenders to the senior facilities continue to benefit from perfected security interests in the pledged collateral of the company. "To the extent that, per the terms of the various indentures and credit facilities, the security interests are released and the obligations thereunder become unsecured, we would reassess the notching on the unsecured debt," said Mr. Shea. The ratings on RAI and its wholly owned subsidiary RJRT continue to reflect the company's participation in the contracting domestic cigarette industry, its declining shipment volumes and market share, and significant litigation risk partly offset by relatively moderate financial policies. The U.S. cigarette industry is mature and highly competitive, and Standard & Poor's projects that overall domestic shipment volume will decline at an approximate 3.5% rate in 2008, and 3% annually thereafter. Operating company RJ Reynolds Tobacco Co.'s profit margins still remain below that of its larger competitor, Philip Morris USA. However, the May 2006 acquisition of Conwood has provided some diversification of sales and EBITDA into higher- margin smokeless tobacco products, as well as providing the company with additional growth opportunities. SALISBURY INT'L: Fitch Slashes $33MM Note Rating to CC from A+ -------------------------------------------------------------- Fitch downgraded 1 class of notes issued by Salisbury International Investments Limited, Series No: 2005-14. The rating action is effective immediately: -- $33,000,000 class D Credit Linked Notes downgraded to 'CC' from 'A+' and removed from Rating Watch Negative. Salisbury 2005-14 is a partially funded, static synthetic collateralized debt obligation that closed on Dec. 8, 2005. Salisbury 2005-14 references a portfolio comprised primarily of subprime residential mortgage-backed securities bonds (44.9%), Alt-A RMBS (24.6%), prime RMBS (1.3%), and other structured finance assets. Subprime RMBS bonds of the pre-2005 and 2005 vintages account for approximately 25.3% and 19.6% of the portfolio, respectively. Alt-A RMBS of the pre-2005 and 2005 vintages represent approximately 16.9% and 7.6% of the portfolio, respectively. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime and Alt-A RMBS. Since January 2007, approximately 38.5% of the portfolio has been downgraded with 7.2% of the portfolio currently on Rating Watch Negative. About 33.2% of the portfolio is rated at below investment-grade. In addition, the Fitch Weighted Average Rating Factor has increased significantly from 4.27 at the last rating action in December 2006 to 16.44 currently. The rating of the class D notes addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. SEALY CORPORATION: March 2 Balance Sheet Upside-Down by $130MM -------------------------------------------------------------- Sealy Corporation's balance sheet at March 2, 2008, showed total assets of $1.0 billion and total liabilities of $1.1 billion, resulting in a total shareholders' deficit of about $130.0 million. The company reported net income for the first quarter of $16.2 million compared with $24.6 million for the same period a year ago. Wholesale domestic unit volumes were affected by accounts transitioning to the company's new Posturepedic line launching this Spring, reduced volumes from certain customers going out of business, and lower sales of promotional products. These factors were partially offset by continued unit growth in the company's specialty bedding products. Branded domestic specialty bedding product sales increased 17% in the first quarter of 2008 compared to the comparable period in the prior year. "During the first quarter we continued to execute on our strategic initiatives designed to drive AUSP growth, improve operational efficiencies, and position the company to achieve margin expansion over time," Larry Rogers, Sealy's interim chief executive officer and president of North America, stated. "We initiated a pricing increase and instituted a more diligent focus on controlling our costs which enabled us to achieve SG&A expense leverage despite the decline in sales." "We also introduced our innovative new Posturepedic line, which will be key to recapturing share of innerspring sales at price points above $1,000, and began shipping floor samples of the new line in March," Mr. Rogers added." "Our specialty business performed well, despite the deterioration in overall trends in our domestic business as the quarter progressed," Mr. Rogers continued. "We were pleased to see continued growing demand for our latex product line and relatively strong performance from our international business." "Going forward, while industry headwinds have intensified, we will focus our efforts on what we can control, including proactively managing our costs and continuing to execute on our strategic initiatives," Mr. Rogers concluded. "I am confident that we are taking steps to strengthen our leading market position and drive long-term growth." Liquidity and Capital Resources At March 2, 2008, the company has approximately $33.9 million available under its revolving credit facility after taking into account letters of credit issued totaling $23.7 million. The company has incurred debt, including senior credit facilities consisting of a $125 million senior secured revolving credit facility maturing in 2010 and senior secured term loan facilities maturing in August 2011 and August 2012 with outstanding balances of $467.1 million at March 2, 2008, for the senior facilities. The company also have an outstanding principal balance of $273.9 million at March 2, 2008, on the 2014 Notes. At March 2, 2008, the company was in compliance with the covenants contained within its senior credit agreements and indenture governing the 2014 Notes. As of March 2, 2008, the company's debt net of cash was $795.2 million, compared to net debt of $803.0 million as of Feb. 25, 2007. Dividend The company also disclosed that its board of directors voted to suspend the company's quarterly dividend. This decision is intended to increase the company's financial flexibility and will enable it to better allocate its capital in order to enhance shareholder returns over time. About Sealy Corporation Headquartered in Trinity, North Carolina, Sealy Corporation (NYSE: ZZ) -- http://www.sealy.com/-- manufactures and markets a broad range of mattresses and foundations under the Sealy(R), Sealy Posturepedic(R), Stearns & Foster(R), and Bassett(R) brands. Sealy operates 26 plants in North America. SHAPES/ARCH HOLDINGS: Files Modified Disclosure Statement --------------------------------------------------------- Shapes/Arch Holdings and its debtor-affiliates delivered a Modified Joint Disclosure Statement dated April 30, 2008, explaining their First Amended Joint Plan of Reorganization to the Hon. Gloria M. Burns of the United States Bankruptcy Court for the District of New Jersey. The Plan provides for a fair allocation of the Debtors' assets in an orderly manner under the Bankruptcy Code and other applicable law. The Debtors disclose that the Plan reflects a commitment by: a) their lender group -- comprised of The CIT Group/Business Credit, Inc., as agent, JPMorgan Chase Bank N.A., and Textron Financial Corporation -- to provide the Debtors with revolving loans of up to $60 million throughout the chapter 11 proceedings and upon exiting bankruptcy; and b) Arcus ASI Funding LLC to pay off the lender group's term loans; to provide funding in excess of what is available based upon the Debtors' eligible inventory and accounts in light of the cyclical nature of the Debtors' businesses; to provide additional working capital for the Debtors, and to fund a dividend to creditors, requiring a total commitment by Arcus of approximately $25 million. The Debtors' Plan will distribute these reserves, after the effective date (i) Class 5 Pool Escrow of $500,000 or $2,000,000 if Class 5 votes to accept the plan, and (ii) plan Expense Reserve of $100,000. Treatment of Claims and Interest Type of Estimated Estimated Class Claim Amount Recovery ----- ------- --------- --------- Unclassified Administrative $2,513,606 100% Claims Unclassified Arcus DIP Claims $22,000,000 100% Unclassified Fee Claims $800,000 100% Unclassified Priority Tax $84,667 100% Claims 1 Other Priority $1,514,113 100% Claims 2 Miscellaneous $75,000 100% Secured Claims 3 CIT Claims $55,000,000 100% 4 Collateralized 100% Insurance Program Claims 5 General Unsecured $38,121,413 2%-5% Claims 6 Ben Interest NA 0% 7 Class 7 Interest NA 100% 8 Class 8 EPA/NJDEP $350,000 100% 9 Class 9 Secured $747,939 100% Real Estate Claims 10 Class 10 Secured $TBD 100% 11 Class 11 Secured $150,000 100% Claims of Warehousemen and Shippers Ben LLC holds 100% in membership interest of the Debtors. A full-text copy of the Modified Disclosure Statement is available for free at: http://ResearchArchives.com/t/s?2b7c A full-text copy of the First Amended Chapter 11 Plan of Reorganization is available for free at: http://ResearchArchives.com/t/s?2b7e Headquartered in Delair, New Jersey, Shapes/Arch Holdings, LLC, produces custom aluminum extrusions for road and rail transportation and commercial and residential construction. The company also manufactures maintenance aluminum fence systems, for residential and commercial use, and above-ground pools. The company and four of its affiliates filed for Chapter 11 protection on March 16, 2008 (Bankr. D. N.J. Lead Case No. 08-14631). Jerrold N. Poslusny, Jr., Esq., at Cozen O'Connor, represents the Debtors in their restructuring efforts. The U.S. Trustee for Region 3 appointed six creditors to serve on an Official Committee of Unsecured Creditors. Halperin Battaglia Raich LLP represents the Committee in this cases. When the Debtors filed for protection against their creditors, they listed assets between $10 million to $50 million and debts between $50 million to $100 million. SHARPS CDO: Fitch Cuts Rating to C from BB on $6.9 Million Notes ---------------------------------------------------------------- Fitch has downgraded 6 classes of notes issued by SHARPS CDO I, and removed them from Rating Watch Negative. These rating actions are effective immediately: -- $255,162,729 class A-1 to 'A-' from 'AAA'; -- $9,450,471 class A-2 to 'A-' from 'AAA'; -- $25,077,674 class B to 'CC' from 'AA+; -- $13,801,136 class C to 'C' from 'A+'; -- $13,127,910 class D to 'C' from 'BBB'; -- $6,900,568 class E to 'C' from 'BB'. SHARPS I is a static cash flow collateralized debt obligation issued with no trading flexibility and no asset manager. Deutsche Bank Trust Company Americas is the trustee for this transaction. SHARPS I has a portfolio comprised primarily of Alt-A RMBS (89.95%) and prime RMBS (10.05%). Alt-A RMBS of the 2005 and 2006 vintages represent approximately 29.44% and 59.45% of the portfolio. The classes A-1 and A-2 notes benefit from external credit enhancement provided by a financial guaranty policy underwritten by CIFG Assurance North America. In the absence of credit enhancement provided by the wrap Fitch would rate both A-1 and A-2 classes as highly speculative below investment grade securities. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically Alt-A RMBS. Since the transaction closed on Dec. 15, 2006, approximately 63% of the portfolio has been downgraded with 40.9% of the portfolio currently on Rating Watch Negative. The negative credit migration is primarily attributable to credit deterioration in Alt-A RMBS bonds from the 2005 and 2006. The classes rated 'CCC' and below are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the classes A-1 and A-2 notes (class A notes) and class B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction governing documents, as well as the aggregate outstanding amount of principal by the legal final maturity date. The ratings of the classes C, D, and E notes address the likelihood that investors will receive ultimate interest payments, as per the transaction governing documents, as well as the aggregate outstanding amount of principal by the legal maturity date. SPECIALTY UNDERWRITING: Fitch Downgrades Ratings on $97.5MM Certs. ------------------------------------------------------------------ Fitch Ratings has taken rating actions on three Specialty Underwriting and Residential Finance mortgage pass-through certificate transactions. Unless stated otherwise, any bonds that were previously placed on Rating Watch Negative are now removed. Affirmations total $86.2 million and downgrades total $97.5 million. Series 2003-BC1 -- $2.4 million class A affirmed at 'AAA'; -- $15.9 million class M-1 affirmed at 'AA+'; -- $2.8 million class M-2 affirmed at 'A'; -- $1.9 million class B-1 downgraded to 'B-/DR1' from 'B'; -- $0.9 million class B-2 remains at 'C/DR6'. Deal Summary -- Originators: Various; -- 60+ day Delinquency: 16.41%; -- Realized Losses to date (% of Original Balance): 2.68%. Series 2003-BC2 -- $11.5 million class M-1 affirmed at 'AA+'; -- $8.7 million class M-2 downgraded to 'B-/DR1' from 'B'; -- $1.7 million class B-1 affirmed at 'CC/DR3'; -- $0.0 million class B-2 revised to 'C/DR6' from 'C/DR5'. Deal Summary -- Originators: Various; -- 60+ day Delinquency: 18.09%; -- Realized Losses to date (% of Original Balance): 2.87%. Series 2004-BC4 -- $24.5 million class A-1A affirmed at 'AAA'; -- $6.1 million class A-1B affirmed at 'AAA'; -- $21.2 million class A-2C affirmed at 'AAA'; -- $64.9 million class M-1 downgraded to 'BBB-' from 'A'; -- $17.7 million class M-2 downgraded to 'BB' from 'BBB'; -- $1.4 million class M-3 downgraded to 'BB-' from 'BBB-'; -- $1.4 million class B-1 downgraded to 'B' from 'BB+'; -- $0.8 million class B-2 downgraded to 'B' from 'BB'; -- $0.7 million class B-3 downgraded to 'C/DR6' from 'BB-'. Deal Summary -- Originators: Various; -- 60+ day Delinquency: 22.95%; -- Realized Losses to date (% of Original Balance): 1.08%. SOLO CUP: Fitch Affirms Ratings and Revises Outlook to Positive --------------------------------------------------------------- Fitch Ratings has affirmed Solo Cup Company's Issuer Default Rating and existing credit ratings as: -- IDR affirmed at 'B-'; -- Senior secured term loan affirmed at 'BB-/RR1'; -- Senior secured revolving credit facility affirmed at 'BB-/RR1'; -- Senior subordinated notes affirmed at 'CCC+/RR5'. The Rating Outlook is revised to Positive from Stable. Approximately $756 million of debt is covered by the ratings. The company's Canadian bank debt is excluded from the ratings. The Rating Outlook revision is based on positive operating trends and continued execution of the company's turnaround strategy, which offset concerns about potentially weaker volumes and cost inflation. Fitch expects that the company's earnings and cash flow will continue to improve in 2008, and credit metrics should continue to strengthen during the year. In addition, Solo has resolved all outstanding material weaknesses in internal controls. If Solo's performance continues to meet these expectations over the course of the coming quarters, the ratings could be reviewed for a possible upgrade. The ratings recognize Solo's leading market share across its product categories; strong brand recognition; diversified raw materials mix; diverse, stable customer base; and modest near-term debt maturities. Concerns center on high leverage; margin and volume pressure due to intense competition; and cost inflation in resin and energy prices. Fitch also expects softer industry volumes in the coming year, which could generally constrain demand and erode price support. Fitch's recovery analysis continues to indicate full expected recovery of the company's bank debt in a hypothetical distressed scenario. Expected recovery for the senior subordinated notes remains within the 'RR5' band (11%-30%). Improved earnings or an upward revision of the IDR could lead to an upgrade of the notes in the intermediate term. Solo has made clear progress through its performance improvement program, achieving about $75 million of cost savings, greater than initial expectations of $60 to $70 million. Performance consultants have been disengaged which should result in additional cost savings of $20 million or more going forward. While some earnings potential has been lost due to business divestitures, improved efficiencies, better product mix management, and greater pricing discipline are likely to more than offset these losses. Higher raw materials prices and other cost inflation will likely continue to challenge profitability for Solo. In addition, competition within Solo's key markets remains intense. General foodservice industry volumes are likely to be softer in the coming year with growth rates in the low single digit range. Solo's ability to manage its core product portfolio profitably in the face of these challenges will be monitored. Solo achieved meaningful debt reduction in 2007 and as a result total leverage has declined appreciably from 9.8 times at first quarter ended Apr. 1 2007 to 5.7x at fiscal year end 2007, by Fitch calculations. Fitch expects further deleveraging as trailing twelve month EBITDA figures begin to benefit from the cost savings and an unusually weak 1Q07 falls out of the calculation. Solo has announced a few remaining asset sales in 2008 which could serve to reduce debt modestly by the end of the year. Fitch expects the company will be able to meet tightening consolidated leverage ratio requirements over the course of 2008. By fiscal year end, Solo must achieve leverage of 4.5x according to the terms of its bank credit agreement. Fitch expects certain cash expenses to increase in the near term stemming from announced facility realignments and higher management compensation. Capital expenditures are also likely to move higher in 2008 as the company modernizes some equipment. Free cash flow is projected to remain positive and should improve from the 2007 figure of $48.4 million, as Fitch expects higher earnings and better working capital management. SOUTH FINANCIAL: Fitch Puts 'BB' Rating on $250MM Preferred Stock ----------------------------------------------------------------- Fitch Ratings has assigned a 'BB' rating to the mandatory convertible non-cumulative preferred stock issued by The South Financial Group, Inc. (Nasdaq: TSFG, 'BBB-/F3', Negative Rating Outlook). The issuance consists of $250 million in series 2008 convertible preferred stock. These preferred shares pay a dividend of 10.00% and mandatorily convert into common equity shares of TSFG in three years. These securities will be treated as Tier 1 capital for regulatory capital purposes. Fitch assigns class E (100% equity content) equity treatment to these securities, subject to the limitation that TSFG's aggregate hybrid securities not exceed 30% of eligible capital. The high equity content reflects the level of subordination and the non- cumulative structure of the preferred stock. Of note, once the conversion into common equity is accomplished, the security will no longer be subject to the hybrid capital limitation. Fitch notes that shareholder approval is required for conversion. Should common stock shareholders not approve the conversion prior to the conversion date, the dividend rate on the preferred shares increases considerably, but remains non-cumulative. This step-up feature is intended to encourage shareholder approval. TSFG intends to use the proceeds from this issuance for general corporate purposes and the repayment of short-term borrowings. TSFG's Rating Outlook remains Negative. While the additional capital creates a larger buffer against ongoing earnings pressure, Fitch believes TSFG will continue to face elevated levels of problem assets and credit losses. Given Fitch's outlook for the housing market and general economic conditions, particularly in Florida, TSFG's internal equity generation will likely remain diminished in the near and intermediate term. Fitch assigned these rating with a Negative Outlook: South Financial Group, Inc. (The) -- Preferred stock 'BB'. STEVEN MOLASKY: Case Summary & 14 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Steven D. Molasky One Hughes Center Dr., Ste. 1404 Las Vegas, NV 89169 Bankruptcy Case No.: 08-14517 Chapter 11 Petition Date: May 3, 2008 Court: District of Nevada (Las Vegas) Judge: Mike K. Nakagawa Debtor's Counsel: Laurel E. Davis, Esq. Email: ldavis@fclaw.com Fennemore Craig, P.C. 300 S. Fourth St., Ste. 1400 Las Vegas, NV 89101 Tel: (702) 692-8000 Fax: (702) 692-8099 http://www.fclaw.com/ Estimated Assets: $50 million to $100 million Estimated Debts: $50 million to $100 million Debtor's 14 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Asset LA, LLC $19,194,150 100 City Pkwy. Ste. 1700 Las Vegas, NV 89106 One Cap Funding Corp. long beach $9,610,833 5440 W. Sahara Ave. 3rd Flr. Las Vegas, NV 89146 Altessa $5,564,667 Clarion #178 $1,043,194 Clarion $172 $676,155 Irwin Union Bank loans $3,897,490 500 Wash. St. Columbus, IN 47201 Irwin Molasky $3,408,750 100 City Pkwy. Ste. 1700 Las Vegas, NV 89106 Park Corp. $3,083,000 6200 Riverside Drive Cleveland, OH 44135 Redwood Capital Finance Co., $3,000,000 LLC 222 North Sepulveda Blvd. El Segundo, CA 90245 M Funding LLC $2,868,000 100 City Pkwy. Ste. 1700 Las Vegas, NV 89106 Kenneth Wynn notes $2,208,289 1717 Enclave Las Vegas, NV 89134 Bank of Nevada $1,417,331 P.O. Box 26237 Las Vegas, NV 89126-0237 Sun West State Bank $469,676 5830 W. Flamingo Road Las Vegas, NV 89103 Andrew Molasky $234,882 Irwin A. Molasky Family Irrev. $162,450 Trust Alan Molasky $154,000 STRUCTURED ASSET: Moody's Lowers Ratings on 57 Certificate Classes ------------------------------------------------------------------ Moody's Investors Service has downgraded 57 certificates and placed on review for possible downgrade 19 classes of certificates from 11 transactions issued by Structured Asset Securities Corp. The transactions are backed by second lien loans. The certificates were downgraded because the bonds' credit enhancement levels, including excess spread and subordination were too low compared to the current projected loss numbers at the previous rating levels. The actions take into account the continued and worsening performance of transactions backed by closed-end-second collateral. Substantial pool losses of over the last few months have eroded credit enhancement available to the mezzanine and senior certificates. Despite the large amount of write-offs due to losses, delinquency pipelines have remained high as borrowers continue to default. Complete rating actions are: Issuer: Structured Asset Securities Corporation 2005-S1 -- Cl. M4, Placed on Review for Possible Downgrade, currently A1 -- Cl. M5, Downgraded to Baa3 from A2; Placed Under Review for further Possible Downgrade -- Cl. M6, Downgraded to Ba3 from Baa3 -- Cl. M7, Downgraded to Caa1 from B2 -- Cl. M8, Downgraded to C from Ca Issuer: Structured Asset Securities Corp Trust 2005-S2 -- Cl. M6, Placed on Review for Possible Downgrade, currently A3 -- Cl. M7, Downgraded to Ba2 from Baa3 -- Cl. M8, Downgraded to B3 from Ba1 -- Cl. M9, Downgraded to Caa2 from B3 Issuer: Structured Asset Securities Corp Trust 2005-S3 -- Cl. M7, Placed on Review for Possible Downgrade, currently Baa1 -- Cl. M8, Downgraded to B1 from Ba1 -- Cl. M9, Downgraded to Caa1 from B1 Issuer: Structured Asset Securities Corp Trust 2005-S5 -- Cl. M3, Placed on Review for Possible Downgrade, currently Aa3 -- Cl. M4, Downgraded to Ba3 from Baa2 -- Cl. M5, Downgraded to B3 from B1 -- Cl. M6, Downgraded to C from Caa2 Issuer: Structured Asset Securities Corp Trust 2005-S6 -- Cl. M2, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. M3, Placed on Review for Possible Downgrade, currently Aa3 -- Cl. M4, Downgraded to Baa1 from A1; Placed Under Review for further Possible Downgrade -- Cl. M5, Downgraded to Ba3 from Baa2 -- Cl. M6, Downgraded to B2 from Ba1 -- Cl. M7, Downgraded to Caa2 from B3 -- Cl. M8, Downgraded to C from Caa3 -- Cl. M9, Downgraded to C from Ca Issuer: Structured Asset Securities Corp Trust 2005-S7 -- Cl. M1, Placed on Review for Possible Downgrade, currently Aa1 -- Cl. M2, Downgraded to A1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M3, Downgraded to A3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to Baa2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M5, Downgraded to Ba2 from Baa1 -- Cl. M6, Downgraded to B2 from Ba2 -- Cl. M7, Downgraded to Caa2 from B3 -- Cl. M8, Downgraded to C from Caa3 Issuer: Structured Asset Securities Corp Trust 2006-ARS1 -- Cl. A1, Downgraded to B1 from A3; Placed Under Review for further Possible Downgrade -- Cl. M1, Downgraded to Ca from Ba1 -- Cl. M2, Downgraded to C from B3 -- Cl. M3, Downgraded to C from Caa2 -- Cl. M4, Downgraded to C from Ca Issuer: Structured Asset Securities Corp Trust 2006-S1 -- Cl. A2, Downgraded to A1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M1, Downgraded to Ba1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M2, Downgraded to Ba3 from Baa1 -- Cl. M3, Downgraded to B2 from Baa2 -- Cl. M4, Downgraded to Caa1 from Ba3 -- Cl. M5, Downgraded to C from Caa2 -- Cl. M6, Downgraded to C from Ca Issuer: Structured Asset Securities Corp Trust 2006-S2 -- Cl. M1, Downgraded to A3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M2, Downgraded to Ba3 from Baa1 -- Cl. M3, Downgraded to B2 from Baa2 -- Cl. M4, Downgraded to B3 from Ba2 -- Cl. M5, Downgraded to Caa2 from B3 -- Cl. M6, Downgraded to C from Caa2 -- Cl. M7, Downgraded to C from Ca Issuer: Structured Asset Securities Corp Trust 2006-S3 -- Cl. M-1, Downgraded to Ba1 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-2, Downgraded to B2 from Ba1 -- Cl. M-3, Downgraded to Caa1 from Ba3 -- Cl. M-4, Downgraded to C from Caa2 -- Cl. M-5, Downgraded to C from Ca Issuer: Structured Asset Securities Corporation 2006-S4 -- Cl. A, Downgraded to Aa3 from Aaa; Placed Under Review for further Possible Downgrade -- Cl. M1, Downgraded to Baa2 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M2, Downgraded to Ba2 from A3 -- Cl. M3, Downgraded to B2 from Baa2 -- Cl. M4, Downgraded to Caa1 from Baa3 -- Cl. M5, Downgraded to Caa2 from Ba3 -- Cl. M6, Downgraded to Ca from B1 -- Cl. M7, Downgraded to Ca from Caa1 ST. JOSEPH'S: Moody's Assigns Ba1 Rating on $236.6 Million Bonds ---------------------------------------------------------------- Moody's Investors Service has assigned a Ba1 rating to St. Joseph's Healthcare System's $236.6 million Series 2008 Bond Issue to be issued by the New Jersey Health Care Facilities Financing Authority. The outlook is positive. The Ba1 rating is an initial rating and reflects this two hospital provider's essentiality in its market offset by the impact of a 232% increase in debt to fund needed facility improvements. The positive outlook speaks to the recent favorable momentum established by this newer management team that has translated into recent profitable operating performance which could contribute to an improved credit profile over the intermediate term. Use of Proceeds: Bonds will refund existing Series 1996A (Ambac insured) and Series 2003 bonds. The 1996B bonds will also be cash defeased. New money proceeds will largely be spent at St. Joseph's Regional Medical Center. Bonds will fund construction of a critical care tower at the SJRMC campus which will expand the existing emergency room, add 12 new operating room suites and add 56 private critical care beds. Reconfiguration of SJRMC with new lobby, separate pediatric waiting area, and new clinic and outpatient specialty space will also be funded from proceeds. At St. Joseph's Wayne Hospital, renovations will result in an improved ICU/CCU unit, and expansion of existing operating suites and renovated lobby area. Legal Security: Annual debt service coverage of 1.10 times and 35 days of cash on hand. Gross revenue pledge and mortgage provided. Historical covenants that limit any transfers between SJRMC and SJW will be eliminated. Interest Rate Derivatives: none Strengths * Essentiality of services and designation as a safety net hospital in Passaic County, offering increasingly tertiary care services including trauma, cardiology and regional perinatal center. * Refocused strategic direction and change in culture since new management team was put in place in 2004. * Improving market presence in Paterson with a leading 24% market share in its four-county service area that is expected to increase following the closure of two former competing facilities, unified operations with full incorporation of Wayne General Hospital into the system and recent physician recruitments. * Under the direction of new management, significant turnaround in financial performance at WGH following structural reorganization of system around service lines. Significantly improved managed care contracting arrangements results in increased revenue and equity of payment rates between WGH and SJH. * Project will finance needed projects at SJRMC and WGH and eliminate restrictive covenants included in existing documents that limits the system's ability to pool resources and capital spending. Challenges * Financial performance is dependent on charity care funding despite the underlying financial improvement and success of various growth strategies due to a challenging payer mix * Weak balance sheet and underinvestment in facilities are the result of extended years of poor performance at WGH and SJRH and gap in senior leadership * Addition of $168 million of new debt for current projects materially affects all ratios and represents the beginning of an extensive capital plan * Need to joint venture with physicians to maintain loyalty and retain interest may present new credit risk as income is now shared * No established fundraising record as the system prepares to launch a large campaign for additional capital projects. * Location in Paterson with below average demographics and economic factors contributes to current reluctance of suburban patients to use the facility * Making up for years of inadequate management and board oversight which left the organization with a weaker financial profile than what fundamentals would suggest Market Position/Competitive Strategy: Improving Profile and Leading Market Share St. Joseph's Healthcare System is comprised of St. Joseph's Regional Medical Center, St. Joseph's Children's Hospital located on the Paterson campus, St. Joseph's Wayne Hospital in Wayne, a nursing home, home health agency and more than two dozen ambulatory and clinic sites located throughout the service area in Passaic, Essex, Bergen and Hudson counties in northern New Jersey. SJRMC is a tertiary provider with centers of excellence in cardiology, Level II trauma and pediatrics, while SJW, acquired from the Saint Barnabas Health System in 2001, provides more primary care services with a focus on geriatrics, subacute and rehabilitation services. SJRMC and SJW have only recently begun operating as a single system with a common vision to grow. Limited strategic opportunities were pursued in the years immediately following SJW's acquisition (2001) because each facility was independently struggling with large operating deficits, facility needs, compounded by a lack of board oversight and management leadership to provide guidance during this period. SJRMC also lost its safety net designation which materially reduced its revenue. Organizational stability and the beginning of the turnaround began with the hiring of the current management team in 2004 who Moody's credit with bringing the hospitals together, standardizing benchmarks for productivity, and reorganizing the system around clinical lines to use the physical space of the two hospitals more effectively. Clinical programs that were not financial contributors were closed including obstetrics at SJW, which was consolidated at SJRMC. More recently, renegotiated managed care contracts to include SJW and new vendor contracts have solidified the unified contracting strategy of the two hospitals which has translated into tangible savings. Physicians and staff remained loyal during the difficult years of 2000-2003 but the stabilized operating environment has led to the successful recruitment of 167 new physicians since 2006, contributing to a 5.8% increase in inpatient admissions in 2007. Management is pursuing multiple joint ventures with its medical staff. To date only a joint venture for a cadiac cath lab at SJW is operational but a joint venture for additional cath labs at SJRMC, a dialysis center, imaging and endoscopy are also being planned to keep the medical staff engaged and increase volumes further. Although the medical staffs' by-laws are separate at the two hospitals (60% overlap), collaboration around quality, clinical standards and medical records are identical. The system records leading market share in its service area with 24% market share, followed by Hackensack University Medical Center with 10%. The children's' hospital has a leading 34% market share for pediatric services and contributes 28% of total admissions. The system has established an academic relationship with St. Jude's Children's Research Hospital through which the hospital's Medical Oncologists participate weekly via telemedicine capabilities in a combined Lymphoma and Leukemia conference. The immediate market is somewhat in flux, with the recent bankruptcy filing by Barnert Hospital, the merger of Passaic Beth Israel into St. Mary's Hospital, and Mountainside Hospital purchased by for- profit Merit Health from Atlantic Healthcare System. Moody's believe that SJRMC will benefit from these market changes through new additions to its medical staff and additional patient volumes, although we also believe that SJRMC will continue to be impacted in the short-term, by its location in Paterson (General Obligation rating of Baa3) and the reluctance of insured suburban patients to travel to SJRMC for care. The System hopes to be the leader in the redevelopment of the area surrounding its Paterson campus and the designation as a hospital enterprise zone brings certain tax advantages to businesses and physician practices relocating to this area. However, state and federal funding has not been received and the timetable for improving the immediate area may not occur as quickly as management anticipates. Moody's would expect that the improvements to the facility as a result of this financing should add to the attractiveness of the campus and enhance the patient experience while the surrounding area is undergoing improvements. Nonetheless, the image of Paterson, real or perceived, could be a limiting factor to future growth. Operating Performance: Turnaround in Financial Performance Underway Since Reorganization in 2003 SJHS suffered from multiple financial challenges through FY 2003 as a result of turnover in senior management, ineffective oversight by the board, and consultants who let the safety net status of SJRMC lapse which resulted in significant lost revenue ($57 million) for charity care for fiscal years 2000-2002. Prolonged losses at SJW following its acquisition in 2001 added to the financial distress and depleted balance sheet reserves. The system has made much progress since those years and new management has been effective in re-establishing SJRMC's safety net status to garner state dollars from charity care subsidy funds. Managed care contracting as a system materially increased rates to SJW, contributing to the turnaround at that facility as did attention to billing and documentation. Productivity standards based on volume and renewed focus on growth as a strategic initiative for financial improvement have been implemented with favorable results. The system has experienced marked improvement in operating performance over the last three years, most recently earning $6.4 million (Moody's excludes investment income and one time gains on sale of real estate) on $553.1 million of total operating revenue (1.2% operating margin) for FY2007. However, system performance has been inconsistent despite being improved from historical levels. Varying profit margins at SJRMC and SJW reflect variances in prior year settlements and subsidy dollars received. Additionally, the hospitals were inadvertently hurt by the success of length of stay reductions which materially reduced revenue from per diem contracts during 2005 and particularly in 2006, causing total revenue to actually decline by 1.75% in 2006 over 2005 despite small gains in inpatient volume. Managed care contracts have since been renegotiated with the full benefit expected to be realized beginning in fiscal 2008 from new contracts signed in 2007 (we favorable note the 7.8% increase in revenue in 2007 over 2006 levels). Operating cashflow has ranged from $22.6 million to $32.4 million during the last four years producing a below average 5.0% operating cash flow margin. Projected operating margins remain below 2% through the projected period (2008-2011). The bonds increase annual debt service materially, and the current run rate must be sustained to maintain minimally acceptable maximum annual debt service coverage. MADS increases to $18.284 million per year from $14.9 million which should be adequately covered based on total cashflow of $34.6 million generated in FY2007 (pro forma MADS of 1.89 times). Projections anticipate annual increases in cashflow as growth strategies bear results and volume increases at both hospitals. Operating cashflow margin is expected to make steady annual progress, reaching 6.4% by 2011 from 5.0% at FYE2007. Meeting cashflow targets will be an important component of any future rating upgrade. Balance Sheet Position: Leveraged Balance Sheet Following Debt Issue; Cash Balances are Light The current balance sheet reflects the impact of multiple years of poor financial position. Days cash on hand of 71.4 days is modest for a system of this size, although we do note that these balances ($103.69 million) have grown considerably since 2001 when the system only had $32.2 million of cash on hand. The additional debt increases the current debt position by 232%, and reduces the favorable cash-to-debt ratio at FYE 2007 of 146.8% to a slim 36.6% ratio. The system prepaid the $18 million note payable to Saint Barnabas Healthcare System for SJW during 2007, contributing to a reduction in debt during the year above normal principal amortization and contributing to the very favorable debt to cashflow ratio of 2.38 times for FY2007. Debt to cashflow increases unfavorably with the addition of new money debt of Series 2008 to 14.2 times but the lowered debt service resulting from refinancing existing bonds with a front-loaded debt structure provides some offset to the increased debt service going forward. However, pro forma MADS coverage remains light, with projected coverage reaching 2.84 times in FY 2011 with projected cash flows. Additional debt could be expected in the intermediate term once the system establishes its track record of performance and completes the projects being financed with 2008 bond proceeds. The facilities have been undercapitalized with a capital spending ratio consistently below one times and the average age of plant an above average 13.8 years for FY2007. A capital campaign with a goal to raise $40 million over the next five years is underway and would be the system's first campaign in recent years. Outlook The positive outlook is based on our belief that SJHS is positioned to improve its credit rating if the growth initiatives being implemented drive new volume to the facilities and favorable operating performance and balance sheet indicators result. Consistency of performance will also be an important consideration in any future rating action. What could change the rating--UP Improved operating performance that meets projected targets, reduction in leverage, improved market position What could change the rating--DOWN Additional debt without commensurate increase in cashflow, reduction in cash, downturn in operating performance Key Iindicators Assumptions & Adjustments: -- Based on financial statements for St. Joseph's Healthcare System, Inc. and Affiliates -- First number reflects Audit year ended December 31, 2006 -- Second number reflects audit year ended December 31, 2007, including Series 2008 Bonds -- Includes $185.6.0 million of additional debt from Series 2008 bonds (232% increase) -- Excludes $560 thousand of non-recurring revenues and $5.979 million of investment income -- Investment returns smoothed at 6% unless otherwise noted -- Pro forma Interest expense "grossed up" to include capitalized interest * Inpatient admissions: 33,247 ; 35,541 * Total operating revenues: $513.0 million; $553.1 million * Moody's-adjusted net revenue available for debt service: $27.6 million; $34.6 million * Total debt outstanding: $71.3 million; $236.6 million * Maximum annual debt service (MADS): $13.774 million; $18.284 million * MADS Coverage with reported investment income: 2.44 times; 1.89 times * Moody's-adjusted MADS Coverage with normalized investment income: 2.52 times; 1.84 times * Debt-to-cash flow: 2.38 times; 12.12 times * Days cash on hand: 71.4 days; 70.1 days * Cash-to-debt: 116.8%; 36.6% * Operating margin: 1.2%; (.7)% * Operating cash flow margin: 5.0%; 5.0% Rated Debt -- Series 2008, $240 million, rated Ba1 THOMAS WEISEL: To Slash 13% of Workforce First Half This Month -------------------------------------------------------------- Thomas Weisel Partners Group, Inc., will reduce employee headcount by 13% during the first half of the month. The move will bring the firm's total year-to-date reductions to roughly 160 employees or 22%, leaving the firm with about 600 employees going forward. The job cuts was announced end of April when Thomas Weisel released financial results for the quarter ended March 31, 2008. The firm said it will continue to selectively upgrade its talent pool within revenue generation areas. During the first quarter, Thomas Weisel posted a $17.8 million net loss on $48.9 million net revenues, compared to $3.8 million net income for the same period in 2007. Adjusting for certain one- time events related to its initial public offering and the amortization of intangible assets it acquired after buying out Canadian investment bank Westwind Partners in October, the firm reported a non-GAAP net loss of $14.8 million. Thomas Weisel also reported that investment banking revenues decreased to $11.5 million in the first quarter of 2008 compared to $52.8 million during the same period in 2007. "The equity capital markets environment in the first quarter of 2008 was extremely challenging, which directly impacted our first quarter results, said Thomas Weisel, Chairman and CEO. "At the beginning of the second quarter, our total backlog of filed, announced and engaged transactions was up slightly compared to the beginning of the first quarter of 2008. However, near term equity capital market conditions remain difficult and uncertain, and at this point, we have not experienced material improvements." "As an alternative to the equity capital markets, several of our IPO clients are pursuing either a strategic alternative or a private financing. M&A continues to be active as evident by our five recently announced transactions, which include: Saxon Energy Service's sale to Schlumberger and First Reserve Corporation for approximately C$590 million, Nuance Communications' $400 million acquisition of eScription, Iomega's $215 million sale to EMC Corporation, Frontier Pacific Mining's sale to Eldorado Gold Corporation for C$157 million and WJ Communications' sale to TriQuint Semiconductor for $72 million," continued Mr. Weisel. Thomas Weisel also reported that asset management revenues decreased to $300,000 in the first quarter of 2008 compared to $5.7 million in 2007 first quarter. "[O]ur $3.7 million of management fees were offset by mark-to- market losses primarily stemming from two public companies held in our healthcare venture fund, Trans1 and Hansen Medical. These losses were partially offset by gains experienced in our venture capital fund of funds and our technology venture fund," said Mr. Weisel. Brokerage revenues increased to $36.1 million in the first quarter compared to $31.9 million a year ago. "Growth in our electronic trading platform, the team we hired for special situations overnight block trading and the opening of new offices in the midwest and Europe all contributed to the year- over-year improvements," commented Tony Stais, Director of Trading. Thomas Weisel insists it has a strong balance sheet position. At the end of the first quarter of 2008, Thomas Weisel disclosed, shareholders' equity and book value per share were $357 million and $11.04, and tangible shareholders' equity and tangible book value per share were $240 million and $7.40. "Over the course of the year, we expect our available cash and net short term assets to be approximately $150 million, of which approximately $100 million is currently used to capitalize our broker-dealer entities, said Lionel F. Conacher, Thomas Weisel's President and Chief Operating Officer. "By right-sizing our firm, combined with our healthy balance sheet and strategic new hires, we are positioning ourselves to fully leverage our diversified platform when stability returns to the capital markets environment," Mr. Conacher said. Financial News-US notes that Thomas Weisel's rival Greenhill & Co. reported that net profit for the quarter ended March 31 rose to $19.2 million compared to $8.7 million in the same period last year. Financial advisory revenues nearly doubled to $69.5 million from $36.3 million a year ago for Greenhill. Financial News-US quotes Scott Bok, co-chief executive at Greenhill, as saying: "Many of our competitors are focused on extraordinary challenges that do not affect us. Clients are increasingly likely to seek a truly independent advisor to assist them in a more challenging environment." Founded in 1998, Thomas Weisel Partners Group, Inc. generates revenues from three principal sources: investment banking, brokerage and asset management. The investment banking group is comprised of two disciplines: corporate finance and strategic advisory. The brokerage group provides equity and convertible debt securities sales and trading services to institutional investors, and offers brokerage, advisory and cash management services to high-net-worth individuals and corporate clients. The asset management group consists of: private equity, public equity and distribution management. Thomas Weisel Partners is headquartered in San Francisco, California, with additional offices in Baltimore, Boston, Calgary, Chicago, Cleveland, Denver, Montreal, New York, Portland, Silicon Valley, Toronto, London, Mumbai and Zurich. On the Net: http://www.tweisel.com/ TOMARCON INC: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Tomarcon, Inc. dba Ad-Aid Mounting & Die Cutting 1835 Burnet Ave. Union, NJ 07083 Bankruptcy Case No.: 08-17763 Chapter 11 Petition Date: May 29, 2008 Court: District of New Jersey (Newark) Judge: Donald H. Steckroth Debtor's Counsel: David H. Stein, Esq. Wilentz, Goldman & Spitzer, P.A. 90 Woodbridge Center Dr. P.O. Box 10 Woodbridge, NJ 07095 Tel: (732) 636-8000 Fax: (732) 855-6117 Email: dstein@wilentz.com Total Assets: $524,463 Total Debts: $1,229,775 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Jiro, Inc. Unperfected lien $940,000 Attn: Ron Berucci on debtor's assets 7 Kirk Bride Terrace by former owner, Towaco, NJ 07082 Jiro, Inc. Henschel-Steinau, Inc. $25,859 Attn: Paul Kapoian 300 Grand Ave. Englewood, NJ 07631 Burnet Interests Landlord $16,412 80 Main St. West Orange, NJ 07052 Die Knowolgist-Brooklyn Navy $11,355 Yard Travelers CL & Specialty $9,992 Bradley Corrugated Box $9,775 Donald F. Conway, Trustee Preferance claim $9,530 IFS Ind., Inc. $8,777 Flech Paper Products $7,969 Beisler Weidmann $7,143 Schiffenhaus Packaging Corp. $3,771 Diversified $2,508 PSE&G $2,179 Mercury Adhesives $1,576 Martin D. Breed $1,522 Amato Landscape Contractors $1,482 Holtzman Design $1,450 Duraco, Inc. $1,396 D&D Display Group, LLC $1,379 Bestway Trucking $1,352 TORO ABS: Fitch Slashes Rating to CCC from A- on $876.9MM Notes --------------------------------------------------------------- Fitch has downgraded and removed from Rating Watch Negative six classes of notes issued by Toro ABS CDO II, Ltd./LLC. The rating actions are effective immediately: -- $876,942,425 class A1 notes downgraded to 'CCC' from 'A-'; -- $55,899,748 class A2 notes downgraded to 'CC' from 'BBB-'; -- $23,957,035 class B notes downgraded to 'CC' from 'BB'; -- $6,987,469 class C notes downgraded to 'CC' from 'B'; -- $9,133,557 class D notes downgraded to 'C' from 'CCC'; -- $10,181,651 class E notes downgraded to 'C' from 'CC'; -- $4,226,371 class F notes remain at 'C'; Toro II is a collateralized debt obligation that closed on April 27, 2006. The initial portfolio was selected by Merrill Lynch Investment Managers and is currently managed by BlackRock Inc. Toro's substitution period will end in June 2009. Toro has a portfolio comprised primarily of subprime residential mortgage- backed securities bonds 54.56%, Alternative-A RMBS 15.32%, prime RMBS 14.81%, structured finance CDOs 14.60% and other structured finance assets. Subprime RMBS bonds of the 2005 and 2006 vintages account for approximately 35.12% and 19.29% of the portfolio, respectively. Likewise, the SF CDO exposure includes 4.05 % originated in 2005 and 8.97% originated in 2006. Alt-A RMBS represents approximately 15.32% of the portfolio. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since November 2007, approximately 43.60% of the portfolio has been downgraded with 17.98% of the portfolio currently on Rating Watch Negative. Actual credit deterioration exceeds the level of downgrades that Fitch assumed in November 2007. Whereby currently 31.57% of the assets in the portfolio now carry a rating below the rating it assumed in November 2007. The ratings of the class A-1, A-2, B and C notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class D, E and F notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. TORO ABS: Fitch Chips BBB Rating to C and Removes Negative Watch ---------------------------------------------------------------- Fitch has downgraded three classes of notes issued by TORO ABS CDO I, Ltd. and two classes of notes remain on Rating Watch Negative. The rating actions are effective immediately: -- $864,771,710 class A notes downgraded to 'B' from 'AAA' and remain on Rating Watch Negative; -- $73,433,128 class B notes downgraded to 'CC' from 'AA' and removed from Rating Watch Negative; -- $14,493,381 class C notes downgraded to 'C' from 'BBB' and removed from Rating Watch Negative. TORO I is a collateralized debt obligation that closed on June 30, 2005. The initial portfolio was selected by Merrill Lynch Investment Management and is currently managed by BlackRock Inc. TORO I's substitution period ended in November 2007. TORO I has a portfolio comprised primarily of subprime residential mortgage- backed securities bonds (45.9%), SF CDOs (25.1%), prime RMBS (15.2%), and Alternative-A RMBS (13.8%). Subprime RMBS bonds of the 2005 and 2006 vintages account for approximately 34.8% and 0.2% of the portfolio, respectively. Likewise, the SF CDO exposure includes SF CDOs originated in 2004 (15.0%) and 2005 (10.1%). Alt-A RMBS bonds of the 2005, 2006 and 2007 vintages represent approximately 11.7% of the portfolio. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Since the beginning of 2007, approximately 45.3% of the portfolio has been downgraded, with 21.7% of the portfolio currently on RWN. The negative credit migration is primarily attributable to credit deterioration in subprime RMBS bonds from the 2005, 2006 and 2007 vintages, coupled with significant downgrades in SF CDOs originated in 2004 and 2005. Additionally, due to the significant amount of collateral deterioration in the portfolio the class A/B overcollateralization ratio and the class C OC ratio were both failing their required test levels as of the March 31, 2008 trustee report. The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS and SF CDOs with underlying exposure to subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A and class B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class C notes addresses the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. TOWERS OF CHANNELSIDE: Court Approves Disclosure Statement ---------------------------------------------------------- The Honorable K. Rodney May of the U.S. Bankruptcy Court for the Middle District of Florida approved the disclosure statement explaining The Towers of Channelside, LLC's plan of reorganization. The Court held that the Disclosure Statement contains adequate information within the meaning of Sec. 1125 of the Bankruptcy Code. Overview of the Plan The Plan creates a mechanism for the sale of units, the funding of ongoing operating expenses, and the payment of creditor claims. This is accomplished by creating a "waterfall" for the distribution of net sales proceeds between creditor constituencies after ensuring that post-confirmation operating expenses, including interest to Wachovia Bank, National Association, and certain secured and priority claims are adequately funded and paid. Under this approach, two secured creditors, Batson-Cook of Tampa Inc. and CIT Technology Financing Services Inc., will be paid deferred amounts in full settlement of their allowed secured claims. Wachovia's secured claims is projected to be paid from funds derived from the sale of units. After Wachovia has been paid in full, unsecured creditors will receive remaining funds until they are paid the allowed amount of their claims in full or until all units are sold. Management will receive fixed and incentive compensation to ensure their continued service and to motivate them to achieve the highest possible payment level to all creditors. Treatment of Claims All Administrative and Priority Claims will be fully paid. The Secured Claim of Wachovia, totaling, $56 million, will be paid the allowed amount of its secured claim plus monthly interest payments of 5% per annum on the principal balance remaining unpaid from time to time. Said interest payments will begin on the first day of the month following the effective date and will continue on the first day of each month until the Wachovia's claim will be paid in full. The Secured Claim of Batson-Cook, totaling $1,285,257, for services performed and materials provided, will be paid in four installments: 1) $500,000 within three business days of the effective date; 2) $200,000 on Dec. 31, 2008; 3) $300,000 on March 30, 2009; 4) $285,257 on June 30, 2009. The Secured Claim of CIT will be paid through 12 monthly payments of $200 plus monthly interest at 5% per annum, starting on the effective date and continuing on the same day of each succeeding month. The allowed secured claims of the disputed deposit claimants, totaling $2 million, will be paid in whole or in part, depending on a settlement or court order. General unsecured claims will be paid on a pro-rata basis and will get cash distributions following the full payment of Wachovia and Batson-Cook's claims. The distributions will start upon the full payment of Wachovia's claim and will continue on a periodic basis until the allowed unsecured claims be paid in full or until all assets liquidated and collected. Equity holders will receive nothing under the Plan. About Towers of Channelside Based in Plant City, Florida, the Towers of Channelside, LLC -- http://www.towersatchannelside.com/-- operates a 29-story twin tower condominium overlooking the Tampa Bay area. The developer filed for Chapter 11 protection on Jan. 25, 2008 (Bankr. M.D. Fla. Case No. 08-00939). Edward J. Peterson, III, Esq. and Harley E. Riedel, Esq., at Stichter Riedel Blain & Prosser P.A., represents the Debtor in its restructuring efforts. The Official Committee of Unsecured Creditors appointed in this bankruptcy case has selected Forizs & Dogali, P.L. as its counsel. As reported in the Troubled Company Reporter on March 4, 2008, the Debtor's schedules showed total assets of $109,783,667 and total debts of $94,258,253. TOWERS OF CHANNELSIDE: Plan Confirmation Hearing Set for May 28 --------------------------------------------------------------- The Hon. K. Rodney May of the U.S. Bankruptcy Court for the Middle District of Florida set a hearing to confirm The Towers of Channelside, LLC's plan of reorganization on May 28, 2008, at 3:00 p.m. in Courtroom 9B, United States Bankruptcy Court, 801 North Florida Avenue, in Tampa, Florida. Based in Plant City, Florida, the Towers of Channelside, LLC -- http://www.towersatchannelside.com/-- operates a 29-story twin tower condominium overlooking the Tampa Bay area. The developer filed for Chapter 11 protection on Jan. 25, 2008 (Bankr. M.D. Fla. Case No. 08-00939). Edward J. Peterson, III, Esq. and Harley E. Riedel, Esq., at Stichter Riedel Blain & Prosser P.A., represents the Debtor in its restructuring efforts. The Official Committee of Unsecured Creditors appointed in this bankruptcy case has selected Forizs & Dogali, P.L. as its counsel. As reported in the Troubled Company Reporter on March 4, 2008, the Debtor's schedules showed total assets of $109,783,667 and total debts of $94,258,253. TRIAD GUARANTY: Planned Mortgage Unit Cues Fitch to Lower Ratings ----------------------------------------------------------------- Fitch Ratings has downgraded the ratings on Triad Guaranty Inc. and its mortgage insurance subsidiary Triad Guaranty Insurance Corporation as: Triad Guaranty Insurance Corporation -- Insurer financial strength to 'BB' from 'BBB-'. Triad Guaranty Inc. -- Long-term Issuer to 'CCC' from 'BB-'. -- $35 million 7.9% fixed coupon senior notes due Jan.15, 2028 to 'CCC/RR4' from 'BB-'. The affected ratings remain on Rating Watch Negative, where they were originally placed on Oct. 25, 2007 by Fitch. This action follows the announcement by Triad Guaranty that it may plan to start up a new monoline mortgage insurance company with a group of investors led by Lightyear Capital LLC, and that if the plan is executed, that it would place Triad Guaranty Insurance Corporation into voluntary runoff. Without the prospects of profitable future business to offset the likely increase in losses created by the 2006 and 2007 vintage years, or a meaningful capital infusion, Fitch believes that Triad's margin of safety to meet policyholder obligations could become pressured if delinquency and loss development continue at a sustained pace. Additional concerns include Triad's Option-ARM portfolio which represented over 12% of the company's insurance in force as of year-end 2007 and the performance trends of the 2007 vintage, a significant portion of which was made up of loans with loan-to-value ratios of 95% or greater. The 2007 vintage is currently exhibiting delinquencies trends that are materially higher than the troubled 2006 vintage for Triad and the rest of the U.S. mortgage insurers. As such, Fitch believes that Triad's current level of capitalization and overall financial profile are now consistent with a non-investment grade IFS rating. The rating action also recognizes that even if the new company is not formed, Fitch believes it is highly likely that Triad will be placed into runoff, as the company appears to be unable to attract new capital. Positively, Fitch believes that if the new mortgage insurance company is formed, its potential ability to assist in the provision of administrative services to Triad may support a more orderly runoff. With the prospects of Triad being placed in run-off, it will be much more difficult for Triad to continue to make dividend payments to Triad Guaranty in order to support holding company level debt service. Given this, Fitch has lowered Triad Guaranty's senior debt rating to 'CCC', implying that default is a real possibility. Consistent with its practice for low non- investment grade debt ratings, The Recovery Rating of 'RR4' on Triad Guaranty's debt obligations indicates that the recovery prospects of Triad's Guaranty's senior debt would be influenced by actual loss development at the operating company and regulatory restrictions on cash flows between the operating and holding company. Triad Guaranty is a holding company that provides private mortgage insurance coverage in the United States through Triad, its wholly owned subsidiary. For Dec. 31, 2007, Triad Guaranty reported consolidated assets under Generally Accepted Accounting Principles of $1.1 billion and shareholders' equity of approximately $499 million. TRIAD GUARANTY: S&P Retains 'BB' Rating Under Negative Watch ------------------------------------------------------------ Standard & Poor's Ratings Services said that all of its ratings on Triad Guaranty Inc. (BB/Watch Neg/--; TGIC) and TGIC's mortgage insurance subsidiary, Triad Guaranty Insurance Corp. (BBB/Watch Neg/--; Triad), remain on CreditWatch with negative implications. This follows TGIC's announcement that it has entered into an exclusive agreement with Lightyear Capital LLC, a private equity firm, to negotiate agreements that will facilitate the formation of a new mortgage insurer to be owned by Lightyear. Lightyear would purchase some of TGIC's assets, and some employees of TGIC would join the new company. TGIC would not have any ownership in the new company. Standard & Poor's lowered its ratings on TGIC and Triad on April 3, 2008, because S&P believed operating losses would deplete a significant portion of Triad's capital base and make it difficult for Triad to write new business. At the same time, S&P placed these ratings on CreditWatch because they may conclude Triad's claims-paying ability may not be consistent with an investment- grade rating. While the announcement by TGIC will increase Triad's claims-paying resources, it does not alleviate its concerns regarding Triad's capitalization. S&P are still in the process of comparing the firm's current liabilities and potential losses to its existing resources. TROPICANA ENTERTAINMENT: Files Chapter 11 Bankruptcy in Delaware ---------------------------------------------------------------- Tropicana Entertainment LLC and nine casinos affiliated with its subsidiary, Columbia Sussex Corp., filed for Chapter 11 protection before the U.S. Bankruptcy Court for the District of Delaware, the Associated Press reports. Tropicana Entertainment's bankruptcy is the largest corporate filing of the year, Jeffrey McCracken and Tamara Audi of The Wall Street Journal say. The petition excludes the Tropicana casino in Atlantic City, New Jersey, which is being sold after New Jersey gambling regulators refused to renew its license, AP relates. WSJ relates quoting Scott Butera, president of Tropicana Entertainment LLC: "The company planned to file for bankruptcy by the end of business on May 5. The filing is an important step toward getting the company back on solid financial ground. I really view this as a positive step. The company is cash-flow positive and in very constructive dialogue with our lending groups." Mr. Butera joined the company a month ago with the intent of restructuring it. Mr. Butera also led Trump Entertainment Resorts Inc.'s chapter 11 reorganization, WSJ say. According to WSJ, citing two people familiar with the matter, on May 2, Tropicana failed to make an interest payment on a $1.32 billion loan with Credit Suisse Group. Sources told WSJ that Tropicana is not expected to make the payment. WSJ states that the missed payment terminates a forbearance agreement the company had with bondholders, putting further pressure on the gambling company. Tropicana Entertainment had $2,845,847,596 in total assets and $2,429,890,642 in total debts as of February 29, 2008. Tropicana has $2.67 billion in rated bank and bond debt, according to WSJ, citing Moody's Investors Service. The largest previous bankruptcy filing of the year was Quebecor World Inc., which had rated debt of roughly $1.8 billion, according to WSJ. WSJ adds that Tropicana bonds, which come due December 2014, traded around 50 cents on the dollar last week. WSJ says that Tropicana has applied for a debtor-in-possession financing with Silver Point Capital LP, a hedge fund and investment firm. Kirkland & Ellis LLP represents Tropicana in their restructuring efforts and Lazard Ltd. is Tropicana's financial advisor. Mr. Butera, WSJ states, couldn't specify how long the company would be in bankruptcy. The company isn't planning any layoffs, or planning to sell any of the 11 properties in its portfolio, WSJ says. About Tropicana Entertainment Tropicana Entertainment LLC -- http://www.tropicanacasinos.com/-- is an indirect subsidiary of Tropicana Casinos and Resorts. The company is one of the largest privately-held gaming entertainment providers in the United States. Tropicana Entertainment owns eleven casino properties in eight distinct gaming markets with premier properties in Las Vegas, Nevada and Atlantic City, New Jersey. TROPICANA ENTERTAINMENT: Case Summary & 30 Largest Creditors ------------------------------------------------------------ Lead Debtor: Tropicana Entertainment, LLC 740 Centre View Boulevard Crestview Hills, KY 41017 Bankruptcy Case No.: 08-10856 Debtor-affiliates filing separate Chapter 11 petitions but with no case numbers assigned yet: Entity ------ Adamar Garage Corp. Adamar of Nevada Argosy of Louisiana, Inc. Atlantic-Deauville, Inc. Aztar Corporation Aztar Development Corporation Aztar Indiana Gaming Company, LLC Aztar Indiana Gaming Corporation Aztar Missouri Gaming Corporation Aztar Riverboat Holding Company, LLC Catfish Queen Partnership in Commendam Centroplex Centre Convention Hotel, L.L.C. Columbia Properties Laughlin, LLC Columbia Properties Tahoe, LLC Columbia Properties Vicksburg, LLC CP Baton Rouge Casino, L.L.C. CP Laughlin Realty LLC Hotel Ramada of Nevada Jazz Enterprises, Inc. JMBS Casino LLC Ramada New Jersey Holdings Corporation Ramada New Jersey, Inc. St. Louis Riverboat Entertainment, Inc. Tahoe Horizon, LLC Tropicana Development Company, LLC Tropicana Enterprises Tropicana Entertainment Holdings, LLC Tropicana Entertainment Intermediate Holdings, LLC Tropicana Express, Inc. Tropicana Finance Corp. Tropicana Las Vegas Holdings, LLC Tropicana Las Vegas Resort and Casino, LLC Tropicana Real Estate Company, LLC Type of Business: The Debtors are privately-held gaming entertainment providers in the US. See http://www.tropicanalvsales.com/ Chapter 11 Petition Date: May 5, 2008 Court: District of Delaware (Delaware) Debtors' Counsel: Mark D. Collins, Esq. Email: collins@RLF.com Richards Layton & Finger One Rodney Square, P.O. Box 551 Wilmington, DE 19899 Tel: (302) 651-7700 Fax: (302) 651-7701 http://www.RLF.com/ Debtors' Consolidated Financial Condition as of February 29, 2008: Total Assets: $2,845,847,596 Total Debts: $2,429,890,642 Debtors' 30 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Wilmington Trust Co. (as Notes $995,676,667 successor indenture trustee for the 9-5/8% Senior Subordinated Notes due 2014 ) Attn: Patrick J. Healy Rodney Square North 1100 North Market St. Wilmington, DE 19890 Tel: (212) 750-6474 Fax: (212) 750-1361 2 Park Cattle Co. Settlement $125,000,000 1300 Buckeye Rd. Ste. A Minden, NV 89423 Tel: (775) 782-2144 Fax: (775) 588-0408 Mapp Construction Trade $3,041,955 344 Third St. Baton Rouge, LA 70801 Tel: (225) 757-0111 Fax: (225) 757-0480 US Foodservice, Inc. Trade $881,587 3682 Collections Center Dr. Chicago, IL 60693 Tel: (312) 733-6050 Fax: (312) 733-0738 IGT Trade $358,267 9295 Prototype Dr. Reno, NV 89521 Tel: (775) 448-7777 Fax: (775) 448-0719 Bally Gaming, Inc. Trade $308,018 6601 S. Bermuda Rd. Las Vegas, NV 89119 Tel: (702) 896-7860 Fax: (702) 896-7860 Sierra Pacific Power Co. Utility $306,608 875 East Long St. Carson City, NV 89701 Tel: (800) 782-2506 Fax: (775) 834-4202 Mission Industries Trade $229,342 NV MegaJackpots Trade $223,007 Marcor Remediation, Inc. Trade $219,427 CSG Direct, Inc. Trade $157,979 Wes Design & Supply Co., Ltd. Trade $146,707 Jamestown Metal Marine Sales Trade $132,876 WMS Gaming, Inc. Trade $118,229 Diane Allen and Associates Trade $117,388 Outwest Meat Co. Trade $102,127 Wilkes Group Trade $101,091 Lamar Cos. Trade $88,119 Fixture Dimensions, Inc. Trade $88,084 Gaming Support Trade $83,643 Agilysys NV LLC Trade $79,267 Briggs Electric, Inc. Trade $78,236 Mayer Brown LLP Trade $72,062 Micros Systems, Inc. Trade $71,094 HMR Enterprises, Inc. Trade $65,823 Oswald Promotions Trade $64,989 Vail Resorts, Inc. Trade $61,800 Shuffle Master, Inc. Trade $60,396 Protiviti, Inc. Trade $59,287 News West Publishing Co. Trade $56,877 UAL CORPORATION: ReGen Insists Cure Amount Worth $4,272,555 ----------------------------------------------------------- ReGen Capital I, Inc., holds a cure claim against UAL Corporation and its debtor-affiliates -- Claim No. 45042 -- as assignee of AT&T Corp., which was party to 10 executory contracts that the Debtors assumed under their confirmed Plan of Reorganization. The Debtors have already stipulated to the allowed amount of the Claim before they sought to assume the 10 contracts with AT&T, but they never stated what amount they would have to pay in connection with their assumption of the 10 executory contracts, ReGen's attorney, Peter J. Roberts, Esq., at Shaw Gussis Fishman Glantz Wolfson & Towbin LLC, in Chicago, Illinois, relates. The Debtors seem to have tried to avoid specifying that amount or paying the claim as a Cure Claim, Mr. Roberts says. Notably, there is no indication that the Debtors obtained services from AT&T except by and through the contracts that they had entered into with AT&T, Mr. Roberts tells the U.S. Bankruptcy Court for the Northern District of Illinois. ReGen determined the Claim's cure amount to be $4,272,555, by subtracting the value -- as of the distribution date -- of new common stock of UAL Corporation which ReGen had received -- $626,172 -- from the total amount owed by the Debtors under Claim No. 43490, as reduced and fixed by a Court-order dated July 20, 2005. For nearly two years after its submission, the Debtors neither responded nor objected to the Cure Claim, nor did they purport to pay any cure for the assumed contracts, while they presumably have enjoyed its benefits, Mr. Roberts relates. Subsequently, the Debtors asked the Court to expunge ReGen's Cure Claim on October 15, 2007, asserting that based on a review of their books and records, they have no liability on the Cure Claim, Mr. Roberts notes. Mr. Roberts states that the Debtors have failed to rebut the prima facie validity of the Cure Claim with any evidence whatsoever. Rather, they simply stated that the Cure Claim should be expunged, Mr. Roberts points out. Accordingly, the Claim held by AT&T and assigned to ReGen must be paid, Mr. Roberts asserts. Alternatively, ReGen asks that a hearing on the Debtors' Objection to its Cure Claim be adjourned pending ReGen's taking discovery from the Debtors as to what amounts they owed AT&T under the Assumed Contracts. About UAL Corp. Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News, Issue No. 156, Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000). * * * As reported in the Troubled Company Reporter on April 24, 2008, Standard & Poor's Ratings Services said that its ratings and outlook on UAL Corp., parent of United Air Lines Inc. (both rated B/Negative/--) are not affected by UAL's report of a heavy first-quarter loss. UAL reported a first-quarter $542 million pretax loss, as much higher fuel prices more than offset increased revenues. S&P had revised its rating outlook on both entities to negative from stable on April 16, 2008. In that outlook revision, S&P cited very high fuel prices and the expected effect on UAL revenues of a weak U.S. economy. UAL CORPORATION: Union Workers Denounce New Incentive Plan ---------------------------------------------------------- United Airlines, Inc.'s union workers are unhappy with management's plan to set aside 8,000,000 shares of United stock worth $130,000,000 to fund the new incentive program for company executives, Julie Johnsson of the Chicago Tribune reports. "It's just another money grab," said Greg Davidowitch, leader of United's flight attendants union, reports Ms. Johnsson. "To propose something like this is completely outrageous and can only serve to further erode the already tenuous relationship between flight attendants and management." The report says United wants to replace the original plan, which expires next year, and needs more shares to do so since that plan is tapped out. "The new incentive plan's 8 million shares will provide the company the opportunity to make awards over the next three to five years, enabling us to attract, retain and reward exceptional senior leaders," United spokeswoman Jean Medina said, according to the report. Experts are baffled over United's timing of its announcement of the incentive plan since it is still in merger talks with US Airways Group Inc., Ms. Johnsson relates. Experts note that a controversy over the new incentives would probably alienate workers, whose cooperation is highly critical in achieving a smooth consolidation. "You've seen what employees who are at war with their employers can do," Robert Mann, president of R.W. Mann & Co. said. "It usually means that customers end up as collateral damage." About UAL Corp. Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. (United Airlines Bankruptcy News, Issue No. 156, Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000). * * * As reported in the Troubled Company Reporter on April 24, 2008, Standard & Poor's Ratings Services said that its ratings and outlook on UAL Corp., parent of United Air Lines Inc. (both rated B/Negative/--) are not affected by UAL's report of a heavy first-quarter loss. UAL reported a first-quarter $542 million pretax loss, as much higher fuel prices more than offset increased revenues. S&P had revised its rating outlook on both entities to negative from stable on April 16, 2008. In that outlook revision, S&P cited very high fuel prices and the expected effect on UAL revenues of a weak U.S. economy. US AIRWAYS: Incurs $236 Million Net Loss in First Quarter 2008 -------------------------------------------------------------- US Airways Group, Inc. reported a net loss for its first quarter 2008 of $236 million, or ($2.56) per share, compared to a net profit of $66 million, or $0.70 per diluted share for the same period last year. Excluding net special items of $3 million, the company reported a net loss of $239 million, or ($2.60) per share for its first quarter 2008. This compares to a net profit excluding special items of $34 million, or $0.37 per diluted share for the first quarter of 2007, which included $32 million of net special credits. US Airways Group Chairman and CEO Doug Parker stated, "Our first quarter results reflect the extremely high fuel prices that are affecting our entire industry. The large losses posted by U.S. airlines this quarter, the forecast for further losses and the recent liquidations and bankruptcies of a number of carriers, indicate quite clearly that the U.S. airline industry is in financial turmoil. "Fortunately, US Airways has taken steps to prepare for this environment. We have a solid balance sheet with significant cash on hand, minimal debt payments through 2013, and our employees have made extraordinary progress in our operational improvement plan. As we move forward, we are continuing to keep capacity in check, exploring opportunities to generate additional sources of revenue, modifying our pricing structure, and reducing our capital expenditures," continued Mr. Parker. Liquidity As of March 31, 2008, the company had $2.8 billion in total cash and investments, of which $2.4 billion was unrestricted. In April, the company entered into an amended agreement with Chase Bank for processing certain credit card transactions. The amendment extends the term of the agreement, reduces pricing, and adjusts the payment terms related to processing fees. The amendment also includes a decrease in the level of collateral required to be maintained by the company, measured as a percentage of outstanding air traffic liability, to the company's level of reserve at March 31, 2008 and in certain circumstances further reductions in that level of collateral requirements. The Company expects $67 million to be released from the reserve account by April 30, 2008 due to the reduced reserve requirements. "We spent the last few years improving our liquidity position to decrease our vulnerability to adverse economic and industry conditions. We have a strong relative liquidity position versus our peers and as a result of financing transactions completed since the merger, we do not have any material debt payments through 2013," continued Chief Financial Officer Derek Kerr. To preserve liquidity US Airways has also reduced its forecasted capital expenditure plan for 2008 by approximately $75 million since the beginning of the year. This brings the total 2008 estimated non-aircraft capital expenditures to $240 million. The company will continue to invest in its previously announced operational improvement plan. As of March 31, 2008, the company had total assets of $$8.2 billion, total liabilities of $7.1 billion, and total stockholders' equity of $1.1 billion. First Quarter Special Items During its first quarter, the company recognized $3 million of net special items. These special items included expenses of $26 million in merger related transition costs, a $13 million impairment loss considered to be other than temporary on certain available for sale auction rate securities, and $2 million in write-off of debt discount and debt issuance costs in connection with the refinancing of certain aircraft equipment notes. These expenses were offset by a $36 million non-cash unrealized net gain associated with the change in fair value of the company's outstanding fuel hedge contracts and an $8 million gain on the forgiveness of debt. A full-text copy of the company's first quarter 2008 results on Form 10-Q is available for free at: http://ResearchArchives.com/t/s?2b7b About US Airways Based in Tempe, Arizona, US Airways Group Inc.'s (NYSE: LCC) - http://www.usairways.com/-- primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc., and Airways Assurance Limited, LLC. Under a Chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' Chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 158; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on March 26, 2008, Standard & Poor's Ratings Services revised its outlook on US Airways Group Inc. to stable from positive. S&P has affirmed all ratings, including the 'B-' long-term corporate credit rating. The TCR reported on April 17, 2008, that Fitch Ratings has affirmed the debt ratings of US Airways Group, Inc. as: Issuer Default Rating at 'B-'; Secured term loan rating at 'BB-/RR1'; and Senior unsecured rating at 'CCC/RR6'. Fitch's ratings apply to approximately $1.7 billion in outstanding debt. The Rating Outlook has been revised to Stable from Positive. U.S. ENERGY: Wants Court to Set July 1 as Claims Bar Date --------------------------------------------------------- U.S. Energy Systems Inc. and its debtor-affiliates ask the Hon. Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York to establish July 1, 2008, as deadline for creditors can file proofs of claim. The Debtors propose July 7, 2008, as claims bar date for governmental units holding claims arising before the Debtors' bankruptcy filing. All original proofs of claim must be delivered to Epiq bankruptcy Solutions LLC, claims agent of the Debtors. A hearing is set on Wednesday May 7, 2008, at 10:00 p.m., to consider for approval of the Debtors' request. About U.S. Energy Based in Avon, Connecticut, U.S. Energy Systems Inc. (Pink Sheets: USEY) -- http://www.usenergysystems.com/-- owns green power and clean energy and resources. USEY owns and operates energy projects in the United States and United Kingdom that generate electricity, thermal energy and gas production. The company filed for Chapter 11 protection on Jan. 9, 2008 (Bank. S.D.N.Y. Case No. 08-10054). There are 34 affiliates who filed for separate Chapter 11 petitions. Peter S. Partee, Esq., at Hunton & Williams LLP, represents the Debtor in its restructuring efforts. Jefferies & Company, Inc. serves as the company's financial advisor. The Debtor also selected Epiq Bankruptcy Solutions LLC as noticing, claims and balloting agent. The Official Committee of Unsecured Creditors has yet to be appointed in these cases by the U.S. Trustee for Region 2. When the Debtors filed for protection from their creditors, they listed total assets of $258,200,000 and total debts of $175,300,000. * * * As reported in the reported in the troubled company reporter on April 22, 2008, the Debtors asked the Court to further extend the exclusive period to file a Chapter 11 plan until July 8, 2008. VERTIS INC: Inks Forbearance Agreement with Senior Noteholders -------------------------------------------------------------- Vertis Inc. disclosed that pursuant to a forbearance agreement, dated April 30, 2008, the holders of an aggregate of 77% of the outstanding principal amount of the Second Lien Notes agreed to: -- forbear from exercising their rights and remedies under the indenture governing the Second Lien Notes; and -- from directing the trustee under the indenture from exercising any rights and remedies on the holders' behalf, until the occurrence of any of these events: (i) the failure of a specified percentage of certain note holders having executed a restructuring and lock-up agreement on or before May 13, 2008, (ii) the termination of the Restructuring Agreement in accordance with its terms, (iii) the occurrence of certain events under the forbearance agreement dated April 3, 2008, between the company and the lenders under the company's four-year revolving credit agreement, as may be amended, (iv) the occurrence of certain events under the forbearance agreement dated as of April 2, 2008, by and among Vertis Receivables II, LLC, Webcraft, LLC, Webcraft Chemicals, LLC, Enteron Group, LLC, Vertis Mailing, LLC, the company and General Electric Capital Corporation, as may be amended and (v) the occurrence of certain other events described in the Forbearance Agreement. As reported in the Troubled Company Reporter on April 11, 2008, as part of the strategy of the company to preserve and enhance its near-term liquidity, the company elected to forego making a $17.1 million interest payment on its 9-3/4% Senior Secured Second Lien Notes. Under the terms of the indenture governing the Second Lien Notes, the company had a thirty-day grace period in which to make this interest payment before it would be an event of default. The holders of the Second Lien Notes that are parties to the Forbearance Agreement also agreed that during the Forbearance Period they will not sell, pledge or otherwise transfer any Second Lien Notes except under certain conditions. Headquartered in Baltimore, Vertis Inc., doing business as Vertis Communications -- http://www.vertisinc.com/-- is a provider of print advertising and direct marketing solutions to America's leading retail and consumer services companies. At Dec. 31, 2007, the company's consolidated balance sheet showed $528.2 million in total assets and $1.403 billion in total liabilities, resulting in a $875.1 million total stockholders' deficit. * * * As reported in the Troubled Company Reporter on April 4, 2008, Deloitte & Touche LLP, in Baltimore, Maryland, expressed substantial doubt about Vertis Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2007, and 2006. The auditing firm said that the company has incurred recurring net losses and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations. As reported in the Troubled Company Reporter on April 3, 2008, Standard & Poor's Ratings Services revised its CreditWatch implications for its 'CC' corporate credit rating on Vertis Inc. to negative from developing following the company's announcement that it had engaged a financial advisor to assist in a possible debt exchange offering. At the same time, Standard & Poor's lowered its ratings on Vertis's $350 million senior secured second-lien notes and $350 million senior unsecured notes to 'C' from 'CCC'. The notes remain on CreditWatch with negative implications, where they were originally placed on April 4, 2007. VICORP RESTAURANTS: U.S. Trustee Forms Seven-Member Committee ------------------------------------------------------------- Kelly Beaudin Stapleton, U.S. Trustee for Region 3, appointed seven members to the Official Committee of Unsecured Creditors of VICORP Restaurants Inc. and its debtor-affiliate, VI Acquisition Corp. The members of the Committee are: 1. Wilmington Trust Company, as Indenture Trustee Attn: James J. McGinley 1100 North Market Street, Rodney Square North Wilmington, DE 19890 Tel: 212-415-0522 Fax: 212-415-0513 2. Sankaty Credit Opportunities II, L.P. Attn: Nathan Gilliland 111 Huntington Ave., 35th Floor Boston, MA 02199 Tel: 617-516-2802 Fax: 617-516-2710 3. Newport Global Opportunity Fund, L.P. Attn: Ryan L. Langdon 21 Waterway Avenue, #150 The Woodlands, TX 77380 Tel: 713-559-7400 Fax: 713-559-7499 4. Fidelity National Special Opportunities, Inc. Attn: Joseph J. Farricielli, Jr. 4050 Calle Real, Ste. 210 Santa Barbara, CA 93110 Tel: 805-696-7349 Fax: 805-696-7311 5. U.S. Foodservice, Inc. Attn: Claudia G. Regen 9755 Patuxent Woods Drive Columbia, MD 21046 Tel: 443-259-2099 Fax: 410-910-3159 6. The Coca-Cola Company Attn: John Lewis, Jr. One Coca-Cola Plaza Atlanta, GA 30313 Tel: 404-676-4016 7. Realty Income Corporation Attn: Michael R. Pfeiffer 600 La Terraza Blvd. Escondido, CA 92025 Tel: 760-317-2961 Fax: 760-741-2235 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual Chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. About VICORP Restaurants Based in Denver, Colorado, VICORP Restaurants Inc. -- http://www.vicorpinc.com/-- operates two restaurant concepts under proven and well-recognized brands, Village Inn and Bakers Square. Founded in 1958, VICORP has 343 restaurants in 25 states, consisting of 250 company-operated restaurants and 93 franchised restaurants. Known for its strong breakfast heritage, Village Inn has been serving its signature breakfast items like one-of-a-kind skillet dishes and made-from-scratch pancakes for 50 years. In addition, Village Inn offers traditional American fare for lunch and dinner. The company and its affiliates filed for Chapter 11 protection on April 3, 2008 (Bankr. D. Del. Lead Case No. 08-10623). Donna L. Culver, Esq., at Morris Nichols Arsht & Tunnell, and Kimberly Ellen Connolly Lawson, Esq., Kurt F. Gwynne, Esq., and Richard A. Robinson, Esq., at Reed Smith LLP, represents the Debtors in their restructuring efforts. The Debtors chose Wells Fargo Trumbull as their claims, noticing, and balloting agent. When the Debtors filed for protection from their creditors, they listed estimated assets and debts of $100 million to $500 million. VILLAGE HOTEL: Gets Interim OK to Use Lender's Cash Collateral -------------------------------------------------------------- The United States Bankruptcy Court for the District of Nevada gave Village Hotel Investors LLC and Village Hotel Holdings LLC interim permission to use their lender's cash collateral. Before filing for bankruptcy, the Debtors entered into a take-out mortgage loan together with a secured credit agreement or deed of trust with German American Capital Corporation dated Sept. 23, 2003, under which Village Hotel Investors serves as borrower, First American Title Company of Nevada as trustee, and Bank One NA as clearing bank. As of April 2008, the Debtors' books and records indicate it owed German American Capital at least $104,000,000 under the secured credit agreement. Substantially of all of the Debtors' real and personal property and other assets secure the loan. The Debtors was in default on the secured credit agreement prior to the bankruptcy filing on April 1, 2008. About Village Hotel Headquartered in Henderson, Nevada, Village Hotel Investors LLC, aka Ritz Carlton, Lake Las Vegas Resort, and its affilate Village Hotel Holdings LLC -- http://www.ritzcarlton.com/-- own the AAA Four Diamond Ritz Carlton Lake Las Vegas, a Mediterranean-style resort nestled in the midst of Southern Nevada desert and mountain landscape. The Debtors filed for chapter 11 protection on April 1, 2008 (Bankr. D. Nev. Case No. 08-13043 and 08-13044). Rob Charles, Esq., and Brett Axelrod, Esq., at Lewis and Roca LLP represent the Debtors in their restructuring efforts. Judge Linda B. Riegle presides the case. Village Hotel Investors listed assets and debts between $100 million and $500 million. VILLAGE HOTEL: Hires Lewis and Roca as Bankruptcy Counsel --------------------------------------------------------- Village Hotel Investors LLC and Village Hotel Holdings LLC obtained authority from the United States Bankruptcy Court for the District of Nevada to employ Lewis and Roca LLP as its counsel. Lewis and Roca will, among other things, give the Debtors legal advice and prepare a plan and disclosure statement related to the case. The firm charges $445 per hour for the services of Rob Charles, Esq., and $440 per hour for the services of Brett Axelrod, Esq., partners. Associate Anne M. Loraditch, Esq., charges at $315 per hour and associate Micaela Rustia, Esq., charges at $285 per hour. Certified legal assistant Marilyn Shoenike charges at $185 per hour and certified bankruptcy paralegal Pat Kois charges at $155 per hour. According to the motion, the firm searched for information with respect to its connection with the parties-in-interest in the case but could not finalize the search because the Debtors have not completed its schedules of assets and liabilities, and statement of financial affairs. The firm may be reached at: Lewis and Roca LLP 3993 Howard Hughes Parkway, Suite 600 Las Vegas, Nevada 89169 Tel: (702) 949-8200 Fax: (702) 949-8398 About Village Hotel Headquartered in Henderson, Nevada, Village Hotel Investors LLC, aka Ritz Carlton, Lake Las Vegas Resort, and its affilate Village Hotel Holdings LLC -- http://www.ritzcarlton.com/-- own the AAA Four Diamond Ritz Carlton Lake Las Vegas, a Mediterranean-style resort nestled in the midst of Southern Nevada desert and mountain landscape. The Debtors filed for chapter 11 protection on April 1, 2008 (Bankr. D. Nev. Case No. 08-13043 and 08-13044). Judge Linda B. Riegle presides the case. Village Hotel Investors listed assets and debts between $100 million and $500 million. WELLCARE HEALTH: S&P Retains 'B+' Credit Rating Under Neg. Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services said that its 'B+' counterparty credit rating on WellCare Health Plans Inc. remains on CreditWatch, where it was placed on Oct. 25, 2007, with negative implications. S&P placed the rating on CreditWatch in connection with an investigation initiated by the U.S. Federal Bureau of Investigation, the U.S. Department of Health and Human Service Office of Inspector General, and the Florida attorney general's Medicaid Fraud Control unit. The company has since been named in various class-action complaints and a whistleblower lawsuit (currently under seal), and it is dealing with various requests for information from the SEC and state regulatory authorities. In response to the investigation, the company has formed a special committee of the board of directors to conduct an independent investigation and to develop and recommend any needed remedial measures. On Jan. 29, 2008, S&P lowered the rating to 'B+' from 'BB-' in connection with the resignation of three top executives, which constituted a material disruption to the company's organizational structure that could lead to diminished near-term operational flexibility. To date, the CFO position remains unfilled through subsequent new-hire activity. "We continue to view these events as a material adverse development with possibly meaningful downside consequences for the company's credit profile," noted Standard & Poor's credit analyst Joseph Marinucci. WellCare has not been advised of the subject matter of the investigation and has not yet filed its 10-Q or 10-K for the periods ended Sept. 30, 2007, and Dec. 31, 2007, respectively. However, S&P believe that risk associated with WellCare's business profile has been partly mitigated by first- quarter 2008 news of contract renewals and service-area expansion, which removes some of the uncertainty regarding marketplace sustainability and financial development. The rating is on CreditWatch negative to reflect the potential impact of sustained business and financial profile challenges, which could further pressure the company's credit profile. Areas of concern include ongoing uncertainty about the scope of the investigation and the potential for contract rescission. "If WellCare were to lose its ability to conduct business in certain core markets or become financially distressed in connection with developments related to the investigation, we could lower the ratings again," Mr. Marinucci said. WESTAR ENERGY: Fitch Retains 'BB+' Rating Under Positive Watch -------------------------------------------------------------- Fitch has assigned a 'BBB' rating to the anticipated $150 million issuance of Kansas Gas & Electric's first mortgage bonds and simultaneously placed the FMBs on Rating Watch Positive. Westar (IDR 'BB+') and subsidiary KGE (IDR 'BB+') remain on Rating Watch Positive, where they were placed on June 12, 2007. KG&E is a wholly-owned subsidiary of Westar Energy. Fitch expects the proceeds from the secured debt offering be used to repay short-term debt and for general corporate purposes. WIREFREE PARTNERS: S&P Cuts Lease-Backed Notes Rating to BB ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the personal communication services spectrum lease-backed notes issued by Wirefree Partners III LLC's series 2005-1 to 'BB' from 'BBB-'and removed it from CreditWatch, where it was placed with negative implications on March 3, 2008. The outlook is stable. The lowered rating and outlook assignment follow the May 1, 2008, lowering of the rating on Sprint Nextel Corp. (BB/Stable/NR). The actions were based on Standard & Poor's assessment that Sprint Nextel's business risk profile no longer supports an investment- grade rating given the company's deteriorating operating performance and lack of visibility in the wireless business, along with its increased financial leverage, due largely to declining EBITDA. The rating assigned to Wirefree's $138.5 million PCS spectrum lease-backed notes series 2005-1 due 2019 reflects the credit quality of the two lessees, WirelessCo L.P. and SprintCom Inc., both of which are wholly owned subsidiaries of Sprint Nextel Corp. Through the November 2007 annual distribution date, the Wirefree transaction has paid down the notes according to its scheduled principal distribution amounts. The current outstanding note balance is $121,234,332. WOLVERINE TUBE: Appoints William Evans to Board & Audit Committee ----------------------------------------------------------------- Wolverine Tube Inc. appointed William Evans to its board of directors. Mr. Evans was also named chairman of its board audit committee effective April 8, 2008. "We welcome [Mr.] Evans' appointment to Wolverine's board of directors and as chairman of its audit committee," Steven S. Elbaum, chairman, stated. [Mr. Evan's] combination of financial, accounting and overall business experience strengthens Wolverine's board and underscores Wolverine's commitment to sound and best practices at an important juncture in the rebuilding of the company." "We are grateful to Jack Duncan for assuming the position of chairman of the audit committee during the last twelve months," Mr. Elbaum added. "Jack will remain a member of the board and audit committee." Mr. Evans retired as executive vice president and chief financial officer of Witness Systems Inc., a public software company based in Roswell, Georgia. He started his professional career in 1971 as a CPA with Peat, Marwick, Mitchell & Co. nka KPMG, becoming a partner in 1980. He is a member of the president's Council at The University of Illinois and the Tocqueville Society of the United Way. About Wolverine Tube Headquartered in Huntsville, Alabama, Wolverine Tube Inc. (OTC BB: WLVT) -- http://www.wlv.com/-- is a manufacturer and distributor of copper and copper alloy tube, fabricated products, and metal joining products. The company currently operates 8 facilities in the United States, Mexico, Canada, China and Portugal. The company also has a distribution operation in The Netherlands. The company's products enhance performance and energy efficiency in many applications, including: commercial and residential heating, ventilation and air conditioning, refrigeration, home appliances, industrial equipment, power generation, petrochemicals and chemical processing. * * * As reported in the Troubled Company Reporter on Nov. 22, 2007, Moody's Investors Service confirmed Wolverine Tube's Caa2 corporate family rating, Caa2 probability of default rating, and Caa3 senior unsecured rating (LGD4, 63%). The rating outlook was revised to negative from ratings under review. * Fitch Says Delinquencies on US Timeshare ABS Receded in 1Q'08 --------------------------------------------------------------- Total delinquencies on U.S. timeshare ABS have receded in the first quarter this year following an increase that began late in 2007, according to the Fitch Ratings' timeshare ABS index. The recent moderation in performance comes despite the significant challenges faced by borrowers in the current economic environment. During last year's winter season, timeshare ABS performance exhibited more dramatic seasonal delinquency and default spikes than seen in recent years, with total delinquencies reaching 3.82% in December, the highest level since a steep drop-off beginning in May 2005. As a result of the higher seasonal delinquencies, March's monthly gross defaults reached 0.60%, the highest level for March since 0.65% in 2004. January through March performance data, however, exhibited decreases in the early stage and overall delinquency rates, indicating that the typical winter deterioration has begun to recede. 'Though timeshare ABS are often characterized by seasonal performance deterioration in the winter months, these spikes exceeded the level of weakening seen in the September through March period in recent years,' said Director Brad Sohl. 'Thus far, the trend in delinquencies has mirrored the seasonal spikes seen in weaker economic environments such as that of 2001-2002. While delinquency and default rates have risen higher in the recent winter season, they remain within Fitch expectations.' Early-stage delinquencies remain the largest contributor to the overall delinquency rate, currently representing approximately 44% of delinquencies, compared to a historical average of 50%. Delinquencies in the 60+ and 90+ day buckets currently represent approximately 28% of the total each, compared to historical averages of 24% and 26%, respectively. Fitch's timeshare ABS index is an aggregation of performance statistics on pools of securitized timeshare loans originated by various developers. Expected cumulative gross defaults on underlying transactions can range from below 10% to above 20%. While delinquencies and defaults may vary on an absolute basis, most transactions supporting the index exhibit similar overall trends. Fitch continues to monitor all timeshare ABS in an effort to provide the market with timely analysis of performance trends. The Fitch timeshare performance index summarizes average monthly delinquency and monthly gross default trends tracked in Fitch's database of timeshare asset backed securities dating back to January 1997 and will be available on a quarterly basis. * Fitch Says Recessionary Pressures Are Among Concerns for Banks ---------------------------------------------------------------- Recessionary pressures within the U.S. economy, outsized exposure to residential construction loans and home equity loans, and reduced short-term profitability are among the emerging credit concerns facing U.S. banks and thrifts that finance trust preferred securities and subordinated debt through collateralized debt obligations, according to Fitch Ratings in a new report. Evidencing these increasing pressures, Fitch has been notified of the deferral of 11 banks and the default of one bank since September 2007. These 12 banks financed $644.5 million in aggregate TruPS and subordinated debt through 46 Fitch-rated CDOs. When taken in combination with pre-existing deferring or defaulted collateral, including non-bank collateral, average exposure to deferring and defaulted collateral across these 46 CDOs was 4.9% of the transactions' respective portfolio balances, and ranged from a maximum of 15.3% to a minimum of 0.1%. 'Further bank deferral and default activity is likely given current economic conditions,' said Senior Director Nathan Flanders. As a result of observed and expected collateral deterioration underlying bank TruPS CDOs, Fitch is revising both its Rating and asset performance Outlook on U.S. bank TruPS CDOs to Negative from Stable. Fitch is currently reviewing bank TruPS CDOs with deferral and/or default exposure or other high-risk exposure and expects to place materially affected transactions on Rating Watch Negative in the near future. 'The magnitude of underlying collateral currently in deferral or default will likely be the most significant determining factor in Fitch's analysis,' said Flanders. However, consideration will also be given to other individual exposures that Fitch believes are of an increased credit risk due to recent adverse developments, such as banks facing heightened regulatory scrutiny, banks which have recently reduced or eliminated dividends on common equity, or those with an above average level of exposure to high risk real estate. Additional considerations will include available credit enhancement, prepayments observed to date, obligor concentration, cash flow redirection mechanisms, and other structural enhancements. * S&P Downgrades Ratings on Eight Tranches from Three Hybrid CDOs ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on eight tranches from three U.S. cash flow and hybrid collateralized debt obligation transactions. S&P removed three of the lowered ratings from CreditWatch with negative implications. The downgraded cash flow and hybrid tranches have a total issuance amount of $230.5 million. All of the affected cash flow and hybrid transactions are high- grade structured finance CDOs of asset-backed securities, which are CDOs collateralized at origination primarily by 'AAA' through 'A' rated tranches of residential mortgage-backed securities and other SF securities. At the same time, S&P lowered its rating on one tranche from one U.S. synthetic CDO transaction and removed it from CreditWatch with negative implications. The downgrade of PARCS-R Master Trust's class 2007-18 variable-rate units reflects the direct link of the note rating to the rating on its reference obligation, the class M-2 notes issued by Morgan Stanley ABS Capital I Inc. Trust Series 2007-NC3, which was lowered to 'BBB' from 'AA' and removed from CreditWatch with negative implications on May 1, 2008. The downgraded synthetic tranche has an issuance amount of $4 million. The CDO downgrades reflect a number of factors, including credit deterioration and recent negative rating actions on U.S. subprime RMBS securities, as well as changes Standard & Poor's has made to the recovery rate and correlation assumptions it uses to assess U.S. RMBS held within CDO collateral pools. To date, including the CDO tranches listed and including actions on both publicly and confidentially rated tranches, S&P have lowered its ratings on 3,372 tranches from 790 U.S. cash flow, hybrid, and synthetic CDO transactions as a result of stress in the U.S. residential mortgage market and credit deterioration of U.S. RMBS. In addition, 583 ratings from 160 transactions are currently on CreditWatch negative for the same reasons. In all, S&P have downgraded $353.005 billion of CDO issuance. Additionally, S&P's ratings on $12.110 billion in securities have not been lowered but are currently on CreditWatch negative, indicating a high likelihood of downgrades. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating and Creditwatch Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Broderick CDO 1 Ltd. A-2 A+ AAA Broderick CDO 1 Ltd. B BBB AA/Watch Neg Broderick CDO 1 Ltd. C BB- BB+/Watch Neg Paragon CDO Ltd. B AA- AA Paragon CDO Ltd. C BBB A/Watch Neg PARCS-R Master Trust Series 2007-18 Trust units BBB AA/Watch Neg Reservoir Funding Ltd. B A- AA Reservoir Funding Ltd. C BBB A- Reservoir Funding Ltd. D BB- BBB Other Outstanding Ratings Transaction Class Rating ----------- ----- ------ Broderick CDO 1 Ltd. A-1NVA AAA Broderick CDO 1 Ltd. A-1NVB AAA Broderick CDO 1 Ltd. A-1V AAA Paragon CDO Ltd. Super-senior AAA Paragon CDO Ltd. A AAA Reservoir Funding Ltd. A-1-NV AAA Reservoir Funding Ltd. A-1-V AAA Reservoir Funding Ltd. A-2 AAA * S&P Says Consumer Products Remains Susceptible to Economic Stir ----------------------------------------------------------------- As of April 15, 2008, the consumer products, media and entertainment, and retail/restaurants sectors remain most susceptible to economic and credit-market turbulence, according to an article published by Standard & Poor's. The article, which is titled "Stress In Corporate America: Slowdown Continues To Hinder Consumer-Reliant Sectors (Premium)," says that these sectors consistently lead risk in S&P's lists of distressed companies (speculative-grade companies with securities trading in excess of 1,000 basis points above U.S. Treasuries), weakest links (companies rated 'B-' or lower with either a negative outlook or on CreditWatch with negative implications), and potential bond downgrades (investment-grade or speculative-grade companies either a negative outlook or on CreditWatch with negative implications). S&P identified 232 companies across these sectors on the basis of these three criteria. "Weakness in the consumer products, media and entertainment, and retail/restaurants sectors is a result of U.S. consumers' diminished economic prospects," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Consumer spending is critical to continued economic expansion, as it accounts for 70% of the U.S. GDP." These cyclical sectors rely heavily on consumer spending, which has recently declined after showing resilience in 2007. S&P expect consumer spending to grow only 1.3% in 2008 (versus .6% forecasted a month ago), a deceleration compared with 2.9% in 2007 and 3.1% in 2006. * S&P Reports High-Yield Market Rebounded in Late March to April ---------------------------------------------------------------- The high-yield market rebounded in late March and into April, with spreads rallying to 685 basis points on April 29 from 802 bps on March 21, according to an article published by Standard & Poor's. The report, titled "U.S. High-Yield Prospects: April Brings High- Yield Rally," says that volatility has also come down from its March peak. "Though the market has calmed, our outlook is fundamentally the same," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "We continue to expect a deterioration in credit quality for the high-yield segment. Downside risk will remain elevated, with a challenging economic environment putting pressure on earnings, especially for businesses that rely solely on the U.S. consumer." Of the 1,235 parent-level U.S. high-yield issuers rated by Standard & Poor's Ratings Services on April 16, 2008, S&P have evaluated the prospects for 1,210 issuers with debt outstanding. A study of their CreditWatch and outlook status identifies 116 issuers with a potential for upgrades and 10 potential rising stars. Of the total, 32.5% (393) of issuers are at the risk of downgrade. Firms in the automotive, consumer products, homebuilders, and real estate companies, media and entertainment, insurance, and retail and restaurants sectors remain vulnerable to relatively high downgrade risk. Firms in the telecommunications sector continue to have the greatest potential for upgrades. The percentage of issuers with developing risk was 1.82%. Ms. Vazza added, "With only $7.3 billion worth of rated debt issued in 2008 as of April 21, the high-yield market is off to its slowest start since 1995. However, S&P expect to see broker/dealers unload some high-yield bond debt from 2007, just as they have done with leveraged loans over the past couple of months." * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------ ------- Absolute Software ABT (3) 83 30 AFC Enterprises AFCE (40) 155 (20) APP Pharmaceutic APPX (80) 1,077 214 Ariad Pham ARIA (8) 101 65 Bare Escentuals BARE (104) 224 84 Blount Intl BLT (54) 412 129 CableVision System CVC (5,097) 9,141 (607) Carrols Restaurant TAST (13) 463 (29) Centennial Comm CYCL (1,063) 1,343 14 Centerplate-IDS CVP (18) 332 (20) Cheniere Energy CQP (228) 1,905 146 Cheniere Energy LNG (16) 2,962 428 Choice Hotels CHH (157) 328 (42) Cincinnati Bell CBB (668) 2,020 0 Claymont Stell PLTE (40) 158 80 Compass Minerals CMP (5) 820 201 Corel Corp. CRE (14) 266 (15) Crown Media HL CRWN (684) 676 4 CV Therapheutics CVTX (185) 259 177 Cyberonics CYBX (15) 136 (15) Deltek Inc PROJ (86) 166 (28) Denny's Corp DENN (179) 381 74 Domino's Pizza DPZ (1,450) 473 51 Dun & Bradstreet DNB (437) 1,659 (192) Einstein Noah Re BACL (34) 149 4 Extendicare Real EXE-U (32) 1,440 (15) Gencorp Inc. GY (52) 995 77 General Motors GM (35,480) 148,883 (9,720) Healthsouth Corp. HLS (1,070) 2,051 (331) Human Genome Sci HGSI (12) 949 47 ICO Global C-New ICOG (131) 602 101 IDEARC Inc IAR (8,600) 1,667 205 IMAX Corp IMAX (85) 208 (8) IMAX Corp IMX (85) 208 (8) Incyte Corp INCY (160) 276 228 Indevus Pharma IDEV (86) 199 40 Intermune Inc ITMN (31) 262 209 IPCS Inc IPCS (40) 547 76 Knology Inc KNOL (35) 619 7 Koppers Holdings KOP (14) 669 189 Life Sciences Re LSR (29) 502 1 Linear Tech Corp LLTC (564) 1,410 912 Lodgenet Interac LNET (48) 694 8 Maxxam Inc MXM (242) 544 120 Mediacom Comm-A MCCC (253) 3,615 (268) Moody's Corp MCO (784) 1,715 (360) National Cinemed NCMI (572) 464 67 Navistar Intl NAVZ (1,699) 10,786 164 New Flyer Indust NFI-U (23) 907 44 Nexstar Broadcasting NXST (89) 709 (11) NPS Pharm Inc NPSP (188) 231 107 Primedia Inc PRM (129) 282 6 Protection One PONE (23) 673 6 Radnet Inc RDNT (53) 434 41 Redwood Trust RWT (718) 9,938 N.A. Regal Entertai-A RGC (119) 2,635 (2) Riviera Holdings RIV (48) 218 14 RSC Holdings Inc RRR (44) 3,460 (128) Rural Cellular-A RCCC (590) 1,350 110 Sally Beauty Hol SBH (745) 1,440 414 Sealy Corp. ZZ (113) 1,025 22 Solutia Inc SOA (1,449) 2,638 (293) Sonic Corp SONC (102) 765 (27) Spectrum Brands SPC (141) 3,265 828 St John Knits Inc SJKI (52) 213 80 Station Casinos STN (291) 3,932 (50) Stelco Inc STE (64) 2,657 693 Theravance THRX (66) 162 101 UST Inc UST (292) 1,487 446 Valence Tech VLNC (61) 20 8 Voyager Learning VLCY (53) 917 (637) Warner Music Gro WMG (47) 4,599 (764) Weight Watchers WTW (926) 1,046 (172) WR Grace & Co. GRA (316) 3,869 (1,057) XM Satellite-A XMSR (925) 1,609 (403) ZIX Corp ZIXI 0 19 (1) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Shimero R. Jainga, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Melanie C. Pador, Ludivino Q. Climaco, Jr., Loyda I. Nartatez, Tara Marie A. Martin, Philline P. Reluya, Joseph Medel C. Martirez, Ma. Cristina I. Canson, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2008. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***